International Paper Reports Significantly Improved Q2 Earnings

July 28, 2010 by timbercommunity

Solid Revenue Growth, Significant Margin Expansion, Strong Free Cash Flow
International Paper today reported preliminary second-quarter 2010 net earnings attributable to common shareholders totaling $93 million ($0.21 per share) compared with a net loss of $162 million ($0.38 per share) in the first quarter of 2010 and net earnings of $136 million ($0.32 per share) in the second quarter of 2009. Amounts in all periods include special items. "Each of our businesses posted strong results in the second quarter, leading to the significant increase in earnings per share and solid free cash flow," said John Faraci, chairman and chief executive officer. "Operating rates are strong, inventories are low, and input costs are moderating. All of these factors position us well for a stronger third quarter."
 

 
 

Diluted Earnings Per Share Attributable to International Paper
Shareholders
--------------------------------------------------------------

Second First Second
Quarter Quarter Quarter
2010 2010 2009
------- -------- -------
Net Earnings (Loss) $0.21 ($0.38) $0.32

Add Back - Net Special
Items Expense (Income) 0.21 0.42 (0.12)
---- ---- -----
Earnings Before Special
Items $0.42 $0.04 $0.20
===== ===== =====

Earnings before special items in the 2010 second quarter totaled $181 million ($0.42 per share), compared with $16 million ($0.04 per share) in the first quarter of 2010 and $86 million ($0.20 per share) in the second quarter of 2009.
Quarterly net sales were $6.1 billion compared with $5.8 billion in the first quarter of 2010 and $5.8 billion reported in the second quarter of 2009.
Operating profits in the second quarter were $353 million, up from $20 million in the first quarter of 2010. Both amounts reflect the inclusion of special items.
 
