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International Paper Reports Solid Third-Quarter Earnings

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MEMPHIS, Tenn., Oct. 28 /PRNewswire-FirstCall/ -- International Paper (NYSE: IP) today reported preliminary 2009 third-quarter net earnings attributable to common shareholders of $371 million ($0.87 per share) compared with $136 million ($0.32 per share) in the second quarter of 2009 and $149 million ($0.35 per share) in the third quarter of 2008. Amounts in all periods include special items.

            Diluted Earnings Per Share Attributable to International Paper
                                    Shareholders

                                     Third       Second      Third
                                    Quarter     Quarter     Quarter
                                      2009        2009        2008
                                    -------     -------     -------
    Net Earnings                     $0.87       $0.32       $0.35
                                     -----       -----       -----

    Add Back - Net Special
        Items Expense (Income)       (0.50)      (0.12)       0.49
                                     -----       -----        ----
    Earnings from Continuing
        Operations and Before        $0.37       $0.20       $0.84
        Special Items                =====       =====       =====


Earnings from continuing operations and before special items in the 2009 third quarter totaled $157 million ($0.37 per share), compared with $86 million ($0.20 per share) in the second quarter of 2009 and $356 million ($0.84 per share) in the third quarter of 2008.

Quarterly net sales were $5.9 billion in the third quarter compared with $5.8 billion in the second quarter of 2009 and $6.8 billion reported in the third quarter of 2008.

Operating profits in the 2009 third quarter were $940 million, up from $788 million in the second quarter of 2009 and $536 million in the third quarter of 2008.

At the end of the 2009 third quarter, International Paper had $4.2 billion in cash and committed liquidity facilities. The company generated $1.3 billion of free cash flow (cash provided by operations less capital expenditures) during the quarter, reflecting its continued focus on reducing costs, managing capacity and working capital, and continued reduced capital spending, as well as cash received from alternative fuel mixture credits. The company also repaid $1.3 billion of debt during the quarter.

"At the end of the third quarter, we began to see some modest improvements in demand in some segments of our paper and packaging businesses," said Chairman and CEO John Faraci. "We expanded margins year-over-year and continued to deliver strong cash flow and pay down debt, and I'm confident we're in position to benefit as the economy continues to slowly recover."

SEGMENT INFORMATION

To measure the performance of the company's business segments from quarter to quarter without variations caused by special or unusual items, management focuses on business segment operating profits excluding those items. Third-quarter 2009 segment operating profits and business trends, excluding special items, compared with the prior quarter are as follows:

Industrial Packaging operating profits were $214 million, down from $255 million in the second quarter of 2009 as lower annual maintenance outages and modest volume improvement were offset by lower box prices.

Printing Papers had operating profits of $138 million compared with operating profits of $86 million in the second quarter of 2009. Improved volume, lower input costs and favorable operations offset unfavorable mix as export sales increased.

Consumer Packaging had operating profits of $68 million, up from $38 million in the previous quarter as lower annual maintenance outages, modest volume improvements and favorable input costs and operations offset pricing pressure.

The company's distribution business, xpedx, reported operating profits of $21 million, up from $10 million in the previous quarter, due to improved volumes and cost reductions.

Forest Products operating profits totaled $2 million, down from $3 million in the second quarter of 2009. The pending sale of 143,000 acres is not expected to close in the fourth quarter of 2009 although interested parties are continuing their due diligence efforts.

Net corporate expenses totaled $46 million for the 2009 third quarter compared with $44 million in the 2009 second quarter and $40 million in the third quarter of 2008. The slight increase versus the 2009 second quarter was due to slightly higher pension expense, while the increase from the 2008 third quarter reflects higher pension expense, partially offset by lower supply chain initiative costs.

EFFECTIVE TAX RATE

The effective tax rate from continuing operations and before special items was 30 percent for the 2009 third quarter, lower than 33 percent in the second quarter of 2009 and 32.5 percent in the third quarter of 2008. The lower rate in the 2009 third quarter reflects adjustments of prior-year income tax estimates upon the filing of the company's 2008 income tax return.

EFFECTS OF SPECIAL ITEMS

Special items in the third quarter of 2009 included a $525 million pre-tax credit ($320 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 renewable energy to operate their businesses, 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 $151 million ($95 million after taxes) for restructuring and other charges. Restructuring and other charges included a pre-tax charge of $102 million ($62 million after taxes) for early debt extinguishment costs, a $39 million pre-tax charge ($24 million after taxes) for severance and benefit costs associated with the company's 2008 overhead reduction program, and a $10 million pre-tax charge ($9 million after taxes) for facility closure costs.

