First Quarter 2013 Earnings | May 2, 2013s1.q4cdn.com/597881801/files/doc_presentations/2013... ·...
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First Quarter 2013 Earnings | May 2, 2013
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013 2
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 a joint venture; (vii) our ability to
reach a definitive agreement on a mutually acceptable transaction combining xpedx with Unisource, the
receipt of governmental and other approvals and favorable rulings associated with such a transaction and
the successful fulfillment or waiver of all other closing conditions for such a transaction without unexpected
delays or conditions, and the successful closing of such a transaction within the estimated timeframe; and
(viii) 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.
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
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 | First Quarter 2013 Earnings Presentation | First Quarter 2013
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. International Paper has not verified or audited any of this
information. Ilim management has indicated that the financial information was
prepared in accordance with International Financial Reporting Standards and
extracted from Ilim’s financial statements. 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 | First Quarter 2013 Earnings Presentation | First Quarter 2013
$872 $917 $928
1Q12 4Q12 1Q13
EBITDA1 ($MM)
Solid results in Industrial Packaging, European/
Russia Papers and Brazil
TIN integration synergies top $400MM run rate
$55 per ton box price realization
Improved manufacturing operations
Good execution on annual maintenance outages
Successful start-up and realization of benefits of
biomass boiler in Brazil
Closed on acquisition of IP Orsa packaging in Brazil
Normal lower seasonal demand
Higher input costs, primarily recycled fiber
Headwinds:
- xpedx earnings ($0.02 / share)
- Unfavorable F/X swing at Ilim JV ($0.04 / share)
- Higher corporate expense ($0.02 / share)
5
First Quarter 2013 Results | Continued Strong Industrial Packaging Results
1 From continuing operations before special items and non-operating pension expense
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
1Q13 Financial Results
1Q12 4Q12 1Q13
Sales ($B) $6.7 $7.1 $7.1
EBIT1 ($MM) $510 $542 $549
EPS2 $0.63 $0.69 $0.65
EBITDA1 ($MM) $872 $917 $928
EBITDA Margin1 13.1% 13.0% 13.1%
Cash From Operations3 ($MM)
$642 $766 $516
Free Cash Flow3
($MM) $357 $384 $300
1 From continuing operations before special items and non-operating pension expense 2 Operating Earnings, defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense 3 See slide #30 for a reconciliation of cash provided by continuing operations to free cash flow
6
$6.7
$7.1 $7.1
1Q12 4Q12 1Q13
Sales ($B)
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Global Economic
Recession
Returns on Invested Capital1 above our Cost of Capital
7
4.5%
6.3%
7.5%
6.5%
5.0%
8.1%
9.4%
8.2% 8.1%
0%
2%
4%
6%
8%
10%
2005 2006 2007 2008 2009 2010 2011 2012 1Q13
ROIC WACC
1 ROIC = [Operating Earnings before Interest] / [Equity (adjusted for pension) + Interest-Bearing Debt]
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
.69 .65
(.05)
(.01) (.04)
(.02) (.04)
.09 .03
4Q12 Price & Mix Volume Operations & Costs
Maintenance Outages
Input Costs xpedx Ilim JV 1Q13
1Q13 vs. 4Q12 EPS
Operating Earnings
8
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
51 114
23 39
129 94
19
127 167
79
93
21
52
214 78 143 300 59
30
Maintenance Vicksburg Flood Market
29 25 15
45
14
52
38 18
2
North American Downtime | Lower Market-Related Downtime in 1Q13
17 20
5 15 18
8
14 1 17
27 18
6
22 15
23
15
18 53 27
24
59
Containerboard1 Uncoated Papers
Market Pulp Coated Paperboard2
144
50
214
253
75
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
207
1 1Q12 - 4Q12 include Temple-Inland mills 2 Augusta PM#2 was permanently shutdown beginning in March 2013 (36,000 tons / quarter run rate)
237
36
319
49
186
9
197
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
($21)
($3)
$1 $1
Fiber Chemicals Energy Freight
North America Outside North America
($25)
$4
($1)
Industrial Packaging
Printing Papers
Consumer Packaging
Wood Energy Chemicals Freight OCC
By Business By Input Type
10
Global Input Costs vs. 4Q12 | $22MM Unfavorable, or $0.04/Share
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
368 369
(11) (2) (13) (16)
(25)
68
4Q12 Price & Mix Volume Operations
& Costs
Overhead
