Good morning, and thank you for standing by. Welcome to today's International Paper fourth-quarter and full-year 2019 earnings conference call. [Operator Instructions] I'd now like to turn today's conference over to Guillermo Gutierrez, vice president, investor relations. Please go ahead.

Thank you, Christie. Good morning, and thank you for joining International Paper's fourth-quarter and full-year 2019 earnings call. Our speakers this morning are Mark Sutton, chairman and chief executive officer; and Tim Nicholls, senior vice president and chief financial officer. There is information at the beginning of our presentation on Slide 2, including certain legal disclaimers. For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties. We will also present certain non-US GAAP financial information. A reconciliation of those figures to US GAAP financial measures is available on our website. Our website also contains copies of the fourth-quarter 2019 earnings press release and today's presentation slides. Relative to the Ilim joint venture and Graphic Packaging investments on Slide 2, we also provide 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. Thank you for joining our call. We'll begin our discussion on Slide 3. International Paper delivered solid earnings and outstanding free cash flow in 2019. Our performance demonstrates the strength of our cash generation and the flexibility of the company to navigate well even in challenging environments. While the US economy remains healthy, we managed through significant inventory headwinds and broader trade tensions that impacted our exports. Against this backdrop, we focused on optimizing our full-value chain. We grew with customers who are market leaders in their respective segments. We ran our manufacturing system well, and we leveraged the flexibility of our mill and converting system, all of which allowed us to continue to grow value for our shareowners with an ROIC of nearly 11%, which is well above our cost of capital. On capital allocation, we're making choices consistent with our framework. In 2019, we returned $1.3 billion to shareholders through dividends and share repurchases. We also increased our dividend for the tenth consecutive year, reinforcing our policy of a strong and sustainable payout of 40% to 50% of free cash flow. And we repaid $1 billion of debt to maintain a strong balance sheet. We continue to invest strategically to strengthen our Industrial Packaging business. In 2019, we made targeted investments in our U.S. box business to enhance our capabilities and reinforce our strong position in the fastest-growing segments. We also made selective acquisitions in our European packaging business to expand the converting network around our Madrid mill. I also want to share some context around our decision to start monetizing our investment in Graphic Packaging, which we announced earlier this week. The thinking around the original structure was to maximize the value of our North American Consumer Packaging business by…

Thank you, Mark. Good morning, everyone. I'm on Slide 7, which shows our year-over-year operating earnings bridge. Operating earnings decreased by $0.89 to $4.43 per share in 2019 in what was clearly a challenging environment, especially outside the U.S. Our results, as Mark said, reflect our ability to optimize our mill and converting systems and manage marginal costs as we matched our production to our customers' needs. Looking at the bridge, price and mix were a headwind, mostly due to significant price pressure in export pulp and containerboard markets, as well as the price impact of index movements in our North American packaging business. Volume was a drag on earnings largely due to challenging export markets. Export containerboard was impacted by unusually high customer inventories as we enter 2019, and it took about three quarters to normalize. Operations and costs were impacted by significant economic downtime, especially in the first half of the year as export shipments slowed and we reduced inventories across our North American packaging system on improved supply chain velocity and reliability. Input costs were favorable for the full year, driven mostly by lower recovered fiber and energy costs. And even though wood cost moderated in the second half of the year, they were actually a significant drag on earnings in 2019. All in, corporate items were favorable, with lower corporate and interest expense partly offset by higher tax expense in 2019. Equity earnings decreased due to lower Ilim earnings. Turning to Slide 8 and our fourth quarter results. EBITDA was $1 billion with margins of 18%. The year-over-year revenue decline is mostly driven by lower pricing and packaging in Global Cellulose Fibers, as well as the impact of the India divestment earlier in the fourth quarter. Free cash flow in the quarter was again strong as…

Thanks, Tim. I'm on Slide 17. As I reflect on our performance this past year, it reaffirms my confidence in International Paper. I've often commented on these quarterly calls about our ability to succeed and generate strong cash flow through practically any set of conditions. And I think that's exactly how 2019 played out. As we enter 2020, we are delivering commercial wins and we'll continue to tightly manage our cost, capital spending and working capital to generate strong free cash flow despite earnings headwinds that we look at as cyclical. And most of these earnings headwinds that are price related are due to flow-through from actions that have already occurred in 2019. The fundamentals of our packaging and fluff pulp business are solid. Our commercial and operational levers position us for positive momentum as we navigate through the year. International Paper has the best customers, the best people, the best system and a strong financial position, and we'll continue to make the choice as consistent with our capital allocation framework in order to drive long-term value creation. With that, I think we'll open it up for questions.

