MEMPHIS, Tenn., July 30,
2020 /PRNewswire/ -- International Paper (NYSE: IP) today
reported second quarter 2020 financial results.
SECOND QUARTER 2020 HIGHLIGHTS
- Second quarter net earnings (loss) attributable to
International Paper of $266 million
($0.67 per diluted share), compared
with $(141) million ($(0.36) per diluted share) in the first quarter
of 2020 and $292 million
($0.73 per diluted share) in the
second 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.
- Second quarter adjusted operating earnings* (non-GAAP) of
$305 million ($0.77 per diluted share) compared with
$226 million ($0.57 per diluted share) in the first quarter of
2020 and $460 million ($1.15 per diluted share) in the second quarter of
2019
- Second quarter cash provided by operations of $890 million and year-to-date of $1.5 billion compared with $1.8 billion year-to-date in the same period of
2019
- Liquidity position of $3.6
billion at the end of the second quarter compared with
$3.5 billion at the end of the first
quarter, which reflects cash and unused committed
facilities
"International Paper delivered solid earnings and generated
strong cash from operations while navigating the COVID-19 pandemic
and its significant economic impact," said Mark Sutton, Chairman and Chief Executive
Officer. "Our performance demonstrates the strength and resilience
of our employees, our diverse customer base and our world-class
manufacturing and supply chain capabilities. Looking ahead, we will
continue to focus on cash generation to reinforce the company's
financial strength as we manage through ongoing uncertainty."
Sutton added, "The health and safety of our employees remain our
most important responsibility. I am proud of their ongoing
commitment to take care of each other and our customers."
Diluted Net EPS
Attributable to International Paper Shareholders and Adjusted
Operating EPS
|
|
|
|
Second
Quarter
2020
|
|
First
Quarter
2020
|
|
Second
Quarter
2019
|
Net Earnings (Loss)
Attributable to International Paper
|
|
$
|
0.67
|
|
|
$
|
(0.36)
|
|
|
$
|
0.73
|
|
Add Back –
Non-Operating Pension Expense (Income)
|
|
(0.03)
|
|
|
(0.01)
|
|
|
0.01
|
|
Add Back – Net
Special Items Expense (Income)
|
|
0.13
|
|
|
0.94
|
|
|
0.41
|
|
Adjusted Operating
Earnings*
|
|
$
|
0.77
|
|
|
$
|
0.57
|
|
|
$
|
1.15
|
|
|
*
|
Adjusted operating
earnings (non-GAAP) is defined as net earnings attributable to
International Paper Company (GAAP) excluding net 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 net special items and non-operating pension expense
(income), see the Consolidated Statement of Operations and related
notes included later in this release.
|
Select Financial
Measures
|
|
(In
millions)
|
|
Second
Quarter
2020
|
|
First
Quarter
2020
|
|
Second
Quarter
2019
|
|
Net Sales
|
|
$
|
4,866
|
|
|
$
|
5,352
|
|
|
$
|
5,667
|
|
|
Net Earnings (Loss)
Attributable to International Paper
|
|
266
|
|
|
(141)
|
|
|
292
|
|
|
Business Segment
Operating Profit
|
|
428
|
|
|
512
|
|
|
629
|
|
|
Adjusted Operating
Earnings
|
|
305
|
|
|
226
|
|
|
460
|
|
|
Cash Provided By
(Used For) Operations
|
|
890
|
|
|
649
|
|
|
1,067
|
|
|
Free Cash
Flow*
|
|
638
|
|
|
363
|
|
|
732
|
|
|
|
*
|
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 (h) below under "Sales and Earnings by Business
Segment." Second quarter 2020 net sales by business segment and
operating profit (loss) by business segment compared with the first
quarter of 2020 and the second quarter of 2019 are as follows:
Business Segment
Results
|
|
(In
millions)
|
|
Second
Quarter
2020
|
|
First
Quarter
2020
|
|
Second
Quarter
2019
|
Net Sales by
Business Segment
|
|
|
|
|
|
|
Industrial
Packaging
|
|
$
|
3,633
|
|
|
$
|
3,819
|
|
|
$
|
3,864
|
|
Global Cellulose
Fibers
|
|
605
|
|
|
568
|
|
|
661
|
|
Printing
Papers
|
|
583
|
|
|
908
|
|
|
1,088
|
|
Corporate and
Inter-segment Sales
|
|
45
|
|
|
57
|
|
|
54
|
|
Net
Sales
|
|
$
|
4,866
|
|
|
$
|
5,352
|
|
|
$
|
5,667
|
|
Operating Profit
(Loss) by Business Segment
|
|
|
|
|
|
|
Industrial
Packaging
|
|
$
|
449
|
|
|
$
|
470
|
|
|
$
|
515
|
|
Global Cellulose
Fibers
|
|
(10)
|
|
|
(54)
|
|
|
—
|
|
Printing
Papers
|
|
(11)
|
|
|
96
|
|
|
114
|
|
Total Business
Segment Operating Profit
|
|
$
|
428
|
|
|
$
|
512
|
|
|
$
|
629
|
|
Industrial Packaging operating profits in the second
quarter of 2020 were $449 million
compared with $470 million in the
first quarter of 2020. In North
America, earnings were stable, reflecting seasonally lower
export containerboard sales volumes and lower sales volumes for
boxes as demand slowed from elevated levels in the first quarter,
as well as the impact of one less shipping day. Input costs were
higher driven by recycled fiber costs. The volume and input cost
earnings impact was mostly offset by strong operations and cost
management, lower maintenance outage expenses and lower wood,
energy and freight costs. Second quarter 2020 earnings benefited
from insurance recoveries related to the Rome fire and Bogalusa recovery boiler event.
