News Release
International Paper Reports Full-Year and Fourth Quarter 2022 Results
MEMPHIS, Tenn. - January 31, 2023 - International Paper (NYSE: IP) today reported full-year and fourth quarter 2022 financial results.
FULL-YEAR AND FOURTH QUARTER 2022 HIGHLIGHTS
- Full-year2022 net earnings (loss) attributable to International Paper of $1.5 billion ($4.10 per diluted share) compared with $1.8 billion ($4.47 per diluted share) for full-year 2021
- Full-year2022 adjusted operating earnings* (non-GAAP) of $1.2 billion ($3.18 per diluted share) compared with $944 million ($2.41 per diluted share) for full-year 2021
- Fourth quarter net earnings (loss) attributable to International Paper of $(318) million ($(0.90) per diluted share) including a $533 million non-cash impairment of our Ilim joint venture investment; Fourth quarter adjusted operating earnings* (non-GAAP) of $309 million ($0.87 per diluted share)
- 9% full-year revenue growth; 24% full-year operating earnings growth
- Building a Better IP initiatives delivered $250 million of earnings benefit in 2022, including $75 million in fourth quarter
- $2.2 billion of full-year 2022 cash provided by operations, including $761 million of cash provided in fourth quarter
- Returned $1.93 billion to shareholders through $1.26 billion share repurchases and $673 million in dividends in full-year 2022; $355 million returned to shareholders in fourth quarter
"In 2022, International Paper grew revenue and earnings in a dynamic and challenging macro environment and returned $1.9 billion to our shareowners," said Mark Sutton, Chairman and Chief Executive Officer. "Our commercial and mill operational performance was solid, while significant inflation and lower demand impacted margins. We also delivered $250 million of earnings benefits from our Building a Better IP initiatives, exceeding our target for the year and building solid momentum going forward."
Sutton added, "As we enter 2023, International Paper is well-positioned to navigate various economic environments from a position of strength, given our strategic customer relationships, our highly talented teams, our track record of solid cash generation and our strong balance sheet. We also remain focused on creating value for all our stakeholders as we continue
Building a Better IP."
Diluted Net EPS Attributable to International Paper Shareholders and Adjusted Operating EPS
Fourth | Third | Fourth | Full- | Full- | ||||||||||
Quarter | Quarter | Quarter | Year | Year | ||||||||||
2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||
Net Earnings (Loss) Attributable to International Paper | $ | (0.90) | $ | 2.64 | $ | 0.28 | $ | 4.10 | $ | 4.47 | ||||
Less - Discontinued Operations (Gain) Loss, Net of Taxes | 1.38 | (0.18) | (0.15) | 0.64 | (2.40) | |||||||||
Net Earnings (Loss) from Continuing Operations | 0.48 | 2.46 | 0.13 | 4.74 | 2.07 | |||||||||
Add Back - Non-Operating Pension Expense (Income) | (0.13) | (0.13) | (0.12) | (0.52) | (0.51) | |||||||||
Add Back - Net Special Items Expense (Income) | 0.41 | 0.32 | 0.77 | 0.63 | 0.94 | |||||||||
Income Tax Effect - Non-Operating Pension and Net Special | ||||||||||||||
Items Expense | 0.11 | (1.82) | (0.17) | (1.67) | (0.09) | |||||||||
Adjusted Operating Earnings* | $ | 0.87 | $ | 0.83 | $ | 0.61 | $ | 3.18 | $ | 2.41 | ||||
- Adjusted operating earnings (non-GAAP) is defined as net earnings attributable to International Paper Company (GAAP) excluding discontinued operations, net special items and non-operating pension expense (income). Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present consolidated operating results. For discussion of discontinued operations, net special items and non-operating pension expense (income), see the disclosure under Effects of Net Special Items, Discontinued Operations and Consolidated Statement of Operations and related notes included later in this release.
Select Financial Measures | ||||||||||||
Fourth | Third | Fourth | Full- | Full- | ||||||||
Quarter | Quarter | Quarter | Year | Year | ||||||||
(In millions) | 2022 | 2022 | 2021 | 2022 | 2021 | |||||||
Net Sales | $ | 5,133 | $ | 5,402 | $ | 5,086 | $ 21,161 | $ 19,363 | ||||
Net Earnings (Loss) Attributable to International Paper | (318) | 951 | 107 | 1,504 | 1,752 | |||||||
Business Segment Operating Profit | 451 | 464 | 415 | 1,848 | 1,635 | |||||||
Adjusted Operating Earnings | 309 | 300 | 235 | 1,168 | 944 | |||||||
Cash Provided By (Used For) Operations | 761 | 435 | 107 | 2,174 | 2,030 | |||||||
Free Cash Flow** | 439 | 197 | (94) | 1,243 | 1,481 |
- Free cash flow is a non-GAAP financial measure. A reconciliation of free cash flow to the most comparable GAAP measure, cash provided by (used for) operations, and disclosure regarding why we believe that free cash flow provides useful information to investors, is included later in this release.
