New York | 13-0872805 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation of organization) | Identification No.) |
6400 Poplar Avenue, Memphis, TN | 38197 |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Shares | IP | New York Stock Exchange |
Large accelerated filer | ý | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | ¨ |
Emerging growth company | ¨ |
PAGE NO. | ||
Condensed Consolidated Statement of Operations - Three Months Ended March 31, 2019 and 2018 | ||
Condensed Consolidated Statement of Comprehensive Income - Three Months Ended March 31, 2019 and 2018 | ||
Condensed Consolidated Balance Sheet - March 31, 2019 and December 31, 2018 | ||
Condensed Consolidated Statement of Cash Flows - Three Months Ended March 31, 2019 and 2018 | ||
ITEM 1. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Net Sales | $ | 5,643 | $ | 5,621 | |||
Costs and Expenses | |||||||
Cost of products sold | 3,929 | 3,948 | |||||
Selling and administrative expenses | 413 | 421 | |||||
Depreciation, amortization and cost of timber harvested | 315 | 325 | |||||
Distribution expenses | 389 | 366 | |||||
Taxes other than payroll and income taxes | 43 | 44 | |||||
Restructuring and other charges, net | — | 22 | |||||
Net (gains) losses on sales and impairments of businesses | (7 | ) | — | ||||
Interest expense, net | 133 | 135 | |||||
Non-operating pension expense | 10 | 4 | |||||
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings | 418 | 356 | |||||
Income tax provision (benefit) | 106 | 89 | |||||
Equity earnings (loss), net of taxes | 114 | 95 | |||||
Earnings (Loss) From Continuing Operations | 426 | 362 | |||||
Discontinued operations, net of taxes | — | 368 | |||||
Net Earnings (Loss) | 426 | 730 | |||||
Less: Net earnings (loss) attributable to noncontrolling interests | 2 | 1 | |||||
Net Earnings (Loss) Attributable to International Paper Company | $ | 424 | $ | 729 | |||
Basic Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders | |||||||
Earnings (loss) from continuing operations | $ | 1.06 | $ | 0.87 | |||
Discontinued operations, net of taxes | — | 0.89 | |||||
Net earnings (loss) | $ | 1.06 | $ | 1.76 | |||
Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders | |||||||
Earnings (loss) from continuing operations | $ | 1.05 | $ | 0.86 | |||
Discontinued operations, net of taxes | — | 0.88 | |||||
Net earnings (loss) | $ | 1.05 | $ | 1.74 | |||
Average Shares of Common Stock Outstanding – assuming dilution | 403.2 | 418.2 | |||||
Cash Dividends Per Common Share | $ | 0.5000 | $ | 0.4750 | |||
Amounts Attributable to International Paper Company Common Shareholders | |||||||
Earnings (loss) from continuing operations | $ | 424 | $ | 361 | |||
Discontinued operations, net of taxes | — | 368 | |||||
Net earnings (loss) | $ | 424 | $ | 729 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Net Earnings (Loss) | $ | 426 | $ | 730 | |||
Other Comprehensive Income (Loss), Net of Tax: | |||||||
Amortization of pension and post-retirement prior service costs and net loss: | |||||||
U.S. plans | 41 | 66 | |||||
Change in cumulative foreign currency translation adjustment | 12 | 42 | |||||
Net gains/losses on cash flow hedging derivatives: | |||||||
Net gains (losses) arising during the period | — | (3 | ) | ||||
Reclassification adjustment for (gains) losses included in net earnings (loss) | 1 | (2 | ) | ||||
Total Other Comprehensive Income (Loss), Net of Tax | 54 | 103 | |||||
Comprehensive Income (Loss) | 480 | 833 | |||||
Net (earnings) loss attributable to noncontrolling interests | (2 | ) | (1 | ) | |||
Other comprehensive (income) loss attributable to noncontrolling interests | — | — | |||||
Comprehensive Income (Loss) Attributable to International Paper Company | $ | 478 | $ | 832 |
March 31, 2019 | December 31, 2018 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current Assets | |||||||
Cash and temporary investments | $ | 641 | $ | 589 | |||
Accounts and notes receivable, net | 3,493 | 3,521 | |||||
Contract assets | 410 | 395 | |||||
Inventories | 2,301 | 2,241 | |||||
Other current assets | 217 | 250 | |||||
Total Current Assets | 7,062 | 6,996 | |||||
Plants, Properties and Equipment, net | 13,071 | 13,067 | |||||
Forestlands | 401 | 402 | |||||
Investments | 1,770 | 1,648 | |||||
Financial Assets of Special Purpose Entities (Note 15) | 7,074 | 7,070 | |||||
Goodwill | 3,393 | 3,374 | |||||
Right of Use Assets | 415 | — | |||||
Deferred Charges and Other Assets | 992 | 1,019 | |||||
Total Assets | $ | 34,178 | $ | 33,576 | |||
Liabilities and Equity | |||||||
Current Liabilities | |||||||
Notes payable and current maturities of long-term debt | $ | 809 | $ | 639 | |||
Accounts payable | 2,518 | 2,413 | |||||
Accrued payroll and benefits | 354 | 535 | |||||
Other current liabilities | 1,272 | 1,107 | |||||
Total Current Liabilities | 4,953 | 4,694 | |||||
Long-Term Debt | 9,965 | 10,015 | |||||
Nonrecourse Financial Liabilities of Special Purpose Entities (Note 15) | 6,300 | 6,298 | |||||
Deferred Income Taxes | 2,634 | 2,600 | |||||
Pension Benefit Obligation | 1,727 | 1,762 | |||||
Postretirement and Postemployment Benefit Obligation | 260 | 264 | |||||
Long-term Lease Obligations | 281 | — | |||||
Other Liabilities | 589 | 560 | |||||
Equity | |||||||
Common stock, $1 par value, 2019 – 448.9 shares and 2018 – 448.9 shares | 449 | 449 | |||||
Paid-in capital | 6,159 | 6,280 | |||||
Retained earnings | 8,211 | 7,465 | |||||
Accumulated other comprehensive loss | (4,975 | ) | (4,500 | ) | |||
9,844 | 9,694 | ||||||
Less: Common stock held in treasury, at cost, 2019 – 49.9 shares and 2018 – 48.3 shares | 2,398 | 2,332 | |||||
Total International Paper Shareholders’ Equity | 7,446 | 7,362 | |||||
Noncontrolling interests | 23 | 21 | |||||
Total Equity | 7,469 | 7,383 | |||||
Total Liabilities and Equity | $ | 34,178 | $ | 33,576 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Operating Activities | |||||||
Net earnings (loss) | $ | 426 | $ | 730 | |||
Depreciation, amortization and cost of timber harvested | 315 | 325 | |||||
Deferred income tax provision (benefit), net | 22 | 157 | |||||
Restructuring and other charges, net | — | 22 | |||||
Net gain on transfer of North American Consumer Packaging business | — | (516 | ) | ||||
Net (gains) losses on sales and impairments of businesses | (7 | ) | — | ||||
Equity method dividends received | 6 | 116 | |||||
Equity (earnings) losses, net | (114 | ) | (95 | ) | |||
Periodic pension expense, net | 26 | 42 | |||||
Other, net | 46 | 14 | |||||
Changes in current assets and liabilities | |||||||
Accounts and notes receivable | 26 | (122 | ) | ||||
Contract assets | (15 | ) | (22 | ) | |||
Inventories | (22 | ) | 21 | ||||
Accounts payable and accrued liabilities | 34 | 11 | |||||
Interest payable | (25 | ) | (34 | ) | |||
Other | 15 | 14 | |||||
Cash Provided By (Used For) Operations | 733 | 663 | |||||
Investment Activities | |||||||
Invested in capital projects | (293 | ) | (489 | ) | |||
Acquisitions, net of cash acquired | (17 | ) | — | ||||
Net settlement on transfer of North American Consumer Packaging business | — | 1 | |||||
Proceeds from divestitures, net of cash divested | 17 | — | |||||
Proceeds from sale of fixed assets | 3 | 1 | |||||
Other | (4 | ) | (2 | ) | |||
Cash Provided By (Used For) Investment Activities | (294 | ) | (489 | ) | |||
Financing Activities | |||||||
Repurchases of common stock and payments of restricted stock tax withholding | (229 | ) | (31 | ) | |||
Issuance of debt | 208 | 223 | |||||
Reduction of debt | (142 | ) | (34 | ) | |||
Change in book overdrafts | (25 | ) | (17 | ) | |||
Dividends paid | (201 | ) | (197 | ) | |||
Cash Provided By (Used For) Financing Activities | (389 | ) | (56 | ) | |||
Effect of Exchange Rate Changes on Cash | 2 | 5 | |||||
Change in Cash and Temporary Investments | 52 | 123 | |||||
Cash and Temporary Investments | |||||||
Beginning of period | 589 | 1,018 | |||||
End of period | $ | 641 | $ | 1,141 |
Three Months Ended March 31, 2019 | ||||||||||||||||||||
In millions | Industrial Packaging | Global Cellulose Fibers | Printing Papers | Corporate and Inter-segment Sales | Total | |||||||||||||||
Primary Geographical Markets (a) | ||||||||||||||||||||
United States | $ | 3,146 | $ | 570 | $ | 488 | $ | 60 | $ | 4,264 | ||||||||||
EMEA | 428 | 81 | 330 | (2 | ) | 837 | ||||||||||||||
Pacific Rim and Asia | 18 | 38 | 59 | 4 | 119 | |||||||||||||||
Americas, other than U.S. | 240 | — | 188 | (5 | ) | 423 | ||||||||||||||
Total | $ | 3,832 | $ | 689 | $ | 1,065 | $ | 57 | $ | 5,643 | ||||||||||
Operating Segments | ||||||||||||||||||||
North American Industrial Packaging | $ | 3,376 | $ | — | $ | — | $ | — | $ | 3,376 | ||||||||||
EMEA Industrial Packaging | 339 | — | — | — | 339 | |||||||||||||||
Brazilian Industrial Packaging | 57 | — | — | — | 57 | |||||||||||||||
European Coated Paperboard | 91 | — | — | — | 91 | |||||||||||||||
Global Cellulose Fibers | — | 689 | — | — | 689 | |||||||||||||||
North American Printing Papers | — | — | 496 | — | 496 | |||||||||||||||
Brazilian Papers | — | — | 215 | — | 215 | |||||||||||||||
European Papers | — | — | 309 | — | 309 | |||||||||||||||
Indian Papers | — | — | 53 | — | 53 | |||||||||||||||
Intra-segment Eliminations | (31 | ) | — | (8 | ) | — | (39 | ) | ||||||||||||
Corporate & Inter-segment Sales | — | — | — | 57 | 57 | |||||||||||||||
Total | $ | 3,832 | $ | 689 | $ | 1,065 | $ | 57 | $ | 5,643 |
Three Months Ended March 31, 2018 | ||||||||||||||||||||
In millions | Industrial Packaging | Global Cellulose Fibers | Printing Papers | Corporate & Intersegment | Total | |||||||||||||||
Primary Geographical Markets (a) | ||||||||||||||||||||
United States | $ | 3,102 | $ | 545 | $ | 440 | $ | 58 | $ | 4,145 | ||||||||||
EMEA | 452 | 75 | 336 | (5 | ) | 858 | ||||||||||||||
Pacific Rim and Asia | 34 | 57 | 64 | 16 | 171 | |||||||||||||||
Americas, other than U.S. | 239 | — | 213 | (5 | ) | 447 | ||||||||||||||
Total | $ | 3,827 | $ | 677 | $ | 1,053 | $ | 64 | $ | 5,621 | ||||||||||
Operating Segments | ||||||||||||||||||||
North American Industrial Packaging | $ | 3,369 | $ | — | $ | — | $ | — | $ | 3,369 | ||||||||||
EMEA Industrial Packaging | 362 | — | — | — | 362 | |||||||||||||||
