UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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| ☒ | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the fiscal year ended |
| | 12/31/20202023 |
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| ☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the transition period from - to - |
Commission File No. 1-3157
INTERNATIONAL PAPER COMPANY
(Exact name of registrant as specified in its charter)
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| New York | | 13-0872805 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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| 6400 Poplar Avenue |
| Memphis, | Tennessee |
| (Address of principal executive offices) |
| 38197 |
| (Zip Code) |
| Registrant's telephone number, including area code: | 901 | 419-9000 |
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| Common Shares | IP | New York Stock Exchange |
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ¨ No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | | Accelerated filer | | Non-accelerated filer | | Smaller reporting company | | Emerging growth company |
| ☒ | | ☐ | | ☐ | | ☐ | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ý
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
The aggregate market value of the Company’s outstanding common stock held by non-affiliates of the registrant, computed by reference to the closing price as reported on the New York Stock Exchange, as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2020)2023) was approximately $13,786,056,781.$10,960,397,116.
The number of shares outstanding of the Company’s common stock as of February 12, 20219, 2024 was 393,117,117.346,353,824.
Documents incorporated by reference:
Portions of the registrant’s proxy statement filed within 120 days of the close of the registrant’s fiscal year in connection with registrant’s 20212024 annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K.
INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 20202023
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| ITEM 6. | ELIMINATEDRESERVED | |
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INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 20202023
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| APPENDIX I | | |
| APPENDIX II | | |
International Paper Company (the "Company""Company," "International Paper" or "International Paper""IP", which may also be referred to as "we" or "us") is a global producer of renewable fiber-based packaging pulp and paperpulp products with manufacturing operations in North America, Latin America, Europe and North Africa and Russia.Africa. We are a New York corporation, incorporated in 1941 as the successor to the New York corporation of the same name organized in 1898. You can learn more about us by visiting our website at www.internationalpaper.com.
In the United States, at December 31, 2020,2023, the Company operated 2723 pulp paper and packaging mills, 162 converting and packaging plants, 16 recycling plants and three bag facilities. Production facilities at December 31, 20202023 in Canada, Europe, North Africa and Latin America included 11four pulp paper and packaging mills, 3937 converting and packaging plants, and two recycling plants. We operate a printing and packaging products distribution business principally through six branches in Asia. At December 31, 2020, we owned or managed approximately 314,000 acres of forestland in Brazil and had, through licenses and forest management agreements, harvesting rights on government-owned forestlands in Russia. Substantially all of our businesses have experienced, and are likely to continue to experience, cycles relating to industry capacity and general economic conditions.
We are guided by our core values. We do the right things, in the right ways, for the right reasons, all of the time – this is The IP Way. Our overarching values are safety, ethics, and stewardship.
•Safety – Above all, we care about people. We look out for each other to ensure everyone returns home safely each day.
•Ethics – We act honestly and operate with integrity and respect. We promote a culture of openness and accountability.
•Stewardship – We are responsible stewards of people and communities, natural resources and capital. We strive to leave everything in better shape for future generations.
•Think the Customer – We will deliver on Our Customer Promise to do the right things for our customers, at every moment, in every experience.
•Include and Engage – We strive to build a culture in which each employee feels a sense of belonging and experiences an environment in which to do their best work every day.
For management and financial reporting purposes, our businesses are separated into threetwo segments: Industrial Packaging;Packaging and Global Cellulose Fibers; and Printing Papers.Fibers. A
On September 18, 2023, we completed the previously announced sale of our 50% equity interestsinterest in Ilim S.A. ("Ilim"), which was a joint venture that operated a pulp and Graphic Packaging International Partners, LLC ("GPIP") arepaper business in Russia and has subsidiaries including Ilim Group. We also separate reportable industry segments.
Following our public announcement on October 18, 2023, the Company permanently closed its containerboard mill in Orange, Texas on December 4, 2023 and permanently ceased production on two of its pulp machines at its Riegelwood, North Carolina and Pensacola, Florida mills on December 11, 2023. The mill closure resulted in pre-tax non-cash asset write-off and accelerated depreciation charges of approximately $347 million and pre-tax cash severance and other shutdown charges of approximately $81 million. The machine shutdowns resulted in pre-tax non-cash asset write-off and accelerated depreciation charges of approximately $75 million and pre-tax cash severance and other shutdown charges of approximately $37 million. The Company recorded these charges in the fourth quarter of 2023.
From 20162019 through 2020,2023, International Paper’s capital spending approximated $6.3$4.6 billion, excluding mergers and acquisitions. These expenditures reflect our continuing efforts to use our capital strategically to improve product quality and environmental performance, as well as lower costs, maintain reliability of operations and deploy strategic capital for capacity expansion. Capital spending in 20202023 was approximately $751 million$1.1 billion and is expected to be approximately $800 million to $1.0 billion in 2021.2024. You can find more information about capital spending on page 3339 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Throughout this Annual Report on Form 10-K, we “incorporate by reference” certain information in parts of other documents filed with the Securities and Exchange Commission ("SEC"). The SEC permits us to disclose important information by referring you to it in that manner. Please refer to such information.those documents. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K and proxy statements, along with all other reports and any amendments thereto filed with or furnished to the SEC, are publicly available free of charge on the Investor RelationsInvestors section of our website at www.internationalpaper.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We encourage you to refer to such information.
Our website contains a significant amount of information about the Company, including our SEC filings and financial and other information for investors. The information that we post on our website could be deemed to be material information. We encourage investors, the media, and others interested in the Company to visit this website from time to time, as information is updated and new information is posted. The information contained on or connected to our website, however, is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report that we filedfile with or furnishedfurnish to the SEC. Our internet address is included as an inactive textual reference only.
Our strategic framework, The IP Way Forward, ensures our business strategy delivers sustainable outcomes for all of our stakeholders - employees, customers, suppliers, communities, governments, non-governmental organizations and shareholders – for generations to come. We accomplish this through a series of programs and processes as discussed below. Additionally in 2020, we established our Vision 2030 goals for healthy and abundant forests, thriving people and communities, sustainable operations and renewable solutions. Several of these goals are discussed in more detail below.
EMPLOYEES
As of December 31, 2020,2023, we have approximately 49,30039,000 employees, nearly 33,40033,000 of whom are located in the United States. Of our U.S. employees, approximately 23,10022,900 are hourly, with unions representing approximately 14,30014,200 employees. Approximately 10,800 ofOf this number, 10,600 are represented by the United Steelworkers union ("USW").
International Paper, the USW, and several other unions have entered into twofour master agreements covering various U.S. mills and converting facilities. These master agreements cover several specific items, including wages, select benefit programs, successorship, employment security, and health and safety. Individual facilities continue to have local agreements for other subjects not covered by the master agreements. If local facility agreements are not successfully negotiated at the time of expiration, under the terms of the master agreements the local
contracts will automatically renew with the same terms in effect. The master agreements cover the majority of our union represented mills and converting facilities. In addition, International Paper is party to a master agreement with District Council 2, International Brotherhood of Teamsters, covering additional converting facilities.
SAFETY AND WELLBEING
TheAt International Paper, safety is core to who we are and how we operate. To achieve this, we are cultivating a resilient safety culture where every team member is empowered to stop work they believe is unsafe. We work tirelessly to anticipate and address unexpected events by incorporating layers of protection, continuously enhancing our employees remains the primary focus of our leaders.systems and engaging all team members in learning events to prevent injuries before they take place. Our Vision 2030 goal is to create a 100% injury-free workplace for our employeesteam members and contractors. To accomplish this goal, we focus on the IP Way of doing things - we do the right things,contractors fuels our commitment from Madrid to Memphis and everywhere in the right ways, for the right reasons, all of the time. Our stated Vision 2030 Goal is to achieve zero injuries for employees and contractors.between.
ThroughoutWe also care deeply about the COVID-19 pandemic, we have remained focused on protecting the healthmental, emotional, physical and safetyprofessional wellbeing of our employees while meeting the needs of our customers. Most of our manufacturing and converting facilities we deemed essential have remained open and operational during the pandemic. The health and safety of ourby providing an Employee Assistance Program (“EAP”) at no cost to employees and contractors is our most important responsibility as we managefamily members. Our EAP offers coaching and counseling sessions aimed at problem solving, achieving goals, and dealing with stress and anxiety management through the COVID-19 pandemic.resiliency. We have implemented work-systems across the Company, including hygiene, social distancing, site cleaning, contract tracing and other measures, as recommended by the Centers for Disease Control and Prevention and the World Health Organization. Asembrace a sign of our appreciation for our workers during the pandemic, the Company gave a one-time bonus to allholistic wellness approach providing employees in December 2020.with resources on incorporating wellness habits into their daily lives.
HUMAN CAPITAL MANAGEMENT
The attraction, retention and development of our employees is critical to our success. We accomplish this, in part, by developing the capabilities of our team memberscreate a positive employee experience that begins at onboarding. Our Human Resources Talent Management Team hosts online Global New Employee Orientation for employees and each business conducts onsite new hire integration training unique to its business and/or facility. This experience continues through our continuous learning, development and performance management programs. OneWe provide continuing education courses that are relevant to our industry and job functions within the Company, including both instructor-led and online training through our Learning Management System (“LMS”) MyLearning platform. Across the enterprise in 2023, employees completed 4.6 million learning activities through our platform.
In addition, we have created learning paths for specific positions that are designed to encourage an employee’s advancement and growth within our organization, such program isas our REACH (Recruit, Engage,
Align College Hires) program through which the Company recruits and developsGlobal Manufacturing Training Initiative programs. Through REACH we recruit and develop early-career engineers and safety professionals for our U.S. Mill system,mills, preparing them to become future leaders. We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows and professionally develops our employees. Our Global Manufacturing Training Initiative provides training services to hourly operations and maintenance employees in our mills in a standardized and structured manner.On the converting side of our business, more than 350 front line and future leaders participated in our multi-day in-person Leadership Application and Professional Development and Manufacturing Management Associate Programs during 2023.
We provide continuing educationdevelop leaders through our IP Leadership Institute offering a broad range of LMS virtual and in person resources, courses that are relevant to our industry and job function within the Company. In addition, we have created learning pathsworkshops for specific positions that are designed to encourage an employee’s advancementindividual contributors, people leaders and growth within our organization.teams. We also offer a peer mentor programmentoring and leadership and customer servicecareer development training to support and develop our employees.
We help our employees better themselves by offering tuition reimbursement to employees to pursue additional education to prepare for other positions at the Company. We also provide student loan assistance to help employees repay qualified student loans. These resources provide employees with the skills and support they need to achieve their career goals, build management skills and become leaders within our Company. In 2019, 580 new hourly operations and maintenance employees at our mills experienced new hire integration training and 460 high potential leaders participated in experiential development programs.
The labor market for both hourly and salaried workers continues to be increasingly competitive. For additional information regarding risks related to the current labor market, see Item 1A. Risk Factors – WE OPERATE IN A CHALLENGING MARKET FOR TALENT AND MAY FAIL TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, INCLUDING KEY MANAGEMENT PERSONNEL.
COMPENSATION AND BENEFITS
We view compensation and benefits as part of how we attract, engage and retain our talented workforce. We do so by rewarding performance while ensuring competitive compensation in our local markets around the world. We continually evaluate our compensation and benefits so that we offer optimal compensation programs and remain a leading employer of choice in the areas in which we operate.
DIVERSITY AND INCLUSION
The Company believesIn 2023, we added Include and Engage as a new core value because we believe in an inclusive workforce, where employees of diverse backgrounds and perspectives are represented, engaged and empowered to inspirecontribute innovative ideas, influence decisions, and decisions. Ourbring their authentic selves to work. While this core value is new, our efforts around diversity and inclusion have been in place for more than 20 years. Looking forward to projected workforce demographic changes over the next decade, and guided by our commitment to equal employment opportunity for all, our stated Vision 2030 goal is to achieve 30% overall representation of women and 50% women in salaried positions, 30% racial and ethnic minority representation in U.S. salaried positions, and to implement regional diversity plans including 30% minority representation in U.S. salaried positions.non-U.S. locations. To foster a more diverse and inclusive culture, the Company is focused on (1) promoting a culture of diversity and inclusion that leverages the talents of all employees, and (2) implementing practices that attract, recruit and retain diverse topa broad diversity of talent.
Our Global Diversity and Inclusion Council, comprised of senior leaders in the Company, is committed to creating and promoting a culture of inclusion, collaboration, engagement, equity and diversity. The Company supports enterprise-wide employee-led networking groupscircles (“ENCs”) that are open to all employees and provide a forum to communicate and exchange ideas, build a network of relationships across the Company, and pursue personal and professional development, such as the Women in International Paper Employee Networking Circle, African American("WIP") ENC, Black Employee Networking Circle ("IPmove"BEN"), LGBTQ Employee Networking Circle (“IPride”LGBTQ+ & Allies ENC ("IPride") and a Veterans Employee Networking Circle.ENC ("iVets"). Each ENC is sponsored by Company leaders and aligned with our core values and business objectives. Through annual initiatives, ENCs offer development opportunities, encourage cross-collaboration and connection with individuals throughout the Company, and engage allies. Some facilities and functions also have their own ENCs.
communications team to recognize women working in our facilities. We also recognize Diversity & Inclusion awareness months, conduct training and host D&I workshops and team-level courses which further our diversity and inclusion goals.
We have also developed a global workforceDiversity Acquisition Framework for U.S. colleges and have implemented programs arounduniversities to guide our enterprise diversity and inclusion efforts as we strive to hire the globe to create diverse,best talent by accessing all the available talent using broad recruiting parameters through inclusive workplaces. We have increased representation of women engineers in our REACH program to 38% with the Class of 2021. And our overall full-time diversity hiring for the REACH Class 2021 is 52%.and legally compliant employment practices.
CITIZENSHIPThe make-up of our Board of Directors and Senior Leadership Team ("SLT") reflects our efforts to seek qualified board candidates with diverse backgrounds and perspectives including, but not limited to, such factors as race, ethnicity and gender.
At December 31, 2023, the composition of our Board of Directors, as noted below, reflects those efforts and the importance of diversity:
•27% women, 27% ethnically diverse, 18% African-American and
•75% of the Board of Director’s standing committees are chaired by women.
Our Senior Leadership Team is currently comprised of senior vice presidents who oversee crucial functions and business units within the Company and is 30 percent women as of December 31, 2023.
COMMUNITY ENGAGEMENT
We encourage our employees to support the communities in which they live and in which the Company operates. Our citizenshipcommunity engagement efforts extend across the globe and support social and educational needs. To that end, in 20192023 we invested more than $24approximately $20 million to address critical needs in the communities in which we work and live. Our Vision 2030 goal is to strengthen the resilience of our communities, in numerous ways, and improve the lives of 100 million people in our communities. Wecommunities in numerous ways, including the support of education, reducing hunger, promoting health and wellness and supporting disaster relief.
One way we lead in promoting health and wellness is through our award-winning Fighting Period Poverty in Our Communities program. Period poverty is lack of access to period products and education and affects at least 500 million women and girls globally. Period poverty leads to school truancy, reproductive issues, health risks and unnecessary shame. Through this program, we collaborate with partners to create
awareness of period poverty globally and provide period care kits to people who need them most.
In 2022, the Company was honored with the American Forest & Paper Association's (“AF&PA”) “Diversity, Equity and Inclusion in Sustainability Award” for our “Ending Period Poverty” program. In 2023, we hosted 62 menstrual product kit packing events in nine countries donating more than 32,000 menstrual product kits to people across the world.
Also in 2023, the Company was awarded a Leadership in Sustainability Award for Resilient U.S. Forests by the AF&PA for its innovative approach to promote forest bird awareness and conservation within the forest product supply chain in partnership with the American Bird Conservancy. In 2024, we received the Grassroots Innovation Award from the Public Affairs Council. Additionally, we are proud to have been named among the world’s most ethical companies by Ethisphere for 1417 consecutive years.
INTELLECTUAL PROPERTY, PATENTS, AND TRADEMARKS
We rely on a combination of patent, copyright, trademark, design, trade secret, and internet domain laws to establish and protect our intellectual property rights in the United States and in foreign jurisdictions. The Company’s practice is to file applications and obtain patents for products and services we believe improve our value proposition to customers. We maintain a portfolio of trademarks and service marks registered with the U.S. Patent and Trademark Office and in certain foreign jurisdictions, unregistered trademarks, licenses, and internet domain names that we consider important to the marketing of our products and business. These trademarks and service marks include those entity and product names that appear in this Annual Report on Form 10-K and our logo, as well as names of other products and marketing-related taglines. Our registered intellectual property has various expiration dates. The Company also relies on trade secret and other confidential information protection for manufacturing processes, product specifications, formulae, analyses, market information, forecasts, and other competitively sensitive information.
The pulp paper and packaging sectors are large and fragmented, and the areas into which the Company sells itswe sell our principal products are very competitive. Our products compete with similar products produced by other forest products companies. We also compete, in some instances, with companies in other industries and against substitutes for wood-fiber products.
The Company sells products directly to end users and converters, as well as through agents, resellers and paper distributors.
Sales volumes of major products for 2020, 20192023, 2022 and 20182021 were as follows:
SALES VOLUMES BY PRODUCT (a)
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| In thousands of short tons (except as noted) | 2020 | 2019 | 2018 |
| Industrial Packaging | | | |
| Corrugated Packaging (b) | 10,671 | | 10,454 | | 10,624 | |
| Containerboard | 3,097 | | 2,909 | | 3,229 | |
| Recycling | 2,181 | | 2,388 | | 2,282 | |
| Saturated Kraft | 158 | | 174 | | 196 | |
| Gypsum/Release Kraft | 209 | | 199 | | 227 | |
| Bleached Kraft | 30 | | 22 | | 31 | |
| EMEA Packaging (b) | 1,627 | | 1,538 | | 1,476 | |
| Brazilian Packaging (b) | 271 | | 366 | | 351 | |
| European Coated Paperboard | 411 | | 417 | | 390 | |
| Industrial Packaging | 18,655 | | 18,467 | | 18,806 | |
Global Cellulose Fibers (in thousands of metric tons) (c) | 3,676 | | 3,501 | | 3,573 | |
| Printing Papers | | | |
| U.S. Uncoated Papers | 1,339 | | 1,799 | | 1,886 | |
| European and Russian Uncoated Papers | 1,249 | | 1,456 | | 1,440 | |
| Brazilian Uncoated Papers | 910 | | 1,172 | | 1,125 | |
| Indian Uncoated Papers | — | | 206 | | 263 | |
| Printing Papers | 3,498 | | 4,633 | | 4,714 | |
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| In thousands of short tons (except as noted) | 2023 | 2022 | 2021 |
| Industrial Packaging | | | |
| Corrugated Packaging (b) | 9,428 | | 10,202 | | 10,787 | |
| Containerboard | 2,604 | | 2,642 | | 2,893 | |
| Recycling | 2,152 | | 2,190 | | 2,223 | |
| Saturated Kraft | 160 | | 188 | | 186 | |
| Gypsum/Release Kraft | 237 | | 251 | | 234 | |
| Europe, Middle East & Africa ("EMEA") Packaging (b) | 1,282 | | 1,376 | | 1,546 | |
| Industrial Packaging | 15,863 | | 16,849 | | 17,869 | |
Global Cellulose Fibers (in thousands of metric tons) (c) | 2,681 | | 2,893 | | 2,970 | |
(a)Includes third-party and inter-segmentintersegment sales and excludes sales of equity investees.
(b)Volumes for corrugated box sales reflect consumed tons sold ("CTS"). Board sales byfor these businesses reflect invoiced tons.
(c) Includes North American European and Brazilian volumes and internal sales to mills.
The Company’s policy is to operate its mills and factories in compliance with all applicable laws and regulations such that it protects the environment and the health and safety of its employees. We operate our businesses and sell products globally. In each of the jurisdictions in which we operate, we are subject to a variety of laws and regulations governing various aspects of our business, including general business regulations as well as those governing the manufacturing, production, content, handling, storage, transport, marketing and sale of our products. Our operations are also subject to forestry reserve requirements, other environmental regulations and occupational health and safety laws. Violations can result in substantial fines, administrative sanctions, criminal penalties, revocations of operating permits and/or shutdowns of our facilities, litigation, other liabilities, as well as damage to our reputation. We incur costs to comply with these requirements. For additional information regarding risks associated with environmental matters, see Item 1A. Risk Factors – WE ARE SUBJECT TO A WIDE VARIETY OF LAWS, REGULATIONS AND OTHER GOVERNMENTAL REQUIREMENTS THAT MAY CHANGE IN SIGNIFICANT WAYS, AND THE COST OF COMPLIANCE, OR THE FAILURE TO COMPLY WITH SUCH REQUIREMENTS, COULD IMPACT OUR BUSINESS AND RESULTS OF OPERATIONS.
TheAs responsible stewards of people and communities, natural resources and capital, stewardship is one of the Company's core values. Our Vision 2030 goals provide a framework to build a better future for people, the planet and the Company in the areas of healthy and abundant forests, thriving people and communities, sustainable operations and renewable solutions. Through these efforts and more, the Company tackles the toughest issues in the value chain to improve its environmental footprint and promote the long-term sustainability of natural capital.
Our approach to sustainability considers our entire value chain, from sourcing raw materials responsibly
and working safely, to making renewable, recyclable products and providing a market for recovered products. To help inform and prioritize the focus of our sustainability strategy, we have engaged with internal and external stakeholders using a variety of methods, assessed key issues and associated risks and opportunities, and incorporated sustainability considerations into our processes. Additionally, in 2020, we established our Vision 2030 goals with the purpose of promoting healthy and abundant forests, thriving people and communities, sustainable operations and renewable solutions.
As part of its business, the Company is subject to extensive and increasingly stringent federal, state local, and stateinternational laws and regulations governing the protection of the environment. For example, Company manufacturing processes involve discharges to water, air emissions, water intake and waste handling and disposal activities, all of which are subject to a variety of environmental regulation, as well as similarlaws and regulations, internationally.along with requirements of environmental permits or analogous authorizations issued by various governmental authorities. In addition, new environmental laws or regulations impacting our facilities around the world are routinelyoften passed or proposed. Our continuing objectives include: (1) controlling emissions and discharges from our facilities to avoid adverse impacts on the environment, and (2) maintaining compliance with applicable laws and regulations. The Company spent $46approximately $40 million in 20202023 for capital projects to control environmental releases into the air and water, and to assure environmentally sound management and disposal of waste. We expect to spend $50approximately $35 million in 20212024 for environmental capital projects. Capital expenditures for 2022on environmental projects for 2025 and 2026, respectively, are anticipated to be approximately $45$40 million and $35 million. Capital
expenditures for 2023It is possible that our capital expenditure assumptions, estimates and project completion dates may change, and our projections are subject to change due to items such as the finalization of ongoing engineering projects, varying costs or changes in environmental projects are estimated to be $30 million.laws and regulations.
The Company has completed capital projects to meet the U.S. Environmental Protection Agency's ("EPA") maximum achievable control technology ("MACT") and risk and technology review ("RTR") regulations that require owners of specified pulp and paper process equipment and boilers to meet new air emissions standards for certain substances. As portions of these MACT and RTR regulations have been remanded to EPA for further consideration it is not clear at this time
what, if any, additional capital project expenditures might result from resolution of the open issues.
The Company has been named as a potentially responsible party ("PRP") in environmental remediation actions under various federal and state
laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"). Many of these proceedings involve the cleanup of hazardous substances at large commercial landfills that received waste from many different sources. While joint and several liability is authorized under CERCLA and equivalent state laws, as a practical matter, liability for CERCLA cleanups is typically allocated among the many PRPs.PRPs and/or potentially liable parties, and costs are commonly allocated according to relative amounts of waste deposited and other factors. There are other remediation costs typically associated with the cleanup of hazardous substances at the Company’s current, closed or formerly-owned facilities, and recorded as liabilities on the balance sheet. For additional information regarding certain remediation actions, see Note 14 Commitments and Contingent Liabilities of Item 8. Financial Statements and Supplementary Data on pages 6874 through 70.78. For additional information regarding risks associated with environmental matters, see
See Item 1A. Risk Factors - – WE ARE SUBJECT TO A WIDE VARIETY OF LAWS, REGULATIONS AND OTHER GOVERNMENTGOVERNMENTAL REQUIREMENTS THAT MAY CHANGE IN SIGNIFICANT WAYS, AND THE COST OF COMPLIANCE WITH SUCH REQUIREMENTS, OR THE FAILURE TO COMPLY WITH SUCH REQUIREMENTS, COULD IMPACT OUR BUSINESS AND RESULTS OF OPERATIONS.
The Company recognizes the impacts of climate change on people and our planet. In order toTo manage climate-related risks, we are taking actions throughout our value chain to help advance a low-carbon economy. We aligned our annual sustainability reporting with the recommendations of the Task Force on Climate-Related Financial Disclosure (“TCFD”) in the 2023 reporting cycle (based upon data from 2022). As part of our TCFD reports, we identify and report on climate-related opportunities. We identify and evaluate physical and transition climate-related risks through our enterprise risk management process.
We transform renewable resources into recyclable products that people depend on every day. This cycle begins with sourcingWe aim to produce low carbon products that have a positive impact on nature. To this end, we source renewable fiber from responsibly managed forests and atrecycled raw materials. We then use a circular manufacturing process that makes the most of resources and byproducts, while reducing the environmental impacts of our operations. At the end of use, the majority of our low-carbon fiber-based products are recycled into
new products at a higher rate than any other base material. We work to advance the shift to a low-carbon, circular economy by designing products that are 100% reusable, recyclable or compostable.
Through improvements in operations, equipment, energy efficiency and fuel diversity, we are working to achieve company-wide reductions in Scope 1 and Scope 2 greenhouse gas (“GHG”) emissions. As part of our Vision 2030 goals, we have committed totargeted incremental reductions of 35% in our Scope I, II1, 2, and III greenhouse gas emissions: 35%3 GHG emissions by 2030 in comparison to 2019 levels. The Science Based Targets initiative (“SBTi”) approved these targets as consistent with levels required to meet the goals of the 2015 Paris Agreement, an agreement signed among over 170 countries, which became effective in November 2016. We intend to continue to evaluate and implement projects as we pursue this Vision 2030 GHG goal. This includes ongoing energy efficiency efforts and capital projects to phase out our most carbon intensive fuel sources (Scope 1) as well as developing GHG reduction by 2030. Our greenhouse gas emissions reduction goal isstrategies for our energy sourcing (Scope 2) and broader supply chain footprint (Scope 3). In addition, we have recently committed to be an early adopter of the Taskforce on Nature-related Financial Disclosures (“TNFD”). TNFD adopters intend to make corporate reporting disclosures that are aligned with TNFD recommendations, which have been designed to (i) meet the corporate reporting requirements of organizations across jurisdictions; (ii) be consistent with the Paris Climate Agreement. Furthermore, weglobal baseline for corporate sustainability reporting; and (iii) be aligned with the global policy goals outlined in the Kunming-Montreal Global Biodiversity Framework, which was adopted to halt and reverse nature loss by 2030.
We use carbon-neutral biomass and manufacturing residuals (rather than fossil fuels) to generate a majority of the manufacturing energy at our mills.
Our We believe our efforts to advance sustainable forest management and restore forest landscapes are an important lever for mitigating climate change through
carbon storage in forests.
In an effort to mitigate the impact of climate change various international, national and sub-national (regional, state and local) governmental actions have been or may be undertaken. Presently, these efforts have not materially impacted the Company, but such efforts may have a material impact on the Company in the future.
INTERNATIONAL EFFORTS
The 2015 Paris Agreement went into effect in November 2016 and continuescompels international efforts and voluntary commitments toward reducing the emissions of greenhouse gases ("GHGs").GHGs. IP supports the 2015 Paris Agreement and recognizes the importance of global policy action to achieve emission reductions consistent with an increase of “well below 2 ° Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 ° Celsius.” Consistent with this objective, participating countries aim to balance GHG emissions generation
and sequestration in the second half of this century or, in effect, achieve net-zero global GHG emissions.
To assist member countries in meeting GHG reduction obligations, the EUEuropean Union operates an Emissions Trading System ("EU ETS"). Currently, we have two sites directly subject to regulation under Phase III of the EU ETS, one in Poland and one in France. Other sites that we operateOur operations in the EU experience indirect impacts of the EU ETS through purchased power pricing. Neither the direct nor indirect impacts of the EU ETS have been material to the Company, but they could be material to the Company in the future depending on how the 2015 Paris Agreement's non-binding commitments or allocation of, and market prices for, GHG credits under existing rules evolve over the coming years.
Additionally, the EU’s newly mandated Corporate Sustainability Reporting Directive (“CSRD”) and Deforestation Regulation (“EUDR”), each impose additional compliance responsibilities on the Company. The CSRD requires additional reporting processes for greater accountability. The Company’s first reporting year under the CSRD is expected to be 2025. The CSRD standards replace the existing Non-Financial Reporting Directive and expands reporting requirements for companies operating in the EU. The implementation timeline varies depending on the type of entity.
The EUDR requires companies trading in products derived from certain commodities to conduct extensive diligence on the value chain to ensure goods do not result from recent deforestation, forest degradation or breaches of local environmental and social laws. Currently, the Company is evaluating the implications of the EUDR to its business with the expected earliest reporting date being in 2025.
U.S. EFFORTS, INCLUDING STATE, REGIONAL AND LOCAL MEASURES
The U.S. Congress has not passed
Responses to climate change may result in regulatory risks as new laws and regulations aimed at reducing GHG legislation.emissions come into effect. The EPA manages regulations to: (i) control GHGs from mobile sources by adopting transportation fuel efficiency standards; (ii) control GHG emissions from new Electric Generating Units ("EGUs"(“EGUs”); (iii) control emissions from new oil and gas processing operationsoperations; and (iv) require reporting of GHGs from sources of GHGs greater than 25,000 tons per year.
Several U.S. states, including states in which we operate facilities, have enacted or are considering legal measures to require the reduction and reporting of emissions of GHGs by companies and public utilities. California, New York and Virginia have already enacted such programs, although these regulations have not had, and are not expected to
have a material impact on the Company. For example, the State of California recently passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act, which will impose climate-related reporting obligations on companies doing business in California meeting specified thresholds, including the Company. We monitor proposed programs in other states as well; however, it is unclear what impacts, if any, future state-level or local GHG rules will have on the Company’s operations.
SUMMARY
Regulation ofrelated to GHGs and climate change continues to evolve in various countriesthe areas of the world in which we do business. WhileHowever, while it is likely that there will be increased governmental action regarding GHGs and climate change in the future, it is unclear what actions will be taken and when such actions will occur and at this time it is not reasonably possible to estimate the Company’s costs of compliance with rules that have not yet been adopted or implemented and may not be adopted or implemented in the future. In addition to possible direct impacts, future legislation and regulation could have indirect impacts on the Company, such as higher prices for transportation, energy and other inputs, as well as more protracted air permitting processes, causing delays and higher costs to implement capital projects. Other possible indirect impacts may include influence on competitive position due to customer and end-consumer preferences regarding low-carbon, circular products with a high recycling rate along with tax credit and funding opportunities to expand green energy production and carbon credit generation. The Company has controls and procedures in place to track GHG emissions from our facilities, as well as to stay informed about developments concerning possible climate change legislationclimate-related laws, regulations, accords, and regulationpolicies in the U.S. and in other countriesjurisdictions where we operate. We regularly assess whether such legislation or regulationdevelopments may have a material effect on the Company, its operations or financial condition, and whether we have any related disclosure obligations under applicable rules and regulations.
Moreover, compliance with legal requirements related to GHGs and/or climate change which are currently in effect or which may be effective or enacted in the future are expected to require future expenditures to meet GHG emission reduction, disclosure or other obligations. These obligations may include carbon taxes, the requirement to purchase GHG credits or the need to acquire carbon offsets. We may also incur significant expenditures in relation to our efforts to meet our internal targets or goals with respect to
GHGs and climate change, including our Vision 2030 goal on GHGs as set forth above. Furthermore, in connection with complying with legal requirements and/or our efforts to meet our internal targets and goals, we have made and expect to continue to make capital and other investments to displace traditional fossil fuels, such as fuel oil and coal, with lower carbon alternatives, such as biomass and natural gas. Rather than rely on carbon offsets, we focus on reducing energy consumption as well as relative GHG emissions across our mills and manufacturing facilities. Currently, these efforts and obligations have not materially impacted the Company but such efforts and obligations may have a material impact on the Company in the future.
We believe sustainability is a key element of corporate governance promoted by our Board of Directors, committees of the Board of Directors, and senior management.
Our Board of Directors has primary oversight of the Company's enterprise risk management program, which includes sustainability. The Board receives updates from our Chief Sustainability Officer ("CSO") and additional members of management. Our Board of Directors also conducts periodic reviews of components of the sustainability strategy and performance and reviews material key sustainability-related developments and issues. Our standing committees share responsibility on sustainability as described below:
Audit and Finance Committee
•Reviews processes and controls for external reporting of sustainability and social impact data and metrics.
•Reviews related disclosures in Annual Report on Form 10-K and other sustainability reports.
Governance Committee
•Reviews and reassesses adequacy of, and oversees compliance with our Corporate Governance Guidelines.
•Seeks Board of Director candidates with diverse backgrounds.
Management Development and Compensation Committee ("MDCC Committee")
•Approves Chief Executive Officer ("CEO") sustainability-focused objectives and evaluates performance.
•Considers sustainability factors in SLT compensation and in overall compensation plan design.
•Reviews sustainability disclosures related to executive compensation.
Public Policy and Environment Committee ("PPE Committee")
•Reviews sustainability and social impact policies, plans and performance to ensure commitments to stewardship.
•Stays current on emerging sustainability and social impact trends and issues impacting the Company.
At the management level, ownership and governance of sustainability matters is embedded in the organization from the top down. Our CEO and SLT are responsible for corporate strategy and leadership including incorporation of our sustainability goals and standards into our daily operations and long-term business strategy. Our SLT, which is comprised of senior vice presidents who oversee critical functions and business units within the Company, evaluates sustainability issues based on input from function-specific councils that report to the SLT. The SLT receives several sustainability updates throughout the year from our CSO. The Company also has an Enterprise Lead Team (“ELT”), comprised of the SLT and additional subject matter experts, including our CSO, that meets quarterly and receives regular climate-related updates. Moreover, at the operational level, our Stewardship Council, a cross-functional leadership team with representatives from businesses and functional teams, guides and supports the Company’s sustainability strategy and tactics.
For additional information regarding risks associated with climate change, see Item 1A. Risk Factors – WE ARE SUBJECT TO RISKS ASSOCIATED WITH CLIMATE CHANGE AND OTHER SUSTAINABILITY MATTERS AND GLOBAL, REGIONAL AND LOCAL WEATHER CONDITIONS AS WELL AS LEGAL, REGULATORY AND MARKET RESPONSES TO CLIMATE CHANGE.
Additional information regarding climate change and the Company is available in our 2019 Global Citizenship reportannual Sustainability Report and TCFD Report, both of which can, or will be, found on our website at www.internationalpaper.com, though thiswww.internationalpaper.com. Our 2023 Sustainability Report and 2023 TCFD Report will be available later in 2024. The information contained in such reports is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report that we file with or furnish to the SEC.
Any targets or goals with respect to sustainability matters discussed herein or in our sustainability reports as noted above are forward-looking statements and may be aspirational. These targets or goals are not guarantees of future results, and involve assumptions and known and unknown risks and uncertainties, some of which are beyond our control.
Mark S. Sutton, 59, chairman (since January 1, 2015) & chief executive officer (since November 1, 2014). Mr. Sutton previously served as president & chief operating officer from June 1, 2014 to October 31, 2014, senior vice president - industrial packaging from November 2011 to May 31, 2014, senior vice president - printing and communications papers of the Americas from 2010 until 2011, senior vice president - supply chain from 2008 to 2009, vice president - supply chain from 2007 until 2008, and vice president - strategic planning from 2005 until 2007. Mr. Sutton joined International Paper in 1984. Mr. Sutton serves on the board of directors of The Kroger Company. He is a member of The Business Council, serves on the American Forest & Paper Association board of directors, The Business Roundtable board of directors, and the international advisory board of the Moscow School of Management - Skolkovo. He was appointed chairman of the U.S. Russian Business Council. He also serves on the board of directors for Memphis Tomorrow and board of governors for New Memphis
Institute. Mr. Sutton has been a director since June 1, 2014.
W. Michael Amick, Jr., 57, senior vice president - paper the Americas since January 1, 2017 until his anticipated departure on March 31, 2021. Mr. Amick previously served as senior vice president - North American papers & consumer packaging from July 2016 until December 2016, senior vice president - North American papers, pulp & consumer packaging from November 2014 until June 2016, vice president - president, IP India, from August 2012 to October 2014, and vice president and general manager for the coated paperboard business from 2010 to 2012. Mr. Amick joined International Paper in 1990.
Clay R. Ellis, 50, senior vice president - enterprise operational excellence since December 2019. Mr. Ellis previously served as vice president - manufacturing, global cellulose fibers from 2016 to December 2019, vice president of pulp from 2014 to 2016, and vice president manufacturing, North American papers from 2012 to 2014. Mr. Ellis joined International Paper in 1992.
W. Thomas Hamic, 55, senior vice president - global cellulose fibers and enterprise commercial excellence since September 2020. Mr. Hamic previously served as senior vice president - containerboard and enterprise commercial excellence from December 2019 until September 2020. Mr. Hamic has also previously served as vice president and general manager - containerboard & recycling, North American containerfrom June 2015 until December 2019. Mr. Hamic became vice president and general manager of the south area in container of the Americas in 2009, and he was appointed to the role of vice president, industrial packaging group’s finance & strategy in 2010. Mr. Hamic joined International Paper in 1991.
Timothy S. Nicholls, 59, senior vice president & chief financial officer since June 2018. Mr. Nicholls previously served as senior vice president - industrial packaging the Americas from January 2017 through June 2018, senior vice president - industrial packaging from November 2014 through December 2016, senior vice president - printing and communications papers of the Americas from November 2011 through October 2014, senior vice president and chief financial officer from 2007 until 2011, vice president and executive project leader of IP Europe during 2007, and vice president and chief financial officer - IP Europe from 2005 until 2007. Mr. Nicholls joined International Paper in 1999.
Thomas J. Plath, 57, senior vice president - human resources and global citizenship since March 1, 2017. Mr. Plath previously served as vice president
- human resources, global businesses from November 2014 through February 2017, and vice president - HR manufacturing, technology, EH&S and global supply chain from April 2013 to November 2014. Mr. Plath joined International Paper in 1991.
Jean-Michel Ribiéras, 58, senior vice president - paper the Americas and chief executive officer-elect of the standalone, publicly traded company that will result from the Company's anticipated spin-off SpinCo since January 2021. Mr. Ribieras previously served as senior vice president - industrial packaging the Americas from June 2018 until January 2021. Mr. Ribieras also previously served as senior vice president - global cellulose fibers from July 2016 through June 2018, senior vice president - president, IP Europe, Middle East, Africa & Russia from 2013 until June 2016, and president - IP Latin America from 2009 until 2013. Mr. Ribieras joined International Paper in 1993.
James P. Royalty, Jr., 51, senior vice president and president, Europe, the Middle East, Africa and Russia since December 2019. Most recently, Mr. Royalty served as vice president, corporate development and disruptive technologies from September 2018 until December 2019, vice president, strategic projects from 2017 until 2018, vice president, investor relations from 2013 until 2017, vice president and general manager, container the Americas in 2008 to 2013. Mr. Royalty joined International Paper in 1991.
Sharon R. Ryan, 61, senior vice president, general counsel & corporate secretary since November 2011. Ms. Ryan previously served as vice president, acting general counsel & corporate secretary from May 2011 until November 2011, vice president from March 2011 until May 2011, associate general counsel, chief ethics and compliance officer from 2009 until 2011, and associate general counsel from 2006 until 2009. Ms. Ryan joined International Paper in 1988.
John V. Sims, 58, senior vice president - finance, papers the Americas and chief financial officer-elect of SpinCo since January 2021. Mr. Sims previously served as senior vice president - corporate development from December 2019 until January 2021. Mr Sims previously served as senior vice president - president, IP Europe, Middle East, Africa & Russia from July 2016 until December 2019. Mr. Sims also previously served as vice president and general manager, European papers from January 2016 until June 2016, vice president & general manager, North American papers from 2014 until December 2015, and vice president, finance and strategy, industrial packaging, from 2009 until 2013. Mr. Sims is a director of Ilim in which International
Paper holds a 50% interest, and of its subsidiary, Ilim Group. Mr. Sims joined International Paper in 1994.
Gregory T. Wanta, 55, senior vice president - North American container since December 2016. Mr. Wanta has served in a variety of roles of increasing responsibility in manufacturing and commercial leadership roles in specialty papers, coated paperboard, printing papers, foodservice and industrial packaging, including vice president, central region, Container the Americas, from January 2012 through October 2016. Mr. Wanta joined International Paper in 1991.
Raw materials essential to our businesses include wood fiber, purchased in the form of pulpwood, wood chips and old corrugated containers (OCC)("OCC"), and certain chemicals, including caustic soda, starch and starch.adhesives. For further information concerning fiber supply purchase agreements, see pages 33 and 34.page 40.
The following are the executive officers of our Company as of the date of this filing.
Mark S. Sutton, 62, chair (since January 2015 and member of the Board of Directors since June 2014) and chief executive officer (since November 2014). In his 40 years with the Company, Mr. Sutton has served in various roles of increasing responsibilities including president and chief operating officer (June 2014-October 2014), senior vice president - Industrial Packaging (2011-2014), senior vice president - Printing and Communications Papers the Americas (2010-2011), senior vice president - Supply Chain (2008-2009), vice president - Supply Chain (2007-2008), and vice president - Strategic Planning (2005-2007). Mr. Sutton is also a member of the board of directors of The Kroger Company (NYSE: KR). He is a member of The Business Council and the Business Roundtable and serves on the American Forest & Paper Association board of directors. He also serves on the board of directors for Memphis Tomorrow, an association of CEOs of Memphis’ largest businesses working to promote opportunity and quality of life for all Memphians. Mr. Sutton joined International Paper in 1984.
Clay R. Ellis, 53, senior vice president - Global Cellulose Fibers and IP Asia since January 2023. Mr. Ellis previously served as senior vice president - Enterprise Operational Excellence (2019-2022) and vice president - Manufacturing, Global Cellulose Fibers (2016-2019). Prior to that, he served as vice president of Pulp (2014-2016), and vice president Manufacturing, North American Papers (2012-2014). Mr. Ellis joined International Paper in 1992.
Aimee Gregg,45, senior vice president, Supply Chain and Information Technology, since January 2023. Prior to this role, Ms. Gregg served as vice president and general manager, Containerboard and Recycling (2020-2023); vice president, Recycling and Recovered Fiber (2018-2020), and general manager, Recycling, (2016-2018). Ms. Gregg joined International Paper in 2002.
W. Thomas Hamic, 57, senior vice president - North American Container and chief commercial officer since January 2023. Prior to this role, Mr. Hamic served as senior vice president - Global Cellulose Fibers and Enterprise Commercial Excellence (2020-2022). Mr. Hamic previously served as senior vice president - Containerboard and Enterprise Commercial Excellence (2019-2020). Mr. Hamic has also previously served as vice president and general manager - Containerboard and Recycling, North American Container(2015-2019). Mr. Hamic became vice president and general manager of the South Area Container the Americas in 2009, and was appointed to the role of vice president, Industrial Packaging Group’s Finance and Strategy in 2010. Mr. Hamic joined International Paper in 1991.
Allison B. Magness, 46, senior vice president Manufacturing and Environmental Health and Safety (”EHS”) since January 2023. Prior to this role, she served as vice president, South Area, North American Container (2019-2022). Previously she served in a number of roles including vice president, Manufacturing and Containerboard (2015-2019); manager, Technical Services, North American Papers and Pulp (2013-2015); and mill manager of the Franklin Mill (2011-2013). Ms. Magness joined International Paper in 2000.
Timothy S. Nicholls, 62, senior vice president and chief financial officer since June 2018. Mr. Nicholls previously served as senior vice president - Industrial Packaging the Americas (2017-2018), senior vice president - Industrial Packaging (2014-2016), senior vice president - Printing and Communications Papers of the Americas (2011-2014), senior vice president and chief financial officer (2007-2011), vice president and executive project leader of IP Europe (2007), and vice president and chief financial officer - IP Europe (2005-2006). Mr. Nicholls joined International Paper in 1999 following our acquisition of Union Camp Corporation where he had worked since 1991.
Thomas J. Plath, 60, senior vice president - Human Resources and Corporate Affairs since January 2023. Prior to this role, he served as senior vice president - Human Resources and Global Citizenship (2017-2022). Mr. Plath previously served as vice president - Human Resources, global businesses (2014-2017), and vice president – Human Resources Manufacturing, Technology, EHS and Global Supply Chain (2013-2014). Mr. Plath joined International Paper in 1991.
James P. Royalty, Jr., 54, senior vice president - Containerboard and Recycling since January 2023. Previously, he served as senior vice president and president, Europe, Middle East, Africa & Russia (2019-2022); vice president, Corporate Development
and Disruptive Technologies (2018-2019); vice president, Strategic Projects (2017-2018); vice president, Investor Relations (2013-2017); vice president and general manager, Container the Americas (2008-2013). Mr. Royalty joined International Paper in 1991.
Joseph R. Saab, 55, senior vice president, general counsel and corporate secretary since July 2022. Mr. Saab previously served as vice president, deputy general counsel and assistant corporate secretary (2019-2022) and associate general counsel - Industrial Packaging North America, Europe, Middle East & Africa (2014-2019). Mr. Saab joined International Paper in 2001.
Ksenia N. Sosnina, 55, senior vice president, Europe, Middle East & Africa since July 2023. Earlier in her career, Ms. Sosnina served as an officer and vice president of IP Russia (2015-2016) and served as chief executive officer of the Ilim Group (2016-2023). Ms. Sosnina joined International Paper in 2013.
There are no family relationships, as defined by the instructions to this item, among any of the Company’s executive officers and any other executive officers or directors of the Company.
Certain statements in this Annual Report on Form 10-K that are not historical in nature may be considered “forward-looking” statements“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. TheseForward-looking statements are oftencan be identified by the use of forward-looking or conditional words “will,such as “expects,” “anticipates,” “believes,” “estimates,” “could,” “should,” “can,” “forecast,” “intend,” “look,” “may,” “should,“will,” “continue,“remain,” “anticipate,“confident,” “believe,” “expect,” “plan,” “appear,” “project,” “estimate,” “intend”“commit” and words of a“plan” or similar nature.expressions. These statements are not guarantees of future performance and reflect management’s current views with respectand speak only as to future events, whichthe dates the statements are made 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) developmentsrisks 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 COVID-19 pandemic, including the severity, magnitudeemission of greenhouse gases and duration of the pandemic, negative global economic conditions arising from the pandemic, the development, availability and effectiveness of treatments and vaccines, impacts of governments’ responses to the pandemic on our operations, impacts of the pandemic on commercial activity, our customers and business partners and consumer preferences and demand, supply chain disruptions, and disruptions in the capital or financial markets;other sustainability matters; (ii) the level of our indebtedness, risks associated with our variable rate debt, and changes in interest rates;rates (including the impact of current elevated interest rate levels); (iii) the impact of global and domestic economic conditions and industry conditions, including but not limitedwith respect to current negative macroeconomic conditions,
inflationary pressures and changes in the cost or availability of raw materials, energy sources and transportation costs,sources, supply chain shortages and disruptions, competition International Paper faces,we face, cyclicality, and changes in customer or consumer preferences, government regulation, demand and pricing for International Paperour products, (including changes resultingand conditions impacting the credit, capital and financial markets; (iv) risks arising from the COVID-19 pandemic); (iv)conducting business internationally, domestic and global geopolitical conditions, military conflict (including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas, the possible expansion of such conflicts, and the potential geopolitical and economic conditions and political changes,consequences associated therewith), changes in currency exchange rates, trade protectionist policies, downgrades in International Paper’sour credit ratings, and/or the credit ratings of
banks issuing certain letters of credit, issued by recognized credit rating organizations; (v) the amount of International Paper’sour future pension funding obligations, and pension and health carehealthcare costs; (vi) unanticipated expendituresthe costs of compliance, or other adverse developments relatedthe failure to the cost of compliancecomply with, existing and new environmental (including with respect to climate change and GHG emissions), tax, labor and employment, privacy, anti-bribery and anti-corruption, and other U.S. and non-U.S. governmental laws and regulations (including new legal requirements arising from the COVID-19 pandemic);regulations; (vii) any material disruption at any of International Paper’sour manufacturing facilities or other adverse impact on our operations due to severe weather, natural disasters, climate change or other causes (including as the result of the COVID-19 pandemic);causes; (viii) risks inherent in conducting business through joint ventures;our ability to realize expected benefits and cost savings associated with restructuring initiatives; (ix) International Paper’sour ability to achieve the benefits expected from, and other risks associated with, acquisitions, joint ventures, divestitures, spin-offs, capital investments and other corporate transactions;transactions, (x) cybersecurity and information technology risks;risks, including as a result of security breaches and cybersecurity incidents; (xi) loss contingencies and pending, threatened or future litigation, including with respect to environmental related matters, matters; (xii) the receipt of regulatory approvals relatingour exposure to the spin-off transaction without unexpected delays or conditions;claims under our agreements with Sylvamo Corporation; (xiii) International Paper’s abilityour failure to successfully separate the SpinCo business and realize the anticipated benefits of the spin-off transaction; (xiv) the ability to satisfy any necessary conditions to consummate the spin-off transaction within the estimated timeframes or at all;of Sylvamo Corporation and (xv) the final terms and conditions of the spin-off transaction, including the amount of any dividend by SpinCo to International Paper and the terms of any ongoing commercial agreements and arrangements between International Paper and SpinCo following any such transaction, the costs of any such transaction, the nature and amount of indebtedness incurred by SpinCo, the qualification of thesuch spin-off transaction as a tax-free transaction for U.S. federal income tax purposes (including whether an IRS ruling will be obtained), diversionpurposes; and (xiv) our ability to attract and retain qualified personnel, particularly in light of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties, and the impact of any such transaction on the businesses of International Paper and SpinCo and the relationship between the two companies following any such transaction.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 International Paper’sour press releases and reports filed with the U.S. Securities and Exchange Commission filings.Commission. In addition, other risks and uncertainties not presently known to International Paperthe Company or that itwe currently believesbelieve to be immaterial could affect the accuracy of any forward-looking statements. International PaperThe Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
The Company faces a variety of risks, including risks in the normal course of business and through global, regional, and local events that could have an adverse impact on its
reputation, operations, and financial performance. The Board of Directors exercises oversight of the Company’s enterprise risk management program, which includes strategic, operational and financial matters, as well as compliance and legal risks. The Audit and Finance Committee coordinates the risk oversight role exercised by the Board’s standing committees and management, and it receives updates on the risk management processes twice per year.
In addition to the risks and uncertainties discussed elsewhere in this Annual Report on Form 10-K (particularly in
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations), or in the Company’s other filings with the Securities and Exchange Commission, theThe following are some importantmaterial risk factors of which we are aware, including risk factors that could cause the Company’s actual results to differ materially from those projectedcontemplated in any forward-looking statement. If any of the events or circumstances described in any of the following risk factors occurs, our business, results of operations and/or financial condition could be materially and adversely affected, and our actual results may differ materially from those contemplated in any forward-looking statements we make in any public disclosures. Additional factors that could affect our business, results of operations and/or financial condition are discussed elsewhere in this Annual Report on Form 10-K (including in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations) and in the Company’s other filings with the Securities and Exchange Commission. Moreover, risks or uncertainties not presently known to us, or that we currently deem immaterial, may adversely affect our business, results of operations, or financial condition.OVERALL
RISKS RELATING TO MARKET AND ECONOMIC
FACTORS
THE CURRENT COVID-19 PANDEMIC HAS HAD
ADVERSE DEVELOPMENTS IN GENERAL BUSINESS AND ECONOMIC CONDITIONS COULD HAVE AN ADVERSE EFFECT ON PORTIONS OFTHE DEMAND FOR OUR BUSINESS,PRODUCTS AND MAY HAVE MATERIAL ADVERSE EFFECTS ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND CASH FLOWS, PARTICULARLY IF NEGATIVE ECONOMIC CONDITIONS ASSOCIATED WITH COVID-19 PERSIST OR DETERIORATE.OPERATIONS. The COVID-19 pandemic has resulted in authorities throughout the world implementing widespread measures attempting to contain the spread and impact of COVID-19, such as travel bans and restrictions, quarantines, stay-at-home orders, the promotion of social distancing and limitations on business activity, including business closures. These measures and the pandemic have caused a significant globalGeneral economic downturn, disrupting supply chains, significantly increasing unemployment and underemployment levels, andconditions may adversely impactingaffect industrial non-durable goods production, consumer confidence and spending. The continued spreadspending, commercial printing and advertising activity, and white-collar employment levels, all of COVID-19 has also led to significant disruption and volatility in the global capital and financial markets.
Although governments of countries in which we operate have generally considered forest products and the supply chain on which we depend to be “essential industries” that should remain operational during this pandemic, any significant disruption in operations at one or more of our mills, plants or other
facilities as a result of the COVID-19 pandemic, including precautionary measures we take or are taken by governmental authorities that limits in-person workplace contact at any of our facilities to reduce the potential for employee exposure to COVID-19, could have an adverse effect on our business or operations. If a significant portion of our workforce is unable to work effectively due to measures taken in response to the COVID-19 pandemic such as those described herein, our operations will likely be negatively impacted.
COVID-19 has had a significant negative impact on demand for our printing papers products. In addition, our operations in Industrial Packaging experienced higher supply chain costs due to the impact of COVID-19.
In addition to the reduction in demand for our products, that the COVID-19 pandemic has had or could have, other negative impacts onotherwise adversely affect our business, include, but are not limited to, the following:
•business. We rely on a global workforce, and we take measures to protect the health and safety of our employees, customers and others with whom we do business, while continuing to effectively manage our employees and maintain business operations. During the pandemic, we have taken additional measures and incurred additional expenses to protect the health and safety of our employees to comply with applicable government requirements and safety guidance. Our business operations may also be additionally disrupted if a significant portion of our workforce is unable to work safely and effectively due to illness, quarantines, government actions,adversely affected by catastrophic or other restrictionsunforeseen events, including health epidemics or measures responsive to the pandemic. Measures taken across our business operations to addresspandemics, such as COVID-19, natural disasters, geopolitical events, military conflicts, terrorism, port and canal blockages and similar disruptions, political, financial or social instability, or civil or social unrest. Future health and safety may not be sufficient to prevent the spread of COVID-19 among our employee base, customers and others.
•A significant number of our employees as well as customers and others with whom we do business, continue to work remotely in response to the COVID-19 pandemic. Our business operations may be disrupted, and we may experience increased risk of adverse effects to our business, if a significant portion of our workforce or certain business operations are negatively impacted as a result of remote work arrangements, including due to cyber risks or other disruption to our technology infrastructure.
•Cost management and various cost-containment actions implemented across our business in response to the COVID-19 pandemicpandemics could hinder executionadversely impact portions of our business strategy,to varying degrees, including deferralas the result of planned capital expenditures,lower demand for certain products, supply chain and labor disruptions, and higher costs. These effects could adversely affect our business and results of operations.
While we are closely monitoring the impact of the pandemic on all aspects of our business, the extent of thehave a material impact on our business, results of operations, cash flow, liquidity, or financial condition. Moreover, negative economic conditions or other adverse developments with
respect to our business have resulted in, and financial performance, as well as our ability to execute near-term and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and which we cannot predict or control, and some of which we are not currently aware, including, but not limited to: (a) the duration, severity and scope of the pandemic, including additional waves, increases and spikesmay in the number of COVID-19 casesfuture result in certain areas; (b) rapidly-changing governmentalimpairment charges which could be material. Volatility or uncertainty in the financial, capital and public health directives to containcredit markets, and combat the outbreak, including the duration, degreenegative developments associated with interest rates, asset values, currency exchange rates and effectiveness of directives, as well as the easing, removal and potential reinstitution of directives; (c) the availability and wide-spread administration of treatments and vaccines for COVID-19; (d) the extent and duration of the pandemic’scredit, could also have a material adverse effect on economic and social activity, consumer confidence, discretionary spending and preferences, labor and healthcare costs, and unemployment rates, any of which may reduce demand for our products; (e) any temporary reduction in our workforce, closures of our offices and facilitiesbusiness, financial condition and our ability to adequately staff and maintain our operations; and (f) the abilityresults of our customers and suppliers to continue their operations, which could result in terminations of contracts, losses of revenue, adverse effects to our supply chain. If the pandemic continues to create disruptions or turmoil in the credit or financial markets, or impacts our credit ratings, it could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs.operations.
GivenMacroeconomic conditions in the inherent uncertainty surrounding COVID-19, we expect the pandemic willU.S. and globally continue to be challenging in various respects, including as the result of significant inflationary pressures, elevated interest rates, challenging labor market conditions, and adverse effects associated with current geopolitical conditions. Our operations have an adverse impact on portionsbeen adversely affected by, and are expected to continue to be adversely affected by, these negative macroeconomic conditions, including as the result of our businesslower demand for certain products, higher raw material and labor costs. Moreover, any significant deterioration in the near term. If thesecurrent negative macroeconomic conditions, persist for a prolonged period, the COVID-19 pandemic, includingor any of the above factors and othersrecovery therefrom that are currently unknown, mayis significantly slower than anticipated, could have a material adverse effect on our business, results of operations cash flow, liquidity, or financial condition. Further if current negative macroeconomic conditions result in significant disruptions to capital and financial markets, our cost of borrowing, our ability to access capital on favorable terms, and our overall liquidity could be adversely affected.
The COVID-19 pandemic adversely impacted portions of our business to varying degrees, including as the result of lower demand for certain of our products, supply chain and labor disruptions, and higher costs. If public health conditions related to COVID-19 or a similar health epidemic or pandemic were to significantly worsen in the U.S. or in other markets in which we operate, our business and financial results could be adversely impacted, and we may be unable to effectively respond to or predict any such developments.
CHANGES IN INTERNATIONAL CONDITIONS OR OTHER RISKS ARISING FROM CONDUCTING BUSINESS INTERNATIONALLY COULD ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS. As a global producer of renewable fiber-based packaging and pulp products, we could be substantially affected by risks related to the countries outside the U.S. in which we have manufacturing facilities or sell our products. These risks, which can vary substantially by country, may include economic or political instability, geopolitical events, corruption, anti-American sentiment, social and ethnic unrest, natural disasters, military conflicts and terrorism, the regulatory environment (including the risks of operating in
developing or emerging markets in which there are significant uncertainties regarding the interpretation and enforceability of legal requirements and the enforceability of contracts rights and intellectual property rights) fluctuations in the value of local currency versus the U.S. dollar, foreign exchange control regimes (including restrictions on currency conversion) repatriating cash from foreign countries to the U.S., downturns or changes in economic conditions (including in relation to commodity inflation), adverse tax consequences or rulings, import restrictions or controls, economic sanctions, health guidelines and safety protocols, nationalization, changes in social, political or labor conditions, and adverse developments regarding sustainability, environmental regulations and trade policies and agreements, any of which risks could negatively affect our financial results. For example, a significant portion of sales from our Global Cellulose Fibers business are concentrated in China and could be adversely affected by changes in economic conditions and demographics in China. Trade protection measures in favor of local producers of competing products, including governmental subsidies, tax benefits and other measures giving local producers a competitive advantage over us, may also adversely impact our operating results and business prospects in these countries. Likewise, disruption in existing trade agreements or increased trade friction between countries (such as in relation to the trade tensions between the U.S. and China), which may result in tariffs, could have a negative effect on our business and results of operations by restricting the free flow of goods and services across borders.
During the third quarter of 2023, we completed the sale of our ownership stake in Ilim and Ilim Group, and we no longer have investments in Russia following the completion of this sale. Prior to the completion of this sale, the military conflict between Russia and Ukraine adversely affected our Ilim joint venture and our financial results, including as the result of economic sanctions, actions by the Russian government, and associated domestic and global economic and geopolitical conditions. Additionally, while we no longer have any investments in Russia, we may continue to be adversely affected by ongoing geopolitical instability and the economic consequences and disruptions arising therefrom, including as the result of the military conflict between Russia and Ukraine, the military conflict between Israel and Hamas, and increasing tensions between China and Taiwan. These risks may be further heightened in the event of the expansion in the scope or escalation of any such military conflicts.
In addition, our international operations are subject to regulation under U.S. law and other laws related to
operations in foreign jurisdictions, including laws prohibiting bribery of government officials and other corrupt practices. For example, the Foreign Corrupt Practices Act of 1977, as amended, prohibits U.S. companies and their representatives from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business abroad, and the U.S. Department of Treasury’s Office of Foreign Assets Control and other non-U.S. government entities maintain economic sanctions targeting various countries, persons and entities. Failure to comply with domestic or foreign laws could result in various adverse consequences, including the imposition of civil or criminal sanctions, damage to our reputation and the prosecution of executives overseeing our international operations.
RISKS RELATED TO CLIMATE AND WEATHER
WE ARE SUBJECT TO PHYSICAL AND FINANCIAL RISKS ASSOCIATED WITH CLIMATE CHANGE AND OTHER SUSTAINABILITY MATTERS AND GLOBAL, REGIONAL AND LOCAL WEATHER CONDITIONS.
