SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
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For Quarter Ended March 31, 1994 Commission file number 1-3157
INTERNATIONAL PAPER COMPANY
(Exact name of registrant as specified in its charter)
New York 13 0872805
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
Two Manhattanville Road, Purchase, NY 10577
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 914-397-1500
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /x/ No / /
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date.
Common stock outstanding on April 29, 1994: 124,632,496 shares.
INTERNATIONAL PAPER COMPANY
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Earnings - 4
Three Months Ended March 31, 1994 and 1993.
Consolidated Balance Sheet - 5-6
March 31, 1994 and December 31, 1993.
Consolidated Statement of Cash Flows - 7
Three Months Ended March 31, 1994 and 1993.
Notes to Consolidated Financial 8-9
Statements.
Item 2. Management's Discussion and Analysis of 10-11
Financial Condition and Results
of Operations.
Item 3. Other Financial Information 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults upon Senior Securities *
Item 4. Submission of Matters to a Vote of *
Security Holders
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INTERNATIONAL PAPER COMPANY
INDEX (Con'd)
Page No.
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Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
* Omitted since no answer is called for, answer is in the
negative or inapplicable.
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ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL PAPER COMPANY
Consolidated Statement of Earnings
(Unaudited)
(In millions, except per-share amounts)
Three Months
Ended
March 31,
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1994 1993
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Net Sales $3,414 $3,362
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Costs and Expenses
Cost of products sold 2,565 2,543
Depreciation and amortization 225 220
Distribution expenses 154 154
Selling and administrative expenses 244 232
Taxes other than payroll and income taxes 38 39
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Total Costs and Expenses 3,226 3,188
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Earnings Before Interest and Income Taxes 188 174
Interest expense, net 77 73
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Earnings Before Income Taxes 111 101
Provision for income taxes 39 37
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Net Earnings $ 72 $ 64
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Earnings per Common Share $ .58 $ .52
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Average Shares of Common Stock Outstanding 124.2 122.8
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Cash Dividends per Common Share $ .42 $ .42
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The accompanying notes are an integral part of these financial statements.
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INTERNATIONAL PAPER COMPANY
Consolidated Balance Sheet
(Unaudited)
(In millions)
March 31, December 31,
1994 1993
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ASSETS
Current Assets
Cash and temporary investments $ 123 $ 242
Accounts and notes receivable, net 1,914 1,856
Inventories 2,078 2,024
Other current assets 278 279
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Total Current Assets 4,393 4,401
Plants, Properties and Equipment, net 8,873 8,872
Forestlands 792 786
Investments 949 631
Goodwill 757 754
Deferred Charges and Other Assets 1,271 1,187
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Total Assets $17,035 $16,631
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The accompanying notes are an integral part of these financial statements.
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INTERNATIONAL PAPER COMPANY
Consolidated Balance Sheet
(Unaudited)
(In millions)
March 31, December 31,
1994 1993
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LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable and current maturities of
long-term debt $ 2,426 $ 2,089
Accounts payable and accrued liabilities 1,955 1,920
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Total Current Liabilities 4,381 4,009
Long-Term Debt 3,604 3,601
Deferred Income Taxes 1,627 1,614
Minority Interest and Other Liabilities 1,184 1,182
Common Shareholders' Equity
Common stock, $1 par value, issued
1994 - 127.4 shares,
1993 - 127.3 shares 127 127
Paid-in capital 1,670 1,704
Retained earnings 4,572 4,553
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6,369 6,384
Less: Common stock held in treasury,
at cost; 1994 - 2.8 shares,
1993 - 3.4 shares 130 159
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Total Common Shareholders' Equity 6,239 6,225
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Total Liabilities and
Common Shareholders' Equity $17,035 $16,631
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The accompanying notes are an integral part of these financial statements.
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INTERNATIONAL PAPER COMPANY
Consolidated Statement of Cash Flows
(Unaudited)
(In millions)
Three Months
Ended
March 31,
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1994 1993
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OPERATING ACTIVITIES
Net earnings $ 72 $ 64
Noncash items
Depreciation and amortization 225 220
Deferred income taxes 5 2
Other, net 2 (9)
Changes in current assets and liabilities
Accounts and notes receivable (97) (82)
Inventories (51) 4
Other current assets (11) (11)
Accounts payable and accrued liabilities 28 (29)
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CASH PROVIDED BY OPERATIONS 173 159
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INVESTMENT ACTIVITIES
Invested in capital projects (207) (196)
Investments in affiliated companies (299)
Other (41) 27
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CASH USED FOR INVESTMENT ACTIVITIES (547) (169)
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FINANCING ACTIVITIES
Issuance of common stock 41 6
Issuance of debt 609 297
Reduction of debt (298) (221)
Change in bank overdrafts (74) (20)
Dividends paid (53) (53)
Other 29 28
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CASH PROVIDED BY FINANCING ACTIVITIES 254 37
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EFFECT OF EXCHANGE RATE CHANGES ON CASH 1 (2)
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CHANGE IN CASH AND TEMPORARY INVESTMENTS (119) 25
CASH AND TEMPORARY INVESTMENTS
Beginning of the period 242 225
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End of the period $ 123 $ 250
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The accompanying notes are an integral part of these financial statements.
