MEMPHIS, Tenn., Aug. 12, 2025 /PRNewswire/ -- International Paper Chief Executive Officer Andy Silvernail will speak at Jefferies 2025 Industrials Conference on September 4, 2025. The presentation is scheduled to begin at 8:10 a.m. Eastern Daylight Time and will be followed by a question-and-answer session.All interested parties are invited to listen to the webcast via the company's website by clicking on the Investors tab and going to the Events & Presentations page at https://www.internationalpaper.com/in ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Q2 2025 and 2024, detailing the DS Smith Plc acquisition's impact and segment reorganization [Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Presents core financial statements, highlighting significant increases in net sales and total assets due to the DS Smith acquisition, alongside a net loss Condensed Consolidated Statement of Operations (Six Months Ended June 30) | Indicator (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net Sales | $12,668 | $9,353 | | Cost of products sold | $9,135 | $6,784 | | Earnings (Loss) Before Income Taxes | $(19) | $291 | | Net Earnings (Loss) | $(30) | $554 | | Diluted Earnings (Loss) Per Share | $(0.06) | $1.57 | Condensed Consolidated Balance Sheet (As of) | Indicator (In millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $9,499 | $6,424 | | Total Assets | $42,376 | $22,800 | | Total Current Liabilities | $7,121 | $4,258 | | Long-Term Debt | $9,694 | $5,368 | | Total Equity | $18,617 | $8,173 | Condensed Consolidated Statement of Cash Flows (Six Months Ended June 30) | Indicator (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Cash Provided By Operations | $188 | $760 | | Cash Used For Investment Activities | $(38) | $(446) | | Cash Used For Financing Activities | $(253) | $(365) | | Change in Cash and Temporary Investments | $(35) | $(64) | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations for financial statements, covering basis of presentation changes, acquisition accounting, and the company's new three-segment reporting structure - Following the acquisition of DS Smith Plc on January 31, 2025, the company reorganized its reporting segments into: **Packaging Solutions North America**, **Packaging Solutions EMEA**, and **Global Cellulose Fibers**[21](index=21&type=chunk)[137](index=137&type=chunk) - The acquisition of DS Smith was completed on January 31, 2025, for a total purchase consideration of approximately **$9.9 billion**[42](index=42&type=chunk)[43](index=43&type=chunk) Disaggregated Revenue by Segment (Six Months Ended June 30, 2025) | Segment (In millions) | Net Sales | | :--- | :--- | | Packaging Solutions North America | $7,562 | | Packaging Solutions EMEA | $3,841 | | Global Cellulose Fibers | $1,271 | | **Total** | **$12,668** | Provisional Purchase Price Allocation for DS Smith Acquisition (In millions) | Category | Provisional Fair Value | | :--- | :--- | | Total assets acquired | $18,145 | | Total liabilities assumed | $8,236 | | **Net assets acquired** | **$9,909** | | Goodwill | $4,091 | | Intangibles | $3,998 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2025 financial results, highlighting a $75 million net income driven by price increases and DS Smith's operations, and provides a Q3 2025 outlook [Executive Summary and Outlook](index=34&type=section&id=Executive%20Summary%20and%20Outlook) Q2 2025 net earnings reached $75 million, improving from Q1, driven by price increases and the DS Smith acquisition, with a generally positive Q3 outlook Q2 2025 Key Earnings Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Earnings (Loss) (in millions) | $75 | $(105) | $498 | | Diluted EPS | $0.14 | $(0.24) | $1.41 | | Adjusted Operating Earnings (in millions) | $105 | $101 | $193 | - The company is pursuing strategic options for its Global Cellulose Fibers business, but there is no assurance that this process will result in a transaction[159](index=159&type=chunk) - On June 30, 2025, the company completed the required divestiture of five European corrugated box plants to Palm Group of Germany for **€125 million** as a condition of the DS Smith acquisition[50](index=50&type=chunk)[160](index=160&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Analyzes consolidated income statement and segment performance for Q2 2025, showing net sales growth to $6.77 billion driven by DS Smith, and varied segment profitability Business Segment Operating Profit (Loss) - Q2 2025 vs Q1 2025 (in millions) | Segment | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Packaging Solutions North America | $277 | $142 | | Packaging Solutions EMEA | $(1) | $46 | | Global Cellulose Fibers | $(4) | $17 | - PS North America's Q2 profit improvement was driven by higher average sales prices for boxes and seasonally higher volumes[189](index=189&type=chunk)[191](index=191&type=chunk) - PS EMEA's Q2 results were impacted by a soft demand environment, though higher sales prices provided some offset[193](index=193&type=chunk)[195](index=195&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Cash from operations decreased to $188 million due to DS Smith transaction costs, with full-year capital expenditures projected at $1.8-$1.9 billion, while liquidity remains adequate - Cash from operations decreased significantly to **$188 million** in the first half of 2025 from **$760 million** in H1 2024, mainly due to payments for DS Smith transaction costs (**$240 million**), severance (**$80 million**), and other items[199](index=199&type=chunk) - Full-year 2025 capital expenditures are projected to be between **$1.8 billion** and **$1.9 billion**[201](index=201&type=chunk) - The company maintains investment-grade credit ratings of **BBB (S&P)** and **Baa2 (Moody's)** and was in compliance with all debt covenants as of June 30, 2025[203](index=203&type=chunk)[204](index=204&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposure since December 31, 2024, with information incorporated by reference from the Annual Report - There have been no material changes in the Company's exposure to market risk since December 31, 2024[222](index=222&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2025, while integrating DS Smith may lead to future internal control changes - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[223](index=223&type=chunk) - The company is currently integrating the newly acquired DS Smith business into its systems and control environment, which may result in changes to internal controls[224](index=224&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) Refers to financial statement notes for details on material legal proceedings, including environmental liabilities, asbestos claims, and antitrust investigations - Material legal proceedings are detailed in Note 13 (Commitments and Contingencies) and Note 20 (Subsequent Events)[227](index=227&type=chunk) - A purported class action complaint was filed on July 29, 2025, against International Paper and other producers, alleging conspiracy to fix prices of containerboard products since November 2020[150](index=150&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the Annual Report, except for updated risks related to legal proceedings and the strategic review of the Global Cellulose Fibers business - The company faces risks from legal proceedings, including an Italian antitrust matter and a new U.S. class action lawsuit alleging price-fixing in the containerboard market[229](index=229&type=chunk)[230](index=230&type=chunk) - There are risks associated with the strategic review of the Global Cellulose Fibers business, including the possibility of no transaction occurring, diversion of management attention, and potential asset impairment charges[232](index=232&type=chunk)[233](index=233&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company acquired 18,748 shares from employees for tax withholding in Q2 2025, with no public repurchases, and **$2.96 billion** remaining authorized Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 14,573 | $53.35 | | May 2025 | 3,708 | $46.96 | | June 2025 | 467 | $50.14 | | **Total** | **18,748** | **N/A** | - All shares purchased were acquired from employees for tax withholding purposes; no shares were bought back under the public repurchase program[235](index=235&type=chunk) [Other Information](index=49&type=section&id=Item%205.%20Other%20Information) Discloses significant management changes effective April 1, 2025, including new roles for Timothy S. Nicholls and the appointment of Lance T. Loeffler as CFO - Effective April 1, 2025, Timothy S. Nicholls was promoted to lead the DS Smith business in EMEA, and Lance T. Loeffler was appointed as the new Senior Vice President and Chief Financial Officer[239](index=239&type=chunk)[244](index=244&type=chunk) - New CFO Lance T. Loeffler's compensation package includes an **$850,000** base salary, a target bonus of **100%** of base salary, a one-time inducement RSU grant of **$1.7 million**, and a 2025 long-term incentive grant of **$3.5 million**[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) [Exhibits](index=52&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including employment agreements for key executives and Sarbanes-Oxley Act certifications - Filed exhibits include the employment offer letter for new CFO Lance T. Loeffler and certifications from the principal executive and financial officers[257](index=257&type=chunk)

