International Paper Reports Fourth-Quarter and 2013 Earnings

Solid Fourth-Quarter Results and Record Operating Earnings for 2013
EBITDA Growth Drives Strong Full Year Cash Flow

PR Newswire

MEMPHIS, Tenn., Feb. 4, 2014 /PRNewswire/ -- International Paper (IP) reported full-year 2013 net earnings attributable to common shareholders totaling $1.4 billion ($3.11 per share) compared with $794 million ($1.80 per share) in full-year 2012. In the fourth quarter of 2013, the company reported net earnings of $436 million ($0.98 per share) compared with $235 million ($0.53 per share) in the fourth quarter of 2012. Amounts in all periods include special items and non-operating pension expense. 

Diluted Earnings Per Share Attributable to International Paper Shareholders

 


Fourth

Quarter

2013

Fourth

Quarter

2012

Full

Year

2013

Full

Year

2012

Net Earnings

$0.98

$0.53

$3.11

$1.80

Less – Discontinued       

Operations Gain

(0.01)

(0.02)

(0.10)

(0.10)

Net Earnings from

Continuing Operations

$0.97

$0.51

$3.01

$1.70

Add Back – Net Special

Items (Income) Expense 

(0.25)

0.11

(0.29)

0.69

Add Back – Non-Operating

Pension Expense

0.11

0.07

0.44

0.26

Operating Earnings*

$0.83

$0.69

$3.16

$2.65

* Operating Earnings is defined as net earnings from continuing operations (GAAP) excluding

   special items and non-operating pension expense.

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

Full-year 2013 Operating Earnings were $1.4 billion ($3.16 per share) compared with $1.2 billion ($2.65 per share) in 2012. Operating Earnings in the fourth quarter of 2013 totaled $367 million ($0.83 per share) compared with $305 million ($0.69 per share) in the fourth quarter of 2012. 

Annual sales totaled $29.1 billion in 2013 compared with $27.8 billion in 2012. Quarterly net sales were $7.2 billion in the fourth quarter compared with $7.1 billion in the fourth quarter of 2012.

Full-year 2013 business segment operating profits were $1.8 billion compared with $2.0 billion in 2012.  Business segment operating profits in the fourth quarter were $59 million compared with $528 million in 2012, both of which included special items.

"International Paper delivered record operating earnings and cash from operations in 2013, largely driven by margin expansion across key businesses," said John Faraci, Chairman and Chief Executive Officer. "In 2014, our businesses are well positioned to achieve another meaningful increase in EBITDA and Free Cash Flow."

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

Industrial Packaging operating profits in the fourth quarter of 2013 were $486 million ($473 million including special items) compared with $517 million ($499 million including special items) in the third quarter of 2013. Box sales volumes improved relative to the market, however two less shipping days for the quarter and seasonally lower demand led to lower volumes. Profits for the segment benefited from the complete realization of the 2013 containerboard price increase.

Printing Papers operating profits were $143 million (a loss of $47 million after special items) in the fourth quarter of 2013 versus $144 million ($93 million including special items) in the third quarter of 2013. North America experienced fixed cost penalties and lower sales volumes resulting from Courtland's partial shutdown in the quarter, partly offset by lower maintenance outages and improved sales price/mix. Brazil's results improved largely driven by higher volume and better mix from seasonally stronger demand.  Europe was negatively impacted by higher outages, while India improved with stronger prices and volume, along with no maintenance outages in fourth quarter of 2013.

Consumer Packaging operating profits were $32 million ($30 million including special items) in the fourth quarter of 2013 compared with $73 million (before and after special items) in the third quarter of 2013. Significant planned maintenance outage expenses and lower volume more than offset the impact of improved pricing.

xpedx, the company's North American distribution business, reported operating profits of $5 million (a loss of $397 million including special items) in the fourth quarter of 2013 as lower demand impacted results, compared with $19 million ($13 million including special items) in the third quarter of 2013.

