![]() Second Quarter 2009 Review July 30, 2009 Second Quarter 2009 Review July 30, 2009 John V. Faraci Chairman & Chief Executive Officer Tim S. Nicholls Senior Vice President & Chief Financial Officer Exhibit 99.2 |
![]() 2 Forward-Looking Statements Forward-Looking Statements These slides and statements made during this presentation contain 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 relate to: (i) increases in interest rates and our ability to meet our debt service obligations; (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 its products; (iii) global economic conditions and political changes, including but not limited to the impairment of financial institutions, changes in currency exchange rates, credit availability, 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 environmental and other governmental regulations and to actual or potential litigation; and (v) whether we experience a material disruption at one of our manufacturing facilities and risks inherent in conducting business through a joint venture. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. 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 the company's Securities and Exchange Commission filings. |
![]() 3 Statements Relating to Non-GAAP Financial Measures 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. |
![]() 4 Second Quarter 2009 Outstanding Results Second Quarter 2009 Outstanding Results 150% Earnings Increase 180 BPS EBITDA Margin Increase $1.3 Billion in Free Cash Flow $600 Million Debt Reduction Exceeded $400 Million Run Rate in WY PKG Integration Synergies Two Years Ahead of Plan Earnings from continuing operations before special items $0.56 |
![]() 5 2Q09 Financial Snapshot 2Q09 Financial Snapshot Earnings from continuing operations before special items; 1Q09 & 2Q09 includes WY PKG 1 Cash provided by continuing operations less capital expenditures 2 Excludes $3.0B proceeds from WY PKG bond issuance $ Billion 2Q08 1Q09 2Q09 Sales $5.8 $5.7 $5.8 EBITDA $0.7 $0.6 $0.7 Free Cash Flow $0.3 $0.7 $1.3 Cash Balance $1.0 $1.0 $1.7 1 2 |
![]() 6 N.A. Industrial Packaging Integration Progress Earnings Well Ahead of Plan N.A. Industrial Packaging Integration Progress Earnings Well Ahead of Plan North American earnings before special items |
![]() 7 .08 .20 .20 .12 .12 (.01) (.01) (.19) (.05) (.06) $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 1Q09 Volume & LOO Price Input Costs Cost Reduction Mix Outages Interest Ilim JV 2Q09 Earnings before special items 2Q09 vs. 1Q09 EPS Volume Stabilized, Price Slippage, Input Cost Relief 2Q09 vs. 1Q09 EPS Volume Stabilized, Price Slippage, Input Cost Relief |
![]() 8 IP Transformation 28% Headcount Reduction IP Transformation 28% Headcount Reduction * At January 1, 2005 Excludes Ilim joint venture employees 8 Achieved year-end headcount goal during 2Q |
![]() 9 Global Input & Freight Costs by Segment $77 Million, or $0.12/Share Favorable vs. 1Q09 Global Input & Freight Costs by Segment $77 Million, or $0.12/Share Favorable vs. 1Q09 By Business By Input Type |
![]() 10 N.A. Lack of Order & Maintenance Downtime 20% of Capacity in 2Q, Down from 27% in 1Q N.A. Lack of Order & Maintenance Downtime 20% of Capacity in 2Q, Down from 27% in 1Q Lack-of-order & maintenance downtime for North American Containerboard, Uncoated Papers, Market Pulp, & Coated Paperboard. See Appendix slide 32 for detail by business. 2009 LOO downtime excludes capacity from mills or machines that have been permanently shutdown (Franklin #3 - 32,000 tons and Louisiana mill - 120,000 tons) or indefinitely shut down (Valliant #3 - 97,000 tons) 1,156 868 1,013 107 |
