MEMPHIS, Tenn., Oct. 25, 2017 /PRNewswire/ -- International Paper (NYSE: IP) today
reported third quarter 2017 net earnings attributable to International Paper of $395 million or
$0.95 per share compared with net earnings of $80 million or
$0.19 per share for the second quarter of 2017 and net earnings of $312
million or $0.75 per share in the third quarter of 2016. Net earnings in all periods include
the impact of special items, if any, non-operating pension expense and discontinued operations.
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Diluted Net EPS Attributable to International Paper Shareholders and
Adjusted Operating EPS
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Third
Quarter
2017
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Second
Quarter
2017
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Third
Quarter
2016
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Net Earnings
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$
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0.95
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$
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0.19
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$
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0.75
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Add Back – Discontinued Operations (Gain) Loss
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—
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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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0.95
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0.19
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0.75
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Add Back – Non-Operating Pension Expense
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0.05
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0.05
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0.06
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Add Back – Net Special Items Expense (Income)
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0.08
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0.41
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0.10
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Adjusted Operating Earnings*
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$
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1.08
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$
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0.65
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$
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0.91
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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. 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 2017 were $449 million or $1.08 per share compared with $270 million or $0.65
per share in the second quarter of 2017 and $380 million or $0.91 per
share in the third quarter of 2016.
Quarterly net sales were $5.9 billion in the third quarter of 2017 compared with $5.8 billion in the second quarter of 2017 and $5.3 billion in the third
quarter of 2016. The year-over-year revenue increase was primarily due to the pulp business that was acquired in late
2016.
Business segment operating profits in the third quarter of 2017 were $707 million, compared with
$129 million in the second quarter of 2017 and $613 million in the
third quarter of 2016. The second quarter of 2017 includes the impact of the Kleen Products settlement.
Cash provided by (used for) operations was $(709) million in the third quarter of 2017 and
$341 million in the third quarter of 2016. Free cash flow (non-GAAP) was $624 million for the third quarter of 2017 and $575 million in the third quarter
of 2016. The third quarter 2017 cash used for operations includes a $1.25 billion cash
contribution to the U.S. qualified pension plan and the $354 million Kleen Products settlement.
"We had a solid third quarter driven by price realization across key businesses and significantly lower maintenance outage
costs, even as our operations were impacted by two hurricanes and record high recycled fiber prices," said Mark Sutton, Chairman and Chief Executive Officer. "Looking forward, continued strong demand across our
Industrial Packaging and Global Cellulose Fibers businesses, combined with prior price increases, should keep International Paper
on track to deliver our expected targeted earnings growth in 2017."
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). The combination of
IP's legacy pulp business with the acquired pulp business in 2016 is now called Global Cellulose Fibers and reported as a
separate business segment (previously reported in Printing Papers). Prior periods have been restated to reflect this
change. Third quarter 2017 business segment operating profits and business trends compared with the prior quarter are as
follows:
Industrial Packaging operating profits in the third quarter of 2017 were $469 million
($484 million excluding special items) compared with $50 million
($407 million excluding special items) in the second quarter of 2017. In North America,
overall market conditions remain healthy, resulting in higher sales price realizations for containerboard and boxes. Planned
maintenance outage costs were lower, partially offset by higher input costs primarily for recycled fiber. The negative
impact of the hurricanes in the third quarter was about $20 million. Sales volume in EMEA was
seasonally lower, while Brazil results improved due to higher sales volume and prices.
Global Cellulose Fibers operating profits in the third quarter of 2017 were $49 million
($57 million excluding special items) compared with $7 million
($12 million excluding special items) in the second quarter of 2017. Improvement in earnings
was driven by improved sales prices, lower maintenance outage costs and strong synergy realization. The negative impact of
the hurricanes in the third quarter was about $5 million.
Printing Papers operating profits in the third quarter of 2017 were $135 million versus
$86 million ($88 million excluding special items) in the second
quarter of 2017. In North America, seasonally higher sales volumes and lower maintenance outage costs were slightly offset
by sales price erosion. Higher export sales prices, higher domestic sales volumes and lower maintenance outage costs in
Brazil were partially offset by lower export sales volumes and unfavorable foreign exchange.
Earnings in Europe and Russia were higher primarily due to
lower maintenance outage costs.
Consumer Packaging operating profits in the third quarter of 2017 were $54 million
compared with a loss of $14 million (a loss of $5 million excluding
special items) in the second quarter of 2017. Earnings increased in North America
due to increased sales prices, higher sales volumes, improved operations and lower maintenance outage costs. Earnings in
Europe reflect higher sales volumes and lower maintenance outage expenses.
