ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2018 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
New York | 13-0872805 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Name of each exchange on which registered | |
Common Stock, $1 per share par value | New York Stock Exchange |
Large accelerated filer ý | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ | Emerging growth company ¨ | ||||
PART I. | ||
ITEM 1. | ||
ITEM 1A. | ||
ITEM 1B. | ||
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
PART II. | ||
ITEM 5. | ||
ITEM 6. | ||
ITEM 7. | ||
ITEM 7A. | ||
ITEM 8. | ||
ITEM 9. | ||
ITEM 9A. | ||
ITEM 9B. | ||
PART III. | ||
ITEM 10. | ||
ITEM 11. | ||
ITEM 12. | ||
ITEM 13. | ||
ITEM 14. | ||
PART IV. | ||
ITEM 15. | ||
APPENDIX I | ||
APPENDIX II |
In thousands of short tons (except as noted) | 2018 | 2017 | 2016 | |||
Industrial Packaging | ||||||
Corrugated Packaging (b) | 10,624 | 10,413 | 10,392 | |||
Containerboard | 3,229 | 3,294 | 3,091 | |||
Recycling | 2,282 | 2,257 | 2,450 | |||
Saturated Kraft | 196 | 181 | 182 | |||
Gypsum/Release Kraft | 227 | 229 | 200 | |||
Bleached Kraft | 31 | 27 | 24 | |||
EMEA Packaging (b) (c) | 1,476 | 1,518 | 1,477 | |||
Asian Box (b) (d) | — | — | 208 | |||
Brazilian Packaging (c) | 351 | 357 | 371 | |||
European Coated Paperboard | 390 | 398 | 393 | |||
Industrial Packaging | 18,806 | 18,674 | 18,788 | |||
Global Cellulose Fibers (in thousands of metric tons) (e) | 3,573 | 3,708 | 1,870 | |||
Printing Papers | ||||||
U.S. Uncoated Papers | 1,886 | 1,915 | 1,872 | |||
European and Russian Uncoated Papers | 1,440 | 1,483 | 1,536 | |||
Brazilian Uncoated Papers | 1,125 | 1,167 | 1,114 | |||
Indian Uncoated Papers | 263 | 253 | 241 | |||
Printing Papers | 4,714 | 4,818 | 4,763 |
(a) | Includes third-party and inter-segment sales and excludes sales of equity investees. |
(b) | Volumes for corrugated box sales reflect consumed tons sold (CTS). Board sales by these businesses reflect invoiced tons. |
(c) | Excludes newsprint sales volumes at the Madrid, Spain mill through Q3 2017. |
(d) | Includes sales volumes through the date of sale on June 30, 2016. |
(e) | Includes North American, European and Brazilian volumes and internal sales to mills. Includes sales volumes from the pulp business acquired beginning December 1, 2016. |
• | 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; |
• | our indebtedness that is subject to variable rates and, in the instance such variable rates use the London Interbank Offered Rate (LIBOR) as a benchmark, exposes us to a possible increase in debt service obligations in the event that the method for determining LIBOR changes, LIBOR is replaced by an alternative reference rate or LIBOR is phased out altogether; |
• | 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. |
• | fires, floods, earthquakes, hurricanes or other catastrophes; |
• | the effect of a drought or reduced rainfall on its water supply; |
• | the effect of other severe weather conditions on equipment and facilities; |
• | terrorism or threats of terrorism; |
• | domestic and international laws and regulations applicable to our Company 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; |
• | widespread outbreak of an illness or any other communicable disease, or any other public health crisis; |
• | labor difficulties; and |
• | other operational problems. |
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, 2018 - October 31, 2018 | 2,225,310 | $ | 44.94 | 2,225,188 | $ | 2.33 | ||||
November 1, 2018 - November 30, 2018 | 1,475,242 | 45.79 | 1,474,900 | 2.27 | ||||||
December 1, 2018 - December 31, 2018 | 725,363 | 45.51 | 712,442 | 2.23 | ||||||
Total | 4,425,915 |
(a) | 13,385 shares were acquired from employees from share withholdings to pay income taxes under the Company’s restricted stock programs. During these periods, 4,412,530 shares were purchased under our share repurchase program, which was approved by our Board of Directors and announced on July 8, 2014 and October 9, 2018. Through this program, which does not have an expiration date, we were authorized to purchase, in open market transactions (including block trades), privately negotiated transactions or otherwise, up to $3.5 billion aggregate amount of shares of our common stock. As of February 15, 2019, approximately $2.19 billion aggregate amount of shares of our common stock remained authorized for purchase under this program. |
Note 2. | Returns are calculated in $USD. |
Dollar amounts in millions, except per share amounts and stock prices | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
RESULTS OF OPERATIONS | ||||||||||||||||||||
Net sales | $ | 23,306 | $ | 21,743 | $ | 19,495 | $ | 20,675 | $ | 21,889 | ||||||||||
Costs and expenses, excluding interest | 20,989 | 20,323 | 18,180 | 18,988 | 20,548 | |||||||||||||||
Earnings (loss) from continuing operations before income taxes and equity earnings | 1,781 | (b) | 848 | (e) | 795 | (h) | 1,132 | (k) | 734 | (n) | ||||||||||
Equity earnings (loss), net of taxes | 336 | 177 | 198 | 117 | (200 | ) | ||||||||||||||
Discontinued operations, net of taxes | 345 | (c) | 34 | (f) | 102 | (i) | 85 | (l) | 77 | (o) | ||||||||||
Net earnings (loss) | 2,017 | (b-d) | 2,144 | (e-g) | 902 | (h-j) | 917 | (k-m) | 536 | (n-p) | ||||||||||
Noncontrolling interests, net of taxes | 5 | — | (2 | ) | (21 | ) | (19 | ) | ||||||||||||
Net earnings (loss) attributable to International Paper Company | 2,012 | (b-d) | 2,144 | (e-g) | 904 | (h-j) | 938 | (k-m) | 555 | (n-p) | ||||||||||
FINANCIAL POSITION | ||||||||||||||||||||
Current assets less current liabilities | $ | 2,302 | $ | 3,175 | $ | 2,601 | $ | 2,244 | $ | 2,719 | ||||||||||
Plants, properties and equipment, net | 13,067 | 13,265 | 13,003 | 11,000 | 11,794 | |||||||||||||||
Forestlands | 402 | 448 | 456 | 366 | 507 | |||||||||||||||
Total assets | 33,576 | 33,903 | 33,093 | 30,271 | 28,369 | |||||||||||||||
Notes payable and current maturities of long-term debt | 639 | 311 | 239 | 426 | 742 | |||||||||||||||
Long-term debt | 10,015 | 10,846 | 11,075 | 8,844 | 8,584 | |||||||||||||||
Total shareholders’ equity | 7,362 | 6,522 | 4,341 | 3,884 | 5,115 | |||||||||||||||
BASIC EARNINGS PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | ||||||||||||||||||||
Earnings (loss) from continuing operations | $ | 4.07 | $ | 5.11 | $ | 1.95 | $ | 2.05 | $ | 1.12 | ||||||||||
Discontinued operations | 0.84 | 0.08 | 0.25 | 0.20 | 0.18 | |||||||||||||||
Net earnings (loss) | 4.91 | 5.19 | 2.20 | 2.25 | 1.30 | |||||||||||||||
DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | ||||||||||||||||||||
Earnings (loss) from continuing operations | $ | 4.02 | $ | 5.05 | $ | 1.93 | $ | 2.03 | $ | 1.10 | ||||||||||
Discontinued operations | 0.83 | 0.08 | 0.25 | 0.20 | 0.19 | |||||||||||||||
Net earnings (loss) | 4.85 | 5.13 | 2.18 | 2.23 | 1.29 | |||||||||||||||
Cash dividends | 1.925 | 1.863 | 1.783 | 1.640 | 1.450 | |||||||||||||||
COMMON STOCK PRICES | ||||||||||||||||||||
High | $ | 66.94 | $ | 58.96 | $ | 54.68 | $ | 57.90 | $ | 55.73 | ||||||||||
Low | 37.55 | 49.60 | 32.50 | 36.76 | 44.24 | |||||||||||||||
Year-end | 40.36 | 57.94 | 53.06 | 37.70 | 53.58 | |||||||||||||||
FINANCIAL RATIOS | ||||||||||||||||||||
Current ratio | 1.5 | 1.6 | 1.6 | 1.6 | 1.5 | |||||||||||||||
Total debt to capital ratio | 0.59 | 0.63 | 0.72 | 0.70 | 0.65 | |||||||||||||||
Return on shareholders’ equity | 28.4 | % | 43.9 | % | 22.1 | % | 20.0 | % | 7.7 | % | ||||||||||
CAPITAL EXPENDITURES | $ | 1,572 | $ | 1,391 | $ | 1,348 | $1,487 | $1,366 | ||||||||||||
NUMBER OF EMPLOYEES | 53,000 | 56,000 | 55,000 | 56,000 | 58,000 |
(a) | All prior periods presented have been restated to reflect the North American Consumer Packaging business and the xpedx business as discontinued operations (excluding cash flow related items) and prior period amounts have been adjusted to conform with current year presentation, if applicable. |
2018 | ||||||||
In millions | Before Tax | After Tax | ||||||
Smurfit-Kappa acquisition proposal costs | 12 | 9 | ||||||
Legal settlement | 9 | 7 | ||||||
Litigation settlement recovery | (5 | ) | (4 | ) | ||||
Environmental remediation reserve adjustment | 9 | 7 | ||||||
EMEA Packaging optimization | 47 | 34 | ||||||
Abandoned property removal | 32 | 24 | ||||||
Riverdale mill conversion costs | 9 | 7 | ||||||
Brazil Packaging impairment | 122 | 81 | ||||||
Debt extinguishment costs | 10 | 7 | ||||||
Gain on sale of investment in Liaison Technologies | (31 | ) | (23 | ) | ||||
Total special items | $ | 214 | $ | 149 | ||||
Non-operating pension expense | 494 | 371 | ||||||
Total | $ | 708 | $ | 520 |
2018 | ||||||||
In millions | Before Tax | After Tax | ||||||
North American Consumer Packaging transaction costs | 25 | 19 | ||||||
North American Consumer Packaging gain on transfer | (488 | ) | (364 | ) | ||||
Total | $ | (463 | ) | $ | (345 | ) |
In millions | 2018 | |||
State income tax legislative changes | $ | 9 | ||
Tax benefit of Tax Cuts and Jobs Act | (36 | ) | ||
International investment restructuring | 19 | |||
Foreign tax audits | 25 | |||
Total | $ | 17 |
2017 | ||||||||
In millions | Before Tax | After Tax | ||||||
Gain on sale of investment in ArborGen | $ | (14 | ) | $ | (9 | ) | ||
Costs associated with the pulp business acquired in 2016 | 33 | 20 | ||||||
Amortization of Weyerhaeuser inventory fair value step-up | 14 | 8 | ||||||
Holmen bargain purchase gain | (6 | ) | (6 | ) | ||||
Abandoned property removal | 20 | 13 | ||||||
Kleen Products settlement | 354 | 219 | ||||||
Asia Foodservice sale | 9 | 4 | ||||||
Brazil Packaging wood supply accelerated amortization | 10 | 7 | ||||||
Debt extinguishment costs | 83 | 51 | ||||||
Interest income on income tax refund claims | (5 | ) | (3 | ) | ||||
Other items | (2 | ) | (2 | ) | ||||
Total special items | $ | 496 | $ | 302 | ||||
Non-operating pension expense | 484 | 298 | ||||||
Total | $ | 980 | $ | 600 |
2017 | ||||||||
In millions | Before Tax | After Tax | ||||||
North American Consumer Packaging transaction costs | $ | 17 | $ | 10 | ||||
Non-operating pension expense | 45 | 28 | ||||||
Total | $ | 62 | $ | 38 |
In millions | 2017 | |||
International legal entity restructuring | $ | 34 | ||
Income tax refund claims | (113 | ) | ||
Cash pension contribution | 38 | |||
International tax law change | 9 | |||
Tax benefit of Tax Cuts and Jobs Act | (1,222 | ) | ||
Total | $ | (1,254 | ) |
2016 | ||||||||
In millions | Before Tax | After Tax | ||||||
Riegelwood mill conversion costs | $ | 9 | $ | 6 | ||||
India Packaging evaluation write-off | 17 | 11 | ||||||
Write-off of certain regulatory pre-engineering costs | 8 | 5 | ||||||
Early debt extinguishment costs | 29 | 18 | ||||||
Costs associated with the newly acquired pulp business | 31 | 21 | ||||||
Asia Box impairment / restructuring | 70 | 58 | ||||||
Gain on sale of investment in Arizona Chemical | (8 | ) | (5 | ) | ||||
Turkey mill closure | 7 | 6 | ||||||
Amortization of Weyerhaeuser inventory fair value step-up | 19 | 11 | ||||||
Total special items | $ | 182 | $ | 131 | ||||
Non-operating pension expense | 610 | 375 | ||||||
Total | $ | 792 | $ | 506 |
2016 | ||||||||
In millions | Before Tax | After Tax | ||||||
xpedx legal settlement | $ | 8 | $ | 5 | ||||
Total | $ | 8 | $ | 5 |
In millions | 2016 | |||
Cash pension contribution | $ | 23 | ||
U.S. Federal audit | (14 | ) | ||
Brazil goodwill | (57 | ) | ||
International legal entity restructuring | (6 | ) | ||
Luxembourg tax rate change | 31 | |||
Total | $ | (23 | ) |
2015 | ||||||||
In millions | Before Tax | After Tax | ||||||
Riegelwood mill conversion costs, net of proceeds from sale of the Carolina Coated Bristols brand | $ | 8 | $ | 4 | ||||
Timber monetization restructuring | 16 | 10 | ||||||
Early debt extinguishment costs | 207 | 133 | ||||||
IP-Sun JV impairment | 174 | 180 | ||||||
Legal reserve adjustment | 15 | 9 | ||||||
Refund and state tax credits | (4 | ) | (2 | ) | ||||
Impairment of Orsa goodwill and trade name intangible | 137 | 137 | ||||||
Other items | 6 | 5 | ||||||
Total special items | $ | 559 | $ | 476 | ||||
Non-operating pension expense | 258 | 157 | ||||||
Total | $ | 817 | $ | 633 |
In millions | 2015 | |||
IP-Sun JV impairment | $ | (67 | ) | |
Cash pension contribution | 23 | |||
Other items | 7 | |||
Total | $ | (37 | ) |
2014 | ||||||||
In millions | Before Tax | After Tax | ||||||
Temple-Inland integration | $ | 16 | $ | 10 | ||||
Courtland mill shutdown | 554 | 338 | ||||||
Early debt extinguishment costs | 276 | 169 | ||||||
India legal contingency resolution | (20 | ) | (20 | ) | ||||
Multi-employer pension plan withdrawal liability | 35 | 21 | ||||||
Foreign tax amnesty program | 32 | 17 | ||||||
Asia Industrial Packaging goodwill impairment | 100 | 100 | ||||||
Loss on sale by investee and impairment of investment | 47 | 36 | ||||||
Other items | 12 | 9 | ||||||
Total special items | $ | 1,052 | $ | 680 | ||||
Non-operating pension expense | 212 | 129 | ||||||
Total | $ | 1,264 | $ | 809 |
2014 | ||||||||
In millions | Before Tax | After Tax | ||||||
xpedx spinoff | $ | 24 | $ | 16 | ||||
Building Products divestiture | 16 | 9 | ||||||
xpedx restructuring | 1 | (1 | ) | |||||
Total | $ | 41 | $ | 24 |
In millions | 2014 | |||
State legislative tax change | $ | 10 | ||
Internal restructuring | (90 | ) | ||
Other items | (1 | ) | ||
Total | $ | (81 | ) |
2018 | 2017 | 2016 | |||||||
Earnings (Loss) Attributable to Shareholders | $ | 2,012 | $ | 2,144 | $ | 904 | |||
Less - Discontinued operations (gain) loss | (345 | ) | (34 | ) | (102 | ) | |||
Earnings (Loss) from Continuing Operations | 1,667 | 2,110 | 802 | ||||||
Add back - Non-operating pension expense (income) | 494 | 484 | 610 | ||||||
Add back - Net special items expense (income) | 214 | 496 | 182 | ||||||
Income tax effect - Non-operating pension and special items expense | (171 | ) | (1,634 | ) | (309 | ) | |||
Adjusted Operating Earnings (Loss) Attributable to Shareholders | $ | 2,204 | $ | 1,456 | $ | 1,285 |
2018 | 2017 | 2016 | |||||||
Diluted Earnings (Loss) Per Share Attributable to Shareholders | $ | 4.85 | $ | 5.13 | $ | 2.18 | |||
Less - Discontinued operations (gain) loss per share | (0.83 | ) | (0.08 | ) | (0.25 | ) | |||
Diluted Earnings (Loss) Per Share from Continuing Operations | 4.02 | 5.05 | 1.93 | ||||||
Add back - Non-operating pension expense (income) per share | 1.19 | 1.16 | 1.47 | ||||||
Add back - Net special items expense (income) per share | 0.52 | 1.19 | 0.44 | ||||||
Income tax effect per share - Non-operating pension and special items expense | (0.41 | ) | (3.91 | ) | (0.75 | ) | |||
Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders | $ | 5.32 | $ | 3.49 | $ | 3.09 |
Three Months Ended December 31, 2018 | Three Months Ended September 30, 2018 | Three Months Ended December 31, 2017 | ||||||||||
Earnings (Loss) Attributable to Shareholders | $ | 316 | $ | 562 | $ | 1,460 | ||||||
Less - Discontinued operations (gain) loss | — | — | 8 | |||||||||
Earnings (Loss) from Continuing Operations | 316 | 562 | 1,468 | |||||||||
Add back - Non-operating pension expense (income) | 429 | 25 | 386 | |||||||||
Add back - Net special items expense (income) | (15 | ) | 142 | 106 | ||||||||
Income tax effect - Non-operating pension and special items expense | (60 | ) | (88 | ) | (1,430 | ) | ||||||
Adjusted Operating Earnings (Loss) Attributable to Shareholders | $ | 670 | $ | 641 | $ | 530 |
Three Months Ended December 31, 2018 | Three Months Ended September 30, 2018 | Three Months Ended December 31, 2017 | ||||||||||
Diluted Earnings (Loss) Per Share Attributable to Shareholders | $ | 0.78 | $ | 1.37 | $ | 3.50 | ||||||
Less - Discontinued operations (gain) loss per share | — | — | 0.02 | |||||||||
Diluted Earnings (Loss) Per Share from Continuing Operations | 0.78 | 1.37 | 3.52 | |||||||||
Add back - Non-operating pension expense (income) per share | 1.05 | 0.06 | 0.92 | |||||||||
Add back - Net special items expense (income) per share | (0.04 | ) | 0.34 | 0.25 | ||||||||
Income tax effect per share - Non-operating pension and special items expense | (0.14 | ) | (0.21 | ) | (3.42 | ) | ||||||
Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders | $ | 1.65 | $ | 1.56 | $ | 1.27 |
In millions | 2018 | 2017 | 2016 | ||||||
Cash provided by operations | $ | 3,226 | $ | 1,757 | $ | 2,478 | |||
Adjustments: | |||||||||
Cash invested in capital projects | (1,572 | ) | (1,391 | ) | (1,348 | ) | |||
Cash contribution to pension plan | — | 1,250 | 750 | ||||||
Cash payment for Kleen Settlement | — | 354 | — | ||||||
Free Cash Flow | $ | 1,654 | $ | 1,970 | $ | 1,880 |
In millions | Three Months Ended December 31, 2018 | Three Months Ended September 30, 2018 | Three Months Ended December 31, 2017 | ||||||
Cash provided by operations | $ | 821 | $ | 941 | $ | 1,188 | |||
Adjustments: | |||||||||
Cash invested in capital projects | (286 | ) | (357 | ) | (456 | ) | |||
Free Cash Flow | $ | 535 | $ | 584 | $ | 732 |
In millions | 2018 | 2017 | 2016 | ||||||
Net Earnings (Loss) From Continuing Operations Attributable to International Paper Company | $ | 1,667 | $ | 2,110 | $ | 802 | |||
Add back (deduct) | |||||||||
Income tax provision (benefit) | 445 | (1,085 | ) | 193 | |||||
Equity (earnings) loss, net of taxes | (336 | ) | (177 | ) | (198 | ) | |||
Noncontrolling interests, net of taxes | 5 | — | (2 | ) | |||||
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings | 1,781 | 848 | 795 | ||||||
Interest expense, net | 536 | 572 | 520 | ||||||
Noncontrolling interests/equity earnings included in operations | (10 | ) | (2 | ) | 1 | ||||
Corporate items, net | 67 | 91 | 121 | ||||||
Corporate special items, net (income) expense | 9 | 76 | 55 | ||||||
Non-operating pension expense | 494 | 484 | 610 | ||||||
$ | 2,877 | $ | 2,069 | $ | 2,102 | ||||
Business Segment Operating Profit | |||||||||
Industrial Packaging | $ | 2,093 | $ | 1,547 | $ | 1,741 | |||
Global Cellulose Fibers | 251 | 65 | (179 | ) | |||||
Printing Papers | 533 | 457 | 540 | ||||||
Business Segment Operating Profit | $ | 2,877 | $ | 2,069 | $ | 2,102 |
• | Industrial Packaging’s profits of $2.1 billion were $546 million higher than in 2017 as the benefits of higher average sales price realizations, net of mix, higher sales volumes and lower input costs were partially offset by higher operating costs and higher maintenance outage costs. In addition, operating profits in 2018 included a charge of $122 million related to the impairment of fixed assets and an intangible asset in our Brazil Packaging business, charges of $47 million related to the optimization of our EMEA Packaging business, charges of $20 million for the removal of abandoned property at our mills and income of $5 million related to a litigation settlement recovery. In 2017, operating profits included a charge of $354 million related to the settlement of the Kleen Products anti-trust class action lawsuit, charges of $14 million for the removal of abandoned property at our mills, a charge of $10 million for the accelerated amortization of an intangible asset in Brazil and a gain of $6 million for a net bargain purchase gain associated with the 2016 acquisition of Holmen Paper's newsprint mill in Madrid, Spain. |
• | Global Cellulose Fibers' operating profit of $251 million was $186 million favorable versus 2017 as the benefits of higher average sales price realizations and improved mix were partially offset by lower sales volumes, higher input costs, higher maintenance outage costs and higher operating costs. Operating profits in 2018 included a charge of $11 million for the removal of abandoned property at our mills. In 2017, operating earnings included $33 million of costs associated with the acquisition and integration of the pulp business acquired in late 2016 from Weyerhaeuser, a charge of $14 million for the amortization of the remaining inventory fair value adjustment associated with that acquisition and a charge of $4 million for the removal of abandoned property at our mills. |
• | Printing Papers’ profits of $533 million represented a $76 million increase in operating profits from 2017. The benefits from higher average sales price realizations, net of mix, were partially offset by lower sales volumes, higher input costs, higher maintenance outage costs and higher operating costs. Operating profits in 2018 included charges of $9 million associated with the announced conversion of a paper machine at our Riverdale mill to containerboard production and a charge of $1 million for the removal of abandoned property at our mills. Operating profits in 2017 included charges of $2 million for the removal of abandoned property at our mills. |
In millions | 2018 | 2017 | 2016 | |||||||||
Earnings from continuing operations attributable to International Paper Company | $ | 1,667 | (a) | $ | 2,110 | (b) | $ | 802 | (c) |
(a) | Includes $166 million of net special items charges and $371 million of non-operating pension expense which included a pre-tax charge of $424 million ($318 million after taxes) for a settlement accounting charge associated with an annuity purchase and transfer of pension obligations for approximately 23,000 retirees. |
(b) | Includes $952 million of net special items income which included a provisional net tax benefit of $1.2 billion related to the enactment of the Tax Cut and Jobs Act and $298 million of non-operating pension expense which included a pre-tax charge of $376 million ($232 million after taxes) for a settlement accounting charge associated with an annuity purchase and transfer of pension obligations for approximately 45,000 retirees. |
(c) | Includes $108 million of net special items charges and $375 million of non-operating pension expense which included a pre-tax charge of $439 million ($270 million after taxes) for a settlement accounting charge associated with payments under a term-vested lump sum buyout. |
Restructuring and Other, Net | ||||||||||||
In millions | 2018 | 2017 | 2016 | |||||||||
Business Segments | ||||||||||||
EMEA Packaging optimization | $ | 47 | (a) | $ | — | $ | — | |||||
Riverdale mill paper machine conversion severance reserve | 3 | (b) | — | — | ||||||||
Turkey mill closure | — | — | 7 | (a) | ||||||||
50 | — | 7 | ||||||||||
Corporate | ||||||||||||
Early debt extinguishment costs (see Note 15) | $ | 10 | $ | 83 | $ | 29 | ||||||
Gain on sale of investment in Liaison Technologies | (31 | ) | — | — | ||||||||
Gain on sale of investment in ArborGen | — | (14 | ) | — | ||||||||
India Packaging business evaluation write-off | — | — | 17 | |||||||||
Gain on sale of investment in Arizona Chemical | — | — | (8 | ) | ||||||||
Riegelwood mill conversion costs net of proceeds from the sale of Carolina Coated Bristols brand | — | — | 9 | |||||||||
Other Items | — | (2 | ) | — | ||||||||
(21 | ) | 67 | 47 | |||||||||
Total | $ | 29 | $ | 67 | $ | 54 |
Other Corporate Items | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Smurfit-Kappa acquisition proposal costs | $ | 12 | $ | — | $ | — | |||
Environmental remediation reserve adjustment | 9 | — | — | ||||||
Legal settlement | 9 | — | — | ||||||
Write-off of certain regulatory pre-engineering costs | — | — | 8 | ||||||
Total | $ | 30 | $ | — | $ | 8 |
Industrial Packaging | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | 15,900 | $ | 15,077 | $ | 14,226 | |||
Operating Profit (Loss) | $ | 2,093 | $ | 1,547 | $ | 1,741 | |||
Brazil Packaging impairment | 122 | — | — | ||||||
EMEA Packaging optimization | 47 | — | — | ||||||
Litigation settlement recovery | (5 | ) | — | — | |||||
Abandoned property removal | 20 | 14 | — | ||||||
Kleen Products anti-trust settlement | — | 354 | — | ||||||
Holmen mill bargain purchase gain | — | (6 | ) | — | |||||
Brazil Packaging wood supply accelerated amortization | — | 10 | — | ||||||
Turkey mill closure | — | — | 7 | ||||||
Asia Packaging restructuring and impairment | — | — | 70 | ||||||
Operating Profit Before Special Items | $ | 2,277 | $ | 1,919 | $ | 1,818 |
North American Industrial Packaging | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales (a) | $ | 14,187 | $ | 13,329 | $ | 12,450 | |||
Operating Profit (Loss) | $ | 2,292 | $ | 1,504 | $ | 1,757 | |||
Litigation settlement recovery | (5 | ) | — | — | |||||
Abandoned property removal | 20 | 14 | — | ||||||
Kleen Products anti-trust settlement | — | 354 | — | ||||||
Operating Profit Before Special Items | $ | 2,307 | $ | 1,872 | $ | 1,757 |
EMEA Industrial Packaging | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | 1,355 | $ | 1,334 | $ | 1,227 | |||
Operating Profit (Loss) | $ | (120 | ) | $ | 6 | $ | 15 | ||
EMEA Packaging optimization | 47 | — | — | ||||||
Holmen mill net bargain purchase gain | — | (6 | ) | — | |||||
Turkey mill closure | — | — | 7 | ||||||
Operating Profit Before Special Items | $ | (73 | ) | $ | — | $ | 22 |
Brazilian Industrial Packaging | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | 232 | $ | 251 | $ | 232 | |||
Operating Profit (Loss) | $ | (151 | ) | $ | (35 | ) | $ | (43 | ) |
Brazil Packaging impairment | 122 | — | — | ||||||
Brazil Packaging wood supply accelerated amortization | — | 10 | — | ||||||
Operating Profit Before Special Items | $ | (29 | ) | $ | (25 | ) | $ | (43 | ) |
