New York | 13-0872805 | |
(State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
6400 Poplar Avenue, Memphis, Tennessee | 38197 | |
(Address of principal executive offices) | (ZIP Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit Number | Description | |
99.1 | Press Release of International Paper Company dated April 27, 2017. |
International Paper Company | |||
Date: April 27, 2017 | By: | /s/ VINCENT P. BONNOT | |
Name: | Vincent P. Bonnot | ||
Title: | Vice President - Finance and Controller |
Exhibit Number | Description | |
99.1 | Press Release of International Paper Company dated April 27, 2017. |
First Quarter 2017 | Fourth Quarter 2016 | First Quarter 2016 | ||||||||||
Net Earnings | $ | 0.50 | $ | 0.53 | $ | 0.81 | ||||||
Add Back – Discontinued Operations (Gain) Loss | — | — | 0.01 | |||||||||
Net Earnings (Loss) from Continuing Operations | 0.50 | 0.53 | 0.82 | |||||||||
Add Back – Non-Operating Pension Expense | 0.05 | 0.05 | 0.07 | |||||||||
Add Back – Net Special Items Expense (Income) | 0.05 | 0.15 | (0.09 | ) | ||||||||
Adjusted Operating Earnings* | $ | 0.60 | $ | 0.73 | $ | 0.80 |
* | Adjusted operating earnings (non-GAAP) is defined as net earnings from continuing operations attributable to International Paper Company (GAAP) excluding special items and non-operating pension expense. 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. |
Three Months Ended March 31, | Three Months Ended December 31, | ||||||||||||
2017 | 2016 | 2016 | |||||||||||
Net Sales | $ | 5,511 | $ | 5,110 | $ | 5,381 | |||||||
Costs and Expenses | |||||||||||||
Cost of products sold | 3,940 | (a) | 3,611 | 3,807 | (i) | ||||||||
Selling and administrative expenses | 422 | (b) | 376 | 433 | (j) | ||||||||
Depreciation, amortization and cost of timber harvested | 345 | 284 | 328 | ||||||||||
Distribution expenses | 379 | 320 | 349 | ||||||||||
Taxes other than payroll and income taxes | 45 | 41 | 41 | ||||||||||
Restructuring and other charges | — | 1 | (e) | 7 | (k) | ||||||||
Net (gains) losses on sales and impairment of businesses | — | 37 | (f) | — | |||||||||
Net bargain purchase gain on acquisition of business | (6 | ) | (c) | — | — | ||||||||
Interest expense, net | 142 | 123 | 136 | ||||||||||
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings | 244 | (a-c) | 317 | (e,f) | 280 | (i-k) | |||||||
Income tax provision (benefit) | 83 | (d) | 41 | (g) | 108 | (l) | |||||||
Equity earnings (loss), net of taxes | 48 | 63 | 47 | ||||||||||
Earnings (Loss) From Continuing Operations | 209 | (a-d) | 339 | (e-g) | 219 | (i-l) | |||||||
Discontinued operations, net of taxes | — | (5 | ) | (h) | — | ||||||||
Net Earnings (Loss) | 209 | (a-d) | 334 | (e-h) | 219 | (i-l) | |||||||
Less: Net earnings (loss) attributable to noncontrolling interests | — | — | 1 | ||||||||||
Net Earnings (Loss) Attributable to International Paper Company | $ | 209 | (a-d) | $ | 334 | (e-h) | $ | 218 | (i-l) | ||||
Basic Earnings Per Common Share Attributable to International Paper Common Shareholders | |||||||||||||
Earnings (loss) from continuing operations | $ | 0.51 | (a-d) | $ | 0.82 | (e-g) | $ | 0.53 | (i-l) | ||||
Discontinued operations | — | (0.01 | ) | (h) | — | ||||||||
Net earnings (loss) | $ | 0.51 | (a-d) | $ | 0.81 | (e-h) | $ | 0.53 | (i-l) | ||||
Diluted Earnings Per Common Share Attributable to International Paper Common Shareholders | |||||||||||||
Earnings (loss) from continuing operations | $ | 0.50 | (a-d) | $ | 0.82 | (e-g) | $ | 0.53 | (i-l) | ||||
Discontinued operations | — | (0.01 | ) | (h) | — | ||||||||
