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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 September 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: (901419-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common SharesIPNew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 October 21, 2022 was 355,670,009.


INDEX
 
  PAGE NO.
Condensed Consolidated Statement of Operations - Three Months and Nine Months Ended September 30, 2022 and 2021
Condensed Consolidated Statement of Comprehensive Income - Three Months and Nine Months Ended September 30, 2022 and 2021
Condensed Consolidated Balance Sheet - September 30, 2022 and December 31, 2021
Condensed Consolidated Statement of Cash Flows - Nine Months Ended September 30, 2022 and 2021



 

INTERNATIONAL PAPER COMPANY
Condensed Consolidated Statement of Operations
(Unaudited)
(In millions, except per share amounts)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Net Sales$5,402 $4,914 $16,028 $14,277 
Costs and Expenses
Cost of products sold3,830 3,423 11,475 10,173 
Selling and administrative expenses337 343 978 1,041 
Depreciation, amortization and cost of timber harvested261 280 789 820 
Distribution expenses471 365 1,337 1,042 
Taxes other than payroll and income taxes38 35 110 106 
Restructuring and other charges, net93 39 93 243 
Net (gains) losses on sales and impairments of businesses   (7)
Net (gains) losses on sales of equity method investments   (204)
Net (gains) losses on mark to market investments(16) (65) 
Interest expense, net123 82 266 261 
Non-operating pension expense (income)(48)(50)(144)(153)
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings313 397 1,189 955 
Income tax provision (benefit)(575)59 (384)193 
Equity earnings (loss), net of taxes63 94 249 247 
Earnings (Loss) From Continuing Operations$951 $432 $1,822 $1,009 
Discontinued operations, net of taxes 432  638 
Net Earnings (Loss)$951 $864 $1,822 $1,647 
Less: Net earnings (loss) attributable to noncontrolling interests   2 
Net Earnings (Loss) Attributable to International Paper Company$951 $864 $1,822 $1,645 
Basic Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Earnings (loss) from continuing operations$2.66 $1.11 $4.97 $2.58 
Discontinued operations, net of taxes 1.11  1.63 
Net earnings (loss)$2.66 $2.22 $4.97 $4.21 
Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Earnings (loss) from continuing operations$2.64 $1.10 $4.92 $2.55 
Discontinued operations, net of taxes 1.10  1.61 
Net earnings (loss)$2.64 $2.20 $4.92 $4.16 
Average Shares of Common Stock Outstanding – assuming dilution360.4 392.6 370.7 395.3 
The accompanying notes are an integral part of these condensed financial statements.
1

INTERNATIONAL PAPER COMPANY
(Unaudited)
(In millions)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Net Earnings (Loss)$951 $864 $1,822 $1,647 
Other Comprehensive Income (Loss), Net of Tax:
Amortization of pension and post-retirement prior service costs and net loss:
U.S. plans21 31 64 101 
Pension and postretirement adjustments:
U.S. plans 826  826 
Non-U.S. plans 5  6 
Change in cumulative foreign currency translation adjustment(120)(70)14 99 
Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period (4) 3 
Reclassification adjustment for (gains) losses included in net earnings (loss)2 (8)2 (9)
Total Other Comprehensive Income (Loss), Net of Tax(97)780 80 1,026 
Comprehensive Income (Loss)854 1,644 1,902 2,673 
Net (earnings) loss attributable to noncontrolling interests   (2)
Other comprehensive (income) loss attributable to noncontrolling interests   2 
Comprehensive Income (Loss) Attributable to International Paper Company$854 $1,644 $1,902 $2,673 
The accompanying notes are an integral part of these condensed financial statements.
2