European Coated Paperboard | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | 359 | $ | 335 | $ | 327 | |||
Operating Profit (Loss) | $ | 72 | $ | 72 | $ | 93 |
Asian Industrial Packaging | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | — | $ | — | $ | 133 | |||
Operating Profit (Loss) | $ | — | $ | — | $ | (81 | ) | ||
Asia Packaging restructuring and impairment | — | — | 70 | ||||||
Operating Profit Before Special Items | $ | — | $ | — | $ | (11 | ) |
Global Cellulose Fibers | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | 2,819 | $ | 2,551 | $ | 1,092 | |||
Operating Profit (Loss) | $ | 251 | $ | 65 | $ | (179 | ) | ||
Acquisition and integration costs | — | 33 | 31 | ||||||
Abandoned property removal | 11 | 4 | — | ||||||
Inventory fair value step-up amortization | — | 14 | 19 | ||||||
Operating Profit Before Special Items | $ | 262 | $ | 116 | $ | (129 | ) |
Printing Papers | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | 4,375 | $ | 4,157 | $ | 4,058 | |||
Operating Profit (Loss) | $ | 533 | $ | 457 | $ | 540 | |||
Riverdale mill conversion | 9 | — | — | ||||||
Abandoned property removal | 1 | 2 | — | ||||||
Operating Profit Before Special Items | $ | 543 | $ | 459 | $ | 540 |
North American Printing Papers | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | 1,956 | $ | 1,833 | $ | 1,890 | |||
Operating Profit (Loss) | $ | 160 | $ | 132 | $ | 236 | |||
Riverdale mill conversion | 9 | — | — | ||||||
Abandoned property removal | 1 | 2 | — | ||||||
Operating Profit Before Special Items | $ | 170 | $ | 134 | $ | 236 |
Brazilian Papers | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales (a) | $ | 978 | $ | 972 | $ | 897 | |||
Operating Profit (Loss) | $ | 227 | $ | 194 | $ | 173 |
European Papers | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | 1,252 | $ | 1,187 | $ | 1,109 | |||
Operating Profit (Loss) | $ | 129 | $ | 136 | $ | 142 |
Indian Papers | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | 202 | $ | 189 | $ | 167 | |||
Operating Profit (Loss) | $ | 17 | $ | (5 | ) | $ | (11 | ) |
In millions | 2018 | 2017 | 2016 | ||||||
Industrial Packaging | $ | 1,061 | $ | 836 | $ | 832 | |||
Global Cellulose Fibers | 183 | 188 | 174 | ||||||
Printing Papers | 303 | 235 | 215 | ||||||
Subtotal | 1,547 | 1,259 | 1,221 | ||||||
Corporate and other | 25 | 21 | 20 | ||||||
Capital Spending | $ | 1,572 | $ | 1,280 | $ | 1,241 |
In millions | 2018 | 2017 | 2016 | ||||||
Debt reductions (a) | $ | 780 | $ | 993 | $ | 266 | |||
Pre-tax early debt extinguishment costs (b) | 10 | 83 | 29 |
(a) | Reductions related to notes with interest rates ranging from 1.57% to 9.38% with original maturities from 2018 to 2032 for the years ended December 31, 2018, 2017 and 2016. |
(b) | Amounts are included in Restructuring and other charges in the accompanying consolidated statements of operations. |
In millions | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | ||||||||||||
Debt maturities | $ | 639 | $ | 83 | $ | 441 | $ | 487 | $ | 348 | $ | 8,656 | ||||||
Lease obligations | 160 | 125 | 77 | 49 | 28 | 118 | ||||||||||||
Purchase obligations (a) | 3,211 | 654 | 578 | 487 | 413 | 1,857 | ||||||||||||
Total (b) | $ | 4,010 | $ | 862 | $ | 1,096 | $ | 1,023 | $ | 789 | $ | 10,631 |
(a) | Includes $1.4 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 $1.1 billion relating to fiber supply agreements assumed in conjunction with the 2016 acquisition of Weyerhaeuser's pulp business. |
(b) | Not included in the above table due to the uncertainty of the amount and timing of the payment are unrecognized tax benefits of approximately $193 million. Also not included in the above table is $206 million of Deemed Repatriation Transition Tax associated with the 2017 Tax Cuts and Jobs Act which will be settled from 2019 - 2026. |
In millions | Benefit Obligation | Fair Value of Plan Assets | ||||
U.S. qualified pension | $ | 10,124 | $ | 8,735 | ||
U.S. nonqualified pension | 343 | — | ||||
Non-U.S. pension | 215 | 161 |
2018 | 2017 | 2016 | ||||
Discount rate | 4.30 | % | 3.60 | % | 4.10 | % |
Rate of compensation increase | 2.25 | % | 3.75 | % | 3.75 | % |
Year | Return | Year | Return | ||
2018 | (3.0 | )% | 2013 | 14.1 | % |
2017 | 19.3 | % | 2012 | 14.1 | % |
2016 | 7.1 | % | 2011 | 2.5 | % |
2015 | 1.3 | % | 2010 | 15.1 | % |
2014 | 6.4 | % | 2009 | 23.8 | % |
In millions | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||
Pension expense | |||||||||||||||
U.S. plans | $ | 632 | $ | 717 | $ | 809 | $ | 461 | $ | 387 | |||||
Non-U.S. plans | 4 | 5 | 4 | 6 | — | ||||||||||
Net expense | $ | 636 | $ | 722 | $ | 813 | $ | 467 | $ | 387 |
In millions | 2020 | 2019 | ||||
Pension expense | ||||||
U.S. plans | $ | 88 | $ | 103 | ||
Non-U.S. plans | 4 | 4 | ||||
Net expense | $ | 92 | $ | 107 |
In millions, except per share amounts, for the years ended December 31 | 2018 | 2017 | 2016 | ||||||
NET SALES | $ | 23,306 | $ | 21,743 | $ | 19,495 | |||
COSTS AND EXPENSES | |||||||||
Cost of products sold | 15,555 | 14,802 | 13,419 | ||||||
Selling and administrative expenses | 1,723 | 1,621 | 1,458 | ||||||
Depreciation, amortization and cost of timber harvested | 1,328 | 1,343 | 1,124 | ||||||
Distribution expenses | 1,567 | 1,434 | 1,237 | ||||||
Taxes other than payroll and income taxes | 171 | 169 | 154 | ||||||
Restructuring and other charges, net | 29 | 67 | 54 | ||||||
Net (gains) losses on sales and impairments of businesses | 122 | 9 | 70 | ||||||
Litigation settlement | — | 354 | — | ||||||
Net bargain purchase gain on acquisition of business | — | (6 | ) | — | |||||
Interest expense, net | 536 | 572 | 520 | ||||||
Non-operating pension expense | 494 | 530 | 664 | ||||||
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY EARNINGS (LOSSES) | 1,781 | 848 | 795 | ||||||
Income tax provision (benefit) | 445 | (1,085 | ) | 193 | |||||
Equity earnings (loss), net of taxes | 336 | 177 | 198 | ||||||
EARNINGS (LOSS) FROM CONTINUING OPERATIONS | 1,672 | 2,110 | 800 | ||||||
Discontinued operations, net of taxes | 345 | 34 | 102 | ||||||
NET EARNINGS (LOSS) | 2,017 | 2,144 | 902 | ||||||
Less: Net earnings (loss) attributable to noncontrolling interests | 5 | — | (2 | ) | |||||
NET EARNINGS (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY | $ | 2,012 | $ | 2,144 | $ | 904 | |||
BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | |||||||||
Earnings (loss) from continuing operations | $ | 4.07 | $ | 5.11 | $ | 1.95 | |||
Discontinued operations, net of taxes | 0.84 | 0.08 | 0.25 | ||||||
Net earnings (loss) | $ | 4.91 | $ | 5.19 | $ | 2.20 | |||
DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | |||||||||
Earnings (loss) from continuing operations | $ | 4.02 | $ | 5.05 | $ | 1.93 | |||
Discontinued operations, net of taxes | 0.83 | 0.08 | 0.25 | ||||||
Net earnings (loss) | $ | 4.85 | $ | 5.13 | $ | 2.18 | |||
AMOUNTS ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | |||||||||
Earnings (loss) from continuing operations | $ | 1,667 | $ | 2,110 | $ | 802 | |||
Discontinued operations, net of taxes | 345 | 34 | 102 | ||||||
Net earnings (loss) | $ | 2,012 | $ | 2,144 | $ | 904 |
In millions for the years ended December 31 | 2018 | 2017 | 2016 | ||||||
NET EARNINGS (LOSS) | $ | 2,017 | $ | 2,144 | $ | 902 | |||
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | |||||||||
Amortization of pension and postretirement prior service costs and net loss: | |||||||||
U.S. plans (less tax of $196, $280 and $343) | 588 | 486 | 545 | ||||||
Non-U.S. plans (less tax of $0, $0 and $0) | 1 | — | — | ||||||
Pension and postretirement liability adjustments: | |||||||||
U.S. plans (less tax of $6, $69 and $283) | 18 | 56 | (451 | ) | |||||
Non-U.S. plans (less tax of $1, $1 and $4) | 4 | 3 | 3 | ||||||
Change in cumulative foreign currency translation adjustment (less tax of $1, $0 and $0) | (473 | ) | 177 | 260 | |||||
Net gains/losses on cash flow hedging derivatives: | |||||||||
Net gains (losses) arising during the period (less tax of $5, $4 and $3) | (10 | ) | 15 | (6 | ) | ||||
Reclassification adjustment for (gains) losses included in net earnings (less tax of $1, $2 and $3) | 2 | (7 | ) | (7 | ) | ||||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | 130 | 730 | 344 | ||||||
Comprehensive Income (Loss) | 2,147 | 2,874 | 1,246 | ||||||
Net (Earnings) Loss Attributable to Noncontrolling Interests | (5 | ) | — | 2 | |||||
Other Comprehensive (Income) Loss Attributable to Noncontrolling Interests | 3 | (1 | ) | 2 | |||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY | $ | 2,145 | $ | 2,873 | $ | 1,250 |
In millions, except per share amounts, at December 31 | 2018 | 2017 | ||||
ASSETS | ||||||
Current Assets | ||||||
Cash and temporary investments | $ | 589 | $ | 1,018 | ||
Accounts and notes receivable (less allowances of $81 in 2018 and $73 in 2017) | 3,521 | 3,287 | ||||
Contract assets | 395 | — | ||||
Inventories | 2,241 | 2,313 | ||||
Assets held for sale | — | 1,377 | ||||
Other current assets | 250 | 282 | ||||
Total Current Assets | 6,996 | 8,277 | ||||
Plants, Properties and Equipment, net | 13,067 | 13,265 | ||||
Forestlands | 402 | 448 | ||||
Investments | 1,648 | 390 | ||||
Financial Assets of Special Purpose Entities (Note 14) | 7,070 | 7,051 | ||||
Goodwill | 3,374 | 3,411 | ||||
Deferred Charges and Other Assets | 1,019 | 1,061 | ||||
TOTAL ASSETS | $ | 33,576 | $ | 33,903 | ||
LIABILITIES AND EQUITY | ||||||
Current Liabilities | ||||||
Notes payable and current maturities of long-term debt | $ | 639 | $ | 311 | ||
Accounts payable | 2,413 | 2,458 | ||||
Accrued payroll and benefits | 535 | 485 | ||||
Liabilities held for sale | — | 805 | ||||
Other accrued liabilities | 1,107 | 1,043 | ||||
Total Current Liabilities | 4,694 | 5,102 | ||||
Long-Term Debt | 10,015 | 10,846 | ||||
Nonrecourse Financial Liabilities of Special Purpose Entities (Note 14) | 6,298 | 6,291 | ||||
Deferred Income Taxes | 2,600 | 2,291 | ||||
Pension Benefit Obligation | 1,762 | 1,939 | ||||
Postretirement and Postemployment Benefit Obligation | 264 | 326 | ||||
Other Liabilities | 560 | 567 | ||||
Commitments and Contingent Liabilities (Note 13) | ||||||
Equity | ||||||
Common stock $1 par value, 2018 - 448.9 shares & 2017 - 448.9 shares | 449 | 449 | ||||
Paid-in capital | 6,280 | 6,206 | ||||
Retained earnings | 7,465 | 6,180 | ||||
Accumulated other comprehensive loss | (4,500 | ) | (4,633 | ) | ||
9,694 | 8,202 | |||||
Less: Common stock held in treasury, at cost, 2018 – 48.310 shares and 2017 – 35.975 shares | 2,332 | 1,680 | ||||
Total International Paper Shareholders’ Equity | 7,362 | 6,522 | ||||
Noncontrolling interests | 21 | 19 | ||||
Total Equity | 7,383 | 6,541 | ||||
TOTAL LIABILITIES AND EQUITY | $ | 33,576 | $ | 33,903 |
In millions for the years ended December 31 | 2018 | 2017 | 2016 | ||||||
OPERATING ACTIVITIES | |||||||||
Net earnings (loss) | $ | 2,017 | $ | 2,144 | $ | 902 | |||
Depreciation, amortization, and cost of timber harvested | 1,328 | 1,423 | 1,227 | ||||||
Deferred income tax provision (benefit), net | 133 | (1,113 | ) | 136 | |||||
Restructuring and other charges, net | 29 | 67 | 54 | ||||||
Pension plan contributions | — | (1,250 | ) | (750 | ) | ||||
Periodic pension expense, net | 632 | 717 | 809 | ||||||
Net gain on transfer of North American Consumer Packaging business | (488 | ) | — | — | |||||
Net bargain purchase gain on acquisition of business | — | (6 | ) | — | |||||
Net (gains) losses on sales and impairments of businesses | 122 | 9 | 70 | ||||||
Equity method dividends received | 153 | 133 | 58 | ||||||
Equity (earnings) losses, net | (336 | ) | (177 | ) | (198 | ) | |||
Other, net | 75 | 212 | 99 | ||||||
Changes in current assets and liabilities | |||||||||
Accounts and notes receivable | (342 | ) | (370 | ) | (94 | ) | |||
Contract assets | (32 | ) | — | — | |||||
Inventories | (236 | ) | (87 | ) | 11 | ||||
Accounts payable and accrued liabilities | 151 | 114 | 98 | ||||||
Interest payable | (8 | ) | 1 | 41 | |||||
Other | 28 | (60 | ) | 15 | |||||
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES | 3,226 | 1,757 | 2,478 | ||||||
INVESTMENT ACTIVITIES | |||||||||
Invested in capital projects | (1,572 | ) | (1,391 | ) | (1,348 | ) | |||
Acquisitions, net of cash acquired | (8 | ) | (45 | ) | (2,228 | ) | |||
Net settlement on transfer of North American Consumer Packaging business | (40 | ) | — | — | |||||
Proceeds from divestitures, net of cash divested | — | 4 | 108 | ||||||
Proceeds from sale of fixed assets | 23 | 26 | 19 | ||||||
Other | 28 | 15 | (49 | ) | |||||
CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES | (1,569 | ) | (1,391 | ) | (3,498 | ) | |||
FINANCING ACTIVITIES | |||||||||
Repurchases of common stock and payments of restricted stock tax withholding | (732 | ) | (47 | ) | (132 | ) | |||
Issuance of debt | 490 | 1,907 | 3,830 | ||||||
Reduction of debt | (1,008 | ) | (1,424 | ) | (1,938 | ) | |||
Change in book overdrafts | (1 | ) | 26 | — | |||||
Dividends paid | (789 | ) | (769 | ) | (733 | ) | |||
Net debt tender premiums paid | (6 | ) | (84 | ) | (31 | ) | |||
Other | — | (8 | ) | (14 | ) | ||||
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES | (2,046 | ) | (399 | ) | 982 | ||||
Effect of Exchange Rate Changes on Cash | (40 | ) | 18 | 21 | |||||
Change in Cash and Temporary Investments | (429 | ) | (15 | ) | (17 | ) | |||
Cash and Temporary Investments | |||||||||
Beginning of the period | 1,018 | 1,033 | 1,050 | ||||||
End of the period | $ | 589 | $ | 1,018 | $ | 1,033 |
In millions | Common Stock Issued | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total International Paper Shareholders’ Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||
BALANCE, JANUARY 1, 2016 | $ | 449 | $ | 6,243 | $ | 4,649 | $ | (5,708 | ) | $ | 1,749 | $ | 3,884 | $ | 25 | $ | 3,909 | |||||||
Issuance of stock for various plans, net | — | (6 | ) | — | — | (128 | ) | 122 | — | 122 | ||||||||||||||
Repurchase of stock | — | — | — | — | 132 | (132 | ) | — | (132 | ) | ||||||||||||||
Dividends | — | — | (743 | ) | — | — | (743 | ) | — | (743 | ) | |||||||||||||
Transactions of equity method investees | — | (48 | ) | — | — | — | (48 | ) | — | (48 | ) | |||||||||||||
Divestiture of noncontrolling interests | — | — | — | — | — | — | (3 | ) | (3 | ) | ||||||||||||||
Other | — | — | 8 | — | — | 8 | — | 8 | ||||||||||||||||
Comprehensive income (loss) | — | — | 904 | 346 | — | 1,250 | (4 | ) | 1,246 | |||||||||||||||
BALANCE, DECEMBER 31, 2016 | 449 | 6,189 | 4,818 | (5,362 | ) | 1,753 | 4,341 | 18 | 4,359 | |||||||||||||||
Issuance of stock for various plans, net | — | 42 | — | — | (120 | ) | 162 | — | 162 | |||||||||||||||
Repurchase of stock | — | — | — | — | 47 | (47 | ) | — | (47 | ) | ||||||||||||||
Dividends | — | — | (782 | ) | — | — | (782 | ) | — | (782 | ) | |||||||||||||
Transactions of equity method investees | — | (25 | ) | — | — | — | (25 | ) | — | (25 | ) | |||||||||||||
Comprehensive income (loss) | — | — | 2,144 | 729 | — | 2,873 | 1 | 2,874 | ||||||||||||||||
BALANCE, DECEMBER 31, 2017 | 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 | — | — | (800 | ) | — | — | (800 | ) | — | (800 | ) | |||||||||||||
Transactions of equity method investees | — | 12 | — | — | — | 12 | — | 12 | ||||||||||||||||
Comprehensive income (loss) | — | — | 2,012 | 133 | — | 2,145 | 2 | 2,147 | ||||||||||||||||
BALANCE, DECEMBER 31, 2018 | $ | 449 | $ | 6,280 | $ | 7,465 | $ | (4,500 | ) | $ | 2,332 | $ | 7,362 | $ | 21 | $ | 7,383 |
Consolidated Statement of Operations | |||||||||||
2018 | |||||||||||
In millions, except per share amounts | Balances As Reported Under ASC 606 | Balances Without Adoption of ASC 606 | Impact of Adoption Increase/(Decrease) | ||||||||
Net sales | $ | 23,306 | $ | 23,274 | $ | 32 | |||||
Cost of products sold | 15,555 | 15,535 | 20 | ||||||||
Distribution expenses | 1,567 | 1,563 | 4 | ||||||||
Income tax provision (benefit), net | 445 | 443 | 2 | ||||||||
Earnings (loss) from continuing operations | 1,672 | 1,666 | 6 | ||||||||
Net earnings (loss) | 2,017 | 2,011 | 6 | ||||||||
Earnings per share attributable to International Paper Company Shareholders | |||||||||||
Basic | $ | 4.91 | $ | 4.90 | $ | 0.01 | |||||
Diluted | 4.85 | 4.84 | 0.01 |
Consolidated Balance Sheet | |||||||||||
2018 | |||||||||||
In millions, except per share amounts | Balances As Reported Under ASC 606 | Balances Without Adoption of ASC 606 | Impact of Adoption Increase/(Decrease) | ||||||||
Contract assets | $ | 395 | $ | — | $ | 395 | |||||
Inventories | 2,241 | 2,511 | (270 | ) | |||||||
Other current assets | 250 | 278 | (28 | ) | |||||||
Other accrued liabilities | 1,107 | 1,088 | 19 | ||||||||
Deferred income taxes | 2,600 | 2,601 | (1 | ) | |||||||
Retained earnings | 7,465 | 7,386 | 79 |
Consolidated Statement of Cash Flows | |||||||||||
2018 | |||||||||||
In millions, except per share amounts | Balances As Reported Under ASC 606 | Balances Without Adoption of ASC 606 | Impact of Adoption Increase/(Decrease) | ||||||||
Net earnings (loss) | $ | 2,017 | $ | 2,011 | $ | 6 | |||||
Deferred income tax provision (benefit), net | 133 | 159 | (26 | ) | |||||||
Contract assets | (32 | ) | — | (32 | ) | ||||||
Inventories | (236 | ) | (256 | ) | 20 | ||||||
Accounts payable and accrued liabilities | 151 | 147 | 4 | ||||||||
Other | 28 | — | 28 |
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 | — | 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 |
In millions | Contract Assets (Short-Term) | Contract Liabilities (Short-Term) | ||||||
Beginning Balance - January 1, 2018 | $ | 366 | $ | 53 | ||||
Ending Balance - December 31, 2018 | 395 | 56 | ||||||
Increase / (Decrease) | $ | 29 | $ | 3 |
In millions, except per share amounts | 2018 | 2017 | 2016 | ||||||||
Earnings (loss) from continuing operations attributable to International Paper common shareholders | $ | 1,667 | $ | 2,110 | $ | 802 | |||||
Weighted average common shares outstanding | 409.1 | 412.7 | 411.1 | ||||||||
Effect of dilutive securities: | |||||||||||
Restricted performance share plan | 5.1 | 5.0 | 4.5 | ||||||||
Weighted average common shares outstanding – assuming dilution | 414.2 | 417.7 | 415.6 | ||||||||
Basic earnings (loss) per share from continuing operations | $ | 4.07 | $ | 5.11 | $ | 1.95 | |||||
Diluted earnings (loss) per share from continuing operations | $ | 4.02 | $ | 5.05 | $ | 1.93 |
In millions | 2018 | 2017 | 2016 | ||||||
Defined Benefit Pension and Postretirement Adjustments | |||||||||
Balance at beginning of period | $ | (2,527 | ) | $ | (3,072 | ) | $ | (3,169 | ) |
Other comprehensive income (loss) before reclassifications | 22 | 59 | (448 | ) | |||||
Amounts reclassified from accumulated other comprehensive income | 589 | 486 | 545 | ||||||
Balance at end of period | (1,916 | ) | (2,527 | ) | (3,072 | ) | |||
Change in Cumulative Foreign Currency Translation Adjustments | |||||||||
Balance at beginning of period | (2,111 | ) | (2,287 | ) | (2,549 | ) | |||
Other comprehensive income (loss) before reclassifications | (475 | ) | 178 | 263 | |||||
Amounts reclassified from accumulated other comprehensive income | 2 | (1 | ) | (3 | ) | ||||
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest | 3 | (1 | ) | 2 | |||||
Balance at end of period | (2,581 | ) | (2,111 | ) | (2,287 | ) | |||
Net Gains and Losses on Cash Flow Hedging Derivatives | |||||||||
Balance at beginning of period | 5 | (3 | ) | 10 | |||||
Other comprehensive income (loss) before reclassifications | (10 | ) | 15 | (6 | ) | ||||
Amounts reclassified from accumulated other comprehensive income | 2 | (7 | ) | (7 | ) | ||||
Balance at end of period | (3 | ) | 5 | (3 | ) | ||||
Total Accumulated Other Comprehensive Income (Loss) at End of Period | $ | (4,500 | ) | $ | (4,633 | ) | $ | (5,362 | ) |
Amount Reclassified from Accumulated Other Comprehensive Income | Location of Amount Reclassified from AOCI | ||||||||||
2018 | 2017 | 2016 | |||||||||
In millions | |||||||||||
Defined benefit pension and postretirement items: | |||||||||||
Prior-service costs | $ | (11 | ) | $ | (33 | ) | $ | (37 | ) | (a) | Non-operating pension expense |
Actuarial gains/(losses) | (774 | ) | (733 | ) | (851 | ) | (a) | Non-operating pension expense | |||
Total pre-tax amount | (785 | ) | (766 | ) | (888 | ) | |||||
Tax (expense)/benefit | 196 | 280 | 343 | ||||||||
Net of tax | (589 | ) | (486 | ) | (545 | ) | |||||
Change in cumulative foreign currency translation adjustments: | |||||||||||
Business acquisitions/divestiture | (2 | ) | 1 | 3 | (b) | Discontinued operations, net of taxes | |||||
Tax (expense)/benefit | — | — | — | ||||||||
Net of tax | (2 | ) | 1 | 3 | |||||||
Net gains and losses on cash flow hedging derivatives: | |||||||||||
Foreign exchange contracts | (3 | ) | 9 | 10 | (c) | Cost of products sold | |||||
Total pre-tax amount | (3 | ) | 9 | 10 | |||||||
Tax (expense)/benefit | 1 | (2 | ) | (3 | ) | ||||||
Net of tax | (2 | ) | 7 | 7 | |||||||
Total reclassifications for the period, net of tax | $ | (593 | ) | $ | (478 | ) | $ | (535 | ) |
In millions | 2018 | |||
EMEA packaging restructuring (a) | $ | 47 | ||
Gain on sale of investment in Liaison Technologies Inc. | (31 | ) | ||
Early debt extinguishment costs (see Note 15) | 10 | |||
Riverdale mill conversion severance (b) | 3 | |||
Total | $ | 29 |
In millions | 2017 | |||
Early debt extinguishment costs (see Note 15) | $ | 83 | ||
Gain on sale of investment in ArborGen | (14 | ) | ||
Other | (2 | ) | ||
Total | $ | 67 |
In millions | 2016 | |||
Early debt extinguishment costs (see Note 15) | $ | 29 | ||
India packaging evaluation write-off | 17 | |||
Gain on sale of investment in Arizona Chemical | (8 | ) | ||
Riegelwood mill conversion costs (a) | 9 | |||
Turkey mill closure (b) | 7 | |||
Total | $ | 54 |
(a) | Includes $3 million of accelerated depreciation, $3 million of inventory write-off charges and $3 million of other charges. |
(b) | Includes $4 million of accelerated depreciation and $3 million of severance charges which is related to 85 employees. |
In millions | June 30, 2017 | ||
Cash and temporary investments | $ | 1 | |
Accounts and notes receivable | 7 | ||
Inventory | 3 | ||
Plants, properties and equipment | 31 | ||
Goodwill | 4 | ||
Other intangible assets | 5 | ||
Deferred charges and other assets | 4 | ||
Total assets acquired | 55 | ||
Accounts payable and accrued liabilities | 4 | ||
Long-term debt | 11 | ||
Other long-term liabilities | 2 | ||
Total liabilities assumed | 17 | ||
Net assets acquired | $ | 38 |
In millions | December 1, 2016 | ||
Cash and temporary investments | $ | 12 | |
Accounts and notes receivable | 195 | ||
Inventory | 238 | ||
Other current assets | 11 | ||
Plants, properties and equipment | 1,711 | ||
Goodwill | 52 | ||
Other intangible assets | 212 | ||
Deferred charges and other assets | 6 | ||
Total assets acquired | 2,437 | ||
Accounts payable and accrued liabilities | 114 | ||
Long-term debt | 104 | ||
Other long-term liabilities | 28 | ||
Total liabilities assumed | 246 | ||
Net assets acquired | $ | 2,191 |
In millions | Estimated Fair Value | Average Remaining Useful Life | |||
Asset Class: | (at acquisition date) | ||||
Customer relationships and lists | $ | 95 | 24 years | ||
Trade names, patents, trademarks and developed technology | 113 | 8 years | |||
Other | 4 | 10 years | |||
Total | $ | 212 |
In millions | June 30, 2016 | ||
Current assets | $ | 14 | |
Equity method investments | 14 | ||
Plants, properties and equipment | 60 | ||
Other long-term assets | 5 | ||
Total assets acquired | 93 | ||
Short-term liabilities | 9 | ||
Long-term liabilities | 16 | ||
Total liabilities assumed | 25 | ||
Net assets acquired | $ | 68 |
In millions | 2018 | 2017 | 2016 | ||||||
Net Sales | $ | — | $ | 1,559 | $ | 1,584 | |||
Costs and Expenses | |||||||||
Cost of products sold | — | 1,179 | 1,095 | ||||||
Selling and administrative expenses | 25 | 110 | 91 | ||||||
Depreciation, amortization and cost of timber harvested | — | 80 | 103 | ||||||
Distribution expenses | — | 126 | 124 | ||||||
Taxes other than payroll and income taxes | — | 11 | 10 | ||||||
(Gain) loss on transfer of business | (488 | ) | — | — | |||||
Interest expense, net | — | 1 | — | ||||||
Earnings (Loss) Before Income Taxes and Equity Earnings | 463 | 52 | 161 | ||||||
Income tax provision (benefit) | 118 | 18 | 54 | ||||||
Discontinued Operations, Net of Taxes | $ | 345 | $ | 34 | $ | 107 |
In millions | 2017 | ||
Accounts and notes receivable | $ | 143 | |
Inventories | 185 | ||
Other current assets | 3 | ||
Plants, properties and equipment | 1,021 | ||
Deferred charges and other assets | 25 | ||
Total Assets Held for Sale | $ | 1,377 | |
Accounts payable | $ | 104 | |
Accrued payroll and benefits | 25 | ||
Other accrued liabilities | 17 | ||
Long-term debt | 651 | ||
Other liabilities | 8 | ||
Total Liabilities Held for Sale | $ | 805 |
In millions at December 31 | 2018 | 2017 | ||||
Accounts and notes receivable: | ||||||
Trade | $ | 3,249 | $ | 3,017 | ||
Other | 272 | 270 | ||||
Total | $ | 3,521 | $ | 3,287 |
In millions at December 31 | 2018 | 2017 | ||||
Raw materials | $ | 260 | $ | 274 | ||
Finished pulp, paper and packaging products | 1,241 | 1,337 | ||||
Operating supplies | 641 | 615 | ||||
Other | 99 | 87 | ||||
Inventories | $ | 2,241 | $ | 2,313 |
In millions at December 31 | 2018 | 2017 | ||||