SEGMENT INFORMATION
To measure the performance of the company's business segments from quarter to quarter without variations caused by special items, management focuses on business segment operating profits excluding those items. Second quarter 2010 business segment operating profits and business trends compared with the prior quarter are as follows:
Industrial Packaging operating profits (excluding special items) increased to $193 million as compared with $46 million in the first quarter of 2010. Earnings improved mainly from increases in linerboard and North America box demand, fewer mill outages and further realization of announced price increases. Operating profits after special items were $192 million in the second quarter of 2010 compared with $41 million in the first quarter of 2010.
Printing Papers had an operating profit (excluding special items) of $158 million as compared with $126 million in the first quarter of 2010. Results were positively impacted by favorable pulp and paper pricing, and improved operations more than offsetting higher mill outage costs. Operating profits after special items were $47 million in the second quarter of 2010 compared with a loss of $78 million in the first quarter of 2010.
Consumer Packaging had an operating profit (excluding special items) of $49 million compared with $31 million in the first quarter of 2010. Results were positively impacted by higher volumes, further realization of announced coated paperboard price increases and stronger operations, partially offset by planned maintenance outages and relatively higher input costs. Operating profits after special items were $48 million in the second quarter of 2010 compared with $28 million in the first quarter of 2010.
The company's distribution business, xpedx, reported operating profits of $26 million, up from $21 million in the first quarter of 2010. The earnings improvement was primarily driven by stronger volumes, lower costs and improved margins. There were no special items recorded in either quarter.
Forest Products operating profits totaled $40 million, up from $8 million in the prior quarter due to a mineral rights sale. There were no special items recorded in either quarter.
Net corporate expenses totaled $54 million for the 2010 second quarter, essentially in line with the $51 million recorded in the 2010 first quarter.
EFFECTIVE TAX RATE
The effective tax rate before special items for the second quarter of 2010 was31 percent, compared with 32 percent in the first quarter of 2010. The tax rate in the second quarter of 2010 is representative of the forecasted annual effective tax rate.
EFFECTS OF SPECIAL ITEMS
Special items in the second quarter of 2010 included a pre-tax charge of $144 million ($88 million after taxes) for restructuring and other charges. Restructuring and other charges included a $111 million pre-tax charge ($68 million after taxes) associated with the closure of the Franklin mill (including $46 million of accelerated depreciation charges and $36 million related to environmental reserves), an $18 million pre-tax charge ($11 million after taxes) for early debt extinguishment costs, a pre-tax charge of $11 million ($7 million after taxes) for an Ohio Commercial Activity tax adjustment and pre-tax charges of $4 million ($2 million after taxes) for other items.
Special items in the first quarter of 2010 included a pre-tax charge of $215 million ($132 million after taxes) for restructuring and other charges and a $46 million after-tax expense to reduce deferred tax assets related to incentive compensation ($14 million) and post-retirement prescription drug coverage (Medicare Part D reimbursements) ($32 million). Restructuring and other charges included a $204 million pre-tax charge ($124 million after taxes) associated with the closure of the Franklin mill (including $190 million of accelerated depreciation), a $4 million pre-tax charge ($2 million after taxes) for early debt extinguishment costs, a $3 million pre-tax charge ($2 million after taxes) associated with the reorganization of the Company's Shorewood operations, and charges of $4 million (before and after taxes) for other items.
Special items in the second quarter of 2009 included a credit of $482 million before taxes ($294 million after taxes) for alternative fuel mixture credits earned under 2007 legislation enacted to provide a tax credit for companies that use alternative fuel mixtures to produce energy to operate their businesses, a $48 million before and after-tax charge to write down the assets of the Etienne mill in France to estimated fair value, a $18 million pre-tax charge ($11 million after taxes) for integration costs associated with the Industrial Packaging business integration, and a pre-tax charge of $79 million ($55 million after taxes) for restructuring and other charges. Restructuring and other charges included a $34 million charge before taxes ($21 million after taxes) for severance and benefit costs associated with the Company's 2008 overhead reduction program, a $25 million charge before taxes ($16 million after taxes) for early debt extinguishment costs, a $15 million before and after-tax charge for severance and other costs related to the Company's Etienne mill in France, and a $5 million charge before taxes ($3 million after taxes) for other closure costs. Additionally, the second-quarter income tax provision included a $156 million charge to establish a valuation allowance for net operating loss carry forwards in France, and a $26 million credit related to the closing of the 2004 and 2005 U.S. federal income tax audit and related state income tax effects.
EARNINGS WEBCAST
The company will host a webcast to discuss earnings and current market conditions at 9 a.m. EDT (8 a.m. CDT) today. All interested parties are invited to listen to the webcast via the company's Internet site at by clicking on the Investors tab and going to the Webcasts and Presentations page. A replay of the webcast will also be on the Web site beginning approximately two hours after the call. Parties who wish to participate in the webcast via teleconference may dial +1 (706) 679-8242 or, within the U.S. only, (877) 316-2541, and ask to be connected to the International Paper Second Quarter Earnings Call. The conference ID number is 82825401. Participants should call in no later than 8:45 a.m. EDT (7:45 a.m. CDT). An audio-only replay will be available for four weeks following the call. To access the replay, dial +1 (706) 645-9291 or, within the U.S. only, (800) 642-1687, and when prompted for the conference ID, enter "82825401."
International Paper (NYSE: IP) is a global paper and packaging company with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include uncoated papers and industrial and consumer packaging, complemented by xpedx, the company's North American distribution company. Headquartered in Memphis, Tenn., the company employs about 60,000 people in more than 20 countries and serves customers worldwide. 2009 net sales were more than $23 billion. For more information about International Paper, its products and stewardship efforts, visit internationalpaper.com.
This press release contains 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 relate to: (i) 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 its 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 environmental and other governmental regulations and to actual or potential litigation; and (v) whether we experience a material disruption at one of our manufacturing facilities and risks inherent in conducting business through a joint venture. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. 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.

