MEMPHIS, Tenn., Oct. 25, 2018 /PRNewswire/ -- International
Paper (NYSE: IP) today reported third quarter 2018 net earnings
attributable to International Paper of $562
million ($1.37 per diluted
share) compared with $405 million
($0.97 per diluted share) in the
second quarter of 2018 and net earnings of $395 million ($0.95
per diluted share) in the third quarter of 2017. Net earnings in
all periods include the impact of special items, if any,
non-operating pension expense and discontinued operations.
|
Diluted Net EPS
Attributable to International Paper Shareholders and Adjusted
Operating EPS
|
|
|
|
Third
Quarter
2018
|
|
Second
Quarter
2018
|
|
Third
Quarter
2017
|
|
|
Net Earnings
|
|
$
|
1.37
|
|
|
$
|
0.97
|
|
|
$
|
0.95
|
|
|
|
Less – Discontinued
Operations (Gain) Loss
|
|
—
|
|
|
0.05
|
|
|
(0.07)
|
|
|
|
Net Earnings (Loss)
from Continuing Operations
|
|
1.37
|
|
|
1.02
|
|
|
0.88
|
|
|
|
Add Back –
Non-Operating Pension Expense
|
|
0.05
|
|
|
0.07
|
|
|
0.05
|
|
|
|
Add Back – Net Special
Items Expense (Income)
|
|
0.14
|
|
|
0.10
|
|
|
0.08
|
|
|
|
Adjusted Operating
Earnings*
|
|
$
|
1.56
|
|
|
$
|
1.19
|
|
|
$
|
1.01
|
|
|
|
|
*
Adjusted operating earnings (non-GAAP) is defined as net earnings
attributable to International Paper Company (GAAP)
excluding discontinued operations,
special items and non-operating pension expense. 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.
|
Adjusted operating earnings in the third quarter of 2018 were
$641 million ($1.56 per diluted share) compared with
$498 million ($1.19 per diluted share) in the second quarter of
2018, and $420 million ($1.01 per diluted share) in the third quarter of
2017.
Net sales were $5.9 billion in the
third quarter of 2018 compared with $5.8
billion in the second quarter of 2018 and $5.5 billion in the third quarter of 2017.
Business segment operating profits were $738 million in the third quarter of 2018
compared with $697 million in the
second quarter of 2018 and $674
million in the third quarter of 2017.
Cash provided by (used for) operations was $941 million in the third quarter of 2018 and
$(709) million in the third quarter
of 2017. Free cash flow (non-GAAP) was $584 million in the third quarter of 2018 and
$624 million in the third quarter of
2017.
"International Paper delivered very strong performance and
significant year-over-year earnings growth in the third quarter,"
said Mark Sutton, Chairman and Chief
Executive Officer. "We had solid commercial performance and
continued momentum across the businesses, and we continue to work
aggressively to offset higher distribution and input costs. I'm
proud of the outstanding work to safely prepare, secure and restart
the facilities affected by Hurricane Florence. Looking ahead to the
fourth quarter, we see continued healthy demand for our products
and remain confident in our commitment to deliver strong full-year
earnings growth in 2018."
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 (non-GAAP). Third quarter
2018 business segment operating profits and business trends
compared with the prior quarter are as follows:
Industrial Packaging operating profits in the third
quarter of 2018 were $472 million
($598 million excluding special
items) compared with $537 million
($569 million excluding special
items) in the second quarter of 2018. In North America, earnings improved due to higher
sales prices for boxes and containerboard and lower planned
maintenance outage expense, partially offset by lower seasonal
volumes and higher input and distribution costs. In Europe, seasonally lower volume and higher
Madrid mill start-up costs
negatively impacted the quarter.
Global Cellulose Fibers operating profits in the third
quarter of 2018 were $83 million
($85 million excluding special items)
compared with $66 million
($69 million excluding special items)
in the second quarter of 2018. Earnings improved on continued
price realization, higher absorbent pulp sales volume and lower
planned maintenance outage expense. Results were negatively
impacted by $28 million associated
with Hurricane Florence.
Printing Papers operating profits in the third quarter of
2018 were $183 million ($188 million excluding special items) versus
$94 million in the second quarter of
2018. In North America, improved
earnings were driven by further price realization and lower planned
maintenance outage costs. Results were negatively impacted by
$7 million associated with Hurricane
Florence. In Brazil, improved
earnings were driven by seasonally stronger sales volumes and
higher sales prices, which were partially offset by higher input
costs. In Europe and Russia, improved earnings were driven by price
realization, higher sales volume, improved operations and lower
planned maintenance outage expense, which were partially offset by
higher input costs.
EQUITY METHOD INVESTMENTS
Ilim joint venture
equity earnings were $74 million in
the third quarter of 2018 compared with $57
million in the second quarter of 2018. Operating results
were favorable due to continued price realization offset by lower
sales volumes due to annual outages. The Company recognized a
non-cash after-tax foreign exchange loss of $23 million in the third quarter of 2018
($0.06 per diluted share) compared
with a loss of $39 million in the
second quarter of 2018 ($0.09 per
diluted share), primarily due to Ilim's U.S. dollar denominated net
debt.