Pulp, paper and packaging facilities | $ | 32,329 | $ | 32,523 | ||
Other properties and equipment | 1,232 | 1,291 | ||||
Gross cost | 33,561 | 33,814 | ||||
Less: Accumulated depreciation | 20,494 | 20,549 | ||||
Plants, properties and equipment, net | $ | 13,067 | $ | 13,265 |
In millions | 2018 | 2017 | 2016 | ||||||
Interest expense | $ | 734 | $ | 758 | $ | 695 | |||
Interest income | 198 | 186 | 175 | ||||||
Capitalized interest costs | 30 | 25 | 28 |
In millions | 2018 | ||
Current assets | $ | 1,757 | |
Noncurrent assets | 5,292 | ||
Current liabilities | 1,148 | ||
Noncurrent liabilities | 3,156 |
In millions | 2018 | ||
Net sales | $ | 6,023 | |
Gross profit | 946 | ||
Income from continuing operations | 336 | ||
Net income | 337 |
In millions | 2018 | 2017 | |||||
Current assets | $ | 981 | $ | 689 | |||
Noncurrent assets | 1,710 | 1,696 | |||||
Current liabilities | 545 | 1,039 | |||||
Noncurrent liabilities | 1,470 | 972 | |||||
Noncontrolling interests | 11 | 6 |
In millions | 2018 | 2017 | 2016 | ||||||||
Net sales | $ | 2,713 | $ | 2,150 | $ | 1,927 | |||||
Gross profit | 1,549 | 1,047 | 957 | ||||||||
Income from continuing operations | 592 | 379 | 419 | ||||||||
Net income | 571 | 362 | 391 |
In millions | Industrial Packaging | Global Cellulose Fibers | Printing Papers | Total | |||||||||||
Balance as of December 31, 2016 | |||||||||||||||
Goodwill | $ | 3,375 | $ | 19 | $ | 2,143 | $ | 5,537 | |||||||
Accumulated impairment losses | (296 | ) | — | (1,877 | ) | (2,173 | ) | ||||||||
3,079 | 19 | 266 | 3,364 | ||||||||||||
Currency translation and other (a) | 3 | — | 8 | 11 | |||||||||||
Additions/reductions | 4 | (b) | 33 | (c) | (1 | ) | 36 | ||||||||
Balance as of December 31, 2017 | |||||||||||||||
Goodwill | 3,382 | 52 | 2,150 | 5,584 | |||||||||||
Accumulated impairment losses | (296 | ) | — | (1,877 | ) | (2,173 | ) | ||||||||
3,086 | 52 | 273 | 3,411 | ||||||||||||
Currency translation and other (a) | (1 | ) | — | (34 | ) | (35 | ) | ||||||||
Additions/reductions | (2 | ) | (d) | — | — | (2 | ) | ||||||||
Balance as of December 31, 2018 | |||||||||||||||
Goodwill | 3,379 | 52 | 2,116 | 5,547 | |||||||||||
Accumulated impairment losses | (296 | ) | — | (1,877 | ) | (2,173 | ) | ||||||||
Total | $ | 3,083 | $ | 52 | $ | 239 | $ | 3,374 |
(a) | Represents the effects of foreign currency translations and reclassifications. |
(b) | Reflects the acquisition of the Moroccan box plant. |
(c) | Reflects the acquisition and purchase price adjustments of the Weyerhaeuser pulp business. |
(d) | Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in the U.S. |
2018 | 2017 | |||||||||||||||||
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 | $ | 247 | $ | 295 | $ | 610 | $ | 247 | $ | 363 | ||||||
Non-compete agreements | 67 | 67 | — | 72 | 72 | — | ||||||||||||
Tradenames, patents and trademarks, and developed technology | 174 | 90 | 84 | 172 | 72 | 100 | ||||||||||||
Land and water rights | 8 | 2 | 6 | 8 | 2 | 6 | ||||||||||||
Software | 26 | 25 | 1 | 24 | 23 | 1 | ||||||||||||
Other | 30 | 23 | 7 | 38 | 26 | 12 | ||||||||||||
Total | $ | 847 | $ | 454 | $ | 393 | $ | 924 | $ | 442 | $ | 482 |
In millions | 2018 | 2017 | 2016 | ||||||
Amortization expense related to intangible assets | $ | 59 | $ | 77 | $ | 54 |
In millions | 2018 | 2017 | 2016 | ||||||
Earnings (loss) | |||||||||
U.S. | $ | 1,450 | $ | 297 | $ | 411 | |||
Non-U.S. | 331 | 551 | 384 | ||||||
Earnings (loss) from continuing operations before income taxes and equity earnings | $ | 1,781 | $ | 848 | $ | 795 |
In millions | 2018 | 2017 | 2016 | ||||||
Current tax provision (benefit) | |||||||||
U.S. federal | $ | 227 | $ | (73 | ) | $ | (7 | ) | |
U.S. state and local | 37 | (23 | ) | (12 | ) | ||||
Non-U.S. | 165 | 112 | 76 | ||||||
$ | 429 | $ | 16 | $ | 57 | ||||
Deferred tax provision (benefit) | |||||||||
U.S. federal | $ | 12 | $ | (1,150 | ) | $ | 134 | ||
U.S. state and local | 50 | 9 | 27 | ||||||
Non-U.S. | (46 | ) | 40 | (25 | ) | ||||
$ | 16 | $ | (1,101 | ) | $ | 136 | |||
Income tax provision (benefit) | $ | 445 | $ | (1,085 | ) | $ | 193 |
In millions | 2018 | 2017 | 2016 | ||||||
Earnings (loss) from continuing operations before income taxes and equity earnings | $ | 1,781 | $ | 848 | $ | 795 | |||
Statutory U.S. income tax rate | 21 | % | 35 | % | 35 | % | |||
Tax expense (benefit) using statutory U.S. income tax rate | 374 | 297 | 278 | ||||||
State and local income taxes | 72 | (7 | ) | 8 | |||||
Impact of rate differential on non-U.S. permanent differences and earnings | 35 | (36 | ) | (26 | ) | ||||
Tax expense (benefit) on manufacturing activities | (1 | ) | 23 | (10 | ) | ||||
Non-deductible business expenses | 27 | 7 | 9 | ||||||
Sale of non-strategic assets | — | — | 12 | ||||||
Tax audits | 28 | — | (14 | ) | |||||
Subsidiary liquidation | — | — | (63 | ) | |||||
Deemed repatriation, net of foreign tax credits | (25 | ) | 231 | — | |||||
U.S. federal tax rate change | (13 | ) | (1,451 | ) | — | ||||
Foreign derived intangible income deduction | (25 | ) | — | — | |||||
US tax on non-U.S. earnings (GILTI and Subpart F) | 19 | 44 | 21 | ||||||
Foreign tax credits | (15 | ) | (96 | ) | (11 | ) | |||
General business and other tax credits | (26 | ) | (86 | ) | (15 | ) | |||
Other, net | (5 | ) | (11 | ) | 4 | ||||
Income tax provision (benefit) | $ | 445 | $ | (1,085 | ) | $ | 193 | ||
Effective income tax rate | 25 | % | (128 | )% | 24 | % |
In millions | 2018 | 2017 | ||||
Deferred income tax assets: | ||||||
Postretirement benefit accruals | $ | 89 | $ | 102 | ||
Pension obligations | 465 | 516 | ||||
Alternative minimum and other tax credits | 291 | 416 | ||||
Net operating and capital loss carryforwards | 594 | 665 | ||||
Compensation reserves | 191 | 174 | ||||
Other | 164 | 139 | ||||
Gross deferred income tax assets | 1,794 | 2,012 | ||||
Less: valuation allowance (a) | (441 | ) | (429 | ) | ||
Net deferred income tax asset | $ | 1,353 | $ | 1,583 | ||
Deferred income tax liabilities: | ||||||
Intangibles | $ | (152 | ) | $ | (139 | ) |
Investments | (255 | ) | — | |||
Plants, properties and equipment | (1,826 | ) | (2,000 | ) | ||
Forestlands, related installment sales, and investment in subsidiary | (1,453 | ) | (1,454 | ) | ||
Gross deferred income tax liabilities | $ | (3,686 | ) | $ | (3,593 | ) |
Net deferred income tax liability | $ | (2,333 | ) | $ | (2,010 | ) |
In millions | 2018 | 2017 | 2016 | ||||||
Balance at January 1 | $ | (188 | ) | $ | (98 | ) | $ | (150 | ) |
(Additions) reductions based on tax positions related to current year | (7 | ) | (54 | ) | (4 | ) | |||
(Additions) for tax positions of prior years | (37 | ) | (40 | ) | (3 | ) | |||
Reductions for tax positions of prior years | 5 | 4 | 33 | ||||||
Settlements | 2 | 6 | 19 | ||||||
Expiration of statutes of limitations | 2 | 1 | 5 | ||||||
Currency translation adjustment | 3 | (7 | ) | 2 | |||||
Balance at December 31 | $ | (220 | ) | $ | (188 | ) | $ | (98 | ) |
In millions | 2019 Through 2028 | 2029 Through 2038 | Indefinite | Total | ||||||||
U.S. federal and non-U.S. NOLs | $ | 53 | $ | — | $ | 417 | $ | 470 | ||||
State taxing jurisdiction NOLs (a) | 80 | 42 | — | 122 | ||||||||
U.S. federal, non- U.S. and state tax credit carryforwards (a) | 162 | 11 | 118 | 291 | ||||||||
U.S. federal and state capital loss carryforwards (a) | 2 | — | — | 2 | ||||||||
Total | $ | 297 | $ | 53 | $ | 535 | $ | 885 | ||||
Less: valuation allowance (a) | (192 | ) | (8 | ) | (198 | ) | (398 | ) | ||||
Total, net | $ | 105 | $ | 45 | $ | 337 | $ | 487 |
In millions | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | ||||||||||||
Lease obligations | $ | 160 | $ | 125 | $ | 77 | $ | 49 | $ | 28 | $ | 118 |
• | 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, |
• | In April 2016, the EPA issued a separate unilateral administrative order to the Company and certain other PRPs for a time-critical removal action (TCRA) of PCB-contaminated sediments from a different portion of the site. The Company responded to the unilateral administrative order and agreed along with two other parties to comply with the order subject to its sufficient cause defenses. |
• | In October 2016, the Company and another PRP received a special notice letter from the EPA inviting participation in the remedial design component of the landfill remedy for the Allied Paper Mill. The record of decision 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 late December 2016. In February 2017, the EPA informed the Company that it would make other arrangements for the performance of the remedial design. |
In millions | 2018 | 2017 | 2016 | ||||||
Revenue (a) | $ | 95 | $ | 95 | $ | 95 | |||
Expense (a) | 128 | 128 | 128 | ||||||
Cash receipts (b) | 95 | 95 | 77 | ||||||
Cash payments (c) | 128 | 128 | 98 |
(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 special purpose entities. |
(c) | The cash payments represent interest paid on Nonrecourse financial liabilities of special purpose entities. |
In millions | 2018 | 2017 | 2016 | ||||||
Revenue (a) | $ | 72 | $ | 49 | $ | 37 | |||
Expense (b) | 67 | 48 | 37 | ||||||
Cash receipts (c) | 48 | 28 | 15 | ||||||
Cash payments (d) | 57 | 39 | 27 |
(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, 2018, 2017 and 2016, respectively, of accretion income for the amortization of the purchase accounting adjustment on the Financial assets of special purpose entities. |
In millions | 2018 | 2017 | 2016 | ||||||
Debt reductions (a) | $ | 780 | $ | 993 | $ | 266 | |||
Pre-tax early debt extinguishment costs (b) | 10 | 83 | 29 |
(a) | Reductions related to notes with interest rates ranging from 1.57% to 9.38% with original maturities from 2018 to 2032 for the years ended December 31, 2018, 2017 and 2016. |
(b) | Amounts are included in Restructuring and other charges in the accompanying consolidated statements of operations. |
In millions at December 31 | 2018 | 2017 | ||||
8.7% note – due 2038 | $ | 264 | $ | 264 | ||
7.5% note – due 2021 | 406 | 409 | ||||
7.3% note – due 2039 | 721 | 721 | ||||
6 7/8% notes – due 2023 – 2029 | 131 | 131 | ||||
6.65% note – due 2037 | 4 | 4 | ||||
6.4% to 7.75% debentures due 2025 – 2027 | 144 | 143 | ||||
6.0% note – due 2041 | 585 | 585 | ||||
5.00% to 5.15% notes – due 2035 – 2046 | 1,288 | 1,281 | ||||
4.8% note – due 2044 | 799 | 796 | ||||
4.75% note – due 2022 | 355 | 817 | ||||
3.00% to 4.40% notes – due 2024 – 2048 | 4,481 | 4,775 | ||||
Floating rate notes – due 2018 – 2023 (a) | 908 | 650 | ||||
Environmental and industrial development bonds – due 2018 – 2035 (b) | 566 | 585 | ||||
Other (c) | 2 | (4 | ) | |||
Total (d) | 10,654 | 11,157 | ||||
Less: current maturities | 639 | 311 | ||||
Long-term debt | $ | 10,015 | $ | 10,846 |
(a) | The weighted average interest rate on these notes was 3.5% in 2018 and 2.6% in 2017. |
(b) | The weighted average interest rate on these bonds was 5.5% in 2018 and 6.0% in 2017. |
(c) | Includes $60 million and $70 million of debt issuance costs as of December 31, 2018 and 2017, respectively. |
(d) | The fair market value was approximately $10.6 billion at December 31, 2018 and $12.3 billion at December 31, 2017. |
In millions | December 31, 2018 | December 31, 2017 | ||
Derivatives in Cash Flow Hedging Relationships: | ||||
Foreign exchange contracts (a) | 407 | 329 | ||
Derivatives in Fair Value Hedging Relationships: | ||||
Interest rate contracts | 700 | — | ||
Derivatives Not Designated as Hedging Instruments: | ||||
Electricity contract | 8 | 13 | ||
Foreign exchange contracts | 19 | 10 |
(a) | These contracts had maturities of two years or less as of December 31, 2018. |
Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion) | |||||||||
In millions | 2018 | 2017 | 2016 | ||||||
Foreign exchange contracts | $ | (10 | ) | $ | 15 | $ | 4 | ||
Interest rate contracts | — | — | (10 | ) | |||||
Total | $ | (10 | ) | $ | 15 | $ | (6 | ) |
Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | ||||||||||||
In millions | 2018 | 2017 | 2016 | ||||||||||
Derivatives in Cash Flow Hedging Relationships: | |||||||||||||
Foreign exchange contracts | $ | (1 | ) | $ | 8 | $ | 7 | Cost of products sold | |||||
Interest rate contracts | (1 | ) | (1 | ) | — | Interest expense, net | |||||||
Total | $ | (2 | ) | $ | 7 | $ | 7 |
Gain (Loss) Recognized in Income | Location of Gain (Loss) in Consolidated Statement of Operations | |||||||||||||||
In millions | 2018 | 2017 | 2016 | |||||||||||||
Derivatives in Fair Value Hedging Relationships: | ||||||||||||||||
Interest rate contracts | $ | 16 | $ | — | $ | — | Interest expense, net | |||||||||
Debt | (16 | ) | — | — | Interest expense, net | |||||||||||
Total | $ | — | $ | — | $ | — | ||||||||||
Derivatives Not Designated as Hedging Instruments: | ||||||||||||||||
Electricity Contracts | $ | 2 | $ | (10 | ) | $ | — | Cost of products sold | ||||||||
Foreign exchange contracts | 1 | — | — | Cost of products sold | ||||||||||||
Interest rate contracts | — | 1 | (a) | 5 | (b) | Interest expense, net | ||||||||||
Total | $ | 3 | $ | (9 | ) | $ | 5 |
(a) | Excluding gain of $1 million related to debt reduction recorded to Restructuring and other charges. |
(b) | Excluding gain of $2 million related to debt reduction recorded to Restructuring and other charges. |
Assets | Liabilities | |||||||||||||||
In millions | December 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | ||||||||||||
Derivatives designated as hedging instruments | ||||||||||||||||
Foreign exchange contracts – cash flow | $ | 3 | $ | 11 | $ | 10 | $ | 1 | ||||||||
Interest rate contracts – fair value | 16 | — | — | — | ||||||||||||
Total derivatives designated as hedging instruments | 19 | (a) | 11 | (b) | 10 | (c) | 1 | (c) | ||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||
Electricity contract | — | — | 4 | 8 | ||||||||||||
Foreign exchange contracts | — | — | 1 | — | ||||||||||||
Total derivatives not designated as hedging instruments | — | — | 5 | (c) | 8 | (d) | ||||||||||
Total derivatives | $ | 19 | $ | 11 | $ | 15 | $ | 9 |
(a) | Includes $2 million recorded in Other current assets and $17 million recorded in Deferred charges and other assets in the accompanying consolidated balance sheet. |
(b) | Included in Other current assets in the accompanying consolidated balance sheet. |
(c) | Included in Other accrued liabilities in the accompanying consolidated balance sheet. |
(d) | Includes $5 million recorded in Other accrued liabilities and $3 million recorded in Other liabilities in the accompanying consolidated balance sheet. |
Common Stock | ||||
In thousands | Issued | Treasury | ||
Balance at January 1, 2016 | 448,916 | 36,776 | ||
Issuance of stock for various plans, net | — | (2,745 | ) | |
Repurchase of stock | — | 3,640 | ||
Balance at December 31, 2016 | 448,916 | 37,671 | ||
Issuance of stock for various plans, net | — | (2,577 | ) | |
Repurchase of stock | — | 881 | ||
Balance at December 31, 2017 | 448,916 | 35,975 | ||
Issuance of stock for various plans, net | — | (1,721 | ) | |
Repurchase of stock | — | 14,056 | ||
Balance at December 31, 2018 | 448,916 | 48,310 |
2018 | 2017 | |||||||||||
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 | $ | 13,264 | $ | 247 | $ | 13,683 | $ | 219 | ||||
Service cost | 153 | 5 | 160 | 4 | ||||||||
Interest cost | 467 | 8 | 536 | 9 | ||||||||
Settlements | (1,653 | ) | (2 | ) | (1,295 | ) | (4 | ) | ||||
Actuarial loss (gain) | (1,089 | ) | (17 | ) | 913 | 2 | ||||||
Acquisitions | — | — | — | 5 | ||||||||
Divestitures | — | — | 33 | — | ||||||||
Plan amendments | 2 | — | 3 | — | ||||||||
Benefits paid | (677 | ) | (9 | ) | (769 | ) | (8 | ) | ||||
Effect of foreign currency exchange rate movements | — | (17 | ) | — | 20 | |||||||
Benefit obligation, December 31 | $ | 10,467 | $ | 215 | $ | 13,264 | $ | 247 | ||||
Change in plan assets: | ||||||||||||
Fair value of plan assets, January 1 | $ | 11,368 | $ | 176 | $ | 10,312 | $ | 153 | ||||
Actual return on plan assets | (332 | ) | (2 | ) | 1,830 | 10 | ||||||
Company contributions | 29 | 10 | 1,290 | 10 | ||||||||
Benefits paid | (677 | ) | (9 | ) | (769 | ) | (8 | ) | ||||
Settlements | (1,653 | ) | (2 | ) | (1,295 | ) | (4 | ) | ||||
Other | — | — | — | 3 | ||||||||
Effect of foreign currency exchange rate movements | — | (12 | ) | — | 12 | |||||||
Fair value of plan assets, December 31 | $ | 8,735 | $ | 161 | $ | 11,368 | $ | 176 | ||||
Funded status, December 31 | $ | (1,732 | ) | $ | (54 | ) | $ | (1,896 | ) | $ | (71 | ) |
Amounts recognized in the consolidated balance sheet: | ||||||||||||
Non-current asset | $ | — | $ | 5 | $ | — | $ | 5 | ||||
Current liability | (27 | ) | (2 | ) | (30 | ) | (3 | ) | ||||
Non-current liability | (1,705 | ) | (57 | ) | (1,866 | ) | (73 | ) | ||||
$ | (1,732 | ) | $ | (54 | ) | $ | (1,896 | ) | $ | (71 | ) |
Amounts recognized in accumulated other comprehensive income under ASC 715 (pre-tax): | ||||||||||||
Prior service cost (credit) | $ | 74 | $ | (1 | ) | $ | 88 | $ | (1 | ) | ||
Net actuarial loss | 3,140 | 57 | 3,893 | 67 | ||||||||
$ | 3,214 | $ | 56 | $ | 3,981 | $ | 66 |
In millions | U.S. Plans | Non- U.S. Plans | ||||
Current year actuarial (gain) loss | $ | 8 | $ | (4 | ) | |
Amortization of actuarial loss | (337 | ) | (2 | ) | ||
Current year prior service cost | 2 | — | ||||
Amortization of prior service cost | (16 | ) | — | |||
Settlements | (424 | ) | — | |||
Effect of foreign currency exchange rate movements | — | (4 | ) | |||
$ | (767 | ) | $ | (10 | ) |
2018 | 2017 | |||||||||||
In millions | U.S. Plans | Non-U.S. Plans | U.S. Plans | Non-U.S. Plans | ||||||||
Projected benefit obligation | $ | 10,467 | $ | 187 | $ | 13,264 | $ | 215 | ||||
Accumulated benefit obligation | 10,440 | 175 | 13,161 | 200 | ||||||||
Fair value of plan assets | 8,735 | 128 | 11,368 | 139 |
2018 | 2017 | 2016 | ||||||||||||||||
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 | $ | 153 | $ | 5 | $ | 160 | $ | 4 | $ | 158 | $ | 4 | ||||||
Interest cost | 467 | 8 | 536 | 9 | 580 | 9 | ||||||||||||
Expected return on plan assets | (765 | ) | (11 | ) | (774 | ) | (11 | ) | (815 | ) | (10 | ) | ||||||
Actuarial loss / (gain) | 337 | 2 | 339 | 2 | 400 | 1 | ||||||||||||
Amortization of prior service cost | 16 | — | 28 | — | 41 | — | ||||||||||||
Curtailment loss / (gain) (a) | — | — | 23 | — | — | — | ||||||||||||
Settlement loss | 424 | — | 383 | 1 | 445 | — | ||||||||||||
Special termination benefits (a) | — | — | 22 | — | — | — | ||||||||||||
Net periodic pension expense | $ | 632 | $ | 4 | $ | 717 | $ | 5 | $ | 809 | $ | 4 |
2018 | 2017 | 2016 | ||||||||||
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: | ||||||||||||
Discount rate | 4.30 | % | 3.97 | % | 3.60 | % | 3.59 | % | 4.10 | % | 3.88 | % |
Rate of compensation increase | 2.25 | % | 4.05 | % | 3.75 | % | 4.06 | % | 3.75 | % | 4.20 | % |
Actuarial assumptions used to determine net periodic pension cost for years ended December 31: | ||||||||||||
Discount rate (a) | 3.80 | % | 3.59 | % | 4.03 | % | 3.88 | % | 4.05 | % | 4.72 | % |
Expected long-term rate of return on plan assets | 7.50 | % | 6.52 | % | 7.50 | % | 6.73 | % | 7.75 | % | 6.55 | % |
Rate of compensation increase | 3.38 | % | 4.06 | % | 3.75 | % | 4.20 | % | 3.75 | % | 4.03 | % |
In millions | 2019 | ||
Expense/(Income): | |||
Discount rate | $ | 27 | |
Expected long-term rate of return on plan assets | 22 |
Asset Class | 2018 | 2017 | Target Allocations | ||
Equity accounts | 32 | % | 49 | % | 32% - 43% |
Fixed income accounts | 51 | % | 36 | % | 44% - 56% |
Real estate accounts | 11 | % | 10 | % | 5% - 11% |
Other | 6 | % | 5 | % | 3% - 8% |
Total | 100 | % | 100 | % |
Fair Value Measurement at December 31, 2018 | ||||||||||||
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 | $ | 685 | $ | 685 | $ | — | $ | — | ||||
Equities – international | 1,150 | 1,141 | 9 | — | ||||||||
Corporate bonds | 1,434 | — | 1,434 | — | ||||||||
Government securities | 2,262 | — | 2,262 | — | ||||||||
Mortgage backed securities | — | — | — | — | ||||||||
Other fixed income | (723 | ) | — | (736 | ) | 13 | ||||||
Derivatives | 98 | — | — | 98 | ||||||||
Cash and cash equivalents | 294 | 294 | — | — | ||||||||
Other investments: | ||||||||||||
Equities - domestic | 515 | |||||||||||
Equities - international | 433 | |||||||||||
Corporate bonds | 59 | |||||||||||
Other fixed income | 180 | |||||||||||
Hedge funds | 886 | |||||||||||
Private equity | 518 | |||||||||||
Real estate funds | 944 | |||||||||||
Total Investments | $ | 8,735 | $ | 2,120 | $ | 2,969 | $ | 111 |
Fair Value Measurement at December 31, 2017 | ||||||||||||
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 | $ | 1,291 | $ | 1,291 | $ | — | $ | — | ||||
Equities – international | 2,132 | 2,119 | 13 | — | ||||||||
Corporate bonds | 1,177 | — | 1,177 | — | ||||||||
Government securities | 2,778 | — | 2,778 | — | ||||||||
Mortgage backed securities | 1 | — | — | 1 | ||||||||
Other fixed income | (802 | ) | — | (814 | ) | 12 | ||||||
Derivatives | 8 | — | (8 | ) | 16 | |||||||
Cash and cash equivalents | 397 | 397 | — | — | ||||||||
Other investments: | ||||||||||||
Equities - domestic | 708 | |||||||||||
Equities - international | 866 | |||||||||||
Corporate bonds | 66 | |||||||||||
Other fixed income | 232 | |||||||||||
Hedge funds | 927 | |||||||||||
Private equity | 481 | |||||||||||
Real estate funds | 1,106 | |||||||||||
Total Investments | $ | 11,368 | $ | 3,807 | $ | 3,146 | $ | 29 |
Other Investments at December 31, 2018 | ||||||||
Investment | Fair Value | Unfunded Commitments | Redemption Frequency | Remediation Notice Period | ||||
In millions | ||||||||
Equities – domestic | $ | 515 | $ | — | Daily to monthly | 1-5 days | ||
Equities – international | 433 | — | Daily to monthly | 1-5 days | ||||
Corporate bonds | 59 | — | Daily to monthly | 1-5 days | ||||
Other fixed income | 180 | — | Daily to monthly | 1-5 days | ||||
Hedge funds | 886 | — | Daily to annually | 1 - 100 days | ||||
Private equity | 518 | 310 | (a) | None | ||||
Real estate funds | 944 | 109 | Quarterly | 45 - 60 days | ||||
Total | $ | 3,535 | $ | 419 |
Other Investments at December 31, 2017 | ||||||||
Investment | Fair Value | Unfunded Commitments | Redemption Frequency | Remediation Notice Period | ||||
In millions | ||||||||
Equities - domestic | $ | 708 | $ | — | Daily to monthly | 1-5 days | ||
Equities - international | 866 | — | Daily to monthly | 1-5 days | ||||
Corporate bonds | 66 | — | Daily to monthly | 1-5 days | ||||
Other fixed income | 232 | — | Daily to monthly | 1-5 days | ||||
Hedge funds | 927 | — | Daily to annually | 1 - 100 days | ||||
Private equity | 481 | 262 | (a) | None | ||||
Real estate funds | 1,106 | 121 | Quarterly | 45 - 60 days | ||||
Total | $ | 4,386 | $ | 383 |
In millions | Mortgage backed securities | Other fixed income | Derivatives | Total | ||||||||
Beginning balance at December 31, 2016 | $ | 1 | $ | 11 | $ | (71 | ) | $ | (59 | ) | ||
Actual return on plan assets: | ||||||||||||
Relating to assets still held at the reporting date | — | 1 | 94 | 95 | ||||||||
Relating to assets sold during the period | — | — | (23 | ) | (23 | ) | ||||||
Purchases, sales and settlements | — | — | 16 | 16 | ||||||||
Transfers in and/or out of Level 3 | — | — | — | — | ||||||||
Ending balance at December 31, 2017 | $ | 1 | $ | 12 | $ | 16 | $ | 29 | ||||
Actual return on plan assets: | ||||||||||||
Relating to assets still held at the reporting date | — | 1 | 75 | 76 | ||||||||
Relating to assets sold during the period | — | — | (19 | ) | (19 | ) | ||||||
Purchases, sales and settlements | (1 | ) | — | 26 | 25 | |||||||
Transfers in and/or out of Level 3 | — | — | — | — | ||||||||
Ending balance at December 31, 2018 | $ | — | $ | 13 | $ | 98 | $ | 111 |
In millions | |||
2019 | $ | 562 | |
2020 | 571 | ||
2021 | 585 | ||
2022 | 597 | ||
2023 | 611 | ||
2024-2028 | 3,191 |
In millions | 2018 | 2017 | 2016 | |||||||||||||||
U.S. Plans | Non- U.S. Plans | U.S. Plans | Non- U.S. Plans | U.S. Plans | Non- U.S. Plans | |||||||||||||
Service cost | $ | 1 | $ | — | $ | 1 | $ | — | $ | 1 | $ | — | ||||||
Interest cost | 8 | 2 | 11 | 2 | 11 | 3 | ||||||||||||
Actuarial loss | 9 | 2 | 8 | 3 | 5 | 2 | ||||||||||||
Amortization of prior service credits | (2 | ) | (3 | ) | (3 | ) | (4 | ) | (4 | ) | (4 | ) | ||||||
Net postretirement expense | $ | 16 | $ | 1 | $ | 17 | $ | 1 | $ | 13 | $ | 1 |
2018 | 2017 | 2016 | ||||||||||
U.S. Plans | Non- U.S. Plans | U.S. Plans | Non- U.S. Plans | U.S. Plans | Non- U.S. Plans | |||||||
Discount rate | 3.50 | % | 9.38 | % | 4.00 | % | 10.53 | % | 4.20 | % | 12.23 | % |
2018 | 2017 | |||||||
U.S. Plans | Non- U.S. Plans | U.S. Plans | Non- U.S. Plans | |||||
Discount rate | 4.20 | % | 9.10 | % | 3.50 | % | 9.38 | % |
Health care cost trend rate assumed for next year | 7.00 | % | 10.04 | % | 6.50 | % | 10.27 | % |
Rate that the cost trend rate gradually declines to | 5.00 | % | 4.93 | % | 5.00 | % | 5.15 | % |
Year that the rate reaches the rate it is assumed to remain | 2026 | 2030 | 2022 | 2028 |
In millions | 2018 | 2017 | ||||||||||
U.S. Plans | Non- U.S. Plans | U.S. Plans | Non- U.S. Plans | |||||||||
Change in projected benefit obligation: | ||||||||||||
Benefit obligation, January 1 | $ | 270 | $ | 25 | $ | 280 | $ | 23 | ||||
Service cost | 1 | — | 1 | — | ||||||||
