MEMPHIS, Tenn., April 30,
2020 /PRNewswire/ -- International Paper (NYSE: IP) today
reported first quarter 2020 financial results.
FIRST QUARTER 2020 HIGHLIGHTS
- First quarter net earnings (loss) attributable to
International Paper of $(141) million
($(0.36) per diluted share), compared
with $165 million ($0.42 per diluted share) in the fourth quarter of
2019 and $424 million ($1.05 per diluted share) in the first quarter of
2019. First quarter 2020 net earnings included an after-tax charge
of $337 million ($0.85 per diluted share) for the impairment of
the net assets and write-off of foreign currency translation
adjustment following the announcement of the sale of our Brazil
Packaging business.
- First quarter adjusted operating earnings* (non-GAAP) of
$226 million ($0.57 per diluted share) compared with
$430 million ($1.09 per diluted share) in the fourth quarter of
2019 and $447 million ($1.11 per diluted share) in the first quarter of
2019
- Cash provided by operations of $649
million
- Monetized $250 million of
ownership position in Graphic Packaging
- Liquidity position was $3.5
billion at quarter end, which reflects cash and committed
credit facilities
COVID-19 HIGHLIGHTS
- Essential business committed to the health and safety of our
employees and serving our customers
- Taking prudent actions to further strengthen
liquidity
- Strong immediate demand for corrugated packaging and pulp;
significant demand decline for printing papers
"International Paper had a solid first quarter in a rapidly
changing environment as the impact of the COVID-19 pandemic and
containment measures accelerated," said Mark Sutton, Chairman and Chief Executive
Officer. "International Paper entered this crisis in a position of
strength due to our committed employees, our diverse customer base,
our world-class manufacturing and supply chain capabilities and
solid financial footing. Given the unprecedented uncertainty
regarding the ultimate economic impact of COVID-19, we are taking
prudent steps to further strengthen the company's liquidity."
Sutton added, "I am especially grateful to our manufacturing,
converting and supply chain frontline teams around the world –
their health and safety is our most important responsibility as we
provide essential products to our customers."
|
Diluted Net EPS
Attributable to International Paper Shareholders and Adjusted
Operating EPS
|
|
|
|
First
Quarter
2020
|
|
Fourth
Quarter
2019
|
|
First
Quarter
2019
|
|
Net Earnings (Loss)
Attributable to International Paper
|
|
$
|
(0.36)
|
|
|
$
|
0.42
|
|
|
$
|
1.05
|
|
|
Add Back –
Non-Operating Pension Expense (Income)
|
|
(0.01)
|
|
|
0.02
|
|
|
0.02
|
|
|
Add Back – Net
Special Items Expense (Income)
|
|
0.94
|
|
|
0.65
|
|
|
0.04
|
|
|
Adjusted Operating
Earnings*
|
|
$
|
0.57
|
|
|
$
|
1.09
|
|
|
$
|
1.11
|
|
|
|
*
|
Adjusted operating
earnings (non-GAAP) is defined as net earnings attributable to
International Paper Company (GAAP) excluding special items and
non-operating pension expense (income). 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 consolidated operating results. For
discussion of special items, net and non-operating pension expense
(income), see the Consolidated Statement of Operations and related
notes.
|
|
Select Financial
Measures
|
|
|
(In
millions)
|
|
First
Quarter
2020
|
|
Fourth
Quarter
2019
|
|
First
Quarter
2019
|
|
|
Net Sales
|
|
$
|
5,352
|
|
|
$
|
5,498
|
|
|
$
|
5,643
|
|
|
|
Net Earnings (Loss)
Attributable to International Paper
|
|
(141)
|
|
|
165
|
|
|
424
|
|
|
|
Business Segment
Operating Profit
|
|
512
|
|
|
669
|
|
|
600
|
|
|
|
Adjusted Operating
Earnings
|
|
226
|
|
|
430
|
|
|
447
|
|
|
|
Cash Provided By
(Used For) Operations
|
|
649
|
|
|
928
|
|
|
733
|
|
|
|
Free Cash
Flow*
|
|
363
|
|
|
565
|
|
|
440
|
|
|
|
|
*
|
Free cash flow is a
non-GAAP financial measure. A reconciliation of free cash
flow to the most comparable GAAP measure, cash provided by (used
for) operations, and disclosure regarding why we believe that free
cash flow provides useful information to investors, is included
later in this release.
