International Paper Company Annual Report 2015

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FY2015 Annual Report · International Paper Company

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ANNUAL
PERFORMANCE
SUMMARY

2015

TRACK RECORD OF
STRONG PERFORMANCE

$1.8B

average free
cash flow for
last five years

$3.65 EPS
highest in
20 years

TRACK RECORD OF

STRONG PERFORMANCE

NYSE (New York Stock Exchange): IP

11%

return on
invested capital

Four straight
years of
double-digit
percentage
dividend
increases

ANNUAL
PERFORMANCE
SUMMARY

2015

International Paper’s
demand for responsibly
sourced wood fiber provides
an incentive to landowners to
sustainably manage millions
of acres of forestland

$15.5 million donated
to address critical
community needs and
improve our planet

Institutional
Investor’s Magazine
“All-America
Executive Team 2016”

Ethisphere Institute’s
“World’s Most Ethical
Companies®” 2016

Fortune’s Magazine
“World’s Most Admired
Companies® 2016”

93 percent of International
Paper locations completed
2015 without a serious injury

Returns exceeding cost of
capital for six straight years

Financial Results

We delivered solid financial results fueled by
strong performances in our North American
industrial packaging business and our
Ilim joint venture in Russia. We achieved
strong results despite many challenges
in 2015: demand for our products was
mixed; the strong U.S. dollar weakened the
competitiveness of our exports; the Brazilian
economy was in recession; and China’s
economy weakened significantly.

Facing continued market and economic
challenges in China, we sold our 55 percent
equity stake in the Sun Paper coated board
joint venture, which removed $400 million
in debt from our balance sheet, and we
announced plans to sell our corrugated box
business in Asia. We will continue to serve
customers in Asia with products from our
Ilim joint venture, from the United States,
and from other regions.

We executed our strategy, enabling us
to achieve return on invested capital of
11 percent, well above our cost of capital.
After six consecutive years of higher than
cost-of-capital returns, we are confident
we can sustainably generate healthy returns
and continue to improve the company.
We generated strong free cash flow of
$1.8 billion, and $3.65 earnings per share,
the highest in 20 years.

RETURN ON INVESTED CAPITAL

11%

9.3%

9.2%

M A R C H 2 0 1 6

To our shareowners:

For more than a century, International Paper
has been using renewable resources
responsibly to make recyclable products
people depend on every day. Once again in
2015, we demonstrated that our people and
our globally competitive manufacturing and
converting facilities can operate safely and
sustainably, maintain strong positions in
attractive markets, and generate substantial
free cash flow, even during challenging
economic environments.

I am pleased with the company’s overall
performance and confident in our ability to
create value for our shareowners, employees,
customers, and communities. We continued
to use cash from our operations in line with
our long-term capital allocation strategy —
reinvesting in our businesses to create
long-term value and returning cash to
our shareowners.

ANNUAL PERFORMANCE SUMMARY 2015

2013

2014

2015

Strong free cash flow averaging $1.8B

Capital Allocation

FREE CASH FLOW

Investing to improve our businesses, returning cash to
shareowners, and maintaining a strong balance sheet
are the priorities of our cash allocation strategy.

5-Year Average: $1.8 billion

In 2015 we returned $1.2 billion to our shareowners using
our strong cash flow to fund a 10 percent increase in our
annual dividend. This was the fourth consecutive year of
double-digit percentage increases.

$1.7

$1.6

$2.1

$1.8

We strengthened our dividend policy by committing
to target 40 to 50 percent of free cash flow—a clear
indication of confidence in the sustainability of our
free cash flow and our commitment to returning cash
to shareowners.

We also continued our stock repurchase program,
acquiring more than $500 million worth of shares
during 2015. We have now repurchased $2.1 billion
of our $3 billion authorization.

Finally, we invested in cost reduction projects to
drive margin improvement and offset cost inflation,
and initiated strategic investments to generate
long-term value.

2011

2012

2013

2014

2015

ANNUALIZED DIVIDEND

$1.05

$1.20

$1.40

$1.60

$1.76

2011

2012

2013

2014

2015

Industrial
Packaging
Optimization

We announced plans to invest $300 million in 2016 and 2017 to further improve our
North American containerboard mill system, enhance product quality, and reduce
manufacturing and delivery costs. These projects are expected to have a collective
internal rate of return of 20 percent.

Fluff Pulp
Expansion

We began converting our Riegelwood, N.C., coated paperboard mill to fluff pulp production;
this incremental 400,000 tons of fluff pulp capacity will allow us to meet our customers’
global growth demand. Production will ramp up mid-2016 with ongoing flexibility to shift
between softwood and fluff production based on market demand.

Foodservice
Expansion

We doubled our manufacturing footprint for paper cups and food containers at our facility in
Kenton, Ohio. Production continues to ramp up to support the consumer-driven demand for
sustainable and renewable products.

ANNUAL PERFORMANCE SUMMARY 2015

Leadership

Effective execution depends on strong leadership
and governance. We continued to build on the bench
strength of our company officers with many new
stretch assignments in 2015.

In February, we welcomed new board member
Ambassador William J. Burns, president of the
Carnegie Endowment for International Peace.
Ambassador Burns served in the U.S. Department
of State as Deputy Secretary of State from
2011 to 2014, as Under Secretary for Political Affairs
from 2008 to 2011, and as Ambassador to Russia
from 2005 to 2008, as well as several other posts
during his 33 years in the Foreign Service. He brings
extensive domestic and international public policy
experience and a unique, valuable perspective to the
International Paper Board of Directors.

Outlook

Looking ahead, I am confident that our
long-term strategy will continue to create
value for International Paper shareowners.

We have a skilled, engaged workforce and talented
leadership teams that continue to demonstrate
their ability to adapt to the changing demands of our
customers and the dynamic global markets we serve.

Our asset base is flexible and well-positioned with
globally competitive cost positions and with steady
access to wood fiber, our primary raw material. We
have strong positions in attractive markets and are
aligned with strategic customers.

We focus on the things we control—serving our
customers, strengthening our people and communities,
operating safely, responsibly, and sustainably, and
deliberately improving our operations.

Our Board of Directors and senior leaders remain
committed to generating strong, sustainable free
cash flow to fuel strategic investments that will
strengthen our portfolio of businesses and create
value for our shareowners, employees, customers,
and communities.

On behalf of the International Paper Board of Directors
and our 55,000 employees, thank you for your
continued support and ownership of International Paper.

Mark Sutton | Chairman and CEO

We do the right things,
in the right ways, for
the right reasons—
this is The IP Way.

*FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Performance Summary may be considered forward-looking statements within the meaning of the federal
securities laws. These statements reflect management’s current views and are subject to risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ include but are not limited
to those listed and discussed in the Company's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K
portion of this Annual Performance Summary.

ANNUAL PERFORMANCE SUMMARY 2015

ABOUT INTERNATIONAL PAPER

We are a leading global producer of packaging, paper, and pulp. We use renewable
resources responsibly to make recyclable products that people depend on every day.

Senior Leadership Team
(left to right)

W. Michael Amick, Jr.
Senior Vice President, North
American Papers, Pulp and
Consumer Packaging

Carol L. Roberts
Senior Vice President,
Chief Financial Officer

C. Cato Ealy
Senior Vice President,
Corporate Development

William P. Hoel
Senior Vice President,
Container The Americas

Sharon R. Ryan
Senior Vice President, General
Counsel and Corporate Secretary

Glenn R. Landau
Senior Vice President & President,
International Paper Latin America

Timothy S. Nicholls
Senior Vice President,
Industrial Packaging

Tommy S. Joseph
Senior Vice President,
Manufacturing, Technology,
EH&S and Global Sourcing

Thomas G. Kadien
Senior Vice President,
Human Resources, Government
Relations and Global Citizenship

Jean-Michel Ribieras
Senior Vice President & President,
International Paper Europe,
Middle East, Africa & Russia

Mark S. Sutton
Chairman and Chief
Executive Officer

We are unified around
a shared commitment
to strengthening
our people and the
communities where we
live and work, performing
sustainably, and using all
resources responsibly.

ANNUAL PERFORMANCE SUMMARY 2015

BUSINESSES

Industrial Packaging
International Paper is the world’s premier manufacturer of containerboard and corrugated packaging.
Our containerboard mills, box plants, and converting operations across the globe allow us to
sustainably meet the most challenging customer sales, shipping, storage, and display requirements.

Industrial packaging also includes our North American recycling business, which recovers,
processes, and sells several million tons of corrugated packaging and paper annually.

65%
of total
revenue

CUSTOMER SEGMENTS:

• Beverages
• Fruits and vegetables
• Protein and processed foods
• Consumer and industrial goods
• Shipping and distribution
• eCommerce

86%
North
America

4% Asia

8% EMEA /Russia

2% Latin America

13%
of total
revenue

22%
of total
revenue

Consumer Packaging
International Paper’s global coated paperboard business is a premier producer of high-quality
coated paperboard used for a wide variety of packaging and foodservice applications. In addition
to coated paperboard, consumer packaging includes our foodservice business, which produces
paper cups, food containers, and lids.

Our consumer packaging business collaborates with customers across a wide range of market
segments to meet consumer-driven demand for high-quality, sustainable, and innovative products.

CUSTOMER SEGMENTS:

• Pharmaceuticals
• Health and beauty
• Packaged food
• General consumer goods
• Quick-service restaurants
• Specialty coffee
• Grocery
• Hospitality
• Convenience stores

66%
North
America

23% Asia

11% EMEA/Russia

Paper and Pulp
International Paper’s global papers businesses manufacture a wide variety of uncoated papers
for commercial printing, imaging, and converting customers. Customers rely on our signature
brands including Accent®, Chamex®, Hammermill®, Pol™, Reflection™, and Rey® to communicate,
advertise, educate, and inform.

International Paper’s pulp business produces fluff pulp for absorbent hygiene products like baby
diapers, feminine care, adult incontinence, and other non-woven products. These products serve
diverse consumers who share a common need for confidence in the quality and convenience of
personal hygiene products.

CUSTOMER SEGMENTS:

• Consumers
• Schools
• Businesses
• Commercial printing
• Book publishing
• Advertising
• Direct mail, bills, and statements
• Office products
• Retail packaging and labeling applications
• Wipes, tabletop, and medical non-wovens

17%
Latin
America

24%
EMEA/
Russia

17%
North
American
Pulp

3% India

39%
North
American
Paper

ANNUAL PERFORMANCE SUMMARY 2015

FORM
10-K

K
-
0
1
M
R
O
F

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
Common 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

2015

$22,365

2,361 (a)
(b)
1,266
(b,c)
917
(21)
938
30,587
3,884

(b,c)

2014

$ 23,617
2,058
872
536
(19)
555
28,684
5,115

(a)
(d)
(d,e)

(d,e)

$ 2.25

(b,c)

$ 1.30

(d,e)

(b,c)

$ 2.23
1.6400
9.43

(d,e)

$ 1.29
1.4500
12.18

12,730
412.1
417.4
420.6

13,351
420.1
427.7
432.0

(a)

(b)

(c)

(d)

(e)

See the reconciliation of net earnings (loss) attributable to International Paper Company to its total industry segment operating profit on page 19 and the
operating profit table on page 81 for details of operating profit by industry segment.
Includes pre-tax restructuring and other charges of $252 million including charges of $207 million for early debt extinguishment costs, charges of $16 million
for costs associated with the Timber Monetization restructuring, a charge of $15 million for a legal liability reserve adjustment, a charge of $8 million for costs
associated with our Riegelwood, North Carolina mill conversion to 100% pulp production, net of proceeds from the sale of the Carolina Coated Bristols brand
and charges of $6 million for other items. Also included are a pre-tax charge of $137 million related to the impairment of goodwill and a trade name intangible
for our Brazil Packaging business, a pre-tax charge of $174 million related to the impairment of our 55% equity share in the IP-Sun JV and gain of $4 million
related to the refund of state tax credits.
Includes a tax benefit of $67 million related to the impairment of the IP-Sun JV, a tax expense of $23 million for the tax impact of the 2015 cash pension
contribution of $750 million and a tax expense of $7 million for other items.
Includes pre-tax restructuring and other charges of $846 million including charges of $276 million for early debt extinguishment costs, charges of $554 million
for costs associated with the shutdown of our Courtland, Alabama mill, and a net charge of $16 million for other items. Also included are a charge of $47
million 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 related to our Asia Industrial Packaging business, a charge of $35 million for a multi-employer pension withdrawal liability,
a charge of $32 million for costs associated with a foreign tax amnesty program, a gain of $20 million for the resolution of a legal contingency in India, charges
of $16 million for costs associated with the integration of Temple-Inland, and a net gain of $4 million for other items.
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 earnings
of the xpedx business through the date of the spin-off on July 1, 2014, net after-tax charges of $16 million for costs associated with the spin-off of the xpedx
business, a gain of $1 million for costs associated with the restructuring of xpedx and charges of $9 million for costs associated with the Building Products
divestiture.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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 18.

In millions, at December 31
Calculation of Free Cash Flow

Cash provided by operations
(Less)/Add:
Cash invested in capital projects
Cash contribution to pension plan, net of tax refunds
Tax receivable collected related to pension contributions
Cash used for European account receivable securitization program
Cash received from unwinding a timber monetization
Change in control payments related to Temple-Inland acquisition
Insurance reimbursement for Guaranty Bank settlement
Free Cash Flow

2015

2014

2013

2012

2011

$2,580

$3,077

$3,028

$2,967

$2,675

(1,487)
750
-
-
-
-
-
$1,843

(1,366)
353
-
-
-
-
-
$2,064

(1,198)
31

(1,383)
44

-
-
-
-
(30)

-
-
(251)
120
80

$1,831

$1,577

(1,159)
300
(123)
209
(175)

-
-
$1,727

In millions, at December 31
Reconciliation of Operating Earnings Before Net Interest Expense to Net Earnings
Before Taxes and Equity Earnings
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings
Add back: Net Interest Expense
Add back: Special Items Before Taxes
Add back: Non-Operating Pension Expense Before Taxes
Operating Earnings Before Interest, Taxes and Equity Earnings
Tax Rate
Operating Earnings Before Interest and Equity Earnings
Equity Earnings, Net of Tax
Operating Earnings Before Interest

2015

2014

2013

$1,266
555
559
258
2,638
33%
1,767
117

$1,884

$872
607
1,052
212
2,743
31%
1,901
(200)

$1,228
612
344
323
2,507
26%
1,855
(39)

$1,701

$1,816

The Company considers return on invested capital (“ROIC”) to be a meaningful indicator of our operating performance, and we evaluate this
metric because it measures how effectively and efficiently we use the capital invested in our business. ROIC is not a measure of financial
performance under U.S. generally accepted accounting principles (“GAAP”) and may not be defined and calculated by other companies in the
same manner. The Company defines and calculates ROIC using in the numerator Operating Earnings Before Interest, the most directly
comparable GAAP measure to which is Earnings Before Income Taxes and Equity Earnings. The Company calculates Operating Earnings
Before Interest by excluding net interest expense, the after-tax effect on non-operating pension expense and items considered by management to
be unusual from the earnings reported under GAAP. Management uses this measure to focus on on-going operations and believes that it is useful
to investors because it enables them to perform meaningful comparisons of past and present operating results.

ROIC = Operating Earnings Before Interest / Average Invested Capital

Invested Capital = Equity adjusted to remove pension-related amounts in OCI, net of taxes + interest-bearing debt

FinalsFINANCIAL 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
Common 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

2015

$22,365

2,361 (a)
(b)
1,266
(b,c)
917
(21)
938
30,587
3,884

(b,c)

2014

$ 23,617
2,058
872
536
(19)
555
28,684
5,115

(a)
(d)
(d,e)

(d,e)

$ 2.25

(b,c)

$ 1.30

(d,e)

(b,c)

$ 2.23
1.6400
9.43

(d,e)

$ 1.29
1.4500
12.18

12,730
412.1
417.4
420.6

13,351
420.1
427.7
432.0

(a)

(b)

(c)

(d)

(e)

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

In millions, at December 31
Calculation of Free Cash Flow

2015

2014

2013

2012

2011

$2,580

$3,077

$3,028

$2,967

$2,675

(1,487)
750
-
-
-
-
-
$1,843

(1,366)
353
-
-
-
-
-
$2,064

(1,198)
31

(1,383)
44

-
-
-
-
(30)

-
-
(251)
120
80

$1,831

$1,577

(1,159)
300
(123)
209
(175)

-
-
$1,727

2015

2014

2013

$1,266
555
559
258
2,638
33%
1,767
117

$1,884

$872
607
1,052
212
2,743
31%
1,901
(200)

$1,228
612
344
323
2,507
26%
1,855
(39)

$1,701

$1,816

ROIC = Operating Earnings Before Interest / Average Invested Capital

Invested Capital = Equity adjusted to remove pension-related amounts in OCI, net of taxes + interest-bearing debt

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, 2015

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, 2015) was approximately $21,026,985,885.

The number of shares outstanding of the Company’s common stock as of February 19, 2016 was 411,157,696.

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 2016
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, 2015

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
2
3
3
3
5
5
6
6
7
11
11
11
11
11
11
11

12
14

17
17
20
21
24
25
30
35
38
38
38
38
39

INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2015

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
2015 LISTING OF FACILITIES
2015 CAPACITY INFORMATION

39
40

42
44
45
46
47
48
49
83

83
85
86

86
86

86
87

87
87
90
91
A-1
A-4

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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, 2015, the
Company operated 24 pulp, paper and packaging mills,
169 converting and packaging plants, 16 recycling
plants and three bag facilities. Production facilities at
December 31, 2015 in Europe, Asia, Africa, India, Latin
America and South America included 16 pulp, paper
and packaging mills, 67 converting and packaging
plants, and two recycling plants. We operate a printing
and packaging products distribution business
principally
At
December 31, 2015, we owned or managed
approximately 335,000 acres of forestland in Brazil and
had,
forest management
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
three segments:
businesses are separated
Industrial Packaging; Printing Papers; and Consumer
Packaging. A description of these business segments
can be found on pages 24 and 25 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 2011 through 2015, International Paper’s capital
expenditures approximated $6.6 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
2015 was approximately $1.5 billion and is expected to
be approximately $1.3 billion in 2016. You can find more
information about capital expenditures on page 31 of
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.

Discussions of acquisitions can be found on pages 31
and 32 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 22 through 24 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 81 and 82 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 82 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
17 through 30 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 24 and 25 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 2015, 2014 and 2013 were as follows:

Sales Volumes by Product (1)

In thousands of short tons
Industrial Packaging

North American Corrugated Packaging
North American Containerboard
North American Recycling
North American Saturated Kraft
North American Gypsum/Release Kraft
North American Bleached Kraft
EMEA Industrial Packaging
Asian Box
Brazilian Packaging

Industrial Packaging

Printing Papers

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

Market Pulp (2)
Consumer Packaging

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

2015

2014

2013

10,284
3,110
2,379
156
171
23
1,417
359
305
18,204

1,879
1,493
1,125
241
4,738
1,736

1,425
381
958
2,764

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

(1)
(2)

Includes third-party and inter-segment sales and excludes sales of equity investees.
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
systems,
development; mechanical
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 $27 million in 2015, $16 million in 2014
and $18 million in 2013.

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
the environment, and
adverse
(2) maintaining compliance with applicable laws and
regulations. The Company spent $93 million in 2015 for
capital projects to control environmental releases into
the air and water, and to assure environmentally sound
management and disposal of waste. The 2015 spend
included costs associated with the U.S. Environmental
Protection Agency’s (EPA) Boiler MACT (maximum
achievable control technology) regulations. We expect

to spend $118 million in 2016 for similar capital projects.
Capital expenditures for 2017 environmental projects
are anticipated to be approximately $114 million.
Capital expenditures for 2018 environmental projects
are estimated to be $83 million. On January 31, 2013,
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.
On December 3, 2015, the U.S. Court of Appeals for
the D.C. Circuit heard oral arguments of the petitioners
challenging these regulations. As such, the projected
for environmental projects
capital expenditures
represent our current best estimate of
future
expenditures with the recognition that the Boiler MACT
regulations could change as a result of the pending
court decision.

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 promulgated revision
to the NAAQS for ozone on October 1, 2015, have not
had a material impact on the Company. Similarly,
regulations addressing specific implementation issues
related to the SO2 NAAQS were released in 2015 by
the EPA and are being implemented during the next two
to four years. Potentially material capital investment
may be required in response to these emerging
requirements, but evaluations are ongoing.

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 (COP21) to the Kyoto
Protocol. COP21 took place in December 2015 and
although well short of reaching another international
agreement, many countries, including the U.S. and EU
member states, did establish non-binding emissions
reduction targets. The U.S non-binding commitment is
for greenhouse gas (GHG) emissions to be 26% to 28%
below 2005 GHG emissions levels by 2025. Other
countries in which we do business made similar non-
binding commitments. The Company’s voluntary GHG
reductions, which are set out in the Company’s annual
Sustainability Report, are roughly in line with the
percentages of the U.S. non-binding commitment. It is
not clear at this time what, if any, further reductions by
the Company might be required by the countries in
which we operate. 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 the 2015 non-binding
commitments or allocation of and market prices for
GHG credits under existing rules evolve over the
coming years.

National Efforts

(through

transportation

In the U.S., the Kyoto Protocol was not ratified and
Congress has not passed GHG legislation. EPA has
enacted (i) regulations to control GHGs from mobile
sources
fuel efficiency
standards), (ii) New Source Performance Standards
(NSPS) for new Electrica Generating Units (EGUs), (iii)
regulations requiring reporting of GHGs from sources
of GHGs greater than 25,000 tons per year, and (iv) in
2015, requirements for states to develop plans to
reduce GHGs from utility electric generating units
(EGUs). In 2015, the Company reported to EPA the
GHG emissions from 21 of our U.S. manufacturing sites
and 9 landfills.

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. To date there have been only minor
permitting considerations and no substantive impacts.

In 2013, EPA issued final regulations establishing
NSPS for new (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 may 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.

