International Paper Company · NYSE:IP
International Paper — International Paper Co /New/ — Q1 2009 Earnings Presentation
52 slides from International Paper's earnings presentation, Apr 30, 2009
Slide 1: First Quarter 2009 Review
First Quarter 2009 Review April 30, 2009 Exhibit 99.2 First Quarter 2009 Review April 30, 2009 John V. Faraci Chairman & Chief Executive Officer Tim S. Nicholls Senior Vice President & Chief Financial Officer
Slide 2: Statements Relating to Non-GAAP Financial Measures
Statements Relating to Non-GAAP Financial Measures 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
Slide 3: First Quarter 2009 Results Summary
First Quarter 2009 Results Summary Solid Results Despite Weak Economy $0.04 $0.07 First Quarter 2009 Results Summary Solid Results Despite Weak Economy Solid Results Input Cost Relief Excellent Operations Integration Synergies Reduced Overhead Expenses Strong Free Cash Flow Debt Refinancing & Reduct
Slide 4: 1Q09 Financial Snapshot
1Q09 Financial Snapshot $ Billion 1Q08 4Q08 1Q09 1Q09 Financial Snapshot Earnings from continuing operations before special items; 4Q08 & 1Q09 includes CBPR Cash provided by continuing operations less capital expenditures Sales $5.7 $6.5 $5.7 EBITDA $0.6 $0.7 $0.6 Free Cash Flow $0.2 $0.4 $0.7 Cash
Slide 5: Industrial Packaging Integration Progress
Industrial Packaging Integration Progress On Track Despite Economic Recession Industrial Packaging Integration Progress On Track Despite Economic Recession
Slide 6: 1Q09 vs. 4Q08 EPS
.48 1Q09 vs. 4Q08 EPS Weak Volume , Input Cost Relief & Strong Operations $ / Share $ / Share Earnings from continuing operations before special items 1Q09 vs. 4Q08 EPS Weak Volume , Input Cost Relief & Strong Operations Forest Products Earnings
Slide 7: Global Input & Freight Costs by Segment
Global Input & Freight Costs by Segment $124MM, or $0.23/Share Favorable vs. 4Q0 8 $0 $15 $30 $45 $60 $75 $90 Fiber Energy Chemicals Freight OCC Global Input & Freight Costs by Segment $124MM, or $0.23/Share Favorable vs. 4Q0 8 Consumer Packaging Industrial Packaging Printing Papers Input costs for
Slide 8: Lack of Order Downtime
Lack of Order Downtime 1.1 Million Tons in 1Q09 Lack of Order Downtime 1.1 Million Tons in 1Q09 (Thousand Tons) None of the businesses recorded LOO downtime in 1Q08. 1Q09 LOO downtime excludes capacity from mills or machines that have been permanently or indefinitely shut down: Valliant #3 (97,000 t
Slide 9: Industrial Packaging Earnings 1Q09 vs. 4Q08
Industrial Packaging Earnings 1Q09 vs. 4Q08 Industrial Packaging Earnings 1Q09 vs. 4Q08 Excludes trade volume Earnings before special items Vicksburg Insurance Settlement
Slide 10: Industrial Packaging Synergies
Industrial Packaging Synergies Achieved Three-Year Run Rate after 8 Months $96 MM $220 MM $405 MM $400 MM Industrial Packaging Synergies Achieved Three-Year Run Rate after 8 Months $96 MM $220 MM $405 MM $400 MM
Slide 11: Industrial Packaging Merger Benefits
Industrial Packaging Merger Benefits Achieving Higher Savings at a Faster Rate Total IPG Employees # of Box Plants Commercial Improvements per CBPR Ton Total Synergies $MM Industrial Packaging Merger Benefits Achieving Higher Savings at a Faster Rate Base 23,700 -- -- Planned 21,900 +$23 $400 Curren
Slide 12: Industrial Packaging Relative Performance
Industrial Packaging Relative Performance Outperforming Competitors in 1Q09 Industrial Packaging Relative Performance Outperforming Competitors in 1Q09 IP EBITDA margins based on North American Industrial Packaging operating profit before special items Competitor EBITDA margins obtained from public
Slide 13: Printing Papers Earnings 1Q09 vs. 4Q08
