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BASIS OF PRESENTATION | 9 Months Ended
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Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
BASIS OF PRESENTATION | BASIS OF PRESENTATION On December 3, 2020, International Paper Company (“International Paper“ or “Parent”) announced that its Board of Directors had approved a plan to spin-off its Printing Papers segment along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia (collectively referred to herein as the “Company,” “we,” “us,” or “our”), and separate into two distinct publicly-traded companies. The accompanying condensed combined financial statements represent, on a historical cost basis, the combined assets, liabilities, revenue and expenses related to the Company as derived from the consolidated financial statements and accounting records of International Paper. On October 1, 2021, we settled the net parent investment and the spin-off was completed by a pro rata distribution to International Paper’s stockholders of approximately 80.1% of our common stock, with International Paper retaining a 19.9% ownership interest. Each holder of International Paper common stock received one share of our common stock for every 11 shares of International Paper common stock held at the close of business on September 15, 2021, the record date for the distribution. International Paper structured the distribution to be tax-free to its U.S. stockholders for U.S. federal income tax purposes. As a result of the spin-off, Sylvamo Corporation is now an independent public company trading on the New York Stock Exchange under the symbol “SLVM.” We historically operated as part of International Paper and not as a standalone company. These condensed combined financial statements reflect the historical financial position, results of operations and cash flows of the Company for the periods presented as the Company was historically managed within International Paper. The condensed combined financial statements have been prepared in United States (“U.S.”) dollars and in conformity with accounting principles generally accepted in the United States (‘‘U.S. GAAP’’). The condensed combined financial statements may not be indicative of the Company’s future performance and do not necessarily reflect what the results of operations, financial position and cash flows would have been had it operated as an independent company during the periods presented. The condensed combined statements of operations also include expense allocations for certain functions provided by International Paper, including, but not limited to general corporate expenses related to finance, legal, information technology, human resources, communications, insurance and stock-based compensation. These expenses have been allocated to the Company on the basis of direct usage when identifiable, with the remainder principally allocated on the basis of percent of capital employed, headcount or other measures. During the three months and nine months ended September 30, 2021 and 2020, the Company was allocated $35 million and $40 million, and $120 million and $118 million, respectively, of such general corporate expenses, which were included within cost of products sold and selling and administrative expenses in the condensed combined statements of operations. Management considers the basis on which the expenses have been allocated to reasonably reflect the utilization of services provided to or the benefit received by the Company during the periods presented. The allocations may not, however, reflect the expenses the Company would have incurred if the Company had been an independent company for the periods presented. Actual costs that may have been incurred if the Company had been an independent company would depend on several factors, including the organizational structure, whether functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. The Company is unable to determine what such costs would have been had the Company been independent. All intracompany transactions have been eliminated. Related party transactions between the Company and International Paper relating to general operating activities have been included in these condensed combined financial statements. These related party transactions historically settled in cash between the Company and International Paper have been reflected in the condensed combined balance sheets as “Related party receivable” or “Related party payable” with the aggregate net effect of these related party transactions reflected in the condensed combined statements of cash flows as either “Related party receivable” or “Related party payable” within operating activities. The aggregate net effect of transactions with International Paper not settled in cash, including corporate allocations, has been reflected in the condensed combined balance sheets as “Parent company investment” and in the condensed combined statements of cash flows as “Net transfers to Parent” within financing activities. In addition, certain of the Company’s Europe locations participated in International Paper’s centralized cash pooling arrangement. Amounts due from the cash pool were generally settled on a daily basis and have been reflected in the condensed combined balance sheets as “Related party receivable” with the aggregate net activity between the Company and International Paper reflected in the condensed combined statements of cash flows as “Cash pool arrangements with Parent” within investing activities. As of September 30, 2021, we no longer participate in International Paper’s centralized cash pooling arrangements. International Paper utilized a centralized approach to cash management and financing its operations. This arrangement is not reflective of the manner in which the Company would have been able to finance its operations had it been independent from International Paper. The cash and temporary investments held by International Paper at the corporate level were not specifically identifiable to the Company and therefore have not been reflected in the Company’s condensed combined balance sheets. Cash and temporary investments in the condensed combined balance sheets represent cash and temporary investments held locally by the Company. The condensed combined financial statements include certain assets and liabilities that were historically held at the International Paper corporate level but were specifically identifiable or otherwise attributable to the Company. International Paper’s third-party debt and the related interest expense have not been allocated to the Company for any of the periods presented as the Company was not the legal obligor of such debt. During the third quarter of 2021, we entered into a series of financing transactions under which we incurred $1.4 billion of long-term debt in conjunction with our spin-off from International Paper, consisting of two term loan facilities and “the 2029 Senior Notes”. On September 29, 2021, we borrowed an additional $100 million from our cash flow-based revolving credit facility. The proceeds of the debt were used primarily to fund a $1.52 billion special payment to International Paper on September 29, 2021 and pay related fees and expenses. The Company operates on a calendar year-end. COVID-19 On March 11, 2020, the World Health Organization (“WHO”) declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. Many of these restrictive measures have been lifted or reduced as the number of COVID-19 cases has declined in the United States and various other countries in comparison to earlier levels at the height of the pandemic, and economic conditions have improved. At the current time all of our facilities are open and operating. Demand for printing papers products, which account for the majority of our net sales, initially was significantly impacted by the pandemic, but has seen a steady increase over the first nine months of 2021. Our operations have experienced higher supply chain costs and constrained transportation due in part to the impacts of COVID-19. There continue to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the various economic reopening plans and the resurgence of new variants of the virus in many areas globally; additional actions that may be taken by governmental authorities and private businesses to attempt to contain the COVID-19 outbreak or to mitigate its impact; the efficacy and availability of various vaccines and associated levels of vaccination, as well as the possibility that strains of the virus may be resistant to current available vaccines; and the impact of COVID-19 on unemployment, economic activity and consumer confidence. COVID-19 significantly adversely affected our business as noted above, and could have a material adverse effect on our financial condition, results of operations and cash flows if public health and/or global economic conditions deteriorate.

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