International Paper recorded equity earnings of
$19 million in the third quarter of
2018 on its 20.5% ownership position in Graphic Packaging compared
with $15 million in the second
quarter of 2018.
CORPORATE EXPENSES
Corporate expenses were
$20 million for the third quarter of
2018, compared with $30 million in
the second quarter of 2018.
EFFECTIVE TAX RATE
The reported effective tax rate for
the third quarter of 2018 was 15%, which reflects the impact of
adjustments associated with the U.S. Tax Cuts and Jobs Act ("Tax
Reform"), compared to a 2018 second quarter reported effective tax
rate of 27%. In the fourth quarter of 2017, the Company recorded a
provisional net benefit related to the enactment of the Tax Reform,
including a non-cash benefit for the remeasurement of the Company's
U.S. deferred taxes and additional tax expense related to the
deemed repatriation of earnings of its foreign subsidiaries. The
Company continues to analyze the impacts of Tax Reform and in the
current quarter recorded a $36
million tax benefit primarily related to the deemed
repatriation of earnings of foreign subsidiaries. The updated
provisional amounts will be finalized in the fourth quarter.
Excluding special items, non-operating pension expense and
discontinued operations, the effective tax rate for the third
quarter of 2018 was 24%, compared with an effective tax rate of 25%
in the second quarter of 2018. The lower effective tax rate for the
third quarter is primarily due to state tax credits and provision
to return adjustments related to the U.S. Federal tax return
completed during the third quarter.
EFFECTS OF SPECIAL ITEMS
Special items in the third
quarter of 2018 included a pre-tax charge of $122 million ($81
million after taxes) related to the impairment of fixed
assets and an intangible asset in our Brazil Packaging business, a
pre-tax charge of $9 million
($7 million after taxes) for an
adjustment to an environmental remediation reserve, pre-tax charges
of $6 million ($4 million after taxes) related to the removal of
abandoned property at our mills and a pre-tax charge of
$5 million ($4
million after taxes) for accelerated depreciation associated
with the announced conversion of a paper machine at our Riverdale
mill to containerboard production. Also included in special
items is a tax benefit of $36 million
related to updates to our provisional estimates of the impacts of
Tax Reform.
Special items in the second quarter of 2018 included a pre-tax
charge of $26 million ($18 million after taxes) in Restructuring and
other charges related to the optimization of our EMEA Packaging
business. Special items also included a pre-tax charge of
$12 million ($9 million after taxes) for costs associated with
our proposal to acquire Smurfit Kappa, pre-tax charges of
$9 million ($7
million after taxes) related to the removal of abandoned
property at our mills and a tax expense of $9 million due to state income tax legislative
changes.
Special items in the third quarter of 2017 included pre-tax
charges of $6 million ($4 million after taxes) for integration costs
associated with the 2016 acquisition of the Weyerhaeuser pulp
business, a pre-tax charge of $10
million ($7 million after
taxes) for accelerated amortization of an intangible asset in
Brazil Packaging and pre-tax
charges of $7 million ($4 million after taxes) related to the removal of
abandoned property at our mills. Also included in special items is
a net tax expense of $19 million due
to international legal entity restructuring.
DISCONTINUED OPERATIONS
As a result of the transfer of
the North American Consumer Packaging business on January 1, 2018, all current and prior year
amounts have been adjusted to reflect this business as a
discontinued operation. There were no discontinued operations
in the third quarter of 2018 compared with a loss of $23 million ($0.05
per diluted share) in the second quarter of 2018 and income of
$29 million ($0.07 per diluted share) in the third quarter of
2017. Discontinued operations in the second quarter of 2018
included a pre-tax loss of $28
million ($21 million after
taxes) to adjust the gain on the transfer of the business as a
result of final post-closing adjustments and charges of
$2 million (before and after taxes)
for costs associated with the transfer. Discontinued operations in
the third quarter of 2017 included the operating earnings of the
North American Consumer Packaging business.
EARNINGS WEBCAST
The company will host a webcast to
discuss earnings and current market conditions, beginning at
10 a.m. ET (9
a.m. CT). All interested parties are invited to listen to
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 on the
web site 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 8966794. 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 ninety days following the call.
To access the replay, dial +1 (404) 537-3406 or, within the U.S.
only, (855) 859-2056 or (800) 585-8367, and when prompted for the
conference ID, enter 8966794.
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, Russia and
India. We produce corrugated
packaging products that protect and promote goods, and enable
worldwide commerce; pulp for diapers, tissue and other personal
hygiene products that promote health and wellness and papers that
facilitate education and communication. We are headquartered in
Memphis, Tenn., and employ
approximately 52,000 colleagues located in more than 24 countries.
Net sales for 2017 were $22 billion.
