World Headquarters
International Paper
6400 Poplar Avenue
Memphis, TN 38197
United States of America
EMEA Headquarters
©2024 International Paper Company. All rights reserved. The International
Chaussée de la Hulpe, 166
Paper logo is a trademark of International Paper Company or its affiliates.
1170 Brussels, Belgium
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International Paper
at a Glance
Every day the world moves forward with
new ideas, new technologies and new
challenges. And every day International
Paper forges ahead, becoming more
dependable, more innovative and more
sustainable than ever. Meeting today’s
needs for renewable, fiber-based
packaging and pulp while sharpening our
focus on the future, we're here for what’s
now and we’re creating what’s next.
21,000+
customers worldwide
39,000+
employees globally
250+
locations in more
than 10 countries
and 35 U.S. states
$18.9B
net sales in 2023
100M
boxes made per day
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01
International Paper 2023 Annual Report What we
achieved in 2023:
$840M
returned to shareowners
$2.16
in adjusted operating
earnings per share
(Non-GAAP)*
$6.4B
five-year total return to
shareowners through
dividends and share
repurchases
What we expect
in 2024:
Opened a $100M state-
of-the-art corrugated
• Positive market momentum
and demand recovery
packaging facility in Atglen,
across portfolio
Pennsylvania, providing more
• Maintain financial strength
than 100 manufacturing
jobs to Atglen and the
surrounding communities
and flexibility to accelerate
value creation for our
stakeholders
*Adjusted operating earnings,
adjusted operating earnings per
share, adjusted EBIT and adjusted
EBITDA 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.
Dear Shareowners,
On January 31, 1898, International Paper
was born when 17 pioneering pulp and
paper mills joined forces. Fast forward
125 years, we provide solutions to
customers around the world as a global
producer of sustainable packaging, pulp
and other fiber-based products, and
one of the world's largest recyclers. Our
39,000 team members are dedicated
to creating products that enhance the
quality of life and ensure essential goods
are protected and transported from
producers to retailers, and ultimately to
our neighbors around the world.
As I reflect on 2023, I appreciate the contributions and
resilience of our employees and our strong customer
relationships as we managed through a challenging
market environment. Lower consumer spending on goods,
customer inventory de-stocking, supply chain disruptions
and historically high cost inflation impacted demand for our
products and significantly constrained our earnings. Our
teams navigated these challenges and executed well, both
commercially and operationally. We leveraged our broad
capabilities and market expertise to innovate, and create
value for our customers.
Driving out costs across our operations was a primary
focus throughout the year and by leveraging advanced
technologies and big data, we continued to improve
productivity and drive profitability. Through our Building a
Better IP initiatives, we delivered $260 million of earnings
benefits in 2023, exceeding our target and demonstrating
the mindset embedded in our culture for maximizing value
through commercial and operational excellence.
02
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We took strategic actions in 2023 to structurally reduce
important improvements within IP and across our supplier
fixed costs and optimize our operations while maintaining
and customer base. I’m incredibly proud of the awards we
flexibility to grow with our customers. We also completed
have earned in recognition of our efforts and the progress we
the sale of our ownership interest in the Ilim joint venture
continue to make.
in Russia. With the completion of this transaction,
International Paper no longer has any investment in Russia.
We continued to optimize our Global Cellulose Fibers
business, aligning with customers and segments that value
our differentiated product and service offerings. We believe
absorbent pulp is a value-added product that will grow
over time due to the essential role it plays in addressing the
personal care needs of consumers around the world. We are
not satisfied with our absolute results in 2023. However, we
made progress in improving mix, reducing our exposure to
"International Paper is well-
positioned for the future. Our
financial foundation is strong,
as are the principles and core
values that guide our actions."
commodity pulp grades and reducing costs.
Looking ahead to 2024, International Paper is well-
In our Industrial Packaging business, we invested in our
extensive box system to improve our ability to serve
customers. We added new converting lines to existing
facilities, upgraded equipment with modern technology and
opened a state-of-the-art facility in eastern Pennsylvania.
These investments are helping address regional capacity
constraints and productivity challenges. Across our
packaging business, we are leveraging capabilities, strong
positioned for the future. Our financial foundation is strong,
as are the principles and core values that guide our actions.
I’m confident in our commercial strategies and our ability
to drive significant improvements across our entire system.
Given our strategic customer relationships, talented teams,
world-class assets and market expertise, we are committed
to maximizing long-term value for all our stakeholders, and
we intend to deliver.
segment-based value propositions and focused cost-
On behalf of International Paper’s board of directors and our
reduction efforts. We are making meaningful progress
39,000 employees, thank you for your continued support
improving margins and mix by creating value for our
and ownership.
customers while maximizing profitability.
IP’s solid financial foundation and disciplined capital
allocation framework continue to be fundamental
to the way we operate. In addition to investing in our
business in 2023, we preserved our solid balance sheet,
remained committed to our dividend policy and returned
approximately $840 million to our shareholders. This brings
our five-year total to $6.4 billion in terms of cash returned to
shareholders through dividends and stock repurchases.
We strive to create a better future for people and our
planet throughout every step of our value chain. Our
commitments to safe operations, community giving
and advancing our Vision 2030 goals are helping drive
Mark S. Sutton,
Chairman of the Board and
Chief Executive Officer
03
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International Paper 2023 Annual Report Shareholder Value
We have advantaged
positions serving attractive
market segments with safe,
efficient manufacturing
operations near sustainable
fiber sources.
2.5x
Debt / EBITDA
(Non-GAAP)*
$3B
in liquidity and cash
Fully funded qualified
pension plan
(U.S. only)
*Adjusted operating earnings,
adjusted operating earnings per
share, adjusted EBIT and adjusted
EBITDA 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.
$260M
of cumulative earnings
improvement generated
through our Building a
Better IP
$1.1B
in capital investments
Continued focus on cost
reduction and future growth
in packaging business
Recognition
FORTUNE Magazine
World’s Most Admired
Companies® 2023
for 20 years
American
Opportunity Index
Best Employers 2023
FTSE4Good
Index Series
An equity index series that
is designed to facilitate
investment in companies
that meet globally
recognized corporate
responsibility standards
Ethisphere Institute
World’s Most Ethical
Companies® for
17 consecutive years
04
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Our
Leadership
As of March 1, 2024
A diverse and agile leadership team
with a winning mindset is critical to
guiding the company’s improvement
efforts and driving our success.
Leadership Transitions
Our CEO Succession Plan:
Mark Sutton
Chairman and CEO
In 2023, our Chairman and CEO Mark Sutton requested that the
Board of Directors move forward with the next phase of the company's
CEO succession plan. This phase includes a comprehensive evaluation
of internal and external candidates for Sutton's successor. Sutton will
continue in his role as chairman and CEO until his successor is in place.
In 2023, we added one senior leader:
Ksenia Sosnina
Senior Vice President, EMEA
Ksenia Sosnina was elected senior vice president and president,
International Paper, Europe, Middle East & Africa in July 2023. Sosnina first
joined International Paper in 2013 as an officer and vice president leading
IP Russia. She became a member of the Ilim Group Board of Directors in
2015 and was subsequently nominated as Chief Executive Officer of the
Ilim Group in 2016.
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
Joseph R. Saab
Senior Vice President,
General Counsel and
Corporate Secretary
Ksenia Sosnina
Senior Vice President and
President, IP EMEA
05
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International Paper 2023 Annual Report Our Businesses
Building on more than 125 years of dependability and
innovation, we continue to use sustainable fiber to serve
customers and create profitable growth and long-term
value for our shareholders.
Total Revenue†
† The remaining 2% of revenue
is attributed mostly to fiber
supply agreements.
Industrial Packaging
83%
15%
Industrial Packaging
83% of our total revenue†
Global Cellulose Fibers
15% of our total revenue†
We create fiber-based packaging that protects and
promotes goods, enables worldwide commerce and
helps keep consumers safe. We meet our customers’
most challenging sales, shipping, storage and display
requirements with sustainable solutions. Our recycling
business collects, consumes and markets more than
7 million tons of paper recovered annually in the
United States, Mexico, Spain and Morocco. We are
one of the world’s largest recyclers of recovered office
paper and corrugated boxes.
In Europe, Middle East & Africa, we serve customers from
our network of two recycled containerboard mills and 23
box plants in France, Italy, Morocco, Portugal and Spain.
Packaging Segments:
• Food and Beverage
• E-Commerce, Shipping
and Distribution
• Durables & Non-Durables
Revenue by region:
• 90% North America
• 10% EMEA and Other
Global Cellulose Fibers
Cellulose fibers are a sustainable, renewable raw material
used in a variety of products people depend on every
day. We create safe, quality pulp for a wide range of
applications like diapers, towel and tissue products,
feminine care, incontinence and other personal care
products that promote health and wellness. In addition,
our innovative specialty pulps serve as a sustainable raw
material used in textiles, construction materials, paints,
coatings and more.
Pulp Segments:
• Absorbent hygiene
• Specialty
• Tissue and paper
Revenue by region:
• 89% North America*
• 11% EMEA and Other
* Although the majority of Global Cellulose Fibers 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.
06
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Vision 2030
Vision 2030 defines our pathway to
become among the most successful,
sustainable and responsible
companies in the world. Comprising
four enterprise-wide goals and eight
targets, Vision 2030 shows how we
will accelerate our progress while
remaining the supplier of choice for
customers, the company of choice
for employees and the investment of
choice for shareholders.
Healthy and Abundant Forests
Sustainable Operations
Goal:
Target:
Target:
Lead forest stewardship
efforts globally
Goal:
Target:
Target:
Source 100% of our
fiber from sustainably
managed forests
or recovered fiber while
safeguarding forests,
watersheds and
biodiversity
Conserve and restore
1 million acres
(400,000 hectares)
of ecologically
significant forestland
Improve our climate
impact and advance
water stewardship
Reduce our Scope
1, 2 and 3 greenhouse
gas (GHG) emissions
by 35%
Reduce our water use
by 25% and implement
context-based water
management plans at
all mills
Thriving People and Communities
Renewable Solutions
Goal:
Goal:
Target:
Accelerate the
transition to a
low-carbon economy
through innovative
fiber-based products
Advance circular
solutions throughout
our value chain and
create innovative
products that are 100%
reusable, recyclable or
compostable
Target:
Target:
Target:
Promote employee
well-being by providing
safe, caring and
inclusive workplaces
and strengthen the
resilience of our
communities
Achieve 30% overall
representation of
women and 50% women
in salaried positions.
Implement regional
diversity plans, including
30% minority
representation in U.S.
salaried positions
Achieve zero injuries for
employees and
contractors
Improve the lives of
100 million people in our
communities
07
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International Paper 2023 Annual Report
Delivering
Our Customer
Promise
Doing the right things for our
customers — at every moment, in
every experience — is our customer
promise. We live up to this commitment
by listening to our customers,
understanding their needs and creating
value-added solutions. We know that
each of our roles is ultimately linked to the
customer experience.
At IP, we understand opportunities,
identify solutions and develop creative
methods to deliver what our customers
value better than anyone else. We focus
on practical innovation and bringing new
improvements to areas from design and
graphics to lab testing and mechanical
packaging systems.
For example, IP worked with a national
customer in our packaging business
to optimize freight by eliminating
incoming wooden pallets and
increasing freight efficiency. Since
more deliveries could fit into each
container, fewer trips were needed to
get products where they needed to
go — meaning lower freight costs and
reduced greenhouse gas emissions.
08
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The IP Way
Our Mission
Our Core Values
Our mission is to
improve people’s lives,
the planet and our
company’s performance
by transforming
renewable resources
into products people
depend on every day.
We do the right things, in
the right ways, for the right
reasons, all of the time.
Our Vision
Our vision is to be among
the most successful,
sustainable and responsible
companies in the world.
Safety Above all, we care
about people. We look
out for each other to
ensure everyone returns
home safely.
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 in better shape
for future generations.
Think the Customer
We will deliver on our
customer promise to
do the right things
for our customers, at
every moment, in
every experience.
Include and Engage
We strive to intentionally
build a culture in which
each employee feels a
sense of belonging and
experiences an environment
in which to do their best
work every day.
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09
International Paper 2023 Annual Report Our Board of Directors
As of March 1, 2024
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
Chief Executive Officer
Atlas Technical Consultants
Clinton A. Lewis, Jr.
Chief Executive Officer
AgroFresh Solutions, 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
Director Transitions
Ray G. Young
Ray Young will not stand for
re-election when his current term
of service ends in May 2024.
10
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10-K
International Paper 2023 Annual Report
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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
Total Assets
Total Shareholders’ Equity Attributable to International Paper Company
PER SHARE OF COMMON STOCK
Basic Earnings Per Share Attributable to International Paper Company
Common Shareholders
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
2023
2022
$ 18,816
$ 21,161
1,249 (a)
(b)
(b-c)
382
288
23,261
8,355
1,848 (a)
(d)
1,511
1,504
(d-e)
23,940
8,497
$ 0.83
$ 0.82
1.8500
8,236
346.0
346.9
349.1
$ 4.14
$ 4.10
1.8500
8,638
350.3
363.5
367.0
(a)
(b)
(c)
(d)
See the comparison of net earnings (loss) from continuing operations attributable to International Paper Company to its total business segment operating profit on
page 31 and the operating profit table on page 91 for details of operating profit by business segment.
Includes net pre-tax restructuring charges of $118 million for costs associated with the permanent closure of our containerboard mill in Orange, Texas and the
permanent shutdown of pulp machines at our Riegelwood, North Carolina and Pensacola, Florida mills and pre-tax income of $19 million for the revision of
severance estimates related to our Build a Better IP initiative. Also included is a charge of $422 million for accelerated depreciation associated with the permanent
closure of our containerboard mill in Orange, Texas and the permanent shutdown of pulp machines at our Riegelwood, North Carolina and Pensacola, Florida
mills, charges of $36 million for environmental remediation reserve adjustments and income of $3 million for interest associated with the previously announced
settlement of the timber monetization restructuring tax matter.
Includes a charge of $135 million for impairment and transaction costs related to our former equity method investment in the Ilim joint venture, a charge of $18
million for the other-than-temporary impairment of an equity method investment, a tax benefit of $23 million related to the settlement of tax audits and tax expense
of $4 million related to internal legal entity restructuring.
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.
(e)
Includes a charge of $533 million 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.
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 29-30.
In millions, at December 31
Calculation of Adjusted EBITDA
Earnings from Continuing Operations Before Income Taxes and Equity Earnings
Interest Expense, Net
Special items
Non-operating pension expense (income)
EBIT before Special Items
Depreciation, amortization and cost of timber harvested
Adjusted EBITDA
2023
2022
$382
231
557
54
1,224
1,010
$2,234
$1,511
325
175
(192)
1,819
1,040
$2,859
Adjusted EBIT and Adjusted EBITDA are “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 and Adjusted EBITDA 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 and Adjusted EBITDA,
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
12/31/2023
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, 2023) was approximately $10,960,397,116.
The number of shares outstanding of the Company’s common stock as of February 9, 2024 was 346,353,824.
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 2024
annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K.
INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2023
PART I.
ITEM 1.
BUSINESS.
General
Human Capital
Competition and Costs
Marketing and Distribution
Description of Principal Products
Sales Volumes by Product
Government Regulation
Environmental Protection
Climate Change
Raw Materials
Information About Our Executive Officers
Forward-looking Statements
ITEM 1A.
ITEM 1B.
ITEM 1C.
ITEM 2.
RISK FACTORS.
UNRESOLVED STAFF COMMENTS.
CYBERSECURITY.
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
Legal Proceedings
Recent Accounting Developments
Effect of Inflation
Foreign Currency Effects
Market Risk
1
1
1
2
4
5
5
5
5
5
6
9
9
10
11
22
22
24
24
24
25
25
26
26
27
28
32
35
36
37
41
43
44
44
44
44
INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2023
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
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
2023 LISTING OF FACILITIES.
APPENDIX II
2023 CAPACITY INFORMATION.
45
46
46
48
51
52
53
54
55
56
93
93
93
93
94
94
94
94
94
94
95
95
95
99
100
A-1
A-3
PART I.
ITEM 1. BUSINESS
GENERAL
(the
International Paper Company
"Company,"
"International Paper" or "IP", 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,
the
incorporated
successor to the New York corporation of the same
name organized in 1898. You can learn more about
at
us
www.internationalpaper.com.
in 1941 as
website
visiting
our
by
three bag
facilities. Production
In the United States, at December 31, 2023, the
Company operated 23 pulp and packaging mills, 162
converting and packaging plants, 16 recycling plants
and
facilities at
December 31, 2023 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 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.
We are guided by our core values. We do the right
things, in the right ways, for the right reasons, all of
the time – this is The IP Way. Our overarching values
are safety, ethics, and stewardship.
•
•
•
•
•
Safety – Above all, we care about people. We
look out for each other to ensure everyone
returns home safely each day.
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 in
better shape for future generations.
Think the Customer – We will deliver on Our
Customer Promise to do the right things for
our customers, at every moment, in every
experience.
Include and Engage – We strive to build a
culture in which each employee feels a sense
of belonging and experiences an environment
in which to do their best work every day.
For management and financial reporting purposes,
our businesses are separated into two segments:
Industrial Packaging and Global Cellulose Fibers. A
1
description of these business segments can be found
on pages 35 and 36 of Item 7. Management’s
Discussion and Analysis of Financial Condition and
Results of Operations.
On September 18, 2023, we completed the previously
announced sale of our 50% equity interest in Ilim S.A.
("Ilim"), which was a joint venture that operated a pulp
and paper business in Russia and has subsidiaries
including Ilim Group. We also completed the sale of
all of our Ilim Group shares (constituting a 2.39%
stake) and divested other non-material residual
interests associated with
the
completed sales, we no longer have an interest in Ilim
or any of its subsidiaries, and no longer have any
investments in Russia. 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 pages 69 and 70 of Item 8.
Financial Statements and Supplementary Data.
Ilim. Following
the Company permanently closed
Following our public announcement on October 18,
2023,
its
containerboard mill in Orange, Texas on December 4,
2023 and permanently ceased production on two of
its pulp machines at its Riegelwood, North Carolina
and Pensacola, Florida mills on December 11, 2023.
The mill closure resulted in pre-tax non-cash asset
write-off and accelerated depreciation charges of
approximately $347 million and pre-tax cash
severance and other
charges of
approximately $81 million. The machine shutdowns
resulted in pre-tax non-cash asset write-off and
accelerated depreciation charges of approximately
$75 million and pre-tax cash severance and other
shutdown charges of approximately $37 million. The
Company recorded these charges in the fourth
quarter of 2023.
shutdown
through 2023,
International Paper’s
From 2019
capital spending approximated $4.6 billion, excluding
mergers and acquisitions. These expenditures reflect
our continuing efforts to use our capital strategically
improve product quality and environmental
to
performance, as well as
lower costs, maintain
reliability of operations and deploy strategic capital for
capacity expansion. Capital spending in 2023 was
approximately $1.1 billion and is expected to be
approximately $800 million to $1.0 billion in 2024. You
can find more information about capital spending on
page 39 of Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations.
Discussions of acquisitions can be found in Note 7
Acquisitions on page 65 of
Item 8. Financial
Statements and Supplementary Data.
You can find discussions of restructuring charges and
other special
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
items on page 35 of
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 you to
those documents. Our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on
Form 8-K and proxy statements, along with all other
reports and any amendments thereto filed with or
furnished to the SEC, are publicly available free of
charge on the Investors 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. We encourage you to
refer to such information.
information
financial and other
Our website contains a significant amount of
information about the Company, including our SEC
filings and
for
investors. The information that we post 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
is not
incorporated by reference into this Annual Report on
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.
to our website, however,
HUMAN CAPITAL
EMPLOYEES
As of December 31, 2023, we have approximately
39,000 employees, nearly 33,000 of whom are
located in the United States. Of our U.S. employees,
22,900 are hourly, with unions
representing
approximately 14,200 employees. Of this number,
10,600 are represented by the United Steelworkers
union ("USW").
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. Individual 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 AND WELLBEING
At International Paper, safety is core to who we are
and how we operate. To achieve this, we are
cultivating a resilient safety culture where every team
member is empowered to stop work they believe is
unsafe. We work tirelessly to anticipate and address
layers of
unexpected events by
protection, continuously enhancing our systems and
engaging all team members in learning events to
prevent injuries before they take place. Our Vision
2030 goal to create a 100% injury-free workplace for
fuels our
our
commitment
to Memphis and
everywhere in between.
team members and contractors
from Madrid
incorporating
We also care deeply about the mental, emotional,
physical and professional wellbeing of our employees
by providing an Employee Assistance Program
(“EAP”) at no cost to employees and family members.
Our EAP offers coaching and counseling sessions
aimed at problem solving, achieving goals, and
dealing with stress and anxiety management through
resiliency. We embrace a holistic wellness approach
providing employees with resources on incorporating
wellness habits into their daily lives.
HUMAN CAPITAL MANAGEMENT
The attraction, retention and development of our
employees is critical to our success. We create a
that begins at
positive employee experience
Talent
onboarding. Our Human Resources
Management Team hosts online Global New
Employee Orientation
for employees and each
business conducts onsite new hire integration training
unique to its business and/or facility. This experience
learning,
our
continues
development
performance management
programs. We provide continuing education courses
that are relevant to our industry and job functions
within the Company, including both instructor-led and
online training through our Learning Management
System (“LMS”) MyLearning platform. Across the
enterprise in 2023, employees completed 4.6 million
learning activities through our platform.
through
and
continuous
In addition, we have created learning paths for
specific positions that are designed to encourage an
employee’s advancement and growth within our
organization, such as our REACH (Recruit, Engage,
2
program
Align College Hires)
and Global
Manufacturing Training Initiative programs. Through
REACH 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 approach to learning
that empowers, intellectually grows and professionally
develops our employees. Our Global Manufacturing
Training Initiative provides training services to hourly
operations and maintenance employees in our mills in
a standardized and structured manner. On
the
converting side of our business, more than 350 front
line and future leaders participated in our multi-day in-
person Leadership Application and Professional
Development and Manufacturing Management
Associate Programs during 2023.
resources, courses and workshops
We develop leaders through our IP Leadership
Institute offering a broad range of LMS virtual and in
person
for
individual contributors, people leaders and teams. We
also offer peer mentoring and leadership and career
development training to support and develop our
employees.
to employees
reimbursement
We help our employees better themselves by offering
to pursue
tuition
additional education to prepare for other positions at
the Company. We also provide 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.
to be
The labor market for both hourly and salaried workers
continues
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
RETAIN QUALIFIED PERSONNEL,
INCLUDING
KEY MANAGEMENT PERSONNEL.
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
local markets
around
the world. We continually evaluate our
compensation and benefits so that we offer optimal
compensation programs and
leading
employer of choice in the areas in which we operate.
remain a
in our
DIVERSITY AND INCLUSION
In 2023, we added Include and Engage as a new
core value because we believe in an inclusive
workforce, where employees of diverse backgrounds
and perspectives are represented, engaged and
empowered to contribute innovative ideas, influence
decisions, and bring their authentic selves to work.
While this core value is new, our efforts around
diversity and inclusion have been in place for more
than 20 years. Looking forward to projected workforce
demographic changes over the next decade, and
guided by our commitment to equal employment
opportunity for all, our stated Vision 2030 goal is to
achieve 30% overall representation of women and
50% women in salaried positions, 30% racial and
ethnic minority
in U.S. salaried
positions, and to implement regional diversity plans in
non-U.S. locations. To foster a more diverse and
focused on
the Company
inclusive culture,
promoting a culture of diversity and inclusion that
leverages
talents of all employees, and
implementing practices that attract, recruit and retain
a broad diversity of talent.
representation
the
is
Our Global Diversity and
Inclusion Council,
comprised of senior leaders in the Company, is
committed to creating and promoting a culture of
inclusion, collaboration, engagement, equity and
diversity. The Company supports enterprise-wide
employee-led networking circles (“ENCs”) 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 ("WIP") ENC, Black
Employee Networking Circle ("BEN"), LGBTQ+ &
Allies ENC ("IPride") and a Veterans ENC ("iVets").
Each ENC is sponsored by Company leaders and
aligned with our core values and business objectives.
Through annual initiatives, ENCs offer development
opportunities, encourage cross-collaboration and
connection with individuals throughout the Company,
and engage allies. Some facilities and functions also
have their own ENCs.
In 2023 our ENCs executed on 30 initiatives aimed at
strengthening our diversity and inclusion culture. As
examples of our efforts, in 2023, IPride hosted a
workshop, “Pride 101,” where speakers educated
attendees on topics such as history of the LGBTQ+
movement, and offered guidance to allies on how to
support LGBTQ+
colleagues. Similarly, BEN
sponsored a Juneteenth event, iVets partnered with
our Community Engagement
to sponsor
Wreaths Across America, and WIP worked with our
team
3
communications team to recognize women working in
our facilities. We also recognize Diversity & Inclusion
awareness months, conduct training and host D&I
workshops and team-level courses which further our
diversity and inclusion goals.
We have also developed a Diversity Acquisition
Framework for U.S. colleges and universities to guide
our enterprise diversity and inclusion efforts as we
strive to hire the best talent by accessing all the
available talent using broad recruiting parameters
through inclusive and legally compliant employment
practices.
The make-up of our Board of Directors and Senior
Leadership Team ("SLT") reflects our efforts to seek
qualified board candidates with diverse backgrounds
and perspectives including, but not limited to, such
factors as race, ethnicity and gender.
At December 31, 2023, the composition of our Board
of Directors, as noted below, reflects those efforts and
the importance of diversity:
•
•
27% women, 27% ethnically diverse, 18%
African-American and
75% of the Board of Director’s standing
committees are chaired by women.
Our Senior Leadership Team is currently comprised
of senior vice presidents who oversee crucial
functions and business units within the Company and
is 30 percent women as of December 31, 2023.
COMMUNITY ENGAGEMENT
to support
the
We encourage our employees
communities in which they live and in which the
Company operates. Our community engagement
efforts extend across the globe and support social
and educational needs. To that end, in 2023 we
invested approximately $20 million to address critical
needs in the communities in which we work and live.
Our Vision 2030 goal is to strengthen the resilience of
our communities, in numerous ways, and improve the
lives of 100 million people in our communities in
numerous ways, including the support of education,
reducing hunger, promoting health and wellness and
supporting disaster relief.
One way we lead in promoting health and wellness is
through our award-winning Fighting Period Poverty in
Our Communities program. Period poverty is lack of
access to period products and education and affects
at least 500 million women and girls globally. Period
poverty leads to school truancy, reproductive issues,
health risks and unnecessary shame. Through this
program, we collaborate with partners to create
awareness of period poverty globally and provide
period care kits to people who need them most.
the Company was honored with
the
In 2022,
American Forest & Paper Association's (“AF&PA”)
“Diversity, Equity and
in Sustainability
Award” for our “Ending Period Poverty” program. In
2023, we hosted 62 menstrual product kit packing
events in nine countries donating more than 32,000
menstrual product kits to people across the world.
Inclusion
in 2023,
the Company was awarded a
Also
Leadership in Sustainability Award for Resilient U.S.
Forests by the AF&PA for its innovative approach to
promote forest bird awareness and conservation
within the forest product supply chain in partnership
with the American Bird Conservancy. In 2024, we
received the Grassroots Innovation Award from the
Public Affairs Council. Additionally, we are proud to
have been named among the world’s most ethical
companies by Ethisphere for 17 consecutive years.
INTELLECTUAL PROPERTY, PATENTS, AND
TRADEMARKS
foreign
in certain
We rely on a combination of patent, copyright,
trademark, design, trade secret, and internet domain
laws to establish and protect our intellectual property
rights in the United States and in foreign jurisdictions.
The Company’s practice is to file applications and
obtain patents for products and services we believe
improve our value proposition to customers. We
maintain a portfolio of trademarks and service marks
registered with the U.S. Patent and Trademark Office
and
jurisdictions, unregistered
trademarks, licenses, and internet domain names that
we consider important to the marketing of our
products and business. These
trademarks and
service marks include those entity and product names
that appear in this Annual Report on Form 10-K and
our logo, as well as names of other products and
marketing-related taglines. Our registered intellectual
property has various expiration dates. The Company
also relies on trade secret and other confidential
information protection for manufacturing processes,
product specifications, formulae, analyses, market
information,
forecasts, and other competitively
sensitive information.
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.
4
Many factors influence the Company’s competitive
position, including price, cost, product quality and
services. You can find more information about the
impact of these factors on operating profits on pages
27 through 37 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.
MARKETING AND DISTRIBUTION
The Company sells products directly to end users and
converters, as well as through agents, resellers and
distributors.
DESCRIPTION OF PRINCIPAL PRODUCTS
The Company’s principal products are described on
pages 35 and 36 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 2023, 2022 and 2021 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
Europe, Middle East & Africa ("EMEA") Packaging (b)
Industrial Packaging
Global Cellulose Fibers (in thousands of metric tons) (c)
2023
2022
2021
9,428
2,604
2,152
160
237
1,282
15,863
2,681
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
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 for these businesses reflect invoiced tons.
(c) Includes North American volumes and internal sales to mills.
GOVERNMENTAL REGULATION
production,
those governing
The Company’s policy is to operate its mills and
factories in compliance with all applicable laws and
regulations such that it protects the environment and
the health and safety of its employees. We operate
our businesses and sell products globally. In each of
the jurisdictions in which we operate, we are subject
to a variety of laws and regulations governing various
aspects of our business, including general business
the
regulations as well as
manufacturing,
handling,
storage,
transport, marketing and sale of our
products. Our operations are also subject to forestry
environmental
reserve
regulations and occupational health and safety laws.