International Paper recorded Ilim joint venture equity earnings of $48 million in the
third quarter of 2017 compared with $21 million in the second quarter of 2017.
Operationally, sales prices improved, primarily for export sales, but sales volumes were lower due to production
constraints resulting from planned maintenance outages. The Company recognized a non-cash after-tax foreign exchange gain of
$7 million in the third quarter of 2017 ($0.02 per share), compared
with a loss of $18 million in the second quarter of 2017 ($0.04 per
share), primarily due to Ilim's U.S. dollar denominated net debt.
CORPORATE EXPENSES
Net corporate expenses, excluding non-operating pension expense, were $19 million for
the third quarter of 2017, compared with $4 million in the second quarter of 2017. The increase in
the quarter was due to other corporate reserves and a decline in the fair value of an energy hedging contract.
EFFECTIVE TAX RATE
The reported effective tax rate for the third quarter of 2017 was 31% compared to a 2017 second quarter effective tax
rate of 298%, reflecting a tax benefit for the second quarter of $89 million that includes a net
$47 million tax benefit primarily related to income tax refund claims. Excluding special
items and non-operating pension expense, the effective tax rate for the third quarter of 2017 was 28%, compared with an effective
tax rate of 30% in the second quarter of 2017. The lower effective tax rate for the third quarter is primarily due to
income tax credits related to both biomass investments and foreign taxes.
EFFECTS OF SPECIAL ITEMS
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 abandoned property at our mills. Also included in special items is a net tax expense of $19
million due to international legal entity restructuring.
Special items in the second quarter of 2017 included a pre-tax gain of $16 million ($11 million after taxes) for Restructuring and other charges. Included within Restructuring and other charges
were 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. Special items also included a pre-tax charge of $354 million ($219 million after taxes) related to an agreement to settle the Kleen Products antitrust class action lawsuit,
a pre-tax loss of $9 million ($4 million after taxes) for the
impairment of the assets of our Foodservice business in Asia, a pre-tax loss of $5 million ($3 million after taxes) for integration costs associated with the
2016 acquisition of the Weyerhaeuser pulp business, and a net charge of $1 million (before and
after taxes) for other items. Also included in special items is a net tax benefit of $47
million primarily due to income tax refund claims.
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 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.
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
62365916. 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
62365916.
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 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; papers that facilitate education and communication; and paper bags,
cups and food containers that provide convenience and portability. We are headquartered in Memphis,
Tenn., and employ approximately 55,000 colleagues located in more than 24 countries. Net sales for 2016 were
$21 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. 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 failure to realize the
expected synergies and cost-savings from our purchase of the pulp business of Weyerhaeuser Company or delay in realization
thereof; (viii) purchase price adjustments relating to our pending transaction to transfer our North American
consumer packaging business to Graphic Packaging Holding Company in exchange for, among other things, an equity interest in an
entity that will hold the assets for the combined business; (ix) receipt of regulatory approvals for the Graphic Packing
transaction and the successful fulfillment or waiver of all other closing conditions without unexpected delays or conditions;
(x) the successful closing of the Graphic Packing transaction within the estimated timeframe; (xi) the
uncertainty of the expected financial performance of the combined business following completion of the Graphic Packaging
transaction; (xii) the failure of the combined business to realize the expected synergies, cost-savings and other benefits from
the Graphic Packaging transaction or delay in realization thereof; (xiii) the successful financing of the Graphic Packaging
transaction; (ix) unforeseen tax treatment relating to the Graphic Packaging transaction, (xv) litigation related to
the Graphic Packaging transaction or limitations or restrictions imposed by regulatory authorities that may delay or
negatively impact the Graphic Packaging transaction; and (xvi) our ability to achieve the benefits we expect from all
other 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.
