International Paper Company Annual Report 2014

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FY2014 Annual Report · International Paper Company

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2014 ANNUAL REPORT

OUR VISION

TO BE ONE OF THE

MOST RESPECTED AND

SUCCESSFUL COMPANIES

IN THE WORLD.

Visit the online version of this annual report at ipannualreport.com

GLOBAL PRESENCE

International Paper is a global leader in packaging and paper with manufacturing operations in North America, Latin America,

EMEA (Europe, the Middle East, Africa), Russia, India and Asia. Our businesses include industrial and consumer packaging,

uncoated papers and market and fluff pulp. Headquartered in Memphis, Tenn., we employ approximately 58,000 people and

are strategically located in more than 24 countries serving customers worldwide.

ILIM
JOINT VENTURE RUSSIA

SUN PAPER
JOINT VENTURE CHINA

$24B 58,000

NET SALES IN 2014

EMPLOYEES WORLDWIDE

COUNTRIES

NYSE:IP

NEW YORK
STOCK EXCHANGE

NORTH AMERICA$17.2B salesNORTH AMERICA$17.2B salesEMEA/RUSSIA$3.1B salesEMEA/RUSSIA$3.1B salesINDIA$0.2B salesINDIA$0.2B salesLATIN AMERICA$1.4B salesLATIN AMERICA$1.4B salesASIA$1.7B salesASIA$1.7B salesGLOBAL BUSINESS OVERVIEW

INDUSTRIAL PACKAGING

62%PERCENTAGE

OF TOTAL REVENUE

85%
NORTH AMERICA

9%
EMEA

2% LATIN
AMERICA

4% ASIA

International Paper is the world’s leading manufacturer of containerboard

and corrugated packaging. With fully aligned containerboard mills, box plants

and converting facilities, we’ve created a unique-to-the-industry platform

that provides the consistent high-quality, best-in-class reliability and total

cost solutions our customers need to meet their most challenging shipping,

storage and sales requirements. End uses for our products include corru-

gated boxes, bulk packaging, retail displays, specialty packaging and paper

bags. Our target market segments include food and beverage, fresh fruits

and vegetables, durables and nondurables and shipping and distribution.

International Paper’s industrial packaging footprint includes facilities in

North America, Latin America, Asia, and EMEA. Industrial packaging also

includes a recycling business with facilities across the United States and

Mexico. International Paper is one of North America’s largest recyclers and

recovers, processes or facilitates the sale of more than 6 million tons of

corrugated packaging and paper annually.

CONSUMER PACKAGING

14%PERCENTAGE

OF TOTAL REVENUE

58%
NORTH AMERICA

11%
EMEA/RUSSIA

31% ASIA

International Paper produces top-quality coated and uncoated paperboard

used by others in a wide variety of packaging and commercial printing

applications. End uses for our paperboard include packaging for food and

beverages, pharmaceuticals, cosmetics, candy, food items, tobacco prod-

ucts, and juice and milk cartons. Our products also are used in a wide range

of commercial printing applications, from greeting cards and direct mail to

book covers and lottery tickets. International Paper’s consumer packaging

footprint includes facilities in North America, EMEA/Russia and Asia. Under

the consumer packaging umbrella, the International Paper foodservice

business serves customers in segments such as quick-service restaurants,

specialty coffee, grocery, hospitality and distribution. Our hot cups, cold

cups, food containers and lids are manufactured in the United States, the

United Kingdom, China, and through a joint venture in Colombia.

PRINTING PAPERS

24%PERCENTAGE

OF TOTAL REVENUE

26%
EMEA/RUSSIA

19%
LATIN AMERICA

1% ASIA

3% INDIA

International Paper’s global papers businesses manufacture almost every

type of uncoated paper used in home offices, businesses and commercial

printing operations. From large commercial printing presses to small home

printers, people around the world rely on many of our signature paper

brands: Accent® Opaque, Ballet®, Chamex®, Hammermill®, POL™, Rey® and

Svetocopy®. We are also a premier source for converting papers with an

extensive portfolio of forms, filing and envelope papers as well as other

specialty uncoated papers for unique applications. International Paper also

produces market and fluff pulp that is used by other companies to produce

a wide range of absorbent hygiene, paper and tissue products used by

millions of consumers every day. Our papers and pulp footprint includes

facilities in North America, Latin America, EMEA/Russia, India and Asia.

35%
N.A. PAPERS

16%
N.A. PULP

LEADERSHIP

Leadership is integral to everything International Paper stands for—the way we operate our business, the way we serve

our customers, and the way we lead, develop and grow our people. Leadership is an essential element of our long-term

value creation strategy to be one of the best, most respected companies in the world. LEADERSHIP is the IP way.

SAFETY

PEOPLE

CUSTOMERS

OPERATIONAL EXCELLENCE

SUSTAINABILITY

FINANCIAL RESULTS

L E T T E R F R O M N E W C E O, M A R K S . S U T T O N
02

I AM PROUD OF THE OUTSTANDING

WORK OUR TEAM MEMBERS AROUND

THE WORLD ARE DOING EVERY DAY

TO ENABLE US TO REWARD OUR

SHAREHOLDERS AND PROVIDE VALUE

TO THE STAKEHOLDERS WE SERVE.

TO THE SHAREOWNERS AND
EMPLOYEES OF INTERNATIONAL PAPER

Let me begin by saying how honored I am to be International Paper’s new chairman and CEO. During my 30 years with

International Paper, I have personally experienced what a great company it is. Our long, rich 117-year history says a lot

about who we are, what we stand for and the enduring value of the fiber-based products we make. I am proud of the

outstanding work our team members around the world are doing every day to enable us to reward our shareholders and

provide value to the stakeholders we serve.

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
03

ABOUT MARK S. SUT TON

Mark Sutton became chairman of the board
of directors of International Paper on January
1, 2015, and CEO on November 1, 2014. Prior
to becoming CEO, he served as president
and chief operating officer (COO) responsible
for leading the company’s global businesses.
Sutton joined the company in 1984 in
Pineville, La., after earning his Bachelor of
Science degree in electrical engineering from
Louisiana State University. In 1995, he was
named mill manager at the Thilmany, Wis.,
mill before relocating to Europe in 2000, to
serve as director of European corrugated
packaging operations. He was subsequently
promoted in 2002, as vice president and
general manager for all corrugated packaging
operations across seven countries in Europe,
the Middle East and Africa. In 2005, he was
named vice president of corporate strategic
planning and relocated to Memphis, Tenn. He
became senior vice president, global supply
chain, in 2007 and in 2009, was named senior
vice president, printing and communications
papers & Latin America. Sutton was appointed
to senior vice president, industrial packaging,
the company’s largest business in 2011, prior
to being named president and COO.

MARK S. SUT TON
CHAIRMAN AND CHIEF E XECUTIVE OFFICER
INTERNATIONAL PAPER

NET SALES

(IN MILLIONS)

NET SALES 1 (IN MILLIONS)

25000

20000

15000

10000

5000

2500

2000

1500

1000

500

5000

4000

3000

2000

1000

2012

2013

2014

FREE CASH FLOW

(IN MILLIONS)

2012

2013

2014

EBITDA

2012

2013

2014

25,000

20,000

15,000

10,000

5,000

2,500

2,000

1,500

1,000

500

5,000

4,000

3,000

2,000

1,000

2012

2013

2014

FREE CASH FLOW 3 (IN MILLIONS)

2012

2013

2014

EBITDA 1, 3

2012

2013

2014

1 xpedx is reflected as a Discontinued Operation in all periods presented.
2 Includes F/X impact primarily related to Ilim JV USD-denominated net debt of

($0.63) in 2014 and ($0.07) in 2013.

3 Refer to financial highlights for reconciliation of non-GAAP financial measures.

$4,143$4,035$3,605$21,852$23,483$23,617$2,064$1,831$1,577EARNINGS PER SHARE

EARNINGS PER SHARE 1, 2, 3

3.5

2.8

2.1

1.4

0.7

0.0

2.0

1.6

1.2

0.8

0.4

0.0

2012

2013

2014

ANNUALIZED DIVIDEND

4Q12

4Q13

4Q14

3.50

2.80

2.10

1.40

0.70

2.00

1.60

1.20

0.80

0.40

2012

2013

2014

ANNUALIZED DIVIDEND

4Q12

4Q13

4Q14

CASH ALLOCATION STRATEGY

STRATEGICALLY

RETURN CASH

REINVEST

IN THE BUSINESS

SHAREOWNERS

MAINTAIN A

STRONG

BALANCE SHEET

$2.51$3.06$3.00$1.60$1.40$1.20L E T T E R F R O M N E W C E O, M A R K S . S U T T O N
04

Our transformation over the past decade has positioned us

As we look back, 2014 was a successful year for

well to compete successfully in global packaging, paper and

International Paper as we generated $2.1 billion of free

pulp markets. As the world around us changes, we must

cash flow, record cash from operations and record

remain agile and adapt to meet the evolving and emerging

earnings from our industrial packaging business. We

needs of our stakeholders. To be the industry leader we

completed the successful spin-off of our xpedx business,

want to be, International Paper has established six key

from which we received more than $400 million in cash

enterprise-wide priorities for 2015. I’d like to share these

payments. Our foodservice business and Ilim joint

priorities with you.

venture each generated record revenue and our global

papers business also posted much-improved year-over-

Our first priority is continuing to develop a culture where

year performance.

every team member is accountable for his or her own

safety, where team members lead by example and where

International Paper’s ability to generate strong, sustainable

they are appreciated for boldly intervening when they see

free cash flow provides the foundation for our ongoing

unsafe behavior or conditions. Second, we must generate

commitment to return cash to shareowners, strategically

strong, sustainable cash flow that allows us to strategically

reinvest in our businesses and maintain a strong balance

reinvest in our businesses, maintain a healthy balance

sheet. In 2014, we returned more cash to our shareowners

sheet and return cash to our shareowners.

with a 14 percent increase in our annual dividend and

bought back approximately $1 billion in shares.

Next, we must continue to build an even more diverse and

inclusive work environment that enables us to successfully

In April, we acquired the remaining 25 percent share of

compete for and retain the most talented employees

Orsa International Paper Embalagens S.A. in Brazil from

around the globe, which in turn, will lead to better overall

our joint venture partner. We are now in a position to fully

performance for the company. Also, to be the best, all of

optimize our system in alignment with our strategy to

our team members, including myself, must set stretch

selectively grow our industrial packaging business globally

goals that encourage us to think beyond business as usual.

in attractive markets. In North America, we broke ground

On the operations side, we must ramp up our manufactur-

on a 250,000 square foot expansion of our foodservice

ing excellence initiatives to generate deliberate, continuous

plant in Kenton, Ohio, and expect it to be operational in

and sustainable improvement and apply what we learn

mid-2015. The expansion supports our customers’ organic

across every area of the company. Finally, we must win with

growth in response to increasing consumer demand for

the right customers—those customers who are growing

renewable fiber-based packaging. We also announced an

profitably and want us to grow along with them. We must

investment to restart the idled No. 3 paper machine at our

go out of our way to delight them with our product quality,

Valliant, Okla., containerboard mill. The machine will provide

ability to innovate, customer service and day-to-day

greater flexibility in our North American containerboard

dependability.

system and enable us to grow in specialty markets and

through our international box system. The machine should

be production-ready by summer 2015.

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
05

Other recent investments continued to progress with

has been a true asset to our board. We welcomed new

excellent results. In 2014, our Ilim joint venture’s upgraded

board member Ray G. Young on October 1. Ray is executive

facilities in Russia continued operating at near full capacity

vice president and chief financial officer for Archer Daniels

to help meet growing, long-term demand for high-quality

Midland Company, one of the largest agricultural processors

low-cost softwood pulp in north and central China. Ilim

in the world. His broad based financial expertise, strategic

shareowners benefitted from solid results in 2014, as the

acumen and deep knowledge of international operations

Ilim board of directors elected to pay a dividend and

add a unique and valuable perspective to the International

International Paper received $56 million.

Paper board.

In Poland, International Paper began producing our new

I’m excited about 2015 and our investors, customers and

Alaska® Plus brand coated board on the rebuilt paper

team members should be as well. My commitment to you

machine at the Kwidzyn Mill. These new lightweight prod-

is this: as a market leader, International Paper, will continue

ucts have quickly gained popularity in the marketplace and

to maintain our relentless focus on execution, leadership

customers are realizing reduced costs and sustainability

and delivering value across our entire enterprise.

benefits.

Thank you for your continued support and ownership of

After more than 40 years of service and a decade of out-

International Paper.

standing leadership as chairman and CEO, John V. Faraci

retired on December 31. John led the transformation of

Sincerely,

International Paper from a diversified set of businesses into

the strategically focused, highly successful global packaging

and paper company it is today. His strategic vision, drive

for results and passion for doing the right things for the

right reasons, will have a lasting impact.

We would also like to thank John F. Turner, who retired from

International Paper’s board of directors on December 31,

Mark S. Sutton

following nearly a decade of distinguished service. John’s

Chairman and Chief Executive Officer

wealth of experience as a public servant and conservationist

International Paper

L E A D E R S H I P
06

SENIOR LEADERSHIP TEAM

ABOVE FROM LEF T TO RIGHT: THOMAS G. K ADIEN, W. MICHAEL AMICK, JR., C. CATO E ALY, JE AN-MICHEL RIBIER AS.
SE ATED LEF T TO RIGHT: MARK S. SUT TON, SHARON R. RYAN

BELOW FROM LEF T TO RIGHT: PAUL J. K ARRE (RETIRED) , WILLIAM P. HOEL, GLENN R. L ANDAU, TOMMY S. JOSEPH, JOHN V. FAR ACI (RETIRED) .
SE ATED LEF T TO RIGHT: CAROL L. ROBERTS, TIM S. NICHOLLS

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
07

OUR TRANSFORMATION OVER THE PAST DECADE HAS

POSITIONED US WELL TO COMPETE SUCCESSFULLY IN

GLOBAL PACKAGING, PAPER AND PULP MARKETS.

A LEGACY OF LEADERSHIP
JOHN FARACI, FORMER CHAIRMAN AND CEO

Following 40 years of dedicated service at International Paper, John V. Faraci retired earlier this year. John’s career

spanned a wide range of business positions, as well as management and executive roles, in geographies around the

globe. He served as our company’s president, executive vice president and chief financial officer, and then in 2003

was elected chairman and chief executive officer. John served as the leader of International Paper through 2014.

During the past decade, John was instrumental in making International Paper a stronger, better, more competitive

company—and also one with a strong culture of integrity, leadership, results and developing talent. He and his senior

leadership team successfully transformed the company by exiting all non-strategic businesses and focusing on packaging

and paper on a global scale.

Highlights of John’s leadership:

•

IP sold more than $11 billion in assets—six million

•

International Paper became a world leader in container-

acres of forest land, its Canadian lumber business,

board production and a major player in market pulp and

13 lumber mills, five wood products plants, European

coated paperboard. Total shareholder return was up

distribution, coated paper division, industrial papers,

approximately 150 percent over the past five years.

fine papers, kraft paper, our chemicals division and bev-

erage packaging.

•

International Paper was named by Fortune ® Magazine
as one of the America’s Most Admired Companies®,

•

International Paper reinvested the proceeds from those

making the list 12 times in 13 years, and this year was

asset sales by acquiring Weyerhaeuser’s industrial pack-

aging business and Temple Inland, which strengthen

named among the Ethisphere Institute’s World’s Most
Ethical Companies® for the ninth year in a row. IP also

IP’s existing operations and created a premier industrial

received awards in Europe, the Middle East, Africa,

packaging business. These moves now generate

Brazil and India. Personally, John was named RISI’s

strong sustainable free cash flow and above the cost-

CEO of the Year in 2014, and was recognized as one of

of-capital returns. Outside the U.S., IP invested in the

the best CEOs by Institutional Investor magazine.

Ilim joint venture in Russia, the Sun Paper joint venture

in China, and in paper and packaging businesses in

Brazil, India and Turkey.

JOHN FAR ACI
FORMER CHAIRMAN AND CHIEF E XECUTIVE OFFICER
INTERNATIONAL PAPER

P E O P L E
08

INVEST IN PEOPLE,

INVEST IN SUCCESS

LEADERS OF TOMORROW
INTERNATIONAL PAPER

The most important investment a company makes is in its people. People devise strategies and execute
decisions. People inspire, they form teams, collaborate, and support each other. Most important, they work
with customers to better understand their business, their needs, and how they can help them succeed.
At International Paper, our people lead.

Of our 58,000 employees, International Paper has
more than 5,000 leaders—first line leaders, plant man-
agers, managers in sales, process improvement,
safety, human resources, manufacturing, customer
service, IT, and senior leadership. Leadership at
International Paper is expected every day, at every
level of the organization. Leadership, however, is not
just about a position—it is an attitude and responsibil-
ity we expect all of our employees to embody. Our
simple and powerful model of leadership is called—
The IP Way.

Every person at IP is granted a “license to lead.” They
are free to take intelligent initiative to engage others in
achieving the best results. This means empowering
people to take on more responsibility and make deci-
sions that help IP win in a highly competitive global
business environment.

We also believe great leadership grows with increased
knowledge, skill and experience. This is why we
value—and are immensely proud of—the breadth and
tenure of our leadership team. In our executive
management team alone, we have an aggregate of

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
09

DIVERSITY AND INCLUSION
MATTERS

INTERNATIONAL PAPER IS
COMMITTED TO DIVERSITY
AND INCLUSION. WE KNOW
TEAMS OF PEOPLE WITH
DIFFERENT VIEWPOINTS
AND BACKGROUNDS, MAKE
BETTER DECISIONS AND
REACH HIGHER LEVELS
OF SUCCESS.

P E O P L E
10

LEADERSHIP BEGINS WITH

CHARACTER—DOING THE

RIGHT THINGS AND CAPABILITY—

DOING THINGS RIGHT.

more than 300 years of experience; our CEO and CFO
have 30 and 33 years of IP experience, respectively. We
change over the years, but we do so based on a strong
foundation of experience.

The central focus of our leadership model is to Engage
Employees in Exceeding Expectations. It is about a
person’s character, capability and ability to be a catalyst.
We believe leadership is ultimately about getting positive,
sustainable results, with a fully engaged team of employ-
ees. We know there are direct links between high
employee engagement and high levels of productivity,
reduced turnover, and improved safety performance.
Highly engaged employees build customer loyalty, improve
profitability, and sustain growth.

We develop our leaders to inform and engage our employees
so they are aligned in the mission of our company. We
build great leaders, and great leaders build great companies.

REACHING FOR STARS
Leadership begins at the beginning.

International Paper is always looking for new leaders, and
has a variety of development programs across businesses
and functions. One such program is REACH (Recruit
Engage Align College Hires). Our goal is to attract top-
notch engineers who have graduated within the past five
years. Rather than a dedicated training program, REACH
allows engineers to work at one of our manufacturing facil-
ities while also participating in a required core curriculum

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
11

of face-to-face and IP-sponsored virtual courses, as
well as “on-the-job” experiences that build technical and
leadership competencies.

We have similar programs for our finance, human resources
and supply chain professionals. We believe the development
of talent requires collaboration between the employee,
their supervisors, leadership, human resources and corpo-
rate departments, and that each of those groups plays a
key role in the employee’s success. Our employees can
have infinite career possibilities, depending on their capa-
bilities, interests and the needs of the company.

C U S T O M E R S
12

WE LISTEN TO OUR CUSTOMERS.

UNDERSTAND THEIR NEEDS

AND CHALLENGES.

THEN DEVELOP

SOLUTIONS.

OUR CUSTOMER FOCUS
INTERNATIONAL PAPER

Throughout our businesses and across the globe, International Paper has developed a wide range of tools,
programs, technology, and products designed to bring us closer to our customers, meet demanding and specific
needs, and forge exceptionally strong partnerships. In doing so, we strive to set new standards in customer
engagement and collaboration. Whether we are helping our customers ship fruit securely and cost-effectively,
or working with our office product distributors and retailers to better manage their inventory, marketing and
supply chain, International Paper dedicates people, expertise and resources to the daily challenges faced by our
customers everywhere.

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
13

EMBRACING SERVICE

WE ARE A COMPANY WITH A
LOCAL PRESENCE AND GLOBAL
REACH. WE BRING EXTENSIVE
TALENT AND PRACTICAL
INNOVATION TO PROBLEM
SOLVING, DELIVERING TOTAL,
EFFICIENT SOLUTIONS.

C U S T O M E R S
14

CHALLENGES. SOLUTIONS.

HARNESSING EXPERTISE,

RESOURCES AND INNOVATION

FOR OUR CUSTOMERS.

Every day our customers face complex challenges—some determine the difference between success and failure in a
tough competitive landscape. At International Paper, our success is linked to our customers’ success.

CHALLENGES, MEET SOLUTIONS.

Challenge: Our customers in the produce industry told us
they needed more secure, efficient, printable packaging
that provided exceptional protection to their products.

Solution: SecureStack®, a revolutionary family of packaging
products that allows for increased storage time, reduced
product damage and simplified packaging. Available in a
variety of styles, SecureStack allows customers to match a
specific box with the level and type of required protection.
The new design features superior pallet stability, optimal
cushioning and a high level of printability that allows for its
use as either attractive primary or secondary packaging.

Challenge: Worldwide demand soars for absorbent
hygiene products requiring soft and absorbent fluff pulp.

Solution: Leveraging the unique characteristics of southern
U.S. softwood—distinctive for its absorbent properties—
IP has invested more than $175 million over the past 10
years to expand its fluff pulp production. With more than
80 percent of the demand for fluff pulp located outside
North America, IP uses its global resource footprint to
provide customers with local expertise and solutions.

Challenge: With sales of cut-size paper essentially flat in a
key overseas market, a European office products supplier
is looking for new ways to grow sales.

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
15

Solution: International Paper puts together several cross-
functional teams focused on optimizing its supply chain
and inventory control, and also develops a training program
to better acquaint the customer’s sales force with IP’s
product line. The result: The EMEA region’s paper business
increased its cut-size paper sales to the customer by 30
percent and achieved an eight percent growth in value
added/high end products in 2014.

Challenge: How is IP leveraging technology to connect
with consumers and customers?

Solution: Print Hammermill™, a free mobile print app
developed by IP’s Hammermill Brand, allows documents
to be printed from any mobile device or tablet to any
WiFi printer. Since it launched last year, the highly-rated
app has been downloaded more than 275,000 times and
has been used to generate more than three million print
sessions. IP also introduced a mobile app of their paper
stock source book, allowing customers to view IP’s broad
breadth of paper stock items. In Brazil, IP has built an
online community of more than 100,000 fans around a
common love of paper through its “Adoro Papel” (I Love
Paper) blog and Facebook page.

BUILDING BRANDS WITH INNOVATION AND DEPENDABILITY

International Paper’s fast-growing Foodservice business,
whose primary products include hot and cold cups, lids, and
food containers, supports winning brands across key markets
including quick-serve restaurants, theaters, hospitality,
vending, supermarkets and convenience stores. We continue
to grow and strengthen solid supply relationships with
some of the best known names in the industry.

Our vertical integration—from coated paperboard to printing,
fabrication, and delivery—assures continuity of supply,
consistent quality and a wide variety of product offerings.

If you buy coffee to go, chances are you’ll be heading off
with one of our Hold&Go® insulated paper hot cups. Some
of our customers also use our compostable ecotainer®
cups, made from fully renewable resources.

In Brazil, where IP’s cut-size copy paper, Chamex® brand
enjoys unprecedented brand recognition, International
Paper provides full market studies to merchants, office
supply stores and distributors to improve sales, segmentation
and inventory management.

O P E R AT I O N A L E X C E L L E N C E
16

OPERATIONAL EXCELLENCE:

A MINDSET OF CONTINUOUS

AND DELIBERATE IMPROVEMENT

OPERATIONAL EXCELLENCE
INTERNATIONAL PAPER

International Paper leverages the vast experience and diversity of our employees to operate our global manufac-
turing system with excellence. Through our commitment to continuous and deliberate improvement, all of our
team members are working to make International Paper the best manufacturing company in the world.

International Paper operates 41 paper mills world-
wide. We have the best people in the industry and we
have always sought to operate our facilities efficiently,
safely and in a manner that minimizes impact on the
environment. That’s why our facilities are recognized
as among the best in the world.

Beginning in 2014, International Paper launched a new
organizational framework in facilities around the globe
to take our manufacturing performance to a new level.

Our Global Manufacturing System (GMS) is a carefully
selected set of our best practices organized into a single
system that every facility will implement over the next
three years. Once fully implemented, the GMS will
drive our results further and faster by leveraging the
efficiency of proven best practices and allow for more
sustainable change as we identify even better ways
of operating.

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
17

THE BEST. THE SAFEST.

INTERNATIONAL PAPER HAS
MADE GREAT STRIDES IN
SAFETY IMPROVEMENT. WHILE
WE’VE DONE QUITE WELL
REDUCING TOTAL INJURIES,
WE CONTINUE TO WORK
TO REDUCE SIGNIFICANT
INJURIES. WE WILL NOT BE
SATISFIED UNTIL EVERY ONE
OF OUR EMPLOYEES AROUND
THE WORLD GOES HOME
SAFELY, EVERY DAY.

O P E R AT I O N A L E X C E L L E N C E
18

ONE COMPANY, ONE STANDARD,

ONE SET OF EXPECTATIONS

PUTTING SAFETY FIRST

EVERY DAY, FOR EVERY

PERSON AND FOR

EVERY JOB

LIFE, at International Paper, means something more than

the obvious. LIFE stands for “life-changing injury and fatality

elimination,” and it’s our comprehensive, company-wide

program about taking safety performance to the next level

to eliminate the serious life-changing injuries and fatalities

that occur in our workplace.

Safety is at the forefront of everything we do. We safe-

guard our surroundings, but our key focus is safety leadership

and employee engagement. When we empower our

employees to make the right decisions and look to leaders

to set the right examples, we see the results of making

safety a core value at International Paper.

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
19

International Paper defines safety leadership as valuing

people, leading by example and empowering employees.

It is a fundamental competency of overall leadership in IP.

These are the critical components of safety leadership,

and are necessary in the development of a culture of

safety that puts the wellbeing of everyone in our facilities

above everything else.

Safety at IP is about creating a culture that refuses to accept

anything less than zero injuries. Across our enterprise, in

every facility, every day, we expect our employees to drive

that safety culture so that everyone can go home safely at

the end of the day. Because no pound of paper is worth an

injury, we take safety more seriously than anything we do.

S U S TA I N A B I L I T Y
20

SUSTAINABILITY IS IN OUR NATURE—

IT IMPACTS THE WAY WE VIEW AND

OPERATE OUR BUSINESS.

IN OUR NATURE
INTERNATIONAL PAPER

Sustainability is integral to International Paper’s vision of becoming one of the best and most respected companies
in the world. As the world’s largest user of wood fiber, our story begins in the forest and extends across the entire
life cycle of our products. Sustainability touches every aspect of our business, from our employees and communities
to our supply chain and manufacturing processes. We continuously strive to improve our efficiency and shrink
our environmental footprint. To that end, we created a set of 12 voluntary sustainability goals that address water use
and quality, fiber certification, employee safety, community involvement, solid waste, fiber efficiency, greenhouse
gas and air emissions, energy efficiency, recycling and supply chain. Through our 58,000 dedicated team members
worldwide, International Paper will continue to focus on generating deliberate, continuous and sustainable
improvement, and applying what we learn across every area of the company.

Globally, International Paper’s sustainability efforts
continue to evolve. Through a continuous review
process, we identify opportunities that make us better;
better at improving our environmental footprint, better
at supporting the communities where we live and
operate and better at ensuring the safety of our
employees.

Our initiatives also support our customers and our
shareholders by improving our financial performance
and mitigating risk; that’s good for everyone.

In 2014 our work with internal and external stakeholders
led us to focus on six key sustainability areas: safety,
forests and ecosystem services, water use in our

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
21

HEIGHTENED PRIORITIES

OUR 2020 SUSTAINABILITY
GOALS ADDRESS AREAS WE
HAVE PRIMARY CONTROL OVER
AND ARE MATERIAL TO OUR
GLOBAL OPERATIONS.

S U S TA I N A B I L I T Y
22

SUSTAINABILITY THROUGHOUT

OUR BUSINESS AND THE WORLD

operations, energy efficiency and greenhouse gas emis-
sions, ethics and compliance, and improving stakeholder
engagement. This focused list is far-from-exhaustive, but
it represents issues IP will focus upon to continuously
improve and maintain our leadership position.

• Safety. International Paper is an industry leader in
safety, but until we are injury-free, we will not be satis-
fied. Our initiatives, LIFE and safety leadership, will
drive us to our injury-free goal.

• Forest stewardship. Globally, International Paper is a
leader in this area. The demand for 71 million tons of
wood we use to make our products creates incentives
for landowners to replant and care for their land.

International Paper provides an economic incentive to
keep 30 million acres of land forested globally.

• Water use. Having mapped our global paper mill water
use, we are working to develop site specific plans at
priority facilities that address additional efficiencies
around water reuse and potential reduction.

• Energy efficiency and greenhouse gases. International
Paper continues to make steady progress toward our
goal to reduce the amount of purchased fossil fuel
energy we use and therefore significantly decrease our
greenhouse gas emissions (GHG). In 2014 our energy
efficiency increase of 6.1% resulted in part in a 8.3%
decrease in our overall GHG emissions.

I N T E R N AT I O N A L PA P E R 2 014 A NN U A L R E P O R T
23

• Ethics and compliance. As International Paper
continues to expand globally, we stay committed to
implement and strengthen our ethics programs
everywhere we operate.

• Stakeholder engagement. We believe engaging with
our key stakeholders, in a consistent and meaningful
way, is critical to understanding their needs and achiev-
ing success across our value-chain.

For the past 117 years, we have been a company rooted
in values and growing with purpose. That commitment
hasn’t changed. At International Paper we believe that
“Sustainability is In Our Nature.” To learn more about what
we are doing in this area, please visit ipsustainability.com.

R E C O G N I T I O N
24

AT INTERNATIONAL PAPER, WE

ARE PROUD OF THE HONORS AND

RECOGNITION WE HAVE RECEIVED.

RECOGNITION
INTERNATIONAL PAPER

THE FOLLOWING RECOGNITION SUPPORT OUR VISION TO BECOME ONE OF THE MOST RESPECTED AND
SUCCESSFUL COMPANIES IN THE WORLD.

Logo do’s and don’ts
Colors and Backgrounds

Do - use the WME logo in the provided colors of blue, white or black.

Do not - change the colors of the logo in any way

FORTUNE magazine named
International Paper as one
of “World’s Most Admired
Companies ® 2015” for the
12th time in the last 13 years.

Ethisphere Institute’s “World’s
Most Ethical Companies® 2015.”
IP made the list for the ninth
year in a row.

Institutional Investor “Most
Honored Company 2015” in
the Paper & Packaging Sector.
John Faraci and Carol Roberts
topped the list for Best CEO, CFO
respectively in the buy side and
sell side categories.

Corp Citizen CR Magazine
100 Best Corporate Citizens
List 2014—on the list for the
second consecutive year.

GUIA EXAME VOCÊ S.A. BEST
COMPANIES TO WORK FOR
2014. Named one of the 150 best
com panies to work for in Brazil
for the 9th time.

Indian Paper Manufacturers
Association (IPMA) Environment
Award 2013–2014 presented to the
Rajahmundry Mill for maintaining
high standards of environment
management.

FE2014

ETYCZNA
FIRMA

Puls Biznesu Daily, “Poland’s
Ethical Companies 2014.” Named
Kwidzyn Mill for the first year
of the initiative.

FINANCIAL HIGHLIGHTS

In millions, except per share amounts, at December 31

FINANCIAL SUMMARY
Net Sales
Operating Profit

Earnings from Continuing Operations Before Income Taxes
and Equity Earnings

Net Earnings
Net Earnings Attributable to Noncontrolling Interests
Net Earnings Attributable to International Paper Company
Total Assets
Total Shareholders’ Equity Attributable to International Paper Company

PER SHARE OF COMMON STOCK

Basic Earnings Per Share Attributable to International Paper
Company Common Shareholders
Diluted Earnings Per Share Attributable to International Paper
Company Common Shareholders

Cash Dividends
Total Shareholders’ Equity

SHAREHOLDER PROFILE
Shareholders of Record at December 31
Shares Outstanding at December 31
Average Common Shares Outstanding
Average Common Shares Outstanding—Assuming Dilution

2014

2013

$ 23,617

2,058(a)

$ 23,483

2,233(a)

872(b)
536(b,c)
(19)
555(b,c)

28,684
5,115

1,228(d)
1,378(d,e)
(17)
1,395(d,e)

31,528
8,105

$ 1.30(b,c)

$ 3.15(d,e)

$ 1.29(b,c)
1.4500
12.18

$ 3.11(d,e)
1.2500
18.57

13,351
420.1
427.7
432.0

14,169
436.3
443.3
448.1

(a) See the reconciliation of net earnings (loss) attributable to International Paper Company to its total industry segment operating profit on page 21 and the

operating profit table on page 85 for details of operating profit by industry segment.

(b) Includes restructuring and other charges of $846 million before taxes ($518 million after taxes) including pre-tax charges of $276 million ($169 million after
taxes) for early debt extinguishment costs, pre-tax charges of $554 million ($338 million after taxes) for costs associated with the shutdown of our
Courtland, Alabama mill and a net pre-tax charge of $16 million ($11 million after taxes) for other items. Also included are a pre-tax charge of $47 million
($36 million after taxes) for a loss on the sale of a business by ASG in which we hold an investment and the subsequent partial impairment of our ASG
investment, a goodwill impairment charge of $100 million (before and after taxes) related to our Asia Industrial Packaging business, pre-tax charges of $35
million ($21 million after taxes) for a multi-employer pension withdrawal liability, a pre-tax charge of $32 million ($17 million after taxes) for costs associated
with a foreign tax amnesty program, a gain of $20 million (before and after taxes) for the resolution of a legal contingency in India, pre-tax charges of $16
million ($10 million after taxes) for costs associated with the integration of Temple-Inland, and a net gain of $4 million ($2 million after taxes) for other items.
(c) Includes a tax benefit of $90 million related to internal restructurings and a net tax expense of $9 million for other items. Also includes the operating earn-
ings of the xpedx business through the date of the spin-off on July 1, 2014, net pre-tax charges of $24 million ($16 million after taxes) for costs associated
with the spin-off of the xpedx business, pre-tax charges of $1 million (a gain of $1 million after taxes) for costs associated with the restructuring of xpedx
and pre-tax charges of $16 million ($9 million after taxes) for costs associated with the Building Products divestiture.

(d) Includes restructuring and other charges of $156 million before taxes ($98 million after taxes) including pre-tax charges of $25 million ($16 million after
taxes) for early debt extinguishment costs, pre-tax charges of $118 million ($72 million after taxes) for costs associated with the shutdown of our
Courtland, Alabama mill, a pre-tax gain of $30 million ($19 million after taxes) for insurance reimbursements related to the 2012 Guaranty Bank legal set-
tlement, a pre-tax charge of $45 million ($28 million after taxes) for costs associated with the permanent shutdown of a paper machine at our Augusta,
Georgia mill, and a net pre-tax gain of $2 million (a loss of $1 million after taxes) for other items. Also included are a pre-tax goodwill and trade name
intangible asset impairment of $127 million ($122 million after taxes) related to our India Papers business, pre-tax charges of $9 million ($5 million after
taxes) to adjust the value of two Company airplanes to fair value, pre-tax charges of $62 million ($38 million after taxes) for integration costs associated
with the acquisition of Temple-Inland, pre-tax charges of $6 million ($4 million after taxes) for an environmental reserve related to the Company’s property
in Cass Lake, Minnesota, and a gain of $13 million (before and after taxes) related to a bargain purchase adjustment on the acquisition of a majority share
of our operations in Turkey.

(e) Includes a tax benefit of $744 million associated with the closings of U.S. federal tax audits, a tax benefit of $31 million for an income tax reserve release
and a net tax loss of $1 million for other items. Also includes the operating results of the xpedx business for the full year and the Temple-Inland Building
Products business through the date of sale in July 2013, pre-tax charges of $32 million ($19 million after taxes) for costs associated with the restructuring
of the Company’s xpedx operations, pre-tax charges of $22 million ($14 million after taxes) for costs associated with the spin-off of our xpedx operations,
a pre-tax goodwill impairment charge of $400 million ($366 million after taxes) related to our xpedx business and pre-tax charges of $23 million ($19 mil-
lion after taxes) for expenses associated with the divestiture of the Temple-Inland Building Products business.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
For reconciliations of free cash flow to cash provided by operations, see page 32.

For reconciliations of Operating Earnings per share attributable to International Paper Company common shareholders
to diluted earnings (loss) per share attributable to International Paper Company common shareholders, see page 20.

In millions, at December 31

CALCULATION OF EBITDA BEFORE SPECIAL ITEMS
Earnings from Continuing Operations Before Interest,

Income Taxes and Equity Earnings

Depreciation, Amortization and Cost of Timber Harvested
Special Items
Non-operating Pension Expense

EBITDA BEFORE SPECIAL ITEMS

2014

2013

2012

$ 1,479
1,406
1,046
212

4,143

$ 1,840
1,531
341
323

$ 1,638
1,473
335
159

4,035

3,605

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________________
FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the fiscal year ended December 31, 2014

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from to

Commission File No. 1-3157
INTERNATIONAL PAPER COMPANY

(Exact name of registrant as specified in its charter)

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

New York

13-0872805

6400 Poplar Avenue
Memphis, Tennessee
(Address of principal executive offices)

38197
(Zip Code)

Registrant’s telephone number, including area code: (901) 419-9000
_____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Stock, $1 per share par value

Name of each exchange on which registered

New York Stock Exchange

_____________________________________________________

Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (section 229.405) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

(Do not check if a smaller
reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes

The aggregate market value of the Company’s outstanding common stock held by non-affiliates of the registrant, computed by reference to the
closing price as reported on the New York Stock Exchange, as of the last business day of the registrant’s most recently completed second fiscal
quarter (June 30, 2014) was approximately $21,745,527,580.

The number of shares outstanding of the Company’s common stock as of February 20, 2015 was 422,845,435.

Documents incorporated by reference:

Portions of the registrant’s proxy statement filed within 120 days of the close of the registrant’s fiscal year in connection with registrant’s 2015
annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K.

INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2014

PART I.

ITEM 1.

ITEM 1A.
ITEM 1B.
ITEM 2.

ITEM 3.
ITEM 4.

PART II.

ITEM 5.

ITEM 6.
ITEM 7.

BUSINESS.
General
Financial Information Concerning Industry Segments
Financial Information About International and U.S. Operations
Competition and Costs
Marketing and Distribution
Description of Principal Products
Sales Volumes by Product
Research and Development
Environmental Protection
Climate Change
Employees
Executive Officers of the Registrant
Raw Materials
Forward-looking Statements

RISK FACTORS.
UNRESOLVED STAFF COMMENTS.
PROPERTIES.
Forestlands
Mills and Plants
Capital Investments and Dispositions

LEGAL PROCEEDINGS.
MINE SAFETY DISCLOSURES.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
SELECTED FINANCIAL DATA.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

Executive Summary
Corporate Overview
Results of Operations
Description of Industry Segments
Industry Segment Results
Liquidity and Capital Resources
Critical Accounting Policies and Significant Accounting Estimates
Recent Accounting Developments
Legal Proceedings
Effect of Inflation
Foreign Currency Effects
Market Risk

1
1
1
1
1
2
2
3
4
4
4
6
6
7
7
8
12
12
12
12
12
12
12

13
15

19
19
23
23
26
27
31
36
40
40
40
40
40

INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2014

ITEM 7A.

ITEM 8.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Management on Financial Statements, Internal Control over
Financial Reporting and Internal Control Environment and Board of
Directors Oversight
Reports of Deloitte & Touche LLP, Independent Registered Public
Accounting Firm
Consolidated Statement of Operations
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to Consolidated Financial Statements
Interim Financial Results (Unaudited)

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
CONTROLS AND PROCEDURES.
OTHER INFORMATION.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
EXECUTIVE COMPENSATION.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.

ITEM 9.

ITEM 9A.
ITEM 9B.

PART III.

ITEM 10.
ITEM 11.
ITEM 12.

ITEM 13.

ITEM 14.

PART IV.

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Additional Financial Data
Schedule II – Valuation and Qualifying Accounts

APPENDIX I
APPENDIX II

SIGNATURES
2014 LISTING OF FACILITIES

2014 CAPACITY INFORMATION

41
42

44
46
47
48
49
50
51
87

87
91
92

92
92

93
93

93
93
97
98
A-1

A-4

(This page intentionally left blank.)

PART I.

ITEM 1. BUSINESS

GENERAL

International Paper Company (the “Company” or
“International Paper,” which may also be referred to as
“we” or “us”) is a global paper and packaging company
with primary markets and manufacturing operations in
North America, Europe, Latin America, Russia, Asia,
Africa and the Middle East. We are a New York
corporation, incorporated in 1941 as the successor to
the New York corporation of the same name organized
in 1898. Our home page on
is
www.internationalpaper.com. You can learn more about
us by visiting that site.

Internet

the

In the United States, at December 31, 2014, the
Company operated 25 pulp, paper and packaging mills,
177 converting and packaging plants, 18 recycling
plants and three bag facilities. Production facilities at
December 31, 2014 in Europe, Asia, Africa, India, Latin
America and South America included 16 pulp, paper
and packaging mills, 69 converting and packaging
plants, and two recycling plants. We operate a printing
and packaging products distribution business
principally
At
December 31, 2014, we owned or managed
approximately 334,000 acres of forestland in Brazil and
forest management
had,
agreements, harvesting rights on government-owned
forestlands
in Russia. Substantially all of our
businesses have experienced, and are likely to
continue to experience, cycles relating to industry
capacity and general economic conditions.

through 12 branches

licenses and

in Asia.

through

into

For management and financial reporting purposes, our
businesses are separated
three segments:
Industrial Packaging; Printing Papers; and Consumer
Packaging. A description of these business segments
can be found on pages 26 through 27 of Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations. The Company’s
50% equity interest in Ilim Holding S.A. is also a
separate reportable industry segment.

From 2010 through 2014, International Paper’s capital
expenditures approximated $5.9 billion, excluding
mergers and acquisitions. These expenditures reflect
our continuing efforts to improve product quality and
environmental performance, as well as lower costs and
maintain reliability of operations. Capital spending in
2014 was approximately $1.4 billion and is expected to
be approximately $1.5 billion in 2015. You can find more
information about capital expenditures on page 32 of
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.

Discussions of acquisitions can be found on pages 33
and 34 of Item 7. Management’s Discussion and

Analysis of Financial Condition and Results of
Operations.

You can find discussions of restructuring charges and
other special items on pages 24 through 26 of Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.

Throughout this Annual Report on Form 10-K, we
“incorporate by reference” certain information in parts
of other documents filed with the Securities and
Exchange Commission (SEC). The SEC permits us to
disclose important information by referring to it in that
manner. Please refer to such information. Our annual
reports on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K, along with all other
reports and any amendments thereto filed with or
furnished to the SEC, are publicly available free of
charge on the Investor Relations section of our Internet
Web site at www.internationalpaper.com as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the SEC. The information
contained on or connected to our Web site is not
incorporated by reference into this Form 10-K and
should not be considered part of this or any other report
that we filed with or furnished to the SEC.

FINANCIAL INFORMATION CONCERNING
INDUSTRY SEGMENTS

The financial information concerning segments is set
forth in Note 19 Financial Information by Industry
Segment and Geographic Area on pages 84 through
86 of Item 8. Financial Statements and Supplementary
Data.

FINANCIAL INFORMATION ABOUT
INTERNATIONAL AND U.S. OPERATIONS

The financial information concerning international and
U.S. operations and export sales is set forth in Note 19
Financial
Industry Segment and
Geographic Area on page 86 of Item 8. Financial
Statements and Supplementary Data.

Information by

COMPETITION AND COSTS

The markets in the pulp, paper and packaging product
lines are large and fragmented. The major markets,
both U.S. and non-U.S., in which the Company sells its
principal products are very competitive. Our products
compete with similar products produced by other forest
products companies. We also compete, in some
instances, with companies in other industries and
against substitutes for wood-fiber products.

Many factors influence the Company’s competitive
position, including price, cost, product quality and
services. You can find more information about the
impact of these factors on operating profits on pages
19 through 31 of Item 7. Management’s Discussion and

Analysis of Financial Condition and Results of
Operations. You can find information about the
Company’s manufacturing capacities on page A-4 of
Appendix II.

MARKETING AND DISTRIBUTION

The Company sells packaging products, paper
products and other products directly to end users and
converters, as well as through agents, resellers and
paper distributors.

DESCRIPTION OF PRINCIPAL PRODUCTS

The Company’s principal products are described on
pages 26 and 27 of Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations.

SALES VOLUMES BY PRODUCT

Sales volumes of major products for 2014, 2013 and 2012 were as follows:

Sales Volumes by Product (1)

In thousands of short tons
Industrial Packaging

North American Corrugated Packaging (2)
North American Containerboard (2)
North American Recycling
North American Saturated Kraft
North American Gypsum/Release Kraft (2)
North American Bleached Kraft
EMEA Industrial Packaging (3)
Asian Box
Brazilian Packaging (4)
Industrial Packaging

Printing Papers

U.S. Uncoated Papers
European and Russian Uncoated Papers
Brazilian Uncoated Papers
Indian Uncoated Papers
Uncoated Papers

Market Pulp (5)
Consumer Packaging

North American Consumer Packaging
European and Russian Coated Paperboard
Asian Coated Paperboard
Consumer Packaging

2014

2013

2012

10,355
3,035
2,459
186
168
26
1,379
408
318
18,334

1,968
1,531
1,141
231
4,871
1,776

1,486
354
1,358
3,198

10,393
3,273
2,379
176
157
132
1,342
416
297
18,565

2,508
1,413
1,150
232
5,303
1,711

1,556
355
1,430
3,341

10,523
3,228
2,349
166
135
114
1,032
410
—
17,957

2,617
1,286
1,165
246
5,314
1,593

1,507
372
1,059
2,938

(1)
(2)
(3)
(4)
(5)

Includes third-party and inter-segment sales and excludes sales of equity investees.
Includes Temple-Inland volumes from date of acquisition in February 2012.
Includes Turkish box plants beginning in Q1 2013 when a majority ownership was acquired.
Includes Brazil Packaging from date of acquisition in mid- January 2013.
Includes North American, European and Brazilian volumes and internal sales to mills.

RESEARCH AND DEVELOPMENT

The Company operates its primary research and
development center in Loveland, Ohio, as well as
several product laboratories. Additionally, the Company
has an interest in ArborGen, Inc., a joint venture with
certain other forest products companies.

packaging

We direct research and development activities to short-
term, long-term and technical assistance needs of
customers and operating divisions, and to process,
equipment and product innovations. Activities include
product development within the operating divisions;
studies on innovation and improvement of pulping,
bleaching, chemical recovery, papermaking, converting
and coating processes; packaging design and materials
development; mechanical
systems,
environmentally sensitive printing inks and reduction of
environmental discharges; re-use of raw materials in
manufacturing processes; recycling of consumer and
packaging paper products; energy conservation;
applications of computer controls to manufacturing
operations; innovations and improvement of products;
and development of various new products. Our
development efforts specifically address product safety
as well as the minimization of solid waste. The cost to
the Company of
its research and development
operations was $16 million in 2014, $18 million in 2013
and $13 million in 2012.

We own numerous patents, copyrights, trademarks,
trade secrets and other intellectual property rights
relating to our products and to the processes for their
production. We also license intellectual property rights
to and from others where advantageous or necessary.
Many of the manufacturing processes are among our
trade secrets. Some of our products are covered by
U.S. and non-U.S. patents and are sold under well
known trademarks. We derive a competitive advantage
by protecting our trade secrets, patents, trademarks
and other intellectual property rights, and by using them
as required to support our businesses.