Printing Papers Earnings 1Q09 vs. 4Q08 Printing Papers Earnings 1Q09 vs. 4Q08 Earnings Before Special Items
Slide 14: Consumer Packaging Earnings 1Q09 vs. 4Q08
Consumer Packaging Earnings 1Q09 vs. 4Q08 Consumer Packaging Earnings 1Q09 vs. 4Q08 Earnings Before Special Items
Slide 15: xpedx
$ Million 1Q08 4Q08 1Q09 xpedx Sales $1,985 $1,940 $1,590 Earnings $16 $26 ($7) xpedx Weak paper and packaging demand Declining prices & gross margin dollars for coated freesheet & coated groundwood (>60% of total paper sales) Reduced headcount by 4%, or 270 positions Solid free cash flow
Slide 16: Forest Products
Forest Products 1Q08 4Q08 1Q09 Forest Products Sales ($ Million) $25 $65 $5 Earnings ($ Million) $25 $38 $2 Acres Sold 13,000 30,000 2,000 Price / Acre $1,871 $2,106 $2,108 Pending sale of 143,000 acres now expected to close in 3Q09. When that transaction closes, remaining NPV of land portfolio will
Slide 17: Ilim Joint Venture
$ Million 1Q08 4Q08 1Q09 Ilim Joint Venture 1Q09 1Q09 vs. 4Q08 1Q09 vs. 1Q08 Business Volume (000 Metric Tons) Price / Ton Volume (000 Metric Tons) Price / Ton Sales (100%) $530 $530 $395 Earnings (IP Share) $17 $0 ($26) Ilim’s results are reported on a one-quarter lag IP’s share of Ilim’s 1Q08, 4Q0
Slide 18: Free Cash Flow
Free Cash Flow ($ Million) 1Q08 4Q08 1Q09 Free Cash Flow Cash from Operations $434 $713 $649 Alternative Fuel Mixture Tax Credits - - $145 Cash Provided by Continuing Operations $434 $713 $794 Less Capital Investment ($215) ($270) ($128) Free Cash Flow $219 $443 $666
Slide 19: Debt Reduction Progress
Debt Reduction Progress $1.6 Billion in 9 Months Debt Reduction Progress $1.6 Billion in 9 Months Billion
Slide 20: Cash & Committed Facilities
Cash & Committed Facilities $3.5 Billion $ Billion Maturity Facility Cost Cash & Committed Facilities $3.5 Billion Quarter-End Cash - $1.0 - $1.0B Accounts Receivables Program JAN 2010 Zero Drawn CP Rate + bps $1.5B Corporate Revolver MAR 2011 Zero Drawn LIBOR + 50 to 60 bps Total Cash & Committed F
Slide 21: Debt Maturities by Quarter
Debt Maturities by Quarter 2009 - 2011 Debt Maturities by Quarter 2009 - U.S. debt as of April 30; foreign debt as of March 31 Monetization & Other: Intend to rollover or refinance timber monetization debt, Sun JV debt and other foreign subsidiary debt $50 $680 $550
Slide 22: Pension Funding Update
Pension Funding Update No Cash Contributions Expected in 2009/1 0 Pension Funding Update No Cash Contributions Expected in 2009/1 0 December 2008 Legislation Funding Requirements – 94% of liability for 2009 – 96% of liability for 2010 – 100% of liability beyond 2010 – Allows asset smoothing which de
Slide 23: Alternative Fuel Mixture Tax Credits
Alternative Fuel Mixture Tax Credits Alternative Fuel Mixture Tax Credits IP generates >70% of integrated mill energy needs from renewable bio-fuels Transforming pulping waste into bio-energy is environmentally beneficial IP is not burning additional fossil fuel to qualify for these credits Black li
Slide 24: Alternative Fuel Mixture Tax Credits
Alternative Fuel Mixture Tax Credits $558 Million Pre-Tax in 4Q08 & 1Q0 9 Tax Credit Claims $ Millions Alternative Fuel Mixture Tax Credits $558 Million Pre-Tax in 4Q08 & 1Q0 9 Received in 1Q09 $145 Accrued in 1Q09 $413 Total Credits 4Q08 – 1Q09 $558* * Before $18 million of associated expenses and
Slide 25: First Quarter Summary
First Quarter Summary Solid Results Despite Recession First Quarter Summary Solid Results Despite Recession Solid Results in Challenging Environment 1.1MM tons of Lack of Order Downtime Excellent Operations $96 Million in Integration Synergies $30 Million in Overhead Expense Reduction $124 Million I
Slide 26: Second Quarter Outlook
