Building on
Our Vision
Annual Report 2022
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For more than 125 years, International Paper has
been a driving force in the global economy. We make
essential products people depend on every day —
from planet-friendly packaging to absorbent pulp for
personal care and other products. Building on our
strong foundation, we’re here for what’s now and we’re
creating what’s next.
International Paper 2022 Annual Report
01
Every day, the world moves forward with new ideas,
new technologies and new priorities. And every day,
International Paper anticipates what’s next and acts
with conviction, confidence and compassion.
By transforming renewable resources into products people depend
on — from planet-friendly packaging to absorbent pulp — we help make
the world better, safer and more sustainable so our customers, employees,
shareowners and communities can thrive and succeed.
Rooted in our core values and driven by our corporate strategy and Vision
2030 sustainability goals, we are steadfast in pursuit of our vision to
be among the most successful, sustainable and responsible companies
in the world.
02
International Paper 2022 Annual Report
Dear Shareowners,
As we celebrate the company’s 125-year anniversary in 2023, we recognize the resilience of
International Paper, the sustainability of our mission and our commitment to transforming
renewable resources into products people depend on every day. We understand the role
we play in the production, transport and recovery of our customers’ products. We also
acknowledge the fundamental role our shareowners continue to play in our evolution,
mission and success. Thank you for your investment in International Paper.
What we achieved in 2022:
In 2022, the external economic
Made capital investments of
$931M
Returned
$1.9B
to shareowners
environment added a degree of difficulty
to serving our customers and managing
costs. The inflationary impact on
consumer spending had a negative effect
on box demand in the latter part of the
$250M
of earnings improvement generated
through our Building a Better IP initiatives
year. Significant input and transportation
Building a Better IP
costs and labor shortages placed
The steps we took in 2021 to strengthen
additional pressure on productivity,
our strategic focus enabled us to
earnings and margins.
concentrate resources on creating value
where we are advantaged. In 2022,
Grew adjusted operating earnings by
Despite these challenges, our teams
we improved earnings by $250 million
24%*
What we expect in 2023:
rallied to use the full scale and breadth
generated through our Building a Better
of our manufacturing and converting
IP initiatives. We also made substantial
system and our supply chain to take care
improvements in our Global Cellulose
of customers and optimize processes
Fibers business including the achievement
and spending. As a result of these efforts,
of cost of capital returns. These are
the company achieved significant
strong indications of the commercial,
year-over-year improvement in sales
operational and financial improvements
• The resiliency of IP through various
revenue, adjusted EBITDA and return on
underway throughout the company.
macro environments
invested capital.*
• Strong leadership and engaged
employees
• Enhanced financial strength and
flexibility to accelerate value creation
for our stakeholders
↑9%
revenue from 2021
$19.4B
$21.2B
* Adjusted operating earnings, adjusted EBITDA
and return on invested capital are non-
GAAP financial measures. For a definition of
these non-GAAP financial measures and a
reconciliation to the most directly comparable
GAAP measure, see the disclosures in Financial
Highlights included in this Annual Report.
2021
2022
We continued to invest in our packaging
business to support our customers’
evolving needs and generate profitable
growth, including adding both capabilities
and capacity to our current box system.
An example of this is our new box plant
outside Philadelphia, Pennsylvania, which
came online late in the year and will
provide needed capacity for customers in
the northeastern United States beginning
in 2023.
Another key IP strength is our strong
balance sheet, which is the foundation
for creating value through the cycle.
It ensures financial sustainability and
IP at a Glance
optionality. And it enables us to continue
provide reliable service and sustainable
investing in our businesses and return
packaging and renewable fiber solutions
International Paper 2022 Annual Report
03
250
facilities operating in 35 U.S. states
and 10 countries
39K+
employees globally
21K+
customers worldwide
$21.2B
net sales in 2022
100M
boxes made per day
Our Core Values
Safety
cash to our shareowners, both by
for our customers.
maintaining our dividend and through
opportunistic share repurchases. In 2022,
Over the past 125 years, IP has continually
we returned $1.9 billion to our shareowners
evolved to meet new challenges.
through dividends and share repurchases.
Anticipating and acting on what’s next for
This brings our five-year total to
all our stakeholders will continue to drive
$7.1 billion — reinforcing our commitment
our strategy and results. Our focused
to a competitive and sustainable dividend.
portfolio and financial strength will further
enable us to drive sustainable, profitable
growth and accelerate value creation in
existing and future markets.
On behalf of International Paper’s board
of directors and our 39,000 employees,
thank you for your continued support
and ownership.
$7.1B
five-year total return to shareowners
through dividends and share repurchases
Our Vision 2030 strategy
Delivering sustainable business outcomes
while being responsible stewards is
integral to IP’s mission and commitment
to making the world better, safer and
more sustainable.
We continued to make significant
progress on our Vision 2030 goals and
received recognition for our efforts from
Mark S. Sutton,
Chairman of the Board and
Chief Executive Officer
Above all, we care about people.
multiple stakeholders:
We look out for each other to ensure
everyone returns home safely.
• Procter & Gamble named us a Supplier
Ethics
We act honestly and operate with
integrity and respect. We promote a
culture of openness and accountability.
Stewardship
We are responsible stewards of people
and communities, natural resources and
capital. We strive to leave everything
of the Year
• The American Forest & Paper
Association recognized us with its
Diversity, Equity and Inclusion Award
for our Fighting Period Poverty in Our
Communities program
IP ranked in the top 10 of U.S.
public companies on the American
x
Opportunity Index, which analyzes
and scores corporate performance in
•
in better shape for future generations.
worker access, mobility and wages.
Think the Customer
Looking ahead…
We will deliver on Our Customer Promise
IP is a resilient company that is well-suited
to do the right things for our customers,
for the challenges and opportunities
at every moment, in every experience.
ahead. Last year’s efforts and results
Include and Engage
We strive to intentionally build a culture
advanced our strategy for Building a
Better IP. In 2023, we expect to gain
ground commercially and strategically,
in which each employee feels a sense
with a refined focus on driving profitable
of belonging and experiences an
growth. Our people are at the heart of
environment in which to do their best
everything we do, and we will continue
work every day.
to invest in them. We will also invest to
04
International Paper 2022 Annual Report
Vision 2030
Vision 2030 consists of four enterprise-wide goals and eight targets designed to ensure
we remain the supplier of choice for customers, the company of choice for employees
and the investment of choice for shareholders.
Vision 2030 will accelerate our progress toward achieving our vision of being among
the most successful, sustainable and responsible companies in the world. We are excited
to provide a snapshot of our 2022 achievements:
Healthy & Abundant Forests
Lead forest stewardship efforts globally
Target:
100%
Target:
1M
Source 100% of our fiber from
Conserve and restore 1 million acres
sustainably managed forests
(400,000 hectares) of ecologically
or recovered fiber while safeguarding
significant forestland
forests, watersheds and biodiversity
2022 Highlight: ForSiteTM proprietary
mapping and monitoring
2022 Highlight: Partnership with the
National Fish & Wildlife Foundation
In 2022, as part of a 5-year Forestland
Prior to harvest, we map and monitor
Stewards Partnership with the National
forestland to enhance and preserve its
Fish & Wildlife Foundation, we teamed
biodiversity. ForSite™, our proprietary
up for 13 new grants and matching
geographic information system (GIS)
contributions worth $7.4 million to
based mapping and due diligence,
restore ecologically important forest and
enables us to assess forestland to
wetland habitats in Alabama, Georgia,
identify ecological attributes such as rare
Kentucky and Tennessee.
or endangered species, priority forest
types, or areas of significant biodiversity
The collective impact of these grants
Renewable Solutions
Accelerate the transition to
a low-carbon economy through
innovative fiber-based products
1
2
Target:
100%
Advance circular solutions throughout
our value chain and create innovative
products that are 100% reusable,
recyclable or compostable
2022 Highlight: Savannah Mill
Beneficial Use Project
In 2022, IP’s Savannah, Georgia Mill
Beneficial Use Project diverted process
waste streams into an agricultural liming
agent for farmers to adjust soil pH and
provide nutrients to grow corn, cotton,
peanuts, onions and soybeans. This
resulted in 44,428 tons of waste diverted
or landscape connectivity.
include: restoring/enhancing more
from landfill in 2022.
Two shining examples: In South Carolina,
more than 30 miles of stream habitat;
our team worked with fiber suppliers
and benefiting numerous aquatic and
to create wildlife corridors to maintain
bird species.
than 20,000 acres of forest; improving
ecosystems that are home to numerous
species of mammals, birds, reptiles and
amphibians. And in Georgia, our team
added non-harvest buffers to a planned
harvest area to protect granite outcrops
where rare plant species thrive.
International Paper 2022 Annual Report
05
Sustainable Operations
Improve our climate impact and advance water stewardship
Target:
35%
Target:
25%
3
Reduce our Scope 1, 2 and 3 greenhouse gas (GHG) emissions
Reduce our water use by 25% and implement context-based
by 35%
water management plans at all mills
2022 Highlight: Rome, Georgia Containerboard Mill
2022 Highlight: Valliant, Oklahoma Containerboard Mill
At our containerboard mill in Rome, Georgia, we replaced the
Since 2019, our containerboard mill in Valliant, Oklahoma, has
power boiler in 2021. Through 2022, we have seen a 39% reduction
reduced total water use intensity by 19%. We achieved this
in total scope 1 and scope 2 GHG emissions since their baseline
reduction through water use education and intentional efforts to
year of 2019.
fix leaks and valves.
Thriving People & Communities
Promote employee well-being by providing safe, caring and inclusive workplaces and strengthen the resilience of our communities
Target:
30/50/30
Target:
100M
Target:
0
4
Achieve 30% overall representation of
Improve the lives of 100 million people
Achieve zero injuries for employees
women and 50% women in salaried
in our communities
and contractors
positions. Implement regional diversity
plans, including 30% minority
representation in U.S. salaried positions
2022 Highlight: Focus on women
representation
2022 Highlight: Fighting period poverty
in our communities
2022 Highlight: Safety leadership
training
Lack of access to adequate menstrual
On our journey to build a resilient safety
health management supplies and
culture focused on human organizational
education affects 500 million women
performance, in 2022 we introduced new
Serving as proof positive of the focus on
and girls globally. IP’s award-winning
IP Safety Leadership training. It includes
women’s representation and impact in
our business are:
Fighting Period Poverty in Our
Communities program provides period
care kits containing supplies for women
real examples of past incidents in our
facilities and a variety of tools to guide
our safety leaders. We also increased the
• Our EMEA Women’s Mentoring
and girls who have no access to
number of learning events throughout
Program and SAIL (Shaping Allies and
these products.
Inclusion Leaders)
• Our sponsorship of the Women’s
Forest Congress, which brings a
In 2022, in conjunction with International
leaders in the company.
Women’s Day and Menstrual Hygiene
our facilities and implemented a new
system to share these learnings to all
voice to women looking to address
Day, we joined forces with Procter &
challenges facing forests and the
Gamble’s Always® brand to expand
forest sector, today and in the future
• Our 39% year-over-year increase in
representation of women engineers
awareness and impact. We hosted 45
packing events to distribute 25,000
feminine care kits internationally,
in IP’s REACH (Recruit, Engage, Align
resulting in more than 600,000 units of
College Hires) program
product provided to women and girls
• Our fifth consecutive annual Women’s
Choice Award® as one of America’s
Best Companies to Work For Women,
Diversity & Millennials
who need them most.
06
International Paper 2022 Annual Report
Our Businesses
Building on 125 years of dependability and innovation,
we continue to use sustainable fiber sources to serve
customers and create profitable growth and long-term
value for our shareholders.
Industrial Packaging
Global Cellulose Fibers
We create fiber-based packaging
Cellulose fiber is a sustainable,
products that protect and promote
renewable raw material used in a variety
goods, enable worldwide commerce
of products people depend on every day.
and help keep consumers safe.
We create quality pulp for a wide range of
We meet our customers’ most challenging
applications like diapers, towel and tissue
sales, shipping, storage and display
products, and feminine care, incontinence
requirements with sustainable solutions.
and other personal care products that
promote health and wellness.
In addition, our recycling business
collects, consumes and markets more
In addition, our innovative specialty pulps
than seven million tons of paper recovered
serve as a sustainable raw material used
annually in the United States and Mexico.
in textiles, construction material, paints,
We are one of North America’s largest
coatings and more.
recyclers of recovered office paper and
corrugated boxes.
Packaging Segments:
Pulp Segments:
• Absorbent hygiene
• Paper and tissue
• Processed food and beverage
• Specialty
Revenue by region:
• 94% North America*
• 6% EMEA and Other
• Fruit and vegetable
• Protein
• E-commerce
• Distribution
• Durables
• Non-durable industrials
Revenue by region:
• 90% North America
•
10% EMEA and Other
Total
Revenue†
Industrial Packaging
Global Cellulose Fibers
Industrial Packaging
82%
of our total revenue†
Global Cellulose
Fibers
15%
of our total revenue†
* Although the majority of revenue is generated in North America, we export approximately 90% of this
volume, primarily to Asia and EMEA, with a smaller portion going to Latin America.
† The remaining 3% of revenue is attributed
mostly to fiber supply agreements.
International Paper 2022 Annual Report
07
We Deliver Value for Our Shareowners
We establish advantaged positions to serve in attractive market segments with
safe, efficient manufacturing operations near sustainable fiber sources.
Adjusted Return On Invested Capital¹
5-Year Average | 11% ROIC | 2022 WACC² 8%
Free Cash Flow¹
Free Cash Flow
Cash to Shareowners (dividends, share repurchases)
13.2%
$1.7B
$2.3B
$2.3B
$1.5B
$1.3B
$0.8B
$1.5B
$1.6B
$1.2B
$1.9B
2018
2019
2020
2021
2022
¹ Historical data is inclusive of our Ilim joint venture, our former global
papers business, which became a standalone, publicly traded company
on October 1, 2021, and our former Kwidzyn, Poland pulp and paper mill
which was sold on August 6, 2021.
² Weighted Average Cost of Capital
3 Annualized dividend adjusted by 10% following spin-off of papers business.
2018
2019
2020
2021
2022
7.7%
10.8%
10.9%
10.8%
Annualized Dividend (Dollars Per Share)
2018
2019
2020
2021
2022
$2.00
$2.05
$2.05
$1.85 3
$1.85
Adjusted Debt to EBITDA¹
(Target 2.5–2.8x)
Pension Gap
Balance Sheet Debt
2.8x
$10.7
2.9x
$9.8
2.9x
$8.1
2.4x
$5.6
2.1x
$5.6
$1.8
$1.6
2018
2019
$1.1
2020
$0.4
2021
$0.3
2022
08
International Paper 2022 Annual Report
Our Leadership
As of March 31, 2023
A diverse and agile leadership team with a winning mindset is critical to guiding the
company’s improvement efforts and driving our success.
Mark S. Sutton
Chairman of the
Board and Chief
Executive Officer
Clay R. Ellis
Senior Vice President
Global Cellulose
Fibers and IP Asia
Aimee Gregg
Senior Vice President
Supply Chain
and Information
Technology
W. Thomas Hamic
Senior Vice President
North American
Container and Chief
Commercial Officer
Allison B. Magness
Senior Vice President
Manufacturing and
Environment, Health
and Safety
Timothy S. Nicholls
Senior Vice President
and Chief Financial
Officer
Thomas J. Plath
Senior Vice President
Human Resources
and Corporate Affairs
James P. Royalty, Jr.
Senior Vice President
Containerboard and
Recycling, EMEA
Joseph R. Saab
Senior Vice President,
General Counsel and
Corporate Secretary
Gregory T. Wanta
Senior Vice President
Retiring effective 2023
Leadership Transitions
The following leader
will retire in 2023:
In 2022 we added
two new senior leaders:
Greg Wanta
Allison Magness
Aimee Gregg
Senior Vice President,
North American Container (NAC)
During his 31 years of service, Greg has built
strong teams, enduring friendships and a
legacy of results across several businesses and
functions. His contributions to the Industrial
Packaging business and the company are
foundational to our continuing plans for growth.
Senior Vice President,
Manufacturing and Environment,
Health and Safety (EHS)
Senior Vice President,
Supply Chain and
Information Technology (IT)
Allison joined the company in 2000 and was
named an officer in 2016. She has held a variety
of engineering, manufacturing and leadership
roles, most recently serving as vice president,
South Area, North American Container.
Aimee joined International Paper in 2002 and
has served in a variety of sales, operations
and leadership roles in our North American
Industrial Packaging business. She was
appointed a company officer in 2018 and most
recently served as vice president and general
manager, Containerboard and Recycling.
International Paper 2022 Annual Report
09
10-K
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FINANCIAL HIGHLIGHTS
In millions, except per share amounts, at December 31
FINANCIAL SUMMARY
Net Sales
Business Segment Operating Profit
Earnings from Continuing Operations Before Income Taxes and Equity
Earnings
Net Earnings
Net Earnings Attributable to Noncontrolling Interests
Net Earnings Attributable to International Paper Company
Total Assets
Total Shareholders’ Equity Attributable to International Paper Company
PER SHARE OF COMMON STOCK
2022
2021
$21,161
$19,363
1,848 (a)
1,635 (a)
1,511 (b)
999 (d)
1,504 (b-c)
1,754 (d-e)
—
2 (f)
1,504 (b-c)
1,752 (d-f)
23,940
8,497
25,243
9,082
Basic Earnings Per Share Attributable to International Paper Company
Common Shareholders
$ 4.14
$ 4.50
Diluted Earnings Per Share Attributable to International Paper Company
Common Shareholders
Cash Dividends
SHAREHOLDER PROFILE
Shareholders of Record at December 31
Shares Outstanding at December 31
Average Common Shares Outstanding
Average Common Shares Outstanding – Assuming Dilution
$ 4.10
1.8500
$ 4.47
2.0000
8,638
350.3
363.5
367.0
8,997
378.6
389.4
392.4
(a) See the comparison of net earnings (loss) from continuing operations attributable to International
Paper Company to its total business segment operating profit on page 27 and the operating profit
table on page 90 for details of operating profit by business segment.
(b)
(c)
(d)
Includes net pre-tax restructuring charges of $89 million including a charge of $93 million for debt
extinguishment costs and other income of $4 million. Also included is a charge of $76 million related
to the impairment of goodwill in our EMEA Packaging business, a net gain of $65 million related to the
monetization of our investment in Sylvamo Corporation, a charge of $63 million for environmental
remediation reserve adjustments, a charge of $58 million for interest related to the previously
announced settlement of the timber monetization restructuring tax matter, a charge of $11 million for a
litigation reserve, income of $15 million for a legal settlement, a loss of $10 million for the foreign
currency cumulative translation adjustment related to the sale of an equity method investment and a
charge of $6 million for other costs.
Includes a charge of $533 million, including a charge of $375 million for foreign currency cumulative
translation adjustment loss, for the impairment of our equity method investment in connection with our
announced plan to sell our interest in the Ilim joint venture, a tax benefit of $604 million related to the
previously announced settlement of the timber monetization restructuring tax matter, a tax benefit of
$66 million related to the tax-free exchange of our shares of Sylvamo Corporation and tax expense of
$45 million related to a foreign deferred tax valuation allowance.
Includes pre-tax restructuring and other charges of $509 million including charges of $461 million for
debt extinguishment costs, $29 million for severance related to our Building a Better IP initiative,
$12 million for severance related to the optimization of our EMEA Packaging business and $7 million
for other items. Also included is a gain of $204 million related to the monetization of our equity
investment in Graphic Packaging, a charge of $32 million related to the fair value adjustment of our
investment in Sylvamo Corporation, a loss of $21 million related to the impairment of real estate, a
charge of $10 million for environmental remediation reserve adjustments, a gain of $7 million related
to the sale of our EMEA Packaging business in Turkey, income of $5 million for a legal reserve
adjustment and a charge of $14 million for other costs.
(e)
Includes a gain of $344 million related to the sale of our Kwidzyn, Poland mill, a charge of $92 million
for costs associated with the spin-off of our Printing Papers business, a gain of $65 million related to the
sale of our La Mirada, California distribution center, income of $37 million for the accrual of a foreign
value-added tax credit, including interest, which transferred to Sylvamo Corporation effective with the
spin-off on October 1, 2021 and tax expense of $24 million for foreign and state taxes associated with
the spin-off of our Printing Papers business.
(f)
Includes the allocation of income to noncontrolling interest of $1 million associated with the sale of our
EMEA Packaging business in Turkey.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The non-GAAP financial measures presented have limitations as analytical tools and should not be
considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP.
In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP
measures may not be comparable to similarly titled measures disclosed by other companies, including
companies in the same industry as International Paper.
Management believes certain non-GAAP financial measures, when used in conjunction with information
presented in accordance with GAAP, can facilitate a better understanding of the impact of various factors
and trends on the Company’s financial condition and results of operations. Management also uses these
non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the
Company’s performance.
For reconciliations of Adjusted Operating Earnings (Loss) per share attributable to International Paper
Company common shareholders to diluted earnings (loss) per share attributable to International Paper
Company common shareholders, see pages 25-26.
In millions, at December 31
Calculation of Free Cash Flow
Cash provided by operations
(Less)/Add:
Cash invested in capital projects, net of insurance recoveries
Free Cash Flow
2022
2021
2020
$2,174 $2,030 $3,063
(931)
(549)
(751)
$1,243 $1,481 $2,312
Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided
by operations. Management believes that free cash flow is useful to investors as a liquidity measure
because it measures the amount of cash generated that is available, after reinvesting in the business, to
maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for
future growth. It should not be inferred that the entire free cash flow amount is available for discretionary
expenditures. By adjusting for certain items that are not indicative of the Company’s ongoing performance,
free cash flow also enables investors to perform meaningful comparisons between past and present
periods.
In millions, at December 31
2022
2021
2020
Reconciliation of Adjusted Operating Earnings Before Net Interest
Expense to Net Earnings (Loss) From Continuing Operations Before
Income Taxes and Equity Earnings
Earnings From Continuing Operations Before Income Taxes and Equity
Earnings
Add back: Net Interest Expense
Add back: Net Special Items Before Taxes
Add back: Non-Operating Pension Expense (Income) Before Taxes
Adjusted Operating Earnings Before Net Interest Expense, Income Taxes and
Equity Earnings
Add back: Graphic Packaging Equity Earnings Before Taxes
Adjusted Operating Earnings Before Net Interest Expense, Income Taxes and
Other Equity Earnings
Tax Rate
$1,511 $ 999 $ 329
325
175
337
370
(192)
(200)
446
743
(41)
1,819 1,506
1,477
—
4
40
1,819 1,510
1,517
24% 19%
24%
Adjusted Operating Earnings Before Net Interest Expense and Equity Earnings
1,375 1,219
1,150
Equity Earnings (Loss) Other than Graphic Packaging, Net of Taxes
(6)
(2)
(11)
Adjusted Operating Earnings Before Net Interest Expense from
Continuing Operations
Adjusted Operating Earnings Before Net Interest Expense from
Discontinued Operations
1,369 1,217
1,139
296
606
307
Total Adjusted Operating Earnings Before Net Interest Expense
$1,665 $1,823 $1,446
The Company considers return on invested capital (“ROIC”) to be a meaningful indicator of our operating
performance, and we evaluate this metric because it measures how effectively and efficiently we use the
capital invested in our business. ROIC, a non-GAAP financial measure, may not be defined and calculated
by other companies in the same manner. The Company defines and calculates ROIC using in the numerator
Adjusted Operating Earnings Before Net Interest Expense, the most directly comparable GAAP measure to
which is Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings. The
Company calculates Adjusted Operating Earnings Before Net Interest Expense by excluding net interest
expense, the after-tax effect of non-operating pension expense and items considered by management to
be unusual (net special items) from the earnings reported under GAAP. Management uses this measure to
focus on on-going operations and believes that it is useful to investors because it enables them to perform
meaningful comparisons of past and present operating results.
ROIC = Adjusted Operating Earnings Before Net Interest Expense / Average Invested Capital
Average Invested Capital = Equity (adjusted to remove pension-related amounts in OCI, net of tax) + Interest-bearing
Debt
In millions, at December 31
Calculation of Adjusted EBITDA
2022
2021
Earnings from Continuing Operations Before Income Taxes and Equity Earnings
$ 1,511 $
Interest Expense, Net
Special items
Non-operating pension expense (income)
EBIT before Special Items
Depreciation, amortization and cost of timber harvested
Adjusted EBITDA
Annualized Net Sales
Adjusted EBITDA Margin
325
175
999
337
370
(192)
(200)
1,819
1,040
1,506
1,097
$ 2,859 $ 2,603
$21,161 $19,363
13.5%
13.4%
Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDA Margin are all “non-GAAP financial measures”
presented as supplemental measures of our performance and the most directly comparable GAAP
measure for Adjusted EBIT and Adjusted EBITDA are operating income and net income, respectively. They
are not presented in accordance with accounting principles generally accepted in the United States, or
GAAP. The Company believes these measures provide additional meaningful information in evaluating the
Company’s performance over time, and that other companies use these and/or similar measures for similar
purposes. However, Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDA Margin have limitations as
analytical tools, and should not be considered in isolation, or as substitutes for analysis of our results as
reported under GAAP. In addition, in evaluating Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDA
Margin, you should be aware that in the future we will incur expenses such as those used in calculating
these measures. Our presentation of these measures should not be construed as an inference that our
future results will be unaffected by unusual or nonrecurring items.
Moody’s methodology is used to calculate Adjusted Debt to EBITDA ratio. Moody’s adjusts debt to include
balance sheet debt, operating leases/deferred tax liability and debt issuance expense, and pension gap.
EBITDA is adjusted to include lease and pension adjustments (non-GAAP).
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
12/31/2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from - to -
Commission File No. 1-3157
INTERNATIONAL PAPER COMPANY
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation or organization)
13-0872805
(I.R.S. Employer Identification No.)
6400 Poplar Avenue
Memphis, Tennessee
(Address of principal executive offices)
38197
(Zip Code)
Registrant's telephone number, including area code:
901 419-9000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares
Trading symbol(s)
Name of each exchange on which registered
IP
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Securities Registered Pursuant to Section 12(g) of the Act: None
Yes ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ¨ No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
"emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
☒
☐
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ý
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
The aggregate market value of the Company’s outstanding common stock held by non-affiliates of the registrant, computed by reference to the
closing price as reported on the New York Stock Exchange, as of the last business day of the registrant’s most recently completed second fiscal
quarter (June 30, 2022) was approximately $15,087,030,329.
The number of shares outstanding of the Company’s common stock as of February 10, 2023 was 350,084,361.
Documents incorporated by reference:
Portions of the registrant’s proxy statement filed within 120 days of the close of the registrant’s fiscal year in connection with registrant’s 2023
annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K.
[THIS PAGE INTENTIONALLY LEFT BLANK]
INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2022
PART I.
ITEM 1.
BUSINESS.
General
Human Capital
Competition and Costs
Marketing and Distribution
Description of Principal Products
Sales Volumes by Product
Environmental Protection
Climate Change
Raw Materials
Information About Our Executive Officers
Forward-looking Statements
ITEM 1A.
ITEM 1B.
ITEM 2.
RISK FACTORS.
UNRESOLVED STAFF COMMENTS.
PROPERTIES.
ITEM 3.
ITEM 4.
PART II.
ITEM 5.
ITEM 6.
ITEM 7.
Mills and Plants
Capital Investments and Dispositions
LEGAL PROCEEDINGS.
MINE SAFETY DISCLOSURES.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
RESERVED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Executive Summary
Results of Operations
Description of Business Segments
Business Segment Results
Liquidity and Capital Resources
Critical Accounting Policies and Significant Accounting Estimates
Recent Accounting Developments
Legal Proceedings
Effect of Inflation
Foreign Currency Effects
Market Risk
1
1
1
2
3
4
4
4
4
5
7
7
8
9
21
21
21
21
21
21
22
22
23
24
28
31
32
33
37
40
40
40
41
41
INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2022
ITEM 7A.
ITEM 8.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Report of Management on Financial Statements, Internal Control over
Financial Reporting and Internal Control Environment and Board of
Directors Oversight
Reports of Deloitte & Touche LLP, Independent Registered Public
Accounting Firm
Consolidated Statement of Operations
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to Consolidated Financial Statements
Interim Financial Results (Unaudited)
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
CONTROLS AND PROCEDURES.
OTHER INFORMATION.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
EXECUTIVE COMPENSATION.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Additional Financial Data
FORM 10-K SUMMARY
SIGNATURES
ITEM 9.
ITEM 9A.
ITEM 9B.
ITEM 9C.
PART III.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV.
ITEM 15.
ITEM 16.
APPENDIX I
2022 LISTING OF FACILITIES
APPENDIX II
2022 CAPACITY INFORMATION
42
43
43
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48
49
50
51
52
53
92
94
94
94
94
94
94
95
95
95
95
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95
95
99
100
A-1
A-3
PART I.
ITEM 1. BUSINESS
GENERAL
International Paper Company (the "Company" or
"International Paper", which may also be referred to
as "we" or "us") is a global producer of renewable
fiber-based packaging and pulp products with
manufacturing operations in North America, Latin
America, Europe and North Africa. We are a New
York corporation,
incorporated in 1941 as the
successor to the New York corporation of the same
name organized in 1898. You can learn more about
us
at
www.internationalpaper.com.
website
visiting
our
by
In the United States, at December 31, 2022,
the
Company operated 24 pulp and packaging mills, 164
converting and packaging plants, 16 recycling plants
and three bag facilities. Production facilities at
December 31, 2022 in Canada, Europe, North Africa
and Latin America included four pulp and packaging
mills, 37 converting and packaging plants, and two
recycling plants. We operate a printing and packaging
products distribution business principally through six
branches in Asia. Substantially all of our businesses
have experienced, and are likely to continue to
experience, cycles relating to industry capacity and
general economic conditions.
For management and financial reporting purposes,
our businesses are separated into two segments:
Industrial Packaging and Global Cellulose Fibers. A
description of these business segments can be found
Item 7. Management’s
on pages 31 and 32 of
Discussion and Analysis of Financial Condition and
Results of Operations.
interest
The Company recently announced it has reached an
agreement to sell
its equity investment in Ilim S.A.
("Ilim"), and has also received from the same
purchaser an indication of
to purchase its
in JSC Ilim Group ("Ilim Group"
equity investment
together with Ilim, the Ilim joint venture). As a result,
all current and historical results of the Ilim investment
reportable segment are presented as Discontinued
Operations, net of taxes. See discussion in Note 11 -
Equity Method Investments on page 66 through 68 of
Item 8. Financial Statements and Supplementary
Data.
International Paper’s
From 2018 through 2022,
capital spending approximated $5.0 billion, excluding
mergers and acquisitions. These expenditures reflect
our continuing efforts to use our capital strategically
to improve product quality and environmental
performance, as well as lower costs, maintain
reliability of operations and deploy strategic capital for
capacity expansion. Capital spending in 2022 was
approximately $931 million and is expected to be
approximately $1.0 billion to $1.2 billion in 2023. You
can find more information about capital spending on
pages 35 and 36 of Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations.
Discussions of acquisitions can be found in Note 7
Item 8. Financial
Acquisitions on page 62 of
Statements and Supplementary Data.
special
You can find discussions of restructuring charges and
Item 7.
other
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
items on page 31 of
our
that
strategy
suppliers,
customers,
Our strategic framework, The IP Way Forward,
delivers
business
ensures
sustainable outcomes for all of our stakeholders –
employees,
communities,
governmental and non-governmental organizations
and shareholders – for generations to come. Our
approach to sustainability considers our entire value
chain,
from focusing on sourcing raw materials
responsibly and working safely, to making renewable,
for
recyclable products and providing a market
recovered products. To help inform and prioritize the
focus of our sustainability strategy, we have engaged
with internal and external stakeholders using a variety
of methods, assessed key issues and associated
incorporated
risks
(ESG)
environmental,
considerations into our processes. Additionally,
in
2020, we established our Vision 2030 goals with the
purpose of promoting healthy and abundant forests,
thriving
sustainable
operations and renewable solutions. Certain of the
goals are discussed in more detail below.
opportunities,
and
and
governance
communities,
people
social
and
and
Throughout
this Annual Report on Form 10-K, we
“incorporate by reference” certain information in parts
of other documents filed with the Securities and
Exchange Commission ("SEC"). The SEC permits us
to disclose important information by referring to it in
that manner. Please refer to such information. Our
annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and proxy
reports and any
statements, along with all other
amendments thereto filed with or furnished to the
SEC, are publicly available free of charge on the
Investor Relations
section of our website at
www.internationalpaper.com as soon as reasonably
practicable after we electronically file such material
with, or furnish it to, the SEC. Our website contains a
significant amount of information about the Company,
including our SEC filings and financial and other
information for investors. The information that we post
1
on our website could be deemed to be material
information. We encourage investors, the media, and
others interested in the Company to visit this website
from time to time, as information is updated and new
information is posted. The information contained on
or connected to our website, however,
is not
incorporated by reference into this Form 10-K and
should not be considered part of this or any other
report that we file with or furnish to the SEC. Our
internet address is included as an inactive textual
reference only.
HUMAN CAPITAL
EMPLOYEES
As of December 31, 2022, we have approximately
39,000 employees, nearly 32,000 of whom are
located in the United States. Of our U.S. employees,
approximately 22,700 are hourly, with unions
representing
employees.
Approximately 10,600 of this number are represented
by the United Steelworkers union ("USW").
approximately
14,000
Individual
International Paper,
the USW, and several other
unions have entered into four master agreements
covering various U.S. mills and converting facilities.
These master agreements cover several specific
items,
including wages, select benefit programs,
successorship, employment security, and health and
safety.
facilities continue to have local
agreements for other subjects not covered by the
master agreements. If local facility agreements are
not successfully negotiated at the time of expiration,
under the terms of the master agreements the local
contracts will automatically renew with the same
terms in effect. The master agreements cover the
majority of our union represented mills and converting
facilities. In addition, International Paper is party to a
master
2,
International Brotherhood of Teamsters, covering
additional converting facilities.
agreement with District Council
SAFETY
our
employees
The safety of our employees remains the primary
is to create a 100%
focus of our leaders. Our goal
injury-free workplace
and
for
contractors. To accomplish this goal, we focus on the
IP Way of doing things - we do the right things, in the
right ways, for the right reasons, all of the time. Our
stated Vision 2030 Goal
is to achieve zero serious
injuries for employees and contractors. We regularly
conduct safety leadership training at all levels of the
Company. In 2022, 93% of our sites operated without
a serious injury, which we define as a life-altering
specific injury, to our employees.
HUMAN CAPITAL MANAGEMENT
to
learning
approach
continuous
through
and
our
performance
retention and development of our
The attraction,
employees is critical to our success. We accomplish
this, in part, by developing the capabilities of our team
members
learning,
management
development
programs. One such program is our REACH (Recruit,
Engage, Align College Hires) program through which
we recruit and develop early-career engineers and
safety professionals for our U.S. mills, preparing them
to become future leaders. We invest in the growth
and development of our employees by providing a
multi-dimensional
that
intellectually grows, and professionally
empowers,
develops our employees. Our HR Talent Management
Team hosts online Global New Employee Orientation
for employees and each business conducts onsite
new hire integration training unique to its business
facility. We provide continuing education
and/or
to our industry and job
courses that are relevant
functions within the Company,
including both
instructor
lead and online training through our
In addition, we have created
MyLearning platform.
learning paths for specific positions that are designed
to encourage an employee’s advancement and
growth within our organization, such as our Global
Manufacturing Training Initiative, which provides
training
and
maintenance employees in our mills in a standardized
and structured manner. On the converting side of our
line and future
business, approximately 200 front
leaders participated in our multi-day in-person
Application
Leadership
Professional
and
Development
and Manufacturing Management
Associate Programs. Across the enterprise in 2022,
employees completed 3.4 million learning activities
through our Learning Management Service (LMS)
system. The IP Leadership Institute offers both LMS
and other courses for individual contributors, people
leaders and teams. We also offer a peer mentor
program and leadership and customer service
training to support and develop our employees.
Moreover, we offer tuition reimbursement programs
for employees who desire to receive additional
outside education to prepare for other positions at the
Company, as well as student loan assistance to help
employees repay qualified student
loans. These
resources provide employees with the skills and
support they need to achieve their career goals, build
management skills and become leaders within our
Company.
operations
services
hourly
to
The labor market for both hourly and salaried workers
has recently been increasingly competitive. For
additional
information regarding risks related to the
current labor market, see Item 1A. Risk Factors – WE
OPERATE IN A CHALLENGING MARKET FOR
TALENT AND MAY FAIL TO ATTRACT AND
2
RETAIN QUALIFIED PERSONNEL,
KEY MANAGEMENT PERSONNEL.
INCLUDING
COMPENSATION AND BENEFITS
We view compensation and benefits as part of how
we attract, engage and retain our talented workforce.
We do so by rewarding performance while ensuring
competitive compensation in our
local markets
around the world. We continually evaluate our
compensation and benefits so that we offer optimal
compensation programs and remain a leading
employer of choice in the areas in which we operate.
DIVERSITY AND INCLUSION
is
and
30% racial
The Company believes in an inclusive workforce,
where employees of diverse backgrounds are
represented, engaged and empowered to contribute
innovative ideas and influence decisions. Our stated
Vision 2030 goal
to achieve 30% overall
representation of women and 50% women in salaried
positions,
ethnic minority
representation in U.S. salaried positions, and to
implement
regional diversity plans in non-U.S.
locations. To foster a more diverse and inclusive
culture,
the Company is focused on promoting a
culture of diversity and inclusion that leverages the
talents of all employees, and implementing practices
that attract, recruit and retain diverse top talent. We
have a Global Diversity and Inclusion Council
comprised of senior leaders in the Company. The
Company supports employee-led networking groups
that are open to all employees and provide a forum to
communicate and exchange ideas, build a network of
relationships across the Company, and pursue
personal and professional development, such as the
Women in International Paper Employee Networking
Circle (Women in IP), African American Employee
Networking Circle (IPMOVE), LGBTQ Employee
Networking Circle (IPride) and a Veterans Employee
Networking Circle (IPVets). We also sponsor diversity
and inclusion (D&I) scholarships at universities,
recognize D&I awareness months, conduct training
inclusion forums, mentoring boards and
and host
team-level courses which further our diversity and
inclusion goals.
have
workplaces. We
We have a global workforce and have implemented
programs around the globe to create diverse,
inclusive
increased
representation of engineers in our REACH program.
Our overall
full-time REACH diversity hiring since
2018 is approximately 50%. Moreover, we have
developed a Diversity Acquisition Framework for U.S.
Colleges to guide our enterprise diversity efforts as
we work towards accomplishing our Vision 2030
goals.
The Company also has been recognized for
the
diversity of its Board of Directors. The make-up of our
Board of Directors reflects our efforts to seek qualified
Board candidates with diverse backgrounds including,
but not limited to, such factors as race, gender, and
ethnicity. The current composition of our Board, as
noted below, reflects those efforts and the importance
of diversity to the Board:
•
•
•
27% women, 27% ethnically diverse,18%
African-American;
60% of the Board’s standing committees are
chaired by women; and
Two women directors and two African-
American directors have joined in the last
several years.
GLOBAL
ENGAGEMENT
CITIZENSHIP
AND
COMMUNITY
We encourage our employees to support
the
communities in which they live and in which the
Company operates. Our global citizenship and
community engagement efforts extend across the
globe and support social and educational needs. To
that end, in 2022 we invested more than $19 million
to address critical needs in the communities in which
is to
we work and live. Our Vision 2030 goal
strengthen the resilience of our communities and
improve the lives of 100 million people in our
communities, including through supporting education,
reducing hunger, promoting health and wellness and
supporting disaster relief. We are proud to have been
named among the world’s most ethical companies by
Ethisphere for 16 consecutive years.
COMPETITION AND COSTS
The pulp and packaging sectors are large and
fragmented, and the areas into which we sell our
principal products are very competitive. Our products
compete with similar products produced by other
forest products companies. We also compete,
in
some instances, with companies in other industries
and against substitutes for wood-fiber products.
Many factors influence the Company’s competitive
including price, cost, product quality and
position,
the
services. You can find more information about
impact of these factors on operating profits on pages
23 through 33 of Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations. You can find information about
the
Company’s manufacturing capacities on page A-3 of
Appendix II.
3
MARKETING AND DISTRIBUTION
DESCRIPTION OF PRINCIPAL PRODUCTS
The Company sells products directly to end users and
converters, as well as through agents, resellers and
distributors.
The Company’s principal products are described on
pages 31 and 32 of Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations.
SALES VOLUMES BY PRODUCT
Sales volumes of major products for 2022, 2021 and 2020 were as follows:
SALES VOLUMES BY PRODUCT (a)
In thousands of short tons (except as noted)
Industrial Packaging
Corrugated Packaging (b)
Containerboard
Recycling
Saturated Kraft
Gypsum/Release Kraft
EMEA Packaging (b)
Brazilian Packaging (b)
Industrial Packaging
Global Cellulose Fibers (in thousands of metric tons) (c)
2022
2021
2020
10,202
2,642
2,190
188
251
1,376
—
16,849
2,893
10,787
2,893
2,223
186
234
1,546
—
17,869
2,970
10,671
3,097
2,181
158
209
1,627
271
18,214
3,159
Includes third-party and intersegment sales and excludes sales of equity investees.
(a)
(b) Volumes for corrugated box sales reflect consumed tons sold ("CTS"). Board sales by these businesses reflect invoiced tons.
(c)
Includes North American volumes and internal sales to mills.
ENVIRONMENTAL PROTECTION
As responsible stewards of people and communities,
natural resources and capital, stewardship is one of
the Company's core values. Our Vision 2030 Goals
future for
provide a framework to build a better
people, the planet and the Company in the areas of
healthy and abundant
thriving people and
communities, sustainable operations and renewable
the
solutions. Through these efforts and more,
Company tackles the toughest issues in the value
chain to improve its environmental
footprint and
promote the long-term sustainability of natural capital.
forests,
and
and
laws
international
As part of its business, the Company is subject to
federal, state
extensive and increasingly stringent
local,
regulations
governing the protection of
the environment. For
example, Company manufacturing processes involve
discharges to water, air emissions, water intake and
waste handling and disposal activities, all of which
are subject to a variety of environmental
laws and
regulations, along with requirements of environmental
permits or analogous authorizations issued by various
governmental
new
environmental
regulations impacting our
facilities around the world are routinely passed or
(1)
proposed. Our continuing objectives include:
authorities.
addition,
laws or
In
to
to
on
and
avoid
assure
impacts
environmentally
controlling emissions and discharges from our
the
adverse
facilities
environment, and (2) maintaining compliance with
applicable laws and regulations. The Company spent
approximately $30 million in 2022 for capital projects
to control environmental releases into the air and
water,
sound
management and disposal of waste. We expect to
spend approximately $39 million in 2023 for
environmental capital projects. Capital expenditures
on environmental projects for 2024 and 2025,
respectively, are anticipated to be approximately $35
million and $26 million. It is possible that our capital
expenditure assumptions, estimates and project
completion dates may change, and our projections
are subject
to change due to items such as the
finalization of ongoing engineering projects, varying
costs or
laws and
regulations.
in environmental
changes
The Company has completed capital projects to meet
the U.S. Environmental Protection Agency's ("EPA")
technology ("MACT")
maximum achievable control
and risk and technology review ("RTR") regulations
that
require owners of specified pulp and paper
process equipment and boilers to meet new air
emissions standards for certain substances. As
portions of these MACT and RTR regulations have
4
been remanded to EPA for further consideration it is
not clear at this time what, if any, additional capital
project expenditures might result from resolution of
the open issues.
in
of
at
and
party
Liability
hazardous
substances
Compensation
The Company has been named as a potentially
environmental
("PRP")
responsible
remediation actions under various federal and state
including the Comprehensive Environmental
laws,
Response,
Act
("CERCLA"). Many of these proceedings involve the
cleanup
large
landfills that received waste from many
commercial
different sources. While joint and several
liability is
authorized under CERCLA and equivalent state laws,
as a practical matter, liability for CERCLA cleanups is
typically allocated among the many PRPs. There are
other remediation costs typically associated with the
cleanup of hazardous substances at the Company’s
formerly-owned facilities, and
current, closed or
recorded as liabilities on the balance sheet. For
additional
information regarding certain remediation
actions, see Note 14 Commitments and Contingent
Item 8. Financial Statements and
Liabilities of
Supplementary Data on pages 71 through 75. For
additional information regarding risks associated with
environmental matters, see Item 1A. Risk Factors –
WE ARE SUBJECT TO A WIDE VARIETY OF
LAWS,
OTHER
GOVERNMENTAL REQUIREMENTS THAT MAY
CHANGE IN SIGNIFICANT WAYS, AND THE COST
OF COMPLIANCE WITH SUCH REQUIREMENTS
COULD IMPACT OUR BUSINESS AND RESULTS
OF OPERATIONS.
REGULATIONS
AND
CLIMATE CHANGE
are
taking
economy.
risks, we
The Company recognizes the impacts of climate
change on people and our planet. In order to manage
climate-related
actions
throughout our value chain to help advance a low-
carbon
annual
We
sustainability reporting with the recommendations of
the Task Force
on Climate-Related Financial
Disclosure (TCFD) in the 2022 reporting cycle (based
upon data from 2021). We identify and evaluate
physical and transition climate-related risks through
our enterprise risk management process.
aligned
our
We transform renewable resources into recyclable
products that people depend on every day. This cycle
begins with sourcing renewable fiber from responsibly
managed forests and recycled raw materials to create
our products. We then use a circular manufacturing
process that makes the most of
resources and
byproducts, while reducing the environmental impacts
of our operations. At the end of use, the majority of
5
our
low-carbon products are recycled into new
products at a higher
rate than any other base
to a low-
material. We work to advance the shift
carbon, circular economy by designing products that
are 100% reusable, recyclable or compostable.
Through improvements in operations, equipment,
energy efficiency and fuel diversity, we have achieved
company-wide reductions in Scope 1 and Scope 2
greenhouse gas (GHG) emissions. For example, we
reduced our GHG emissions by approximately 20%
between 2010 and 2020. Moreover, as part of our
Vision 2030 goals, we have targeted incremental
reductions of 35% in our Scope 1, 2, and 3 GHG
emissions in comparison to 2019 levels. The Science
Based Targets initiative (SBTi) approved these targets
as consistent with levels required to meet the goals of
the Paris Agreement, an agreement signed among
over 170 countries, which became effective in
November 2016. We intend to continue to evaluate
and implement projects as we pursue this Vision
2030 GHG goal. This includes ongoing energy
efficiency efforts and capital projects to phase out our
most carbon intensive fuel sources (Scope 1) as well
as developing GHG reduction strategies for our
energy sourcing (Scope 2) and broader supply chain
footprint (Scope 3).
fuels)
than fossil
We use carbon-neutral biomass and manufacturing
residuals (rather
to generate a
majority of the manufacturing energy at our mills. We
believe our efforts to advance sustainable forest
management and restore forest landscapes are an
important lever for mitigating climate change through
carbon storage in forests.
INTERNATIONAL EFFORTS
The Paris Agreement went into effect in November
2016 and compels international efforts and voluntary
commitments toward reducing the emissions of
GHGs. Consistent with this objective, participating
countries aim to balance GHG emissions generation
and sequestration in the second half of this century
or, in effect, achieve net-zero global GHG emissions.
To assist member countries in meeting GHG
reduction obligations, the EU operates an Emissions
Trading System ("EU ETS"). Our operations in the EU
experience indirect impacts of the EU ETS through
purchased power pricing. Neither
the direct nor
indirect impacts of the EU ETS have been material to
the Company, but
to the
Company in the future depending on how the Paris
Agreement's non-binding commitments or allocation
of, and market prices for, GHG credits under existing
rules evolve over the coming years.
they could be material
U.S. EFFORTS,
AND LOCAL MEASURES
INCLUDING STATE, REGIONAL
Responses to climate change may result in regulatory
risks as new laws and regulations aimed at reducing
GHG emissions come into effect. The EPA manages
regulations to: (i) control GHGs from mobile sources
by adopting transportation fuel efficiency standards;
(ii) control GHG emissions from new Electric
Generating Units ("EGUs");
(iii) control emissions
from new oil and gas processing operations; and (iv)
require reporting of GHGs from sources of GHGs
greater than 25,000 tons per year.
including states in which we
Several U.S. states,
operate facilities, have enacted or are considering
legal measures to require the reduction and reporting
of emissions of GHGs by companies and public
utilities. California, New York and Virginia have
already enacted such programs, although these
regulations have not had, and are not expected to
have a material impact on the Company. We monitor
proposed programs in other states as well; however,
it is unclear what impacts, if any, future state-level or
local GHG rules will have on the Company’s
operations.
