01—Abstract
Summary
Summary of the 10-K filed February 27, 2014. Cited figures are marked; the original filing is the authoritative source.
International Paper Company reported net sales of $29.1 billiona for 2013, up from $27.8 billion in 2012, and net earnings attributable to International Paper Company of $1.4 billion ($3.11 per diluted share), compared with $794 million ($1.80 per share) in 2012.
Operating Earnings per diluted share were $3.16b in 2013 versus $2.65 in 2012. Results were affected by special items, including a $512 million goodwill impairment charge covering the xpedx and India Papers businesses and a $770 million tax benefit from the settlement of tax audits. Management cited record cash flow from operations of $3 billion and free cash flow of $1.8 billion, and noted that the company returned cash through a share buy-back program and a 17% increase in the quarterly dividend beginning with the fourth quarter of 2013.
The company announced on January 28, 2014 that it will spin off its xpedx distribution business (SpinCo) and merge it with Unisource in a Reverse Morris Trust transaction, with International Paper shareholders owning approximately 51% of SpinCo and the Unisource shareholder approximately 49%. Completion is expected in mid-2014 and is subject to an IRS private letter ruling and other conditions. Total debt at year-end was approximately $9.5 billionc, and capital spending for 2013 was $1.2 billion with a planned $1.4 billion for 2014.
For 2014, management said it does not anticipate macroeconomic conditions significantly better than 2013 but expects a meaningful increase in year-over-year earnings, citing North American Industrial Packaging optimization and the Ilim joint venture ramp-up. It also expects a 2014 effective tax rate of approximately 33%d, and the filing describes a significant first-quarter 2014 negative effect from severe winter weather and input costs.
02—Key points
Key Highlights
- Net sales rose to $29.1 billion in 2013 from $27.8 billion in 2012; net earnings attributable to International Paper were $1.4 billion ($3.11 per diluted share) versus $794 million ($1.80) in 2012.
- Operating Earnings per diluted share were $3.16 in 2013, compared with $2.65 in 2012.
- Record cash provided by operations of $3.0 billion and free cash flow of $1.8 billion in 2013.
- Goodwill impairment charge of $512 million in the fourth quarter of 2013 covering the xpedx and India Papers businesses; a $770 million tax benefit from settlement of tax audits boosted 2013 results.
- Quarterly dividend increased 17% to $0.35 per share beginning with the fourth quarter of 2013; a $1.5 billion share repurchase program was announced in September 2013.
- Planned spin-off of xpedx, combined with Unisource in a Reverse Morris Trust transaction, with International Paper shareholders owning approximately 51% of SpinCo, expected to be completed in mid-2014.
- Total indebtedness of approximately $9.5 billion at December 31, 2013, with long-term credit ratings of BBB (S&P) and Baa3 (Moody's), both stable outlook.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, International Paper kept $0.06.
- Revenue$23.48B100.0%
- Cost of revenue−$16.28B69.3%
- Gross profit$7.20B30.7%
- Operating costs−$4.97B21.2%
- Operating income$2.23B9.5%
- Interest, other & tax−$838.0M3.6%
- Net income$1.40B5.9%
Where FY2013 revenue went
$23.48B- Cost of revenue: $16.28B, 69% of revenue
- Other operating costs: $3.17B, 14% of revenue
- Net income: $1.40B, 5.9% of revenue
- SG&A: $1.80B, 7.6% of revenue
- Interest, other & tax: $838.0M, 3.6% of revenue
Kept 5.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 27, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $23.48B$21.85B | +7.5% |
| Gross Profit | $7.20B$7.25B | −0.6% |
| SG&A Expenses | $1.80B$1.67B | +7.3% |
| Operating Income | $2.23B$1.93B | +15.5% |
| Interest Expense | $669.00M$742.00M | −9.8% |
| Net Income | $1.40B$794.00M | +75.7% |
| EPS (Basic) | $3.15$1.82 | +73.1% |
| EPS (Diluted) | $3.11$1.80 | +72.8% |
| Shares Outstanding (Basic) | 443.30M435.20M | +1.9% |
| Shares Outstanding (Diluted) | 448.10M440.20M | +1.8% |
05—Questions
Frequently Asked Questions
How did International Paper perform financially in 2013?
Net sales were $29.1 billion, up from $27.8 billion in 2012. Net earnings attributable to International Paper were $1.4 billion, or $3.11 per diluted share, compared with $794 million, or $1.80 per diluted share, in 2012. Operating Earnings, a non-GAAP measure, were $3.16 per diluted share versus $2.65 in 2012.
What is the xpedx spin-off transaction?
On January 28, 2014, International Paper agreed to spin off its xpedx distribution business into a new company, SpinCo, and merge it with Unisource. International Paper shareholders will own approximately 51% of SpinCo and the Unisource shareholder approximately 49%. The company expects the transaction to be completed in mid-2014, subject to conditions including an IRS private letter ruling and a $400 million special payment to International Paper.
What significant charges affected 2013 results?
Special items included a $512 million goodwill impairment charge (covering xpedx and India Papers), a $118 million charge for the Courtland, Alabama mill shutdown, and a $45 million charge for shutting a paper machine at the Augusta, Georgia mill. A $770 million tax benefit from the settlement of tax audits partially offset these charges.
How much cash did the company generate and return to shareholders?
The company generated cash provided by operations of $3.0 billion and free cash flow of $1.8 billion in 2013. It repurchased common stock and paid restricted stock withholding taxes totaling $512 million and paid dividends of $554 million, with the quarterly dividend increased to $0.35 per share in the fourth quarter.
What is the outlook for 2014?
Management does not anticipate macroeconomic conditions significantly better than in 2013 but expects a meaningful increase in year-over-year earnings. It expects planned capital spending of about $1.4 billion, an effective tax rate of approximately 33%, and a significant negative first-quarter impact from severe winter weather and higher input costs.
06—Continue