MEMPHIS, Tenn., Oct. 27,
2016 /PRNewswire/ -- International Paper (NYSE: IP) today
reported third quarter 2016 net earnings attributable to
International Paper of $312 million
($0.75 per share) compared with net
earnings of $40 million ($0.10 per share) in the second quarter of 2016
and net earnings of $220 million
($0.53 per share) in the third
quarter of 2015. Net earnings in all periods include the impact of
special items, if any, non-operating pension expense and
discontinued operations.
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Diluted Net EPS
Attributable to International Paper Shareholders and Adjusted
Operating EPS
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Third
Quarter
2016
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Second
Quarter
2016
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Third
Quarter
2015
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Net Earnings
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$
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0.75
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$
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0.10
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$
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0.53
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Less – Discontinued
Operations (Gain) Loss
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—
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—
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—
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Net Earnings (Loss)
from Continuing Operations
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0.75
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0.10
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0.53
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Add Back –
Non-Operating Pension Expense
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0.06
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0.72
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0.11
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Add Back – Net Special
Items Expense (Income)
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0.10
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0.10
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0.33
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Adjusted Operating
Earnings*
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$
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0.91
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$
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0.92
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$
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0.97
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*
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Adjusted operating
earnings (Non-GAAP) is defined as net earnings from continuing
operations attributable to International Paper Company (GAAP)
excluding special items and non-operating pension expense.
Non-operating pension expense in the second quarter of 2016
included a pre-tax charge of $439 million ($270 million after taxes
or $0.65 per share) for a settlement accounting charge associated
with payments under the previously announced term-vested lump sum
buyout.
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Adjusted operating earnings in the third quarter of 2016 totaled
$380 million ($0.91 per share) compared with $379 million ($0.92
per share) in the second quarter of 2016 and $407 million ($0.97
per share) in the third quarter of 2015.
Quarterly net sales were $5.3
billion in the third quarter of 2016 compared with
$5.3 billion in the second quarter of
2016 and $5.7 billion in the
third quarter of 2015. The year-over-year revenue decline was
primarily due to the sale of the IP-Sun joint venture and the Asian
Corrugated Packaging business, as well as the sale of the Carolina®
Coated Bristols business.
Business segment operating profits in the third quarter of 2016
were $613 million, compared with
$628 million in the second quarter of
2016 and $579 million in the third
quarter of 2015.
Cash provided by operations was $341
million in the third quarter of 2016. Free cash flow
(non-GAAP) was $575 million for the
quarter.
"I'm pleased with our strong cash generation this quarter
despite an uneven global economy and rising input costs," said
Mark Sutton, Chairman and Chief
Executive Officer. "We continue to see stable to improved market
demand across most of our businesses, particularly North American
Industrial Packaging. We have begun to implement the NA
containerboard and box price increases and we remain focused on a
fourth quarter close of the Weyerhaeuser pulp business
acquisition. These key efforts, along with others, will
increase shareholder value and give us confidence in our continued
ability to generate strong and sustainable cash from operations and
free cash flow."
SEGMENT INFORMATION
The performance of the Company's business segments is measured
quarter to quarter without variations caused by special items, as
management focuses on business segment operating profits excluding
those items. Third quarter 2016 business segment operating profits
and business trends compared with the prior quarter are as
follows:
Industrial Packaging operating profits in the third
quarter of 2016 were $424 million
($429 million excluding special
items) compared with $459 million
($487 million excluding special
items) in the second quarter of 2016. In North America, the
negative impacts of box price erosion, increased input costs for
recycled fiber and energy were only partially offset by lower
planned maintenance costs. In Brazil, earnings improved primarily due to
higher sales volumes and lower outage costs. Earnings in EMEA
decreased due to seasonally lower sales volumes.
Printing Papers operating profits were $128 million ($135
million excluding special items) in the third quarter of
2016 versus $96 million ($101 million excluding special items) in the
second quarter of 2016. Earnings in North America and Brazil benefited from
lower maintenance outage costs. Operating costs improved, but
commercial pressures negatively impacted price/mix. In Europe
and Russia, improved operating
costs were offset by lower sales prices.
Consumer Packaging operating profits were $61 million in the third quarter of 2016 compared
with $73 million in the second
quarter of 2016. The earnings decrease in North America was primarily due to unfavorable
sales prices and mix, as well as higher costs. In Europe and Russia, higher sales volumes were more than
offset by lower prices and higher costs.
International Paper recorded Ilim joint venture equity
earnings of $46 million in the third
quarter of 2016 compared with $46
million in the second quarter of 2016. EBITDA for Ilim was
in-line with the prior quarter. Primarily due to Ilim's U.S.
dollar denominated net debt, the Company recognized a non-cash
after-tax foreign exchange gain of $3
million in the third quarter of 2016 ($0.01 per share), compared with a gain of
$6 million in the second quarter of
2016 ($0.01 per share).
CORPORATE EXPENSES
Net corporate expenses, excluding non-operating pension expense,
were $11 million for the third
quarter of 2016, compared with $26
million in the second quarter of 2016.
EFFECTIVE TAX RATE
The effective tax rate before special items and non-operating
pension expense for the third quarter of 2016 was 30.5%, compared
with an effective tax rate of 34% in the second quarter of 2016.
The lower rate in the third quarter was due to lower U.S. earnings,
adjustments to tax reserves, and the inclusion in the second
quarter of an increase in valuation allowance for state income
taxes.
