Second Quarter 2013 Earnings | July 25,...
Transcript of Second Quarter 2013 Earnings | July 25,...
Second Quarter 2013 Earnings | July 25, 2013
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second 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 | Second Quarter 2013 Earnings Presentation | Second 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 | Second Quarter 2013 Earnings Presentation | Second 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 | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
$920 $928 $1,013
2Q12 1Q13 2Q13
EBITDA1 ($MM)
Strong free cash flow and EBITDA margins
Strong results in Industrial Packaging driven by
increased prices and seasonally higher volumes
Solid results in Brazil and European/Russian papers
Building momentum in Consumer Packaging
Solid manufacturing operations and cost control
Successfully executed peak level of annual
maintenance outages
July 19 closed on TIN Building Products sale;
$710MM proceeds to IP as expected
One-off impacts:
- National Envelope (NEC) bad debt expense
- Unfavorable non-cash F/X swing at Ilim JV
5
Second Quarter 2013 Results | Solid Performance Drives Strong Results
1 From continuing operations before special items and non-operating pension expense
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
2Q13 Financial Results
2Q12 1Q13 2Q13
Sales ($B) $7.1 $7.1 $7.3
EBIT1 ($MM) $554 $549 $626
EPS2 $0.53 $0.65 $0.64
EBITDA1 ($MM) $920 $928 $1,013
EBITDA Margin1 13.0% 13.1% 13.8%
Cash From Operations3 ($MM)
$682 $516 $724
Free Cash Flow3
($MM) $262 $300 $452
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 #28 for a reconciliation of cash provided by continuing operations to free cash flow
6
$262 $300
$452
2Q12 1Q13 2Q13
Free Cash Flow ($MM)
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
.65 .64
(.15)
(.09)
(.05) (.05)
.10
.10
.08
.05
1Q13 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Corporate / Other Items
TAX NEC Ilim JV 2Q13
2Q13 vs. 1Q13 EPS
Operating Earnings
7
0
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
114
23 39
129 94
19
127 167
99
79
21
52
214 78 143 300
49 30
1
Maintenance Vicksburg Flood Market
25 15
45
14
52
38
18
53
2
North American Downtime | Heavy Annual Maintenance Outage Quarter
20
5 15 18
8 14
21
1 17 27
18 6
22 13 15
23
15
18 53 27
24
59
Containerboard1 Uncoated Papers
Market Pulp Coated Paperboard2
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 Temple-Inland mills included since 1Q12 2Augusta PM#2 was permanently shutdown in March 2013 (36,000 tons / quarter)
237
36
319
49
176
8
197
100
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
($6)
($3)
$2
$6
Fiber Energy Freight Chemicals
North America Outside North America
$5
($5)
($1)
Industrial Packaging
Printing Papers
Consumer Packaging
Wood Energy Chemicals Freight OCC
By Business By Input Type
Input costs ($MM) for continuing businesses
Global Input Costs vs. 1Q13 | Flat
9
Wood
OCC
Wood
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
369
477 (3)
45
39 4
18 5
1Q13 Price & Mix Volume Manufacturing Ops.
Operations & Costs
Maintenance Outages
Input Costs
2Q13
Industrial Packaging | 2Q13 vs. 1Q13 $
Mill
ion
Segment operating profit before special items
10
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
N.A. Industrial Packaging Relative EBITDA Margins
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
19.4%
17.7%
11.3%
19.2% 19.4%
13.4%
22.6%
19.7%
17.3%
IP PCA RockTenn
2Q12 1Q13 2Q13
11
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Price Realization
2Q13 3Q13 4Q13
Containerboard Sales
~250M tons per quarter
Containerboard Purchases
~200M tons per quarter
Boxes & Sheets Sales
~2,250M tons per quarter
Industrial Packaging | Expected April N.A. Price Increase Realization
12
Full
Full
Full
Earnings Presentation | Second Quarter 2013
Global Recession
N.A. Industrial Packaging | The Strategic Journey
13
0.4 0.5 0.6 0.8
1.3 1.3 1.6
2.0
2.6
2005 2006 2007 2008 2009 2010 2011 2012 2Q13 Annualized
2014-16E
Bu
sin
es
s
EB
ITD
A ($
B)
Weyco Packaging Acquisition &
Integration
TIN Acquisition &
Integration
Optimization
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 - 16
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
First full quarter of reporting (March – May),
one month lag basis
Brazil box market growing at 4% YTD
Price increase announced for 3Q
implementation
Synergy and productivity improvement plans
underway; benefit ramp up begins 3Q
14
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 | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
51 52
(19)
(2) (2) 2
10
12
1Q13 Price & Mix Volume Operations & Costs
Maintenance Outages
Input Costs
Other 2Q13
Consumer Packaging | 2Q13 vs. 1Q13 $
Mill
ion
15
Segment operating profit before special items
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013 16
Consumer Packaging | SBS Industry Backlogs at Highest Level in Two Years