Net earnings (loss) | $ | 0.50 | (a-d) | $ | 0.81 | (e-h) | $ | 0.53 | (i-l) | ||||
Average Shares of Common Stock Outstanding - Diluted | 416.0 | 414.0 | 415.6 | ||||||||||
Cash Dividends Per Common Share | $ | 0.4625 | $ | 0.4400 | $ | 0.4625 | |||||||
Amounts Attributable to International Paper Common Shareholders | |||||||||||||
Earnings (loss) from continuing operations, net of tax | $ | 209 | (a-d) | $ | 339 | (e-g) | $ | 218 | (i-l) | ||||
Discontinued operations, net of tax | — | (5 | ) | (h) | — | ||||||||
Net earnings | $ | 209 | (a-d) | $ | 334 | (e-h) | $ | 218 | (i-l) |
(a) | Includes a pre-tax charge of $14 million ($8 million after taxes) to amortize the inventory fair value step-up for the pulp business acquired in December 2016 and charges of $2 million (before and after taxes) for other costs. |
(b) | Includes a pre-tax charge of $4 million ($2 million after taxes) for costs associated with the pulp business acquisition in December 2016. |
(c) | Includes a net bargain purchase gain of $6 million (before and after taxes) associated with the June 2016 Holmen Paper mill acquisition in Madrid, Spain. |
(d) | Includes a tax expense of $15 million for international investment restructuring. |
(e) | Includes a gain of $8 million ($5 million after taxes) related to the sale of our investment in Arizona Chemical, and a pre-tax charge of $9 million ($6 million after taxes) for costs associated with the Riegelwood mill conversion to 100% pulp production. |
(f) | Includes a pre-tax charge of $37 million ($34 million after taxes) for the impairment of the assets of our Asia corrugated packaging business and costs associated with the sale of that business. |
(g) | Includes a tax benefit of $57 million related to the legal restructuring of our Brazil Packaging business and a tax benefit of $14 million related to the closure of a U.S. federal tax audit. |
(h) | Includes a pre-tax charge of $8 million ($5 million after taxes) for a legal settlement associated with the xpedx business. |
(i) | Includes a pre-tax charge of $19 million ($11 million after taxes) to amortize the inventory fair value step-up for the pulp business acquired in December 2016 and charges of $3 million (before and after taxes) for other costs associated with the acquisition. |
(j) | Includes a pre-tax charge of $16 million ($11 million after taxes) for costs associated with the pulp business acquisition in December 2016. |
(k) | Includes a pre-tax charge of $7 million ($6 million after taxes) for costs associated with the closure of a mill in Turkey. |
(l) | Includes a tax expense of $31 million associated with a tax rate change in Luxembourg. |
Three Months Ended March 31, | Three Months Ended December 31, | ||||||||||||
2017 | 2016 | 2016 | |||||||||||
Net Earnings (Loss) Attributable to International Paper Company | $ | 209 | $ | 334 | $ | 218 | |||||||
Add back: Discontinued operations (gain) loss | — | 5 | (b) | — | |||||||||
Earnings (Loss) from Continuing Operations, including non-controlling interest | 209 | 339 | 218 | ||||||||||
Add back: Non-operating pension expense | 19 | 27 | 23 | ||||||||||
Add back: Special items expense (gain) | 21 | (a) | (36 | ) | (c) | 62 | (d) | ||||||
Adjusted Operating Earnings | $ | 249 | $ | 330 | $ | 303 | |||||||
Three Months Ended March 31, | Three Months Ended December 31, | ||||||||||||
2017 | 2016 | 2016 | |||||||||||
Diluted Earnings per Common Share as Reported | $ | 0.50 | $ | 0.81 | $ | 0.53 | |||||||