Second Quarter Outlook Second Quarter Outlook Challenging Economic Environment Major Variables - Volume, Downtime, & Pricing Increased Maintenance Outages Lower Ilim Equity Earnings
Slide 27: Priorities
Priorities Priorities Aggressively Manage Cost Match Supply to Customers’ Needs Strengthen Balance Sheet
Slide 28: Special Items Net of Taxes
Special Items Net of Taxes 1Q0 9 $ Million EPS Special Items Net of Taxes 1Q0 9 Earnings from Continuing Operations & Before Special Items $34 $0.08 Special Items Net of Taxes: Alternative Fuel Mixture Credits $330 Facilities Closure Costs ($33) Overhead Reduction Initiative ($32) Integration Costs
Slide 29: Key Financial Statistics
$ Billion 2007 1 2008 2009 Estimate Key Financial Statistics Capital Spending $1.3 $1.0 $0.6 Depreciation & Amortization $1.1 $1.3 $1.5 Net Interest Expense $0.3 $0.5 $0.7 Corporate Items $0.2 $0.1 $0.25 Effective Tax Rate 30% 31.5% 32% - 34% Excludes discontinued operations Before special items and
Slide 30: Maintenance Outages Expenses
$ Millions 1Q09 2Q09E 3Q09E 4Q09E Maintenance Outages Expenses $58 Million Seasonal Increase North America Europe Brazil Printing Papers Total $31 $57 $55 $28 Industrial Packaging $44 $58 $6 $43 Consumer Packaging $4 $22 $11 $9 Total Impact $79 $137 $72 $80 Dollar impact of planned maintenance outag
Slide 31: Business Segment Price Realization
Business Segment Price Realization Average Selling Price Realizations Industrial Packaging ($/ton) 1Q08 4Q08 1Q09 Printing Papers ($/ton) 1Q08 4Q08 1Q09 Business Segment Price Realization Containerboard $545E $584 $551 Corrugated Boxes $785E $836 $846 Uncoated Freesheet $950 $1,005 $996 Pulp $646 $5
Slide 32: Industrial Packaging Volume and Price
1Q09 vs. 4Q08 1Q09 vs. 1Q08 Business Volume Price / Ton Volume Price / Ton Industrial Packaging N.A. Containerboard (23%) ($32) (49%)E $8E N.A. Container (5%) $10 (17%)E $61E European Container (3%) (€21) (9%) (€26) Industrial Packaging Average IP price realization (includes the impact of mix across
Slide 33: Printing Papers Volume and Price
1Q09 vs. 4Q08 1Q09 vs. 1Q08 Business Volume Price / Ton Volume Price / Ton Printing Papers Average IP price realization (includes the impact of mix across all grades) N.A. Paper (7%) ($10) (24%) $46 N.A. Pulp (21%) ($39) (9%) ($108) European Paper 3% (€56) (1%) (€72) Brazilian Paper (16%) ($39) (15%
Slide 34: Consumer Packaging Volume and Price
1Q09 vs. 4Q08 1Q09 vs. 1Q08 Volume Price/Ton Volume Price/Ton Revenue Price Revenue Price Consumer Packaging Average IP price realization (includes the impact of mix across all grades) U.S. Coated Paperboard (25%) $38 (28%) $107 Converting Businesses (10%) NA (3%) NA Consumer Packaging
Slide 35: Special Items
Special Items Special Items Pre-Tax: 1Q08 4Q08 1Q09 Special Items Printing Papers Alternative Fuel Mixture Credits $240 Facility Closure Costs ($153) ($29) Industrial Packaging Alternative Fuel Mixture Credits $208 Integration Costs ($26) ($36) Facility Closure Costs ($8) Consumer Packaging Alternat
Slide 36: Debt Covenants
Debt Covenants Covenant 1Q09 Debt Covenants Maximum Debt-to-Total Capital 60% 50.3% Minimum Consolidated Net Worth $9B $11.4B
Slide 37: 1Q09 EBITDA from Continuing Operations before Special Items
1Q09 EBITDA from Continuing Operations before Special Items Operating Profit $ Millions D & A $ Millions Tons (000) EBITDA per Ton 1Q09 EBITDA from Continuing Operations before Special Items Industrial Packaging North American $175 $156 2,863 $116 European $13 $8 $78 Printing Papers North American $
Slide 38: Operating Profits by Industry Segment