Brazilian Industrial Packaging | 62 | — | — | — | 62 | |||||||||||||||
European Coated Paperboard | 92 | — | — | — | 92 | |||||||||||||||
Global Cellulose Fibers | — | 677 | — | — | 677 | |||||||||||||||
North American Printing Papers | — | — | 458 | — | 458 | |||||||||||||||
Brazilian Papers | — | — | 229 | — | 229 | |||||||||||||||
European Papers | — | — | 319 | — | 319 | |||||||||||||||
Indian Papers | — | — | 52 | — | 52 | |||||||||||||||
Intra-segment Eliminations | (58 | ) | — | (5 | ) | — | (63 | ) | ||||||||||||
Corporate & Inter-segment Sales | — | — | — | 64 | 64 | |||||||||||||||
Total | $ | 3,827 | $ | 677 | $ | 1,053 | $ | 64 | $ | 5,621 |
In millions | Contract Assets (Short-Term) | Contract Liabilities (Short-Term) | ||||||
Beginning Balance - January 1, 2019 | $ | 395 | $ | 56 | ||||
Ending Balance - March 31, 2019 | 410 | 53 | ||||||
Increase / (Decrease) | $ | 15 | $ | (3 | ) |
Three Months Ended March 31, 2019 | |||||||||||||||||||||||||||||||
In millions, except per share amounts | 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 | $ | 449 | $ | 6,280 | $ | 7,465 | $ | (4,500 | ) | $ | 2,332 | $ | 7,362 | $ | 21 | $ | 7,383 | ||||||||||||||
Adoption of ASU 2018-02 reclassification of stranded tax effects resulting from Tax Reform | — | — | 529 | (529 | ) | — | — | — | — | ||||||||||||||||||||||
Issuance of stock for various plans, net | — | (118 | ) | — | — | (163 | ) | 45 | — | 45 | |||||||||||||||||||||
Repurchase of stock | — | — | — | — | 229 | (229 | ) | — | (229 | ) | |||||||||||||||||||||
Common stock dividends ($.5000 per share) | — | — | (207 | ) | — | — | (207 | ) | — | (207 | ) | ||||||||||||||||||||
Transactions of equity method investees | — | (3 | ) | — | — | — | (3 | ) | — | (3 | ) | ||||||||||||||||||||
Comprehensive income (loss) | — | — | 424 | 54 | — | 478 | 2 | 480 | |||||||||||||||||||||||
Ending Balance, March 31 | $ | 449 | $ | 6,159 | $ | 8,211 | $ | (4,975 | ) | $ | 2,398 | $ | 7,446 | $ | 23 | $ | 7,469 |
Three Months Ended March 31, 2018 | |||||||||||||||||||||||||||||||
In millions, except per share amounts | 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 | $ | 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 | — | (41 | ) | — | — | (79 | ) | 38 | — | 38 | |||||||||||||||||||||
Repurchase of stock | — | — | — | — | 31 | (31 | ) | — | (31 | ) | |||||||||||||||||||||
Common stock dividends ($.4750 per share) | — | — | (199 | ) | — | — | (199 | ) | — | (199 | ) | ||||||||||||||||||||
Transactions of equity method investees | — | 10 | — | — | — | 10 | — | 10 | |||||||||||||||||||||||
Comprehensive income (loss) | — | — | 729 | 103 | — | 832 | 1 | 833 | |||||||||||||||||||||||
Ending Balance, March 31 | $ | 449 | $ | 6,175 | $ | 6,783 | $ | (4,530 | ) | $ | 1,632 | $ | 7,245 | $ | 20 | $ | 7,265 |
Three Months Ended March 31, | ||||||||
In millions | 2019 | 2018 | ||||||
Defined Benefit Pension and Postretirement Adjustments | ||||||||
Balance at beginning of period | $ | (1,916 | ) | $ | (2,527 | ) | ||
Reclassification of stranded tax effects | (527 | ) | — | |||||
Amounts reclassified from accumulated other comprehensive income | 41 | 66 | ||||||
Balance at end of period | (2,402 | ) | (2,461 | ) | ||||
Change in Cumulative Foreign Currency Translation Adjustments | ||||||||
Balance at beginning of period | (2,581 | ) | (2,111 | ) | ||||
Other comprehensive income (loss) before reclassifications | 8 | 40 | ||||||
Amounts reclassified from accumulated other comprehensive income | 4 | 2 | ||||||
Other comprehensive income (loss) attributable to noncontrolling interest | — | — | ||||||
Balance at end of period | (2,569 | ) | (2,069 | ) | ||||
Net Gains and Losses on Cash Flow Hedging Derivatives | ||||||||
Balance at beginning of period | (3 | ) | 5 | |||||
Other comprehensive income (loss) before reclassifications | — | (3 | ) | |||||
Reclassification of stranded tax effects | (2 | ) | — | |||||
Amounts reclassified from accumulated other comprehensive income | 1 | (2 | ) | |||||
Balance at end of period | (4 | ) | — | |||||
Total Accumulated Other Comprehensive Income (Loss) at End of Period | $ | (4,975 | ) | $ | (4,530 | ) |
In millions: | Amounts Reclassified from Accumulated Other Comprehensive Income | Location of Amount Reclassified from AOCI | |||||||||
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Defined benefit pension and postretirement items: | |||||||||||
Prior-service costs | $ | (3 | ) | $ | (4 | ) | (a) | Non-operating pension expense | |||
Actuarial gains (losses) | (52 | ) | (84 | ) | (a) | Non-operating pension expense | |||||
Total pre-tax amount | (55 | ) | (88 | ) | |||||||
Tax (expense) benefit | 14 | 22 | |||||||||
Net of tax | (41 | ) | (66 | ) | |||||||
Reclassification of stranded tax effects | 527 | — | Retained Earnings | ||||||||
Total, net of tax | 486 | (66 | ) | ||||||||
Change in cumulative foreign currency translation adjustments: | |||||||||||
Business acquisitions/divestitures | (4 | ) | (2 | ) | (b) | Cost of products sold | |||||
Tax (expense) benefit | — | — | |||||||||
Net of tax | (4 | ) | (2 | ) | |||||||
Net gains and losses on cash flow hedging derivatives: | |||||||||||
Foreign exchange contracts | (1 | ) | 3 | (c) | Cost of products sold | ||||||
Total pre-tax amount | (1 | ) | 3 | ||||||||
Tax (expense)/benefit | — | (1 | ) | ||||||||
Net of tax | (1 | ) | 2 | ||||||||
Reclassification of stranded tax effects | 2 | — | Retained Earnings | ||||||||
Total, net of tax | 1 | 2 | |||||||||
Total reclassifications for the period | $ | 483 | $ | (66 | ) |
(a) | These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 18 for additional details). |
(b) | Amount for the three months ended March 31, 2018 was reclassified to Discontinued operations, net of taxes. |
(c) | This accumulated other comprehensive income component is included in our derivatives and hedging activities (see Note 17 for additional details). |
Three Months Ended March 31, | |||||||
In millions, except per share amounts | 2019 | 2018 | |||||
Earnings (loss) from continuing operations attributable to International Paper Company common shareholders | $ | 424 | $ | 361 | |||
Weighted average common shares outstanding | 400.5 | 413.5 | |||||
Effect of dilutive securities | |||||||
Restricted performance share plan | 2.7 | 4.7 | |||||
Weighted average common shares outstanding – assuming dilution | 403.2 | 418.2 | |||||
Basic earnings (loss) per share from continuing operations | $ | 1.06 | $ | 0.87 | |||
Diluted earnings (loss) per share from continuing operations | $ | 1.05 | $ | 0.86 |
In millions | Three Months Ended March 31, 2018 | ||
Net Sales | $ | — | |
Costs and Expenses | |||
Selling and administrative expenses | 23 | ||
(Gain) loss on transfer of business | (516 | ) | |
Earnings (Loss) Before Income Taxes and Equity Earnings | 493 | ||
Income tax provision (benefit) | 125 | ||
Discontinued Operations, Net of Taxes | $ | 368 |
In millions | March 31, 2019 | December 31, 2018 | |||||
Accounts and notes receivable, net: | |||||||
Trade | $ | 3,186 | $ | 3,249 | |||
Other | 307 | 272 | |||||
Total | $ | 3,493 | $ | 3,521 |
In millions | March 31, 2019 | December 31, 2018 | |||||
Raw materials | $ | 266 | $ | 260 | |||
Finished pulp, paper and packaging | 1,282 | 1,241 | |||||
Operating supplies | 637 | 641 | |||||
Other | 116 | 99 | |||||
Total | $ | 2,301 | $ | 2,241 |
Three Months Ended March 31, | ||||||||
In millions | 2019 | 2018 | ||||||
Interest expense | $ | 184 | $ | 180 | ||||
Interest income | 51 | 45 | ||||||
Capitalized interest costs | 5 | 8 |
In millions | March 31, 2019 | |||
Operating lease costs | $ | 39 | ||
Variable lease costs | 22 | |||
Short-term lease costs | 11 | |||
Finance lease cost | ||||
Amortization of lease assets | 2 | |||
Interest on lease liabilities | 1 | |||
Total lease cost, net | $ | 75 |
In millions | Classification | March 31, 2019 | ||||
Assets | ||||||
Operating lease assets | Right-of-use assets | $ | 415 | |||
Finance lease assets | Plants, properties and equipment, net (a) | 104 | ||||
Total leased assets | $ | 519 | ||||
Liabilities | ||||||
Current | ||||||
Operating | Other current liabilities | $ | 137 | |||
Finance | Notes payable and current maturities of long-term debt | 9 | ||||
Noncurrent | ||||||
Operating | Long-term lease obligations | 281 | ||||
Finance | Long-term debt | 90 | ||||
Total lease liabilities | $ | 517 |
(a) | Finance leases are recorded net of accumulated amortization of $33 million. |
In millions | March 31, 2019 | ||
Weighted average remaining lease term (years) | |||
Operating leases | 10.15 years | ||
Finance leases | 11.93 years | ||
Weighted average discount rate | |||
Operating leases | 3.28 | % | |
Finance leases | 4.55 | % |
In millions | March 31, 2019 | |||
Cash paid for amounts included in the measurement of lease liabilities | ||||
Operating cash flows related to operating leases | $ | (35 | ) | |
Financing cash flows related to finance leases | (2 | ) |
March 31, 2019 | ||||||||||||
In millions | Operating Leases | Financing Leases | Total | |||||||||
2019 (remainder of year) | $ | 111 | $ | 11 | $ | 122 | ||||||
2020 | 117 | 14 | 131 | |||||||||
2021 | 78 | 12 | 90 | |||||||||
2022 | 47 | 11 | 58 | |||||||||
2023 | 26 | 11 | 37 | |||||||||
Thereafter | 100 | 76 | 176 | |||||||||
Total lease payments | 479 | 135 | 614 | |||||||||
Less: Interest (a) | 61 | 36 | 97 | |||||||||
Present value of lease liabilities | $ | 418 | $ | 99 | $ | 517 |
(a) | Calculated using the interest rate for each lease. |
In millions | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | ||||||||||||||||||
Lease obligations | $ | 160 | $ | 125 | $ | 77 | $ | 49 | $ | 28 | $ | 118 |
In millions | March 31, 2019 | December 31, 2018 | |||||
Current assets | $ | 1,831 | $ | 1,757 | |||
Noncurrent assets | 5,450 | 5,292 | |||||
Current liabilities | 995 | 1,148 | |||||
Noncurrent liabilities | 3,528 | 3,156 |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Net sales | $ | 1,506 | $ | 1,476 | |||
Gross profit | 266 | 223 | |||||
Income from continuing operations | 95 | 62 | |||||
Net income | 95 | 62 |
In millions | March 31, 2019 | December 31, 2018 | |||||
Current assets | $ | 1,136 | $ | 981 | |||
Noncurrent assets | 2,019 | 1,710 | |||||
Current liabilities | 706 | 545 | |||||
