International Paper Reports Third Quarter Earnings

Delivered Record Operating Earnings

Driven by Continued Margin Expansion and Solid Operational Performance

24 Oct, 2013, 07:02 ET from International Paper

MEMPHIS, Tenn., Oct. 24, 2013 /PRNewswire/ -- International Paper today reported third quarter 2013 net earnings attributable to common shareholders totaling $382 million ($0.85 per share), compared with net earnings of $259 million ($0.57 per share) in the second quarter of 2013 and $237 million ($0.54 per share) in the third 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


Third
Quarter
2013

Second

Quarter

2013

Third
Quarter
2012

Net Earnings

$0.85

$0.57

$0.54

Less – Discontinued
Operations (Gain) Loss

0.02

(0.05)

 

(0.03)

Net Earnings from
Continuing Operations

$0.87

$0.52

$0.51

Add Back – Net Special
Items Expense

0.07

0.01

0.24

Add Back – Non-Operating
Pension Expense

0.11

0.11

0.06

Operating Earnings*

$1.05

$0.64

$0.81

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

Record operating earnings were $471 million ($1.05 per share) in the third quarter of 2013 compared with $288 million ($0.64 per share) in the second quarter of 2013 and $358 million ($0.81 per share) in the third quarter of 2012.

Quarterly net sales were $7.4 billion compared with $7.3 billion in the second quarter of 2013 and $7.0 billion in the third quarter of 2012.

Business segment operating profits before special items were $753 million in the third quarter of 2013, compared with $622 million in the second quarter of 2013 and $634 million in the third quarter of 2012.

"International Paper delivered record operating earnings in the third quarter, as our margins continued to expand.  Results were driven by solid operational performance and higher prices that more than offset a spike in wood costs," said John Faraci, Chairman and Chief Executive Officer. "Looking ahead, the company is well positioned going into 2014 and we continue to focus on growing free cash flow and generating above cost of capital returns." 

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. Third quarter 2013 business segment operating profits and business trends compared with the prior quarter are as follows:

Industrial Packaging operating profits in the third quarter of 2013 were $517 million ($499 million including special items) compared with $477 million ($474 million including special items) in the second quarter of 2013. In North America, higher selling prices for boxes and containerboard, operational improvements and fewer maintenance outages favorably impacted the quarter. Wood and waste fiber costs were higher than anticipated. Third quarter industry year-over-year box growth was approximately 0.5 percent, a modest improvement from flat growth in the second quarter of 2013. In Europe, sales volumes were seasonally lower and sales margins were down, reflecting higher board costs.

Printing Papers operating profits were $144 million ($93 million including special items) in the third quarter of 2013 versus $76 million (before and after special items) in the second quarter of 2013. The earnings increase of $68 million from the second quarter was primarily due to fewer planned maintenance outages in the U.S. and Europe and the non-recurrence of a $28 million bad debt reserve posted last quarter. This increase was partially offset by higher wood costs due to wet weather in the southeastern U.S.

Consumer Packaging operating profits were $73 million (before and after special items) in the third quarter of 2013 compared with $52 million ($51 million including special items) in the second quarter of 2013. In both North America and Europe, the business benefited from lower maintenance outage costs and favorable pricing.  

xpedx, the company's North American distribution business, reported operating profits of $19 million ($13 million including special items) in the third quarter of 2013 compared with $17 million (break-even including special items) in the second quarter of 2013. Seasonally higher sales volumes drove the earnings increase.

Ilim joint venture  
International Paper recorded equity earnings of $11 million in the third quarter of 2013, compared with an equity loss of $34 million in the second quarter of 2013. The earnings improvement was partially due to foreign exchange movement of the U.S. dollar versus the Russian ruble. The Company recognized an after-tax foreign exchange gain of $8 million compared with a $23 million loss in the second quarter of 2013. The impact in both quarters was due to non-cash adjustments associated with the Ilim Group joint venture's U.S. dollar denominated debt. Additionally, operating earnings improved during the third quarter as ramp-up efforts related to two major capital projects progressed.  