ENVIRONMENTAL PROTECTION

impacts on

International Paper is subject to extensive federal and
state environmental regulation as well as similar
regulations internationally. Our continuing objectives
include: (1) controlling emissions and discharges from
our facilities into the air, water and groundwater to avoid
adverse
the environment, and
(2) maintaining compliance with applicable laws and
regulations. The Company spent $93 million in 2014 for
capital projects to control environmental releases into
the air and water, and to assure environmentally sound
management and disposal of waste. We expect to
spend approximately $134 million in 2015 for similar
capital projects, including expenditures associated with
the U.S. Environmental Protection Agency's (EPA)
Boiler MACT (maximum achievable control technology)

for

expenditures

2016
regulations. Capital
environmental capital projects are anticipated to be
approximately $96 million, including Boiler MACT costs.
Capital expenditures for 2017 environmental capital
projects are estimated to be $115 million, including
Boiler MACT costs. On January 31, 2013, the EPA
issued the final suite of Boiler MACT regulations. These
regulations require owners of specified boilers to meet
revised air emissions standards for certain substances.
Several lawsuits have been filed to challenge all or
portions of the Boiler MACT regulations and on
December 1, 2014, EPA proposed limited revisions to
the regulations. Litigation challenging these regulations
is ongoing. As such, the projected capital expenditures
for environmental capital projects represent our current
best estimate of
the
recognition that the Boiler MACT regulations are
subject to change.

future expenditures with

In the U.S., revisions to National Ambient Air Quality
Standards (NAAQS) for sulfur dioxide (SO2), nitrogen
dioxide (NO2), and fine particulate (PM2.5) finalized
between 2010 and 2012, and a proposed revision to
the NAAQS for ozone in late 2014, have not had a
material
the Company. Regulations
addressing specific implementation issues related to
the SO2 NAAQS are being developed by the EPA and
are expected to be finalized during the next two years.
Potentially material capital investment may be required
in response to these emerging requirements.

impact on

CLIMATE CHANGE

Climate change refers to any significant change in the
measure of the earth’s climatic conditions such as
temperature, precipitation, or winds that persist for
decades or longer. Climate change can be caused by
natural factors, such as changes in the sun’s intensity
and ocean circulation, and human activities can also
affect the composition of the earth’s atmosphere, such
as from the burning of fossil fuels. In an effort to mitigate
the potential of climate change impacts from human
activities, various international, national and sub-
national (regional, state and local) governmental
actions have been undertaken. Presently, these efforts
have not materially impacted International Paper, but
such efforts may have a material impact on the
Company in the future.

International Efforts

The 1997 Kyoto Protocol established emission
reduction obligations for certain countries where the
Company had and continues to have operations.
Though the Kyoto Protocol expired in 2012, several
countries, and most notably the European Union (EU),
extended their emissions commitments until 2020. A
successor program to the Kyoto Protocol is the subject
of on-going international negotiations including a

Conference of the Parties to the Kyoto Protocol
scheduled for December 2015. It is not yet clear if these
negotiations will result in a new International Climate
Change Agreement and, if so, what form it may take.
Due to this uncertainty, it is not possible at this time to
estimate the potential impacts of future international
agreements on the Company.

To assist member countries in meeting obligations
under the Kyoto Protocol, the EU established and
continues to operate an Emissions Trading System (EU
ETS). Currently, we have two sites directly subject to
regulation under Phase III of the EU ETS, one in Poland
and one in France. Other sites that we operate in the
EU experience indirect impacts of the EU ETS through
purchased power pricing. Neither the direct nor indirect
impacts of the EU ETS have been material to the
Company, but they could be material to the Company
in the future depending on how allocation of and market
prices for greenhouse gas (GHG) credits evolve over
the coming years.

National Efforts

In the U.S., the Kyoto Protocol was not ratified and
Congress has not passed GHG legislation. The U.S.
EPA has enacted (i) regulations to control GHGs from
mobile sources (through transportation fuel efficiency
standards), (ii) New Source Performance Standards
(NSPS) for new Electrical Generating Units (EGUs) and
(iii) regulations requiring reporting of GHGs from
sources of GHGs greater than 25,000 tons per year. In
2014, the Company reported to EPA the GHG
emissions from 23 of our U.S. manufacturing sites and
8 landfills.

In 2010, EPA issued GHG regulations for new and
modified sources under the New Source Review and
Title V Operating Permit programs and shortly
thereafter deferred the applicability of these GHGs
regulations to biomass carbon emissions until the
summer of 2014. EPA subsequently issued guidance
clarifying that GHGs cannot be the sole basis for
designating a new or modified source as a major source
subject to new source review or Title V air permitting
requirements. EPA also established that BACT (Best
Available Control Technology) would be required for any
GHG emissions increase above 75,000 tons per year
if a new source or Title V review was required for other
regulated pollutants.

framework addressing

On November 19, 2014 EPA issued a revised draft
carbon accounting
the
circumstances under which biomass combustion can
be considered carbon neutral. EPA has stated it intends
to issue future rulemakings to address how states may
use the revised framework in implementing state permit
rules and in developing plans for regulating GHGs from
utility electric generators. Given the uncertainties
regarding the framework and scope of future GHG

rulemaking, it is unclear what impacts, if any, EPA’s
actions in this area will have on the Company’s
operations.

In 2013, EPA issued final regulations establishing New
Source Performance Standards (NSPS) for new
Electrical Generating Units (EGUs). This regulation is
the first of several expected NSPSs that EPA will
implement over the coming years. The EPA has not yet
identified the pulp and paper industry in the first phase
of sectors to be covered by the new standards.
However, we anticipate that at some future time pulp
and paper sources will be subject to new GHG NSPS
rules. It is unclear what impacts, if any, future GHG
NSPS rules will have on the Company’s operations.

In 2014, EPA proposed regulations for GHGs from new
These
and existing utility electric generators.
regulations have the potential to increase purchased
electricity prices across the United States. The
proposed rules phase in the compliance obligations
between about 2018 and 2030 and they remain subject
to substantive revisions before final promulgation. EPA
estimates purchased electricity prices will increase by
less than seven percent, but some utilities are
estimating significantly higher price increases. Given
the uncertainties regarding the scope of the final
regulations, it is unclear what impacts, if any, these
regulations will have on the Company’s operations.

State, Regional and Local Measures

A few U.S. states have enacted or are considering legal
measures to require the reduction of emissions of
GHGs by companies and public utilities, primarily
through the development of GHG emission inventories
or regional GHG cap-and-trade programs. One such
state is California. The Company does not have any
sites currently subject to California's GHG regulatory
plan. There may be indirect impacts from changing input
costs (such as electricity) at some of our California
converting operations but these have yet to manifest
themselves in material impacts. Although we are
monitoring proposed programs in other states, it is
unclear what impacts, if any, state-level GHG rules will
have on the Company’s operations.

Summary

Regulation of GHGs continues to evolve in various
countries in which we do business. While it is likely that
there will be increased governmental action regarding
GHGs and climate change, at this time it is not
reasonably possible to estimate either a timetable for
the implementation of any new regulations or our costs
of compliance. In addition to possible direct impacts,
future legislation and regulation could have indirect
impacts on International Paper, such as higher prices
for transportation, energy and other inputs, as well as
more protracted air permitting processes, causing

delays and higher costs to implement capital projects.
International Paper has controls and procedures in
place to stay informed about developments concerning
possible climate change legislation and regulation in
the U.S. and in other countries where we operate. We
regularly assess whether such legislation or regulation
may have a material effect on the Company, its
operations or financial condition, and whether we have
any related disclosure obligations.

Additional information regarding climate change and
International Paper is available in our Sustainability
Report found at http://www.internationalpaper.com/US/
EN/Company/Sustainability/SustainabilityReport.html,
though this information is not incorporated by reference
into this Form 10-K and should not be considered part
of this or any other report that we file with or furnish to
the SEC.

EMPLOYEES

As of December 31, 2014, we had approximately
58,000 employees, nearly 34,000 of whom were
located in the United States. Of the U.S. employees,
approximately 23,600 are hourly, with unions
representing approximately 14,000 employees.
Approximately 11,000 of the union employees are
represented by the United Steel Workers (USW).

International Paper, the USW, and several other unions
have entered into two master agreements covering
various mills and converting facilities. These master
agreements cover several specific items, including
wages, select benefit programs, successorship,
employment security, and health and safety. Individual
facilities continue to have local agreements for other
subjects not covered by the master agreements. If local
facility agreements are not successfully negotiated at
the time of expiration, under the terms of the master
agreements the local contracts will automatically renew
with the same terms in effect. The mill master
agreement covers 19 of our U.S. pulp, paper, and
packaging mills; the converting agreement includes 61
of our converting facilities. In addition, International
Paper is party to a master agreement with District
Council 2, International Brotherhood of Teamsters,
covering 13 additional converting facilities.

During 2014, local labor agreements were negotiated
at four mills and 27 converting facilities. In 2015, local
labor agreements are scheduled to be negotiated at 18
facilities, including five mills and 13 converting facilities.
Fourteen of these agreements will automatically renew
under the terms of the applicable master agreement if
new agreements are not reached.

EXECUTIVE OFFICERS OF THE REGISTRANT

Mark S. Sutton, 53, chairman (since January 1, 2015)
& chief executive officer (since November 1, 2014).
Mr. Sutton previously served as president & chief
operating officer from June 1, 2014 to October 31,
2014, senior vice president - industrial packaging from
November 2011 to May 31, 2014, senior vice
president - printing and communications papers of the
Americas from 2010 until 2011, senior vice president
- supply chain from 2008 to 2009, vice president -
supply chain from 2007 until 2008, and vice president
- strategic planning from 2005 until 2007. Mr. Sutton
joined International Paper in 1984.

John V. Faraci, 65, special advisor to the board since
January 1, 2015. Mr. Faraci will retire as an officer and
employee effective February 28, 2015. Mr. Faraci
previously served as chairman from 2003 to December
31, 2014, and as chief executive officer from 2003 to
October 31, 2014. Mr. Faraci joined International Paper
in 1974.

W. Michael Amick, Jr., 51, senior vice president -
North American papers, pulp & consumer packaging
since November 1, 2014. Mr. Amick previously served
as vice president - president, IP India, from August
2012 to October 31, 2014, and vice president and
general manager for the coated paperboard business
from 2010 to 2012. Mr. Amick joined International
Paper in 1990.

C. Cato Ealy, 58, senior vice president - corporate
development since 2003. Mr. Ealy is a director of Ilim
Holding S.A., a Swiss holding company in which
International Paper holds a 50% interest, and of its
subsidiary, Ilim Group. Mr. Ealy joined International
Paper in 1992.

William P. Hoel, 58, senior vice president, Container
The Americas, since February 2012. Mr. Hoel
previously served as vice president, Container The
Americas, from 2005 until 2012, senior vice president,
corporate sales and marketing, from 2004 until 2005,
and vice president, Wood Products, from 2000 until
2004. Mr. Hoel joined International Paper in 1983.

Tommy S. Joseph, 55, senior vice president -
manufacturing,
technology, EHS&S and global
sourcing since January 2010. Mr. Joseph previously
served as senior vice president - manufacturing,
from February 2009 until
technology, EHS&S
December 2009, and vice president - technology from
2005 until February 2009. Mr. Joseph is a director of
Ilim Holding S.A., a Swiss Holding Company in which
International Paper holds a 50% interest, and of its
subsidiary, Ilim Group. Mr. Joseph joined International
Paper in 1983.

Thomas G. Kadien, 58, senior vice president - human
resources, communications & global government
relations since November 1, 2014. Mr. Kadien
previously served as senior vice president - consumer
packaging and IP Asia from January 2010 to October
31, 2014, and senior vice president and president -
xpedx from 2005 until 2009. Mr. Kadien joined
International Paper in 1978. Mr. Kadien serves on the
board of directors of The Sherwin-Williams Company.

Paul J. Karre, 62, senior vice president - human
resources & communications since May 2009. Mr.
Karre will retire as an officer and employee effective
March 31, 2015. Mr. Karre previously served as vice
president - human resources from 2000 until 2009.
Mr. Karre joined International Paper in 1974.

Glenn R. Landau, 46, senior vice president -
president, IP Latin America since November 1, 2014.
Mr. Landau previously served as vice president -
president IP Latin America from 2013 to October 31,
2014, vice president - investor relations from 2011 to
2013, and vice president and general manager,
containerboard and recycling from 2007 to 2011. Mr.
Landau joined International Paper in 1991.

Tim S. Nicholls, 53, senior vice president - industrial
packaging since November 1, 2014. Mr. Nicholls
previously served as senior vice president - printing
and communications papers of the Americas from
November 2011 to October 31, 2014, senior vice
president and chief financial officer from 2007 until
2011, vice president and executive project leader of
IP Europe during 2007, and vice president and chief
financial officer - IP Europe from 2005 until 2007. Mr.
Nicholls joined International Paper in 1991.

Jean-Michel Ribieras, 52, senior vice president -
president, IP Europe, Middle East, Africa & Russia
since June 2013. Mr. Ribieras previously served as
president - IP Latin America from 2009 until 2013. Mr.
Ribieras is a director of Ilim Holding S.A., a Swiss
holding company in which International Paper holds
a 50% interest, and of its subsidiary, Ilim Group. Mr.
Ribieras joined International Paper in 1993.

Carol L. Roberts, 55, senior vice president & chief
financial officer since November 2011. Ms. Roberts
previously served as senior vice president - industrial
packaging from 2008 until 2011 and senior vice
president - IP packaging solutions from 2005 until
2008. Ms. Roberts serves on the board of directors of
Alcoa Inc. and Ilim Holding S.A., a Swiss holding
company in which International Paper holds a 50%
interest, and of its subsidiary, Ilim Group. Ms. Roberts
joined International Paper in 1981.

Sharon R. Ryan, 55, senior vice president, general
counsel & corporate secretary since November 2011.
Ms. Ryan previously served as vice president, acting

general counsel & corporate secretary from May 2011
until November 2011, vice president from March 2011
until May 2011, associate general counsel, chief
ethics and compliance officer from 2009 until 2011,
and associate general counsel from 2006 until 2009.
Ms. Ryan joined International Paper in 1988.

RAW MATERIALS

Raw materials essential to our businesses include
wood fiber, purchased in the form of pulpwood, wood
chips and old corrugated containers (OCC), and certain
chemicals,
including caustic soda and starch.
fiber supply purchase
Information concerning
agreements that were entered into in connection with
the Company’s 2006 Transformation Plan and the
CBPR acquisition in 2008 is presented in Note 11
Commitments and Contingent Liabilities on page 64
and 67 of
Item 8. Financial Statements and
Supplementary Data.

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-
K that are not historical in nature may be considered
“forward-looking” statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These
statements are often identified by the words, “will,”
“may,” “should,” “continue,” “anticipate,” “believe,”
“expect,” “plan,” “appear,” “project,” “estimate,” “intend,”
and words of a similar nature. These statements are
not guarantees of future performance and reflect
management’s current views with respect to future
events, which 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; and (vii) our ability to
achieve
from strategic
acquisitions, divestitures and restructurings. These and
other factors that could cause or contribute to actual

the benefits we expect

results differing materially from such forward looking
statements are discussed in greater detail below in
“Item 1A. Risk Factors.” We undertake no obligation to
publicly update any
forward-looking statements,
whether as a result of new information, future events or
otherwise.

than historical

All financial information and statistical measures
regarding our 50/50 Ilim joint venture in Russia (“Ilim”),
other
International Paper Equity
Earnings and dividends received by International
Paper, have been prepared by the management of Ilim.
In providing this information in this filing, we are relying
on
internal control
environment. Any projected financial information and
statistical measures reflect the current views of Ilim
management and are subject to the risks and
uncertainties
to differ
materially from those expressed or implied by such
projections.

that cause actual results

the effectiveness of

Ilim's

ITEM 1A. RISK FACTORS

In addition to the risks and uncertainties discussed
elsewhere in this Annual Report on Form 10-K
(particularly in Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations), or in the Company’s other filings with the
Securities and Exchange Commission, the following
are some important factors that could cause the
Company’s actual results to differ materially from those
projected in any forward-looking statement.

RISKS RELATING TO INDUSTRY CONDITIONS

CHANGES IN THE COST OR AVAILABILITY OF RAW
MATERIALS, ENERGY AND TRANSPORTATION
COULD AFFECT OUR PROFITABILITY. We rely
heavily on the use of certain raw materials (principally
virgin wood fiber, recycled fiber, caustic soda and
starch), energy sources (principally natural gas, coal
and fuel oil) and third-party companies that transport
our goods. The market price of virgin wood fiber varies
based upon availability and source. Increased demand
for biomass to meet a growing number of government
mandates and incentives to promote the use of biomass
for renewable electrical energy generation may also
impact pricing and availability of virgin wood fiber. In
addition,
in demand of products
manufactured, in whole or in part, from recycled fiber,
on a global basis, may cause an occasional tightening
in the supply of recycled fiber. Energy prices, in
particular prices for oil and natural gas, have fluctuated
dramatically in the past and may continue to fluctuate
in the future.

increase

the

Our profitability has been, and will continue to be,
affected by changes in the costs and availability of such

raw materials, energy sources and transportation
sources.

OUR

AFFECT

INDUSTRIES

THE
IN WHICH WE OPERATE
EXPERIENCE BOTH ECONOMIC CYCLICALITY
AND CHANGES IN CONSUMER PREFERENCES.
FLUCTUATIONS IN THE PRICES OF, AND THE
DEMAND FOR, OUR PRODUCTS COULD
FINANCIAL
MATERIALLY
CONDITION, RESULTS OF OPERATIONS AND
CASH FLOWS. Substantially all of our businesses
have experienced, and are likely to continue to
experience, cycles relating to industry capacity and
length and
general economic conditions. The
magnitude of these cycles have varied over time and
by product.
in consumer
In addition, changes
preferences may increase or decrease the demand for
our fiber-based products and non-fiber substitutes.
These consumer preferences affect the prices of our
products. Consequently, our operating cash flow is
sensitive to changes in the pricing and demand for our
products.

COMPETITION
IN THE UNITED STATES AND
INTERNATIONALLY COULD NEGATIVELY IMPACT
in a
OUR FINANCIAL RESULTS. We operate
competitive environment, both in the United States and
internationally, in all of our operating segments. Product
innovations, manufacturing and operating efficiencies,
and marketing, distribution and pricing strategies
pursued or achieved by competitors could negatively
impact our financial results.

RISKS RELATING TO MARKET AND ECONOMIC
FACTORS

ADVERSE DEVELOPMENTS
IN GENERAL
BUSINESS AND ECONOMIC CONDITIONS COULD
HAVE AN ADVERSE EFFECT ON THE DEMAND
FOR OUR PRODUCTS AND OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
General economic conditions may adversely affect
industrial non-durable goods production, consumer
spending, commercial printing and advertising activity,
white-collar employment
levels and consumer
confidence, all of which impact demand for our
products. In addition, volatility in the capital and credit
interest rates, currency
markets, which
exchange rates and the availability of credit, could have
a material adverse effect on our business, financial
condition and our results of operations.

impacts

THE LEVEL OF OUR INDEBTEDNESS COULD
ADVERSELY AFFECT OUR FINANCIAL CONDITION
AND IMPAIR OUR ABILITY TO OPERATE OUR
BUSINESS. As of December 31, 2014, International
Paper had approximately $9.4 billion of outstanding
indebtedness, including $8.7 billion of indebtedness
outstanding under our floating and fixed rate notes.
There was no indebtedness outstanding under our

credit facilities as of December 31, 2014. The level of
our indebtedness could have important consequences
to our financial condition, operating results and
business, including the following:

•

financing

it may limit our ability to obtain additional debt or
equity
for working capital, capital
expenditures, product development, dividends,
share repurchases, debt service requirements,
acquisitions and general corporate or other
purposes;

a portion of our cash flows from operations will be
dedicated to payments on indebtedness and will
not be available for other purposes, including
operations, capital expenditures and
future
business opportunities;

the debt service requirements of our indebtedness
could make it more difficult for us to satisfy other
obligations;

our indebtedness that is subject to variable rates
of interest exposes us to increased debt service
obligations in the event of increased interest rates;

it may limit our ability to adjust to changing market
conditions and place us at a competitive
disadvantage compared to our competitors that
have less debt; and

it may increase our vulnerability to a downturn in
general economic conditions or in our business,
and may make us unable to carry out capital
spending that is important to our growth.

In addition, we are subject to agreements that require
meeting and maintaining certain financial ratios and
covenants. A significant or prolonged downturn in
general business and economic conditions may affect
our ability to comply with these covenants or meet those
financial ratios and tests and could require us to take
action to reduce our debt or to act in a manner contrary
to our current business objectives.

IN CREDIT RATINGS

CHANGES
ISSUED BY
NATIONALLY RECOGNIZED STATISTICAL RATING
ORGANIZATIONS COULD ADVERSELY AFFECT
OUR COST OF FINANCING AND HAVE AN
ADVERSE EFFECT ON THE MARKET PRICE OF
OUR SECURITIES. Maintaining an investment-grade
credit rating is an important element of our financial
strategy, and a downgrade of the Company’s ratings
below investment grade may limit our access to the
capital markets, have an adverse effect on the market
price of our securities, increase our cost of borrowing
and require us to post collateral for derivatives in a net
liability position. The Company’s desire to maintain its
investment grade rating may cause the Company to
take certain actions designed to improve its cash flow,
including sale of assets, suspension or reduction of our

dividend and reductions in capital expenditures and
working capital.

the

terms of

Under
the agreements governing
approximately $3.3 billion of our debt as of
December 31, 2014, the applicable interest rate on
such debt may increase upon each downgrade in our
credit rating. As a result, a downgrade in our credit rating
may lead to an increase in our interest expense. There
can be no assurance that such credit ratings will remain
in effect for any given period of time or that such ratings
will not be lowered, suspended or withdrawn entirely by
the rating agencies, if, in each rating agency’s
judgment, circumstances so warrant. Any such
downgrade of our credit ratings could adversely affect
our cost of borrowing, limit our access to the capital
markets or result in more restrictive covenants in
future
the
agreements governing
indebtedness that we may incur.

terms of any

the 2006

OUR
INABILITY TO EXTEND, RENEW OR
REFINANCE LOAN AGREEMENTS USED TO
MONETIZE INSTALLMENT NOTES FROM THE
SALE OF OUR FORESTLANDS MAY RESULT IN THE
ACCELERATION OF DEFERRED TAXES.
In
International Paper
connection with
installment sale of forestlands, we received installment
notes (or timber notes), which we contributed to certain
borrower entities. The entities to which these
installment notes were contributed used the installment
notes as collateral for approximately $4.8 billion in loans
from third-party lenders. Of the $4.8 billion in loans from
third-party lenders, $4.1 billion mature in September
2015, while the installment notes mature in August 2016
(unless extended). Failure to extend, renew or
refinance these loans prior to their stated maturity could
trigger the sale of the installment notes to facilitate the
$4.1 billion debt payment which, in turn, would result in
an acceleration of the payment of approximately $1.2
billion in deferred income taxes in 2015, rather than in
2016 when the installment notes mature (unless
extended). The deferred taxes are currently recorded
in the Company's consolidated financial statements.
For further information, see Item 7. Management’s
Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources
and Note 10 Income Taxes on pages 62 through 64 and
Note 12 Variable Interest Entities and Preferred
Securities of Subsidiaries on pages 67 through 69 of
Item 8. Financial Statements and Supplementary Data.

DOWNGRADES IN THE CREDIT RATINGS OF
BANKS ISSUING CERTAIN LETTERS OF CREDIT
WILL INCREASE OUR COST OF MAINTAINING
CERTAIN INDEBTEDNESS AND MAY RESULT IN
THE ACCELERATION OF DEFERRED TAXES. We
are subject to the risk that a bank with currently issued
irrevocable letters of credit supporting installment notes
delivered to the Company in connection with our 2006

and Temple-Inland's 2007 sales of forestlands may be
downgraded below a required rating. Since 2006,
certain banks have fallen below the required ratings
threshold and were successfully replaced, or waivers
were obtained regarding their replacement. As a result
of continuing uncertainty in the banking environment, a
number of the letter-of-credit banks currently in place
remain subject to risk of downgrade and the number of
qualified replacement banks remains limited. The
downgrade of one or more of these banks may subject
the Company to additional costs of securing a
replacement letter-of-credit bank or could result in an
acceleration of payments of up to $2.3 billion in deferred
income taxes if replacement banks cannot be obtained.
The deferred taxes are currently recorded in the
Company's consolidated financial statements. See
Note 12 Variable Interest Entities and Preferred
Securities of Subsidiaries on pages 67 through 69 and
Note 10 Income Taxes on pages 62 through 64 of
Item 8. Financial Statements and Supplementary Data
for further information.

OUR PENSION AND HEALTH CARE COSTS ARE
SUBJECT TO NUMEROUS FACTORS WHICH
COULD CAUSE THESE COSTS TO CHANGE. We
have defined benefit pension plans covering
substantially all U.S. salaried employees hired prior to
July 1, 2004 and substantially all hourly and union
employees regardless of hire date. We provide retiree
health care benefits to certain of our U.S. salaried and
certain hourly employees. Our pension costs are
dependent upon numerous factors resulting from actual
plan experience and assumptions of future experience.
Pension plan assets are primarily made up of equity
and fixed income investments. Fluctuations in actual
equity market returns, changes in general interest rates
and changes in the number of retirees may result in
increased pension costs in future periods. Likewise,
changes in assumptions regarding current discount
rates and expected rates of return on plan assets could
increase pension costs. Health care reform under the
Patient Protection and Affordable Care Act of 2010
could also increase costs with respect to medical
coverage of the Company’s full-time employees.
Significant changes in any of these factors may
adversely impact our cash flows, financial condition and
results of operations.

OUR PENSION PLANS ARE CURRENTLY
UNDERFUNDED, AND OVER TIME WE MAY BE
REQUIRED TO MAKE CASH PAYMENTS TO THE
PLANS, REDUCING THE CASH AVAILABLE FOR
OUR BUSINESS. We record a liability associated with
our pension plans equal to the excess of the benefit
obligation over the fair value of plan assets. The benefit
liability recorded under the provisions of Accounting
Standards Codification (ASC) 715, “Compensation –
Retirement Benefits,” at December 31, 2014 was
future
$3.9 billion. The amount and

timing of

contributions will depend upon a number of factors,
including the actual earnings and changes in values of
plan assets and changes in interest rates.

INTERNATIONAL CONDITIONS
CHANGES
COULD ADVERSELY AFFECT OUR BUSINESS AND
RESULTS OF OPERATIONS. Our operating results
and business prospects could be substantially affected
by risks related to the countries outside the United
States in which we have manufacturing facilities or sell
our products. Specifically, Russia, Brazil, Poland,
China, India, and Turkey where we have substantial
manufacturing facilities, are countries that are exposed
to economic and political instability in their respective
regions of the world. Fluctuations in the value of local
currency versus the U.S. dollar (such as in Russia
during 2014), downturns in economic activity, adverse
tax consequences, nationalization or any change in
social, political or labor conditions in any of these
countries or regions could negatively affect our financial
results. Trade protection measures in favor of local
including
producers
governmental subsidies,
tax benefits and other
local producers a competitive
measures giving
advantage over
International Paper, may also
adversely impact our operating results and business
prospects
In addition, our
international operations are subject to regulation under
U.S. law and other laws related to operations in foreign
the Foreign Corrupt
jurisdictions. For example,
Practices Act prohibits U.S. companies and their
representatives from offering, promising, authorizing or
making payments to foreign officials for the purpose of
obtaining or retaining business abroad. Failure to
comply with domestic or foreign laws could result in
various adverse consequences,
the
imposition of civil or criminal sanctions and the
prosecution of executives overseeing our international
operations.

these countries.

competing

products,

including

RISKS RELATING TO LEGAL PROCEEDINGS AND
COMPLIANCE COSTS

Our operations are subject

WE ARE SUBJECT TO A WIDE VARIETY OF LAWS,
REGULATIONS AND OTHER GOVERNMENT
REQUIREMENTS THAT MAY CHANGE
IN
SIGNIFICANT WAYS, AND THE COST OF
COMPLIANCE WITH SUCH REQUIREMENTS
COULD IMPACT OUR BUSINESS AND RESULTS OF
OPERATIONS.
to
regulation under a wide variety of U.S. federal and state
and non-U.S. laws, regulations and other government
requirements -- including, among others, those relating
to the environment, health and safety, labor and
employment and health care. There can be no
assurance that laws, regulations and government
requirements will not be changed, applied or interpreted
in ways that will require us to modify our operations and
objectives or affect our returns on investments by

restricting existing activities and products, subjecting
them to escalating costs. For example, we have
incurred, and expect that we will continue to incur,
significant capital, operating and other expenditures
complying with applicable environmental laws and
regulations. There can be no assurance that future
remediation requirements and compliance with existing
and new laws and requirements, including with global
climate change laws and regulations, Boiler MACT and
NAAQSs, will not require significant expenditures, or
that existing reserves for specific matters will be
adequate to cover future costs. We could also incur
substantial fines or sanctions, enforcement actions
(including orders limiting our operations or requiring
corrective measures), natural resource damages
claims, cleanup and closure costs, and third-party
claims for property damage and personal injury as a
result of violations of, or liabilities under, environmental
laws, regulations, codes and common law. The amount
and timing of environmental expenditures is difficult to
predict, and, in some cases, liability may be imposed
without regard to contribution or to whether we knew
of, or caused, the release of hazardous substances. As
another example, we are subject to a number of labor
and employment laws and regulations that could
significantly increase our operating costs and reduce
our operational flexibility.

RESULTS OF LEGAL PROCEEDINGS COULD HAVE
A MATERIAL EFFECT ON OUR CONSOLIDATED
FINANCIAL STATEMENTS. The costs and other
effects of pending litigation against us cannot be
determined with certainty. Although we believe that the
outcome of any pending or threatened lawsuits or
claims, or all of them combined, will not have a material
effect on our business or consolidated financial
statements, there can be no assurance that the
outcome of any lawsuit or claim will be as expected.

RISKS RELATING TO OUR OPERATIONS

FACILITIES

MATERIAL DISRUPTIONS AT ONE OF OUR
COULD
MANUFACTURING
NEGATIVELY IMPACT OUR FINANCIAL RESULTS.
We operate our facilities in compliance with applicable
rules and regulations and take measures to minimize
the risks of disruption at our facilities. A material
disruption at our corporate headquarters or one of our
manufacturing facilities could prevent us from meeting
customer demand, reduce our sales and/or negatively
impact our financial condition. Any of our manufacturing
facilities, or any of our machines within an otherwise
operational
operations
could
unexpectedly due to a number of events, including:

facility,

cease

•

fires, floods, earthquakes, hurricanes or other
catastrophes;

the effect of a drought or reduced rainfall on its
water supply;

•

the effect of other severe weather conditions on
equipment and facilities;

terrorism or threats of terrorism;

domestic and international laws and regulations
applicable to our Company and our business
partners, including joint venture partners, around
the world;

unscheduled maintenance outages;

prolonged power failures;

an equipment failure;

a chemical spill or release;

explosion of a boiler;

damage or disruptions caused by third parties
operating on or adjacent
to one of our
manufacturing facilities;

disruptions in the transportation infrastructure,
including roads, bridges, railroad tracks and
tunnels;

• widespread outbreak of an illness or any other
communicable disease, or any other public health
crisis;

•

labor difficulties; and

other operational problems.

Any such downtime or facility damage could prevent us
from meeting customer demand for our products and/
or require us to make unplanned expenditures. If one
of these machines or facilities were to incur significant
downtime, our ability to meet our production targets and
satisfy customer requirements could be impaired,
resulting in lower sales and having a negative effect on
our business and financial results.

AND

SENSITIVE

TO
EMPLOYEE

WE ARE SUBJECT TO CYBER-SECURITY RISKS
RELATED TO BREACHES OF SECURITY
COMPANY,
PERTAINING
CUSTOMER,
VENDOR
INFORMATION AS WELL AS BREACHES IN THE
TECHNOLOGY THAT MANAGES OPERATIONS
AND OTHER BUSINESS PROCESSES. Our business
operations rely upon secure information technology
systems for data capture, processing, storage and
reporting. Despite careful security and controls design,
implementation, updating and independent third party
verification, our information technology systems, and
those of our third party providers, could become subject
to cyber attacks. Network, system, application and data
breaches could result in operational disruptions or
information misappropriation including, but not limited
to interruption to systems availability, denial of access

to and misuse of applications required by our customers
to conduct business with International Paper. Access
to internal applications required to plan our operations,
source materials, manufacture and ship finished goods
and account for orders could be denied or misused.
Theft of intellectual property or trade secrets, and
inappropriate disclosure of confidential company,
employee, customer or vendor information, could stem
these operational
from such
disruptions and/or misappropriation of information
could result in lost sales, business delays, negative
publicity and could have a material effect on our
business.

incidents. Any of

SEVERAL OPERATIONS ARE CONDUCTED BY
JOINT VENTURES THAT WE CANNOT OPERATE
SOLELY FOR OUR BENEFIT. Several operations,
particularly in emerging markets, are carried on by joint
ventures such as the Ilim joint venture in Russia. In joint
ventures, we share ownership and management of a
company with one or more parties who may or may not
have the same goals, strategies, priorities or resources
as we do. In general, joint ventures are intended to be
operated for the benefit of all co-owners, rather than for
our exclusive benefit. Operating a business as a joint
requires additional organizational
venture often
formalities as well as time-consuming procedures for
sharing information and making decisions. In joint
ventures, we are required to pay more attention to our
relationship with our co-owners as well as with the joint
venture, and if a co-owner changes, our relationship
may be adversely affected. In addition, the benefits from
a successful joint venture are shared among the co-
owners, so that we do not receive all the benefits from
our successful joint ventures.

WE MAY NOT ACHIEVE THE EXPECTED BENEFITS
JOINT
STRATEGIC ACQUISITIONS,
FROM
VENTURES,
DIVESTITURES AND OTHER
CORPORATE TRANSACTIONS. Our strategy for
long-term growth, productivity and profitability
depends, in part, on our ability to accomplish prudent
strategic acquisitions, joint ventures, divestitures and
other corporate transactions and to realize the benefits
we expect from such transactions, and we are subject
to the risk that we may not achieve the expected
benefits. Among the benefits we expect from potential
as well as recently completed acquisitions and joint
ventures are synergies, cost savings, growth
opportunities or access
to new markets (or a
combination thereof), and in the case of divestitures,
the realization of proceeds from the sale of businesses
and assets to purchasers placing higher strategic value
on such businesses and assets than does International
Paper.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

FORESTLANDS

As of December 31, 2014, the Company owned or
managed approximately 334,000 acres of forestlands
in Brazil, and had, through licenses and forest
management agreements, harvesting
rights on
government-owned forestlands in Russia and Poland.
All owned lands in Brazil are independently third-party
certified for sustainable forestry under the Brazilian
National Forest Certification Program (CERFLOR) and
the Forest Stewardship Council (FSC).

MILLS AND PLANTS

A listing of our production facilities by segment, the vast
majority of which we own, can be found in Appendix I
hereto, which is incorporated herein by reference.

The Company’s facilities are in good operating
condition and are suited for the purposes for which they
are presently being used. We continue to study the
economics of modernization or adopting other
alternatives for higher cost facilities.

CAPITAL INVESTMENTS AND DISPOSITIONS

Given the size, scope and complexity of our business
interests, we continually examine and evaluate a wide
variety of business opportunities and planning
alternatives, including possible acquisitions and sales
or other dispositions of properties. You can find a
discussion about
level of planned capital
investments for 2015 on page 35, and dispositions and
restructuring activities as of December 31, 2014, on
pages 24
Item 7. Management’s
Discussion and Analysis of Financial Condition and
Results of Operations, and on pages 55 and 56 and
pages 59 and 60 of Item 8. Financial Statements and
Supplementary Data.

through 26 of

the

ITEM 3. LEGAL PROCEEDINGS

concerning

legal
Information
proceedings is set forth in Note 11 Commitments and
Contingencies on pages 64 through 67 of Item 8.
Financial Statements and Supplementary Data.

the Company’s

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Dividend per share data on the Company’s common
stock and the high and low sales prices for the
Company’s common stock for each of the four quarters
in 2014 and 2013 are set forth on page 87 of Item 8.
Financial Statements and Supplementary Data. As of

the filing of this Annual Report on Form 10-K, the
Company’s common shares are traded on the New York
Stock Exchange. As of February 20, 2015, there were
approximately 13,267 record holders of common stock
of the Company.

The table below presents information regarding the
Company’s purchase of its equity securities for the time
periods presented.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

Period

October 1, 2014 - October 31, 2014

November 1, 2014 - November 30, 2014

December 1, 2014 - December 31, 2014

Total

Total Number of Shares
Purchased (a)

Average Price Paid per
Share

Total Number of Shares (or
Units) Purchased as Part of
Publicly Announced
Programs

Maximum Number
(or Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
Programs (in billions)

2,825,448

177,532

545,681

3,548,661

$46.80

52.68

53.84

2,825,448

177,300

533,340

$1.59

1.58

1.56

(a) 12,573 shares were acquired from employees from share withholdings to pay income taxes under the Company’s restricted stock programs.
The remainder were purchased under a share repurchase program that was approved by our Board of Directors and announced on September
10, 2013, and through which we were authorized to purchase, in open market transactions (including block trades), privately negotiated
transactions or otherwise, up to $1.5 billion of our common stock by December 31, 2016. Another repurchase program was approved by our
Board of Directors and announced on July 8, 2014, to supplement the former program. Through the latter program, which does not have an
expiration date, we were authorized to purchase, in open market transactions (including block trades), privately negotiated transactions or
otherwise, up to $1.5 billion of additional shares of our common stock. As of February 20, 2015, approximately $1.54 billion of shares of our
common stock remained authorized for purchase under our share repurchase programs.

PERFORMANCE GRAPH

The performance graph shall not be deemed to be
“soliciting material” or to be “filed” with the Commission
or subject to Regulation 14A or 14C, or to the liabilities
of Section 18 of the Exchange Act of 1934, as amended.

The following graph compares a $100 investment in
Company stock on December 31, 2009 with a $100
investment in our Return on Invested Capital (ROIC)
Peer Group and the S&P 500 also made at market close
on December 31, 2009. The graph portrays total return,
2009–2014, assuming reinvestment of dividends.

Note: The companies included in the ROIC Peer Group are Domtar Inc., Fibria Celulose S.A., Klabin S.A., MeadWestvaco Corp., Metsa Board
Corporation, Mondi Group, Packaging Corporation of America, Rock-Tenn Company, Smurfit Kappa Group, Stora Enso Group, and
UPM-Kymmene Corp.

ITEM 6. SELECTED FINANCIAL DATA

FIVE-YEAR FINANCIAL SUMMARY (a)

Dollar amounts in millions, except per
share amounts and stock prices

RESULTS OF OPERATIONS

2014

2013

2012

2011

2010

Net sales

$ 23,617

Costs and expenses, excluding interest

22,138

$ 23,483

21,643

$ 21,852

20,214

$ 19,464

17,528

$ 18,496

17,169

Earnings (loss) from continuing
operations before income taxes and
equity earnings

872

(b)

1,228

(e)

967

(h)

1,395

(k)

Equity earnings (loss), net of taxes

(200)

(39)

Discontinued operations, net of taxes

(13)

(c)

(309)

(f)

(i)

140

(l)

(n)

719

111

(o)

Net earnings (loss)

536

(b-d)

1,378

(e-g)

799

(h-j)

1,336

(k-m)

712

(n-p)

Noncontrolling interests, net of taxes

(19)

(17)

Net earnings (loss) attributable to
International Paper Company

FINANCIAL POSITION

555

(b-d)

1,395

(e-g)

794

(h-j)

1,322

(k-m)

691

(n-p)

Current assets less current liabilities

$ 3,050

3,898

3,907

5,718

3,525

Plants, properties and equipment, net

Forestlands

Total assets

Notes payable and current maturities of
long-term debt

Long-term debt

Total shareholders’ equity

BASIC EARNINGS PER SHARE
ATTRIBUTABLE TO INTERNATIONAL
PAPER COMPANY COMMON
SHAREHOLDERS

Earnings (loss) from continuing
operations

Discontinued operations

Net earnings (loss)

DILUTED EARNINGS PER SHARE
ATTRIBUTABLE TO INTERNATIONAL
PAPER COMPANY COMMON
SHAREHOLDERS

Earnings (loss) from continuing
operations

Discontinued operations

Net earnings (loss)

Cash dividends

Total shareholders’ equity

COMMON STOCK PRICES

High

Low

Year-end

FINANCIAL RATIOS

Current ratio

Total debt to capital ratio

12,728

507

28,684

742

8,631

5,115

13,672

557

31,528

661

8,827

8,105

1.33

3.85

(0.03)

1.30

(0.70)

3.15

1.31

3.80

(0.02)

1.29

1.4500

12.18

(0.69)

3.11

1.2500

18.57

13,949

622

32,153

444

9,696

6,304

1.65

0.17

1.82

1.63

0.17

1.80

1.088

14.33

11,817

660

27,018

719

9,189

6,645

2.87

0.19

3.06

2.84

0.19

3.03

0.975

15.21

12,002

747

25,409

313

8,358

6,875

1.46

0.15

1.61

1.44

0.15

1.59

0.400

15.71

$ 55.73

50.33

39.88

33.01

29.25

44.24

53.58

1.6

0.65

39.47

49.03

1.8

0.54

27.29

39.84

1.8

0.62

21.55

29.60

2.2

0.60

19.33

27.24

1.8

0.56

Return on shareholders’ equity

7.7% (b-d)

20.2% (e-g)

11.6% (h-j)

17.9% (k-m)

11.4% (n-p)

CAPITAL EXPENDITURES

NUMBER OF EMPLOYEES

$ 1,366

58,000

1,198

64,000

1,383

65,000

$1,159

56,000

$775

53,000

FINANCIAL GLOSSARY

Current ratio—

current assets divided by current liabilities.

Total debt to capital ratio—

long-term debt plus notes payable and current
maturities of long-term debt divided by long-term
debt, notes payable and current maturities of long-
term debt and total shareholders’ equity.

Return on shareholders’ equity—

net earnings attributable to International Paper
Company divided by average shareholders’ equity
(computed monthly).

FOOTNOTES TO FIVE-YEAR FINANCIAL SUMMARY

(a) All periods presented have been restated to reflect
the xpedx business and the Temple-Inland Building
Products business as discontinued operations, if
applicable.

2014:

(c) Includes the operating earnings of the xpedx
business through the date of the spin-off on July 1,
2014, net pre-tax charges of $24 million ($16 million
after taxes) for costs associated with the spin-off of
the xpedx business, pre-tax charges of $1 million
(a gain of $1 million after taxes) for costs associated
with the restructuring of xpedx and pre-tax charges
of $16 million ($9 million after taxes) for costs
associated with the Building Products divestiture.

(d) Includes a tax benefit of $90 million related to
internal restructurings and a net tax expense of $9
million for other items.

2013:

(e) Includes restructuring and other charges of $156
million before taxes ($98 million after taxes)
including pre-tax charges of $25 million ($16 million
after taxes) for early debt extinguishment costs,
pre-tax charges of $118 million ($72 million after
taxes) for costs associated with the shutdown of
our Courtland, Alabama mill, a pre-tax gain of $30
million ($19 million after taxes) for insurance
reimbursements related to the 2012 Guaranty Bank
legal settlement, a pre-tax charge of $45 million
($28 million after taxes) for costs associated with
the permanent shutdown of a paper machine at our
Augusta, Georgia mill and a net pre-tax gain of $2
million (a loss of $1 million after taxes) for other
items. Also included are a pre-tax goodwill and
trade name intangible asset impairment of $127
million ($122 million after taxes) related to our India
Papers business, pre-tax charges of $9 million ($5
million after taxes) to adjust the value of two
Company airplanes to fair value, pre-tax charges
of $62 million ($38 million after taxes) for integration
costs associated with the acquisition of Temple-
Inland, pre-tax charges of $6 million ($4 million
after taxes) for an environmental reserve related to
the Company's property in Cass Lake, Minnesota,
and a gain of $13 million (before and after taxes)
related to a bargain purchase adjustment on the
acquisition of a majority share of our operations in
Turkey.

(f)

Includes the operating results of the xpedx
business for the full year and the Temple-Inland
Building Products business through the date of sale
in July 2013. Also includes pre-tax charges of $32
million ($19 million after taxes) for costs associated
with the restructuring of the Company's xpedx
operations, pre-tax charges of $22 million ($14
million after taxes) for costs associated with the
spin-off of our xpedx operations, a pre-tax goodwill
impairment charge of $400 million ($366 million
after taxes) related to our xpedx business and pre-
tax charges of $23 million ($19 million after taxes)
for expenses associated with the divestiture of the
Temple-Inland Building Products business.

(g) Includes a tax benefit of $744 million associated
with the closings of U.S. federal tax audits, a tax
benefit of $31 million for an income tax reserve
release and a net tax loss of $1 million for other
items.

2012:

taxes)

for costs associated with

(h) Includes restructuring and other charges of $65
million before taxes ($46 million after taxes)
including pre-tax charges of $48 million ($30
million after taxes) for early debt extinguishment
costs, pre-tax charges of $17 million ($12 million
after
the
the Company's Packaging
restructuring of
business in EMEA. Also included are a pre-tax
charge of $20 million ($12 million after taxes)
related to the write-up of the Temple-Inland
inventories to fair value, pre-tax charges of $164
million ($108 million after taxes) for integration
costs associated with the acquisition of Temple-
Inland, 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, and pre-tax
charges of $29 million ($55 million after taxes) for
costs associated with the divestiture of three
containerboard mills.

(i)

Includes the operating earnings of the xpedx
business and the Temple-Inland Building Products
business, pre-tax charges of $44 million ($28
million after taxes) for costs associated with the
restructuring of the Company's xpedx operations
and pre-tax charges of $15 million ($9 million after
taxes) for expenses associated with pursuing the
divestiture of the Temple-Inland Building Products
business.

(j)

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

tax assets related

(l)

taxes) for a fixed-asset impairment of the North
American Shorewood business, pre-tax charges 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 that 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.

Includes a pre-tax gain of $50 million ($30 million
after taxes) for an earnout provision related to the
sale of the Company’s Kraft Papers business
completed in January 2007. Also, the Company
sold its Brazilian Coated Paper business in the third
quarter 2006. Local country tax contingency
reserves were included in the business’ operating
results in 2005 and 2006 for which the related
statute of limitations has expired. The reserves
were reversed and a tax benefit of $15 million plus
associated interest income of $6 million ($4 million
after taxes) was recorded. Also included are the
operating results of our xpedx business and pre-
tax charges of $49 million ($34 million after taxes)
for costs associated with the restructuring of the
Company's xpedx business.

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

2011:

2010:

(k) Includes restructuring and other charges of $53
million before taxes ($32 million after taxes)
including pre-tax charges of $32 million ($19 million
after taxes) for early debt extinguishment costs,
pre-tax charges of $18 million ($12 million after
taxes) for costs associated with the acquisition of
a majority share of Andhra Pradesh Paper Mills
Limited in India, pre-tax charges of $20 million ($12
million after taxes) for costs associated with signing
an agreement to acquire Temple-Inland, and a pre-
tax gain of $24 million ($15 million after taxes)
related to the reversal of environmental and other
reserves due to the announced repurposing of a
portion of the Franklin mill. Also included are 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, a
pre-tax charge of $129 million ($104 million after

(n) Includes restructuring and other charges of $390
million before taxes ($239 million after taxes)
including pre-tax charges of $315 million ($192
million after taxes) for shutdown costs related to the
Franklin, Virginia mill, a pre-tax charge of $35
million ($21 million after taxes) for early debt
extinguishment costs, pre-tax charges of $7 million
($4 million after taxes) for closure costs related to
the Bellevue, Washington container plant, a pre-tax
charge of $11 million ($7 million after taxes) for an
Ohio Commercial Activity tax adjustment, a pre-tax
charge of $2 million ($1 million after taxes) for
severance and benefit costs associated with the
Company’s S&A reduction initiative, and a pre-tax
charge of $8 million ($5 million after taxes) for costs
associated with
the
Company’s Shorewood operations. Also included
are a pre-tax charge of $18 million ($11 million after

reorganization of

the

taxes) for an environmental reserve related to the
Company’s property in Cass Lake, Minnesota, and
a pre-tax gain of $25 million ($15 million after taxes)
related to the partial redemption of the Company’s
interests in Arizona Chemical.