In Europe, earnings decreased
driven by lower sales volumes due to the impacts of the COVID-19
pandemic in all regions and seasonality in Morocco, partially offset by improved margins
reflecting a favorable product mix and favorable foreign currency
impacts, primarily in Morocco.
Global Cellulose Fibers operating profits (losses) in the
second quarter of 2020 were $(10)
million compared with $(54)
million in the first quarter of 2020. Earnings improved
driven by higher average sales prices, higher sales volumes
reflecting continued strong consumer demand driven by the COVID-19
pandemic, strong mill operations and cost management and lower
planned maintenance outage expenses, partially offset by the
non-repeat of a favorable inventory valuation adjustment in the
first quarter of 2020.
Printing Papers operating profits (losses) in the
second quarter of 2020 were $(11)
million compared with $96
million in the first quarter of 2020. In North America, earnings decreased
significantly driven by lower sales volumes and increased economic
downtime reflecting the unprecedented demand impact of the COVID-19
pandemic. Strong mill operations and cost management drove lower
operating costs. Maintenance outage expenses were also lower. In
Brazil, earnings decreased
significantly due to lower sales volumes and economic downtime
driven by the demand impacts of the COVID-19 pandemic and
unfavorable foreign currency impacts, slightly offset by lower
operating costs. In Europe and
Russia, earnings were also
significantly impacted by the COVID-19 pandemic, resulting in lower
sales volumes and economic downtime. Maintenance outage expenses
were higher, partially offset by lower operating costs in both
regions.
EQUITY METHOD INVESTMENTS
Ilim joint
venture equity earnings (loss) were $63 million in the second quarter of 2020
compared with $(35) million in the
first quarter of 2020. Operationally, earnings increased
driven by higher sales volumes, higher sales prices for hardwood
and softwood pulp to China and
other export regions, partially offset by higher planned
maintenance outage expenses. The Company recognized a non-cash
after-tax foreign exchange gain of $34
million in the second quarter of 2020 ($0.09 per diluted share), compared with a loss of
$51 million in the first quarter of
2020 ($0.13 per diluted share),
primarily due to Ilim's U.S. dollar denominated net debt.
Graphic Packaging equity earnings on our 18.9% ownership
position were $11 million in the
second quarter of 2020, compared with $7
million in the first quarter of 2020.
CORPORATE EXPENSES
Corporate expenses (income) were
$(3) million for the second quarter
of 2020, compared with $32 million in
the first quarter of 2020.
EFFECTIVE TAX RATE
The reported effective tax rate for
the second quarter of 2020 was 26%, compared to a 2020 first
quarter reported effective tax rate of (588)%. The reported
effective tax rate in the first quarter reflects the impact of a
non-deductible impairment of our Brazil packaging business, included in the
below net special items table.