Interest cost | 8 | 2 | 11 | 2 | ||||||||
Participants’ contributions | 5 | — | 5 | — | ||||||||
Actuarial (gain) loss | (34 | ) | 2 | 14 | 2 | |||||||
Plan amendments | — | — | — | — | ||||||||
Benefits paid | (38 | ) | (1 | ) | (42 | ) | (2 | ) | ||||
Less: Federal subsidy | 1 | — | 1 | — | ||||||||
Currency Impact | — | (4 | ) | — | — | |||||||
Benefit obligation, December 31 | $ | 213 | $ | 24 | $ | 270 | $ | 25 | ||||
Change in plan assets: | ||||||||||||
Fair value of plan assets, January 1 | $ | — | $ | — | $ | — | $ | — | ||||
Company contributions | 33 | 1 | 37 | 2 | ||||||||
Participants’ contributions | 5 | — | 5 | — | ||||||||
Benefits paid | (38 | ) | (1 | ) | (42 | ) | (2 | ) | ||||
Fair value of plan assets, December 31 | $ | — | $ | — | $ | — | $ | — | ||||
Funded status, December 31 | $ | (213 | ) | $ | (24 | ) | $ | (270 | ) | $ | (25 | ) |
Amounts recognized in the consolidated balance sheet under ASC 715: | ||||||||||||
Current liability | $ | (23 | ) | $ | (1 | ) | $ | (28 | ) | $ | (1 | ) |
Non-current liability | (190 | ) | (23 | ) | (242 | ) | (24 | ) | ||||
$ | (213 | ) | $ | (24 | ) | $ | (270 | ) | $ | (25 | ) | |
Amounts recognized in accumulated other comprehensive income under ASC 715 (pre-tax): | ||||||||||||
Net actuarial loss (gain) | $ | 31 | $ | 15 | $ | 74 | $ | 19 | ||||
Prior service credit | (4 | ) | (22 | ) | (6 | ) | (30 | ) | ||||
$ | 27 | $ | (7 | ) | $ | 68 | $ | (11 | ) |
In millions | U.S. Plans | Non- U.S. Plans | ||||
Current year actuarial (gain) loss | $ | (34 | ) | $ | 2 | |
Amortization of actuarial (loss) gain | (9 | ) | (2 | ) | ||
Current year prior service cost | — | — | ||||
Amortization of prior service credit | 2 | 3 | ||||
Currency impact | — | 1 | ||||
$ | (41 | ) | $ | 4 |
In millions | Benefit Payments | Subsidy Receipts | Benefit Payments | ||||||
U.S. Plans | U.S. Plans | Non- U.S. Plans | |||||||
2019 | $ | 24 | $ | 1 | $ | 1 | |||
2020 | 23 | 1 | 1 | ||||||
2021 | 21 | 1 | 1 | ||||||
2022 | 20 | 1 | 1 | ||||||
2023 | 19 | 1 | 1 | ||||||
2024 – 2028 | 77 | 5 | 7 |
Twelve Months Ended December 31, 2018 | |
Expected volatility | 22.75%-22.99% |
Risk-free interest rate | 1.31%-1.98% |
Share/Units | Weighted Average Grant Date Fair Value | ||||
Outstanding at December 31, 2015 | 5,857,733 | $38.69 | |||
Granted | 2,617,982 | 37.26 | |||
Shares issued | (2,316,085 | ) | 43.82 | ||
Forfeited | (209,500 | ) | 43.61 | ||
Outstanding at December 31, 2016 | 5,950,130 | 35.89 | |||
Granted | 2,163,912 | 51.78 | |||
Shares issued | (1,876,134 | ) | 51.00 | ||
Forfeited | (438,024 | ) | 45.96 | ||
Outstanding at December 31, 2017 | 5,799,884 | 36.17 | |||
Granted | 1,751,235 | 62.97 | |||
Shares issued | (1,588,642 | ) | 53.67 | ||
Forfeited | (196,000 | ) | 56.57 | ||
Outstanding at December 31, 2018 | 5,766,477 | $38.79 |
Shares | Weighted Average Grant Date Fair Value | ||||
Outstanding at December 31, 2015 | 120,368 | $48.24 | |||
Granted | 117,881 | 42.81 | |||
Shares issued | (59,418 | ) | 47.14 | ||
Forfeited | (9,500 | ) | 39.36 | ||
Outstanding at December 31, 2016 | 169,331 | 45.34 | |||
Granted | 63,319 | 57.24 | |||
Shares issued | (59,650 | ) | 47.90 | ||
Forfeited | (6,700 | ) | 53.53 | ||
Outstanding at December 31, 2017 | 166,300 | 48.63 | |||
Granted | 66,100 | 51.43 | |||
Shares issued | (100,289 | ) | 48.44 | ||
Forfeited | — | — | |||
Outstanding at December 31, 2018 | 132,111 | $50.17 |
In millions | 2018 | 2017 | 2016 | ||||||
Total stock-based compensation expense (included in selling and administrative expense) | $ | 135 | $ | 147 | $ | 124 | |||
Income tax benefits related to stock-based compensation | 16 | 45 | 34 |
In millions | 2018 | 2017 | 2016 | ||||||||
Industrial Packaging | $ | 15,900 | $ | 15,077 | $ | 14,226 | |||||
Global Cellulose Fibers | 2,819 | 2,551 | 1,092 | ||||||||
Printing Papers | 4,375 | 4,157 | 4,058 | ||||||||
Corporate and Intersegment Sales (a) | 212 | (42 | ) | 119 | |||||||
Net Sales | $ | 23,306 | $ | 21,743 | $ | 19,495 |
In millions | 2018 | 2017 | 2016 | ||||||||
Industrial Packaging | $ | 2,093 | $ | 1,547 | $ | 1,741 | |||||
Global Cellulose Fibers | 251 | 65 | (179 | ) | |||||||
Printing Papers | 533 | 457 | 540 | ||||||||
Business Segment Operating Profit | 2,877 | 2,069 | 2,102 | ||||||||
Earnings (loss) from continuing operations before income taxes and equity earnings | 1,781 | 848 | 795 | ||||||||
Interest expense, net | 536 | 572 | 520 | ||||||||
Noncontrolling interests / equity earnings adjustment (b) | (10 | ) | (2 | ) | 1 | ||||||
Corporate items, net (a) | 67 | 91 | 121 | ||||||||
Corporate special items, net (a) | 9 | 76 | 55 | ||||||||
Non-operating pension expense | 494 | 484 | 610 | ||||||||
$ | 2,877 | $ | 2,069 | $ | 2,102 |
In millions | 2018 | 2017 | 2016 | ||||||||
Industrial Packaging | $ | 47 | $ | — | $ | 7 | |||||
Global Cellulose Fibers | — | — | — | ||||||||
Printing Papers | 3 | — | — | ||||||||
Corporate (c) | (21 | ) | 67 | 47 | |||||||
Restructuring and Other Charges | $ | 29 | $ | 67 | $ | 54 |
In millions | 2018 | 2017 | |||||
Industrial Packaging | $ | 15,859 | $ | 15,354 | |||
Global Cellulose Fibers | 3,880 | 3,913 | |||||
Printing Papers | 3,905 | 4,054 | |||||
Corporate and other (d) | 9,932 | 10,582 | |||||
Assets | $ | 33,576 | $ | 33,903 |
In millions | 2018 | 2017 | 2016 | ||||||||
Industrial Packaging | $ | 1,061 | $ | 836 | $ | 832 | |||||
Global Cellulose Fibers | 183 | 188 | 174 | ||||||||
Printing Papers | 303 | 235 | 215 | ||||||||
Subtotal | 1,547 | 1,259 | 1,221 | ||||||||
Corporate and other (e) | 25 | 21 | 20 | ||||||||
Capital Spending | $ | 1,572 | $ | 1,280 | $ | 1,241 |
In millions | 2018 | 2017 | 2016 | ||||||||
Industrial Packaging | $ | 803 | $ | 815 | $ | 760 | |||||
Global Cellulose Fibers | 262 | 264 | 110 | ||||||||
Printing Papers | 258 | 254 | 242 | ||||||||
Corporate (h) | 5 | 10 | 12 | ||||||||
Depreciation and Amortization | $ | 1,328 | $ | 1,343 | $ | 1,124 |
In millions | 2018 | 2017 | 2016 | ||||||||
Industrial Packaging | $ | 15,828 | $ | 14,946 | $ | 14,142 | |||||
Global Cellulose Fibers | 2,810 | 2,524 | 1,090 | ||||||||
Printing Papers | 4,359 | 4,142 | 4,062 | ||||||||
Other (i) | 309 | 131 | 201 | ||||||||
Net Sales | $ | 23,306 | $ | 21,743 | $ | 19,495 |
In millions | 2018 | 2017 | 2016 | ||||||||
United States (k) | $ | 17,609 | $ | 16,247 | $ | 14,363 | |||||
EMEA | 3,321 | 3,129 | 2,852 | ||||||||
Pacific Rim and Asia | 605 | 625 | 699 | ||||||||
Americas, other than U.S. | 1,771 | 1,742 | 1,581 | ||||||||
Net Sales | $ | 23,306 | $ | 21,743 | $ | 19,495 |
In millions | 2018 | 2017 | |||||
United States | $ | 10,586 | $ | 10,545 | |||
EMEA | 1,315 | 1,302 | |||||
Pacific Rim and Asia | 201 | 236 | |||||
Americas, other than U.S. | 1,367 | 1,630 | |||||
Long-Lived Assets | $ | 13,469 | $ | 13,713 |
(a) | Includes sales of $0 million in 2018, $15 million in 2017 and $42 million in 2016, operating profits (losses) of $0 million in 2018, $0 million in 2017 and $(2) million in 2016, and corporate special items expense of $0 million in 2018, $9 million in 2017 and $9 million in 2016, from previously divested businesses. |
(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 interests and equity earnings for these subsidiaries is added here to present consolidated earnings from continuing operations before income taxes and equity earnings. |
(c) | Includes corporate expenses and expenses of $0 million in 2018, $9 million in 2017 and $9 million in 2016, from previously divested businesses. |
(d) | Includes corporate assets, assets of businesses held for sale and assets of previously divested businesses. |
(e) | Includes corporate assets and assets of previously divested businesses of $0 million in 2018, $0 million in 2017 and $1 million in 2016. |
(f) | Excludes accelerated depreciation related to the closure and/or repurposing of mills in 2016. |
(g) | Prior years recast to reflect current methodology for allocation of Corporate depreciation and amortization to the business segments. There is no change to segment operating profit. |
(h) | Includes $0 million in 2018, $1 million in 2017 and $2 million in 2016, from previously divested businesses. |
(i) | Includes $0 million in 2018, $15 million in 2017, and $42 million in 2016, from previously divested businesses. |
(j) | Net sales are attributed to countries based on the location of the seller. |
(k) | Export sales to unaffiliated customers were $3.1 billion in 2018, $2.9 billion in 2017 and $1.8 billion in 2016. |
(l) | Long-Lived Assets includes Forestlands and Plants, Properties and Equipment, net. |
In millions, except per share amounts and stock prices | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year | |||||||||||||||
2018 | ||||||||||||||||||||
Net sales | $ | 5,621 | $ | 5,833 | $ | 5,901 | $ | 5,951 | $ | 23,306 | ||||||||||
Earnings (loss) from continuing operations before income taxes and equity earnings | 356 | (a) | 490 | (a) | 553 | (a) | 382 | (a) | 1,781 | (a) | ||||||||||
Gain (loss) from discontinued operations | 368 | (b) | (23 | ) | (b) | — | (b) | — | (b) | 345 | (b) | |||||||||
Net earnings (loss) attributable to International Paper Company | 729 | (a-c) | 405 | (a-c) | 562 | (a-c) | 316 | (a-c) | 2,012 | (a-c) | ||||||||||
Basic earnings (loss) per share attributable to International Paper Company common shareholders: | ||||||||||||||||||||
Earnings (loss) from continuing operations | $ | 0.87 | $ | 1.03 | $ | 1.38 | $ | 0.79 | $ | 4.07 | ||||||||||
Gain (loss) from discontinued operations | 0.89 | (0.05 | ) | — | — | 0.84 | ||||||||||||||
Net earnings (loss) | 1.76 | 0.98 | 1.38 | 0.79 | 4.91 | |||||||||||||||
Diluted earnings (loss) per share attributable to International Paper Company common shareholders: | ||||||||||||||||||||
Earnings (loss) from continuing operations | 0.86 | 1.02 | 1.37 | 0.78 | 4.02 | |||||||||||||||
Gain (loss) from discontinued operations | 0.88 | (0.05 | ) | — | — | 0.83 | ||||||||||||||
Net earnings (loss) | 1.74 | 0.97 | 1.37 | 0.78 | 4.85 | |||||||||||||||
Dividends per share of common stock | 0.4750 | 0.4750 | 0.4750 | 0.5000 | 1.9250 | |||||||||||||||
2017 | ||||||||||||||||||||
Net sales | $ | 5,132 | $ | 5,383 | $ | 5,517 | $ | 5,711 | $ | 21,743 | ||||||||||
Earnings (loss) from continuing operations before income taxes and equity earnings | 217 | (d) | (23 | ) | (d) | 457 | (d) | 197 | (d) | 848 | (d) | |||||||||
Gain (loss) from discontinued operations | 17 | (e) | (4 | ) | (e) | 29 | (e) | (8 | ) | (e) | 34 | (e) | ||||||||
Net earnings (loss) attributable to International Paper Company | 209 | (d-f) | 80 | (d-f) | 395 | (d-f) | 1,460 | (d-f) | 2,144 | (d-f) | ||||||||||
Basic earnings (loss) per share attributable to International Paper Company common shareholders: | ||||||||||||||||||||
Earnings (loss) from continuing operations | $ | 0.47 | $ | 0.20 | $ | 0.89 | $ | 3.56 | $ | 5.11 | ||||||||||
Gain (loss) from discontinued operations | 0.04 | (0.01 | ) | 0.07 | (0.02 | ) | 0.08 | |||||||||||||
Net earnings (loss) | 0.51 | 0.19 | 0.96 | 3.54 | 5.19 | |||||||||||||||
Diluted earnings (loss) per share attributable to International Paper Company common shareholders: | ||||||||||||||||||||
Earnings (loss) from continuing operations | 0.46 | 0.20 | 0.88 | 3.52 | 5.05 | |||||||||||||||
Gain (loss) from discontinued operations | 0.04 | (0.01 | ) | 0.07 | (0.02 | ) | 0.08 | |||||||||||||
Net earnings (loss) | 0.50 | 0.19 | 0.95 | 3.50 | 5.13 | |||||||||||||||
Dividends per share of common stock | 0.4625 | 0.4625 | 0.4625 | 0.4750 | 1.8625 |
(a) | Includes the following pre-tax charges (gains): |
2018 | ||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | ||||||||||||
Smurfit-Kappa acquisition proposal costs | $ | — | $ | 12 | $ | — | $ | — | ||||||||
Legal settlement | 9 | — | — | — | ||||||||||||
Litigation settlement recovery | — | — | — | (5 | ) | |||||||||||
Environmental remediation reserve adjustment | — | — | 9 | — | ||||||||||||
EMEA Packaging optimization | 22 | 26 | — | (1 | ) | |||||||||||
Abandoned property removal | 9 | 9 | 6 | 8 | ||||||||||||
Riverdale mill conversion costs | — | — | 5 | 4 | ||||||||||||
Brazil Packaging impairment | — | — | 122 | — | ||||||||||||
Debt extinguishment costs | — | — | — | 10 | ||||||||||||
Gain on sale of investment in Liaison Technologies | — | — | — | (31 | ) | |||||||||||
Non-operating pension expense | 4 | 36 | 25 | 429 | ||||||||||||
Total | $ | 44 | $ | 83 | $ | 167 | $ | 414 |
2018 | ||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | ||||||||||||
North American Consumer Packaging transaction costs | $ | 23 | $ | 2 | $ | — | $ | — | ||||||||
North American Consumer Packaging gain on transfer | (516 | ) | 28 | — | — | |||||||||||
Total | $ | (493 | ) | $ | 30 | $ | — | $ | — |
2018 | ||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | ||||||||||||
State income tax legislative changes | $ | — | $ | 9 | $ | — | $ | — | ||||||||
Tax benefit of Tax Cuts and Jobs Act | — | — | (36 | ) | — | |||||||||||
International investment restructuring | — | — | — | 19 | ||||||||||||
Foreign tax audits | — | — | — | 25 | ||||||||||||
Tax impact of other special items | (9 | ) | (13 | ) | (46 | ) | 3 | |||||||||
Tax impact of non-operating pension expense | (1 | ) | (9 | ) | (6 | ) | (107 | ) | ||||||||
Total | $ | (10 | ) | $ | (13 | ) | $ | (88 | ) | $ | (60 | ) |
2017 | ||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | ||||||||||||
Gain on sale of investment in ArborGen | $ | — | $ | (14 | ) | $ | — | $ | — | |||||||
Costs associated with the pulp business acquired in 2016 | 4 | 5 | 6 | 18 | ||||||||||||
Amortization of Weyerhaeuser inventory fair value step-up | 14 | — | — | — | ||||||||||||
Holmen bargain purchase gain | (6 | ) | — | — | — | |||||||||||
Abandoned property removal | 2 | 5 | 7 | 6 | ||||||||||||
Kleen Products settlement | — | 354 | — | — | ||||||||||||
Asia Foodservice sale | — | 9 | — | — | ||||||||||||
Brazil Packaging wood supply accelerated amortization | — | — | 10 | — | ||||||||||||
Debt extinguishment costs | — | — | — | 83 | ||||||||||||
Interest income on income tax refund claims | — | (4 | ) | — | (1 | ) | ||||||||||
Other items | — | (2 | ) | — | — | |||||||||||
Non-operating pension expense | 31 | 34 | 33 | 386 | ||||||||||||
Total | $ | 45 | $ | 387 | $ | 56 | $ | 492 |
2017 | ||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | ||||||||||||
North American Consumer Packaging transaction costs | $ | — | $ | — | $ | — | $ | 17 | ||||||||
Non-operating pension expense | — | — | — | 45 | ||||||||||||
Total | $ | — | $ | — | $ | — | $ | 62 |
2017 | ||||||||||||||||
In millions | Q1 | Q2 | Q3 | Q4 | ||||||||||||
International legal entity restructuring | $ | 15 | $ | — | $ | 19 | $ | — | ||||||||
Income tax refund claims | — | (85 | ) | — | (28 | ) | ||||||||||
Cash pension contribution | — | 38 | — | — | ||||||||||||
International tax law change | — | — | — | 9 | ||||||||||||
Tax benefit of Tax Cuts and Jobs Act | — | — | — | (1,222 | ) | |||||||||||
Tax impact of other special items | (8 | ) | (137 | ) | (8 | ) | (41 | ) | ||||||||
Tax impact of non-operating pension expense | (12 | ) | (13 | ) | (13 | ) | (148 | ) | ||||||||
Total | $ | (5 | ) | $ | (197 | ) | $ | (2 | ) | $ | (1,430 | ) |
(1) | Financial Statements – See Item 8. Financial Statements and Supplementary Data. |
(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. |
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(4.11) | 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 Commission upon request. |
(10.1) | |
(10.2) | |
(10.3) | |
(10.4) | |
(10.5) | |
(10.6) | |
(10.7) | |
(10.8) | |
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(10.10) | |
(10.11) | |
(10.12) | |
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(10.15) | |
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(10.29) | |
(21) | |
(23.1) | |
(23.2) | |
(24) | |
(31.1) | |
(31.2) | |
(32) | |
(99.1) | |
(101.INS) | XBRL Instance Document * |
(101.SCH) | XBRL Taxonomy Extension Schema * |
(101.CAL) | XBRL Taxonomy Extension Calculation Linkbase * |
(101.DEF) | XBRL Taxonomy Extension Definition Linkbase * |
(101.LAB) | XBRL Taxonomy Extension Label Linkbase * |
(101.PRE) | XBRL Extension Presentation Linkbase * |
By: | /S/ SHARON R. RYAN | February 20, 2019 | |
Sharon R. Ryan | |||
Senior Vice President, General Counsel and Corporate Secretary |
Signature | Title | Date | ||
/S/ MARK S. SUTTON | Chairman of the Board & Chief Executive Officer and Director | February 20, 2019 | ||
Mark S. Sutton | ||||
/S/ DAVID J. BRONCZEK | Director | February 20, 2019 | ||
David J. Bronczek | ||||
/S/ WILLIAM J. BURNS | Director | February 20, 2019 | ||
Willliam J. Burns | ||||
/S/ CHRISTOPHER M. CONNOR | Director | February 20, 2019 | ||
Christopher M. Connor | ||||
/S/ AHMET C. DORDUNCU | Director | February 20, 2019 | ||
Ahmet C. Dorduncu | ||||
/S/ ILENE S. GORDON | Director | February 20, 2019 | ||
Ilene S. Gordon |
/S/ JACQUELINE C. HINMAN | Director | February 20, 2019 | ||
Jacqueline C. Hinman | ||||
/s/ CLINTON A. LEWIS, JR. | Director | February 20, 2019 | ||
Clinton A. Lewis, Jr. | ||||
/S/ KATHRYN D. SULLIVAN | Director | February 20, 2019 | ||
Kathryn D. Sullivan | ||||
/S/ J. STEVEN WHISLER | Director | February 20, 2019 | ||
J. Steven Whisler | ||||
/S/ RAY G. YOUNG | Director | February 20, 2019 | ||
Ray G. Young | ||||
/S/ TIMOTHY S. NICHOLLS | Senior Vice President and Chief Financial Officer | February 20, 2019 | ||
Timothy S. Nicholls | ||||
/S/ VINCENT P. BONNOT | Vice President – Finance and Controller | February 20, 2019 | ||
Vincent P. Bonnot |
PRINTING PAPERS | Savannah, Georgia | Tracy, California | ||
Cayuga, Indiana | 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, Florida leased | ||
Georgetown, South Carolina | Mansfield, Louisiana | 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: | Stone Mountain, Georgia leased | ||
Saillat, France | Franco da Rocha, São Paulo, Brazil | Tucker, Georgia | ||
Kadiam, India | Nova Campina, São Paulo, Brazil | Aurora, Illinois (3 locations) | ||
Rajahmundry, India | Paulinia, São Paulo, Brazil | Bedford Park, Illinois (2 locations) 1 leased | ||
Kwidzyn, Poland | Veracruz, Mexico | Belleville, Illinois | ||
Svetogorsk, Russia | Kenitra, Morocco | Carol Stream, Illinois | ||
Madrid, Spain | Des Plaines, Illinois | |||
GLOBAL CELLULOSE FIBERS | Lincoln, Illinois | |||
Corrugated Container | Montgomery, Illinois | |||
Pulp | U.S.: | Northlake, Illinois | ||
U.S.: | Bay Minette, Alabama | Rockford, Illinois | ||
Cantonment, Florida | Decatur, Alabama | Butler, Indiana | ||
Flint River, Georgia | Dothan, Alabama leased | Crawfordsville, Indiana | ||
Port Wentworth, Georgia | Huntsville, Alabama | Fort Wayne, Indiana | ||
Columbus, Mississippi | Conway, Arkansas | Hammond, Indiana | ||
New Bern, North Carolina | Fort Smith, Arkansas (2 locations) | Indianapolis, Indiana (2 locations) | ||
Riegelwood, North Carolina | Russellville, Arkansas (2 locations) | Saint Anthony, Indiana | ||
Eastover, South Carolina | Tolleson, Arizona | Tipton, Indiana | ||
Georgetown, South Carolina | Yuma, Arizona | Cedar Rapids, Iowa | ||
Franklin, Virginia | Anaheim, California | Waterloo, Iowa | ||
Buena Park, California leased | Garden City, Kansas | |||
International: | Camarillo, California | Kansas City, Kansas | ||
Grande Prairie, Alberta, Canada | Carson, California | Bowling Green, Kentucky | ||
Saillat, France | Cerritos, California leased | Lexington, Kentucky | ||
Gdansk, Poland | Compton, California | Louisville, Kentucky | ||
Kwidzyn, Poland | Elk Grove, California | Walton, Kentucky | ||
Svetogorsk, Russia | Exeter, California | Bogalusa, Louisiana | ||
Gilroy, California (2 locations) | Lafayette, Louisiana | |||
INDUSTRIAL PACKAGING | Los Angeles, California | Shreveport, Louisiana | ||
Modesto, California | Springhill, Louisiana | |||
Containerboard | Ontario, California | Auburn, Maine | ||
U.S.: | Salinas, California | Three Rivers, Michigan | ||
Pine Hill, Alabama | Sanger, California | Arden Hills, Minnesota | ||
Prattville, Alabama | San Leandro, California leased 3 | Austin, Minnesota | ||
Cantonment, Florida | Santa Fe Springs, California (2 locations) | Fridley, Minnesota | ||
Rome, Georgia | Stockton, California | Minneapolis, Minnesota leased |
Shakopee, Minnesota | Laurens, South Carolina | Silao, Mexico | ||
White Bear Lake, Minnesota | Lexington, South Carolina | Toluca, Mexico | ||
Houston, Mississippi | Ashland City, Tennessee leased | Villa Nicolas Romero, Mexico | ||
Jackson, Mississippi | Cleveland, Tennessee | Zapopan, Mexico | ||
Magnolia, Mississippi leased | Elizabethton, Tennessee leased | Agadir, Morocco | ||
Olive Branch, Mississippi | Morristown, Tennessee | Casablanca, Morocco | ||
Fenton, Missouri | Murfreesboro, Tennessee | Tangier, Morocco | ||
Kansas City, Missouri | Amarillo, Texas | Almeria, Spain 2 | ||
Maryland Heights, Missouri | Carrollton, Texas (2 locations) | Barcelona, Spain | ||
North Kansas City, Missouri leased | Edinburg, Texas | Bilbao, Spain | ||
St. Joseph, Missouri | El Paso, Texas | Gandia, Spain | ||
St. Louis, Missouri | Ft. Worth, Texas leased | Las Palmas, Spain | ||
Omaha, Nebraska | Grand Prairie, Texas | Madrid, Spain | ||
Barrington, New Jersey | Hidalgo, Texas | Tenerife, Spain | ||
Bellmawr, New Jersey | McAllen, Texas | Adana, Turkey | ||
Milltown, New Jersey | San Antonio, Texas (2 locations) | Bursa. Turkey | ||
Spotswood, New Jersey | Sealy, Texas | Corlu, Turkey | ||
Thorofare, New Jersey | Waxahachie, Texas | Corum, Turkey | ||
Binghamton, New York | Lynchburg, Virginia | Gebze, Turkey | ||
Buffalo, New York | Petersburg, Virginia | Izmir, Turkey | ||
Rochester, New York | Richmond, Virginia | |||
Scotia, New York | Moses Lake, Washington | Recycling | ||
Utica, New York | Olympia, Washington | U.S.: | ||
Charlotte, North Carolina (2 locations) 1 leased | Yakima, Washington | Phoenix, Arizona | ||
Lumberton, North Carolina | Fond du Lac, Wisconsin | Fremont, California | ||
Manson, North Carolina | Manitowoc, Wisconsin | Norwalk, California | ||
Newton, North Carolina | West Sacramento, California | |||
Statesville, North Carolina | International: | Itasca, Illinois | ||
Byesville, Ohio | Manaus, Amazonas, Brazil | Des Moines, Iowa | ||
Delaware, Ohio | Paulinia, São Paulo, Brazil | Wichita, Kansas | ||
Eaton, Ohio | Rio Verde, Goias, Brazil | Roseville, Minnesota | ||
Madison, Ohio | Suzano, São Paulo, Brazil | Omaha, Nebraska | ||
Marion, Ohio | Rancagua, Chile | Charlotte, North Carolina | ||
Marysville, Ohio leased | Arles, France | Beaverton, Oregon | ||
Middletown, Ohio | Chalon-sur-Saone, France | Springfield, Oregon leased | ||
Mt. Vernon, Ohio | Creil, France | Carrollton, Texas | ||
Newark, Ohio | LePuy, France (Espaly Box Plant) | Salt Lake City, Utah | ||
Streetsboro, Ohio | Mortagne, France | Richmond, Virginia | ||
Wooster, Ohio | Guadeloupe, French West Indies | Kent, Washington | ||
Oklahoma City, Oklahoma | Bellusco, Italy | |||
Beaverton, Oregon (3 locations) | Catania, Italy | International: | ||
Hillsboro, Oregon | Pomezia, Italy | Monterrey, Mexico leased | ||
Portland, Oregon | San Felice, Italy | Xalapa, Veracruz, Mexico leased | ||
Salem, Oregon leased | Apodaco (Monterrey), Mexico leased | |||
Biglerville, Pennsylvania (2 locations) | Ixtaczoquitlan, Mexico | Bags | ||
Eighty-four, Pennsylvania | Juarez, Mexico leased | U.S.: | ||
Hazleton, Pennsylvania | Los Mochis, Mexico | Buena Park, California | ||
Kennett Square, Pennsylvania | Puebla, Mexico leased | Beaverton, Oregon | ||
Lancaster, Pennsylvania | Reynosa, Mexico | Grand Prairie, Texas | ||
Mount Carmel, Pennsylvania | San Jose Iturbide, Mexico | |||
Georgetown, South Carolina | Santa Catarina, Mexico |
Coated Paperboard | ||||
International: | ||||
Kwidzyn, Poland | ||||
Svetogorsk, Russia | ||||
DISTRIBUTION | ||||
IP Asia | ||||
International: | ||||
Guangzhou, China | ||||
Hong Kong, China | ||||
Shanghai, China | ||||
Japan | ||||
Korea | ||||
Singapore | ||||
Taiwan 1 | ||||
Thailand 1 | ||||
Vietnam 1 | ||||
FOREST RESOURCES | ||||
International: | ||||
Approximately 329,400 acres | ||||
in Brazil | ||||
1) Closed July 2018 | ||||
2) Closed September 2018 | ||||
3) Closed December 2018 | ||||
(in thousands of short tons except as noted) | U.S. | EMEA | Americas, other than U.S. | India | Total | |||||||||
Industrial Packaging | ||||||||||||||
Containerboard (a) | 13,596 | 91 | 366 | — | 14,053 | |||||||||
Coated Paperboard | — | 428 | — | — | 428 | |||||||||
Total Industrial Packaging | 13,596 | 519 | 366 | — | 14,481 | |||||||||
Global Cellulose Fibers | ||||||||||||||
Dried Pulp (in thousands of metric tons) | 2,914 | 277 | 535 | — | 3,726 | |||||||||
Printing Papers | ||||||||||||||
Uncoated Freesheet & Bristols (b) | 1,990 | 1,162 | 1,135 | 266 | 4,553 | |||||||||
Newsprint | — | 75 | — | — | 75 | |||||||||
Total Printing Papers | 1,990 | 1,237 | 1,135 | 266 | 4,628 |
Forest Resources | ||
We own, manage or have an interest in approximately 1.4 million acres of forestlands worldwide. These forestlands and associated acres are located in the following regions: | (M Acres) | |
Brazil | 329 | |
We have harvesting rights in: | ||
Russia | 1,047 | |
Total | 1,376 |
1. | GAC Issuance and GAC Issuance True-Up Premium. Prudential agrees to issue the Contract as follows: |