(o) Includes the operating results of the Company's

xpedx business.

tax adjustments

(p) Includes tax expense of $14 million and $32 million
for
incentive
compensation and Medicare Part D deferred tax
write-offs, respectively, and a $40 million tax benefit
related to cellulosic bio-fuel tax credits.

ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

2014 with significant momentum, entering 2015 with a
particular focus on execution to drive continued earnings
growth and strong free cash flow.

EXECUTIVE SUMMARY

Operating Earnings (a non-GAAP measure) is defined as
net earnings from continuing operations (a GAAP
measure) excluding special items and non-operating
pension expense.
International Paper generated
Operating Earnings per diluted share attributable to
common shareholders of $3.00 in 2014, compared with
$3.06 in 2013, and $2.51 in 2012. Diluted earnings (loss)
per share attributable to common shareholders were
$1.29 in 2014, compared with $3.11 in 2013 and $1.80 in
2012.

International Paper delivered strong results during 2014,
driven by margin expansion in all our key businesses,
most notably in our North American Industrial Packaging
business. We generated record cash flow from
operations which enabled the Company to return cash to
our shareholders in the form of approximately $1 billion
in share buy-backs and a 14% increase in the quarterly
dividend beginning with the 2014 fourth quarter dividend
payment. Finally, with respect to our balanced use of
cash, we completed a bond issue and related tender offer
which enabled us to address outstanding debt due in 2018
and 2019 as well as shift from higher cost to lower cost
debt.

following

Our 2014 results reflect continued margin expansion
driven by sustained price improvements in our North
American Industrial Packaging business along with
improved pricing in our North American Printing Papers
and Consumer Packaging businesses. In aggregate,
volumes were down, largely due to declines in our North
American Printing Papers business
the
completion of the Courtland mill closure. Input costs
increased year over year largely due to higher wood costs
and higher energy costs, which were impacted by the
significant adverse weather events experienced in much
of the U.S. during the 2014 first quarter. Our Ilim joint
venture
operational
continued
performance in 2014 associated with the productivity
ramp-up of the two joint venture funded capital projects
and other efficiency improvements. Ilim’s 2014 results
were significantly impacted by unfavorable non-cash
foreign currency movements associated with Ilim’s U.S.
dollar denominated debt, particularly in the 2014 fourth
quarter. Finally, during 2014, we completed the spin-off
of the xpedx distribution business which included our
receipt of $411 million in special payments.

delivered

solid

Overall, 2014 reflects our successful efforts to drive
margin growth across all of our key businesses. We once
again generated returns in excess of our cost of capital
while returning cash to our shareholders in the form of
increased dividends and share repurchases. We exited

Looking ahead to the 2015 first quarter, we expect volume
to be largely flat with the exception of seasonally lower
volumes in our Brazilian and European Printing Papers
businesses. The fourth quarter historically represents the
strongest volume quarter for our Brazilian Printing Papers
business. Pricing is expected to be relatively stable except
for our European Printing Papers and European Industrial
Packaging businesses where pricing pressure continues
due to the challenging economic conditions. We expect
improved operating performance as we move past the
isolated issues that impacted the 2014 fourth quarter in
our North American Industrial Packaging and Brazil
Printing Papers businesses. Input costs should be
relatively stable in the 2015 first quarter with some
improvement in the North American Industrial Packaging
business, primarily related to lower energy and fuel costs.
Planned maintenance downtime costs should increase
primarily driven by outages in our North American
Industrial Packaging business. Equity earnings from our
Ilim joint venture are expected to benefit from the absence
of the significant negative impact from remeasurement of
Ilim’s U.S. dollar denominated debt due to devaluation of
the Russian ruble in the 2014 fourth quarter.

For the 2015 full year, we anticipate an overall challenging
macroeconomic environment but expect to benefit from
the strengthening U.S. economy. Even in those markets
facing economic headwinds, namely Brazil and Russia,
our low cost export position should enable us to effectively
navigate these challenges. There continues to be
significant optimization opportunities
in our North
American Industrial Packaging business which we expect
to further realize during 2015. Additionally, we expect
improvement in the results of our Brazilian Industrial
Packaging business along with the benefits of continued
margin expansion at the Ilim joint venture. We also expect
to take further advantage of the growing demand for fiber-
based food packaging. In addition, we expect to realize
the benefits of the repositioned North American Printing
Papers business
the
Courtland mill closure. Finally, we expect to generate
strong free cash flow results but we do expect some
impact from higher cash taxes driven by changes in our
geographic mix of earnings and other non-repeating
events that benefitted 2014 cash taxes.

the completion of

following

Free cash flow (a non-GAAP measure) of $2.1 billion
generated in 2014 was higher than the $1.8 billion
generated in 2013 and the $1.6 billion generated in 2012
(see reconciliation on page 32).

Operating Earnings per share attributable to common
shareholders of $0.53 in the 2014 fourth quarter were
lower than the $0.95 in the 2014 third quarter and the
$0.81 in the 2013 fourth quarter. Diluted earnings (loss)

per share attributable to common shareholders were
$0.32 in the 2014 fourth quarter, compared with $0.83 in
the 2014 third quarter and $0.98 in the 2013 fourth quarter.

Free cash flow of $739 million generated in the 2014 fourth
quarter was higher than the $696 million generated in the
2014 third quarter and the $598 million generated in the
2013 fourth quarter (see reconciliation on page 32).

Operating Earnings and Operating Earnings Per Share
are non-GAAP measures. Diluted earnings (loss) per
share attributable to International Paper Company
common shareholders is the most directly comparable
GAAP measure. The Company calculates Operating
Earnings by excluding the after-tax effect of items
considered by management to be unusual from the
earnings reported under GAAP, non-operating pension
expense and discontinued operations. 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. The Company believes that
using this information, along with the most directly
comparable GAAP measure, provides for a more
complete analysis of the results of operations. The
following are reconciliations of Operating Earnings per
share attributable to International Paper Company
common shareholders to diluted earnings (loss) per share
attributable to International Paper Company common
shareholders.

Operating Earnings (Loss) Per Share
Attributable to Shareholders

Non-operating pension expense

Special items

Diluted Earnings (Loss) Per Share from
Continuing Operations

Discontinued operations

Diluted Earnings (Loss) Per Share
Attributable to Shareholders

2014

2013

2012

$ 3.00 $ 3.06 $ 2.51

(0.30)

(0.44)

(0.26)

(1.39)

1.18

(0.62)

1.31

3.80

(0.02)

(0.69)

1.63

0.17

$ 1.29 $ 3.11 $ 1.80

Three Months
Ended
December 31,
2014

Three Months
Ended
September 30,
2014

Three Months
Ended
December 31,
2013

0.53

0.95

0.81

(0.07)

(0.12)

(0.08)

(0.11)

1.08

0.34

(0.02)

0.79

0.04

1.78

(0.80)

0.32

0.83

0.98

Operating
Earnings
(Loss) Per
Share
Attributable
to
Shareholders

Non-operating
pension
expense

Special items

Diluted
Earnings
(Loss) Per
Share from
Continuing
Operations

Discontinued
operations

Diluted
Earnings
(Loss) Per
Share
Attributable
to
Shareholders

Results of Operations

Industry segment operating profits are used by
International Paper’s management to measure the
earnings performance of its businesses. Management
believes that this measure allows a better understanding
of trends in costs, operating efficiencies, prices and
volumes. Industry segment operating profits are defined
as earnings before taxes, equity earnings, noncontrolling
items and
interests,
corporate special items. Industry segment operating
profits are defined by the Securities and Exchange
Commission as a non-GAAP financial measure, and are
not GAAP alternatives to net income or any other
operating measure prescribed by accounting principles
generally accepted in the United States.

interest expense, corporate

International Paper operates in three segments: Industrial
Packaging, Printing Papers and Consumer Packaging.

The following table presents a reconciliation of net
earnings (loss) attributable
International Paper
Company to its total industry segment operating profit:

In millions

2014

2013

2012

Net Earnings (Loss) Attributable to
International Paper Company

Deduct – Discontinued operations:

555 $ 1,395 $ 794

(Earnings) from operations

Special items (gain) loss

(11)

(109)

(120)

418

Earnings (Loss) From Continuing
Operations Attributable to
International Paper Company

Add back (deduct):

Income tax provision

Equity (earnings) loss, net of taxes

Net earnings (loss) attributable to
noncontrolling interests

Earnings (Loss) From Continuing
Operations Before Income Taxes
and Equity Earnings

Interest expense, net

Noncontrolling interests / equity
earnings included in operations

Corporate items

Special items:

Restructuring and other charges

Net losses (gains) on sales and
impairments of businesses

Non-Operating Pension Expense

Industry Segment Operating Profit

Industrial Packaging

Printing Papers

Consumer Packaging

568

1,704

717

123

200

(498)

306

(61)

(19)

(17)

872

601

1,228

612

282

212

(1)

—

323

967

671

—

(2)

159

$ 2,058 $ 2,233 $ 1,933

$ 1,896 $ 1,801 $ 1,066

(16)

178

271

161

599

268

Total Industry Segment Operating
Profit

$ 2,058 $ 2,233 $ 1,933

Industry segment operating profits in 2014 included a net
loss from special items of $732 million compared with
$336 million in 2013 and $286 million in 2012.
Operationally, compared with 2013, the benefit from
higher average sales price realizations and favorable mix
($563 million) and lower other costs ($16 million) were
offset by lower sales volumes ($35 million), higher
operating costs ($138 million), higher input costs ($141
million), higher maintenance outage costs ($3 million) and
higher costs associated with the closure of our Courtland,
Alabama mill ($41 million).

The principal changes in operating profit by segment
were as follows:

•

Industrial Packaging’s profits of $1.9 billion were $95
million higher than in 2013 as the net benefit of higher
average sales price realizations and mix were
partially offset by lower sales volumes, higher
operating costs, higher maintenance outage costs
and higher input costs. In addition, 2014 operating
profits included $16 million of costs associated with
the
integration of Temple-Inland, a goodwill
impairment charge of $100 million related to our Asia
Industrial Packaging business, a charge of $35
million for costs associated with a multi-employer
pension plan withdrawal liability and a net charge of
$7 million for other items. Operating profits in 2013
included $62 million of costs associated with the
integration of Temple-Inland and a $13 million gain
for a bargain purchase adjustment on the acquisition
of a majority share of our operations in Turkey.

• Printing Papers’ operating loss of $16 million
represented a $287 million reduction in operating
profits from 2013. The benefits of higher average
sales price realizations and a more favorable mix,
lower maintenance outage costs, the absence of a
provision for bad debt related to a large envelope
customer that was booked in 2013, and lower foreign
exchange and other costs were more than offset by
lower sales volumes, higher operating costs, higher
input costs and higher costs associated with the
closure of our Courtland, Alabama mill. The 2014
operating loss also included a special items charge
of $554 million for costs associated with the
shutdown of our Courtland, Alabama mill, a gain of
$20 million for the resolution of a legal contingency
in India and a charge of $32 million for costs
associated with a foreign tax amnesty program.
Operating profits in 2013 included $118 million of
costs associated with the shutdown of our Courtland,
Alabama mill and net charges of $123 million for the

impairment of the goodwill and a trade name
intangible asset of the Company's India Papers
business.

• Consumer Packaging’s profits of $178 million were
$17 million higher than in 2013. The benefits from
higher average sales price realizations and a
favorable mix were more than offset by lower sales
volumes, higher operating costs, higher planned
maintenance downtime costs, higher input costs and
higher other expenses. Operating profits in 2014
included $8 million of sheet plant closure costs.
Operating profits in 2013 included costs of $45
million associated with the permanent shutdown of
a paper machine at our Augusta, Georgia mill.

foreign exchange charge

Corporate items, net, of $51 million of expense in 2014
were lower than the $61 million of expense in 2013 due
to lower pension costs partially offset by a one-time non-
cash
the
administrative restructuring of some international entities.
The decrease in 2013 from the expense of $87 million in
2012 primarily reflects lower supply chain initiative
expenses.

Corporate special items, including restructuring and other
items and net losses on sales and impairments of
businesses were a loss of $320 million in 2014 compared
with a loss of $4 million in 2013 and a loss of $49 million
in 2012. The higher loss in 2014 is due to higher debt
extinguishment costs and a loss on the sale of a business
by ASG, in which we hold an investment, and the
subsequent partial impairment of our ASG investment

Interest expense, net, was $607 million ($601 million
excluding special items net interest expense reported in
the Printing Papers business segment) in 2014 compared
with $612 million in 2013 and $671 million in 2012. The
decrease in 2014 compared with 2013 reflects lower
average interest rates. The decrease in 2013 compared
with 2012 reflects lower average debt levels and the
reversal of interest reserves related to U.S. federal
income tax audits.

A net income tax provision of $123 million was recorded
for 2014, including a tax benefit of $90 million related to
internal restructurings and a net tax expense of $9 million
for other items. The 2013 income tax benefit of $498
million includes a tax benefit of $770 million associated
with the settlement of tax audits and a net tax benefit of
$4 million for other items. The 2012 income tax provision
of $306 million includes a net expense of $14 million
related to internal restructurings and an expense of $5
million to adjust deferred tax assets related to post-
retirement prescription drug coverage (Medicare Part D
reimbursements).

Discontinued Operations

2014: On July 1, 2014, International Paper completed
the spinoff of its distribution business, xpedx, which
subsequently merged with Unisource Worldwide, Inc.,
with the combined companies now operating as Veritiv
Corporation (Veritiv). The xpedx business had historically
represented
the Company's Distribution reportable
segment.

The spinoff was accomplished by the contribution of the
xpedx business to Veritiv and the distribution of 8,160,000
shares of Veritiv common stock on a pro-rata basis to
International Paper shareholders. International Paper
received payments of approximately $411 million,
financed with new debt in Veritiv's capital structure.

2013: On April 1, 2013, the Company finalized the sale
of Temple-Inland's 50% interest in Del-Tin Fiber L.L.C. to
joint venture partner Deltic Timber Corporation for $20
million in assumed liabilities and cash.

On July 19, 2013 the Company finalized the sale of its
Temple-Inland Building Products division to Georgia-
Pacific Building Products, LLC for approximately $726
million in cash.

2012: Upon
the acquisition of Temple-Inland,
management committed to a plan to sell the Temple-
Inland Building Products business, and on December 12,
2012, International Paper reached an agreement to sell
the business (including Del-Tin Fiber L.L.C.) to Georgia-
Pacific for $750 million in cash, subject to satisfaction of
customary closing conditions, including satisfactory
review by the DOJ, and to certain pre-and post-closing
purchase price adjustments. The assets to be sold
included 16 manufacturing facilities.

Liquidity and Capital Resources

For the year ended December 31, 2014, International
Paper generated $3.1 billion of cash flow from operations
compared with $3.0 billion in 2013. Cash flow from
operations included $353 million and $31 million of cash
pension contributions in 2014 and 2013, respectively.
Capital spending for 2014 totaled $1.4 billion, or 97% of
depreciation and amortization expense. Net decreases in
debt totaled $113 million. Our liquidity position remains
strong, supported by approximately $2.0 billion of credit
facilities that we believe are adequate to meet future
liquidity requirements. Maintaining an investment-grade
credit rating for our long-term debt continues to be an
important element in our overall financial strategy.

We expect to generate strong free cash flow again in 2015
and will continue our balanced use of cash through
investments in capital projects, the reduction of total debt,
including the Company’s unfunded pension obligation,
returning value to shareholders and strengthening our

businesses
appropriate.

through

strategic

acquisitions,

Capital spending for 2015 is targeted at $1.5 billion, or
about 105% of depreciation and amortization.

Legal

See Note 11 Commitments and Contingent Liabilities on
pages 64 through 67 of Item 8. Financial Statements and
Supplementary Data for a discussion of legal matters.

CORPORATE OVERVIEW

While the operating results for International Paper’s
various business segments are driven by a number of
business-specific factors, changes in International
Paper’s operating results are closely tied to changes in
general economic conditions in North America, Europe,
Russia, Latin America, Asia, Africa and the Middle East.
Factors that impact the demand for our products include
industrial non-durable goods production, consumer
spending, commercial printing and advertising activity,
white-collar employment levels, and movements in
currency exchange rates.

Product prices are affected by general economic
trends, inventory levels, currency exchange rate
movements and worldwide capacity utilization. In
addition to these revenue-related factors, net earnings
are impacted by various cost drivers, the more
significant of which include changes in raw material
costs, principally wood, recycled fiber and chemical
costs; energy costs; freight costs; salary and benefits
costs,
including pensions; and manufacturing
conversion costs.

The following is a discussion of International Paper’s
results of operations for the year ended December 31,
2014, and the major factors affecting these results
compared to 2013 and 2012.

RESULTS OF OPERATIONS

For the year ended December 31, 2014, International
Paper reported net sales of $23.6 billion, compared with
$23.5 billion in 2013 and $21.9 billion in 2012.
International net sales (including U.S. exports) totaled
$9.3 billion or 39% of total sales in 2014. This compares
with international net sales of $9.5 billion in 2013 and
$8.4 billion in 2012.

Full year 2014 net earnings attributable to International
Paper Company totaled $555 million ($1.29 per share),
compared with net earnings of $1.4 billion ($3.11 per
share) in 2013 and $794 million ($1.80 per share) in
2012. Amounts in all periods include the results of
discontinued operations.

Earnings from continuing operations attributable to
International Paper Company after taxes in 2014 were

$568 million, including $599 million of net special items
charges and $129 million of non-operating pension
expense compared with $1.7 billion, including $528
million of net special items gains and $197 million of
non-operating pension expense in 2013, and $717
million, including $272 million of net special items
charges and $113 million of non-operating pension
expense in 2012. Compared with 2013, the benefit from
higher average sales price realizations and mix, lower
corporate and other costs and lower interest expense
were offset by lower sales volumes, higher operating
costs, higher maintenance outage costs, higher input
costs, higher costs associated with the closure of the
Courtland mill, and higher tax expense. In addition,
2014 results included lower equity earnings, net of
taxes, relating to the Company’s investment in Ilim
Holdings, SA.

See Industry Segment Results on pages 27 through 31
for a discussion of the impact of these factors by
segment.

Discontinued Operations

2014:

In 2014, $24 million of net income adjustments were
recorded relating to discontinued businesses, including
$16 million of costs associated with the spin-off of the
xpedx business and $9 million of costs associated with
the divestiture of the Temple-Inland Building Products
business. Also included are the operating earnings of
the xpedx business prior to the spin-off on July 1, 2014.

2013:

In 2013, $418 million of net income adjustments were
recorded relating to discontinued businesses, including
goodwill impairment charges of $366 million associated
with the xpedx business, $19 million for costs
associated with the restructuring of the xpedx business,
$14 million for costs associated with the spin-off of the
xpedx business and $19 million for costs associated
with the sale of the Temple-Inland Building Products
business. Also included are the operating profits for the
xpedx business for the full year and for the Temple-

Inland Building Products business through the date of
sale of July 19, 2013.

2012:

In 2012, $43 million of net income adjustments were
recorded relating to discontinued businesses, including
$33 million of costs associated with the restructuring of
the xpedx business and $9 million of costs associated
with the announced agreement to sell the Temple-
Inland Building Products business. Also included are
the operating profits for the xpedx and Temple-Inland
Building Products businesses.

Income Taxes

A net income tax provision of $123 million was recorded
for 2014, including a tax benefit of $90 million related
to internal restructurings and a net $9 million tax
expense for other items. Excluding these items, a $372
million net tax benefit for other special items and a $83
million tax benefit related to non-operating pension
expense, the tax provision was $659 million, or 31% of
pre-tax earnings before equity earnings.

A net income tax benefit of $498 million was recorded
for 2013 including a tax benefit of $770 million related
to the settlement of tax audits and a net benefit of $4
million for other items. Excluding these items, a $95
million net tax benefit for other special items and a $126
million tax benefit related to non-operating pension
expense, the tax provision was $497 million, or 26% of
pre-tax earnings before equity earnings.

A net income tax provision of $306 million was recorded
for 2012, including a net tax 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). Excluding these items, an $82
million net tax benefit for other special items and a $46
million tax benefit related to non-operating pension
expense, the tax provision was $415 million, or 28% of
pre-tax earnings before equity earnings.

Equity Earnings, Net of Taxes

Equity earnings, net of taxes in 2014, 2013 and 2012
consisted principally of the Company’s share of
earnings from its 50% investment in Ilim Holding S.A.
in Russia (see page 31).

Corporate Items and Interest Expense

Corporate items totaled $51 million of expense for the
year ended December 31, 2014 compared with $61
million in 2013 and $87 million in 2012. The decrease
in 2014 from 2013 reflects lower pension expenses
partially offset by a one-time non-cash
foreign
exchange charge related to the administrative
restructuring of some international entities. The

decrease in 2013 from 2012 reflects lower supply chain
initiative expenses, partially offset by higher pension
expense.

Net corporate interest expense totaled $601 million in
2014, $612 million in 2013 and $671 million in 2012.
The decrease in 2014 compared with 2013 reflects
lower average interest rates. The decrease in 2013
compared with 2012 reflects lower average debt levels
and the reversal of interest reserves related to U.S.
federal income tax audits.

Net earnings attributable to noncontrolling interests
totaled a loss of $19 million in 2014 compared with a
loss of $17 million in 2013 and earnings of $5 million
in 2012. The decrease in 2014 reflects the impact of
the acquisition of the remaining 25% share of Orsa IP
from the joint venture partner. The decrease in 2013
primarily reflects lower earnings for the Shandong IP &
Sun Food Packaging Co., Ltd. joint venture in China
due to competitive pressures on sales prices and higher
pulp costs. In addition, 2013 includes a $15 million pre-
tax charge for the impairment of a tradename intangible
asset related to our India Papers business which has a
net $3 million impact on noncontrolling interest.

Special Items

Restructuring and Other Charges

International Paper continually evaluates its operations
for improvement opportunities targeted to (a) focus our
portfolio on our core businesses, (b) rationalize and
realign capacity to operate fewer facilities with the same
revenue capability and close high cost facilities, and
(c) reduce costs. Annually, strategic operating plans are
developed by each of our businesses. If it subsequently
becomes apparent that a facility’s plan will not be
achieved, a decision is then made to (a) invest
additional capital to upgrade the facility, (b) shut down
the facility and record the corresponding charge, or
(c) evaluate the expected recovery of the carrying value
of the facility to determine if an impairment of the asset
value of the facility has occurred. In recent years, this
policy has led to the shutdown of a number of facilities
and the recording of significant asset impairment
charges and severance costs. It is possible that
additional charges and costs will be incurred in future
periods in our core businesses should such triggering
events occur.

2014: During 2014, corporate restructuring and other
charges totaling $277 million before taxes ($169 million
after taxes) were recorded. These charges included:

taxes)

a $276 million charge before taxes ($169 million
after
the early
for costs related
extinguishment of debt (see Note 13 Debt and
Lines of Credit on pages 69 and 70 of Item 8.
Financial Statements and Supplementary Data)

•

In addition, restructuring and other charges totaling
$569 million before taxes ($349 million after taxes) were
recorded in the Industrial Packaging, Printing Papers
and Consumer Packaging industry segments including:

In addition, restructuring and other charges totaling $14
million before taxes ($11 million after taxes) were
recorded in the Industrial Packaging and Consumer
Packaging industry segments including:

•

a $554 million charge before taxes ($338 million
after taxes) for costs related to the shutdown of
the Courtland, Alabama mill, and

a $15 million charge before taxes ($11 million after
taxes) for other items.

•

a $17 million charge before taxes ($12 million after
taxes) related to the restructuring of our Packaging
business in EMEA, and

a $3 million gain before taxes ($1 million after
taxes) for other items.

2013: During 2013, corporate restructuring and other
charges totaling a gain of $5 million before taxes ($3
million after taxes) were recorded. These charges
included:

•

a $25 million charge before taxes ($16 million after
taxes) for costs related to the early extinguishment
of debt (see Note 13 Debt and Lines of Credit on
pages 69 and 70 of Item 8. Financial Statements
and Supplementary Data), and

a $30 million gain before taxes ($19 million after
taxes) for insurance reimbursements related to
the Guaranty Bank legal settlement.

In addition, restructuring and other charges totaling
$161 million before taxes ($101 million after taxes) were
recorded in the Industrial Packaging, Printing Papers
and Consumer Packaging industry segments including:

•

a $118 million charge before taxes ($72 million
after taxes) for costs related to the shutdown of
the Courtland, Alabama mill,

a $45 million charge before taxes ($28 million after
taxes) for costs related to the shutdown of a paper
machine at the Augusta, Georgia mill, and

a $2 million gain before taxes (loss of $1 million
after taxes) for other items.

2012: During 2012, corporate restructuring and other
charges totaling $51 million before taxes ($35 million
after taxes) were recorded. These charges included:

•

a $48 million charge before taxes ($30 million after
taxes) for costs related to the early extinguishment
of debt (see Note 13 Debt and Lines of Credit on
pages 69 and 70 of Item 8. Financial Statements
and Supplementary Data), and

•

a $3 million charge before taxes ($5 million after
taxes) for other items.

Impairments of Goodwill

In the fourth quarter of 2014, in conjunction with the
annual testing of its reporting units for possible goodwill
impairments, the Company calculated the estimated
fair value of its Asia Industrial Packaging business using
expected discounted future cash flows and determined
that due to a change in the strategic outlook, all of the
goodwill of this business, totaling $100 million, should
be written off. The decline in the fair value of the Asia
Industrial Packaging business and resulting impairment
charge was due to a change in the strategic outlook for
the business.

In the fourth quarter of 2013, in conjunction with the
annual testing of its reporting units for possible goodwill
impairments, the Company calculated the estimated
fair value of its India Papers business using expected
discounted future cash flows and determined that due
to a change in the strategic outlook, all of the goodwill
of this business, totaling $112 million, should be written
off. The decline in the fair value of the India Papers
reporting unit and resulting impairment charge was due
to a change in the strategic outlook for the India Papers
operations.

Also in the fourth quarter of 2013, the Company
calculated the estimated fair value of its xpedx business
using the discounted future cash flows and wrote off all
of the goodwill of its xpedx business, totaling $400
million, which has been included in Discontinued
operations
the accompanying consolidated
statement of operations. The decline in the fair value of
the xpedx reporting unit and resulting impairment
charge was due to a significant decline in earnings and
a change in the strategic outlook for the xpedx
operations.

Also during 2013, the Company recorded a pre-tax
charge of $15 million ($7 million after taxes and
noncontrolling interest) for the impairment of a trade
name intangible asset related to our India Papers
business.

No goodwill impairment charges were recorded in
2012.

Net Losses (Gains) on Sales and Impairments of
Businesses

Net losses (gains) on sales and impairments of
businesses included in special items totaled a pre-tax
loss of $38 million ($31 million after taxes) in 2014, a
pre-tax loss of $3 million ($1 million after taxes) in 2013
and a pre-tax loss of $86 million ($87 million after taxes)
in 2012. The principal components of these gains/
losses were:

2014: During 2014, the Company recorded net pre-tax
charges of $47 million ($36 million after taxes) for a loss
on the sale of a business by ASG in which we hold an
investment and the subsequent partial impairment of
our ASG investment, and a pre-tax gain of $9 million
($5 million after taxes) related to the sale of an
investment.

2013: During 2013, the Company recorded net pre-tax
charges of $3 million ($1 million after taxes) for
three
adjustments related
containerboard mills in 2012 and the sale of the
Shorewood business.

the divestiture of

2012: As referenced in Note 6 Acquisitions and Joint
Ventures on pages 56 through 59 in Item. 8 Financial
Statements and Supplementary Data, on July 2, 2012,
International Paper finalized the sales of its Ontario and
Oxnard (Hueneme), California containerboard mills to
its New
New-Indy Containerboard LLC, and
Johnsonville, Tennessee containerboard mill to Hood
Container Corporation. During 2012, the Company
recorded pre-tax charges of $29 million ($55 million
after taxes) for costs associated with the divestitures of
these mills. Also during 2012, in anticipation of the
divestiture of the Hueneme mill, a pre-tax charge of $62
million ($38 million after taxes) was recorded to adjust
the long-lived assets of the mill to their fair value.

Industry Segment Operating Profits

Industry segment operating profits of $2.1 billion in 2014
decreased from $2.2 billion in 2013. The benefits from
higher average sales price realizations and mix ($563
million) and lower other costs ($16 million) were offset
by lower sales volumes ($35 million), higher operating
costs ($138 million), higher input costs ($141 million),
higher mill outage costs ($3 million) and higher costs
associated with the closure of our Courtland, Alabama
mill ($41 million). Special items were a $732 million net
loss in 2014 compared with a net loss of $336 million
in 2013.

Market-related downtime
approximately 281,000
412,000 tons in 2013.

in 2014 decreased

to
from approximately

tons

DESCRIPTION OF INDUSTRY SEGMENTS

International Paper’s industry segments discussed
below are consistent with the internal structure used to
these businesses. All segments are
manage
differentiated on a common product, common customer
basis consistent with the business segmentation
generally used in the forest products industry.

Industrial Packaging

International Paper is the largest manufacturer of
containerboard in the United States. Our production
capacity is about 13 million tons annually. Our products
include
recycled
linerboard, medium, whitetop,
linerboard, recycled medium and saturating kraft. About
80% of our production is converted domestically into
corrugated boxes and other packaging by our 168 U.S.
container plants. Additionally, we recycle approximately
one million tons of OCC and mixed and white paper
through our 20 recycling plants. In EMEA, our
operations include three recycled fiber containerboard
mills in Morocco and Turkey and 27 container plants in
France, Italy, Spain, Morocco and Turkey. In Brazil our
operations include three containerboard mills and four
box plants. In Asia, our operations include 17 container
plants in China and additional container plants in
Indonesia, Malaysia, Singapore, and Thailand. Our
container plants are supported by regional design
centers, which offer total packaging solutions and
supply chain initiatives.

Printing Papers

International Paper is one of the world’s leading
producers of printing and writing papers. Products in
this segment include uncoated papers and pulp.

Uncoated Papers: This business produces papers for use
in copiers, desktop and laser printers and digital
imaging. End use applications include advertising and
promotional materials such as brochures, pamphlets,
greeting cards, books, annual reports and direct mail.
Uncoated papers also produces a variety of grades that
are converted by our customers into envelopes, tablets,
business forms and file folders. Uncoated papers are
sold under private label and International Paper brand
names
include Hammermill, Springhill,
Williamsburg, Postmark, Accent, Great White,
Chamex, Ballet, Rey, Pol, and Svetocopy. The mills
producing uncoated papers are located in the United
States, France, Poland, Russia, Brazil and India. The
mills have uncoated paper production capacity of
approximately 4 million
tons annually. Brazilian
operations function through International Paper do
Brasil, Ltda, which owns or manages approximately
334,000 acres of forestlands in Brazil.

that

Pulp: Pulp is used in the manufacture of printing, writing
and specialty papers, towel and tissue products and
filtration products. Pulp is also converted into products
such as diapers and sanitary napkins. Pulp products
include fluff, and southern softwood pulp, as well as
southern and birch hardwood paper pulps. These
products are produced in the United States, France,
Poland, Russia, and Brazil and are sold around the
world. International Paper facilities have annual dried
pulp capacity of about 1.8 million tons.

Consumer Packaging

International Paper is the world’s largest producer of
solid bleached sulfate board with annual U.S.
production capacity of about 1.6 million tons. Our
coated paperboard business produces high quality
coated paperboard for a variety of packaging and
commercial printing end uses. Our Everest®, Fortress®,
and Starcote® brands are used
in packaging
applications for everyday products such as food,
cosmetics, pharmaceuticals, computer software and
tobacco products. Our Carolina® brand is used in
commercial printing end uses such as greeting cards,
paperback book covers, lottery tickets, direct mail and
point-of-purchase advertising. Our U.S. capacity is
supplemented by about 352,000 tons of capacity at our
mills producing coated board in Poland and Russia and
by our International Paper & Sun Cartonboard Co., Ltd.
joint venture in China which has annual capacity of 1.4
million tons.

Our Foodservice business produces cups, lids, food
containers and plates through three domestic plants
and four international facilities.

Ilim Holding S.A.

In October 2007, International Paper and Ilim Holding
S.A. (Ilim) completed a 50:50 joint venture to operate a
pulp and paper business located in Russia. Ilim’s
facilities include three paper mills located in Bratsk, Ust-
Ilimsk, and Koryazhma, Russia, with combined total
pulp and paper capacity of over 3.2 million tons. Ilim
has exclusive harvesting rights on timberland and forest
areas exceeding 14.1 million acres (5.7 million
hectares).

Products and brand designations appearing in italics
are trademarks of International Paper or a related
company.

INDUSTRY SEGMENT RESULTS

Industrial Packaging

Demand for Industrial Packaging products is closely
correlated with non-durable
industrial goods
production, as well as with demand for processed foods,

poultry, meat and agricultural products. In addition to
prices and volumes, major factors affecting the
profitability of Industrial Packaging are raw material and
energy costs, freight costs, manufacturing efficiency
and product mix.

impairment charges,

Industrial Packaging net sales and operating profits
include the results of the Temple-Inland packaging
operations from the date of acquisition in February 2012
and the results of the Brazil Packaging business from
the date of acquisition in January 2013. In addition, due
to the acquisition of a majority share of Olmuksa
International Paper Sabanci Ambalaj Sanayi Ve Ticaret
A.S., (now called Olmuksan International Paper or
Olmuksan) net sales for our corrugated packaging
business in Turkey are included in the business
segment totals beginning in the first quarter of 2013 and
the operating profits reflect a higher ownership
percentage than in previous years. Net sales for 2014
increased 1% to $14.9 billion compared with $14.8
billion in 2013, and 13% compared with $13.3 billion in
2012. Operating profits were 5% higher in 2014 than in
2013 and 78% higher than in 2012. Excluding costs
associated with the acquisition and integration of
Temple-Inland, goodwill
the
three containerboard mills, costs
divestiture of
associated with a multi-employer pension liability and
other special items, operating profits in 2014 were 11%
higher than in 2013 and 52% higher than in 2012.
Benefits from the net impact of higher average sales
price realizations and mix ($308 million) were offset by
lower sales volumes ($12 million), higher operating
costs ($21 million), higher maintenance outage costs
($20 million), higher input costs ($49 million) and higher
other costs ($1 million). Additionally, operating profits
in 2014 include a goodwill impairment charge of $100
million related
Industrial Packaging
business, costs of $16 million associated with the
integration of Temple-Inland, a charge of $35 million
associated with a multi-employer pension plan
withdrawal liability and a net charge of $7 million for
other items, while operating profits in 2013 include costs
of $62 million associated with the integration of Temple-
Inland, a gain of $13 million related to a bargain
purchase adjustment on the acquisition of a majority
share of our operations in Turkey, and a net gain of $1
million for other items.

to our Asia

Industrial Packaging
In millions

Sales

Operating Profit

2013

2014

2012
$ 14,944 $ 14,810 $ 13,280
1,066

1,801

1,896

North American Industrial Packaging net sales were $12.7
billion in 2014 compared with $12.5 billion in 2013 and
$11.6 billion in 2012. Operating profits in 2014 were
$2.0 billion (both including and excluding costs
associated with the integration of Temple-Inland, a
multi-employer pension withdrawal liability and other

special items) compared with $1.8 billion (both including
and excluding costs associated with the integration of
Temple-Inland and other special items) in 2013 and
$1.0 billion ($1.3 billion excluding costs associated with
the acquisition and integration of Temple-Inland and mill
divestiture costs) in 2012.

profits included net gains of $2 million and $13 million
in 2014 and 2013, respectively,
insurance
settlements and Italian government grants, partially
offset by additional operating costs in 2013, related to
the earthquakes in Northern Italy in May 2012, which
affected our San Felice box plant.

for

Sales volumes decreased in 2014 compared with 2013
reflecting slightly softer market demand for boxes.
Average sales price realizations were higher mainly due
to the realization of price increases for boxes and
domestic containerboard that were implemented in
2013. Input costs were significantly higher for wood and
increased. Planned
energy. Freight costs also
maintenance downtime costs were $20 million higher
than
in 2013. Manufacturing operating costs
decreased, but were offset by inflation and higher
overhead and distribution costs. The business took
about 655,000 tons of total downtime in 2014 of which
240,000 were market-related and 415,000 were
maintenance downtime. In 2013, the business took
about 777,000 tons of total downtime of which about
377,000 were market-related and 400,000 were
maintenance downtime. Operating profits in 2014
included $16 million of costs associated with the
integration of Temple-Inland and a charge of $35 million
associated with a multi-employer pension withdrawal
liability. Operating profits in 2013 included $62 million
of costs associated with the integration of Temple-
Inland.

Looking ahead to 2015, compared with the fourth
quarter of 2014, sales volumes for boxes in the first
quarter are expected to be stable. Input costs are
expected to be similar for wood and recycled fiber, but
lower for mill energy. Planned maintenance downtime
spending is expected to be about $18 million higher with
outages scheduled at
the Pine Hill, Savannah,
Pensacola and Vicksburg mills. Manufacturing and
other operating costs are expected to improve.

EMEA Industrial Packaging net sales in 2014 and 2013
include the sales of our packaging operations in Turkey
which are fully consolidated as of the beginning of 2013.
Net sales were $1.3 billion in 2014 compared with $1.3
billion in 2013 and $1.0 billion in 2012. Operating profits
in 2014 were $25 million ($31 million excluding
restructuring costs) compared with $43 million ($32
million excluding a gain on a bargain purchase price
adjustment on the acquisition of a majority share of our
operations in Turkey and restructuring costs) in 2013
and $53 million ($72 million excluding restructuring
costs) in 2012.

Sales volumes in 2014 were higher than in 2013
recovering economic conditions and
reflecting
improved demand for industrial packaging. Average
sales margins were higher due to increased sales prices
for boxes, partially offset by higher board costs. Other
input costs, primarily for energy, were lower. Operating

Entering the first quarter of 2015, sales volumes are
expected to increase slightly reflecting continuing
economic recovery. Average sales margins are
expected to be favorably impacted by lower board
costs, but box prices may decline due to competitive
pressures. Other input costs should be about flat.

Brazilian Industrial Packaging net sales were $349 million
in 2014 compared with $335 million in 2013. Operating
profits in 2014 were a loss of $3 million ($4 million
excluding a net gain related to acquisition and
integration costs) compared with a loss of $2 million (a
net gain of $2 million excluding acquisition and
integration costs) in 2013.

Sales volumes in 2014 decreased compared with 2013
due to overall weaker market demand and lower box
consumption in the product segments of some of our
key customers. Average sales price realizations were
higher reflecting the impact of sales price increases
implemented in the first half of 2014. Input costs were
higher, primarily for recycled fiber and chemicals.
Operating costs were higher.

Looking ahead to the first quarter of 2015, sales
volumes are expected to be stable. Average sales
margins should improve reflecting a more favorable
product mix. Input costs are expected to be stable.

Asian Industrial Packaging net sales were $625 million in
2014 compared with $685 million in 2013 and $660
million in 2012. Operating profits were a loss of $112
million (a loss of $5 million excluding goodwill
impairment charges and restructuring costs) in 2014
compared with a loss of $2 million (a gain of $2 million
excluding restructuring costs) in 2013 and a gain of $5
million in 2012. Operating profits were negatively
impacted in 2014 compared with 2013 by lower average
sales margins and lower sales volumes, partially offset
by decreased operating costs Looking ahead to the
first quarter of 2015, sales volumes and average sales
margins are expected to be seasonally soft.

Printing Papers

Demand for Printing Papers products is closely
correlated with changes in commercial printing and
advertising activity, direct mail volumes and, for
uncoated cut-size products, with changes in white-
collar employment levels that affect the usage of copy
and laser printer paper. Pulp is further affected by
changes in currency rates that can enhance or
in different geographic
disadvantage producers

regions. Principal cost drivers include manufacturing
efficiency, raw material and energy costs and freight
costs.

in 2012. Excluding

Printing Papers net sales for 2014 decreased 8% to $5.7
billion compared with $6.2 billion in 2013 and 8%
compared with $6.2 billion in 2012. Operating profits in
2014 were 106% lower than in 2013 and 103% lower
facility closure costs,
than
impairment costs and other special items, operating
profits in 2014 were 7% higher than in 2013 and 8%
lower than in 2012. Benefits from higher average sales
price realizations and a favorable mix ($178 million),
lower planned maintenance downtime costs ($26
million), the absence of a provision for bad debt related
to a large envelope customer that was booked in 2013
($28 million), and lower foreign exchange and other
costs ($25 million) were offset by lower sales volumes
($82 million), higher operating costs ($49 million),
higher input costs ($47 million), and costs associated
with the closure of our Courtland, Alabama mill ($41
million). In addition, operating profits in 2014 include
special items costs of $554 million associated with the
closure of our Courtland, Alabama mill. During 2013,
the Company accelerated depreciation for certain
Courtland assets, and evaluated certain other assets
for possible alternative uses by one of our other
businesses. The net book value of these assets at
December 31, 2013 was approximately $470 million.
In the first quarter of 2014, we completed our evaluation
and concluded that there were no alternative uses for
these assets. We recognized approximately $464
million of accelerated depreciation related to these
assets in 2014. Operating profits in 2014 also include
a charge of $32 million associated with a foreign tax
amnesty program, and a gain of $20 million for the
resolution of a legal contingency in India, while
operating profits in 2013 included costs of $118 million
the announced closure of our
associated with
Courtland, Alabama mill and a $123 million impairment
charge associated with goodwill and a trade name
intangible asset in our India Papers business.

Printing Papers

In millions

Sales

Operating Profit (Loss)

2013

2014

2012
$ 5,720 $ 6,205 $ 6,230
599

(16)

271

North American Printing Papers net sales were $2.1 billion
in 2014, $2.6 billion in 2013 and $2.7 billion in 2012.
Operating profits in 2014 were a loss of $398 million
(a gain of $156 million excluding costs associated with
the shutdown of our Courtland, Alabama mill) compared
with gains of $36 million ($154 million excluding costs
associated with the Courtland mill shutdown) in 2013
and $331 million in 2012.

Sales volumes in 2014 decreased compared with 2013
due to lower market demand for uncoated freesheet

paper and the closure our Courtland mill. Average sales
price realizations were higher, reflecting sales price
increases in both domestic and export markets. Higher
input costs for wood were offset by lower costs for
chemicals, however freight costs were higher. Planned
maintenance downtime costs were $14 million lower in
2014. Operating profits in 2014 were negatively
impacted by costs associated with the shutdown of our
Courtland, Alabama mill but benefited from the absence
of a provision for bad debt related to a large envelope
customer that was recorded in 2013.

Entering the first quarter of 2015, sales volumes are
expected to be stable compared with the fourth quarter
of 2014. Average sales margins should improve
reflecting a more favorable mix although average sales
price realizations are expected to be flat. Input costs
are expected to be stable. Planned maintenance
downtime costs are expected to be about $16 million
lower with an outage scheduled in the 2015 first quarter
at our Georgetown mill compared with outages at our
Eastover and Riverdale mills in the 2014 fourth quarter.

Brazilian Papers net sales for 2014 were $1.1 billion
compared with $1.1 billion in 2013 and $1.1 billion in
2012. Operating profits for 2014 were $177 million
($209 million excluding costs associated with a tax
amnesty program) compared with $210 million in 2013
and $163 million in 2012.

freesheet paper due

Sales volumes in 2014 were about flat compared with
2013. Average sales price realizations improved for
domestic uncoated
the
realization of price increases implemented in the
second half of 2013 and in 2014. Margins were
favorably affected by an increased proportion of sales
to the higher-margin domestic market. Raw material
costs increased for wood and chemicals. Operating
in 2013 and planned
costs were higher
maintenance downtime costs were flat.

than

Looking ahead to 2015, sales volumes in the first
quarter are expected to decrease due to seasonally
weaker customer demand for uncoated freesheet
paper. Average sales price improvements are expected
to reflect the partial realization of announced sales price
increases in the Brazilian domestic market for uncoated
freesheet paper. Input costs are expected to be flat.
Planned maintenance outage costs should be $5 million
lower with an outage scheduled at the Luiz Antonio mill
in the first quarter.

European Papers net sales in 2014 were $1.5 billion
compared with $1.5 billion in 2013 and $1.4 billion in
2012. Operating profits in 2014 were $140 million
compared with $167 million in 2013 and $179 million in
2012.

Compared with 2013, sales volumes for uncoated
freesheet paper in 2014 were slightly higher in both

Russia and Europe. Average sales price realizations
for uncoated freesheet paper decreased in both Europe
and Russia, reflecting weak economic conditions and
soft market demand. In Russia, sales prices in rubles
increased, but this improvement is masked by the
impact of the currency depreciation against the U.S.
dollar. Input costs were significantly higher for wood in
both Europe and Russia, partially offset by lower
chemical costs. Planned maintenance downtime costs
were $11 million lower in 2014 than in 2013.
Manufacturing and other operating costs were
favorable.

Entering 2015, sales volumes in the first quarter are
expected to be seasonally weaker in Russia, and about
flat in Europe. Average sales price realizations for
uncoated freesheet paper are expected to remain
steady in Europe, but increase in Russia. Input costs
should be lower for oil and wood, partially offset by
higher chemicals costs.

Indian Papers net sales were $178 million in 2014, $185
million ($174 million excluding excise duties which were
included in net sales in 2013 and prior periods) in 2013
and $185 million ($178 million excluding excise duties)
in 2012. Operating profits were $8 million (a loss of $12
million excluding a gain related to the resolution of a
legal contingency) in 2014, a loss of $145 million (a loss
of $22 million excluding goodwill and trade name
impairment charges) in 2013 and a loss of $16 million
in 2012.

Average sales price realizations improved in 2014
compared with 2013 due to the impact of price
increases implemented in 2013. Sales volumes were
flat, reflecting weak economic conditions. Input costs
were higher, primarily for wood. Operating costs and
planned maintenance downtime costs were lower in
2014. Looking ahead to the first quarter of 2015, sales
volumes are expected to be seasonally higher. Average
sales price realizations are expected to decrease due
to competitive pressures.

Asian Printing Papers net sales were $59 million in 2014,
$90 million in 2013 and $85 million in 2012. Operating
profits were $0 million in 2014 and $1 million in both
2013 and 2012.

U.S. Pulp net sales were $895 million in 2014 compared
with $815 million in 2013 and $725 million in 2012.
Operating profits were $57 million in 2014 compared
with $2 million in 2013 and a loss of $59 million in 2012.

Sales volumes in 2014 increased from 2013 for both
fluff pulp and market pulp reflecting improved market
demand. Average sales price realizations increased
significantly for fluff pulp, while prices for market pulp
were also higher. Input costs for wood and energy were
higher. Operating costs were lower, but planned
maintenance downtime costs were $1 million higher.

Compared with the fourth quarter of 2014, sales
volumes in the first quarter of 2015, are expected to
decrease for market pulp, but be slightly higher for fluff
pulp. Average sales price realizations are expected to
to be stable for fluff pulp and softwood market pulp,
while hardwood market pulp prices are expected to
improve.
flat. Planned
maintenance downtime costs should be about $13
million higher than in the fourth quarter of 2014.

Input costs should be

Consumer Packaging

Demand and pricing for Consumer Packaging products
correlate closely with consumer spending and general
economic activity. In addition to prices and volumes,
major factors affecting the profitability of Consumer
Packaging are raw material and energy costs, freight
costs, manufacturing efficiency and product mix.

Consumer Packaging net sales in 2014 decreased 1%
from 2013, but increased 7% from 2012. Operating
profits increased 11% from 2013, but decreased 34%
from 2012. Excluding sheet plant closure costs, costs
associated with the permanent shutdown of a paper
machine at our Augusta, Georgia mill and costs related
to the sale of the Shorewood business, 2014 operating
profits were 11% lower than in 2013, and 30% lower
than in 2012. Benefits from higher average sales price
realizations and a favorable mix ($60 million) were
offset by lower sales volumes ($11 million), higher
($9 million), higher planned
operating costs
maintenance downtime costs ($12 million), higher input
costs ($43 million) and higher other costs ($7 million).
In addition, operating profits in 2014 include $8 million
of costs associated with sheet plant closures, while
operating profits in 2013 include costs of $45 million
related to the permanent shutdown of a paper machine
at our Augusta, Georgia mill and $2 million of costs
associated with the sale of the Shorewood business.

