International Paper Releases Second Quarter Earnings Solid Results and Strong Free Cash Flow Driven by Expanded Margins, Seasonally Strong Volumes and Good Operational Performance

MEMPHIS, Tenn., July 25, 2013 /PRNewswire/ -- International Paper (NYSE: IP) today reported second quarter 2013 net earnings attributable to common shareholders totaling $259 million ($0.57 per share) compared with net earnings of $318 million ($0.71 per share), in the first quarter of 2013 and $134 million ($0.31 per share) in the second quarter of 2012. Amounts in all periods include the impact of special items.          

(Logo: http://photos.prnewswire.com/prnh/20020701/IPLOGO)

                                                      

Diluted Earnings Per Share Attributable to International Paper Shareholders






Second  
Quarter
2013

First

Quarter

2013

Second
Quarter
2012

Net Earnings

$0.57

$0.71

$0.31

Less – Discontinued       
Operations Gain

(0.05)

(0.06)

(0.04)

Net Earnings from
Continuing Operations

$0.52

$0.65

$0.27

Add Back – Net Special
Items Expense (Income)

0.01

(0.11)

0.19

Add Back – Non-Operating
Pension Expense

0.11

0.11

0.07

Operating Earnings*

$0.64

$0.65

$0.53





* Operating Earnings is defined as net earnings from continuing operations (GAAP) excluding special items and non-operating pension expense.

Operating Earnings were $288 million ($0.64 per share) in the second quarter of 2013, compared with $292 million ($0.65 per share) in the first quarter of 2013 and $232 million ($0.53 per share) in the second quarter of 2012.

Quarterly net sales were $7.3 billion compared with $7.1 billion in the first quarter of 2013 and $7.1 billion in the second quarter of 2012.

Business segment operating profits before special items in the second quarter of 2013 were $622 million, compared with $571 million in the first quarter of 2013.

"International Paper delivered strong results this quarter.  We expanded margins and benefited from seasonally stronger volumes and solid operating performance despite higher planned maintenance outage costs" said John Faraci, Chairman and Chief Executive Officer. "As we move into the second half of the year, the company is well positioned to significantly improve earnings and free cash flow for the balance of 2013."

SEGMENT INFORMATION
The performance of the company's business segments are measured quarter to quarter without variations caused by special items, as management focuses on business segment operating profits excluding those items. Second quarter 2013 business segment operating profits and business trends compared with the prior quarter are as follows:

Industrial Packaging operating profits in the second quarter of 2013 were $477 million ($474 million including special items) compared with $369 million ($355 million including special items) in the first quarter of 2013. In North America, higher selling prices for boxes and containerboard, increased box shipments and lower operating costs drove improved results.  In Europe, performance was weaker in challenged Western European markets.

Printing Papers operating profits were $76 million (before and after special items) in the second quarter of 2013 versus $149 million (before and after special items) in the first quarter of 2013. The earnings decrease of ($73 million) was due to significantly higher planned annual outage costs in the second quarter in North America and Europe and the establishment of a reserve ($28 million) to cover potential credit exposure related to the National Envelope bankruptcy.  Brazil's results improved compared to the first quarter due to seasonally stronger domestic volume and price.

Consumer Packaging operating profits were $52 million ($51 million including special items) in the second quarter of 2013 compared with $51 million ($7 million including special items) in the first quarter of 2013.  Earnings were impacted by higher sales volumes and lower manufacturing costs in North America, offset by higher annual outage costs in both North America and Europe.

xpedx, the company's North American distribution business, reported operating profits of $17 million (break-even including special items) in the second quarter of 2013 compared with $2 million (a loss of $5 million including special items) in the first quarter of 2013. The second quarter results reflect lower costs, partly from the business's strategic restructuring efforts.

International Paper recorded Ilim joint venture equity losses of $34 million in the second quarter of 2013, compared with equity losses of $11 million in the first quarter of 2013.  Based on a stronger dollar versus the ruble, the after-tax impact of a foreign exchange loss in the second quarter of 2013 was $23 million compared with an $11 million loss in the first quarter.  The impact in both quarters was due to non-cash adjustments associated with the Ilim Group joint venture's U.S. dollar denominated debt.  Earnings were also negatively impacted by start-up costs related to two major capital projects.

