01—Abstract
Summary
Summary of the 10-K filed February 25, 2010. Cited figures are marked; the original filing is the authoritative source.
International Paper Company reported net sales of $23.4 billiona for 2009, compared with $24.8 billion in 2008 and $21.9 billion in 2007.
Net earnings attributable to International Paper Company totaled $663 millionb ($1.55 per diluted share) in 2009, including $1.4 billion of after-tax alternative fuel mixture credits and $853 million of after-tax restructuring and other charges, compared with a net loss of $1.3 billion in 2008, which included a $1.8 billion goodwill impairment charge. Industry segment operating profits rose to $2.4 billion from $1.4 billion in 2008. Management stated that the company generated record cash flow from operations of $4.7 billion, enabling it to reduce long-term debt by $3.1 billion while increasing cash balances by approximately $800 million.
The company incurred 3.6 million tons of downtime in 2009, including 1.1 million tons tied to shutting down production capacity in its North American mill system, and recorded plant closure charges for mills at Albany, Oregon, Franklin, Virginia and Pineville, Louisiana. Management expects these actions to yield annual savings of approximately $650 millionc and to support higher operating rates, lower fixed costs and lower payroll costs in 2010. Management stated it expects improved earnings versus 2009 in all major businesses, though it described first-quarter 2010 operations as likely to be challenging due to seasonality, poor harvesting weather and rising fiber costs.
Capital spending is targeted at $800 milliond for 2010. At December 31, 2009, the company held long-term credit ratings of BBB (negative outlook) from S&P and Baa3 (negative outlook) from Moody's, had $9.0 billion of total debt, and reported a total-debt-to-capital ratio of 43.3% against a covenant limit of less than 60%.
Liquidity totaled approximately $1.9 billion in cash and $2.5 billion of committed facilities. Its U.S. qualified pension plan was underfunded, with the projected benefit obligation for U.S. defined benefit plans approximately $2.8 billion higher than plan assets, and the company expects no required 2010 cash contribution to that plan.
02—Key points
Key Highlights
- Net earnings attributable to International Paper Company were $663 million ($1.55 per diluted share) in 2009, compared with a net loss of $1.3 billion in 2008, which included a $1.8 billion goodwill impairment.
- Alternative fuel mixture credits contributed about $2.1 billion of credits in cost of products sold for 2009 ($1.4 billion after taxes), and the company received $1.7 billion of these credits in cash.
- Cash provided by continuing operations was $4.7 billion in 2009, versus $2.7 billion in 2008, and the company reduced long-term debt by $3.1 billion.
- Restructuring and other charges totaled $1.4 billion before taxes ($853 million after taxes), including mill closure charges at Albany, Oregon; Franklin, Virginia; and Pineville, Louisiana.
- Management expects annual savings of approximately $650 million from 2009 restructuring actions, and a reduction of 6,000 in overhead headcount.
- Net sales fell to $23.4 billion from $24.8 billion, while industry segment operating profits rose to $2.4 billion from $1.4 billion.
- The company expects 2010 capital spending of about $800 million and an effective income tax rate of approximately 30-32%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, International Paper kept $0.03.
- Revenue$23.37B100.0%
- Cost of revenue−$15.22B65.1%
- Gross profit$8.15B34.9%
- Operating costs−$5.79B24.8%
- Operating income$2.36B10.1%
- Interest, other & tax−$1.70B7.3%
- Net income$663.0M2.8%
Where FY2009 revenue went
$23.37B- Cost of revenue: $15.22B, 65% of revenue
- Other operating costs: $3.75B, 16% of revenue
- Net income: $663.0M, 2.8% of revenue
- SG&A: $2.03B, 8.7% of revenue
- Interest, other & tax: $1.70B, 7.3% of revenue
Kept 2.8% as net incomeNet income $663.0M · 2.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 25, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $23.37B$24.83B | −5.9% |
| Cost of Revenue | $15.22B$18.74B | −18.8% |
| Gross Profit | $8.15B$6.09B | +33.8% |
| SG&A Expenses | $2.03B$1.95B | +4.3% |
| Operating Income | $2.36B-$1.27B | +286.0% |
| Interest Expense | $702.00M$572.00M | +22.7% |
| Net Income | $663.00M-$1.28B | +151.7% |
| EPS (Basic) | $1.56$-3.05 | +151.1% |
| EPS (Diluted) | $1.55$-3.05 | +150.8% |
| Shares Outstanding (Basic) | 425.30M421.00M | +1.0% |
| Shares Outstanding (Diluted) | 428.00M421.00M | +1.7% |
05—Questions
Frequently Asked Questions
How did International Paper perform financially in 2009 compared with 2008?
Net sales declined to $23.4 billion from $24.8 billion. The company reported net earnings attributable to International Paper Company of $663 million ($1.55 per diluted share), compared with a net loss of $1.3 billion in 2008 that included a $1.8 billion goodwill impairment charge. Results were supported by $1.4 billion (after taxes) of alternative fuel mixture credits and were reduced by $853 million (after taxes) of restructuring and other charges.
What drove the company's cash flow in 2009?
Cash provided by continuing operations totaled $4.7 billion in 2009, compared with $2.7 billion in 2008. The filing attributes the increase mainly to $1.7 billion of cash received from alternative fuel mixture credits. Capital spending from continuing operations was $534 million, and the company used cash to reduce debt by $3.1 billion.
What is the company's debt and credit position?
At December 31, 2009, total debt was $9.0 billion and the total-debt-to-capital ratio was 43.3%, within the covenant limit of less than 60%. The company had approximately $1.9 billion in cash and $2.5 billion of committed liquidity facilities. Its long-term credit ratings were BBB (negative outlook) from S&P and Baa3 (negative outlook) from Moody's.
What does management expect for 2010?
Management said it remains positive about 2010 and expects improved earnings versus 2009 in all major businesses. It noted that the first quarter of 2010 would be challenging because of seasonality, poor harvesting weather in the U.S. South and higher fiber costs. Capital spending for 2010 is targeted at $800 million, and the company expects no obligation to fund its domestic qualified pension plan in 2010.
What are the main risks related to pensions and legal matters?
The filing states that U.S. defined benefit plans had a projected benefit obligation approximately $2.8 billion higher than plan asset fair value at December 31, 2009, and that the company expects future contributions that could be material. Legal proceedings are not expected to have a material adverse effect on consolidated financial statements, though the costs of pending litigation cannot be determined with certainty.
06—Continue