Excluding net special items and non-operating pension expense,
the operational effective tax rate for the second quarter of 2020
was 26%, compared with 29% for the first quarter of 2020. 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 NET SPECIAL ITEMS
Net special items in the
second quarter of 2020 amount to a net after-tax charge of
$50 million ($0.13 per diluted
share) compared with $372 million
($0.94 per diluted share) in the
first quarter of 2020 and $162
million ($0.41 per diluted
share) in the second quarter of 2019. Net special items in
all periods include the following charges (gains):
|
|
Second Quarter
2020
|
|
First Quarter
2020
|
|
Second Quarter
2019
|
(In
millions)
|
|
Before
Tax
|
|
After
Tax
|
|
Before
Tax
|
|
After
Tax
|
|
Before
Tax
|
|
After
Tax
|
Restructuring and
other charges, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment
costs
|
|
$
|
18
|
|
|
$
|
13
|
|
|
$
|
8
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total
restructuring and other charges, net
|
|
18
|
|
|
13
|
|
|
8
|
|
|
6
|
|
|
—
|
|
|
—
|
|
Asbestos litigation
reserve adjustment (a)
|
|
43
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Brazil Packaging
impairment
|
|
8
|
|
|
6
|
|
|
344
|
|
|
337
|
|
|
—
|
|
|
—
|
|
Abandoned property
removal
|
|
5
|
|
|
4
|
|
|
9
|
|
|
7
|
|
|
11
|
|
|
8
|
|
Gain on sale of
portion of investment in India
|
|
(6)
|
|
|
(6)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
India investment fair
value adjustment
|
|
—
|
|
|
—
|
|
|
17
|
|
|
17
|
|
|
—
|
|
|
—
|
|
Environmental
remediation reserve adjustment
|
|
—
|
|
|
—
|
|
|
41
|
|
|
31
|
|
|
—
|
|
|
—
|
|
Gain on sale of
portion of equity investment in Graphic
Packaging
|
|
—
|
|
|
—
|
|
|
(33)
|
|
|
(25)
|
|
|
—
|
|
|
—
|
|
Foreign value-added
tax refund accrual
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
India Papers
impairment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
145
|
|
|
143
|
|
Other
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
Other tax expense,
net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
Total net
special items
|
|
$
|
68
|
|
|
$
|
50
|
|
|
$
|
384
|
|
|
$
|
372
|
|
|
$
|
158
|
|
|
$
|
162
|
|
|
(a)
|
During the quarter
ended June 30, 2020, we adjusted our estimated net liability
associated with asbestos-related litigation concerning products
sold by Champion International Corporation prior to our acquisition
of Champion in 2000 to revise the time horizon associated with
anticipated future claims to forty years. This adjustment of $43
million, which increased this net liability to $75 million, was not
material to the quarter or any period.
|
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 second quarter earnings call. The conference ID
number is 8077936. 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 8077936.
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
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2020
|
|
2019
|
|
|
Net
Sales
|
|
$
4,866
|
|
$
5,667
|
|
$
5,352
|
|
$
10,218
|
|
$
11,310
|
|
|
Costs and
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products
sold
|
|
3,427
|
(a)
|
3,901
|
(g)
|
3,746
|
(a)
|
7,173
|
(a)
|
7,830
|
(g)
|
|
Selling and
administrative expenses
|
|
332
|
|
402
|
|
418
|
|
750
|
|
815
|
|
|
Depreciation,
amortization and cost of timber
harvested
|
|
312
|
|
321
|
(h)
|
323
|
(b)
|
635
|
(b)
|
636
|
(h)
|
|
Distribution
expenses
|
|
365
|
|
384
|
|
407
|
|
772
|
|
773
|
|
|
Taxes other than
payroll and income taxes
|
|
41
|
|
43
|
|
44
|
|
85
|
|
86
|
|
|
Restructuring and
other charges, net
|
|
18
|
(c)
|
—
|
|
8
|
(c)
|
26
|
(c)
|
—
|
|
|
Net (gains) losses on
sales and impairments of businesses
|
|
8
|
(d)
|
152
|
(i)
|
344
|
(d)
|
352
|
(d)
|
145
|
(i)
|
|
Net (gains) losses on
sales of equity method investments
|
|
—
|
|
—
|
|
(33)
|
(e)
|
(33)
|
(e)
|
—
|
|
|
Interest expense,
net
|
|
116
|
|
122
|
(j)
|
117
|
(f)
|
233
|
(f)
|
255
|
(j)
|
|
Non-operating pension
expense(income)
|
|
(14)
|
|
8
|
|
(6)
|
|
(20)
|
|
18
|
|
|
Earnings (Loss)
Before Income Taxes and Equity Earnings
|
|
261
|
|
334
|
|
(16)
|
|
245
|
|
752
|
|
|
Income tax provision
(benefit)
|
|
67
|
|
128
|
(k)
|
94
|
|
161
|
|
234
|
(k)
|
|
Equity earnings
(loss), net of taxes
|
|
72
|
|
80
|
|
(31)
|
|
41
|
|
194
|
|
|
Net Earnings
(Loss)
|
|
266
|
|
286
|
|
(141)
|
|
125
|
|
712
|
|
|
Less: Net earnings
(loss) attributable to noncontrolling interests
|
|
—
|
|
(6)
|
(l)
|
—
|
|
—
|
|
(4)
|
(l)
|
|
Net Earnings
(Loss) Attributable to International Paper Company
|
|
$
266
|
|
$
292
|
|
$
(141)
|
|
$
125
|
|
$
716
|
|
|
Basic Earnings Per
Common Share Attributable to International Paper Common
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss)
|
|
$
0.67
|
|
$
0.74
|
|
$
(0.36)
|
|
$
0.32
|
|
$
1.80
|
|
|
Diluted Earnings
Per Common Share Attributable to International Paper
Common Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss)
|
|
$
0.67
|
|
$
0.73
|
|
$
(0.36)
|
|
$
0.32
|
|
$
1.78
|
|
|
Average Shares of
Common Stock Outstanding - Diluted
|
|
393.1
|
|
398.2
|
|
392.6
|
|
394.0
|
|
401.4
|
|
|
The accompanying
notes are an integral part of this consolidated statement of
operations.