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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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2017
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2016
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2017
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2017
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2016
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Net Sales
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$ 5,913
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$ 5,266
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$ 5,772
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$ 17,196
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$ 15,698
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Costs and Expenses
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Cost of products sold
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4,024
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(a)
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3,622
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(e)
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4,105
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(i)
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12,069
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(p)
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11,345
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(t)
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Selling and administrative expenses
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431
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(b)
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380
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(f)
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422
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(j)
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1,275
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(q)
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1,142
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(u)
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Depreciation, amortization and cost of timber harvested
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373
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(c)
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314
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357
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1,075
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(c)
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899
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Distribution expenses
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386
|
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353
|
|
390
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1,155
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1,012
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Taxes other than payroll and income taxes
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44
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41
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43
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|
132
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123
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Restructuring and other charges
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—
|
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46
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(g)
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(16)
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(k)
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(16)
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(k)
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47
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(v)
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Net (gains) losses on sales and impairment of businesses
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—
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|
5
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(h)
|
9
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(l)
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9
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(l)
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70
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(w)
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Litigation settlement
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—
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—
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354
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(m)
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354
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(m)
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—
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Net bargain purchase gain on acquisition of business
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—
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—
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—
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(6)
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(r)
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—
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Interest expense, net
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152
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|
132
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|
137
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(n)
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431
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(n)
|
384
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Earnings (Loss) From Continuing Operations Before Income Taxes and
Equity Earnings
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503
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(a-c)
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373
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(e-h)
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(29)
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(i-n)
|
718
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(c,k-n,p-r)
|
676
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(t-w)
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Income tax provision (benefit)
|
|
153
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(d)
|
107
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(89)
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(o)
|
147
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(s)
|
139
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(x)
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Equity earnings (loss), net of taxes
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|
45
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|
43
|
|
20
|
|
113
|
|
151
|
|
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Earnings (Loss) From Continuing Operations
|
|
395
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(a-d)
|
309
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(e-h)
|
80
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(i-o)
|
684
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(c,k-n,p-s)
|
688
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(t-x)
|
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Discontinued operations, net of taxes
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|
—
|
|
—
|
|
—
|
|
—
|
|
(5)
|
(y)
|
|
Net Earnings (Loss)
|
|
395
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(a-d)
|
309
|
(e-h)
|
80
|
(i-o)
|
684
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(c,k-n,p-s)
|
683
|
(t-y)
|
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Less: Net earnings (loss) attributable to noncontrolling
interests
|
|
—
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(3)
|
|
—
|
|
—
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(3)
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Net Earnings (Loss) Attributable to International Paper
Company
|
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$ 395
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(a-d)
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$ 312
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(e-h)
|
$
80
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(i-o)
|
$ 684
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(c,k-n,p-s)
|
$ 686
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(t-y)
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Basic Earnings Per Common Share Attributable to International Paper
Common Shareholders
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|
|
|
|
|
|
|
|
|
|
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Earnings (loss) from continuing operations
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|
$ 0.96
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(a-d)
|
$ 0.76
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(e-h)
|
$
0.19
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(i-o)
|
$ 1.65
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(c,k-n,p-s)
|
$ 1.68
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(t-x)
|
|
Discontinued operations
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|
—
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|
—
|
|
—
|
|
—
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(0.01)
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(y)
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Net earnings (loss)
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$ 0.96
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(a-d)
|
$ 0.76
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(e-h)
|
$
0.19
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(i-o)
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$ 1.65
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(c,k-n,p-s)
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$ 1.67
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(t-y)
|
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Diluted Earnings Per Common Share Attributable to International Paper
Common Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
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Earnings (loss) from continuing operations
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$ 0.95
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(a-d)
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$ 0.75
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(e-h)
|
$
0.19
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(i-o)
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$ 1.64
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(c,k-n,p-s)
|
$ 1.66
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(t-x)
|
|
Discontinued operations
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|
—
|
|
—
|
|
—
|
|
—
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|
(0.01)
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(y)
|
|
Net earnings (loss)
|
|
$ 0.95
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(a-d)
|
$ 0.75
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(e-h)
|
$
0.19
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(i-o)
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$ 1.64
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(c,k-n,p-s)
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$ 1.65
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(t-y)
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Average Shares of Common Stock Outstanding - Diluted
|
|
417.4
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|
415.3
|
|
416.4
|
|
417.4
|
|
415.5
|
|
|
Cash Dividends Per Common Share
|
|
$ 0.4625
|
|
$ 0.4400
|
|
$ 0.4625
|
|
$ 1.3875
|
|
$ 1.3200
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Amounts Attributable to International Paper Common
Shareholders
|
|
|
|
|
|
|
|
|
|
|
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Earnings (loss) from continuing operations, net of tax
|
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$ 395
|
(a-d)
|
$ 312
|
(e-h)
|
$
80
|
(i-o)
|
$ 684
|
(c,k-n,p-s)
|
$ 691
|
(t-x)
|
|
Discontinued operations, net of tax
|
|
—
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|
—
|
|
—
|
|
—
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|
(5)
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(y)
|
|
Net earnings
|
|
$ 395
|
(a-d)
|
$ 312
|
(e-h)
|
$
80
|
(i-o)
|
$ 684
|
(c,k-n,p-s)
|
$ 686
|
(t-y)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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The accompanying notes are an integral part of this consolidated statement
of operations.