Corporate Expenses  
Net corporate expenses, excluding non-operating pension expense, for the 2013 third quarter were $13 million compared with $0 million in the second quarter of 2013 and $1 million in the third quarter of 2012. 

Effective Tax Rate  
The effective tax rate before special items for the third quarter of 2013 was 24 percent, compared with 30 percent in the second quarter of 2013.  The lower rate in the third quarter is primarily the result of a onetime inclusion of a $30 million benefit related to the adjustment of the tax basis in certain of the Company's fixed assets. The recording of this benefit is predicated upon a 2012 U.S. Court of Federal Claims decision decided in favor of another taxpayer.

Effects of Special Items  
Special items in the third quarter of 2013 included a net pre-tax loss of $76 million ($47 million after taxes) for restructuring and other charges, pre-tax charges of $24 million ($15 million after taxes) for integration costs related to the Temple-Inland acquisition and a pre-tax charge of $1 million ($0 million after taxes) for other items. In addition, a tax benefit of $31 million related to the release of an income tax reserve was recorded. Restructuring and other charges included a pre-tax charge of $51 million ($31 million after taxes) for costs associated with the announced closure of our Courtland, Alabama mill, pre-tax charges of $15 million ($9 million after taxes) for debt extinguishment costs, pre-tax charges of $6 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, pre-tax charges of $11 million ($7 million after taxes) for costs associated with the announced potential spin-off of our xpedx operations, a pre-tax gain of $9 million ($6 million after taxes) related to the sale of the Bellevue, Washington box plant facility that was closed in 2010, and charges of $2 million (before and after taxes) for other 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 third quarter of 2012 included pre-tax charges of $33 million ($24 million after taxes) for restructuring and other charges, pre-tax charges of $58 million ($34 million after taxes) for integration costs related to the Temple-Inland acquisition, and pre-tax charges of $19 million ($49 million after taxes) for costs associated with the divestiture of three containerboard mills. Restructuring and other charges included pre-tax charges of $13 million ($8 million after taxes) for debt extinguishment costs, pre-tax charges of $8 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, pre-tax charges of $16 million ($11 million after taxes) for costs associated with the restructuring of our Packaging business in Europe, and a net pre-tax gain of $4 million (a charge of $1 million after taxes) for other items.

Discontinued Operations  
Discontinued operations in the third quarter and second quarter of 2013 and the third quarter of 2012 included the operating earnings of Temple-Inland's Building Products business for the period prior to the date of sale on July 19, 2013.  Also included are the write-off of capital investments and costs associated with the divestiture of this business. 

EARNINGS WEBCAST  
The company will hold a webcast to review earnings at 9:00 a.m. ET / 8:00 a.m. CT 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 third quarter earnings call. The conference ID number is 71203703. Participants should call in no later than 8:45 a.m. ET/7:45 a.m. CT. 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 71203703.

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

Nine Months Ended

September 30,

June 30,

September 30,

2013

2012

2013

2013

2012

Net Sales

$    7,406

$    7,026

$      7,335

$ 21,831

$   20,758

Costs and Expenses

  Cost of products sold

5,313

5,140

 (e) 

5,414

 (i) 

15,947

 (i) 

15,394

 (r) 

  Selling and administrative expenses

572

 (a) 

527

 (f) 

515

 (j) 

1,654

 (n) 

1,514

 (s) 

  Depreciation, amortization and cost of timber harvested

401

383

396

 (k) 

1,176

 (k) 

1,111

  Distribution expenses

438

403

449

1,309

1,198

  Taxes other than payroll and income taxes

47

39

47

143

124

  Restructuring and other charges

76

 (b) 

33

 (g) 

(4)

 (l) 

131

 (o) 

88

 (t) 

  Net losses on sales and impairments of businesses

1

 (c) 

18

 (h) 

-

1

 (c) 

89

 (u) 

  Net bargain purchase gain on acquisition of business

-

-

(13)

 (m) 

(13)

 (m) 