For more information about International Paper, our products and
global citizenship efforts, please visit
internationalpaper.com.
Certain statements in this press release may be considered
forward-looking statements. Words such as "expects", "anticipates",
"continues to believe", "estimates" and similar expressions
identify forward-looking statements. The forward-looking statements
include, but are not limited to, earnings growth. 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) our ability to achieve the benefits we expect
from strategic acquisitions, divestitures, restructurings and
capital investments; and (viii) other factors that can be found in
International Paper's press releases and U.S. Securities and
Exchange Commission (the "SEC") filings. 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 SEC 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Three
Months
Ended
June 30,
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
2017
|
|
|
Net
Sales
|
|
$
5,901
|
|
$
5,517
|
|
$
5,833
|
|
$
|
17,355
|
|
$
16,032
|
|
|
Costs and
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products
sold
|
|
3,887
|
(a)
|
3,713
|
(e)
|
3,922
|
(a)
|
11,757
|
(a)
|
11,100
|
(e)
|
|
Selling and
administrative expenses
|
|
405
|
|
401
|
(f)
|
451
|
(i)
|
1,277
|
(i)
|
1,187
|
(f)
|
|
Depreciation,
amortization and cost of timber harvested
|
|
335
|
(b)
|
350
|
(g)
|
330
|
|
990
|
(b)
|
1,004
|
(g)
|
|
Distribution
expenses
|
|
397
|
|
354
|
|
403
|
|
1,166
|
|
1,061
|
|
|
Taxes other than
payroll and income taxes
|
|
44
|
|
41
|
|
42
|
|
130
|
|
124
|
|
|
Restructuring and other
charges
|
|
—
|
|
—
|
|
26
|
(j)
|
48
|
(j)
|
(16)
|
(l)
|
|
Net (gains) losses on
sales and impairments of business
|
|
122
|
(c)
|
—
|
|
—
|
|
122
|
(c)
|
9
|
(m)
|
|
Litigation
settlement
|
|
—
|
|
—
|
|
—
|
|
—
|
|
354
|
(n)
|
|
Net bargain purchase
gain on acquisition of business
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(6)
|
(o)
|
|
Interest expense,
net
|
|
133
|
|
152
|
|
133
|
|
401
|
|
431
|
(p)
|
|
Non-operating pension
expense
|
|
25
|
|
49
|
|
36
|
|
65
|
|
133
|
|
|
Earnings (Loss)
From Continuing Operations Before Income Taxes
and Equity Earnings
|
|
553
|
|
457
|
|
490
|
|
1,399
|
|
651
|
|
|
Income tax provision
(benefit)
|
|
83
|
(d)
|
136
|
(h)
|
130
|
(d)
|
302
|
(d)
|
122
|
(h)
|
|
Equity earnings (loss),
net of taxes
|
|
92
|
|
45
|
|
70
|
|
257
|
|
113
|
|
|
Earnings (Loss)
From Continuing Operations
|
|
562
|
|
366
|
|
430
|
|
1,354
|
|
642
|
|
|
Discontinued
operations, net of taxes
|
|
—
|
|
29
|
|
(23)
|
(k)
|
345
|
(k)
|
42
|
|
|
Net Earnings
(Loss)
|
|
562
|
|
395
|
|
407
|
|
1,699
|
|
684
|
|
|
Less: Net earnings
(loss) attributable to noncontrolling interests
|
|
—
|
|
—
|
|
2
|
|
3
|
|
—
|
|
|
Net Earnings
(Loss) Attributable to International Paper Company
|
|
$
562
|
|
$
395
|
|
$
405
|
|
$
|
1,696
|
|
$
684
|
|
|
Basic Earnings Per
Common Share Attributable to International
Paper Common Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from
continuing operations
|
|
$
1.38
|
|
$
0.89
|
|
$
1.03
|
|
$
|
3.28
|
|
$
1.55
|
|
|
Discontinued
operations
|
|
—
|
|
0.07
|
|
(0.05)
|
|
0.84
|
|
0.10
|
|
|
Net earnings
(loss)
|
|
$
1.38
|
|
$
0.96
|
|
$
0.98
|
|
$
|
4.12
|
|
$
1.65
|
|
|
Diluted Earnings
Per Common Share Attributable to International
Paper Common Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from
continuing operations
|
|
$
1.37
|
|
$
0.88
|
|
$
1.02
|
|
$
|
3.25
|
|
$
1.54
|
|
|
Discontinued
operations
|
|
—
|
|
0.07
|
|
(0.05)
|
|
0.83
|
|
0.10
|
|
|
Net earnings
(loss)
|
|
$
1.37
|
|
$
0.95
|
|
$
0.97
|
|
$
|
4.08
|
|
$
1.64
|
|
|
Average Shares of
Common Stock Outstanding - Diluted
|
|
411.4
|
|
417.4
|
|
417.7
|
|
416.3
|
|
417.4
|
|
|
Cash Dividends Per
Common Share
|
|
$
0.4750
|
|
$
0.4625
|
|
$
0.4750
|
|
$
|
1.4250
|
|
$
1.3875
|
|
|
Amounts
Attributable to International Paper Common
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from
continuing operations, net of tax
|
|
$
562
|
|
$
366
|
|
$
428
|
|
$
|
1,351
|
|
$
642
|
|
|
Discontinued
operations, net of tax
|
|
—
|
|
29
|
|
(23)
|
|
345
|
|
42
|
|
|
Net earnings
(loss)
|
|
$
562
|
|
$
395
|
|
$
405
|
|
$
|
1,696
|
|
$
684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this consolidated statement of
operations.
