International Paper Company

Ladies and gentlemen, thank you for standing by and welcome to the International Paper Second Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. I will now turn the call over to Guillermo Gutierrez, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Laurie. Good morning, and thank you for joining International Papers, second quarter 2020. Our speakers this morning are Mark Sutton, Chairman and Chief Executive Officer, and Tim Nichols, Senior Vice President and Chief Financial Officer. There's important information at the beginning of the presentation on slide two, including certain legal disclaimers. For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties, including the impact of COVID-19. We will also present certain non-U.S. GAAP financial information. A reconciliation to those figures to U.S. GAAP financial measures is available on our website. Our website also contains copies of the second quarter 2020 earnings press release and today's presentation spots. Relative to the IllumJoint venture and graphic packaging investments, Slide two also provides context around the financial information and statistical measures presented on those entities. I will now turn the call over to Mark Sutton.

Thank you, Guillermo, and good morning, everyone. We will begin our discussion on slide three. The COVID-19 pandemic continues to be unlike anything we've experienced and requires us to focus on what we need to do to remain strong and resilient for all our stakeholders in the short term as well as the long term. And as you can see from our results, that's exactly what we're doing. We delivered solid earnings and strong free cash flow in the second quarter, again demonstrating the strength of international paper. Through the first half of the year, we generated $1 billion of free cash flow through strong commercial and operational performance, as well as outstanding cost management across all of our businesses. As you would expect, demand and recovery trends vary greatly by business and end-use consumer segment. Overall, demand for corrugated packaging in fluff pulp continues to be resilient and is outpacing what you would expect in the general economic backdrop. Our North America box shipments were flat in the second quarter compared to last year, and we saw continued strong demand for fluff pulp. However, we've seen a substantial decline in demand for printing papers across all geographic regions due to work-from-home and school disruptions. Against this backdrop, our commercial teams are doing a tremendous job with our customers to ensure that we meet their changing needs. And our manufacturing and supply chain teams continue to leverage the scale and flexibility of our system to deliver strong operational performance and optimize cost across our businesses. All of this contributed to the company's solid performance in the second quarter. I'll turn to slide four now, which shows some of the specifics of our second quarter results. Operating earnings were 77 cents per share, and this included a favorable ILMFX non-cash impact of 9 cents in the quarter. Overall, our teams did a tremendous job managing through the current environment. Looking at sales, the majority of the sequential decrease is attributed to the decline in demand for printing papers. And as I said earlier, we generated strong free cash flow in the second quarter, bringing free cash flow to $1 billion for the first half of the year. We continue to apply cash consistent with our capital allocation framework to maintain a strong balance sheet, return cash to shareholders, and invest to create value. We will remain focused on cash generation and continue to be thoughtful in how we use cash as we manage through the ongoing uncertainty. Turning to slide five, As I said last quarter, International Paper entered the COVID-19 pandemic in a position of strength, and it all starts with our employees. I'm really proud of their ongoing commitment to take care of first each other and our customers. I want to take this opportunity once again to thank them, and especially our frontline teams, for their ability to not only adapt to the challenging environment, but to perform at a really high level even with reconfigured work systems that align with the highest COVID-19 health practices. I'm also proud of the work we're doing to support the critical needs in our communities, including our donation of corrugated boxes to agencies that deliver essential food and supplies. As we look ahead, we're starting to see some recovery in our markets as economies around the world begin to reopen. Having said that, Uncertainty regarding the duration and magnitude of the economic impact of COVID-19 persists. We'll continue to navigate these uncertain times by staying focused on the health and well-being of our employees, taking care of our customers, and ensuring that the company has a strong financial foundation through each phase of the crisis. Now I'll turn it over to Tim, who will cover our business performance as well as our third quarter outlook. Tim?