-

  Interest expense, net

147

163

168

479

 (p) 

503

Earnings From Continuing Operations Before Income Taxes  and

  Equity Earnings

411

 (a-c) 

320

 (e-h) 

363

 (i-m) 

1,004

 (c,i,k,m-p) 

737

 (r-u) 

  Income tax provision

41

 (d) 

130

94

66

 (q) 

257

  Equity earnings (loss), net of taxes

16

34

(36)

(30)

52

Earnings From Continuing Operations 

386

 (a-d) 

224

 (e-h) 

233

 (i-m) 

908

 (c,i,k,m-q) 

532

 (r-u) 

  Discontinued operations, net of taxes 

(10)

14

24

40

35

Net Earnings  

$       376

 (a-d) 

$       238

 (e-h) 

$         257

 (i-m) 

$       948

 (c,i,k,m-q) 

$        567

 (r-u) 

  Less: Net earnings (loss) attributable to noncontrolling interests

(6)

1

(2)

(11)

8

Net Earnings Attributable to International Paper Company

$       382

 (a-d) 

$       237

 (e-h) 

$         259

 (i-m) 

$       959

 (c,i,k,m-q) 

$        559

 (r-u) 

Basic Earnings Per Common Share Attributable to

  International Paper Common Shareholders

  Earnings from continuing operations

$      0.88

 (a-d) 

$      0.51

 (e-h) 

$        0.53

 (i-m) 

$      2.07

 (c,i,k,m-q) 

$       1.20

 (r-u) 

  Discontinued operations 

(0.02)

0.03

0.05

0.09

0.08

  Net earnings

$      0.86

 (a-d) 

$      0.54

 (e-h) 

$        0.58

 (i-m) 

$      2.16

 (c,i,k,m-q) 

$       1.28

 (r-u) 

Diluted Earnings Per Common Share Attributable to

  International Paper Common Shareholders

  Earnings from continuing operations

$      0.87

 (a-d) 

$      0.51

 (e-h) 

$        0.52

 (i-m) 

$      2.05

 (c,i,k,m-q) 

$       1.19

 (r-u) 

  Discontinued operations

(0.02)

0.03

0.05

0.09

0.08

  Net earnings  

$      0.85

 (a-d) 

$      0.54

 (e-h) 

$        0.57

 (i-m) 

$      2.14

 (c,i,k,m-q) 

$       1.27

 (r-u) 

Average Shares of Common Stock Outstanding - Diluted

449.7

439.8

448.5

448.7

439.7

Cash Dividends Per Common Share

$  0.3000

$  0.2625

$    0.3000

$ 0.9000

$   0.7875

Amounts Attributable to International Paper Common Shareholders

  Earnings from continuing operations, net of tax

$       392

 (a-d) 

$       223

 (e-h) 

$         235

 (i-m) 

$       919

 (c,i,k,m-q) 

$        524

 (r-u) 

  Discontinued operations, net of tax

(10)

14

24

40

35

  Net Earnings 

$       382

 (a-d) 

$       237

 (e-h) 

$         259

 (i-m) 

$       959

 (c,i,k,m-q) 

$        559

 (r-u) 

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

(a) Includes a pre-tax charge of $24 million ($15 million after taxes) for integration costs associated with the acquisition of Temple-Inland. 

(b) Includes a pre-tax charge of $51 million ($31 million after taxes) for costs associated with the announced shutdown of our Courtland mill, a pre-tax charge of $15 million ($9 million after taxes) for debt extinguishment costs, a pre-tax charge of $6 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, a pre-tax charge of $11 million ($7 million after taxes) for costs associated with the announced possible spin-off of the xpedx operations, a pre-tax gain of $9 million ($6 million after taxes) associated with the sale of the Bellevue box plant facility which was closed in 2010, and charges of $2 million (before and after taxes) for other items.

(c) Includes a pre-tax charge of $1 million ($0 million after taxes) for costs associated with the divestiture of three containerboard mills in 2012. 