On August 3, 2015, EPA promulgated the Clean Power
Plan (CPP) rule to address climate change by reducing
carbon dioxide (CO2) and other designated green
house gas pollutant emissions from utility EGUs. In
response, states are
to develop EGU pollutant
reduction plans over the next 1 to 3 years to reduce
emissions over the 2022 to 2033 timeframe by about
32 percent from 2005 levels. These plans, or the federal
plan that would take effect if the states do not act, pose
potential cost increases for electricity purchased by the
Company. EPA estimated that the proposed rule would
increase purchased electricity prices by less than seven
percent, but some utilities are estimating significantly
higher price increases from the final rule (11 to 14%, or
more). The magnitude of the cost increase to the
Company will not be possible to estimate reliably until
the plans and the utility industries’ responses are better
defined over the next few years. Adding to the
uncertainty, states and some industry parties have filed
lawsuits challenging the rule, the result of which could
materially affect the scope and stringency of the
regulations. On February 9, 2016, the U.S. Supreme
Court granted a stay of the Clean Power Plan. The stay
will remain in effect until final disposition of the case,
and as such, the rule’s potential impact on the Company
remains unclear.

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. Further state
measures are under substantive review as they
respond to EPA’s 2015 Clean Power Plan and develop
an implementation plan over the next 1 to 3 years. The
CPP allows significant flexibility in how states develop
their plans, so the uncertainty regarding potential
impacts will remain high until more specificity is reached
their
individual power companies develop
and
compliance strategies.

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, any material impact to the
company is not likely to occur before 2020 and at this
time it is not reasonably possible to estimate Company
costs of compliance with rules that have not yet been
adopted or implemented and may not be adopted or
implemented in the future. 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
International Paper has controls and
projects.
procedures
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.

in place

to stay

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

the United States. Of

As of December 31, 2015, we have approximately
56,000 employees, nearly 34,000 of whom are located
the U.S. employees,
in
approximately 26,000 are hourly, with unions
representing approximately 14,000
employees.
Approximately 11,000 of this number are represented
by the United Steelworkers union (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 2015, local labor agreements were negotiated
at five mills and 13 converting facilities. In 2016, local
labor agreements are scheduled to be negotiated at 29
facilities, including four mills and 25 converting facilities.
26 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, 54, 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.

W. Michael Amick, Jr., 52, 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, 59, 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, 59, 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.

Alcoa Inc. Ms. Roberts joined International Paper in
1981.

Tommy S. Joseph, 56, senior vice president -
manufacturing,
technology, EH&S and global
sourcing since January 2010. Mr. Joseph previously
served as senior vice president - manufacturing,
from February 2009 until
technology, EH&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, 59, senior vice president - human
resources, government relations & global citizenship,
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 serves on the board of
directors of The Sherwin-Williams Company. Mr.
Kadien joined International Paper in 1978.

Glenn R. Landau, 47, 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.

Timothy S. Nicholls, 54, 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, 53, 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, 56, 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

Sharon R. Ryan, 56, 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
including caustic soda and starch.
chemicals,
Information concerning
fiber supply purchase
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 61 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
changes in interest rates; (ii) industry conditions,
including but not limited to changes in the cost or
availability of raw materials, energy and transportation
costs, competition we face, cyclicality and changes in
consumer preferences, demand and pricing for our
products; (iii) global economic conditions and political
changes, including but not limited to the impairment of
financial institutions, changes in currency exchange
rates, credit ratings issued by recognized credit rating
organizations, the amount of our future pension funding
obligation, changes in tax laws and pension and health
care costs; (iv) unanticipated expenditures related to
the cost of compliance with existing and new
environmental and other governmental regulations and
to actual or potential litigation; (v) whether we
experience a material disruption at one of our

manufacturing facilities; (vi) risks inherent in conducting
business through a joint venture; (vii) the execution of
a definitive agreement to sell our corrugated box
business in China and Southeast Asia, and the
successful closing of the transaction within the
estimated timeframe; and (viii) our ability to achieve the
benefits we expect
from strategic acquisitions,
divestitures and restructurings. These and other factors
that could cause or contribute to actual results differing
materially from such forward looking statements are
discussed in greater detail 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 that could cause actual results to differ
materially from those expressed or implied by such
projections.

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. In addition, the
increase 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. 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

IN WHICH WE OPERATE
THE
EXPERIENCE BOTH ECONOMIC CYCLICALITY
AND CHANGES IN CONSUMER PREFERENCES.
FLUCTUATIONS IN THE PRICES OF, AND THE
DEMAND FOR, OUR PRODUCTS COULD
MATERIALLY
FINANCIAL
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
general economic conditions. The
length and
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
OUR FINANCIAL RESULTS. We operate
in a
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
markets, which
interest rates, currency
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, 2015, International
Paper had approximately $9.3 billion of outstanding
indebtedness, including $9.3 billion of indebtedness
outstanding under our floating and fixed rate notes.
There was no indebtedness outstanding under our

credit facilities as of December 31, 2015. 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

the agreements governing
Under
approximately $2.5 billion of our debt as of
December 31, 2015, 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
agreements governing
future
the
indebtedness that we may incur.

terms of any

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 Temple-Inland in connection with Temple-
Inland's 2007 sales of forestlands may be downgraded
below a required rating. Since 2007, 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 $840 million in deferred income taxes
if replacement banks cannot be obtained. The deferred
taxes are currently recorded
the Company's
consolidated financial statements. See Note 12,
Variable Interest Entities, on pages 64 through 66, and
Note 10, Income Taxes, on pages 59 through 61, in 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, 2015 was
$3.6 billion. The amount and
future
contributions will depend upon a number of factors,
including the actual earnings and changes in values of
plan assets and changes in interest rates. As described
elsewhere in this Annual Report on Form 10-K, during
the first half of 2016, former employees who are
participants in our pension plan will be able to request
early payment of their entire plan benefit in the form of
a single lump sum payment. While all payments will be
made from the plan's trust assets, the target population
has a total liability of $3.0 billion. For further information,
see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -
Liquidity and Capital Resources on page 34.

timing of

CHANGES
INTERNATIONAL CONDITIONS
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, 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, 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
producers
including
tax benefits and other
governmental subsidies,
local producers a competitive
measures giving

competing

products,

these countries.

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
jurisdictions. For example,
the Foreign Corrupt
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
the
various adverse consequences,
imposition of civil or criminal sanctions and the
prosecution of executives overseeing our international
operations.

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.

•

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

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 do not believe
that the outcome of any pending or threatened lawsuits
or claims will 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
MANUFACTURING
COULD
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
operations
could
operational
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;

• 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.

SUBJECT

INFORMATION
WE ARE
TECHNOLOGY RISKS RELATED TO BREACHES
OF SECURITY PERTAINING TO SENSITIVE
COMPANY, CUSTOMER, EMPLOYEE AND VENDOR
INFORMATION AS WELL AS BREACHES IN THE
TECHNOLOGY USED TO MANAGE 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 employee error or malfeasance, cyber attacks, or
natural disasters. 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
from such
these operational
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

CERTAIN OPERATIONS ARE CONDUCTED BY
JOINT VENTURES THAT WE CANNOT OPERATE
SOLELY FOR OUR BENEFIT. Certain operations in
Russia are carried on by a joint venture, Ilim. 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

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 2016 on page 33 and 34, and
dispositions and
restructuring activities as of
December 31, 2015, on pages 20 through 24 of Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations, and on page 54
and pages 56 and 57 of Item 8. Financial Statements
and Supplementary Data.

the

ITEM 3. LEGAL PROCEEDINGS

concerning

Information
legal
proceedings is set forth in Note 11 Commitments and
Contingencies on pages 61 through 64 of Item 8.
Financial Statements and Supplementary Data.

the Company’s

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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 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, 2015, the Company owned or
managed approximately 335,000 acres of forestlands
in Brazil, and had, through licenses and forest
management agreements, harvesting
rights on
government-owned forestlands in Russia. 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).

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 2015 and 2014 are set forth on page 83 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 19, 2016, there were
approximately 12,705 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, 2015 - October 31, 2015

November 1, 2015 - November 30, 2015

December 1, 2015 - December 31, 2015

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)

—

2,028,004

404,562

2,432,566

$—

41.05

41.80

—

2,027,636

402,163

$1.13

1.05

1.03

(a) 2,767 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 July 8,
2014. Through this 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 shares of our common stock. As of February 19, 2016,
approximately $933 million 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, 2010 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, 2010. The graph portrays total return,
2010–2015, assuming reinvestment of dividends.

Note 1: The companies included in the ROIC Peer Group are Domtar Inc., Fibria Celulose S.A., Klabin S.A., Metsa Board Corporation, Mondi
Group, Packaging Corporation of America, Smurfit Kappa Group, Stora Enso Group, and UPM-Kymmene Corp. MeadWestvaco Corp.
and Rock-Tenn Company are included in the ROIC Peer Group results through 2014.

Note 2: Returns are calculated in $USD.

ITEM 6. SELECTED FINANCIAL DATA

FIVE-YEAR FINANCIAL SUMMARY (a)

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

RESULTS OF OPERATIONS

2015

2014

2013

2012

2011

Net sales

$ 22,365

Costs and expenses, excluding interest

20,544

$ 23,617

22,138

$ 23,483

21,643

$ 21,852

20,214

$ 19,464

17,528

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

Equity earnings (loss), net of taxes

Discontinued operations, net of taxes

Net earnings (loss)

Noncontrolling interests, net of taxes

Net earnings (loss) attributable to
International Paper Company

FINANCIAL POSITION

1,266

(b)

117

—

917

(21)

(b-c)

872

(d)

(200)

(13)

(e)

(d-f)

536

(19)

1,228

(g)

967

(j)

1,395

(m)

(39)

(309)

1,378

(17)

(h)

(g-i)

799

(k)

(j-l)

140

1,336

(n)

(m-o)

938

(b-c)

555

(d-f)

1,395

(g-i)

794

(j-l)

1,322

(m-o)

Current assets less current liabilities

$ 2,553

3,050

3,898

3,907

5,718

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

Return on shareholders’ equity

CAPITAL EXPENDITURES

NUMBER OF EMPLOYEES

11,980

366

30,587

426

8,900

3,884

12,728

507

28,684

742

8,631

5,115

13,672

557

31,528

661

8,827

8,105

2.25

1.33

3.85

—

2.25

(0.03)

1.30

(0.70)

3.15

2.23

1.31

3.80

—

2.23

1.640

9.43

(0.02)

1.29

1.450

12.18

(0.69)

3.11

1.250

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

$ 57.90

55.73

50.33

39.88

33.01

36.76

37.70

44.24

53.58

39.47

49.03

27.29

39.84

21.55

29.60

1.7

0.71
20.0% (b-c)

1.6

0.65
7.7% (d-f)

1.8

0.54
20.2% (g-i)

$ 1,487

56,000

1,366

58,000

1,198

64,000

1.8

0.62
11.6% (j-l)

$1,383

65,000

2.2

0.60
17.9% (m-o)

$1,159

56,000

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.

2015:

(b) Includes the following pre-tax charges (gains):

In millions

2015

Riegelwood mill conversion costs, net of
proceeds from sale of Carolina Coated Bristols
brand

Timber monetization restructuring

Early debt extinguishment costs

IP-Sun JV impairment

Brazil Packaging impairment

Legal liability reserve adjustment

Refund of state tax credits

Other items

Total

207

174

137

(4)

559

2013:

2014:

(d) Includes the following pre-tax charges (gains):

In millions

Temple-Inland integration

Courtland mill shutdown

Early debt extinguishment costs

India legal contingency resolution

Multi-employer pension plan withdrawal liability

Foreign tax amnesty program

Asia Industrial Packaging goodwill impairment

Loss on sale by investee and impairment of
investment

Other items

Total

2014

554

276

(20)

100

1,052

(e) Includes the after-tax operating earnings of the
xpedx business prior to the spin-off and the
following after-tax charges (gains):

In millions

xpedx spinoff

Building Products divestiture

xpedx restructuring

Total

2014

(1)

(f) Includes the following tax expenses (benefits):

In millions

State legislative tax change

Internal restructuring

Other items

Total

2014

(90)

(1)

(81)

(g) Includes the following pre-tax charges (gains):

In millions

IP-Sun JV impairment

Cash pension contribution

Other items

Total

2015

In millions

2013

Temple-Inland integration

Courtland mill shutdown

Early debt extinguishment costs

Insurance reimbursement related to legal
settlement

Shut down of paper machine at Augusta mill

India Papers tradename and goodwill
impairment

Fair value adjustment of company airplanes

Cass Lake environmental reserve

Bargain purchase adjustment - Turkey

Other items

Total

118

(30)

127

(13)

(5)

344

(67)

(37)

2011:

(m) Includes the following pre-tax charges (gains):

In millions

Temple-Inland acquisition costs

Early debt extinguishment costs

APPM acquisition costs

Reversal of environmental and other reserves
related to repurposing at Franklin mill

Cass Lake environmental reserve

North American Shorewood business fixed
asset impairment

Shorewood business impairment

Inverurie, Scotland mill asset impairment

2011

(24)

129

Total

291

(n) Includes the following after-tax charges (gains):

In millions

Gain for earnout provision - sale of Kraft
Papers business

Tax benefit - Brazilian Coated Papers business
sale

Interest income on tax benefit - Brazilian
Coated Papers business sale

xpedx restructuring

Total

2011

(30)

(15)

(4)

(15)

(o) Includes the following tax expenses (benefits):

In millions

Internal restructuring

Tax benefit related to reduction of the carrying
value of the Shorewood business and write-off
of the associated deferred tax liability

Tax expense for APPM acquisitions costs

Release of deferred tax asset valuation
allowance

Other items

Total

2011

(222)

(174)

(h) Includes the after-tax operating earnings 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 the following
after-tax charges (gains):

In millions

xpedx spinoff

xpedx goodwill impairment

Building Products divestiture

xpedx restructuring

Total

2013

366

418

(i) Includes the following tax expenses (benefits):

In millions

Settlement of U.S. federal tax audits

Income tax reserve release

Other items

Total

2012:

2013

(744)

(31)

(774)

(j) Includes the following pre-tax charges (gains):

In millions

Temple-Inland integration

Early debt extinguishment costs

EMEA packaging business restructuring

Temple-Inland inventory fair value adjustment

Hueneme mill long-lived asset fair value
adjustment

Containerboard mill divestitures

2012

164

Total

340

(k) Includes the after-tax operating earnings of the
xpedx business and the Temple-Inland Building
Products business for the full year. Also includes
the following after-tax charges (gains):

In millions

Building Products divestiture

xpedx restructuring

Total

2012

(l) Includes the following tax expenses (benefits):

In millions

Internal restructuring

Deferred tax asset adjustment related to
Medicare Part D reimbursement

Total

2012

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

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 $3.65 in 2015, compared with
$3.00 in 2014, and $3.06 in 2013. Diluted earnings (loss)
per share attributable to common shareholders were
$2.23 in 2015, compared with $1.29 in 2014 and $3.11 in
2013.

International Paper delivered solid results during 2015
driven by strong margins and earnings in our North
American Industrial Packaging business and record
performance from the Ilim joint venture. We generated
$1.8 billion of free cash flow which enabled the Company
to return cash to our shareholders in the form of
approximately $500 million in share repurchases and a
10% increase in the quarterly dividend beginning with the
2015 fourth quarter dividend payment. During 2015, we
successfully completed the restructuring of the 2006
timber monetization to achieve our objectives of reducing
risk and preserving financial flexibility, while maintaining
the deferral of $1.4 billion of deferred income taxes.
Finally, with respect to our balanced use of cash, we
completed a $2 billion bond issue and related tender offer
along with making a $750 million voluntary pension
contribution.

Our 2015 results reflect the benefits of favorable input
costs offset by price and mix declines across our North
American businesses. Volumes were generally flat
compared to 2014 except for lower volumes in our North
American Industrial Packaging business due to lower
containerboard export tons. Input costs decreased versus
2014 largely due to lower energy, chemicals and freight
costs. Price declined relative to 2014 driven mainly by
lower pricing in our North American Industrial Packaging
and Printing Papers and Pulp businesses. Our Ilim joint
venture generated record results in 2015 driven by
improved operations and increased margins. The positive
results were partially offset by the unfavorable impact of
non-cash foreign currency movements associated with
Ilim’s US dollar denominated debt. Finally, during 2015
we completed the divestiture of our interest in the IP-Sun
joint venture, generating $23 million in cash proceeds and
removing approximately $400 million of debt from our
balance sheet upon completion of the deal.

Overall, 2015 reflects solid performance
in what
continues to be a challenging economic environment. 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. Our
focus on maximizing free cash flow generation and
deploying capital in a way that creates additional value
for our shareholders has positioned us for another
successful year in 2016.

lower volumes

Looking ahead to the 2016 first quarter, we expect
in our North American
seasonally
Industrial Packaging business, with some offset from
higher export volume which carries a lower margin.
Additionally, we expect seasonally lower volumes in our
Brazilian Printing Papers business as the fourth quarter
historically represents the strongest volume quarter for
this business. Pricing is expected to be lower for our North
American Printing Papers and Pulp business, primarily
driven by lower pulp prices. Additionally, pricing is
expected to be lower in our North American Industrial
Packaging business due to lower export pricing and price
index changes. We expect price improvements in our
EMEA Printing Papers business, including Russia, and
Brazilian Printing Papers business following announced
price increases although these will be largely offset by
inflationary cost pressures. We expect operating
performance to be in line with the 2015 fourth quarter with
some modest improvement in our North American
Industrial Packaging business. Planned maintenance
downtime costs should increase, primarily driven by
outages in our North American Industrial Packaging and
Printing Papers businesses, including costs associated
with the Riegelwood mill conversion. Equity earnings from
our Ilim joint venture are expected to benefit from strong
operations offset by softwood pulp price pressure and
normal seasonality. Additionally, we expect Ilim’s
earnings to be impacted by the absence of the positive
impact from foreign currency movements driven by Ilim’s
U.S. dollar denominated debt as we assume no change
in foreign currency rates in our outlook.

For the 2016 full year, we continue to face an uncertain
macroeconomic environment but believe we are well
positioned to deal with whatever the market brings. We
will continue to improve our North American Industrial
Packaging business by further realizing optimization
opportunities during 2016. We expect to complete the
Riegelwood mill conversion during first half of 2016 and
be fully ramped by the 2016 fourth quarter, initially
producing softwood market pulp. Additionally, we will
continue executing against our plan to drive profitable
growth
the
Foodservice business as well as optimizing commercial
opportunities and mix within the North American Printing
Papers portfolio. Finally, we will remain focused on
maximizing free cash flow generation and deploying that
capital in a way that creates additional value for our
shareholders.

the recent expansion within

following

Three Months
Ended
December 31,
2015

Three Months
Ended
September 30,
2015

Three Months
Ended
December 31,
2014

0.87

0.97

0.53

(0.09)

(0.35)

(0.11)

(0.33)

(0.07)

(0.12)

0.43

—

0.53

—

0.34

(0.02)

0.43

0.53

0.32

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
interests,
items and
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.

Free cash flow (a non-GAAP measure) of $1.8 billion
generated in 2015 was lower than the $2.1 billion
generated in 2014 and even with the $1.8 billion
generated in 2013 (see reconciliation on page 30).

Operating Earnings per share attributable to common
shareholders of $0.87 in the 2015 fourth quarter were
lower than the $0.97 in the 2015 third quarter, but higher
than the $0.53 in the 2014 fourth quarter. Diluted earnings
(loss) per share attributable to common shareholders
were $0.43 in the 2015 fourth quarter, compared with
$0.53 in the 2015 third quarter and $0.32 in the 2014
fourth quarter.

Free cash flow of $501 million generated in the 2015 fourth
quarter was lower than the $512 million generated in the
2015 third quarter and the $739 million generated in the
2014 fourth quarter (see reconciliation on page 30).

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

2015

2014

2013

$ 3.65 $ 3.00 $ 3.06

(0.38)

(0.30)

(0.44)

(1.04)

(1.39)

1.18

2.23

1.31

3.80

— (0.02)

(0.69)

$ 2.23 $ 1.29 $ 3.11

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

In millions

2015

2014

2013

Net Earnings (Loss) Attributable to
International Paper Company

Deduct – Discontinued operations:

(Earnings) from operations

Special items (gain) loss

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:

938 $ 555 $ 1,395

—

(11)

(109)

418

938

568

1,704

466

(117)

123

200

(498)

(21)

(19)

(17)

1,266

555

872

601

1,228

612

(1)

Restructuring and other charges

238

282

Net losses (gains) on sales and
impairments of businesses

Non-Operating Pension Expense

Industry Segment Operating Profit

Industrial Packaging

Printing Papers

Consumer Packaging

—

258

212

—

323

$ 2,361 $ 2,058 $ 2,233

$ 1,853 $ 1,896 $ 1,801

533

(25)

(16)

178

271

161

Total Industry Segment Operating
Profit

$ 2,361 $ 2,058 $ 2,233

Industry segment operating profits in 2015 included a net
loss from special items of $321 million compared with
$732 million in 2014 and $336 million in 2013.
Operationally, compared with 2014, the benefit from lower
input costs ($232 million) was offset by lower average
sales price realizations and mix ($226 million), lower sales
volumes ($38 million), higher operating costs ($16
million), higher maintenance outage costs ($37 million)
and higher other costs ($23 million).

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

•

Industrial Packaging’s profits of $1.9 billion were $43
million lower than in 2014 as the benefit of lower
input costs was offset by lower average sales price
realizations and mix, lower sales volumes, higher
operating costs and higher maintenance outage
costs. In addition, 2015 operating profits included a
goodwill and trade name impairment charge of $137
million related to our Brazil Packaging business.
Operating profits in 2014 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.

• Printing Papers’ profits of $533 million represented
a $549 million increase in operating profits from
2014. The benefits from lower input costs, lower
costs associated with the closure of our Courtland,
Alabama mill and lower foreign exchange impact
were offset by lower average sales price realizations
and mix, lower sales volumes, higher operating
costs and higher maintenance outage costs. The
2014 operating loss 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.

• Consumer Packaging’s operating loss of $25 million
represented a $203 million reduction in operating
profits from 2014. The benefits from higher sales
volumes, lower planned maintenance downtime
costs and lower input costs were offset by lower
average sales price realizations and mix, higher
operating costs, and higher foreign exchange and
other expenses. In addition, 2015 operating profits
included an asset impairment charge of $174 million

related to the sale of our 55% equity share of the IP-
Sun JV in Asia, a net cost of $8 million related to
costs to convert our Riegelwood mill to 100% pulp
production, net of proceeds from the sale of the
Carolina Coated Bristols brand, and $2 million of
sheet plant closure costs. Operating profits in 2014
included $8 million of sheet plant closure costs.

