01—Abstract
Summary
Summary of the 10-K filed February 17, 2023. Cited figures are marked; the original filing is the authoritative source.
International Paper Company reported full-year 2022 net earnings attributable to shareholders of $1.5 billiona ($4.10 per diluted share), compared with $1.8 billion ($4.47 per diluted share) in 2021.
Net sales rose to $21.2 billionb from $19.4 billion. Management said price realization and the Building a Better IP initiatives, which delivered $250 million of earnings benefits, offset significant inflation and lower demand. Cash from operations was $2.2 billion and free cash flow was $1.2 billion, and the company returned $1.93 billion to shareholders through $1.26 billion of share repurchases and $673 million of dividends.
The company agreed to sell its 50% interest in Ilim S.A. to its joint venture partners for $484 millionc and received an indication of interest for its JSC Ilim Group shares at $24 million. The 2022 results include a $533 million impairment on the Ilim investment, which is presented as discontinued operations. Once the sale closes, subject to regulatory approval, the company will no longer have investments in Russia.
Results also include a $604 milliond one-time tax benefit from settling the timber monetization tax matter. The filing describes a balance sheet with about $5.6 billion of outstanding indebtedness and credit ratings of BBB (stable) from S&P and Baa2 (stable) from Moody's.
For 2023 the company expects cash from operations of $1.9 billion to $2.3 billion, free cash flow of $0.9 billion to $1.1 billion, and capital expenditures of $1.0 billion to $1.2 billion. Management also noted continuing risks from inflation, labor market competition, a USW master agreement expiring in August 2023, and an ongoing Brazilian tax dispute.
02—Key points
Key Highlights
- Net earnings attributable to shareholders of $1.5 billion ($4.10 per diluted share) in 2022, versus $1.8 billion ($4.47 per diluted share) in 2021
- Net sales of $21.2 billion in 2022, up from $19.4 billion in 2021; Industrial Packaging net sales rose 7% to $17.5 billion
- Adjusted operating earnings of $1.17 billion ($3.18 per diluted share) in 2022, versus $944 million ($2.41 per diluted share) in 2021, per the filing's non-GAAP reconciliation
- Cash from operations of $2.2 billion and free cash flow of $1.2 billion in 2022
- Returned $1.93 billion to shareholders in 2022, including $1.26 billion in share repurchases and $673 million in dividends; $3.2 billion of repurchase authorization remained at year-end
- Agreement to sell the 50% Ilim S.A. interest for $484 million, with a $533 million impairment recorded in Q4 2022 and results presented as discontinued operations
- 2023 guidance: cash from operations of $1.9 billion to $2.3 billion, free cash flow of $0.9 billion to $1.1 billion, and capital expenditures of $1.0 billion to $1.2 billion
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, International Paper kept $0.07.
- Revenue$21.16B100.0%
- Cost of revenue−$15.14B71.6%
- Gross profit$6.02B28.4%
- Operating costs−$4.28B20.2%
- Operating income$1.74B8.2%
- Interest, other & tax−$237.0M1.1%
- Net income$1.50B7.1%
Where FY2022 revenue went
$21.16B- Cost of revenue: $15.14B, 72% of revenue
- Other operating costs: $2.98B, 14% of revenue
- Net income: $1.50B, 7.1% of revenue
- SG&A: $1.29B, 6.1% of revenue
- Interest, other & tax: $237.0M, 1.1% of revenue
Kept 7.1% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 17, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $21.16B$19.36B | +9.3% |
| Cost of Revenue | $15.14B$13.83B | +9.5% |
| Gross Profit | $6.02B$5.53B | +8.8% |
| SG&A Expenses | $1.29B$1.39B | −6.6% |
| Operating Income | $1.74B$811.00M | +114.7% |
| Interest Expense | $403.00M$430.00M | −6.3% |
| Net Income | $1.50B$1.75B | −14.2% |
| EPS (Basic) | $4.14$4.50 | −8.0% |
| EPS (Diluted) | $4.10$4.47 | −8.3% |
| Shares Outstanding (Basic) | 363.50M389.40M | −6.7% |
| Shares Outstanding (Diluted) | 367.00M392.40M | −6.5% |
05—Questions
Frequently Asked Questions
Why did earnings per share decline in 2022 even though sales grew?
Net sales rose to $21.2 billion from $19.4 billion, but the filing attributes higher operating costs ($530 million), higher input costs ($853 million) and higher maintenance outage costs to inflation and supply chain pressures. Net earnings also fell to $1.5 billion from $1.8 billion, reflecting the $533 million Ilim impairment recorded within discontinued operations, partly offset by price and mix gains and a $604 million tax benefit from the timber monetization settlement.
What is the status of the Ilim sale and what does it mean for Russia exposure?
In January 2023 the company announced a definitive agreement to sell its 50% interest in Ilim S.A. for $484 million, and its JV partners expressed interest in buying its JSC Ilim Group shares for $24 million. Completion is subject to regulatory approvals and other risks, including Russian government actions and sanctions. The company states that once the sales close, it will no longer have investments in Russia.
How strong is the company's balance sheet and credit position?
As of December 31, 2022, the company had approximately $5.6 billion of outstanding indebtedness and long-term credit ratings of BBB (stable outlook) from S&P and Baa2 (stable outlook) from Moody's. Its credit agreements totaled $2.0 billion, with no borrowings under the $1.5 billion committed facility or the $500 million receivables program. The company was in compliance with its debt covenants at year-end.
What cash returns and capital allocation plans did management outline?
In 2022 the company returned $1.93 billion to shareholders through $1.26 billion of share repurchases and $673 million of dividends. In October 2022 the board authorized an additional $1.5 billion of repurchases, bringing the total authorization to about $3.2 billion. For 2023, management plans capital expenditures of $1.0 billion to $1.2 billion, with added investment in its U.S. box system, and says it will keep paying regular quarterly dividends and repurchase shares opportunistically.
What key risks does the filing highlight for investors?
The filing highlights inflationary pressure on raw material, energy and labor costs; competitive labor market conditions; and the mill master collective bargaining agreement with the USW, which expires in August 2023, with negotiations scheduled to begin February 19, 2023. It also cites the Russia-Ukraine conflict's effect on the Ilim joint venture, climate and ESG-related regulatory and target risks, and a Brazilian tax dispute in which the company agreed to pay 60% of the first $300 million of any liability.
06—Continue