|
SEGMENT INFORMATION
Business segment operating profits
are used by International Paper's management to measure the
earnings performance of its businesses and is calculated as set
forth in footnote (e) below under "Sales and Earnings by Business
Segment". First quarter 2020 business segment net sales and
operating profits compared with the fourth quarter of 2019 and the
first quarter of 2019 are as follows:
|
Business Segment
Results
|
|
|
(In
millions)
|
|
First
Quarter
2020
|
|
Fourth
Quarter
2019
|
|
First
Quarter
2019
|
|
Net Sales by
Business Segment
|
|
|
|
|
|
|
|
Industrial
Packaging
|
|
$
|
3,819
|
|
|
$
|
3,810
|
|
|
$
|
3,832
|
|
|
Global Cellulose
Fibers
|
|
568
|
|
|
577
|
|
|
689
|
|
|
Printing
Papers
|
|
908
|
|
|
1,067
|
|
|
1,065
|
|
|
Corporate and
Inter-segment Sales
|
|
57
|
|
|
44
|
|
|
57
|
|
|
Net
Sales
|
|
$
|
5,352
|
|
|
$
|
5,498
|
|
|
$
|
5,643
|
|
|
Operating Profit
(Loss) by Business Segment
|
|
|
|
|
|
|
|
Industrial
Packaging
|
|
$
|
470
|
|
|
$
|
605
|
|
|
$
|
421
|
|
|
Global Cellulose
Fibers
|
|
(54)
|
|
|
(45)
|
|
|
35
|
|
|
Printing
Papers
|
|
96
|
|
|
109
|
|
|
144
|
|
|
Total Business
Segment Operating Profit
|
|
$
|
512
|
|
|
$
|
669
|
|
|
$
|
600
|
|
Industrial Packaging operating profits in the first
quarter of 2020 were $470 million
compared with $605 million in the
fourth quarter of 2019. In North
America, earnings decreased due to lower sales prices for
boxes and export containerboard, higher planned maintenance outage
expenses and higher operating costs driven by the Riverdale mill
conversion. Demand for export containerboard improved and input
costs were lower, primarily for energy. Earnings were negatively
impacted by the non-repeat of a favorable inventory valuation
adjustment in the fourth quarter of 2019. In Europe, earnings
improved driven by seasonally higher volumes, primarily in
Morocco and Turkey and continued performance improvements
at the Madrid, Spain mill,
slightly offset by unfavorable foreign currency impacts, primarily
in Morocco.
Global Cellulose Fibers operating profits (losses) in the
first quarter of 2020 were $(54)
million compared with $(45)
million in the fourth quarter of 2019. Earnings decreased
driven by lower average sales prices and higher planned maintenance
outage expenses partially offset by a favorable inventory valuation
adjustment in the first quarter of 2020.
Printing Papers operating profits in the first
quarter of 2020 were $96 million
compared with $109 million in the
fourth quarter of 2019. In North
America, earnings decreased due to lower export and domestic
sales volumes, seasonally higher operating costs and higher planned
maintenance outage expenses. Earnings benefited from the non-repeat
of an unfavorable inventory valuation adjustment in the fourth
quarter of 2019. In Brazil,
earnings decreased due to seasonally lower sales volumes and lower
margins driven by geographic mix slightly offset by lower input
costs and favorable foreign currency impacts. In Europe and Russia, earnings increased primarily due to
lower operating costs in both regions, lower planned maintenance
outage expenses and input costs in Europe, slightly offset by lower sales prices
in both regions and lower sales volumes in Russia.
EQUITY METHOD INVESTMENTS
Ilim joint
venture equity earnings (loss) were $(35) million in the first quarter of 2020
compared with $21 million in the
fourth quarter of 2019. Operationally, earnings decreased
slightly driven by lower sales prices for hardwood pulp, softwood
pulp and containerboard to China
and Russia. The Company recognized
a non-cash after-tax foreign exchange loss of $51 million in the first quarter of 2020
($0.13 per diluted share), compared
with a gain of $8 million in the
fourth quarter of 2019 ($0.02 per
diluted share), primarily due to Ilim's U.S. dollar denominated net
debt.
Graphic Packaging equity earnings on our 18.7% ownership
position were $7 million in the first
quarter of 2020, compared with $9
million in the fourth quarter of 2019.
CORPORATE EXPENSES
Corporate expenses were
$32 million for the first quarter of
2020, compared with $9 million in the
fourth quarter of 2019.
EFFECTIVE TAX RATE
The reported effective tax rate for
the first quarter of 2020 was (588)%, compared to a 2019 fourth
quarter reported effective tax rate of 66%. The reported effective
tax rate in the first quarter reflects the impact of a
non-deductible impairment of our Brazil packaging business, noted below as a
special item. The tax rate in the fourth quarter reflects
additional tax expense primarily related to a foreign deferred tax
valuation allowance.
Excluding special items and non-operating pension expense, the
operational effective tax rate for the first quarter of 2020 was
29%, compared with 26% for the fourth quarter of 2019. The higher
operational effective tax rate in the first quarter is primarily
related to the final measurement of the tax deduction for
equity-classified awards, treated as a discrete period item.
