UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From              to             

 _________________________________________

Commission File Number 001-03157

INTERNATIONAL PAPER COMPANY

(Exact name of registrant as specified in its charter)

New York	13-0872805
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)
6400 Poplar Avenue, Memphis, Tennessee	38197
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (901) 419-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	IP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒   No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange

Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐    No  ☒

The number of shares outstanding of the registrant’s common stock, par value $1.00 per share, as of July 22, 2022 was 362,016,847.

INDEX

 

		PAGE NO.
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statement of Operations - Three Months and Six Months Ended June 30, 2022 and 2021	1
	Condensed Consolidated Statement of Comprehensive Income - Three Months and Six Months Ended June 30, 2022 and 2021	2
	Condensed Consolidated Balance Sheet - June 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statement of Cash Flows - Six Months Ended June 30, 2022 and 2021	4
	Condensed Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

ITEM 1.FINANCIAL STATEMENTS

INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Operations

(Unaudited)

(In millions, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net Sales	$	5,389	$	4,770	$	10,626	$	9,363
Costs and Expenses
Cost of products sold	3,806		3,402		7,645		6,750
Selling and administrative expenses	300		396		641		698
Depreciation, amortization and cost of timber harvested	267		272		528		540
Distribution expenses	442		342		866		677
Taxes other than payroll and income taxes	36		36		72		71
Restructuring and other charges, net	—		174		—		204
Net (gains) losses on sales and impairments of businesses	—		(9)		—		(7)
Net (gains) losses on sales of equity method investments	—		(130)		—		(204)
Net (gains) losses on mark to market investments	(3)		—		(49)		—
Interest expense, net	74		86		143		179
Non-operating pension expense (income)	(47)		(51)		(96)		(103)
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	514		252		876		558
Income tax provision (benefit)	96		46		191		134
Equity earnings (loss), net of taxes	93		104		186		153
Earnings (Loss) From Continuing Operations	$	511	$	310	$	871	$	577
Discontinued operations, net of taxes	—		124		—		206
Net Earnings (Loss)	$	511	$	434	$	871	$	783
Less: Net earnings (loss) attributable to noncontrolling interests	—		2		—		2
Net Earnings (Loss) Attributable to International Paper Company	$	511	$	432	$	871	$	781
Basic Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Earnings (loss) from continuing operations	$	1.39	$	0.79	$	2.34	$	1.47
Discontinued operations, net of taxes	—		0.31		—		0.52
Net earnings (loss)	$	1.39	$	1.10	$	2.34	$	1.99
Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Earnings (loss) from continuing operations	$	1.38	$	0.78	$	2.32	$	1.45
Discontinued operations, net of taxes	—		0.31		—		0.51
Net earnings (loss)	$	1.38	$	1.09	$	2.32	$	1.96
Average Shares of Common Stock Outstanding – assuming dilution	370.7		396.8		375.7		397.7

The accompanying notes are an integral part of these condensed financial statements.

1

INTERNATIONAL PAPER COMPANY

(Unaudited)

(In millions)

 

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net Earnings (Loss)	$	511	$	434	$	871	$	783
Other Comprehensive Income (Loss), Net of Tax:
Amortization of pension and post-retirement prior service costs and net loss:
U.S. plans	23		36		43		70
Pension and postretirement adjustments:
Non-U.S. plans	—		1		—		1
Change in cumulative foreign currency translation adjustment	182		312		134		169
Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period	—		13		—		7
Reclassification adjustment for (gains) losses included in net earnings (loss)	—		(4)		—		(1)
Total Other Comprehensive Income (Loss), Net of Tax	205		358		177		246
Comprehensive Income (Loss)	716		792		1,048		1,029
Net (earnings) loss attributable to noncontrolling interests	—		(2)		—		(2)
Other comprehensive (income) loss attributable to noncontrolling interests	—		1		—		2
Comprehensive Income (Loss) Attributable to International Paper Company	$	716	$	791	$	1,048	$	1,029

The accompanying notes are an integral part of these condensed financial statements.