International Paper Company
Consolidated Statement of Operations
Preliminary and Unaudited
(In millions, except per share amounts)

Three Months
Three Months Ended Ended
June 30, March 31,
--------
2010 2009 2010
---- ---- ----
Net Sales $6,121 $5,802 $5,807
------ ------ ------
Costs and Expenses
Cost of products
sold 4,490 3,781 (b) 4,464
Selling and
administrative
expenses 472 508 (c) 421
Depreciation,
amortization and
cost of timber
harvested 363 367 371
Distribution
expenses 330 279 317
Taxes other than
payroll and income
taxes 47 47 45
Restructuring and
other charges 144 (a) 79 (d) 215 (g)
Net losses on sales
and impairments of
businesses - 48 (e) -
Interest expense,
net 157 173 149
--- --- ---
Earnings (Loss) From
Continuing
Operations Before
Income Taxes and
Equity Earnings 118 (a) 520 (b-e) (175) (g)
Income tax provision
(benefit) 25 348 (f) (24) (h)
Equity earnings
(losses), net of
taxes 7 (32) (2)
--- --- ---
Net Earnings (Loss) $100 (a) $140 (b-f) $(153) (g,h)
Less: Net earnings
attributable to
noncontrolling
interests 7 4 9
--- --- ---
Net Earnings (Loss)
Attributable to
International Paper
Company $93 (a) $136 $(162) (g,h)
=== ==== =====

Basic Earnings
(Loss) Per Common
Share Attributable
to
International Paper
Common Shareholders $0.22 (a) $0.32 (b-f) $(0.38) (g,h)
===== ===== ======

Diluted Earnings
(Loss) Per Common
Share Attributable
to
International Paper
Common Shareholders $0.21 (a) $0.32 (b-f) $(0.38) (g,h)
===== ===== ======

Average Shares of
Common Stock
Outstanding -
Diluted 433.4 425.4 428.8
===== ===== =====
Cash Dividends Per
Common Share $0.125 $0.025 $0.025
====== ====== ======

Six Months Ended
June 30,
--------
2010 2009
Net Sales $11,928 $11,470
------- -------
Costs and Expenses
Cost of products sold 8,954 7,512 (j)
Selling and administrative
expenses 893 1,008 (k)
Depreciation, amortization and
cost of timber harvested 734 710
Distribution expenses 647 558
Taxes other than payroll and
income taxes 92 97
Restructuring and other charges 359 (i) 162 (l)
Net losses on sales and
impairments of businesses - 48 (e)
Interest expense, net 306 337
--- ---
Earnings (Loss) From Continuing
Operations Before Income Taxes
and
(e,j-
Equity Earnings (57) (i) 1,038 l)
Income tax provision (benefit) 1 (h) 578 (f)
Equity earnings (losses), net of
taxes 5 (59)
--- ---
(e,f,j-
Net Earnings (Loss) $(53) (h,i) $401 l)
Less: Net earnings attributable to
noncontrolling interests 16 8
--- ---
Net Earnings (Loss) Attributable (e,f,j-
to International Paper Company $(69) (h,i) $393 l)
==== ====

Basic Earnings (Loss) Per Common
Share Attributable to
International Paper Common (e,f,j-
Shareholders $(0.16) (h,i) $0.93 l)
====== =====

Diluted Earnings (Loss) Per Common
Share Attributable to
International Paper Common (e,f,j-
Shareholders $(0.16) (h,i) $0.93 l)
====== =====

Average Shares of Common Stock
Outstanding -Diluted 429.2 424.2
===== =====
Cash Dividends Per Common Share $0.150 $0.275
====== ======