SUMMARY
impacts,
Regulation related to GHGs and climate change
continues to evolve in the areas of the world in which
we do business. However, while it is likely that there
will be increased governmental action regarding
GHGs and climate change in the future, it is unclear
what actions will be taken and when such actions will
occur and at this time it is not reasonably possible to
estimate the Company’s costs of compliance with
rules that have not yet been adopted or implemented
and may not be adopted or implemented in the future.
In addition to possible direct
future
legislation and regulation could have indirect impacts
on the Company,
for
transportation, energy and other inputs, as well as
more protracted air permitting processes, causing
delays and higher costs to implement capital projects.
The Company has controls and procedures in place
to track GHG emissions from our facilities, as well as
to stay informed about developments concerning
possible climate-related laws, regulations, accords,
and policies in the U.S. and in other jurisdictions
where we operate. We regularly assess whether such
developments may have a material effect on the
Company, its operations or financial condition, and
whether we have any related disclosure obligations
under applicable rules and regulations.
such as higher prices
Moreover, compliance with legal requirements related
to GHGs and/or climate change which are currently in
effect or may be enacted in the future may require
6
future expenditures to meet GHG emission reduction
obligations. These obligations may include carbon
taxes, the requirement to purchase GHG credits or
the need to acquire carbon offsets. We may also
incur significant expenditures in relation to our efforts
to meet our internal targets or goals with respect to
GHGs and climate change, including our Vision 2030
goal on GHGs as set forth above. Furthermore, in
connection with complying with legal requirements
and/or our efforts to meet our internal targets and
goals, we have made and expect to continue to make
capital and other investments to displace traditional
fossil
fuels, such as fuel oil and coal, with lower
carbon alternatives, such as biomass and natural
gas. Currently, these efforts and obligations have not
materially impacted the Company but such efforts
and obligations may have a material
impact on the
Company in the future.
We believe global citizenship is a key element of
corporate governance promoted by our Board of
Directors and senior management. The Public Policy
and Environment Committee of the Board has overall
oversight responsibility for global citizenship at the
Company. This Committee reviews and oversees
environmental
climate
change), public policy, legal, health and safety and
technology issues. The Company’s Governance
Committee also has oversight of certain public policy
and sustainability matters.
sustainability
(including
For additional information regarding risks associated
with climate change, see Item 1A. Risk Factors – WE
ARE SUBJECT TO PHYSICAL, OPERATIONAL,
TRANSITIONAL
RISKS
ASSOCIATED WITH CLIMATE CHANGE AND
GLOBAL, REGIONAL AND LOCAL WEATHER
CONDITIONS AS WELL AS BY
LEGAL,
REGULATORY AND MARKET RESPONSES TO
CLIMATE CHANGE.
FINANCIAL
AND
The
Additional information regarding climate change and
the Company is available in our 2021 Sustainability
Report, and will be available in our upcoming 2022
Sustainability Report to be filed later in 2023, both of
found on our website at
which can, or will be,
information
www.internationalpaper.com.
contained in such reports is not
incorporated by
reference into this Form 10-K and should not be
considered part of this or any other report that we file
with or furnish to the SEC. Any targets or goals with
respect to ESG matters discussed herein or in our
sustainability reports as noted above are forward-
looking statements and may be aspirational. These
targets or goals are not guarantees of future results,
and involve assumptions and known and unknown
risks and uncertainties, some of which are beyond
our control.
RAW MATERIALS
to our businesses include
Raw materials essential
wood fiber, purchased in the form of pulpwood, wood
chips and old corrugated containers (OCC), and
certain chemicals, including caustic soda, starch and
adhesives. For further information concerning fiber
supply purchase agreements, see page 36.
INFORMATION ABOUT OUR EXECUTIVE
OFFICERS
Mark S. Sutton, 61, chairman (since January 1,
2015) & chief executive officer (since November 1,
2014). Mr. Sutton previously served as president &
chief operating officer from June 1, 2014 to October
31, 2014, senior vice president - industrial packaging
from November 2011 to May 31, 2014, senior vice
president - printing and communications papers of the
Americas from 2010 until 2011, senior vice president -
supply chain from 2008 to 2009, vice president -
supply chain from 2007 until 2008, and vice president
- strategic planning from 2005 until 2007. Mr. Sutton
joined International Paper in 1984. Mr. Sutton serves
on the board of directors of The Kroger Company. He
is a member of The Business Council and the
Business Roundtable and serves on the American
Forest & Paper Association board of directors. He
also serves on the board of directors for Memphis
Tomorrow and board of governors for New Memphis
Institute. Mr. Sutton has been a director since June 1,
2014.
Clay R. Ellis, 52, senior vice president
- global
cellulose fibers and IP Asia since January 2023. Mr.
Ellis previously served as senior vice president -
enterprise operational excellence from December
2019 to December 2022 and vice president
-
manufacturing, global cellulose fibers from 2016 to
December 2019. Prior to that, he served as vice
president of pulp from 2014 to 2016, and vice
president manufacturing, North American papers from
2012 to 2014. Mr. Ellis joined International Paper in
1992.
Aimee K. Gregg, 44, senior vice president, supply
chain & information technology, since January 2023.
Prior to this role, Ms. Gregg served as vice president
and general manager, Containerboard & Recycling,
from September 2020 until January 2023; vice
president, Recycling & Recovered Fiber, from 2018
until 2020, and general manager,
from
2016 to 2018. Ms. Gregg joined International Paper in
2002.
recycling,
W. Thomas Hamic, 57, senior vice president -
North American container and chief commercial
officer since January 2023. Prior to that he served
enterprise
excellence
as senior vice president - global cellulose fibers and
enterprise commercial excellence from September
2020 to December 2022. Mr. Hamic previously
served as senior vice president - containerboard
and
from
commercial
December 2019 until September 2020. Mr. Hamic
has also previously served as vice president and
- containerboard & recycling,
general manager
North American container
from June 2015 until
December 2019. Mr. Hamic became vice president
and general manager of the south area in container
of the Americas in 2009, and he was appointed to
the role of vice president,
industrial packaging
group’s finance & strategy in 2010. Mr. Hamic joined
International Paper in 1991.
Allison B. Magness, 45, senior vice president
manufacturing & EH&S (environmental, health and
safety) since January 2023. Prior to that she served
as vice president, South Area, North American
container from 2019 to 2022. Previously she had
served in a number of roles including vice president,
Manufacturing & Containerboard from 2015 to 2019;
manager, technical services, North American Paper &
Pulp from 2013 to 2015; and mill manager of the
Franklin Mill from 2011 to 2013. Ms. Magness joined
International Paper in 1999.
Timothy S. Nicholls, 61, senior vice president &
chief financial officer since June 2018. Mr. Nicholls
previously served as senior vice president
-
industrial packaging the Americas from January
2017 through June 2018, senior vice president -
industrial packaging from November 2014 through
December 2016, senior vice president - printing and
communications papers of
the Americas from
November 2011 through October 2014, senior vice
president and chief financial officer from 2007 until
2011, vice president and executive project leader of
IP Europe during 2007, and vice president and chief
financial officer - IP Europe from 2005 until 2007.
Mr. Nicholls joined International Paper in 1999.
Thomas J. Plath, 59, senior vice president - human
resources and corporate affairs since January 2023.
Prior to that he served as senior vice president -
human resources and global citizenship from March
1, 2017 to December 2022. Mr. Plath previously
served as vice president - human resources, global
businesses from November 2014 through February
2017, and vice president
- HR manufacturing,
technology, EH&S and global supply chain from
April 2013 to November 2014. Mr. Plath joined
International Paper in 1991.
James P. Royalty, Jr., 53, senior vice president -
containerboard and recycling since January 2023.
Prior to that he served as senior vice president and
president, Europe, the Middle East, Africa and Russia
7
from December 2019 to December 2022. Most
recently, Mr. Royalty served as vice president,
corporate development and disruptive technologies
from September 2018 until December 2019, vice
president, strategic projects from 2017 until 2018,
vice president,
relations from 2013 until
2017, vice president and general manager, container
the Americas in 2008 to 2013. Mr. Royalty joined
International Paper in 1991.
investor
Joseph Saab, 54, senior vice president, general
counsel & corporate secretary since July 2022. Mr.
Saab previously served as vice president, deputy
general counsel & assistant corporate secretary
from 2019 until July 2022 and associate general
counsel
Industrial Packaging North America,
Europe, Middle East and Africa from 2014 until
2019.
-
Gregory T. Wanta, 57, senior vice president as of
January 2023. Prior to that Mr. Wanta served as
senior vice president - North American container
from December 2016 to December 2022. Mr. Wanta
increasing
has served in a variety of
responsibility in manufacturing and commercial
leadership roles
coated
foodservice and
paperboard, printing papers,
including vice president,
industrial packaging,
central
from
the Americas,
January 2012 through October 2016. Mr. Wanta
joined International Paper in 1991.
in specialty papers,
region, Container
roles of
FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-
K that are not historical in nature may be considered
“forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995.
Words such as “expects,” “anticipates,” “believes,”
“estimates” and similar expressions identify forward-
looking statements. These statements are not
guarantees of
future performance and 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 include but are not limited to: (i) risks
with respect to climate change and global, regional,
and local weather conditions, as well as risks related
to our ability to meet targets and goals with respect to
climate change and the emission of GHGs and other
environmental, social and governance matters; (ii) the
impact of the conflict involving Russia and Ukraine,
including in connection with related escalated
sanctions
the
European Union, G7 and other countries and possible
actions by the Russian government, and the impact of
such developments on domestic and global economic
and geopolitical conditions in general and on us and
the United States,
imposed by
8
to
(iv)
and
current
respect
the full
industry
impact of
conditions
in Ilim Group (and,
our Ilim joint venture, which could be materially and
adversely affected by such developments, and our
the Russian
inability to predict
invasion of Ukraine, current or
future sanctions,
current or future actions by the Russian government,
geopolitical instability and the possibility of broadened
Ilim joint venture, on our
military conflict on our
receipt of dividends from our Ilim joint venture and on
our ability to complete the sale of our interest in the
Ilim joint venture under the terms of the agreement
with our joint venture partners or the sale of our
interest
if we are unable to
complete such sales, on the value of and our ability to
sell such interests to another purchaser); (iii) the level
of our indebtedness and changes in interest rates
(including the impact of current elevated interest rate
the impact of global and domestic
levels);
conditions,
economic
including with
negative
macroeconomic conditions, inflationary pressures and
changes in the cost or availability of raw materials,
energy sources and transportation sources, supply
chain shortages and disruptions, competition we face,
cyclicality and changes in consumer preferences,
demand and pricing for our products, and conditions
impacting the credit, capital and financial markets; (v)
domestic and global geopolitical conditions, changes
trade protectionist
in currency exchange rates,
policies, downgrades in our credit ratings, and/or the
credit ratings of banks issuing certain letters of credit,
issued by recognized credit rating organizations; (vi)
the amount of our future pension funding obligations,
and pension and healthcare costs; (vii) unanticipated
expenditures or other adverse developments related
to compliance with existing and new environmental,
tax, labor and employment, privacy, anti-bribery and
non-U.S.
anti-corruption,
governmental laws and regulations; (viii) any material
disruption at any of our manufacturing facilities or
other adverse impact on our operations due to severe
weather, natural disasters, climate change or other
causes; (ix) risks inherent
in conducting business
through joint ventures; (x) our ability to achieve the
benefits expected from, and other risks associated
with, acquisitions, joint ventures, divestitures, spinoffs
and other corporate transactions, (xi) cybersecurity
loss
and
technology
contingencies and pending,
future
to environmental
litigation,
related matters; (xiii) our exposure to claims under
our agreements with Sylvamo Corporation; (xiv) our
failure to realize the anticipated benefits of the spin-
off of Sylvamo Corporation and the qualification of
such spin-off as a tax-free transaction for U.S. federal
income tax purposes; and (xv) our ability to attract
and retain qualified personnel, particularly in light of
current
labor market conditions. These and other
factors that could cause or contribute to actual results
forward-looking
differing materially
(xii)
threatened or
including with respect
from such
other U.S.
information
risks;
and
and
statements can be found in our press releases and
SEC filings. In addition, other risks and uncertainties
not presently known to the Company or that we
currently believe to be immaterial could affect
the
accuracy of any forward-looking statements. The
Company undertakes no obligation to publicly update
any forward-looking statements, whether as a result
of new information, future events or otherwise.
ITEM 1A. RISK FACTORS
The Company faces risks in the normal course of
business and through global,
regional, and local
events that could have an adverse impact on its
reputation, operations, and financial performance.
The Board of Directors exercises oversight of
the
Company’s enterprise risk management program,
which includes strategic, operational and financial
matters, as well as compliance and legal risks. The
Audit and Finance Committee coordinates the risk
role exercised by the Board’s standing
oversight
committees and management, and it
receives
updates on the risk management processes twice per
year.
In addition to the risks and uncertainties discussed
elsewhere in this Annual Report on Form 10-K
(particularly in Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations), or in the Company’s other filings with the
Securities and Exchange Commission, the following
factors that could cause the
are some important
Company’s actual results to differ materially from
those projected in any forward-looking statement. If
any of the events or circumstances described in any
the following risk factors occurs, our business,
of
results of operations and/or financial condition could
be materially and adversely affected, and our actual
results may differ materially from those contemplated
in any forward-looking statements we make in any
public disclosures.
RISKS RELATING TO MARKET AND ECONOMIC
FACTORS
IN
DEVELOPMENTS
ADVERSE
GENERAL
BUSINESS AND ECONOMIC CONDITIONS COULD
HAVE AN ADVERSE EFFECT ON THE DEMAND
FOR OUR PRODUCTS AND OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
General economic conditions may adversely affect
industrial non-durable goods production, consumer
spending,
advertising
activity, white-collar employment levels and consumer
confidence, all of which impact demand for our
products, or otherwise adversely affect our business.
We may also be adversely affected by catastrophic or
including future health
other unforeseen events,
disasters,
or
epidemics
pandemics,
commercial
printing
natural
and
9
terrorism, political,
geopolitical events,
financial or
social instability, or civil or social unrest. Moreover,
negative economic conditions or other adverse
developments with respect
to our business have
resulted in, and may in the future result in impairment
charges which could be material. Volatility or
uncertainty in the financial, capital and credit markets,
which impacts interest rates, currency exchange rates
and the availability of credit, could also have a
material adverse effect on our business,
financial
condition and our results of operations.
to
and
conditions,
disruptions
including as the result of higher
Macroeconomic conditions in the U.S. and globally
continue to be challenging in various respects,
including as the result of slow or negative GDP
inflationary
growth in recent quarters, significant
pressures, elevated interest rates, challenging labor
market
supply
networks.
Our operations have been adversely
affected by, and are expected to continue to be
adversely affected by, these negative macroeconomic
conditions,
raw
material and labor costs, supply chain constraints and
transportation
disruptions,
environment. Moreover, any significant deterioration
in current negative macroeconomic conditions, or any
recovery therefrom that
is significantly slower than
anticipated, could have a material adverse effect on
our business,
financial
condition. Further if current negative macroeconomic
conditions result in significant disruptions to capital
and financial markets, our cost of borrowing, our
ability to access capital on favorable terms, and our
overall liquidity could be adversely affected.
results of operations or
constrained
and
a
can
risks, which
products. These
INTERNATIONALLY
CHANGES IN INTERNATIONAL CONDITIONS OR
OTHER RISKS ARISING FROM CONDUCTING
BUSINESS
COULD
ADVERSELY AFFECT OUR BUSINESS AND
RESULTS OF OPERATIONS. Our operating results
and business prospects could be substantially
affected by risks related to the countries outside the
U.S. in which we have manufacturing facilities or sell
our
vary
substantially by country, may include economic or
instability, geopolitical events (such as
political
between Ukraine and Russia and/or
increasing
tensions between China and Taiwan), corruption, anti-
American sentiment, social and ethnic unrest,
the
(including the risks of
regulatory environment
operating in developing or emerging markets in which
there are significant uncertainties regarding the
legal
interpretation
requirements),
local
currency versus the U.S. dollar, repatriating cash from
foreign countries to the U.S., downturns or changes in
economic
to
commodity inflation), adverse tax consequences or
rulings, nationalization or any change in social,
political or labor conditions in any of these countries
and
enforceability
fluctuations in the value of
conditions
(including
relation
of
in
of
products,
competing
or regions impacting matters such as sustainability,
environmental
regulations and trade policies and
financial
agreements, could negatively affect our
results. Trade protection measures in favor of local
producers
including
governmental subsidies,
tax benefits and other
measures giving local producers a competitive
advantage over us, may also adversely impact our
operating results and business prospects in these
countries. Likewise, disruption in existing trade
agreements or
increased trade friction between
countries (such as in relation to the trade tensions
between the U.S. and China), which can result
in
tariffs, could have a negative effect on our business
and results of operations by restricting the free flow of
goods and services across borders.
the purpose of obtaining or
In addition, our international operations are subject to
regulation under U.S. law and other laws related to
operations in foreign jurisdictions. For example, the
Foreign Corrupt Practices Act
prohibits U.S.
companies and their representatives from offering,
promising, authorizing or making payments to foreign
retaining
officials for
business abroad, and the U.S. Department of
Treasury’s Office of Foreign Asset Control and other
non-U.S. government entities maintain economic
sanctions targeting various countries, persons and
entities. Failure to comply with domestic or foreign
laws could result in various adverse consequences,
including the imposition of civil or criminal sanctions
and the prosecution of executives overseeing our
international operations.
RISKS RELATED TO CLIMATE AND WEATHER
TO
ARE
AND
GLOBAL,
SUBJECT
REGIONAL
PHYSICAL,
WE
OPERATIONAL, TRANSITIONAL AND FINANCIAL
RISKS ASSOCIATED WITH CLIMATE CHANGE
AND
LOCAL
WEATHER CONDITIONS AS WELL AS BY LEGAL,
REGULATORY, AND MARKET RESPONSES TO
CLIMATE CHANGE. Climate change impacts,
including rising temperatures and the increasing
severity and/or
frequency of adverse weather
conditions, may result in operational impacts on our
facilities, supply chain disruptions and increased raw
material and other costs. These adverse weather
conditions and other physical impacts which may be
exacerbated as the result of climate change include
floods,
earthquakes,
hailstorms, wildfires, snow, ice storms and drought.
Climate change may also contribute to the decreased
productivity of forests and adverse impacts on the
distribution and abundance of species, the spread of
disease and insect epidemics, any of which
developments
timber
harvesting. The effects of climate change and global,
regional and local weather conditions, including the
hurricanes,
tornadoes,
adversely
affect
could
10
resulting financial costs of compliance with legal or
regulatory initiatives, could have a material adverse
effect on our results of operations and business.
and
to ESG matters,
including with respect
to various ESG matters,
There has been an increased focus, including from
the general public and U.S. and foreign
investors,
authorities,
nongovernmental
governmental
regarding environmental, social and governance
(ESG) matters,
to climate
change, GHG emissions, packaging and waste,
sustainable supply chain practices, deforestation, and
increased
land, energy and water use. This
awareness with respect
including
climate change, may result
in more prescriptive
reporting requirements with respect to ESG metrics,
an increased expectation that such metrics will be
voluntarily disclosed by companies such as ours, and
increased pressure to make commitments, set
targets, or establish goals, and take action to meet
them. As the result of this increased focus and our
commitment
to ESG matters, we have voluntarily
provided disclosure and established targets and goals
with respect
including
climate change. For example, we have made public
commitments regarding our
intended reduction of
carbon emissions, including our Vision 2030 Goal of
reducing Scope 1, 2 and 3 GHG emissions by 35%
and have received approval by SBTi of these targets
as consistent with levels required to meet the goals of
the Paris Agreement. Meeting these and other ESG
targets and goals have increased, and may continue
to increase, our capital and operational costs. There
also continues to be a lack of consistency in legal and
regulatory initiatives regarding climate change across
jurisdictions and various governmental entities.
Additionally, we may also incur additional expenses
regulators
as a result of U.S. and international
requiring additional disclosures
regarding GHG
emissions. Further,
there can be no assurance
regarding the extent to which our climate and other
ESG targets will be achieved, and the achievement of
these targets is subject
to various risks and
uncertainties, some of which are outside our control.
For example, there has been limited net change in
our combined Scope 1 and Scope 2 emissions from
2019 to 2021, which we believe was largely due to
increased mill production over this period, along with
other
factors driven by COVID-19 disruption, mill
operations, weather events and energy supplies.
Moreover,
investments
there is no assurance that
made in furtherance of achieving such targets and
goals will meet investor expectations or any binding
regarding
or
sustainability performance. If we are unable to meet
these climate and other ESG targets and goals, this
failure could adversely impact our reputation as well
as
stakeholder
relationships, which could adversely impact our
non-binding
standards
customer
investor,
other
legal
and
business and results of operations. Moreover, not all
of our competitors may seek to establish climate or
other ESG targets and goals at a comparable level to
ours, which could result
in lower supply chain or
operating costs for competitors.
of
introduction
Other climate-related business risks that we face
include risks related to the transition to a lower-
carbon economy, such as increased prices for fuels;
the
increased
regulations; and more stringent and/or complex
environmental and other permitting requirements. To
the extent
risks
materialize, particularly if we are unprepared for
them, we may incur unexpected costs, and our
business may be materially and adversely affected.
climate-related business
carbon
that
tax;
a
RISKS RELATED TO OUR INDEBTEDNESS
OUR
AFFECT
THE LEVEL OF OUR INDEBTEDNESS COULD
ADVERSELY
FINANCIAL
CONDITION AND IMPAIR OUR ABILITY TO
OPERATE OUR BUSINESS. As of December 31,
of
approximately
2022, we
outstanding
our
indebtedness could have important consequences to
our
and
business, including the following:
had
indebtedness.
billion
of
condition,
operating
financial
results
level
$5.6
The
•
•
•
•
•
it may limit our ability to obtain additional debt
or equity financing for working capital, capital
development,
product
expenditures,
dividends, share repurchases, debt service
requirements,
general
acquisitions
corporate or other purposes;
and
be
dedicated
a portion of our cash flows from operations
will
on
indebtedness and will not be available for
other purposes, including operations, capital
business
expenditures
opportunities;
payments
future
and
to
debt
service
the
our
indebtedness could make it more difficult for
us to satisfy other obligations;
requirements
of
it may limit our ability to adjust to changing
market conditions, including to take actions in
connection with rising interest rates (such as
in
rate
environment), and place us at a competitive
disadvantage compared to our competitors
that have less debt;
interest
current
rising
the
it may increase our exposure to risks related
to fluctuations in foreign currency as we earn
profits in a variety of currencies around the
11
world and our debt is denominated in U.S.
dollars;
•
•
it may increase our exposure to the risk of
increased interest rates insofar as we are
compelled to refinance indebtedness at
higher interest rates, which risk is heightened
by the current high interest rate environment;
and
it may increase our vulnerability to a
downturn in general economic conditions or
in our business, and may make us unable to
carry out capital spending that is important to
our growth.
to our
indebtedness that
In addition, we are subject to agreements governing
our
require us to meet and
maintain certain financial ratios and covenants. A
significant or prolonged downturn in general business
and economic conditions, or other significant adverse
developments with respect
results of
operations or financial condition, may affect our ability
those
to comply with these covenants or meet
financial ratios and tests and could require us to take
action to reduce our debt or to act
in a manner
contrary to our current business objectives. Moreover,
the restrictions associated with these financial ratios
and covenants may prevent us from taking actions
that we believe would be in the best interest of our
business and may make it difficult for us to execute
our business strategy successfully or effectively
compete with companies that are not similarly
restricted. Additionally, despite these restrictions, we
may
additional
indebtedness in the future, which might subject us to
additional restrictive covenants that could affect our
financial and operational
flexibility and otherwise
increase the risks associated with our indebtedness
as noted above.
substantial
incur
able
be
to
WE ARE SUBJECT TO RISKS ASSOCIATED WITH
OUR VARIABLE RATE DEBT AND THE
UPCOMING TRANSITION FROM LIBOR TO SOFR.
We have interest rate risk, primarily related to our
short-term cash investments, variable rate debts,
supply chain financing, short-term debt and the
installment notes and loans in the Temple Inland
timber monetization special purpose entities. Interest
rates rose significantly during 2022 and could remain
high and volatile in 2023 and beyond. Changes in
interest rates impact how much we earn on our short
term cash investments, the interest rate we pay on
our variable rate debt and credit agreements, the cost
of supply chain financing and the refinance rate of our
short term debt.
it will
In addition, as of December 31, 2022, $127 million of
our variable rate debt continued to be priced based
on the London Interbank Offered Rate (“LIBOR”) with
the remaining $195 million of our variable rate debt
priced based on the Secured Overnight Financing
Rate (“SOFR”). The ICE Benchmark Administration
cease calculating and
announced that
publishing all USD LIBOR tenors on June 30, 2023.
All of our variable rate debt
that continues to be
priced based upon LIBOR will need to either be
amended, refinanced or paid off prior to the June 30,
2023 deadline, with any new variable rate debt
needing to be based upon SOFR. In addition, the
installment notes and some of the loans in the Temple
Inland timber monetization special purpose entities
are also priced based on LIBOR, and we are working
to change the pricing index with respect to such notes
and loan to SOFR before the June 30, 2023 deadline.
SOFR is calculated differently from LIBOR and has
inherent differences from LIBOR, which could give
rise to risks and uncertainties, including the limited
historical data and volatility in the benchmark rates.
The full effects to us of the transition to SOFR remain
uncertain.
CHANGES IN CREDIT RATINGS ISSUED BY
NATIONALLY
STATISTICAL
RECOGNIZED
RATING ORGANIZATIONS COULD ADVERSELY
AFFECT OUR COST OF FINANCING AND HAVE
AN ADVERSE EFFECT ON THE MARKET PRICE
OF OUR SECURITIES. Maintaining an investment-
grade credit rating is an important element of our
financial strategy, and a downgrade of the Company’s
ratings below investment grade will
likely eliminate
our ability to access the commercial paper market,
may limit our access to the capital markets, have an
adverse effect on the market price of our securities,
increase our cost of borrowing and require us to post
collateral for derivatives in a net liability position. Our
desire to maintain the Company's investment grade
rating may cause us to take certain actions designed
to improve our cash flow, including sale of assets,
suspension or
reduction of our dividend and
reductions in capital expenditures and working
capital.
the terms of
Under
the agreements governing
approximately $539 million of our debt as of
December 31, 2022, the applicable interest rate on
such debt may increase upon each downgrade in our
credit rating below investment grade. As a result, a
rating below investment
downgrade in our credit
interest
grade may lead to an increase in our
expense. There can be no assurance that such credit
ratings will remain in effect for any given period of
time or
that such ratings will not be lowered,
suspended or withdrawn entirely by the rating
in each rating agency’s judgment,
agencies,
if,
12
circumstances so warrant. Any such downgrade,
suspension or withdrawal of our credit ratings could
limit our
adversely affect our cost of borrowing,
access to the capital markets or
in more
result
restrictive covenants in agreements governing the
terms of any future indebtedness that we may incur.
credit
DOWNGRADES IN THE CREDIT RATINGS OF
BANKS ISSUING CERTAIN LETTERS OF CREDIT
WILL INCREASE OUR COST OF MAINTAINING
CERTAIN INDEBTEDNESS AND MAY RESULT IN
THE ACCELERATION OF DEFERRED TAXES. We
to the risk that a bank with currently
are subject
issued irrevocable letters of
supporting
installment notes in connection with Temple-Inland's
2007 sales of forestlands, may be downgraded below
a required rating. Prior to 2013, certain banks had
fallen below the required ratings threshold and were
successfully replaced, or waivers were obtained
regarding their replacement. As a result of continuing
uncertainty in the banking environment, some of the
letter-of-credit banks currently in place remain subject
to risk of downgrade and the number of qualified
replacement banks remains limited. The downgrade
of one or more of these banks may subject us to
additional costs of securing a replacement letter-of-
credit bank or could result
in an acceleration of
payments of up to $485 million in deferred income
taxes if replacement banks cannot be obtained. The
recorded in our
deferred taxes are currently
consolidated financial statements.
See Note 15,
Variable Interest Entities, on pages 75 and 76, and
Note 13. Income Taxes, on pages 69 through 71, in
Item 8. Financial Statements and Supplementary
Data for further information.
RISKS RELATING TO OUR PENSION AND
HEALTHCARE COSTS
plans
benefit
defined
pension
OUR PENSION AND HEALTH CARE COSTS ARE
SUBJECT TO NUMEROUS FACTORS WHICH
COULD CAUSE THESE COSTS TO CHANGE. We
have
covering
substantially all U.S. salaried employees hired prior to
July 1, 2004 (or later for certain acquired populations,
as described in Note 19. Retirement Plans, on pages
81 through 87, in Item 8. Financial Statements and
Supplementary Data) and substantially all hourly
union and non-union employees regardless of hire
date. We froze participation under these plans for
U.S. salaried employees, including credited service
and compensation on or after January 1, 2019;
however, the pension freeze does not affect benefits
accrued through December 31, 2018. We provide
retiree health care benefits to certain former U.S.
employees, as well as financial assistance towards
the cost of
individual retiree medical coverage for
certain former U.S. salaried employees. Our pension
costs are dependent upon numerous factors resulting
from actual plan experience and assumptions of
future experience. Pension plan assets are primarily
made up of equity and fixed income investments.
Fluctuations in actual market returns on plan assets,
changes in general interest rates and changes in the
number of retirees may impact pension costs in future
periods. Likewise, changes in assumptions regarding
current discount rates and expected rates of return on
plan assets could increase pension costs. However,
the impact of market fluctuations has been reduced
as a result of investments in our pension plan asset
portfolio which hedge the impact of changes in
interest rates on the plan’s funded status. Drivers for
fluctuating health costs include unit cost changes,
health care utilization by participants, and potential
changes in legal
requirements and government
oversight.
OUR U.S. FUNDED PENSION PLANS ARE
CURRENTLY FULLY FUNDED ON A PROJECTED
BENEFIT OBLIGATION BASIS; HOWEVER, THE
POSSIBILITY EXISTS THAT OVER TIME WE MAY
BE REQUIRED TO MAKE CASH PAYMENTS TO
THE PLANS, REDUCING THE CASH AVAILABLE
FOR OUR BUSINESS. We record an asset or a
liability associated with our pension plans equal to the
surplus of the fair value of plan assets above the
the benefit
benefit obligation or
obligation over
the fair value of plan assets. At
December 31, 2022, we had an overfunded pension
asset balance. The benefit surplus recorded under
the provisions of Accounting Standards Codification
("ASC") 715, “Compensation – Retirement Benefits,”
at December 31, 2022 was $29 million. The amount
future contributions, which could be
and timing of
material, will depend upon a number of
factors,
including the actual earnings and changes in values
of plan assets and changes in interest rates.
the excess of
RISKS RELATED TO THE COVID-19 PANDEMIC
RESULTS
CONDITION,
CONDITIONS
SIGNIFICANTLY
THE COVID-19 PANDEMIC HAS HAD AN
ADVERSE EFFECT ON PORTIONS OF OUR
BUSINESS, AND COULD HAVE MATERIAL
EFFECTS ON OUR BUSINESS,
ADVERSE
FINANCIAL
OF
OPERATIONS AND CASH FLOWS IF PUBLIC
ASSOCIATED WITH
HEALTH
DETERIORATE.
COVID-19
COVID-19 has continued to result in a large number
of hospitalizations and deaths in the U.S. and
throughout the world, although the macroeconomic
impact of the pandemic has decreased in comparison
to the impact experienced earlier in the pandemic.
The pandemic has had an adverse effect on portions
of our business to varying degrees, including as the
result of lower demand for certain of our products,
supply chain and labor disruptions, and higher costs,
13
and could continue to have adverse effects on our
business depending on the future course of
the
the pandemic could have a
pandemic. Moreover,
material adverse effect on our business, results of
operations, cash flow, liquidity, or financial condition if
public health conditions significantly deteriorate. The
ongoing impact of the pandemic on us will depend on
numerous evolving factors and future developments,
which are highly uncertain, including (a) the duration,
severity and scope of
the pandemic, including the
potential spread of more contagious and/or virulent
forms of the virus; (b) governmental and public health
directives and/or actions taken by our customers,
vendors and other private businesses in connection
with the pandemic; (c) the availability, acceptance,
of medical
effectiveness
for
treatments,
shots
COVID-19; and (d) the extent and duration of
the
pandemic’s impact on economic conditions and social
activity.
and
vaccines
administration
booster
and
RISKS RELATING TO INDUSTRY CONDITIONS
HAVE
ENERGY
MATERIALS,
individual governments'
CHANGES IN THE COST OR AVAILABILITY OF
RAW
AND
TRANSPORTATION
RECENTLY
AFFECTED, AND COULD CONTINUE TO AFFECT
OUR PROFITABILITY. We rely heavily on the use of
certain raw materials (principally virgin wood fiber,
recycled fiber, caustic soda, starch and adhesives),
energy sources (principally biomass, natural gas,
electricity and fuel oil) and third-party companies that
transport our goods. The market price of virgin wood
fiber varies based upon availability and source. The
global supply and demand for recycled fiber may be
affected by factors such as trade policies between
legislation and
countries,
regulations, and general macroeconomic conditions.
In addition,
the increase in demand of products
manufactured, in whole or in part, from recycled fiber,
on a global basis, may cause significant fluctuations
in recycled fiber prices. Taking into account ongoing
inflationary conditions in the U.S. and globally, we
have recently experienced, and expect to continue to
experience, a significant increase in various costs,
including recycled fiber, energy, freight, chemical, and
other supply chain costs, which has adversely
affected and is expected to continue to adversely
in
affect our results of operations. Energy prices,
particular prices for oil and natural gas, have
fluctuated dramatically in the past and have recently
increased (including as the result of
the current
energy crisis in Europe associated with the Russia-
Ukraine conflict), and may continue to increase and/
or fluctuate in the future. Moreover, the availability of
labor and the market price for fuel may affect our
costs for
In addition,
because our businesses operate in highly competitive
third-party transportation.
industry segments, we may not be able to recoup
past or future increases in the costs of any raw
materials, energy sources or transportation sources
through price increases to our customers. Our
profitability has been, and will continue to be, affected
by changes in the costs and availability of such raw
materials, energy sources and transportation sources.
FLUCTUATIONS IN THE PRICES OF AND THE
DEMAND FOR OUR PRODUCTS DUE TO
FACTORS SUCH AS ECONOMIC CYCLICALITY
AND CHANGES IN CONSUMER PREFERENCES
COULD MATERIALLY AFFECT OUR FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND
CASH FLOWS. Substantially all of our businesses
have experienced, and are likely to continue to
experience, cycles relating to industry capacity and
general economic
conditions. The length and
magnitude of these cycles have varied over time and
by product.
In addition, changes in consumer
preferences may increase or decrease the demand
for our fiber-based products and non-fiber substitutes.
Moreover, consumer preferences are constantly
factors, cost,
changing based on, among other
convenience and health concerns and perceptions
and an increased awareness of ESG considerations.
These consumer preferences may affect the prices of
our products. Consequently, our financial results are
sensitive to changes in the pricing and demand for
our products.
results may be
adversely affected if we fail to anticipate trends that
would enable us to offer products that respond to
changing customer preferences and technological
and regulatory developments.
In addition, our
IN
forest
products
companies.
THE
COULD
AND
U.S.
COMPETITION
INTERNATIONALLY
NEGATIVELY
IMPACT OUR FINANCIAL RESULTS. We operate in
a competitive environment, both in the U.S. and
internationally, in all of our operating segments. Our
products compete with similar products produced by
other
Product
innovations, manufacturing and operating efficiencies,
additional manufacturing
capacity, marketing,
or
distribution
achieved by competitors, and the entry of new
competitors in to the markets we serve could
negatively impact our financial results. In addition, our
in some instances, with
products also compete,
companies
produce
that
industries
substitutes for wood-fiber products, such as plastics
and various types of metal, and customer shifts away
from wood-fiber products toward such substitute
products may adversely affect our business.
strategies
pursued
pricing
other
and
in
RISKS RELATING TO OUR OPERATIONS
OUR
IMPACT
FACILITIES
MATERIAL DISRUPTIONS AT ONE OF OUR
MANUFACTURING
COULD
NEGATIVELY
FINANCIAL
RESULTS. We operate our facilities in compliance
with applicable rules and regulations and take
measures to minimize the risks of disruption at our
facilities. A material disruption at our corporate
headquarters or one of our manufacturing facilities
could prevent us from meeting customer demand,
reduce our sales and/or negatively impact our
financial condition. Any of our manufacturing facilities,
or any of our machines within an otherwise
operations
could
operational
unexpectedly due to a number of events, including:
facility,
cease
adverse weather events like fires,
floods,
earthquakes, hurricanes, winter storms and
catastrophes
extreme
(including adverse weather conditions that
may be intensified by climate change);
other
cold,
or
the effect of a drought or reduced rainfall on
its water supply;
disruption in the supply of raw materials or
other manufacturing inputs;
terrorism or threats of terrorism;
information system disruptions or failures due
to any number of causes,
including cyber-
attacks;
and
international
domestic
and
regulations applicable to us and our business
partners,
including joint venture partners,
around the world;
laws
unscheduled maintenance outages;
prolonged power failures;
an equipment failure;
a chemical spill or release;
explosion of a boiler or other equipment;
damage or disruptions caused by third parties
operating on or adjacent
to one of our
manufacturing facilities;
disruptions
infrastructure,
railroad tracks and tunnels;
in
the
including
transportation
bridges,
roads,
•
•
•
•
•
•
•
•
•
•
•
•
•
14
•
•
•
•
a widespread outbreak of an illness or any
other communicable disease, such as the
outbreak of the COVID-19 virus, or any other
public health crisis;
failure of our third-party service providers and
business partners to satisfactorily fulfill their
commitments and responsibilities in a timely
manner and in accordance with agreed upon
terms;
labor difficulties; and
other operational problems.
Any such downtime or facility damage could prevent
us from meeting customer demand for our products
and/or require us to make unplanned expenditures. If
one of our machines or
facilities were to incur
to meet our
significant downtime, our ability
production targets and satisfy customer requirements
could be impaired, resulting in lower sales and having
a negative effect on our business and financial
results.
to sell
this equity interest.
CERTAIN OPERATIONS ARE CONDUCTED BY
JOINT VENTURES THAT WE CANNOT OPERATE
SOLELY FOR OUR BENEFIT. We have a 50%
equity interest in Ilim S.A., whose primary operations
are in Russia. We recently announced our entry into
an agreement
In joint
ventures, such as the Ilim joint venture, we share
ownership and management of a company with one
or more parties who may or may not have the same
goals, strategies, priorities or resources as we do. In
general, joint ventures are intended to be operated for
than for our
the benefit of all co-owners,
exclusive benefit. Operating a business as a joint
venture often requires additional organizational
formalities as well as time-consuming procedures for
In joint
sharing information and making decisions.
ventures, we are required to pay more attention to our
relationship with our co-owners as well as with the
joint venture, and if a co-owner changes, our
relationship may be adversely affected. In addition,
the benefits from a successful
joint venture are
shared among the co-owners, so we receive only our
portion of those benefits.
rather
OUR FINANCIAL RESULTS AND BUSINESSES,
INCLUDING OUR ILIM JOINT VENTURE, HAVE
BEEN, AND MAY CONTINUE TO BE, ADVERSELY
AFFECTED BY
THE CURRENT MILITARY
CONFLICT BETWEEN RUSSIA AND UKRAINE,
INCLUDING ONGOING OR FUTURE SANCTIONS
AND EXPORT CONTROLS TARGETING RUSSIA
AND OTHER
TO RUSSIA'S
RESPONSES
INVASION OF UKRAINE. The global economy has
been, and may continue to be, negatively impacted
15
the U.S.,
by Russia’s invasion of Ukraine. As a result of
Russia's invasion of Ukraine,
the United
the European Union and other G7
Kingdom,
countries, among other countries, have imposed
coordinated financial and economic sanctions and
export control measures on many industry sectors
and parties in Russia. The negative impacts arising
from the conflict and these sanctions and export
control measures as well as sanctions and other
actions taken by Russia have included and may
continue to include reduced consumer demand,
supply chain disruptions and increased costs for
transportation, raw materials and energy,
including
recent energy increases which have been particularly
acute in Europe. We continue to carefully monitor the
conflict and the potential
financial and
economic sanctions and export control measures on
the regional and global economy.
impact of
We have a 50% equity interest in Ilim, the parent
company of Ilim Group, whose primary operations are
in Russia. Specifically, Ilim Group’s facilities include
three paper mills located in Bratsk, Ust-Ilimsk, and
Koryazhma, Russia, with combined total pulp and
paper capacity of over 3.6 million metric tons. In joint
ventures, such as the Ilim joint venture, we share
ownership and management of a company with one
or more parties who may or may not have the same
goals, strategies, priorities or resources as we do.
Ilim, and its directors and employees are not specially
designated nationals or blocked persons or otherwise
specifically identified in sanctions or export control
measures issued by the U.S. or other countries.
to various risks,
The military conflict between Russia and Ukraine,
including ongoing sanctions, actions by the Russian
government, and associated domestic and global
economic and geopolitical conditions, has adversely
affected and may continue to adversely affect our Ilim
joint venture and our businesses, financial condition,
In January
results of operations and cash flows.
2023, we announced our entry into a definitive
agreement to sell our equity interest in Ilim; however,
we cannot be certain if or when the completion of this
sale may occur. Our ability to complete this sale is
subject
including (i) purchasers’
inability to obtain necessary regulatory approvals or
to finance the purchase pursuant to the terms of the
(ii) adverse actions by the Russian
agreement,
government, and (iii) new or expanded sanctions
imposed by the U.S.,
the United Kingdom, or the
European Union or its member countries. We are
unable to predict the full impact that Russia’s ongoing
future
invasion of Ukraine, current or potential
sanctions or export control measures, ongoing or
potential disruptions resulting from the conflict, the
changing regulatory environment in Russia, negative
macroeconomic conditions arising from such conflict,
supply chain disruptions, and/or geopolitical instability
I,
instability.
in trade policies,
and shifts, may have on us or our ability to complete
the sale of our interest in the Ilim joint venture. In
the current conflict,
addition, any escalation of
including as a result of the use of tactical nuclear
weapons by Russia or the expansion of the conflict to
neighboring countries, could result
in additional
economic disruptions, capital market volatility, and
significant geopolitical
In addition,
developments with respect
to the Russia-Ukraine
conflict could heighten many of our known risks
Item 1A “Risk
described elsewhere in this Part
Factors” in our Annual Report. Such risks include, but
are not limited to, adverse effects on global business
and economic conditions,
including volatility and
increases in the price and demand of oil, natural gas
and other energy products and inflation, demand for
our products, increased cybersecurity risks, adverse
changes
taxes, government
regulations, or our ability to implement and execute
our business strategy including with respect to joint
ventures, divestitures, spin-offs, capital
investments
and other corporate transactions that we have
pursued or may pursue, disruptions in global supply
chains, risks related to employees and contracts in
the affected regions, our exposure to foreign currency
fluctuations and potential nationalizations and asset
seizures in Russia, constraints, volatility, or disruption
in the capital markets and our sources of liquidity, and
our potential
remaining
performance obligations and potential contractual
breaches and litigations. Additionally, fluctuations in
the value of the Russian ruble versus the U.S. dollar
impacts our investment carrying value as well as
financial
ruble-
denominated results into U.S. dollars and the re-
measurement impact associated with non-functional
currency financial assets and liabilities.
results based on translation of
inability to service our
the content or
legislative proposals that,
In particular, our investments in Ilim involve certain
legal, geopolitical,
repatriation, and
investment,
transparency risks as a result of the conflict between
Russia and Ukraine including: (i) the legal framework
of Russia continues to evolve and it is not possible to
accurately predict
implications of
changes in their statutes or regulations; and there has
been a number of
if
adopted, could result in nationalization, expropriation,
onerous or disadvantageous exit
terms or other
unfavorable regulations and could be introduced or
enacted at any time without prior warning or
consultation;
(ii) current and future statutes and
regulations may be unfairly or unevenly enforced, the
courts may decline to enforce legal protections
covering our investments altogether and/or the cost
and difficulties of
litigation in Russia may make
enforcement of our rights impractical or impossible;
(iii) the risk we may inadvertently violate sanctions or
export control measures that may be imposed by the
U.S. or foreign governments, including Russia, given
the situation;
the complexity and fluidity of
(iv)
financial and economic sanctions and export control
measures imposed on certain industry sectors and
parties in Russia as well as counter-sanctions
measures implemented by Russia could lead to
further disruptions in supply chains and adversely
affect operations in Russia; (v) increased risks of
economic, political, or social
instability, escalating
military conflicts with Ukraine or new conflicts with
any other countries, war, or terrorism, which could
adversely affect the economy of Russia or lead to a
material adverse change in the value of our
investments
disclosure,
accounting, and financial standards and requirements
is not possible to
in Russia may evolve and it
accurately predict
implications of
changes in their disclosure requirements.
the content or
in Russia;
and
(vi)
and
AND
productivity
INVESTMENTS
WE MAY NOT ACHIEVE THE EXPECTED
BENEFITS FROM STRATEGIC ACQUISITIONS,
JOINT VENTURES, DIVESTITURES, SPIN-OFFS,
CAPITAL
OTHER
CORPORATE TRANSACTIONS THAT WE HAVE
PURSUED OR MAY PURSUE. Our strategy for
long-term growth,
profitability
depends, in part, on our ability to accomplish prudent
acquisitions,
joint ventures, divestitures, spin-offs,
capital investments and other corporate transactions
that we may pursue and to realize the benefits we
expect from such transactions. We are subject to the
risk that we may not achieve the expected benefits
from such transactions. This failure could require us
to record an impairment charge for goodwill or other
intangible assets, which could lead to decreased
assets and reduced net earnings. Among the benefits
we expect
from potential as well as completed
acquisitions and joint ventures are synergies, cost
savings, growth opportunities and access to new
markets (or a combination thereof), and in the case of
divestitures, the realization of proceeds from the sale
of businesses and assets to purchasers who place
higher strategic value on such businesses and assets
than we do.
this nature that we may
Corporate transactions of
pursue involve a number of special risks, including
with respect to our inability to realize our business
goals with to such transactions as noted above, the
focus of our management’s attention on these
transactions and the assimilation of acquired
businesses into our operations, the demands on our
financial, operational and information technology
systems resulting from acquired businesses, and the
possibility that we may become responsible for
substantial contingent or unanticipated legal liabilities
as the result of acquisitions or other corporate
transactions.
16
We believe that the spin-off of Sylvamo Corporation
allows us and Sylvamo Corporation to pursue distinct
respective markets.
strategies appropriate to our
However,
there can be no assurance that we will
realize any or all of the expected strategic, financial,
operational or other benefits of the spin-off. A failure
the spin-off could
to realize expected benefits of
result in a material adverse effect on our business,
results of operations and financial condition.