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|
|
|
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(a)
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Includes a pre-tax charge of $7 million ($4 million after taxes) related to
the Global Cellulose Fibers and Industrial Packaging businesses for abandoned property at our mills.
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(b)
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Includes a pre-tax charge of $6 million ($4 million after taxes) for
integration costs associated with the pulp business acquired in December 2016.
|
|
(c)
|
Includes a pre-tax charge of $10 million ($7 million after taxes) for
accelerated amortization of a Brazil Packaging intangible asset.
|
|
(d)
|
Includes a tax expense of $19 million for international investment
restructuring.
|
|
(e)
|
Includes a pre-tax charge of $8 million ($5 million after taxes) for the
write-off of certain regulatory pre-engineering costs.
|
|
(f)
|
Includes a pre-tax charge of $7 million ($4 million after taxes) for costs
associated with the agreement to purchase the Weyerhaeuser Pulp business.
|
|
(g)
|
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.
|
|
(h)
|
Includes a pre-tax charge of $5 million ($4 million after taxes) for costs
associated with the sale of our Asia corrugated packaging business.
|
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(i)
|
Includes a pre-tax charge of $5 million ($3 million after taxes) related to
the Global Cellulose Fibers, Consumer Packaging, Industrial Packaging and Printing Papers businesses for abandoned
property at our mills.
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(j)
|
Includes a pre-tax charge of $5 million ($3 million after taxes) for
integration costs associated with the pulp business acquired in December 2016.
|
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(k)
|
Includes a 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.
|
|
(l)
|
Includes a pre-tax charge of $9 million ($4 million after taxes) for the
impairment of the assets of our Foodservice business in Asia.
|
|
(m)
|
Includes a pre-tax charge of $354 million ($219 million after taxes)
related to the agreement to settle the Kleen Products anti-trust class action lawsuit.
|
|
(n)
|
Includes a pre-tax gain of $4 million ($2 million after taxes) for interest
income related to an income tax refund claim.
|
|
(o)
|
Includes a net tax benefit of $47 million primarily due to income tax
refund claims.
|
|
(p)
|
Includes a pre-tax charge of $14 million ($8 million after taxes) to
amortize the inventory fair value step-up for the pulp business acquired in December 2016, and pre-tax charges of $14
million ($9 million after taxes) related to the Global Cellulose Fibers, Consumer Packaging, Industrial Packaging and
Printing Papers businesses for abandoned property at our mills.
|
|
(q)
|
Includes a pre-tax charge of $15 million ($9 million after taxes) for costs
associated with the pulp business acquisition in December 2016.
|
|
(r)
|
Includes a net bargain purchase gain of $6 million (before and after taxes)
associated with the June 2016 Holmen Paper mill acquisition in Madrid, Spain.
|
|
(s)
|
Includes a net tax benefit of $47 million primarily due to income tax
refund claims and a tax expense of $34 million for international investment restructuring.
|
|
(t)
|
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.
|
|
(u)
|
Includes a pre-tax charge of $12 million ($7 million after taxes) for costs
associated with the agreement to purchase the Weyerhaeuser Pulp business.
|
|
(v)
|
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.
|
|
(w)
|
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.
|
|
(x)
|
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.
|
|
(y)
|
Includes a pre-tax charge of $8 million ($5 million after taxes) for a
legal settlement associated with the xpedx business.