Core Insights - International Paper reported Q2 2025 results, highlighting the impact of the DS Smith acquisition, with GAAP revenue reaching $6.8 billion, exceeding analyst expectations [1][2] - Non-GAAP EPS of $0.20 fell short of the $0.39 estimate, reflecting challenges from higher costs and integration expenses [1][2] - Net earnings (GAAP) dropped to $75 million from $498 million in Q2 2024, indicating an 84.9% decline [1][2] Financial Performance - Revenue (GAAP) increased by 44.7% year-over-year, from $4.7 billion in Q2 2024 to $6.8 billion in Q2 2025 [2] - Non-GAAP EPS decreased by 63.6% from $0.55 in Q2 2024 to $0.20 in Q2 2025 [2] - Free cash flow (non-GAAP) fell by 67.7% from $167 million in Q2 2024 to $54 million in Q2 2025 [2] Operational Highlights - The integration of DS Smith is now reflected in the North America and EMEA Packaging Solutions segments, with North America segment profit rising to $277 million [5] - EMEA sales reached $2.3 billion, but the segment reported a $1 million operating loss due to integration costs and subdued demand [5] - Global Cellulose Fibers segment sales declined to $628 million, resulting in a $4 million loss, attributed to downtime and higher operating expenses [6] Strategic Focus - The company is concentrating on transforming core operations through the DS Smith acquisition and a strategic 80/20 approach to enhance efficiency and reduce costs [4] - Future success hinges on effective integration of DS Smith, achieving cost savings, and leading in sustainable packaging innovations [4] Shareholder and Debt Information - Shareholders received $488 million in dividends during the first half of 2025, while long-term debt increased to $9.7 billion as of June 30, 2025 [9] - The acquisition expanded the employee base to 65,000, reflecting the scale of the transaction [9] Future Outlook - Management is optimistic about Q3, anticipating increased global revenue and earnings as integration progresses [11] - Caution is advised regarding potential softness in European markets that may limit the benefits of price increases [11] - The company aims to improve full-year EBITDA and achieve synergy and cost-out targets, with a focus on margin recovery and cost efficiencies [12]

Core Insights - International Paper Company (IP) reported second-quarter 2025 adjusted earnings of 20 cents per share, missing the Zacks Consensus Estimate of 38 cents by 47% and reflecting a 64% year-over-year decline [1][10] - Net sales for the quarter reached $6.767 billion, a 42.9% increase from the previous year, but fell short of the Zacks Consensus Estimate of $6.770 billion [2][10] Financial Performance - The cost of sales was $4.88 billion, up 45.1% from $3.36 billion in the same quarter last year, while gross profit increased 37.6% year over year to $1.89 billion, resulting in a gross margin of 27.9%, down from 29% a year ago [3] - Selling and administrative costs rose to $578 million, a 27.6% increase from $453 million in the prior-year quarter, with adjusted operating profit at $105 million, down 45.6% from $193 million in Q2 2024 [4] Segment Performance - Packaging Solutions North America reported sales of $3.86 billion, a 6.4% increase year over year, but operating profit fell 1.4% to $277 million [6] - Packaging Solutions EMEA saw sales rise to $2.29 billion from $0.35 billion due to the integration of DS Smith, but reported an operating loss of $1 million compared to a profit of $10 million in the prior year [7] - Global Cellulose Fibers experienced a 12.4% decline in sales to $628 million, resulting in an operating loss of $4 million, down from a profit of $31 million in the same quarter last year [8] Cash and Debt Position - At the end of the second quarter, cash and temporary investments totaled $1.13 billion, slightly down from $1.17 billion at the end of 2024 [9] - Long-term debt increased to $9.69 billion from $5.34 billion as of the end of 2024, with cash flow from operating activities at $188 million in the first half of 2025, compared to $760 million in the same period of 2024 [11] Stock Performance - The company's shares have increased by 19.6% over the past year, while the industry has seen a rise of 28.5% [12]