We cannot guarantee that Sylvamo Corporation will
be successful as a standalone entity. In the event that
Sylvamo Corporation is not successful, it is possible
that plaintiffs could assert a variety of claims against
us. Depending on their nature and number, such
claims could have a material adverse effect on our
business, financial condition or results of operations.
and
UNDER
services
property
transition
distribution
registration
agreement,
agreement,
agreements
CORPORATION
WE COULD BE EXPOSED TO CLAIMS FROM
SYLVAMO
OUR
AGREEMENTS WITH SYLVAMO CORPORATION
OR OTHERWISE. We previously entered into
agreements with Sylvamo Corporation and its
including among others a separation
subsidiaries,
rights
and
agreement,
tax
matters agreement, supply and offtake agreements,
other
intellectual
commercial arrangements in connection with the
spin-off. Our agreements with Sylvamo Corporation
or its subsidiaries may not reflect terms that would
have resulted from negotiations between unaffiliated
parties and, in certain instances, may relate to the
continuation of certain business arrangements among
us and Sylvamo Corporation in existence prior to the
spin-off. Such agreements include, among other
things, the parties’ respective indemnification rights
and obligations with respect to certain losses relating
to specified liabilities as well as certain losses relating
to specified information included in certain securities
the allocations of assets and liabilities,
filings,
payment obligations and other obligations between us
and Sylvamo Corporation. There can be no
assurance that any remedies available under these
arrangements will be sufficient to compensate us in
the event of a dispute or non-performance.
In
addition, there can be no assurance that the attention
we must pay, and resources we must devote, to our
obligations under one or more of these agreements,
the results of any failure to perform those
or
obligations,
claim by Sylvamo
Corporation that we have failed to perform those
obligations or have an indemnification obligation
under these agreements, will not have a material
impact on our own business performance, results of
operations or financial condition.
successful
or
We will rely on Sylvamo Corporation to satisfy its
performance and payment obligations under these
agreements entered into in connection with the spin-
off.
If Sylvamo Corporation fails to satisfy such
obligations, it could have a material adverse effect on
our financial condition and results of operations.
In addition, under the tax matters agreement, we
could have significant payment obligations
in
connection with certain Brazilian tax matters. Under
this agreement, we have agreed to pay 60% of the
first $300 million of any liability resulting from the
resolution of
these Brazilian tax matters (with
Sylvamo paying the remaining 40% of any such
liability) and 100% of any liability resulting from the
Brazilian tax matters over $300 million. The
assessments for the tax years 2007 - 2015 currently
total approximately $111 million in tax and $361
million in interest, penalties and fees as of December
31, 2022 (adjusted for variation in currency exchange
rates). See Note 14 Commitments and Contingent
Liabilities on pages 71 through 75 of Item 8. Financial
Statements and Supplementary Data for
further
information.
WE OPERATE IN A CHALLENGING MARKET FOR
TALENT AND MAY FAIL TO ATTRACT AND
INCLUDING
RETAIN QUALIFIED PERSONNEL,
KEY MANAGEMENT PERSONNEL. Our ability to
operate and grow our business depends on our ability
to attract and retain employees with the skills
facilities,
necessary to operate and maintain our
produce our products and serve our customers. The
market for both hourly workers and salaried workers
has been, and remains, very competitive, particularly
for employees with specialized technical and trade
experience. For example, due to labor market
constraints, we have recently had to increase
overtime while we try to hire additional
regular
employees. This, along with the current competitive
labor market and ongoing inflationary conditions, has
led to higher labor costs, particularly at our converting
facilities. Moreover, despite our focused efforts to
attract and retain employees,
including by offering
higher levels of compensation in certain instances,
we experienced attrition rates within our workforce
(particularly those early in their career) in the past two
years that exceeded historical levels.
In addition, we
rely on key executive and management personnel to
manage our business efficiently and effectively. The
loss of key executive and management employees,
particularly in a challenging market for attracting and
retaining employees, could adversely affect our
business.
Moreover, changing demographics and labor work
force trends,
including remote work and work-life
balance expectations for many individuals arising
17
from the COVID-19 pandemic, may make it difficult
for us to replace retiring or departing employees. If
we fail to attract and retain qualified personnel, or if
we continue to experience excessive turnover, we
may continue to experience higher labor costs and
labor shortages, and our business may be adversely
impacted.
In addition, a significant number of our employees are
represented by unions. We may not be able to
successfully negotiate new union contracts once our
current contracts with unions expire without work
stoppages or labor difficulties, or we may be unable
to renegotiate such contracts on favorable terms.
Negotiations between the company and USW
regarding the mill master collective bargaining
agreement (which expires August 2023) and related
mill
joint pension counsel master agreement (which
expires September 2023) are scheduled to begin on
February 19, 2023. USW represents approximately
6,000 employees at
the mills. We have also
experienced work stoppages in the past and may
experience them in the future. Moreover,
labor
to organize groups of
organizations may attempt
additional employees from time to time, and potential
changes in labor laws could make it easier for them to
do so. If we experience any extended interruption of
operations at any of our facilities as a result of strikes
or other work stoppages or if unions are able to
organize additional groups of our employees, our
operating costs increase and our operational flexibility
could be reduced.
WE ARE SUBJECT TO CYBERSECURITY AND
INFORMATION TECHNOLOGY RISKS RELATED
TO BREACHES OF SECURITY PERTAINING TO
SENSITIVE COMPANY, CUSTOMER, EMPLOYEE
AND VENDOR INFORMATION AS WELL AS
BREACHES IN THE TECHNOLOGY USED TO
MANAGE OPERATIONS AND OTHER BUSINESS
PROCESSES. Our business operations rely upon
securely managed information technology systems,
some of which are provided or managed by third
parties,
for data capture, processing, storage and
reporting. We have invested in information technology
security initiatives and information technology risk
management, as well as incident response, business
continuity and disaster recovery plans but we cannot
eliminate all systematic risk. The development and
maintenance of
these measures is costly and
requires ongoing monitoring, testing and updating as
technologies and processes change, and efforts to
overcome security measures become increasingly
sophisticated. Additionally, the regulatory environment
surrounding information security data privacy and
data protection is becoming increasingly restrictive
and is evolving frequently.
18
("hacktivist")
organizations,
The current cyber
threat environment presents
increased risk for all companies, including those in
industry. Like other global companies, our
our
systems are subject
to recurring attempts by third
parties to access information, manipulate data or
disrupt our operations, and we have experienced
cyber threats and incidents, although none have been
material or had a material adverse effect on our
business. Despite careful security and controls
implementation, updating and independent
design,
information technology
third party verification, our
systems, and those of our third-party providers or
joint venture partners, could become subject
to
employee error or malfeasance, cyber-attacks, such
as ransomware and data theft, by common hackers,
criminal groups or nation-state organizations or social
activist
geopolitical
events, natural disasters, failures or impairments of
telecommunications networks or other catastrophic
events. Moreover, hardware, software or applications
we use may have inherent vulnerabilities or defects of
design, manufacture or operations or could be
inadvertently or intentionally implemented or used in
a manner that could compromise information security.
In addition, the cybersecurity-related threats that we
face may remain undetected for an extended period
of
time. Network, system, application and data
breaches, and other cybersecurity incidents, could
in operational disruptions, data loss or
result
manipulation,
information misappropriation
including, but not limited to, interruption to systems
availability, denial of access to and misuse of
applications required by our customers to conduct
business with us. Access to applications required to
plan our operations, source materials, manufacture
and ship finished goods and account for orders could
be denied or misused. Theft of intellectual property or
trade secrets, and loss or inappropriate disclosure of
confidential company, employee, customer or vendor
information, could stem from such incidents. While we
have significant security processes and initiatives in
place, we may be unable to detect or prevent a
breach or disruption. Any significant cybersecurity
and/or
incident
in lost
misappropriation of
sales, business delays, negative publicity, cause us to
incur legal
liability and increased costs to address
such events and related security concerns which may
include costs to recover data and institute additional
controls to prevent future similar incidents and have a
material effect on our business. Additionally, while we
have insurance coverage designed to address certain
aspects of cyber
risks in place, such insurance
coverage may be insufficient to cover all losses or all
types of claims that may arise in connection with such
incidents.
information could result
operational
disruptions
or
or
RISKS RELATING TO LEGAL PROCEEDINGS
AND COMPLIANCE COSTS
AND
REGULATIONS
WE ARE SUBJECT TO A WIDE VARIETY OF
LAWS,
OTHER
GOVERNMENT REQUIREMENTS THAT MAY
CHANGE IN SIGNIFICANT WAYS, AND THE COST
OF COMPLIANCE WITH SUCH REQUIREMENTS
COULD IMPACT OUR BUSINESS AND RESULTS
OF OPERATIONS. Our operations are subject
to
regulation under a wide variety of U.S. federal and
state and non-U.S.
regulations and other
government requirements -- including, among others,
those relating to the environment, health and safety,
labor and employment, data privacy, tax, trade and
health care. There can be no assurance that laws,
regulations and government requirements will not be
changed, applied or
interpreted in ways that will
require us to modify our operations and objectives or
returns on investments by restricting
affect our
existing activities and products, or subjecting us to
increased costs.
laws,
Our
laws,
compliance
uncertainty.
unexpected
federal, state,
including with respect
laws and regulations.
laws governing the protection of
For example, as part of our business, we are subject
local and
to increasingly stringent
international
the
environment. We have incurred significant capital,
operating and other expenditures complying with
In
applicable environmental
regulations or
addition, new environmental
other requirements,
to GHG
emissions or climate change, may cause us to incur
costs.
and
increased
Moreover,
there has historically been, and may
continue to be, a lack of consistency between
jurisdictions regarding legal requirements with respect
to climate and GHG emission matters, which has
created and may continue to create economic and
environmental
regulatory
expenditures include, among other areas,
those
related to air and water quality, waste disposal and
the cleanup of contaminated soil and groundwater,
including situations where we have been identified as
a potentially responsible party. Moreover, we may be
directly impacted by, and are working to manage, the
risks and costs to us, our customers and our vendors
of
the effects of climate change, GHGs, and the
availability of energy and water resources. These
risks include the potentially adverse impact on
forestlands, which are a key resource in the
production of our products, increased product costs
and a change in the types of products that customers
purchase. There can be no assurance that
future
remediation requirements and compliance with
existing and new laws and requirements will not
require significant expenditures, or
that existing
reserves for specific matters will be adequate to cover
future costs. We could also incur substantial fines or
sanctions, enforcement actions (including orders
natural
resource
damages
limiting our operations or
requiring corrective
measures),
claims,
third-party claims for
cleanup and closure costs,
property damage and personal injury and reputational
harm as a result of violations of, or liabilities under,
environmental laws, regulations, codes and common
law. The amount and timing of environmental
expenditures is difficult
in some
cases,
liability may be imposed without regard to
contribution or to whether we knew of, or caused, the
release of hazardous substances.
to predict, and,
(“GDPR”),
Our global operations subject us to complex and
evolving U.S and international data privacy laws and
regulations, such as European’s Union General Data
Protection Regulation
the California
Consumer Privacy Act of 2018 (“CCPA”) as amended,
and China’s Personal
Information Protection Law
(“PIPL”) which came into effect as of November 1,
2021. These laws require the Company to comply
with a range of compliance obligations regarding the
handling of personal data. There are significant
penalties for non-compliance including monetary
fines, disruption of operations and reputational harm.
Moreover, other states and governmental authorities
around the world have introduced or passed, or are
considering, similar
legislation which may impose
varying standards and requirements on our data
collection, use and processing activities.
the international,
This increasingly restrictive and evolving regulatory
federal and state
environment at
level related to data privacy and data protection may
continue to require changes to our business practices
and give rise to significantly expanded compliance
burdens, costs and enforcement risks. Moreover,
many of these laws and regulations are subject to
uncertain application,
interpretation or enforcement
standards that could result in claims, changes to our
business practices, data processing and security
increased operating costs or
systems, penalties,
other impacts on our businesses. These laws often
provide for civil penalties for violations, as well as
private rights of action for data breaches that may
increase data breach litigation. We proactively use
internal and external resources to monitor compliance
with relevant
legislation and continually evaluates
and, where necessary, modifies its data processing
practices and policies in order to comply with evolving
privacy
regulatory
authorities could determine that our data handling
practices fail
the requirements of
certain new laws, which could subject us to penalties
and/or litigation. In addition, there is no assurance
that our security controls over personal data,
the
training of employees and vendors on data privacy
and data security, and the policies, procedures and
practices we implemented or may implement in the
laws. Nevertheless,
to address all
relevant
19
future will prevent
the improper handling of,
disclosure of or access to personal data. Improper
handling and disclosure of or access to personal data
in violation of the GDPR, PIPL, the CCPA and/or of
other data privacy and protection laws could harm our
reputation, cause loss of consumer confidence,
subject us to government enforcement actions
(including fines), or result in private litigation against
us, which could result in loss of revenue, increased
costs,
fines and/or
criminal prosecution, all of which could negatively
affect our business and operating results.
liability for monetary damages,
We are subject
to taxes in the U.S. and various
foreign jurisdictions, and changes in laws, regulation
or interpretation of existing laws and regulations in
the U.S. and other jurisdictions where we are subject
to taxation, could increase our taxes and have an
adverse effect on our financial results. In addition, the
application of tax law is subject to interpretation and
is subject to audit by taxing authorities. Additionally,
administrative guidance can be incomplete or vary
from legislative intent, and therefore the application of
the tax law is uncertain. While we believe the
positions reported by the Company comply with
relevant tax laws and regulations, taxing authorities
could interpret our application of certain laws and
regulations differently.
We are currently subject to tax audits in the U.S. and
other taxing jurisdictions around the world.
In some
cases, we have appealed and may continue to
appeal, assessments by taxing authorities in the court
system. As such, tax controversy matters may result
in previously unrecorded tax expenses, accelerated
cash tax payments, higher future tax expenses, or the
assessment of interest and penalties.
A MATERIAL
RESULTS OF LEGAL PROCEEDINGS COULD
HAVE
EFFECT ON OUR
CONSOLIDATED FINANCIAL RESULTS. We are a
party to various legal, regulatory and governmental
proceedings and other related matters, including with
respect to environmental matters. In addition, we are
and may become subject to other loss contingencies,
both known and unknown, which may relate to past,
present and future facts, events, circumstances and
occurrences. Should an unfavorable outcome occur
or
our
in
governmental
loss
contingencies, or if we become subject to any such
loss contingencies in the future,
there could be a
material adverse impact on our financial results. See
Note 14 Commitments and Contingent Liabilities on
pages 71 through 75 of Item 8. Financial Statements
and Supplementary Data for further information.
regulatory
other
connection with
proceedings
legal,
or
the spin-off of
IF THE SPIN-OFF OF SYLVAMO CORPORATION
WERE TO FAIL TO QUALIFY FOR NON-
RECOGNITION TREATMENT FOR U.S. FEDERAL
INCOME TAX PURPOSES, THEN INTERNATIONAL
PAPER AND OUR SHAREHOLDERS MAY BE
SUBJECT TO SIGNIFICANT U.S. FEDERAL
INCOME TAXES. The Company received an opinion
of tax counsel and a private letter ruling from the
U.S. Internal Revenue Service (the “IRS”) regarding
the qualification of
Sylvamo
Corporation and certain related transactions as a
transaction that
is generally tax-free to Sylvamo
Corporation, the Company and the shareholders of
the Company for U.S. federal income tax purposes. A
tax opinion is not binding on the IRS or the courts,
and there can be no assurance that the IRS or a court
will not
the
Company’s tax counsel and the IRS relied on certain
representations and covenants delivered by the
Company and Sylvamo Corporation in rendering such
opinion and private letter
the
representations or covenants relied upon for the tax
opinion or private letter ruling become inaccurate,
incomplete or not complied with by the Company,
Sylvamo Corporation or any of
respective
subsidiaries, the tax opinion may be invalid and the
conclusions reached therein could be jeopardized.
take a contrary position.
In addition,
If any of
ruling.
their
If the IRS ultimately determines that the spin-off is
taxable,
then the spin-off could be treated as a
taxable dividend or capital gain to the Company’s
income tax purposes,
shareholders for U.S. federal
and the Company could incur significant U.S. federal
income tax liabilities. These income tax liabilities may
be indemnifiable by Sylvamo Corporation pursuant to
a tax matters agreement between the Company and
Sylvamo. However, there can be no assurance that
Sylvamo would have the resources or
liquidity
required to indemnify the Company for any such tax
liability.
Even if
the spin-off otherwise qualifies for non-
recognition of gain or loss under Section 355 of the
Code, the spin-off may be taxable to the Company
(but not the shareholders of the Company) pursuant
to Section 355(e) of the Code if there is a 50% or
more (by vote or value) change in ownership of either
the Company or Sylvamo Corporation, directly or
related
indirectly, as part of a plan or series of
transactions that
this
purpose, any acquisitions of
the Company’s or
Sylvamo Corporation’s common stock within two
years before or after the spin-off are presumed to be
part of such a plan, although the Company or
Sylvamo Corporation may be able to rebut
that
presumption based on either applicable facts and
circumstances or a “safe harbor” described in the
U.S. tax regulations.
include the spin-off. For
20
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
MILLS AND PLANTS
A listing of our production facilities by segment, the
vast majority of which we own, can be found in
Appendix I hereto, which is incorporated herein by
reference.
The Company’s facilities are in good operating
condition and are suited for the purposes for which
they are presently being used. We continue to study
the economics of modernization or adopting other
alternatives for higher cost facilities.
CAPITAL INVESTMENTS AND DISPOSITIONS
Given the size, scope and complexity of our business
interests, we continually examine and evaluate a wide
variety of business opportunities and planning
alternatives, including possible acquisitions and sales
or other dispositions of properties. You can find a
discussion about
the level of planned capital
investments for 2023 on page 35, and dispositions
and restructuring activities as of December 31, 2022,
on page 31 of Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations, and in Note 7 Acquisitions on page 62 of
Item 8. Financial Statements and Supplementary
Data.
ITEM 3. LEGAL PROCEEDINGS
Information concerning certain legal proceedings of
the Company is set forth in Note 14 Commitments
and Contingent Liabilities on pages 71 through 75 of
Item 8. Financial Statements and Supplementary
Data which is incorporated herein by reference.
The Company is not subject to any administrative or
judicial proceeding arising under any Federal, State
or local provisions that have been enacted or adopted
regulating the discharge of materials into the
environment or primarily for the purpose of protecting
the environment that is likely to result in monetary
sanctions of $1 million or more.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
21
PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS
AND
EQUITY
PURCHASES
SECURITIES
ISSUER
OF
As of the filing of this Annual Report on Form 10-K,
the Company’s common shares are traded on the
New York Stock Exchange (NYSE:
IP). As of
February 10, 2023, there were approximately 8,608
record holders of common stock of the Company.
We pay regular quarterly cash dividends and expect
to continue to pay regular quarterly cash dividends in
the foreseeable future,
though each quarterly
dividend payment is subject to review and approval
by our Board of Directors.
The table below presents information regarding the
Company’s purchases of its equity securities for the
time periods presented.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
Period
October 1, 2022 - October 31, 2022
November 1, 2022 - November 30, 2022
December 1, 2022 - December 31, 2022
Total
Total Number of Shares
Purchased (a)
Average Price Paid per
Share
Total Number of Shares (or
Units) Purchased as Part of
Publicly Announced
Programs
Maximum Number
(or Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
Programs (in billions)
12,056 $
3,075,160
2,314,920
5,402,136
31.70
34.83
36.30
— $
3,074,156
2,314,920
3.35
3.25
3.16
(a) 13,061 shares were acquired from employees or board members as a result of share withholdings to pay income taxes under the
Company's restricted stock program. The remainder were purchased under a share repurchase program. As of December 31, 2022
approximately $3.16 billion aggregate shares of our common stock remained authorized for repurchase under a previous Board
authorization. This authorization was increased by our Board on October 11, 2022, up to a total of $3.35 billion shares. This repurchase
program does not have an expiration date.
22
PERFORMANCE GRAPH
to the liabilities of Section 18 of,
The performance graph shall not be deemed
to be "filed" with the
"soliciting material" or
to Regulation 14A or 14C
Commission or subject
under, or
the
Exchange Act of 1934, as amended and will not be
deemed to be incorporated by reference into any
filing of
the Company under the Securities Act of
1933, as amended, or the Exchange Act, except to
the extent the Company specifically incorporates it by
reference into such a filing.
The following line graph compares a $100 investment
in Company stock on December 31, 2017 with a $100
in our Peer Group and the S&P
investment
Composite-500 Stock Index (S&P 500 Index) also
made at market close on December 31, 2017. The
graph portrays total
return, 2017-2022, assuming
reinvestment of all dividends.
1)
The companies included in the Peer Group are DS Smith PLC, Klabin S.A., Mondi Group, Packaging Corporation
of America, Smurfit Kappa Group, Stora Enso Group, and WestRock Company.
2) Returns are calculated in $USD
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with our consolidated financial statements
and related notes included in “Financial Statements
and Supplementary Data” of this Annual Report on
In addition to historical consolidated
Form 10-K.
discussion
financial
information,
following
the
contains forward-looking statements that reflect our
plans, estimates, and beliefs that involve significant
risks and uncertainties. Our actual results could differ
materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to
those differences include those discussed below and
elsewhere in this Annual Report on Form 10-K,
particularly in “Risk Factors” and “Forward-Looking
Statements.”
The following generally discusses 2022 and 2021
items and year-to-year comparisons between 2022
and 2021. Discussion of historical items in 2020, and
23
year-to-year comparisons between 2021 and 2020,
can be found in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2021, filed with
the SEC on February 18, 2022, under Part II, Item 7,
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
EXECUTIVE SUMMARY
net
2022
Full-year
to
shareholders were $1.5 billion ($4.10 per diluted
share) compared with $1.8 billion ($4.47 per diluted
share) for full-year 2021.
attributable
earnings
offset
inflationary
Industrial Packaging business,
During 2022, International Paper grew revenue and
earnings, driven by solid commercial and operational
performance, while facing significant
inflation and
lower demand. Our businesses generated improved
earnings as profit improvement initiatives and price
cost
significant
realization
headwinds. We continued to make solid progress in
our Building a Better IP initiatives, delivering $250
million of earnings benefits through initiatives focused
on lowering our cost structure and accelerating
profitable growth. As a result, we exceeded our full-
year
target and have strong momentum going
forward. We made strategic investments, primarily in
in support of
our
profitable growth and will continue to make such
investments to grow earnings and cash generation by
building additional capabilities and capacity in our
U.S. box system. We made significant progress
toward achieving value-creating returns in our Global
Cellulose Fibers business by delivering $100 million
of earnings growth in 2022. The business expects to
continue the earnings improvement
in 2023. We
generated full-year cash from operations of $2.2
billion and free cash flow of $1.2 billion. Our
continued solid cash generation enabled us to return
$1.93 billion to shareholders, including $1.26 billion in
share repurchases and $673 million in dividend
payments. Finally, we reached agreement to sell our
50% interest in Ilim SA to our joint venture partners
for $484 million. Additionally, our partners have
expressed interest in purchasing our shares in JSC
Ilim Group for $24 million. Upon sale of our interests
in the Ilim joint venture, which are subject
to
regulatory approval, we will no longer have
investments in Russia.
Comparing our 2022 results to 2021, price and mix
improved significantly for both the North American
Industrial Packaging and Global Cellulose Fibers
businesses, with strong price realization across all of
our channels, along with the benefits of commercial
initiatives. Volume was lower in our North American
Industrial Packaging business following stronger
packaging demand in 2021 as consumers had pulled
forward purchases of goods during the pandemic. In
24
shifted priorities
2022, demand was also negatively impacted as
consumers
toward both non-
discretionary goods as well as services while dealing
with inflation. Operating costs were negatively
impacted by lower volumes in our North American
Industrial Packaging business. High inflation on
materials and services also negatively impacted
operating costs in our North American Industrial
Packaging and Global Cellulose Fibers businesses.
Rising supply chain costs negatively impacted both
businesses during 2022. Higher operating costs were
partially offset by improved mill performance and
reliability. Maintenance outage expense increased, as
impacted by high inflation on equipment,
planned,
Input costs rose
parts and contracted services.
sharply across nearly all categories, with higher
energy and fuel costs being the leading drivers.
Corporate expenses were favorable driven by
overhead streamlining initiatives.
Looking ahead to the first quarter 2023, as compared
to the fourth quarter 2022, in our Industrial Packaging
business, we expect price and mix to be lower based
on prior price index movements and lower average
export prices. Volume is expected to be higher in the
first quarter 2023 due to four more shipping days in
North America, partially offset by normal seasonal
declines in North America. Operations and costs are
expected to decrease earnings due to the non-repeat
of favorable one-time items in the fourth quarter 2022,
seasonally higher energy consumption and additional
inflation on materials and services. Maintenance
outage expense is expected to be significantly higher
as the first quarter will be our highest outage quarter
this year, representing about 40% of total planned
outage costs in 2023. Input costs are expected to
improve on lower average costs for energy, fuel and
fiber.
In our Global Cellulose Fibers business, we
expect price and mix to improve. We expect volume
to decrease due to seasonally lower demand and
inventory destocking in response to
customer
increased supply chain velocity. Operations and
costs are expected to increase on the non-repeat of a
favorable one-time items in the fourth quarter 2022.
Operations and costs will also be impacted by higher
unabsorbed fixed costs due to lower volumes,
seasonally higher energy consumption and additional
inflation on materials and services. Maintenance
outage expense is expected to increase as the first
quarter 2023 will also be Global Cellulose Fibers
highest maintenance outage quarter in 2023. Input
costs are expected to decrease driven by lower
energy and fiber.
Looking to full-year 2023, we believe we have
significant opportunities to reduce high marginal costs
across our system and capture further benefits from
our Building a Better IP initiatives. The Building a
IP initiatives are focused on continuing to
Better
related
payment
invest
in projects to drive structural cost reduction
through efficiency improvements and accelerating
profitable growth. We expect continued momentum
from these initiatives as we move into 2023 including
meaningful earnings growth in our Global Cellulose
Fibers business as a result of our commercial
strategy execution. We expect cash from operations
ranging from $1.9 billion to $2.3 billion with free cash
flow of $0.9 billion to $1.1 billion. Included in both
the tax
ranges is approximately $190 million for
timber
our
settlement
monetization transaction. With respect to our capital
allocation framework, we are targeting capital
expenditures of $1.0 billion to $1.2 billion with
increased investments in our US box system to build
additional capabilities and support profitable growth
with our customers. As previously mentioned, we
returned approximately $1.9 billion of cash to
shareowners in 2022. In October 2022, our board of
directors authorized an additional $1.5 billion of share
repurchases with a total current authorization of
approximately $3.2 billion. Going forward, we are
committed to returning cash through maintaining our
share
dividend
repurchases.
opportunistic
through
and
to
(loss) per
Adjusted Operating Earnings and Adjusted Operating
Earnings Per Share are non-GAAP measures and are
defined as net earnings
(loss) attributable to
(a GAAP measure) excluding
International Paper
discontinued operations, net special
items and non-
operating pension expense (income). Net earnings
share
(loss) and Diluted earnings
attributable to common shareholders are the most
directly comparable GAAP measures. The Company
calculates Adjusted Operating Earnings by excluding
the after-tax effect of discontinued operations, non-
operating pension expense (income) and items
considered by management
(net
special items) from net earnings (loss) attributable to
under GAAP. Adjusted
shareholders
Operating Earnings Per Share is calculated by
dividing Adjusted Operating Earnings by diluted
average shares of common stock outstanding.
Management uses this measure to focus on on-going
operations, and believes that it is useful to investors
because it enables them to perform meaningful
comparisons of past and present consolidated
operating results from continuing operations. The
Company believes that using this information, along
with the most direct comparable GAAP measure,
provides for a more complete analysis of the results
of operations.
to be unusual
reported
The following are reconciliations of Earnings (loss)
attributable to common shareholders to Adjusted
operating earnings (loss) attributable to common
shareholders on a total and per share basis.
is provided later in this Form 10-K
Additional detail
regarding the net special
items referenced in the
charts below:
In millions
Net Earnings (Loss) Attributable to
Shareholders
Less - Discontinued operations, net of taxes
(gain) loss
2022
2021
$ 1,504 $ 1,752
237
(941)
Earnings (Loss) from Continuing Operations
1,741
811
Add back - Non-operating pension expense
(income)
(192)
(200)
Add back - Net special items expense (income)
233
371
Income tax effect - Non-operating pension and
special items expense
(614)
(38)
Adjusted Operating Earnings (Loss)
Attributable to Shareholders
$ 1,168 $ 944
Diluted Earnings (Loss) Per Share
Attributable to Shareholders
Less - Discontinued operations, net of taxes
(gain) loss per share
Diluted Earnings (Loss) Per Share from
Continuing Operations
Add back - Non-operating pension expense
(income) per share
Add back - Net special items expense (income)
per share
Income tax effect per share - Non-operating
pension and special items expense
2022
2021
$ 4.10 $ 4.47
0.64
(2.40)
4.74
2.07
(0.52)
(0.51)
0.63
0.94
(1.67)
(0.09)
Adjusted Operating Earnings (Loss) Per Share
Attributable to Shareholders
$ 3.18 $ 2.41
In millions
Net Earnings
(Loss) Attributable
to Shareholders
Less - Discontinued
operations, net of
taxes (gain) loss
Earnings (Loss)
from Continuing
Operations
Add back - Non-
operating pension
expense (income)
Add back - Net
special items
expense (income)
Income tax effect -
Non-operating
pension and special
items expense
Adjusted Operating
Earnings (Loss)
Attributable to
Shareholders
Three Months
Ended
December 31,
2022
Three Months
Ended
September 30,
2022
Three Months
Ended
December 31,
2021
$
(318) $
951
$
107
489
171
(48)
144
(64)
887
(48)
117
(58)
49
(47)
295
42
(656)
(62)
$
309
$
300
$
235
25
Three Months
Ended
December 31,
2022
Three Months
Ended
September 30,
2022
Three Months
Ended
December 31,
2021
The following are reconciliations of free cash flow to
cash provided by operations:
0.11
(1.82)
(0.17)
Free Cash Flow
$
(0.90) $
2.64
$
0.28
1.38
(0.18)
(0.15)
0.48
2.46
0.13
(0.13)
(0.13)
(0.12)
0.41
0.32
0.77
Diluted Earnings
(Loss) Per Share
Attributable to
Shareholders
Less - Discontinued
operations, net of
taxes (gain) loss per
share
Diluted Earnings
(Loss) Per Share
from Continuing
Operations
Add back - Non-
operating pension
expense (income)
per share
Add back - Net
special items
expense (income)
per share
Income tax effect per
share - Non-
operating pension
and special items
expense
Adjusted Operating
Earnings (Loss)
Per Share
Attributable to
Shareholders
$
0.87
$
0.83
$
0.61
2021,
the most
Cash provided by operations, including discontinued
totaled $2.2 billion and $2.0 billion for
operations,
2022
respectively. The Company
and
generated free cash flow of approximately $1.2 billion
in 2022 and $1.5 billion in 2021. Free Cash Flow is a
non-GAAP measure
directly
and
comparable GAAP measure is cash provided by
operations. Management utilizes this measure in
connection with managing our business and believes
that free cash flow is useful to investors as a liquidity
measure because it measures the amount of cash
generated that is available, after reinvesting in the
business, to maintain a strong balance sheet, pay
dividends, repurchase stock, service debt and make
It should not be
investments for
is
inferred that
available for discretionary expenditures. By adjusting
for certain items that are not
the
Company's
operational
performance, we believe that
free cash flow also
enables investors to perform meaningful comparisons
between past and present periods.
the entire free cash flow amount
future growth.
indicative of
underlying
ongoing
In millions
2022
2021
Cash provided by operations
$
2,174 $
2,030
Adjustments:
Cash invested in capital projects, net of
insurance recoveries
Free Cash Flow
(931)
(549)
$
1,243 $
1,481
In millions
Cash provided by
operations
Adjustments:
Cash invested in
capital projects, net of
insurance recoveries
Three Months
Ended
December 31,
2022
Three Months
Ended
September 30,
2022
Three Months
Ended
December 31,
2021
$
$
761 $
435 $
107
(322)
439 $
(238)
197 $
(201)
(94)
The non-GAAP financial measures presented in this
Form 10-K as referenced above have limitations as
tools and should not be considered in
analytical
isolation or as a substitute for an analysis of our
results calculated in accordance with GAAP.
In
addition, because not all companies utilize identical
the Company’s presentation of non-
calculations,
GAAP measures in this Form 10-K may not be
comparable to similarly titled measures disclosed by
other companies, including companies in the same
industry as the Company.
RESULTS OF OPERATIONS
Business Segment Operating Profits are used by
to measure the
International Paper’s management
earnings performance of its businesses. Management
uses this measure to focus on on-going operations
and believes that it is useful to investors because it
enables them to perform meaningful comparisons of
past and present operating results.
International
Paper believes that using this information, along with
net earnings, provides a more complete analysis of
the results of operations by year.
26
Business Segment Operating Profits are defined as
earnings (loss)
from continuing operations before
income taxes and equity earnings, but including the
impact of less than wholly owned subsidiaries, and
excluding interest expense, net, corporate expenses,
net, corporate net special items, business net special
items and non-operating pension expense. Business
Segment Operating Profits is a measure reported to
our management for purposes of making decisions
about allocating resources to our business segments
and assessing the performance of our business
segments and is presented in our financial statement
footnotes in accordance with ASC 280.
results of
International Paper operates in two segments:
Industrial Packaging and Global Cellulose Fibers. The
Company recently announced an agreement to sell
its Ilim equity investment and, as a result, all current
and historical
the Ilim investment are
presented as Discontinued Operations, net of taxes
and our equity investment is no longer a separate
reportable industry segment. During 2021, as a result
of the spin-off of our Printing Papers business along
with certain mixed-use coated paperboard and pulp
businesses and the associated reclassification of
these businesses to Discontinued Operations, we no
longer have a Printing Paper segment and the
remaining sales and operating profits previously
reported in the Printing Papers business have been
reclassified for segment reporting for all
periods
presented.
The following table presents a comparison of net
earnings (loss) from continuing operations attributable
to International Paper Company to its total Business
Segment Operating Profit:
In millions
2022
2021
Net Earnings (Loss) from Continuing
Operations Attributable to International Paper
Company
$ 1,741 $ 811
Add back (deduct)
Income tax provision (benefit)
(236)
188
Equity (earnings) loss, net of taxes
Noncontrolling interests, net of taxes
Earnings (Loss) From Continuing Operations
Before Income Taxes and Equity Earnings
Interest expense, net
Adjustment for less than wholly owned
subsidiaries
Corporate expenses, net
Corporate net special items
Business net special items
6
—
1,511
325
(5)
34
99
76
(2)
2
999
337
(5)
134
352
18
Non-operating pension expense (income)
(192)
(200)
Business Segment Operating Profit (Loss):
Industrial Packaging
Global Cellulose Fibers
$ 1,848 $ 1,635
$ 1,742 $ 1,638
106
(3)
Total Business Segment Operating Profit
$ 1,848 $ 1,635
Business Segment Operating Profit in 2022 was $213
million higher than in 2021 as the benefits from higher
average sales price realizations net of an unfavorable
mix ($2.2 billion) were partially offset by lower sales
volumes ($160 million), higher operating costs ($657
million), higher input costs ($1.1 billion) and higher
maintenance outage costs ($70 million).
27
The principal changes in operating profit by business
segment were as follows:
RESULTS OF OPERATIONS
•
Industrial Packaging’s operating profit of $1.7
billion was $104 million higher than in 2021 as
the benefits of higher average sales price net of
an unfavorable mix were partially offset by lower
sales volumes, higher operating costs, higher
input costs and higher maintenance outage
costs.
• Global Cellulose Fibers' operating profit (loss)
improved $109 million to $106 million profit
compared with 2021 as the benefits of higher
average sales price,
favorable mix and sales
volumes were partially offset by higher operating
higher
costs,
maintenance outage costs.
higher
costs
input
and
LIQUIDITY AND CAPITAL RESOURCES
Including discontinued operations, International Paper
generated $2.2 billion of cash flow from operations for
the year ended December 31, 2022, compared with
$2.0 billion in 2021. Capital spending for 2022 totaled
$931 million, or 90% of depreciation and amortization
expense. Our
liquidity position remains strong,
supported by approximately $2.0 billion of credit
facilities.
28
While the operating results for International Paper’s
various business segments are driven by a number of
business-specific factors, changes in International
Paper’s operating results are closely tied to changes
in general economic conditions in North America,
Europe, Latin America, North Africa and the Middle
East.
impact
Factors that
the demand for our products
include industrial non-durable goods production,
consumer preferences, consumer spending and
movements in currency exchange rates.
Product prices are affected by a variety of factors
including general economic trends, inventory levels,
currency exchange rate movements and worldwide
capacity utilization.
In addition to these revenue-
related factors, net earnings are impacted by various
cost drivers,
the more significant of which include
changes in raw material costs, principally wood,
recovered fiber and chemical costs; energy costs;
freight costs; mill outage costs; salary and benefits
and manufacturing
including
costs,
conversion costs.
pensions;
The following is a discussion of International Paper’s
consolidated results of operations for the year ended
December 31, 2022, and the major factors affecting
these results compared to 2021.
For the year ended December 31, 2022, International
Paper reported net sales of $21.2 billion, compared
with $19.4 billion in 2021.
International net sales
(based on the location of the seller and including U.S.
exports) totaled $5.9 billion or 28% of total sales in
2022. This compares with international net sales of
$5.2 billion in 2021.
net
year
2022
earnings
attributable
to
Full
International Paper Company totaled $1.5 billion
($4.10 per diluted share), compared with net earnings
of $1.8 billion ($4.47 per diluted share) in 2021.
Amounts in 2022 and 2021 include the results of
discontinued operations.
Earnings from continuing operations attributable to
International Paper Company after taxes in 2022 and
2021 were as follows:
In millions
2022
2021
Earnings from continuing operations
attributable to International Paper
Company
$ 1,741 (a) $ 811 (b)
(a)
(b)
Includes $429 million of net special items income and $144
million of non-operating pension income.
Includes $284 million of net special items charges and $151
million of non-operating pension income.
Compared with 2021,
the benefits from higher
average sales price net of an unfavorable mix ($1.7
billion), lower corporate and other costs ($82 million)
and lower net
interest expense ($57 million) were
partially offset by lower sales volumes ($129 million),
higher operating costs ($530 million), higher input
costs ($853 million), higher maintenance outage
costs ($57 million) and higher
tax expense ($79
million).
In addition, 2022 results included lower
equity earnings, net of taxes. Our Building a Better IP
initiatives delivered $250 million of earnings in 2022
primarily though our lean effectiveness initiative which
streamlined our corporate and staff functions and our
strategy acceleration initiative to deliver profitable
growth
investment
commercial
excellence.
through
and
See Business Segment Results on pages 32 and 33
of Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a
discussion of the impact of these factors by segment.
DISCONTINUED OPERATIONS
The Company recently announced it has reached an
agreement to sell its equity investment in Ilim and has
also received an indication of interest to purchase its
29
benefit of $66 million related to the tax-free exchange
of our shares of Sylvamo Corporation and tax
expense of $45 million related to a foreign deferred
tax valuation allowance. Excluding these items, a $37
million net tax benefit for other special
items and a
$48 million tax expense related to non-operating
pension income, the operational tax provision (non-
GAAP) was $378 million, or 24% of pre-tax earnings
before equity earnings.
A net income tax provision from continuing operations
of $188 million was recorded for 2021. Excluding a
$87 million net tax benefit for other special items and
a $49 million tax expense related to non-operating
pension income, the operational tax provision (non-
GAAP) was $226 million, or 19% of pre-tax earnings
before equity earnings.
The operational tax provision and rate are non-GAAP
measures and are calculated by adjusting the income
tax provision from continuing operations and rate to
exclude net special items and non-operating pension
expense (income). Management adjusts the income
tax provision and rate to account for non-recurring,
non-operational
items as we believe it provides a
more meaningful comparison of the income tax rate
between past and present periods.
INTEREST EXPENSE, EQUITY EARNINGS, NET OF TAXES
AND NONCONTROLLING INTEREST
Net corporate interest expense totaled $325 million in
2022 and $337 million in 2021. Net interest expense
in 2022 includes $58 million of
interest expense
related to the timber monetization restructuring tax
matter. The decrease in 2022 compared with 2021
was due to lower average outstanding debt.
Equity earnings, net of taxes were a loss of $6 million
and income of $2 million in 2022 and 2021,
respectively.
Net earnings attributable to noncontrolling interests
were $2 million in 2021. There were no net earnings
attributable to noncontrolling interests in 2022.
equity investment
in Ilim Group. All current and
historical results of the Ilim investment are presented
taxes in the
as Discontinued Operations, net of
consolidated
This
transaction is discussed further in Note 11 - Equity
Method Investments on pages 66 through 68 of Item
8. Financial Statements and Supplementary Data for
further discussion.
operations.
statement
of
the Company completed the
On October 1, 2021,
spin-off of
its Printing Papers business along with
certain mixed-use coated paperboard and pulp
businesses in North America, France and Russia into
a standalone, publicly-traded company, Sylvamo
the Company
Corporation. On August 6, 2021,
completed the sale of its Kwidzyn, Poland mill which
in Kwidzyn and
included the pulp and paper mill
the Sylvamo
supporting functions. As a result of
the
Corporation spin-off and sale of Kwidzyn,
Company no longer had a Printing Papers business
segment and historical results reflect the Kwidzyn and
the Printing Papers business and other businesses
conveyed to Sylvamo Corporation as discontinued
operations. See Note 8 - Divestitures on pages 62
through 64 of
Item 8. Financial Statements and
Supplementary Data for further discussion.
Discontinued operations include the equity and
operating earnings of the businesses noted above.
Discontinued operations also includes an after-tax net
special items loss of $533 million in 2022 and gain of
$330 million in 2021.
Details of these (gains) and losses were as follows:
Special Items in Discontinued Operations
In millions
2022
2021
Ilim equity method investment impairment
$ 533
$ —
Printing Papers spin-off expenses
Gain on sale of Kwidzyn, Poland mill
Gain on sale of La Mirada, CA distribution
center
Foreign value-added tax credit (including
interest)
Foreign and state taxes related to Printing
Papers spin-off
—
—
—
—
—
92
(344)
(65)
(37)
24
Total
$ 533
$ (330)
INCOME TAXES
A net income tax benefit from continuing operations of
$236 million was recorded for 2022, including a tax
benefit of $604 million related to the settlement of the
timber monetization restructuring tax matter, a tax
30
SPECIAL ITEMS
items (excluding interest expense)
Pre-tax special
included in continuing operations totaling $175 million
and $371 million were recorded in 2022 and 2021,
respectively. Details of
these charges were as
follows:
Special Items
In millions
Business Segments
2022
2021
Restructuring and other, net
$ —
$ 25
Net (gains) losses on sales and
impairments of businesses
Other
Corporate
76
—
76
(7)
1 (a)
19
Restructuring and other, net
$ 89
$ 484
Environmental remediation reserve
adjustments
Legal reserve adjustments
Foreign currency cumulative translation
loss related to sale of equity method
investment
Sylvamo investment fair value
adjustment
Real estate - office impairment
Gain on sale of portion of equity
investment in Graphic Packaging
Other
Total
63
(4)
10
(65)
—
—
6
99
10
(5)
—
32
21
(204)
14
352
including reducing debt
allocation framework to maintain a strong balance
sheet
to maximize value
creation and maintain our current investment grade
credit rating.
During 2022 and 2021, pre-tax restructuring and
totaling $89 million and $509
other charges, net,
million were recorded. Details of these charges were
as follows:
Restructuring and Other, Net
In millions
Business Segments
2022
2021
Building a Better IP initiative
$ —
$ 14 (a)
EMEA Packaging optimization
Other
Corporate
—
—
—
12
(1) (b)
25
Early debt extinguishment costs (see
Note 16)
$ 93
$ 461
Building a Better IP initiative
Other
Total
—
(4)
89
15
8
484
$ 89
$ 509
(a) Includes $11 million recorded in the Industrial Packaging
business segment and $3 million recorded in the Global
Cellulose Fibers business segment.
(b) Recorded in the Industrial Packaging business segment.
$ 175
$ 371
DESCRIPTION OF BUSINESS SEGMENTS
(a) Allocation of income to noncontrolling interest associated with
the sale of our EMEA Packaging business in Turkey.
(gains)
Net
losses on sales and impairments of
businesses included in special items totaled a pre-tax
loss of $76 million and gain of $7 million in 2022 and
2021, respectively. Details of
these (gains) losses
were as follows:
International Paper’s business segments discussed
below are consistent with the internal structure used
to manage these businesses. All segments are
differentiated on a common product,
common
business
the
customer
segmentation generally used in the forest products
industry.
consistent with
basis
Net (Gains) Losses on Sales and Impairments of Businesses
INDUSTRIAL PACKAGING
In millions
2022
EMEA Packaging goodwill impairment
$ 76
EMEA Packaging - Turkey
—
Total
$ 76
$
2021
$ —
(7)
(7)
See Note 8 Divestitures on pages 62 through 64 of
Item 8. Financial Statements and Supplementary
Data for further discussion.
Paper
evaluates
continually
International
its
operations for improvement opportunities targeted to
(a)
focus our portfolio on our core businesses,
(b) realign capacity to operate fewer facilities with the
(c) close high cost,
same revenue capability,
unprofitable
costs.
reduce
and
Additionally, the Company is committed to its capital
facilities,
(d)
International Paper is the largest manufacturer of
containerboard in the United States. Our U.S.
production capacity is over 13 million tons annually.
Our products include linerboard, medium, whitetop,
recycled linerboard, recycled medium and saturating
kraft. About 80% of our production is converted into
corrugated packaging and other packaging by our
176 North American corrugated packaging plants.
Additionally, we recycle approximately one million
tons of OCC and mixed and white paper through our
16 U.S. recycling plants. Our corrugated packaging
plants are supported by regional design centers,
which offer total packaging solutions and supply chain
initiatives. In EMEA, our operations include a recycled
fiber containerboard mill in Morocco and one in Spain
and 24 corrugated packaging plants in France, Italy,
Spain, Morocco and Portugal.
31
GLOBAL CELLULOSE FIBERS
Our cellulose fibers product portfolio includes fluff,
market and specialty pulps. International Paper is the
largest producer of fluff pulp which is used to make
absorbent hygiene products like baby diapers,
incontinence and other non-
feminine care, adult
woven products. Our market pulp is used for tissue
and paper products. We continue to invest
in
exploring new innovative uses for our products, such
as our specialty pulps, which are used for non-
absorbent end uses including textiles,
filtration,
construction material, paints and coatings, reinforced
plastics and more. Our products are made in the
United States and Canada and are sold around the
world. International Paper facilities have annual dried
pulp capacity of about 3 million metric tons.
BUSINESS SEGMENT RESULTS
The following tables present net sales and operating
profit
(loss) which is the Company's measure of
segment profitability.
INDUSTRIAL PACKAGING
industrial
Demand for Industrial Packaging products is closely
correlated with
goods
non-durable
production, as well as with demand for e-commerce,
processed foods, poultry, meat and agricultural
products. In addition to prices and volumes, major
factors
Industrial
Packaging are raw material and energy costs, freight
costs, mill outage costs, manufacturing efficiency and
product mix.
profitability
affecting
the
of
Industrial Packaging
In millions
Net Sales
Operating Profit (Loss)
2022
2021
$ 17,451 $ 16,326
1,742 $ 1,638
$
Industrial Packaging net sales for 2022 increased
7% to $17.5 billion compared with $16.3 billion in
2021. Operating profits in 2022 were 6% higher than
in 2021. Comparing 2022 with 2021, benefits from
higher average sales price net of an unfavorable mix
($1.6 billion) were offset by lower sales volumes
($168 million), higher operating costs ($400 million),
higher
($882 million) and higher
maintenance outage costs ($59 million).
costs
input
North American Industrial Packaging
In millions
Net Sales (a)
Operating Profit (Loss)
2022
2021
$ 16,011 $ 14,944
$
1,753 $ 1,605
(a)
Includes intra-segment sales of $132 million for 2022 and
$126 million for 2021.
reflecting
North American Industrial Packaging's average
sales margins were higher reflecting higher prices for
both containerboard and corrugated boxes. Sales
volumes decreased in 2022 compared with 2021 for
corrugated boxes across our segments driven by the
macroeconomic
lower
environment
consumer spending on goods and retailer inventory
volumes also
destocking. Containerboard sales
decreased.
economic
downtime was about 956,000 short
tons higher in
2022 compared with 2021, primarily due to economic
downtime. Operating and distribution costs increased,
primarily due to inflation on materials and services
and supply chain and labor constraints. Planned
maintenance downtime costs were $58 million higher
in 2022 than in 2021. Input costs were significantly
higher, driven by higher energy, wood and chemical
costs.
