International Paper Company · NYSE:IP
International Paper — International Paper Co /New/ — Q3 2007 Earnings Presentation
37 slides from International Paper's earnings presentation, Nov 2, 2007
Slide 1: Third Quarter 2007 Review
John V. Faraci Chairman & CEO Marianne M. Parrs EVP & CFO Third Quarter 2007 Review November 2, 2007 Third Quarter 2007 Review November 2, 2007 John V. Faraci Chairman & CEO Marianne M. Parrs EVP & CFO
Slide 2: Statements Relating to Non-GAAP Financial Measures
• • D uring 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 www.internationalpaper.com under Investors. Statements Relating to Non-GAAP Financial
Slide 3: Diluted EPS from Continuing Operations and Before Special Items
.60 .44 .25 .04 .03 .06 .14 .10 .27 .26 .11 .15 .11 .03 .02 .16 .30 .34 .27 .04 .12 .30 .47 .45 .57 .63 .45 .52 .26 .17 .20 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q Diluted EPS from Continuing Operations and Before Special Items Diluted EPS from Co
Slide 4: 3Q '07 vs. 2Q '07 EPS from continuing operations before special items
.57 .52 .02 .07 (.04) $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 2Q '07 North America Brazil Europe 3Q '07 EPS $ / Share EPS $ / Share 3Q ‘07 vs. 2Q ’07 EPS from continuing operations before special items 3Q ‘07 vs. 2Q ’07 EPS from continuing operations before special items
Slide 5: 9M '07 vs. 9M '06 EPS from continuing operations before special items
1.54 .87 .15 .59 .22 .51 (.33) (.03) (.17) (.19) (.06) (.02) $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 9M '06 Price Volume Cost/Mix Pensacola Input & Distrib.Costs Land Sales Cash Redeployment Unallocated Expenses / Other Plant Closures Divestitures 9M '07 EPS $ / Share EPS $
Slide 6: 3Q '07 vs. 2Q '07 EPS from continuing operations before special items
.57 .52 .04 .01 .04 (.02) (.01) (.01) $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 2Q '07 Price Cost/Mix Pensacola Input Costs Interest Expense Other 3Q '07 EPS $ / Share EPS $ / Share 3Q ‘07 vs. 2Q ’07 EPS from continuing operations before special items 3Q ‘07 vs. 2Q ’07 EPS from continuing oper
Slide 7: Higher Input & Distribution Costs: EBIT Impact 9M'07 vs. 9M'06
$MM Total of $129 million or $0.19 per share negative impact in 9M ’ 07 versus 9M ’ 06 (54) (59) (27) (70) (60) (50) (40) (30) (20) (10) Wood Chemicals Freight Energy Total of $129 million or $0.19 per share negative impact in 9M ’ 07 versus 9M ’ 06 Higher Input & Distribution Costs EBIT Impact 9M’0
Slide 8: Printing Papers
Price Realization per Ton Volume Business 3Q’07 vs. 2Q’07 2Q’07 3Q’07 $ Million Printing Papers Average IP price realization (includes the impact of mix across all grades) $25 7% Brazilian Uncoated Papers € 15 (1%) European Uncoated Papers $19 1% U.S. Pulp $8 (1%) N.A. Uncoated Papers $249 $307 Earn
Slide 9: Global Paper Earnings 3Q'07 vs. 2Q'07
(9) 2Q07 N.A Paper & Pulp Brazil Europe 3Q07 Global Paper Earnings 3Q’07 vs. 2Q’07 Global Paper Earnings 3Q’07 vs. 2Q’07 EBIT $MM EBIT $MM
Slide 10: Industrial Packaging
Price Realization Volume Business 3Q’07 vs. 2Q’07 2Q’07 3Q’07 $ Million Industrial Packaging Average IP price realization (includes the impact of mix across all grades) Flat (1%) N.A. Container $8/ton 2% N.A. Containerboard $139 $115 Earnings $1,315 $1,305 Sales
Slide 11: Industrial Packaging Earnings 3Q'07 vs. 2Q'07
(10) (7) (1) (6) $70 $80 $90 $100 $110 $120 $130 $140 $150 2Q '07 European Cont. Volume All Other 3Q '07 before One-time Costs Pensacola Conversion NA Restructuring 3Q '07 $ MM $ MM Industrial Packaging Earnings 3Q’07 vs. 2Q’07 Industrial Packaging Earnings 3Q’07 vs. 2Q’07
Slide 12: Consumer Packaging