[Operator Instructions] Our first question comes from Anthony Pettinari of Citigroup.

Hi. We saw some signs of improvement in China and the pulp market at the end of last year, kind of beginning of this year. The coronavirus has obviously kind of shaken things up. I was wondering if you could talk about what impact you're maybe seeing to your customers, I guess, on the pulp side in China, understanding the situation is unfolding?

It's a great question, Anthony. I think the coronavirus, we see what you just mentioned, improving conditions, both on the demand and on the economics. The virus issue is obviously a fluid situation and it's kind of early to tell. There are inventories in the system. The kind of products that our pulp goes into from GCF, from our cellulose fibers business, is an absorbent pulp. The type of products that tend to be a little less discretionary. On our Ilim joint venture, it's more market pulp for packaging and other softwood market uses. And they have seen some improvements as well. I think we're all watching very closely and looking at different contingencies based on the virus, which I think they'll get through. But the question is, how long does it take?

Okay, that's helpful. And then your 2020 guidance suggests capex could be below $1 billion. And I don't think IP's capex has been below $1 billion for maybe a decade. I'm just wondering what the split there is between maintenance and discretionary? Maybe what kind of investments maybe you're pulling back on? And then just how you would frame that capex level versus a normalized level versus where we might be in the cycle?

That's a great question because it is a number you haven't seen. Well, let me just make a high level comment. I'll ask Tim to talk about the categories. Over these periods of time that you mentioned, we're not the same company, obviously, in terms of asset quality, the amount of strategic investment, which we've done a lot organic strategic investment in the last few years. And as we said earlier, last year on, I think, would be the third quarter call, we don't have those type of large projects every period. So the combination of all that allows us to have periods where we'll have less. Our guidance has always been about $1.4 billion over time. But it wouldn't be that every year. And Tim, if you want to add a little clarity to the category?

Yes, I think you covered it well in terms of talking about the ramp down and the strategic projects. It's roughly 60% that we have targeted for maintenance and regulatory and then the balance being discretionary. But you're right, $1 billion is on the high side, it could be lower than that. It could be closer to $900 million for the year.

Next question is from Steve Chercover of D.A. Davidson.

First quick question. If I'm not mistaken, your free cash flow was $300 million above your $2 billion guidance. So was that surplus due to mainly the working capital? Or can you elaborate, Tim?

Yes, that was a big piece of it. There are several factors. One, there was some timing on some items. We had lower capital spending than what we had earlier estimated in the year. And then working capital. We picked up some things. Part of it is timing. We'll keep it. Part of it is just from one year to the next and so it will probably come back in 2020.

And then to quote you on Graphic Packaging, you're on a monetization path. So is it a bold assumption to say that you get another $250,000 that will be put toward the repo and/or debt reduction?

Yes. I mean, we'll put it through the capital allocation framework. And that's the primary focus that we have right now. So I don't assume any difference. And just to clarify, a maximum of $250 million every six months that we have, under the contract, the ability to monetize.

Can I just ask one other question? You've got some flexibility. Obviously, it should be share price dependent, right? I guess the valuation of GPK will have some influence on your timing.

It will, I would say, modestly, but we're not -- we don't think of ourselves as investors in equity shares. So we're not trying to time the market in an undue way. We're trying to just make sure we're smart about how we think through our right some of the contracts to monetize the stake that we have.

Our next question is from George Staphos of Bank of America.

Hi everyone. Good morning. Thanks for all the details. I wanted to talk about the maintenance spending that you're doing this year. And you've said that there are eight cold outages this year versus two last year. Away from those numbers, when you're done with the projects this year, Mark, what will be further enabled either within Industrial Packaging or GCF that you don't have already from the maintenance? Or will it be obviously, much of it is going to be related to normal maintenance, but what will be the different capabilities out of the systems on either side when we're done with this?

