01—Abstract
Summary
Summary of the 10-K filed February 18, 2022. Cited figures are marked; the original filing is the authoritative source.
International Paper Company (NYSE: IP) reported 2021 net earnings attributable to International Paper Company of $1.75 billiona ($4.47 per diluted share), compared with $482 million ($1.22 per diluted share) in 2020.
Net sales were $19.4 billionb versus $17.6 billion in 2020. Adjusted operating earnings were $1.26 billion ($3.20 per diluted share) versus $848 million ($2.14 per diluted share) in 2020. Management said volume was essentially flat as operational and supply chain constraints limited the benefit of solid demand, while price and mix improved and input costs rose sharply.
Cash provided by operations was $2.0 billionc in 2021, versus $3.1 billion in 2020, and free cash flow was $1.5 billion, versus $2.3 billion. Debt was reduced by $2.5 billion during 2021, and total debt stood at about $5.6 billion at year-end. The company returned $1.6 billion to shareowners, including about $810 million in share repurchases.
The October 1, 2021 spin-off of the Printing Papers business as Sylvamo Corporation and the sale of the Kwidzyn, Poland mill reshaped the portfolio into two segments, Industrial Packaging and Global Cellulose Fibers, with a 50% stake in Ilim S.A. The company plans to spend about $1.1 billiond on capital expenditures in 2022 and committed to $350 to $430 million of incremental earnings in 2024 under its Building a Better IP initiative.
The filing also highlights risks, including the Brazilian tax assessments (about $106 million in tax and $351 million in interest, penalties and fees), a deferred tax liability of $813 million tied to the 2015 timber monetization that is under IRS examination, and continuing COVID-19 uncertainty. The U.S. qualified pension plan was 105% funded, with a surplus of $600 million.
02—Key points
Key Highlights
- Net earnings attributable to International Paper of $1.75 billion ($4.47 per diluted share) in 2021, up from $482 million ($1.22 per diluted share) in 2020
- Net sales of $19.4 billion in 2021 versus $17.6 billion in 2020; Industrial Packaging net sales rose to $16.3 billion
- Adjusted operating earnings of $1.26 billion ($3.20 per diluted share) in 2021 versus $848 million ($2.14 per diluted share) in 2020
- Cash from operations of $2.0 billion and free cash flow of $1.5 billion in 2021; debt reduced by $2.5 billion
- Returned $1.6 billion to shareowners, including about $810 million in share repurchases, with $2.9 billion of authorization remaining at year-end
- 2022 capital spending planned at about $1.1 billion, with a commitment to a dividend payout of 40 to 50% of free cash flow
- Sylvamo Corporation spin-off completed October 1, 2021; Brazilian tax assessments and a $813 million deferred tax liability tied to the 2015 timber monetization remain key contingent exposures
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, International Paper kept $0.09.
- Revenue$19.36B100.0%
- Cost of revenue−$13.83B71.4%
- Gross profit$5.53B28.6%
- Operating costs−$4.72B24.4%
- Operating income$811.0M4.2%
- Interest, other & tax$941.0M4.9%
- Net income$1.75B9.0%
Where FY2021 revenue went
$19.36B- Cost of revenue: $13.83B, 71% of revenue
- Other operating costs: $3.33B, 17% of revenue
- Operating income: $811.0M, 4.2% of revenue
- SG&A: $1.39B, 7.2% of revenue
Kept 4.2% as operating incomeOperating income $811.0M · 4.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 18, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $19.36B$17.57B | +10.2% |
| Cost of Revenue | $13.83B$12.34B | +12.1% |
| Gross Profit | $5.53B$5.23B | +5.8% |
| SG&A Expenses | $1.39B$1.35B | +2.4% |
| Operating Income | $811.00M$182.00M | +345.6% |
| Interest Expense | $430.00M$597.00M | −28.0% |
| Net Income | $1.75B$482.00M | +263.5% |
| EPS (Basic) | $4.50$1.23 | +265.9% |
| EPS (Diluted) | $4.47$1.22 | +266.4% |
| Shares Outstanding (Basic) | 389.40M393.00M | −0.9% |
| Shares Outstanding (Diluted) | 392.40M395.70M | −0.8% |
05—Questions
Frequently Asked Questions
What drove the improvement in 2021 earnings?
Price and mix improved, with strong price realization across all business segments and channels, and mix benefited from growth in higher-margin U.S. packaging channels. Business Segment Operating Profit rose $96 million, as higher average sales prices and mix ($1.6 billion) and higher sales volumes ($8 million) were partly offset by higher operating costs ($350 million), higher input costs ($981 million) and higher maintenance outage costs ($177 million). Net earnings also benefited from a $204 million gain on the sale of an equity investment in Graphic Packaging and higher equity earnings from Ilim.
How much debt does International Paper carry, and how is its liquidity?
Total indebtedness was approximately $5.6 billion at December 31, 2021, after $2.5 billion of debt reductions during the year. The company had about $2.1 billion of credit agreements, comprising a $1.5 billion committed bank credit agreement and up to $550 million under the receivables securitization program, with no borrowings outstanding under either at year-end. Long-term credit ratings were BBB (stable) from S&P and Baa2 (stable) from Moody's.
What are the main outstanding risks disclosed for investors?
Key risks include Brazilian tax assessments of approximately $106 million in tax and $351 million in interest, penalties and fees for tax years 2007 to 2015, of which the company pays 60% of the first $300 million under the Sylvamo tax matters agreement and 100% above that. A deferred tax liability of $813 million tied to the 2015 timber monetization is under IRS examination. The filing also cites continuing COVID-19 uncertainty, supply chain and labor constraints, and rising input costs.
What is the outlook for 2022?
The company expects a solid demand environment for corrugated packaging and pulp, with demand growth normalizing as it recovers from near-term COVID-19 Omicron constraints. Capital spending is targeted at $1.1 billion, and first-quarter 2022 maintenance outage expense is expected to be significantly higher, representing about 40% of total planned 2022 outage costs. The company also expects Ilim equity earnings to improve in the first quarter.
06—Continue