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

(a) Includes a pre-tax charge of $111 million ($68 million after taxes)
for shutdown costs for the Franklin mill (including $46 million of
accelerated depreciation and $36 million of environmental closure costs),
a pre-tax charge of $18 million ($11 million after taxes) for
early debt extinguishment costs, a pre-tax charge of $11 million ($7
million after taxes) for an Ohio Commercial Activity tax adjustment and
charges of $4 million ($2 million after taxes) for
other items.
(b) Includes a pre-tax gain of $482 million ($294 million after taxes)
related to alternative fuel mixture credits.
(c) Includes a pre-tax charge of $18 million ($11 million after taxes)
for integration costs associated with the Containerboard, Packaging and
Recycling business (CBPR) acquired from Weyerhaeuser Company in August
2008.
(d) Includes a pre-tax charge of $34 million ($21 million after taxes)
for severance and benefit costs associated with the Company's 2008
overhead cost reduction initiative, a pre-tax charge of $25 million ($16
million after taxes) for early debt extinguishment costs, a charge of $15
million (before and after taxes) for severance and other costs associated
with the planned closure of the Etienne mill in France, and a pre-tax
charge of $5 million ($3 million after taxes) for other items.
(e) Includes a charge of $48 million (before and after taxes) to write
down the assets at the Etienne mill to estimated fair value.
(f) Includes a $156 million tax expense for the write off of deferred tax
assets in France and a $26 million tax benefit related to the closing of
the 2004 and 2005 U.S. federal income tax audit, and related state income
tax effects.
(g) Includes a pre-tax charge of $204 million ($124 million after taxes)
for shutdown costs for the Franklin mill (including $190 million of
accelerated depreciation), a pre-tax charge of $4 million ($2 million
after taxes) for early debt extinguishment costs, a pre-tax charge of
$3 million ($2 million after taxes) for costs associated with the
reorganization of the Company's Shorewood operations and charges of $4
million (before and after taxes) for other items.
(h) Includes a $14 million tax expense and a $32 million tax expense for
incentive compensation and Medicare Part D deferred tax write-offs,
respectively.
(i) Includes a pre-tax charge of $315 million ($192 million after taxes)
for shutdown costs for the Franklin mill (including $236 million of
accelerated depreciation and $36 million of environmental closure costs),
a pre-tax charge of $22 million ($13 million after taxes) for
early debt extinguishment costs, a pre-tax charge of $11 million ($7
million after taxes) for an Ohio Commercial Activity tax adjustment, a
pre-tax charge of $4 million ($2 million after taxes) for costs associated
with the reorganization of the Company's Shorewood operations and charges
of $7 million ($6 million after taxes) for other items.
(j) Includes a pre-tax gain of $1 billion ($624 million after taxes)
related to alternative fuel mixture credits.
(k) Includes a pre-tax charge of $54 million ($33 million after taxes)
for integration costs associated with the CBPR business.
(l) Includes a pre-tax charge of $86 million ($53 million after taxes)
for severance and benefit costs associated with the Company's 2008
overhead cost reduction initiative, a pre-tax charge of
$23 million ($28 million after taxes) for closure costs associated with
the Inverurie, Scotland mill, a pre-tax charge of $25 million ($16 million
after taxes) for early debt extinguishment costs, a charge of $15 million
(before and after taxes) for severance and other costs associated
with the Etienne mill, and a pre-tax charge of $13 million ($8 million
after taxes) for other items.

International Paper Company
Reconciliation of Earnings Before Special Items to Net Earnings
Attributable to International Paper Company
Preliminary and Unaudited
(In millions except for per share amounts)

Three Months Three Months Six Months
Ended Ended Ended
June 30, March 31, June 30,
-------- --------
2010 2009 2010 2010 2009
---- ---- ---- ---- ----

Earnings
Before
Special
Items $181 $86 $16 $197 $120

Restructuring
and other
charges (88) (55) (132) (220) (120)
CBPR
business
integration
costs - (11) - - (33)
Alternative
fuel
mixture
credits - 294 - - 624
Net losses
on sales
and
impairments
of
businesses - (48) - - (48)
Income tax
adjustments - (130) (46) (46) (150)

Net
Earnings
(Loss) as
Reported $93 $136 $(162) $(69) $393
=== ==== ===== ==== ====

Three Months Three Months Six Months
Ended Ended Ended
June 30, March 31, June 30,
-------- --------
Diluted
Earnings
per Common
Share 2010 2009 2010 2010 2009
---- ---- ---- ---- ----