a. | Specimen GAC Form Issuance. On the Scheduled GAC Issuance Date, subject to Prudential’s receipt of the Premium Due Date Transfers and any GAC Issuance True-Up Premium due to Prudential and subject to the terms of paragraphs 1.b. and 1.c., Prudential irrevocably agrees to issue the Contract with an effective date that is the Premium Due Date, and in accordance with the Contract, irrevocably commits to make payments owed to Payees under the Contract on and after the Annuity Start Date; provided that, if the parties are unable to complete the takeover of administration services regarding payments under the Contract pursuant to paragraph 6 prior to the Annuity Start Date, Prudential shall make a bulk payment to the Plan Trust (or in such other manner as the parties agree) equal to the Aggregate Monthly Payment (as defined in the Contract) for each month until administration is transferred to Prudential pursuant to paragraph 6. The Contract will be in substantially the form of the specimen group annuity contract (the “Specimen GAC Form”) attached hereto as Schedule 1 unless a Modified GAC Form is issued pursuant to and in accordance with paragraph 2. |
b. | Form of Annuities and Payments under the Contract. The type, description and forms of annuities (e.g., single life annuity, joint and survivor annuity), payments under the Contract and other terms of the Contract will be consistent with the terms of Prudential’s proposal dated June 7, 2018 and September 21, 2018 (the “Proposal”) as updated to reflect (i) any modifications contemplated in Prudential’s Final Annuity Quote Sheet dated September 25, 2018 (the “Final Annuity Quote Sheet”) and (ii) any modifications mutually agreed to between the parties after the Commitment Agreement Date and before the 35th Business Day prior to the Scheduled GAC Issuance Date. Subject to Prudential’s receipt of the Premium Due Date Transfers, Prudential will make payments to Payees commencing on December 31, 2018 in accordance with the Proposal and the Final Annuity Quote Sheet until the Contract has been issued and, for the avoidance of doubt, will make such payments even if the Contract has not been |
c. | Necessary Data. As a condition to Prudential’s issuing the Contract, the Company will deliver or cause to be delivered to Prudential the data necessary for Prudential to prepare the annuity exhibit and the information necessary for Prudential to draft provisions of the Contract and administer the payments thereunder. If there are any delays in the delivery of the foregoing information based on the delivery dates set forth in Schedule 7 or such other delivery dates as may be designated by Prudential, Prudential may refer any Payee who contacts Prudential to the Company Contact for assistance and Prudential may, in its sole discretion, delay the mailing of Welcome Kits and annuity certificates. The annuity exhibit will not include any Payee for which Prudential has not been provided each of the following: (i) name, (ii) gender, (iii) date of birth and (iv) social security or federal taxpayer identification number. |
d. | GAC Issuance True-Up Premium. Schedule 8 provides a description of the methodologies and procedures by which Prudential will calculate the GAC Issuance True-Up Premium. Prudential and the Company will cooperate in good faith so that Prudential can calculate the GAC Issuance True-Up Premium, subject to the following acknowledgements, limitations and conditions: |
i. | GAC Issuance Data. To the extent that the Company discovers or has any Removed Lives or Data Corrections after the Commitment Agreement Date and prior to the date that is 35 Business Days prior to the Scheduled GAC Issuance Date (the “GAC Issuance Data Notice Date”), the Company will provide written notice of such Removed Life or Data Correction as promptly as reasonably practicable to Prudential. Prudential will only be responsible for incorporating into the calculation of the GAC Issuance True-Up Premium those Data Corrections and Removed Lives that have been notified to Prudential by the Company on or prior to the GAC Issuance Data Notice Date together with any other Removed Lives and Data Corrections identified by Prudential (the “GAC Issuance Data”). Such incorporation is subject to Prudential’s agreement with such Removed Lives or Data Corrections and any limitations on incorporating such Data Corrections and Removed Lives into the GAC Issuance True-Up Premium set forth in Schedule 8. |
ii. | GAC Issuance Annuity Exhibit. Twenty Business Days prior to the Scheduled GAC Issuance Date, Prudential will deliver to the Company a proposed annuity exhibit utilizing and consistent with the Base File and the GAC Issuance Data. Fifteen Business Days prior to the Scheduled GAC Issuance Date, the Company will respond to Prudential with any questions on the annuity exhibit. Prudential and the Company will cooperate in good faith to resolve any discrepancies on or prior to the eleventh Business Day prior to the Scheduled GAC Issuance Date and Prudential will reflect in the annuity exhibit any changes that have been agreed to on or prior to such eleventh Business Day. The annuity exhibit will not include any Payee for which Prudential has not been provided each of the following: (1) name, (2) gender, (3) date of birth and (4) social security or federal taxpayer identification number. Notwithstanding the foregoing, if the (1) name, (2) gender, (3) date of birth or (4) social security or federal taxpayer identification number for a Payee that is provided in accordance with this paragraph 1.d.ii is determined to be incorrect after |
iii. | GAC Issuance True-Up Premium. Eight Business Days prior to the Scheduled GAC Issuance Date, Prudential will send the calculation of the GAC Issuance True-Up Premium to the Company for review [***]. Five Business Days prior to the Scheduled GAC Issuance Date, the Company will respond to Prudential with any questions on the GAC Issuance True-Up Premium. If the Company and Prudential cannot resolve any dispute with respect to the GAC Issuance True-Up Premium on or prior to the date that is three Business Days prior to the Scheduled GAC Issuance Date, then Prudential’s determination will control for purposes of the GAC Issuance True-Up Premium but the Company may immediately commence an arbitration dispute pursuant to Schedule 4 with respect to the GAC Issuance True-Up Premium. |
iv. | GAC Issuance True-Up Premium Payment. The GAC Issuance True-Up Premium will be paid on the Scheduled GAC Issuance Date as follows: (A) if the GAC Issuance True-Up Premium is a positive number, then the Independent Fiduciary will irrevocably direct the Plan Trustee to pay to Prudential an amount, in Cash, equal to the GAC Issuance True-Up Premium or (B) if the GAC Issuance True-Up Premium is a negative number, then Prudential will pay to the Plan Trust an amount, in Cash, equal to the absolute value of the GAC Issuance True-Up Premium. |
2. | Negotiation of Modified GAC Form. After the Commitment Agreement Date, Prudential, the Company and the Independent Fiduciary will each use commercially reasonable efforts to revise the Specimen GAC Form to reflect such revisions that were mutually agreed to by the parties prior to the Commitment Agreement Date and will use commercially reasonable efforts to negotiate any additional revisions to the Specimen GAC Form (the “Modified GAC Form”) and related forms of annuity certificates, subject to the following acknowledgements, limitations and conditions: |
a. | Regulatory Approvals. Prudential will use commercially reasonable efforts to obtain regulatory approvals, to the extent required by applicable law, of the Modified GAC Form prior to the date that is 90 Business Days after the Commitment Agreement Date (the “Modified GAC Deadline Date”) and in the event that any approval, to the extent required by applicable law, is not granted, or if the Contract is disapproved, Prudential, the Independent Fiduciary and the Company will cooperate in good faith to mutually agree on modifications to the Contract to address the requests of the Tennessee Department of Commerce and Insurance, if any, and, to the extent possible, to preserve the provisions included in the Modified GAC Form. Prudential will use commercially reasonable efforts to obtain regulatory approvals, to the extent required by applicable law, of customized annuity certificates prior to the annuity certificate mailing date set forth in paragraph 5.b. |
b. | Modified GAC Form Issuance. If, in accordance with paragraph 2.a., the negotiation of the Modified GAC Form and the receipt of any related regulatory approvals for all negotiated changes to the Specimen GAC Form are completed by the Modified GAC Deadline Date, then, subject to Prudential’s receipt of the Premium Due Date Transfers and any GAC Issuance True-Up Premium due to Prudential, (i) if Prudential |
3. | Premium Due Date Transfers. The Independent Fiduciary will irrevocably direct the Plan Trustee to pay Prudential [***]. (the “Premium Amount”) on the Premium Due Date by paying an amount in Cash equal to the Premium Amount (such payment, the “Premium Due Date Transfer”). Notwithstanding anything to the contrary in this Commitment Agreement, Prudential, the Company and the Independent Fiduciary each agree and acknowledge that the Premium Amount will be paid entirely in Cash [***]. |
a. | Schedule 2 Updates. On the second Business Day after the Commitment Agreement Date, Prudential will deliver to the Company an updated Schedule 2 that reflects the [***] of each [***]. If the Company and Prudential cannot resolve any dispute with respect to any such information on or prior to the Premium Due Date, then [***] may immediately commence an arbitration dispute pursuant to Schedule 4 with respect to any such information. On the Premium Due Date, Prudential will, if needed, update Schedule 2 to reflect the removal of [***]. Prudential will, if needed, further update Schedule 2 to reflect the removal of [***] and is returned to the Plan Trust in accordance therewith. |
b. | [***]. On and as of the Business Day prior to the Premium Due Date, Prudential will provide to the Company [***] in the form of Schedule 5 [***]. Prior to the Premium Due Date, the Company will confirm to Prudential in writing that such information is accurate and complete or will provide any additions, deletions or corrections to such information. If the Company and Prudential have a dispute with respect to any such information and cannot resolve such dispute on or prior to the Business Day prior to the Premium Due Date, then [***] may immediately commence an arbitration dispute pursuant to Schedule 4 with respect to any such information. |
c. | [***]. By written notice to the other party on or before [***] following the Premium Due Date, the Company or Prudential may identify [***] and the parties will work in good faith [***] following the receipt of such notice to agree on which, if any, [***]. If the parties agree that an asset is [***] within [***] following the receipt of such notice, then, on or before the date that is [***] following such agreement, the Independent Fiduciary will irrevocably direct the Plan Trustee to promptly pay or cause to be paid to Prudential an amount, in Cash, equal to [***], and, simultaneously with receipt of such payment, Prudential will return [***] to the Plan Trust together with any [***]. |
d. | Additional Actions with respect to Assets. The Independent Fiduciary will irrevocably direct the Plan Trustee to promptly give all notices that are required, under applicable law and the terms of [***], in connection with the sale, assignment, transfer and delivery of [***] on the Premium Due Date. The Independent Fiduciary will irrevocably direct the Plan Trustee to and Prudential will promptly execute, deliver, record or file or cause to be executed, delivered, recorded or filed any and all releases, affidavits, |
e. | [***]. [***]. |
f. | Available Assets. The Company will cause the Plan Trust to have sufficient Cash or other assets (whether by means of a Cash contribution or otherwise) to enable the Plan Trustee to pay all amounts that it is directed to pay to Prudential by the Independent Fiduciary pursuant to this Commitment Agreement. |
4. | Public Announcements. |
a. | Press Releases. The Company and Prudential have the right to issue a transaction announcement or press release regarding the transactions contemplated by this Commitment Agreement, a copy of which will be provided to the other party for review no less than two Business Days prior to the issuance thereof, and the party issuing the transaction announcement or press release will consider in good faith any comments made by the other party; provided, however, that, if the Company has not issued a transaction announcement or press release, Prudential will not issue a transaction announcement or press release without the prior written consent of the Company; provided, further, that nothing contained in this paragraph 4.a. will prevent Prudential from communicating with Payees, including through communications posted to Prudential’s website. |
b. | SEC Filings. If the Company concludes that disclosure of this Commitment Agreement is required by the rules of the Securities and Exchange Commission (“SEC”), (i) the Company will, in good faith, consider whether to make an application with the SEC for confidential treatment of information that the Company concludes is competitively sensitive from the perspective of the Company and (ii) the Company will provide Prudential with a copy of any material correspondence (written or oral) with the SEC regarding any such application for confidential treatment, and the Company and Prudential will otherwise reasonably cooperate in connection with any such application. |
c. | No Insurer Communications. From the Commitment Agreement Date until the issuance of any annuity certificate by Prudential to an annuitant, other than as provided for in this Commitment Agreement, without the Company’s prior written consent, (i) Prudential will cause the employees of its retirement services business unit not to initiate any contact or communication with any participant or beneficiary of the Plan in connection with any transactions other than those transactions contemplated by this Commitment Agreement and (ii) Prudential will not, and will cause all of its affiliates not to, provide any of their respective insurance agents, wholesalers, retailers or other representatives with any contact information of such participants and beneficiaries of the Plan obtained from the Company or any of its representatives in connection with the transactions contemplated by this Commitment Agreement, except for those representatives of Prudential or any of their respective affiliates who need to know such information for purposes of the transactions contemplated by this Commitment Agreement and agree to comply with the requirements of this Commitment Agreement. However, this paragraph 4.c. will not restrict employees of Prudential’s retirement services business unit from contacting any participant or |
5. | Welcome Kits and Annuity Certificates. |
a. | Welcome Kits. Beginning on December 12, 2018, Prudential will mail a welcome kit to each annuitant under the Contract (the “Welcome Kit”). Prudential will send a preliminary draft of the Welcome Kit to the Company and the Independent Fiduciary as soon as practicable and Prudential will consider in good faith any comments made by the Company or the Independent Fiduciary on the “Frequently Asked Questions” section of the Welcome Kit on or before the fifth Business Day after it receives the preliminary draft of the Welcome Kit from Prudential. |
b. | Annuity Certificates. Prudential will mail an annuity certificate to each applicable Payee on or before the later of (i) 20 Business Days after the Contract is issued and (ii) 120 Business Days after the date on which the Welcome Kit is mailed to Payees, in each case, subject to receiving regulatory approvals for any such annuity certificate, if needed. To the extent that any changes are made to the forms of annuity certificates or the related benefit terms after the Company, the Independent Fiduciary and Prudential have agreed on the forms of annuity certificates to be filed and the related benefit terms, the mailing of an annuity certificate to each applicable Payee shall be extended by the number of days elapsed since the Company, the Independent Fiduciary and Prudential had first agreed on the forms of such annuity certificates and the related benefit terms. Each annuity certificate will include a statement informing a Payee of his or her right to obtain a copy of the Contract (redacted to exclude information concerning other annuitants) and the right to enforce all provisions of the Contract. The rights of a Payee are not conditioned on the issuance of the annuity certificates, and any delay in issuing a certificate shall not have any effect on the date as of which the Payee has enforceable rights against Prudential. |
6. | Administration and Transfer. |
a. | Administrative Transition. The Company will provide or cause to be provided to Prudential the information needed to administer the payments under the Contract and will complete or cause to be completed all processes set forth in Schedule 7. The Company and Prudential will use commercially reasonable efforts to take or cause to be taken all actions and do or cause to be done all things necessary to coordinate the takeover by Prudential of all administration responsibilities necessary to effectively provide recordkeeping and administration services regarding payments under the Contract commencing on December 31, 2018. The Company will provide Prudential with final census data in good order on or before October 22, 2018 in order for Prudential to provide recordkeeping and administration |
b. | Call Center and Company Contact. Prudential will maintain, at its cost and expense, a toll-free phone number and/or a website (the “Call Center”) which will be available starting from December 12, 2018 for Payees to contact Prudential with questions related to the Contract and the annuity certificates. For a period of five years following the Premium Due Date, the Company will maintain, at its cost and expense, a point of contact (the “Company Contact”) to which Prudential may refer Payees who pose questions related to their Plan benefits. In the event that a Payee contacts the Company with questions related to the Contract and the annuity certificates, the Company may refer the Payee to the Call Center. In the event that a Payee contacts Prudential with questions related to their Plan benefits, Prudential may refer the Payee to the Company Contact. |
7. | [***]; Termination. |
a. | [***]. In the event (1) the Independent Fiduciary breaches its obligation to irrevocably direct the Plan Trustee to pay the Premium Due Date Transfers in accordance with paragraph 3, (2) the Premium Due Date Transfers are not transferred to and received by Prudential in accordance with paragraph 3 (due to failure of the Plan Trustee to pay the Premium Due Date Transfers or otherwise) or (3) the condition to closing set forth in paragraph 9.b.ii is not satisfied, the Company will promptly pay Prudential [***]. [***]. |
b. | Termination. This Commitment Agreement (i) may be terminated at Prudential’s option if the Premium Due Date Transfers have not occurred in accordance with this Commitment Agreement on the Premium Due Date, or (ii) will be terminated upon the payment of [***]. If this Commitment Agreement is terminated pursuant to the preceding sentence, all rights and obligations of the parties under this Commitment Agreement will terminate and will become null and void except that this paragraph 7 ([***]; Termination), paragraph 10 (Definitions), Schedule 9 ([***]), and paragraph 12 (Miscellaneous) will survive any such termination and no party will otherwise have any liability to any other party under this Commitment Agreement. However, nothing in this paragraph 7 will relieve any party from liability for any fraud or willful and material breach of this Commitment Agreement. |
8. | Representations and Warranties. |
a. | Prudential Representations and Warranties. Prudential hereby represents and warrants to the Company and the Independent Fiduciary as of the Commitment Agreement Date and as of the Premium Due Date that: |
i. | Due Organization, Good Standing and Corporate Power. Prudential is a life insurance company, duly organized, validly existing and in good standing under the laws of the State of New Jersey. Prudential is duly qualified or licensed to do business and is in good standing in each jurisdiction in which its performance of its obligations in the Commitment Agreement and the Ancillary Agreements makes such qualification or licensing necessary, except in such jurisdictions where the failure to be in good standing or so qualified or licensed would not be material. Prudential has all requisite power and authority to enter into and carry out its obligations under this Commitment Agreement and the Ancillary Agreements and to consummate the transactions contemplated to be undertaken by Prudential in this Commitment Agreement and the Ancillary Agreements. |
ii. | Authorization of Commitment Agreement and Enforceability. Prudential has received all necessary corporate approvals and no other action on the part of Prudential is necessary to authorize the execution, delivery and performance of this Commitment Agreement and the Ancillary Agreements, and the consummation of the transactions contemplated to be undertaken by Prudential in this Commitment Agreement and the Ancillary Agreements. This Commitment Agreement and the Ancillary Agreements have been (or will be) duly executed and delivered by Prudential, and each is (or when executed will be) a valid and binding obligation of Prudential, enforceable against Prudential in accordance with its terms, subject to the applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (“Enforceability Exceptions”). |
iii. | No Conflict. The execution, delivery and performance of this Commitment Agreement and the Ancillary Agreements by Prudential, and the consummation by Prudential of the transactions contemplated to be undertaken by Prudential in this Commitment Agreement do not (1) violate or conflict with any provision of its certificates or articles of incorporation, bylaws, code of regulations, or the comparable governing documents, (2) except for the filings and approvals of state insurance governmental authorities in the states listed on Schedule 11, violate or conflict with any law or order of any governmental authority applicable to Prudential, (3) require any governmental or governmental agency approval other than any filing made or approval received as of the Commitment Agreement Date and filings with and approvals of state insurance governmental authorities in the states listed on Schedule 11 or (4) require any consent of or other action by any person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause or permit termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit under, any provision of any contract to which Prudential is a party, except where the occurrence of any of the foregoing would not have a material adverse effect on Prudential’s ability to consummate the transactions and perform its obligations contemplated by this Commitment Agreement. No filing or approval is required to issue the annuity certificates in accordance with the Contract, other than any filing made or approval received as of the Commitment Agreement Date and filings with and approvals of state insurance governmental authorities in the states listed on Schedule 11. |
iv. | Compliance with Laws. The business of insurance conducted by Prudential has been and is being conducted in material compliance with applicable laws, and none of the licenses, permits or governmental approvals required for the continued conduct of the business of Prudential as such business is currently being conducted will lapse, terminate, expire or otherwise be impaired as a result of the consummation of the transactions contemplated to be undertaken by Prudential in this Commitment Agreement, except as, in either case, would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Prudential to perform its obligations under this Commitment Agreement. |
v. | Accuracy of Information. To Prudential’s Knowledge (x) all material information provided by Prudential to the Company or the Independent Fiduciary (other than any component incorporated into the calculation of the Premium Amount or the GAC Issuance True-Up Premium not calculated, determined or provided by Prudential, including the Base File, and any information provided by Prudential based on any such component) in connection with the transactions contemplated by this Commitment Agreement was, as of the date indicated on such information, true and correct in all material respects and (y) no change has occurred since the date indicated on such information that Prudential has not publicly disclosed or disclosed to the recipient of such information that would cause such information, taken as a whole, to be materially false or misleading. |