EFFECTS OF SPECIAL ITEMS
Special items in the first
quarter of 2020 amount to a net after-tax charge of
$372 million ($0.94 per diluted
share) compared with $258 million
($0.65 per diluted share) in the
fourth quarter of 2019 and $15
million ($0.04 per diluted
share) in the first quarter of 2019. Special items in all
periods include the following charges (gains):
|
|
First Quarter
2020
|
|
Fourth Quarter
2019
|
|
First Quarter
2019
|
|
(In
millions)
|
|
Before
Tax
|
|
After
Tax
|
|
Before
Tax
|
|
After
Tax
|
|
Before
Tax
|
|
After
Tax
|
|
Restructuring
and other charges, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment
costs
|
|
$
|
8
|
|
|
$
|
6
|
|
|
$
|
21
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
EMEA Packaging
business optimization
|
|
—
|
|
|
—
|
|
|
15
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
Total
restructuring and other charges, net
|
|
8
|
|
|
6
|
|
|
36
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
Brazil Packaging
impairment
|
|
344
|
|
|
337
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Environmental
remediation reserve adjustment
|
|
41
|
|
|
31
|
|
|
10
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
India
transaction
|
|
17
|
|
|
17
|
|
|
5
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
Abandoned property
removal
|
|
9
|
|
|
7
|
|
|
15
|
|
|
12
|
|
|
11
|
|
|
8
|
|
|
Gain on sale of
portion of equity investment in Graphic
Packaging
|
|
(33)
|
|
|
(25)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Foreign value-added
tax refund accrual
|
|
(3)
|
|
|
(2)
|
|
|
(6)
|
|
|
(4)
|
|
|
—
|
|
|
—
|
|
|
Global Cellulose
Fibers goodwill impairment
|
|
—
|
|
|
—
|
|
|
52
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|
Litigation
reserves
|
|
—
|
|
|
—
|
|
|
19
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
Multi-employer
pension plan exit liability adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
12
|
|
|
Gain on sale of EMEA
Packaging box plant
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7)
|
|
|
(6)
|
|
|
Other
|
|
1
|
|
|
1
|
|
|
5
|
|
|
4
|
|
|
1
|
|
|
1
|
|
|
Foreign deferred tax
valuation allowance
|
|
—
|
|
|
—
|
|
|
—
|
|
|
203
|
|
|
—
|
|
|
—
|
|
|
Tax expense (benefit)
related to internal investment
restructuring
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(53)
|
|
|
—
|
|
|
—
|
|
|
Total special
items, net
|
|
$
|
384
|
|
|
$
|
372
|
|
|
$
|
136
|
|
|
$
|
258
|
|
|
$
|
21
|
|
|
$
|
15
|
|
EARNINGS WEBCAST
The company will host a webcast
today 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 website at
internationalpaper.com by clicking on the Performance tab and going
to the Presentations and Events/Webcasts page. A replay of the
webcast will also be on the website 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 first quarter earnings call. The conference ID
number is 3073251. 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 3073251.
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 and Russia. We
produce corrugated packaging products that protect and promote
goods, and enable world-wide 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.,
employ more than 50,000 colleagues and serve more than 25,000
customers in 150 countries. Net sales for 2019 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 that are not historical
in nature may be considered "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Words such as "expects", "anticipates", "believes", "estimates" and
similar expressions identify forward-looking statements. These
statements are not guarantees of future performance and 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) developments related to the COVID-19 pandemic, including
the severity, magnitude and duration of the pandemic, negative
global economic conditions arising from the pandemic, impacts of
governments' responses to the pandemic on our operations, impacts
of the pandemic on commercial activity, our customers and business
partners and consumer preferences and demand, supply chain
disruptions, and disruptions in the credit or financial markets;
(ii) the level of indebtedness and changes in interest rates; (iii)
industry conditions, including but not limited to changes in the
cost or availability of raw materials, energy and transportation
costs, competition International Paper faces, cyclicality and
changes in consumer preferences, demand and pricing for
International Paper products (including changes resulting from the
COVID-19 pandemic); (iv) domestic and global economic conditions
and political changes, changes in currency exchange rates, trade
protectionist policies, downgrades in International Paper's credit
ratings, and/or the credit ratings of banks issuing certain letters
of credit, issued by recognized credit rating organizations, (v)
the amount of International Paper's future pension funding
obligations, and pension and health care costs; (vi)
unanticipated expenditures or other adverse developments related to
the cost of compliance with existing and new environmental, tax,
labor and employment, privacy, and other U.S. and non-U.S.
