International Paper Reports Fourth-Quarter and 2012 Earnings Record Cash Generation from Operations

Temple-Inland Acquisition Delivering Results

MEMPHIS, Tenn., Jan. 29, 2013 /PRNewswire/ -- International Paper (NYSE: IP) reported preliminary full-year 2012 net earnings attributable to common shareholders totaling $794 million ($1.80 per share) compared with $1.3 billion ($3.03 per share) in full-year 2011. In the fourth quarter of 2012, the company reported net earnings of $235 million ($0.53 per share) compared with $281 million ($0.65 per share) in the fourth quarter of 2011. Amounts in all periods include special items and non-operating pension expense.

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Diluted Earnings Per Share Attributable to International Paper Shareholders


Fourth
Quarter
2012

Fourth
Quarter
2011

Full
Year
2012

Full
Year
2011

Net Earnings

$0.53

$0.65

$1.80

$3.03

Less – Discontinued Operations Gain

(0.02)

-

(0.10)

(0.11)

Net Earnings from Continuing Operations

$0.51

$0.65

$1.70

$2.92

Add Back – Net Special Items Expense

0.11

0.07

0.69

0.14

Add Back – Non-Operating Pension Expense

0.07

0.01

0.26

0.06

Operating Earnings*

$0.69

$0.73

$2.65

$3.12






* Operating Earnings is defined as net earnings from continuing operations (GAAP) excluding special items and non-operating pension expense.

Full-year 2012 Operating Earnings were $1.2 billion ($2.65 per share) compared with $1.4 billion ($3.12 per share) in 2011. Operating Earnings in the fourth quarter of 2012 totaled $305 million ($0.69 per share) compared with $319 million ($0.73 per share) in the fourth quarter of 2011. 

Annual sales totaled $27.8 billion in 2012 compared with $26.0 billion in 2011.  Quarterly net sales were $7.1 billion in the fourth quarter compared with $6.4 billion in the fourth quarter of 2011.

Full-year 2012 business segment operating profits were $2.0 billion compared with $2.2 billion in 2011.  Business segment operating profits in the fourth quarter were $528 million compared with $577 million in 2011, both of which included special items.

"Our success capturing merger benefits from the Temple-Inland acquisition contributed to our fourth quarter results and IP's record cash generation from operations in 2012," said John Faraci, Chairman and Chief Executive Officer. "Given our runway levers and ability to execute, we are positioned to deliver a step-change in earnings as we move through 2013."

SEGMENT INFORMATION
The performance of the company's business segments are measured quarter to quarter without variations caused by special items, as management focuses on business segment operating profits excluding those items. Fourth quarter 2012 business segment operating profits and business trends compared with the prior quarter are as follows:

Industrial Packaging operating profits in the fourth quarter of 2012 were $368 million ($336 million including special items) compared with $342 million ($255 million including special items) in the third quarter of 2012. The profit increase in North America was the result of improved pricing, partially offset by higher planned outage-related maintenance expenses and input costs. Profits for the segment also benefited from seasonally higher sales volumes in Europe and an insurance settlement related to the earthquake that occurred in Northern Italy.

Printing Papers operating profits were $147 million (before and after special items) in the fourth quarter of 2012 versus $201 million ($202 million including special items) in the third quarter of 2012. North American operations were impacted by higher planned outage-related maintenance expenses, seasonally lower sales and lower average sales price for paper, particularly in export markets. Europe's results were stronger quarter over quarter mainly from lower planned maintenance expenses.

Consumer Packaging operating profits were $39 million ($41 million including special items) in the fourth quarter of 2012 compared with $67 million (before and after special items) in the third quarter of 2012. Earnings were impacted by higher outage-related maintenance expenses and lower average sales price primarily due to mix, along with cost associated with the start-up of the coated paper machine in China.

xpedx, the company's North American distribution business, reported operating profits of $11 million ($4 million including special items) in the fourth quarter of 2012 compared with $24 million ($15 million including special items) in the third quarter of 2012, reflecting higher operating expenses in the fourth quarter.

International Paper recorded Ilim joint venture equity earnings of $8 million in the fourth quarter of 2012, compared with equity earnings of $33 million in the third quarter of 2012. Fourth quarter results were lower as modestly higher average prices did not offset increases in input costs. In addition, the after-tax impact of favorable foreign exchange gains was $15 million less in the fourth quarter compared with the third quarter. The gains in both quarters were due to non-cash adjustments associated with the Ilim joint venture's U.S. dollar denominated debt.

Net corporate expenses, excluding non-operating pension expense, for the 2012 fourth quarter were $15 million compared with $1 million in the third quarter of 2012 and $20 million in the fourth quarter of 2011. 