Corporate items, net, of $36 million of expense in 2015
were lower than the $51 million of expense in 2014 due
to the absence of a one-time non-cash foreign exchange
charge related to the administrative restructuring of some
international entities in 2014. The decrease in 2014 from
the expense of $61 million in 2013 is due to lower pension
costs partially offset by the one-time non-cash foreign
exchange charge.

Corporate special items, including restructuring and other
items and net losses on sales and impairments of
businesses were a loss of $238 million in 2015 compared
with a loss of $320 million in 2014 and a loss of $4 million
in 2013. The loss in 2015 is due to debt premium costs,
costs associated with the restructure of our timber
monetization and a legal liability reserve adjustment. The
loss in 2014 is primarily due to debt extinguishment costs
and a loss on the sale of a business by ASG, which was
formerly referred to as AGI-Shorewood and in which we
hold an
the subsequent partial
impairment of our ASG investment.

investment, and

Interest expense, net, was $555 million in 2015 compared
with $607 million ($601 million excluding special items net
interest expense reported in the Printing Papers business
segment) in 2014 and $612 million in 2013. The decrease
in 2015 compared with 2014 is due to lower average
interest rates. The decrease in 2014 compared with 2013
also reflects lower average interest rates.

A net income tax provision of $466 million was recorded
for 2015, including a tax benefit of $62 million related to
internal restructurings, an expense of $23 million for the
tax impact of the 2015 cash pension contribution of $750
million and a tax expense of $2 million for other items.
The 2014 income tax provision of $123 million includes 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 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.

Liquidity and Capital Resources

For the year ended December 31, 2015, International
Paper generated $2.6 billion of cash flow from operations
compared with $3.1 billion in 2014 and $3.0 billion in 2013.
Cash flow from operations included $750 million, $353
and $31 million of cash pension contributions in 2015,
2014 and 2013, respectively. Capital spending for 2015
totaled $1.5 billion, or 115% of depreciation and
amortization expense. Net decreases in debt totaled $74
million. Our liquidity position remains strong, supported
by approximately $2.1 billion of credit facilities that we
believe are adequate
liquidity
requirements. Maintaining an investment-grade credit
rating for our long-term debt continues to be an important
element in our overall financial strategy.

to meet

future

We expect to generate strong free cash flow again in 2016
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
as
appropriate.

acquisitions,

strategic

through

Capital spending for 2016 is targeted at $1.3 billion, or
about 100% of depreciation and amortization.

Legal

See Note 11 Commitments and Contingent Liabilities on
pages 61 through 64 of Item 8. Financial Statements and
Supplementary Data for a discussion of legal matters.

Discontinued Operations

CORPORATE OVERVIEW

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.

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,
2015, and the major factors affecting these results
compared to 2014 and 2013.

RESULTS OF OPERATIONS

For the year ended December 31, 2015, International
Paper reported net sales of $22.4 billion, compared with
$23.6 billion in 2014 and $23.5 billion in 2013.
International net sales (including U.S. exports) totaled
$7.8 billion or 35% of total sales in 2015. This compares
with international net sales of $9.3 billion in 2014 and
$9.5 billion in 2013.

Full year 2015 net earnings attributable to International
Paper Company totaled $938 million ($2.23 per share),
compared with net earnings of $555 million ($1.29 per
share) in 2014 and $1.4 billion ($3.11 per share) in 2013.
Amounts
the results of
discontinued operations.

in all periods

include

Earnings from continuing operations attributable to
International Paper Company after taxes in 2015 were
$938 million, including $439 million of net special items
charges and $157 million of non-operating pension
expense compared with $568 million, including $599
million of net special items charges and $129 million of
non-operating pension expense in 2014, and $1.7
billion, including $528 million of net special items gains
and $197 million of non-operating pension expense in
2013. Compared with 2014, the benefits from lower
input costs, lower corporate and other costs and lower
interest expense were offset by lower average sales
price realizations and mix, lower sales volumes, higher
operating costs, higher maintenance outage costs, and
higher tax expense. In addition, 2015 results included
higher equity earnings, net of taxes, relating to the
Company’s investment in Ilim Holdings, SA.

See Industry Segment Results on pages 25 through 30
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.

Income Taxes

A net income tax provision of $466 million was recorded
for 2015, including a tax benefit of $62 million related
to internal restructurings, a tax expense of $23 million
for the tax impact of the 2015 cash pension contribution
of $750 million and a $2 million tax expense for other
items. Excluding these items, an $83 million net tax
benefit for other special items and a $101 million tax
benefit related to non-operating pension expense, the
tax provision was $687 million, or 33% of pre-tax
earnings before equity earnings.

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.

Equity Earnings, Net of Taxes

Equity earnings, net of taxes in 2015, 2014 and 2013
consisted principally of the Company’s share of
earnings from its 50% investment in Ilim Holding S.A.
in Russia (see page 30).

Corporate Items and Interest Expense

Corporate items totaled $36 million of expense for the
year ended December 31, 2015 compared with $51
million in 2014 and $61 million in 2013. The decrease
in 2015 from 2014 reflects the absence of a one-time
non-cash foreign exchange charge related to the
administrative restructuring of some
international
entities that occurred in 2014. 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.

Net corporate interest expense totaled $555 million in
2015, $601 million in 2014 and $612 million in 2013.
The decrease in 2015 compared with 2014 reflects
lower average interest rates. The decrease in 2014
compared with 2013 also reflects lower average interest
rates.

Net earnings attributable to noncontrolling interests
totaled a loss of $21 million in 2015 compared with a
loss of $19 million in 2014 and a loss of $17 million in
2013. The decrease in 2015 reflects the sale of our
equity share of the IP-Sun JV and lower earnings for
the Shandong IP & Sun Food Packaging Co., Ltd joint
venture in China prior to its divestiture. The decrease
in 2014 compared with 2013 reflects the impact of the
acquisition of the remaining 25% share of Orsa IP from
the joint venture partner.

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 assets
have 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.

2015: During 2015, corporate restructuring and other
charges totaling $242 million before taxes ($155 million
after taxes) were recorded. These charges included:

•

a $207 million charge before taxes ($133
million after taxes) for premiums paid on a cash
tender offer on outstanding debt (see Note 13
Debt and Lines of Credit on pages 66 and 67
Item 8. Financial Statements and
of
Supplementary Data),

a $16 million charge before taxes ($10 million
after taxes) for costs related to the restructuring
of our 2006 timber monetization,

a $15 million charge before taxes ($9 million
after taxes) for legal reserve adjustments, and

a $4 million charge before taxes ($3 million after
taxes) for other items.

In addition, restructuring and other charges totaling $10
million before taxes ($6 million after taxes) were
recorded in the Consumer Packaging industry segment
including:

•

an $8 million net charge before taxes ($4 million
after taxes) related to costs associated with the
conversion of the Riegelwood, North Carolina
facility to 100% pulp production, net of
proceeds from the sale of the Carolina Coated
Bristols brand, and

•

a $2 million charge (before and after taxes) for
other items.

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 66 and 67 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:

•

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.

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 66 and 67 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.

Impairments of Goodwill

In the fourth quarter of 2015, in conjunction with the
annual testing of its reporting units for possible goodwill
impairments, the Company calculated the estimated
fair value of its Brazil Packaging business using the
discounted future cash flows and determined that all of
the goodwill in the business, totaling $137 million,
should be written off. The decline in the fair value of the
Brazil Packaging business and resulting impairment
charge was due to the negative impacts on the cash
flows of the business caused by the continued decline
of the overall Brazilian economy.

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 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, 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.

Net Losses on Sales and Impairments of Businesses

Net losses on sales and impairments of businesses
included in special items totaled a pre-tax loss of $174
million ($113 million after taxes) in 2015, a pre-tax loss
of $38 million ($31 million after taxes) in 2014 and a
pre-tax loss of $3 million ($1 million after taxes) in 2013.
The principal components of these losses were:

million was recorded during the third quarter in the
Company's Consumer Packaging segment to write
down the long-lived assets of this business to their
estimated fair value. In the fourth quarter of 2015, upon
the sale and corresponding deconsolidation of IP-Sun
JV from the Company's consolidated balance sheet,
final adjustments were made resulting in a reduction
of the impairment of $12 million. The amount of pre-tax
losses related to noncontrolling interest of the IP-Sun
JV included in the Company's consolidated statement
of operations for the years ended December 31, 2015,
2014 and 2013 were $19 million, $12 million and $8
million, respectively. The amount of pre-tax losses
related to the IP-Sun JV included in the Company's
consolidated statement of operations for the years
ended December 31, 2015, 2014 and 2013 were $226
million, $51 million and $41 million, respectively.

The net 2015 loss totaling $174 million related to the
impairment of Sun-JV is included in Net (gains) losses
on sales and impairments of businesses in the
accompanying consolidated statement of operations.

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 (formerly referred to
as AGI-Shorewood), 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
adjustments related
three
containerboard mills in 2012 and the sale of the
Shorewood business.

the divestiture of

Industry Segment Operating Profits

Industry segment operating profits of $2.4 billion in 2015
decreased from $2.1 billion in 2014. The benefit from
lower input costs ($232 million) was offset by lower
average sales price realizations and mix ($226 million),
lower sales volumes ($38 million), higher operating
costs ($16 million), higher maintenance outage costs
($37 million) and higher other costs ($23 million).

Special items were a $321 million net loss in 2015
compared with a net loss of $732 million in 2014.

Market-related downtime
approximately 440,000
281,000 tons in 2014.

in 2015

increased

to
from approximately

tons

DESCRIPTION OF INDUSTRY SEGMENTS

International Paper’s industry segments discussed
below 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.

Industrial Packaging

include

International Paper is the largest manufacturer of
containerboard
the United States. Our U.S.
production capacity is over 13 million tons annually. Our
products
linerboard, medium, whitetop,
recycled linerboard, recycled medium and saturating
kraft. About 80% of our production is converted
domestically
into corrugated boxes and other
packaging by our 165 U.S. container plants.
Additionally, we recycle approximately one million tons
of OCC and mixed and white paper through our 18
recycling plants. In EMEA, our operations include two
recycled fiber containerboard mills in Morocco and
Turkey and 26 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 16 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
tons annually. Brazilian
approximately 4 million
operations function through International Paper do
Brasil, Ltda, which owns or manages approximately
335,000 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 one of the world’s largest
producers of solid bleached sulfate board with annual
U.S. production capacity of about 1.2 million tons
(reduced from about 1.6 million tons) after initiating the
conversion of the Riegelwood Mill to 100% pulp
production in late December of 2015. Our coated
paperboard business produces high quality coated
paperboard for a variety of packaging and foodservice
end uses. Our Everest®, Fortress®, and Starcote®
brands are used in packaging applications for everyday
products such as food, cosmetics, pharmaceuticals and
tobacco products. The Carolina® brand, which was sold
to MeadWestvaco Corporation in April 2015, was used
in commercial printing end uses. Our U.S. capacity is
supplemented by about 379,000 tons of capacity at our
mills producing coated board in Poland and Russia and,
prior to its sale in October 2015, by our International
Paper & Sun Cartonboard Co., Ltd. joint venture in
China which had an 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 3.4 million tons. Ilim
has exclusive harvesting rights on timberland and forest
areas exceeding 14.8 million acres (6.0 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.

Industrial Packaging net sales for 2015 decreased 3% to
$14.5 billion compared with $14.9 billion in 2014, and
2% compared with $14.8 billion in 2013. Operating
profits were 2% lower in 2015 than in 2014 and 3%
higher than in 2013. Excluding costs associated with
the acquisition and integration of Temple-Inland,
goodwill impairment charges, costs associated with a
multi-employer pension liability and other special items,
operating profits in 2015 were 3% lower than in 2014
and 8% higher than in 2013. Benefits from lower input
costs ($175 million) were offset by lower average sales
price realizations and mix ($144 million), lower sales
volumes ($36 million), higher operating costs ($43
million) and higher maintenance outage costs ($16
million). Additionally, operating profits in 2015 include
a goodwill and
impairment charge
associated with our Brazil Packaging business ($137
million). Operating profits in 2014 include a goodwill
impairment charge of $100 million related to our Asia
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. 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.

trade name

Industrial Packaging

In millions

Sales

Operating Profit

2015

2014
$ 14,484 $ 14,944 $ 14,810
1,801

1,896

1,853

2013

North American Industrial Packaging net sales were $12.5
billion in 2015 compared with $12.7 billion in 2014 and
$12.5 billion in 2013. Operating profits in 2015 were
$2.0 billion compared with $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) in 2014 and $1.8 billion
(both including and excluding costs associated with the
integration of Temple-Inland and other special items in
2013.

Sales volumes decreased in 2015 compared with 2014
reflecting slightly lower box shipments and lower
shipments of containerboard to export markets. In
2015, the business took about 814,000 tons of total
downtime of which about 363,000 were market-related
and 451,000 were maintenance downtime. The
business took about 622,000 tons of total downtime in
2014 of which 240,000 were market-related and
382,000 were maintenance downtime. Average sales
price realizations were
for Euro-
denominated shipments of containerboard to export
markets. Input costs were lower, primarily for energy.
Distribution costs were flat as lower freight fuel
surcharges offset rate increases. Planned maintenance
downtime costs were $15 million higher than in 2014.
Manufacturing operating costs decreased, but were
more than offset by wage and benefit inflation.
Depreciation costs were lower.

lower mostly

Looking ahead to the first quarter of 2016, compared
with the fourth quarter of 2015, sales volumes for boxes
are expected to be seasonally lower, while shipments
of containerboard to export markets should increase.
Input costs are expected to be higher for energy and
wood, but lower for waste fiber. Planned maintenance
downtime spending is expected to be about $21 million
higher. Manufacturing operating costs are expected to
improve.

EMEA Industrial Packaging net sales were $1.1 billion in
2015 compared with $1.3 billion in 2014 and $1.3 billion
in 2013. Operating profits in 2015 were $13 million
compared with $25 million ($31 million excluding
restructuring costs) in 2014 and $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.

Sales volumes in 2015 were higher than in 2014
reflecting
improved market demand and strong
commercial initiatives in the Eurozone throughout the
year and growth in Morocco and Turkey in the fourth
quarter. Net sales decreased primarily due to the
negative impact of foreign exchange rates. Higher
board costs also contributed to lower average sales
margins. Other input costs, primarily for energy, were
lower. Operating earnings in 2015 also included a gain
of $4 million related to the change in ownership of our
OCC collection operations in Turkey.

Entering the first quarter of 2016, compared with the
fourth quarter of 2015 sales volumes are expected to
be flat. Average sales margins are expected to be
favorably impacted by higher box sales prices, lower
board costs in Turkey and a favorable mix. Input costs
for energy should be slightly higher.

Brazilian Industrial Packaging net sales were $228 million
in 2015 compared with $349 million in 2014 and $335
million in 2013. Operating profits in 2015 were a loss

of $163 million (a loss of $26 million excluding goodwill
and trade name impairment charges) compared with a
loss of $3 million (a loss of $4 million excluding a net
gain related to acquisition and integration costs) in 2014
and a loss of $2 million (a gain of $2 million excluding
acquisition and integration costs) in 2013.

Sales volumes in 2015 decreased compared with 2014
due to overall weak economic conditions and lower box
consumption in the product segments of some of our
key customers. Average sales price realizations for
boxes were lower. Input costs were slightly higher.
Operating costs also increased. Planned maintenance
downtime costs were $1 million lower in 2015 compared
with 2014.

Looking ahead to the first quarter of 2016, compared
with the fourth quarter of 2015 sales volumes are
expected to be seasonally lower. Average sales
margins should
improve reflecting a previously
announced sales price increase for boxes. Input costs
are expected to be stable and operating costs should
reflect the benefits of cost savings initiatives.

Asian Industrial Packaging net sales were $601 million in
2015 compared with $625 million in 2014 and $685
million in 2013. Operating profits were a loss of $6
million in 2015 compared with a loss of $112 million (a
loss of $5 million excluding goodwill impairment
charges and restructuring costs) in 2014 and a loss of
$2 million (a gain of $2 million excluding restructuring
costs) in 2013. Compared with 2014, sales volumes for
boxes in 2015 were lower and average sales margins
decreased due to competitive price pressures and an
unfavorable sales mix. However, operating costs were
lower.

Looking ahead to the first quarter of 2016, sales
volumes are expected to be seasonally lower. On
October 8, 2015, the Company announced that it was
pursuing strategic options for its corrugated box
business in China and Southeast Asia and had signed
a non-binding letter of intent with a prospective buyer.

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
disadvantage producers
in different geographic
regions. Principal cost drivers include manufacturing
efficiency, raw material and energy costs and freight
costs.

Printing Papers net sales for 2015 decreased 12% to $5.0
billion compared with $5.7 billion in 2014 and 19%

compared with $6.2 billion in 2013. Operating profits in
2015 were significantly higher than in both 2014 and
2013. Excluding facility closure costs, impairment costs
and other special items, operating profits in 2015 were
3% lower than in 2014 and 4% higher than in 2013.
Benefits from lower input costs ($18 million), lower costs
associated with the closure of our Courtland, Alabama
mill ($44 million) and favorable foreign exchange ($33
million) were offset by lower average sales price
realizations and mix ($52 million), lower sales volumes
($16 million), higher operating costs ($18 million) and
higher planned maintenance downtime costs ($26
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
associated with
the announced closure of our
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)

2015

2014
$ 5,031 $ 5,720 $ 6,205
271

2013

(16)

533

North American Printing Papers net sales were $1.9 billion
in 2015, $2.1 billion in 2014 and $2.6 billion in 2013.
Operating profits in 2015 were $179 million compared
with a loss of $398 million (a gain of $156 million
excluding costs associated with the shutdown of our
Courtland, Alabama mill) in 2014 and a gain of $36
million ($154 million excluding costs associated with the
Courtland mill shutdown) in 2013.

Sales volumes in 2015 decreased compared with 2014
primarily due to the closure of our Courtland mill in 2014.
Shipments to the domestic market increased, but export
shipments declined. Average sales price realizations
decreased, primarily in the domestic market. Input
for energy. Planned
costs were
maintenance downtime costs were $12 million higher
in 2015. Operating profits in 2014 were negatively
impacted by costs associated with the shutdown of our
Courtland, Alabama mill.

lower, mainly

flat reflecting

Entering the first quarter of 2016, sales volumes are
expected to be up slightly compared with the fourth
quarter of 2015. Average sales margins should be
lower average sales price
about
realizations offset by a more favorable product mix.
Input costs are expected to be stable. Planned
maintenance downtime costs are expected to be about
$14 million lower with an outage scheduled in the 2016
first quarter at our Georgetown mill compared with
outages at our Eastover and Riverdale mills in the 2015
fourth quarter.

In January 2015, the United Steelworkers, Domtar
Corporation, Packaging Corporation of America, Finch
Paper LLC and P. H. Glatfelter Company (the
Petitioners) filed an anti-dumping petition before the
United States International Trade Commission (ITC)
and the United States Department of Commerce (DOC)
alleging that paper producers in China, Indonesia,
Australia, Brazil, and Portugal are selling uncoated free
sheet paper in sheet form (the Products) in violation of
international trade rules. The Petitioners also filed a
countervailing-duties petition with these agencies
regarding imports of the Products from China and
Indonesia. In January 2016, the DOC announced its
final countervailing duty rates on imports of the
Products to the United States from certain producers
from China and Indonesia. Also, in January 2016, the
DOC announced its final anti-dumping duty rates on
imports of the Products to the United States from certain
producers from Australia, Brazil, China, Indonesia and
Portugal. In February 2016, the ITC concluded its anti-
dumping and countervailing duties investigations and
made a final determination that the U.S. market had
been injured by imports of the Products. Accordingly,
the DOC’s previously announced countervailing duty
rates and anti-dumping duty rates will be in effect for a
minimum of five years. We do not believe the impact
of these rates will have a material, adverse effect on
our consolidated financial statements.

Brazilian Papers net sales for 2015 were $878 million
compared with $1.1 billion in 2014 and $1.1 billion in
2013. Operating profits for 2015 were $186 million
compared with $177 million ($209 million excluding
costs associated with a tax amnesty program) in 2014
and $210 million in 2013.

Sales volumes in 2015 were lower compared with 2014
reflecting weak economic conditions and the absence
of 2014 one-time events. Average sales price
realizations improved for domestic uncoated freesheet
paper due to the realization of price increases
implemented in the second half of 2015. Margins were
unfavorably affected by an increased proportion of
sales to the lower-margin export markets. Raw material
costs increased for energy and wood. Operating costs
were higher than in 2014, while planned maintenance
downtime costs were $4 million lower.

Looking ahead to 2016, compared with the fourth
quarter of 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 slightly
higher for chemicals and electricity.

European Papers net sales in 2015 were $1.2 billion
compared with $1.5 billion in 2014 and $1.5 billion in
2013. Operating profits in 2015 were $133 million
compared with $140 million in 2014 and $167 million in
2013.

Compared with 2014, sales volumes for uncoated
freesheet paper in 2015 were slightly lower in both
Russia and Europe. Average sales price realizations
for uncoated freesheet paper increased in Russia, but
remained flat in Europe, reflecting tight demand and
supply conditions in the first half of the year. Input costs
increased slightly as higher costs for wood, chemicals
and energy in Russia were largely offset by lower costs
in Europe. Planned maintenance downtime costs were
$11 million higher in 2015 than in 2014.

Entering 2016, domestic sales volumes in the first
quarter are expected to be seasonally weaker in Russia,
and stable in Europe. Average sales price realizations
for uncoated freesheet paper are expected to reflect the
impact of announced price increases in both Europe
and Russia. Input costs should be slightly higher for
wood and chemicals. Planned maintenance downtime
costs should be $1 million lower than in the fourth
quarter of 2015.

Indian Papers net sales were $172 million in 2015, $178
million in 2014 and $185 million ($174 million excluding
excise duties which were included in net sales in 2013
and prior periods) in 2013. Operating profits were a loss
of $11 million in 2015, compared with a gain of $8 million
(a loss of $12 million excluding a gain related to the
resolution of a legal contingency) in 2014 and a loss of
$145 million (a loss of $22 million excluding goodwill
and trade name impairment charges) in 2013.

