International Paper Reports Second Quarter 2024 Results
SECOND QUARTER 2024 HIGHLIGHTS
-
Second
quarter net earnings of
$498 million ($1.41 per diluted share); includes a tax benefit of$338 million ($0.96 per diluted share) related to internal legal entity restructuring -
Second
quarter adjusted operating earnings (non-GAAP) of
$193 million ($0.55 per diluted share) -
Second
quarter cash provided by operations of
$365 million and returned$160 million to shareholders in dividends
"Reflecting on my first 90 days, I am confident in our teams' ability to unlock substantial value at IP," said
Diluted Net EPS and Adjusted Operating EPS |
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Second |
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First |
|
Second |
|
Net Earnings (Loss) Per Share |
|
$ 1.41 |
|
$ 0.16 |
|
$ 0.68 |
|
Less – Discontinued Operations (Gain) Loss, Net of Taxes |
|
— |
|
— |
|
(0.04) |
|
Net Earnings (Loss) from Continuing Operations |
|
1.41 |
|
0.16 |
|
0.64 |
|
Add Back – Non-Operating Pension Expense (Income) |
|
(0.02) |
|
(0.04) |
|
0.03 |
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Add Back – Net Special Items Expense (Income) |
|
0.14 |
|
0.05 |
|
(0.02) |
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Income Taxes - Non-Operating Pension and Special Items |
|
(0.98) |
|
— |
|
(0.06) |
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Adjusted Operating Earnings Per Share* |
|
$ 0.55 |
|
$ 0.17 |
|
$ 0.59 |
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* |
Adjusted operating earnings per share (non-GAAP) is defined as net earnings (loss) per share (GAAP) excluding per share impact of discontinued operations, net special items and non-operating pension expense (income). Diluted earnings (loss) per share is the most directly comparable GAAP measure. Management uses this measure to focus on on-going operations, and believes that such measure is useful to investors in assessing the operational performance of the Company and enabling investors to perform meaningful comparisons of past and present consolidated operating results from continuing operations. For discussion of discontinued operations, net special items and non-operating pension expense (income), see the disclosure under Effects of Net Special Items, Discontinued Operations, Net of Taxes and Consolidated Statement of Operations and related notes included later in this release. A reconciliation of net earnings (loss) to adjusted operating earnings and diluted earnings (loss) per share to adjusted operating earnings per share, and an explanation of why we believe these non-GAAP financial measures provide useful information to investors, are included later in this release. |
Select Financial Measures |
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(In millions) |
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Second |
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First |
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Second |
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|
|
$ 4,734 |
|
$ 4,619 |
|
$ 4,682 |
|
Net Earnings (Loss) |
|
498 |
|
56 |
|
235 |
|
Adjusted Operating Earnings |
|
193 |
|
61 |
|
204 |
|
Cash Provided By (Used For) Operations |
|
365 |
|
395 |
|
528 |
|
Free Cash Flow** |
|
167 |
|
144 |
|
261 |
|
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|
** |
Free cash flow is a non-GAAP financial measure, which equals cash provided by operations less cash invested in capital projects. The most directly comparable GAAP measure is cash provided by (used for) operations. A reconciliation of cash provided by (used for) operations to free cash flow and an explanation of why we believe this non-GAAP financial measure provides useful information to investors, are included later in this release. |
SEGMENT INFORMATION
The following table presents net sales and business segment operating profit (loss), which is the Company's measure of segment profitability. Business segment operating profit (loss) is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280 - "Segment Reporting". Second quarter 2024 net sales by business segment and operating profit (loss) by business segment compared with the first quarter of 2024 and the second quarter of 2023 are as follows:
Business Segment Results |
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(In millions) |
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Second |
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First |
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Second |
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$ 3,931 |
|
$ 3,808 |
|
$ 3,884 |
|
Global Cellulose Fibers |
|
717 |
|
704 |
|
698 |
|
Corporate and Inter-segment Sales |
|
86 |
|
107 |
|
100 |
|
|
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$ 4,734 |
