Attached files
 Building on the
Future
Building on the
Future
June 6, 2011
June 6, 2011
Exhibit 99.2 |
 2
Forward-Looking Statements
Forward-Looking Statements
All statements included or incorporated by reference in these slides other than
statements or characterizations of historical fact, are forward-looking
statements. These statements reflect management's current views and are
subject to risks and uncertainties that could cause actual results to differ
materially from those expressed or implied in these statements. Factors
which could cause actual results to differ relate to: (i) The failure to
realize
synergies
and
cost
savings
from
the
transaction
or
delay
in
realization
thereof;
(ii)
increases in interest rates; (iii) industry conditions, including but not limited
to changes in the cost or availability of raw materials, energy and
transportation costs, competition we face, cyclicality and changes in
consumer preferences, demand and pricing for our products;
(iv)
global
economic
conditions
and
political
changes,
including
but
not
limited
to
the impairment of financial institutions, changes in currency exchange rates,
credit ratings issued by recognized credit rating organizations, the amount
of our future pension funding obligation, changes in tax laws and pension
and health care costs; (v) unanticipated expenditures
related
to
the
cost
of
compliance
with
existing
and
new
environmental
and
other governmental regulations and to actual or potential litigation; and (vi)
whether we experience a material disruption at one of our manufacturing
facilities and risks inherent in conducting business through a joint
venture. We undertake no obligation to publicly update any statements or
information relating to these slides or the potential offer, whether as a
result
of
new
information,
future
events
or
otherwise.
These
and
other
factors
that
could
cause or contribute to actual results differing materially from such forward
looking statements are discussed in greater detail in the company's SEC
filings. |
 3
Statements Relating to Non-GAAP
Financial Measures
Statements Relating to Non-GAAP
Financial Measures
During the course of this presentation, certain
non-U.S. GAAP financial information will be
presented.
A reconciliation of those numbers to U.S. GAAP
financial measures is available on the
company’s
website
at
internationalpaper.com
under Investors. |
 4
Consistent with IP’s transformation plan and focus on achieving and
sustaining cost of capital returns
Makes a very good business an excellent one
-
Compelling strategic and industrial logic
-
Shared focus on low-cost mills; complementary converting systems; high level
of box integration
-
Powerful cash flow engine
Delivers near and long term value for both IP and TIN shareholders
driven by significant synergies
-
Substantial and immediate premium for TIN shareholders represents unique
opportunity to realize compelling and certain value, in cash today
-
By
end
of
year
one,
strongly
earnings
accretive
to
IP,
continues
to
drive
FCF
and
ROI
improvement while maintaining Debt / EBITDA below 3x
IP is a proven outstanding operator with demonstrated track record
of success integrating acquisitions
Building on the Future
The Temple-Inland Opportunity
Building on the Future
The Temple-Inland Opportunity |
 5
•
Exited non-strategic businesses
•
Reduced structural capacity & fixed costs
•
Significant reduction of overhead costs
•
Industry-leading margins
•
Increased dividend to a sustainable level
•
Generate strong, sustainable FCF
•
Expand margins & earnings in all businesses
•
Achieve cycle-average ROI above cost-of-capital
•
Balance cash allocation
•
Recovering from industry demand declines
•
Managing our supply to meet customer demand
•
Improving liquidity
•
Capitalizing on global demand growth
Transformation to the “New IP”
2006-2011
Transformation to the “New IP”
2006-2011
What
We’ve
Done
What
We’re
Doing
What
We’ll
Do |
 6
Transformation Accomplishments
Transformation Accomplishments
Significant improvement in margins
Replaced land sales earnings by strengthening core businesses
Achieved Cost of Capital returns
Balanced Use of Cash
-
Cash to Shareholders -
$1.05 dividend, $460MM (~30% FCF)
-
Reinvestment in Base Business -
CAPEX $1B/year
-
Debt Repayment
EBITDA coverage from 5.1x to <3.0x
-
Investment in Core North America Businesses to enhance FCF
WY PKG
-
Investment
Internationally
for
Profitable
Growth
and
Future
Cash
Generation
ILIM JV
Sun JV coated paperboard
SCA Packaging Asia
APPM India (pending) |
 7
Streamlined Business Portfolio
Improved Positions in more Profitable Segments
Streamlined Business Portfolio
Improved Positions in more Profitable Segments
Segment Position
Market Segment
2004
2010
U.S. Industrial Packaging
#3
#1
U.S. Uncoated Papers
#1
#2
U.S. Coated Paperboard
#1
#1
Global Market Pulp
Secondary
#4
U.S. Coated Papers
Secondary
Exited
U.S. Wood Products
Secondary
Exited
U.S. Forestland
#2
Exited
U.S. Kraft Paper
Secondary
Exited
U.S. Chemicals
Secondary
Exited
U.S. Beverage Packaging
Secondary
Exited |
       8
Step-Change
Improvement
in
Free
Cash
Flow
Step-Change
Improvement
in
Free
Cash
Flow
Free cash flow, based on data in the 10-K for each year at the time of
filing. Excludes net cash pension contributions impacting 2006, 2010 &
2011 cash flows under European accounts receivable securitization beginning
in 2009 and ending in 1Q 2011, and cash received from AFMTC & CBTC in
2009 and 2010. 1Q RR
2000 –
2004 Average
$0.9 Billion
Transformation
2008 –
2011 Average
$1.8 Billion |
 9
Improving Returns on Invested Capital
Transformation Driving ROI
Improving Returns on Invested Capital
Transformation Driving ROI |
 10
1H10
Margin
12%
17%
14%
24%
22%
11%
Significantly Improved EBITDA Margins
Significantly Improved EBITDA Margins |
 11
Step Change in Level of Performance
Post-WY PKG Acquisition
Step Change in Level of Performance
Post-WY PKG Acquisition
Post-WY PKG
Note: Corporate allocations for 2000 –
2004 held constant at 2005 allocation level, EBITDA % margins calculated per
external reporting
with
trades
included
in
revenue.