Average sales price realizations decreased in 2015
compared with 2014 reflecting soft market demand.
Sales volumes increased, primarily to export markets.
Input costs were lower for wood and chemicals.
Operating costs were higher in 2015, but planned
maintenance downtime costs were even with 2014.
Looking ahead to the first quarter of 2016, sales
volumes are expected to be seasonally higher. Average
sales price realizations are expected to be stable.

U.S. Pulp net sales were $844 million in 2015 compared
with $895 million in 2014 and $815 million in 2013.

Operating profits were $46 million in 2015 compared
with $57 million in 2014 and $2 million in 2013.

Sales volumes in 2015 decreased from 2014 with lower
softwood pulp volumes being partially offset by higher
fluff pulp volumes. Average sales price realizations
were lower for both fluff pulp and softwood market pulp.
Input costs decreased primarily for energy. Operating
costs were higher, but distribution costs were lower.
Planned maintenance downtime costs were $4 million
lower in 2015 than in 2014.

Compared with the fourth quarter of 2015, sales
volumes in the first quarter of 2016 are expected to be
stable. Average sales price realizations are expected
to be lower for fluff pulp and softwood market pulp. Input
costs should be higher for fuels and utilities. Planned
maintenance downtime costs should be about $45
million higher than in the fourth quarter of 2015 including
outage costs associated with the conversion of our
Riegelwood mill to 100% pulp production.

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 2015 decreased 14%
from 2014, and decreased 14% from 2013. Operating
profits decreased 114% from 2014 and decreased
116% from 2013. Excluding the cost associated with
the conversion of our Riegelwood, North Carolina mill
to 100% pulp production, net of the proceeds from the
sale of the Carolina Coated Bristols brand, costs
associated with the impairment of goodwill and other
assets of the IP-Sun JV, costs associated with the
permanent shutdown of a paper machine at our
Augusta, Georgia mill and other special items, 2015
operating profits were 15% lower than in 2014, and 24%
lower than in 2013. Benefits from higher sales volumes
($14 million), lower planned maintenance downtime
costs ($5 million) and lower input costs ($39 million)
were offset by lower average sales price realizations
and mix ($30 million), higher operating costs ($44
million), and higher foreign exchange and other costs
($11 million). In addition, operating profits in 2015
include a charge of $174 million for the impairment of
goodwill and other assets for the IP-Sun JV, an $8
million cost related to the conversion of our Riegelwood
mill to 100% pulp production, net of the proceeds from
the sale of the Carolina Coated Bristols brand, and $2
million of costs associated with sheet plant closures,
while operating profits in 2014 include $8 million of costs
associated with sheet plant closures. 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 (Loss)

2015

2014
$ 2,940 $ 3,403 $ 3,435
161

2013

(25)

178

North American Consumer Packaging net sales were $1.9
billion in 2015 compared with $2.0 billion in 2014 and
$2.0 billion in 2013. Operating profits were $81 million
($91 million excluding the cost associated with the
planned conversion of our Riegelwood mill to 100% pulp
production, net of proceeds from the sale of the Carolina
Coated Bristols brand, and sheet plant closure costs)
in 2015 compared with $92 million ($100 million
excluding sheet plant closure costs) in 2014 and $63
million
($110 million excluding paper machine
shutdown costs and costs related to the sale of the
Shorewood business) in 2013.

Coated Paperboard sales volumes in 2015 were lower
than in 2014 reflecting weaker market demand. The
business took about 77,000 tons of market-related
downtime in 2015 compared with about 41,000 tons in
2014. Average sales price realizations increased
modestly year over year as competitive pressures in
the current year only partially offset the impact of sales
price increases implemented in 2014. Input costs
decreased for energy and chemicals, but wood costs
increased. Planned maintenance downtime costs were
$10 million lower in 2015. Operating costs were higher,
mainly due to inflation and overhead costs.

Foodservice sales volumes
in 2015
compared with 2014 reflecting strong market demand.
Average sales margins increased due to lower resin
costs and a more favorable mix. Operating costs and
distribution costs were both higher.

increased

Looking ahead to the first quarter of 2016, Coated
Paperboard sales volumes are expected to be slightly
lower than in the fourth quarter of 2015 due to our exit
from the coated bristols market. Average sales price
realizations are expected to be flat, but margins should
benefit from a more favorable product mix. Input costs
are expected to be higher for wood, chemicals 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 a more favorable mix. Operating costs
are expected to decrease.

European Consumer Packaging net sales in 2015 were
$319 million compared with $365 million in 2014 and
$380 million in 2013. Operating profits in 2015 were $87
million compared with $91 million in 2014 and $100
million in 2013. Sales volumes in 2015 compared with

2014 increased in Europe, but decreased in Russia.
Average sales margins improved in Russia due to
slightly higher average sales price realizations and a
more favorable mix. In Europe average sales margins
decreased reflecting
lower average sales price
realizations and an unfavorable mix. Input costs were
lower in Europe, primarily for wood and energy, but were
higher in Russia, primarily for wood.

Looking forward to the first quarter of 2016, compared
with the fourth quarter of 2015, sales volumes are
expected to be stable. Average sales price realizations
are expected to be slightly higher in both Russia and
Europe. Input costs are expected to be flat, while
operating costs are expected to increase.

Asian Consumer Packaging The Company sold its 55%
equity share in the IP-Sun JV in October 2015. Net sales
and operating profits presented below include results
through September 30, 2015. Net sales were $682
million in 2015 compared with $1.0 billion in 2014 and
$1.1 billion in 2013. Operating profits in 2015 were a
loss of $193 million (a loss of $19 million excluding
goodwill and other asset impairment costs) compared
with losses of $5 million in 2014 and $2 million in 2013.

Sales volumes and average sales price realizations
were lower in 2015 due to over-supplied market
conditions and competitive pressures. Average sales
margins were also negatively impacted by a less
favorable mix. Input costs and freight costs were lower
and operating costs also decreased.

On October 13, 2015, the Company finalized the sale
of its 55% interest in IP Asia Coated Paperboard (IP-
Sun JV) business, within the Company's Consumer
Packaging segment, to its Chinese coated board joint
venture partner, Shandong Sun Holding Group Co., Ltd.
for RMB 149 million (approximately USD $23 million).
During the third quarter of 2015, a determination was
made that the current book value of the asset group
exceeded its estimated fair value of $23 million, which
was the agreed upon selling price. The 2015 loss
includes the net pre-tax impairment charge of $174
million ($113 million after taxes). A pre-tax charge of
$186 million was recorded during the third quarter in
the Company's Consumer Packaging segment to write
down the long-lived assets of this business to their
estimated fair value. In the fourth quarter of 2015, upon
the sale and corresponding deconsolidation of IP-Sun
JV from the Company's consolidated balance sheet,
final adjustments were made resulting in a reduction
of the impairment of $12 million. The amount of pre-tax
losses related to noncontrolling interest of the IP-Sun
JV included in the Company's consolidated statement
of operations for the years ended December 31, 2015,
2014 and 2013 were $19 million, $12 million and $8
million, respectively. The amount of pre-tax losses
related to the IP-Sun JV included in the Company's

consolidated statement of operations for the years
ended December 31, 2015, 2014 and 2013 were $226
million, $51 million and $41 million, respectively.

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 $131 million in 2015 compared with a
loss of $194 million in 2014 and a loss of $46 million in
2013. Operating results recorded in 2015 included an
after-tax non-cash foreign exchange loss of $75 million
compared with an after-tax foreign exchange loss of
$269 million in 2014 and an after-tax foreign exchange
loss of $32 million
the
remeasurement of Ilim's U.S. dollar-denominated net
debt.

in 2013 primarily on

Sales volumes for the joint venture increased year over
year for shipments to China of hardwood pulp and
softwood pulp, but decreased for linerboard. Sales
volumes in the domestic Russian market increased for
hardwood pulp and paper, but decreased for softwood
pulp and linerboard. Average sales price realizations
were higher in 2015 for sales of hardwood pulp to export
markets and linerboard to the domestic market, but
were offset by lower average sales price realizations
for sales of softwood pulp to export markets. Input costs
increased year-over-year for wood, chemicals, fuel and
energy. Freight costs also increased. The Company
received cash dividends from the joint venture of $35
million in 2015 and $56 million in 2014. No dividends
were paid in 2013.

Entering the first quarter of 2016, sales volumes are
expected to be seasonally lower than in the fourth
quarter of 2015 due to the January holidays in Russia.
Average sales price realizations are expected to
decrease for exported hardwood pulp, softwood pulp
and containerboard, slightly offset by higher average
sales price realizations for paper in the domestic
market. Input costs for energy, chemicals and wood
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 2015 were primarily focused on
working capital requirements, capital spending, debt
reductions and returning cash to shareholders.

Cash Provided by Operating Activities

Cash provided by operations totaled $2.6 billion in 2015
compared with $3.1 billion for 2014 and $3.0 billion for
2013.

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
from
and changes
operations, adjusted for non-cash income and expense
items and cash pension contributions decreased by
$433 million in 2015 versus 2014 driven mainly by
increased cash pension contributions in 2015. Cash
used
for working capital components, accounts
receivable and inventory less accounts payable and
accrued liabilities, interest payable and other totaled
$222 million in 2015, compared with a cash use of $158
million in 2014 and a cash use of $486 million in 2013.

free cash

The Company generated
flow of
approximately $1.8 billion, $2.1 billion and $1.8 billion
in 2015, 2014 and 2013, 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:

2015

2014

2013

$ 2,580 $ 3,077 $ 3,028

Cash invested in capital projects

(1,487)

(1,366)

(1,198)

Cash contribution to pension plan

750

353

Insurance reimbursement for
Guaranty Bank settlement

Free Cash Flow

—

(30)

$ 1,843 $ 2,064 $ 1,831

In millions

Cash provided by
operations

(Less)/Add:

Cash invested in capital
projects

Free Cash Flow

Three
Months
Ended
December
31, 2015

Three
Months
Ended
September
30, 2015

Three
Months
Ended
December
31, 2014

990 $

837 $

1,144

(489)

(325)

501 $

512 $

(405)

739

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 -
the Company
2009. As a result, during 2013,
recognized an income tax benefit of $753 million related
to the non-taxability of the alternative fuel mixture tax
credits.

Investment Activities

Investment activities in 2015 were up from 2014
reflecting an increase in capital spending and the use
of $198 million of cash in conjunction with the timber
monetization restructuring (see Note 12 Variable
Interest Entities and Preferred Securities of
Subsidiaries on pages 64 through 66 of Item 8. Financial
Statements and Supplementary Data) in 2015. In
addition, 2014 investment activity includes the receipt
of approximately $400 million in connection with the
spin-off of the xpedx distribution business. The
Company maintains an average capital spending target
around depreciation or amortization levels or modestly
above due to strategic plans over the course of an
economic cycle. Capital spending was $1.5 billion in
2015, or 115% of depreciation and amortization,
compared with $1.4 billion in 2014, or 97% of
depreciation and amortization, and $1.2 billion, or 77%
of depreciation and amortization in 2013. Across our
businesses, capital spending as a percentage of
depreciation and amortization ranged from 118% to
100% in 2015.

following

The
for
operations by business segment for the years ended
December 31, 2015, 2014 and 2013.

table shows capital spending

12.6% public shares of Olmuksan. The Company also
purchased outstanding shares of Olmuksan outside of
the tender offer. As of December 31, 2014 and 2015,
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.

In millions

Industrial Packaging

Printing Papers

Consumer Packaging

Distribution

Subtotal

Corporate and other

Total

2015

2014

2013

858 $

754 $ 629

361

216

—
1,435

318

233

—
1,305

294

208

9
1,140

58
$ 1,487 $ 1,366 $ 1,198

Capital expenditures in 2016 are currently expected to
be about $1.3 billion, or 100% of depreciation and
amortization.

Acquisitions and Joint Ventures

OLMUKSAN

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
acquisition of business
the accompanying
consolidated statement of operations.

the cumulative

interest gain,

ORSA

2014: In May 2014, the Company conducted a
voluntary tender offer for the remaining outstanding

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
in Redeemable
Company reported $163 million
noncontrolling interest in the December 31, 2013
consolidated balance sheet.

Financing Activities

Amounts related to early debt extinguishment during
the years ended December 31, 2015, 2014 and 2013
were as follows:

In millions

Debt reductions (a)

2015

2014

2013

$2,151 $1,625 $ 574

Pre-tax early debt extinguishment costs
(b)

207

276

(a) Reductions related to notes with interest rates ranging from
2.00% to 9.38% with original maturities from 2014 to 2031 for
the years ended December 31, 2015, 2014 and 2013. Includes
the $630 million payment for a portion of the Special Purpose
Entity Liability (see Note 12 Variable Interest Entities on pages
64
Item 8. Financial Statements and
Supplementary Data ).

through 66 of

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

2015: Financing activities during 2015 included debt
issuances of $6.9 billion and retirements of $6.9 billion
for a net decrease of $74 million.

During 2015, the Company restructured the timber
monetization which resulted in the use of $630 million
in cash to pay down a portion of the third party bank
loans and refinance the loans on nonrecourse terms.
(see Note 12 Variable Interest Entities on pages 64
through 66 of Item 8. Financial Statements and
Supplementary Data).

International Paper utilizes interest rate swaps to
change the mix of fixed and variable rate debt and
manage interest expense. At December 31, 2015,
International Paper had interest rate swaps with a total
notional amount of $17 million and maturities in 2018
(see Note 14 Derivatives and Hedging Activities on
pages 67 through 71 of Item 8. Financial Statements
and Supplementary Data). During 2015, existing swaps
and the amortization of deferred gains on previously
terminated swaps decreased the weighted average
cost of debt from 5.9% to an effective rate of 5.8%. The
inclusion of the offsetting interest income from short-
term investments reduced this effective rate to 5.1%.

In 2015, International Paper issued $700 million of
3.80% senior unsecured notes with a maturity date in
2026, $600 million of 5.00% senior unsecured notes
with a maturity date in 2035, and $700 million of 5.15%
senior unsecured notes with a maturity date in 2046.
The proceeds from this borrowing were used to repay
approximately $1.0 billion of notes with interest rates
ranging from 4.75% to 9.38% and original maturities
from 2018 to 2022, along with $211 million of cash
premiums associated with the debt repayments.
Additionally, the proceeds from this borrowing were
used to make a $750 million voluntary cash contribution
to the Company's pension plan. Pre-tax early debt
retirement costs of $207 million related to the debt
the $211 million of cash
repayments,
premiums, are included in restructuring and other
charges in the accompanying consolidated statement
of operations for the twelve months ended December
31, 2015.

including

Other financing activities during 2015 included the net
repurchase of approximately 8.0 million shares of
treasury stock, including restricted stock withholding,
and the issuance of 62,000 shares of common stock
for various plans, including stock options exercises that
generated approximately $2.4 million of cash.
Repurchases of common stock and payments of
restricted stock withholding taxes totaled $604.6
million, including $522.6 million related to shares
repurchased under the Company's share repurchase
program.

In October 2015, International Paper announced that
the quarterly dividend would be increased from $0.40
per share to $0.44 per share, effective for the 2015
fourth quarter.

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 67 through 71 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 17.9 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 67 through 71 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.

Variable Interest Entities

Information concerning variable interest entities is set
forth in Note 12 Variable Interest Entities on pages 64
through 66 of Item 8. Financial Statements and
Supplementary Data for discussion.

Liquidity and Capital Resources Outlook for 2016

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 2016
through current cash balances and cash
from
operations. Additionally, the Company has existing
totaling $2.1 billion available at
credit
December 31, 2015.

facilities

The Company was in compliance with all its debt
covenants at December 31, 2015. 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, 2015, International
Paper’s net worth was $14.1 billion, and the total-debt-
to-capital ratio was 39.8%.

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, 2015, 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, 2015, were as follows:

In millions

2015

2016

2017

2018

2019

Thereafter

Maturities of long-term
debt (a)

426 $

43 $

811 $

427 $

183 $

7,436

Lease obligations

118

128

Purchase obligations
(b)

3,001

541

447

371

358

1,579

Total (c)

$ 3,545 $

679 $ 1,330 $

853 $

582 $

9,143

(a) Total debt includes scheduled principal payments only.
(b)

Includes $2.1 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) 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 $101 million.

We consider the undistributed earnings of our foreign
subsidiaries as of December 31, 2015, to be indefinitely
reinvested and, accordingly, no U.S. income taxes have
been provided thereon. As of December 31, 2015, the
amount of cash associated with indefinitely reinvested
foreign earnings was approximately $600 million. 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 associated with our domestic debt service
requirements.

Pension Obligations and Funding

At December 31, 2015, the projected benefit obligation
for
the Company’s U.S. defined benefit plans
determined under U.S. GAAP was approximately $3.5
billion higher than the fair value of plan assets.
Approximately $3.2 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

that are subject

to minimum

(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 $750 million
and $353 million for the years ended December 31,
2015 and 2014, respectively. At this time, we do not
expect to have any required contributions to our plans
in 2016, 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. International Paper has
announced a voluntary, limited-time opportunity for
former employees who are participants
the
Retirement Plan of International Paper Company (the
Pension Plan) to request early payment of their entire
Pension Plan benefit in the form of a single lump sum
payment. Eligible participants who wish to receive the
lump sum payment must make an election between
February 29 and April 29, 2016, and payment is
scheduled to be made on or before June 30, 2016. All
payments will be made from the Pension Plan trust
assets. The target population has a total liability of $3.0
billion. The amount of the total payments will depend
on the participation rate of eligible participants, but is
expected to be approximately $1.5 billion. Based on the
expected level of payments, settlement accounting
rules will apply in the period in which the payments are
made. This will result in a plan remeasurement and the
recognition in earnings of a pro-rata portion of
unamortized net actuarial loss.

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 and Finance 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
and
historical
loss
recommendations of legal counsel. Liabilities for
environmental matters require evaluations of relevant
environmental regulations and estimates of future
remediation alternatives and costs.

experience

based

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

impairment charges based on

key factors change in future periods, the Company will
update its impairment analyses to reflect its latest
estimates and projections.

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.

In calculating

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
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
by diluted common shares outstanding
the
Company’s market price per share on the analysis date.

in additional

flows of the business caused by the continued decline
of the overall Brazilian economy.

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.

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
interest),
representing all of the recorded goodwill of the xpedx
business and the India Papers business.

to noncontrolling

Pension and Postretirement Benefit Obligations

recorded

for pension and other
The charges
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, 2015, 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

14,092 $

Fair Value of
Plan Assets
10,923

347

275

204

—

155

—

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

2015

2014

2013

4.40%

4.10%

4.90%

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

2015

2014

7.00%

5.00%

2022

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, 2015 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) 2016 pension expense by

approximately $27 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

2015

2014

2013

2012

2011

Return

1.3%
6.4%
14.1%

14.1%
2.5%

Year

2010

2009

2008

2007

2006

Return

15.1 %

23.8 %

(23.6)%
9.6 %
14.9 %

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 7.5% and 7.0% for the past
five and ten years, respectively. The following graph
in
shows
International Paper’s U.S. Pension Plan Master Trust.
The graph portrays the time-weighted rate of return from
2005 – 2015.

the growth of a $1,000

investment

recognized

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
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 $374 million and $41 million, respectively.

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

In millions

2015

2014

2013

2012

2011

Pension expense

U.S. plans (non-
cash)

Non-U.S. plans

Postretirement
expense

U.S. plans

Non-U.S. plans

$ 461 $ 387 $ 545 $ 342 $ 195

—

(1)

(4)

Net expense

$ 480 $ 401 $ 556 $ 342 $ 205

The increase in 2015 U.S. pension expense principally
reflects a decrease in the discount rate, updated
mortality assumptions, higher amortization of
unrecognized actuarial losses and a settlement charge
in 2015.

Assuming that discount rates, expected long-term
returns on plan assets and rates of future compensation
increases remain the same as in 2015, 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

2017 (1)

2016 (1)

278 $

364

304 $

388

(1) Based on assumptions at December 31, 2015.

The Company estimates that it will record net pension
expense of approximately $364 million for its U.S.
defined benefit plans in 2016, with the decrease from
expense of $461 million in 2015 reflecting an increase
in the assumed discount rate to 4.40% in 2016 from
4.10% in 2015, updated demographic assumptions and
lower unrecognized losses.

The market value of plan assets for International
Paper’s U.S. qualified pension plan at December 31,
2015 totaled approximately $10.9 billion, consisting of
approximately 48% equity securities, 33% debt
securities, 10% real estate and 9% other assets. Plan
assets include an immaterial amount of International
Paper common stock.

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,

the plan,

the

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. There are no required
contributions to the U.S. qualified plan in 2016. The
nonqualified defined benefit plans are funded to the
extent of benefit payments, which totaled $62 million
for the year ended December 31, 2015.

Accounting for Stock-Based Compensation

The Company has a Performance Share Plan, which
grants performance-based restricted stock units that
are paid out in stock when the awards are earned. Such
incentive compensation plans are accounted for under
ASC 718, “Compensation - Stock Compensation.” This
standard requires that the value of shares to be issued
under this plan be recognized as compensation over
the period in which the awards are earned based on
the fair value of the awards, and requires the use of a
number of judgments and assumptions in determining
the timing and amount of such charges. Additionally,
since a component of these awards is based on the
Company’s performance over a specified period
compared to other companies, the amount of expense
recorded for a given period could require adjustments
after the end of the period.

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

that

of these matters may differ from recorded estimated
amounts.

The Company’s effective income tax rates, before
equity earnings and discontinued operations, were
37%, 14% and (41)% for 2015, 2014 and 2013,
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 2015 was 33% of pre-tax
earnings compared with 31% in 2014 and 26% in 2013.
We estimate that the 2016 effective income tax rate will
be approximately 34% 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 51 and 52 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 61 through
64 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

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
financial
international operations’
statements into U.S. dollars and the remeasurement

local currency

value liability of financial instruments with exposure to
interest rate risk was approximately $9.3 billion and $9.8
billion, respectively. The potential loss in fair value
resulting from a 10% adverse shift in quoted interest
rates would have been approximately $565 million and
$410 million at December 31, 2015 and 2014,
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 or forward purchase contracts may be used to
manage risks associated with market fluctuations in
energy prices. The net fair value of such outstanding
energy hedge contracts at December 31, 2015 and
2014 was approximately a $7 million and a $2 million
liability, respectively. The potential loss in fair value
resulting from a 10% adverse change in the underlying
commodity prices would have been approximately $1
million at December 31, 2015 and 2014, respectively.

