-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, J1twyOXEiFJjQ+rdel+i6ZGyUELJw5Go4DsdtrlOg1igbh5bTRcwFbRyVREx6OWL jbaEaDF24H7DSNNZOWHN+Q== 0000889812-94-000026.txt : 19940815 0000889812-94-000026.hdr.sgml : 19940815 ACCESSION NUMBER: 0000889812-94-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL PAPER CO /NEW/ CENTRAL INDEX KEY: 0000051434 STANDARD INDUSTRIAL CLASSIFICATION: 2631 IRS NUMBER: 130872805 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03157 FILM NUMBER: 94543687 BUSINESS ADDRESS: STREET 1: TWO MANHATTANVILLE RD CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9143971500 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL PAPER & POWER CORP DATE OF NAME CHANGE: 19710527 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 -------------------------------------- For Quarter Ended June 30, 1994 Commission file number 1-3157 INTERNATIONAL PAPER COMPANY (Exact name of registrant as specified in its charter) New York 13 0872805 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) Two Manhattanville Road, Purchase, NY 10577 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 914-397-1500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______ ________ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Common stock outstanding on July 29, 1994: 124,794,130 shares. INTERNATIONAL PAPER COMPANY INDEX Page No. ________ PART I. Financial Information Item 1. Financial Statements Consolidated Statement of Earnings - 4 Three Months and Six Months Ended June 30, 1994 and 1993. Consolidated Balance Sheet - 5-6 June 30, 1994 and December 31, 1993. Consolidated Statement of Cash Flows - 7 Six Months Ended June 30, 1994 and 1993. Notes to Consolidated Financial 8-9 Statements. Item 2. Management's Discussion and Analysis of 10-11 Financial Condition and Results of Operations. Item 3. Other Financial Information 12 PART II Other Information Item 1. Legal Proceedings 13 Item 2. Changes in Securities * Item 3. Defaults upon Senior Securities * Item 4. Submission of Matters to a Vote of 14 Security Holders - 2 - INTERNATIONAL PAPER COMPANY INDEX (Con'd) Page No. ________ Item 5. Other Information * Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 * Omitted since no answer is called for, answer is in the negative or inapplicable. - 3 - ITEM 1. FINANCIAL STATEMENTS INTERNATIONAL PAPER COMPANY Consolidated Statement of Earnings (Unaudited) (In millions, except per-share amounts)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------------------- 1994 1993 1994 1993 ------- ------- ------- ------- Net Sales $ 3,633 $ 3,506 $ 7,047 $ 6,868 ------- ------- ------- ------- Costs and Expenses Cost of products sold 2,712 2,619 5,277 5,162 Depreciation and amortization 228 228 453 448 Distribution expenses 175 165 329 319 Selling and administrative expenses 258 252 502 484 Taxes other than payroll and income taxes 40 41 78 80 ------- ------- ------- ------- Total Costs and Expenses 3,413 3,305 6,639 6,493 ------- ------- ------- ------- Earnings Before Interest and Income Taxes 220 201 408 375 Interest expense, net 86 79 163 152 ------- ------- ------- ------- Earnings Before Income Taxes 134 122 245 223 Provision for income taxes 47 45 86 82 ------- ------- ------- ------- Net Earnings $ 87 $ 77 $ 159 $ 141 ======= ======= ======= ======= Earnings per Common Share $ .70 $ .62 $ 1.28 $ 1.14 ======= ======= ======= ======= Average Shares of Common Stock Outstanding 124.6 123.1 124.4 123.0 ======= ======= ======= ======= Cash Dividends per Common Share $ .42 $ .42 $ .84 $ .84 ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements. -4- INTERNATIONAL PAPER COMPANY Consolidated Balance Sheet (Unaudited) (In millions)
June 30, December 31, 1994 1993 -------- ------------ Assets Current Assets Cash and temporary investments $ 193 $ 242 Accounts and notes receivable, net 2,098 1,856 Inventories 2,072 2,024 Other current assets 274 279 -------- -------- Total Current Assets 4,637 4,401 Plants, Properties and Equipment, net 8,909 8,872 Forestlands 796 786 Investments 975 631 Goodwill 763 754 Deferred Charges and Other Assets 1,295 1,187 -------- -------- Total Assets $ 17,375 $ 16,631 ======== ========
The accompanying notes are an integral part of these financial statements. - 5 - INTERNATIONAL PAPER COMPANY Consolidated Balance Sheet (Unaudited) (In millions)