Operating Profits by Industry Segment from Continuing Operations before Special Items $ Million 1Q08 4Q08 1Q09 Operating Profits by Industry Segment from Continuing Operations before Special Items Industrial Packaging $97 $145 $188 Printing Papers $185 $113 $101 Consumer Packaging $14 $1 $22 Distrib
Slide 39: Geographic Business Segment Operating Results
Geographic Business Segment Operating Results from Continuing Operations before Special Items $ Million Sales Operating Profit 1Q08 4Q08 1Q09 1Q08 4Q08 1Q09 Geographic Business Segment Operating Results from Continuing Operations before Special Items Industrial Packaging North American $1,050 $2,125
Slide 40: Earnings from Continuing Operations 2009
Pre-Tax $MM Tax $MM Minority Interest $MM Equity Earnings Net Income $MM Estimated Tax Rate Average Shares ¹ MM Diluted EPS Before Special Items Special Items Earnings from Continuing Operations 2009 Earnings from Continuing Operations 2 Assuming dilution A reconciliation to GAAP EPS is available at
Slide 41: Total Cash Cost Components 1Q09
Total Cash Cost Components 1Q0 9 Total Cash Cost Components 1Q0 9 North American Mills Only
Slide 42: Global Input & Freight Costs by Input vs. 4Q08
Global Input & Freight Costs by Input $124MM, or $0.23/Share Positive Impact vs. 4Q08 Global Input & Freight Costs by Input $124MM, or $0.23/Share Positive Impact vs. 4Q08 Input costs for continuing businesses
Slide 43: Global Input & Freight Costs by Input vs. 1Q08
Global Input & Freight Costs by Input $28MM, or $0.05/Share Negative Impact vs. 1Q08 Global Input & Freight Costs by Input $28MM, or $0.05/Share Negative Impact vs. 1Q08 Input costs for continuing businesses; does not include CBPR
Slide 44: 1Q09 vs. 1Q08 EPS
.48 1Q09 vs. 1Q08 EPS .04 $ / Share $ / Share Earnings from continuing operations before special items; volume includes earnings from CBPR 1Q09 vs. 1Q08 EPS .37 Forest Products Earnings
Slide 45: Industrial Packaging Earnings 1Q09 vs. 1Q08
Industrial Packaging Earnings 1Q09 vs. 1Q0 8 Industrial Packaging Earnings 1Q09 vs. 1Q0 8 Excludes trade volume and includes CBPR earnings Earnings Before Special Items
Slide 46: Printing Papers Earnings 1Q09 vs. 1Q08
Printing Papers Earnings 1Q09 vs. 1Q0 8 Printing Papers Earnings 1Q09 vs. 1Q0 8 Earnings Before Special Items
Slide 47: Consumer Packaging Earnings 1Q09 vs. 1Q08
Consumer Packaging Earnings 1Q09 vs. 1Q08 Consumer Packaging Earnings 1Q09 vs. 1Q08 Earnings Before Special Items
Slide 48: Natural Gas Costs
Natural Gas Costs 28% Decrease vs. 4Q08 Average Cost NYMEX Natural Gas closing prices Index: Jan 2005 Natural Gas Costs = 100 Natural Gas Costs 28% Decrease vs. 4Q08 Average Cost
Slide 49: U.S. Fuel Oil
U.S. Fuel Oil 17% Decrease vs. 4Q08 Average Cost Index: Jan 2006 Fuel Oil Costs = 100 U.S. Fuel Oil 17% Decrease vs. 4Q08 Average Cost Delivered cost to U.S. facilities
Slide 50: U.S. Mill Wood Costs
U.S. Mill Wood Costs 9% Decrease vs. 4Q08 Average Cost U.S. Mill Wood Costs 9% Decrease vs. 4Q08 Average Cost Index: Jan 2005 Wood Costs = 100 Delivered cost to U.S. facilities
Slide 51: U.S. Chemical Composite Index
U.S. Chemical Composite Index 7% Decrease vs. 4Q08 Average Cost Index: Q1’05 Chemical Composite= 100 U.S. Chemical Composite Index 7% Decrease vs. 4Q08 Average Cost Delivered cost to U.S. facilities; includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid 2005 - 2008 excludes CBPR
Slide 52: Global Consumption Annual Purchase Estimates for Key Inputs
Global Consumption Annual Purchase Estimates for Key Inputs Commodity U. S. Non – U. S. Global Consumption Annual Purchase Estimates for Key Inputs Does not include Asian or Ilim consumption; excludes consumption by permanent & indefinite machine shutdowns Estimates are based on normal operations an
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