|
|
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,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2017
|
|
2016
|
|
|
Net Earnings (Loss) Attributable to International Paper
Company
|
|
$ 395
|
|
$ 312
|
|
$
80
|
|
$ 684
|
|
$ 686
|
|
|
Add back: Discontinued operations (gain) loss
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5
|
(e)
|
|
Earnings (Loss) from Continuing Operations, including non-controlling
interest
|
|
395
|
|
312
|
|
80
|
|
684
|
|
691
|
|
|
Add back: Non-operating pension expense
|
|
20
|
|
26
|
|
21
|
|
60
|
|
352
|
(g)
|
|
Add back: Special items expense (gain)
|
|
34
|
(a)
|
42
|
(b)
|
169
|
(c)
|
224
|
(d)
|
46
|
(f)
|
|
Adjusted Operating Earnings
|
|
$ 449
|
|
$ 380
|
|
$ 270
|
|
$ 968
|
|
$ 1,089
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Three Months Ended
June 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2017
|
|
2016
|
|
|
Diluted Earnings per Common Share as Reported
|
|
$ 0.95
|
|
$ 0.75
|
|
$ 0.19
|
|
$ 1.64
|
|
$ 1.65
|
|
|
Add back: Discontinued operations (gain) loss
|
|
—
|
|
—
|
|
—
|
|
—
|
|
0.01
|
|
|
Continuing Operations
|
|
0.95
|
|
0.75
|
|
0.19
|
|
1.64
|
|
1.66
|
|
|
Add back: Non-operating pension expense
|
|
0.05
|
|
0.06
|
|
0.05
|
|
0.14
|
|
0.85
|
|
|
Add back: Special items expense (gain)
|
|
0.08
|
|
0.10
|
|
0.41
|
|
0.54
|
|
0.11
|
|
|
Adjusted Operating Earnings per Share
|
|
$ 1.08
|
|
$ 0.91
|
|
$ 0.65
|
|
$ 2.32
|
|
$ 2.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
See footnotes (a) - (d) on the Consolidated Statement of
Operations
|
|
|
|
|
|
(b)
|
See footnotes (e) - (h) on the Consolidated Statement of
Operations
|
|
|
|
|
|
(c)
|
See footnotes (i) - (o) on the Consolidated Statement of
Operations
|
|
|
|
|
|
(d)
|
See footnotes (c), (k) - (n), (p) - (s) on the Consolidated Statement of
Operations
|
|
|
|
|
|
(e)
|
See footnote (y) on the Consolidated Statement of Operations
|
|
|
|
|
|
(f)
|
See footnotes (u) - (x) on the Consolidated Statement of
Operations
|
|
|
|
|
|
(g)
|
See footnote (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,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2017
|
|
2016
|
|
|
Industrial Packaging
|
|
$ 3,734
|
|
$ 3,491
|
|
$ 3,706
|
|
$ 10,939
|
|
$ 10,422
|
|
|
Global Cellulose Fibers
|
|
654
|
|
242
|
|
612
|
|
1,830
|
|
713
|
|
|
Printing Papers
|
|
1,039
|
|
1,019
|
|
1,017
|
|
3,051
|
|
3,003
|
|
|
Consumer Packaging
|
|
491
|
|
494
|
|
474
|
|
1,431
|
|
1,490
|
|
|
Corporate and Inter-segment Sales
|
|
(5)
|
|
20
|
|
(37)
|
|
(55)
|
|
70
|
|
|
Net Sales
|
|
$ 5,913
|
|
$ 5,266
|
|
$ 5,772
|
|
$ 17,196
|
|
$ 15,698
|
|
|
Operating Profit by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Three Months Ended
June 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2017
|
|
2016
|
|
|
Industrial Packaging
|
|
$ 469
|
(a)
|
$ 423
|
(f)
|
$ 50
|
(a)
|
$ 884
|
(a)
|
$ 1,277
|
(f)
|
|
Global Cellulose Fibers
|
|
49
|
(b)
|
(38)
|
(g)
|
7
|
(b)
|
(14)
|
(b)
|
(109)
|
(g)
|
|
Printing Papers
|
|
135
|
|
167
|
|
86
|
(c)
|
321
|
(c)
|
419
|
|
|
Consumer Packaging
|
|
54
|
|
61
|
|
(14)
|
(d)
|
73
|
(d)
|
150
|
(h)
|
|
Total Business Segment Operating Profit
|
|
$ 707
|
|
$ 613
|
|
$ 129
|
|
$ 1,264
|
|
$ 1,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) From Continuing Operations
Before Income Taxes and Equity Earnings
|
|
$ 503
|
|
$ 373
|
|
$ (29)
|
|
$ 718
|
|
$ 676
|
|
|
Interest expense, net
|
|
152
|
|
132
|
|
137
|
(e)
|
431
|
(e)
|
384
|
|
|
Noncontrolling interest/equity earnings adjustment (j)
|
|
—
|
|
1
|
|
(1)
|
|
(1)
|
|
1
|
|
|
Corporate items, net
|
|
19
|
|
11
|
|
4
|
|
34
|
|
57
|
|
|
Special items, net
|
|
—
|
|
54
|
|
(16)
|
|
(16)
|
|
46
|
|
|
Non-operating pension expense
|
|
33
|
|
42
|
|
34
|
|
98
|
|
573
|
(i)
|
|
Adjusted Operating Profit
|
|
$ 707
|
|
$ 613
|
|
$ 129
|
|
$ 1,264
|
|
$ 1,737
|
|
|
Equity Earnings (Loss) in Ilim Holdings S.A., Net of Taxes
|
|
$ 48
|
|
$ 46
|
|
$ 21
|
|
$ 119
|
|
$ 154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
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 three months ended June 30, 2017 and the nine months ended September 30, 2017 related to the agreement to
settle 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, $3 million and $9 million for the three months ended September 30, 2017
and June 30, 2017 and nine months ended September
30, 2017, respectively, for other items.