300
350
400
450
500
550
600
650
M T
on
s /
We
ek
Source: AF&PA
Unmade Orders by Week
• SBS backlogs up to 5+ weeks from January 2013
• Announced $45/ton folding carton board price increase July 9th
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
149
76
(2) (63)
(5) (28)
11 4
10
1Q13 Price & Mix Volume Operations & Costs
Maintenance Outages
Input Costs
NEC Other 2Q13
Printing Papers | 2Q13 vs. 1Q13 $
Mill
ion
17
Segment operating profit before special items
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
$ Million 2Q12 1Q13 2Q13
Sales $285 $260 $270
Earnings $51 $45 $59
EBITDA Margin 29% 30% 34%
2Q13 vs. 1Q13 2Q13 vs. 2Q12
Business Volume Price/Ton Volume Price/Ton
Uncoated Freesheet 7% $16 (5%) $19
Domestic 4% $35 4% $84
Export 10% ($1) (13%) ($38)
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)
18
Printing Papers | IP Brazil
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Distribution | 2Q13 vs. 1Q13
$ Million 2Q12 1Q13 2Q13
Sales $1,500 $1,385 $1,405
Earnings $17 $2 $17
Daily Sales Change vs. 2Q12 vs. 1Q13
Printing (4.7%) (0.6%)
Packaging 0.1% 1.6%
Facility Solutions (11.2%) 1.5%
Reduction in operating costs primary driver of quarter over
quarter improvement
Maintaining margins in a competitive environment; demand
for printing and writing papers continues to decline
Working toward potential xpedx-Unisource combination
19 xpedx
Segment operating profit before special items
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Ilim Joint Venture | 2Q13 vs. 1Q13
$ Million 2Q12 1Q13 2Q13
Sales Volume (thousand tons)
741 647 647
Sales $513 $462 $465
Operational EBITDA1 $81 $38 $36
F/X (Impact of USD Debt2) ($100) ($27) ($56)
EBITDA ($19) $11 ($20)
IP Equity Earnings3 ($25) ($11) ($34)
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 2Q13 Ilim JV USD-denominated debt balance of ~$1.3B; 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 2Q12,1Q13 & 2Q13 include after-tax f/x losses of $41MM, $11MM, and $23MM, respectively
20
Softening demand from China and unfavorable F/X impact
Significant start-up progress during 2Q at Bratsk and Koryazhma;
finalizing commercial qualification process and ramp-up 3Q
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Ilim Joint Venture | Project Start-up/Ramp-up Costs and Benefits
21
1Q13A 2Q13A 3Q13E 4Q13E
Start-up/Ramp-up Costs Project Benefits
Earnings Presentation | Second Quarter 2013 22
Third Quarter Outlook | Changes from 2Q13
North America EMEA & Russia Brazil Asia3
Volume
Paper Stable Stable Seasonal Increase
Stable
Packaging Seasonally weaker;
one less shipping day Western Europe Stable Stable
Pricing / Mix
Paper Pulp mix (+)
Export mix (-) Modest Decline Flat Improving
Packaging Increase Increasing Pressure Stable Stable
Operations & Other
Paper Non-recurring
NEC charge Stable Stable Stable
Packaging Modest improvement Stable Modest
Improvement Stable
Inputs & Freight
Paper Higher Wood Higher Wood &
Energy Stable Increasing
Packaging Higher Fiber Stable Higher OCC Stable
Mill Maintenance Outages
Paper Decrease
$39MM
Decrease $17MM
Increase $7MM
Increase
$5MM
Packaging Decrease
$43MM
Decrease $7MM1
None Scheduled None Scheduled
xpedx Earnings Flat
ILIM JV Equity Earnings Non-recurring
Currency Impact2
1 Consumer Packaging Segment 2 Assumes stable F/X 3 Includes India
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Continued strong FCF generation in a low growth environment
Increasing realization of April containerboard / box price increase
Lowest scheduled maintenance outage quarter
Non-recurrence of NEC bad debt expense
Improving trends in NA Consumer Packaging business
Ramp up of capital projects at Ilim JV and lower start up costs
Slowing demand and oversupply situation in China
Continued weak business conditions in Western Europe
Seasonally lower volume in Industrial Packaging and one less day
Input costs up moderately, mostly fiber
Softening export paper markets
23
3Q13 Outlook Summary | Improved Earnings Runway
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013 24
Balanced Global Earnings Growth
2011 EBITDA
2Q 2013 EBITDA Annualized
Mid-Cycle EBITDA Potential
$3.7B
$5.1B
1 As of May 2012 Investor Day
Opportunities
• Higher containerboard and
box pricing
• NA Industrial Packaging
optimization
• Leveraging global footprint
• xpedx spin & merge with
Unisource
Challenges
• Weaker demand environment
• Pulp pricing below midcycle
• Overcapacity in China
$4.1B
1
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Appendix Investor Relations Contacts
Jay Royalty 901-419-1731
Michele Vargas 901-419-7287
Media Contact
Tom Ryan 901-419-4333
25
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Balance Sheet | Debt Coverage
26
$ B
illio
n
$2.7 Pension
Gap
4.0x 3.5x
$12.0 Balance
Sheet
Debt $10.1
Balance
Sheet
Debt
$1.2 Op. Lease Adj. $1.2 Op. Lease Adj.
