Annual Performance Summary More Than 52,000 Board of Directors 25,000 Global Employees
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2018 Annual Performance Summary More than 52,000 Board of Directors 25,000 Global Employees Customers in LEFT TO RIGHT 150 Countries Ray G. Young Ilene S. Gordon Mark S. Sutton Not Pictured : Executive Vice President and Presiding Director Chairman and Chief Financial Officer Retired Executive Chairman Chief Executive Officer Anders Gustafsson Archer Daniels Midland Company Ingredion Incorporated International Paper Company Chief Executive Officer $23 Billion Zebra Technologies Corporation Clinton A. Lewis, Jr. J. Steven Whisler Christopher M. Connor (Effective March 1, 2019) Total Revenue in 2018 Executive Vice President and Retired Chairman and Retired Executive Chairman Group President Chief Executive Officer The Sherwin-Williams Company Kathryn D. Sullivan International Operations, Phelps Dodge Corporation Senior Fellow Commercial Development, Jacqueline C. Hinman Potomac Institute for Global Genetics and About the cover… Ahmet C. Dorduncu Former Chairman, President and Policy Studies and Aquatic Health Chief Executive Officer Chief Executive Officer Ambassador-at-Large Zoetis Inc. At International Paper, creating value for the future is all about people: employees, customers, suppliers, community Akkök Group CH2M HILL Companies, Ltd. Smithsonian National Air members, shareowners and all other stakeholders. That’s why we’re highlighting a few of these people in our suite of and Space Museum William J. Burns 2018 reports. This cover features an employee, a tree farmer, a child in one of our communities and Dusty Braddock, Jay L. Johnson David J. Bronczek President Retired Chairman and Retired President and who works for our customer, Sanderson Farms. Learn more about Dusty below, and about all our stakeholders at The Carnegie Endowment for Chief Executive Officer Chief Operating Officer InternationalPaper.com/reports. International Peace General Dynamics Corporation FedEx Corporation (Retired December 31, 2018) (Retired February 28, 2019) Dusty Braddock Corporate Purchasing, Sanderson Farms Global Headquarters Regional Headquarters International Paper Company International Paper Asia International Paper Europe, International Paper Russia 6400 Poplar Avenue 8F, Building A Middle East and Africa (EMEA) Kropotkina Street 1, Litera I International Paper has a long relationship with Memphis, TN 38197 Xuhui Vanke Center Chaussée de la Hulpe 166 Saint Petersburg, 197101, Russia United States of America 55 Ding An Road 1170 Brussels, Belgium Sanderson Farms, one of the largest poultry producers Shanghai, 200235, China in the United States. By partnering with our customer International Paper India to develop innovative packaging solutions, Sanderson corrugated boxes with an environmentally-friendly moisture barrier. Our team members regularly visit Dusty International Paper Brazil Krishe Sapphire Building Farms is able to serve millions of consumers. Avenida Engenheiro Luís 8th Floor Hitech City and his team at Sanderson Farms to ensure we exceed Carlos Berrini, Main Road, Madhapur Sanderson Farms supplies chicken to grocery stores expectations and continue working together toward 105 - 16 andar, São Paulo, Hyderabad 500 081, India across the country with our ClimaShield® packaging — recyclable packaging solutions. SP, Brazil Learn more at InternationalPaper.com/reports 2 Dear Fellow Mark S. Sutton Chairman and Chief Executive Officer “We are a strong, resilient company, International Paper delivered and we consistently deliver greater a strong performance in 2018. than cost of capital returns and generate robust cash flow. We are More importantly, we strengthened confident in our ability to perform consistently as we navigate dynamic our businesses and the company. economic and industry conditions.” We are well positioned for the challenges we may face. We have the people, the innovation, the best value chain to solve our customers’ needs, and a low-cost, high-quality manufacturing system to succeed. We are investing in high-return projects to strengthen our businesses and grow cash generation. Our team earned more than $4.3 billion of adjusted earnings before interest, tax, depreciation and amortization (EBITDA), delivering the second consecutive year of 16 percent earnings growth. We improved adjusted operating earnings per diluted share by 52 percent to $5.32 through strong commercial and operational execution, and we achieved a 13 percent adjusted return on invested capital, our ninth consecutive year of value-creating returns. We are proud of our collective accomplishments. We recognize that safety is our most important measure of success. Since 2010, we have reduced serious injuries by nearly 50 percent by building an active safety culture. Despite