Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On July 1, 2014, International Paper Company ("International Paper" or the "Company") completed the previously announced spinoff (the "Spinoff") of its distribution solutions business, xpdex. Immediately following the Spinoff of the xpedx business to International Paper shareholders, UWW Holdings, Inc., the parent company of Unisource Worldwide, Inc., merged with and into the xpedx business to form a new, publicly-traded company, Veritiv Corporation ("Veritiv"), listed on the New York Stock Exchange. After the Spinoff and merger, Veritiv owns and operates the combined distribution solutions businesses of xpedx and Unisource.
The historical financial information for International Paper set forth below has been derived from the historical audited consolidated financial statements of International Paper included in the Annual Reports on Form 10-K for the years ended December 31, 2013, 2012 and 2011 and the unaudited consolidated financial statements included in the Quarterly Report on Form10-Q for the quarter ended March 31, 2014. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2014 was prepared as if the Spinoff occurred on that date and the adjustments give effect to events that are directly attributable to the transaction. The unaudited pro forma condensed consolidated statements of operations were prepared as if the Spinoff occurred on January 1, 2011.
The pro forma statements do not purport to represent what the results of operations or financial position of International Paper would have been had the transaction occurred on the dates noted above, or to project the results of operations or the financial position of International Paper for any future periods. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed consolidated financial information have been made. Beginning in the third quarter of 2014, historical financial results for xpedx for periods prior to the Spinoff will be reflected in International Paper's consolidated financial statements as discontinued operations.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical financial statements of the Company included in its 2013, 2012 and 2011 Annual Reports on Form 10-K and its Quarterly Report on Form 10-Q for the three months ended March 31, 2014.
The As Reported column in the unaudited pro forma condensed consolidated balance sheet and in the unaudited pro forma condensed consolidated statements of operations reflects International Paper's historical financial statements for the periods presented and does not reflect any adjustments related to the Spinoff and related events.
The information in the Disposition of xpedx column in the unaudited pro forma condensed consolidated statements of operations was derived from International Paper's accounting records and was adjusted to exclude certain previously allocated corporate overhead costs. The Disposition of xpedx column also includes the goodwill impairment charge associated with the xpedx reporting unit that was previously included in the Company's historical financial results for the year ended December 31, 2013. The information in the Disposition of xpedx column in the unaudited pro forma condensed consolidated balance sheet was derived from International Paper's accounting records and represents the net assets of xpedx contributed in the Spinoff as defined in the Contribution and Distribution Agreement.
The Pro Forma Adjustments column in the unaudited pro forma condensed consolidated financial statements reflects additional pro forma adjustments which are further described in the accompanying notes.
INTERNATIONAL PAPER COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
(In millions)
|
| | | | | | | | | | | | | | | | |
| | | As of March 31, 2014 |
| | | As Reported | | Disposition of xpedx | | Pro Forma Adjustments | | Pro Forma |
| ASSETS | | | | | | | | |
| Current assets | | | | | | | | |
| Cash and temporary investments | | $ | 1,341 |