International Paper recorded Ilim joint venture equity losses of $12 million in the fourth quarter of 2013, compared with equity earnings of $11 million in the third quarter of 2013. The company recognized an after-tax foreign exchange loss of $6 million in the fourth quarter of 2013 compared with an after-tax gain of $8 million in the third quarter of 2013 due to foreign exchange movement in the U.S. dollar versus the Russian ruble. The impact in both quarters was due to non-cash adjustments associated with the Ilim Group joint venture's U.S. dollar denominated debt.

Corporate items net, for the 2013 fourth quarter were income of $6 million compared with expenses of $13 million in the third quarter of 2013. 

Effective Tax Rate
The effective tax rate before special items for the fourth quarter of 2013 was 31 percent, compared with an effective tax rate before special items of 24 percent in the third quarter of 2013.  The higher rate in the fourth quarter is primarily attributable to a one-time inclusion in the third quarter of a $30 million benefit related to the adjustment of the tax basis in certain of the Company's fixed assets.  The 2013 full year rate was 27 percent compared with 29 percent for the 2012 full year.

Effects of Special Items
Special items in the fourth quarter of 2013 included a net pre-tax loss of $79 million ($50 million after taxes) for restructuring and other charges, pre-tax charges of $12 million ($7 million after taxes) for integration costs related to the Temple-Inland acquisition and a pre-tax charge of $2 million ($1 million after taxes) for other items.   Also included in special items is a pre-tax charge of $127 million ($119  million after a $5 million tax benefit and a gain of $3 million related to non-controlling interest) for the impairment of goodwill and a trade name intangible asset of the Company's India Papers business and a pre-tax charge of $400 million ($366 million after taxes) for the impairment of goodwill of the Company's xpedx business.  In addition, a tax benefit of $651 million related to the closing of a U.S. federal income tax audit and a net tax benefit of $3 million for other tax items were recorded. Restructuring and other charges included a pre-tax charge of $67 million ($41 million after taxes) for costs associated with the announced closure of our Courtland, Alabama mill, pre-tax charges of $8 million ($5 million after taxes) for costs associated with the announced spin-off of our xpedx operations, and a net charge of $4 million (before and after taxes) for other 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 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 fourth quarter of 2012 included pre-tax charges of $21 million ($14 million after taxes) for restructuring and other charges, pre-tax charges of $28 million ($19 million after taxes) for integration costs related to the Temple-Inland acquisition, and a gain of $3 million (before and after taxes) for other items. Also included are a net tax expense of $14 million related to internal restructurings and a tax expense of $5 million to adjust deferred tax assets related to post-retirement prescription drug coverage (Medicare Part D reimbursements).  Restructuring and other charges included pre-tax charges of $9 million ($6 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 $5 million ($4 million after taxes) for other items.

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

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 +1 (706) 679-8242 or, within the U.S. only, (877) 316-2541, and ask to be connected to the International Paper fourth quarter earnings call. The conference ID number is 31060455. 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 31060455.

International Paper (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 2013 were $29 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) the receipt of governmental and other approvals and favorable rulings associated with the agreed-upon transaction combining xpedx with Unisource, 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


Twelve Months Ended




December 31,



September 30,


December 31,




2013


2012



2013


2013


2012


Net Sales

$    7,249


$    7,075



$      7,406


$ 29,080


$   27,833


Costs and Expenses












  Cost of products sold

5,276


5,193



5,313


21,223

 (o) 

20,587

(w)

  Selling and administrative expenses

551

 (a) 

578

 (g) 


572

 (k) 

2,205

 (p) 

2,092

(x)

  Depreciation, amortization and cost of timber harvested

371


375



401


1,547

 (q) 

1,486


  Distribution expenses

423


413



438


1,732


1,611


  Taxes other than payroll and income taxes

42


42



47


185


166


  Restructuring and other charges

79

 (b) 

21

 (h) 


76

 (l) 

210

 (r) 

109

(y)

  Impairment of goodwill and other intangibles

527

 (c) 

-



-


527

 (c) 

-


  Net losses on sales and impairments of businesses

2

 (d) 

(3)

 (i) 


1

 (m) 

3

 (s) 

86

(z)

  Net bargain purchase gain on acquisition of business

-


-



-


(13)

 (t) 

-


  Interest expense, net

133


169



147


612

 (u) 

672


Earnings From Continuing Operations Before Income Taxes  and












  Equity Earnings

(155)