|
|
(a)
|
Includes a pre-tax
charge of $43 million ($33 million after taxes) for the three
months and six months ended June 30, 2020 for an asbestos
litigation reserve adjustment, pre-tax charges of $5 million ($4
million after taxes), $9 million ($7 million after taxes) and $14
million ($11 million after taxes) for the three months ended June
30, 2020 and March 31, 2020 and the six months ended June 30, 2020,
respectively, for the removal of abandoned property at our mills, a
gain of $6 million (before and after taxes) for the three months
and six months ended June 30. 2020 on the sale of the majority of
our remaining investment in India, a pre-tax charge of $41 million
($31 million after taxes) for three months ended March 31, 2020 and
the six months ended June 30, 2020 for environmental remediation
reserve adjustments, a charge of $17 million (before and after
taxes) for the three months ended March 31, 2020 and the six months
ended June 30, 2020 for the fair value adjustment of our investment
in India and pre-tax income of $2 million ($1 million after taxes)
for the three months ended March 31, 2020 and the six months ended
June 30, 2020 for the accrual of a foreign value-added tax
refund.
|
|
|
(b)
|
Includes a charge of
$1 million (before and after taxes) for the three months ended
March 31, 2020 and the six months ended June 30, 2020 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 $18 million ($13 million after taxes), $8 million ($6
million after taxes) and $26 million ($19 million after taxes) for
the three months ended June 30, 2020 and March 31, 2020 and the six
months ended June 30 2020, respectively, for debt extinguishment
costs.
|
|
|
(d)
|
Includes a pre-tax
loss of $5 million ($3 million after taxes, $20 million ($13
million after taxes) and $25 million ($16 million after taxes) for
the three months ended June 30, 2020 and March 31, 2020 and the six
months ended June 30, 2020, respectively, for the impairment of the
net assets of our Brazil Packaging business and a loss of $3
million (before and after taxes), $324 million (before and after
taxes) and $327 million (before and after taxes) for the three
months ended June 30, 2020 and March 31, 2020 and the six months
ended June 30, 2020, respectively, 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.
|
|
|
(e)
|
Includes a pre-tax
gain of $33 million ($25 million after taxes) for the three months
ended March 31, 2020 and the six months ended June 30, 2020 related
to the monetization of approximately 19% of our equity investment
in Graphic Packaging.
|
|
|
(f)
|
Includes income of $1
million (before and after taxes) for the three months ended March
31, 2020 and the six months ended June 30, 2020 for interest income
associated with the accrual of a foreign value-added tax
refund.
|
|
|
(g)
|
Includes pre-tax
charges of $11 million ($8 million after taxes) and $22 million
($16 million after taxes) for the three months and six months ended
June 30, 2019, respectively, for the removal of abandoned property
at our mills and a pre-tax charge of $16 million ($12 million after
taxes) for the six months ended June 30, 2019 for costs associated
with a multi-employer pension plan liability.
|
|
|
(h)
|
Includes charges of
$1 million (before and after taxes) and $2 million (before and
after taxes) for the three months ended June 30, 2019 and the six
months ended June 30, 2019, respectively, for accelerated
depreciation associated with the announced conversion of a paper
machine at our Riverdale mill to containerboard
production.