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INTERNATIONAL PAPER COMPANY
Notes to Consolidated Financial Statements
(Unaudited)
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the
opinion of Management, include all adjustments (consisting only of normal
recurring accruals) which are necessary for the fair presentation of
results for the interim periods. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements
and the notes thereto incorporated by reference in the Company's Form 10-K
for the year ended December 31, 1993, which has previously been filed with
the Commission.
2. In March 1994, the Company acquired from Brierley Investments Limited an
additional 8 percent of the outstanding shares of Carter Holt Harvey
Limited (Carter Holt), a major New Zealand forest products and paper com-
pany with substantial assets in Chile. The purchase increased the Com-
pany's ownership of Carter Holt to 24 percent.
In April 1993, the Company acquired certain assets of the Los Angeles -
based Ingram Paper Company (Ingram). Ingram is a distributor of
industrial and fine printing papers. In December, JB Papers, Inc., a
paper distribution company located in Union, N.J., was purchased. Also in
December, the assets of Monsanto Company's Kentucky-based Fome-Cor
division, a manufacturer of polystyrene foam products, were acquired.
All of the 1993 acquisitions were accounted for using the purchase method.
The effects of these acquisitions, individually or in the aggregate,
were not significant to the Company's financial statements.
The consolidated balance sheet at March 31, 1994 includes preliminary
purchase price allocations for JB Papers and Fome-Cor. The consolidated
balance sheet at December 31, 1993 includes preliminary purchase price
allocations for Ingram, JB Papers and Fome-Cor. Final allocations for
JB Papers and Fome-Cor will be completed in 1994.
3. Inventories by major category include:
March 31, December 31,
1994 1993
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(In millions)
Raw materials $ 388 $ 380
Finished pulp, paper and packaging products 1,046 1,017
Finished imaging products 169 164
Finished lumber and panel products 81 79
Operating supplies 323 324
Other 71 60
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Total $2,078 $2,024
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4. Interest payments made during the periods ended March 31, 1994 and
1993 were $88 million and $101 million, respectively. Income tax payments
made during the first quarters of 1994 and 1993 were $6 million and
$16 million, respectively.
5. Temporary investments with a maturity of three months or less are treated
as cash equivalents and are stated at cost. Temporary investments totaled
$58 million and $160 million at March 31, 1994 and December 31, 1993,
respectively.
6. Certain amounts have been reclassified in the 1993 consolidated statement
of cash flows to conform with the current year presentation for changes in
bank overdrafts as financing activities. Changes in bank overdrafts were
previously presented as operating activities.
Bank overdrafts are included in accounts payable and accrued liabilities
in the consolidated balance sheet.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
International Paper reported 1994 first-quarter net earnings of
$72 million or $.58 per share, a 12% increase over 1993 first-
quarter net earnings of $64 million or $.52 per share. First-
quarter net sales of $3.4 billion were about even with the prior
year.
The Company's Forest Products business continued to generate strong
results for the quarter which were comparable to the first quarter of
1993 and Specialty Products sales and earnings were higher than a year
ago. Packaging volume improved, but price declines for bleached board
more than offset improved containerboard prices. Printing Papers
volume and pricing were below expectations for the quarter, although
losses were less than a year ago. Assisted by higher pulp prices,
European and export markets began to show signs of recovery; however,
severe winter weather conditions hampered some domestic businesses.
Printing Papers first-quarter 1994 net sales of $955 million were
below the $1.0 billion reported in the prior year. Although operating
losses were less than a year ago, a sharp decline in U.S. uncoated
paper prices resulted in a shortfall in earnings compared with the
fourth quarter of 1993. Results for pulp were ahead of the prior year
due to improved pricing.
First-quarter Packaging net sales of $755 million were even with the
1993 first quarter. Operating results were below the first-quarter of
1993 and the prior quarter due to lower prices for bleached board.
Improving containerboard demand is expected to favorably impact prices
but industry overcapacity for bleached board will continue to depress
prices and earnings in this area.
Distribution net sales increased to $800 million in the first quarter
of 1994, up from $745 million in the 1993 first quarter. Operating
profits were comparable with the 1993 fourth and first quarters
despite severe weather conditions in the northeastern United States.