Noncurrent liabilities | 1,542 | 1,470 | |||||
Noncontrolling interests | 18 | 11 |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Net sales | $ | 620 | $ | 677 | |||
Gross profit | 336 | 375 | |||||
Income from continuing operations | 205 | 189 | |||||
Net income | 199 | 183 |
In millions | Industrial Packaging | Global Cellulose Fibers | Printing Papers | Total | |||||||||||
Balance as of January 1, 2019 | |||||||||||||||
Goodwill | $ | 3,379 | $ | 52 | $ | 2,116 | $ | 5,547 | |||||||
Accumulated impairment losses (a) | (296 | ) | — | (1,877 | ) | (2,173 | ) | ||||||||
3,083 | 52 | 239 | 3,374 | ||||||||||||
Currency translation and other (b) | — | — | (2 | ) | (2 | ) | |||||||||
Additions/reductions | 21 | (c) | — | — | 21 | ||||||||||
Balance as of March 31, 2019 | |||||||||||||||
Goodwill | 3,400 | 52 | 2,114 | 5,566 | |||||||||||
Accumulated impairment losses (a) | (296 | ) | — | (1,877 | ) | (2,173 | ) | ||||||||
Total | $ | 3,104 | $ | 52 | $ | 237 | $ | 3,393 |
(a) | Represents accumulated goodwill impairment charges since the adoption of ASC 350, "Intangibles-Goodwill and Other" in 2002. |
(b) | Represents the effects of foreign currency translations and reclassifications. |
March 31, 2019 | December 31, 2018 | ||||||||||||||||||||||
In millions | Gross Carrying Amount | Accumulated Amortization | Net Intangible Assets | Gross Carrying Amount | Accumulated Amortization | Net Intangible Assets | |||||||||||||||||
Customer relationships and lists | $ | 541 | $ | 253 | $ | 288 | $ | 542 | $ | 247 | $ | 295 | |||||||||||
Non-compete agreements | 68 | 68 | — | 67 | 67 | — | |||||||||||||||||
Tradenames, patents and trademarks, and developed technology | 173 | 93 | 80 | 174 | 90 | 84 | |||||||||||||||||
Land and water rights | 8 | 2 | 6 | 8 | 2 | 6 | |||||||||||||||||
Software | 26 | 25 | 1 | 26 | 25 | 1 | |||||||||||||||||
Other | 31 | 24 | 7 | 30 | 23 | 7 | |||||||||||||||||
Total | $ | 847 | $ | 465 | $ | 382 | $ | 847 | $ | 454 | $ | 393 |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Amortization expense related to intangible assets | $ | 12 | $ | 14 |
• | In March 2016, the Company and other PRPs received a special notice letter from the EPA (i) inviting participation in implementing a remedy for a portion of the site known as Operable Unit 5, Area 1, and (ii) demanding reimbursement of EPA past costs totaling $37 million, including $19 million in past costs previously demanded by the EPA. The Company responded to the special notice letter. In December 2016, the EPA issued a unilateral administrative order to the Company and other PRPs to perform the remedy. The Company responded to the unilateral administrative order, agreeing to comply with the order subject to its sufficient cause defenses. |
• | 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 December 2016. In February 2017, the EPA informed the Company that it would make other arrangements for the performance of the remedial design. |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Revenue (a) | $ | 24 | $ | 24 | |||
Expense (a) | 32 | 32 | |||||
Cash receipts (b) | 47 | 47 | |||||
Cash payments (c) | 64 | 64 |
(a) | The revenue and expense are included in Interest expense, net in the accompanying 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. |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Revenue (a) | $ | 21 | $ | 15 | |||
Expense (b) | 21 | 14 | |||||
Cash receipts (c) | 16 | 9 | |||||
Cash payments (d) | 18 | 12 |
(a) | The revenue is included in Interest expense, net in the accompanying statement of operations and includes approximately $5 million for each of the three months ended March 31, 2019 and 2018, respectively, of accretion income for the amortization of the basis difference adjustment on the Financial assets of special purpose entities. |
(b) | The expense is included in Interest expense, net in the accompanying statement of operations and includes approximately $2 million for each of the three months ended March 31, 2019 and 2018, respectively, of accretion expense for the amortization of the basis difference adjustment on the Nonrecourse financial liabilities of special purpose entities. |
(c) | The cash receipts are interest received on the Financial assets of special purpose entities. |
(d) | The cash payments are interest paid on Nonrecourse financial liabilities of special purpose entities. |
In millions | March 31, 2019 | December 31, 2018 | |||||
Derivatives in Cash Flow Hedging Relationships: | |||||||
Foreign exchange contracts (a) | $ | 403 | $ | 407 | |||
Derivatives in Fair Value Hedging Relationships: | |||||||
Interest rate contracts | 700 | 700 | |||||
Derivatives Not Designated as Hedging Instruments: | |||||||
Electricity contract | 3 | 8 | |||||
Foreign exchange contracts | 11 | 19 |
(a) | These contracts had maturities of two years or less as of March 31, 2019. |
Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion) | |||||||
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Interest rate contracts | $ | — | $ | (3 | ) | ||
Total | $ | — | $ | (3 | ) |
Gain (Loss) Reclassified from AOCI (Effective Portion) | Location of Gain (Loss) Reclassified from AOCI (Effective Portion) | ||||||||
Three Months Ended March 31, | |||||||||
In millions | 2019 | 2018 | |||||||
Derivatives in Cash Flow Hedging Relationships: | |||||||||
Foreign exchange contracts | $ | (1 | ) | $ | 2 | Cost of products sold | |||
Total | $ | (1 | ) | $ | 2 |
Gain (Loss) Recognized | Location of Gain (Loss) In Statement of Operations | ||||||||
Three Months Ended March 31, | |||||||||
In millions | 2019 | 2018 | |||||||
Derivatives in Fair Value Hedging Relationships: | |||||||||
Interest rate contracts | $ | 12 | $ | — | Interest expense, net | ||||
Debt | (12 | ) | — | Interest expense, net | |||||
Total | $ | — | $ | — | |||||
Derivatives Not Designated as Hedging Instruments: | |||||||||
Electricity contract | $ | 4 | $ | (2 | ) | Cost of products sold | |||
Total | $ | 4 | $ | (2 | ) |
Assets | Liabilities | |||||||||||||||
In millions | March 31, 2019 | December 31, 2018 | March 31, 2019 | December 31, 2018 | ||||||||||||
Derivatives designated as hedging instruments | ||||||||||||||||
Foreign exchange contracts – cash flow | $ | 3 | $ | 3 | $ | 8 | $ | 10 | ||||||||
Interest rate contracts - fair value | 29 | 16 | — | — | ||||||||||||
Total derivatives designated as hedging instruments | 32 | (a) | 19 | (b) | 8 | (c) | 10 | (c) | ||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||
Electricity contract | — | — | 3 | 4 | ||||||||||||
Foreign exchange contracts | — | — | — | 1 | ||||||||||||
Total derivatives not designated as hedging instruments | — | — | 3 | (c) | 5 | (c) | ||||||||||
Total derivatives | $ | 32 | $ | 19 | $ | 11 | $ | 15 |
(a) | Includes $2 million recorded in Other current assets and $30 million recorded in Deferred charges and other assets in the accompanying consolidated balance sheet. |
(b) | Includes $2 million recorded in Other current assets and $17 million recorded in Deferred charges and other assets in the accompanying balance sheet. |
(c) | Included in Other current liabilities in the accompanying balance sheet. |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Service cost | $ | 18 | $ | 38 | |||
Interest cost | 110 | 118 | |||||
Expected return on plan assets | (157 | ) | (200 | ) | |||
Actuarial loss | 51 | 82 | |||||
Amortization of prior service cost | 4 | 4 | |||||
Net periodic pension expense | $ | 26 | $ | 42 |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Total stock-based compensation expense (selling and administrative) | $ | 27 | $ | 31 | |||
Income tax benefits related to stock-based compensation | 34 | 22 |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Industrial Packaging | $ | 3,832 | $ | 3,827 | |||
Global Cellulose Fibers | 689 | 677 | |||||
Printing Papers | 1,065 | 1,053 | |||||
Corporate and Intersegment Sales | 57 | 64 | |||||
Net Sales | $ | 5,643 | $ | 5,621 |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Industrial Packaging | $ | 404 | $ | 437 | |||
Global Cellulose Fibers | 32 | 11 | |||||
Printing Papers | 143 | 64 | |||||
Business Segment Operating Profits | 579 | 512 | |||||
Earnings (loss) from continuing operations before income taxes and equity earnings | 418 | 356 | |||||
Interest expense, net | 133 | 135 | |||||
Noncontrolling interests/equity earnings adjustment | (3 | ) | (1 | ) | |||
Corporate expenses, net | 21 | 9 | |||||
Corporate special items, net | — | 9 | |||||
Non-operating pension expense | 10 | 4 | |||||
Business Segment Operating Profits | $ | 579 | $ | 512 |
ITEM 2. |
Three Months Ended March 31, | Three Months Ended December 31, | ||||||||||
In millions | 2019 | 2018 | 2018 | ||||||||
Earnings (Loss) Attributable to Shareholders | $ | 424 | $ | 729 | $ | 316 | |||||
Less - Discontinued operations (gain) loss | — | (368 | ) | — | |||||||
Earnings (Loss) from Continuing Operations | 424 | 361 | 316 | ||||||||
Add Back - Non-operating pension expense (income) | 10 | 4 | 429 | ||||||||
Add Back - Net special items expense (income) | 21 | 40 | (15 | ) | |||||||
Income tax effect - Non-operating pension and special items expense | (8 | ) | (10 | ) | (60 | ) | |||||
Adjusted Operating Earnings (Loss) Attributable to Shareholders | $ | 447 | $ | 395 | $ | 670 |
Three Months Ended March 31, | Three Months Ended December 31, | ||||||||||
2019 | 2018 | 2018 | |||||||||
Diluted Earnings (Loss) Per Share Attributable to Shareholders | $ | 1.05 | $ | 1.74 | $ | 0.78 | |||||
Less - Discontinued operations (gain) loss per share | — | (0.88 | ) | — | |||||||
Diluted Earnings (Loss) Per Share from Continuing Operations | 1.05 | 0.86 | 0.78 | ||||||||
Add Back - Non-operating pension expense (income) per share | 0.02 | 0.01 | 1.05 | ||||||||
Add Back - Net special items expense (income) per share | 0.05 | 0.09 | (0.04 | ) | |||||||
Income tax effect per share - Non-operating pension and special items expense | (0.01 | ) | (0.02 | ) | (0.14 | ) | |||||
Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders | $ | 1.11 | $ | 0.94 | $ | 1.65 |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Cash provided by operations | $ | 733 | $ | 663 | |||
Adjustments: | |||||||