Net corporate expenses, excluding non-operating pension expense, for the 2013 second quarter were $0 million compared with $22 million in the first quarter of 2013 and $3 million in the second quarter of 2012. 

Effective Tax Rate
The effective tax rate before special items for the second quarter of 2013 was 30%, compared with an effective tax rate before special items of 21% in the first quarter of 2013.  The primary reason for the lower first quarter rate was due to the inclusion of a benefit of approximately $35 million related to the enactment into law of The American Taxpayer Relief Act of 2012 on January 2, 2013 (the "Act"). The Act retroactively restored several expired business tax provisions including the research and experimentation credit and the Subpart F controlled foreign corporation look-through exception. 

Effects of Special Items
Special items in the second quarter of 2013 included a net pre-tax gain of $4 million ($2 million after taxes) for restructuring and other charges and pre-tax charges of $14 million ($8 million after taxes) for integration costs related to the Temple-Inland acquisition. Also included are a pre-tax charge of $6 million ($4 million after taxes) for an environmental reserve related to the Company's property in Cass Lake, Minnesota and a pre-tax charge of $9 million ($5 million after taxes) to adjust the value of two Company airplanes to fair value.  In addition, a gain of $13 million (before and after taxes) was recorded for a net bargain purchase gain on the first quarter 2013 acquisition of a majority share of our Packaging operations in Turkey. Restructuring and other charges included a pre-tax gain of $30 million ($19 million after taxes) for insurance reimbursements related to the 2012 Guaranty Bank legal settlement, pre-tax charges of $17 million ($10 million after taxes) for costs associated with the restructuring of our xpedx operations, pre-tax charges of $3 million ($2 million after taxes) for debt extinguishment costs, pre-tax charges of $3 million ($2 million after taxes) for costs associated with the announced potential spin-off of the xpedx operations and charges of $3 million (before and after taxes) for other items.

Special items in the first quarter of 2013 included pre-tax charges of $59 million ($36 million after taxes) for restructuring and other charges and pre-tax charges of $12 million ($8 million after taxes) for integration costs related to the Temple-Inland acquisition. Also included are pre-tax interest income of $6 million ($4 million after taxes) and a tax benefit of $93 million both associated with the closing of a U.S. federal income tax audit and a net tax expense of $2 million related to internal restructurings. Restructuring and other charges included pre-tax charges of $44 million ($27 million after taxes) for costs related to the permanent shutdown of a paper machine at our Augusta, Georgia mill, pre-tax charges of $6 million ($4 million after taxes) for debt extinguishment costs, pre-tax charges of $7 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations and pre-tax charges of $2 million ($1 million after taxes) for other items.

Special items in the second quarter of 2012 included pre-tax charges of $21 million ($13 million after taxes) for restructuring and other charges, a pre-tax charge of $62 million ($38 million after taxes) to adjust the value of the long-lived assets of the Hueneme mill in Oxnard, California to their fair value in anticipation of its divestiture, pre-tax charges of $35 million ($22 million after taxes) for integration costs related to the Temple-Inland acquisition, pre-tax charges of $9 million ($5 million after taxes) for costs associated with the announced third-quarter 2012 divestiture of the Hueneme mill and two other containerboard mills, and pre-tax charges of $9 million ($7 million after taxes) for other items. Restructuring and other charges included pre-tax charges of $10 million ($6 million after taxes) for debt extinguishment costs, pre-tax charges of $10 million ($6 million after taxes) for costs associated with the restructuring of our xpedx operations and charges of $1 million (before and after taxes) for other items.

Discontinued Operations
Discontinued operations in the second and first quarters of 2013 and in the second quarter of 2012 included the Operating Earnings of Temple-Inland's Building Products business. Also included are pre-tax charges of $13 million ($8 million after taxes) in the second quarter of 2013 and $4 million ($3 million after taxes) in the first quarter of 2013 for the write-off of capital investments and expenses associated with pursuing the divestiture of this business.