Violations
fines,
administrative
penalties,
revocations of operating permits and/or shutdowns of
our facilities, litigation, other liabilities, as well as
damage to our reputation. We incur costs to comply
with these requirements. For additional information
risks associated with environmental
regarding
matters, see Item 1A. Risk Factors – WE ARE
result
sanctions,
requirements,
substantial
content,
criminal
other
can
in
SUBJECT TO A WIDE VARIETY OF LAWS,
REGULATIONS AND OTHER GOVERNMENTAL
IN
REQUIREMENTS THAT MAY CHANGE
SIGNIFICANT WAYS, AND THE COST OF
COMPLIANCE, OR THE FAILURE TO COMPLY
WITH SUCH REQUIREMENTS, COULD IMPACT
OUR BUSINESS AND RESULTS OF OPERATIONS.
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
provide a framework to build a better future for
people, the planet and the Company in the areas of
healthy and abundant forests, thriving people and
communities, sustainable operations and renewable
solutions. Through
the
Company tackles the toughest issues in the value
chain to improve its environmental footprint and
promote the long-term sustainability of natural capital.
these efforts and more,
Our approach to sustainability considers our entire
value chain, from sourcing raw materials responsibly
5
and working safely, to making renewable, recyclable
products and providing a market
for 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,
issues and associated risks and
assessed key
opportunities,
sustainability
and
considerations into our processes. Additionally, in
2020, we established our Vision 2030 goals with the
purpose of promoting healthy and abundant forests,
thriving people and communities, sustainable
operations and renewable solutions.
incorporated
In
addition,
laws and
authorities.
international
As part of its business, the Company is subject to
extensive and increasingly stringent federal, state
regulations
local, and
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 laws or regulations impacting our
facilities around the world are often passed or
proposed. Our continuing objectives include: (1)
controlling emissions and discharges
from our
the
to avoid adverse
facilities
environment, and (2) maintaining compliance with
applicable laws and regulations. The Company spent
approximately $40 million in 2023 for capital projects
to control environmental releases into the air and
water, and
to assure environmentally sound
management and disposal of waste. We expect to
spend approximately $35 million
for
environmental capital projects. Capital expenditures
on environmental projects
for 2025 and 2026,
respectively, are anticipated to be approximately $40
million and $35 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
laws and
costs or changes
regulations.
in environmental
impacts on
in 2024
The Company has completed capital projects to meet
the U.S. Environmental Protection Agency's ("EPA")
maximum achievable control technology ("MACT")
and risk and technology review ("RTR") regulations
that require owners of specified pulp and paper
process equipment and boilers to meet new air
for certain substances. As
emissions standards
portions of these MACT and RTR regulations have
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.
6
in
party
The Company has been named as a potentially
responsible
environmental
("PRP")
remediation actions under various federal and state
laws, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"). Many of these proceedings
involve the cleanup of hazardous substances at large
commercial landfills that received waste from many
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 and/or
potentially liable parties, and costs are commonly
allocated according to relative amounts of waste
factors. There are other
deposited and other
remediation costs
the
cleanup of hazardous substances at the Company’s
current, closed or
facilities, and
recorded as liabilities on the balance sheet. For
additional information regarding certain remediation
actions, see Note 14 Commitments and Contingent
Liabilities of
Item 8. Financial Statements and
Supplementary Data on pages 74 through 78. 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,
OR THE FAILURE TO COMPLY WITH SUCH
REQUIREMENTS,
OUR
COULD
BUSINESS AND RESULTS OF OPERATIONS.
typically associated with
REGULATIONS
formerly-owned
IMPACT
AND
CLIMATE CHANGE
aligned
economy. We
The Company recognizes the impacts of climate
change on people and our planet. To manage
taking actions
risks, we are
climate-related
throughout our value chain to help advance a low-
carbon
annual
sustainability reporting with the recommendations of
the Task Force on Climate-Related Financial
Disclosure (“TCFD”) in the 2023 reporting cycle
(based upon data from 2022). As part of our TCFD
reports, we identify and report on climate-related
opportunities. We identify and evaluate physical and
transition climate-related risks through our enterprise
risk management process.
our
We transform renewable resources into recyclable
products that people depend on every day. We aim to
produce low carbon products that have a positive
impact on nature. To this end, we source renewable
fiber from responsibly managed forests and recycled
raw materials. 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
our low-carbon fiber-based products are recycled into
new products at a higher rate than any other base
material. We work to advance the shift to a low-
carbon, circular economy by designing products that
are 100% reusable, recyclable or compostable.
Through improvements in operations, equipment,
energy efficiency and fuel diversity, we are working to
achieve company-wide reductions in Scope 1 and
Scope 2 greenhouse gas (“GHG”) emissions. As part
of our Vision 2030 goals, we have
targeted
incremental reductions of 35% in our Scope 1, 2, and
3 GHG emissions by 2030 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 2015 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
to phase out our most carbon
capital projects
intensive
(Scope 1) as well as
developing GHG reduction strategies for our energy
sourcing (Scope 2) and broader supply chain footprint
(Scope 3). In addition, we have recently committed to
be an early adopter of the Taskforce on Nature-
(“TNFD”). TNFD
related Financial Disclosures
adopters
reporting
TNFD
disclosures
recommendations, which have been designed to (i)
meet
requirements of
organizations across jurisdictions; (ii) be consistent
with the global baseline for corporate sustainability
reporting; and (iii) be aligned with the global policy
goals outlined
the Kunming-Montreal Global
Biodiversity Framework, which was adopted to halt
and reverse nature loss by 2030.
to make corporate
the corporate
aligned with
fuel sources
reporting
intend
that
are
in
We use carbon-neutral biomass and manufacturing
residuals (rather than fossil fuels) 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 2015 Paris Agreement compels international
efforts and voluntary commitments toward reducing
the emissions of GHGs. IP supports the 2015 Paris
Agreement and recognizes the importance of global
policy action
reductions
consistent with an increase of “well below 2 ° Celsius
above pre-industrial levels and to pursue efforts to
limit the temperature increase even further to 1.5 °
Celsius.” Consistent with this objective, participating
countries aim to balance GHG emissions generation
to achieve emission
7
and sequestration in the second half of this century
or, in effect, achieve net-zero global GHG emissions.
in meeting GHG
To assist member countries
reduction obligations, the European Union operates
an Emissions Trading System ("EU ETS"). Our
operations in the EU experience indirect impacts of
through purchased power pricing.
the EU ETS
Neither the direct nor indirect impacts of the EU ETS
have been material to the Company, but they could
be material to the Company in the future depending
on how the 2015 Paris Agreement's non-binding
commitments or allocation of, and market prices for,
GHG credits under existing rules evolve over the
coming years.
compliance
responsibilities on
Additionally, the EU’s newly mandated Corporate
Sustainability Reporting Directive
(“CSRD”) and
Deforestation Regulation (“EUDR”), each impose
the
additional
Company. The CSRD requires additional reporting
processes for greater accountability. The Company’s
first reporting year under the CSRD is expected to be
2025. The CSRD standards replace the existing Non-
Financial Reporting Directive and expands reporting
requirements for companies operating in the EU. The
implementation timeline varies depending on the type
of entity.
from certain commodities
The EUDR requires companies trading in products
derived
to conduct
extensive diligence on the value chain to ensure
goods do not result from recent deforestation, forest
degradation or breaches of local environmental and
social laws. Currently, the Company is evaluating the
implications of the EUDR to its business with the
expected earliest reporting date being in 2025.
U.S. EFFORTS, INCLUDING STATE, REGIONAL
AND LOCAL MEASURES
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.
Several U.S. states, including states in which we
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
impact on
have a material
the Company. For
example, the State of California recently passed the
Climate Corporate Data Accountability Act and the
Climate-Related Financial Risk Act, which will impose
climate-related reporting obligations on companies
in California meeting specified
doing business
thresholds,
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.
including
SUMMARY
impacts,
to possible direct
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.
future
In addition
legislation and regulation could have indirect impacts
on
for
the Company, such as higher prices
transportation, energy and other inputs, as well as
more protracted air permitting processes, causing
delays and higher costs to implement capital projects.
Other possible indirect impacts may include influence
on competitive position due to customer and end-
consumer preferences regarding low-carbon, circular
products with a high recycling rate along with tax
credit and funding opportunities to expand green
energy production and carbon credit generation. 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.
Moreover, compliance with legal requirements related
to GHGs and/or climate change which are currently in
effect or which may be effective or enacted in the
future are expected to require future expenditures to
meet GHG emission reduction, disclosure or other
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. Rather than rely on carbon offsets, we focus on
reducing energy consumption as well as relative GHG
emissions across our mills and manufacturing
facilities. 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 sustainability
is a key element of
corporate governance promoted by our Board of
Directors, committees of the Board of Directors, and
senior management.
Our Board of Directors has primary oversight of the
Company's enterprise risk management program,
which includes sustainability. The Board receives
updates from our Chief Sustainability Officer ("CSO")
and additional members of management. Our Board
of Directors also conducts periodic reviews of
components of
the sustainability strategy and
performance and reviews material key sustainability-
related developments and
issues. Our standing
committees share responsibility on sustainability as
described below:
Audit and Finance Committee
•
•
Reviews processes and controls for external
reporting of sustainability and social impact
data and metrics.
Reviews related disclosures in Annual Report
on Form 10-K and other sustainability
reports.
Governance Committee
•
•
Reviews and reassesses adequacy of, and
oversees compliance with our Corporate
Governance Guidelines.
Seeks Board of Director candidates with
diverse backgrounds.
Management Development and Compensation
Committee ("MDCC Committee")
objectives
Approves Chief Executive Officer ("CEO")
sustainability-focused
and
evaluates performance.
in SLT
Considers sustainability
compensation and in overall compensation
plan design.
Reviews sustainability disclosures related to
executive compensation.
factors
•
•
•
8
Public Policy and Environment Committee ("PPE
Committee")
•
•
Reviews sustainability and social
impact
policies, plans and performance to ensure
commitments to stewardship.
Stays current on emerging sustainability and
social impact trends and issues impacting the
Company.
in
is embedded
At the management level, ownership and governance
of sustainability matters
the
organization from the top down. Our CEO and SLT
are responsible for corporate strategy and leadership
including incorporation of our sustainability goals and
standards into our daily operations and long-term
business strategy. Our SLT, which is comprised of
senior vice presidents who oversee critical functions
and business units within the Company, evaluates
sustainability issues based on input from function-
specific councils that report to the SLT. The SLT
receives several sustainability updates throughout the
year from our CSO. The Company also has an
Enterprise Lead Team (“ELT”), comprised of the SLT
and additional subject matter experts, including our
CSO, that meets quarterly and receives regular
climate-related updates. Moreover, at the operational
level, our Stewardship Council, a cross-functional
leadership team with representatives from businesses
the
and
Company’s sustainability strategy and tactics.
teams, guides and supports
functional
For additional information regarding risks associated
with climate change, see Item 1A. Risk Factors – WE
ARE SUBJECT TO RISKS ASSOCIATED WITH
CLIMATE CHANGE AND OTHER SUSTAINABILITY
MATTERS AND GLOBAL, REGIONAL AND LOCAL
WEATHER CONDITIONS AS WELL AS LEGAL,
REGULATORY AND MARKET RESPONSES TO
CLIMATE CHANGE.
on
our
found
website
Additional information regarding climate change and
the Company is available in our annual Sustainability
Report and TCFD Report, both of which can, or will
be,
at
www.internationalpaper.com. Our 2023 Sustainability
Report and 2023 TCFD Report will be available later
in 2024. The information contained in such reports is
not incorporated by reference into this Annual Report
on 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
sustainability 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
Raw materials essential to our businesses include
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 40.
INFORMATION ABOUT OUR EXECUTIVE
OFFICERS
The following are the executive officers of our
Company as of the date of this filing.
Mark S. Sutton, 62, chair (since January 2015 and
member of the Board of Directors since June 2014)
and chief executive officer (since November 2014).
In his 40 years with the Company, Mr. Sutton has
served in various roles of increasing responsibilities
including president and chief operating officer (June
2014-October 2014), senior vice president - Industrial
Packaging (2011-2014), senior vice president -
Printing and Communications Papers the Americas
(2010-2011), senior vice president - Supply Chain
(2008-2009), vice president
- Supply Chain
(2007-2008), and vice president - Strategic Planning
(2005-2007). Mr. Sutton is also a member of the
board of directors of The Kroger Company (NYSE:
KR). 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, an association of CEOs of Memphis’
largest businesses working to promote opportunity
and quality of life for all Memphians. Mr. Sutton joined
International Paper in 1984.
Clay R. Ellis, 53, senior vice president - Global
Cellulose Fibers and IP Asia since January 2023. Mr.
Ellis previously served as senior vice president -
Enterprise Operational Excellence (2019-2022) and
vice president - Manufacturing, Global Cellulose
Fibers (2016-2019). Prior to that, he served as vice
president of Pulp (2014-2016), and vice president
Manufacturing, North American Papers (2012-2014).
Mr. Ellis joined International Paper in 1992.
Aimee Gregg, 45, senior vice president, Supply
Chain and Information Technology, since January
2023. Prior to this role, Ms. Gregg served as vice
president and general manager, Containerboard and
Recycling (2020-2023); vice president, Recycling and
Recovered Fiber (2018-2020), and general manager,
Recycling,
joined
International Paper in 2002.
(2016-2018). Ms. Gregg
9
W. Thomas Hamic, 57, senior vice president - North
American Container and chief commercial officer
since January 2023. Prior to this role, Mr. Hamic
served as senior vice president - Global Cellulose
Fibers and Enterprise Commercial Excellence
(2020-2022). Mr. Hamic previously served as senior
vice president - Containerboard and Enterprise
Commercial Excellence (2019-2020). Mr. Hamic has
also previously served as vice president and general
manager - Containerboard and Recycling, North
American Container (2015-2019). Mr. Hamic became
vice president and general manager of the South
Area Container the Americas in 2009, and was
appointed to the role of vice president, Industrial
Packaging Group’s Finance and Strategy in 2010. Mr.
Hamic joined International Paper in 1991.
Allison B. Magness, 46, senior vice president
Manufacturing and Environmental Health and Safety
(”EHS”) since January 2023. Prior to this role, she
served as vice president, South Area, North American
Container (2019-2022). Previously she served in a
president,
number
roles
Manufacturing and Containerboard
(2015-2019);
manager, Technical Services, North American Papers
and Pulp (2013-2015); and mill manager of the
Franklin Mill
joined
International Paper in 2000.
(2011-2013). Ms. Magness
including
vice
of
Timothy S. Nicholls, 62, senior vice president and
chief financial officer since June 2018. Mr. Nicholls
previously served as senior vice president - Industrial
Packaging the Americas (2017-2018), senior vice
president - Industrial Packaging (2014-2016), senior
vice president - Printing and Communications Papers
of the Americas (2011-2014), senior vice president
and chief financial officer (2007-2011), vice president
and executive project leader of IP Europe (2007), and
vice president and chief financial officer - IP Europe
(2005-2006). Mr. Nicholls joined International Paper
in 1999 following our acquisition of Union Camp
Corporation where he had worked since 1991.
Thomas J. Plath, 60, senior vice president - Human
Resources and Corporate Affairs since January 2023.
Prior to this role, he served as senior vice president -
Human Resources
and Global Citizenship
(2017-2022). Mr. Plath previously served as vice
president - Human Resources, global businesses
(2014-2017), and vice president – Human Resources
Manufacturing, Technology, EHS and Global Supply
Chain (2013-2014). Mr. Plath joined International
Paper in 1991.
James P. Royalty, Jr., 54, senior vice president -
Containerboard and Recycling since January 2023.
Previously, he served as senior vice president and
president, Europe, Middle East, Africa & Russia
(2019-2022); vice president, Corporate Development
10
and Disruptive Technologies
president, Strategic Projects
president,
Investor Relations
president and general manager, Container
Americas
International Paper in 1991.
(2018-2019); vice
(2017-2018); vice
(2013-2017); vice
the
joined
(2008-2013). Mr. Royalty
Joseph R. Saab, 55, senior vice president, general
counsel and corporate secretary since July 2022. Mr.
Saab previously served as vice president, deputy
general counsel and assistant corporate secretary
-
(2019-2022) and associate general counsel
Industrial Packaging North America, Europe, Middle
East & Africa
joined
International Paper in 2001.
(2014-2019). Mr. Saab
Ksenia N. Sosnina, 55, senior vice president,
Europe, Middle East & Africa since July 2023. Earlier
in her career, Ms. Sosnina served as an officer and
vice president of IP Russia (2015-2016) and served
as chief executive officer of
Ilim Group
(2016-2023). Ms. Sosnina joined International Paper
in 2013.
the
There are no family relationships, as defined by the
instructions to this item, among any of the Company’s
executive officers and any other executive officers or
directors of the Company.
FORWARD-LOOKING STATEMENTS
“believes,”
“anticipates,”
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.
Forward-looking statements can be identified by the
use of forward-looking or conditional words such as
“expects,”
“estimates,”
“could,” “should,” “can,” “forecast,” “intend,” “look,”
“may,” “will,” “remain,” “confident,” “commit” and
“plan” or similar expressions. These statements are
not guarantees of future performance and reflect
management’s current views and speak only as to the
dates the statements are made 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 greenhouse
gases and other sustainability matters; (ii) the level of
our indebtedness, risks associated with our variable
rate debt, and changes in interest rates (including the
impact of current elevated interest rate levels); (iii) the
impact of global and domestic economic conditions
and industry conditions, including with respect to
conditions,
current
negative macroeconomic
to
(iv)
rates,
risks arising
financial markets;
conditions, military
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 customer or consumer preferences,
government regulation, demand and pricing for our
products, and conditions impacting the credit, capital
from
and
conducting business internationally, domestic and
global geopolitical
conflict
(including the Russia/Ukraine conflict, the conflict in
Israel and surrounding areas, the possible expansion
of such conflicts, and the potential geopolitical and
therewith),
economic consequences associated
changes
trade
in currency exchange
in our credit
protectionist policies, downgrades
ratings, and/or the credit ratings of banks issuing
certain letters of credit, issued by recognized credit
rating organizations; (v) the amount of our future
funding obligations, and pension and
pension
healthcare costs; (vi) the costs of compliance, or the
comply with, existing and new
failure
to climate
environmental (including with respect
change and GHG emissions),
labor and
tax,
employment, privacy, anti-bribery and anti-corruption,
and other U.S. and non-U.S. governmental laws and
regulations; (vii) any material disruption at any of our
manufacturing facilities or other adverse impact on
to severe weather, natural
our operations due
disasters, climate change or other causes; (viii) our
ability to realize expected benefits and cost savings
associated with restructuring initiatives; (ix) our ability
to achieve the benefits expected from, and other risks
associated with,
ventures,
acquisitions,
divestitures, spin-offs, capital investments and other
corporate
cybersecurity and
information technology risks, including as a result of
security breaches and cybersecurity incidents; (xi)
loss contingencies and pending, threatened or future
litigation, including with respect to environmental
related matters; (xii) our exposure to claims under our
agreements with Sylvamo Corporation; (xiii) 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 (xiv) 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
statements can be found in our press releases and
reports filed with the U.S. Securities and Exchange
Commission. 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.
transactions,
from such
joint
(x)
ITEM 1A. RISK FACTORS
The Company faces a variety of risks, including 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 following are material risk factors of which we are
aware, including risk factors that could cause the
Company’s actual results to differ materially from
those contemplated in any forward-looking statement.
If any of the events or circumstances described in any
of the following risk factors occurs, our business,
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. Additional factors that could affect
our business, results of operations and/or financial
condition are discussed elsewhere in this Annual
Report on Form 10-K
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations) and in the
Company’s other filings with the Securities and
Exchange Commission. Moreover,
or
uncertainties not presently known to us, or that we
currently deem immaterial, may adversely affect our
business, results of operations, or financial condition.
(including
risks
in
RISKS RELATING TO MARKET AND ECONOMIC
FACTORS
ADVERSE DEVELOPMENTS
IN 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
confidence and spending, commercial printing and
advertising activity, and white-collar employment
levels, all of which impact demand for our products,
or otherwise adversely affect our business. We may
also be adversely affected by catastrophic or other
unforeseen events, including health epidemics or
pandemics, such as COVID-19, natural disasters,
geopolitical events, military conflicts, terrorism, port
and canal blockages and similar disruptions, political,
financial or social instability, or civil or social unrest.
Future health pandemics could adversely impact
portions of our business to varying degrees, including
as the result of lower demand for certain products,
supply chain and labor disruptions, and higher costs.
These effects could have a material impact on our
business, results of operations, cash flow, liquidity, or
financial condition. Moreover, negative economic
conditions or other adverse developments with
11
and
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,
negative
credit markets,
capital
developments associated with interest rates, asset
values, 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.
and
to be challenging
Macroeconomic conditions in the U.S. and globally
in various respects,
continue
including as the result of significant inflationary
pressures, elevated interest rates, challenging labor
market conditions, and adverse effects associated
with current geopolitical conditions. Our operations
have been adversely affected by, and are expected to
continue to be adversely affected by, these negative
macroeconomic conditions, including as the result of
for certain products, higher raw
lower demand
material and labor costs. Moreover, any significant
in current negative macroeconomic
deterioration
conditions, or any
is
recovery
significantly slower than anticipated, could have a
material adverse effect on our business, results of
operations or financial condition. Further if current
negative macroeconomic
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.
conditions
therefrom
result
that
impacted
The COVID-19 pandemic adversely
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. If public health conditions related to
COVID-19 or a similar health epidemic or pandemic
were to significantly worsen in the U.S. or in other
markets in which we operate, our business and
financial results could be adversely impacted, and we
may be unable to effectively respond to or predict any
such developments.
renewable
INTERNATIONALLY
CHANGES IN INTERNATIONAL CONDITIONS OR
OTHER RISKS ARISING FROM CONDUCTING
BUSINESS
COULD
ADVERSELY AFFECT OUR BUSINESS AND
RESULTS OF OPERATIONS. As a global producer
fiber-based packaging and pulp
of
products, we could be substantially affected by risks
related to the countries outside the U.S. in which we
have manufacturing facilities or sell our products.
These risks, which can vary substantially by country,
instability,
may
geopolitical
anti-American
sentiment, social and ethnic unrest, natural disasters,
regulatory
military conflicts and
environment (including the risks of operating in
include economic or political
corruption,
terrorism,
events,
the
in
safety
relation
(including
guidelines
developing or emerging markets in which there are
significant uncertainties regarding the interpretation
and enforceability of legal requirements and the
intellectual
enforceability of contracts rights and
property rights) fluctuations in the value of local
currency versus the U.S. dollar, foreign exchange
control regimes (including restrictions on currency
conversion) repatriating cash from foreign countries
to the U.S., downturns or changes in economic
conditions
to commodity
inflation), adverse
tax consequences or rulings,
import restrictions or controls, economic sanctions,
health
protocols,
and
nationalization, changes in social, political or labor
conditions, and adverse developments regarding
sustainability, environmental regulations and trade
policies and agreements, any of which risks could
negatively affect our financial results. For example, a
significant portion of sales from our Global Cellulose
Fibers business are concentrated in China and could
be adversely affected by changes
in economic
conditions and demographics
in China. Trade
protection measures in favor of local producers of
competing
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 may 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.
products,
including
During the third quarter of 2023, we completed the
sale of our ownership stake in Ilim and Ilim Group,
and we no longer have investments in Russia
following the completion of this sale. Prior to the
completion of this sale, the military conflict between
Russia and Ukraine adversely affected our Ilim joint
venture and our financial results, including as the
result of economic sanctions, actions by the Russian
government, and associated domestic and global
economic and geopolitical conditions. Additionally,
while we no longer have any investments in Russia,
we may continue to be adversely affected by ongoing
geopolitical
economic
instability
therefrom,
consequences and disruptions arising
including as the result of the military conflict between
Russia and Ukraine, the military conflict between
Israel and Hamas, and increasing tensions between
China and Taiwan. These risks may be further
heightened in the event of the expansion in the scope
or escalation of any such military conflicts.
and
the
In addition, our international operations are subject to
regulation under U.S. law and other laws related to
12
operations in foreign jurisdictions, including laws
prohibiting bribery of government officials and other
corrupt practices. For example, the Foreign Corrupt
Practices Act of 1977, as amended, prohibits U.S.
companies and their representatives from offering,
promising, authorizing or making payments to foreign
officials for the purpose of obtaining or retaining
the U.S. Department of
business abroad, and
Treasury’s Office of Foreign Assets 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,
damage to our reputation and the prosecution of
executives overseeing our international operations.
RISKS RELATED TO CLIMATE AND WEATHER
WE ARE SUBJECT TO RISKS ASSOCIATED WITH
CLIMATE CHANGE AND OTHER SUSTAINABILITY
MATTERS AND GLOBAL, REGIONAL AND LOCAL
WEATHER CONDITIONS AS WELL AS BY LEGAL,
REGULATORY, AND MARKET RESPONSES TO
impacts,
CLIMATE CHANGE. Climate change
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
earthquakes,
floods,
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, and 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
resulting financial costs of compliance with legal or
regulatory initiatives, could have a material adverse
effect on our results of operations and business.
hurricanes,
tornadoes,
adversely
affect
could
and
governmental
There has been an increased focus, including from
investors, customers, the general public, U.S. and
foreign
nongovernmental
authorities, regarding sustainability matters, including
with respect to climate change, GHG emissions,
packaging and waste, sustainable supply chain
practices, biodiversity, deforestation, land, energy and
water use, diversity and inclusion and other human
capital matters. This increased focus on sustainability
matters, including climate change, may result in more
prescriptive reporting requirements with respect to
sustainability metrics, an increased expectation that
such metrics will be voluntarily disclosed by
companies such as ours, and increased pressure to
intended
requiring
to be a
regulatory
regulators
legal and
make commitments, set targets, or establish goals,
and take action to meet them. As the result of this
increased focus and our commitment to sustainability
matters, we have voluntarily provided disclosure and
established targets and goals with respect to various
sustainability matters, including climate change. For
example, we have made public commitments
reduction of carbon
regarding our
emissions, including our Vision 2030 goal of reducing
Scope 1, 2 and 3 GHG emissions by 35% from
2019-2030, which have been approved by SBTi as
consistent with levels required to meet the goals of
the 2015 Paris Agreement. Meeting these and other
sustainability targets and goals have increased, and
may continue to increase, our capital and operational
lack of
costs. There also continues
consistency
initiatives
in
regarding climate change across jurisdictions and
various governmental entities. We also expect to
incur additional expenses as a result of U.S. and
international
additional
disclosures regarding GHG emissions. Further, there
can be no assurance regarding the extent to which
our climate and other sustainability targets will be
achieved, and the achievement of these targets is
subject to various risks and uncertainties, some of
which are outside our control. Moreover, there is no
assurance that investments made in furtherance of
achieving such targets and goals will meet investor
expectations or any binding or non-binding legal
standards regarding sustainability performance. If we
are unable to meet climate and other sustainability
targets and goals, on our projected timelines or at all,
or if such goals and targets are perceived negatively,
including the perception that they are not sufficiently
robust or, conversely, are too costly or not otherwise
in our best interests, any such developments could
adversely impact our reputation as well as investor,
customer and other stakeholder relationships, which
could adversely impact our business and results of
operations. Moreover, not all of our competitors
establish climate or other sustainability targets and
goals at comparable levels to ours, which could result
in competitors having lower supply chain or operating
costs as well as reduced reputational risks associated
with not meeting such goals.
Other climate-related business risks that we face
include risks related to the transition to a lower-
carbon economy, such as increased prices for fossil
fuels; the introduction of a carbon tax; increased
regulation of our operations and our products, and the
resulting potential for increased litigation; and more
stringent and/or complex environmental and other
permitting requirements. To the extent that climate-
related business risks materialize, particularly if we
are unprepared for them, we may incur unexpected
costs, and our business may be materially and
adversely affected.
13
RISKS RELATED TO OUR INDEBTEDNESS
OUR
AFFECT
THE LEVEL OF OUR INDEBTEDNESS COULD
FINANCIAL
ADVERSELY
CONDITION AND
IMPAIR OUR ABILITY TO
OPERATE OUR BUSINESS. As of December 31,
2023, we had approximately $5.6 billion of
level of our
outstanding
indebtedness could have important consequences to
our
results and
business, including the following:
financial condition, operating
indebtedness. The
•
•
•
•
•
•
•
it may limit our ability to obtain additional debt
or equity financing for working capital, capital
expenditures,
development,
product
dividends, share repurchases, debt service
requirements, acquisitions and general
corporate or other purposes;
be
dedicated
a portion of our cash flows from operations
will
on
indebtedness and will not be available for
other purposes, including operations, capital
expenditures
business
opportunities;
payments
future
and
to
the debt service
requirements of our
indebtedness could make it more difficult for
us to satisfy other obligations;
it may limit our ability to adjust to changing
market conditions, including to take actions in
connection with elevated interest rates (such
as
interest rate
environment), and place us at a competitive
disadvantage compared to our competitors
that have less debt;
the current elevated
in
it may increase our exposure to risks related
to fluctuations in foreign currency as we earn
profits in a variety of currencies around the
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
indebtedness at
higher interest rates, which risk is heightened
by the current high interest rate environment;
and
refinance
to
it may
to a
increase our vulnerability
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.
In addition, we are subject to agreements governing
to meet and
our
that require us
indebtedness
to our
maintain certain financial ratios and covenants. A
significant or prolonged downturn in general business
and economic conditions, or other significant adverse
results of
respect
developments with
operations or financial condition, may affect our ability
to comply with these covenants or meet those
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 be able
incur substantial 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.
to
WE ARE SUBJECT TO RISKS ASSOCIATED WITH
OUR VARIABLE RATE DEBT We have interest rate
risk, primarily related to variable rate debt in the
aggregate amount of approximately $908 million as of
December 31, 2023, associated with 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.
rose
significantly during 2022 and 2023 and could remain
high and volatile in 2024 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
information, see
short-term debt. For additional
“Market Risk –
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations on page 44.