![]() 11 Industrial Packaging Earnings 2Q09 vs. 1Q09 Industrial Packaging Earnings 2Q09 vs. 1Q09 1 Excludes trade volume Earnings before special items 1 |
![]() 12 N.A. Industrial Packaging Performance N.A. Industrial Packaging Performance Box shipments up 5.8% vs. prior quarter Domestic containerboard prices stabilized Continued strong operations combined with cost reduction Some input cost pressure – OCC increasing Lean inventories |
![]() 13 N.A. Industrial Packaging Synergies Exceeded Year-Three Run Rate N.A. Industrial Packaging Synergies Exceeded Year-Three Run Rate $118 MM $118 MM $220 MM $220 MM $490 MM $490 MM $400 MM $400 MM |
![]() 14 N.A. Industrial Packaging Relative Performance Outperforming Competitors in 2009 N.A. Industrial Packaging Relative Performance Outperforming Competitors in 2009 IP EBITDA margins based on North American Industrial Packaging operating profit before special items Competitor EBITDA margins obtained from public filings and IP analysis |
![]() 15 Printing Papers Earnings 2Q09 vs. 1Q09 Printing Papers Earnings 2Q09 vs. 1Q09 Earnings Before Special Items |
![]() 16 Consumer Packaging Earnings 2Q09 vs. 1Q09 Consumer Packaging Earnings 2Q09 vs. 1Q09 Earnings Before Special Items |
![]() 17 $ Million 2Q08 1Q09 2Q09 Sales $1,970 $1,590 $1,595 Earnings $26 ($7) $10 xpedx xpedx Unit sales up, but offset by coated paper price deflation National accounts segment continues to outperform competition Continued cost reductions Position eliminations Warehouse space reduction Inventory reduction |
![]() 18 $ Million 2Q08 1Q09 2Q09 Sales (100%) $555 $395 $290 Earnings (IP Share) $32 ($26) ($30) Ilim’s results are reported on a one-quarter lag IP’s shares of Ilim’s 2Q08, 1Q09 & 2Q09 earnings includes an after-tax foreign exchange gain of $14 million, and after-tax foreign exchange losses of $15 million and $22 million, respectively Ilim Joint Venture Ilim Joint Venture 2Q09 vs. 1Q09 2Q09 vs. 2Q08 Business Volume (000 Metric Tons) Price / Ton Volume (000 Metric Tons) Price / Ton Pulp (1%) ($148) (12%) ($292) Containerboard (5%) ($110) (4%) ($128) |
![]() 19 International Operations Highlights International Operations Highlights New Brazilian UFS machine production seven months ahead of ramp-up plan Improved mix on Svetogorsk coated paperboard +$200 per ton on 60,000 tons Strong performance at Kwidzyn Sun JV coated paperboard shipments up 75% over 2Q08 levels |
![]() 20 Free Cash Flow Free Cash Flow $ Million 2Q08 1Q09 2Q09 Cash from Operations $576 $649 $707 Alternative Fuel Mixture Tax Credits - $145 $688 Cash Provided by Continuing Operations $576 $794 $1,395 Less Capital Investment ($267) ($128) ($131) Free Cash Flow $309 $666 $1,264 |
![]() 21 Debt Reduction Progress Projecting $3.2 Billion Minimum Reduction Debt Reduction Progress Projecting $3.2 Billion Minimum Reduction |
![]() 22 22 20 325 75 570 $0 $200 $400 $600 $800 $1,000 2009 2010 2011 2012 Debt Maturities Monetization & Other Debt maturity profile as of May 31, 2009 Monetization & Other: Intend to rollover or refinance timber monetization debt, Sun JV debt and other foreign subsidiary debt Debt Profile Maturities as of July Month-end Debt Profile Maturities as of July Month-end |
![]() 23 Second Quarter Summary Solid Results Despite Recession Second Quarter Summary Solid Results Despite Recession 180 BPS EBITDA Margin Expansion $120 Million in Integration Synergies $1.3 Billion Free Cash Flow $600 Million Debt Reduction in 2Q plus $600 Million Reduction in July |