EARNINGS WEBCAST
The company will hold a webcast to review earnings at 9:00 a.m. EST / 8:00 a.m. CST today. All interested parties are invited to listen to the webcast live and view the slides to be presented at the webcast via the company's Internet site at http://www.internationalpaper.com by clicking on the Investors tab and going to the presentations page. A replay of the webcast will also be available beginning approximately two hours after the call. Parties in the U.S. who wish to participate in the webcast via teleconference may dial (877) 316-2541. Those outside the U.S. should dial +1 (706) 679-8242 and ask to be connected to the International Paper second quarter earnings call. The conference ID number is 13659244. Participants should call in no later than 8:45 a.m. EST/7:45 a.m. CST. An audio-only replay will be available for four weeks following the call. To access the replay, dial +1 (404) 537-3406 or, within the U.S. only, (855) 859-2056, and when prompted for the conference ID, enter 13659244.

International Paper (NYSE: IP) is a global leader in packaging and paper with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include industrial and consumer packaging and uncoated papers, complemented by xpedx, the company's North American distribution company. Headquartered in Memphis, Tenn., the company employs approximately 70,000 people and is strategically located in more than 24 countries serving customers worldwide. International Paper net sales for 2012 were $28 billion.  For more information about International Paper, its products and stewardship efforts, 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 increases 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 a joint venture; (vii) our ability to reach a definitive agreement on a mutually acceptable transaction combining xpedx with Unisource, the receipt of governmental and other approvals and favorable rulings associated with such a transaction and the successful fulfillment or waiver of all other closing conditions for such a transaction without unexpected delays or conditions, and the successful closing of such a transaction within the estimated timeframe; and (viii) our ability to achieve the benefits we expect from all strategic acquisitions, divestitures and restructurings.  These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements are discussed in greater detail in the company's Securities and Exchange Commission filings. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

 


INTERNATIONAL PAPER COMPANY

 Consolidated Statement of Operations

Preliminary and Unaudited

(In millions, except per share amounts)





















Three Months 








Three Months Ended



Ended


Six Months Ended




June 30,



March 31,


June 30,




2013


2012



2013


2013


2012


Net Sales

$    7,335


$    7,077



$         7,090


$ 14,425


$   13,732


Costs and Expenses












  Cost of products sold

5,414

 (a) 

5,270

 (f) 


5,220


10,634

 (a) 

10,254

 (p) 

  Selling and administrative expenses

515

 (b) 

474

 (g) 


567

 (j) 

1,082

 (n) 

987

 (q) 

  Depreciation, amortization and cost of timber harvested

396

 (c) 

366



379


775

 (c) 

728


  Distribution expenses

449


448



422


871


795


  Taxes other than payroll and income taxes

47


44



49


96


85


  Restructuring and other charges

(4)

 (d) 

21

 (h) 


59

 (k) 

55

 (o) 

55

 (r) 

  Net losses on sales and impairments of businesses

-


78

 (i) 


-


-


71

 (s) 

  Net bargain purchase gain on acquisition of business

(13)

 (e) 

-



-


(13)

 (e) 

-


  Interest expense, net

168


172



164

 (l) 

332

 (l) 

340


Earnings From Continuing Operations Before Income Taxes  and












  Equity Earnings

363

 (a-e) 

204

 (f-i) 


230

 (j-l) 

593

 (a,c,e,l,n,o) 

417

 (p-s) 

  Income tax (benefit) provision

94


57



(69)

 (m) 

25

 (m) 

127


  Equity earnings (loss), net of taxes

(36)


(26)



(10)


(46)


18


Earnings From Continuing Operations 

233

 (a-e) 

121

 (f-i) 


289

 (j-m) 

522

 (a,c,e,l-o) 

308

 (p-s) 

  Discontinued operations, net of taxes 

24


16



26


50


21


Net Earnings  

$       257

 (a-e) 

$       137

 (f-i) 


$            315

 (j-m) 

$       572

 (a,c,e,l-o) 

$        329

 (p-s) 

  Less: Net earnings (loss) attributable to noncontrolling interests

(2)


3



(3)


(5)


7


Net Earnings Attributable to International Paper Company

$       259

 (a-e) 

$       134

 (f-i) 


$            318

 (j-m) 

$       577

 (a,c,e,l-o) 

$        322

 (p-s) 














Basic Earnings Per Common Share Attributable to












  International Paper Common Shareholders












  Earnings from continuing operations

$      0.53

 (a-e) 

$      0.27

 (f-i) 