Interest Rate Risk”
Interest
rates
in
ISSUED BY
IN CREDIT RATINGS
CHANGES
STATISTICAL
RECOGNIZED
NATIONALLY
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. 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
14
to improve our cash flow, including sale of assets,
reduction of our dividend and
suspension or
reductions
in capital expenditures and working
capital.
the
terms of
Under
the agreements governing
approximately $1.1 billion of our debt as of
December 31, 2023, the applicable interest rate on
such debt may increase upon each downgrade in our
credit rating. As a result, a downgrade in our credit
rating may lead to an increase in our interest
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,
the rating
suspended or withdrawn entirely by
judgment,
in each rating agency’s
agencies
circumstances so warrant. Any such downgrade,
suspension or withdrawal of our credit ratings could
adversely affect our cost of borrowing, limit our
access to the capital markets or result in more
restrictive covenants in agreements governing the
terms of any future indebtedness that we may incur.
if,
irrevocable
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
are subject to the risk that a bank with currently
issued
letters of credit 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
deferred
in our
consolidated financial statements. See Note 15,
Variable Interest Entities, on pages 78 through 80,
and Note 13. Income Taxes, on pages 72 through 74,
in Item 8. Financial Statements and Supplementary
Data for further information.
taxes are currently
recorded
RISKS RELATING TO OUR PENSION AND
HEALTHCARE COSTS
OUR PENSION AND HEALTH CARE COSTS ARE
SUBJECT TO NUMEROUS FACTORS WHICH
COULD CAUSE THESE COSTS TO CHANGE. We
have defined benefit pension plans covering
15
substantially all U.S. salaried employees hired prior to
July 1, 2004 (or later for certain acquired populations,
as described in Note 18. Retirement Plans, on pages
82 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 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
legal requirements and government
oversight.
in
the excess of
OUR U.S. FUNDED PENSION PLAN
IS
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 PLAN, 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
benefit obligation or
the benefit
obligation over the fair value of plan assets. At
December 31, 2023, we had an overfunded U.S.
qualified pension asset balance of $118 million. When
aggregated with U.S.
pension
obligations, the benefit deficit recorded under the
provisions of Accounting Standards Codification
("ASC") 715, “Compensation – Retirement Benefits,”
at December 31, 2023 was $146 million. The amount
and timing of future contributions, which could be
material, will depend upon a number of factors,
including the actual earnings, changes in values of
plan assets and changes in interest rates.
nonqualified
RISKS RELATING TO INDUSTRY CONDITIONS
HAVE
ENERGY
MATERIALS,
CHANGES IN THE COST OR AVAILABILITY OF
AND
RAW
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
countries, individual governments' legislation and
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 experienced, and may continue to experience, a
significant
including
recycled fiber, energy, freight, chemical, and other
supply chain costs, which has adversely affected and
is expected to continue to adversely affect our results
of operations. Energy prices, in particular prices for oil
and natural gas, have fluctuated dramatically in the
past 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 third-
In addition, because our
party
businesses operate in highly competitive industry
segments, we may have not always been able, and
may in the future be unable to recoup past or future
increases in the costs of any raw materials, energy
sources or
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.
transportation sources
in various costs,
transportation.
increase
consumer preferences may increase or decrease the
demand for our fiber-based products and non-fiber
substitutes. Moreover, customer and consumer
preferences are constantly changing based on,
factors, cost, convenience, health
among other
concerns and perceptions and an
increased
awareness of sustainability considerations. These
preferences may affect the prices of our products. In
addition, regulatory developments, such as new or
developing
regulation or single-use packaging
products could significantly alter the market for our
products. Consequently, our financial results are
sensitive to changes in the pricing, and supply and
demand for our products. In addition, our reputation
and financial results may be adversely affected if we
fail to anticipate trends that would enable us to offer
to changing customer
products
preferences and
regulatory
developments.
technological and
respond
that
IN
forest
products
companies.
THE
COULD
U.S.
AND
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,
capacity, marketing,
additional manufacturing
distribution and pricing strategies pursued or
achieved by competitors,
increased use of
artificial intelligence and machine learning solutions in
our industry, and the entry of new competitors into the
markets we serve could negatively
impact our
financial results.
In addition, our products also
compete, in some instances, with companies in other
industries that produce substitutes for wood-fiber
products, such as plastics and various types of metal.
Customer shifts away
from wood-fiber products
toward such substitute products may adversely affect
our business and financial results.
the
FLUCTUATIONS IN THE PRICES OF AND THE
DEMAND FOR OUR PRODUCTS DUE TO
FACTORS SUCH AS ECONOMIC CYCLICALITY
AND CHANGES IN CUSTOMER OR CONSUMER
PREFERENCES,
GOVERNMENT
AND
REGULATION 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 customer or
16
RISKS RELATING TO OUR OPERATIONS
OUR
IMPACT
FACILITIES
MATERIAL DISRUPTIONS AT ONE OF OUR
COULD
MANUFACTURING
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,
impact our
reduce our sales and/or negatively
financial condition. Any of our manufacturing facilities,
or any of our machines within an otherwise
operational
unexpectedly due to a number of events, including:
facility,
cease
could
operations
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
adverse weather events like fires, floods,
earthquakes, hurricanes, winter storms and
extreme temperatures, or other catastrophes
(including adverse weather conditions that
may be intensified by climate change);
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;
international
domestic and
laws and
regulations applicable to us and our business
partners, including joint venture partners,
around the world;
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;
the
in
disruptions
infrastructure,
including
railroad tracks and tunnels;
transportation
roads, bridges,
a widespread outbreak of an illness or any
other communicable disease, or any other
public health crisis or any impacts related to
government regulation as a result thereof;
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
significant downtime, our ability
to meet our
production targets and satisfy customer requirements
could be impaired, resulting in lower sales and having
a negative effect on our business and financial
results.
in part, on our ability
WE MAY NOT ACHIEVE THE EXPECTED
BENEFITS FROM STRATEGIC ACQUISITIONS,
JOINT VENTURES, DIVESTITURES, SPIN-OFFS,
CAPITAL INVESTMENTS, CAPITAL PROJECTS
AND OTHER CORPORATE TRANSACTIONS THAT
WE HAVE PURSUED OR MAY PURSUE. Our
long-term growth, productivity and
strategy
for
profitability depends,
to
accomplish prudent acquisitions,
joint ventures,
divestitures, spin-offs, capital investments, capital
projects, and other corporate transactions that we
may pursue and to realize the benefits we expect
from such transactions. Our expenditures for capital
projects could be higher than we anticipate, we may
experience unanticipated disruptions or delays in
completing the projects and we may not achieve the
desired benefits from those projects, including as a
result of a deterioration in macroeconomic conditions
in our business, unavailability of capital equipment or
related materials, delays in obtaining permits or other
requisite approvals or changes
laws and
regulations. We are subject to the risk that we may
from such
the expected benefits
not achieve
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
the sale of
businesses and assets to purchasers who place a
higher strategic value on such businesses and assets
than we do.
realization of proceeds
from
in
Corporate transactions of this nature that we may
pursue involve a number of special risks, including
with respect to our inability to realize our business
goals with 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
technology
financial, operational and
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.
information
17
Any of these circumstances could adversely affect
our results of operations, cash flows and financial
condition, and the trading price of our common stock.
the
WE COULD BE EXPOSED TO LIABILITY FOR
BRAZILIAN TAXES UNDER OUR AGREEMENTS
WITH SYLVAMO CORPORATION. In connection
with the spin-off of Sylvamo Corporation ("Sylvamo"),
we previously entered into agreements with Sylvamo
and its subsidiaries, including among others a tax
matters agreement. Under
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
the first $300 million 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 total approximately $119 million (adjusted
for variation in currency exchange rates) in tax, plus
interest, penalties, and fees. The interest, penalties,
and fees currently total approximately $274 million
(adjusted for variation in currency exchange rates),
which reflects a recent law change pursuant to which
the Brazil tax authority on January 16, 2024 agreed to
cancel a portion of the interest, penalties, and fees.
total
Accordingly,
approximately $393 million (adjusted for variation in
currency exchange rates). See Note 14 Commitments
and Contingent Liabilities on pages 74 through 78 of
Item 8. Financial Statements and Supplementary
Data for further information.
the assessments
currently
to be competitive, particularly
WE OPERATE IN A CHALLENGING MARKET FOR
TALENT AND MAY FAIL TO ATTRACT AND
RETAIN QUALIFIED PERSONNEL,
INCLUDING
KEY MANAGEMENT PERSONNEL. Our ability to
operate and grow our business depends on our ability
the skills
to attract and retain employees with
necessary to operate and maintain our facilities,
produce our products and serve our customers. The
market for both hourly workers and salaried workers
for
continues
employees with specialized
trade
experience. This, along with the current competitive
labor market and ongoing inflationary conditions, has
led to higher labor costs, particularly at our converting
facilities. Although our focused efforts to attract and
retain employees, including by offering higher levels
of compensation in certain instances, resulted in a
decreased attrition rate in 2023 compared to the prior
two years’ historically high attrition rates, recruiting
and retaining talent (particularly those early in their
careers) continues to be a challenge. In addition, we
rely on key executive and management personnel to
manage our business efficiently and effectively. The
technical and
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 changing
work-life balance expectations, 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 expired August 2023) and related
mill joint pension council master agreement (which
expired September 2023) resulted in new agreements
which will expire August 2027 and September 2027,
respectively. Negotiations between the Company and
USW regarding the converting master collective
bargaining agreement (which expires April 2024) and
related converting joint pension council master (which
expires September 2024) are scheduled to begin on
February 19, 2024. USW represents approximately
10,600 employees in our converting facilities. We
have also experienced work stoppages in the past
and may experience them in the future. Moreover,
labor organizations may attempt to organize groups
of additional employees from time to time, recent 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 risk management, as well as
18
incident response, business continuity and disaster
recovery plans but we cannot eliminate all systematic
or external 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
sophisticated.
Additionally, the regulatory environment surrounding
information security data privacy and data protection
is becoming increasingly restrictive and is evolving
frequently.
increasingly
become
social
activist
updating,
monitoring
joint venture partners, could
The current cyber
threat environment presents
increased risk for all companies, including those in
our
industry. Like other global companies, our
systems are subject to recurring attempts by third
parties to access information, manipulate data or
disrupt our operations. In this regard, we have
experienced cyber threats and incidents, although
none have materially affected us, including our results
of operations or financial condition. Given the current
cyber threat environment, we expect the volume and
intensity of cybersecurity attacks and attempted
intrusions to increase in the future. In addition,
despite careful security and controls design,
implementation,
and
independent third-party verification, our information
technology systems, and those of our third-party
be
providers or
compromised or disrupted due to employee error or
malfeasance, cyber-attacks, including ransomware,
malware, phishing attacks, or data or security
breaches by malicious actors such as common
hackers, criminal groups or nation-state organizations
or
organizations,
disruptions resulting from geopolitical events, natural
of
disasters,
telecommunications networks or other catastrophic
events. Such attacks are increasing in complexity,
and the rapid evolution and increased adoption of
artificial intelligence technologies may intensify our
cybersecurity risks by making cyberattacks more
difficult to detect, contain, and mitigate. Furthermore,
the significant
in remote working and
personal device use increases the risks of cyber
incidents and the improper dissemination of personal
or confidential
information. 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
that could
compromise information security. In addition, the
cybersecurity-related threats that we face may remain
undetected for an extended period of time. In the
event that our information systems are disrupted or
compromised, or the information systems of any
businesses with which we interact, are disrupted or
compromised, in a manner which impacts us or our
information systems, as a result of any cybersecurity
in a manner
("hacktivist")
impairments
increase
failures
or
19
impact, and a
to conduct business with us,
attack, data or security breach, or other security
incident, any such developments could result in lost
sales, business delays, negative publicity or
loss of customer
reputational
confidence, and have a material adverse effect on our
business or financial results. Any such incident or
breach could also result in operational or supply chain
disruptions, data loss, corruption or manipulation, or
information misappropriation including, but not limited
to, interruption to systems availability, denial of
access to and misuse of applications required by our
the
customers
acquisition, use or disclosure of data or inability to
access data, the release of confidential Information
about our operations, and subject us to litigation and
government enforcement actions. Further, in such
event, 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 also stem from such incidents.
Moreover, any significant cybersecurity event could
require us to devote significant management time and
resources in response to such event, interfere with
the pursuit of other important business strategies and
initiatives, and cause us
incur additional
expenditures, which could be material, including to
investigate and remediate such event, recover lost
data, prevent future compromises and adapt systems
and practices in response to such events. There is no
assurance that any remedial actions will meaningfully
limit the success of future attempts to breach our
information systems, particularly because malicious
actors are increasingly sophisticated and utilize tools
and techniques specifically designed to circumvent
security measures, avoid detection and obfuscate
forensic evidence, which means we may be unable to
identify, investigate or remediate effectively or in a
timely manner. 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.
to
WITH
WE MAY BE UNABLE TO REALIZE THE
EXPECTED BENEFITS AND COSTS SAVINGS
ASSOCIATED
RESTRUCTURING
INCLUDING OUR STRATEGIC
INITIATIVES,
ACTIONS ANNOUNCED IN OCTOBER 2023. We
have restructured portions of our operations from time
to time, have current restructuring initiatives taking
in
place, and
restructuring activities in the future. In particular, as
previously disclosed in October 2023, the Company
committed to certain strategic actions impacting its
Containerboard and Global Cellulose Fibers
businesses as further described below. Consistent
that we will engage
likely
is
it
with this initiative, in December 2023, the Company
permanently closed its containerboard mill in Orange,
Texas and permanently ceased production on two of
its pulp machines at its Riegelwood, North Carolina
and Pensacola, Florida mills. The Company recorded
charges associated with these actions during the
three months ended December 31, 2023. See Note 6
- Restructuring and Other Charges, Net in Item 8.
Financial Statements and Supplementary Data for
additional information.
take.
initiatives which we may
We may be unable to realize the expected benefits
from the strategic actions described above and other
In
restructuring
particular, restructuring activities may divert
the
attention of management, disrupt our operations and
fail to achieve the intended cost and operational
benefits. In addition, because we are not able to
predict or control market conditions,
including
changes in the supply and demand for our products,
the prices for our products or our manufacturing
costs, we may not be able to predict the appropriate
time to undertake restructurings. Further, we may
incur cash and non-cash charges in connection with
restructuring activities, which may be material.
Moreover,
to estimate
is
restructuring charges, and these estimates, and the
assumptions underlying
them, may change as
additional information becomes available or facts or
circumstances
initiatives
to
change.
restructuring
judgment
required
related
RISKS RELATING TO LEGAL PROCEEDINGS
AND COMPLIANCE COSTS
AND
IMPACT
REGULATIONS
WE ARE SUBJECT TO A WIDE VARIETY OF
OTHER
LAWS,
GOVERNMENT REQUIREMENTS THAT MAY
CHANGE IN SIGNIFICANT WAYS, AND THE COST
OF COMPLIANCE WITH SUCH REQUIREMENTS,
OR THE FAILURE TO COMPLY WITH SUCH
REQUIREMENTS,
OUR
COULD
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. laws,
regulations and other government requirements -
including, among others,
the
to
environment, health and
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 affect our
returns on investments by restricting existing activities
and products, or subjecting us to increased costs. In
addition, any failure or alleged failure to comply with
applicable laws, regulations or other government
requirements could adversely affect our reputation,
and financial results or result in, among other things,
those relating
safety,
litigation, revocation of required licenses, internal
investigations,
or
proceedings, administrative enforcement actions,
fines and civil and criminal liability.
governmental
investigations
to
and
matters.
Additionally,
incurred, and expect
For example, as part of our business, we are subject
to increasingly stringent federal, state, local and
international laws governing the protection of the
environment. We have
to
continue to incur, significant capital, operating and
other expenditures complying with applicable and
laws and regulations,
forthcoming environmental
including with respect to GHG emissions and other
climate-related
new
environmental laws, regulations or other requirements
to address GHG emissions or climate change may
cause us
incur additional compliance costs,
including costs that we are unable to predict at the
current time. 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
uncertainty. Our
regulatory
environmental expenditures include, among other
areas, those related to air and water quality, waste
disposal and the cleanup of 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
impact on
risks
forestlands, which are a key resource
the
in
production of our products, increased product costs
and changes 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
that existing
require significant expenditures, or
reserves for specific matters will be adequate to cover
future costs. We could also incur substantial fines or
sanctions, enforcement actions (including orders
requiring corrective
limiting our operations or
measures), natural
resource damages claims,
cleanup and closure costs, third-party claims for
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 to predict, and, in some
cases, liability may be imposed without regard to
contribution or to whether we knew of, or caused, the
release of hazardous substances.
the potentially adverse
include
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
20
Protection Regulation, China’s Personal Information
Protection Law and comprehensive privacy laws in
many states,
including California, Connecticut,
Colorado, Utah, and Virginia. These laws impose a
range of compliance obligations
the
handling of personal data. There are significant
penalties
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.
for non-compliance
regarding
This increasingly restrictive and evolving regulatory
environment at the international, federal and state
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
systems, penalties, increased operating costs or
other
impacts on our businesses. Additionally,
regulatory bodies and others tasked with enforcing
privacy and data protection laws have been actively
engaging in enforcement investigations and actions.
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 evaluate and, where necessary, modify
our data processing practices and policies to comply
with evolving privacy laws. Nevertheless, relevant
regulatory authorities could determine that our data
handling practices fail to address all 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 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 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, liability for monetary
damages, fines and/or criminal prosecution, all of
which could negatively affect our business and
operating results.
21
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. For example,
the Organization for Economic Cooperation and
Development ("OECD") has proposed a 15% global
minimum tax applied on a country-by-country basis
(the "Pillar Two rule"), and many countries (including
countries in which we operate) have enacted or
begun the process of enacting laws adopting the
Pillar Two rule. The first component of the Pillar Two
rule is expected to begin applying in 2024, with the
second component expected to go into effect in 2025.
While we do not currently expect the Pillar Two rule to
have a material impact on our effective tax rate, our
analysis is ongoing as the OECD continues to release
guidance and as countries begin
implementing
legislation. Future developments could change our
current assessment, and it is possible that the Pillar
Two rule could adversely impact our effective tax rate
in future periods.
can
from
relevant
guidance
legislative
administrative
In addition, the application of tax law is subject to
interpretation and to audit by taxing authorities.
Additionally,
be
incomplete or vary
intent, and
therefore the application of the tax law is uncertain.
While we believe the positions reported by the
Company comply with
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.
tax
As with many technological innovations, artificial
intelligence (“AI”) presents risks and challenges that
could affect its adoption, and therefore our business.
Uncertainty in the legal regulatory regime relating to
artificial intelligence may require significant resources
to modify and maintain business practices to comply
with U.S. and non-U.S. laws, the nature of which
time. Several
cannot be determined at
jurisdictions,
federal
government, and certain U.S. states, have already
proposed or enacted laws, regulations, and other
requirements governing AI. For example, on October
30, 2023,
issued an
the Biden administration
Executive Order to, among other things, establish
extensive new standards for AI safety and security.
Other jurisdictions may decide to adopt similar or
more restrictive requirements that may render the use
including Europe,
the U.S.
this
of AI challenging. These requirements may make it
harder for us to conduct our business using AI, lead
to regulatory fines or penalties, require us to change
our business practices, or limit our use of AI. If our
use of AI is restricted, our business may be less
efficient, or we may be at a competitive disadvantage.
Any of these factors could adversely affect our
results of
financial condition, and
business,
operations.
shareholders for U.S. federal income tax purposes,
and the Company could incur significant U.S. federal
income tax liabilities. These income tax liabilities may
be indemnifiable by Sylvamo pursuant to a tax
matters agreement between
the Company and
Sylvamo. However, there can be no assurance that
Sylvamo would have adequate resources or liquidity if
it were required to indemnify the Company for any
such tax liability.
RESULTS OF LEGAL PROCEEDINGS COULD
HAVE A MATERIAL 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
regulatory or
in connection with our
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 74 through 78 of Item 8. Financial Statements
and Supplementary Data for further information.
legal,
or
proceedings
other
to Sylvamo,
the Company and
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 the spin-off of Sylvamo and certain
related transactions as a transaction that is generally
the
tax-free
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 take a contrary position. In
addition, the Company’s tax counsel and the IRS
relied on certain representations and covenants
delivered by the Company and Sylvamo in rendering
such opinion and private letter ruling. If any of 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 or any of their respective subsidiaries, the
tax opinion may be invalid and the conclusions
reached therein could be jeopardized.
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
Even if the spin-off otherwise qualifies for non-
recognition of gain or loss under Section 355 of the
U.S. Tax 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, directly or
indirectly, as part of a plan or series of related
transactions
this
that
the Company’s or
purpose, any acquisitions of
Sylvamo'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 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.
the spin-off. For
include
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
RISK MANAGEMENT AND STRATEGY
legal
financial,
compliance,
The Company’s cybersecurity
risk management
processes are integrated into the Company’s overall
risk management system. The Company has a
formalized enterprise risk management program
overseen by the Board of Directors and committees
of the Board of Directors that addresses strategic,
operational,
and
information technologies and cybersecurity risks. In
addition, the Enterprise Risk Management Council
team
(“ERM Council”)
comprised of senior vice presidents and other
business leaders responsible for managing enterprise
risks and planning and organizing the activities of our
organization to minimize the effects of risk on the
Company's business and financial results. The ERM
Council regularly reports to the Board of Directors on
areas of risk and risk management. The Chief
Financial Officer serves as the ERM Council Lead.
The Chief Audit Executive serves as the ERM Council
Process Owner.
is a management-level
The Company has an Information Technology (“IT”)
the
Risk Governance Program
that aligns with
22
level. The
enterprise risk management framework and assists
with fulfilling oversight responsibilities for major IT
risks, including cybersecurity risks. The IT Risk
Governance Program identifies, defines, manages,
measures and governs cybersecurity risks across the
Company at an enterprise
IT Risk
Governance Program is carried out by an IT Risk
Identification and Mitigation Team (“IT RIM”), which is
comprised of business
information
security, information technology, human resources,
internal audit, legal, and risk. The IT RIM meets
monthly, reviews all cybersecurity incidents meeting
certain criteria, provides oversight with respect to
cybersecurity matters at a management level, and
reports to the ERM Council.
leaders
from
Our Risk Assessment Program
faces
targeted
to our website,
The Company has a risk assessment program in
place to assess, identify and manage material risks
from cybersecurity threats. Cybersecurity risks the
Company
attacks,
include
ransomware, data theft, virus and intrusion software,
as well as attacks
financial
technology,
operational
applications,
telecommunications and human resources data. For
a full discussion of cybersecurity risks facing the
Company, please see Part I, Item 1A. Risk Factors -
WE ARE SUBJECT TO CYBERSECURITY AND
INFORMATION TECHNOLOGY RISKS RELATED
TO BREACHES OF SECURITY PERTAINING TO
SENSITIVE COMPANY, CUSTOMER, EMPLOYEE
INFORMATION AS WELL AS
AND VENDOR
BREACHES IN TECHNOLOGY USED TO MANAGE
BUSINESS
OPERATIONS
PROCESSES. Key aspects of
the Company’s
cybersecurity program include the following:
OTHER
AND
•
•
•
•
•
and
awareness
layered technical protective capabilities and
detective surveillance controls;
utilizing independent third parties to assess
the Company’s practices related to, and
provide expertise and assistance with,
various aspects of information security, as
further described below;
on
courses
for employees with
information security
to Company
Company email or access
devices,
social
engineering and other cybersecurity training
as well as targeted training for specific roles
based on responsibilities and risk level;
global security and privacy policies; and
business continuity, incident response and
disaster recovery procedures, including table
top exercises involving senior leaders.
phishing,
including
training
Engagement of Third Parties
The Company engages third parties in connection
with assessing,
cybersecurity risks, including the following:
identifying and managing
its
•
•
•
for, preventing,
Engagement of an independent third party
with incident response expertise to provide
intelligence-based cybersecurity solutions
and services to assist the Company with
preparing
investigating,
responding to and remediating cybersecurity
incidents, including attacks that target on-
premise, cloud, and critical
infrastructure
environments.
Engagement of an independent third party to
security program
conduct an annual
assessment of the controls, maturity and
performance of the Company’s information
security program and the information security
risk associated with the Company’s business
systems. The assessment uses the National
Institute of Standards and Technology
Cybersecurity Framework as its benchmark.
Engagement of a leading third-party service
provider to annually perform an external and
an internal penetration assessment using
industry standard tools and techniques.
Additionally, our Internal Audit team conducts annual
assessments of our cyber programs and controls.
Oversight of Third Parties
In
the Company’s use of
regard,
this
The Company has processes to oversee and identify
material risks from cybersecurity threats associated
third-party service
with
the Company’s
providers.
cybersecurity risk management program takes into
account third-party systems whereby the Company
could be impacted by the compromise of the security
the
of vendors or other business relations of
Company, and the Company has a comprehensive
third-party access management system. In addition,
the Company conducts risk-based due diligence on
the profiles of third-party service providers with
respect to cybersecurity risks prior to engagement,
and providers of critical services are continuously
monitored with
risks. The
Company also requires service providers to provide
prompt notification of any actual or suspected breach
impacting Company data or operations.
to security
respect
The Company does not believe that risks from
cybersecurity threats, including as a result of any
previous cybersecurity
incidents, have materially
affected the Company, including its business strategy,
results of operations or financial condition.
The Company carries cyber insurance which provides
connection with
coverage
breaches.
in
cybersecurity
23
GOVERNANCE
Role of the Board of Directors and its Committees
International Paper has an integrated board and
executive-level governance structure that oversees
risks from cybersecurity threats. The Company’s
Board of Directors has primary oversight of our
enterprise risk management program, which includes
cybersecurity risk. Moreover, the Board of Directors is
supported in its oversight by the Audit and Finance
Committee and PPE Committee, which share
oversight responsibilities related to the Company’s
information security programs. The Audit and Finance
Committee reviews management’s cybersecurity and
information security risk management programs and
controls,
for management’s
identification and reporting of material cybersecurity
incidents. The PPE Committee reviews technology
issues pertinent to the Company including those
associated with
operational
information
technology, cybersecurity and data security and
assesses related Company strategies.
including processes
and
Our Board of Directors, Audit and Finance Committee
and PPE Committee each receives periodic updates
on cybersecurity issues from management (including
our Chief Information Security Officer (“CISO”)). For
example, the CISO provides reports to the Audit and
Finance Committee and PPE Committee regarding
cybersecurity risks, as well as plans and strategies to
mitigate those risks, at least annually. Furthermore,
our ERM Council annually reports its activities either
directly to the Board of Directors or through the Audit
and Finance Committee.
Role of Management
At a management
level, our cybersecurity risk
management program is led by our CISO. Our current
CISO has been with the Company for over 30 years,
worked in Information Technology for over 25 years,
and has led the Company’s security efforts since
2011. He was appointed as the Company’s first CISO
in 2019. Our CISO stays current on cybersecurity
issues and
through continuing education
activities such as participation at conferences and in
webinars. Our CISO reports to the Chief Information
Officer who oversees the Company’s information
technology department.
trends
The Company has also adopted a cyber-incident
response plan which provides
for controls and
procedures in connection with cybersecurity events,
including escalation procedures summarized below.
The cyber-incident response plan is designed to
address
operational
cybersecurity events. Evaluation and response to
cybersecurity events is led by our Cybersecurity
non-operational
and
remediation and
Incident Response Team (“CIRT”), under the direction
of our CISO. The CIRT is comprised of subject matter
experts representing Information Security, Information
Technology, Operational Technology, and Legal. The
CIRT performs an impact assessment with respect to
cybersecurity incidents, gathers facts and provides a
chronology of events in connection therewith, and
recovery activities. Our
leads
General Counsel, Senior Vice President of Human
Resources, Chief Ethics and Compliance Officer (or
their respective designees), and CISO review and
assess significant non-operational data breaches.
Cybersecurity events that meet specified criteria for
operational impact are escalated for further review to
our Business Continuity Incident Command Team
(“Incident Command Team”). The Incident Command
Team performs an initial assessment that includes
evaluation of
the cybersecurity event’s severity,
response required, and estimated business cost, and
leads the execution of business continuity plans to
maintain Company operations. Cybersecurity events
meeting certain criteria are escalated
to our
Disclosure Committee, General Counsel and Chief
Financial Officer for further review. The Disclosure
Committee, General Counsel and Chief Financial
Officer assess and determine materiality using the
facts and chronology of events provided by the
Incident Command Team.
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
level of planned capital
investments for 2024 on page 39, and dispositions
and restructuring activities as of December 31, 2023,
on page 35 of Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations, and in Note 7 Acquisitions on page 65 of
Item 8. Financial Statements and Supplementary
Data.
the
24
ITEM 3. LEGAL PROCEEDINGS
Information concerning certain legal proceedings of
the Company is set forth in Note 14 Commitments
and Contingent Liabilities on pages 74 through 78 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
the discharge of materials
environment or primarily for the purpose of protecting
the environment that is likely to result in monetary
sanctions of $1 million or more.
into
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
25
PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS
AND
EQUITY
SECURITIES
PURCHASES OF
ISSUER
We pay regular quarterly cash dividends and expect
to continue to pay regular quarterly cash dividends in
though each quarterly
the
dividend payment is subject to review and approval
by our Board of Directors.
foreseeable
future,
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 9, 2024, there were approximately 8,188
record holders of common stock of the Company.
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, 2023 - October 31, 2023
November 1, 2023 - November 30, 2023
December 1, 2023 - December 31, 2023
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)
5,373 $
3,992
1,241
10,606
35.19
33.71
38.82
— $
—
—
2.96
2.96
2.96
(a) 10,606 shares were acquired from employees or members of our Board of Directors as a result of share withholdings to pay income taxes
under the Company's restricted stock program. On October 11, 2022, our Board of Directors increased the authorization up to a total of
$3.35 billion shares. This repurchase program does not have an expiration date. As of December 31, 2023, approximately $2.96 billion
aggregate shares of our common stock remained authorized for repurchase.