Total maintenance
and
Looking ahead to the first quarter of 2023, compared
with the fourth quarter of 2022, sales volumes for
corrugated boxes and containerboard are expected to
increase reflecting four additional shipping days
partially offset by the normal season decline. Average
sales margins are expected to be lower. Operating
costs are expected to increase. Planned maintenance
downtime costs are expected to be $95 million higher.
Input costs are expected to be lower primarily for
recovered fiber and energy.
EMEA Industrial Packaging
In millions
Net Sales
Operating Profit (Loss)
2022
2021
$
$
1,572 $ 1,508
33
(11) $
average
sales
EMEA Industrial Packaging's
margins were higher in the Eurozone driven by higher
average sales price. Average sales margins in
Morocco were lower
reflecting the impact of an
unfavorable product mix. Sales volumes in 2022 were
lower than in 2021 driven by the sale of our EMEA
Packaging business
in May 2021.
Operating costs were higher driven by inflation on
materials and services. Planned maintenance outage
costs were higher in 2022 compared with 2021. Input
costs
by
significantly
unprecedented energy costs.
in Turkey
higher,
driven
were
Entering the first quarter of 2023, compared with the
fourth quarter of 2022, sales volumes are expected to
be higher driven by seasonality in Morocco. Average
sales margins are expected to be higher, reflecting
lower containerboard costs. Operating costs are
expected to be higher. Planned maintenance outage
costs are expected to be $4 million lower due to no
planned outages in the first quarter. Other input costs
are expected to be stable.
32
GLOBAL CELLULOSE FIBERS
products,
and
Demand for Cellulose Fibers products is closely
correlated with changes in demand for absorbent
primarily
hygiene
the
demographics
various
income
geographic regions. It is further affected by changes
in currency rates that can benefit or hurt producers in
different geographic regions. Principal cost drivers
include manufacturing efficiency, raw material and
energy costs, mill outage costs, and freight costs.
growth
driven
by
in
Global Cellulose Fibers
In millions
Net Sales
Operating Profit (Loss)
2022
2021
$ 3,227 $ 2,732
$
106 $
(3)
sales
Global Cellulose Fibers net
for 2022
increased 18% to $3.2 billion, compared with $2.7
billion in 2021. Operating profits in 2022 improved
significantly compared to 2021. Comparing 2022 with
2021, benefits from higher average sales price, a
favorable mix and sales volumes ($552 million) were
partially offset by higher operating costs ($257
million), higher input costs ($175 million) and higher
maintenance outage costs ($11 million).
the
supply
reflecting
challenging
Sales volumes in 2022 compared with 2021 were
lower
chain
environment. Total maintenance and economic
downtime was about 13,000 short tons higher in 2022
compared with 2021, primarily due to economic
downtime. Average sales margins were higher,
reflecting higher average fluff and market pulp prices.
Operating costs increased, driven by inflation on
materials and services and supply chain related mill
slowbacks and downtime. Distribution costs were
significantly higher driven by continuing global supply
chain disruptions. Planned maintenance outage costs
were $11 million higher in 2022.
Input costs were
significantly higher, driven by chemicals, wood and
energy.
Entering the first quarter of 2023, compared with the
fourth quarter of 2022, sales volumes are expected to
be lower reflecting seasonally lower demand and
customer
inventory destocking in response to
increased supply chain velocity. Average sales
margins are expected to improve. Operating costs are
expected to be higher. Planned maintenance outage
costs are expected to be $13 million higher than in
the fourth quarter of 2022. Input costs are expected to
be lower, primarily for energy.
EQUITY EARNINGS, NET OF TAXES - ILIM
On January 24, 2023, the Company announced it had
reached an agreement to sell its equity investment in
Ilim and also received from the same purchasers an
33
indication of interest to purchase its equity investment
in Ilim Group. This transaction is discussed further in
Note 11 - Equity Method Investments on pages 66
through 68 of
Item 8. Financial Statements and
Supplementary Data.
All current and historical results of the Ilim investment
are presented as Discontinued Operations, net of
taxes in the consolidated statement of operations.
The Company recorded equity earnings, net of taxes,
related to Ilim of $296 million in 2022, compared with
earnings of $311 million in 2021.
to China, partially offset by
Higher sales volumes and better sales margins in
2022 were more than offset by higher input costs,
shipping costs and repair expenses. Sales volumes
for
the joint venture increased by 5% in 2022,
primarily for softwood pulp and containerboard
shipments
lower
shipments of softwood pulp and containerboard to
other export markets. Average sales margins were
significantly higher for sales of softwood pulp and
hardwood pulp reflecting higher average sales prices
in all markets. Average sales margins for shipments
of containerboard declined reflecting lower average
sales prices in all markets. Input costs were higher,
primarily for wood, fuel and chemicals. Distribution
costs were
higher
transportation tariffs and other inflationary pressures.
Maintenance and repair expenses were higher due in
part to repairs to recovery boiler No. 2 at the Ust-
Ilimsk mill in the fourth quarter of 2022. The Company
received cash dividends from the joint venture of
$204 million in 2022 and $154 million in 2021.
negatively
impacted
by
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
resource planning is
A major factor in International Paper’s liquidity and
capital
its generation of
operating cash flow, which is highly sensitive to
changes in the pricing and demand for our major
products. While changes in key operating cash costs,
such as raw material, energy, mill outage and
distribution, do have an effect on operating cash
generation, we believe that our focus on commercial
and operational excellence, as well as our ability to
tightly manage costs and working capital has
improved our cash flow generation over an operating
cycle.
Use of cash during 2022 was primarily focused on
working capital requirements, capital spending and
returning cash to shareholders through dividends and
share repurchases under
the Company's share
repurchase program.
CASH PROVIDED BY OPERATING ACTIVITIES
FINANCING ACTIVITIES
Cash provided by operations, including discontinued
operations,
totaled $2.2 billion in 2022, compared
with $2.0 billion for 2021. Cash used by working
capital components (accounts receivable, contract
assets and inventory less accounts payable and
accrued liabilities, interest payable and other) totaled
$145 million in 2022, compared with cash used by
working capital components of $426 million in 2021.
Cash dividends received from equity investments
were $204 million in 2022, compared with $159
million in 2021.
INVESTMENT ACTIVITIES
operations,
discontinued
Including
investment
activities in 2022 decreased from 2021, as 2021
included proceeds from the sale of
the Kwidzyn,
Poland mill and the sale of our ownership interest in
Olmuksan International Paper for $827 million, net of
cash divested, proceeds from the monetization of our
investment
International
in Graphic Packaging
Partners, LLC (GPIP) for $908 million and proceeds
the 2015
of $4.85 billion from the settlement of
Financing Entities Timber Notes (see Note 15
Variable Interest Entities on pages 75 and 76 of Item
8. Financial Statements and Supplementary Data).
Capital spending was $931 million in 2022, or 90% of
depreciation and amortization, compared with $549
million in 2021, or 45% of depreciation and
amortization. Capital spending as a percentage of
depreciation and amortization was 56% for Global
Cellulose Fibers and 97% for Industrial Packaging in
2022.
The following table shows capital spending by
business segment for the years ended December 31,
2022 and 2021, excluding amounts related to
discontinued operations of $69 million in 2021:
In millions
Industrial Packaging
Global Cellulose Fibers
Subtotal
Corporate and other
Capital Spending
2022
2021
$
762 $
143
905
26
$
931 $
382
83
465
15
480
Capital spending in 2023 is expected to be
approximately $1.0 billion to $1.2 billion, or 91% to
109% of depreciation and amortization.
Acquisitions
Item 8.
See Note 7 Acquisitions on page 62 of
Financial Statements and Supplementary Data for a
discussion of the Company's acquisitions.
34
Including discontinued operations,
Financing activities during 2022 included debt
issuances of $1.0 billion and reductions of $1.0
billion.
financing
activities during 2021 included debt issuances of $1.5
billion and reductions of $2.5 billion for a net
decrease of $1.0 billion.
Amounts related to early debt extinguishment during
the years ended December 31, 2022 and 2021 were
as follows:
In millions
Early debt reductions (a)
2022
2021
$ 503 $ 2,472
Pre-tax early debt extinguishment costs (b)
93
461
(a) Reductions related to notes with interest rates ranging from
3.00% to 8.70% with original maturities from 2023 to 2048
for the years ended December 31, 2022 and 2021.
(b) Amounts are included in Restructuring and other charges in
the accompanying consolidated statements of operations.
reductions in 2022
The Company's early debt
included debt
tenders of $498 million with interest
rates ranging from 6.40% to 8.70% and maturity
dates ranging from 2023 to 2039. In addition, during
2022, the Company had $5 million in open market
repurchases related to debt with interest
rates
ranging from 4.35% to 4.40% and maturity dates
ranging from 2047 to 2048. In addition to the early
debt reductions, the Company had debt reductions of
$514 million in 2022 related primarily to capital
leases, debt maturities, and international debt.
In January 2023, the Company entered into a variable
term loan agreement providing for a $600 million term
loan which was fully drawn on the date of such loan
agreement and matures in 2028. The $600 million
debt was issued following the repayment of $410
million of commercial paper earlier in 2023 and will
also be used to repay debt maturing later in 2023 and
general corporate purposes.
Other financing activities during 2022 included the net
issuance of approximately 1.6 million shares of
treasury stock. Repurchases of common stock and
payments of restricted stock withholding taxes totaled
$1.3 billion, including $1.3 billion related to shares
repurchased under the Company's share repurchase
program. The Company has repurchased 114.4
million shares at an average price of $46.66, for a
total of approximately $5.3 billion,
since the
repurchase program began in September 2013
through December 31, 2022. The Company paid cash
dividends totaling $673 million during 2022.
Other financing activities during 2021 included the net
issuance of approximately 1.9 million shares of
treasury stock. Repurchases of common stock and
payments of restricted stock withholding taxes totaled
including $810.9 million related to
$838 million,
the Company's share
shares repurchased under
repurchase program.
The Company paid cash
dividends totaling $780 million during 2021.
Interest Rate Swaps
Our policy is to manage interest cost using a mixture
of fixed-rate and variable-rate debt. To manage this
risk, International Paper utilizes interest rate swaps to
change the mix of fixed and variable rate debt. During
2020, International Paper terminated its interest rate
swaps with a notional amount of $700 million and
maturities ranging from 2024 to 2026 with an
approximate fair value of $85 million. Subsequent to
the termination of the interest rate swaps, the fair
value basis adjustment is amortized to earnings as
income over the same period as a debt
interest
premium on the previously hedged debt. The
Company had no outstanding interest rate swaps for
the years ended December 31, 2022 and 2021 (see
Note 17 Derivatives and Hedging Activities on pages
78 through 81 of Item 8. Financial Statements and
Supplementary Data).
Variable Interest Entities
Information concerning variable interest entities is set
forth in Note 15 Variable Interest Entities on pages 75
and 76 of
Item 8. Financial Statements and
In connection with the 2006
Supplementary Data.
International Paper installment sale of forestlands, we
received $4.8 billion of
installment notes. These
installment notes were used by variable interest
entities as collateral for borrowings from third-party
lenders. These variable interest entities were
restructured in 2015 when the installment notes and
third-party loans were extended. The restructured
variable interest entities held installment notes of $4.8
billion and third-party loans of $4.2 billion which both
matured in August 2021. We settled the third-party
loans at their maturity with the proceeds from the
installment notes. This resulted in cash proceeds of
approximately $630 million representing our equity in
the variable interest entities. Maturity of
the
installment notes and termination of the monetization
structure also resulted in a $72 million tax liability that
was paid in the fourth quarter of 2021. On September
2, 2022,
the Company and the Internal Revenue
Service agreed to settle the previously disclosed
timber monetization restructuring tax matter. Under
this agreement, the Company will fully resolve the
matter and pay $252 million in U.S. federal
income
taxes. As a result, interest will also be charged upon
closing of the audit. The amount of interest expense
recognized through December 31, 2022 is $58
million. As of December 31, 2022, $89 million in U.S.
federal
income taxes and $28 million in interest
expense have been paid as a result of the settlement
agreement. The remaining $163 million U.S. federal
income tax liability and $30 million accrued interest
liabilities in the
liability are recorded as current
balance sheet. The reversal of
the Company’s
remaining deferred tax liability associated with the
2015 Financing Entities of $604 million was
recognized as a one-time tax benefit
in the third
quarter of 2022.
LIQUIDITY AND CAPITAL RESOURCES OUTLOOK FOR 2023
We expect another year of solid cash generation in
2023. Furthermore, we intend to continue to make
choices for the use of cash that are consistent with
our capital allocation framework to drive long-term
value creation. These include maintaining a strong
balance sheet and investment grade credit rating,
returning meaningful cash to shareholders through
dividends and share repurchases and making organic
investments to maintain our world-class system and
strengthen our businesses.
as
for
purchase
authorized
On October 11, 2022, our Board of Directors
approved an additional $1.5 billion under our share
repurchase program. This program does not have an
expiration date and has approximately $3.2 billion
aggregate amount of shares of common stock
remaining
of
December 31, 2022. We may continue to repurchase
shares under such authorization in open market
privately
transactions
to
negotiated transactions or otherwise, subject
prevailing
liquidity
requirements, applicable securities laws requirements
In addition, we pay regular
and other
quarterly cash dividends and expect to continue to
pay
the
foreseeable future. Each quarterly dividend is subject
to review and approval by our Board of Directors.
conditions,
(including
dividends
quarterly
trades),
factors.
regular
market
block
cash
our
in
Capital Expenditures and Long-Term Debt
Capital spending for 2023 is planned at approximately
$1.0 billion to $1.2 billion, or about 91% to 109% of
depreciation and amortization.
At December 31, 2022, International Paper’s credit
agreements totaled $2.0 billion, which is comprised of
the $1.5 billion contractually committed bank credit
agreement and up to $500 million under
the
receivables
securitization program. Management
believes these credit agreements are adequate to
cover expected operating cash flow variability during
the current economic cycle. The credit agreements
generally provide for interest rates at a floating rate
index plus a pre-determined margin dependent upon
International Paper’s credit rating. At December 31,
35
the
than
covenants
2022, the Company had no borrowings outstanding
under the $1.5 billion credit agreement or the $500
securitization program. The
million receivables
Company’s credit agreements are not subject to any
restrictive
financial
other
covenants as disclosed on pages 76 through 78 in
Item 8.
Note 16 - Debt and Lines of Credit of
Financial Statements and Supplementary Data, and
the borrowings under the receivables securitization
program being limited by eligible receivables. The
its debt
Company was in compliance with all
covenants at December 31, 2022 and was well below
the thresholds stipulated under
the covenants as
defined in the credit agreements. Further the financial
covenants do not restrict any borrowings under the
credit agreements.
Under the terms of the Company's commercial paper
program,
individual maturities on borrowings may
vary, but not exceed one year from the date of issue.
Interest bearing notes may be issued either as fixed
or floating rate notes. As of December 31, 2022, the
Company had $410 million outstanding under the
program with remaining capacity of $590 million. As
of December 31, 2022,
the remaining credit
agreement capacity was $1.1 billion.
International Paper expects to be able to meet
projected capital expenditures, service existing debt,
meet working capital and dividend requirements and
make common stock and/or debt repurchases for the
the foreseeable future
next 12 months and for
thereafter with current cash balances and cash from
operations, supplemented as required by its existing
credit facilities. The Company will continue to rely on
debt and capital markets for the majority of any
long-term funding not provided by
necessary
operating cash flows. Funding decisions will be
guided by our capital structure planning objectives.
The primary goals of the Company’s capital structure
flexibility and
planning are to maximize financial
maintain appropriate levels of liquidity to meet our
needs while managing balance sheet debt and
interest expense, and we have repurchased, and may
continue to repurchase, our common stock (under our
existing share repurchase program) and debt
(including through open market purchases, privately
negotiated transactions or otherwise) to the extent
consistent with this capital structure planning. The
majority of
is accessed
International Paper’s debt
through global public capital markets where we have
a wide base of investors. During 2020, management
took various actions to further strengthen the
Company’s liquidity position in response to the
COVID-19 pandemic. This included the Company
deferring the payment of our payroll taxes as allowed
under CARES Act. The CARES Act allows for the
deferral of the payment of the employer portion of
Social Security taxes accrued between March 27,
36
2020 and December 31, 2020. Under the CARES Act
50% of the deferred payroll taxes was paid in 2021
and the remainder was paid in 2022. We believe that
our
credit agreements and commercial paper
program provide us with sufficient liquidity to operate
in the current negative macroeconomic environment;
however, an extended period of economic disruption
could impact our access to additional sources of
liquidity.
Maintaining an investment grade credit rating is an
important element of International Paper’s financing
strategy. At December 31, 2022, the Company held
long-term credit ratings of BBB (stable outlook) and
Baa2 (stable outlook) by S&P and Moody’s,
respectively.
Contractual obligations for
future payments under
existing debt and lease commitments and purchase
obligations at December 31, 2022, were as follows:
In millions
2023
2024
2025
2026
2027
Thereafter
Debt maturities (a)
$
763 $
148 $
191 $
72 $
298 $
4,107
Operating lease
obligations
Purchase obligations (b)
157
2,504
113
818
75
471
48
360
30
285
36
1,651
Total (c)
$ 3,424 $ 1,079 $
737 $
480 $
613 $
5,794
Includes financing lease obligations.
(a)
(b)
Includes $4.0 billion relating to fiber supply agreements.
(c) Not included in the above table due to the uncertainty of the
amount and timing of the payment are unrecognized tax
benefits of approximately $169 million. Also not included in
the above table is $95 million of Deemed Repatriation
Transition Tax associated with the 2017 Tax Cuts and Jobs
Act which will be settled from 2023 - 2026. Additionally, the
deferred tax liability of $485 million related to the Temple-
Inland timber monetization is not
included in the table
above. It will be settled with the maturity of the notes in
2027.
We consider the undistributed earnings of our foreign
subsidiaries as of December 31, 2022,
to be
permanently reinvested and, accordingly, no U.S.
income taxes have been provided thereon (see Note
13 Income Taxes on pages 69 through 71 of Item 8.
Financial Statements and Supplementary Data). We
do not anticipate the need to repatriate funds to the
United States to satisfy domestic liquidity needs
arising in the ordinary course of business, including
liquidity needs associated with our domestic debt
service requirements.
Pension Obligations and Funding
determined
At December 31, 2022,
the projected benefit
obligation for the Company’s U.S. defined benefit
was
under
plans
approximately $29 million lower than the fair value of
plan assets, excluding non-U.S. plans. Approximately
$297 million of this amount relates to plans that are
to minimum funding requirements. Under
subject
current IRS funding rules, the calculation of minimum
U.S. GAAP
for accounting purposes.
funding requirements differs from the calculation of
the present value of plan benefits (the "projected
In
benefit obligation")
December 2008, the Worker, Retiree and Employer
Recovery Act of 2008 ("WERA") was passed by the
U.S. Congress which provided for pension funding
relief and technical corrections. Funding contributions
depend on the funding method selected by the
Company, and the timing of its implementation, as
well as on actual demographic data and the targeted
funding level. The Company continually reassesses
the
discretionary
contributions and elected not to make any voluntary
contributions in 2020, 2021 or 2022. At this time, we
do not expect to have any required contributions to
our plans in 2023, although the Company may elect
to make future voluntary contributions. The timing and
future contributions, which could be
amount of
material, will depend on a number of
factors,
including the actual earnings and changes in values
of plan assets and changes in interest rates.
amount
timing
and
any
of
CRITICAL ACCOUNTING POLICIES AND
SIGNIFICANT ACCOUNTING ESTIMATES
requires
International Paper
The preparation of financial statements in conformity
with accounting principles generally accepted in the
to
United States
establish accounting policies and to make estimates
the
that affect both the amounts and timing of
recording
and
require
expenses. Some
are
subjective
inherently uncertain.
liabilities,
these
about matters
assets,
of
judgments
estimates
revenues
that
of
their application,
Accounting policies whose application has had or is
impact on the
reasonably likely to have a material
reported results of operations and financial position of
International Paper, and that can require a significant
level of estimation or uncertainty by management that
affect
include the accounting for
long-lived
contingencies,
assets and goodwill, pensions and income taxes. The
Company has discussed the selection of critical
accounting policies and the effect of significant
estimates with the Audit and Finance Committee of
the Company’s Board of Directors and with its
independent registered public accounting firm.
impairment or disposal of
CONTINGENT LIABILITIES
Accruals for contingent liabilities, including personal
injury, product liability, environmental, asbestos and
other legal matters, are recorded when it is probable
that a liability has been incurred or an asset impaired
and the amount of
the loss can be reasonably
estimated. Liabilities accrued for legal matters require
judgments regarding projected outcomes and range
litigation and settlement
of loss based on historical
legal counsel
experience and recommendations of
37
regulations and estimates of
and,
if applicable, other experts. Liabilities for
environmental matters require evaluations of relevant
future
environmental
remediation alternatives and costs. The Company
estimated the probable liability associated with these
environmental matters to be approximately $243
million ($251 million undiscounted) in the aggregate
as of December 31, 2022 and $182 million ($191
million undiscounted)
in the aggregate as of
December 31, 2021. Liabilities for asbestos-related
matters require reviews of recent and historical claims
data. The Company's total
recorded liability with
respect to pending and future asbestos-related claims
was $105 million and $103 million, net of estimated
insurance recoveries, as of December 31, 2022 and
2021, respectively. The Company utilizes its in-house
legal counsel and environmental experts to develop
estimates of
its legal, environmental and asbestos
obligations, supplemented as needed by third-party
specialists to analyze its most complex contingent
liabilities.
estimated
We calculate our workers' compensation reserves
calculated
actuarially
on
based
development
factors. The workers' compensation
reserves are reviewed at least quarterly to determine
the adequacy of the accruals and related financial
statement disclosure. The Company's total recorded
workers' compensation reserve was $136 million and
$159 million as of December 31, 2022 and 2021,
respectively. While we believe that our assumptions
are appropriate, the ultimate settlement of workers'
compensation reserves may differ significantly from
amounts we have accrued in our consolidated
financial statements.
IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL
of
or
events
changes
occurrence
Long-lived assets are reviewed for impairment upon
the
in
circumstances that indicate that the carrying value of
the assets may not be recoverable. A recoverability
is performed by comparing the undiscounted
test
cash flows to carrying value of
the
carrying amount is less than the undiscounted cash
flows, the fair value of the assets is compared to the
carrying value to determine if they are impaired. An
impairment of a long-lived asset exists when the
asset’s carrying amount exceeds its fair value.
the assets.
If
impairment as of
We perform an annual goodwill
October 1. Additionally,
interim assessments of
possible impairments of goodwill are also made when
events or changes in circumstances indicate that the
carrying value of the asset may not be recoverable
through future operations. A goodwill
impairment
exists when the carrying amount of goodwill exceeds
its fair value.
on
based
impairment
The amount and timing of goodwill and long-lived
asset
these
charges
assessments requires the estimation of future cash
flows or the fair market value of the related assets
based on management’s best estimates of certain
key factors,
including future selling prices and
volumes, operating, raw material, energy and freight
costs, various other projected operating economic
factors and other intended uses of the assets.
for impairment
ASU 2011-08, "Intangibles - Goodwill and Other,"
allows entities testing goodwill
the
option of performing a qualitative assessment before
performing the quantitative goodwill impairment test.
If a qualitative assessment is performed, an entity is
required to perform the quantitative goodwill
not
impairment
test unless the entity determines that,
based on that qualitative assessment, it is more likely
than not that its fair value is less than its carrying
value. The Company performed its annual testing of
its reporting units for possible goodwill
impairments
by applying the qualitative assessment to its North
America Industrial Packaging reporting unit and the
to its EMEA
quantitative goodwill
Industrial Packaging reporting unit as of October 1,
2022.
impairment
test
various
the current year evaluation,
assumptions,
the Company
For
assessed
and
events
circumstances that would have affected the estimated
fair value of the North America Industrial Packaging
reporting unit under the qualitative assessment and
the results of the qualitative assessments indicated
that it was not more likely than not that the fair value
of the reporting unit was less than its carrying value.
Our most recent quantitative goodwill impairment test
for our NA IPG reporting unit was performed as part
test. That
of our 2020 annual goodwill
quantitative goodwill
indicated that
impairment
the fair value of the NA IPG reporting unit exceeded
the carrying amount by approximately 100%.
impairment
test
The Company also performed the quantitative
impairment test which included comparing
goodwill
the EMEA Industrial
the carrying amount of
Packaging reporting unit to its estimated fair value.
The estimated fair value of the reporting unit was
calculated using a weighted approach based on
discounted future cash flows, market multiples and
transaction multiples. The determination of fair value
using the discounted cash flow approach requires
management
to make significant estimates and
assumptions related to forecasts of future revenues,
rates. The
operating profit margins, and discount
determination of fair value using market multiples and
transaction multiples requires management to make
significant assumptions related to revenue multiples
taxes,
and adjusted earnings before interest,
depreciation, and amortization ("EBITDA") multiples.
38
The results of our quantitative goodwill
impairment
test indicated that the carrying amount exceeded the
estimated fair value of the EMEA Industrial Packaging
reporting unit and it was determined that all of the
goodwill in the reporting unit, totaling $76 million, was
impaired. The decline in the fair value of EMEA
Industrial Packaging and resulting impairment charge
was due to the impacts of certain macroeconomic
conditions, including the impacts from inflation and
the geopolitical environment to the reporting unit.
Due to the macroeconomic factors noted above, we
also performed the long-lived asset impairment test
for asset groups that represent the EMEA Industrial
to the goodwill
Packaging reporting unit prior
impairment
test and the respective assets groups
were determined not to be impaired.
OTHER-THAN-TEMPORARY IMPAIRMENT
that
is other than temporary including:
The Company evaluates our investment in the Ilim
joint venture for other-than-temporary impairment
(OTTI) when circumstances indicate the investment
may be impaired. When a decline in fair value is
deemed to be an OTTI, an impairment is recognized
to the extent
the fair value is less than the
carrying value of the investment. We consider various
factors in determining whether a loss in value of an
investment
the
length of time and the extent to which the fair value
has been below cost, the financial condition of Ilim
joint venture, and our intent and ability to retain the
investment for a period of time sufficient to allow for
recovery of value. Management makes certain
judgments and estimates in its assessment including
but not limited to: identifying if circumstances indicate
a decline in value is other
than temporary,
expectations about operations, as well as industry,
financial, regulatory and market factors. During the
fourth quarter of 2022,
the Company received a
binding third-party offer to purchase our interest in the
Ilim joint venture which was then submitted to our
joint
preemption
provisions of the Ilim shareholders' agreement. The
third-party offer resulted in an implied fair value that
was less than our investment carrying value. This
decrease in fair value below carrying value was not
considered to be a temporary decline in value. As
recorded a $533 million
such,
impairment in the fourth quarter of 2022 based on the
agreed selling price for our 50% interest. The
impairment charge included recognition of $375
foreign currency cumulative translation
million of
adjustment loss. The timing by which the sale of our
investment will be completed is dependent on
obtaining required regulatory approvals.
In the
meantime, we could recognize additional OTTI
investment
charges as the carrying value of our
the Company
partners
venture
under
the
fluctuates relative to the approximate $500 million
implied fair value, through additional equity earnings
and foreign currency translation.
PENSION BENEFIT OBLIGATIONS
in
annually
determined
The charges recorded for pension benefit obligations
are
conjunction with
International Paper’s consulting actuary, and are
dependent upon various assumptions including the
expected long-term rate of return on plan assets,
compensation
projected
rates,
discount
increases and mortality rates.
future
The calculations of pension obligations and expenses
require decisions about a number of key assumptions
that can significantly affect
liability and expense
amounts,
including the expected long-term rate of
return on plan assets and the discount rate used to
calculate plan liabilities.
Benefit obligations and fair values of plan assets as of
December 31, 2022, for International Paper’s pension
plan were as follows:
In millions
U.S. qualified pension
U.S. nonqualified pension
Non-U.S. pension
$
Benefit
Obligation
Fair Value of
Plan Assets
8,845
—
18
8,548 $
268
54
The table below shows the discount rate used by
to calculate U.S. pension
International Paper
obligations for the years shown:
Discount rate
2022
2021
2020
5.40 %
2.90 %
2.60 %
these
determines
International Paper
actuarial
assumptions, after consultation with our actuaries, on
December 31 of each year or more frequently if
required, to calculate liability information as of that
date and pension expense for the following year. The
expected long-term rate of return on plan assets is
based on projected rates of return for current asset
classes in the plan’s investment portfolio. The
discount rate assumption was determined based on a
hypothetical settlement portfolio selected from a
universe of high quality corporate bonds.
The weighted average expected long-term rate of
return on U.S. pension plan assets used to determine
net periodic cost for the year ended December 31,
2022 was 6.00%.
Increasing (decreasing) the expected long-term rate
of return on U.S. plan assets by an additional 0.25%
would decrease (increase) 2023 pension expense by
approximately $20 million, while a (decrease)
39
increase of 0.25% in the discount
(increase)
approximately $15 million.
decrease
pension
rate would
by
expense
Actual rates of return earned on U.S. pension plan
assets for each of the last 10 years were:
Year
2022
2021
2020
2019
2018
Return
(22.0)%
7.7 %
24.7 %
23.9 %
(3.0)%
Year
2017
2016
2015
2014
2013
Return
19.3 %
7.1 %
1.3 %
6.4 %
14.1 %
The 2013 and 2014 returns above represent weighted
averages of
International Paper and Temple-Inland
asset returns. International Paper and Temple-Inland
assets were combined in October 2014. The
annualized time-weighted rate of return earned on
U.S. pension plan assets was 4.7% and 7.1% for the
past five and ten years, respectively.
“Compensation – Retirement Benefits,”
ASC 715,
provides for delayed recognition of actuarial gains
and losses, including amounts arising from changes
in the estimated projected plan benefit obligation due
to changes in the assumed discount rate, differences
between the actual and expected return on plan
assets, and other assumption changes. These net
gains and losses are recognized in pension expense
prospectively over a period that approximates the
active
service
average
employees expected to receive benefits under the
plans to the extent that they are not offset by gains
and losses in subsequent years.
remaining
period
of
Net periodic pension plan expenses, calculated for all
of International Paper’s plans, were as follows:
In millions
2022
2021 2020 2019 2018
Pension (income) expense
U.S. plans
Non-U.S. plans
$(116) $ (112) $ 32 $ 93 $ 632
5
4
5
6
4
Net (income) expense
$(111) $ (108) $ 37 $ 99 $ 636
The increase in 2022 pension income primarily
reflects lower service cost, lower actuarial loss, and
lower asset returns, slightly offset by higher interest
cost.
Assuming that discount rates, expected long-term
returns on plan assets and rates of
future
compensation increases remain the same as of
December 31, 2022, projected future net periodic
pension plan expense (income) would be as follows:
In millions
Pension expense (income)
U.S. plans
Non-U.S. plans
Net (income) expense
2024
2023
$
$
38 $
102
5
5
43 $
107
The Company estimates that it will record net pension
expense of approximately $102 million for its U.S.
defined benefit plans in 2023, compared to income of
$116 million in 2022.
The market value of plan assets for International
Paper’s U.S. qualified pension plan at December 31,
2022 totaled approximately $8.8 billion, consisting of
approximately 16% equity securities, 67% debt
securities, 9% real estate funds and 8% other assets.
The Company’s funding policy for
its qualified
pension plans is to contribute amounts sufficient to
meet legal funding requirements, plus any additional
the Company may determine to be
amounts that
appropriate considering the funded status of the plan,
the cash flows generated by the
tax deductibility,
Company,
factors. The Company
and
continually reassesses the amount and timing of any
discretionary contributions and could elect to make
voluntary contributions in the future. There were no
required contributions to the U.S. qualified plan in
2022. The nonqualified defined benefit plans are
funded to the extent of benefit payments, which
totaled $29 million for the year ended December 31,
2022.
other
INCOME TAXES
International Paper records its global
tax provision
based on the respective tax rules and regulations for
the jurisdictions in which it operates. Where the
Company believes that a tax position is supportable
for income tax purposes, the item is included in its
income tax returns. Where treatment of a position is
liabilities are recorded based upon the
uncertain,
Company’s evaluation of the “more likely than not”
outcome considering technical merits of the position
based on specific tax regulations and facts of each
matter. Changes to recorded liabilities are only made
when an identifiable event occurs that changes the
likely outcome, such as settlement with the relevant
tax authority, the expiration of statutes of limitation for
the subject tax year, change in tax laws, or recent
court cases that are relevant to the matter. Accrued
interest related to these uncertain tax positions is
recorded in our consolidated statement of operations
in Interest expense, net.
Valuation allowances are recorded to reduce deferred
tax assets when it is more likely than not that a tax
benefit will not be realized. Significant judgment is
required in assessing the need for and magnitude of
appropriate valuation allowances against deferred tax
assets. This assessment
is completed by tax
jurisdiction and relies on both positive and negative
evidence available, with significant weight placed on
recent financial results. Cumulative reported pre-tax
income is considered objectively verifiable positive
evidence of our ability to generate positive pre-tax
income in the future. In accordance with GAAP, when
there is a recent history of pre-tax losses, there is
little or no weight placed on forecasts for purposes of
assessing the recoverability of our deferred tax
assets. When necessary, we use systematic and
logical methods to estimate when deferred tax
liabilities will reverse and generate taxable income
and when deferred tax assets will
reverse and
generate tax deductions. Assumptions, judgment, and
the use of estimates are required when scheduling
the reversal of deferred tax assets and liabilities, and
the exercise is inherently complex and subjective.
The realization of
these assets is dependent on
generating future taxable income, as well as
successful
implementation of various tax planning
strategies. The Company's valuation allowance was
$677 million and $708 million at December 31, 2022
and 2021, respectively.
While International Paper believes
these
judgments and estimates are appropriate and
actual
reasonable
resolution of these matters may differ from recorded
estimated amounts.
circumstances,
under
that
the
LEGAL PROCEEDINGS
Information concerning the Company’s environmental
and other legal proceedings is set forth in Note 14
Commitments and Contingent Liabilities on pages 71
Item 8. Financial Statements and
through 75 of
Supplementary Data. The Company is not subject to
any administrative or judicial proceeding arising under
any Federal, State or local provisions that have been
enacted or adopted regulating the discharge of
materials into the environment or primarily for the
purpose of protecting the environment that is likely to
result in monetary sanctions of $1 million or more.
RECENT ACCOUNTING DEVELOPMENTS
See Note 2 Recent Accounting Developments on
page 57 of
Item 8. Financial Statements and
Supplementary Data for a discussion of new
accounting pronouncements.
EFFECT OF INFLATION
Inflationary increases in certain input costs, such as
energy, wood, recycled fiber,
freight and chemical
costs, had an adverse impact on the Company’s
operating results in 2021 and 2022, but had a minimal
impact in 2020. We expect that inflationary pressures
will continue to adversely impact our operating results
40
activity,
including
labor market
in 2023. The effects of
inflation have been more
significant in recent years due to general inflationary
conditions,
conditions,
economic
supply
consumer
shortages and disruptions. Sales prices and volumes
are primarily influenced by economic supply and
demand factors in specific markets and by exchange
rate fluctuations but are also currently being impacted
by the current inflationary environment.
behavior,
The fair value of our debt and financial
instruments
varies due to changes in market interest and foreign
currency rates and commodity prices since the
inception of the related instruments. We assess this
risk utilizing a sensitivity analysis. The
market
sensitivity analysis measures the potential
loss in
fair values and cash flows based on a
earnings,
hypothetical 10% change (increase and decrease) in
interest and currency rates and commodity prices.
FOREIGN CURRENCY EFFECTS
INTEREST RATE RISK
Our exposure to market risk for changes in interest
rates relates primarily to short- and long-term debt
obligations and investments in marketable securities.
We invest in investment-grade securities of financial
institutions and money market mutual funds with a
minimum rating of AAA and limit exposure to any one
issuer or
investments in marketable
securities at December 31, 2022 and 2021 are stated
at cost, which approximates market due to their short-
term nature. Our interest rate risk exposure related to
these investments was not material.
fund. Our
We issue fixed and floating rate debt in a proportion
that management deems appropriate based on
current and projected market conditions. Derivative
instruments, such as interest rate swaps, may be
used to execute this strategy. At December 31, 2022
and 2021, the fair value of the net liability of financial
instruments with exposure to interest rate risk was
approximately
billion,
billion
$6.7
increase in fair value
respectively. The potential
resulting from a 10% adverse shift in quoted interest
rates would have been approximately $328 million
and $304 million at December 31, 2022 and 2021,
respectively.
$4.3
and
COMMODITY PRICE RISK
of
our
objective
commodity
The
exposure
management is to minimize volatility in earnings due
to large fluctuations in the price of commodities.
Commodity swap or forward purchase contracts may
be used to manage risks associated with market
fluctuations in energy prices. At December 31, 2022
and 2021, the net fair value of these contracts was
$20 million asset and $10 million asset. The potential
loss in fair value from a 10% adverse change in
quoted commodity prices for these contracts would
have been approximately $3 million and $2 million at
December 31, 2022 and 2021, respectively.
International Paper has operations in a number of
Its operations in those countries also
countries.
to, and compete with imports from other
export
regions. As such, currency movements can have a
impacts on the
number of direct and indirect
Company’s financial statements. Direct
impacts
include the translation of
international operations’
local currency financial statements into U.S. dollars
and the remeasurement impact associated with non-
functional currency financial assets and liabilities.
Indirect
in
include
competitiveness of imports into, and exports out of,
the United States (and the impact on local currency
pricing of products that are traded internationally). In
general, a weaker U.S. dollar and stronger
local
to International Paper. The
currency is beneficial
currency that has the most impact is the Euro.
impacts
change
the
MARKET RISK
trading
including fixed and
instruments,
We use financial
variable rate debt, to finance operations, for capital
spending programs and for general
corporate
purposes. Additionally, financial instruments, including
various derivative contracts, are used to hedge
exposures to interest rate, commodity and foreign
instruments
currency risks. We do not use financial
for
to
related
purposes.
International Paper’s debt obligations is included in
Note 16 Debt and Lines of Credit on pages 76
through 78 of
Item 8. Financial Statements and
Supplementary Data. A discussion of derivatives and
hedging activities is included in Note 17 Derivatives
and Hedging Activities on pages 78 through 81 of
Item 8. Financial Statements and Supplementary
Data.
Information
41
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
the
preceding
See
17
Derivatives and Hedging Activities on pages 78
through 81 of
Item 8. Financial Statements and
Supplementary Data.
and Note
discussion
FOREIGN CURRENCY RISK
transacts business in many
International Paper
currencies and is also subject to currency exchange
rate risk through investments and businesses owned
and operated in foreign countries. Our objective in
managing the associated foreign currency risks is to
minimize the effect of adverse exchange rate
fluctuations on our after-tax cash flows. We address
these risks on a limited basis by entering into cross-
currency interest rate swaps, or foreign exchange
contracts.
At December 31, 2022 and 2021, the net fair value of
financial
instruments with exposure to foreign
currency risk was immaterial. The potential loss in fair
value for such financial
instruments from a 10%
adverse change in quoted foreign currency exchange
rates was also immaterial.
42
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
REPORT OF MANAGEMENT ON:
Financial Statements
statements
The management of International Paper Company is
responsible for the preparation of the consolidated
report. The
financial statements in this annual
been
have
financial
consolidated
prepared using accounting principles generally
accepted in the United States of America considered
appropriate in the circumstances to present fairly the
Company’s consolidated financial position, results of
operations and cash flows on a consistent basis.
Management has also prepared the other information
in this annual
its
accuracy and consistency with the consolidated
financial statements.
report and is responsible for
As can be expected in a complex and dynamic
business environment, some financial statement
amounts are based on estimates and judgments.
Even though estimates and judgments are used,
measures have been taken to provide reasonable
assurance of
the
the integrity and reliability of
information contained in this annual report.
financial
We have formed a Disclosure Committee to oversee
this process.
The accompanying consolidated financial statements
have been audited by the independent registered
public accounting firm Deloitte & Touche LLP
(PCAOB ID No. 34). During its audits, Deloitte &
Touche LLP was given unrestricted access to all
financial records and related data, including minutes
of all meetings of stockholders and the board of
directors
board.
Management believes that all representations made
to the independent auditors during their audits were
valid and appropriate.
committees
and
the
all
of
Internal Control Over Financial Reporting
Internal
control over
The management of International Paper Company is
also responsible for establishing and maintaining
adequate internal control over financial reporting (as
defined in Rules (13a-15(e) and 15d-15(e) under the
Exchange Act).
financial
reporting is the process designed by, or under the
supervision of, our principal executive officer and
principal financial officer, and effected by our Board of
to
Directors, management and other personnel
provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial
statements for external purposes. All internal control
including the
systems have inherent
possibility of circumvention and overriding of controls,
limitations,
and therefore can provide only reasonable assurance
of achieving the designed control objectives. The
Company’s internal control system is supported by
written policies and procedures,
self-
monitoring mechanisms, and is audited by the
internal audit function. Appropriate actions are taken
by management to correct deficiencies as they are
identified. Our procedures for
reporting
include the active involvement of senior management,
our Audit and Finance Committee and our staff of
highly qualified financial and legal professionals.
contains
financial
financial
control over
The Company has assessed the effectiveness of its
internal
reporting as of
December 31, 2022. In making this assessment, it
used the criteria described in “Internal Control –
the
Integrated Framework
by
Committee of Sponsoring Organizations of
the
Treadway Commission ("COSO"). Based on this
assessment, management believes that, as of
December 31, 2022, the Company’s internal control
over financial reporting was effective.
(2013)”
issued
public
independent
The Company’s
accounting firm, Deloitte & Touche LLP, has issued its
report on the effectiveness of the Company’s internal
control over financial reporting. The report appears on
pages 45 through 47.
registered
Internal Control Environment And Board Of
Directors Oversight
control
internal
includes
environment
an
Our
enterprise-wide attitude of
integrity and control
consciousness that establishes a positive “tone at the
top.” This is exemplified by our ethics program that
includes long-standing principles and policies on
ethical business conduct that require employees to
maintain the highest ethical and legal standards in the
conduct of International Paper business, which have
been distributed to all employees; a toll-free
telephone helpline whereby any employee may
anonymously report suspected violations of
law or
International Paper’s policy; and an office of ethics
and business practice. The internal control system
includes careful selection and training of
further
supervisory and management personnel, appropriate
delegation of authority and division of responsibility,
dissemination of accounting and business policies
International Paper, and an extensive
throughout
program of internal audits with management follow-
up.
The Board of Directors, assisted by the Audit and
Finance Committee ("Committee"), monitors the
integrity of the Company’s financial statements and
financial reporting procedures, the performance of the
Company’s internal audit function and independent
auditors, and other matters set forth in its charter. The
43
and
without
Committee, which consists of independent directors,
meets regularly with representatives of management,
and with the independent auditors and the Internal
management
Auditor,
with
representatives
to review their
in attendance,
activities. The Committee’s Charter takes into account
the New York Stock Exchange rules relating to Audit
Committees and the SEC rules and regulations
promulgated as a result of the Sarbanes-Oxley Act of
2002. The Committee has reviewed and discussed
the consolidated financial statements for the year
ended December
critical
accounting policies and significant management
judgments, with management and the independent
auditors. The Committee’s report recommending the
inclusion of such financial statements in this Annual
Report on Form 10-K will be set forth in our Proxy
Statement.
including
2022,
31,
MARK S. SUTTON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TIMOTHY S. NICHOLLS
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
44
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of
International Paper Company:
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of International Paper Company and
subsidiaries (the "Company") as of December 31,
2022 and 2021, the related consolidated statements
of operations, comprehensive income (loss), changes
in equity, and cash flows for each of the three years in
the period ended December 31, 2022, and the related
notes (collectively referred to as the "financial
statements"). In our opinion, the financial statements
present fairly, in all material respects, the financial
position of the Company as of December 31, 2022
and 2021, and the results of its operations and its
cash flows for each of the three years in the period
ended December 31, 2022,
in conformity with
accounting principles generally accepted in the
United States of America.
We did not audit the financial statements of Ilim S.A.
as of and for the year ended December 31, 2022.
The Company’s investment in Ilim S.A. is accounted
for by use of the equity method and is presented as
held-for-sale and within discontinued operations, as
disclosed in Note 11. The accompanying financial
the Company include its equity
statements of
investment
in Ilim S.A. of $133 million as of
December 31, 2022, and its equity earnings in Ilim
S.A. of $296 million for the year ended December 31,
2022. The financial statements of
Ilim S.A. were
audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates
to the amounts included for Ilim S.A. as of and for the
year ended December 31, 2022, is based solely on
the report of the other auditors.
(PCAOB),
in accordance with the
We have also audited,
the Public Company Accounting
standards of
the
Oversight Board (United States)
Company's internal control over financial reporting as
of December 31, 2022, based on criteria established
in Internal Control — Integrated Framework (2013)
Sponsoring
issued
Organizations of the Treadway Commission and our
report dated February 17, 2023, expressed an
unqualified opinion on the Company's internal control
over financial reporting.
Committee
the
by
of
Basis for Opinion
These financial statements are the responsibility of
the Company's management. Our responsibility is to
express an opinion on the Company's financial
45
statements based on our audits. We are a public
accounting firm registered with the PCAOB and are
to the
required to be independent with respect
Company in accordance with the U.S.
federal
laws and the applicable rules and
securities
regulations
and Exchange
of
Commission and the PCAOB.
the Securities
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require
to obtain
that we plan and perform the audit
reasonable assurance about whether the financial
statements are free of material misstatement,
whether due to error or fraud. Our audits included
performing procedures to assess the risks of material
misstatement of
the financial statements, whether
due to error or fraud, and performing procedures that
respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting
principles used and significant estimates made by
management, as well as evaluating the overall
presentation of the financial statements. We believe
that our audits provide a reasonable basis for our
opinion.
Critical Audit Matters
The critical audit matter communicated below is a
matter arising from the current-period audit of
the
financial statements that was communicated or
required to be communicated to the Audit and
Finance Committee and that (1) relates to an account
to the financial
or disclosure that
statements
especially
challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter
in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating
the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts
or disclosures to which it relates.
is material
involved
and
our
(2)
Retirement Plans — Plan Assets — Refer to Note
19 to the financial statements
Critical Audit Matter Description
As of December 31, 2022, the Company’s Pension
Plans held approximately $2.8 billion in investments
whose reported value is determined based on net
asset value (“NAV”). The strategic asset allocation
policy prescribed by the Company’s Pension Plan
includes permissible investments in certain hedge
funds, private equity funds, and real estate funds
whose reported values are determined based on the
estimated NAV of each investment.
These NAVs are generally determined by the Pension
Plan’s third-party administrators or fund managers
to review and oversight by
and are subject
management of
the Company and its third-party
investment advisors.
Given a lack of a readily determinable value of these
investments and the subjective nature of the valuation
methodologies and unobservable inputs used in
these methodologies, auditing the NAV associated
with these investments requires a high degree of
auditor judgment and an increased extent of effort,
including the need to involve professionals in our firm
having expertise in alternative investments.
How the Critical Audit Matter Was Addressed in the
Audit
Our audit procedures related to the determination of
NAV associated with the Company’s Pension Plan’s
investments in hedge funds, private equity funds, and
real estate funds included the following, among
others:
• We tested the effectiveness of controls over
the Company’s determination and evaluation
of NAV,
including those related to the
reliability of NAVs reported by third-party
administrators and fund managers.
• We inquired of management and the
investment advisors regarding changes to the
investment
investment
strategies.
portfolio
and
• We obtained a confirmation from the third-
party custodian as of December 31, 2022 of
all individual investments held in trust for the
Pension Plan to confirm the existence of
each individual asset held in trust.
•
fund with a
For each selected investment
fiscal
year end of December 31, we
performed a retrospective review in which we
compared the estimated fair value recorded
by the Company in the December 31, 2021
financial statements, to the actual fair value
of
the fund (using the per-share NAV
disclosed in the fund’s subsequently issued
audited financial statements), to evaluate the
appropriateness of management’s estimation
process.