2000
–
2006
also
excludes
discontinued
operations
–
Kraft
and
Specialty
IP Industrial Packaging EBITDA Trend |
 12
Demonstrated Ability to Deliver Synergies
Demonstrated Ability to Deliver Synergies
Synergies generated from the WY PKG acquisition have
exceeded expectations
Targeted $400MM of synergies on a sales base of
$5.2B
Generated over $500MM of run rate synergies ahead
of plan
Synergies strongly contributed to the better than cost
of capital returns generated within 18 months of the
acquisition |
 13
Strengthening North American Industrial Packaging
Strengthening North American Industrial Packaging
($ Billion)
North American
Industrial Packaging
Pre-WY PKG
2007
3Q’10-1Q’11
Annualized
Sales
$3.9
$8.6
EBITDA (before special items)
$0.5
$1.6
EBITDA Margin
IPG = 13%
Comp. A = 20%
Comp. B = 11%
Comp. C = 9%
IPG = 19%
Comp. A = 20%
Comp. B = 15%
Comp. C = 13%
ROI (before special items)
7%
10%
Industry Box Volume (BSF)
390
357 |
 14
Strengthening International Paper
Strengthening International Paper
($ Billion, except per share)
IP Total
Excl. Forest Products
Pre-WY PKG
2007
3Q’10-1Q’11
Annualized
Sales
$21.4
$25.9
EBITDA (before special items)
$2.3
$3.7
EBITDA Margin
11%
14%
Free Cash Flow
(Includes special items;
excludes pension contribution & AFMTC)
$0.3
$2.2
ROI (before special items)
4%
8%
EPS (before special items)
$1.48
$3.00 |
 15
Current State Summary
Current State Summary
Focused Business Portfolio
Higher, More Sustainable Earnings
Reduced Costs
Reduced Debt
Increased Earnings, Free Cash Flow & Returns
Commitment to Balanced use of Cash to Generate
Increased Shareholder Value |
 16
Offer to Acquire Temple-Inland
Transaction Highlights
Offer to Acquire Temple-Inland
Transaction Highlights
Consideration
All-cash offer for all TIN shares at $30.60 per share
Premium
Premium of 44% to TIN price as of noon, 6 June 2011 ($21.21)
Accretion
Substantially accretive to IP EPS in first year
Synergies
Expect to generate significant synergies
Financing
IP has obtained committed financing in an amount sufficient to
consummate this transaction
IP is committed to remaining investment grade and expects the
acquisition would not result in a rating or outlook change
Regulatory
Approval
IP has thoroughly considered potential regulatory issues of this
combination and believes all approvals can be obtained
|
 17
Financing Overview
Financing Overview |
 18
Synergy Opportunities
Synergy Opportunities
S G & A
Business Overhead Reduction
Corporate Overhead Reduction
Mills
Machine / Product Optimization
Efficiency Improvements
Market Access
Mix Improvement
Supply Chain
Freight Optimization
Purchasing
Box Plants
System Streamlining |
 19
2011 Sales¹
of $4 Billion
2011 EBITDA¹
of $510 Million
4 Million Tons of
Containerboard Capacity
7 Containerboard Mills
59 Box Plants
14 Building Products Plants
Corrugated
82%
Building
Products
18%
2010 Segment Assets
Temple-Inland at a Glance
Predominately a Corrugated Packaging Company
Temple-Inland at a Glance
Predominately a Corrugated Packaging Company
1
First Call TIN estimates (without synergies) |
 20
N. A. Industrial Packaging
Producer Positions
N. A. Industrial Packaging
Producer Positions
Source:
RISI
N.A.