 (a-d) 

287

 (g-i) 


411

 (k-m) 

849

 (c,o-u) 

1,024

 (w-z) 

  Income tax provision (benefit)

(589)

 (e) 

74

 (j) 


41

 (n) 

(523)

 (v) 

331

 (j) 

  Equity earnings (loss), net of taxes

(9)


9



16


(39)


61


Earnings From Continuing Operations 

425

 (a-e) 

222

 (g-j) 


386

 (k-n) 

1,333

 (c,o-v) 

754

 (j,w-z) 

  Discontinued operations, net of taxes 

5


10



(10)


45


45


Net Earnings  

$       430

 (a-e) 

$       232

 (g-j) 


$         376

 (k-n) 

$   1,378

 (c,o-v) 

$        799

 (j,w-z) 

  Less: Net earnings (loss) attributable to noncontrolling interests

(6)

 (f) 

(3)



(6)


(17)

 (f) 

5


Net Earnings Attributable to International Paper Company

$       436

 (a-f) 

$       235

 (g-j) 


$         382

 (k-n) 

$   1,395

 (c,f,o-v) 

$        794

 (j,w-z) 














Basic Earnings Per Common Share Attributable to












  International Paper Common Shareholders












  Earnings from continuing operations

$      0.98

 (a-f) 

$      0.52

 (g-j) 


$        0.88

 (k-n) 

$      3.05

 (c,f,o-v) 

$       1.72

 (j,w-z) 

  Discontinued operations 

0.01


0.02



(0.02)


0.10


0.10


  Net earnings

$      0.99

 (a-f) 

$      0.54

 (g-j) 


$        0.86

 (k-n) 

$      3.15

 (c,f,o-v) 

$       1.82

 (j,w-z) 














Diluted Earnings Per Common Share Attributable to












  International Paper Common Shareholders












  Earnings from continuing operations

$      0.97

 (a-f) 

$      0.51

 (g-j) 


$        0.87

 (k-n) 

$      3.01

 (c,f,o-v) 

$       1.70

 (j,w-z) 

  Discontinued operations

0.01


0.02



(0.02)


0.10


0.10


  Net earnings  

$      0.98

 (a-f) 

$      0.53

 (g-j) 


$        0.85

 (k-n) 

$      3.11

 (c,f,o-v) 

$       1.80

 (j,w-z) 














Average Shares of Common Stock Outstanding - Diluted

445.3


441.5



449.7


448.1


440.2


Cash Dividends Per Common Share

$  0.3500


$  0.3000



$    0.3000


$ 1.2500


$   1.0875















Amounts Attributable to International Paper Common Shareholders











  Earnings from continuing operations, net of tax

$       431

 (a-f) 

$       225

 (g-j) 


$         392

 (k-n) 

$   1,350

 (c,f,o-v) 

$        749

 (j,w-z) 

  Discontinued operations, net of tax

5


10



(10)


45


45


  Net Earnings 

$       436

 (a-f) 

$       235

 (g-j) 


$         382

 (k-n) 

$   1,395

 (c,f,o-v) 

$        794

 (j,w-z) 

 

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


(a) 

Includes a pre-tax charge of $12 million ($7 million after taxes) for integration costs associated with the acquisition of Temple-Inland.             



(b) 

Includes a pre-tax charge of $67 million ($41 million after taxes) for costs associated with the announced shutdown of our Courtland mill, a pre-tax charge of $8 million ($5 million after taxes) for costs associated with the announced spin-off of the xpedx operations,  a pre-tax charge of $4 million ($3 million after taxes) for costs associated with the restructuring of the Asia Box operations, and a net pre-tax loss of $0 million ($1 million after taxes) for other items.            



(c) 

Includes a pre-tax charge of $400 million ($366 million after taxes) for the impairment of goodwill in the Company's xpedx business and a pre-tax charge of $127 million ($122 million after taxes) for the impairment of goodwill and a trade name intangible asset of the Company's India Papers business.            



(d) 

Includes a pre-tax charge of $2 million ($1 million after taxes) for an adjustment associated with the Company's divestiture of the Shorewood operations.            