• With the assistance of professionals in our
firm having
alternative
expertise
investments, we rolled forward the valuation
from the selected funds’ most
recently
audited financial statements to December 31,
forward procedure included
2022. This roll
in
46
independently
consideration of the Company’s transactions
in the fund during the period, as well as an
estimate of the funds’ returns based on an
appropriate,
obtained
benchmark or index. We then compared our
independent
fund valuation estimate to the
December 31, 2022, balance recorded by the
Company. For certain selected funds, our roll
alternative
forward
procedures,
trust
as
statements for observable transactions near
year-end to compare to the estimated fair
value.
procedures
inspecting
included
such
•
For certain investments, we inquired of
management
to understand year-over-year
changes in the fund manager’s estimate of
NAV and compared the fund’s return on
investment to other available qualitative and
quantitative information.
/s/ Deloitte & Touche LLP
Memphis, Tennessee
February 17, 2023
We have served as the Company's auditor since
2002.
REPORT OF
PUBLIC ACCOUNTING FIRM
INDEPENDENT
REGISTERED
To the shareholders and the Board of Directors of
International Paper Company:
Opinion on Internal Control over Financial
Reporting
We have audited the internal control over financial
International Paper Company and
reporting of
subsidiaries (the “Company”) as of December 31,
2022, based on criteria established in Internal Control
— Integrated Framework (2013)
issued by the
the
Committee of Sponsoring Organizations of
Treadway Commission (COSO). In our opinion, the
Company maintained,
respects,
effective internal control over financial reporting as of
December 31, 2022, based on criteria established in
Internal Control — Integrated Framework (2013)
issued by COSO.
in all material
in accordance with the
We have also audited,
the Public Company Accounting
standards of
Oversight Board (United States)
the
consolidated financial statements as of and for the
year ended December 31, 2022, of the Company and
our report dated February 17, 2023, expressed an
unqualified opinion on those financial statements.
(PCAOB),
Basis for Opinion
is responsible for
The Company’s management
maintaining effective internal control over financial
reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in
the accompanying Report of Management on Internal
Control over Financial Reporting. Our responsibility is
to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We are a public accounting firm registered with the
PCAOB and are required to be independent with
respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and
and Exchange
the Securities
of
regulations
Commission and the PCAOB.
control
assurance
over
We conducted our audit
in accordance with the
standards of the PCAOB. Those standards require
to obtain
that we plan and perform the audit
effective
about whether
reasonable
internal
reporting was
financial
maintained in all material respects. Our audit included
obtaining an understanding of internal control over
financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design
and operating effectiveness of internal control based
on the assessed risk, and performing such other
procedures as we considered necessary in the
circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control over
Financial Reporting
A company’s internal control over financial reporting
is a process designed to provide reasonable
assurance regarding the reliability of
financial
reporting and the preparation of financial statements
for external purposes in accordance with generally
accepted accounting principles. A company’s internal
control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of
records that,
in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the
(2) provide reasonable
assets of
assurance
as
necessary
financial
statements in accordance with generally accepted
and
accounting
expenditures of the company are being made only in
accordance with authorizations of management and
directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of
the
company’s assets that could have a material effect on
the financial statements.
the company;
that
to
are
preparation
recorded
of
transactions
principles,
receipts
permit
and
that
limitations,
its inherent
Because of
internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk
that controls may become inadequate because of
changes in conditions, or
the degree of
compliance with the policies or procedures may
deteriorate.
that
/s/ Deloitte & Touche LLP
Memphis, Tennessee
February 17, 2023
47
CONSOLIDATED STATEMENT OF OPERATIONS
In millions, except per share amounts, for the years ended December 31
NET SALES
COSTS AND EXPENSES
Cost of products sold
Selling and administrative expenses
Depreciation, amortization and cost of timber harvested
Distribution expenses
Taxes other than payroll and income taxes
Restructuring and other charges, net
Net (gains) losses on sales and impairments of businesses
Net (gains) losses on sales of equity method investments
Net (gains) losses on mark to market investments
Interest expense, net
Non-operating pension (income) expense
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY
EARNINGS (LOSSES)
Income tax provision (benefit)
Equity earnings (loss), net of taxes
EARNINGS (LOSS) FROM CONTINUING OPERATIONS
Discontinued operations, net of taxes
NET EARNINGS (LOSS)
Less: Net earnings (loss) attributable to noncontrolling interests
NET EARNINGS (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER
COMPANY
BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY
COMMON SHAREHOLDERS
Earnings (loss) from continuing operations
Discontinued operations, net of taxes
Net earnings (loss)
DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY
COMMON SHAREHOLDERS
Earnings (loss) from continuing operations
Discontinued operations, net of taxes
Net earnings (loss)
The accompanying notes are an integral part of these financial statements.
2022
2021
2020
$ 21,161 $ 19,363 $ 17,565
15,143
13,832
12,339
1,293
1,040
1,783
148
89
76
10
(65)
325
(192)
1,511
(236)
(6)
1,741
(237)
1,385
1,097
1,444
139
509
(7)
(204)
32
337
(200)
999
188
2
813
941
1,504
1,754
—
2
1,353
1,091
1,287
136
195
465
(35)
—
446
(41)
329
176
29
182
300
482
—
$
1,504 $
1,752 $
482
$
$
$
$
4.79 $
2.08 $
(0.65)
2.42
4.14 $
4.50 $
4.74 $
2.07 $
(0.64)
2.40
4.10 $
4.47 $
0.46
0.77
1.23
0.46
0.76
1.22
48
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
In millions for the years ended December 31
NET EARNINGS (LOSS)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Amortization of pension and postretirement prior service costs and net loss:
U.S. plans (less tax of $28, $41 and $56)
Non-U.S. plans (less tax of $0, $0 and $0)
Pension and postretirement liability adjustments:
U.S. plans (less tax of $(109), $235 and $76)
Non-U.S. plans (less tax of $1, $1 and $(1))
Change in cumulative foreign currency translation adjustment (less tax of $0, $0 and $1)
Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period (less tax of $0, $1 and $(15))
Reclassification adjustment for (gains) losses included in net earnings (less tax of $1, $(2) and $13)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Comprehensive Income (Loss)
Net (Earnings) Loss Attributable to Noncontrolling Interests
Other Comprehensive (Income) Loss Attributable to Noncontrolling Interests
2022
2021
2020
$
1,504 $
1,754 $
482
85
1
(327)
8
(28)
—
2
124
1
706
7
69
3
(9)
(259)
1,245
901
2,655
—
—
(2)
2
170
—
229
(2)
8
(34)
26
397
879
—
—
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY
$
1,245 $
2,655 $
879
The accompanying notes are an integral part of these financial statements.
49
CONSOLIDATED BALANCE SHEET
In millions, except per share amounts, at December 31
ASSETS
Current Assets
Cash and temporary investments
Accounts and notes receivable (less allowances of $31 in 2022 and $34 in 2021)
Contract assets
Inventories
Current investments
Assets held for sale
Other current assets
Total Current Assets
Plants, Properties and Equipment, net
Long-Term Investments
Long-Term Financial Assets of Variable Interest Entities (Note 15)
Goodwill
Overfunded Pension Plan Assets
Right of Use Assets
Long-Term Assets Held for Sale
Deferred Charges and Other Assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Current Liabilities
Notes payable and current maturities of long-term debt
Accounts payable
Accrued payroll and benefits
Other current liabilities
Total Current Liabilities
Long-Term Debt
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 15)
Deferred Income Taxes
Underfunded Pension Benefit Obligation
Postretirement and Postemployment Benefit Obligation
Long-Term Lease Obligations
Other Liabilities
Commitments and Contingent Liabilities (Note 14)
Equity
Common stock $1 par value, 2022 - 448.9 shares and 2021 - 448.9 shares
Paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less: Common stock held in treasury, at cost, 2022 – 98.6 shares and 2021 – 70.4 shares
Total Equity
TOTAL LIABILITIES AND EQUITY
The accompanying notes are an integral part of these financial statements.
50
2022
2021
$
804 $ 1,295
3,284
3,232
481
378
1,942
1,814
—
133
126
245
—
132
6,770
7,096
10,431
10,441
186
2,294
3,041
297
424
—
497
194
2,275
3,130
595
365
557
590
$ 23,940 $ 25,243
$
763 $
196
2,708
2,606
355
1,174
5,000
4,816
2,106
1,732
281
150
283
440
902
4,144
5,383
2,099
2,618
377
205
236
1,075
1,099
449
4,725
9,855
449
4,668
9,029
(1,925)
(1,666)
13,104
12,480
4,607
8,497
3,398
9,082
$ 23,940 $ 25,243
CONSOLIDATED STATEMENT OF CASH FLOWS
In millions for the years ended December 31
OPERATING ACTIVITIES
Net earnings (loss)
Depreciation, amortization, and cost of timber harvested
Deferred income tax provision (benefit), net
Restructuring and other charges, net
Periodic pension (income) expense, net
Net (gains) losses on mark to market investments
Net (gains) losses on sales and impairments of businesses
Net (gains) losses on sales and impairments of equity method investments
Net (gains) losses on sales of fixed assets
Equity method dividends received
Equity (earnings) losses, net
Other, net
Changes in current assets and liabilities
Accounts and notes receivable
Contract assets
Inventories
Accounts payable and accrued liabilities
Interest payable
Other
2022
2021
2020
$ 1,504 $ 1,754 $
482
1,040
(773)
89
(116)
(65)
76
543
—
204
(291)
108
(59)
(103)
(162)
110
41
28
1,210
1,287
(291)
509
(112)
32
(358)
(205)
(86)
159
(313)
157
(596)
(49)
(263)
519
(32)
(5)
9
195
32
—
465
(35)
—
162
(77)
219
59
35
35
141
(55)
109
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
2,174
2,030
3,063
INVESTMENT ACTIVITIES
Invested in capital projects, net of insurance recoveries
Acquisitions, net of cash acquired
Proceeds from sales of equity method investments
Proceeds from sales of businesses, net of cash divested
Proceeds from exchange of equity securities
Proceeds from settlement of Variable Interest Entities
Proceeds from sale of fixed assets
Other
CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES
FINANCING ACTIVITIES
Repurchases of common stock and payments of restricted stock tax withholding
Issuance of debt
Reduction of debt
Change in book overdrafts
Dividends paid
Reduction of Variable Interest Entity loans
Distribution to Sylvamo Corporation
Net debt tender premiums paid
Other
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Cash Included in Assets Held for Sale
Effect of Exchange Rate Changes on Cash
Change in Cash and Temporary Investments
Cash and Temporary Investments
Beginning of the period
End of the period
The accompanying notes are an integral part of these financial statements.
51
(931)
—
—
—
311
—
13
(1)
(608)
(549)
(80)
908
827
—
4,850
101
(3)
6,054
(1,284)
1,011
(1,017)
1
(673)
(839)
1,512
(2,509)
65
(780)
— (4,220)
—
(89)
(3)
(2,054)
—
(3)
(491)
(130)
(456)
(18)
(9)
700
(751)
(65)
500
40
—
—
8
(1)
(269)
(42)
583
(2,278)
35
(806)
—
—
(188)
(4)
(8)
84
511
595
(7,375)
—
(2,700)
(2)
1,295
595
$
804 $ 1,295 $
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
In millions
BALANCE, JANUARY 1,
2020
Adoption of ASU 2016-13
measurement of credit losses
on financial instruments
Issuance of stock for various
plans, net
Repurchase of stock
Dividends ($2.050 per share)
Transactions of equity
method investees
Transactions with
noncontrolling interest
holders
Comprehensive income (loss)
BALANCE, DECEMBER 31,
2020
Issuance of stock for various
plans, net
Repurchase of stock
Dividends ($2.000 per share)
Transactions of equity
method investees
Divestiture of noncontrolling
interests
Comprehensive income (loss)
BALANCE, DECEMBER 31,
2021
Issuance of stock for
various plans, net
Repurchase of stock
Dividends ($1.850 per
share)
Comprehensive income
(loss)
BALANCE, DECEMBER 31,
2022
Common
Stock
Issued
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Common
Stock
Held In
Treasury,
At Cost
Total
International
Paper
Shareholders’
Equity
Noncontrolling
Interests
Total
Equity
$
449 $ 6,297 $
8,408 $
(4,739) $
2,702 $
7,713 $
5 $ 7,718
—
—
—
—
—
—
—
—
(8)
—
—
36
—
—
(2)
—
—
(818)
—
—
482
—
—
—
—
—
—
397
—
(96)
42
—
—
—
—
449
6,325
8,070
(4,342)
2,648
—
—
—
(793)
—
—
—
—
—
—
—
—
54
—
—
18
—
—
—
—
—
—
—
(89)
839
—
—
—
—
1,752
903
449
4,668
9,029
(1,666)
3,398
—
—
—
—
57
—
—
—
—
—
(678)
1,504
—
—
—
(259)
(75)
1,284
—
—
(2)
88
(42)
(818)
36
—
879
7,854
44
143
(839)
(793)
18
—
2,655
9,082
132
(1,284)
(678)
1,245
—
—
—
—
—
9
—
14
(1)
—
—
—
—
(2)
88
(42)
(818)
36
9
879
7,868
43
143
(839)
(793)
18
(13)
(13)
—
—
—
2,655
9,082
132
— (1,284)
—
—
(678)
1,245
$
449 $ 4,725 $
9,855 $
(1,925) $
4,607 $
8,497 $
— $ 8,497
Sylvamo Corporation spin-off
— (1,729)
1,773
—
The accompanying notes are an integral part of these financial statements.
52
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 SUMMARY OF BUSINESS AND
SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
with
products
(the "Company")
primary markets
International Paper
is a global
producer of renewable fiber-based packaging and
pulp
and
manufacturing operations in North America and
Europe and additional markets and manufacturing
operations in Latin America, North Africa and Asia.
Substantially all of our businesses have experienced,
and are likely to continue to experience, cycles
relating to available industry capacity and general
economic conditions.
FINANCIAL STATEMENTS
These consolidated financial statements have been
prepared in conformity with accounting principles
generally accepted in the United States that require
the use of management’s estimates. Actual results
could differ from management’s estimates.
Printing Papers Spinoff
On October 1, 2021,
the Company completed the
previously announced spin-off of its Printing Papers
segment along with certain mixed-use coated
paperboard and pulp businesses in North America,
France and Russia into a standalone, publicly-traded
company, Sylvamo Corporation ("Sylvamo"). The
transaction was implemented through the distribution
of shares of the standalone company to International
Paper's shareholders (the "Distribution"). As a result
of the Distribution, Sylvamo is an independent public
company that
trades on the New York Stock
Exchange under the symbol "SLVM".
In addition to the spin-off of Sylvamo, the Company
completed the sale of
its Kwidzyn, Poland mill on
August 6, 2021. All historical operating results of the
Sylvamo businesses and Kwidzyn mill have been
presented as Discontinued Operations, net of tax, in
the consolidated statement of operations. See Note 8
- Divestitures for
further details regarding the
Sylvamo spin-off and discontinued operations.
Russia-Ukraine Conflict
The military conflict between Russia and Ukraine,
including ongoing sanctions, actions by the Russian
government, and associated domestic and global
economic and geopolitical conditions, has adversely
affected and may continue to adversely affect our Ilim
joint venture and our businesses, financial condition,
results of operations and cash flows. We recently
announced that we have reached an agreement to
sell our equity interest in Ilim and have also received
from the same purchaser an indication of interest to
purchase our equity investment
in Ilim Group,
however, we cannot be certain if and when the
completion of these sales may occur. Our ability to
to various risks,
complete such sales is subject
including (i) purchasers’ inability to obtain necessary
regulatory approvals or
to finance the purchase
pursuant to the terms of the agreement, (ii) adverse
actions by the Russian government, and (iii) new or
expanded sanctions imposed by the U.S., the United
its member
Kingdom, or
the European Union or
countries. We are unable to predict the full
impact
that Russia’s ongoing invasion of Ukraine, current or
potential
future sanctions, ongoing or potential
disruptions resulting from the conflict, the changing
regulatory
negative
macroeconomic conditions arising from such conflict,
instability
supply chain disruptions, and geopolitical
and shifts, may have on us or our ability to complete
the sale of our interest in the Ilim joint venture.
environment
Russia,
in
DISCONTINUED OPERATIONS
A discontinued operation may include a component or
a group of components of the Company's operations.
A disposal of a component or a group of components
is reported in discontinued operations if the disposal
represents a strategic shift that has or will have a
major effect on the Company's operations and
financial results when the following occurs: (1) a
(or group of components) meets the
component
criteria to be classified as held for sale; (2) the
component or group of components is disposed of by
sale; or (3) the component or group of components is
disposed of other than by sale (for example, by
abandonment or in a distribution to owners in a spin-
off). For any component classified as held for sale or
disposed of by sale or other than by sale, qualifying
the
for presentation as a discontinued operation,
Company reports the results of operations of
the
discontinued operations (including any gain or loss
recognized on the disposal or loss recognized on
classification as held for sale of a discontinued
operation), less applicable income taxes (benefit), as
a separate component in the consolidated statement
of operations for current and all prior periods
presented. The Company also reports assets and
liabilities associated with discontinued operations as
separate line items on the consolidated balance
sheet.
CONSOLIDATION
The consolidated financial statements include the
accounts of International Paper and subsidiaries for
interest,
which we have a controlling financial
including variable interest entities for which we are
53
the primary beneficiary. All significant intercompany
balances and transactions are eliminated.
charges or adjust
periods. See Note 7 for further details.
their economic lives in future
EQUITY METHOD INVESTMENTS
RESTRUCTURING LIABILITIES AND COSTS
The equity method of accounting is applied for
investments when the Company has significant
influence over the investee’s operations, or when the
investee is structured with separate capital accounts.
Our material
are
described in Note 11.
equity method
investments
OTHER-THAN-TEMPORARY IMPAIRMENT
our
that
evaluates
is other than temporary including:
The Company
equity method
impairment
for other-than-temporary
investments
(OTTI) when circumstances indicate the investment
may be impaired. When a decline in fair value is
deemed to be an OTTI, an impairment is recognized
the fair value is less than the
to the extent
carrying value of the investment. We consider various
factors in determining whether a loss in value of an
investment
the
length of time and the extent to which the fair value
has been below cost, the financial condition of the
investee, and our
intent and ability to retain the
investment for a period of time sufficient to allow for
recovery of value. Management makes certain
judgments and estimates in its assessment including
but not limited to: identifying if circumstances indicate
a decline in value is other
than temporary,
expectations about operations, as well as industry,
financial, regulatory and market factors.
BUSINESS COMBINATIONS
long-lived assets,
In developing estimates of
The Company allocates the total consideration of the
assets acquired and liabilities assumed based on
the business
their estimated fair value as of
combination date.
fair
values for
including identifiable
intangible assets, the Company utilizes a variety of
inputs including forecasted cash flows, anticipated
growth rates, discount rates, estimated replacement
costs and depreciation and obsolescence factors.
Determining the fair value for specifically identified
intangible assets
lists and
developed technology involves judgment. We may
refine our estimates and make adjustments to the
assets acquired and liabilities assumed over a
measurement period, not to exceed one year. Upon
the conclusion of the measurement period or the final
determination of the values of assets acquired and
liabilities assumed, whichever comes first, any
the
subsequent
consolidated statement of operations. Subsequent
actual
the underlying business activity
supporting the specifically identified intangible assets
requiring us to record impairment
could change,
adjustments
results of
such as
customer
charged
are
to
policy
broadly
communicated
For operations to be closed or restructured, a liability
and related expense is recorded in the period when
operations cease. For termination costs associated
with employees covered by a written or substantive
plan, a liability is recorded when it is probable that
employees will be entitled to benefits and the amount
can be reasonably estimated. For termination costs
associated with employees not covered by a written
and
covering
involuntary termination benefits (severance plan), a
liability is recorded for costs to terminate employees
(one-time termination benefits) when the termination
plan has been approved and committed to by
management, the employees to be terminated have
been identified, the termination plan benefit terms are
communicated, the employees identified in the plan
have been notified and actions required to complete
the plan indicate that it is unlikely that significant
changes to the plan will be made or that the plan will
be withdrawn. The timing and amount of an accrual is
dependent upon the type of benefits granted,
the
timing of communication and other provisions that
may be provided in the benefit plan. The accounting
for each termination is evaluated individually. See
Note 6 for further details.
REVENUE RECOGNITION
Generally,
the Company recognizes revenue on a
point-in-time basis when the customer takes title to
the goods and assumes the risks and rewards for the
goods. For customized goods where the Company
has a legally enforceable right to payment
for the
goods, the Company recognizes revenue over time,
which generally is, as the goods are produced.
The Company’s revenue is primarily derived from
fixed consideration; however, we do have contract
terms that give rise to variable consideration,
primarily volume rebates, early payment discounts
and other customer refunds. The Company estimates
its volume rebates at the individual customer level
based on the most likely amount method outlined in
ASC 606. The Company estimates early payment
discounts and other customer refunds based on the
historical experience across the Company's portfolio
of customers to record reductions in revenue that is
consistent with the expected value method outlined in
these
ASC 606. Management has concluded that
methods
the
consideration the Company will be entitled to from its
customers.
in the best estimate of
result
54
The Company has elected to present all sales taxes
on a net basis, account for shipping and handling
recognize the
activities as fulfillment activities,
incremental costs of obtaining a contract as expense
when incurred if the amortization period of the asset
the Company would recognize is one year or less,
and not record interest income or interest expense
when the difference in timing of control or transfer
and customer payment is one year or less. See Note
3 for further details.
TEMPORARY INVESTMENTS
Temporary investments with an original maturity of
three months or less and money market funds with
greater than three month maturities but with the right
to redeem without notice are treated as cash
equivalents
cost, which
approximates market value. See Note 9 for further
details.
stated
and
are
at
INVENTORIES
products: materials,
Inventories are valued at the lower of cost or market
value and include all costs directly associated with
manufacturing
and
manufacturing overhead. In the United States, costs
of
raw materials and finished pulp and paper
products, are generally determined using the last-in,
first-out method. Other inventories are valued using
the first-in,
first-out or average cost methods. See
Note 9 for further details.
labor
LEASED ASSETS
the lease based on the present value of
Operating lease right of use (ROU) assets and
liabilities are recognized at the commencement date
lease
of
payments over the lease term. The Company's leases
may include options to extend or terminate the lease.
These options to extend are included in the lease
is reasonably certain that we will
term when it
exercise that option. Some leases have variable
payments, however, because they are not based on
an index or rate, they are not included in the ROU
assets and liabilities. Variable payments for
real
estate leases primarily relate to common area
maintenance, insurance, taxes and utilities. Variable
payments for equipment, vehicles, and leases within
supply agreements primarily relate to usage, repairs
and maintenance. As the implicit rate is not readily
determinable for most of the Company's leases, the
Company applies a portfolio approach using an
estimated incremental borrowing rate to determine
the initial present value of lease payments over the
lease terms on a collateralized basis over a similar
term, which is based on market and company specific
information. We use the unsecured borrowing rate
a
rate
and
collateralized rate, and apply the rate based on the
approximate
risk-adjust
that
to
55
currency of the lease, which is updated on a quarterly
basis for measurement of new lease liabilities.
Leases having a lease term of twelve months or less
are not recorded on the balance sheet and the related
lease expense is recognized on a straight-line basis
over the term of the lease. In addition, the Company
has applied the practical expedient to account for the
lease and non-lease components as a single lease
component for all of the Company's leases except for
certain gas and chemical agreements. See Note 10
for further details.
PLANTS, PROPERTIES AND EQUIPMENT
Plants, properties and equipment are stated at cost,
less accumulated depreciation. Expenditures for
betterments are capitalized, whereas normal repairs
and maintenance are expensed as incurred. The
units-of-production method of depreciation is used for
pulp and paper mills, and the straight-line method is
used for other plants and equipment. See Note 9 for
further details.
GOODWILL
year, with
Annual evaluation for possible goodwill impairment is
performed as of the beginning of the fourth quarter of
each
interim evaluation
additional
performed when management believes that it is more
that events or circumstances have
likely than not,
occurred that would result
in the impairment of a
reporting unit’s goodwill.
a
by
of
circumstances
first
events
performing
and
is less than its carrying amounts,
is less than its carrying amount, or
The Company has the option to evaluate goodwill for
qualitative
impairment
assessment
to
determine whether it is more likely than not that the
fair value of a reporting unit is less than its carrying
amount. If, after assessing the totality of events or
circumstances, the Company determines that it is not
more likely than not that the fair value of a reporting
then the
unit
quantitative goodwill impairment test is not required to
be performed. If the Company determines that it is
more likely than not that the fair value of a reporting
the
unit
Company does not elect the option to perform an
is
initial qualitative assessment,
goodwill
required
the
impairment
Company estimates the fair value of its reporting unit
using a weighted approach based on discounted
future cash flows, market multiples and transaction
multiples. The determination of fair value using the
discounted cash flow approach requires management
to make significant estimates and assumptions
related to forecasts of
future revenues, operating
profit margins, and discount rates. The determination
of fair value using market multiples and transaction
multiples requires management to make significant
In performing this evaluation,
the Company
perform the
quantitative
test.
to
if
assumptions
related to revenue multiples and
adjusted earnings before interest, taxes, depreciation,
and amortization ("EBITDA") multiples. For reporting
units whose carrying amount
their
estimated fair value, the reporting unit will record an
impairment charge by the amount that the carrying
amount exceeds the reporting unit's fair value, not to
exceed the total amount of goodwill allocated to the
reporting unit.
is in excess of
IMPAIRMENT OF LONG-LIVED ASSETS
of
or
events
changes
occurrence
Long-lived assets are reviewed for impairment upon
the
in
circumstances that indicate that the carrying value of
the assets may not be recoverable. A recoverability
test
is performed by comparing the undiscounted
cash flows to carrying value of the assets. The inputs
related to the undiscounted cash flows requires
judgments as to whether assets are held and used or
held for sale, the weighting of operational alternatives
being considered by management and estimates of
the amount and timing of expected future cash flows
from the use of the long-lived assets generated by
their use.
is less than the
undiscounted cash flows, the fair value of the assets
is compared to the carrying value to determine if they
are impaired. We estimate fair value using discounted
cash flows and other valuation techniques as needed.
Impaired assets are recorded at their estimated fair
value.
the carrying amount
If
INCOME TAXES
International Paper uses the asset and liability
method of accounting for
income taxes whereby
deferred income taxes are recorded for the future tax
consequences attributable to differences between the
financial statement and tax bases of assets and
liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply
to taxable income in the years in which those
temporary differences are expected to be recovered
or settled. Deferred tax assets and liabilities are
remeasured to reflect new tax rates in the periods
rate changes are enacted.
International Paper records its global
tax provision
based on the respective tax rules and regulations for
the jurisdictions in which it operates. Where the
Company believes that a tax position is supportable
for income tax purposes, the item is included in its
income tax returns. Where treatment of a position is
uncertain,
liabilities are recorded based upon the
Company’s evaluation of the “more likely than not”
outcome considering technical merits of the position
based on specific tax regulations and facts of each
matter. Changes to recorded liabilities are only made
when an identifiable event occurs that changes the
likely outcome, such as settlement with the relevant
56
tax authority, the expiration of statutes of limitation for
the subject tax year, change in tax laws, or recent
court cases that are relevant to the matter. Accrued
interest related to these uncertain tax positions is
recorded in our consolidated statement of operations
in Interest expense, net.
The judgments and estimates made by the Company
are based on management’s evaluation of
the
technical merits of a matter, assisted as necessary by
consultation with outside consultants, historical
experience and other assumptions that management
believes are appropriate and reasonable under
current circumstances. Actual
these
matters may differ from recorded estimated amounts,
resulting in adjustments that could materially affect
future financial statements. See Note 13 for further
details.
resolution of
Valuation allowances are recorded to reduce deferred
tax assets when it is more likely than not that a tax
benefit will not be realized. Significant judgment is
required in assessing the need for and magnitude of
appropriate valuation allowances against deferred tax
assets. This assessment
is completed by tax
jurisdiction and relies on both positive and negative
evidence available, with significant weight placed on
recent financial results. Cumulative reported pre-tax
income is considered objectively verifiable positive
evidence of our ability to generate positive pre-tax
income in the future. In accordance with GAAP, when
there is a recent history of pre-tax losses, there is
little or no weight placed on forecasts for purposes of
assessing the recoverability of our deferred tax
assets. When necessary, we use systematic and
logical methods to estimate when deferred tax
liabilities will reverse and generate taxable income
and when deferred tax assets will
reverse and
generate tax deductions. Assumptions, judgment, and
the use of estimates are required when scheduling
the reversal of deferred tax assets and liabilities, and
the exercise is inherently complex and subjective.
The realization of
these assets is dependent on
generating future taxable income, as well as
implementation of various tax planning
successful
strategies.
International Paper uses the flow-through method to
account for investment tax credits earned on eligible
open-loop biomass facilities and combined heat and
power system expenditures. Under this method, the
investment tax credits are recognized as a reduction
to income tax expense in the year they are earned
rather than a reduction in the asset basis.
ENVIRONMENTAL REMEDIATION COSTS
remediation
Costs associated with environmental
obligations are accrued when such costs are
The Company adopted the provisions of
this
guidance in 2022. We analyzed the government
assistance received by the Company and determined
that the amounts received were not material to the
Company's consolidated financial statements and
related disclosures.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT
YET ADOPTED
Reference Rate Reform
In March 2020,
the FASB issued ASU 2020-04,
"Reference Rate Reform (Topic 848): Facilitation of
the Effects of Reference Rate Reform on Financial
Reporting." This guidance provides companies with
optional guidance to ease the potential accounting
burden associated with transitioning away from
reference rates that are expected to be discontinued.
This guidance is effective upon issuance and
generally can be applied through December 31, 2024.
The Company will apply the amendments in this
update to account for contract modifications due to
changes in reference rates once those occur. We do
these amendments to have a material
not expect
impact on our consolidated financial statements and
related disclosures.
Liabilities - Supplier Finance Programs
In September 2022, the FASB issued ASU 2022-04,
"Liabilities - Supplier Finance Programs (Subtopic
405-50): Disclosure of Supplier Finance Program
Obligations." This guidance requires a business entity
operating as a buyer in a supplier finance agreement
to disclose qualitative and quantitative information
about its supplier finance programs. This guidance is
effective for annual reporting periods beginning after
December 15, 2022, and interim periods within those
this guidance to have a
years. We do not expect
material
consolidated financial
impact on our
statements. We continue to evaluate the disclosure
requirements regarding supplier
finance programs
upon adoption.
probable and reasonably estimable. Such accruals
are adjusted as further
information develops or
circumstances change. Costs of future expenditures
for
are
discounted to their present value when the amount
and timing of expected cash payments are reliably
determinable. See Note 14 for further details.
environmental
remediation
obligations
TRANSLATION OF FINANCIAL STATEMENTS
Balance sheets of
international operations are
translated into U.S. dollars at year-end exchange
rates, while statements of operations are translated at
average rates. Adjustments resulting from financial
translations are included as cumulative
statement
other
translation
comprehensive income (loss).
in Accumulated
adjustments
FAIR VALUE MEASUREMENTS
The guidance for
fair value measurements and
disclosures sets out a fair value hierarchy that groups
fair value measurement inputs into the following three
classifications:
Level 1: Quoted market prices in active markets for
identical assets or liabilities.
Level 2: Observable market-based inputs other than
quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly.
Level 3: Unobservable inputs for the asset or liability
reflecting the reporting entity’s own assumptions or
external inputs from inactive markets.
Transfers between levels are recognized at the end of
the reporting period.
NOTE 2 RECENT ACCOUNTING DEVELOPMENTS
Other than as described below, no new accounting
pronouncement issued or effective during the fiscal
year has had or is expected to have a material impact
on the consolidated financial statements.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Government Assistance
In November 2021, the FASB issued ASU 2021-10,
"Government Assistance (Topic 832): Disclosures by
Business Entities about Government Assistance."
This guidance requires a business entity to provide
certain disclosures around assistance received from
governments. This guidance is effective for annual
reporting periods beginning after December 15, 2021.
57
NOTE 3 - REVENUE RECOGNITION
DISAGGREGATED REVENUE
Reportable Segments
Primary Geographical Markets (a)
United States
EMEA
Pacific Rim and Asia
Americas, other than U.S.
Total
Operating Segments
North American Industrial Packaging
EMEA Industrial Packaging
Global Cellulose Fibers
Intrasegment Eliminations
Corporate & Intersegment Sales
Total
2022
Industrial
Packaging
Global
Cellulose
Fibers
Corporate &
Intersegment
Total
$
14,970
$
3,032
$
480
$
18,482
1,572
46
863
121
74
—
—
3
—
1,693
123
863
17,451
$
3,227
$
483
$
21,161
16,011
$
— $
— $
16,011
$
$
1,572
—
(132)
—
—
3,227
—
—
$
17,451
$
3,227
$
—
—
—
483
483
1,572
3,227
(132)
483
$
21,161
(a) Net sales are attributed to countries based on the location of the reportable segment making the sale.
Reportable Segments
Primary Geographical Markets (a)
United States
EMEA
Pacific Rim and Asia
Americas, other than U.S.
Total
Operating Segments
North American Industrial Packaging
EMEA Industrial Packaging
Global Cellulose Fibers
Intrasegment Eliminations
Corporate & Intersegment Sales
Total
2021
Industrial
Packaging
Global
Cellulose
Fibers
Corporate &
Intersegment
Total
$
14,006
$
2,510
$
253
$
16,769
1,506
59
755
109
113
—
(4)
35
21
1,611
207
776
16,326
$
2,732
$
305
$
19,363
14,944
$
— $
— $
14,944
$
$
1,508
—
(126)
—
—
2,732
—
—
$
16,326
$
2,732
$
—
—
—
305
305
1,508
2,732
(126)
305
$
19,363
(a) Net sales are attributed to countries based on the location of the reportable segment making the sale.
58
Reportable Segments
Primary Geographical Markets (a)
United States
EMEA
Pacific Rim and Asia
Americas, other than U.S.
Total
Operating Segments
North American Industrial Packaging
EMEA Industrial Packaging
Brazilian Industrial Packaging
Global Cellulose Fibers
Intrasegment Eliminations
Corporate & Intersegment Sales
Total
2020
Industrial
Packaging
Global
Cellulose
Fibers
Corporate &
Intersegment
Total
12,770
1,309
57
764
2,212
90
91
—
196
(4)
55
25
15,178
1,395
203
789
14,900
$
2,393
$
272
$
17,565
13,552
$
— $
— $
13,552
$
$
1,317
148
—
(117)
—
—
—
2,393
—
—
$
14,900
$
2,393
$
—
—
—
—
272
272
1,317
148
2,393
(117)
272
$
17,565
(a) Net sales are attributed to countries based on the location of the reportable segment making the sale.
REVENUE CONTRACT BALANCES
A contract asset
is created when the Company
recognizes revenue on its customized products prior
to having an unconditional right to payment from the
customer, which generally does not occur until title
and risk of loss passes to the customer.
A contract liability is created when customers prepay
for goods prior to the Company transferring those
goods to the customer. The contract
liability is
reduced once control of the goods is transferred to
the customer. The majority of our
customer
prepayments are received during the fourth quarter
each year
for goods that will be transferred to
customers over the following twelve months. Current
liabilities of $38 million and $27 million are included in
Other
accompanying
consolidated balance sheet as of December 31, 2022
and 2021, respectively. During the second quarter of
2021, the Company also recorded a contract liability
of $115 million related to the April 2021 acquisition
disclosed in Note 7 - Acquisitions. The balance of this
contract liability was $99 million and $107 million at
December 31, 2022 and 2021, respectively, and is
recorded in Other current
liabilities and Other
Liabilities in the accompanying consolidated balance
sheet.
liabilities
current
the
in
The difference between the opening and closing
balances of
the Company's contract assets and
contract liabilities primarily results from the difference
between the price and quantity at comparable points
in time for goods which we have an unconditional
59
to payment or receive prepayment
right
customer, respectively.
from the
PERFORMANCE
JUDGMENTS
OBLIGATIONS
AND
SIGNIFICANT
principal
business
International Paper's
to
manufacture and sell fiber-based packaging and pulp
goods. As a general rule, none of our businesses
provide equipment
installation or other ancillary
services outside of producing and shipping packaging
and pulp products to customers.
is
The nature of
the Company's contracts can vary
based on the business, customer type and region;
instances it is International Paper's
however, in all
customary business practice to receive a valid order
from the customer, in which each parties' rights and
related payment terms are clearly identifiable.
Contracts or purchase orders with customers could
include a single type of product or it could include
multiple types/grades of products. Regardless,
the
contracted price with the customer is agreed to at the
level outlined in the customer
individual product
contracts or purchase orders. The Company does not
bundle prices; however, we do negotiate with
customers on pricing and rebates for
the same
products based on a variety of factors (e.g. level of
location, etc.).
contractual volume, geographical
Management
prices
has
negotiated with each individual
customer are
representative of the stand-alone selling price of the
product.
concluded
that
the
NOTE 4 EARNINGS PER SHARE ATTRIBUTABLE
TO INTERNATIONAL PAPER COMPANY
COMMON SHAREHOLDERS
Basic earnings per share is computed by dividing
earnings by the weighted average number of
common shares outstanding. Diluted earnings per
share is computed assuming that all potentially
dilutive securities were converted into common
shares.
There are no adjustments required to be made to net
income for purposes of computing basic and diluted
earnings per share.
A reconciliation of
the amounts included in the
computation of basic earnings (loss) per share from
continuing operations, and diluted earnings (loss) per
share from continuing operations is as follows:
In millions, except per share amounts
2022
2021
2020
Earnings (loss) from continuing
operations attributable to
International Paper common
shareholders
Weighted average common shares
outstanding
Effect of dilutive securities:
$ 1,741
$ 811
$ 182
363.5
389.4
393.0
Restricted performance share plan
3.5
3.0
2.7
Weighted average common shares
outstanding – assuming dilution
Basic earnings (loss) per share
from continuing operations
Diluted earnings (loss) per share
from continuing operations
367.0
392.4
395.7
$ 4.79
$ 2.08
$ 0.46
$ 4.74
$ 2.07
$ 0.46
NOTE 5 OTHER COMPREHENSIVE INCOME
The following table presents changes in Accumulated Other Comprehensive Income (Loss) (AOCI), net of tax,
reported in the consolidated financial statements for the years ended December 31:
In millions
Defined Benefit Pension and Postretirement Adjustments
Balance at beginning of period
Other comprehensive income (loss) before reclassifications
Reclassification related to Sylvamo Corporation spin-off
Amounts reclassified from accumulated other comprehensive income (loss)
Balance at end of period
Change in Cumulative Foreign Currency Translation Adjustments
Balance at beginning of period
Other comprehensive income (loss) before reclassifications
Reclassification related to Sylvamo Corporation spin-off
Amounts reclassified from accumulated other comprehensive income (loss)
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest
Balance at end of period
Net Gains and Losses on Cash Flow Hedging Derivatives
Balance at beginning of period
Other comprehensive income (loss) before reclassifications
Reclassification related to Sylvamo Corporation spin-off
Amounts reclassified from accumulated other comprehensive income (loss)
Balance at end of period
2022
2021
2020
$
(962) $
(1,880) $
(2,277)
(319)
—
86
713
80
125
227
—
170
(1,195)
(962)
(1,880)
(694)
(38)
—
10
—
(2,457)
(115)
1,692
184
2
(2,465)
(319)
—
327
—
(722)
(694)
(2,457)
(10)
—
—
2
(8)
(5)
3
1
(9)
(10)
3
(34)
—
26
(5)
Total Accumulated Other Comprehensive Income (Loss) at End of Period
$
(1,925) $
(1,666) $
(4,342)
60
Reclassifications out of AOCI for the three years ended December 31 were as follows:
In millions
Defined benefit pension and postretirement items:
Prior-service costs
Actuarial gains/(losses)
Total pre-tax amount
Tax (expense)/benefit
Net of tax
Reclassification related to Sylvamo Corporation spin-off
Total, net of tax
Change in cumulative foreign currency translation
adjustments:
Business divestiture
Tax (expense)/benefit
Net of tax
Reclassification related to Sylvamo Corporation spin-off
Total, net of tax
Net gains and losses on cash flow hedging
derivatives:
Cash flow hedges
Total pre-tax amount
Tax (expense)/benefit
Net of tax
Reclassification related to Sylvamo Corporation spin-off
Total, net of tax
Amount Reclassified from Accumulated
Other Comprehensive Income (Loss)
2022
2021
2020
Location of Amount
Reclassified from AOCI
$
(23) $
(20) $
(19) (a) Non-operating pension expense
(91)
(114)
28
(86)
—
(86)
(10)
—
(10)
—
(10)
(3)
(3)
1
(2)
—
(2)
(146)
(166)
41
(125)
(80)
(205)
(184)
—
(184)
(1,692)
(1,876)
11
11
(2)
9
(1)
8
(207) (a) Non-operating pension expense
(226)
56
(170)
—
(170)
(327)
—
(327)
—
(327)
Paid-in Capital
Net (gains) losses on sales of
equity method investments,
Discontinued Operations, net of
taxes and Net (gains) losses on
sales and impairment of
businesses
Paid-in Capital
Cost of products sold,
Discontinued operations, net of
taxes, and Interest expense, net
(39) (b)
(39)
13
(26)
—
(26)
Paid-in Capital
Total reclassifications for the period, net of tax
$
(98) $
(2,073) $
(523)
(a) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost (see Note
19 for additional details).
(b) This accumulated other comprehensive income (loss) component is included in our derivatives and hedging activities (see Note 17 for
additional details).
61
NOTE 6 RESTRUCTURING AND OTHER
CHARGES, NET
2022: During 2022, restructuring and other charges,
net, totaling $89 million before taxes were recorded.
The charges included:
In millions
Early debt extinguishment costs (see Note 16)
Other restructuring items
Total
2022
93
(4)
89
$
$
2021: During 2021, restructuring and other charges,
net, totaling $509 million before taxes were recorded.
The charges included:
In millions
Cash and temporary investments
$
Accounts and notes receivable
Inventories
Plants, properties and equipment
Goodwill
Intangible assets
Total assets acquired
Short-term debt
Accounts payable and accrued liabilities
Other current liabilities
Long-term debt
Deferred income taxes
Total liabilities assumed
Net assets acquired
$
5
10
3
50
23
13
104
2
4
2
1
12
21
83
In millions
Early debt extinguishment costs (see Note 16)
Building a Better IP (a)
EMEA packaging restructuring (b)
Other restructuring items
Total
2021
461
29
12
7
509
$
$
Pro forma information has not been included as it is
impracticable to obtain the information due to the lack
of availability of historical U.S. GAAP financial data.
The results of the operations of these businesses do
not have a material effect on the Company's
consolidated results of operations.
(a) Severance related to our Building a Better IP initiative which is
focused on value creation through streamlined operations and
process optimization. The majority of the severance charges
were paid in 2022.
b) Severance related to the optimization of our EMEA Packaging
business. The majority of the severance charges were paid in
2022.
2020: During 2020, restructuring and other charges,
net, totaling $195 million before taxes were recorded.
These charges included:
In millions
Early debt extinguishment costs (see Note 16)
Other restructuring items
Total
2020
196
(1)
195
$
$
NOTE 7 ACQUISITIONS
2021: On April 1, 2021, the Company closed on the
previously announced acquisition of two box plants
located in Spain. The total purchase consideration,
inclusive of working capital adjustments, was
approximately €71 million (approximately $83 million
based on the April 1, 2021 exchange rate).
The following table summarizes the final fair value
assigned to assets and liabilities acquired as of April
1, 2021:
The Company has accounted for
the above
acquisition under ASC 805, "Business Combinations"
and the results of operations have been included in
International Paper's financial statements beginning
with the date of acquisition.
In the second quarter,
the Company received a
2021:
In April 2021,
in a U.S-based corrugated
noncontrolling interest
packaging producer.
the
Company recorded its investment of $115 million
based on the fair value of the noncontrolling interest,
and a corresponding contract liability that is amortized
over 15 years. The Company is party to various
agreements with the entity which includes a
containerboard supply agreement. The Company is
its interest as an equity method
accounting for
investment.
NOTE 8 DIVESTITURES
PRINTING PAPERS SPIN-OFF
2021: On October 1, 2021, the Company completed
the previously announced spin-off of
its Printing
Papers segment along with certain mixed-use coated
paperboard and pulp businesses in North America,
France and Russia into a standalone, publicly-traded
company, Sylvamo Corporation. The transaction was
implemented through the distribution of shares of the
standalone
International Paper's
to
shareholders (the "Distribution"). As a result of the
Distribution, Sylvamo Corporation is an independent
public company that trades on the New York Stock
Exchange under the symbol "SLVM".
company
62
The Distribution was made to the Company's
stockholders of record as of the close of business on
September 15, 2021 (the "Record Date"), and such
stockholders received one share of Sylvamo common
stock for every 11 shares of
International Paper
common stock held as of the close of business on the
Record Date. The Company retained 19.9% of the
shares of Sylvamo at the time of the separation and
this retained investment is discussed further in Note 9
- Supplementary Financial Statement
Information.
The spin-off was tax-free for the Company and its
shareholders for U.S. federal income tax purposes.
a
of
that
and
other
govern
assets,
liabilities
including
transition
agreements
In connection with the Distribution, on September 29,
the Company and Sylvamo entered into a
2021,
separation and distribution agreement as well as
various
the
relationships between the parties following the
Distribution,
services
agreement, a tax matters agreement and an
employee matters agreement. These agreements
provided for the allocation between the Company and
Sylvamo
obligations
the
attributable to periods prior
Distribution and govern certain relationships between
the Company and Sylvamo after the Distribution. The
Company was also party
to various ongoing
operational agreements with Sylvamo under which it
sold fiber, paper and other products. Related party
sales under these agreements were $630 million and
$185 million for the year ended December 31, 2022
the third
and 2021, respectively. As of
quarter 2022,
the Company no longer had an
ownership interest in Sylvamo and as such will no
longer
-
Supplementary Financial Statement
Information for
further discussion.
party. See Note
to, at and after
the end of
related
be
9
a
All historical operating results of
the Sylvamo
businesses, as well as the results of our Kwidzyn,
that was sold on August 6, 2021, are
Poland mill
presented as Discontinued Operations, net of tax, in
the consolidated statement of operations. Kwidzyn
was previously part of the Printing Papers business
prior to its sale in August 2021. See the Kwidzyn Mill
section below for further details regarding this sale.
The following summarizes the major classes of line
items comprising Earnings (Loss) Before Income
Taxes and Equity Earnings reconciled to Discontinued
Operations, net of
related to the Sylvamo
Corporation businesses and Kwidzyn for all prior
periods presented in the consolidated statement of
operations:
tax,
63
In millions
Net Sales
Costs and Expenses
Cost of products sold
Selling and administrative expenses
Depreciation, amortization and cost of
timber harvested
Distribution expenses
Taxes other than payroll and income
taxes
Net (gains) losses on sales of fixed
assets
Net (gains) losses on sales and
impairments of businesses
Interest expense, net
Earnings (Loss) Before Income Taxes
and Equity Earnings
Income tax provision (benefit)
2021
2020
$
2,417 $ 3,015
1,508
2,036
224
113
229
24
(86)
(351)
(19)
775
145
165
196
264
35
—
—
(2)
321
69
Discontinued Operations, Net of Taxes
$
630 $
252
The following summarizes the total cash provided by
operations and total cash used for investing activities
related to the Sylvamo Corporation businesses and
Kwidzyn and included in the consolidated statement
of cash flows:
In millions
Cash Provided by (Used For) Operating
Activities
Cash Provided by (Used For) Investment
Activities
2021
2020
$
$
290 $
463
757 $
(111)
In anticipation of the spin-off, Sylvamo incurred $1.5
billion in debt during the third quarter of 2021 with the
proceeds used for a distribution to the Company and
other expenses associated with the transaction. The
Company was an obligor of the debt prior to the spin-
off as Sylvamo was a wholly-owned subsidiary.