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$ 4,619 |
|
$ 4,682 |
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Business Segment Operating Profit (Loss) |
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$ 291 |
|
$ 216 |
|
$ 304 |
|
Global Cellulose Fibers |
|
31 |
|
(47) |
|
30 |
|
Global Cellulose Fibers business segment operating profit (loss) in the second quarter of 2024 was
EFFECTS OF SPECIAL ITEMS
Net special items includes items considered by management to not be reflective of the Company's underlying operations. Net special items in the second quarter of 2024 amount to a net after-tax benefit of $297 million (
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Second Quarter 2024 |
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First Quarter 2024 |
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Second Quarter 2023 |
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(In millions) |
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Before Tax |
|
After Tax |
|
Before Tax |
|
After Tax |
|
Before Tax |
|
After Tax |
|
Restructuring and other charges, net: |
|
|
|
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|
|
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|
|
|
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|
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Severance and other costs |
|
$ — |
|
$ — |
|
$ 3 |
|
$ 2 |
(e) |
$ — |
|
$ — |
|
Total restructuring and other charges, net |
|
— |
|
— |
|
3 |
|
2 |
|
— |
|
— |
|
Environmental remediation adjustment |
|
25 |
|
19 |
(a) |
— |
|
— |
|
— |
|
— |
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DS Smith combination costs |
|
17 |
|
17 |
(b) |
5 |
|
4 |
(b) |
— |
|
— |
|
Strategic advisory fees |
|
12 |
|
9 |
(b) |
— |
|
— |
|
— |
|
— |
|
Legal reserve adjustments |
|
— |
|
— |
|
10 |
|
7 |
(f) |
— |
|
— |
|
Closure costs |
|
— |
|
— |
|
5 |
|
4 |
(e) |
— |
|
— |
|
Net (gain) loss on miscellaneous land sales |
|
(5) |
|
(4) |
(c) |
5 |
|
4 |
(c) |
— |
|
— |
|
Interest related to settlement of tax audits |
|
— |
|
— |
|
(10) |
|
(7) |
(g) |
(6) |
|
(4) |
(g) |
Tax benefit related to internal legal entity restructuring |
|
— |
|
(338) |
(d) |
— |
|
— |
|
— |
|
— |
|
Tax benefit related to settlement of tax audits |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(23) |
(h) |
Total special items, net |
|
$ 49 |
|
$ (297) |
|
$ 18 |
|
$ 14 |
|
$ (6) |
|
$ (27) |
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(a) |
Environmental remediation adjustment associated with the remediation work at a waste pit site at a mill acquired but never operated by the Company and last utilized by the predecessor owner of the mill. |
(b) |
Transaction related costs not reflective of the Company's underlying operations. |
(c) |
(Gains) losses recognized in connection with miscellaneous land sales that the Company does not believe is reflective of the Company's underlying operations. |
(d) |
Tax benefit resulting from internal legal entity restructuring completed during the three months ended |
(e) |
Severance and closure costs associated with the Company's previously disclosed permanent closure of our containerboard mill in |
(f) |
Legal reserve adjustment associated with a previously discontinued business. |
(g) |
Interest income on tax overpayments in prior years associated with the settlement of certain tax audits. |
(h) |
Tax benefit resulting from tax overpayments in prior years associated with the settlement of certain tax audits. |
EARNINGS WEBCAST
The company will host a webcast today to discuss earnings and current market conditions, beginning at
Parties who wish to participate in the webcast via teleconference may dial +1 (409) 207-6984 or, within the
About
Visit https://www.internationalpaper.com/investors for more information regarding
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release that are not historical in nature may be considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements can be identified by the use of forward-looking or conditional words such as "expects," "anticipates," "believes," "estimates," "could," "should," "can," "forecast," "intend," "look," "may," "will," "remain," "confident," "commit" and "plan" or similar expressions. These statements are not guarantees of future performance and reflect management's current views and speak only as to the dates the statements are made and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. All statements, other than statements of historical fact, are forward-looking statements, including, but not limited to, statements regarding anticipated financial results, economic conditions, industry trends, future prospects and the execution and consummation of corporate transactions or contemplated acquisitions, including