Price Realization Volume Business 3Q’07 vs. 2Q’07 2Q’07 3Q’07 $ Million Consumer Packaging Average IP price realization (includes the impact of mix across all grades) 2% Converting Businesses $6/ton 1% U.S. Coated Paperboard $48 $49 Earnings $790 $775 Sales
Slide 13: Distribution
2Q’07 3Q’07 $ Million Distribution • Volume and margins up • 3Q earnings up 4% vs. 2Q’07 and 16% vs. 3Q’06 • Record 3Q sales, earnings & ROI $38 $40 Earnings $1,720 $1,880 Sales
Slide 14: Forest Products
2Q’07 3Q’07 $ Million Forest Products $98 $99 Earnings $90 $120 Sales
Slide 15: Free Cash Flow
3Q’07 YTD 3Q’07 3Q’07 Free Cash Flow $ Million Free Cash Flow Free Cash Flow $592 $381 Free Cash Flow $262 ($330) ($804) $1,396 $274 Net ($107) Less Dividends Paid ($327) Less Capital Investment $708 Cash Provided by Continuing Operations
Slide 16: Special Items & Discontinued Operations
Discontinued Operations (Net of tax) Special Items (Net of minority interest & tax) $/Share $ Million 3Q’07 Special Items & Discontinued Operations ($0.01) ($3) Total Discontinued Operations ($2) Wood Products ($1) Beverage Packaging ($0.05) ($23) Total Special Items ($29) Restructuring & Corporate
Slide 17: Special Items & Discontinued Operations: Diluted Earnings per Share 3Q'07
Diluted Earnings per Share 3Q’07 Special Items & Discontinued Operations $0.51 Net Earnings ($0.01) Discontinued Operations $0.52 Earnings from Continuing Operations ($0.05) Special Items $0.57 Earnings from Continuing Operations & Before Special Items
Slide 18: EBIT Margin Expansion in Operating Businesses
1.1% 5.7% 3.4% 0.0% 2.0% 4.0% 6.0% 9'M YTD EBIT Margin Expansion in Operating Businesses EBIT Margin Expansion in Operating Businesses EBIT Margin *Excludes special items, Forest Products and divested businesses
Slide 19: Earnings Growth Outside North America
North America 70% North America 80% Earnings Growth Outside North America Diversifying Our Earnings Capacity Earnings Growth Outside North America Diversifying Our Earnings Capacity 2007 Estimated 2002 Actual Non- North America 30% Non- North America 20% Business level EBITDA excluding Forest Produc
Slide 20: Transformation Plan Yielding Results
1.54 .87 .16 .32 .69 (.33) (.17) $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 9M '06 Core Business EBIT Land Sales Divestitures* Interest Shares 9M '07 EPS $ / Share EPS $ / Share * Includes Harvest and Recreation income, Coated Papers and Arizona Chemical Transformation Plan Yielding
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Slide 22: Key Financial Statistics
2006 ¹ Effective Tax Rate ² Unallocated Expenses Supply Chain Expense Net Interest Expense Depreciation & Amortization Capital Spending 2005 ¹ 2007 Estimate 29% $746 MM $156 MM $521 MM $1.1 B $1.1 B 20% $607 MM $135 MM $595 MM $1.2 B $1.1 B 30-31% $710-$730 MM $200 MM $320 MM $1.1 B $1.3 B 1 Exclude
Slide 23: Lack of Order Downtime (M Short Tons)
M Short Tons 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q Containerboard Uncoated Papers Pulp Coated Paperboard European Papers *Includes indefinitely closed uncoated papers capacity at Pensacola, FL, Bastrop, LA and Jay, ME in 2Q05 (72,000 tons), 3Q05 (108,000 tons) and 4Q’05 (108,000 t
Slide 24: Raw Material & Distribution Costs: EBIT Impact 3Q'07 vs. 2Q'07
$MM Total of $10 million or $0.01 per share negative impact in 3Q ’ 07 versus 2Q ’ 07 Total of $10 million or $0.01 per share negative impact in 3Q ’ 07 versus 2Q ’ 07 Raw Material & Distribution Costs EBIT Impact 3Q’07 vs. 2Q’07 Raw Material & Distribution Costs EBIT Impact 3Q’07 vs. 2Q’07 All cost
Slide 25: Incremental Maintenance Outages