Economic Indicators - The Personal Consumption Expenditures (PCE) report for June showed results warmer than expected, with year-over-year PCE reaching +2.6%, which is 10 basis points higher than anticipated [2][5] - Personal Income increased by +0.3%, exceeding expectations by 10 basis points, while Personal Spending fell to +0.3%, down 10 basis points from expectations [3][4] - The overall PCE Index month-over-month was in line with expectations at +0.3%, following an upwardly revised +0.2% the previous month [4] Job Market - Initial Jobless Claims rose slightly to 218K, marking the first increase in seven weeks, but still significantly lower than the 250K seen in early June [7] - Continuing Claims remained stable at 1.946 million, indicating a leveling off after a period of decline [8] - The upcoming Employment Situation report for July is expected to show 100K new jobs, which is a decrease of 47K from the previous month [9] Q2 Earnings Reports - AbbVie reported Q2 earnings of $2.97 per share, surpassing projections of $2.89, with a year-to-date increase of +6.5% [10] - CVS Health exceeded earnings estimates with $1.81 per share, resulting in an earnings beat of +23.13% and a year-to-date increase of +38.8% [10] - Mastercard's earnings of $4.15 per share beat expectations by 10 cents, with a year-to-date increase of +6% [10] - Bristol Myers-Squibb had a notable earnings beat at $1.46 per share, exceeding estimates by +36.45% [11] - International Paper reported a significant earnings drop to $0.20 per share, missing expectations by -47.37% [11] - Sirius XM missed estimates with earnings of 57 cents per share, resulting in a -27.85% earnings surprise [12] Market Outlook - The Chicago Business Barometer (PMI) report is expected after the market opens, with no further scheduled announcements [13] - Anticipation surrounds upcoming earnings reports from major companies such as Apple and Amazon, with expectations of modest gains for Apple and high-single-digit growth for Amazon [14]

Financial Data and Key Metrics Changes - The second quarter revenue met expectations, with a goal of achieving $6 billion in EBITDA by 2027 [6][7] - Adjusted operating earnings per share for the second quarter was $0.20, down from $0.23 in the first quarter [27] - Free cash flow for the second quarter was $54 million, with expectations for the full year ranging from $100 million to $300 million [25][27] Business Line Data and Key Metrics Changes - In Packaging Solutions North America, on-time delivery improved from 92% to 97% [15] - Volume in Packaging Solutions North America was seasonally higher, while EMEA experienced lower volumes due to market softness [23][36] - The company expects to achieve a run rate of approximately $650 million in commercial excellence benefits by the end of the year [16][20] Market Data and Key Metrics Changes - Industry demand in North America remained stable but softer than the previous year, with expectations for stable box demand in the third quarter [11][12] - EMEA box shipments slowed by approximately 1% in the second quarter, but June showed signs of recovery [13] - The company anticipates a moderate increase in demand in the second half of the year, driven by seasonal growth in fast-moving consumer goods [14] Company Strategy and Development Direction - The company is focused on a transformational journey, deploying the "eightytwenty" strategy to drive improvements and synergies [7][8] - Strategic decisions include closing and selling facilities to reduce complexity and minimize costs [18][20] - The company aims to build a pure play packaging business, emphasizing stability and predictability [67] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing mill reliability issues, attributing them to years of underinvestment and emphasizing the need for consistent capital reinvestment [48][90] - The outlook for North America is positive, with expectations of closing the gap to industry standards by the fourth quarter [12][56] - In Europe, the company is experiencing variability due to market conditions, but remains committed to achieving its EBITDA targets [66][68] Other Important Information - The company has proposed to close five UK plants, which is expected to yield approximately $25 million in savings [19] - The strategic review of the global Southern Fibers business is ongoing, with no changes to the expected timeline [22] Q&A Session Summary Question: Concerns about mill reliability