Effective Tax Rate
The effective tax rate before special items for the fourth quarter of 2012 was 22 percent, compared with an effective tax rate before special items of 31 percent in the third quarter of 2012.  The lower rate in the 4th quarter is attributable to the release of a $29 million valuation allowance previously imposed on state income tax attributes which the Company now foresees utilizing.  The 2012 full year rate was 29 percent compared with 32 percent for the 2011 full year.

Effects of Special Items
Special items in the fourth quarter of 2012 included pre-tax charges of $21 million ($14 million after taxes) for restructuring and other charges, pre-tax charges of $28 million ($19 million after taxes) for integration costs related to the Temple-Inland acquisition, and a gain of $3 million (before and after taxes) for other items. Also included are a net tax expense of $14 million related to internal restructurings and a tax expense of $5 million to adjust deferred tax assets related to post-retirement prescription drug coverage (Medicare Part D reimbursements).  Restructuring and other charges included pre-tax charges of $9 million ($6 million after taxes) for debt extinguishment costs, pre-tax charges of $7 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, and pre-tax charges of $5 million ($4 million after taxes) for other items.

Special items in the third quarter of 2012 included pre-tax charges of $33 million ($24 million after taxes) for restructuring and other charges, pre-tax charges of $58 million ($34 million after taxes) for integration costs related to the Temple-Inland acquisition, and pre-tax charges of $19 million ($49 million after taxes) for costs associated with the divestiture of three containerboard mills. Restructuring and other charges included pre-tax charges of $13 million ($8 million after taxes) for debt extinguishment costs, pre-tax charges of $8 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, pre-tax charges of $16 million ($11 million after taxes) for costs associated with the restructuring of our Packaging business in Europe, and a net pre-tax gain of $4 million (a charge of $1 million after taxes) for other items.

Special items in the fourth quarter of 2011 included a pre-tax charge of $18 million ($13 million after taxes) for restructuring and other charges, a pre-tax gain of $4 million ($3 million after taxes) for an adjustment to the loss on the sale of our Shorewood business, a net tax expense of $22 million and charges of $6 million ($5 million after taxes) for other items. Restructuring and other charges included a pre-tax charge of $14 million ($11 million after taxes) for costs associated with the restructuring of our xpedx operations, pre-tax charges of $12 million ($7 million after taxes) for costs associated with the signing of an agreement to acquire Temple-Inland, and net pre-tax gains of $8 million ($5 million after taxes) for other items. The net tax expense of $22 million included a $24 million expense related to internal restructurings, a $9 million expense for costs associated with our acquisition of a majority interest in Andhra Pradesh Paper Mills Limited, a $13 million benefit related to the release of a deferred tax asset valuation allowance, and $2 million of expense for other items. In addition, a gain of $6 million (before and after taxes) was recorded for interest associated with a tax claim.

Discontinued Operations
Discontinued operations in both the fourth and third quarters of 2012 included the Operating Earnings of Temple-Inland's Building Products business. Also included are pre-tax charges of $13 million ($8 million after taxes) and $2 million ($1 million after taxes) in the fourth quarter of 2012 and the third quarter of 2012, respectively, for expenses associated with pursuing the divestiture of this business.

EARNINGS WEBCAST
The company will hold a webcast to review earnings at 9:00 a.m. EST / 8:00 a.m. CST today. All interested parties are invited to listen to the webcast live and view the slides to be presented at the webcast via the company's Internet site at http://www.internationalpaper.com by clicking on the Investors tab and going to the presentations page. A replay of the webcast will also be available beginning approximately two hours after the call. Parties in the U.S. who wish to participate in the webcast via teleconference may dial (877) 316-2541. Those outside the U.S. should dial +1 (706) 679-8242 and ask to be connected to the International Paper fourth-quarter and 2012 earnings call. The conference ID number is 82052223. Participants should call in no later than 8:45 a.m. EST/7:45 a.m. CST. An audio-only replay will be available for four weeks following the call. To access the replay, dial +1 (404) 537-3406 or, within the U.S. only, (855) 859-2056, and when prompted for the conference ID, enter 82052223.

International Paper (NYSE: IP) is a global leader in packaging and paper with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include industrial and consumer packaging and uncoated papers, complemented by xpedx, the company's North American distribution company. Headquartered in Memphis, Tenn., the company employs approximately 68,000 people and is strategically located in more than 24 countries serving customers worldwide. International Paper net sales for 2012 were $28 billion.  For more information about International Paper, its products and stewardship efforts, visit internationalpaper.com.