SEGMENT INFORMATION
Business segment operating profits are used by International Paper's management to measure the earnings performance of its businesses and is calculated as set forth in footnote (h) below under "Sales and Earnings by Business Segment". As a result of the spin-off of our global Printing Papers business on October 1, 2021, the Printing Papers business segment has been eliminated and all prior year amounts have been adjusted to reflect this business as a discontinued operation. For discussion of discontinued operations, see the disclosure under Discontinued Operations included later in this release. Fourth quarter 2022 net sales by business segment and operating profit (loss) by business segment compared with the third quarter of 2022 and the fourth quarter of 2021 along with full-year 2022 net sales by business segment and operating profit (loss) by business segment compared with full-year 2021 are as follows:
Business Segment Results | |||||||||||||||
Fourth | Third | Fourth | Full- | Full- | |||||||||||
Quarter | Quarter | Quarter | Year | Year | |||||||||||
(In millions) | 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||
Net Sales by Business Segment | |||||||||||||||
Industrial Packaging | $ | 4,169 | $ | 4,385 | $ | 4,255 | $ | 17,451 | $ | 16,326 | |||||
Global Cellulose Fibers | 842 | 887 | 717 | 3,227 | 2,732 | ||||||||||
Corporate and Inter-segment Sales | 122 | 130 | 114 | 483 | 305 | ||||||||||
Net Sales | $ | 5,133 | $ | 5,402 | $ | 5,086 | $ | 21,161 | $ | 19,363 | |||||
Operating Profit (Loss) by Business Segment | |||||||||||||||
$ | 416 | $ | 1,742 | ||||||||||||
Industrial Packaging | $ | 369 | $ | 414 | $ | 1,638 | |||||||||
Global Cellulose Fibers | 35 | 95 | 1 | 106 | (3) | ||||||||||
Total Business Segment Operating Profit | $ | 451 | $ | 464 | $ | 415 | $ | 1,848 | $ | 1,635 | |||||
Industrial Packaging operating profits (losses) in the fourth quarter of 2022 were $416 million compared with $369 million in the third quarter of 2022. In North America, earnings increased driven by higher sales prices for corrugated boxes and lower input costs, primarily for recovered fiber and energy. Sales volumes for corrugated boxes and containerboard were lower, reflecting continued consumer spending focus on non-discretionary goods and retailer inventory destocking. Lower demand resulted in increased economic downtime which negatively impacted operating costs. Operating costs also increased due to seasonality, inflation and the impact of Winter Storm Elliott. In EMEA, earnings improved driven by seasonally higher sales volumes in Morocco and lower energy costs.
Global Cellulose Fibers operating profits (losses) in the fourth quarter of 2022 were $35 million compared with $95 million in the third quarter of 2022. Earnings decreased driven by higher planned maintenance outage expenses and lower sales volumes, partially offset by higher sales prices for fluff pulp and lower input costs, primarily for energy. Volume was lower due to additional pull through of shipments in the third quarter as supply chain velocity began to improve. Operating costs were higher driven by the impact of Winter Storm Elliott and isolated reliability incidents.
EQUITY METHOD INVESTMENT - ILIM JOINT VENTURE
On January 24, 2023, the Company announced an agreement to sell its investment in the Ilim joint venture, subject to regulatory approvals. The Company recognized a $533 million impairment charge in the fourth quarter of 2022. The impairment charge includes recognition of $375 million of foreign currency cumulative translation adjustment loss. Equity earnings (losses), excluding impairment, were $44 million in the fourth quarter of 2022 compared with $64 million in the third quarter of 2022. The current period and historical results have been adjusted to reflect Ilim as a discontinued operation and our investment balance, following the adjustment to fair value and resulting impairment charge, is included in Assets Held for Sale.
CORPORATE EXPENSES
Corporate expenses, net was a benefit of $20 million for the fourth quarter of 2022, compared with expense of $15 million in the third quarter of 2022.