Cash invested in capital projects | (293 | ) | (489 | ) | |||
Free Cash Flow | $ | 440 | $ | 174 |
Three Months Ended | |||||||||||
March 31, | December 31, | ||||||||||
In millions | 2019 | 2018 | 2018 | ||||||||
Net Earnings (Loss) From Continuing Operations Attributable to International Paper Company | $ | 424 | $ | 361 | $ | 316 | |||||
Add back (deduct): | |||||||||||
Income tax provision (benefit) | 106 | 89 | 143 | ||||||||
Equity (earnings) loss, net of taxes | (114 | ) | (95 | ) | (79 | ) | |||||
Noncontrolling interests, net of taxes | 2 | 1 | 2 | ||||||||
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings | 418 | 356 | 382 | ||||||||
Interest expense, net | 133 | 135 | 135 | ||||||||
Noncontrolling interests / equity earnings included in operations | (3 | ) | (1 | ) | (3 | ) | |||||
Corporate expenses, net | 21 | 9 | 8 | ||||||||
Corporate special items (income) expense | — | 9 | (21 | ) | |||||||
Non-operating pension expense | 10 | 4 | 429 | ||||||||
Adjusted Operating Profit | $ | 579 | $ | 512 | $ | 930 | |||||
Business Segment Operating Profit: | |||||||||||
Industrial Packaging | $ | 404 | $ | 437 | $ | 647 | |||||
Global Cellulose Fibers | 32 | 11 | 91 | ||||||||
Printing Papers | 143 | 64 | 192 | ||||||||
Total Business Segment Operating Profit | $ | 579 | $ | 512 | $ | 930 |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Three Months Ended December 31, 2018 | ||||
Economic-related downtime | 484 | — | — | |||
Maintenance downtime | 156 | 285 | 57 |
Three Months Ended March 31, | |||||
In thousands of short tons (except as noted) | 2019 | 2018 | |||
Industrial Packaging | |||||
Corrugated Packaging (c) | 2,535 | 2,579 | |||
Containerboard | 697 | 783 | |||
Recycling | 609 | 537 | |||
Saturated Kraft | 41 | 46 | |||
Gypsum/Release Kraft | 51 | 53 | |||
Bleached Kraft | 7 | 7 | |||
EMEA Packaging (c) | 370 | 397 | |||
Brazilian Packaging (c) | 85 | 86 | |||
European Coated Paperboard | 104 | 96 | |||
Industrial Packaging | 4,499 | 4,584 | |||
Global Cellulose Fibers (in thousands of metric tons) (b) | 859 | 895 | |||
Printing Papers | |||||
U.S. Uncoated Papers | 448 | 470 | |||
European and Russian Uncoated Papers | 354 | 361 | |||
Brazilian Uncoated Papers | 244 | 260 | |||
Indian Uncoated Papers | 68 | 67 | |||
Printing Papers | 1,114 | 1,158 |
(a) | Sales volumes include third party and inter-segment sales and exclude sales of equity investees. |
(b) | Includes North American, European and Brazilian volumes and internal sales to mills. |
(c) | Volumes for corrugated box sales reflect consumed tons sold (CTS). Board sales for these businesses reflect invoiced tons. |
Three Months Ended | ||||||||||||||||||||||||
March 31, | December 31, | |||||||||||||||||||||||
2019 | 2018 | 2018 | ||||||||||||||||||||||
In millions | Before Tax | After Tax | Before Tax | After Tax | Before Tax | After Tax | ||||||||||||||||||
Business Segments | ||||||||||||||||||||||||
Multi-employer pension plan exit liability | $ | 16 | $ | 12 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Gain on sale of EMEA Packaging box plant | (7 | ) | (6 | ) | — | — | — | — | ||||||||||||||||
EMEA Packaging optimization | — | — | 22 | 17 | (1 | ) | (1 | ) | ||||||||||||||||
Abandoned property removal | 11 | 8 | 9 | 7 | 8 | 6 | ||||||||||||||||||
Riverdale mill conversion | 1 | 1 | — | — | 4 | 3 | ||||||||||||||||||
Litigation settlement recovery | — | — | — | — | (5 | ) | (4 | ) | ||||||||||||||||
Business Segments Total | 21 | 15 | 31 | 24 | 6 | 4 | ||||||||||||||||||
Corporate | ||||||||||||||||||||||||
Legal settlement | — | — | 9 | 7 | — | — | ||||||||||||||||||
Debt extinguishment costs | — | — | — | — | 10 | 7 | ||||||||||||||||||
Gain on sale of investment in Liaison Technologies | — | — | — | — | (31 | ) | (23 | ) | ||||||||||||||||
Corporate Total | — | — | 9 | 7 | (21 | ) | (16 | ) | ||||||||||||||||
Total special items | 21 | 15 | 40 | 31 | (15 | ) | (12 | ) | ||||||||||||||||
Non-operating pension expense | 10 | 8 | 4 | 3 | 429 | 322 | ||||||||||||||||||
Total special items and non-operating pension expense | $ | 31 | $ | 23 | $ | 44 | $ | 34 | $ | 414 | $ | 310 |
Three Months Ended | ||||||||||||
March 31, | December 31, | |||||||||||
In millions | 2019 | 2018 | 2018 | |||||||||
International investment restructuring | $ | — | $ | — | $ | 19 | ||||||
Foreign tax audits | — | — | 25 | |||||||||
Total | $ | — | $ | — | $ | 44 |
Total Industrial Packaging | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales | $ | 3,832 | $ | 3,827 | $ | 4,017 | |||||
Operating Profit | $ | 404 | $ | 437 | $ | 647 | |||||
Multi-employer pension plan exit liability | 16 | — | — | ||||||||
Gain on sale of EMEA Packaging box plant | (7 | ) | — | — | |||||||
EMEA Packaging optimization | — | 22 | (1 | ) | |||||||
Litigation settlement recovery | — | — | (5 | ) | |||||||
Abandoned property removal | 8 | 5 | 5 | ||||||||
Operating Profit Before Special Items | $ | 421 | $ | 464 | $ | 646 |
North American Industrial Packaging | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales (a) | $ | 3,376 | $ | 3,369 | $ | 3,583 | |||||
Operating Profit | $ | 395 | $ | 459 | $ | 641 | |||||
Multi-employer pension plan exit liability | 16 | — | — | ||||||||
Litigation settlement recovery | — | — | (5 | ) | |||||||
Abandoned property removal | 8 | 5 | 5 | ||||||||
Operating Profit Before Special Items | $ | 419 | $ | 464 | $ | 641 |
(a) | Includes intra-segment sales of $31 million, $58 million and $55 million for the three months ended March 31, 2019, March 31, 2018 and December 31, 2018, respectively. |
EMEA Industrial Packaging | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales | $ | 339 | $ | 362 | $ | 338 | |||||
Operating Profit | $ | (8 | ) | $ | (34 | ) | $ | (6 | ) | ||
Gain on sale of EMEA Packaging box plant | (7 | ) | — | — | |||||||
EMEA Packaging optimization | — | 22 | (1 | ) | |||||||
Operating Profit Before Special Items | $ | (15 | ) | $ | (12 | ) | $ | (7 | ) |
Brazilian Industrial Packaging | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales | $ | 57 | $ | 62 | $ | 57 | |||||
Operating Profit | $ | (5 | ) | $ | (8 | ) | $ | (5 | ) |
European Coated Paperboard | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales | $ | 91 | $ | 92 | $ | 94 | |||||
Operating Profit | $ | 22 | $ | 20 | $ | 17 |
Total Global Cellulose Fibers | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales | $ | 689 | $ | 677 | $ | 736 | |||||
Operating Profit | $ | 32 | $ | 11 | $ | 91 | |||||
Abandoned property removal | 3 | 4 | 2 | ||||||||
Operating Profit Before Special Items | $ | 35 | $ | 15 | $ | 93 |
Total Printing Papers | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales | $ | 1,065 | $ | 1,053 | $ | 1,160 | |||||
Operating Profit | $ | 143 | $ | 64 | $ | 192 | |||||
Abandoned property removal | — | — | 1 | ||||||||
Riverdale mill conversion | 1 | — | 4 | ||||||||
Operating Profit Before Special Items | $ | 144 | $ | 64 | $ | 197 |
North American Papers | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales | $ | 496 | $ | 458 | $ | 513 | |||||
Operating Profit | $ | 56 | $ | 1 | $ | 75 | |||||
Abandoned property removal | — | — | 1 | ||||||||
Riverdale mill conversion | 1 | — | 4 | ||||||||
Operating Profit Before Special Items | $ | 57 | $ | 1 | $ | 80 |
European Papers | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales | $ | 309 | $ | 319 | $ | 320 | |||||
Operating Profit | $ | 47 | $ | 21 | $ | 47 |
Brazilian Papers | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales (a) | $ | 215 | $ | 229 | $ | 272 | |||||
Operating Profit | $ | 33 | $ | 40 | $ | 63 |
(a) | Includes intra-segment sales of $8 million, $5 million and $(3) million for the three months ended March 31, 2019, March 31, 2018 and December 31, 2018, respectively. |
Indian Papers | 2019 | 2018 | |||||||||
In millions | 1st Quarter | 1st Quarter | 4th Quarter | ||||||||
Sales | $ | 53 | $ | 52 | $ | 52 | |||||
Operating Profit | $ | 7 | $ | 2 | $ | 7 |
Three Months Ended March 31, | |||||||
In millions | 2019 | 2018 | |||||
Early debt reductions (a) | $ | 94 | $ | — | |||
Pre-tax early debt extinguishment costs | (1 | ) | — |
(a) | Reductions related to notes with interest rates ranging from 3.00% to 9.50% with original maturities from 2024 to 2033 for the three months ended March 31, 2019. |
ITEM 3. |
ITEM 4. |
ITEM 1. |
ITEM 1A. |
Period | Total Number of Shares Purchased (a) | Average Price Paid per Share | Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in billions) | ||||
January 1, 2019 - January 31, 2019 | 376,054 | $41.55 | 373,678 | $2.22 | ||||
February1, 2019 - February 28, 2019 | 2,087,105 | 46.36 | 1,053,224 | 2.17 | ||||
March 1, 2019 - March 31, 2019 | 2,551,764 | 45.79 | 2,519,637 | 2.05 | ||||
Total | 5,014,923 |
10.1 | ||
31.1 | ||
31.2 | ||
32 | ||
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. |
INTERNATIONAL PAPER COMPANY (Registrant) | ||
May 3, 2019 | By | /s/ Tim S. Nicholls |
Tim S. Nicholls | ||
Senior Vice President and Chief Financial Officer | ||
May 3, 2019 | By | /s/ Vincent P. Bonnot |
Vincent P. Bonnot | ||
Vice President – Finance and Controller |
1.1 | General.....................................................................1 |
2.1 | Definitions................................................................1 |
3.1 | Effective Date..........................................................9 |
3.2 | Termination of Plan.................................................9 |
4.1 | Committee...............................................................9 |
4.2 | Actions and Interpretations by the Committee........9 |
4.3 | Authority of Committee.........................................10 |
4.4 | Delegation..............................................................11 |
5.1 | Number of Shares..................................................12 |
5.2 | Share Counting......................................................12 |
5.3 | Stock Distributed...................................................13 |
5.4 | Limitation on Awards............................................13 |
6.1 | General...................................................................14 |
7.1 | General...................................................................14 |