Certain statements in this press release may be considered forward-looking statements. These statements reflect management's current views and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Factors which could cause actual results to differ include but are not limited to: (i) the level of our indebtedness and increases in interest rates; (ii) industry conditions, including but not limited to changes in the cost or availability of raw materials, energy and transportation costs, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products; (iii) global economic conditions and political changes, including but not limited to the impairment of financial institutions, changes in currency exchange rates, credit ratings issued by recognized credit rating organizations, the amount of our future pension funding obligation, changes in tax laws and pension and health care costs; (iv) unanticipated expenditures related to the cost of compliance with existing and new environmental and other governmental regulations and to actual or potential litigation; (v) whether we experience a material disruption at one of our manufacturing facilities; (vi) risks inherent in conducting business through a joint venture; (vii) the failure to realize synergies and cost savings from the Temple-Inland transaction or delay in realization thereof; and (viii) our ability to achieve the benefits we expect from all other strategic acquisitions, divestitures and restructurings. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements are discussed in greater detail in the company's Securities and Exchange Commission filings. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

  















INTERNATIONAL PAPER COMPANY

 Consolidated Statement of Operations

Preliminary and Unaudited

(In millions, except per share amounts)































Three Months Ended



Three Months Ended


Twelve Months Ended




December 31,



September 30,


December 31,




2012


2011



2012


2012


2011


Net Sales


$   7,075


$   6,367



$   7,026



$ 27,833


$ 26,034


Costs and Expenses














  Cost of products sold


5,193


4,662

 (e) 


5,140

 (j) 


20,587

 (n) 

18,960

(r)

  Selling and administrative expenses


578

 (a) 

441



527

 (k) 


2,092

 (o) 

1,887


  Depreciation, amortization and cost of timber harvested


375


321



383



1,486


1,332


  Distribution expenses


413


337



403



1,611


1,390


  Taxes other than payroll and income taxes


42


35



39



166


146


  Restructuring and other charges


21

 (b) 

18

 (f) 


33

 (l) 


109

 (p) 

102

(s)

  Net (gains) losses on sales and impairments of businesses


(3)

 (c) 

(1)

 (g) 


18

 (m) 


86

 (q) 

218

(t)

  Interest expense, net


169


138

 (h) 


163



672


541

 (h) 

Earnings From Continuing Operations Before Income Taxes and














  Equity Earnings


287

 (a-c) 

416

 (e-h) 


320

 (j-m) 


1,024

 (n-q) 

1,458

(h,r-t)

  Income tax (benefit) provision


74

 (d) 

154

 (i) 


130



331

 (d) 

311

(u)

  Equity earnings (loss), net of taxes


9


23



34



61


140


Earnings From Continuing Operations 


222

 (a-d) 

285

 (e-i) 


224

 (j-m) 


754

 (d, n-q) 

1,287

(h, r-u)

  Discontinued operations, net of taxes 


10


-



14



45


49


Net Earnings  


$      232

 (a-d) 

$      285

 (e-i) 


$      238

 (j-m) 


$      799

 (d, n-q) 

$   1,336

(h, r-u)

  Less: Net earnings (loss) attributable to noncontrolling interests


(3)


4



1



5


14

(v)

Net Earnings Attributable to International Paper Company


$      235

 (a-d) 

$      281

 (e-i) 


$      237

 (j-m) 


$      794

 (d, n-q) 

$   1,322

(h, r-v)















Basic Earnings Per Common Share Attributable to International Paper Common Shareholders














  Earnings from continuing operations


$     0.52

 (a-d) 

$     0.65

 (e-i) 


$     0.51

 (j-m) 


$     1.72

 (d, n-q) 

$     2.95

(h, r-v)

  Discontinued operations 


0.02


-



0.03



0.10


0.11


  Net earnings


$     0.54

 (a-d) 

$     0.65

 (e-i) 


$     0.54

 (j-m) 


$     1.82

 (d, n-q) 

$     3.06

(h, r-v)















Diluted Earnings Per Common Share Attributable to














International Paper Common Shareholders














  Earnings from continuing operations


$     0.51

 (a-d) 

$     0.65

 (e-i) 


$     0.51

 (j-m) 


$     1.70

 (d, n-q) 

$     2.92

(h, r-v)

  Discontinued operations


0.02


-



0.03



0.10


0.11


  Net earnings  


$     0.53

 (a-d) 

$     0.65

 (e-i) 


$     0.54

 (j-m) 


$     1.80

 (d, n-q) 

$     3.03

(h, r-v)















Average Shares of Common Stock Outstanding - Diluted


441.5


436.3



439.8



440.2


437.0


Cash Dividends Per Common Share


$ 0.3000


$ 0.2625



$ 0.2625



$ 1.0875


$ 0.9750
















Amounts Attributable to International Paper Common Shareholders














  Earnings from continuing operations, net of tax


$      225

 (a-d) 

$      281

 (e-i) 


$      223

 (j-m) 


$      749

 (d, n-q) 

$   1,273

(h, r-v)

  Discontinued operations, net of tax


10


-



14



45


49


  Net Earnings 


$      235

 (a-d) 

$      281

 (e-i) 


$      237

 (j-m) 


$      794

 (d, n-q) 

$   1,322

(h, r-v)





























The accompanying notes are an integral part of this consolidated statement of operations.