EFFECTS OF SPECIAL ITEMS
Special items in the third quarter of 2016 included a pre-tax
charge of $46 million ($29 million after taxes) for Restructuring and
other charges. Included within Restructuring and other
charges were a pre-tax charge of $29
million ($18 million after
taxes) for debt extinguishment costs and a pre-tax charge of
$17 million ($11 million after taxes) to write-off costs
associated with the India Packaging business evaluation.
Special items also included a pre-tax charge of $8 million ($5
million after taxes) for the write-off of certain regulatory
pre-engineering costs, pre-tax charges of $7
million ($4 million after
taxes) for costs associated with the announced agreement to
purchase the Weyerhaeuser pulp business and pre-tax charges of
$5 million ($4
million after taxes) for costs associated with the sale of
our Asia corrugated packaging
business.
Special items in the second quarter of 2016 included a pre-tax
charge of $28 million ($20 million after taxes) for costs associated
with the sale of our Asia
corrugated packaging business, a pre-tax charge of $5 million ($3
million after taxes) for costs associated with the announced
agreement to purchase the Weyerhaeuser pulp business, a tax expense
of $23 million associated with 2016
cash pension contributions and a tax benefit of $6 million related to an international legal
entity restructuring.
Special items in the third quarter of 2015 included a pre-tax
loss of $25 million ($16 million after taxes) for Restructuring and
other charges. Included within Restructuring and other charges were
a pre-tax charge of $17 million
($11 million after taxes) related to
the restructuring of our 2006 timber monetization, net pre-tax
charges of $7 million ($4 million after taxes) related to the sale of
the Carolina® Coated Bristols brand and costs associated with the
conversion of the Riegelwood, North
Carolina facility to 100% pulp production, and a charge of
$1 million (before and after taxes)
for other items. Special items also included a pre-tax charge of
$186 million ($125 million after taxes) for the impairment of
goodwill and other assets of the IP-Sun JV.
EARNINGS WEBCAST
The Company will hold a webcast to review earnings at
10:00 a.m. ET / 9:00 a.m. CT today. All interested parties are
invited to listen to the webcast live and view the slides to be
presented at the webcast via the Company's Internet site at
http://www.internationalpaper.com by clicking on the
Performance/Investors tab and going to the Presentations and
Events/Webcasts page. A replay of the webcast will also be
available beginning approximately two hours after the call. Parties
who wish to participate in the webcast via teleconference may dial
+1 (706) 679-8242 or, within the U.S. only,
(877) 316-2541, and ask to be connected to the International
Paper third quarter earnings call. The conference ID number is
90466167. Participants should call in no later than
9:45 a.m. ET (8:45 a.m. CT). An
audio-only replay will be available for four weeks following the
call. To access the replay, dial +1 (404) 537-3406 or, within the
U.S. only, (800) 585-8367, and when prompted for the conference ID,
enter 90466167.
ABOUT INTERNATIONAL PAPER
International Paper (NYSE: IP) is a leading global producer of
renewable fiber-based packaging, pulp and paper products with
manufacturing operations in North
America, Latin America,
Europe, North Africa, Asia and Russia. We produce packaging
products that enable world-wide commerce; pulp for diapers, tissue
and other personal hygiene products; papers that drive
communication; paper bags that carry groceries; and paper cups and
food containers. We are headquartered in Memphis, Tenn., and employ 53,000 colleagues
located in more than 24 countries. Net sales for 2015 were
$22 billion. For more
information about International Paper, its products and global
citizenship efforts, please visit internationalpaper.com.
Certain statements in this press release may be considered
forward-looking statements. These statements reflect management's
current views and are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed or
implied in these statements. Factors which could cause actual
results to differ include but are not limited to: (i) the level of
our indebtedness and changes in interest rates; (ii) industry
conditions, including but not limited to changes in the cost or
availability of raw materials, energy and transportation costs,
competition we face, cyclicality and changes in consumer
preferences, demand and pricing for our products; (iii) global
economic conditions and political changes, including but not
limited to the impairment of financial institutions, changes in
currency exchange rates, credit ratings issued by recognized credit
rating organizations, the amount of our future pension funding
obligation, changes in tax laws and pension and health care costs;
(iv) unanticipated expenditures related to the cost of compliance
with existing and new environmental and other governmental
regulations and to actual or potential litigation; (v) whether we
experience a material disruption at one of our manufacturing
facilities; (vi) risks inherent in conducting business through
joint ventures; (vii) the receipt of regulatory approvals for our
pending transaction to purchase the pulp business of Weyerhaeuser
Company and the successful fulfillment or waiver of all other
closing conditions without unexpected delays or conditions; (viii)
the failure to realize the expected synergies and cost-savings from
the Weyerhaeuser transaction or delay in realization thereof; and
(ix) our ability to achieve the benefits we expect from all
strategic acquisitions, divestitures and restructurings. These and
other factors that could cause or contribute to actual results
differing materially from such forward-looking statements are
discussed in greater detail in the Company's Securities and
Exchange Commission filings. We undertake no obligation to publicly
update any forward-looking statements, whether as a result of new
information, future events or otherwise.