| | $ | — |
| | $ | 400 |
| (a) | $ | 1,741 |
|
| Accounts and notes receivable, net | | 3,933 |
| | (644 | ) | | 30 |
| (a) | 3,319 |
|
| Inventories | | 2,809 |
| | (316 | ) | | — |
| | 2,493 |
|
| Other current assets | | 650 |
| | (32 | ) | | — |
| | 618 |
|
| Plants, properties and equipment, net | | 13,194 |
| | (77 | ) | | — |
| | 13,117 |
|
| Forestlands | | 578 |
| | — |
| | — |
| | 578 |
|
| Investments | | 659 |
| | — |
| | — |
| | 659 |
|
| Financial assets of special purpose entities | | 2,132 |
| | — |
| | — |
| | 2,132 |
|
| Goodwill | | 3,996 |
| | — |
| | — |
| | 3,996 |
|
| Deferred charges and other assets | | 1,403 |
| | (36 | ) | | — |
| | 1,367 |
|
| TOTAL ASSETS | | $ | 30,695 |
| | $ | (1,105 | ) | | $ | 430 |
| | $ | 30,020 |
|
| LIABILITIES AND EQUITY | | | | | | | | |
| Current liabilities | | | | | | | | |
| Notes payable and current maturities of long-term debt | | $ | 561 |
| | $ | — |
| | $ | — |
| | $ | 561 |
|
| Accounts payable | | 2,954 |
| | (331 | ) | | 5 |
| (a) | 2,628 |
|
| Accrued payroll and benefits | | 411 |
| | (45 | ) | | — |
| | 366 |
|
| Other accrued liabilities | | 1,102 |
| | (34 | ) | | — |
| | 1,068 |
|
| Long-term debt | | 8,867 |
| | — |
| | — |
| | 8,867 |
|
| Nonrecourse financial liabilities of special purpose entities | | 2,045 |
| | — |
| | — |
| | 2,045 |
|
| Deferred income taxes | | 3,540 |
| | (17 | ) | | — |
| | 3,523 |
|
| Pension benefit obligation | | 2,319 |
| | — |
| | — |
| | 2,319 |
|
| Postretirement and postemployment benefit obligation | | 408 |
| | — |
| | — |
| | 408 |
|
| Other liabilities | | 574 |
| | (13 | ) | | — |
| | 561 |
|
| TOTAL LIABILITIES | | 22,781 |
| | (440 | ) | | 5 |
| | 22,346 |
|
| Redeemable Noncontrolling Interest | | 168 |
| | — |
| | — |
| | 168 |
|
| TOTAL EQUITY | | 7,746 |
| | (665 | ) | | 425 |
| | 7,506 |
|
| TOTAL LIABILITIES AND EQUITY | | $ | 30,695 |
| | $ | (1,105 | ) | | $ | 430 |
| | $ | 30,020 |
|
See accompanying notes.
INTERNATIONAL PAPER COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(In millions, except per share data)
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2014 |
| | | As Reported (a) | | Disposition of xpedx (b) | | Pro Forma Adjustments | | Pro Forma |
| NET SALES | | $ | 7,014 |
| | $ | 1,290 |
| | $ | 142 |
| (a) | $ | 5,866 |
|
| COST AND EXPENSES | | | | | | | | |
| Cost of products sold | | 5,175 |
| | 1,153 |
| | 142 |
| (a) | 4,164 |
|
| Selling and administrative expenses | | 528 |
| | 88 |
| | — |
| | 440 |
|
| Depreciation, amortization and cost of timber harvested | | 352 |
| | 5 |
| | — |
| | 347 |
|
| Distribution expenses | | 400 |
| | 35 |
| | — |
| | 365 |
|
| Taxes other than payroll and income taxes | | 47 |
| | 1 |
| | — |
| | 46 |
|
| Restructuring and other charges | | 517 |
| | 2 |
| | (16 | ) | (b) | 499 |
|
| Interest expense, net | | 142 |
| | — |
| | — |
| | 142 |
|
| EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY EARNINGS | | (147 | ) | | 6 |
| | 16 |
| | (137 | ) |
| Income tax provision (benefit) | | (83 | ) | | 2 |
| | 6 |
| | (79 | ) |
| Equity earnings (losses), net of taxes | | (33 | ) | | — |
| | — |
| | (33 | ) |
| NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS | | (97 | ) | | 4 |
| | 10 |
| | (91 | ) |
| Less: Net earnings (loss) attributable to noncontrolling interests | | (4 | ) | | — |
| | — |
| | (4 | ) |
| NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY | | $ | (93 | ) | | $ | 4 |
| | $ | 10 |
| | $ | (87 | ) |
| BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | | | | | | | | |
| Earnings (loss) from continuing operations | | $ | (0.21 | ) | | | | | | $ | (0.20 | ) |
| Average common shares outstanding | | 435.6 |
| | | | | | 435.6 |
|
| DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | | | | | | | | |
| Earnings (loss) from continuing operations | | $ | (0.21 | ) | | | | | | $ | (0.20 | ) |
| Average common shares outstanding - assuming dilution | | 435.6 |
| | | | | | 435.6 |
|
See accompanying notes.