7.2 | Incentive Stock Options.........................................15 |
8.1 | Grant of Stock Appreciation Rights.......................15 |
9.1 | Grant of Restricted Stock, Restricted Stock Units and Deferred Stock Units.......................................16 |
9.2 | Issuance and Restrictions.......................................16 |
9.3 | Forfeiture................................................................17 |
9.4 | Delivery of Restricted Stock..................................17 |
10.1 | Grant of Performance Awards................................17 |
10.2 | Performance Goals.................................................18 |
11.1 | Options and Stock Appreciation Rights.................18 |
11.2 | Other Awards..........................................................18 |
11.3 | Performance Goals.................................................19 |
11.4 | Inclusions and Exclusions from Performance Criteria...................................................................20 |
11.5 | Certification of Performance Goals.......................20 |
11.6 | Award Limits..........................................................20 |
12.1 | Grant of Dividend Equivalents..............................21 |
13.1 | Grant of Stock or Other Stock-Based Awards.......21 |
14.1 | Award Certificates..................................................21 |
14.2 | Form of Payment of Awards..................................21 |
14.3 | Limits on Transfer..................................................22 |
14.4 | Beneficiaries..........................................................22 |
14.5 | Stock Trading Restrictions.....................................22 |
14.6 | Treatment upon Death or Disability.......................22 |
14.7 | Effect of a Change in Control – Awards Granted Before February 11, 2014......................................23 |
14.8 | Effect of a Change in Control – Awards Granted On or After February 11, 2014.....................................24 |
14.9 | Acceleration for Any Other Reason.......................27 |
14.10 | Forfeiture Events....................................................27 |
14.11 | Substitute Awards..................................................27 |
15.1 | Mandatory Adjustments.........................................28 |
15.2 | Discretionary Adjustments.....................................28 |
15.3 | General...................................................................28 |
16.1 | Amendment, Modification and Termination..........29 |
16.2 | Awards Previously Granted...................................29 |
16.3 | Compliance Amendments......................................30 |
17.1 | Rights of Participants.............................................31 |
17.2 | Withholding...........................................................31 |
17.3 | Impact of Restatement of Financial Statements Upon Previous Awards...........................................32 |
17.4 | Special Provisions Related to Section 409A of the Code.......................................................................32 |
17.5 | Unfunded Status of Awards....................................35 |
17.6 | Relationship to Other Benefits...............................35 |
17.7 | Expenses................................................................35 |
17.8 | Titles and Headings................................................35 |
17.9 | Gender and Number...............................................35 |
17.10 | Fractional Shares....................................................35 |
17.11 | Government and Other Regulations.......................35 |
17.12 | Governing Law.......................................................36 |
17.13 | Severability............................................................36 |
17.14 | No Limitations on Rights of Company..................37 |
17.15 | Indemnification......................................................37 |
(a) | “Affiliate” means (i) any Subsidiary or Parent, or (ii) an entity that directly or through one or more intermediaries controls, is controlled by or is under common control with, the Company, as determined by the Committee. |
(b) | “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Deferred Stock Unit Award, Dividend Equivalent Award, Other Stock-Based Award, or any other right or interest relating to Stock or cash, granted to a Participant under the Plan. |
(c) | “Award Certificate” means a written document, in such form as the Committee prescribes from time to time, setting forth the terms and conditions of an Award. Award Certificates may be in the form of individual award agreements or certificates or a program document describing the terms and provisions of an Award or series of Awards under the Plan. The Committee may provide for the use of electronic, internet or other non-paper Award Certificates. |
(d) | “Beneficial Owner” shall have the meaning given such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. |
(e) | “Board” means the Board of Directors of the Company. |
(f) | “Cause” as a reason for a Participant’s termination of employment shall have the meaning assigned such term in the employment, severance or similar agreement, if any, between such Participant and the Company or an Affiliate, provided, however that if there is no such employment, severance or similar agreement in which such term is defined, and unless otherwise defined in the applicable Award Certificate, “Cause” shall include but is not limited to misconduct or other activity detrimental to the business interest or reputation of the Company or continued unsatisfactory job performance without making reasonable efforts to improve. Examples include insubordination, protracted or repeated absence from work without permission, illegal activity, disorderly conduct, etc. |
(g) | “Change in Control” means and includes the occurrence of any one of the following events: |
(h) | “Code” means the Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision. |
(i) | “Committee” means the Management Development and Compensation Committee of the Board described in Article 4. |
(j) | “Company” means International Paper Company, a New York corporation, or any successor corporation. |
(k) | “Continuous Service” means the absence of any interruption or termination of service as an employee, officer, or director of the Company or any Affiliate, as applicable; provided, however, that for purposes of an Incentive Stock Option “Continuous Service” means the absence of any interruption or termination of service as an employee of the Company or any Parent or Subsidiary, as applicable, pursuant to applicable tax regulations. Continuous Service shall not be considered interrupted in the following cases: (i) a Participant transfers employment between the Company and an Affiliate or between Affiliates, or (ii) in the discretion of the Committee as specified at or prior to such occurrence, in the case of a spin-off, sale or disposition of the Participant’s employer from the Company or any Affiliate, (iii) a Participant transfers from being an employee of the Company or an Affiliate to being a director of the Company or of an Affiliate, or vice versa, or (iv) any leave of absence authorized in |
(l) | “Covered Employee” means a covered employee as defined in Code Section 162(m)(3). |
(m) | “Deferred Stock Unit” means a right granted to a Participant under Article 9 to receive Shares of Stock (or the equivalent value in cash or other property if the Committee so provides) at a future time as determined by the Committee, or as determined by the Participant within guidelines established by the Committee in the case of voluntary deferral elections. |
(n) | “Disability” of a Participant means that the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant’s employer. If the determination of Disability relates to an Incentive Stock Option, Disability means Permanent and Total Disability as defined in Section 22(e)(3) of the Code. In the event of a dispute, the determination whether a Participant has incurred a Disability will be made by the Committee and may be supported by the advice of a physician competent in the area to which such Disability relates. |
(o) | “Dividend Equivalent” means a right granted to a Participant under Article 12. |
(p) | “Effective Date” has the meaning assigned such term in Section 3.1. |
(q) | “Eligible Participant” means Non-Employee Directors and designated employees of the Company or any Affiliate. |
(r) | “Exchange” means any national securities exchange on which the Stock may from time to time be listed or traded. |
(s) | “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time. |
(t) | “Fair Market Value,” on any date, means (i) if the Stock is listed on a securities exchange, the closing stock price on such date (or, in the absence of reported sales on such date, on the immediately preceding date on which sales were reported), or (ii) if the Stock is not listed on a securities exchange, the mean between the bid and offered prices as quoted by the applicable interdealer quotation system for such date, provided that if the Stock is not quoted on an interdealer quotation system or if it is determined that the fair market value is not properly reflected by such quotations, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable and in compliance with Code Section 409A. |
(u) | “Full-Value Award” means an Award other than in the form of an Option or SAR, and which is settled by the issuance of Stock (or at the discretion of the Committee, settled in cash valued by reference to Stock value). |
(v) | “Good Reason” (or a similar term denoting constructive termination) has the meaning, if any, assigned such term in the employment, severance or similar agreement, if any, between a Participant and the Company or an Affiliate, provided, however that if there is no such employment, severance or similar agreement in which such term is defined, “Good Reason” shall have the meaning, if any, given such term in the applicable Award Certificate. If not defined in any such document, the term “Good Reason” as used herein shall not apply to a particular Award. |
(w) | “Grant Date” of an Award means the first date on which all necessary corporate action has been taken to approve the grant of the Award as provided in the Plan, or such later date as is determined and specified |