Paper
Packaging
Capacity
Reports,
SEC
filings,
IP
analysis,
RKT/
SSCC
announcements
to
public
in
2011
2010
Post RKT / SSCC Acquisition
2010
With IP + TIN
IP
12%
SSCC
18%
GP
11%
TIN
10%
PCA
6%
WY
16%
Other
27%
(35 companies)
IP
27%
RKT/ SSCC
19%
GP
11%
TIN
10%
PCA
6%
Other
27%
(30 companies)
2007
Prior to IP / WY PKG Acquisition
IP
37%
RKT
19%
GP
11%
PCA
6%
Other
27%
(30 companies) |
 21
External Environment
External Environment
U.S. economy is recovering
U.S. box demand grew 3% in 2010 and is
expected to grow with the economy
Strong demand for containerboard exports
U.S. supply and demand balanced |
 22
2011 -
Demand Still Recovering
2011 -
Demand Still Recovering
Source: Fibre Box Association
2011 Q1 Run Rate
U.S. Box Shipments |
 23
Acquisition Assessment
Acquisition Assessment
Creates Shareholder Value
Consistent with Strategy
Improves Core Business
Cost of Capital Returns
Significant Synergies
Greater Cash Flow Generation
Low Integration Risk |
 24
The ‘New IP’
Repositioned and well positioned
The ‘New IP’
Repositioned and well positioned
IP + TIN
EBITDA¹
1
Combined (IP + TIN) 2010 EBITDA excluding special items
North
America
75%
Rest of
World
25%
North America
Stronger free cash flow
Leading core segment positions
ROI greater than cost of capital
EMEA,
Brazil,
Asia,
Russia
JV,
India
•
Growing margins
•
Revenue + profit growth runway
•
Leading emerging market positions |
 25
Asia
India
Eastern Europe
Brazil
North America
Russia
Western Europe
TIME
Today
2011-2012
Near Term
Next 3-5 Years
Medium Term
Next 5+ Years
Earnings Growth Horizon
Temple-Inland “an investment for today”
Earnings Growth Horizon
Temple-Inland “an investment for today” |
 26
Path Forward
Path Forward
IP Board of Directors is serious and committed
Given TIN’s Board outright rejection and lack of interest
to engage, IP has decided to take the offer directly to
shareholders
A negotiated transaction represents the best path
forward for all shareholders
All reasonable options are on the table with respect to
next steps |
 27
Acquisition Summary
Acquisition Summary
Consistent with strategy
Financially attractive
-
Accretive in year one
-
Returns exceed cost of capital
Strengthens IP’s portfolio
Makes a good Industrial Packaging business an
excellent one
Significant synergy opportunities
Creates shareholder value |
 28
Other Information
Additional Information
Other Information
Additional Information
This communication does not constitute an offer to buy or solicitation of an offer
to sell any securities. No tender offer for the shares of Temple-Inland
Inc. (“Temple-Inland”) has commenced at this time. In
connection with the proposed transaction, International Paper Company (the
“Company”) may file tender offer documents with the U.S. Securities and
Exchange Commission (“SEC”). Any definitive tender offer documents
will be mailed to stockholders of Temple-Inland. INVESTORS AND SECURITY
HOLDERS OF TEMPLE- INLAND ARE URGED TO READ THESE AND OTHER DOCUMENTS
FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Investors and security holders will be able to obtain free copies of
these documents
(if
and
when
available)
and
other
documents
filed
with
the
SEC
by
the
Company
through
the
web
site
maintained
by
the
SEC
at
http://www.sec.gov.
In
connection
with
the
proposed
transaction,
the
Company
may
file
a
proxy
statement
with
the SEC. Any definitive proxy statement will be mailed to stockholders of
Temple-Inland. INVESTORS AND SECURITY HOLDERS OF TEMPLE-INLAND
ARE URGED TO READ THESE AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN
THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT
INFORMATION
ABOUT
THE
PROPOSED
TRANSACTION.
Investors
and
security holders will be able to obtain free copies of these documents (if and when
available)
and
other
documents
filed
with
the
SEC
by
the
Company
through
the
web
site
maintained by the SEC at http://www.sec.gov. |
 29
Other Information
Certain Information Regarding Participants
Other Information
Certain Information Regarding Participants
The Company and certain of its respective directors and executive officers
may be deemed to be participants in the proposed transaction under the rules
of the SEC. Security holders may obtain information regarding the names,
affiliations and interests of the Company’s directors and executive officers
in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2010 which was filed with the SEC on February 25, 2011, and its
proxy statement for the 2011 Annual Meeting, which was filed with the SEC on
April 8, 2011.
These
documents
can
be
obtained
free
of
charge
from
the
sources
indicated
above.
Additional
information
regarding
the
interests
of
these
participants in the proxy solicitation and a description of their direct and
indirect
interests,
by
security
holdings
or
otherwise,
will
also
be
included
in
any proxy statement and other relevant materials to be filed with the SEC
when they become available. |
 30
Investor Relations Contacts
Glenn R. Landau
901-419-1731
Emily Nix
901-419-4987
Media Contact
Tom Ryan
901-419-4333
Contacts
Contacts |