June 30, December 31, 1994 1993 -------- ------------ Liabilities and Common Shareholders' Equity Current Liabilities Notes payable and current maturities of long-term debt $ 2,371 $ 2,089 Accounts payable and accrued liabilities 1,871 1,920 -------- -------- Total Current Liabilities 4,242 4,009 Long-Term Debt 3,981 3,601 Deferred Income Taxes 1,643 1,614 Minority Interest and Other Liabilities 1,195 1,182 Common Shareholders' Equity Common stock, $1 par value, issued 1994 - 127.4 shares, 1993 - 127.3 shares 127 127 Paid-in capital 1,706 1,704 Retained earnings 4,607 4,553 -------- -------- 6,440 6,384 Less: Common stock held in treasury, at cost; 1994 - 2.7 shares, 1993 - 3.4 shares 126 159 -------- -------- Total Common Shareholders' Equity 6,314 6,225 -------- -------- Total Liabilities and Common Shareholders' Equity $ 17,375 $ 16,631 ======== ========
The accompanying notes are an integral part of these financial statements. - 6 - INTERNATIONAL PAPER COMPANY Consolidated Statement of Cash Flows (Unaudited) (In millions)
Six Months Ended June 30, ------------------ 1994 1993 ------- ------ Operating Activities Net earnings $ 159 $ 141 Noncash items Depreciation and amortization 453 448 Deferred income taxes 7 2 Other, net (21) (18) Changes in current assets and liabilities Accounts and notes receivable (258) (117) Inventories (29) (42) Other current assets (1) (36) Accounts payable and accrued liabilities 9 (89) ------- ------ Cash Provided by Operations 319 289 ------- ------ Investment Activities Invested in capital projects (418) (373) Mergers and acquisitions Plants, properties and equipment, net (4) Other assets and liabilities, net (17) Investments in affiliated companies (299) Other (60) (28) ------- ------ Cash Used for Investment Activities (777) (422) ------- ------ Financing Activities Issuance of common stock 52 38 Issuance of debt 1,150 430 Reduction of debt (521) (161) Change in bank overdrafts (119) 3 Dividends paid (105) (103) Other (50) (26) ------- ------ Cash Provided by Financing Activities 407 181 ------- ------ Effect of Exchange Rate Changes on Cash 2 (1) Change in Cash and Temporary Investments (49) 47 Cash and Temporary Investments Beginning of the period 242 225 ------- ------ End of the period $ 193 $ 272 ======= ======
The accompanying notes are an integral part of these financial statements. - 7 - INTERNATIONAL PAPER COMPANY Notes to Consolidated Financial Statements (Unaudited) 1. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of Management, include all adjustments (consisting only of normal recurring accruals) which are necessary for the fair presentation of results for the interim periods. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto incorporated by reference in the Company's Form 10-K for the year ended December 31, 1993, which has previously been filed with the Commission. 2. In March 1994, the Company acquired approximately one-half of Brierley Investments Limited's (Brierley) holdings in Carter Holt Harvey Limited (Carter Holt), a major New Zealand forest products and paper company with substantial assets in Chile. The purchase increased the Company's ownership of Carter Holt to 24 percent and leaves Brierley with 8 percent. The investment in Carter Holt is accounted for using the equity method. In April 1993, the Company acquired certain assets of the Los Angeles - based Ingram Paper Company (Ingram). Ingram is a distributor of industrial and fine printing papers. In December, JB Papers, Inc., a paper distribution company located in Union, N.J., was purchased. Also in December, the assets of Monsanto Company's Kentucky-based Fome-Cor division, a manufacturer of polystyrene foam products, were acquired. All of the 1993 acquisitions were accounted for using the purchase method. The effects of these acquisitions, individually or in the aggregate, were not significant to the Company's financial statements. The consolidated balance sheet at June 30, 1994 includes preliminary purchase price allocations for JB Papers and Fome-Cor. The consolidated balance sheet at December 31, 1993 includes preliminary purchase price allocations for Ingram, JB Papers and Fome-Cor. Final allocations for JB Papers and Fome-Cor will be completed in 1994. 3. Inventories by major category include:
June 30, December 31, 1994 1993 -------- ------------ (In millions) Raw materials $ 378 $ 380 Finished pulp, paper and packaging products 1,042 1,017 Finished imaging products 172 164 Finished lumber and panel products 80 79 Operating supplies 331 324 Other 69 60 ------ ------ Total $2,072 $2,024 ====== ======