this meaningful progress, we experienced an increase in serious injuries in 2018 and, tragically, three contractors were fatally injured while performing work in our facilities. We continue to work with employees, suppliers and contractors to create layers of protection to ensure everyone returns home safely every day. 2018 ANNUAL PERFORMANCE SUMMARY | 1 We believe an injury-free workplace is possible. We know we still have a long way to go to achieve this ultimate goal, but we are working on the right things, Who we are and we are committed to keeping each other safe. We are one of the world’s leading producers of We produce fiber-based products that are integral to our renewable, fiber-based customers’ success. We continue to execute on our strategy packaging, pulp and paper. of establishing advantaged positions to serve attractive markets with innovative customer solutions and responsible procurement and manufacturing practices to maximize What we do value creation. We improve people’s lives, Industrial Packaging delivered outstanding revenue and earnings growth the planet and our through our deliberate focus on serving the fastest growing segments and company’s performance by aligning with the best customers. transforming renewable resources into products Global Cellulose Fibers achieved robust fluff pulp volume by understanding people depend on every day. and addressing customers’ needs through a powerful innovation engine and service model with global reach and local execution. Printing Papers delivered a strong performance and continues to generate How we do it significant cash – we are managing the North American business in a mature demand environment to maximize cash generation and to provide We do the right things, in future options for the company. the right ways, for the right reasons, all of the time – Our ownership interests in Ilim and Graphic Packaging contributed $336 this is The IP Way. Together, million in equity earnings, and provided $153 million in cash dividends to The IP Way and our Core International Paper. Values of Safety, Ethics and Stewardship serve as our guideposts as we carry out We generated strong cash from operations in 2018, which our mission. we used to strengthen our balance sheet, return cash to shareowners and invest to grow our cash generation. Consistent with our capital allocation framework, we increased our annual The IP Way dividend to $2 per share, the seventh consecutive annual increase, and we Forward repurchased about $700 million of outstanding shares. We also reduced balance sheet debt by about $500 million. With our focus on creating long-term value, We pursue our vision we invested to increase needed capacity and enhance capabilities to better and create value for all serve our customers. These investments will grow our future cash generation. stakeholders for generations to come through our strategic framework – We improved our environmental footprint and strengthened The IP Way Forward and our communities. its five drivers: Sustaining Forests, Investing in People, We continued to make progress on our Vision 2020 sustainability goals and Improving the Planet, remain on track to meet or exceed our most important objectives. We also Creating Innovative Products and Delivering began developing next-generation goals that will align with certain United Inspired Performance. Nations’ Sustainable Development Goals. In 2018, we donated products, provided volunteers and contributed more than $21 million to address critical needs in the communities where our employees live and work. We continue to contribute to building stronger communities. 2 | 2018 ANNUAL PERFORMANCE SUMMARY Outlook We are a strong, resilient company, and we consistently deliver greater than cost of capital returns and generate robust cash flow. We are confident in our ability to perform consistently as we navigate dynamic economic and industry conditions. We will maximize value creation for our shareowners through strong and sustainable cash from operations. We will maintain a strong balance sheet and investment grade credit rating. We will continue to invest in the business to support future cash generation. Returning cash to shareholders will continue to be an important component of our capital allocation framework through a strong and sustainable dividend of 40 to 50 percent of free cash flow and a consistent cadence of share repurchases based on value. On behalf of the International Paper Board of Directors and our more than 52,000 colleagues, thank you for your ongoing support and investment in International Paper as we pursue our vision to be among the most successful, sustainable and responsible companies in the world. Mark S. Sutton Chairman and Chief Executive Officer Leadership and Governance Transitions Strong governance and leadership are Zebra Technologies