(d) Includes a tax benefit of $31 million for a income tax reserve release. In addition, the third quarter tax rate includes a $30 million benefit related to the adjustment of the tax basis in certain of the Company's fixed assets.

(e) Includes a charge of $1 million (before and after taxes) for an inventory write-off related to the xpedx reorganization.

(f) Includes a pre-tax charge of $58 million ($34 million after taxes) for integration costs associated with the acquisition of Temple-Inland. 

(g) Includes a  pre-tax charge of $13 million ($8 million after taxes) for debt extinguishment costs, a pre-tax charge of $8 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, a pre-tax charge of $16 million ($11 million after taxes) for costs associated with the restructuring of the Company's Packaging business in Europe, and a pre-tax gain of $4 million (a loss of $1 million after taxes) for other items.

(h) Includes a pre-tax charge of $19 million ($49 million after taxes) for costs associated with the containerboard mill divestitures and a gain of $1 million (before and after taxes) for other items. 

(i) 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.

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

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

(l) 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.

(m) 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.

(n) Includes a pre-tax charge of $50 million ($31 million after taxes) for integration costs associated with the acquisition of Temple-Inland. 

(o) Includes a pre-tax charge of $51 million ($31 million after taxes) for costs associated with the announced shutdown of our Courtland mill, 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 $45 million ($28 million after taxes) for costs associated with the permanent shutdown of a paper machine at our Augusta mill, a pre-tax charge of $24 million ($15 million after taxes) for debt extinguishment costs, a pre-tax charge of $30 million ($18 million after taxes) for costs associated with the restructuring of our xpedx operations, a pre-tax charge of $14 million ($9 million after taxes) for costs associated with the announced possible spin-off of the xpedx operations, a pre-tax gain of $9 million ($6 million after taxes) for the sale of our Bellevue box plant facility which was closed in 2010, and charges of $6 million ($5 million after taxes) for other items.

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

(q) Includes a tax benefit of $93 million associated with the closing of a U.S. federal tax audit, a tax benefit of $31 million for an income tax reserve release, 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 and the third quarter tax rate includes a $30 million benefit related to the adjustment of the tax basis in certain of the Company's fixed assets.

(r) 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 $5 million (before and after taxes) for an inventory write-off related to the xpedx reorganization.

(s) Includes a pre-tax charge of $136 million ($89 million after taxes) for integration costs associated with the acquisition of Temple-Inland.

(t) Includes a  pre-tax charge of $39 million ($24 million after taxes) for debt extinguishment costs, a pre-tax charge of $37 million ($24 million after taxes) for costs associated with the restructuring of our xpedx operations, a pre-tax charge of $16 million ($11 million after taxes) for costs associated with the restructuring of the Company's Packaging business in Europe and a pre-tax gain of $4 million (a loss of $1 million after taxes) for other items.

(u) 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 $28 million ($54 million after taxes) for costs associated with the containerboard mill divestitures, and a pre-tax gain of $1 million ($2 million 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

Nine Months Ended

September 30,

June 30,

September 30,

2013

2012

2013

2013

2012

Operating Earnings

$         471

$       358

$                 288

$     1,051

$         862

Non-Operating Pension

(48)

(28)

(51)

(150)

(82)

Special Items

(31)

 (a) 

(107)

 (b) 

(2)

 (c) 

18

 (d) 

(256)

 (e) 

Earnings from Continuing Operations

392

223

235

919

524

Discontinued operations

(10)

14

24

40

35

Net Earnings as Reported

$         382

$       237

$                 259

$         959

$         559

Three Months Ended

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

Diluted Earnings per Common Share

2013

2012

2013

2013

2012

Operating Earnings Per Share 

$        1.05

$      0.81

$                0.64

$        2.34

$        1.96

Non-Operating Pension

(0.11)

(0.06)

(0.11)

(0.33)

(0.19)

Special Items

(0.07)

(0.24)

(0.01)

0.04

(0.58)

  Continuing Operations

0.87

0.51

0.52

2.05

1.19

Discontinued operations

(0.02)