CONDITIONS AS WELL AS BY LEGAL, REGULATORY, AND MARKET RESPONSES TO CLIMATE CHANGE.
Our operationsClimate change impacts, including rising temperatures and the operationsincreasing severity and/or frequency of adverse weather conditions, may result in operational impacts on our suppliers are subjectfacilities, supply chain disruptions and increased raw material and other costs. These adverse weather conditions and other physical impacts which may be exacerbated as the result of climate change include floods, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, snow, ice storms and drought. Climate change may also contribute to climate variations, which impact the decreased productivity of forests the frequency and severity of wildfires,adverse impacts on the distribution and abundance of species, and the spread of disease or insect epidemics. Additionally, the unpredictability and frequency of natural disasters such as hurricanes, earthquakes, hailstorms, wildfires, snow, ice storms, the spread of disease, and insect infestations could also affect timber supply or cause variations in the costepidemics, any of raw materials. Changes in precipitation could make wildfires more frequent or more severe, andwhich developments could adversely affect timber harvesting. The effects of climate change and global, regional and local weather conditions, including the resulting financial costs of compliance with legal or regulatory initiatives, could also have a material adverse effect on our results of operations and business.
There has been an increased focus, including from investors, customers, the general public, U.S. and foreign governmental and nongovernmental authorities, regarding sustainability matters, including with respect to climate change, GHG emissions, packaging and waste, sustainable supply chain practices, biodiversity, deforestation, land, energy and water use, diversity and inclusion and other human capital matters. This increased focus on sustainability matters, including climate change, may result in more prescriptive reporting requirements with respect to sustainability metrics, an increased expectation that such metrics will be voluntarily disclosed by companies such as ours, and increased pressure to
make commitments, set targets, or establish goals, and take action to meet them. As the result of this increased focus and our commitment to sustainability matters, we have voluntarily provided disclosure and established targets and goals with respect to various sustainability matters, including climate change. For example, we have made public commitments regarding our intended reduction of carbon emissions, including our Vision 2030 goal of reducing Scope 1, 2 and 3 GHG emissions by 35% from 2019-2030, which have been approved by SBTi as consistent with levels required to meet the goals of the 2015 Paris Agreement. Meeting these and other sustainability targets and goals have increased, and may continue to increase, our capital and operational costs. There also continues to be a lack of consistency in legal and regulatory initiatives regarding climate change across jurisdictions and various governmental entities. We also expect to incur additional expenses as a result of U.S. and international regulators requiring additional disclosures regarding GHG emissions. Further, there can be no assurance regarding the extent to which our climate and other sustainability targets will be achieved, and the achievement of these targets is subject to various risks and uncertainties, some of which are outside our control. Moreover, there is no assurance that investments made in furtherance of achieving such targets and goals will meet investor expectations or any binding or non-binding legal standards regarding sustainability performance. If we are unable to meet climate and other sustainability targets and goals, on our projected timelines or at all, or if such goals and targets are perceived negatively, including the perception that they are not sufficiently robust or, conversely, are too costly or not otherwise in our best interests, any such developments could adversely impact our reputation as well as investor, customer and other stakeholder relationships, which could adversely impact our business and results of operations. Moreover, not all of our competitors establish climate or other sustainability targets and goals at comparable levels to ours, which could result in competitors having lower supply chain or operating costs as well as reduced reputational risks associated with not meeting such goals.
Other climate-related business risks that we face include risks related to the transition to a lower-carbon economy, such as increased prices for fossil fuels; the introduction of a carbon tax; increased regulation of our operations and our products, and the resulting potential for increased litigation; and more stringent and/or complex environmental and other permitting requirements. To the extent that climate-related business risks materialize, particularly if we are unprepared for them, we may incur unexpected costs, and our business may be materially and adversely affected.
RISKS RELATED TO OUR INDEBTEDNESS
THE LEVEL OF OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND IMPAIR OUR ABILITY TO OPERATE OUR BUSINESS. As of December 31, 2023, we had approximately $5.6 billion of outstanding indebtedness. The level of our indebtedness could have important consequences to our financial condition, operating results and business, including the following:
•it may limit our ability to obtain additional debt or equity financing for working capital, capital expenditures, product development, dividends, share repurchases, debt service requirements, acquisitions and general corporate or other purposes;
•a portion of our cash flows from operations will be dedicated to payments on indebtedness and will not be available for other purposes, including operations, capital expenditures and future business opportunities;
•the debt service requirements of our indebtedness could make it more difficult for us to satisfy other obligations;
•it may limit our ability to adjust to changing market conditions, including to take actions in connection with elevated interest rates (such as in the current elevated interest rate environment), and place us at a competitive disadvantage compared to our competitors that have less debt;
•it may increase our exposure to risks related to fluctuations in foreign currency as we earn profits in a variety of currencies around the world and our debt is denominated in U.S. dollars;
•it may increase our exposure to the risk of increased interest rates insofar as we are compelled to refinance indebtedness at higher interest rates, which risk is heightened by the current high interest rate environment; and
•it may increase our vulnerability to a downturn in general economic conditions or in our business, and may make us unable to carry out capital spending that is important to our growth.
In addition, we are subject to agreements governing our indebtedness that require us to meet and
maintain certain financial ratios and covenants. A significant or prolonged downturn in general business and economic conditions, or other significant adverse developments with respect to our results of operations or financial condition, may affect our ability to comply with these covenants or meet those financial ratios and tests and could require us to take action to reduce our debt or to act in a manner contrary to our current business objectives. Moreover, the restrictions associated with these financial ratios and covenants may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. Additionally, despite these restrictions, we may be able to incur substantial additional indebtedness in the future, which might subject us to additional restrictive covenants that could affect our financial and operational flexibility and otherwise increase the risks associated with our indebtedness as noted above.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR VARIABLE RATE DEBT We have interest rate risk, primarily related to variable rate debt in the aggregate amount of approximately $908 million as of December 31, 2023, associated with our short-term cash investments, variable rate debts, supply chain financing, short-term debt and the installment notes and loans in the Temple-Inland timber monetization special purpose entities. Interest rates rose significantly during 2022 and 2023 and could remain high and volatile in 2024 and beyond. Changes in interest rates impact how much we earn on our short-term cash investments, the interest rate we pay on our variable rate debt and credit agreements, the cost of supply chain financing and the refinance rate of our short-term debt. For additional information, see “Market Risk – Interest Rate Risk” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations on page 44.
CHANGES IN CREDIT RATINGS ISSUED BY NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS COULD ADVERSELY AFFECT OUR COST OF FINANCING AND HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR SECURITIES. Maintaining an investment-grade credit rating is an important element of our financial strategy. A downgrade of the Company’s ratings below investment grade will likely eliminate our ability to access the commercial paper market, may limit our access to the capital markets, have an adverse effect on the market price of our securities, increase our cost of borrowing and require us to post collateral for derivatives in a net liability position. Our desire to maintain the Company's investment grade rating may cause us to take certain actions designed
to improve our cash flow, including sale of assets, suspension or reduction of our dividend and reductions in capital expenditures and working capital.
Under the terms of the agreements governing approximately $1.1 billion of our debt as of December 31, 2023, the applicable interest rate on such debt may increase upon each downgrade in our credit rating. As a result, a downgrade in our credit rating may lead to an increase in our interest expense. There can be no assurance that such credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies if, in each rating agency’s judgment, circumstances so warrant. Any such downgrade, suspension or withdrawal of our credit ratings could adversely affect our cost of borrowing, limit our access to the capital markets or result in more restrictive covenants in agreements governing the terms of any future indebtedness that we may incur.
DOWNGRADES IN THE CREDIT RATINGS OF BANKS ISSUING CERTAIN LETTERS OF CREDIT WILL INCREASE OUR COST OF MAINTAINING CERTAIN INDEBTEDNESS AND MAY RESULT IN THE ACCELERATION OF DEFERRED TAXES. We are subject to the risk that a bank with currently issued irrevocable letters of credit supporting installment notes in connection with Temple-Inland's 2007 sales of forestlands, may be downgraded below a required rating. Prior to 2013, certain banks had fallen below the required ratings threshold and were successfully replaced, or waivers were obtained regarding their replacement. As a result of continuing uncertainty in the banking environment, some of the letter-of-credit banks currently in place remain subject to risk of downgrade and the number of qualified replacement banks remains limited. The downgrade of one or more of these banks may subject us to additional costs of securing a replacement letter-of-credit bank or could result in an acceleration of payments of up to $485 million in deferred income taxes if replacement banks cannot be obtained. The deferred taxes are currently recorded in our consolidated financial statements. See Note 15, Variable Interest Entities, on pages 78 through 80, and Note 13. Income Taxes, on pages 72 through 74, in Item 8. Financial Statements and Supplementary Data for further information.
RISKS RELATING TO OUR PENSION AND HEALTHCARE COSTS
OUR PENSION AND HEALTH CARE COSTS ARE SUBJECT TO NUMEROUS FACTORS WHICH COULD CAUSE THESE COSTS TO CHANGE. We have defined benefit pension plans covering
substantially all U.S. salaried employees hired prior to July 1, 2004 (or later for certain acquired populations, as described in Note 18. Retirement Plans, on pages 82 through 87, in Item 8. Financial Statements and Supplementary Data) and substantially all hourly union and non-union employees regardless of hire date. We froze participation under these plans for U.S. salaried employees, including credited service and compensation on or after January 1, 2019; however, the pension freeze does not affect benefits accrued through December 31, 2018. We provide retiree health care benefits to certain former U.S. employees, as well as financial assistance towards the cost of individual retiree medical coverage for certain former U.S. salaried employees. Our pension costs are dependent upon numerous factors resulting from actual plan experience and assumptions of future experience. Pension plan assets are primarily made up of equity and fixed income investments. Fluctuations in actual market returns on plan assets, changes in general interest rates and in the number of retirees may impact pension costs in future periods. Likewise, changes in assumptions regarding current discount rates and expected rates of return on plan assets could increase pension costs. However, the impact of market fluctuations has been reduced as a result of investments in our pension plan asset portfolio which hedge the impact of changes in interest rates on the plan’s funded status. Drivers for fluctuating health costs include unit cost changes, health care utilization by participants, and potential changes in legal requirements and government oversight.
OUR U.S. FUNDED PENSION PLAN IS CURRENTLY FULLY FUNDED ON A PROJECTED BENEFIT OBLIGATION BASIS; HOWEVER, THE POSSIBILITY EXISTS THAT OVER TIME WE MAY BE REQUIRED TO MAKE CASH PAYMENTS TO THE PLAN, REDUCING THE CASH AVAILABLE FOR OUR BUSINESS. We record an asset or a liability associated with our pension plans equal to the surplus of the fair value of plan assets above the benefit obligation or the excess of the benefit obligation over the fair value of plan assets. At December 31, 2023, we had an overfunded U.S. qualified pension asset balance of $118 million. When aggregated with U.S. nonqualified pension obligations, the benefit deficit recorded under the provisions of Accounting Standards Codification ("ASC") 715, “Compensation – Retirement Benefits,” at December 31, 2023 was $146 million. The amount and timing of future contributions, which could be material, will depend upon a number of factors, including the actual earnings, changes in values of plan assets and changes in interest rates.
RISKS RELATING TO INDUSTRY CONDITIONS
CHANGES IN THE COST OR AVAILABILITY OF RAW MATERIALS, ENERGY AND TRANSPORTATION HAVE RECENTLY AFFECTED, AND COULD CONTINUE TO AFFECT OUR PROFITABILITY.We rely heavily on the use of certain raw materials (principally virgin wood fiber, recycled fiber, caustic soda, starch and starch)adhesives), energy sources (principally biomass, natural gas, electricity and fuel oil) and third-party companies that transport our goods. The market price of virgin wood fiber varies based upon availability and source. The global supply and demand for recycled fiber may be affected by factors such as trade policies between countries, individual governments' legislation and regulations, as well as changes in the global economy.and general macroeconomic conditions. In addition, the increase in demand of products manufactured, in whole or in part, from recycled fiber, on a global basis, may cause significant fluctuations in recycled fiber prices. Taking into account ongoing inflationary conditions in the U.S. and globally, we have experienced, and may continue to experience, a significant increase in various costs, including recycled fiber, energy, freight, chemical, and other supply chain costs, which has adversely affected and is expected to continue to adversely affect our results of operations. Energy prices, in particular prices for oil and natural gas, have fluctuated dramatically in the past and may continue to increase and/or fluctuate in the future. TheMoreover, the availability of labor and the market price for fuel may affect our costs for third-party transportation. In addition, because our businesses operate in highly competitive industry segments, we may have not always been able, and may in the future be unable to recoup past or future increases in the costs of any raw materials, energy sources or transportation sources through price increases to our customers. Our profitability has been, and will continue to be, affected by changes in the costs and availability of such raw materials, energy sources and transportation sources.
THE INDUSTRIES IN WHICH WE OPERATE EXPERIENCE BOTH ECONOMIC CYCLICALITY AND CHANGES IN CONSUMER PREFERENCES.
FLUCTUATIONS IN THE PRICES OF AND THE DEMAND FOR OUR PRODUCTS DUE TO FACTORS SUCH AS ECONOMIC CYCLICALITY AND CHANGES IN CUSTOMER OR CONSUMER PREFERENCES, AND GOVERNMENT REGULATION COULD MATERIALLY AFFECT OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS.FLOWS. Substantially all of our businesses have experienced, and are likely to continue to experience, cycles relating to industry capacity and
general economic conditions. The length and magnitude of these cycles have varied over time and by product. In addition, changes in customer or
consumer preferences may increase or decrease the demand for our fiber-based products and non-fiber substitutes. Moreover, customer and consumer preferences are constantly changing based on, among other factors, cost, convenience, and health environmental and social concerns and perceptions.perceptions and an increased awareness of sustainability considerations. These consumer preferences may affect the prices of our products. In addition, regulatory developments, such as new or developing regulation or single-use packaging products could significantly alter the market for our products. Consequently, our financial results are sensitive to changes in the pricing, and supply and demand for our products. In addition, our reputation and financial results may be adversely affected if we fail to anticipate trends that would enable us to offer products that respond to changing customer preferences and technological and regulatory developments.
COMPETITION IN THE UNITED STATESU.S. AND INTERNATIONALLY COULD NEGATIVELY IMPACT OUR FINANCIAL RESULTS. We operate in a competitive environment, both in the United StatesU.S. and internationally, in all of our operating segments. Our products compete with similar products produced by other forest products companies. Product innovations, manufacturing and operating efficiencies, andadditional manufacturing capacity, marketing, distribution and pricing strategies pursued or achieved by competitors, the increased use of artificial intelligence and machine learning solutions in our industry, and the entry of new competitors into the markets we serve could negatively impact our financial results.
RISKS RELATING TO MARKET AND ECONOMIC FACTORS
ADVERSE DEVELOPMENTS IN GENERAL BUSINESS AND ECONOMIC CONDITIONS COULD HAVE AN ADVERSE EFFECT ON THE DEMAND FOR OUR PRODUCTS AND OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS. General economic conditions In addition, our products also compete, in some instances, with companies in other industries that produce substitutes for wood-fiber products, such as plastics and various types of metal. Customer shifts away from wood-fiber products toward such substitute products may adversely affect industrial non-durable goods production, consumer spending, commercial printing and advertising activity, white-collar employment levels and consumer confidence, all of which impact demand for our products. In addition, volatility in the capital and credit markets, which impacts interest rates, currency exchange rates and the availability of credit, could have a material adverse effect on our business, financial condition and our results of operations.
CHANGES IN INTERNATIONAL CONDITIONS COULD ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS.Our operating results and business prospects could be substantially affected by risks related to the countries outside the United States in which we have manufacturing facilities or sell our products. Specifically, Russia, Brazil, Poland, and Turkey, where we have substantial manufacturing facilities, are countries that are exposed to economic and political instability in their respective regions of the world. Fluctuations in the value of local currency versus the U.S. dollar, downturns in economic activity, adverse tax consequences or rulings, nationalization or any change in social, political or labor conditions in any of these countries or regions impacting matters such as sustainability, environmental regulations and trade policies and agreements, could negatively affect our financial results. Trade protection measures in favor
of local producers of competing products, including governmental subsidies, tax benefits and other measures giving local producers a competitive advantage over International Paper, may also adversely impact our operating results and business prospects in these countries. Likewise, disruption in existing trade agreements or increased trade friction between countries (e.g., the U.S. and China), which can result in tariffs, could have a negative effect on our business and results of operations by restricting the free flow of goods and services across borders. In addition, our international operations are subject to regulation under U.S. law and other laws related to operations in foreign jurisdictions. For example, the Foreign Corrupt Practices Act prohibits U.S. companies and their representatives from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business abroad, and the U.S. Department of Treasury’s Office of Foreign Asset Control and other non-U.S. government entities maintain economic sanctions targeting various countries, persons and entities. Failure to comply with domestic or foreign laws could result in various adverse consequences, including the imposition of civil or criminal sanctions and the prosecution of executives overseeing our international operations.
THE LEVEL OF OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND IMPAIR OUR ABILITY TO OPERATE OUR BUSINESS.As of December 31, 2020, International Paper had approximately $8.1 billion of outstanding indebtedness. The level of our indebtedness could have important consequences to our financial condition, operating results and business, including the following:results.
•it may limit our ability to obtain additional debt or equity financing for working capital, capital expenditures, product development, dividends, share repurchases, debt service requirements, acquisitions and general corporate or other purposes;
•a portion of our cash flows from operations will be dedicated to payments on indebtedness and will not be available for other purposes, including operations, capital expenditures and future business opportunities;
•the debt service requirements of our indebtedness could make it more difficult for us to satisfy other obligations;
•it may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors that have less debt; and
•it may increase our vulnerability to a downturn in general economic conditions or in our business, and may make us unable to carry out capital spending that is important to our growth.
In addition, we are subject to agreements governing our indebtedness that require us to meet and maintain certain financial ratios and covenants. A significant or prolonged downturn in general business and economic conditions, or other significant adverse developments with respect to our results of operations or financial condition, may affect our ability to comply with these covenants or meet those financial ratios and tests and could require us to take action to reduce our debt or to act in a manner contrary to our current business objectives. Moreover, the restrictions associated with these financial ratios and covenants may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. Additionally, despite these restrictions, we may be able to incur substantial additional indebtedness in the future, which might subject us to additional restrictive covenants that could affect our financial and operational flexibility and otherwise increase the risks associated with our indebtedness as noted above.
Moreover, certain of our variable rate debt uses the London Interbank Offering Rate (“LIBOR”) as a benchmark for establishing the interest rate. The U.K. Financial Conduct Authority announced in 2017 that it intends to phase out LIBOR by the end of 2021. In November 2020, the administrator of LIBOR announced it will consult on its intention to extend the retirement date of certain offered rates whereby the publication of the one week and two month LIBOR offered rates will cease after December 31, 2021, but the publication of the remaining LIBOR offered rates will continue until June 20 2023. In addition, other regulators have suggested reforming or replacing other benchmark rates. The discontinuation, reform or replacement of LIBOR or any other benchmark rates may have an unpredictable impact on contractual mechanics in the credit markets or cause disruption to the broader financial markets. Additionally, uncertainty as to the nature of such potential discontinuation, reform or replacement may negatively impact the cost of our variable rate debt.
CHANGES IN CREDIT RATINGS ISSUED BY NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS COULDADVERSELY AFFECT OUR COST OF FINANCING AND HAVE AN ADVERSEEFFECT ON THE MARKET PRICE OF OUR SECURITIES.Maintaining an investment-grade credit rating is an important element of our
financial strategy, and a downgrade of the Company’s ratings below investment grade will likely eliminate our ability to access the commercial paper market, may limit our access to the capital markets, have an adverse effect on the market price of our securities, increase our cost of borrowing and require us to post collateral for derivatives in a net liability position. The Company’s desire to maintain its investment grade rating may cause the Company to take certain actions designed to improve its cash flow, including sale of assets, suspension or reduction of our dividend and reductions in capital expenditures and working capital.
Under the terms of the agreements governing approximately $1.0 billion of our debt as of December 31, 2020, the applicable interest rate on such debt may increase upon each downgrade in our credit rating below investment grade. As a result, a downgrade in our credit rating below investment grade may lead to an increase in our interest expense. There can be no assurance that such credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant. Any such downgrade, suspension or withdrawal of our credit ratings could adversely affect our cost of borrowing, limit our access to the capital markets or result in more restrictive covenants in agreements governing the terms of any future indebtedness that we may incur.
DOWNGRADES IN THE CREDIT RATINGS OF BANKS ISSUING CERTAIN LETTERS OF CREDIT WILL INCREASE OUR COST OF MAINTAINING CERTAIN INDEBTEDNESS AND MAY RESULT IN THE ACCELERATION OF DEFERRED TAXES. We are subject to the risk that a bank with currently issued irrevocable letters of credit supporting installment notes, including those delivered to Temple-Inland in connection with Temple-Inland's 2007 sales of forestlands, may be downgraded below a required rating. Since 2007, certain banks have fallen below the required ratings threshold and were successfully replaced, or waivers were obtained regarding their replacement. As a result of continuing uncertainty in the banking environment, a number of the letter-of-credit banks currently in place remain subject to risk of downgrade and the number of qualified replacement banks remains limited. The downgrade of one or more of these banks may subject the Company to additional costs of securing a replacement letter-of-credit bank or could result in an acceleration of payments of up to $488 million in deferred income taxes if replacement banks cannot be obtained. The deferred taxes are currently recorded in the Company's consolidated financial statements. See Note 15, Variable Interest Entities,OUR PENSION AND HEALTH CARE COSTS ARE SUBJECT TO NUMEROUS FACTORS WHICH COULD CAUSE THESE COSTS TO CHANGE. We have defined benefit pension plans covering substantially all U.S. salaried employees hired prior to July 1, 2004 (or later for certain acquired populations, as described in Note 19. Retirement Plans, on pages 78 through 84, in Item 8. Financial Statements and Supplementary Data) and substantially all hourly union and non-union employees regardless of hire date. The Company has frozen participation under these plans for U.S. salaried employees, including credited service and compensation on or after January 1, 2019; however, the pension freeze does not affect benefits accrued through December 31, 2018. We provide retiree health care benefits to certain former U.S. employees, as well as financial assistance towards the cost of individual retiree medical coverage for certain former U.S. salaried employees. Our pension costs are dependent upon numerous factors resulting from actual plan experience and assumptions of future experience. Pension plan assets are primarily made up of equity and fixed income investments. Fluctuations in actual equity market returns, changes in general interest rates and changes in the number of retirees may impact pension costs in future periods. Likewise, changes in assumptions regarding current discount rates and expected rates of return on plan assets could increase pension costs. Drivers for fluctuating health costs include unit cost changes, health care utilization by participants, and potential legislative impacts and government oversight.OUR PENSION PLANS ARE CURRENTLY UNDERFUNDED ON A PROJECTED BENEFIT OBLIGATION BASIS, AND OVER TIME WE MAY BE REQUIRED TO MAKE CASH PAYMENTS TO THE PLANS, REDUCING THE CASH AVAILABLE FOR OUR BUSINESS.We record a liability associated with our pension plans equal to the excess of the benefit obligation over the fair value of plan assets. The benefit liability recorded under the provisions of Accounting Standards Codification ("ASC") 715, “Compensation – Retirement Benefits,” at December 31, 2020 was $1.1 billion. The amount and timing of future contributions, which could be material, will depend upon a number of factors, including the actual earnings and changes in values of plan assets and changes in interest rates.
RISKS RELATING TO OUR OPERATIONS
MATERIAL DISRUPTIONS AT ONE OF OUR MANUFACTURING FACILITIES COULD
NEGATIVELY IMPACT OUR FINANCIAL RESULTS. We operate our facilities in compliance with applicable rules and regulations and take measures to minimize the risks of disruption at our facilities. A material disruption at our corporate headquarters or one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales and/or negatively impact our financial condition. Any of our manufacturing facilities, or any of our machines within an otherwise
operational facility, could cease operations unexpectedly due to a number of events, including:
•adverse weather events like fires, floods, earthquakes, hurricanes, winter storms and extreme temperatures, or other catastrophes;catastrophes (including adverse weather conditions that may be intensified by climate change);
•the effect of a drought or reduced rainfall on its water supply;
•the effect of other severe weather conditions on equipment and facilities;
•disruption in the supply of raw materials or other manufacturing inputs;
•terrorism or threats of terrorism;
•information system disruptions or failures due to any number of causes, including cyber-attacks;
•domestic and international laws and regulations applicable to our Companyus and our business partners, including joint venture partners, around the world;
•unscheduled maintenance outages;
•prolonged power failures;
•an equipment failure;
•a chemical spill or release;
•explosion of a boiler or other equipment;
•damage or disruptions caused by third parties operating on or adjacent to one of our manufacturing facilities;
•disruptions in the transportation infrastructure, including roads, bridges, railroad tracks and tunnels;
•a widespread outbreak of an illness or any other communicable disease, such as the outbreak of the COVID-19 virus, or any other public health crisis;crisis or any impacts related to government regulation as a result thereof;
•failure of our third partythird-party service providers and business partners to satisfactorily fulfill their commitments and responsibilities in a timely manner and in accordance with agreed upon terms;
•labor difficulties; and
•other operational problems.
Any such downtime or facility damage could prevent us from meeting customer demand for our products and/or require us to make unplanned expenditures. If one of theseour machines or facilities were to incur significant downtime, our ability to meet our production targets and satisfy customer requirements could be impaired, resulting in lower sales and having a negative effect on our business and financial results.
CERTAIN OPERATIONS ARE CONDUCTED BY JOINT VENTURES THAT WE CANNOT OPERATE SOLELY FOR OUR BENEFIT.Certain operations in Russia are carried on by a joint venture, Ilim. In joint ventures, we share ownership and management of a company with one or more parties who may or may not have the same goals, strategies, priorities or resources as we do. In general, joint ventures are intended to be operated for the benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities as well as time-consuming procedures for sharing information and making decisions. In joint ventures, we are required to pay more attention to our relationship with our co-owners as well as with the joint venture, and if a co-owner changes, our relationship may be adversely affected. In addition, the benefits from a successful joint venture are shared among the co-owners, so we receive only our portion of those benefits.
THE ANNOUNCED PROPOSED SPIN-OFF OF OUR PRINTING PAPERS BUSINESS MAY NOT BE COMPLETED WITHIN THE EXPECTED TIMEFRAME, OR AT ALL, AND WE MAY NOT ACHIEVE THE EXPECTED BENEFITS FROM THE SEPARATION.On December 3, 2020, we announced a plan to pursue a spin-off of our Printing Papers segment into SpinCo, a standalone, publicly traded company.International Paper will distribute shares of SpinCo to International Paper shareholders on a pro rata basis in a manner intended to be tax-free to International Paper and its shareholders for U.S. Federal income tax purposes. The transaction is expected to be completed in late third quarter 2021.The proposed spin-off is subject to customary conditions, including final approval by the International Paper Board of Directors, receipt of a tax opinion and the filing and effectiveness of a Form 10 registration statement with the U.S. Securities and Exchange Commission.No assurance can be given regarding the form that a spin-off transaction may take or the specific terms or timing thereof, or that a spin-off will in fact occur.In addition, International Paper expects to retain up to 19.9% of the shares of
SpinCo at the time of the separation, with the intent to monetize in the future and provide additional proceeds to International Paper.No assurance can be given that we will be able to monetize the shares of SpinCo at a favorable price or at all, or the timing thereof.
International Paper and SpinCo may not realize some or all of the anticipated strategic, financial, operational or other benefits, including cost savings, from the separation on the expected timeframe or at all.As independent publicly-traded companies, International Paper and SpinCo will be smaller, less diversified companies with a narrower business focus and may be more vulnerable to changing market conditions, such as changes in the industrial packaging or printing papers industry, which could result in increased volatility in their respective cash flows, working capital and financing requirements and could materially and adversely affect the respective business, financial condition and results of operations. In connection with the transaction, SpinCo is expected to pay International Paper a dividend to be used to pay down outstanding International Paper indebtedness.There can be no assurance that SpinCo will be able to pay a dividend, the amount of any such dividend, or that any dividend paid will be sufficient to repay the amount of indebtedness expected.Further, there can be no assurance that the combined value of the common stock of the two publicly-traded companies will be equal to or greater than what the value of International Paper’s common stock would have been had the proposed separation not occurred.
Moreover, substantial expenses will be incurred in connection with the transaction.Such expenses are difficult to estimate accurately and may exceed current estimates.Accordingly, the benefits from the transaction may be offset by costs or delays incurred in effectuating the transaction.Executing the proposed transaction will require significant time and attention from International Paper’s senior management and employees, which could disrupt International Paper’s ongoing business and adversely affect the financial results and results of operations.
WE MAY NOT ACHIEVE THE EXPECTED BENEFITS FROM STRATEGIC ACQUISITIONS, JOINT VENTURES, DIVESTITURES, SPIN-OFFS, CAPITAL INVESTMENTS, CAPITAL PROJECTS AND OTHER CORPORATE TRANSACTIONS THAT WE HAVE PURSUED OR MAY PURSUE. Our strategy for long-term growth, productivity and profitability depends, in part, on our ability to accomplish prudent acquisitions, joint ventures, divestitures, spin-offs, capital investments, capital projects, and other corporate transactions that we may pursue and to realize the benefits we expect from such transactions,transactions. Our expenditures for capital projects could be higher than we anticipate, we may experience unanticipated disruptions or delays in completing the projects and we may not achieve the desired benefits from those projects, including as a result of a deterioration in macroeconomic conditions in our business, unavailability of capital equipment or related materials, delays in obtaining permits or other requisite approvals or changes in laws and regulations. We are subject to the risk that we may not
achieve the expected benefits.benefits from such transactions. This failure could require us to record an
impairment charge for goodwill or other intangible assets, which could lead to decreased assets and reduced net earnings. Among the benefits we expect from potential as well as completed acquisitions and joint ventures are synergies, cost savings, growth opportunities orand access to new markets (or a combination thereof), and in the case of divestitures, the realization of proceeds from the sale of businesses and assets to purchasers who place a higher strategic value on such businesses and assets than does International Paper.we do.
Corporate transactions of this nature whichthat we may pursue involve a number of special risks, including with respect to our inability to realize our business goals with respect to such transactions as noted above, the focus of our management’s attention on these transactions and the assimilation of acquired businesses into our operations, the demands on our financial, operational and information technology systems resulting from acquired businesses, and the possibility that we may become responsible for substantial contingent or unanticipated legal liabilities as the result of acquisitions or other corporate transactions.
Any of these circumstances could adversely affect our results of operations, cash flows and financial condition, and the trading price of our common stock.
WE COULD BE EXPOSED TO LIABILITY FOR BRAZILIAN TAXES UNDER OUR AGREEMENTS WITH SYLVAMO CORPORATION. In connection with the spin-off of Sylvamo Corporation ("Sylvamo"), we previously entered into agreements with Sylvamo and its subsidiaries, including among others a tax matters agreement. Under the tax matters agreement, we could have significant payment obligations in connection with certain Brazilian tax matters. Under this agreement, we have agreed to pay 60% of the first $300 million of any liability resulting from the resolution of these Brazilian tax matters (with Sylvamo paying the remaining 40% of the first $300 million of any such liability) and 100% of any liability resulting from the Brazilian tax matters over $300 million. The assessments for the tax years 2007-2015 total approximately $119 million (adjusted for variation in currency exchange rates) in tax, plus interest, penalties, and fees. The interest, penalties, and fees currently total approximately $274 million (adjusted for variation in currency exchange rates), which reflects a recent law change pursuant to which the Brazil tax authority on January 16, 2024 agreed to cancel a portion of the interest, penalties, and fees. Accordingly, the assessments currently total approximately $393 million (adjusted for variation in currency exchange rates). See Note 14 Commitments and Contingent Liabilities on pages 74 through 78 of Item 8. Financial Statements and Supplementary Data for further information.
WE OPERATE IN A CHALLENGING MARKET FOR TALENT AND MAY FAIL TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, INCLUDING KEY MANAGEMENT PERSONNEL. Our ability to operate and grow our business depends on our ability to attract and retain employees with the skills necessary to operate and maintain our facilities, produce our products and serve our customers. The market for both hourly workers and salaried workers continues to be competitive, particularly for employees with specialized technical and trade experience. This, along with the current competitive labor market and ongoing inflationary conditions, has led to higher labor costs, particularly at our converting facilities. Although our focused efforts to attract and retain employees, including by offering higher levels of compensation in certain instances, resulted in a decreased attrition rate in 2023 compared to the prior two years’ historically high attrition rates, recruiting and retaining talent (particularly those early in their careers) continues to be a challenge. In addition, we rely on key executive and management personnel to manage our business efficiently and effectively. The
loss of key executive and management employees, particularly in a challenging market for attracting and retaining employees, could adversely affect our business.
Moreover, changing demographics and labor work force trends, including remote work and changing work-life balance expectations, may make it difficult for us to replace retiring or departing employees. If we fail to attract and retain qualified personnel, or if we continue to experience excessive turnover, we may continue to experience higher labor costs and labor shortages, and our business may be adversely impacted.
In addition, a significant number of our employees are represented by unions. We may not be able to successfully negotiate new union contracts once our current contracts with unions expire without work stoppages or labor difficulties, or we may be unable to renegotiate such contracts on favorable terms. Negotiations between the company and USW regarding the mill master collective bargaining agreement (which expired August 2023) and related mill joint pension council master agreement (which expired September 2023) resulted in new agreements which will expire August 2027 and September 2027, respectively. Negotiations between the Company and USW regarding the converting master collective bargaining agreement (which expires April 2024) and related converting joint pension council master (which expires September 2024) are scheduled to begin on February 19, 2024. USW represents approximately 10,600 employees in our converting facilities. We have also experienced work stoppages in the past and may experience them in the future. Moreover, labor organizations may attempt to organize groups of additional employees from time to time, recent and potential changes in labor laws could make it easier for them to do so. If we experience any extended interruption of operations at any of our facilities as a result of strikes or other work stoppages or if unions are able to organize additional groups of our employees, our operating costs increase and our operational flexibility could be reduced.
WE ARE SUBJECT TO CYBERSECURITY AND INFORMATION TECHNOLOGY RISKS RELATED TO BREACHES OF SECURITY PERTAINING TO SENSITIVE COMPANY, CUSTOMER, EMPLOYEE AND VENDOR INFORMATION AS WELL AS BREACHES IN THE TECHNOLOGY USED TO MANAGE OPERATIONS AND OTHER BUSINESS PROCESSES. Our business operations rely upon securesecurely managed information technology systems, some of which are provided or managed by third parties, for data capture, processing, storage and reporting. DespiteWe have invested in information technology security initiatives and risk management, as well as
incident response, business continuity and disaster recovery plans but we cannot eliminate all systematic or external risk. The development and maintenance of these measures is costly and requires ongoing monitoring, testing and updating as technologies and processes change, and efforts to overcome security measures become increasingly sophisticated. Additionally, the regulatory environment surrounding information security data privacy and data protection is becoming increasingly restrictive and is evolving frequently.
The current cyber threat environment presents increased risk for all companies, including those in our industry. Like other global companies, our systems are subject to recurring attempts by third parties to access information, manipulate data or disrupt our operations. In this regard, we have experienced cyber threats and incidents, although none have materially affected us, including our results of operations or financial condition. Given the current cyber threat environment, we expect the volume and intensity of cybersecurity attacks and attempted intrusions to increase in the future. In addition, despite careful security and controls design, implementation, updating, monitoring and independent third partythird-party verification, our information technology systems, and those of our third partythird-party providers or joint venture partners, could become subjectbe compromised or disrupted due to employee error or malfeasance, cyber-attacks, including ransomware, malware, phishing attacks, or data or security breaches by malicious actors such as ransomware and data theft, by common hackers, criminal groups or nation-state organizations or social activist ("hacktivist") organizations, disruptions resulting from geopolitical events, natural disasters, failures or impairments of telecommunications networks or other catastrophic events. Network, system, applicationSuch attacks are increasing in complexity, and the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks by making cyberattacks more difficult to detect, contain, and mitigate. Furthermore, the significant increase in remote working and personal device use increases the risks of cyber incidents and the improper dissemination of personal or confidential information. Moreover, hardware, software or applications we use may have inherent vulnerabilities or defects of design, manufacture or operations or could be inadvertently or intentionally implemented or used in a manner that could compromise information security. In addition, the cybersecurity-related threats that we face may remain undetected for an extended period of time. In the event that our information systems are disrupted or compromised, or the information systems of any businesses with which we interact, are disrupted or compromised, in a manner which impacts us or our information systems, as a result of any cybersecurity
attack, data breachesor security breach, or other security incident, any such developments could result in lost sales, business delays, negative publicity or reputational impact, and a loss of customer confidence, and have a material adverse effect on our business or financial results. Any such incident or breach could also result in operational or supply chain disruptions, data loss, corruption or manipulation, or information misappropriation including, but not limited to, interruption to systems availability, denial of access to and misuse of applications required by our customers to conduct business with International Paper. Accessus, the acquisition, use or disclosure of data or inability to access data, the release of confidential Information about our operations, and subject us to litigation and government enforcement actions. Further, in such event, access to applications required to plan our operations, source materials, manufacture and ship finished goods and account for orders could be denied or misused. Theft of intellectual property or trade secrets, and loss or inappropriate disclosure of confidential company,
employee, customer or vendor information, could also stem from such incidents. AnyMoreover, any significant cybersecurity event could require us to devote significant management time and resources in response to such event, interfere with the pursuit of other important business strategies and initiatives, and cause us to incur additional expenditures, which could be material, including to investigate and remediate such event, recover lost data, prevent future compromises and adapt systems and practices in response to such events. There is no
assurance that any remedial actions will meaningfully limit the success of future attempts to breach our information systems, particularly because malicious actors are increasingly sophisticated and utilize tools and techniques specifically designed to circumvent security measures, avoid detection and obfuscate forensic evidence, which means we may be unable to identify, investigate or remediate effectively or in a timely manner. Additionally, while we have insurance coverage designed to address certain aspects of cyber risks in place, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise in connection with such incidents.
WE MAY BE UNABLE TO REALIZE THE EXPECTED BENEFITS AND COSTS SAVINGS ASSOCIATED WITH RESTRUCTURING INITIATIVES, INCLUDING OUR STRATEGIC ACTIONS ANNOUNCED IN OCTOBER 2023. We have restructured portions of our operations from time to time, have current restructuring initiatives taking place, and it is likely that we will engage in restructuring activities in the future. In particular, as previously disclosed in October 2023, the Company committed to certain strategic actions impacting its Containerboard and Global Cellulose Fibers businesses as further described below. Consistent
We may be unable to realize the expected benefits from the strategic actions described above and other restructuring initiatives which we may take. In particular, restructuring activities may divert the attention of management, disrupt our operations and fail to achieve the intended cost and operational disruptions and/benefits. In addition, because we are not able to predict or misappropriation ofcontrol market conditions, including changes in the supply and demand for our products, the prices for our products or our manufacturing costs, we may not be able to predict the appropriate time to undertake restructurings. Further, we may incur cash and non-cash charges in connection with restructuring activities, which may be material. Moreover, judgment is required to estimate restructuring charges, and these estimates, and the assumptions underlying them, may change as additional information could result in lost sales, business delays, negative publicity and could have a material effect on our business.becomes available or facts or circumstances related to restructuring initiatives change.
RISKS RELATING TO LEGAL PROCEEDINGS AND COMPLIANCE COSTS
WE ARE SUBJECT TO A WIDE VARIETY OF LAWS, REGULATIONS AND OTHER GOVERNMENT REQUIREMENTS THAT MAY CHANGE IN SIGNIFICANT WAYS, AND THE COST OF COMPLIANCE WITH SUCH REQUIREMENTS, OR THE FAILURE TO COMPLY WITH SUCH REQUIREMENTS, COULD IMPACT OUR BUSINESS AND RESULTS OF OPERATIONS. Our operations are subject to regulation under a wide variety of U.S. federal and state and non-U.S. laws, regulations and other government requirements --- including, among others, those relating to the environment, health and safety, labor and employment, data privacy, tax, trade and health care. There can be no assurance that laws, regulations and government requirements will not be changed, applied or interpreted in ways that will require us to modify our operations and objectives or affect our returns on investments by restricting existing activities and products, or subjecting themus to escalatingincreased costs. In addition, any failure or alleged failure to comply with applicable laws, regulations or other government requirements could adversely affect our reputation, and financial results or result in, among other things,
litigation, revocation of required licenses, internal investigations, governmental investigations or proceedings, administrative enforcement actions, fines and civil and criminal liability.
For example, as part of our business, we are subject to increasingly stringent federal, state, local and international laws governing the protection of the environment. We have incurred, and expect that we willto continue to incur, significant capital, operating and other expenditures complying with applicable and forthcoming environmental laws and regulations.regulations, including with respect to GHG emissions and other climate-related matters. Additionally, new environmental laws, regulations or other requirements to address GHG emissions or climate change may cause us to incur additional compliance costs, including costs that we are unable to predict at the current time. Moreover, there has historically been, and may continue to be, a lack of consistency between jurisdictions regarding legal requirements with respect to climate and GHG emission matters, which has created and may continue to create economic and regulatory uncertainty. Our environmental expenditures include, among other areas, those related to air and water quality, waste disposal and the cleanup of contaminated soil and groundwater, including situations where we have been identified as a potentially responsible party. Moreover, we may be directly impacted by, and are working to manage, the risks and costs to us, our customers and our vendors of the effects of climate change, greenhouse gases,GHGs, and the availability of energy and water resources. These risks include the potentially adverse impact on forestlands, which are a key resource in the production of our products, increased product costs and a changechanges in the types of products that customers purchase. We also face risks arising from the increased public focus, including by governmental and nongovernmental organizations, on these and other environmental sustainability matters, such as packaging and waste, deforestation, and land use. These risks also include the increased pressure to make commitments, set targets, or establish additional goals and take actions to meet them. These risks could expose us to market, operational, and execution costs or risks. There can be no assurance that future remediation requirements and compliance with existing and new laws and
requirements will not require significant expenditures, or that existing reserves for specific matters will be adequate to cover future costs. We could also incur substantial fines or sanctions, enforcement actions (including orders limiting our operations or requiring corrective measures), natural resource damages claims, cleanup and closure costs, and third-party claims for property damage and personal injury and reputational harm as a result of violations of, or liabilities under, environmental laws, regulations, codes and common law. The amount and timing of environmental expenditures is difficult to predict, and, in some cases, liability may be imposed without regard to contribution or to whether we knew of, or caused, the release of hazardous substances.
Our global operations subject us to complex and evolving U.S and international data privacy laws and regulations, such as European’s Union General Data
Protection Regulation, (“GDPR”), Brazil's Lei Geral de Pnoteçāo de Dados ("LGPD")China’s Personal Information Protection Law and thecomprehensive privacy laws in many states, including California, Consumer Privacy Act of 2018 (“CCPA”)Connecticut, Colorado, Utah, and the California Privacy Rights Act ("CPRA").Virginia. These laws require the Company to comply withimpose a range of compliance obligations regarding the handling of personal data. TheseThere are significant penalties for non-compliance including monetary fines, disruption of operations and reputational harm. Moreover, other states and governmental authorities around the world have introduced or passed, or are considering, or are in the process of implementing newsimilar legislation which may impose varying standards and requirements on our data protection regulations.collection, use and processing activities.
ManyThis increasingly restrictive and evolving regulatory environment at the international, federal and state level related to data privacy and data protection may continue to require changes to our business practices and give rise to significantly expanded compliance burdens, costs and enforcement risks. Moreover, many of these laws and regulations are subject to uncertain application, interpretation or enforcement standards that could result in claims, changes to our business practices, data processing and security systems, penalties, increased operating costs or other impacts on our businesses. The recently enactedAdditionally, regulatory bodies and others tasked with enforcing privacy and data protection laws have been actively engaging in enforcement investigations and actions. These laws often provide for civil penalties for violations, as well as private rights of action for data breaches that may increase data breach litigation. IPWe proactively usesuse internal and external resources to monitor compliance with relevant legislation and continually evaluatesevaluate and, where necessary, modifies itsmodify our data processing practices and policies in order to comply with evolving privacy laws. Nevertheless, relevant regulatory authorities could determine that our data handling practices fail to address all the requirements of certain new laws, which could subject us to penalties and/or litigation. In addition, there is no assurance that our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we implemented or may implement in the future will prevent the improper handling of, disclosure of or access to personal data. Improper handling and disclosure of or access to personal data in violation of the GDPR, the CCPA and/or of other personal data privacy and protection laws could harm our reputation, cause loss of consumer
confidence, subject us to government enforcement actions (including fines), or result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and/or criminal prosecution, all of which could negatively affect our business and operating results.
As
We are subject to taxes in the U.S. and various foreign jurisdictions, and changes in laws, regulation or interpretation of existing laws and regulations in the U.S. and other jurisdictions where we are subject to taxation, could increase our taxes and have an adverse effect on our financial results. For example, the Organization for Economic Cooperation and Development ("OECD") has proposed a final example,15% global minimum tax applied on a country-by-country basis (the "Pillar Two rule"), and many countries (including countries in which we operate) have enacted or begun the process of enacting laws adopting the Pillar Two rule. The first component of the Pillar Two rule is expected to begin applying in 2024, with the second component expected to go into effect in 2025. While we do not currently expect the Pillar Two rule to have a material impact on our effective tax rate, our analysis is ongoing as the OECD continues to release guidance and as countries begin implementing legislation. Future developments could change our current assessment, and it is possible that the Pillar Two rule could adversely impact our effective tax rate in future periods.
In addition, the application of tax law is subject to interpretation and is subject to audit by taxing authorities. Additionally, administrative guidance can be incomplete or vary from legislative intent, and therefore the application of the tax law is uncertain. While we believe the positions reported by the Company comply with relevant tax laws and regulations, taxing authorities could interpret our application of certain laws and regulations differently. We are currently subject to tax audits in the U.S., Brazil, Poland, Russia and other taxing jurisdictions around the world. In some cases, we have appealed, and may continue to appeal, assessments by taxing authorities in the court system. As such, tax controversy matters may result in previously unrecorded tax expenses, accelerated cash tax payments, higher future tax expenses, or the assessment of interest and penalties.
As with many technological innovations, artificial intelligence (“AI”) presents risks and challenges that could affect its adoption, and therefore our business. Uncertainty in the legal regulatory regime relating to artificial intelligence may require significant resources to modify and maintain business practices to comply with U.S. and non-U.S. laws, the nature of which cannot be determined at this time. Several jurisdictions, including Europe, the U.S. federal government, and certain U.S. states, have already proposed or enacted laws, regulations, and other requirements governing AI. For example, on October 30, 2023, the Biden administration issued an Executive Order to, among other things, establish extensive new standards for AI safety and security. Other jurisdictions may decide to adopt similar or more restrictive requirements that may render the use
of AI challenging. These requirements may make it harder for us to conduct our business using AI, lead to regulatory fines or penalties, require us to change our business practices, or limit our use of AI. If our use of AI is restricted, our business may be less efficient, or we may be at a competitive disadvantage. Any of these factors could adversely affect our business, financial condition, and results of operations.
RESULTS OF LEGAL PROCEEDINGS COULD HAVE A MATERIAL EFFECT ON OUR CONSOLIDATED FINANCIAL RESULTS.We are a party to various legal, regulatory and governmental proceedings and other related matters, including with respect to environmental matters. In addition, we are and may become subject to other loss contingencies, both known and unknown, which may relate to past, present and future facts, events, circumstances and occurrences. Should an unfavorable outcome occur in connection with our legal, regulatory or governmental proceedings or other loss contingencies, or if we become subject to any such loss contingencies in the future, there could be a material adverse impact on our financial results. See Note 14 Commitments and Contingent Liabilities on pages 74 through 78 of Item 8. Financial Statements and Supplementary Data for further information.
IF THE SPIN-OFF OF SYLVAMO CORPORATION WERE TO FAIL TO QUALIFY FOR NON-RECOGNITION TREATMENT FOR U.S. FEDERAL INCOME TAX PURPOSES, THEN INTERNATIONAL PAPER SPINCO AND OUR SHAREHOLDERS MAY BE SUBJECT TO SIGNIFICANT U.S. FEDERAL INCOME TAXES. International Paper intends to receiveThe Company received an opinion of tax counsel toand a private letter ruling from the effect thatU.S. Internal Revenue Service (the “IRS”) regarding the qualification of the spin-off of Sylvamo and certain related transactions will qualify as a transaction that is generally tax-free to SpinCo, International PaperSylvamo, the Company and itsthe shareholders of the Company for U.S. federal income tax purposes.A tax opinion is not binding on the IRS or the courts, and there can be no assurance that the IRS or a court will not take a contrary position. In addition, International Paper’sthe Company’s tax counsel will relyand the IRS relied on certain representations and covenants delivered by International Paperthe Company and SpinCoSylvamo in rendering such opinion. International Paper may also pursue aopinion and private letter ruling. If any of the representations or covenants relied upon for the tax opinion or private letter ruling frombecome inaccurate, incomplete or not complied with by the IRS to
Company, Sylvamo or any of their respective subsidiaries, the effect thattax opinion may be invalid and the spin-off and certain related transactions will qualify as tax-free to International Paper, SpinCo and International Paper shareholders for U.S. federal income tax purposes.
If the IRS ultimately determines that the spin-off is taxable, then the spin-off could be treated as a taxable dividend or capital gain to the International Paper Company’s
shareholders for U.S. federal income tax purposes, International Paperand the Company could incur significant U.S. federal income tax liabilities. These income tax liabilities and SpinCo may be required to indemnify International Paper for such tax liabilityindemnifiable by Sylvamo pursuant to a tax matters agreement. Thereagreement between the Company and Sylvamo. However, there can be no assurance that SpinCoSylvamo would have theadequate resources or liquidity if it were required to indemnify International Paperthe Company for any such tax liability.
Even if the spin-off otherwise qualifies for non-recognition of gain or loss under Internal Revenue Code ("the Code") Section 355 of the U.S. Tax Code, the spin-off may be taxable to International Paperthe Company (but not International Paper’s shareholders)the shareholders of the Company) pursuant to Section 355(e) of the Code if there is a 50% or more (by vote or value) change in ownership of either International Paperthe Company or SpinCo,Sylvamo, directly or indirectly, as part of a plan or series of related transactions that include the spin-off. For this purpose, any acquisitions of International Paper’sthe Company’s or SpinCo’sSylvamo's common stock within two years before or after the spin-off are presumed to be part of such a plan, although International Paperthe Company or SpinCoSylvamo may be able to rebut that presumption based on either applicable facts and circumstances or a “safe harbor” described in the U.S. income tax regulations.
None.
AsRISK MANAGEMENT AND STRATEGY
The Company’s cybersecurity risk management processes are integrated into the Company’s overall risk management system. The Company has a formalized enterprise risk management program overseen by the Board of December 31, 2020,Directors and committees of the Board of Directors that addresses strategic, operational, financial, compliance, legal and information technologies and cybersecurity risks. In addition, the Enterprise Risk Management Council (“ERM Council”) is a management-level team comprised of senior vice presidents and other business leaders responsible for managing enterprise risks and planning and organizing the activities of our organization to minimize the effects of risk on the Company's business and financial results. The ERM Council regularly reports to the Board of Directors on areas of risk and risk management. The Chief Financial Officer serves as the ERM Council Lead. The Chief Audit Executive serves as the ERM Council Process Owner.
The Company has an Information Technology (“IT”) Risk Governance Program that aligns with the
enterprise risk management framework and assists with fulfilling oversight responsibilities for major IT risks, including cybersecurity risks. The IT Risk Governance Program identifies, defines, manages, measures and governs cybersecurity risks across the Company ownedat an enterprise level. The IT Risk Governance Program is carried out by an IT Risk Identification and Mitigation Team (“IT RIM”), which is comprised of business leaders from information security, information technology, human resources, internal audit, legal, and risk. The IT RIM meets monthly, reviews all cybersecurity incidents meeting certain criteria, provides oversight with respect to cybersecurity matters at a management level, and reports to the ERM Council.
Our Risk Assessment Program
The Company has a risk assessment program in place to assess, identify and manage material risks from cybersecurity threats. Cybersecurity risks the Company faces include targeted attacks, ransomware, data theft, virus and intrusion software, as well as attacks to our website, financial applications, operational technology, telecommunications and human resources data. For a full discussion of cybersecurity risks facing the Company, please see Part I, Item 1A. Risk Factors - WE ARE SUBJECT TO CYBERSECURITY AND INFORMATION TECHNOLOGY RISKS RELATED TO BREACHES OF SECURITY PERTAINING TO SENSITIVE COMPANY, CUSTOMER, EMPLOYEE AND VENDOR INFORMATION AS WELL AS BREACHES IN TECHNOLOGY USED TO MANAGE OPERATIONS AND OTHER BUSINESS PROCESSES. Key aspects of the Company’s cybersecurity program include the following: •layered technical protective capabilities and detective surveillance controls;
•utilizing independent third parties to assess the Company’s practices related to, and provide expertise and assistance with, various aspects of information security, as further described below;
•courses and awareness training on information security for employees with Company email or managed approximately 314,000 acresaccess to Company devices, including phishing, social engineering and other cybersecurity training as well as targeted training for specific roles based on responsibilities and risk level;
•global security and privacy policies; and
•business continuity, incident response and disaster recovery procedures, including table top exercises involving senior leaders.
The Company carries cyber insurance which provides coverage in connection with cybersecurity breaches.
Engagement of forestlandsThird Parties
The Company engages third parties in Brazil,connection with assessing, identifying and had,managing its cybersecurity risks, including the following:
•Engagement of an independent third party with incident response expertise to provide intelligence-based cybersecurity solutions and services to assist the Company with preparing for, preventing, investigating, responding to and remediating cybersecurity incidents, including attacks that target on-premise, cloud, and critical infrastructure environments.
•Engagement of an independent third party to conduct an annual security program assessment of the controls, maturity and performance of the Company’s information security program and the information security risk associated with the Company’s business systems. The assessment uses the National Institute of Standards and Technology Cybersecurity Framework as its benchmark.
•Engagement of a leading third-party service provider to annually perform an external and an internal penetration assessment using industry standard tools and techniques.
Additionally, our Internal Audit team conducts annual assessments of our cyber programs and controls.
Oversight of Third Parties
The Company has processes to oversee and identify material risks from cybersecurity threats associated with the Company’s use of third-party service providers. In this regard, the Company’s cybersecurity risk management program takes into account third-party systems whereby the Company could be impacted by the compromise of the security of vendors or other business relations of the Company, and the Company has a comprehensive third-party access management system. In addition, the Company conducts risk-based due diligence on the profiles of third-party service providers with respect to cybersecurity risks prior to engagement, and providers of critical services are continuously monitored with respect to security risks. The Company also requires service providers to provide prompt notification of any actual or suspected breach impacting Company data or operations.
The Company does not believe that risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected the Company, including its business strategy, results of operations or financial condition.
GOVERNANCE
Role of the Board of Directors and its Committees
International Paper has an integrated board and executive-level governance structure that oversees risks from cybersecurity threats. The Company’s Board of Directors has primary oversight of our enterprise risk management program, which includes cybersecurity risk. Moreover, the Board of Directors is supported in its oversight by the Audit and Finance Committee and PPE Committee, which share oversight responsibilities related to the Company’s information security programs. The Audit and Finance Committee reviews management’s cybersecurity and information security risk management programs and controls, including processes for management’s identification and reporting of material cybersecurity incidents. The PPE Committee reviews technology issues pertinent to the Company including those associated with information and operational technology, cybersecurity and data security and assesses related Company strategies.
Our Board of Directors, Audit and Finance Committee and PPE Committee each receives periodic updates on cybersecurity issues from management (including our Chief Information Security Officer (“CISO”)). For example, the CISO provides reports to the Audit and Finance Committee and PPE Committee regarding cybersecurity risks, as well as plans and strategies to mitigate those risks, at least annually. Furthermore, our ERM Council annually reports its activities either directly to the Board of Directors or through licensesthe Audit and forestFinance Committee.
Role of Management
At a management agreements, harvesting rightslevel, our cybersecurity risk management program is led by our CISO. Our current CISO has been with the Company for over 30 years, worked in Information Technology for over 25 years, and has led the Company’s security efforts since 2011. He was appointed as the Company’s first CISO in 2019. Our CISO stays current on government-owned forestlandscybersecurity issues and trends through continuing education activities such as participation at conferences and in Russia. All owned landswebinars. Our CISO reports to the Chief Information Officer who oversees the Company’s information technology department.
The Company has also adopted a cyber-incident response plan which provides for controls and procedures in Brazil are independently third-party certified for sustainable forestryconnection with cybersecurity events, including escalation procedures summarized below. The cyber-incident response plan is designed to address non-operational and operational cybersecurity events. Evaluation and response to cybersecurity events is led by our Cybersecurity
Incident Response Team (“CIRT”), under the Brazilian National Forest Certification Program ("CERFLOR")direction of our CISO. The CIRT is comprised of subject matter experts representing Information Security, Information Technology, Operational Technology, and Legal. The CIRT performs an impact assessment with respect to cybersecurity incidents, gathers facts and provides a chronology of events in connection therewith, and leads remediation and recovery activities. Our General Counsel, Senior Vice President of Human Resources, Chief Ethics and Compliance Officer (or their respective designees), and CISO review and assess significant non-operational data breaches. Cybersecurity events that meet specified criteria for operational impact are escalated for further review to our Business Continuity Incident Command Team (“Incident Command Team”). The Incident Command Team performs an initial assessment that includes evaluation of the Forest Stewardship Council ("FSC").cybersecurity event’s severity, response required, and estimated business cost, and leads the execution of business continuity plans to maintain Company operations. Cybersecurity events meeting certain criteria are escalated to our Disclosure Committee, General Counsel and Chief Financial Officer for further review. The Disclosure Committee, General Counsel and Chief Financial Officer assess and determine materiality using the facts and chronology of events provided by the Incident Command Team.
A listing of our production facilities by segment, the vast majority of which we own, can be found in Appendix I hereto, which is incorporated herein by reference.
The Company’s facilities are in good operating condition and are suited for the purposes for which they are presently being used. We continue to study the economics of modernization or adopting other alternatives for higher cost facilities.
Given the size, scope and complexity of our business interests, we continually examine and evaluate a wide variety of business opportunities and planning alternatives, including possible acquisitions and sales or other dispositions of properties. You can find a discussion about the level of planned capital investments for 20212024 on page 33,39, and dispositions and restructuring activities as of December 31, 2020,2023, on
The Company is not subject to any administrative or judicial proceeding arising under any Federal, State
or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that is likely to result in monetary sanctions of $1 million or more.
Not applicable.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
As of the filing of this Annual Report on Form 10-K, the Company’s common shares are traded on the New York Stock Exchange (NYSE: IP). As of February 12, 2021,9, 2024, there were approximately 9,3798,188 record holders of common stock of the Company.
We pay regular quarterly cash dividends and expect to continue to pay regular quarterly cash dividends in the foreseeable future, though each quarterly dividend payment is subject to review and approval by our Board of Directors. Our ability to pay dividends is, and in the future may continue to be, limited by the terms of our debt documents.
The table below presents information regarding the Company’s purchases of its equity securities for the time periods presented.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
| | | | | | | | | | | | | | |
| Period | Total Number of Shares Purchased (a) | Average Price Paid per Share | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Programs | Maximum��Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in billions) |
| October 1, 2020 - October 31, 2020 | 244 | | $ | 40.54 | | — | | $ | 1.73 | |
| November 1, 2020 - November 30, 2020 | 1,393 | | 43.75 | | — | | 1.73 | |
| December 1, 2020 - December 31, 2020 | — | | — | | — | | 1.73 | |
| Total | 1,637 | | | | |
| | | | | | | | | | | | | | |
| Period | Total Number of Shares Purchased (a) | Average Price Paid per Share | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in billions) |
| October 1, 2023 - October 31, 2023 | 5,373 | | $ | 35.19 | | — | | $ | 2.96 | |
| November 1, 2023 - November 30, 2023 | 3,992 | | 33.71 | | — | | 2.96 | |
| December 1, 2023 - December 31, 2023 | 1,241 | | 38.82 | | — | | 2.96 | |
| Total | 10,606 | | | | |
(a)1,63710,606 shares were acquired from employees fromor members of our Board of Directors as a result of share withholdings to pay income taxes under the Company’sCompany's restricted stock programs. During 2020, 389,100 shares were purchased underprogram. On October 11, 2022, our shareBoard of Directors increased the authorization up to a total of $3.35 billion shares. This repurchase program which was approved on September 30, 2013, and increased twice on July 8, 2014 and October 9, 2018. Through this program, which does not have an expiration date, we are authorized to purchase, in open market transactions (including block trades), privately negotiated transactions or otherwise, up to $5 billion shares of our common stock.date. As of December 31, 2020,2023, approximately $1.73$2.96 billion aggregate amount of shares of our common stock remainremained authorized for purchase under this program.repurchase.
PERFORMANCE GRAPH
The performance graph shall not be deemed "soliciting material" or to be "filed" with the Commission or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.amended, (the "Exchange Act") and will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent
the Company specifically incorporates it by reference into such a filing.
