International Paper Reports 2015 Q1 Earnings, Results Driven by Key Business

MEMPHIS, TN—April 29, 2015—International Paper today reported first quarter 2015 net earnings attributable to common shareholders of $313 million ($0.74 per share) compared with net earnings of $134 million ($0.32 per share) in the fourth quarter of 2014 and a net loss of $95 million ($0.21 per share) in the first quarter of 2014. First quarter 2015 earnings included a $0.04 per share non-cash foreign exchange charge for the Ilim JV, as described below, compared with a $0.40 per share charge in the fourth quarter of 2014. First quarter 2014 earnings included a pre-tax charge of $495 million associated with the Courtland mill shutdown. Amounts in all periods include the impact of special items, if any, non-operating pension expense and discontinued operations.

Diluted Earnings Per Share Attributable to International Paper Shareholders: 

Operating Earnings were $357 million ($0.84 per share) in the first quarter of 2015, compared with $227 million ($0.53 per share) in the fourth quarter of 2014 and $260 million ($0.60 per share) in the first quarter of 2014.

Quarterly net sales were $5.5 billion in the first quarter of 2015 compared with $5.9 billion in the fourth quarter of 2014 and $5.7 billion in the first quarter of 2014.

Business segment operating profits before special items in the first quarter of 2015 were $623 million, compared with $694 million in the fourth quarter of 2014 and $570 million in the first quarter of 2014.

"International Paper delivered another strong quarter through good execution and cost management that resulted in increased margins," said Mark Sutton , chairman and CEO. "Our North American Packaging businesses, as well as our Ilim joint venture, performed very well. Looking ahead, we will continue to focus on long term value creation by generating strong free cash flow, making sound strategic investments and returning cash to shareholders."

Segment Information

The performance of the company's business segments is measured quarter to quarter without variations caused by special items, as management focuses on business segment operating profits excluding those items. First quarter 2015 business segment operating profits and business trends compared with the prior quarter are as follows:

Industrial Packaging operating profits in the first quarter of 2015 were $468 million compared with $484 million ($379 million including special items) in the fourth quarter of 2014. In North America, solid operating performance was largely offset by seasonally lower box volume and lower export pricing. Higher planned maintenance outage costs were offset by lower input costs for energy and freight.

Printing Papers operating profits were $109 million in the first quarter of 2015 versus $155 million ($148 million including special items) in the fourth quarter of 2014. Earnings in North America for Paper and Pulp decreased due to slightly lower average sales prices and higher operating costs due to winter weather and other one-time expenses. In addition, earnings in Brazil decreased due to seasonally lower sales volumes, continued weakness in the local economy and a less favorable mix.

Consumer Packaging operating profits were $46 million in the first quarter of 2015 compared with $55 million ($51 million including special items) in the fourth quarter of 2014. In North America, sales volume and input costs were favorable. The business delivered another solid quarter of operations with some impact from winter weather and start-up issues following a planned maintenance outage.

International Paper recorded Ilim joint venture equity earnings of $39 million in the first quarter of 2015 compared with an equity loss of $136 million in the fourth quarter of 2014. With respect to Ilim's U.S. dollar denominated net debt, the company recognized a non-cash after-tax foreign exchange loss of $18 million in the first quarter of 2015 ($0.04 per share), compared with an after-tax loss of $171 million in the fourth quarter of 2014 ($0.40 per share), due primarily to foreign exchange movement in the U.S. dollar versus the Russian ruble. Business performance improved due to margin expansion associated with lower operating costs.

Corporate Expenses

Net corporate expenses, excluding non-operating pension expense, for the first quarter of 2015 were $9 million compared with $35 million in the fourth quarter of 2014. Corporate expenses in the fourth quarter of 2014 reflected $21 million for a non-cash foreign exchange charge related to administrative restructuring of some international entities.

Effective Tax Rate

The effective tax rate before special items and non-operating pension expense for the first quarter of 2015 was 33%, compared with an effective tax rate of 30.5% in the fourth quarter of 2014. The principal reason for the lower rate in the fourth quarter of 2014 is the passage of the Tax Increase Prevention Act of 2014 (the "Act") in December 2014. The Act retroactively restored several expired favorable business tax provisions, including the research and experimentation credit and the Subpart F controlled foreign corporation look-through exception.

Effects of Special Items

There were no special items in the first quarter of 2015.

Special items in the fourth quarter of 2014 included a net pre-tax loss of $16 million ($10 million after taxes) for Restructuring and other charges. Included within Restructuring and other charges were pre-tax charges of $7 million ($4 million after taxes) for costs associated with the closure of our Courtland, Alabama mill, pre-tax charges of $4 million ($3 million after taxes) for costs related to our Brazil Packaging business, and pre-tax charges of $5 million ($3 million after taxes) for other items. Also included in special items were a pre-tax charge of $47 million ($36 million after taxes) for a loss on the sale of a business by ASG, in which we hold an investment, and the resulting impairment of our ASG investment, a pre-tax gain of $9 million ($5 million after taxes) for the sale of an investment, a charge of $100 million (before and after taxes) for the impairment of goodwill in the company's Asia Industrial Packaging business, a tax benefit of $90 million related to an internal restructuring and a charge of $1 million (before and after taxes) for other items.

Special items in the first quarter of 2014 included a net pre-tax loss of $499 million ($305 million after taxes) for Restructuring and other charges. Included within Restructuring and other charges were a pre-tax charge of $495 million ($302 million after taxes) for costs associated with the closure of our Courtland, Alabama mill and net pre-tax charges of $4 million ($3 million after taxes) for other items. Special items also included pre-tax charges of $12 million ($7 million after taxes) for integration costs related to the Temple-Inland acquisition, a tax expense of $10 million related a state legislative change and a tax benefit of $1 million for other items.

Discontinued Operations

As a result of the July 1, 2014 spin-off of the xpedx business, all prior year amounts have been adjusted to reflect xpedx as a discontinued operation. Previously reported information regarding the Distribution reportable segment has been excluded as this reportable segment was comprised solely of the xpedx business.

Discontinued operations in the fourth quarter of 2014 included a loss of $14 million ($9 million after taxes) related to the divestiture of the Building Products business. Discontinued operations in the first quarter of 2014 included the operating earnings of the xpedx businesses, pre-tax charges of $16 million ($10 million after taxes) for costs associated with the spin-off of the xpedx operations, pre-tax charges of $2 million ($0 million after taxes) for costs associated with the restructuring of the xpedx business and charges of $2 million (before and after taxes) associated with the divestiture of the Building Products business.

About International Paper
International Paper (NYSE: IP) is a global leader in packaging and paper with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include industrial and consumer packaging along with uncoated papers and pulp. Headquartered in Memphis, TN, the company employs approximately 58,000 people and is strategically located in more than 24 countries serving customers worldwide. International Paper net sales for 2014 were $24 billion.

Source: International Paper.