INTERNATIONAL PAPER COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(In millions, except per share data)
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2013 |
| | | As Reported | | Disposition of xpedx | | Pro Forma Adjustments | | Pro Forma |
| NET SALES | | $ | 29,080 |
| | $ | 5,597 |
| | $ | 604 |
| (a) | $ | 24,087 |
|
| COST AND EXPENSES | | | | | | | | |
| Cost of products sold | | 21,223 |
| | 5,026 |
| | 604 |
| (a) | 16,801 |
|
| Selling and administrative expenses | | 2,205 |
| | 324 |
| | — |
| | 1,881 |
|
| Depreciation, amortization and cost of timber harvested | | 1,547 |
| | 16 |
| | — |
| | 1,531 |
|
| Distribution expenses | | 1,732 |
| | 149 |
| | — |
| | 1,583 |
|
| Taxes other than payroll and income taxes | | 185 |
| | 7 |
| | — |
| | 178 |
|
| Restructuring and other charges | | 210 |
| | 32 |
| | (23 | ) | (b) | 155 |
|
| Impairment of goodwill and other intangibles | | 527 |
| | 400 |
| | — |
| | 127 |
|
| Net (gains) losses on sales and impairments of business | | 3 |
| | — |
| | — |
| | 3 |
|
| Net bargain purchase gain on acquisition of business | | (13 | ) | | — |
| | — |
| | (13 | ) |
| Interest expense, net | | 612 |
| | — |
| | — |
| | 612 |
|
| EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY EARNINGS | | 849 |
| | (357 | ) | | 23 |
| | 1,229 |
|
| Income tax provision (benefit) | | (523 | ) | | (17 | ) | (c) | 9 |
| | (497 | ) |
| Equity earnings (losses), net of taxes | | (39 | ) | | — |
| | — |
| | (39 | ) |
| NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS | | 1,333 |
| | (340 | ) | | 14 |
| | 1,687 |
|
| Less: Net earnings (loss) attributable to noncontrolling interests | | (17 | ) | | — |
| | — |
| | (17 | ) |
| NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY | | $ | 1,350 |
| | $ | (340 | ) | | $ | 14 |
| | $ | 1,704 |
|
| BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | | | | | | | | |
| Earnings (loss) from continuing operations | | $ | 3.05 |
| | | | | | $ | 3.84 |
|
| Average common shares outstanding | | 443.3 |
| | | | | | 443.3 |
|
| DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | | | | | | | | |
| Earnings (loss) from continuing operations | | $ | 3.01 |
| | | | | | $ | 3.80 |
|
| Average common shares outstanding - assuming dilution | | 448.1 |
| | | | | | 448.1 |
|
See accompanying notes.
INTERNATIONAL PAPER COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(In millions, except per share data)
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2012 |
| | | As Reported | | Disposition of xpedx | | Pro Forma Adjustments | | Pro Forma |
| NET SALES | | $ | 27,833 |
| | $ | 5,981 |
| | $ | 639 |
| (a) | $ | 22,491 |
|
| COST AND EXPENSES | | | | | | | | |
| Cost of products sold | | 20,587 |
| | 5,376 |
| | 639 |
| (a) | 15,850 |
|
| Selling and administrative expenses | | 2,092 |
| | 342 |
| | — |
| | 1,750 |
|
| Depreciation, amortization and cost of timber harvested | | 1,486 |
| | 13 |
| | — |
| | 1,473 |
|
| Distribution expenses | | 1,611 |
| | 141 |
| | — |
| | 1,470 |
|
| Taxes other than payroll and income taxes | | 166 |
| | 7 |
| | — |
| | 159 |
|
| Restructuring and other charges | | 109 |
| | 44 |
| | — |
| | 65 |
|
| Net (gains) losses on sales and impairments of business | | 86 |
| | — |
| | — |
| | 86 |
|
| Interest expense, net | | 672 |
| | — |
| | — |
| | 672 |
|
| EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY EARNINGS | | 1,024 |
| | 58 |
| | — |
| | 966 |
|
| Income tax provision (benefit) | | 331 |
| | 23 |
| | — |
| | 308 |
|
| Equity earnings (losses), net of taxes | | 61 |
| | — |
| | — |
| | 61 |
|
| NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS | | 754 |
| | 35 |
| | — |
| | 719 |
|
| Less: Net earnings attributable to noncontrolling interests | | 5 |
| | — |
| | — |
| | 5 |
|
| NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY | | $ | 749 |
| | $ | 35 |
| | $ | — |
| | $ | 714 |
|
| BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | | | | | | | | |
| Earnings (loss) from continuing operations | | $ | 1.72 |
| | | | | | $ | 1.64 |
|
| Average common shares outstanding | | 435.2 |
| | | | | | 435.2 |
|
| DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | | | | | | | | |
| Earnings (loss) from continuing operations | | $ | 1.70 |
| | | | | | $ | 1.62 |
|
| Average common shares outstanding - assuming dilution | | 440.2 |
| | | | | | 440.2 |
|
See accompanying notes.