|
|
|
(i)
|
Includes a loss of
$95 million (before and after taxes) for the three months and six
months ended June 30, 2019 related to the foreign currency
cumulative translation adjustment resulting from the classification
of the assets and liabilities of our India Papers business as held
for sale, a pre-tax loss of $57 million ($55 million after taxes)
for the three months and six months ended June 30, 2019 for the
impairment of the net assets of our India Papers business and a
pre-tax gain of $7 million ($6 million after taxes) for the six
months ended June 30, 2019 related to the sale of a box plant in
our EMEA Packaging business.
|
|
|
(j)
|
Includes a charge of
$1 million (before and after taxes) for the three months and six
months ended June 30, 2019 for interest expense associated with
foreign tax audits.
|
|
|
(k)
|
Includes tax expense
of $9 million for the three months and six months ended June 30,
2019 related to a tax rate change in Luxembourg, tax expense of $3
million for the three months and six months ended June 30, 2019
related to foreign tax audits and a tax benefit of $3 million for
the three months and six months ended June 30, 2019 related to
state income tax legislative changes.
|
|
|
(l)
|
Includes the
allocation of loss to noncontrolling interest of $7 million (before
and after taxes) for the three months and six months ended June 30,
2019 associated with the impairment of the net assets of our India
Papers business.
|
|
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
June 30,
|
|
Three Months
Ended
March 31,
|
|
|
Six Months
Ended
June 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
|
2020
|
|
2019
|
|
Net Earnings
(Loss) Attributable to International Paper Company
|
$
266
|
|
$
292
|
|
$
(141)
|
|
|
$
125
|
|
$
716
|
|
Add back:
Non-operating pension expense (income)
|
(11)
|
|
6
|
|
(5)
|
|
|
(16)
|
|
14
|
|
Add back: Net special
items expense (income)
|
50
|
|
162
|
|
372
|
|
|
422
|
|
177
|
|
Adjusted Operating
Earnings
|
$
305
|
|
$
460
|
|
$
226
|
|
|
$
531
|
|
$
907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
|
Six Months
Ended
June 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
|
2020
|
|
2019
|
|
Diluted Earnings
per Common Share as Reported
|
$
0.67
|
|
$
0.73
|
|
$
(0.36)
|
|
|
$
0.32
|
|
$
1.78
|
|
Add back:
Non-operating pension expense (income)
|
(0.03)
|
|
0.01
|
|
(0.01)
|
|
|
(0.04)
|
|
0.03
|
|
Add back: Net special
items expense (income)
|
0.13
|
|
0.41
|
|
0.94
|
|
|
1.07
|
|
0.45
|
|
Adjusted Operating
Earnings per Share
|
$
0.77
|
|
$
1.15
|
|
$
0.57
|
|
|
$
1.35
|
|
$
2.26
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (net special items) as
reflected in the Consolidated Statement of Operations and related
notes included in this release 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.
|
|
|
|
Since diluted
earnings per share are computed independently for each period,
six-month per share amounts may not equal the sum of respective
quarters.
|
INTERNATIONAL
PAPER COMPANY Sales and Earnings by Business
Segment Preliminary and Unaudited
(In millions)
|
|
|
Net Sales by
Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2020
|
|
2019
|
|
|
Industrial
Packaging
|
$
3,633
|
|
$
3,864
|
|
$
3,819
|
|
$
7,452
|
|
$
7,696
|
|
|
Global Cellulose
Fibers
|
605
|
|
661
|
|
568
|
|
1,173
|
|
1,350
|
|
|
Printing
Papers
|
583
|
|
1,088
|
|
908
|
|
1,491
|
|
2,153
|
|
|
Corporate and
Inter-segment Sales
|
45
|
|
54
|
|
57
|
|
102
|
|
111
|
|
|
Net
Sales
|
$
4,866
|
|
$
5,667
|
|
$
5,352
|
|
$
10,218
|
|
$ 11,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit
by Business Segment
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2020
|
|
2019
|
|
|
Industrial
Packaging
|
$
449
|
|
$
515
|
|
$
470
|
|
$
919
|
|
$
936
|
|
|
Global Cellulose
Fibers
|
(10)
|
|
—
|
|
(54)
|
|
(64)
|
|
35
|
|
|
Printing
Papers
|
(11)
|
|
114
|
|
96
|
|
85
|
|
258
|
|
|
Total Business
Segment Operating Profit
|
$
428
|
|
$
629
|
|
$
512
|
|
$
940
|
|
$
1,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss)
Before Income Taxes and Equity Earnings
|
$
261
|
|
$
334
|
|
$
(16)
|
|
$
245
|
|
$
752
|
|
|
Interest expense,
net
|
116
|
|
122
|
(d)
|
117
|
(a)
|
233
|
(a)
|
255
|
(d)
|
|
Noncontrolling
interest adjustment (g)
|
—
|
|
5
|
(e)
|
—
|
|
—
|
|
2
|
(e)
|
|
Corporate expenses,
net
|
(3)
|
|
3
|
|
32
|
|
29
|
|
24
|
|
|
Corporate net special
items
|
54