vi. | Relationship to the Plan. Prudential is not (1) a trustee of the Plan (other than a non-discretionary trustee who does not render investment advice with respect to any assets of the Plan), (2) a Plan administrator (within the meaning of ERISA § 3(16)(A) and the Code § 414(g)) with respect to the Plan or) or (3) an employer any of whose employees are covered by the Plan. Schedule 6 sets forth a true and complete list of (x) Prudential and Prudential’s affiliates that are investment managers within the meaning of ERISA § 3(38)(B) and (y) without duplication of clause (x), Prudential and Prudential’s affiliates that are registered as investment advisers under the Investment Advisers Act of 1940; provided, however, that solely with respect to the representation and warranty as to Schedule 6 to be made by Prudential on and as of the Premium Due Date, Prudential may update Schedule 6 through the Premium Due Date by providing a written update to the Company so that the information included therein is current on and as of the Premium Due Date. |
vii. | No Post-Closing Liability. Following receipt by Prudential of the Premium Due Date Transfers, the Plan, the Company and the Independent Fiduciary and their respective affiliates and representatives will not have any liability to pay any annuity payment under the Contract. |
viii. | The Contract. The Contract, when executed, will be duly executed and delivered by Prudential and will be a valid and binding obligation of Prudential and enforceable against Prudential by the Company and each Payee in accordance with its terms, subject to the Enforceability Exceptions. At all times, the right to a benefit and all other provisions under the Contract, in accordance with the Contract’s terms, will be enforceable by the sole choice of the Payee to whom such benefit is owed under the Contract, subject to the Enforceability Exceptions. In the event that the Company, as the contract holder, ceases to exist, notifies Prudential that it will |
ix. | Litigation. As of the Commitment Agreement Date, there is no action pending or, to Prudential’s Knowledge, threatened against Prudential that in any manner challenges or seeks to prevent, enjoin or materially alter or delay the transactions contemplated by this Commitment Agreement or that could reasonably be expected to materially impair or restrict Prudential’s ability to consummate the transactions contemplated by this Commitment Agreement and to perform its obligations hereunder. |
x. | No Commissions. No fees, commissions or payments are or will be owed by Prudential to any individual or entity in connection with the transactions contemplated in this Commitment Agreement and the Ancillary Agreements for which any other party, or its respective affiliates or representatives, could be liable. |
xi. | RBC Ratio. As of the Commitment Agreement Date, Prudential’s most recent Projected RBC Ratio is [***] and, to Prudential’s Knowledge, no event (including a change to financial market metrics) has occurred between the date of Prudential’s most recent Projected RBC Ratio and the Commitment Agreement Date that would be expected to cause Prudential’s Projected RBC Ratio, calculated as of part of its next scheduled forecast, to [***]. |
xii. | [***]. [***]. [***]. [***]. [***]. |
b. | Company Representations and Warranties. The Company hereby represents and warrants to Prudential and the Independent Fiduciary as of the Commitment Agreement Date and as of the Premium Due Date that: |
i. | Due Organization, Good Standing and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New York. The Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which its performance of its obligations in the Commitment Agreement and the Ancillary Agreements to which it is a party makes such qualification or licensing necessary, except in such jurisdictions where the failure to be in good standing or so qualified or licensed would not be material. The Company has all requisite power and authority to enter into and carry out its obligations under this Commitment Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated to be undertaken by the Company in this Commitment Agreement and the Ancillary Agreements. |
ii. | Authorization of Commitment Agreement and Enforceability. The Company has received all necessary corporate approvals and no other action on the part of the Company is necessary to authorize the execution, delivery and performance of this Commitment Agreement and the Ancillary Agreements to which it is a party, and the consummation of the transactions contemplated to be undertaken by the Company in this Commitment Agreement and the Ancillary Agreements to which |
iii. | No Conflict. The execution, delivery and performance of this Commitment Agreement and the Ancillary Agreements to which it is a party by the Company, and the consummation by the Company of the transactions contemplated to be undertaken by the Company in this Commitment Agreement do not (1) violate or conflict with any provision of the Plan and any documents and instruments governing the Plan as contemplated under ERISA § 404(a)(1)(D) (the “Plan Governing Documents”), the certificates or articles of incorporation, bylaws, code of regulations, or the comparable governing documents of the Company, (2) violate or conflict with any law or order of any governmental authority applicable to the Company or the Plan Governing Documents, (3) require any governmental or governmental agency approval or (4) require any consent of or other action by any person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause or permit termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit under, any provision of any contract to which the Company is a party, except where the occurrence of any of the foregoing would not have a material adverse effect on the Company’s ability to consummate the transactions and perform its obligations contemplated by this Commitment Agreement. |
iv. | Accuracy of Information. Notwithstanding anything to the contrary in the Company NDA, to the Company’s Knowledge, (1) the mortality experience data file provided by or on behalf of the Company to Prudential identified on Schedule 10 did not contain any misstatements or omissions that were, in the aggregate, material, and (2) the data in respect of benefit amounts, forms of annuities, date of birth, date of death, state of residence, gender and status (beneficiary in pay or participant), in each case, with respect to the Payees that was furnished by or on behalf of the Company to Prudential, was not generated using any materially incorrect systematic assumptions or material omissions. |
v. | Compliance with ERISA. The Plan and Plan Trust are maintained under and subject to ERISA and, to the Company’s Knowledge, are in compliance with ERISA in all material respects. To the Company’s Knowledge, no event has occurred that is reasonably likely to result in the Plan losing its status as qualified by the Code for preferential tax treatment under Code §§ 401(a) and 501(a). All Plan amendments necessary to effect the transactions contemplated by this Commitment Agreement and the Ancillary Agreements have been duly executed and, to the extent that they require authorization by the Company, have been, or will be by the Premium Due Date, duly authorized and made by the Company. |
vi. | Plan Investments. Neither Prudential nor any of Prudential’s affiliates is a fiduciary of the Plan who either (A) has or exercises any discretionary authority or control with respect to the investment of Plan Assets that are or will be involved in the transactions contemplated by the Commitment Agreement or the Ancillary Agreements or (B) renders investment advice (within the |
vii. | Independent Fiduciary. The Independent Fiduciary has been duly appointed as independent fiduciary of the Plan with respect to the purchase of one or more group annuity contracts to (1) be the sole fiduciary responsible for selecting one or more insurers to provide annuities in accordance and compliance with the ERISA Requirements, (2) determine whether the transactions contemplated by this Commitment Agreement and the Ancillary Agreements satisfy ERISA, (3) represent the interests of the Plan and its participants and beneficiaries in connection with the negotiation of a commitment agreement and, to the extent set forth in the IF Engagement Letter, the terms of any agreements with Prudential, including the Contract and the annuity certificates, (4) direct the Plan Trustee on behalf of the Plan to transfer the Premium Due Date Transfers in connection with the consummation of the transactions contemplated by this Commitment Agreement and any amounts required pursuant to paragraphs 1.d.iv. and 3.c. and (5) take all other actions on behalf of the Plan necessary to effectuate the foregoing to the extent set forth in the IF Engagement Letter. |
viii. | Plan Trustee is Directed Trustee. The Plan Trustee has been duly appointed as the directed trustee of the Plan Trust and is obligated to follow the Independent Fiduciary’s directions to effectuate and consummate the transactions contemplated by this Commitment Agreement and the IF Engagement Letter. |
ix. | Litigation. There is no action pending or, to the Company’s Knowledge, threatened against the Company, the Plan or the Independent Fiduciary that in any manner challenges or seeks to prevent, enjoin or materially alter or delay the transactions contemplated by this Commitment Agreement or that could reasonably be expected to materially impair or restrict such party’s ability to consummate the transactions contemplated by this Commitment Agreement and to perform its obligations hereunder. |
x. | No Commissions. No fees, commissions or payments are or will be owed by the Company to any individual or entity in connection with the transactions contemplated in this Commitment Agreement and the Ancillary Agreements for which any other party, or its respective affiliates or representatives, could be liable. |
c. | Independent Fiduciary Representations and Warranties. The Independent Fiduciary hereby represents and warrants to the Company and Prudential as of the Commitment Agreement Date and as of the Premium Due Date and, with respect to paragraph 8.c.v.4 only, as of any other date on which the Plan Trustee pays Cash or assets to Prudential in connection with the transactions contemplated by this Commitment Agreement or the Contract, that: |
i. | Due Organization, Good Standing and Corporate Power. The Independent Fiduciary is a trust company, duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. The Independent Fiduciary is duly qualified or licensed to do business and is in good standing in each jurisdiction in which its performance of its obligations in the Commitment Agreement and the Ancillary Agreements to which it is a party makes such qualification or licensing necessary, except in such jurisdictions where the failure to be in good standing or so qualified or licensed would not be material. The Independent Fiduciary has all requisite power and authority to enter into and carry out its obligations under this Commitment Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated to be undertaken by the Independent Fiduciary in this Commitment Agreement and the Ancillary Agreements. |
ii. | Authorization of Commitment Agreement and Enforceability. The Independent Fiduciary has received all necessary corporate approvals and no other action on the part of the Independent Fiduciary is necessary to authorize the execution, delivery and performance of this Commitment Agreement and the Ancillary Agreements to which it is a party, and the consummation of the transactions contemplated to be undertaken by the Independent Fiduciary in this Commitment Agreement and the Ancillary Agreements to which it is a party. This Commitment Agreement and the Ancillary Agreements to which it is a party have been duly executed and delivered by the Independent Fiduciary and each is (or when executed will be) a valid and binding obligation of the Independent Fiduciary, enforceable against the Independent Fiduciary, in accordance with its terms, subject to the Enforceability Exceptions. |
iii. | No Conflict. The execution, delivery and performance of this Commitment Agreement and the Ancillary Agreements to which it is a party by the Independent Fiduciary, and the consummation by the Independent Fiduciary of the transactions contemplated to be undertaken by the Independent Fiduciary in this Commitment Agreement do not (1) violate or conflict with any provision of its certificates or articles of incorporation, bylaws, code of regulations, or the comparable governing documents, (2) violate or conflict with any law or order of any governmental authority applicable to the Independent Fiduciary, (3) require any governmental or governmental agency approval, (4) violate or conflict with any law or order of any governmental authority applicable to any provision of the Plan Governing Documents or (5) require any consent of or other action by any person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause or permit termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit under, any provision of any contract to which the Independent Fiduciary is a party, except where the occurrence of any of the foregoing would not have a material adverse effect on the Independent Fiduciary’s ability to consummate the transactions and perform its obligations contemplated by this Commitment Agreement. |
iv. | Independent Fiduciary Compliance with ERISA. |
1. | The Independent Fiduciary meets the requirements of, and in the transactions contemplated by this Commitment Agreement and the Ancillary Agreements is acting as, an “investment manager” under ERISA § 3(38), and further constitutes a “qualified professional asset manager” under the U.S. Department of Labor Prohibited Transaction Class Exemption 84-14 solely with respect to the transfer of assets to Prudential in connection with the transactions contemplated by this Commitment Agreement and the Ancillary Agreements (but not the selection of such assets or the management of such assets prior to the transfer). |
2. | The Independent Fiduciary has accepted, and has not rescinded or terminated, its designation as the sole fiduciary of the Plan with authority to select one or more insurers to issue one or more group annuity contracts in the IF Engagement Letter (a true and correct copy of which has been provided to Prudential, except that the fees to be paid to the Independent Fiduciary and indemnification provisions have been redacted), and the Independent Fiduciary reaffirms its fiduciary status as set forth in the IF Engagement Letter. |
3. | The Independent Fiduciary has accepted, and has not rescinded or terminated, appointment as independent fiduciary of the Plan with respect to the purchase of one or more group annuity contracts to (a) be the designated fiduciary responsible for selecting one or more insurers to provide annuities in accordance and compliance with the ERISA Requirements, (b) determine whether the transactions contemplated by this Commitment Agreement and the Ancillary Agreements satisfy ERISA, (c) represent the interests of the Plan and its participants and beneficiaries in connection with the negotiation of a commitment agreement and, to the extent set forth in the IF Engagement Letter, the terms of any agreements with Prudential, including the Contract and the annuity certificates, (d) direct the Plan Trustee on behalf of the Plan to transfer the Premium Due Date Transfers in connection with the consummation of the transactions contemplated by this Commitment Agreement and any amounts required pursuant to paragraphs 1.d.iv. and 3.c. and (e) take all other actions on behalf of the Plan necessary to effectuate the foregoing to the extent set forth in the IF Engagement Letter. |
4. | The Independent Fiduciary is fully qualified and has the requisite expertise together with its reliance on its consultant, Mercer Health and Benefits LLC, and its counsel, K&L Gates LLP, to serve as an independent fiduciary in connection with the transactions contemplated by this Commitment Agreement and the Ancillary Agreements, and it is independent of the Company and Prudential within the meaning of 29 C.F.R. § 2570.31(j). The Independent Fiduciary has ensured that it has established commercially reasonable ethical walls between its personnel working on the transactions contemplated in the Commitment Agreement and the Ancillary Agreements and its personnel working on other matters involving the Company, Prudential or any of their respective affiliates. |
v. | ERISA Related Determinations. |
1. | The Independent Fiduciary has selected Prudential to issue the Contract as set forth in this Commitment Agreement and such selection, the transactions contemplated by this Commitment Agreement, the Plan’s use of assets for the purchase of the Contract as contemplated by this |
2. | The transactions contemplated by this Commitment Agreement and the purchase of the Contract do not result in a Non-Exempt Prohibited Transaction, provided that the representations in paragraphs 8.a.vi and 8.b.vi are true and correct in all material respects as of the Premium Due Date. |
3. | The Plan Trust (I) will receive no less than “adequate consideration” for the Transferred Assets and (II) will pay no more than “adequate consideration” for the Contract, in each case within the meaning of “adequate consideration” under ERISA § 408(b)(17)(B) and Code § 4975(f)(10). |
4. | The Independent Fiduciary is responsible for exercising independent judgment in evaluating any transactions that the Plan engages in with Prudential (including purchase of the Contract). The Independent Fiduciary understands that Prudential did not undertake and is not undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with any transactions that the Plan engages in with Prudential. |
5. | The Independent Fiduciary has provided and will continue to provide the services described in Section 2 of the IF Engagement Letter prudently and for the exclusive benefit and in the sole interest of the Plan and its participants and beneficiaries. |
vi. | No Commissions. No fees, commissions or payments are or will be owed by the Independent Fiduciary to any individual or entity in connection with the transactions contemplated in this Commitment Agreement and the Ancillary Agreements for which any other party, or its respective affiliates or representatives, could be liable. |
9. | Conditions to Closing. The parties’ obligations to consummate the transactions contemplated by this Commitment Agreement in connection with the Premium Due Date Transfers, including the Independent Fiduciary’s obligation to direct the Plan Trustee to consummate the transactions contemplated by this Commitment Agreement, are subject to the conditions that: |
a. | the Independent Fiduciary will have confirmed that the transactions contemplated by this Commitment Agreement continue to satisfy the ERISA Requirements because an Independent Fiduciary MAC has not occurred or, if an Independent Fiduciary MAC has occurred, it is not continuing on the Premium Due Date; and |
b. | no court or government agency has taken any action after the Commitment Agreement Date that would (i) cause the consummation of the transactions contemplated by this Commitment Agreement to violate the law or (ii) cause the Plan to fail to remain qualified under Code Section 401(a); provided that, if the condition to closing set forth in this paragraph 9.b.ii is not satisfied, the [***] shall be payable in accordance with paragraph 7. |
10. | Definitions. For purposes of this Commitment Agreement, the following defined terms will have the following meanings: |
a. | “AAA” is defined in Schedule 4. |
b. | “Ancillary Agreements” means, collectively, the Contract and the Plan Trustee Agreement. |
c. | “Annuity Start Date” means December 31, 2018. |
d. | “Annual Benefit” is defined in Schedule 8. |
e. | “Approved Firm” is defined in Schedule 4. |
f. | [***]. |
g. | [***]. |
h. | “Authorized Persons” is defined in paragraph 12.d. |
i. | [***]. |
j. | “Base File” means the data file titled [***], provided by the Company to Prudential posted to Willis Towers Watson OnePlace secure website at 3:24 p.m. eastern time on August 28, 2018. |
k. | “Business Day” means any day other than a Saturday, a Sunday or a day on which banks located in New York, New York are authorized or required by law to close. |
l. | “Call Center” is defined in paragraph 6.b. |
m. | “Cash” means a wire transfer, through the Federal Reserve System, of currency of the United States of America. |
n. | “Check Register” is defined in Schedule 7. |
o. | “Code” means the Internal Revenue Code of 1986 and the applicable Treasury Regulations issued thereunder. |
p. | “Commitment Agreement” is defined in the preamble. |
q. | “Commitment Agreement Date” is defined in the preamble. |
r. | “Company” is defined in the preamble. |
s. | “Company Contact” is defined in paragraph 6.b. |
t. | “Company Indemnified Party” is defined in paragraph 11. |
u. | “Company NDA” is defined in paragraph 12.c. |
v. | “Confidential Information” has the meaning ascribed to such term in the Company NDA. |
w. | “Contract” is defined in the preamble. |
x. | “Corridor Breach” is defined in Schedule 8. |
y. | “Cut-Off Time” means 1:00 p.m. eastern time on the Premium Due Date. |
z. | “Data Corrections” is defined in Schedule 8. |
aa. | “Data Correction Adjustment” is defined in Schedule 8. |
bb. | “Data Load File” is defined in Schedule 7. |
cc. | “Data Load File Sign-Off” is defined in Schedule 7. |
dd. | “Deleted Lives” is defined in Schedule 8. |
ee. | “Deleted Lives Percentage” is defined in Schedule 8. |
ff. | [***]. |
gg. | “Enforceability Exceptions” is defined in paragraph 8.a.ii. |
hh. | “ERISA” means Employee Retirement Income Security Act of 1974, as amended, and any federal agency regulations promulgated thereunder that are currently in effect and applicable. |
ii. | “ERISA Requirements” means all of the applicable requirements of ERISA and applicable guidance promulgated thereunder, including Interpretive Bulletin 95-1. |
jj. | [***]. [***]. |
kk. | “Final Annuity Quote Sheet” is defined in paragraph 1.b. |
ll. | “Final Production Data File” is defined in Schedule 7. |
mm. | “GAC Issuance Data” is defined in paragraph 1.d.i. |
nn. | “GAC Issuance Data Notice Date” is defined in paragraph 1.d.i. |
oo. | “GAC Issuance True-Up Premium” is defined in Schedule 8. |
pp. | [***]. |
qq. | [***]. |
rr. | “IF Engagement Letter” means the engagement agreement between the Fiduciary Review Committee of the Retirement Plan of International Paper Company and the Independent Fiduciary dated August 3, 2018. |
ss. | “IFID NDA” is defined in paragraph 12.c. |
tt. | “Independent Fiduciary” is defined in the preamble. |
uu. | “Independent Fiduciary MAC” means (i) the occurrence of a material adverse change, as determined in the Independent Fiduciary’s sole discretion, in or directly affecting Prudential after the Commitment Agreement Date that would cause the selection of Prudential and the purchase of the Contract to fail to satisfy the ERISA Requirements, or (ii) the occurrence of a change in ERISA Requirements after the Commitment Agreement Date that would cause the selection of Prudential and the Plan’s purchase of the Contract to fail to satisfy ERISA Requirements. |
vv. | [***] |
ww. | [***]. [***]. |
xx. | “Knowledge” means actual knowledge after making appropriate inquiry. |
yy. | “Liability Baseline Value” is defined in Schedule 8. |
zz. | [***]. |
[[. | [***]. |
aaa. | [***]. |
bbb. | “Modified GAC Deadline Date” is defined in paragraph 2.a. |
ccc. | “Modified GAC Form” is defined in paragraph 2. |
ddd. | “Mortalities” is defined in Schedule 8. |
eee. | “Mortality Corrections” is defined in Schedule 8. |
fff. | “NAIC” is defined in Schedule 12. |
ggg. | “NDA” is defined in paragraph 12.c. |
hhh. | “New Lives” is defined in Schedule 8. |
iii. | “New Lives Percentage” is defined in Schedule 8. |
jjj. | “Non-Exempt Prohibited Transaction” means a transaction prohibited by ERISA § 406 or Code § 4975, for which no statutory exemption or U.S. Department of Labor class exemption is available. |
kkk. | “Payee” means any payee under the Contract, including annuitants, contingent annuitants, alternate payees and beneficiaries, as applicable. |
lll. | [***]. |
mmm. | “Plan” is defined in the preamble. |
nnn. | “Plan Asset” means an asset of the Plan within the meaning of ERISA. |
ooo. | “Plan Governing Documents” is defined in paragraph 8.b.iii. |
ppp. | “Plan Trust” means International Paper Company Retirement Plans Master Trust. |
qqq. | “Plan Trustee” means State Street Bank and Trust Company. |
rrr. | “Plan Trustee Agreement” means the agreement, dated as of the date hereof, among Prudential, the Plan Trustee and the Independent Fiduciary. |
sss. | “Preliminary Production Data File” is defined in Schedule 7. |
ttt. | “Premium Amount” is defined in paragraph 3. |
uuu. | “Premium Due Date” means five Business Days following the Commitment Agreement Date. |
vvv. | “Premium Due Date Transfers” is defined in paragraph 3. |