(x) | “Incentive Stock Option” means an Option that is intended to be an incentive stock option and meets the requirements of Section 422 of the Code or any successor provision thereto. |
(y) | “Independent Directors” means those members of the Board of Directors who qualify at any given time as “independent” directors under the applicable rules of each Exchange on which the Shares are listed, “non-employee” directors under Rule 16b-3 of the Exchange Act, and “outside” directors under Section 162(m) of the Code. |
(z) | “Non-Employee Director” means a director of the Company who is not a common law employee of the Company or an Affiliate. |
(aa) | “Non-qualified Stock Option” means an Option that is not an Incentive Stock Option. |
(ab) | “Non-Segmented Performance Award” means a Performance Award that is not a Segmented Performance Award. |
(ac) | “Option” means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-qualified Stock Option. |
(ad) | “Other Stock-Based Award” means a right granted to a Participant under Article 13 that relates to or is valued by reference to Stock or other Awards relating to Stock. |
(ae) | “Parent” means a corporation, limited liability company, partnership or other entity which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall have the meaning set forth in Section 424(e) of the Code. |
(af) | “Participant” means an Eligible Participant who has been granted an Award under the Plan; provided that in the case of the death of a Participant, the term “Participant” refers to a beneficiary designated pursuant to Section 14.4 or the legal guardian or other legal representative acting in a fiduciary capacity on behalf of the Participant under applicable state law and court supervision. |
(ag) | “Performance Award” means any award granted under the Plan pursuant to Article 10. |
(ah) | “Person” means any individual, entity or group, within the meaning of Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) or 14(d)(2) of the Exchange Act. |
(ai) | “Plan” means the International Paper Company Amended and Restated 2009 Incentive Compensation Plan, as it may be amended from time to time. |
(aj) | “Qualified Performance-Based Award” means an Award that is either (i) intended to qualify for the Section 162(m) Exemption and is made subject to performance goals based on Qualified Business Criteria as set forth in Section 11.2, or (ii) an Option or SAR having an exercise price equal to or greater than the Fair Market Value of the underlying Stock as of the Grant Date. |
(ak) | “Qualified Business Criteria” means one or more of the Business Criteria listed in Section 11.2 upon which performance goals for certain Qualified Performance-Based Awards may be established by the Committee. |
(al) | “Restricted Stock Award” means Stock granted to a Participant under Article 9 that is subject to certain restrictions and to risk of forfeiture. |
(am) | “Restricted Stock Unit Award” means the right granted to a Participant under Article 9 to receive shares of Stock (or the equivalent value in cash or other property if the Committee so provides) in the future, which right is subject to certain restrictions and to risk of forfeiture. |
(an) | “Retirement” means a Participant’s termination of employment with the Company or an Affiliate after reaching at least age 55 with 10 years of service, age 61 with 20 years of service, age 62 with 10 years of service, or age 65. In the case of a Participant who is a Non-Employee Director, “Retirement” means retirement from the Board after reaching the age specified for mandatory retirement from the Board. |
(ao) | “Securities Act” means the Securities Act of 1933, as amended from time to time. |
(ap) | “Section 162(m) Exemption” means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code |
(aq) | “Segmented Performance Award” means a Performance Award that provides for two or more segments within an overall performance period and in which performance achievement is measured separately for each individual segment and a portion of the award is deemed earned and “banked” pending the final assessment of performance |
(ar) | “Shares” means shares of the Company’s Stock. If there has been an adjustment or substitution with respect to the Shares (whether or not pursuant to Article 15), the term “Shares” shall also include any shares of stock or other securities that are substituted for Shares or into which Shares are adjusted. |
(as) | “Stock” means the $1.00 par value common stock of the Company and such other securities of the Company as may be substituted for Stock pursuant to Article 15. |
(at) | “Stock Appreciation Right” or “SAR” means a right granted to a Participant under Article 8 to receive a payment equal to the difference between the Fair Market Value of a Share as of the date of exercise of the SAR over the base price of the SAR, all as determined pursuant to Article 8. |
(au) | “Subsidiary” means any corporation, limited liability company, partnership or other entity of which 50% or more of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Section 424(f) of the Code. |
(av) | “Surviving Entity” means the entity resulting from a Change in Control (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets or stock either directly or through one or more subsidiaries). |
(a) | Grant Awards; |
(b) | Delegate the granting Awards as specified in Section 4.4; |
(c) | Designate Participants; |
(d) | Determine the type or types of Awards to be granted to each Participant; |
(e) | Determine the number of Awards to be granted and the number of Shares or dollar amount to which an Award will relate; |
(f) | Determine the terms and conditions of any Award granted under the Plan; |
(g) | Prescribe the form of each Award Certificate, which need not be identical for each Participant; |
(h) | Decide all other matters that must be determined in connection with an Award; |
(i) | Establish, adopt or revise any rules, regulations, guidelines or procedures as it may deem necessary or advisable to administer the Plan; |
(j) | Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan; |
(k) | Amend the Plan or any Award Certificate as provided herein; and |
(l) | Adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of the United States or any non-U.S. jurisdictions in which the Company or any Affiliate may operate, in order to assure the viability of the benefits of Awards granted to participants located in the United States or such other jurisdictions and to meet the objectives of the Plan. |
(a) | Administrative Duties. The Committee may delegate to one or more of its members or to one or more officers of the Company or an Affiliate or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Committee or such individuals may have under this Plan. |
(b) | Special Committee. The Board may, by resolution, expressly delegate to a special committee, consisting of one or more directors who may but need not be officers of the Company, the authority, within specified parameters as to the number and terms of Awards, to (i) designate employees of the Company or any of its Affiliates to be recipients of Awards under the Plan, and (ii) to determine the number of such Awards to be received by any such Participants; provided, however, that such delegation of duties and responsibilities to an officer of the Company may not be made with respect to the grant of Awards to eligible participants (a) who are subject to Section 16(a) of the Exchange Act at the Grant Date, or (b) who as of the Grant Date are reasonably anticipated to be become Covered Employees during the term of the Award. The acts of such delegates shall be treated hereunder as acts of the Board and such delegates shall report regularly to the Board and the Committee regarding the delegated duties and responsibilities and any Awards so granted. |
(c) | Other Delegation. The Board may, by resolution, expressly delegate to the Senior Vice President, Human Resources and Communications, the authority, within specified parameters as to the number and terms of Awards, to (i) designate employees of the Company or any of its Affiliates to be recipients of Awards under the Plan, and (ii) to determine the number of such Awards to be received by any such Participants; provided, however, that such delegation of duties and responsibilities may not be made with respect to the grant of Awards to eligible participants who are Senior Vice President of the Company and above. The acts of such delegate shall be treated hereunder as acts of the Board and such delegate shall report regularly to the Committee regarding the delegated duties and responsibilities and any Awards so granted. |
(a) | To the extent that an Award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued or forfeited Shares subject to the Award shall be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan. |
(b) | Shares subject to Awards settled in cash shall be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan. |
(c) | Shares withheld from an Award or delivered by a Participant to satisfy |
(d) | If the exercise price of an Option is satisfied by delivering Shares to the Company (by either actual delivery or attestation), only the number of Shares issued to the Participant in excess of the Shares tendered (by delivery or attestation) shall be debited from the number of Shares remaining available for issuance pursuant to Awards granted under the Plan. |
(e) | To the extent that the full number of Shares subject to an Option or SAR is not issued upon exercise of the Option or SAR for any reason, including by reason of net-settlement of the Award, only the number of Shares issued and delivered upon exercise of the Option or SAR shall be considered for purposes of determining the number of Shares remaining available for issuance pursuant to Awards granted under the Plan. |
(f) | To the extent that the full number of Shares subject to a Performance Award is not issued by reason of failure to achieve maximum performance goals, the unissued Shares originally subject to the Performance Award will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan. |