Special items in the second quarter of 2009 included a $482 million pre-tax credit ($294 million after taxes) for alternative fuel mixture credits, a $48 million before and after-tax charge to write down the assets of the Etienne mill in France to estimated fair value, an $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 carryforwards 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.

Special items in the third quarter of 2008 included a $107 million pre-tax charge ($84 million after taxes) to write down the assets of the Inverurie, Scotland, mill to its estimated fair value, a $155 million pre-tax charge ($96 million after taxes) for restructuring and other charges, a $3 million pre-tax credit ($2 million after taxes) for adjustments to estimated transaction costs accrued in connection with 2006 transformation plan forestland sales, and a $29 million income tax charge relating to estimated U.S. taxes on a gain in the company's Ilim joint venture.

EARNINGS WEBCAST

The company will hold a webcast to review earnings at 10 a.m. EDT / 9 a.m. CDT today. All interested parties are invited to listen to the webcast live 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 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 Third-Quarter Earnings Call. The conference ID number is 31381047. Participants should call in no later than 9:45 a.m. EDT/8:45 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 31381047.

About International Paper

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 approximately 58,000 people in more than 20 countries and serves customers worldwide. 2008 net sales were approximately $25 billion. For more information about International Paper, its products and stewardship efforts, visit www.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 Ended      Three Months Ended
                                September 30,               June 30
                                -------------
                            2009            2008              2009
                            ----            ----              ----
    Net Sales             $5,919          $6,808            $5,802
                          ------          ------            ------
    Costs and Expenses
      Cost of products
       sold                3,758    (a)    5,154    (d)      3,781    (i)
      Selling and
       administrative
       expenses              527    (b)      507    (e)        508    (j)
      Depreciation,
       amortization and
       cost of timber
       harvested             378             374               367
      Distribution expenses  299             376               279
      Taxes other than
       payroll and income
       taxes                  48              48                47
      Restructuring and other
       charges               151    (c)       97    (f)         79    (k)
      Gain on sale of
       mineral rights          -            (261)                -
      Forestland sales         -              (3)   (g)          -
      Net losses on sales and
       impairments of
       businesses              -             107    (h)         48    (l)
      Interest expense, net  169             144               173
                             ---             ---               ---
    Earnings From Continuing
     Operations Before
     Income Taxes and
     Equity Earnings         589    (a-c)    265    (d-h)      520    (i-l)
      Income tax provision   212             118               348    (m)
      Equity earnings
       (losses), net of taxes  -               5               (32)
                             ---             ---               ---
    Earnings From Continuing
     Operations              377    (a-c)    152    (d-h)      140    (i-m)
      Discontinued
       operations, net
       of taxes                -               -                 -
                             ---             ---               ---
    Net Earnings            $377    (a-c)   $152    (d-h)     $140    (i-m)
      Less: Net earnings
       attributable to
       noncontrolling
       interests               6               3                 4
                             ---             ---               ---
    Net Earnings
     Attributable to
     International
     Paper Company          $371    (a-c)   $149    (d-h)     $136    (i-m)
                            ====            ====              ====

    Basic Earnings Per
     Common Share
     Attributable to
     International Paper
     Common Shareholders
      Earnings from
       continuing
       operations          $0.87    (a-c)  $0.35    (d-h)    $0.32    (i-m)
      Discontinued
       operations              -               -                 -
                             ---             ---               ---
      Net earnings         $0.87    (a-c)  $0.35    (d-h)    $0.32    (i-m)
                           =====           =====             =====

    Diluted Earnings Per
     Common Share
     Attributable to
     International Paper
     Common Shareholders
      Earnings from
       continuing
       operations          $0.87    (a-c)  $0.35    (d-h)    $0.32    (i-m)
      Discontinued
       operations              -               -                 -
                             ---             ---               ---
      Net earnings         $0.87    (a-c)  $0.35    (d-h)    $0.32    (i-m)
                           =====           =====             =====

    Average Shares
     of Common Stock
     Outstanding -
     Diluted               428.7           423.4             425.4
                           =====           =====             =====
    Cash Dividends
     Per Common Share     $0.025           $0.25            $0.025
                          ======           =====            ======