0.03

0.05

0.09

0.08

Diluted Earnings per Common Share as Reported

$        0.85

$      0.54

$                0.57

$        2.14

$        1.27

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) - (m) on the Consolidated Statement of Operations

(d) See footnotes (c), (i), (k) and (m) - (q) on the Consolidated Statement of Operations

(e) See footnotes (r) - (u) 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, nine-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 

Nine Months 

Ended

Ended

Ended

September 30,

June 30,

September 30,

2013

2012

2013

2013

2012

Industrial Packaging

$

3,755

$

3,335

$

3,780

$

11,095

$

9,900

Printing Papers

1,555

1,580

1,540

4,635

4,650

Consumer Packaging 

885

765

855

2,570

2,355

Distribution

1,445

1,535

1,405

4,235

4,510

Corporate and Inter-segment Sales

(234)

(189)

(245)

(704)

(657)

Net Sales

$

7,406

$

7,026

$

7,335

$

21,831

$

20,758

Operating Profit by Industry Segment

Three Months 

Three Months 

Nine Months 

Ended

Ended

Ended

September 30,

June 30,

September 30,

2013

2012

2013

2013

2012

Industrial Packaging

$

499

(1)

$

255

(5)

$

474

(1)

$

1,328

(1)

$

730

(5)

Printing Papers

93

(2)

202

(6)

76

318

(2)

452

(6)

Consumer Packaging 

73

67

51

(3)

131

(3)

227

(7)

Distribution

13

(4)

15

(8)

-

8

(4)

18

(8)

Operating Profit

678

539

601

1,785

1,427

Interest expense, net

(147)

(163)

(168)

(479)

(9)

(503)

Noncontrolling interest/equity earnings adjustment (10)

(3)

-

4

1

8

Corporate items, net

(13)

(1)

-

(35)

(36)

Restructuring and other charges

(26)

(15)

9

(23)

(40)

Non-operating pension expense

(78)

(40)

(83)

(245)

(119)

Earnings (Loss) From Continuing Operations  

    Before Income Taxes and Equity Earnings

$

411

$

320

$

363

$

1,004

$

737

Equity Earnings in Ilim Holdings S.A., 

    Net of Taxes 

$

11

$

33

$

(34)

$

(34)

$

48

(1)

Includes charges of $24 million and $14 million for the three months ended September 30, 2013 and June 30, 2013, respectively, and a charge of $50 million for the nine months ended September 30, 2013 for integration costs associated with the acquisition of Temple-Inland, gains of $13 million for the three months ended June 30, 2013, and $14 million for the nine months ended September 30, 2013 for a bargain purchase adjustment on the first quarter 2013 acquisition of a majority share of our operations in Turkey, a gain of $9 million for the three months and nine months ended September 30, 2013 related to the sale of the box plant facility in Bellevue, Washington, and charges of $3 million and $2 million for the three months ended September 30, 2013 and June 30, 2013, respectively, and a charge of $8 million for the nine months ended September 30, 2013 for other items. 

(2)

Includes charges of $51 million for the three months and nine months ended September 30, 2013 for costs associated with the announced shutdown of our Courtland mill. 

(3)

Includes charges of $1 million for the three months ended June 30, 2013 and $45 million for the nine months ended September 30, 2013 for costs associated with the permanent shutdown of a paper machine at our Augusta mill.

(4)

Includes charges of $6 million and $17 million for the three months ended September 30, 2013 and June 30, 2013, respectively, and a charge of $30 million for the nine months ended September 30, 2013 for costs associated with the restructuring of the Company's xpedx operation.

(5)

Includes charges of $58 million and $136 million for the three months and nine months ended September 30, 2012 for integration costs associated with the Temple-Inland acquisition, charges of $19 million and $28 million for the three months and nine months ended September 30, 2012  for costs associated with the divestiture of three containerboard mills, charges of $16 million for the three months and nine months ended September 30, 2012 for costs associated with the restructuring of our Packaging business in Europe, a charge of $62 million for the nine months ended September 30, 2012 to adjust the value of the long-lived assets of the Hueneme mill in Oxnard, California to their fair value, a charge of $20 million for the nine months ended September 30, 2012 related to the write-up of the Temple-Inland inventory to fair value, and gains of $6 million and $5 million for the three months and nine months ended September 30, 2012 for other items.

