Second Quarter 2014 Earnings | July 29, 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 joint ventures; and (vii) 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 | Second Quarter 2014 Earnings Presentation | Second 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 | Second Quarter 2014 Earnings Presentation | Second 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 | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
Second Quarter 2014 Results Good execution resulting in strong EBITDA 1 earnings and margins ($MM) Continued strong results in NA Industrial Packaging and solid performance in other key businesses Rebound from weather impact of 1Q, but high input costs remain Successfully executed peak level of annual maintenance outages $1,059 Continued solid results in operating $1,013 performance at Ilim; favorable F/X $920 Additional $1.5B share buyback authorization Mark Sutton appointed President and Chief Operating Officer 2Q13 1Q14 2Q14 xpedx spin-off completed July 1 1 From continuing operations before special items and non-operating pension expense 5 Earnings Presentation | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
2Q14 Financial Results EPS 2 ($MM) 2Q13 1Q14 2Q14 Sales ($B) $7.3 $7.0 $7.2 EBIT 1 ($MM) $626 $568 $700 EPS 2 $0.64 $0.61 $0.95 $0.95 EBITDA 1 ($MM) $1,013 $920 $1,059 $0.64 $0.61 EBITDA Margin 1 13.8% 13.1% 14.7% Free Cash Flow 3 $452 $254 $380 ($MM) 2Q13 1Q14 2Q14 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 #21 for a reconciliation of cash provided by continuing operations to free cash flow 6 Earnings Presentation | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
2Q14 vs. 1Q14 EPS .95 .17 (.09) .09 .02 (.01) .03 .08 .05 .61 1Q14 Price / Mix Volume Operations Maintenance Input Costs Corporate Courtland Ilim JV 2Q14 & Costs Outages & Other Items Closure Operating Earnings 7 Earnings Presentation | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
Global Input Costs 1H14 vs. 1H13 | $109MM Unfavorable By Business By Input Type $26 OCC ($13) Wood ($28) ($47) ($37) Wood ($44) ($75) Industrial Printing Consumer Fiber Energy Chemicals Freight Packaging Papers Packaging North America Outside North America Energy Wood Chemicals Freight OCC Input costs ($MM) for continuing businesses 8 Earnings Presentation | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
Industrial Packaging | 2Q14 vs. 1Q14 (22) 20 534 13 50 6 467 $ Million 1Q14 Price / Mix Volume Operations Maintenance Input Costs 2Q14 & Costs Outages Segment operating profit before special items 9 Earnings Presentation | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
NA Industrial Packaging Relative EBITDA Margins 23.7% 22.6% 22.5% 2013 21.5% 21.2% 2013 22.3% 20.9% 18.0% 19.8% 2013 17.5% 15.2% RKT reports 7/30 1 IP PCA RockTenn 2Q13 1Q14 2Q14 1 Reflects Company’s change in accounting method beginning in 2014 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 10 Earnings Presentation | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
Industrial Packaging | U.S. Corrugated Market 1 IP Select Segment 2014 2014 Total Box Volume (Daily Basis) 2Q vs. 1Q 2Q YOY Performance (YOY) IP +5.1% +1.1% • Poultry FBA Industry +5.3% +1.0% • Shipping & Distribution IP Volume (2Q14 vs. 2Q13) • Beverage East Of Rockies West of Rockies • Processed Foods 18% of Volume 82% of Volume • Beef Daily Basis Daily Basis IP +2.2% IP (3.4%) FBA +1.5% FBA (1.0%) • Agriculture ( West Coast) 1 Corrugator plant sales Source: Fibre Box Association (FBA), IP Analysis 11 Earnings Presentation | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
Consumer Packaging | 2Q14 vs. 1Q14 16 (5) 0 (2) 34 3 4 $ Million 18 1Q14 Price / Mix Volume Operations Maintenance Input Costs Other 2Q14 & Costs Outages Segment operating profit before special items 12 Earnings Presentation | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
Consumer Packaging 2H 2014 Earnings Runway 1H2014 2H2014 Lower outages / Volume pickup • 1Q severe weather Pricing realizations • Volume constrained during Incremental cupstock growth due heavy outage period to shift from foam to paper • Price increases announced Double digit foodservice volume growth driving solid demand for • High input costs coated paperboard • Kwidzyn project construction Mix improvements associated with and start-up seasonality (hot cup season) Input costs remain high, above expectations Kwidzyn project ramp-up 13 Earnings Presentation | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
Printing Papers | 2Q14 vs. 1Q14 (30) 20 5 118 12 25 (5) 6 85 $ Million 1Q14 Price / Mix Volume Operations Maintenance Input Costs Courtland Other 2Q14 & Costs Outages Segment operating profit before special items 14 Earnings Presentation | Second Quarter 2014 Earnings Presentation | Second Quarter 2014
Printing Papers | 2Q14 vs. 1Q14 Change in Segment Operating Profit 1 ($MM) 22 Europe 18 North America 21 Papers 0 North America Pulp India 8 Brazil 1 Before special items 15 Earnings Presentation | Second Quarter 2014
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