www. | “Projected RBC Ratio” means the projection of the RBC Ratio as of [***], as calculated under the method set forth on Schedule 12. |
xxx. | “Proposal” is defined in paragraph 1.b. |
yyy. | “Prudential” is defined in the preamble. |
zzz. | “RBC Ratio” means the company action level risk-based capital ratio of Prudential [***]. |
[[[. | [***] . |
aaaa. | [***]. |
bbbb. | “Relevant Percentage” is defined in Schedule 8. |
cccc. | “Removed Lives” is defined in Schedule 8. |
dddd. | [***]. |
eeee. | “Scaled GAAP PBO” is defined in Schedule 8. |
ffff. | [***]. |
gggg. | “Scheduled GAC Issuance Date” means on or before April 18, 2019 or, if applicable, and, if later, by the date that is five Business Days following the final resolution of any arbitration disputes in accordance with Schedule 4. |
hhhh. | “SEC” is defined in paragraph 4.b. |
iiii. | “Specimen GAC Form” is defined in paragraph 1.a. |
jjjj. | [***]. [***]. |
kkkk. | [***]. |
llll. | [***]. |
mmmm. | “Update File” is defined in Schedule 7. |
nnnn. | “Welcome Kit” is defined in paragraph 5.a. |
11. | Indemnification. |
12. | Miscellaneous. |
a. | This Commitment Agreement, together with the Schedules to this Commitment Agreement, which are incorporated by reference and made a part of this Commitment Agreement as if fully set forth herein, constitutes the sole and entire agreement of the parties to this Commitment Agreement with respect to the subject matter contained herein and therein. The parties each hereby acknowledge that they jointly and equally participated in the drafting of this Commitment Agreement and all other agreements contemplated hereby, and no presumption will be made that any provision of this Commitment Agreement will be construed against any party by reason of such role in the drafting of this Commitment Agreement or any other agreement contemplated hereby. No amendment of any of the provisions hereof shall be effective unless set forth in writing and signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No failure to exercise, or delay in exercising, any right, remedy, power, or privilege arising from this Commitment Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege. Except to the extent expressly provided in this Commitment Agreement, nothing in this Commitment Agreement shall confer any rights or remedies upon any person other than the parties hereto. |
b. | This Commitment Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction). Any legal suit, action, or proceeding arising out of or relating |
c. | Notwithstanding anything to the contrary in the Mutual Non-Disclosure Agreement, dated as of April 26, 2018, between the Company and Prudential (the “Company NDA”), and the Non-Disclosure Agreement, dated as of August 14. 2018, between Prudential and the Independent Fiduciary (the “IFID NDA” and, together with the Company NDA, the “NDAs” and each an “NDA”), each NDA shall continue in full force and effect except that, if the Premium Due Date Transfers are transferred to and received by Prudential, (a) each NDA shall continue indefinitely and shall not be terminated without the mutual written agreement of (i) the Company and Prudential in the case of the Company NDA and (ii) Prudential and the Independent Fiduciary in the case of the IFID NDA, and (b) with respect to the Company NDA, Prudential will not be required to return or destroy any Confidential Information and will not be restricted in its use or disclosure of any Confidential Information related to Payees, annuity payments under the Contract or the pricing or underwriting of the Contract, received from another party, provided, that Prudential will use such Confidential Information only in compliance with all applicable laws relating to privacy of personally identifying information. |
d. | Prudential will comply, and will ensure that all of its affiliates, agents, and subcontractors comply, with all applicable laws and regulations governing the Confidential Information of all Payees, including those laws relating to privacy, data security and protection and the safeguarding of such information, and its maintenance, disclosure and use. Prudential will maintain administrative, technical and physical safeguards to protect the privacy and security of the confidential information related to Payees. Prudential will comply in all material respects with any internal written policies relating to the confidential information of any Payee as in effect from time to time. Prudential acknowledges that it is solely responsible from and after the Commitment Agreement Date for any Data Breach. For purposes of this paragraph 12.d., “Data Breach” means any act or omission by Prudential or its agents, subcontractors or service providers (“Authorized Persons”) that compromises either the security, confidentiality or integrity of Payee data or the physical, technical, administrative or organizational safeguards put in place by Prudential (or any Authorized Persons) that relate to the protection of the security, confidentiality or integrity of any personally identifying information of any Payee. |
e. | Prudential, the Company and the Independent Fiduciary shall not assign or transfer this Commitment Agreement or any of its rights or obligations hereunder without the prior written consent of the other parties. Any assignment or transfer in violation of this paragraph 12.e. will be null and void from the outset, without any effect whatsoever. |
f. | This Commitment Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. |
INTERNATIONAL PAPER COMPANY | THE PRUDENTIAL INSURANCE COMPANY OF AMERICA |
By: /S/ ERROL HARRIS | By: /S/ MARGARET G. MCDONALD |
Print Name: Errol Harris | Print Name: Margaret G. McDonald |
Title: Vice President & Treasurer | Title: AVP |
STATE STREET GLOBAL ADVISORS TRUST COMPANY, acting solely in its capacity as Independent Fiduciary of the Plan | |
By: /S/ DENISE SISK | |
Print Name: Denise Sisk | |
Title: Managing Director |
Contract-Holder: NAME OF CONTRACT-HOLDER | Plan: NAME OF RETIREMENT PLAN |
Employer: NAME OF EMPLOYER | |
[***] [***] | Jurisdiction: STATE OF JURISDICTION |
Effective Date: MM DD, YYYY Amendment Date: MM DD, YYYY | Contribution Amount as of Effective Date: $XXX,XXX Contribution Adjustment Amount: None, as of MM DD, YYYY Total Contribution Amount as of MM, DD, YYYY: $XXX,XXX |
Pages Attached: 1-XX, Cash and Transferred Assets Exhibit, Cash and Transferred Assets Exhibit Supplement, Annuity Exhibits |
NAME OF CONTRACT-HOLDER | THE PRUDENTIAL INSURANCE COMPANY OF AMERICA 30 Scranton Office Park Scranton, PA 18507-1789 SAMPLE |
By: __ SAMPLE __________ Title: Date: | Chairman and Chief Executive Officer SAMPLE Secretary Attest: _______________________________ Date: |
1.1 | Definitions |
1.2 | Agreement to Pay Contribution Amount; Deposit into the Separate Account |
1.3 | Agreement to Make Annuity Payments; Associated Withdrawals from the Separate Account |
1.4 | The Separate Account that Supports this Contract |
1.5 | Investments Held in Separate Account; Insulation of Separate Account Assets |
1.6 | Insulation of Separate Account Assets |
1.7 | Expenses; Establishing Reserves; Withdrawal of Assets from the Separate Account |
1.8 | Process for Making Annuity Payments |
1.9 | Persons Entitled to Enforce this Contract |
(a) | Covered Lives and Contingent Lives. Any Covered Life or Contingent Life shall have the right to enforce his or her right to receive Annuity Payments under this Contract against Prudential in the capacity of an intended third party beneficiary thereof. The rights of a Covered Life or Contingent Life are not diminished if Contract-Holder ceases to exist and no successor is appointed. |
(b) | Contract-Holder and the Plan. Contract-Holder shall have the right to enforce any provision of this Contract against Prudential. Neither Contract-Holder nor the Plan shall have any obligation to any Covered Life or Contingent Life with respect to the Annuity Payments under this Contract. |
(c) | Prudential. Prudential shall have the right to enforce any provision of this Contract against Contract-Holder. |
1.10 | Termination of Contract |
1.11 | Small Account Conversion |
2.1 | Covered Lives, Contingent Lives, and Beneficiaries |
2.2 | Definitions |
2.3 | Annuity Forms |
(i) | “Period Certain Annuity” means the following for each Covered Life identified in the Annuity Exhibits as receiving a distribution of a “Period Certain” Annuity Form. |
(ii) | “Life and Period Certain Annuity” means the following for each Covered Life identified in the Annuity Exhibits as receiving a distribution of a “Life and Period Certain” Annuity Form. |
(iii) | “Life Annuity” means the following for each Covered Life identified in the Annuity Exhibits as receiving a distribution of a “Life” Annuity Form. |
(iv) | “Joint and Survivor Life Annuity” means the following for each Covered Life identified in the Annuity Exhibits as receiving a distribution of a “Joint and Survivor” Annuity Form. |
(v) | “Joint and Survivor Life with Period Certain Annuity” means the following for each Covered Life identified in the Annuity Exhibits as receiving a distribution of a “Joint and Survivor with Period Certain” Annuity Form. |
(vii) | “Temporary Annuity” means the following for each Covered Life identified in the Annuity Exhibits as receiving a distribution of a “Temporary Annuity” Form. |
2.4 | No Assignment by Covered Lives and Contingent Lives |
2.5 | Proof of Continued Existence for Life Annuities; Escheatment |
2.6 | Misstatements |
(i) | If the corrected Annuity Payment owed by Prudential in respect of such Covered Life (and, if applicable, Contingent Life) is less than the Annuity Payment calculated using the data misstatement, then such Annuity Payment will be decreased to the amount calculated pursuant to this paragraph. Prudential may reduce future Annuity Payments further by amounts previously overpaid by Prudential. |
(ii) | If the corrected Annuity Payment owed by Prudential in respect of such Covered Life (and, if applicable, Contingent Life) is more than the Annuity Payment calculated using the data misstatement, then such Annuity Payment will be increased to the amount calculated pursuant to this paragraph. Prudential will further pay the amount of the underpayments in one or more Annuity Payments owed by Prudential. |
2.7 | Concerning Designations |
2.8 | Concerning Qualified Domestic Relations Orders |
2.9 | Payments to Representatives |
2.10 | Certificates |
3.1 | Communications |
3.2 | Currency; Payments |
3.3 | Reliance on Records; Correction of Errors |
3.4 | Contract-Holder; Successor |
3.5 | No Implied Waiver |
3.6 | Changes |
(a) | Mutual Agreement. This Contract may be amended at any time by written agreement between Prudential, Employer and Contract-Holder. |
(b) | Law or Regulation. Prudential may change this Contract as it deems necessary or appropriate to satisfy the requirements of any law enacted by (or of any regulation promulgated by) any legislative or governmental authority, body or agency. |
3.7 | Entire Contract - Construction |
3.8 | Third Party Beneficiaries |
Covered Life | Social Security Number | Sex | Date of Birth | Covered Life Amount | Guaranteed Number of Payments | Lump Sum Death Benefit |
A | B | C | D | E | F | G | H | I | J |
[***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] |
1. | [***]. |
2. | [***]. [***]: |
a. | [***], |
b. | [***], |
c. | [***], or |
d. | [***]. |
3. | [***]. |
4. | [***]. |
5. | [***]. |
6. | [***]. |
7. | [***]. |
8. | [***]. |
1. | Rules and Procedures. Any dispute between the parties referenced herein shall be resolved by arbitration conducted by one arbitrator, in accordance with Commercial Arbitration Rules and Expedited Procedures for Large, Complex Commercial Disputes of the American Arbitration Association (“AAA”), as such rules and procedures are in effect at the time of the arbitration, except as they may be modified herein or by mutual agreement of the Company, Prudential, and, if a party to such dispute, the Independent Fiduciary. |
2. | Location. The seat of the arbitration shall be New York City, New York, at a mutually agreed upon location, or in the absence of agreement at the New York City offices of the AAA. |
3. | Arbitrator. The Company, Prudential and, if a party to the dispute, the Independent Fiduciary shall jointly engage a mutually agreed upon firm (such firm, the “Approved Firm”), within five Business Days after a dispute notice is delivered by either party to the other party to resolve any arbitration dispute. If the Company, Prudential and, if a party to such dispute, the Independent Fiduciary are unable to engage an Approved Firm within such time period on such terms, then the AAA shall appoint an arbitrator within three Business Days thereafter. |
4. | Damages. The arbitrator shall resolve any arbitration dispute within the range of difference between (a) any amounts or values as calculated or determined by Prudential and (b) any amounts or values as calculated or determined by the Company or, if a party to the dispute, any amounts or values as calculated or determined by the Independent Fiduciary. The arbitrator will have no authority to award any other damages other than as provided for herein. |
5. | Judgment. Any arbitration award shall be final and binding on the Company, Prudential and, if a party to the dispute, the Independent Fiduciary. The Company, Prudential and, if a party to such dispute, the Independent Fiduciary undertake to carry out any award without delay and waive their respective rights to any form of recourse based on grounds other than personal conflict of interest of the arbitrator that was undisclosed at the time of the arbitrator’s appointment. Judgment upon the award may be entered by any court having jurisdiction thereof or having jurisdiction over the Company, Prudential or, if a party to such dispute, the Independent Fiduciary, as applicable, or their respective assets. |
6. | Costs. The Company and Prudential shall share the fees and disbursements of the arbitrator equally (i.e., on a 50%/50% basis). The Company, Prudential and, if a party to the dispute, the Independent Fiduciary shall each bear their own costs and expenses incurred in connection with prosecuting and/or defending any arbitration dispute. |
7. | [***]. [***]. |
[***] | [***] | |||||||
[***] | [***] | [***] | ||||||
[***] | [***] | [***] | [***] | [***] | [***] |
1. | Jennison Associates LLC |
• | Jennison |
• | Jennison Associates |
2. | Quantitative Management Associates LLC |
3. | PGIM, Inc. |
• | Prudential Investments |
• | PGIM Investments |
• | Prudential Capital Group |
• | PGIM |
• | PGIM Fixed Income |
• | Prudential Fixed Income |
• | PGIM Institutional Advisory & Solutions |
• | PGIM Real Estate |
• | PGIM Global Partners |
• | Prudential Financial, Inc. |
• | PREI |
• | PGIM Real Estate Finance |
• | Prudential Real Estate Investors |
• | Pramerica Real Estate Investors |
• | Prudential Real Estate Fixed Income Investors |
• | PRICOA Capital Group |
• | Prudential Capital Partners |
• | Pramerica Capital Partners |
• | Pramerica Investment Management – Fixed Income |
• | PCG |
• | PRICOA Capital Group Limited |
• | PRICOA Capital Partners |
• | Prudential Capital Energy Partners |
• | PRICOA Capital Energy Partners |
• | Pramerica Capital Energy Partners |
4. | The Prudential Insurance Company of America |
• | Prudential Financial, Inc. |
5. | Prudential Trust Company |
6. | Prudential Retirement Insurance and Annuity Company |
7. | PGIM Limited |
• | PGIM Fixed Income |
• | PGIM Real Estate |
• | PGIM Real Estate Finance |
• | PRICOA Capital Group |
8. | PGIM Fund Management Limited |
• | PGIM Real Estate |
9. | Global Portfolio Strategies, Inc. |
10. | PGIM Investments LLC |
• | Prudential Investments LLC |
11. | Prudential Private Placement Investors, L.P. |
12. | AST Investment Services, Inc. |
13. | Prudential International Investment Advisers, LLC |
• | PGIM Global Partners |
14. | Pruco Securities LLC |
• | Prudential Financial Planning Services |
15. | PGIM Real Estate Finance, LLC |
• | PGIM Real Estate Finance |
• | Prudential Agricultural Investments |
• | PRICOA Mortgage Capital Company |
• | Prudential Mortgage Capital Company |
16. | PGIM Real Estate Luxembourg S.A. |
17. | Prudential Customer Solutions LLC |
Deliverable | Delivery Date | Action by the Company/Plan | Action by Prudential |
Preliminary Production Data File | September 27, 2018 | Deliver Preliminary Production Data File | Receive and reconcile Preliminary Production Data File to begin data cleanse and data mapping |
Final Production Data File | October 22, 2018 | Deliver Final Production Data File | Receive Final Production Data File |
Check Register October 31, 2018 and November 1, 2018 | October 22, 2018 | Deliver Check Register | Receive Check Register |
Update File | November 14, 2018 | Deliver Update File | Receive Update File |
Data Load File (related to Final Production Data File) | November 26, 2018 | Receive Data Load File | Deliver Data Load File |
Data Load File Sign-Off (related to Final Production Data File) | December 3, 2018 | Approve Data Load File | Receive Data Load File Sign-Off |
Update File | December 3, 2018 | Deliver Update File | Receive Update File |
1. | [***]. |
a. | [***], |
b. | [***], |
c. | [***], |
d. | [***], |
e. | [***], |
f. | [***], |
g. | [***], |
h. | [***], |
i. | [***], |
j. | [***], or |
k. | [***], |
2. | [***]. |
3. | [***]. |
a. | [***] |
b. | [***] |
c. | [***] |
4. | [***]. |
(4A) | [***]; |
(4B) | [***]; |
(4C) | [***]. |
(4D) | [***]. |
5. | [***]. |
(5A) | [***]; |
(5B) | [***]; |
(5C) | [***]. |
(5D) | [***]. [***]. |
(5E) | [***]. |
(5F) | [***]. [***]. |
(5G) | [***]: |
(i) | [***]. |
(ii) | [***]. |
6. | [***]. |
7. | [***]. |
8. | [***]. |
9. | [***]. |
a. | [***]. |
b. | [***]. |
c. | [***]. |
d. | [***]. |
Name | Jurisdiction | |
Balsa Forests LLC | Delaware | |
Basswood Forests IIA LLC | Delaware | |
Basswood Forests LLC | Delaware | |
Branigar Organization, Inc., The | Illinois | |
Carton y Papel Reciclado, S.A. | Spain | |
Cartonajes International, S.L. | Spain | |
Cartonajes Union S.L. | Spain | |
Cartonnerie de Martinique SAS | France | |
Certified Forest Management LLC | Delaware | |
CircleTree Insurance Company | Vermont | |
CMCP - INTERNATIONAL PAPER S.A.S. | Morocco | |
Commercial Realty & Properties LLC | Delaware | |
Comptoir des Bois de Brive SAS | France | |
Dogal Kagit Hammaddeleri Sanayi ve Ticaret Limited Sirketi | Turkey | |
EM Xpedx, S.A. De C.V. | Mexico | |
Emballages Laurent SAS | France | |
English Oak LLC | Delaware | |
Envases Antonio Grau, S.A. | Spain | |
Envases Grau, S.L. | Spain | |
Federal Forestlands Inc. | Delaware | |
Forest Insurance Limited | Bermuda | |
Haig Point, Inc. | Delaware | |
I.P. CONTAINER HOLDINGS (SPAIN) S.L. | Spain | |
Instituto International Paper | Brazil | |
International Paper - Comércio de Papel e Participações Arapoti Ltda. | Brazil | |
International Paper - Kwidzyn Sp. Z O.O. | Poland | |
International Paper (Asia) Limited | Hong Kong | |
International Paper (Deutschland) GmbH | Germany | |
International Paper (Europe) S.à r.l. | Luxembourg | |
International Paper (India) Private Limited | India | |
International Paper (New Zealand) Limited | New Zealand | |
International Paper (Poland) Holding sp. z o.o. | Poland | |
International Paper (UK) Limited | Scotland | |
International Paper Agroflorestal Ltda. | Brazil | |
International Paper APPM Limited | India | |
International Paper Asia Limited (Branch Office) | Korea | |
International Paper Benelux SPRL | Belgium | |
International Paper Canada Pulp Holdings ULC | Alberta | |
International Paper Cartones Ltda. | Chile | |
International Paper Cellulose Fibers (Poland) sp. z o.o. | Poland | |
International Paper Cellulose Fibers Sales Sàrl | Switzerland | |
International Paper Company Employee Relief Fund | New York | |
International Paper Company Foundation | New York | |
International Paper Company Limited | England & Wales | |
International Paper Container (France) Holding SAS | France | |
International Paper CTA (Mexico), S.A. de C.V., SOFOM, E.N.R. | Mexico |
Name | Jurisdiction | |
International Paper Czech Republic, s.r.o. | Czech Republic | |
International Paper Distribution (Shanghai) Limited | China | |
International Paper Distribution Group (Taiwan) Limited | China | |
International Paper do Brasil Ltda. | Brazil | |
INTERNATIONAL PAPER DUTCH SERVICES B.V. | Netherlands | |
International Paper Embalagens da Amazônia Ltda. | Brazil | |
International Paper Export Sales, Inc. | Delaware | |
International Paper Exportadora Ltda. | Brazil | |
International Paper Financial Services, Inc. | Delaware | |
International Paper France SAS | France | |
International Paper Global Cellulose Fibers Holdings S.à r.l. | Luxembourg | |
International Paper Group (UK) Limited | England & Wales | |
International Paper Holdings (Luxembourg) S.à r.l. | Luxembourg | |
International Paper Hungary Kereskedelmi Kft. | Hungary | |
International Paper Industrie France SA | France | |
International Paper Investment (Shanghai) Co., Ltd. | China | |
International Paper Investment (Shanghai) Co., Ltd., Guangzhou Branch | China | |
International Paper Investments (Asia) B.V. | Netherlands | |
International Paper Investments (France) S.A.S | France | |
International Paper Investments (Luxembourg) S.à r.l. | Luxembourg | |
International Paper Italia Srl | Italy | |
International Paper Japan Limited | Japan | |
International Paper Madrid Mill, S.L. | Spain | |
International Paper Manufacturing & Distribution Limited | Hong Kong | |
International Paper Mexico Company, S. de R.L. de C.V. | Mexico | |
International Paper Nordic Sales Company Oy | Finland | |
International Paper Packaging Malaysia Sdn. Bhd. | Malaysia | |
International Paper Papiers de Bureau SARL | France | |
International Paper Peru S.R.L. | Peru | |
International Paper Polska Sp. z o.o. | Poland | |
International Paper Procurement (Shanghai) Limited | China | |
International Paper Professional Services Corporation | Delaware | |
International Paper Russia Holding B.V. | Netherlands | |
International Paper S.A. | France | |
International Paper Switzerland GmbH | Switzerland | |
International Paper Trading (Shanghai) Limited | China | |
International Paper Ukraine SE | Ukraine | |
IP Belgian Services Company SPRL | Belgium | |
IP Canada Holdings Limited | Canada | |
IP Cartones Y Corrugados, S. de R.L. de C.V. | Mexico | |
IP CBPR Properties 2 LLC | Delaware | |
IP CBPR Properties LLC | Delaware | |
IP Celimo SAS | France | |
IP Commercial Properties LLC | Delaware | |
IP Corporate Management (Shanghai) Co. Ltd. | China | |
IP Eagle LLC | Delaware | |
IP East Holding (Singapore) Pte. Ltd. | Singapore |
Name | Jurisdiction | |
IP Forest Resources Company | Delaware | |
IP Foret Services | France | |
IP India Foundation | India | |
IP International Holdings, Inc. | Delaware | |
IP Investment (Brazil) S.a r.l. | Luxembourg | |
IP Mexico Holdings S.à r.l. | Luxembourg | |
IP Mineral Holdings LLC | Delaware | |
IP Papers Holding S.a r.l. | Luxembourg | |
IP Petroleum LLC | Delaware | |
IP Realty Holdings LLC | Delaware | |
IP Singapore Holding Pte. Ltd. | Singapore | |
IP Timberlands Operating Company, Ltd. | Texas | |
IP-35, Inc. | Delaware | |
Joshua Tree Forests LLC | Delaware | |
Juniper Forests LLC | Delaware | |
Lacebark LLC | Delaware | |
Lake Superior Land Company | Delaware | |
Longleaf Insurance Company | Tennessee | |
Lost Creek, Inc. | Delaware | |
Med Packaging SARL | Morocco | |
Montauban Cartons SAS | France | |
Northwest Pines, Inc. | Delaware | |
Olmuksan International Paper Ambalaj Sanayi ve Ticaret Anonim Sirketi | Turkey | |
Papeteries d'Espaly SAS | France | |
Piper LLC | Delaware | |
Przedsiebiorstwo Produkcyjno-Handlowe "Tor-Pal" Spolka z Ograniczona Odpowiedzialnoscia | Poland | |
Red Bird Receivables, LLC | Delaware | |
Sabine River & Northern Railroad Company | Texas | |
Societe Guadeloupeenne de Carton Ondule SAS | France | |
Societe Mauritanienne de Cartons - SOMACAR, S.A. | Mauritania | |
Societe Mediterraneenne d'Emballages SAS | France | |
Societe Normande de Carton Ondule SAS | France | |
SP Forests L.L.C. | Delaware | |
Supplier Finance Company, LLC | Delaware | |
Sustainable Forests L.L.C. | Delaware | |
Sycamore Forests LLC | Delaware | |
Temple Associates LLC | Texas | |
Timberlands Capital Corp. II, Inc. | Delaware | |
Timberlands Capital Corp. III, Inc. | Delaware | |
TIN Intermediate, LLC | Delaware | |
TIN Land Financing, LLC | Delaware | |
TIN Timber Financing, LLC | Delaware |
Name | Jurisdiction | |
U. C. Realty LLC | Delaware | |
Velarium Oy Ab | Finland | |
ZAO International Paper | Russia | |
ZAO Tikhvinsky Komplexny Lespromokhoz | Russia |
1. | I have reviewed this annual report on Form 10-K of International Paper Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
February 20, 2019 |
/s/ Mark S. Sutton |
Mark S. Sutton |
Chairman and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of International Paper Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
February 20, 2019 |
/s/ Timothy S. Nicholls |
Timothy S. Nicholls |
Senior Vice President and Chief |
Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Mark S. Sutton |