Add back: Discontinued operations (gain) loss | — | 0.01 | — | ||||||||||
Continuing Operations | 0.50 | 0.82 | 0.53 | ||||||||||
Add back: Non-operating pension expense | 0.05 | 0.07 | 0.05 | ||||||||||
Add back: Special items expense (gain) | 0.05 | (0.09 | ) | 0.15 | |||||||||
Adjusted Operating Earnings per Share | $ | 0.60 | $ | 0.80 | $ | 0.73 |
(a) | See footnotes (a) - (d) on the Consolidated Statement of Operations |
(b) | See footnote (h) on the Consolidated Statement of Operations |
(c) | See footnotes (e) - (g) on the Consolidated Statement of Operations |
(d) | See footnotes (i) - (l) on the Consolidated Statement of Operations |
(1) | The Company calculates Adjusted Operating Earnings (non-GAAP) 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 attributable to International Paper is the most directly comparable GAAP measure. |
Three Months Ended March 31, | Three Months Ended December 31, | ||||||||||||
2017 | 2016 | 2016 | |||||||||||
Industrial Packaging | $ | 3,499 | $ | 3,452 | $ | 3,559 | |||||||
Global Cellulose Fibers | 564 | 212 | 379 | ||||||||||
Printing Papers | 995 | 972 | 1,055 | ||||||||||
Consumer Packaging | 466 | 495 | 464 | ||||||||||
Corporate and Inter-segment Sales | (13 | ) | (21 | ) | (76 | ) | |||||||
Net Sales | $ | 5,511 | $ | 5,110 | $ | 5,381 | |||||||
Operating Profit by Business Segment | |||||||||||||
Three Months Ended March 31, | Three Months Ended December 31, | ||||||||||||
2017 | 2016 | 2016 | |||||||||||
Industrial Packaging | $ | 365 | (a) | $ | 396 | (c) | $ | 372 | (e) | ||||
Global Cellulose Fibers | (70 | ) | (b) | (50 | ) | (70 | ) | (f) | |||||
Printing Papers | 100 | 135 | 121 | ||||||||||
Consumer Packaging | 33 | 16 | (d) | 41 | |||||||||
Total Business Segment Operating Profit | $ | 428 | $ | 497 | $ | 464 | |||||||
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings | $ | 244 | $ | 317 | $ | 280 | |||||||
Interest expense, net | 142 | 123 | 136 | ||||||||||
Noncontrolling interest/equity earnings adjustment (g) | — | — | — | ||||||||||
Corporate items, net | 11 | 21 | 11 | ||||||||||
Special items, net | — | (8 | ) | — | |||||||||
Non-operating pension expense | 31 | 44 | 37 | ||||||||||
Adjusted Operating Profit | $ | 428 | $ | 497 | $ | 464 | |||||||
Equity Earnings (Loss) in Ilim Holdings S.A., Net of Taxes | $ | 50 | $ | 62 | $ | 45 |
(a) | Includes a gain of $6 million for the three months ended March 31, 2017 for a net bargain purchase gain associated with the June 2016 acquisition of Holmen Paper's newsprint mill in Madrid, Spain and a charge of $1 million for other items. |
(b) | Includes a charge of $14 million for the amortization of the inventory fair value step-up for the pulp business acquired in December 2016, charges of $4 million for costs associated with the acquisition of that business and a charge of $1 million for other items. |
(c) | Includes a charge of $37 million for the three months ended March 31, 2016 for the impairment of the assets of our corrugated packaging business in Asia and costs associated with the sale of that business. |
(d) | Includes a charge of $9 million for the three months ended March 31, 2016 for costs associated with the Riegelwood mill conversion to 100% pulp production. |
(e) | Includes a charge of $7 million for the three months ended December 31, 2016 for costs associated with the closure of a mill in Turkey. |
(f) | Includes a charge of $19 million for the three months ended December 31, 2016 for costs associated with the December 2016 pulp business acquisition and a charge of $19 million for the three months ended December 31, 2016 for the amortization of the newly acquired pulp business inventory fair value step-up. |
