01—Abstract
Summary
Summary of the 10-K filed March 12, 2004. Cited figures are marked; the original filing is the authoritative source.
International Paper Company, a global forest products, paper and packaging company, reported 2003 net sales of $25.18 billiona, up from $24.98 billion in 2002, and net earnings of $302 million ($0.63 per share), compared with a net loss of $880 million in 2002.
Earnings before extraordinary items and cumulative effect of accounting changes rose to $315 millionb from $295 million. Industry segment operating profit declined to $1.80 billion from $1.94 billion, as higher energy and raw material costs ($270 million) and lower average prices ($75 million) outweighed cost reduction gains ($245 million). Restructuring and other charges fell to $298 million from $695 million, and interest expense, net, decreased to $766 million from $783 million.
Cash provided by operations was $1.82 billionc in 2003, and capital spending was $1.17 billion. Management expects 2004 capital spending of about $1.3 billion and anticipates a seasonally slow first quarter, with price increases announced in containerboard, uncoated free sheet, pulp and certain bleached board grades. The company repaid high-coupon debt through refinancing, with about $2.5 billion of debt scheduled for refinancing or repayment in 2004, including $1.1 billion of zero-coupon convertible debentures that holders may require the company to repurchase in June 2004.
Standard & Poor's long-term rating was BBB with negative outlook, and Moody's was Baa2 with stable outlook. Litigation remains significant.
Exterior siding reserves totaled $387 milliond at December 31, 2003, and the company is pursuing insurance recoveries, including a jury finding in July 2003 that $383 million of its settlement payments are covered by its policies. A settlement reached in February 2004 requires the company to pay a third party up to $95 million of future insurance proceeds.
02—Key points
Key Highlights
- Net earnings of $302 million ($0.63 per share) in 2003, versus a net loss of $880 million ($1.83 per share) in 2002
- Net sales of $25.18 billion in 2003, up from $24.98 billion in 2002
- Industry segment operating profit fell to $1.80 billion from $1.94 billion, pressured by $270 million of higher energy and raw material costs and $75 million of lower prices
- Restructuring and other charges declined to $298 million from $695 million, and interest expense, net, fell to $766 million from $783 million
- Cash provided by operations was $1.82 billion, and 2004 capital spending is expected to be about $1.3 billion
- About $2.5 billion of debt is scheduled for refinancing or repayment in 2004, including $1.1 billion of zero-coupon convertible debentures subject to a holder put in June 2004
- Exterior siding reserves were $387 million at December 31, 2003, with a $383 million jury verdict on insurance coverage and a February 2004 settlement capping a payment to a third party at $95 million
03—Questions
Frequently Asked Questions
How did International Paper perform in 2003 compared with 2002?
Net earnings were $302 million ($0.63 per share) versus a net loss of $880 million ($1.83 per share) in 2002, which included a $1.2 billion goodwill accounting charge. Net sales rose to $25.18 billion from $24.98 billion. Industry segment operating profit declined to $1.80 billion from $1.94 billion.
What drove the decline in segment operating profit?
The filing attributes the decline principally to higher energy and raw material costs ($270 million) and lower average prices ($75 million). These were partially offset by cost reduction initiatives, improved operating performance and a more favorable product mix ($245 million).
How is the company managing its debt and liquidity?
The company refinanced high-coupon debt, reducing the weighted average coupon on about $1.7 billion of long-term debt from 6% to 4.8%. It expects to meet about $2.5 billion of 2004 maturities through operating cash flow and refinancing, and it cites $3.1 billion of committed liquidity. Its $1.5 billion revolving credit facility, which runs to March 2006, was unused at year-end.
What outlook does management give for 2004?
Management expects a seasonally slow first quarter with continuing low prices and high wood and energy costs. It anticipates improving demand as 2004 progresses, and says the announced price increases should progressively benefit earnings. Capital spending is expected to be about $1.3 billion, and the effective income tax rate about 31%.
What are the main legal exposures?
The main exposure is exterior siding and roofing litigation linked to former Masonite products, with reserves of $387 million at December 31, 2003. The company is pursuing insurance recoveries, and a jury found in July 2003 that $383 million of its settlement payments are covered by its policies, though no judgment had yet been entered and the amount ultimately recoverable is not estimable.
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