|
(b)
|
—
|
|
33
|
(b)
|
87
|
(b)
|
—
|
|
|
Business net special
items
|
14
|
(c)
|
157
|
(f)
|
352
|
(c)
|
366
|
(c)
|
178
|
(f)
|
|
Non-operating pension
expense (income)
|
(14)
|
|
8
|
|
(6)
|
|
(20)
|
|
18
|
|
|
Business Segment
Operating Profit (h)
|
$
428
|
|
$
629
|
|
$
512
|
|
$
940
|
|
$
1,229
|
|
|
Equity Earnings
(Loss) in Ilim S.A., Net of Taxes
|
$
63
|
|
$
67
|
|
$
(35)
|
|
$
28
|
|
$
168
|
|
|
Equity Earnings
(Loss) in Graphic Packaging International Partners,
LLC
|
$
11
|
|
$
14
|
|
$
7
|
|
$
18
|
|
$
27
|
|
|
(a)
|
Includes income of $1
million for the three months ended March 31, 2020 and the six
months ended June 30, 2020 for interest income associated with the
accrual of a foreign value-added tax refund.
|
|
|
(b)
|
Includes a charge of
$43 million for the three months and six months ended June 30, 2020
for an asbestos litigation reserve adjustment, charges of $18
million, $8 million and $26 million for the three months ended June
30, 2020 and March 31, 2020 and the six months ended June 30, 2020,
respectively, for debt extinguishment costs, a gain of $6 million
for the three months and six months ended June 30, 2020 on the sale
of the majority of our remaining investment in India, income of $1
million for the three months and six months ended June 30, 2020
related to the impairment of the net assets of our Brazil Packaging
business, a charge of $41 million for the three months ended March
31, 2020 and the six months ended June 30, 2020 for environmental
remediation reserve adjustments, a charge of $17 million for the
three months ended March 31, 2020 and the six months ended June 30,
2020 for the fair value adjustment of our investment in India and a
gain of $33 million for the three months ended March 31, 2020 and
the six months ended June 30, 2020 related to the monetization of
approximately 19% of our equity investment in Graphic
Packaging.
|
|
|
(c)
|
Related to Industrial
Packaging, includes charges of $6 million, $20 million and $26
million for the three months ended June 30, 2020 and March 31, 2020
and the six months ended June 30, 2020, respectively, for the
impairment of the net assets of our Brazil Packaging business, a
loss of $3 million, $324 million and $327 million for the three
months ended June 30, 2020 and March 31, 2020 and the six months
ended June 30, 2020, respectively, 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 $3 million, $6 million and $9 million for
the three months ended June 30, 2020 and March 31, 2020 and the six
months ended June 30, 2020, respectively, for the removal of
abandoned property at our mills and income of $2 million for the
three months ended March 31, 2020 and the six months ended June 30,
2020 for the accrual of a foreign value-added tax
refund.
|
|
|
|
Related to Global
Cellulose Fibers, includes charges of $2 million, $3 million and $5
million for the three months ended June 30, 2020 and March 31, 2020
and the six months ended June 30, 2020, respectively, for the
removal of abandoned property at our mills.
|
|
|
|
Related to Printing
Papers, includes a charge of $1 million for the three months ended
March 31, 2020 and the six months ended June 30, 2020 for
accelerated depreciation associated with the announced conversion
of a paper machine at our Riverdale mill to containerboard
production.
|
|
|
(d)
|
Includes a charge of
$1 million for the three months and six months ended June 30, 2019
for interest expense associated with foreign tax
audits.
|
|
|
(e)
|
Includes the
allocation of loss to noncontrolling interest of $7 million for the
three months and six months ended June 30, 2019 associated with the
impairment of the net assets of our India Papers
business.
|
|
|
(f)
|
Related to Industrial
Packaging, includes charges of $8 million and $16 million for the
three months and six months ended June 30, 2019, respectively, for
the removal of abandoned property at our mills, a charge of $16
million for the six months ended June 30, 2019 for costs associated
with a multi-employer pension plan exit liability and a gain of $7
million for the six months ended June 30, 2019 related to the sale
of a box plant in our EMEA Packaging business.
|
|
|
|
Related to Global
Cellulose Fibers, includes charges of $2 million and $5 million for
the three months and six months ended June 30, 2019, respectively,
for the removal of abandoned property at our mills.
