First Quarter 2014 Earnings | April 30, 2014
Forward-Looking Statements Certain statements in these slides and made during this presentation 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 transaction without unexpected delays or conditions, and the successful closing of such 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 our 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. 2 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
Statements Relating to Non-GAAP Financial Measures During the course of this presentation, certain non-U.S. GAAP financial information will be presented. A reconciliation of those numbers to U.S. GAAP financial measures is available on the company’s website at internationalpaper.com under Investors. 3 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
Ilim JV Information All financial information and statistical measures regarding our 50/50 Ilim joint venture in Russia (“Ilim”), other than historical International Paper Equity Earnings and dividends received by International Paper, have been prepared by the management of Ilim. Ilim management has indicated that the financial information was prepared in accordance with International Financial Reporting Standards and extracted from Ilim’s financial statements, but International Paper has not verified or audited any of this information. Any projected financial information and statistical measures reflect the current views of Ilim management and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such projections. See “Forward - Looking Statements.” 4 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
First Quarter 2014 Results EBIT 1 Solid results despite NA weather impact in ($MM) quarter (~$60MM) Higher pricing momentum in most global businesses Record 1Q results in NA Industrial Packaging Good execution on maintenance outages Courtland closure complete; costs ramping $676 $568 down $549 xpedx spin progressing toward early 3Q close Significantly improved Ilim operational EBITDA Share buyback program well ahead of plan 1Q13 4Q13 1Q14 1 From continuing operations before special items and non-operating pension expense 5 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
1Q14 Financial Results EBITDA 1 ($MM) 1Q13 4Q13 1Q14 Sales ($B) $7.1 $7.2 $7.0 EBIT 1 ($MM) $549 $676 $568 EPS 2 $0.65 $0.83 $0.61 $1,047 EBITDA 1 ($MM) $928 $1,047 $920 $928 $920 EBITDA Margin 1 13.1% 14.4% 13.1% Free Cash Flow 3 $300 $595 $254 ($MM) 1Q13 4Q13 1Q14 1 From continuing operations before special items and non-operating pension expense 2 EPS based on Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense) 3 See slide #27 for a reconciliation of cash provided by continuing operations to free cash flow 6 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
1Q14 vs. 4Q13 EPS .09 (.04) .01 (.05) (.04) .83 (.05) (.04) (.10) .61 4Q13 Price / Mix Volume Operations Maintenance Input Costs Corporate Ilim JV Weather 1Q14 & Costs Outages & Other Items Operating Earnings 7 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
1Q14 vs. 1Q13 EPS (.04) .35 (.05) (.09) (.09) .04 .05 (.07) (.04) (.10) .65 .61 Courtland (.05) FX (.08) Ops .04 1Q13 Price / Mix Volume Maintenance Input Costs Interest Corporate Tax Operations Ilim JV Weather 1Q14 Outages & Other Items & Costs Operating Earnings 8 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
Global Input Costs vs. 4Q13 | $39MM Unfavorable, or $0.06 per Share By Business By Input Type $4 OCC Wood ($1) ($9) ($9) ($11) NA Weather ($19) ($33) Industrial Printing Consumer Packaging Papers Packaging Fiber Freight Energy Chemicals Energy Energy (NA Weather) Wood Chemicals North America Outside North America Freight OCC Input costs ($MM) for continuing businesses 9 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
Industrial Packaging | 1Q14 vs. 4Q13 7 (35) 32 (7) 27 (1) (42) 486 467 $ Million 4Q13 Price / Mix Volume Operations Maintenance Input Costs Other Weather 1Q14 & Costs Outages Segment operating profit before special items 10 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
NA Industrial Packaging Relative EBITDA Margins 23.0% 22.5% 21.9% 2013 21.2% 1 2013 22.3% 19.2% 20.9% 19.4% 2013 17.5% 16.9% 13.9% 15.2% IP PCA RockTenn 1Q13 4Q13 1Q14 1 Reflects Company’s change in accounting method beginning in 1Q14 IP EBITDA margins based on North American Industrial Packaging operating profit before special items Excludes the Recycling Business and revenue from trade volumes Competitor EBITDA margin estimates obtained from public filings and IP analysis 11 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
IP U.S. Corrugated Shipments Trend Improving on Per Day Basis MSF Sold per Day April 2014 Volume +3% vs 1Q14 Avg +2% vs April 2013 1Q14 Avg/Day April '13 April '14 (Estimate) 12 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
Consumer Packaging | 1Q14 vs. 4Q13 (9) 7 (3) 3 0 32 (3) (9) $ Million 18 4Q13 Price / Mix Volume Operations Maintenance Input Costs Other Weather 1Q14 & Costs Outages Segment operating profit before special items 13 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
Consumer Packaging Earnings Runway Market Fundamentals NA SBS industry backlogs remain strong at 5 weeks, up over 20% vs. a year ago Continued realization of $50/ton March 1 price increase IP continues to capitalize on the growing shift from foam-based cups to paper cups (benefits Coated Paperboard and Foodservice businesses) Kenton, OH foodservice facility expansion 2014 U.S. Cup Demand (Billions of Units) complete by mid-2015 • $60-70MM investment Paper Hot Plastic • Adding 250,000 sq. feet and 125 jobs 18 21 = Paper 15 – 25 Thousand Tons of Every 1 Billion Foam & Plastic Cold Foam Cups Converted to Paper Coated Paperboard Demand 38 31 Kwidzyn, Poland investment in coated paperboard machine completed 1 st quarter. Enhances product quality and service platform for regional folding boxboard market 14 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
Printing Papers | 1Q14 vs. 4Q13 (42) 24 143 (14) (4) (10) $ Million (5) (7) 85 4Q13 Price / Mix Volume Operations Maintenance Input Costs FX Weather 1Q14 & Costs Outages Segment operating profit before special items 15 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
NA Printing Papers Update Courtland Shutdown Complete; Good Progress on Transition of Business All machines down early Feb Sheeters down in March Inventory to be depleted by late May Paper qualification trials 95% complete A significant number of employees have found jobs internally/externally Some cost impacts will continue into 2Q14 and beyond 16 Earnings Presentation | First Quarter 2014 Earnings Presentation | First Quarter 2014
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