|
|
|
|
|
|
|
|
(a)
|
Includes pre-tax
charges of $6 million ($4 million after taxes), $9 million ($7
million after taxes) and $24 million ($18 million after taxes) for
the three months ended September 30, 2018 and June 30, 2018 and the
nine months ended September 30, 2018, respectively, for the removal
of abandoned property at our mills, a pre-tax charge of $9 million
($7 million after taxes) for the three months and nine months ended
September 30, 2018 for an environmental remediation reserve
adjustment and a pre-tax charge of $9 million ($7 million after
taxes) for the nine months ended September 30, 2018 for a legal
settlement.
|
|
(b)
|
Includes a pre-tax
charge of $5 million ($4 million after taxes) for the three months
and nine months ended September 30, 2018 for accelerated
depreciation associated with the announced conversion of a paper
machine at our Riverdale mill to containerboard
production.
|
|
(c)
|
Includes a pre-tax
charge of $122 million ($81 million after taxes) for the three
months and nine months ended September 30, 2018 related to the
impairment of fixed assets and an intangible asset in our Brazil
Packaging business.
|
|
(d)
|
Includes a tax
benefit of $36 million for the three months and nine months ended
September 30, 2018 related to the Tax Cuts and Jobs Act and tax
expense of $9 million for the three months ended June 30, 2018 and
nine months ended September 30, 2018 related to state income tax
legislative changes.
|
|
(e)
|
Includes pre-tax
charges of $7 million ($4 million after taxes) and $14 million ($9
million after taxes) for the three months and nine months ended
September 30, 2017, respectively, related to the removal of
abandoned property at our mills and a pre-tax charge of $14 million
($8 million after taxes) for the nine months ended September 30,
2017 for the amortization of inventory fair value step-up for the
pulp business acquired in December 2016.
|
|
(f)
|
Includes pre-tax
charges of $6 million ($4 million after taxes) and $15 million ($9
million after taxes) for the three months and nine months ended
September 30, 2017, respectively, for costs associated with the
acquisition and integration of the pulp business acquired in
December 2016.
|
|
(g)
|
Includes a pre-tax
charge of $10 million ($7 million after taxes) for the three months
and nine months ended September 30, 2017 for the accelerated
amortization of a Brazil Packaging intangible asset.
|
|
(h)
|
Includes tax expense
of $19 million and $34 million for the three months and nine months
ended September 30, 2017, respectively, for international
investment restructuring and a net tax benefit of $47 million for
the nine months ended September 30, 2017 primarily due to income
tax refund claims.
|
|
(i)
|
Includes a pre-tax
charge of $12 million ($9 million after taxes) for the three months
ended June 30, 2018 and nine months ended September 30, 2018
associated with our proposal to acquire Smurfit
Kappa.
|
|
(j)
|
Includes pre-tax
charges of $26 million ($18 million after taxes) and $48 million
($35 million after taxes) for the three months ended June 30, 2018
and nine months ended September 30, 2018, respectively, related to
the optimization of our EMEA Packaging business.
|
|
(k)
|
Includes a pre-tax
charge of $28 million ($21 million after taxes) and pre-tax income
of $488 million ($364 million after taxes) for the three months
ended June 30, 2018 and the nine months ended September 30, 2018,
respectively, for the gain on the transfer of the North American
Consumer Packaging business. Also includes pre-tax charges of
$2 million (before and after taxes) and $25 million ($19 million
after taxes) for the three months ended June 30, 2018 and the nine
months ended September 30, 2018, respectively, for transaction
costs to transfer the North American Consumer Packaging
business.
|
|
(l)
|
Includes a pre-tax
gain of $14 million ($9 million after taxes) related to the sale of
our investment in ArborGen and a gain of $2 million (before and
after taxes) for other items for the nine months ended September
30, 2017.
|
|
(m)
|
Includes a pre-tax
charge of $9 million ($4 million after taxes) for the nine months
ended September 30, 2017 for the impairment of the assets of our
Foodservice business in Asia.
|
|
(n)
|
Includes a pre-tax
charge of $354 million ($219 million after taxes) for the nine
months ended September 30, 2017 related to the settlement of the
Kleen Products anti-trust class action lawsuit.