governmental laws and regulations (including new legal requirements
arising from the COVID-19 pandemic); (vii) any material disruption
at any of International Paper's manufacturing facilities (including
as the result of the COVID-19 pandemic); (viii) risks inherent in
conducting business through joint ventures; (ix) International
Paper's ability to achieve the benefits expected from, and other
risks associated with, acquisitions, joint ventures, divestitures
and other corporate transactions, (x) information technology risks,
and (xi) loss contingencies and pending, threatened or future
litigation, including with respect to environmental related
matters. These and other factors that could cause or
contribute to actual results differing materially from such
forward-looking statements can be found in International Paper's
press releases and U.S. Securities and Exchange Commission
filings. In addition, other risks and uncertainties not
presently known to us or that we currently believe to be immaterial
could affect the accuracy of any forward-looking statements. 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
March 31,
|
|
Three Months
Ended
December 31,
|
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
|
Net
Sales
|
|
$
5,352
|
|
$
5,643
|
|
$
5,498
|
|
|
Costs and
Expenses
|
|
|
|
|
|
|
|
|
Cost of products
sold
|
|
3,746
|
(a)
|
3,929
|
(a)
|
3,666
|
(a)
|
|
Selling and
administrative expenses
|
|
418
|
|
413
|
|
445
|
(g)
|
|
Depreciation,
amortization and cost of timber
harvested
|
|
323
|
(b)
|
315
|
(b)
|
343
|
(b)
|
|
Distribution
expenses
|
|
407
|
|
389
|
|
392
|
|
|
Taxes other than
payroll and income taxes
|
|
44
|
|
43
|
|
42
|
|
|
Restructuring and
other charges, net
|
|
8
|
(c)
|
—
|
|
36
|
(c)
|
|
Net (gains) losses on
sales and impairments of businesses
|
|
344
|
(d)
|
(7)
|
(d)
|
52
|
(d)
|
|
Net (gains) losses on
sales of equity method investments
|
|
(33)
|
(e)
|
—
|
|
—
|
|
|
Interest expense,
net
|
|
117
|
(f)
|
133
|
|
113
|
(f)
|
|
Non-operating pension
expense(income)
|
|
(6)
|
|
10
|
|
9
|
|
|
Earnings (Loss)
Before Income Taxes and Equity Earnings
|
|
(16)
|
|
418
|
|
400
|
|
|
Income tax provision
(benefit)
|
|
94
|
|
106
|
|
263
|
(h)
|
|
Equity earnings
(loss), net of taxes
|
|
(31)
|
|
114
|
|
29
|
|
|
Net Earnings
(Loss)
|
|
(141)
|
|
426
|
|
166
|
|
|
Less: Net earnings
(loss) attributable to noncontrolling interests
|
|
—
|
|
2
|
|
1
|
|
|
Net Earnings
(Loss) Attributable to International Paper Company
|
|
$
(141)
|
|
$
424
|
|
$
165
|
|
|
Basic Earnings Per
Common Share Attributable to International Paper Common
Shareholders
|
|
|
|
|
|
|
|
|
Net earnings
(loss)
|
|
$
(0.36)
|
|
$
1.06
|
|
$
0.42
|
|
|
Diluted Earnings
Per Common Share Attributable to International Paper Common
Shareholders
|
|
|
|
|
|
|
|
|
Net earnings
(loss)
|
|
$
(0.36)
|
|
$
1.05
|
|
$
0.42
|
|
|
Average Shares of
Common Stock Outstanding - Diluted
|
|
392.6
|
|
403.2
|
|
395.6
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this consolidated statement of
operations.
|
|
|
(a)
|
Includes pre-tax
charges of $41 million ($31 million after taxes) and $10 million
($8 million after taxes) for three months ended March 31, 2020 and
December 31, 2019, respectively, for environmental remediation
reserve adjustments, charges of $17 million (before and after
taxes) and $3 million (before and after taxes) for the three months
ended March 31, 2020 and December 31, 2019, respectively, for the
fair value adjustment of our remaining investment in India, pre-tax
charges of $9 million ($7 million after taxes), $11 million ($8
million after taxes) and $15 million ($12 million after taxes) for
the three months ended March 31, 2020, March 31, 2019 and December
31, 2019, respectively, for the removal of abandoned property at
our mills, pre-tax income of $2 million ($1 million after taxes)
and $3 million ($2 million after taxes) for the three months ended
March 31, 2020 and December 31, 2019 respectively, for the accrual
of a foreign value-added tax refund, a pre-tax charge of $16
million ($12 million after taxes) for the three months ended March
31, 2019 for costs associated with a multi-employer pension plan
exit liability, a pre-tax charge of $19 million ($14 million after
taxes) for the three months ended December 31, 2019 for litigation
reserves and a charge of $2 million (before and after taxes) for
the three months ended December 31, 2019 for the write-off of
inventory related to the optimization of our EMEA Packaging
business.
|
|
|
|
(b)
|
Includes pre-tax
charges of $1 million (before and after taxes), $1 million (before
and after taxes) and $2 million ($1 million after taxes) for the
three months ended March 31, 2020, March 31, 2019 and December 31,
2019, respectively, for accelerated depreciation associated with
the announced conversion of a paper machine at our Riverdale mill
to containerboard production.