(e) 

Includes a tax benefit of $651 million associated with the closing of a U.S. federal tax audit and a net tax benefit of $3 million for other items.            



(f) 

Includes pre-tax noncontrolling interest income of $4 million ($3 million after taxes) associated with the write-off of a trade name intangible asset in our India Papers business.            



(g) 

Includes a pre-tax charge of $28 million ($19 million after taxes) for integration costs associated with the acquisition of Temple-Inland.             



(h) 

Includes a pre-tax charge of $9 million ($6 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 $5 million ($4 million after taxes) for other items.            



(i) 

Includes a gain of $2 million (before and after taxes) for proceeds associated with the 2010 sale of the Arizona Chemical business, a gain of $2 million (before and after taxes) for the sale of the Company's Shorewood operations, and a charge of $1 million (before and after taxes) for costs associated with the divestiture of three containerboard mills in 2012.            



(j) 

Includes a net expense of $14 million related to internal restructurings, and a $5 million expense to adjust deferred tax assets related to post-retirement prescription drug coverage (Medicare Part D reimbursements).            



(k) 

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



(l) 

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 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.            



(m) 

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



(n)  

Includes a tax benefit of $31 million for an 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.



(o) 

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.            



(p) 

Includes a pre-tax charge of $62 million ($38 million after taxes) for integration costs associated with the acquisition of Temple-Inland.             



(q) 

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



(r) 

Includes a pre-tax charge of $118 million ($72 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 $25 million ($16 million after taxes) for debt extinguishment costs, a pre-tax charge of $32 million ($19 million after taxes) for costs associated with the restructuring of our xpedx operations, a pre-tax charge of $22 million ($14 million after taxes) for costs associated with the announced spin-off of the xpedx operations, and a net pre-tax gain of $2 million (a loss of $1 million after taxes) for other items.            



(s) 

Includes a pre-tax charge of $1 million ($0 million after taxes) for costs associated with the divestiture of three containerboard mills in 2012 and a pre-tax charge of $2 million ($1 million after taxes) for an adjustment associated with the Company's divestiture of the Shorewood operations.             



(t) 

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.            



(u) 

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



(v) 

Includes a tax benefit of $744 million associated with the closings of U.S. federal tax audits, a tax benefit of $31 million for an income tax reserve release, and a net tax benefit of $1 million for other items. 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.            



(w) 

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.            



(x) 

Includes a pre-tax charge of $164 million ($108 million after taxes) for integration costs associated with the acquisition of Temple-Inland.            



(y) 

Includes a pre-tax charge of $48 million ($30 million after taxes) for debt extinguishment costs, a pre-tax charge of $44 million ($28 million after taxes) for costs associated with the restructuring of our xpedx operations, a pre-tax charge of $17 million ($12 million after taxes) for costs associated with the restructuring of the Company's Packaging business in Europe, and net pre-tax charges of $0 million ($4 million after taxes) for other items.            



(z) 

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 $29 million ($55 million after taxes) for costs associated with the containerboard mill divestitures, a gain of $2 million (before and after taxes) for proceeds associated with the 2010 sale of the Arizona Chemical business, a gain of $2 million (before and after taxes) for the sale of the Company's Shorewood operations, 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


Twelve Months Ended



December 31,


September 30,


December 31,



2013


2012


2013


2013


2012













Operating Earnings

$           367


$         305


$                   471


$        1,418


$        1,167













Non-Operating Pension

(47)


(31)


(48)


(197)


(113)


Special Items

111

 (a) 

(49)

 (b) 

(31)

 (c) 

129

 (d) 

(305)

 (e) 

Earnings from Continuing Operations

431


225


392


1,350


749


Discontinued operations

5


10


(10)


45


45













Net Earnings as Reported

$           436


$         235


$                   382


$        1,395


$           794



































































Three Months Ended


Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


Diluted Earnings per Common Share

2013


2012


2013


2013


2012
























Operating Earnings Per Share 

$          0.83


$        0.69


$                  1.05


$          3.16


$          2.65













Non-Operating Pension

(0.11)


(0.07)


(0.11)


(0.44)


(0.26)


Special Items

0.25


(0.11)


(0.07)


0.29


(0.69)