4Q’07 Forecast vs. 3Q’07 Impact ($ Million) Total Impact Consumer Packaging Industrial Packaging Printing Papers Maintenance Outages (Tons) $5 ($10) ($5) $20 (2,000) 15,000 8,000 (25,000) Maintenance outages and dollar impacts are estimated and are subject to change Incremental Maintenance Outages I
Slide 26: Earnings by Industry Segment Before Special Items
Unallocated Expenses, net Other Businesses Operating Profit Interest Expense, net Minority Interest 3Q’06 2Q’07 Earnings from continuing operations before income taxes, minority interest & special items Forest Products Distribution Consumer Packaging Industrial Packaging Printing Papers Earnings by
Slide 27: Business Segment Operating Results Before Special Items
Industrial Packaging North American European Asian Asian European North American Consumer Packaging Sales Operating Profit $ Million 3Q’07 2Q’07 3Q’06 U.S. Market Pulp 3Q’07 Brazilian European North American Printing Papers 3Q’06 2Q’07 Business Segment Operating Results Before Special Items Business
Slide 28: 2007 Earnings from Continuing Operations
Diluted EPS 2 1Q07 2Q07 3Q07 Earnings from Continuing Operations 3Q07 2Q07 1Q07 Net Income $MM Estimated Tax Rate Minority Interest $MM Special Items Pre-Tax $MM 3Q07 2Q07 1Q07 Before Special Items Average Shares 1 MM Tax $MM 2007 Earnings from Continuing Operations 2007 Earnings from Continuing Ope
Slide 29: Business Segment Price Realization
Industrial Packaging Printing Papers SEP ‘06 SEP ‘07 Average Selling Price Realizations U. S. Business Segment 3Q’06 3Q’07 2Q’07 Business Segment Price Realization Business Segment Price Realization $62.2 $500 $551 $888 $61.2 $527 $605 $916 $502 $513 $521 Containerboard ($/ton) $61.9 $61.4 $61.2 Cor
Slide 30: 2007 Capital Spending
Capital Allocated in Excess of D&A to Brazil and E. Europe Pensacola Mill IP/Sun JV Tres Lagoas 2007 Capital Spending $1.3 B of Projected Spending by Business 2007 Capital Spending $1.3 B of Projected Spending by Business Brazil Europe Industrial Packaging IP Uncoated Papers Coated Paperboard % of D
Slide 31: 2008 Estimated Capital Spending
Capital Allocated in Excess of D&A in Brazil and Asia Tres Lagoas IP/Sun JV 2008 Estimated Capital Spending 2008 Estimated Capital Spending Brazil Europe Industrial Packaging IP Uncoated Papers Coated Paperboard % of D&A 88% 220% 100% 78% 109% 47% Capital Allocated in Excess of D&A in Brazil and Asi
Slide 32: Natural Gas Costs
Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr Jul Oct Natural Gas Costs * NYMEX Natural Gas closing prices Index: Jan 2004 Natural Gas Costs = 100
Slide 33: U.S. Mill Wood Costs
Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr Jul Oct U.S. Mill Wood Costs U.S. Mill Wood Costs Index: Jan 2004 Wood Costs = 100 * Delivered cost to U.S. pulp & paper ongoing mills
Slide 34: Caustic Soda Costs
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Caustic Soda Costs Index: Jan 2004 Caustic Soda Costs = 100 * Delivered cost to U.S. facilities
Slide 35: Corn Starch Costs
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Corn Starch Costs Index: Jan 2006 Corn Starch Costs = 100 * Delivered cost to U.S. facilities
Slide 36: Annual Purchase Estimates for Key Inputs
Commodity Non – U. S. U. S. Global Consumption Annual Purchase Estimates for Key Inputs Global Consumption Annual Purchase Estimates for Key Inputs Chemicals Fiber Energy 50,000 215,000 Sodium Chlorate (Ton) - 40,000 LD Polyethylene (Ton) 4,000 24,000 Latex (Ton) 230,000 1,300,000 Coal (Ton) 8,000,0
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International Paper Co /New/ — Q3 2007 Earnings Presentation on 6ix