INTERNATIONAL PAPER COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(In millions, except per share data)
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2011 |
| | | As Reported | | Disposition of xpedx | | Pro Forma Adjustments | | Pro Forma |
| NET SALES | | $ | 26,034 |
| | $ | 6,571 |
| | $ | 652 |
| (a) | $ | 20,115 |
|
| COST AND EXPENSES | | | | | | | | |
| Cost of products sold | | 18,960 |
| | 5,899 |
| | 652 |
| (a) | 13,713 |
|
| Selling and administrative expenses | | 1,887 |
| | 391 |
| | — |
| | 1,496 |
|
| Depreciation, amortization and cost of timber harvested | | 1,332 |
| | 14 |
| | — |
| | 1,318 |
|
| Distribution expenses | | 1,390 |
| | 146 |
| | — |
| | 1,244 |
|
| Taxes other than payroll and income taxes | | 146 |
| | 9 |
| | — |
| | 137 |
|
| Restructuring and other charges | | 102 |
| | 49 |
| | — |
| | 53 |
|
| Net (gains) losses on sales and impairments of business | | 218 |
| | — |
| | — |
| | 218 |
|
| Interest expense, net | | 541 |
| | — |
| | — |
| | 541 |
|
| EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY EARNINGS | | 1,458 |
| | 63 |
| | — |
| | 1,395 |
|
| Income tax provision (benefit) | | 311 |
| | 25 |
| | — |
| | 286 |
|
| Equity earnings (losses), net of taxes | | 140 |
| | — |
| | — |
| | 140 |
|
| NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS | | 1,287 |
| | 38 |
| | — |
| | 1,249 |
|
| Less: Net earnings attributable to noncontrolling interests | | 14 |
| | — |
| | — |
| | 14 |
|
| NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY | | $ | 1,273 |
| | $ | 38 |
| | $ | — |
| | $ | 1,235 |
|
| BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | | | | | | | | |
| Earnings (loss) from continuing operations | | $ | 2.95 |
| | | | | | $ | 2.86 |
|
| Average common shares outstanding | | 432.2 |
| | | | | | 432.2 |
|
| DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | | | | | | | | |
| Earnings (loss) from continuing operations | | $ | 2.92 |
| | | | | | $ | 2.83 |
|
| Average common shares outstanding - assuming dilution | | 437.0 |
| | | | | | 437.0 |
|
See accompanying notes.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed consolidated financial statements give effect to the pro forma adjustments necessary to reflect the Spinoff as if it occurred on January 1, 2011 in the unaudited pro forma condensed consolidated statements of operations for the years ended 2013, 2012, and 2011 and for the three months ended March 31, 2014, and as of March 31, 2014 in the unaudited pro forma condensed consolidated balance sheet.
2. Pro Forma Adjustments
The following notes relate to the unaudited pro forma condensed balance sheet:
(a) Represents the special payment received by International Paper excluding any possible working capital, net debt, or other adjustments and an estimate of intercompany receivables and intercompany payables that will be settled in cash, as trade accounts receivable and trade accounts payable, pursuant to the terms of the Contribution and Distribution Agreement.
The following notes relate to the unaudited pro forma condensed consolidated statements of operations:
(a) Represents the historical net sales from International Paper to xpedx that were previously eliminated in consolidations.
(b) Reflects the removal of transaction costs and related tax effects incurred during the quarter ended March 31, 2014 and the year ended December 31, 2013, that are directly related to the Spinoff of xpedx from International Paper.
(c) Represents the tax benefit for the loss during the period, excluding the nondeductible portion of the goodwill impairment.