Consumer Packaging

In millions
Sales

Operating Profit

2013

2014

2012
$ 3,403 $ 3,435 $ 3,170
268

178

161

North American Consumer Packaging net sales were $2.0
billion in 2014 compared with $2.0 billion in 2013 and
$2.0 billion in 2012. Operating profits were $92 million
($100 million excluding sheet plant closure costs) in
2014 compared with $63 million ($110 million excluding
paper machine shutdown costs and costs related to the
sale of the Shorewood business) in 2013 and $165
million ($162 million excluding a gain associated with
the sale of the Shorewood business in 2012).

Coated Paperboard sales volumes in 2014 were lower
than in 2013 reflecting weaker market demand. The
business took about 41,000 tons of market-related
downtime in 2014 compared with about 24,000 tons in
2013. Average sales price realizations increased year-

over-year due to the impact of sales price increases
implemented in 2013 and 2014. Input costs increased,
primarily for wood and energy. Planned maintenance
downtime costs were $11 million higher in 2014.
Operating costs were also higher.

increased

Foodservice sales volumes
in 2014
compared with 2013 reflecting strong market demand.
Average sales margins were flat as higher average
sales prices and a more favorable customer mix were
offset by higher input costs for board and resins.
Operating costs and distribution costs were both higher.

Looking ahead to the first quarter of 2015, Coated
Paperboard sales volumes are expected
to be
seasonally weaker than in the fourth quarter of 2014.
Average sales price realizations are expected to be
slightly higher, and margins should also benefit from a
more favorable product mix. Input costs are expected
to be higher for wood and energy. Planned maintenance
downtime costs should be $4 million higher with a
planned maintenance outage scheduled at our Augusta
mill in the first quarter. Foodservice sales volumes are
expected to be seasonally lower. Average sales
margins are expected to improve due to the realization
of sales price increases effective with our January
contract openers. Input costs, primarily for resin, are
expected to improve and operating costs are expected
to decrease.

European Consumer Packaging net sales in 2014 were
$365 million compared with $380 million in 2013 and
$380 million in 2012. Operating profits in 2014 were $91
million compared with $100 million in 2013 and $99
million in 2012. Sales volumes in 2014 compared with
2013 were flat as an increase in the Russian market
was offset by a decrease in the European market.
Average sales price realizations were higher in the
Russian market. In Europe, average sales price
realizations decreased and average sales margins
were also negatively impacted by an unfavorable
geographic mix. Input costs, primarily for wood,
increased year-over-year. Planned maintenance
downtime costs were $1 million lower in 2014 than in
2013.

Looking forward to the first quarter of 2015, sales
volumes are expected to be lower than in the fourth
quarter of 2014 reflecting weak economic conditions.
Average sales price realizations are expected to be
slightly higher in both Russia and Europe. Input costs
are expected to be lower, primarily for fuel.

Asian Consumer Packaging net sales were $1.0 billion in
2014 compared with $1.1 billion in 2013 and $830
million in 2012. Operating profits in 2014 were a loss of
$5 million compared with a loss of $2 million in 2013
and a gain of $4 million in 2012. Sales volumes and
average sales price realizations were lower in 2014 due
to over-supplied market conditions and competitive

pressures. The currency depreciation of the Chinese
renminbi against the U.S. dollar also negatively
impacted year-over-year results. However, average
sales margins benefited from a more favorable product
mix. Input costs and freight costs were lower and
operating costs also decreased.

In the first quarter of 2015, sales volumes are expected
to be slightly lower. Average sales price realizations are
expected to be flat reflecting continuing competitive
pressures. The business will drive earnings
improvement through operational excellence.

Equity Earnings, Net of Taxes – Ilim Holding S.A.

International Paper accounts for its investment in Ilim
Holding S.A. (Ilim), a separate reportable industry
segment, using the equity method of accounting.

The Company recorded equity earnings, net of taxes,
related to Ilim of a loss of $194 million in 2014 compared
with a loss of $46 million in 2013 and a gain of $56
million in 2012. Operating results recorded in 2014
included an after-tax non-cash foreign exchange loss
of $269 million compared with an after-tax foreign
exchange loss of $32 million in 2013 and an after-tax
foreign exchange gain of $16 million in 2012 primarily
on
Ilim's U.S. dollar-
denominated net debt.

remeasurement of

the

Sales volumes for the joint venture increased year-
over-year for shipments to China of hardwood pulp,
softwood pulp and linerboard. Sales volumes in the
domestic Russian market increased for linerboard, but
decreased for softwood pulp and hardwood pulp.
Average sales price realizations were higher in 2014
for sales to China of softwood pulp, but lower for
hardwood pulp . In the domestic market, average sales
price realizations were lower for pulp and linerboard.
for wood,
increased year-over-year
Input costs
chemicals and energy. The Company received cash
dividends from the joint venture of $56 million in 2014.
No dividends were paid in 2013 and 2012.

Entering the first quarter of 2015, sales volumes are
expected to be seasonally lower than in the fourth
quarter of 2014 due to the January holidays in Russia.
Average sales price realizations are expected to remain
strong for exported hardwood pulp and domestic
linerboard and paper, partially offset by lower sales
prices for exported softwood pulp. Input costs for wood
and energy should be higher and distribution costs are
also expected to increase.

LIQUIDITY AND CAPITAL RESOURCES

Overview

A major factor in International Paper’s liquidity and
capital resource planning is its generation of operating
cash flow, which is highly sensitive to changes in the

pricing and demand for our major products. While
changes in key cash operating costs, such as energy,
raw material and transportation costs, do have an effect
on operating cash generation, we believe that our focus
on pricing and cost controls has improved our cash flow
generation over an operating cycle.

Cash uses during 2014 were primarily focused on
working capital requirements, capital spending, debt
reductions and returning cash to shareholders.

In millions

Cash provided by
operations

(Less)/Add:

Cash invested in capital
projects

Cash contribution to
pension plan

Three
Months
Ended
December
31, 2014

Three
Months
Ended
September
30, 2014

Three
Months
Ended
December
31, 2013

1,144 $

933 $

1,037

(405)

(327)

(439)

—

598

Cash Provided by Operating Activities

Free Cash Flow

739 $

696 $

Cash provided by operations totaled $3.1 billion in 2014
compared with $3.0 billion for 2013 and $3.0 billion for
2012.

in working capital. Earnings

The major components of cash provided by operations
are earnings from operations adjusted for non-cash
income and expense items, cash pension contributions
and changes
from
operations, adjusted for non-cash income and expense
items and cash pension contributions decreased by
$279 million in 2014 versus 2013 driven mainly by
increased cash pension contributions in 2014. Cash
used
for working capital components, accounts
receivable and inventory less accounts payable and
accrued liabilities, interest payable and other totaled
$158 million in 2014, compared with a cash use of $486
million in 2013 and cash provided of $84 million in 2012.

free cash

The Company generated
flow of
approximately $2.1 billion, $1.8 billion and $1.6 billion
in 2014, 2013 and 2012, respectively. Free cash flow is
a non-GAAP measure and the most comparable GAAP
measure is cash provided by operations. Management
uses free cash flow as a liquidity metric because it
measures the amount of cash generated that is
available to maintain our assets, make investments or
acquisitions, pay dividends and reduce debt. The
following are reconciliations of free cash flow to cash
provided by operations:

In millions

Cash provided by operations
(Less)/Add:

2014

2013

2012

$ 3,077 $ 3,028 $ 2,967

Cash invested in capital projects

(1,366)

(1,198)

(1,383)

Cash contribution to pension plan

353

Cash received from unwinding a
timber monetization

Change in control payments related
to Temple-Inland acquisition

Insurance reimbursement for
Guaranty Bank settlement

—

(251)

120

(30)

Free Cash Flow

$ 2,064 $ 1,831 $ 1,577

Alternative Fuel Mixture Credit

On July 19, 2011, the Company filed an amended 2009
tax return claiming alternative fuel mixture tax credits
as non-taxable income. The amended position has
been accepted by the Internal Revenue Service (IRS)
in the closing of the IRS tax audit for the years 2006 -
2009. As a result, during 2013,
the Company
recognized an income tax benefit of $753 million related
to the non-taxability of the alternative fuel mixture tax
credits.

Investment Activities

increase

Investment activities in 2014 were up from 2013
reflecting an
in capital spending. The
Company maintains an average capital spending target
of $1.4 billion per year over the course of an economic
cycle. Capital spending was $1.4 billion in 2014, or 97%
of depreciation and amortization, compared with $1.2
billion in 2013, or 77% of depreciation and amortization,
and $1.4 billion, or 93% of depreciation and
amortization in 2012. Across our businesses, capital
spending as a percentage of depreciation and
amortization ranged from 87% to 104% in 2014.

following

The
for
operations by business segment for the years ended
December 31, 2014, 2013 and 2012.

table shows capital spending

In millions

Industrial Packaging

Printing Papers

Consumer Packaging

Distribution

Subtotal

Corporate and other

Total

2014

2013

2012

754 $

629 $ 565

318

233

—
1,305

294

208

9
1,140

449

296
10

1,320

63
$ 1,366 $ 1,198 $ 1,383

Capital expenditures in 2015 are currently expected to
be about $1.5 billion, or 105% of depreciation and
amortization.

Acquisitions and Joint Ventures

ORSA

OLMUKSAN

2014: In May 2014, the Company conducted a
voluntary tender offer for the remaining outstanding
12.6% public shares of Olmuksan. The Company also
purchased outstanding shares of Olmuksan outside of
the tender offer. As of December 31, 2014, the
Company owned 91.7% of Olmuksan's outstanding and
issued shares.

2013: On January 3, 2013, International Paper
completed the acquisition (effective date of acquisition
on January 1, 2013) of the shares of its joint venture
partner, Sabanci Holding, in the Turkish corrugated
packaging company, Olmuksa International Paper
Sabanci Ambalaj Sanayi ve Ticaret A.S., now called
Olmuksan International Paper Ambalaj Sanayi ve
Ticaret A.S. (Olmuksan), for a purchase price of $56
million. The acquired shares represented 43.7% of
this acquisition,
Olmuksan's shares. Prior
International Paper held a 43.7% equity interest in
Olmuksan.

issued shares,

Because the transaction resulted in International Paper
becoming the majority shareholder, owning 87.4% of
Olmuksan's outstanding and
its
completion triggered a mandatory call for tender of the
remaining public shares which began in March 2013
and ended in April 2013, with no shares tendered. As
a result, the 12.6% owned by other parties were
considered non-controlling interests. Olmuksan's
financial results have been consolidated with the
Company's Industrial Packaging segment beginning
January 1, 2013, the effective date which International
Paper obtained majority control of the entity.

Following the transaction, the Company's previously
held 43.7% equity
in Olmuksan was
interest
remeasured to a fair value of $75 million, resulting in a
gain of $9 million. In addition, the cumulative translation
adjustment balance of $17 million relating to the
previously held equity interest was reclassified, as
expense, from accumulated other comprehensive
income.

2014: On April 8, 2014, the Company acquired the
remaining 25% of shares of Orsa International Paper
Embalangens S.A. (Orsa IP) from its joint venture
partner, Jari Celulose, Papel e Embalagens S.A. (Jari),
a Grupo Orsa company, for approximately $127 million,
of which $105 million was paid in cash with the
remaining $22 million held back pending satisfaction of
certain indemnification obligations by Jari. International
Paper will release the amount held back, or any amount
for which we have not notified Jari of a claim, by March
30, 2016. An additional $11 million, which was not
included in the purchase price, was placed in an escrow
account pending resolution of certain open matters.
During 2014, these open matters were successfully
resolved, which resulted in $9 million paid out of escrow
to Jari and correspondingly added to the final purchase
consideration. The remaining $2 million was released
back to the Company. As a result of this transaction,
the Company reversed the $168 million of Redeemable
noncontrolling interest included on the March 31, 2014
consolidated balance sheet. The net difference
between
interest
the Redeemable noncontrolling
balance plus $14 million of currency translation
adjustment reclassified out of Other comprehensive
income less the 25% purchase price was reflected as
an increase to Retained earnings on the consolidated
balance sheet.

2013: On January 14, 2013, International Paper and
Jari formed Orsa IP with International Paper holding a
75% stake. The value of
International Paper's
investment in Orsa IP was approximately $471 million.
Because International Paper acquired a majority control
of the joint venture, Orsa IP's financial results have been
consolidated with our Industrial Packaging segment
from the date of formation on January 14, 2013. The
25% owned by Jari was considered a redeemable
noncontrolling interest and met the requirements to be
classified outside permanent equity. As such, the
Company reported $163 million
in Redeemable
noncontrolling interest in the December 31, 2013
consolidated balance sheet.

TEMPLE-INLAND, INC.

The final purchase price allocation indicated that the
sum of the cash consideration paid, the fair value of the
noncontrolling interest and the fair value of the
previously held interest was less than the fair value of
the underlying assets by $21 million, resulting in a
bargain purchase price gain being recorded on this
transaction. The aforementioned remeasurement of
translation
equity
adjustment to expense, and the bargain purchase gain
are included in the Net bargain purchase gain on
acquisition of business
the accompanying
consolidated statement of operations.

the cumulative

interest gain,

2012: On February 13, 2012, International Paper
completed the acquisition of Temple-Inland, Inc.
(Temple-Inland). International Paper acquired all of the
outstanding common stock of Temple-Inland for $32.00
per share in cash, totaling approximately $3.7 billion,
and assumed approximately $700 million of Temple-
Inland’s debt. As a condition to allowing the transaction
to proceed, the Company entered into an agreement
on a Final Judgment with the Antitrust Division of the
U.S. Department of Justice (DOJ) that required the
Company to divest three containerboard mills, with
aggregate
approximately

970,000

tons

containerboard mills

containerboard capacity. On July 2, 2012, International
Paper sold its Ontario and Oxnard (Hueneme),
California
to New-Indy
Containerboard LLC, and
its New Johnsonville,
Tennessee containerboard mill to Hood Container
Corporation. By completing these transactions, the
Company satisfied its divestiture obligations under the
Final Judgment. See Note 7 Divestitures/Spinoff on
pages 59 and 60 of Item 8. Financial Statements and
Supplementary Data for further details of these
divestitures.

Temple-Inland's results of operations are included in
the consolidated financial statements from the date of
acquisition on February 13, 2012.

Financing Activities

Amounts related to early debt extinguishment during
the years ended December 31, 2014, 2013 and 2012
were as follows:

In millions

Debt reductions (a)

2014

2013

2012

1,625 $ 574 $ 1,272

Pre-tax early debt extinguishment
costs (b)

276

(a) Reductions related to notes with interest rates ranging from
1.63% to 9.38% with original maturities from 2014 to 2041 for
the years ended December 31, 2014, 2013 and 2012.

(b) Amounts are included in Restructuring and other charges in
the accompanying consolidated statements of operations.

2014: Financing activities during 2014 included debt
issuances of $2.0 billion and retirements of $2.1 billion,
for a net decrease of $113 million.

International Paper utilizes interest rate swaps to
change the mix of fixed and variable rate debt and
manage interest expense. At December 31, 2014,
International Paper had interest rate swaps with a total
notional amount of $230 million and maturities in 2018
(see Note 14 Derivatives and Hedging Activities on
pages 70 through 74 of Item 8. Financial Statements
and Supplementary Data). During 2014, existing swaps
and the amortization of deferred gains on previously
terminated swaps decreased the weighted average
cost of debt from 6.8% to an effective rate of 6.7%. The
inclusion of the offsetting interest income from short-
term investments reduced this effective rate to 6.3%.

During the second quarter of 2014, International Paper
issued $800 million of 3.65% senior unsecured notes
with a maturity date in 2024 and $800 million of 4.80%
senior unsecured notes with a maturity date in 2044.
The proceeds from this borrowing were used to repay
approximately $960 million of notes with interest rates
ranging from 7.95% to 9.38% and original maturities
from 2018 to 2019. Pre-tax early debt retirement costs
of $262 million related to these debt repayments,
including $258 million of cash premiums, are included

the
in Restructuring and other charges
accompanying consolidated statement of operations
for the twelve months ended December 31, 2014.

Other financing activities during 2014 included the net
repurchase of approximately 22.5 million shares of
treasury stock, including restricted stock withholding,
and the issuance of 1.6 million shares of common stock
for various plans, including stock options exercises that
generated approximately $66 million of cash.
Repurchases of common stock and payments of
restricted stock withholding taxes totaled $1.06 billion,
including $983 million related to shares repurchased
under the Company's share repurchase program.

In September 2014, International Paper announced
that the quarterly dividend would be increased from
$0.35 per share to $0.40 per share, effective for the
2014 fourth quarter.

2013: Financing activities during 2013 included debt
issuances of $241 million and retirements of $845
million, for a net decrease of $604 million.

International Paper utilizes interest rate swaps to
change the mix of fixed and variable rate debt and
manage interest expense. At December 31, 2013,
International Paper had interest rate swaps with a total
notional amount of $175 million and maturities in 2018
(see Note 14 Derivatives and Hedging Activities on
pages 70 through 74 of Item 8. Financial Statements
and Supplementary Data). During 2013, existing swaps
and the amortization of deferred gains on previously
terminated swaps decreased the weighted average
cost of debt from 6.7% to an effective rate of 6.5%. The
inclusion of the offsetting interest income from short-
term investments reduced this effective rate to 6.2%.

Other financing activities during 2013 included the net
repurchase of approximately 10.9 million shares of
treasury stock, including restricted stock withholding,
and the issuance of 7.3 million shares of common stock
for various plans, including stock options exercises that
generated approximately $298 million of cash.
Repurchases of common stock and payments of
restricted stock withholding taxes totaled $512 million,
including $461 million related to shares repurchased
under the Company's share repurchase program.

In September 2013, International Paper announced
that the quarterly dividend would be increased from
$0.30 per share to $0.35 per share, effective for the
2013 fourth quarter.

2012: Financing activities during 2012 included debt
issuances of $2.1 billion and retirements of $2.5 billion,
for a net decrease of $356 million.

In February 2012, International Paper issued a $1.2
billion term loan with an initial interest rate of LIBOR
plus a margin of 138 basis points that varies depending

on the credit rating of the Company and a $200 million
term loan with an interest rate of LIBOR plus a margin
of 175 basis points, both with maturity dates in 2017.
The proceeds from these borrowings were used, along
with available cash, to fund the acquisition of Temple-
Inland. During 2012, International Paper fully repaid the
$1.2 billion term loan.

International Paper utilizes interest rate swaps to
change the mix of fixed and variable rate debt and
manage interest expense. At December 31, 2012,
International Paper had interest rate swaps with a total
notional amount of $150 million and maturities in 2013
(see Note 14 Derivatives and Hedging Activities on
pages 70 through 74 of Item 8. Financial Statements
and Supplementary Data). During 2012, existing swaps
and the amortization of deferred gains on previously
terminated swaps decreased the weighted average
cost of debt from 6.8% to an effective rate of 6.6%. The
inclusion of the offsetting interest income from short-
term investments reduced this effective rate to 6.2%.

Other financing activities during 2012 included the
issuance of approximately 1.9 million shares of treasury
stock, net of restricted stock withholding, and 1.0 million
shares of common stock for various incentive plans,
including stock options exercises that generated
approximately $108 million of cash. Payment of
restricted stock withholding taxes totaled $35 million.

Off-Balance Sheet Variable Interest Entities

Information concerning off-balance sheet variable
interest entities is set forth in Note 12 Variable Interest
Entities and Preferred Securities of Subsidiaries on
pages 67 through 69 of Item 8. Financial Statements
and Supplementary Data for discussion.

Liquidity and Capital Resources Outlook for 2015

Capital Expenditures and Long-Term Debt

International Paper expects to be able to meet projected
capital expenditures, service existing debt and meet
working capital and dividend requirements during 2015
through current cash balances and cash
from
operations. Additionally, the Company has existing
credit facilities totaling $2.0 billion of which nothing has
been used.

The Company was in compliance with all its debt
covenants at December 31, 2014. The Company’s
financial covenants require the maintenance of a
minimum net worth of $9 billion and a total debt-to-
capital ratio of less than 60%. Net worth is defined as
the sum of common stock, paid-in capital and retained
earnings, less treasury stock plus any cumulative
goodwill impairment charges. The calculation also
excludes accumulated other comprehensive income/
loss and Nonrecourse Financial Liabilities of Special
Purpose Entities. The total debt-to-capital ratio is

defined as total debt divided by the sum of total debt
plus net worth. At December 31, 2014, International
Paper’s net worth was $14.0 billion, and the total-debt-
to-capital ratio was 40%.

The Company will continue to rely upon debt and capital
markets for the majority of any necessary long-term
funding not provided by operating cash flows. Funding
decisions will be guided by our capital structure
planning objectives. The primary goals of
the
Company’s capital structure planning are to maximize
financial flexibility and preserve liquidity while reducing
interest expense. The majority of International Paper’s
debt is accessed through global public capital markets
where we have a wide base of investors.

Maintaining an investment grade credit rating is an
important element of International Paper’s financing
strategy. At December 31, 2014, the Company held
long-term credit ratings of BBB (stable outlook) and
Baa2
(stable outlook) by S&P and Moody’s,
respectively.

Contractual obligations for future payments under
existing debt and lease commitments and purchase
obligations at December 31, 2014, were as follows:

In millions

2015

2016

2017

2018

2019 Thereafter

Maturities of long-term
debt (a)

Debt obligations with
right of offset (b)

Lease obligations

Purchase obligations
(c)

742 $

543 $

71 $ 1,229 $

605 $

6,184

— 5,202

142

106

—

3,266

761

583

463

422

1,690

Total (d)

$ 4,150 $ 6,612 $

738 $ 1,755 $ 1,072 $

7,965

(a) Total debt includes scheduled principal payments only.
(b) Represents debt obligations borrowed from non-consolidated
variable interest entities for which International Paper has, and
intends to effect, a legal right to offset these obligations with
investments held in the entities. Accordingly, in its consolidated
balance sheet at December 31, 2014, International Paper has
offset approximately $5.2 billion of interests in the entities
against this $5.3 billion of debt obligations held by the entities
(see Note 12 Variable Interest Entities and Preferred
Securities of Subsidiaries on pages 67 through 69 in Item 8.
Financial Statements and Supplementary Data).
Includes $2.3 billion relating to fiber supply agreements
entered into at the time of the 2006 Transformation Plan
forestland sales and in conjunction with the 2008 acquisition
of Weyerhaeuser Company’s Containerboard, Packaging and
Recycling business.

(c)

(d) Not included in the above table due to the uncertainty as to
the amount and timing of the payment are unrecognized tax
benefits of approximately $119 million.

As discussed in Note 12 Variable Interest Entities and
Preferred Securities of Subsidiaries on pages 67
through 69 in Item 8. Financial Statements and
Supplementary Data, in connection with the 2006
International Paper installment sale of forestlands, we
received $4.8 billion of installment notes (or timber
notes), which we contributed
to certain non-
consolidated borrower entities. The installment notes
mature in August 2016 (unless extended). The deferred

tax liability of $1.4 billion related to the 2006 forestlands
sale will be settled in connection with the maturity of the
timber notes. The entities to which these installment
notes were contributed used the installment notes as
collateral for $4.8 billion of borrowings from third-party
lenders. Of these third-party loans, $4.1 billion mature
in September 2015. Failure to extend, renew or
refinance these third-party loans prior to their stated
maturity, which we believe is unlikely, could trigger the
sale of the installment notes to facilitate the $4.1 billion
debt payment which, in turn, would result in an
acceleration of the payment of the deferred income
taxes that resulted from the 2006 forestlands sale. As
a result, we could have tax payment obligations of
approximately $1.2 billion in 2015. We expect we would
fund these tax payments, if required, from current cash
balances, cash from operations, borrowings under our
existing credit facilities, accessing capital markets, or a
combination thereof.

We consider the undistributed earnings of our foreign
subsidiaries as of December 31, 2014, to be indefinitely
reinvested and, accordingly, no U.S. income taxes have
been provided thereon. As of December 31, 2014, the
amount of cash associated with indefinitely reinvested
foreign earnings was approximately $1 billion. We do
not anticipate the need to repatriate funds to the United
States to satisfy domestic liquidity needs arising in the
ordinary course of business, including liquidity needs
service
associated with our domestic debt
requirements.

Pension Obligations and Funding

to minimum

that are subject

At December 31, 2014, the projected benefit obligation
for
the Company’s U.S. defined benefit plans
determined under U.S. GAAP was approximately $3.8
billion higher than the fair value of plan assets.
Approximately $3.4 billion of this amount relates to
plans
funding
requirements. Under current IRS funding rules, the
calculation of minimum funding requirements differs
from the calculation of the present value of plan benefits
(the projected benefit obligation)
for accounting
purposes. In December 2008, the Worker, Retiree and
Employer Recovery Act of 2008 (WERA) was passed
by the U.S. Congress which provided for pension
funding relief and technical corrections. Funding
contributions depend on the funding method selected
by the Company, and the timing of its implementation,
as well as on actual demographic data and the targeted
funding level. The Company continually reassesses the
amount and timing of any discretionary contributions
and elected to make contributions totaling $353 million
and $31 million for the years ended December 31, 2014
and 2013, respectively. At this time, we expect that
required contributions to its plans in 2015 will be
approximately $63 million, although the Company may
elect to make future voluntary contributions. The timing

and amount of future contributions, which could be
material, will depend on a number of factors, including
the actual earnings and changes in values of plan
assets and changes in interest rates.

Ilim Holding S.A. Shareholder’s Agreement

In October 2007, in connection with the formation of the
Ilim Holding S.A. joint venture, International Paper
entered into a shareholder’s agreement that includes
provisions relating to the reconciliation of disputes
among the partners. This agreement was amended on
May 7, 2014. Pursuant to the amended agreement,
beginning on January 1, 2017, either the Company or
its partners may commence certain procedures
specified under the deadlock provisions. If these or any
other deadlock provisions are commenced,
the
Company may in certain situations, choose to purchase
its partners’ 50% interest in Ilim. Any such transaction
would be subject to review and approval by Russian
and other relevant antitrust authorities. Any such
purchase by International Paper would result in the
consolidation of Ilim’s financial position and results of
operations in all subsequent periods.

CRITICAL ACCOUNTING POLICIES AND
SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of financial statements in conformity
with accounting principles generally accepted in the
United States requires International Paper to establish
accounting policies and to make estimates that affect
both the amounts and timing of the recording of assets,
liabilities, revenues and expenses. Some of these
estimates require judgments about matters that are
inherently uncertain.

Accounting policies whose application may have a
significant effect on the reported results of operations
and financial position of International Paper, and that
can require judgments by management that affect their
application, include the accounting for contingencies,
impairment or disposal of long-lived assets and
goodwill, pensions and postretirement benefit
obligations, stock options and income taxes. The
Company has discussed the selection of critical
accounting policies and the effect of significant
estimates with the Audit Committee of the Company’s
Board of Directors.

Contingent Liabilities

Accruals for contingent liabilities, including legal and
environmental matters, are recorded when it is probable
that a liability has been incurred or an asset impaired
and the amount of the loss can be reasonably
estimated. Liabilities accrued for legal matters require
judgments regarding projected outcomes and range of
loss
and
historical
recommendations of legal counsel. Liabilities for

experience

based

environmental matters require evaluations of relevant
environmental regulations and estimates of future
remediation alternatives and costs.

Impairment of Long-Lived Assets and Goodwill

An impairment of a long-lived asset exists when the
asset’s carrying amount exceeds its fair value, and is
recorded when the carrying amount is not recoverable
through cash flows from future operations. A goodwill
impairment exists when the carrying amount of goodwill
exceeds its fair value. Assessments of possible
impairments of long-lived assets and goodwill are made
when events or changes in circumstances indicate that
the carrying value of the asset may not be recoverable
through future operations. Additionally, testing for
possible impairment of goodwill and intangible asset
balances is required annually. The amount and timing
of any
these
assessments require the estimation of future cash flows
and the fair market value of the related assets based
on management’s best estimates of certain key factors,
including future selling prices and volumes, operating,
raw material, energy and freight costs, and various
other projected operating economic factors. As these
key factors change in future periods, the Company will
update its impairment analyses to reflect its latest
estimates and projections.

impairment charges based on

Under
the provisions of Accounting Standards
Codification (ASC) 350, “Intangibles – Goodwill and
Other,” the testing of goodwill for possible impairment
is a two-step process. In the first step, the fair value of
the Company’s reporting units is compared with their
carrying value, including goodwill. If fair value exceeds
the carrying value, goodwill is not considered to be
impaired. If the fair value of a reporting unit is below the
carrying value, then step two is performed to measure
the amount of the goodwill impairment loss for the
reporting unit. This analysis requires the determination
of the fair value of all of the individual assets and
liabilities of the reporting unit, including any currently
unrecognized intangible assets, as if the reporting unit
had been purchased on the analysis date. Once these
fair values have been determined, the implied fair value
of the unit’s goodwill is calculated as the excess, if any,
of the fair value of the reporting unit determined in step
one over the fair value of the net assets determined in
step two. The carrying value of goodwill is then reduced
to this implied value, or to zero if the fair value of the
assets exceeds the fair value of the reporting unit,
through a goodwill impairment charge.

impairment analysis requires a number of
The
judgments by management.
the
estimated fair value of its reporting units in step one,
the Company uses the projected future cash flows to
be generated by each unit over the estimated remaining
useful operating lives of the unit’s assets, discounted
using the estimated cost-of-capital discount rate for

In calculating

in additional

each reporting unit. These calculations require many
estimates, including discount rates, future growth rates,
and cost and pricing trends for each reporting unit.
Subsequent changes in economic and operating
conditions can affect these assumptions and could
result
testing and goodwill
interim
impairment charges in future periods. Upon completion,
the resulting estimated fair values are then analyzed for
reasonableness by comparing them to earnings
multiples for historic industry business transactions,
and by comparing the sum of the reporting unit fair
values and other corporate assets and liabilities divided
the
by diluted common shares outstanding
Company’s market price per share on the analysis date.

In the fourth quarter of 2014, in conjunction with the
annual testing of its reporting units for possible goodwill
impairments, the Company calculated the estimated
fair value of its Asia Industrial Packaging business using
the discounted future cash flows and determined that
all of the goodwill in this business, totaling $100 million,
should be written off. The decline in the fair value of the
Asia Industrial Packaging business and resulting
impairment charge was due to a change in the strategic
outlook for the business.

In the fourth quarter of 2013, in conjunction with the
annual testing of its reporting units for possible goodwill
impairments, the Company calculated the estimated
fair value of its India Papers business using the
discounted future cash flows and determined that all of
the goodwill of this business, totaling $112 million,
should be written off. The decline in the fair value of the
India Papers reporting unit and resulting impairment
charge was due to a change in the strategic outlook for
the India Papers operations.

Also in the fourth quarter of 2013, the Company
calculated the estimated fair value of its xpedx business
using the discounted future cash flows and wrote off all
of the goodwill of its xpedx business, totaling $400
million. The decline in fair value of the xpedx reporting
unit and resulting impairment charge was due to a
significant decline in earnings and a change in the
strategic outlook for the xpedx operations. As a result,
during the fourth quarter of 2013, the Company
recorded a total goodwill impairment charge of $512
million ($485 million after taxes and a gain of $3 million
related to noncontrolling interest), representing all of
the recorded goodwill of the xpedx business and the
India Papers business.

No goodwill impairment charges were recorded in
2012.

Pension and Postretirement Benefit Obligations

recorded

The charges
for pension and other
postretirement benefit obligations are determined
annually in conjunction with International Paper’s
consulting actuary, and are dependent upon various
assumptions including the expected long-term rate of
return on plan assets, discount rates, projected future
compensation increases, health care cost trend rates
and mortality rates.

The calculations of pension and postretirement benefit
obligations and expenses require decisions about a
number of key assumptions that can significantly affect
liability and expense amounts, including the expected
long-term rate of return on plan assets, the discount
rate used to calculate plan liabilities, the projected rate
of future compensation increases and health care cost
trend rates.

Benefit obligations and fair values of plan assets as of
December 31, 2014, for International Paper’s pension
and postretirement plans were as follows:

In millions

U.S. qualified pension

U.S. nonqualified pension

U.S. postretirement

Non-U.S. pension

Non-U.S. postretirement

Benefit
Obligation

14,343 $

Fair Value of
Plan Assets
10,918

398

306

233

—

180

—

table below shows assumptions used by
to calculate U.S. pension

The
International Paper
obligations for the years shown:

Discount rate

Rate of compensation
increase

2014

2013

2012

4.10%

4.90%

4.10%

3.75%

Additionally, health care cost trend rates used in the
calculation of U.S. postretirement obligations for the
years shown were:

Health care cost trend rate assumed for
next year

Rate that the cost trend rate gradually
declines to

Year that the rate reaches the rate it is
assumed to remain

2014

2013

7.00%

5.00%

2022

2017

International Paper determines
these actuarial
assumptions, after consultation with our actuaries, on
December 31 of each year
liability
to calculate
information as of
that date and pension and
postretirement expense for the following year. The
expected long-term rate of return on plan assets is

based on projected rates of return for current and
planned asset classes in the plan’s investment portfolio.
The discount rate assumption was determined based
on a hypothetical settlement portfolio selected from a
universe of high quality corporate bonds.

The expected long-term rate of return on U.S. pension
plan assets used to determine net periodic cost for the
year ended December 31, 2014 was 7.75%.

Increasing (decreasing) the expected long-term rate of
return on U.S. plan assets by an additional 0.25% would
decrease (increase) 2015 pension expense by
approximately $25 million, while a (decrease) increase
of 0.25% in the discount rate would (increase) decrease
pension expense by approximately $36 million. The
effect on net postretirement benefit cost from a 1%
increase or decrease in the annual health care cost
trend rate would be approximately $1 million.

Actual rates of return earned on U.S. pension plan
assets for each of the last 10 years were:

Year

2014

2013

2012

2011

2010

Return

6.4%
14.1%

14.1%
2.5%
15.1%

Year

2009

2008

2007

2006

2005

Return

23.8 %

(23.6)%
9.6 %
14.9 %

11.7 %

The 2012, 2013 and 2014 returns above represent
weighted averages of International Paper and Temple-
Inland asset returns. International Paper and Temple-
Inland assets were combined in October 2014. The
annualized time-weighted rate of return earned on U.S.
pension plan assets was 10.3% and 8.1% for the past
five and ten years, respectively. The following graph
shows
in
International Paper’s U.S. Pension Plan Master Trust.
The graph portrays the time-weighted rate of return from
2004 – 2014.

the growth of a $1,000

investment

ASC 715, “Compensation – Retirement Benefits,”
provides for delayed recognition of actuarial gains and
losses, including amounts arising from changes in the
estimated projected plan benefit obligation due to

The market value of plan assets for International
Paper’s U.S. qualified pension plan at December 31,
2014 totaled approximately $10.9 billion, consisting of
approximately 47% equity securities, 33% debt
securities, 10% real estate and 10% other assets. Plan
assets include an immaterial amount of International
Paper common stock.

the

the plan,

The Company’s funding policy for its qualified pension
plans is to contribute amounts sufficient to meet legal
funding requirements, plus any additional amounts that
the Company may determine to be appropriate
considering
tax
funded status of
deductibility, the cash flows generated by the Company,
and other
factors. The Company continually
reassesses the amount and timing of any discretionary
contributions and could elect to make voluntary
contributions in the future. The required contribution for
the U.S. qualified pension plans
is
approximately $63 million. The nonqualified defined
benefit plans are funded to the extent of benefit
payments, which totaled $38 million for the year ended
December 31, 2014.

in 2015

Accounting for Stock Options

International Paper follows ASC 718, “Compensation –
Stock Compensation,” in accounting for stock options.
Under this guidance, expense for stock options is
recorded over the related service period based on the
grant-date fair market value.

During each reporting period, diluted earnings per
share is calculated by assuming that “in-the-money”
options are exercised and the exercise proceeds are
used to repurchase shares in the marketplace. When
options are actually exercised, option proceeds are
credited to equity and issued shares are included in the
computation of earnings per common share, with no
effect on reported earnings. Equity is also increased by
the tax benefit that International Paper will receive in its
tax return for income reported by the optionees in their
individual tax returns.

At December 31, 2014 and 2013, 0.07 million options,
and 1.8 million options, respectively, were outstanding
with exercise prices of $39.03 per share for 2014 and
a range of $38.41 to $48.19 per share for 2013.

recognized

changes in the assumed discount rate, differences
between the actual and expected return on plan assets,
and other assumption changes. These net gains and
losses are
in pension expense
prospectively over a period that approximates the
average remaining service period of active employees
expected to receive benefits under the plans to the
extent that they are not offset by gains and losses in
subsequent years. The estimated net loss and prior
service cost that will be amortized from accumulated
other comprehensive income into net periodic pension
cost for the U.S. pension plans over the next fiscal year
are $475 million and $43 million, respectively.

Net periodic pension and postretirement plan
expenses, calculated for all of International Paper’s
plans, were as follows:

In millions

2014

2013

2012

2011

2010

Pension expense

U.S. plans (non-
cash)

Non-U.S. plans

Postretirement
expense

U.S. plans

Non-U.S. plans

$ 387 $ 545 $ 342 $ 195 $ 231

—

(1)

(4)

—

Net expense

$ 401 $ 556 $ 342 $ 205 $ 238

The decrease in 2014 U.S. pension expense principally
reflects an increase in the discount rate and lower
amortization of unrecognized actuarial losses. The
increase in 2014 U.S. postretirement expense is
principally due to lower amortization of prior service
credits.

Assuming that discount rates, expected long-term
returns on plan assets and rates of future compensation
increases remain the same as in 2014, projected future
net periodic pension and postretirement plan expenses
would be as follows:

In millions

Pension expense

U.S. plans (non-cash)

Non-U.S. plans

Postretirement expense

U.S. plans

Non-U.S. plans

Net expense

2016 (1)

2015 (1)

390 $

488

416 $

510

(1) Based on assumptions at December 31, 2014.

The Company estimates that it will record net pension
expense of approximately $488 million for its U.S.
defined benefit plans in 2015, with the increase from
expense of $387 million in 2014 reflecting a decrease
in the assumed discount rate to 4.10% in 2015 from
4.65% in 2014, updated mortality assumptions and
higher unrecognized losses.

Income Taxes

International Paper records its global tax provision
based on the respective tax rules and regulations for
the jurisdictions in which it operates. Where the
Company believes that a tax position is supportable for
income tax purposes, the item is included in its income
tax returns. Where treatment of a position is uncertain,
liabilities are recorded based upon the Company’s
evaluation of the “more likely than not” outcome
considering technical merits of the position based on
specific tax regulations and facts of each matter.
Changes to recorded liabilities are only made when an
identifiable event occurs that changes the likely
outcome, such as settlement with the relevant tax
authority, the expiration of statutes of limitation for the
subject tax year, change in tax laws, or a recent court
case that addresses the matter.

Valuation allowances are recorded to reduce deferred
tax assets when it is more likely than not that a tax
benefit will not be realized. Significant judgment is
required in evaluating the need for and magnitude of
appropriate valuation allowances against deferred tax
assets. The realization of these assets is dependent on
generating future taxable income, as well as successful
implementation of various tax planning strategies.

International Paper believes

While
these
judgments and estimates are appropriate and
reasonable under the circumstances, actual resolution
of these matters may differ from recorded estimated
amounts.

that

The Company’s effective income tax rates, before
equity earnings and discontinued operations, were
14%, (41)% and 32% for 2014, 2013 and 2012,
respectively. These effective tax rates include the tax
effects of certain special items that can significantly
affect the effective income tax rate in a given year, but
may not recur in subsequent years. Management
believes that the effective tax rate computed after
excluding these special items may provide a better
estimate of the rate that might be expected in future
years if no additional special items were to occur in
those years. Excluding these special items, the
effective income tax rate for 2014 was 31% of pre-tax
earnings compared with 26% in 2013 and 28% in 2012.
We estimate that the 2015 effective income tax rate will
be approximately 33% based on expected earnings and
business conditions.

RECENT ACCOUNTING DEVELOPMENTS

There were no new accounting pronouncements issued
or effective during the fiscal year which have had or are
expected to have a material impact on the Company’s
consolidated financial statements. See Note 2 Recent
Accounting Developments on pages 53 and 54 of

Item 8. Financial Statements and Supplementary Data
for a discussion of new accounting pronouncements.

LEGAL PROCEEDINGS

Information concerning the Company’s environmental
and legal proceedings is set forth in Note 11
Commitments and Contingencies on pages 64 through
67 of Item 8. Financial Statements and Supplementary
Data.

EFFECT OF INFLATION

While inflationary increases in certain input costs, such
as energy, wood fiber and chemical costs, have an
impact on the Company’s operating results, changes in
general inflation have had minimal impact on our
operating results in each of the last three years. Sales
prices and volumes are more strongly influenced by
economic supply and demand factors in specific
markets and by exchange rate fluctuations than by
inflationary factors.

FOREIGN CURRENCY EFFECTS

local currency

International Paper has operations in a number of
countries. Its operations in those countries also export
to, and compete with, imports from other regions. As
such, currency movements can have a number of direct
and indirect impacts on the Company’s financial
statements. Direct impacts include the translation of
international operations’
financial
statements into U.S. dollars and the remeasurement
impact associated with non-functional currency
financial assets and liabilities. Indirect impacts include
the change in competitiveness of imports into, and
exports out of, the United States (and the impact on
local currency pricing of products that are traded
internationally). In general, a weaker U.S. dollar and
stronger local currency is beneficial to International
Paper. The currencies that have the most impact are
the Euro, the Brazilian real, the Polish zloty and the
Russian ruble.

MARKET RISK

We use financial instruments, including fixed and
variable rate debt, to finance operations, for capital
for general corporate
spending programs and
purposes. Additionally, financial instruments, including
various derivative contracts, are used to hedge
exposures to interest rate, commodity and foreign
currency risks. We do not use financial instruments for
trading purposes. Information related to International
Paper’s debt obligations is included in Note 13 Debt
and Lines of Credit on pages 69 and 70 of Item 8.
Financial Statements and Supplementary Data. A
discussion of derivatives and hedging activities is
included in Note 14 Derivatives and Hedging Activities
on pages 70 through 74 of Item 8. Financial Statements
and Supplementary Data.

Foreign Currency Risk

transacts business

International Paper
in many
currencies and is also subject to currency exchange
rate risk through investments and businesses owned
and operated in foreign countries. Our objective in
managing the associated foreign currency risks is to
minimize
the effect of adverse exchange rate
fluctuations on our after-tax cash flows. We address
these risks on a limited basis by financing a portion of
our investments in overseas operations with borrowings
denominated in the same currency as the operation’s
functional currency, or by entering into cross-currency
and interest rate swaps, or foreign exchange contracts.
At December 31, 2014 and 2013, the net fair value of
financial instruments with exposure to foreign currency
risk was approximately a $1 million and a $4 million
asset, respectively. The potential loss in fair value for
such financial instruments from a 10% adverse change
in quoted foreign currency exchange rates would have
been approximately $52 million and $88 million at
December 31, 2014 and 2013, respectively.

ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

See the preceding discussion and Note 14 Derivatives
and Hedging Activities on pages 70 through 74 of
Item 8. Financial Statements and Supplementary Data.

The fair value of our debt and financial instruments
varies due to changes in market interest and foreign
currency rates and commodity prices since the
inception of the related instruments. We assess this
market risk utilizing a sensitivity analysis. The sensitivity
analysis measures the potential loss in earnings, fair
values and cash flows based on a hypothetical 10%
change (increase and decrease) in interest and
currency rates and commodity prices.

Interest Rate Risk

Our exposure to market risk for changes in interest rates
relates primarily to short- and long-term debt obligations
and investments in marketable securities. We invest in
investment-grade securities of financial institutions and
money market mutual funds with a minimum rating of
AAA and limit exposure to any one issuer or fund. Our
investments in marketable securities at December 31,
2014 and 2013 are stated at cost, which approximates
market due to their short-term nature. Our interest rate
risk exposure related to these investments was not
material.

We issue fixed and floating rate debt in a proportion
consistent with International Paper’s targeted capital
structure, while at the same time taking advantage of
market opportunities to reduce interest expense as
appropriate. Derivative instruments, such as interest
rate swaps, may be used to implement this capital
structure. At December 31, 2014 and 2013, the net fair
value liability of financial instruments with exposure to
interest rate risk was approximately $9.8 billion and
$10.1 billion, respectively. The potential loss in fair value
resulting from a 10% adverse shift in quoted interest
rates would have been approximately $410 million and
$480 million at December 31, 2014 and 2013,
respectively.

Commodity Price Risk

The objective of our commodity exposure management
is to minimize volatility in earnings due to large
fluctuations in the price of commodities. Commodity
swap and option contracts have been used to manage
risks associated with market fluctuations in energy
prices. The net fair value of such outstanding energy
hedge contracts at December 31, 2014 and 2013 was
approximately a $2 million liability and a $2 million
asset, respectively. The potential loss in fair value
resulting from a 10% adverse change in the underlying
commodity prices would have been approximately $1
million and $2 million at December 31, 2014 and 2013,
respectively.

ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA

REPORT OF MANAGEMENT ON:

Financial Statements

The management of International Paper Company is
responsible for the preparation of the consolidated
financial statements in this annual report and for
establishing and maintaining adequate internal controls
over financial reporting. The consolidated financial
statements have been prepared using accounting
principles generally accepted in the United States of
America considered appropriate in the circumstances
to present fairly the Company’s consolidated financial
position, results of operations and cash flows on a
consistent basis. Management has also prepared the
other information in this annual report and is responsible
for its accuracy and consistency with the consolidated
financial statements.

As can be expected in a complex and dynamic business
environment, some financial statement amounts are
based on estimates and judgments. Even though
estimates and judgments are used, measures have
been taken to provide reasonable assurance of the
integrity and reliability of the financial information
contained in this annual report. We have formed a
Disclosure Committee to oversee this process.

The accompanying consolidated financial statements
have been audited by the independent registered public
accounting firm, Deloitte & Touche LLP. During its
audits, Deloitte & Touche LLP was given unrestricted
access to all financial records and related data,
including minutes of all meetings of stockholders and
the board of directors and all committees of the board.
Management believes that all representations made to
the independent auditors during their audits were valid
and appropriate.

Internal Control Over Financial Reporting

The management of International Paper Company is
also responsible for establishing and maintaining
adequate internal control over financial reporting.
Internal control over financial reporting is the process
designed by, or under the supervision of, our principal
executive officer and principal financial officer, and
effected by our Board of Directors, management and
other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of
for external
purposes. All internal control systems have inherent
limitations, including the possibility of circumvention
and overriding of controls, and therefore can provide
only reasonable assurance of achieving the designed
control objectives. The Company’s internal control

financial statements

system is supported by written policies and procedures,
contains self-monitoring mechanisms, and is audited
by the internal audit function. Appropriate actions are
taken by management to correct deficiencies as they
are identified.

financial

The Company has assessed the effectiveness of its
internal control over
reporting as of
December 31, 2014. In making this assessment, it used
the criteria described in “Internal Control – Integrated
Framework (2013)” issued by the Committee of
Sponsoring Organizations
the Treadway
Commission (COSO). Based on this assessment,
management believes that, as of December 31, 2014,
the Company’s internal control over financial reporting
was effective.

registered public
independent
The Company’s
accounting firm, Deloitte & Touche LLP, has issued its
report on the effectiveness of the Company’s internal
control over financial reporting. The report appears on
pages 44 and 45.

