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International Paper Reports Solid Q4 Results, Record Operating Earnings

February 4, 2014

Consumer Packaging operating profits were $32 million ($30 million including special items) in the fourth quarter of 2013 compared with $73 million (before and after special items) in the third quarter of 2013. Significant planned maintenance outage expenses and lower volume more than offset the impact of improved pricing.

xpedx, the company's North American distribution business, reported operating profits of $5 million (a loss of $397 million including special items) in the fourth quarter of 2013 as lower demand impacted results, compared with $19 million ($13 million including special items) in the third quarter of 2013.

International Paper recorded Ilim joint venture equity losses of $12 million in the fourth quarter of 2013, compared with equity earnings of $11 million in the third quarter of 2013. The company recognized an after-tax foreign exchange loss of $6 million in the fourth quarter of 2013 compared with an after-tax gain of $8 million in the third quarter of 2013 due to foreign exchange movement in the U.S. dollar versus the Russian ruble. The impact in both quarters was due to non-cash adjustments associated with the Ilim Group joint venture's U.S. dollar denominated debt.

Corporate items net, for the 2013 fourth quarter were income of $6 million compared with expenses of $13 million in the third quarter of 2013.

Effective Tax Rate
The effective tax rate before special items for the fourth quarter of 2013 was 31 percent, compared with an effective tax rate before special items of 24 percent in the third quarter of 2013.  The higher rate in the fourth quarter is primarily attributable to a one-time inclusion in the third quarter of a $30 million benefit related to the adjustment of the tax basis in certain of the Company's fixed assets.  The 2013 full year rate was 27 percent compared with 29 percent for the 2012 full year.

Effects of Special Items
Special items in the fourth quarter of 2013 included a net pre-tax loss of $79 million ($50 million after taxes) for restructuring and other charges, pre-tax charges of $12 million ($7 million after taxes) for integration costs related to the Temple-Inland acquisition and a pre-tax charge of $2 million ($1 million after taxes) for other items.   Also included in special items is a pre-tax charge of $127 million ($119  million after a $5 million tax benefit and a gain of $3 million related to non-controlling interest) for the impairment of goodwill and a trade name intangible asset of the Company's India Papers business and a pre-tax charge of $400 million ($366 million after taxes) for the impairment of goodwill of the Company's xpedx business.  In addition, a tax benefit of $651 million related to the closing of a U.S. federal income tax audit and a net tax benefit of $3 million for other tax items were recorded. Restructuring and other charges included a pre-tax charge of $67 million ($41 million after taxes) for costs associated with the announced closure of our Courtland, Alabama mill, pre-tax charges of $8 million ($5 million after taxes) for costs associated with the announced spin-off of our xpedx operations, and a net charge of $4 million (before and after taxes) for other items.

Special items in the third quarter of 2013 included a net pre-tax loss of $76 million ($47 million after taxes) for restructuring and other charges, pre-tax charges of $24 million ($15 million after taxes) for integration costs related to the Temple-Inland acquisition and a pre-tax charge of $1 million ($0 million after taxes) for other items. In addition, a tax benefit of $31 million related to the release of an income tax reserve was recorded. Restructuring and other charges included a pre-tax charge of $51 million ($31 million after taxes) for costs associated with the announced closure of our Courtland, Alabama mill, pre-tax charges of $15 million ($9 million after taxes) for debt extinguishment costs, pre-tax charges of $6 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, pre-tax charges of $11 million ($7 million after taxes) for costs associated with the announced spin-off of our xpedx operations, a pre-tax gain of $9 million ($6 million after taxes) related to the sale of the Bellevue, Washington box plant facility that was closed in 2010, and charges of $2 million (before and after taxes) for other items.

Special items in the fourth quarter of 2012 included pre-tax charges of $21 million ($14 million after taxes) for restructuring and other charges, pre-tax charges of $28 million ($19 million after taxes) for integration costs related to the Temple-Inland acquisition, and a gain of $3 million (before and after taxes) for other items. Also included are a net tax expense of $14 million related to internal restructurings and a tax expense of $5 million to adjust deferred tax assets related to post-retirement prescription drug coverage (Medicare Part D reimbursements).  Restructuring and other charges included pre-tax charges of $9 million ($6 million after taxes) for debt extinguishment costs, pre-tax charges of $7 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, and pre-tax charges of $5 million ($4 million after taxes) for other items.

Discontinued Operations
Discontinued operations in the fourth quarter and third quarter of 2013, along with the fourth quarter of 2012, included the write-off of capital investments and costs associated with the divestiture of the Temple-Inland Building Products business. The operating earnings from Building Products are also included in the third quarter of 2013, for the period prior to the date of sale on July 19, 2013, and the fourth quarter of 2012.

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 and uncoated papers, complemented by xpedx, the company's North American distribution company. Headquartered in Memphis, TN, the company employs approximately 70,000 people and is strategically located in more than 24 countries serving customers worldwide. International Paper net sales for 2013 were $29 billion. 

Source: International Paper.
 

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