- 8 - 4. Interest payments made during the periods ended June 30, 1994 and 1993 were $164 million and $170 million, respectively, including payments of $76 million and $69 million for the 1994 and 1993 second quarters. Income tax payments made during the six months of 1994 and 1993 were $67 million and $85 million, respectively. 5. Temporary investments with a maturity of three months or less are treated as cash equivalents and are stated at cost. Temporary investments totaled $85 million and $160 million at June 30, 1994 and December 31, 1993, respectively. 6. Certain amounts have been reclassified in the 1993 consolidated statement of cash flows to conform with the current year presentation for changes in bank overdrafts as financing activities. Changes in bank overdrafts were presented as operating activities prior to 1994. Bank overdrafts are included in accounts payable and accrued liabilities in the consolidated balance sheet. 7. Early in the second quarter of 1994 the Company filed a shelf registration statement with the Securities and Exchange Commission to register $2.0 billion of debt and other securities. At August 12, 1994, $600 million of long-term notes have been issued under this shelf registration statement. The proceeds from these notes were used primarily for the retirement of short-term borrowings. - 9 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The first half of 1994 saw steady improvement in International Paper's overall results. Sales for the period totaled $7.0 billion versus $6.9 billion during the first six months of 1993. Net earnings were $159 million, or $1.28 per share, up from $141 million and $1.14, respectively, one year ago. 1994 second-quarter net earnings of $87 million or $.70 per share, is a 13% increase over prior-year second-quarter net earnings of $77 million or $.62 per share. Second-quarter net sales were $3.6 billion, compared with last year's second-quarter net sales of $3.5 billion and 1994 first-quarter net sales of $3.4 billion. Although these increases are relatively modest, we believe that they represent the beginning of a fundamental turnaround in many of our key markets. As economic growth, worldwide demand, pricing trends and internal cost-cutting initiatives gather strength during the second half of this year, we expect operating results to improve further. Printing Papers net sales totaled $1.0 billion in each of the second quarters of 1994 and 1993 and were $2.0 billion in the first half of each year. While the printing papers business reported a loss in 1994, operating results were ahead of the prior-year second quarter and the 1994 first quarter. First-half prices for uncoated papers declined slightly compared to a year ago, but sales began to improve late in the second quarter in response to low merchant inventories and rising end-user demand. In Europe, paper product prices and sales volume have improved in response to the region's economic recovery. Additionally, pulp profits rose on improved worldwide pricing and coated papers prices have stabilized, supported by greater U.S. demand. The Company is optimistic about prospects for continued improvement in printing papers markets during the second half of this year. Packaging net sales increased to $825 million in the 1994 second quarter from $790 million in the 1993 second quarter and were $1.6 billion and $1.5 billion in the first half of 1994 and 1993, respectively. Demand for containerboard rose in response to strong domestic and export markets, enabling price increases late in 1993 and again in the spring and summer of 1994. While bleached board prices declined compared to first-half 1993 levels, stronger global demand for consumer packaging should support higher prices in the months ahead. Distribution net sales were $820 million and $775 million in the second quarter of 1994 and 1993, respectively. Net sales for the first half of 1994 were $1.6 billion compared with $1.5 billion in the first half of 1993. Sales for the second quarter of 1994 were favorably impacted by the acquisition of JB Papers late in 1993. Operating results were up slightly for the 1994 second quarter compared with the 1993 second quarter due to improved business conditions in U.S and European markets. - 10 - Specialty Products net sales were $640 million and $630 million in the second quarter of 1994 and 1993, respectively, and were $1.3 billion in the 1994 first half compared with $1.2 billion in the 1993 first half. Specialty Products earnings continued to increase, up from the 1994 first quarter and slightly ahead of the second quarter a year ago. The specialty panels business led the group in sales growth and operating profits, supported by a strong housing market and robust sales of decorative products. Forest Products net sales of $445 million for the 1994 second quarter and $870 million for the six-month period were higher than the $440 million and $840 million reported in the respective 1993 periods. Steady demand for curtailed supplies of stumpage and wood products resulted in second-quarter 1994 operating profits that were about even with the prior year. Despite some moderation in the second quarter of 1994, overall pricing levels for stumpage and wood products remained high. Harvest and wood products volumes over the next six months should match first-half levels in a favorable pricing environment. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operations totaled $319 million for the 1994 six months, up from $289 million for the comparable 1993 period. Higher earnings coupled with lower working capital requirements led to the increase. Investments in capital projects totaled $418 million for the first half of 1994, up from the $373 million spent in the first half of 1993. Additionally, $299 million was spent to increase investments in affiliated companies. Dividend payments were $105 million, or $.84 per common share. Debt issued in 1994 included commercial paper and bank notes together with $300 million of long-term notes used to retire short-term borrowings and additional non-US borrowings. Early in the 1994 third quarter, an additional $300 million of long-term notes were issued that will be used to reduce short-term borrowings. At June 30, 1994, approximately $2.2 billion of borrowings were outstanding with floating short-term interest rates. The Company anticipates that cash flow generated from operations, supplemented as necessary by short- or long-term borrowings, will be adequate to meet capital expenditures which are expected to exceed $1.1 billion for 1994. - 11 - ITEM 3. OTHER FINANCIAL INFORMATION Sales by Industry Segment and Production by Products (Unaudited) Sales by Industry Segment (In millions)
Three Months Ended Six Months Ended June 30, June 30, -------------------- ------------------ 1994 1993 1994 1993 ------- ------- ------- ------- Printing Papers $ 1,035 $ 1,020 $ 1,990 $ 2,030 Packaging 825 790 1,580 1,545 Distribution 820 775 1,620 1,520 Specialty Products 640 630 1,265 1,235 Forest Products 445 440 870 840 Less: Intersegment Sales (132) (149) (278) (302) ------- ------- ------- ------- Net Sales $ 3,633 $ 3,506 $ 7,047 $ 6,868 ======= ======= ======= =======
Production by Products
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 1994 1993 1994 1993 ---- ---- ----- ----- Printing Papers (In thousands of tons) White Papers and Bristols 713 703 1,523 1,417 Coated Papers 250 248 506 490 Market Pulp (A) 406 413 825 795 Packaging (In thousands of tons) Containerboard 552 541 1,041 1,036 Bleached Packaging Board 279 245 527 508 Industrial Papers 192 137 343 275 Industrial and Consumer Packaging (B) 739 716 1,471 1,406 Forest Products (In millions) Panels (sq. ft. 3/8" basis) (C) 209 200 416 385 Lumber (board feet) 242 243 475 474
(A) This excludes market pulp purchases of approximately 700,000 tons annually. (B) A significant portion of this tonnage was fabricated from paperboard and paper produced at the Company's own mills and included in the containerboard, bleached packaging board, and industrial papers amounts in this table. (C) Panels include plywood and oriented strand board. - 12 - PART II. OTHER INFORMATION Item 1. Legal Proceedings Dioxin Litigation As reported in the Annual Report on Form 10-K for the year ended December 31, 1993 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, a lawsuit purporting to be a class action suit was filed against the Company, Dow Chemical and other individual employees of both companies in the 18th Judicial District of Louisiana seeking compensatory and punitive damages of an unspecified amount, alleging that the Company polluted the Staulkinghead River and all other waterways south thereof, by discharging chemicals, including dioxin, from its Bastrop, Louisiana mill. The case was removed to the U.S. District Court for the Middle District of Louisiana. On June 22, 1994, the Court entered an order dismissing Dow and its employees from the case. The plaintiff is appealing that ruling. As reported in the Annual Report on Form 10-K for the year ended December 31, 1993, a summary was given of the number of cases and amount of claims in the Mississippi dioxin litigations, and due to various dismissals and new filings as of that report, there are now 70 cases pending in State Court and 7 pending in Federal Court, for a total of 77 Mississippi cases as of June 30, 1994. In these cases, both State and Federal, there are a total of 5,093 plaintiffs seeking total compensatory damages of approximately $1.0 billion, punitive damages of approximately $8.2 billion and injunctive relief. Other Litigation As reported in the Annual Report on Form 10-K for the year ended December 31, 1993, the Company had entered into settlement discussions with the State of New York concerning the emissions from the power boiler at the Company's Ticonderoga, New