INTERNATIONAL PAPER COMPANY
(In millions)
September 30,
2022
December 31,
2021
 (unaudited) 
Assets
Current Assets
Cash and temporary investments$511 $1,295 
Accounts and notes receivable, net3,453 3,232 
Contract assets514 378 
Inventories1,976 1,814 
Current investments 245 
Other current assets168 132 
Total Current Assets6,622 7,096 
Plants, Properties and Equipment, net10,219 10,441 
Long-Term Investments926 751 
Long-Term Financial Assets of Variable Interest Entities (Note 16)2,289 2,275 
Goodwill3,116 3,130 
Overfunded Pension Plan Assets772 595 
Right of Use Assets387 365 
Deferred Charges and Other Assets534 590 
Total Assets$24,865 $25,243 
Liabilities and Equity
Current Liabilities
Notes payable and current maturities of long-term debt$616 $196 
Accounts payable2,668 2,606 
Accrued payroll and benefits378 440 
Other current liabilities1,143 902 
Total Current Liabilities4,805 4,144 
Long-Term Debt4,766 5,383 
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)2,105 2,099 
Deferred Income Taxes1,806 2,618 
Underfunded Pension Benefit Obligation359 377 
Postretirement and Postemployment Benefit Obligation189 205 
Long-Term Lease Obligations251 236 
Other Liabilities1,096 1,099 
Equity
Common stock, $1 par value, 2022 – 448.9 shares and 2021 – 448.9 shares
449 449 
Paid-in capital4,702 4,668 
Retained earnings10,340 9,029 
Accumulated other comprehensive loss(1,586)(1,666)
13,905 12,480 
Less: Common stock held in treasury, at cost, 2022 – 93.3 shares and 2021 – 70.4 shares
4,417 3,398 
Total Equity9,488 9,082 
Total Liabilities and Equity$24,865 $25,243 
The accompanying notes are an integral part of these condensed financial statements.
3

INTERNATIONAL PAPER COMPANY
(Unaudited)
(In millions)
 Nine Months Ended
September 30,
 20222021
Operating Activities
Net earnings (loss)$1,822 $1,647 
Depreciation, amortization and cost of timber harvested789 933 
Deferred income tax provision (benefit), net(816)(151)
Restructuring and other charges, net93 243 
Net (gains) losses on mark to market investments(65) 
Net (gains) losses on sales and impairments of businesses (367)
Net (gains) losses on sales of equity method investments (205)
Net (gains) losses on sales of fixed assets (86)
Equity method dividends received204 149 
Equity (earnings) losses, net(249)(247)
Periodic pension (income) expense, net(87)(84)
Other, net126 129 
Changes in current assets and liabilities
Accounts and notes receivable(294)(510)
Contract assets(138)(74)
Inventories(217)(133)
Accounts payable and accrued liabilities218 716 
Interest payable50 9 
Other(23)(46)
Cash Provided By (Used For) Operations1,413 1,923 
Investment Activities
Invested in capital projects, net of insurance recoveries(609)(348)
Acquisitions, net of cash acquired (80)
Proceeds from sales of equity method investments 843 
Proceeds from sales of businesses, net of cash divested 827 
Proceeds from exchange of equity securities311  
Proceeds from settlement of Variable Interest Entity installment notes 4,850 
Proceeds from sale of fixed assets11 95 
Other(6)(3)
Cash Provided By (Used For) Investment Activities(293)6,184 
Financing Activities
Repurchases of common stock and payments of restricted stock tax withholding(1,093)(425)
Issuance of debt752 1,511 
Reduction of debt(954)(1,132)
Change in book overdrafts 29 
Dividends paid(509)(602)
Net debt tender premiums paid(89)(221)
Reduction of Variable Interest Entity loans (4,220)
Other(2)(14)
Cash Provided By (Used For) Financing Activities(1,895)(5,074)
Effect of Exchange Rate Changes on Cash and Temporary Investments (9)(7)
Change in Cash and Temporary Investments (784)3,026 
Cash and Temporary Investments
Beginning of period1,295 595 
End of period$511 $3,621 
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 nine 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. While we may sell our equity interests in the Ilim joint venture, we cannot be certain if and when this may occur, or the impact that possible disruptions in the capital markets, negative macroeconomic conditions, or conditions associated with the Russia-Ukraine conflict, could have on the value of and our ability to sell our equity interest in the Ilim joint venture and the timing of any such sale.


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. We do not expect this guidance to have a material impact on our consolidated financial statements and related disclosures.

Liabilities - Supplier Finance Programs

In September 2022, the FASB issued ASU 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations." This guidance requires a business entity operating as a buyer in a supplier finance agreement to disclose qualitative and quantitative information about its supplier finance programs. This guidance is effective for annual reporting periods beginning after December 15, 2022, and interim periods within those years. 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 September 30, 2022
In millionsIndustrial PackagingGlobal Cellulose FibersCorporate and Inter-segment SalesTotal
Primary Geographical Markets (a)
United States$3,816 $846 $129 $4,791 
EMEA355 29  384 
Pacific Rim and Asia12 12 1 25 
Americas, other than U.S.202   202 
Total$4,385 $887 $130 $5,402 
Operating Segments
North American Industrial Packaging$4,055 $ $— $4,055 
EMEA Industrial Packaging355  — 355 
Global Cellulose Fibers 887 — 887 
Intra-segment Eliminations(25)  (25)
Corporate & Inter-segment Sales  130 130 
Total$4,385 $887 $130 $5,402 
(a) Net sales are attributed to countries based on the location of the seller.