EFFECTIVE TAX RATE
The reported effective tax rate for the fourth quarter of 2022 was 46%, compared to a third quarter of 2022 reported effective tax rate of (184)%. The third quarter was significantly lower due to one-time tax benefits for the sale of Sylvamo shares and an IRS settlement. The higher tax rate in the fourth quarter reflects tax expense related to increases in foreign and state deferred taxes as well as a non-deductible goodwill impairment (see special items table below).
Excluding special items and non-operating pension expense, the operational effective tax rate for the fourth quarter of 2022 was 25%, compared with 21% for the third quarter of 2022. The higher operational effective tax rate in the fourth quarter is primarily due to an increase in state deferred taxes.
EFFECTS OF SPECIAL ITEMS
Net special items in the fourth quarter of 2022 amount to a net after-tax charge of $174 million ($0.49 per diluted share) compared with a gain of $551 million ($1.53 per diluted share) in the third quarter of 2022 and a charge of $222 million ($0.58 per diluted share) in the fourth quarter of 2021. Net special items in all periods include the following charges (gains):
Fourth Quarter 2022 | Third Quarter 2022 | Fourth Quarter 2021 | |||||||||||||||
(In millions) | Before Tax | After Tax | Before Tax | After Tax | Before Tax | After Tax | |||||||||||
Restructuring and other charges, net: | |||||||||||||||||
Debt extinguishment costs | $ | - | $ | - | $ | 93 | $ | 70 | $ | 238 | $ | 179 | |||||
Building a Better IP | - | - | - | - | 29 | 22 | |||||||||||
Other | (4) | (3) | - | - | (1) | (1) | |||||||||||
Total restructuring and other charges, net | (4) | (3) | 93 | 70 | 266 | 200 | |||||||||||
EMEA Packaging goodwill impairment | 76 | 76 | - | - | - | - | |||||||||||
Environmental remediation reserve adjustment | 48 | 36 | - | - | - | - | |||||||||||
Legal reserve adjustments | 11 | 8 | (15) | (11) | (5) | (4) | |||||||||||
Foreign currency cumulative translation loss related to | 10 | 10 | - | - | - | - | |||||||||||
sale of equity method investment | |||||||||||||||||
Sylvamo investment (a) | - | - | (16) | (12) | 32 | 24 | |||||||||||
Foreign deferred tax valuation allowance | - | 45 | - | - | - | - | |||||||||||
Tax benefit related to timber monetization settlement, | 3 | 2 | 55 | (563) | - | - | |||||||||||
net of interest (b) | |||||||||||||||||
Tax benefit related to exchange of Sylvamo shares (c) | - | - | - | (35) | - | - | |||||||||||
Other | - | - | - | - | 2 | 2 | |||||||||||
Total special items, net | $ | 144 | $ | 174 | $ | 117 | $ | (551) | $ | 295 | $ | 222 | |||||
- See notes (e) and (n) on the Consolidated Statement of Operations included later in this release.
- See notes (f) and (g) on the Consolidated Statement of Operations included later in this release.
- See note (g) on the Consolidated Statement of Operations included later in this release.
DISCONTINUED OPERATIONS, NET OF TAXES
Discontinued operations, net of taxes include the equity earnings associated with our Ilim joint venture and the operating earnings of our former Printing Papers segment and EMEA Coated Paperboard and Pulp business including the Kwidzyn, Poland mill, divested in the third quarter of 2021. Discontinued operations, net of taxes also includes the following special items charges (gains):
Fourth Quarter 2022 | Fourth Quarter 2021 | ||||||||||
(In millions) | Before Tax | After Tax | Before Tax | After Tax | |||||||
Ilim equity method investment impairment | $ | 533 | $ | 533 | $ | - | $ | - | |||
Printing Papers spin-off | - | - | 10 | 5 | |||||||
Gain on sale of Kwidzyn, Poland mill | - | - | 9 | 6 | |||||||
Foreign and state taxes related to Printing Papers spin-off | - | - | - | (3) | |||||||
Total | $ | 533 | $ | 533 | $ | 19 | $ | 8 | |||
EARNINGS WEBCAST
The company will host a webcast today to discuss earnings and current market conditions, beginning at 10 a.m. ET (9 a.m. CT). All interested parties are invited to listen to the webcast via the company's website at internationalpaper.com by clicking on the Performance tab and going to the Presentations and Events/Webcasts and Presentations page. A replay of the webcast will also be on the website beginning approximately two hours after the call. Parties who wish to participate in the webcast via teleconference may dial +1 (234) 720-6995 or, within the U.S. only, (844) 291-6362, and ask to be connected to the International Paper fourth quarter earnings call. The conference ID number is 1238959. Participants should call in no later than 9:45 a.m. ET (8:45 a.m. CT). An audio-only replay will be available for ninety days following the call. To access the replay, dial +1 (402) 970-0847 or, within the U.S. only, (866) 207-1041 and when prompted for the conference ID, enter 2572206.