(g) | Substitute Awards granted pursuant to Section 14.11 shall not count against the Shares otherwise available for issuance under the Plan under Section 5.1. |
(h) | Subject to applicable Exchange requirements, shares available under a shareowner-approved plan of a company acquired by the Company (as appropriately adjusted to Shares to reflect the transaction) may be issued under the Plan pursuant to Awards granted to individuals who were not employees of the Company or its Affiliates immediately before such transaction and will not count against the maximum share limitation specified in Section 5.1. |
(a) | Options. The maximum aggregate number of Shares subject to Options granted under the Plan in any 12-month period to any one Participant shall be 1,200,000. |
(b) | SARs. The maximum number of Shares subject to Stock Appreciation Rights granted under the Plan in any 12-month period to any one Participant shall be 1,200,000. |
(c) | Restricted Stock or Restricted Stock Units. The maximum aggregate number of Shares underlying of Awards of Restricted Stock or Restricted Stock Units under the Plan in any 12-month period to any one Participant shall be 660,000. |
(d) | Other Stock-Based Awards. The maximum aggregate grant with respect to Other Stock-Based Awards under the Plan in any 12-month period to any one Participant shall be 660,000 Shares. |
(e) | Performance Awards. With respect to any one 12-month period (i) the maximum amount that may be paid to any one Participant for Performance Awards payable in cash or property other than Shares shall be $10,000,000, and (ii) the maximum number of Shares that may be paid to any one Participant for Performance Awards payable in Stock shall be 660,000 Shares. For purposes of applying these limits in the case of multi‑year performance periods, the amount of cash or property or number of Shares deemed paid with respect to any one 12-month period is the total amount payable or Shares earned for the performance period divided by the number of 12-month periods in the performance period. |
(a) | Exercise Price. The exercise price per Share under an Option shall be determined by the Committee, provided that the exercise price for any Option (other than an Option issued as a substitute Award pursuant to Section 14.11) shall not be less than the Fair Market Value as of the Grant Date. |
(b) | Prohibition on Repricing. Except as otherwise provided in Section 15.1, the exercise price of an Option may not be reduced, directly or indirectly by cancellation and regrant or otherwise, without the prior approval of the shareowners of the Company. |
(c) | Time and Conditions of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, subject to Section 7.1(e). The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised or vested. |
(d) | Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, and |
(e) | Exercise Term. Except for Non-qualified Stock Options granted to Participants outside the United States, no Option granted under the Plan shall be exercisable for more than ten years from the Grant Date. |
(f) | No Deferral Feature. No Option shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the Option. |
(g) | No Dividend Equivalents. No Option shall provide for Dividend Equivalents. |
(a) | Right to Payment. Upon the exercise of a SAR, the Participant to whom it is granted has the right to receive, for each Share with respect to which the SAR is being exercised, the excess, if any, of: |
(b) | Prohibition on Repricing. Except as otherwise provided in Section 15.1, the base price of a SAR may not be reduced, directly or indirectly by cancellation and regrant or otherwise, without the prior approval of the shareowners of the Company. |
(c) | Time and Conditions of Exercise. Except for SARs granted to Participants outside the United States, no SAR shall be exercisable for more than ten years from the Grant Date. |
(d) | No Deferral Feature. No SAR shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the SAR. |
(e) | No Dividend Equivalents. No SAR shall provide for Dividend Equivalents. |
(f) | Other Terms. All SARs shall be evidenced by an Award Certificate. Subject to the limitations of this Article 8, the terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any SAR shall be determined by the Committee at the time of the grant of the Award and shall be reflected in the Award Certificate. |
(a) | Revenue |
(b) | Sales |
(c) | Profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures) |
(d) | Earnings (EBIT, EBITDA, earnings per share, or other corporate earnings measures) |
(e) | Net income (before or after taxes, operating income or other income measures) |
(f) | Cash (cash flow, cash generation or other cash measures) |
(g) | Stock price or performance |
(h) | Total shareholder return (stock price appreciation plus reinvested dividends divided by beginning share price) |
(i) | Economic value added |
(j) | Return measures (including, but not limited to, return on assets, income, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales); |
(k) | Market share |
(l) | Improvements in capital structure |
(m) | Expenses (expense management, expense ratio, expense efficiency ratios or other expense measures) |
(n) | Business expansion or consolidation (acquisitions and divestitures) |
(o) | Internal rate of return or increase in net present value |
(p) | Working capital targets relating to inventory and/or accounts receivable |
(q) | Safety standards |
(r) | Productivity measures |
(s) | Cost reduction measures |
(t) | Strategic plan development and implementation |
(a) | all of that Participant’s outstanding Options and SARs shall become fully exercisable, and shall thereafter remain exercisable for a period of one (1) year or until the earlier expiration of the original term of the Option or SAR; |
(b) | all time-based vesting restrictions on that Participant’s outstanding Awards shall lapse as of the date of termination; and |
(c) | the payout opportunities attainable under all of that Participant’s outstanding Performance Awards shall be prorated based upon the number of months employed during each measurement period and shall be paid at the end of the Award period based on actual Company performance. |
(a) | Options. All Incentive Stock Options and Non-qualified Stock Options shall be immediately exercisable, and all service-based restrictions on Shares issued pursuant to the exercise of such Options shall be immediately removed. |
(b) | Stock Appreciation Rights. All service-based restrictions shall be immediately removed with respect to SARs. |
(c) | Full-Value Awards. All service-based restrictions shall be immediately removed with respect to Restricted Stock, Restricted Stock Units and Deferred Stock Units. |
(d) | Performance Awards. All service-based restrictions shall be immediately removed with respect to all earned Performance Awards, (ii) a pro rata portion of each outstanding Performance Award that would have been earned were Company performance to reach the target goals established by the Committee for each uncompleted Award period shall be deemed earned (based on the number of months of the total Award period which have been completed prior to the Change in Control), and all restrictions shall be immediately removed with respect to that number of shares, and (iii) the remaining portion of each Performance Award shall be forfeited. |
(a) | Awards Assumed or Substituted by Surviving Entity. With respect to Awards assumed by the Surviving Entity or otherwise equitably converted or substituted in connection with a Change in Control in a manner approved by the Committee or the Board: if within two years after the effective date of the Change in Control, a Participant’s employment is terminated without Cause or the Participant resigns for Good Reason, then |
(i) | all of that Participant’s outstanding Options or SARs shall become fully vested and exercisable as of the employment termination date and shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Certificate; |
(ii) | all time-based vesting restrictions on that Participant’s outstanding Awards shall lapse as of the employment termination date; and |
(iii) | the level of performance achievement under all of that Participant’s Performance Awards that were outstanding immediately prior to effective time of the Change in Control shall be calculated as follows: |
1. | The portion of the Award that had been “banked” prior to the employment termination date based on the assessment of performance for a completed segment shall be fully vested as of the employment termination date; and |
2. | The portion of the Award that relates to any segment that had not been completed, or for which performance had not been assessed, prior to the employment termination date shall vest as of the employment termination date based on the assumed achievement of performance at the “target” level. |
3. | In either such case, the vested portion of the Award shall be paid within sixty (60) days following the employment termination date (unless a later date is required by Section 17.4 hereof). |
1. | Where less than one year had elapsed between the beginning of the applicable performance period and the employment termination date, a Non-Segmented Performance Award shall vest as of the employment termination date based on the assumed achievement of performance at the “target” level; and |
2. | Where one year or more has elapsed between the beginning of the applicable performance period and the employment termination date, a Non-Segmented Award shall vest based upon the level of actual Company performance measured through the end of the year immediately preceding the employment termination date. |
3. | In either such case, the vested portion of the Award shall be paid within sixty (60) days following the employment termination date (unless a later date is required by Section 17.4 hereof). |
(b) | Awards not Assumed or Substituted by Surviving Entity. Upon the occurrence of a Change in Control, and except with respect to any Awards assumed by the Surviving Entity or otherwise equitably converted or substituted in connection with the Change in Control in a manner approved by the Committee or the Board: |