|
|
(o)
|
Includes a net
bargain purchase gain of $6 million (before and after taxes) for
the nine months ended September 30, 2017 associated with the June
2016 acquisition of Holmen Paper's newsprint mill in Madrid,
Spain.
|
|
(p)
|
Includes a pre-tax
gain of $4 million ($2 million after taxes) for the nine months
ended September 30, 2017 for interest income associated with an
income tax refund claim.
|
|
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,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
2017
|
|
|
Net Earnings
(Loss) Attributable to International Paper Company
|
|
$
562
|
|
$
395
|
|
$
405
|
|
$
1,696
|
|
$
684
|
|
|
Less: Discontinued
operations (gain) loss
|
|
—
|
|
(29)
|
|
23
|
|
(345)
|
|
(42)
|
|
|
Earnings (Loss)
from Continuing Operations, including non-controlling
interest
|
|
562
|
|
366
|
|
428
|
|
1,351
|
|
642
|
|
|
Add back:
Non-operating pension expense
|
|
19
|
|
20
|
|
27
|
|
49
|
|
60
|
|
|
Add back: Special
items expense (gain)
|
|
60
|
|
34
|
|
43
|
|
134
|
|
224
|
|
|
Adjusted Operating
Earnings
|
|
$
641
|
|
$
420
|
|
$
498
|
|
$
1,534
|
|
$
926
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Three Months
Ended
June 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
2017
|
|
|
Diluted Earnings
per Common Share as Reported
|
|
$
1.37
|
|
$
0.95
|
|
$
0.97
|
|
$
4.08
|
|
$
1.64
|
|
|
Less: Discontinued
operations (gain) loss
|
|
—
|
|
(0.07)
|
|
0.05
|
|
(0.83)
|
|
(0.10)
|
|
|
Continuing
Operations
|
|
1.37
|
|
0.88
|
|
1.02
|
|
3.25
|
|
1.54
|
|
|
Add back:
Non-operating pension expense
|
|
0.05
|
|
0.05
|
|
0.07
|
|
0.11
|
|
0.14
|
|
|
Add back: Special
items expense (gain)
|
|
0.14
|
|
0.08
|
|
0.10
|
|
0.32
|
|
0.54
|
|
|
Adjusted Operating
Earnings per Share
|
|
$
1.56
|
|
$
1.01
|
|
$
1.19
|
|
$
3.68
|
|
$
2.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company
calculates Adjusted Operating Earnings (non-GAAP) by excluding the
after-tax effect of non-operating pension expense, items considered
by management to be unusual as reflected in the notes to the
Consolidated Statement of Operations and discontinued operations
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,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
2017
|
|
|
Industrial
Packaging
|
|
$
4,034
|
|
$
3,822
|
|
$
4,022
|
|
$
11,883
|
|
$
11,184
|
|
|
Global Cellulose
Fibers
|
|
714
|
|
654
|
|
692
|
|
2,083
|
|
1,830
|
|
|
Printing
Papers
|
|
1,102
|
|
1,039
|
|
1,060
|
|
3,215
|
|
3,051
|
|
|
Corporate and
Inter-segment Sales (h)
|
|
51
|
|
2
|
|
59
|
|
174
|
|
(33)
|
|
|
Net
Sales
|
|
$
5,901
|
|
$
5,517
|
|
$
5,833
|
|
$
17,355
|
|
$
16,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit
by Business Segment
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Three Months
Ended
June 30,
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
2017
|
|
|
Industrial
Packaging
|
|
$
|
472
|
(a)
|
$
|
490
|
(d)
|
$
|
537
|
(a)
|
$
|
1,446
|
(a)
|
$
|
938
|
(d)
|
|
Global Cellulose
Fibers
|
|
83
|
(b)
|
49
|
(e)
|
66
|
(b)
|
160
|
(b)
|
(14)
|
(e)
|
|
Printing
Papers
|
|
183
|
(c)
|
135
|
|
94
|
|
341
|
(c)
|
321
|
(f)
|
|
Total Business
Segment Operating Profit
|
|
$
|
738
|
|
$
|
674
|
|
$
|
697
|
|
$
|
1,947
|
|
$
|
1,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss)
From Continuing Operations
Before Income Taxes and Equity Earnings
|
|
$
|
553
|
|
$
|
457
|
|
$
|
490
|
|
$
|
1,399
|
|
$
|
651
|
|
|
Interest expense,
net
|
|
133
|
|
152
|
|
133
|
|
401
|
|
431
|
(g)
|
|
Noncontrolling
interest/equity earnings adjustment (i)
|
|
(2)
|
|
—
|
|
(4)
|
|
(7)
|
|
(1)
|
|
|
Corporate items
(h)
|
|
20
|
|
32
|
|
30
|
|
59
|
|
73
|
|
|
Corporate special
items, net
|
|
9
|
|
—
|
|
12
|
|
30
|
|
(7)
|
|
|
Non-operating pension
expense
|
|
25
|
|
33
|
|
36
|
|
65
|
|
98
|
|
|
Adjusted Operating
Profit
|
|
$
|
738
|
|
$
|
674
|
|
$
|
697
|
|
$
|
1,947
|
|
$
|
1,245
|
|
|
Equity Earnings
(Loss) in Ilim Holdings S.A., Net of Taxes
|
|
$
|
74
|
|
$
|
48
|
|
$
|
57
|
|
$
|
223
|
|
$
|
119
|
|
|
Equity Earnings
(Loss) in Graphic Packaging LLC
|
|
$
|
19
|
|
$
|
—
|
|
$
|
15
|
|
$
|
36
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes a charge of
$122 million for the three months and nine months ended September
30, 2018 for the impairment of fixed assets and an intangible asset
in our Brazil Packaging business, charges of $26 million and $48
million for the three months ended June 30, 2018 and the nine
months ended September 30, 2018, respectively, related to the
optimization of our EMEA Packaging business and charges of $4
million, $6 million and $15 million for the three months ended
September 30, 2018 and June 30, 2018, and the nine months ended
September 30, 2018, respectively, for the removal of abandoned
property at our mills.
