International Paper Company

Good morning and thank you for standing by. Welcome to today's international paper, fourth quarter and full year 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be the opportunity to ask questions. To ask a question, please press star one on your telephone keypad. To withdraw your question, press the pound key. I'd now like to turn today's conference over to Guillermo Gutierrez, Vice President of Investor Relations. Sir, you may begin.

Thank you, Angie. Good morning, and thank you for joining International Papers' fourth quarter and full year 2021 earnings call. Our speakers this morning are Mark Sutton, Chairman and Chief Executive Officer, and Tim Nichols, Senior Vice President and Chief Financial Advisor. There is important information at the beginning of our presentation on slide two, including certain legal disclaimers. For example, during this call, we will make forward-looking statements that are subject to risks and observes. We will also present certain non-U.S. GAAP financial information. A reconciliation of those figures to U.S. GAAP financial measures is also available on our website. Our website contains copies of the fourth quarter 2021 earnings press release and today's presentation slides. I would note that the printing papers business segment is now reflected as discontinued operations from 2019 to 2021. Lastly, relative to the ULM joint venture, slide two provides context around the joint venture's financial information and statistical measures. I will now turn the call over to Mark Sutton.

Thank you, Guillermo, and good morning, everyone. Thank you for joining our call. We will begin our discussion on slide three. In 2021, we serve a strong customer demand and a really highly challenging operating environment due to the continued uncertainties associated with COVID-19. I'm really proud and appreciative of the commitment of our employees to continue to take care of each other and to take care of our customers. Our employees' health and safety is our most important responsibility. Looking at our performance, international paper grew earnings and revenue while managing through significant operational and supply chain constraints. For much of 2021, we operated with a sub-optimized system, which limited our ability to capture the full opportunity that comes with a strong demand backdrop. We made strong progress on price realization from prior increases to mitigate the impact of substantial cost pressure from inputs and distribution. While we anticipate the near-term operating environment to remain fluid, we expect to grow earnings meaningfully in 2022. We are building a better IP. We're a corrugated packaging-focused company with less complexity and more focus. We've initiated meaningful actions to materially lower our cost structure and accelerate profitable growth. We have a strong balance sheet. We reduced debt by $2.5 billion in 2021. Our pension plan is fully funded, and we will invest to grow earnings and cash generation by building out capabilities and capacity in our U.S. box system over the next few years. We are also well-positioned to return meaningful cash to shareholders. In 2021, we returned $1.6 billion to shareholders, including about $800 million in share repurchases. Turning to the full year results on slide four, revenue for international paper increased by 10%, driven by strong price realization in our two business segments, and operating earnings improved by 50%. Operating margins were impacted by input, operating, and distribution costs, which outpaced price realization. Looking at segment performance, earnings in our packaging segment decreased by about $100 million year-over-year, with significant cost headwinds from fiber, energy, and distribution, while earnings in our cellulose fibers business improved by about $200 million, driven by commercial improvements and price recovery. Equity earnings were $313 million, driven by very strong performance from our Illum joint venture, which delivered EBITDA of $1.1 billion in 2021. Free cash flow was $1.5 billion. I would note that free cash flow included about $500 million in tax payments related to the various monetization actions that we took in 2021, as well as payroll tax payments related to the CARES Act. Turning now to slide five, revenue in the fourth quarter increased by about $650 million or 15% compared to last year. We delivered EBITDA of $645 million. Margins decreased primarily due to higher operating maintenance and input cost. This was partially offset by price realization. And I would note that input costs were higher than anticipated. Free cash flow in the fourth quarter was impacted by about $300 million in tax payments, again, related to the various monetization actions that we took throughout 2021 and the impact of the CARES Act. I'll now turn it over to Tim, who will cover business performance and our outlook. Tim?