International Paper(IP) - 2024 Q2 - Quarterly Report

Financial Performance - Net earnings for Q2 2024 were $498 million ($1.41 per diluted share), a significant increase from $56 million ($0.16 per diluted share) in Q1 2024 and $235 million ($0.68 per diluted share) in Q2 2023[119]. - Adjusted operating earnings for Q2 2024 were $193 million ($0.55 per diluted share), compared to $61 million ($0.17 per diluted share) in Q1 2024 and $204 million ($0.59 per diluted share) in Q2 2023[119]. - Earnings from continuing operations for Q2 2024 totaled $498 million, or$1.41 per diluted share, compared to $56 million, or$0.16 per diluted share in Q1 2024 and $222 million, or$0.64 per diluted share in Q2 2023[150]. - Adjusted operating earnings per share for Q2 2024 were $0.55, compared to$0.59 in Q2 2023[133]. - The company reported a net special items gain of $297 million in Q2 2024, compared to a gain of$27 million in Q2 2023[155]. Sales and Volumes - Net sales for Q2 2024 were $4,734 million, a 2$3,931 million, a 3% increase from Q1 2024 and a 1% increase from Q2 2023, while operating profit was $291 million, 35$3,628 million, driven by higher average sales prices and seasonally higher volumes, with operating profit of $281 million[167]. - Global Cellulose Fibers net sales in Q2 2024 were$717 million, a 2% increase from Q1 2024 and a 3% increase from Q2 2023, with operating profit of $31 million[174]. - Sales volumes for corrugated packaging decreased to 2,255 thousand short tons in Q2 2024 from 2,393 thousand short tons in Q2 2023[156]. Costs and Expenses - Selling and administrative expenses increased by$95 million or 27% from Q1 2024 to Q2 2024, and by $117 million or 35$64 million or 2% from Q1 2024 to Q2 2024, while remaining flat compared to Q2 2023[139][140]. - Input costs in the Global Cellulose Fibers business were slightly higher due to increased chemical and wood costs, partially offset by lower energy costs[121]. - Operations and costs in the Industrial Packaging business are projected to increase due to higher reliability spending and labor costs during the summer months[123]. - Planned maintenance downtime costs are expected to be higher in Q3 2024 compared to Q2 2024, while input costs are anticipated to rise due to energy and recovered fiber[170]. Cash Flow and Investments - Free cash flow for the first six months of 2024 was $311 million, up from$265 million in the same period of 2023[135]. - The company generated cash provided by operations of $760 million in the first six months of 2024, down from$873 million in the same period of 2023[135]. - Cash provided by operations totaled $760 million for the first six months of 2024, down from$873 million in the same period of 2023, primarily due to timing of mill outage spending[178]. - Investments in capital projects totaled $449 million in the first six months of 2024, compared to$608 million in the same period of 2023, with full-year capital spending expected to be between $800 million and$1.0 billion[179]. Debt and Credit - The company recorded a net decrease in debt of $8 million in the first half of 2024, contrasting with a net increase of$236 million in the same period of 2023[179]. - At June 30, 2024, the company maintained long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) from S&P and Moody's, respectively[183]. - As of June 30, 2024, International Paper's credit agreements totaled $1.9 billion, including a$1.4 billion bank credit agreement and up to $500 million under a receivables securitization program[184]. - The company had no outstanding borrowings under the$1.4 billion credit agreement or the $500 million receivables securitization program as of June 30, 2024[184]. - The company has a commercial paper program with a borrowing capacity of$1.0 billion, supported by its $1.4 billion credit agreement, with no outstanding borrowings as of June 30, 2024[185]. Shareholder Returns - Cash dividend payments for the first six months of 2024 totaled$321 million, maintaining a dividend of $0.9250 per share, consistent with the same period in 2023[191]. - The company utilized 2.0 million shares of treasury stock for incentive plans and repurchased common stock totaling$22 million during the first six months of 2024[189]. - The current share repurchase program has approximately $2.96 billion remaining authorized for purchase as of June 30, 2024[189]. - International Paper expects to meet projected capital expenditures, service existing debt, and make stock repurchases with current cash balances and cash from operations[188]. Strategic Initiatives - The company is implementing an 80/20 strategic approach to focus on profitable growth and improve customer reliability and innovation in packaging solutions[120]. - The company expects price and mix improvements in the Industrial Packaging business in Q3 2024, driven by prior index movements and higher export prices[123]. - Anticipated earnings for Q3 2024 are expected to be negatively impacted by maintenance outage expenses and seasonally lower sales volumes[122]. - The company expects to close the acquisition of DS Smith in Q4 2024, with the transaction structured as an all-stock deal[124]. Tax Matters - An income tax benefit of$293 million was recorded for Q2 2024, resulting in an effective income tax rate of (142)%, primarily due to a tax benefit from internal legal entity restructuring[160]. - Special items for Q2 2024 included a tax benefit of $338 million related to internal legal entity restructuring[128]. - The company has fully satisfied its tax obligations related to the settlement of a tax matter, totaling$252 million in U.S. federal income taxes and $58 million in interest expense[193]. Pension and Retirement - International Paper's pension plan is fully funded, with no anticipated cash contributions required for the next 12 months[192].