$           0.66

 (j-m) 

$      1.19

 (a,c,e,l-o) 

$       0.69

 (p-s) 

  Discontinued operations 

0.05


0.04



0.06


0.11


0.05


  Net earnings

$      0.58

 (a-e) 

$      0.31

 (f-i) 


$           0.72

 (j-m) 

$      1.30

 (a,c,e,l-o) 

$       0.74

 (p-s) 














Diluted Earnings Per Common Share Attributable to












  International Paper Common Shareholders












  Earnings from continuing operations

$      0.52

 (a-e) 

$      0.27

 (f-i) 


$           0.65

 (j-m) 

$      1.18

 (a,c,e,l-o) 

$       0.68

 (p-s) 

  Discontinued operations

0.05


0.04



0.06


0.11


0.05


  Net earnings  

$      0.57

 (a-e) 

$      0.31

 (f-i) 


$           0.71

 (j-m) 

$      1.29

 (a,c,e,l-o) 

$       0.73

 (p-s) 














Average Shares of Common Stock Outstanding - Diluted

448.5


438.2



446.1


447.9


439.3


Cash Dividends Per Common Share

$  0.3000


$  0.2625



$       0.3000


$ 0.6000


$   0.5250















Amounts Attributable to International Paper Common Shareholders











  Earnings from continuing operations, net of tax

$       235

 (a-e) 

$       118

 (f-i) 


$            292

 (j-m) 

$       527

 (a,c,e,l-o) 

$        301

 (p-s) 

  Discontinued operations, net of tax

24


16



26


50


21


  Net Earnings 

$       259

 (a-e) 

$       134

 (f-i) 


$            318

 (j-m) 

$       577

 (a,c,e,l-o) 

$        322

 (p-s) 



























The accompanying notes are an integral part of this consolidated statement of operations.

















(a)

Includes a pre-tax charge of $6 million ($4 million after taxes) for an environmental reserve related to the Company's property in Cass Lake, Minnesota.














(b)

Includes a pre-tax charge of $14 million ($8 million after taxes) for integration costs associated with the acquisition of Temple-Inland. 














(c)

Includes a pre-tax charge of $9 million ($5 million after taxes) to adjust the value of two Company airplanes to fair value.














(d)

Includes a pre-tax gain of $30 million ($19 million after taxes) for insurance reimbursements related to the 2012 Guaranty Bank legal settlement, a pre-tax charge of $3 million ($2 million after taxes) for debt extinguishment costs, a pre-tax charge of $17 million ($10 million after taxes) for costs associated with the restructuring of our xpedx operations, a pre-tax charge of $3 million ($2 million after taxes) for costs associated with the announced possible spin-off of the xpedx operations, and charges of $3 million (before and after taxes) for other items.














(e)

Includes a gain of $13 million (before and after taxes) related to a bargain purchase adjustment on the first-quarter 2013 acquisition of a majority share of our operations in Turkey.














(f)

Includes a charge of $2 million (before and after taxes) for an inventory write-off related to the xpedx reorganization.














(g)

Includes a pre-tax charge of $35 million ($22 million after taxes) for integration costs associated with the acquisition of Temple-Inland. 














(h)

Includes a pre-tax charge of $10 million ($6 million after taxes) for debt extinguishment costs, a pre-tax charge of $10 million ($6 million after taxes) for costs associated with the restructuring of our xpedx operations and charges of $1 million (before and after taxes) for other items.














(i)

Includes a pre-tax charge of $62 million ($38 million after taxes) to adjust the long-lived assets of the Hueneme mill in Oxnard, California to their fair value in anticipation of its divestiture, a pre-tax charge of $9 million ($5 million after taxes) for costs associated with the announced third-quarter 2012 divestiture of the Hueneme mill and two other containerboard mills, a pre-tax charge of $6 million ($4 million after taxes) for an adjustment related to the sale of Shorewood, and charges of $1 million (before and after taxes) for other items.














(j)

Includes a pre-tax charge of $12 million ($8 million after taxes) for integration costs associated with the acquisition of Temple-Inland. 