issues - Management acknowledged that mill reliability issues have been building for years due to underinvestment and emphasized the need for consistent capital reinvestment [48][49] Question: Outlook for North America and EMEA - Management expressed confidence in North America, citing improvements in commercial operations and the potential for growth, while acknowledging the challenges in Europe due to market conditions [56][62] Question: July box volumes and customer inventories - Management indicated that the market remains relatively flat, with cautious customer behavior and no significant evidence of restocking anticipated [72][74] Question: Opportunities for accelerating reinvestment in mills - Management stated that while there is a focus on mill reliability, the ability to accelerate reinvestment is constrained by the need to prioritize strategic assets [90][92] Question: Update on exiting non-strategic export markets - Management confirmed progress in exiting non-strategic export markets, emphasizing that not all export is detrimental [94]

Financial Data and Key Metrics Changes - The second quarter adjusted operating earnings per share was $0.20, down from $0.23 in the first quarter, with price and mix increasing by $0.21 per share due to strong price realization in Packaging Solutions North America [27][28] - Free cash flow for the second quarter was $54 million, with expectations for the full year ranging from $100 million to $300 million [25][26] - The company is holding its 2025 EBITDA guidance, targeting $600 million, and aims for $1.1 billion by 2027 [6][20] Business Line Data and Key Metrics Changes - In Packaging Solutions North America, on-time delivery improved from 92% in Q4 of the previous year to 97% in Q2 [15] - Volume in Packaging Solutions North America was seasonally higher, while EMEA experienced lower volume due to macroeconomic uncertainty [23][36] - The company announced the closure of four facilities and the sale of three facilities in North America to reduce complexity and minimize costs [17] Market Data and Key Metrics Changes - Industry demand in North America has been stable but softer than last year, with expectations for stable box demand in Q3 and potential upside in Q4 [11][12] - EMEA box shipments slowed by approximately 1% in Q2, primarily due to market softness, although June showed signs of recovery [13] - The company anticipates a moderate increase in demand in EMEA in the second half of the year, driven by seasonal growth in fast-moving consumer goods [14] Company Strategy and Development Direction - The company is focused on a transformational journey aiming for $6 billion in EBITDA by 2027, with a strategy centered around the "eightytwenty" initiative to drive operational excellence [6][8] - The company is committed to a relentless pursuit of commercial excellence and cost reduction to build a stronger organization [21][22] - The strategic review of the global Southern Fibers business is ongoing, with no changes to the expected timeline [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in closing the market share gap in North America despite soft market conditions in the U.S. and EMEA [6][12] - The management acknowledged ongoing mill reliability issues, attributing them to years of underinvestment, and emphasized the need for consistent capital reinvestment [50][94] - The outlook for EMEA remains cautious due to macroeconomic volatility, but management believes the trough was reached in early Q2 [67] Other Important Information - The company has proposed to close five UK plants, which is expected to yield approximately $25 million in savings [20] - The company is nearing its goal of a $600 million run rate in cost-out actions by year-end [20] Q&A Session Summary Question: Concerns about mill reliability issues - Management acknowledged that mill reliability issues have been building for years due to underinvestment and emphasized the need for consistent capital reinvestment into strategic assets [50][52] Question: Outlook for North America and EMEA - Management expressed confidence in North America due to improved commercial actions and the implementation of the eightytwenty initiative, while EMEA's outlook remains subject to market conditions [60][67] Question: July box volumes and customer inventories - Management indicated that the market is relatively flat, with no evidence of significant restocking among customers, and highlighted the cautious approach of customers regarding net investment spending [76][80] Question: Opportunities for accelerating reinvestment in mills - Management stated that while there is a focus on mill reliability, the ability to accelerate reinvestment is constrained by the need to avoid funding non-strategic assets [94][96] Question: Update on exiting non-strategic export markets - Management reported progress in exiting non-strategic export markets, indicating they are about halfway through the process [100][102]