Subsequent to the distribution of the net assets, the
Company was no longer an obligor of the Sylvamo
debt. The $1.5 billion of borrowings was comprised of
$450 million of 7.00% senior unsecured notes due
2029 issued in September 2021.
It was also
comprised of the senior secured credit facility that
Sylvamo entered into in September 2021 which
consisted of $450 million of borrowings related to its
term loan “B” facility, $520 million
of borrowings
related to its term loan “F” facility, and the $100
million draw on its revolving credit facility which had a
capacity of $450 million. Additionally, at the time of
the spin-off
the
Company distributed $130 million to Sylvamo. The
debt
Sylvamo
Corporation are classified as financing activities in the
accompanying consolidated statement of cash flows.
in the fourth quarter of 2021,
distribution
issuance
and
to
KWIDZYN MILL
2021: On August 6, 2021, the Company completed
the sale of its Kwidzyn, Poland mill for €669 million
(approximately $794 million using the July 31, 2021
exchange rate) in cash. The business included the
in Kwidzyn and supporting
pulp and paper mill
functions. During the third quarter of 2021,
the
Company recorded a net gain of $360 million ($350
million after taxes) including a gain of $404 million
($394 million after taxes) related to the sale of net
assets and a loss of $44 million (before and after
taxes)
related to the cumulative foreign currency
translation loss. During the fourth quarter of 2021, the
Company incurred $9 million ($6 million after taxes)
of costs related to the sale of Kwidzyn. All historical
operating results for Kwidzyn have been presented as
Discontinued Operations,
the
of
consolidated statement of operations.
tax,
net
in
OLMUKSAN INTERNATIONAL PAPER
to Mondi Group
2021: On May 31, 2021, the Company completed the
sale of its 90.38% ownership interest in Olmuksan
International Paper, a corrugated packaging business
in Turkey,
€66 million
(approximately $81 million using the May 31, 2021
exchange rate). During the twelve months ended
December 31, 2021, the Company recorded a net
gain of $4 million ($2 million after taxes) related to the
business working capital adjustment and cumulative
foreign currency translation loss.
for
In conjunction with the announced agreement in the
fourth quarter of 2020, a determination was made that
the current book value of the Olmuksan International
Paper disposal group exceeded its estimated fair
value of $79 million which was based on the agreed
upon transaction price. As a result, a preliminary
charge of $123 million (before and after taxes) was
recorded during the fourth quarter of 2020.
BRAZIL PACKAGING
2020: On October 14, 2020, the Company closed the
previously announced sale of its Brazilian Industrial
Packaging business for R$330 million ($58.5 million
U.S. dollars), with R$280 million ($49.6 million U.S.
dollars) paid at closing and R$50 million ($8.9 million
U.S. dollars) to be paid one year from closing. This
business included three containerboard mills and four
box plants and the agreement followed International
Paper's previously announced strategic review of the
Brazilian Industrial Packaging business.
In conjunction with the announced agreement, net
pre-tax charges of $347 million ($340 million after
taxes) were recorded in 2020. These charges
included $327 million related to the cumulative foreign
currency translation loss and a $20 million loss
related the write down of the long-lived assets of the
Brazilian Industrial Packaging business to their
estimated fair value. These charges are included in
losses on sales and impairments of
Net
(gains)
businesses
consolidated
in
statement of operations and is included in the results
for the Industrial Packaging segment.
accompanying
the
NOTE 9 SUPPLEMENTARY FINANCIAL
STATEMENT INFORMATION
TEMPORARY INVESTMENTS
Temporary investments with an original maturity of
three months or less and money market funds with
greater than three month maturities but with the right
to redeem without notices are treated as cash
equivalents and are stated at cost. Temporary
investments totaled $690 million and $1.1 billion at
December 31, 2022 and 2021, respectively.
ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable, net, by classification
were:
In millions at December 31
2022
2021
Accounts and notes receivable:
Trade (less allowances of $31 in 2022 and
$34 in 2021)
Other
Total
INVENTORIES
$ 3,064 $ 3,027
220
205
$ 3,284 $ 3,232
In millions at December 31
Raw materials
2022
2021
$
267 $
245
Finished pulp and packaging products
1,071
1,014
Operating supplies
Other
Inventories
516
88
486
69
$ 1,942 $ 1,814
International Paper’s U.S.
The last-in, first-out inventory method is used to value
most of
inventories.
Approximately 76% of total raw materials and finished
products inventories were valued using this method.
The last-in,
inventory reserve was $282
million and $195 million at December 31, 2022 and
2021, respectively.
first-out
CURRENT INVESTMENTS
the 2021 spin-off of Sylvamo,
As a result of
the
Company retained 19.9% of the shares of Sylvamo
with the intent to monetize its investment and provide
additional proceeds to the Company. In the second
quarter 2022,
the Company exchanged 4,132,000
shares of Sylvamo common stock owned by the
for an
Company in exchange and as repayment
64
approximately $144 million term loan obligation which
resulted in the reversal of a $31 million deferred tax
liability due to the tax-free exchange of the Sylvamo
Corporation common stock. In the third quarter 2022,
the Company exchanged the remaining 4,614,358
shares of Sylvamo common stock owned by the
Company in exchange for $167 million and as partial
repayment of a $210 million term loan obligation. This
also resulted in the reversal of a $35 million deferred
tax liability due to the tax-free exchange of
the
Sylvamo Corporation common stock. See Note 16 -
Debt and Lines of Credit for further discussion.
As of the end of the third quarter 2022, the Company
no longer had an ownership interest in Sylvamo. The
Company's investment
in Sylvamo was valued at
$245 million at December 31, 2021, and was
recorded in Current investments in the accompanying
consolidated balance sheet. The Company accounted
for its ownership interest in Sylvamo at fair value as
an investment in equity securities.
PLANTS, PROPERTIES AND EQUIPMENT
In millions at December 31
2022
2021
Pulp and packaging facilities
$ 27,773 $ 27,025
Other properties and equipment
Gross cost
Less: Accumulated depreciation
1,029
972
28,802
27,997
18,371
17,556
Amounts related to interest were as follows:
In millions
Interest expense
Interest income
Capitalized interest costs
2022
2021
2020
$
403 $
430 $
78
18
93
12
597
151
31
ASSET RETIREMENT OBLIGATIONS
At December 31, 2022 and 2021, we had recorded
liabilities
$107 million,
respectively, related to asset retirement obligations.
$105 million
and
of
In connection with potential
future closures or
redesigns of certain production facilities, it is possible
that the Company may be required to take steps to
remove certain materials
from these facilities.
Applicable regulations and standards provide that the
removal of certain materials would only be required if
the facility were to be demolished or underwent major
renovations. At this time, any such obligations have
an indeterminate settlement date, and the Company
believes that adequate information does not exist to
apply
to
estimate any such potential obligations. Accordingly,
the Company does not record a liability for such
remediation until a decision is made that allows
reasonable estimation of
such
remediation.
expected-present-value
the timing of
technique
an
Plants, properties and equipment, net
$ 10,431 $ 10,441
NOTE 10 LEASES
leases various real estate,
International Paper
including certain operating facilities, warehouses,
office space and land. The Company also leases
material handling equipment, vehicles, and certain
other equipment. The Company's leases have
remaining lease terms of up to 31 years.
COMPONENTS OF LEASE EXPENSE
In millions
2022
2021
2020
Operating lease costs, net
$
153 $
138 $
132
Variable lease costs
Short-term lease costs, net
Finance lease cost
Amortization of lease assets
Interest on lease liabilities
39
57
11
3
40
53
11
3
43
46
10
3
Total lease cost, net
$
263 $
245 $
234
Non-cash additions to plants, property and equipment
included within accounts payable were $185 million,
$106 million and $41 million at December 31, 2022,
2021 and 2020, respectively.
in
capital
projects
invested
Amounts
the
accompanying consolidated statement of cash flows
are presented net of
insurance recoveries of
$26 million, $17 million and $42 million received
during the years ended December 31, 2022, 2021
and 2020, respectively.
in
Annual straight-line depreciable lives generally are,
for buildings - 20 to 40 years, and for machinery and
equipment - 3 to 20 years. Depreciation expense was
$996 million for the year ended December 31, 2022
and $1.1 billion for each of
the years ended
December 31, 2021 and 2020. Cost of products sold
excludes depreciation and amortization expense.
INTEREST
Interest payments of $380 million, $473 million and
$682 million were made during the years ended
December 31, 2022, 2021 and 2020, respectively.
65
SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED
TO LEASES
MATURITY OF LEASE LIABILITIES
Classification
2022
2021
In millions
Operating
Leases
Financing
Leases
Total
In millions
Assets
Operating
lease assets
Right of use assets
$
424 $
365
Finance lease
assets
Plants, properties and
equipment, net (a)
49
57
Total leased
assets
Liabilities
Current
$
473 $
422
Operating
Other current liabilities $
147 $
132
Finance
Noncurrent
Operating
Notes payable and
current maturities of
long-term debt
Long-term lease
obligations
Finance
Long-term debt
Total lease
liabilities
10
10
283
49
236
56
2023
2024
2025
2026
2027
Thereafter
Total lease
payments
Less imputed
interest
Present value of
lease liabilities
$
157 $
113
75
48
30
36
459
29
13 $
11
10
9
8
26
77
18
170
124
85
57
38
62
536
47
$
430 $
59 $
489
NOTE 11 EQUITY METHOD INVESTMENTS
The Company accounts for the following investments
under the equity method of accounting.
$
489 $
434
ILIM S.A. ("Ilim")
(a) Finance leases are recorded net of accumulated amortization
of $59 million and $51 million at December 31, 2022 and
2021, respectively.
LEASE TERM AND DISCOUNT RATE
In millions
2022
2021
Weighted average remaining lease
term (years)
Operating leases
Finance leases
4.1 years
8.4 years
4.0 years
9.1 years
Weighted average discount rate
Operating leases
Finance leases
2.96 %
4.57 %
2.12 %
4.50 %
SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO
LEASES
In millions
2022
2021
2020
Cash paid for amounts included
in the measurement of lease
liabilities
Operating cash flows related
to operating leases
Operating cash flows related
to financing leases
Financing cash flows related
to finance leases
Right of use assets obtained in
exchange for lease liabilities
Operating leases
Finance leases
$
160 $
166 $
162
3
10
4
14
5
10
221
6
156
9
179
11
The Company holds a 50% equity interest in Ilim, the
holding company for its Ilim joint venture (JV), which
has subsidiaries,
including JSC Ilim Group, whose
primary operations are in Russia. The Company
it had entered into an
recently announced that
agreement to sell its interest in Ilim to its JV partners
for $484 million. The completion of the sale is subject
to various closing conditions, including the receipt of
regulatory approvals in Russia.
The Company also received an indication of interest
from its JV partners to purchase all of the Company’s
shares (constituting a 2.39% stake) in JSC Ilim Group
for $24 million, on terms and conditions to be agreed.
The Company intends to pursue an agreement to sell
the JSC Ilim Group shares, and to divest other non-
material residual interests associated with Ilim, to its
JV partners.
In conjunction with the entry into the announced
agreement, a determination was made that the book
value of the Ilim and JSC Ilim Group investments plus
associated cumulative translation losses, exceeded
fair value, based upon the agreed upon transaction
price for Ilim and the offer price for JSC Ilim Group.
As a result, an other than temporary impairment of
$533 million was recorded in the fourth quarter of
2022 to write down these investments to fair value.
The impairment charge included $375 million of
foreign currency cumulative translation adjustment
loss. As of December 31, 2022, the $375 million of
cumulative translation adjustment
loss remained
within AOCI with the recognition of this loss recorded
as an offset to the investment balance.
66
also
facts
Company
evaluated
The
and
circumstances as of December 31, 2022 and
the held for sale balance sheet
concluded that
classification criteria had been met as of that date
and therefore have classified the Ilim investment
balance, net of impairment, as Assets held for sale.
the December 31, 2021 investment
Additionally,
balance has been reclassified to Long-Term Assets
Held for Sale.
All current and historical results of the Ilim investment
are presented as Discontinued Operations, net of
taxes in the consolidated statement of operations.
The Company recorded equity earnings, net of taxes,
of $296 million, $311 million, and $48 million in 2022,
2021, and 2020, respectively, for Ilim. Equity earnings
includes an after-tax foreign exchange (loss) gain of
$(50) million in 2020, primarily on the remeasurement
of U.S. dollar-denominated net debt. Foreign
exchange gains (losses) included in equity earnings
in 2022 and 2021, were not material. JSC Ilim Group
had no U.S. dollar-denominated debt outstanding as
of December 31, 2022. The Company received cash
dividends from the joint venture of $204 million, $154
million and $141 million in 2022, 2021 and 2020,
respectively. At December 31, 2022 and 2021, the
Company's investment in Ilim, which is recorded in
Assets held for sale in the consolidated balance
sheet, was
$557 million,
respectively, which was $403 million lower and $121
million higher,
than the Company's
proportionate share of the joint venture's underlying
net assets.
$133 million
respectively,
and
Prior to the spin-off of the Printing Papers segment on
October 1, 2021, the Company was party to a joint
marketing agreement with JSC Ilim Group, a
subsidiary of
Ilim, under which the Company
purchased, marketed and sold paper produced by
JSC Ilim Group. Purchases under this agreement
were $125 million and $174 million for the years
ended December 31, 2021 and 2020, respectively.
The joint marketing agreement was conveyed to
Sylvamo as part of
transaction on
October 1, 2021.
the spin-off
Summarized financial information for Ilim is presented
in the following tables:
Balance Sheet
In millions
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Noncontrolling interests
Income Statement
2022
2021
$
766
$
3,663
1,275
2,040
40
1,010
3,145
1,212
2,047
24
In millions
Net sales
Gross profit
2022
2021
2020
$
$
3,147
1,561
$
2,693
1,432
2,015
838
Income from
continuing operations
Net income
591
575
635
613
115
113
GRAPHIC PACKAGING INTERNATIONAL PARTNERS, LLC
The Company completed the transfer of its North American Consumer Packaging business in exchange for an initial
20.5% ownership interest (79,911,591 units) in Graphic Packaging International Partners, LLC (GPIP) in 2018. The
Company has since fully monetized its investment in GPIP with transactions beginning in the first quarter 2020
through the second quarter 2021.
Date
Transaction Type
Units
Proceeds
Pre-Tax Gain
After-Tax Gain
In millions except units
2020 First Quarter
Units exchange
15,150,784 $
250 $
33 $
2020 Third Quarter
Units exchange
17,399,414
2021 First Quarter
Units exchange and open market sale
24,588,316
250
397
2021 First Quarter
TRA (a)
2021 Second Quarter
Units exchange and open market sale
22,773,077
403
2021 Second Quarter
TRA (a)
—
33
42
64
66
25
—
25
31
48
50
(a) The TRA entitles the Company to 50% of the amount of any tax benefits projected to be realized by GPIP upon the Company's exchange of
its units. The Company made income tax payments of $310 million in 2021 as a result of the monetization of its investment in GPIP.
67
As of June 30, 2021, the Company no longer had an ownership interest in GPIP. The Company recorded equity
earnings of $4 million and $40 million for the twelve months ended December 31, 2021 and 2020, respectively. The
Company received cash dividends from GPIP of $5 million and $20 million during 2021 and 2020, respectively.
The Company's remaining equity method investments are not material.
NOTE 12 GOODWILL AND OTHER INTANGIBLES
GOODWILL
The following table presents changes in the goodwill balances as allocated to each business segment for the years
ended December 31, 2022 and 2021:
In millions
Balance as of December 31, 2020
Goodwill
Accumulated impairment losses
Currency translation and other (a)
Goodwill additions/reductions
Balance as of December 31, 2021
Goodwill
Accumulated impairment losses
Currency translation and other (a)
Impairment loss
Balance as of December 31, 2022
Goodwill
Accumulated impairment losses
Total
Industrial
Packaging
Global
Cellulose
Fibers
Total
$
$
3,411
(296)
3,115
(8)
23 (b)
3,426
(296)
3,130
(13)
(76) (c)
3,413
(372)
3,041
$
$
52
(52)
—
—
—
52
(52)
—
—
—
52
(52)
—
$
$
3,463
(348)
3,115
(8)
23
3,478
(348)
3,130
(13)
(76)
3,465
(424)
3,041
(a) Represents the effects of foreign currency translations and reclassifications.
(b) Reflects the goodwill for the acquisitions of EMEA Industrial Packaging box plants.
(c) Reflects the impairment of the EMEA Industrial Packaging reporting unit.
testing of
its
The Company performed its annual
impairments by
reporting units for possible goodwill
applying the qualitative assessment
to its North
America Industrial Packaging reporting unit and the
quantitative goodwill
to its EMEA
Industrial Packaging reporting unit as of October 1,
2022.
impairment
test
various
the current year evaluation,
assumptions,
the Company
For
and
events
assessed
circumstances that would have affected the estimated
fair value of the North America Industrial Packaging
reporting unit under the qualitative assessment and
the results of the qualitative assessments indicated
that it was not more likely than not that the fair value
of the reporting unit was less than its carrying value.
The Company also performed the quantitative
impairment test which included comparing
goodwill
the carrying amount of
the EMEA Industrial
Packaging reporting unit to its estimated fair value.
The estimated fair value of the reporting unit was
calculated using a weighted approach based on
68
to
management
discounted future cash flows, market multiples and
transaction multiples which are classified as Level 2
and Level 3 within the fair value hierarchy. The
determination of fair value using the discounted cash
flow approach requires management
to make
significant estimates and assumptions related to
forecasts of future revenues, operating profit margins,
and discount rates. The determination of fair value
using market multiples and transaction multiples
significant
requires
assumptions
related to revenue multiples and
adjusted earnings before interest, taxes, depreciation,
and amortization ("EBITDA") multiples. The results of
our quantitative goodwill
indicated
that the carrying amount exceeded the estimated fair
value of the EMEA Industrial Packaging reporting unit
and it was determined that all of the goodwill in the
reporting unit, totaling $76 million, was impaired. The
decline in the fair value of EMEA Industrial Packaging
and resulting impairment charge was due to the
impacts
negative macroeconomic
conditions, including the impacts from inflation and
the geopolitical environment to the reporting unit.
impairment
certain
make
test
of
OTHER INTANGIBLES
Identifiable intangible assets are recorded in Deferred Charges and Other Assets in the accompanying consolidated
balance sheet and comprised the following:
In millions at December 31
Customer relationships and lists
Tradenames, patents and trademarks, and
developed technology
Land and water rights
Other
Total
$
$
2022
2021
Gross
Carrying
Amount
Accumulated
Amortization
Net
Intangible
Assets
Gross
Carrying
Amount
Accumulated
Amortization
Net Intangible
Assets
490 $
303 $
187 $
493 $
273 $
170
8
23
691 $
146
2
20
471 $
24
6
3
220 $
170
8
24
695 $
131
2
21
427 $
220
39
6
3
268
The Company recognized the following amounts as amortization expense related to intangible assets:
In millions
Amortization expense related to intangible assets
2022
2021
2020
$
44 $
44 $
45
Based on current intangibles subject to amortization, estimated amortization expense for each of the succeeding
years is as follows: 2023 – $40 million, 2024 – $40 million, 2025 – $34 million, 2026 – $29 million, 2027 – $11
million, and cumulatively thereafter – $60 million.
NOTE 13 INCOME TAXES
International Paper’s earnings
The components of
from continuing operations before income taxes and
equity earnings by taxing jurisdiction were as follows:
In millions
Earnings (loss)
U.S.
Non-U.S.
2022
2021
2020
$ 1,469 $
906 $
660
42
93
(331)
Earnings (loss) from continuing
operations before income taxes
and equity earnings (losses)
$ 1,511 $
999 $
329
The Company’s deferred income tax provision
(benefit) includes a $3 million benefit, an $8 million
benefit and a $2 million benefit for 2022, 2021 and
2020, respectively, for the effect of various changes in
non-U.S. and U.S. federal and state tax rates.
International Paper made income tax payments, net
of refunds, of $345 million, $601 million and $162
million in 2022, 2021 and 2020, respectively.
The provision (benefit)
continuing
interests) by taxing jurisdiction was as follows:
for
(excluding
income taxes from
noncontrolling
operations
In millions
2022
2021
2020
Current tax provision (benefit)
U.S. federal
U.S. state and local
Non-U.S.
$
454 $
413 $
56
27
47
37
98
31
(3)
Deferred tax provision (benefit)
U.S. federal
U.S. state and local
Non-U.S.
Income tax provision (benefit)
$
$
$
$
537 $
497 $
126
(775) $
(274) $
(39)
41
(27)
(8)
(773) $
(309) $
(2)
2
50
50
(236) $
188 $
176
69
A reconciliation of
statutory U.S.
actual income tax provision follows:
income tax expense using the
income tax rate compared with the
The tax effects of significant temporary differences,
representing deferred income tax assets and liabilities
at December 31, 2022 and 2021, were as follows:
In millions
2022
2021
2020
In millions
2022
2021
Deferred income tax assets:
Postretirement benefit accruals
$
68 $
Pension obligations
Tax credits
Net operating and capital loss
carryforwards
Compensation reserves
Lease obligations
Environmental reserves
Other
Gross deferred income tax assets
Less: valuation allowance (a)
Net deferred income tax asset
Deferred income tax liabilities:
Intangibles
Investments
Right of use assets
Pension obligations
18
175
568
151
108
119
271
84
—
199
661
184
92
104
189
$
$
$
1,478 $
1,513
(677)
801 $
(708)
805
(147) $
(140)
(2)
(108)
—
(56)
(92)
(34)
Plants, properties and equipment
(1,778)
(1,776)
Forestlands, related installment sales,
and investment in subsidiary
(485)
(1,279)
Gross deferred income tax liabilities
$ (2,520) $ (3,377)
Net deferred income tax liability
$ (1,719) $ (2,572)
(a) The net change in the total valuation allowance for the years
ended December 31, 2022 and 2021 was a decrease of
$(31) million and an increase of $27 million, respectively.
The net change in the current year includes an increase
impacting the future utilization of foreign deferred tax assets
of $45 million.
Deferred income tax assets and liabilities are
recorded in the accompanying consolidated balance
sheet under the captions Deferred charges and other
assets and Deferred income taxes, respectively. The
$485 million of deferred tax liabilities for forestlands,
in
sales,
related
subsidiary is attributable to a 2007 Temple-Inland
installment sale of forestlands (see Note 15).
investment
installment
and
Earnings (loss) from
continuing
operations before income
taxes
and equity earnings
$ 1,511
$ 999
$
329
Statutory U.S. income tax rate
21 %
21 %
21 %
Tax expense (benefit) using
statutory U.S. income tax rate
State and local income taxes
Impact of rate differential on
non-U.S. permanent differences
and earnings
Foreign valuation allowance
Tax expense (benefit) on
exchange of Sylvamo shares
Adjustment to tax basis of
assets
Non-deductible business
expenses
Non-deductible impairments
Non-deductible compensation
Tax audits
Timber Monetization Audit
Settlement
U.S. federal tax rate change
Foreign derived intangible
income deduction
US tax on non-U.S. earnings
(GILTI and Subpart F)
Foreign tax credits
General business and other tax
credits
Tax expense (benefit) on equity
earnings
Other, net
317
44
1
45
(56)
—
2
16
13
6
(604)
—
(8)
27
8
210
15
5
—
—
(14)
1
—
11
9
—
—
(7)
5
(6)
69
26
29
—
—
—
4
92
11
(28)
—
7
—
6
(3)
(43)
(39)
(42)
(1)
(3)
—
(2)
8
(3)
Income tax provision (benefit) $ (236)
$ 188
$
176
Effective income tax rate
(16)%
19 %
53 %
70
A reconciliation of the beginning and ending amount
of unrecognized tax benefits for the years ended
December 31, 2022, 2021 and 2020 is as follows:
In millions
2022
2021
2020
Balance at January 1
$
(166) $
(143) $
(166)
(Additions) reductions for tax
positions related to current year
(Additions) for tax positions related
to prior years
Reductions for tax positions
related to prior years
Settlements
Expiration of statutes of
limitations
Currency translation adjustment
(7)
(13)
(10)
(10)
(23)
(10)
3
1
1
1
1
10
1
1
30
13
1
(1)
Balance at December 31
$
(177) $
(166) $
(143)
If the Company were to prevail on the unrecognized
tax benefits recorded, substantially all of the balances
at December 31, 2022, 2021 and 2020 would benefit
the effective tax rate.
income
The Company accrues interest on unrecognized tax
benefits as a component of
interest expense.
Penalties, if incurred, are recognized as a component
of
had
approximately $29 million and $21 million accrued for
the payment of estimated interest and penalties
associated with
at
unrecognized
December 31, 2022 and 2021, respectively.
expense. The Company
benefits
tax
tax
The Company is currently subject to audits in the
United States and other taxing jurisdictions around
the world. Generally, tax years 2009 through 2021
remain open and subject
to examination by the
tax authorities. The Company frequently
relevant
faces challenges regarding the amount of taxes due.
These challenges include positions taken by the
Company related to the timing, nature, and amount of
income among
deductions and the allocation of
various tax jurisdictions. Pending audit settlements
and the expiration of statute of
limitations could
reduce the uncertain tax positions by $28 million
during the next twelve months.
The Company provides for foreign withholding taxes
and any applicable U.S. state income taxes on
earnings intended to be repatriated from non-U.S.
subsidiaries, which we believe will be limited in the
future to each year's current earnings. No provision
for
these taxes on approximately $1.9 billion of
undistributed earnings of non-U.S. subsidiaries as of
December 31, 2022 has been made, as these
earnings
invested.
Determination of the amount of taxes that might be
paid on these undistributed earnings if eventually
remitted in a taxable manner is not practicable.
considered
indefinitely
are
If management decided to monetize the Company’s
foreign investments, we would recognize the tax cost
related to the excess of the book value over the tax
basis of
those investments. This would include
foreign withholding taxes and any applicable U.S.
Federal and state income taxes. Determination of the
tax cost that would be incurred upon monetization of
the Company’s foreign investments is not practicable;
however, we do not believe it would be material.
The following details the scheduled expiration dates
of the Company’s net operating loss and income tax
credit carryforwards:
In millions
U.S. federal and
non-U.S. NOLs
State taxing
jurisdiction NOLs (a)
U.S. federal, non-
U.S. and state tax
credit carryforwards
(a)
Total
Less: valuation
allowance (a)
Total, net
$
$
2023
Through
2032
2033
Through
2042
Indefinite
Total
$
1 $
95 $
422 $
518
—
50
43
70
7
8
114 $
110 $
519 $
97
175
743
(50)
(89)
(463)
(602)
64 $
21 $
56 $
141
(a) State amounts are presented net of federal benefit.
NOTE 14 COMMITMENTS AND CONTINGENT
LIABILITIES
GUARANTEES
representations
commonly makes
In connection with sales of businesses, property,
equipment, forestlands and other assets, International
and
Paper
warranties relating to such businesses or assets, and
may agree to indemnify buyers with respect to tax
and
of
representations and warranties, and other matters.
Where liabilities for such matters are determined to
be probable and reasonably estimable, accrued
liabilities are recorded at the time of sale as a cost of
the transaction.
environmental
breaches
liabilities,
the Company, until
Brazil Goodwill Tax Matter: The Brazilian Federal
Revenue Service has challenged the deductibility of
goodwill amortization generated in a 2007 acquisition
by Sylvamo do Brasil Ltda. ("Sylvamo Brazil"), a
wholly-owned subsidiary of
the
October 1, 2021 spin-off of
the Printing Papers
business after which it became a subsidiary of
Sylvamo. Sylvamo Brazil received assessments for
the tax years 2007-2015 totaling approximately $111
million in tax, and $361 million in interest, penalties,
and fees as of December 31, 2022 (adjusted for
variation in currency exchange rates). After an initial
these
favorable ruling challenging the basis for
71
the
from
decisions
assessments, Sylvamo Brazil received subsequent
unfavorable
Brazilian
Administrative Council of Tax Appeals. Sylvamo Brazil
has appealed these decisions and intends to appeal
any future unfavorable administrative judgments to
the Brazilian federal courts; however, this tax litigation
matter may take many years to resolve. Sylvamo
Brazil and International Paper believe the transaction
underlying these assessments was appropriately
evaluated, and that Sylvamo Brazil's tax position
would be sustained, based on Brazilian tax law.
of
at
hazardous
substances
cleanup
large
commercial
landfills that received waste from many
liability is
different sources. While joint and several
authorized under CERCLA and equivalent state laws,
as a practical matter, liability for CERCLA cleanups is
typically allocated among the many PRPs. There are
other remediation costs typically associated with the
cleanup of hazardous substances at the Company’s
current, closed and formerly-owned facilities, and
recorded as liabilities in the balance sheet.
between
to the terms of
into
transaction. Pursuant
agreement
This matter pertains to a business that was conveyed
to Sylvamo as of October 1, 2021, as part of our spin-
the tax
off
matters
the
entered
Company and Sylvamo, the Company will pay 60%
and Sylvamo will pay 40%, on up to $300 million of
any assessment
related to this matter, and the
the assessment
Company will pay all amounts of
over $300 million. Under the terms of the agreement,
decisions concerning the conduct of
the litigation
related to this matter, including strategy, settlement,
pursuit and abandonment, will be made by the
Company. Sylvamo thus has no control over any
decision related to this ongoing litigation. The
Company intends to vigorously defend this historic
tax position against the current assessments and any
similar assessments that may be issued for tax years
subsequent to 2015. The Brazilian government may
enact a tax amnesty program that would allow
Sylvamo Brazil to resolve this dispute for less than
the assessed amount. As of October 1, 2021,
in
connection with the recording of the distribution of
assets and liabilities resulting from the spin-off
the Company established a liability
transaction,
the contingent
representing the initial
liability under
the tax matters agreement. The
contingent liability was determined in accordance with
ASC 460 "Guarantees" based on the probability
weighting of various possible outcomes. The initial
fair value estimate and recorded liability as of
December 31, 2021 was $48 million and remains this
amount at December 31, 2022. This liability will not
be increased in subsequent periods unless facts and
circumstances change such that an amount greater
than the initial recognized liability becomes probable
and estimable.
fair value of
ENVIRONMENTAL AND LEGAL PROCEEDINGS
Environmental
The Company has been named as a potentially
responsible party (PRP) in environmental remediation
actions under various federal and state laws,
Environmental
Comprehensive
including
Act
Liability
and
Response,
(CERCLA). Many of these proceedings involve the
Compensation
the
estimable.
International Paper
Remediation costs are recorded in the consolidated
financial statements when they become probable and
reasonably
has
estimated the probable liability associated with these
environmental remediation matters,
including those
described herein, to be approximately $243 million
($251 million undiscounted) in the aggregate as of
December 31, 2022. Other than as described below,
remedial
completion of
actions is not expected to have a material effect on
our consolidated financial statements.
required environmental
In June 2011,
Cass Lake: One of the matters included above arises
facility located in
out of a closed wood-treatment
the United
Cass Lake, Minnesota.
States Environmental Protection Agency
(EPA)
selected and published a proposed soil remedy at the
site with an estimated cost of $46 million. In April
2020, the EPA issued a final plan concerning clean-
up standards at a portion of the site, the estimated
remedy
cost of which is included within the soil
referenced above.
to the Allied Paper,
Kalamazoo River: The Company is a PRP with
Inc./Portage Creek/
respect
Kalamazoo River Superfund Site in Michigan. The
EPA asserts that
the site is contaminated by
polychlorinated biphenyls (PCBs) primarily as a result
of discharges from various paper mills located along
the Kalamazoo River, including a paper mill formerly
owned by St. Regis Paper Company (St. Regis). The
Company is a successor in interest to St. Regis.
• Operable Unit 5, Area 1:
In March 2016,
the
Company and other PRPs received a special
notice letter from the EPA (i) inviting participation
in implementing a remedy for a portion of the site
known as Operable Unit 5, Area 1, and (ii)
demanding reimbursement of EPA past costs
totaling $37 million, including $19 million in past
costs previously demanded by the EPA. The
Company responded to the special notice letter. In
December 2016,
the EPA issued a unilateral
administrative order to the Company and other
PRPs to perform the remedy. The Company
responded to the unilateral administrative order,
72
agreeing to comply with the order subject to its
sufficient cause defenses.
• Operable Unit 1: In October 2016, the Company
and another PRP received a special notice letter
from the EPA inviting participation in the remedial
design (RD) component of the landfill remedy for
the Allied Paper Mill, which is also known as
Operable Unit 1. The Record of Decision (ROD)
establishing the final landfill remedy for the Allied
Paper Mill was issued by the EPA in September
2016. The Company responded to the Allied Paper
Mill special notice letter in December 2016.
In
February 2017, the EPA informed the Company
it would make other arrangements for the
that
performance of
In the summer 2021,
remedial action (RA) activities were initiated by the
EPA. In October 2022, the Company received a
unilateral administrative order to perform the RA.
As a result, the Company increased its reserve by
$27 million in the fourth quarter of 2022. The total
reserve for the Kalamazoo River superfund site
was
of
December 31, 2022 and 2021, respectively.
$37 million
$13 million
the RD.
and
as
in December 2019,
In addition,
the United States
published notice in the Federal Register of a
proposed consent decree with NCR Corporation (one
of the parties to the allocation/apportionment litigation
described below), the State of Michigan and natural
resource trustees under which NCR would make
payments of more than $100 million and perform
work in Operable Unit 5, Areas 2, 3, and 4 at an
estimated cost of $136 million. In December 2020,
the Federal District Court approved the proposed
consent decree.
The Company’s CERCLA liability has not been finally
determined with respect
to these or any other
portions of the site, and except as noted above, the
Company has declined to perform any work or
reimburse the EPA at this time. As noted below, the
Company is involved in allocation/apportionment
litigation with regard to the site. Accordingly,
is
the outcome or estimate our
premature to predict
maximum reasonably possible loss or range of loss
with respect to this site. We have recorded a liability
for
the site that are
probable and reasonably estimable, and it remains
reasonably possible that additional losses in excess
of this recorded liability could be material.
future remediation costs at
it
The Company was named as a defendant by
Georgia-Pacific Consumer Products LP, Fort James
Corporation and Georgia Pacific LLC (collectively GP)
in a contribution and cost recovery action for alleged
pollution
and
as
Weyerhaeuser Company
defendants in the suit. The suit seeks contribution
site. NCR Corporation
named
also
are
the
at
under CERCLA for costs purportedly expended by
plaintiffs ($79 million as of the filing of the complaint)
and for future remediation costs. In June 2018, the
Court
issued its Final Judgment and Order, which
fixed the past cost amount at approximately $50
million (plus interest to be determined) and allocated
to the Company a 15% share of responsibility for
those past costs. The Court did not address
responsibility for future costs in its decision. In July
2018, the Company and each of the other parties filed
notices appealing the Final Judgment and prior
orders incorporated into that Judgment. On April 25,
2022, the appellate court reversed the Judgment of
the Court, finding that the suit against the Company
the applicable statute of
was
limitations. On May 9, 2022, GP filed a petition for
remaining with the Sixth Circuit Court of Appeals. The
Sixth Circuit issued an order denying GP's petition on
July 14, 2022. On November 14, 2022, GP filed a
petition for writ of certiorari with the U.S. Supreme
Court. The Company has filed a brief in opposition to
this writ.
time-barred by
Harris County: International Paper and McGinnis
(MIMC),
Industrial Maintenance Corporation
a
subsidiary of Waste Management,
Inc. (WMI), are
PRPs at the San Jacinto River Waste Pits Superfund
Site in Harris County, Texas. The PRPs have been
actively participating in the activities at the site and
share the costs of these activities.
In October 2017, the EPA issued a ROD selecting the
final remedy for the site: removal and relocation of the
waste material from both the northern and southern
impoundments. The EPA did not specify the methods
or practices needed to perform this work. The EPA’s
selected remedy was accompanied by a cost
estimate of approximately $115 million ($105 million
for the northern impoundment, and $10 million for the
southern impoundment). Subsequent to the issuance
there have been numerous meetings
of
between the EPA and the PRPs, and the Company
continues to work with the EPA and MIMC/WMI to
develop the remedial design.
the ROD,
To this end, in April 2018, the PRPs entered into an
Administrative Order on Consent (AOC) with the EPA,
agreeing to work together to develop the remedial
design for the northern impoundment. That remedial
design work is ongoing. The AOC does not include
any agreement to perform waste removal or other
construction activity at
involves
adaptive management techniques and a pre-design
investigation,
the objectives of which include filling
data gaps (including but not limited to post-Hurricane
Harvey technical data generated prior to the ROD
and not
incorporated into the selected remedy),
refining areas and volumes of materials to be
the site. Rather,
it
73
addressed, determining if an excavation remedy is
able to be implemented in a manner protective of
human health and the environment, and investigating
potential
to
infrastructure in the vicinity.
remediation
activities
impacts
of
During the first quarter of 2020, through a series of
meetings among the Company, MIMC/WMI, our
consultants, the EPA and the Texas Commission on
Environmental Quality (TCEQ), progress was made
to resolve key technical issues previously preventing
the Company from determining the manner in which
the selected remedy for the northern impoundment
would be feasibly implemented. As a result of these
developments the Company reserved the following
amounts in relation to remediation at this site: (a) $10
million for the southern impoundment; and (b) $55
million
impoundment, which
represents the Company's 50% share of our estimate
of the low end of the range of probable remediation
costs.
northern
the
for
We submitted the Final Design Package for
the
to the EPA, and the EPA
southern impoundment
approved this plan May 7, 2021. The EPA issued a
Unilateral Administrative Order for Remedial Action of
the southern impoundment on August 5, 2021. An
addendum to the Final 100% Remedial Design
(Amended April 2021) was submitted to the EPA for
the southern impoundment on June 2, 2022. This
addendum incorporated additional data collected to
date which indicated that additional waste material
removal will be required,
lengthening the time to
complete the remedial action. The Company's
estimated cost
the Southern impoundment
remedial action as of December 31, 2022 was $25
million.
for
amount
reserved
increased
the
With respect
to the northern impoundment,
respondents submitted the final component of
the
90% remedial design to the EPA on November 8,
2022. Upon submittal of
the final component, an
updated engineering estimate was developed and the
Company
by
the
approximately $21 million, which represents the
Company's 50% share of our estimate of the low end
the range of probable remediation costs. While
of
issues have been resolved,
several key technical
challenges
respondents
remediating this area in a cost-efficient manner and
without a release to the environment, and therefore
our discussions with the EPA on the best approach to
remediation will continue. Because of ongoing
timing and
questions regarding cost effectiveness,
gathering other technical data, additional
losses in
excess of our recorded liability are possible. The total
reserve for the southern and northern impoundment
was $95 million and $60 million as of December 31,
2022 and 2021, respectively.
significant
face
still
74
Asbestos-Related Matters
injury litigation,
in various
We have been named as a defendant
asbestos-related personal
in both
state and federal court, primarily in relation to the
prior operations of certain companies previously
acquired by the Company. As of December 31, 2022,
the Company's total recorded liability with respect to
pending and future asbestos-related claims was $105
million, net of estimated insurance recoveries. While it
is reasonably possible that the Company may incur
losses in excess of its recorded liability with respect
to asbestos-related matters, we are unable to
estimate any loss or range of loss in excess of such
liability, and do not believe additional material losses
are probable.
Antitrust
an
the
into
subsidiary
In April 2019,
In March 2017, the Italian Competition Authority (ICA)
Italian
investigation
commenced
packaging industry to determine whether producers of
corrugated sheets and boxes violated the applicable
European competition law.
the ICA
concluded its investigation and issued initial findings
alleging that over 30 producers, including our Italian
packaging
improperly
coordinated the production and sale of corrugated
sheets and boxes. On August 6, 2019, the ICA issued
its decision and assessed IP Italy a fine of €29 million
(approximately $31 million at current exchange rates)
which was recorded in the third quarter of 2019. We
appealed the ICA decision and our appeal was
denied on May 25, 2021. However, we continue to
believe we have numerous and strong bases to
challenge the ICA decision, and we have further
appealed the decision to the Italian Council of State.
Italy),
(IP
General
liability,
The Company is involved in various other inquiries,
administrative proceedings and litigation relating to
environmental and safety matters, personal
injury,
product
labor and employment, contracts,
sales of property, intellectual property, tax, and other
matters, some of which allege substantial monetary
damages. See Note 13 for details regarding a tax
matter. Assessments of
lawsuits and claims can
involve a series of complex judgments about future
events,
and
heavily
assumptions, and are otherwise subject to significant
uncertainties. As a result, there can be no certainty
that the Company will not ultimately incur charges in
excess of presently recorded liabilities. The Company
believes that loss contingencies arising from pending
matters including the matters described herein, will
not have a material effect on the consolidated
liquidity of
financial position or
the Company.
the inherent uncertainties
in light of
However,
involved in pending or threatened legal matters, some
estimates
can
rely
on
of which are beyond the Company's control, and the
large or indeterminate damages sought in some of
these matters, a future adverse ruling, settlement,
unfavorable development, or increase in accruals with
respect to these matters could result in future charges
that could be material to the Company's results of
operations or cash flows in any particular reporting
period.
Taxes Other Than Payroll and Income Taxes
that
In 2018 and 2019,
In 2017,
the Brazilian Federal Supreme Court
decided that the state value-added tax (VAT) should
federal VAT
not be included in the basis of
the Brazilian tax
calculations.
authorities published both an internal consultation
and a normative ruling with a narrow interpretation of
the case. Based upon the best
the effects of
information available to us at
time, we
determined an estimated refund was probable of
being realized. As of March 31, 2021, we had
recognized a receivable of $11 million based upon the
authority's narrow interpretation. On May 13, 2021,
the Brazilian Federal Supreme Court ruled again on
the case. This ruling provides a much broader
definition of
the state VAT, which increased the
exclusion amount from the Federal VAT calculations.
Therefore, we recognized an additional receivable of
$70 million during the three months ended June 30,
2021, which brought the total receivable to $81 million
as of June 30, 2021. The $70 million of
income
recognized during the second quarter of 2021
included income of $42 million and income of $28
interest expense and is recorded in
million of net
Discontinued Operations, net of
in the
accompanying consolidated statement of operations.
A portion of this receivable has been consumed by
offsetting various taxes payable leaving a remaining
receivable of $48 million. This remaining receivable
was conveyed to Sylvamo Corporation on of October
1, 2021, as part of our spin-off transaction.
taxes,
NOTE 15 VARIABLE INTEREST ENTITIES
In connection with the acquisition of Temple-Inland in
February 2012, two special purpose entities became
wholly-owned subsidiaries of International Paper. The
use of the two wholly-owned special purpose entities
discussed below preserved the tax deferral
that
resulted from the 2007 Temple-Inland timberlands
sales. As of December 31, 2022, this deferred tax
liability was $485 million, which will be settled with the
maturity of the notes in 2027.
bankruptcy-remote special purpose entities. The
notes are shown in Long-term financial assets of
in the accompanying
variable interest entities
consolidated balance sheet and are supported by
$2.4 billion of irrevocable letters of credit issued by
three banks, which are required to maintain minimum
credit ratings on their long-term debt.
In December 2007, Temple-Inland's two wholly-
owned special purpose entities borrowed $2.1 billion
which is shown in Long-term nonrecourse financial
liabilities of variable interest entities. The loans are
repayable in 2027 and are secured by the $2.4 billion
of notes and the irrevocable letters of credit securing
the notes, and are nonrecourse to us. The loan
agreements provide that if a credit rating of any of the
is downgraded
banks issuing the letters of credit
below the specified threshold,
the letters of credit
issued by that bank must be replaced within 30 days
with letters of credit from another qualifying financial
institution.
As of both December 31, 2022 and 2021, the fair
value of the notes receivable was $2.3 billion. As of
both December 31, 2022 and 2021, the fair value of
this debt was $2.1 billion. The notes receivable and
debt are classified as Level 2 within the fair value
hierarchy, which is further defined in Note 17.
Activity between the Company and the 2007 financing
entities was as follows:
In millions
Revenue (a)
Expense (b)
Cash receipts (c)
Cash payments (d)
2022
2020
2021
$ 65 $ 24 $ 41
43
29
40
24
5
16
58
28
40
(a) The revenue is included in Interest expense, net, in the
accompanying consolidated statement of operations and
includes approximately $19 million for the years ended
respectively, of
December 31, 2022, 2021 and 2020,
accretion income for
the purchase
accounting adjustment on the Financial assets of variable
interest entities.
the amortization of
(b) The expense is included in Interest expense, net, in the
accompanying consolidated statement of operations and
includes approximately $7 million for
the years ended
December 31, 2022, 2021 and 2020 respectively, of
accretion expense for the amortization of
the purchase
accounting adjustment on the Long-term nonrecourse
financial liabilities of variable interest entities.
(c) The cash receipts are interest received on the Financial
(d)
assets of special purpose entities.
The cash payments are interest paid on Nonrecourse
financial liabilities of special purpose entities.
In October 2007, Temple-Inland sold 1.55 million
acres of
timberland for $2.4 billion. The total
consideration consisted almost entirely of notes due
in 2027 issued by the buyer of the timberland, which
Temple-Inland contributed to two wholly-owned,
In connection with the 2006 sale of approximately 5.6
million acres of
International Paper
received installment notes (the "Timber Notes")
totaling approximately $4.8 billion. The Timber Notes
were used as collateral for borrowings from third party
forestlands,
75
lenders, which effectively monetized the Timber
Notes through the creation of newly formed special
purposes entities (the "Entities"). The monetization
structure preserved the tax deferral that resulted from
the 2006 forestlands sales. During 2015, International
Paper initiated a series of actions in order to extend
the 2006 monetization structure and maintain the
long-term nature of
the deferred tax liability. The
Entities, with assets and liabilities primarily consisting
of the Timber Notes and third-party bank loans (the
"Extension Loans"), were restructured which resulted
in the formation of wholly-owned, bankruptcy-remote
special purpose entities
(the "2015 Financing
Entities").
In August 2021, the Timber Notes of $4.8 billion and
the Extension Loans of $4.2 billion related to the 2015
Financing Entities both matured. We settled the
Extension Loans at their maturity with the proceeds
from the Timber Notes. This resulted in cash
proceeds of approximately $630 million representing
our equity in the variable interest entities. Maturity of
the installment notes and termination of
the
monetization structure also resulted in a $72 million
tax liability that was paid in the fourth quarter of 2021.
On September 2, 2022, the Company and the Internal
Revenue Service agreed to settle the previously
disclosed timber monetization restructuring tax
matter. Under this agreement, the Company will fully
resolve the matter and pay $252 million in U.S.
federal income taxes. As a result, interest will also be
charged upon closing of the audit. The amount of
interest expense recognized through December 31,
2022 is $58 million. As of December 31, 2022, $89
million in U.S. federal income taxes and $28 million in
interest expense have been paid as a result of the
settlement agreement. The remaining $163 million
income tax liability and $30 million
U.S.
federal
accrued interest
liability are recorded as current
the
liabilities in the balance sheet. As part of
settlement with the Internal Revenue Service, the $72
million tax payment discussed in the preceding
federal
paragraph was applied to the 2022 U.S.
the
estimated tax payments. The reversal of
Company’s remaining deferred tax liability associated
with the 2015 Financing Entities of $604 million was
recognized as a one-time tax benefit
in the third
quarter of 2022.
Activity between the Company and the 2015
Financing Entities for the years ended December 31,
2021 and 2020 was as follows:
In millions
Revenue (a)
Expense (a)
Cash receipts (b)
Cash payments (c)
2021
2020
$
61 $
34
95
38
95
122
95
157
(a) The revenue and expense are included in Interest expense,
in the accompanying consolidated statement of
net
operations.
(b) The cash receipts are interest received on the Financial
assets of variable interest entities.
(c) The cash payments represent
interest paid on Current
nonrecourse financial liabilities of variable interest entities.
NOTE 16 DEBT AND LINES OF CREDIT
Amounts related to early debt extinguishment during
the years ended December 31, 2022, 2021 and 2020
were as follows:
In millions
2022
2021
2020
Early debt reductions (a)
$
503 $ 2,472 $ 1,640
Pre-tax early debt extinguishment
costs (b)
93
461
196
(a) Reductions related to notes with interest rates ranging from
3.00% to 8.70% with original maturities from 2021 to 2048
for the years ended December 31, 2022, 2021 and 2020.