26
PERFORMANCE GRAPH
to be
"filed" with
The performance graph shall not be deemed
the
"soliciting material" or
Commission or subject to Regulation 14A or 14C
under, or to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended, (the
"Exchange Act") 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, 2018 with a $100
investment
the S&P
in our peer group and
Composite-500 Stock Index (S&P 500 Index) also
made at market close on December 31, 2018. The
graph portrays total return, 2018-2023, 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
information,
and Supplementary Data” of this Annual Report on
Form 10-K. In addition to historical consolidated
financial
following discussion
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,
27
particularly in “Risk Factors” and “Forward-Looking
Statements.”
The following generally discusses 2023 and 2022
items and year-to-year comparisons between 2023
and 2022. Discussion of historical items in 2021, and
year-to-year comparisons between 2022 and 2021,
can be found in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2022, filed with
the SEC on February 17, 2023, under Part II, Item 7,
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
EXECUTIVE SUMMARY
Full-year 2023 net earnings attributable
to
shareholders were $288 million ($0.82 per diluted
share) compared with $1.5 billion ($4.10 per diluted
share) for full-year 2022.
During 2023, International Paper executed well, both
commercially and operationally, as we navigated an
uncertain and challenging demand environment.
During much of the year, underlying demand for our
lower as consumers prioritized
products was
spending on services and essential goods. This trend
was influenced by the pull forward of goods during
the pandemic, as well as by inflationary pressures
and rising interest rates that impacted the consumer.
Demand for our products was further constrained by
inventory destocking as our customers, and the
broader supply chain, worked
through elevated
inventories of their products. The lower demand
combined with declining sales prices and continued
cost inflation resulted in lower sales and earnings in
2023 as compared
to 2022. During 2023, we
remained focused on mitigating the impact of these
challenges through commercial and cost reduction
initiatives. We advanced our strategies to improve
profitability across our portfolio by
in
capabilities in our Industrial Packaging business to
enhance our value proposition to align with customer
needs and optimizing our Global Cellulose Fibers
business by reducing our exposure to commodity
pulp. We took strategic actions to structurally reduce
fixed costs in our mill system in both our Industrial
Packaging and Global Cellulose Fibers businesses.
We also made significant progress in Building a
IP, driven by commercial and process
Better
benefits
improvement
exceeding our 2023
target. Regarding capital
allocation in 2023, we returned approximately $840
million to shareowners including approximately $640
million of dividends and $200 million of share
repurchases. Finally, during 2023, we completed the
sale of our ownership stake in Ilim for $508 million.
International Paper no longer has investments in
Russia following completion of this sale.
initiatives,
investing
resulting
in
28
to prior
the year
Comparing 2023 performance to 2022, price and mix
was lower in our North American Industrial Packaging
business due to prior index movements, lower export
prices and higher export mix, as demand improved.
Price in our Global Cellulose Fibers business was
lower due
index movements and an
unfavorable mix driven by lower absorbent pulp
shipments. Volume in both business segments was
impacted by ongoing inventory destocking across the
supply chain. While there was demand recovery in
the second half of
in both business
segments, volume was lower in our North American
Industrial Packaging business as consumers shifted
priorities
toward non-discretionary goods and
services while dealing with inflation. Volume in our
Global Cellulose Fibers business was also impacted
by lower demand as a result of the slowdown in the
global economy. Operations and costs in both the
North American Industrial Packaging and Global
Cellulose Fibers businesses were higher reflecting
the impact of inflation on materials and services along
with the impact of higher unabsorbed costs resulting
from increased economic downtime in the current
year. Planned maintenance outage costs were lower
in our North American Industrial Packaging business
while higher in our Global Cellulose Fibers business.
Input costs were lower in both business segments,
primarily driven by
lower energy, wood and
distribution costs along with lower recovered fiber
costs in our North American Industrial Packaging
business.
in
in our
from contract restructuring
Looking ahead to the first quarter 2024, as compared
to the fourth quarter 2023, we expect this quarter to
be an earnings trough on seasonally lower volumes,
higher costs and from the impact of the January
winter freeze. We also expect the majority of prior
index movements to flow through in the first quarter
2024. Specifically
Industrial Packaging
business, we expect price to be relatively flat as prior
price index movements are offset by the commercial
benefits
the box
business. Volume is expected to be lower in the first
quarter 2024 due to normal seasonal declines in
North America, partially offset by two more shipping
days. Operations and costs are expected to decrease
earnings
energy
higher
consumption and cost
inflation on wages and
employee benefits. These increases are expected to
be partially offset by lower fixed costs resulting from
the closure of our Orange, Texas mill. Maintenance
outage expense is expected to be higher coming off
of a seasonally lower fourth quarter 2023. Input costs
to decrease earnings on higher
are expected
recovered fiber and energy costs. In our Global
Cellulose Fibers business, we expect price and mix to
modestly improve as a result of our strategy to reduce
seasonally
due
to
exposure to commodity pulp. We expect volume to be
relatively flat as seasonally lower shipments due to
the Chinese New Year are offset by improved
demand in other areas. Operations and costs are
expected to decrease earnings due to seasonality
and cost inflation, partially offset by the non-repeat of
a turbine maintenance outage and lower fixed costs
resulting from the idling of our pulp machine in our
Riegelwood, North Carolina mill. Maintenance outage
expense is expected to increase earnings while
higher
input costs associated with energy and
chemicals are expected to decrease earnings.
Looking at full-year 2024, we see a transitional year
where markets continue to recover as we focus on
in both business
improving mix and margins
segments
through execution of our commercial
strategies. We expect demand trends to continue to
improve across our portfolio with year-over-year
industry growth of approximately three percent for
packaging and fluff pulp. Additionally, we expect more
than $400 million of net benefits from our commercial
and operational initiatives. This includes the fixed cost
reductions tied to the closure of our Orange, Texas
containerboard mill and the permanent shutdown of
two pulp machines in our Global Cellulose Fibers
business, with the benefits of both strategic actions
expected to be at a full run rate by the fourth quarter
2024. These cost saving initiatives will be important
in offsetting expected higher costs for recovered fiber,
transportation and general
inflation on wages,
employee benefits, materials and services. With
respect to our capital allocation framework, we are
targeting capital expenditures of $800 million - $1.0
billion
for general maintenance, cost
improvement and to enhance capabilities in our box
business. As previously mentioned, we returned
approximately $840 million of cash to shareowners in
2023
including approximately $640 million of
dividends. Given our strategic customer relationships,
teams, world class assets and market
talented
expertise, we are committed to maximizing long-term
value for all our stakeholders.
in 2024
As previously disclosed, the Company permanently
closed its containerboard mill in Orange, Texas in
December 2023 and permanently ceased production
of two of its pulp machines at its Riegelwood, North
Carolina and Pensacola, Florida mills on December
11, 2023. The mill closure resulted in pre-tax non-
cash asset write-off and accelerated depreciation
charges of approximately $347 million and pre-tax
cash severance and other shutdown charges of
approximately $81 million during the year ended
December 31, 2023. The machine shutdowns
resulted in pre-tax non-cash asset write-off and
accelerated depreciation charges of approximately
$75 million and pre-tax cash severance and other
shutdown charges of approximately $37 million during
the year ended December 31, 2023.
(loss) attributable
Adjusted Operating Earnings and Adjusted Operating
Earnings Per Share are non-GAAP measures and are
defined as net earnings
to
International Paper (a GAAP measure) excluding
discontinued operations, net special items and non-
operating pension expense (income). Net earnings
(loss) and Diluted earnings
(loss) per share
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 to be unusual (net
special items) from net earnings (loss) attributable to
reported 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 directly comparable GAAP measure,
provides for a more complete analysis of the results
of operations.
The following are reconciliations of Earnings (loss)
attributable to common shareholders to Adjusted
operating earnings (loss) attributable to common
total and per share basis.
shareholders on a
Additional detail is provided later in this Annual
Report on Form 10-K 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
2023
2022
$ 288 $ 1,504
14
237
Earnings (Loss) from Continuing Operations
302 1,741
Add back - Non-operating pension expense
(income)
54
(192)
Add back - Net special items expense (income)
572
233
Income tax effect - Non-operating pension and
special items
(173)
(614)
Adjusted Operating Earnings (Loss)
Attributable to Shareholders
$ 755 $ 1,168
29
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
2023
2022
$ 0.82 $ 4.10
0.04 0.64
0.86 4.74
0.15
(0.52)
Add back - Net special items expense (income)
per share
1.64 0.63
Income tax effect per share - Non-operating
pension and special items
(0.49)
(1.67)
Adjusted Operating Earnings (Loss) Per Share
Attributable to Shareholders
$ 2.16 $ 3.18
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
Adjusted Operating
Earnings (Loss)
Attributable to
Shareholders
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
Adjusted Operating
Earnings (Loss)
Per Share
Attributable to
Shareholders
Three Months
Ended
December 31,
2023
Three Months
Ended
September 30,
2023
Three Months
Ended
December 31,
2022
$
(284) $
165 $
(318)
—
(284)
14
546
27
192
13
29
489
171
(48)
144
(134)
(10)
42
$
142 $
224 $
309
Three Months
Ended
December 31,
2023
Three Months
Ended
September 30,
2023
Three Months
Ended
December 31,
2022
$
(0.82) $
0.47 $
(0.90)
—
0.08
1.38
(0.82)
0.55
0.48
0.04
0.04
(0.13)
1.58
0.08
0.41
(0.39)
(0.03)
0.11
$
0.41 $
0.64 $
0.87
30
Cash provided by operations, including discontinued
operations, totaled approximately $1.8 billion and
$2.2 billion for 2023 and 2022, respectively. The
Company generated free cash flow of approximately
$692 million in 2023 and $1.2 billion in 2022. Free
cash flow is a non-GAAP measure and the most
directly 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
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
operational
performance, we believe that free cash flow also
enables investors to perform meaningful comparisons
between past and present periods.
underlying
ongoing
The following are reconciliations of free cash flow to
cash provided by operations:
In millions
2023
2022
Cash provided by operations
$
1,833 $
2,174
Adjustments:
Cash invested in capital projects, net of
insurance recoveries
Free Cash Flow
(1,141)
(931)
$
692 $
1,243
Three Months
Ended
December 31,
2023
Three Months
Ended
September 30,
2023
Three Months
Ended
December 31,
2022
$
492 $
468 $
761
In millions
Cash provided by
operations
Adjustments:
Cash invested in
capital projects, net of
insurance recoveries
Free Cash Flow
$
(305)
187 $
(228)
240 $
(322)
439
The non-GAAP financial measures presented in this
Annual Report on Form 10-K as referenced above
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 utilize
identical calculations, the Company’s presentation of
non-GAAP measures in this Annual Report on Form
10-K may not be comparable to similarly titled
measures disclosed by other companies, including
companies in the same industry as the Company.
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 (Loss):
In millions
2023
2022
Net Earnings (Loss) from Continuing
Operations Attributable to International Paper
Company
$ 302 $ 1,741
Add back (deduct)
Income tax provision (benefit)
Equity (earnings) loss, 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
59
(236)
21
6
382 1,511
231
325
(2)
27
28
529
(5)
34
99
76
Non-operating pension expense (income)
54
(192)
Business Segment Operating Profit (Loss):
Industrial Packaging
Global Cellulose Fibers
Total Business Segment Operating Profit
(Loss)
$ 1,249 $ 1,848
$ 1,266 $ 1,742
(17)
106
$ 1,249 $ 1,848
Business Segment Operating Profit (Loss) in 2023
was $599 million lower than in 2022 as the benefits
from lower input costs ($982 million) and lower
maintenance outage costs ($8 million) were more
than offset by lower average sales price realizations
and an unfavorable mix ($435 million), lower sales
volumes ($228 million) and higher operating costs
($926 million).
RESULTS OF OPERATIONS
International Paper’s management
Business Segment Operating Profits (Losses) are
to
used by
measure the earnings performance of its businesses.
Management uses this measure to focus on ongoing
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
this
information, along with net earnings, provides a more
complete analysis of the results of operations by year.
that using
income
Business Segment Operating Profits (Losses) are
defined as earnings (loss) from continuing operations
before
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
(Losses) 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 - "Segment Reporting".
in
two segments:
International Paper operates
Industrial Packaging and Global Cellulose Fibers. On
September 18, 2023, the Company completed the
sale of its Ilim equity investment and, as a result, all
current and historical results of the Ilim investment
are presented as Discontinued Operations, net of
taxes and our equity investment in Ilim is no longer a
separate reportable industry segment. For additional
information, see discussion in Note 11 – Equity
method Investments on pages 69 and 70 of Item 8.
Financial Statements and Supplementary Data.
31
The principal changes in operating profit by business
segment were as follows:
supported by approximately $1.9 billion of credit
facilities.
•
Industrial Packaging’s operating profit of $1.3
billion was $476 million lower than in 2022 as
the benefits of
input costs and
lower
maintenance outage costs were more than offset
by lower average sales price and an unfavorable
mix, lower sales volumes and higher operating
costs.
• Global Cellulose Fibers' operating profit (loss) of
$(17) million was $123 million lower than in 2022
as the benefits of lower input costs were more
than offset by lower average sales price and an
unfavorable mix, lower sales volumes, higher
operating costs and maintenance outage costs.
LIQUIDITY AND CAPITAL RESOURCES
Including discontinued operations, International Paper
generated $1.8 billion of cash flow from operations for
the year ended December 31, 2023, compared with
$2.2 billion in 2022. Capital spending for 2023 totaled
$1.1 billion, or 80% of depreciation and amortization
remains strong,
liquidity position
expense. Our
32
RESULTS OF OPERATIONS
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.
Factors that impact 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
costs,
including pensions; and manufacturing
conversion costs.
The following is a discussion of International Paper’s
consolidated results of operations for the year ended
December 31, 2023, and the major factors affecting
these results compared to 2022.
For the year ended December 31, 2023, International
Paper reported net sales of $18.9 billion, compared
with $21.2 billion in 2022. International net sales
(based on the location of the seller and including U.S.
exports) totaled $5.3 billion or 28% of total sales in
2023. This compares with international net sales of
$5.9 billion in 2022.
Full year 2023 net earnings attributable
to
International Paper Company totaled $288 million
($0.82 per diluted share), compared with net earnings
of $1.5 billion ($4.10 per diluted share) in 2022.
Amounts in 2023 and 2022 include the results of
discontinued operations.
Earnings from continuing operations attributable to
International Paper Company after taxes in 2023 and
2022 were as follows:
In millions
2023
2022
Earnings from continuing operations
attributable to International Paper
Company
$
302 (a) $ 1,741 (b)
(a)
(b)
Includes $412 million of net special items charges and $41
million of non-operating pension expense.
Includes $429 million of net special items income and $144
million of non-operating pension income.
Compared with 2022, the benefits from lower input
costs ($743 million), lower maintenance outage costs
($6 million), lower corporate and other costs ($3
million), lower net interest expense ($25 million) and
lower tax expense ($8 million) were more than offset
by lower average sales price and an unfavorable mix
($329 million), lower sales volumes ($172 million) and
higher operating costs ($700 million). In addition,
excluding special items, 2023 results included higher
equity earnings, net of taxes. Our Building a Better IP
initiatives delivered $260 million of earnings in 2023
primarily though our strategy acceleration initiative to
deliver profitable growth through commercial and
investment excellence.
33
The operational
tax provision and operational
effective tax rate are non-GAAP financial measures
and are calculated by adjusting the income tax
provision from continuing operations and rate to
exclude the tax effect of net special items and non-
operating pension expense (income). Management
believes
this presentation provides useful
information to investors by providing a meaningful
comparison of the income tax rate between past and
present periods.
that
The following is a reconciliation of the net income tax
provision (benefit) to the operational tax provision and
rate:
In millions
2023
2022
Earnings (Loss) From Continuing
Operations Before Income Taxes and
Equity Earnings
Pre-tax special items
Non-operating pension (income) expense
Adjusted Operating Earnings (Loss)
from Continuing Operations Before
Income Taxes and Equity Earnings
$ 382
$ 1,511
554
54
233
(192)
$ 990
$ 1,552
Income tax provision (benefit)
$
59
$ (236)
Income tax effect - non-operating pension
(income) expense and pre-tax special
items
173
614
Operational Tax Provision
$ 232
$ 378
Operational Tax Rate
23 %
24 %
INTEREST EXPENSE AND EQUITY EARNINGS, NET OF TAXES
related
Net corporate interest expense totaled $231 million in
2023 and $325 million in 2022. Net interest expense
includes $3 million and $58 million of
interest
timber monetization
to
expense
restructuring
in 2023 and 2022,
tax matter
respectively. Net interest expense in 2023 also
includes $6 million of interest income associated with
the settlement of tax audits. The decrease in net
interest expense in 2023 compared with 2022 was
due to higher interest income.
the
Equity earnings, net of taxes were a loss of $21
million and a loss of $6 million in 2023 and 2022,
respectively. Equity earnings in 2023 includes an $18
million other-than-temporary impairment of an equity
method investment.
See Business Segment Results on pages 36 and 37
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
On September 18, 2023, the Company completed the
sale of its Ilim equity investment and, as a result, all
current and historical results of the Ilim investment
are presented as Discontinued Operations, net of
taxes and our equity investment is no longer a
segment. This
separate
transaction is discussed further in Note 11 - Equity
Method Investments on pages 69 and 70 of Item 8.
Financial Statements and Supplementary Data for
further discussion.
reportable
industry
Discontinued operations include the equity earnings
of the prior Ilim joint venture. Discontinued operations
also includes after-tax losses of $126 million and
$533 million in 2023 and 2022, respectively for
impairment and transaction costs related to our
former equity method investment in the Ilim joint
venture.
INCOME TAXES
A net income tax provision from continuing operations
of $59 million was recorded for 2023 and the reported
effective income tax rate was 15%. This includes a
tax benefit of $23 million related to the settlement of
tax audits and tax expense of $4 million related to
internal legal entity restructuring. Excluding these
items, a $141 million net tax benefit for other special
items and a $13 million tax benefit related to non-
operating pension expense,
tax
provision (non-GAAP) for 2023 was $232 million, or
23% of pre-tax earnings before equity earnings.
the operational
A net income tax benefit from continuing operations of
$236 million was recorded for 2022 and the reported
effective income tax rate was (16%). This includes a
tax benefit of $604 million related to the 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 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 $48 million tax
expense related to non-operating pension income,
the operational tax provision (non-GAAP) for 2022
was $378 million, or 24% of pre-tax earnings before
equity earnings.
34
2023
2022
Orange mill closure costs
$ 81 (a) $ —
SPECIAL ITEMS
Pre-tax special items (excluding interest expense and
equity earnings) included in continuing operations
totaling $557 million and $175 million were recorded
in 2023 and 2022, respectively. Details of these
charges were as follows:
Special Items
In millions
Business Segments
Restructuring and other, net
$ 107
$ —
Orange mill accelerated depreciation
347 (a)
—
Pensacola mill and Riegelwood mill
accelerated depreciation
Net (gains) losses on sales and
impairments of businesses
75 (b)
—
Corporate
—
529
76 (c)
76
Corporate
Restructuring and other, net
$
(8)
$ 89
Environmental remediation reserve
adjustments
Legal reserve adjustments
Foreign currency cumulative translation
loss related to sale of equity method
investment
Sylvamo investment fair value
adjustment
Other
Total
36
—
—
—
—
28
63
(4)
10
(65)
6
99
$ 557
$ 175
(a) Recorded in the Industrial Packaging business segment.
(b) Recorded in the Global Cellulose Fibers business segment.
(c) Recorded in the Industrial Packaging business segment for the
impairment of goodwill in our EMEA Packaging business.
evaluates
continually
revenue capability,
International Paper
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
reduce costs.
unprofitable
Additionally, the Company is committed to its capital
allocation framework to maintain a strong balance
sheet including reducing debt to maximize value
creation and maintain our current investment grade
credit rating.
facilities, and
(d)
During 2023 and 2022, pre-tax restructuring and
other charges, net, totaling $99 million and $89
million, respectively, were recorded. Details of these
charges were as follows:
Restructuring and Other, Net
In millions
Business Segments
2023
2022
Pensacola mill and Riegelwood mill pulp
machine shutdowns
Building a Better IP
37 (b)
—
(11) (c)
—
107
—
Building a Better IP
$
(8)
$ —
Early debt extinguishment costs (see Note
16)
Other
Total
—
—
(8)
93
(4)
89
$ 99
$ 89
(a) Recorded in the Industrial Packaging business segment.
(b) Recorded in the Global Cellulose Fibers segment.
the
(c)
Industrial
Includes $8 million
Packaging business segment and $3 million income recorded
in the Global Cellulose Fibers business segment.
income recorded
in
DESCRIPTION OF BUSINESS SEGMENTS
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
customer basis consistent with
the business
segmentation generally used in the forest products
industry.
INDUSTRIAL PACKAGING
The majority of our business is focused on creating
fiber-based packaging that protects and promotes
goods, enables worldwide commerce and helps keep
consumers safe. We meet our customers’ most
challenging sales, shipping, storage and display
requirements with sustainable solutions. Our U.S.
production capacity is over 13 million tons annually.
35
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
173 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 23 corrugated packaging plants in France, Italy,
Spain, Morocco and Portugal.
GLOBAL CELLULOSE FIBERS
feminine care,
Cellulose fibers are a sustainable, renewable raw
material used in a variety of products people depend
on every day. We create safe, quality pulp for a wide
range of applications like diapers, towel and tissue
products,
incontinence and other
personal care products that promote health and
wellness. In addition, our innovative specialty pulps
serve as a sustainable raw material used in textiles,
construction materials, paints, coatings and more.
Our products are made in the United States and
Canada and 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,
foods, poultry, meat and agricultural
processed
products. In addition to prices and volumes, major
factors affecting
Industrial
Packaging are raw material and energy costs, freight
costs, mill outage costs, manufacturing efficiency and
product mix.
the profitability of
Industrial Packaging
In millions
Net Sales
Operating Profit (Loss)
2023
2022
$ 15,596 $ 17,451
$
1,266 $ 1,742
Industrial Packaging net sales for 2023 decreased
11% to $15.6 billion compared with $17.5 billion in
2022. Operating profits in 2023 were 27% lower than
in 2022. Comparing 2023 with 2022, benefits from
lower input costs ($856 million) and maintenance
36
outage costs ($21 million) were more than offset by
lower average sales price and an unfavorable mix
($363 million), lower sales volumes ($177 million) and
higher operating costs ($813 million).
North American Industrial Packaging
In millions
Net Sales (a)
Operating Profit (Loss)
2023
2022
$ 14,293 $ 16,011
$
1,186 $ 1,753
(a) Includes intra-segment sales of $95 million for 2023 and
$132 million for 2022.
geographic mix. Sales
in 2023 compared with 2022
North American Industrial Packaging's average
sales margins were lower, reflecting lower prices for
both containerboard and corrugated boxes and an
volumes
unfavorable
decreased
for
corrugated boxes across our segments, reflecting a
soft demand environment as consumer spending
focused on non-discretionary goods and services and
retailers and manufacturers pulled down inventory
levels. Containerboard
also
decreased. Total maintenance and economic
downtime was about 725,000 short tons higher in
2023 compared with 2022, primarily due to economic
downtime. Operating and distribution costs increased,
primarily due to inflation on materials and services
and
increased economic downtime. Planned
maintenance downtime costs were lower in 2023 than
in 2022. Input costs were significantly lower, driven by
lower recovered fiber, energy and wood costs.
volumes
sales
Looking ahead to the first quarter of 2024, compared
with the fourth quarter of 2023, sales volumes for
corrugated boxes and containerboard are expected to
be seasonally lower. Average sales margins are
expected to be stable. Operating costs are expected
to increase. Planned maintenance downtime costs
are expected to be higher. Input costs are expected to
be higher, primarily for recovered fiber.
EMEA Industrial Packaging
In millions
Net Sales
Operating Profit (Loss)
2023
2022
$
$
1,398 $ 1,572
80 $
(11)
EMEA
Industrial Packaging's average sales
margins were lower reflecting lower average sales
prices for containerboard and an unfavorable product
mix partially offset by higher average sales prices for
corrugated boxes. Sales volumes in 2023 were lower
than in 2022 driven by soft demand. Operating costs
in 2023 were higher driven by inflation on materials
and services. Planned maintenance outage costs
were lower in 2023 compared with 2022. Input costs
were significantly lower in 2023, driven by energy and
recovered fiber costs.
Entering the first quarter of 2024, compared with the
fourth quarter of 2023, sales volumes are expected to
be higher driven by seasonality. Average sales
margins are expected to be higher, reflecting lower
containerboard costs. Operating costs are expected
to be lower. Planned maintenance outage costs are
expected to be lower. Other input costs are expected
to be stable. Earnings will be impacted by the non-
repeat of an energy subsidy and other favorable one-
time items in the fourth quarter 2023.
Entering the first quarter of 2024, compared with the
fourth quarter of 2023, sales volumes are expected to
be stable. Average sales margins are expected to be
stable. Operating costs are expected to be higher.
Planned maintenance outage costs are expected to
be lower than in the fourth quarter of 2023. Input
costs are expected to be higher, primarily for energy
and chemicals.
LIQUIDITY AND CAPITAL RESOURCES
GLOBAL CELLULOSE FIBERS
OVERVIEW
A major factor in International Paper’s liquidity and
capital resource planning is 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, have an
effect on operating cash generation, we believe 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 2023 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
Cash provided by operations, including discontinued
operations, totaled $1.8 billion in 2023, compared
with $2.2 billion for 2022. Cash used by working
capital components (accounts receivable, contract
assets and inventory less accounts payable and
accrued liabilities, interest payable and other) totaled
$2 million in 2023, compared with cash used by
working capital components of $145 million in 2022.
Cash dividends received from equity investments
were $13 million in 2023, compared with $204 million
in 2022.
INVESTMENT ACTIVITIES
Investment activities in 2023 increased from 2022.
Capital spending was $1.1 billion in 2023, or 80% of
depreciation and amortization, compared with $931
million
in 2022, or 90% of depreciation and
amortization. Included in 2023 depreciation expense
is $347 million of accelerated depreciation related to
Demand for Cellulose Fibers products is closely
correlated with changes in demand for absorbent
primarily
hygiene
the
products,
in various
income growth
demographics and
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.
driven
by
Global Cellulose Fibers
In millions
Net Sales
Operating Profit (Loss)
2023
2022
$ 2,890 $ 3,227
$
(17) $
106
for 2023
Global Cellulose Fibers net sales
decreased 10% to $2.9 billion, compared with $3.2
billion in 2022. Operating profits in 2023 decreased
compared to 2022. Comparing 2023 with 2022,
benefits from lower input costs ($126 million) were
more than offset by lower average sales price and an
unfavorable mix ($72 million), lower sales volumes
($51 million), higher operating costs ($113 million)
and higher maintenance outage costs ($13 million).
Sales volumes in 2023 compared with 2022 were
lower, driven by customer inventory destocking. Total
maintenance and economic downtime was about
507,000 short tons higher in 2023 compared with
2022, primarily due to economic downtime. Average
sales margins were lower, reflecting lower average
market pulp prices and an unfavorable product mix
partially offset by higher average fluff pulp prices.
Operating costs increased, driven by inflation on
materials and services and downtime. Distribution
costs were
the global supply chain
environment improved. Planned maintenance outage
costs were higher in 2023. Input costs were lower,
driven by energy, freight, wood and chemicals.
lower as
37
the closure of our containerboard mill in Orange,
Texas and $75 million of accelerated depreciation
related to the permanent shutdown of pulp machines
at our Riegelwood, North Carolina and Pensacola,
Florida mills. Capital spending as a percentage of
depreciation and amortization was 62% for Global
Cellulose Fibers and 81% for Industrial Packaging in
2023.
following
The
table shows capital spending by
business segment for the years ended December 31,
2023 and 2022:
In millions
Industrial Packaging
Global Cellulose Fibers
Subtotal
Corporate and other
Capital Spending
2023
2022
$
928 $
177
1,105
36
762
143
905
26
$ 1,141 $
931
Capital spending
to be
approximately $800 million to $1.0 billion, or 78% to
97% of expected depreciation and amortization.
is expected
in 2024
Acquisitions
See Note 7 Acquisitions on page 65 of Item 8.
Financial Statements and Supplementary Data for a
discussion of the Company's acquisitions.
FINANCING ACTIVITIES
Financing activities during 2023
included debt
issuances of $783 million and reductions of $780
million for a net increase of $3 million. Financing
activities during 2022 included debt issuances of $1.0
billion and reductions of $1.0 billion.
There were no early debt extinguishment amounts
during the year ended December 31, 2023. Amounts
related to early debt extinguishment during the year
ended December 31, 2022 are below:
In millions
Early debt reductions (a)
Pre-tax early debt extinguishment costs (b)
2022
$
503
93
(a) Reductions related to notes with interest rates ranging from
3.00% to 8.70% with original maturities from 2021 to 2048
for the year ended December 31, 2022.
(b) Amounts are included in Restructuring and other charges in
the accompanying consolidated statements of operations.
Other financing activities during 2023 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
$218 million, including $197 million related to shares
repurchased under the Company's share repurchase
program. Through December 31, 2023, the Company
38
has repurchased 119.8 million shares at an average
price of $46.23, for a total of approximately $5.5
billion, since
in
September 2013. The Company paid cash dividends
totaling $642 million during 2023.
the repurchase program began
Other financing activities during 2022 included the net
issuance of approximately 1.6 million shares of
treasury stock. In 2022, 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 paid cash
dividends totaling $673 million during 2022.
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
to 2026 with an
from 2024
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
interest income over the same period as a debt
the previously hedged debt. The
premium on
Company had no outstanding interest rate swaps for
the years ended December 31, 2023 and 2022.
