Vertical Research Partners Global Materials Conference...
Transcript of Vertical Research Partners Global Materials Conference...
Vertical Research Partners Global Materials Conference | November 17, 2016
Vertical Research Partners Global Materials Conference
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 changes 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 joint ventures; (vii) the receipt of regulatory approvals for our pending transaction to
purchase the pulp business of Weyerhaeuser Company and the successful fulfillment or waiver of all other
closing conditions without unexpected delays or conditions; (viii) the failure to realize the expected
synergies and cost-savings from the Weyerhaeuser transaction or delay in realization thereof; and (ix) 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.
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Vertical Research Partners Global Materials Conference
Statements Relating to Non-GAAP Financial Measures
During the course of this presentation, certain non U.S. GAAP financial measures
will be presented, such as Adjusted Operating EPS, Adjusted EBIT, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Adjusted ROIC.
A reconciliation of all presented non-GAAP measures (and their components) to
U.S. GAAP financial measures is available on the company’s website at
internationalpaper.com under Performance/Investors.
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Vertical Research Partners Global Materials Conference
IP Investment Thesis | Long-Term Value Creation
To be among the most successful, sustainable and
responsible companies in the world
• Fiber-based Packaging, Pulp and Paper
• Advantaged positions in advantaged markets
• Strong Free Cash Flow Generation
• Value creation driving ROIC above cost of capital
• Exceed shareholders’ TSR expectations
Vision
Strategy
Shareholder Value
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Vertical Research Partners Global Materials Conference
Global
Economic
Recession
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Expanded Spread of Adj. ROIC1 Above Cost of Capital | Increasing Shareholder Value
4.5%
6.3%
7.5%
6.5%
5.0%
8.1%
9.5%
8.3%
9.3% 9.2%
11.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
5-Year Average
9.5%
WACC: 8%
1 Adjusted ROIC = Adjusted Operating Earnings before Interest / Average Invested Capital [Equity (adjusted to remove pension related amounts in OCI, net of tax) +
Interest-bearing Debt]
Vertical Research Partners Global Materials Conference
Global Economic
Recession
$1.7$1.6
$1.8
$2.1
$1.8
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$ B
illi
on
s
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Strong Free Cash Flow Generation
Free Cash Flow reflects cash provided by continuing operations for 2005 – 2011, based on data in the 10-K for each year at the time of filing. Free Cash Flow reflects
cash provided by operations for 2012 onward.
Excludes net cash pension contributions impacting 2006, 2010, 2011, 2013, 2014 & 2015, cash flows under European accounts receivable securitization beginning in
2009 and ending in 2011, and cash received from Black Liquor Tax Credits in 2009 and 2010. 2012 excludes $120MM cash paid for Temple-Inland change-in-control
agreements, $251MM cash received from unwinding a timber monetization, $44MM cash paid for Temple-Inland pension plan contribution, and $80MM cash paid for
Guaranty Bank settlement. 2013 excludes $31MM cash paid for pension plan contribution and $30MM cash received from Guaranty Bank insurance reimbursements.
2014 excludes $353MM cash paid for pension plan contribution. 2015 excludes $750MM cash paid for pension plan contribution.
Transformation:
$0.5 Billion (average)
5-Year Average
$1.8 Billion
Vertical Research Partners Global Materials Conference
IP Investment Thesis | Leveraging Selective Choices
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Cost Positions
• Low-cost asset base
− Mill footprint on cost curve
− Disciplined capital
investment
• Sustained low-cost
positions through
operational excellence
and optimization
• Fiber-based Packaging, Pulp and Paper
• Advantaged positions in advantaged markets
Strategy
Renewable
Natural Resources
Availability and access to
low-cost, sustainable fiber
in key manufacturing
regions
Channels to Market
• Strong market positions
• Sell products in markets
where they are valued
• Winning with the right
customers and segments
Vertical Research Partners Global Materials Conference
Compelling Strategic Acquisition | Weyerhaeuser’s Pulp Business
Excellent Strategic Fit R
Quality Assets, People and Commercial Capabilities R
Improves Core Pulp Business R
Returns Greater than Cost of Capital R
Significant Synergies of $175 Million R
Compelling Economics and Tax Step Up R
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Vertical Research Partners Global Materials Conference
Weyerhaeuser & IP Mill Locations
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Weyco Market Pulp Mill
Weyco Fluff Pulp Mill
IP Fluff Pulp Mill
Converting facilities
Columbus, MS
Port Wentworth, GA
New Bern, NC
Franklin, VA
Georgetown, SC
Riegelwood, NC
Flint River, GA
Pensacola, FL
Grand Prairie, Alberta
Gdansk, Pomorskie
Vertical Research Partners Global Materials Conference
BuildCapability
Engaged Employees Working Safely
GrowWith the Right
Customers
OptimizeMargins
ManageCost
Aggressively
Industrial Packaging Strategy | Drive IP Success Through Value Creation
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Vertical Research Partners Global Materials Conference
Capital Allocation | IP’s Balanced Use of Cash
Systematically Return Cash to Shareholders
Trough-Tested Sustainable Dividend
(40% − 50% of FCF)
Opportunistic Share Repurchases
CashFrom
OperationsMaintain Strong
Balance Sheet
& Credit Rating
Appropriate Liquidity & Debt Coverage
Proactively Manage Pension Plan
Selective Reinvestment
Value-Creating, Healthy Spread
Above Cost of Capital
Improving Competitive Position
Effective Capital Spending
Maintenance & Regulatory Needs
High Return, Cost Reduction Projects
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Vertical Research Partners Global Materials Conference
Summary | IP Poised for Further Success
Long-term value creation driving ROIC above cost of capital
Leveraging selective choices within IP’s strategic framework
Strong FCF generation enables high-return reinvestment and
return of capital to shareholders
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