(a)  Includes a pre-tax charge of $28 million ($19 million after taxes) for integration costs associated with the acquisition of Temple-Inland. 















(b)  Includes a  pre-tax charge of $9 million ($6 million after taxes) for debt extinguishment costs, a pre-tax charge of $7 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, and  pre-tax charges of $5 million ($4 million after taxes) for other items.















(c)  Includes a gain of $2 million (before and after taxes) for proceeds associated with the 2010 sale of the Arizona Chemical business, a gain of $2 million (before and after taxes) for the sale of the Company's Shorewood operations, and a charge of $1 million (before and after taxes) for costs associated with the containerboard mill divestitures.















(d)  Includes a net expense of $14 million related to internal restructurings and a $5 million expense to adjust deferred tax assets related to post-retirement prescription drug coverage (Medicare Part D reimbursements).















(e)  Includes a pre-tax charge of $3 million ($2 million after taxes) for an inventory write-off related to the xpedx reorganization.















(f)  Includes a pre-tax charge of $14 million ($11 million after taxes) for severance and other costs associated with the restructuring of the Company's xpedx operations, a pre-tax charge of $12 million ($7 million after taxes) for costs associated with the signing of an agreement to acquire Temple-Inland, a gain of $4 million (before and after taxes) for the reversal of a reserve related to an asset exchange in Brazil  in 2007, and net pre-tax gains of $4 million ($1 million after taxes) for other items.















(g)  Includes a pre-tax gain of $4 million ($3 million after taxes) for an adjustment to the previously recorded loss to reduce the carrying value of the Company's Shorewood business and a charge of $3 million (before and after taxes) for asset impairment charges at our Inverurie, Scotland mill which was closed in 2009.















(h)  Includes a gain of $6 million (before and after taxes) for interest associated with a tax claim.















(i)  Includes $24 million of expense related to internal restructurings, $9 million of expense for costs associated with our acquisition of a majority interest in Andhra Pradesh Paper Mills Limited, $13 million of benefit related to the release of a deferred tax asset valuation allowance, and $2 million of expense for other items.















(j)  Includes a charge of $1 million (before and after taxes) for an inventory write-off related to the xpedx reorganization.
















(k)  Includes a pre-tax charge of $58 million ($34 million after taxes) for integration costs associated with the acquisition of Temple-Inland. 















(l)  Includes a  pre-tax charge of $13 million ($8 million after taxes) for debt extinguishment costs, a pre-tax charge of $8 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, a pre-tax charge of $16 million ($11 million after taxes) for costs associated with the restructuring of the Company's Packaging business in Europe, and a pre-tax gain of $4 million (a loss of $1 million after taxes) for other items.



(m)  Includes a pre-tax charge of $19 million ($49 million after taxes) for costs associated with the containerboard mill divestitures and a gain of $1 million (before and after taxes) for other items.









(n)  Includes a pre-tax charge of $20 million ($12 million after taxes) related to the write-up of the Temple-Inland inventories to fair value and a charge of $5 million (before and after taxes) for an inventory write-off related to the xpedx reorganization.















(o)  Includes a pre-tax charge of $164 million ($108 million after taxes) for integration costs associated with the acquisition of Temple-Inland.















(p)  Includes a pre-tax charge of $48 million ($30 million after taxes) for debt extinguishment costs, a pre-tax charge of $44 million ($28 million after taxes) for costs associated with the restructuring of our xpedx operations, a pre-tax charge of $17 million ($12 million after taxes) for costs associated with the restructuring of the Company's Packaging business in Europe, and net pre-tax charges of $0 million ($4 million after taxes) for other items.















(q)  Includes a pre-tax charge of $62 million ($38 million after taxes) to adjust the long-lived assets of the Hueneme mill in Oxnard, California to their fair value in anticipation of its divestiture, a pre-tax charge of $29 million ($55 million after taxes) for costs associated with the containerboard mill divestitures, a gain of $2 million (before and after taxes) for proceeds associated with the 2010 sale of the Arizona Chemical business, a gain of $2 million (before and after taxes) for the sale of the Company's Shorewood operations, and a pre-tax gain of $1 million ($2 million after taxes) for other items.