Internal Control Environment And Board Of
Directors Oversight

internal control environment

includes an
Our
enterprise-wide attitude of
integrity and control
consciousness that establishes a positive “tone at the
top.” This is exemplified by our ethics program that
includes long-standing principles and policies on ethical
business conduct that require employees to maintain
the highest ethical and legal standards in the conduct
of International Paper business, which have been
distributed to all employees; a toll-free telephone
helpline whereby any employee may anonymously
report suspected violations of law or International
Paper’s policy; and an office of ethics and business
practice. The internal control system further includes
careful selection and training of supervisory and
management personnel, appropriate delegation of
authority and division of responsibility, dissemination of
throughout
accounting and business policies
International Paper, and an extensive program of
internal audits with management follow-up.

the performance of

The Board of Directors, assisted by the Audit and
Finance Committee (Committee), monitors the integrity
of the Company’s financial statements and financial
reporting procedures,
the
Company’s internal audit function and independent
auditors, and other matters set forth in its charter. The
Committee, which consists of independent directors,
meets regularly with representatives of management,
and with the independent auditors and the Internal
Auditor, with and without management representatives
in attendance,
their activities. The
review
Committee’s Charter takes into account the New York
Stock Exchange rules relating to Audit Committees and

the SEC rules and regulations promulgated as a result
of the Sarbanes-Oxley Act of 2002. The Committee has
reviewed and discussed the consolidated financial
statements for the year ended December 31, 2014,
including critical accounting policies and significant
management judgments, with management and the
report
independent auditors. The Committee’s
recommending
financial
statements in this Annual Report on Form 10-K will be
set forth in our Proxy Statement.

inclusion of such

the

MARK S. SUTTON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

CAROL L. ROBERTS
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER

REPORT OF DELOITTE & TOUCHE LLP,
INDEPENDENT
PUBLIC
ACCOUNTING
FIRM, ON CONSOLIDATED
FINANCIAL STATEMENTS

REGISTERED

To the Board of Directors and Shareholders of
International Paper Company:

We have audited the accompanying consolidated
balance sheets of International Paper Company and
subsidiaries (the “Company”) as of December 31, 2014
and 2013, and the related consolidated statements of
operations, comprehensive income, changes in equity,
and cash flows for each of the three years in the period
ended December 31, 2014. Our audits also included
the financial statement schedule listed in the Index at
Item 15. These financial statements and the financial
statement schedule are the responsibility of the
Company's management. Our responsibility is to
express an opinion on the financial statements and the
financial statement schedule based on our audits.

We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial
position of
International Paper Company and
subsidiaries as of December 31, 2014 and 2013, and
the results of their operations and their cash flows for
each of the three years in the period ended December
31, 2014, in conformity with accounting principles
generally accepted in the United States of America.
Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.

We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board
(United States), the Company's internal control over
financial reporting as of December 31, 2014, based on

the criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of
Sponsoring Organizations
the Treadway
Commission and our report dated February 26, 2015
expressed an unqualified opinion on the Company's
internal control over financial reporting.

Memphis, Tennessee
February 26, 2015

REPORT OF DELOITTE & TOUCHE LLP,
INDEPENDENT
PUBLIC
ACCOUNTING FIRM, ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

REGISTERED

To the Board of Directors and Shareholders of
International Paper Company:

The Company's management

We have audited the internal control over financial
reporting of
International Paper Company and
subsidiaries (the "Company") as of December 31, 2014,
based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee
the Treadway
of Sponsoring Organizations of
Commission.
is
responsible for maintaining effective internal control
over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying Report of Management
on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company's
internal control over financial reporting based on our
audit.

We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable
assurance about whether effective internal control over
financial reporting was maintained in all material
respects. Our
an
understanding of
financial
reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed
risk, and performing such other procedures as we
considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our
opinion.

included
internal control over

obtaining

audit

We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements
and financial statement schedule as of and for the year
ended December 31, 2014 of the Company and our
report dated February 26, 2015 expressed an
unqualified opinion on those financial statements and
financial statement schedule.

Memphis, Tennessee
February 26, 2015

A company's internal control over financial reporting is
a process designed by, or under the supervision of, the
company's principal executive and principal financial
officers, or persons performing similar functions, and
the company's board of directors,
effected by
management, and other personnel
to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles. A company's
internal control over financial reporting includes those
policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded
financial
as necessary
statements in accordance with generally accepted
accounting principles, and
receipts and
expenditures of the company are being made only in
accordance with authorizations of management and
directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on
the financial statements.

to permit preparation of

that

Because of the inherent limitations of internal control
over financial reporting, including the possibility of
collusion or improper management override of controls,
material misstatements due to error or fraud may not
be prevented or detected on a timely basis. Also,
projections of any evaluation of the effectiveness of the
internal control over financial reporting to future periods
are subject to the risk that the controls may become
inadequate because of changes in conditions, or that
the degree of compliance with
the policies or
procedures may deteriorate.

In our opinion, the Company maintained, in all material
respects, effective internal control over financial
reporting as of December 31, 2014, based on the
criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of
Sponsoring Organizations
the Treadway
Commission.

CONSOLIDATED STATEMENT OF OPERATIONS

In millions, except per share amounts, for the years ended December 31

NET SALES

COSTS AND EXPENSES

Cost of products sold

Selling and administrative expenses

Depreciation, amortization and cost of timber harvested

Distribution expenses

Taxes other than payroll and income taxes

Restructuring and other charges

Impairment of goodwill and other intangibles

Net (gains) losses on sales and impairments of businesses

Net bargain purchase gain on acquisition of business

Interest expense, net

EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY
EARNINGS

Income tax provision (benefit)

Equity earnings (loss), net of taxes

EARNINGS (LOSS) FROM CONTINUING OPERATIONS

Discontinued operations, net of taxes

NET EARNINGS (LOSS)

Less: Net earnings (loss) attributable to noncontrolling interests

NET EARNINGS (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER
COMPANY

BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY
COMMON SHAREHOLDERS

Earnings (loss) from continuing operations

Discontinued operations, net of taxes

Net earnings (loss)

DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY
COMMON SHAREHOLDERS

Earnings (loss) from continuing operations

Discontinued operations, net of taxes

Net earnings (loss)

AMOUNTS ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS

Earnings (loss) from continuing operations

Discontinued operations, net of taxes

Net earnings (loss)

The accompanying notes are an integral part of these financial statements.

2014

2013

2012

$ 23,617 $ 23,483 $ 21,852

16,254

16,282

15,287

1,793

1,406

1,521

1,796

1,531

1,583

180

846

100

—

607

872

123

(200)

549

(13)

536

(19)

178

156

127

(13)

612

1,228

(498)

(39)

1,687

(309)

1,378

(17)

1,674

1,473

1,470

159

—

671

967

306

722

799

555 $

1,395 $

794

1.33 $

3.85 $

(0.03)

(0.70)

1.30 $

3.15 $

1.31 $

3.80 $

(0.02)

(0.69)

1.29 $

3.11 $

568 $

1,704 $

(13)

(309)

555 $

1,395 $

1.65

0.17

1.82

1.63

0.17

1.80

717

794

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In millions for the years ended December 31

NET EARNINGS (LOSS)

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

Amortization of pension and post-retirement prior service costs and net loss:

U.S. plans (less tax of $154, $195 and $124)

Pension and postretirement liability adjustments:

U.S. plans (less tax of $798, $756 and $583)

Non-U.S. plans (less tax of $5, $3 and $9)

Change in cumulative foreign currency translation adjustment

Net gains/losses on cash flow hedging derivatives:

Net gains (losses) arising during the period (less tax of $3, $2 and $1)

Reclassification adjustment for (gains) losses included in net earnings (less tax of $1, $3 and $13)

TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

Comprehensive Income (Loss)

Net (Earnings) Loss Attributable to Noncontrolling Interests

Other Comprehensive (Income) Loss Attributable to Noncontrolling Interests

2014

2013

536 $

1,378 $

2012

799

242

307

195

(1,253)

1,188

(18)

(876)

(4)

(426)

(4)

(1,899)

(1,363)

—

(7)

1,058

2,436

(914)

(25)

(131)

(838)

(39)

(5)

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY

$ (1,332) $

2,476 $

(41)

The accompanying notes are an integral part of these financial statements.

CONSOLIDATED BALANCE SHEET

In millions, except per share amounts, at December 31

2014

2013

ASSETS

Current Assets

Cash and temporary investments

Accounts and notes receivable, less allowances of $82 in 2014 and $109 in 2013

Inventories

Deferred income tax assets

Other current assets

Total Current Assets

Plants, Properties and Equipment, net

Forestlands

Investments

Financial Assets of Special Purpose Entities (Note 12)

Goodwill

Deferred Charges and Other Assets

TOTAL ASSETS

LIABILITIES AND EQUITY

Current Liabilities

Notes payable and current maturities of long-term debt

Accounts payable

Accrued payroll and benefits

Other accrued liabilities

Total Current Liabilities

Long-Term Debt

Nonrecourse Financial Liabilities of Special Purpose Entities (Note 12)

Deferred Income Taxes

Pension Benefit Obligation

Postretirement and Postemployment Benefit Obligation

Other Liabilities

Redeemable Noncontrolling Interest

Commitments and Contingent Liabilities (Note 11)

Equity

Common stock $1 par value, 2014 – 448.9 shares and 2013 – 447.2 shares

Paid-in capital

Retained earnings

Accumulated other comprehensive loss

Less: Common stock held in treasury, at cost, 2014 – 28.734 shares and 2013 – 10.868 shares

Total Shareholders’ Equity

Noncontrolling interests

Total Equity

TOTAL LIABILITIES AND EQUITY

The accompanying notes are an integral part of these financial statements.

$ 1,881 $ 1,802

3,083

2,424

331

240

3,756

2,825

302

340

7,959

9,025

12,728

13,672

507

248

2,145

3,773

1,324

557

733

2,127

3,987

1,427

$ 28,684 $ 31,528

742 $

661

2,664

2,900

477

1,026

4,909

8,631

2,050

3,063

3,819

396

553

—

511

1,055

5,127

8,827

2,043

3,765

2,205

412

702

163

449

6,245

4,409

447

6,463

4,446

(4,646)

(2,759)

6,457

1,342

5,115

148

8,597

492

8,105

179

5,263

8,284

$ 28,684 $ 31,528

CONSOLIDATED STATEMENT OF CASH FLOWS

In millions for the years ended December 31

OPERATING ACTIVITIES

Net earnings (loss)

Depreciation, amortization, and cost of timber harvested

Deferred income tax provision (benefit), net

Restructuring and other charges

Pension plan contribution

Net bargain purchase gain on acquisition of business

Periodic pension expense, net

Net (gains) losses on sales and impairments of businesses

Equity (earnings) losses, net of taxes

Release of tax reserves

Impairment of goodwill and other intangible assets

Other, net

Changes in current assets and liabilities

Accounts and notes receivable

Inventories

Accounts payable and accrued liabilities

Interest payable

Other

2014

2013

2012

536 $

1,378 $

799

1,414

1,547

1,486

(135)

881

(353)

—

387

200

—

100

167

(97)

(103)

(18)

146

210

(31)

(13)

545

(775)

527

(62)

(134)

(114)

(110)

(57)

(71)

204

109

(44)

—

342

(61)

—

(38)

377

(28)

(273)

(22)

CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES

3,077

3,028

2,967

INVESTMENT ACTIVITIES

Invested in capital projects

Acquisitions, net of cash acquired

Proceeds from divestitures

Proceeds from spinoff

Equity investment in Ilim

Proceeds from sale of fixed assets

Other

CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES

FINANCING ACTIVITIES

(1,366)

(1,198)

—

411

—

(505)

726

—

(1,383)

(3,734)

474

—

(45)

—

(170)

(860)

(827)

(4,858)

Repurchase of common stock and payments of restricted stock tax withholding

(1,062)

(512)

1,982

(2,095)

(620)

(114)

(269)

—

(4)

298

241

(845)

(123)

(554)

—

(150)

(43)

(2,086)

(1,688)

(52)

(13)

500

(35)

108

2,132

(2,488)

(476)

—

(47)

(795)

(6)

(2,692)

1,802

1,302

3,994

1,881 $

1,802 $

1,302

Issuance of common stock

Issuance of debt

Reduction of debt

Change in book overdrafts

Dividends paid

Acquisition of redeemable noncontrolling interest

Debt tender premiums paid

Redemption of securities

Other

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES

Effect of Exchange Rate Changes on Cash

Change in Cash and Temporary Investments

Cash and Temporary Investments

Beginning of the period

End of the period

The accompanying notes are an integral part of these financial statements.

Common
Stock
Issued

Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Treasury
Stock

Total
International
Paper
Shareholders’
Equity

Noncontrolling
Interests

Total
Equity

439 $

5,908 $

3,355 $

(3,005) $

52 $

6,645 $

340 $

6,985

—

(835)

(3,840)

—

1,081

(87)

—

(20)

512

—

(2,759)

492

—

(1,887)

(212)

1,062

—

222

(35)

(487)

—

(41)

—

(6)

(4)

222

(35)

(487)

(6)

(4)

(39)

6,304

332

6,636

448

(512)

(567)

—

(44)

2,476

8,105

283

(1,062)

(287)

(633)

(5)

—

448

(512)

(567)

(1)

(112)

(156)

(40)

2,436

179

8,284

—

283

(1,062)

(287)

(633)

(5)

(1,332)

(31)

(1,363)

449 $

6,245 $

4,409 $

(4,646) $

1,342 $

5,115 $

148 $

5,263

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

In millions

BALANCE, JANUARY 1,
2012

Issuance of stock for various
plans, net

Repurchase of stock

Dividends

Dividends paid to
noncontrolling interests by
subsidiary

Noncontrolling interests of
acquired entities

Comprehensive income
(loss)

BALANCE, DECEMBER 31,
2012

Issuance of stock for various
plans, net

Repurchase of stock

Dividends

Dividends paid to
noncontrolling interests by
subsidiary

Noncontrolling interests of
acquired entities

Comprehensive income
(loss)

Issuance of stock for
various plans, net

Repurchase of stock

xpedx spinoff

Dividends

Acquisition of redeemable
noncontrolling interest

Remeasurement of
redeemable noncontrolling
interest

Comprehensive income
(loss)

BALANCE, DECEMBER 31,
2014

—

134

—

(487)

—

794

440

6,042

3,662

—

421

—

(287)

—

(567)

—

(44)

1,395

4,446

—

(633)

(5)

555

BALANCE, DECEMBER 31,
2013

447

6,463

The accompanying notes are an integral part of these financial statements.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 1 SUMMARY OF BUSINESS AND
SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

International Paper (the Company) is a global paper
and packaging company with primary markets and
manufacturing operations in North America, Europe,
Latin America, Russia, Asia, Africa and the Middle East.
Substantially all of our businesses have experienced,
and are likely to continue to experience, cycles relating
to available industry capacity and general economic
conditions.

SHIPPING AND HANDLING COSTS

Shipping and handling costs, such as freight to our
customers’ destinations, are included in distribution
expenses in the consolidated statement of operations.
When shipping and handling costs are included in the
sales price charged for our products, they are
recognized in net sales.

ANNUAL MAINTENANCE COSTS

Costs for repair and maintenance activities are
expensed in the month that the related activity is
performed under the direct expense method of
accounting.

FINANCIAL STATEMENTS

TEMPORARY INVESTMENTS

These consolidated financial statements have been
prepared in conformity with accounting principles
generally accepted in the United States that require the
use of management’s estimates. Actual results could
differ from management’s estimates.

On July 1, 2014, International Paper completed the
spinoff of its distribution business, xpedx, and xpedx's
merger with Unisource Worldwide, Inc., with the
combined companies now operating as Veritiv
Corporation (Veritiv). As a result of the spinoff, all
current and prior year amounts have been adjusted to
reflect xpedx as a discontinued operation. See Note 7
for further discussion.

CONSOLIDATION

The consolidated financial statements include the
accounts of International Paper and its wholly-owned,
controlled majority-owned and financially controlled
subsidiaries. All significant intercompany balances and
transactions are eliminated.

in affiliated companies where

Investments
the
Company has significant influence over their operations
are accounted for by the equity method. International
Paper’s share of affiliates’ results of operations totaled
earnings (loss) of $(200) million, $(39) million and $61
million in 2014, 2013 and 2012, respectively.

REVENUE RECOGNITION

transactions designated

Revenue is recognized when the customer takes title
and assumes the risks and rewards of ownership.
Revenue is recorded at the time of shipment for terms
designated f.o.b. (free on board) shipping point. For
sales
f.o.b. destination,
revenue is recorded when the product is delivered to
the customer’s delivery site, when title and risk of loss
are transferred. Timber and forestland sales revenue is
generally recognized when title and risk of loss pass to
the buyer.

Temporary investments with an original maturity of
three months or less are treated as cash equivalents
and are stated at cost, which approximates market
value.

INVENTORIES

Inventories are valued at the lower of cost or market
value and include all costs directly associated with
manufacturing products: materials,
labor and
manufacturing overhead. In the United States, costs of
raw materials and finished pulp and paper products, are
generally determined using the last-in, first-out method.
Other inventories are valued using the first-in, first-out
or average cost methods.

PLANTS, PROPERTIES AND EQUIPMENT

Plants, properties and equipment are stated at cost,
less accumulated depreciation. Expenditures
for
betterments are capitalized, whereas normal repairs
and maintenance are expensed as incurred. The units-
of-production method of depreciation is used for pulp
and paper mills, and the straight-line method is used
for other plants and equipment. Annual straight-line
depreciation rates are, for buildings — 2.50% to 8.50%,
and for machinery and equipment — 5% to 33%.

FORESTLANDS

At December 31, 2014, International Paper and its
subsidiaries owned or managed approximately
334,000 acres of forestlands in Brazil, and through
licenses and forest management agreements, had
harvesting rights on government-owned forestlands in
Russia. Costs attributable to timber are expensed as
trees are cut. The rate charged is determined annually
based on the relationship of incurred costs to estimated
current merchantable volume.

GOODWILL

Goodwill relating to a single business reporting unit is
included as an asset of the applicable segment, while
goodwill arising from major acquisitions that involve
multiple business segments is classified as a corporate
asset for segment reporting purposes. For goodwill
impairment testing, this goodwill is allocated to
reporting units. Annual testing for possible goodwill
impairment is performed as of the beginning of the
fourth quarter of each year, with additional interim
testing performed when management believes that it is
more likely than not events or circumstances have
occurred that would result in the impairment of a
reporting unit’s goodwill.

In performing this testing, the Company estimates the
fair value of its reporting units using the projected future
cash flows to be generated by each unit over the
estimated remaining useful operating lives of the unit’s
assets, discounted using the estimated cost of capital
for each reporting unit. These estimated fair values are
then analyzed for reasonableness by comparing them
to historic market transactions for businesses in the
industry, and by comparing the sum of the reporting unit
fair values and other corporate assets and liabilities
divided by diluted common shares outstanding to the
Company’s traded stock price on the testing date. For
reporting units whose recorded value of net assets plus
goodwill is in excess of their estimated fair values, the
fair values of the individual assets and liabilities of the
respective reporting units are then determined to
calculate the amount of any goodwill impairment charge
required. See Note 9 for further discussion.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets are reviewed for impairment upon the
occurrence of events or changes in circumstances that
indicate that the carrying value of the assets may not
be recoverable, measured by comparing their net book
value to the undiscounted projected future cash flows
generated by their use. Impaired assets are recorded
at their estimated fair value.

INCOME TAXES

for

the

future

taxes are recorded

International Paper uses the asset and liability method
of accounting for income taxes whereby deferred
income
tax
consequences attributable to differences between the
financial statement and tax bases of assets and
liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary
differences are expected to be recovered or settled.
Deferred tax assets and liabilities are remeasured to
reflect new tax rates in the periods rate changes are
enacted.

International Paper records its worldwide tax provision
based on the respective tax rules and regulations for
the jurisdictions in which it operates. Where the
Company believes that a tax position is supportable for
income tax purposes, the item is included in its income
tax returns. Where treatment of a position is uncertain,
liabilities are recorded based upon the Company’s
evaluation of the “more likely than not” outcome
considering the technical merits of the position based
on specific tax regulations and the facts of each matter.
Changes to recorded liabilities are made only when an
identifiable event occurs that changes the likely
outcome, such as settlement with the relevant tax
authority, the expiration of statutes of limitation for the
subject tax year, a change in tax laws, or a recent court
case that addresses the matter.

While the judgments and estimates made by the
Company are based on management’s evaluation of
the technical merits of a matter, assisted as necessary
by consultation with outside consultants, historical
experience and other assumptions that management
believes are appropriate and reasonable under current
circumstances, actual resolution of these matters may
differ from recorded estimated amounts, resulting in
charges or credits that could materially affect future
financial statements.

STOCK-BASED COMPENSATION

Compensation costs resulting from all stock-based
compensation
transactions are measured and
recorded in the consolidated financial statements
based on the grant-date fair value of the equity or liability
instruments issued. In addition, liability awards are
remeasured each reporting period. Compensation cost
is recognized over the period that an employee provides
service in exchange for the award.

ENVIRONMENTAL REMEDIATION COSTS

Costs associated with environmental remediation
obligations are accrued when such costs are probable
and reasonably estimable. Such accruals are adjusted
as further information develops or circumstances
change. Costs of future expenditures for environmental
remediation obligations are discounted to their present
value when the amount and timing of expected cash
payments are reliably determinable.

ASSET RETIREMENT OBLIGATIONS

A liability and an asset are recorded equal to the present
value of the estimated costs associated with the
retirement of long-lived assets where a legal or
contractual obligation exists and the liability can be
reasonably estimated. The liability is accreted over time
and the asset is depreciated over the life of the related
equipment or facility. International Paper’s asset
retirement obligations principally relate to closure costs

for landfills. Revisions to the liability could occur due to
changes in the estimated costs or timing of closures, or
possible new federal or state regulations affecting these
closures.

In connection with potential future closures or redesigns
of certain production facilities, it is possible that the
Company may be required to take steps to remove
certain materials from these facilities. Applicable
regulations and standards provide that the removal of
certain materials would only be required if the facility
were to be demolished or underwent major renovations.
At this time, any such obligations have an indeterminate
settlement date, and the Company believes that
adequate information does not exist to apply an
expected-present-value technique to estimate any
such potential obligations. Accordingly, the Company
does not record a liability for such remediation until a
decision is made that allows reasonable estimation of
the timing of such remediation.

TRANSLATION OF FINANCIAL STATEMENTS

Balance sheets of
international operations are
translated into U.S. dollars at year-end exchange rates,
while statements of operations are translated at
average rates. Adjustments resulting from financial
statement translations are included as cumulative
translation adjustments
in Accumulated other
comprehensive loss.

NOTE 2 RECENT ACCOUNTING DEVELOPMENTS

Other than as described below, no new accounting
pronouncement issued or effective during the fiscal
year has had or is expected to have a material impact
on the consolidated financial statements.

SHARE-BASED PAYMENT

In June 2014, the Financial Accounting Standards
Board (FASB) issued ASU 2014-12, "Accounting for
Share-based Payments When the Terms of an Award
Provide That Performance Target Could Be Achieved
After the Requisite Service Period." This guidance
provides that entities should treat performance targets
that can be met after the requisite service period of a
share-based payment award as performance
conditions that affect vesting. As such, an entity should
not record compensation expense related to an award
for which transfer to the employee is contingent on the
entity's satisfaction of a performance target until it
becomes probable that the performance target will be
met. This ASU is effective for annual reporting periods
beginning after December 15, 2015, and interim periods
is currently
within
evaluating the provisions of this guidance.

those years. The Company

REVENUE RECOGNITION

In May 2014, the FASB issued ASU 2014-09, "Revenue
from Contracts with Customers." The guidance
replaces most existing revenue recognition guidance
and provides that an entity should recognize revenue
to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange
for those goods and services. This ASU is effective for
annual reporting periods beginning after December 15,
2016, and interim periods within those years, and
permits the use of either the retrospective or cumulative
effect transition method. The Company is currently
evaluating the provisions of this guidance.

DISCONTINUED OPERATIONS

the FASB

issued ASU 2014-08,
In April 2014,
"Reporting Discontinued Operations and Disclosures
of Disposals of Components of an Entity," which
changes the criteria for determining which disposals
can be presented as discontinued operations and
modifies the related disclosure requirements. This
guidance should be applied prospectively to new
disposals and new classifications of disposal groups as
held for sale after the effective date which is fiscal years
beginning on or after December 15, 2014, and interim
periods within those annual periods. The Company
chose to early adopt the provisions of this guidance in
the third quarter of 2014. See Note 7 for further
discussion and disclosures.

HEDGE ACCOUNTING

In July 2013, the FASB issued ASU 2013-10, "Inclusion
of the Fed Funds Effective Swap Rate (or Overnight
Index Swap Rate) as a Benchmark Interest Rate for
Hedge Accounting Purposes," which amends ASC 815,
"Derivatives and Hedging," to allow entities to use the
Fed Funds Effective Swap Rate, in addition to U.S.
Treasury rates and LIBOR, as a benchmark interest rate
in accounting for fair value and cash flow hedges in the
United States. The ASU also eliminates the provision
that prohibits the use of different benchmark rates for
similar hedges except
justifiable
circumstances. The ASU was effective prospectively for
qualifying new hedging relationships entered into on or
after July 17, 2013 and for hedging relationships
redesignated on or after that date. The adoption of the
provisions of this guidance did not have a material effect
on the Company's consolidated financial statements.

rare and

INCOME TAXES

In July 2013, the FASB also issued ASU 2013-11,
"Presentation of an Unrecognized Tax Benefit When a
Net Operating Loss Carryforward, a Similar Tax Loss,
or a Tax Credit Carryforward Exists," which provides
guidance on financial statement presentation of an

unrecognized tax benefit when a net operating loss
carryforward, a similar tax loss, or a tax credit
carryforward exists. This guidance should be applied to
all unrecognized tax benefits that exist as of the
effective date which is fiscal years beginning after
December 15, 2013, and interim periods within those
years. The adoption of the provisions of this guidance
did not have a material effect on the Company's
consolidated financial statements.

NOTE 3 EARNINGS PER SHARE ATTRIBUTABLE
TO INTERNATIONAL PAPER COMPANY COMMON
SHAREHOLDERS

Basic earnings per share is computed by dividing
earnings by the weighted average number of common
shares outstanding. Diluted earnings per share is
computed assuming
that all potentially dilutive
securities, including “in-the-money” stock options, were
converted into common shares.

A reconciliation of the amounts included in the
computation of basic earnings (loss) per share from
continuing operations, and diluted earnings (loss) per
share from continuing operations is as follows:

In millions, except per share
amounts

Earnings (loss) from continuing
operations

2014

2013

2012

568

$ 1,704

$ 717

Effect of dilutive securities (a)

—

Earnings (loss) from continuing
operations – assuming dilution

568

$ 1,704

$ 717

Average common shares
outstanding

Effect of dilutive securities (a):

Restricted performance share
plan

Stock options (b)

427.7

443.3

435.2

4.2

0.1

4.5

0.3

5.0

—

Average common shares
outstanding – assuming dilution

Basic earnings (loss) per share
from continuing operations

Diluted earnings (loss) per share
from continuing operations

432.0

448.1

440.2

$ 1.33

$ 3.85

$ 1.65

$ 1.31

$ 3.80

$ 1.63

(a) Securities are not included in the table in periods when

antidilutive.

(b) Options to purchase 0.0 million, 0.0 million and 9.1 million
shares for the years ended December 31, 2014, 2013 and
2012, respectively, were not included in the computation of
diluted common shares outstanding because their exercise
price exceeded the average market price of the Company’s
common stock for each respective reporting date.

NOTE 4 OTHER COMPREHENSIVE INCOME

The following table presents changes in AOCI for the year ended December 31, 2014:

Defined Benefit Pension and
Postretirement Items (a)

Change in Cumulative
Foreign Currency Translation
Adjustments (a)

Net Gains and Losses
on Cash Flow Hedging
Derivatives (a)

In millions

Balance as of December 31, 2013

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive income

Net Current Period Other Comprehensive Income

Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest

Balance as of December 31, 2014

(2,105) $

(1,271)

242

(1,029)

—

(3,134) $

(649) $

(863)

(13)

(876)

(5) $

(4)

—

Total (a)

(2,759)

(2,124)

225

(1,899)

(1,513) $

1 $

(4,646)

(a) All amounts are net of tax. Amounts in parentheses indicate debits to AOCI.

The following table presents changes in AOCI for the year ended December 31, 2013:

In millions

Balance as of December 31, 2012

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive income

Net Current Period Other Comprehensive Income

Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest

Balance as of December 31, 2013

Defined Benefit Pension and
Postretirement Items (a)

Change in Cumulative
Foreign Currency Translation
Adjustments (a)

Net Gains and Losses
on Cash Flow Hedging
Derivatives (a)

Total (a)

(3,596) $

1,184

307

1,491

—

(2,105) $

(246) $

(443)

(426)

(649) $

2 $

(3,840)

—

(7)

—

741

317

1,058

(5) $

(2,759)

(a) All amounts are net of tax. Amounts in parentheses indicate debits to AOCI.

The following table presents changes in AOCI for the year ended December 31, 2012:

In millions

Balance as of December 31, 2011

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive income

Net Current Period Other Comprehensive Income

Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest

Balance as of December 31, 2012

Defined Benefit Pension and
Postretirement Items (a)

Change in Cumulative
Foreign Currency Translation
Adjustments (a)

Net Gains and Losses
on Cash Flow Hedging
Derivatives (a)

(2,852) $

(118) $

(35) $

(939)

195

(744)

—

(3,596) $

(96)

(35)

(131)

(246) $

Total (a)

(3,005)

(1,020)

182

(838)

—

2 $

(3,840)

(a) All amounts are net of tax. Amounts in parentheses indicate debits to AOCI.

The following table presents details of the reclassifications out of AOCI for the three years ended:

Details About Accumulated Other Comprehensive Income
Components

2014

2013

2012

Location of Amount
Reclassified from AOCI

Amount Reclassified from Accumulated Other Comprehensive Income (a)

In millions

Defined benefit pension and postretirement items:

Prior-service costs

Actuarial gains/(losses)

Total pre-tax amount

Tax (expense)/benefit

Net of tax

Change in cumulative foreign currency translation adjustments:

Business acquisition/divestiture

Tax (expense)/benefit

Net of tax

Net gains and losses on cash flow hedging derivatives:

Foreign exchange contracts

Natural gas contracts

Total pre-tax amount

Tax (expense)/benefit

Net of tax

(17) $

(9) $

(2) (b)

Cost of products sold

(379)

(396)

154

(242)

—

(493)

(502)

195

(307)

(17)

—

(17)

—

(3)

(317) (b)

Cost of products sold

(319)

124

(195)

(13)

Net (gains) losses on
sales and impairments of
businesses or Retained
earnings

(24) (c)

Cost of products sold

(11) (c)

Cost of products sold

(35)

(22)

(182)

Total reclassifications for the period

(225) $

(317) $

(a) Amounts in parentheses indicate debits to earnings/loss.
(b) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 16 for

additional details).

(c) This accumulated other comprehensive income component is included in our derivatives and hedging activities (see Note 14 for additional

details).

NOTE 5 RESTRUCTURING CHARGES AND
OTHER ITEMS

2014: During 2014, total restructuring and other
charges of $846 million before taxes ($518 million after
taxes) were recorded. These charges included:

In millions

Early debt extinguishment costs (see
Note 13)

Courtland mill shutdown (a)

Other (b)

Total

Before-Tax
Charges

After-Tax
Charges

276

554

846

169

338

518

(a) Includes $464 million of accelerated depreciation, $24 million
of inventory impairment charges, $26 million of severance
charges and $40 million of other charges which are recorded
in the Printing Papers segment.

(b) Includes $15 million of severance charges.

the $846 million of organization
Included
restructuring and other charges is $41 million of
severance charges.

The following table presents a rollforward of the
severance and other costs for approximately 957
employees included in the 2014 restructuring charges.

In millions

Additions and adjustments

Cash payments in 2014

Balance, December 31, 2014

Severance
and Other

(29)

As of December 31, 2014, 788 employees had left the
Company under these programs.

2013: During 2013, total restructuring and other
charges of $156 million before taxes ($98 million after
taxes) were recorded. These charges included:

In millions

Before-Tax
Charges

After-Tax
Charges

Early debt extinguishment costs (see
Note 13)

Courtland mill shutdown (a)

Box plant closures

Augusta paper machine shutdown (b)

Insurance reimbursements

Other (c)

Total

118

(13)

(30)

156

(8)

(19)

(a) Includes $73 million of accelerated depreciation and other non-
cash charges, $42 million of severance charges and $3 million
of other charges which are recorded in the Printing Papers
segment. During 2013, the Company accelerated depreciation
for certain Courtland assets, and diligently evaluated certain
other assets for possible alternative uses by one of our other
businesses. The net book value of these assets at December
31, 2013 was approximately $470 million.

(b) Includes $39 million of accelerated depreciation charges, $2
million of severance charges and $4 million of other charges
which are recorded in the Consumer Packaging segment.

the $156 million of organization
Included
restructuring and other charges is $46 million of
severance charges.

The following table presents a rollforward of the
severance and other costs for approximately 1,384
employees included in the 2013 restructuring charges.

In millions

Additions and adjustments

Cash payments in 2013

Cash payments in 2014

Balance, December 31, 2014

Severance
and Other

(5)

(41)

—

As of December 31, 2014, all of these employees had
left the Company under these programs.

2012: During 2012, total restructuring and other
charges of $65 million before taxes ($46 million after
taxes) were recorded. These charges included:

In millions

Early debt extinguishment costs
(see Note 13)

EMEA packaging restructuring (a)

Other

Total

Before-Tax
Charges

After-Tax
Charges

—

(a) Includes $17 million of severance charges.

the $65 million of organizational
Included
restructuring and other charges is $17 million of
severance charges.

The following table presents a rollforward of the
severance and other costs for approximately 366
employees included in the 2012 restructuring charges:

In millions

Additions and adjustments

Cash payments in 2012

Cash payments in 2013

Cash payments in 2014

Balance, December 31, 2014

Severance
and Other

(3)

(4)

(6)

As of December 31, 2014, 300 employees had left the
Company under these programs.

ALTERNATIVE FUEL MIXTURE TAX CREDIT

On July 19, 2011 the Company filed an amended 2009
tax return claiming alternative fuel mixture tax credits
as non-taxable income. The amended position has
been accepted by the Internal Revenue Service (IRS)
in the closing of the IRS tax audit for the years 2006 -
2009. As a result, during 2013,
the Company
recognized an income tax benefit of $753 million related
to the non-taxability of the alternative fuel mixture tax
credits.

NOTE 6 ACQUISITIONS AND JOINT VENTURES

OLMUKSAN

2013: On January 3, 2013, International Paper
completed the acquisition (effective date of acquisition
on January 1, 2013) of the shares of its joint venture
partner, Sabanci Holding, in the Turkish corrugated
packaging company, Olmuksa International Paper
Sabanci Ambalaj Sanayi ve Ticaret A.S., now called
Olmuksan International Paper Ambalaj Sanayi ve
Ticaret A.S. (Olmuksan), for a purchase price of $56
million. The acquired shares represented 43.7% of
Olmuksan's shares. Prior
this acquisition,
International Paper held a 43.7% equity interest in
Olmuksan.

Because the transaction resulted in International Paper
becoming the majority shareholder, owning 87.4% of
its
Olmuksan's outstanding and

issued shares,

Pro forma information related to the acquisition of
Olmuksan has not been included as it does not have a
material effect on the Company's consolidated results
of operations.

ORSA

2013: On January 14, 2013, International Paper and
Jari formed Orsa IP with International Paper holding a
International Paper's
75% stake. The value of
investment in Orsa IP was approximately $471 million.
Because International Paper acquired a majority control
of the joint venture, Orsa IP's financial results have been
consolidated with our Industrial Packaging segment
from the date of formation on January 14, 2013. The
25% owned by Jari was considered a redeemable
noncontrolling interest and met the requirements to be
classified outside permanent equity. As such, the
in Redeemable
Company reported $163 million
noncontrolling interest in the December 31, 2013
consolidated balance sheet.

completion triggered a mandatory call for tender of the
remaining public shares which began in March 2013
and ended in April 2013, with no shares tendered. As
a result, the 12.6% owned by other parties were
considered non-controlling interests. Olmuksan's
financial results have been consolidated with the
Company's Industrial Packaging segment beginning
January 1, 2013, the effective date which International
Paper obtained majority control of the entity.

The final purchase price allocation indicated that the
sum of the cash consideration paid, the fair value of the
noncontrolling interest and the fair value of the
previously held interest was less than the fair value of
the underlying assets by $21 million, resulting in a
bargain purchase price gain being recorded on this
transaction. The aforementioned remeasurement of
equity
translation
adjustment to expense, and the bargain purchase gain
are included in the Net bargain purchase gain on
the accompanying
acquisition of business
consolidated statement of operations.

the cumulative

interest gain,

The following table summarizes the final allocation of
the purchase price to the fair value of assets and
liabilities acquired as of January 1, 2013, which was
completed in the fourth quarter of 2013.

In millions

Cash and temporary investments

Accounts and notes receivable

Inventory

Other current assets

Plants, properties and equipment

Investments

Total assets acquired

Notes payable and current maturities of long-term
debt

Accounts payable and accrued liabilities

Deferred income tax liability

Postretirement and postemployment benefit
obligation

Total liabilities assumed

Noncontrolling interest

Net assets acquired

106

227

155

tons

970,000

containerboard mills

Company to divest three containerboard mills, with
approximately
aggregate
containerboard capacity. On July 2, 2012, International
Paper sold its Ontario and Oxnard (Hueneme),
to New-Indy
California
Containerboard LLC, and
its New Johnsonville,
Tennessee containerboard mill to Hood Container
Corporation. By completing these transactions, the
Company satisfied its divestiture obligations under the
Final Judgment. See Note 7 for further details of these
divestitures.

Temple-Inland's results of operations are included in
the consolidated financial statements from the date of
acquisition on February 13, 2012.

The following table summarizes the allocation of the
purchase price to the fair value of assets and liabilities
acquired as of February 13, 2012, which was finalized
in the fourth quarter of 2012.

In millions

Accounts and notes receivable

Inventory

Deferred income tax assets – current

Other current assets

Plants, properties and equipment

Financial assets of special purpose entities

Goodwill

Other intangible assets

Deferred charges and other assets

Total assets acquired

Notes payable and current maturities of long-term
debt

Accounts payable and accrued liabilities

Long-term debt

Nonrecourse financial liabilities of special purpose
entities

Deferred income tax liability

Pension benefit obligation

Postretirement and postemployment benefit obligation

Other liabilities

Total liabilities assumed

Net assets acquired

466

484

140

2,911

2,091

2,139

693

9,035

130

704

527

2,030

1,252

338

221

5,301

$ 3,734

The following table summarizes the final allocation of
the purchase price to the fair value of assets and
liabilities acquired as of January 14, 2013, which was
completed in the fourth quarter of 2013.

In millions

Cash and temporary investments

Accounts and notes receivable

Inventory

Plants, properties and equipment

Goodwill

Other intangible assets

Other long-term assets

Total assets acquired

Accounts payable and accrued liabilities

Deferred income tax liability

Total liabilities assumed

Noncontrolling interest

Net assets acquired

290

260

110

710

105

134

471

identifiable

in
The
connection with the Orsa IP acquisition included the
following:

intangible assets acquired

In millions

Asset Class:

Customer relationships

Trademark

Wood supply agreement

Total

Average
Remaining
Useful Life

(at acquisition
date)

12 years

6 years

25 years

Estimated
Fair Value

110

Pro forma information related to the acquisition of Orsa
IP has not been included as it does not have a material
effect on the Company's consolidated results of
operations.

Due to the complex organizational structure of Orsa IP's
operations, and the extended time required to prepare
consolidated financial information in accordance with
accounting principles generally accepted in the United
States, the Company reports Orsa IP's operating results
on a one-month lag basis.

TEMPLE-INLAND, INC.

identifiable

in
The
connection with the Temple-Inland acquisition included
the following:

intangible assets acquired

In millions

Asset Class:

Customer relationships

Developed technology

Tradenames

Favorable contracts

Non-compete agreement

Estimated
Fair Value

Average
Remaining
Useful Life

(at acquisition
date)

536

12-17 years

109

5-10 years

Indefinite

4-7 years

2 years

Total

693

In connection with the purchase price allocation,
inventories were written up by approximately $20
million before taxes ($12 million after taxes) to their
estimated fair value. As the related inventories were
sold in the 2012 first quarter, this amount was expensed
in Cost of products sold for the quarter.

Additionally, Selling and administrative expenses for
the years ended December 31, 2014, 2013 and 2012
included $16 million before taxes ($10 million after
taxes), $62 million before taxes ($38 million after
taxes), and $164 million ($105 million after taxes)
respectively, in charges for integration costs associated
with the acquisition.

The following unaudited pro forma information for the
year ended December 31, 2012 represents the results
of operations of International Paper as if the Temple-
Inland acquisition had occurred on January 1, 2012.
This information is based on historical results of
operations, adjusted for certain acquisition accounting
adjustments and does not purport to represent
International Paper’s actual results of operations as if
the transaction described above would have occurred
as of January 1, 2012, nor is it necessarily indicative of
future results.

In millions, except per share amounts

Net sales

Earnings (loss) from continuing operations (a)

Net earnings (loss) (a)

Diluted earnings (loss) from continuing operations per
share (a)

Diluted net earnings (loss) per share (a)

2012

$ 28,125

805

845

1.82

1.92

(a) Attributable

International Paper Company common

shareholders.

NOTE 7 DIVESTITURES / SPINOFF

DISCONTINUED OPERATIONS

2014: On July 1, 2014, International Paper completed
the spinoff of its distribution business, xpedx, which

subsequently merged with Unisource Worldwide, Inc.,
with the combined companies now operating as Veritiv
Corporation
(Veritiv). The xpedx business had
historically represented the Company's Distribution
reportable segment.

The spinoff was accomplished by the contribution of the
xpedx business to Veritiv and the distribution of
8,160,000 shares of Veritiv common stock on a pro-rata
basis to International Paper shareholders. International
Paper received a payment of approximately $411
million, financed with new debt in Veritiv's capital
structure.

All current and historical operating results for xpedx are
included in Discontinued operations, net of tax, in the
accompanying consolidated statement of operations.
The following summarizes the major classes of line
items comprising Earnings (Loss) Before Income Taxes
and Equity Earnings reconciled
to Discontinued
Operations, net of tax, related to the xpedx spinoff for
all periods presented in the consolidated statement of
operations:

In millions

Net Sales
Costs and Expenses

Cost of products sold

2014
$ 2,604

2013
$ 5,597

2012
$ 5,981

2,309

4,941

5,300

Selling and administrative
expenses

Depreciation, amortization and
cost of timber harvested
Distribution expenses

Restructuring and other charges

Impairment of goodwill and other
intangibles

Other, net

Earnings (Loss) Before Income
Taxes and Equity Earnings

Income tax provision (benefit)

Discontinued Operations, Net of
Taxes (a)

191

—

(2)

(1)

409

149

400

(379)

(25)

(1) $ (354) $

418

141
44

—

(a) These amounts, along with those disclosed below related to
the Temple-Inland Building Products divestitures, are included
in Discontinued operations, net of tax, in the consolidated
statement of operations.

Total cash provided by operations related to xpedx of
$29 million, $81 million and $81 million for 2014, 2013
and 2012, respectively, is included in Cash Provided By
(Used For) Operations in the consolidated statement of
cash flows. Total cash provided by (used for) investing
activities related to xpedx of $3 million, $12 million and
$(5) million for 2014, 2013 and 2012, respectively, is
included in Cash Provided By (Used For) Investing
Activities in the consolidated statement of cash flows.

2013: On April 1, 2013, the Company finalized the
sale of Temple-Inland's 50% interest in Del-Tin Fiber

L.L.C. to joint venture partner Deltic Timber Corporation
for $20 million in assumed liabilities and cash.

On July 19, 2013 the Company finalized the sale of its
Temple-Inland Building Products division to Georgia-
Pacific Building Products, LLC for approximately $726
million in cash.

the acquisition of Temple-Inland,
2012: Upon
management committed to a plan to sell the Temple-
Inland Building Products business, and on December
12, 2012, International Paper reached an agreement to
sell the business (including Del-Tin Fiber L.L.C.) to
Georgia-Pacific for $750 million in cash, subject to
satisfaction of customary closing conditions, including
satisfactory review by the DOJ, and to certain pre-and
post-closing purchase price adjustments. The assets to
be sold included 16 manufacturing facilities.

The operating results of the Temple-Inland Building
Products business have been included in Discontinued
operations from the date of acquisition.

Related to these divestitures, the Company recorded
income (loss) of $(12) million, $45 million and $45
million for the years ended December 31, 2014, 2013
and 2012, respectively. These amounts are included in
Discontinued operations, net of tax in the consolidated
statement of operations.

OTHER DIVESTITURES AND IMPAIRMENTS

2014: During 2014, the Company recorded a net pre-
tax charge of $47 million ($36 million after taxes) for the
loss on the sale of a business by our equity method
investee,
to as AGI-
Shorewood), and the subsequent partial impairment of
this ASG investment.

(formerly

referred

ASG

The net 2014 loss totaling $38 million, including the ASG
impairment discussed above,
to other
divestitures and impairments is included in Net (gains)
losses on sales and impairments of businesses in the
accompanying consolidated statement of operations.

2013: During 2013, the Company recorded net pre-tax
charges of $3 million ($1 million after taxes) for
adjustments related
three
containerboard mills in 2012 and the sale of the
Shorewood business. This loss is included in Net
(gains) losses on sales and impairments of businesses
in
the accompanying consolidated statement of
operations.

the divestiture of

2012: As referenced in Note 6, on July 2, 2012,
International Paper finalized the sales of its Ontario and
Oxnard (Hueneme), California containerboard mills to
New-Indy Containerboard LLC, and
its New
Johnsonville, Tennessee containerboard mill to Hood

Container Corporation. During 2012, the Company
recorded pre-tax charges of $29 million ($55 million
after taxes) for costs associated with the divestitures of
these mills. Also during 2012, in anticipation of the
divestiture of the Hueneme mill, a pre-tax charge of $62
million ($38 million after taxes) was recorded to adjust
the long-lived assets of the mill to their fair value.

The net 2012 loss totaling $86 million related to other
divestitures and impairments is included in Net (gains)
losses on sales and impairments of businesses in the
accompanying consolidated statement of operations.

NOTE 8 SUPPLEMENTARY FINANCIAL
STATEMENT INFORMATION

TEMPORARY INVESTMENTS

In millions at December 31

Temporary Investments

2014

2013
$ 1,480 $ 1,398

ACCOUNTS AND NOTES RECEIVABLE

Accounts and notes receivable, net of allowances, by
classification were:

In millions at December 31

Accounts and notes receivable:

Trade

Other

Total

INVENTORIES

In millions at December 31

Raw materials

Finished pulp, paper and packaging
products

Operating supplies

Other

Inventories

2014

2013

$ 2,860 $ 3,497

223

259

$ 3,083 $ 3,756

2014

2013

494 $

372

1,273

1,834

562

572

$ 2,424 $ 2,825

International Paper’s U.S.

The last-in, first-out inventory method is used to value
inventories.
most of
Approximately 66% of total raw materials and finished
products inventories were valued using this method. If
the first-in, first-out method had been used, it would
inventory balances by
have
approximately $334 million and $417 million at
December 31, 2014 and 2013, respectively.

increased

total

PLANTS, PROPERTIES AND EQUIPMENT

In millions at December 31

2014

2013

Pulp, paper and packaging facilities

$ 31,805 $ 32,268

Other properties and equipment

Gross cost

Less: Accumulated depreciation

1,263

1,478

33,068

33,746

20,340

20,074

Plants, properties and equipment, net

$ 12,728 $ 13,672

In millions

2014

2013

2012

Depreciation expense

$ 1,308 $ 1,415 $ 1,390

INTEREST

Cash payments related to interest were as follows:

In millions

Interest payments

2014

2013

2012

718 $

751 $

740

Amounts related to interest were as follows:

In millions

Interest expense (a)

Interest income (a)

Capitalized interest costs

2014

2013

2012

677 $

669 $

742

(a)

Interest expense and interest income exclude approximately
$38 million, $45 million and $49 million in 2014, 2013 and 2012,
respectively, related to investments in and borrowings from
variable interest entities for which the Company has a legal
right of offset (see Note 12).