    Amounts Attributable
     to International
     Paper Common
     Shareholders
      Earnings from
       continuing
       operations, net
       of tax               $371            $149              $136
      Discontinued
       operations, net
       of tax                  -               -                 -
                             ---             ---               ---
      Net Earnings          $371            $149              $136
                            ====            ====              ====



                                     Nine Months Ended
                                       September 30,
                                       -------------
                                2009                   2008
                                ----                   ----
    Net Sales                $17,389                $18,283
                             -------                -------
    Costs and Expenses
      Cost of products sold   11,270  (n)            13,720  (d)
      Selling and administrative
       expenses                1,535  (o)             1,438  (e)
      Depreciation,
       amortization and
       cost of timber
       harvested               1,088                    965
      Distribution expenses      857                    962
      Taxes other than payroll
       and income taxes          145                    136
      Restructuring and other
       charges                   313    (p)             152  (q)
      Gain on sale of mineral
       rights                      -                   (261)
      Forestland sales             -                     (6) (g)
      Net losses on sales and
       impairments of businesses  48  (l)               106  (h)
      Interest expense, net      506                    306
                                 ---                    ---
    Earnings From Continuing
     Operations Before Income
     Taxes and Equity Earnings 1,627    (l,n-p)         765  (d,e,g,h,q)
      Income tax provision       790    (m)             274
      Equity earnings (losses),
       net of taxes              (59)                    51
                                 ---                     --
    Earnings From Continuing
     Operations                  778    (l-p)           542  (d,e,g,h,q)
      Discontinued operations,
       net of taxes                -                    (18) (r)
                                 ---                    ---
    Net Earnings                $778    (l-p)           524
      Less: Net earnings
       attributable to
       noncontrolling
       interests                  14                     15
                                  --                     --
    Net Earnings Attributable
     to International
     Paper Company              $764    (l-p)           509  (d,e,g,h,q,r)
                                ====                   ====

    Basic Earnings Per
     Common Share Attributable
     to International Paper
     Common Shareholders
      Earnings from continuing
       operations              $1.80    (l-p)         $1.25  (d,e,g,h,q)
      Discontinued operations      -                  (0.04) (r)
                                 ---                  -----
      Net earnings             $1.80    (l-p)         $1.21  (d,e,g,h,q,r)
                               =====                  =====

    Diluted Earnings Per
     Common Share Attributable
     to International Paper
     Common Shareholders
      Earnings from continuing
       operations              $1.79    (l-p)         $1.24  (d,e,g,h,q)
      Discontinued operations      -                  (0.04) (r)
                                 ---                  -----
      Net earnings             $1.79    (l-p)         $1.20  (d,e,g,h,q,r)
                               =====                  =====

    Average Shares of Common
     Stock Outstanding -
     Diluted                   426.6                  424.2
                               =====                  =====
    Cash Dividends
     Per Common Share         $0.300                  $0.75
                              ======                  =====

    Amounts Attributable
     to International
     Paper Common
     Shareholders
      Earnings from continuing
       operations, net of tax   $764                  $527
      Discontinued operations,
       net of tax                  -                   (18)
                                 ---                   ---
      Net Earnings              $764                   509
                                ====                   ===


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


    (a)  Includes a pre-tax gain of $525 million ($320 million after taxes)
         related to alternative fuel mixture credits.

    (b)  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.

    (c)  Includes a pre-tax charge of $39 million ($24 million after taxes)
         for severance and benefit costs associated with the Company's 2008
         overhead cost reduction initiative, a pre-tax charge of $102 million
         ($62 million after taxes) for early debt extinguishment costs, a
         charge of $7 million (before and after taxes) for costs associated
         with the planned closure of the Etienne mill in France and a pre-tax
         charge of $3 million ($2 million after taxes) for other items.

    (d)  Includes a pre-tax charge of $39 million ($24 million after taxes)
         relating to the write-up of inventory to fair value in connection
         with the CBPR acquisition.

    (e)  Includes a pre-tax charge of $19 million ($12 million after taxes)
         for integration costs associated with the CBPR acquisition.

    (f)  Includes a pre-tax charge of $35 million ($22 million after taxes)
         for an adjustment to legal reserves, a pre-tax charge of $8 million
         ($5 million after taxes) for costs associated with the
         reorganization of the Company's Shorewood operations in Canada, a
         pre-tax charge of $53 million ($33 million after taxes) to write off
         deferred supply chain initiative development costs for U.S.
         container operations that will not be implemented due to the CBPR
         acquisition, and a pre-tax charge of $1 million ($0 million after
         taxes) for severance costs associated with the Company's
         Transformation Plan.