The following line graph compares a $100 investment in Company stock on December 31, 20152018 with a $100 investment in our Peer Grouppeer group and the S&P Composite-500 Stock Index (S&P 500 Index) also made at market close on December 31, 2015.2018. The graph portrays total return, 2015-2020,2018-2023, assuming reinvestment of all dividends.
1)The companies included in the Peer Grouppeer group are Domtar Inc., Graphic Packaging Holding Company,DS Smith PLC, Klabin S.A., Metsa Board Corporation, Mondi Group, Packaging Corporation of America, Smurfit Kappa Group, Stora Enso Group, UPM-Kymmene Corp., and WestRock Company.
2)Returns are calculated in $USD$USD.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in “Financial Statements
and Supplementary Data” of this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Annual Report on Form 10-K,
particularly in “Risk Factors” and “Forward-Looking Statements.”
The following generally discusses 20202023 and 20192022 items and year-to-year comparisons between 20202023 and 2019.2022. Discussion of historical items in 2018,2021, and year-to-year comparisons between 20192022 and 2018,2021, can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2022, filed with the SEC on February 19, 2020,17, 2023, under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Full-year 20202023 net earnings attributable to shareholders were $482$288 million ($1.220.82 per diluted share) compared with $1.2$1.5 billion ($3.074.10 per diluted share) for full-year 2019.2022.
During 2023, International Paper executed well, both commercially and operationally, as we navigated the impactsan uncertain and challenging demand environment. During much of the Covid-19year, underlying demand for our products was lower as consumers prioritized spending on services and essential goods. This trend was influenced by the pull forward of goods during the pandemic, as well as by inflationary pressures and rising interest rates that impacted the consumer. Demand for our products was further constrained by inventory destocking as our customers, and the broader supply chain, worked through elevated inventories of their products. The lower demand combined with declining sales prices and continued cost inflation resulted in 2020lower sales and earnings in 2023 as compared to deliver solid earnings2022. During 2023, we remained focused on mitigating the impact of these challenges through commercial and outstanding cash generation. Our 2020 performance demonstratescost reduction initiatives. We advanced our strategies to improve profitability across our portfolio by investing in capabilities in our Industrial Packaging business to enhance our value proposition to align with customer needs and optimizing our Global Cellulose Fibers business by reducing our exposure to commodity pulp. We took strategic actions to structurally reduce fixed costs in our mill system in both our Industrial Packaging and Global Cellulose Fibers businesses. We also made significant progress in Building a Better IP, driven by commercial and process improvement initiatives, resulting in benefits exceeding our 2023 target. Regarding capital allocation in 2023, we returned approximately $840 million to shareowners including approximately $640 million of dividends and $200 million of share repurchases. Finally, during 2023, we completed the strength and resiliencesale of our employees, our diverse customer base and our world class manufacturing and supply chain capabilities. We ran our manufacturing system well and leveraged the flexibilityownership stake in Ilim for $508 million. International Paper no longer has investments in Russia following completion of our mill and converting systems to overcome significant challenges due to the pandemic, while managing costs extremely well across our three businesses, with no material operational disruptions due to the pandemic. We continued to grow value for our shareholders with a return above our cost of capital, which marks the eleventh consecutive year with value-creating returns. We generated full-year cash from operations of $3.1 billion and free cash flow of $2.3 billion. Given the significant economic uncertainty, we took prudent and early actions to reinforce cash generation and enhance our financial strength. We continued to execute on our capital allocation framework.this sale.
In 2020, we returned $820
millionComparing 2023 performance to shareowners2022, price and reduced debt by $1.7 billion.We also investedmix was lower in our North American and EMEA corrugated packaging businessesIndustrial Packaging business due to enhance our capabilities and grow earnings. Finally, in the fourth quarter, we announced plans to spin-off our Printing Papers business into a stand-alone, publicly traded company, which we expect to complete in the third quarter 2021.
Compared to 2019, the Company’s 2020 results reflect strong execution and effective cost management to mitigate the impact of market disruptions associated with the pandemic. Price and mix were negatively affected by the full-year impact of 2019 priceprior index movements, in our North America Packaging business,lower export prices and higher export mix, as well as lower average pricingdemand improved. Price in our Global Cellulose Fibers and Printing Papers businesses. Volumebusiness was also an earnings headwindlower due to prior index movements and an unfavorable mix driven by lower absorbent pulp shipments. Volume in both business segments was impacted by ongoing inventory destocking across the unprecedented declinesupply chain. While there was demand recovery in demand for Printing Papers related to the pandemic.These price andsecond half of the year in both business segments, volume headwinds were partly offset by strong volume growthwas lower in our North American Industrial Packaging business outstanding cost managementas consumers shifted priorities toward non-discretionary goods and services while dealing with inflation. Volume in our Global Cellulose Fibers business was also impacted by lower demand as a result of the slowdown in the global economy. Operations and costs in both the North American Industrial Packaging and Global Cellulose Fibers businesses were higher reflecting the impact of inflation on materials and services along with the impact of higher unabsorbed costs resulting from increased economic downtime in the current year. Planned maintenance outage expenses. During 2020, we made choices around planned maintenance and other spending priorities in response to market disruptions resulting from the pandemic. Operating costs were lower in our North American Industrial Packaging business while higher in 2020, primarily due to higher costs in the latter part of the year, as we flexed our system to meet strong packaging demand. Overall, inputGlobal Cellulose Fibers business. Input costs were favorablelower in 2020,both business segments, primarily driven by lower energy, wood energy and distribution costs although we did see an increase inalong with lower recovered fiber energy and distributioncosts in the fourth quarter. Equity earnings were lower in 2020 due to decreased Ilim earnings, driven by the challenging global pulp markets along with a foreign exchange loss on Ilim’s U.S. dollar denominated net debt.our North American Industrial Packaging business.
Looking ahead to the first quarter 2021,2024, as compared to the fourth quarter 2023, we expect this quarter to be an earnings trough on seasonally lower volumes, higher costs and from the impact of 2019,the January winter freeze. We also expect the majority of prior index movements to flow through in the first quarter 2024. Specifically in our Industrial Packaging business, we expect price and mix to improve on the realization ofbe relatively flat as prior price index movement.movements are offset by the commercial benefits from contract restructuring in the box business. Volume is expected to be flat sequentially with continued strong box demandlower in the first quarter 2024 due to normal seasonal declines in North America.America, partially offset by two more shipping days. Operations and costs are expected to improve sequentially,decrease earnings due to seasonally higher energy consumption and cost inflation on wages and employee benefits. These increases are expected to be partially offset by lower fixed costs resulting from the non-repeatclosure of isolated reliability issues and other unfavorable one-time items in the fourth quarter 2020.our Orange, Texas mill. Maintenance outage expense is expected to be higher along with increased inputcoming off of a seasonally lower fourth quarter 2023. Input costs mainly dueare expected to decrease earnings on higher recovered fiber and distributionenergy costs.In our Global Cellulose Fibers business, we expect improved price and mix on the realizationto modestly improve as a result of prior price index movements. Volume is expectedour strategy to be stable and operations and costs are expected to improve on the non-repeat of unfavorable fourth quarter items. Maintenance outage expenses are expected to decrease moderately and input costs are expected to increase on seasonallyreduce
higher wood and energy costs. In our Printing Papers business, price and mix is expectedexposure to commodity pulp. We expect volume to be stable and volume is expected to decrease, mostlyrelatively flat as seasonally lower shipments due to lower seasonalthe Chinese New Year are offset by improved demand in Brazil and Russia.other areas. Operations and costs are expected to improvedecrease earnings due to seasonality and cost inflation, partially offset by the non-repeat of a turbine maintenance outage and lower fixed costs resulting from the idling of our pulp machine in our Riegelwood, North Carolina mill. Maintenance outage expense is expected to be flat. Inputincrease earnings while higher input costs associated with energy and chemicals are expected to be higher, primarily duedecrease earnings.
Looking at full-year 2024, we see a transitional year where markets continue to higher seasonal woodrecover as we focus on improving mix and energy costs. Lastly,margins in both business segments through execution of our commercial strategies. We expect demand trends to continue to improve across our portfolio with year-over-year industry growth of approximately three percent for our Ilim joint venture,packaging and fluff pulp. Additionally, we expect lower earnings onmore than $400 million of net benefits from our commercial and operational initiatives. This includes the non-repeatfixed cost reductions tied to the closure of our Orange, Texas containerboard mill and the foreign currency gain on US denominated debt recognizedpermanent shutdown of two pulp machines in our Global Cellulose Fibers business, with the benefits of both strategic actions expected to be at a full run rate by the fourth quarter 2020.
As we enter 2021, we are mindful that we are still2024. These cost saving initiatives will be important in the midst of a global pandemicoffsetting expected higher costs for recovered fiber, transportation and there is still uncertainty.Accordingly, we remain committedgeneral inflation on wages, employee benefits, materials and services. With respect to our COVID-19 principles to focus on what we need to do as a company to remain strong and resilient for all our stakeholders – to keep our employees and contractors safe, to take care of our customers and to maintain our financial strength. Looking to 2021, we anticipate continued strong demand for corrugated packaging and pulp and are poised to grow earnings. We remain focused on cash generation and will continue to make choices consistent with our capital allocation framework, we are targeting capital expenditures of $800 million - $1.0 billion in 2024 for general maintenance, cost improvement and to driveenhance capabilities in our box business. As previously mentioned, we returned approximately $840 million of cash to shareowners in 2023 including approximately $640 million of dividends. Given our strategic customer relationships, talented teams, world class assets and market expertise, we are committed to maximizing long-term value creation.for all our stakeholders.
On MarchAs previously disclosed, the Company permanently closed its containerboard mill in Orange, Texas in December 2023 and permanently ceased production of two of its pulp machines at its Riegelwood, North Carolina and Pensacola, Florida mills on December 11, 2020 the World Health Organization declared the novel strain2023. The mill closure resulted in pre-tax non-cash asset write-off and accelerated depreciation charges of coronavirus ("COVID-19") a global pandemicapproximately $347 million and recommended containmentpre-tax cash severance and mitigation measures worldwide. Since that time, mostother shutdown charges of our manufacturing and converting facilities have remained open and operationalapproximately $81 million during the pandemic. The health and safety of our employees and contractors is our most important responsibility as we manage through the COVID-19 pandemic. We have implemented work-systems across the Company, including hygiene, social distancing, site cleaning, contact tracing, and other measures, as recommended by the CDC and WHO. Our COVID-19 measures are proving to be effective and we have not had any material disruptions to our operations.
We have seen a significant negative impact on demand for our printing papers products. Demand for our pulp, containerboard and corrugated box products has not been negatively impacted by COVID-19 to date, but our operations in Industrial Packaging experienced higher supply chain costs due to the impacts of COVID-19. The recent resurgence of the virus in many areas has led to additional governmental measures, such as stay-at-home orders or business and school closures, negatively impacting our supply chain, and therefore our production.
There continue to be significant uncertainties associated with the COVID-19 pandemic, includingyear ended
with respect toDecember 31, 2023. The machine shutdowns resulted in pre-tax non-cash asset write-off and accelerated depreciation charges of approximately $75 million and pre-tax cash severance and other shutdown charges of approximately $37 million during the various economic reopening plans
and the resurgence of the virus in many areas; additional actions that may be taken by governmental authorities and private businesses to attempt to contain the COVID-19 outbreak or to mitigate its impact; the extent and duration of social distancing and stay-at-home orders; the efficacy of various vaccines; and availability and the ongoing impact of COVID-19 on unemployment, economic activity and consumer confidence. Developments related to COVID-19 are significantly adversely affecting portions of our business, and could have a material adverse effect on our financial condition, results of operations and cash flows, particularly if negative global economic conditions persist for a significant period of time or deteriorate.year ended December 31, 2023.
Adjusted Operating Earnings and Adjusted Operating Earnings Per Share are non-GAAP measures and are defined as net earnings (loss) attributable to International Paper (a GAAP measure) excluding discontinued operations, net special items and non-operating pension expense (income). Net earnings (loss) and Diluted earnings (loss) per share attributable to common shareholders are the most directly comparable GAAP measures. The Company calculates Adjusted Operating Earnings by excluding the after-tax effect of discontinued operations, non-operating pension expense (income) and items considered by management to be unusual (net special items) from thenet earnings (loss) attributable to shareholders reported under GAAP. Adjusted Operating Earnings Per Share is calculated by dividing Adjusted Operating Earnings by diluted average shares of common stock outstanding. 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.results from continuing operations. The Company believes that using this information, along with the most directdirectly comparable GAAP measure, provides for a more complete analysis of the results of operations.
The following are reconciliations of Earnings (loss) attributable to common shareholders to Adjusted operating earnings (loss) attributable to common shareholders.shareholders on a total and per share basis. Additional detail is provided later in this Annual Report on Form 10-K regarding the net special items referenced in the charts below.below:
| | In millions | In millions | 2020 | 2019 | In millions | 2023 | 2022 |
| Net Earnings (Loss) Attributable to Shareholders | Net Earnings (Loss) Attributable to Shareholders | $ | 482 | | $ | 1,225 | |
| Less - Discontinued operations, net of taxes (gain) loss | |
| Earnings (Loss) from Continuing Operations | |
| Add back - Non-operating pension expense (income) | Add back - Non-operating pension expense (income) | (41) | | 36 | |
| Add back - Net special items expense (income) | Add back - Net special items expense (income) | 762 | | 409 | |
| Income tax effect - Non-operating pension and special items expense | (96) | | 98 | |
| Income tax effect - Non-operating pension and special items | |
| Adjusted Operating Earnings (Loss) Attributable to Shareholders | Adjusted Operating Earnings (Loss) Attributable to Shareholders | $ | 1,107 | | $ | 1,768 | |
| | 2020 | 2019 |
| 2023 | | | 2023 | 2022 |
| Diluted Earnings (Loss) Per Share Attributable to Shareholders | Diluted Earnings (Loss) Per Share Attributable to Shareholders | $ | 1.22 | | $ | 3.07 | |
| Less - Discontinued operations, net of taxes (gain) loss per share | |
| Diluted Earnings (Loss) Per Share from Continuing Operations | |
| Add back - Non-operating pension expense (income) per share | Add back - Non-operating pension expense (income) per share | (0.10) | | 0.09 | |
| Add back - Net special items expense (income) per share | Add back - Net special items expense (income) per share | 1.93 | | 1.02 | |
| Income tax effect per share - Non-operating pension and special items expense | (0.25) | | 0.25 | |
| Income tax effect per share - Non-operating pension and special items | |
| Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders | Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders | $ | 2.80 | | $ | 4.43 | |
| | In millions | In millions | | Three Months Ended December 31, 2020 | | Three Months Ended September 30, 2020 | | Three Months Ended December 31, 2019 | In millions | | Three Months Ended December 31, 2023 | | Three Months Ended September 30, 2023 | | Three Months Ended December 31, 2022 |
| Net Earnings (Loss) Attributable to Shareholders | Net Earnings (Loss) Attributable to Shareholders | | $ | 153 | | | $ | 204 | | | $ | 165 | |
| Less - Discontinued operations, net of taxes (gain) loss | |
| Earnings (Loss) from Continuing Operations | |
| Add back - Non-operating pension expense (income) | Add back - Non-operating pension expense (income) | | (10) | | | (11) | | | 9 | |
| Add back - Net special items expense (income) | Add back - Net special items expense (income) | | 201 | | | 109 | | | 136 | |
| Income tax effect - Non-operating pension and special items expense | | (48) | | | (22) | | | 120 | |
| Income tax effect - Non-operating pension and special items | |
| Adjusted Operating Earnings (Loss) Attributable to Shareholders | Adjusted Operating Earnings (Loss) Attributable to Shareholders | | $ | 296 | | | $ | 280 | | | $ | 430 | |
| | Three Months Ended December 31, 2020 | | Three Months Ended September 30, 2020 | | Three Months Ended December 31, 2019 |
| | Three Months Ended December 31, 2023 | | | | Three Months Ended December 31, 2023 | | Three Months Ended September 30, 2023 | | Three Months Ended December 31, 2022 |
| Diluted Earnings (Loss) Per Share Attributable to Shareholders | Diluted Earnings (Loss) Per Share Attributable to Shareholders | | $ | 0.39 | | | $ | 0.52 | | | $ | 0.42 | |
| Less - Discontinued operations, net of taxes (gain) loss per share | |
| Diluted Earnings (Loss) Per Share from Continuing Operations | |
| Add back - Non-operating pension expense (income) per share | Add back - Non-operating pension expense (income) per share | | (0.03) | | | (0.03) | | | 0.02 | |
| Add back - Net special items expense (income) per share | Add back - Net special items expense (income) per share | | 0.51 | | | 0.28 | | | 0.34 | |
| Income tax effect per share - Non-operating pension and special items expense | | (0.12) | | | (0.06) | | | 0.31 | |
| Income tax effect per share - Non-operating pension and special items | |
| Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders | Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders | | $ | 0.75 | | | $ | 0.71 | | | $ | 1.09 | |
Cash provided by operations, including discontinued operations, totaled $3.1approximately $1.8 billion and $3.6$2.2 billion for 20202023 and 2019,2022, respectively. The Company generated free cash flow of approximately $2.3$692 million in 2023 and $1.2 billion in both 2020 and 2019.2022. Free Cash Flowcash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management utilizes this measure in connection with managing our business and believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the
business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company's ongoing underlying operational performance, we believe that free cash flow also enables investors to perform meaningful comparisons between past and present periods.
The following are reconciliations of free cash flow to cash provided by operations:
| | In millions | In millions | 2020 | 2019 | In millions | 2023 | 2022 |
| Cash provided by operations | Cash provided by operations | $ | 3,063 | | $ | 3,610 | |
| Adjustments: | Adjustments: | |
| Cash invested in capital projects, net of insurance recoveries | Cash invested in capital projects, net of insurance recoveries | (751) | | (1,276) | |
| Cash invested in capital projects, net of insurance recoveries | |
| Cash invested in capital projects, net of insurance recoveries | |
| Free Cash Flow | Free Cash Flow | $ | 2,312 | | $ | 2,334 | |
| | In millions | In millions | Three Months Ended December 31, 2020 | Three Months Ended September 30, 2020 | Three Months Ended December 31, 2019 | In millions | Three Months Ended December 31, 2023 | Three Months Ended September 30, 2023 | Three Months Ended December 31, 2022 |
| Cash provided by operations | Cash provided by operations | $ | 789 | | $ | 735 | | $ | 928 | |
| Adjustments: | Adjustments: | |
| Cash invested in capital projects, net of insurance recoveries | Cash invested in capital projects, net of insurance recoveries | (94) | | (119) | | (363) | |
| Cash invested in capital projects, net of insurance recoveries | |
| Cash invested in capital projects, net of insurance recoveries | |
| Free Cash Flow | Free Cash Flow | $ | 695 | | $ | 616 | | $ | 565 | |
The non-GAAP financial measures presented in this Annual Report on Form 10-K as referenced above have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies utilize identical calculations, the Company’s presentation of non-GAAP measures in this Annual Report on Form 10-K may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as the Company.
RESULTS OF OPERATIONS
Business Segment Operating Profits (Losses) are used by International Paper’s management to measure the earnings performance of its businesses. Management uses this measure to focus on on-goingongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. International Paper believes that using this information, along with net earnings, provides a more complete analysis of the results of operations by year.
Business Segment Operating Profits (Losses) are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of noncontrolling interests,less than wholly owned subsidiaries, and
excluding interest expense, net, corporate expenses, net, corporate net special items, business net special items and non-operating pension expense. Business Segment Operating Profits (Losses) is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280.280 - "Segment Reporting".
International Paper operates in threetwo segments: Industrial Packaging and Global Cellulose FibersFibers. On September 18, 2023, the Company completed the sale of its Ilim equity investment and, Printing Papers.as a result, all current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes and our equity investment in Ilim is no longer a separate reportable industry segment. For additional information, see discussion in Note 11 – Equity method Investments on pages 69 and 70 of Item 8. Financial Statements and Supplementary Data.
The following table presents a comparison of netNet earnings (loss) from continuing operations attributable to International Paper Company to its total Business Segment Operating Profit:Profit (Loss):
| | In millions | In millions | 2020 | 2019 | In millions | 2023 | 2022 |
| Net Earnings (Loss) Attributable to International Paper Company | $ | 482 | | $ | 1,225 | |
| Net Earnings (Loss) from Continuing Operations Attributable to International Paper Company | |
| Add back (deduct) | Add back (deduct) | |
| Income tax provision (benefit) | Income tax provision (benefit) | 245 | | 634 | |
| Income tax provision (benefit) | |
| Income tax provision (benefit) | |
| Equity (earnings) loss, net of taxes | Equity (earnings) loss, net of taxes | (77) | | (250) | |
| Noncontrolling interests, net of taxes | — | | (5) | |
| Earnings (Loss) Before Income Taxes and Equity Earnings | 650 | | 1,604 | |
| | Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings | |
| Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings | |
| Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings | |
| Interest expense, net | Interest expense, net | 444 | | 491 | |
| Noncontrolling interests included in operations | — | | 3 | |
| Adjustment for less than wholly owned subsidiaries | |
| Corporate expenses, net | Corporate expenses, net | (7) | | 54 | |
| Corporate net special items | Corporate net special items | 274 | | 104 | |
| Business net special items | Business net special items | 490 | | 307 | |
| Non-operating pension expense (income) | Non-operating pension expense (income) | (41) | | 36 | |
| $ | 1,810 | | $ | 2,599 | |
| $ | |
| Business Segment Operating Profit (Loss): | Business Segment Operating Profit (Loss): | |
| Industrial Packaging | Industrial Packaging | $ | 1,819 | | $ | 2,076 | |
| Industrial Packaging | |
| Industrial Packaging | |
| Global Cellulose Fibers | Global Cellulose Fibers | (237) | | (6) | |
| Printing Papers | 228 | | 529 | |
| Total Business Segment Operating Profit | $ | 1,810 | | $ | 2,599 | |
| | Total Business Segment Operating Profit (Loss) | |
| Total Business Segment Operating Profit (Loss) | |
| Total Business Segment Operating Profit (Loss) | |
Business Segment Operating Profit (Loss) in 20202023 was $789$599 million lower than in 20192022 as the benefits from lower input costs ($221982 million) and lower maintenance outage costs ($648 million) were more than offset by lower average sales price realizations and an unfavorable mix ($907435 million), lower sales volumes ($95228 million) and higher operating costs ($72926 million).
The principal changes in operating profit by business segment were as follows:
•Industrial Packaging’s operating profit of $1.8$1.3 billion was $257$476 million lower than in 20192022 as the benefits of higher sales volumes, lower input costs and lower maintenance outage costs were more than offset by lower average sales price and an unfavorable mix, lower sales volumes and higher operating costs.
•Global Cellulose Fibers' operating lossprofit (loss) of $237$(17) million was $231$123 million higherlower than the operating loss in 20192022 as the benefits of higher sales volumes, lower operating costs, lower maintenance outage costs and lower input costs were more than offset by lower average sales price net of mix.
•Printing Papers’ operating profit of $228 million was $301 million lower than in 2019 as the benefits of lower input costs and lower maintenance outage costs were more than offset by lower average sales price,an unfavorable mix, lower sales volumes, and higher operating costs and maintenance outage costs.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 2020,Including discontinued operations, International Paper generated $3.1$1.8 billion of cash flow from operations for the year ended December 31, 2023, compared with $3.6$2.2 billion in 2019.2022. Capital spending for 20202023 totaled $751 million,$1.1 billion, or 58%80% of depreciation and amortization expense. Our liquidity position remains strong,
supported by approximately $2.8$1.9 billion of credit facilities.
While the operating results for International Paper’s various business segments are driven by a number of business-specific factors, changes in International Paper’s operating results are closely tied to changes in general economic conditions in North America, Europe, Russia, Latin America, North Africa and the Middle East.
Factors that impact the demand for our products include industrial non-durable goods production, consumer preferences, consumer spending commercial printing and advertising activity, white-collar employment levels and location, and movements in currency exchange rates.
Product prices are affected by a variety of factors including general economic trends, inventory levels, currency exchange rate movements and worldwide capacity utilization. In addition to these revenue-related factors, net earnings are impacted by various cost drivers, the more significant of which include changes in raw material costs, principally wood,
recovered fiber and chemical costs; energy costs; freight costs; mill outage costs; salary and benefits costs, including pensions; and manufacturing conversion costs.
The following is a discussion of International Paper’s consolidated results of operations for the year ended December 31, 2020,2023, and the major factors affecting these results compared to 2019.2022.
For the year ended December 31, 2020,2023, International Paper reported net sales of $20.6$18.9 billion, compared with $22.4$21.2 billion in 2019.2022. International net sales (based on the location of the seller and including U.S. exports) totaled $6.9$5.3 billion or 34%28% of total sales in 2020.2023. This compares with international net sales of $8.1$5.9 billion in 2019.2022.
Full year 20202023 net earnings attributable to International Paper Company totaled $0.5 billion$288 million ($1.220.82 per diluted share), compared with net earnings of $1.2$1.5 billion ($3.074.10 per diluted share) in 2019.2022. Amounts in 2023 and 2022 include the results of discontinued operations.
Earnings from continuing operations attributable to International Paper Company after taxes in 20202023 and 20192022 were as follows:
| | | | | | | | | | | | | | |
| In millions | 2020 | | 2019 | |
| Earnings from continuing operations attributable to International Paper Company | $ | 482 | | (a) | $ | 1,225 | | (b) |
| | | | | | | | | | | | | | |
| In millions | 2023 | | 2022 | |
| Earnings from continuing operations attributable to International Paper Company | $ | 302 | | (a) | $ | 1,741 | | (b) |
(a)Includes $656$412 million of net special items charges and $31$41 million of non-operating pension expense.
(b)Includes $429 million of net special items income and $144 million of non-operating pension income.
(b)Includes $515 million of net special items charges which included tax expense of $203 million related to a foreign
deferred tax valuation allowance and $28 million of non-operating pension expense.
Compared with 2019,2022, the benefits from lower input costs ($163743 million), lower maintenance outage costs ($476 million), lower corporate and other costs ($443 million), lower net interest expense ($3525 million) and lower tax expense ($168 million) were more than offset by lower average sales price and an unfavorable mix ($670329 million), lower sales volumes ($70172 million) and higher operating costs ($53700 million). In addition, 2020excluding special items, 2023 results included lowerhigher equity earnings, net of taxes, relatingtaxes. Our Building a Better IP initiatives delivered $260 million of earnings in 2023 primarily though our strategy acceleration initiative to the Company’s investments in Ilimdeliver profitable growth through commercial and GPIP.investment excellence.
DISCONTINUED OPERATIONS
On September 18, 2023, the Company completed the sale of its Ilim equity investment and, as a result, all current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes and our equity investment is no longer a separate reportable industry segment. This transaction is discussed further in Note 11 - Equity Method Investments on pages 69 and 70 of Item 8. Financial Statements and Supplementary Data for further discussion. Discontinued operations include the equity earnings of the prior Ilim joint venture. Discontinued operations also includes after-tax losses of $126 million and $533 million in 2023 and 2022, respectively for impairment and transaction costs related to our former equity method investment in the Ilim joint venture.
INCOME TAXES
A net income tax provision from continuing operations of $245$59 million was recorded for 2020, including2023 and the reported effective income tax rate was 15%. This includes a tax benefit of $32$23 million related to the settlement of tax audits.audits and tax expense of $4 million related to internal legal entity restructuring. Excluding this item,these items, a $74$141 million net tax benefit for other special items and a $10$13 million tax benefit related to non-operating pension expense, the operational tax provision (non-GAAP) for 2023 was $232 million, or 23% of pre-tax earnings before equity earnings.
A net income tax benefit from continuing operations of $236 million was recorded for 2022 and the reported effective income tax rate was (16%). This includes a tax benefit of $604 million related to the settlement of the timber monetization restructuring tax matter, a tax benefit of $66 million related to the tax-free exchange of our shares of Sylvamo and tax expense of $45 million related to a foreign deferred tax valuation allowance. Excluding these items, a $37 million net tax benefit for other special items and $48 million tax expense related to non-operating pension income, the operational tax provision (non-GAAP) for 2022 was $341$378 million, or 25%24% of pre-tax earnings before equity earnings.
A
The operational tax provision and operational effective tax rate are non-GAAP financial measures and are calculated by adjusting the income tax provision from continuing operations and rate to exclude the tax effect of net special items and non-operating pension expense (income). Management believes that this presentation provides useful information to investors by providing a meaningful comparison of the income tax rate between past and present periods.
The following is a reconciliation of the net income tax provision of $634 million was recorded for 2019, including tax expense of $203 million related(benefit) to a foreign deferred tax valuation allowance, a tax benefit of $53 million related to internal investment restructuring, tax expense of $9 million related to a non U.S. tax rate change, tax expense of $3 million related to foreign tax audits and a tax benefit of $3 million related to state income tax legislative changes. Excluding these items, a $53 million net tax benefit for other special items and a $8 million tax benefit related to non-operating pension expense, the operational tax provision was $536 million, or 26% of pre-tax earnings before equity earnings.
| | | | | | | | |
| In millions | 2023 | 2022 |
| Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings | $ | 382 | | $ | 1,511 | |
| Pre-tax special items | 554 | | 233 | |
| Non-operating pension (income) expense | 54 | | (192) | |
| Adjusted Operating Earnings (Loss) from Continuing Operations Before Income Taxes and Equity Earnings | $ | 990 | | $ | 1,552 | |
| | |
| Income tax provision (benefit) | $ | 59 | | $ | (236) | |
| Income tax effect - non-operating pension (income) expense and pre-tax special items | 173 | | 614 | |
| Operational Tax Provision | $ | 232 | | $ | 378 | |
| Operational Tax Rate | 23 | % | 24 | % |
INTEREST EXPENSE AND EQUITY EARNINGS, NET OF TAXES
Net corporate interest expense totaled $231 million in 2023 and $325 million in 2022. Net interest expense includes $3 million and $58 million of interest expense related to the timber monetization restructuring tax matter in 2023 and 2022, respectively. Net interest expense in 2023 also includes $6 million of interest income associated with the settlement of tax audits. The decrease in net interest expense in 2023 compared with 2022 was due to higher interest income.
Equity earnings, net of taxes consisted principallywere a loss of the Company’s share of earnings from its 50% investment in Ilim of $48$21 million and $207 million in 2020 and 2019, respectively, and from its 15.0% ownership interest at December 31, 2020 in GPIP of $40 million in 2020, and from its 20.5%ownership interest at December 31, 2019 of $46 million in 2019 (see page 30).
INTEREST EXPENSE AND NONCONTROLLING INTEREST
Net corporate interest expense totaled $444 million in 2020 and $491 million in 2019. Net interest expense in 2020 includes $2 million of interest income associated with a foreign value-added tax refund accrual. Net interest expense in 2019 includes $3 million of interest income associated with a foreign value-added tax refund accrual and $1 million of interest expense related to foreign tax audits. The decrease in 2020 compared with 2019 was due to lower average outstanding debt.
Net earnings attributable to noncontrolling interests were zero in 2020, compared with a loss of $5$6 million in 2019. The loss2023 and 2022, respectively. Equity earnings in 20192023 includes the allocation of loss of $9an $18 million associated with theother-than-temporary impairment of the net assets of our India Papers business.an equity method investment.
SPECIAL ITEMS
Pre-tax special items (excluding interest expense and equity earnings) included in continuing operations totaling $764$557 million and $420$175 million were recorded in 20202023 and 2019,2022, respectively. Details of these charges were as follows:
| | | | | | | | | | | | | | |
| Special Items | | | | |
| In millions | 2023 | | 2022 | |
| Business Segments | | | | |
| Restructuring and other, net | $ | 107 | | | $ | — | | |
| Orange mill accelerated depreciation | 347 | | (a) | — | | |
| Pensacola mill and Riegelwood mill accelerated depreciation | 75 | | (b) | — | | |
| Net (gains) losses on sales and impairments of businesses | — | | | 76 | | (c) |
| 529 | | | 76 | | |
| Corporate | | | | |
| Restructuring and other, net | $ | (8) | | | $ | 89 | | |
| Environmental remediation reserve adjustments | 36 | | | 63 | | |
| Legal reserve adjustments | — | | | (4) | | |
| Foreign currency cumulative translation loss related to sale of equity method investment | — | | | 10 | | |
| Sylvamo investment fair value adjustment | — | | | (65) | | |
| Other | — | | | 6 | | |
| 28 | | | 99 | | |
| Total | $ | 557 | | | $ | 175 | | |
| | | | | | | | | | | | | | |
| Special Items | | | | |
| In millions | 2020 | | 2019 | |
| Business Segments | | | | |
| Net loss on sales and impairments of businesses | $ | 467 | | | $ | 205 | | |
| Abandoned property removal | 14 | | (a) | 50 | | (a) |
| Environmental remediation reserve adjustments | 7 | | (b) | — | | |
| Riverdale mill conversion accelerated depreciation | 1 | | (b) | 5 | | (b) |
| Restructuring and other, net | (1) | | | 25 | | |
| Antitrust fines | — | | | 32 | | (c) |
| Multi-employer pension plan exit liability | — | | | 9 | | (c) |
| Gain on sale of previously closed Albany, Oregon mill site | — | | | (9) | | (c) |
| Other | 2 | | (d) | (1) | | (d) |
| 490 | | | 316 | | |
| Corporate | | | | |
| Restructuring and other, net | $ | 196 | | | $ | 32 | | |
| Asbestos litigation reserve adjustment | 43 | | | — | | |
| Environmental remediation reserve adjustments | 41 | | | 25 | | |
| India investment | 11 | | | 3 | | |
| Printing Papers business spin-off costs | 9 | | | — | | |
| Litigation reserves | — | | | 41 | | |
| India transaction costs | — | | | 3 | | |
| Gain on sale of portion of equity investment in Graphic Packaging | (33) | | | — | | |
| Net gain on sales and impairments of businesses | (2) | | | — | | |
| Other | 9 | | | — | | |
| 274 | | | 104 | | |
| Total | $ | 764 | | | $ | 420 | | |
(a) Includes $9 million and $35 million recordedRecorded in the Industrial Packaging business segment for 2020 and 2019, respectively; $5 million and $12 million recordedsegment.
(b) Recorded in the Global Cellulose Fibers business segment for 2020 and 2019, respectively; $3 million recorded in the Printing Papers business segment for 2019.
(b) Recorded in the Printing Papers business segment.
(c) Recorded in the Industrial Packaging business segment.
(d) Includes expensesegment for the impairment of $2 million for 2019 recordedgoodwill in the Industrialour EMEA Packaging business segment and expense of $2 million and income of $3 million for 2020 and 2019, respectively, recorded in the Printing Papers business segment.business.
Net losses on sales and impairments of businesses included in special items totaled a pre-tax loss of $465 million and $205 million in 2020 and 2019, respectively. Details of these losses were as follows:
| | | | | | | | |
| Net Loss on Sales and Impairments of Businesses |
| In millions | 2020 | 2019 |
| Brazil Packaging impairment | $ | 348 | | $ | — | |
| EMEA Packaging impairment - Turkey | 123 | | — | |
| India Papers impairment | — | | 159 | |
| Global Cellulose Fibers goodwill impairment | — | | 52 | |
| Gain on sale of EMEA Packaging box plant | — | | (6) | |
| Other | (6) | | — | |
| Total | $ | 465 | | $ | 205 | |
International Paper continually evaluates its operations for improvement opportunities targeted to (a) focus our portfolio on our core businesses, (b) realign capacity to operate fewer facilities with the same revenue capability, (c) close high cost, unprofitable facilities, and (d) reduce costs. Additionally, the Company is committed to its capital allocation framework to maintain a strong balance sheet including reducing debt to maximize value creation and maintain our current investment grade credit rating.
During 20202023 and 2019,2022, pre-tax restructuring and other charges, net, totaling $195$99 million and $57$89 million, respectively, were recorded. Details of these charges were as follows:
| | Restructuring and Other, Net | Restructuring and Other, Net | |
| In millions | In millions | 2020 | | 2019 | |
| In millions | |
| In millions | |
| Business Segments | Business Segments | |
| EMEA Packaging optimization | $ | — | | | $ | 15 | | (a) |
| Overhead reduction initiative | — | | | 10 | | (b) |
| Business Segments | |
| Business Segments | |
| Orange mill closure costs | |
| Orange mill closure costs | |
| Orange mill closure costs | |
| Pensacola mill and Riegelwood mill pulp machine shutdowns | |
| Pensacola mill and Riegelwood mill pulp machine shutdowns | |
| Pensacola mill and Riegelwood mill pulp machine shutdowns | |
| Building a Better IP | |
| Building a Better IP | |
| Building a Better IP | |
| 107 | |
| 107 | |
| 107 | |
| Corporate | |
| Corporate | |
| Corporate | |
| Building a Better IP | |
| Building a Better IP | |
| Building a Better IP | |
Early debt extinguishment costs (see Note 16) | |
Early debt extinguishment costs (see Note 16) | |
Early debt extinguishment costs (see Note 16) | |
| Other | Other | (1) | | (a) | — | | |
| (1) | | | 25 | | |
| Corporate | |
| Early debt extinguishment costs (see Note 16) | $ | 196 | | | $ | 21 | | |
| Overhead reduction initiative | — | | | 11 | | |
| 196 | | | 32 | | |
| Other | |
| Other | |
| (8) | |
| (8) | |
| (8) | |
| Total | Total | $ | 195 | | | $ | 57 | | |
| Total | |
| Total | |
(a) Recorded in the Industrial Packaging business segment.
(b) Recorded in the Global Cellulose Fibers segment.
(c) Includes $6$8 million income recorded in the Printing PapersIndustrial Packaging business segment and $4$3 million income recorded in the Global Cellulose Fibers business segment.
International Paper’s business segments discussed below are consistent with the internal structure used to manage these businesses. All segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the forest products industry.
INDUSTRIAL PACKAGING
International PaperThe majority of our business is the largest manufacturer of containerboard in the United States.focused on creating fiber-based packaging that protects and promotes goods, enables worldwide commerce and helps keep consumers safe. We meet our customers’ most challenging sales, shipping, storage and display requirements with sustainable solutions. Our U.S. production capacity is over 13 million tons annually.
Our products include linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft. About 80% of our production is converted into corrugated
boxespackaging and other packaging by our
174173 North American
containercorrugated packaging plants. Additionally, we recycle approximately one million tons of OCC and mixed and white paper through our
1816 U.S. recycling plants. Our
containercorrugated packaging plants are supported by regional design centers, which offer total packaging solutions and supply chain initiatives. In EMEA, our operations include
onea recycled fiber containerboard mill in Morocco
a recycled containerboard milland one in Spain and
27 container23 corrugated packaging plants in France, Italy, Spain, Morocco
Turkey and Portugal.
On January 5, 2021, the Company announced that it had entered into an agreement with Mondi Group to sell its 90.38% ownership interest in Olmuksan International Paper, a corrugated packaging business in Turkey. See Note 8 Divestitures and Impairments of Businesses on pages 59 through 61 of Item 8. Financial Statements and Supplementary Data.
International Paper also produces high quality coated paperboard for a variety of packaging end uses with 443,000 tons of annual capacity at our mills in Poland and Russia.
GLOBAL CELLULOSE FIBERS
Our cellulose fibers product portfolio includes fluff, market and specialty pulps. International Paper is the largest producer of fluff pulp which is used to make absorbent hygiene products like baby diapers, feminine care, adult incontinence and other non-woven products. Our market pulp is used for tissue and paper products. We continue to invest in exploring new innovative uses for our products, such as our specialty pulps, which are used for non-absorbent end uses including textiles, filtration, construction material, paints and coatings, reinforced plastics and more. Our products are made in the United States, Canada, France, Poland, and Russia and are sold around the world. International Paper facilities have annual dried pulp capacity of about 4 million metric tons.
PRINTING PAPERS
International Paper is one of the world’s largest producers of printing and writing papers. The primary product in this segment is uncoated papers. This business produces papers for use in copiers, desktop and laser printers and digital imaging. End-use applications include advertising and promotional materials such as brochures, pamphlets, greeting cards, books, annual reports and direct mail. Uncoated papers also produces a variety of grades that are converted by our customers into envelopes, tablets, business forms and file folders. Uncoated papers are sold under private label and International Paper brand names that include Hammermill, Springhill, Williamsburg, Postmark, Accent, Great White, Chamex, Ballet, Rey, Pol, and Svetocopy. The mills producing uncoated papers are located in the United States, France, Poland, Russia and Brazil. The mills have uncoated paper production capacity of over 4 million tons annually. Brazilian operations function through International Paper do Brasil, Ltda, which owns or manages approximately 314,000 acres of forestlands in Brazil. On December 3, 2020, the Company announced a plan to pursue a spin-off of the Printing Papers segment into SpinCo, a standalone, publicly-traded company. The transaction will be implemented through the distribution of SpinCo shares to International Paper shareholders. We expect the transaction to be tax-free for International Paper's shareholders for U.S. federal income tax purposes. International Paper will retain approximately 19.9% of the shares of SpinCo at the time of the separation, with the intent to monetize and provide additional proceeds to International Paper. The transaction is expected to close late in the third quarter of 2021 and is subject to customary conditions, including final approval by the International Paper board of directors and the filing and effectiveness of a Form 10 registration statement with the SEC. See further discussion in Note 8 Divestitures and Impairments of Businesses on pages 59 through 61 of Item 8. Financial Statements and Supplementary Data.
ILIM
In October 2007, International Paper and Ilim completed a 50:50 joint venture to operate a pulp and paper business located in Russia. Ilim’s facilities include three paper mills located in Bratsk, Ust-Ilimsk, and Koryazhma, Russia, with combined total pulp and paper capacity of over 3.6 million metric tons. Ilim has exclusive harvesting rights on timberland and forest areas exceeding 19.8 million acres (8.01 million hectares).
GPIP
On January 1, 2018, the Company completed the transfer of its North American Consumer Packaging business, which includes its North American Coated Paperboard and Foodservice businesses, to Graphic Packaging International Partners, LLC ("GPIP"), a subsidiary of Graphic Packaging Holding Company, in exchange for a 20.5% ownership interest in GPIP. GPIP subsequently transferred the North American Consumer Packaging business to Graphic Packaging International, LLC ("GPI"), a wholly-owned subsidiary of GPIP that holds the assets of the combined business.
On January 29, 2020, the Company exchanged 15,150,784 units of the aggregate units owned by the Company for an aggregated price of $250 million, resulting in a pre-tax gain of $33 million ($25 million after taxes) which was recorded in the first quarter of 2020. On August 7, 2020, the Company exchanged 17,399,414 units of the aggregate units owned by the Company for an aggregated price of $250 million, resulting in an immaterial gain which was recorded in the third quarter of 2020. After these transactions, the Company's ownership percentage in GPIP is approximately 15%. See Note 11 Equity Method Investments on pages 62 and 63 and Note 23 Subsequent Events on page 88 of Item 8. Financial Statements and Supplementary Data for further information.
Products and brand designations appearing in italics are trademarks of International Paper or a related company.
The following tables present net sales and operating profit (loss) which is the Company's measure of segment profitability.
INDUSTRIAL PACKAGING
Demand for Industrial Packaging products is closely correlated with non-durable industrial goods production, as well as with demand for e-commerce, processed foods, poultry, meat and agricultural products. In addition to prices and volumes, major factors affecting the profitability of Industrial Packaging are raw material and energy costs, freight costs, mill outage costs, manufacturing efficiency and product mix.
| | | | | | | | |
| Industrial Packaging | | |
| In millions | 2020 | 2019 |
| Net Sales | $ | 15,033 | | $ | 15,326 | |
| Operating Profit (Loss) | $ | 1,819 | | $ | 2,076 | |
Industrial Packagingnet sales for 2020 decreased 2% to $15.0 billion compared with $15.3 billion in 2019. Operating profits in 2020 were 12% lower than in 2019. Comparing 2020 with 2019, benefits from higher sales volumes ($66 million), lower input costs ($125 million) and lower maintenance outage costs ($56 million) were more than offset by lower average sales price and an unfavorable mix ($431 million) and higher operating costs ($73 million).
| | | | | | | | |
| North American Industrial Packaging | | |
| In millions | 2020 | 2019 |
| Net Sales (a) | $ | 13,318 | | $ | 13,509 | |
| Operating Profit (Loss) | $ | 1,722 | | $ | 2,043 | |
(a) Includes intra-segment sales of $116 million for 2020 and $118 million for 2019.
North American Industrial Packaging's sales volumes increased in 2020 compared with 2019 for boxes driven by strong demand in certain customer segments including e-commerce and shipping and distribution, reflecting the impacts of the COVID-19 pandemic. Export containerboard sales volumes also increased. Total maintenance and economic downtime was about 942,000 tons lower in 2020 compared with 2019, primarily due to economic downtime. Average sales prices were lower for both export containerboard and box. Operating costs increased primarily due to inflation and costs related to the Riverdale conversion. Planned maintenance downtime costs were $60 million lower in 2020 than in 2019. Input costs were lower, driven by lower wood and energy costs partially offset by higher recovered fiber costs.
Looking ahead to the first quarter of 2021, compared with the fourth quarter of 2020, sales volumes for boxes are expected to be stable, with strong box demand offset by one less shipping day in the first quarter. Average sales margins are expected to be higher. Operating costs are expected to be lower. Planned maintenance downtime costs are expected to be $87 million higher. Input costs are expected to be higher primarily for recovered fiber, wood and energy.
| | | | | | | | |
| EMEA Industrial Packaging | | |
| In millions | 2020 | 2019 |
| Net Sales | $ | 1,317 | | $ | 1,335 | |
| Operating Profit (Loss) | $ | 38 | | $ | (17) | |
EMEA Industrial Packaging's sales volumes in 2020 were higher than in 2019, despite the negative demand impact of the COVID-19 pandemic which was more than offset by improved economic conditions in Turkey and the full-year impact of 2019 acquisitions. Average sales margins improved
significantly in all regions driven by lower containerboard costs and stable sales prices for boxes. Operating costs were lower, driven by the ramp-up of the Madrid, Spain mill and improved box plant operations partially offset by inflation in Turkey. Planned maintenance outage costs were $3 million higher in 2020 compared with 2019. Other input costs were lower. Earnings were negatively affected by unfavorable foreign currency impacts in Turkey.
Entering the first quarter of 2021, compared with the fourth quarter of 2020, sales volumes are expected to be seasonally higher. Average sales margins are expected to be lower, reflecting higher input costs. Operating costs are expected to be lower. Planned maintenance outage costs are expected to be flat due to no outages in the fourth quarter and no planned outages in the first quarter. Input costs are expected to be stable.
| | | | | | | | |
| Brazilian Industrial Packaging | | |
| In millions | 2020 | 2019 |
| Net Sales | $ | 148 | | $ | 235 | |
| Operating Profit (Loss) | $ | (3) | | $ | (14) | |
| | | | | | | | |
| European Coated Paperboard | | |
| In millions | 2020 | 2019 |
| Net Sales | $ | 366 | | $ | 365 | |
| Operating Profit (Loss) | $ | 62 | | $ | 64 | |
European Coated Paperboard'ssales volumes in 2020 compared with 2019 were stable as higher volumes in Russia were offset by lower volumes in Europe. Average sales margins were slightly higher as higher sales prices in Russia and a favorable mix in Europe were mostly offset by an unfavorable mix in Russia. Operating costs were higher. Planned maintenance outage costs were $3 million higher in 2020 compared with 2019. Input costs were lower, driven by purchased pulp, wood and energy costs in Europe. In Russia, input costs were slightly higher, primarily for wood. Earnings benefited from favorable foreign currency impacts in Russia, partially offset by unfavorable impacts in Europe.
Looking forward to the first quarter of 2021, compared with the fourth quarter of 2020, sales volumes are expected to be stable in both regions. Average sales margins are expected to be slightly higher, driven by a favorable mix in Russia. Operating costs are expected to be lower. Planned maintenance outage costs are expected to be flat due to no outages in the fourth quarter and no planned outages in the first
quarter. Input costs are expected to be higher driven by purchased pulp, wood and energy in Europe.
GLOBAL CELLULOSE FIBERS
Cellulose fibers are a sustainable, renewable raw material used in a variety of products people depend on every day. We create safe, quality pulp for a wide range of applications like diapers, towel and tissue products, feminine care, incontinence and other personal care products that promote health and wellness. In addition, our innovative specialty pulps serve as a sustainable raw material used in textiles, construction materials, paints, coatings and more. Our products are made in the United States and Canada and sold around the world. International Paper facilities have annual dried pulp capacity of about 3 million metric tons.
The following tables present net sales and operating profit (loss) which is the Company's measure of segment profitability.
INDUSTRIAL PACKAGING
Demand for Industrial Packaging products is closely correlated with non-durable industrial goods production, as well as with demand for e-commerce, processed foods, poultry, meat and agricultural products. In addition to prices and volumes, major factors affecting the profitability of Industrial Packaging are raw material and energy costs, freight costs, mill outage costs, manufacturing efficiency and product mix.
| | | | | | | | |
| Industrial Packaging | | |
| In millions | 2023 | 2022 |
| Net Sales | $ | 15,596 | | $ | 17,451 | |
| Operating Profit (Loss) | $ | 1,266 | | $ | 1,742 | |
Industrial Packagingnet sales for 2023 decreased 11% to $15.6 billion compared with $17.5 billion in 2022. Operating profits in 2023 were 27% lower than in 2022. Comparing 2023 with 2022, benefits from lower input costs ($856 million) and maintenance
outage costs ($21 million) were more than offset by lower average sales price and an unfavorable mix ($363 million), lower sales volumes ($177 million) and higher operating costs ($813 million).
| | | | | | | | |
| North American Industrial Packaging | | |
| In millions | 2023 | 2022 |
| Net Sales (a) | $ | 14,293 | | $ | 16,011 | |
| Operating Profit (Loss) | $ | 1,186 | | $ | 1,753 | |
(a) Includes intra-segment sales of $95 million for 2023 and $132 million for 2022.
North American Industrial Packaging's average sales margins were lower, reflecting lower prices for both containerboard and corrugated boxes and an unfavorable geographic mix. Sales volumes decreased in 2023 compared with 2022 for corrugated boxes across our segments, reflecting a soft demand environment as consumer spending focused on non-discretionary goods and services and retailers and manufacturers pulled down inventory levels. Containerboard sales volumes also decreased. Total maintenance and economic downtime was about 725,000 short tons higher in 2023 compared with 2022, primarily due to economic downtime. Operating and distribution costs increased, primarily due to inflation on materials and services and increased economic downtime. Planned maintenance downtime costs were lower in 2023 than in 2022. Input costs were significantly lower, driven by lower recovered fiber, energy and wood costs.
Looking ahead to the first quarter of 2024, compared with the fourth quarter of 2023, sales volumes for corrugated boxes and containerboard are expected to be seasonally lower. Average sales margins are expected to be stable. Operating costs are expected to increase. Planned maintenance downtime costs are expected to be higher. Input costs are expected to be higher, primarily for recovered fiber.
| | | | | | | | |
| EMEA Industrial Packaging | | |
| In millions | 2023 | 2022 |
| Net Sales | $ | 1,398 | | $ | 1,572 | |
| Operating Profit (Loss) | $ | 80 | | $ | (11) | |
EMEA Industrial Packaging's average sales margins were lower reflecting lower average sales prices for containerboard and an unfavorable product mix partially offset by higher average sales prices for corrugated boxes. Sales volumes in 2023 were lower than in 2022 driven by soft demand. Operating costs in 2023 were higher driven by inflation on materials and services. Planned maintenance outage costs were lower in 2023 compared with 2022. Input costs were significantly lower in 2023, driven by energy and recovered fiber costs.
Entering the first quarter of 2024, compared with the fourth quarter of 2023, sales volumes are expected to be higher driven by seasonality. Average sales margins are expected to be higher, reflecting lower containerboard costs. Operating costs are expected to be lower. Planned maintenance outage costs are expected to be lower. Other input costs are expected to be stable. Earnings will be impacted by the non-repeat of an energy subsidy and other favorable one-time items in the fourth quarter 2023.
GLOBAL CELLULOSE FIBERS
Demand for Cellulose Fibers products is closely correlated with changes in demand for absorbent hygiene products, primarily driven by the demographics and income growth in various geographic regions. It is further affected by changes in currency rates that can benefit or hurt producers in different geographic regions. Principal cost drivers include manufacturing efficiency, raw material and energy costs, mill outage costs, and freight costs.
| | Global Cellulose Fibers | Global Cellulose Fibers | | Global Cellulose Fibers | |
| In millions | In millions | 2020 | 2019 | In millions | 2023 | 2022 |
| Net Sales | Net Sales | $ | 2,319 | | $ | 2,551 | |
| Operating Profit (Loss) | Operating Profit (Loss) | $ | (237) | | $ | (6) | |
Global Cellulose Fibers net sales for 20202023 decreased 9%10% to $2.3$2.9 billion, compared with $2.6$3.2 billion in 2019.2022. Operating profits in 2020 were significantly lower than in 2019.2023 decreased compared to 2022. Comparing 20202023 with 2019,2022, benefits from higher sales volumes ($1 million), lower operating costs ($15 million), lower input costs ($33 million) and lower maintenance outage costs ($2126 million) were more than offset by lower average sales price net ofand an unfavorable mix ($28272 million), lower sales volumes ($51 million), higher operating costs ($113 million) and higher maintenance outage costs ($13 million).
Sales volumes in 20202023 compared with 20192022 were slightly higher as higher volumes in North America were mostly offsetlower, driven by lower volumes in Europe and Russia.customer inventory destocking. Total maintenance and economic downtime was about 104,000507,000 short tons lowerhigher in 20202023 compared with 2019,2022, primarily due to economic downtime. Average sales margins were significantly lower, reflecting lower average fluff and market pulp prices drivenand an unfavorable product mix partially offset by the flow through of 2019 price decreases.higher average fluff pulp prices. Operating costs increased, primarily due to inflation.driven by inflation on materials and services and downtime. Distribution costs were lower as the global supply chain environment improved. Planned maintenance outage costs were $2 million lowerhigher in 2020.2023. Input costs were lower, driven by energy, freight, wood chemicals and energy.chemicals.
Entering the first quarter of 2021,2024, compared with the fourth quarter of 2020,2023, sales volumes are expected to be stable. Average sales margins are expected to be higher. Operating costs are expected to be lower, reflecting the non-repeat of unfavorable items in the fourth quarter of 2020. Planned maintenance outage costs are expected to be $6 million lower than in the fourth quarter of 2020. Input costs are expected to be seasonally higher, primarily for wood, chemicals and energy.
PRINTING PAPERS
Demand for Printing Papers products is closely correlated with changes in commercial printing and
advertising activity, direct mail volumes and, for uncoated cut-size products, with changes in white-collar employment levels and work location that affect the usage of copy and laser printer paper. Principal cost drivers include manufacturing efficiency, raw material and energy costs, mill outage costs and freight costs.
| | | | | | | | |
| Printing Papers | | |
| In millions | 2020 | 2019 |
| Net Sales | $ | 3,036 | | $ | 4,291 | |
| Operating Profit (Loss) | $ | 228 | | $ | 529 | |
Printing Papersnet sales for 2020 of $3.0 billion decreased 29%, compared with $4.3 billion in 2019. Operating profits in 2020 were 57% lower than in 2019. Comparing 2020 with 2019, benefits from lower input costs ($63 million) and lower planned maintenance outage costs ($6 million), were more than offset by lower average sales price realizations and an unfavorable of mix ($194 million), lower sales volumes ($162 million) and higher operating costs ($14 million).
| | | | | | | | |
| North American Printing Papers | | |
| In millions | 2020 | 2019 |
| Net Sales | $ | 1,436 | | $ | 1,956 | |
| Operating Profit (Loss) | $ | 53 | | $ | 211 | |
North American Printing Papers'sales volumes for 2020 were significantly lower across all grades for uncoated freesheet paper than in 2019 driven by the unprecedented demand decline due to the COVID-19 pandemic. The Riverdale conversion also negatively impacted volumes. Total maintenance and economic downtime was about 281,000 tons higher in 2020 compared with 2019, primarily due to demand conditions. Average sales margins were lower, reflecting lower sales prices for cutsize paper and rolls, net of a favorable geographic mix. Operating costs were lower, reflecting cost reduction initiatives and strong cost management. Planned maintenance outage costs were flat in 2020 compared with 2019. Input costs were lower, primarily for wood and chemicals.
Entering the first quarter of 2021, compared with the fourth quarter of 2020, sales volumes are expected to be stable. Average sales margins are also expected to be stable. Operating costs are expected to be higher due to seasonality and inflation.higher. Planned maintenance outage costs are expected to be about $4 million higher in the first quarter of 2021. Input
costs are expected to be higher, primarily for wood and chemicals.
| | | | | | | | |
| Brazilian Papers | | |
| In millions | 2020 | 2019 |
| Net Sales (a) | $ | 632 | | $ | 967 | |
| Operating Profit (Loss) | $ | 83 | | $ | 155 | |
(a) Includes intra-segment sales of $8 million for 2020 and $42 million for 2019.
Brazilian Papers' sales volumes for uncoated freesheet paper in 2020 were significantly lower compared with 2019 for both export and domestic markets reflecting the unprecedented negative demand impact of the COVID-19 pandemic. Earnings were negatively impacted by economic downtime in 2020 due to the COVID-19 demand impact. Average sales margins were lower, driven by lower average export sales prices and an unfavorable geographic mix. Operating costs were lower. Planned maintenance outage costs were $1 million lower in 2020. Input costs were favorable, primarily for pulp and virgin fiber.
Looking ahead to the first quarter of 2021, compared with the fourth quarter of 2020, sales volumes for uncoated freesheet paper are expected to be seasonally lower. Average sales margins are expected to higher. Operating costs are expected to be flat. Planned maintenance outage costs are expected to be flat with no outages in either the fourth quarter of 2020 or the first quarter of 2021. Input costs are expected to be slightly higher, primarily for chemicals.
| | | | | | | | |
| European Papers | | |
| In millions | 2020 | 2019 |
| Net Sales | $ | 976 | | $ | 1,250 | |
| Operating Profit (Loss) | $ | 92 | | $ | 144 | |
European Papers' sales volumes for uncoated freesheet paper in 2020 were significantly lower in both Europe and Russia compared with 2019, driven by the unprecedented negative demand impact of the COVID-19 pandemic. Earnings in both regions were negatively impacted by economic downtime in 2020 due to the COVID-19 demand impact. Average sales margins decreased for uncoated freesheet paper in both regions, reflecting lower average sales prices and an unfavorable mix. Operating costs were lower. Planned maintenance outage costs were $2 million lower in 2020 than in 2019. Input costs were lower in Europe primarily for wood, energy and pulp. In Russia, input costs were slightly higher driven by wood costs. Earnings benefited from favorable foreign currency impacts in both regions.
Entering 2021, sales volumes for uncoated freesheet paper in the first quarter are expected to be flat in Europe and seasonally lower in Russia, compared to the fourth quarter of 2020. Average sales margins are expected to be slightly lower in Europe and stable in Russia. Operating costs are expected to be higher in both regions. Planned maintenance outage costs are expected to be about $2 million lower in the first quarter. Input costs are expected to be higher in both regions, primarily for wood, energy and chemicals.
| | | | | | | | |
| Indian Papers | | |
| In millions | 2020 | 2019 |
| Net Sales | $ | — | | $ | 160 | |
| Operating Profit (Loss) | $ | — | | $ | 19 | |
EQUITY EARNINGS, NET OF TAXES - ILIM
International Paper accounts for its investment in Ilim, a separate reportable industry segment, using the equity method of accounting.
The Company recorded equity earnings, net of taxes, related to Ilim of $48 million in 2020, compared with earnings of $207 million in 2019. Operating results recorded in 2020 included an after-tax non-cash foreign exchange loss of $50 million, compared with an after-tax foreign exchange gain of $32 million in 2019, primarily on the remeasurement of Ilim's U.S. dollar denominated net debt.
Driven by the newly modernized Ust Ilimsk pulp line and the upgraded Bratsk containerboard machine, sales volumes for the joint venture increased by 9% in 2020, primarily for softwood pulp shipments to China, Russia and other export markets, partially offset by lower shipments of hardwood pulp to China and Russia. Average sales price margins were significantly lower for sales of softwood pulp, hardwood pulp and containerboard in all areas. Input costs were higher, primarily for wood. Distribution costs were negatively impacted by transportation tariffs and inflation. Maintenance and repair expenses were higher. The Company received cash dividends from the joint venture of $141 million in 2020 and $246 million in 2019.
Entering the first quarter of 2021, sales volumes are expected to be lower than in the fourth quarter of 2020, due to the New Year holidays in China and other seasonal factors. Based on results to date in
the current quarter, average margins2023. Input costs are expected to increasebe higher, primarily for softwood pulp, hardwood pulpenergy and containerboard. Input costs and distribution costs are projected to be relatively flat.
EQUITY EARNINGS - GPIP
International Paper recorded equity earnings of $40 million in 2020 and $46 million in 2019 on its ownership position in GPIP. The Company received cash dividends from the investment of $20 million in 2020 and $27 million in 2019. See Description of Business Segments on pages 26 and 27 for further detail regarding our ownership interest in GPIP.
chemicals.