2

INTERNATIONAL PAPER COMPANY

(In millions)

	June 30, 2022		December 31, 2021
	(unaudited)
Assets
Current Assets
Cash and temporary investments	$	826	$	1,295
Accounts and notes receivable, net	3,462		3,232
Contract assets	506		378
Inventories	1,897		1,814
Current investments	151		245
Other current assets	204		132
Total Current Assets	7,046		7,096
Plants, Properties and Equipment, net	10,234		10,441
Long-Term Investments	930		751
Long-Term Financial Assets of Variable Interest Entities (Note 16)	2,284		2,275
Goodwill	3,124		3,130
Overfunded Pension Plan Assets	713		595
Right of Use Assets	383		365
Deferred Charges and Other Assets	568		590
Total Assets	$	25,282	$	25,243
Liabilities and Equity
Current Liabilities
Notes payable and current maturities of long-term debt	$	293	$	196
Accounts payable	2,678		2,606
Accrued payroll and benefits	380		440
Other current liabilities	1,001		902
Total Current Liabilities	4,352		4,144
Long-Term Debt	5,275		5,383
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)	2,103		2,099
Deferred Income Taxes	2,614		2,618
Underfunded Pension Benefit Obligation	364		377
Postretirement and Postemployment Benefit Obligation	194		205
Long-Term Lease Obligations	245		236
Other Liabilities	1,092		1,099
Equity
Common stock, $1 par value, 2022 – 448.9 shares and 2021 – 448.9 shares	449		449
Paid-in capital	4,675		4,668
Retained earnings	9,557		9,029
Accumulated other comprehensive loss	(1,489)		(1,666)
	13,192		12,480
Less: Common stock held in treasury, at cost, 2022 – 86.9 shares and 2021 – 70.4 shares	4,149		3,398
Total Equity	9,043		9,082
Total Liabilities and Equity	$	25,282	$	25,243

The accompanying notes are an integral part of these condensed financial statements.

3

INTERNATIONAL PAPER COMPANY

(Unaudited)

(In millions)

	Six Months Ended June 30,
	2022		2021
Operating Activities
Net earnings (loss)	$	871	$	783
Depreciation, amortization and cost of timber harvested	528		615
Deferred income tax provision (benefit), net	(5)		5
Restructuring and other charges, net	—		204
Net (gains) losses on mark to market investments	(49)		—
Net (gains) losses on sales and impairments of businesses	—		(7)
Net (gains) losses on sales of equity method investments	—		(204)
Equity method dividends received	204		149
Equity (earnings) losses, net	(186)		(153)
Periodic pension (income) expense, net	(58)		(57)
Other, net	72		71
Changes in current assets and liabilities
Accounts and notes receivable	(276)		(496)
Contract assets	(129)		(62)
Inventories	(133)		110
Accounts payable and accrued liabilities	199		367
Interest payable	3		(2)
Other	(63)		(45)
Cash Provided By (Used For) Operations	978		1,278
Investment Activities
Invested in capital projects, net of insurance recoveries	(371)		(222)
Acquisitions, net of cash acquired	—		(80)
Proceeds from sales of equity method investments	—		800
Proceeds from sales of businesses, net of cash divested	—		90
Proceeds from exchange of equity securities	144		—
Proceeds from sale of fixed assets	11		—
Other	(1)		(2)
Cash Provided By (Used For) Investment Activities	(217)		586
Financing Activities
Repurchases of common stock and payments of restricted stock tax withholding	(823)		(213)
Issuance of debt	232		4
Reduction of debt	(243)		(914)
Change in book overdrafts	(47)		2
Dividends paid	(344)		(403)
Net debt tender premiums paid	—		(188)
Other	(1)		(3)
Cash Provided By (Used For) Financing Activities	(1,226)		(1,715)
Cash Included in Assets Held for Sale	—		(45)
Effect of Exchange Rate Changes on Cash and Temporary Investments	(4)		7
Change in Cash and Temporary Investments	(469)		111
Cash and Temporary Investments
Beginning of period	1,295		595
End of period	$	826	$	706

The accompanying notes are an integral part of these condensed financial statements.

4

INTERNATIONAL PAPER COMPANY

(Unaudited)

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments that are necessary for the fair presentation of International Paper Company’s ("International Paper's", "the Company’s" or "our") financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed herein, such adjustments are of a normal, recurring nature. Results for the first six months of the year may not necessarily be indicative of full year results. You should read these condensed financial statements in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report"), which have previously been filed with the Securities and Exchange Commission.

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States that require the use of management’s estimates. Actual results could differ from management’s estimates.

Printing Papers Spinoff

On October 1, 2021, the Company completed the previously announced spin-off of its Printing Papers segment along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia into a standalone, publicly-traded company, Sylvamo Corporation ("Sylvamo"). The transaction was implemented through the distribution of shares of the standalone company to International Paper's shareholders (the "Distribution"). As a result of the Distribution, Sylvamo is an independent public company that trades on the New York Stock Exchange under the symbol "SLVM".