|
|
|
|
Related to Printing
Papers, includes a loss of $57 million, partially offset by the
allocation of loss to noncontrolling interest of $7 million, for
the three months and six months ended June 30, 2019 for the
impairment of the net assets of our India Papers business, a loss
of $95 million for the three months and six months ended June 30,
2019 related to the foreign currency cumulative translation
adjustment resulting from the classifiction of the assets and
liabilities of our India Papers business as held for sale, charges
of $1 million and $2 million for the three months and six months
ended June 30, 2019, respectively, for accelerated depreciation
associated with the announced conversion of a paper machine at our
Riverdale mill to containerboard production and a charge of $1
million for the three months and six months ended June 30, 2019 for
the removal of abandoned property at our mills.
|
|
|
(g)
|
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 for these
subsidiaries is adjusted here to present consolidated earnings
before income taxes and equity earnings.
|
|
|
(h)
|
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 noncontrolling interests, and excluding
interest expense, net, corporate expenses, net, corporate net
special items, business net special items 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
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2020
|
|
2019
|
|
Industrial Packaging
(In thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
Corrugated Packaging
(b)
|
2,571
|
|
2,624
|
|
2,624
|
|
5,195
|
|
5,159
|
|
Containerboard
|
783
|
|
707
|
|
827
|
|
1,610
|
|
1,404
|
|
Recycling
|
512
|
|
625
|
|
416
|
|
928
|
|
1,234
|
|
Saturated
Kraft
|
39
|
|
52
|
|
48
|
|
87
|
|
93
|
|
Gypsum /Release
Kraft
|
48
|
|
49
|
|
56
|
|
104
|
|
100
|
|
Bleached
Kraft
|
8
|
|
5
|
|
7
|
|
15
|
|
12
|
|
EMEA Packaging
(b)
|
375
|
|
379
|
|
441
|
|
816
|
|
749
|
|
Brazilian
Packaging (b)
|
83
|
|
91
|
|
90
|
|
173
|
|
176
|
|
European Coated
Paperboard
|
95
|
|
102
|
|
111
|
|
206
|
|
206
|
|
Industrial
Packaging
|
4,514
|
|
4,634
|
|
4,620
|
|
9,134
|
|
9,133
|
|
Global Cellulose
Fibers (In thousands of metric tons) (c)
|
965
|
|
869
|
|
901
|
|
1,866
|
|
1,728
|
|
Printing Papers (In
thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
U.S. Uncoated
Papers
|
247
|
|
441
|
|
415
|
|
662
|
|
889
|
|
European &
Russian Uncoated Papers
|
271
|
|
367
|
|
360
|
|
631
|
|
721
|
|
Brazilian Uncoated
Papers
|
150
|
|
283
|
|
240
|
|
390
|
|
527
|
|
Indian Uncoated
Papers
|
—
|
|
66
|
|
—
|
|
—
|
|
134
|
|
Printing
Papers
|
668
|
|
1,157
|
|
1,015
|
|
1,683
|
|
2,271
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
June 30,
2020
|
|
December 31,
2019
|
Assets
|
|
|
|
Current
Assets
|
|
|
|
Cash and Temporary
Investments
|
$
847
|
|
$
511
|
Accounts and Notes
Receivable, Net
|
3,060
|
|
3,280
|
Contract
Assets
|
401
|
|
393
|
Inventories
|
2,010
|
|
2,208
|
Assets Held for
Sale
|
112
|
|
—
|
Other
|
169
|
|
247
|
Total Current
Assets
|
6,599
|
|
6,639
|
Plants, Properties
and Equipment, Net
|
12,586
|
|
13,004
|
Forestlands
|
293
|
|
391
|
Investments
|
1,407
|
|
1,721
|
Financial Assets of
Variable Interest Entities
|
7,098
|
|
7,088
|
Goodwill
|
3,304
|
|
3,347
|
Right of Use
Assets
|
425
|
|
434
|
Deferred Charges and
Other Assets
|
807
|
|
847
|
Total
Assets
|
$
32,519
|
|
$
33,471
|
Liabilities and
Equity
|
|
|
|
Current
Liabilities
|
|
|
|
Notes Payable and
Current Maturities of Long-Term Debt
|
$
33
|
|
$
168
|
Current Nonrecourse