OVERVIEW
A major factor in International Paper’s liquidity and capital resource planning is its generation of operating cash flow, which is highly sensitive to changes in the pricing and demand for our major products. While changes in key operating cash costs, such as raw material, energy, mill outage and distribution, do have an effect on operating cash generation, we believe that our focus on commercial and operational excellence, as well as our ability to tightly manage costs and working capital has improved our cash flow generation over an operating cycle.
Use of cash during 20202023 was primarily focused on working capital requirements, capital spending debt reduction and returning cash to shareholders through dividends.dividends and share repurchases under the Company's share repurchase program.
CASH PROVIDED BY OPERATING ACTIVITIES
Cash provided by operations, including discontinued operations, totaled $3.1$1.8 billion in 2020,2023, compared with $3.6$2.2 billion for 2019.2022. Cash providedused by working capital components (accounts receivable, contract assets and inventory less accounts payable and accrued liabilities, interest payable and other) totaled $324$2 million in 2020,2023, compared with cash providedused by working capital components of $342$145 million in 2019.2022. Cash dividends received from equity investments were $162$13 million in 2020,2023, compared with $273$204 million in 2019.2022.
INVESTMENT ACTIVITIES
Cash outflows from investment
Investment activities in 2020 decreased2023 increased from 2019, as 2019 included higher capital spending. The Company made a concerted effort to control spending in 2020 and will continue to do so throughout 2021.2022. Capital spending was $751 million$1.1 billion in 2020,2023, or 58%80% of depreciation and amortization, compared with $1.3 billion$931 million in 2019,2022, or 98%90% of depreciation and amortization. AcrossIncluded in 2023 depreciation expense is $347 million of accelerated depreciation related to
the closure of our segments, capitalcontainerboard mill in Orange, Texas and $75 million of accelerated depreciation related to the permanent shutdown of pulp machines at our Riegelwood, North Carolina and Pensacola, Florida mills. Capital spending as a percentage of depreciation and amortization ranged from 35.8% to 63.6%was 62% for Global Cellulose Fibers and 81% for Industrial Packaging in 2020.
2023.
The following table shows capital spending by business segment for the years ended December 31, 20202023 and 2019:2022:
| | In millions | In millions | 2020 | 2019 | In millions | 2023 | 2022 |
| Industrial Packaging | Industrial Packaging | $ | 525 | | $ | 922 | |
| Global Cellulose Fibers | Global Cellulose Fibers | 97 | | 162 | |
| Printing Papers | 116 | | 172 | |
| | Subtotal | |
| Subtotal | |
| Subtotal | Subtotal | 738 | | 1,256 | |
| Corporate and other | Corporate and other | 13 | | 20 | |
| Capital Spending | Capital Spending | $ | 751 | | $ | 1,276 | |
Capital spending in 20212024 is expected to be approximately $800 million to $1.0 billion, or 61%78% to 97% of expected depreciation and amortization.
Acquisitions
FINANCING ACTIVITIES
Financing activities during 20202023 included debt issuanceissuances of $583$783 million and reductions of $2.3 billion$780 million for a net decreaseincrease of $1.7 billion.$3 million. Financing activities during 20192022 included debt issuances of $534 million$1.0 billion and reductions of $1.5 billion for a net decrease of $973 million.$1.0 billion.
There were no early debt extinguishment amounts during the year ended December 31, 2023. Amounts related to early debt extinguishment during the yearsyear ended December 31, 2020 and 2019 were as follows:2022 are below:
| | | | | | | | |
| In millions | 2020 | 2019 |
| Early debt reductions (a) | $ | 1,640 | | $ | 614 | |
| Pre-tax early debt extinguishment costs (b) | 196 | | 21 | |
| | | | | |
| In millions | 2022 |
| Early debt reductions (a) | $ | 503 | |
| Pre-tax early debt extinguishment costs (b) | 93 | |
(a)Reductions related to notes with interest rates ranging from 3.00% to 9.50%8.70% with original maturities from 2021 to 2048 for the yearsyear ended December 31, 2020 and 2019.2022.
(b)Amounts are included in Restructuring and other charges in the accompanying consolidated statements of operations.
The Company’s early debt reductions in 2020 were comprised of debt tenders of $406 million with an interest rate of 7.50% due in 2021, $658 million with an interest rate of 3.65% due in 2024, $127 million with an interest rate of 3.80% due in 2026, and $297 million with an interest rate of 3.00% due in 2027. In
addition to these debt tenders, the Company had early debt extinguishments of approximately $152 million from open market repurchases related to debt with interest rates ranging from 3.00% to 4.40% and maturities dates from 2026 to 2048.
The Company had debt issuances in 2020 of $583 million related primarily to the AR securitization program and international debt. In addition to the early debt reductions, the Company had debt reductions of $638 million in 2020 related primarily to the AR securitization program, commercial paper, and international debt.
Other financing activities during 20202023 included the net issuance of approximately one1.6 million shares of treasury stock. Repurchases of common stock and payments of restricted stock withholding taxes totaled $42$218 million, including $14$197 million related to shares repurchased under the Company's share repurchase program. TheThrough December 31, 2023, the Company
has repurchased 69.3119.8 million shares at an average price of $47.17,$46.23, for a total of approximately $3.3$5.5 billion, since the repurchase program began in September 2013 through December 31, 2020.2013. The Company paid cash dividends totaling $806$642 million during 2020.2023.
Other financing activities during 20192022 included the net repurchaseissuance of approximately 8.51.6 million shares of treasury stock, including restricted stock tax withholding. Repurchasesstock. In 2022, repurchases of common stock and payments of restricted stock withholding taxes totaled $535 million,$1.3 billion, including $485 million$1.3 billion related to shares repurchased under the Company's share repurchase program. The Company paid cash dividends totaling $796$673 million during 2019.2022.
Interest Rate Swaps
Our policy is to manage interest cost using a mixture of fixed-rate and variable-rate debt. To manage this risk, International Paper utilizes interest rate swaps to change the mix of fixed and variable rate debt. During the first quarter of 2020, International Paper terminated its interest rate swaps with a notional amount of $700 million and maturities ranging from 2024 to 2026 with an approximate fair value of $85 million. Subsequent to the termination of the interest rate swaps, the fair value basis adjustment is amortized to earnings as interest income over the same period as a debt premium on the previously hedged debt (see Note 17 Derivatives and Hedging Activities on pages 73 through 77 of Item 8. Financial Statements and Supplementary Data). At December 31, 2019 thedebt. The Company had no outstanding interest rate swaps with a notional amount of $700 millionfor the years ended December 31, 2023 and during 2019, the inclusion of the offsetting interest income from short term investments reduced the effective interest rate from 4.8% to 4.4%.2022.
Variable Interest Entities
Information concerning variable interest entities is set forth in Note 15 Variable Interest Entities on pages 7078 through 7280 of Item 8. Financial Statements and Supplementary Data. In connection with the 2006 International Paper installment sale of forestlands, we received $4.8 billion of installment notes. These installment notes were used by variable interest entities as collateral for borrowings from third-party lenders. These variable interest entities were restructured in 2015 (the "2015 Financing Entities") when the installment notes and third-party loans were extended. The restructured variable interest entities hold2015 Financing Entities held installment notes of $4.8 billion that mature in August 2021 and third-party loans of $4.2 billion which as a result of an extension in November 2020, matureboth matured in August 2021. These installment notes and third-party loans are shown in Current nonrecourse financial assets of variable interest entities and Current nonrecourse financial liabilities of variable interest entities, respectively, on the accompanying consolidated balance sheet. We will settlesettled the third-party loans at their maturity in August 2021 with the proceeds from the installment notes which also maturenotes. This resulted in August 2021 resulting in expected cash proceeds of approximately $0.6 billion$630 million representing our equity in the variable interest entities.2015 Financing Entities. Maturity of the installment notes and termination of the monetization structure is expected to resultalso resulted in a $75$72 million cash tax liability that was paid in the fourth quarter of 2021. On September 2, 2022, the Company and the Internal Revenue Service agreed to settle the 2015 Financing Entities timber monetization restructuring tax matter. Under this
agreement, the Company agreed to fully resolve the matter and pay $252 million in U.S. federal income taxes. As a result, interest was charged upon closing of the audit. The amount of interest expense recognized in 2022 was $58 million. As of December 31, 2023, $252 million in U.S. federal income taxes and $58 million in interest expense have been paid as a result of the settlement agreement. The Company has now fully satisfied the payment terms of the settlement agreement regarding the 2015 Financing Entities timber monetization restructuring tax matter. The reversal of the Company’s remaining deferred tax liability associated with the 2015 Financing Entities of $604 million was recognized as a one-time tax benefit in 2021.the third quarter of 2022.
LIQUIDITY AND CAPITAL RESOURCES OUTLOOK FOR 20212024
We expect another year of solid cash generation in 2021. Furthermore, we intend to continue to makemaking choices for the use of cash that are consistent with our capital allocation framework to drive long-term value creation. These include maintaining a strong balance sheet and investment grade credit rating, returning meaningful cash to shareholders through dividends and share repurchases and making organic investments to maintain our world-class system and strengthen our packaging business.businesses.
Under our share repurchase program most recently approved byOn October 11, 2022, our Board of Directors on October 9, 2018, whichapproved an additional $1.5 billion under our share repurchase program. This program does not have an expiration date and has approximately $1.73$2.96 billion aggregate amount of shares of common stock remainsremaining authorized for purchase under this program.as of December 31, 2023. We may continue to repurchase shares under such authorization in open market transactions (including block trades), privately negotiated transactions or otherwise, subject to prevailing market conditions, our liquidity requirements, restrictions in our debt documents, applicable securities laws requirements and other factors. In addition, we payhave paid regular quarterly cash dividends and expect to continue to pay regular quarterly cash dividends in the foreseeable future.
Each quarterly dividend is subject to review and approval by our Board of Directors, and is subject to restrictions in our debt documents.Directors.
Capital Expenditures and Long-Term Debt
Capital spending for 20212024 is planned at approximately $800 million to $1.0 billion, or about 61%78% to 97% of depreciation and amortization.
At December 31, 2020,2023, International Paper’s credit agreements totaled $2.8$1.9 billion, which is comprised of the $750 million contractually committed revolving credit agreement, the $1.5$1.4 billion contractually committed bank credit agreement and up to $550$500 million under the receivables securitization program. In June 2023, the Company amended and restated its credit agreement
to, among other things (i) reduce the size of the contractually committed bank facility from $1.5 billion to $1.4 billion, (ii) extend the maturity date from June 2026 to June 2028, and (iii) replace the LIBOR-based rate with a SOFR-based rate. Management believes these credit agreements are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. At December 31, 2020,2023, the Company had no borrowings outstanding under the $750 million revolving credit agreement, the $1.5$1.4 billion credit agreement or the $550$500 million receivables securitization program. The Company’s credit agreements are not subject to any restrictive covenants other than the financial covenants as disclosed on pages 7280 and 7381 in Note 16 - Debt and Lines of Credit of Item 8. Financial Statements and Supplementary Data, and the borrowings under the receivables securitization program being limited by eligible receivables. The Company was in compliance with all its debt covenants at December 31, 20202023 and was well below the thresholds stipulated under the covenants as defined in the credit agreements. Further the financial covenants do not restrict any borrowings under the credit agreements. After considering the Company’s liquidity position in relation to COVID-19 and the current economic environment, the Company's receivable securitization program was amended from a committed financing arrangement to an uncommitted financing arrangement in February 2021 with the borrowing limit and expiration date remaining unchanged.”
In addition to the $2.8$1.9 billion incapacity under the Company's credit agreements, International Paper has a commercial paper program with a borrowing capacity of $1.0 billion.billion supported by its $1.4 billion credit agreement. Under the terms of the Company's commercial paper program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. The Company had no borrowings outstanding as of December 31, 2020,2023, and $30$410 million of borrowings outstanding as of December 31, 2019,2022, under this program.
During the first quarter of 2023, the Company entered into a variable term loan agreement providing for a $600 million term loan which was fully drawn on the date of such loan agreement and matures in 2028. The $600 million debt was issued following the repayment of $410 million of commercial paper earlier in 2023. Additionally, during the first quarter of 2023, the Company issued an approximately $72 million environmental development bond ("EDB") with an interest rate of 4.00% and a maturity date of April 1, 2026. The proceeds from this issuance were used to repay an approximately $72 million outstanding EDB that matured on April 1, 2023.
During the second quarter of 2023, the Company issued approximately $24 million of debt with a variable interest rate and a maturity date of December 1, 2027. The Company had debt
reductions of approximately $49 million of variable interest EDBs with current maturities. Additionally, during the second quarter of 2023, the Company issued an approximately $54 million EDB with a variable rate and a maturity date of May 1, 2028. The proceeds of this were used to repay an approximately $54 million EDB that matured on May 1, 2023. The Company issued an approximately $25 million EDB with a variable rate and a maturity date of June 1, 2030. The proceeds of this were used to repay an approximately $25 million EDB that matured on June 1, 2023.
During the third quarter of 2023, the Company repaid an approximately $70 million EDB with an interest rate of 2.90% that matured on September 1, 2023.
During the fourth quarter of 2023, the Company repaid an approximately $87 million note with an interest rate of 6.875% that matured on November 1, 2023. Additionally, the Company issued approximately $11 million of debt with a variable interest rate and a maturity date of December 1, 2027.
International Paper expects to be able to meet projected capital expenditures, service existing debt, and meet working capital and dividend requirements and make common stock and/or debt repurchases for the next 12 months and for the foreseeable future thereafter with current cash balances and cash from operations, supplemented as required by its existing credit facilities. The Company will continue to rely on debt and capital markets for the majority of any necessary long-term funding not provided by operating cash flows. Funding decisions will be guided by our capital structure planning objectives. The primary goals of the Company’s capital structure planning are to maximize financial flexibility and maintain appropriate levels of liquidity to meet our needs while managing balance sheet debt and interest expense. We have repurchased, and may continue to repurchase, our common stock (under our existing share repurchase program) and debt (including through open market purchases, privately negotiated transactions or otherwise) to the extent consistent with this capital structure planning, and subject to prevailing market conditions, our liquidity requirements, applicable securities laws requirements and other factors. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors. During 2020, management took various actions to further strengthen the Company’s liquidity position in response to the COVID-19 pandemic. This included the Company amending its receivable securitization program from an uncommitted financing arrangement to a committed financing arrangement in April 2020 and also deferring the payment of our payroll taxes as allowed under CARES Act. The CARES Act allows for the deferral of the payment of the employer portion of Social Security taxes accrued between March 27, 2020, and December 31, 2020. Under the CARES Act 50% of the deferred payroll taxes will be paid by December 31, 2021 and the remainder will be paid by December 31, 2022. We believe that our credit agreements, commercial paper program, and the actions taken in response to COVID-19 provide us with sufficient liquidity to operate in this uncertain environment; however, an extended period of economic disruption could impact our access to additional sources of liquidity.
Maintaining an investment grade credit rating is an important element of International Paper’s financing strategy. At December 31, 2020,2023, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and Moody’s, respectively.
Contractual obligations for future payments under existing debt and lease commitments and purchase obligations at December 31, 2020,2023, were as follows:
| | | | | | | | | | | | | | | | | | | | |
| In millions | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter |
| Debt maturities | $ | 29 | | $ | 199 | | $ | 361 | | $ | 152 | | $ | 209 | | $ | 7,143 | |
| Lease obligations | 175 | | 133 | | 88 | | 53 | | 36 | | 161 | |
| Purchase obligations (a) | 2,768 | | 540 | | 441 | | 329 | | 317 | | 1,308 | |
| Total (b) | $ | 2,972 | | $ | 872 | | $ | 890 | | $ | 534 | | $ | 562 | | $ | 8,612 | |
| | | | | | | | | | | | | | | | | | | | |
| In millions | 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter |
| Debt maturities (a) | $ | 138 | | $ | 189 | | $ | 143 | | $ | 333 | | $ | 670 | | $ | 4,120 | |
| Operating lease obligations | 171 | | 127 | | 89 | | 60 | | 33 | | 31 | |
| Purchase obligations (b) | 2,222 | | 847 | | 698 | | 507 | | 363 | | 1,863 | |
| Total (c) | $ | 2,531 | | $ | 1,163 | | $ | 930 | | $ | 900 | | $ | 1,066 | | $ | 6,014 | |
(a)Includes $945 millionfinancing lease obligations.
(b)Includes $3.8 billion relating to fiber supply agreements entered into at the time of the 2006 Transformation Plan forestland sales and in conjunction with the 2008 acquisition of Weyerhaeuser Company’s Containerboard, Packaging and Recycling business. Also includes $993 million relatingagreements.
to fiber supply agreements assumed in conjunction with the 2016 acquisition of Weyerhaeuser's pulp business.
(b)(c)Not included in the above table due to the uncertainty of the amount and timing of the payment are unrecognized tax benefits of approximately $163$168 million. Also not included in the above table is $117$84 million of Deemed Repatriation Transition Tax associated with the 2017 Tax Cuts and Jobs Act which will be settled from 20212024 - 2026. Additionally, the deferred tax liability of $485 million related to the Temple-Inland timber monetization is not included in the table above. It will be settled with the maturity of the notes in 2027.
We consider the undistributed earnings of our foreign subsidiaries as of December 31, 2020,2023, to be permanently reinvested and, accordingly, no U.S. income taxes have been provided thereon (see Note 13 Income Taxes on pages 6572 through 6874 of ItemItem 8. Financial Statements and Supplementary Data). We do not anticipate the need to repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.
The Company expects significant cash generation through various transactions in 2021 including the sale of the Kwidzyn, Poland mill, further monetization of our investment in Graphic Packaging, the Printing Papers spin-off, the unwind of the 2005 timber monetization structure and the sale of its ownership interest in Olmuksan International Paper. We will deploy this cash in a manner consistent with our capital allocation framework by maintaining a strong balance sheet, returning cash to shareholders and investing in opportunities that generate returns above our cost of capital and grow earnings and cash.
Pension Obligations and Funding
At December 31, 2020,2023, the projected benefit obligation for the Company’s U.S. defined benefit plans determined under U.S. GAAP was approximately $1.0 billion$146 million higher than the fair value of plan assets, excluding non-U.S. plans. Approximately $595 million of this amount relates to plansPlans that are subject to minimum funding requirements.requirements had plan assets of $118 million higher than the projected benefit obligation. Under current IRS funding rules, the calculation of minimum funding requirements differs from the calculation of the present value of plan benefits (the "projected benefit obligation") for accounting purposes. In December 2008, the Worker, Retiree and Employer Recovery Act of 2008 ("WERA") was passed by the U.S. Congress which provided for pension funding relief and technical corrections. Funding contributions depend on the funding methodmethods selected by the Company,Company. The selected methods allow for the smoothing of asset values and interest rates used to measure the timing of its implementation, as well as on actual demographic data and the targeted funding level.obligations. The Company continually reassesses the amount and timing of any
discretionary contributions and elected not to make any voluntary contributions in 2018, 20192021, 2022 or 2020.2023. At this time, we do not expect to have any required contributions to our plans in 2021,2024, although the Company may elect to make future voluntary contributions. The timing and
amount of future contributions, which could be material, will depend on a number of factors, including the actual earnings and changes in values of plan assets and changes in interest rates.
ILIM SHAREHOLDER'S AGREEMENT
In October 2007, in connection with the formation of the Ilim joint venture, International Paper entered into a shareholder’s agreement that includes provisions relating to the reconciliation of disputes among the partners. This agreement provides that at any time, either the Company or its partners may commence procedures specified under the deadlock agreement. If these or any other deadlock procedures under the shareholder's agreement are commenced, although it is not obligated to do so, the Company may in certain situations choose to purchase its partners' 50% interest in Ilim. Any such transaction would be subject to review and approval by Russian and other relevant antitrust authorities. Based on the provisions of the agreement, the Company estimates that the current purchase price for its partners' 50% interests would be approximately $700 million, which could be satisfied by payment of cash or International Paper common stock, or some combination of the two, at the Company's option. The purchase by the Company of its partners’ 50% interest in Ilim would result in the consolidation of Ilim's financial position and results of operations in all subsequent periods. The parties have informed each other that they have no current intention to commence procedures specified under the deadlock provisions of the shareholder’s agreement.
The preparation of financial statements in conformity with accounting principles generally accepted in the United StatesU.S. GAAP requires International Paper to establish accounting policies and to make estimates that affect both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require subjective judgments about matters that are inherently uncertain.
Accounting policies whose application mayhas had or is reasonably likely to have a significant effectmaterial impact on the reported results of operations and financial position of International Paper, and that can require judgmentsa significant level of estimation or uncertainty by management that affect their application, include the accounting for contingencies, impairment or disposal of long-lived assets and goodwill, pensions and income taxes. The CompanyManagement has discussed the selection of critical accounting policies and the effect of significant estimates with the Audit and Finance Committee of
the Company’s Board of Directors and with its independent registered public accounting firm.
While we have taken into account certain impacts arising from COVID-19 in connection with the accounting estimates reflected in this Annual Report on Form 10-K, the full impact of COVID-19 is unknown and cannot be reasonably estimated. However, we have made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are differences between these estimates and actual results, our consolidated financial statements may be affected.
CONTINGENT LIABILITIES
Accruals for contingent liabilities, including personal injury, product liability, environmental, asbestos and other legal matters, are recorded when it is probable that a liability has been incurred or an asset impaired and the amount of the loss can be reasonably estimated. Liabilities accrued for legal matters require judgments regarding projected outcomes and range of loss based on historical litigation and settlement experience and recommendations of legal counsel and, if applicable, other experts. Liabilities for environmental matters require evaluations of relevant environmental regulations and estimates of future remediation alternatives and costs. The Company estimated the probable liability associated with environmental matters to be approximately $251 million and $243 million in the aggregate as of December 31, 2023 and 2022, respectively. Liabilities for asbestos-related matters require reviews of recent and historical claims data. The Company's total recorded liability with respect to pending and future
asbestos-related claims was $97 million and $105 million, net of estimated insurance recoveries, as of December 31, 2023 and 2022, respectively. The Company utilizes its in-house legal counsel and environmental experts to develop estimates of its legal, environmental and asbestos obligations, supplemented as needed by third-party specialists to analyze its most complex contingent liabilities.
We calculate our workers' compensation reserves based on estimated actuarially calculated development factors. The workers' compensation reserves are reviewed at least quarterly to determine the adequacy of the accruals and related financial statement disclosure. While we believe that our assumptions are appropriate, the ultimate settlement of workers' compensation reserves may differ significantly from amounts we have accrued in our consolidated financial statements.
IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable. A recoverability test is performed by comparing the undiscounted cash flows to carrying value of the assets. If the carrying amount is less than the undiscounted cash flows, the fair value of the assets is compared to the carrying value to determine if they are impaired. An impairment of a long-lived asset exists when the asset’s carrying amount exceeds its fair value, and is recordedvalue.
We perform an annual goodwill impairment as of October 1. Additionally, interim assessments of possible impairments of goodwill are also made when events or changes in circumstances indicate that the carrying amount isvalue of the asset may not be recoverable through undiscounted cash flows from future operations or disposals.operations. A goodwill impairment exists when the carrying amount of goodwill exceeds its fair value. Assessments of possible impairments of long-lived assets and goodwill are made when events or changes in circumstances indicate that the carrying
value of the asset may not be recoverable through future operations. Additionally, evaluation for possible impairment of goodwill is required annually. The amount and timing of anygoodwill and long-lived asset impairment charges based on these assessments may requirerequires the estimation of future cash flows or the fair market value of the related assets based on management’s best estimates of certain key factors, including future selling prices and volumes, operating, raw material, energy and freight costs, various other projected operating economic factors and other intended uses of the assets. As these key factors change in future periods, the Company will update its impairment analysis to reflect its latest estimates and projections.
ASU 2011-08, "Intangibles - Goodwill and Other," allows entities testing goodwill for impairment the option of performing a qualitative assessment before performing the quantitative goodwill impairment test. If a qualitative assessment is performed, an entity is not required to perform the quantitative goodwill impairment test unless the entity determines that, based on that qualitative assessment, it is more likely than not that its fair value is less than its carrying value.
The CompanyNorth America Industrial Packaging reporting unit is the Company’s only reporting unit with goodwill. As of October 1, 2023, we performed itsour annual testing of its reporting units for possible goodwill impairments by performing the quantitative goodwill impairment test for its North America Industrial Packaging, EMEA Industrial Packaging, European Papers, Russian Papers, and Brazilian Papersthis reporting units as of October 1, 2020. The Company elected to perform theunit through a quantitative goodwill impairment test for its reporting units due totest. For the current economic environment. The2023 quantitative goodwill impairment test was performed by comparing the carrying amount of each respective reporting unit to its estimated fair value. The Company calculatedassessment, the estimated fair value of each
the reporting units with goodwillunit was calculated using a weighted approach based on discounted future cash flows, market multiples and transaction multiples. The determination of fair value using the discounted cash flow approach requires management to make significant estimates and assumptions related to forecasts of future revenues, operating profit margins, and discount rates. The determination of fair value using market multiples and transaction multiples requires management to make significant assumptions related to revenue multiples and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA") multiples. The results of our annualquantitative goodwill impairment test indicated that the carrying amount did not exceed the estimated fair value of any reporting units. For our EMEAthe North America Industrial Packaging reporting unit, the fair value exceeded the carrying amount by 13%. While the reporting unit’s forecasted results support the fair value, significant changes in or inability to achieve the forecasts could result in the impairment of all or a portion of the reporting unit’s $70 million goodwill balance as of December 31, 2020. While the Printing Papers
segment has experienced a significant decline in demand for its products in the current year as a result of COVID-19, the Company has determined the fair values for those reporting units have not been materially impacted based on management's cumulative long-term outlook and forecasts, which are inherently subjective given the uncertainty around the duration and magnitude of the economic impact of COVID-19. Currently all of our Printing Papers reporting units fair values exceed carrying values by more than 85%.unit.
In addition, the Company considered whether there were any events or circumstances outside of the annual evaluation that would reduce the fair value of its reporting units below their carrying amounts and necessitate a goodwill impairment evaluation. In consideration of all relevant factors, there were no indicators that would require goodwill impairment subsequent to October 1, 2020.
In the fourth quarter of 2019, in conjunction with the annual testing of its reporting units for possible goodwill impairments, the Company calculated the estimated fair value of the Global Cellulose Fibers reporting unit, and it was determined that all of the goodwill in the reporting unit, totaling $52 million, was impaired. This impairment charge was recognized during the fourth quarter of 2019. The decline in the fair value of Global Cellulose Fibers and resulting impairment charge was due to a change in the outlook of the Global Cellulose Fibers reporting unit's operations.
PENSION BENEFIT OBLIGATIONS
The charges recorded forcalculation of the pension benefit obligationsobligation and corresponding expense amounts are determined annually, in conjunction with involvement of International Paper’s consulting actuary, and are dependent upon various assumptions including the expected long-term rate of return on plan assets, discount rates, projected future compensation increases and mortality rates.
The calculations of pension benefit obligations and expensesexpense require decisions about a number of key assumptions that can significantly affect liability and expense amounts, including the expected long-term rate of return on plan assets and the discount rate used to calculate plan liabilities.
Benefit obligations and fair values of plan assets as of December 31, 2020,2023, for International Paper’s pension plan were as follows:
| | In millions | In millions | Benefit
Obligation | Fair Value of
Plan Assets | In millions | Benefit
Obligation | Fair Value of
Plan Assets |
| U.S. qualified pension | U.S. qualified pension | $ | 12,613 | | $ | 12,018 | |
| U.S. nonqualified pension | U.S. nonqualified pension | 407 | | — | |
| Non-U.S. pension | Non-U.S. pension | 264 | | 190 | |
The table below shows the discount rate used by International Paper to calculate U.S. pension obligations for the years shown:
| | | | | | | | | | | |
| 2020 | 2019 | 2018 |
| Discount rate | 2.60 | % | 3.40 | % | 4.30 | % |
| | | | | | | | | | | |
| 2023 | 2022 | 2021 |
| Discount rate | 5.10 | % | 5.40 | % | 2.90 | % |
International Paper determines these actuarial assumptions, after consultation with our actuaries, on December 31 of each year or more frequently if required, to calculate liability information as of that date and pension expense for the following year. The expected long-term rate of return on plan assets is
based on projected rates of return for current asset classes in the plan’s investment portfolio. The discount rate assumption was determined based on a hypothetical settlement portfolio selected from a universe of high qualityhigh-quality corporate bonds.
The expected long-term rate of return on U.S. pension plan assets used to determine net periodic cost for the year ended December 31, 20202023 was 7.00%6.50%.
Increasing (decreasing) the expected long-term rate of return on U.S. plan assets by an additional 0.25% would decrease (increase) 20212024 pension expense by approximately $28$21 million, while a (decrease) increase of 0.25% in the discount rate would (increase) decrease pension expense by approximately $27$12 million.
Actual rates of return earned on U.S. pension plan assets for each of the last 10 years were:
| | | | | | | | | | | |
| Year | Return | Year | Return |
| 2020 | 24.7 | % | 2015 | 1.3 | % |
| 2019 | 23.9 | % | 2014 | 6.4 | % |
| 2018 | (3.0) | % | 2013 | 14.1 | % |
| 2017 | 19.3 | % | 2012 | 14.1 | % |
| 2016 | 7.1 | % | 2011 | 2.5 | % |
The 2012, 2013 and 2014 returns above represent weighted averages of International Paper and Temple-Inland asset returns. International Paper and Temple-Inland assets were combined in October 2014. The annualized time-weighted rate of return earned on U.S. pension plan assets was 13.9% and 10.7% for the past five and ten years, respectively. | | | | | | | | | | | |
| Year | Return | Year | Return |
| 2023 | 7.3 | % | 2018 | (3.0) | % |
| 2022 | (22.0) | % | 2017 | 19.3 | % |
| 2021 | 7.7 | % | 2016 | 7.1 | % |
| 2020 | 24.7 | % | 2015 | 1.3 | % |
| 2019 | 23.9 | % | 2014 | 6.4 | % |
ASC 715, “Compensation – Retirement Benefits,” provides for delayed recognition of actuarial gains and losses, including amounts arising from changes in the estimated projected plan benefit obligation due to changes in the assumed discount rate, differences between the actual and expected return on plan assets, and other assumption changes. These net gains and losses are recognized in pension expense
prospectively over a period that approximates the average remaining service period of active employees expected to receive benefits under the plans to the extent that they are not offset by gains and losses in subsequent years.
Net periodic pension plan expenses, calculated for all of International Paper’s plans, were as follows:
| | In millions | In millions | 2020 | 2019 | 2018 | 2017 | 2016 | In millions | 2023 | 2022 | 2021 | 2020 | 2019 |
| Pension expense | |
| Pension (income) expense | |
| U.S. plans | |
| U.S. plans | |
| U.S. plans | U.S. plans | $ | 32 | | $ | 93 | | $ | 632 | | $ | 717 | | $ | 809 | |
| Non-U.S. plans | Non-U.S. plans | 5 | | 6 | | 4 | | 5 | | 4 | |
| Net expense | $ | 37 | | $ | 99 | | $ | 636 | | $ | 722 | | $ | 813 | |
| Net (income) expense | |
The decreaseincrease in 20202023 pension expense primarily reflects a higher interest cost and lower expected return on assets, and lower interest costs slightly offset by higherlower service cost.
Assuming that discount rates, expected long-term returns on plan assets and rates of future compensation increases remain the same as of
December 31, 2020,2023, projected future net periodic pension plan expense (income) would be as follows:
| | In millions | In millions | 2022 | 2021 | In millions | 2025 | 2024 |
| Pension expense (income) | Pension expense (income) | |
| U.S. plans | U.S. plans | $ | (181) | | $ | (114) | |
| U.S. plans | |
| U.S. plans | |
| Non-U.S. plans | Non-U.S. plans | 4 | | 5 | |
| Net (income) expense | Net (income) expense | $ | (177) | | $ | (109) | |
The Company estimates that it will record net pension income of approximately $114$7 million for its U.S. defined benefit plans in 2021,2024, compared to expense of $32$94 million in 2020. The estimated decrease in net pension expense in 2021 is primarily due to higher return on assets, lower interest cost and lower amortization of actuarial losses partially offset by higher service cost.2023.
The market value of plan assets for International Paper’s U.S. qualified pension plan at December 31, 20202023 totaled approximately $12.0$8.8 billion, consisting of approximately 40% equity securities, 48% debt securities, 7% real estate funds66% hedging assets and 5% other34% return seeking assets. The Company’s funding policy for its qualified pension plansplan is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plan, tax deductibility, the cash flows generated by the Company, and other factors. The Company continually reassesses the amount and timing of any discretionary contributions and could elect to make voluntary contributions in the future. There were no required contributions to the U.S. qualified plan in 2020.2023. The nonqualified defined benefit plans are funded to the extent of benefit payments, which
totaled $31$22 million for the year ended December 31, 2020.2023.
INCOME TAXES
International Paper records its global tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where the Company believes that a tax position is supportable for income tax purposes, the item is included in its income tax returns. Where treatment of a position is uncertain, liabilities are recorded based upon the Company’s evaluation of the “more likely than not” outcome considering technical merits of the position based on specific tax regulations and facts of each matter. Changes to recorded liabilities are only made when an identifiable event occurs that changes the likely outcome, such as settlement with the relevant tax authority, the expiration of statutes of limitation for the subject tax year, change in tax laws, or recent court cases that are relevant to the matter. Accrued interest related to these uncertain tax positions is recorded in our consolidated statement of operations in Interest expense, net.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in evaluatingassessing the need for and magnitude of appropriate valuation allowances against deferred tax assets. This assessment is completed by tax jurisdiction and relies on both positive and negative evidence available, with significant weight placed on recent financial results. Cumulative reported pre-tax income is considered objectively verifiable positive evidence of our ability to generate positive pre-tax income in the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little or no weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. When necessary, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the use of estimates are required when scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies. The Company's valuation allowance was $848 million and $677 million at December 31, 2023 and 2022, respectively.
While International Paper believes that these judgments and estimates are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts.
Information concerning the Company’s environmental and other legal proceedings is set forth in Note 14 Commitments and Contingent Liabilities on pages 6874 through 7078 of Item 8. Financial Statements and Supplementary Data. The Company is not subject to any administrative or judicial proceeding arising under any Federal, State or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that is likely to result in monetary sanctions of $1 million or more.
While inflationaryInflationary increases in certain input costs, such as energy, wood, recycled fiber, freight and chemical costs, havehad an adverse impact on the Company’s operating results changes in general2023 and 2022. The effects of inflation have had minimal impact
on our operating resultsbeen more significant in each of the last three years.recent years due to general inflationary conditions, including labor market conditions, economic activity, consumer behavior, supply shortages and disruptions. Sales prices and volumes are more stronglyprimarily influenced by economic supply and demand factors in specific markets and by exchange rate fluctuations thanbut are also currently being impacted by the current inflationary factors.
environment.
International Paper has operations in a number of countries. Its operations in those countries also export to, and compete with imports from other regions. As such, currency movements can have a number of direct and indirect impacts on the Company’s financial statements. Direct impacts include the translation of international operations’ local currency financial statements into U.S. dollars and the remeasurement impact associated with non-functional currency financial assets and liabilities. Indirect impacts include the change in competitiveness of imports into, and exports out of, the United States (and the impact on local currency pricing of products that are traded internationally). In general, a weaker U.S. dollar and stronger local currency is beneficial to International Paper. The currenciescurrency that havehas the most impact areis the Euro, the Brazilian real, the Polish zloty and the Russian ruble.
Euro.
We use financial instruments, including fixed and variable rate debt, to finance operations, for capital spending programs and for general corporate purposes. Additionally, financial instruments, including various derivative contracts, are used to hedge exposures to interest rate, commodity and foreign currency risks. We do not use financial instruments for trading purposes. Information related to International Paper’s debt obligations is included in
The fair value of our debt and financial instruments varies due to changes in market interest and foreign currency rates and commodity prices since the inception of the related instruments. We assess this market risk utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and currency rates and commodity prices.
INTEREST RATE RISK
Our exposure to market risk for changes in interest rates relates primarily to short- and long-term debt obligations and investments in marketable securities. We invest in investment-grade securities of financial institutions and money market mutual funds with a minimum rating of AAA and limit exposure to any one issuer or fund. Our investments in marketable securities at December 31, 20202023 and 20192022 are stated at cost, which approximates market due to their short-term nature. Our interest rate risk exposure related to these investments was not material.
We issue fixed and floating rate debt in a proportion that management deems appropriate based on current and projected market conditions. Derivative instruments, such as interest rate swaps, may be used to execute this strategy. At December 31, 20202023 and 2019,2022, the fair value of the net liability of financial instruments with exposure to interest rate risk was approximately $9.3$4.5 billion and $9.8$4.3 billion, respectively. The potential increase in fair value resulting from a 10% adverse shift in quoted interest rates would have been approximately $443$273 million and $511$328 million at December 31, 20202023 and 2019,2022, respectively.
COMMODITY PRICE RISK
The objective of our commodity exposure management is to minimize volatility in earnings due to large fluctuations in the price of commodities. Commodity swap or forward purchase contracts may be used to manage risks associated with market fluctuations in energy prices. At both December 31, 20202023 and 2019,2022, the net fair value of these contracts was immaterial$27 million asset and the$20 million asset. The potential loss in fair value from a 10% adverse change in quoted commodity prices for these contracts was also immaterial.would have been approximately $4 million and $3 million at December 31, 2023 and 2022, respectively.
FOREIGN CURRENCY RISK
International Paper transacts business in many currencies and is also subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries. The currency that has the most impact is the Euro. Our objective in managing the associated foreign currency risks is to minimize the effect of adverse exchange rate fluctuations on our after-tax cash flows. We address these risks on a limited basis by entering into cross-currency interest rate swaps, or foreign exchange contracts.
At December 31, 20202023 and 2019,2022, the net fair value of financial instruments with exposure to foreign currency risk was approximately a $3 million liability and a $16 million asset, respectively.immaterial. The
potential loss in fair value for such financial instruments from a 10% adverse change in quoted foreign currency exchange rates would have been approximately $26 million and $87 million at December 31, 2020 and 2019, respectively.
was also immaterial.
REPORT OF MANAGEMENT ON:
Financial Statements
The management of International Paper Company is responsible for the preparation of the consolidated financial statements in this annual report.Annual Report on Form 10-K. The consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America considered appropriate in the circumstances to present fairly the Company’s consolidated financial position, results of operations and cash flows on a consistent basis. Management has also prepared the other information in this annual reportAnnual Report on Form 10-K and is responsible for its accuracy and consistency with the consolidated financial statements.
As can be expected in a complex and dynamic business environment, some financial statement amounts are based on estimates and judgments. Even though estimates and judgments are used, measures have been taken to provide reasonable assurance of the integrity and reliability of the financial information contained in this annual report.Annual Report on Form 10-K. We have formed a Disclosure Committee to oversee this process.
The accompanying consolidated financial statements have been audited by the independent registered public accounting firm Deloitte & Touche LLP.LLP (PCAOB ID No. 34). During its audits, Deloitte & Touche LLP was given unrestricted access to all financial records and related data, including minutes of all meetings of stockholdersshareholders and the boardBoard of directorsDirectors and all committees of the board.Board of Directors. Management believes that all representations made to the independent auditors during their audits were valid and appropriate.
Internal Control Over Financial Reporting
The management of International Paper Company is also responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules (13a-15(e) and 15d-15(e) under the Exchange Act). Internal control over financial reporting is the process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. All internal control systems have inherent limitations, including the possibility of circumvention and overriding of controls,
and therefore can provide only reasonable assurance
of achieving the designed control objectives. The Company’s internal control system is supported by written policies and procedures, contains self-monitoring mechanisms, and is audited by theour internal audit function. Appropriate actions are taken by management to correct deficiencies as they are identified. Our procedures for financial reporting include the active involvement of senior management, our Audit and Finance Committee and our staff of highly qualified financial and legal professionals.
The Company has assessed the effectiveness of its internal control over financial reporting as of December 31, 2020.2023. In making this assessment, it used the criteria described in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this assessment, management believes that, as of December 31, 2020,2023, the Company’s internal control over financial reporting was effective.
The Company’s independent registered public accounting firm, Deloitte & Touche LLP, has issued its report on the effectiveness of the Company’s internal control over financial reporting. The report appears on pages 44 and 45.48 through 50.
Internal Control Environment And Board Of Directors Oversight
Our internal control environment includes an enterprise-wide attitude of integrity and control consciousness that establishes a positive “tone at the top.” This is exemplified by our ethics program that includes long-standing principles and policies on ethical business conduct that require employees to maintain the highest ethical and legal standards in the conduct of International Paper business, which have been distributed to all employees;employees. The Company provides a toll-free telephone helpline whereby any employee may anonymously report suspected violations of law or International Paper’s policy; and maintains an office of ethics and business practice. The internal control system further includes careful selection and training of supervisory and management personnel, appropriate delegation of authority and division of responsibility, dissemination of accounting and business policies throughout International Paper, and an extensive program of internal audits with management follow-up.
The Board of Directors, assisted by the Audit and Finance Committee, ("Committee"), monitors the integrity of the Company’s financial statements and financial reporting procedures, the performance of the Company’s internal audit function and independent auditors, and other matters set forth in its charter. The
Audit and Finance Committee, which consists of independent directors,
meets regularly with representatives of management, and with the independent auditors and the Internal Auditor, with and without management representatives in attendance, to review their activities. The Committee’sAudit and Finance Committee Charter takes into account the New York Stock Exchange rules relating to Audit Committeesaudit committees and the SEC rules and regulations promulgated as a result of the Sarbanes-Oxley Act of 2002. The Audit and Finance Committee has reviewed and discussed the consolidated financial statements for the year ended December 31, 2020,2023, including critical accounting policies and significant management judgments, with management and the independent auditors. The Audit and Finance Committee’s report recommending the inclusion of such financial statements in this Annual Report on Form 10-K will be set forth in our Proxy Statement.
MARK S. SUTTON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TIMOTHY S. NICHOLLS
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of International Paper Company:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of International Paper Company and subsidiaries (the "Company") as of December 31, 20202023 and 2019,2022, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2020,2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20202023 and 2019,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020,2023, in conformity with accounting principles generally accepted in the United States of America.
We did not audit the financial statements of Ilim S.A. as of and for the year ended December 31, 2022. The Company’s investment in Ilim S.A. is accounted for by use of the equity method and is presented as held-for-sale and within discontinued operations, as disclosed in Note 11. The accompanying financial statements of the Company include its equity investment in Ilim S.A. of $133 million as of December 31, 2022, and its equity earnings in Ilim S.A. of $296 million for the year ended December 31, 2022. The financial statements of Ilim S.A. were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Ilim S.A. as of and for the year ended December 31, 2022, is based solely on the report of the other auditors.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020,2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2021,16, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit MattersMatter
The critical audit mattersmatter communicated below are mattersis a matter arising from the current-period audit of the financial statements that werewas communicated or required to be communicated to the Audit and Finance Committee and that (1) relaterelates to accountsan account or disclosuresdisclosure that areis material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit mattersmatter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing a separate opinionsopinion on the critical audit mattersmatter or on the accounts or disclosures to which they relate.
Goodwill — Printing Papers Reportable Segment — Refer to Note 12 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of goodwill associated with the Printing Papers reportable segment for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company determines the fair value of its reporting units using the discounted cash flow model and the market approach. The determination of the fair value using the discounted cash flow model requires management to make significant estimates and assumptions related to forecasts of future revenues, operating profit margins, and discount rates. The determination of the fair value using the market approach requires management to make significant assumptions related to revenue multiples and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) multiples. The Company performed its annual impairment assessment of each reporting unit as of October 1, 2020. Because the estimated fair values exceeded their carrying values, no impairments were recorded. As of December 31, 2020, the Printing Papers reportable segment’s goodwill was $201 million.
We identified the Company’s impairment evaluations of goodwill for the Printing Papers reportable segment, specifically related to the Brazil Papers and European Papers reporting units, as a critical audit matter. Given reductions in cash flows caused by a substantial decline in demand for printing papers across all geographic regions and given the uncertainty regarding the duration and magnitude of
the economic impact of the COVID-19 pandemic, a high degree of auditor judgment and an increased extent of effort was required when performing audit procedures to evaluate the reasonableness of management and its specialists’ estimates and assumptions related to the discount rate, forecasted future revenues and operating margins, and revenue and adjusted EBITDA multiples, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of future revenues and operating profit margins ("forecasts"), revenue and adjusted EBITDA multiples, and selection of discount rates for the Brazil Papers and European Papers reporting units, included the following, among others:
•We tested the effectiveness of controls over goodwill, including those over the determination of fair value, such as controls related to management’s selection of the discount rate and forecasts of future revenue and operating margin.
•We evaluated management’s ability to accurately forecast future revenues and operating margins by comparing actual results to management’s historical forecasts.
•We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in Company press releases as well as in analyst and industry reports of the Company and companies in its peer group.
•We considered the impact of changes in the operating environment on management’s forecasts, including the impact of the COVID-19 pandemic on the long-term demand for the Company’s products.
•With the assistance of our fair value specialists, we evaluated the discount rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.
•With the assistance of our fair value specialists, we evaluated the revenue and adjusted EBITDA multiples, including testing the underlying source information and
mathematical accuracy of the calculations, and comparing the multiples selected by management to its guideline companies.it relates.
Retirement Plans — Plan Assets — Refer to Note 1918 to the financial statements
Critical Audit Matter Description
As of December 31, 2020,2023, the Company’s Qualified Pension PlansPlan held approximately $2.5$2.7 billion in investments whose reported value is determined based on net asset value (“NAV”). The strategic asset allocation policy prescribed by the Company’s Qualified Pension Plan includes permissible investments in certain hedge funds, private equity funds, and real estate funds whose reported values
are determined based on the estimated NAV of each investment.
These NAVs are generally determined by the Qualified Pension Plan’s third-party administrators or fund managers and are subject to review and oversight by management of the Company and its third-party investment advisors.
Given a lack of a readily determinable value of these investments and the subjective nature of the valuation methodologies and unobservable inputs used in these methodologies, auditing the NAV associated with these investments requires a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals in our firm having expertise in alternative investments.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the determination of NAV associated with the Company’s Qualified Pension Plan’s investments in hedge funds, private equity funds, and real estate funds included the following, among others:
•We tested the effectiveness of controls over the Company’s determination and evaluation of NAV, including those related to the reliability of NAVs reported by third-party administrators and fund managers.
•We inquired of management and the investment advisors regarding changes to the investment portfolio and investment strategies.
•We obtained a confirmation from the third-party custodian as of December 31, 20202023 of all individual investments held in trust for the Qualified Pension Plan to confirm the existence of each individual asset held in trust.
•For each selected investment fundfunds with a fiscal year end of December 31, we performed a retrospective review in which we compared the estimated fair value recorded by the Company in the December 31, 20192022 financial statements, to the actual fair value of the fund (using the per-share NAV disclosed in the fund’s subsequently issued audited financial statements), to evaluate the appropriateness of management’s estimation process.
•With the assistance of professionals in our firm having expertise in alternative investments, we rolled forward the valuation
from the selected funds’ most recently audited financial statements to December 31, 2020.2023. This roll forward procedure included consideration of the Company’s transactions in the fund during the period, as well as an estimate of the funds’ returns based on an appropriate, independently obtained benchmark or index. We then compared our independent fund valuation estimate to the December 31, 2020,2023, balance recorded by the Company. For certain selected funds, our roll forward procedures included alternative procedures, such as inspecting trust statements for observable transactions near year-end to compare to the estimated fair value.
/s/ Deloitte & Touche LLP
Memphis, Tennessee
February 19, 202116, 2024
We have served as the Company's auditor since 2002.
To the shareholders and the Board of Directors of International Paper Company":Company:
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of International Paper Company and subsidiaries (the “Company”) as of December 31, 2020,2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020,2023, based on criteria established in
Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the
year ended December 31, 2020,2023, of the Company and our report dated February 19, 2021,16, 2024, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Memphis, Tennessee
February 19, 202116, 2024
| | In millions, except per share amounts, for the years ended December 31 | In millions, except per share amounts, for the years ended December 31 | 2020 | 2019 | 2018 | In millions, except per share amounts, for the years ended December 31 | 2023 | 2022 | 2021 |
| NET SALES | NET SALES | $ | 20,580 | | $ | 22,376 | | $ | 23,306 | |
| COSTS AND EXPENSES | COSTS AND EXPENSES | |
| Cost of products sold | |
| Cost of products sold | |
| Cost of products sold | Cost of products sold | 14,373 | | 15,268 | | 15,555 | |
| Selling and administrative expenses | Selling and administrative expenses | 1,520 | | 1,647 | | 1,723 | |
| Depreciation, amortization and cost of timber harvested | Depreciation, amortization and cost of timber harvested | 1,287 | | 1,306 | | 1,328 | |
| Distribution expenses | Distribution expenses | 1,551 | | 1,560 | | 1,567 | |
| Taxes other than payroll and income taxes | Taxes other than payroll and income taxes | 171 | | 170 | | 171 | |
| Restructuring and other charges, net | Restructuring and other charges, net | 195 | | 57 | | 29 | |
| Net (gains) losses on sales and impairments of businesses | Net (gains) losses on sales and impairments of businesses | 465 | | 205 | | 122 | |
| Net (gains) losses on sales of equity method investments | Net (gains) losses on sales of equity method investments | (35) | | 0 | | 0 | |
| Antitrust fines | 0 | | 32 | | 0 | |
| Net (gains) losses on mark to market investments | |
| Interest expense, net | Interest expense, net | 444 | | 491 | | 536 | |
| Non-operating pension (income) expense | Non-operating pension (income) expense | (41) | | 36 | | 494 | |
| EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY EARNINGS (LOSSES) | EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY EARNINGS (LOSSES) | 650 | | 1,604 | | 1,781 | |
| Income tax provision (benefit) | Income tax provision (benefit) | 245 | | 634 | | 445 | |
| Equity earnings (loss), net of taxes | Equity earnings (loss), net of taxes | 77 | | 250 | | 336 | |
| EARNINGS (LOSS) FROM CONTINUING OPERATIONS | EARNINGS (LOSS) FROM CONTINUING OPERATIONS | 482 | | 1,220 | | 1,672 | |
| Discontinued operations, net of taxes | Discontinued operations, net of taxes | 0 | | 0 | | 345 | |
| NET EARNINGS (LOSS) | NET EARNINGS (LOSS) | 482 | | 1,220 | | 2,017 | |
| Less: Net earnings (loss) attributable to noncontrolling interests | Less: Net earnings (loss) attributable to noncontrolling interests | 0 | | (5) | | 5 | |
NET EARNINGS (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER
COMPANY | NET EARNINGS (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER
COMPANY | $ | 482 | | $ | 1,225 | | $ | 2,012 | |
| BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | |
| Earnings (loss) from continuing operations | Earnings (loss) from continuing operations | $ | 1.23 | | $ | 3.10 | | $ | 4.07 | |
| Earnings (loss) from continuing operations | |
| Earnings (loss) from continuing operations | |
| Discontinued operations, net of taxes | Discontinued operations, net of taxes | 0 | | 0 | | 0.84 | |
| Net earnings (loss) | Net earnings (loss) | $ | 1.23 | | $ | 3.10 | | $ | 4.91 | |
| DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | |
| Earnings (loss) from continuing operations | Earnings (loss) from continuing operations | $ | 1.22 | | $ | 3.07 | | $ | 4.02 | |
| Earnings (loss) from continuing operations | |
| Earnings (loss) from continuing operations | |
| Discontinued operations, net of taxes | Discontinued operations, net of taxes | 0 | | 0 | | 0.83 | |
| Net earnings (loss) | Net earnings (loss) | $ | 1.22 | | $ | 3.07 | | $ | 4.85 | |
The accompanying notes are an integral part of these financial statements.
| | In millions for the years ended December 31 | In millions for the years ended December 31 | 2020 | 2019 | 2018 | In millions for the years ended December 31 | 2023 | 2022 | 2021 |
| NET EARNINGS (LOSS) | NET EARNINGS (LOSS) | $ | 482 | | $ | 1,220 | | $ | 2,017 | |
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | |
| Amortization of pension and postretirement prior service costs and net loss: | Amortization of pension and postretirement prior service costs and net loss: | |
| U.S. plans (less tax of $56, $54 and $196) | 170 | | 163 | | 588 | |
| Amortization of pension and postretirement prior service costs and net loss: | |
| Amortization of pension and postretirement prior service costs and net loss: | |
| U.S. plans (less tax of $29, $28 and $41) | |
| U.S. plans (less tax of $29, $28 and $41) | |
| U.S. plans (less tax of $29, $28 and $41) | |
| Non-U.S. plans (less tax of $0, $0 and $0) | Non-U.S. plans (less tax of $0, $0 and $0) | 0 | | 1 | | 1 | |
| Pension and postretirement liability adjustments: | Pension and postretirement liability adjustments: | |
| U.S. plans (less tax of $76, $7 and $6) | 229 | | 22 | | 18 | |
| Non-U.S. plans (less tax of $1, $3 and $1) | (2) | | (20) | | 4 | |
| Change in cumulative foreign currency translation adjustment (less tax of $1, $1 and $1) | 8 | | 116 | | (473) | |
| Net gains/losses on cash flow hedging derivatives: | |
| Net gains (losses) arising during the period (less tax of $15, $2 and $5) | (34) | | 4 | | (10) | |
| Reclassification adjustment for (gains) losses included in net earnings (less tax of $13, $2 and $1) | 26 | | 4 | | 2 | |
| U.S. plans (less tax of $(56), $(109) and $235) | |
| U.S. plans (less tax of $(56), $(109) and $235) | |
| U.S. plans (less tax of $(56), $(109) and $235) | |
| Non-U.S. plans (less tax of $0, $1 and $1) | |
| Change in cumulative foreign currency translation adjustment (less tax of $0, $0 and $0) | |
| Net gains/losses on cash flow hedging derivatives (less tax of $0, $1 and $(1)) | |
| TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | 397 | | 290 | | 130 | |
| Comprehensive Income (Loss) | Comprehensive Income (Loss) | 879 | | 1,510 | | 2,147 | |
| Net (Earnings) Loss Attributable to Noncontrolling Interests | Net (Earnings) Loss Attributable to Noncontrolling Interests | 0 | | 5 | | (5) | |
| Other Comprehensive (Income) Loss Attributable to Noncontrolling Interests | Other Comprehensive (Income) Loss Attributable to Noncontrolling Interests | 0 | | 0 | | 3 | |
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY | COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY | $ | 879 | | $ | 1,515 | | $ | 2,145 | |
The accompanying notes are an integral part of these financial statements.
| | In millions, except per share amounts, at December 31 | In millions, except per share amounts, at December 31 | 2020 | 2019 | In millions, except per share amounts, at December 31 | 2023 | 2022 |
| ASSETS | ASSETS | |
| Current Assets | Current Assets | |
| Current Assets | |
| Current Assets | |
| Cash and temporary investments | Cash and temporary investments | $ | 595 | | $ | 511 | |
| Accounts and notes receivable (less allowances of $76 in 2020 and $73 in 2019) | 3,064 | | 3,280 | |
| Cash and temporary investments | |
| Cash and temporary investments | |
| Accounts and notes receivable (less allowances of $34 in 2023 and $31 in 2022) | |
| Contract assets | Contract assets | 355 | | 393 | |
| Inventories | Inventories | 2,050 | | 2,208 | |
| Current financial assets of variable interest entities (Note 15) | 4,850 | | 0 | |
| Assets held for sale | Assets held for sale | 138 | | 0 | |
| Other current assets | Other current assets | 184 | | 247 | |
| Total Current Assets | Total Current Assets | 11,236 | | 6,639 | |
| Plants, Properties and Equipment, net | Plants, Properties and Equipment, net | 12,217 | | 13,004 | |
| Forestlands | 311 | | 391 | |
| Investments | Investments | 1,178 | | 1,721 | |
| Long-Term Financial Assets of Variable Interest Entities (Note 15) | Long-Term Financial Assets of Variable Interest Entities (Note 15) | 2,257 | | 7,088 | |
| Goodwill | Goodwill | 3,315 | | 3,347 | |
| Overfunded Pension Plan Assets | |
| Right of Use Assets | Right of Use Assets | 459 | | 434 | |
| Deferred Charges and Other Assets | Deferred Charges and Other Assets | 745 | | 847 | |
| TOTAL ASSETS | TOTAL ASSETS | $ | 31,718 | | $ | 33,471 | |
| LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | |
| Current Liabilities | Current Liabilities | |
| Current Liabilities | |
| Current Liabilities | |
| Notes payable and current maturities of long-term debt | Notes payable and current maturities of long-term debt | $ | 29 | | $ | 168 | |
| Current nonrecourse financial liabilities of variable interest entities (Note 15) | 4,220 | | 4,220 | |
| Notes payable and current maturities of long-term debt | |
| Notes payable and current maturities of long-term debt | |
| Accounts payable | Accounts payable | 2,320 | | 2,423 | |
| Accrued payroll and benefits | Accrued payroll and benefits | 466 | | 466 | |
| Liabilities held for sale | 181 | | 0 | |
| Other current liabilities | Other current liabilities | 1,068 | | 1,369 | |
| Total Current Liabilities | Total Current Liabilities | 8,284 | | 8,646 | |
| Long-Term Debt | Long-Term Debt | 8,064 | | 9,597 | |
| Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 15) | Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 15) | 2,092 | | 2,085 | |
| Deferred Income Taxes | Deferred Income Taxes | 2,743 | | 2,633 | |
| Pension Benefit Obligation | 1,055 | | 1,578 | |
| Underfunded Pension Benefit Obligation | |
| Postretirement and Postemployment Benefit Obligation | Postretirement and Postemployment Benefit Obligation | 251 | | 270 | |
| Long-Term Lease Obligations | Long-Term Lease Obligations | 315 | | 304 | |
| Other Liabilities | Other Liabilities | 1,046 | | 640 | |
| Commitments and Contingent Liabilities (Note 14) | Commitments and Contingent Liabilities (Note 14) | 0 | Commitments and Contingent Liabilities (Note 14) | |
| Equity | Equity | |
| Common stock $1 par value, 2020 - 448.9 shares and 2019 - 448.9 shares | 449 | | 449 | |
| Common stock $1 par value, 2023 - 448.9 shares and 2022 - 448.9 shares | |
| Common stock $1 par value, 2023 - 448.9 shares and 2022 - 448.9 shares | |
| Common stock $1 par value, 2023 - 448.9 shares and 2022 - 448.9 shares | |
| Paid-in capital | Paid-in capital | 6,325 | | 6,297 | |
| Retained earnings | Retained earnings | 8,070 | | 8,408 | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | (4,342) | | (4,739) | |
| 10,502 | | 10,415 | |
| Less: Common stock held in treasury, at cost, 2020 – 55.8 shares and 2019 – 56.8 shares | 2,648 | | 2,702 | |
| Total International Paper Shareholders’ Equity | 7,854 | | 7,713 | |
| Noncontrolling interests | 14 | | 5 | |
| 13,105 | |
| Less: Common stock held in treasury, at cost, 2023 – 102.9 shares and 2022 – 98.6 shares | |
| Total Equity | Total Equity | 7,868 | | 7,718 | |
| TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | $ | 31,718 | | $ | 33,471 | |
The accompanying notes are an integral part of these financial statements.
| | | | | | | | | | | |
| In millions for the years ended December 31 | 2023 | 2022 | 2021 |
| OPERATING ACTIVITIES | | | |
| Net earnings (loss) | $ | 288 | | $ | 1,504 | | $ | 1,754 | |
| Depreciation, amortization, and cost of timber harvested | 1,432 | | 1,040 | | 1,210 | |
| Deferred income tax provision (benefit), net | (156) | | (773) | | (291) | |
| Restructuring and other charges, net | 99 | | 89 | | 509 | |
| Periodic pension (income) expense, net | 94 | | (116) | | (112) | |
| Net (gains) losses on mark to market investments | — | | (65) | | 32 | |
| Net (gains) losses on sales and impairments of businesses | — | | 76 | | (358) | |
| Net (gains) losses on sales and impairments of equity method investments | 153 | | 543 | | (205) | |
| Net (gains) losses on sales of fixed assets | — | | — | | (86) | |
| Equity method dividends received | 13 | | 204 | | 159 | |
| Equity (earnings) losses, net | (108) | | (291) | | (313) | |
| Other, net | 20 | | 108 | | 157 | |
| Changes in current assets and liabilities | | | |
| Accounts and notes receivable | 255 | | (59) | | (596) | |
| Contract assets | 48 | | (103) | | (49) | |
| Inventories | 73 | | (162) | | (263) | |
| Accounts payable and accrued liabilities | (402) | | 110 | | 519 | |
| Interest payable | (19) | | 41 | | (32) | |
| Other | 43 | | 28 | | (5) | |
| CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES | 1,833 | | 2,174 | | 2,030 | |
| INVESTMENT ACTIVITIES | | | |
| Invested in capital projects, net of insurance recoveries | (1,141) | | (931) | | (549) | |
| Acquisitions, net of cash acquired | — | | — | | (80) | |
| Proceeds from sales of equity method investments, net of transaction costs | 472 | | — | | 908 | |
| Proceeds from sales of businesses, net of cash divested | — | | — | | 827 | |
| Proceeds from exchange of equity securities | — | | 311 | | — | |
| Proceeds from settlement of Variable Interest Entities | — | | — | | 4,850 | |
| Proceeds from sale of fixed assets | 4 | | 13 | | 101 | |
| Other | (3) | | (1) | | (3) | |
| CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES | (668) | | (608) | | 6,054 | |
| FINANCING ACTIVITIES | | | |
| Repurchases of common stock and payments of restricted stock tax withholding | (218) | | (1,284) | | (839) | |
| Issuance of debt | 783 | | 1,011 | | 1,512 | |
| Reduction of debt | (780) | | (1,017) | | (2,509) | |
| Change in book overdrafts | (8) | | 1 | | 65 | |
| Dividends paid | (642) | | (673) | | (780) | |
| Reduction of Variable Interest Entity loans | — | | — | | (4,220) | |
| Distribution to Sylvamo Corporation | — | | — | | (130) | |
| Net debt tender premiums paid | — | | (89) | | (456) | |
| Other | (1) | | (3) | | (18) | |
| CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES | (866) | | (2,054) | | (7,375) | |
| Effect of Exchange Rate Changes on Cash | 10 | | (3) | | (9) | |
| Change in Cash and Temporary Investments | 309 | | (491) | | 700 | |
| Cash and Temporary Investments | | | |
| Beginning of the period | 804 | | 1,295 | | 595 | |
| End of the period | $ | 1,113 | | $ | 804 | | $ | 1,295 | |
The accompanying notes are an integral part of these financial statements.