Financial Performance - Sales for Q2 2025 reached $6767 million, compared to $5901 million in Q1 2025 and $4734 million in Q2 2024[27] - Adjusted EBITDA for Q2 2025 was $733 million, down from $769 million in Q1 2025 but up from $561 million in Q2 2024[27] - Adjusted Operating EPS decreased from $023 in Q1 2025 to $020 in Q2 2025[27] - Free Cash Flow improved significantly from $(618) million in Q1 2025 to $54 million in Q2 2025[27] Packaging Solutions North America (PS NA) - PS NA Sales increased to $3860 million in Q2 2025 from $3702 million in Q1 2025 and $3628 million in Q2 2024[34] - PS NA Adjusted EBITDA was $515 million in Q2 2025, compared to $554 million in Q1 2025 and $465 million in Q2 2024[35] - IP U S Box shipments decreased by 50% YoY/day[37] Packaging Solutions EMEA (PS EMEA) - PS EMEA Sales significantly increased to $2291 million in Q2 2025, including DS Smith results, compared to $1550 million in Q1 2025 and $328 million in Q2 2024[40] - PS EMEA Adjusted EBIT was $(1) million in Q2 2025, down from $46 million in Q1 2025 and $10 million in Q2 2024[40] - PS EMEA Adjusted EBITDA was $194 million in Q2 2025, up from $153 million in Q1 2025 and $26 million in Q2 2024[40] Global Cellulose Fibers (GCF) - GCF Sales decreased to $628 million in Q2 2025 from $643 million in Q1 2025 and $717 million in Q2 2024[45] - GCF Adjusted EBITDA decreased to $45 million in Q2 2025 from $68 million in Q1 2025 and $90 million in Q2 2024[46] - GCF Adjusted EBITDA Margin decreased to 72% in Q2 2025 from 106% in Q1 2025 and 126% in Q2 2024[47] Strategic Initiatives - Commercial Excellence actions are expected to yield ~$650 million YTD, targeting $11 billion by 2027[16] - Cost Out actions are expected to yield ~$550 million YTD, targeting $19 billion by 2027[20]

Core Viewpoint - International Paper reported quarterly earnings of $0.20 per share, missing the Zacks Consensus Estimate of $0.38 per share, and down from $0.55 per share a year ago, indicating a significant earnings surprise of -47.37% [1] - The company posted revenues of $6.77 billion for the quarter, slightly missing the Zacks Consensus Estimate by 0.04%, and showing an increase from $4.73 billion year-over-year [2] Financial Performance - Over the last four quarters, International Paper has surpassed consensus EPS estimates two times and topped revenue estimates only once [2] - The company's shares have decreased by approximately 0.4% since the beginning of the year, contrasting with the S&P 500's gain of 8.2% [3] Future Outlook - The future performance of International Paper's stock will largely depend on management's commentary during the earnings call and the revisions of earnings estimates [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.67 on revenues of $6.92 billion, and for the current fiscal year, it is $2.01 on revenues of $26.53 billion [7] Industry Context - The Paper and Related Products industry, to which International Paper belongs, is currently ranked in the bottom 16% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of International Paper's stock may also be influenced by the overall outlook for the industry [8]

[Financial Highlights & Outlook](index=1&type=section&id=Financial%20Highlights%20%26%20Outlook) International Paper reported Q2 2025 net earnings of $75 million ($0.14/share) and adjusted operating earnings of $105 million ($0.20/share) on net sales of $6.8 billion, with stronger Q3 global revenue and earnings anticipated Q2 2025 Key Financial Results | Metric | Value | | :--- | :--- | | Net Sales | $6.8 billion | | Net Earnings | $75 million | | Net EPS (Diluted) | $0.14 | | Adjusted Operating Earnings (Non-GAAP) | $105 million | | Adjusted Operating EPS (Non-GAAP) | $0.20 | - CEO Andy Silvernail highlighted that Q2 results reflect a full quarter with the combined DS Smith business, with commercial efforts driving revenue and seasonally higher volumes in North America, though margins were impacted by cost headwinds and maintenance outages[3](index=3&type=chunk) - The company expects stronger global revenue and earnings in Q3 2025, citing