|
|
(b)
|
Includes charges of
$2 million, $3 million and $9 million for the three months ended
September 30, 2018 and June 30, 2018, and the nine months ended
September 30, 2018, respectively, for the removal of abandoned
property at our mills.
|
|
(c)
|
Includes a charge of
$5 million for the three months and nine months ended September 30,
2018 for accelerated depreciation associated with the announced
conversion of a paper machine at our Riverdale mill to
containerboard production.
|
|
(d)
|
Includes a charge of
$10 million for the three months and nine months ended September
30, 2017 for the accelerated amortization of an intangible asset in
Brazil, a charge of $354 million for the nine months ended
September 30, 2017 related to the settlement of the Kleen Products
anti-trust class action lawsuit, a gain of $6 million for the nine
months ended September 30, 2017 for a net bargain purchase gain
associated with the June 2016 acquisition of Holmen Paper's
newsprint mill in Madrid, Spain and charges of $5 million and $9
million for the three months and nine months ended September 30,
2017, respectively, for the removal of abandoned property at our
mills and other costs.
|
|
(e)
|
Includes a charge of
$14 million for the nine months ended September 30, 2017 for the
amortization of the inventory fair value step-up for the pulp
business acquired in December 2016, charges of $6 million and $15
million for the three months and nine months ended September 30,
2017, respectively, for costs associated with the acquisition and
integration of that business and charges of $2 million and $3
million for the three months and nine months ended September 30,
2017, respectively, for the removal of abandoned property at our
mills and other costs.
|
|
(f)
|
Includes a charge of
$2 million for the nine months ended September 30, 2017 for the
removal of abandoned property at our mills and other
costs.
|
|
(g)
|
Includes a gain of $4
million for the nine months ended September 30, 2017 for interest
income associated with an income tax refund claim.
|
|
(h)
|
Includes sales and
operating profits of previously divested businesses.
|
|
(i)
|
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, 2018
|
|
|
|
Industrial
Packaging
|
|
Global Cellulose
Fibers
|
|
Printing
Papers
|
|
Total
|
|
Operating Profit
(Loss) as Reported
|
|
$
472
|
|
$
83
|
|
$
183
|
|
$
738
|
|
Special Items Expense
(Income) (a)
|
|
126
|
|
2
|
|
5
|
|
133
|
|
Operating Profit
(Loss) Before Special Items
|
|
$
598
|
|
$
85
|
|
$
188
|
|
$
871
|
|
|
|
|
|
|
Three Months Ended
September 30, 2017
|
|
|
|
Industrial
Packaging
|
|
Global Cellulose
Fibers
|
|
Printing
Papers
|
|
Total
|
|
Operating Profit
(Loss) as Reported
|
|
$
490
|
|
$
49
|
|
$
135
|
|
$
674
|
|
Special Items Expense
(Income) (b)
|
|
15
|
|
8
|
|
—
|
|
23
|
|
Operating Profit
(Loss) Before Special Items
|
|
$
505
|
|
$
57
|
|
$
135
|
|
$
697
|
|
|
|
|
|
|
Three Months Ended
June 30, 2018
|
|
|
|
Industrial
Packaging
|
|
Global Cellulose
Fibers
|
|
Printing
Papers
|
|
Total
|
|
Operating Profit
(Loss) as Reported
|
|
$
537
|
|
$
66
|
|
$
94
|
|
$
697
|
|
Special Items Expense
(Income) (a)
|
|
32
|
|
3
|
|
—
|
|
35
|
|
Operating Profit
(Loss) Before Special Items
|
|
$
569
|
|
$
69
|
|
$
94
|
|
$
732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2018
|
|
|
|
Industrial
Packaging
|
|
Global Cellulose
Fibers
|
|
Printing
Papers
|
|
Total
|
|
Operating Profit
(Loss) as Reported
|
|
$
1,446
|
|
$
160
|
|
$
341
|
|
$
1,947
|
|