![]() 24 Third Quarter Outlook Changes from 2Q09 Third Quarter Outlook Changes from 2Q09 North America Europe Brazil Russia - Svetogorsk Asia Volume Paper Flat Flat Increase Flat Flat Packaging Export Increase Decrease Increase Pricing Paper Flat Under Pressure Flat Flat Flat Packaging Decrease Under Pressure Increase Maintenance Outages $65 Million Decrease Slight Decrease Flat Significant Decrease Input & Freight Costs OCC Up Flat Flat Slight Decrease Slight Increase Pulp Up Ilim Joint Venture Improved Equity Earnings |
![]() 25 Priorities Priorities Maximize Free Cash Flow Match our Supply to our Customers’ Needs Continue Cost Reductions Continue Debt Reduction |
![]() 26 Appendix Investor Relations Contacts Thomas A. Cleves 901-419-7566 Emily Nix 901-419-4987 Media Contact Kathleen Bark 901-419-4333 |
![]() 27 Special Items Net of Taxes 2Q09 Special Items Net of Taxes 2Q09 $ Million EPS Earnings Before Special Items $86 $0.20 Special Items Net of Taxes: Alternative Fuel Mixture Credits $294 Tax Adjustments ($130) Etienne Impairment & Severance Costs ($63) Overhead Reduction Initiative ($21) Debt Extinguishment Costs ($16) Integration Costs ($11) Other Previously Announced Closures ($3) Total Special Items Net of Taxes $50 $0.12 Net Earnings $136 $0.32 |
![]() 28 $ Billion 2007 1 2008 2009 Estimate Capital Spending $1.3 $1.0 $0.6 Depreciation & Amortization $1.1 $1.3 $1.5 3 Net Interest Expense $0.3 $0.5 $0.7 Corporate Items 2 $0.2 $0.1 $0.2 Effective Tax Rate 2 30% 31.5% 32% - 34% 1 Excludes discontinued operations 2 Before special items and excluding Ilim 3 Estimated depreciation impacted by extensive lack-of-order downtime Key Financial Statistics Key Financial Statistics |
![]() 29 29 Monetization & Other: Intend to rollover or refinance timber monetization debt, Sun JV debt and other foreign subsidiary debt Preferred Annual Debt Ceiling Debt Maturity Profile Maturities as of July Month-end Debt Maturity Profile Maturities as of July Month-end |
![]() 30 Cash & Committed Facilities $4.2 Billion Cash & Committed Facilities $4.2 Billion $ Billion Maturity Facility Cost Quarter-End Cash - $1.7 - $1.0B Accounts Receivables Program JAN 2010 Zero Drawn CP Rate 2 + 150 bps $1.5B Corporate Revolver MAR 2011 Zero Drawn LIBOR + 50 to 60 bps Total Cash & Committed Facilities $4.2 - Cost includes commitment fees 1 $890 million available at quarter-end based on eligible receivable balances 2 Conduit’s rate 1 |
![]() 31 Debt Covenants & Credit Ratings Debt Covenants & Credit Ratings Covenant 2Q09 Maximum Debt-to-Total Capital 60% 48.6% Minimum Consolidated Net Worth $9B $11.5B Rating Outlook Standard & Poor’s BBB Negative Moody’s Baa3 Negative |
![]() 32 N.A. Lack of Order & Maintenance Downtime 20% of Capacity in 2Q, Down from 27% in 1Q N.A. Lack of Order & Maintenance Downtime 20% of Capacity in 2Q, Down from 27% in 1Q • LOO downtime excludes capacity from mills or machines that have been permanently shutdown (Franklin #3 - 32,000 tons and Louisiana mill - 120,000 tons) or indefinitely shut down (Valliant #3 - 97,000 tons) 3 127 82 27 1Q09 2Q09 9 34 152 132 1Q09 2Q09 Containerboard Uncoated Papers Market Pulp Coated Paperboard 806 582 161 166 59 11 130 109 |
![]() 33 $ Millions 1Q09 2Q09 3Q09E 4Q09E Industrial Packaging $44 $46 $6 $43 North America 19 33 17 44 Europe 7 19 13 0 Brazil 5 0 3 0 Printing Papers Total $31 $52 $33 $44 Consumer Packaging $4 $20 $11 $9 Total Impact $79 $118 $50 $96 Dollar impact of planned maintenance outages are estimates and subject to change Includes WY PKG outages Maintenance Outages Expenses Maintenance Outages Expenses |
![]() 34 Forest Products Forest Products 2Q08 1Q09 2Q09 Sales ($ Million) $55 $5 $10 Earnings ($ Million) $41 $2 $3 Acres Sold 30,000 2,000 2,900 Price / Acre $1,872 $2,108 $2,649 Pending sale of 143,000 acres now expected to close in 4Q09, at the earliest. When that transaction closes, remaining NPV of land portfolio will be $60 - $80 million. |