Variable Interest Entities
Information concerning variable interest entities is set
forth in Note 15 Variable Interest Entities on pages 78
through 80 of Item 8. Financial Statements and
Supplementary Data. In connection with the 2006
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 (the "2015 Financing Entities")
when the installment notes and third-party loans were
extended. The 2015 Financing 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
the 2015 Financing
representing our equity
Entities. Maturity of
installment notes and
the
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
timber
to settle
monetization restructuring tax matter. Under this
the 2015 Financing Entities
in
the audit. The amount of
agreement, the Company agreed to fully resolve the
matter and pay $252 million in U.S. federal income
taxes. As a result, interest was charged upon closing
interest expense
of
recognized
in 2022 was $58 million. As of
December 31, 2023, $252 million in U.S. federal
income taxes and $58 million in interest expense
the settlement
have been paid as a result of
agreement. The Company has now fully satisfied the
payment terms of the settlement agreement regarding
timber monetization
the 2015 Financing Entities
the
restructuring
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.
tax matter. The
reversal of
LIQUIDITY AND CAPITAL RESOURCES OUTLOOK FOR 2024
We intend to continue making 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 $2.96 billion
aggregate amount of shares of common stock
remaining
of
December 31, 2023. We may continue to repurchase
shares under such authorization in open market
trades), privately
transactions
to
negotiated
prevailing market
liquidity
requirements, applicable securities laws requirements
and other factors. In addition, we have paid regular
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.
regular quarterly cash dividends
transactions or otherwise, subject
(including block
conditions,
our
in
Capital Expenditures and Long-Term Debt
Capital spending for 2024 is planned at approximately
$800 million to $1.0 billion, or about 78% to 97% of
depreciation and amortization.
At December 31, 2023, International Paper’s credit
agreements totaled $1.9 billion, which is comprised of
the $1.4 billion contractually committed bank credit
agreement and up
the
receivables securitization program. In June 2023, the
Company amended and restated its credit agreement
to $500 million under
39
to, among other things (i) reduce the size of the
contractually committed bank facility from $1.5 billion
to $1.4 billion, (ii) extend the maturity date from June
2026 to June 2028, and (iii) replace the LIBOR-based
rate with a SOFR-based rate. 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,
2023, the Company had no borrowings outstanding
under the $1.4 billion credit agreement or the $500
million
receivables securitization program. The
Company’s credit agreements are not subject to any
financial
restrictive covenants other
covenants as disclosed on pages 80 and 81 in Note
16 - Debt and Lines of Credit of Item 8. Financial
Statements and Supplementary Data, and
the
receivables securitization
borrowings under
program being limited by eligible receivables. The
Company was
its debt
covenants at December 31, 2023 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.
in compliance with all
than
the
the
In addition to the $1.9 billion capacity under the
Company's credit agreements, International Paper
has a commercial paper program with a borrowing
capacity of $1.0 billion supported by its $1.4 billion
credit agreement. 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. The
Company had no borrowings outstanding as of
December 31, 2023, and $410 million outstanding as
of December 31, 2022, under this program.
During the first quarter of 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. Additionally, during the first quarter of 2023,
the Company issued an approximately $72 million
environmental development bond ("EDB") with an
interest rate of 4.00% and a maturity date of April 1,
2026. The proceeds from this issuance were used to
repay an approximately $72 million outstanding EDB
that matured on April 1, 2023.
During the second quarter of 2023, the Company
issued approximately $24 million of debt with a
rate and a maturity date of
variable
December 1, 2027. The Company had debt
interest
reductions of approximately $49 million of variable
interest EDBs with current maturities. Additionally,
during the second quarter of 2023, the Company
issued an approximately $54 million EDB with a
variable rate and a maturity date of May 1, 2028. The
proceeds of this were used to repay an approximately
$54 million EDB that matured on May 1, 2023. The
Company issued an approximately $25 million EDB
with a variable rate and a maturity date of June 1,
2030. The proceeds of this were used to repay an
approximately $25 million EDB that matured on
June 1, 2023.
During the third quarter of 2023, the Company repaid
an approximately $70 million EDB with an interest
rate of 2.90% that matured on September 1, 2023.
During the fourth quarter of 2023, the Company
repaid an approximately $87 million note with an
interest rate of 6.875% that matured on November 1,
2023.
issued
the
approximately $11 million of debt with a variable
interest rate and a maturity date of December 1,
2027.
Additionally,
Company
For additional information regarding the Company’s
credit agreements and outstanding indebtedness, see
Note 16 Debt and Lines of Credit on pages 80 and 81
of Item 8. Financial Statements and Supplementary
Data.
long-term
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
next 12 months and for the foreseeable future
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
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
planning are to maximize financial flexibility and
maintain appropriate levels of liquidity to meet our
needs while managing balance sheet debt and
interest expense. 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, and
subject to prevailing market conditions, our liquidity
requirements, applicable securities laws requirements
and other
International
factors. The majority of
Paper’s debt is accessed through global public capital
markets where we have a wide base of investors.
40
Maintaining an investment grade credit rating is an
important element of International Paper’s financing
strategy. At December 31, 2023, 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, 2023, were as follows:
In millions
2024
2025
2026
2027
2028
Thereafter
Debt maturities (a)
$ 138 $ 189 $ 143 $ 333 $ 670 $
4,120
Operating lease
obligations
171
Purchase obligations (b)
2,222
127
847
89
698
60
507
33
363
31
1,863
Total (c)
$ 2,531 $ 1,163 $ 930 $ 900 $ 1,066 $
6,014
Includes financing lease obligations.
(a)
(b)
Includes $3.8 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 $168 million. Also not included in
the above table is $84 million of Deemed Repatriation
Transition Tax associated with the 2017 Tax Cuts and Jobs
Act which will be settled from 2024 - 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, 2023,
to be
permanently reinvested and, accordingly, no U.S.
income taxes have been provided thereon (see Note
13 Income Taxes on pages 72 through 74 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, 2023,
the projected benefit
obligation for the Company’s U.S. defined benefit
plans
under U.S. GAAP was
approximately $146 million higher than the fair value
of plan assets, excluding non-U.S. plans. Plans that
are subject to minimum funding requirements had
plan assets of $118 million higher than the projected
benefit obligation. Under current IRS funding rules,
the calculation of minimum funding requirements
differs from the calculation of the present value of
plan benefits (the "projected benefit obligation") for
accounting purposes. Funding contributions depend
on the funding methods selected by the Company.
The selected methods allow for the smoothing of
asset values and interest rates used to measure the
funding obligations. The Company continually
timing of any
reassesses
the amount and
discretionary contributions and elected not to make
any voluntary contributions in 2021, 2022 or 2023. At
this time, we do not expect to have any required
contributions to our plans in 2024, although the
future voluntary
Company may elect
contributions. The
future
contributions, which could be material, will depend on
a number of factors, including the actual earnings and
changes in values of plan assets and changes in
interest rates.
timing and amount of
to make
CRITICAL ACCOUNTING POLICIES AND
SIGNIFICANT ACCOUNTING ESTIMATES
The preparation of financial statements in conformity
with U.S. GAAP requires International Paper to
establish accounting policies and to make estimates
that affect both the amounts and timing of the
revenues and
recording of assets,
expenses. Some of
require
that are
subjective
inherently uncertain.
liabilities,
these estimates
judgments about matters
Accounting policies whose application has had or is
reasonably likely to have a material impact on the
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 their application, include the accounting for
contingencies, impairment or disposal of long-lived
assets and goodwill, pensions and income taxes.
Management 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.
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
of loss based on historical litigation and settlement
experience and recommendations of legal counsel
and,
for
if applicable, other experts. Liabilities
environmental matters require evaluations of relevant
environmental regulations and estimates of future
remediation alternatives and costs. The Company
estimated
liability associated with
environmental matters to be approximately $251
million and $243 million in the aggregate as of
December 31, 2023 and 2022, respectively. 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
the probable
asbestos-related claims was $97 million and $105
million, net of estimated insurance recoveries, as of
December 31, 2023 and 2022, 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.
IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL
changes
Long-lived assets are reviewed for impairment upon
in
the occurrence of events or
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. If 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.
We perform an annual goodwill impairment as of
interim assessments of
October 1. Additionally,
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.
impairment
charges based on
The amount and timing of goodwill and long-lived
asset
these
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
future selling prices and
key
volumes, operating, raw material, energy and freight
costs, various other projected operating economic
factors and other intended uses of the assets.
including
factors,
ASU 2011-08, "Intangibles - Goodwill and Other,"
allows entities testing goodwill for impairment the
option of performing a qualitative assessment before
performing the quantitative goodwill impairment test.
If a qualitative assessment is performed, an entity is
not required to perform the quantitative goodwill
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 North America Industrial Packaging reporting unit
is the Company’s only reporting unit with goodwill. As
of October 1, 2023, we performed our annual goodwill
impairment test for this reporting unit through a
quantitative goodwill impairment test. For the 2023
quantitative assessment, the estimated fair value of
41
requires management
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
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
to make
requires management
significant
assumptions
revenue multiples and
to
adjusted earnings before interest, taxes, depreciation,
and amortization ("EBITDA") multiples. The results of
our quantitative goodwill impairment test indicated
that the carrying amount did not exceed the estimated
fair value of the North America Industrial Packaging
reporting unit.
related
PENSION BENEFIT OBLIGATIONS
The calculation of the pension benefit obligation and
corresponding expense amounts are determined
annually, with involvement of International Paper’s
consulting actuary, and are dependent upon various
assumptions including the expected long-term rate of
return on plan assets, discount rates, projected future
compensation increases and mortality rates.
The calculations of pension benefit obligations and
expense 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, 2023, 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
$
8,718 $
8,836
264
58
—
20
The table below shows the discount rate used by
International Paper
to calculate U.S. pension
obligations for the years shown:
Discount rate
2023
2022
2021
5.10 %
5.40 %
2.90 %
International Paper determines
these actuarial
assumptions, after consultation with our actuaries, on
December 31 each year or more
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
frequently
42
in
the plan’s
based on projected rates of return for current asset
classes
investment portfolio. The
discount rate assumption was determined based on a
hypothetical settlement portfolio selected from a
universe of high-quality corporate bonds.
The expected long-term rate of return on U.S.
pension plan assets used to determine net periodic
cost for the year ended December 31, 2023 was
6.50%.
Increasing the expected long-term rate of return on
U.S. plan assets by an additional 0.25% would
decrease 2024 pension expense by approximately
$21 million, while a (decrease) increase of 0.25% in
the discount rate would (increase) decrease pension
expense by approximately $12 million.
Actual rates of return earned on U.S. pension plan
assets for each of the last 10 years were:
Year
2023
2022
2021
2020
2019
Return
7.3 %
(22.0) %
7.7 %
24.7 %
23.9 %
Year
2018
2017
2016
2015
2014
Return
(3.0) %
19.3 %
7.1 %
1.3 %
6.4 %
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 in pension expense
prospectively over a period that approximates the
average
service period of active
employees expected to receive benefits under the
plans to the extent that they are not offset by gains
and losses in subsequent years.
remaining
Net periodic pension plan expenses, calculated for all
of International Paper’s plans, were as follows:
In millions
2023
2022 2021 2020 2019
Pension (income) expense
U.S. plans
Non-U.S. plans
$ 94 $ (116) $ (112) $ 32 $ 93
5
5
4
5
6
Net (income) expense
$ 99 $ (111) $ (108) $ 37 $ 99
The increase in 2023 pension expense primarily
reflects higher interest cost and lower expected return
on assets, offset by lower service cost.
Assuming that discount rates, expected long-term
returns on plan assets and
future
compensation increases remain the same as of
rates of
is completed by
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
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
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
income, as well as
generating
successful implementation of various tax planning
strategies. The Company's valuation allowance was
$848 million and $677 million at December 31, 2023
and 2022, respectively.
to estimate when deferred
taxable
future
International Paper believes
While
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 74
through 78 of Item 8. Financial Statements and
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.
December 31, 2023, 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
2025
2024
$
$
(43) $
5
(38) $
(7)
5
(2)
The Company estimates that it will record net pension
income of approximately $7 million for its U.S. defined
benefit plans in 2024, compared to expense of $94
million in 2023.
The market value of plan assets for International
Paper’s U.S. qualified pension plan at December 31,
2023 totaled approximately $8.8 billion, consisting of
approximately 66% hedging assets and 34% return
seeking assets. The Company’s funding policy for its
qualified pension plan is to contribute amounts
sufficient to meet legal funding requirements, plus
any additional amounts that the Company may
determine to be appropriate considering the funded
status of the plan, tax deductibility, the cash flows
generated by the Company, and other factors. The
Company 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 2023. The nonqualified defined
benefit plans are funded to the extent of benefit
payments, which totaled $22 million for the year
ended December 31, 2023.
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
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
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.
43
RECENT ACCOUNTING DEVELOPMENTS
See Note 2 Recent Accounting Developments on
Item 8. Financial Statements and
page 60 of
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 2023 and 2022. The effects of
inflation have been more significant in recent years
due to general inflationary conditions, including labor
market conditions, economic activity, consumer
behavior, supply 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
the current
also currently being
inflationary environment.
impacted by
FOREIGN CURRENCY EFFECTS
indirect
impacts on
financial statements. Direct
International Paper has operations in a number of
countries. Its operations in those countries also
export to, and compete with imports from other
regions. As such, currency movements can have a
the
number of direct and
Company’s
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
currency is beneficial to International Paper. The
currency that has the most impact is the Euro.
impacts
change
the
MARKET RISK
We use financial instruments, including fixed and
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
currency risks. We do not use financial instruments
for
to
related
International Paper’s debt obligations is included in
trading purposes.
Information
44
Note 16 Debt and Lines of Credit on pages 80 and 81
of Item 8. Financial Statements and Supplementary
Data.
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
market risk utilizing a sensitivity analysis. The
sensitivity analysis measures the potential loss in
earnings, fair values and cash flows based on a
hypothetical 10% change (increase and decrease) in
interest and currency rates and commodity prices.
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
in marketable
securities at December 31, 2023 and 2022 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.
investments
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, 2023
and 2022, the fair value of the net liability of financial
instruments with exposure to interest rate risk was
approximately $4.5 billion and $4.3 billion,
respectively. The potential increase in fair value
resulting from a 10% adverse shift in quoted interest
rates would have been approximately $273 million
and $328 million at December 31, 2023 and 2022,
respectively.
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, 2023
and 2022, the net fair value of these contracts was
$27 million asset and $20 million asset. The potential
loss in fair value from a 10% adverse change in
quoted commodity prices for these contracts would
have been approximately $4 million and $3 million at
December 31, 2023 and 2022, respectively.
FOREIGN CURRENCY RISK
transacts business
International Paper
in many
currencies and is also subject to currency exchange
rate risk through investments and businesses owned
and operated in foreign countries. The currency that
has the most impact is the Euro. 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.
instruments with exposure
At December 31, 2023 and 2022, the net fair value of
financial
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.
to
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
See the preceding discussion regarding market risk.
45
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
REPORT OF MANAGEMENT ON:
Financial Statements
The management of International Paper Company is
responsible for the preparation of the consolidated
financial statements in this Annual Report on Form
10-K. The consolidated financial statements have
been 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
is
this Annual Report on Form 10-K and
responsible for its accuracy and consistency with the
consolidated financial statements.
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 integrity and reliability of the
financial information contained in this Annual Report
formed a Disclosure
on Form 10-K. We have
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 shareholders and the Board of
the Board of
Directors and all committees of
Directors. Management
all
that
representations made to the independent auditors
during their audits were valid and appropriate.
believes
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
financial
Exchange Act).
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
the
systems have
possibility of circumvention and overriding of controls,
limitations,
including
inherent
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, contains self-
monitoring mechanisms, and
is audited by our
internal audit function. Appropriate actions are taken
by management to correct deficiencies as they are
identified. Our procedures for financial reporting
include the active involvement of senior management,
our Audit and Finance Committee and our staff of
highly qualified financial and legal professionals.
financial
The Company has assessed the effectiveness of its
internal control over
reporting as of
December 31, 2023. In making this assessment, it
used the criteria described in “Internal Control –
the
Integrated Framework
issued by
Committee of Sponsoring Organizations of
the
Treadway Commission ("COSO"). Based on this
that, as of
assessment, management believes
December 31, 2023, the Company’s internal control
over financial reporting was effective.
(2013)”
The Company’s
registered public
independent
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 48 through 50.
Internal Control Environment And Board Of
Directors Oversight
internal control environment
includes 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. The Company
provides a toll-free telephone helpline whereby any
employee may anonymously
report suspected
violations of law or International Paper’s policy; and
maintains an office of ethics and business practice.
The internal control system further includes careful
selection
and
management personnel, appropriate delegation of
authority and division of responsibility, dissemination
throughout
of accounting and business policies
International Paper, and an extensive program of
internal audits with management follow-up.
supervisory
training
and
of
The Board of Directors, assisted by the Audit and
Finance Committee, monitors the integrity of the
financial
Company’s
reporting procedures,
the
Company’s internal audit function and independent
auditors, and other matters set forth in its charter. The
financial statements and
the performance of
46
representatives
Audit and Finance Committee, which consists of
regularly with
independent
directors, meets
representatives of management, and with
the
independent auditors and the Internal Auditor, with
and without management
in
attendance, to review their activities. The Audit and
Finance Committee 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 Audit and Finance Committee has
reviewed and discussed the consolidated financial
statements for the year ended December 31, 2023,
including critical accounting policies and significant
management judgments, with management and the
independent auditors. The Audit and Finance
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.
MARK S. SUTTON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TIMOTHY S. NICHOLLS
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
47
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of
International Paper Company:
Opinion on the Financial Statements
statements based on our audits. We are a public
accounting firm registered with the PCAOB and are
required to be independent with respect to the
federal
Company
securities
rules and
regulations of
the Securities and Exchange
Commission and the PCAOB.
in accordance with
laws and
the applicable
the U.S.
We have audited the accompanying consolidated
balance sheets of International Paper Company and
subsidiaries (the "Company") as of December 31,
2023 and 2022, 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, 2023, and the related
the "financial
notes (collectively referred
statements"). In our opinion, the financial statements
present fairly, in all material respects, the financial
position of the Company as of December 31, 2023
and 2022, and the results of its operations and its
cash flows for each of the three years in the period
in conformity with
ended December 31, 2023,
accounting principles generally accepted
the
United States of America.
to as
in
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
statements of
its equity
Ilim S.A. of $133 million as of
in
investment
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.
include
We have also audited, in accordance with the
the Public Company Accounting
standards of
the
Oversight Board (United States) (PCAOB),
Company's internal control over financial reporting as
of December 31, 2023, based on criteria established
in Internal Control — Integrated Framework (2013)
issued
of Sponsoring
Organizations of the Treadway Commission and our
report dated February 16, 2024, expressed an
unqualified opinion on the Company's internal control
over financial reporting.
the Committee
by
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
48
the audit
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require
that we plan and perform
to obtain
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 Matter
that
is material
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
or disclosure
financial
statements and
involved our especially
challenging, subjective, or complex judgments. The
communication of the critical audit matter does not
alter
financial
statements, taken as a whole, and we are not, by
the critical audit matter below,
communicating
providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it
relates.
in any way our opinion on
the
the
(2)
to
Retirement Plans — Plan Assets — Refer to Note
18 to the financial statements
Critical Audit Matter Description
As of December 31, 2023, the Company’s Qualified
Pension Plan held approximately $2.7 billion in
investments whose reported value is determined
based on net asset value (“NAV”). The strategic asset
the Company’s
allocation policy prescribed by
Qualified Pension Plan
permissible
investments in certain hedge funds, private equity
funds, and real estate funds whose reported values
includes
are determined based on the estimated NAV of each
investment.
the
These NAVs are generally determined by
Qualified Pension Plan’s third-party administrators or
fund managers and are subject to review and
oversight by 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 Qualified
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,
the
reliability of NAVs reported by third-party
administrators and fund managers.
those related
including
to
• We
the
inquired of management and
investment advisors regarding changes to the
investment
investment
strategies.
portfolio
and
• We obtained a confirmation from the third-
party custodian as of December 31, 2023 of
all individual investments held in trust for the
Qualified Pension Plan
the
existence of each individual asset held in
trust.
to confirm
•
For selected investment funds with a 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, 2022 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
alternative
expertise
firm
investments, we rolled forward the valuation
having
in
roll
independently
from selected funds’ most recently audited
financial statements to December 31, 2023.
This
included
forward procedure
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, 2023, balance recorded by the
Company. For certain selected funds, our roll
included alternative
forward procedures
procedures,
trust
statements for observable transactions near
year-end to compare to the estimated fair
value.
such as
inspecting
•
For certain
inquired of
investments, we
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 16, 2024
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
Reporting
Internal Control over Financial
Integrated Framework (2013)
We have audited the internal control over financial
reporting of
International Paper Company and
subsidiaries (the “Company”) as of December 31,
2023, based on criteria established in Internal Control
the
—
issued by
Committee of Sponsoring Organizations of
the
Treadway Commission (COSO). In our opinion, the
respects,
Company maintained,
effective internal control over financial reporting as of
December 31, 2023, based on criteria established in
Internal Control — Integrated Framework (2013)
issued by COSO.
in all material
We have also audited, in accordance with the
the Public Company Accounting
standards of
Oversight Board (United States) (PCAOB),
the
consolidated financial statements as of and for the
49
year ended December 31, 2023, of the Company and
our report dated February 16, 2024, expressed an
unqualified opinion on those financial statements.
company’s assets that could have a material effect on
the financial statements.
Basis for Opinion
is responsible
The Company’s management
for
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
regulations of
the Securities and Exchange
Commission and the PCAOB.
financial
the audit
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require
that we plan and perform
to obtain
reasonable assurance about whether effective
internal control over
reporting was
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
regarding
to provide
reliability of
A company’s internal control over financial reporting
reasonable
is a process designed
assurance
financial
the
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
assets of the company; (2) provide reasonable
recorded as
that
transactions are
assurance
necessary
financial
to permit preparation of
statements in accordance with generally accepted
receipts and
accounting principles, and
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
that
Because of its inherent limitations, 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
the degree of
compliance with the policies or procedures may
deteriorate.
in conditions, or
that
/s/ Deloitte & Touche LLP
Memphis, Tennessee
February 16, 2024
50
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.
2023
2022
2021
$ 18,916 $ 21,161 $ 19,363
13,629 15,143 13,832
1,360
1,293
1,385
1,432
1,040
1,097
1,575
1,783
1,444
154
148
99
—
—
—
231
89
76
10
(65)
325
139
509
(7)
(204)
32
337
54
(192)
(200)
382
1,511
59
(21)
(236)
(6)
302
1,741
(14)
(237)
999
188
2
813
941
288
1,504
1,754
—
—
2
$
288 $ 1,504 $ 1,752
$
0.87 $
4.79 $
(0.04)
(0.65)
$
0.83 $
4.14 $
$
0.86 $
4.74 $
(0.04)
(0.64)
$
0.82 $
4.10 $
2.08
2.42
4.50
2.07
2.40
4.47
51
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 $29, $28 and $41)
Non-U.S. plans (less tax of $0, $0 and $0)
Pension and postretirement liability adjustments:
U.S. plans (less tax of $(56), $(109) and $235)
Non-U.S. plans (less tax of $0, $1 and $1)
Change in cumulative foreign currency translation adjustment (less tax of $0, $0 and $0)
Net gains/losses on cash flow hedging derivatives (less tax of $0, $1 and $(1))
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
2023
2022
2021
$
288 $
1,504 $
1,754
87
(1)
85
1
124
1
(170)
(327)
706
3
441
—
360
648
—
—
8
(28)
2
7
69
(6)
(259)
901
1,245
2,655
—
—
(2)
2
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY
$
648 $
1,245 $
2,655
The accompanying notes are an integral part of these financial statements.
52
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 $34 in 2023 and $31 in 2022)
Contract assets
Inventories
Assets held for sale
Other current assets
Total Current Assets
Plants, Properties and Equipment, net
Investments
Long-Term Financial Assets of Variable Interest Entities (Note 15)
Goodwill
Overfunded Pension Plan Assets
Right of Use Assets
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, 2023 - 448.9 shares and 2022 - 448.9 shares
Paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less: Common stock held in treasury, at cost, 2023 – 102.9 shares and 2022 – 98.6 shares
Total Equity
TOTAL LIABILITIES AND EQUITY
The accompanying notes are an integral part of these financial statements.
53
2023
2022
$ 1,113 $
804
3,059
3,284
433
481
1,889
1,942
—
114
133
126
6,608
6,770
10,150 10,431
163
186
2,312
2,294
3,041
3,041
118
448
421
297
424
497
$ 23,261 $ 23,940
$
138 $
763
2,442
2,708
397
355
982
1,174
3,959
5,000
5,455
4,816
2,113
2,106
1,552
1,732
280
140
312
281
150
283
1,095
1,075
449
449
4,730
4,725
9,491
9,855
(1,565)
(1,925)
13,105 13,104
4,750
4,607
8,355
8,497
$ 23,261 $ 23,940
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
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
INVESTMENT ACTIVITIES
Invested in capital projects, net of insurance recoveries
Acquisitions, net of cash acquired
Proceeds from sales of equity method investments, net of transaction costs
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
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.
54
2023
2022
2021
$
288 $ 1,504 $ 1,754
1,432
1,040
1,210
(156)
(773)
(291)
99
94
—
—
153
—
13
89
509
(116)
(112)
(65)
76
543
—
204
32
(358)
(205)
(86)
159
(108)
(291)
(313)
20
108
157
255
(59)
(596)
48
73
(402)
(19)
43
(103)
(162)
110
41
28
(49)
(263)
519
(32)
(5)
1,833
2,174
2,030
(1,141)
(931)
(549)
—
472
—
—
—
4
(3)
—
—
—
311
—
13
(1)
(80)
908
827
—
4,850
101
(3)
(668)
(608)
6,054
(218)
(1,284)
(839)
783
1,011
1,512
(780)
(1,017)
(2,509)
(8)
1
65
(642)
(673)
(780)
—
—
—
(1)
—
(4,220)
—
(89)
(3)
(130)
(456)
(18)
(866)
(2,054)
(7,375)
10
(3)
(9)
309
(491)
700
804
1,295
595
$ 1,113 $
804 $ 1,295
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Sylvamo Corporation spin-off
—
(1,729)
In millions
BALANCE, JANUARY 1,
2021
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
Issuance of stock for
various plans, net
Repurchase of stock
Dividends ($1.850 per
share)
Comprehensive income
(loss)
BALANCE, DECEMBER 31,
2023
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 $ 6,325 $
8,070 $
(4,342) $
2,648 $
7,854 $
—
—
—
54
—
—
—
18
—
—
—
—
—
—
—
(793)
—
—
1,752
1,773
—
44
—
—
—
(89)
839
—
—
—
—
903
—
—
143
(839)
(793)
18
—
2,655
14 $ 7,868
(1)
43
—
—
143
(839)
—
(793)
—
18
(13)
(13)
—
2,655
449
4,668
9,029
(1,666)
3,398
9,082
—
9,082
—
—
—
—
57
—
—
—
—
—
(678)
1,504
—
—
—
(259)
(75)
1,284
—
—
132
(1,284)
(678)
1,245
—
132
—
(1,284)
—
—
(678)
1,245
449
4,725
9,855
(1,925)
4,607
8,497
—
8,497
—
—
5
—
—
—
—
—
(77)
220
82
(220)
—
82
—
(220)
—
—
(652)
—
—
(652)
—
(652)
—
—
288
360
—
648
—
648
$
449 $ 4,730 $
9,491 $
(1,565) $
4,750 $
8,355 $
— $ 8,355
The accompanying notes are an integral part of these financial statements.
55
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 SUMMARY OF BUSINESS AND
SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
products with
primary markets
International Paper (the "Company") 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. Certain
amounts from prior year have been reclassified to
conform with the current year financial statement
presentation.
Printing Papers Spin-off
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
the New York Stock
company
Exchange under the symbol "SLVM".
trades on
that
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
for further details regarding the Sylvamo spin-off and
discontinued operations.
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
56
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
component (or group of components) meets the
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
for presentation as a discontinued operation, the
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
including variable interest entities for which we are
the primary beneficiary. All significant intercompany
balances and transactions are eliminated.
financial
EQUITY METHOD INVESTMENTS
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 equity method
investments are
described in Note 11.
OTHER-THAN-TEMPORARY IMPAIRMENT
The Company evaluates our 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
to the extent that 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 is other than temporary including: 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
in value
a decline
temporary,
expectations about operations, as well as industry,
financial, regulatory and market factors.
is other
than
BUSINESS COMBINATIONS
The Company allocates the total consideration of the
assets acquired and liabilities assumed based on
the business
fair value as of
their estimated
combination date. In developing estimates of fair
values for long-lived assets, 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
lists and
intangible assets such as customer
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
first, any
liabilities assumed, whichever comes
the
subsequent adjustments are charged
consolidated statement of operations. Subsequent
actual results of the underlying business activity
supporting the specifically identified intangible assets
could change, requiring us to record impairment
charges or adjust their economic lives in future
periods. See Note 7 for further details.
to
RESTRUCTURING LIABILITIES AND COSTS
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 Company transfers
control of the goods to the customer. For customized
goods where the Company has a legally enforceable
right
the Company
recognizes revenue over time, which generally is, as
the goods are produced.
to payment
the goods,
for
rise
that give
The Company’s revenue is primarily derived from
fixed consideration; however, we do have contract
terms
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 "Revenue from Contracts with Customers".
The Company estimates early payment discounts and
other customer refunds based on the historical
the Company's portfolio of
experience across
customers to record reductions in revenue that is
consistent with the expected value method outlined in
ASC 606. Management has concluded that these
the
methods
consideration the Company will be entitled to from its
customers.
the best estimate of
result
in
recognize
The Company has elected to present all sales taxes
on a net basis, account for shipping and handling
activities as
the
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 and are stated at cost, which
approximates market value. See Note 9 for further
details.