NOTE 9 GOODWILL AND OTHER INTANGIBLES

GOODWILL

The following tables present changes in the goodwill
balances as allocated to each business segment for the
years ended December 31, 2014 and 2013:

Industrial
Packaging

Printing
Papers

Consumer
Packaging

Distribution

Total

$3,430

$2,311

$1,787

$400

$7,928

—

(1,877)

3,430

434

(1,664)

123

(34)

—

(57)

(20) (c)

—

(3)

—

(400)

(3,941)

—

3,987

(94)

(20)

(100)

(400)

400

3,396

2,234

1,784

—

7,414

In millions

Balance as of
January 1, 2014

Goodwill

Accumulated
impairment
losses (a)

Reclassifications
and other (b)

Additions/
reductions

Write off of
goodwill

Write off of
accumulated
impairment loss

Balance as of
December 31, 2014

Goodwill

Accumulated
impairment
losses (a)

Impairment loss

(100) (d)

Total

$3,296

$357

(100)

(1,877)

(1,664)

$120

—

$—

(3,641)

$3,773

(a) Represents accumulated goodwill impairment charges since the
adoption of ASC 350, “Intangibles – Goodwill and Other” in 2002.
(b) Represents the effects of foreign currency translations and

reclassifications.

of goodwill amortization for tax purposes in Brazil.

(d) Reflects a charge of $100 million for goodwill impairment related

to our Asia Industrial Packaging business.

Industrial
Packaging

Printing
Papers

Consumer
Packaging

Distribution

Total

3,165

2,396

1,783

400

$ 7,744

In millions

Balance as of
January 1, 2013

Goodwill

Accumulated
impairment
losses (a)

Reclassifications
and other (b)

Additions/
reductions

Balance as of
December 31, 2013

Goodwill

Accumulated
impairment
losses (a)

—

(1,765)

(1,664)

3,165

631

119

(28)

(63)

293 (c)

(22) (d)

—

400

—

(400) (e)

(3,429)

4,315

(88)

272

(512)

Impairment loss

—

(112) (e)

3,430

2,311

1,787

400

7,928

Total

3,430

434

123

—

(1,877)

(1,664)

(400)

—

(3,941)

$ 3,987

(a) Represents accumulated goodwill impairment charges since the
adoption of ASC 350, “Intangibles – Goodwill and Other” in 2002.
(b) Represents the effects of foreign currency translations and

reclassifications.

(c) Reflects $260 million for Orsa IP, the newly formed joint venture
in Brazil and the adjustment of $54 million ($33 million after-tax)
previously included as a trade name intangible asset in Deferred
Charges and Other Assets on the balance sheet.

(d) Reflects a reduction from tax benefits generated by the deduction

of goodwill amortization for tax purposes in Brazil.

(e) Represents the impairment of goodwill for the India Papers

business and xpedx.

At December 31, 2013, there was $400 million of goodwill
and $400 million of accumulated impairment losses
included in the consolidated balance sheet associated with
the xpedx business (Distribution segment). Effective July
1, 2014, the Company completed the spinoff of its xpedx
business which had historically
the
Company's Distribution reportable segment. Following the
spinoff of xpedx, the assets and liabilities of this business
have been reclassified as discontinued operations and
adjusted off of the consolidated balance sheet and are not
included in balances as of December 31, 2014.

represented

its reporting units

In the fourth quarter of 2014, in conjunction with the annual
testing of
for possible goodwill
impairments, the Company calculated the estimated fair
value of its Asia Industrial Packaging business using the
discounted future cash flows and determined that all of the
goodwill in this business, totaling $100 million, should be
written off. The decline in the fair value of the Asia Industrial
Packaging business and resulting impairment charge was
due to a change in the strategic outlook for the business.

its reporting units

In the fourth quarter of 2013, in conjunction with the annual
testing of
for possible goodwill
impairments, the Company calculated the estimated fair
value of its India Papers business using the discounted
future cash flows and determined that all of the goodwill of
this business, totaling $112 million, should be written off.
The decline in the fair value of the India Papers reporting
unit and resulting impairment charge was due to a change
in the strategic outlook for the India Papers operations.

Also in the fourth quarter of 2013, the Company calculated
the estimated fair value of its xpedx business using the
discounted future cash flows and wrote off all of the
goodwill of its xpedx business, totaling $400 million. The
decline in fair value of the xpedx reporting unit and resulting
impairment charge was due to a significant decline in
earnings and a change in the strategic outlook for the xpedx
operations. As a result, during the fourth quarter of 2013,
the Company recorded a total goodwill impairment charge
of $512 million, representing all of the recorded goodwill
of the xpedx business and the India Papers business.

No goodwill impairment charges were recorded in 2012.

OTHER INTANGIBLES

Identifiable intangible assets comprised the following:

NOTE 10 INCOME TAXES

The components of International Paper’s earnings from
continuing operations before income taxes and equity
earnings by taxing jurisdiction were as follows:

In millions

Earnings (loss)

U.S.

Non-U.S.

2014

2013

2012

565 $

775 $

307

453

419

548

Earnings (loss) from continuing
operations before income taxes
and equity earnings

872 $ 1,228 $

967

The provision (benefit) for income taxes (excluding
noncontrolling interests) by taxing jurisdiction was as
follows:

2014

2013

In millions

2014

2013

2012

Current tax provision (benefit)

U.S. federal

U.S. state and local

Non-U.S.

Deferred tax provision (benefit)

U.S. federal

U.S. state and local

Non-U.S.

$ 175 $

(663) $

(98)

(3)

100

$ 258 $

(666) $ 109

(67) $

206 $ 220

(73)

(18)

(20)

(28)

$ (135) $

168 $ 197

Income tax provision (benefit)

$ 123 $

(498) $ 306

The Company’s deferred income tax provision (benefit)
includes a $13 million benefit, a $7 million provision and
a $25 million provision for 2014, 2013 and 2012,
respectively, for the effect of changes in non-U.S. and
U.S. state tax rates.

International Paper made income tax payments, net of
refunds, of $172 million, $291 million and $95 million in
2014, 2013 and 2012, respectively.

In millions at
December 31

Customer relationships
and lists

Non-compete
agreements

Tradenames, patents
and trademarks

Land and water rights

Fuel and power
agreements

Software

Other

Total

Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization

561 $

157 $

602

139

(a)

848 $

309 $

920

272

(a)

Includes $15 million recorded to write-off a tradename intangible
asset of the Company's India Papers business. This amount is
included in Impairment of goodwill and other intangibles in the
accompanying consolidated statement of operations.

The Company recognized the following amounts as
amortization expense related to intangible assets:

In millions
Amortization expense related to
intangible assets

2014

2013

2012

73 $

79 $

Based on current intangibles subject to amortization,
estimated amortization expense for each of the succeeding
years is as follows: 2015 – $64 million, 2016 – $55 million,
2017 – $52 million, 2018 – $47 million, 2019 – $46 million,
and cumulatively thereafter – $275 million.

A reconciliation of income tax expense using the
statutory U.S. income tax rate compared with the actual
income tax provision follows:

In millions

2014

2013

2012

Earnings (loss) from
continuing
operations before income
taxes
and equity earnings

872

$1,228

967

Statutory U.S. income tax rate

35%

35 %

35%

Tax expense (benefit) using
statutory U.S. income tax rate

State and local income taxes

Tax rate and permanent
differences on non-U.S.
earnings

Net U.S. tax on non-U.S.
dividends

Tax benefit on manufacturing
activities

Non-deductible business
expenses

Non-deductible goodwill

Tax audits

Subsidiary liquidation

Retirement plan dividends

Tax basis adjustments

Tax credits

Medicare subsidy

Other, net

Income tax provision
(benefit)

305

430

(2)

338

(72)

(90)

(116)

(15)

(46)

(27)

—

(85)

(5)

—

(34)

—

(8)

(770)

—

(5)

(33)

(23)

—

(4)

(15)

—

(5)

—

123

$ (498)

306

Effective income tax rate

14%

(41)%

32%

The tax effects of significant temporary differences,
representing deferred income tax assets and liabilities
at December 31, 2014 and 2013, were as follows:

In millions

Deferred income tax assets:

2014

2013

Postretirement benefit accruals

189 $

Pension obligations

Alternative minimum and other tax
credits

Net operating and capital loss
carryforwards

Compensation reserves

Other

Gross deferred income tax assets

Less: valuation allowance

Net deferred income tax asset

Deferred income tax liabilities:

Intangibles

Plants, properties and equipment

Forestlands and related installment
sales

1,517

342

672

280

266

193

725

515

610

281

284

3,266

(415)

2,608

(413)

2,851 $

2,195

(316) $

(304)

(2,707)

(2,919)

(2,290)

(2,307)

Gross deferred income tax liabilities

$ (5,313) $ (5,530)

Net deferred income tax liability

$ (2,462) $ (3,335)

Deferred income tax assets and liabilities are recorded
in the accompanying consolidated balance sheet under
the captions Deferred income tax assets, Deferred
charges and other assets, Other accrued liabilities, and
Deferred income taxes. There is an increase in deferred
income tax assets principally relating to the tax impact
of changes in qualified pension liabilities partially offset
by the utilization of tax credits. Deferred tax liabilities
decreased primarily due to book depreciation in excess
of tax depreciation. Of the $2.3 billion forestlands and
related installment sales deferred tax liability, $1.4
billion relates to a 2006 International Paper installment
sale of forestlands and $840 million relates to a 2007
Temple-Inland installment sale of forestlands (see Note
12). Certain tax attributes reflected on our tax returns
as filed differ from those reflected in the deferred income
tax accounts due to uncertain tax benefits.

The valuation allowance for deferred income tax assets
as of December 31, 2014 was $415 million. The net
change in the total valuation allowance for the year
ended December 31, 2014 was an increase of $2
million.

A reconciliation of the beginning and ending amount of
the years ended
unrecognized
December 31, 2014, 2013 and 2012 is as follows:

tax benefits

for

In millions

2014

2013

2012

Balance at January 1

(161) $

(972) $

(857)

(Additions) reductions based on
tax positions related to current
year

Additions for tax positions of prior
years

Reductions for tax positions of
prior years

Settlements

Expiration of statutes of
limitations

Currency translation adjustment

(15)

(22)

(1)

(29)

(140)

—

824

(2)

Balance at December 31

(158) $

(161) $

(972)

Included in the balance at December 31, 2014, 2013
and 2012 are $1 million, $1 million and $14 million,
respectively, for tax positions for which the ultimate
benefits are highly certain, but for which there is
uncertainty about the timing of such benefits. However,
except for the possible effect of any penalties, any
disallowance that would change the timing of these
benefits would not affect the annual effective tax rate,
but would accelerate the payment of cash to the taxing
authority to an earlier period.

The Company accrues interest on unrecognized tax
benefits as a component of interest expense. Penalties,
if incurred, are recognized as a component of income
tax expense. The Company had approximately $41
million and $54 million accrued for the payment of
estimated interest and penalties associated with

unrecognized tax benefits at December 31, 2014 and
2013, respectively.

The major jurisdictions where the Company files
income tax returns are the United States, Brazil, France,
Poland and Russia. Generally, tax years 2003 through
2013 remain open and subject to examination by the
relevant tax authorities. The Company is typically
engaged in various tax examinations at any given time,
both in the United States and overseas. In 2013, the
Company concluded its examination with the U.S.
Internal Revenue Service for the tax years 2006 through
2009 for both International Paper Company and
Temple-Inland. As a result of the completion of the
examinations, the Company reduced its unrecognized
tax benefits by approximately $844 million. Other
pending audit settlements and the expiration of statute
of limitations could further reduce the uncertain tax
positions by $5 million during the next twelve months.
While the Company believes that it is adequately
accrued for possible audit adjustments, the final
resolution of these examinations cannot be determined
at this time and could result in final settlements that
differ from current estimates.

Included in the Company’s 2014, 2013 and 2012
income tax provision (benefit) are $(453) million, $(869)
million and $(63) million, respectively, related to special
items. The components of the net provisions related to
special items were as follows:

In millions

Special items

Tax-related adjustments:

Internal restructurings

Settlement of tax audits and
legislative changes

Medicare D deferred income tax
write-off

Other tax adjustments

Income tax provision (benefit)
related to special items

2014

2013

2012

(372) $

(95) $

(82)

(90)

(4)

(770)

—

(1)

—

(453) $

(869) $

(63)

Excluding the impact of special items and nonoperating
pension expense, the 2014, 2013 and 2012 income tax
provisions were $659 million, $497 million and $415
respectively, or 31%, 26% and 28%,
million,
respectively, of pre-tax earnings before equity earnings.

The following details the scheduled expiration dates of
the Company’s net operating loss and income tax credit
carryforwards:

In millions

U.S. federal and
non-U.S. NOLs

State taxing
jurisdiction NOLs

U.S. federal, non-
U.S. and state tax
credit carryforwards

U.S. federal and
state capital loss
carryforwards

2015
Through
2024

2025
Through

2034 Indefinite

Total

28 $

3 $

462 $

493

140

146

—

216

275

444

—

Total

372 $

102 $

737 $

1,211

Deferred income taxes are not provided for temporary
differences of approximately $5.2 billion, $5.1 billion
and $4.7 billion as of December 31, 2014, 2013 and
2012, respectively, representing earnings of non-U.S.
subsidiaries intended to be permanently reinvested.
Computation of the potential deferred tax liability
associated with these undistributed earnings and other
basis differences is not practicable.

The American Taxpayer Relief Act of 2012 (the “Act”)
was signed into law on January 2, 2013. The Act
retroactively restored several expired business tax
provisions, including the research and experimentation
credit and the Subpart F controlled foreign corporation
look-through exception. Because a change in tax law
is accounted for in the period of enactment, the
retroactive effect of the Act on the Company's U.S.
federal taxes for 2012 of a benefit of approximately $32
million was recognized in the first quarter of 2013.

NOTE 11 COMMITMENTS AND CONTINGENT
LIABILITIES

PURCHASE COMMITMENTS AND OPERATING LEASES

Certain property, machinery and equipment are leased
under cancelable and non-cancelable agreements.

Unconditional purchase obligations have been entered
into in the ordinary course of business, principally for
capital projects and the purchase of certain pulpwood,
logs, wood chips, raw materials, energy and services,
including
to purchase
pulpwood that were entered into concurrently with the
Company’s 2006 Transformation Plan forestland sales
and in conjunction with the 2008 acquisition of
Weyerhaeuser Company’s Containerboard, Packaging
and Recycling business.

fiber supply agreements

future minimum
At December 31, 2014,
commitments under existing non-cancelable operating
leases and purchase obligations were as follows:

total

2015

2016

2017

2018

2019 Thereafter

142 $ 106 $

84 $

63 $

45 $

In millions

Lease
obligations

Purchase
obligations
(a)

3,266

761

583

463

422

Total

$ 3,408 $ 867 $ 667 $ 526 $ 467 $

1,690

1,781

(a)

Includes $2.3 billion relating to fiber supply agreements
entered into at the time of the Company’s 2006 Transformation
Plan forestland sales and in conjunction with the 2008
acquisition of Weyerhaeuser Company’s Containerboard,
Packaging and Recycling business.

Rent expense was $154 million, $168 million and $185
million for 2014, 2013 and 2012, respectively.

GUARANTEES

In connection with sales of businesses, property,
equipment, forestlands and other assets, International
Paper commonly makes
representations and
warranties relating to such businesses or assets, and
may agree to indemnify buyers with respect to tax and
environmental liabilities, breaches of representations
and warranties, and other matters. Where liabilities for
such matters are determined to be probable and subject
liabilities are
to reasonable estimation, accrued
recorded at the time of sale as a cost of the transaction.

ENVIRONMENTAL PROCEEDINGS

CERCLA and State Actions

Environmental

International Paper has been named as a potentially
responsible party in environmental remediation actions
under various federal and state laws, including the
Response,
Comprehensive
Compensation and Liability Act (CERCLA). Many of
these proceedings involve the cleanup of hazardous
substances at large commercial landfills that received
waste from many different sources. While joint and
several liability is authorized under CERCLA and
equivalent state laws, as a practical matter, liability for
CERCLA cleanups is typically allocated among the
many potential responsible parties. Remedial costs are
recorded in the consolidated financial statements when
they become probable and reasonably estimable.
International Paper has estimated the probable liability
associated with these matters to be approximately $95
million in the aggregate as of December 31, 2014.

Cass Lake: One of the matters referenced above is a
closed wood treating facility located in Cass Lake,
Minnesota. During 2009, in connection with an
environmental site remediation action under CERCLA,
International Paper submitted to the EPA a remediation
feasibility study. In June 2011, the EPA selected and
published a proposed soil remedy at the site with an

estimated cost of $46 million. The overall remediation
reserve for the site is currently $50 million to address
the selection of an alternative for the soil remediation
component of the overall site remedy. In October 2011,
the EPA released a public statement indicating that the
final soil remedy decision would be delayed. In the
unlikely event that the EPA changes its proposed soil
remedy and approves instead a more expensive clean-
up alternative, the remediation costs could be material,
and significantly higher
than amounts currently
recorded. In October 2012, the Natural Resource
Trustees for this site provided notice to International
Paper and other potentially responsible parties of their
intent
to perform a Natural Resource Damage
Assessment. It is premature to predict the outcome of
the assessment or to estimate a loss or range of loss,
if any, which may be incurred.

Other Remediation Costs

typically associated with

In addition to the above matters, other remediation
costs
the cleanup of
hazardous substances at the Company’s current,
closed or formerly-owned facilities, and recorded as
liabilities in the balance sheet, totaled approximately
$41 million as of December 31, 2014. Other than as
described above, completion of required remedial
actions is not expected to have a material effect on our
consolidated financial statements.

LEGAL PROCEEDINGS

Environmental

Kalamazoo River: The Company is a potentially
responsible party with respect to the Allied Paper, Inc./
Portage Creek/Kalamazoo River Superfund Site
(Kalamazoo River Superfund Site) in Michigan. The
EPA asserts that the site is contaminated primarily by
PCBs as a result of discharges from various paper mills
located along the Kalamazoo River, including a paper
mill formerly owned by St. Regis Paper Company (St.
Regis). The Company is a successor in interest to St.
Regis. Although the Company has not received any
orders from the EPA, in December 2014, the EPA sent
the Company a letter demanding payment of $19 million
to reimburse the EPA for costs associated with a Time
Critical Removal Action of PCB contaminated
sediments from a portion of the site. The Company’s
CERCLA liability has not been finally determined with
respect to this or any other portion of the site and we
have declined to reimburse the EPA at this time. As
noted below, the Company is involved in allocation/
apportionment
the site.
litigation with regard
Accordingly, it is premature to estimate a loss or range
of loss with respect to this site.

The Company was named as a defendant by Georgia-
Pacific Consumer Products LP, Fort James Corporation
and Georgia Pacific LLC in a contribution and cost
recovery action for alleged pollution at the site. The suit

seeks contribution under CERCLA for $79 million in
costs purportedly expended by plaintiffs as of the filing
of the complaint and for future remediation costs. The
suit alleges that a mill, during the time it was allegedly
owned and operated by St. Regis, discharged PCB
contaminated solids and paper residuals resulting from
paper de-inking and recycling. Also named as
defendants in the suit are NCR Corporation and
Weyerhaeuser Company. In mid-2011, the suit was
transferred from the District Court for the Eastern
District of Wisconsin to the District Court for the Western
District of Michigan. The trial of the initial liability phase
took place in February 2013. Weyerhaeuser conceded
prior to trial that it was a liable party with respect to the
site. In September 2013, an opinion and order was
issued in the suit. The order concluded that the
Company (as the successor to St. Regis) was not an
“operator,” but was an “owner,” of the mill at issue during
a portion of the relevant period and is therefore liable
under CERCLA. The order also determined that NCR
is a liable party as an "arranger for disposal" of PCBs
in waste paper that was de-inked and recycled by mills
along the Kalamazoo River. The order did not address
the Company's responsibility, if any, for the costs
plaintiffs seek to recover. This will be the subject of a
separate trial, which has been set for September 2015.
The Company thus believes it is premature to predict
the outcome or to estimate a loss or range of loss, if
any, which may be incurred.

Harris County: International Paper and McGinnis
Industrial Maintenance Corporation, a subsidiary of
Waste Management, Inc., are potentially responsible
parties at the San Jacinto River Waste Pits Superfund
Site (San Jacinto River Superfund Site) in Harris
County, Texas, and have been actively participating in
investigation and remediation activities at this site. In
December 2011, Harris County, Texas filed a suit
against the Company in Harris County District Court
seeking civil penalties with regard to the alleged
discharge of dioxin into the San Jacinto River since
1965 from waste impoundments that are part of the San
Jacinto River Superfund Site. Also named as
defendants in this action were McGinnis Industrial
Maintenance Corporation, Waste Management, Inc.
and Waste Management of Texas, Inc. Harris County
sought civil penalties pursuant to the Texas Water Code
and the Texas Administrative Code, which provide for
the imposition of civil penalties between $50 and
$25,000 per day. Trial began on October 7, 2014. On
November 13, 2014, the jury rendered a verdict finding
International Paper not responsible for the violations
alleged by Harris County. On January 20, 2015, the
court entered final judgment consistent with the jury
verdict. Harris County filed a motion for new trial on
February 18, 2015. International Paper is preparing its
response in opposition.

In October 2012, a civil lawsuit was filed against the
same defendants, including the Company, in the District
Court of Harris County by approximately 400 local
fishermen seeking medical monitoring and damages
with regard to the alleged discharge of dioxin into the
San Jacinto River since 1965
from waste
impoundments that are a part of the San Jacinto
Superfund Site. Trial is currently scheduled for May
2015. This case is in the discovery phase and it is
therefore premature to predict the outcome or to
estimate a loss or range of loss, if any, which may be
incurred. In December 2012, residents of an up-river
neighborhood filed a civil action against the same
defendants, including the Company, in the District Court
of Harris County alleging property damage and
personal injury from the alleged discharge of dioxin into
the San Jacinto River from the San Jacinto Superfund
Site. The parties anticipate that in March 2015 the court
will enter a docket control order and set a trial date. This
case is in the discovery phase and it is therefore
premature to predict the outcome or to estimate a loss
or range of loss, if any, which may be incurred.

Antitrust

that

2010,

including

In September

eight
Containerboard:
International
containerboard producers,
Paper and Temple-Inland, were named as defendants
in a purported class action complaint that alleged a civil
violation of Section 1 of the Sherman Act. The suit is
captioned Kleen Products LLC v. International Paper
Co. (N.D.
the
Ill.). The complaint alleges
defendants, beginning in February 2004 through
November 2010, conspired to limit the supply and
thereby increase prices of containerboard products.
The alleged class is all persons who purchased
containerboard products directly from any defendant for
use or delivery in the United States during the period
February 2004 to November 2010. The complaint seeks
to recover an unspecified amount of treble actual
damages and attorneys' fees on behalf of the purported
class. Four similar complaints were filed and have been
consolidated
Illinois.
Moreover, in January 2011, International Paper was
named as a defendant in a lawsuit filed in state court in
Cocke County, Tennessee alleging that International
Paper violated Tennessee law by conspiring to limit the
supply and fix the prices of containerboard from
mid-2005 to the present. Plaintiffs in the state court
action seek certification of a class of Tennessee indirect
purchasers of containerboard products, damages and
costs, including attorneys’ fees. The Company disputes
the allegations made and is vigorously defending each
action. However, because the federal action is in the
discovery stage and the Tennessee action is in a
preliminary stage, we are unable to predict an outcome
or estimate a range of reasonably possible loss.

the Northern District of

Gypsum: Beginning in late December 2012, certain
purchasers of gypsum board filed a number of

purported class action complaints alleging civil
violations of Section 1 of the Sherman Act against
Temple-Inland and a number of other gypsum
manufacturers. The complaints were similar and
alleged that the gypsum manufacturers conspired or
otherwise reached agreements to: (1) raise prices of
gypsum board either from 2008 or 2011 to the present;
(2) avoid price erosion by ceasing the practice of issuing
job quotes; and (3) restrict supply through downtime
and limiting order fulfillment. The alleged classes are
all persons who purchased gypsum board and/or
gypsum finishing products directly or indirectly from any
recover
defendant. The complainants seek
unspecified treble actual damages and attorneys' fees
on behalf of the purported classes. On April 8, 2013,
the Judicial Panel on Multidistrict Litigation ordered
transfer of all pending cases to the U.S. District Court
for the Eastern District of Pennsylvania for coordinated
and consolidated pretrial proceedings, and the direct
purchaser plaintiffs and indirect purchaser plaintiffs filed
their respective amended consolidated complaints in
June 2013. The amended consolidated complaints
allege a conspiracy or agreement beginning in or before
September 2011. In September 2014, we reached an
agreement in principle to settle these cases for an
immaterial amount. In February 2015, we executed a
definitive settlement agreement, which is subject to
court approval.

In addition, in September 2013, similar purported class
actions were filed in courts in Quebec, Canada and
Ontario, Canada, with each suit alleging violations of
the Canadian Competition Act and seeking damages
and injunctive relief. The Company intends to dispute
the allegations made and to vigorously defend the
litigation. Because these Canadian cases are in a
preliminary stage, we are unable to predict an outcome
or estimate our maximum reasonably possible loss.
However, we do not believe that any material loss is
probable.

Tax

The Company was previously being challenged by the
Brazil taxing authorities concerning the statute of
limitations related to the use of certain tax credits. The
Company was previously appealing an unfavorable
March 2012 administrative court ruling. During August
2014, the Company settled this claim for $22 million
($11 million after taxes) as part of a tax amnesty
program sponsored by the Brazil taxing authorities.

General

The Company is involved in various other inquiries,
administrative proceedings and litigation relating to
environmental and safety matters, contracts, sales of
property, intellectual property, personal injury, labor and
employment (especially
in California) and other
matters, some of which allege substantial monetary

damages. While any proceeding or litigation has the
element of uncertainty, the Company believes that the
outcome of any of the lawsuits or claims that are
pending or threatened or all of them combined (other
than those that cannot be assessed due to their
preliminary nature) will not have a material effect on its
consolidated financial statements.

NOTE 12 VARIABLE INTEREST ENTITIES AND
PREFERRED SECURITIES OF SUBSIDIARIES

VARIABLE INTEREST ENTITIES

forestlands,

In connection with the 2006 sale of approximately 5.6
million acres of
International Paper
received installment notes (the Timber Notes) totaling
approximately $4.8 billion. The Timber Notes, which do
not require principal payments prior to their August 2016
maturity, are supported by irrevocable letters of credit
obtained by the buyers of the forestlands.

During 2006, International Paper contributed the
Timber Notes to newly formed entities (the Borrower
Entities) in exchange for Class A and Class B interests
in these entities. Subsequently, International Paper
contributed its $200 million Class A interests in the
Borrower Entities, along with approximately $400
million of International Paper promissory notes, to other
newly formed entities (the Investor Entities, and
together with the Borrower Entities, the Entities) in
exchange for Class A and Class B interests in these
entities, and simultaneously sold its Class A interest in
the Investor Entities to a third party investor. As a result,
at December 31, 2006, International Paper held Class
B interests in the Borrower Entities and Class B
interests in the Investor Entities valued at approximately
$5.0 billion. International Paper did not provide any
financial support that was not previously contractually
required for the years ended December 31, 2014, 2013
or 2012.

Following the 2006 sale of forestlands and creation of
the Entities discussed above, the Timber Notes were
used as collateral for borrowings from third party
lenders, which effectively monetized the Timber Notes.
Provisions of certain loan agreements require any bank
issuing letters of credit supporting the Timber Notes to
maintain a credit rating above a specified threshold. In
the event the credit rating of a letter of credit bank is
downgraded below the specified threshold, the letters
of credit must be replaced within 60 days by letters of
credit from a qualifying institution, or for one letter of
credit bank, collateral must be posted. The Company,
retained to provide management services for the third-
party entities that hold the Timber Notes, has, as
required by the loan agreements, successfully replaced
banks that fell below the specified threshold or obtained
a waiver as further discussed below.

for

financial

Also during 2006, the Entities acquired approximately
$4.8 billion of International Paper debt obligations for
cash, resulting in a total of approximately $5.2 billion of
International Paper debt obligations held by the Entities
at December 31, 2006. The various agreements
entered into in connection with these transactions
provide that International Paper has, and intends to
effect, a legal right to offset its obligation under these
debt instruments with its investments in the Entities.
Accordingly,
reporting purposes,
International Paper has offset approximately $5.2 billion
of Class B interests in the Entities against $5.3 billion
of International Paper debt obligations held by these
Entities at December 31, 2014 and 2013. Despite the
offset treatment, these remain debt obligations of
International Paper. Remaining borrowings of $50
million and $67 million at December 31, 2014 and 2013,
respectively, are included in floating rate notes due
2014 – 2019 in the summary of long-term debt in Note
13. Additional debt related to the above transaction of
$107 million and $79 million is included in short-term
notes in the summary of long-term debt in Note 13 at
December 31, 2014 and 2013.

facilitated

The use of
the
the above entities
monetization of the credit enhanced Timber Notes in a
cost effective manner by increasing the borrowing
capacity and lowering the interest rate, while providing
for the offset accounting treatment described above.
Additionally, the monetization structure preserved the
tax deferral that resulted from the 2006 forestlands
sales. The Company recognized a $1.4 billion deferred
tax liability in connection with the 2006 forestlands sale,
which will be settled with the maturity of the Timber
Notes in the third quarter of 2016 (unless extended).

During 2011 and 2012, the credit ratings for two letter
of credit banks that support $1.5 billion of Timber Notes
were downgraded below the specified threshold. These
letters of credit were successfully replaced by other
qualifying institutions. Fees of $10 million were incurred
during 2012 in connection with these replacements.

During 2012, an additional letter of credit bank that
supports $707 million of Timber Notes was downgraded
below the specified threshold. In December 2012, the
Company and the third-party managing member
agreed to a continuing replacement waiver for these
letters of credit, terminable upon 30 days notice.

Activity between the Company and the Entities was as
follows:

In millions
Revenue (loss) (a)

Expense (a)

Cash receipts (b)

Cash payments (c)

2014
2012
2013
$ 38 $ 45 $ 49
90

(a) The net expense related to the Company’s interest in the
Entities
the
accompanying consolidated statement of operations, as
International Paper has and intends to effect its legal right to
offset as discussed above.

Interest expense, net

included

(b) The cash receipts are equity distributions from the Entities to

International Paper.

associated debt obligations discussed above.

Based on an analysis of the Entities discussed above
under guidance that considers the potential magnitude
of the variability in the structures and which party has
a controlling financial interest, International Paper
determined that it is not the primary beneficiary of the
Entities, and therefore, should not consolidate its
investments in these entities. It was also determined
that the source of variability in the structure is the value
of the Timber Notes, the assets most significantly
impacting the structure’s economic performance. The
credit quality of the Timber Notes is supported by
irrevocable letters of credit obtained by third-party
buyers which are 100% cash collateralized.
International Paper analyzed which party has control
over the economic performance of each entity, and
concluded International Paper does not have control
over significant decisions surrounding the Timber Notes
and letters of credit and therefore is not the primary
beneficiary. The Company’s maximum exposure to loss
equals the value of the Timber Notes; however, an
analysis performed by the Company concluded the
likelihood of this exposure is remote.

International Paper also held variable interests in
financing entities that were used to monetize long-term
notes received from the sale of forestlands in 2002.
International Paper transferred notes (the Monetized
Notes, with an original maturity of 10 years from
inception) and cash of approximately $500 million to
these entities in exchange for preferred interests, and
accounted for the transfers as a sale of the notes with
no associated gain or loss. In the same period, the
entities acquired approximately $500 million of
for cash.
International Paper debt obligations
International Paper has no obligation to make any
further capital contributions to these entities and did not
provide any financial support that was not previously
the years ended
contractually
December 31, 2014, 2013 or 2012.

required during

During 2012, $252 million of the 2002 Monetized Notes
matured. Cash receipts upon maturity were used to pay
the associated debt obligations. Effective June 1, 2012,
International Paper liquidated its interest in the 2002
financing entities.

In connection with the acquisition of Temple-Inland in
February 2012, two special purpose entities became
wholly-owned subsidiaries of International Paper.

The use of the two wholly-owned special purpose
entities discussed below preserved the tax deferral that
resulted from the 2007 Temple-Inland timberlands
sales. The Company recognized an $840 million
deferred tax liability in connection with the 2007 sales,
which will be settled with the maturity of the notes in
2027.

In October 2007, Temple-Inland sold 1.55 million acres
of timberlands for $2.38 billion. The total consideration
consisted almost entirely of notes due in 2027 issued
by the buyer of the timberlands, which Temple-Inland
contributed to two wholly-owned, bankruptcy-remote
special purpose entities. The notes are shown in
Financial assets of special purpose entities in the
accompanying consolidated balance sheet and are
supported by $2.38 billion of irrevocable letters of credit
issued by three banks, which are required to maintain
minimum credit ratings on their long-term debt. In the
third quarter of 2012, International Paper completed its
preliminary analysis of the acquisition date fair value of
the notes and determined it to be $2.09 billion. As of
December 31, 2014 and 2013, the fair value of the notes
was $2.27 billion and $2.62 billion, respectively. These
notes are classified as Level 2 within the fair value
hierarchy, which is further defined in Note 14.

In December 2007, Temple-Inland's two wholly-owned
special purpose entities borrowed $2.14 billion shown
in Nonrecourse financial liabilities of special purpose
entities in the accompanying consolidated balance
sheet. The loans are repayable in 2027 and are secured
only by the $2.38 billion of notes and the irrevocable
letters of credit securing the notes and are nonrecourse
to the Company. The loan agreements provide that if a
credit rating of any of the banks issuing the letters of
credit is downgraded below the specified threshold, the
letters of credit issued by that bank must be replaced
within 30 days with letters of credit from another
qualifying financial institution. In the third quarter of
2012, International Paper completed its preliminary
analysis of the acquisition date fair value of the
borrowings and determined it to be $2.03 billion. As of
December 31, 2014 and 2013, the fair value of this debt
was $2.16 billion and $2.49 billion, respectively. This
debt is classified as Level 2 within the fair value
hierarchy, which is further defined in Note 14.

During 2012, the credit ratings for two letter of credit
banks that support $1.0 billion of the 2007 Monetized
Notes were downgraded below the specified threshold.
These letters of credit were successfully replaced by
other qualifying institutions. Fees of $8 million were
incurred in connection with these replacements.

Activity between the Company and the 2007 financing
entities was as follows:

In millions

Revenue (loss) (a)
Expense (b)

Cash receipts (c)

Cash payments (d)

2014
2012
2013
$ 26 $ 27 $ 28
28

(a) The revenue is included in Interest expense, net in the
accompanying consolidated statement of operations and
includes approximately $19 million, $19 million and $17 million
for the years ended December 31, 2014, 2013 and 2012,
respectively, of accretion income for the amortization of the
purchase accounting adjustment of the Financial assets of
special purpose entities.

(b) The expense is included in Interest expense, net in the
accompanying consolidated statement of operations and
includes $7 million, $7 million and $6 million for the years
ended December 31, 2014, 2013 and 2012, respectively, of
accretion expense for the amortization of the purchase
accounting adjustment on the Nonrecourse financial liabilities
of special purpose entities.

of special purpose entities.

(d) The cash payments are interest paid on Nonrecourse financial

liabilities of special purpose entities.

PREFERRED SECURITIES OF SUBSIDIARIES

In March 2003, Southeast Timber, Inc. (Southeast
Timber), a consolidated subsidiary of International
Paper, issued $150 million of preferred securities to a
private investor with future dividend payments based
on LIBOR. Southeast Timber, which
through a
subsidiary initially held approximately 1.50 million acres
of forestlands in the southern United States, was
International Paper’s primary vehicle for sales of
southern forestlands. As of December 31, 2014,
substantially all of these forestlands have been sold.
On March 27, 2013, Southeast Timber redeemed its
Class A common shares owned by the private investor
for $150 million. Distributions paid to the third-party
investor were $1 million and $6 million in 2013 and 2012,
respectively. The expense related to these preferred
securities is shown in Net earnings (loss) attributable
the accompanying
to noncontrolling
consolidated statement of operations.

interests

NOTE 13 DEBT AND LINES OF CREDIT

accompanying consolidated statement of operations
for the twelve months ended December 31, 2014.

In 2012, International Paper entered into a $1.2 billion
term loan and a $200 million term loan, both with
maturity dates in 2017. The proceeds from these
borrowings were used, along with available cash, to
fund the acquisition of Temple-Inland. During 2012,
International Paper fully repaid the $1.2 billion term
loan. During 2014, International Paper fully repaid the
$200 million term loan.

Amounts related to early debt extinguishment during
the years ended December 31, 2014, 2013 and 2012
were as follows:

In millions

Debt reductions (a)

2014

2013

2012

$ 1,625 $ 574 $ 1,272

Pre-tax early debt extinguishment
costs (b)

276

(a) Reductions related to notes with interest rates ranging from
1.63% to 9.38% with original maturities from 2014 to 2041 for
the years ended December 31, 2014, 2013 and 2012.

(b) Amounts are included in Restructuring and other charges in
the accompanying consolidated statements of operations.

A summary of long-term debt follows:

In millions at December 31

8.7% note – due 2038

9 3/8% note – due 2019

7.95% debentures – due 2018

7.5% note – due 2021

7.3% notes – due 2039

6 7/8% notes – due 2023 – 2029

6.65% note – due 2037

6.4% to 7.75% debentures due 2025 –
2027

6 3/8% to 6 5/8% notes – due 2016 – 2018

6.0% notes – due 2041

5.25% to 5.3% notes – due 2015 – 2016

4.8% notes - due 2044

4.75% notes – due 2022

3.65% notes - due 2024

Floating rate notes – due 2014 – 2019 (a)

Environmental and industrial development
bonds – due 2014 – 2035 (b)

Short-term notes (c)

Other (d)

Total (e)

Less: current maturities

Long-term debt

2014

2013

264 $

420

903

979

721

131

142

358

585

457

796

896

797

271

950

424

275

264

848

1,429

999

721

130

142

364

585

657

—

899

—

269

1,487

386

304

9,373

9,488

742

661

$ 8,631 $ 8,827

(a) The weighted average interest rate on these notes was 2.8%

in 2014 and 2.6% in 2013.

(b) The weighted average interest rate on these bonds was 5.7%

in 2014 and 5.5% in 2013.

$93 million at December 31, 2013 related to non-U.S.
denominated borrowings with a weighted average interest rate
of 7.2% in 2014 and 5.8% in 2013.
Includes $20 million at December 31, 2014 and $41 million at
December 31, 2013, related to the unamortized gain on
interest rate swap unwinds (see Note 14).

(d)

(e) The fair market value was approximately $10.6 billion at
December 31, 2014 and $10.7 billion at December 31, 2013.

In addition to the long-term debt obligations shown
above, International Paper has $5.3 billion of debt
obligations payable
to non-consolidated variable
interest entities having principal payments of $5.2 billion
due in 2016, for which International Paper has, and
intends to effect, a legal right to offset these obligations
with Class B interests held in the entities. Accordingly,
in the accompanying consolidated balance sheet,
International Paper has offset the $5.3 billion of debt
obligations with $5.2 billion of Class B interests in these
entities as of December 31, 2014 (see Note 12). Total
maturities of long-term debt over the next five years are
2015 – $742 million; 2016 – $543 million; 2017 – $71
million; 2018 – $1.2 billion; and 2019 – $605 million.

At December 31, 2014, International Paper’s credit
facilities (the Agreements) totaled $2.0 billion. The
Agreements generally provide for interest rates at a
floating rate index plus a pre-determined margin
dependent upon International Paper’s credit rating. The
Agreements
include a $1.5 billion contractually
committed bank facility that expires in August 2019 and
has a facility fee of 0.15% payable annually. The liquidity
facilities also include up to $500 million of uncommitted
financings based on eligible receivables balances
($500 million available as of December 31, 2014) under
a receivables securitization program that expires in
December 2015. At December 31, 2014, there were no
borrowings under either the bank facility or receivables
securitization program.

NOTE 14 DERIVATIVES AND HEDGING
ACTIVITIES

International Paper periodically uses derivatives and
other financial instruments to hedge exposures to
interest
risks.
rate, commodity and currency
International Paper does not hold or issue financial
instruments for trading purposes. For hedges that meet
the hedge accounting criteria, International Paper, at
inception, formally designates and documents the
instrument as a fair value hedge, a cash flow hedge or
a net investment hedge of a specific underlying
exposure.

INTEREST RATE RISK MANAGEMENT

Our policy is to manage interest cost using a mixture of
fixed-rate and variable-rate debt. To manage this risk
in a cost-efficient manner, we enter into interest rate
swaps whereby we agree to exchange with the
counterparty, at specified intervals, the difference
between fixed and variable interest amounts calculated
by reference to a notional amount.

Interest rate swaps that meet specific accounting
criteria are accounted for as fair value or cash flow
hedges. For fair value hedges, the changes in the fair
value of both the hedging instruments and the
underlying debt obligations are immediately recognized
in interest expense. For cash flow hedges, the effective
portion of the changes in the fair value of the hedging
in Accumulated other
instrument
comprehensive income (“AOCI”) and reclassified into
interest expense over the life of the underlying debt.
The ineffective portion for both cash flow and fair value
hedges, which is not material for any year presented,
is immediately recognized in earnings.

reported

FOREIGN CURRENCY RISK MANAGEMENT

We manufacture and sell our products and finance
operations in a number of countries throughout the
world and, as a result, are exposed to movements in
foreign currency exchange rates. The purpose of our
foreign currency hedging program is to manage the
volatility associated with the changes in exchange
rates.

To manage this exchange rate risk, we have historically
utilized a combination of forward contracts, options and
currency swaps. Contracts that qualify are designated
as cash flow hedges of certain forecasted transactions
denominated in foreign currencies. The effective
portion of the changes in fair value of these instruments
is reported in AOCI and reclassified into earnings in the
same financial statement line item and in the same
period or periods during which the related hedged
transactions affect earnings. The ineffective portion,
which is not material for any year presented, is
immediately recognized in earnings.

in value of certain non-qualifying
The change
instruments used
foreign exchange
to manage
exposure of intercompany financing transactions and
certain balance sheet items subject to revaluation is
immediately recognized in earnings, substantially
offsetting the foreign currency mark-to-market impact
of the related exposure.

COMMODITY RISK MANAGEMENT

Certain raw materials used in our production processes
are subject to price volatility caused by weather, supply
conditions, political and economic variables and other

unpredictable factors. To manage the volatility in
earnings due to price fluctuations, we may utilize swap
contracts. These contracts are designated as cash flow
hedges of forecasted commodity purchases. The
effective portion of the changes in fair value for these
instruments is reported in AOCI and reclassified into
earnings in the same financial statement line item and
in the same period or periods during which the hedged
transactions affect earnings. The ineffective and non-
qualifying portions, which are not material for any year
presented, are immediately recognized in earnings.

The notional amounts of qualifying and non-qualifying
instruments used in hedging transactions were as
follows:

In millions

Derivatives in Cash Flow
Hedging Relationships:

Foreign exchange contracts
(Sell / Buy; denominated in
sell notional): (a)

Brazilian real / U.S. dollar -
Forward

British pounds / Brazilian
real - Forward

European euro / Brazilian
real - Forward

European euro / Polish zloty
- Forward

U.S. dollar / Brazilian real -
Forward

U.S. dollar / Brazilian real -
Zero-cost collar

Derivatives in Fair Value
Hedging Relationships:

Interest rate contracts (in
USD)

Derivatives Not Designated as
Hedging Instruments:

Foreign exchange contracts
(Sell / Buy; denominated in
sell notional):

Indian rupee / U.S. dollar

Mexican peso / U.S. dollar

U.S. dollar / Brazilian real

December
31, 2014

December

31, 2013

166

502

280

125

—

252

290

230

175

187

157

—

(a) These contracts had maturities of three years or less as of

December 31, 2014.

The following table shows gains or losses recognized
in AOCI, net of tax, related to derivative instruments:

In millions

Foreign exchange
contracts

Natural gas contracts

Total

Gain (Loss)
Recognized in AOCI on Derivatives
(Effective Portion)

2014

2013

2012

10 $

—

10 $

— $

—

— $

(1)

During the next 12 months, the amount of the
December 31, 2014 AOCI balance, after tax, that is

expected to be reclassified to earnings is a gain of $3
million.

The amounts of gains and losses recognized in the consolidated statement of operations on qualifying and non-
qualifying financial instruments used in hedging transactions were as follows:

In millions

Derivatives in Cash Flow Hedging Relationships:

Foreign exchange contracts

Natural gas contracts

Total

Gain (Loss)
Reclassified from
AOCI
into Income
(Effective Portion)

2014

2013

2012

Location of Gain
(Loss)
Reclassified
from AOCI
into Income
(Effective Portion)

4 $

—

4 $

7 $

(15)

Cost of products sold

—

7 $

(7)

(22)

Cost of products sold

Gain (Loss)
Recognized

in Income

Location of Gain
(Loss)
in Consolidated
Statement of
Operations

In millions

Derivatives in Fair Value Hedging Relationships:

2014

2013

2012

Interest rate contracts

Debt

Total

Derivatives Not Designated as Hedging Instruments:

Electricity Contracts

Embedded derivatives

Foreign exchange contracts

Interest rate contracts

Total

(1)

$ —

Interest expense, net

(1)

—

Interest expense, net

$ —

(2)

—

(1)

12 (a)

(1)

(5)

(4)

—

Cost of products sold

Interest expense, net

Cost of products sold

Interest expense, net

(a) Excluding gain of $7 million, net related to debt issuance and debt reduction recorded to Restructuring and other charges.

The following activity is related to fully effective interest rate swaps designated as fair value hedges:

In millions

Fourth Quarter

First Quarter

Total

Issued

Terminated

Undesignated

Issued

Terminated

Undesignated

— $

—

— $

—

175

—

175

—

2014

2013

Fair Value Measurements

International Paper’s financial assets and liabilities that
are recorded at fair value consist of derivative contracts,
including interest rate swaps, foreign currency forward
contracts, and other financial instruments that are used
to hedge exposures to interest rate, commodity and
currency risks. In addition, a consolidated subsidiary of
International Paper has an embedded derivative. For
the embedded
instruments and
these
derivative, fair value is determined at each balance
sheet date using an income approach.

financial

The guidance for fair value measurements and
disclosures sets out a fair value hierarchy that groups
fair value measurement inputs into the following three
classifications:

Level 1: Quoted market prices in active markets for
identical assets or liabilities.

Level 2: Observable market-based inputs other than
quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly.

Level 3: Unobservable inputs for the asset or liability
reflecting the reporting entity’s own assumptions or
external inputs from inactive markets.

Transfers between levels are recognized at the end of
the reporting period. All of International Paper’s
derivative fair value measurements use Level 2 inputs.

Below is a description of the valuation calculation and
the inputs used for each class of contract:

Interest Rate Contracts

Interest rate contracts are valued using swap curves
obtained from an independent market data provider.
The market value of each contract is the sum of the fair
value of all future interest payments between the
contract counterparties, discounted to present value.
The fair value of the future interest payments is
determined by comparing the contract rate to the
derived forward interest rate and present valued using
the appropriate derived interest rate curve.

Natural Gas Contracts

Natural gas contracts are traded over-the-counter and
settled using the NYMEX last day settle price; therefore,
forward contracts are valued using the closing prices
of the NYMEX natural gas future contracts. The fair

value of each contract is determined by comparing the
strike price to the closing price of the corresponding
natural gas future contract and present valued using
the appropriate interest rate curve.

Foreign Exchange Contracts

Foreign currency forward contracts are valued using
foreign currency forward and interest rate curves
obtained from an independent market data provider.
The fair value of each contract is determined by
comparing the contract rate to the forward rate. The fair
value is present valued using the applicable interest
rate from an independent market data provider.

Embedded Derivative

Embedded derivatives are valued using a hypothetical
interest rate derivative with identical terms. The
hypothetical interest rate derivative contracts are fair
valued as described above under Interest Rate
Contracts.

Since the volume and level of activity of the markets
that each of the above contracts are traded in has been
normal, the fair value calculations have not been
adjusted for inactive markets or disorderly transactions.