$4.1 Pension
Gap
[3.2x]2
[2.5x]2
Feb 20121 Jun 20133
Adjusted Debt reflects gross balance sheet debt plus pension gap and operating leases (Moody’s Methodology) 1 Includes Temple-Inland debt & pension gap. Adjusted EBITDA of $4.0B reflects 2012 actual plus pension and lease expense adjustments (Moody’s Methodology) 2 Simple Debt Coverage: Balance Sheet Debt / 2012 EBITDA of $3.7B; Balance sheet debt / 2013 2Q Annualized EBITDA of $4.1B 3 Adjusted EBITDA of $4.4B reflects 2Q 2013 annualized plus pension and lease expense adjustments (Moody’s Methodology)
Moody’s Target: Adjusted Debt < 3X Adjusted EBITDA
On track to meet the rating
agency’s target by year-end 2013
Made required pension cash
contribution of $31MM in 2Q 2013
Pension Gap would change by
~$1.5B due to a change of 100 bps
in the discount rate (AA Corporate
Bond Rate)
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second 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%
27
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
$ Million 2Q12 1Q13 2Q13
Cash Provided by Continuing Operations
$6821 $516 $7242
Less Capital Investment ($420) ($216) ($272)
Free Cash Flow $262 $300 $452
Free Cash Flow
28
1 Excludes $44 MM cash paid for Temple-Inland pension plan contribution and $140 MM cash received from unwinding a timber monetization 2 Excludes $31 MM cash paid for pension plan contribution and $30 MM cash received from Guaranty Bank insurance reimbursements
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Maintenance Outages Expenses | 2013 Forecast
$ Million 1Q13 2Q13 3Q13E 4Q13E 2013E
Industrial Packaging $69 $72 $39 $32 $212
Printing Papers Total $24 $87 $43 $51 $205
North America 24 66 27 31 148
Europe 0 20 3 14 37
Brazil 0 1 8 6 15
India 0 0 5 0 5
Consumer Packaging $0 $19 $2 $33 $54
North America 0 12 2 33 47
Europe 0 7 0 0 7
Total Impact $93 $178 $84 $116 $471
29
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Special Items Pre-Tax ($ Million) 2Q12 1Q13 2Q13
Industrial Packaging
Acquisition and Integration Costs ($35) ($12) ($14)
Mill Divestiture Costs ($71) ($1)
Olmuksan Bargain Purchase Gain $1 $13
Other ($1) ($2) ($2)
Printing Papers Other ($2)
Consumer Packaging
Augusta PM Shutdown ($44) ($1)
Shorewood Sale Adjustments ($6)
xpedx Reorganization ($12) ($7) ($17)
Corporate
Debt Extinguishment ($10) ($6) ($3)
Interest Income $6
Guaranty Bank Insurance Reimb. $30
Cass Lake Environmental Reserve ($6)
Revaluation of Company Airplanes ($9)
Other $1 ($3)
Total Special Items Before Tax ($136) ($65) ($12)
30
Special Items Before Tax | Continuing Operations
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Special Items Net of Taxes
1Q13 2Q13
$ Million EPS $ Million EPS
Earnings Before Special Items $292 $0.65 $288 $0.64
Special Items Net of Taxes:
Tax Items $91
Debt Extinguishment Costs ($4) ($2)
Acquisition and Integration Costs ($8) ($8)
Reorganization ($4) ($10)
Augusta PM Shutdown ($27) ($1)
Olmuksan Bargain Purchase Gain $1 $13
Guaranty Bank Insurance Reimbursements $19
Cass Lake Environmental Reserve ($4)
Revaluation of Company Airplanes ($5)
Other $2 ($4)
Total Special Items Net of Taxes $51 $0.11 ($2) ($0.01)
Non-Operating Pension Expense ($51) ($0.11) ($51) ($0.11)
Discontinued Operations Net of Taxes $26 $0.06 $24 $0.05
Net Earnings $318 $0.71 $259 $0.57
31 Earnings Presentation