|
INTERNATIONAL
PAPER COMPANY
Consolidated Statement of
Operations
Preliminary and Unaudited
(In millions, except per share amounts)
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Three Months
Ended
September 30,
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Three Months
Ended
June 30,
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Nine Months
Ended
September 30,
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2016
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2015
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2016
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2016
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2015
|
|
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Net
Sales
|
|
$
5,266
|
|
$
5,691
|
|
$
5,322
|
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$
15,698
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|
$
16,922
|
|
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Costs and
Expenses
|
|
|
|
|
|
|
|
|
|
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Cost of products
sold
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3,622
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(a)
|
3,891
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|
4,112
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(h)
|
11,345
|
(l)
|
11,703
|
(r)
|
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Selling and
administrative expenses
|
|
380
|
(b)
|
417
|
|
386
|
(i)
|
1,142
|
(m)
|
1,226
|
|
|
Depreciation,
amortization and cost of timber harvested
|
|
314
|
|
329
|
|
301
|
|
899
|
|
980
|
|
|
Distribution
expenses
|
|
353
|
|
334
|
|
339
|
|
1,012
|
|
1,058
|
|
|
Taxes other than
payroll and income taxes
|
|
41
|
|
39
|
|
41
|
|
123
|
|
127
|
|
|
Restructuring and
other charges
|
|
46
|
(c)
|
25
|
(e)
|
—
|
|
47
|
(n)
|
219
|
(s)
|
|
Net (gains) losses on
sales and impairment of businesses
|
|
5
|
(d)
|
186
|
(f)
|
28
|
(j)
|
70
|
(o)
|
186
|
(f)
|
|
Interest expense,
net
|
|
132
|
|
141
|
|
129
|
|
384
|
|
422
|
|
|
Earnings (Loss)
From Continuing Operations Before Income Taxes and Equity
Earnings
|
|
373
|
(a-d)
|
329
|
(e,f)
|
(14)
|
(h-j)
|
676
|
(l-o)
|
1,001
|
(f,r,s)
|
|
Income tax provision
(benefit)
|
|
107
|
|
106
|
(g)
|
(9)
|
(k)
|
139
|
(p)
|
346
|
(t)
|
|
Equity earnings
(loss), net of taxes
|
|
43
|
|
(13)
|
|
45
|
|
151
|
|
84
|
|
|
Earnings (Loss)
From Continuing Operations
|
|
309
|
(a-d)
|
210
|
(e-g)
|
40
|
(h-k)
|
688
|
(l-p)
|
739
|
(f,r-t)
|
|
Discontinued
operations, net of taxes
|
|
—
|
|
—
|
|
—
|
|
(5)
|
(q)
|
—
|
|
|
Net Earnings
(Loss)
|
|
309
|
(a-d)
|
210
|
(e-g)
|
40
|
(h-k)
|
683
|
(l-q)
|
739
|
(f,r-t)
|
|
Less: Net earnings
(loss) attributable to noncontrolling interests
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|
(3)
|
|
(10)
|
|
—
|
|
(3)
|
|
(21)
|
|
|
Net Earnings
(Loss) Attributable to International Paper Company
|
|
$
312
|
(a-d)
|
$
220
|
(e-g)
|
$
40
|
(h-k)
|
$
686
|
(l-q)
|
$
760
|
(f,r-t)
|
|
Basic Earnings Per
Common Share Attributable to International Paper Common
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from
continuing operations
|
|
$
0.76
|
(a-d)
|
$
0.53
|
(e-g)
|
$
0.10
|
(h-k)
|
$
1.68
|
(l-p)
|
$
1.81
|
(f,r-t)
|
|
Discontinued
operations
|
|
—
|
|
—
|
|
—
|
|
(0.01)
|
(q)
|
—
|
|
|
Net earnings
(loss)
|
|
$
0.76
|
(a-d)
|
$
0.53
|
(e-g)
|
$
0.10
|
(h-k)
|
$
1.67
|
(l-q)
|
$
1.81
|
(f,r-t)
|
|
Diluted Earnings
Per Common Share Attributable to International Paper Common
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from
continuing operations
|
|
$
0.75
|
(a-d)
|
$
0.53
|
(e-g)
|
$
0.10
|
(h-k)
|
$
1.66
|
(l-p)
|
$
1.80
|
(f,r-t)
|
|
Discontinued
operations
|
|
—
|
|
—
|
|
—
|
|
(0.01)
|
(q)
|
—
|
|
|
Net earnings
(loss)
|
|
$
0.75
|
(a-d)
|
$
0.53
|
(e-g)
|
$
0.10
|
(h-k)
|
$
1.65
|
(l-q)
|
$
1.80
|
(f,r-t)
|
|
Average Shares of
Common Stock Outstanding - Diluted
|
|
415.3
|
|
417.5
|
|
414.7
|
|
415.5
|
|
421.9
|
|
|
Cash Dividends Per
Common Share
|
|
$
0.4400
|
|
$
0.4000
|
|
$
0.4400
|
|
$
1.3200
|
|
$
1.2000
|
|
|
Amounts
Attributable to International Paper Common
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
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Earnings (loss) from
continuing operations, net of tax
|
|
$
312
|
(a-d)
|
$
220
|
(e-g)
|
$
40
|
(h-k)
|
$
691
|
(l-p)
|
$
760
|
(f,r-t)
|
|
Discontinued
operations, net of tax
|
|
—
|
|
—
|
|
—
|
|
(5)
|
(q)
|
—
|
|
|
Net
earnings
|
|
$
312
|
(a-d)
|
$
220
|
(e-g)
|
$
40
|
(h-k)
|
$
686
|
(l-q)
|
$
760
|
(f,r-t)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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The accompanying
notes are an integral part of this consolidated statement of
operations.