|
|
(b)
|
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, $5 million and $15 million for the three months ended September 30, 2017 and June 30, 2017
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 other items.
|
|
(c)
|
Includes a charge of $2 million for the three months ended June 30, 2017
and nine months ended September 30, 2017 for other items.
|
|
(d)
|
Includes a charge of $9 million for the three months ended June 30, 2017
and nine months ended September 30, 2017 for the impairment of the assets of our Foodservice business
in Asia.
|
|
(e)
|
Includes a gain of $4 million for the three months ended June 30, 2017 and
nine months ended September 30, 2017 for interest income associated with an income tax refund claim.
|
|
(f)
|
Includes charges of $5 million and $70 million for the three months and
nine months ended September 30, 2016, respectively, for the impairment of the assets of our corrugated
packaging business in Asia and costs associated with the sale of that business.
|
|
(g)
|
Includes charges of $7 million and $12 million for the three months and
nine months ended September 30, 2016, respectively, for costs associated with the agreement to purchase
the Weyerhaeuser pulp business.
|
|
(h)
|
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.
|
|
(i)
|
Includes a charge of $439 million for the nine months ended September 30,
2016 for a settlement accounting charge associated with term-vested lump sum payments.
|
|
(j)
|
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, 2017
|
|
|
|
Industrial Packaging
|
|
Global Cellulose Fibers
|
|
Printing Papers
|
|
Consumer Packaging
|
|
Total
|
|
Operating Profit (Loss) as Reported
|
|
$ 469
|
|
$ 49
|
|
$ 135
|
|
$ 54
|
|
$ 707
|
|
Special Items Expense (Income) (a)
|
|
15
|
|
8
|
|
—
|
|
—
|
|
23
|
|
Operating Profit (Loss) Before Special Items
|
|
$ 484
|
|
$ 57
|
|
$ 135
|
|
$ 54
|
|
$ 730
|
|
|
|
|
|
|
Three Months Ended September 30, 2016
|
|
|
|
Industrial Packaging
|
|
Global Cellulose Fibers
|
|
Printing Papers
|
|
Consumer Packaging
|
|
Total
|
|
Operating Profit (Loss) as Reported
|
|
$ 423
|
|
$ (38)
|
|
$ 167
|
|
$ 61
|
|
$ 613
|
|
Special Items Expense (Income) (b)
|
|
5
|
|
7
|
|
—
|
|
—
|
|
12
|
|
Operating Profit (Loss) Before Special Items
|
|
$ 428
|
|
$ (31)
|
|
$ 167
|
|
$ 61
|
|
$ 625
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
|
Industrial Packaging
|
|
Global Cellulose Fibers
|
|
Printing Papers
|
|
Consumer Packaging
|
|
Total
|
|
Operating Profit (Loss) as Reported
|
|
$ 50
|
|
$ 7
|
|
$ 86
|
|
$ (14)
|
|
$ 129
|
|
Special Items Expense (Income) (c)
|
|
357
|
|
5
|
|
2
|
|
9
|
|
373
|
|
Operating Profit (Loss) Before Special Items
|
|
$ 407
|
|
$ 12
|
|
$ 88
|
|
$ (5)
|
|
$ 502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2017
|
|
|
|
Industrial Packaging
|
|
Global Cellulose Fibers
|
|
Printing Papers
|
|
Consumer Packaging
|
|
Total
|
|
Operating Profit (Loss) as Reported
|
|
$ 884
|
|
$ (14)
|
|
$ 321
|
|
$ 73
|
|
$ 1,264
|
|
Special Items Expense (Income) (c)
|
|
367
|
|
32
|
|
2
|
|
9
|
|
410
|
|
Operating Profit (Loss) Before Special Items
|
|
$ 1,251
|
|
$ 18
|
|
$ 323
|
|
$ 82
|
|
$ 1,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016
|
|
|
|
Industrial Packaging
|
|
Global Cellulose Fibers
|
|
Printing Papers
|
|
Consumer Packaging
|
|
Total
|
|
Operating Profit (Loss) as Reported
|
|
$ 1,277
|
|
$ (109)
|
|
$ 419
|
|
$ 150
|
|
$ 1,737
|
|