Allocation
Maintenance
Outages
Input
Costs
1Q13
Industrial Packaging | 1Q13 vs. 4Q12 $
Mill
ion
Segment operating profit before special items
11
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
N.A. Industrial Packaging Relative EBITDA Margins
IP EBITDA margins based on North American Industrial Packaging operating profit before special items
Competitor EBITDA margin estimates obtained from public filings and IP analysis
Excludes the Recycling Business and revenue from trade volumes
17.3% 17.1%
11.3%
19.6% 19.4%
15.4%
19.2% 19.4%
13.4%
IP PCA RockTenn
1Q12 4Q12 1Q13
12
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Synergy Category Outcome
Revised
Synergy
Target ($MM)
1Q13
Run Rate
S G & A Eliminated ~80% TIN corp. staff positions1
Reduced $30MM+ in fees and expenses $115 Exceeded
Containerboard Mills / Supply Chain
Grade / machine mix optimization
Efficiency improvement savings (including
reduced consumption of $40MM of fiber and
$20MM of energy)
Reduced miles per delivered ton, increased
weight per load
$90
>90%
Box Plants
10 plant closures / 3 shift reductions (2012)
4 additional plant closures announced April
500+ salaried headcount reduction
800+ hourly headcount reduction
Efficiency improvement savings (including
$25MM in waste and $17MM in distribution
& warehouse spending)
$150
Exceeded
Sourcing Purchasing consolidation $45 Exceeded
Total Synergies Original Target $300MM $400 Exceeded
13
Temple-Inland Integration | Synergies Top $400MM Run Rate
1 Excludes IT
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Price Realization
2Q13 3Q13 4Q13
Domestic Containerboard
Sales
~250M tons per quarter
Containerboard Purchases
~200M tons per quarter
Domestic Boxes & Sheets
Sales
~2,250M tons per quarter
N.A. Industrial Packaging | Expected April Domestic Price Increase Realization
14
Full
Full
Full
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Closed acquisition on January 15th
Integration going well
IP Orsa Box Sales up 5% in 1Q13 vs. 1Q12
Focusing on implementing / achieving synergies
and finalizing 2013 & 2014 priorities
15
Brazil Packaging | Orsa International Paper Embalagens S.A.
Paulinia Mill
Box plant
Mill
Paulinia Box Plant Franco da Rocha Mill
Rio Verde Box Plant
Nova Campinas Mill
Manaus Box Plant
Suzano Box Plant
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
39
51
(11)
(1)
2
4
18
4Q12 Price & Mix Volume Operations
& Costs Maintenance
Outages Input
Costs 1Q13
Consumer Packaging | 1Q13 vs. 4Q12 $
Mill
ion
16
Segment operating profit before special items
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013 17
Consumer Packaging | SBS Industry Backlogs at Highest Level in Two Years
300
320
340
360
380
400
420
440
460
480
500
To
ns / W
eek
Source: AF&PA
Unmade orders by week
SBS backlog up 46% vs. Dec. 2012
Improving demand
Customer re-stocking
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
147 149 (15)
(18) 13
18 4
4Q12 Price & Mix Volume Operations
& Costs Maintenance
Outages Input
Costs 1Q13
Printing Papers | 1Q13 vs. 4Q12 $
Mill
ion
18
Segment operating profit before special items
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013 19
Printing Papers | Leveraging Our Global Paper Portfolio
$1MM
$9.3MM
$6.5MM
2013 Global Mix Improvement Opportunity of $17MM (annuallized)
EMEA Cutsize Mix Upgrade A4 Commodity → A4 Premium
North America Export Mix Upgrade Offset Rolls → A4 Commodity Cutsize
Latin America Geographic Mix Upgrade (Cutsize) A4 Europe → A4 Latin America
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
$ Million 1Q12 4Q12 1Q13
Sales $270 $295 $260
Earnings $23 $44 $45
EBITDA Margin 22% 25% 30%
1Q13 vs. 4Q12 1Q13 vs. 1Q12
Business Volume Price/Ton Volume Price/Ton
Uncoated Freesheet (14%) ($6) (4%) $46
Domestic (21%) $18 18% $92
Export (6%) ($28) (17%) $5
Segment operating profit before special items
IP Brazil results are reported in the Printing Papers segment
Average IP Brazil price realization (includes the impact of mix across all grades)
20
Printing Papers | IP Brazil
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Brazil Printing Papers | Mogi Guacu Biomass Boiler Execution
21
13
3
8
2
2
5
4
1Q12 1Q13
Energy Cost (US$MM)
Gas Biomass Oil Purchased Electricity
23
14
1
12012 Mix at 1Q13 Pricing
Savings
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Distribution | 1Q13 vs. 4Q12
$ Million 1Q12 4Q12 1Q13
Sales $1,475 $1,530 $1,385
Earnings $19 $11 $2
Daily Sales Change vs. 1Q12 vs. 4Q12
Printing (1%) (11%)
Packaging (1%) (7%)
Facility Solutions (9%) (16%)