(r)  Includes a pre-tax charge of $27 million ($17 million after taxes) for an environmental reserve related to the Company's property in Cass Lake, Minnesota and a pre-tax charge of $3 million ($2 million after taxes) for an inventory write-off related to the reorganization of the Company's xpedx business.















(s)  Includes a pre-tax charge of $49 million ($34 million after taxes) for severance and other costs associated with the restructuring of the Company's xpedx operations, a pre-tax charge of $32 million ($19 million after taxes) for early debt extinguishment costs, a pre-tax charge of $16 million ($10 million after taxes) for costs associated with the acquisition of a majority share of Andhra Pradesh Paper Mills Limited in India, a pre-tax charge of $20 million ($12 million after taxes) for costs associated with signing an agreement to acquire Temple-Inland, a pre-tax charge of $6 million ($4 million after taxes) for costs associated with the sale of the Company's Shorewood operations, a pre-tax gain of $21 million ($13 million after taxes) related to the reversal of environmental reserves due to the announced repurposing of a portion of the Franklin mill, a gain of $4 million (before and after taxes) for the reversal of a reserve related to an asset exchange in Brazil in 2007, and a charge of $4 million (before and after taxes) for other items. 















(t)  Includes a pre-tax charge of $129 million ($104 million after taxes) for a fixed-asset impairment of the North American Shorewood business, a pre-tax charge of $78 million (a gain of $143 million after taxes) to reduce the carrying value of the Shorewood business based on the terms of the definitive agreement to sell this business, and a charge of $11 million (before and after taxes) for asset impairment costs associated with the Inverurie, Scotland mill which was closed in 2009.















(u)  Includes $222 million of benefit related to the reduction of the carrying value of the Shorewood business and the write-off of a deferred tax liability associated with Shorewood, $24 million of expense related to internal restructurings, $9 million of expense for costs associated with our acquisition of a majority interest in Andhra Pradesh Paper Mills Limited, $13 million of benefit related to the release of a deferred tax asset valuation allowance, and $2 million of expense for other items.















(v)  Includes noncontrolling interest income of $8 million (before and after taxes) associated with the fixed asset impairment of Shorewood Mexico.

 

International Paper Company

Reconciliation of Operating Earnings to Net Earnings

Attributable to International Paper Company

Preliminary and Unaudited

(In millions except for per share amounts)
































Three Months Ended


Three Months Ended


Twelve Months Ended


December 31,


September 30,


December 31,


2012


2011


2012


2012


2011











Operating Earnings

$           305


$         319


$                   358


$        1,167


$        1,365











Non-Operating Pension

(31)


(7)


(28)


(113)


(29)

Restructuring and other charges

(33)


(15)


(59)


(199)


(85)

Net gains/(losses) on sales/impairments of businesses

3


-


(48)


(87)


36

Interest income

-


6




-


6

Income tax adjustments

(19)


(22)


-


(19)


(27)

Bargain purchase price adjustment recorded in equity earnings

-


-


-


-


7

Earnings from Continuing Operations

225


281


223


749


1,273

Discontinued operations

10


-


14


45


49











Net Earnings as Reported

$           235


$         281


$                   237


$           794


$        1,322






























































Three Months Ended


Three Months Ended


Twelve Months Ended


December 31,


September 30,


December 31,

Diluted Earnings per Common Share

2012


2011


2012


2012


2011





















Operating Earnings Per Share 

$          0.69


$        0.73


$                  0.81


$          2.65


$          3.12











Non-Operating Pension

(0.07)


(0.01)


(0.06)


(0.26)


(0.06)

Restructuring and other charges

(0.08)


(0.03)


(0.13)


(0.45)


(0.19)

Net gains/(losses) on sales/impairments of businesses

0.01


-


(0.11)


(0.20)


0.08

Interest income

-


0.01




-


0.01

Income tax adjustments

(0.04)


(0.05)


-


(0.04)


(0.06)

Bargain purchase price adjustment recorded in equity earnings

-


-


-


-


0.02

Diluted Earnings Per Common Share from 










  Continuing Operations

0.51


0.65


0.51


1.70


2.92

Discontinued operations

0.02


-


0.03


0.10


0.11











Diluted Earnings per Common Share as Reported

$          0.53


$        0.65


$                  0.54


$          1.80


$          3.03











Notes:











(1) The Company calculates Operating Earnings by excluding the after-tax effect of non-operating pension expense and items considered by management to be unusual from the earnings reported under U.S. generally accepted accounting principles ("GAAP"). Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. International Paper believes that using this information, along with net earnings, provides for a more complete analysis of the results of operations by quarter. Net earnings is the most directly comparable GAAP measure.











(2) Since diluted earnings per share are computed independently for each period, twelve-month per share amounts may not equal the sum of the respective quarters.











