01—Abstract
Summary
Summary of the 10-K filed March 28, 1997. Cited figures are marked; the original filing is the authoritative source.
International Paper Company, a New York corporation headquartered in Purchase, N.Y., filed this annual report on Form 10-K for the fiscal year ended December 31, 1996.
The company reported 1996 net sales of $20.1 billiona, up slightly from $19.8 billion in 1995, with the Federal Paper Board merger and Carter Holt Harvey acquisitions offsetting weak pricing across major product lines. Net earnings fell to $303 million, or $1.04 per share, from $1.15 billion, or $4.50 per share, in 1995. Results after special items include a $592 million pre-tax gain on the sale of a partnership interest, offset by a $515 million restructuring and asset impairment charge and a $165 million write-down of the Scitex investment.
Excluding these items, net earnings before special items were $434 millionb, or $1.49 per share. Management's letter describes 1996 as a year that did not meet expectations and says improving performance, including a 12 percent average return on investment over a business cycle as the goal, will be the critical objective for 1997. Balance sheet and cash flow data show total assets of $28.25 billion and common shareholders' equity of $9.34 billion at year-end 1996.
Cash provided by operations was $1.74 billionc, compared with $2.25 billion in 1995. Capital spending was $1.39 billion in 1996 and is budgeted at about $1.2 billion for 1997, below forecast depreciation and amortization of $1.3 billion. Management states its first priority for excess cash is debt repayment.
The debt-to-capital ratio was 38.9 percent in 1996. Dividends were $1.00d per share for 1996. The filing also details environmental and legal matters.
Environmental capital expenditures were $130 million in 1996, with about $140 million expected in 1997. The company cites a preliminary estimate of $350 million to $580 million for additional environmental appropriations in 1998 through 1999.
The Masonite hardboard siding class action remains pending in Alabama, with a Phase II trial set for July 1997. Management believes that none of the pending proceedings will have a material adverse effect on its financial position or results of operations.
02—Key points
Key Highlights
- Net sales of $20.1 billion in 1996, up slightly from $19.8 billion in 1995, reflecting acquisitions that offset weak pricing; sales excluding Federal Paper Board and Carter Holt Harvey declined 10 percent.
- Net earnings of $303 million, or $1.04 per share, versus $1.15 billion, or $4.50 per share, in 1995; before special items, net earnings were $434 million, or $1.49 per share.
- Special items included a $592 million pre-tax gain on the sale of a partnership interest, a $515 million restructuring and asset impairment charge, and a $165 million write-down of the Scitex investment.
- Cash provided by operations was $1.74 billion in 1996, down from $2.25 billion in 1995; capital spending was $1.39 billion and is budgeted at about $1.2 billion for 1997.
- Total assets of $28.25 billion and common shareholders' equity of $9.34 billion at December 31, 1996; the total debt-to-capital ratio was 38.9 percent.
- Printing Papers operating profit fell to $185 million from $1.09 billion in 1995, while Specialty Products posted an operating loss of $51 million after a $370 million special charge.
- Management expects Forest Products sales and earnings to decline in 1997 following the sale of western forestlands, and targets a 12 percent average return on investment over a business cycle.
03—Questions
Frequently Asked Questions
What drove the decline in International Paper's 1996 earnings?
Net earnings fell to $303 million, or $1.04 per share, from $1.15 billion, or $4.50 per share, in 1995. The filing attributes the drop mainly to significantly lower average selling prices across major product lines, particularly printing papers and containerboard, as industry operating rates were insufficient to sustain higher prices. Special items reduced 1996 net earnings by $131 million, or $0.45 per share.
How did the Federal Paper Board merger affect the company?
The March 12, 1996 merger with Federal Paper Board was completed for about $1.3 billion in cash and $1.4 billion in International Paper common stock, with approximately $800 million of debt assumed. Management says the integration exceeded its expectations and contributed positively to earnings. The merger increased the Company's goodwill, forestlands, and long-term debt, and it will be included for a full year in 1997.
What is management's outlook for 1997?
Management expects improved business conditions and price recovery to be gradual, with early-1997 prices significantly below 1996 levels. Higher printing papers earnings are expected mainly from volume growth, grade mix and cost control. The Company expects lower Forest Products sales and earnings because of the western forestlands sale and reduced harvest levels. Capital spending is budgeted at about $1.2 billion, and the first priority for excess cash is debt repayment.
What legal and environmental exposures does the filing disclose?
The Masonite hardboard siding class action in Alabama is still pending, with a Phase II trial set for July 14, 1997. The Company and Masonite say they have valid defenses. The dioxin litigation has been resolved in the Company's favor. Environmental capital expenditures were $130 million in 1996 and are expected to be about $140 million in 1997, and the Company estimates additional environmental appropriations of $350 million to $580 million for 1998 through 1999. Management believes none of these matters will have a material adverse effect on its financial position or results of operations.
04—Continue