INVENTORIES
Inventories are valued at the lower of cost or market
value and include all costs directly associated with
manufacturing products: materials,
labor 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.
57
LEASED ASSETS
leases primarily relate
Operating lease right of use ("ROU") assets and
liabilities are recognized at the commencement date
of the lease based on the present value of lease
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
term when it is reasonably certain that we will
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
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
and
to approximate a
rate
collateralized rate, and apply the rate based on the
currency of the lease, which is updated on a quarterly
liabilities.
basis
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.
for measurement of new
risk-adjust
lease
that
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. If a decision is
made to abandon plants, properties or equipment
before the end of its useful life, depreciation expense
is revised to reflect the shortened useful life. See
Note 9 for further details.
GOODWILL
Annual evaluation for possible goodwill impairment is
performed as of the beginning of the fourth quarter of
each year, with additional
interim evaluation
performed when management believes that it is more
likely than not, that events or circumstances have
58
occurred that would result in the impairment of a
reporting unit’s goodwill.
the Company
The Company has the option to evaluate goodwill for
first performing a qualitative
impairment by
assessment of events and circumstances
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
unit is less than its carrying amounts, then the
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
unit is less than its carrying amount, or if the
Company does not elect the option to perform an
initial qualitative assessment,
is
required
the quantitative goodwill
to perform
impairment test. In performing this evaluation, the
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
assumptions
revenue multiples and
adjusted earnings before interest, taxes, depreciation,
and amortization ("EBITDA") multiples. For reporting
units whose carrying amount is in excess of 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.
related
to
IMPAIRMENT OF LONG-LIVED ASSETS
changes
Long-lived assets are reviewed for impairment upon
the occurrence of events or
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. If 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. We estimate fair value using discounted
cash flows and other valuation techniques as needed.
Impaired assets are recorded at their estimated fair
value.
INCOME TAXES
the asset and
International Paper uses
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
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 resolution of these
matters may differ from recorded estimated amounts,
resulting in adjustments that could materially affect
future financial statements. See Note 13 for further
details.
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
tax
jurisdiction and relies on both positive and negative
evidence available, with significant weight placed on
recent financial results. Cumulative reported pre-tax
is completed by
to estimate when deferred
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
tax
logical methods
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
income, as well as
generating
successful implementation of various tax planning
strategies.
taxable
future
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
Costs associated with environmental remediation
obligations are accrued when such costs are
probable and reasonably estimable. Such accruals
are adjusted as further information develops or
circumstances change. See Note 14 for further
details.
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
statement translations are included as cumulative
translation adjustments
in Accumulated other
comprehensive income (loss).
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.
59
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
years. The Company adopted the provisions of this
guidance in the first quarter of 2023. See Note 9 -
Supplementary Financial Statement Information.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT
YET ADOPTED
Segment Reporting
In November 2023, the FASB issued ASU 2023-07,
"Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures." This guidance
requires companies to disclose incremental segment
information on an annual and interim basis. This
guidance is effective for annual reporting periods
beginning after December 15, 2023 and interim
periods within those years beginning after December
15, 2024. Early adoption of these amendments is
permitted and amendments should be applied
retrospectively to all prior periods presented in the
financial statements. The Company
is currently
evaluating the provisions of this guidance.
Income Taxes
income
In December 2023, the FASB issued ASU 2023-09,
"Income Taxes (Topic 740): Improvements to Income
Tax Disclosures." This guidance requires companies
tax disclosures, particularly
to enhance
around rate reconciliations and income taxes paid
information. This guidance is effective for annual
reporting periods beginning after December 15, 2024.
Early adoption of these amendments is permitted and
amendments should be applied prospectively. The
Company is currently evaluating the provisions of this
guidance.
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
Reference Rate Reform
transitioning away
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
from
reference rates that are expected to be discontinued.
This guidance
issuance and
is effective upon
generally can be applied through December 31, 2024.
The Company has applied and will continue to apply
this guidance to account for contract modifications
due
those
modifications occur. We do not expect this guidance
to have a material impact on our consolidated
financial statements and related disclosures.
to changes
rates as
reference
in
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
60
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
2023
Industrial
Packaging
Global
Cellulose
Fibers
Corporate &
Intersegment
Total
$
13,340 $
2,570 $
430 $
16,340
1,398
37
821
96
224
—
—
—
—
1,494
261
821
$
15,596 $
2,890 $
430 $
18,916
$
14,293 $
— $
— $
14,293
1,398
—
(95)
—
—
2,890
—
—
—
—
—
430
1,398
2,890
(95)
430
$
15,596 $
2,890 $
430 $
18,916
(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
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
—
—
—
—
—
483
1,572
3,227
(132)
483
$
17,451 $
3,227 $
483 $
21,161
(a) Net sales are attributed to countries based on the location of the reportable segment making the sale.
61
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
—
—
—
—
—
305
1,508
2,732
(126)
305
$
16,326 $
2,732 $
305 $
19,363
(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 $32 million and $38 million are included in
Other current
the accompanying
consolidated balance sheet as of December 31, 2023
and 2022, respectively. The Company also recorded
a contract liability of $115 million related to a previous
acquisition. The balance of this contract liability was
$92 million and $99 million at December 31, 2023
and 2022, respectively, and is recorded in Other
current
the
liabilities and Other Liabilities
accompanying consolidated balance sheet.
liabilities
in
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
right to payment or receive prepayment from the
customer, respectively.
62
PERFORMANCE
JUDGMENTS
OBLIGATIONS
AND
SIGNIFICANT
International Paper's principal business
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;
however, in all instances it is International Paper's
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
individual product level outlined in the customer
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
contractual volume, geographical location, etc.).
the prices
Management has concluded
negotiated with each
individual customer are
representative of the stand-alone selling price of the
product.
that
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
2023
2022
2021
Earnings (loss) from continuing
operations attributable to
International Paper common
shareholders
Weighted average common shares
outstanding
Effect of dilutive securities:
$ 302 $ 1,741 $ 811
346.9
363.5
389.4
Restricted performance share plan
2.2
3.5
3.0
Weighted average common shares
outstanding – assuming dilution
349.1
367.0
392.4
Basic earnings (loss) per share
from continuing operations
Diluted earnings (loss) per share
from continuing operations
$ 0.87 $ 4.79 $ 2.08
$ 0.86 $ 4.74 $ 2.07
NOTE 5 OTHER COMPREHENSIVE INCOME
The following table presents changes in Accumulated Other Comprehensive 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 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 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 loss
Balance at end of period
2023
2022
2021
$
(1,195) $
(962) $
(1,880)
(167)
(319)
—
86
—
86
713
80
125
(1,276)
(1,195)
(962)
(722)
(694)
(2,457)
(76)
—
517
—
(38)
—
10
—
(115)
1,692
184
2
(281)
(722)
(694)
(8)
—
—
—
(8)
(10)
—
—
2
(8)
(5)
3
1
(9)
(10)
Total Accumulated Other Comprehensive Income (Loss) at End of Period
$
(1,565) $
(1,925) $
(1,666)
63
Reclassifications out of AOCI for the three years ended December 31 were as follows:
Amount Reclassified from Accumulated
Other Comprehensive Loss
2023
2022
2021
Location of Amount
Reclassified from AOCI
$
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
(23) $
(92)
(115)
29
(86)
—
(86)
(517)
—
(517)
—
(517)
—
—
—
—
—
—
(23) $
(91)
(114)
28
(86)
—
(86)
(10)
—
(10)
—
(10)
(3)
(3)
1
(2)
—
(2)
(20) (a) Non-operating pension expense
(146) (a) Non-operating pension expense
(166)
41
(125)
(80)
(205)
(184) (b)
—
(184)
(1,692)
(1,876)
11
11
(2)
9
(1)
8
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
Paid-in Capital
Total reclassifications for the period, net of tax
$
(603) $
(98) $
(2,073)
(a) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost (see Note
18 - Retirement Plans for additional details).
(b) See Note 11 - Equity Method Investments for additional details for 2023 amounts.
64
NOTE 6 RESTRUCTURING AND OTHER
CHARGES, NET
approximately €71 million (approximately $83 million
based on the April 1, 2021 exchange rate).
2023: During 2023, restructuring and other charges,
net, totaling $99 million before taxes were recorded.
The charges included:
The following table summarizes the final fair value
assigned to assets and liabilities acquired as of April
1, 2021:
In millions
2023
In millions
Orange, Texas mill closure costs (a)
$
81
Cash and temporary investments
$
Pensacola mill and Riegelwood mill pulp machine
shutdowns (b)
Building a Better IP (c)
Total
37
(19)
99
$
(a) Includes $25 million of severance charges, $30 million of
inventory impairment charges and $26 million of other costs
associated with the closure of our containerboard mill in
Orange, Texas. The majority of the severance charges will be
paid in 2024.
(b) Includes $21 million of severance charges, $12 million of
inventory impairment charges and $4 million of other costs
associated with the permanent shutdown of pulp machines at
our Riegelwood, North Carolina and Pensacola, Florida mills.
The majority of the severance charges will be paid in 2024.
(c) Revision of severance estimates related to our Building a
Better IP initiative.
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.
These charges included:
In millions
2021
Early debt extinguishment costs (see Note 16)
$
461
Building a Better IP (a)
EMEA packaging restructuring (b)
Other restructuring items
Total
29
12
7
$
509
(a) Severance related to our Building a Better IP initiative which is
focused on value creation through streamlined operations and
process optimization. All severance has been paid as of
December 31, 2023.
(b) Severance related to the optimization of our EMEA Packaging
business. All severance has been paid as of December 31,
2023.
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
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
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.
The Company has accounted
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.
for
In April 2021,
2021:
the Company received a
noncontrolling interest in a U.S-based corrugated
packaging producer. In the second quarter, 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
includes a
agreements with
containerboard supply agreement. The Company is
accounting for its interest as an equity method
investment.
the entity which
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
65
company, Sylvamo Corporation ("Sylvamo"). The
transaction was implemented through the distribution
of shares of Sylvamo
International Paper's
shareholders (the "Distribution"). As a result of the
independent public
Distribution, Sylvamo
is an
company
the New York Stock
Exchange under the symbol "SLVM".
trades on
that
to
to
The Distribution was made
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 with
the intent to monetize its investment and provide
additional proceeds to the Company. The spin-off was
tax-free for the Company and its shareholders for
U.S. federal income tax purposes.
2022, the Company no longer had an ownership
interest in Sylvamo.
the Sylvamo
All historical operating results of
businesses, as well as the results of our Kwidzyn,
Poland mill that was sold on August 6, 2021, are
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 tax, related to the Sylvamo
businesses and Kwidzyn
the year ended
December 31, 2021 presented in the consolidated
statement of operations:
for
a
other
transition
agreements
govern
following
that
the parties
In connection with the Distribution, on September 29,
2021, the Company and Sylvamo entered into a
separation and distribution agreement as well as
the
various
the
relationships between
Distribution,
services
including
agreement, a
tax matters agreement and an
employee matters agreement. These agreements
provided for the allocation between the Company and
Sylvamo of assets,
liabilities and obligations
attributable to periods prior to, at and after the
Distribution and govern certain relationships between
the Company and Sylvamo after the Distribution. The
Company
operational
agreements with Sylvamo under which it sells fiber,
paper and other products. Related party sales under
these agreements were $630 million and $185 million
for the year ended December 31, 2022 and 2021,
respectively. Following the sale of the Company's
ownership interest in Sylvamo during the third quarter
2022, Sylvamo is no longer considered a related
party.
ongoing
various
has
In the second quarter 2022, the Company exchanged
4,132,000 shares of Sylvamo common stock owned
by the Company in exchange and as repayment for
an 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 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 Sylvamo
common stock. As of the end of the third quarter
66
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)
Discontinued Operations, Net of Taxes
$
2021
$
2,417
1,508
224
113
229
24
(86)
(351)
(19)
775
145
630
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
290
757
$
$
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
issued
$450 million of 7.00% senior unsecured notes due
2029
It was also
in September 2021.
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 in the fourth quarter of 2021, the
Company distributed $130 million to Sylvamo. The
to Sylvamo
debt
Corporation are classified as financing activities in the
accompanying consolidated statement of cash flows.
issuance and distribution
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
pulp and paper mill in Kwidzyn and supporting
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
the
Discontinued Operations, net of
consolidated statement of operations.
tax,
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,
for €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.
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.
67
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 $950 million and $690 million at
December 31, 2023 and 2022, respectively.
ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable, net, by classification
were:
In millions at December 31
2023
2022
Accounts and notes receivable:
Trade (less allowances of $34 in 2023 and
$31 in 2022)
Other
Total
INVENTORIES
$ 2,841 $ 3,064
218
220
$ 3,059 $ 3,284
In millions at December 31
Raw materials
Finished pulp and packaging products
Operating supplies
Other
Inventories
2023
2022
$
229 $
267
975
1,071
622
63
516
88
$ 1,889 $ 1,942
International Paper’s U.S.
The last-in, first-out inventory method is used to value
most of
inventories.
Approximately 81% of total raw materials and finished
products inventories were valued using this method.
The last-in, first-out inventory reserve was $343
million and $282 million at December 31, 2023 and
2022, respectively.
PLANTS, PROPERTIES AND EQUIPMENT
In millions at December 31
Pulp and packaging facilities
Other properties and equipment
Gross cost
2023
2022
$ 28,661 $ 27,773
1,050
1,029
29,711 28,802
Less: Accumulated depreciation
19,561 18,371
Plants, properties and equipment, net
$ 10,150 $ 10,431
Non-cash additions to plants, property and equipment
included within accounts payable were $141 million,
$185 million and $106 million at December 31, 2023,
2022 and 2021, respectively.
in
invested
in capital projects
Amounts
the
accompanying consolidated statement of cash flows
are presented net of insurance recoveries of $26
million and $17 million received during the years
ended December 31, 2022 and 2021, respectively.
There were no insurance recoveries received during
the year ended December 31, 2023.
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
$1.4 billion, $996 million and $1.1 billion for the years
ended December 31, 2023, 2022 and 2021.
Depreciation
ended
December 31, 2023
includes $422 million of
accelerated depreciation related to mill strategic
actions. Cost of products sold excludes depreciation
and amortization expense.
expense
year
the
for
ACCOUNTS PAYABLE
Under a supplier finance program, International Paper
agrees to pay a bank the stated amount of confirmed
invoices from its designated suppliers on the original
maturity dates of the invoices. International Paper or
the bank may terminate the agreement upon at least
90 days’ notice. The supplier invoices that have been
confirmed as valid under
the program require
payment in full on the due date with no terms
exceeding 180 days. The accounts payable balance
included $122 million of supplier finance program
liabilities as of both December 31, 2023 and 2022.
INTEREST
Interest payments of $463 million, $380 million and
$473 million were made during the years ended
December 31, 2023, 2022 and 2021, respectively.
Amounts related to interest were as follows:
In millions
Interest expense
Interest income
Capitalized interest costs
2023
2022
2021
$
421 $
403 $
430
190
22
78
18
93
12
ASSET RETIREMENT OBLIGATIONS
At December 31, 2023 and 2022, we had recorded
liabilities of $103 million and $105 million,
respectively, related to asset retirement obligations.
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
facilities.
remove certain materials
Applicable regulations and standards provide that the
removal of certain materials would only be required if
these
from
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 an expected-present-value
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
timing of such
remediation.
technique
the
NOTE 10 LEASES
leases various
International Paper
real estate,
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 30 years.
COMPONENTS OF LEASE EXPENSE
In millions
2023
2022
2021
Operating lease costs, net
$
177 $
153 $
138
Variable lease costs
Short-term lease costs, net
Finance lease cost
Amortization of lease assets
Interest on lease liabilities
39
71
12
3
39
57
11
3
40
53
11
3
Total lease cost, net
$
302 $
263 $
245
SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED
TO LEASES
In millions
Assets
Operating
lease assets
Classification
2023
2022
Right of use assets
$
448 $
424
Finance lease
assets
Plants, properties and
equipment, net (a)
47
49
Total leased
assets
Liabilities
Current
$
495 $
473
Operating
Other current liabilities $
153 $
147
Finance
Noncurrent
Operating
Notes payable and
current maturities of
long-term debt
11
10
Long-term lease
obligations
312
283
Finance
Long-term debt
44
49
Total lease
liabilities
$
520 $
489
(a) Finance leases are recorded net of accumulated amortization
of $67 million and $59 million at December 31, 2023 and
2022, respectively.
68
LEASE TERM AND DISCOUNT RATE
NOTE 11 EQUITY METHOD INVESTMENTS
In millions
2023
2022
Weighted average remaining lease
term (years)
Operating leases
Finance leases
4.0 years
4.1 years
7.7 years
8.4 years
Weighted average discount rate
Operating leases
Finance leases
3.99 %
4.78 %
2.96 %
4.57 %
SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO
LEASES
In millions
2023
2022
2021
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
$
180 $
160 $
166
3
3
4
13
10
14
Operating leases
Finance leases
216
12
221
156
6
9
MATURITY OF LEASE LIABILITIES
In millions
Operating
Leases
Financing
Leases
Total
2024
2025
2026
2027
2028
Thereafter
Total lease
payments
Less imputed
interest
Present value of
lease liabilities
$
171 $
127
89
60
33
31
511
46
14 $
12
11
10
8
14
185
139
100
70
41
45
69
580
14
60
$
465 $
55 $
520
The Company accounts for the following investments
under the equity method of accounting.
ILIM S.A. ("Ilim")
On September 18, 2023, pursuant to a previously
announced agreement, the Company completed the
sale of its 50% equity interest in Ilim, which was a
joint venture that operated a pulp and paper business
in Russia and has subsidiaries including Ilim Group,
to its joint venture partners for $484 million in cash.
The Company also completed the sale of all of its Ilim
Group shares (constituting a 2.39% stake) for $24
million, and divested other non-material residual
interests associated with Ilim, to its joint venture
partners. Following
the
Company no longer has an interest in Ilim or any of
its subsidiaries. Additionally, we incurred transaction
fees of $36 million in connection with the sale of our
investment. The Company
reclassified currency
translation adjustments in AOCI of $517 million to the
investment at the completion of the transaction.
the completed sales,
As of December 31, 2022 and for all subsequent
periods, the Company concluded that the held for
sale balance sheet classification criteria had been
met and classified the investment as Assets held for
sale in the consolidated balance sheet. Also, all
current and historical results of the Ilim investment
have been presented as Discontinued Operations,
the consolidated statement of
net of
operations.
taxes
in
Also in conjunction with the previously announced
agreement entered into in January 2023 to sell the
Company's ownership interests in Ilim and related
offer for the Company's shares in Ilim Group, a
determination was made that in the fourth quarter of
2022 and for all subsequent periods through the third
quarter 2023, the combined book value of our
investments, plus associated cumulative translation
losses, exceeded fair value based upon the agreed
upon transaction price of $484 million for Ilim and the
offer price of $24 million for Ilim Group and the
company recorded impairment charges as presented
in the table below.
69
The following summarizes the items comprising Equity Earnings, Impairment Charges, Tax Expense (Benefit),
Discontinued Operations and Dividends related to the sale of our equity interest in Ilim:
In millions
Equity Earnings
Impairment Charges
Tax Expense (Benefit)
Discontinued Operations,
net of tax (a)
Dividends
Twelve Months Ended
December 31, 2022
Twelve Months Ended
December 31, 2023
$
$
296
$
112
$
533
$
135
$
—
$
(9)
$
(237) $
204
(14) $
13
(a) Discontinued operations, net of tax is Equity Earnings less Impairment Charges and Tax Expense (Benefit).
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
2021 First Quarter
Units exchange and open market sale
24,588,316 $
397 $
33 $
2021 First Quarter
TRA (a)
2021 Second Quarter
Units exchange and open market sale
22,773,077
403
2021 Second Quarter
TRA (a)
42
64
66
25
31
48
50
(a) The tax receivable agreement ("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.
As of June 30, 2021, the Company no longer had an ownership interest in GPIP. The Company recorded equity
earnings of $4 million for the twelve months ended December 31, 2021. The Company received cash dividends
from GPIP of $5 million during 2021.
The Company's remaining equity method investments are not material.
70
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, 2023 and 2022:
In millions
Balance as of December 31, 2021
Goodwill
Accumulated impairment losses
Currency translation and other (a)
Accumulated impairment loss additions/reductions
Balance as of December 31, 2022
Goodwill
Accumulated impairment losses
Balance as of December 31, 2023
Goodwill
Accumulated impairment losses
Total
(a) Represents the effects of foreign currency translations and reclassifications.
(b) Reflects the impairment of the EMEA Industrial Packaging reporting unit.
Industrial
Packaging
Global
Cellulose
Fibers
$
3,426
$
(296)
3,130
(13)
(76) (b)
3,413
(372)
3,041
3,413
(372)
$
3,041
$
52
(52)
—
—
—
52
(52)
—
52
(52)
—
Total
$
3,478
(348)
3,130
(13)
(76)
3,465
(424)
3,041
3,465
(424)
$
3,041
to
to
test
impairment
fair value of
testing by applying
its annual goodwill
The Company performed
the quantitative
impairment
goodwill
its North America
Industrial Packaging reporting unit as of October 1,
2023. This was performed by comparing the carrying
amount of the North America Industrial Packaging
reporting unit
fair value. The
its estimated
estimated
the reporting unit was
calculated using a weighted approach based on
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
to make
flow approach
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
to make
requires management
significant
assumptions
revenue multiples and
to
adjusted earnings before interest, taxes, depreciation,
requires management
related
and amortization ("EBITDA") multiples. The results of
our quantitative goodwill impairment test indicated
that the carrying amount did not exceed the estimated
fair value of the North America Industrial Packaging
reporting unit.
Industrial Packaging
In the fourth quarter of 2022, the Company performed
the quantitative goodwill impairment test related to its
EMEA
reporting unit and
estimated fair value in the same manner noted above.
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
impacts of certain negative
was due
macroeconomic conditions, including the impacts
from inflation and the geopolitical environment to the
reporting unit.
the
to
71
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
2023
2022
Gross
Carrying
Amount
Accumulated
Amortization
Net
Intangible
Assets
Gross
Carrying
Amount
Accumulated
Amortization
Net Intangible
Assets
$
494 $
335 $
159 $
490 $
303 $
Tradenames, patents and trademarks, and
developed technology
Land and water rights
Other
Total
$
170
8
21
693 $
154
2
19
510 $
16
6
2
183 $
170
8
23
691 $
146
2
20
471 $
The Company recognized the following amounts as amortization expense related to intangible assets:
187
24
6
3
220
In millions
Amortization expense related to intangible assets
2023
2022
2021
$
37 $
44 $
44
Based on current intangibles subject to amortization, estimated amortization expense for each of the succeeding
years is as follows: 2024 – $40 million, 2025 – $36 million, 2026 – $29 million, 2027 – $11 million, 2028 – $8 million,
and cumulatively thereafter – $53 million.
NOTE 13 INCOME TAXES
The components of International Paper’s earnings
from continuing operations before income taxes and
equity earnings by taxing jurisdiction were as follows:
In millions
Earnings (loss)
U.S.
Non-U.S.
2023
2022
2021
$
129 $ 1,469 $
906
253
42
93
Earnings (loss) from continuing
operations before income taxes
and equity earnings (losses)
$
382 $ 1,511 $
999
The provision
continuing operations
interests) by taxing jurisdiction was as follows:
for
from
(excluding noncontrolling
(benefit)
income
taxes
In millions
2023
2022
2021
Current tax provision (benefit)
U.S. federal
U.S. state and local
Non-U.S.
Deferred tax provision (benefit)
U.S. federal
U.S. state and local
Non-U.S.
Income tax provision (benefit)
$
157 $
454 $
413
16
42
56
27
47
37
$
215 $
537 $
497
$
(164) $
(775) $
(274)
3
5
(39)
41
(27)
(8)
$
$
(156) $
(773) $
(309)
59 $
(236) $
188
72
income
The Company’s deferred
tax provision
(benefit) includes a $6 million benefit, a $3 million
benefit and an $8 million benefit for 2023, 2022 and
2021, 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 $340 million, $345 million and $601
million in 2023, 2022 and 2021, respectively.
A reconciliation of income tax expense using the
statutory U.S. income tax rate compared with the
actual income tax provision follows:
In millions
2023
2022
2021
Earnings (loss) from
continuing
operations before income
taxes
and equity earnings
$ 382
$ 1,511
$ 999
The tax effects of significant temporary differences,
representing deferred income tax assets and liabilities
at December 31, 2023 and 2022, were as follows:
In millions
Deferred income tax assets:
2023
2022
Postretirement benefit accruals
$
67 $
Pension obligations
Tax credits
Net operating and capital loss
carryforwards
Compensation reserves
Lease obligations
Environmental reserves
Other
61
182
699
146
116
114
319
68
18
175
568
151
108
119
271
Gross deferred income tax assets
$ 1,704 $ 1,478
Less: valuation allowance (a)
(848)
(677)
Net deferred income tax asset
$
856 $
801
Statutory U.S. income tax rate
21 %
21 %
21 %
Deferred income tax liabilities:
Intangibles
Investments
Right of use assets
$
(141) $
(147)
3
(2)
(116)
(108)
Plants, properties and equipment
(1,650)
(1,778)
Forestlands, related installment sales,
and investment in subsidiary
Gross deferred income tax liabilities
Net deferred income tax liability
(485)
(485)
$
$
(2,389) $
(2,520)
(1,533) $
(1,719)
(a) The net change in the total valuation allowance for the years
ended December 31, 2023 and 2022 was an increase of
$171 million and a decrease of $(31) million, respectively.
income
tax assets and
Deferred
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
related
subsidiary is attributable to a 2007 Temple-Inland
installment sale of forestlands (see Note 15 - Variable
Interest Entities).
installment sales, and
investment
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
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
Legal entity restructuring gain
(loss)
Other, net
80
2
(10)
—
317
44
1
45
—
(56)
210
15
5
—
—
—
—
(14)
7
—
7
(4)
2
16
13
6
—
(604)
2
—
8
(8)
27
8
1
—
11
9
—
(7)
5
(6)
(38)
(43)
(39)
(4)
(1)
4
5
—
(3)
—
—
(2)
Income tax provision (benefit) $
59
$ (236) $ 188
Effective income tax rate
15 %
(16) %
19 %
73
A reconciliation of the beginning and ending amount
of unrecognized tax benefits for the years ended
December 31, 2023, 2022 and 2021 is as follows:
In millions
2023
2022
2021
Balance at January 1
$
(177) $
(166) $
(143)
(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
(13)
(7)
(13)
(11)
(10)
(23)
1
17
11
(1)
3
1
1
1
1
10
1
1
Balance at December 31
$
(173) $
(177) $
(166)
If the Company were to prevail on the unrecognized
tax benefits recorded, substantially all of the balances
at December 31, 2023, 2022 and 2021 would benefit
the effective tax rate. Pending audit settlements and
the expiration of statutes of limitations could reduce
the uncertain tax positions by $7 million during the
next twelve months.
income
The Company accrues interest on unrecognized tax
benefits as a component of
interest expense.
Penalties, if incurred, are recognized as a component
of
tax expense. The Company had
approximately $34 million and $29 million accrued for
the payment of estimated interest and penalties
tax benefits at
associated with unrecognized
December 31, 2023 and 2022, respectively.
The Company is currently subject to audits in the
United States and other taxing jurisdictions around
the world. Generally, tax years 2009 through 2022
remain open and subject to examination by the
relevant tax authorities. The Company frequently
faces challenges regarding the amount of taxes due.
These challenges include positions taken by the
Company related to the timing, nature, and amount of
deductions and the allocation of income among
various tax jurisdictions.
are
that
years
currently
On January 5, 2024, the Company received a notice
of proposed adjustment from the Internal Revenue
Service relating to investment tax credits for the
under
2017-2019
examination. We estimate the net incremental tax
liability associated with the proposed adjustments
would be approximately $50 million. We disagree with
the proposed adjustments and plan to initiate the
administrative appeals process in the first quarter.
An unfavorable resolution in the current examination,
future administrative proceedings, or
tax
litigation could result in cash tax payments and could
adversely impact the effective tax rate.
future
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 $1.6 billion of
undistributed earnings of non-U.S. subsidiaries as of
December 31, 2023 has been made, as these
earnings are considered
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.
indefinitely
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:
2024
Through
2033
2034
Through
2043
Indefinite
Total
$
1 $
225 $
426 $
652
38
9
—
47
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
$
121 $
237 $
523 $
82
3
97
182
881
Less: valuation
allowance (a)
(83)
(220)
(475)
(778)
Total, net
$
38 $
17 $
48 $
103
(a) State amounts are presented net of federal benefit.
NOTE 14 COMMITMENTS AND CONTINGENT
LIABILITIES
GUARANTEES
commonly makes
In connection with sales of businesses, property,
equipment, forestlands and other assets, International
representations 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,
74
and
fees
currently
penalties
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"), which
was a wholly-owned subsidiary of the Company, until
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 $119
million (adjusted for variation in currency exchange
rates) in tax, plus interest, penalties and fees. The
total
interest,
approximately $274 million (adjusted for variation in
currency exchange rates), which reflects a recent law
change pursuant to which the Brazil tax authority on
January 16, 2024 agreed to cancel a portion of the
interest, penalties and
the
approximately
assessments
currently
$393 million (adjusted
in currency
exchange rates). After an initial favorable ruling
challenging
these assessments,
Sylvamo Brazil received subsequent unfavorable
decisions from the Brazilian Administrative Council of
Tax Appeals. Sylvamo Brazil has appealed these
future
decisions and
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.
total
for variation
fees. Accordingly,
to appeal any
the basis
intends
for
the
liability under
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, 2023. 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.