  


International Paper

Sales and Earnings by Industry Segment 

Preliminary and Unaudited

(In Millions)






















Sales by Industry Segment






















Three Months 




Three Months 



Twelve Months 







Ended




Ended



Ended







December 31,




September 30,



December 31,







2012



2011




2012



2012



2011



Industrial Packaging


$

3,380


$

2,510



$

3,335


$

13,280


$

10,430



Printing Papers



1,580



1,550




1,580



6,230



6,215



Consumer Packaging 



815



905




765



3,170



3,710



Distribution



1,530



1,625




1,535



6,040



6,630



Corporate and Inter-segment Sales



(230)



(223)




(189)



(887)



(951)























Net Sales


$

7,075


$

6,367



$

7,026


$

27,833


$

26,034











































Operating Profit by Industry Segment






















Three Months 




Three Months 



Twelve Months 







Ended




Ended



Ended







December 31,




September 30,



December 31,







2012



2011




2012



2012



2011



Industrial Packaging


$

336

(1)

$

306

(5)


$

255

(1)

$

1,066

(1)

$

1,147

(5)


Printing Papers



147



189

(6)



202

(2)


599

(2)


872

(6)


Consumer Packaging 



41

(3)


66

(7)



67



268

(3)


163

(7)


Distribution



4

(4)


16

(8)



15

(4)


22

(4)


34

(8)






















Operating Profit



528



577




539



1,955



2,216























Interest expense, net



(169)



(138)

(9)



(163)



(672)



(541)

(9)


Noncontrolling interest/equity earnings adjustment (10)



(8)



4




-



-



10



Corporate items, net



(15)



(20)




(1)



(51)



(102)



Restructuring and other charges



(11)



4




(15)



(51)



(82)



Net gains (losses) on sales and impairments of businesses



2



-




-



2



-



Non-operating pension expense



(40)



(11)




(40)



(159)



(43)































































Earnings From Continuing Operations  



















Before Income Taxes and Equity Earnings


$

287


$

416



$

320


$

1,024


$

1,458











































Equity Earnings in Ilim Holdings S.A., 



















Net of Taxes 


$

8


$

25



$

33


$

56


$

134






























































(1)

Includes charges of $28 million for the three months ended December 31, 2012, $58 million for the three months ended September 30, 2012 and $164 million for the twelve months ended December 31, 2012 for integration costs associated with the Temple-Inland acquisition, charges of $1 million for the three months ended December 31, 2012, $19 million for the three months ended September 30, 2012 and $29 million for the twelve months ended December 31, 2012 for costs associated with the divestiture of three containerboard mills, charges of $1 million for the three months ended December 31, 2012, $16 million for the three months ended September 30, 2012, and $17 million for the twelve months ended December 31, 2012 for costs associated with the restructuring of our Packaging business in Europe, a charge of $62 million for the twelve months ended December 31, 2012 to adjust the value of the long-lived assets of the Hueneme mill in Oxnard, California to their fair value, a charge of $20 million for the twelve months ended December 31, 2012 related to the write-up of the Temple-Inland inventory to fair value and a gain of $3 million for the twelve months ended December 31, 2012 for other items.





















(2)

Includes a gain of $1 million for the three months ended September 30, 2012, and a net gain of $0 million for the twelve months ended December 31, 2012 related to the acquisition of Andhra Pradesh Paper Mills Limited.





















(3)

Includes a gain of $2 million and a gain of $3 million for the three months and twelve months ended December 31, 2012, respectively, for adjustments related to the sale of the Shorewood business.





















(4)

Includes charges of $7 million for the three months ended December 31, 2012, $9 million for the three months ended September 30, 2012, and $49 million for the twelve months ended December 31, 2012 for costs associated with the restructuring of the Company's xpedx operation.





















(5)

Includes charges of $12 million for the three months ended December 31, 2011 and $20 million for the twelve months ended December 31, 2011 for costs associated with signing an agreement to acquire Temple-Inland, a gain of $2 million for the three months and twelve months ended December 31, 2011 for an adjustment to the Albany mill shutdown reserve, a gain of $7 million for the twelve months ended December 31, 2011 for a bargain purchase price adjustment on an acquisition by our joint venture in Turkey, and costs of $2 million for the twelve months ended December 31, 2011 for additional closure costs for the Etienne mill in France.





















(6)

Includes gains of $2 million for the three months ended December 31, 2011 and $24 million for the twelve months ended December 31, 2011 related to the repurposing of the Franklin mill, and charges of $3 million and $11 million for the three months and twelve months ended December 31, 2011, respectively, for asset impairment costs associated with the Inverurie mill.





