(b) Amounts are included in Restructuring and other charges in
the accompanying consolidated statements of operations.
The Company's early debt
reductions in 2022
included a debt tender of $498 million with interest
rates ranging from 6.40% to 8.70% and maturity
dates ranging from 2023 to 2039. In addition, in 2022,
the Company had $5 million in open market
repurchases related to debt with interest
rates
ranging from 4.35% to 4.40% and maturity dates
ranging from 2047 to 2048. In addition to the early
debt reductions, the Company had debt reductions of
$514 million in 2022 related primarily to capital
leases, debt maturities, and international debt.
the Company
During the second quarter of 2022,
borrowed approximately $144 million under a term
loan credit agreement with a third party lender.
Subsequently,
the Company exchanged 4,132,000
shares of Sylvamo common stock owned by the
Company in exchange and as repayment of
the
approximately $144 million term loan obligation.
the Company
During the third quarter of 2022,
borrowed approximately $210 million under a term
loan credit agreement with a third party lender.
Subsequently, the Company repaid $167 million of
the term loan with an exchange of 4,614,358 shares
of Sylvamo common stock owned by the Company.
The remainder of the term loan was repaid with cash.
76
During the first quarter of 2022, the Company issued
approximately $88 million of debt with an interest rate
of 2.65% and a maturity date of 2027. The proceeds
from this issuance were used to repay approximately
$88 million of outstanding debt that matured on April
1, 2022. During the third quarter of 2022,
the
Company issued approximately $50 million of debt
with a variable rate of interest and a maturity date of
2027. During the fourth quarter of 2022, the Company
issued $110 million of debt with a variable rate of
interest and a maturity date of 2027.
In January 2023, the Company entered into a variable
term loan agreement providing for a $600 million
term loan which was fully drawn on the date of such
loan agreement and matures in 2028. The $600
million debt was issued following the repayment of
$410 million of commercial paper earlier in 2023 and
will be used to repay debt maturing later in 2023 and
general corporate purposes.
The Company had debt issuances in 2021 of $1.5
billion related primarily to Sylvamo debt issuances as
discussed further in Note 8 - Divestitures.
The borrowing capacity of the Company's commercial
paper program is $1.0 billion supported by its $1.5
billion credit agreement. In June 2021, the Company
extended the maturity date of the $1.5 billion credit
facility from December 2022 to June 2026. Under the
terms of
individual maturities on
borrowings may vary, but not exceed one year from
Interest bearing notes may be
the date of
issued either as fixed or floating rate notes. The
Company had $410 million borrowings outstanding as
of December 31, 2022 and no borrowings outstanding
as of December 31, 2021 under this program.
this program,
issue.
The liquidity facilities also previously included up to
$550 million of uncommitted financings based on
eligible receivables balances under a receivables
securitization program that had an expiration date in
April 2022. The receivables securitization program
was renewed on April 27, 2022 with up to $500 million
of
eligible
receivables balances with the expiration date in April
2024. As of December 31, 2022 and December 31,
2021, the Company had no borrowings outstanding
under the program.
uncommitted
financings
based
on
A summary of long-term debt follows:
In millions at December 31
2022
2021
6.875% notes – due 2023
7.350% notes – due 2025
7.750% notes – due 2025
7.200% notes – due 2026
6.400% notes – due 2026
7.150% notes – due 2027
6.875% notes – due 2029
5.000% notes – due 2035
6.650% notes – due 2037
8.700% notes – due 2038
7.300% notes – due 2039
6.000% notes – due 2041
4.800% notes – due 2044
5.150% notes – due 2046
4.400% notes – due 2047
4.350% notes – due 2048
Floating rate notes – due 2023 – 2027 (a)
Environmental and industrial development
bonds – due 2023 – 2028 (b)
Total principal
Capitalized leases
Premiums, discounts, and debt issuance
costs
Terminated interest rate swaps
Other (c)
Total (d)
Less: current maturities
Long-term debt
87
39
22
58
5
7
10
407
3
86
453
585
686
449
647
740
732
489
94
44
31
58
5
7
37
407
4
265
722
585
686
449
648
744
222
489
5,505
5,497
59
66
(42)
(48)
55
2
58
6
5,579
5,579
763
196
$ 4,816 $ 5,383
(a) The weighted average interest rate on these notes was
4.6% in 2022 and 1.4% in 2021.
(b) The weighted average interest rate on these bonds was
(c)
2.4% in 2022 and 3.2% in 2021.
Includes $0 million and $1 million of
fair market value
adjustments as of December 31, 2022 and 2021,
respectively.
(d) The fair market value was approximately $5.2 billion at
December 31, 2022 and $7.1 billion at December 31, 2021.
Debt fair value measurements use Level 2 inputs.
the
At December 31, 2022, contractual obligations for
future payments of debt maturities (including finance
lease liabilities disclosed in Note 10 - Leases and
structures
excluding
disclosed in Note 15 - Variable Interest Entities) by
calendar year were as follows over the next
five
years: 2023 – $763 million; 2024 – $148 million; 2025
– $191 million; 2026 – $72 million; and 2027 – $298
million.
timber monetization
77
The Company’s financial covenants require the
maintenance of a minimum net worth, as defined in
our debt agreements, of $9 billion and a total debt-to-
capital ratio of less than 60%. Net worth is defined as
the sum of common stock, paid-in capital and
less treasury stock plus any
retained earnings,
The
cumulative
calculation
other
comprehensive income/loss and both the current and
long-term Nonrecourse
of
Variable Interest Entities. The total debt-to-capital
ratio is defined as total debt divided by the sum of
total debt plus net worth. As of December 31, 2022,
we were in compliance with our debt covenants.
goodwill
also
accumulated
impairment
Liabilities
Financial
excludes
charges.
NOTE 17 DERIVATIVES AND HEDGING
ACTIVITIES
and
currency
International Paper periodically uses derivatives and
instruments to hedge exposures to
other financial
interest
risks.
commodity
rate,
International Paper does not hold or issue financial
instruments for trading purposes. For hedges that
inception,
meet
International
and
documents the instrument as a fair value hedge, a
cash flow hedge or a net
investment hedge of a
specific underlying exposure.
the hedge accounting criteria at
designates
formally
Paper
INTEREST RATE RISK MANAGEMENT
Our policy is to manage interest cost using a mixture
of fixed-rate and variable-rate debt. To manage this
risk in a cost-efficient manner, we enter into interest
rate swaps whereby we agree to exchange with the
the difference
counterparty, at specified intervals,
amounts
between
calculated by reference to a notional amount.
variable
interest
fixed
and
debt
Interest rate swaps that meet specific accounting
criteria are accounted for as fair value or cash flow
hedges. For fair value hedges, the changes in the fair
value of both the hedging instruments and the
underlying
immediately
obligations
recognized in interest expense. For cash flow
hedges, the effective portion of the changes in the fair
value of the hedging instrument is reported in AOCI
and reclassified into interest expense over the life of
the underlying debt. The ineffective portion for both
cash flow and fair value hedges, which is not material
for any year presented, is immediately recognized in
earnings.
are
FOREIGN CURRENCY RISK MANAGEMENT
We manufacture and sell our products and finance
operations in a number of countries throughout the
world and, as a result, are exposed to movements in
foreign currency exchange rates. The purpose of our
foreign currency hedging program is to manage the
78
volatility associated with the changes in exchange
rates.
a
of
utilized
combination
investment hedges of
To manage this exchange rate risk, we have
historically
forward
contracts, options and currency swaps. Contracts that
qualify are designated as cash flow hedges of certain
forecasted transactions denominated in foreign
currencies or net
foreign
denominated subsidiaries. For cash flow hedges, the
effective portion of the changes in fair value of these
instruments is reported in AOCI and reclassified into
earnings in the same financial statement line item and
in the same period or periods during which the related
hedged transactions affect earnings. The ineffective
portion, which is not material for any year presented,
is immediately recognized in earnings. For net
investment hedges, all changes in the fair value of
these instruments are recorded in AOCI, offsetting the
the related
currency
investment that is also recorded in AOCI.
translation adjustment of
The change in value of certain non-qualifying
instruments used to manage foreign exchange
exposure of intercompany financing transactions and
certain balance sheet items subject to revaluation is
immediately recognized in earnings, substantially
offsetting the foreign currency mark-to-market impact
of the related exposure.
COMMODITY RISK MANAGEMENT
Certain raw materials used in our production
processes are subject to price volatility caused by
weather, supply conditions, political and economic
variables and other unpredictable factors. To manage
the volatility in earnings due to price fluctuations, we
may utilize swap contracts or
forward purchase
contracts.
in
are
instruments
reported
their
the
Derivative
fair values,
consolidated balance sheets at
unless the derivative instruments qualify for
the
normal purchase normal sale ("NPNS") exception
under GAAP and such exception has been elected.
If
the NPNS exception is elected, the fair values of such
contracts are not recognized on the balance sheet.
Contracts that qualify are designated as cash flow
forecasted commodity purchases. The
hedges of
effective portion of the changes in fair value for these
instruments is reported in AOCI and reclassified into
earnings in the same financial statement line item and
in the same period or periods during which the
hedged transactions affect earnings. The ineffective
and non-qualifying portions, which are not material for
any year presented, are immediately recognized in
earnings. The change in the fair value of certain non-
qualifying instruments used to reduce commodity
price volatility is immediately recognized in earnings.
The notional amounts of qualifying and non-qualifying
instruments used in hedging transactions were as
follows:
In millions
Derivatives Not Designated as
Hedging Instruments:
December 31,
2022
December 31,
2021
Electricity contract (MWh)
0.2
0.5
The following table shows gains or losses recognized
in AOCI, net of tax, related to derivative instruments:
Gain (Loss)
Recognized in AOCI on Derivatives
(Effective Portion)
In millions
2022
2021
2020
$
— $
3 $
(34)
Derivatives in Cash Flow
Hedging Relationships:
Foreign exchange
contracts
Derivatives in Net
Investment Hedging
Relationships:
Foreign exchange
contracts
Interest rate contracts
Total
$
— $
18 $
—
—
18
—
—
25
25
During the next 12 months, none of the December 31,
2022 AOCI balance, after tax,
is expected to be
reclassified to earnings.
The amounts of gains and losses recognized in the consolidated statement of operations on qualifying and non-
qualifying financial instruments used in hedging transactions were as follows:
Gain (Loss)
Reclassified from
AOCI
into Income
(Effective Portion)
In millions
2022
2021
2020
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts
Interest rate contracts
Total
$ —
(2)
(2)
$
$
$
10
(1)
9
$ (25)
(1)
$ (26)
Location of Gain
(Loss)
Reclassified
from AOCI
into Income
(Effective Portion)
Cost of products sold
and Discontinued
operations, net of
taxes
Interest expense, net
Gain (Loss)
Recognized
in Income
Location of Gain
(Loss)
in Consolidated
Statement of
Operations
In millions
2022
2021
2020
Derivatives in Fair Value Hedging Relationships:
Interest rate contracts
Debt
Total
Derivatives in Net Investment Hedging Relationships:
Foreign exchange contracts
Total
Derivatives Not Designated as Hedging Instruments:
Electricity Contracts
Foreign exchange contracts
Total
$ —
$ —
$
38
Interest expense, net
—
—
(38)
Interest expense, net
$ —
$ —
$ —
$ —
$ —
$
$
26
—
26
$ —
$ —
$
$
15
(2)
13
$
$
$
$
2
2
(2)
—
(2)
Net (gains) losses on
sales and
impairments of
businesses
Cost of products sold
Cost of products sold
79
Fair Value Measurements
rate swaps,
International Paper’s financial assets and liabilities
that are recorded at fair value consist of derivative
including interest
contracts,
foreign
forward contracts, options and other
currency
that are used to hedge
instruments
financial
exposures to interest rate, commodity and currency
risks. For these financial
instruments, fair value is
determined at each balance sheet date using an
International Paper’s
income approach. All of
derivative fair value measurements use Level 2
inputs.
Below is a description of the valuation calculation and
the inputs used for each class of contract:
Interest Rate Contracts
Interest rate contracts are valued using swap curves
obtained from an independent market data provider.
The market value of each contract is the sum of the
fair value of all future interest payments between the
contract counterparties, discounted to present value.
The fair value of
the future interest payments is
determined by comparing the contract rate to the
derived forward interest
rate and present valued
using the appropriate derived interest rate curve.
Foreign Exchange Contracts
Foreign currency forward and option contracts are
valued using standard valuation models. Significant
inputs used in these standard valuation models are
foreign currency forward and interest rate curves and
a volatility measurement. The fair value of each
contract
is present valued using the applicable
interest rate. All significant inputs are readily available
in public markets, or can be derived from observable
market transactions.
Electricity Contract
The Company is party to an electricity contract used
to manage market fluctuations in energy pricing. The
Company's electricity contract
is valued using the
Mid-C index forward curve obtained from the
Intercontinental Exchange. The market value of the
contract
future
purchase
contract
counterparties, discounted to present value. The fair
value of the future purchase payments is determined
by comparing the contract price to the forward price
and present valued using International Paper's cost of
capital.
the fair value of all
between
is the sum of
payments
the
Since the volume and level of activity of the markets
that each of the above contracts are traded in has
the fair value calculations have not
been normal,
been adjusted for
inactive markets or disorderly
transactions.
The following table provides a summary of the impact
of our derivative instruments in the consolidated
balance sheet:
Fair Value Measurements
Level 2 – Significant Other Observable Inputs
Assets
December 31,
2022
December 31,
2021
In millions
Derivatives not
designated as
hedging instruments
Electricity contract
$
20 (a) $
10 (b)
(a)
(b)
Includes $20 million recorded in Other current assets in the
accompanying consolidated balance sheet.
Included $6 million recorded in Other current assets and $4
million in Deferred charges and other assets recorded in the
accompanying consolidated balance sheet.
The above contracts are subject
to enforceable
master netting arrangements that provide rights of
offset with each counterparty when amounts are
payable on the same date in the same currency or in
the case of certain specified defaults. Management
has made an accounting policy election to not offset
the fair value of recognized derivative assets and
derivative liabilities in the consolidated balance sheet.
The amounts owed to the counterparties and owed to
the Company are considered immaterial with respect
to each counterparty and in the aggregate with all
counterparties.
Credit-Risk-Related Contingent Features
International Paper evaluates credit risk by monitoring
its exposure with each counterparty to ensure that
exposure stays within acceptable policy limits. Credit
risk is also mitigated by contractual provisions with
the majority of our banks. Certain of the contracts
requires the
include a credit support annex that
posting
or
by
collateral
International Paper based on each party’s rating and
level of exposure. Based on the Company’s current
credit rating, the collateral threshold is generally $15
million.
counterparty
the
of
If the lower of the Company’s credit rating by Moody’s
or S&P were to drop below investment grade, the
Company would be required to post collateral for all
of its derivatives in a net liability position, although no
derivatives would terminate. There were no derivative
instruments containing credit-risk-related contingent
80
The Company also has two unfunded nonqualified
defined benefit pension plans: a Pension Restoration
Plan that provides retirement benefits based on
eligible compensation in excess of limits set by the
Internal Revenue Service, and a supplemental
retirement plan for senior managers ("SERP"), which
salaried
is an alternative retirement plan for
employees who are senior vice presidents and above
or who are designated by the chief executive officer
as participants. These nonqualified plans are only
funded to the extent of benefits paid, which totaled
$29 million, $21 million and $31 million in 2022, 2021
and 2020, respectively, and which are expected to be
$22 million in 2023.
including
credited
for salaried employees under
the Company froze
Effective January 1, 2019,
and
service
participation,
compensation,
the
Pension Plan, the Pension Restoration Plan and the
SERP plan. This change does not affect benefits
accrued through December 31, 2018. For service
after December 31, 2018, employees affected by the
freeze receive a company contribution to their
individual Retirement Savings Account as described
later in this Note 19.
Many non-U.S. employees are covered by various
retirement benefit arrangements, some of which are
considered to be defined benefit pension plans for
accounting purposes.
1,
2021,
the spin-off of
the Printing Papers
In advance of
segment into a standalone, publicly-traded company,
Sylvamo, a legally separate Sylvamo Pension Plan
was established to transfer both pension liabilities
and qualified pension assets for the approximately
900 active pension participants who transitioned to
Sylvamo. Effective September
the
Retirement Plan of International Paper (“IP Pension
Plan”) and the Sylvamo Pension Plan were legally
that date. The
separated and remeasured as of
remeasurement resulted in a net asset balance of
$520 million for the IP Pension Plan, which has been
classified as part of the Pension Assets balance on
the Consolidated Balance Sheet. Based on the
September 1, 2021 remeasurement, the IP Pension
Plan completed the transfer of approximately $287
million
and
approximately $255 million in pension assets, net of
post-spin true-up adjustments,
to the Sylvamo
Pension Plan.
obligation
projected
benefit
in
features in a net
liability position as of December 31,
2022 and December 31, 2021. The Company was
not required to post any collateral as of December 31,
2022 or 2021.
NOTE 18 CAPITAL STOCK
The authorized capital stock at both December 31,
2022 and 2021, consisted of 990,850,000 shares of
common stock, $1 par value; 400,000 shares of
cumulative $4 preferred stock, without par value
(stated value $100 per share); and 8,750,000 shares
of serial preferred stock, $1 par value. The serial
preferred stock is issuable in one or more series by
further shareholder
the Board of Directors without
action.
The following is a rollforward of shares of common
stock for the three years ended December 31, 2022,
2021 and 2020:
In thousands
Balance at January 1, 2020
Issuance of stock for various plans, net
Repurchase of stock
Balance at December 31, 2020
Issuance of stock for various plans, net
Repurchase of stock
Balance at December 31, 2021
Issuance of stock for various plans,
net
Repurchase of stock
Balance at December 31, 2022
NOTE 19 RETIREMENT PLANS
Common Stock
Treasury
Issued
56,800
448,916
(2,010)
—
1,027
—
55,817
448,916
(1,855)
—
— 16,400
70,362
448,916
(1,569)
—
— 29,839
98,632
448,916
International Paper sponsors and maintains the
Retirement Plan of International Paper Company (the
"Pension Plan"), a tax-qualified defined benefit
pension plan that provides retirement benefits to
certain employees.
The Pension Plan provides defined pension benefits
based on years of credited service and either final
average earnings (salaried employees and hourly
employees receiving salaried benefits), hourly job
rates or specified benefit rates (hourly and union
employees).
81
OBLIGATIONS AND FUNDED STATUS
The following table shows the changes in the benefit
obligation and plan assets for 2022 and 2021 and the
plans’ funded status.
Actuarial loss (gain)
(2,863)
(11)
2022
2021
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
$11,833 $
65 $13,020 $ 264
85
338
3
2
—
16
(593)
—
—
—
(2)
(3)
100
333
(760)
(287)
—
(573)
—
5
4
(11)
(187)
—
(5)
(5)
$ 8,816 $
54 $11,833 $
65
$12,075 $
19 $12,018 $ 190
(2,666)
29
(593)
—
—
—
2
(2)
—
(1)
864
21
(573)
4
6
(5)
(255)
(175)
—
(1)
$ 8,845 $
18 $12,075 $
19
$
29 $
(36) $
242 $
(46)
$
297 $ — $
595 $ —
(22)
(2)
(21)
(1)
(246)
(34)
(332)
$
29 $
(36) $
242 $
(45)
(46)
In millions
Change in projected benefit
obligation:
Benefit obligation,
January 1
Service cost
Interest cost
Divestitures
Plan amendments
Benefits paid
Effect of foreign currency
exchange rate movements
Benefit obligation,
December 31
Change in plan assets:
Fair value of plan assets,
January 1
Actual return on plan
assets
Company contributions
Benefits paid
Divestiture
Effect of foreign currency
exchange rate movements
Fair value of plan assets,
December 31
Funded status,
December 31
Amounts recognized in the
consolidated balance sheet:
Overfunded pension plan
assets
Underfunded pension
benefit obligation - current
Underfunded pension
benefit obligation - non-
current
Amounts recognized in
accumulated other
comprehensive income
(loss) under ASC 715 (pre-
tax):
Prior service cost (credit)
$
89 $ — $
95 $ —
Net actuarial loss (gain)
1,563
(7)
1,199
$ 1,652 $
(7) $ 1,294 $
4
4
82
The non-current asset
the qualified plan is
for
included in the accompanying consolidated balance
sheet under Overfunded Pension Plan Assets. The
non-current portion of the liability is included with the
pension liability under Underfunded Pension Benefit
Obligation.
The largest contributor to the actuarial gain affecting
the benefit obligation was the increase in the discount
rate from 2.90% at December 31, 2021 to 5.40% at
December 31, 2022.
The components of the $357 million and $(12) million
related
plans,
respectively, in the amounts recognized in OCI during
2022 consisted of:
to U.S.
non-U.S.
plans
and
In millions
Current year actuarial (gain) loss
Amortization of actuarial loss
Current year prior service cost
Amortization of prior service cost
Effect of foreign currency exchange
rate movements
U.S.
Plans
Non-
U.S.
Plans
$
$
451 $
(87)
16
(23)
—
357 $
(10)
(1)
—
—
(1)
(12)
The portion of the change in the funded status that
was recognized in net periodic benefit cost and OCI
for the U.S. plans was $474 million, $(1.0) billion and
$(500) million in 2022, 2021 and 2020, respectively.
The portion of the change in funded status for the
non-U.S. plans was $(6) million, $(73) million, and
$13 million in 2022, 2021 and 2020, respectively.
The accumulated benefit obligation at December 31,
2022 and 2021 was $8.8 billion and $11.8 billion,
respectively, for our U.S. defined benefit plans and
$46 million and $56 million,
respectively, at
December 31, 2022 and 2021 for our non-U.S.
defined benefit plans.
The following table summarizes information for
pension plans with an accumulated benefit obligation
in excess of plan assets at December 31, 2022 and
2021:
2022
2021
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
In millions
Projected benefit obligation $
268 $
54 $
353 $
Accumulated benefit
obligation
Fair value of plan assets
268
—
45
18
353
—
65
56
19
The components of net periodic pension expense
other than the Service cost component are included
in Non-operating pension (income) expense in the
Consolidated Statement of Operations with the
exception of $(3) million related to Sylvamo
participants
in 2021 recorded in Discontinued
Operations.
The decrease in 2022 pension expense primarily
reflects lower asset returns, higher interest cost due
to a higher discount rate and lower actuarial loss due
to a longer amortization period and lower service
cost.
ASSUMPTIONS
its
Paper
evaluates
International
actuarial
assumptions annually as of December 31 (the
measurement date) and considers changes in these
long-term factors based upon market conditions and
the requirements for employers’ accounting for
pensions. These assumptions are used to calculate
benefit obligations as of December 31 of the current
year and pension expense to be recorded in the
following year
rate used to
determine the benefit obligation as of December 31,
2022 is also the discount rate used to determine net
pension expense for the 2023 year).
the discount
(i.e.,
ASC 715,
“Compensation – Retirement Benefits”
provides for delayed recognition of actuarial gains
and losses, including amounts arising from changes
in the estimated projected plan benefit obligation due
to changes in the assumed discount rate, differences
between the actual and expected return on plan
assets and other assumption changes. These net
gains and losses are recognized prospectively over a
period that approximates the average remaining
service period of active employees expected to
receive benefits under the plans to the extent that
they are not offset by gains in subsequent years.
NET PERIODIC PENSION EXPENSE
Service cost is the actuarial present value of benefits
attributed by the plans’ benefit formula to services
rendered by employees during the year. Interest cost
represents the increase in the projected benefit
obligation, which is a discounted amount, due to the
passage of time. The expected return on plan assets
reflects
current-year
earnings from the investment of plan assets using an
estimated long-term rate of return.
the computed amount of
Net periodic pension expense for qualified and
nonqualified U.S. and non-U.S. defined benefit plans
comprised the following:
2022
2021
2020
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
In millions
Service cost
$
85 $
3 $ 100 $
5 $
85 $
Interest cost
338
2
333
4
393
5
6
Expected return
on plan assets
Actuarial loss
(gain)
Amortization of
prior service cost
Curtailment loss
(gain)
Settlement loss
Net periodic
pension
(income)
expense
(649)
(1)
(705)
(7)
(668)
(8)
87
23
—
—
1
138
2
202
—
—
—
22
—
—
—
—
—
20
—
—
2
—
(1)
1
$ (116) $
5 $ (112) $
4 $
32 $
5
83
Major actuarial assumptions used in determining the benefit obligations and net periodic pension cost for our
defined benefit plans are presented in the following table:
Actuarial assumptions used to determine benefit obligations as of December 31:
Discount rate
Rate of compensation increase
Actuarial assumptions used to determine net periodic pension cost for years ended
December 31:
2022
2021
2020
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
5.40 % 5.31 % 2.90 % 2.59 % 2.60 % 2.32 %
3.00 % 3.36 % 3.00 % 2.92 % 2.25 % 3.66 %
Discount rate (a)
Expected long-term rate of return on plan assets (a)
Rate of compensation increase
2.90 % 2.59 % 2.67 % 2.32 % 3.40 % 2.70 %
6.00 % 3.66 % 6.40 % 4.99 % 7.00 % 4.92 %
3.00 % 2.92 % 2.25 % 3.66 % 2.25 % 3.62 %
(a) Represents the weighted average rate for the U.S. qualified plans in 2021 due to the spin-off remeasurement..
The expected long-term rate of return on plan assets
is based on projected rates of return for current asset
classes in the plan’s investment portfolio. Projected
rates of return are developed through an asset/liability
study in which projected returns for each of the plan’s
classes are determined after analyzing
asset
historical experience and future expectations of
returns and volatility of the various asset classes.
PLAN ASSETS
of Directors
has
International Paper’s Board
appointed a Fiduciary Review Committee that
is
responsible for fiduciary oversight of the U.S. Pension
Plan, approving investment policy and reviewing the
management and control of plan assets. Pension
Plan assets are invested to maximize returns within
prudent levels of risk.
rate
The
discount
Based on the target asset allocation for each asset
class,
the overall expected rate of return for the
portfolio is developed considering the effects of active
portfolio management and expenses paid from plan
assumption was
assets.
determined from a universe of high quality corporate
bonds. A settlement portfolio is selected and matched
to the present value of the plan’s projected benefit
payments. To calculate pension expense for 2023,
the Company will use an expected long-term rate of
return on plan assets of 6.50% for the Retirement
Plan of International Paper, a discount rate of 5.40%
and an assumed rate of compensation increase of
3.00%. The Company estimates that it will record net
pension expense of approximately $102 million for its
U.S. defined benefit plans in 2023, compared to
income of $116 million in 2022.
The Pension Plan maintains a strategic asset
allocation policy that designates target allocations by
asset class.
Investments are diversified across
classes and within each class to minimize the risk of
large losses. Derivatives,
forward
and futures contracts, may be used as asset class
substitutes or for hedging or other risk management
purposes. Periodic reviews are made of investment
investment manager
and
policy
performance. For non-U.S. plans, assets consist
principally of common stock and fixed income
securities.
including swaps,
objectives
International Paper’s U.S. pension allocations by type
of fund at December 31, 2022 and 2021 and target
allocations were as follows:
For non-U.S. pension plans, assumptions reflect
economic assumptions applicable to each country.
The following illustrates the effect on pension
expense for 2023 of a 25 basis point decrease in the
above assumptions:
Asset Class
Equity accounts
Fixed income accounts
Real estate accounts
Other
Total
2022
2021
16 %
67 %
9 %
8 %
18 %
68 %
8 %
6 %
100 %
100 %
Target
Allocations
14% - 25%
62% - 78%
4% - 11%
2% - 8%
In millions
Expense (Income):
Discount rate
Expected long-term rate of return on plan assets
2023
$
15
20
The fair values of International Paper’s pension plan
assets at December 31, 2022 and 2021 by asset
class are shown below. Hedge funds disclosed in the
following table are allocated to fixed income accounts
for target allocation purposes.
84
Fair Value Measurement at December 31, 2022
Other Investments at December 31, 2021
Quoted
Prices
in
Active
Markets
For
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Asset Class
In millions
Total
Equities – domestic
$
442 $
248 $
194 $
641
—
—
—
—
—
82
270
1,790
3,796
103
(1,146)
—
—
Equities – international
Corporate bonds
Government securities
Mortgage backed securities
Other fixed income
Derivatives
Cash and cash equivalents
Other investments:
Hedge funds
Private equity
Real estate funds
911
1,790
3,796
103
(1,139)
25
82
1,319
688
828
—
—
—
—
—
7
25
—
Total Investments
$ 8,845 $
971 $
5,007 $
32
Fair Value Measurement at December 31, 2021
Quoted
Prices in
Active
Markets
For
Identical
Assets
(Level 1)
Total
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Asset Class
In millions
Equities – domestic
$
805 $
471 $
334 $
Equities – international
Corporate bonds
Government securities
Mortgage backed securities
Other fixed income
Derivatives
Cash and cash equivalents
Other investments:
Hedge funds
Private equity
Real estate funds
1,381
2,249
5,733
126
(1,482)
(21)
266
1,368
721
929
976
—
—
—
—
—
266
405
2,249
5,733
126
(1,498)
—
—
—
—
—
—
—
16
(21)
—
Total Investments
$ 12,075 $
1,713 $
7,349 $
(5)
In accordance with accounting standards, certain
investments that are measured at NAV and are not
classified in the fair value hierarchy.
Other Investments at December 31, 2022
Investment
Fair Value
Unfunded
Commitments
Redemption
Frequency
Remediation
Notice Period
In millions
Hedge funds
$
1,319 $
120 Daily to annually
1 - 100 days
Private equity
Real estate
funds
688
828
Total
$
2,835 $
126
129
375
(a)
None
Quarterly
45 - 60 days
(a) A private equity fund investment ("partnership interest") is
contractually locked up for the life of the private equity fund by the
partnership agreement. Limited partners do not have the option to
redeem partnership interests.
85
Investment
Fair Value
Unfunded
Commitments
Redemption
Frequency
Remediation
Notice Period
In millions
Hedge funds
$
1,368 $
Private equity
Real estate
funds
721
929
Total
$
3,018 $
176
190
176
542
Daily to annually
1 - 100 days
(a)
None
Quarterly
45 - 60 days
(a) A private equity fund investment ("partnership interest") is
contractually locked up for the life of the private equity fund by
the partnership agreement. Limited partners do not have the
option to redeem partnership interests.
Equity securities consist primarily of publicly traded
U.S. companies and international companies. Publicly
the closing prices
traded equities are valued at
reported in the active market in which the individual
securities are traded.
corporate
Fixed income consists of government securities,
mortgage-backed
bonds,
securities,
common collective funds and other
fixed income
investments. Government securities are valued by
third-party pricing sources. Mortgage-backed security
holdings consist primarily of agency-rated holdings.
The fair value estimates for mortgage securities are
calculated by third-party pricing sources chosen by
the custodian’s price matrix. Corporate bonds are
valued using either the yields currently available on
comparable securities of issuers with similar credit
ratings or using a discounted cash flows approach
that utilizes observable inputs, such as current yields
of similar instruments, but includes adjustments for
certain risks that may not be observable, such as
credit and liquidity risks. Common collective funds are
valued at the net asset value per share multiplied by
the number of shares held as of the measurement
date. Other fixed income investments of $(1.1) billion
and $(1.5) billion at December 31, 2022 and 2021,
respectively, primarily include reverse repurchase
agreement obligations in which we have sold a
security and have an agreement to repurchase the
same or substantially the same security at a later
date for a price specified in the agreement.
Derivative investments such as futures,
forward
contracts, options and swaps are used to help
manage risks. Derivatives are generally employed as
asset class substitutes (such as when employed in a
portable alpha strategy), for managing asset/liability
mismatches,
other
appropriate risk management purposes. Derivative
instruments are generally valued by the investment
managers or in certain instances by third-party pricing
sources.
hedging
bona
fide
or
or
(commingled, multi-manager
Hedge funds are investment structures for managing
private, loosely-regulated investment pools that can
pursue a diverse array of investment strategies with a
wide range of different securities and derivative
instruments. These investments are made through
funds-of-funds
fund
in
structures) and through direct
individual hedge funds. Hedge funds are primarily
valued by each fund’s third-party administrator based
upon the valuation of the underlying securities and
instruments and primarily by applying a market or
income
appropriate
depending on the specific type of security or
instrument held. Funds-of-funds are valued based
the underlying
upon the net asset values of
investments in hedge funds.
valuation methodology
investments
as
invest
Private equity consists of interests in partnerships
that
in U.S. and non-U.S. debt and equity
securities. Partnership interests are valued using the
most recent general partner statement of fair value,
updated for any subsequent partnership interest cash
flows.
retail, office,
Real estate funds include commercial properties, land
and timberland, and generally include, but are not
limited to,
industrial, multifamily and
hotel properties. Real estate fund values are primarily
reported by the fund manager and are based on
valuation of the underlying investments which include
cost, discounted cash flows,
inputs
based
and market
independent
comparable data.
appraisals
such as
The following is a reconciliation of the assets that are classified using significant unobservable inputs (Level 3) at
December 31, 2022:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
In millions
Beginning balance at December 31, 2020
Actual return on plan assets:
Relating to assets still held at the reporting date
Relating to assets sold during the period
Purchases, sales and settlements
Transfers in and/or out of Level 3
Ending balance at December 31, 2021
Actual return on plan assets:
Relating to assets still held at the reporting date
Relating to assets sold during the period
Purchases, sales and settlements
Transfers in and/or out of Level 3
Ending balance at December 31, 2022
FUNDING AND CASH FLOWS
$
$
$
Other
fixed
income
Derivatives
Total
14 $
(6) $
8
16 $
(21) $
2
—
—
—
(9)
10
(10)
—
(20)
(18)
(101)
(101)
106
—
197
—
106
—
(5)
187
—
32
38
29
(189)
(179)
7 $
25 $
to
determine
be
the plans,
The Company’s funding policy for the Pension Plan is
to contribute amounts sufficient to meet legal funding
requirements, plus any additional amounts that the
appropriate
Company may
considering the funded status of
tax
deductibility, cash flow generated by the Company,
continually
factors. The Company
and
other
timing of any
the amount and
reassesses
discretionary contributions. No voluntary contributions
were made in 2020, 2021 or 2022. Generally,
International Paper’s non-U.S. pension plans are
funded using the projected benefit as a target, except
in certain countries where funding of benefit plans is
not required.
At December 31, 2022, projected future pension
benefit payments, excluding any termination benefits,
were as follows:
In millions
2023
2024
2025
2026
2027
2028-2032
$
610
622
628
637
640
3,199
OTHER U.S. PLANS
International Paper sponsors the International Paper
Company Salaried Savings Plan and the International
Paper Company Hourly Savings Plan, both of which
are tax-qualified defined contribution 401(k) savings
86
plans. Substantially all U.S. salaried and certain
hourly employees are eligible to participate and may
make elective deferrals to such plans to save for
retirement.
International Paper makes matching
contributions to participant accounts on a specified
percentage of employee deferrals as determined by
the provisions of each plan. The Company makes
Retirement Savings Account contributions equal to a
percentage of an eligible employee’s pay. Beginning
the freeze for salaried
in 2019, as a result of
all salaried
employees under
employees are eligible for the contribution to the
Retirement Savings Account.
the Pension Plan,
is
an
plan
plan.
Account
contributions)
unfunded
This
nonqualified
permits
The Company also sponsors the International Paper
Company Deferred Compensation Savings Plan,
defined
which
contribution
eligible
employees to continue to make deferrals and receive
company matching contributions (and Retirement
Savings
their
contributions to the International Paper Salaried
Savings Plan are stopped due to limitations under
tax law. Participant deferrals and company
U.S.
contributions are not invested in a separate trust, but
are paid directly from International Paper’s general
assets at the time benefits become due and payable.
totaled
Company
approximately $159 million, $172 million and $154
million for the plan years ending in 2022, 2021 and
2020, respectively.
contributions
when
plans
the
to
NOTE 20 POSTRETIREMENT BENEFITS
U.S. POSTRETIREMENT BENEFITS
International Paper provides certain retiree health
care and life insurance benefits covering certain U.S.
salaried and hourly employees. These employees are
generally eligible for benefits upon retirement and
completion of a specified number of years of
creditable service. International Paper does not fund
these benefits prior to payment and has the right to
modify or terminate certain of
these plans in the
future.
In addition to the U.S. plan, certain Moroccan
employees are eligible for retiree health care and life
insurance benefits.
The components of postretirement benefit expense in
2022, 2021 and 2020 were as follows:
In millions
2022
2021
2020
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
Service cost
$ — $ — $ — $ — $ — $ —
Interest cost
Actuarial loss
Amortization of
prior service
credits
Net
postretirement
expense
5
3
—
—
5
5
1
1
7
5
2
1
—
—
—
(2)
(1)
(2)
$
8 $ — $
10 $ — $
11 $
1
its
Paper
evaluates
International
actuarial
assumptions annually as of December 31 (the
measurement date) and considers changes in these
long-term factors based upon market conditions and
the requirements of employers’ accounting for
postretirement benefits other
than pensions. The
discount rate assumption was determined based on a
hypothetical settlement portfolio selected from a
universe of high quality corporate bonds.
The discount rates used to determine net U.S. and
for the years
non-U.S. postretirement benefit cost
ended December 31, 2022, 2021 and 2020 were as
follows:
2022
2021
2020
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
Discount rate 2.90 % 5.20 % 2.50 % 6.91 % 3.30 % 7.15 %
The weighted
to
determine the benefit obligation at December 31,
2022 and 2021 were as follows:
assumptions
average
used
2022
2021
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
Discount rate
5.50 % 5.70 % 2.90 % 5.20 %
Health care cost trend rate
assumed for next year
Rate that the cost trend rate
gradually declines to
Year that the rate reaches the
rate it is assumed to remain
7.25 % 4.00 % 7.00 % 4.00 %
5.00 % 4.00 % 5.00 % 4.00 %
2032
2023
2030
2022
87
The plans are only funded in an amount equal to
benefits paid. The following table presents the
changes in benefit obligation and plan assets for
2022 and 2021:
The components of the ($35) million and ($1) million
change in the amounts recognized in OCI during
respectively,
2022 for U.S. and non-U.S. plans,
consisted of:
In millions
2022
2021
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
In millions
Current year actuarial (gain) loss
Amortization of actuarial (loss) gain
Change in projected benefit
obligation:
U.S.
Plans
Non-
U.S.
Plans
$ (32) $
(3)
$ (35) $
(1)
—
(1)
Benefit obligation, January 1
$ 172 $
5 $ 201 $
Service cost
Interest cost
Participants’ contributions
Actuarial (gain) loss
Benefits paid
Less: Federal subsidy
Divestiture
Currency Impact
Benefit obligation,
December 31
Change in plan assets:
Fair value of plan assets,
January 1
Company contributions
Participants’ contributions
Benefits paid
Fair value of plan assets,
December 31
—
5
3
(33)
(23)
1
—
—
—
—
—
—
—
—
—
(1)
—
5
3
(12)
(26)
1
—
—
20
—
1
—
—
—
—
(15)
(1)
$ 125 $
4 $ 172 $
5
$ — $ — $ — $ —
20
3
(23)
—
—
—
23
3
(26)
—
—
—
$ — $ — $ — $ —
Funded status, December 31
$ (125) $
(4) $ (172) $
(5)
Amounts recognized in the
consolidated balance sheet
under ASC 715:
Current liability
$ (15) $ — $ (17) $ —
2023
2024
2025
2026
2027
Non-current liability
(110)
(4)
(155)
$ (125) $
(4) $ (172) $
(5)
(5)
2028 – 2032
The portion of the change in the funded status that
was recognized in net periodic benefit cost and OCI
for the U.S. plans was $44 million, $27 million and
$12 million in 2022, 2021 and 2020, respectively.
The portion of the change in funded status for the
non-U.S. plans was $0 million, $1 million, and $0
million in 2022, 2021 and 2020, respectively.
At December 31, 2022, estimated total
future
postretirement benefit payments, net of participant
contributions and estimated future Medicare Part D
subsidy receipts, were as follows:
In millions
Benefit
Payments
Subsidy
Receipts
Benefit
Payments
U.S.
Plans
U.S.
Plans
$
15 $
1 $
Non-
U.S.
Plans
14
13
12
12
49
1
1
1
1
3
—
—
—
—
—
1
NOTE 21 INCENTIVE PLANS
International Paper
currently has an Incentive
Compensation Plan (ICP). The ICP authorizes grants
of restricted stock, restricted or deferred stock units,
performance awards payable in cash or stock upon
the attainment of specified performance goals,
stock
dividend
appreciation rights, other stock-based awards, and
cash-based
the
Management Development and Compensation
equivalents,
discretion
options,
awards
stock
the
at
of
Amounts recognized in
accumulated other
comprehensive income (loss)
under ASC 715 (pre-tax):
Net actuarial loss (gain)
Prior service credit
$
$
(6) $
(1) $ 29 $ —
—
—
—
—
(6) $
(1) $ 29 $ —
The non-current portion of the liability is included with
the postemployment
liability in the accompanying
consolidated balance sheet under Postretirement and
postemployment benefit obligation.
88
The following summarizes PSP activity for the three
years ended December 31, 2022:
Outstanding at December 31, 2019
Granted
Shares issued
Forfeited
Outstanding at December 31, 2020
Granted
Shares issued
Forfeited
Outstanding at December 31, 2021
Granted
Shares issued
Forfeited
Weighted
Average
Grant Date
Fair Value
$41.14
49.15
51.70
51.70
40.36
45.24
63.54
57.55
35.43
50.32
40.23
42.03
Share/Units
5,514,728
2,171,385
(1,221,950)
(844,138)
5,620,025
2,316,295
(994,052)
(1,016,126)
5,926,142
1,899,211
(1,130,236)
(1,382,637)
Outstanding at December 31, 2022
5,312,480
$38.01
Effective January 1, 2023, the ICP was amended to
change the name of the PSP to Long-Term Incentive
Plan (LTIP), which incorporates RSUs, along with
tiering of performance-based stock units and RSUs.
RESTRICTED STOCK AWARD PROGRAMS
The service-based Restricted Stock Award program
("RSA"), designed for
retention and
special recognition purposes, provides for awards of
restricted stock to key employees.
recruitment,
The following summarizes the activity of
the RSA
program for the three years ended December 31,
2022:
Outstanding at December 31, 2019
Granted
Shares issued
Forfeited
Outstanding at December 31, 2020
Granted
Shares issued
Forfeited
Outstanding at December 31, 2021
Granted
Shares issued
Forfeited
Weighted
Average
Grant Date
Fair Value
$47.27
40.12
44.25
46.43
44.83
50.90
45.59
45.52
49.03
43.38
44.53
47.78
Shares
160,700
82,228
(83,053)
(33,800)
126,075
85,098
(85,768)
(21,636)
103,769
132,200
(104,177)
(5,400)
Outstanding at December 31, 2022
126,392
$46.88
of
the Board
of Directors
Committee
(the
"Committee") that administers the ICP. Additionally,
restricted stock, which may be deferred into restricted
stock units (RSUs), may be awarded under a
Restricted Stock and Deferred Compensation Plan for
Non-Employee Directors.
PERFORMANCE SHARE PLAN
the Performance Share Plan
("PSP"),
Under
contingent awards of
International Paper common
stock are granted by the Committee. The PSP awards
are earned over a three-year period. PSP awards are
earned based on the achievement of defined
performance of Return on Invested Capital ("ROIC")
internal benchmark and
measured against our
ranking
("TSR")
of Total Shareholder Return
compared to the TSR peer group of companies. The
2020-2022, 2021-2023 and 2022-2024 Awards are
weighted 50% ROIC and 50% TSR for all
participants. The ROIC component of
the PSP
awards is valued at the closing stock price on the day
prior to the grant date. As the ROIC component
contains a performance condition, compensation
expense, net of estimated forfeitures,
is recorded
over the requisite service period based on the most
probable number of awards expected to vest. The
TSR component of the PSP awards is valued using a
Monte Carlo simulation as the TSR component
contains a market condition. The Monte Carlo
simulation estimates the fair value of
the TSR
component based on the expected term of the award,
a risk-free rate, expected dividends, and the expected
volatility for the Company and its competitors. The
expected term is estimated based on the vesting
period of the awards, the risk-free rate is based on
the yield on U.S. Treasury securities matching the
vesting period, and the volatility is based on the
Company’s historical volatility over the expected term.
PSP grants
performance-based
restricted stock units.
are made
in
The following table sets forth the assumptions used to
determine compensation cost for the market condition
component of the PSP plan:
Expected volatility
Risk-free interest rate
Twelve Months Ended
December 31, 2022
24.36% - 36.92%
0.17% - 1.61%
89
At December 31, 2022, 2021 and 2020 a total of 7.3
million,
shares,
and
respectively, were available for grant under the ICP.
8.5 million
7.7 million
Stock-based compensation expense and related
income tax benefits were as follows:
In millions
2022
2021
2020
Total stock-based compensation
expense (included in selling and
administrative expense)
$
124 $
130 $
72
Income tax benefits related to stock-
based compensation
13
13
17
At December 31, 2022, $79 million of compensation
cost, net of estimated forfeitures, related to unvested
restricted performance shares, executive continuity
awards and restricted stock attributable to future
performance had not yet been recognized. This
amount will be recognized in expense over a
weighted-average period of 1.8 years.
NOTE
BUSINESS SEGMENT AND GEOGRAPHIC AREA
INFORMATION
FINANCIAL
22
BY
International Paper’s business segments,
Industrial
Packaging and Global Cellulose Fibers are consistent
with the internal structure used to manage these
businesses. See the Description of Business
Segments on pages 31 and 32 in Part II. Item 7.
Management's Discussion and Analysis of Financial
Condition and Results of Operations for a description
of the types of products and services from which each
reportable segment derives its revenues. On October
1, 2021,
the Company completed the previously
announced spin-off of its Printing Papers business
into a new, publicly-traded company, Sylvamo, listed
on the New York Stock Exchange. Additionally, on
August 6, 2021, the Company completed the sale of
its Kwidzyn, Poland mill which included the pulp and
paper mill in Kwidzyn and supporting functions. As a
the Sylvamo spin-off and the sale of
result of
Kwidzyn,
the Company no longer has a Printing
Papers segment, and all prior year amounts have
been adjusted to reflect the Sylvamo and Kwidzyn
businesses as a discontinued operation. Both
segments are differentiated on a common product,
common customer basis consistent with the business
segmentation generally used in the Forest Products
industry.
allows
costs,
this measure
in
trends
of
Business segment operating profits are used by
International Paper’s management
to measure the
earnings performance of its businesses. Management
a
believes
better
that
understanding
operating
efficiencies, prices and volumes. Business segment
operating profits are defined as earnings (loss) from
continuing operations before income taxes and equity
earnings, but including the impact of less than wholly
owned subsidiaries, excluding interest expense, net,
items,
corporate items, net, corporate net special
business net special items and non-operating pension
expense.
External sales by major product
is determined by
aggregating sales from each segment based on
similar products or services. External sales are
defined as those that are made to parties outside
International Paper’s consolidated group, whereas
in the Net Sales table are
sales by segment
determined using a management approach and
include intersegment sales.