Earnings
Per Share
Before
Special
Items $0.42 $0.20 $0.04 $0.46 $0.28

Restructuring
and other
charges (0.21) (0.13) (0.31) (0.51) (0.28)
CBPR
business
integration
costs - (0.03) - - (0.08)
Alternative
fuel
mixture
credits - 0.69 - - 1.47
Net losses
on sales
and
impairments
of
businesses - (0.11) - - (0.11)
Income tax
adjustments - (0.30) (0.11) (0.11) (0.35)

Diluted
Earnings
(Loss) per
Common
Share as
Reported $0.21 $0.32 $(0.38) $(0.16) $0.93
===== ===== ====== ====== =====

Notes:

(1) The Company calculates Earnings Before Special Items by excluding the
after-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) Since diluted earnings per share are computed independently for each
period, six-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
Ended Ended
June 30, March 31,
--------
2010 2009 2010
---- ---- ----
Industrial Packaging $2,440 $2,270 $2,220
Printing Papers 1,445 1,360 1,405
Consumer Packaging 845 770 805
Distribution 1,630 1,595 1,580
Forest Products 5 10 10
Corporate and Inter-
segment Sales (244) (203) (213)
---- ---- ----

Net Sales $6,121 $5,802 $5,807
====== ====== ======

Sales by Industry
Segment
Six Months
Ended
June 30,
--------
2010 2009
---- ----
Industrial Packaging $4,660 $4,450
Printing Papers 2,850 2,685
Consumer Packaging 1,650 1,485
Distribution 3,210 3,185
Forest Products 15 15
Corporate and Inter-
segment Sales (457) (350)
---- ----

Net Sales $11,928 $11,470
======= =======

Operating Profit by Industry Segment

Three Months Three Months
Ended Ended
June 30, March 31,
--------
2010 2009 2010
---- ---- ----
Industrial Packaging $192 (2) $382 (4,5,6) $41 (2)
Printing Papers 47 (3) 279 (4,7) (78) (3)
Consumer Packaging 48 (8) 114 (4,8) 28 (8)
Distribution 26 10 21
Forest Products 40 3 8
--- --- ---

Operating Profit (1) 353 788 20

Interest expense, net (157) (173) (149)
Noncontrolling interest/
equity earnings adjustment
(9) 7 8 8
Corporate items, net (54) (44) (51)
Restructuring and other
charges (31) (59) (3)
--- --- ---

Earnings (Loss) From
Continuing Operations
Before Income Taxes and
Equity Earnings $118 $520 $(175)
==== ==== =====

Equity Earnings (Loss) in
Ilim Holdings S.A.,
Net of Taxes (1) $5 $(30) $(3)
=== ==== ===

Six Months
Ended
June 30,
--------
2010 2009
---- ----
Industrial Packaging $233 (2) $742 (4,5,6)
Printing Papers (31) (3) 591 (4,7)
Consumer Packaging 76 (8) 226 (4,8)
Distribution 47 3
Forest Products 48 5
--- ---

Operating Profit (1) 373 1,567

Interest expense, net (306) (337)
Noncontrolling interest/
equity earnings adjustment
(9) 15 14
Corporate items, net (105) (95)
Restructuring and other
charges (34) (111)
--- ----

Earnings (Loss) From
Continuing Operations
Before Income Taxes and
Equity Earnings $(57) $1,038
==== ======

Equity Earnings (Loss) in
Ilim Holdings S.A.,
Net of Taxes (1) $2 $(56)
=== ====

(1) In addition to the operating profits shown above, International
Paper recorded equity earnings, net of taxes, of $5 million and $2
million for the three months and six months ended June 30, 2010,
respectively; and equity losses, net of taxes, of $30 million and $3
million for the three months ended June 30, 2009 and March 31, 2010,
respectively; and $56 million for the six months ended June 30,
2009, related to the equity investment in Ilim Holdings S.A., a
separate reportable industry segment.

(2) Includes charges of $1 million and $2 million for additional
closure costs for the Etienne mill in France for the three months
ended June 30, 2010 and March 31, 2010, respectively; and $3 million
of additional closure costs for U.S. mills for the three months
ended March 31, 2010.