our proposed business combination with DS Smith Plc. Factors which could cause actual results to differ include but are not limited to: (i) our ability to consummate and achieve the benefits expected from, and other risks associated with, acquisitions, joint ventures, divestitures, spinoffs, capital investments and other corporate transactions, including, but not limited to, our proposed business combination with DS Smith Plc and our ability to integrate and implement our plans, forecasts, and other expectations with respect to the combined company; (ii) uncertainty as to whether or when the business combination may be completed, if at all; (iii) risks with respect to climate change and global, regional, and local weather conditions, as well as risks related to our targets and goals with respect to climate change and the emission of greenhouse gases (GHG) and other environmental, social and governance matters, including our ability to meet such targets and goals; (iv) loss contingencies and pending, threatened or future litigation, including with respect to environmental related matters; (v) the level of our indebtedness, risks associated with our variable rate debt, and changes in interest rates (including the impact of current elevated interest rate levels); (vi) the impact of global and domestic economic conditions and industry conditions, including with respect to current negative macroeconomic conditions, inflationary pressures and changes in the cost or availability of raw materials, energy sources and transportation sources, supply chain shortages and disruptions, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products, and conditions impacting the credit, capital and financial markets; (vii) risks arising from conducting business internationally, domestic and global geopolitical conditions, military conflict (including the
Additional Information
This release may be deemed to be solicitation material in respect of the proposed business combination with DS Smith Plc (the "Business Combination"), including the issuance of new shares of
Participants in the Solicitation
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Three Months Ended
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Three Months Ended
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Six Months Ended
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2024 |
|
2023 |
|
2024 |
|
2024 |
|
2023 |
|
|
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$ 4,734 |
|
$ 4,682 |
|
$ 4,619 |
|
$ 9,353 |
|
$ 9,702 |
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Costs and Expenses |
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Cost of products sold |
3,360 |
(a) |
3,360 |
|
3,424 |
(a) |
6,784 |
(a) |
7,002 |
|
|
Selling and administrative expenses |
453 |
(b) |
336 |
|
358 |
(b) |
811 |
(b) |
717 |
|
|
Depreciation and amortization |
261 |
|
244 |
|
278 |
(c) |
539 |
(c) |
485 |
|
|
Distribution expenses |
379 |
|
376 |
|
391 |
|
770 |
|
798 |
|
|
Taxes other than payroll and income taxes |
35 |
|
40 |
|
41 |
|
76 |
|
76 |
|
|
Restructuring and other charges, net |
— |
|
— |
|
3 |
(d) |
3 |
(d) |
— |
|
|
Net (gains) losses on sales of fixed assets |
(5) |
(e) |
— |
|
5 |
(e) |
— |
(e) |
— |
|
|
Interest expense, net |
55 |
|
59 |
(h) |
46 |
(f) |
101 |
(f) |
121 |
(h) |
|
Non-operating pension expense (income) |
(10) |
|
12 |
|
(12) |
|
(22) |
|
27 |
|
|
Earnings (Loss) From Continuing Operations Before Income Taxes and |
206 |
|
255 |
|
85 |
|
291 |
|
476 |
|
|
Income tax provision (benefit) |
(293) |
(g) |
33 |
(i) |
27 |
|
(266) |
(g) |
81 |
(i) |
|
Equity earnings (loss), net of taxes |
(1) |
|
— |
|
(2) |
|
(3) |
|
(1) |
|
|
Earnings (Loss) From Continuing Operations |
498 |
|
222 |
|
56 |
|
554 |
|
394 |
|
|
Discontinued operations, net of taxes |
— |
|
13 |
(j) |
— |
|
— |
|
13 |
(j) |
|
Net Earnings (Loss) |
$ 498 |
|
$ 235 |
|
$ 56 |
|
$ 554 |
|
$ 407 |
|
|
Basic Earnings Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations |
$ 1.43 |
|
$ 0.64 |
|
$ 0.16 |
|
$ 1.59 |
|
$ 1.13 |
|
|
Discontinued operations, net of taxes |
— |
|
0.04 |
|
— |
|
— |
|
0.04 |
|
|
Net earnings (loss) |
$ 1.43 |
|
$ 0.68 |
|
$ 0.16 |
|
$ 1.59 |
|
$ 1.17 |
|
|
Diluted Earnings Per Common Share |
|
|
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|
|
|
|
|
|
Earnings (loss) from continuing operations |
$ 1.41 |
|
$ 0.64 |
|
$ 0.16 |
|
$ 1.57 |
|
$ 1.12 |
|
|
Discontinued operations, net of taxes |
— |
|
0.04 |
|
— |
|
— |
|
0.04 |
|
|
Net earnings (loss) |
$ 1.41 |
|
$ 0.68 |
|
$ 0.16 |
|
$ 1.57 |
|
$ 1.16 |
|
|
Average Shares of Common Stock Outstanding - Diluted |
352.8 |
|
346.5 |
|
348.5 |
|
352.7 |
|
349.5 |
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The accompanying notes are an integral part of this Consolidated Statement of Operations. |
