01—Abstract
Summary
Summary of the 10-Q filed November 1, 2024. Cited figures are marked; the original filing is the authoritative source.
International Paper Company's Form 10-Q for the quarter ended September 30, 2024 reports third-quarter net sales of $4,686 milliona, up from $4,613 million a year earlier, and net earnings of $150 million ($0.42 per diluted share), compared with $165 million ($0.47 per diluted share) in the third quarter of 2023.
Adjusted operating earnings were $153 millionb ($0.44 per diluted share), versus $224 million ($0.64 per diluted share) in the prior-year quarter. For the nine months, net sales were $14,039 million and net earnings were $704 million ($1.99 per diluted share). Results were supported by higher sales prices, while selling and administrative expenses rose sharply to $508 million in the quarter from $286 million, and restructuring and other charges of $56 million were recorded.
Income tax benefits from an internal legal entity restructuring ($338 millionc in the second quarter and $78 million in the third quarter) strongly affected reported results. The company is executing an 80/20 strategic approach that includes a corporate overhead restructuring plan targeting approximately 650 employees with aggregate pre-tax charges of about $80 million, closure of five North American packaging plants in the fourth quarter, and the October 31, 2024 announcement of a permanent closure of its Georgetown, South Carolina pulp mill with pre-tax charges of about $270 million, mostly accelerated depreciation. The company also announced a review of strategic options for its Global Cellulose Fibers business.
Free cash flow was $620 milliond for the first nine months of 2024, versus $505 million a year earlier, and dividends paid were $482 million. The pending acquisition of DS Smith Plc is progressing: DS Smith shareholders and International Paper shareholders approved the transaction in October 2024, the HSR waiting period expired, and the combination remains subject to European Commission antitrust clearance, with completion expected early in the first quarter of 2025. Total debt was $5.6 billion at September 30, 2024, and the company was in compliance with its debt covenants.
02—Key points
Key Highlights
- Third-quarter 2024 net sales were $4,686 million, up from $4,613 million in the third quarter of 2023, with the filing attributing the increase to higher sales prices.
- Third-quarter 2024 net earnings were $150 million ($0.42 per diluted share), versus $165 million ($0.47 per diluted share) a year earlier; adjusted operating earnings were $153 million ($0.44 per diluted share) versus $224 million ($0.64 per diluted share).
- Selling and administrative expenses rose to $508 million from $286 million year over year, and restructuring and other charges of $56 million were recorded in the quarter.
- Income tax benefits from an internal legal entity restructuring were $338 million in the second quarter and $78 million in the third quarter of 2024, significantly affecting reported earnings.
- The company announced the permanent closure of its Georgetown, South Carolina pulp mill (about $270 million of pre-tax charges, including about $220 million of accelerated depreciation) and a review of strategic options for the Global Cellulose Fibers business.
- Free cash flow was $620 million for the first nine months of 2024, compared with $505 million in the first nine months of 2023; capital project investments were $661 million.
- The DS Smith acquisition received shareholder approval from both companies in October 2024 and is expected to become effective early in the first quarter of 2025, subject to European Commission antitrust clearance.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, International Paper kept $0.04.
- Revenue$3.98B100.0%
- Cost of revenue−$2.88B72.4%
- Gross profit$1.10B27.6%
- Operating costs−$862.0M21.7%
- Operating income$237.0M6.0%
- Interest, other & tax−$87.0M2.2%
- Net income$150.0M3.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 1, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $3.98B$4.61B | −13.7% |
| Cost of Revenue | $2.88B$3.35B | −13.9% |
| Gross Profit | $1.10B$1.27B | −13.3% |
| SG&A Expenses | $473.00M$286.00M | +65.4% |
| Operating Income | $237.00M$352.00M | −32.7% |
| Interest Expense | $107.00M$105.00M | +1.9% |
| Net Income | $150.00M$165.00M | −9.1% |
| EPS (Basic) | $0.43$0.47 | −8.5% |
| EPS (Diluted) | $0.42$0.47 | −10.6% |
| Shares Outstanding (Basic) | 347.40M346.00M | +0.4% |
| Shares Outstanding (Diluted) | 353.40M348.10M | +1.5% |
05—Questions
Frequently Asked Questions
Why did adjusted operating earnings decline so much year over year?
Adjusted operating earnings were $153 million ($0.44 per diluted share) in the third quarter of 2024, versus $224 million ($0.64 per diluted share) in the third quarter of 2023. The filing states that the third quarter benefited from higher average sales prices and favorable mix ($194 million), but these were offset by higher operating costs ($211 million), lower sales volumes ($29 million), higher raw material and freight costs ($27 million) and higher mill maintenance outage costs ($22 million).
What are the expected financial effects of the Georgetown mill closure and other restructuring actions?
The company estimates aggregate pre-tax charges of about $270 million for the Georgetown, South Carolina pulp mill closure, comprised of about $220 million of noncash accelerated depreciation and about $50 million of severance and other shutdown charges, to be recorded in the fourth quarter of 2024. The corporate overhead restructuring plan targets about 650 employees with aggregate pre-tax charges of about $80 million, of which $49 million was recorded in the third quarter. The company expects significant earnings benefit in 2025 from these restructuring actions.
What is the status of the DS Smith acquisition?
DS Smith shareholders voted to approve the Business Combination on October 7, 2024, and International Paper shareholders approved the Share Issuance on October 11, 2024. The Hart-Scott-Rodino waiting period expired on June 25, 2024. Completion remains subject to satisfaction or waiver of conditions, including antitrust clearance from the European Commission, and the companies expect the combination to become effective early in the first quarter of 2025. The filing states an implied enterprise value of approximately $9.9 billion.
How is the company's liquidity and debt position?
Cash and temporary investments were $1,159 million at September 30, 2024, and the company had no borrowings outstanding under its $1.4 billion credit agreement, its $1.0 billion commercial paper program, or its $500 million receivables securitization program. Total long-term debt was $5,307 million, and the fair value of the company's $5.6 billion of debt was approximately $5.5 billion. The company stated it was in compliance with its debt covenants, and its long-term credit ratings were BBB (stable outlook) from S&P and Baa2 (stable outlook) from Moody's.
What is the potential impact of the IRS examination and Brazil tax matter?
The IRS issued an Unagreed Revenue Agent Report on September 3, 2024 relating to investment tax credits for 2017-2019, with an estimated net incremental tax liability of about $50 million; the company disagrees and filed a protest on October 30, 2024. For the Brazil goodwill tax matter, total assessments are approximately $368 million (adjusted for currency), and an October 11, 2024 federal regional court ruling favorable to Sylvamo Brazil covers about $236 million of that total, subject to appeal. Under the tax matters agreement, the company pays 60% of up to $300 million of any assessment and 100% above $300 million, and its recorded liability for this matter remains $48 million.
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