|
|
|
|
|
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(a)
|
Includes a pre-tax
charge of $8 million ($5 million after taxes) for the write-off of
certain regulatory pre-engineering costs.
|
|
|
|
(b)
|
Includes a pre-tax
charge of $7 million ($4 million after taxes) for costs associated
with the announced agreement to purchase the Weyerhaeuser Pulp
business.
|
|
|
|
(c)
|
Includes a pre-tax
charge of $29 million ($18 million after taxes) for debt
extinguishment costs, and a pre-tax charge of $17 million ($11
million after taxes) to write-off costs associated with the India
Packaging business evaluation.
|
|
|
|
(d)
|
Includes a pre-tax
charge of $5 million ($4 million after taxes) for costs associated
with the sale of our Asia corrugated packaging business.
|
|
|
|
(e)
|
Includes a pre-tax
charge of $17 million ($11 million after taxes) for costs
associated with the Timber Monetization restructure, a
pre-tax charge of $7 million ($4 million after taxes) related to
the sale of the Carolina Coated Bristols brand and costs associated
with the Riegelwood mill conversion to 100% pulp production, and a
charge of $1 million (before and after taxes) for costs associated
with the Coated Paperboard sheet plant closures.
|
|
|
|
(f)
|
Includes a pre-tax
charge of $186 million ($192 million after taxes) for asset
write-offs associated with the sale of our 55% equity share in the
IP-Sun JV.
|
|
|
|
(g)
|
Includes a tax
benefit of $67 million related to the impairment of the IP-Sun
JV.
|
|
|
|
(h)
|
Includes a pre-tax
charge of $439 million ($270 million after taxes) for a settlement
accounting charge associated with term-vested lump sum pension
payments.
|
|
|
|
(i)
|
Includes a pre-tax
charge of $5 million ($3 million after taxes) for costs associated
with the announced agreement to purchase the Weyerhaeuser Pulp
business.
|
|
|
|
(j)
|
Includes a pre-tax
charge of $28 million ($20 million after taxes) for costs
associated with the sale of our Asia corrugated packaging
business.
|
|
|
|
(k)
|
Includes a tax
expense of $23 million associated with 2016 cash pension
contributions and a tax benefit of $6 million related to an
international legal entity restructuring.
|
|
|
|
(l)
|
Includes a pre-tax
charge of $439 million ($270 million after taxes) for a settlement
accounting charge associated with term-vested lump sum pension
payments, and a pre-tax charge of $8 million ($5 million after
taxes) for the write-off of certain regulatory pre-engineering
costs.
|
|
|
|
(m)
|
Includes a pre-tax
charge of $12 million ($7 million after taxes) for costs associated
with the announced agreement to purchase the Weyerhaeuser Pulp
business.
|
|
|
|
(n)
|
Includes a pre-tax
gain of $8 million ($5 million after taxes) related to the sale of
our investment in Arizona Chemical, a pre-tax charge of $29 million
($18 million after taxes) for debt extinguishment costs, a pre-tax
charge of $17 million ($11 million after taxes) for costs
associated with the write-off of the India Packaging business
evaluation, and a pre-tax charge of $9 million ($6 million after
taxes) for costs associated with the Riegelwood mill conversion to
100% pulp production.
|
|
|
|
(o)
|
Includes a pre-tax
charge of $70 million ($58 million after taxes) for the impairment
of the assets of our Asia corrugated packaging business and costs
associated with the sale of that business.
|
|
|
|
(p)
|
Includes a tax
benefit of $57 million related to the legal restructuring of our
Brazil Packaging business, a tax expense of $23 million associated
with 2016 cash pension contributions, a tax benefit of $14 million
related to the closure of a U.S. federal tax audit, and a tax
benefit of $6 million related to an international legal entity
restructuring.
|
|
|
|
(q)
|
Includes a pre-tax
charge of $8 million ($5 million after taxes) for a legal
settlement associated with the xpedx business.
|
|
|
|
(r)
|
Includes a pre-tax
gain of $4 million ($2 million after taxes) for the partial
reversal of a 2014 accrual for the repayment of previously claimed
state tax credits.
|
|
|
|
(s)
|
Includes a pre-tax
charge of $207 million ($133 million after taxes) for debt premium
costs, a net pre-tax gain of $7 million ($5 million after taxes)
related to the sale of the Carolina Coated Bristols brand and costs
associated with the Riegelwood mill conversion to 100% pulp
production, a charge of $2 million (before and after taxes) for
costs associated with the Coated Paperboard sheet plant closures,
and a pre-tax charge of $17 million ($11 million after taxes) for
costs associated with the Timber Monetization
restructure.
|
|
|
|
(t)
|
Includes a tax
benefit of $67 million related to the impairment of the IP-Sun JV,
a tax expense of $23 million for the 2014 tax impact of the 2015
cash pension contribution of $750 million and a tax expense of $5
million for other items.