(k)

Includes a pre-tax charge of $44 million ($27 million after taxes) for costs associated with the permanent shutdown of a paper machine at our Augusta mill, a pre-tax charge of $6 million ($4 million after taxes) for debt extinguishment costs, a pre-tax charge of $7 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, and pre-tax charges of $2 million ($1 million after taxes) for other items.



(l)

Includes interest income of $6 million ($4 million after taxes) related to the closing of a U.S. federal income tax audit.














(m)

Includes a tax benefit of $93 million associated with the closing of a U.S. federal income tax audit and a net tax expense of $2 million related to internal restructurings. In addition, the first quarter tax rate includes a benefit of approximately $35 million related to the enactment into law of The American Taxpayer Relief Act of 2012 in January 2013. 














(n)

Includes a pre-tax charge of $26 million ($16 million after taxes) for integration costs associated with the acquisition of Temple-Inland. 














(o)

Includes a pre-tax gain of $30 million ($19 million after taxes) for insurance reimbursements related to the 2012 Guaranty Bank legal settlement, a pre-tax charge of $9 million ($6 million after taxes) for debt extinguishment costs, a pre-tax charge of $24 million ($14 million after taxes) for costs associated with the restructuring of our xpedx operations, a pre-tax charge of $3 million ($2 million after taxes) for costs associated with the announced possible spin-off of our xpedx operations, a pre-tax charge of $45 million ($28 million after taxes) for costs associated with the permanent shutdown of a paper machine at our Augusta mill, and pre-tax charges of $4 million ($3 million after taxes) for other items.














(p)

Includes a pre-tax charge of $20 million ($12 million after taxes) related to the write-up of the Temple-Inland inventories to fair value and a charge of $4 million (before and after taxes) for an inventory write-off related to the xpedx reorganization.














(q)

Includes a pre-tax charge of $78 million ($55 million after taxes) for integration costs associated with the acquisition of Temple Inland.














(r)

Includes a  pre-tax charge of $26 million ($16 million after taxes) for debt extinguishment costs, and a pre-tax charge of $29 million ($20 million after taxes) for costs associated with the restructuring of our xpedx operations.














(s)

Includes a pre-tax charge of $62 million ($38 million after taxes) to adjust the long-lived assets of the Hueneme mill in Oxnard, California to their fair value in anticipation of its divestiture, a pre-tax charge of $9 million ($5 million after taxes) for costs associated with the announced third-quarter 2012 divestiture of the Hueneme mill and two other containerboard mills, a pre-tax gain of $1 million ($2 million after taxes) for adjustments related to the sale of the Shorewood business and charges of $1 million (before and after taxes) for other items.

 


International Paper Company


Reconciliation of Operating Earnings to Net Earnings


Attributable to International Paper Company


Preliminary and Unaudited


(In millions except for per share amounts)




































Three Months Ended


Three Months Ended


Six Months Ended



June 30,


March 31,


June 30,



2013


2012


2013


2013


2012













Operating Earnings

$           288


$         232


$                   292


$           580


$           504













Non-Operating Pension

(51)


(29)


(51)


(102)


(54)


Special Items

(2)

 (a) 

(85)

 (b) 

51

 (c) 

49

 (d) 

(149)

 (e) 

Earnings from Continuing Operations

235


118


292


527


301


Discontinued operations

24


16


26


50


21













Net Earnings as Reported

$           259


$         134


$                   318


$           577


$           322



































































Three Months Ended


Three Months Ended


Six Months Ended



June 30,


March 31,


June 30,


Diluted Earnings per Common Share

2013


2012


2013


2013


2012
























Operating Earnings Per Share 

$          0.64


$        0.53


$                  0.65


$          1.30


$          1.14













Non-Operating Pension

(0.11)


(0.07)


(0.11)


(0.23)


(0.12)


Special Items

(0.01)


(0.19)


0.11


0.11


(0.34)


  Continuing Operations

0.52


0.27


0.65


1.18


0.68


Discontinued operations

0.05


0.04


0.06


0.11


0.05













Diluted Earnings per Common Share as Reported

$          0.57


$        0.31


$                  0.71


$          1.29


$       0.73















Notes:













(a) See footnotes (a) - (e) on the Consolidated Statement of Operations







(b) See footnotes (f) - (i) on the Consolidated Statement of Operations







(c) See footnotes (j) - (m) on the Consolidated Statement of Operations







(d) See footnotes (a), (c), (e), and (l) - (o) on the Consolidated Statement of Operations





(e) See footnotes (p) - (s) on the Consolidated Statement of Operations

















(1) The Company calculates Operating Earnings 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 is the most directly comparable GAAP measure.













