International Paper Reports 2014 Fourth-Quarter and Full Year Earnings
OREANDA-NEWS. International Paper (NYSE: IP) today reported full-year 2014 net earnings attributable to common shareholders totaling USD 555 million (USD 1.29 per share) compared with USD 1.4 billion (USD 3.11 per share) in full-year 2013.In the fourth quarter 2014, the Company reported net earnings of USD 134 million (USD 0.32 per share) compared with USD 436 million (USD 0.98 per share) in the fourth quarter of 2013. Fourth quarter 2014 earnings included a USD 0.40 per share non-cash foreign exchange charge as described below. Amounts in all periods include the impact of special items, non-operating pension expense and discontinued operations.
Operating Earnings is defined as net earnings from continuing operations attributable to International Paper Company (GAAP) excluding special items and non-operating pension expense.
Full-year 2014 Operating Earnings were USD 1.3 billion (USD 3.00 per share) compared with USD 1.4 billion (USD 3.06 per share) in 2013. Operating Earnings in the fourth quarter of 2014 totaled USD 227 million (USD 0.53 per share) compared with USD 359 million (USD 0.81 per share) in the fourth quarter of 2013.
Annual sales totaled USD 23.6 billion in 2014 compared with USD 23.5 billion in 2013. Quarterly net sales were USD 5.9 billion in the fourth quarter of 2014 compared with USD 5.8 billion in the fourth quarter of 2013.
Full-year 2014 business segment operating profits were USD 2.8 billion compared with USD 2.6 billion in 2013. Business segment operating profits in the fourth quarter of 2014 were USD 694 million, compared with USD 661 million in the fourth quarter of 2014.
"International Paper delivered record cash from operations through strong performance by the North American Industrial Packaging group," said Mark Sutton , Chairman and Chief Executive Officer. "As we enter 2015, a strengthening North American economy is helping to offset a global environment that remains challenged. With our focus on execution, IP expects to deliver another year of earnings growth and strong free cash flow."
SEGMENT INFORMATION
The performance of the Company's business segments are measured quarter to quarter without variations caused by special items, as management focuses on business segment operating profits excluding those items. Fourth quarter 2014 business segment operating profits and business trends compared with the prior quarter are as follows:
Industrial Packaging operating profits in the fourth quarter of 2014 were USD 484 million (USD 379 million including special items) compared with USD 569 million (USD 527 million including special items) in the third quarter of 2014. The earnings decrease was largely due to higher planned maintenance outage expenses, lower export prices and higher operating expenses. North America's box business ended the quarter with the strongest seasonal demand since 2010.
Printing Papers operating profits were USD 155 million (USD 148 million including special items) in the fourth quarter of 2014 versUSD 192 million (USD 177 million including special items) in the third quarter of 2014. In the U.S., the earnings decrease was primarily driven by higher annual maintenance outage expenses for paper, while pulp earnings benefited from fewer annual maintenance outages. In Brazil, volume and mix improved quarter over quarter reflecting seasonal improvements, but were more than offset by higher operating and maintenance outage expenses. In Europe, despite challenging market conditions, volumes were higher. Europe's results were additionally impacted by higher costs.
Consumer Packaging operating profits were USD 55 million (USD 51 million including special items) in the fourth quarter of 2014 compared with USD 79 million (USD 77 million including special items) in the third quarter of 2014. North American coated paperboard earnings decreased due to lower sales volume and higher planned annual maintenance spending, which was partially offset by improved input costs. Revenue and volume for IP's foodservice business were at record levels.
International Paper recorded an Ilim joint venture equity loss of USD 136 million in the fourth quarter of 2014 compared with an equity loss of USD 70 million in the third 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 USD 171 million in the fourth quarter of 2014 (USD 0.40 per share), compared with an after-tax loss of USD 82 million in the third quarter of 2014, largely due to foreign exchange movement in the U.S. dollar versus the Russian ruble. Operating earnings improved quarter over quarter, reflecting higher sales volumes, strong operations and margin expansion.