confirmed strategic wins, progress on cost-out initiatives, and fewer planned maintenance outages[3](index=3&type=chunk) EPS Comparison (Q2 2025 vs. Q1 2025 vs. Q2 2024) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Earnings (Loss) Per Share | $0.14 | $(0.24) | $1.41 | | Adjusted Operating Earnings Per Share | $0.20 | $0.23 | $0.55 | Select Financial Measures Comparison (in millions) | Metric | Q2 2025 (in millions) | Q1 2025 (in millions) | Q2 2024 (in millions) | | :--- | :--- | :--- | :--- | | Net Sales | $6,767 | $5,901 | $4,734 | | Net Earnings (Loss) | $75 | $(105) | $498 | | Adjusted Operating Earnings | $105 | $101 | $193 | | Free Cash Flow | $54 | $(618) | $167 | [Segment Performance](index=2&type=section&id=SEGMENT%20INFORMATION) Post-DS Smith acquisition, new segments Packaging Solutions North America, EMEA, and Global Cellulose Fibers show North America's operating profit nearly doubled to $277 million, while EMEA and Global Cellulose Fibers reported losses due to demand and cost pressures - The company has reorganized its reporting segments following the DS Smith acquisition, effective January 31, 2025, with new segments including Packaging Solutions North America, Packaging Solutions EMEA, and Global Cellulose Fibers[8](index=8&type=chunk) Business Segment Operating Profit (Loss) (in millions) | Segment | Q2 2025 (in millions) | Q1 2025 (in millions) | Q2 2024 (in millions) | | :--- | :--- | :--- | :--- | | Packaging Solutions North America | $277 | $142 | $281 | | Packaging Solutions EMEA | $(1) | $46 | $10 | | Global Cellulose Fibers | $(4) | $17 | $31 | [Packaging Solutions North America (PS NA)](index=2&type=section&id=Packaging%20Solutions%20North%20America) PS NA operating profit increased to $277 million in Q2 2025 from $142 million in Q1 2025, driven by higher sales prices and volumes, partially offset by increased manufacturing costs and overhead expenses - PS NA operating profit was **$277 million** in Q2 2025, a significant increase from **$142 million** in Q1 2025[11](index=11&type=chunk) - Performance was driven by higher sales prices for boxes and containerboard and seasonally higher box volumes[11](index=11&type=chunk) - Depreciation was lower due to the non-repeat of a **$193 million** accelerated depreciation charge from Q1 related to a mill closure[13](index=13&type=chunk) [Packaging Solutions EMEA (PS EMEA)](index=3&type=section&id=Packaging%20Solutions%20EMEA) The PS EMEA segment reported an operating loss of $(1) million in Q2 2025, a sharp decline from a $46 million profit, despite increased net sales to $1.9 billion due to the DS Smith acquisition, impacted by soft demand, higher energy costs, and increased depreciation and amortization - PS EMEA reported an operating loss of **$(1) million** in Q2 2025 compared to a **$46 million** profit in Q1 2025[14](index=14&type=chunk) - Net sales increased to **$1.9 billion** from **$1.2 billion** in Q1, reflecting three months of DS Smith results versus two months in the prior quarter[14](index=14&type=chunk) - Profitability was negatively impacted by a soft demand environment, higher energy and maintenance costs, and a significant increase in depreciation and amortization from the DS Smith acquisition accounting[14](index=14&type=chunk) [Global Cellulose Fibers](index=3&type=section&id=Global%20Cellulose%20Fibers) The Global Cellulose Fibers segment posted an operating loss of $(4) million in Q2 2025, down from a $17 million profit, primarily due to lower sales volumes offsetting higher prices, and increased planned outage and operating costs - Global Cellulose Fibers reported an operating loss of **$(4) million** in Q2 2025, compared to a **$17 million** profit in Q1 2025[15](index=15&type=chunk) - Net sales were lower as higher average sales prices were more than offset by lower volumes[15](index=15&type=chunk) - Costs were higher due to planned outages and increased operating expenses[15](index=15&type=chunk) [Effects of Net Special Items](index=3&type=section&id=EFFECTS%20OF%20NET%20SPECIAL%20ITEMS) The company recorded a net after-tax charge from special items of $34 million ($0.06 per share) in Q2 2025, significantly lower than Q1 2025, including DS Smith combination costs, severance, and a gain on European box plant sales Net Special Items Summary (After Tax, in millions) | Item | Q2 2025 (in millions) | Q1 2025 (in millions) | Q2 2024 (in millions) | | :--- | :--- | :--- | :--- | | DS Smith combination costs | $29 | $183 | $17 | | Severance and other costs | $34 | $63 | — | | Net (gain) on sale of business | $(40) | — | — | | **Total special items, net** | **$34** | **$204** | **$(297)** | - A gain of **$51 million** (pre-tax) was recognized from the sale of five European box plants to satisfy regulatory commitments for the DS Smith combination[17](index=17&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) Unaudited financial statements reflect significant changes due to the DS Smith acquisition, with a net loss of $30 million on $12.7 billion net sales for H1 2025, substantial balance sheet expansion, and decreased cash from operations [Consolidated Statement of Operations](index=7&type=section&id=Consolidated%20Statement%20of%20Operations) For Q2 2025, International Paper reported Net Sales of $6.8 billion and Net Earnings of $75 million, compared to Q2 2024's $4.7 billion sales and $498 million earnings, with 2025 results impacted by DS Smith combination costs Consolidated Statement of Operations Highlights (in millions) | Line Item | Q2 2025 (in millions) | Q2 2024 (in millions) | | :--- | :--- | :--- | | Net Sales | $6,767 | $4,734 | | Cost of products sold | $4,876 | $3,360 | | Earnings Before Income Taxes | $116 | $206 | | Net Earnings (Loss) | $75 | $498 | [Consolidated Balance Sheet](index=10&type=section&id=Consolidated%20Balance%20Sheet) As of June 30, 2025, the balance sheet expanded significantly due to the DS Smith acquisition, with Total Assets growing to $42.4 billion from $22.8 billion, driven by increases in Goodwill, Intangibles, and PP&E, and Long-Term Debt rising to $9.7 billion Balance Sheet Comparison (in millions) | Metric | June 30, 2025 (in millions) | Dec 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $9,499 | $6,424 | | Goodwill | $7,531 | $3,038 | | Intangibles, Net | $4,406 | $145 | | **Total Assets** | **$42,376** | **$22,800** | | Long-Term Debt | $9,694 | $5,368 | | **Total Equity** | **$18,617** | **$8,173** | [Consolidated Statement of Cash Flows](index=11&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) For H1 2025, cash provided by operating activities was $188 million, down from $760 million in H1 2024, with investing activities using $38 million and financing activities using $253 million, primarily for dividends Six-Month Cash Flow Summary (in millions) | Activity | H1 2025 (in millions) | H1 2024 (in millions) | | :--- | :--- | :--- | | Cash Provided By Operating Activities | $188 | $760 | | Cash Provided By (Used For) Investment Activities | $(38) | $(446) | | Cash Provided By (Used for) Financing Activities | $(253) | $(365) | | **Change in Cash** | **$(35)** | **$(64)** | [Non-GAAP Reconciliations](index=9&type=section&id=Non-GAAP%20Reconciliations) The company provides reconciliations for non-GAAP measures like Adjusted Operating Earnings and Free Cash Flow to their GAAP equivalents, aiding investors in assessing operational performance - Management uses non-GAAP measures like Adjusted Operating Earnings and Free Cash Flow to focus on ongoing operations and believes they are useful for investors in assessing performance and comparing results[29](index=29&type=chunk)[37](index=37&type=chunk) [Reconciliation of Net Earnings to Adjusted Operating Earnings](index=9&type=section&id=Reconciliation%20of%20Net%20Earnings%20to%20Adjusted%20Operating%20Earnings) For Q2 2025, GAAP Net Earnings of $75 million are reconciled to non-GAAP Adjusted Operating Earnings of $105 million by adding back net special items and accounting for non-operating pension income Q2 2025 Reconciliation of Net Earnings to Adjusted Operating Earnings (in millions) | Line Item | Q2 2025 (in millions) | | :--- | :--- | | Net Earnings (Loss) | $75 | | Add back: Non-operating pension expense (income) | $(5) | | Add back: Net special items expense (income) | $35 | | Income taxes - Non-operating pension and special items | $— | | **Adjusted Operating Earnings** | **$105** | [Reconciliation of Cash Provided by Operations to Free Cash Flow](index=12&type=section&id=Reconciliation%20of%20Cash%20Provided%20by%20Operations%20to%20Free%20Cash%20Flow) In Q2 2025, cash from operating activities of $476 million, after subtracting $422 million for capital expenditures, resulted in Free Cash Flow of $54 million, a decrease from Q2 2024 Free Cash Flow Reconciliation (in millions) | Line Item | Q2 2025 (in millions) | Q2 2024 (in millions) | | :--- | :--- | :--- | | Cash Provided By (Used For) Operating Activities | $476 | $365 | | Capital expenditures | $(422) | $(198) | | **Free Cash Flow** | **$54** | **$167** |