Memphs, Tenn. – International Paper today reported first quarter 2019 financial results.

HIGHLIGHTS

• First quarter net earnings attributable to International Paper of $424 million ($1.05 per diluted share) compared with $316 million ($0.78 per diluted share) in the fourth quarter of 2018 and $729 million ($1.74 per diluted share) in the first quarter of 2018
• First quarter adjusted operating earnings* (non-GAAP) of $447 million ($1.11 per diluted share) compared with $670 million ($1.65 per diluted share) in the fourth quarter of 2018 and $395 million ($0.94 per diluted share) in the first quarter of 2018
• First quarter equity earnings of $114 million compared with $95 million in the first quarter of 2018
• First quarter share repurchases of $180 million, bringing the trailing 12 month total to $880 million

"International Paper delivered solid earnings and generated strong cash from operations in the first quarter," said Mark Sutton, Chairman and Chief Executive Officer. "Operational performance was strong; we managed costs well and leveraged the strength and flexibility of our manufacturing system. In the first quarter, we also returned nearly $400 million to shareholders through dividends and share repurchases. Looking ahead to the second quarter, we anticipate improved seasonal demand and we are well positioned to continue generating strong cash flows in 2019."

Diluted Net EPS Attributable to International Paper Shareholders and Adjusted Operating EPS 

*
Adjusted operating earnings (non-GAAP) is defined as net earnings from continuing operations attributable to International Paper Company (GAAP) excluding special items and non-operating pension expense. Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. For discussion of special items, net and non-operating pension expense, see the footnotes to the Consolidated Statement of Operations.

Key Financial Measures

SEGMENT INFORMATION
Business segment operating profits are used by International Paper's management to measure the earnings performance of its businesses. First quarter 2019 business segment net sales and operating profits compared with the fourth quarter of 2018 and the first quarter of 2018 are as follows:

Business Segment Results

Industrial Packaging operating profits in the first quarter of 2019 were $404 million ($421 million excluding special items) compared with $647 million ($646 million excluding special items) in the fourth quarter of 2018. In North America, earnings decreased due to lower demand for boxes and export containerboard, increased economic downtime and higher planned maintenance outage expenses. Input costs were slightly favorable. In Europe, earnings decreased driven by lower sales prices and volumes due to weaker economic conditions, primarily in Turkey and unfavorable foreign currency impacts.

Global Cellulose Fibers operating profits in the first quarter of 2019 were $32 million ($35 million excluding special items) compared with $91 million ($93 million excluding special items) in the fourth quarter of 2018. Earnings decreased due to lower fluff pulp volume and lower average sales prices for market pulp. In addition, planned maintenance outage expenses, manufacturing operating costs and economic downtime increased.

Printing Papers operating profits in the first quarter of 2019 were $143 million ($144 million excluding special items) versus $192 million ($197 million excluding special items) in the fourth quarter of 2018. In North America, decreased volumes were partially offset by improved sales prices and mix. Manufacturing operating costs increased primarily due to seasonality and inflation. In Brazil, earnings decreased due to seasonally lower demand and unfavorable geographic mix, slightly offset by improved domestic sales prices. In Europe and Russia, earnings benefited from higher sales prices for uncoated freesheet paper and lower input costs. Sales volumes increased in Europe but were lower in Russia.

EQUITY METHOD INVESTMENTS
Ilim joint venture equity earnings were $101 million in the first quarter of 2019 compared with $67 million in the fourth quarter of 2018. Operationally, earnings decreased due to significantly lower export sales prices for hardwood and softwood pulp to China. The Company recognized a non-cash after-tax foreign exchange gain of $21 million in the first quarter of 2019 ($0.05 per diluted share), compared with a loss of $19 million in the fourth quarter of 2018 ($0.05 per diluted share), primarily due to Ilim's U.S. dollar denominated net debt.

Graphic Packaging equity earnings on our 20.5% ownership position were $13 million in the first quarter of 2019, compared with $10 million in the fourth quarter of 2018.

CORPORATE EXPENSES
Corporate expenses were $21 million for the first quarter of 2019, compared with $8 million in the fourth quarter of 2018.

EFFECTIVE TAX RATE
The reported effective tax rate for the first quarter of 2019 was 25%, compared to a 2018 fourth quarter reported effective tax rate of 37%. In the fourth quarter of 2018, the Company recorded, as special items, tax expense of $25 million related to foreign tax audits and tax expense of $19 million related to international investment restructuring.

Excluding special items, non-operating pension expense and discontinued operations, the effective tax rate for the first quarter of 2019 was 25%, compared with an effective tax rate of 26% in the fourth quarter of 2018.

EFFECTS OF SPECIAL ITEMS
Special items in the first quarter of 2019 amount to a net after-tax charge of $15 million ($0.04 per diluted share) compared with $32 million ($0.08 per diluted share) in the fourth quarter of 2018 and $31 million ($0.07 per diluted share) in the first quarter of 2018. Special items in all periods include the following charges (gains):

DISCONTINUED OPERATIONS
Discontinued operations in the first quarter of 2018 included a pre-tax gain on the 2017 transfer of the North American Consumer Packaging business of $516 million ($385 million after taxes) and pre-tax charges of $23 million ($17 million after taxes) for costs associated with the transfer.

EARNINGS WEBCAST
The company will host a webcast today to discuss earnings and current market conditions, beginning at 10 a.m. ET (9 a.m. CT). All interested parties are invited to listen to the webcast via the company's website at internationalpaper.com by clicking on the Performance tab and going to the Presentations and Events/Webcasts page. A replay of the webcast will also be on the website beginning approximately two hours after the call. Parties who wish to participate in the webcast via teleconference may dial +1 (706) 679-8242 or, within the U.S. only, (877) 316-2541, and ask to be connected to the International Paper first quarter earnings call. The conference ID number is 9573956. Participants should call in no later than 9:45 a.m. ET (8:45 a.m. CT). An audio-only replay will be available for ninety days following the call. To access the replay, dial +1 (404) 537-3406 or, within the U.S. only, (855) 859-2056 or (800) 585-8367, and when prompted for the conference ID, enter 9573956.