|
|
INTERNATIONAL
PAPER COMPANY
Reconciliation of Net Earnings (Loss)
Attributable to International Paper Company to Adjusted Operating
Earnings
Preliminary and Unaudited
(In millions except for per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Three Months
Ended
June 30,
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
|
|
Net Earnings
(Loss) Attributable to International Paper Company
|
|
$
312
|
|
$
220
|
|
$
40
|
|
$
686
|
|
$
760
|
|
|
Add back:
Discontinued operations (gain) loss
|
|
—
|
|
—
|
|
—
|
|
5
|
(f)
|
—
|
|
|
Earnings (Loss)
from Continuing Operations, including non-controlling
interest
|
|
312
|
|
220
|
|
40
|
|
691
|
|
760
|
|
|
Add back:
Non-operating pension expense
|
|
26
|
|
46
|
|
299
|
(a)
|
352
|
(a)
|
121
|
|
|
Add back: Special
items expense
|
|
42
|
(b)
|
141
|
(c)
|
40
|
(d)
|
46
|
(e)
|
292
|
(g)
|
|
Adjusted Operating
Earnings
|
|
$
380
|
|
$
407
|
|
$
379
|
|
$
1,089
|
|
$
1,173
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Three Months
Ended
June 30,
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
|
|
Diluted Earnings
per Common Share as Reported
|
|
$
0.75
|
|
$
0.53
|
|
$
0.10
|
|
$
1.65
|
|
$
1.80
|
|
|
Add back:
Discontinued operations (gain) loss
|
|
—
|
|
—
|
|
—
|
|
0.01
|
|
—
|
|
|
Continuing
Operations
|
|
0.75
|
|
0.53
|
|
0.10
|
|
1.66
|
|
1.80
|
|
|
Add back:
Non-operating pension expense
|
|
0.06
|
|
0.11
|
|
0.72
|
|
0.85
|
|
0.28
|
|
|
Add back: Special
items expense
|
|
0.10
|
|
0.33
|
|
0.10
|
|
0.11
|
|
0.70
|
|
|
Adjusted Operating
Earnings per Share
|
|
$
0.91
|
|
$
0.97
|
|
$
0.92
|
|
$
2.62
|
|
$
2.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes a pre-tax
charge of $439 million ($270 million after taxes) for the three
months ended June 30, 2016 and the nine months ended September 30,
2016 for a settlement accounting charge associated with term-vested
lump sum payments.
|
|
|
|
(b)
|
See footnotes (a) -
(d) on the Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
See footnotes (e) -
(g) on the Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
See footnotes (i) -
(k) on the Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
See footnotes (l) -
(p) on the Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
(f)
|
See footnotes (q) on
the Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
(g)
|
See footnotes (f),
(r) - (t) on the Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company
calculates Adjusted Operating Earnings (non-GAAP) by excluding the
after-tax effect of non-operating pension expense and items
considered by management to be unusual from the earnings reported
under U.S. generally accepted accounting principles ("GAAP").
Management uses this measure to focus on on-going operations, and
believes that it is useful to investors because it enables them to
perform meaningful comparisons of past and present operating
results. International Paper believes that using this information,
along with net earnings, provides for a more complete analysis of
the results of operations by quarter. Net earnings attributable to
International Paper is the most directly comparable GAAP
measure.
|
|
|
|
(2)
|
Since diluted
earnings per share are computed independently for each period,
nine-month per share amounts may not equal the sum of the
respective quarters.
|
|
INTERNATIONAL
PAPER COMPANY
Sales and Earnings by Business Segment
Preliminary and
Unaudited
(In millions)
|
|
|
Sales by Business
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Three Months
Ended
June 30,
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
|
|
Industrial
Packaging
|
|
$
3,582
|
|
$
3,642
|
|
$
3,597
|
|
$
10,631
|
|
$
10,889
|
|
|
Printing
Papers
|
|
1,266
|
|
1,258
|
|
1,271
|
|
3,721
|
|
3,735
|
|
|
Consumer
Packaging
|
|
494
|
|
809
|
|
501
|
|
1,490
|
|
2,384
|
|
|
Corporate and
Inter-segment Sales
|
|
(76)
|
|
(18)
|
|
(47)
|
|
(144)
|
|
(86)
|
|
|
Net
Sales
|
|
$
5,266
|
|
$
5,691
|
|
$
5,322
|
|
$
15,698
|
|
$
16,922
|
|
|
Operating Profit
by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Three Months
Ended
June 30,
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
|
|
Industrial
Packaging
|
|
$
424
|
(a)
|
$
553
|
|
$
459
|
(a)
|
$
1,279
|
(a)
|
$
1,549
|
|
|
Printing
Papers
|
|
128
|
(b)
|
179
|
|
96
|
(b)
|
309
|
(b)
|
389
|
|
|
Consumer
Packaging
|
|
61
|
|
(153)
|
(d)
|
73
|
|
150
|
(c)
|
(60)
|
(d)
|
|
Total Industry
Business Operating Profit
|
|
$
613
|
|
$
579
|
|
$
628
|
|
$
1,738
|
|
$
1,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss)
From Continuing Operations
Before Income Taxes and Equity Earnings
|
|
$
373
|
|
$
329
|
|
$
(14)
|
|
$
676
|
|
$
1,001
|
|
|
Interest expense,
net
|
|
132
|
|
141
|
|
129
|
|
384
|
|
422
|
|
|
Noncontrolling
interest/equity earnings adjustment (f)
|
|
1
|
|
6
|
|
—
|
|
1
|
|
10
|
|
|
Corporate items,
net
|
|
11
|
|
10
|
|
26
|
|
58
|
|
27
|
|
|
Special items,
net
|
|
54
|
|
17
|
|
—
|
|
46
|
|
220
|
|
|
Non-operating pension
expense
|
|
42
|
|
76
|
|
487
|
(e)
|
573
|
(e)
|
198
|
|
|
Adjusted Operating
Profit
|
|
$
613
|
|
$
579
|
|
$
628
|
|
$
1,738
|
|
$
1,878
|
|
|
Equity Earnings
(Loss) in Ilim Holdings S.A., Net of Taxes
|
|
$
46
|
|
$
(9)
|
|
$
46
|
|
$
154
|
|
$
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes charges of
$5 million and $28 million for the three months ended September 30,
2016 and June 30, 2016, respectively, and $70 million for the nine
months ended September 30, 2016 for the impairment of the assets of
our Asia corrugated packaging business and costs associated with
the sale of the business.