(7)

Includes a gain of $4 million for the three months ended December 31, 2011, and a charge of $78 million for the twelve months ended December 31, 2011 to reduce the carrying value of the Shorewood business to fair market value, a charge of $129 million for the twelve months ended December 31, 2011 for a fixed asset impairment for the North American Shorewood business, an $8 million gain for the twelve months ended December 31, 2011 for noncontrolling interest related to the fixed asset impairment at Shorewood Mexico, and a charge of $2 million for the twelve months ended December 31, 2011 for costs associated with the reorganization of the Company's Shorewood operations.





















(8)

Includes charges of $17 million for the three months ended December 31, 2011, and $52 million for the twelve months ended December 31, 2011 associated with the restructuring of the Company's xpedx operations.





















(9)

Includes a gain of $6 million for the three months and twelve months ended December 31, 2011 for interest associated with a tax claim.





















(10)

Operating profits for industry segments include each segment's percentage share of the profits of subsidiaries included in that segment that are less than wholly owned. The pre-tax noncontrolling interest and equity earnings for these subsidiaries are adjusted here to present consolidated earnings before income taxes and equity earnings.

  









International Paper Company

Reconciliation of Operating Profit to Operating Profit Before Special Items

(In millions)











Three Months Ended December 31, 2012




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$        368

$  147

$          39

$           11

$    565










Restructuring and other charges


(31)

-

-

(7)

(38)










Net gains (losses) on sales and impairments of businesses


(1)

-

2

-

1










Operating Profit as Reported


$        336

$  147

$          41

$             4

$    528




























Three Months Ended December 31, 2011




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$        316

$  190

$          62

$           33

$    601










Restructuring and other charges


(10)

2

-

(17)

(25)










Net gains (losses) on sales and impairments of businesses


-

(3)

4

-

1










Operating Profit as Reported


$        306

$  189

$          66

$           16

$    577




























Three Months Ended September 30, 2012




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$        342

$  201

$          67

$           24

$    634










Restructuring and other charges


(69)

1

-

(9)

(77)










Net gains (losses) on sales and impairments of businesses


(18)

-

-

-

(18)










Operating Profit as Reported


$        255

$  202

$          67

$           15

$    539




























Twelve Months Ended December 31, 2012




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$     1,355

$  599

$        265

$           71

$ 2,290










Restructuring and other charges


(198)

-

-

(49)

(247)










Net gains (losses) on sales and impairments of businesses


(91)

-

3

-

(88)










Operating Profit as Reported


$     1,066

$  599

$        268

$           22

$ 1,955




























Twelve Months Ended December 31, 2011




Industrial

Printing

Consumer






Packaging

Papers

Packaging

Distribution

Total










Operating Profit Before Special Items


$     1,160

$  859

$        364

$           86

$ 2,469










Restructuring and other charges


(20)

24

(2)

(52)

(50)










Net gains (losses) on sales and impairments of businesses


-

(11)

(199)

-

(210)










Bargain purchase price adjustment recorded in equity earnings


7

-

-

-

7










Operating Profit as Reported


$     1,147

$  872

$        163

$           34

$ 2,216


























(1) The Company calculates Operating Profit Before Special Items by excluding the pre-tax effect of items considered by management to be unusual from the earnings reported under U.S. generally accepted accounting principles ("GAAP"). Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. International Paper believes that using this information, along with net earnings, provides for a more complete analysis of the results of operations by quarter. Net earnings is the most directly comparable GAAP measure.









(2) The Company has substantially completed its land sales and earnings for future land sales are expected to be insignificant.  Beginning in 2011, Forest Products is no longer reported as a separate industry segment.

  
















International Paper

Sales Volume by Product (1)

Preliminary and Unaudited
















International Paper Consolidated 
































Three Months



 Three Months



Twelve Months





Ended



Ended



Ended





December 31,



September 30,



December 31,





2012


2011



2012



2012


2011

Industrial Packaging (In thousands of short tons)














Corrugated Packaging (2)


2,602


1,806



2,665



10,523


7,424


Containerboard (2)


828


582



823



3,228


2,371


Recycling 


595


575



620



2,349


2,435


Saturated Kraft


36


39



47



166


161


Gypsum/Release Kraft


38


-



37



127


-


Bleached Kraft


29


20



30



114


95


European Industrial Packaging


262


264



244



1,032


1,047


Asian Box 


103


107



108



410


444



Industrial Packaging


4,493


3,393



4,574



17,949


13,977
















Printing Papers (In thousands of short tons)














U.S. Uncoated Papers 


627


641



668



2,617


2,616


European & Russian Uncoated Papers


338


311



326



1,286


1,218


Brazilian Uncoated Papers


306


315



290



1,165


1,141


Indian Uncoated Papers (3)


61


49



59



246


49



Uncoated Papers 


1,332


1,316



1,343



5,314


5,024


Market Pulp (4)


438


358



414



1,593


1,410
















Consumer Packaging (In thousands of short tons)














North American Consumer Packaging


368


352



378



1,507


1,560


European Coated Paperboard


94


88



93



372


332


Asian Coated Paperboard


340


261



242



1,059


998



Consumer Packaging


802


701



713



2,938


2,890































(1)

Sales volumes include third party and inter-segment sales and exclude sales of equity investees.