About International Paper
International Paper (NYSE: IP) is a leading global supplier of renewable fiber-based products. We produce corrugated packaging products that protect and promote goods, and enable worldwide commerce, and pulp for diapers, tissue and other personal care products that promote health and wellness. Headquartered in Memphis, Tenn., we employ approximately 38,000 colleagues globally. We serve customers worldwide, with manufacturing operations in North America, Latin America, North Africa and Europe. Net sales for 2022 were $21.2 billion. Additional information can be found by visiting InternationalPaper.com.
Certain statements in this press release that are not historical in nature may be considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "anticipates," "believes," "estimates" and similar expressions identify forward-looking statements. These statements are not guarantees of future performance and reflect management's current views and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Factors which could cause actual results to differ include but are not limited to: (i) risks with respect to climate change and global, regional, and local weather conditions, as well as risks related to our ability to meet targets and goals with respect to climate change and the emission of GHGs and other environmental, social and governance matters; (ii) the impact of the conflict involving Russia and Ukraine, including in connection with related escalated sanctions imposed by the United States, the European Union, G7 and other countries and possible actions by the Russian government, and the impact of such developments on domestic and global economic and geopolitical conditions in general and on us and our Ilim joint venture, which could be materially and adversely affected by such developments, and our inability to predict the full impact of the Russian invasion of Ukraine, current or future sanctions, current or future actions by the Russian government, geopolitical instability and the possibility of broadened military conflict on our Ilim joint venture, on our receipt of dividends from our Ilim joint venture and on our ability to complete the sale of our interest in the Ilim joint venture under the terms of the agreement with our joint venture partners to purchase our interest (and, if we are unable to complete such sale, on the value of and our ability to sell our interest to another purchaser); (iii) the level of our indebtedness and changes in interest rates (including the impact of current elevated interest rate levels); (iv) the impact of global and domestic economic conditions and industry conditions, including with respect to current negative macroeconomic conditions, inflationary pressures and changes in the cost or availability of raw materials, energy sources and transportation sources, supply chain shortages and disruptions, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products, and conditions impacting the credit, capital and financial markets; (v) domestic and global geopolitical conditions, changes in currency exchange rates, trade protectionist policies, downgrades in our credit ratings, and/ or the credit ratings of banks issuing certain letters of credit, issued by recognized credit rating organizations; (vi) the amount of our future pension funding obligations, and pension and healthcare costs; (vii) unanticipated expenditures or other adverse developments related to compliance with existing and new environmental, tax, labor and employment, privacy, anti-bribery and anti-corruption, and other U.S. and non-U.S. governmental laws and regulations; (viii) any material disruption at any of our manufacturing facilities or other adverse impact on our operations due to severe weather, natural disasters, climate change or other causes; (ix) risks inherent in conducting business through joint ventures; (x) our ability to achieve the benefits expected from, and other risks associated with, acquisitions, joint ventures, divestitures, spinoffs and other corporate transactions, (xi) cybersecurity and information technology risks; (xii) loss contingencies and pending, threatened or future litigation, including with respect to environmental related matters; (xiii) our exposure to claims under our agreements with Sylvamo Corporation;
- our failure to realize the anticipated benefits of the spin-off of Sylvamo Corporation and the qualification of such spin-off as a tax-free transaction for U.S. federal income tax purposes; and (xv) our ability to attract and retain qualified personnel, particularly in light of current labor market conditions. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements can be found in our press releases and SEC filings. In addition, other risks and uncertainties not presently known to the Company or that we currently believe to be immaterial could affect the accuracy of any forward-looking statements. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
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Contacts:
Media: Amy Simpson, 901-419-4964 Investors: Mark Nellessen; 901-419-1731; Michele Vargas, 901-419-7287.
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International Paper Company published this content on 31 January 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 January 2023 12:17:05 UTC.