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Operating Profit $ Million
D & A $ Million
Tons Thousand
EBITDA per Ton
EBITDA Margin
Industrial Packaging
North America1 $469 $187 3,625 $181 23%
Brazil2 $1 $6 62 $114 9%
Printing Papers
North America3 ($8) $38 664 $45 5%
Europe & Russia4 $30 $17 366 $128 15%
Brazil $59 $32 279 $326 34%
India2 ($3) $5 43 $47 6%
North American Pulp ($3) $17 327 $43 7%
Consumer Packaging
North America5 $33 $38 410 $173 14%
Europe $18 $4 90 $244 23%
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 adjustment for minority ownership share 3 Includes Bleached Kraft business 4 Uncoated Papers (excludes Pulp)
5 Includes Foodservice business
32
2Q13 EBITDA | Integrated Mill Business Margins
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Operating Profits by Industry Segment | Continuing Operations
$ Million 2Q12 1Q13 2Q13
Industrial Packaging $367 $369 $477
Printing Papers $106 $149 $76
Consumer Packaging $63 $51 $52
Distribution $17 $2 $17
Operating Profit $553 $571 $622
Net Interest Expense ($172) ($170) ($168)
Noncontrolling Interest / Equity Earnings Adjustment $4 $0 $4
Corporate Items ($3) ($22) $0
Non-Operating Pension Expense ($42) ($84) ($83)
Special Items ($136) ($65) ($12)
Net Earnings from continuing operations before income taxes, equity earnings & noncontrolling interest
$204 $230 $363
Equity Earnings, net of taxes - Ilim ($25) ($11) ($34)
33
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Geographic Business Segment Operating Results | Before Special Items
$ Million Sales Operating Profit
2Q12 1Q13 2Q13 2Q12 1Q13 2Q13
Industrial Packaging
North America $3,035 $3,025 $3,190 $354 $350 $468
Europe $255 $320 $310 $12 $18 $8
Brazil - $45 $100 - $1 $1
Asia $160 $170 $180 $1 $0 $0
Printing Papers
North American $670 $645 $645 $69 $63 ($8)
Europe $335 $365 $360 $20 $54 $31
Brazil $285 $260 $270 $51 $45 $59
Asia / India $35 $75 $60 ($8) ($4) ($3)
N.A. Pulp $160 $195 $205 ($26) ($9) ($3)
Consumer Packaging
North America $495 $460 $505 $37 $22 $33
Europe $90 $95 $95 $21 $32 $18
Asia (Sun JV) $195 $275 $255 $5 ($3) $1
xpedx $1,500 $1,385 $1,405 $17 $2 $17
Does not reflect total company sales and operating profit
34
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second 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
2Q13 $458 ($136) $2 ($36) $288 449 $0.64
Non-Operating Pension Expense
1Q13 ($84) $33 $0 $0 ($51) 446 ($0.11)
2Q13 ($83) $32 $0 $0 ($51) 449 ($0.11)
Net Special Items
1Q13 ($65) $116 $0 $0 $51 446 $0.11
2Q13 ($12) $10 $0 $0 ($2) 449 ($0.01)
Net Earnings from Continuing Operations
1Q13 $230 $69 $3 ($10) $292 446 $0.65
2Q13 $363 ($94) $2 ($36) $235 449 $0.52
35
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second 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
.64 .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 2Q
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
36
2013
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
.53
.64
(.06)
(.06) (.05)
(.02)
.27 .01
.02
2Q12 Price & Mix Volume Operations & Costs
Maintenance Outages
Input Costs TIN Step-up DA & Divested
Mills
Tax NEC Ilim JV 2Q13
2Q13 vs. 2Q12 EPS
Operating Earnings
37
0 0
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
367
477
(40)
(50)
(9) (11)
211 2
7
2Q12 Price/Mix Volume TIN Step-up DA &
Divested Mills
Manufacturing Ops.