(2) Since diluted earnings per share are computed independently for each period, six-month per share amounts may not equal the sum of the respective quarters.


 


International Paper


Sales and Earnings by Industry Segment 


Preliminary and Unaudited


(In Millions)























Sales by Industry Segment























Three Months 




Three Months 



Six Months 







Ended




Ended



Ended







June 30,




March 31,



June 30,







2013



2012




2013



2013



2012



Industrial Packaging


$

3,780


$

3,450



$

3,560


$

7,340


$

6,565



Printing Papers



1,540



1,510




1,540



3,080



3,070



Consumer Packaging 



855



780




830



1,685



1,590



Distribution



1,405



1,500




1,385



2,790



2,975



Corporate and Inter-segment Sales



(245)



(163)




(225)



(470)



(468)























Net Sales


$

7,335


$

7,077



$

7,090


$

14,425


$

13,732











































Operating Profit by Industry Segment























Three Months 




Three Months 



Six Months 







Ended




Ended



Ended







June 30,




March 31,



June 30,







2013



2012




2013



2013



2012



Industrial Packaging


$

474

(1)

$

260

(4)


$

355

(1)

$

829

(1)

$

475

(4)


Printing Papers



76



104

(5)



149



225



250

(5)


Consumer Packaging 



51

(2)


57

(6)



7

(2)


58

(2)


160

(6)


Distribution



-

(3)


5

(7)



(5)

(3)


(5)

(3)


3

(7)






















Operating Profit



601



426




506



1,107



888























Interest expense, net



(168)



(172)




(164)

(8)


(332)

(8)


(340)



Noncontrolling interest/equity earnings adjustment (9)

4



4




-



4



8



Corporate items, net



-



(3)




(22)



(22)



(35)



Restructuring and other charges



9



(9)




(6)



3



(25)



Net gains (losses) on sales and impairments of businesses



-



-




-



-



-



Non-operating pension expense



(83)



(42)




(84)



(167)



(79)























Earnings (Loss) From Continuing Operations  


















    Before Income Taxes and Equity Earnings

$

363


$

204



$

230


$

593


$

417











































Equity Earnings in Ilim Holdings S.A., 



















    Net of Taxes 


$

(34)


$

(25)



$

(11)


$

(45)


$

15






























































(1)

Includes charges of $14 million and $12 million for the three months ended June 30, 2013 and March 31, 2013, respectively, and a charge of $26 million for the six months ended June 30, 2013 for integration costs associated with the acquisition of Temple-Inland, gains of $13 million and $1 million for the three months ended June 30, 2013 and March 31, 2013, respectively, and a gain of $14 million for the six months ended June 30, 2013 for a bargain purchase adjustment on the first quarter 2013 acquisition of a majority share of our operations in Turkey, and charges of $2 million and $3 million for the three months ended June 30, 2013 and March 31, 2013, respectively, and $5 million for the six months ended June 30, 2013 for other items. 






















(2)

Includes charges of $1 million and $44 million for the three months ended June 30, 2013 and March 31, 2013, respectively, and a charge of $45 million for the six months ended June 30, 2013 for costs associated with the permanent shutdown of a paper machine at our Augusta mill.























(3)

Includes charges of $17 million and $7 million for the three months ended June 30, 2013 and March 31, 2013, respectively, and a charge of $24 million for the six months ended June 30, 2013 for costs associated with the restructuring of the Company's xpedx operation.






















(4)

Includes a charge of $62 million for the three months and six months ended June 30, 2012 to adjust the value of the long-lived assets of the Hueneme mill in Oxnard, California to their fair value in anticipation of its divestiture, charges of $35 million for the three months ended June 30, 2012 and $78 million for the six months ended June 30, 2012 for integration costs associated with the Temple-Inland acquisition, charges of $9 million for the three months and six months ended June 30, 2012 for costs associated with the announced third-quarter 2012 divestiture of the Hueneme mill and two other containerboard mills, a charge of $1 million for the three months and six months ended June 30, 2012 related to the closure of the Etienne mill in France, and a charge of $20 million for the six months ended June 30, 2012 related to the write-up of the Temple-Inland inventory to fair value. 






















