01—Abstract
Summary
Summary of the 10-K filed February 25, 2016. Cited figures are marked; the original filing is the authoritative source.
International Paper Company, a global paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia, Africa and the Middle East, reported net sales of $22.4 billiona for 2015, down from $23.6 billion in 2014 and $23.5 billion in 2013.
Net earnings attributable to International Paper were $938 millionb ($2.23 per diluted share), compared with $555 million ($1.29 per share) in 2014. Operating Earnings per diluted share were $3.65 in 2015, versus $3.00 in 2014. Results were supported by lower input costs and record performance from the Ilim joint venture, but were offset by lower average sales price realizations and mix, lower sales volumes, and higher maintenance outage costs.
Cash provided by operations was $2.6 billionc and free cash flow, a non-GAAP measure, was $1.8 billion. Capital spending was $1.5 billion, and the company returned cash through roughly $500 million of share repurchases and a 10% increase in the quarterly dividend to $0.44 per share. The balance sheet carried approximately $9.3 billion of outstanding indebtedness at December 31, 2015, with no borrowings under credit facilities.
During 2015 the company issued $2.0 billiond of senior notes, used the proceeds to repay about $1.0 billion of notes and make a $750 million voluntary pension contribution, and restructured the 2006 timber monetization. Total debt to capital was 0.71 in the five-year summary. The company reported a $3.6 billion pension benefit liability, and the U.S. pension target population has a $3.0 billion liability for a lump-sum window in 2016 expected to pay about $1.5 billion.
Credit ratings were BBB (S&P) and Baa2 (Moody's), both stable outlook. Looking to 2016, the company expects 2016 capital spending of about $1.3 billion, lower pricing in several North American businesses, and completion of the Riegelwood mill conversion to 100% softwood market pulp in the first half of 2016. Special items in 2015 totaled a net loss of $321 million in industry segment operating profit, including a $174 million impairment tied to the sale of the IP-Sun joint venture and $207 million of early debt extinguishment costs.
02—Key points
Key Highlights
- Net sales were $22.4 billion in 2015, compared with $23.6 billion in 2014 and $23.5 billion in 2013.
- Net earnings attributable to International Paper were $938 million ($2.23 per diluted share) in 2015, compared with $555 million ($1.29 per share) in 2014.
- Operating Earnings per diluted share were $3.65 in 2015, up from $3.00 in 2014 and $3.06 in 2013.
- Free cash flow was $1.8 billion in 2015, versus $2.1 billion in 2014, and cash provided by operations was $2.6 billion.
- Shareholder returns included roughly $500 million of share repurchases and a 10% quarterly dividend increase to $0.44 per share beginning with the fourth quarter 2015 payment.
- Total indebtedness was approximately $9.3 billion at December 31, 2015, with no borrowings under the $2.1 billion of credit facilities; credit ratings were BBB (S&P) and Baa2 (Moody's), both stable outlook.
- The company expects 2016 capital spending of about $1.3 billion and a pension lump-sum window in 2016 with expected payments of about $1.5 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, International Paper kept $0.05.
- Revenue$20.68B100.0%
- Cost of revenue−$13.78B66.6%
- Gross profit$6.90B33.4%
- Operating costs−$4.54B21.9%
- Operating income$2.36B11.4%
- Interest, other & tax−$1.42B6.9%
- Net income$938.0M4.5%
Where FY2015 revenue went
$20.68B- Cost of revenue: $14.31B, 69% of revenue
- Net income: $938.0M, 4.5% of revenue
- SG&A: $1.54B, 7.4% of revenue
- Other operating costs: $2.46B, 12% of revenue
- Interest, other & tax: $1.42B, 6.9% of revenue
Kept 4.5% as net incomeNet income $938.0M · 4.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 25, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $20.68B$23.62B | −12.5% |
| Cost of Revenue | $14.31B$16.25B | −11.9% |
| Gross Profit | $6.90B$7.36B | −6.3% |
| SG&A Expenses | $1.54B$1.79B | −14.2% |
| Operating Income | $2.36B$2.06B | +14.7% |
| Interest Expense | $644.00M$677.00M | −4.9% |
| Net Income | $938.00M$555.00M | +69.0% |
| EPS (Basic) | $2.25$1.30 | +73.1% |
| EPS (Diluted) | $2.23$1.29 | +72.9% |
| Shares Outstanding (Basic) | 417.40M427.70M | −2.4% |
| Shares Outstanding (Diluted) | 420.60M432.00M | −2.6% |
05—Questions
Frequently Asked Questions
How did International Paper perform in 2015 compared with 2014?
Net sales declined to $22.4 billion from $23.6 billion, while net earnings attributable to the company rose to $938 million ($2.23 per diluted share) from $555 million ($1.29 per share). Operating Earnings per diluted share increased to $3.65 from $3.00. Lower input costs and record Ilim joint venture results were offset by lower average sales price realizations and mix, lower sales volumes and higher maintenance outage costs.
What drove the 2015 results in the company's segments?
Industrial Packaging operating profit was $1.85 billion, down from $1.90 billion, after a $137 million Brazil Packaging goodwill and trade name impairment. Printing Papers operating profit rose to $533 million from a $16 million loss in 2014, which included the $554 million Courtland, Alabama mill shutdown charge. Consumer Packaging posted an operating loss of $25 million, including a $174 million impairment related to the IP-Sun joint venture sale.
How much debt does International Paper carry and how is it managed?
Outstanding indebtedness was about $9.3 billion at December 31, 2015, with no borrowings under credit facilities. In 2015 the company issued $700 million of 3.80% notes due 2026, $600 million of 5.00% notes due 2035 and $700 million of 5.15% notes due 2046, using the proceeds to repay about $1.0 billion of higher-coupon notes and fund a $750 million voluntary pension contribution. Financial covenants require minimum net worth of $9 billion and a total debt-to-capital ratio below 60%, and the company reported net worth of $14.1 billion and a ratio of 39.8%.
What pension obligations could affect investors?
The benefit liability recorded under ASC 715 was $3.6 billion at December 31, 2015. Former employees in the pension plan may request a lump-sum payment in early 2016, with a target population liability of $3.0 billion and expected payments of approximately $1.5 billion. The company expects no required contributions to its plans in 2016, though it may make voluntary contributions, and expects 2016 U.S. pension expense of about $364 million.
What are the main outlook items for 2016?
The company expects seasonally lower North American Industrial Packaging volumes in the first quarter, lower pricing for North American Printing Papers and Pulp, and higher planned maintenance downtime costs. It plans to complete the Riegelwood mill conversion to 100% softwood market pulp in the first half of 2016 and expects capital spending of about $1.3 billion, with an estimated effective tax rate of about 34%.
06—Continue