Revenue per day seasonally down
Highly competitive conditions impacting margins
Remaining focused on cost savings initiatives
22 xpedx
Segment operating profit before special items
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Distribution | xpedx – Unisource Worldwide (UWW) Combination
23 xpedx
On April 22nd International Paper announced it is in talks with UWW
regarding a proposed business combination of xpedx and UWW
Both parties have entered into a non-binding letter of intent to
explore a possible transaction
Both parties have agreed to negotiate exclusively with each other
Reverse Morris Trust transaction
Transaction is tax-free to IP and its Shareholders
Opportunity to create a new distribution company that is stronger and
more competitive
Merger benefits are unique to the combination of xpedx and UWW
Supply agreements to be negotiated
Process to complete a transaction could take up to 12 months
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013 24
Distribution | Proposed RMT Transaction Structure
xpedx
Definitive agreement with UWW
xpedx assets contributed to new
subsidiary of IP
Debt placed on xpedx
Debt proceeds distributed to IP as a
dividend
IP distributes shares of xpedx to its
shareholders
xpedx becomes a public company
xpedx immediately merges with UWW to
form Newco
IP
xpedx
UWW
UWW xpedx
IP Shareholders
100%
Agreement
UWW Shareholders
100%
Step 2: Merger
Step 1: Spin-off
Dividend
to IP
Merges
Newco
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Ilim Joint Venture | First Quarter 2013 Projects Update
25
Bratsk Mill Koryazhma Mill
Pulp Dryer Wet End
Sawlog Cross-cutting Line PM #7 Dryer Sections
• Construction phase complete April 15th
• New fiber-line running, in full ramp mode
• Cost savings from new turbines begin in May
• Construction phase complete April 1st
• PM running offset rolls, cut-size in May
• Coater completion and start-up by end of Q3
Offset Roll Production
Earnings Presentation | First Quarter 2013 26
Second Quarter Outlook | Changes from 1Q13
North America EMEA & Russia Brazil Asia
Volume
Paper Stable Stable Seasonal Increase Stable
Packaging Seasonal Increase Stable Full Quarter Stable
Pricing / Mix
Paper Pulp Price/Mix Modest Decline Seasonal Mix Improvement
Stable
Packaging Increase Stable Stable Stable
Operations & Other
Paper Stable Stable Stable Stable
Packaging Improved Mill Operations
Stable Stable Stable
Inputs & Freight
Paper Stable Higher Wood Stable Stable
Packaging OCC Stable Stable Stable
Mill Maintenance Outages
Paper Increase $48MM
Increase $26MM
Increase $1MM
Increase $2MM
Packaging Increase $32MM
Increase $4MM1
None Scheduled None Scheduled
xpedx Earnings Seasonal Increase
ILIM JV Equity Earnings Start-up Costs2
1 Consumer Packaging Segment 2 Impact of non-repeating currency of +$11MM more than offset by expansion project start-up costs
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Seasonally stronger global demand
Partial realization of April containerboard / box price increase
Full quarter of IP Orsa results
Higher scheduled maintenance outages (peak quarter)
Non repeat of tax benefit
IIim JV expansion project start-up costs
Input costs up moderately
Higher prices on containerboard purchases offsets price
increase on domestic containerboard and boxes
27
2Q13 Outlook Summary | Transitional Quarter to Stronger Second Half
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Appendix Investor Relations Contacts
Glenn R. Landau 901-419-1731
Michele Vargas 901-419-7287
Media Contact
Tom Ryan 901-419-4333
28
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Key Financial Statistics
$ Million (Except as noted)
2011 2012 2013 Estimate
Capital Spending $1.2 B $1.4 B ~ $1.4 B
Depreciation &
Amortization $1.3 B $1.5 B ~ $1.5 B
Net Interest Expense $541 $672 ~ $650
Corporate Items $102 $51 ~ $60
Effective Tax Rate 32% 29% 30 – 32%
29
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
$ Million 1Q12 4Q12 1Q13
Cash Provided by Continuing Operations
$6421 $7662 $516
Less Capital Investment ($285) ($382) ($216)
Free Cash Flow $357 $384 $300
1 Excludes $120MM cash paid for Temple-Inland change-in-control agreements and $111MM cash received from unwinding a timber monetization 2 Excludes $80MM cash paid for Guaranty Bank settlement
Free Cash Flow
30
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Balance Sheet | Debt Coverage
31
$ B
illio
n
$2.7 Pension
Gap
4.0x 3.9x
$12.0 Balance
Sheet
Debt $10.2
Balance
Sheet
Debt
$1.2 Op. Lease Adj. $1.2 Op. Lease Adj.