(5)

Includes a loss of $2 million for the three months ended June 30, 2012 and a loss of $1 million for the six months ended June 30, 2012 related to the acquisition of the majority interest in Andhra Pradesh Paper Mills Limited.  






















(6)

Includes a loss of $6 million for the three months ended June 30, 2012 and a gain of $1 million for the six months ended June 30, 2012 for adjustments related to the sale of the Shorewood business.






















(7)

Includes charges of $12 million for the three months ended June 30, 2012 and $33 million for the six months ended June 30, 2012 for costs associated with the restructuring of the Company's xpedx operation.






















(8)

Includes a gain of $6 million for interest related to the settlement of an IRS tax audit.






















(9)

Operating profits for industry 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

(In millions)



















Three Months Ended June 30, 2013




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$         477

$           76

$           52

$           17

$         622










Special Items (a)


(3)

-

(1)

(17)

(21)










Operating Profit as Reported


$         474

$           76

$           51

$             -

$         601




























Three Months Ended June 30, 2012




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$         367

$         106

$           63

$           17

$         553










Special Items (b)


(107)

(2)

(6)

(12)

(127)










Operating Profit as Reported


$         260

$         104

$           57

$              5

$         426




























Three Months Ended March 31, 2013




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$         369

$         149

$           51

$              2

$         571










Special Items (a)


(14)

-

(44)

(7)

(65)










Operating Profit as Reported


$         355

$         149

$              7

$             (5)

$         506




























Six Months Ended June 30, 2013



Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$         846

$         225

$         103

$            19

$      1,193










Special Items (a)


$          (17)

$             -

$          (45)

$          (24)

$          (86)










Operating Profit as Reported


$         829

$         225

$           58

$            (5)

$      1,107




























Six Months Ended June 30, 2012




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$         645

$         251

$         159

$           36

$      1,091










Special Items (b)


(170)

(1)

1

(33)

(203)










Operating Profit as Reported


$         475

$         250

$         160

$              3

$         888


























(a) See footnotes (1) - (3) on Sales and Earnings by Industry Segment 






(b) See footnotes (4) - (7) on Sales and Earnings by Industry Segment 














(1) The Company calculates Operating Profit Before Special Items 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 is the most directly comparable GAAP measure.










 


International Paper

Sales Volume by Product (1)

Preliminary and Unaudited
















International Paper Consolidated 































Three Months



 Three Months



Six Months





Ended



Ended



Ended





June 30,



March 31,



June 30,





2013


2012



2013



2013


2012

Industrial Packaging (In thousands of short tons)













Corrugated Packaging (2)

2,679


2,795



2,549



5,228


5,257


Containerboard (2)

861


828



858



1,719


1,577


Recycling 


580


597



581



1,161


1,134


Saturated Kraft

49


45



40



89


83


Gypsum /Release Kraft (2)

36


31



30



66


52


Bleached Kraft

40


32



31



71


55


European Industrial Packaging (3)

332


260



339



671


526


Asian Box 


101


100



100



201


198


Brazilian Packaging (4)

82


0



41



123


0



Industrial Packaging

4,760


4,688



4,569



9,329


8,882
















Printing Papers (In thousands of short tons)













U.S. Uncoated Papers 

624


637



630



1,254


1,322


European & Russian Uncoated Papers

366


311



329



695


622


Brazilian Uncoated Papers

279


295



264



543


569


Indian Uncoated Papers 

57


47



60



117


126



Uncoated Papers 

1,326


1,290



1,283



2,609


2,639


Market Pulp (5)

427


356



432



859


741
















Consumer Packaging (In thousands of short tons)













North American Consumer Packaging

410


388



369



779


761


European Coated Paperboard

90


88



91



181


185


Asian Coated Paperboard

338


240



360



698


477



Consumer Packaging

838


716



820



1,658


1,423



























































































(1)

Sales volumes include third party and inter-segment sales and exclude sales of equity investees.



(2)

Includes Temple-Inland volumes from date of acquisition in February 2012.