INFORMATION BY BUSINESS SEGMENT
Net Sales
In millions
Industrial Packaging
Global Cellulose Fibers
2022
$ 17,451
3,227
2021
$ 16,326
2,732
2020
$ 14,900
2,393
Corporate and Intersegment
Sales (a)
Net Sales
483
$ 21,161
305
$ 19,363
272
$ 17,565
Operating Profit (Loss)
In millions
2022
2021
2020
Industrial Packaging
$
1,742
$
1,638
$
1,757
Global Cellulose Fibers
106
(3)
(218)
Business Segment
Operating Profit
1,848
1,635
1,539
Earnings (loss) from
continuing operations
before income taxes and
equity earnings
Interest expense, net
Adjustment for less than
wholly owned subsidiaries (b)
Corporate expenses, net (a)
Corporate net special items
Business net special items
Non-operating pension
(income) expense
1,511
325
(5)
34
99
76
999
337
(5)
134
352
18
329
446
—
62
262
481
(192)
(200)
(41)
$
1,848
$
1,635
$
1,539
90
Assets
In millions
Industrial Packaging
Global Cellulose Fibers
Corporate and other
Assets
Capital Spending
2022
2021
$ 16,425
$ 16,247
3,625
3,890
3,521
5,475
$ 23,940
$ 25,243
In millions
2022
2021
2020
Industrial Packaging
$
Global Cellulose Fibers
Subtotal
Corporate and other
Capital Spending
762
143
905
26
$
382
$
83
465
15
$
931
$
480
$
554
96
650
13
663
Depreciation, Amortization and Cost of Timber
Harvested
In millions
2022
2021
2020
Industrial Packaging
$
Global Cellulose Fibers
$
783
255
2
$
829
265
3
813
274
4
Corporate
Depreciation and
Amortization
$
1,040
$
1,097
$
1,091
External Sales By Major Product
In millions
Industrial Packaging
Global Cellulose Fibers
Other (c)
Net Sales
2022
$ 17,441
3,219
501
$ 21,161
2021
$ 16,276
2,730
357
$ 19,363
2020
$ 14,851
2,394
320
$ 17,565
INFORMATION BY GEOGRAPHIC AREA
Net Sales (d)
In millions
2022
2021
2020
United States (e)
$ 18,482
$ 16,769
$ 15,178
EMEA
Pacific Rim and Asia
Americas, other than U.S.
1,693
1,611
1,395
123
863
207
776
203
789
Net Sales
$ 21,161
$ 19,363
$ 17,565
Long-Lived Assets (f)
In millions
United States
EMEA
Americas, other than U.S.
Long-Lived Assets
2022
2021
$
9,333
$
9,317
738
378
745
397
$ 10,449
$ 10,459
(a)
Includes sales of $44 million in 2021 and $56 million in 2020
and operating profit (losses) of $9 million in 2021 and $1
million in 2020, from previously divested businesses. There
were no sales or operating profit (losses) from previously
divested businesses in 2022.
(b) Operating profits for
industry segments include each
segment’s percentage share of
the profits of subsidiaries
included in that segment that are less than wholly-owned.
The pre-tax earnings for these subsidiaries is added here to
present consolidated earnings from continuing operations
before income taxes and equity earnings.
Includes $44 million in 2021 and $56 million in 2020 from
previously divested businesses.
(c)
(d) Net sales are attributed to countries based on the location of
the seller.
(e) Export sales to unaffiliated customers were $3.2 billion in
(f)
2022, $2.6 billion in 2021 and $2.4 billion in 2020.
Long-Lived Assets
Properties and Equipment, net.
includes Forestlands and Plants,
91
INTERIM FINANCIAL RESULTS (UNAUDITED)
In millions, except per share amounts
and stock prices
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
Dividends per share of common stock
0.4625
0.25
0.95
0.25
1.38
0.4625
0.18
2.64
0.4625
(1.38)
(0.90)
0.4625
(0.64)
4.10
1.8500
2022
Net sales
Earnings (loss) from continuing
operations before income taxes and
equity earnings
Gain (loss) from discontinued
operations
Net earnings (loss) attributable to
International Paper Company
Basic earnings (loss) per share
attributable to International Paper
Company common shareholders:
Earnings (loss) from continuing
operations
Gain (loss) from discontinued
operations
Net earnings (loss)
Diluted earnings (loss) per share
attributable to International Paper
Company common shareholders:
Earnings (loss) from continuing
operations
Gain (loss) from discontinued
operations
Net earnings (loss)
2021
Net sales
Earnings (loss) from continuing
operations before income taxes and
equity earnings
Gain (loss) from discontinued operations
Net earnings (loss) attributable to
International Paper Company
Basic earnings (loss) per share
attributable to International Paper
Company common shareholders:
Earnings (loss) from continuing
operations
Gain (loss) from discontinued operations
Net earnings (loss)
Diluted earnings (loss) per share
attributable to International Paper
Company common shareholders:
Earnings (loss) from continuing
operations
Gain (loss) from discontinued operations
Net earnings (loss)
$ 5,237
$ 5,389
$ 5,402
$ 5,133
$ 21,161
362 (a)
514 (a)
313 (a)
322 (a)
1,511 (a)
93 (b)
95 (b)
64 (b)
(489) (b)
(237) (b)
360 (a-c)
511 (a-c)
951 (a-c)
(318) (a-c)
1,504 (a-c)
$
0.71
$
1.13
$
2.48
$
0.48
$
4.79
0.25
0.96
0.26
1.39
0.18
2.66
(1.38)
(0.90)
(0.65)
4.14
$
0.70
$
1.13
$
2.46
$
0.48
$
4.74
$ 4,593
$ 4,770
$ 4,914
$ 5,086
$ 19,363
306 (d)
131 (e)
252 (d)
225 (e)
397 (d)
527 (e)
44 (d)
58 (e)
999 (d)
941 (e)
349 (d-f)
432 (d-g)
864 (d-f)
107 (d-f)
1,752 (d-g)
$
0.56
$
0.53
$
0.86
$
0.13
$
2.08
0.33
0.89
0.57
1.10
1.36
2.22
0.15
0.28
2.42
4.50
$
0.55
0.33
0.88
$
0.52
0.57
1.09
$
0.86
1.34
2.20
$
0.13
0.15
0.28
$
2.07
2.40
4.47
2.000
Dividends per share of common stock
0.5125
0.5125
0.5125
0.4625
Note: International Paper's common shares (symbol: IP) are listed
on the New York Stock Exchange.
Note: Since basic and diluted earnings per share are computed
independently for each period and category, full year per share
amounts may not equal the sum of the four quarters. In addition,
the unaudited selected consolidated financial data are derived from
our audited consolidated financial statements and have been
revised to reflect discontinued operations.
92
Footnotes to Interim Financial Results
(d) Includes the following pre-tax charges (gains):
(a) Includes the following pre-tax charges (gains):
In millions
Q1
Q2
Q3
Q4
Debt extinguishment costs
$ — $ — $ 93
$ —
2022
EMEA Packaging goodwill
impairment
Foreign currency cumulative
translation loss related to sale
of equity method investment
Timber monetization
settlement interest
Litigation reserve adjustments
Environmental remediation
reserve adjustment
Sylvamo investment - fair
value adjustment
Other items
Non-operating pension
expense
—
—
—
—
—
(46)
—
—
—
76
—
—
—
15
(3)
6
—
55
(15)
—
(16)
—
10
3
11
48
—
(4)
(49)
(47)
(48)
(48)
Total
$ (95) $ (29) $ 69
$ 96
Includes equity earnings from our
Ilim equity method
(b)
investment for the full year. Also includes a charge of $533 million
for the three months ended December 31, 2022 related to the
impairment of our equity method investment in connection with the
announced plan to sell our interest in the Ilim joint venture.
(c) Includes the following tax expenses (benefits):
2022
In millions
Q1
Q2
Q3
Q4
Tax benefit related to timber
monetization settlement
Tax benefit related to exchange
of Sylvamo shares
Tax impact of other special
items
Foreign deferred tax valuation
allowance
Tax impact of non-operating
pension expense
$ — $ — $ (604) $ —
—
11
—
12
(31)
(35)
—
(4)
(29)
(15)
—
12
—
12
45
12
Total
$ 23
$ (23) $ (656) $ 42
In millions
Q1
Q2
Q3
Q4
Debt extinguishment costs
$ 18
$ 170
$ 35
$ 238
2021
EMEA Packaging business
optimization
Building a Better IP
Legal reserve adjustment
Environmental remediation
reserve adjustment
Gain on sale of equity
investment in Graphic
Packaging
EMEA Packaging impairment -
Turkey
Sylvamo investment - fair
value adjustment
Real estate - office impairment
Other items
Non-operating pension
expense
12
—
—
—
—
—
—
5
(74)
(130)
2
—
—
—
(9)
—
21
11
—
—
—
5
—
—
—
—
9
—
29
(5)
—
—
—
32
—
1
(52)
(51)
(50)
(47)
Total
$ (94) $ 17
$
(1) $ 248
(e)
Includes the operating earnings of the Printing Papers
business and equity earnings from our Ilim equity method
investment
the full year. Also includes the following
for
charges (gains):
In millions
Q1
Q2
Q3
Q4
2021
Printing Papers spin-off
expenses
Gain on sale of Kwidzyn,
Poland mill
Gain on sale of La Mirada, CA
distribution center
Foreign value-added tax credit
Foreign and state taxes related
to spin-off of Printing Papers
business
Non-operating pension expense
$ 20
$ 20
$ 47
$
—
—
—
—
(1)
— (350)
—
(47)
(65)
10
—
(1)
27
—
Total
$ 19
$ (28) $ (331) $
(f)
Includes the following tax expenses (benefits):
5
6
—
—
(3)
—
8
2021
In millions
Q1
Q2
Q3
Q4
Tax impact of other special
items
Tax impact of non-operating
pension expense
$ 12
$ (14) $ (12) $ (73)
13
13
12
11
Total
$ 25
$
(1) $ — $ (62)
(g) Includes the allocation of income to noncontrolling interest
of $1 million for the three months ended June 30, 2021 related
to the gain on the sale of our EMEA Packaging business in
Turkey.
93
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE
None.
ITEM 9A. CONTROLS AND PROCEDURES
of
As of December 31, 2022, an evaluation was carried
out under the supervision and with the participation of
the Company’s management, including our principal
executive officer and principal financial officer, of the
effectiveness
and
procedures (as that term is defined in Rule 13a-15(f)
and 15d-15(f) of the Exchange Act). Based upon this
evaluation, our principal executive officer and
principal
the
Company’s disclosure controls and procedures were
effective as of December 31, 2022.
financial officer have concluded that
disclosure
controls
our
CHANGES IN INTERNAL CONTROL OVER FINANCIAL
REPORTING
financial
There have been no changes in our internal control
reporting during the quarter ended
over
December 31, 2022, that have materially affected, or
are reasonably likely to materially affect, our internal
control over financial reporting.
See Item 8. Financial Statements and Supplementary
Data on pages 43 and 44 of
this Form 10-K for
management's annual report on our internal control
over financial reporting and the attestation report of
our independent public accounting firm.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN
JURISDICTIONS THAT PREVENT INSPECTIONS
None.
94
Information concerning our directors is hereby
incorporated by reference to our definitive proxy
statement that will be filed with the Securities and
Exchange Commission ("SEC") within 120 days of
the close of our fiscal year. The Audit and Finance
Committee of the Board of Directors has at least one
member who is a financial expert, as that term is
defined in Item 401(d)(5) of Regulation S-K. Further
information concerning the composition of the Audit
and Finance Committee and our audit committee
financial experts is hereby incorporated by reference
to our definitive proxy statement that will be filed with
the SEC within 120 days of the close of our fiscal
year.
to our executive
officers is set forth on pages 7 and 8 in Part I of this
Form 10-K under the caption, “Information About Our
Executive Officers.”
Information with respect
Executive officers of International Paper are elected
to hold office until the next annual meeting of the
Board of Directors following the annual meeting of
shareholders and, until
the election of successors,
subject to removal by the Board.
The Company’s Code of Business Ethics (Code) is
applicable to all employees of the Company, including
the chief executive officer and senior
financial
officers, as well as the Board of Directors. We
disclose any amendments to our Code and any
waivers from a provision of our Code granted to our
directors, chief executive officer and senior financial
officers on our website within four business days
following such amendment or waiver. To date, no
waivers of the Code have been granted.
We make available free of charge on our website at
www.internationalpaper.com, and in print
to any
shareholder who requests them, our Corporate
Governance Principles, our Code of Business Ethics
and the Charters of our Audit and Finance
Committee,
and
Compensation Committee, Governance Committee
and Public Policy and Environment Committee.
Requests for copies may be directed to the corporate
secretary at our corporate headquarters.
Development
Management
to
respect
compliance with
Information with
Section 16(a) of the Exchange Act and our corporate
governance is hereby incorporated by reference to
our definitive proxy statement that will be filed with
the SEC within 120 days of the close of our fiscal
year.
ITEM 11. EXECUTIVE COMPENSATION
to the compensation of
Information with respect
executives and directors of the Company is hereby
incorporated by reference to our definitive proxy
statement that will be filed with the SEC within 120
days of the close of our fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
A description of
the security ownership of certain
beneficial owners and management and equity
compensation plan information is hereby incorporated
by reference to our definitive proxy statement that will
be filed with the SEC within 120 days of the close of
our fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
A description of applicable information with respect to
certain relationships and related transactions and
director
hereby
incorporated by reference to our definitive proxy
statement that will be filed with the SEC within 120
days of the close of our fiscal year.
independence
matters,
is
ITEM 14. PRINCIPAL ACCOUNTING FEES AND
SERVICES
Information with respect to fees paid to, and services
rendered by, our
registered public
independent
accounting firm, and our policies and procedures for
pre-approving those services, is hereby incorporated
by reference to our definitive proxy statement that will
be filed with the SEC within 120 days of the close of
our fiscal year.
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(1) Financial Statements – See Item 8. Financial
Statements and Supplementary Data.
(2) Financial Statement Schedules – The following
financial data should be read in
additional
conjunction with the consolidated financial
statements in Item 8. Financial Statements and
Supplementary Data. Schedules not
included
financial data have been
with this additional
omitted because they are not applicable, or the
required
the
consolidated financial statements or the notes
thereto.
information
shown
in
is
Additional Financial Data
2022, 2021 and 2020
Transaction Agreement, dated October
23, 2017, by and among the Company,
Graphic Packaging Holding Company,
LLC and Graphic
Gazelle Newco
Packaging
Inc.
(incorporated by reference to Exhibit 2.1
to the Company’s Current Report on
Form 8-K dated October 24, 2017).
International,
Separation and Distribution Agreement,
dated as of September 29, 2021, by and
between International Paper Company
and Sylvamo Corporation (incorporated
by reference to Exhibit 2.1 to the
Company’s’ Current Report on Form 8-K
dated October 1, 2021).
Incorporation
Restated Certificate of
by
the Company
of
reference
the
Company’s Current Report on Form 8-K
dated May 13, 2013).
(incorporated
to
3.1
to Exhibit
By-laws of the Company, as amended
through February 9, 2016 (incorporated
by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K
dated February 8, 2016).
Indenture, dated as of April 12, 1999,
between the Company and The Bank of
New York, as Trustee (incorporated by
reference
the
Company’s Current Report on Form 8-K
dated June 16, 2000).
to Exhibit
4.1
to
Supplemental
Indenture (including the
form of Notes), dated as of June 4,
2008, between the Company and The
Trustee
Bank
(incorporated by reference to Exhibit 4.1
to the Company’s Current Report on
Form 8-K dated June 4, 2008).
of New York,
as
Supplemental
Indenture (including the
form of Notes), dated as of December 7,
2009, between the Company and The
Bank
of New York Mellon Trust
Company, N.A., as trustee (incorporated
by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K
dated December 7, 2009).
Supplemental
Indenture (including the
form of Notes), dated as of November
16, 2011, between the Company and
The Bank of New York Mellon Trust
Company, N.A., as trustee (incorporated
by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K
dated November 16, 2011).
(2.1)
(2.2)
(3.1)
(3.2)
(4.1)
(4.2)
(4.3)
(4.4)
95
and
Stock
Restricted
Deferred
Compensation Plan for Non-Employee
Directors, Amended and Restated as of
May 10, 2010 (incorporated by reference
to Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for
the quarter
ended June 30, 2010). +
Restricted
Form of
Award
Agreement (incorporated by reference to
Exhibit 10.3 to the Company's Annual
Report on Form 10-K for the fiscal year
ended December 31, 2017). +
Stock
Form of Restricted Stock Unit Award
Agreement (cash settled) (incorporated by
reference to Exhibit 10.4 to the Company's
Annual Report on Form 10-K for the fiscal
year ended December 31, 2017). +
Form of Restricted Stock Unit Award
Agreement (stock settled) (incorporated by
reference to Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the fiscal
year ended December 31, 2017). +
Form of Performance Share Plan award
certificate (incorporated by reference to
Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the fiscal year
ended December 31, 2017). +
Pension Restoration Plan for Salaried
Employees (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for
the quarter
ended March 31, 2009). +
to
Number One
Amendment
the
International Paper Pension Restoration
Plan for Salaried Employees effective
January
by
reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the fiscal
year ended December 31, 2019). +
(incorporated
2013
1,
to
Two
Number
Amendment
the
International Paper Pension Restoration
Plan for Salaried Employees effective
by
January
reference to Exhibit 10.9 to the Company's
Annual Report on Form 10K for the fiscal
year ended December 31, 2019). +
(incorporated
2013
1,
to
Three
the
Amendment Number
International Paper Pension Restoration
Plan for Salaried Employees effective
by
January
reference
the
Company's Annual Report on Form 10-K
for the fiscal year ended December 31,
2019). +
(incorporated
to
2015
to Exhibit
10.10
1,
(4.5)
(4.6)
(4.7)
(4.8)
(4.9)
(4.10)
(4.11)
(10.1)
(10.2)
(10.3)
(10.4)
(10.5)
(10.6)
(10.7)
(10.8)
(10.9)
(10.10)
Supplemental
Indenture (including the
form of Notes), dated as of June 10,
2014, between the Company and The
Bank of New York Mellon Trust
trustee
Company,
(incorporated
to
Exhibit 4.1 to the Company's Current
Report on Form 8-K dated June 10,
2014).
N.A.,
by
reference
as
Supplemental
Indenture (including the
form of Notes), dated as of May 26,
2015, between the Company and The
Bank of New York Mellon Trust
trustee
Company,
(incorporated
to
Exhibit 4.1 to the Company's Current
Report on Form 8-K dated May 26,
2015).
N.A.,
by
reference
as
Supplemental
Indenture (including the
form of Notes), dated as of August 11,
2016, between the Company and The
Bank of New York Mellon Trust
Company,
trustee
(incorporated by reference to Exhibit
4.1 to the Company's Current Report on
Form 8-K dated August 11, 2016).
N.A.,
as
Supplemental
Indenture (including the
form of Notes), dated as of August 9,
2017, between the Company and The
Bank of New York Mellon Trust
trustee
Company,
(incorporated by reference to Exhibit
4.1 to the Company's Current Report on
Form 8-K dated August 9, 2017.
N.A.,
as
Indenture (including the
Supplemental
form of Notes), dated as of June 10,
2019, between the Company and the
The Bank of New York Mellon Trust
Company,
trustee
(incorporated by reference to Exhibit
4.1 to the Company's Current Report on
Form 8-K dated June 10, 2019).
N.A.,
as
with
accordance
In
Item 601
(b) (4) (iii) (A) of Regulation S-K, certain
instruments respecting long-term debt
of the Company have been omitted but
will be furnished to the Commission
upon request.
Description of Securities (incorporated
by reference to Exhibit 4.13 to the
Company's Annual Report on Form 10K
for the fiscal year ended December 31,
2019).
Amended and Restated 2009 Incentive
Compensation Plan (ICP)
(corrected
version of a previously filed exhibit)
(incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended
March 31, 2019). +
96
(10.11)
(10.12)
(10.13)
(10.14)
(10.15)
(10.16)
to
Amendment Number Four
the
International Paper Pension Restoration
Plan for Salaried Employees effective
July 1, 2014 (incorporated by reference
to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the
fiscal year ended December 31, 2019).
+
to
Five
Amendment Number
the
International Paper Pension Restoration
Plan for Salaried Employees effective
January 1, 2019 (incorporated by
reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K
for the fiscal year ended December 31,
2019). +
to
Six
Amendment Number
the
International Paper Pension Restoration
Plan for Salaried Employees effective
January 1, 2020 (incorporated by
the
reference
Company’s Quarterly Report on Form
10-Q for the quarter ended March 31,
2020). +
to Exhibit
10.1
to
Unfunded Supplemental Retirement
Plan for Senior Managers, as amended
and restated effective January 1, 2008
(incorporated by reference to Exhibit
10.21 to the Company’s Annual Report
on Form 10-K for the fiscal year ended
December 31, 2007). +
Amendment No. 1 to the International
Unfunded
Paper
Company
Supplemental Retirement Plan
for
Senior Managers, effective October 13,
2008 (incorporated by reference to
Exhibit 10.3 to the Company’s Current
Report on Form 8-K dated October 17,
2008). +
Amendment No. 2 to the International
Unfunded
Paper
Company
Supplemental Retirement Plan
for
Senior Managers, effective October 14,
2008 (incorporated by reference to
Exhibit 10.5 to the Company’s Current
Report on Form 8-K dated October 17,
2008). +
Amendment No. 3 to the International
Paper Company Unfunded Supplemental
Retirement Plan for Senior Managers,
effective December 8, 2008 (incorporated
by reference to Exhibit 10.20 to the
Company’s Annual Report on Form 10-K
for the fiscal year ended December 31,
2008). +
Amendment No. 4 to the International
Paper Company Unfunded Supplemental
Retirement Plan for Senior Managers,
effective January 1, 2009 (incorporated by
reference to Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the
quarter ended September 30, 2009). +
Amendment No. 5 to the International
Paper Company Unfunded Supplemental
Retirement Plan for Senior Managers,
effective October 31, 2009 (incorporated
by reference to Exhibit 10.17 to the
Company’s Annual Report on Form 10-K
for the fiscal year ended December 31,
2009). +
Amendment No. 6 to the International
Paper Company Unfunded Supplemental
Retirement Plan for Senior Managers,
effective January 1, 2012 (incorporated by
reference
the
Company’s Annual Report on Form 10-K
for the fiscal year ended December 31,
2011). +
to Exhibit
10.21
to
Amendment No. 7 to the International
Paper Company Unfunded Supplemental
Retirement Plan for Senior Managers
effective July 12, 2016 (incorporated by
reference
the
Company's Annual Report on Form 10-K
for the fiscal year ended December 31,
2019). +
to Exhibit
10.20
to
Amendment No. 8 to the International
Paper Company Unfunded Supplemental
Retirement Plan for Senior Managers
effective January 1, 2019 (incorporated by
the
reference
Company's Annual Report on Form 10-K
for the year ended December 31, 2019). +
to Exhibit
10.21
to
Amendment No. 9 to the International
Paper Company Unfunded Supplemental
Retirement Plan for Senior Managers
effective November 1, 2019 (incorporated
by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-
Q for the quarter ended September 30,
2019. +
(10.17)
(10.18)
(10.19)
(10.20)
(10.21)
(10.22)
(10.23)
97
(10.24)
(10.25)
(10.26)
(10.27)
(10.28)
(10.29)
(10.30)
(10.31)
(10.32)
(10.33)
(10.34)
(10.35)
(10.36)
(10.37)
by
into
Form of Non-Competition Agreement,
certain Company
entered
employees (including named executive
officers) who have received restricted
stock (incorporated by reference to
Exhibit 10.22 to the Company’s Annual
Report on Form 10-K for the fiscal year
ended December 31, 2008). +
by
into
Form of Non-Solicitation Agreement,
entered
certain Company
employees (including named executive
officers) who have received restricted
stock (incorporated by reference to
Exhibit 10.5 to the Company’s Quarterly
Report on Form 10-Q for the quarter
ended March 31, 2006). +
senior
"grandfathered"
Form of Change-in-Control Agreement -
Tier I, for the Chief Executive Officer and
all
vice
presidents elected prior to 2012 (all but
one named executive officer) - approved
by
September
reference
the
Company’s Quarterly Report on Form
10-Q for the quarter ended September
30, 2013). +
(incorporated
to
10.1
to Exhibit
2013
II,
(one
for all
future senior
Form of Change-in-Control Agreement -
Tier
vice
presidents and all "grandfathered" vice
executive
presidents
officer) elected prior to February 2008 -
approved
2013
(incorporated by reference to Exhibit
10.2 to the Company’s Quarterly Report
on Form 10-Q for the quarter ended
September 30, 2013). +
September
named
Form of Indemnification Agreement for
Directors (incorporated by reference to
Exhibit 10.13 to the Company’s Annual
Report on Form 10-K for the fiscal year
ended December 31, 2003). +
Board Policy on Severance Agreements
with Senior Executives (incorporated by
the
reference
Company’s Current Report on Form 8-K
filed on October 18, 2005). +
to Exhibit
10.1
to
Board Policy on Change of Control
Agreements (incorporated by reference
to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed on October 18,
2005). +
Time Sharing Agreement, dated October
17, 2014 (and effective November 1,
2014), by and between Mark S. Sutton
and
International Paper Company
(incorporated by reference to Exhibit
99.1 to the Company’s Current Report
on Form 8-K dated October 14, 2014). +
98
26,
2017,
Agreement,
Insurance Company
Commitment
dated
between
September
International Paper Company and The
Prudential
of
America, relating to the Retirement Plan
of
Company
(incorporated by reference to Exhibit
10.1 to the Company’s Quarterly Report
on Form 10-Q for the quarter ended
September 30, 2017). +
International
Paper
Insurance Company
Agreement,
2018,
25,
dated
Commitment
September
between
International Paper Company and The
Prudential
of
America, relating to the Retirement Plan
Company
of
(corrected version of previously filed
exhibit)
(incorporated by reference to
Exhibit 10.27 to the Company's Annual
Report on Form 10-K for the fiscal year
ended December 31, 2018). * +
International
Paper
Amendment No. 16 to the Second
Amended and Restated Credit and
Security Agreement,
dated April 28,
International
2020, by and among
Paper Company, as servicer, Red Bird
Receivables, LLC,
the
lenders and co-agents from time to time
party thereto, and Mizuho Bank, Ltd.,
as Administrative Agent (incorporated by
reference to Exhibit 10.1 to
the
Company's Current Report on Form 8-K
filed on April 29, 2020).
as borrower,
Second Amended and Restated Five
Year Credit Agreement dated as of June
17, 2021, among International Paper
Company, JPMorgan Chase Bank, N.A.,
individually and as administrative agent,
and certain lenders (incorporated by
reference to
Exhibit 10.1 to the
Company's Current Report on Form 8-K
filed June 17, 2021).
and CoBank, ACB,
Term Loan Agreement dated January
24, 2023, between International Paper
Company
as
(incorporated by
adminstrative agent
reference
the
Company's Current Report on Form 8-K
filed January 24, 3023).+
to Exhibit
10.1
to
for
the
Share Purchase Agreement
Divestiture
International Paper-
of
Kwidzyn SP. Z.O.O. by and among
International Paper (Poland) Holding SP.
Z.O.O., Mayr-Melnhof Containerboard
International, GMBH, Mayr-Melnhof
Karton AG and International Paper
dated August 4, 2021, incorporated by
reference
the
Company’s Quarterly Report on Form
10-Q filed October 28. 2021.
to Exhibit
10.1
to
(101.INS) XBRL Instance Document - the instance
in the
document does not appear
Interactive Data File because its XBRL
tags are embedded within the inline
XBRL document. *
(101.SCH) XBRL Taxonomy Extension Schema *
(101.CAL) XBRL Taxonomy Extension Calculation
Linkbase *
(101.DEF) XBRL Taxonomy Extension Definition
Linkbase *
(101.LAB) XBRL
Taxonomy
Extension
Label
Linkbase *
(101.PRE) XBRL Extension Presentation Linkbase
*
(104)
Cover Page
(formatted
contained in Exhibit 101. *
Inline
Interactive Data File
and
XBRL,
as
+ Management contract or compensatory plan or arrangement.
* Filed herewith
** Furnished herewith
† Confidential treatment has been granted for certain information
pursuant to Rule 24b-2 under the Securities Act of 1934, as
amended.
Item 16. Form 10-K Summary
None.
(10.38)
(10.39)
(21)
(23.1)
(23.2)
(24)
(31.1)
(31.2)
(32)
(99)
Share Purchase Agreement,
dated
February 12, 2021, by and between
Investments
Paper
International
(Luxembourg) S.a.r.l, Mayr-Melnhoff
Cartonboard International GmbH, Mayr-
Melnhof Karton AG, International Paper
Company (Poland) Holding Sp. Z O.O.,
International Paper Company
and
(incorporated by reference to Exhibit 2.1
to the Company's Quarterly Report on
Form 10-Q filed on April 30, 2021).
Transfer Notice from International Paper
Switzerland GmbH to Pulp Holding
Luxembourg S.A.R.L and ILIM Holding
Luxembourg S.A.R.L dated December
15, 2022. *
Subsidiaries and Joint Ventures.*
Consent of
Public Accounting Firm. *
Independent Registered
Consent of
Public Accounting Firm. *
Independent Registered
Power of Attorney (contained on the
signature page to the Company’s Annual
Report on Form 10-K for the year ended
December 31, 2010). *
Certification
S. Sutton,
by Mark
Chairman and Chief Executive Officer,
pursuant
the
302
Sarbanes-Oxley Act of 2002. *
to Section
of
Certification by Tim S. Nicholls, Senior
Vice President and Chief Financial
Officer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. *
Certification pursuant
to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002.**
Report of Independent Auditors for Ilim
S.A and subsidiaries as of and for the
years ended December 31, 2022 and
2021. *
99
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL PAPER COMPANY
By:
/S/ JOSEPH R. SAAB
Joseph R. Saab
Senior Vice President, General Counsel
and Corporate Secretary
POWER OF ATTORNEY
February 17, 2023
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Timothy S. Nicholls, Joseph R. Saab and Amy M. Beeson as his or her true and lawful attorney-in-fact and
agent, acting alone, with full power of substitution and resubstitution for him or her and in his or her name, place and
stead, in any and all capacities, to sign any or all amendments to this annual report on Form 10-K, and to file the
same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact full power and authority to do and perform each and every act and
thing requisite or necessary to be done, hereby ratifying and confirming all that said attorney-in-fact and agent, or
his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/S/ MARK S. SUTTON
Mark S. Sutton
Chairman of the Board & Chief Executive
Officer and Director
February 17, 2023
/S/ CHRISTOPHER M. CONNOR
Director
Christopher M. Connor
February 17, 2023
/S/ AHMET C. DORDUNCU
Director
February 17, 2023
Ahmet C. Dorduncu
/S/
ILENE S. GORDON
Director
February 17, 2023
Ilene S. Gordon
/S/ ANDERS GUSTAFSSON
Director
February 17, 2023
Anders Gustafsson
/S/
JACQUELINE C. HINMAN
Director
February 17, 2023
Jacqueline C. Hinman
100
/s/ CLINTON A. LEWIS, JR.
Director
Clinton A. Lewis, Jr.
/s/ DONALD G. (DG) MACPHERSON
Director
Donald G. (DG) Macpherson
/s/ KATHRYN D. SULLIVAN
Kathryn D. Sullivan
Director
/s/ ANTON V. VINCENT
Director
Anton V. Vincent
/S/ RAY G. YOUNG
Director
Ray G. Young
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
/S/ TIMOTHY S. NICHOLLS
Timothy S. Nicholls
/S/ HOLLY G. GOUGHNOUR
Holly G. Goughnour
Senior Vice President and Chief Financial
Officer
February 17, 2023
Vice President – Finance and Corporate
Controller
February 17, 2023
101
[THIS PAGE INTENTIONALLY LEFT BLANK]
2022 LISTING OF FACILITIES
(all facilities are owned except noted otherwise)
INDUSTRIAL PACKAGING
Containerboard
U.S.:
Pine Hill, Alabama
Prattville, Alabama
Selma, Alabama (Riverdale Mill)
Modesto, California
Ontario, California
Salinas, California
Sanger, California
Santa Fe Springs, California (2
locations)
Tracy, California
Golden, Colorado
Cantonment, Florida (Pensacola Mill)
Wheat Ridge, Colorado
APPENDIX I
Fridley, Minnesota
Minneapolis, Minnesota leased
Shakopee, Minnesota
White Bear Lake, Minnesota
Houston, Mississippi
Jackson, Mississippi
Magnolia, Mississippi leased
Olive Branch, Mississippi
Fenton, Missouri
Kansas City, Missouri (2 locations)
Maryland Heights, Missouri
North Kansas City, Missouri
leased
St. Joseph, Missouri
St. Louis, Missouri
Omaha, Nebraska
McCarran, Nevada
Barrington, New Jersey
Bellmawr, New Jersey
Milltown, New Jersey
Spotswood, New Jersey
Thorofare, New Jersey
Binghamton, New York
Buffalo, New York
Rochester, New York
Scotia, New York
Utica, New York
Charlotte, North Carolina (2
locations) 1 leased
Lumberton, North Carolina
Manson, North Carolina
Newton, North Carolina
Putnam, Connecticut
Orlando, Florida
Plant City, Florida
Tampa, Florida leased
Columbus, Georgia
Forest Park, Georgia
Griffin, Georgia
Lithonia, Georgia
Savannah, Georgia
Tucker, Georgia
Aurora, Illinois (3 locations)
Bedford Park, Illinois (2 locations) 1
leased
Belleville, Illinois
Carol Stream, Illinois
Des Plaines, Illinois
Lincoln, Illinois
Montgomery, Illinois
Northlake, Illinois
Rockford, Illinois
Butler, Indiana
Crawfordsville, Indiana
Fort Wayne, Indiana
Indianapolis, Indiana (3 locations)
Statesville, North Carolina
Saint Anthony, Indiana
Tipton, Indiana
Cedar Rapids, Iowa
Waterloo, Iowa
Garden City, Kansas
Byesville, Ohio
Delaware, Ohio
Eaton, Ohio
Madison, Ohio
Marion, Ohio
Bowling Green, Kentucky
Marysville, Ohio leased
Lexington, Kentucky
Louisville, Kentucky
Walton, Kentucky
Bogalusa, Louisiana
Lafayette, Louisiana
Shreveport, Louisiana
Springhill, Louisiana
Auburn, Maine
Three Rivers, Michigan
Arden Hills, Minnesota
Austin, Minnesota
A-1
Middletown, Ohio
Mt. Vernon, Ohio
Newark, Ohio
Streetsboro, Ohio
Wooster, Ohio
Oklahoma City, Oklahoma
Beaverton, Oregon (3 locations)
Hillsboro, Oregon
Portland, Oregon
Salem, Oregon leased
Atglen, Pennsylvania
Rome, Georgia
Savannah, Georgia
Cayuga, Indiana
Cedar Rapids, Iowa
Henderson, Kentucky
Maysville, Kentucky
Bogalusa, Louisiana
Campti, Louisiana
Mansfield, Louisiana
Vicksburg, Mississippi
Valliant, Oklahoma
Springfield, Oregon
Orange, Texas
International:
Veracruz, Mexico
Kenitra, Morocco
Madrid, Spain
Corrugated Packaging
U.S.:
Bay Minette, Alabama
Decatur, Alabama
Dothan, Alabama leased
Huntsville, Alabama
Conway, Arkansas
Fort Smith, Arkansas (2 locations)
Russellville, Arkansas (2 locations)
Tolleson, Arizona
Yuma, Arizona
Anaheim, California
Buena Park, California leased
Camarillo, California
Carson, California
Cerritos, California leased
Compton, California
Elk Grove, California
Exeter, California
Gilroy, California (2 locations)
Los Angeles, California
Bags
U.S.:
Buena Park, California
Beaverton, Oregon
Grand Prairie, Texas
GLOBAL CELLULOSE FIBERS
Pulp
U.S.:
Cantonment, Florida (Pensacola Mill)
Flint River, Georgia
Port Wentworth, Georgia
Columbus, Mississippi
New Bern, North Carolina
Riegelwood, North Carolina
Georgetown, South Carolina
Franklin, Virginia
International:
Grande Prairie, Alberta, Canada
Gdansk, Poland
DISTRIBUTION
International:
Guangzhou, China leased
Hong Kong, China leased
Shanghai, China leased
Japan leased
Korea leased
Singapore leased
Biglerville, Pennsylvania (2 locations)
Puebla, Mexico leased
Eighty-four, Pennsylvania
Hazleton, Pennsylvania
Kennett Square, Pennsylvania
Lancaster, Pennsylvania
Mount Carmel, Pennsylvania
Georgetown, South Carolina
Laurens, South Carolina
Lexington, South Carolina
Ashland City, Tennessee leased
Cleveland, Tennessee
Elizabethton, Tennessee leased
Morristown, Tennessee
Murfreesboro, Tennessee
Amarillo, Texas
Carrollton, Texas (2 locations)
Edinburg, Texas
El Paso, Texas
Ft. Worth, Texas leased
Grand Prairie, Texas
Hidalgo, Texas
McAllen, Texas
San Antonio, Texas (2 locations)
Sealy, Texas
Waxahachie, Texas
Lynchburg, Virginia
Petersburg, Virginia
Richmond, Virginia
Moses Lake, Washington
Olympia, Washington
Yakima, Washington
Fond du Lac, Wisconsin
Manitowoc, Wisconsin
International:
Rancagua, Chile
Cabourg, France
Chalon-sur-Saone, France
LePuy, France (Espaly Box Plant)
Mortagne, France
Saint Amand, France
Bellusco, Italy
Catania, Italy
Pomezia, Italy
San Felice, Italy
Apodaco (Monterrey), Mexico leased
Ixtaczoquitlan, Mexico
Juarez, Mexico leased (2 locations)
Los Mochis, Mexico
Reynosa, Mexico
San Jose Iturbide, Mexico
Santa Catarina, Mexico
Silao, Mexico
Toluca, Mexico
Zapopan, Mexico
Agadir, Morocco
Casablanca, Morocco
Tangier, Morocco
Ovar, Portugal
Barcelona, Spain
Bilbao, Spain
Gandia, Spain
Grinon, Spain
Las Palmas, Spain
Madrid, Spain
Montblanc, Spain
Tavernes de la Valldigna, Spain
Tenerife, Spain
Valls, Spain
Recycling
U.S.:
Phoenix, Arizona
Fremont, California
Norwalk, California
West Sacramento, California
Itasca, Illinois
Des Moines, Iowa
Wichita, Kansas
Roseville, Minnesota
Omaha, Nebraska
Charlotte, North Carolina
Beaverton, Oregon
Springfield, Oregon leased
Carrollton, Texas
Salt Lake City, Utah
Richmond, Virginia
Kent, Washington
International:
Monterrey, Mexico leased
Xalapa, Veracruz, Mexico leased
A-2
2022 CAPACITY INFORMATION
(in thousands of short tons except as noted)
Industrial Packaging
Containerboard (a)
Global Cellulose Fibers
Dried Pulp (in thousands of metric tons)
(a) In addition to Containerboard, this also includes saturated kraft, kraft bag, and gypsum.
APPENDIX II
U.S.
EMEA
Americas,
other
than U.S.
Total
13,823
524
27
14,374
2,963
—
388
3,351
A-3
2022 Annual Performance Summary – Officers Listing
Officers listing as of [March 1, 2023]
Elected Officers / SLT:
Mark S. Sutton
Chairman of the Board and
Chief Executive Officer
Clay R. Ellis
Senior Vice President
Global Cellulose Fibers and IP Asia
Aimee K. Gregg
Senior Vice President
Supply Chain and Information Technology
W. Thomas Hamic
Senior Vice President
North American Container and Chief Commercial Officer
Allison B. Magness
Senior Vice President
Manufacturing and Environment, Health and Safety
Timothy S. Nicholls
Senior Vice President and
Chief Financial Officer
Thomas J. Plath
Senior Vice President
Global Human Resources and
Corporate Affairs
James P. Royalty, Jr.
Senior Vice President
Containerboard and Recycling and
IP Europe, Middle East and Africa
Joseph R. Saab
Senior Vice President
General Counsel and Corporate Secretary
Gregory T. Wanta
Senior Vice President
Retiring in 2023
Company Officers / VPs:
Lee C. Alexander
Vice President
Global Fiber Supply
Michael H. Anderson
Vice President and
Chief Information Officer
Santiago Arbelaez
Vice President, Strategy
Industrial Packaging
2022 Annual Performance Summary – Officers Listing
Sophie N. Beckham
Vice President and
Chief Sustainability Officer
September G. Blain
Vice President
Disruptive Technologies
Paul J. Blanchard
Vice President
IPG Supply Chain and
Supply Chain Operations
Vincent P. Bonnot
Vice President
Financial Planning and Analysis
Eric Chartrain
Vice President
Strategy Acceleration and Operational Excellence
Europe, Middle East and Africa
Donald P. Devlin
Vice President
Finance and Strategic Planning
Industrial Packaging
Kenneth R. Goldberg
Vice President
Tax
Holly G. Goughnour
Vice President
Finance and Corporate Controller
John F. Grover
Vice President
Enterprise Converting Optimization
North American Container
Guillermo J. Gutierrez
Vice President and General Manager
North American Container
Latin America and South Texas Border Area
Charles Levell Hairston
Vice President
Recycling and Recovered Fiber
Jason J. Handel
Vice President
Sales
Global Cellulose Fibers
Errol A. Harris
Vice President and Treasurer
2022 Annual Performance Summary – Officers Listing
Russell V. Harris
Vice President Manufacturing
Containerboard
Peter G. Heist
Vice President
Operational Excellence
Kally Hodgson
Vice President
Global Sourcing
Robert M. Hunkeler
Vice President
*Retiring March 31, 2023
David Hunt
Vice President
Technology and Capital Execution
Chris J. Keuleman
Vice President
Global Government Relations
Brian N.G. McDonald
Vice President
Strategic Planning
Mark P. Nellessen
Vice President
Investor Relations
Leslie A. Petrie
Vice President
Environment, Health and Safety
Jose Maria Rodriguez Meis
Vice President and General Manager
North American Container
West Area
Christopher M. Roeder
Vice President and General Manager
North American Container
East Area
F. David Segal
Vice President
Investment Excellence
Fred A. Towler
Vice President Human Resources,
Talent Management
and Chief Diversity Officer
*Retiring May 31, 2023
2022 Annual Performance Summary – Officers Listing
Keith R. Townsend
Vice President and General Manager
North American Container
South Area
Carol W. Tusch
Vice President
Trusts and Investments
Marc Van Lieshout
Vice President
Audit
Kevin N. Walls
Vice President Manufacturing
Containerboard
Hunter M. Whiteley
Vice President Manufacturing
Global Cellulose Fibers
Sylvia M. Williams
Vice President
Deputy General Counsel and
Assistant Corporate Secretary
Ron P. Wise
Vice President and General Manager
Commercial and National Accounts
North American Container
Ksenia Sosnina
Chief Executive Officer
Ilim Group
*Agreement to sell ownership interest in Ilim Group announced Jan. 24, 2023
Board of Directors as of March 31, 2023
Mark S. Sutton
Chairman of the Board and
Chief Executive Officer
International Paper Company
Christopher M. Connor
Lead Director
Retired Chairman, Chief Executive Officer
The Sherwin-Williams Company
Ahmet C. Dorduncu
Retired Chief Executive Officer
Akkok Group
Ilene S. Gordon
Retired Chairman, President
and Chief Executive Officer
Ingredion Incorporated
Anders Gustafsson
Executive Chair, Former Chief Executive Officer
Zebra Technologies Corporation
Jacqueline C. Hinman
Former Chairman, President
and Chief Executive Officer
CH2M HILL Companies, Ltd.
Clinton A. Lewis, Jr.
Chief Executive Officer
AgroFresh Solutions, Inc.
Donald G. “DG” Macpherson
Chairman and Chief Executive Officer
W.W. Grainger, Inc.
Kathryn D. Sullivan
Senior Fellow Potomac Institute
for Policy Studies & Ambassador-at-Large
Smithsonian National Air
and Space Museum
Anton V. Vincent
President
Mars Wrigley North America
Ray G. Young
Retired Vice Chairman and
Chief Financial Officer
Archer Daniels Midland Company
SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS
International Paper Company
6400 Poplar Avenue Memphis, TN 38197
(901) 419-9000
ANNUAL MEETING
The next annual meeting of shareholders will be held at
International Paper’s headquarters in Memphis TN at 11:00 a.m.
CDT on Monday, May 8, 2023
TRANSFER AGENT AND REGISTRAR
Computershare, our transfer agent, maintains the records of
our registered shareholders and can help you with a variety of
shareholder related services at no charge including:
Š Change of name or address
Š Consolidation of accounts
Š Duplicate mailings
Š Dividend reinvestment enrollment
Š Lost stock certificates
Š Transfer of stock to another person
Š Additional administrative services
Telephone:
(800) 678-8715 (U.S.)
(201) 680-6578 (International)
MAILING ADDRESSES
Shareholder correspondence should be mailed to:
Computershare Investor Services
P.O. Box 43006
Providence, RI 02940-3006
USA
Overnight mail delivery:
Computershare Investor Services
150 Royall Street, Suite 101
Canton, MA 02021
USA
SHAREHOLDER WEBSITE
www.computershare.com/investor
Shareholder online inquiries
https://www-us.computershare.com/investor/Contact
STOCK EXCHANGE LISTINGS
Common shares (symbol: IP) are listed on the New York
Stock Exchange
DIRECT PURCHASE PLAN
Under our plan, you may invest all or a portion of your dividends,
and you may purchase up to $250,000 of additional shares each
year. You may also deposit your certificates with the transfer
agent for safe-keeping. For a copy of the plan prospectus, call or
write to Computershare.
https://www-us.computershare.com/Investor/#DirectStock
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Suite 350
6075 Poplar Avenue
Memphis, TN 38119-0112
USA
REPORTS AND PUBLICATIONS
This Annual Report is being delivered to our shareholders
to comply with the annual report delivery requirements
of the New York Stock Exchange Act. All information required by those
applicable rules are contained in this Annual Report, including
certain information contained in the Form 10-K included
herein, which has previously been filed with the Securities
and Exchange Commission. Copies of this Annual Report
(including the 10-K), SEC filings and other publications may
be obtained free of charge by visiting our Web site, http://
www.internationalpaper.com, by calling (800) 332-8146, or by
writing to our investor relations department at the corporate
headquarters address listed above.
INVESTOR RELATIONS
Investors desiring further information about International Paper
should contact the investor relations department at corporate
headquarters, (901) 419-9000.
International Paper Board of Directors
As of March 31, 2023
Mark S. Sutton
Chairman of the Board and
Chief Executive Officer
International Paper
Christopher M. Connor
Lead Director, Retired
Chairman, President and
Chief Executive Officer
The Sherwin-Williams Company
Ahmet C. Dorduncu
Retired Chief Executive Officer
Akkök Group
Ilene S. Gordon
Retired Chairman, President
and Chief Executive Officer
Ingredion Incorporated
Anders Gustafsson
Executive Chair
Zebra Technologies Corporation
Jacqueline C. Hinman
Former Chairman, President
and Chief Executive Officer
CH2M HILL Companies, Ltd.
Clinton A. Lewis, Jr.
Chief Executive Officer
AgroFresh Solutions, Inc.
Donald G. “DG” Macpherson
Chairman and Chief
Executive Officer
W.W. Grainger, Inc.
Kathryn D. Sullivan
Senior Fellow Potomac Institute
for Policy Studies Ambassador-
at-Large Smithsonian National
Air and Space Museum
Anton V. Vincent
President
Mars Wrigley North America
Ray G. Young
Retired Vice Chairman and
Chief Financial Officer
Archer Daniels Midland
Company
Recognition
FORTUNE Magazine
World’s Most Admired
Companies® 2023
for 20 years
Women’s Choice Award®
Best Companies to Work
For Diversity & Millennials
2018-2023
Ethisphere Institute
World’s Most Ethical
Companies® 20 times
American Opportunity Index
Best Employers 2022
FTSE4Good Index Series
An equity index series that is designed
to facilitate investment in companies
that meet globally recognized corporate
responsibility standards
©2023 International Paper Company.
Company) confirms that International Paper
World Headquarters
All rights reserved. The International Paper
has been independently assessed according to
International Paper Company
logo is a trademark of International Paper
the FTSE4Good criteria, and has satisfied the
6400 Poplar Avenue
Company or its affiliates.
requirements to become a constituent of the
Memphis, TN 38197
FTSE4Good Index Series. Created by the global
United States of America
From Fortune © 2023. Fortune Media IP
index provider FTSE Russell, the FTSE4Good
Limited All rights reserved. FORTUNE is a
Index Series is designed to measure the
EMEA Headquarters
registered trademark of Fortune Media IP
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Limited and is used under license. Fortune and
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1170 Brussels, Belgium
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Ethisphere LLC. FTSE Russell (the trading name
respective owners.
of FTSE International Limited and Frank Russell
internationalpaper.com