ENVIRONMENTAL AND LEGAL PROCEEDINGS
Environmental
in
and
party
The Company has been named as a potentially
responsible
environmental
("PRP")
remediation actions under various federal and state
laws, including the Comprehensive Environmental
Liability Act
Response, Compensation
("CERCLA"). Many of these proceedings involve the
cleanup of hazardous
large
commercial landfills that received waste from many
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
current, closed and formerly-owned facilities, and
recorded as liabilities in the balance sheet.
substances at
into between
This matter pertains to a business that was conveyed
to Sylvamo as of October 1, 2021, as part of our spin-
off transaction. Pursuant to the terms of the tax
the
matters agreement 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
Company will pay all amounts of the assessment 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
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
the spin-off
assets and
transaction,
liability
representing the initial fair value of the contingent
liabilities resulting
the Company established a
this ongoing
from
to
Remediation costs are recorded in the consolidated
financial statements when they become probable and
reasonably estimable.
International Paper has
estimated the probable liability associated with these
environmental remediation matters, including those
described herein, to be approximately $251 million
and $243 million in the aggregate as of December 31,
2023 and December 31, 2022, respectively. Other
than as described below, completion of required
environmental
is not
expected
to have a material effect on our
consolidated financial statements.
remedial actions
("RAs")
Cass Lake: One of the matters included above arises
out of a closed wood-treatment facility located in
Cass Lake, Minnesota. In June 2011, the U.S.
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
final plan concerning clean-up
standards at a portion of the site, the estimated cost
of which is included within the soil remedy referenced
above. The total reserve for the Cass Lake superfund
site was $46 million and $47 million as of December
31, 2023 and 2022, respectively.
issued a
75
that
Kalamazoo River: The Company is a PRP with
respect to the Allied Paper, Inc./Portage Creek/
Kalamazoo River Superfund Site in Michigan. The
is contaminated by
EPA asserts
polychlorinated biphenyls 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.
the site
• 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,
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. A 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
that it would make other arrangements for the
performance of the RD. In the summer 2021, the
EPA initiated RA activities. 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 $27 million and $37 million as of
December 31, 2023 and 2022, respectively.
in
In addition, in December 2019, the United States
published notice
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 Corporation
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,
76
the Federal District Court approved the proposed
consent decree.
is
involved
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
in allocation/apportionment
litigation with regard to the site. Accordingly, it is
premature to predict the outcome or estimate our
maximum reasonably possible loss or range of loss
with respect to this site. We have recorded a liability
for future remediation costs at 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.
fixed
(plus
interest
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 at the site. NCR Corporation and
Weyerhaeuser Company were also named as
defendants in the suit. The suit seeks contribution
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
Federal District Court issued its Final Judgment and
the past cost amount at
Order, which
approximately $50 million
to be
determined) and allocated to the Company a 15%
share of responsibility for those past costs. The
District 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. In April 2022, the Sixth Circuit Court of
Appeals reversed the Judgment of the Court, finding
that the suit against the Company was time-barred by
the applicable statute of limitations. In May 2022, GP
filed a petition for rehearing with the Sixth Circuit
Court of Appeals, which was denied in July 2022. In
November 2022, GP filed a petition for writ of
certiorari with the U.S. Supreme Court. In October
2023, the U.S. Supreme Court denied GP's writ
petition,
the Sixth Circuit's
decision that GP's suit against the Company was
time-barred. In January 2024 GP requested that the
District Court’s final order declare that each party is
jointly and severally liable for future costs, arguing
that the Sixth Circuit decision only applies to past
costs. The Company believes
the Sixth Circuit
decision dismisses all of GP’s claims against it,
whether for past or future costs, and is opposing GP’s
request.
thus rendering
final
Harris County: International Paper and McGinnis
Industrial Maintenance Corporation
("MIMC"), 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
of the ROD, there have been numerous meetings
between the EPA and the PRPs, and the Company
continues to work with the EPA and MIMC/WMI to
develop the RD.
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 RD for
the northern impoundment. That RD work is ongoing.
The AOC does not include any agreement to perform
waste removal or other construction activity at the
involves adaptive management
it
site. Rather,
techniques and a pre-design
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 addressed, determining if an
excavation remedy is able to be implemented in a
the
manner protective of human health and
environment, and investigating potential impacts of
remediation activities to infrastructure in the vicinity.
investigation,
technical
issues previously preventing
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, progress was made to resolve
the
key
Company from determining the manner in which the
selected remedy for the northern impoundment would
be
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.
implemented. As a result of
the northern
feasibly
for
We submitted the Final Design Package for the
southern impoundment to the EPA, and the EPA
77
approved this plan in May 2021. The EPA issued a
Unilateral Administrative Order for RA of the southern
impoundment in August 2021. An addendum to the
Final 100% RD (Amended April 2021) was submitted
to the EPA for the southern impoundment in June
2022. This addendum incorporated additional data
collected to date which indicated that additional waste
material removal will be required, lengthening the
time to complete RA.
With respect to the northern impoundment, the PRPs
submitted the final component of the 90% RD to the
EPA in November 2022. Upon submittal of the final
component, an updated engineering estimate was
developed, and the Company increased the reserved
amount by approximately $21 million, which
represents the Company's 50% share of our estimate
of the low end of the range of probable remediation
costs. On January 5, 2024, the PRPs received
comments from the EPA on the November 2022 90%
RD submittal. The PRPs responded to the EPA
comments in late January 2024. While several key
technical issues have been resolved, respondents still
face significant challenges remediating this area in a
cost-efficient manner that will not result in a release of
contaminated materials to the environment during the
excavation, removal and transport of the materials.
Our discussions with the EPA on the best approach to
remediation will continue. Because of ongoing
questions regarding cost effectiveness, timing and
gathering other technical data, additional losses in
excess of our recorded liability are possible. The total
reserve for the southern and northern impoundment
was $83 million and $95 million as of December 31,
2023 and 2022, respectively.
a
the
57-acre
Versailles Pond: The Company is a responsible
remediation of
party
investigation and
for
Versailles Pond,
river
dammed
impoundment that historically received paperboard
in Sprague, Connecticut. A
mill wastewater
comprehensive investigation has determined that
Versailles Pond is contaminated with PCBs, mercury,
and metals. A preliminary remediation plan was
prepared in the third quarter 2023. Negotiations with
state and federal governmental officials are ongoing
regarding the scope and timing of the remediation.
The total reserve for Versailles Pond was $30 million
as of December 31, 2023.
Asbestos-Related Matters
We have been named as a defendant in various
asbestos-related personal injury litigation, in both
state and federal court, primarily in relation to the
prior operations of certain companies previously
acquired by the Company. The Company's total
recorded liability with respect to pending and future
asbestos-related claims was $97 million, net of
respectively. While
estimated insurance recoveries and $105 million, net
of insurance recoveries as of December 31, 2023 and
December 31, 2022,
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.
it
Antitrust
the
("IP
Italy"),
subsidiary
In March 2017, the Italian Competition Authority
("ICA") commenced an investigation into the Italian
packaging industry to determine whether producers of
corrugated sheets and boxes violated the applicable
European competition law. In April 2019, 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. In August 2019, the ICA issued its
decision and assessed IP Italy a fine of €29 million
(approximately $31 million at
then-current
exchange rates) which was recorded in the third
quarter of 2019. We appealed the ICA decision, and
our appeal was denied in May 2021. We further
appealed the decision to the Italian Council of State
("Council of State"), and in March 2023 the Council of
State largely upheld the ICA’s findings but referred
the calculation of IP Italy’s fine back to the ICA,
finding that it was disproportionately high based on
the conduct found. We have further appealed the
Council of State decision to uphold the ICA’s findings.
The Company and other producers also have been
named in lawsuits, and we have received other
claims, by a number of customers in Italy for
damages associated with the alleged anticompetitive
conduct. We do not believe material losses arising
from such private lawsuits and claims are probable.
General
The Company is involved in various other inquiries,
administrative proceedings and litigation relating to
environmental and safety matters, personal injury,
product liability, labor and employment, contracts,
sales of property, intellectual property, tax, and other
matters, some of which allege substantial monetary
damages. See Note 13 - Income Taxes for details
regarding a tax matter. Assessments of lawsuits and
claims can involve a series of complex judgments
about future events, can rely heavily on estimates
and 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
the
herein, will not have a material effect on
78
in
the
light of
consolidated financial position or liquidity of the
Company. However,
inherent
uncertainties involved in pending or threatened legal
matters, some 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
in
that
included
to us at
the basis of
In 2017,
the Brazilian Federal Supreme Court
decided that the state value-added tax (VAT) should
not be
federal VAT
calculations. In 2018 and 2019, the Brazilian tax
authorities published both an internal consultation
and a normative ruling with a narrow interpretation of
the effects of the case. Based upon the best
information available
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
million of net interest expense and is recorded in
Discontinued Operations, net of
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 on October 1, 2021, as
part of our spin-off transaction.
taxes,
in
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, 2023, this deferred tax
liability was $485 million, which will be settled with the
maturity of the notes in 2027.
In October 2007, Temple-Inland sold 1.55 million
total
acres of
for $2.4 billion. The
timberland
to
consideration consisted almost entirely of notes due
in 2027 issued by the buyer of the timberland, which
Temple-Inland contributed
two wholly-owned,
bankruptcy-remote special purpose entities. The
notes are shown in Long-term financial assets of
variable
the accompanying
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.
interest entities
in
two wholly-
In December 2007, Temple-Inland's
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
banks issuing the letters of credit is downgraded
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, 2023 and 2022, the fair
value of the notes receivable was $2.3 billion. As of
both December 31, 2023 and 2022, 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.
Activity between the Company and the 2007 financing
entities was as follows:
In millions
Revenue (a)
Expense (b)
Cash receipts (c)
Cash payments (d)
2023
2022
2021
$ 146 $ 65 $ 24
136
122
123
58
28
40
24
5
16
(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
December 31, 2023, 2022 and 2021, respectively, of
accretion income for the amortization of the purchase
accounting adjustment on the Financial assets of variable
interest entities.
(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, 2023, 2022 and 2021 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
assets of special purpose entities.
(d) The cash payments are interest paid on Nonrecourse
financial liabilities of special purpose entities.
79
forestlands,
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
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 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
bankruptcy-remote
formation
special purpose entities
"2015 Financing
Entities").
of wholly-owned,
(the
the Timber Notes. This resulted
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
in cash
from
proceeds of approximately $630 million representing
our equity in the variable interest entities. Maturity of
the
the
monetization structure also resulted in a $72 million
tax liability that was paid in the fourth quarter of 2021.
installment notes and
termination of
to
the Company was required
On September 2, 2022, the Company and the Internal
Revenue Service agreed to settle the previously
disclosed timber monetization restructuring tax matter
involving the 2015 Financing Entities. Under this
agreement,
fully
resolve the matter and pay $252 million in U.S.
federal income taxes. As a result, interest was
charged upon closing of the audit. The amount of
interest expense recognized in 2022 was $58 million.
As of December 31, 2023, $252 million in U.S. federal
income taxes and $58 million in interest expense
have been paid as a result of
the settlement
agreement. The Company paid $163 million in U.S.
federal income taxes and $30 million in interest
during the first quarter of 2023 and fully satisfied the
payment terms of the settlement agreement regarding
the 2015 Financing Entities
timber monetization
restructuring tax matter during the second quarter of
2023. The reversal of the Company’s remaining
deferred
the 2015
Financing Entities of $604 million was recognized as
a one-time tax benefit in the third quarter of 2022.
liability associated with
tax
Activity between
the 2015
Financing Entities for the year ended 2021 was as
follows:
the Company and
In millions
Revenue (a)
Expense (a)
Cash receipts (b)
Cash payments (c)
2021
$
61
34
95
38
(a) The revenue and expense are included in Interest expense,
the accompanying consolidated statement of
in
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, 2023, 2022 and 2021
were as follows:
In millions
2023
2022
2021
Early debt reductions (a)
$ — $ 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 2021 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.
The Company had no early debt reductions in 2023.
The Company had debt reductions of $780 million in
2023, related primarily to capital leases, commercial
paper, debt maturities and international debt.
During the first quarter of 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. Additionally, during the first quarter of 2023,
the Company issued an approximately $72 million
environmental development bond ("EDB") with an
interest rate of 4.00% and a maturity date of April 1,
2026. The proceeds from this issuance were used to
repay an approximately $72 million outstanding EDB
that matured on April 1, 2023.
interest
During the second quarter of 2023, the Company
issued approximately $24 million of debt with a
rate and a maturity date of
variable
December 1, 2027. The Company had debt
reductions of approximately $49 million of variable
interest EDBs with current maturities. Additionally,
during the second quarter of 2023, the Company
issued an approximately $54 million EDB with a
variable rate and a maturity date of May 1, 2028. The
proceeds of this were used to repay an approximately
$54 million EDB that matured on May 1, 2023. The
Company issued an approximately $25 million EDB
with a variable rate and a maturity date of June 1,
2030. The proceeds of this were used to repay an
approximately $25 million EDB that matured on
June 1, 2023.
During the third quarter of 2023, the Company repaid
an approximately $70 million EDB with an interest
rate of 2.90% that matured on September 1, 2023.
During the fourth quarter of 2023, the Company
repaid an approximately $87 million note with an
interest rate of 6.875% that matured on November 1,
2023.
issued
the
approximately $11 million of debt with a variable
interest rate and a maturity date of December 1,
2027.
Additionally,
Company
The Company had debt issuances in 2022 of $354
million of term loan agreements, $410 million of
commercial paper and $248 million of environmental
development bonds.
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 $1.4
billion credit agreement. Under the terms of this
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
floating rate notes. The Company had no
or
borrowings outstanding as of December 31, 2023 and
$410 million borrowings outstanding as of
December 31, 2022 under this program.
At December 31, 2023, the Company's credit facilities
totaled $1.9 billion. The credit facilities generally
provide for interest rates at a floating rate index plus a
pre-determined margin dependent upon International
Paper's credit rating. The credit facilities previously
included a $1.5 billion contractually committed bank
facility with a maturity date of June 2026. In June
2023, the Company amended and restated its credit
agreement to, among other things, (i) reduce the size
of the contractually committed bank facility from
$1.5 billion to $1.4 billion, (ii) extend the maturity date
from June 2026 to June 2028, and (iii) replace the
LIBOR-based rate with a SOFR-based rate. The
liquidity facilities also include up to $500 million of
uncommitted financings based on eligible receivables
balances under a receivable securitization program
that expires in June 2025. As of December 31, 2023
80
and December 31, 2022, the Company had no
borrowings outstanding under the program.
A summary of long-term debt follows:
In millions at December 31
2023
2022
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)
Floating rate term loan - due 2028
Total principal
Capitalized leases
Premiums, discounts, and debt issuance
costs
Terminated interest rate swaps
Other
Total (c)
Less: current maturities
Long-term debt
$ — $
39
22
58
5
7
10
407
3
86
453
585
686
449
647
740
308
419
600
87
39
22
58
5
7
10
407
3
86
453
585
686
449
647
740
732
489
—
5,524 5,505
55
59
(41)
54
1
(42)
55
2
5,593 5,579
138
763
$ 5,455 $ 4,816
(a) The weighted average interest rate on these notes was
5.4% in 2023 and 4.6% in 2022.
(b) The weighted average interest rate on these bonds was
2.4% in 2023 and 2.4% in 2022.
(c) The fair market value was approximately $5.5 billion at
December 31, 2023 and $5.2 billion at December 31, 2022.
Debt fair value measurements use Level 2 inputs.
the
At December 31, 2023, contractual obligations for
future payments of debt maturities (including finance
lease liabilities disclosed in Note 10 - Leases and
excluding
structures
disclosed in Note 15 - Variable Interest Entities) by
calendar year were as follows over the next five
years: 2024 – $138 million; 2025 – $189 million;
2026 – $143 million; 2027 – $333 million; and 2028 –
$670 million.
timber monetization
financial covenants require
The Company’s
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
retained earnings, less treasury stock plus any
cumulative goodwill
impairment charges. The
calculation also excludes accumulated other
comprehensive income/loss and both the current and
long-term Nonrecourse Financial Liabilities 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, 2023,
we were in compliance with our debt covenants.
NOTE 17 CAPITAL STOCK
The authorized capital stock at both December 31,
2023 and 2022, 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
the Board of Directors without further shareholder
action.
The following is a roll forward of shares of common
stock for the three years ended December 31, 2023,
2022 and 2021:
In thousands
Balance at January 1, 2021
Issuance of stock for various plans, net
Repurchase of stock
Common Stock
Issued
Treasury
448,916 55,817
—
(1,855)
— 16,400
Balance at December 31, 2021
448,916 70,362
Issuance of stock for various plans, net
Repurchase of stock
—
(1,569)
— 29,839
Balance at December 31, 2022
448,916 98,632
Issuance of stock for various plans,
net
Repurchase of stock
—
—
(1,647)
5,894
Balance at December 31, 2023
448,916 102,879
81
NOTE 18 RETIREMENT PLANS
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).
The Company also has two unfunded nonqualified
defined benefit pension plans:
the Pension
Restoration Plan that provides retirement benefits
based on eligible compensation in excess of limits set
by the Internal Revenue Service, and the Unfunded
Supplemental Retirement Plan for Senior Managers
("SERP"), which is an alternative retirement plan for
salaried 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 $22 million, $29 million and $21 million
in 2023, 2022 and 2021, respectively, and which are
expected to be $20 million in 2024.
credited
including
the Company
service
froze
Effective January 1, 2019,
participation,
and
compensation, for salaried employees under the
Pension Plan, the Pension Restoration Plan and the
SERP. 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
their
individual Retirement Savings Account as described
later in this Note 18.
to
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.
OBLIGATIONS AND FUNDED STATUS
The following table shows the changes in the benefit
obligation and plan assets for 2023 and 2022 and the
plans’ funded status.
In millions
Change in projected benefit
obligation:
Benefit obligation,
January 1
Service cost
Interest cost
Actuarial loss (gain)
Plan amendments
Benefits paid
Special termination
benefits
2023
2022
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
$ 8,816 $
54 $ 11,833 $
65
48
459
225
4
3
85
338
3
2
(3) (2,863)
(11)
26 —
16 —
(593)
(3)
(593)
(2)
1
—
—
—
Effect of foreign currency
exchange rate movements
—
3
—
(3)
Benefit obligation,
December 31
Change in plan assets:
Fair value of plan assets,
January 1
Actual return on plan
assets
Company contributions
$ 8,982 $
58 $ 8,816 $
54
$ 8,845 $
18 $ 12,075 $
19
562
22
1 (2,666) —
3
29
2
(2)
Benefits paid
(593)
(3)
(593)
Effect of foreign currency
exchange rate movements
—
1
—
(1)
Fair value of plan assets,
December 31
$ 8,836 $
20 $ 8,845 $
18
$
(146) $
(38) $
29 $
(36)
$
118 $ — $
297 $ —
(20)
(2)
(22)
(2)
(244)
(36)
(246)
(34)
$
(146) $
(38) $
29 $
(36)
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)
$
91 $ — $
89 $ —
Net actuarial loss (gain)
1,663
(10) 1,563
$ 1,754 $
(10) $ 1,652 $
(7)
(7)
The non-current asset for the qualified plan is
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.
82
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
the computed amount of current-year
earnings from the investment of plan assets using an
estimated long-term rate of return.
Net periodic pension expense for qualified and
nonqualified U.S. and non-U.S. defined benefit plans
comprised the following:
2023
2022
2021
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
$ 48 $
4 $ 85 $
3 $ 100 $
Interest cost
459
3 338
2 333
5
4
Expected return
on plan assets
Actuarial loss
(gain)
Amortization of
prior service cost
Special
termination
benefits
Net periodic
pension
(income)
expense
(530)
(1) (649)
(1) (705)
(7)
93
(1)
87
1 138
2
23 —
23 —
22 —
1 — — — — —
$ 94 $
5 $ (116) $
5 $ (112) $
4
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 except for $(3)
million related
in 2021
recorded in Discontinued Operations.
to Sylvamo participants
The increase in 2023 pension expense primarily
reflects lower asset returns, higher interest cost due
to a higher discount rate, higher actuarial loss, and
lower service cost.
The largest contributor to the actuarial loss affecting
the benefit obligation was the decrease in the
discount rate from 5.40% at December 31, 2022 to
5.10% at December 31, 2023.
The components of the $102 million and $(3) million
related
to U.S. plans and non-U.S. plans,
respectively, in the amounts recognized in OCI during
2023 consisted of:
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
Non-
U.S.
Plans
U.S.
Plans
$
192 $
(93)
26
(23)
—
$
102 $
(3)
1
—
—
(1)
(3)
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 $197 million, $474 million and
$(1.0) billion in 2023, 2022 and 2021, respectively.
The portion of the change in funded status for the
non-U.S. plans was $2 million, $(6) million, and $(73)
million in 2023, 2022 and 2021, respectively.
The accumulated benefit obligation at December 31,
2023 and 2022 was $9.0 billion and $8.8 billion,
respectively, for our U.S. defined benefit plans and
$49 million and $46 million,
respectively, at
December 31, 2023 and 2022 for our non-U.S.
defined benefit plans.
following
The
for
table summarizes
pension plans with an accumulated benefit obligation
in excess of plan assets at December 31, 2023 and
2022:
information
2023
2022
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
In millions
Projected benefit obligation $
264 $
57 $
268 $
54
Accumulated benefit
obligation
Fair value of plan assets
264
—
49
20
268
—
45
18
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
83
ASSUMPTIONS
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
its
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
to
following year (i.e.,
determine the benefit obligation as of December 31,
2023 is also the discount rate used to determine net
pension expense for the 2024 year).
the discount rate used
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:
2023
2022
2021
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
5.10 % 5.88 % 5.40 % 5.31 % 2.90 % 2.59 %
3.00 % 3.40 % 3.00 % 3.36 % 3.00 % 2.92 %
Discount rate (a)
Expected long-term rate of return on plan assets (a)
Rate of compensation increase
5.40 % 5.31 % 2.90 % 2.59 % 2.67 % 2.32 %
6.50 % 3.83 % 6.00 % 3.66 % 6.40 % 4.99 %
3.00 % 3.36 % 3.00 % 2.92 % 2.25 % 3.66 %
(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
asset classes are determined after analyzing
historical experience and
future expectations of
returns and volatility of the various asset classes.
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
rate assumption was
assets. The discount
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 2024,
the Company will use an expected long-term rate of
return on plan assets of 7.00% for the Retirement
Plan of International Paper, a discount rate of 5.10%
and an assumed rate of compensation increase of
3.00%. The Company estimates that it will record net
pension income of approximately $7 million for its
U.S. defined benefit plans in 2024, compared to
expense of $94 million in 2023.
For non-U.S. pension plans, assumptions reflect
economic assumptions applicable to each country.
84
following
The
the effect on pension
expense for 2024 of a 25 basis point decrease in the
above assumptions:
illustrates
In millions
Expense (Income):
Discount rate
Expected long-term rate of return on plan assets
PLAN ASSETS
2024
$
12
21
International Paper’s Board of Directors has
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.
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, including swaps, 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
policy
investment manager
and
performance. For non-U.S. plans, assets consist
principally of common stock and
income
securities.
objectives
fixed
International Paper’s U.S. pension allocations by type
of fund at December 31, 2023 and 2022 and target
allocations were as follows:
Asset Class
Hedging assets
Return seeking assets (a)
2023
2022
Target
Allocations
66 %
34 %
64 %
36 %
61% - 72%
28% - 39%
Total
100 %
100 %
(a) Return seeking assets include Real Estate (9% for both 2023
and 2022) and Private Equity (7% and 8% for 2023 and 2022,
respectively).
The fair values of International Paper’s pension plan
assets at December 31, 2023 and 2022 by asset
class are shown below. Hedge funds disclosed in the
following table are allocated to hedging assets for
target allocation purposes.
Fair Value Measurement at December 31, 2023
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
Fixed income
Derivatives
Cash and cash equivalents
Other investments:
Hedge funds
Private equity
Real estate funds
$ 1,336 $
835 $
501 $
—
—
49
4,684
—
—
4,691
71
49
1,293
644
752
Total Investments
$ 8,836 $
884 $
5,185 $
78
Fair Value Measurement at December 31, 2022
Quoted
Prices in
Active
Markets
For
Identical
Assets
(Level 1)
Total
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
—
7
25
—
$ 1,353 $
889 $
464 $
—
—
82
4,543
—
—
4,550
25
82
1,319
688
828
Asset Class
In millions
Equities
Fixed income
Derivatives
Cash and cash equivalents
Other investments:
Hedge funds
Private equity
Real estate funds
Total Investments
$ 8,845 $
971 $
5,007 $
32
In accordance with accounting standards, certain
investments that are measured at NAV and are not
classified in the fair value hierarchy.
85
Other Investments at December 31, 2023
Investment
Fair Value
Unfunded
Commitments
Redemption
Frequency
Remediation
Notice Period
In millions
Hedge funds
$
1,293 $
Private equity
Real estate
funds
644
752
Total
$
2,689 $
103
81
94
278
Quarterly to
semi-annually
45 - 60 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.
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.
—
7
71
—
Equity securities consist primarily of publicly traded
U.S. companies and international companies. Publicly
traded equities are valued at the closing prices
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.
futures,
investments such as
Derivative
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
fide hedging or other
mismatches, or bona
investments
(commingled, multi-manager
wide range of different securities and derivative
instruments. These investments are made through
funds-of-funds
fund
in
through direct
structures) and
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 valuation methodology as appropriate
depending on
type of security or
instrument held. Funds-of-funds are valued based
the underlying
upon
investments in hedge funds.
the net asset values of
the specific
Private equity consists of interests in partnerships
that invest 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.
Real estate funds include commercial properties, land
and timberland, and generally include, but are not
limited to, retail, office, 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
flows,
inputs such as cost, discounted cash
based
independent
comparable data.
and market
appraisals
appropriate risk management purposes. Derivative
instruments are generally valued by the investment
managers or in certain instances by third-party pricing
sources.
The following tables summarize derivative holdings
as of December 31, 2023 and 2022, respectively:
In millions
Collateral
Credit Default Swap
Interest Rate Swap
Bond/Equity Swap
Total
$
$
Derivatives at December 31, 2023
Gross Asset
Gross Liability
Total
7 $
(7) $
2
4
65
—
—
—
78 $
(7) $
Derivatives at December 31, 2022
In millions
Collateral
Gross Asset
Gross Liability
Total
$
9 $
— $
Credit Default Swap
Interest Rate Swap
Bond/Equity Swap
Options
Total
1
16
3
6
$
35 $
—
—
—
(10)
(10) $
—
2
4
65
71
9
1
16
3
(4)
25
Hedge funds are investment structures for managing
private, loosely-regulated investment pools that can
pursue a diverse array of investment strategies with a
86
The following is a reconciliation of the assets that are classified using significant unobservable inputs (Level 3) at
December 31, 2023:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
In millions
Beginning 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
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, 2023
FUNDING AND CASH FLOWS
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
Company may determine
to be appropriate
considering the funded status of the plans, tax
deductibility, cash flow generated by the Company,
factors. The Company continually
and other
reassesses
timing of any
the amount and
discretionary contributions. No voluntary contributions
were made in 2021, 2022 or 2023. 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, 2023, projected future pension
benefit payments, excluding any termination benefits,
were as follows:
In millions
2024
2025
2026
2027
2028
2029-2033
$
620
632
639
639
639
3,175
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
87
Other
fixed
income
Derivatives
Total
16 $
(21) $
(5)
(9)
10
(10)
—
7 $
—
—
—
—
7 $
38
29
(189)
(179)
197
187
—
25 $
57
48
—
32
57
48
(59)
(59)
—
71 $
—
78
$
$
$
are tax-qualified defined contribution 401(k) savings
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
in 2019, as a result of the freeze for salaried
employees under the Pension Plan, all salaried
employees are eligible for the contribution to the
Retirement Savings Account.
contributions) when
The Company also sponsors the International Paper
Company Deferred Compensation Savings Plan,
is an unfunded nonqualified defined
which
contribution plan. This plan permits eligible
employees to continue to make deferrals and receive
company matching contributions (and Retirement
their
Savings Account
contributions to the International Paper Salaried
Savings Plan are stopped due to limitations under
U.S. tax law. Participant deferrals and Company
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.
Company contributions
totaled
approximately $160 million, $159 million and $172
million for the plan years ended in 2023, 2022 and
2021, respectively.
the plans
to
NOTE 19 POSTRETIREMENT BENEFITS
U.S. POSTRETIREMENT BENEFITS
The weighted average assumptions used
to
determine the benefit obligation at December 31,
2023 and 2022 were as follows:
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
2023, 2022 and 2021 were as follows:
In millions
2023
2022
2021
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
7 —
5 —
Actuarial loss
— —
3 —
5
5
1
1
— — — — —
(2)
Amortization of
prior service
credits
Net
postretirement
expense
2023
2022
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
Discount rate
5.20 % 6.10 % 5.50 % 5.70 %
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
7.00 % 4.00 % 7.25 % 4.00 %
5.00 % 4.00 % 5.00 % 4.00 %
2032
2023
2032
2023
The plans are only funded in an amount equal to
benefits paid. The
the
following
changes in benefit obligation and plan assets for
2023 and 2022:
table presents
In millions
2023
2022
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
Change in projected benefit
obligation:
Benefit obligation, January 1
$ 125 $
4 $ 172 $
5
Service cost
Interest cost
— — — —
7 —
5 —
Participants’ contributions
2 —
3 —
Actuarial (gain) loss
8 —
(33) —
$
7 $ — $
8 $ — $ 10 $ —
Benefits paid
(24) —
(23) —
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
for
requirements of employers’ accounting
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
non-U.S. postretirement benefit cost for the years
ended December 31, 2023, 2022 and 2021 were as
follows:
2023
2022
2021
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
Discount rate 5.50 % 5.70 % 2.90 % 5.20 % 2.50 % 6.91 %
Less: Federal subsidy
— —
1 —
Currency Impact
— — —
(1)
Benefit obligation,
December 31
Change in plan assets:
Fair value of plan assets,
January 1
$ 118 $
4 $ 125 $
4
$ — $ — $ — $ —
Company contributions
22 —
20 —
Participants’ contributions
2 —
3 —
Benefits paid
(24) —
(23) —
Fair value of plan assets,
December 31
$ — $ — $ — $ —
Funded status, December 31
$ (118) $
(4) $ (125) $
(4)
Amounts recognized in the
consolidated balance sheet
under ASC 715:
Current liability
$
(13) $ — $ (15) $ —
Non-current liability
(105)
(4) (110)
$ (118) $
(4) $ (125) $
(4)
(4)
Amounts recognized in
accumulated other
comprehensive income (loss)
under ASC 715 (pre-tax):
Net actuarial loss (gain)
$
2 $
(1) $
(6) $
(1)
Prior service credit
— — — —
$
2 $
(1) $
(6) $
(1)
88
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.