|
|
|
|
(c)
|
Includes pre-tax
charges of $8 million ($6 million after taxes) and $21 million ($16
million after taxes) for the three months ended March 31, 2020 and
December 31, 2019, respectively, for debt extinguishment costs and
a pre-tax charge of $15 million ($12 million after taxes) for the
three months ended December 31, 2019 primarily for severance
related to the optimization of our EMEA Packaging
business.
|
|
|
|
(d)
|
Includes a pre-tax
loss of $20 million ($13 million after taxes) for the three months
ended March 31, 2020 for the impairment of the net assets of our
Brazil Packaging business, a loss of $324 million (before and after
taxes) for the three months ended March 31, 2020 related to the
foreign currency cumulative translation adjustment resulting from
the classification of the assets and liabilities of our Brazil
Packaging business as held for sale, a pre-tax gain of $7 million
($6 million after taxes) and a loss of $1 million (before and after
taxes) for the three months ended March 31, 2019 and December 31,
2019 respectively, related to the sale of a box plant in our EMEA
packaging business, a pre-tax loss of $52 million ($42 million
after taxes) for the three months ended December 31, 2019 related
to the impairment of goodwill in our Global Cellulose Fibers
business and a gain of $1 million (before and after taxes) for the
three months ended December 31, 2019 for the impairment of the net
assets of our India Papers business.
|
|
|
|
(e)
|
Includes a pre-tax
gain of $33 million ($25 million after taxes) for the three months
ended March 31, 2020 related to the monetization of approximately
19% of our equity investment in Graphic Packaging.
|
|
|
|
(f)
|
Includes pre-tax
income of $1 million (before and after taxes) and $3 million ($2
million after taxes) for the three months ended March 31, 2020 and
December 31, 2019, respectively, for interest income associated
with the accrual of a foreign value-added tax refund.
|
|
|
|
(g)
|
Includes a pre-tax
charge of $3 million ($2 million after taxes) for the three months
ended December 31, 2019 for transaction costs associated with the
divestiture of our India Papers business.
|
|
|
|
(h)
|
Includes tax expense
of $203 million for the three months ended December 31, 2019
related to a foreign deferred tax valuation allowance and a tax
benefit of $53 million for the three months ended December 31, 2019
related to an internal investment restructuring.
|
|
INTERNATIONAL
PAPER COMPANY
Reconciliation of Net Earnings (Loss)
Attributable to International Paper Company to Adjusted Operating
Earnings
Preliminary and Unaudited
(In millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
Three Months
Ended
December 31,
|
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
|
Net Earnings
(Loss) Attributable to International Paper Company
|
|
$
(141)
|
|
$
424
|
|
$
165
|
|
|
Add back:
Non-operating pension expense (income)
|
|
(5)
|
|
8
|
|
7
|
|
|
Add back: Special
items expense (income)
|
|
372
|
|
15
|
|
258
|
|
|
Adjusted Operating
Earnings
|
|
$
226
|
|
$
447
|
|
$
430
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
Three Months
Ended
December 31,
|
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
|
Diluted Earnings
per Common Share as Reported
|
|
$
(0.36)
|
|
$
1.05
|
|
$
0.42
|
|
|
Add back:
Non-operating pension expense (income)
|
|
(0.01)
|
|
0.02
|
|
0.02
|
|
|
Add back: Special
items expense (income)
|
|
0.94
|
|
0.04
|
|
0.65
|
|
|
Adjusted Operating
Earnings per Share
|
|
$
0.57
|
|
$
1.11
|
|
$
1.09
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
|
|
|
|
|
|
|
|
|
The Company
calculates Adjusted Operating Earnings (non-GAAP) by excluding the
after-tax effect of non-operating pension expense (income) and
items considered by management to be unusual (special items) as
reflected in the Consolidated Statement of Operations and related
notes 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 consolidated 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 (loss) attributable to
International Paper is the most directly comparable GAAP
measure.