![]() 35 Business Segment Price Realization Business Segment Price Realization Average Selling Price Realizations Industrial Packaging ($/ton) 2Q08 1Q09 2Q09 Containerboard $551 $551 $494 Corrugated Boxes $794 $846 $818 Printing Papers ($/ton) 2Q08 1Q09 2Q09 Uncoated Freesheet $988 $996 $959 Pulp $651 $538 $511 1 Estimate based on IP legacy plus WY PKG history Average IP U.S. selling price realizations (includes the impact of mix across all grades) 1 1 |
![]() 36 2Q09 vs. 1Q09 2Q09 vs. 2Q08 Business Volume Price / Ton Volume Price / Ton N.A. Containerboard 13% ($57) (37%) ($57) N.A. Container 7% ($28) (16%) $24 European Container (1%) (€24) (7%) (€55) Industrial Packaging Industrial Packaging 1 Estimate based on IP legacy plus WY PKG history Average IP price realization (includes the impact of mix across all grades) 1 1 1 1 |
![]() 37 Average IP price realization (includes the impact of mix across all grades) 2Q09 vs. 1Q09 2Q09 vs. 2Q08 Business Volume Price / Ton Volume Price / Ton N.A. Paper 2% ($37) (19%) ($30) N.A. Pulp 13% ($27) (16%) ($140) European Paper (10%) (€16) (11%) (€91) Brazilian Paper 31% ($50) 11% ($59) Printing Papers Printing Papers |
![]() 38 Average IP price realization (includes the impact of mix across all grades) 2Q09 vs. 1Q09 2Q09 vs. 2Q08 Volume Price/Ton Volume Price/Ton U.S. Coated Paperboard 11% ($9) (20%) $84 Revenue Price Revenue Price Converting Businesses 5% NA (5%) NA Consumer Packaging Consumer Packaging |
![]() 39 Special Items Special Items Special Items Pre-Tax: 2Q08 1Q09 2Q09 Industrial Packaging Alternative Fuel Mixture Credits $208 $208 Integration Costs ($36) ($18) Facility Closure Costs ($63) Printing Papers Alternative Fuel Mixture Credits $240 $197 Facility Closure Costs ($29) ($4) Consumer Packaging Alternative Fuel Mixture Credits $92 $77 Reorganization ($13) ($2) ($1) Corporate Restructuring & Other Charges ($52) ($59) Sale of Forestlands $3 Total Special Items Pre-Tax ($10) $421 $337 |
![]() 40 2Q09 EBITDA before Special Items 2Q09 EBITDA before Special Items Operating Profit $ Million D & A $ Million Tons Thousand EBITDA $ per Ton EBITDA Margin % Industrial Packaging North American $241 $164 3,056 $133 20.7% European $14 $9 268 $86 9.6% Printing Papers North American $61 $53 719 $159 16.5% European & Russian $16 $19 332 $105 11.3% Brazilian $23 $29 234 $222 23.9% U.S. Market Pulp ($14) $9 263 ($15) (3.5%) Consumer Packaging U.S. Coated Paperboard $11 $30 318 $129 11.7% 1 Includes Recycling & Saturating Kraft businesses 2 Includes Bleached Kraft business 1 2 |
![]() 41 Operating Profits by Industry Segment Operating Profits by Industry Segment $ Million 2Q08 1Q09 2Q09 Industrial Packaging $87 $188 $255 Printing Papers $226 $101 $86 Consumer Packaging $26 $22 $38 Distribution $26 ($7) $10 Forest Products $41 $2 $3 Operating Profit $406 $306 $392 Net Interest Expense ($81) ($164) ($173) Noncontrolling Interest / Equity Earnings Adjustment $8 $6 $8 Corporate Items ($21) ($51) ($44) Special Items ($10) $421 $337 Earnings from continuing operations before income taxes, equity earnings & minority interest $302 $518 $520 Equity Earnings, net of taxes - Ilim $32 ($26) ($30) |
![]() 42 Geographic Business Segment Operating Results from Continuing Operations before Special Items Geographic Business Segment Operating Results from Continuing Operations before Special Items $ Million Sales Operating Profit 2Q08 1Q09 2Q09 2Q08 1Q09 2Q09 Industrial Packaging North American $1,060 $1,885 $1,955 $65 $175 $241 European $315 $240 $240 $20 $13 $14 Asian $95 $55 $75 $2 $0 $0 Printing Papers North American $880 $705 $685 $125 $84 $61 European $445 $325 $315 $39 $25 $16 Brazilian $255 $170 $215 $51 $20 $23 U.S. Market Pulp $205 $125 $135 $11 ($28) ($14) Asian $5 $0 $10 $0 $0 $0 Consumer Packaging North American $625 $530 $565 $13 $4 $17 European $75 $70 $80 $8 $14 $14 Asian $95 $115 $125 $5 $4 $7 Distribution $1,970 $1,590 $1,595 $26 ($7) $10 Excludes Forest Products |