(3)

Includes volumes for Turkish box plants beginning in Q1 2013 when a majority ownership was acquired


(4)

Includes volumes for Brazil Packaging from date of acquisition in mid-January 2013



(5)

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,


December 31,


2013


2012

Assets








Current Assets




  Cash and Temporary Investments

$              1,205


$               1,302

  Accounts and Notes Receivable, Net

3,946


3,562

  Inventories

2,745


2,730

  Deferred Income Tax Assets

322


323

  Assets held for sale

774


759

  Other

276


229

    Total Current Assets

9,268


8,905





Plants, Properties and Equipment, Net

13,838


13,949

Forestlands

578


622

Investments 

730


887

Financial Assets of Special Purpose Entities

2,118


2,108

Goodwill

4,437


4,315

Deferred Charges and Other Assets

1,576


1,367





Total Assets

$            32,545


$             32,153





Liabilities and Equity








Current Liabilities




  Notes Payable and Current Maturities




   of Long-Term Debt

$              1,068


$                  444

  Liabilities held for sale

54


44

  Accounts Payable and Accrued Liabilities

4,555


4,510

    Total Current Liabilities

5,677


4,998





Long-Term Debt

9,057


9,696

Nonrecourse Financial Liabilities of Special Purpose Entities

2,040


2,036

Deferred Income Taxes

3,137


3,026

Pension Benefit Obligation

4,089


4,112

Postretirement and Postemployment Benefit Obligation

453


473

Other Liabilities

1,067


1,176





Equity




  Invested Capital

2,740


2,642

  Retained Earnings

3,967


3,662

    Total Shareholders' Equity

6,707


6,304





   Noncontrolling interests

318


332

    Total Equity

7,025


6,636





Total Liabilities and Equity

$            32,545


$             32,153





 

INTERNATIONAL PAPER COMPANY

Consolidated Statement of Cash Flows

Preliminary and Unaudited

(In Millions)






Six Months Ended


June 30,


2013


2012

Operating Activities




  Net earnings

$          572


$          329

  Discontinued operations, net of taxes and noncontrolling interests

(50)


(21)

  Earnings from continuing operations

$          522


$          308

  Depreciation, amortization and cost of timber harvested

775


728

  Deferred income tax expense (benefit), net

36


110

  Restructuring and other charges

55


55

  Pension plan contribution 

(31)


(44)

  Net (gains) losses on sales and impairments of businesses

-


71

  Net bargain purchase gain on acquisition of business

(13)


-

  Equity (earnings) loss, net

46


(18)

  Periodic pension expense, net

279


170

  Other, net

(36)


(16)

  Changes in current assets and liabilities




    Accounts and notes receivable

(334)


276

    Inventories

(32)


33

    Accounts payable and accrued liabilities

78


(243)

    Interest payable

(17)


20

    Other

(89)


(39)

Cash Provided By (Used For) Operations - Continuing Operations

1,239


1,411

Cash Provided By (Used For) Operations - Discontinued Operations

40


(36)

Cash Provided by (Used For) Operations

1,279


1,375

Investment Activities




  Invested in capital projects - continuing operations

(488)


(705)

  Acquisitions, net of cash acquired

(501)


(3,734)

  Proceeds from divestitures

-


5

  Other     

(61)


(93)

Cash Provided By (Used For) Investment Activities - Continuing Operations

(1,050)


(4,527)

Cash Provided By (Used For) Investment Activities - Discontinued Operations

(3)


(53)

Cash Provided By (Used For) Investment Activities

(1,053)


(4,580)

Financing Activities




  Repurchases of common stock and payments of restricted stock tax withholding

(51)


(35)

  Issuance of common stock

243


21

  Issuance of debt

168


1,919

  Reduction of debt

(160)


(1,135)

  Change in book overdrafts

(79)


(46)

  Dividends paid

(266)


(229)

  Redemption of preferred securities

(150)


-

  Other  

(12)


(37)

Cash Provided By (Used for) Financing Activities

(307)


458

Effect of Exchange Rate Changes on Cash 

(16)


(19)

Change in Cash and Temporary Investments

(97)


(2,766)

Cash and Temporary Investments




  Beginning of the period

1,302


3,994

  End of the period

$       1,205


$       1,228





SOURCE International Paper



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