(i) | outstanding Options or SARs shall become fully vested and exercisable as of the date of the Change in Control and shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Certificate; |
(ii) | time-based vesting restrictions on outstanding Awards shall lapse as of the date of the Change in Control; and |
(iii) | the level of performance achievement under outstanding Performance Awards shall be calculated as follows: |
1. | The portion of the Award that had been “banked” prior to the Change in Control based on the assessment of performance for a completed segment shall be fully vested as of the date of the Change in Control; and |
2. | The portion of the Award that relates to any segment that had not been completed, or for which performance had not been |
3. | In either such case, the vested portion of the Award shall be paid within sixty (60) days following the Change in Control (unless a later date is required by Section 17.4 hereof). |
1. | Where less than one year has elapsed between the beginning of the applicable performance period and the Change in Control, a Non-Segmented Performance Award shall vest as of the date of the Change in Control based on the assumed achievement of performance at the “target” level; and |
2. | Where one year or more has elapsed between the beginning of the applicable performance period and the Change in Control, a Non-Segmented Award shall vest as of the date of the Change in Control based upon the level of actual Company performance measured through the date of the Change in Control. |
3. | In either such case, the vested portion of the Award shall be paid within sixty (60) days following the Change in Control (unless a later date is required by Section 17.4 hereof). |
(a) | Awards issued under another Company plan prior to the approval by the Company’s shareowners of this Plan at the 2009 annual meeting of shareowners (e.g., under the Company’s Long-Term Incentive Compensation Plan, as amended and restated as of February 7, 2005), shall continue to be subject to the terms of such prior plan and the instruments evidencing such awards, unless otherwise specified in the Award Certificate. |
(b) | Subject to the terms of the applicable Award Certificate, no amendment, modification or termination shall, without the Participant’s consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination (with the per-share value of an Option or SAR for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment or termination over the exercise or base price of such Award); |
(c) | The original term of an Option or SAR may not be extended without the prior approval of the shareowners of the Company; |
(d) | Except as otherwise provided in Section 15.1, the exercise price of an Option or base price of a SAR may not be reduced, directly or |
(e) | No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant affected thereby. An outstanding Award shall not be deemed to be “adversely affected” by a Plan amendment if such amendment would not reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment (with the per-share value of an Option or SAR for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment over the exercise or base price of such Award). |
(a) | No Participant or any Eligible Participant shall have any claim to be granted any Award under the Plan. Neither the Company, its Affiliates nor the Committee is obligated to treat Participants or Eligible Participants uniformly, and determinations made under the Plan may be made by the Committee selectively among Eligible Participants who receive, or are eligible to receive, Awards (whether or not such Eligible Participants are similarly situated). |
(b) | Nothing in the Plan, any Award Certificate or any other document or statement made with respect to the Plan, shall interfere with or limit in any way the right of the Company or any Affiliate to terminate any Participant’s employment or status as an officer, or any Participant’s service as a director, at any time, nor confer upon any Participant any right to continue as an employee, officer, or director of the Company or any Affiliate, whether for the duration of a Participant’s Award or otherwise. |
(c) | Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company or any Affiliate and, accordingly, subject to Article 16, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company or an of its Affiliates. |
(d) | No Award gives a Participant any of the rights of a shareowner of the Company unless and until Shares are in fact issued to such person in connection with such Award. |
(a) | General. It is intended that the payments and benefits provided under the Plan and any Award shall either be exempt from the application of, or comply with, the requirements of Section 409A of the Code. The Plan and all Award Certificates shall be construed in a manner that effects such intent. Nevertheless, the tax treatment of the benefits provided under the Plan or any Award is not warranted or guaranteed. Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers (other than in his or her capacity as a Participant) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award. |
(b) | Definitional Restrictions. Notwithstanding anything in the Plan or in any Award Certificate to the contrary, to the extent that any amount or benefit that would constitute non-exempt “deferred compensation” |
(c) | Allocation among Possible Exemptions. If any one or more Awards granted under the Plan to a Participant could qualify for any separation pay exemption described in Treas. Reg. Section 1.409A-1(b)(9), but such Awards in the aggregate exceed the dollar limit permitted for the separation pay exemptions, the Company (acting through the Committee or the Head of Human Resources) shall determine which Awards or portions thereof will be subject to such exemptions. |
(d) | Six-Month Delay in Certain Circumstances. Notwithstanding anything in the Plan or in any Award Certificate to the contrary, if any amount or benefit that would constitute Non-Exempt Deferred Compensation would otherwise be payable or distributable under this Plan or any Award Certificate by reason of a Participant’s separation from service during a period in which the Participant is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Committee under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes): |
(e) | Installment Payments. If, pursuant to an Award, a Participant is entitled to a series of installment payments, such Participant’s right to the series of installment payments shall be treated as a right to a series of separate payments and not to a single payment. For purposes of the preceding sentence, the term “series of installment payments” has the meaning provided in Treas. Reg. Section 1.409A-2(b)(2)(iii) (or any successor thereto). |
(f) | Timing of Release of Claims. Whenever an Award conditions a payment or benefit on the Participant’s execution and non-revocation of a release of claims, such release must be executed and all revocation periods shall have expired within 60 days after the date of termination of the Participant’s employment; failing which such payment or benefit shall be forfeited. If such payment or benefit is exempt from Section 409A of the Code, the Company may elect to make or commence payment at any time during such 60-day period. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then, subject to subsection (c) above, (i) if such 60-day period begins and ends in a single calendar year, the Company may make or commence payment at any time during such period at its discretion, and (ii) if such 60-day period begins in one calendar year and ends in the next calendar year, the payment shall be made or commence during the second such calendar year (or any later date specified for such payment under the applicable Award), even if such signing and non-revocation of the release occur during the first such calendar year |
(g) | Permitted Acceleration. The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to Participants of deferred amounts, provided that such distribution(s) meets the requirements of Treas. Reg. Section 1.409A-3(j)(4). |
(a) | Notwithstanding any other provision of the Plan, no Participant who acquires Shares pursuant to the Plan may, during any period of time that such Participant is an affiliate of the Company (within the meaning of the rules and regulations of the Securities and Exchange Commission under the Securities Act), sell such Shares, unless such offer and sale is made (i) pursuant to an effective registration |
(b) | Notwithstanding any other provision of the Plan, if at any time the Committee shall determine that the registration, listing or qualification of the Shares covered by an Award upon any Exchange or under any foreign, federal, state or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Award or the purchase or receipt of Shares thereunder, no Shares may be purchased, delivered or received pursuant to such Award unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Committee. Any Participant receiving or purchasing Shares pursuant to an Award shall make such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing or any other applicable legal requirements. The Company shall not be required to issue or deliver any certificate or certificates for Shares under the Plan prior to the Committee’s determination that all related requirements have been fulfilled. The Company shall in no event be obligated to register any securities pursuant to the Securities Act or applicable state or foreign law or to take any other action in order to cause the issuance and delivery of such certificates to comply with any such law, regulation or requirement. |
1. | I have reviewed this quarterly report on Form 10-Q 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. |
May 3, 2019 |
/s/ Mark S. Sutton |
Mark S. Sutton |
Chairman of the Board and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q 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. |
May 3, 2019 |
/s/ Tim S. Nicholls |
Tim 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 of the Board and Chief Executive Officer |
May 3, 2019 |
/s/ Tim S. Nicholls |
Tim S. Nicholls |
Senior Vice President and Chief Financial Officer |
May 3, 2019 |
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