(g) | Operating profits for business segments include each segment's percentage share of the profits of subsidiaries included in that segment that are less than wholly owned. The pre-tax noncontrolling interest and equity earnings for these subsidiaries are adjusted here to present consolidated earnings before income taxes and equity earnings. |
Three Months Ended March 31, 2017 | ||||||||||||||||||||
Industrial Packaging | Global Cellulose Fibers | Printing Papers | Consumer Packaging | Total | ||||||||||||||||
Operating Profit (Loss) as Reported | $ | 365 | $ | (70 | ) | $ | 100 | $ | 33 | $ | 428 | |||||||||
Special Items Expense (Income) (a) | (5 | ) | 19 | — | — | 14 | ||||||||||||||
Operating Profit (Loss) Before Special Items | $ | 360 | $ | (51 | ) | $ | 100 | $ | 33 | $ | 442 | |||||||||
Three Months Ended March 31, 2016 | ||||||||||||||||||||
Industrial Packaging | Global Cellulose Fibers | Printing Papers | Consumer Packaging | Total | ||||||||||||||||
Operating Profit (Loss) as Reported | $ | 396 | $ | (50 | ) | $ | 135 | $ | 16 | $ | 497 | |||||||||
Special Items Expense (Income) (b) | 37 | — | — | 9 | 46 | |||||||||||||||
Operating Profit (Loss) Before Special Items | $ | 433 | $ | (50 | ) | $ | 135 | $ | 25 | $ | 543 | |||||||||
Three Months Ended December 31, 2016 | ||||||||||||||||||||
Industrial Packaging | Global Cellulose Fibers | Printing Papers | Consumer Packaging | Total | ||||||||||||||||
Operating Profit (Loss) as Reported | $ | 372 | $ | (70 | ) | $ | 121 | $ | 41 | $ | 464 | |||||||||
Special Items Expense (Income) (c) | 7 | 38 | — | — | 45 | |||||||||||||||
Operating Profit (Loss) Before Special Items | $ | 379 | $ | (32 | ) | $ | 121 | $ | 41 | $ | 509 | |||||||||
(a) | See footnotes (a) - (b) on Sales and Earnings by Business Segment |
(b) | See footnotes (c) - (d) on Sales and Earnings by Business Segment |
(c) | See footnotes (e) - (f) on Sales and Earnings by Business Segment |
Three Months Ended March 31, | Three Months Ended December 31, | ||||||||
2017 | 2016 | 2016 | |||||||
Industrial Packaging (In thousands of short tons) | |||||||||
Corrugated Packaging (c) | 2,537 | 2,519 | 2,591 | ||||||
Containerboard | 813 | 740 | 780 | ||||||
Recycling | 950 | 928 | 977 | ||||||
Saturated Kraft | 46 | 47 | 40 | ||||||
Gypsum /Release Kraft | 53 | 46 | 58 | ||||||
Bleached Kraft | 7 | 6 | 6 | ||||||
EMEA Packaging (c) (d) | 374 | 374 | 386 | ||||||
Asian Box (c) (e) | — | 103 | — | ||||||
Brazilian Packaging (c) | 86 | 77 | 117 | ||||||
Industrial Packaging | 4,866 | 4,840 | 4,955 | ||||||
Global Cellulose Fibers (In thousands of metric tons) (b) | 877 | 367 | 626 | ||||||
Printing Papers (In thousands of short tons) | |||||||||
U.S. Uncoated Papers | 489 | 475 | 470 | ||||||
European & Russian Uncoated Papers | 359 | 373 | 417 | ||||||
Brazilian Uncoated Papers | 264 | 254 | 314 | ||||||
Indian Uncoated Papers | 61 | 63 | 66 | ||||||
Uncoated Papers | 1,173 | 1,165 | 1,267 | ||||||
Consumer Packaging (In thousands of short tons) | |||||||||
North American Consumer Packaging | 291 | 308 | 274 | ||||||
European Coated Paperboard | 99 | 94 | 95 | ||||||
Consumer Packaging | 390 | 402 | 369 |
March 31, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and Temporary Investments | $ | 998 | $ | 1,033 | ||||
Accounts and Notes Receivable, Net | 3,078 | 3,001 | ||||||
Inventories | 2,394 | 2,438 | ||||||
Other | 251 | 198 | ||||||