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(a) |
Includes a pre-tax charge of |
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(b) |
Includes pre-tax charges of |
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(c) |
Includes a pre-tax charge of |
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(d) |
Includes a pre-tax charge of |
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(e) |
Includes a pre-tax net gain of |
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(f) |
Includes pre-tax income of |
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(g) |
Includes a tax benefit of |
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(h) |
Includes pre-tax income of |
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(i) |
Includes a tax benefit of |
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(j) |
Includes charges of |
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Three Months Ended
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Three Months Ended
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Six Months Ended
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|
2024 |
|
2023 |
|
2024 |
|
2024 |
|
2023 |
|
|
Net Earnings (Loss) |
$ 498 |
|
$ 235 |
|
$ 56 |
|
$ 554 |
|
$ 407 |
|
|
Less: Discontinued operations, net of taxes (gain) loss |
— |
|
(13) |
|
— |
|
— |
|
(13) |
|
|
Earnings (Loss) from Continuing Operations |
498 |
|
222 |
|
56 |
|
554 |
|
394 |
|
|
Add back: Non-operating pension expense (income) |
(10) |
|
12 |
|
(12) |
|
(22) |
|
27 |
|
|
Add back: Net special items expense (income) |
49 |
|
(6) |
|
18 |
|
67 |
|
(3) |
|
|
Income taxes - Non-operating pension and special items |
(344) |
|
(24) |
|
(1) |
|
(345) |
|
(29) |
|
|
Adjusted Operating Earnings |
$ 193 |
|
$ 204 |
|
$ 61 |
|
$ 254 |
|
$ 389 |
|
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Three Months Ended
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Three Months Ended
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Six Months Ended
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|
2024 |
|
2023 |
|
2024 |
|
2024 |
|
2023 |
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Diluted Earnings per Common Share as Reported |
$ 1.41 |
|
$ 0.68 |
|
$ 0.16 |
|
$ 1.57 |
|
$ 1.16 |
|
|
Less: Discontinued operations, net of taxes (gain) loss |
— |
|
(0.04) |
|
— |
|
— |
|
(0.04) |
|
|
Continuing Operations |
1.41 |
|
0.64 |
|
0.16 |
|
1.57 |
|
1.12 |
|
|
Add back: Non-operating pension expense (income) |
(0.02) |
|
0.03 |
|
(0.04) |
|
(0.06) |
|
0.08 |
|
|
Add back: Net special items expense (income) |
0.14 |
|
(0.02) |
|
0.05 |
|
0.19 |
|
(0.01) |
|
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Income taxes per share - Non-operating pension and special items |
(0.98) |
|
(0.06) |
|
— |
|
(0.98) |
|
(0.08) |
|
|
Adjusted Operating Earnings per Share |
$ 0.55 |
|
$ 0.59 |
|
$ 0.17 |
|
$ 0.72 |
|
$ 1.11 |
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Notes: |
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Adjusted Operating Earnings and Adjusted Operating Earnings Per Share are non-GAAP measures defined as net earnings (loss) (a GAAP measure) excluding discontinued operations, net special items and non-operating pension expense (income). Net earnings (loss) and Diluted earnings (loss) per share are the most directly comparable GAAP measures. The Company calculates Adjusted Operating Earnings (non-GAAP) by excluding the after-tax effect of discontinued operations, non-operating pension expense (income) and net special items, as described in greater detail above, from the net earnings (loss) reported under |
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Non-operating pension expense (income) represents amortization of prior service cost, amortization of actuarial gains/losses, expected return on assets and interest cost. The Company excludes these amounts from Adjusted Operating Earnings as the Company does not believe these items reflect ongoing operations. These particular pension cost elements are not directly attributable to current employee service. The Company includes service cost in our Non-GAAP measure as it is directly attributable to employee service, and the corresponding employees' compensation elements, in connection with ongoing operations. |
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Since diluted earnings per share are computed independently for each period, six-month per share amounts may not equal the sum of respective quarters. |
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Assets |
|
|
|
Current Assets |
|
|
|
Cash and Temporary Investments |
$ 1,049 |
|
$ 1,113 |
Accounts and Notes Receivable, Net |
3,197 |
|
3,059 |
Contract Assets |
436 |
|
433 |
Inventories |
1,728 |
|
1,889 |
Other |
147 |
|