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, 2015 and 2014, the net fair value of
financial instruments with exposure to foreign currency
risk was approximately a $4 million and a $1 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 $30 million and $52 million at
December 31, 2015 and 2014, respectively.

ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

See the preceding discussion and Note 14 Derivatives
and Hedging Activities on pages 67 through 71 of
Item 8. Financial Statements and Supplementary Data.

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
spending programs and
for general corporate
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 66 and 67 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 67 through 71 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,
2015 and 2014 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, 2015 and 2014, the net fair

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
for external
preparation of
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
reporting as of
internal control over
December 31, 2015. In making this assessment, it used
the criteria described in “Internal Control – Integrated
Framework (2013)” issued by the Committee of
the Treadway
Sponsoring Organizations
Commission (COSO). Based on this assessment,
management believes that, as of December 31, 2015,
the Company’s internal control over financial reporting
was effective.

The Company’s
registered public
independent
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 42 and 43.

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
accounting and business policies
throughout
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
the
reporting procedures,
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, 2015,
including critical accounting policies and significant
management judgments, with management and the
report
independent auditors. The Committee’s
financial
recommending
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 INDEPENDENT REGISTERED PUBLIC
ACCOUNTING
FIRM, ON CONSOLIDATED
FINANCIAL STATEMENTS

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, 2015
and 2014, 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, 2015. Our audits also included
the financial statement schedule listed in the Index at
Item 15. These financial statements and financial
statement schedule are the responsibility of the
Company's management. Our responsibility is to
express an opinion on the financial statements and
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, 2015 and 2014, and
the results of their operations and their cash flows for
each of the three years in the period ended December
31, 2015, 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, 2015, 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 25, 2016
expressed an unqualified opinion on the Company's

internal control over financial reporting.

Memphis, Tennessee
February 25, 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM, ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

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

We have audited the internal control over financial
International Paper Company and
reporting of
subsidiaries (the "Company") as of December 31, 2015,
based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee
the Treadway
of Sponsoring Organizations of
Commission. The Company's management
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
an
respects. Our
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

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, 2015, based on the
criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of
Sponsoring Organizations
the Treadway
Commission.

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, 2015 of the Company and our
report dated February 25, 2016 expressed an
unqualified opinion on those financial statements and
financial statement schedule.

Memphis, Tennessee
February 25, 2016

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.

2015

2014

2013

$ 22,365 $ 23,617 $ 23,483

15,468

16,254

16,282

1,645

1,294

1,406

168

252

137

174

—

555

1,266

466

117

917

—

917

(21)

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)

938 $

555 $ 1,395

2.25 $

1.33 $

3.85

—

(0.03)

(0.70)

2.25 $

1.30 $

3.15

2.23 $

1.31 $

3.80

—

(0.02)

(0.69)

2.23 $

1.29 $

3.11

938 $

568 $ 1,704

—

(13)

(309)

938 $

555 $ 1,395

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 postretirement prior service costs and net loss:

U.S. plans (less tax of $186, $154 and $195)

Pension and postretirement liability adjustments:

U.S. plans (less tax of $206, $798 and $756)

Non-U.S. plans (less tax of $0, $5 and $3)

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, $3 and $2)

Reclassification adjustment for (gains) losses included in net earnings (less tax of $8, $1 and $3)

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

2015

2014

2013

917 $

536 $

1,378

296

242

307

(329)

(1,253)

1,188

(2)

(1,042)

(3)

(18)

(876)

(4)

(1,068)

(151)

(1,899)

(1,363)

(4)

(426)

—

(7)

1,058

2,436

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY

(124) $

(1,332) $

2,476

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

CONSOLIDATED BALANCE SHEET

In millions, except per share amounts, at December 31

2015

2014

ASSETS

Current Assets

Cash and temporary investments

Accounts and notes receivable, less allowances of $70 in 2015 and $82 in 2014

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

Commitments and Contingent Liabilities (Note 11)

Equity

Common stock $1 par value, 2015 & 2014 – 448.9 shares

Paid-in capital

Retained earnings

Accumulated other comprehensive loss

Less: Common stock held in treasury, at cost, 2015 – 36.776 shares and 2014 – 28.734 shares

Total Shareholders’ Equity

Noncontrolling interests

Total Equity

TOTAL LIABILITIES AND EQUITY

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

$ 1,050 $ 1,881

2,675

2,228

312

212

3,083

2,424

331

240

6,477

7,959

11,980

12,728

366

228

7,014

3,335

1,187

507

248

2,145

3,773

1,324

$ 30,587 $ 28,684

426 $

742

2,078

2,664

434

986

3,924

8,900

6,277

3,231

3,548

364

434

477

1,026

4,909

8,631

2,050

3,063

3,819

396

553

449

6,243

4,649

449

6,245

4,409

(5,708)

(4,646)

5,633

1,749

3,884

6,457

1,342

5,115

148

3,909

5,263

$ 30,587 $ 28,684

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

2015

2014

2013

917 $

536 $

1,378

1,294

1,414

1,547

281

252

(750)

—

461

174

(117)

—

137

153

(131)

(89)

(17)

(135)

881

(353)

—

387

200

—

100

167

(97)

(103)

(18)

146

210

(31)

(13)

545

(775)

527

(62)

(134)

(114)

(110)

(57)

(71)

CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES

2,580

3,077

3,028

INVESTMENT ACTIVITIES

Invested in capital projects

Acquisitions, net of cash acquired

Proceeds from divestitures

Proceeds from spinoff

Investment in Special Purpose Entities

Proceeds from sale of fixed assets

Other

CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES

FINANCING ACTIVITIES

(1,487)

(1,366)

(1,198)

—

(198)

(114)

—

411

—

(505)

726

—

(1,739)

(860)

(827)

Repurchase of common stock and payments of restricted stock tax withholding

(605)

(1,062)

(512)

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.

6,873

1,982

(6,947)

(2,095)

(14)

(685)

—

(211)

—

(14)

(620)

(114)

(269)

—

(4)

298

241

(845)

(123)

(554)

—

(150)

(43)

(1,601)

(2,086)

(1,688)

(71)

(831)

(52)

(13)

500

1,881

1,802

1,302

1,050 $

1,881 $

1,802

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

In millions

BALANCE, JANUARY 1,
2013

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,
2013

Issuance of stock for various
plans, net

Repurchase of stock

xpedx spinoff

Dividends

Acquisition of redeemable
noncontrolling interests

Remeasurement of
redeemable noncontrolling
interest

Comprehensive income
(loss)

BALANCE, DECEMBER 31,
2014

Issuance of stock for
various plans, net

Repurchase of stock

Dividends

Transactions of equity
method investees

Divestiture of
noncontrolling interests

Comprehensive income
(loss)

Common
Stock
Issued

Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Treasury
Stock

Total
International
Paper
Shareholders’
Equity

Noncontrolling
Interests

Total
Equity

440 $

6,042 $

3,662 $

(3,840) $

— $

6,304 $

332 $

6,636

—

421

—

447

6,463

—

(287)

—

(567)

—

(44)

1,395

4,446

—

(633)

(5)

555

—

1,081

(20)

512

—

(2,759)

492

—

(1,887)

(212)

1,062

—

449

6,245

4,409

(4,646)

1,342

—

(37)

—

(698)

—

938

—

(1,062)

(198)

605

—

448

(512)

(567)

—

(44)

2,476

8,105

283

(1,062)

(287)

(633)

(5)

(1,332)

5,115

233

(605)

(698)

(37)

—

(124)

—

448

(512)

(567)

(1)

(112)

(156)

(40)

2,436

179

8,284

—

283

(1,062)

(287)

(633)

(5)

(31)

(1,363)

148

5,263

—

(96)

(27)

233

(605)

(698)

(37)

(96)

(151)

BALANCE, DECEMBER 31,
2015

449 $

6,243 $

4,649 $

(5,708) $

1,749 $

3,884 $

25 $

3,909

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.

FINANCIAL STATEMENTS

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 prior
year amounts have been adjusted to reflect xpedx as
a discontinued operation. See Note 7 for further
discussion.

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.

TEMPORARY INVESTMENTS

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.

CONSOLIDATION

PLANTS, PROPERTIES AND EQUIPMENT

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

the
Investments
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 $117 million, $(200) million and $(39)
million in 2015, 2014 and 2013, 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
f.o.b. destination,
sales
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.

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 generally are, for buildings — 2.50%
to 5.00%, and for machinery and equipment — 5% to
33%.

FORESTLANDS

At December 31, 2015, International Paper and its
subsidiaries owned or managed approximately
335,000 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. 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
tax
income
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
transactions are measured and
compensation
recorded in the consolidated financial statements
based on the grant-date fair value of the equity or liability
instruments issued. 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.

CLASSIFICATION OF DEFERRED TAXES

In November 2015, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update
(ASU) 2015-17, "Balance Classification of Deferred
Taxes." This ASU requires entities to offset all deferred
tax assets and liabilities (and valuation allowances) for
each tax-paying jurisdiction within each tax-paying
component. The net deferred tax must be presented as
a single noncurrent amount. This ASU is effective for
annual reporting periods beginning after December 15,
2016, and interim periods within those years. Early
the
adoption
requirements of this guidance is not expected to have
a material effect on
financial
statements.

is permitted. The application of

the consolidated

BUSINESS COMBINATIONS
In September 2015, the FASB issued ASU 2015-16,
"Business Combinations - Simplifying the Accounting
for Measurement Period Adjustments." This ASU
provides that an acquirer must recognize adjustments
to provisional amounts that are identified during the
measurement period in the reporting period in which
the adjustment amounts are determined. The ASU also
requires acquirers to present separately on the face of
the income statement, or disclose in the notes, the

portion of the amount recorded in current-period
earnings by line item that would have been recorded in
previous reporting periods if the adjustment to the
provisional amounts had been recognized at the
acquisition date. This ASU is effective for annual
reporting periods beginning after December 15, 2016,
and interim periods within fiscal years beginning after
December 15, 2017. This ASU must be applied
prospectively to adjustments to provisional amounts
that occur after the effective date. Early adoption is
permitted for financial statements that have not been
issued. The Company is currently evaluating the
provisions of this guidance.

INVENTORY

the FASB

issued ASU 2015-11,
In July 2015,
"Simplifying the Measurement of Inventory." This ASU
provides that entities should measure inventory at the
lower of cost and net realizable value. Net realizable
value is the estimated selling prices in the ordinary
course of business less reasonably predictable costs
of completion, disposal and transportation. Subsequent
measurement is unchanged for inventory measure
using LIFO or the retail inventory method. This ASU is
effective for annual reporting periods beginning after
December 15, 2016, and interim periods within those
years. Early adoption is permitted. The Company is
currently evaluating the provisions of this guidance.

CLOUD COMPUTING ARRANGEMENTS

the FASB

In April 2015,
issued ASU 2015-05,
"Customer's Accounting for Fees Paid in a Cloud
Computing Arrangement." This ASU provides
clarification on whether a cloud computing arrangement
includes a software license. If a software license is
included, the customer should account for the license
consistent with its accounting of other software
licenses. If a software license is not included, the
arrangement should be accounted for as a service
contract. This ASU is effective for annual reporting
periods beginning after December 15, 2015, and interim
periods within those years. Early adoption is permitted.
The application of the requirements of this guidance is
not expected to have a material effect on the
consolidated financial statements.

DEBT ISSUANCE COSTS

In April 2015, the FASB issued ASU 2015-03, "Interest
- Imputation of Interest (Subtopic 835-30: Simplifying
the Presentation of Debt Issuance Costs)," which
simplifies the balance sheet presentation of the costs
for issuing debt. This ASU is effective for annual
reporting periods beginning after December 15, 2015,
and interim periods within those years; however, early
adoption is allowed. An entity should apply the new
guidance on a retrospective basis, wherein the balance
sheet of each individual period presented should be

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
that all potentially dilutive
computed assuming
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

2015

2014

2013

938

$ 568

$ 1,704

Effect of dilutive securities (a)

—

Earnings (loss) from continuing
operations – assuming dilution

938

$ 568

$ 1,704

Average common shares
outstanding

Effect of dilutive securities (a):

Restricted performance share
plan

Stock options (b)

417.4

427.7

443.3

3.2

—

4.2

0.1

4.5

0.3

Average common shares
outstanding – assuming dilution

Basic earnings (loss) per share
from continuing operations

Diluted earnings (loss) per share
from continuing operations

420.6

432.0

448.1

$ 2.25

$ 1.33

$ 3.85

$ 2.23

$ 1.31

$ 3.80

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

antidilutive.

(b) Options to purchase shares were not included in the
computation of diluted common shares outstanding if their
exercise price exceeded the average market price of the
Company’s common stock for each respective reporting date.

adjusted to reflect the period-specific effects of applying
the new guidance. The application of the requirements
of this guidance is not expected to have a material effect
on the consolidated financial statements.

CONSOLIDATION

and

significantly

In February 2015, the FASB issued ASU 2015-02,
"Consolidation," which amends the requirements for
consolidation
the
consolidation analysis required. This ASU is effective
for annual reporting periods beginning after December
15, 2015, and interim periods within those years. The
application of the requirements of this guidance is not
expected to have a material effect on the consolidated
financial statements.

changes

SHARE-BASED PAYMENT

In June 2014, the 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 within those years. The application
of the requirements of this guidance is not expected to
have a material effect on the consolidated financial
statements.

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,
2017, 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.

NOTE 4 OTHER COMPREHENSIVE INCOME

The following table presents changes in AOCI for the year ended December 31, 2015:

In millions

Balance as of December 31, 2014

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, 2015

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)

(3,134) $

(331)

296

(35)

—

(1,513) $

(1,002)

(40)

(1,042)

1 $

(3)

—

(4,646)

(1,336)

268

(1,068)

(3,169) $

(2,549) $

10 $

(5,708)

(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, 2014:

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

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)

(2,105) $

(1,271)

242

(1,029)

—

(3,134) $

(649) $

(863)

(13)

(876)

(5) $

(4)

—

(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 details of the reclassifications out of AOCI for the three years ended:

Details About Accumulated Other Comprehensive Income
Components

Amount Reclassified from Accumulated Other Comprehensive Income (a)

2015

2014

2013

Location of Amount
Reclassified from AOCI

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

Total pre-tax amount

Tax (expense)/benefit

Net of tax

(33) $

(17) $

(9) (b)

Cost of products sold

(449)

(482)

186

(296)

—

(20)

(12)

(379)

(396)

154

(242)

—

(493) (b)

Cost of products sold

(502)

195

(307)

(17)

—

(17)

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

10 (c)

Cost of products sold

(3)

(317)

Total reclassifications for the period

(268) $

(225) $

(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

2015: During 2015, total restructuring and other
charges of $252 million before taxes were recorded.
These charges included:

In millions

2015

Early debt extinguishment costs (see Note 13)

Timber monetization restructuring

Legal liability reserve adjustment

Riegelwood mill conversion costs net of proceeds
from the sale of Carolina Coated Bristols brand (a)

207

Other

Total

(a) Includes $5 million of severance charges, $24 million of
accelerated depreciation, sale proceeds of $22 million and $1
million of other charges.

Included in the $252 million of restructuring and other
charges is severance expense of $5 million which is
related to 69 employees.

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

Included in the $846 million of restructuring and other
charges is severance expense of $41 million which is
related to 957 employees.

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

In millions

2013

Early debt extinguishment costs (see Note 13)

Courtland mill shutdown (a)

Box plant closures

Augusta paper machine shutdown (b)

118

(13)

(30)

156

252

Insurance reimbursements

Other (c)

Total

(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.

In millions

2014

Early debt extinguishment costs (see Note 13)

Courtland mill shutdown (a)

Other (b)

Total

276

554

846

(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.

Included in the $156 million of restructuring and
other charges is severance expense of $46 million
which is related to 1,384 employees.

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

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 and 2015,
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
Olmuksan's shares. Prior
this acquisition,
International Paper held a 43.7% equity interest in
Olmuksan.

issued shares,

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

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

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.

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.

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
to Discontinued
and Equity Earnings reconciled
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

2,309

4,941

Selling and administrative expenses

191

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)

—

(2)

(1)

409

149
54

400

(379)

(25)

Discontinued Operations, Net of Taxes (a)

(1) $ (354)

(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 and $81 million for 2014 and 2013,
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 and $12 million for 2014

and 2013, 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.

Related to these divestitures, the Company recorded
income (loss) of $0 million, $(12) million and $45 million
for the years ended December 31, 2015, 2014 and
2013, respectively. These amounts are included in
Discontinued operations, net of tax in the consolidated
statement of operations.

OTHER DIVESTITURES AND IMPAIRMENTS

2015: On October 13, 2015, the Company finalized the
sale of its 55% interest in IP Asia Coated Paperboard
(IP-Sun JV) business, within the Company's Consumer
Packaging segment, to its Chinese coated board joint
venture partner, Shandong Sun Holding Group Co., Ltd.
for RMB 149 million (approximately USD $23 million).
During the third quarter of 2015, a determination was
made that the current book value of the asset group
exceeded its estimated fair value of $23 million, which
was the agreed upon selling price. The 2015 loss
includes the net pre-tax impairment charge of $174
million ($113 million after taxes). A pre-tax charge of
$186 million was recorded during the third quarter in
the Company's Consumer Packaging segment to write
down the long-lived assets of this business to their
estimated fair value. In the fourth quarter of 2015, upon
the sale and corresponding deconsolidation of IP-Sun
JV from the Company's consolidated balance sheet,
final adjustments were made resulting in a reduction
of the impairment of $12 million. The amount of pre-tax
losses related to noncontrolling interest of the IP-Sun
JV included in the Company's consolidated statement
of operations for the years ended December 31, 2015,
2014 and 2013 were $19 million, $12 million and $8
million, respectively. The amount of pre-tax losses
related to the IP-Sun JV included in the Company's
consolidated statement of operations for the years
ended December 31, 2015, 2014 and 2013 were $226
million, $51 million and $41 million, respectively.

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
to as AGI-
investee,
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, 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.

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. This loss is included in Net
(gains) losses on sales and impairments of businesses
the accompanying consolidated statement of
in
operations.

the divestiture of

NOTE 8 SUPPLEMENTARY FINANCIAL
STATEMENT INFORMATION

TEMPORARY INVESTMENTS

In millions at December 31

Temporary Investments

2015

2014

738 $ 1,480

ACCOUNTS AND NOTES RECEIVABLE

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

In millions at December 31

2015

2014

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

$ 2,480 $ 2,860

195

223

$ 2,675 $ 3,083

2015

2014

339 $

494

1,248

1,273

563

562

$ 2,228 $ 2,424

International Paper’s U.S.

The last-in, first-out inventory method is used to value
most of
inventories.
Approximately 78% 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
have
inventory balances by
approximately $345 million and $334 million at
December 31, 2015 and 2014, respectively.

increased

total

PLANTS, PROPERTIES AND EQUIPMENT

In millions at December 31

2015

2014

Pulp, paper and packaging facilities

$ 31,466 $ 31,805

Other properties and equipment

Gross cost

Less: Accumulated depreciation

1,242

1,263

32,708

33,068

20,728

20,340

Plants, properties and equipment, net

$ 11,980 $ 12,728

In millions

Balance as of
January 1, 2014

Goodwill

Accumulated
impairment losses
(a)

Reclassifications and
other (b)

Additions/reductions

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)

(400)

(3,941)

—

(400)

3,987

(94)

(20)

(100)

(400)

400

(3)

—

Impairment loss

(100) (d)

Write off of goodwill

Write off of
accumulated
impairment loss

Balance as of
December 31, 2014

—

Goodwill

3,396

2,234

1,784

—

7,414

Accumulated
impairment losses
(a)

(100)

(1,877)

Total

$3,296

$357

(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.

its reporting units

In the fourth quarter of 2015, in conjunction with the annual
testing of
for possible goodwill
impairments, the Company calculated the estimated fair
value of its Brazil Packaging business using its discounted
future cash flows and determined that all of the goodwill in
the business, totaling $137 million, should be written off.
The decline in the fair value of the Brazil Packaging
business and resulting impairment charge was due to the
negative impacts on the cash flows of the business caused
by the continued decline of the overall Brazilian economy.

its reporting units

In the fourth quarter of 2014, in conjunction with the annual
for possible goodwill
testing of
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.

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

In millions

2015

2014

2013

Depreciation expense

$ 1,213 $ 1,308 $ 1,415

INTEREST

Cash payments related to interest were as follows:

In millions

Interest payments

2015

2014

2013

680 $

718 $

751

Amounts related to interest were as follows:

In millions

Interest expense (a)

Interest income (a)

Capitalized interest costs

2015

2014

2013

644 $

677 $

669

(a)

Interest expense and interest income exclude approximately
$25 million, $38 million and $45 million in 2015, 2014 and 2013,
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, 2015 and 2014:

In millions

Balance as of January 1, 2015

Industrial
Packaging

Printing
Papers

Consumer
Packaging

Total

Goodwill

$3,396

$2,234

$1,784

$7,414

Accumulated impairment losses (a)

(100)

(1,877)

(1,664)

(3,641)

Reclassifications and other (b)

Additions/reductions

Impairment loss

Balance as of December 31, 2015

3,296

(70)

(1)

357

(95)

120

(3)

(15) (c)

(117) (d)

(137) (e)

—

3,773

(168)

(133)

(137)

Goodwill

3,325

2,124

1,664

7,113

Accumulated impairment losses (a)

(237)

(1,877)

(1,664)

(3,778)

Total

$3,088

$247

$—

$3,335

(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) Reduction due to the sale and de-consolidation of Shandong Sun

joint venture in Asia.

(e) Reflects a charge for goodwill impairment related to our Brazil

Industrial Packaging business.

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 adjusted off of the consolidated balance sheet
and are not included in balances as of December 31, 2014.

represented

OTHER INTANGIBLES

Identifiable intangible assets comprised the following:

In millions at
December 31

2015

2014

Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization

Customer relationships and lists

495 $

166 $

561 $

Non-compete agreements

Tradenames, patents and
trademarks

Land and water rights

Software

Other

Total

157

726 $

331 $

848 $

309

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

In millions

2015

2014

2013

Amortization expense related to
intangible assets

60 $

73 $

Based on current intangibles subject to amortization,
estimated amortization expense for each of the succeeding
years is as follows: 2016 – $46 million, 2017 – $44 million,
2018 – $35 million, 2019 – $33 million, 2020 – $32 million,
and cumulatively thereafter – $199 million.