The acquisitions of Ingram Paper early in the 1993 second quarter and
JB Papers in the 1993 fourth quarter contributed to much of the sales
increase.
Specialty Products net sales of $625 million in the 1994 first quarter
exceeded net sales of $605 million a year ago. Operating profit was
ahead of the prior quarter and improved significantly over the first
quarter of 1993. Strengthened demand for Masonite products was a
driving force behind the segment's improved profitability. Reduced
production and lower oil prices resulted in lower earnings for the
petroleum business compared with the first quarter of 1993.
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Forest Products net sales increased to $425 million for the 1994
first quarter, up from $400 million in the comparable 1993 period.
Operating profits, although down from the 1993 fourth quarter due to
lower harvest volumes, were comparable to the first quarter of 1993
due to continued strong lumber and timber prices.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations totaled $173 million for the 1994 first
quarter, up from $159 million for the comparable 1993 period. Higher
working capital requirements were more than offset by higher earnings
and noncash items.
Investments in capital projects totaled $207 million for the first
quarter of 1994, comparable with $196 million spent a year ago.
Investments in affiliated companies totalling $299 million in the
first quarter of 1994 reflect the Company's additional investment in
Carter Holt Harvey.
Dividend payments were $53 million, or $.42 per common share. Debt
issued in 1994 consisted primarily of commercial paper borrowings
that were used for investment activities and the retirement of
short-term bank debt.
The Company anticipates that cash flow generated from operations,
supplemented as necessary by short- or long-term borrowings, will be
adequate to meet capital expenditures which are expected to exceed
$1.1 billion for 1994.
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ITEM 3. OTHER FINANCIAL INFORMATION
Sales by Industry Segment
and
Production by Products
(Unaudited)
Sales by Industry Segment (In millions)
Three Months
Ended
March 31,
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1994 1993
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Printing Papers $ 955 $1,010
Packaging 755 755
Distribution 800 745
Specialty Products 625 605
Forest Products 425 400
Less: Intersegment Sales (146) (153)
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Net Sales $3,414 $3,362
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Certain reclassifications have been made to prior-year amounts
to conform with the current-year presentation.
Production by Products
Three Months
Ended
March 31,
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1994 1993
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Printing Papers (In thousands of tons)
White Papers and Bristols 810 714
Coated Papers 256 242
Market Pulp (A) 419 382
Packaging (In thousands of tons)
Containerboard 489 495
Bleached Packaging Board 248 263
Industrial Papers 151 138
Industrial and Consumer Packaging (B) 732 690
Wood Products (In millions)
Panels (sq. ft. 3/8" basis) (C) 207 185
Lumber (board feet) 233 231
(A) This excludes market pulp purchases of approximately 600,000 tons annually.
(B) A significant portion of this tonnage was fabricated from paperboard and
paper produced at the Company's own mills and included in the
containerboard, bleached packaging board, and industrial papers amounts in
this table.
(C) Panels include plywood and oriented strand board.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(11) Statement of Computation of Per Share Earnings
(b) Reports on Form 8-K.
No Current Reports on Form 8-K have been filed
during the first quarter of 1994, except those
previously reported in the Annual Report of Form
10-K for the year ended 1993, filed March 31,
1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
INTERNATIONAL PAPER COMPANY
(Registrant)
Date: May 10, 1994 By /s/ ROBERT C. BUTLER
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Robert C. Butler
Senior Vice President
and Chief Financial
Officer
Date: May 10, 1994 By /s/ ANDREW R. LESSIN
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Andrew R. Lessin
Controller and Chief
Accounting Officer
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(Exhibit 11)
INTERNATIONAL PAPER COMPANY
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(In millions, except per-share amounts)
Three Months
Ended
March 31,
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1994 1993
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Net earnings $ 72 $ 64
Debenture interest savings, net
of taxes, assuming conversion
of convertible subordinated
debentures * *
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Primary and fully diluted
net earnings $ 72 $ 64
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Earnings per common share $ .58 $ .52
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Primary and fully diluted earnings
per share $ .58 $ .52
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PRIMARY AND FULLY DILUTED SHARES
Average shares outstanding 124.2 122.8
Shares assumed to be repurchased
using long-term incentive plan
deferred compensation at average
market price (.3) (.3)
Shares assumed to be issued upon
exercise of stock options, net
of treasury buyback at average
market price .5 .4
Shares assumed to be issued upon
conversion of convertible
subordinated debentures * *
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Primary and fully diluted shares 124.4 122.9
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The Company reports earning per common share as the effect of dilutive
securities is less than 3%.
* Convertible subordinated debentures are antidilutive.