Operations & Costs
Maintenance Outages
Input Costs
2Q13
Industrial Packaging | 2Q13 vs. 2Q12 $
Mill
ion
38
Segment operating profit before special items
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
2Q13 vs. 1Q13 2Q13 vs. 2Q12
Business Volume Price /
Ton Volume
Price / Ton
N.A. Container1 5% $10 (3%) $65
European Container2 (2%) (€3) (1%) (€19)
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)
39
Industrial Packaging | Volume and Pricing Trends
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
106
76
(14)
(2)
(29)
(28)
35 8
2Q12 Price & Mix Volume Operations & Costs
Maintenance Outages
Input Costs
NEC 2Q13
Printing Papers | 2Q13 vs. 2Q12 $
Mill
ion
40
Segment operating profit before special items
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
2Q13 vs. 1Q13 2Q13 vs. 2Q12
Business Volume Price / Ton Volume Price / Ton
N.A. Paper 0% ($7) (1%) ($32)
N.A. Pulp1 (1%) $22 27% ($20)
European Paper 11% (€2) 18% (€13)
Average IP volume and price realization (includes the impact of mix across all grades) 1 Reflects Fluff and Market Pulp combined
41
Printing Papers | Volume and Pricing Trends
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
63
52
(25)
(5) (1) 15 1
4
2Q12 Price & Mix Volume Operations & Costs
Maintenance Outages
Input Costs
Other 2Q13
Consumer Packaging | 2Q13 vs. 2Q12 $
Mill
ion
42
Segment operating profit before special items
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Average IP price realization (includes the impact of mix across all grades)
2Q13 vs. 1Q13 2Q13 vs. 2Q12
Volume Price/Ton Volume Price/Ton
N.A. Coated Paperboard 10% ($2) 6% ($41)
Revenue Price Revenue Price
Foodservice 6% NA 0% NA
43
Consumer Packaging | Volume and Pricing Trends
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
20081 2009 2010 2011 2012
Sales Volume (Billion ton) 2.6 2.6 2.8 2.8 2.9
Sales ($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 ($MM) 197 516 591 291
F/X Gain (loss) (35) 12 (60) 39
EBITDA ($MM) 290 163 528 531 330
EBITDA Margin 15% 12% 28% 24% 17%
Depreciation ($MM) 120 121 124 134
EBIT ($MM) 43 407 406 196
Interest Expense ($MM) 28 18 7 6
Net Income (loss) ($MM) (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 | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Ilim Joint Venture | Volume and Pricing Trends
2Q13 vs. 1Q13 2Q13 vs. 2Q12
Business Volume Price/Ton Volume Price/Ton
Pulp 1% $36 (12%) $17
Containerboard (15%) $15 (26%) $57
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Average Ilim JV (100%) volume and price realization (includes the impact of mix across all grades and destinations)
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
Total Cash Cost Components | 2Q13 YTD
Fiber 30%
Materials 15%
Labor 12%
Chemicals 9%
Freight 16%
Energy 10%
Overhead 8%
North American Mills Only (Including Temple Inland Mills)
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Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
($28) ($14)
$5
Energy Fiber Freight Chemicals
North America Outside North America
($11) ($30)
$4
Industrial Packaging
Printing Papers
Consumer Packaging
Wood Energy Chemicals Freight OCC
By Business By Input Type
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Global Input Costs vs. 2Q12 | $37MM Unfavorable, or $0.06/Share
Wood
OCC
Wood
Input costs ($MM) for continuing businesses
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second 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% Decrease vs. 1Q13 Average Cost
Cost Indexed to January 2006 values
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Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
2006 2007 2008 2009 2010 2011 60
80
100
120
140
160
180
200
220
240
260 J
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Ju
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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 | 3% Increase vs. 1Q13 Average Cost
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Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second 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 Apr
2012 2013
NYMEX Natural Gas closing prices
Natural Gas Costs Trend | 23% Increase vs. 1Q13 Average Cost
Cost Indexed to January 2006 values
50
Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second 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 Apr
2012 2013
U.S. Fuel Oil Trend | 8% Decrease vs. 1Q13 Average Cost
WTI Crude prices Cost Indexed to January 2006 values
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Earnings Presentation | Second Quarter 2013 Earnings Presentation | Second 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 Apr
2012 2013
U.S. Chemical Composite Index Trend | 1% Increase vs. 1Q13 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 | Second Quarter 2013 Earnings Presentation | Second Quarter 2013
2013 Global Consumption | Annual Purchase Estimates for Key Inputs
Commodity U. S. Non – U. S.
Energy
Natural Gas (MM BTUs) 68,000,000 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) 400,000 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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