George, I think one key point on maintenance is we talk about the capital, and that's a portion of maintenance, but a much bigger portion is just on the expense side and how we do precision maintenance, how we make repairs, how well-trained our technical staffs are. And they're just getting better every year. So we have less failures. We expect better reliability, which ends up resulting in needing less capital for major replacements. And that's just been a continuing story for IP. So we spend the money on the expense side in education, training, techniques, and we save the money on the capital side. That's one point. What we've been trying to do is make sure that in containerboard and in the new cellulose fibers business that we combined with the former Weyerhaeuser business that we have flexibility in the system so that we can make multiple products at multiple facilities, that's a strong value proposition for our customers. It's great in terms of managing marginal cost for wood or transportation. So what you'll see out of this is less variability between the worst facility we have in terms of reliability and capability and the best. So both systems are going to be more flexible and less variation. There's much more work to do, but we have made a lot of progress. And so it's kind of normal that we would have a period where we can enjoy some of the kind of fruits of the investments we've made. So capability and consistency across those mill systems. In one case, feeding box plants, largely our own box plants. In the other case, going directly to customers who convert into absorbent products.

So tying a bow on that, so part of what you'll get also is an ability to further make your cost variable as opposed to fixed, depending on the system that you're in or the environment that you're in. Would that be fair?

That's fair, George. And you saw that. Again, we don't want to get too good at this because it usually only gets to show up when we're taking economic downtime, and markets are slower, but you saw a kind of a sort of a step change in 2019, containerboard LLO experience and our marginal cost management versus prior periods a few years earlier. And we would expect that to continue. So variabilizing our cost and getting better at marginal cost management is definitely part of it. There are some structural cost issues in some of our mills, especially on the GCF side that are not related to reliability. Just related to configuration and there's things there that we can address and will address in the future as our resources and priorities allow us to.

Okay. Second question, I'll try to make it quick. You mentioned that 60% of your free cash flow over the last five years has been dedicated to value return to the shareholder and your performance on cash flow and your performance returning value back to the shareholders has been impressive. Given the target of 40% to 50% over time, would it suggest that maybe that ratio necessarily has to come down as you delever? Or we shouldn't draw that conclusion? And what kind of circumstances would we need to see where the dividend, which looks to be amply supported now, might be something that is a little bit more at risk? Thanks guys and good luck in the quarter.

Well, the approach we take to the dividend, George, and thanks for the question, is that it's both competitive and sustainable. And so when we make these decisions, when we put forth recommendations to our Board and they decide dividend policy, we are trough testing and providing ample outlook for how we think the business is going to perform. So I don't see a need for the first part of your question and taking the action there, I think we're in a bit of a trough year. We're still on the high end, but within the range. And I think we have the flexibility to do what we need to do across our capital allocation choices.

I think also just an additional point on Tim's comment, is when you think about the combination of near-term capital return via the dividend and the share repurchase, we have reduced our shares outstanding and the actual outlay for the dividend is -- even though we've raised the dividend, as you can figure out for yourself, not growing in terms of pure cash outlay. So we're committed to the dividend. We think 40% to 50% has got the right balance of getting cash to shareholders, but not doing it in a way that's not sustainable. And I mean, that's what we're focused on in the company is generating the cash that's in trough, testing our recommendations to make sure that we are, in any case, talking about the dividend not being sustainable.

Next question is from Chip Dillon of Vertical Research.

Good morning and thanks for all the help. If you could talk a little bit about the South American business, I think, firstly, in corrugated, I know that's something I think you're looking to exit. And I just wanted to know, a, how that's going? And b, you mentioned some targeted M&A possibilities. I don't know if there is a chance that you might actually want to keep a presence in Brazil and if that would be a possibility?

On packaging?

Yes.

No, no. We've talked about strategic options. The process has taken a little bit longer than we thought. But we don't want this to go on forever. But I think it started slower based on just some timing and holidays and gearing up. We have made progress. I think we'll be in a position in the not-too-distant future to talk to you about the outcome. But in terms of an acquisition on packaging in Brazil, as we're still looking at options for how we exit that business, there's nothing that we're looking at.

When Tim was talking in his remarks about capital allocation and we made a comment about investments and targeted small acquisitions, if there are any, those are primarily for our North American Industrial Packaging business and for our European packaging business, like we did a few, we bought a few box plants right near the Madrid mill. That's what he was referring to on targeted M&A for packaging, not anything else.