  Continuing Operations

0.97


0.51


0.87


3.01


1.70


Discontinued operations

0.01


0.02


(0.02)


0.10


0.10













Diluted Earnings per Common Share as Reported

$          0.98


$        0.53


$                  0.85


$          3.11


$          1.80


Notes:         


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

(b) See footnotes (g) - (j) on the Consolidated Statement of Operations         

(c) See footnotes (k) - (n) on the Consolidated Statement of Operations         

(d) See footnotes (c), (f) and (o) - (v) on the Consolidated Statement of Operations         

(e) See footnotes (j), and (w) - (z) 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, twelve-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 



Twelve Months 







Ended




Ended



Ended







December 31,




September 30,



December 31,







2013



2012




2013



2013



2012



Industrial Packaging


$

3,715


$

3,380



$

3,755


$

14,810


$

13,280



Printing Papers



1,570



1,580




1,555



6,205



6,230



Consumer Packaging 



865



815




885



3,435



3,170



Distribution



1,415



1,530




1,445



5,650



6,040



Corporate and Inter-segment Sales



(316)



(230)




(234)



(1,020)



(887)























Net Sales


$

7,249


$

7,075



$

7,406


$

29,080


$

27,833











































Operating Profit by Industry Segment























Three Months 




Three Months 



Twelve Months 







Ended




Ended



Ended







December 31,




September 30,



December 31,







2013



2012




2013



2013



2012



Industrial Packaging


$

473

(1)

$

336

(5)


$

499

(1)

$

1,801

(1)

$

1,066

(5)


Printing Papers



(47)

(2)


147




93

(2)


271

(2)


599



Consumer Packaging 



30

(3)


41

(6)



73



161

(3)


268

(6)


Distribution



(397)

(4)


4

(7)



13

(4)


(389)

(4)


22

(7)






















Operating Profit



59



528




678



1,844



1,955























Interest expense, net



(133)



(169)




(147)



(612)

(8)


(672)



Noncontrolling interest/equity earnings adjustment (9)

-



(8)




(3)



1



-



Corporate items, net



6



(15)




(13)



(29)



(51)



Restructuring and other charges



(9)



(11)




(26)



(32)



(51)



Net gains (losses) on sales and impairment of business

-



2




-



-



2



Non-operating pension expense



(78)



(40)




(78)



(323)



(159)























Earnings (Loss) From Continuing Operations  


















    Before Income Taxes and Equity Earnings

$

(155)


$

287



$

411


$

849


$

1,024











































Equity Earnings in Ilim Holdings S.A., 



















    Net of Taxes 


$

(12)


$

8



$

11


$

(46)


$

56


 

(1)

Includes charges of $12 million and $24 million for the three months ended December 31, 2013 and September 30, 2013, respectively, and a charge of $62 million for the twelve months ended December 31, 2013 for integration costs associated with the acquisition of Temple-Inland, gains of $14 million for the twelve months ended December 31, 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 ended September 30, 2013 and the twelve months ended December 31, 2013 related to the sale of the box plant facility in Bellevue, Washington, charges of $4 million for the three months and twelve months ended December 31, 2013 for costs associated with the restructuring of the Asia Box operations, and a net gain of $3 million and charges of $3 million for the three months ended December 31, 2013 and September 30, 2013, respectively, and a net charge of $5 million for the twelve months ended December 31, 2013 for other items.                  



(2)

Includes charges of $67 million and $51 million for the three months ended December 31, 2013 and September 30, 2013, respectively, and a charge of $118 million for the twelve months ended December 31, 2013 for costs associated with the announced shutdown of our Courtland mill, and charges of $127 million, partially offset by $4 million of noncontrolling interest income, for the three months and twelve months ended December 31, 2013 for the impairment of goodwill and a trade name intangible asset of the Company's India Papers business.                  



(3)

Includes charges of $45 million for the twelve months ended December 31, 2013 for costs associated with the permanent shutdown of a paper machine at our Augusta mill, and charges of $2 million for the three months and twelve months ended December 31, 2013 for costs associated with the divestiture of the Shorewood business.                  