|
|
INTERNATIONAL
PAPER COMPANY
Sales and Earnings by Business
Segment
Preliminary and Unaudited
(In millions)
|
|
|
|
|
|
|
|
|
|
Net Sales by
Business Segment
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
Three Months
Ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
|
Industrial
Packaging
|
$
3,819
|
|
$
3,832
|
|
$
3,810
|
|
|
Global Cellulose
Fibers
|
568
|
|
689
|
|
577
|
|
|
Printing
Papers
|
908
|
|
1,065
|
|
1,067
|
|
|
Corporate and
Inter-segment Sales
|
57
|
|
57
|
|
44
|
|
|
Net
Sales
|
$
5,352
|
|
$
5,643
|
|
$
5,498
|
|
|
Operating Profit
by Business Segment
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
Three Months
Ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
|
Industrial
Packaging
|
$
470
|
|
$
421
|
|
$
605
|
|
|
Global Cellulose
Fibers
|
(54)
|
|
35
|
|
(45)
|
|
|
Printing
Papers
|
96
|
|
144
|
|
109
|
|
|
Total Business
Segment Operating Profit
|
$
512
|
|
$
600
|
|
$
669
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss)
Before Income Taxes and Equity Earnings
|
$
(16)
|
|
$
418
|
|
$
400
|
|
|
Interest expense,
net
|
117
|
(a)
|
133
|
|
113
|
(a)
|
|
Noncontrolling
interest/equity earnings adjustment (d)
|
—
|
|
(3)
|
|
(1)
|
|
|
Corporate expenses,
net
|
32
|
|
21
|
|
9
|
|
|
Corporate special
items, net
|
33
|
(b)
|
—
|
|
56
|
(b)
|
|
Business special
items, net
|
352
|
(c)
|
21
|
(c)
|
83
|
(c)
|
|
Non-operating pension
expense (income)
|
(6)
|
|
10
|
|
9
|
|
|
Business Segment
Operating Profit (e)
|
$
512
|
|
$
600
|
|
$
669
|
|
|
Equity Earnings
(Loss) in Ilim S.A., Net of Taxes
|
$
(35)
|
|
$
101
|
|
$
21
|
|
|
Equity Earnings
(Loss) in Graphic Packaging International Partners,
LLC
|
$
7
|
|
$
13
|
|
$
9
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes income of $1
million and $3 million for the three months ended March 31, 2020
and December 31, 2019, respectively, for interest income associated
with the accrual of a foreign value-added tax refund.
|
|
|
|
(b)
|
Includes charges of
$41 million and $10 million for the three months ended March 31,
2020 and December 31, 2019, respectively, for environmental
remediation reserve adjustments, charges of $17 million and $3
million for the three months ended March 31, 2020 and December 31,
2019, respectively, for the fair value adjustment of our remaining
investment in India, a gain of $33 million for the three months
ended March 31, 2020 related to the monetization of approximately
19% of our equity investment in Graphic Packaging, charges of $8
million and $21 million for the three months ended March 31, 2020
and December 31, 2019, respectively, for debt extinguishment costs,
a charge of $19 million for the three months ended December 31,
2019 for litigation reserves and a charge of $3 million for the
three months ended December 31, 2019 for transaction costs
associated with the divestiture of our India Papers
business.
|
|
|
|
(c)
|
Related to Industrial
Packaging, includes a charge of $20 million for the three months
ended March 31, 2020 for the impairment of the net assets of our
Brazil Packaging business, a loss of $324 million for the three
months ended March 31, 2020 related to the foreign currency
cumulative translation adjustment resulting from the classification
of the assets and liabilities of our Brazil Packaging business as
held for sale, charges of $6 million, $8 million and $10 million
for the three months ended March 31, 2020, March 31, 2019 and
December 31, 2019, respectively, for the removal of abandoned
property at our mills, income of $2 million for the three months
ended March 31, 2020 for the accrual of a foreign value-added tax
refund, a charge of $16 million for the three months ended March
31, 2019 for costs associated with a multi-employer pension plan
exit liability, a gain of $7 million and a loss of $1 million for
the three months ended March 31, 2019 and December 31, 2019,
respectively, related to the sale of a box plant in our EMEA
Packaging business and a charge of $17 million for the three months
December 31, 2019 related to the optimization of our EMEA Packaging
business.
|
|
|
|
Related to Global
Cellulose Fibers, includes charges of $3 million for each of the
three months ended March 31, 2020 and March 31, 2019 and $4 million
for the three months ended December 31, 2019 for the removal of
abandoned property at our mills and a charge of $52 million for the
three months ended December 31, 2019 related to the impairment of
goodwill.
|
|
|
|
Related to Printing
Papers, includes charges of $1 million for each of the three months
ended March 31, 2020 and March 31, 2019 and $2 million for the
three months ended December 31, 2019 for accelerated depreciation
associated with the announced conversion of a paper machine at our
Riverdale mill to containerboard production, a charge of $1 million
for the three months ended December 31, 2019 for the removal of
abandoned property at our mills, a gain of $1 million for the three
months ended December 31, 2019 for the impairment of the net assets
of our India Papers business and income of $3 million for the three
months ended December 31, 2019 for the accrual of a foreign
value-added tax refund.
|
|
|
|
(d)
|
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.
|
|
|
|
(e)
|
As set forth in the
chart above, business segment operating profit is defined as
earnings (loss) before income taxes and equity earnings, but
including the impact of equity earnings and noncontrolling
interests, and excluding interest expense, net, corporate expenses,
net, corporate special items, net, business special items, net and
non-operating pension expense. Business segment operating profit is
a measure reported to our management for purposes of making
decisions about allocating resources to our business segments and
assessing the performance of our business segments and is presented
in our financial statement footnotes in accordance with ASC
280.