Mark S. Sutton |
Chairman and Chief Executive Officer |
February 20, 2019 |
/s/ Timothy S. Nicholls |
Timothy S. Nicholls |
Senior Vice President and Chief Financial Officer |
February 20, 2019 |
Notes | December 31, 2018 | December 31, 2017 | ||
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | 4 | 529,436 | 238,035 | |
Accounts receivable | 4 | 143,373 | 124,772 | |
Accounts receivable from related parties | 9 | 27,473 | 24,303 | |
Value added tax receivable | 30,123 | 38,756 | ||
Prepayments | 23,629 | 23,206 | ||
Inventories | 4 | 224,426 | 237,813 | |
Other current assets | 2,286 | 2,083 | ||
Total current assets | 980,746 | 688,968 | ||
Non-current assets | ||||
Plant, properties and equipment, net | 4 | 1,565,972 | 1,521,441 | |
Prepayments for property, plant and equipment | 66,405 | 93,258 | ||
Intangible assets | 4 | 27,658 | 28,002 | |
Goodwill | 4 | 6,982 | 8,421 | |
Deferred income tax assets | 5 | 6,946 | 4,418 | |
Other non-current assets | 4 | 36,246 | 40,719 | |
Total non-current assets | 1,710,209 | 1,696,259 | ||
TOTAL ASSETS | 2,690,955 | 2,385,227 | ||
LIABILITIES AND EQUITY | ||||
Current liabilities | ||||
Current maturities of long-term debt | 7 | 286,563 | 733,694 | |
Accounts payable | 62,206 | 66,890 | ||
Accounts payable to related parties | 9 | 7,101 | 7,542 | |
Accrued payroll and benefits | 36,030 | 39,003 | ||
Taxes payable | 22,711 | 35,774 | ||
Other accruals and liabilities | 4 | 130,425 | 155,871 | |
Total current liabilities | 545,036 | 1,038,774 | ||
Non-current liabilities | ||||
Long-term debt | 7 | 1,350,312 | 844,982 | |
Deferred income tax liabilities | 5 | 105,501 | 112,620 | |
Employee benefit plan obligation | 5,001 | 5,745 | ||
Other liabilities | 8,984 | 8,586 | ||
Total non-current liabilities | 1,469,798 | 971,933 | ||
Equity | ||||
Common stock (1 CHF par value; 133,582,480 shares) | 8 | 109,341 | 109,341 | |
Additional paid-in capital | 41,693 | 15,939 | ||
Receivables from shareholders | 9 | (158,434) | (155,091) | |
Retained earnings | 1,228,262 | 893,321 | ||
Accumulated other comprehensive loss | 3 | (555,319) | (494,594) | |
Total Ilim S.A. shareholders’ equity | 665,543 | 368,916 | ||
Non-controlling interests | 10,578 | 5,604 | ||
Total equity | 676,121 | 374,520 | ||
TOTAL LIABILITIES AND EQUITY | 2,690,955 | 2,385,227 |
Notes | 2018 | 2017 | 2016 | |||
NET SALES | 4 | 2,713,368 | 2,150,029 | 1,926,567 | ||
COSTS AND EXPENSES | ||||||
Cost of products sold, excluding depreciation and amortization | (1,010,042) | (959,001) | (854,497) | |||
Distribution and selling costs | (303,905) | (279,985) | (239,761) | |||
General and administration costs | (129,734) | (150,817) | (123,622) | |||
Depreciation | (150,573) | (144,880) | (115,706) | |||
Amortization | (6,220) | (6,205) | (5,260) | |||
Taxes other than payroll and income taxes | (39,209) | (25,972) | (19,645) | |||
Other operating expenses, net | 4 | (23,147) | (39,444) | (9,327) | ||
Foreign exchange (loss) gain | (203,632) | 37,179 | 67,141 | |||
Interest expense, net | 4 | (70,265) | (87,203) | (78,650) | ||
EARNINGS BEFORE INCOME TAXES | 776,641 | 493,701 | 547,240 | |||
Income tax expense | 5 | (184,174) | (115,184) | (127,900) | ||
NET EARNINGS | 592,467 | 378,517 | 419,340 | |||
Net earnings attributable to non-controlling interests | (21,267) | (16,375) | (28,132) | |||
NET EARNINGS ATTRIBUTABLE TO ILIM S.A. | 571,200 | 362,142 | 391,208 |
Notes | 2018 | 2017 | 2016 | |||
NET EARNINGS | 592,467 | 378,517 | 419,340 | |||
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | ||||||
Remeasurement of defined benefit obligation (net of income tax of $48, $99 and $(14) respectively) | 190 | 396 | (57) | |||
Change in cumulative foreign currency translation adjustments | (62,850) | 21,446 | 81,854 | |||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | 3 | (62,660) | 21,842 | 81,797 | ||
Total comprehensive income | 529,807 | 400,359 | 501,137 | |||
Net earnings attributable to non-controlling interests | (21,267) | (16,375) | (28,132) | |||
Other comprehensive loss (income) attributable to non-controlling interests | 1,935 | (1,869) | 945 | |||
COMPREHENSIVE INCOME ATTRIBUTABLE TO ILIM S.A. | 510,475 | 382,115 | 473,950 |
Notes | 2018 | 2017 | 2016 | |||
OPERATING ACTIVITIES | ||||||
Net earnings | 592,467 | 378,517 | 419,340 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||
Depreciation and amortization | 156,793 | 151,085 | 120,966 | |||
Income tax expense, net | 5 | 184,174 | 115,184 | 127,900 | ||
Net interest expense, net of amounts capitalized | 4 | 70,265 | 87,203 | 78,650 | ||
Loss (gain) on disposal of plant, properties and equipment | 4 | (1,177) | 64 | (2,976) | ||
Loss (gain) from disposal of other assets | 4 | 10,571 | 2,132 | (746) | ||
Foreign exchange (gain) loss | 203,632 | (37,179) | (67,141) | |||
Allowance for doubtful accounts receivable | 344 | 1,059 | 1,694 | |||
Impairment of plant, properties and equipment | 4 | 7,838 | 8,960 | 2,500 | ||
Write down of inventories | 2,925 | 1,554 | (170) | |||
Other, net | 4,314 | 11,114 | (7,057) | |||
Changes in current assets and liabilities | ||||||
Accounts receivable | (22,481) | (24,260) | (13,667) | |||
Inventories | (30,794) | (25,213) | (15,494) | |||
Accounts payable and accrued liabilities | (37,498) | 35,524 | 2,862 | |||
Taxes payable other than income tax | 4,947 | 790 | (3,405) | |||
Interest paid | (72,198) | (93,086) | (81,711) | |||
Income tax paid | 5 | (194,515) | (95,251) | (54,005) | ||
CASH PROVIDED BY OPERATING ACTIVITIES | 879,607 | 518,197 | 507,540 | |||
INVESTMENT ACTIVITIES | ||||||
Invested in capital projects | (455,140) | (405,850) | (282,737) | |||
Proceeds from sale of plant, properties and equipment | 4,107 | 3,289 | 2,898 | |||
Other | 3,079 | (8,592) | (630) | |||
CASH USED FOR INVESTMENT ACTIVITIES | (447,954) | (411,153) | (280,469) | |||
FINANCING ACTIVITIES | ||||||
Issuance of debt | 1,202,586 | 365,579 | 808,402 | |||
Repayment of debt | (1,061,751) | (285,435) | (564,393) | |||
Loans issued to shareholders | (20,000) | - | (81,818) | |||
Loan repaid by a shareholder | 9 | 15,906 | 6,699 | - | ||
Purchase of non-controlling interest in JSC Ilim Group | - | (80,191) | (35,144) | |||
Dividends paid | 8 | (250,604) | (260,143) | (129,960) | ||
CASH USED FOR FINANCING ACTIVITIES | (113,863) | (253,491) | (2,913) | |||
Effect of exchange rate changes on cash and cash equivalents | (26,389) | (12,436) | 18,110 | |||
Change in cash and cash equivalents | 291,401 | (158,883) | 242,268 | |||
Cash and cash equivalents | ||||||
Beginning of the year | 4 | 238,035 | 396,918 | 154,650 | ||
End of the year | 4 | 529,436 | 238,035 | 396,918 |
Ilim S.A. shareholders | |||||||||||||||
Common Stock | Additional Paid-in Capital | Receivables From Shareholders | Retained Earnings | Accumulated Other Comprehen-sive Loss | Total Ilim S.A. Shareholders’ Equity | Non-controlling Interests | Total Equity | ||||||||
BALANCE, JANUARY 1, 2016 | 109,341 | 12,777 | (77,272) | 555,967 | (578,542) | 22,271 | 20,995 | 43,266 | |||||||
Dividends paid ($ 0.87 per share; Note 8) | - | - | - | (118,118) | - | (118,118) | - | (118,118) | |||||||
Dividends paid to non-controlling interests by subsidiary (Note 8) | - | - | - | - | - | - | (19,776) | (19,776) | |||||||
Loan issued to a shareholder (Note 9) | - | 5,074 | (78,474) | - | - | (73,400) | (125) | (73,525) | |||||||
Purchase of non-controlling interest in subsidiaries from third parties | - | (6,710) | (1,228) | (14,065) | (6,539) | (28,542) | (6,602) | (35,144) | |||||||
Comprehensive income | - | - | - | 391,208 | 82,742 | 473,950 | 27,187 | 501,137 | |||||||
BALANCE, DECEMBER 31, 2016 | 109,341 | 11,141 | (156,974) | 814,992 | (502,339) | 276,161 | 21,679 | 297,840 | |||||||
Dividends paid ($ 1.81 per share; Note 8) | - | - | - | (241,760) | - | (241,760) | - | (241,760) | |||||||
Dividends paid to non-controlling interests by subsidiary (Note 8) | - | - | - | - | - | - | (10,829) | (10,829) | |||||||
Loan issued to a shareholder, net (Note 9) | - | 4,868 | 4,294 | - | - | 9,162 | (61) | 9,101 | |||||||
Purchase of non-controlling interest in subsidiaries from third parties | - | (70) | (2,411) | (42,053) | (12,228) | (56,762) | (23,429) | (80,191) | |||||||
Comprehensive income | - | - | - | 362,142 | 19,973 | 382,115 | 18,244 | 400,359 | |||||||
BALANCE, DECEMBER 31, 2017 | 109,341 | 15,939 | (155,091) | 893,321 | (494,594) | 368,916 | 5,604 | 374,520 | |||||||
Dividends paid ($ 1.74 per share; Note 8) | - | - | - | (232,632) | - | (232,632) | - | (232,632) | |||||||
Dividends paid to non-controlling interests by subsidiary (Note 8) | - | - | - | - | - | - | (17,981) | (17,981) | |||||||
Loans issued to / collected from shareholders, net (Note 9) | - | 25,754 | (3,343) | - | - | 22,411 | (4) | 22,407 | |||||||
Change of non-controlling interest in subsidiaries | - | - | - | (3,627) | - | (3,627) | 3,627 | - | |||||||
Comprehensive income (loss) | - | - | - | 571,200 | (60,725) | 510,475 | 19,332 | 529,807 | |||||||
BALANCE, DECEMBER 31, 2018 | 109,341 | 41,693 | (158,434) | 1,228,262 | (555,319) | 665,543 | 10,578 | 676,121 |
1. | SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES |
Ownership Percentage and Voting Rights | |||||||||
Entity | Principal activity | Country of incorporation | December 31, 2018 | December 31, 2017 | |||||
JSC Ilim Group | Manufacturing of pulp, paper and linerboard | Russia | 96.37 | % | 96.37 | % | |||
LLC Fintrans GL | Transportation of cargo | Russia | 96.37 | % | 96.37 | % | |||
LLC Ilim Gofra | Corrugated packaging | Russia | 96.37 | % | 96.37 | % | |||
Ilim Trading S.A.* | Trading company | Switzerland | - | 100.00 | % |
1. | SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
1. | SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Asset category | Useful life (years) |
Buildings | 35-50 |
Plant and equipment | 5-25 |
Other | 3-20 |
Asset category | Useful life (years) |
Management accounting system (SAP) | 5-10 |
Other software | 3-5 |
Licenses and patents | 3-5 |
Other | 3-5 |
1. | SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
• | the counterparty experiences a significant financial difficulty as evidenced by its financial information; |
• | the counterparty considers bankruptcy or a financial reorganization; |
• | there is an adverse change in the payment status of the counterparty as a result of changes in the national or local economic conditions that impact the counterparty. |
1. | SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
1. | SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
• | assets and liabilities for each balance sheet are translated at the closing rate at the date of that balance sheet; |
• | share capital and other equity components are translated at historical rates; |
• | income and expenses for each statement of operations and statement of comprehensive income are translated at average monthly exchange rates that approximate the translation using the actual transaction date rates; and |
• | all resulting exchange differences are recognized as a separate component of equity in other comprehensive income. |
1. | SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
2. | RECENT ACCOUNTING DEVELOPMENTS |
2. | RECENT ACCOUNTING DEVELOPMENTS (CONTINUED) |
3. | OTHER COMPREHENSIVE LOSS |
Defined Benefit Obligation Items | Change in Cumulative Foreign Currency Translation Adjustments | Total | |||
Balance at December 31, 2017 | 653 | (495,247) | (494,594) | ||
Other comprehensive income (loss) | 17 | (62,850) | (62,833) | ||
Amounts reclassified from accumulated other comprehensive income | 173 | - | 173 | ||
Net current period other comprehensive income (loss) | 190 | (62,850) | (62,660) | ||
Other comprehensive income (loss) attributable to non-controlling interest | (7) | 1,942 | 1,935 | ||
Balance at December 31, 2018 | 836 | (556,155) | (555,319) |
Defined Benefit Obligation Items | Change in Cumulative Foreign Currency Translation Adjustments | Total | |||
Balance at December 31, 2016 | 271 | (502,610) | (502,339) | ||
Other comprehensive income | 179 | 21,446 | 21,625 | ||
Amounts reclassified from accumulated other comprehensive income (loss) | 217 | - | 217 | ||
Net current period other comprehensive income (loss) | 396 | 21,446 | 21,842 | ||
Other comprehensive income (loss) attributable to non-controlling interest | (14) | (1,855) | (1,869) | ||
Adjustment due to purchase of non-controlling shares | - | (12,228) | (12,228) | ||
Balance at December 31, 2017 | 653 | (495,247) | (494,594) |
Defined Benefit Obligation Items | Change in Cumulative Foreign Currency Translation Adjustments | Total | |||
Balance at December 31, 2015 | 325 | (578,867) | (578,542) | ||
Other comprehensive income (loss) | (246) | 81,854 | 81,608 | ||
Amounts reclassified from accumulated other comprehensive income | 189 | - | 189 | ||
Net current period other comprehensive income (loss) | (57) | 81,854 | 81,797 | ||
Other comprehensive income attributable to non-controlling interest | 3 | 942 | 945 | ||
Adjustment due to purchase of non-controlling shares | - | (6,539) | (6,539) | ||
Balance at December 31, 2016 | 271 | (502,610) | (502,339) |
3. | OTHER COMPREHENSIVE LOSS (CONTINUED) |
Amounts Reclassified from Accumulated Other Comprehensive Loss | Location of Amounts Reclassified from AOCI | ||||||
2018 | 2017 | 2016 | |||||
Defined benefit obligation items: | |||||||
Prior-service costs | (416) | (477) | (455) | (a) | Cost of products sold | ||
Actuarial gains | 200 | 206 | 219 | (a) | Cost of products sold | ||
Total pre-tax amount | (216) | (271) | (236) | ||||
Tax benefit | 43 | 54 | 47 | ||||
Net of tax | (173) | (217) | (189) |
(a) | These accumulated other comprehensive income components are included in the computation of net periodic defined benefit plan cost. |
4. | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION |
December 31, 2018 | December 31, 2017 | ||
Bank deposits | 501,310 | 36,936 | |
Cash in current bank accounts | 28,126 | 201,099 | |
Total | 529,436 | 238,035 |
December 31, 2018 | December 31, 2017 | ||
Trade receivables | 149,406 | 134,245 | |
Other receivables | 2,808 | 1,074 | |
Less: allowance for doubtful accounts | (10,032) | (11,395) | |
Total financial assets within trade and other receivables | 142,182 | 123,924 | |
Other | 1,191 | 848 | |
Total | 143,373 | 124,772 |
4. | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (CONTINUED) |
Trade receivables | Other receivables | Total | |||
At January 1, 2017 | 10,381 | 1,094 | 11,475 | ||
Additions charged to Earnings | 839 | 253 | 1,092 | ||
Deductions from allowance (a) | (923) | (762) | (1,685) | ||
Translation difference | 480 | 33 | 513 | ||
At December 31, 2017 | 10,777 | 618 | 11,395 | ||
Additions charged to Earnings | 630 | 19 | 649 | ||
Deductions from allowance (a) | (332) | (10) | (342) | ||
Translation difference | (1,563) | (107) | (1,670) | ||
At December 31, 2018 | 9,512 | 520 | 10,032 |
(a) | Includes write offs, less recoveries, of uncollectible accounts. |
December 31, 2018 | December 31, 2017 | ||
Raw materials | 107,855 | 115,673 | |
Operating supplies, net of provision | 54,382 | 62,006 | |
Finished pulp, paper and packaging products | 50,557 | 44,249 | |
Other, net of provision | 11,632 | 15,885 | |
Total | 224,426 | 237,813 |
December 31, 2018 | December 31, 2017 | ||
Land and buildings | 365,625 | 402,567 | |
Plant and equipment | 1,411,034 | 1,500,539 | |
Other | 425,996 | 444,489 | |
Assets under construction and equipment for installation | 350,449 | 228,279 | |
Gross cost | 2,553,104 | 2,575,874 | |
Less: Accumulated depreciation | (987,132) | (1,054,433) | |
Plant, properties and equipment, net | 1,565,972 | 1,521,441 |
December 31, 2018 | December 31, 2017 | ||
Opening balance | 8,421 | 7,997 | |
Translation difference | (1,439) | 424 | |
Closing balance | 6,982 | 8,421 |
4. | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (CONTINUED) |
December 31, 2018 | December 31, 2017 | ||
Prepayment for non-current assets other than plant, properties and equipment | 14,364 | 16,360 | |
Prepayment to pension fund | 6,966 | 8,077 | |
Non-current receivables | 19 | 141 | |
Other non-current assets | 14,897 | 16,141 | |
Total | 36,246 | 40,719 |
December 31, 2018 | December 31, 2017 | ||
Payables and accruals for plant, properties and equipment | 45,112 | 30,943 | |
Customer advances | 43,067 | 88,064 | |
Unused vacations | 20,341 | 21,164 | |
Accruals for audit and consulting services | 2,868 | 1,712 | |
Interest payable on debt | 2,842 | 1,049 | |
Other accruals and liabilities | 16,195 | 12,939 | |
Total | 130,425 | 155,871 |
2018 | |||||||||||||
Pulp | Cardboard | Paper | Timber | Services | Other | Total | |||||||
Asia without the Middle East | 1,245,290 | 130,184 | 31,042 | 42,082 | - | 4,164 | 1,452,762 | ||||||
Russia and the CIS | 183,925 | 165,589 | 314,342 | 86,029 | 33,092 | 146,523 | 929,500 | ||||||
Europe | 99,845 | 73,014 | 51,556 | - | 669 | 5,208 | 230,292 | ||||||
Other | 22,298 | 57,801 | 20,677 | - | - | 38 | 100,814 | ||||||
Total | 1,551,358 | 426,588 | 417,617 | 128,111 | 33,761 | 155,933 | 2,713,368 |
2017 | |||||||||||||
Pulp | Cardboard | Paper | Timber | Services | Other | Total | |||||||
Asia without the Middle East | 941,918 | 89,301 | 21,610 | 42,337 | 52 | 5,291 | 1,100,509 | ||||||
Russia and the CIS | 126,137 | 150,045 | 285,440 | 70,831 | 27,099 | 143,319 | 802,871 | ||||||
Europe | 71,116 | 55,059 | 54,202 | - | 701 | 3,485 | 184,563 | ||||||
Other | 14,675 | 32,263 | 15,148 | - | - | - | 62,086 | ||||||
Total | 1,153,846 | 326,668 | 376,400 | 113,168 | 27,852 | 152,095 | 2,150,029 |
4. | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (CONTINUED) |
2016 | |||||||||||||
Pulp | Cardboard | Paper | Timber | Services | Other | Total | |||||||
Asia without the Middle East | 815,329 | 92,976 | 18,498 | 35,755 | 99 | 3,212 | 965,869 | ||||||
Russia and the CIS | 130,261 | 119,005 | 260,556 | 56,904 | 21,961 | 116,838 | 705,525 | ||||||
Europe | 53,843 | 50,934 | 50,072 | - | 889 | 4,356 | 160,094 | ||||||
Other | 54,007 | 36,442 | 4,630 | - | - | - | 95,079 | ||||||
Total | 1,053,440 | 299,357 | 333,756 | 92,659 | 22,949 | 124,406 | 1,926,567 |
2018 | 2017 | 2016 | |||
Shipping and handling costs | 261,524 | 245,492 | 225,267 |
2018 | 2017 | 2016 | |||
Income from the government grant funding (railroad tariff subsidy) | 18,256 | - | - | ||
Gain on disposal of plant, properties and equipment | 1,177 | - | 2,976 | ||
Penalties received | 1,054 | 1,297 | 704 | ||
Reversal of allowance for doubtful receivables and prepayments | 343 | 54 | 117 | ||
Gain on disposal of non-core materials and spare parts | - | - | 746 | ||
Other | 4,976 | 1,612 | 7,764 | ||
Total | 25,806 | 2,963 | 12,307 |
2018 | 2017 | 2016 | |||
Social costs and donations | 10,851 | 12,654 | 6,204 | ||
Loss from disposal of non-core materials and spare parts | 10,571 | 7,219 | - | ||
Impairment of plant, properties and equipment | 7,838 | 8,960 | 2,500 | ||
Non-refundable VAT | 2,185 | 1,755 | 397 | ||
Redundancy expenses | 2,181 | 2,160 | 2,995 | ||
Penalties paid | 746 | 554 | 1,035 | ||
Allowance for doubtful receivables and prepayments, accounts payable write-off | 687 | 1,113 | 1,811 | ||
Loss from disposal of property, plant and equipment | - | 64 | - | ||
Tax obligations | - | - | 1,462 | ||
Other | 13,894 | 7,928 | 5,230 | ||
Total | 48,953 | 42,407 | 21,634 |
4. | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (CONTINUED) |
2018 | 2017 | 2016 | |||
Interest income | 8,197 | 4,485 | 3,333 | ||
Interest expense | (78,462) | (91,688) | (81,983) | ||
Total interest expense, net | (70,265) | (87,203) | (78,650) | ||
Capitalized interest costs | 15,539 | 7,631 | 2,993 |
At December 31, 2018 | At December 31, 2017 | ||||||
Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||
Management accounting system (SAP) | 41,771 | 22,272 | 41,184 | 23,337 | |||
Other software | 22,679 | 14,949 | 24,732 | 14,801 | |||
Licenses and patents | 616 | 258 | 360 | 227 | |||
Other | 285 | 214 | 340 | 249 | |||
Total | 65,351 | 37,693 | 66,616 | 38,614 |
5. | INCOME TAXES |
2018 | 2017 | 2016 | |||
Earnings | |||||
Russia | 744,735 | 443,450 | 513,335 | ||
Other markets | 31,906 | 50,251 | 33,905 | ||
Earnings from continuing operations before income taxes | 776,641 | 493,701 | 547,240 |
2018 | 2017 | 2016 | |||
Current tax expense | |||||
Russia | (147,883) | (80,070) | (39,191) | ||
Other markets | (31,166) | (26,043) | (21,712) | ||
(179,049) | (106,113) | (60,903) | |||
Deferred tax (expense) benefit | |||||
Russia | (7,558) | (15,380) | (66,679) | ||
Other markets | 2,433 | 6,309 | (318) | ||
(5,125) | (9,071) | (66,997) | |||
Income tax (expense) | (184,174) | (115,184) | (127,900) |
5. | INCOME TAXES (CONTINUED) |
2018 | 2017 | 2016 | ||||||
Earnings from continuing operations before income taxes | 776,641 | 493,701 | 547,240 | |||||
Statutory Russian income tax rate | 20 | % | 20 | % | 20 | % | ||
Tax (expense) using statutory Russian income tax rate | (155,328) | (98,740) | (109,448) | |||||
Tax rate and permanent differences on non-Russian earnings | 3,763 | 4,453 | 1,589 | |||||
Non-deductible expenses | (8,022) | (7,451) | (4,861) | |||||
Tax on dividends | (24,484) | (12,619) | (15,668) | |||||
Other, net | (103) | (827) | 488 | |||||
Income tax (expense) | (184,174) | (115,184) | (127,900) | |||||
Effective income tax rate | 24 | % | 23 | % | 23 | % |
December 31, 2018 | December 31, 2017 | ||
Deferred income tax assets: | |||
Net operating loss carryforwards | 687 | 571 | |
Inventory | 9,849 | 7,484 | |
Other | 13,343 | 10,626 | |
Deferred income tax assets | 23,879 | 18,681 | |
Deferred income tax liabilities: | |||
Intangible assets | (5,325) | (5,558) | |
Plant, properties and equipment | (116,423) | (120,680) | |
Other | (686) | (645) | |
Deferred income tax liabilities | (122,434) | (126,883) | |
Net deferred income tax (liabilities) | (98,555) | (108,202) |
6. | COMMITMENTS AND CONTINGENT LIABILITIES |
6. | COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED) |
7. | DEBT AND LINES OF CREDIT |
Weighted average interest rates | Notional currency | December 31, 2018 | December 31, 2017 | |||||
Fixed rate long-term bank loans | 8.24 | % | RUB | 753,827 | 513,013 | |||
Floating rate long-term bank loans | 4.54 | % | US Dollar | 875,897 | 1,056,536 | |||
Finance lease liabilities | 9.21 | % | RUB | 7,151 | 9,127 | |||
Total long-term borrowings (a) | 1,636,875 | 1,578,676 | ||||||
Less: current maturities | 286,563 | 733,694 | ||||||
Long-term debt | 1,350,312 | 844,982 |
(a) | The estimated fair market value was approximately $ 1,641,111 at December 31, 2018 and $ 1,591,308 at December 31, 2017. The fair values are determined on the basis of expected cash flows discounted at current interest rates for new instruments with similar credit risks and remaining maturities and were categorized to level 2 of the fair value hierarchy. |
Less than 1 year | 1-5 years | Over 5 years | Total | ||||
Minimum lease payments at December 31, 2018 | 1,096 | 4,382 | 5,542 | 11,020 | |||
Less: future finance charges | (640) | (2,079) | (1,150) | (3,869) | |||
Present value of minimum lease payments at December 31, 2018 | 456 | 2,303 | 4,392 | 7,151 |
Less than 1 year | 1-5 years | Over 5 years | Total | ||||
Minimum lease payments at December 31, 2017 | 1,322 | 5,285 | 8,005 | 14,612 | |||
Less: future finance charges | (820) | (2,750) | (1,915) | (5,485) | |||
Present value of minimum lease payments at December 31, 2017 | 502 | 2,535 | 6,090 | 9,127 |
8. | CAPITAL STOCK |
9. | RELATED PARTY TRANSACTIONS |
• | companies controlled by the Russian Shareholders; |
• | International Paper Company. |
December 31, 2018 | December 31, 2017 | ||||||
Sales/purchases of: | Receivables | Payables | Receivables | Payables | |||
Other services | 3,815 | - | 1,258 | (776) | |||
Raw materials | 1,562 | (615) | 5,184 | (558) | |||
Transport services | 319 | (508) | 513 | - | |||
Operating lease | 248 | (2) | 272 | (20) | |||
Energy, gas, water and heat | 139 | - | 78 | - | |||
Total | 6,083 | (1,125) | 7,305 | (1,354) |
9. | RELATED PARTY TRANSACTIONS (CONTINUED) |
2018 | 2017 | 2016 | |||||||||
Income | Expenses | Income | Expenses | Income | Expenses | ||||||
Raw materials | 50,990 | (8,365) | 46,377 | (5,578) | 40,023 | (5,275) | |||||
Energy, gas, water and heat | 2,038 | - | 1,353 | - | 1,350 | - | |||||
Other services | 2,014 | (7,834) | 1,682 | (8,617) | 1,362 | (4,103) | |||||
Operating lease | 861 | (1,624) | 447 | (1,580) | 451 | (1,254) | |||||
Transport services | 840 | - | 1,085 | - | 1,238 | - | |||||
Total | 56,743 | (17,823) | 50,944 | (15,775) | 44,424 | (10,632) |
December 31, 2018 | December 31, 2017 | ||||||
Sales/purchases of: | Receivables | Payables | Receivables | Payables | |||
Finished goods | 21,390 | (1,081) | 16,950 | (380) | |||
Services | - | (4,895) | 48 | (5,808) | |||
Total | 21,390 | (5,976) | 16,998 | (6,188) |
2018 | 2017 | 2016 | |||||||||
Sales | Purchases | Sales | Purchases | Sales | Purchases | ||||||
Finished goods | 234,041 | - | 221,838 | - | 200,500 | (47) | |||||
Services | 95 | (2,831) | 158 | (1,816) | - | (214) | |||||
Total | 234,136 | (2,831) | 221,996 | (1,816) | 200,500 | (261) |
10. | SUBSEQUENT EVENTS |
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