(4)

Includes charges of $2 million and $6 million for the three months ended December 31, 2013 and September 30, 2013, respectively, and a charge of $32 million for the twelve months ended December 31, 2013 for costs associated with the restructuring of the Company's xpedx operation, and a charge of $400 million for the three months and twelve months ended December 31, 2013 for the impairment of goodwill in the Company's xpedx business.                   



(5)

Includes charges of $28 million and $164 million for the three months and twelve months ended December 31, 2012 for integration costs associated with the Temple-Inland acquisition, charges of $1 million and $29 million for the three months and twelve months ended December 31, 2012  for costs associated with the divestiture of three containerboard mills, charges of $1 million and $17 million for the three months and twelve months ended December 31, 2012 for costs associated with the restructuring of our Packaging business in Europe, a charge of $62 million for the twelve months ended December 31, 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 twelve months ended December 31, 2012 related to the write-up of the Temple-Inland inventory to fair value, and a charge of $2 million and a gain of $3 million for the three months and twelve months ended December 31, 2012, respectively, for other items.                 



(6)

Includes gains of $2 million and $3 million for the three months and twelve months ended December 31, 2012 for adjustments related to the sale of the Shorewood business.                 



(7)

Includes charges of $7 million and $49 million for the three months and twelve months ended December 31, 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 December 31, 2013




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$            486

$            143

$             32

$               5

$            666










Special Items (a)


(13)

(190)

(2)

(402)

(607)










Operating Profit as Reported


$            473

$            (47)

$             30

$           (397)

$             59




























Three Months Ended December 31, 2012




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$            368

$            147

$             39

$             11

$            565










Special Items (b)


(32)

-

2

(7)

(37)






 . 




Operating Profit as Reported


$            336

$            147

$             41

$               4

$            528




























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




























Twelve Months Ended December 31, 2013




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$         1,849

$            512

$            208

$             43

$         2,612










Special Items (a)


(48)

(241)

(47)

(432)

(768)










Operating Profit as Reported


$         1,801

$            271

$            161

$           (389)

$         1,844




























Twelve Months Ended December 31, 2012




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$         1,355

$            599

$            265

$             71

$         2,290










Special Items (b)


(289)

-

3

(49)

(335)










Operating Profit as Reported


$         1,066

$            599

$            268

$             22

$         1,955


 

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

(b) See footnotes (5) - (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.       


(2) The Company has substantially completed its land sales and earnings for future land sales are expected to be insignificant.  Beginning in 2011, Forest Products is no longer reported as a separate industry segment.       


 


International Paper

Sales Volume by Product (1)

Preliminary and Unaudited
















International Paper Consolidated 































Three Months



 Three Months



Twelve Months





Ended



Ended



Ended





Dec 31,



Sept 30,



Dec 31,





2013


2012



2013



2013


2012

Industrial Packaging (In thousands of short tons)













Corrugated Packaging (2)

2,556


2,602



2,609



10,393


10,523


Containerboard (2)

753


828



801



3,273


3,228


Recycling 


615


595



603



2,379


2,349


Saturated Kraft

38


36



49



176


166


Gypsum /Release Kraft (2)

44


38



47



157


127


Bleached Kraft

22


29



39



132


114


European Industrial Packaging (3)

346


262



325



1,342


1,032


Asian Box 


104


103



111



416


410


Brazilian Packaging (4)

89


0



85



297


0



Industrial Packaging

4,567


4,493



4,669



18,565


17,949
















Printing Papers (In thousands of short tons)













U.S. Uncoated Papers 

604


627



650



2,508


2,617


European & Russian Uncoated Papers

386


338



359



1,413


1,286


Brazilian Uncoated Papers

319


306



288



1,150


1,165


Indian Uncoated Papers 

62


61



53



232


246



Uncoated Papers 

1,371


1,332



1,350



5,303


5,314


Market Pulp (5)

439


438



413



1,711


1,593
















Consumer Packaging (In thousands of short tons)













North American Consumer Packaging

368


368



409



1,556


1,507


European Coated Paperboard

87


94



87



355


372


Asian Coated Paperboard

367


340



365



1,430


1,059



Consumer Packaging

822


802



861



3,341


2,938


(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)