Special Items Expense
(Income) (a)
|
|
185
|
|
9
|
|
5
|
|
199
|
|
Operating Profit
(Loss) Before Special Items
|
|
$
1,631
|
|
$
169
|
|
$
346
|
|
$
2,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2017
|
|
|
|
Industrial
Packaging
|
|
Global Cellulose
Fibers
|
|
Printing
Papers
|
|
Total
|
|
Operating Profit
(Loss) as Reported
|
|
$
938
|
|
$
(14)
|
|
$
321
|
|
$
1,245
|
|
Special Items Expense
(Income) (b)
|
|
367
|
|
32
|
|
2
|
|
401
|
|
Operating Profit
(Loss) Before Special Items
|
|
$
1,305
|
|
$
18
|
|
$
323
|
|
$
1,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
See footnotes (a) -
(c) on Sales and Earnings by Business Segment
|
|
(b)
|
See footnotes (d) -
(f) 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,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
2017
|
|
Industrial Packaging
(In thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
Corrugated Packaging
(c)
|
|
2,666
|
|
2,599
|
|
2,724
|
|
7,969
|
|
7,784
|
|
Containerboard
|
|
853
|
|
828
|
|
800
|
|
2,436
|
|
2,438
|
|
Recycling
|
|
566
|
|
544
|
|
597
|
|
1,700
|
|
1,684
|
|
Saturated
Kraft
|
|
51
|
|
45
|
|
52
|
|
149
|
|
132
|
|
Gypsum /Release
Kraft
|
|
56
|
|
54
|
|
67
|
|
176
|
|
165
|
|
Bleached
Kraft
|
|
8
|
|
7
|
|
9
|
|
24
|
|
20
|
|
EMEA Packaging (c)
(d)
|
|
329
|
|
350
|
|
387
|
|
1,113
|
|
1,124
|
|
Brazilian
Packaging (c)
|
|
92
|
|
93
|
|
85
|
|
263
|
|
266
|
|
European Coated
Paperboard
|
|
98
|
|
103
|
|
90
|
|
284
|
|
296
|
|
Industrial
Packaging
|
|
4,719
|
|
4,623
|
|
4,811
|
|
14,114
|
|
13,909
|
|
Global Cellulose
Fibers (In thousands of metric tons) (b)
|
|
886
|
|
933
|
|
884
|
|
2,665
|
|
2,706
|
|
Printing Papers (In
thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Uncoated
Papers
|
|
461
|
|
497
|
|
484
|
|
1,415
|
|
1,451
|
|
European &
Russian Uncoated Papers
|
|
363
|
|
365
|
|
342
|
|
1,066
|
|
1,104
|
|
Brazilian Uncoated
Papers
|
|
293
|
|
280
|
|
265
|
|
818
|
|
832
|
|
Indian Uncoated
Papers
|
|
62
|
|
58
|
|
66
|
|
195
|
|
186
|
|
Printing
Papers
|
|
1,179
|
|
1,200
|
|
1,157
|
|
3,494
|
|
3,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 the Madrid, Spain mill through Q3 2017.
|
|
INTERNATIONAL
PAPER COMPANY
Consolidated Balance Sheet
Preliminary and Unaudited
(In millions)
|
|
|
September 30,
2018
|
|
December 31,
2017
|
|
Assets
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash and Temporary
Investments
|
|
$
1,026
|
|
$
1,018
|
|
Accounts and Notes
Receivable, Net
|
|
3,580
|
|
3,287
|
|
Contract
Assets
|
|
383
|
|
—
|
|
Inventories
|
|
2,130
|
|
2,313
|
|
Assets Held for
Sale
|
|
—
|
|
1,377
|
|
Other
|
|
199
|
|
282
|
|
Total Current
Assets
|
|
7,318
|
|
8,277
|
|
Plants, Properties
and Equipment, Net
|
|
13,088
|
|
13,265
|
|
Forestlands
|
|
388
|
|
448
|
|
Investments
|
|
1,615
|
|
390
|
|
Financial Assets of
Special Purpose Entities
|
|
7,065
|
|
7,051
|
|
Goodwill
|
|
3,371
|
|
3,411
|
|
Deferred Charges and
Other Assets
|
|
958
|
|
1,061
|
|
Total
Assets
|
|
$
33,803
|
|
$
33,903
|
|
Liabilities and
Equity
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Notes Payable and
Current Maturities of Long-Term Debt
|
|
$
555
|
|
$
311
|
|
Accounts Payable and
Accrued Liabilities
|
|
4,048
|
|
3,986
|
|
Liabilities Held for
Sale
|
|
—
|
|
805
|
|
Total Current
Liabilities
|
|
4,603
|
|
5,102
|
|
Long-Term
Debt
|
|
10,700
|
|
10,846
|
|
Nonrecourse Financial
Liabilities of Special Purpose Entities
|
|
6,296
|
|
6,291
|
|
Deferred Income
Taxes
|
|
2,512
|
|
2,291
|
|
Pension Benefit