| | | | | | | | | | | |
| In millions for the years ended December 31 | 2020 | 2019 | 2018 |
| OPERATING ACTIVITIES | | | |
| Net earnings (loss) | $ | 482 | | $ | 1,220 | | $ | 2,017 | |
| Depreciation, amortization, and cost of timber harvested | 1,287 | | 1,306 | | 1,328 | |
| Deferred income tax provision (benefit), net | 9 | | 212 | | 133 | |
| Restructuring and other charges, net | 195 | | 57 | | 29 | |
| Periodic pension expense, net | 32 | | 93 | | 632 | |
| Net gain on transfer of North American Consumer Packaging business | 0 | | 0 | | (488) | |
| Net (gains) losses on sales and impairments of businesses | 465 | | 205 | | 122 | |
| Net (gains) losses on sales of equity method investments | (35) | | 0 | | 0 | |
| Antitrust fines | 0 | | 32 | | 0 | |
| Equity method dividends received | 162 | | 273 | | 153 | |
| Equity (earnings) losses, net | (77) | | (250) | | (336) | |
| Other, net | 219 | | 120 | | 75 | |
| Changes in current assets and liabilities | | | |
| Accounts and notes receivable | 59 | | 246 | | (342) | |
| Contract assets | 35 | | 2 | | (32) | |
| Inventories | 35 | | (1) | | (236) | |
| Accounts payable and accrued liabilities | 141 | | 139 | | 151 | |
| Interest payable | (55) | | (19) | | (8) | |
| Other | 109 | | (25) | | 28 | |
| CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES | 3,063 | | 3,610 | | 3,226 | |
| INVESTMENT ACTIVITIES | | | |
| Invested in capital projects, net of insurance recoveries | (751) | | (1,276) | | (1,572) | |
| Acquisitions, net of cash acquired | (65) | | (103) | | (8) | |
| Proceeds from sales of equity method investments | 500 | | 0 | | 0 | |
| Net settlement on transfer of North American Consumer Packaging business | 0 | | 0 | | (40) | |
| Proceeds from sales of businesses, net of cash divested | 40 | | 81 | | 0 | |
| Proceeds from sale of fixed assets | 8 | | 18 | | 23 | |
| Other | (1) | | (20) | | 28 | |
| CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES | (269) | | (1,300) | | (1,569) | |
| FINANCING ACTIVITIES | | | |
| Repurchases of common stock and payments of restricted stock tax withholding | (42) | | (535) | | (732) | |
| Issuance of debt | 583 | | 534 | | 490 | |
| Reduction of debt | (2,278) | | (1,507) | | (1,008) | |
| Change in book overdrafts | 35 | | (66) | | (1) | |
| Dividends paid | (806) | | (796) | | (789) | |
| Net debt tender premiums paid | (188) | | (18) | | (6) | |
| Other | (4) | | (1) | | 0 | |
| CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES | (2,700) | | (2,389) | | (2,046) | |
| Cash Included in Assets Held for Sale | (2) | | 0 | | 0 | |
| Effect of Exchange Rate Changes on Cash | (8) | | 1 | | (40) | |
| Change in Cash and Temporary Investments | 84 | | (78) | | (429) | |
| Cash and Temporary Investments | | | |
| Beginning of the period | 511 | | 589 | | 1,018 | |
| End of the period | $ | 595 | | $ | 511 | | $ | 589 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions | Common Stock Issued | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Common Stock Held In Treasury, At Cost | Total International Paper Shareholders’ Equity | Noncontrolling Interests | Total Equity |
| BALANCE, JANUARY 1, 2021 | $ | 449 | | $ | 6,325 | | $ | 8,070 | | $ | (4,342) | | $ | 2,648 | | $ | 7,854 | | $ | 14 | | $ | 7,868 | |
| Sylvamo Corporation spin-off | — | | (1,729) | | — | | 1,773 | | — | | 44 | | (1) | | 43 | |
| Issuance of stock for various plans, net | — | | 54 | | — | | — | | (89) | | 143 | | — | | 143 | |
| Repurchase of stock | — | | — | | — | | — | | 839 | | (839) | | — | | (839) | |
| Dividends ($2.000 per share) | — | | — | | (793) | | — | | — | | (793) | | — | | (793) | |
| Transactions of equity method investees | — | | 18 | | — | | — | | — | | 18 | | — | | 18 | |
| Divestiture of noncontrolling interests | — | | — | | — | | — | | — | | — | | (13) | | (13) | |
| Comprehensive income (loss) | — | | — | | 1,752 | | 903 | | — | | 2,655 | | — | | 2,655 | |
| BALANCE, DECEMBER 31, 2021 | 449 | | 4,668 | | 9,029 | | (1,666) | | 3,398 | | 9,082 | | — | | 9,082 | |
| Issuance of stock for various plans, net | — | | 57 | | — | | — | | (75) | | 132 | | — | | 132 | |
| Repurchase of stock | — | | — | | — | | — | | 1,284 | | (1,284) | | — | | (1,284) | |
| Dividends ($1.850 per share) | — | | — | | (678) | | — | | — | | (678) | | — | | (678) | |
| Comprehensive income (loss) | — | | — | | 1,504 | | (259) | | — | | 1,245 | | — | | 1,245 | |
| BALANCE, DECEMBER 31, 2022 | 449 | | 4,725 | | 9,855 | | (1,925) | | 4,607 | | 8,497 | | — | | 8,497 | |
| Issuance of stock for various plans, net | — | | 5 | | — | | — | | (77) | | 82 | | — | | 82 | |
| Repurchase of stock | — | | — | | — | | — | | 220 | | (220) | | — | | (220) | |
| Dividends ($1.850 per share) | — | | — | | (652) | | — | | — | | (652) | | — | | (652) | |
| Comprehensive income (loss) | — | | — | | 288 | | 360 | | — | | 648 | | — | | 648 | |
| BALANCE, DECEMBER 31, 2023 | $ | 449 | | $ | 4,730 | | $ | 9,491 | | $ | (1,565) | | $ | 4,750 | | $ | 8,355 | | $ | — | | $ | 8,355 | |
The accompanying notes are an integral part of these financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions | Common Stock Issued | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Common Stock Held In Treasury, At Cost | Total International Paper Shareholders’ Equity | Noncontrolling Interests | Total Equity |
| BALANCE, JANUARY 1, 2018 | $ | 449 | | $ | 6,206 | | $ | 6,180 | | $ | (4,633) | | $ | 1,680 | | $ | 6,522 | | $ | 19 | | $ | 6,541 | |
| Adoption of ASC 606 revenue from contracts with customers | — | | — | | 73 | | — | | — | | 73 | | — | | 73 | |
| Issuance of stock for various plans, net | — | | 62 | | — | | — | | (80) | | 142 | | — | | 142 | |
| Repurchase of stock | — | | — | | — | | — | | 732 | | (732) | | — | | (732) | |
| Dividends ($1.925 per share) | — | | — | | (800) | | — | | — | | (800) | | — | | (800) | |
| Transactions of equity method investees | — | | 12 | | — | | — | | — | | 12 | | 0 | | 12 | |
| Comprehensive income (loss) | 0 | | 0 | | 2,012 | | 133 | | 0 | | 2,145 | | 2 | | 2,147 | |
| BALANCE, DECEMBER 31, 2018 | 449 | | 6,280 | | 7,465 | | (4,500) | | 2,332 | | 7,362 | | 21 | | 7,383 | |
| Adoption of ASU 2018-02 reclassification of stranded tax effects resulting from Tax Reform | — | | — | | 529 | | (529) | | — | | 0 | | — | | 0 | |
| Issuance of stock for various plans, net | — | | (18) | | — | | — | | (165) | | 147 | | — | | 147 | |
| Repurchase of stock | — | | — | | — | | — | | 535 | | (535) | | — | | (535) | |
| Dividends ($2.013 per share) | — | | — | | (811) | | — | | — | | (811) | | — | | (811) | |
| Transactions of equity method investees | — | | 35 | | — | | — | | — | | 35 | | 0 | | 35 | |
| Divestiture of noncontrolling interests | — | | — | | — | | — | | — | | 0 | | (11) | | (11) | |
| Comprehensive income (loss) | 0 | | 0 | | 1,225 | | 290 | | 0 | | 1,515 | | (5) | | 1,510 | |
| BALANCE, DECEMBER 31, 2019 | 449 | | 6,297 | | 8,408 | | (4,739) | | 2,702 | | 7,713 | | 5 | | 7,718 | |
| Adoption of ASU 2016-13 measurement of credit losses on financial instruments | — | | — | | (2) | | — | | — | | (2) | | — | | (2) | |
| Issuance of stock for various plans, net | — | | (8) | | — | | — | | (96) | | 88 | | — | | 88 | |
| Repurchase of stock | — | | — | | — | | — | | 42 | | (42) | | — | | (42) | |
| Dividends ($2.050 per share) | — | | — | | (818) | | — | | — | | (818) | | — | | (818) | |
| Transactions of equity method investees | — | | 36 | | — | | — | | — | | 36 | | 0 | | 36 | |
| Transactions with noncontrolling interest holders | — | | — | | — | | — | | — | | 0 | | 9 | | 9 | |
| Comprehensive income (loss) | 0 | | 0 | | 482 | | 397 | | 0 | | 879 | | 0 | | 879 | |
| BALANCE, DECEMBER 31, 2020 | $ | 449 | | $ | 6,325 | | $ | 8,070 | | $ | (4,342) | | $ | 2,648 | | $ | 7,854 | | $ | 14 | | $ | 7,868 | |
The accompanying notes are an integral part of these financial statements.
NATURE OF BUSINESS
International Paper (the "Company") is a global paperproducer of renewable fiber-based packaging and packaging companypulp products with primary markets and manufacturing operations in North America and Europe and additional markets and manufacturing operations in Latin America, North Africa and Russia.Asia. Substantially all of our businesses have experienced, and are likely to continue to experience, cycles relating to available industry capacity and general economic conditions.
FINANCIAL STATEMENTS
On March 11, 2020 the World Health Organization (WHO) declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Since that time, most of our manufacturing and converting facilities have remained open and operational during the pandemic. The health and safety of our employees and contractors is our most important responsibility as we manage through the COVID-19 pandemic. We have implemented work-systems across the Company, including hygiene, social distancing, site cleaning, contact tracing, and other measures, as recommended by the Centers for Disease Control (CDC) and WHO. Our COVID-19 measures are proving to be effective and we have not had any material disruptions to our operations.
We have seen a significant negative impact on demand for our printing papers products. Demand for our pulp, containerboard and corrugated box products has not been negatively impacted by COVID-19 to date, but our operations in Industrial Packaging experienced higher supply chain costs due to the impacts of COVID-19. The recent resurgence of the virus in many areas has led to additional governmental measures, such as stay-at-home orders or business and school closures, negatively impacting our supply chain, and therefore our production.
There continue to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the various economic reopening plans and the resurgence of the virus in many areas; additional actions that may be taken by governmental authorities and private businesses to attempt to contain the COVID-19 outbreak or to mitigate its impact; the extent and duration of social distancing and stay-at-home orders; the efficacy and availability of various vaccines; and the ongoing impact of COVID-19 on unemployment, economic activity and consumer confidence. Developments related to
COVID-19 are significantly adversely affecting portions of our business, and could have a material adverse effect on our financial condition, results of operations and cash flows, particularly if negative global economic conditions persist for a significant period of time or deteriorate.
These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States that require the use of management’s estimates. Actual results could differ from management’s estimates. Certain amounts from prior year have been reclassified to conform with the current year financial statement presentation.
Printing Papers Spin-off
On October 1, 2021, the Company completed the previously announced spin-off of its Printing Papers segment along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia into a standalone, publicly-traded company, Sylvamo Corporation ("Sylvamo"). The transaction was implemented through the distribution of shares of the standalone company to International Paper's shareholders (the "Distribution"). As a result of the Distribution, Sylvamo is an independent public company that trades on the New York Stock Exchange under the symbol "SLVM".
In addition to the spin-off of Sylvamo, the Company completed the sale of its Kwidzyn, Poland mill on August 6, 2021. All historical operating results of the Sylvamo businesses and Kwidzyn mill have been presented as Discontinued Operations, net of tax, in the consolidated statement of operations. See Note 8 for further details regarding the Sylvamo spin-off and discontinued operations.
DISCONTINUED OPERATIONS
A discontinued operation may include a component or a group of components of the Company's operations. A disposal of a component or a group of components is reported in discontinued operations if the disposal
represents a strategic shift that has or will have a major effect on the Company's operations and financial results when the following occurs: (1) a component (or group of components) meets the criteria to be classified as held for sale; (2) the component or group of components is disposed of by sale; or (3) the component or group of components is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spin-off).For any component classified as held for sale or disposed of by sale or other than by sale, qualifying for presentation as a discontinued operation, the Company reports the results of operations of the discontinued operations (including any gain or loss recognized on the disposal or loss recognized on classification as held for sale of a discontinued operation), less applicable income taxes (benefit), as a separate component in the consolidated statement of operations for current and all prior periods presented. The Company also reports assets and liabilities associated with discontinued operations as separate line items on the consolidated balance sheet.
CONSOLIDATION
The consolidated financial statements include the accounts of International Paper and subsidiaries for which we have a controlling financial interest, including variable interest entities for which we are the primary beneficiary. All significant intercompany balances and transactions are eliminated.
EQUITY METHOD INVESTMENTS
The equity method of accounting is applied for investments when the Company has significant influence over the investee’s operations, or when the investee is structured with separate capital accounts. Our material equity method investments are described in Note 11.
OTHER-THAN-TEMPORARY IMPAIRMENT
The Company evaluates our equity method investments for other-than-temporary impairment ("OTTI") when circumstances indicate the investment may be impaired. When a decline in fair value is deemed to be an OTTI, an impairment is recognized to the extent that the fair value is less than the carrying value of the investment. We consider various factors in determining whether a loss in value of an investment is other than temporary including: the length of time and the extent to which the fair value has been below cost, the financial condition of the investee, and our intent and ability to retain the investment for a period of time sufficient to allow for recovery of value. Management makes certain judgments and estimates in its assessment including but not limited to: identifying if circumstances indicate
a decline in value is other than temporary, expectations about operations, as well as industry, financial, regulatory and market factors.
BUSINESS COMBINATIONS
The Company allocates the total consideration of the assets acquired and liabilities assumed based on their estimated fair value as of the business combination date. In developing estimates of fair values for long-lived assets, including identifiable intangible assets, the Company utilizes a variety of inputs including forecasted cash flows, anticipated growth rates, discount rates, estimated replacement costs and depreciation and obsolescence factors. Determining the fair value for specifically identified intangible assets such as customer lists and developed technology involves judgment. We may refine our estimates and make adjustments to the assets acquired and liabilities assumed over a measurement period, not to exceed one year. Upon the conclusion of the measurement period or the final determination of the values of assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are charged to the consolidated statement of operations. Subsequent actual results of the underlying business activity supporting the specifically identified intangible assets could change, requiring us to record impairment charges or adjust their economic lives in future periods. See Note 7 for further details.
DISCONTINUED OPERATIONS
A discontinued operation may include a component or a group of components of the Company's operations. A disposal of a component or a group of components is reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the Company's operations and financial results when the following occurs: (1) a component (or group of components) meets the criteria to be classified as held for sale; (2) the component or group of components is disposed of by sale; or (3) the component or group of components is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spin-off).For any component classified as held for sale or disposed of by sale or other than by sale, qualifying for presentation as a discontinued operation, the Company reports the results of operations of the discontinued operations (including any gain or loss recognized on the disposal or loss recognized on classification as held for sale of a discontinued operation), less applicable income taxes (benefit), as a separate component in the consolidated statement of operations for current and all prior periods presented.
RESTRUCTURING LIABILITIES AND COSTS
For operations to be closed or restructured, a liability and related expense is recorded in the period when operations cease. For termination costs associated with employees covered by a written or substantive plan, a liability is recorded when it is probable that employees will be entitled to benefits and the amount can be reasonably estimated. For termination costs associated with employees not covered by a written and broadly communicated policy covering involuntary termination benefits (severance plan), a liability is recorded for costs to terminate employees (one-time termination benefits) when the termination plan has been approved and committed to by management, the employees to be terminated have been identified, the termination plan benefit terms are communicated, the employees identified in the plan have been notified and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The timing and amount of an accrual is dependent upon the type of benefits granted, the timing of communication and other provisions that may be provided in the benefit plan. The accounting for each termination is evaluated individually. See Note 6 for further details.
REVENUE RECOGNITION
Generally, the Company recognizes revenue on a point-in-time basis when the customer takes titleCompany transfers control of the goods to the goods and assumes the risks and rewards for the
goods.customer. For customized goods where the Company has a legally enforceable right to payment for the goods, the Company recognizes revenue over time, which generally is, as the goods are produced.
The Company’s revenue is primarily derived from fixed consideration; however, we do have contract terms that give rise to variable consideration, primarily volume rebates, early payment discounts and other customer refunds. The Company estimates its volume rebates at the individual customer level based on the most likely amount method outlined in ASC 606.606 "Revenue from Contracts with Customers". The Company estimates early payment discounts and other customer refunds based on the historical experience across the Company's portfolio of customers to record reductions in revenue whichthat is consistent with the expected value method outlined in ASC 606. Management has concluded that these methods result in the best estimate of the consideration the Company will be entitled to from its customers.
The Company has elected to present all sales taxes on a net basis, account for shipping and handling activities as fulfillment activities, recognize the incremental costs of obtaining a contract as expense when incurred if the amortization period of the asset the Company would recognize is one year or less, and not record interest income or interest expense when the difference in timing of control or transfer and customer payment is one year or less. See Note 3 for further details.
TEMPORARY INVESTMENTS
Temporary investments with an original maturity of three months or less and money market funds with greater than three monththree-month maturities but with the right to redeem without notice are treated as cash equivalents and are stated at cost, which approximates market value. See Note 9 for further details.
INVENTORIES
Inventories are valued at the lower of cost or market value and include all costs directly associated with manufacturing products: materials, labor and manufacturing overhead. In the United States, costs
of raw materials and finished pulp and paper products, are generally determined using the last-in, first-out method. Other inventories are valued using the first-in, first-out or average cost methods. See Note 9 for further details.
LEASED ASSETS
Operating lease ROUright of use ("ROU") assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over
the lease term. The Company's leases may include options to extend or terminate the lease. These options to extend are included in the lease term when it is reasonably certain that we will exercise that option. Some leases have variable payments, however, because they are not based on an index or rate, they are not included in the ROU assets and liabilities. Variable payments for real estate leases primarily relate to common area maintenance, insurance, taxes and utilities. Variable payments for equipment, vehicles, and leases within supply agreements primarily relate to usage, repairs and maintenance. As the implicit rate is not readily determinable for most of the Company's leases, the Company applies a portfolio approach using an estimated incremental borrowing rate to determine the initial present value of lease payments over the lease terms on a collateralized basis over a similar term, which is based on market and company specific information. We use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate, and apply the rate based on the currency of the lease, which is updated on a quarterly basis for measurement of new lease liabilities. Leases having a lease term of twelve months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the term of the lease. In addition, the Company has applied the practical expedient to account for the lease and non-lease components as a single lease component for all of the Company's leases.leases except for certain gas and chemical agreements. See Note 10 for further details.
PLANTS, PROPERTIES AND EQUIPMENT
Plants, properties and equipment are stated at cost, less accumulated depreciation. Expenditures for betterments are capitalized, whereas normal repairs and maintenance are expensed as incurred. The units-of-production method of depreciation is used for pulp and paper mills, and the straight-line method is used for other plants and equipment. If a decision is made to abandon plants, properties or equipment before the end of its useful life, depreciation expense is revised to reflect the shortened useful life. See Note 9 for further details.
GOODWILL
Annual evaluation for possible goodwill impairment is performed as of the beginning of the fourth quarter of each year, with additional interim evaluation performed when management believes that it is more likely than not, that events or circumstances have
occurred that would result in the impairment of a reporting unit’s goodwill.
The Company has the option to evaluate goodwill for impairment by first performing a qualitative assessment of events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or
circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amounts, then the quantitative goodwill impairment test is not required to be performed. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if the Company does not elect the option to perform an initial qualitative assessment, the Company is required to perform the quantitative goodwill impairment test. In performing this evaluation, the Company estimates the fair value of its reporting unit using a weighted approach based on discounted future cash flows, market multiples and transaction multiples. The determination of fair value using the discounted cash flow approach requires management to make significant estimates and assumptions related to forecasts of future revenues, operating profit margins, and discount rates. The determination of fair value using market multiples and transaction multiples requires management to make significant assumptions related to revenue multiples and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA") multiples. The results of our annual impairment test indicated that the carrying amount did not exceed the estimated fair value of any reporting units. For reporting units whose carrying amount is in excess of their estimated fair value, the reporting unit will record an impairment charge by the amount that the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. See Note 12 for further discussion.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable. A recoverability test is performed based onby comparing the undiscounted cash flows requiringto carrying value of the assets. The inputs related to the undiscounted cash flows requires judgments as to whether assets are held and used or held for sale, the weighting of operational alternatives being considered by management and estimates of the amount and timing of expected future cash flows from the use of the long-lived assets generated by their use. If the carrying amount is less than the undiscounted cash flows, the fair value of the assets is compared to the carrying value to determine if they are impaired. We estimate fair value using discounted cash flows and other valuation techniques as needed.
Impaired assets are recorded at their estimated fair value. See Note 8 for further discussion.
INCOME TAXES
International Paper uses the asset and liability method of accounting for income taxes whereby deferred income taxes are recorded for the future tax consequences attributable to differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are remeasured to reflect new tax rates in the periods rate changes are enacted.
International Paper records its worldwideglobal tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where the Company believes that a tax position is supportable for income tax purposes, the item is included in its income tax returns. Where treatment of a position is uncertain, liabilities are recorded based upon the Company’s evaluation of the “more likely than not” outcome considering the technical merits of the position based on specific tax regulations and the facts of each matter. Changes to recorded liabilities are only made only when an identifiable event occurs that changes the likely outcome, such as settlement with the relevant tax authority, the expiration of statutes of limitation for the subject tax year, a change in tax laws, or a recent court casecases that addressesare relevant to the matter. Accrued interest related to these uncertain tax positions is recorded in our consolidated statement of operations in Interest expense, net.
While theThe judgments and estimates made by the Company are based on management’s evaluation of the technical merits of a matter, assisted as necessary by consultation with outside consultants, historical experience and other assumptions that management believes are appropriate and reasonable under current circumstances, actualcircumstances. Actual resolution of these matters may differ from recorded estimated amounts, resulting in adjustments that could materially affect future financial statements. See Note 13 for further details.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in assessing the need for and magnitude of appropriate valuation allowances against deferred tax assets. This assessment is completed by tax jurisdiction and relies on both positive and negative evidence available, with significant weight placed on recent financial results. Cumulative reported pre-tax
income is considered objectively verifiable positive evidence of our ability to generate positive pre-tax income in the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little or no weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. When necessary, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the use of estimates are required when scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies.
International Paper uses the flow-through method to account for investment tax credits earned on eligible open-loop biomass facilities and combined heat and power system expenditures. Under this method, the investment tax credits are recognized as a reduction to income tax expense in the year they are earned rather than a reduction in the asset basis.
ENVIRONMENTAL REMEDIATION COSTS
Costs associated with environmental remediation obligations are accrued when such costs are probable and reasonably estimable. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are discounted to their present value when the amount and timing of expected cash payments are reliably determinable. See Note 14 for further details.
TRANSLATION OF FINANCIAL STATEMENTS
Balance sheets of international operations are translated into U.S. dollars at year-end exchange rates, while statements of operations are translated at average rates. Adjustments resulting from financial statement translations are included as cumulative translation adjustments in Accumulated other comprehensive loss.
income (loss).
FAIR VALUE MEASUREMENTS
The guidance for fair value measurements and disclosures sets out a fair value hierarchy that groups fair value measurement inputs into the following three classifications:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability reflecting the reporting entity’s own assumptions or external inputs from inactive markets.
Transfers between levels are recognized at the end of the reporting period.
Other than as described below, no new accounting pronouncement issued or effective during the fiscal year has had or is expected to have a material impact on the consolidated financial statements.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Income Taxes
In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This guidance removes certain exceptions from recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The Company early adopted the provisions of this guidance in the fourth quarter of 2020 with no material impact.
Financial Instruments - Credit Losses
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This guidance replaces the current incurred loss impairment method with a method that reflects expected credit losses. The Company adopted this guidance using the modified retrospective approach on January 1, 2020. As a result of using this approach, the Company recognized a cumulative effect adjustment of $2 million to the opening balance of retained earnings representing the adjustment to our opening allowance for doubtful accounts required to state our trade receivables and contract assets net of their expected credit losses, net of deferred taxes.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This guidance provides companies with
optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued.
This guidance is effective upon issuance and generally can be applied through December 31, 2022.2024.
The Company has applied and will continue to apply this guidance to account for contract modifications due to changes in reference rates as those modifications occur. We do not expect this guidance to have a material impact on our consolidated financial statements and related disclosures.
Liabilities - Supplier Finance Programs
In September 2022, the FASB issued ASU 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations." This guidance requires a business entity
operating as a buyer in a supplier finance agreement to disclose qualitative and quantitative information about its supplier finance programs. This guidance is
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
Segment Reporting
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." This guidance requires companies to disclose incremental segment information on an annual and interim basis. This guidance is effective for annual reporting periods beginning after December 15, 2023 and interim periods within those years beginning after December 15, 2024. Early adoption of these amendments is permitted and amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the provisions of this guidance.
Income Taxes
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This guidance requires companies to enhance income tax disclosures, particularly around rate reconciliations and income taxes paid information. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption of these amendments is permitted and amendments should be applied prospectively. The Company is currently evaluating the provisions of this guidance.
DISAGGREGATED REVENUE
A geographic disaggregation | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2023 |
| Reportable Segments | | Industrial Packaging | | Global Cellulose Fibers | | Corporate & Intersegment | | Total |
| Primary Geographical Markets (a) | | | | | | | | |
| United States | | $ | 13,340 | | | $ | 2,570 | | | $ | 430 | | | $ | 16,340 | |
| EMEA | | 1,398 | | | 96 | | | — | | | 1,494 | |
| Pacific Rim and Asia | | 37 | | | 224 | | | — | | | 261 | |
| Americas, other than U.S. | | 821 | | | — | | | — | | | 821 | |
| Total | | $ | 15,596 | | | $ | 2,890 | | | $ | 430 | | | $ | 18,916 | |
| | | | | | | | |
| Operating Segments | | | | | | | | |
| North American Industrial Packaging | | $ | 14,293 | | | $ | — | | | $ | — | | | $ | 14,293 | |
| EMEA Industrial Packaging | | 1,398 | | | — | | | — | | | 1,398 | |
| Global Cellulose Fibers | | — | | | 2,890 | | | — | | | 2,890 | |
| Intrasegment Eliminations | | (95) | | | — | | | — | | | (95) | |
| Corporate & Intersegment Sales | | — | | | — | | | 430 | | | 430 | |
| Total | | $ | 15,596 | | | $ | 2,890 | | | $ | 430 | | | $ | 18,916 | |
(a) Net sales are attributed to countries based on the location of revenues across our company segmentation in the following tables provides information to assist in evaluatingreportable segment making the nature, timing and uncertainty of revenue and cash flows and how they may be impacted by economic factors.sale.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 |
| Reportable Segments | | Industrial Packaging | | Global Cellulose Fibers | | Printing Papers | | Corporate & Intersegment | | Total |
| Primary Geographical Markets (a) | | | | | | | | | | |
| United States | | $ | 12,537 | | | $ | 1,993 | | | $ | 1,425 | | | $ | 192 | | | $ | 16,147 | |
| EMEA | | 1,675 | | | 235 | | | 1,025 | | | (15) | | | 2,920 | |
| Pacific Rim and Asia | | 57 | | | 91 | | | 26 | | | 28 | | | 202 | |
| Americas, other than U.S. | | 764 | | | 0 | | | 560 | | | (13) | | | 1,311 | |
| Total | | $ | 15,033 | | | $ | 2,319 | | | $ | 3,036 | | | $ | 192 | | | $ | 20,580 | |
| | | | | | | | | | |
| Operating Segments | | | | | | | | | | |
| North American Industrial Packaging | | $ | 13,318 | | | $ | — | | | $ | — | | | $ | — | | | $ | 13,318 | |
| EMEA Industrial Packaging | | 1,317 | | | — | | | — | | | — | | | 1,317 | |
| Brazilian Industrial Packaging | | 148 | | | — | | | — | | | — | | | 148 | |
| European Coated Paperboard | | 366 | | | — | | | — | | | — | | | 366 | |
| Global Cellulose Fibers | | — | | | 2,319 | | | — | | | — | | | 2,319 | |
| North American Printing Papers | | — | | | — | | | 1,436 | | | — | | | 1,436 | |
| Brazilian Papers | | — | | | — | | | 632 | | | — | | | 632 | |
| European Papers | | — | | | — | | | 976 | | | — | | | 976 | |
| Intra-segment Eliminations | | (116) | | | — | | | (8) | | | — | | | (124) | |
| Corporate & Inter-segment Sales | | — | | | — | | | — | | | 192 | | | 192 | |
| Total | | $ | 15,033 | | | $ | 2,319 | | | $ | 3,036 | | | $ | 192 | | | $ | 20,580 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 |
| Reportable Segments | | Industrial Packaging | | Global Cellulose Fibers | | Corporate & Intersegment | | Total |
| Primary Geographical Markets (a) | | | | | | | | |
| United States | | $ | 14,970 | | | $ | 3,032 | | | $ | 480 | | | $ | 18,482 | |
| EMEA | | 1,572 | | | 121 | | | — | | | 1,693 | |
| Pacific Rim and Asia | | 46 | | | 74 | | | 3 | | | 123 | |
| Americas, other than U.S. | | 863 | | | — | | | — | | | 863 | |
| Total | | $ | 17,451 | | | $ | 3,227 | | | $ | 483 | | | $ | 21,161 | |
| | | | | | | | |
| Operating Segments | | | | | | | | |
| North American Industrial Packaging | | $ | 16,011 | | | $ | — | | | $ | — | | | $ | 16,011 | |
| EMEA Industrial Packaging | | 1,572 | | | — | | | — | | | 1,572 | |
| Global Cellulose Fibers | | — | | | 3,227 | | | — | | | 3,227 | |
| Intrasegment Eliminations | | (132) | | | — | | | — | | | (132) | |
| Corporate & Intersegment Sales | | — | | | — | | | 483 | | | 483 | |
| Total | | $ | 17,451 | | | $ | 3,227 | | | $ | 483 | | | $ | 21,161 | |
(a) Net sales are attributed to countries based on the location of the reportable segment making the sale.
| | 2019 |
| | 2021 | | | | 2021 |
| Reportable Segments | Reportable Segments | | Industrial Packaging | | Global Cellulose Fibers | | Printing Papers | | Corporate & Intersegment | | Total | Reportable Segments | | Industrial Packaging | | Global Cellulose Fibers | | Corporate & Intersegment | | Total |
| Primary Geographical Markets (a) | Primary Geographical Markets (a) | |
| United States | |
| United States | |
| United States | United States | | $ | 12,668 | | | $ | 2,148 | | | $ | 1,912 | | | $ | 220 | | | $ | 16,948 | |
| EMEA | EMEA | | 1,692 | | | 254 | | | 1,323 | | | (11) | | | 3,258 | |
| Pacific Rim and Asia | Pacific Rim and Asia | | 65 | | | 149 | | | 189 | | | 12 | | | 415 | |
| Americas, other than U.S. | Americas, other than U.S. | | 901 | | | 0 | | | 867 | | | (13) | | | 1,755 | |
| Total | Total | | $ | 15,326 | | | $ | 2,551 | | | $ | 4,291 | | | $ | 208 | | | $ | 22,376 | |
| | Operating Segments | Operating Segments | |
| Operating Segments | |
| Operating Segments | |
| North American Industrial Packaging | |
| North American Industrial Packaging | |
| North American Industrial Packaging | North American Industrial Packaging | | $ | 13,509 | | | $ | — | | | $ | — | | | $ | — | | | $ | 13,509 | |
| EMEA Industrial Packaging | EMEA Industrial Packaging | | 1,335 | | | — | | | — | | | — | | | 1,335 | |
| Brazilian Industrial Packaging | | 235 | | | — | | | — | | | — | | | 235 | |
| European Coated Paperboard | | 365 | | | — | | | — | | | — | | | 365 | |
| Global Cellulose Fibers | Global Cellulose Fibers | | — | | | 2,551 | | | — | | | — | | | 2,551 | |
| North American Printing Papers | | — | | | — | | | 1,956 | | | — | | | 1,956 | |
| Brazilian Papers | | — | | | — | | | 967 | | | — | | | 967 | |
| European Papers | | — | | | — | | | 1,250 | | | — | | | 1,250 | |
| Indian Papers | | — | | | — | | | 160 | | | — | | | 160 | |
| Intra-segment Eliminations | | (118) | | | — | | | (42) | | | — | | | (160) | |
| Corporate & Inter-segment Sales | | — | | | — | | | — | | | 208 | | | 208 | |
| Intrasegment Eliminations | |
| Corporate & Intersegment Sales | |
| Total | Total | | $ | 15,326 | | | $ | 2,551 | | | $ | 4,291 | | | $ | 208 | | | $ | 22,376 | |
(a) Net sales are attributed to countries based on the location of the reportable segment making the sale.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 |
| Reportable Segments | | Industrial Packaging | | Global Cellulose Fibers | | Printing Papers | | Corporate & Intersegment | | Total |
| Primary Geographical Markets (a) | | | | | | | | | | |
| United States | | $ | 13,167 | | | $ | 2,336 | | | $ | 1,903 | | | $ | 203 | | | $ | 17,609 | |
| EMEA | | 1,704 | | | 304 | | | 1,330 | | | (17) | | | 3,321 | |
| Pacific Rim and Asia | | 142 | | | 179 | | | 245 | | | 39 | | | 605 | |
| Americas, other than U.S. | | 887 | | | 0 | | | 897 | | | (13) | | | 1,771 | |
| Total | | $ | 15,900 | | | $ | 2,819 | | | $ | 4,375 | | | $ | 212 | | | $ | 23,306 | |
| | | | | | | | | | |
| Operating Segments | | | | | | | | | | |
| North American Industrial Packaging | | $ | 14,187 | | | $ | — | | | $ | — | | | $ | — | | | $ | 14,187 | |
| EMEA Industrial Packaging | | 1,355 | | | — | | | — | | | — | | | 1,355 | |
| Brazilian Industrial Packaging | | 232 | | | — | | | — | | | — | | | 232 | |
| European Coated Paperboard | | 359 | | | — | | | — | | | — | | | 359 | |
| Global Cellulose Fibers | | — | | | 2,819 | | | — | | | — | | | 2,819 | |
| North American Printing Papers | | — | | | — | | | 1,956 | | | — | | | 1,956 | |
| Brazilian Papers | | — | | | — | | | 978 | | | — | | | 978 | |
| European Papers | | — | | | — | | | 1,252 | | | — | | | 1,252 | |
| Indian Papers | | — | | | — | | | 202 | | | — | | | 202 | |
| Intra-segment Eliminations | | (233) | | | — | | | (13) | | | — | | | (246) | |
| Corporate & Inter-segment Sales | | — | | | — | | | — | | | 212 | | | 212 | |
| Total | | $ | 15,900 | | | $ | 2,819 | | | $ | 4,375 | | | $ | 212 | | | $ | 23,306 | |
(a) Net sales are attributed to countries based on the location of the reportable segment making the sale.
REVENUE CONTRACT BALANCES
A contract asset is created when the Company recognizes revenue on its customized products prior to having an unconditional right to payment from the customer, which generally does not occur until title and risk of loss passes to the customer.
A contract liability is created when customers prepay for goods prior to the Company transferring those goods to the customer. The contract liability is reduced once control of the goods is transferred to the customer. The majority of our customer prepayments are received during the fourth quarter each year for goods that will be transferred to customers over the following twelve months. Current liabilities of $31$32 million and $56$38 million are included in Other current liabilities in the accompanying condense consolidated balance sheetssheet as of December 31, 20202023 and 2019,2022, respectively. The Company also recorded a contract liability of $115 million related to a previous acquisition. The balance of this contract liability was $92 million and $99 million at December 31, 2023 and 2022, respectively, and is recorded in Other current liabilities and Other Liabilities in the accompanying consolidated balance sheet.
The difference between the opening and closing balances of the Company's contract assets and contract liabilities primarily results from the difference between the price and quantity at comparable points in time for goods which we have an unconditional right to payment or receive prepayment from the customer, respectively.
PERFORMANCE OBLIGATIONS AND SIGNIFICANT JUDGEMENTSJUDGMENTS
International Paper's principal business is to manufacture and sell fiber-based packaging pulp and paperpulp goods. As a general rule, none of our businesses provide equipment installation or other ancillary services outside of producing and shipping packaging and pulp and paper goodsproducts to customers.
The nature of the Company's contracts can vary based on the business, customer type and region; however, in all instances it is International Paper's customary business practice to receive a valid order from the customer, in which each parties' rights and related payment terms are clearly identifiable.
Contracts or purchase orders with customers could include a single type of product or it could include
multiple types/grades of products. Regardless, the contracted price with the customer is agreed to at the individual product level outlined in the customer contracts or purchase orders. The Company does not
bundle prices; however, we do negotiate with customers on pricing and rebates for the same products based on a variety of factors (e.g. level of contractual volume, geographical location, etc.).
Management has concluded that the prices negotiated with each individual customer are representative of the stand-alone selling price of the product.
Basic earnings per share is computed by dividing earnings by the weighted average number of common shares outstanding. Diluted earnings per share is computed assuming that all potentially dilutive securities were converted into common shares.
There are no adjustments required to be made to net income for purposes of computing basic and diluted EPS.earnings per share.
A reconciliation of the amounts included in the computation of basic earnings (loss) per share from continuing operations, and diluted earnings (loss) per share from continuing operations is as follows:
| | | | | | | | | | | | | | | | | |
| In millions, except per share amounts | 2020 | | 2019 | | 2018 |
| Earnings (loss) from continuing operations attributable to International Paper common shareholders | $ | 482 | | | $ | 1,225 | | | $ | 1,667 | |
| Weighted average common shares outstanding | 393.0 | | | 395.3 | | | 409.1 | |
| Effect of dilutive securities: | | | | | |
| Restricted performance share plan | 2.7 | | | 3.5 | | | 5.1 | |
| Weighted average common shares outstanding – assuming dilution | 395.7 | | | 398.8 | | | 414.2 | |
| Basic earnings (loss) per share from continuing operations | $ | 1.23 | | | $ | 3.10 | | | $ | 4.07 | |
| Diluted earnings (loss) per share from continuing operations | $ | 1.22 | | | $ | 3.07 | | | $ | 4.02 | |
| | | | | | | | | | | | | | | | | |
| In millions, except per share amounts | 2023 | | 2022 | | 2021 |
| Earnings (loss) from continuing operations attributable to International Paper common shareholders | $ | 302 | | | $ | 1,741 | | | $ | 811 | |
| Weighted average common shares outstanding | 346.9 | | | 363.5 | | | 389.4 | |
| Effect of dilutive securities: | | | | | |
| Restricted performance share plan | 2.2 | | | 3.5 | | | 3.0 | |
| Weighted average common shares outstanding – assuming dilution | 349.1 | | | 367.0 | | | 392.4 | |
| Basic earnings (loss) per share from continuing operations | $ | 0.87 | | | $ | 4.79 | | | $ | 2.08 | |
| Diluted earnings (loss) per share from continuing operations | $ | 0.86 | | | $ | 4.74 | | | $ | 2.07 | |
The following table presents changes in AOCI,Accumulated Other Comprehensive Loss ("AOCI"), net of tax, reported in the consolidated financial statements for the years ended December 31:
| | | | | | | | | | | |
| In millions | 2020 | 2019 | 2018 |
| Defined Benefit Pension and Postretirement Adjustments | | | |
| Balance at beginning of period | $ | (2,277) | | $ | (1,916) | | $ | (2,527) | |
| Other comprehensive income (loss) before reclassifications | 227 | | 2 | | 22 | |
| Reclassification of stranded tax effects | 0 | | (527) | | 0 | |
| Amounts reclassified from accumulated other comprehensive income | 170 | | 164 | | 589 | |
| Balance at end of period | (1,880) | | (2,277) | | (1,916) | |
| Change in Cumulative Foreign Currency Translation Adjustments | | | |
| Balance at beginning of period | (2,465) | | (2,581) | | (2,111) | |
| Other comprehensive income (loss) before reclassifications | (319) | | 14 | | (475) | |
| Amounts reclassified from accumulated other comprehensive income | 327 | | 102 | | 2 | |
| Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest | 0 | | 0 | | 3 | |
| Balance at end of period | (2,457) | | (2,465) | | (2,581) | |
| Net Gains and Losses on Cash Flow Hedging Derivatives | | | |
| Balance at beginning of period | 3 | | (3) | | 5 | |
| Other comprehensive income (loss) before reclassifications | (34) | | 4 | | (10) | |
| Reclassification of stranded tax effects | 0 | | (2) | | 0 | |
| Amounts reclassified from accumulated other comprehensive income | 26 | | 4 | | 2 | |
| Balance at end of period | (5) | | 3 | | (3) | |
| Total Accumulated Other Comprehensive Income (Loss) at End of Period | $ | (4,342) | | $ | (4,739) | | $ | (4,500) | |
| | | | | | | | | | | |
| In millions | 2023 | 2022 | 2021 |
| Defined Benefit Pension and Postretirement Adjustments | | | |
| Balance at beginning of period | $ | (1,195) | | $ | (962) | | $ | (1,880) | |
| Other comprehensive income (loss) before reclassifications | (167) | | (319) | | 713 | |
| Reclassification related to Sylvamo Corporation spin-off | — | | — | | 80 | |
| Amounts reclassified from accumulated other comprehensive loss | 86 | | 86 | | 125 | |
| Balance at end of period | (1,276) | | (1,195) | | (962) | |
| Change in Cumulative Foreign Currency Translation Adjustments | | | |
| Balance at beginning of period | (722) | | (694) | | (2,457) | |
| Other comprehensive income (loss) before reclassifications | (76) | | (38) | | (115) | |
| Reclassification related to Sylvamo Corporation spin-off | — | | — | | 1,692 | |
| Amounts reclassified from accumulated other comprehensive loss | 517 | | 10 | | 184 | |
| Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest | — | | — | | 2 | |
| Balance at end of period | (281) | | (722) | | (694) | |
| Net Gains and Losses on Cash Flow Hedging Derivatives | | | |
| Balance at beginning of period | (8) | | (10) | | (5) | |
| Other comprehensive income (loss) before reclassifications | — | | — | | 3 | |
| Reclassification related to Sylvamo Corporation spin-off | — | | — | | 1 | |
| Amounts reclassified from accumulated other comprehensive loss | — | | 2 | | (9) | |
| Balance at end of period | (8) | | (8) | | (10) | |
| Total Accumulated Other Comprehensive Income (Loss) at End of Period | $ | (1,565) | | $ | (1,925) | | $ | (1,666) | |
Reclassifications out of AOCI for the three years ended December 31 were as follows:
| | | | | | | | | | | | | | | | | |
| Amount Reclassified from Accumulated Other Comprehensive Income | | Location of Amount Reclassified from AOCI |
| 2020 | 2019 | 2018 | |
| In millions | | | | | |
| Defined benefit pension and postretirement items: | | | | | |
| Prior-service costs | $ | (19) | | $ | (10) | | $ | (11) | | (a) | Non-operating pension expense |
| Actuarial gains/(losses) | (207) | | (208) | | (774) | | (a) | Non-operating pension expense |
| Total pre-tax amount | (226) | | (218) | | (785) | | | |
| Tax (expense)/benefit | 56 | | 54 | | 196 | | | |
| Net of tax | (170) | | (164) | | (589) | | | |
| Reclassification of stranded tax effects | 0 | | 527 | | 0 | | | Retained Earnings |
| Total, net of tax | (170) | | 363 | | (589) | | | |
| Change in cumulative foreign currency translation adjustments: | | | | | |
| Business acquisitions/divestiture | (327) | | (102) | | (2) | | | Net (gains) losses on sales and impairment of businesses and Discontinued operations, net of taxes |
| Tax (expense)/benefit | 0 | | 0 | | 0 | | | |
| Net of tax | (327) | | (102) | | (2) | | | |
| Net gains and losses on cash flow hedging derivatives: | | | | | |
| Foreign exchange contracts | (39) | | (6) | | (3) | | (b) | Cost of products sold |
| Total pre-tax amount | (39) | | (6) | | (3) | | | |
| Tax (expense)/benefit | 13 | | 2 | | 1 | | | |
| Net of tax | (26) | | (4) | | (2) | | | |
| Reclassification of stranded tax effects | 0 | | 2 | | 0 | | | Retained Earnings |
| Total, net of tax | (26) | | (2) | | (2) | | | |
| Total reclassifications for the period, net of tax | $ | (523) | | $ | 259 | | $ | (593) | | | |
| | | | | | | | | | | | | | | | | |
| Amount Reclassified from Accumulated Other Comprehensive Loss | | Location of Amount Reclassified from AOCI |
| 2023 | 2022 | 2021 | |
| In millions | | | | | |
| Defined benefit pension and postretirement items: | | | | | |
| Prior-service costs | $ | (23) | | $ | (23) | | $ | (20) | | (a) | Non-operating pension expense |
| Actuarial gains/(losses) | (92) | | (91) | | (146) | | (a) | Non-operating pension expense |
| Total pre-tax amount | (115) | | (114) | | (166) | | | |
| Tax (expense)/benefit | 29 | | 28 | | 41 | | | |
| Net of tax | (86) | | (86) | | (125) | | | |
| Reclassification related to Sylvamo Corporation spin-off | — | | — | | (80) | | | Paid-in Capital |
| Total, net of tax | (86) | | (86) | | (205) | | | |
| Change in cumulative foreign currency translation adjustments: | | | | | |
| Business divestiture | (517) | | (10) | | (184) | | (b) | Net (gains) losses on sales of equity method investments, Discontinued Operations, net of taxes and Net (gains) losses on sales and impairment of businesses |
| Tax (expense)/benefit | — | | — | | — | | | |
| Net of tax | (517) | | (10) | | (184) | | | |
| Reclassification related to Sylvamo Corporation spin-off | — | | — | | (1,692) | | | Paid-in Capital |
| Total, net of tax | (517) | | (10) | | (1,876) | | | |
| Net gains and losses on cash flow hedging derivatives: | | | | | |
| Cash flow hedges | — | | (3) | | 11 | | | Cost of products sold, Discontinued operations, net of taxes, and Interest expense, net |
| Total pre-tax amount | — | | (3) | | 11 | | | |
| Tax (expense)/benefit | — | | 1 | | (2) | | | |
| Net of tax | — | | (2) | | 9 | | | |
| Reclassification related to Sylvamo Corporation spin-off | — | | — | | (1) | | | Paid-in Capital |
| Total, net of tax | — | | (2) | | 8 | | | |
| Total reclassifications for the period, net of tax | $ | (603) | | $ | (98) | | $ | (2,073) | | | |
(a) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost (see Note 1918 - Retirement Plans for additional details).
(b) This accumulated other comprehensive income component is included in our derivatives and hedging activities (see Note 17 for additional details).
2020:2023: During 2020,2023, restructuring and other charges, net, totaling $195$99 million before taxes were recorded. The charges included:
| | | | | | | | |
| In millions | | 2023 |
| Orange, Texas mill closure costs (a) | | $ | 202081 | |
| Pensacola mill and Riegelwood mill pulp machine shutdowns (b) | | 37 | |
| Building a Better IP (c) | | (19) | |
| Total | | $ | 99 | |
(a) Includes $25 million of severance charges, $30 million of inventory impairment charges and $26 million of other costs associated with the closure of our containerboard mill in Orange, Texas. The majority of the severance charges will be paid in 2024.
(b) Includes $21 million of severance charges, $12 million of inventory impairment charges and $4 million of other costs associated with the permanent shutdown of pulp machines at our Riegelwood, North Carolina and Pensacola, Florida mills. The majority of the severance charges will be paid in 2024.
(c) Revision of severance estimates related to our Building a Better IP initiative.
2022: During 2022, restructuring and other charges, net, totaling $89 million before taxes were recorded. The charges included:
| | | | | | | | |
| In millions | | 2022 |
| Early debt extinguishment costs (see Note 16) | | $ | 19693 | |
| Other restructuring items | | (1)(4) | |
| Total | | $ | 19589 | |
2019:2021: During 2019,2021, restructuring and other charges, net, totaling $57 million before taxes were recorded. These charges included:
| | | | | | | | |
In millions | | 2019 |
Overhead cost reduction initiative (a) | | $ | 21 | |
EMEA packaging restructuring (b) | | 15 | |
Early debt extinguishment costs (see Note 16) | | 21 | |
Total | | $ | 57 | |
(a) Includes pre-tax charges of $11 million, $6 million and $4 million in Corporate, the Printing Papers segment and the Global Cellulose Fibers segment, respectively, for severance related to an overhead cost reduction initiative. The majority of the severance charges were paid in 2020.
(b) Includes $14 million of severance and $1 million in other charges in conjunction with the restructuring of our EMEA Packaging business. The majority of the severance charges were paid in 2020.
2018: During 2018, restructuring and other charges, net, totaling $29$509 million before taxes were recorded. These charges included:
| | | | | | | | |
| In millions | | 20182021 |
EMEA packaging restructuring (a) | | $ | 47 | |
Gain on sale of investment in Liaison Technologies Inc. | | (31) | |
| Early debt extinguishment costs (see Note 16) | | $ | 10461 | |
Riverdale mill conversion severanceBuilding a Better IP (a) | | 329 | |
| EMEA packaging restructuring (b) | | 12 | |
| Other restructuring items | | 7 | |
| Total | | $ | 29509 | |
(a) Includes $33 millionSeverance related to our Building a Better IP initiative which is focused on value creation through streamlined operations and process optimization. All severance has been paid as of severance, $6 million in accelerated depreciation, $2 million in accelerated amortization and $6 million in other charges in conjunction withDecember 31, 2023.
(b) Severance related to the optimization of our EMEA Packaging business. The majorityAll severance has been paid as of the severance charges recorded were paid throughout 2018..December 31, 2023.
2020:2021: In May 2020,On April 1, 2021, the Company increased itsclosed on the previously announced acquisition of two box plants located in Spain. The total purchase consideration, inclusive of working capital adjustments, was
approximately €71 million (approximately $83 million based on the April 1, 2021 exchange rate).
The following table summarizes the final fair value assigned to assets and liabilities acquired as of April 1, 2021:
| | | | | |
| In millions | |
| Cash and temporary investments | $ | 5 | |
| Accounts and notes receivable | 10 | |
| Inventories | 3 | |
| Plants, properties and equipment | 50 | |
| Goodwill | 23 | |
| Intangible assets | 13 | |
| Total assets acquired | 104 | |
| Short-term debt | 2 | |
| Accounts payable and accrued liabilities | 4 | |
| Other current liabilities | 2 | |
| Long-term debt | 1 | |
| Deferred income taxes | 12 | |
| Total liabilities assumed | 21 | |
| Net assets acquired | $ | 83 | |
Pro forma information has not been included as it is impracticable to obtain the information due to the lack of availability of historical U.S. GAAP financial data. The results of the operations of these businesses do not have a material effect on the Company's consolidated results of operations.
The Company has accounted for the above acquisition under ASC 805, "Business Combinations" and the results of operations have been included in International Paper's financial statements beginning with the date of acquisition.
2021: In April 2021, the Company received a noncontrolling interest in an entitya U.S-based corrugated packaging producer. In the second quarter, the Company recorded its investment of $115 million based on the fair value of the noncontrolling interest, and a corresponding contract liability that produces corrugated sheets from a 7% interest to a 40% interest. The equity purchase price was $56 million.is amortized over 15 years. The Company is party to various agreements with the entity which includes a containerboard supply agreement. The Company accountsis accounting for its interest as
an equity method investment.
2019: On June 28, 2019, the Company completed the acquisition of 2 packaging businesses located in Portugal (Ovar) and France (Torigni and Cabourg) from DS Smith Packaging. The total purchase consideration, inclusive of working capital adjustments, was approximately €71 million (approximately $81 million at June 30, 2019 exchange rates).
The following table summarizes the final fair value assigned to assets and liabilities assumed as of June 28, 2019:
| | | | | |
In millions | June 28, 2019 |
Cash and temporary investments | $ | 2 | |
Accounts and notes receivable | 22 | |
Inventory | 8 | |
Plants, properties and equipment | 37 | |
Goodwill | 27 | |
Intangible assets | 14 | |
Right of use assets | 3 | |
Deferred charges and other assets | 2 | |
Total assets acquired | 115 | |
Short-term debt | 2 | |
Accounts payable and accrued liabilities | 17 | |
Other current liabilities | 5 | |
Deferred income taxes | 4 | |
Long-term debt | 1 | |
Postretirement and postemployment benefit obligation | 3 | |
Long-term lease obligations | 2 | |
Total liabilities assumed | 34 | |
Net assets acquired | $ | 81 | |
PRINTING PAPERS SPIN-OFF
2020:2021: On December 3, 2020,October 1, 2021, the Company completed the previously announced a plan to pursue a spin-off of the Company'sits Printing Papers segment along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia into a standalone, publicly-traded company.
company, Sylvamo Corporation ("Sylvamo"). The transaction will bewas implemented through the distribution of shares of the standalone companySylvamo to International Paper shareholders.Paper's shareholders (the "Distribution"). As a result of the Distribution, Sylvamo is an independent public company that trades on the New York Stock Exchange under the symbol "SLVM".
The Distribution was made to the Company's stockholders of record as of the close of business on September 15, 2021 (the "Record Date"), and such stockholders received one share of Sylvamo common stock for every 11 shares of International Paper will retain up tocommon stock held as of the close of business on the Record Date. The Company retained 19.9% of the shares of the standalone companySylvamo at the time of the separation with the intent to monetize its investment and to provide additional proceeds to the Company. The Company expects the separation to bespin-off was tax-free for the Company and its shareholders for U.S. federal income tax purposespurposes.
In connection with the Distribution, on September 29, 2021, the Company and plansSylvamo entered into a separation and distribution agreement as well as various other agreements that govern the relationships between the parties following the Distribution, including a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements provided for the allocation between the Company and Sylvamo of assets, liabilities and obligations attributable to completeperiods prior to, at and after the Distribution and govern certain relationships between the Company and Sylvamo after the Distribution. The Company has various ongoing operational agreements with Sylvamo under which it sells fiber, paper and other products. Related party sales under these agreements were $630 million and $185 million for the year ended December 31, 2022 and 2021, respectively. Following the sale of the Company's ownership interest in Sylvamo during the third quarter 2022, Sylvamo is no longer considered a related party.
In the second quarter 2022, the Company exchanged 4,132,000 shares of Sylvamo common stock owned by the Company in exchange and as repayment for an approximately $144 million term loan obligation which resulted in the reversal of a $31 million deferred tax liability due to the tax-free exchange of the Sylvamo common stock. In the third quarter 2022, the Company exchanged the remaining 4,614,358 shares of Sylvamo common stock owned by the Company in exchange for $167 million and as partial repayment of a $210 million term loan obligation. This also resulted in the reversal of a $35 million deferred tax liability due to the tax-free exchange of Sylvamo common stock. As of the end of the third quarter
2022, the Company no longer had an ownership interest in Sylvamo.
All historical operating results of the Sylvamo businesses, as well as the results of our Kwidzyn, Poland mill that was sold on August 6, 2021, are presented as Discontinued Operations, net of tax, in the consolidated statement of operations. Kwidzyn was previously part of the Printing Papers business prior to its sale in August 2021. See the Kwidzyn Mill section below for further details regarding this sale.
The following summarizes the major classes of line items comprising Earnings (Loss) Before Income Taxes and Equity Earnings reconciled to Discontinued Operations, net of tax, related to the Sylvamo businesses and Kwidzyn for the year ended December 31, 2021 presented in the consolidated statement of operations:
| | | | | |
| In millions | 2021 |
| Net Sales | $ | 2,417 | |
| Costs and Expenses | |
| Cost of products sold | 1,508 | |
| Selling and administrative expenses | 224 | |
| Depreciation, amortization and cost of timber harvested | 113 | |
| Distribution expenses | 229 | |
| Taxes other than payroll and income taxes | 24 | |
| Net (gains) losses on sales of fixed assets | (86) | |
| Net (gains) losses on sales and impairments of businesses | (351) | |
| Interest expense, net | (19) | |
| Earnings (Loss) Before Income Taxes and Equity Earnings | 775 | |
| Income tax provision (benefit) | 145 | |
| Discontinued Operations, Net of Taxes | $ | 630 | |
The following summarizes the total cash provided by operations and total cash used for investing activities related to the Sylvamo Corporation businesses and Kwidzyn and included in the consolidated statement of cash flows:
| | | | | |
| In millions | 2021 |
| Cash Provided by (Used For) Operating Activities | $ | 290 | |
| Cash Provided by (Used For) Investment Activities | $ | 757 | |
In anticipation of the spin-off,
lateSylvamo incurred $1.5 billion in
debt during the third quarter of 2021
subjectwith the proceeds used for a distribution to the
receiptCompany and other expenses associated with the transaction. The Company was an obligor of
required regulatory approvals. See Note 23 for further discussion.the debt prior to the spin-off as Sylvamo was a wholly-owned subsidiary. Subsequent to the distribution of the net assets, the Company was no longer an obligor of the Sylvamo debt. The $1.5 billion of borrowings was comprised of
BRAZIL PACKAGING$450 million of 7.00% senior unsecured notes due 2029 issued in September 2021. It was also comprised of the senior secured credit facility that Sylvamo entered into in September 2021 which consisted of $450 million of borrowings related to its term loan “B” facility, $520 million of borrowings related to its term loan “F” facility, and the $100 million draw on its revolving credit facility which had a capacity of $450 million. Additionally, at the time of the spin-off in the fourth quarter of 2021, the Company distributed $130 million to Sylvamo. The debt issuance and distribution to Sylvamo Corporation are classified as financing activities in the accompanying consolidated statement of cash flows.
KWIDZYN MILL
2020:2021: On October 14, 2020,August 6, 2021, the Company closedcompleted the previously announced sale of its Brazilian Industrial PackagingKwidzyn, Poland mill for €669 million (approximately $794 million using the July 31, 2021 exchange rate) in cash. The business for R$330included the pulp and paper mill in Kwidzyn and supporting functions. During the third quarter of 2021, the Company recorded a net gain of $360 million ($58.5 million U.S. dollars), with R$280 million ($49.6 million U.S. dollars) paid at closing and R$50 million ($8.9 million U.S. dollars) to be paid one year from closing. This business includes 3 containerboard mills and 4 box plants and the agreement follows International Paper's previously announced strategic review of the Brazilian Industrial Packaging business.
In conjunction with the announced agreement, net pre-tax charges of $347 million ($340350 million after taxes) were recorded in 2020. These charges included $327including a gain of $404 million ($394 million after taxes) related to the sale of net assets and a loss of $44 million (before and after taxes) related to the cumulative foreign currency translation loss and a $20loss. During the fourth quarter of 2021, the Company incurred $9 million loss($6 million after taxes) of costs related to the write downsale of the long-lived assetsKwidzyn. All historical operating results for Kwidzyn have been presented as Discontinued Operations, net of the Brazilian Industrial Packaging business to their estimated fair value. These charges are included in Net (gains) losses on sales and impairments of businessestax, in the accompanying consolidated statement of operations and is included in the results for the Industrial Packaging segment.