    (g)  Reflects adjustments of estimated transaction costs accrued in
         connection with the 2006 Transformation Plan forestland sales.

    (h)  Includes a pre-tax charge of $107 million ($84 million after taxes)
         to write down the assets at the Inverurie, Scotland mill to
         estimated fair value.

    (i)  Includes a pre-tax gain of $482 million ($294 million after taxes)
         related to alternative fuel mixture credits.

    (j)  Includes a pre-tax charge of $18 million ($11 million after taxes)
         for integration costs associated with the CBPR business.

    (k)  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.

    (l)  Includes a pre-tax charge of $48 million (before and after taxes)
         to write down the assets at the Etienne mill to estimated fair
         value.

    (m)  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.

    (n)  Includes a pre-tax gain of $1.5 billion ($944 million after taxes)
         related to alternative fuel mixture credits.

    (o)  Includes a pre-tax charge of $72 million ($44 million after taxes)
         for integration costs associated with the CBPR business.

    (p)  Includes a pre-tax charge of $125 million ($77 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 $127 million ($78
         million after taxes) for early debt extinguishment costs, a charge
         of $22 million (before and after taxes) for severance and other
         costs associated with the planned closure of the Etienne mill, and a
         pre-tax charge of $16 million ($10 million after taxes) for other
         items.

    (q)  Includes a $75 million pre-tax charge ($47 million after taxes) for
         adjustments to legal reserves, a pre-tax charge of $26 million ($17
         million after taxes) for costs associated with the reorganization of
         the Company's Shorewood operations in Canada , a pre-tax charge of
         $53 million ($33 million after taxes) to write off deferred supply
         chain initiative development costs for U.S. container operations
         that will not be implemented due to the CBPR acquisition, and a gain
         of $2 million (before and after taxes) for adjustments to previously
         recorded reserves and other charges associated with the Company's
         Transformation Plan.

    (r)  Includes a pre-tax charge of $25 million ($16 million after taxes)
         for the settlement of a post-closing adjustment on the sale of the
         beverage packaging business, and the operating results of certain
         wood products facilities.



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


                              Three Months      Three Months    Nine Months
                                 Ended             Ended           Ended
                              September 30,       June 30,     September 30,
                              -------------                    -------------
                               2009   2008          2009        2009   2008
                               ----   ----          ----        ----   ----

    Earnings Before Special
     Items                     $157   $356           $86        $277   $766

    Restructuring and other
     charges                    (95)   (84)          (55)       (215)  (119)
    CBPR business integration
     costs                      (11)   (12)          (11)        (44)   (12)
    Alternative fuel mixture
     credits                    320      -           294         944      -
    Forestland sales              -      2             -           -      4
    Net losses on sales and
     impairments of
     businesses                   -    (84)          (48)        (48)   (83)
    Income tax adjustments        -    (29)         (130)       (150)   (29)
                                ---    ---           ---         ---    ---
    Earnings from Continuing
     Operations                 371    149           136         764    527
    Discontinued operations       -      -             -           -    (18)
                                ---    ---           ---         ---    ---

    Net Earnings as Reported   $371   $149          $136        $764   $509
                               ====   ====          ====        ====   ====



                               Three Months     Three Months    Nine Months
                                  Ended            Ended           Ended
                               September 30,      June 30,     September 30,
                               -------------                   -------------
    Diluted Earnings per
     Common Share              2009   2008          2009        2009   2008
                               ----   ----          ----        ----   ----


    Earnings Per Share Before
     Special Items            $0.37  $0.84         $0.20       $0.65  $1.80


    Restructuring and other
     charges                  (0.22) (0.20)        (0.13)      (0.50) (0.28)
    CBPR business integration
     costs                    (0.03) (0.03)        (0.03)      (0.11) (0.03)
    Alternative fuel mixture
     credits                   0.75      -          0.69        2.21      -
    Forestland sales              -      -             -           -   0.01
    Net losses on sales and
     impairments of businesses    -  (0.20)        (0.11)      (0.11) (0.19)
    Income tax adjustments        -  (0.06)        (0.30)      (0.35) (0.07)
                                ---   -----        ------      ------ ------


    Earnings Per Common Share
     from Continuing
     Operations                0.87   0.35          0.32        1.79   1.24
    Discontinued operations       -      -             -           -  (0.04)
                                ---    ---           ---         ---  -----

    Diluted Earnings per
     Common Share             $0.87  $0.35         $0.32       $1.79  $1.20
                              =====  =====         =====       =====  =====

    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)  Diluted earnings per common share reflect the inclusion of
         contingently convertible securities in the computation.