|
|
INTERNATIONAL
PAPER COMPANY
Sales Volume by Product (a)
Preliminary and
Unaudited
|
|
International
Paper Consolidated
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
Three Months
Ended
December 31,
|
|
|
2020
|
|
2019
|
|
2019
|
|
Industrial Packaging
(In thousands of short tons)
|
|
|
|
|
|
|
Corrugated Packaging
(b)
|
2,624
|
|
2,535
|
|
2,644
|
|
Containerboard
|
827
|
|
697
|
|
769
|
|
Recycling
|
416
|
|
609
|
|
598
|
|
Saturated
Kraft
|
48
|
|
41
|
|
34
|
|
Gypsum /Release
Kraft
|
56
|
|
51
|
|
50
|
|
Bleached
Kraft
|
7
|
|
7
|
|
5
|
|
EMEA Packaging
(b)
|
441
|
|
370
|
|
414
|
|
Brazilian
Packaging (b)
|
90
|
|
85
|
|
94
|
|
European Coated
Paperboard
|
111
|
|
104
|
|
105
|
|
Industrial
Packaging
|
4,620
|
|
4,499
|
|
4,713
|
|
Global Cellulose
Fibers (In thousands of metric tons) (c)
|
901
|
|
859
|
|
895
|
|
Printing Papers (In
thousands of short tons)
|
|
|
|
|
|
|
U.S. Uncoated
Papers
|
415
|
|
448
|
|
459
|
|
European &
Russian Uncoated Papers
|
360
|
|
354
|
|
383
|
|
Brazilian Uncoated
Papers
|
240
|
|
244
|
|
344
|
|
Indian Uncoated
Papers
|
—
|
|
68
|
|
23
|
|
Printing
Papers
|
1,015
|
|
1,114
|
|
1,209
|
|
|
|
|
|
|
|
|
(a)
|
Sales volumes include
third party and inter-segment sales and exclude sales of equity
investees.
|
|
|
|
(b)
|
Volumes for
corrugated box sales reflect consumed tons sold (CTS). Board sales
by these businesses reflect invoiced tons.
|
|
|
|
(c)
|
Includes North
American, European and Brazilian volumes and internal sales to
mills.
|
|
INTERNATIONAL
PAPER COMPANY
Consolidated Balance Sheet
Preliminary and Unaudited
(In millions)
|
|
|
March 31,
2020
|
|
December 31,
2019
|
|
Assets
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash and Temporary
Investments
|
|
$
1,239
|
|
$
511
|
|
Accounts and Notes
Receivable, Net
|
|
3,226
|
|
3,280
|
|
Contract
Assets
|
|
423
|
|
393
|
|
Inventories
|
|
2,002
|
|
2,208
|
|
Assets Held for
Sale
|
|
112
|
|
—
|
|
Other
|
|
213
|
|
247
|
|
Total Current
Assets
|
|
7,215
|
|
6,639
|
|
Plants, Properties
and Equipment, Net
|
|
12,691
|
|
13,004
|
|
Forestlands
|
|
308
|
|
391
|
|
Investments
|
|
1,370
|
|
1,721
|
|
Financial Assets of
Variable Interest Entities
|
|
7,093
|
|
7,088
|
|
Goodwill
|
|
3,304
|
|
3,347
|
|
Right of Use
Assets
|
|
422
|
|
434
|
|
Deferred Charges and
Other Assets
|
|
812
|
|
847
|
|
Total
Assets
|
|
$
33,215
|
|
$
33,471
|
|
Liabilities and
Equity
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Notes Payable and
Current Maturities of Long-Term Debt
|
|
$
664
|
|
$
168
|
|
Current Nonrecourse
Financial Liabilities of Variable Interest Entities
|
|
4,220
|
|
4,220
|
|
Accounts Payable and
Other Current Liabilities
|
|
4,094
|
|
4,258
|
|
Liabilities Held for
Sale
|
|
364
|
|
—
|
|
Total Current
Liabilities
|
|
9,342
|
|
8,646
|
|
Long-Term
Debt
|
|
9,561
|
|
9,597
|
|
Long-Term Nonrecourse
Financial Liabilities of Variable Interest Entities
|
|
2,087
|
|
2,085
|
|
Deferred Income
Taxes
|
|
2,662
|
|
2,633
|
|
Pension Benefit
Obligation
|
|
1,521
|
|
1,578
|
|
Postretirement and
Postemployment Benefit Obligation
|
|
252
|
|
270
|
|
Long-Term Lease
Obligations
|
|
293
|
|
304
|
|
Other
Liabilities
|
|
636
|
|
640
|
|
Equity
|
|
|
|
|
|
Invested Capital, Net
of Treasury Stock
|
|
(1,205)
|
|
(695)
|
|
Retained
Earnings
|
|
8,062
|
|
8,408
|
|
Total International
Paper Shareholders' Equity
|
|
6,857
|
|
7,713
|
|
Noncontrolling
interests
|
|
4
|
|
5
|
|
Total
Equity
|
|
6,861
|
|
7,718
|
|
Total Liabilities
and Equity
|
|
$
33,215
|
|
$
33,471
|
|
INTERNATIONAL
PAPER COMPANY
Consolidated Statement of Cash
Flows
Preliminary and Unaudited