(3) Includes charges of $111 million and $204 million for the three
months ended June 30, 2010 and March 31, 2010, respectively, for
shutdown costs for the Franklin mill.

(4) Includes gains of $208 million and $416 million in the Industrial
Packaging segment, $197 million and $437 million in the Printing
Papers segment, and $77 million and $169 million in the Consumer
Packaging segment relating to alternative fuel mixture credits for
the three months ended June 30, 2009 and the six months ended June
30, 2009, respectively.

(5) Includes charges of $48 million to write down the assets at the
Etienne mill in France to estimated fair value and $15 million for
severance and other costs related to the Etienne mill.

(6) Includes charges of $18 million and $54 million for the three and
six months ended June 30, 2009 respectively, for CBPR integration
costs.

(7) Includes charges of $4 million and $10 million for the three and
six months ended June 30, 2009 respectively, for shutdown costs for
the Louisiana mill and Franklin lumber mill, sheet converting plant
and converting innovations center and a charge of $23 million for
the six months ended June 30, 2009 for the closure of the Inverurie,
Scotland mill.

(8) Includes charges of $1 million, $1 million and $3 million for the
three months ended June 30, 2010, June 30, 2009 and March 31, 2010,
respectively; and $4 million and $3 million for the six months ended
June 30, 2010 and June 30, 2009, respectively, related to the
reorganization of the Company's Shorewood operations.

(9) 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 Segment Operating Profit to Segment Operating
Profit Before Special Items
(In millions)

Three Months Ended June 30, 2010
--------------------------------
Industrial Printing Consumer
Packaging Papers Packaging
--------- ------ ---------

Segment Operating Profit
as Reported 192 47 48

Restructuring and other
charges 1 111 1

Segment Operating Profit
Before Special Items 193 158 49
=== === ===

Three Months Ended June 30, 2010
--------------------------------
Forest
Distribution Products Total
------------ -------- -----

Segment Operating Profit
as Reported 26 40 353

Restructuring and other
charges - - 113

Segment Operating Profit
Before Special Items 26 40 466
=== === ===

Three Months Ended March 31, 2010
---------------------------------
Industrial Printing Consumer
Packaging Papers Packaging
--------- ------ ---------

Segment Operating Profit
as Reported 41 (78) 28

Restructuring and other
charges 5 204 3

Segment Operating Profit
Before Special Items 46 126 31
=== === ===

Three Months Ended March 31, 2010
---------------------------------
Forest
Distribution Products Total
------------ -------- -----

Segment Operating Profit
as Reported 21 8 20

Restructuring and other
charges - - 212

Segment Operating Profit
Before Special Items 21 8 232
=== === ===

International Paper Company
Sales Volume by Product (1)
Preliminary and Unaudited

International
Paper
Consolidated

Three
Three Months Months Six Months
Ended Ended Ended
June 30, March 31, June 30,
-------- --------
2010 2009 2010 2010 2009
---- ---- ---- ---- ----
Industrial
Packaging
(In
thousands of
short tons)
Corrugated
Packaging 1,956 1,899 1,809 3,765 3,675
Containerboard 602 530 631 1,233 1,001
Recycling 644 598 580 1,224 1,193
Saturated
Kraft 50 29 41 91 50
Bleached
Kraft 21 17 22 43 30
European
Industrial
Packaging 259 268 258 517 538
Asian
Industrial
Packaging 126 139 140 266 227
--- --- --- --- ---
Industrial
Packaging 3,658 3,480 3,481 7,139 6,714
----- ----- ----- ----- -----

Printing
Papers (In
thousands of
short tons)
U.S. Uncoated
Papers 667 702 700 1,367 1,395
European &
Russian
Uncoated
Papers 310 332 308 618 702
Brazilian
Uncoated
Papers 282 234 248 530 414
Asian
Uncoated
Papers 19 12 32 51 15
--- --- --- --- ---
Uncoated
Papers 1,278 1,280 1,288 2,566 2,526
----- ----- ----- ----- -----
Market Pulp
(2) 317 375 351 668 692
--- --- --- --- ---