    (3)  Since diluted earnings per share are computed independently for each
         period, nine-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
                                  September 30,                June 30,
                                  -------------
                             2009             2008               2009
                             ----             ----               ----
      Industrial Packaging $2,230           $2,320             $2,270
      Printing Papers       1,470            1,800              1,360
      Consumer Packaging      790              830                770
      Distribution          1,665            2,075              1,595
      Forest Products           5               55                 10
      Corporate and
       Inter-segment Sales   (241)            (272)              (203)
                             ----             ----               ----

      Net Sales            $5,919           $6,808             $5,802
                           ======           ======             ======


      Sales by Industry Segment
                                                    Nine Months
                                                      Ended
                                                   September 30,
                                                   -------------
                                               2009             2008
                                               ----             ----
      Industrial Packaging                   $6,680           $5,235
      Printing Papers                         4,155            5,305
      Consumer Packaging                      2,275            2,395
      Distribution                            4,850            6,030
      Forest Products                            20              135
      Corporate and Inter-segment Sales        (591)            (817)
                                               ----             ----

      Net Sales                             $17,389          $18,283
                                            =======          =======

      Operating Profit by
       Industry Segment
                                  Three Months              Three Months
                                      Ended                     Ended
                                  September 30,                June 30,
                                  -------------
                             2009             2008               2009
                             ----             ----               ----
      Industrial Packaging   $410  (2,3,4)     $95  (5)          $382 (2,3,4)
      Printing Papers         363    (2,6)     103  (7)           279   (2,6)
      Consumer Packaging      144    (2,8)      (2) (8)           114   (2,8)
      Distribution             21               35                 10
      Forest Products           2              305                  3
                              ---              ---                ---

      Operating Profit (1)    940              536                788

      Interest expense, net  (169)            (144)              (173)
      Noncontrolling
       interest/equity
       earnings adjustment (9)  5               (1)                 8
      Corporate items, net    (46)             (40)               (44)
      Restructuring and
       other charges         (141)             (89)               (59)
      Sale of forestlands       -                3                  -
      Net gains on sales and
       impairments of
       businesses               -                -                  -
                              ---              ---                ---

      Earnings From Continuing
       Operations Before
       Income Taxes and
       Equity Earnings       $589             $265               $520
                             ====             ====               ====


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





      Operating Profit by Industry Segment
                                                    Nine Months
                                                      Ended
                                                   September 30,
                                                   -------------
                                               2009             2008
                                               ----             ----
      Industrial Packaging                   $1,152  (2,3,4)    $279  (5)
      Printing Papers                           954    (2,6)     514  (7)
      Consumer Packaging                        370    (2,8)      20  (8)
      Distribution                               24               77
      Forest Products                             7              371
                                                ---              ---

      Operating Profit (1)                    2,507            1,261

      Interest expense, net                    (506)            (306)
      Noncontrolling interest/equity earnings
       adjustment (9)                            19               11
      Corporate items, net                     (141)             (82)
      Restructuring and other charges          (252)            (126)
      Sale of forestlands                         -                6
      Net gains on sales and impairments of
       businesses                                 -                1
                                                ---              ---

      Earnings From Continuing Operations
       Before Income Taxes and Equity
       Earnings                              $1,627             $765
                                             ======             ====


      Equity Earnings  (Loss) in Ilim
       Holdings S.A., Net of Taxes (1)         $(56)             $54
                                               ====              ===

    (1)  In addition to the operating profits shown above, International
         Paper recorded equity earnings, net of taxes, of $0 million for the
         three months ended September 30, 2009, equity losses, net of taxes,
         of $30 million for the three months ended June 30, 2009 and $56
         million for the nine months ended September 30, 2009, and equity
         earnings, net of taxes, of $5 million for the three months ended
         September 30, 2008 and $54 million for the nine months ended
         September 30, 2008, related to its equity investment in Ilim Holding
         S.A., a separate reportable industry segment.