In addition to the spin-off of Sylvamo, the Company completed the sale of its Kwidzyn, Poland mill on August 6, 2021. All historical operating results of the Sylvamo businesses and Kwidzyn mill have been presented as Discontinued Operations, net of tax, in the condensed consolidated statement of operations. See Note 9 - Divestitures and Impairments of Businesses for further details regarding the Sylvamo spin-off and discontinued operations.

Russia/Ukraine Conflict

The Russia-Ukraine conflict, including current and future sanctions, actions by the Russian government, and associated domestic and global economic and geopolitical conditions, have affected and could materially and adversely affect our Ilim joint venture and could otherwise adversely affect our business, financial condition, results of operations and cash flows. We are unable to predict the full impact of Russia’s ongoing invasion of Ukraine, sanctions that have been imposed to date or that may in the future be imposed, geopolitical instability and the possibility of broadened military conflict may have on us or our Ilim joint venture, including whether our Ilim joint venture may be able to continue to pay dividends to us. We continue to actively explore strategic options with respect to the Ilim joint venture, including a sale of our 50% equity interest in Ilim. In addition, we have disclosed our intent to monetize our remaining equity stake in Sylvamo (which has certain operations in Russia and announced in March 2022 that it began the suspension of operations in Russia and that it was continuing to assess various options for its operations in that country). While we may sell our equity interests in the Ilim joint venture and Sylvamo, we cannot be certain if and when this may occur, or the impact that possible disruptions in the capital markets, or conditions associated with the Russia-Ukraine conflict, could have on the value of and our ability to sell our equity interests in the Ilim joint venture and/or Sylvamo and the timing of any such sales.

Recently Issued Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This guidance provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company will apply the amendments in this update to account for contract modifications due to changes in reference rates once those occur. We do not expect these amendments to have a material impact on our consolidated financial statements and related disclosures.

5

Government Assistance

In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance." This guidance requires a business entity to provide certain disclosures around assistance received from governments. This guidance is effective for annual reporting periods beginning after December 15, 2021. The Company is currently evaluating the provisions of the guidance.

Generally, the Company recognizes revenue on a point-in-time basis when the customer takes title to the goods and assumes the risks and rewards for the goods. For customized goods where the Company has a legally enforceable right to payment for the goods, the Company recognizes revenue over time which, generally, is as the goods are produced.

Disaggregated Revenue

A geographic disaggregation of revenues across our company segmentation in the following tables provides information to assist in evaluating the nature, timing and uncertainty of revenue and cash flows and how they may be impacted by economic factors.

	Three Months Ended June 30, 2022
In millions	Industrial Packaging		Global Cellulose Fibers		Corporate and Inter-segment Sales		Total
Primary Geographical Markets (a)
United States	$	3,842	$	752	$	109	$	4,703
EMEA	413		25		—		438
Pacific Rim and Asia	11		11		1		23
Americas, other than U.S.	225		—		—		225
Total	$	4,491	$	788	$	110	$	5,389
Operating Segments
North American Industrial Packaging	$	4,126	$	—	$	—	$	4,126
EMEA Industrial Packaging	413		—		—		413
Global Cellulose Fibers	—		788		—		788
Intra-segment Eliminations	(48)		—		—		(48)
Corporate & Inter-segment Sales	—		—		110		110
Total	$	4,491	$	788	$	110	$	5,389

(a) Net sales are attributed to countries based on the location of the seller.

6

	Six Months Ended June 30, 2022
In millions	Industrial Packaging		Global Cellulose Fibers		Corporate & Intersegment		Total
Primary Geographical Markets (a)
United States	$	7,603	$	1,414	$	229	$	9,246
EMEA	823		55		—		878
Pacific Rim and Asia	21		29		2		52
Americas, other than U.S.	450		—		—		450
Total	$	8,897	$	1,498	$	231	$	10,626
Operating Segments
North American Industrial Packaging	$	8,151	$	—	$	—	$	8,151
EMEA Industrial Packaging	823		—		—		823
Global Cellulose Fibers	—		1,498		—		1,498
Intra-segment Eliminations	(77)		—		—		(77)
Corporate & Inter-segment Sales	—		—		231		231
Total	$	8,897	$	1,498	$	231	$	10,626

(a) Net sales are attributed to countries based on the location of the seller.

	Three Months Ended June 30, 2021
In millions	Industrial Packaging		Global Cellulose Fibers		Corporate & Intersegment		Total
Primary Geographical Markets (a)
United States	$	3,430	$	633	$	43	$	4,106
EMEA	395		22		(1)		416
Pacific Rim and Asia	14		25		10		49
Americas, other than U.S.	191		—		8		199
Total	$	4,030	$	680	$	60	$	4,770
Operating Segments
North American Industrial Packaging	$	3,663	$	—	$	—	$	3,663
EMEA Industrial Packaging	394		—		—		394
Global Cellulose Fibers	—		680		—		680
Intra-segment Eliminations	(27)		—		—		(27)
Corporate & Inter-segment Sales	—		—		60		60
Total	$	4,030	$	680	$	60	$	4,770

(a) Net sales are attributed to countries based on the location of the seller.