(In millions)
|
|
Three Months Ended
March 31,
|
|
2020
|
|
2019
|
|
Operating
Activities
|
|
|
|
|
Net earnings
(loss)
|
$
(141)
|
|
$
426
|
|
Depreciation,
amortization and cost of timber harvested
|
323
|
|
315
|
|
Deferred income tax
expense (benefit), net
|
35
|
|
22
|
|
Restructuring and
other charges, net
|
8
|
|
—
|
|
Net (gains) losses on
sales of equity method investments
|
(33)
|
|
—
|
|
Net (gains) losses on
sales and impairments of businesses
|
344
|
|
(7)
|
|
Equity method
dividends received
|
5
|
|
6
|
|
Equity (earnings)
losses, net
|
31
|
|
(114)
|
|
Periodic pension
expense, net
|
11
|
|
26
|
|
Other, net
|
166
|
|
46
|
|
Changes in current
assets and liabilities
|
|
|
|
|
Accounts and notes
receivable
|
(107)
|
|
26
|
|
Contract
assets
|
(33)
|
|
(15)
|
|
Inventories
|
60
|
|
(22)
|
|
Accounts payable and
accrued liabilities
|
(31)
|
|
34
|
|
Interest
payable
|
(12)
|
|
(25)
|
|
Other
|
23
|
|
15
|
|
Cash Provided By
(Used For) Operating Activities
|
649
|
|
733
|
|
Investment
Activities
|
|
|
|
|
Invested in capital
projects, net of insurance recoveries
|
(286)
|
|
(293)
|
|
Acquisitions, net of
cash acquired
|
—
|
|
(17)
|
|
Proceeds from sales
of equity method investments
|
250
|
|
—
|
|
Proceeds from sales
of businesses, net of cash divested
|
—
|
|
17
|
|
Proceeds from sale of
fixed assets
|
1
|
|
3
|
|
Other
|
—
|
|
(4)
|
|
Cash Provided By
(Used For) Investment Activities
|
(35)
|
|
(294)
|
|
Financing
Activities
|
|
|
|
|
Repurchases of common
stock and payments of restricted stock tax withholding
|
(41)
|
|
(229)
|
|
Issuance of
debt
|
560
|
|
208
|
|
Reduction of
debt
|
(136)
|
|
(142)
|
|
Change in book
overdrafts
|
(9)
|
|
(25)
|
|
Dividends
paid
|
(202)
|
|
(201)
|
|
Other
|
(7)
|
|
—
|
|
Cash Provided By
(Used for) Financing Activities
|
165
|
|
(389)
|
|
Cash Included in
Assets Held for Sale
|
(9)
|
|
—
|
|
Effect of Exchange
Rate Changes on Cash
|
(42)
|
|
2
|
|
Change in Cash and
Temporary Investments
|
728
|
|
52
|
|
Cash and Temporary
Investments
|
|
|
|
|
Beginning of the
period
|
511
|
|
589
|
|
End of the
period
|
$
1,239
|
|
$
641
|
|
INTERNATIONAL
PAPER COMPANY
Reconciliation of Cash Provided by
Operations to Free Cash Flow
Preliminary and Unaudited
(In millions)
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
Cash Provided By
(Used For) Operating Activities
|
$
649
|
|
$
733
|
|
|
Adjustments:
|
|
|
|
|
|
Cash invested in
capital projects, net of insurance recoveries
|
(286)
|
|
(293)
|
|
|
Free Cash
Flow
|
$
363
|
|
$
440
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
The non-GAAP
financial measures presented in this release have limitations as
analytical tools and should not be considered in isolation or as a
substitute for an analysis of our results calculated in accordance
with GAAP. In addition, because not all companies use identical
calculations, the Company's presentation of non-GAAP measures in
this release may not be comparable to similarly titled measures
disclosed by other companies, including companies in the same
industry as International Paper.
|
|
|
Management believes
certain non-U.S. GAAP financial measures, when used in conjunction
with information presented in accordance with U.S. GAAP, can
facilitate a better understanding of the impact of various factors
and trends on the Company's financial condition and results of
operations. Management also uses these non-U.S. GAAP
financial measures in making financial, operating and planning
decisions and in evaluating the Company's performance.
|
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SOURCE International Paper