And just to put some brackets around it in terms of size and the targeted nature of it and how it improves the business that we have, like packaging.

Okay. That's super helpful. And then just a quick follow-up. When you look at the capex level going down to like $900 million to $1 billion, which certainly makes a lot of sense given the very immediate environment and certainly keeps your flexibility as high as it's been. Is that sort of a level -- I mean, that should include, I assume some Riverdale expense -- capex. So what should we kind of guess capex will be or would you expect capex to be in the '21, '22, '23 period? Let's say, things get that better, is there a reason that capex would rise up again, given your current footprint?

Should that be situational, I think from a strategic investment type, the bigger capital there, those get identified over time. We don't act on all of them. The cost reduction side of it is where I think you could see an increase over time. But like I said, it depends on the circumstances, the market conditions and how the business is performing. So we don't forecast publicly that far out in time. But situationally, I think we're in a spot where we can maintain around the level we have. If conditions warrant, we can take advantage of some high return cost reduction type projects to improve the business.

Yes. I think, Chip, the way we're thinking about this, if you go back all the way to 2014, where we started investing in our North American containerboard system for lots of reasons to replace the purchase board we were doing post the Temple acquisition to improve all the things I talked about in the prior answer, there's been a steady demand for large projects in our mill system and containerboard. Then we built the Madrid mill, and now we're doing Riverdale. We've got the capacity we need and the capability we need largely for the foreseeable future, not only in that business but also in cellulose fibers. And so structural cost reduction in our system probably hasn't gotten the same level of attention, and that will be a focus going forward. But it's not as large as individual projects. It's smaller projects across more facilities. So depending on what the environment looks like, how much product we need based on our order book, we can time those structural cost reduction projects a little bit better than the strategic projects where you're trying to bring something on to market. So that will be the focus going forward. We don't have an exact number past 2020, but it'll be a different mix of projects because we've made the investments we need to make for the foreseeable future.

That's very helpful. Thank you.

Next question is from Mark Wilde of BMO Capital Markets.

Good morning Mark, thank you. I think you owe the Industrial Packaging crew lunch today.

That happens often.

Well, that's a very good performance. Listen, the question I had, the recovery in pulp performance, it sounds like there are a couple of moving pieces we need to be conscious of as we go through '20. One is kind of a lag in kind of pricing and the other is kind of the shift in mix. So Tim, I wondered if you could just help us with a little more color on that?

Well, I'll help you with as much as I can give. I mean, you see the price follow-on. We do think that markets have begun stabilizing. And so the question will be recovery and how fast it comes on the pricing front. But inventory levels after some weak market conditions based on individual country economies, region economies, as well as the tariff situation, we think, had a fairly dramatic impact on price as we went through 2019 that we carry into this year. But we think that we are in a place where fundamentals have shifted and look like they're beginning to improve. On the mix side, because of the lower growth for fluff overall, based on those factors, we had a higher percent of commodity market pulp in our mix, for certain types of grades on -- certainly on Southern soft bleach, we have a higher cost structure. We have a very good cost structure in our mill in Canada for Northern bleach. But for Southern, we have a higher cost structure and prices were impacted more. So that weighed on the business as well. Going forward, it's about intelligently restoring the fluff and absorbent specialty percent of our mix based on the commercial loss that we talked about last year, but doing it in a way that maximizes profit over time. So we're not just simply focused on volume. We're focused on how do we improve the earnings performance of the business and working through these macro challenges in the moment.

And for a follow-on, I just wondered, Mark, can you update us on sort of where the Ilim capital plans are? I know that they've had some big projects talked about over time, but I don't know whether there's been any commitment to those. So if you could update us.