2018: During 2018, a determination was made that the current carrying value of the long-lived assets of the Brazil Packaging business exceeded their estimated fair value due to a change in the outlook for the business. Management engaged a third party to assist with determining the fair value of the business and the fixed assets. The fair value of the business was calculated using a probability-weighted approach based on discounted future cash flows, market multiples, and transaction multiples and the fair value of the fixed assets was determined using a market approach. As a result, a pre-tax charge of $122 million ($81 million, net of tax) was recorded related to the impairment of an intangible asset and fixed assets. This charge is included in Net (gains) losses on sales and impairments of businesses in the accompanying consolidated statement of operations and is included in the results for the Industrial Packaging segment.operations.
OLMUKSAN INTERNATIONAL PAPER
20202021: On January 5,May 31, 2021, the Company announced that it had entered into an agreement with Mondi Group to sellcompleted the sale of its 90.38% ownership interest in Olmuksan International Paper, a corrugated packaging business in Turkey, to Mondi Group for €66 million (approximately $81 million using the DecemberMay 31, 20202021 exchange rate). The transaction is expectedDuring the twelve months ended December 31, 2021, the Company recorded a net gain of $4 million ($2 million after taxes) related to be completed in the first half of 2021 subject to satisfaction of customary closing conditionsbusiness working capital adjustment and regulatory approvals.cumulative foreign currency translation loss.
In conjunction with the announced agreement in the fourth quarter of 2020, a determination was made that the current book value of the Olmuksan International Paper disposal group exceeded its estimated fair value of $79 million which was based on the agreed upon transaction price. As a result, a preliminary charge of $123 million (before and after taxes) was recorded during the fourth quarter of 2020 related to the cumulative foreign currency translation loss. This charge is included in the Net (gains) losses on sales and impairments of businesses in the accompanying consolidated statement of operations and is included in the results for the Industrial Packaging segment.
At December 31, 2020, all assets and liabilities related to Olmuksan International Paper are classified as current assets held for sale and current liabilities held for sale in the accompanying consolidated balance sheet.
The following summarizes the major classes of assets and liabilities of Olmuksan International Paper reconciled to total Assets held for sale and total Liabilities held for sale in the accompanying consolidated balance sheet.
| | | | | |
In millions | December 31, 2020 |
Cash and temporary investments | $ | 2 | |
Accounts and notes receivable | 62 | |
Inventories | 18 | |
Other current assets | 5 | |
Plants, properties and equipment (net of impairment) | 38 | |
Goodwill | 6 | |
Deferred charges and other assets | 7 | |
Total Assets Held for Sale | 138 | |
Accounts payable and accrued liabilities | 29 | |
Other current liabilities | 24 | |
Deferred income taxes | 1 | |
Other liabilities | 4 | |
Impairment reserve | 123 | |
Total Liabilities Held for Sale | 181 | |
INTERNATIONAL PAPER APPM LIMITED2020.
2019: On October 30, 2019, the Company closed on the sale of its controlling interest in International Paper APPM Limited ("APPM") to West Coast Paper Mills Limited ("WCPM"). The net proceeds received for the sale totaled $82 million.
As a result of the transaction, a net pre-tax impairment charge of $159 million ($157 million after taxes) was recorded during 2019. This charge is included in the Net (gains) losses on sales and impairments of businesses in the accompanying consolidated statement of operations and is included
in the results for the Printing Papers segment. A loss of $9 million (before and after taxes) has been allocated to the noncontrolling interest related to the impairment of the long-lived assets of APPM.
During 2020, the Company sold its remaining investment in APPM and recorded an immaterial loss.
TEMPORARY INVESTMENTS
Temporary investments with an original maturity of three months or less and money market funds with greater than three monththree-month maturities but with the right to redeem without notices are treated as cash equivalents and are stated at cost. Temporary investments totaled $358$950 million and $335$690 million at December 31, 20202023 and 2019,2022, respectively.
ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable, net, by classification were:
| | | | | | | | |
| In millions at December 31 | 2020 | 2019 |
| Accounts and notes receivable: | | |
| Trade | $ | 2,776 | | $ | 3,020 | |
| Other | 288 | | 260 | |
| Total | $ | 3,064 | | $ | 3,280 | |
The allowance for expected credit losses was $76 million at December 31, 2020 and the allowance for doubtful accounts was $73 million at December 31, 2019. Based on the Company's accounting estimates and the facts and circumstances available as of the reporting date, we believe our allowance for expected credit losses is adequate. While we have taken into account certain impacts of COVID-19 in connection with our estimate of the allowance for expected credit losses, it is possible that additional expected credit losses in excess of such allowance could occur if additional containment and mitigation measures are required or negative economic conditions persist or deteriorate as a result of COVID-19. | | | | | | | | |
| In millions at December 31 | 2023 | 2022 |
| Accounts and notes receivable: | | |
| Trade (less allowances of $34 in 2023 and $31 in 2022) | $ | 2,841 | | $ | 3,064 | |
| Other | 218 | | 220 | |
| Total | $ | 3,059 | | $ | 3,284 | |
INVENTORIES
| | In millions at December 31 | In millions at December 31 | 2020 | 2019 | In millions at December 31 | 2023 | 2022 |
| Raw materials | Raw materials | $ | 268 | | $ | 298 | |
| Finished pulp, paper and packaging products | 1,091 | | 1,192 | |
| Finished pulp and packaging products | |
| Operating supplies | Operating supplies | 627 | | 659 | |
| Other | Other | 64 | | 59 | |
| Inventories | Inventories | $ | 2,050 | | $ | 2,208 | |
The last-in, first-out inventory method is used to value most of International Paper’s U.S. inventories. Approximately 74%81% of total raw materials and finished
products inventories were valued using this method. The last-in, first-out inventory reserve was $242$343 million and $295$282 million at December 31, 20202023 and 2019,2022, respectively.
PLANTS, PROPERTIES AND EQUIPMENT
| | In millions at December 31 | In millions at December 31 | 2020 | 2019 | In millions at December 31 | 2023 | 2022 |
| Pulp, paper and packaging facilities | $ | 32,439 | | $ | 32,292 | |
| Pulp and packaging facilities | |
| Other properties and equipment | Other properties and equipment | 1,156 | | 1,224 | |
| Gross cost | Gross cost | 33,595 | | 33,516 | |
| Less: Accumulated depreciation | Less: Accumulated depreciation | 21,378 | | 20,512 | |
| Plants, properties and equipment, net | Plants, properties and equipment, net | $ | 12,217 | | $ | 13,004 | |
Non-cash additions to plants, property and equipment included within accounts payable were $41$141 million, $164$185 million and $135$106 million at December 31, 2020, 20192023, 2022 and 2018,2021, respectively.
Amounts invested in capital projects in the accompanying condensed consolidated statement of cash flows are presented net of insurance recoveries of $42$26 million and $17 million received during the years ended December 31, 2022 and 2021, respectively. There were no insurance recoveries received during the year ended December 31, 2020. There were 0 insurance recoveries received during the years ended December 31, 2019 and 2018.2023.
Annual straight-line depreciable lives generally are, for buildings - 20 to 40 years, and for machinery and equipment - 3 to 20 years. Depreciation expense was $1.2$1.4 billion, $996 million and $1.1 billion for the each of the years ended December 31, 2020, 20192023, 2022 and 2018.2021. Depreciation expense for the year ended December 31, 2023 includes $422 million of accelerated depreciation related to mill strategic actions. Cost of products sold excludes depreciation and amortization expense.
ACCOUNTS PAYABLE
Under a supplier finance program, International Paper agrees to pay a bank the stated amount of confirmed invoices from its designated suppliers on the original maturity dates of the invoices. International Paper or the bank may terminate the agreement upon at least 90 days’ notice. The supplier invoices that have been confirmed as valid under the program require payment in full on the due date with no terms exceeding 180 days. The accounts payable balance included $122 million of supplier finance program liabilities as of both December 31, 2023 and 2022.
INTEREST
Interest payments of $686$463 million, $754$380 million and $772$473 million were made during the years ended December 31, 2020, 20192023, 2022 and 2018,2021, respectively.
Amounts related to interest were as follows:
| | In millions | In millions | 2020 | 2019 | 2018 | In millions | 2023 | 2022 | 2021 |
| Interest expense | Interest expense | $ | 600 | | $ | 706 | | $ | 734 | |
| Interest income | Interest income | 156 | | 215 | | 198 | |
| Capitalized interest costs | Capitalized interest costs | 31 | | 29 | | 30 | |
ASSET RETIREMENT OBLIGATIONS
At December 31, 20202023 and 2019,2022, we had recorded liabilities of $116$103 million and $96$105 million, respectively, related to asset retirement obligations.
In connection with potential future closures or redesigns of certain production facilities, it is possible that the Company may be required to take steps to remove certain materials from these facilities. Applicable regulations and standards provide that the removal of certain materials would only be required if
the facility were to be demolished or underwent major renovations. At this time, any such obligations have an indeterminate settlement date, and the Company believes that adequate information does not exist to apply an expected-present-value technique to estimate any such potential obligations. Accordingly, the Company does not record a liability for such remediation until a decision is made that allows reasonable estimation of the timing of such remediation.
International Paper leases various real estate, including certain operating facilities, warehouses, office space and land. The Company also leases material handling equipment, vehicles, and certain
other equipment. The Company's leases have remaining lease terms of one yearup to 9630 years.
COMPONENTS OF LEASE EXPENSE
| | | | | | | | |
| In millions | 2020 | 2019 |
| Operating lease costs, net | $ | 145 | | $ | 132 | |
| Variable lease costs | 61 | | 70 | |
| Short-term lease costs, net | 52 | | 59 | |
| Finance lease cost | | |
| Amortization of lease assets | 14 | | 12 | |
| Interest on lease liabilities | 5 | | 5 | |
| Total lease cost, net | $ | 277 | | $ | 278 | |
| | | | | | | | | | | |
| In millions | 2023 | 2022 | 2021 |
| Operating lease costs, net | $ | 177 | | $ | 153 | | $ | 138 | |
| Variable lease costs | 39 | | 39 | | 40 | |
| Short-term lease costs, net | 71 | | 57 | | 53 | |
| Finance lease cost | | | |
| Amortization of lease assets | 12 | | 11 | | 11 | |
| Interest on lease liabilities | 3 | | 3 | | 3 | |
| Total lease cost, net | $ | 302 | | $ | 263 | | $ | 245 | |
SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES
| | In millions | In millions | Classification | 2020 | 2019 | In millions | Classification | 2023 | 2022 |
| Assets | Assets | |
| Operating lease assets | |
| Operating lease assets | |
| Operating lease assets | Operating lease assets | Right of use assets | $ | 459 | | $ | 434 | |
| Finance lease assets | Finance lease assets | Plants, properties and equipment, net (a) | 95 | | 103 | |
| Total leased assets | Total leased assets | | $ | 554 | | $ | 537 | |
| Liabilities | Liabilities | |
| Current | Current | |
| Current | |
| Current | |
| Operating | |
| Operating | |
| Operating | Operating | Other current liabilities | $ | 148 | | $ | 134 | |
| Finance | Finance | Notes payable and current maturities of long-term debt | 13 | | 12 | |
| Noncurrent | Noncurrent | |
| Operating | Operating | Long-term lease obligations | 315 | | 304 | |
| Operating | |
| Operating | |
| Finance | Finance | Long-term debt | 82 | | 88 | |
| Total lease liabilities | Total lease liabilities | | $ | 558 | | $ | 538 | |
(a) Finance leases are recorded net of accumulated amortization of $53$67 million and $40$59 million at December 31, 20202023 and 2019,2022, respectively.
LEASE TERM AND DISCOUNT RATE
| | In millions | In millions | 2020 | 2019 | In millions | 2023 | 2022 |
| Weighted average remaining lease term (years) | Weighted average remaining lease term (years) | |
| Operating leases | Operating leases | 9.7 years | 9.8 years |
| Operating leases | |
| Operating leases | | 4.0 years | 4.1 years |
| Finance leases | Finance leases | 9.9 years | 10.9 years | Finance leases | 7.7 years | 8.4 years |
| Weighted average discount rate | Weighted average discount rate | |
| Operating leases | Operating leases | 2.56 | % | 3.06 | % |
| Operating leases | |
| Operating leases | | 3.99 | % | 2.96 | % |
| Finance leases | Finance leases | 4.52 | % | 4.69 | % | Finance leases | 4.78 | % | 4.57 | % |
SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES
| | | | | | | | | | | |
| In millions | 2023 | 2022 | 2021 |
| Cash paid for amounts included in the measurement of lease liabilities | | | |
| Operating cash flows related to operating leases | $ | 180 | | $ | 160 | | $ | 166 | |
| Operating cash flows related to financing leases | 3 | | 3 | | 4 | |
| Financing cash flows related to finance leases | 13 | | 10 | | 14 | |
| | | |
| Right of use assets obtained in exchange for lease liabilities | | | |
| Operating leases | 216 | | 221 | | 156 | |
| Finance leases | 12 | | 6 | | 9 | |
MATURITY OF LEASE LIABILITIES
| | | | | | | | | | | |
| In millions | Operating Leases | Financing Leases | Total |
| 2024 | $ | 171 | | $ | 14 | | $ | 185 | |
| 2025 | 127 | | 12 | | 139 | |
| 2026 | 89 | | 11 | | 100 | |
| 2027 | 60 | | 10 | | 70 | |
| 2028 | 33 | | 8 | | 41 | |
| Thereafter | 31 | | 14 | | 45 | |
| Total lease payments | 511 | | 69 | | 580 | |
| Less imputed interest | 46 | | 14 | | 60 | |
| Present value of lease liabilities | $ | 465 | | $ | 55 | | $ | 520 | |
SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES
| | | | | | | | |
| In millions | 2020 | 2019 |
| Cash paid for amounts included in the measurement of lease liabilities | | |
| Operating cash flows related to operating leases | $ | 162 | | $ | 147 | |
| Operating cash flows related to financing leases | 5 | | 5 | |
| Financing cash flows related to finance leases | 10 | | 9 | |
| | |
| Right of use assets obtained in exchange for lease liabilities | | |
| Operating leases | 179 | | 162 | |
| Finance leases | 11 | | 11 | |
MATURITY OF LEASE LIABILITIES
| | | | | | | | | | | |
| In millions | Operating Leases | Financing Leases | Total |
| 2021 | $ | 158 | | $ | 17 | | $ | 175 | |
| 2022 | 117 | | 16 | | 133 | |
| 2023 | 74 | | 14 | | 88 | |
| 2024 | 42 | | 11 | | 53 | |
| 2025 | 26 | | 10 | | 36 | |
| Thereafter | 105 | | 56 | | 161 | |
| Total lease payments | 522 | | 124 | | 646 | |
| Less imputed interest | 59 | | 29 | | 88 | |
| Present value of lease liabilities | $ | 463 | | $ | 95 | | $ | 558 | |
The Company accounts for the following investments under the equity method of accounting.
ILIM S.A. ("Ilim")
On September 18, 2023, pursuant to a previously announced agreement, the Company completed the sale of its 50% equity interest in Ilim, which was a joint venture that operated a pulp and paper business in Russia and has subsidiaries including Ilim Group, to its joint venture partners for $484 million in cash. The Company also completed the sale of all of its Ilim Group shares (constituting a 2.39% stake) for $24 million, and divested other non-material residual interests associated with Ilim, to its joint venture partners. Following the completed sales, the Company no longer has an interest in Ilim or any of its subsidiaries. Additionally, we incurred transaction fees of $36 million in connection with the sale of our investment. The Company reclassified currency translation adjustments in AOCI of $517 million to the investment at the completion of the transaction.
As of December 31, 2022 and for all subsequent periods, the Company concluded that the held for sale balance sheet classification criteria had been met and classified the investment as Assets held for sale in the consolidated balance sheet. Also, all current and historical results of the Ilim investment have been presented as Discontinued Operations, net of taxes in the consolidated statement of operations.
Also in conjunction with the previously announced agreement entered into in January 2023 to sell the Company's ownership interests in Ilim and related offer for the Company's shares in Ilim Group, a determination was made that in the fourth quarter of 2022 and for all subsequent periods through the third quarter 2023, the combined book value of our investments, plus associated cumulative translation losses, exceeded fair value based upon the agreed upon transaction price of $484 million for Ilim and the offer price of $24 million for Ilim Group and the company recorded impairment charges as presented in the table below.
The following summarizes the items comprising Equity Earnings, Impairment Charges, Tax Expense (Benefit), Discontinued Operations and Dividends related to the sale of our equity interest in Ilim:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions | Equity Earnings | | Impairment Charges | | Tax Expense (Benefit) | | Discontinued Operations, net of tax (a) | | Dividends |
| Twelve Months Ended December 31, 2022 | $ | 296 | | | $ | 533 | | | $ | — | | | $ | (237) | | | $ | 204 | |
| Twelve Months Ended December 31, 2023 | $ | 112 | | | $ | 135 | | | $ | (9) | | | $ | (14) | | | $ | 13 | |
(a) Discontinued operations, net of tax is Equity Earnings less Impairment Charges and Tax Expense (Benefit).
GRAPHIC PACKAGING INTERNATIONAL PARTNERS, LLC
In January 2018, theThe Company completed the transfer of its North American Consumer Packaging business in exchange for aan initial 20.5% ownership interest (79,911,511(79,911,591 units) in Graphic Packaging International Partners, LLC ("GPIP"). in 2018. The Company has since fully monetized its investment in GPIP subsequently transferred the North American Consumer Packaging business to Graphic Packaging International, LLC ("GPI"), a wholly-owned subsidiary of GPIP that holds the assets of the combined business. On January 29, 2020, the Company exchanged 15,150,784 units of the aggregate units owned by the Company for an aggregated price of $250 million, resulting in a pre-tax
gain of $33 million ($25 million after taxes) which was recordedwith transactions beginning in the first quarter of 2020. On August 7, 2020 through the second quarter 2021.
| | | | | | | | | | | | | | | | | |
| Date | Transaction Type | Units | Proceeds | Pre-Tax Gain | After-Tax Gain |
| In millions except units | | | | | |
| 2021 First Quarter | Units exchange and open market sale | 24,588,316 | | $ | 397 | | $ | 33 | | $ | 25 | |
| 2021 First Quarter | TRA (a) | | | 42 | 31 | |
| 2021 Second Quarter | Units exchange and open market sale | 22,773,077 | | 403 | 64 | 48 | |
| 2021 Second Quarter | TRA (a) | | | 66 | 50 | |
(a) The tax receivable agreement ("TRA") entitles the Company exchanged 17,399,414 unitsto 50% of the aggregated units ownedamount of any tax benefits projected to be realized by GPIP upon the Company's exchange of its units. The Company made income tax payments of $310 million in 2021 as a result of the monetization of its investment in GPIP.
As of June 30, 2021, the Company forno longer had an aggregated price of $250 million, resultingownership interest in an immaterial gain which was recorded in the third quarter of 2020. As of December 31, 2020, the Company's ownership percentage in GPIP was 15.0%.GPIP. The Company recorded equity earnings of $40 million, $46 million and $46$4 million for the yearstwelve months ended December 31, 2020, 2019 and 2018, respectively.2021. The Company received cash dividends from GPIP of $20$5 million and $27 million in 2020 and 2019, respectively. The Company's investment in GPIP was $702 million and $1.1 billion at December 31, 2020 and 2019, respectively, which was $345 million and $529 million more than the Company's proportionate share of the entity's underlying net assets at December 31, 2020 and 2019, respectively. The difference primarily relates to the basis difference between the fair value of our investment and the underlying net assets and is generally amortized in equity earnings over a period consistent with the underlying long-lived assets.during 2021.
The Company is party to various agreements with GPI under which it sells fiber and other products to GPI. Sales under these agreements were $253 million, $274 million and $240 million for the years ended December 31, 2020, 2019 and 2018 respectively.
Summarized financial information for GPIP is presented in the following tables:
Balance Sheet
| | | | | | | | | | | |
| In millions | 2020 | | 2019 |
| Current assets | $ | 2,011 | | | $ | 1,796 | |
| Noncurrent assets | 5,784 | | | 5,482 | |
| Current liabilities | 1,827 | | | 1,178 | |
| Noncurrent liabilities | 3,594 | | | 3,244 | |
Income Statement
| | | | | | | | | | | | | | | | | |
| In millions | 2020 | | 2019 | | 2018 |
| Net sales | $ | 6,560 | | | $ | 6,160 | | | $ | 6,023 | |
| Gross profit | 1,100 | | | 1,093 | | | 946 | |
| Income from continuing operations | 232 | | | 333 | | | 336 | |
| Net income | 233 | | | 334 | | | 337 | |
ILIM S.A. ("Ilim")
The Company also holds a 50% equity interest in Ilim, which has subsidiaries whose primary operations are in Russia. The Company recorded equity earnings, net of taxes, of $48 million, $207 million, and $290 million in 2020, 2019, and 2018, respectively, for Ilim. Equity earnings includes an after-tax foreign exchange (loss) gain of $(50) million, $32 million, and
$(82) million in 2020, 2019 and 2018, respectively, primarily on the remeasurement of U.S. dollar-denominated net debt. The Company received cash
dividends from the joint venture of $141 million and $246 million in 2020 and 2019, respectively. At December 31, 2020 and 2019, the Company's investment in Ilim, which is recorded in Investments in the consolidated balance sheet, was $393 million and $508 million, respectively, which was $127 million and $136 million, respectively, more than the Company's proportionate share of the joint venture's underlying net assets. The differences primarily relate to currency translation adjustments and the basis difference between the fair value of our investment at acquisition and the underlying net assets. The Company is party to a joint marketing agreement with JSC Ilim Group, a subsidiary of Ilim, under which the Company purchases, markets and sells paper produced by JSC Ilim Group. Purchases under this agreement were $174 million, $215 million and $214 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Summarized financial information for Ilim is presented in the following tables:
Balance Sheet
| | | | | | | | | | | |
| In millions | 2020 | | 2019 |
| Current assets | $ | 739 | | | $ | 804 | |
| Noncurrent assets | 2,733 | | | 2,813 | |
| Current liabilities | 674 | | | 1,015 | |
| Noncurrent liabilities | 2,249 | | | 1,844 | |
| Noncontrolling interests | 17 | | | 16 | |
Income Statement
| | | | | | | | | | | | | | | | | |
| In millions | 2020 | | 2019 | | 2018 |
| Net sales | $ | 2,015 | | | $ | 2,189 | | | $ | 2,713 | |
| Gross profit | 838 | | | 1,025 | | | 1,549 | |
| Income from continuing operations | 115 | | | 438 | | | 592 | |
| Net income | 113 | | | 424 | | | 571 | |
The Company's remaining equity method investments are not material.
GOODWILL
The following table presents changes in the goodwill balances as allocated to each business segment for the years ended December 31, 20202023 and 2019:2022:
| | In millions | In millions | Industrial
Packaging | | Global Cellulose Fibers | | Printing
Papers | | Total | In millions | Industrial
Packaging | | Global Cellulose Fibers | | Total |
| Balance as of December 31, 2018 | |
| Balance as of December 31, 2021 | |
| Goodwill | |
| Goodwill | |
| Goodwill | |
| Accumulated impairment losses | |
| 3,130 | |
| Currency translation and other (a) | |
| Accumulated impairment loss additions/reductions | |
| Balance as of December 31, 2022 | |
| Goodwill | |
| Goodwill | |
| Goodwill | Goodwill | $ | 3,379 | | | $ | 52 | | | $ | 2,116 | | | $ | 5,547 | |
| Accumulated impairment losses | Accumulated impairment losses | (296) | | | 0 | | | (1,877) | | | (2,173) | |
| | 3,083 | | | 52 | | | 239 | | | 3,374 | |
| Currency translation and other (a) | 0 | | | 0 | | | (6) | | | (6) | |
| Goodwill additions/reductions | 31 | | (b)(c) | 0 | | | (112) | | (d) | (81) | |
| Accumulated impairment loss additions/reductions | 0 | | | (52) | | (e) | 112 | | (d) | 60 | |
| Balance as of December 31, 2019 | |
| Balance as of December 31, 2023 | |
| Goodwill | Goodwill | 3,410 | | | 52 | | | 1,998 | | | 5,460 | |
| Accumulated impairment losses | (296) | | | (52) | | | (1,765) | | | (2,113) | |
| | 3,114 | | | 0 | | | 233 | | | 3,347 | |
| Currency translation and other (a) | 5 | | | 0 | | | (33) | | | (28) | |
| Goodwill additions/reductions | (5) | | (b)(c) | 0 | | | 1 | | | (4) | |
| Balance as of December 31, 2020 | |
| Goodwill | |
| Goodwill | Goodwill | 3,410 | | | 52 | | | 1,966 | | | 5,428 | |
| Accumulated impairment losses | Accumulated impairment losses | (296) | | | (52) | | | (1,765) | | | (2,113) | |
| Total | Total | $ | 3,114 | | | $ | 0 | | | $ | 201 | | | $ | 3,315 | |
(a)Represents the effects of foreign currency translations and reclassifications.
(b)Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in the U.S.
(c)Reflects the goodwill for the acquisitions and divestitures of Industrial Packaging box plants in EMEA.
(d)Reflects the reclassification of India goodwill and related impairment losses to held for sale prior to the sale of the business.
(e)Reflects the impairment of the Global Cellulose FibersEMEA Industrial Packaging reporting unit.
The Company performed its annual testing of its reporting units for possible goodwill impairmentsimpairment testing by applying the quantitative goodwill impairment test to its North America Industrial Packaging EMEA Industrial Packaging, European Papers, Russian Papers, and Brazilian Papers reporting unitsunit as of October 1, 2020. The Company elected to perform the quantitative goodwill impairment test due to the current economic environment. The quantitative goodwill impairment test2023. This was performed by comparing the carrying amount of each respectivethe North America Industrial Packaging reporting unit to its estimated fair value. The Company calculated the estimated fair value of each of itsthe reporting units with goodwillunit was calculated using a weighted approach based on discounted future cash flows, market multiples and transaction multiples which are classified as Level 2 and Level 3 within the fair value hierarchy. The determination of fair value using the discounted cash flow approach requires management to make significant estimates and assumptions related to forecasts of future revenues, operating profit margins, and discount rates. The determination of fair value using market multiples and transaction multiples requires management to make significant assumptions related to revenue multiples and adjusted earnings before interest, taxes, depreciation,
and amortization ("EBITDA") multiples. The results of our quantitative goodwill impairment test indicated that the carrying amount did not exceed the estimated fair value of anythe North America Industrial Packaging reporting units.
unit.In addition, the Company considered whether there were any events or circumstances outside of the annual evaluation that would reduce the fair value of its reporting units below their carrying amounts and necessitate a goodwill impairment evaluation. In consideration of all relevant factors, there were no indicators that would require goodwill impairment subsequent to October 1, 2020.
In the fourth quarter of 2019, in conjunction with the annual testing of its reporting units for possible goodwill impairments,2022, the Company calculatedperformed the quantitative goodwill impairment test related to its EMEA Industrial Packaging reporting unit and estimated fair value in the same manner noted above. The results of our quantitative goodwill impairment test indicated that the carrying amount exceeded the estimated fair value of the Global Cellulose FibersEMEA Industrial Packaging reporting unit and it was determined that all of the goodwill in the reporting unit, totaling $52$76 million, was impaired. ThisThe decline in the fair value of EMEA Industrial Packaging and resulting impairment charge was recognized duringdue to the fourth quarterimpacts of 2019.certain negative macroeconomic conditions, including the impacts from inflation and the geopolitical environment to the reporting unit.
OTHER INTANGIBLES
Identifiable intangible assets are recorded in Deferred Charges and Other Assets in the accompanying consolidated balance sheet and comprised the following:
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | 2019 |
| In millions at December 31 | Gross
Carrying
Amount | Accumulated
Amortization | Net Intangible Assets | Gross
Carrying
Amount | Accumulated
Amortization | Net Intangible Assets |
| Customer relationships and lists | $ | 542 | | $ | 294 | | $ | 248 | | $ | 560 | | $ | 275 | | $ | 285 | |
| Tradenames, patents and trademarks, and developed technology | 170 | | 117 | | 53 | | 170 | | 102 | | 68 | |
| Land and water rights | 8 | | 2 | | 6 | | 8 | | 2 | | 6 | |
| Software | 25 | | 24 | | 1 | | 26 | | 25 | | 1 | |
| Other | 19 | | 10 | | 9 | | 18 | | 10 | | 8 | |
| Total | $ | 764 | | $ | 447 | | $ | 317 | | $ | 782 | | $ | 414 | | $ | 368 | |
| | | | | | | | | | | | | | | | | | | | |
| | 2023 | 2022 |
| In millions at December 31 | Gross
Carrying
Amount | Accumulated
Amortization | Net Intangible Assets | Gross
Carrying
Amount | Accumulated
Amortization | Net Intangible Assets |
| Customer relationships and lists | $ | 494 | | $ | 335 | | $ | 159 | | $ | 490 | | $ | 303 | | $ | 187 | |
| Tradenames, patents and trademarks, and developed technology | 170 | | 154 | | 16 | | 170 | | 146 | | 24 | |
| Land and water rights | 8 | | 2 | | 6 | | 8 | | 2 | | 6 | |
| Other | 21 | | 19 | | 2 | | 23 | | 20 | | 3 | |
| Total | $ | 693 | | $ | 510 | | $ | 183 | | $ | 691 | | $ | 471 | | $ | 220 | |
The Company recognized the following amounts as amortization expense related to intangible assets:
| | In millions | In millions | 2020 | 2019 | 2018 | In millions | 2023 | 2022 | 2021 |
| Amortization expense related to intangible assets | Amortization expense related to intangible assets | $ | 60 | | $ | 58 | | $ | 59 | |
Based on current intangibles subject to amortization, estimated amortization expense for each of the succeeding years is as follows: 2021 – $51 million, 2022 – $46 million, 2023 – $41 million, 2024 – $41$40 million, 2025 – $36 million, 2026 – $29 million, 2027 – $11 million, 2028 – $8 million, and cumulatively thereafter – $96$53 million.
The components of International Paper’s earnings from continuing operations before income taxes and equity earnings by taxing jurisdiction were as follows:
| | In millions | In millions | 2020 | 2019 | 2018 | In millions | 2023 | 2022 | 2021 |
| Earnings (loss) | Earnings (loss) | |
| U.S. | U.S. | $ | 727 | | $ | 1,342 | | $ | 1,450 | |
| U.S. | |
| U.S. | |
| Non-U.S. | Non-U.S. | (77) | | 262 | | 331 | |
| Earnings (loss) from continuing operations before income taxes and equity earnings (losses) | Earnings (loss) from continuing operations before income taxes and equity earnings (losses) | $ | 650 | | $ | 1,604 | | $ | 1,781 | |
The provision (benefit) for income taxes from continuing operations (excluding noncontrolling interests) by taxing jurisdiction was as follows:
| | | | | | | | | | | |
| In millions | 2020 | 2019 | 2018 |
| Current tax provision (benefit) | | | |
| U.S. federal | $ | 124 | | $ | 271 | | $ | 227 | |
| U.S. state and local | 35 | | 29 | | 37 | |
| Non-U.S. | 77 | | 122 | | 165 | |
| | $ | 236 | | $ | 422 | | $ | 429 | |
| Deferred tax provision (benefit) | | | |
| U.S. federal | $ | (6) | | $ | 44 | | $ | 12 | |
| U.S. state and local | 1 | | (23) | | 50 | |
| Non-U.S. | 14 | | 191 | | (46) | |
| | $ | 9 | | $ | 212 | | $ | 16 | |
| Income tax provision (benefit) | $ | 245 | | $ | 634 | | $ | 445 | |
| | | | | | | | | | | |
| In millions | 2023 | 2022 | 2021 |
| Current tax provision (benefit) | | | |
| U.S. federal | $ | 157 | | $ | 454 | | $ | 413 | |
| U.S. state and local | 16 | | 56 | | 47 | |
| Non-U.S. | 42 | | 27 | | 37 | |
| | $ | 215 | | $ | 537 | | $ | 497 | |
| Deferred tax provision (benefit) | | | |
| U.S. federal | $ | (164) | | $ | (775) | | $ | (274) | |
| U.S. state and local | 3 | | (39) | | (27) | |
| Non-U.S. | 5 | | 41 | | (8) | |
| | $ | (156) | | $ | (773) | | $ | (309) | |
| Income tax provision (benefit) | $ | 59 | | $ | (236) | | $ | 188 | |
The Company’s deferred income tax provision (benefit) includes a $2$6 million benefit, a $44$3 million benefit and a $13an $8 million benefit for 2020, 20192023, 2022 and 2018,2021, respectively, for the effect of various changes in non-U.S. and U.S. federal and state tax rates.
International Paper made income tax payments, net of refunds, of $162$340 million, $349$345 million and $388$601 million in 2020, 20192023, 2022 and 2018,2021, respectively.
A reconciliation of income tax expense using the statutory U.S. income tax rate compared with the actual income tax provision follows:
| | In millions | In millions | 2020 | 2019 | 2018 | In millions | 2023 | 2022 | 2021 |
Earnings (loss) from continuing
operations before income taxes
and equity earnings | Earnings (loss) from continuing
operations before income taxes
and equity earnings | $ | 650 | | $ | 1,604 | | $ | 1,781 | |
| Statutory U.S. income tax rate | Statutory U.S. income tax rate | 21 | % | 21 | % | 21 | % | Statutory U.S. income tax rate | 21 | % | 21 | % | 21 | % |
| Tax expense (benefit) using statutory U.S. income tax rate | Tax expense (benefit) using statutory U.S. income tax rate | 137 | | 337 | | 374 | |
| State and local income taxes | State and local income taxes | 28 | | 6 | | 72 | |
| Impact of rate differential on non-U.S. permanent differences and earnings | Impact of rate differential on non-U.S. permanent differences and earnings | 22 | | 31 | | 35 | |
| Foreign valuation allowance | Foreign valuation allowance | 0 | | 203 | | 0 | |
| Tax expense (benefit) on manufacturing activities | 0 | | 0 | | (1) | |
| Tax expense (benefit) on exchange of Sylvamo shares | |
| Adjustment to tax basis of assets | |
| Non-deductible business expenses | Non-deductible business expenses | 5 | | 7 | | 6 | |
| Non-deductible impairments | Non-deductible impairments | 92 | | 31 | | 0 | |
| Non-deductible compensation | Non-deductible compensation | 11 | | 3 | | 11 | |
| Tax audits | Tax audits | (38) | | 0 | | 28 | |
| Deemed repatriation, net of foreign tax credits | 14 | | 1 | | (25) | |
| U.S. federal tax rate change | 7 | | 0 | | (13) | |
| Timber Monetization Audit Settlement | |
| Foreign derived intangible income deduction | Foreign derived intangible income deduction | 0 | | 2 | | (25) | |
| US tax on non-U.S. earnings (GILTI and Subpart F) | US tax on non-U.S. earnings (GILTI and Subpart F) | 11 | | 36 | | 19 | |
| Foreign tax credits | Foreign tax credits | (4) | | (2) | | (15) | |
| General business and other tax credits | General business and other tax credits | (45) | | (33) | | (26) | |
| Tax expense (benefit) on equity earnings | Tax expense (benefit) on equity earnings | 8 | | 10 | | 10 | |
| Legal entity restructuring gain (loss) | |
| Other, net | Other, net | (3) | | 2 | | (5) | |
| Income tax provision (benefit) | Income tax provision (benefit) | $ | 245 | | $ | 634 | | $ | 445 | |
| Effective income tax rate | Effective income tax rate | 38 | % | 40 | % | 25 | % | Effective income tax rate | 15 | % | (16) | % | 19 | % |
The tax effects of significant temporary differences, representing deferred income tax assets and liabilities at December 31, 20202023 and 2019,2022, were as follows:
| | In millions | In millions | 2020 | 2019 | In millions | 2023 | 2022 |
| Deferred income tax assets: | Deferred income tax assets: | |
| Postretirement benefit accruals | |
| Postretirement benefit accruals | |
| Postretirement benefit accruals | Postretirement benefit accruals | $ | 91 | | $ | 90 | |
| Pension obligations | Pension obligations | 288 | | 421 | |
| Tax credits | Tax credits | 296 | | 290 | |
| Net operating and capital loss carryforwards | Net operating and capital loss carryforwards | 590 | | 621 | |
| Compensation reserves | Compensation reserves | 179 | | 181 | |
| Lease obligations | Lease obligations | 114 | | 106 | |
| Environmental reserves | Environmental reserves | 117 | | 93 | |
| Other | Other | 218 | | 126 | |
| Gross deferred income tax assets | Gross deferred income tax assets | $ | 1,893 | | $ | 1,928 | |
| Less: valuation allowance (a) | Less: valuation allowance (a) | (685) | | (691) | |
| Net deferred income tax asset | Net deferred income tax asset | $ | 1,208 | | $ | 1,237 | |
| Deferred income tax liabilities: | Deferred income tax liabilities: | |
| Intangibles | Intangibles | $ | (159) | | $ | (152) | |
| Intangibles | |
| Intangibles | |
| Investments | Investments | (251) | | (265) | |
| Right of use assets | Right of use assets | (114) | | (106) | |
| Plants, properties and equipment | Plants, properties and equipment | (1,958) | | (1,866) | |
| Forestlands, related installment sales, and investment in subsidiary | Forestlands, related installment sales, and investment in subsidiary | (1,400) | | (1,407) | |
| Gross deferred income tax liabilities | Gross deferred income tax liabilities | $ | (3,882) | | $ | (3,796) | |
| Net deferred income tax liability | Net deferred income tax liability | $ | (2,674) | | $ | (2,559) | |
(a) The net change in the total valuation allowance for the years ended December 31, 20202023 and 20192022 was an increase of $171 million and a decrease of $(6)$(31) million, and an increase of $250 million, respectively. The net change in the prior year is primarily due to tax law changes in foreign jurisdictions impacting future utilization of deferred tax assets of $203 million.
Deferred income tax assets and liabilities are recorded in the accompanying consolidated balance sheet under the captions Deferred charges and other assets and Deferred income taxes. Of the $1.4 billiontaxes, respectively. The $485 million of deferred tax liabilities for forestlands, related installment sales, and investment in subsidiary $887 million is attributable to an investment in subsidiary and relates to a 2006 International Paper installment sale of forestlands and $488 million is attributable to a 2007 Temple-Inland installment sale of forestlands (see Note 15 - Variable Interest Entities).
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2020, 20192023, 2022 and 20182021 is as follows:
| | In millions | In millions | 2020 | 2019 | 2018 | In millions | 2023 | 2022 | 2021 |
| Balance at January 1 | Balance at January 1 | $ | (189) | | $ | (220) | | $ | (188) | |
| (Additions) reductions for tax positions related to current year | (Additions) reductions for tax positions related to current year | (10) | | (5) | | (7) | |
| (Additions) for tax positions related to prior years | (Additions) for tax positions related to prior years | (10) | | (6) | | (37) | |
| Reductions for tax positions related to prior years | Reductions for tax positions related to prior years | 30 | | 5 | | 5 | |
| Settlements | Settlements | 13 | | 31 | | 2 | |
Expiration of statutes of
limitations | Expiration of statutes of
limitations | 1 | | 3 | | 2 | |
| Currency translation adjustment | Currency translation adjustment | (1) | | 3 | | 3 | |
| Balance at December 31 | Balance at December 31 | $ | (166) | | $ | (189) | | $ | (220) | |
If the Company were to prevail on the unrecognized tax benefits recorded, substantially all of the balances at December 31, 2020, 20192023, 2022 and 20182021 would benefit the effective tax rate. Pending audit settlements and the expiration of statutes of limitations could reduce the uncertain tax positions by $7 million during the next twelve months.
The Company accrues interest on unrecognized tax benefits as a component of interest expense. Penalties, if incurred, are recognized as a component of income tax expense. The Company had approximately $17$34 million and $21$29 million accrued for the payment of estimated interest and penalties associated with unrecognized tax benefits at December 31, 20202023 and 2019,2022, respectively.
The major jurisdictions where the Company files income tax returns areis currently subject to audits in the United States Brazil, France, Poland and Russia.other taxing jurisdictions around the world. Generally, tax years 20072009 through 20192022 remain open and subject to examination by the relevant tax authorities. The Company frequently faces challenges regarding the amount of taxes due. These challenges include positions taken by the Company related to the timing, nature, and amount of deductions and the allocation of income among various tax jurisdictions. Pending audit settlements and the expiration of statute of limitations could reduce the uncertain tax positions by $16 million during the next twelve months.
The Brazilian Federal Revenue Service has challenged the deductibility of goodwill amortization generated in a 2007 acquisition by International Paper do Brasil Ltda., a wholly-owned subsidiary of the Company. The Company received assessments for the tax years 2007-2015 totaling approximately $114 million in tax, and $367 million in interest, penalties, and fees as of December 31, 2020 (adjusted for variation in currency exchange rates). After a previous favorable ruling challenging the basis for these assessments, we received other subsequent unfavorable decisions from the Brazilian Administrative Council of Tax Appeals. The Company has appealed and intends to further appeal these and any future unfavorable administrative judgments to the Brazilian federal courts; however, this tax litigation matter may take many years to resolve. The Company believes that it has appropriately evaluated the transaction underlying these assessments, and has concluded based on Brazilian tax law, that its tax position would be sustained. The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for tax years subsequent to 2015.
The Company provides for foreign withholding taxes and any applicable U.S. state income taxes on earnings intended to be repatriated from non-U.S. subsidiaries, which we believe will be limited in the future to each year's current earnings. No provision for these taxes on approximately $2.3$1.6 billion of undistributed earnings of non-U.S. subsidiaries as of December 31, 20202023 has been made, as these earnings are considered indefinitely invested. Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted in a taxable manner is not practicable.
If management decided to monetize the Company’s foreign investments, we would recognize the tax cost related to the excess of the book value over the tax basis of those investments. This would include foreign withholding taxes and any applicable U.S. Federal and state income taxes. Determination of the
tax cost that would be incurred upon monetization of the Company’s foreign investments is not practicable; however, we do not believe it would be material.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act ("the CARES Act"). The CARES Act provides various types of economic relief for individuals and businesses due to the COVID-19 pandemic, including temporary corporate tax relief. We currently do not believe there to be a material impact to the income tax provision resulting from the CARES Act.
The following details the scheduled expiration dates of the Company’s net operating loss and income tax credit carryforwards:
| | | | | | | | | | | | | | |
| In millions | 2021
Through
2030 | 2031
Through
2040 | Indefinite | Total |
| U.S. federal and non-U.S. NOLs | $ | 2 | | $ | 53 | | $ | 457 | | $ | 512 | |
| State taxing jurisdiction NOLs (a) | 61 | | 16 | | 0 | | 77 | |
U.S. federal, non-
U.S. and state tax credit carryforwards (a) | 169 | | 8 | | 119 | | 296 | |
| Total | $ | 232 | | $ | 77 | | $ | 576 | | $ | 885 | |
| Less: valuation allowance (a) | (145) | | (49) | | (410) | | (604) | |
| Total, net | $ | 87 | | $ | 28 | | $ | 166 | | $ | 281 | |
| | | | | | | | | | | | | | |
| In millions | 2024
Through
2033 | 2034
Through
2043 | Indefinite | Total |
| U.S. federal and non-U.S. NOLs | $ | 1 | | $ | 225 | | $ | 426 | | $ | 652 | |
| State taxing jurisdiction NOLs (a) | 38 | | 9 | | — | | 47 | |
U.S. federal, non-
U.S. and state tax credit carryforwards (a) | 82 | | 3 | | 97 | | 182 | |
| Total | $ | 121 | | $ | 237 | | $ | 523 | | $ | 881 | |
| Less: valuation allowance (a) | (83) | | (220) | | (475) | | (778) | |
| Total, net | $ | 38 | | $ | 17 | | $ | 48 | | $ | 103 | |
(a) State amounts are presented net of federal benefit.
GUARANTEES
In connection with sales of businesses, property, equipment, forestlands and other assets, International Paper commonly makes representations and warranties relating to such businesses or assets, and may agree to indemnify buyers with respect to tax and environmental liabilities, breaches of representations and warranties, and other matters. Where liabilities for such matters are determined to be probable and reasonably estimable, accrued liabilities are recorded at the time of sale as a cost of the transaction.
Brazil Goodwill Tax Matter: The Brazilian Federal Revenue Service has challenged the deductibility of goodwill amortization generated in a 2007 acquisition by Sylvamo do Brasil Ltda. ("Sylvamo Brazil"), which was a wholly-owned subsidiary of the Company, until the October 1, 2021 spin-off of the Printing Papers business, after which it became a subsidiary of Sylvamo. Sylvamo Brazil received assessments for the tax years 2007-2015 totaling approximately $119 million (adjusted for variation in currency exchange rates) in tax, plus interest, penalties and fees. The interest, penalties and fees currently total approximately $274 million (adjusted for variation in currency exchange rates), which reflects a recent law change pursuant to which the Brazil tax authority on January 16, 2024 agreed to cancel a portion of the interest, penalties and fees. Accordingly, the assessments currently total approximately $393 million (adjusted for variation in currency exchange rates). After an initial favorable ruling challenging the basis for these assessments, Sylvamo Brazil received subsequent unfavorable decisions from the Brazilian Administrative Council of Tax Appeals. Sylvamo Brazil has appealed these decisions and intends to appeal any future unfavorable administrative judgments to the Brazilian federal courts; however, this tax litigation matter may take many years to resolve. Sylvamo Brazil and International Paper believe the transaction underlying these assessments was appropriately evaluated, and that Sylvamo Brazil's tax position would be sustained, based on Brazilian tax law.
This matter pertains to a business that was conveyed to Sylvamo as of October 1, 2021, as part of our spin-off transaction. Pursuant to the terms of the tax matters agreement entered into between the Company and Sylvamo, the Company will pay 60% and Sylvamo will pay 40%, on up to $300 million of any assessment related to this matter, and the Company will pay all amounts of the assessment over $300 million. Under the terms of the agreement, decisions concerning the conduct of the litigation related to this matter, including strategy, settlement, pursuit and abandonment, will be made by the Company. Sylvamo thus has no control over any decision related to this ongoing litigation. The Company intends to vigorously defend this historic tax position against the current assessments and any similar assessments that may be issued for tax years subsequent to 2015. The Brazilian government may enact a tax amnesty program that would allow Sylvamo Brazil to resolve this dispute for less than the assessed amount. As of October 1, 2021, in connection with the recording of the distribution of assets and liabilities resulting from the spin-off transaction, the Company established a liability representing the initial fair value of the contingent
liability under the tax matters agreement. The contingent liability was determined in accordance with ASC 460 "Guarantees" based on the probability weighting of various possible outcomes. The initial fair value estimate and recorded liability as of December 31, 2021 was $48 million and remains this amount at December 31, 2023. This liability will not be increased in subsequent periods unless facts and circumstances change such that an amount greater than the initial recognized liability becomes probable and estimable.
ENVIRONMENTAL AND LEGAL PROCEEDINGS
Environmental
International PaperThe Company has been named as a potentially responsible party ("PRP") in environmental remediation actions under various federal and state laws, including the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). Many of these proceedings involve the
cleanup of hazardous substances at large commercial landfills that received waste from many different sources. While joint and several liability is authorized under CERCLA and equivalent state laws, as a practical matter, liability for CERCLA cleanups is typically allocated among the many PRPs. There are other remediation costs typically associated with the cleanup of hazardous substances at the Company’s current, closed orand formerly-owned facilities, and recorded as liabilities in the balance sheet.
Remediation costs are recorded in the consolidated financial statements when they become probable and reasonably estimable. International Paper has estimated the probable liability associated with these environmental remediation matters, including those described herein, to be approximately $185$251 million ($194and $243 million undiscounted) in the aggregate as of December 31, 2020.2023 and December 31, 2022, respectively. Other than as described below, completion of required environmental remedial actions ("RAs") is not expected to have a material effect on our consolidated financial statements.
Cass Lake: One of the matters included above arises out of a closed wood-treatment facility located in Cass Lake, Minnesota. In June 2011, the United StatesU.S. Environmental Protection Agency (EPA)("EPA") selected and published a proposed soil remedy at the site with an estimated cost of $45 million as of December 31, 2020.$46 million. In April 2020, the EPA issued a final plan concerning clean-up standards at a portion of the site, the estimated cost of which is included within the reservesoil remedy referenced above. In October 2012,The total reserve for the Natural Resource Trustees for thisCass Lake superfund site provided notice to International Paperwas $46 million and other PRPs$47 million as of their intent to perform a Natural Resource Damage Assessment. It is premature to predict the outcome of the assessment or to estimate a loss or range of loss, if any, in excess of the applicable reserve referenced above, which may be incurred.December 31, 2023 and 2022, respectively.
Kalamazoo River:The Company is a PRP with respect to the Allied Paper, Inc./Portage Creek/Kalamazoo River Superfund Site in Michigan. The EPA asserts that the site is contaminated by polychlorinated biphenyls ("PCBs") primarily as a result of discharges from various paper mills located along the Kalamazoo River, including a paper mill (the "Allied Paper Mill") formerly owned by St. Regis Paper Company ("St. Regis"). The Company is a successor in interest to St. Regis.
•Operable Unit 5, Area 1: In March 2016, the Company and other PRPs received a special notice letter from the EPA (i) inviting participation in implementing a remedy for a portion of the site known as Operable Unit 5, Area 1, and (ii) demanding reimbursement of EPA past costs totaling $37 million, including $19 million in past costs previously demanded by the EPA. The Company responded to the special notice letter. In December 2016, the EPA issued a unilateral administrative order to the Company and other
PRPs to perform the remedy. The Company responded to the unilateral administrative order, agreeing to comply with the order subject to its sufficient cause defenses.
•Operable Unit 5, Area 2: In September 2017, the EPA issued a Record of Decision selecting the final remedy for a portion of the site known as Operable Unit 5, Area 2, but has not yet issued a special notice letter for implementing the remedy.
•Operable Unit 1: In October 2016, the Company and another PRP received a special notice letter from the EPA inviting participation in the remedial design ("RD") component of the landfill remedy for the Allied Paper Mill, which is also known as Operable Unit 1. TheA Record of Decision ("ROD") establishing the final landfill remedy for the Allied Paper Mill was issued by the EPA in September 2016. The Company responded to the Allied Paper Mill special notice letter in December 2016. In February 2017, the EPA informed the Company that it would make other arrangements for the performance of the remedial design.RD. In the summer 2021, the EPA initiated RA activities. In October 2022, the Company received a unilateral administrative order to perform the RA. As a result, the Company increased its reserve by $27 million in the fourth quarter of 2022.
The total reserve for the Kalamazoo River superfund site was $27 million and $37 million as of December 31, 2023 and 2022, respectively.
In addition, in December 2019, the United States published notice in the Federal Register of a proposed consent decree with NCR Corporation (one of the parties to the allocation/apportionment litigation described below), the State of Michigan and natural resource trustees under which NCR Corporation would make payments of more than $100 million and perform work at the Sitein Operable Unit 5, Areas 2, 3, and 4 at an estimated cost of $135.7$136 million. OnIn December 2, 2020,
the Federal District Court approved the proposed consent decree, as submitted. NCR will deposit the settlement funds into a Court Registry Account.decree.
The Company’s CERCLA liability has not been finally determined with respect to these or any other portions of the site, and except as noted above, the Company has declined to perform any work or reimburse the EPA at this time. As noted below, the Company is involved in allocation/apportionment litigation with regard to the site. Accordingly, it is premature to predict the outcome or estimate our maximum reasonably possible loss or range of loss with respect to this site. We have recorded a liability for future remediation costs at the site that are probable and reasonably estimable, and it remains reasonably possible that additional losses in excess of this recorded liability could be material.
The Company was named as a defendant by Georgia-Pacific Consumer Products LP, Fort James Corporation and Georgia Pacific LLC (collectively, "GP") in a contribution and cost recovery action for alleged pollution at the site. NCR Corporation and Weyerhaeuser Company arewere also named as defendants in the suit. The suit seeks contribution under CERCLA for costs purportedly expended by plaintiffs ($79 million as of the filing of the complaint) and for future remediation
costs. In June 2018, the Federal District Court issued its Final Judgment and Order, which fixed the past cost amount at approximately $50 million (plus interest to be determined) and allocated to the Company a 15% share of responsibility for those past costs. The District Court did not address responsibility for future costs in its decision. In July 2018, the Company and each of the other parties filed notices appealing the Final Judgment and prior orders incorporated into that Judgment. In April 2022, the Sixth Circuit Court of Appeals reversed the Judgment of the Court, finding that the suit against the Company was time-barred by the applicable statute of limitations. In May 2022, GP filed a petition for rehearing with the Sixth Circuit Court of Appeals, which was denied in July 2022. In November 2022, GP filed a petition for writ of certiorari with the U.S. Supreme Court. In October 2023, the U.S. Supreme Court denied GP's writ petition, thus rendering final the Sixth Circuit's decision that GP's suit against the Company was time-barred. In January 2024 GP requested that the District Court’s final order declare that each party is jointly and severally liable for future costs, arguing that the Sixth Circuit decision only applies to past costs. The proposed consent decree by NCR described above will result inCompany believes the terminationSixth Circuit decision dismisses all of NCR's involvement in the appeal.GP’s claims against it, whether for past or future costs, and is opposing GP’s request.
Harris County: International Paper and McGinnis Industrial Maintenance Corporation ("MIMC"), a subsidiary of Waste Management, Inc. ("WMI"), are PRPs at the San Jacinto River Waste Pits Superfund Site in Harris County, Texas. The PRPs have been actively participating in the activities at the site and share the costs of these activities.
In October 2017, the EPA issued a Record of Decision ("ROD")ROD selecting the final remedy for the site: removal and relocation of the waste material from both the northern and southern impoundments. The EPA did not specify the methods or practices needed to perform this work. The EPA’s selected remedy was accompanied by a cost estimate of approximately $115 million ($105 million for the northern impoundment, and $10 million for the southern impoundment). Subsequent to the issuance of the ROD, there have been numerous meetings between the EPA and the PRPs, and the Company continues to work with the EPA and MIMC/WMI to develop the remedial design.RD.
To this end, in April 2018, the PRPs entered into an Administrative Order on Consent ("AOC") with the EPA, agreeing to work together to develop the remedial design until April 2021.RD for the northern impoundment. That RD work is ongoing. The AOC does not include any agreement to perform waste removal or other construction activity at the site. Rather, it involves adaptive management techniques and a pre-design investigation, the objectives of which include filling data gaps (including but not limited to post-Hurricane Harvey technical data generated prior to the ROD and not incorporated into the selected remedy), refining areas and volumes of materials to be addressed, determining if an excavation remedy is able to be implemented in a manner protective of human health and the environment, and investigating potential impacts of remediation activities to infrastructure in the vicinity.
During the first quarter of 2020, through a series of meetings among the Company, MIMC/WMI, our consultants, the EPA and the Texas Commission on Environmental Quality, ("TCEQ"), progress was made to resolve key technical issues previously preventing the Company from determining the manner in which the selected remedy for the northern impoundment would be feasibly implemented. As a result of these developments the Company reserved the following amounts in relation to remediation at this site: (a) $10 million for the southern impoundment; and (b) $55 million for the northern impoundment, which
represents the Company's 50% share of our estimate of the low end of the range of probable remediation costs.
AlthoughWe submitted the Final Design Package for the southern impoundment to the EPA, and the EPA
approved this plan in May 2021. The EPA issued a Unilateral Administrative Order for RA of the southern impoundment in August 2021. An addendum to the Final 100% RD (Amended April 2021) was submitted to the EPA for the southern impoundment in June 2022. This addendum incorporated additional data collected to date which indicated that additional waste material removal will be required, lengthening the time to complete RA.
With respect to the northern impoundment, the PRPs submitted the final component of the 90% RD to the EPA in November 2022. Upon submittal of the final component, an updated engineering estimate was developed, and the Company increased the reserved amount by approximately $21 million, which represents the Company's 50% share of our estimate of the low end of the range of probable remediation costs. On January 5, 2024, the PRPs received comments from the EPA on the November 2022 90% RD submittal. The PRPs responded to the EPA comments in late January 2024. While several key technical issues have been resolved, werespondents still face significant challenges remediating the northern impoundmentthis area in a cost-efficient manner and withoutthat will not result in a release of contaminated materials to the environment during the excavation, removal and therefore ourtransport of the materials. Our discussions with the EPA on the best approach to remediation will continue. Because of ongoing questions regarding cost effectiveness, timing and gathering other technical data, additional losses in excess of our recorded liability are possible. We are currently unable to reasonably estimate any further adjustment to our recorded liability or any loss or rangeThe total reserve for the southern and northern impoundment was $83 million and $95 million as of loss in excess of such liability; however, we believe it is unlikely any adjustment would be material.December 31, 2023 and 2022, respectively.
Versailles Pond: The Company is a responsible party for the investigation and remediation of Versailles Pond, a 57-acre dammed river impoundment that historically received paperboard mill wastewater in Sprague, Connecticut. A comprehensive investigation has determined that Versailles Pond is contaminated with PCBs, mercury, and metals. A preliminary remediation plan was prepared in the third quarter 2023. Negotiations with state and federal governmental officials are ongoing regarding the scope and timing of the remediation. The total reserve for Versailles Pond was $30 million as of December 31, 2023.
Asbestos-Related Matters
We have been named as a defendant in various asbestos-related personal injury litigation, in both state and federal court, primarily in relation to the prior operations of certain companies previously acquired by the Company. The Company regularly conducts a comprehensive legal review of its asbestos liabilities and reviews recent and historical claims data. During the second quarter of 2020, as previously disclosed, we adjusted our estimated net liability associated with asbestos-related litigation concerning products sold by Champion International Corporation prior to our acquisition of Champion in 2000 to revise the time period associated with anticipated future claims through 2059, a commonly viewed end point when such claims are more predictable. We concluded the adjustment of $43 million to increase this net liability, which resulted in a liability of $75 million, net of estimated insurance recoveries, was not material to any period. As of December 31, 2020, the Company's total recorded liability with respect to pending and future asbestos-related claims was $115$97 million, net of
estimated insurance recoveries.recoveries and $105 million, net of insurance recoveries as of December 31, 2023 and December 31, 2022, respectively. While it is reasonably possible that the Company may incur losses in excess of its recorded liability with respect to asbestos-related matters, we are unable to estimate any loss or range of loss in excess of such liability, and do not believe additional material losses are probable.
Antitrust
Italy: In March 2017, the Italian Competition Authority ("ICA") commenced an investigation into the Italian packaging industry to determine whether producers of corrugated sheets and boxes violated the applicable European competition law. In April 2019, the ICA concluded its investigation and issued initial findings alleging that over 30 producers, including our Italian packaging subsidiary ("IP Italy"), improperly coordinated the production and sale of corrugated sheets and boxes. OnIn August 6, 2019, the ICA issued its decision and assessed IP Italy a fine of €29 million (approximately $32$31 million at currentthe then-current exchange rates) which was recorded in the third quarter of 2019.
However, we are vigorously appealing this We appealed the ICA decision, ofand our appeal was denied in May 2021. We further appealed the ICAdecision to the Italian courtsCouncil of State ("Council of State"), and have numerous and strong bases for our appeal.
Taxes Other Than Payroll and Income Taxes
In 2017,in March 2023 the Brazilian Federal Supreme Court decidedCouncil of State largely upheld the ICA’s findings but referred the calculation of IP Italy’s fine back to the ICA, finding that it was disproportionately high based on the state value-added tax ("VAT") should not be included in the basis of federal VAT calculations. In 2018 and 2019, the Brazilian tax authorities published both an internal consultation and a normative ruling with a narrow interpretation of the effects of the case.conduct found. We have determined that any related federal VAT refunds should be recognized when they are both probablefurther appealed the Council of State decision to uphold the ICA’s findings. The Company and reasonably estimable. Based upon the best information available to us,other producers also have been named in lawsuits, and we have determined thatreceived other claims, by a number of customers in Italy for damages associated with the amount of refund that is probable of being realized is limited to that determined by the tax authorities' narrow interpretation, for which we have recognized a receivable of $12 million as of December 31, 2020. It is possible that future court decisionsalleged anticompetitive conduct. We do not believe material losses arising from such private lawsuits and guidance from the tax authorities could expand the scope of the federal VAT refunds.claims are probable.
General
The Company is involved in various other inquiries, administrative proceedings and litigation relating to environmental and safety matters, personal injury, product liability, labor and employment, contracts, sales of property, intellectual property, tax, and other matters, some of which allege substantial monetary damages. See Note 13 - Income Taxes for details regarding a tax matter. Assessments of lawsuits and claims can involve a series of complex judgments about future events, can rely heavily on estimates and assumptions, and are otherwise subject to significant uncertainties. As a result, there can be no certainty that the Company will not ultimately incur charges in excess of presently recorded liabilities. The Company believes that loss contingencies arising from pending matters including the matters described herein, will not have a material effect on the consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in pending or threatened legal matters, some of which are beyond the Company's control, and the large or indeterminate damages sought in some of these matters, a future adverse ruling, settlement, unfavorable development, or increase in accruals with respect to these matters could result in future charges that could be material to the Company's results of operations or cash flows in any particular reporting period.