$4.1 Pension
Gap
[3.2x]2
[2.8x]2
Feb 20121 Mar 2013 Adjusted Debt reflects gross balance sheet debt plus pension gap and operating leases (Moody’s Methodology)
Adjusted EBITDA of $4.0B reflects 2012 actual plus pension and lease expense adjustments (Moody’s Methodology) 1 Includes Temple-Inland debt & pension gap 2 Simple Debt Coverage: Balance Sheet Debt / 2012 EBITDA of $3.7B
Moody’s Target: Adjusted Debt < 3X Adjusted EBITDA
Reduced Balance Sheet debt $1.8B
since Temple-Inland acquisition
(Feb 2012)
Pension Gap increased by $1.4B
due to ~100 bps lower discount rate
(AA Corporate Bond Rate)
On track to meet Moody’s debt
coverage target of < 3X adjusted
debt by year-end 2013
Required pension cash
contribution of ~$40MM in 2013
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Maintenance Outages Expenses | 2013
$ Million 1Q13 2Q13E 3Q13E 4Q13E 2013E
Industrial Packaging $69 $86 $32 $34 $221
Printing Papers Total $24 $101 $39 $50 $214
North America 24 72 27 31 154
Europe 0 26 2 13 41
Brazil 0 1 9 6 16
India 0 2 1 0 3
Consumer Packaging $0 $19 $4 $38 $61
North America 0 15 4 38 57
Europe 0 4 0 0 4
Total Impact $93 $206 $75 $122 $496
32
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Special Items Pre-Tax ($ Million) 1Q12 4Q12 1Q13
Industrial Packaging
Acquisition and Integration Costs ($63) ($28) ($12)
Other ($4) ($2)
Printing Papers Other $1
Consumer Packaging
Augusta PM Shutdown ($44)
Shorewood Sale Adjustments $7 $2
xpedx Reorganization ($21) ($7) ($7)
Corporate
Debt Extinguishment ($16) ($9) ($6)
Acquisition Costs ($3)
Interest Income $6
Other $3
Total Special Items Before Tax ($92) ($46) ($65)
33
Special Items Before Tax | Continuing Operations
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Special Items Net of Taxes
1Q13
$ Million EPS
Operating Earnings $292 $0.65
Special Items Net of Taxes:
Tax Items $91
Debt Extinguishment Costs ($4)
Acquisition and Integration Costs ($8)
Reorganization ($4)
Augusta PM Shutdown ($27)
Other $3
Total Special Items Net of Taxes $51 $0.11
Non-Operating Pension Expense ($51) ($0.11)
Discontinued Operations Net of Taxes $26 $0.06
Net Earnings $318 $0.71
34
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Operating Profit $ Million
D & A $ Million
Tons Thousand
EBITDA per Ton
EBITDA Margin
Industrial Packaging
North America1 $349 $181 3,477 $152 19%
Brazil $1 $4 41 $122 15%
Printing Papers
North America2 $63 $40 661 $156 16%
Europe & Russia3 $54 $17 329 $216 22%
Brazil $45 $33 264 $295 30%
India ($4) $7 60 $50 7%
North American Pulp ($9) $17 332 $24 4%
Consumer Packaging
North America4 $22 $38 369 $163 13%
Europe $32 $5 91 $407 39%
Segment operating profit before special items 1 Includes Corrugated Packaging, Saturating Kraft & Bag businesses, Gypsum & Release Kraft business; excludes Recycling business and revenue from trade volumes 2 Includes Bleached Kraft business 3 Uncoated Papers (excludes Pulp) 4 Includes Foodservice business
35
1Q13 EBITDA | Integrated Mill Business Margins
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Operating Profits by Industry Segment | Continuing Operations
$ Million 1Q12 4Q12 1Q13
Industrial Packaging $278 $368 $369
Printing Papers $145 $147 $149
Consumer Packaging $96 $39 $51