Sure. The Ilim Board approved some projects involving some containerboard production, primarily for China. And so that's under way and additional softwood pulp at one of the existing facilities, debottlenecking one of the facilities. So both of those projects are approved and are beginning to get under way and will come online later in next year. So right now, the focus for Ilim is, as anybody in the softwood pulp business, is looking at getting the inventory stabilized and getting the market pricing, hopefully, back to a more normalized level. As Tim mentioned in the Ilim results, even at these lower cyclical price levels for commodity pulp, the Ilim cost structure is so far out ahead of everything else in the world that it's still a very, very powerful cash generator. And that's really what we want to do in our GCF business, which is really absorbent pulp focused. We are still 10 percentage points away from the mix. We really target to have 85% of our capacity, which is essentially all of our North American mills, on absorbent pulp, and only the Canadian northern bleached softwood mill on nonabsorbent pulp. And with a demand step back in the China economy, it just takes longer to get that mix up, as Tim said, intelligently, where we're doing it at a profitable level. So it's a setback in terms of the path we were on, but it's still the right path. And the business and the end-use and the customer book is all very solid.

Your next question is from Adam Josephson of KeyBanc Capital.

Good morning. Thanks so much for taking my questions. Tim, just one on pulp. On Slide 11, you talk about a successful contract season accelerating your recovery this year. Can you just help me with what your pricing visibility is on contracts that you successfully renewed or secured? I'm just wondering if you know what pricing on that business will be throughout the year? Or it's similar to market pulp in that regard? And then just you mentioned fluff is growing at a lower rate than market. I was just wondering just intuitively, why that would be the case.

Yes. On the growth, I think we've had some unusual challenges. We've had certain countries in the Middle East, which are big fluff pulp consumers, their economies have underperformed, their currencies have underperformed against the dollar. There has been some, for a moment, demand destruction. There's been the tariff issue in China, which had to be sorted through and caused a lot of uncertainty. And so I think there's been the combination of some demand destruction in the moment. We don't think it's structural. And there's also the fact that we had inflated inventories around the world last year for a big part of the year that had to be rebalanced on fluff pulp. On the contracts on pricing, you can appreciate why I can't go into a whole lot of detail here, but it's really across the gamut. There's different customer types that we have. And some of those work on annual contracts with price negotiations that happen as you go through the year. Some of them are annual in the nature of the amount of volume they're going to take. And then there's openers along the way. And then we have parts of the market that it's month to month or quarter to quarter.

And then, Mark, just one on U.S. box demand, at least through November, it was about flat last year after having been up quite a bit from '16 to '18. Over the past decade, it's flat or so. So what do you think, just, I guess, forget about longer term, but what are you expecting this year? Do you have any reason to think this year, Mark, will be much different than the flattish we saw last year for any particular reason?

Yes. We look at a lot of economic leading indicators that correlate very nicely with box demand. We built our own internal International Paper model and it was reasonably accurate for last year. We see a little bit of growth this year. But I think when you look at what came out today on the GDP number and you think about box demand occasionally, it'll track GDP, but largely in the way the U.S. economy is configured, it'll always lag that a little bit. So a 2% year, roughly, is what it looks like 2019 was and you'll end up with a box demand that for the inventory issues we talked about that occurred at the end of '18 in our customers' world, you end up with a little bit of a disconnect from GDP. I think without that inventory issue, I think you probably saw 1.3% to 1.5% box demand in '19 against a 2% GDP. And I think the reason that didn't happen is some of the '18 kind of stronger demand was really '19. We made boxes in '18 for our customers who didn't ship the product to well into '19.

Your next question is from Mark Weintraub of Seaport Global.

First, on the outlook. You noted that it includes the impact of 2019 price carryover in January containerboard index adjustment. Does that mean that it doesn't include any other potential changes, and so pricing is effectively kept flat from where it is? Or is that not necessarily a conclusion to draw?

Well, the challenge is we don't talk about pricing on a go-forward basis. So we have carried in all of the carryover from last year to where we currently are. We have included the $10 published down for a containerboard that just happened. And within that range is our view on how we think about price over the course of 2020.

I understand. Also, the inventory valuation impact in packaging and paper, could you specify those for us?

Yes, both of them are to do with LIFO. And as you know, we go through the year looking at how a number of factors are going to play out over the course of the year, and we're making estimates about what the LIFO charge is. As you get to the end of the year, you're truing up all of those. In the case of papers, we had overestimated our benefit, where we thought we were going to be earlier in the third quarter, and it actually ended up in a worse position. So we had to make that true-up and just the opposite on the containerboard side. As you go through the year, it's not a precise science, and we're putting our best estimates based on business conditions. And as forecast factors change, then we have to make sure that we've [indiscernible] it up to the appropriate amount at the end of the year.