York paper mill. In July 1994 the Company entered into an Order on Consent with the State, which settles with the State all outstanding emissions matters concerning the mill's power boiler. The Order requires the Company to install new control equipment on the power boiler in accordance with a schedule and assessed a penalty against the Company of $175,000, of which $25,000 was suspended so long as the Company complies with the provisions of the Order. -13- The Joplin, Missouri environmental matter reported in the Annual Report on Form 10-K for the year ended December 31, 1993, was terminated on July 18, 1994, when the Company entered into a consent decree with the Missouri Attorney General's office and the Department of Natural Resources, which resolved an enforcement action alleging hazardous waste violations at the Company's treated wood plant in Joplin. The settlement included a civil penalty of $273,500. Item 4. Submission of Matters to Vote a Security Holders The Annual Meeting of shareholders of the common stock of the Company was held on May 10, 1994. The shareholders voted on*: (a) the election of three directors to Class III, two directors to Class I and one director to Class II. The votes for and those withheld for each nominee were: Class III Mr. Georges For: 101,681,725 Withheld: 1,682,966 Mr. McHenry For: 101,737,712 Withheld: 1,626,979 Mr. Noonan For: 101,728,404 Withheld: 1,636,287 Class I Mr. Gault For: 101,751,653 Withheld: 1,613,038 Mr. Smith For: 101,377,324 Withheld: 1,987,367 Class II Mrs. Pfeiffer For: 101,737,180 Withheld: 1,627,511 (b) the appointment of Arthur Andersen & Co. as independent auditors for 1994 was approved and the votes were; for 102,473,642, against 714,224 and abstentions 176,825; and (c) a management proposal relating to the Amendment of the Long-Term Incentive Compensation Plan and the votes were; for 79,993,874, against 21,387,502, abstentions 1,977,887 and broker non-votes 5,428, which constituted a vote "for" the proposal of more than a majority of all outstanding shares of common stock entitled to vote at the meeting and required to pass the proposal under New York law. __________________________________ * If a specific vote category, for, against, withheld, abstentions and broker non-votes is omitted the number is zero. -14- PART II OTHER INFORMATION (cont'd) Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits (11) Statement of Computation of Per Share Earnings. (b) Reports on Form 8-K. Reports on Form 8-K were filed on April 29, 1994, May 19, 1994, June 9, 1994, August 1, 1994, August 3, 1994 and August 10, 1994. -15- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERNATIONAL PAPER COMPANY (Registrant) Date: August 12, 1994 By /s/ ROBERT C. BUTLER ------------------------- Robert C. Butler Senior Vice President and Chief Financial Officer Date: August 12, 1994 By /s/ ANDREW R. LESSIN ------------------------- Andrew R. Lessin Controller and Chief Accounting Officer - 16 - EXHIBIT INDEX ------------- EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 11 International Paper Company Statement of Computation of Per Share Earnings EX-11 2 STATEMENT OF COMPUTATION OF PER SHARE EARNINGS (Exhibit 11) INTERNATIONAL PAPER COMPANY STATEMENT OF COMPUTATION OF PER SHARE EARNINGS (In millions, except per-share amounts)
Three Months Ended Six Months Ended June 30, June 30, --------------------- ------------------ 1994 1993 1994 1993 -------- -------- ------- ------- Net earnings $ 87 $ 77 $ 159 $ 141 Debenture interest savings, net of taxes, assuming conversion of convertible subordinated debentures 2 2 * * -------- -------- ------- ------- Primary and fully diluted net earnings $ 89 $ 79 $ 159 $ 141 ======== ======== ======= ======= Earnings per common share $ .70 $ .62 $ 1.28 $ 1.14 ======== ======== ======= ======= Primary and fully diluted earnings per share $ .70 $ .62 $ 1.28 $ 1.14 ======== ======== ======= ======= PRIMARY AND FULLY DILUTED SHARES Average shares outstanding 124.6 123.1 124.4 123.0 Shares assumed to be repurchased using long-term incentive plan deferred compensation at average market price (.3) (.3) (.3) (.4) Shares assumed to be issued upon exercise of stock options, net of treasury buyback at average market price .3 .4 .4 .4 Shares assumed to be issued upon conversion of convertible subordinated debentures 2.9 2.9 * * -------- -------- ------- ------- Primary and fully diluted shares 127.5 126.1 124.5 123.0 ======== ======== ======= =======
- -------------------- The Company reports earnings per common share as the effect of dilutive securities is less than 3%. * Convertible subordinated debentures are antidilutive. -----END PRIVACY-ENHANCED MESSAGE-----