    (2)  Includes gains of $221 million and $208 million in the Industrial
         Packaging segment, $226 million and $197 million in the Printing
         Papers segment, and $78 million and $77 million in the Consumer
         Packaging segment for the three months ended September 30, 2009 and
         June 30, 2009, respectively, and gains of $637 million in the
         Industrial Packaging segment, $663 million in the Printing Papers
         segment, and $247 million in the Consumer Packaging segment for the
         nine months ended September 30, 2009, relating to alternative fuel
         mixture credits.

    (3)  Includes charges of $18 million for both the three months ended
         September 30, 2009 and June 30, 2009, and $72 million for the nine
         months ended September 30, 2009, for CBPR integration costs.

    (4)  Includes charges of $7 million and $15 million for the three months
         ended September 30, 2009 and June 30, 2009, respectively, for
         severance and other costs related to the planned closure of the
         Etienne mill in France, and $48 million for the three months ended
         June 30, 2009 to write down the assets at the Etienne mill to
         estimated fair value.

    (5)  Includes a charge of $39 million relating to the write-up of
         inventory to fair value in connection with the CBPR acquisition, and
         a charge of $19 million for CBPR integration costs.

    (6)  Includes charges of $1 million and $4 million for the three months
         ended September 30, 2009 and June 30, 2009, and $11 million for the
         nine months ended September 30, 2009, for shutdown costs for the
         Louisiana mill and the Franklin lumber mill, sheet converting plant
         and converting innovations center, and a charge of $23 million for
         the nine months ended September 30, 2009 for the closure of the
         Inverurie, Scotland mill.

    (7)  Includes a charge of $107 million to write down the assets of the
         Inverurie, Scotland mill to estimated fair value.

    (8)  Includes charges of $2 million, $8 million, and $1 million for the
         three months ended September 30, 2009, September 30, 2008 and June
         30, 2009, respectively, and $5 million and $26 million for the nine
         months ended September 30, 2009 and 2008, 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
                               Sales Volume by Product (1) (2)
                                  Preliminary and Unaudited

    International Paper Consolidated

                               Three Months     Three Months   Nine Months
                                  Ended            Ended          Ended
                               September 30,      June 30,    September 30,
                               -------------                  -------------
                                2009  2008          2009        2009  2008
                                ----  ----          ----        ----  ----
    Industrial Packaging (In
     thousands of short tons)
      Corrugated Packaging (4) 1,856 1,641         1,899       5,531 3,419
      Containerboard (4)         580   686           530       1,581 1,686
      Recycling (4)              566   397           598       1,759   397
      Saturated Kraft             33    45            29          83   130
      Bleached Kraft              22    24            17          52    65
      European Industrial
       Packaging                 252   261           268         790   844
      Asian Industrial Packaging 200   154           139         427   443
                                 ---   ---           ---         ---   ---

        Industrial Packaging   3,509 3,208         3,480      10,223 6,984
                               ----- -----         -----      ------ -----

    Printing Papers (In
     thousands of short tons)
      U.S. Uncoated Papers       753   875           702       2,148 2,653
      European & Russian Uncoated
       Papers                    304   355           332       1,006 1,101
      Brazilian Uncoated Papers  282   217           234         696   638
      Asian Uncoated Papers       25     6            12          40    21
                                  --    --            --          --    --

        Uncoated Papers        1,364 1,453         1,280       3,890 4,413
                               ----- -----         -----       ----- -----
      Market Pulp (3)            422   448           375       1,114 1,218
                                 ---   ---           ---       ----- -----

    Consumer Packaging (In
     thousands of short tons)
      U.S. Coated Paperboard     324   403           318         932 1,202
      European Coated Paperboard  86    81            92         265   235
      Asian Coated Paperboard    221   138           218         628   386
      Other Consumer Packaging    42    48            42         130   136
                                  --    --            --         ---   ---

        Consumer Packaging       673   670           670       1,955 1,959
                                 ---   ---           ---       ----- -----


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

    (2) Sales volumes for divested businesses are included through the date
        of sale, except for discontinued operations.

    (3) Includes internal sales to mills.

    (4) Includes CBPR volumes from date of acquisition.