Taxes Other Than Payroll and Income Taxes
In 2017, the Brazilian Federal Supreme Court decided that the state value-added tax (VAT) should not be included in the basis of federal VAT calculations. In 2018 and 2019, the Brazilian tax authorities published both an internal consultation and a normative ruling with a narrow interpretation of the effects of the case. Based upon the best information available to us at that time, we determined an estimated refund was probable of being realized. As of March 31, 2021, we had recognized a receivable of $11 million based upon the authority's narrow interpretation. On May 13, 2021, the Brazilian Federal Supreme Court ruled again on the case. This ruling provides a much broader definition of the state VAT, which increased the exclusion amount from the Federal VAT calculations. Therefore, we recognized an additional receivable of $70 million during the three months ended June 30, 2021, which brought the total receivable to $81 million as of June 30, 2021. The $70 million of income recognized during the second quarter of 2021 included income of $42 million and income of $28 million of net interest expense and is recorded in Discontinued Operations, net of taxes, in the accompanying consolidated statement of operations. A portion of this receivable has been consumed by offsetting various taxes payable leaving a remaining receivable of $48 million. This remaining receivable was conveyed to Sylvamo on October 1, 2021, as part of our spin-off transaction.
In connection with the 2006 sale of approximately 5.6 million acres of forestlands, International Paper received installment notes (the "Timber Notes") totaling approximately $4.8 billion. The Timber Notes were used as collateral for borrowings from third party lenders, which effectively monetized the Timber
Notes through the creation of newly formed special purposes entities (the "Entities"). The monetization structure preserved the tax deferral that resulted from the 2006 forestlands sales. As of December 31, 2020, this deferred tax liability was $887 million.
During 2015, International Paper initiated a series of actions in order to extend the 2006 monetization structure and maintain the long-term nature of the deferred tax liability. The Entities, with assets and liabilities primarily consisting of the Timber Notes and third-party bank loans (the "Extension Loans"), were restructured which resulted in the formation of wholly-owned, bankruptcy-remote special purpose entities (the "2015 Financing Entities").
The Timber Notes are shown in Current financial assets of variable interest entities on the accompanying consolidated balance sheet and mature in August 2021. These notes, which do not require principal payments prior to their maturity, are supported by approximately $4.8 billion of irrevocable letters of credit.
During the fourth quarter of 2020, the Extension Loans were amended to extend the maturity dates to August 2021. The Extension Loans are shown in Current nonrecourse financial liabilities of variable interest entities on the accompanying consolidated balance sheet. These bank loans, totaling approximately $4.2 billion, are nonrecourse to the Company, and are secured by approximately $4.8 billion of Timber Notes, the irrevocable letters of credit supporting the Timber Notes, and approximately $150 million of International Paper debt obligations. The $150 million of International Paper debt obligations are eliminated in the consolidation of the 2015 Financing Entities and are not reflected in the Company’s consolidated balance sheet. Provisions of loan agreements related to approximately $1.1 billion of the Extension Loans require the bank issuing letters of credit supporting the Timber Notes pledged as collateral to maintain a credit rating at or above a specified threshold. In the event the credit rating of the letter of credit bank is downgraded below the specified threshold, the letters of credit must be replaced within 60 days with letters of credit from a qualifying financial institution.
As of both December 31, 2020 and 2019, the fair value of the Timber Notes was $4.9 billion, and the fair value of the Extension Loans was $4.2 billion and $4.3 billion for the years ended 2020 and 2019. The Timber Notes and Extension Loans are classified as Level 2 within the fair value hierarchy, which is further defined in Note 17.
Activity between the Company and the 2015 Financing Entities was as follows:
| | | | | | | | | | | |
| In millions | 2020 | 2019 | 2018 |
| Revenue (a) | $ | 95 | | $ | 95 | | $ | 95 | |
| Expense (a) | 122 | | 128 | | 128 | |
| Cash receipts (b) | 95 | | 95 | | 95 | |
| Cash payments (c) | 157 | | 128 | | 128 | |
(a)The revenue and expense are included in Interest expense, net in the accompanying consolidated statement of operations.
(b)The cash receipts are interest received on the Financial assets of variable interest entities.
(c)The cash payments represent interest paid on Current nonrecourse financial liabilities of variable interest entities.
In connection with the acquisition of Temple-Inland in February 2012, two special purpose entities became wholly-owned subsidiaries of International Paper. The use of the two wholly-owned special purpose entities discussed below preserved the tax deferral that resulted from the 2007 Temple-Inland timberlands sales. As of December 31, 2020,2023, this deferred tax liability was $488$485 million, which will be settled with the maturity of the notes in 2027.
In October 2007, Temple-Inland sold 1.55 million acres of timberland for $2.4 billion. The total
consideration consisted almost entirely of notes due in 2027 issued by the buyer of the timberland, which Temple-Inland contributed to two wholly-owned, bankruptcy-remote special purpose entities. The notes are shown in Long-term financial assets of variable interest entities in the accompanying consolidated balance sheet and are supported by $2.4 billion of irrevocable letters of credit issued by three banks, which are required to maintain minimum credit ratings on their long-term debt.
In December 2007, Temple-Inland's two wholly-owned special purpose entities borrowed $2.1 billion which is shown in Long-term nonrecourse financial liabilities of variable interest entities. The loans are repayable in 2027 and are secured by the $2.4 billion of notes and the irrevocable letters of credit securing the notes, and are nonrecourse to us. The loan agreements provide that if a credit rating of any of the banks issuing the letters of credit is downgraded below the specified threshold, the letters of credit issued by that bank must be replaced within 30 days with letters of credit from another qualifying financial institution.
As of both December 31, 20202023 and 2019,2022, the fair value of the notes receivable was $2.3 billion. As of both December 31, 20202023 and 2019,2022, the fair value of this debt was $2.1 billion. The notes receivable and
debt are classified as Level 2 within the fair value hierarchy, which is further defined in Note 17.hierarchy.
Activity between the Company and the 2007 financing entities was as follows:
| | In millions | In millions | 2020 | 2019 | 2018 | In millions | 2023 | 2022 | 2021 |
| Revenue (a) | Revenue (a) | $ | 41 | | $ | 79 | | $ | 72 | |
| Expense (b) | Expense (b) | 43 | | 76 | | 67 | |
| Cash receipts (c) | Cash receipts (c) | 29 | | 62 | | 48 | |
| Cash payments (d) | Cash payments (d) | 40 | | 69 | | 57 | |
(a)The revenue is included in Interest expense, net, in the accompanying consolidated statement of operations and includes approximately $19 million for the years ended December 31, 2020, 20192023, 2022 and 2018,2021, respectively, of accretion income for the amortization of the purchase accounting adjustment on the Financial assets of variable interest entities.
(b) The expense is included in Interest expense, net, in the accompanying consolidated statement of operations and includes approximately $7 million for the years ended December 31, 2020, 20192023, 2022 and 20182021 respectively, of accretion expense for the amortization of the purchase accounting adjustment on the Long-term nonrecourse financial liabilities of variable interest entities.
(c) The cash receipts are interest received on the Financial assets of special purpose entities.
(d) The cash payments are interest paid on Nonrecourse financial liabilities of special purpose entities.
In connection with the 2006 sale of approximately 5.6 million acres of forestlands, International Paper received installment notes (the "Timber Notes") totaling approximately $4.8 billion. The Timber Notes were used as collateral for borrowings from third party lenders, which effectively monetized the Timber Notes through the creation of newly formed special purposes entities (the "Entities"). The monetization structure preserved the tax deferral that resulted from the 2006 forestlands sales. During 2015, International Paper initiated a series of actions to extend the 2006 monetization structure and maintain the long-term nature of the deferred tax liability. The Entities, with assets and liabilities primarily consisting of the Timber Notes and third-party bank loans (the "Extension Loans"), were restructured which resulted in the formation of wholly-owned, bankruptcy-remote special purpose entities (the "2015 Financing Entities").
In August 2021, the Timber Notes of $4.8 billion and the Extension Loans of $4.2 billion related to the 2015 Financing Entities both matured. We settled the Extension Loans at their maturity with the proceeds from the Timber Notes. This resulted in cash proceeds of approximately $630 million representing our equity in the variable interest entities. Maturity of the installment notes and termination of the monetization structure also resulted in a $72 million tax liability that was paid in the fourth quarter of 2021.
On September 2, 2022, the Company and the Internal Revenue Service agreed to settle the previously disclosed timber monetization restructuring tax matter involving the 2015 Financing Entities. Under this agreement, the Company was required to fully resolve the matter and pay $252 million in U.S. federal income taxes. As a result, interest was charged upon closing of the audit. The amount of interest expense recognized in 2022 was $58 million. As of December 31, 2023, $252 million in U.S. federal income taxes and $58 million in interest expense have been paid as a result of the settlement agreement. The Company paid $163 million in U.S. federal income taxes and $30 million in interest during the first quarter of 2023 and fully satisfied the payment terms of the settlement agreement regarding the 2015 Financing Entities timber monetization restructuring tax matter during the second quarter of 2023. The reversal of the Company’s remaining deferred tax liability associated with the 2015 Financing Entities of $604 million was recognized as a one-time tax benefit in the third quarter of 2022.
Activity between the Company and the 2015 Financing Entities for the year ended 2021 was as follows:
| | | | | |
| In millions | 2021 |
| Revenue (a) | $ | 61 | |
| Expense (a) | 34 | |
| Cash receipts (b) | 95 | |
| Cash payments (c) | 38 | |
(a)The revenue and expense are included in Interest expense, net in the accompanying consolidated statement of operations.
(b)The cash receipts are interest received on the Financial assets of variable interest entities.
(c)The cash payments represent interest paid on Current nonrecourse financial liabilities of variable interest entities.
Amounts related to early debt extinguishment during the years ended December 31, 2020, 20192023, 2022 and 20182021 were as follows:
| | In millions | In millions | 2020 | 2019 | 2018 | In millions | 2023 | 2022 | 2021 |
| Early debt reductions (a) | Early debt reductions (a) | $ | 1,640 | | $ | 614 | | $ | 780 | |
| Pre-tax early debt extinguishment costs (b) | Pre-tax early debt extinguishment costs (b) | 196 | | 21 | | 10 | |
(a)Reductions related to notes with interest rates ranging from 3.00% to 9.50%8.70% with original maturities from 2021 to 2048 for the years ended December 31, 2020, 20192022 and 2018.2021.
(b)Amounts are included in Restructuring and other charges in the accompanying consolidated statements of operations.
The Company’sCompany had no early debt reductions in 2020 were comprised2023. The Company had debt reductions of $780 million in 2023, related primarily to capital leases, commercial paper, debt tendersmaturities and international debt.
During the first quarter of $4062023, the Company entered into a variable term loan agreement providing for a $600 million term loan which was fully drawn on the date of such loan agreement and matures in 2028. The $600 million debt was issued following the repayment of $410 million of commercial paper earlier in 2023. Additionally, during the first quarter of 2023, the Company issued an approximately $72 million environmental development bond ("EDB") with an interest rate of 7.50% due in 2021, $6584.00% and a maturity date of April 1, 2026. The proceeds from this issuance were used to repay an approximately $72 million outstanding EDB that matured on April 1, 2023.
During the second quarter of 2023, the Company issued approximately $24 million of debt with a variable interest rate and a maturity date of December 1, 2027. The Company had debt reductions of approximately $49 million of variable interest EDBs with current maturities. Additionally, during the second quarter of 2023, the Company issued an approximately $54 million EDB with a
variable rate and a maturity date of May 1, 2028. The proceeds of this were used to repay an approximately $54 million EDB that matured on May 1, 2023. The Company issued an approximately $25 million EDB with a variable rate and a maturity date of June 1, 2030. The proceeds of this were used to repay an approximately $25 million EDB that matured on June 1, 2023.
During the third quarter of 2023, the Company repaid an approximately $70 million EDB with an interest rate of 3.65% due in 2024, $1272.90% that matured on September 1, 2023.
During the fourth quarter of 2023, the Company repaid an approximately $87 million note with an interest rate of 3.80% due in 2026, and $2976.875% that matured on November 1, 2023. Additionally, the Company issued approximately $11 million of debt with ana variable interest rate and a maturity date of 3.00% due inDecember 1, 2027. In addition to these debt tenders, the Company had early debt extinguishments of approximately
$152 million in open market repurchases related to debt with interest rates ranging from 3.00% to 4.40% and maturities dates from 2026 to 2048.
The Company had debt issuances in 20202022 of $583$354 million of term loan agreements, $410 million of commercial paper and $248 million of environmental development bonds.
The Company had debt issuances in 2021 of $1.5 billion related primarily to the AR securitization program and international debt. In addition to the earlySylvamo debt reductions, the Company had debt reductions of $638 millionissuances as discussed further in 2020 related primarily to the AR securitization program, commercial paper, and international debt.Note 8 - Divestitures.
The borrowing capacity of the Company's commercial paper program is $1.0 billion.billion supported by its $1.4 billion credit agreement. Under the terms of this program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. The Company had 0no borrowings outstanding as of December 31, 2020,2023 and $30$410 million of borrowings outstanding as of December 31, 2019,2022 under this program.
At December 31, 2023, the Company's credit facilities totaled $1.9 billion. The credit facilities generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper's credit rating. The credit facilities previously included a $1.5 billion contractually committed bank facility with a maturity date of June 2026. In March 2020,June 2023, the Company entered into a $750 millionamended and restated its credit agreement to, among other things, (i) reduce the size of the contractually committed 364-day revolving credit agreementbank facility from $1.5 billion to $1.4 billion, (ii) extend the maturity date from June 2026 to June 2028, and (iii) replace the LIBOR-based rate with a syndicateSOFR-based rate. The liquidity facilities also include up to $500 million of banks and other financial institutions which augments the Company's access to liquidity due to macroeconomic conditions atuncommitted financings based on eligible receivables balances under a receivable securitization program that time and supplements the Company's $1.5 billion five-year credit agreement. In October 2020, the Company extended the expiration date of the $1.5 billion credit agreement from December 2021 to December 2022.expires in June 2025. As of December 31, 2020,2023
and December 31, 2022, the Company had no borrowings outstanding under either the $750 million revolving credit agreement or the $1.5 billion credit agreement.
In April 2020, the Company's receivable securitization program was amended from an uncommitted financing arrangement to a committed financing arrangement with a borrowing limit up to $550 million based on eligible receivables balances that expires in April 2022. This was done in response to the economic environment related to COVID-19 to further strengthen the Company’s liquidity position. As of December 31, 2020, the Company had 0 borrowings outstanding under the program. After considering the Company’s liquidity position in relation to COVID-19 and the current economic environment, the Company's receivable securitization program was amended from a committed financing arrangement to an uncommitted financing arrangement in February 2021 with the borrowing limit and expiration date remaining unchanged.
A summary of long-term debt follows:
| | In millions at December 31 | In millions at December 31 | 2020 | 2019 | In millions at December 31 | 2023 | 2022 |
| 7.500% notes – due 2021 | $ | 0 | | $ | 406 | |
| 6.875% notes – due 2023 | 6.875% notes – due 2023 | 94 | | 94 | |
| 3.650% notes – due 2024 | 0 | | 658 | |
| 7.350% notes – due 2025 | 7.350% notes – due 2025 | 44 | | 44 | |
| 7.750% notes – due 2025 | 7.750% notes – due 2025 | 31 | | 31 | |
| 3.800% notes – due 2026 | 517 | | 645 | |
| 7.200% notes – due 2026 | 7.200% notes – due 2026 | 58 | | 58 | |
| 6.400% notes – due 2026 | 6.400% notes – due 2026 | 5 | | 5 | |
| 3.000% notes – due 2027 | 477 | | 803 | |
| 7.150% notes – due 2027 | 7.150% notes – due 2027 | 7 | | 7 | |
| 3.550% notes – due 2029 | 200 | | 200 | |
| 6.875% notes – due 2029 | 6.875% notes – due 2029 | 37 | | 37 | |
| 5.000% notes – due 2035 | 5.000% notes – due 2035 | 600 | | 600 | |
| 6.650% notes – due 2037 | 6.650% notes – due 2037 | 4 | | 4 | |
| 8.700% notes – due 2038 | 8.700% notes – due 2038 | 265 | | 265 | |
| 7.300% notes – due 2039 | 7.300% notes – due 2039 | 722 | | 722 | |
| 6.000% notes – due 2041 | 6.000% notes – due 2041 | 585 | | 585 | |
| 4.800% notes – due 2044 | 4.800% notes – due 2044 | 800 | | 800 | |
| 5.150% notes – due 2046 | 5.150% notes – due 2046 | 700 | | 700 | |
| 4.400% notes – due 2047 | 4.400% notes – due 2047 | 1,084 | | 1,158 | |
| 4.350% notes – due 2048 | 4.350% notes – due 2048 | 938 | | 986 | |
| Floating rate notes – due 2020 – 2024 (a) | 245 | | 339 | |
| Environmental and industrial development bonds – due 2022 – 2035 (b) | 579 | | 552 | |
| Floating rate notes – due 2023 – 2027 (a) | |
| Environmental and industrial development bonds – due 2023 – 2028 (b) | |
| Floating rate term loan - due 2028 | |
| Total principal | Total principal | 7,992 | | 9,699 | |
| Capitalized leases | Capitalized leases | 95 | | 100 | |
| Premiums, discounts, and debt issuance costs | Premiums, discounts, and debt issuance costs | (80) | | (88) | |
| Terminated interest rate swaps | Terminated interest rate swaps | 80 | | 0 | |
| Interest rate swaps | 0 | | 46 | |
| Other (c) | 6 | | 8 | |
| Total (d) | 8,093 | | 9,765 | |
| Other | |
| Total (c) | |
| Less: current maturities | Less: current maturities | 29 | | 168 | |
| Long-term debt | Long-term debt | $ | 8,064 | | $ | 9,597 | |
(a)The weighted average interest rate on these notes was 1.3%5.4% in 20202023 and 3.1%4.6% in 2019.2022.
(b)The weighted average interest rate on these bonds was 3.5%2.4% in 20202023 and 4.4%2.4% in 2019.2022.
(c)Includes $4 million and $7 million of fair market value adjustments as of December 31, 2020 and 2019, respectively.
(d)The fair market value was approximately $10.5$5.5 billion at December 31, 20202023 and $10.9$5.2 billion at December 31, 2019.2022. Debt fair value measurements use Level 2 inputs.
At December 31, 2020,2023, contractual obligations for future payments of debt maturities (including finance lease liabilities disclosed in Note 1010 - Leases and excluding the timber monetization structures disclosed in Note 1515 - Variable Interest Entities) by calendar year were as follows over the next five years: 2021 – $29 million; 2022 – $199 million; 2023 – $361 million; 2024 – $152$138 million; 2025 – $189 million; 2026 – $143 million; 2027 – $333 million; and 20252028 – $209$670 million.
The Company’s financial covenants require the maintenance of a minimum net worth, as defined in our debt agreements, of $9 billion and a total debt-to-capital ratio of less than 60%. Net worth is defined as the sum of common stock, paid-in capital and retained earnings, less treasury stock plus any cumulative goodwill impairment charges. The calculation also excludes accumulated other comprehensive income/loss and both the current and long-term Nonrecourse Financial Liabilities of Variable Interest Entities. The total debt-to-capital ratio is defined as total debt divided by the sum of total debt plus net worth. As of December 31, 2020,2023, we were in compliance with our debt covenants.
International Paper periodically uses derivatives and other financial instruments to hedge exposures to interest rate, commodity and currency risks. International Paper does not hold or issue financial instruments for trading purposes. For hedges that meet the hedge accounting criteria at inception, International Paper formally designates and documents the instrument as a fair value hedge, a cash flow hedge or a net investment hedge of a specific underlying exposure.
INTEREST RATE RISK MANAGEMENT
Our policy is to manage interest cost using a mixture of fixed-rate and variable-rate debt. To manage this risk in a cost-efficient manner, we enter into interest rate swaps whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to a notional amount.
Interest rate swaps that meet specific accounting criteria are accounted for as fair value or cash flow hedges. For fair value hedges, the changes in the fair value of both the hedging instruments and the underlying debt obligations are immediately recognized in interest expense. For cash flow hedges, the effective portion of the changes in the fair value of the hedging instrument is reported in Accumulated other comprehensive income (AOCI) and reclassified into interest expense over the life of the underlying debt. The ineffective portion for both cash flow and fair value hedges, which is not material for any year presented, is immediately recognized in earnings.
FOREIGN CURRENCY RISK MANAGEMENT
We manufacture and sell our products and finance operations in a number of countries throughout the
world and, as a result, are exposed to movements in foreign currency exchange rates. The purpose of our foreign currency hedging program is to manage the volatility associated with the changes in exchange rates.
To manage this exchange rate risk, we have historically utilized a combination of forward contracts, options and currency swaps. Contracts that qualify are designated as cash flow hedges of certain forecasted transactions denominated in foreign currencies or net investment hedges of foreign denominated subsidiaries. For cash flow hedges, the effective portion of the changes in fair value of these instruments is reported in AOCI and reclassified into earnings in the same financial statement line item and in the same period or periods during which the related hedged transactions affect earnings. The ineffective portion, which is not material for any year presented, is immediately recognized in earnings. For net investment hedges, all changes in the fair value of these instruments are recorded in AOCI, offsetting the currency translation adjustment of the related investment that is also recorded in AOCI.
The change in value of certain non-qualifying instruments used to manage foreign exchange exposure of intercompany financing transactions and certain balance sheet items subject to revaluation is immediately recognized in earnings, substantially offsetting the foreign currency mark-to-market impact of the related exposure.
COMMODITY RISK MANAGEMENT
Certain raw materials used in our production processes are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. To manage the volatility in earnings due to price fluctuations, we may utilize swap contracts or forward purchase contracts.
Derivative instruments are reported in the consolidated balance sheets at their fair values, unless the derivative instruments qualify for the normal purchase normal sale ("NPNS") exception under GAAP and such exception has been elected. If the NPNS exception is elected, the fair values of such contracts are not recognized on the balance sheet.
Contracts that qualify are designated as cash flow hedges of forecasted commodity purchases. The effective portion of the changes in fair value for these instruments is reported in AOCI and reclassified into earnings in the same financial statement line item and in the same period or periods during which the hedged transactions affect earnings. The ineffective and non-qualifying portions, which are not material for any year presented, are immediately recognized in earnings. The change in the fair value of certain non-qualifying instruments used to reduce commodity price volatility is immediately recognized in earnings.
The notional amounts of qualifying and non-qualifying instruments used in hedging transactions were as follows:
| | | | | | | | |
| In millions | December 31, 2020 | December 31, 2019 |
| Derivatives in Cash Flow Hedging Relationships: | | |
| Foreign exchange contracts (a) | 313 | | 407 | |
| Derivatives in Fair Value Hedging Relationships: | | |
| Interest rate contracts | 0 | | 700 | |
| Derivatives in Net Investment Hedging Relationships: | | |
| Interest rate contracts | 0 | | 475 | |
| Derivatives Not Designated as Hedging Instruments: | | |
| Electricity contract | 7 | | 16 | |
| Foreign exchange contracts | 0 | | 7 | |
(a)These contracts had maturities of two years or less as of December 31, 2020.
During the first quarter of 2020, International Paper terminated its interest rate contracts in fair value hedging relationships. These contracts had a notional value of $700 million and an approximate fair value of $85 million at the time of termination. Subsequent to the termination of the interest rate swaps, the fair value basis adjustment is amortized to earnings as interest income over the same period as a debt premium on the previously hedged debt. During the first and second quarter of 2020, International Paper also terminated interest rate contracts in net investment hedging relationships with a notional value of $475 million. These contracts had an approximate fair value of $33 million at the time of termination.
Subsequent to the termination of the net investment hedges, the fair value is accounted for in other comprehensive income as cumulative translation adjustment for the previously hedged net investment.
The following table shows gains or losses recognized in AOCI, net of tax, related to derivative instruments:
| | | | | | | | | | | |
| | Gain (Loss)
Recognized in AOCI on Derivatives
(Effective Portion) |
| In millions | 2020 | 2019 | 2018 |
| Derivatives in Cash Flow Hedging Relationships: | | | |
| Foreign exchange contracts | $ | (34) | | $ | 4 | | $ | (10) | |
| Derivatives in Net Investment Hedging Relationships: | | | |
| Interest rate contracts | $ | 25 | | $ | 7 | | $ | 0 | |
During the next 12 months, the amount of the December 31, 2020 AOCI balance, after tax, that is expected to be reclassified to earnings is a loss of $2 million.
The amounts of gains and losses recognized in the consolidated statement of operations on qualifying and non-qualifying financial instruments used in hedging transactions were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Gain (Loss)
Reclassified from
AOCI
into Income
(Effective Portion) | | Location of Gain
(Loss)
Reclassified
from AOCI
into Income
(Effective Portion) |
| In millions | 2020 | | 2019 | | 2018 | | |
| Derivatives in Cash Flow Hedging Relationships: | | | | | | | |
| Foreign exchange contracts | $ | (25) | | | $ | (3) | | | $ | (1) | | | Cost of products sold |
| Interest rate contracts | (1) | | | (1) | | | (1) | | | Interest expense, net |
| Total | $ | (26) | | | $ | (4) | | | $ | (2) | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gain (Loss)
Recognized
in Income | | | Location of Gain (Loss)
in Consolidated Statement of
Operations |
| In millions | 2020 | | | 2019 | | | 2018 | | | |
| Derivatives in Fair Value Hedging Relationships: | | | | | | | | | | |
| Interest rate contracts | $ | 38 | | | | $ | 30 | | | | $ | 16 | | | | Interest expense, net |
| Debt | (38) | | | | (30) | | | | (16) | | | | Interest expense, net |
| Total | $ | 0 | | | | $ | 0 | | | | $ | 0 | | | | |
| Derivatives in Net Investment Hedging Relationships: | | | | | | | | | | |
| Foreign exchange contracts | $ | 2 | | | | $ | 0 | | | | $ | 0 | | | | Net (gains) losses on sales and impairments of businesses |
| Total | $ | 2 | | | | $ | 0 | | | | $ | 0 | | | | |
| Derivatives Not Designated as Hedging Instruments: | | | | | | | | | | |
| Electricity Contracts | $ | (2) | | | | $ | 3 | | | | $ | 2 | | | | Cost of products sold |
| Foreign exchange contracts | 0 | | | | (2) | | | | 1 | | | | Cost of products sold |
| Total | $ | (2) | | | | $ | 1 | | | | $ | 3 | | | | |
Fair Value Measurements
International Paper’s financial assets and liabilities that are recorded at fair value consist of derivative contracts, including interest rate swaps, foreign currency forward contracts, options and other financial instruments that are used to hedge exposures to interest rate, commodity and currency risks. For these financial instruments, fair value is determined at each balance sheet date using an income approach.
The guidance for fair value measurements and disclosures sets out a fair value hierarchy that groups fair value measurement inputs into the following three classifications:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability reflecting the reporting entity’s own assumptions or external inputs from inactive markets.
Transfers between levels are recognized at the end of the reporting period. All of International Paper’s derivative fair value measurements use Level 2 inputs.
Below is a description of the valuation calculation and the inputs used for each class of contract:
Interest Rate Contracts
Interest rate contracts are valued using swap curves obtained from an independent market data provider.
The market value of each contract is the sum of the fair value of all future interest payments between the contract counterparties, discounted to present value.
The fair value of the future interest payments is determined by comparing the contract rate to the derived forward interest rate and present valued using the appropriate derived interest rate curve.
Foreign Exchange Contracts
Foreign currency forward and option contracts are valued using standard valuation models. Significant inputs used in these standard valuation models are foreign currency forward and interest rate curves and a volatility measurement. The fair value of each contract is present valued using the applicable interest rate. All significant inputs are readily available in public markets, or can be derived from observable market transactions.
Electricity Contract
The Company is party to an electricity contract used to manage market fluctuations in energy pricing. The Company's electricity contract is valued using the Mid-C index forward curve obtained from the Intercontinental Exchange. The market value of the
contract is the sum of the fair value of all future purchase payments between the contract counterparties, discounted to present value. The fair value of the future purchase payments is determined by comparing the contract price to the forward price and present valued using International Paper's cost of capital.
Since the volume and level of activity of the markets that each of the above contracts are traded in has been normal, the fair value calculations have not been adjusted for inactive markets or disorderly transactions.
The following table provides a summary of the impact of our derivative instruments in the consolidated balance sheet:
Fair Value Measurements
Level 2 – Significant Other Observable Inputs
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Assets | | Liabilities | |
| In millions | December 31, 2020 | | December 31, 2019 | | December 31, 2020 | | December 31, 2019 | |
| Derivatives designated as hedging instruments | | | | | | | | |
| Foreign exchange contracts – cash flow | $ | 5 | | | $ | 10 | | | $ | 8 | | | $ | 4 | | |
| Interest rate contracts - net investment | 0 | | | 11 | | | 0 | | | 0 | | |
| Interest rate contracts – fair value | 0 | | | 47 | | | 0 | | | 0 | | |
| Total derivatives designated as hedging instruments | 5 | | | 68 | | | 8 | | | 4 | | |
| Derivatives not designated as hedging instruments | | | | | | | | |
| Electricity contract | 0 | | | 0 | | | 1 | | | 2 | | |
| Foreign exchange contracts | 0 | | | 0 | | | 0 | | | 1 | | |
| Total derivatives not designated as hedging instruments | 0 | | | 0 | | | 1 | | | 3 | | |
| Total derivatives | $ | 5 | | (a) | $ | 68 | | (b) | $ | 9 | | (c) | $ | 7 | | (d) |
(a)Includes $5 million recorded in Other current assets in the accompanying consolidated balance sheet.
(b)Included $14 million recorded in Other current assets and $54 million Deferred charges recorded in the accompanying consolidated balance sheet.
(c)Included $7 million recorded in Other current liabilities and $2 million recorded in Other liabilities the accompanying consolidated balance sheet.
(d)Included $6 million recorded in Other current liabilities and $1 million recorded in Other liabilities in the accompanying consolidated balance sheet.
The above contracts are subject to enforceable master netting arrangements that provide rights of offset with each counterparty when amounts are payable on the same date in the same currency or in the case of certain specified defaults. Management has made an accounting policy election to not offset the fair value of recognized derivative assets and derivative liabilities in the consolidated balance sheet. The amounts owed to the counterparties and owed to the Company are considered immaterial with respect to each counterparty and in the aggregate with all counterparties.
Credit-Risk-Related Contingent Features
International Paper evaluates credit risk by monitoring its exposure with each counterparty to ensure that exposure stays within acceptable policy limits. Credit risk is also mitigated by contractual provisions with the majority of our banks. Certain of the contracts include a credit support annex that requires the posting of collateral by the counterparty or International Paper based on each party’s rating and level of exposure. Based on the Company’s current credit rating, the collateral threshold is generally $15 million.
If the lower of the Company’s credit rating by Moody’s or S&P were to drop below investment grade, the Company would be required to post collateral for all of its derivatives in a net liability position, although no derivatives would terminate. The fair value of derivative instruments containing credit-risk-related contingent features in a net liability position was $5 million and $1 million as of December 31, 2020 and December 31, 2019, respectively. The Company was not required to post any collateral as of December 31, 2020 or 2019.
The authorized capital stock at both December 31, 20202023 and 2019,2022, consisted of 990,850,000 shares of common stock, $1 par value; 400,000 shares of cumulative $4 preferred stock, without par value (stated value $100 per share); and 8,750,000 shares of serial preferred stock, $1 par value. The serial preferred stock is issuable in one or more series by the Board of Directors without further shareholder action.
The following is a rollforwardroll forward of shares of common stock for the three years ended December 31, 2020, 20192023, 2022 and 2018:2021:
| | | | Common Stock | | Common Stock |
| In thousands | In thousands | Issued | Treasury | In thousands | Issued | Treasury |
| Balance at January 1, 2018 | 448,916 | | 35,975 | |
| Balance at January 1, 2021 | |
| Issuance of stock for various plans, net | Issuance of stock for various plans, net | 0 | | (1,721) | |
| Repurchase of stock | Repurchase of stock | 0 | | 14,056 | |
| Balance at December 31, 2018 | 448,916 | | 48,310 | |
| Balance at December 31, 2021 | |
| Issuance of stock for various plans, net | Issuance of stock for various plans, net | 0 | | (3,416) | |
| Repurchase of stock | Repurchase of stock | 0 | | 11,906 | |
| Balance at December 31, 2019 | 448,916 | | 56,800 | |
| Balance at December 31, 2022 | |
| Issuance of stock for various plans, net | Issuance of stock for various plans, net | 0 | | (2,010) | |
| Repurchase of stock | Repurchase of stock | 0 | | 1,027 | |
| Balance at December 31, 2020 | 448,916 | | 55,817 | |
| Balance at December 31, 2023 | |
International Paper sponsors and maintains the Retirement Plan of International Paper Company (the "Pension Plan"), a tax-qualified defined benefit pension plan that provides retirement benefits to certain employees.
The Pension Plan provides defined pension benefits based on years of credited service and either final average earnings (salaried employees and hourly employees receiving salaried benefits), hourly job rates or specified benefit rates (hourly and union employees).
The Company also has 2two unfunded nonqualified defined benefit pension plans: athe Pension Restoration Plan that provides retirement benefits based on eligible compensation in excess of limits set by the Internal Revenue Service, and a supplemental retirement planthe Unfunded Supplemental Retirement Plan for senior managersSenior Managers ("SERP"), which is an alternative retirement plan for salaried employees who are senior vice presidents and above or who are designated by the chief executive officer as participants. These nonqualified plans are only funded to the extent of benefits paid, which totaled $31$22 million, $26$29 million and $29$21 million in 2020, 20192023, 2022 and 2018,2021, respectively, and which are expected to be $21$20 million in 2021.2024.
Effective January 1, 2019, the Company froze participation, including credited service and compensation, for salaried employees under the Pension Plan, the Pension Restoration Plan and the SERP plan.SERP. This change does not affect benefits accrued through December 31, 2018. For service after December 31, 2018, employees affected by the freeze receive a companyCompany contribution to their individual Retirement Savings Account as described later in this Note 1918.
Many non-U.S. employees are covered by various retirement benefit arrangements, some of which are considered to be defined benefit pension plans for accounting purposes.
OBLIGATIONS AND FUNDED STATUS
The following table shows the changes in the benefit obligation and plan assets for 20202023 and 2019,2022 and the plans’ funded status.
| | | | | | | | | | | | | | |
| | 2020 | 2019 |
| In millions | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| Change in projected benefit obligation: | | | | |
| Benefit obligation, January 1 | $ | 11,699 | | $ | 253 | | $ | 10,467 | | $ | 215 | |
| Service cost | 85 | | 5 | | 68 | | 5 | |
| Interest cost | 393 | | 6 | | 440 | | 8 | |
| Curtailment | 0 | | (1) | | 0 | | (1) | |
| Settlements | 0 | | (5) | | 0 | | (6) | |
| Actuarial loss (gain) | 1,357 | | 10 | | 1,230 | | 33 | |
| Acquisitions | 0 | | 0 | | 0 | | 3 | |
| Divestitures | 0 | | (1) | | 0 | | (1) | |
| Plan amendments | 42 | | 0 | | 40 | | 0 | |
| Benefits paid | (556) | | (7) | | (546) | | (8) | |
| Effect of foreign currency exchange rate movements | 0 | | 4 | | 0 | | 5 | |
| Benefit obligation, December 31 | $ | 13,020 | | $ | 264 | | $ | 11,699 | | $ | 253 | |
| Change in plan assets: | | | | |
| Fair value of plan assets, January 1 | $ | 10,165 | | $ | 183 | | $ | 8,735 | | $ | 161 | |
| Actual return on plan assets | 2,377 | | 11 | | 1,950 | | 23 | |
| Company contributions | 32 | | 9 | | 26 | | 10 | |
| Benefits paid | (556) | | (7) | | (546) | | (8) | |
| Settlements | 0 | | (5) | | 0 | | (6) | |
| Effect of foreign currency exchange rate movements | 0 | | (1) | | 0 | | 3 | |
| Fair value of plan assets, December 31 | $ | 12,018 | | $ | 190 | | $ | 10,165 | | $ | 183 | |
| Funded status, December 31 | $ | (1,002) | | $ | (74) | | $ | (1,534) | | $ | (70) | |
| Amounts recognized in the consolidated balance sheet: | | | | |
| Non-current asset | $ | 0 | | $ | 5 | | $ | 0 | | $ | 6 | |
| Current liability | (20) | | (3) | | (28) | | (3) | |
| Non-current liability | (982) | | (76) | | (1,506) | | (73) | |
| | $ | (1,002) | | $ | (74) | | $ | (1,534) | | $ | (70) | |
| | | | | | | | | | | | | | |
| | 2023 | 2022 |
| In millions | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| Change in projected benefit obligation: | | | | |
| Benefit obligation, January 1 | $ | 8,816 | | $ | 54 | | $ | 11,833 | | $ | 65 | |
| Service cost | 48 | | 4 | | 85 | | 3 | |
| Interest cost | 459 | | 3 | | 338 | | 2 | |
| Actuarial loss (gain) | 225 | | (3) | | (2,863) | | (11) | |
| Plan amendments | 26 | | — | | 16 | | — | |
| Benefits paid | (593) | | (3) | | (593) | | (2) | |
| Special termination benefits | 1 | | — | | — | | — | |
| Effect of foreign currency exchange rate movements | — | | 3 | | — | | (3) | |
| Benefit obligation, December 31 | $ | 8,982 | | $ | 58 | | $ | 8,816 | | $ | 54 | |
| Change in plan assets: | | | | |
| Fair value of plan assets, January 1 | $ | 8,845 | | $ | 18 | | $ | 12,075 | | $ | 19 | |
| Actual return on plan assets | 562 | | 1 | | (2,666) | | — | |
| Company contributions | 22 | | 3 | | 29 | | 2 | |
| Benefits paid | (593) | | (3) | | (593) | | (2) | |
| Effect of foreign currency exchange rate movements | — | | 1 | | — | | (1) | |
| Fair value of plan assets, December 31 | $ | 8,836 | | $ | 20 | | $ | 8,845 | | $ | 18 | |
| Funded status, December 31 | $ | (146) | | $ | (38) | | $ | 29 | | $ | (36) | |
| Amounts recognized in the consolidated balance sheet: | | | | |
| Overfunded pension plan assets | $ | 118 | | $ | — | | $ | 297 | | $ | — | |
| Underfunded pension benefit obligation - current | (20) | | (2) | | (22) | | (2) | |
| Underfunded pension benefit obligation - non-current | (244) | | (36) | | (246) | | (34) | |
| | $ | (146) | | $ | (38) | | $ | 29 | | $ | (36) | |
| | | | | | | | | | | | | | |
| Amounts recognized in accumulated other comprehensive income under ASC 715 (pre-tax): | | | | |
| Prior service cost (credit) | $ | 120 | | $ | 0 | | $ | 98 | | $ | (1) | |
| Net actuarial loss | 2,297 | | 82 | | 2,851 | | 75 | |
| | $ | 2,417 | | $ | 82 | | $ | 2,949 | | $ | 74 | |
| | | | | | | | | | | | | | |
| Amounts recognized in accumulated other comprehensive income (loss) under ASC 715 (pre-tax): | | | | |
| Prior service cost (credit) | $ | 91 | | $ | — | | $ | 89 | | $ | — | |
| Net actuarial loss (gain) | 1,663 | | (10) | | 1,563 | | (7) | |
| | $ | 1,754 | | $ | (10) | | $ | 1,652 | | $ | (7) | |
The non-current asset for the qualified plan is included in the accompanying consolidated balance sheet under Overfunded Pension Plan Assets. The non-current portion of the liability is included with the pension liability in the accompanying consolidated balance sheet under Underfunded Pension Benefit Obligation. The liability for Turkey has been reclassified to Liabilities held for sale.
The largest contributor to the actuarial loss affecting the benefit obligation was the decrease in the discount rate from 3.40%5.40% at December 31, 20192022 to 2.60%5.10% at December 31, 2020. However positive asset returns offset the higher obligation for an improved funded position.2023.
The components of the $(532)$102 million and $8$(3) million related to U.S. plans and non-U.S. plans, respectively, in the amounts recognized in OCI during 20202023 consisted of:
| | In millions | In millions | U.S.
Plans | Non-
U.S.
Plans | In millions | U.S.
Plans | Non-
U.S.
Plans |
| Current year actuarial (gain) loss | Current year actuarial (gain) loss | $ | (352) | | $ | 6 | |
| Amortization of actuarial loss | Amortization of actuarial loss | (202) | | (2) | |
| Current year prior service cost | Current year prior service cost | 42 | | — | |
| Amortization of prior service cost | Amortization of prior service cost | (20) | | 0 | |
| Effect of foreign currency exchange rate movements | Effect of foreign currency exchange rate movements | — | | 4 | |
| | | $ | (532) | | $ | 8 | |
The portion of the change in the funded status that was recognized in net periodic benefit cost and OCI for the U.S. plans was $(500)$197 million, $(172)$474 million and $(134) million$(1.0) billion in 2020, 20192023, 2022 and 2018,2021, respectively. The portion of the change in funded status for the non-U.S. plans was $13$2 million, $24$(6) million, and $(6)$(73) million in 2020, 20192023, 2022 and 2018,2021, respectively.
The accumulated benefit obligation at December 31, 20202023 and 20192022 was $13.0$9.0 billion and $11.7$8.8 billion, respectively, for our U.S. defined benefit plans and
$246 $49 million and $236$46 million, respectively, at December 31, 20202023 and 20192022 for our non-U.S. defined benefit plans.
The following table summarizes information for pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 20202023 and 2019:2022:
| | | | 2020 | 2019 | | 2023 | 2022 |
| In millions | In millions | U.S.
Plans | Non-U.S.
Plans | U.S.
Plans | Non-U.S.
Plans | In millions | U.S.
Plans | Non-U.S.
Plans | U.S.
Plans | Non-U.S.
Plans |
| Projected benefit obligation | Projected benefit obligation | $ | 13,020 | | $ | 245 | | $ | 11,699 | | $ | 225 | |
| Accumulated benefit obligation | Accumulated benefit obligation | 12,997 | | 227 | | 11,672 | | 208 | |
| Fair value of plan assets | Fair value of plan assets | 12,018 | | 166 | | 10,165 | | 149 | |
ASC 715, “Compensation – Retirement Benefits” provides for delayed recognition of actuarial gains and losses, including amounts arising from changes in the estimated projected plan benefit obligation due to changes in the assumed discount rate, differences
between the actual and expected return on plan
assets and other assumption changes. These net gains and losses are recognized prospectively over a period that approximates the average remaining service period of active employees expected to receive benefits under the plans to the extent that they are not offset by gains in subsequent years.
NET PERIODIC PENSION EXPENSE
Service cost is the actuarial present value of benefits attributed by the plans’ benefit formula to services rendered by employees during the year. Interest cost represents the increase in the projected benefit obligation, which is a discounted amount, due to the passage of time. The expected return on plan assets reflects the computed amount of current-year earnings from the investment of plan assets using an estimated long-term rate of return.
Net periodic pension expense for qualified and nonqualified U.S. and non-U.S. defined benefit plans comprised the following:
| | | | 2020 | 2019 | 2018 | | 2023 | 2022 | 2021 |
| In millions | In millions | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans | In millions | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| Service cost | Service cost | $ | 85 | | $ | 5 | | $ | 68 | | $ | 5 | | $ | 153 | | $ | 5 | |
| Interest cost | Interest cost | 393 | | 6 | | 440 | | 8 | | 467 | | 8 | |
| Expected return on plan assets | Expected return on plan assets | (668) | | (8) | | (631) | | (10) | | (765) | | (11) | |
| Actuarial loss (gain) | Actuarial loss (gain) | 202 | | 2 | | 200 | | 2 | | 337 | | 2 | |
| Amortization of prior service cost | Amortization of prior service cost | 20 | | 0 | | 16 | | 0 | | 16 | | 0 | |
| Curtailment loss (gain) | 0 | | (1) | | 0 | | (1) | | 0 | | 0 | |
| Settlement loss | 0 | | 1 | | 0 | | 2 | | 424 | | 0 | |
| Net periodic pension expense | $ | 32 | | $ | 5 | | $ | 93 | | $ | 6 | | $ | 632 | | $ | 4 | |
| Special termination benefits | |
| Net periodic pension (income) expense | |
The components of net periodic pension expense other than the Service cost component are included in Non-operating pension (income) expense in the Consolidated Statement of Operations except for $(3) million related to Sylvamo participants in 2021 recorded in Discontinued Operations.
The decreaseincrease in 20202023 pension expense primarily reflects higherlower asset returns, and lowerhigher interest cost slightly offset bydue to a higher discount rate, higher actuarial loss, and lower service cost.
On September 25, 2018, the Company entered into an agreement with The Prudential Insurance Company83
ASSUMPTIONS
International Paper evaluates its actuarial assumptions annually as of December 31 (the measurement date) and considers changes in these long-term factors based upon market conditions and the requirements for employers’ accounting for
pensions. These assumptions are used to calculate
benefit obligations as of December 31 of the current year and pension expense to be recorded in the following year (i.e., the discount rate used to determine the benefit obligation as of December 31, 20202023 is also the discount rate used to determine net pension expense for the 20212024 year).
Major actuarial assumptions used in determining the benefit obligations and net periodic pension cost for our defined benefit plans are presented in the following table:
| | | | 2020 | 2019 | 2018 | | 2023 | 2022 | 2021 |
| | | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans | | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| Actuarial assumptions used to determine benefit obligations as of December 31: | Actuarial assumptions used to determine benefit obligations as of December 31: | |
| Discount rate | Discount rate | 2.60 | % | 2.32 | % | 3.40 | % | 2.70 | % | 4.30 | % | 3.97 | % |
| Discount rate | |
| Discount rate | | 5.10 | % | 5.88 | % | 5.40 | % | 5.31 | % | 2.90 | % | 2.59 | % |
| Rate of compensation increase | Rate of compensation increase | 2.25 | % | 3.66 | % | 2.25 | % | 3.62 | % | 2.25 | % | 4.05 | % | Rate of compensation increase | 3.00 | % | 3.40 | % | 3.00 | % | 3.36 | % | 3.00 | % | 2.92 | % |
| Actuarial assumptions used to determine net periodic pension cost for years ended December 31: | Actuarial assumptions used to determine net periodic pension cost for years ended December 31: | |
| Discount rate (a) | Discount rate (a) | 3.40 | % | 2.70 | % | 4.30 | % | 3.97 | % | 3.80 | % | 3.59 | % |
| Expected long-term rate of return on plan assets | 7.00 | % | 4.92 | % | 7.25 | % | 6.20 | % | 7.50 | % | 6.52 | % |
| Discount rate (a) | |
| Discount rate (a) | | 5.40 | % | 5.31 | % | 2.90 | % | 2.59 | % | 2.67 | % | 2.32 | % |
| Expected long-term rate of return on plan assets (a) | | Expected long-term rate of return on plan assets (a) | 6.50 | % | 3.83 | % | 6.00 | % | 3.66 | % | 6.40 | % | 4.99 | % |
| Rate of compensation increase | Rate of compensation increase | 2.25 | % | 3.62 | % | 2.25 | % | 4.05 | % | 3.38 | % | 4.06 | % | Rate of compensation increase | 3.00 | % | 3.36 | % | 3.00 | % | 2.92 | % | 2.25 | % | 3.66 | % |
(a) Represents the weighted average rate for the U.S. qualified plans in 20182021 due to the remeasurements.spin-off remeasurement..
The expected long-term rate of return on plan assets is based on projected rates of return for current asset classes in the plan’s investment portfolio. Projected rates of return are developed through an asset/liability study in which projected returns for each of the plan’s asset classes are determined after analyzing historical experience and future expectations of returns and volatility of the various asset classes.
Based on the target asset allocation for each asset class, the overall expected rate of return for the portfolio is developed considering the effects of active portfolio management and expenses paid from plan assets. The discount rate assumption was determined from a universe of high qualityhigh-quality corporate bonds. A settlement portfolio is selected and matched to the present value of the plan’s projected benefit
payments. To calculate pension expense for 2021,2024, the Company will use an expected long-term rate of return on plan assets of 6.60%7.00% for the Retirement Plan of International Paper, a discount rate of 2.60%5.10% and an assumed rate of compensation increase of 2.25%3.00%. The Company estimates that it will record net pension income of approximately $114$7 million for its U.S. defined benefit plans in 2021,2024, compared to expense of $32$94 million in 2020. The estimated decrease in net pension expense in 2020 is primarily due to higher return on assets and lower interest cost partially offset by higher amortization of actuarial losses and higher service cost.2023.
For non-U.S. pension plans, assumptions reflect economic assumptions applicable to each country.
The following illustrates the effect on pension expense for 20212024 of a 25 basis point decrease in the above assumptions:
| | | | | |
| In millions | 20212024 |
| Expense (Income): | |
| Discount rate | $ | 2712 | |
| Expected long-term rate of return on plan assets | 2821 | |
PLAN ASSETS
International Paper’s Board of Directors has appointed a Fiduciary Review Committee that is responsible for fiduciary oversight of the U.S. Pension Plan, approving investment policy and reviewing the management and control of plan assets. Pension Plan assets are invested to maximize returns within prudent levels of risk.
The Pension Plan maintains a strategic asset allocation policy that designates target allocations by asset class. Investments are diversified across classes and within each class to minimize the risk of large losses. Derivatives, including swaps, forward and futures contracts, may be used as asset class substitutes or for hedging or other risk management purposes. Periodic reviews are made of investment
policy objectives and investment manager performance. For non-U.S. plans, assets consist principally of common stock and fixed income securities.
International Paper’s U.S. pension allocations by type of fund at December 31, 20202023 and 20192022 and target allocations were as follows:
| | | | | | | | | | | |
| Asset Class | 2020 | 2019 | Target
Allocations |
| Equity accounts | 40 | % | 37 | % | 32% - 43% |
| Fixed income accounts | 48 | % | 50 | % | 44% - 56% |
| Real estate accounts | 7 | % | 8 | % | 5% - 11% |
| Other | 5 | % | 5 | % | 3% - 8% |
| Total | 100 | % | 100 | % | |
| | | | | | | | | | | |
| Asset Class | 2023 | 2022 | Target
Allocations |
| Hedging assets | 66 | % | 64 | % | 61% - 72% |
| Return seeking assets (a) | 34 | % | 36 | % | 28% - 39% |
| Total | 100 | % | 100 | % | |
(a) Return seeking assets include Real Estate (9% for both 2023 and 2022) and Private Equity (7% and 8% for 2023 and 2022, respectively).
The fair values of International Paper’s pension plan assets at December 31, 20202023 and 20192022 by asset class are shown below. Hedge funds disclosed in the following table are allocated to fixed income accountshedging assets for target allocation purposes.
| | | | | | | | | | | | | | |
| Fair Value Measurement at December 31, 2020 |
| Asset Class | Total | Quoted
Prices
in
Active
Markets
For
Identical
Assets
(Level 1) | Significant
Observable
Inputs
(Level 2) | Significant
Unobservable
Inputs
(Level 3) |
| In millions | | | | |
| Equities – domestic | $ | 1,806 | | $ | 1,037 | | $ | 769 | | $ | 0 | |
| Equities – international | 2,921 | | 2,181 | | 740 | | 0 | |
| Corporate bonds | 2,345 | | — | | 2,345 | | — | |
| Government securities | 3,377 | | — | | 3,377 | | — | |
| Mortgage backed securities | 133 | | — | | 133 | | — | |
| Other fixed income | (1,585) | | — | | (1,599) | | 14 | |
| Derivatives | 336 | | 342 | | — | | (6) | |
| Cash and cash equivalents | 210 | | 210 | | — | | — | |
| Other investments: | | | | |
| Hedge funds | 1,112 | | | | |
| Private equity | 563 | | | | |
| Real estate funds | 800 | | | | |
| Total Investments | $ | 12,018 | | $ | 3,770 | | $ | 5,765 | | $ | 8 | |
| | | | | | | | | | | | | | |
| Fair Value Measurement at December 31, 2023 |
| Asset Class | Total | Quoted
Prices
in
Active
Markets
For
Identical
Assets
(Level 1) | Significant
Observable
Inputs
(Level 2) | Significant
Unobservable
Inputs
(Level 3) |
| In millions | | | | |
| Equities | $ | 1,336 | | $ | 835 | | $ | 501 | | $ | — | |
| Fixed income | 4,691 | | — | | 4,684 | | 7 | |
| Derivatives | 71 | | — | | — | | 71 | |
| Cash and cash equivalents | 49 | | 49 | | — | | — | |
| Other investments: | | | | |
| Hedge funds | 1,293 | | | | |
| Private equity | 644 | | | | |
| Real estate funds | 752 | | | | |
| Total Investments | $ | 8,836 | | $ | 884 | | $ | 5,185 | | $ | 78 | |
| Fair Value Measurement at December 31, 2019 | | Fair Value Measurement at December 31, 2022 | | Fair Value Measurement at December 31, 2022 |
| Asset Class | Asset Class | Total | Quoted
Prices in
Active
Markets
For
Identical
Assets
(Level 1) | Significant
Observable
Inputs
(Level 2) | Significant
Unobservable
Inputs
(Level 3) | Asset Class | Total | Quoted
Prices in
Active
Markets
For
Identical
Assets
(Level 1) | Significant
Observable
Inputs
(Level 2) | Significant
Unobservable
Inputs
(Level 3) |
| In millions | In millions | | In millions | |
| Equities – domestic | $ | 1,613 | | $ | 965 | | $ | 648 | | $ | — | |
| Equities – international | 2,181 | | 1,599 | | 582 | | — | |
| Corporate bonds | 1,845 | | — | | 1,845 | | — | |
| Government securities | 2,659 | | — | | 2,659 | | — | |
| Mortgage backed securities | 1 | | — | | 1 | | — | |
| Other fixed income | (647) | | — | | (661) | | 14 | |
| Equities | |
| Fixed income | |
| Derivatives | Derivatives | (19) | | — | | 0 | | (19) | |
| Cash and cash equivalents | Cash and cash equivalents | 336 | | 336 | | 0 | | — | |
| Other investments: | Other investments: | |
| Hedge funds | Hedge funds | 902 | | |
| Hedge funds | |
| Hedge funds | |
| Private equity | |
| Private equity | |
| Private equity | Private equity | 522 | | |
| Real estate funds | Real estate funds | 772 | | |
| Real estate funds | |
| Real estate funds | |
| Total Investments | Total Investments | $ | 10,165 | | $ | 2,900 | | $ | 5,074 | | $ | (5) | |
| Total Investments | |
| Total Investments | |
In accordance with accounting standards, certain investments that are measured at NAV and are not classified in the fair value hierarchy.
| | | | | | | | | | | | | | |
| Other Investments at December 31, 2020 |
| Investment | Fair Value | Unfunded Commitments | Redemption Frequency | Remediation Notice Period |
| In millions | | | | |
| Hedge funds | 1,112 | | 0 | | Daily to annually | 1 - 100 days |
| Private equity | 563 | | 290 | | (a) | None |
| Real estate funds | 800 | | 210 | | Quarterly | 45 - 60 days |
| Total | $ | 2,475 | | $ | 500 | | | |
| | | | | | | | | | | | | | |
| Other Investments at December 31, 2023 |
| Investment | Fair Value | Unfunded Commitments | Redemption Frequency | Remediation Notice Period |
| In millions | | | | |
| Hedge funds | $ | 1,293 | | $ | 103 | | Quarterly to semi-annually | 45 - 60 days |
| Private equity | 644 | | 81 | | (a) | None |
| Real estate funds | 752 | | 94 | | Quarterly | 45 - 60 days |
| Total | $ | 2,689 | | $ | 278 | | | |
(a) A private equity fund investment ("partnership interest") is contractually locked up for the life of the private equity fund by the partnership agreement. Limited partners do not have the option to redeem partnership interests.
| Other Investments at December 31, 2019 | | Other Investments at December 31, 2022 | | Other Investments at December 31, 2022 |
| Investment | Investment | Fair Value | Unfunded Commitments | Redemption Frequency | Remediation Notice Period | Investment | Fair Value | Unfunded Commitments | Redemption Frequency | Remediation Notice Period |
| In millions | In millions | | In millions | |
| Hedge funds | Hedge funds | 902 | | 0 | | Daily to annually | 1 - 100 days | Hedge funds | $ | 1,319 | | $ | 120 | | Daily to annually | Daily to annually | 1 - 100 days |
| Private equity | Private equity | 522 | | 198 | | (a) | None | Private equity | 688 | | 126 | 126 | | (a) | (a) | None |
| Real estate funds | Real estate funds | 772 | | 147 | | Quarterly | 45 - 60 days | Real estate funds | 828 | | 129 | 129 | | Quarterly | Quarterly | 45 - 60 days |
| Total | Total | $ | 2,196 | | $ | 345 | | |
(a) A private equity fund investment ("partnership interest") is contractually locked up for the life of the private equity fund by the partnership agreement. Limited partners do not have the option to redeem partnership interests.
Equity securities consist primarily of publicly traded U.S. companies and international companies. Publicly traded equities are valued at the closing prices reported in the active market in which the individual securities are traded.
Fixed income consists of government securities, mortgage-backed securities, corporate bonds,
common collective funds and other fixed income investments. Government securities are valued by third-party pricing sources. Mortgage-backed security holdings consist primarily of agency-rated holdings. The fair value estimates for mortgage securities are calculated by third-party pricing sources chosen by the custodian’s price matrix. Corporate bonds are valued using either the yields currently available on comparable securities of issuers with similar credit ratings or using a discounted cash flows approach that utilizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks. Common collective funds are valued at the net asset value per share multiplied by the number of shares held as of the measurement date. Other fixed income investments of $(1,585) million and $(647) million at December 31, 2020 and 2019, respectively, primarily include reverse repurchase agreement obligations in which we have sold a security and have an agreement to repurchase the same or substantially the same security at a later date for a price specified in the agreement.
Derivative investments such as futures, forward contracts, options and swaps are used to help manage risks. Derivatives are generally employed as asset class substitutes (such as when employed in a portable alpha strategy), for managing asset/liability mismatches, or bona fide hedging or other
appropriate risk management purposes. Derivative instruments are generally valued by the investment managers or in certain instances by third-party pricing sources.
The following tables summarize derivative holdings as of December 31, 2023 and 2022, respectively:
| | | | | | | | | | | |
| Derivatives at December 31, 2023 |
| In millions | Gross Asset | Gross Liability | Total |
| Collateral | $ | 7 | | $ | (7) | | $ | — | |
| Credit Default Swap | 2 | | — | | 2 | |
| Interest Rate Swap | 4 | | — | | 4 | |
| Bond/Equity Swap | 65 | | — | | 65 | |
| Total | $ | 78 | | $ | (7) | | $ | 71 | |
| | | | | | | | | | | |
| Derivatives at December 31, 2022 |
| In millions | Gross Asset | Gross Liability | Total |
| Collateral | $ | 9 | | $ | — | | $ | 9 | |
| Credit Default Swap | 1 | | — | | 1 | |
| Interest Rate Swap | 16 | | — | | 16 | |
| Bond/Equity Swap | 3 | | — | | 3 | |
| Options | 6 | | (10) | | (4) | |
| Total | $ | 35 | | $ | (10) | | $ | 25 | |
Hedge funds are investment structures for managing private, loosely-regulated investment pools that can pursue a diverse array of investment strategies with a
wide range of different securities and derivative instruments. These investments are made through funds-of-funds (commingled, multi-manager fund structures) and through direct investments in individual hedge funds. Hedge funds are primarily valued by each fund’s third-party administrator based upon the valuation of the underlying securities and instruments and primarily by applying a market or income valuation methodology as appropriate depending on the specific type of security or instrument held. Funds-of-funds are valued based upon the net asset values of the underlying investments in hedge funds.
Private equity consists of interests in partnerships that invest in U.S. and non-U.S. debt and equity securities. Partnership interests are valued using the most recent general partner statement of fair value, updated for any subsequent partnership interest cash flows.
Real estate funds include commercial properties, land and timberland, and generally include, but are not limited to, retail, office, industrial, multifamily and hotel properties. Real estate fund values are primarily reported by the fund manager and are based on
valuation of the underlying investments which include inputs such as cost, discounted cash flows, independent appraisals and market based comparable data.
The following is a reconciliation of the assets that are classified using significant unobservable inputs (Level 3) at December 31, 2020.2023:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
| | | | | | | | | | | | |
| In millions | | Other
fixed
income | Derivatives | Total |
| Beginning balance at December 31, 2018 | | $ | 13 | | $ | 98 | | $ | 111 | |
| Actual return on plan assets: | | | | |
| Relating to assets still held at the reporting date | | 1 | | (127) | | (126) | |
| Relating to assets sold during the period | | 0 | | 314 | | 314 | |
| Purchases, sales and settlements | | 0 | | (304) | | (304) | |
| Transfers in and/or out of Level 3 | | 0 | | 0 | | 0 | |
| Ending balance at December 31, 2019 | | $ | 14 | | $ | (19) | | $ | (5) | |
| Actual return on plan assets: | | | | |
| Relating to assets still held at the reporting date | | 1 | | 21 | | 22 | |
| Relating to assets sold during the period | | (1) | | 268 | | 267 | |
| Purchases, sales and settlements | | 0 | | (276) | | (276) | |
| Transfers in and/or out of Level 3 | | 0 | | 0 | | 0 | |
| Ending balance at December 31, 2020 | | $ | 14 | | $ | (6) | | $ | 8 | |
| | | | | | | | | | | | |
| In millions | | Other
fixed
income | Derivatives | Total |
| Beginning balance at December 31, 2021 | | $ | 16 | | $ | (21) | | $ | (5) | |
| Actual return on plan assets: | | | | |
| Relating to assets still held at the reporting date | | (9) | | 38 | | 29 | |
| Relating to assets sold during the period | | 10 | | (189) | | (179) | |
| Purchases, sales and settlements | | (10) | | 197 | | 187 | |
| Transfers in and/or out of Level 3 | | — | | — | | — | |
| Ending balance at December 31, 2022 | | $ | 7 | | $ | 25 | | $ | 32 | |
| Actual return on plan assets: | | | | |
| Relating to assets still held at the reporting date | | — | | 57 | | 57 | |
| Relating to assets sold during the period | | — | | 48 | | 48 | |
| Purchases, sales and settlements | | — | | (59) | | (59) | |
| Transfers in and/or out of Level 3 | | — | | — | | — | |
| Ending balance at December 31, 2023 | | $ | 7 | | $ | 71 | | $ | 78 | |
FUNDING AND CASH FLOWS
The Company’s funding policy for the Pension Plan is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plans, tax deductibility, cash flow generated by the Company, and other factors. The Company continually reassesses the amount and timing of any discretionary contributions. No voluntary contributions were made in 2018, 20192021, 2022 or 2020.2023. Generally, International Paper’s non-U.S. pension plans are funded using the projected benefit as a target, except in certain countries where funding of benefit plans is not required.