CORPORATE EXPENSES
Net corporate expenses, excluding non-operating pension expense, for the 2014 fourth quarter were USD 35 million compared with USD 3 million in the third quarter of 2014. Corporate expenses reflect USD 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 fourth quarter of 2014 was 30.5%, compared with an effective tax rate of 30.5% in the third quarter of 2014. The 2014 full year rate was 31% compared with 26% for the 2013 full year.
EFFECTS OF SPECIAL ITEMS
Special items in the fourth quarter of 2014 included a net pre-tax loss of USD 16 million (USD 10 million after taxes) for Restructuring and other charges. Included within Restructuring and other charges were pre-tax charges of USD 7 million (USD 4 million after taxes) for costs associated with the closure of our Courtland, Alabama mill, pre-tax charges of USD 4 million (USD 3 million after taxes) for costs related to our Brazil Packaging business, and pre-tax charges of USD 5 million (USD 3 million after taxes) for other items. Also included in special items were a pre-tax charge of USD 47 million (USD 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 USD 9 million (USD 5 million after taxes) for the sale of an investment, a charge of USD 100 million (before and after taxes) for the impairment of goodwill in the Company's Asia Industrial Packaging business, a tax benefit of USD 90 million related to an internal restructuring and a charge of USD 1 million (before and after taxes) for other items.
Special items in the third quarter of 2014 included a net pre-tax loss of USD 24 million (USD 15 million after taxes) for Restructuring and other charges. Included within Restructuring and other charges were a pre-tax charge of USD 13 million (USD 8 million after taxes) for debt extinguishment costs, pre-tax charges of USD 3 million (USD 2 million after taxes) for costs associated with the closure of our Courtland, Alabama mill, pre-tax charges of USD 5 million (USD 3 million after taxes) for costs associated with the restructuring of our European Packaging business and pre-tax charges of USD 3 million (USD 2 million after taxes) for other items. Also included in special items were a pre-tax charge of USD 35 million (USD 21 million after taxes) for a multi-employer pension plan withdrawal liability, a pre-tax charge of USD 32 million (USD 17 million after taxes) related to a foreign tax amnesty program, a gain of USD 20 million (before and after taxes) related to the resolution of a legal contingency in India, charges of USD 1 million (before and after taxes) for integration costs related to the Temple-Inland acquisition and a pre-tax charge of USD 5 million (USD 3 million after taxes) for a refund of previously taken state tax credits.
Special items in the fourth quarter of 2013 included a net pre-tax loss of USD 69 million (USD 44 million after taxes) for Restructuring and other charges. Included within Restructuring and other charges were a pre-tax charge of USD 67 million (USD 41 million after taxes) for costs associated with the closure of our Courtland, Alabama mill and a net pre-tax charge of USD 2 million (USD 3 million after taxes) for other items. Special items also included pre-tax charges of USD 12 million (USD 7 million after taxes) for integration costs related to the Temple-Inland acquisition, a pre-tax charge of USD 127 million (USD 119 million after a USD 5 million tax benefit and a gain of USD 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 USD 2 million (USD 1 million after taxes) for other items. In addition, a tax benefit of USD 651 million related to the closing of a U.S. federal income tax audit and a net tax benefit of USD 3 million for other tax items were recorded.
DISCONTINUED OPERATIONS
As a result of the July 1, 2014 spin-off of the xpedx business, all current and 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 USD 14 million (USD 9 million after taxes) related to the divestiture of the Building Products business. Discontinued operations in the third quarter of 2014 included a gain of USD 11 million (USD 14 million after taxes) for the recovery of costs related to the July 1, 2014 spin-off of our xpedx business and a tax benefit of USD 2 million related to the divestiture of the Building Products business. Discontinued operations in the fourth quarter of 2013 included the operating earnings of the xpedx businesses, a pre-tax charge of USD 400 million (USD 366 million after taxes) for the impairment of goodwill of the xpedx business, pre-tax charges of USD 8 million (USD 5 million after taxes) for costs associated with the spin-off of the xpedx business, a pre-tax gain of USD 18 million (USD 11 million after taxes) related to the divestiture of the Building Products business and charges of USD 2 million (USD 1 million after taxes) for other items.
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