The following table provides a summary of the impact of our derivative instruments in the consolidated balance sheet:

Fair Value Measurements
Level 2 – Significant Other Observable Inputs

In millions

Derivatives designated as hedging instruments

Foreign exchange contracts – cash flow

Interest rate contracts - fair value

Total derivatives designated as hedging
instruments

Derivatives not designated as hedging instruments

Electricity contract

Foreign exchange contracts

Total derivatives not designated as hedging
instruments

Total derivatives

—

1 (b)

December 31,

2014

2013

2014

2013

Assets

Liabilities

16 (a) $

37 (c) $

14 (d) $

—

33 (e)

1 (f)

2 (b) $

—

2 (d) $

2 (d)

—

(a)

(b)
(c)

(d)
(e)

(f)

Includes $14 million recorded in Other current assets and $2 million recorded in Deferred charges and other assets in the accompanying
consolidated balance sheet.
Included in Other current assets in the accompanying consolidated balance sheet.
Includes $23 million recorded in Other current assets and $14 million recorded in Deferred charges and other assets in the accompanying
consolidated balance sheet.
Included in Other accrued liabilities in the accompanying consolidated balance sheet.
Includes $24 million recorded in Other accrued liabilities and $9 million recorded in Other liabilities in the accompanying consolidated balance
sheet.
Included in Other liabilities in the accompanying consolidated balance sheet.

The above contracts are subject to enforceable master
netting arrangements that provide rights of offset with
each counterparty when amounts are payable on the
same date in the same currency or in the case of certain
Management has made an
specified defaults.
accounting policy election to not offset the fair value of
recognized derivative assets and derivative liabilities in
the consolidated balance sheet. The amounts owed to
the counterparties and owed to the Company are
considered
to each
counterparty and
the aggregate with all
counterparties.

immaterial with
in

respect

Credit-Risk-Related Contingent Features

International Paper evaluates credit risk by monitoring
its exposure with each counterparty to ensure that
exposure stays within acceptable policy limits. Credit
risk is also mitigated by contractual provisions with the
majority of our banks. Certain of the contracts include
a credit support annex that requires the posting of
collateral by the counterparty or International Paper
based on each party’s rating and level of exposure.
Based on the Company’s current credit rating, the
collateral threshold is generally $15 million.

If the lower of the Company’s credit rating by Moody’s
or S&P were to drop below investment grade, the
Company would be required to post collateral for all of
its derivatives in a net liability position, although no
derivatives would
fair values of
derivative instruments containing credit-risk-related
contingent features in a net liability position were $1
million as of December 31, 2014 and $3 million as of
December 31, 2013. The Company was not required to
post any collateral as of December 31, 2014 or 2013.

terminate. The

NOTE 15 CAPITAL STOCK

The authorized capital stock at both December 31,
2014 and 2013, consisted of 990,850,000 shares of
common stock, $1 par value; 400,000 shares of
cumulative $4 preferred stock, without par value (stated
value $100 per share); and 8,750,000 shares of serial
preferred stock, $1 par value. The serial preferred stock
is issuable in one or more series by the Board of
Directors without further shareholder action.

The following is a rollforward of shares of common stock
for the three years ended December 31, 2014, 2013
and 2012:

Common Stock

In thousands

Balance at January 1, 2012

Issuance of stock for various plans, net

Repurchase of stock

Balance at December 31, 2012

Issuance of stock for various plans, net

Repurchase of stock

Balance at December 31, 2013

Issuance of stock for various plans, net

Repurchase of stock

Balance at December 31, 2014

NOTE 16 RETIREMENT PLANS

Issued Treasury
1,921

438,872
1,022

—

439,894
7,328

447,222
1,632

448,854

(2,994)
1,086

13
(533)
— 11,388
10,868

(4,668)
— 22,534
28,734

International Paper sponsors and maintains
the
Retirement Plan of International Paper Company (the
“Pension Plan”), a tax-qualified defined benefit pension
plan that provides retirement benefits to substantially
all U.S. salaried employees and hourly employees
(receiving salaried benefits) hired prior to July 1, 2004,
and substantially all other U.S. hourly and union
employees who work at a participating business unit
regardless of hire date. These employees generally are
eligible to participate in the Pension Plan upon attaining
21 years of age and completing one year of eligibility
service. U.S. salaried employees and hourly employees
(receiving salaried benefits) hired after June 30, 2004
are not eligible to participate in the Pension Plan, but
receive a company contribution to their individual
savings plan accounts (see Other U.S. Plans); however,
salaried employees hired by Temple Inland prior to
March 1, 2007 also participate in the Pension Plan. The
Pension Plan provides defined pension benefits based
on years of credited service and either final average
earnings (salaried employees and hourly employees
receiving salaried benefits), hourly job rates or specified
benefit rates (hourly and union employees).

In connection with the Temple-Inland acquisition in
February 2012,
International Paper assumed
administrative responsibility for the Temple-Inland
Retirement Plan, a defined benefit plan which covers
substantially all employees of Temple-Inland. The
Temple-Inland Retirement Plan merged with the
Retirement Plan of International Paper Company on
December 31, 2014.

The Company also has three unfunded nonqualified
defined benefit pension plans: a Pension Restoration
Plan available to employees hired prior to July 1, 2004
that provides retirement benefits based on eligible
compensation in excess of limits set by the Internal
Revenue Service, and two supplemental retirement
plans for senior managers (SERP), which is an

alternative retirement plan for salaried employees who
are senior vice presidents and above or who are
designated by
the chief executive officer as
participants. These nonqualified plans are only funded
to the extent of benefits paid, which totaled $38 million,
$28 million and $95 million in 2014, 2013 and 2012,
respectively, and which are expected to be $62 million
in 2015.

The Company will freeze participation, including
credited service and compensation,
for salaried
employees under the Pension Plan, the Pension
Restoration Plan and the two SERP plans for all service
on or after January 1, 2019. Credited service was
previously frozen for the Temple Retirement Plans.
This change will not affect benefits accrued through
December 31, 2018. For service after this date,
employees affected by
freeze will receive
Retirement Savings Account contributions as described
later in this Note 16.

the

Many non-U.S. employees are covered by various
retirement benefit arrangements, some of which are
considered to be defined benefit pension plans for
accounting purposes.

OBLIGATIONS AND FUNDED STATUS

The following table shows the changes in the benefit
obligation and plan assets for 2014 and 2013, and the
plans’ funded status. The U.S. combined benefit
obligation as of December 31, 2014 increased by $1.8
billion, due to the remeasurement in February to reflect
the pension freeze, a decrease in the discount rate
assumption used in computing the estimated benefit
obligation and a change in our mortality assumptions.
Our mortality assumption for the year ended December
31, 2014 reflects adoption of the newly issued Society
improvement scale, with
of Actuaries
Company specific adjustments. U.S. plan assets
increased by $212 million,
favorable
investment results in addition to a $353 million required
qualified pension contribution in 2014 offset by benefit
payments.

reflecting

longevity

2014

Non-
U.S.
Plans

U.S.
Plans

2013

Non-
U.S.
Plans

U.S.
Plans

$12,903 $ 228 $14,201 $ 223

145

600

—

(23)

—

133

—

(772)

(4)

—

(13)

188

576

(14)

(5)

(1,309)

—

(742)

—

(4)

—

(8)

—

(20)

—

(1)

$14,741 $ 233 $12,903 $ 228

In millions

Change in projected benefit
obligation:

Benefit obligation,
January 1

Service cost

Interest cost

Curtailments

Settlements

Divestitures

Other

Plan amendments

Special termination
benefits

Benefits paid

Effect of foreign currency
exchange rate
movements

Benefit obligation,
December 31

Change in plan assets:

Actuarial loss (gain)

1,755

Fair value of plan assets

$10,706 $ 181 $10,111 $ 171

Actual return on plan
assets

Company contributions

Benefits paid

Settlements

Other

Effect of foreign currency
exchange rate
movements

Fair value of plan
assets, December 31

Funded status,
December 31

Amounts recognized in the
consolidated balance
sheet:

593

391

1,283

(772)

(13)

(742)

—

(5)

—

(8)

(4)

—

(15)

—

(1)

$10,918 $ 180 $10,706 $ 181

$ (3,823) $

(53) $ (2,197) $

(47)

Non-current asset

— $

8 $

— $

Current liability

(62)

(3)

(46)

Non-current liability

(3,761)

(58)

(2,151)

$ (3,823) $

(53) $ (2,197) $

(2)

(54)

(47)

Amounts recognized in
accumulated other
comprehensive income
under ASC 715 (pre-tax):

Prior service cost

Net actuarial loss

209 $ — $

107 $ —

4,812

3,285

$ 5,021 $

40 $ 3,392 $

The components of the $1.6 billion and $11 million
increase related to U.S. plans and non-U.S. plans,
respectively, in the amounts recognized in OCI during
2014 consisted of:

In millions

Current year actuarial (gain) loss

Amortization of actuarial loss

Current year prior service cost

Amortization of prior service cost

Curtailments

Restructuring Effects

Effect of foreign currency exchange
rate movements

U.S.
Plans

1,924 $
(374)
133

(30)

(1)

(23)

—

1,629 $

Non-
U.S.
Plans
13

—

(6)

The accumulated benefit obligation at December 31,
2014 and 2013 was $14.6 billion and $12.6 billion,
respectively, for our U.S. defined benefit plans and
$208 million and $208 million, respectively, at
December 31, 2014 and 2013 for our non-U.S. defined
benefit plans.

The following table summarizes information for pension
plans with an accumulated benefit obligation in excess
of plan assets at December 31, 2014 and 2013:

2014

Non-
U.S.
Plans

U.S.
Plans

2013

Non-
U.S.
Plans

U.S.
Plans

$ 14,741 $ 196 $ 12,903 $

181

14,559

10,918

176

135

12,560

10,706

168

125

In millions

Projected benefit
obligation

Accumulated benefit
obligation

Fair value of plan assets

ASC 715, “Compensation – Retirement Benefits”
provides for delayed recognition of actuarial gains and
losses, including amounts arising from changes in the
estimated projected plan benefit obligation due to
changes in the assumed discount rate, differences
between the actual and expected return on plan assets
and other assumption changes. These net gains and
losses are recognized prospectively over a period that
approximates the average remaining service period of
active employees expected to receive benefits under
the plans to the extent that they are not offset by gains
in subsequent years. The estimated net loss and prior
service cost that will be amortized from AOCI into net
periodic pension cost for the U.S. plans during the next
fiscal year are expected to be $475 million and $43
million, respectively.

NET PERIODIC PENSION EXPENSE

Service cost is the actuarial present value of benefits
attributed by the plans’ benefit formula to services
rendered by employees during the year. Interest cost
represents the increase in the projected benefit
obligation, which is a discounted amount, due to the
passage of time. The expected return on plan assets
reflects the computed amount of current-year earnings
from the investment of plan assets using an estimated
long-term rate of return.

Net periodic pension expense for qualified and
nonqualified U.S. and non-U.S. defined benefit plans
comprised the following:

2014

Non-
U.S.
Plans

U.S.
Plans

2013

Non-
U.S.
Plans

U.S.
Plans

2012

Non-
U.S.
Plans

$ 145 $

5 $ 188 $

4 $ 152 $

600

576

604

(762)

(14)

(738)

(11)

(753)

(12)

374

— 485

307

—

(4)

—

$ 387 $ — $ 545 $

5 $ 342 $

In millions

Service cost

Interest cost

Expected return
on plan assets

Actuarial loss /
(gain)

Amortization of
prior service
cost

Curtailment
gain

Net periodic
pension
expense (a)

(a) Excludes $1 million in curtailments in 2014 related to the pension
freeze remeasurement that were recorded in restructuring and
other charges.

The decrease in 2014 pension expense reflects an
increase in the discount rate from 4.10% in 2013 to
4.65% in 2014 and lower amortization of unrecognized
actuarial losses.

ASSUMPTIONS

accounting

International Paper evaluates its actuarial assumptions
annually as of December 31 (the measurement date)
and considers changes in these long-term factors
based upon market conditions and the requirements for
pensions. These
employers’
assumptions are used to calculate benefit obligations
as of December 31 of the current year and pension
expense to be recorded in the following year (i.e., the
discount rate used to determine the benefit obligation
as of December 31, 2014 was also the discount rate
used to determine net pension expense for the 2015
year).

for

Major actuarial assumptions used in determining the benefit obligations and net periodic pension cost for our defined
benefit plans are presented in the following table:

Actuarial assumptions used to determine benefit obligations as of December 31:

Discount rate

Rate of compensation increase

Actuarial assumptions used to determine net periodic pension cost for years
ended December 31:

2014

Non-
U.S.
Plans

2013

Non-
U.S.
Plans

U.S.
Plans

2012

Non-
U.S.
Plans

U.S.
Plans

4.72% 4.90% 5.07% 4.10% 4.96%

4.03% 3.75% 4.13% 3.75% 3.17%

U.S.
Plans

4.10%

3.75%

Discount rate

Expected long-term rate of return on plan assets (b)

Rate of compensation increase

4.65% (a)

5.07% 4.10% 4.96% 5.10% 5.98%

7.75%

3.75%

7.53% 8.00% 7.04% 8.00% 7.62%

4.13% 3.75% 3.17% 3.75% 3.12%

(a) Represents the weighted average rate for 2014 due to the remeasurement in the first quarter of 2014.
(b) Represents the expected rate of return for International Paper's qualified pension plan for 2014 and 2013. The weighted average rate for the

Temple-Inland Retirement Plan was 7.00%, 6.16% and 5.70% for 2014, 2013 and 2012, respectively.

The expected long-term rate of return on plan assets is
based on projected rates of return for current and
planned asset classes in the plan’s investment portfolio.
Projected rates of return are developed through an
asset/liability study in which projected returns for each
of the plan’s asset classes are determined after
analyzing historical experience and future expectations
of returns and volatility of the various asset classes.

Based on the target asset allocation for each asset
class, the overall expected rate of return for the portfolio
is developed considering the effects of active portfolio
management and expenses paid from plan assets. The
discount rate assumption was determined from a
universe of high quality corporate bonds. A settlement
portfolio is selected and matched to the present value
of the plan’s projected benefit payments. To calculate
pension expense for 2015, the Company will use an
expected long-term rate of return on plan assets of
7.75% for the Retirement Plan of International Paper,
a discount rate of 4.10% and an assumed rate of
compensation increase of 3.75%. The Company
estimates that it will record net pension expense of
approximately $488 million for its U.S. defined benefit
plans in 2015, with the increase from expense of $387
million in 2014 reflecting a decrease in the discount
rate to 4.10% in 2015 from 4.65% in 2014, updated
mortality assumptions, and higher amortization of
unrecognized losses.

For non-U.S. pension plans, assumptions reflect
economic assumptions applicable to each country.

The following illustrates the effect on pension expense
for 2015 of a 25 basis point decrease in the above
assumptions:

In millions

Expense/(Income):

Discount rate

Expected long-term rate of return on plan assets

Rate of compensation increase

PLAN ASSETS

2015

25
(1)

International Paper’s Board of Directors has appointed
a Fiduciary Review Committee that is responsible for
fiduciary oversight of the U.S. Pension Plan, approving
investment policy and reviewing the management and
control of plan assets. Pension Plan assets are invested
to maximize returns within prudent levels of risk.

The Pension Plan maintains a strategic asset allocation
policy that designates target allocations by asset class.
Investments are diversified across classes and within
each class to minimize the risk of large losses.
Derivatives, including swaps, forward and futures
contracts, may be used as asset class substitutes or
for hedging or other risk management purposes.
Periodic reviews are made of investment policy
objectives and investment manager performance. For
non-U.S. plans, assets consist principally of common
stock and fixed income securities.

International Paper’s U.S. pension allocations by type
of fund at December 31, and target allocations were as
follows:

Asset Class

Equity accounts

Fixed income accounts

Real estate accounts

Other

Total

2014

2013

47%

33%

10%

100%

49%

32%

10%

9%
100%

Target
Allocations

43% - 54%

25% - 35%

7% - 13%

8% - 17%

The 2014 and 2013 actual and target allocations shown
represent a weighted average of International Paper
and Temple-Inland plan assets.

The fair values of International Paper’s pension plan
assets at December 31, 2014 and 2013 by asset class
are shown below. Plan assets included an immaterial
amount of International Paper common stock at
December 31, 2014 and 2013. Hedge funds disclosed
in the following table are allocated equally between
equity and fixed income accounts for target allocation
purposes.

Fair Value Measurement at December 31, 2014

Quoted
Prices in
Active
Markets
For
Identical
Assets
(Level 1)

Total

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Asset Class

In millions

Equities – domestic

$ 2,268 $

1,380 $

888 $

Equities – international

Corporate bonds

Government securities

Mortgage backed securities

Other fixed income

Commodities

Hedge funds

Private equity

Real estate

Derivatives

Cash and cash equivalents

2,397

1,230

1,282

172

207

170

867

519

1,101

376

329

1,815

—

329

582

1,230

1,282

172

197

170

—

867

519

1,101

376

—

Total Investments

$10,918 $

3,524 $

4,521 $

2,873

Fair Value Measurement at December 31, 2013

Quoted
Prices
in
Active
Markets
For
Identical
Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Asset Class

In millions

Total

Equities – domestic

$ 2,466 $

1,175 $

1,290 $

Equities – international

Corporate bonds

Government securities

Mortgage backed securities

Other fixed income

Commodities

Hedge funds

Private equity

Real estate

Derivatives

Cash and cash equivalents

Total Investments

2,313

1,248

1,097

143

193

831

484

1,038

313

506

1,470

—

(1)

—

843

1,248

1,097

143

193

—

(10)

516

—

831

484

1,038

313

—

$ 10,706 $

2,634 $

5,395 $

2,677

Equity securities consist primarily of publicly traded
U.S. companies and international companies. Publicly
traded equities are valued at the closing prices reported
in the active market in which the individual securities
are traded.

Fixed income consists of government securities,
mortgage-backed securities, corporate bonds and
common collective funds. Government securities are
valued by third-party pricing sources. Mortgage-backed
security holdings consist primarily of agency-rated
holdings. The fair value estimates for mortgage
securities are calculated by third-party pricing sources
chosen by the custodian’s price matrix. Corporate
bonds are valued using either the yields currently
available on comparable securities of issuers with
similar credit ratings or using a discounted cash flows
approach that utilizes observable inputs, such as
current yields of similar instruments, but includes
adjustments
that may not be
observable, such as credit and liquidity risks. Common
collective funds are valued at the net asset value per
share multiplied by the number of shares held as of the
measurement date.

for certain risks

Commodities consist of commodity-linked notes and
commodity-linked derivatives. Commodities are valued
at closing prices determined by calculation agents for
outstanding transactions.

(commingled, multi-manager

Hedge funds are investment structures for managing
private, loosely-regulated investment pools that can
pursue a diverse array of investment strategies with a
wide range of different securities and derivative
instruments. These investments are made through
funds-of-funds
fund
structures) and through direct investments in individual
hedge funds. Hedge funds are primarily valued by each
the
fund’s
valuation of the underlying securities and instruments
and primarily by applying a market or income valuation
methodology as appropriate depending on the specific
type of security or instrument held. Funds-of-funds are
valued based upon the net asset values of the
underlying investments in hedge funds.

third-party administrator based upon

Private equity consists of interests in partnerships that
invest in U.S. and non-U.S. debt and equity securities.
Partnership interests are valued using the most recent
general partner statement of fair value, updated for any
subsequent partnership interest cash flows.

Real estate includes commercial properties, land and
timberland, and generally includes, but is not limited to,
retail, office, industrial, multifamily and hotel properties.
Real estate fund values are primarily reported by the
fund manager and are based on valuation of the
underlying investments which include inputs such as
cost, discounted cash flows, independent appraisals
and market based comparable data.

futures,

investments such as

Derivative
forward
contracts, options, and swaps are used to help manage
risks. Derivatives are generally employed as asset
class substitutes (such as when employed within a
portable alpha strategy), for managing asset/liability
mismatches, or bona fide hedging or other appropriate
risk management purposes. Derivative instruments are
generally valued by the investment managers or in
certain instances by third-party pricing sources.

The fair value measurements using significant unobservable inputs (Level 3) at December 31, 2014 were as
follows:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

In millions

Equities-
Domestic

Other
Fixed
Income

Hedge
Funds

Private
Equity

Real

Estate Derivatives

Total

Beginning balance at December 31, 2013

1 $

10 $ 831 $

484 $ 1,038 $

313 $ 2,677

Actual return on plan assets:

Relating to assets still held at the reporting date

Relating to assets sold during the period

Purchases, sales and settlements

Transfers in and/or out of Level 3 (a)

(1)

—

(5)

—

(1)

(13)

(7)

(32)

(260)

229

159

(286)

229

Ending balance at December 31, 2014

— $

10 $ 867 $

519 $ 1,101 $

376 $ 2,873

(a) Includes the transfer of a $32 million investment historically shown as Real
Estate now categorized as Private Equity.

FUNDING AND CASH FLOWS

The Company’s funding policy for the Pension Plan is
to contribute amounts sufficient to meet legal funding
requirements, plus any additional amounts that the
Company may determine to be appropriate considering
the funded status of the plans, tax deductibility, cash
flow generated by the Company, and other factors. The
Company continually reassesses the amount and
timing of any discretionary contributions. Contributions
to the qualified plan totaling $353 million, $31 million
and $44 million were made by the Company in 2014,
2013 and 2012, respectively. Generally, International
Paper’s non-U.S. pension plans are funded using the
projected benefit as a target, except in certain countries
where funding of benefit plans is not required.

At December 31, 2014, projected future pension benefit
payments, excluding any termination benefits, were as
follows:

In millions

2015

2016

2017

2018

2019

2020 – 2024

OTHER U.S. PLANS

802

769

781

795

811

4,279

International Paper sponsors the International Paper
Company Salaried Savings Plan and the International
Paper Company Hourly Savings Plan, both of which are

The components of postretirement benefit expense in
2014, 2013 and 2012 were as follows:

In millions

Service cost

Interest cost

Actuarial loss

Amortization of
prior service
credits

Curtailment gain

Net
postretirement
(benefit)
expense (a)

2014

Non-
U.S.
Plans

2013

Non-
U.S.
Plans

U.S.
Plans

2012

Non-
U.S.
Plans

U.S.
Plans

1 $

2 $

3 $ —

(13)

(1)

(24)

—

(30)

(7)

—

7 $

(1) $

7 $

(4) $

(a) Excludes $7 million of curtailment gains in 2013 related to the
sale of Building Products that were recorded in Net (gains)
losses on sales and impairments of businesses in the
consolidated statement of operations.

International Paper evaluates its actuarial assumptions
annually as of December 31 (the measurement date)
and considers changes in these long-term factors
based upon market conditions and the requirements of
employers’ accounting for postretirement benefits other
than pensions. Temple-Inland's postretirement plan
was remeasured on July 19, 2013 due to the sale of
Building Products which reduced the obligation by $6
million. International Paper's postretirement plan was
remeasured on January 31, 2012 due to a negative plan
amendment which reduced our obligation by $29 million
and reduced the 2012 expected benefit cost by $11
million. Temple-Inland's postretirement plan was
remeasured on July 31, 2012 due to a negative plan
amendment which reduced the obligation by $6 million
and reduced 2012 expense by $1 million.

The discount rates used to determine net U.S. and non-
U.S. postretirement benefit cost for the years ended
December 31, 2014, 2013 and 2012 were as follows:

2014

Non-
U.S.
Plans

U.S.
Plans

2013

Non-
U.S.
Plans

U.S.
Plans

2012

Non-
U.S.
Plans

U.S.
Plans

Discount rate

4.50% 11.94% 3.70% 8.43% 4.40% 7.73%

tax-qualified defined contribution 401(k) savings plans.
Substantially all U.S. salaried and certain hourly
employees are eligible to participate and may make
elective deferrals to such plans to save for retirement.
International Paper makes matching contributions to
participant accounts on a specified percentage of
employee deferrals as determined by the provisions of
each plan. For eligible employees hired after June 30,
the Company makes Retirement Savings
2004,
Account contributions equal to a percentage of an
eligible employee’s pay.

In connection with the Temple-Inland acquisition,
International Paper acquired two savings plans which
were merged into the International Paper savings plans
on December 31, 2012.

The Company also sponsors the International Paper
Company Deferred Compensation Savings Plan, which
is an unfunded nonqualified defined contribution plan.
This plan permits eligible employees to continue to
make deferrals and receive company matching
contributions when
the
International Paper Salaried Savings Plan are stopped
due to limitations under U.S. tax law. Participant
deferrals and company matching contributions are not
invested in a separate trust, but are paid directly from
International Paper’s general assets at the time benefits
become due and payable.

their contributions

Company matching contributions to the plans totaled
approximately $112 million, $120 million and $122
million for the plan years ending in 2014, 2013 and 2012,
respectively.

NOTE 17 POSTRETIREMENT BENEFITS

U.S. POSTRETIREMENT BENEFITS

International Paper provides certain retiree health care
and life insurance benefits covering certain U.S.
salaried and hourly employees. These employees are
generally eligible for benefits upon retirement and
completion of a specified number of years of creditable
service. Excluded from company-provided medical
benefits are salaried employees whose age plus years
of employment with the Company totaled less than 60
as of January 1, 2004. International Paper does not
fund these benefits prior to payment and has the right
to modify or terminate certain of these plans in the
future.

In addition to the U.S. plan, certain Brazilian and
Moroccan employees are eligible for retiree health care
and life insurance benefits.

The weighted average assumptions used to determine
the benefit obligation at December 31, 2014 and 2013
were as follows:

The plan is only funded in an amount equal to benefits
paid. The following table presents the changes in
benefit obligation and plan assets for 2014 and 2013:

2014

Non-
U.S.
Plans

U.S.
Plans

2013

Non-
U.S.
Plans

U.S.
Plans

In millions

2014

Non-
U.S.
Plans

U.S.
Plans

2013

Non-
U.S.
Plans

Discount rate

3.90% 11.52% 4.50% 11.94%

Health care cost trend rate
assumed for next year

Rate that the cost trend rate
gradually declines to

Year that the rate reaches the
rate it is assumed to remain

7.00% 11.38% 7.00% 11.43%

5.00% 6.11% 5.00% 6.12%

2022

2025

2017

2024

A 1% increase in the assumed annual health care cost
trend rate would have increased the U.S. and non-U.S.
accumulated postretirement benefit obligations at
December 31, 2014 by approximately $13 million and
$10 million, respectively. A 1% decrease in the annual
trend rate would have decreased the U.S. and non-U.S.
accumulated postretirement benefit obligation at
December 31, 2014 by approximately $12 million and
$8 million, respectively. The effect on net postretirement
benefit cost from a 1% increase or decrease would be
approximately $1 million for both U.S. and non-U.S.
plans.

Change in projected benefit
obligation:

Benefit obligation, January 1

$ 322 $

72 $ 449 $

Service cost

Interest cost

Participants’ contributions

Actuarial (gain) loss

Other

Plan amendments

Benefits paid

Less: Federal subsidy

Curtailment

Currency Impact

Benefit obligation,
December 31

Change in plan assets:

Fair value of plan assets,
January 1

Company contributions

Participants’ contributions

Benefits paid

Fair value of plan assets,
December 31

—

(62)

—

(26)

(7)

(1)

—

(5)

(80)

—

(82)

(2)

—

(1)

—

(6)

$ 306 $

59 $ 322 $

$ — $ — $ — $ —

—

(62)

(1)

(82)

—

(1)

$ — $ — $ — $ —

Funded status, December 31

$ (306) $ (59) $ (322) $ (72)

Amounts recognized in the
consolidated balance sheet
under ASC 715:

Current liability

$ (33) $

(2) $ (39) $

(2)

Non-current liability

(273)

(57)

(283)

(70)

$ (306) $ (59) $ (322) $ (72)

Amounts recognized in
accumulated other
comprehensive income under
ASC 715 (pre-tax):

Net actuarial loss (gain)

Prior service credit

44 $

23 $

31 $

(22)

(5)

(35)

22 $

18 $

(4) $

—

The non-current portion of the liability is included with
the postemployment liability in the accompanying
consolidated balance sheet under Postretirement and
postemployment benefit obligation.

The components of the $26 million and $7 million
increase in the amounts recognized in OCI during 2014
for U.S. and non-U.S. plans, respectively, consisted of:

In millions

Current year actuarial gain

Amortization of actuarial (loss) gain

Current year prior service credit

Amortization of prior service credit

U.S.
Plans

Non-
U.S.
Plans

18 $

(5)

—

26 $

(1)

(7)

The portion of the change in the funded status that was
recognized in either net periodic benefit cost or OCI for
the U.S. plans was $33 million, $63 million and $0 million
in 2014, 2013 and 2012, respectively. The portion of
the change in funded status for the non-U.S. plans was
$14 million, $19 million, and $2 million in 2014, 2013
and 2012, respectively.

The estimated amounts of net loss and prior service
credit that will be amortized from OCI into net U.S.
postretirement benefit cost in 2015 are expected to be
$6 million and $(10) million, respectively. The estimated
amounts for non-U.S. plans in 2015 are expected to be
$1 million and $(3) million, respectively.

At December 31, 2014, estimated
future
postretirement benefit payments, net of participant
contributions and estimated future Medicare Part D
subsidy receipts, were as follows:

total

In millions

Benefit
Payments

Subsidy
Receipts

Benefit
Payments

2015

2016

2017

2018

2019

2020 – 2024

U.S.
Plans

35 $

2 $

112

Non-
U.S.
Plans

NOTE 18 INCENTIVE PLANS

International Paper currently has an
Incentive
Compensation Plan (ICP) which, upon the approval by
the Company’s shareholders in May 2009, replaced the
Company’s Long-Term Incentive Compensation Plan
(LTICP). The ICP authorizes grants of restricted stock,
restricted or deferred stock units, performance awards
payable in cash or stock upon the attainment of
specified performance goals, dividend equivalents,
stock options, stock appreciation rights, other stock-
based awards, and cash-based awards at the discretion
of the Management Development and Compensation
Committee of the Board of Directors (the Committee)
that administers the ICP. Additionally, restricted stock,
which may be deferred into RSU’s, may be awarded
under a Restricted Stock and Deferred Compensation
Plan for Non-Employee Directors.

STOCK OPTION PROGRAM

–

International Paper accounts for stock options in
accordance with guidance under ASC 718,
“Compensation
Compensation.”
Compensation expense is recorded over the related
service period based on the grant-date fair market
value. Since all outstanding options were vested as of
July 14, 2005, only replacement option grants are
expensed.

Stock

Under the program, upon exercise of an option, a
replacement option may be granted under certain
circumstances with an exercise price equal to the
market price at the time of exercise and with a term
extending to the expiration date of the original option.

The Company has discontinued the issuance of stock
options for all eligible U.S. and non-U.S. employees. In
the United States, the stock option program was
replaced with a performance-based restricted share
program to more closely tie long-term incentive
compensation to Company performance on two key
performance drivers: return on investment (ROI) and
total shareholder return (TSR).

The following summarizes the status of the Stock
Option Program and the changes during the three years
ending December 31, 2014:

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Life
(years)

Aggregate
Intrinsic
Value
(thousands)

Options
(a,b)

Outstanding at December 31,
2011

15,556,786

$38.13

1.55

$—

Granted

Exercised

Expired

Outstanding at December 31,
2012

Granted

Exercised

Expired

Outstanding at December 31,
2013

Granted

Exercised

Expired

2,513

(3,200,642)

35.94

33.62

(3,222,597)

40.71

9,136,060

4,744

(7,317,825)

38.79

48.11

38.57

(70,190)

37.15

1,752,789

3,247

(1,634,858)

39.80

49.13

39.80

(49,286)

41.50

1.15

1,077

0.67

16,175

Outstanding at December 31,
2014

71,892

$39.03

0.18

$1,046

(a) The table does not include Continuity Award tandem stock
options described below. No fair market value is assigned to
these options under ASC 718. The tandem restricted shares
accompanying these options are expensed over their vesting
period.

(b) The table includes options outstanding under an acquired
company plan under which options may no longer be granted.

PERFORMANCE SHARE PLAN

Under the Performance Share Plan (PSP), contingent
awards of International Paper common stock are
granted by the Committee. The PSP awards are earned
evenly over a three-year period. PSP awards are
earned based on
the achievement of defined
performance rankings of ROI and TSR compared to
ROI and TSR peer groups of companies. Awards are
weighted 75% for ROI and 25% for TSR for all
participants except for officers for whom the awards are
weighted 50% for ROI and 50% for TSR. The ROI
component of the PSP awards is valued at the closing
stock price on the day prior to the grant date. As the
ROI component contains a performance condition,
compensation expense, net of estimated forfeitures, is
recorded over the requisite service period based on the
most probable number of awards expected to vest. The
TSR component of the PSP awards is valued using a
Monte Carlo simulation as the TSR component contains
a market condition. The Monte Carlo simulation
estimates the fair value of the TSR component based
on the expected term of the award, a risk-free rate,
expected dividends, and the expected volatility for the
Company and its competitors. The expected term is
estimated based on the vesting period of the awards,
the risk-free rate is based on the yield on U.S. Treasury
securities matching the vesting period, and the volatility
is based on the Company’s historical volatility over the
expected term.

PSP grants are made in performance-based restricted
stock units (PSU’s). PSP awards issued to certain
members of senior management are accounted for as
liability awards, which are remeasured at fair value at
each balance sheet date for the 2012 grant only. The
valuation of these PSP liability awards is computed
based on the same methodology as the PSP equity
awards. On December 8, 2014, IP eliminated the
election for executives to withhold more than the
minimum tax withholding for the 2013 and 2014 grants
making them equity awards.

The following table sets forth the assumptions used to
determine compensation cost for the market condition
component of the PSP plan:

Expected volatility

Risk-free interest rate

Twelve Months Ended
December 31, 2014

19.01%-55.33%

0.13% - 0.78%

The following summarizes PSP activity for the three
years ending December 31, 2014:

Outstanding at December 31, 2011

Granted

Shares issued

Forfeited

Outstanding at December 31, 2012

Granted

Shares issued

Forfeited

Outstanding at December 31, 2013

Granted

Shares issued (a)

Forfeited

Weighted
Average
Grant Date
Fair Value

$22.83

31.57

16.83

28.89

28.37

40.76

32.48

34.58

31.20

46.82

37.18

43.10

Share/Units

8,060,059

3,641,911

(2,871,367)

(169,748)

8,660,855

3,148,445

(3,262,760)

(429,051)

8,117,489

3,682,663

(4,025,111)

(499,107)

Outstanding at December 31, 2014

7,275,934

$34.98

(a)

Includes 488,676 units related to retirements or terminations
that are held for payout until the end of the performance period.

EXECUTIVE CONTINUITY AND RESTRICTED STOCK AWARD
PROGRAMS

The Executive Continuity Award program provides for
the granting of tandem awards of restricted stock and/
or nonqualified stock options to key executives. Grants
are restricted and awards conditioned on attainment of
a specified age. The awarding of a tandem stock option
results in the cancellation of the related restricted
shares. The final award under this program was paid
in 2013.

The service-based Restricted Stock Award program
(RSA), designed for recruitment, retention and special
recognition purposes, also provides for awards of
restricted stock to key employees.

The following summarizes the activity of the Executive
Continuity Award program and RSA program for the
three years ending December 31, 2014:

Outstanding at December 31, 2011

Granted

Shares issued

Forfeited

Outstanding at December 31, 2012

Granted

Shares issued

Forfeited

Outstanding at December 31, 2013

Granted

Shares issued

Forfeited

Outstanding at December 31, 2014

Weighted
Average
Grant Date
Fair Value
$27.86

31.91

27.13

28.91

30.49

44.41

32.30

37.75

36.24

48.19

33.78

45.88

$47.03

128,917

88,715

(61,083)

(5,000)

151,549

67,100

(88,775)

(17,500)

112,374
89,500

(83,275)

(4,000)

114,599

At December 31, 2014, 2013 and 2012 a total of 16.3
million, 17.8 million and 19.3 million shares,
respectively, were available for grant under the ICP.

Stock-based compensation expense and related
income tax benefits were as follows:

In millions

2014

2013

2012

Total stock-based compensation
expense (included in selling and
administrative expense)

Income tax benefits related to stock-
based compensation

118 $

137 $

116

At December 31, 2014, $117 million of compensation
cost, net of estimated forfeitures, related to unvested
restricted performance shares, executive continuity
awards and restricted stock attributable to future
performance had not yet been recognized. This amount
will be recognized in expense over a weighted-average
period of 1.6 years.

NOTE 19 FINANCIAL INFORMATION BY
INDUSTRY SEGMENT AND GEOGRAPHIC AREA

International Paper’s industry segments, Industrial
Packaging, Printing Papers and Consumer Packaging
Businesses, are consistent with the internal structure
used to manage these businesses. All segments are
differentiated on a common product, common customer
basis consistent with the business segmentation
generally used in the Forest Products industry.
Following the July 1, 2014 spinoff of xpedx, which
historically represented the Company's Distribution
reportable segment, the assets of the xpedx business
totaling $1.2 billion as of December 31, 2013 were
adjusted off the consolidated balance sheet and are not
included on the consolidated balance sheet as of
December 31, 2014.

For management purposes, International Paper reports
the operating performance of each business based on
earnings before interest and income taxes (EBIT).
Intersegment sales and transfers are recorded at
current market prices.

External sales by major product is determined by
aggregating sales from each segment based on similar
products or services. External sales are defined as
those that are made to parties outside International
Paper’s consolidated group, whereas sales by segment
in the Net Sales table are determined using a
management approach and include intersegment
sales.

The Company also holds a 50% interest in Ilim that is
a separate reportable industry segment. The Company
recorded equity earnings (losses), net of taxes, of
$(194) million, $(46) million and $56 million in 2014,
2013, and 2012, respectively, for Ilim. Equity earnings
(losses) includes an after-tax foreign exchange gain
(loss) of $(269) million, $(32) million and $16 million in
2014, 2013 and 2012, respectively, primarily on the
remeasurement of U.S. dollar-denominated net debt.

Summarized financial information for Ilim which is
accounted for under the equity method is presented in
the following table.

Operating Profit

In millions

2014

2013

2012

Industrial Packaging

1,896

1,801

1,066

Balance Sheet

In millions

Current assets

Noncurrent assets

Current liabilities

Noncurrent liabilities

Noncontrolling interests

Income Statement

In millions

Net sales

Gross profit

Income from continuing operations

Net income attributable to Ilim

2014

2013

$ 458
1,223

$ 595
2,124

899

742

560

1,335

2014
$ 2,138
772
(387)

(360)

2013
$ 1,897
562

2012
$ 1,972
678

(76)

(71)

140

131

At December 31, 2014 and 2013, the Company's
investment in Ilim was $170 million and $580 million,
respectively, which was $158 million and $200 million,
respectively, more than the Company's proportionate
share of the joint venture's underlying net assets. The
differences primarily relate to purchase price fair value
adjustments and currency translation adjustments.

INFORMATION BY INDUSTRY SEGMENT

Net Sales

In millions

2014

2013

Industrial Packaging

$ 14,944

Printing Papers

Consumer Packaging
Corporate and Intersegment
Sales

$ 14,810
6,205

2012
$ 13,280
6,230

3,435

3,170

5,720

3,403

(450)

(967)

(828)

Net Sales

$ 23,617

$ 23,483

$ 21,852

Printing Papers

Consumer Packaging

Operating Profit

Interest expense, net

Noncontrolling interests /
equity earnings adjustment
(a)

Corporate items, net

Restructuring and other
charges

Net gains (losses) on sales
and impairments of
businesses

Non-operating pension
expense

Earnings (Loss) From
Continuing Operations
Before Income Taxes and
Equity Earnings

(16)

178

2,058

(601)

(2)

(51)

(282)

271

161

2,233

(612)

(61)

(10)

599

268

1,933

(671)

—

(87)

(51)

(38)

—

(212)

(323)

(159)

872

1,228

967

Restructuring and Other Charges

In millions

2014

2013

2012

Industrial Packaging

(2) $

Printing Papers

Consumer Packaging

Corporate

Restructuring and Other
Charges

554

277

118

(5)

846

156

—

Assets

In millions

Industrial Packaging

Printing Papers

Consumer Packaging

Distribution (b)

Corporate and other (c)

Assets

Capital Spending

2014

$ 14,852
5,393

2013
$ 15,083
6,574

3,249

—
5,190

$ 28,684

3,222

1,186

5,463
$ 31,528

In millions

2014

2013

2012

Industrial Packaging

Printing Papers

Consumer Packaging

Distribution (b)

Subtotal

Corporate and other (c)

754

318

233

—

1,305

629

294

208

1,140

565

449

296

1,320

Total

1,366

1,198

1,383

Long-Lived Assets (g)

In millions

United States

EMEA
Pacific Rim and Asia

Americas, other than U.S.

Corporate

Long-Lived Assets

2014
9,476

926
897
1,553

383

$ 13,235

2013
$ 10,056
1,126

946
1,772

329
$ 14,229

(a) 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 interests and equity earnings for these
subsidiaries is added here to present consolidated earnings
from continuing operations before income taxes and equity
earnings.

(b) The xpedx business, which historically represented the
Company's Distribution reportable segment, was spun off July
1, 2014 and the related assets of this business were adjusted
off the consolidated balance sheet.
Includes corporate assets and assets of businesses held for
sale.

(c)

(d) Excludes accelerated depreciation related to closure of mills.
(e) Net sales are attributed to countries based on the location of

the seller.

(f) Export sales to unaffiliated customers were $2.3 billion in 2014,

$2.4 billion in 2013 and $2.2 billion in 2012.

(g) Long-Lived Assets

includes Forestlands and Plants,

Properties and Equipment, net.

Depreciation, Amortization and Cost of Timber
Harvested (d)

In millions

2014

2013

2012

Industrial Packaging

Printing Papers

Consumer Packaging

Corporate

Depreciation and
Amortization

775

367

223

805

446

206

755

450

196

1,406

1,531

1,473

External Sales By Major Product

In millions

2014

2013

Industrial Packaging

$ 14,837

Printing Papers

Consumer Packaging

Other

Net Sales

$ 14,729
5,443

3,311

—

5,360

3,307

113

$ 23,617

$ 23,483

2012
$ 13,223
5,483

3,146

—
$ 21,852

INFORMATION BY GEOGRAPHIC AREA
Net Sales (e)

In millions

United States (f)

EMEA

Pacific Rim and Asia

Americas, other than U.S.

2014

2013

$ 16,645

3,273

1,951

1,748

$ 16,371
3,250

2,114

1,748

Net Sales

$ 23,617

$ 23,483

2012
$ 15,689
2,886

1,816

1,461
$ 21,852

INTERIM FINANCIAL RESULTS (UNAUDITED)

In millions, except per share amounts
and stock prices

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year

2014

Net sales

Gross margin (a)

Earnings (loss) from continuing
operations before income taxes and
equity earnings

Gain (loss) from discontinued
operations

Net earnings (loss) attributable to
International Paper Company

Basic earnings (loss) per share
attributable to International Paper
Company common shareholders:

Earnings (loss) from continuing
operations

Gain (loss) from discontinued
operations

$ 5,724

$ 5,899

$ 6,051

$ 5,943

$ 23,617

1,690

1,839

1,996

1,838

7,363

(139) (b)

152 (e)

552 (g)

307 (i)

872 (b,e,g,i)

(7) (c)

(13) (f)

16 (h)

(9) (j)

(13) (c,f,h,j)

(95) (b,c,d)

161 (e,f)

355 (g,h)

134 (i,j,k)

555 (b-k)

(0.20) (b)

0.40 (e)

0.80 (g)

0.34 (i)

1.33 (b,e,g,i)

(0.01) (c)

(0.03) (f)

0.04 (h)

(0.02) (j)

(0.03) (c,f,h,j)

Net earnings (loss)

(0.21) (b,c,d)

0.37 (e,f)

0.84 (g,h)

0.32 (i,j,k)

1.30 (b-k)

Diluted earnings (loss) per share
attributable to International Paper
Company common shareholders:

Earnings (loss) from continuing
operations

Gain (loss) from discontinued
operations

(0.20) (b)

0.40 (e)

0.79 (g)

0.34 (i)

1.31 (b,e,g,i)

(0.01) (c)

(0.03) (f)

0.04 (h)

(0.02) (j)

(0.02) (c,f,h,j)

Net earnings (loss)

(0.21) (b,c,d)

0.37 (e,f)

0.83 (g,h)

0.32 (i,j,k)

1.29 (b-k)

Dividends per share of common stock

0.3500

0.4000

1.4500

Common stock prices

High

Low

2013

Net sales

$ 49.71

$ 50.65

$ 51.98

$ 55.73

44.43

44.24

46.77

44.50

44.24

$ 5,716

$ 5,944

$ 5,975

$ 5,848

$ 23,483

Gross margin (a)

1,709

1,757

1,927

1,808

7,201

Earnings (loss) from continuing
operations before income taxes and
equity earnings

Gain (loss) from discontinued operations

Net earnings (loss) attributable to
International Paper Company

Basic earnings (loss) per share
attributable to International Paper
Company common shareholders:

Earnings (loss) from continuing
operations

227 (l)

28 (m)

359 (o)

27 (p)

403 (q)

(5) (r)

239 (t)

(359) (u)

1,228 (l,o,q,t)

(309) (m,p,r,u)

318 (l,m,n)

259 (o,p)

382 (q,r,s)

436 (t,u,v,w)

1,395 (l-w)

0.66 (l)

0.52 (o)

0.87 (q)

1.80 (t)

3.85 (l,o,q,t)

Gain (loss) from discontinued operations

0.06 (m)

0.06 (p)

(0.01) (r)

(0.81) (u)

(0.70) (m,p,r,u)

Net earnings (loss)

Diluted earnings (loss) per share
attributable to International Paper
Company common shareholders:

Earnings (loss) from continuing
operations

Gain (loss) from discontinued operations

0.72 (l,m,n)

0.58 (o,p)

0.86 (q,r,s)

0.99 (t,u,v,w)

3.15 (l-w)

0.65 (l)

0.06 (m)

0.52 (o)

0.05 (p)

0.86 (q)

(0.01) (r)

1.78 (t)

(0.80) (u)

3.80 (l,o,q,t)

(0.69) (m,p,r,u)

Net earnings (loss)

0.71 (l,m,n)

0.57 (o,p)

0.85 (q,r,s)

0.98 (t,u,v,w)

3.11 (l-w)

Dividends per share of common stock

0.3000

0.3500

1.2500

Common stock prices

High

Low

$ 47.25

$ 49.10

$ 50.33

$ 49.52

$ 50.33

39.47

42.36

43.95

42.92

39.47

Note: Since basic and diluted earnings per share are computed
independently for each period and category, full year per share
amounts may not equal the sum of the four quarters. In addition, the
unaudited selected consolidated financial data are derived from our
audited consolidated financial statements and have been revised to
reflect discontinued operations.

Footnotes to Interim Financial Results

(a) Gross margin represents net sales less cost of
depreciation,

products
amortization and cost of timber harvested.

excluding

sold,

for

taxes)

(b) Includes a pre-tax charge of $12 million ($7
integration costs
million after
associated with the acquisition of Temple-
Inland, a pre-tax charge of $495 million ($302
million after taxes) for costs associated with the
shutdown of our Courtland mill, and a pre-tax
charge of $4 million ($3 million after taxes) for
other items.

(c) Includes the operating earnings of the xpedx
business, a pre-tax charge of $16 million ($10
million after taxes) for costs associated with the
spin-off of the xpedx operations, a pre-tax
charge of $2 million ($0 million after taxes) for
costs associated with the restructuring of our
xpedx operations and a charge of $2 million
(before and after taxes) for costs associated
with the Building Products divestiture.

(d) Includes a

tax expense of $10 million
associated with a state legislative change and
a tax benefit of $1 million for other items.

for

taxes)

(e) Includes a pre-tax charge of $2 million ($1
million after
integration costs
associated with the acquisition of Temple-
Inland, a pre-tax charge of $262 million ($160
million after taxes) for debt extinguishment
costs, a pre-tax charge of $49 million ($30
million after taxes) for costs associated with the
shutdown of our Courtland mill, a pre-tax gain
of $7 million ($5 million after taxes) associated
with our Brazil Packaging business and net
charges of $3 million (before and after taxes)
for other items.

(f)

Includes the operating earnings of the xpedx
business, a pre-tax charge of $18 million ($20
million after taxes) for costs associated with the
spin-off of our xpedx operations, and a gain of
$1 million (before and after taxes) related to the
xpedx restructuring.