Understood. And can you share with us what the adjustments in the fourth quarter were in the segments?

Yes, I think we did. It was $15 million in papers, and it was around $40 million in Industrial Packaging.

Great. And then lastly, on the box shipments. So it sounds -- is the win that we should get from not having, hopefully, any inventory destocking this year, in the 0.5% to 1% range, would you say? And also, could you let us know how January had played out?

Yes. I know there's a lot of calls today, Mark. Right now, January looks like it's somewhere between 1% and 2%. We're late in the month and you say, well, shouldn't you know better? But we don't really have a final number until we go through the close process and see how shipments actually came in. But we're seeing some of the wins that we talked about in the third quarter actually coming through in our North American container business. So we feel good about that. On the export containerboard side, we referenced inventory levels having returned to normalized levels late last year. But in some places, in some markets, our view is that inventory levels are low. Demand is very good right now. And so in the export markets, we think it's normal to skew on the lower side for inventory levels.

Your next question is from Mark Connelly of Stephens Inc.

Thanks. We've obviously seen you take quite a lot of downtime without the sort of cost drags that would have been evident in the past. So clearly, all the work on the supply chain is working. I'm curious if your experience over the past year is leading to more changes? And if, in effect, you're getting more efficient at taking that downtime?

Well, it's a great question, Mark. And I would say the short answer is yes. We took a level of downtime in containerboard last year that we haven't taken before. So we were able to do it a little more efficiently, primarily because of some of the investments we made in the '14, '15, '16 time frame. We also learned a little bit more about how to better manage the transportation component when we know we're going to take downtime and the wood fiber component. So I think we're actively learning how to manage our output to meet our customer demand across multiple facilities a little bit better each year. '18, we ran everything wide open, and there was none of that work being done because we almost couldn't make enough product for all channels that we serve. And we actually added costs in some cases to make that incremental amount. So I think last year afforded us an opportunity to really try to use the benefits of all the investments we made, both capital and noncapital in systems and so forth in the supply chain. So I would say, yes, we are continuing to learn how to do that better.

That's helpful. And one more question on pulp, and I'm sorry to keep bugging on this question, but fluff markets have been tracking commodity markets a lot more closely in the last couple of years, and that's not normal. So what has to happen, say, in the medium term? Sometimes when markets get soft, contract terms get squishy, and you start to increase that volatility. Is it going to take longer to get back to that normal because we've got a cleanup contract messiness?

I think, Mark, that's a great question. I think two main things going on with the connection between fluff pulp and the broader commodity markets. One is the shape of the curves on pricing, for example, are similar, but there's still a pretty healthy differential between the two, as there should be. There's a level of capacity in the market because fluff is still a relatively small market in terms of the other markets. It's about six million tons. There's about 15% capacity that can move in or out of the lower ends of fluff, based on what's happening in commodity pulp. The same producer has a choice. We don't have any of that capacity, but others do. And so it's a meaningful flex capacity that just needs to be absorbed as the market grows. Over time, I think that will buffet things a little bit better. And then, of course, any time you have these kind of conditions, you end up with contract terms and agreements that's probably not sustainable long term. So there is some of that, that has to be done. But this flexible capacity that can make softwood market or softwood absorbent is meaningful enough that in soft demand for market pulp or lower, lower price environments for market pulp, it ends up showing up just in enough at the margins to create some issues on the absorbent side.

Your next question is from Brian Maguire of Goldman Sachs.

Just a couple around capital reallocation. Obviously, with the recent cellulose fiber acquisition, they're writing off the goodwill and the challenges in the pulp market. Just wondering, in aggregate, does that make you less likely or a little bit more gun-shy about doing large M&A? I think some of your comments sort of alluded to really just focusing on smaller bolt-on deals. And then just sort of related to that, it seems like the leverage is set to move higher with the lower EBITDA guidance in 2020. So should we assume that kind of the focus, the priority for the near-term is more on preserving the balance sheet as opposed to share repurchase and things like that?