6

Nine Months Ended September 30, 2022
In millionsIndustrial PackagingGlobal Cellulose FibersCorporate & IntersegmentTotal
Primary Geographical Markets (a)
United States$11,419 $2,260 $358 $14,037 
EMEA1,178 84  1,262 
Pacific Rim and Asia33 41 3 77 
Americas, other than U.S.652   652 
Total$13,282 $2,385 $361 $16,028 
Operating Segments
North American Industrial Packaging$12,206 $ $— $12,206 
EMEA Industrial Packaging1,178  — 1,178 
Global Cellulose Fibers 2,385 — 2,385 
Intra-segment Eliminations(102)  (102)
Corporate & Inter-segment Sales  361 361 
Total$13,282 $2,385 $361 $16,028 
(a) Net sales are attributed to countries based on the location of the seller.


Three Months Ended September 30, 2021
In millionsIndustrial PackagingGlobal Cellulose FibersCorporate & IntersegmentTotal
Primary Geographical Markets (a)
United States$3,590 $675 $51 $4,316 
EMEA331 28 (1)358 
Pacific Rim and Asia13 37 8 58 
Americas, other than U.S.177  5 182 
Total$4,111 $740 $63 $4,914 
Operating Segments
North American Industrial Packaging$3,814 $— $— $3,814 
EMEA Industrial Packaging331 — — 331 
Global Cellulose Fibers— 740 — 740 
Intra-segment Eliminations(34)— — (34)
Corporate & Inter-segment Sales— — 63 63 
Total$4,111 $740 $63 $4,914 
(a) Net sales are attributed to countries based on the location of the seller.
7

Nine Months Ended September 30, 2021
In millionsIndustrial PackagingGlobal Cellulose FibersCorporate & IntersegmentTotal
Primary Geographical Markets (a)
United States$10,352 $1,851 $141 $12,344 
EMEA1,119 74 (3)1,190 
Pacific Rim and Asia45 90 32 167 
Americas, other than U.S.555  21 576 
Total$12,071 $2,015 $191 $14,277 
Operating Segments
North American Industrial Packaging$11,037 $— $— $11,037 
EMEA Industrial Packaging1,121 — — 1,121 
Global Cellulose Fibers— 2,015 — 2,015 
Intra-segment Eliminations(87)— — (87)
Corporate & Inter-segment Sales— — 191 191 
Total$12,071 $2,015 $191 $14,277 
(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 $17 million and $27 million are included in Other current liabilities in the accompanying condensed consolidated balance sheet as of September 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 $101 million and $107 million at September 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 nine months ended September 30, 2022 and 2021 is provided below:

Three Months Ended September 30, 2022
In millions, except per share amountsCommon Stock IssuedPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Common Stock Held In Treasury, At CostTotal
Equity
Balance, July 1$449 $4,675 $9,557 $(1,489)$4,149 $9,043 
Issuance of stock for various plans, net 27   (2)29 
Repurchase of stock    270 (270)
Common stock dividends
($0.4625 per share)
  (168)  (168)
Comprehensive income (loss)  951 (97) 854 
Ending Balance, September 30$449 $4,702 $10,340 $(1,586)$4,417 $9,488 

8

Nine Months Ended September 30, 2022
In millions, except per share amountsCommon Stock IssuedPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Common Stock Held In Treasury, At CostTotal
Equity
Balance, January 1$449 $4,668 $9,029 $(1,666)$3,398 $9,082 
Issuance of stock for various plans, net 34   (74)108 
Repurchase of stock    1,093 (1,093)
Common stock dividends
($1.3875 per share)
  (511)  (511)
Comprehensive income (loss)  1,822 80  1,902 
Ending Balance, September 30$449 $4,702 $10,340 $(1,586)$4,417 $9,488 

Three Months Ended September 30, 2021
In millions, except per share amountsCommon Stock IssuedPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Common Stock Held In Treasury, At CostTotal
International
Paper
Shareholders’
Equity
Noncontrolling
Interests
Total
Equity
Balance, July 1$449 $6,330 $8,442 $(4,094)$2,775 $8,352 $2 $8,354 
Issuance of stock for various plans, net— 41