Distribution $19 $11 $2
Operating Profit $538 $565 $571
Net Interest Expense ($168) ($169) ($170)
Noncontrolling Interest / Equity Earnings Adjustment $4 ($8) $0
Corporate Items ($32) ($15) ($22)
Non-Operating Pension Expense ($37) ($40) ($84)
Special Items ($92) ($46) ($65)
Net Earnings from continuing operations before income taxes, equity earnings & noncontrolling interest
$213 $287 $230
Equity Earnings, net of taxes - Ilim $40 $8 ($11)
36
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Geographic Business Segment Operating Results | Before Special Items
$ Million Sales Operating Profit
1Q12 4Q12 1Q13 1Q12 4Q12 1Q13
Industrial Packaging
North America $2,690 $2,950 $3,025 $258 $338 $350
Europe $270 $255 $320 $19 $29 $18
Brazil - - $45 - - $1
Asia $155 $175 $170 $1 $1 $0
Printing Papers
North American $700 $650 $645 $100 $52 $63
Europe $335 $375 $365 $44 $64 $54
Brazil $270 $295 $260 $23 $44 $45
Asia / India $80 $60 $75 $1 ($6) ($4)
N.A. Pulp $175 $200 $195 ($23) ($7) ($9)
Consumer Packaging
North America $520 $470 $460 $63 $17 $22
Europe $100 $95 $95 $28 $29 $32
Asia (Sun JV) $190 $250 $275 $5 ($7) ($3)
xpedx $1,475 $1,530 $1,385 $19 $11 $2
Does not reflect total company sales and operating profit
37
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
1 Assuming dilution 2 A reconciliation to GAAP EPS is available at www.internationalpaper.com under the Investors tab at Webcasts and Presentations
2013 Operating Earnings
Pre-Tax $MM
Tax $MM
Non-controlling
Interest $MM
Equity Earnings
Net Income $MM
Average Shares1
MM
Diluted EPS2
Operating Earnings
1Q13 $379 ($80) $3 ($10) $292 446 $0.65
Non-Operating Pension Expense
1Q13 ($84) $33 $0 $0 ($51) 446 ($0.11)
Net Special Items
1Q13 ($65) $116 $0 $0 $51 446 $0.11
Net Earnings from Continuing Operations
1Q13 $230 $69 $3 ($10) $292 446 $0.65
38
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
.36 .31
.29
.12 .12
.35
.40
.47 .45
.52
.57
.73
.45 .49
.41
.15
.07
.27
.38
.22
.09
.49
.89
.74 .78
.81 .83
.73
.63
.53
.81
.69 .65
.42
.08
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 4Q 1Q
Operating Business EPS | Well Positioned for next Step-Change in Performance
2005 2006 2007 2010 2008
Impact of Mineral
Rights Gain
2009
2005-2006 as originally reported
2007-2011 adjusted for elimination of the Ilim JV reporting lag
2005-2010 Net Earnings from continuing operations and before special items; 2010 onward reflects Operating Earnings
.83
2011
.97
Final Land Sale
2012
39
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
.63 .65
(.04) (.07)
(.03)
(.12) .18
.01
.09
1Q12 Price & Mix Volume Operations & Costs
Input Costs TIN Step-up DA & Divested Mills
xpedx Tax Ilim JV 1Q13
1Q13 vs. 1Q12 EPS
Operating Earnings
40
0
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
278
369
(47)
(17) (1) (8)
145
19
1Q12 Price/Mix Volume TIN Step-up DA & Divested Mills
Operations & Costs
Maintenance Outages
Input Costs
1Q13
Industrial Packaging | 1Q13 vs. 1Q12 $
Mill
ion
41
Segment operating profit before special items
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
1Q13 vs. 4Q12 1Q13 vs. 1Q12
Business Volume Price /
Ton Volume
Price / Ton
N.A. Container1 (2%) $33 (6%) $57
European Container2 0% €9 0% (€12)