Special Items Expense (Income) (d)
|
|
70
|
|
12
|
|
—
|
|
9
|
|
91
|
|
Operating Profit (Loss) Before Special Items
|
|
$ 1,347
|
|
$ (97)
|
|
$ 419
|
|
$ 159
|
|
$ 1,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
See footnotes (a) - (b) on Sales and Earnings by Business
Segment
|
|
(b)
|
See footnotes (f) - (g) on Sales and Earnings by Business
Segment
|
|
(c)
|
See footnotes (a) - (d) on Sales and Earnings by Business
Segment
|
|
(d)
|
See footnotes (f) - (h) 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,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2017
|
|
2016
|
|
Industrial Packaging (In thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
Corrugated Packaging (c)
|
|
2,599
|
|
2,640
|
|
2,648
|
|
7,784
|
|
7,801
|
|
Containerboard
|
|
828
|
|
801
|
|
797
|
|
2,438
|
|
2,311
|
|
Recycling
|
|
924
|
|
977
|
|
925
|
|
2,799
|
|
2,873
|
|
Saturated Kraft
|
|
45
|
|
51
|
|
41
|
|
132
|
|
142
|
|
Gypsum /Release Kraft
|
|
54
|
|
49
|
|
58
|
|
165
|
|
142
|
|
Bleached Kraft
|
|
7
|
|
7
|
|
6
|
|
20
|
|
18
|
|
EMEA Packaging (c) (d)
|
|
350
|
|
344
|
|
400
|
|
1,124
|
|
1,091
|
|
Asian Box (c) (e)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
208
|
|
Brazilian Packaging (c)
|
|
93
|
|
93
|
|
87
|
|
266
|
|
254
|
|
Industrial Packaging
|
|
4,900
|
|
4,962
|
|
4,962
|
|
14,728
|
|
14,840
|
|
Global Cellulose Fibers (In thousands of metric tons) (b)
|
|
933
|
|
415
|
|
896
|
|
2,706
|
|
1,233
|
|
Printing Papers (In thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Uncoated Papers
|
|
497
|
|
467
|
|
465
|
|
1,451
|
|
1,402
|
|
European & Russian Uncoated Papers
|
|
365
|
|
358
|
|
380
|
|
1,104
|
|
1,120
|
|
Brazilian Uncoated Papers
|
|
280
|
|
274
|
|
288
|
|
832
|
|
800
|
|
Indian Uncoated Papers
|
|
58
|
|
51
|
|
67
|
|
186
|
|
175
|
|
Uncoated Papers
|
|
1,200
|
|
1,150
|
|
1,200
|
|
3,573
|
|
3,497
|
|
Consumer Packaging (In thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
North American Consumer Packaging
|
|
296
|
|
301
|
|
289
|
|
876
|
|
915
|
|
European Coated Paperboard
|
|
103
|
|
105
|
|
94
|
|
296
|
|
298
|
|
Consumer Packaging
|
|
399
|
|
406
|
|
383
|
|
1,172
|
|
1,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. Includes sales volumes from the pulp business acquired beginning December 1, 2016.
|
|
(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.
|
|
INTERNATIONAL PAPER COMPANY
Consolidated Balance Sheet
Preliminary and Unaudited
(In millions)
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
Assets
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
Cash and Temporary Investments
|
|
$
998
|
|
$
1,033
|
|
Accounts and Notes Receivable, Net
|
|
3,343
|
|
3,001
|
|
Inventories
|
|
2,465
|
|
2,438
|
|
Other
|
|
405
|
|
198
|
|
Total Current Assets
|
|
7,211
|
|
6,670
|
|
Plants, Properties and Equipment, Net
|
|
14,065
|
|
13,990
|
|
Forestlands
|
|
468
|
|
456
|
|
Investments
|
|
336
|
|
360
|
|
Financial Assets of Special Purpose Entities
|
|
7,047
|
|
7,033
|
|
Goodwill
|
|
3,420
|
|
3,364
|
|
Deferred Charges and Other Assets
|
|
1,266
|
|
1,220
|
|
Total Assets
|
|
$
33,813
|
|
$
33,093
|
|
Liabilities and Equity
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
Notes Payable and Current Maturities of Long-Term Debt
|
|
$
958
|
|
$
239
|
|
Accounts Payable and Accrued Liabilities
|
|
3,911
|
|
3,830
|
|
Total Current Liabilities
|
|
4,869
|
|
4,069
|
|
Long-Term Debt
|
|
11,373
|
|
11,075
