01—Abstract
Summary
Summary of the 10-K filed February 26, 2009. Cited figures are marked; the original filing is the authoritative source.
International Paper Company, a global paper and packaging company, reported a 2008 net loss of $1.28 billiona ($3.05 per share), compared with net earnings of $1.17 billion ($2.70 per share) in 2007.
Net sales rose to $24.83 billionb from $21.89 billion, driven largely by the August 2008 acquisition of Weyerhaeuser's Containerboard, Packaging and Recycling (CBPR) business for approximately $6 billion in cash. The loss was driven by special items, most notably goodwill impairment charges totaling about $1.78 billion and restructuring and other charges of $370 million. Industry segment operating profits fell to $1.39 billion from $1.90 billion, as higher energy and raw material costs ($721 million) and higher distribution costs ($135 million) more than offset higher average prices ($570 million).
The company reported $2.67 billionc of cash provided by operations, its strongest figure in the filing's discussion, and capital spending of $1.0 billion, with a 2009 target of about $700 million. Balance sheet leverage increased substantially. Long-term debt reached $11.25 billion at year-end 2008, versus $6.35 billion a year earlier, and common shareholders' equity fell to $4.17 billion from $8.67 billion.
The company stated it had $1.6 billiond of debt due in 2009, including a euro 500 million term loan it was negotiating to refinance, and it reported ratings of BBB (negative outlook) from S&P and Baa3 (negative outlook) from Moody's. Management said it was in compliance with its debt covenants and held about $2.5 billion of unused committed bank credit facilities. management guided that first-quarter 2009 operating profit would be below fourth-quarter 2008 levels, reflecting weak demand and about one million tons of lack-of-order downtime taken in the fourth quarter. The filing also reports a $3.2 billion pension benefit liability under SFAS 158 and notes that the company expects no obligation to fund its plans in 2009.
02—Key points
Key Highlights
- Net sales rose to $24.83 billion in 2008 from $21.89 billion in 2007, reflecting the CBPR acquisition.
- Net loss of $1.28 billion ($3.05 per share) in 2008, versus net earnings of $1.17 billion ($2.70 per share) in 2007.
- Goodwill impairment charges of about $1.78 billion, including $1.3 billion for U.S. Printing Papers, drove the loss.
- Industry segment operating profit fell to $1.39 billion from $1.90 billion as energy and raw material costs rose $721 million.
- Cash provided by continuing operations was $2.67 billion, against $1.95 billion in 2007 (the 10-K calls it a record).
- Long-term debt rose to $11.25 billion from $6.35 billion after about $6 billion of debt issued for the CBPR acquisition.
- Common shareholders' equity fell to $4.17 billion from $8.67 billion; 2009 capital spending is targeted at about $700 million.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2008, International Paper lost $0.05.
- Revenue$24.83B100.0%
- Cost of revenue−$18.74B75.5%
- Gross profit$6.09B24.5%
- Operating costs−$7.36B29.6%
- Operating income−$1.27B5.1%
- Interest, other & tax−$13.0M0.1%
- Net income−$1.28B5.2%
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 26, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $24.83B$21.89B | +13.4% |
| Cost of Revenue | $18.74B$16.06B | +16.7% |
| Gross Profit | $6.09B$5.83B | +4.4% |
| SG&A Expenses | $1.95B$1.83B | +6.3% |
| Operating Income | -$1.27B$1.22B | −204.4% |
| Interest Expense | $572.00M— | — |
| Net Income | -$1.28B$1.17B | −209.8% |
| EPS (Basic) | $-3.05$2.72 | −212.1% |
| EPS (Diluted) | $-3.05$2.70 | −213.0% |
| Shares Outstanding (Basic) | 421.00M— | — |
| Shares Outstanding (Diluted) | 421.00M— | — |
05—Questions
Frequently Asked Questions
Why did International Paper report a net loss in 2008?
The loss was driven by special items, principally $1.78 billion of goodwill impairment charges and $370 million of restructuring and other charges, which together outweighed operating results. Industry segment operating profit was $1.39 billion, down from $1.90 billion, as higher energy, raw material and freight costs offset higher average prices.
What was the CBPR acquisition and how was it financed?
On August 4, 2008, International Paper acquired the assets of Weyerhaeuser Company's Containerboard, Packaging and Recycling business for approximately $6 billion in cash. It was financed with $3 billion of unsecured senior notes issued in June 2008, a $2.5 billion bank term loan, about $0.4 billion from a receivables securitization program, and existing cash.
How much debt does the company have coming due, and how is it being managed?
As of December 31, 2008, the company had $1.6 billion of debt that had to be repaid or refinanced in 2009, including $362 million repaid in January 2009 and a euro 500 million term loan due August 2009 that it was negotiating to refinance. It had about $2.5 billion of unused committed bank credit agreements, and the receivables securitization program was extended in January 2009.
What is the outlook for 2009?
Management expects first-quarter 2009 operating profit to be below fourth-quarter 2008 levels, depending on downtime and pricing and input costs. Sales volumes for paper and packaging are expected to be similar to fourth-quarter levels, and capital spending is targeted at about $700 million.
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