Financial Liabilities of Variable Interest Entities
|
4,220
|
|
4,220
|
Accounts Payable and
Other Current Liabilities
|
3,709
|
|
4,258
|
Liabilities Held for
Sale
|
368
|
|
—
|
Total Current
Liabilities
|
8,330
|
|
8,646
|
Long-Term
Debt
|
9,432
|
|
9,597
|
Long-Term Nonrecourse
Financial Liabilities of Variable Interest Entities
|
2,089
|
|
2,085
|
Deferred Income
Taxes
|
2,654
|
|
2,633
|
Pension Benefit
Obligation
|
1,472
|
|
1,578
|
Postretirement and
Postemployment Benefit Obligation
|
249
|
|
270
|
Long-Term Lease
Obligations
|
294
|
|
304
|
Other
Liabilities
|
939
|
|
640
|
Equity
|
|
|
|
Invested Capital, Net
of Treasury Stock
|
(1,066)
|
|
(695)
|
Retained
Earnings
|
8,123
|
|
8,408
|
Total International
Paper Shareholders' Equity
|
7,057
|
|
7,713
|
Noncontrolling
interests
|
3
|
|
5
|
Total
Equity
|
7,060
|
|
7,718
|
Total Liabilities
and Equity
|
$
32,519
|
|
$
33,471
|
INTERNATIONAL
PAPER COMPANY Consolidated Statement of Cash
Flows Preliminary and Unaudited
(In millions)
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
Operating
Activities
|
|
|
|
Net earnings
(loss)
|
$
125
|
|
$
712
|
Depreciation,
amortization and cost of timber harvested
|
635
|
|
636
|
Deferred income tax
expense (benefit), net
|
12
|
|
50
|
Restructuring and
other charges, net
|
26
|
|
—
|
Net (gains) losses on
sales of equity method investments
|
(33)
|
|
—
|
Net (gains) losses on
sales and impairments of businesses
|
352
|
|
145
|
Equity method
dividends received
|
151
|
|
251
|
Equity (earnings)
losses, net
|
(41)
|
|
(194)
|
Periodic pension
expense, net
|
16
|
|
47
|
Other, net
|
109
|
|
55
|
Changes in current
assets and liabilities
|
|
|
|
Accounts and notes
receivable
|
74
|
|
48
|
Contract
assets
|
(11)
|
|
(4)
|
Inventories
|
65
|
|
48
|
Accounts payable and
accrued liabilities
|
(37)
|
|
2
|
Interest
payable
|
—
|
|
1
|
Other
|
96
|
|
3
|
Cash Provided By
(Used For) Operating Activities
|
1,539
|
|
1,800
|
Investment
Activities
|
|
|
|
Invested in capital
projects, net of insurance recoveries
|
(538)
|
|
(628)
|
Acquisitions, net of
cash acquired
|
(64)
|
|
(99)
|
Proceeds from sales
of equity method investments
|
250
|
|
—
|
Proceeds from sales
of businesses, net of cash divested
|
—
|
|
17
|
Proceeds from sale of
fixed assets
|
3
|
|
4
|
Other
|
15
|
|
(9)
|
Cash Provided By
(Used For) Investment Activities
|
(334)
|
|
(715)
|
Financing
Activities
|
|
|
|
Repurchases of common
stock and payments of restricted stock tax withholding
|
(41)
|
|
(460)
|
Issuance of
debt
|
579
|
|
444
|
Reduction of
debt
|
(917)
|
|
(452)
|
Change in book
overdrafts
|
(10)
|
|
(14)
|
Dividends
paid
|
(403)
|
|
(398)
|
Other
|
(25)
|
|
4
|
Cash Provided By
(Used for) Financing Activities
|
(817)
|
|
(876)
|
Cash
Included in Assets Held for Sale
|
(13)
|
|
(21)
|
Effect of Exchange
Rate Changes on Cash
|
(39)
|
|
10
|
Change in Cash and
Temporary Investments
|
336
|
|
198
|
Cash and Temporary
Investments
|
|
|
|
Beginning of the
period
|
511
|
|
589
|
End of the
period
|
$
847
|
|
$
787
|
INTERNATIONAL
PAPER COMPANY Reconciliation of Cash Provided by
Operations to Free Cash Flow Preliminary and Unaudited
(In millions)
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cash Provided By
(Used For) Operating Activities
|
$
890
|
|
$
1,067
|
|
$
1,539
|
|
$
1,800
|
Adjustments:
|
|
|
|
|
|
|
|
Cash invested in
capital projects, net of insurance recoveries
|
(252)
|
|
(335)
|
|
(538)
|
|
(628)
|
Free Cash
Flow
|
$
638
|
|
$
732
|
|
$
1,001
|
|
$
1,172
|
|
|
|
|
|
|
|
|
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