Consumer
Packaging
(In
thousands of
short tons)
U.S. Coated
Paperboard 354 318 339 693 608
European
Coated
Paperboard 86 92 90 176 179
Asian Coated
Paperboard 217 218 221 438 407
Other
Consumer
Packaging 44 42 40 84 88
--- --- --- --- ---
Consumer
Packaging 701 670 690 1,391 1,282
--- --- --- ----- -----

(1) Sales volumes include third party and inter-segment sales and
exclude sales of equity investees.
(2) Includes internal sales to mills.

International Paper Company
Consolidated Balance Sheet
Preliminary and Unaudited
(In Millions)

June December
30, 31,
2010 2009
---- ----
Assets

Current Assets
Cash and Temporary Investments $1,871 $1,892
Accounts and Notes Receivable, Net 3,033 2,695
Inventories 2,212 2,179
Deferred Income Tax Assets 328 368
Other 285 417
--- ---
Total Current Assets 7,729 7,551
----- -----

Plants, Properties and Equipment,
Net 12,008 12,688
Forestlands 729 757
Investments 1,101 1,077
Goodwill 2,283 2,290
Deferred Charges and Other Assets 1,197 1,185
----- -----

Total Assets $25,047 $25,548
======= =======

Liabilities and Equity

Current Liabilities
Notes Payable and Current
Maturities of Long-Term Debt $357 $304
Accounts Payable and Accrued
Liabilities 3,809 3,708
----- -----
Total Current Liabilities 4,166 4,012
----- -----

Long-Term Debt 8,574 8,729
Deferred Income Taxes 2,355 2,425
Pension Benefit Obligation 2,772 2,765
Postretirement and Postemployment
Benefit Obligation 516 538
Other Liabilities 723 824

Equity
Invested Capital 3,881 4,074
Retained Earnings 1,812 1,949
----- -----
Total Shareholders' Equity 5,693 6,023
----- -----

Non-controlling interests 248 232
--- ---
Total Equity 5,941 6,255
----- -----

Total Liabilities and Equity $25,047 $25,548
======= =======

International Paper Company
Consolidated Statement of Cash Flows
Preliminary and Unaudited
(In Millions)

Six Months Ended
June 30,
--------
2010 2009
---- ----
Operating Activities
Net earnings (loss) $(53) $401
Depreciation, amortization and cost of timber
harvested 734 710
Deferred income tax expense (benefit), net 62 539
Restructuring and other charges 359 162
Payments related to restructuring and legal
reserves (2) (24)
Net losses on sales and impairments of businesses - 48
Equity (earnings) loss, net (5) 59
Periodic pension expense, net 116 107
Alternative fuel mixture credits receivable - (189)
Other, net (75) 107
Changes in current assets and liabilities
Accounts and notes receivable (324) 195
Inventories (111) 310
Accounts payable and accrued liabilities 43 (165)
Interest payable (8) (32)
Other 64 (39)
--- ---
Cash Provided by Operations 800 2,189
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Investment Activities
Invested in capital projects (273) (259)
Acquisitions, net of cash received (155) (8)
Other (32) (59)
--- ---
Cash Used for Investment Activities (460) (326)
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Financing Activities
Repurchases of common stock and payments of
restricted stock tax withholding (26) (10)
Issuance of common stock - -
Issuance of debt 166 1,476
Reduction of debt (309) (2,617)
Change in book overdrafts (35) (72)
Dividends paid (66) (118)
Other (22) (35)
--- ---
Cash Used for Financing Activities (292) (1,376)
Effect of Exchange Rate Changes on Cash (69) 23
--- ---
Change in Cash and Temporary Investments (21) 510
Cash and Temporary Investments
Beginning of the period 1,892 1,144
----- -----
End of the period $1,871 $1,654
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