![]() 43 1 Assuming dilution 2 A reconciliation to GAAP EPS is available at www.internationalpaper.com under the Investors tab at presentations Pre-Tax $MM Tax $MM Minority Interest $MM Equity Earnings Net Income $MM Estimated Tax Rate Average Shares MM Diluted EPS Before Special Items 1Q09 $97 ($32) ($4) ($27) $34 33% 423 $0.08 2Q09 $183 ($61) ($4) ($32) $86 33% 425 $0.20 Special Items 1Q09 $421 ($198) $0 $0 $223 47% 423 $0.53 2Q09 $337 ($287) $0 $0 $50 85% 425 $0.12 Earnings 1Q09 $518 ($230) ($4) ($27) $257 44% 423 $0.61 2Q09 $520 ($348) ($4) ($32) $136 67% 425 $0.32 2009 Earnings 2009 Earnings 1 2 |
![]() 44 Total Cash Cost Components 2Q09 Total Cash Cost Components 2Q09 North American Mills Only |
![]() 45 Global Input & Freight Costs by Input $129MM, or $0.21/Share Favorable Impact vs. 2Q08 Global Input & Freight Costs by Input $129MM, or $0.21/Share Favorable Impact vs. 2Q08 Input costs for continuing businesses; does not include WY PKG |
![]() 46 .20 .50 .18 .21 (.15) (.06) (.15) (.04) (.05) (.24) .06 $0.00 $0.20 $0.40 $0.60 $0.80 2Q08 Volume & LOO Price Input Costs Cost Reduction Mix Interest Corporate & Other Ilim JV 2Q09 .56 Earnings from continuing operations before special items; volume includes earnings from WY PKG .48 2Q09 vs. 2Q08 EPS 2Q09 vs. 2Q08 EPS Forest Products Earnings |
![]() 47 Industrial Packaging Earnings 2Q09 vs. 2Q08 Industrial Packaging Earnings 2Q09 vs. 2Q08 1 Excludes trade volume and includes WY PKG earnings Earnings Before Special Items 1 1 |
![]() 48 Printing Papers Earnings 2Q09 vs. 2Q08 Printing Papers Earnings 2Q09 vs. 2Q08 Earnings Before Special Items |
![]() 49 Consumer Packaging Earnings 2Q09 vs. 2Q08 Consumer Packaging Earnings 2Q09 vs. 2Q08 Earnings Before Special Items |
![]() 50 2005 2006 2007 NYMEX Natural Gas closing prices Index: Jan 2005 Natural Gas Costs = 100 Natural Gas Costs 28% Decrease vs. 1Q09 Average Cost Natural Gas Costs 28% Decrease vs. 1Q09 Average Cost 2008 2009 |
![]() 51 U.S. Mill Wood Costs 6% Decrease vs. 1Q09 Average Cost U.S. Mill Wood Costs 6% Decrease vs. 1Q09 Average Cost Index: Jan 2005 Wood Costs = 100 2005 2006 2007 2009 Delivered cost to U.S. facilities 2008 |
![]() 52 2006 2007 Index: Jan 2006 Fuel Oil Costs = 100 U.S. Fuel Oil 32% Increase vs. 1Q09 Average Cost U.S. Fuel Oil 32% Increase vs. 1Q09 Average Cost 2008 Delivered cost to U.S. facilities 2009 |
![]() 53 2005 2006 2007 2009 Index: Q1’05 Chemical Composite= 100 2008 Delivered cost to U.S. facilities; includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid 2005 - 2008 excludes WY PKG U.S. Chemical Composite Index 20% Decrease vs. 1Q09 Average Cost U.S. Chemical Composite Index 20% Decrease vs. 1Q09 Average Cost |
![]() 54 Global Consumption Annual Purchase Estimates for Key Inputs Global Consumption Annual Purchase Estimates for Key Inputs Does not include Asian or Ilim consumption; excludes consumption by permanent & indefinite machine shutdowns Estimates are based on normal operations and may be impacted by downtime Commodity U. S. Non – U. S. Energy Natural Gas (MM BTUs) 50,500,000 16,000,000 Fuel Oil (Barrels) 2,100,000 500,000 Coal (Tons) 1,100,000 230,000 Fiber Wood (Tons) 50,000,000 8,400,000 Old Corrugated Containers (Tons) 3,500,000 310,000 Chemicals Caustic Soda (Tons) 330,000 60,000 Starch (Tons) 490,000 110,000 Sodium Chlorate (Tons) 225,000 50,000 LD Polyethylene (Tons) 50,000 - Latex (Tons) 25,000 4,000 |