(6)

Includes a gain of $1 million for the three months ended September 30, 2012 and a net $0 million charge for the nine months ended September 30, 2012 related to the acquisition of Andhra Pradesh Paper Mills Limited.

(7)

Includes a gain of $1 million for the nine months ended September 30, 2012 for adjustments related to the sale of the Shorewood business.

(8)

Includes charges of $9 million and $42 million for the three months and nine months ended September 30, 2012 for costs associated with the restructuring of the Company's xpedx operation.

(9)

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

(10)

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 September 30, 2013

Industrial

Printing

Consumer

Packaging

Papers

Packaging

Distribution

Total

Operating Profit Before Special Items

$         517

$         144

$           73

$           19

$         753

Special Items (a)

(18)

(51)

-

(6)

(75)

Operating Profit as Reported

$         499

$           93

$           73

$           13

$         678

Three Months Ended September 30, 2012

Industrial

Printing

Consumer

Packaging

Papers

Packaging

Distribution

Total

Operating Profit Before Special Items

$         342

$         201

$           67

$           24

$         634

Special Items (b)

(87)

1

-

(9)

(95)

 . 

Operating Profit as Reported

$         255

$         202

$           67

$           15

$         539

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

Nine Months Ended September 30, 2013

Industrial

Printing

Consumer

Packaging

Papers

Packaging

Distribution

Total

Operating Profit Before Special Items

$      1,363

$         369

$         176

$           38

$      1,946

Special Items (a)

(35)

(51)

(45)

(30)

(161)

Operating Profit as Reported

$      1,328

$         318

$         131

$              8

$      1,785

Nine Months Ended September 30, 2012

Industrial

Printing

Consumer

Packaging

Papers

Packaging

Distribution

Total

Operating Profit Before Special Items

$         987

$         452

$         226

$           60

$      1,725

Special Items (b)

(257)

-

1

(42)

(298)

Operating Profit as Reported

$         730

$         452

$         227

$           18

$      1,427

(a) See footnotes (1) - (4) on Sales and Earnings by Industry Segment

(b) See footnotes (5) - (8) 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

Nine Months

Ended

Ended

Ended

Sept 30,

June 30,

Sept 30,

2013

2012

2013

2013

2012

Industrial Packaging (In thousands of short tons)

Corrugated Packaging (2)

2,609

2,665

2,679

7,837

7,922

Containerboard (2)

801

823

861

2,520

2,400

Recycling 

603

620

580

1,764

1,754

Saturated Kraft

49

47

49

138

130

Gypsum /Release Kraft (2)

47

37

36

113

89

Bleached Kraft

39

30

40

110

85

European Industrial Packaging (3)

325

244

332

996

770

Asian Box 

111

108

101

312

306

Brazilian Packaging (4)

85

0

82

208

0

Industrial Packaging

4,669

4,574

4,760

13,998

13,456

Printing Papers (In thousands of short tons)

U.S. Uncoated Papers 

650

668

624

1,904

1,990

European & Russian Uncoated Papers

359

326

339

1,027

948

Brazilian Uncoated Papers

288

290

279

831

859

Indian Uncoated Papers 

53

59

57

170

185

Uncoated Papers 

1,350

1,343

1,299

3,932

3,982

Market Pulp (5)

413

414

427

1,272

1,155

Consumer Packaging (In thousands of short tons)

North American Consumer Packaging

409

378

410

1,188

1,139

European Coated Paperboard

87

93

90

268

278

Asian Coated Paperboard

365

242

338

1,063

719

Consumer Packaging

861

713

838

2,519

2,136

(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)