I think on the first part of your question, Brian, the large M&A is not a focus right now because it's not necessary for International Paper. We've got a great company. We've got the ability to improve the businesses we have. We've done a lot of large M&A in the past, and it's now time for us to optimize this and to profitably grow the target businesses, which don't require large M&A. So the second part of your question, I think we'll see how the year plays out. But the combination, I think we put it on our chart, of debt repayment and share repurchase is a constant discussion in the company about which channel through our capital allocation framework to flow that cash. We have an outlook. We're sitting here in January, but we really don't know how the year is going to turn out. And it could be better or it could be not as good, and we'll make the decisions. But obviously, maintaining that balance sheet, investment grade, as Tim said, is an absolute priority, and we'll make the cash flow adjustments we need to make sure that happens.

Yes. And the only thing I would add is we have been very clear about our commitment to the balance sheet and how we would manage that. We've been very clear about our approach to returning cash to shareowners. I think Mark's right. It's dynamic. So we have to see how markets and results play out. We never viewed that we would be within the 2.5 to 2.8 times 100% of the time. We always thought that there could be reasons. But we don't want to be extremely wide of those, and we don't want to be there for long. And so we have a very strong commitment to support the credit rating that we have. We also are looking at share repurchase and making sure that we are returning value to shareowners. It'll be dynamic.

And then my last question is just more of a longer term, a bit of an open-ended question. Obviously, 2020 EBITDA is a bit cyclically depressed. You're cutting back on capex a bit, some of the growth in productivity projects. I guess the question is, beyond 2020, where should we think about earnings growth coming from beyond price increases. In other words, if we don't get any movement higher in pricing beyond 2020, where would be the drivers of earnings growth from there?

I think the earnings growth will come from beyond any market pricing moves is the commercial investments we've made on new products, better mix and growing our business in the segments that are growing the most. And that's a true statement for our box business as well as our cellulose fibers business. And then there's a healthy dose of constantly looking at our cost structure and improving that over time.

Our final question for today comes from Debbie Jones of Deutsche Bank.

Just two questions. I'm going to ask them together. Are you happy with your current European footprint? I know you aren't targeting any major M&A as you outlined earlier, but I'm just curious of your overall position there and how you feel about it. And then secondly, could you characterize any major differences that you're seeing with the way that your customers in Europe versus the US have needs as they relate to their sustainability efforts?

So I think the first answer is, yes, we are happy with our footprint. There are some issues that we're trying to sort out around whether they're structural or cyclical, like the market in Turkey, for example, which has been good and not so good over time. But we do like the business format we have, which is now that we have a large high-performance mill in the mix. And so we're continuing to look to improve that business from its core. And then on sustainability, I just think Europe tends to be a year or two ahead of this market in sustainability initiatives, and it's largely partly due to regulation and partly due to just the consumer and the mindfulness of the consumer. But I think Europe is a good leading indicator for a lot of things that we learn there, we are able to prepare for here, but it might be a year or two later. But I think that the role fiber packaging is playing in helping customers in various market segments with their sustainability story -- the fact that we've got renewable natural resources, recyclable products and our energy is generated from carbon neutral biomass is playing very, very heavily and well with our customers. So before we sign off, I just want to wrap up a couple of key points that we talked about. Our focus for this year and beyond is delivering on the commercial wins. We've made a lot of investments in talent, approaches, equipment, innovation, and that's what we're focused on, on the commercial side. We're looking at the levers we discussed today to generate free cash flow. We'll get to a strong free cash flow year by year by year, slightly different ways but what you can count on from IP is to deliver it. We believe our core businesses have solid long-term fundamentals. There'll always be some cyclicality. We're seeing some of that now. But the fundamentals of what we make in boxes and what we make in our fluff pulp and the role that our paper business plays are solid and we believe in them for the future. And I think some of the things we talked about today, commercially, operationally, give us momentum as we navigate through the year of 2020. And I feel good about where we are as a company, strong balance sheet, as I said outstanding customers and outstanding people. And the ability for a year like 2019 to still show us that we can generate strong free cash flow, share it with our investors, make smart investments and the company gets stronger every year. So with that Guillermo, I'll turn it back over to you.

Thank you, again, for joining International Paper's fourth-quarter earnings call. As always, Michelle and I will be available for your follow-up questions. Thank you.

Thank you for participating in today's International Paper Fourth Quarter and Full Year 2019 Earnings Conference Call. You may now disconnect.