Additionally, restricted stock, which may be deferred
into RSUs, may be awarded under a Restricted Stock
and Deferred Compensation Plan for Non-Employee
Directors.
The components of the $8 million and $0 million
change
in other
comprehensive income ("OCI") during 2023 for U.S.
and non-U.S. plans, respectively, consisted of:
the amounts
recognized
in
In millions
Current year actuarial (gain) loss
Amortization of actuarial (loss) gain
U.S.
Plans
Non-
U.S.
Plans
$
8 $ —
— —
$
8 $ —
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 $(2) million, $44 million and
$27 million in 2023, 2022 and 2021, respectively.
The portion of the change in funded status for the
non-U.S. plans was $0 million, $0 million, and $1
million in 2023, 2022 and 2021, respectively.
At December 31, 2023, estimated
future
postretirement benefit payments, net of participant
contributions and estimated future Medicare Part D
subsidy receipts, were as follows:
total
In millions
Benefit
Payments
Subsidy
Receipts
Benefit
Payments
2024
2025
2026
2027
2028
2029– 2033
U.S.
Plans
U.S.
Plans
$
14 $
1 $
Non-
U.S.
Plans
13
12
11
11
45
1
1
1
1
2
—
—
—
—
—
1
NOTE 20 INCENTIVE PLANS
and
2009
International Paper currently operates under
its
Incentive
Restated
Amended
Compensation Plan ("ICP"). The ICP authorizes
grants of restricted stock, restricted or deferred stock
units ("RSUs"), performance awards payable in cash
or stock upon the attainment of specified performance
goals ("PSUs"), dividend equivalents, stock options,
stock appreciation rights, other stock-based awards,
and cash-based awards at the discretion of the
Management Development and Compensation
Committee of the Board of Directors (the "MDCC").
The MDCC administers the ICP.
LONG-TERM INCENTIVE PLAN
Effective January 1, 2023, the MDCC renamed the
Performance Share Plan ("PSP") to the Long-Term
Incentive Plan ("LTIP") and began
incorporating
RSUs into its annual grant process as a complement
to PSUs to better align with market and aid in our
recruitment and retention efforts. Under the LTIP,
contingent awards of International Paper common
stock are granted by the MDCC.
that may be
The maximum aggregate number of shares of the
Company’s common stock
issued
pursuant to awards under the ICP shall not exceed
15.4 million shares. Shares for which payment is in
cash, including the shares withheld to cover associate
payroll taxes, as well as shares that expire, terminate,
or are canceled or forfeited, may be awarded,or
granted again under the ICP.
Performance Share Units
PSU awards are earned over a three-year period
based on
the achievement of pre-established
performance goals of Return on Invested Capital
("ROIC") measured against our internal benchmark
and our relative performance in Total Shareholder
Return ("TSR") compared to the TSR peer group. The
2021-2023, 2022-2024 and 2023-2025 Awards are
for all
weighted 50% ROIC and 50% TSR
participants. The ROIC component of
the PSU
awards is valued at the 20-trading day average
closing price immediately 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 PSU
awards is valued using the same methodology as the
RSUs but then adjusted using a factor derived from 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.
PSUs are payable
the
Company's discretion.
in cash or shares at
89
Restricted Stock Units
in
to vest
three equal
Time-based RSU awards granted under the LTIP are
installments
expected
commencing on February 1st following the first
anniversary of the grant date over a 3-year service
period, subject to forfeiture and transfer restrictions.
the
RSUs are payable
Company’s discretion.
in cash or shares at
Generally, the requisite service period is the vesting
period. In the case of retirement (eligibility for which is
based on the associate's age and years of service as
provided in the relevant award agreement), awards
vest pro-rata based on length of service during the
award period, subject to continued employment and
paid upon termination.
and special recognition purposes. It provides for
awards of RSUs to key employees.
The following summarizes the activity of the RA
Program for the three years ended December 31,
2023:
Outstanding at December 31, 2020
126,075
$44.83
Weighted
Average
Grant Date
Fair Value
Shares
Granted
Shares issued
Forfeited
Outstanding at December 31, 2021
Granted
Shares issued
Forfeited
85,098
(85,768)
(21,636)
103,769
132,200
(104,177)
(5,400)
126,392
123,454
(81,629)
(11,643)
50.90
45.59
45.52
49.03
43.38
44.53
47.78
46.88
35.51
45.40
39.77
Dividend equivalents are generally accrued on PSUs
and RSUs outstanding as of the record date. These
dividend equivalents are paid only on PSUs and
RSUs that ultimately vest.
Outstanding at December 31, 2022
Granted
Shares issued
Forfeited
The following table sets forth the assumptions used to
determine compensation cost for the market condition
component of the LTIP plan:
Expected volatility
Risk-free interest rate
Twelve Months Ended
December 31, 2023
35.97% - 37.11%
0.17% - 4.18%
The following summarizes LTIP activity for the three
years ended December 31, 2023:
Weighted
Average
Grant Date
Fair Value
Share/Units
Outstanding at December 31, 2020
5,620,025
$40.36
Granted
Shares issued
Forfeited
2,316,295
(994,052)
(1,016,126)
Outstanding at December 31, 2021
5,926,142
Granted
Shares issued
Forfeited
1,899,211
(1,130,236)
(1,382,637)
Outstanding at December 31, 2022
5,312,480
Granted - LTIP PSU
Granted - LTIP RSU
Shares issued - LTIP PSU
Shares issued - LTIP RSU
Forfeited
1,619,481
1,411,042
(972,563)
(15,161)
(1,234,328)
45.24
63.54
57.55
35.43
50.32
40.23
42.03
38.01
37.78
34.63
40.44
34.63
45.38
Outstanding at December 31, 2023
6,120,951
$35.31
RECOGNITION AWARD PROGRAM
The Recognition Award Program ("RA Program") is
service-based and designed for recruitment, retention
Outstanding at December 31, 2023
156,574
$39.22
At December 31, 2023, 2022 and 2021 a total of 5.5
million, 7.3 million and 7.7 million shares,
respectively, were available for grant under the ICP.
Stock-based compensation expense and related
income tax benefits were as follows:
In millions
2023
2022
2021
Total stock-based compensation
expense (included in selling and
administrative expense)
Income tax benefits related to stock-
based compensation
$
58 $ 124 $ 130
12
13
13
At December 31, 2023, $58 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 1.4 years.
NOTE
BUSINESS SEGMENT AND GEOGRAPHIC AREA
INFORMATION BY
FINANCIAL
21
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 35 and 36 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
90
announced spin-off of its Printing Papers business
into a new, publicly-traded company, Sylvamo, listed
on
the New York Stock Exchange as SLVM.
the Company
Additionally, on August 6, 2021,
completed the sale of its Kwidzyn, Poland mill which
included the pulp and paper mill in Kwidzyn and
supporting functions. As a result of the Sylvamo spin-
off and the sale 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.
that
trends
Business segment operating profits are used by
International Paper’s management to measure the
earnings performance of its businesses. Management
believes
this measure allows a better
in costs, operating
understanding of
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,
corporate items, net, corporate net special items,
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
sales by segment
table are
determined using a management approach and
include intersegment sales.
the Net Sales
in
INFORMATION BY BUSINESS SEGMENT
Net Sales
Operating Profit (Loss)
In millions
2023
2022
2021
Industrial Packaging
$ 1,266 $ 1,742 $ 1,638
Global Cellulose Fibers
(17)
106
(3)
Business Segment
Operating Profit
1,249
1,848
1,635
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
Assets
In millions
Industrial Packaging
Global Cellulose Fibers
Corporate and other
Assets
Capital Spending
382
231
(2)
27
28
529
1,511
325
(5)
34
99
76
999
337
(5)
134
352
18
54
(192)
(200)
$ 1,249 $ 1,848 $ 1,635
2023
2022
$ 16,060 $ 16,425
3,369
3,832
3,625
3,890
$ 23,261 $ 23,940
In millions
2023
2022
2021
Industrial Packaging
$
928 $
762 $
Global Cellulose Fibers
Subtotal
Corporate and other
Capital Spending
177
1,105
36
143
905
26
$ 1,141 $
931 $
382
83
465
15
480
Depreciation, Amortization and Cost of Timber
Harvested
In millions
2023
2022
2021
Industrial Packaging
$ 1,144 $
783 $
286
2
255
2
829
265
3
$ 1,432 $ 1,040 $ 1,097
In millions
Industrial Packaging
2023
2022
2021
$ 15,596 $ 17,451 $ 16,326
Global Cellulose Fibers
2,890
3,227
2,732
Global Cellulose Fibers
Corporate
Depreciation and
Amortization
Corporate and Intersegment
Sales (a)
430
483
305
External Sales By Major Product
Net Sales
$ 18,916 $ 21,161 $ 19,363
In millions
Industrial Packaging
Global Cellulose Fibers
Other (c)
Net Sales
2023
2022
2021
$ 15,596 $ 17,441 $ 16,276
2,883
437
3,219
501
2,730
357
$ 18,916 $ 21,161 $ 19,363
91
INFORMATION BY GEOGRAPHIC AREA
Net Sales (d)
In millions
2023
2022
2021
United States (e)
$ 16,340 $ 18,482 $ 16,769
EMEA
Pacific Rim and Asia
Americas, other than U.S.
1,494
1,693
1,611
261
821
123
863
207
776
Net Sales
$ 18,916 $ 21,161 $ 19,363
Long-Lived Assets (f)
In millions
United States
EMEA
Americas, other than U.S.
Long-Lived Assets
2023
2022
$ 9,021 $ 9,333
757
390
738
378
$ 10,168 $ 10,449
(a)
Includes sales of $44 million in 2021 and operating profit
(losses) of $9 million in 2021, from previously divested
businesses. There were no sales or operating profit (losses)
from previously divested businesses in 2022 and 2023.
(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 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 $2.7 billion in
(f)
2023, $3.2 billion in 2022 and $2.6 billion in 2021.
Long-Lived Assets
Properties and Equipment, net.
includes Forestlands and Plants,
92
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
As of December 31, 2023, 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 of our disclosure controls 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 financial officer have concluded that the
Company’s disclosure controls and procedures were
effective as of December 31, 2023.
CHANGES
REPORTING
IN
INTERNAL CONTROL OVER FINANCIAL
There have been no changes in our internal control
over financial reporting during the quarter ended
December 31, 2023, 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 46 and 47 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
On November 14, 2023, Ms. Kathryn D. Sullivan, a
member of
the Company’s Board of Directors,
adopted a trading arrangement for the sale of the
Company’s common stock (a “Rule 10b5-1 Trading
Plan”) that is intended to satisfy the affirmative
defense conditions of Securities Exchange Act Rule
10b5-1(c). The Rule 10b5-1 Trading Plan provides for
the sale of up to 12,000 shares of common stock
pursuant to the terms of the Rule 10b5-1 Trading Plan
beginning in February 2024 and ending in November
2024.
With the exception of Ms. Sullivan, during the quarter
ended December 31, 2023, no other director or
Section 16 officer adopted or terminated any Rule
10b5-1 trading arrangements or non-Rule 10b5-1
trading arrangements, as defined in Item 408 of
Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN
JURISDICTIONS THAT PREVENT INSPECTIONS
None.
93
respect
Information with
to compliance 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
Information with respect to the compensation of
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
hereby
director
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
independent registered public
rendered by, our
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 III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE
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 9 and 10 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 Conduct (the "Code") is
applicable to all employees of the Company, including
the CEO 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, CEO 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 our Corporate Governance Principles, our
Code and the Charters of our Audit and Finance
Committee, MDCC, Governance Committee and PPE
Committee available free of charge on our website
(www.internationalpaper.com), and in print to any
shareholder who requests them. In addition, requests
for printed copies may be directed to the corporate
secretary at our corporate headquarters. Please
direct your request to:
International Paper Company
Attn: Mr. Joseph R. Saab, Corporate Secretary
6400 Poplar Avenue
Memphis, TN 38197
94
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(1) Financial Statements – See Item 8. Financial
Statements and Supplementary Data.
the consolidated
(2) Financial Statement Schedules – The following
additional financial data should be read in
conjunction with
financial
statements in Item 8. Financial Statements and
Supplementary Data. Schedules not included
with this additional financial data have been
omitted because they are not applicable, or the
required
the
consolidated financial statements or the notes
thereto.
information
shown
in
is
(2.1)
(2.2)
Additional Financial Data
2023, 2022 and 2021
Transaction Agreement, dated October
23, 2017, by and among the Company,
Graphic Packaging Holding Company,
Gazelle Newco LLC and Graphic
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
the
by reference
Company’s’ Current Report on Form 8-K
dated October 1, 2021).
to Exhibit 2.1
to
Incorporation
Restated Certificate of
(incorporated by
of
the Company
reference
the
to Exhibit 3.1
Company’s Current Report on Form 8-K
dated May 13, 2013).
to
By-laws of the Company, as amended
through May 9, 2023 (incorporated by
the
to Exhibit 3.1
reference
Company’s Current Report on Form 8-K
dated May 9, 2023).
to
Indenture, dated as of April 12, 1999,
between the Company and The Bank of
New York, as Trustee (incorporated by
reference
the
to Exhibit 4.1
Company’s Current Report on Form 8-K
dated June 16, 2000).
to
Supplemental Indenture (including the
form of Notes), dated as of June 4,
2008, between the Company and The
Bank of New York, as Trustee
(incorporated by reference to Exhibit 4.1
to the Company’s Current Report on
Form 8-K dated June 4, 2008).
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
the
Company's Current Report on Form 8-K
dated December 7, 2009).
to Exhibit 4.1
to
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
the
Company's Current Report on Form 8-K
dated November 16, 2011).
to Exhibit 4.1
to
(3.1)
(3.2)
(4.1)
(4.2)
(4.3)
(4.4)
95
(4.5)
(4.6)
(4.7)
(4.8)
(4.10)
(4.11)
(10.1)
(10.2)
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
Company,
trustee
(incorporated by reference to Exhibit
4.1 to the Company's Current Report on
Form 8-K dated August 9, 2017.
N.A.,
as
Item
accordance with
In
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 SEC upon
request.
Description of Securities (incorporated
by reference to Exhibit 4.13 to the
Company's Annual Report on Form 10-
K 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). +
Stock
Restricted
and Deferred
Compensation Plan for Non-Employee
Directors, Amended and Restated as of
(incorporated by
May 10, 2010
reference
the
to Exhibit 10.1
Company’s Quarterly Report on Form
10-Q for the quarter ended June 30,
2010). +
to
(10.3)
(10.4)
(10.5)
(10.6)
Form of Notice of Award under
the
Recognition Plan Restricted Stock Unit
Award Agreement (stock settled) providing
for accelerated vesting. * +
Form of Notice of Award under
the
Recognition Plan Restricted Stock Unit
Award Agreement (stock settled). * +
Form of Notice of Award under
the
Recognition Plan Restricted Stock Unit
Award Agreement (cash settled).* +
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). +
(10.6.1)
Form of Notice of Award under the Long-
Term Incentive Plan Performance Stock
Unit Award Agreement (cash settled). * +
Form of Notice of Award under the Long-
Term Incentive Plan Performance Stock
Unit Award Agreement (stock settled). * +
Form of Notice of Award under the Long-
Term Incentive Plan Restricted Stock Unit
Award Agreement (cash settled). * +
Form of Notice of Award under the Long-
Term Incentive Plan Restricted Stock Unit
Award Agreement (stock settled). * +
International Paper Company Pension
Restoration Plan for Salaried Employees
effective April 1, 1991 (corrected version of
previously filed exhibit). * +
to
Amendment Number One
the
International Paper Company Pension
Restoration Plan for Salaried Employees
effective January 1, 2013 (incorporated by
reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the fiscal
year ended December 31, 2019). +
to
Amendment Number Two
the
International Paper Company Pension
Restoration Plan for Salaried Employees
effective January 1, 2013 (incorporated by
reference to Exhibit 10.9 to the Company's
Annual Report on Form 10K for the fiscal
year ended December 31, 2019). +
to
Amendment Number Three
the
International Paper Company Pension
Restoration Plan for Salaried Employees
effective January 1, 2015 (incorporated by
reference
the
to Exhibit 10.10
Company's Annual Report on Form 10-K
for the fiscal year ended December 31,
2019). +
to
(10.6.2)
(10.6.3)
(10.6.4)
(10.7)
(10.8)
(10.9)
(10.10)
96
(10.11)
(10.12)
(10.13)
to
Amendment Number Four
the
International Paper Company Pension
Restoration Plan for Salaried Employees
effective July 1, 2014 (incorporated by
reference
the
to Exhibit 10.11
Company's Annual Report on Form 10-K
for the fiscal year ended December 31,
2019). +
to
to
Amendment Number Five
the
International Paper Company 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
Amendment Number Six
the
International Paper Company Pension
Restoration Plan for Salaried Employees
effective January 1, 2020 (incorporated
by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form
10-Q for the quarter ended March 31,
2020). +
(10.13.1) Amendment Number Seven
the
International Paper Company Pension
Restoration Plan for Salaried Employees
effective September 1, 2021. *
to
(10.13.2) Amendment Number Eight
the
International Paper Company Pension
Restoration Plan for Salaried Employees
effective January 1, 2023. *
to
(10.14)
(10.15)
(10.16)
International Paper Company 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,
to
2008 (incorporated by reference
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
the
Company’s Annual Report on Form 10-K
for the fiscal year ended December 31,
2008). +
to Exhibit 10.20
to
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
the
Company’s Annual Report on Form 10-K
for the fiscal year ended December 31,
2009). +
to Exhibit 10.17
to
Amendment No. 6 to the International
Paper Company Unfunded Supplemental
for Senior Managers,
Retirement Plan
effective January 1, 2012 (incorporated by
reference
the
to Exhibit 10.21
Company’s Annual Report on Form 10-K
for the fiscal year ended December 31,
2011). +
to
Amendment No. 7 to the International
Paper Company Unfunded Supplemental
Retirement Plan
for Senior Managers
effective July 12, 2016 (incorporated by
reference
the
to Exhibit 10.20
Company's Annual Report on Form 10-K
for the fiscal year ended December 31,
2019). +
to
Amendment No. 8 to the International
Paper Company Unfunded Supplemental
Retirement Plan
for Senior Managers
effective January 1, 2019 (incorporated by
reference
the
to Exhibit 10.21
Company's Annual Report on Form 10-K
for the fiscal year ended December 31,
2019). +
to
Amendment No. 9 to the International
Paper Company Unfunded Supplemental
Retirement Plan
for Senior Managers
effective November 1, 2019 (incorporated
by
the
Company's Quarterly Report on Form 10-
Q for the quarter ended September 30,
2019. +
to Exhibit 10.1
reference
to
(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)
(10.31)
(10.32)
Form of Non-Competition Agreement,
entered
into by certain Company
employees (including named executive
officers) who have received restricted
stock units. * +
Form of Non-Solicitation Agreement,
entered
into by certain Company
employees (including named executive
officers) who have received restricted
stock units. * +
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
(incorporated by
September 2013
the
to Exhibit 10.1
reference
Company’s Quarterly Report on Form
10-Q for the quarter ended September
30, 2013). +
to
II,
for all
Form of Change-in-Control Agreement -
Tier
future senior vice
presidents and all "grandfathered" vice
presidents
(one named executive
officer) elected prior to February 2008 -
2013
approved
(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
of
Agreement
Indemnity
Form
(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). +
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). +
26,
2017,
Agreement,
Commitment
dated
between
September
International Paper Company and The
Prudential
Insurance Company of
America, relating to the Retirement Plan
of
International Paper 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). +
(10.33)
(10.34)
(10.35)
(10.36)
(10.37)
25,
dated
Commitment Agreement,
September
between
2018,
International Paper Company and The
Prudential
Insurance Company of
America, relating to the Retirement Plan
of
International Paper Company
(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). +
to
the Second
Amendment No. 20
Amended and Restated Credit and
Security Agreement, dated June 8,
2023, by and among
International
Paper Company, as servicer, Red Bird
Receivables, LLC, as borrower, the
lenders and co-agents from time to time
party thereto, and Mizuho Bank, Ltd.,
as Administrative Agent.*
among
Third Amended and Restated Five-Year
Credit Agreement, dated as of June 7,
2023,
International Paper
Company, JPMorgan Chase Bank, N.A.,
individually and as administrative agent,
Citibank, individually and as syndication
agent, and certain lenders (incorporated
by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K
filed June 7, 2023.
Term Loan Agreement dated January
24, 2023, between International Paper
Company and CoBank, ACB, as
administrative agent (incorporated by
the
to Exhibit 10.1
reference
Company's Current Report on Form 8-K
filed January 24, 2023).+
to
for
Share Purchase Agreement
the
International Paper-
Divestiture of
Kwidzyn SP. Z.O.O. by and among
International Paper (Poland) Holding SP.
Z.O.O., Mayr-Melnhof Containerboard
International, GMBH, Mayr-Melnhof
International Paper
Karton AG and
Company dated August 4, 2021,
incorporated by reference to Exhibit 10.1
to the Company’s Quarterly Report on
Form 10-Q filed October 28. 2021.
98
(101.INS) XBRL Instance Document - the instance
document does not appear
the
Interactive Data File because its XBRL
tags are embedded within the inline
XBRL document. *
in
(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 as
contained in Exhibit 101. *
Interactive Data File
Inline XBRL, and
+ 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)
(19)
(21)
(23.1)
(23.2)
(24)
(31.1)
(31.2)
(32)
(97)
(99)
Share Purchase Agreement, dated
February 12, 2021, by and between
International
Investments
Paper
(Luxembourg) S.a.r.l, Mayr-Melnhoff
Cartonboard International GmbH, Mayr-
Melnhof Karton AG, International Paper
Company (Poland) Holding Sp. Z O.O.,
and
International Paper Company
(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
to Pulp Holding
Switzerland GmbH
Luxembourg S.A.R.L and ILIM Holding
Luxembourg S.A.R.L dated December
15, 2022.
International Paper Company
Trading Policy.*
Insider
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 by Mark S. Sutton,
Chairman and Chief Executive Officer,
pursuant
the
Sarbanes-Oxley Act of 2002. *
to Section 302 of
Certification by Timothy S. Nicholls,
Senior Vice President and Chief
Financial Officer, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
*
to 18 U.S.C.
Certification pursuant
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002.**
International Paper Company Clawback
Policy.*
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 16, 2024
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Timothy S. Nicholls, Joseph R. Saab and Amanda M. Jenkins 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, as amended, 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 16, 2024
/S/ CHRISTOPHER M. CONNOR
Director
Christopher M. Connor
February 16, 2024
/S/ AHMET C. DORDUNCU
Director
February 16, 2024
Ahmet C. Dorduncu
/S/ ILENE S. GORDON
Director
February 16, 2024
Ilene S. Gordon
/S/ ANDERS GUSTAFSSON
Director
February 16, 2024
Anders Gustafsson
/S/ JACQUELINE C. HINMAN
Director
February 16, 2024
Jacqueline C. Hinman
100
/s/ CLINTON A. LEWIS, JR.
Director
Clinton A. Lewis, Jr.
/s/ KATHRYN D. SULLIVAN
Kathryn D. Sullivan
Director
/s/ ANTON V. VINCENT
Director
Anton V. Vincent
/S/ RAY G. YOUNG
Ray G. Young
Director
February 16, 2024
February 16, 2024
February 16, 2024
February 16, 2024
/S/ TIMOTHY S. NICHOLLS
Timothy S. Nicholls
/S/ HOLLY G. GOUGHNOUR
Holly G. Goughnour
Senior Vice President and Chief Financial
Officer
February 16, 2024
Vice President – Finance and Corporate
Controller
February 16, 2024
101
(This page intentionally left blank.)
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
2023 LISTING OF FACILITIES
(all facilities are owned except noted otherwise)
INDUSTRIAL PACKAGING
Containerboard
U.S.:
Modesto, California
Ontario, California
Salinas, California
Sanger, California
Pine Hill, Alabama
Prattville, Alabama
Selma, Alabama (Riverdale Mill)
Santa Fe Springs, California (2
locations)
Tracy, California
Golden, Colorado
Cantonment, Florida (Pensacola Mill)
Wheat Ridge, Colorado
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 (1)
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
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) 1 leased
Milltown, New Jersey leased
Bedford Park, Illinois (2 locations) 1
leased (2)
Belleville, Illinois
Carol Stream, Illinois
Des Plaines, Illinois
Lincoln, Illinois
Montgomery, Illinois
Northlake, Illinois
Rockford, Illinois
Butler, Indiana
Crawfordsville, Indiana
Fort Wayne, Indiana
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
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
Hillsboro, Oregon
Portland, Oregon
Salem, Oregon leased
Atglen, Pennsylvania
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 (2 locations)
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
1) Closed December 2023
2) Closed one location January 2023
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, France
Espaly, France
Mortagne, France
Saint Amand, France
Bellusco, Italy
Catania, Italy
Pomezia, Italy
San Felice, Italy
Apodaco, 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
2023 CAPACITY INFORMATION
(in thousands of short tons except as noted)
Industrial Packaging
Containerboard (a)
Global Cellulose Fibers
Dried Pulp (in thousands of metric tons) (b)
APPENDIX II
U.S.
EMEA
Americas,
other
than U.S.
Total
13,829
560
27
14,416
2,749
—
373
3,122
(a) In addition to Containerboard, this also includes saturated kraft, kraft bag, and gypsum. U.S capacity includes Orange, Texas mill, which was
permanently closed in December 2023.
(b) U.S. capacity includes pulp machines at Riegelwood, North Carolina and Pensacola, Florida mills, which were permanently shutdown in
December 2023 and August 2023, respectively.
A-3
(This page intentionally left blank.)
INTERNATIONAL PAPER LEADERSHIP
As of March 1, 2024
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
Joseph R. Saab
Senior Vice President
General Counsel and
Corporate Secretary
Ksenia N. Sosnina
Senior Vice President and
President
International Paper Europe,
Middle East and Africa
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
Sophie N. Beckham
Vice President and
Chief Sustainability Officer
John D. Berry
Vice President and General
Manager
North American Container
Central Area
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
Nicole J. Cody
Vice President
Total Rewards
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 and Marketing
Global Cellulose Fibers
Errol A. Harris
Vice President and Treasurer
Russell V. Harris
Vice President Manufacturing
Containerboard
Kally Hodgson
Vice President
Global Sourcing
David Hunt
Vice President
Technology and Capital
Execution
Chris J. Keuleman
Vice President
Global Government Relations
Shawn M. Lawson
Vice President and General
Manager
European Packaging
Brian N.G. McDonald
Vice President
Strategic Planning
Marcez N. Mitchell
Vice President and General
Manager
North American Container,
Specialty Business
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
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
Corporate 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
BOARD OF DIRECTORS
As of March 1, 2024
SHAREHOLDER INFORMATION
Mark S. Sutton
Chairman of the Board and
Chief Executive Officer
International Paper Company
Christopher M. Connor
Lead Director
Retired Executive Chairman, Chief Executive Officer
The Sherwin-Williams Company
Ahmet C. Dorduncu
Retired Chief Executive Officer
Akkok Group
Ilene S. Gordon
Retired Executive Chairman, President
and Chief Executive Officer
Ingredion Incorporated
Anders Gustafsson
Executive Chairman, Former Chief Executive Officer
Zebra Technologies Corporation
Jacqueline C. Hinman
Chief Executive Officer
Atlas Technical Consultants
Clinton A. Lewis, Jr.
Chief Executive Officer
AgroFresh Solutions, 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
*Ray Young will not stand for re-election
when his current term of service ends in May 2024.
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 13, 2024
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:
• Change of name or address
• Consolidation of accounts
• Duplicate mailings
• Dividend reinvestment enrollment
• Lost stock certificates
• Transfer of stock to another person
• 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) 419-4352.
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©2024 International Paper Company. All rights reserved. The International
Chaussée de la Hulpe, 166
Paper logo is a trademark of International Paper Company or its affiliates.
1170 Brussels, Belgium
From Fortune © 2023. Fortune Media IP Limited All rights reserved.
FORTUNE is a registered trademark of Fortune Media IP Limited and is
used under license. Fortune and Fortune Media IP Limited are not affiliated
with, and do not endorse products or services of, International Paper
Company. “World’s Most Ethical Companies” and “Ethisphere” names
and marks are registered trademarks of Ethisphere LLC. FTSE Russell (the
trading name of FTSE International Limited and Frank Russell Company)
confirms that International Paper has been independently assessed
according to the FTSE4Good criteria, and has satisfied the requirements
to become a constituent of the FTSE4Good Index Series. Created by
the global index provider FTSE Russell, the FTSE4Good Index Series is
designed to measure the performance of companies demonstrating strong
Environmental, Social and Governance (ESG) practices. The FTSE4Good
indices are used by a wide variety of market participants to create and
assess responsible investment funds and other products. All product
names, logos and brands are property of their respective owners.
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World Headquarters
International Paper
6400 Poplar Avenue
Memphis, TN 38197
United States of America
internationalpaper.com
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