|
|
|
|
(b)
|
Includes charges of
$7 million and $5 million for the three months ended September 30,
2016 and June 30, 2016, respectively, and $12 million for the nine
months ended September 30, 2016 for costs associated with the
announced agreement to purchase the Weyerhaeuser Pulp
business.
|
|
|
|
(c)
|
Includes a charge of
$9 million for the nine months ended September 30, 2016 for costs
associated with the Riegelwood mill conversion to 100% pulp
production.
|
|
|
|
(d)
|
Includes a charge of
$186 million for the three months and nine months ended September
30, 2015 for asset write-offs associated with the sale of our 55%
equity share in the IP-Sun JV, a net expense of $7 million and a
net gain of $7 million for the three months and nine months ended
September 30, 2015, respectively, related to the sale of the
Carolina Coated Bristols brand, and costs associated with the
Riegelwood mill conversion to 100% pulp production, and charges of
$1 million and $2 million for the three months and nine months
ended September 30, 2015 for costs associated with the Coated
Paperboard sheet plant closures.
|
|
|
|
(e)
|
Includes a charge of
$439 million for the three months ended June 30, 2016 and nine
months ended September 30, 2016 for a settlement accounting charge
associated with term-vested lump sum payments.
|
|
|
|
(f)
|
Operating profits for
business segments include each segment's percentage share of the
profits of subsidiaries included in that segment that are less than
wholly owned. The pre-tax noncontrolling interest and equity
earnings for these subsidiaries are adjusted here to present
consolidated earnings before income taxes and equity
earnings.
|
|
INTERNATIONAL
PAPER COMPANY
Reconciliation of Operating Profit to
Operating Profit Before Special Items
Preliminary and
Unaudited
(In millions)
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2016
|
|
|
|
Industrial
Packaging
|
|
Printing
Papers
|
|
Consumer
Packaging
|
|
Total
|
|
Operating Profit as
Reported
|
|
$
424
|
|
$
128
|
|
$
61
|
|
$
613
|
|
Special Items Expense
(a)
|
|
5
|
|
7
|
|
—
|
|
12
|
|
Operating Profit
Before Special Items
|
|
$
429
|
|
$
135
|
|
$
61
|
|
$
625
|
|
|
|
|
|
|
Three Months Ended
September 30, 2015
|
|
|
|
Industrial
Packaging
|
|
Printing
Papers
|
|
Consumer
Packaging
|
|
Total
|
|
Operating Profit as
Reported
|
|
$
553
|
|
$
179
|
|
$
(153)
|
|
$
579
|
|
Special Items Expense
(b)
|
|
—
|
|
—
|
|
194
|
|
194
|
|
Operating Profit
Before Special Items
|
|
$
553
|
|
$
179
|
|
$
41
|
|
$
773
|
|
|
|
|
|
|
Three Months Ended
June 30, 2016
|
|
|
|
Industrial
Packaging
|
|
Printing
Papers
|
|
Consumer
Packaging
|
|
Total
|
|
Operating Profit as
Reported
|
|
$
459
|
|
$
96
|
|
$
73
|
|
$
628
|
|
Special Items Expense
(a)
|
|
28
|
|
5
|
|
—
|
|
33
|
|
Operating Profit
Before Special Items
|
|
$
487
|
|
$
101
|
|
$
73
|
|
$
661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2016
|
|
|
|
Industrial
Packaging
|
|
Printing
Papers
|
|
Consumer
Packaging
|
|
Total
|
|
Operating Profit as
Reported
|
|
$
1,279
|
|
$
309
|
|
$
150
|
|
$
1,738
|
|
Special Items Expense
(a)
|
|
70
|
|
12
|
|
9
|
|
91
|
|
Operating Profit
Before Special Items
|
|
$
1,349
|
|
$
321
|
|
$
159
|
|
$
1,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2015
|
|
|
|
Industrial
Packaging
|
|
Printing
Papers
|
|
Consumer
Packaging
|
|
Total
|
|
Operating Profit as
Reported
|
|
$
1,549
|
|
$
389
|
|
$
(60)
|
|
$
1,878
|
|
Special Items Expense
(b)
|
|
—
|
|
—
|
|
181
|
|
181
|
|
Operating Profit
Before Special Items
|
|
$
1,549
|
|
$
389
|
|
$
121
|
|
$
2,059
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
See footnotes (a) -
(c) on Sales and Earnings by Business Segment
|
|
|
|
(b)
|
See footnote (d) on
Sales and Earnings by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company
calculates Operating Profit Before Special Items (non-GAAP) by
excluding the pre-tax effect of items considered by management to
be unusual from the earnings reported under U.S. generally accepted
accounting principles ("GAAP"). Management uses this measure to
focus on on-going operations, and believes that it is useful to
investors because it enables them to perform meaningful comparisons
of past and present operating results. International Paper believes
that using this information, along with net earnings, provides for
a more complete analysis of the results of operations by quarter.