|
|
Nonrecourse Financial Liabilities of Special Purpose Entities
|
|
6,289
|
|
6,284
|
|
Deferred Income Taxes
|
|
3,505
|
|
3,127
|
|
Pension Benefit Obligation
|
|
2,069
|
|
3,400
|
|
Postretirement and Postemployment Benefit Obligation
|
|
315
|
|
330
|
|
Other Liabilities
|
|
460
|
|
449
|
|
Equity
|
|
|
|
|
|
Invested Capital
|
|
(4)
|
|
(477)
|
|
Retained Earnings
|
|
4,918
|
|
4,818
|
|
Total International Paper Shareholders' Equity
|
|
4,914
|
|
4,341
|
|
Noncontrolling interests
|
|
19
|
|
18
|
|
Total Equity
|
|
4,933
|
|
4,359
|
|
Total Liabilities and Equity
|
|
$
33,813
|
|
$
33,093
|
|
INTERNATIONAL PAPER COMPANY
Consolidated Statement of Cash Flows
Preliminary and Unaudited
(In millions)
|
|
|
Nine Months Ended
September 30,
|
|
|
2017
|
|
2016
|
|
Operating Activities
|
|
|
|
|
|
Net earnings (loss)
|
|
$ 684
|
|
$ 683
|
|
Depreciation, amortization and cost of timber harvested
|
|
1,075
|
|
899
|
|
Deferred income tax expense (benefit), net
|
|
295
|
|
45
|
|
Restructuring and other charges
|
|
(16)
|
|
47
|
|
Pension plan contributions
|
|
(1,250)
|
|
(750)
|
|
Net bargain purchase gain on acquisition of business
|
|
(6)
|
|
—
|
|
Net (gains) losses on sales and impairments of businesses
|
|
9
|
|
70
|
|
Ilim dividends received
|
|
129
|
|
58
|
|
Equity (earnings) loss, net
|
|
(113)
|
|
(151)
|
|
Periodic pension expense, net
|
|
237
|
|
718
|
|
Other, net
|
|
92
|
|
67
|
|
Changes in current assets and liabilities
|
|
|
|
|
|
Accounts and notes receivable
|
|
(293)
|
|
(83)
|
|
Inventories
|
|
(70)
|
|
(6)
|
|
Accounts payable and accrued liabilities
|
|
5
|
|
(37)
|
|
Interest payable
|
|
(11)
|
|
24
|
|
Other
|
|
(198)
|
|
(18)
|
|
Cash Provided By (Used For) Operating Activities
|
|
569
|
|
1,566
|
|
Investment Activities
|
|
|
|
|
|
Invested in capital projects
|
|
(935)
|
|
(903)
|
|
Acquisitions, net of cash acquired
|
|
(45)
|
|
(56)
|
|
Proceeds from divestitures, net of cash divested
|
|
4
|
|
105
|
|
Proceeds from sale of fixed assets
|
|
22
|
|
13
|
|
Other
|
|
(54)
|
|
(130)
|
|
Cash Provided By (Used For) Investment Activities
|
|
(1,008)
|
|
(971)
|
|
Financing Activities
|
|
|
|
|
|
Repurchases of common stock and payments of restricted stock tax
withholding
|
|
(46)
|
|
(132)
|
|
Issuance of debt
|
|
1,366
|
|
3,447
|
|
Reduction of debt
|
|
(369)
|
|
(1,855)
|
|
Change in book overdrafts
|
|
5
|
|
(5)
|
|
Dividends paid
|
|
(573)
|
|
(543)
|
|
Debt tender premiums
|
|
(1)
|
|
(31)
|
|
Other
|
|
(2)
|
|
(3)
|
|
Cash Provided By (Used for) Financing Activities
|
|
380
|
|
878
|
|
Effect of Exchange Rate Changes on Cash
|
|
24
|
|
39
|
|
Change in Cash and Temporary Investments
|
|
(35)
|
|
1,512
|
|
Cash and Temporary Investments
|
|
|
|
|
|
Beginning of the period
|
|
1,033
|
|
1,050
|
|
End of the period
|
|
$ 998
|
|
$ 2,562
|
|
|
|
|
|
|
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,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
Cash provided by (used for) Operating Activities
|
$ (709)
|
|
$ 341
|
|
$ 569
|
|
$ 1,566
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Cash invested in capital projects
|
(271)
|
|
(266)
|
|
(935)
|
|
(903)
|
|
|
Cash contribution to pension plan
|
1,250
|
|
500
|
|
1,250
|
|
750
|
|
|
Cash payment for Kleen Settlement
|
354
|
|
—
|
|
354
|
|
—
|
|
|
Free Cash Flow
|
$ 624
|
|
$ 575
|
|
$ 1,238
|
|
$ 1,413
|
|
|
|
|
|
|
|
|
|
|
|
(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