Average IP volume and price realization (includes the impact of mix across all segments) 1 N.A. Container Volume on FBA reporting basis (excludes shipments from the Display & Bulk Segment and facilities in Mexico and Latin America but
includes shipments from domestic Sheet Plants); All periods include full quarter of Temple-Inland volume 2 European Container Volume reflects box shipments only (includes shipments from the newly-consolidated joint venture in Turkey)
42
Industrial Packaging | Volume and Pricing Trends
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
145 149 (16)
(17)
5
29 3
1Q12 Price & Mix Volume Operations & Costs
Maintenance Outages
Input Costs
1Q13
Printing Papers | 1Q13 vs. 1Q12 $
Mill
ion
43
Segment operating profit before special items
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
1Q13 vs. 4Q12 1Q13 vs. 1Q12
Business Volume Price / Ton Volume Price / Ton
N.A. Paper 1% ($11) (7%) ($8)
N.A. Pulp1 1% ($6) 20% ($26)
European Paper (3%) (€5) 6% (€7)
Average IP volume and price realization (includes the impact of mix across all grades) 1 Reflects Fluff and Market Pulp combined
44
Printing Papers | Volume and Pricing Trends
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
N.A. Printing Papers Relative EBITDA Margins1
20.3% 21.1%
14.3%
19.7%
16.0% 14.9%
IP Domtar
1Q12 4Q12 1Q13
45
1Excludes Pulp business
IP EBITDA margins based on operating profit from continuing operations before special items
Competitor EBITDA margin estimates obtained from public filings and IP analysis
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
96
51
(28)
(22) 2
3
1Q12 Price & Mix Volume Operations & Costs
Input Costs
1Q13
Consumer Packaging | 1Q13 vs. 1Q12 $
Mill
ion
46
Segment operating profit before special items
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Average IP price realization (includes the impact of mix across all grades)
1Q13 vs. 4Q12 1Q13 vs. 1Q12
Volume Price/Ton Volume Price/Ton
N.A. Coated Paperboard 5% ($12) (1%) ($50)
Revenue Price Revenue Price
Foodservice (6%) NA (2%) NA
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Consumer Packaging | Volume and Pricing Trends
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
N.A. Consumer Packaging Relative EBITDA Margins
IP EBITDA margins based on North American Consumer Packaging operating profit before special items
Competitor EBITDA margin estimates obtained from public filings and IP analysis; reflects Food & Beverage segment
20.0%
11.8% 11.9%
9.0%
13.0%
8.4%
IP MeadWestvaco
1Q12 4Q12 1Q13
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Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
20081 2009 2010 2011 2012
Sales Volume (Billion ton) 2.6 2.6 2.8 2.8 2.9
Sales ($B) 1.9 1.3 1.9 2.2 2.0
Capital Employed ($B) 1.3 1.2 1.2 1.6 2.1
Debt ($B) 0.4 0.4 0.5 0.9 1.2
Operating EBITDA ($MM) 197 516 591 291
F/X (35) 12 (60) 39
EBITDA 290 163 528 531 330
EBITDA Margin 15% 12% 28% 24% 17%
Depreciation 120 121 124 134
EBIT 43 407 406 196
Interest Expense 28 18 7 6
Net Income (loss) (19) 266 299 132
IP Equity Earnings (loss) ($MM) 11 (27) 103 134 56
Dividends (to IP) ($MM) 67 50 34 85 0
Ilim JV results are IFRS basis. 1 KPK sale was excluded from 2008 results.