At December 31, 2020,2023, projected future pension benefit payments, excluding any termination benefits, were as follows:
| | | | | |
| In millions | |
| 2021 | $ | 580 | |
| 2022 | 598 | |
| 2023 | 612 | |
| 2024 | 624 | |
| 2025 | 635 | |
| 2026-2030 | 3,271 | |
| | | | | |
| In millions | |
| 2024 | $ | 620 | |
| 2025 | 632 | |
| 2026 | 639 | |
| 2027 | 639 | |
| 2028 | 639 | |
| 2029-2033 | 3,175 | |
OTHER U.S. PLANS
International Paper sponsors the International Paper Company Salaried Savings Plan and the International Paper Company Hourly Savings Plan, both of which
are tax-qualified defined contribution 401(k) savings plans. Substantially all U.S. salaried and certain hourly employees are eligible to participate and may make elective deferrals to such plans to save for retirement. International Paper makes matching contributions to participant accounts on a specified percentage of employee deferrals as determined by the provisions of each plan. The Company makes Retirement Savings Account contributions equal to a percentage of an eligible employee’s pay. Beginning in 2019, as a result of the freeze for salaried employees under the Pension Plan, all salaried employees are eligible for the contribution to the Retirement Savings Account.
The Company also sponsors the International Paper Company Deferred Compensation Savings Plan, which is an unfunded nonqualified defined contribution plan. This plan permits eligible employees to continue to make deferrals and receive company matching contributions (and Retirement Savings Account contributions) when their contributions to the International Paper Salaried
Savings Plan are stopped due to limitations under U.S. tax law. Participant deferrals and companyCompany contributions are not invested in a separate trust, but are paid directly from International Paper’s general assets at the time benefits become due and payable.
Company contributions to the plans totaled approximately $154$160 million, $172$159 million and $125$172 million for the plan years endingended in 2020, 20192023, 2022 and 2018,2021, respectively.
U.S. POSTRETIREMENT BENEFITS
International Paper provides certain retiree health care and life insurance benefits covering certain U.S. salaried and hourly employees. These employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. International Paper does not fund these benefits prior to payment and has the right to modify or terminate certain of these plans in the future.
In addition to the U.S. plan, certain Brazilian and Moroccan employees are eligible for retiree health care and life insurance benefits.
The components of postretirement benefit expense in 2020, 20192023, 2022 and 20182021 were as follows:
| | In millions | In millions | 2020 | 2019 | 2018 | In millions | 2023 | 2022 | 2021 |
| U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| U.S.
Plans | | | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| Service cost | Service cost | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1 | | $ | 1 | | $ | 0 | |
| Interest cost | Interest cost | 7 | | 2 | | 8 | | 1 | | 8 | | 2 | |
| Actuarial loss | Actuarial loss | 5 | | 1 | | 4 | | 2 | | 9 | | 2 | |
| Amortization of prior service credits | Amortization of prior service credits | (1) | | (2) | | (2) | | (3) | | (2) | | (3) | |
| Net postretirement expense | Net postretirement expense | $ | 11 | | $ | 1 | | $ | 10 | | $ | 1 | | $ | 16 | | $ | 1 | |
International Paper evaluates its actuarial assumptions annually as of December 31 (the measurement date) and considers changes in these long-term factors based upon market conditions and the requirements of employers’ accounting for postretirement benefits other than pensions. The discount rate assumption was determined based on a hypothetical settlement portfolio selected from a universe of high qualityhigh-quality corporate bonds.
The discount rates used to determine net U.S. and non-U.S. postretirement benefit cost for the years ended December 31, 2020, 20192023, 2022 and 20182021 were as follows:
| | | | | | | | | | | | | | | | | | | | |
| 2020 | 2019 | 2018 |
| U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| Discount rate | 3.30 | % | 7.15 | % | 4.20 | % | 9.10 | % | 3.50 | % | 9.38 | % |
| | | | | | | | | | | | | | | | | | | | |
| 2023 | 2022 | 2021 |
| U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| Discount rate | 5.50 | % | 5.70 | % | 2.90 | % | 5.20 | % | 2.50 | % | 6.91 | % |
The weighted average assumptions used to determine the benefit obligation at December 31, 20202023 and 20192022 were as follows:
| | 2020 | 2019 |
| U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| 2023 | | | 2023 | 2022 |
| U.S.
Plans | | | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| Discount rate | Discount rate | 2.50 | % | 6.91 | % | 3.30 | % | 7.15 | % | Discount rate | 5.20 | % | 6.10 | % | 5.50 | % | 5.70 | % |
| Health care cost trend rate assumed for next year | Health care cost trend rate assumed for next year | 6.50 | % | 8.56 | % | 6.75 | % | 9.57 | % | Health care cost trend rate assumed for next year | 7.00 | % | 4.00 | % | 7.25 | % | 4.00 | % |
| Rate that the cost trend rate gradually declines to | Rate that the cost trend rate gradually declines to | 5.00 | % | 4.23 | % | 5.00 | % | 4.78 | % | Rate that the cost trend rate gradually declines to | 5.00 | % | 4.00 | % | 5.00 | % | 4.00 | % |
| Year that the rate reaches the rate it is assumed to remain | Year that the rate reaches the rate it is assumed to remain | 2026 | 2031 | 2026 | 2030 | Year that the rate reaches the rate it is assumed to remain | 2032 | 2023 | 2032 | 2023 |
The plans are only funded in an amount equal to benefits paid. The following table presents the changes in benefit obligation and plan assets for 20202023 and 2019:2022:
| | In millions | In millions | 2020 | 2019 | In millions | 2023 | 2022 |
| U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| U.S.
Plans | | | U.S.
Plans | Non-
U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| Change in projected benefit obligation: | Change in projected benefit obligation: | |
| Benefit obligation, January 1 | |
| Benefit obligation, January 1 | |
| Benefit obligation, January 1 | Benefit obligation, January 1 | $ | 214 | | $ | 31 | | $ | 213 | | $ | 24 | |
| Service cost | Service cost | 0 | | 0 | | 0 | | 1 | |
| Interest cost | Interest cost | 7 | | 2 | | 8 | | 1 | |
| Participants’ contributions | Participants’ contributions | 3 | | 0 | | 4 | | 0 | |
| Actuarial (gain) loss | Actuarial (gain) loss | 4 | | 1 | | 20 | | 8 | |
| Benefits paid | Benefits paid | (28) | | (1) | | (32) | | (2) | |
| Less: Federal subsidy | Less: Federal subsidy | 1 | | 0 | | 1 | | 0 | |
| Divestiture | 0 | | (7) | | 0 | | 0 | |
| Currency Impact | Currency Impact | 0 | | (6) | | 0 | | (1) | |
| Benefit obligation, December 31 | Benefit obligation, December 31 | $ | 201 | | $ | 20 | | $ | 214 | | $ | 31 | |
| Change in plan assets: | Change in plan assets: | |
| Fair value of plan assets, January 1 | |
| Fair value of plan assets, January 1 | |
| Fair value of plan assets, January 1 | Fair value of plan assets, January 1 | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| Company contributions | Company contributions | 25 | | 1 | | 28 | | 2 | |
| Participants’ contributions | Participants’ contributions | 3 | | 0 | | 4 | | 0 | |
| Benefits paid | Benefits paid | (28) | | (1) | | (32) | | (2) | |
| Fair value of plan assets, December 31 | Fair value of plan assets, December 31 | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| Funded status, December 31 | Funded status, December 31 | $ | (201) | | $ | (20) | | $ | (214) | | $ | (31) | |
| Amounts recognized in the consolidated balance sheet under ASC 715: | Amounts recognized in the consolidated balance sheet under ASC 715: | |
| Current liability | Current liability | $ | (18) | | $ | 0 | | $ | (21) | | $ | (1) | |
| Current liability | |
| Current liability | |
| Non-current liability | Non-current liability | (183) | | (20) | | (193) | | (30) | |
| | | $ | (201) | | $ | (20) | | $ | (214) | | $ | (31) | |
| Amounts recognized in accumulated other comprehensive income under ASC 715 (pre-tax): | |
| Amounts recognized in accumulated other comprehensive income (loss) under ASC 715 (pre-tax): | |
| Net actuarial loss (gain) | |
| Net actuarial loss (gain) | |
| Net actuarial loss (gain) | Net actuarial loss (gain) | $ | 46 | | $ | 12 | | $ | 47 | | $ | 19 | |
| Prior service credit | Prior service credit | 0 | | (12) | | (2) | | (18) | |
| | | $ | 46 | | $ | 0 | | $ | 45 | | $ | 1 | |
The non-current portion of the liability is included with the postemployment liability in the accompanying consolidated balance sheet under Postretirement and postemployment benefit obligation.
The components of the $1$8 million and ($1)$0 million change in the amounts recognized in OCIother comprehensive income ("OCI") during 20202023 for U.S. and non-U.S. plans, respectively, consisted of:
| | | | | | | | |
| In millions | U.S.
Plans | Non-
U.S.
Plans |
| Current year actuarial (gain) loss | $ | 5 | | $ | 1 | |
| Amortization of actuarial (loss) gain | (5) | | (1) | |
| Current year prior service cost | 0 | | 0 | |
| Amortization of prior service credit | 1 | | 2 | |
| Divestitures | 0 | | (2) | |
| Currency impact | 0 | | (1) | |
| | $ | 1 | | $ | (1) | |
| | | | | | | | |
| In millions | U.S.
Plans | Non-
U.S.
Plans |
| Current year actuarial (gain) loss | $ | 8 | | $ | — | |
| Amortization of actuarial (loss) gain | — | | — | |
| $ | 8 | | $ | — | |
The portion of the change in the funded status that was recognized in net periodic benefit cost and OCI for the U.S. plans was $12$(2) million, $29$44 million and $(25)$27 million in 2020, 20192023, 2022 and 2018,2021, respectively. The portion of the change in funded status for the non-U.S. plans was $0 million, $9$0 million, and $5$1 million in 2020, 20192023, 2022 and 2018,2021, respectively.
At December 31, 2020,2023, estimated total future postretirement benefit payments, net of participant contributions and estimated future Medicare Part D subsidy receipts, were as follows:
| | | | | | | | | | | |
| In millions | Benefit
Payments | Subsidy Receipts | Benefit
Payments |
| U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| 2021 | $ | 20 | | $ | 1 | | $ | 0 | |
| 2022 | 18 | | 1 | | 0 | |
| 2023 | 17 | | 1 | | 1 | |
| 2024 | 16 | | 1 | | 1 | |
| 2025 | 15 | | 1 | | 1 | |
| 2026 – 2030 | 64 | | 4 | | 5 | |
| | | | | | | | | | | |
| In millions | Benefit
Payments | Subsidy Receipts | Benefit
Payments |
| U.S.
Plans | U.S.
Plans | Non-
U.S.
Plans |
| 2024 | $ | 14 | | $ | 1 | | $ | — | |
| 2025 | 13 | | 1 | | — | |
| 2026 | 12 | | 1 | | — | |
| 2027 | 11 | | 1 | | — | |
| 2028 | 11 | | 1 | | — | |
| 2029– 2033 | 45 | | 2 | | 1 | |
International Paper currently has anoperates under its Amended and Restated 2009 Incentive Compensation Plan (ICP)("ICP"). The ICP authorizes grants of restricted stock, restricted or deferred stock units ("RSUs"), performance awards payable in cash or stock upon the attainment of specified performance goals
("PSUs"), dividend equivalents, stock options, stock appreciation rights, other stock-based awards, and cash-based awards at the discretion of the Management Development and Compensation Committee of the Board of Directors (the "Committee""MDCC") that. The MDCC administers the ICP.
Additionally, restricted stock, which may be deferred into RSU’s,RSUs, may be awarded under a Restricted Stock and Deferred Compensation Plan for Non-Employee Directors.
PERFORMANCE SHARELONG-TERM INCENTIVE PLAN
UnderEffective January 1, 2023, the MDCC renamed the Performance Share Plan ("PSP"), to the Long-Term Incentive Plan ("LTIP") and began incorporating RSUs into its annual grant process as a complement to PSUs to better align with market and aid in our recruitment and retention efforts. Under the LTIP, contingent awards of International Paper common stock are granted by the Committee. MDCC.
The PSPmaximum aggregate number of shares of the Company’s common stock that may be issued pursuant to awards under the ICP shall not exceed 15.4 million shares. Shares for which payment is in cash, including the shares withheld to cover associate payroll taxes, as well as shares that expire, terminate, or are canceled or forfeited, may be awarded,or granted again under the ICP.
Performance Share Units
PSU awards are earned over a three-year period. PSP awards are earnedperiod based on the achievement of definedpre-established performance goals of Return on Invested Capital ("ROIC") measured against our internal benchmark and ranking ofour relative performance in Total Shareholder Return ("TSR") compared to the TSR peer group of companies.group. The 2018-2020, 2019-20212021-2023, 2022-2024 and 2020-20222023-2025 Awards are weighted 50% ROIC and 50% TSR for all participants. The ROIC component of the PSPPSU awards is valued at the 20-trading day average closing stock price on the dayimmediately prior to the grant date. As the ROIC component contains a performance condition, compensation expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable number of awards expected to vest. The TSR component of the PSPPSU awards is valued using the same methodology as the RSUs but then adjusted using a factor derived from a Monte Carlo simulation as the TSR component contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on the expected term of the award, a risk-free rate, expected dividends, and the expected volatility for the Company and its competitors. The expected term is estimated based on the vesting period of the awards, the risk-free rate is based on the yield on U.S. Treasury securities matching the vesting period, and the volatility is based on the Company’s historical volatility over the expected term. PSP grantsPSUs are madepayable in performance-based restricted stock units.cash or shares at the Company's discretion.
Restricted Stock Units
Time-based RSU awards granted under the LTIP are expected to vest in three equal installments commencing on February 1st following the first anniversary of the grant date over a 3-year service period, subject to forfeiture and transfer restrictions. RSUs are payable in cash or shares at the Company’s discretion.
Generally, the requisite service period is the vesting period. In the case of retirement (eligibility for which is based on the associate's age and years of service as provided in the relevant award agreement), awards vest pro-rata based on length of service during the award period, subject to continued employment and paid upon termination.
Dividend equivalents are generally accrued on PSUs and RSUs outstanding as of the record date. These dividend equivalents are paid only on PSUs and RSUs that ultimately vest.
The following table sets forth the assumptions used to determine compensation cost for the market condition component of the PSPLTIP plan:
| | | | | |
| | Twelve Months Ended December 31, 20202023 |
| Expected volatility | 22.81%35.97% - 24.60%37.11% |
| Risk-free interest rate | 1.61%0.17% - 2.44%4.18% |
The following summarizes PSPLTIP activity for the three years ended December 31, 2020:2023:
| | Share/Units | Weighted
Average
Grant Date
Fair Value |
| Outstanding at December 31, 2017 | 5,799,884 | | $36.17 | |
| Share/Units | | | Share/Units | Weighted
Average
Grant Date
Fair Value |
| Outstanding at December 31, 2020 | |
| Granted | Granted | 1,751,235 | | 62.97 | |
| Shares issued | Shares issued | (1,588,642) | | 53.67 | |
| Forfeited | Forfeited | (196,000) | | 56.57 | |
| Outstanding at December 31, 2018 | 5,766,477 | | 38.79 | |
| Outstanding at December 31, 2021 | |
| Granted | Granted | 2,353,613 | | 43.49 | |
| Shares issued | Shares issued | (2,367,135) | | 36.79 | |
| Forfeited | Forfeited | (238,227) | | 50.64 | |
| Outstanding at December 31, 2019 | 5,514,728 | | 41.14 | |
| Granted | 2,171,385 | | 49.15 | |
| Shares issued | (1,221,950) | | 51.70 | |
| Outstanding at December 31, 2022 | |
| Granted - LTIP PSU | |
| Granted - LTIP RSU | |
| Shares issued - LTIP PSU | |
| Shares issued - LTIP RSU | |
| Forfeited | Forfeited | (844,138) | | 51.70 | |
| Outstanding at December 31, 2020 | 5,620,025 | | $40.36 | |
| Outstanding at December 31, 2023 | |
RESTRICTED STOCKRECOGNITION AWARD PROGRAMSPROGRAM
The Recognition Award Program ("RA Program") is service-based Restricted Stock Award program ("RSA"),and designed for recruitment, retention
and special recognition purposes,purposes. It provides for awards of restricted stockRSUs to key employees.
The following summarizes the activity of the RSA programRA Program for the three years ended December 31, 2020:2023:
| | Shares | Weighted
Average
Grant Date
Fair Value |
| Outstanding at December 31, 2017 | 166,300 | | $48.63 | |
| Shares | | | Shares | Weighted
Average
Grant Date
Fair Value |
| Outstanding at December 31, 2020 | |
| Granted | Granted | 66,100 | | 51.43 | |
| Shares issued | Shares issued | (100,289) | | 48.44 | |
| Forfeited | Forfeited | 0 | | 0 | |
| Outstanding at December 31, 2018 | 132,111 | | 50.17 | |
| Outstanding at December 31, 2021 | |
| Granted | Granted | 87,910 | | 43.70 | |
| Shares issued | Shares issued | (52,021) | | 48.90 | |
| Forfeited | Forfeited | (7,300) | | 45.10 | |
| Outstanding at December 31, 2019 | 160,700 | | 47.27 | |
| Outstanding at December 31, 2022 | |
| Granted | Granted | 82,228 | | 40.12 | |
| Shares issued | Shares issued | (83,053) | | 44.25 | |
| Forfeited | Forfeited | (33,800) | | 46.43 | |
| Outstanding at December 31, 2020 | 126,075 | | $44.83 | |
| Outstanding at December 31, 2023 | |
At December 31, 2020, 20192023, 2022 and 20182021 a total of 8.55.5 million, 9.87.3 million and 11.97.7 million shares, respectively, were available for grant under the ICP.
Stock-based compensation expense and related income tax benefits were as follows:
| | In millions | In millions | 2020 | 2019 | 2018 | In millions | 2023 | 2022 | 2021 |
| Total stock-based compensation expense (included in selling and administrative expense) | Total stock-based compensation expense (included in selling and administrative expense) | $ | 72 | | $ | 130 | | $ | 135 | |
| Income tax benefits related to stock-based compensation | Income tax benefits related to stock-based compensation | 17 | | 30 | | 16 | |
At December 31, 2020, $662023, $58 million of compensation cost, net of estimated forfeitures, related to unvested restricted performance shares, executive continuity awards and restricted stock attributable to future performance had not yet been recognized. This amount will be recognized in expense over a weighted-average period of 1.61.4 years.
announced spin-off of its Printing Papers business into a new, publicly-traded company, Sylvamo, listed on the New York Stock Exchange as SLVM. Additionally, on August 6, 2021, the Company completed the sale of its Kwidzyn, Poland mill which included the pulp and paper mill in Kwidzyn and supporting functions. As a result of the Sylvamo spin-off and the sale of Kwidzyn, the Company no longer has a Printing Papers segment, and all prior year amounts have been adjusted to reflect the Sylvamo and Kwidzyn businesses as a discontinued operation. Both segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the Forest Products industry.
Business segment operating profits are used by International Paper’s management to measure the earnings performance of its businesses. Management believes that this measure allows a better understanding of trends in costs, operating efficiencies, prices and volumes. Business segment operating profits are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of noncontrolling interests,less than wholly owned subsidiaries, excluding interest expense, net, corporate items, net, corporate net special items, business net special items and non-operating pension expense.
External sales by major product is determined by aggregating sales from each segment based on similar products or services. External sales are defined as those that are made to parties outside International Paper’s consolidated group, whereas sales by segment in the Net Sales table are determined using a management approach and include intersegment sales.
INFORMATION BY BUSINESS SEGMENT
Net Sales
| | In millions | In millions | 2020 | | 2019 | | 2018 | In millions | 2023 | | 2022 | | 2021 |
| Industrial Packaging | Industrial Packaging | $ | 15,033 | | | $ | 15,326 | | | $ | 15,900 | |
| Global Cellulose Fibers | Global Cellulose Fibers | 2,319 | | | 2,551 | | | 2,819 | |
| Printing Papers | 3,036 | | | 4,291 | | | 4,375 | |
| Corporate and Intersegment Sales | 192 | | | 208 | | | 212 | |
| | Corporate and Intersegment Sales (a) | |
| Corporate and Intersegment Sales (a) | |
| Corporate and Intersegment Sales (a) | |
| Net Sales | Net Sales | $ | 20,580 | | | $ | 22,376 | | | $ | 23,306 | |
Operating Profit (Loss)
| | In millions | In millions | 2020 | | 2019 | | 2018 | In millions | 2023 | | 2022 | | 2021 |
| Industrial Packaging | Industrial Packaging | $ | 1,819 | | | $ | 2,076 | | | $ | 2,277 | |
| Global Cellulose Fibers | Global Cellulose Fibers | (237) | | | (6) | | | 262 | |
| Printing Papers | 228 | | | 529 | | | 543 | |
| Business Segment Operating Profit | Business Segment Operating Profit | 1,810 | | | 2,599 | | | 3,082 | |
| | Earnings (loss) from continuing operations before income taxes and equity earnings | Earnings (loss) from continuing operations before income taxes and equity earnings | 650 | | | 1,604 | | | 1,781 | |
| Earnings (loss) from continuing operations before income taxes and equity earnings | |
| Earnings (loss) from continuing operations before income taxes and equity earnings | |
| Interest expense, net | Interest expense, net | 444 | | | 491 | | | 536 | |
| Noncontrolling interests adjustment (a) | 0 | | | 3 | | | (10) | |
| Corporate expenses, net | (7) | | | 54 | | | 67 | |
| Adjustment for less than wholly owned subsidiaries (b) | |
| Corporate expenses, net (a) | |
| Corporate net special items | Corporate net special items | 274 | | | 104 | | | 9 | |
| Business net special items | Business net special items | 490 | | | 307 | | | 205 | |
| Non-operating pension (income) expense | Non-operating pension (income) expense | (41) | | | 36 | | | 494 | |
| $ | 1,810 | | | $ | 2,599 | | | $ | 3,082 | |
| $ | |
Business Net Special Items
| | | | | | | | | | | | | | | | | |
| In millions | 2020 | | 2019 | | 2018 |
| Industrial Packaging | $ | 475 | | | $ | 78 | | | $ | 184 | |
| Global Cellulose Fibers | 5 | | | 68 | | | 11 | |
| Printing Papers | 10 | | | 161 | | | 10 | |
| Business Net Special Items | $ | 490 | | | $ | 307 | | | $ | 205 | |
Assets
| | In millions | In millions | 2020 | | 2019 | In millions | 2023 | | 2022 |
| Industrial Packaging | Industrial Packaging | $ | 15,976 | | | $ | 16,338 | |
| Global Cellulose Fibers | Global Cellulose Fibers | 3,507 | | | 3,733 | |
| Printing Papers | 2,855 | | | 3,476 | |
| Corporate and other | Corporate and other | 9,380 | | | 9,924 | |
| Assets | Assets | $ | 31,718 | | | $ | 33,471 | |
Capital Spending
| | In millions | In millions | 2020 | | 2019 | | 2018 | In millions | 2023 | | 2022 | | 2021 |
| Industrial Packaging | Industrial Packaging | $ | 525 | | | $ | 922 | | | $ | 1,061 | |
| Global Cellulose Fibers | Global Cellulose Fibers | 97 | | | 162 | | | 183 | |
| Printing Papers | 116 | | | 172 | | | 303 | |
| Subtotal | Subtotal | 738 | | | 1,256 | | | 1,547 | |
| Corporate and other | Corporate and other | 13 | | | 20 | | | 25 | |
| Capital Spending | Capital Spending | $ | 751 | | | $ | 1,276 | | | $ | 1,572 | |
Depreciation, Amortization and Cost of Timber Harvested
| | In millions | In millions | 2020 | | 2019 | | 2018 | In millions | 2023 | | 2022 | | 2021 |
| Industrial Packaging | Industrial Packaging | $ | 826 | | | $ | 794 | | | $ | 803 | |
| Global Cellulose Fibers | Global Cellulose Fibers | 271 | | | 263 | | | 262 | |
| Printing Papers | 186 | | | 244 | | | 258 | |
| Corporate | Corporate | 4 | | | 5 | | | 5 | |
| Depreciation and Amortization | Depreciation and Amortization | $ | 1,287 | | | $ | 1,306 | | | $ | 1,328 | |
External Sales By Major Product
| | In millions | In millions | 2020 | | 2019 | | 2018 | In millions | 2023 | | 2022 | | 2021 |
| Industrial Packaging | Industrial Packaging | $ | 14,983 | | | $ | 15,259 | | | $ | 15,828 | |
| Global Cellulose Fibers | Global Cellulose Fibers | 2,317 | | | 2,545 | | | 2,810 | |
| Printing Papers | 3,016 | | | 4,284 | | | 4,359 | |
| Other | 264 | | | 288 | | | 309 | |
| Other (c) | |
| Net Sales | Net Sales | $ | 20,580 | | | $ | 22,376 | | | $ | 23,306 | |
INFORMATION BY GEOGRAPHIC AREA
Net Sales (b)(d)
| | In millions | In millions | 2020 | | 2019 | | 2018 | In millions | 2023 | | 2022 | | 2021 |
| United States (c) | $ | 16,147 | | | $ | 16,948 | | | $ | 17,609 | |
| United States (e) | |
| EMEA | EMEA | 2,920 | | | 3,258 | | | 3,321 | |
| Pacific Rim and Asia | Pacific Rim and Asia | 202 | | | 415 | | | 605 | |
| Americas, other than U.S. | Americas, other than U.S. | 1,311 | | | 1,755 | | | 1,771 | |
| Net Sales | Net Sales | $ | 20,580 | | | $ | 22,376 | | | $ | 23,306 | |
Long-Lived Assets (d)(f)
| | In millions | In millions | 2020 | | 2019 | In millions | 2023 | | 2022 |
| United States | United States | $ | 10,221 | | | $ | 10,706 | |
| EMEA | EMEA | 1,280 | | | 1,368 | |
| Americas, other than U.S. | Americas, other than U.S. | 1,027 | | | 1,321 | |
| Long-Lived Assets | Long-Lived Assets | $ | 12,528 | | | $ | 13,395 | |
(a)Includes sales of $44 million in 2021 and operating profit (losses) of $9 million in 2021, from previously divested businesses. There were no sales or operating profit (losses) from previously divested businesses in 2022 and 2023.
(b)Operating profits for industry segments include each segment’s percentage share of the profits of subsidiaries included in that segment that are less than wholly-owned. The pre-tax noncontrolling interestsearnings for these subsidiaries is added here to present consolidated earnings from continuing operations before income taxes and equity earnings.
(b)(c)Includes $44 million in 2021 from previously divested businesses.
(d)Net sales are attributed to countries based on the location of the seller.
(c)(e)Export sales to unaffiliated customers were $2.5 billion in 2020, $2.7 billion in 2019 and $3.12023, $3.2 billion in 2018.2022 and $2.6 billion in 2021.
(d)(f)Long-Lived Assets includes Forestlands and Plants, Properties and Equipment, net.
SALE OF KWIDZYN MILL
On February 12, 2021, the Company entered into an agreement to sell our Kwidzyn, Poland mill for €670 million (approximately $812 million) in cash, subject to final working capital and net debt adjustments. The business includes the pulp and paper mill in Kwidzyn and supporting functions. The transaction is expected to close in the fourth quarter of 2021, subject to customary closing conditions and regulatory approvals.
On December 3, 2020, the Company announced its intention to spin off its Printing Papers business into a standalone, publicly-traded company in order to focus on its corrugated packaging and absorbent fibers businesses. The sale of Kwidzyn provides an opportunity for International Paper to achieve a premium value and significant incremental cash proceeds, but otherwise does not change its plans for the proposed spin-off.
GRAPHIC PACKAGING MONETIZATION
On February 16, 2021, the Company exchanged 15,307,000 units of the aggregate units owned by the Company for 15,307,000 shares of Graphic Packaging stock. The Company sold the shares in open market transactions for approximately $247 million. Additionally, on February 16, 2021, Graphic Packaging repurchased 9,281,316 units owned by the Company for an aggregate price of $150 million. The Company expects to recognize a gain on these two transactions and related tax expense in the first quarter 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions, except per share amounts and stock prices | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | Year | |
| 2020 | | | | | | | | | | |
| Net sales | $ | 5,352 | | | $ | 4,866 | | | $ | 5,123 | | | $ | 5,239 | | | $ | 20,580 | | |
| Earnings (loss) from continuing operations before income taxes and equity earnings | (16) | | (a) | 261 | | (a) | 282 | | (a) | 123 | | (a) | 650 | | (a) |
| Net earnings (loss) attributable to International Paper Company | (141) | | (a-b) | 266 | | (a-b) | 204 | | (a-b) | 153 | | (a-b) | 482 | | (a-b) |
| Basic earnings (loss) per share attributable to International Paper Company common shareholders: | (0.36) | | | 0.67 | | | 0.52 | | | 0.39 | | | 1.23 | | |
| Diluted earnings (loss) per share attributable to International Paper Company common shareholders: | (0.36) | | | 0.67 | | | 0.52 | | | 0.39 | | | 1.22 | | |
| Dividends per share of common stock | 0.5125 | | | 0.5125 | | | 0.5125 | | | 0.5125 | | | 2.0500 | | |
| 2019 | | | | | | | | | | |
| Net sales | $ | 5,643 | | | $ | 5,667 | | | $ | 5,568 | | | $ | 5,498 | | | $ | 22,376 | | |
| Earnings (loss) from continuing operations before income taxes and equity earnings | 418 | | (c) | 334 | | (c) | 452 | | (c) | 400 | | (c) | 1,604 | | (c) |
| Net earnings (loss) attributable to International Paper Company | 424 | | (c-d) | 292 | | (c-e) | 344 | | (c-e) | 165 | | (c-d) | 1,225 | | (c-e) |
| Basic earnings (loss) per share attributable to International Paper Company common shareholders: | 1.06 | | | 0.74 | | | 0.88 | | | 0.42 | | | 3.10 | | |
| Diluted earnings (loss) per share attributable to International Paper Company common shareholders: | 1.05 | | | 0.73 | | | 0.87 | | | 0.42 | | | 3.07 | | |
| Dividends per share of common stock | 0.5000 | | | 0.5000 | | | 0.5000 | | | 0.5125 | | | 2.0125 | | |
Note: International Paper's common shares (symbol: IP) are listed on the New York Stock Exchange.
Note: Since basic and diluted earnings per share are computed independently for each period and category, full year per share amounts may not equal the sum of the four quarters.
Footnotes to Interim Financial Results
(a)Includes the following pre-tax charges (gains):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 |
| In millions | | Q1 | | Q2 | | Q3 | | Q4 |
| Brazil Packaging impairment | | $ | 344 | | | $ | 8 | | | $ | (4) | | | $ | 0 | |
| India investment | | 17 | | | (6) | | | — | | | — | |
| Asbestos litigation reserve adjustment | | — | | | 43 | | | — | | | — | |
| Environmental remediation reserve adjustments | | 41 | | | — | | | 7 | | | — | |
| Gain on sale of portion of equity investment in Graphic Packaging | | (33) | | | — | | | — | | | — | |
| Abandoned property removal | | 9 | | | 5 | | | — | | | — | |
| Riverdale mill conversion accelerated depreciation | | 1 | | | — | | | — | | | — | |
| Debt extinguishment costs | | 8 | | | 18 | | | 105 | | | 65 | |
| EMEA Packaging impairment | | — | | | — | | | — | | | 123 | |
| Printing Papers business spin-off costs | | — | | | — | | | — | | | 9 | |
| Other items | | (3) | | | 0 | | | 1 | | | 4 | |
| Non-operating pension expense | | (6) | | | (14) | | | (11) | | | (10) | |
| Total | | $ | 378 | | | $ | 54 | | | $ | 98 | | | $ | 191 | |
(b)Includes the following tax expenses (benefits):
| | | | | | | | | | | | | | | | | | | | | | | |
| 2020 |
| In millions | Q1 | | Q2 | | Q3 | | Q4 |
| Tax benefit related to settlement of tax audits | $ | — | | | $ | — | | | $ | — | | | $ | (32) | |
| Tax impact of other special items | (12) | | | (18) | | | (26) | | | (18) | |
| Tax impact of non-operating pension expense | 1 | | | 3 | | | 4 | | | 2 | |
| Total | $ | (11) | | | $ | (15) | | | $ | (22) | | | $ | (48) | |
(c)Includes the following pre-tax charges (gains):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2019 |
| In millions | | Q1 | | Q2 | | Q3 | | Q4 |
| India impairment | | $ | — | | | $ | 152 | | | $ | 8 | | | $ | (1) | |
| India divestiture transaction costs | | — | | | — | | | — | | | 3 | |
| Global Cellulose Fibers goodwill impairment | | — | | | — | | | — | | | 52 | |
| Litigation reserves | | — | | | — | | | 22 | | | 19 | |
| Italian antitrust fine | | — | | | — | | | 32 | | | — | |
| Environmental remediation reserve adjustment | | — | | | — | | | 15 | | | 10 | |
| (Gain) loss on sale of EMEA Packaging box plant | | (7) | | | — | | | — | | | 1 | |
| EMEA Packaging business optimization | | — | | | — | | | — | | | 17 | |
| Multi-employer pension plan exit liability | | 16 | | | — | | | (7) | | | — | |
| Abandoned property removal | | 11 | | | 11 | | | 13 | | | 15 | |
| Riverdale mill conversion costs | | 1 | | | 1 | | | 1 | | | 2 | |
| Foreign VAT refund accrual including interest | | — | | | — | | | — | | | (6) | |
| Debt extinguishment costs | | — | | | — | | | — | | | 21 | |
| Gain on sale of previously closed Oregon mill site | | — | | | — | | | (9) | | | — | |
| Overhead cost reduction initiative | | — | | | — | | | 21 | | | — | |
| Other items | | — | | | 1 | | | — | | | 3 | |
| Non-operating pension expense | | 10 | | | 8 | | | 9 | | | 9 | |
| Total | | $ | 31 | | | $ | 173 | | | $ | 105 | | | $ | 145 | |
(d)Includes the following tax expenses (benefits):
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| | 2019 |
| In millions | | Q1 | | Q2 | | Q3 | | Q4 |
| Luxembourg statutory tax rate change | | $ | — | | | $ | 9 | | | $ | — | | | $ | — | |
| State income tax legislative changes | | — | | | (3) | | | — | | | — | |
| Foreign tax audits | | — | | | 3 | | | — | | | — | |
| Internal investment restructuring | | — | | | — | | | — | | | (53) | |
| Foreign deferred tax valuation allowance | | — | | | — | | | — | | | 203 | |
| Tax impact of other special items | | (6) | | | (5) | | | (14) | | | (28) | |
| Tax impact of non-operating pension expense | | (2) | | | (2) | | | (2) | | | (2) | |
| Total | | $ | (8) | | | $ | 2 | | | $ | (16) | | | $ | 120 | |
(e)Includes allocation of loss to noncontrolling interest of $7 million and $2 million for the three months ended June 30, 2019 and September 30, 2019, respectively, associated with the impairment of the net assets of our India Papers business.
None.
As of December 31, 2020,2023, an evaluation was carried out under the supervision and with the participation of the Company’s management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as that term is defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act). Based upon this evaluation, our principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2020.2023.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2020,2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During Q1 2020, many corporate employees began working remotely due to the COVID-19 pandemic. From the onset of the pandemic, we have closely monitored the potential impact on the design and operating effectiveness of our internal control over financial reporting.
None.On November 14, 2023, Ms. Kathryn D. Sullivan, a member of the Company’s Board of Directors, adopted a trading arrangement for the sale of the Company’s common stock (a “Rule 10b5-1 Trading Plan”) that is intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c). The Rule 10b5-1 Trading Plan provides for the sale of up to 12,000 shares of common stock pursuant to the terms of the Rule 10b5-1 Trading Plan beginning in February 2024 and ending in November 2024.
With the exception of Ms. Sullivan, during the quarter ended December 31, 2023, no other director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements, as defined in Item 408 of Regulation S-K.
None.
Information concerning our directors is hereby incorporated by reference to our definitive proxy statement that will be filed with the Securities and Exchange Commission ("SEC") within 120 days of the close of our fiscal year. The Audit and Finance Committee of the Board of Directors has at least one member who is a financial expert, as that term is defined in Item 401(d)(5) of Regulation S-K. Further information concerning the composition of the Audit and Finance Committee and our audit committee financial experts is hereby incorporated by reference
to our definitive proxy statement that will be filed with the SEC within 120 days of the close of our fiscal year. Information with respect to our executive officers is set forth on pages 69 and 710 in Part I of this Form 10-K under the caption, “Information About Our Executive Officers.” Executive officers of International Paper are elected to hold office until the next annual meeting of the Board of Directors following the annual meeting of shareholders and, until the election of successors, subject to removal by the Board.
The Company’s Code of Business Ethics (Code)Conduct (the "Code") is applicable to all employees of the Company, including the chief executive officerCEO and senior financial officers, as well as the Board of Directors. We disclose any amendments to our Code and any waivers from a provision of our Code granted to our directors, chief executive officerCEO and senior financial officers on our website within four business days following such amendment or waiver. To date, no waivers of the Code have been granted.
We make available free of charge on our website at www.internationalpaper.com, and in print to any shareholder who requests them, our Corporate Governance Principles, our Code of Business Ethics and the Charters of our Audit and Finance Committee, Management Development and Compensation Committee,MDCC, Governance Committee and Public PolicyPPE Committee available free of charge on our website (www.internationalpaper.com), and Environment Committee. Requestsin print to any shareholder who requests them. In addition, requests for printed copies may be directed to the corporate
secretary at our corporate headquarters. Please direct your request to:
International Paper Company
Attn: Mr. Joseph R. Saab, Corporate Secretary
6400 Poplar Avenue
Memphis, TN 38197
Information with respect to compliance with Section 16(a) of the Exchange Act and our corporate governance is hereby incorporated by reference to our definitive proxy statement that will be filed with the SEC within 120 days of the close of our fiscal year.
Information with respect to the compensation of executives and directors of the Company is hereby incorporated by reference to our definitive proxy statement that will be filed with the SEC within 120 days of the close of our fiscal year.
A description of the security ownership of certain beneficial owners and management and equity compensation plan information is hereby incorporated by reference to our definitive proxy statement that will be filed with the SEC within 120 days of the close of our fiscal year.
A description of applicable information with respect to certain relationships and related transactions and director independence matters, is hereby incorporated by reference to our definitive proxy statement that will be filed with the SEC within 120 days of the close of our fiscal year.
Information with respect to fees paid to, and services rendered by, our independent registered public accounting firm, and our policies and procedures for pre-approving those services, is hereby incorporated by reference to our definitive proxy statement that will be filed with the SEC within 120 days of the close of our fiscal year.
(2)Financial Statement Schedules – The following additional financial data should be read in conjunction with the consolidated financial statements in Item 8. Financial Statements and Supplementary Data. Schedules not included with this additional financial data have been omitted because they are not applicable, or the required information is shown in the consolidated financial statements or the notes thereto.
2020, 20192023, 2022 and 20182021
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(4.12)(4.10) | In accordance with Item 601 (b)(4)(iii)(A) of Regulation S-K, certain instruments respecting long-term debt of the Company have been omitted but will be furnished to the CommissionSEC upon request. |
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(10.38)(10.34) | Amendment No. 1620 to the Second Amended and Restated Credit and Security Agreement, dated April 28, 2020,June 8, 2023, by and among the Corporation,International Paper Company, as servicer, Red Bird Receivables, LLC, as borrower, the lenders and co-agents from time to time party thereto, and Mizuho Bank, Ltd., as Administrative AgentAgent.* |
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| (10.35) | Third Amended and Restated Five-Year Credit Agreement, dated as of June 7, 2023, among International Paper Company, JPMorgan Chase Bank, N.A., individually and as administrative agent, Citibank, individually and as syndication agent, and certain lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 7, 2023. |
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| (101.INS) | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document. * |
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| (104) | Cover Page Interactive Data File (formatted as Inline XBRL, and contained in Exhibit 101. * |
+ Management contract or compensatory plan or arrangement.
* Filed herewith
** Furnished herewith
† Confidential treatment has been granted for certain information pursuant to Rule 24b-2 under the Securities Act of 1934, as amended.
None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL PAPER COMPANY
| | | | | | | | | | | |
| | | |
| By: | /S/ SJHARONOSEPH R. RSYANAAB | | February 19, 202116, 2024 |
| SharonJoseph R. RyanSaab | | |
| Senior Vice President, General Counsel
and Corporate Secretary | | |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy S. Nicholls, SharonJoseph R. RyanSaab and Alan R. HaguewoodAmanda M. Jenkins as his or her true and lawful attorney-in-fact and agent, acting alone, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact full power and authority to do and perform each and every act and thing requisite or necessary to be done, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
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| Signature | | Title | | Date |
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/S/ MARK S. SUTTON | | Chairman of the Board & Chief Executive Officer and Director | | February 19, 202116, 2024 |
| Mark S. Sutton | | | | |
| | | | |
/S/ WILLIAM J. BURNS
| | Director | | February 19, 2021 |
Willliam J. Burns | | | | |
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/S/ CHRISTOPHER M. CONNOR | | Director | | February 19, 202116, 2024 |
| Christopher M. Connor | | | | |
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/S/ AHMET C. DORDUNCU | | Director | | February 19, 202116, 2024 |
| Ahmet C. Dorduncu | | | | |
| | | | |
/S/ ILENE S. GORDON | | Director | | February 19, 202116, 2024 |
| Ilene S. Gordon | | | | |
| | | | |
/S/ ANDERS GUSTAFSSON | | Director | | February 19, 202116, 2024 |
| Anders Gustafsson | | | | |
| | | | | | | | | | | | | | |
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/S/ JACQUELINE C. HINMAN | | Director | | February 19, 202116, 2024 |
| Jacqueline C. Hinman | | | | |
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/s/ CLINTON A. LEWIS, JR. | | Director | | February 19, 202116, 2024 |
| Clinton A. Lewis, Jr. | | | | |
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/S/s/ KATHRYN D. SULLIVAN | | Director | | February 19, 202116, 2024 |
| Kathryn D. Sullivan | | | | |
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/s/ AS/ J. STEVENNTON WHISLER V. VINCENT | | Director | | February 19, 202116, 2024 |
J. Steven WhislerAnton V. Vincent | | | | |
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/S/ RAY G. YOUNG | | Director | | February 19, 202116, 2024 |
| Ray G. Young | | | | |
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/S/ TIMOTHY S. NICHOLLS | | Senior Vice President and Chief Financial Officer | | February 19, 202116, 2024 |
| Timothy S. Nicholls | | | | |
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/S/ VHINCENTOLLY P. BG. GONNOT OUGHNOUR | | Vice President – Finance and Corporate Controller | | February 19, 202116, 2024 |
Vincent P. BonnotHolly G. Goughnour | | | | |
20202023 LISTING OF FACILITIES
(all facilities are owned except noted otherwise)
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PRINTING PAPERSINDUSTRIAL PACKAGING | | Savannah, GeorgiaModesto, California | | Tracy, CaliforniaFridley, Minnesota |
| | Cayuga, IndianaOntario, California | | Golden, Colorado |
Uncoated Papers | | Cedar Rapids, Iowa | | Wheat Ridge, Colorado |
U.S.: | | Henderson, Kentucky | | Putnam, Connecticut |
Selma, Alabama (Riverdale Mill) | | Maysville, Kentucky | | Orlando, Florida |
Ticonderoga, New York | | Bogalusa, Louisiana | | Plant City, Florida |
Eastover, South Carolina | | Campti, Louisiana | | Tampa, FloridaMinneapolis, Minnesota leased |
Georgetown, South CarolinaContainerboard | | Mansfield, LouisianaSalinas, California | | Columbus, Georgia |
Sumter, South Carolina | | Vicksburg, Mississippi | | Forest Park, Georgia |
| | Valliant, Oklahoma | | Griffin, Georgia |
International: | | Springfield, Oregon | | Kennesaw, Georgia leased |
Luiz Antônio, São Paulo, Brazil | | Orange, Texas | | Lithonia, Georgia |
Mogi Guacu, São Paulo, Brazil | | | | Savannah, Georgia |
Três Lagoas, Mato Grosso do Sul, Brazil | | International: | | Tucker, Georgia |
Saillat, France | | Franco da Rocha, São Paulo, Brazil 1
| | Aurora, Illinois (3 locations) |
Kwidzyn, Poland | | Nova Campina, São Paulo, Brazil 1
| | Bedford Park, Illinois (2 locations) 1 leased |
Svetogorsk, Russia | | Paulinia, São Paulo, Brazil 1
| | Belleville, Illinois |
| | Veracruz, Mexico | | Carol Stream, Illinois |
GLOBAL CELLULOSE FIBERS | | Kenitra, Morocco | | Des Plaines, Illinois |
| | Madrid, Spain | | Lincoln, Illinois |
Pulp | | | | Montgomery, IllinoisShakopee, Minnesota |
| U.S.: | | Corrugated ContainerSanger, California | | White Bear Lake, Minnesota |
| Pine Hill, Alabama | | Santa Fe Springs, California (2 locations) | | Northlake, IllinoisHouston, Mississippi |
| Prattville, Alabama | | Tracy, California | | Jackson, Mississippi |
| Selma, Alabama (Riverdale Mill) | | Golden, Colorado | | Magnolia, Mississippi leased |
| Cantonment, Florida (Pensacola Mill) | | Wheat Ridge, Colorado | | Olive Branch, Mississippi |
| Rome, Georgia | | Putnam, Connecticut | | Fenton, Missouri |
| Savannah, Georgia | | Orlando, Florida | | Kansas City, Missouri (2 locations) |
| Cayuga, Indiana | | Plant City, Florida | | Maryland Heights, Missouri |
| Cedar Rapids, Iowa | | Tampa, Florida leased | | North Kansas City, Missourileased |
| Henderson, Kentucky | | Columbus, Georgia | | St. Joseph, Missouri |
| Maysville, Kentucky | | Forest Park, Georgia | | St. Louis, Missouri |
| Bogalusa, Louisiana | | Griffin, Georgia | | Omaha, Nebraska |
| Campti, Louisiana | | Lithonia, Georgia | | McCarran, Nevada |
| Mansfield, Louisiana | | Savannah, Georgia | | Barrington, New Jersey |
| Vicksburg, Mississippi | | Tucker, Georgia | | Bellmawr, New Jersey |
| Valliant, Oklahoma | | Aurora, Illinois (3 locations) 1 leased | | Milltown, New Jersey leased |
| Springfield, Oregon | | Bedford Park, Illinois (2 locations) 1 leased (2) | | Spotswood, New Jersey |
Orange, Texas (1) | | Belleville, Illinois | | Thorofare, New Jersey |
| | Carol Stream, Illinois | | Binghamton, New York |
| International: | | Des Plaines, Illinois | | Buffalo, New York |
| Veracruz, Mexico | | Lincoln, Illinois | | Rochester, New York |
| Kenitra, Morocco | | Montgomery, Illinois | | Scotia, New York |
| Madrid, Spain | | Northlake, Illinois | | Utica, New York |
| | Rockford, Illinois | | Charlotte, North Carolina (2 locations) 1 leased |
| Corrugated Packaging | | Butler, Indiana | | Lumberton, North Carolina |
| U.S.: | | Crawfordsville, Indiana | | Rockford, IllinoisManson, North Carolina |
Flint River, Georgia | | Bay Minette, Alabama | | Butler,Fort Wayne, Indiana | | Newton, North Carolina |
Port Wentworth, Georgia | | Decatur, Alabama | | Indianapolis, Indiana (3 locations) | | Crawfordsville, IndianaStatesville, North Carolina |
Columbus, Mississippi | | Dothan, Alabama leased | | Fort Wayne, Indiana |
New Bern, North Carolina | | Huntsville, Alabama | | Indianapolis, Indiana (2 locations) |
Riegelwood, North Carolina | | Conway, Arkansas | | Saint Anthony, Indiana | | Byesville, Ohio |
Eastover, South CarolinaHuntsville, Alabama | | Tipton, Indiana | | Delaware, Ohio |
| Conway, Arkansas | | Cedar Rapids, Iowa | | Eaton, Ohio |
| Fort Smith, Arkansas (2 locations) | | Waterloo, Iowa | | Tipton, IndianaMadison, Ohio |
Georgetown, South Carolina | | Russellville, Arkansas (2 locations) | | Cedar Rapids, Iowa |
Franklin, Virginia | | Tolleson, Arizona | | Waterloo, Iowa |
| | Yuma, Arizona | | Garden City, Kansas | | Marion, Ohio |
International:Tolleson, Arizona | | Bowling Green, Kentucky | | Marysville, Ohio leased |
| Yuma, Arizona | | Lexington, Kentucky | | Middletown, Ohio |
| Anaheim, California | | Louisville, Kentucky | | Kansas City, KansasMt. Vernon, Ohio |
Grande Prairie, Alberta, Canada | | Buena Park, California leased | | Bowling Green,Walton, Kentucky | | Newark, Ohio |
Saillat, France | | Camarillo, California | | Bogalusa, Louisiana | | Lexington, KentuckyStreetsboro, Ohio |
Gdansk, Poland | | Carson, California | | Lafayette, Louisiana | | Louisville, KentuckyWooster, Ohio |
Kwidzyn, Poland | | Cerritos, California leased | | Shreveport, Louisiana | | Walton, KentuckyOklahoma City, Oklahoma |
Svetogorsk, Russia | | Compton, California | | Bogalusa,Springhill, Louisiana | | Beaverton, Oregon |
| | Elk Grove, California | | Auburn, Maine | | Lafayette, LouisianaHillsboro, Oregon |
INDUSTRIAL PACKAGING | | Exeter, California | | Three Rivers, Michigan | | Shreveport, LouisianaPortland, Oregon |
| | Gilroy, California (2 locations) | | Arden Hills, Minnesota | | Springhill, LouisianaSalem, Oregon leased |
Containerboard | | Los Angeles, California | | Auburn, Maine |
U.S.: | | Modesto, California | | Three Rivers, Michigan |
Pine Hill, Alabama | | Ontario, California | | Arden Hills, Minnesota |
Prattville, Alabama | | Salinas, California | | Austin, Minnesota |
| Selma, Alabama (Riverdale Mill) | | Sanger, California | | Fridley, Minnesota |
Cantonment, Florida (Pensacola Mill) | | Santa Fe Springs, California (2 locations) | | Minneapolis, Minnesota leased |
Rome, Georgia | | Stockton, California 2
| | Shakopee, MinnesotaAtglen, Pennsylvania |
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| Biglerville, Pennsylvania (2 locations) | | Puebla, Mexico leased | | | | | | | | | | | | | Bags |
White Bear Lake, MinnesotaEighty-four, Pennsylvania | | Reynosa, Mexico | | U.S.: |
| Hazleton, Pennsylvania | | San Jose Iturbide, Mexico | | Buena Park, California |
| Kennett Square, Pennsylvania | | Santa Catarina, Mexico | | Beaverton, Oregon |
| Lancaster, Pennsylvania | | Silao, Mexico | | Grand Prairie, Texas |
| Mount Carmel, Pennsylvania | | Toluca, Mexico | | |
| Georgetown, South Carolina | | Zapopan, Mexico | | GLOBAL CELLULOSE FIBERS |
| Laurens, South Carolina | | Agadir, Morocco | | |
| Lexington, South Carolina | | Casablanca, Morocco | | Silao, MexicoPulp |
Houston, Mississippi | | Ashland City, Tennessee leased | | Tangier, Morocco | | Toluca, MexicoU.S.: |
Jackson, Mississippi | | Cleveland, Tennessee | | Ovar, Portugal | | Zapopan, MexicoCantonment, Florida (Pensacola Mill) |
Magnolia, Mississippi leased | | Elizabethton, Tennessee leased | | Barcelona, Spain | | Agadir, MoroccoFlint River, Georgia |
Olive Branch, Mississippi | | Morristown, Tennessee | | Bilbao, Spain | | Casablanca, MoroccoPort Wentworth, Georgia |
Fenton, Missouri | | Murfreesboro, Tennessee | | Gandia, Spain | | Tangier, MoroccoColumbus, Mississippi (2 locations) |
Kansas City, Missouri | | Amarillo, Texas | | Grinon, Spain | | Ovar, PortugalNew Bern, North Carolina |
Maryland Heights, Missouri | | Carrollton, Texas (2 locations) | | Barcelona,Las Palmas, Spain | | Riegelwood, North Carolina |
North Kansas City, Missouri leased | | Edinburg, Texas | | Bilbao,Madrid, Spain | | Georgetown, South Carolina |
St. Joseph, Missouri | | El Paso, Texas | | Gandia,Montblanc, Spain | | Franklin, Virginia |
St. Louis, Missouri | | Ft. Worth, Texas leased | | Las Palmas, Spain |
Omaha, Nebraska | | Grand Prairie, Texas | | Madrid, Spain |
Barrington, New Jersey | | Hidalgo, Texas | | Montblanc, Spain |
Bellmawr, New Jersey | | McAllen, Texas | | Tavernes de la Valldigna, Spain | | |
Milltown, New JerseyGrand Prairie, Texas | | Tenerife, Spain | | International: |
| Hidalgo, Texas | | Valls, Spain | | Grande Prairie, Alberta, Canada |
| McAllen, Texas | | | | Gdansk, Poland |
| San Antonio, Texas (2 locations) | | Tenerife, Spain |
Spotswood, New JerseyRecycling | | |
| Sealy, Texas | | U.S.: | | Adana, TurkeyDISTRIBUTION |
Thorofare, New Jersey | | Waxahachie, Texas | | Bursa, Turkey |
Binghamton, New YorkPhoenix, Arizona | | |
| Lynchburg, Virginia | | Fremont, California | | Corum, TurkeyInternational: |
Buffalo, New York | | Petersburg, Virginia | | Norwalk, California | | Gebze, TurkeyGuangzhou, China leased |
Rochester, New York | | Richmond, Virginia | | West Sacramento, California | | Izmir, TurkeyHong Kong, China leased |
Scotia, New York | | Moses Lake, Washington | | Itasca, Illinois | | Shanghai, China leased |
Utica, New York | | Olympia, Washington | | Des Moines, Iowa | | RecyclingJapan leased |
Charlotte, North Carolina (2 locations) 1 leased | | Yakima, Washington | | Wichita, Kansas | | U.S.:Korea leased |
Lumberton, North Carolina | | Fond du Lac, Wisconsin | | Roseville, Minnesota | | Phoenix, ArizonaSingapore leased |
Manson, North Carolina | | Manitowoc, Wisconsin | | Fremont, California |
Newton, North Carolina | | | | Norwalk, California |
Statesville, North Carolina | | International: | | West Sacramento, California |
Byesville, Ohio | | Manaus, Amazonas, Brazil 1
| | Itasca, Illinois |
Delaware, Ohio | | Paulinia, São Paulo, Brazil 1
| | Des Moines, Iowa |
Eaton, Ohio | | Rio Verde, Goias, Brazil 1
| | Wichita, Kansas |
Madison, Ohio | | Suzano, São Paulo, Brazil 1
| | Roseville, Minnesota |
Marion, Ohio | | Rancagua, Chile | | Omaha, Nebraska | | |
| Marysville, Ohio leased | Arles, France 3
| | Charlotte, North Carolina | | |
Middletown, OhioInternational: | | Cabourg, France | | Beaverton, Oregon | | |
Mt. Vernon, OhioRancagua, Chile | | Chalon-sur-Saone, France | | Springfield, Oregon leased | | 1) Closed December 2023 |
Newark, OhioCabourg, France | | LePuy, France (Espaly Box Plant) | | Carrollton, Texas | | 2) Closed one location January 2023 |
Streetsboro, Ohio | | Mortagne,Chalon, France | | Salt Lake City, Utah | | |
Wooster, OhioEspaly, France | | Richmond, Virginia | | |
| Mortagne, France | | Kent, Washington | | |
| Saint Amand, France | | | Richmond, Virginia | |
Oklahoma City, Oklahoma | | Guadeloupe, French West Indies | | Kent, Washington |
Beaverton, Oregon (3 locations) | | Bellusco, Italy | | |
Hillsboro, OregonInternational: | | |
| Catania, Italy | | International: |
Portland, Oregon | | Pomezia, Italy | | Monterrey, Mexico leased | | |
Salem, Oregon leased | | San Felice,Pomezia, Italy | | Xalapa, Veracruz, Mexico leased | | |
Biglerville, Pennsylvania (2 locations)San Felice, Italy | | | Apodaco (Monterrey), Mexico leased | |
Eighty-four, PennsylvaniaApodaco, Mexico leased | | | | |
| Ixtaczoquitlan, Mexico | | | Bags | |
Hazleton, Pennsylvania | | Juarez, Mexico leased (2 locations) | | | U.S.: | |
Kennett Square, Pennsylvania | | Los Mochis, Mexico | | | Buena Park, California | |
| Lancaster, Pennsylvania | | Puebla, Mexico leased | | Beaverton, Oregon
| Mount Carmel, Pennsylvania | | Reynosa, Mexico | | Grand Prairie, Texas
| Georgetown, South Carolina | | San Jose Iturbide, Mexico | |
Laurens, South Carolina | | Santa Catarina, Mexico | | |
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Coated Paperboard | | | | |
International: | | | | |
Kwidzyn, Poland | | | | |
Svetogorsk, Russia | | | | |
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DISTRIBUTION | | | | |
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International: | | | | |
Guangzhou, China leased | | | | |
Hong Kong, China leased | | | | |
Shanghai, China leased | | | | |
Japan leased | | | | |
Korea leased | | | | |
Singapore leased | | | | |
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FOREST RESOURCES | | | | |
International: | | | | |
Approximately 314,000 acres | | | | |
in Brazil | | | | |
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1) Sold October 2020 | | | | |
2) Closed September 2020 | | | | |
3) Closed July 2020 | | | | |
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20202023 CAPACITY INFORMATION
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| (in thousands of short tons except as noted) | U.S. | | EMEA | | Americas,
other
than U.S. | | | | Total |
| Industrial Packaging | | | | | | | | | |
Containerboard (a) | 13,738 | | | 497 | | | 27 | | | | | 14,262 | |
| Coated Paperboard | — | | | 443 | | | — | | | | | 443 | |
| Total Industrial Packaging | 13,738 | | | 940 | | | 27 | | | | | 14,705 | |
| Global Cellulose Fibers | | | | | | | | | |
Dried Pulp (in thousands of metric tons) | 2,988 | | | 352 | | | 498 | | | | | 3,838 | |
| Printing Papers | | | | | | | | | |
Uncoated Freesheet & Bristols (b) | 1,700 | | | 1,186 | | | 1,135 | | | | | 4,021 | |
| Newsprint | — | | | 102 | | | — | | | | | 102 | |
| Total Printing Papers | 1,700 | | | 1,288 | | | 1,135 | | | | | 4,123 | |
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| (in thousands of short tons except as noted) | U.S. | | EMEA | | Americas,
other
than U.S. | | Total |
| Industrial Packaging | | | | | | | |
Containerboard (a) | 13,829 | | | 560 | | | 27 | | | 14,416 | |
| Global Cellulose Fibers | | | | | | | |
Dried Pulp (in thousands of metric tons) (b) | 2,749 | | | — | | | 373 | | | 3,122 | |
(a) In addition to Containerboard, this also includes saturated kraft, kraft bag, and gypsum. U.S capacity includes Orange, Texas mill, which was permanently closed in December 2023.
(b) In addition to Uncoated FreesheetU.S. capacity includes pulp machines at Riegelwood, North Carolina and Bristols, includes bleached multiwall bagPensacola, Florida mills, which were permanently shutdown in December 2023 and plate.August 2023, respectively.
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Forest Resources | |
We own, manage or have an interest in approximately 1.2 million acres of forestlands worldwide. These forestlands and associated acres are located in the following regions: | (M Acres) |
Brazil | 314 | |
We have harvesting rights in: | |
Russia | 862 | |
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Total | 1,176 | |