September 30,

December 31,

2013

2012

Assets

Current Assets

  Cash and Temporary Investments

$              1,946

$               1,302

  Accounts and Notes Receivable, Net

4,024

3,562

  Inventories

2,841

2,730

  Deferred Income Tax Assets

421

323

  Assets held for sale

-

759

  Other

243

229

    Total Current Assets

9,475

8,905

Plants, Properties and Equipment, Net

13,697

13,949

Forestlands

580

622

Investments 

755

887

Financial Assets of Special Purpose Entities

2,122

2,108

Goodwill

4,512

4,315

Deferred Charges and Other Assets

1,469

1,367

Total Assets

$            32,610

$             32,153

Liabilities and Equity

Current Liabilities

  Notes Payable and Current Maturities

   of Long-Term Debt

$                 783

$                  444

  Liabilities held for sale

-

44

  Accounts Payable and Accrued Liabilities

4,612

4,510

    Total Current Liabilities

5,395

4,998

Long-Term Debt

8,900

9,696

Nonrecourse Financial Liabilities of Special Purpose Entities

2,042

2,036

Deferred Income Taxes

3,351

3,026

Pension Benefit Obligation

3,932

4,112

Postretirement and Postemployment Benefit Obligation

435

473

Other Liabilities

1,013

1,176

Equity

  Invested Capital

3,018

2,642

  Retained Earnings

4,212

3,662

    Total Shareholders' Equity

7,230

6,304

   Noncontrolling interests

312

332

    Total Equity

7,542

6,636

Total Liabilities and Equity

$            32,610

$             32,153

 

 

INTERNATIONAL PAPER COMPANY

Consolidated Statement of Cash Flows

Preliminary and Unaudited

(In Millions)

Nine Months Ended

September 30,

2013

2012

Operating Activities

  Net earnings

$          948

$          567

  Discontinued operations, net of taxes and noncontrolling interests

(40)

(35)

  Earnings from continuing operations

$          908

$          532

  Depreciation, amortization and cost of timber harvested

1,176

1,111

  Deferred income tax expense (benefit), net

55

192

  Restructuring and other charges

131

88

  Pension plan contribution 

(31)

(44)

  Net (gains) losses on sales and impairments of businesses

1

89

  Net bargain purchase gain on acquisition of business

(13)

-

  Equity (earnings) loss, net

30

(52)

  Periodic pension expense, net

413

256

  Other, net

(112)

(66)

  Changes in current assets and liabilities

    Accounts and notes receivable

(357)

226

    Inventories

(121)

23

    Accounts payable and accrued liabilities

(19)

(125)

    Interest payable

(8)

65

    Other

(89)

(21)

Cash Provided By (Used For) Operations - Continuing Operations

1,964

2,274

Cash Provided By (Used For) Operations - Discontinued Operations

27

(20)

Cash Provided By (Used For) Operations

1,991

2,254

Investment Activities

  Invested in capital projects - continuing operations

(759)

(1,001)

  Acquisitions, net of cash acquired

(507)

(3,734)

  Proceeds from divestitures

733

474

  Equity investment in Ilim 

-

(45)

  Proceeds from sale of fixed assets

76

-

  Other     

(33)

(115)

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

(490)

(4,421)

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

1

(61)

Cash Provided By (Used For) Investment Activities

(489)

(4,482)

Financing Activities

  Repurchases of common stock and payments of restricted stock tax withholding

(70)

(35)

  Issuance of common stock

288

60

  Issuance of debt

212

2,052

  Reduction of debt

(637)

(2,123)

  Change in book overdrafts

(65)

(52)

  Dividends paid

(400)

(344)

  Redemption of preferred securities

(150)

-

  Other  

(28)

(38)

Cash Provided By (Used for) Financing Activities

(850)

(480)

Effect of Exchange Rate Changes on Cash 

(8)

(11)

Change in Cash and Temporary Investments

644

(2,719)

Cash and Temporary Investments

  Beginning of the period

1,302

3,994

  End of the period

$       1,946

$       1,275

 

SOURCE International Paper



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