December 31,


December 31,


2013


2012

Assets








Current Assets




  Cash and Temporary Investments

$              1,802


$               1,302

  Accounts and Notes Receivable, Net

3,756


3,562

  Inventories

2,825


2,730

  Deferred Income Tax Assets

302


323

  Assets held for sale

-


759

  Other

340


229

    Total Current Assets

9,025


8,905





Plants, Properties and Equipment, Net

13,672


13,949

Forestlands

557


622

Investments 

733


887

Financial Assets of Special Purpose Entities

2,127


2,108

Goodwill

3,987


4,315

Deferred Charges and Other Assets

1,427


1,367





Total Assets

$            31,528


$             32,153





Liabilities and Equity








Current Liabilities




  Notes Payable and Current Maturities




   of Long-Term Debt

$                 661


$                  444

  Liabilities held for sale

-


44

  Accounts Payable and Accrued Liabilities

4,466


4,510

    Total Current Liabilities

5,127


4,998





Long-Term Debt

8,827


9,696

Nonrecourse Financial Liabilities of Special Purpose Entities

2,043


2,036

Deferred Income Taxes

3,765


3,026

Pension Benefit Obligation

2,205


4,112

Postretirement and Postemployment Benefit Obligation

412


473

Other Liabilities

702


1,176





Mezzanine Noncontrolling Interest

163


-





Equity




  Invested Capital

3,659


2,642

  Retained Earnings

4,446


3,662

    Total Shareholders' Equity

8,105


6,304





   Noncontrolling interests

179


332

    Total Equity

8,284


6,636





Total Liabilities and Equity

$            31,528


$             32,153

 

INTERNATIONAL PAPER COMPANY

Consolidated Statement of Cash Flows

Preliminary and Unaudited

(In Millions)






Twelve Months Ended


December 31,


2013


2012

Operating Activities




  Net earnings

$       1,378


$          799

  Discontinued operations, net of taxes and noncontrolling interests

(45)


(45)

  Earnings from continuing operations

$       1,333


$          754

  Depreciation, amortization and cost of timber harvested

1,547


1,486

  Deferred income tax expense (benefit), net

146


204

  Restructuring and other charges

210


109

  Pension plan contribution 

(31)


(44)

  Net (gains) losses on sales and impairments of businesses

3


86

  Net bargain purchase gain on acquisition of business

(13)


-

  Equity (earnings) loss, net

39


(61)

  Periodic pension expense, net

545


342

  Release of tax reserves

(775)


-

  Impairment of goodwill and other intangible assets

527


-

  Other, net

(47)


-

  Changes in current assets and liabilities




    Accounts and notes receivable

(134)


377

    Inventories

(114)


(28)

    Accounts payable and accrued liabilities

(110)


(273)

    Interest payable

(57)


30

    Other

(71)


(22)

Cash Provided By (Used For) Operations - Continuing Operations

2,998


2,960

Cash Provided By (Used For) Operations - Discontinued Operations

30


7

Cash Provided By (Used For) Operations

3,028


2,967

Investment Activities




  Invested in capital projects - continuing operations

(1,198)


(1,383)

  Acquisitions, net of cash acquired

(505)


(3,734)

  Proceeds from divestitures

726


474

  Equity investment in Ilim 

-


(45)

  Proceeds from sale of fixed assets

65


-

  Other     

84


(80)

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

(828)


(4,768)

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

1


(90)

Cash Provided By (Used For) Investment Activities

(827)


(4,858)

Financing Activities




  Repurchases of common stock and payments of restricted stock tax withholding

(512)


(35)

  Issuance of common stock

298


108

  Issuance of debt

241


2,132

  Reduction of debt

(845)


(2,488)

  Change in book overdrafts

(123)


11

  Dividends paid

(554)


(476)

  Redemption of preferred securities

(150)


-

  Other  

(43)


(47)

Cash Provided By (Used for) Financing Activities

(1,688)


(795)

Effect of Exchange Rate Changes on Cash 

(13)


(6)

Change in Cash and Temporary Investments

500


(2,692)

Cash and Temporary Investments




  Beginning of the period

1,302


3,994

  End of the period

$       1,802


$       1,302

 

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