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.

2015

2014

2013

$ 1,147 $

565 $

119

307

775

453

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

$ 1,266 $

872 $ 1,228

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

In millions

2015

2014

2013

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.

62 $

175 $ (663)

111

(98)

$ 185 $

258 $ (666)

$ 321 $

(67) $ 206

(70)

(73)

(18)

(20)

$ 281 $

(135) $ 168

Income tax provision (benefit)

$ 466 $

123 $ (498)

The Company’s deferred income tax provision (benefit)
includes a $3 million provision, a $13 million benefit and
a $7 million provision for 2015, 2014 and 2013,
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 $149 million, $172 million and $291 million
in 2015, 2014 and 2013, respectively.

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

In millions

2015

2014

2013

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

$ 1,266

$ 872

$1,228

Statutory U.S. income tax rate

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 impairments

Sale of non-strategic assets

Tax audits

Subsidiary liquidation

Retirement plan dividends

Tax basis adjustments

Tax credits

Other, net

443

305

430

(2)

(44)

(72)

(90)

(15)

(14)

(46)

(27)

109

(61)

—

(5)

—

(15)

—

(85)

(5)

—

(34)

(8)

—

(770)

—

(5)

(33)

(23)

(4)

Income tax provision (benefit)

$ 466

$ 123

$ (498)

Effective income tax rate

37%

14%

(41)%

The tax effects of significant temporary differences,
representing deferred income tax assets and liabilities
at December 31, 2015 and 2014, were as follows:

A reconciliation of the beginning and ending amount of
unrecognized
the years ended
December 31, 2015, 2014 and 2013 is as follows:

tax benefits

for

In millions

Deferred income tax assets:

2015

2014

In millions

2015

2014

2013

Balance at January 1

(158) $

(161) $

(972)

Postretirement benefit accruals

172 $

189

Pension obligations

1,403

1,517

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, related installment sales,
and investment in subsidiary

283

732

265

244

342

672

280

266

3,099

(430)

3,266

(415)

2,669 $

2,851

(271) $

(316)

(2,727)

(2,707)

(2,253)

(2,290)

Gross deferred income tax liabilities

$ (5,251) $ (5,313)

Net deferred income tax liability

$ (2,582) $ (2,462)

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 a decrease in deferred
income tax assets principally relating to the tax impact
of changes in qualified pension liabilities and the
liabilities
tax credits. Deferred
utilization of
decreased primarily due to a reduction in the intangibles
deferred tax liability. Of the $2.3 billion forestlands,
related installment sales, and investment in subsidiary
deferred tax liability, $1.4 billion is attributable to an
investment in subsidiary and relates to a 2006
International Paper installment sale of forestlands and
$840 million is attributable 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.

tax

The valuation allowance for deferred income tax assets
as of December 31, 2015, 2014 and 2013 was $430
million, $415 million and $413 million, respectively. The
net change in the total valuation allowance for the years
ended December 31, 2015 and 2014 was an increase
of $15 million and an increase of $2 million, respectively.

(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

(6)

(15)

(22)

(1)

(29)

—

824

Balance at December 31

(150) $

(158) $

(161)

Included in the balance at December 31, 2015, 2014
and 2013 are $1 million, $1 million and $1 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 $34
million and $41 million accrued for the payment of
estimated interest and penalties associated with
unrecognized tax benefits at December 31, 2015 and
2014, 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
2014 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 $39 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 2015, 2014 and 2013
income tax provision (benefit) are $(121) million, $(453)
million and $(869) million, respectively, related to
special items. The components of the net provisions
related to special items were as follows:

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

2015

2014

2013

PURCHASE COMMITMENTS AND OPERATING LEASES

In millions

Special items

Tax-related adjustments:

Return to accrual

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

(84) $

(372) $

(95)

(62)

—

(90)

—

(4)

(770)

—

(1)

—

(121) $

(453) $

(869)

Excluding the impact of special items and nonoperating
pension expense, the 2015, 2014 and 2013 income tax
provisions were $687 million, $659 million and $497
million,
respectively, or 33%, 31% and 26%,
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:

2016
Through
2025

2026
Through
2035

Indefinite

Total

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

At December 31, 2015,
future minimum
commitments under existing non-cancelable operating
leases and purchase obligations were as follows:

total

In millions

2016

2017

2018

2019

2020 Thereafter

118 $

95 $

72 $

55 $

41 $

128

Lease
obligations

Purchase
obligations
(a)

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

76 $

— $

519 $

595

Total

$ 3,119 $ 636 $ 519 $ 426 $ 399 $

3,001

541

447

371

358

1,579

1,707

—

204

(a)

147

144

—

241

417

—

Includes $2.1 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.

Total

390 $

89 $

760 $

1,239

Deferred income taxes are not provided for temporary
differences of approximately $5.7 billion, $5.2 billion
and $5.1 billion as of December 31, 2015, 2014 and
2013, 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.

Rent expense was $170 million, $154 million and $168
million for 2015, 2014 and 2013, 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
to reasonable estimation, accrued
liabilities are
recorded at the time of sale as a cost of the transaction.

ENVIRONMENTAL PROCEEDINGS

CERCLA and State Actions

International Paper has been named as a potentially
responsible party in environmental remediation actions
under various federal and state laws, including the

Environmental

Comprehensive
Response,
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. Remediation 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 $93
million in the aggregate as of December 31, 2015.

Cass Lake: One of the matters included above arises
out of 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 United States
Environmental Protection Agency (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 $47 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,
than amounts currently
and significantly higher
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
$46 million as of December 31, 2015. 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 (PRP) with respect to the Allied Paper,
Inc./Portage Creek/Kalamazoo River Superfund Site in
Michigan. The EPA asserts that the site is contaminated
by polychlorinated biphenyls (PCBs) primarily 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 predict the outcome or
estimate our maximum reasonably possible loss with
respect to this site. However, we do not believe that any
material loss is probable.

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 costs purportedly
expended by plaintiffs ($79 million 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. NCR Corporation and
Weyerhaeuser Company are also named as
defendants in the suit. 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 past or future
costs, which is the subject of a separate trial, in which
trial testimony was given between September and
December 2015 and post-trial briefing is currently
scheduled to be completed in March 2016. The Court
has not yet ruled to what extent it will decide
responsibility for future costs. We are unable to predict
the outcome or estimate our maximum reasonably
possible loss. However, we do not believe that any
material loss is probable.

Harris County: International Paper and McGinnis
Industrial Maintenance Corporation, a subsidiary of

Waste Management, Inc., are PRPs 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 Superfund Site. In December 2011,
Harris County, Texas filed a suit against the Company
seeking civil penalties with regard to the alleged
discharge of dioxin into the San Jacinto River from
waste impoundments that are part of the San Jacinto
River Superfund Site. In November 2014, International
Paper secured a zero liability jury verdict. Harris County
appealed the verdict in April 2015, and that appeal is
pending. The Company is also defending an additional
lawsuit related to the San Jacinto River Superfund Site
brought by approximately 400 individuals who allege
property damage and personal injury. Because this
case is still in the discovery phase, it is 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:
containerboard producers,
International
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 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 in the Northern District of Illinois. In March
2015, the District Court certified a class of direct
purchasers of containerboard products; in June 2015,
the United States Court of Appeals for the Seventh
Circuit granted the defendants' petition to appeal and
the class certification issue is now pending in that court.
In June 2015, International Paper and Temple-Inland
were named as defendants in a lawsuit captioned Del
Monte Fresh Products N.A.,
Inc. v. Packaging
Corporation of America (S.K. Fl.), in which the Plaintiff
asserts substantially similar allegations to those raised
in the Kleen Products LLC action. Pursuant to a tolling
agreement signed by all parties, the case was
voluntarily dismissed without prejudice in November
2015. 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.
No class certification materials have been filed to date
in the Tennessee action. The Company disputes the
allegations made and is vigorously defending each
action. However, because the Kleen Products LLC
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.

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 through the
present; (2) avoid price erosion by ceasing the practice
of issuing job quotes; and (3) restrict supply through
downtime and limiting order fulfillment. 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
alleged a conspiracy or agreement beginning on or
before September 2011. The alleged classes were all
persons who purchased gypsum board directly or
indirectly from any defendant. The complainants seek
to recover unspecified treble actual damages and
attorneys' fees on behalf of the purported classes. In
February 2015, we executed a definitive agreement to
settle these cases for an immaterial amount, and this
settlement received final court approval and was paid
in the third quarter of 2015.

In March 2015, several homebuilders filed an antitrust
action in the United States District Court for the Northern
District of California alleging that they purchased
gypsum board and making similar allegations to those
contained in the above settled proceeding. That lawsuit
was transferred by the Judicial Panel on Multidistrict
Litigation to the Eastern District of Pennsylvania. The
homebuilders filed a notice to opt out of the class
settlements and recently amended their complaint to
assert that the alleged conspiracy or conspiracies
continued into 2015. The Company intends to dispute
the allegations made and to vigorously defend that
lawsuit.

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. In April 2015, a similar class action

was filed in British Columbia, Canada. In May 2015, we
reached an agreement in principle to settle these
Canadian cases
In
November 2015, a definitive settlement agreement was
executed and is subject to court approval.

immaterial amount.

for an

Tax

On October 16, 2015, the Company was notified of a
$92 million tax assessment issued by the state of Sao
Paulo, Brazil for tax years 2011 through 2013. The
the
assessment pertains
Company related to the sale of paper to the editorial
segment, which is exempt from the payment of ICMS
value-added tax. This assessment is in the preliminary
stage. The Company does not believe that a material
loss is probable.

issued by

invoices

General

The Company is involved in various other inquiries,
administrative proceedings and litigation relating to
environmental and safety matters,
labor and
employment, contracts, sales of property, intellectual
property, personal injury 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 these
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
financial
statements.

its consolidated

NOTE 12 VARIABLE INTEREST ENTITIES

forestlands,

In connection with the 2006 sale of approximately 5.6
International Paper
million acres of
received installment notes (the Timber Notes) totaling
approximately $4.8 billion. The Timber Notes, which do
not require principal payments prior to their maturity
which was originally August 2016, 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 special purpose 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
the Borrower Entities, along with
approximately $400 million of International Paper
promissory notes, to other newly formed special
purpose 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, 2015, 2014, or 2013.

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.

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
provided that International Paper had, and intended to
effect, a legal right to offset its obligation under these
debt instruments with its investments in the Entities.
Accordingly,
reporting purposes,
International Paper had 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 despite the
offset treatment, these remained debt obligations of
International Paper. Remaining borrowings of $50
million are
the
accompanying consolidated balance sheet at
December 31, 2014. Additional debt related to the
above transaction of $107 million is included in Notes
payable and current maturities of long-term debt at
December 31, 2014.

in Long-term debt

included

The use of the Entities facilitated the monetization of
the credit enhanced Timber Notes in a cost effective
manner by increasing borrowing capacity and lowering
the interest rate, while providing for the offset
accounting treatment described above. Additionally, the
monetization structure preserved the $1.4 billion tax
deferral that resulted from the 2006 forestlands sales.

its

investments

Based on an analysis of the Entities under ASC 810,
"Consolidation," that considers the potential magnitude
of the variability in the structures and which party has
a controlling financial interest, International Paper
determined that it was not the primary beneficiary of the
Entities at December 31, 2014, and therefore, did not
consolidate
the Entities. The
Company also determined that the source of variability
in the structures is the value of the Timber Notes, the
assets most significantly impacting the structures'
economic performance. The credit quality of the Timber
Notes is supported by irrevocable letters of credit
obtained by the Timber Note issuers. International
Paper analyzed which party had control over the
economic performance of each Entity, and concluded
International Paper did not have control over significant
decisions surrounding the Timber Notes and letters of

credit and therefore was not the primary beneficiary at
December 31, 2014. The Company’s maximum
exposure to loss at December 31, 2014 equaled the
principal amount of the Timber Notes; however, an
analysis performed by the Company concluded the
likelihood of this exposure was remote.

During the third quarter of 2015, we initiated a series of
actions in order to extend the 2006 monetization
structure and maintain the long-term nature of the $1.4
billion deferred tax liability. First, International Paper
acquired the Class A interests in the Investor Entities
from a third party for $198 million in cash. As a result,
International Paper became the owner of all of the Class
A and Class B interests in the Entities and became the
primary beneficiary of the Entities. The assets and
liabilities of the Entities, primarily consisting of the
Timber Notes and third party bank loans, were recorded
at fair value as of the acquisition date of the Class A
interests.

Subsequent to purchasing the Class A interests in the
Investor Entities, International Paper restructured the
Entities, which resulted in the formation of wholly-
owned, bankruptcy-remote special purpose entities
(the 2015 Financing Entities). As part of
the
restructuring, the Timber Notes held by the Borrower
Entities, subject to the third party bank loans, were
contributed to the 2015 Financing Entities along with
approximately $150 million in International Paper debt
obligations, approximately $600 million in cash and
approximately $130 million in demand loans from
International Paper, and certain Entities were
liquidated. As a
transactions,
result of
International Paper began consolidating the 2015
Financing Entities during the third quarter of 2015. Also,
during the third quarter of 2015, the 2015 Financing
Entities used $630 million in cash to pay down a portion
loans and refinanced
of
approximately $4.2 billion of
loans on
nonrecourse terms (the 2015 Refinance Loans).

third party bank

those

these

the

During the fourth quarter of 2015, International Paper
extended the maturity date on the Timber Notes for an
additional five years. The Timber Notes are shown in
Financial assets of special purpose entities on the
accompanying consolidated balance sheet and mature
in August 2021 unless extended for an additional five
years. These notes are supported by approximately
$4.8 billion of irrevocable letters of credit. In addition,
the Company extinguished the 2015 Refinance Loans
scheduled to mature in May 2016 and entered into new
nonrecourse
totaling
approximately $4.2 billion (the Extension Loans).
Provisions of loan agreements related to approximately
$1.1 billion of the Extension Loans require the bank
issuing letters of credit supporting the Timber Notes
pledged as collateral to maintain a credit rating at or
above a specified threshold. In the event the credit

third party bank

loans

rating of the letter of credit bank is downgraded below
the specified threshold, the letters of credit must be
replaced within 60 days with letters of credit from a
qualifying financial institution. The Extension Loans are
shown in Nonrecourse financial liabilities of special
purpose entities on the accompanying consolidated
balance sheet and mature in the fourth quarter of 2020.
The extinguishment of the 2015 Refinance Loans of
approximately $4.2 billion and the issuance of the
Extension Loans of approximately $4.2 billion are
shown as part of reductions of debt and issuances of
debt, respectively, in the financing activities of the
consolidated statement of cash flows.

The Extension Loans are nonrecourse to the Company,
and are secured by approximately $4.8 billion of Timber
Notes, the irrevocable letters of credit supporting the
Timber Notes and approximately $150 million of
International Paper debt obligations. The $150 million
of International Paper debt obligations are eliminated
in the consolidation of the 2015 Financing Entities and
are not reflected in the Company’s consolidated
balance sheet.

above

facilitated

described

The purchase of the Class A interests and subsequent
restructuring
the
refinancing and extensions of the third party bank loans
on nonrecourse terms. The transactions described in
long-term
these paragraphs result
classification of the $1.4 billion deferred tax liability
recognized in connection with the 2006 forestlands
sale.

in continued

As of December 31, 2015, the fair value of the Timber
Notes and Extension Loans is $4.68 billion and $4.28
billion, respectively. The Timber Notes and Extension
Loans are classified as Level 2 within the fair value
hierarchy, which is further defined in Note 14.

Activity between the Company and the 2015 Financing
Entities (the Entities prior to the purchase of the Class
A interest discussed above) was as follows:

In millions

Revenue (a)

Expense (a)

Cash receipts (b)

Cash payments (c)

2015
2013
2014
$ 43 $ 38 $ 45
79

(a) The net expense related to the Company’s interest in the
Entities is included in the accompanying consolidated
statement of operations, as International Paper has and
intends to effect its legal right to offset as discussed above.
After formation of the 2015 Financing Entities, the revenue
and expense are included in Interest expense, net in the
accompanying consolidated statement of operations.

(b) The cash receipts are equity distributions from the Entities to
International Paper prior to the formation of the 2015 Financing
Entities. After formation of the 2015 Financing Entities, cash
receipts are interest received on the Financial assets of special
purpose entities.

(c) The cash payments are interest payments on the associated
debt obligations discussed above. After formation of the 2015
Financing Entities, the payments represent interest paid on
Nonrecourse financial liabilities of special purpose 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 timberland for $2.38 billion. The total consideration
consisted almost entirely of notes due in 2027 issued
by the buyer of the timberland, 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, 2015 and 2014, the fair value of the notes
was $2.10 billion and $2.27 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. 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 us. 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, 2015 and 2014, the fair value of this debt
was $1.97 billion and $2.16 billion, respectively. This
debt is classified as Level 2 within the fair value
hierarchy, which is further defined in Note 14.

Activity between the Company and the 2007 financing
entities was as follows:

In millions

Revenue (a)

Expense (b)

Cash receipts (c)

Cash payments (d)

2013
2014
2015
$ 27 $ 26 $ 27
29

8
21

(a) The revenue is included in Interest expense, net in the
accompanying consolidated statement of operations and
includes approximately $19 million, $19 million and $19 million
for the years ended December 31, 2015, 2014 and 2013,
respectively, of accretion income for the amortization of the
purchase accounting adjustment on 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 approximately $7 million, $7 million and $7 million for
the years ended December 31, 2015, 2014 and 2013,
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.

NOTE 13 DEBT AND LINES OF CREDIT

In 2015, International Paper issued $700 million of
3.80% senior unsecured notes with a maturity date in
2026, $600 million of 5.00% senior unsecured notes
with a maturity date in 2035, and $700 million of 5.15%
senior unsecured notes with a maturity date in 2046.
The proceeds from this borrowing were used to repay
approximately $1.0 billion of notes with interest rates
ranging from 4.75% to 9.38% and original maturities
from 2018 to 2022, along with $211 million of cash
premiums associated with the debt repayments.
Additionally, the proceeds from this borrowing were
used to make a $750 million voluntary cash contribution
to the Company's pension plan. Pre-tax early debt
retirement costs of $207 million related to the debt
repayments,
the $211 million of cash
premiums, are included in restructuring and other
charges in the accompanying consolidated statement
of operations for the twelve months ended December
31, 2015.

including

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

Amounts related to early debt extinguishment during
the years ended December 31, 2015, 2014 and 2013
were as follows:

In millions

Debt reductions (a)

2015

2014

2013

$ 2,151 $ 1,625 $ 574

Pre-tax early debt extinguishment
costs (b)

207

276

(a) Reductions related to notes with interest rates ranging from
2.00% to 9.38% with original maturities from 2014 to 2031 for
the years ended December 31, 2015, 2014 and 2013. Includes
the $630 million payment for a portion of the Special Purpose
Entity Liability (see Note 12 Variable Interest Entities).
(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

2015

2014

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

5.00% to 5.15% – due 2035 – 2046

4.8% notes - due 2044

4.75% notes – due 2022

3.65% to 3.80% notes – due 2024 – 2026

Floating rate notes – due 2015 – 2025 (a)

Environmental and industrial development
bonds – due 2015 – 2035 (b)

Short-term notes (c)

Other (d)

Total (e)

Less: current maturities

Long-term debt

264 $

295

648

603

721

131

142

185

585

261

1,280

796

817

1,490

438

594

264

420

903

979

721

131

142

358

585

457

—

796

896

797

271

950

424

275

9,326

9,373

426

742

$ 8,900 $ 8,631

(a) The weighted average interest rate on these notes was 2.9%

in 2015 and 2.8% in 2014.

(b) The weighted average interest rate on these bonds was 5.8%

in 2015 and 5.7% in 2014.

(c) The weighted average interest rate was 2.2% in 2015 and
2.6% in 2014. Includes $5 million at December 31, 2015 and
$91 million at December 31, 2014 related to non-U.S.
denominated borrowings with a weighted average interest rate
of 2.2% in 2015 and 7.2% in 2014.
Includes $8 million at December 31, 2015 and $20 million at
December 31, 2014 related to the unamortized gain on interest
rate swap unwinds (see Note 14 Derivatives and Hedging
Instruments).

(d)

(e) The fair market value was approximately $9.9 billion at
December 31, 2015 and $10.6 billion at December 31, 2014.

Total maturities of long-term debt over the next five
years are 2016 – $426 million; 2017 – $43 million; 2018
– $811 million; 2019 – $427 million; and 2020 – $183
million.

At December 31, 2015, International Paper’s credit
facilities (the Agreements) totaled $2.1 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 $600 million of uncommitted
financings based on eligible receivables balances
(approximately $600 million available as of December
31, 2015) under a receivables securitization program
that expires in December 2016. At December 31, 2015,
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

reported

instrument
in Accumulated other
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.

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 or forward purchase contracts.

Derivative instruments are reported in the consolidated
balance sheets at their fair values, unless the derivative
instruments qualify for the normal purchase normal sale
("NPNS") exception under GAAP and such exception
has been elected. If the NPNS exception is elected,
the fair values of such contracts are not recognized on
the balance sheet.

Contracts that qualify 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 change in the fair value of certain non-qualifying
instruments used to reduce commodity price volatility
is 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

Mexican peso / U.S. dollar -
Forward

U.S. dollar / Brazilian real -
Forward

Derivatives in Fair Value
Hedging Relationships:

Interest rate contracts (in
USD)

Derivatives Not Designated as
Hedging Instruments:

Electricity contract (in
Megawatt Hours)

Foreign exchange contracts
(Sell / Buy; denominated in sell
notional):

European euro / British
pounds

Indian rupee / U.S. dollar

Mexican peso / U.S. dollar

U.S. dollar / Brazilian real

Interest rate contracts (in USD)

December 31,
2015

December 31,
2014

—

260

136

—

131

—

166

280

—

125

230

—

187

—

(a) These contracts had maturities of three years or less as of

December 31, 2015.