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Ilim Joint Venture | Full Year Financials
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Ilim Joint Venture | 1Q13 vs. 4Q12
$ Million 1Q12 4Q12 1Q13
Sales Volume (thousand tons)
712 737 647
Sales $488 $500 $462
Operational EBITDA1 $75 $58 $38
F/X (Impact of USD Debt2) $74 $15 ($27)
EBITDA $149 $74 $11
IP Equity Earnings3 $40 $8 ($11)
Ilim JV results are on an IFRS basis with the exception of IP Equity Earnings which is US GAAP 1 Before F/X impact 2 1Q13 Ilim JV USD-denominated debt balance of ~$1.1B; Ilim Group’s functional currency is the Ruble (RUB); Non-functional-denominated currency balances are
measured monthly using the month-end exchange rate
3 IP Equity Earnings for 1Q12 & 4Q12 include an after-tax f/x gain of $29MM and $6MM, respectively; 1Q13 earnings include an after-tax f/x loss of $11MM
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Seasonal slow demand domestically, modest price improvement in China
Finalizing commissioning and start-up at Bratsk and Koryazhma,
commercial ramp-up in 2Q
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Ilim Joint Venture | Volume and Pricing Trends
1Q13 vs. 4Q12 1Q13 vs. 1Q12
Business Volume Price/Ton Volume Price/Ton
Pulp (16%) $8 (12%) $0
Containerboard (9%) ($34) (2%) $41
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Average Ilim JV (100%) volume and price realization (includes the impact of mix across all grades and destinations)
Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
Total Cash Cost Components | 1Q13
Fiber 30%
Materials 14%
Labor 12%
Chemicals 10%
Freight 16%
Energy 10%
Overhead 8%
North American Mills Only (Including Temple Inland Mills)
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Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
($12)
($8)
($4)
$2
Energy Fiber Freight Chemicals
North America Outside North America
($8)
($17)
$3
Industrial Packaging
Printing Papers
Consumer Packaging
Wood Energy Chemicals Freight OCC
By Business By Input Type
Input costs for continuing businesses
Global Input Costs vs. 1Q12 | $22MM Unfavorable, or $0.03/Share
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Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
2006 2007 2008 2009 2010 2011 90
95
100
105
110
115
120
125
130
2012 2013
U.S. Mill Wood Delivered Cost Trend | 1% Increase vs. 4Q12 Average Cost
Cost Indexed to January 2006 values
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Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
2006 2007 2008 2009 2010 2011 60
80
100
120
140
160
180
200
220
240
260
2012 2013
2006-2007 represents WY PKG delivered costs; 2008-2010 represents delivered costs to the integrated system Cost Indexed to January 2006 values
U.S. OCC Delivered Cost Trend | 15% Increase vs. 4Q12 Average Cost
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Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
2006 2007 2008 2009 2010 2011 0
50
100
150
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan
2012 2013
NYMEX Natural Gas closing prices
Natural Gas Costs Trend | 2% Decrease vs. 4Q12 Average Cost
Cost Indexed to January 2006 values
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Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
2006 2007 2008 2009 2010 2011 40
60
80
100
120
140
160
180
200
220
240
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan
2012 2013
U.S. Fuel Oil Trend | 4% Increase vs. 4Q12 Average Cost
WTI Crude prices Cost Indexed to January 2006 values
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Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
2006 2007 2008 2009 2010 2011 75
100
125
150
175
200
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan
2012 2013
U.S. Chemical Composite Index Trend | Flat vs. 4Q12 Average Cost
Delivered cost to U.S. facilities: includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid 2006 - 2008 excludes WY PKG Cost Indexed to January 2006 values
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Earnings Presentation | First Quarter 2013 Earnings Presentation | First Quarter 2013
2013 Global Consumption | Annual Purchase Estimates for Key Inputs
Commodity U. S. Non – U. S.
Energy
Natural Gas (MM BTUs) 65,000,000 12,000,000
Fuel Oil (Barrels) 750,000 400,000
Coal (Tons) 480,000 450,000
Fiber Wood (Tons) 54,700,000 9,100,000
Old Corrugated Containers (Tons) 3,700,000 100,000
Chemicals
Caustic Soda (Tons) 380,000 65,000
Starch (Tons) 430,000 107,000
Sodium Chlorate (Tons) 180,000 50,000
LD Polyethylene (Tons) 40,000 -
Latex (Tons) 23,000 6,000
Does not include Asia, India or volume consumed by Joint Ventures (Sun JV, Ilim JV, Orsa JV) Estimates are based on normal operations and may be impacted by downtime Excludes consumption related to divested TIN mills and TIN Building Products
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