Net earnings attributable to International Paper is the most
directly comparable GAAP measure.
|
|
INTERNATIONAL
PAPER COMPANY
Sales Volume by Product
(a)
Preliminary and Unaudited
|
|
International
Paper Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Three Months
Ended
June 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
|
Industrial Packaging
(In thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
Corrugated Packaging
(c)
|
|
2,640
|
|
2,609
|
|
2,642
|
|
7,801
|
|
7,717
|
|
Containerboard
|
|
801
|
|
783
|
|
770
|
|
2,311
|
|
2,375
|
|
Recycling
|
|
613
|
|
588
|
|
592
|
|
1,812
|
|
1,788
|
|
Saturated
Kraft
|
|
51
|
|
37
|
|
44
|
|
142
|
|
112
|
|
Gypsum /Release
Kraft
|
|
49
|
|
46
|
|
47
|
|
142
|
|
125
|
|
Bleached
Kraft
|
|
7
|
|
6
|
|
5
|
|
18
|
|
17
|
|
EMEA Packaging (c)
(d)
|
|
344
|
|
340
|
|
373
|
|
1,091
|
|
1,039
|
|
Asian Box (c)
(e)
|
|
—
|
|
110
|
|
105
|
|
208
|
|
307
|
|
Brazilian
Packaging (c)
|
|
84
|
|
89
|
|
74
|
|
235
|
|
261
|
|
Industrial
Packaging
|
|
4,589
|
|
4,608
|
|
4,652
|
|
13,760
|
|
13,741
|
|
Printing Papers (In
thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Uncoated
Papers
|
|
467
|
|
485
|
|
460
|
|
1,402
|
|
1,404
|
|
European &
Russian Uncoated Papers
|
|
358
|
|
364
|
|
389
|
|
1,120
|
|
1,110
|
|
Brazilian Uncoated
Papers
|
|
274
|
|
294
|
|
272
|
|
800
|
|
783
|
|
Indian Uncoated
Papers
|
|
51
|
|
55
|
|
61
|
|
175
|
|
182
|
|
Uncoated
Papers
|
|
1,150
|
|
1,198
|
|
1,182
|
|
3,497
|
|
3,479
|
|
Market Pulp
(b)
|
|
457
|
|
446
|
|
497
|
|
1,359
|
|
1,291
|
|
Consumer Packaging
(In thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
North American
Consumer Packaging
|
|
301
|
|
371
|
|
306
|
|
915
|
|
1,080
|
|
European Coated
Paperboard
|
|
105
|
|
96
|
|
99
|
|
298
|
|
284
|
|
Asian Coated
Paperboard (f)
|
|
—
|
|
339
|
|
—
|
|
—
|
|
958
|
|
Consumer
Packaging
|
|
406
|
|
806
|
|
405
|
|
1,213
|
|
2,322
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Sales volumes include
third party and inter-segment sales and exclude sales of equity
investees.
|
|
|
|
|
|
|
(b) Includes North American,
European and Brazilian volumes and internal sales to
mills.
|
|
|
(c) Volumes for corrugated
box sales reflect consumed tons sold (CTS). Board sales by these
businesses reflect invoiced tons.
|
|
|
(d) Excludes newsprint sales
volumes at Madrid, Spain mill.
|
|
|
(e) Includes sales volumes
through the date of sale on June 30, 2016.
|
|
|
(f) Includes sales volumes
through the date of sale in October 2015.
|
|
INTERNATIONAL
PAPER COMPANY
Consolidated Balance
Sheet
Preliminary and Unaudited
(In millions)
|
|
|
September 30,
2016
|
|
December 31,
2015
|
|
Assets
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash and Temporary
Investments
|
|
$
2,562
|
|
$
1,050
|
|
Accounts and Notes
Receivable, Net
|
|
2,807
|
|
2,675
|
|
Inventories
|
|
2,222
|
|
2,228
|
|
Deferred Income Tax
Assets
|
|
287
|
|
312
|
|
Other
|
|
225
|
|
212
|
|
Total Current
Assets
|
|
8,103
|
|
6,477
|
|
Plants, Properties
and Equipment, Net
|
|
12,205
|
|
11,980
|
|
Forestlands
|
|
447
|
|
366
|
|
Investments
|
|
325
|
|
228
|
|
Financial Assets of
Special Purpose Entities
|
|
7,028
|
|
7,014
|
|
Goodwill
|
|
3,362
|
|
3,335
|
|
Deferred Charges and
Other Assets
|
|
1,131
|
|
1,131
|
|
Total
Assets
|
|
$
32,601
|
|
$
30,531
|
|
Liabilities and
Equity
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Notes Payable and
Current Maturities of Long-Term Debt
|
|
$
78
|
|
$
426
|
|
Accounts Payable and
Accrued Liabilities
|
|
3,463
|
|
3,498
|
|
Total Current
Liabilities
|
|
3,541
|
|
3,924
|
|
Long-Term
Debt
|
|
10,823
|
|
8,844
|
|
Nonrecourse Financial
Liabilities of Special Purpose Entities
|
|
6,282
|
|
6,277
|
|
Deferred Income
Taxes
|
|
3,273
|
|
3,231
|
|
Pension Benefit
Obligation
|
|
3,709
|
|
3,548
|
|
Postretirement and
Postemployment Benefit Obligation
|
|
320
|
|
364
|
|
Other
Liabilities