The following table shows gains or losses recognized
in AOCI, net of tax, related to derivative instruments:

Gain (Loss)
Recognized in AOCI on Derivatives
(Effective Portion)

In millions

2015

2014

2013

Foreign exchange
contracts

Total

(3) $

10 $

—

During the next 12 months, the amount of the
December 31, 2015 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

Total

Gain (Loss)
Reclassified from
AOCI
into Income
(Effective Portion)

2015

2014

2013

Location of Gain
(Loss)
Reclassified
from AOCI
into Income
(Effective Portion)

(12) $

4 $

Cost of products sold

Gain (Loss)
Recognized
in Income

Location of Gain
(Loss)
in Consolidated
Statement of
Operations

In millions

2015

2014

2013

Derivatives in Fair Value Hedging Relationships:

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

(3)

(1)

Interest expense, net

$ —

(7)

—

(4)

(2)

—

(1)

13 (a)

12 (b)

(1)

(5)

Cost of products sold

Interest expense, net

Cost of products sold

Interest expense, net

(a) Excluding gain of $3 million related to debt reduction recorded to Restructuring and other charges.
(b) 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:

2015

2014

In millions

Second Quarter

First Quarter

Total

Issued

Terminated

Undesignated

Issued

Terminated

Undesignated

—

— $

175

—

175

—

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

financial

International Paper has an embedded derivative. For
these
the embedded
instruments and
derivative, fair value is determined at each balance
sheet date using an income approach.

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:

Foreign Exchange Contracts

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.

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.

Electricity Contract

The electricity contract is valued using the Mid-C
index forward curved obtained from the
Intercontinental Exchange. The market value of the
contract is the sum of the fair value of all future
purchase payments between the contract
counterparties, discounted to present value. The fair
value of the future purchase payments is determined
by comparing the contract price to the forward price
and present valued using International Paper's cost
of capital.

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

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

Assets

Liabilities

December 31,
2015

December 31,
2014

December 31,
2015

December 31,
2014

5 (a) $

16 (b) $

1 (c) $

14 (c)

—

1 (a)

7 (d) $

—

2 (c)

(a)

Included in Other current assets in the accompanying consolidated balance sheet.

(b)

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 accrued liabilities in the accompanying consolidated balance sheet.
Includes $4 million recorded in Other accrued liabilities and $3 million recorded 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
specified defaults.
Management has made an
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
the aggregate with all
counterparty and
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, 2015 and December 31,
2014, respectively. The Company was not required to
post any collateral as of December 31, 2015 or 2014.

terminate. The

NOTE 15 CAPITAL STOCK

The authorized capital stock at both December 31,
2015 and 2014, 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, 2015, 2014
and 2013:

Common Stock

In thousands

Balance at January 1, 2013

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

Issued

439,894
7,328

447,222
1,632

448,854

Treasury
13
(533)
— 11,388
10,868

(4,668)
— 22,534
28,734

Issuance of stock for various plans, net

Repurchase of stock

Balance at December 31, 2015

62
(4,230)
— 12,272
36,776

448,916

NOTE 16 RETIREMENT PLANS

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).

2015

2014

U.S.
Plans

Non-
U.S.
Plans

U.S.
Plans

Non-
U.S.
Plans

$14,741 $ 233 $12,903 $ 228

161

597

—

(43)

(254)

—

(12)

145

600

—

(1)

1,755

—

(23)

—

133

(4)

—

(764)

(7)

(772)

(13)

—

(25)

—

(20)

$14,438 $ 204 $14,741 $ 233

$10,918 $ 180 $10,706 $ 181

(1)

813

(764)

(43)

—

(7)

(12)

—

593

391

(772)

(13)

—

(19)

—

(15)

$10,923 $ 155 $10,918 $ 180

$ (3,515) $

(49) $ (3,823) $

(53)

In millions

Change in projected benefit
obligation:

Benefit obligation,
January 1

Service cost

Interest cost

Curtailments

Settlements

Actuarial loss (gain)

Divestitures

Other

Plan amendments

Benefits paid

Effect of foreign currency
exchange rate
movements

Benefit obligation,
December 31

Change in plan assets:

Fair value of plan assets,
January 1
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:

Non-current asset

— $

7 $

— $

Current liability

(22)

(2)

(62)

Non-current liability

(3,493)

(54)

(3,761)

$ (3,515) $

(49) $ (3,823) $

(3)

(58)

(53)

Amounts recognized in
accumulated other
comprehensive income
under ASC 715 (pre-tax):

Prior service cost

Net actuarial loss

166 $ — $

209 $ —

4,899

4,812

$ 5,065 $

42 $ 5,021 $

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 $62 million,
$38 million and $28 million in 2015, 2014 and 2013,
respectively, and which are expected to be $22 million
in 2016.

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 2015 and 2014, and the
plans’ funded status. The U.S. combined benefit
obligation as of December 31, 2015 decreased by $302
million, due to an increase in the discount rate
assumption used in computing the estimated benefit
obligation partially offset by updated demographic
assumptions. Our mortality assumption for the year
ended December 31, 2014 reflects adoption of the
longevity
newly
improvement sale, with Company specific adjustments.
U.S. plan assets increased by $5 million, primarily
reflecting a $750 million qualified pension contribution
in 2015 offset by benefit payments.

issued Society of Actuaries

The components of the $44 million and $2 million
increase related to U.S. plans and non-U.S. plans,
respectively, in the amounts recognized in OCI during
2015 consisted of:

In millions

Current year actuarial (gain) loss

Amortization of actuarial loss

Amortization of prior service cost

Settlements

Effect of foreign currency exchange
rate movements

U.S.
Plans

Non-
U.S.
Plans

530 $
(428)
(43)

(15)

—

44 $

5
(1)
—

—

(2)

The accumulated benefit obligation at December 31,
2015 and 2014 was $14.3 billion and $14.6 billion,
respectively, for our U.S. defined benefit plans and
$189 million and $208 million, respectively, at
December 31, 2015 and 2014 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, 2015 and 2014:

2015

2014

U.S.
Plans

Non-
U.S.
Plans

U.S.
Plans

Non-
U.S.
Plans

$ 14,438 $ 182 $ 14,741 $

196

14,282

10,923

168

126

14,559

10,918

176

135

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 $374 million and $41
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:

2015

Non-
U.S.
Plans

U.S.
Plans

2014

Non-
U.S.
Plans

U.S.
Plans

2013

Non-
U.S.
Plans

$ 161 $

6 $ 145 $

5 $ 188 $

597

600

576

(783)

(11)

(762)

(14)

(738)

(11)

428

374

— 485

—

(4)

—

$ 461 $

6 $ 387 $ — $ 545 $

In millions

Service cost

Interest cost

Expected return
on plan assets

Actuarial loss /
(gain)

Amortization of
prior service
cost

Curtailment
gain

Settlement loss

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 increase in 2015 pension expense reflects a
decrease in the discount rate from 4.65% in 2014 to
4.10% in 2015, updated mortality assumptions, higher
amortization of unrecognized actuarial losses and a
settlement charge in 2015.

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, 2015 was also the discount rate
used to determine net pension expense for the 2016
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:

2015

2014

2013

U.S.
Plans

Non-
U.S.
Plans

U.S.
Plans

Non-
U.S.
Plans

U.S.
Plans

Non-
U.S.
Plans

4.40% 4.64% 4.10% 4.72% 4.90% 5.07%

3.75% 4.12% 3.75% 4.03% 3.75% 4.13%

Discount rate (a)

Expected long-term rate of return on plan assets (b)

Rate of compensation increase

4.10% 4.72% 4.65% 5.07% 4.10% 4.96%

7.75% 6.64% 7.75% 7.53% 8.00% 7.04%

3.75% 4.03% 3.75% 4.13% 3.75% 3.17%

(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% and 6.16% for 2014 and 2013, 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 2016, 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 4.40% and an assumed rate of
compensation increase of 3.75%. The Company
estimates that it will record net pension expense of
approximately $364 million for its U.S. defined benefit
plans in 2016, with the decrease from expense of $461
million in 2015 reflecting an increase in the discount
rate to 4.40% in 2016 from 4.10% in 2015, updated
demographic assumptions, and lower 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 2016 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

2016

27
(2)

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

2015

2014

48%

33%

10%

100%

47%

33%

10%

10%
100%

Target
Allocations

43% - 54%

25% - 35%

7% - 13%

8% - 17%

The 2014 actual allocations shown represent a
weighted average of International Paper and Temple-
Inland plan assets as the TIN plan was fully merged into
the IP plan by 2015.

The fair values of International Paper’s pension plan
assets at December 31, 2015 and 2014 by asset class
are shown below. Plan assets included an immaterial
amount of International Paper common stock at
December 31, 2015 and 2014. 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, 2015

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

$ 2,150 $

1,382 $

768 $

Equities – international

Corporate bonds

Government securities

Mortgage backed securities

Other fixed income

Commodities

Hedge funds

Private equity

Real estate

Risk parity funds

Cash and cash equivalents

2,563

1,286

518

217

275

118

894

492

1,094

341

975

1,818

—

975

745

1,286

518

217

265

118

—

894

492

1,094

340

—

Total Investments

$10,923 $

4,175 $

3,918 $

2,830

Fair Value Measurement at December 31, 2014

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

$ 2,268 $

1,380 $

888 $

Equities – international

Corporate bonds

Government securities

Mortgage backed securities

Other fixed income

Commodities

Hedge funds

Private equity

Real estate

Risk parity funds

Cash and cash equivalents

Total Investments

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

—

$ 10,918 $

3,524 $

4,521 $

2,873

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.

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

(commingled, multi-manager

third-party administrator based upon

fund’s
the
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.

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.

Risk Parity Funds are defined as engineered beta
exposure to a wide range of asset classes and risk
premia, including equity, interest rates, credit, and
commodities. Risk parity funds seek to provide high
risk-adjusted returns while providing a high level of
diversification relative to a traditional equity/fixed
income portfolio. These funds seek to achieve this
objective with the use of modest leverage applied to
lower-risk, more diverse asset classes. Investments in
Risk parity funds are valued using monthly reported net
asset values. Also included in these funds are related
derivative instruments which are generally employed
as asset class substitutes 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, 2015 were as
follows:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

In millions

Beginning balance at December 31, 2014

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

Ending balance at December 31, 2015

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 $750 million, $353 million
and $31 million were made by the Company in 2015,
2014 and 2013, 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.

Other
fixed
income

Hedge
funds

Private
equity

Real
estate

Risk
parity
funds

Total

10 $ 867 $

519 $ 1,101 $

376 $ 2,873

—

(3)

—

(9)

(45)

—

(75)

—

(39)

(7)

—

(113)

—

10 $ 894 $

492 $ 1,094 $

340 $ 2,830

At December 31, 2015, projected future pension benefit
payments, excluding any termination benefits, were as
follows:

In millions

2016

2017

2018

2019

2020

2021 – 2025

OTHER U.S. PLANS

782

792

803

818

832

4,365

International Paper sponsors the International Paper
Company Salaried Savings Plan and the International
Paper Company Hourly Savings Plan, both of which are
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.

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 $100 million, $112 million and $120
million for the plan years ending in 2015, 2014 and 2013,
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 components of postretirement benefit expense in
2015, 2014 and 2013 were as follows:

In millions

Service cost

Interest cost

Actuarial loss

Amortization of
prior service
credits

Net
postretirement
(benefit)
expense (a)

2015

Non-
U.S.
Plans

U.S.
Plans

2014

Non-
U.S.
Plans

U.S.
Plans

2013

Non-
U.S.
Plans

1 $

2 $

—

(10)

(2)

(13)

(1)

(24)

—

8 $

5 $

7 $

(1) $

(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.

The discount rates used to determine net U.S. and non-
U.S. postretirement benefit cost for the years ended
December 31, 2015, 2014 and 2013 were as follows:

2015

Non-
U.S.
Plans

U.S.
Plans

2014

Non-
U.S.
Plans

2013

Non-
U.S.
Plans

U.S.
Plans

Discount rate

3.90% 11.52% 4.50% 11.94% 3.70% 8.43%

The weighted average assumptions used to determine
the benefit obligation at December 31, 2015 and 2014
were as follows:

2015

Non-
U.S.
Plans

U.S.
Plans

2014

Non-
U.S.
Plans

U.S.
Plans

Discount rate

4.20% 12.23% 3.90% 11.52%

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% 11.41% 7.00% 11.38%

5.00% 5.94% 5.00% 6.11%

2022

2026

2022

2025

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, 2015 by approximately $11 million and
$7 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, 2015 by approximately $10 million and
$6 million, respectively. The effect on net postretirement

The components of the $8 million and ($5) million
increase and decrease in the amounts recognized in
OCI during 2015 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 cost

Amortization of prior service credit

Currency impact

U.S.
Plans

Non-
U.S.
Plans

4 $ —

(6)

(1)

—

8 $

(7)

(5)

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 $17 million, $33 million and $63
million in 2015, 2014 and 2013, respectively. The
portion of the change in funded status for the non-U.S.
plans was $0 million, $14 million, and $19 million in
2015, 2014 and 2013, 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 2016 are expected to be
$6 million and $(4) million, respectively. The estimated
amounts for non-U.S. plans in 2016 are expected to be
$1 million and $(2) million, respectively.

At December 31, 2015, 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

2016

2017

2018

2019

2020

2021 – 2025

U.S.
Plans

31 $

1 $

Non-
U.S.
Plans

benefit cost from a 1% increase or decrease would be
approximately $1 million for both U.S. and non-U.S.
plans.

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 2015 and 2014:

In millions

2015

Non-
U.S.
Plans

U.S.
Plans

2014

Non-
U.S.
Plans

U.S.
Plans

Change in projected benefit
obligation:

Benefit obligation, January 1

$ 306 $

59 $ 322 $

Service cost

Interest cost

Participants’ contributions

Actuarial (gain) loss

Other

Plan amendments

Benefits paid

Less: Federal subsidy

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

—

(57)

—

(1)

—

(1)

—

(19)

—

(62)

—

(26)

(7)

(1)

—

(5)

$ 275 $

45 $ 306 $

$ — $ — $ — $ —

—

(57)

(1)

(62)

—

(1)

$ — $ — $ — $ —

Funded status, December 31

$ (275) $ (45) $ (306) $ (59)

Amounts recognized in the
consolidated balance sheet
under ASC 715:

Current liability

$ (29) $

(2) $ (33) $

(2)

Non-current liability

(246)

(43)

(273)

(57)

$ (275) $ (45) $ (306) $ (59)

Amounts recognized in
accumulated other
comprehensive income under
ASC 715 (pre-tax):

Net actuarial loss (gain)

Prior service credit

42 $

15 $

44 $

(12)

(2)

(22)

(5)

30 $

13 $

22 $

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.

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

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 employees in their
individual tax returns.

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 invested capital (ROIC)
and total shareholder return (TSR). All outstanding
options expired on March 15, 2015.

The following summarizes the status of the Stock
Option Program and the changes during the three years
ending December 31, 2015:

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Life
(years)

Aggregate
Intrinsic
Value
(thousands)

Options
(a,b)

Outstanding at December 31,
2012

9,136,060

$38.79

1.15

$1,077

Granted

Exercised

Expired

Outstanding at December 31,
2013

Granted

Exercised

Expired

4,744

(7,317,825)

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

0.67

16,175

Outstanding at December 31,
2014

71,892

39.03

0.18

1,046

Granted

Exercised

Expired

—

(62,477)

39.05

(9,415)

38.92

Outstanding at December 31,
2015

—

$—

0.00

$—

(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 ROIC and TSR compared to
ROIC and TSR peer groups of companies. Awards are
weighted 75% for ROIC and 25% for TSR for all
participants except for officers for whom the awards are
weighted 50% for ROIC and 50% for TSR. The ROIC
component of the PSP awards is valued at the closing
stock price on the day prior to the grant date. As the
ROIC 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.

The following summarizes the activity of the Executive
Continuity Award program and RSA program for the
three years ending December 31, 2015:

Outstanding at December 31, 2012

Granted

Shares issued

Forfeited

Outstanding at December 31, 2013

Granted

Shares issued

Forfeited

Outstanding at December 31, 2014

Granted

Shares issued

Forfeited

Outstanding at December 31, 2015

Weighted
Average
Grant Date
Fair Value
$30.49
44.41

32.30

37.75

36.24

48.19

33.78

45.88

47.03

50.06

45.35

50.04

$48.24

151,549

67,100

(88,775)

(17,500)

112,374

89,500

(83,275)

(4,000)

114,599

36,300

(27,365)

(3,166)

120,368

At December 31, 2015, 2014 and 2013 a total of 16.2
million, 16.3 million and 17.8 million shares,
respectively, were available for grant under the ICP.

Stock-based compensation expense and related
income tax benefits were as follows:

In millions

2015

2014

2013

Total stock-based compensation
expense (included in selling and
administrative expense)

Income tax benefits related to stock-
based compensation

114 $

118 $

137

At December 31, 2015, $126 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.

PSP grants are made in performance-based restricted
stock units. The 2012 PSP awards issued to certain
members of senior management were accounted for as
liability awards, which were remeasured at fair value at
each balance sheet date. The valuation of these PSP
liability awards was 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, 2015

19.01%-36.02%

0.21%-1.10%

The following summarizes PSP activity for the three
years ending December 31, 2015:

Outstanding at December 31, 2012

Granted

Shares issued

Forfeited

Outstanding at December 31, 2013

Granted

Shares issued

Forfeited

Outstanding at December 31, 2014

Granted

Shares issued

Forfeited

Weighted
Average
Grant Date
Fair Value

$28.37

40.76

32.48

34.58

31.20

46.82

37.18

43.10

34.98

53.25

37.09

53.97

Share/Units

8,660,855

3,148,445

(3,262,760)

(429,051)

8,117,489

3,682,663

(4,025,111)

(499,107)

7,275,934

1,863,623

(2,959,160)

(322,664)

Outstanding at December 31, 2015

5,857,733

$38.69

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.

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.

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.

At December 31, 2015 and 2014, the Company's
investment in Ilim was $172 million and $170 million,
respectively, which was $161 million and $158 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. The
Company is party to a joint marketing agreement with
Ilim, under which the Company purchases, markets and
sells paper produced by Ilim. Purchases under this
agreement were $170 million, $200 million and $114
million for the years ended December 31, 2015, 2014
and 2013, respectively.

INFORMATION BY INDUSTRY SEGMENT

Net Sales

In millions

2015

2014

Industrial Packaging

$ 14,484

Printing Papers
Consumer Packaging

Corporate and Intersegment
Sales

$ 14,944
5,720

2013
$ 14,810
6,205

3,403

3,435

5,031
2,940

(90)

(450)

(967)

Net Sales

$ 22,365

$ 23,617

$ 23,483

Operating Profit

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 $131
million, $(194) million and $(46) million in 2015, 2014,
and 2013, respectively, for Ilim. Equity earnings (losses)
includes an after-tax foreign exchange gain (loss) of
$(75) million, $(269) million and $(32) million in 2015,
2014 and 2013, respectively, primarily on
the
remeasurement of U.S. dollar-denominated net debt.

Consumer Packaging

Interest expense, net

Industrial Packaging

Operating Profit

Printing Papers

In millions

1,853

2,361

(555)

2015

(25)

533

(16)

178

2,058

(601)

2014

2013

1,896

1,801

Summarized financial information for Ilim which is
accounted for under the equity method is presented in
the following table.

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

2015

2014

$ 455

968

665

715

$ 458
1,223

899

742

2015
$ 1,931
971

254

237

2014
$ 2,138
772
(387)

(360)

2013
$ 1,897
562

(76)

(71)

271

161

2,233

(612)

(61)

(10)

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

(8)

(36)

(2)

(51)

(238)

(282)

—

(38)

—

(258)

(212)

(323)

1,266

872

1,228

Restructuring and Other Charges

In millions

2015

2014

2013

Industrial Packaging

— $

—

242

554

277

(2)

118

(5)

252

846

156

Printing Papers

Consumer Packaging

Corporate

Restructuring and Other
Charges

Assets

In millions

Industrial Packaging

Printing Papers

Consumer Packaging

Corporate and other (b)

Assets

Capital Spending

2015

$ 14,483
4,696

2,115

9,293

$ 30,587

2014
$ 14,852
5,393

3,249

5,190
$ 28,684

INFORMATION BY GEOGRAPHIC AREA
Net Sales (e)

In millions

United States (f)

EMEA

Pacific Rim and Asia

Americas, other than U.S.

2015

2014

$ 16,554

2,770

1,501

1,540

$ 16,645
3,273

1,951

1,748

Net Sales

$ 22,365

$ 23,617

2013
$ 16,371
3,250

2,114

1,748
$ 23,483

Long-Lived Assets (g)

In millions

United States

EMEA

Pacific Rim and Asia

Americas, other than U.S.

Corporate

Long-Lived Assets

2015

2014

9,683

9,476

827

353
1,085

398

$ 12,346

926

897
1,553

383
$ 13,235

(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.
Includes corporate assets and assets of businesses held for
sale.

(b)

(c) The xpedx business, which historically represented the
Company's Distribution reportable segment, was spun off July
1, 2014.

(d) Excludes accelerated depreciation related to the closure and/

or repurposing of mills.

(e) Net sales are attributed to countries based on the location of

the seller.

(f) Export sales to unaffiliated customers were $2.0 billion in 2015,

$2.3 billion in 2014 and $2.4 billion in 2013.

(g) Long-Lived Assets

includes Forestlands and Plants,

Properties and Equipment, net.