Total Current Assets | 6,721 | 6,670 | ||||||
Plants, Properties and Equipment, Net | 14,049 | 13,990 | ||||||
Forestlands | 471 | 456 | ||||||
Investments | 311 | 360 | ||||||
Financial Assets of Special Purpose Entities | 7,037 | 7,033 | ||||||
Goodwill | 3,402 | 3,364 | ||||||
Deferred Charges and Other Assets | 1,310 | 1,220 | ||||||
Total Assets | $ | 33,301 | $ | 33,093 | ||||
Liabilities and Equity | ||||||||
Current Liabilities | ||||||||
Notes Payable and Current Maturities of Long-Term Debt | $ | 454 | $ | 239 | ||||
Accounts Payable and Accrued Liabilities | 3,813 | 3,830 | ||||||
Total Current Liabilities | 4,267 | 4,069 | ||||||
Long-Term Debt | 10,823 | 11,075 | ||||||
Nonrecourse Financial Liabilities of Special Purpose Entities | 6,286 | 6,284 | ||||||
Deferred Income Taxes | 3,185 | 3,127 | ||||||
Pension Benefit Obligation | 3,375 | 3,400 | ||||||
Postretirement and Postemployment Benefit Obligation | 325 | 330 | ||||||
Other Liabilities | 446 | 449 | ||||||
Equity | ||||||||
Invested Capital | (257 | ) | (477 | ) | ||||
Retained Earnings | 4,832 | 4,818 | ||||||
Total Shareholders’ Equity | 4,575 | 4,341 | ||||||
Noncontrolling interests | 19 | 18 | ||||||
Total Equity | 4,594 | 4,359 | ||||||
Total Liabilities and Equity | $ | 33,301 | $ | 33,093 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Operating Activities | ||||||||
Net earnings (loss) | $ | 209 | $ | 334 | ||||
Depreciation, amortization and cost of timber harvested | 345 | 284 | ||||||
Deferred income tax expense (benefit), net | 7 | (37 | ) | |||||
Restructuring and other charges | — | 1 | ||||||
Net bargain purchase gain on acquisition of business | (6 | ) | — | |||||
Net (gains) losses on sales and impairments of businesses | — | 37 | ||||||
Ilim dividends received | 127 | — | ||||||
Equity (earnings) loss, net | (48 | ) | (63 | ) | ||||
Periodic pension expense, net | 78 | 91 | ||||||
Other, net | 45 | 27 | ||||||
Changes in current assets and liabilities | ||||||||
Accounts and notes receivable | (57 | ) | (7 | ) | ||||
Inventories | (15 | ) | (9 | ) | ||||
Accounts payable and accrued liabilities | 22 | (26 | ) | |||||
Interest payable | (18 | ) | 32 | |||||
Other | (56 | ) | (44 | ) | ||||
Cash Provided By (Used For) Operating Activities | 633 | 620 | ||||||
Investment Activities | ||||||||
Invested in capital projects | (374 | ) | (309 | ) | ||||
Proceeds from sale of fixed assets | 1 | 8 | ||||||
Other | (27 | ) | (63 | ) | ||||
Cash Provided By (Used For) Investment Activities | (400 | ) | (364 | ) | ||||
Financing Activities | ||||||||
Repurchases of common stock and payments of restricted stock tax withholding | (46 | ) | (131 | ) | ||||
Issuance of debt | 186 | 467 | ||||||
Reduction of debt | (227 | ) | (322 | ) | ||||
Change in book overdrafts | (6 | ) | 3 | |||||
Dividends paid | (191 | ) | (181 | ) | ||||
Cash Provided By (Used for) Financing Activities | (284 | ) | (164 | ) | ||||
Cash Included in Assets Held for Sale | — | (12 | ) | |||||
Effect of Exchange Rate Changes on Cash | 16 | 25 | ||||||
Change in Cash and Temporary Investments | (35 | ) | 105 | |||||
Cash and Temporary Investments | ||||||||
Beginning of the period | 1,033 | 1,050 | ||||||
End of the period | $ | 998 | $ | 1,155 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Cash provided by (used for) Operating Activities | $ | 633 | $ | 620 | |||
Adjustments: | |||||||
Cash invested in capital projects | (374 | ) | (309 | ) | |||
Free Cash Flow | $ | 259 | $ | 311 |
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