114 |
Total Current Assets |
6,557 |
|
6,608 |
Plants, Properties and Equipment, Net |
9,953 |
|
10,150 |
Investments |
163 |
|
163 |
Long-Term Financial Assets of Variable Interest Entities |
2,321 |
|
2,312 |
|
3,040 |
|
3,041 |
Overfunded Pension Plan Assets |
171 |
|
118 |
Right of Use Assets |
439 |
|
448 |
Deferred Charges and Other Assets |
419 |
|
421 |
Total Assets |
$ 23,063 |
|
$ 23,261 |
Liabilities and Equity |
|
|
|
Current Liabilities |
|
|
|
Notes Payable and Current Maturities of Long-Term Debt |
259 |
|
138 |
Accounts Payable and Other Current Liabilities |
3,855 |
|
3,821 |
Total Current Liabilities |
4,114 |
|
3,959 |
Long-Term Debt |
5,329 |
|
5,455 |
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities |
2,117 |
|
2,113 |
Deferred Income Taxes |
1,131 |
|
1,552 |
Underfunded Pension Benefit Obligation |
249 |
|
280 |
Postretirement and Postemployment Benefit Obligation |
130 |
|
140 |
Long-Term Lease Obligations |
299 |
|
312 |
Other Liabilities |
1,099 |
|
1,095 |
Equity |
|
|
|
Common Stock |
449 |
|
449 |
|
4,688 |
|
4,730 |
Retained Earnings |
9,719 |
|
9,491 |
Accumulated Other Comprehensive Loss |
(1,580) |
|
(1,565) |
|
13,276 |
|
13,105 |
Less: Common Stock Held in |
4,681 |
|
4,750 |
Total Equity |
8,595 |
|
8,355 |
Total Liabilities and Equity |
$ 23,063 |
|
$ 23,261 |
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Six Months Ended |
||
|
2024 |
|
2023 |
Operating Activities |
|
|
|
Net earnings (loss) |
$ 554 |
|
$ 407 |
Depreciation and amortization |
539 |
|
485 |
Deferred income tax expense (benefit), net |
(427) |
|
(13) |
Restructuring and other charges, net |
3 |
|
— |
Net (gains) losses on sales and impairments of equity method investments |
— |
|
76 |
Equity method dividends received |
— |
|
13 |
Equity (earnings) losses, net of taxes |
3 |
|
(88) |
Periodic pension (income) expense, net |
(1) |
|
47 |
Other, net |
77 |
|
34 |
Changes in current assets and liabilities |
|
|
|
Accounts and notes receivable |
(161) |
|
160 |
Contract assets |
(3) |
|
(9) |
Inventories |
112 |
|
87 |
Accounts payable and accrued liabilities |
90 |
|
(280) |
Interest payable |
4 |
|
(23) |
Other |
(30) |
|
(23) |
Cash Provided By (Used For) Operating Activities |
760 |
|
873 |
Investment Activities |
|
|
|
Invested in capital projects |
(449) |
|
(608) |
Proceeds from sale of fixed assets |
4 |
|
3 |
Other |
(1) |
|
2 |
Cash Provided By (Used For) Investment Activities |
(446) |
|
(603) |
Financing Activities |
|
|
|
Repurchases of common stock and payments of restricted stock tax withholding |
(22) |
|
(218) |
Issuance of debt |
— |
|
772 |
Reduction of debt |
(8) |
|
(536) |
Change in book overdrafts |
(14) |
|
(33) |
Dividends paid |
(321) |
|
(322) |
Other |
— |
|
(1) |
Cash Provided By (Used for) Financing Activities |
(365) |
|
(338) |
Effect of Exchange Rate Changes on Cash and Temporary Investments |
(13) |
|
10 |
Change in Cash and Temporary Investments |
(64) |
|
(58) |
Cash and Temporary Investments |
|
|
|
Beginning of the period |
1,113 |
|
804 |
End of the period |
$ 1,049 |
|
$ 746 |
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Three Months Ended |
|
Six Months Ended |
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|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
Cash Provided By (Used For) Operating Activities |
$ 365 |
|
$ 528 |
|
$ 760 |
|
$ 873 |
|
|
Adjustments: |
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|
Cash invested in capital projects |
(198) |
|
(267) |
|
(449) |
|
(608) |
|
|
Free Cash Flow |
$ 167 |
|
$ 261 |
|
$ 311 |
|
$ 265 |
|
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Free cash flow is a non-GAAP measure which equals cash provided by (used for) operating activities less cash invested in capital projects, and the most directly comparable GAAP measure is cash provided by operations. Management utilizes this measure in connection with managing our business and believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. |
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The non-GAAP financial measures presented in this release have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company's presentation of non-GAAP measures in this release may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as |
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Management believes non-GAAP financial measures, when used in conjunction with information presented in accordance with GAAP, can facilitate a better understanding of the impact of various factors and trends on the Company's financial results. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company's performance. Investors are cautioned to not place undue reliance on any non-GAAP financial measures used in this release. |
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