|
|
424
|
|
434
|
|
Equity
|
|
|
|
|
|
Invested
Capital
|
|
(584)
|
|
(765)
|
|
Retained
Earnings
|
|
4,793
|
|
4,649
|
|
Total Shareholders'
Equity
|
|
4,209
|
|
3,884
|
|
Noncontrolling
interests
|
|
20
|
|
25
|
|
Total
Equity
|
|
4,229
|
|
3,909
|
|
Total Liabilities
and Equity
|
|
$
32,601
|
|
$
30,531
|
|
INTERNATIONAL
PAPER COMPANY
Consolidated Statement of Cash
Flows
Preliminary and Unaudited
(In millions)
|
|
|
Nine Months
Ended
September 30,
|
|
|
2016
|
|
2015
|
|
Operating
Activities
|
|
|
|
|
|
Net earnings
(loss)
|
|
$
683
|
|
$
739
|
|
Depreciation,
amortization and cost of timber harvested
|
|
899
|
|
980
|
|
Deferred income tax
expense (benefit), net
|
|
45
|
|
101
|
|
Restructuring and
other charges
|
|
47
|
|
219
|
|
Pension plan
contributions
|
|
(750)
|
|
(750)
|
|
Net (gains) losses on
sales and impairments of businesses
|
|
70
|
|
186
|
|
Equity (earnings)
loss, net
|
|
(151)
|
|
(84)
|
|
Periodic pension
expense, net
|
|
718
|
|
350
|
|
Other, net
|
|
125
|
|
132
|
|
Changes in current
assets and liabilities
|
|
|
|
|
|
Accounts and notes
receivable
|
|
(83)
|
|
(166)
|
|
Inventories
|
|
(6)
|
|
(221)
|
|
Accounts payable and
accrued liabilities
|
|
(37)
|
|
77
|
|
Interest
payable
|
|
24
|
|
24
|
|
Other
|
|
(18)
|
|
3
|
|
Cash Provided By
(Used For) Operations
|
|
1,566
|
|
1,590
|
|
Investment
Activities
|
|
|
|
|
|
Invested in capital
projects
|
|
(903)
|
|
(998)
|
|
Acquisitions, net of
cash acquired
|
|
(56)
|
|
—
|
|
Proceeds from
divestitures, net of cash divested
|
|
105
|
|
—
|
|
Investment in Special
Purpose Entities
|
|
—
|
|
(198)
|
|
Proceeds from sale of
fixed assets
|
|
13
|
|
32
|
|
Other
|
|
(130)
|
|
(35)
|
|
Cash Provided By
(Used For) Investment Activities
|
|
(971)
|
|
(1,199)
|
|
Financing
Activities
|
|
|
|
|
|
Repurchases of common
stock and payments of restricted stock tax withholding
|
|
(132)
|
|
(505)
|
|
Issuance of common
stock
|
|
—
|
|
2
|
|
Issuance of
debt
|
|
3,447
|
|
2,440
|
|
Reduction of
debt
|
|
(1,855)
|
|
(2,202)
|
|
Change in book
overdrafts
|
|
(5)
|
|
15
|
|
Dividends
paid
|
|
(543)
|
|
(503)
|
|
Debt tender
premiums
|
|
(31)
|
|
(211)
|
|
Other
|
|
(3)
|
|
—
|
|
Cash Provided By
(Used for) Financing Activities
|
|
878
|
|
(964)
|
|
Cash Included in
Assets Held for Sale
|
|
—
|
|
(143)
|
|
Effect of Exchange
Rate Changes on Cash
|
|
39
|
|
(61)
|
|
Change in Cash and
Temporary Investments
|
|
1,512
|
|
(777)
|
|
Cash and Temporary
Investments
|
|
|
|
|
|
Beginning of the
period
|
|
1,050
|
|
1,881
|
|
End of the
period
|
|
$
2,562
|
|
$
1,104
|
|
INTERNATIONAL
PAPER COMPANY
Reconciliation of Cash Provided by
Operations to Free Cash Flow
Preliminary and Unaudited
(In millions)
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Cash provided by
operations
|
$
341
|
|
$
837
|
|
$
1,566
|
|
$ 1,590
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Cash invested in
capital projects
|
(266)
|
|
(325)
|
|
(903)
|
|
(998)
|
|
Cash contribution to
pension plan
|
500
|
|
—
|
|
750
|
|
750
|
|
Free Cash
Flow
|
$
575
|
|
$
512
|
|
$
1,413
|
|
$ 1,342
|
|
|
|
|
|
|
|
|
|
(1) Free cash flow is
a non-GAAP measure and the most directly comparable GAAP measure is
cash provided by operations. Management believes that free cash
flow is useful to investors as a liquidity measure because it
measures the amount of cash generated that is available, after
reinvesting in the business, to maintain a strong balance sheet,
pay dividends, repurchase stock, service debt and make investments
for future growth. It should not be inferred that the entire free
cash flow amount is available for discretionary expenditures. By
adjusting for certain items that are not indicative of the
Company's ongoing performance, free cash flow also enables
investors to perform meaningful comparisons between past and
present periods.
|
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SOURCE International Paper