                            INTERNATIONAL PAPER COMPANY
                             Consolidated Balance Sheet
                             Preliminary and Unaudited
                                   (In Millions)

                                                   September 30, December 31,
                                                        2009         2008
                                                        ----         ----
    Assets

    Current Assets
      Cash and Temporary Investments                   $1,652       $1,144
      Accounts and Notes Receivable, Net                3,080        3,288
      Inventories                                       2,278        2,495
      Deferred Income Tax Assets                          207          261
      Other                                               300          172
                                                          ---          ---
        Total Current Assets                            7,517        7,360
                                                        -----        -----

    Plants, Properties and Equipment, Net              13,699       14,202
    Forestlands                                           749          594
    Investments                                         1,102        1,274
    Goodwill                                            2,288        2,027
    Deferred Charges and Other Assets                   1,326        1,456
                                                        -----        -----

    Total Assets                                      $26,681      $26,913
                                                      =======      =======

    Liabilities and Equity

    Current Liabilities
      Notes Payable and Current Maturities of
       Long-Term Debt                                    $369         $828
      Accounts Payable and Accrued Liabilities          3,947        3,927
                                                        -----        -----
        Total Current Liabilities                       4,316        4,755
                                                        -----        -----

    Long-Term Debt                                      9,253       11,246
    Deferred Income Taxes                               2,514        1,957
    Pension Benefit Obligation                          3,303        3,260
    Postretirement and Postemployment Benefit
     Obligation                                           632          663
    Other Liabilities                                     779          631

    Equity
      Invested Capital                                  3,583        2,739
      Retained Earnings                                 2,062        1,430
                                                        -----        -----
        Total Shareholders' Equity                      5,645        4,169
                                                        -----        -----

       Noncontrolling interests                           239          232
                                                          ---          ---
        Total Equity                                    5,884        4,401
                                                        -----        -----

    Total Liabilities and Equity                      $26,681      $26,913
                                                      =======      =======



                          INTERNATIONAL PAPER COMPANY
                     Consolidated Statement of Cash Flows
                           Preliminary and Unaudited
                                 (In Millions)

                                                          Nine Months Ended
                                                            September 30,
                                                            -------------
                                                             2009    2008
                                                             ----    ----
    Operating Activities
      Net earnings attributable to International Paper
       Company                                               $764    $509
      Noncontrolling interests                                 14      15
      Discontinued operations, net of taxes and noncontrolling
       interests                                                -      18
                                                              ---     ---
         Earnings from continuing operations                  778     542
      Depreciation, amortization and cost of timber
       harvested                                            1,088     965
      Deferred income tax expense (benefit), net              585     (51)
      Restructuring and other charges                         313     152
      Payments related to restructuring and legal reserves    (35)    (71)
      Net losses on sales and impairments of businesses        48     106
      Gains on sales of forestlands                             -      (3)
      Equity loss (earnings), net                              59     (51)
      Periodic pension expense, net                           160      89
      Alternative fuel mixture credits receivable            (251)      -
      Other, net                                              140      65
      Changes in current assets and liabilities
        Accounts and notes receivable                         466     (12)
        Inventories                                           262    (104)
        Accounts payable and accrued liabilities              (38)    255
        Interest payable                                       21     (12)
        Other                                                 (26)     86
                                                              ---      --
    Cash Provided by Operations                             3,570   1,956
                                                            -----   -----
    Investment Activities
      Invested in capital projects                           (367)   (732)
      Acquisitions, net of cash received                      (17) (6,086)
      Proceeds from divestitures                                -      14
      Equity investment in Ilim                                 -     (21)
      Other                                                   (59)   (147)
                                                              ---    ----
    Cash Used for Investment Activities                      (443) (6,972)
                                                             ----  ------
    Financing Activities
      Repurchases of common stock and payments of restricted
       stock tax withholding                                  (10)    (47)
      Issuance of common stock                                  -       1
      Issuance of debt                                      2,490   6,011
      Reduction of debt                                    (4,911)   (627)
      Change in book overdrafts                                (5)    (45)
      Dividends paid                                         (129)   (321)
      Other                                                  (113)    (69)
                                                             ----     ---
    Cash (Used for) Provided by Financing Activities       (2,678)  4,903
                                                           ------   -----
    Effect of Exchange Rate Changes on Cash                    59     (21)
                                                               --     ---
    Change in Cash and Temporary Investments                  508    (134)
    Cash and Temporary Investments
      Beginning of the period                               1,144     905
                                                            -----     ---
      End of the period                                    $1,652    $771
                                                           ======    ====

SOURCE International Paper

Media: Kathleen Bark, +1-901-419-4333, Investors: Thomas A. Cleves, +1-901-419-7566, or Emily Nix, +1-901-419-4987, all of International Paper