7

	Six Months Ended June 30, 2021
In millions	Industrial Packaging		Global Cellulose Fibers		Corporate & Intersegment		Total
Primary Geographical Markets (a)
United States	$	6,762	$	1,176	$	90	$	8,028
EMEA	788		46		(2)		832
Pacific Rim and Asia	32		53		24		109
Americas, other than U.S.	378		—		16		394
Total	$	7,960	$	1,275	$	128	$	9,363
Operating Segments
North American Industrial Packaging	$	7,223	$	—	$	—	$	7,223
EMEA Industrial Packaging	790		—		—		790
Global Cellulose Fibers	—		1,275		—		1,275
Intra-segment Eliminations	(53)		—		—		(53)
Corporate & Inter-segment Sales	—		—		128		128
Total	$	7,960	$	1,275	$	128	$	9,363

(a) Net sales are attributed to countries based on the location of the seller.

Revenue Contract Balances

A contract asset is created when the Company recognizes revenue on its customized products prior to having an unconditional right to payment from the customer, which generally does not occur until title and risk of loss passes to the customer.

A contract liability is created when customers prepay for goods prior to the Company transferring those goods to the customer. The contract liability is reduced once control of the goods is transferred to the customer. The majority of our customer prepayments are received during the fourth quarter each year for goods that will be transferred to customers over the following twelve months. Contract liabilities of $16 million and $27 million are included in Other current liabilities in the accompanying condensed consolidated balance sheet as of June 30, 2022 and December 31, 2021, respectively. During the second quarter of 2021, the Company also recorded a contract liability of $115 million related to the April 2021 acquisition disclosed in Note 8 - Acquisitions. The balance of this contract liability was $103 million and $107 million at June 30, 2022 and December 31, 2021, respectively, and is recorded in Other current liabilities and Other Liabilities in the accompanying condensed consolidated balance sheet.

The difference between the opening and closing balances of the Company's contract assets and contract liabilities primarily results from the difference between the price and quantity at comparable points in time for goods for which we have an unconditional right to payment or receive prepayment from the customer, respectively.

A summary of the changes in equity for the three and six months ended June 30, 2022 and 2021 is provided below:

	Three Months Ended June 30, 2022
In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total Equity
Balance, April 1	$	449	$	4,670	$	9,218	$	(1,694)	$	3,756	$	8,887
Issuance of stock for various plans, net	—		5		—		—		(2)		7
Repurchase of stock	—		—		—		—		395		(395)
Common stock dividends ($0.4625 per share)	—		—		(172)		—		—		(172)
Comprehensive income (loss)	—		—		511		205		—		716
Ending Balance, June 30	$	449	$	4,675	$	9,557	$	(1,489)	$	4,149	$	9,043

8

	Six Months Ended June 30, 2022
In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total Equity
Balance, January 1	$	449	$	4,668	$	9,029	$	(1,666)	$	3,398	$	9,082
Issuance of stock for various plans, net	—		7		—		—		(72)		79
Repurchase of stock	—		—		—		—		823		(823)
Common stock dividends ($0.9250 per share)	—		—		(343)		—		—		(343)
Comprehensive income (loss)	—		—		871		177		—		1,048
Ending Balance, June 30	$	449	$	4,675	$	9,557	$	(1,489)	$	4,149	$	9,043

	Three Months Ended June 30, 2021
In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total International Paper Shareholders’ Equity		Noncontrolling Interests		Total Equity
Balance, April 1	$	449	$	6,267	$	8,214	$	(4,453)	$	2,719	$	7,758	$	13	$	7,771
Issuance of stock for various plans, net	—		44		—		—		(2)		46		—		46
Repurchase of stock	—		—		—		—		58		(58)		—		(58)
Common stock dividends ($0.5125 per share)	—		—		(204)		—		—		(204)		—		(204)
Transactions of equity method investees	—		19		—		—		—		19		—		19
Divestiture of noncontrolling interests	—		—		—		—		—		—		(12)		(12)
Comprehensive income (loss)	—		—		432		359		—		791		1		792
Ending Balance, June 30	$	449	$	6,330	$	8,442	$	(4,094)	$	2,775	$	8,352	$	2	$	8,354

	Six Months Ended June 30, 2021
In millions, except per share amounts	Common Stock Issued