In millions

2015

2014

2013

Industrial Packaging

Printing Papers

Consumer Packaging

Distribution (c)

Subtotal

Corporate and other (b)

858

361

216

—

1,435

754

318

233

—

1,305

629

294

208

1,140

Total

1,487

1,366

1,198

Depreciation, Amortization and Cost of Timber
Harvested (d)

In millions

2015

2014

2013

Industrial Packaging

Printing Papers

Consumer Packaging

Corporate

Depreciation and
Amortization

725

307

215

775

367

223

805

446

206

1,294

1,406

1,531

External Sales By Major Product

In millions

2015

2014

Industrial Packaging

$ 14,421

Printing Papers

Consumer Packaging

Other

Net Sales

$ 14,837
5,360

3,307

113

4,919

2,907

118

$ 22,365

$ 23,617

2013
$ 14,729
5,443

3,311

—
$ 23,483

INTERIM FINANCIAL RESULTS (UNAUDITED)

In millions, except per share amounts
and stock prices

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year

2015

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

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

Net earnings (loss)

$ 5,517

$ 5,714

$ 5,691

$ 5,443

$ 22,365

1,673

1,746

1,800

1,678

6,897

406

—

313

266 (b)

329 (b)

265 (b)

1,266 (b)

—

227 (b,c)

220 (b,c)

178 (b,c)

938 (b,c)

0.74

0.54 (b)

0.53 (b)

0.43 (b)

2.25 (b)

—

0.74

—

0.74

—

0.54 (b,c)

0.53 (b,c)

0.43 (b,c)

2.25 (b,c)

0.54 (b)

0.53 (b)

0.43 (b)

2.23 (b)

—

0.54 (b,c)

0.53 (b,c)

0.43 (b,c)

2.23 (b,c)

Dividends per share of common stock

0.4000

0.4400

1.6400

Common stock prices

High

Low

2014

Net sales

$ 57.90

$ 56.49

$ 49.49

$ 44.83

$ 57.90

51.35

47.39

37.11

36.76

$ 5,724

$ 5,899

$ 6,051

$ 5,943

$ 23,617

Gross margin (a)

1,690

1,839

1,996

1,838

7,363

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

(139) (d)

(7) (e)

152 (d)

(13) (e)

552 (d)

16 (e)

307 (d)

(9) (e)

872 (d)

(13) (e)

(95) (d-f)

161 (d-f)

355 (d-f)

134 (d-f)

555 (d-f)

(0.20) (d)

0.40 (d)

0.80 (d)

0.34 (d)

1.33 (d)

Gain (loss) from discontinued operations

(0.01) (e)

(0.03) (e)

0.04 (e)

Net earnings (loss)

(0.21) (d-f)

0.37 (d-f)

0.84 (d-f)

(0.02) (e)

0.32 (d-f)

(0.03) (e)

1.30 (d-f)

Diluted earnings (loss) per share
attributable to International Paper
Company common shareholders:

Earnings (loss) from continuing
operations

Gain (loss) from discontinued operations

(0.20) (d)

(0.01) (e)

0.40 (d)

(0.03) (e)

0.79 (d)

0.04 (e)

0.34 (d)

(0.02) (e)

1.31 (d)

(0.02) (e)

Net earnings (loss)

(0.21) (d-f)

0.37 (d-f)

0.83 (d-f)

0.32 (d-f)

1.29 (d-f)

Dividends per share of common stock

0.3500

0.4000

1.4500

Common stock prices

High

Low

$ 49.71

$ 50.65

$ 51.98

$ 55.73

44.43

44.24

46.77

44.50

44.24

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
products sold, excluding depreciation, amortization
and cost of timber harvested.

(b) Includes the following pre-tax charges (gains):

In millions

2015

Riegelwood mill conversion
costs, net of proceeds from
sale of the Carolina Coated
Bristols brand

Timber monetization
restructuring

Early debt extinguishment
costs

Refund and state tax credits

IP-Sun JV impairment

Legal reserve adjustment

Impairment of Orsa goodwill
and trade name intangible

Other items

Total

$ — $ (14) $

$ 15

—

207

(4)

—

186

—

(1)

—

(12)

137

$ — $ 190

$ 211

$ 158

(d) Includes the following pre-tax charges (gains):

2014

Temple-Inland integration

$ 12

Courtland mill shutdown

495

Early debt extinguishment
costs

India legal contingency
resolution

Multi-employer pension plan
withdrawal liability

Foreign tax amnesty program

Asia Industrial Packaging
goodwill impairment

Loss on sale by investee and
impairment of investment

Other items

Total

—

100

(1)

—

262

—

(4)

(20)

—

$ 511

$ 309

$ 77

$ 155

(e) Includes the after-tax operating earnings of the
xpedx business prior to the spin-off and the
following after-tax charges (gains):

2014

xpedx spinoff

$ 10

$ 20

$ (14) $ —

Building Products divestiture

xpedx restructuring

Total

—

(1)

(2)

—

$ 12

$ 19

$ (16) $

—

(f) Includes the following tax expenses (benefits):

2015

Tax expense for cash pension

$ — $ 23

$ — $ —

Tax benefit related to IP-Sun
JV
Other items

—

(67)

—

Total

$ — $ 28

$ (67) $

—

2014

State legislative tax change

$ 10

$ — $ — $ —

Internal restructuring

Other items

Total

—

(1)

—

(90)

—

$ — $ — $ (90)

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, 2015, 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, 2015.

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
preparation of
for external
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;

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
are being made only
in accordance with
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, 2015, management has assessed
the effectiveness of the Company’s internal control over
financial reporting. In a report included on pages 40 and
41, management concluded that the Company’s
internal control over financial reporting was effective as
of December 31, 2015.

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. Deloitte & Touche LLP has also issued
an attestation report on our internal control over
financial reporting. Their report on the consolidated
financial statements and attestation report are included
in Part II, Item 8 of this Annual Report under the heading
“Financial Statements and Supplementary Data.”

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
the
representatives of management, and with
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, 2015, 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

Information concerning our directors
is hereby
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 5
and 6 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

2015, 2014 and 2013

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 February 9, 2016
(incorporated by reference to Exhibit 3.1 to
the Company’s Current Report on Form 8-
K dated February 8, 2016).

(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) Supplemental Indenture (including the form
of Notes), dated as of May 26, 2015,
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 May 26, 2015).

(4.9) 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) 2015 Management

Incentive

Plan
(incorporated by reference to Exhibit 10.2 to
the Company’s Annual Report on Form 10-
K for the fiscal year ended December 31,
2014). +

(10.3) 2016 Management Incentive Plan

(incorporated by reference to Exhibit 99.1 to
the Company’s Current Report on Form 8-
K dated February 8, 2016) +

(10.4) Amended and Restated 2009 Executive
Management Incentive Plan, including 2015
Exhibits thereto (incorporated by reference
to Exhibit 10.4 to the Company’s Annual
Report on Form 10-K for the fiscal year
ended December 31, 2014). +

(10.5) 2016 Exhibits to the Amended and Restated
Incentive

2009 Executive Management
Plan. * +

(10.6) Restricted

and

Deferred
Stock
for Non-Employee
Compensation Plan
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. * +

(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
Company
Supplemental
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
- approved
prior
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) Equity Transfer Agreement dated October

7, 2015, between International Paper
Investment (Shanghai) Co., Ltd. and
Shandong Sun Holding Group Co., Ltd. *

(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, 2015). *

(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.*

(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

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
(In millions)

For the Year Ended December 31, 2015
Additions
Charged to
Other
Accounts

Deductions
from
Reserves

Additions
Charged to
Earnings

Balance at
Beginning
of Period

Balance at
End of
Period

82 $
16

11 $

—
—

(23)(a) $
(11)(b)

70
10

For the Year Ended December 31, 2014
Additions
Charged to
Other
Accounts

Deductions
from
Reserves

Additions
Charged to
Earnings

Balance at
Beginning
of Period

Balance at
End of
Period

109 $

11 $
41

—
—

(38)(a) $
(76)(b)

82
16

For the Year Ended December 31, 2013

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

Description

Reserves Applied Against Specific
Assets Shown on Balance Sheet:

Doubtful accounts – current

119 $

Restructuring reserves

38 $

—

(48)(a) $

(12)(b)

109

(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 25, 2016

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 25, 2016

/S/ DAVID J. BRONCZEK Director

David J. Bronczek

February 25, 2016

/S/ WILLIAM J. BURNS Director

February 25, 2016

Willliam J. Burns

/S/ AHMET C. DORDUNCU Director

Ahmet C. Dorduncu

/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

Director

February 25, 2016

/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

Director

February 25, 2016

Senior Vice President and Chief
Financial Officer

February 25, 2016

Vice President – Finance and Controller

February 25, 2016

2015 LISTING OF FACILITIES
(all facilities are owned except noted otherwise)

PRINTING PAPERS

Uncoated Papers and Pulp

U.S.:

Selma, Alabama (Riverdale Mill)

Cantonment, Florida (Pensacola Mill)

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

Paulinia, São Paulo, Brazil
Yanzhou City, China (2)

Veracruz, Mexico

Kenitra, Morocco

Edirne, Turkey
Corum, Turkey (1)

Corrugated Container

U.S.:

Bay Minette, Alabama

Decatur, Alabama

Dothan, Alabama leased

Huntsville, Alabama

Conway, Arkansas (2 locations)

Fort Smith, Arkansas (2 locations)

APPENDIX I

Stone Mountain, Georgia leased

Tucker, Georgia

Aurora, Illinois (3 locations)

Bedford Park, Illinois (2 locations) 1
leased

Belleville, Illinois

Carroll Stream, Illinois

Des Plaines, Illinois

Lincoln, Illinois

Montgomery, Illinois

Northlake, Illinois

Rockford, Illinois

Butler, Indiana

Crawfordsville, Indiana

Fort Wayne, Indiana

Hammond, Indiana

Russellville, Arkansas (2 locations)

Indianapolis, Indiana (3 locations)

Três Lagoas, Mato Grosso do Sul, Brazil

Phoenix (Tolleson), Arizona

Saint Anthony, Indiana

Saillat, France

Kadiam, India

Rajahmundry, India

Kwidzyn, Poland

Svetogorsk, Russia

INDUSTRIAL PACKAGING

Containerboard

U.S.:

Pine Hill, Alabama

Prattville, Alabama

Cantonment, Florida (Pensacola Mill)

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

Yuma, Arizona

Anaheim, California

Buena Park, California leased

Camarillo, California

Carson, California

Compton, California

Elk Grove, California

Exeter, California

Gilroy, California (2 locations)

Los Angeles, California leased

Modesto, California

Ontario, California

Salinas, California

Sanger, California

San Leandro, California leased

Santa Fe Springs, California (2
locations)

Stockton, California

Tracy, California

Golden, Colorado

Wheat Ridge, Colorado

Putnam, Connecticut

Orlando, Florida

Plant City, Florida

Tampa, Florida leased

Columbus, Georgia

Forest Park, Georgia

Griffin, Georgia

Tipton, Indiana

Cedar Rapids, Iowa

Waterloo, Iowa

Garden City, Kansas

Bowling Green, Kentucky

Lexington, Kentucky

Louisville, Kentucky

Walton (Richwood), Kentucky

Bogalusa, Louisiana

Lafayette, Louisiana

Shreveport, Louisiana

Springhill, Louisiana

Auburn, Maine

Three Rivers, Michigan

Arden Hills, Minnesota

Austin, Minnesota

Fridley, Minnesota

Minneapolis, Minnesota leased

Shakopee, Minnesota

White Bear Lake, Minnesota

Houston, Mississippi

Jackson (Richland), Mississippi

Magnolia, Mississippi leased

Olive Branch, Mississippi

Fenton, Missouri

Kansas City, Missouri

Maryland Heights, Missouri

International:

Kennesaw, Georgia leased

North Kansas City, Missouri leased

Franco da Rocha, São Paulo, Brazil

Nova Campina, São Paulo, Brazil

Lithonia, Georgia

Savannah, Georgia

St. Joseph, Missouri

St. Louis, Missouri

A-1

Omaha, Nebraska

Barrington, New Jersey

Bellmawr, New Jersey

Milltown, New Jersey

Spotswood, New Jersey

Thorofare, New Jersey

Binghamton (Conklin), New York

Buffalo, New York

Rochester, New York

Scotia, New York

Utica, New York

Charlotte, North Carolina (2 locations)

1 leased

Lumberton, North Carolina

Manson, North Carolina

Newton, North Carolina

Statesville, North Carolina

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 (2 locations)

Eighty-four, Pennsylvania

Hazleton, Pennsylvania

Kennett Square (Toughkenamon),
Pennsylvania
Lancaster, Pennsylvania

Mount Carmel, Pennsylvania

Georgetown, South Carolina

Laurens, South Carolina

Lexington, South Carolina

Amarillo, Texas

Carrollton, Texas (2 locations)

Edinburg, Texas

El Paso, Texas

Ft. Worth, Texas leased

Grand Prairie, Texas

Hidalgo, Texas

McAllen, Texas

San Antonio, Texas (2 locations)

Sealy, Texas

Waxahachie, Texas

Lynchburg, Virginia

Petersburg, Virginia

Richmond, Virginia

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

Santa Catarina, Mexico

Moses Lake, Washington

Silao, Mexico

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

Villa Nicolas Romero, Mexico

Zapopan, Mexico

Agadir, Morocco

Casablanca, Morocco

Singapore, Singapore

Almeria, Spain

Barcelona, Spain

Bilbao, Spain

Gandia, Spain

Madrid, Spain

Las Palmas, Canary Islands

Bangkok, Thailand

Tenerife, Canary Islands

Rancagua, Chile

Baoding, China

Beijing, China

Chengdu, China

Dalian, China

Dongguan, China

Adana, Turkey

Bursa, Turkey

Corlu, Turkey

Corum, Turkey

Gebze, Turkey

Izmir, Turkey

Guangzhou, China (2 locations)

Hohhot, China

Nanjing China

Recycling

U.S.:

Shanghai, China (2 locations)

Phoenix, Arizona

Shenyang, China

Suzhou, China

Tianjin, China (2 locations)

Wuhan, China

Arles, France

Chalon-sur-Saone, France

Fremont, California

Norwalk, California

West Sacramento, California
Denver, Colorado (1)

Itasca, Illinois

Des Moines, Iowa

Wichita, Kansas

Ashland City, Tennessee leased

Creil, France

Cleveland, Tennessee

LePuy, France (Espaly Box Plant)

Roseville, Minnesota

Elizabethton, Tennessee leased

Mortagne, France

Omaha, Nebraska

Morristown, Tennessee

Murfreesboro, Tennessee

Guadeloupe, French West Indies

Charlotte, North Carolina

Batam, Indonesia

Beaverton, Oregon

A-2

Eugene, Oregon leased
Memphis, Tennessee leased (1)

Carrollton, Texas

Salt Lake City, Utah

Richmond, Virginia

Kent, Washington

International:

Monterrey, Mexico leased

Xalapa, Veracruz, Mexico leased

Bags

U.S.:

Buena Park, California

Beaverton, Oregon

Grand Prairie, Texas

CONSUMER PACKAGING

Coated Paperboard

Augusta, Georgia

Riegelwood, North Carolina

Prosperity, South Carolina

Texarkana, Texas

Foodservice

U.S.:

Visalia, California

Shelbyville, Illinois

Kenton, Ohio

International:

Shanghai, China

Beijing, China

Bogota, Colombia

Cheshire, England leased

(1) Closed March 2015

(2) Closed October 2015

DISTRIBUTION

IP Asia

International:

China (8 locations)

Malaysia

Taiwan

Thailand

Vietnam

FOREST PRODUCTS

Forest Resources

International:

Approximately 335,000 acres in Brazil

A-3

2015 CAPACITY INFORMATION
CONTINUING OPERATIONS

APPENDIX II

(in thousands of short
tons)

Industrial Packaging

Containerboard (a)

Printing Papers

Uncoated Freesheet

Bristols

Uncoated Papers and
Bristols

Dried Pulp

Newsprint

Total Printing Papers

Consumer Packaging

Coated Paperboard

U.S.

EMEA

Americas,
other
than U.S.

Asia

India

Total

13,131

1,808

165

1,973

1,335

—

3,308

1,568

1,150

—

1,150

346

124

1,620

379

360

1,135

—

1,135

140

—

1,275

—

1,413 (b)

—

258

—

258

—

258

—

13,539

4,351

165

4,516

1,821

124

6,461

3,360

(a) In addition to Containerboard, this also includes saturated kraft, kraft bag, and gypsum.
(b) The Company's ownership interest in the Asian Coated Paperboard business was sold in October 2015.

Forest Resources

We own, manage or have an interest in
approximately 1.4 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

(M Acres)

335

1,047

—

1,382

A-4

INTERNATIONAL PAPER LEADERSHIP
As of March 1, 2016

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
and Global Sourcing

Thomas G. Kadien
Senior Vice President
Human Resources,
Government Relations
and Global Citizenship

Glenn R. Landau
Senior Vice President
President, International
Paper Latin America

Timothy 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

Mark M. Azzarello
Vice President
Global Compensation
and Benefits

September G. Blain
Vice President
Finance and
Strategic Planning
Industrial Packaging

Paul J. Blanchard
Vice President
Supply Chain
Industrial Packaging

Eric Chartrain
Vice President
European Packaging

Thomas A. Cleves
Vice President
Global Citizenship

Kirt J. Cuevas
Vice President
Environment, Health
and Safety

Donald P. Devlin
Vice President
Audit

Clay R. Ellis
Vice President
Manufacturing
N.A. Papers and Pulp

Jonathan E. Ernst
Vice President

Roman B. Gallo
Vice President
Manufacturing
Containerboard

Gary M. Gavin
Vice President
Enterprise Converting
Optimization
Container The Americas

Greg C. Gibson
Vice President
N.A. Papers and
Converting Papers

John F. Grover
Vice President
Pulp

William T. Hamic
Vice President
Containerboard and
Recycling

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
Finance

Cecilia Ho
Vice President and
President
International Paper Asia

Robert M. Hunkeler
Vice President
Trust and Investments

David A. Liebetreu
Vice President
Global Sourcing and
Fiber Supply

Allison B. Magness
Vice President
Manufacturing
Containerboard

Rildo Martini
Vice President
Manufacturing
Europe, Middle East,
Africa and Russia

Brian N.G. McDonald
Vice President
Strategic Planning

Kevin G. McWilliams
Vice President
Tax

Brett A. Mosley
Vice President
Manufacturing
Containerboard

Tracy L. Pearson
Vice President
Foodservice

Thomas J. Plath
Vice President
Global Businesses
Human Resources

Chris R. Read
Vice President
Global Technology

Jay P. Royalty
Vice President
Investor Relations

Bathsheba T. Sams
Vice President
HR Operations
Human Resources

John V. Sims
Vice President
European Papers

Ksenia Sosnina
Vice President and
President
International Paper Russia

Rampraveen Swaminathan
Vice President and
President
International Paper India

Fred A. Towler
Vice President
Supply Chain Operations
N.A. Paper, Pulp and
Coated Paperboard

Keith R. Townsend
Vice President
South Region
Container The Americas

Deon Vaughan
Vice President
Deputy General Counsel

Shiela P. Vinczeller
Vice President
Talent Management
Human Resources

Greg T. Wanta
Vice President
Central Region
Container The Americas

Robert W. Wenker
Vice President
Chief Information Officer
Information Technology

Patrick Wilczynski
Vice President
Coated Paperboard

Ron P. Wise
Vice President
Commercial and National
Accounts
Container The Americas

Ann B. Wrobleski
Vice President
Global Government
Relations

ILIM GROUP
SENIOR LEADERSHIP

Franz Josef Marx
Chief Executive Officer

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
Akko¨ k 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
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
Former Managing Partner and Chief Operating Officer
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 100lb. 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 International Paper’s global headquarters in Memphis, TN,
at 11:00 a.m. CDT on Monday, May 9, 2016.

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
additional 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
This Annual Performance Summary is being delivered to our
shareholders to comply with the annual report delivery
requirements of the New York Stock Exchange and Rule
14a-3 under the Securities Exchange Act. All information
required by those applicable rules is contained in this Annual
Performance Summary, including certain information
contained in the Form 10-K included herein, which has
previously been filed with the Securities and Exchange
Commission. Copies of this Annual Performance Summary
(including the 10-K), 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.

INVESTOR RELATIONS
Investors desiring further information about International
Paper should contact the investor relations department at
corporate headquarters, (901) 419-9000.

INTERNATIONAL
PAPER
BOARD OF
DIRECTORS

As of March 1, 2016

GLOBAL HEADQUARTERS
International Paper Company
6400 Poplar Avenue
Memphis, TN 38197, U.S.A.

REGIONAL HEADQUARTERS
International Paper Europe
Middle East and Africa (EMEA)
Chaussée de la Hulpe 166
1170 Brussels, Belgium

International Paper do Brasil
Avenida Paulista, 37 14° andar
01311-902 São Paulo SP, Brazil

International Paper Asia
17-18F, West Building
Greenland Center
600 Middle Longhua Road
Shanghai, China 200032

International Paper India
Krishe Sapphire Building,
8th Floor Hitech City
Main Road, Madhapur
Hyderabad 500 081, India

International Paper Russia
Kropotkina Street 1, Litera I
Saint Petersburg, 197101, Russia

Board of Directors
(left to right)

Ilene S. Gordon
Chairman, President and
Chief Executive Officer
Ingredion Incorporated

David J. Bronczek
President and
Chief Executive Officer
FedEx Express

John L. Townsend, III
Former Managing Partner and
Chief Operating Officer
Tiger Management, LLC

William G. Walter
Retired Chairman and
Chief Executive Officer
FMC Corporation

Jay L. Johnson
Retired Chairman and
Chief Executive Officer
General Dynamics Corporation

J. Steven Whisler
Presiding Director,
Retired Chairman and
Chief Executive Officer
Phelps Dodge Corporation

Mark S. Sutton
Chairman of the Board and
Chief Executive Officer
International Paper Company

William J. Burns
President
The Carnegie Endowment for
International Peace

Ahmet C. Dorduncu
Chief Executive Officer
Akkök Group

Ray G. Young
Executive Vice President
and Chief Financial Officer
Archer Daniels Midland Company

Joan E. Spero
Adjunct Senior Research Scholar
Columbia University School of
International and Public Affairs

Stacey J. Mobley
Retired Senior Vice President,
Chief Administrative Officer
and General Counsel
DuPont

Chamex, Hammermill, and Rey are registered trademarks of

International Paper Company or its affiliates. Pol and Reflection

are trademarks of International Paper Company or its affiliates.

Forest Stewardship Council, FSC and the FSC logo are trademarks of

Forest Stewardship Council. PEFC and the PEFC logo are registered

trademarks of the PEFC Council. SFl marks are registered marks owned

by Sustainable Forestry Initiative Inc.

“World’s Most Ethical Companies” and “Ethisphere” names and

marks are registered trademarks of Ethisphere LLC. From FORTUNE

FORTUNE and Time Inc. are not affiliated with, and do not endorse

products or services of, Licensee.

Cover printed on Accent® Opaque Cover Smooth White 100lb. Text printed
on Accent® Opaque Text Smooth White 100lb. and Williamsburg Offset
Smooth White 60lb.