(2)

Includes Temple-Inland volumes from date of acquisition in February 2012.

(3)

Includes APPM volumes from date of acquisition in October 2011.

(4)

Includes North American, European and Brazilian volumes and internal sales to mills.

  






INTERNATIONAL PAPER COMPANY

Consolidated Balance Sheet

Preliminary and Unaudited

(In Millions)






December 31,


December 31,


2012


2011

Assets








Current Assets




  Cash and Temporary Investments

$            1,302


$            3,994

  Accounts and Notes Receivable, Net

3,562


3,486

  Inventories

2,730


2,320

  Deferred Income Tax Assets

323


296

  Assets held for sale

759


196

  Other

229


164

    Total Current Assets

8,905


10,456





Plants, Properties and Equipment, Net

13,949


11,817

Forestlands

622


660

Investments 

887


657

Financial Assets of Special Purpose Entities

2,108


-

Goodwill

4,315


2,346

Deferred Charges and Other Assets

1,367


1,082





Total Assets

$          32,153


$          27,018





Liabilities and Equity








Current Liabilities




  Notes Payable and Current Maturities




   of Long-Term Debt

$               444


$               719

  Liabilities held for sale

44


43

  Accounts Payable and Accrued Liabilities

4,510


3,976

    Total Current Liabilities

4,998


4,738





Long-Term Debt

9,696


9,189

Nonrecourse Financial Liabilities of Special Purpose Entities

2,036


-

Deferred Income Taxes

3,026


2,497

Pension Benefit Obligation

4,115


2,375

Postretirement and Postemployment Benefit Obligation

466


476

Other Liabilities

1,180


758





Equity




  Invested Capital

2,642


3,290

  Retained Earnings

3,662


3,355

    Total Shareholders' Equity

6,304


6,645





   Noncontrolling interests

332


340

    Total Equity

6,636


6,985





Total Liabilities and Equity

$          32,153


$          27,018









  






INTERNATIONAL PAPER COMPANY

Consolidated Statement of Cash Flows

Preliminary and Unaudited

(In Millions)






Twelve Months Ended


December 31,


2012


2011

Operating Activities




  Net earnings

$    794


$ 1,322

  Discontinued operations, net of taxes and noncontrolling interests

(40)


(35)

  Earnings from continuing operations

$    754


$ 1,287

  Depreciation, amortization and cost of timber harvested

1,486


1,332

  Deferred income tax expense (benefit), net

211


317

  Restructuring and other charges

109


102

  Pension plan contribution

(44)


(300)

  Net losses on sales and impairments of businesses

86


218

  Equity (earnings) loss, net

(61)


(140)

  Periodic pension expense, net

342


195

  Other, net

(7)


169

  Changes in current assets and liabilities




    Accounts and notes receivable

377


(128)

    Inventories

(28)


(56)

    Accounts payable and accrued liabilities

(273)


(389)

    Interest payable

30


6

    Other

(22)


62

Cash provided by operations - Continuing Operations

2,960


2,675

Cash used for operations - Discontinued Operations

7


-

Cash Provided by Operations

2,967


2,675

Investment Activities




  Invested in capital projects - continuing operations

(1,383)


(1,159)

  Acquisitions, net of cash acquired

(3,734)


(379)

  Proceeds from divestitures

474


50

  Equity investment in Ilim

(45)


-

  Escrow arrangement

-


(25)

  Other     

(80)


26

Cash used for investment activities - Continuing Operations

(4,768)


(1,487)

Cash used for investment activities - Discontinued Operations

(90)


-

Cash Used for Investment Activities

(4,858)


(1,487)

Financing Activities




  Repurchases of common stock and payments of restricted stock tax withholding

(35)


(30)

  Issuance of common stock

108


-

  Issuance of debt

2,132


1,766

  Reduction of debt

(2,488)


(517)

  Change in book overdrafts

11


(29)

  Dividends paid

(476)


(427)

  Other  

(47)


(21)

Cash Provided by (Used for) Financing Activities

(795)


742

Effect of Exchange Rate Changes on Cash 

(6)


(9)

Change in Cash and Temporary Investments

(2,692)


1,921

Cash and Temporary Investments




  Beginning of the period

3,994


2,073

  End of the period

$ 1,302


$ 3,994





 

SOURCE International Paper



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