(g) Includes a pre-tax charge of $5 million ($3
million after taxes) for a refund of previously
claimed state tax credits, a gain of $20 million
(before and after taxes) for the resolution of a
legal contingency in India, a pre-tax charge of
$35 million ($21 million after taxes) for costs
associated with a multi-employer pension plan
withdrawal liability, a pre-tax charge of $32
million ($17 million after taxes) for costs
associated with a foreign tax amnesty program,
a pre-tax charge of $13 million ($8 million after
taxes) for debt extinguishment costs, a pre-tax
charge of $3 million ($2 million after taxes) for
costs associated with the shutdown of our
Courtland mill, a charge of $1 million (before
and after taxes) for integration costs associated
with the acquisition of Temple-Inland, a pre-tax
charge of $5 million ($3 million after taxes) for
costs associated with the restructuring of the
Company's Packaging business in Europe, and
a net pre-tax loss of $3 million ($2 million after
taxes) for other items.

(h) Includes a net pre-tax gain of $11 million ($14
million after taxes) for the recovery of costs
related to the spin-off of the xpedx business and
a $2 million tax benefit associated with the
Building Products divestiture.

(i)

Includes a charge of $100 million (before and
after taxes) for a goodwill impairment charge
related to our Asian Industrial Packaging
business, a charge of $1 million (before and
after taxes) for integration costs associated with
the acquisition of Temple-Inland, a pre-tax
charge of $7 million ($4 million after taxes) for
costs associated with the shutdown of our
Courtland mill, a pre-tax charge of $4 million ($3
integration costs
million after
associated with our Brazil Packaging business,
a pre-tax charge of $47 million ($36 million after
taxes) for a loss on the sale of a business by
ASG in which we hold an investment, and the
resulting impairment of our ASG investment, a
pre-tax gain of $9 million ($5 million after taxes)
related to the sale of an investment, and a net
pre-tax charge of $5 million ($3 million after
taxes) for other items.

taxes)

for

(j)

Includes a pre-tax loss of $14 million ($9 million
after taxes) related to the Building Products
divestiture.

(k) Includes a tax benefit of $90 million associated

with internal restructuring.

(l)

for

taxes)

Includes a pre-tax charge of $12 million ($8
million after
integration costs
associated with the acquisition of Temple-
Inland, a pre-tax charge of $44 million ($27
million after taxes) for costs associated with the
permanent shutdown of a paper machine at our
Augusta mill, a pre-tax charge of $6 million ($4
million after taxes) for debt extinguishment
costs, interest income of $6 million ($4 million
after taxes) related to the closing of a U.S.
federal income tax audit, and pre-tax charges
of $2 million ($1 million after taxes) for other
items.

(m) Includes the operating earnings of the xpedx
and Building Products businesses, a pre-tax
charge of $7 million ($4 million after taxes) for
costs associated with the restructuring of our
xpedx operations, and a pretax charge of $4
million ($3 million after
for costs
associated with
the Building Products
divestiture.

taxes)

(n) Includes a tax benefit of $93 million associated
with the closing of a U.S. federal income tax
audit and a net tax expense of $2 million related
to internal restructurings. In addition, the first
includes a benefit of
quarter
approximately $35 million related
the
enactment into law of The American Taxpayer
Relief Act of 2012 in January 2013.

rate

tax

for

taxes)

(o) Includes a pre-tax charge of $6 million ($4
million after taxes) for an environmental reserve
related to the Company's property in Cass Lake,
Minnesota, a pre-tax charge of $14 million ($8
million after
integration costs
associated with the acquisition of Temple-
Inland, a pre-tax charge of $9 million ($5 million
after taxes) to adjust the value of two Company
airplanes to market value, a pre-tax gain of $30
million ($19 million after taxes) for insurance
reimbursements related to the 2012 Guaranty
Bank legal settlement, a pre-tax charge of $3
million ($2 million after
for debt
extinguishment costs, a gain of $13 million
(before and after taxes) related to a bargain
purchase adjustment on the first-quarter 2013
acquisition of a majority share of our operations
in Turkey, and charges of $3 million (before and
after taxes) for other items.

taxes)

(p) Includes the operating earnings of the xpedx
and Building Products businesses, a pre-tax
charge of $17 million ($10 million after taxes)
for costs associated with the restructuring of our
xpedx operations, a pre-tax charge of $3 million
($2 million after taxes) for costs associated with
the spin-off of the xpedx operations, and a pre-
tax charge of $13 million ($8 million after taxes)
for costs associated with the divestiture of
Building Products.

for

taxes)

(q) Includes a pre-tax charge of $24 million ($15
million after
integration costs
associated with the acquisition of Temple-
Inland, a pre-tax charge of $51 million ($31
million after taxes) for costs associated with the
shutdown of our Courtland mill, a pre-tax charge
of $15 million ($9 million after taxes) for debt
extinguishment costs, a pre-tax gain of $9
million ($6 million after taxes) associated with
the sale of the Bellevue box plant facility which
was closed in 2010, a pre-tax charge of $1
for costs
million ($0 million after
associated with
three
containerboard mills in 2012 and charges of $2
million (before and after taxes) for other items.

the divestiture of

taxes)

(r) Includes the operating earnings of the xpedx
business, a pre-tax charge of $6 million ($4
million after taxes) for costs associated with the
restructuring of our xpedx operations, a pre-tax
charge of $11 million ($7 million after taxes) for
costs associated with the spin-off of the xpedx
operations, and a pre-tax charge of $24 million
($15 million after taxes) for costs associated
with the Building Products divestiture.

(s) Includes a tax benefit of $31 million for an
income tax reserve release. In addition, the third
quarter tax rate includes a $30 million benefit
related to the adjustment of the tax basis in
certain of the Company's fixed assets.

(t)

for

taxes)

Includes a pre-tax charge of $12 million ($7
million after
integration costs
associated with the acquisition of Temple-
Inland, a pre-tax charge of $67 million ($41
million after taxes) for costs associated with the
shutdown of our Courtland mill, a pre-tax charge
of $4 million ($3 million after taxes) for costs
associated with the restructuring of the Asia Box
operations, a pre-tax charge of $127 million
($122 million after taxes) for the impairment of
goodwill and a trade name intangible asset of
the Company's India Papers business, a pre-
tax charge of $2 million ($1 million after taxes)
for an adjustment associated with
the
Company's divestiture of
the Shorewood
operations, and a net pre-tax gain of $2 million
($0 million after taxes) for other items.

(u) Includes the operating earnings of the xpedx
business, a pre-tax charge of $8 million ($5
million after taxes) for costs associated with the
spin-off of the xpedx operations, a pre-tax
charge of $400 million ($366 million after taxes)
for the impairment of goodwill in the Company's
xpedx business, a net pre-tax loss of $2 million
($1 million after taxes) for costs associated with
the restructuring of the xpedx operations, and
a pre-tax gain of $18 million ($6 million after
taxes)
the Building Products
divestiture.

(v) Includes a tax benefit of $651 million associated
with the closing of a U.S. federal tax audit and
a net tax benefit of $3 million for other items.

(w) Includes pre-tax noncontrolling interest income
of $4 million ($3 million after taxes) associated
with the write-off of a trade name intangible
asset in our India Papers business.

•

provide reasonable assurance that transactions
are recorded as necessary to allow for the
preparation of financial statements in accordance
with GAAP, and that our receipts and expenditures
in accordance with
are being made only
authorizations of our management and directors;

assurance

reasonable

provide
regarding
prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that
could have a material effect on our consolidated
financial statements; and

•

provide reasonable assurance as to the detection
of fraud.

All internal control systems have inherent limitations,
including the possibility of circumvention and overriding
of controls, and therefore can provide only reasonable
assurance of achieving the designed control objectives.
The Company’s internal control system is supported by
written policies and procedures, contains self-
monitoring mechanisms, and is audited by the internal
audit function. Appropriate actions are taken by
management to correct deficiencies as they are
identified.

As of December 31, 2014, management has assessed
the effectiveness of the Company’s internal control over
financial reporting. In a report included on pages 44 and
45, management concluded that the Company’s
internal control over financial reporting was effective as
of December 31, 2014.

In making this assessment, we used the criteria
described in “Internal Control – Integrated Framework
(2013)” issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

Our independent registered public accounting firm,
Deloitte & Touche LLP, with direct access to our Board
of Directors through our Audit and Finance Committee,
has audited the consolidated financial statements
prepared by us. Their report on the consolidated
financial statements is included in Part II, Item 8 of this
Annual Report under
“Financial
Statements and Supplementary Data”. Deloitte &
Touche LLP has issued an attestation report on our
internal control over financial reporting.

the heading

ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND
PROCEDURES

“Exchange Act”),

We maintain disclosure controls and procedures that
are designed to ensure that information required to be
disclosed by us in the reports we file or submit under
the Securities and Exchange Act of 1934, as amended
(the
recorded, processed,
is
summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to
management, including our principal executive officer
and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. As of
December 31, 2014, an evaluation was carried out
under the supervision and with the participation of the
Company’s management,
including our principal
executive officer and principal financial officer, of the
effectiveness of our disclosure controls and
procedures, as defined by Rule 13a-15 under the
Exchange Act. Based upon this evaluation, our principal
executive officer and principal financial officer have
concluded that the Company’s disclosure controls and
procedures were effective as of December 31, 2014.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING

Our management is responsible for establishing and
maintaining adequate internal control over our financial
reporting. Internal control over financial reporting is the
process designed by, or under the supervision of, our
principal executive officer and principal financial officer,
and effected by our Board of Directors, management
and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
for external
preparation of
purposes in accordance with accounting principles
generally accepted in the United States (GAAP). Our
internal control over financial reporting includes those
policies and procedures that:

financial statements

•

pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets;

MANAGEMENT’S PROCESS TO ASSESS THE
EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL
REPORTING

To comply with the requirements of Section 404 of the
followed a
Sarbanes-Oxley Act of 2002, we
comprehensive compliance process across
the
enterprise to evaluate our internal control over financial
reporting, engaging employees at all levels of the
organization. Our internal control environment includes
an enterprise-wide attitude of integrity and control
consciousness that establishes a positive “tone at the
top.” This is exemplified by our ethics program that
includes long-standing principles and policies on ethical
business conduct that require employees to maintain
the highest ethical and legal standards in the conduct
of our business, which have been distributed to all
employees; a toll-free telephone helpline whereby any
employee may report suspected violations of law or our
policy; and an office of ethics and business practice.
The internal control system further includes careful
selection and training of supervisory and management
personnel, appropriate delegation of authority and
division of responsibility, dissemination of accounting
and business policies throughout the Company, and an
extensive program of internal audits with management
follow-up. Our Board of Directors, assisted by the Audit
and Finance Committee, monitors the integrity of our
financial
reporting
and
procedures, the performance of our internal audit
function and independent auditors, and other matters
set forth in its charter. The Committee, which consists
regularly with
of
representatives of management, and with
the
independent auditors and the Internal Auditor, with and
without management representatives in attendance, to
review their activities.

independent directors, meets

statements

financial

CHANGES IN INTERNAL CONTROL OVER FINANCIAL
REPORTING

reporting during

There have been no changes in our internal control over
financial
the quarter ended
December 31, 2014 that have materially affected, or are
reasonably likely to materially affect, our internal control
over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE

is hereby
Information concerning our directors
incorporated by reference to our definitive proxy
statement that will be filed with the Securities and
Exchange Commission (SEC) within 120 days of the

close of our fiscal year. The Audit and Finance
Committee of the Board of Directors has at least one
member who is a financial expert, as that term is defined
in Item 401(d)(5) of Regulation S-K. Further information
concerning the composition of the Audit and Finance
Committee and our audit committee financial experts
is hereby incorporated by reference to our definitive
proxy statement that will be filed with the SEC within
120 days of the close of our fiscal year. Information with
respect to our executive officers is set forth on pages 6
and 7 in Part I of this Form 10-K under the caption,
“Executive Officers of the Registrant.”

Executive officers of International Paper are elected to
hold office until the next annual meeting of the Board
of Directors
the annual meeting of
shareholders and, until the election of successors,
subject to removal by the Board.

following

The Company’s Code of Business Ethics (Code) is
applicable to all employees of the Company, including
the chief executive officer and senior financial officers,
as well as the Board of Directors. We disclose any
amendments to our Code and any waivers from a
provision of our Code granted to our directors, chief
executive officer and senior financial officers on our
Internet Web site within four business days following
such amendment or waiver. To date, no waivers of the
Code have been granted.

We make available free of charge on our Internet Web
site at www.internationalpaper.com, and in print to any
shareholder who requests
them, our Corporate
Governance Principles, our Code of Business Ethics
and the Charters of our Audit and Finance Committee,
Management Development and Compensation
Committee, Governance Committee and Public Policy
and Environment Committee. Requests for copies may
be directed to the corporate secretary at our corporate
headquarters.

Information with respect to compliance with Section 16
(a) of the Securities and Exchange Act and our
corporate governance is hereby incorporated by
reference to our definitive proxy statement that will be
filed with the SEC within 120 days of the close of our
fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to the compensation of
executives and directors of the Company is hereby
incorporated by reference to our definitive proxy
statement that will be filed with the SEC within 120 days
of the close of our fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

A description of the security ownership of certain
beneficial owners and management and equity
compensation plan information is hereby incorporated
by reference to our definitive proxy statement that will
be filed with the SEC within 120 days of the close of our
fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

A description of certain relationships and related
transactions is hereby incorporated by reference to our
definitive proxy statement that will be filed with the SEC
within 120 days of the close of our fiscal year.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES

Information with respect to fees paid to, and services
rendered by, our principal accountant, and our policies
and procedures for pre-approving those services, is
hereby incorporated by reference to our definitive proxy
statement that will be filed with the SEC within 120 days
of the close of our fiscal year.

PART IV.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES

(1) Financial Statements – See Item 8. Financial

Statements and Supplementary Data.

the consolidated

(2) Financial Statement Schedules – The following
additional financial data should be read in
conjunction with
financial
statements in Item 8. Schedules not included with
this additional financial data have been omitted
because they are not applicable, or the required
information is shown in the consolidated financial
statements or the notes thereto.

Additional Financial Data

2014, 2013 and 2012

Consolidated Schedule:
II-Valuation and
Qualifying Accounts.

(3.1) Restated Certificate of
Paper

Incorporation
of International
Company
(incorporated by reference to Exhibit 3.1 to
the Company’s Current Report on Form 8-
K dated May 13, 2013).

(3.2) By-laws of International Paper Company, as

amended through May 17, 2013
(incorporated by reference to Exhibit 3.2 to
the Company’s Current Report on Form 8-
K dated May 13, 2013).

(4.1) Indenture, dated as of April 12, 1999,
between International Paper and The Bank
of New York, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K dated June 29,
2000).

(4.2) Supplemental Indenture (including the form
of Notes), dated as of June 4, 2008, between
International Paper Company and The Bank
of New York, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K dated June 4,
2008).

(4.3) Supplemental Indenture (including the form
of Notes), dated as of May 11, 2009,
between International Paper Company and
The Bank of New York Mellon, as trustee
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
K dated May 11, 2009).

(4.4) Supplemental Indenture (including the form
of Notes), dated as of August 10, 2009,
between International Paper Company and
The Bank of New York Mellon, as trustee
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
K dated August 10, 2009).

(4.5) Supplemental Indenture (including the form
of Notes), dated as of December 7, 2009,
between International Paper Company and
The Bank of New York Mellon Trust
Company, N.A., as trustee (incorporated by
reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K dated
December 7, 2009).

(4.6) Supplemental Indenture (including the form
of Notes), dated as of November 16, 2011,
between the Company and The Bank of New
York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
K dated November 16, 2011).

(4.7) Supplemental Indenture (including the form
of Notes), dated as of June 10, 2014,
between the Company and The Bank of New
York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
K dated June 10, 2014).

(4.8) In

with

accordance

Item 601
(b) (4) (iii) (A) of Regulation S-K, certain
instruments respecting long-term debt of the
Company have been omitted but will be
furnished to the Commission upon request.

(10.1) Amended and Restated 2009 Incentive
Compensation Plan (ICP) (incorporated by
reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated February
10, 2014). +

(10.2) 2014 Management

Incentive

Plan
(incorporated by reference to Exhibit 10.3 to
the Company’s Annual Report on Form 10-
K for the fiscal year ended December 31,
2013). +

(10.3) 2015 Management Incentive Plan. * +

(10.4) Amended and Restated 2009 Executive
Management Incentive Plan, including 2015
Exhibits thereto. * +

(10.5) 2014 Exhibits to the Amended and Restated
2009 Executive Management Incentive Plan
(incorporated by reference to Exhibit 10.6 to
the Company’s Annual Report on Form 10-
K for the fiscal year ended December 31,
2013). +

(10.6) Restricted

and

Deferred
Stock
Compensation Plan
for Non-Employee
Directors, Amended and Restated as of May
10, 2010 (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended
June 30, 2010). +

(10.7) Form of Restricted Stock Award Agreement.
(incorporated by reference to Exhibit 10.8 to
the Company’s Annual Report on Form 10-
K for the fiscal year ended December 31,
2013). +

(10.8) Form of Restricted Stock Unit Award
Agreement (cash settled). (incorporated by
reference to Exhibit 10.9 to the Company’s
Annual Report on Form 10-K for the fiscal
year ended December 31, 2013). +

(10.9) Form of Restricted Stock Unit Award
Agreement (stock settled). (incorporated by
reference to Exhibit 10.10 to the Company’s
Annual Report on Form 10-K for the fiscal
year ended December 31, 2013). +

(10.10) Form of Performance Share Plan award
certificate. (incorporated by reference to
Exhibit 10.11 to the Company’s Annual
Report on Form 10-K for the fiscal year
ended December 31, 2013). +

(10.11) Pension Restoration Plan

for Salaried
Employees (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended
March 31, 2009). +

(10.12) Unfunded Supplemental Retirement Plan
for Senior Managers, as amended and
restated effective January 1, 2008
(incorporated by reference to Exhibit 10.21
the Company’s Annual Report on
to
Form 10-K
fiscal year ended
December 31, 2007). +

the

for

Unfunded

(10.13) Amendment No. 1 to the International Paper
Company
Supplemental
Retirement Plan for Senior Managers,
effective October 13, 2008 (incorporated by
reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K dated October
17, 2008). +

Unfunded

(10.14) Amendment No. 2 to the International Paper
Supplemental
Company
Retirement Plan for Senior Managers,
effective October 14, 2008 (incorporated by
reference to Exhibit 10.5 to the Company’s
Current Report on Form 8-K dated October
17, 2008). +

Unfunded

(10.15) Amendment No. 3 to the International Paper
Company
Supplemental
Retirement Plan for Senior Managers,
effective December 8, 2008 (incorporated
by reference
the
Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008).
+

to Exhibit 10.20

Unfunded

(10.16) Amendment No. 4 to the International Paper
Company
Supplemental
Retirement Plan for Senior Managers,
effective January 1, 2009 (incorporated by
reference to Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the
quarter ended September 30, 2009). +

Unfunded

(10.17) Amendment No. 5 to the International Paper
Supplemental
Company
Retirement Plan for Senior Managers,
effective October 31, 2009 (incorporated by
reference to Exhibit 10.17 to the Company’s
Annual Report on Form 10-K for the fiscal
year ended December 31, 2009). +

Unfunded

(10.18) Amendment No. 6 to the International Paper
Company
Supplemental
Retirement Plan for Senior Managers,
effective January 1, 2012 (incorporated by
reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the fiscal
year ended December 31, 2011). +

(10.19) Form of Non-Competition Agreement,
entered into by certain Company employees
(including named executive officers) who
have received restricted stock (incorporated
by reference
the
Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008).
+

to Exhibit 10.22

(10.20) Form of Non-Solicitation Agreement,
entered into by certain Company employees
(including named executive officers) who
have received restricted stock (incorporated
by
the
Company’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2006). +

to Exhibit 10.5

reference

(10.21) Form of Change-in-Control Agreement - Tier
I, for the Chief Executive Officer and all
"grandfathered" senior vice presidents
elected prior to 2012 (all named executive
officers)
- approved September 2013
(incorporated by reference to Exhibit 10.1 to
the Company’s Quarterly Report on Form
10-Q for the quarter ended September 30,
2013). +

(10.22) Form of Change-in-Control Agreement - Tier
II, for all future senior vice presidents and all
"grandfathered" vice presidents elected
prior
- approved
September 2013 (incorporated by reference
to Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended
September 30, 2013). +

to February 2008

(10.23) Form of Indemnification Agreement for
Directors (incorporated by reference to
Exhibit 10.13 to the Company’s Annual
Report on Form 10-K for the fiscal year
ended December 31, 2003). +

(10.24) Board Policy on Severance Agreements
with Senior Executives (incorporated by
reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on October
18, 2005). +

(10.25) Board Policy on Change of Control
Agreements (incorporated by reference to
Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed on October 18,
2005). +

(10.26) Time Sharing Agreement, dated October 17,
2014 (and effective November 1, 2014), by
and between Mark S. Sutton and
International Paper Company (incorporated
by
the
Company’s Current Report on Form 8-K
dated October 14, 2014). +

to Exhibit 99.1

reference

(10.27) Five-Year Credit Agreement dated as of
August 5, 2014, among International Paper
Company, JPMorgan Chase Bank, N.A.,
individually and as administrative agent, and
certain lenders (incorporated by reference
to Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended
September 30, 2014).

(10.28) IP Debt Security, dated December 7, 2006,
issued by International Paper Company to
Basswood Forests LLC (incorporated by
reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K dated
December 13, 2006).

(10.29) IP Hickory Note, dated December 7, 2006,
issued by International Paper Company to
Hickory Forests LLC (incorporated by
reference to Exhibit 4.2 to the Company’s
Current Report on Form 8-K dated
December 13, 2006).

(10.30) Credit Agreement, dated as of February 13,
2012, by and among the Company, UBS AG,
Stamford Branch, as administrative agent;
BNP Paribas Securities Corp., as
syndication
agent; Deutsche Bank
Securities Inc., HSBC Securities (USA) Inc.
and The Royal Bank of Scotland PLC, as co-
documentation agents; UBS Securities LLC,
BNP Paribas Securities Corp., CoBank,
ACB, Deutsche Bank Securities Inc., HSBC
Securities (USA) Inc. and RBS Securities
Inc., as joint lead arrangers; and the lenders
party thereto (incorporated by reference to
Exhibit 10.1 to the Company’s Current
Report on Form 8-K dated February 13,
2012).

(10.31) Loan Agreement dated December 3, 2007,
by and among TIN Land Financing, LLC,
Citibank, N.A., Citicorp North America, Inc.,
as Agent, and the other Lenders named
therein (incorporated by reference to Exhibit
10.1 to Temple-Inland's Current Report on
Form 8-K filed with the Commission on
December 4, 2007).

(10.32) Amendment No. 1 dated August 11, 2011 to
Loan Agreement dated December 3, 2007,
by and among TIN Land Financing, LLC,
Citibank, N.A., Citicorp North America, Inc.,
as Agent, and the other Lenders named
therein (incorporated by reference to Exhibit
10.1 to Temple-Inland's Quarterly Report on
Form 10-Q for the quarter ended October 1,
2011, and filed with the Commission on
November 7, 2011).

(10.33) Loan Agreement dated December 3, 2007,
by and among TIN Timber Financing, LLC,
Citibank, N.A., Citicorp North America, Inc.,
as Agent, and the other Lenders named
therein (incorporated by reference to Exhibit
10.2 to Temple-Inland's Current Report on
Form 8-K filed with the Commission on
December 4, 2007).

(101.INS) XBRL Instance Document *

(101.SCH) XBRL Taxonomy Extension Schema *

(101.CAL) XBRL Taxonomy Extension Calculation

Linkbase *

(101.DEF) XBRL Taxonomy Extension Definition

Linkbase *

(101.LAB) XBRL Taxonomy Extension Label

Linkbase *

(101.PRE) XBRL

Extension

Presentation

Linkbase *

+ Management contract or compensatory plan or arrangement.

* Filed herewith

(10.34) Amendment No. 1 dated August 11, 2011 to
Loan Agreement dated December 3, 2007,
by and among TIN Timber Financing, LLC,
Citibank, N.A., Citicorp North America, Inc.,
as Agent, and the other Lenders named
therein (incorporated by reference to Exhibit
10.2 to Temple-Inland's Quarterly Report on
Form 10-Q for the quarter ended October 1,
2011, and filed with the Commission on
November 7, 2011).

(10.35) Form

of Timber Note Receivable
(incorporated by reference to Exhibit 10.1 to
Temple-Inland's Quarterly Report on Form
10-Q for the quarter ended July 3, 2010, and
filed with the Commission on August 9,
2010).The Company agrees to furnish
supplementally a copy of any omitted
schedule or exhibit to the staff of the
Securities and Exchange Commission upon
request.

(10.36) Form of Letter of Credit (incorporated by
reference to Exhibit 10.2 to Temple-Inland's
Quarterly Report on Form 10-Q for the
quarter ended July 3, 2010, and filed with
the Commission on August 9, 2010).

(11) Statement of Computation of Per Share

Earnings.*

(12) Computation of Ratio of Earnings to Fixed

Charges and Preferred Stock Dividends. *

(21) List of Subsidiaries of Registrant. *

(23) Consent of Independent Registered Public

Accounting Firm. *

(24) Power of Attorney (contained on

the
signature page to the Company’s Annual
Report on Form 10-K for the year ended
December 31, 2014). *

(31.1) Certification by Mark S. Sutton, Chairman
and Chief Executive Officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002. *

(31.2) Certification by Carol L. Roberts, Chief
Financial Officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. *

(32) Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.*

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
(In millions)

Balance at
Beginning
of Period

Additions
Charged to
Earnings

For the Year Ended December 31, 2014
Additions
Charged to
Other
Accounts

Deductions
from
Reserves

Balance at
End of
Period

Description
Reserves Applied Against Specific
Assets Shown on Balance Sheet:
Doubtful accounts – current
Restructuring reserves

109 $

11 $
41

—
—

(38)(a) $
(76)(b)

82
16

Balance at
Beginning
of Period

Additions
Charged to
Earnings

For the Year Ended December 31, 2013
Additions
Charged to
Other
Accounts

Deductions
from
Reserves

Balance at
End of
Period

119 $

38 $
46

—
—

(48)(a) $
(12)(b)

109
51

For the Year Ended December 31, 2012

Balance at
Beginning
of Period

Additions
Charged to
Earnings

Additions
Charged to
Other
Accounts

Deductions
from
Reserves

Balance at
End of
Period

Description

Reserves Applied Against Specific
Assets Shown on Balance Sheet:

Doubtful accounts – current

Restructuring reserves

126 $
8

11 $

—

(18)(a) $

(8)(b)

119

(a)
(b)

Includes write-offs, less recoveries, of accounts determined to be uncollectible and other adjustments.
Includes payments and deductions for reversals of previously established reserves that were no longer required.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTERNATIONAL PAPER COMPANY

By:

/S/ SHARON R. RYAN
Sharon R. Ryan

Senior Vice President, General Counsel
and Corporate Secretary

POWER OF ATTORNEY

February 26, 2015

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
Sharon R. Ryan and Deon Vaughan as his or her true and lawful attorney-in-fact and agent, acting alone, with full
power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities,
to sign any or all amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-
in-fact full power and authority to do and perform each and every act and thing requisite or necessary to be done,
hereby ratifying and confirming all that said attorney-in-fact and agent, or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature

Title

Date

/S/ MARK S. SUTTON

Mark S. Sutton

Chairman of the Board & Chief
Executive Officer and Director

February 26, 2015

/S/ DAVID J. BRONCZEK Director

David J. Bronczek

/S/ AHMET C. DORDUNCU Director

Ahmet C. Dorduncu

Director

/S/ ILENE S. GORDON

Ilene S. Gordon

/S/ JAY L. JOHNSON

Jay L. Johnson

/S/ STACEY J. MOBLEY

Stacey J. Mobley

/S/ JOAN E. SPERO

Joan E. Spero

/S/ JOHN L. TOWNSEND III

John L. Townsend III

/S/ WILLIAM G. WALTER

William G. Walter

/S/ J. STEVEN WHISLER

J. Steven Whisler

/S/ RAY G. YOUNG

Ray G. Young

/S/ CAROL L. ROBERTS

Carol L. Roberts

/S/ TERRI L. HERRINGTON

Terri L. Herrington

February 26, 2015

Senior Vice President and Chief
Financial Officer

February 26, 2015

Vice President – Finance and Controller

February 26, 2015

2014 LISTING OF FACILITIES
(all facilities are owned except noted otherwise)

PRINTING PAPERS

Nova Campina, São Paulo, Brazil

Griffin, Georgia

Paulinia, São Paulo, Brazil

Kennesaw, Georgia leased

APPENDIX I

Uncoated Papers and Pulp

Yanzhou City, China

U.S.:

Courtland, Alabama (1)

Selma, Alabama (Riverdale Mill)

Cantonment, Florida (Pensacola Mill)

Veracruz, Mexico

Kenitra, Morocco

Edirne, Turkey

Corum, Turkey

Lithonia, Georgia

Savannah, Georgia

Stone Mountain, Georgia

Tucker, Georgia

Aurora, Illinois (2 locations)

Bedford Park, Illinois (2 locations) 1
leased

Ticonderoga, New York

Riegelwood, North Carolina

Eastover, South Carolina

Georgetown, South Carolina

Sumter, South Carolina

Franklin, Virginia

International:

Luiz Antônio, São Paulo, Brazil

Mogi Guacu, São Paulo, Brazil

Corrugated Container

Belleville, Illinois

U.S.:

Bay Minette, Alabama

Decatur, Alabama

Dothan, Alabama leased

Huntsville, Alabama

Bentonville, Arkansas

Conway, Arkansas

Fort Smith, Arkansas (2 locations)

Carroll Stream, Illinois

Chicago, Illinois

Des Plaines, Illinois

Lincoln, Illinois

Montgomery, Illinois

Northlake, Illinois

Rockford, Illinois

Butler, Indiana

Três Lagoas, Mato Grosso do Sul, Brazil

Russellville, Arkansas (2 locations)

Crawfordsville, Indiana

Saillat, France

Kadiam, India

Rajahmundry, India

Kwidzyn, Poland

Svetogorsk, Russia

INDUSTRIAL PACKAGING

Containerboard

U.S.:

Pine Hill, Alabama

Prattville, Alabama

Tolleson, Arizona

Yuma, Arizona

Anaheim, California

Bell, California

Fort Wayne, Indiana

Hammond, Indiana

Indianapolis, Indiana (2 locations)

Saint Anthony, Indiana

Buena Park, California leased

Tipton, Indiana

Camarillo, California

Carson, California

Cerritos, California leased

Compton, California

Elk Grove, California

Exeter, California

Cedar Rapids, Iowa

Waterloo, Iowa

Garden City, Kansas

Bowling Green, Kentucky

Lexington, Kentucky

Louisville, Kentucky

Gilroy, California (2 locations) 1 leased

Walton, Kentucky

Cantonment, Florida (Pensacola Mill)

Los Angeles, California leased

Rome, Georgia

Savannah, Georgia

Cayuga, Indiana

Cedar Rapids, Iowa

Henderson, Kentucky

Maysville, Kentucky

Bogalusa, Louisiana

Campti, Louisiana

Mansfield, Louisiana

Vicksburg, Mississippi

Valliant, Oklahoma

Springfield, Oregon

Orange, Texas

International:

Franco da Rocha, São Paulo, Brazil

Modesto, California

Ontario, California

Salinas, California

Sanger, California

Lafayette, Louisiana

Bogalusa, Louisiana

Shreveport, Louisiana

Springhill, Louisiana

Auburn, Maine

San Leandro, California leased

Three Rivers, Michigan

Santa Fe Springs, California (2
locations) 1 leased

Arden Hills, Minnesota

Stockton, California

Tracy, California

Golden, Colorado

Wheat Ridge, Colorado

Putnam, Connecticut

Orlando, Florida

Plant City, Florida

Tampa, Florida leased

Columbus, Georgia

Forest Park, Georgia

A-1

Austin, Minnesota

Fridley, Minnesota

Minneapolis, Minnesota leased

Shakopee, Minnesota

White Bear Lake, Minnesota

Houston, Mississippi

Jackson, Mississippi

Magnolia, Mississippi leased

Olive Branch, Mississippi

Fenton, Missouri

Kansas City, Missouri

Maryland Heights, Missouri

Laurens, South Carolina

Lexington, South Carolina

Wuhan, China

Arles, France

North Kansas City, Missouri leased

Ashland City, Tennessee leased

Chalon-sur-Saone, France

Cleveland, Tennessee

Creil, France

Elizabethton, Tennessee leased

LePuy, France (Espaly Box Plant)

St. Joseph, Missouri

St. Louis, Missouri

Omaha, Nebraska

Barrington, New Jersey

Bellmawr, New Jersey

Milltown, New Jersey

Spotswood, New Jersey

Thorofare, New Jersey

Binghamton, New York

Buffalo, New York

Rochester, New York

Scotia, New York

Utica, New York

Morristown, Tennessee

Murfreesboro, Tennessee

Amarillo, Texas

Carrollton, Texas (2 locations)
Edinburg, Texas (2 locations) (7)

El Paso, Texas

Ft. Worth, Texas leased

Grand Prairie, Texas

Hidalgo, Texas

McAllen, Texas

San Antonio, Texas (2 locations)

Mortagne, France

Guadeloupe, French West Indies

Batam, Indonesia

Bellusco, Italy

Catania, Italy

Pomezia, Italy

San Felice, Italy

Kuala Lumpur, Malaysia

Juhor, Malaysia

Apodaco (Monterrey), Mexico leased

Ixtaczoquitlan, Mexico

Juarez, Mexico leased

Los Mochis, Mexico

Puebla, Mexico leased

Reynosa, Mexico

San Jose Iturbide, Mexico

Charlotte, North Carolina (2 locations)

Sealy, Texas

1 leased

Lumberton, North Carolina

Manson, North Carolina

Newton, North Carolina

Waxahachie, Texas

Lynchburg, Virginia

Petersburg, Virginia

Richmond, Virginia

Statesville, North Carolina

Moses Lake, Washington

Santa Catarina, Mexico

Byesville, Ohio

Delaware, Ohio

Eaton, Ohio

Kenton, Ohio

Madison, Ohio

Marion, Ohio

Marysville, Ohio leased

Middletown, Ohio

Mt. Vernon, Ohio

Newark, Ohio

Streetsboro, Ohio

Wooster, Ohio

Oklahoma City, Oklahoma

Beaverton, Oregon (2 locations)

Hillsboro, Oregon

Portland, Oregon

Salem, Oregon leased

Biglerville, Pennsylvania

Eighty-four, Pennsylvania

Hazleton, Pennsylvania

Kennett Square, Pennsylvania

Lancaster, Pennsylvania
Littlestown, Pennsylvania (4)

Mount Carmel, Pennsylvania

Georgetown, South Carolina

Olympia, Washington

Yakima, Washington

Fond du Lac, Wisconsin

Manitowoc, Wisconsin

International:

Manaus, Amazonas, Brazil

Paulinia, São Paulo, Brazil

Rio Verde, Goias, Brazil

Suzano, São Paulo, Brazil

Las Palmas, Canary Islands

Tenerife, Canary Islands

Rancagua, Chile

Baoding, China
Beijing, China (2 locations) (8)

Chengdu, China

Dalian, China

Dongguan, China

Guangzhou, China (2 locations)

Hohhot, China

Nanjing China

Silao, Mexico

Villa Nicolas Romero, Mexico

Zapopan, Mexico

Agadir, Morocco

Casablanca, Morocco

Kenitra, Morocco

Singapore, Singapore

Almeria, Spain

Barcelona, Spain

Bilbao, Spain

Gandia, Spain

Madrid, Spain
Valladolid, Spain (2)

Bangkok, Thailand

Adana, Turkey

Bursa, Turkey

Corlu, Turkey

Corum, Turkey

Gebze, Turkey

Izmir, Turkey

Shanghai, China (2 locations)

Recycling

Shenyang, China

Suzhou, China

Tianjin, China (2 locations)

U.S.:

Phoenix, Arizona leased

Fremont, California leased

A-2

Norwalk, California

West Sacramento, California

Denver, Colorado

Itasca, Illinois

Des Moines, Iowa

Wichita, Kansas

Roseville, Minnesota

Omaha, Nebraska leased

Charlotte, North Carolina

Beaverton, Oregon

Eugene, Oregon leased

Memphis, Tennessee leased

Carrollton, Texas

Salt Lake City, Utah

Richmond, Virginia

Kent, Washington

Riegelwood, North Carolina
Hazelton, Pennsylvania (6)

(C & D Center)

Prosperity, South Carolina

Texarkana, Texas

Foodservice

U.S.:

Visalia, California

Shelbyville, Illinois

Kenton, Ohio

International:

Shanghai, China

Beijing, China

Bogota, Colombia

Cheshire, England leased

International:

Monterrey, Mexico leased

DISTRIBUTION

Xalapa, Veracruz, Mexico leased

IP Asia

International:

China (8 locations)

Malaysia

Taiwan

Thailand

Vietnam

FOREST PRODUCTS

Forest Resources

International:

Approximately 334,000 acres in Brazil

Bags

U.S.:

Buena Park, California

Beaverton, Oregon

Grand Prairie, Texas

CONSUMER PACKAGING

Coated Paperboard

Ontario, California leased (3)

(C & D Center)

Augusta, Georgia
Springhill, Louisiana (5)

(C & D Center)
Sturgis, Michigan (6)

(C & D Center)

Greensboro, North Carolina (6)

(C & D Center)

(1) Closed February 2014

(2) Closed March 2014

(3) Closed June 2014

(4) Closed July 2014

(5) Closed December 2014

(6) Sold October 2014

(7) 1 location closed February 2014

(8) 1 location sold December 2014

A-3

2014 CAPACITY INFORMATION
CONTINUING OPERATIONS

APPENDIX II

U.S.

EMEA

Americas,
other
than U.S.

Asia

India

Total

(in thousands of short
tons)

Industrial Packaging

Containerboard

Printing Papers

Uncoated Freesheet

Bristols

Uncoated Papers and
Bristols

Dried Pulp

Newsprint

Total Printing Papers

Consumer Packaging

Coated Paperboard

13,001

1,771

169

1,940

1,307

—

3,247

1,566

Forest Resources

We own, manage or have an interest in
approximately 1.2 million acres of forestlands
worldwide. These forestlands and associated acres
are located in the following regions:

Brazil

We have harvesting rights in:

Russia

Poland

Total

366

1,135

—

1,135

140

—

1,275

—

1,413

—

256

—

256

—

256

—

13,405

4,312

169

4,481

1,775

124

6,380

3,331

1,150

—

1,150

328

124

1,602

352

(M Acres)

334

882

1,219

A-4

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Fred A. Towler
Vice President
Supply Chain Operations

Keith R. Townsend
Vice President
South Region
Container The Americas

Shiela P. Vinczeller
Vice President
Talent Management
Human Resources

Greg T. Wanta
Vice President
Central Region
Container The Americas

Robert W. Wenker
Vice President and
Chief Technology Officer
Information Technology

Patrick Wilczynski
Vice President
Manufacturing, EMEA

Ron P. Wise
Vice President
Commercial National
Accounts
Container The Americas

Ann B. Wrobleski
Vice President
Global Government
Relations

ILIM GROUP
SENIOR LEADERSHIP

Franz Josef Marx
Chief Executive Officer

Brett A. Mosley
Vice President
Manufacturing

INTERNATIONAL PAPER LEADERSHIP
As of April 1, 2015

Mark S. Sutton
Chairman of the Board
and Chief Executive Officer

W. Michael Amick, Jr.
Senior Vice President
N.A. Papers, Pulp and
Consumer Packaging

C. Cato Ealy
Senior Vice President
Corporate Development

William P. Hoel
Senior Vice President
Container The Americas

Tommy S. Joseph
Senior Vice President
Manufacturing,
Technology, EHS&S
and Global Sourcing

Thomas G. Kadien
Senior Vice President
Human Resources,
Communications and
Global Government
Relations

Glenn R. Landau
Senior Vice President
President, International
Paper Latin America

Tim S. Nicholls
Senior Vice President
Industrial Packaging

Jean-Michel Ribieras
Senior Vice President and
President, International
Paper Europe, Middle
East, Africa and Russia

Carol L. Roberts
Senior Vice President and
Chief Financial Officer

Sharon R. Ryan
Senior Vice President
General Counsel and
Corporate Secretary

David W. Apollonio
Vice President
East Region
Container The Americas

Santiago Arbelaez
Vice President
Industrial Packaging
International Paper Brazil

September G. Blain
Vice President
Converting Papers
and Specialty Papers

Paul J. Blanchard
Vice President
Supply Chain
Industrial Packaging

Eric Chartrain
Vice President
European Papers

Thomas A. Cleves
Vice President
Containerboard and
Recycling

Kirt J. Cuevas
Vice President
Manufacturing
N.A. Papers and Pulp

Clay R. Ellis
Vice President
Pulp
N.A. Papers and Pulp

Jonathan E. Ernst
Vice President
European Container

Roman B. Gallo
Vice President
Manufacturing—West
Containerboard

Gary M. Gavin
Vice President
Industrial Packaging
International Paper Asia

Greg C. Gibson
Vice President
Coated Paperboard

John F. Grover
Vice President
Manufacturing—East
Containerboard

William T. Hamic
Vice President
Finance and
Strategic Planning
Industrial Packaging

Errol A. Harris
Vice President and
Treasurer
Global Treasury

Russell V. Harris
Vice President
Manufacturing
Coated Paperboard

Peter G. Heist
Vice President
West Region
Container The Americas

Terri L. Herrington
Vice President Controller
and Chief Accounting
Officer, Finance

Cecilia Ho
Vice President and
President
International Paper Asia

Robert M. Hunkeler
Vice President
Trust Investments

David M. Kiser
Vice President
Environment, Health,
Safety and Sustainability

David A. Liebetreu
Vice President
Global Sourcing and
Fiber Supply

Rildo Martini
Vice President
Strategic Planning
Finance and Supply Chain
N.A. Papers and Pulp

Brian N.G. McDonald
Vice President
Strategic Planning

Kevin G. McWilliams
Vice President
Tax

Tracy L. Pearson
Vice President
Foodservice

Thomas J. Plath
Vice President
Global Businesses
Human Resources

Jay P. Royalty
Vice President
Investor Relations

Bathsheba T. Sams
Vice President
HR Operations
Human Resources

John V. Sims
Vice President
Printing Papers
N.A. Papers and Pulp

Ksenia Sosnina
Vice President and
President
International Paper Russia

Rampraveen Swaminathan
Vice President and
President
International Paper India

BOARD OF DIRECTORS
Mark S. Sutton
Chairman of the Board and Chief Executive Officer
International Paper Company

David J. Bronczek
President and Chief Executive Officer
FedEx Express

William J. Burns
President, The Carnegie Endowment
for International Peace

Ahmet C. Dorduncu
Chief Executive Officer
Akkök Group

Ilene S. Gordon
Chairman, President and Chief Executive Officer
Ingredion Incorporated

Jay L. Johnson
Retired Chairman and Chief Executive Officer
General Dynamics Corporation

Stacey J. Mobley
Senior Counsel
Dickstein Shapiro LLP and
Retired Senior Vice President,
Chief Administrative Officer and General Counsel
DuPont

Joan E. Spero
Adjunct Senior Research Scholar
Columbia University School of International
and Public Affairs

John L. Townsend, III
Senior Advisor
Tiger Management, LLC

William G. Walter
Retired Chairman and Chief Executive Officer
FMC Corporation

J. Steven Whisler
Presiding Director
Retired Chairman and Chief Executive Officer
Phelps Dodge Corporation

Ray G. Young
Executive Vice President and
Chief Financial Officer
Archer Daniels Midland Company

Papers used in this report:
Accent® Opaque 120lb. Cover, 50lb. and 100lb. Text
White Smooth

Printed in the U.S. by RR Donnelley

Senior Lead Team and Board of Directors Photographs
Toby Richards

SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS
International Paper Company
6400 Poplar Avenue
Memphis, TN 38197
(901) 419-9000

ANNUAL MEETING
The next annual meeting of shareholders will be held
at The Marriott Memphis East in Memphis, TN, at
11:00 a.m. CDT on Monday, May 11, 2015.

TRANSFER AGENT AND REGISTRAR
Computershare, our transfer agent, maintains the records
of our registered shareholders and can help you with a
variety of shareholder related services at no charge including:

Change of name or address
Consolidation of accounts
Duplicate mailings
Dividend reinvestment enrollment
Lost stock certificates
Transfer of stock to another person
Additional administrative services

Telephone:
(800) 678-8715 (U.S.)
(781) 575-2723 (International)

MAILING ADDRESSES
Shareholder correspondence should be mailed to:

Computershare
P.O. BOX 30170
College Station, TX 77842-3170

Overnight correspondence should be sent to:
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845

SHAREHOLDER WEBSITE
www.computershare.com/investor

Shareholder online inquiries
https://www-us.computershare.com/investor/Contact

STOCK EXCHANGE LISTINGS
Common shares (symbol: IP) are listed on the New York
Stock Exchange.

DIRECT PURCHASE PLAN
Under our plan, you may invest all or a portion of your
dividends, and you may purchase up to $20,000 of addi-
tional shares each year. International Paper pays most
of the brokerage commissions and fees. You may also
deposit your certificates with the transfer agent for safe-
keeping. For a copy of the plan prospectus, call or write
to Computershare.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
100 Peabody Place, Ste. 800
Memphis, TN 38103

REPORTS AND PUBLICATIONS
Copies of this annual report (including the financial
statements and the financial statement schedules),
SEC filings and other publications may be obtained
free of charge by visiting our Web site, http://www.
internationalpaper.com, by calling (800) 332-8146 or
by writing to our investor relations department at
the corporate headquarters address listed above.
Copies of our most recent Sustainability Report
are available by calling (901) 419-4319 or e-mailing
sustainability@ipaper.com.

INVESTOR RELATIONS
Investors desiring further information about International
Paper should contact the investor relations department at
corporate headquarters, (901) 419-9000.

BOARD OF DIRECTORS

BOARD OF DIRECTORS, STANDING, LEFT TO RIGHT: AHMET C. DORDUNCU, DAVID J. BRONCZEK, JOHN L. TOWNSEND, III, J. STEVEN WHISLER, WILLIAM G. WALTER, JOAN E. SPERO, RAY G. YOUNG,
JAY L. JOHNSON, STACEY J. MOBLEY, JOHN F. TURNER (RETIRED). SEATED, LEFT TO RIGHT: ILENE S. GORDON, MARK S. SUTTON, JOHN V. FARACI (RETIRED). NOT PICTURED: WILLIAM J. BURNS

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GLOBAL HEADQUARTERS

REGIONAL HEADQUARTERS

International Paper Company
6400 Poplar Avenue
Memphis, TN 38197, U.S.A.
901-419-9000

International Paper Europe
Middle East and Africa (EMEA)
Chaussée de la Hulpe 166
1170 Brussels, Belgium
+32-2-774-1211

International Paper do Brasil
Avenida Paulista, 37 14° andar
01311-902 São Paulo SP, Brazil
+55-11-3797-5797

International Paper Asia
17-18F, West Building Greenland Center
600 Middle Longhua Road
Shanghai, China 200032
+86-21-61133200

International Paper India
Krishe Sapphire Building, 8th Floor
Hitech City Main Road, Madhapur
Hyderabad 500 081, India
+91-040-33121-000

International Paper Russia
Bolloev Business Center, 5th Floor
Grivtsova Lane 4, Litera A
St. Petersburg 190000, Russia
+7-812-334-57-30

INTERNATIONALPAPER.COM

©2015 International Paper Company. All rights reserved. Printed in USA.
Accent, Alaska, Ballet, Chamex, ecotainer, Hammermill, Hold&Go, Rey,
SecureStack and Svetocopy are registered trademarks of International Paper
Company or its affiliates. POL is a trademark of International Paper Company
or its affiliates. Forest Stewardship Council, FSC and the FSC logo are trade-
marks of Forest Stewardship Council, A.C. PEFC and the PEFC logo are regis-
tered trademarks of the PEFC Council. SFI marks are registered marks owned
by Sustainable Forestry Initiative Inc. 0315132.

FORTUNE and The World’s Most Admired Companies are registered trade-
marks of Time Inc. and are used under license. From FORTUNE Magazine,
March 1, 2015 ©2015 Time Inc. Used under license. FORTUNE and Time Inc.
are not affiliated with, and do not endorse products or services of, Licensee.