Obligation
|
|
1,785
|
|
1,939
|
|
Postretirement and
Postemployment Benefit Obligation
|
|
305
|
|
326
|
|
Other
Liabilities
|
|
544
|
|
567
|
|
Equity
|
|
|
|
|
|
Invested Capital, Net
of Treasury Stock
|
|
(313)
|
|
342
|
|
Retained
Earnings
|
|
7,353
|
|
6,180
|
|
Total International
Paper Shareholders' Equity
|
|
7,040
|
|
6,522
|
|
Noncontrolling
Interests
|
|
18
|
|
19
|
|
Total
Equity
|
|
7,058
|
|
6,541
|
|
Total Liabilities
and Equity
|
|
$
33,803
|
|
$
33,903
|
|
INTERNATIONAL
PAPER COMPANY
Consolidated Statement of Cash Flows
Preliminary and
Unaudited
(In millions)
|
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
2017
|
|
Operating
Activities
|
|
|
|
|
|
Net earnings
(loss)
|
|
$
1,699
|
|
$
684
|
|
Depreciation,
amortization and cost of timber harvested
|
|
990
|
|
1,075
|
|
Deferred income tax
expense (benefit), net
|
|
163
|
|
295
|
|
Restructuring and
other charges
|
|
48
|
|
(16)
|
|
Pension plan
contributions
|
|
—
|
|
(1,250)
|
|
Net gain on transfer
of North American Consumer Packaging business
|
|
(488)
|
|
—
|
|
Net bargain purchase
gain on acquisition of business
|
|
—
|
|
(6)
|
|
Net (gains) losses on
sales and impairments of businesses
|
|
122
|
|
9
|
|
Equity method
dividends received
|
|
130
|
|
129
|
|
Equity (earnings)
loss, net
|
|
(257)
|
|
(113)
|
|
Periodic pension
expense, net
|
|
172
|
|
237
|
|
Other, net
|
|
75
|
|
92
|
|
Changes in current
assets and liabilities
|
|
|
|
|
|
Accounts and notes
receivable
|
|
(441)
|
|
(293)
|
|
Contract
assets
|
|
(20)
|
|
—
|
|
Inventories
|
|
(120)
|
|
(70)
|
|
Accounts payable and
accrued liabilities
|
|
301
|
|
5
|
|
Interest
payable
|
|
(33)
|
|
(11)
|
|
Other
|
|
64
|
|
(198)
|
|
Cash Provided By
(Used For) Operating Activities
|
|
2,405
|
|
569
|
|
Investment
Activities
|
|
|
|
|
|
Invested in capital
projects
|
|
(1,286)
|
|
(935)
|
|
Acquisitions, net of
cash acquired
|
|
—
|
|
(45)
|
|
Net settlement on
transfer of North American Consumer Packaging business
|
|
(40)
|
|
—
|
|
Proceeds from
divestitures, net of cash divested
|
|
—
|
|
4
|
|
Proceeds from sale of
fixed assets
|
|
12
|
|
22
|
|
Other
|
|
4
|
|
(54)
|
|
Cash Provided By
(Used For) Investment Activities
|
|
(1,310)
|
|
(1,008)
|
|
Financing
Activities
|
|
|
|
|
|
Repurchases of common
stock and payments of restricted stock tax withholding
|
|
(532)
|
|
(46)
|
|
Issuance of
debt
|
|
349
|
|
1,366
|
|
Reduction of
debt
|
|
(242)
|
|
(369)
|
|
Change in book
overdrafts
|
|
(33)
|
|
5
|
|
Dividends
paid
|
|
(588)
|
|
(573)
|
|
Debt tender premiums
paid
|
|
—
|
|
(1)
|
|
Other
|
|
—
|
|
(2)
|
|
Cash Provided By
(Used for) Financing Activities
|
|
(1,046)
|
|
380
|
|
Effect of Exchange
Rate Changes on Cash
|
|
(41)
|
|
24
|
|
Change in Cash and
Temporary Investments
|
|
8
|
|
(35)
|
|
Cash and Temporary
Investments
|
|
|
|
|
|
Beginning of the
period
|
|
1,018
|
|
1,033
|
|
End of the
period
|
|
$
1,026
|
|
$
998
|
|
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,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Cash provided by
(used for) Operating Activities
|
$
941
|
|
$
(709)
|
|
$
2,405
|
|
$
569
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Cash invested in
capital projects
|
(357)
|
|
(271)
|
|
(1,286)
|
|
(935)
|
|
Cash contribution to
pension plan
|
—
|
|
1,250
|
|
—
|
|
1,250
|
|
Cash payment for
Kleen Settlement
|
—
|
|
354
|
|
—
|
|
354
|
|
Free Cash
Flow
|
$
584
|
|
$
624
|
|
$
1,119
|
|
$
1,238
|
|
|
|
|
|
|
|
|
|
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