International Paper Company Annual Report 2017

FY2017 Annual Report · International Paper Company

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2017
Annual
Performance
Summary

We continued to create long-term value,
achieved above cost-of-capital returns for
the eighth consecutive year and generated
strong free cash flow by providing sustainable
solutions to our customers.

Mark S. Sutton,

Chairman and CEO

To our
shareowners,

In 2017, we continued to pursue our vision

of being among the most successful,

sustainable and responsible companies in

the world. Our 52,000 colleagues increased

sales and earnings, generated strong free

cash flow and returns above cost-of-capital,

and strengthened our balance sheet.

As one of the world’s leading producers of renewable, fiber-based packaging, pulp and

paper, our global team is committed to strengthening our people and the communities

where we live and work, using all resources responsibly and efficiently, and ensuring our

businesses are safe, successful and sustainable for generations to come. We transform

renewable resources into recyclable products that people depend on every day.

Every day, our global teams create:

• Packaging products that protect and promote goods, enable worldwide commerce

and keep consumers safe

• Pulp for diapers, tissue and other personal hygiene products that promote

health and wellness

• Papers that facilitate education and communication

CE I n

N
A
M
R
O
F
R
E
P

v e s t i ng in PEOPLE

Sustaining
FOREST S

n
g
o
u
r
P
L
A
N
ET

novative PR O D U C T

THE IP WAY
F O R WA R D

We create long-term stakeholder

value via The IP Way Forward,

our strategic framework consisting

of five Strategic Drivers:

• Sustaining Forests

•

Investing in People

•

Improving our Planet

• Creating Innovative Products

• Delivering Inspired Performance

2017 ANNUAL PERFORMANCE SUMMARY | 1

Sustaining
Forests

Our entire business depends upon the sustainability of

forests. We will continue to lead the world in responsible

forest stewardship to ensure healthy and productive forest

ecosystems for generations to come.

From 2013 to 2017, we invested $9.5 million in Forestland

Stewards, a collaboration with the National Fish and

Wildlife Foundation (NFWF) aimed at restoring, protecting

and enhancing more than 240,000 acres of ecologically

significant forestlands in the United States. Our investment

generated more than $24 million in matching funds for a

total conservation impact of $34 million. In 2017, we renewed

and expanded our relationship with NFWF and pledged to

contribute an additional $10 million over the next five years

to protect forests in the United States.

Forestland Collaborations:

Forestland Stewards, our
conservation collaborative with the
National Fish and Wildlife Foundation

World Wildlife Fund
Global Forest and Trade Network

The Carolinas Working Forest
Conservation Collaborative,
formed by American Forest Foundation,
International Paper, The Procter &
Gamble Company and 3M Company

International Paper has
systems in place to ensure
our products contain wood
fiber that has been responsibly
managed and harvested.

Sarah Gibson,
Global Sourcing, Georgetown, S.C., Mill

Investing
in People

engagement plans to build on our strengths and to address

the opportunities for improvement.

We also promote a culture of inclusion where individuals

feel respected, are treated fairly and have an opportunity to

We make sustainable investments to protect and improve the

do their best work every day. In 2017, we appointed a Chief

lives of our employees and mobilize our people, products and

Diversity Officer, Shiela Vinczeller, to guide our progress.

resources to address critical needs in the communities where

our employees live and work.

Above all, we care about people. Our most important

measure of success is ensuring all employees, contractors

and visitors arrive home safely every day. We focus on

achieving injury-free operations by:

• Providing safe working conditions and building in
Layers of Protection

• Using Safety Leading Indicators, Safe Work
Observations and moments of high influence

to ensure safe work actions

• Training all employees to recognize and address hazards
and unsafe conditions

• Promoting accountability and responsibility for ourselves
and our colleagues

• Maintaining an active safety mindset at work and at home

We are also committed to developing, promoting and

supporting employees at all levels. We create a supportive

work environment where our colleagues are inspired to

collaborate, grow and continuously improve, and we help our

employees grow based upon their interests and capabilities,

as well as the needs of our company.

In 2017, we initiated the MyView employee engagement
survey to gather input from our colleagues on company

strengths and improvement opportunities. Eighty-nine
percent of our global team members completed surveys;

leaders at all levels are using the feedback to build

We continue to be a force for good in our communities by

mobilizing our people, products and resources to address

critical needs in the communities where our employees live

and work. In 2017, we contributed more than $16 million to

charitable organizations.

More than 60% reduction in serious
safety incidents since 2012

Serious Safety Incidents

2017

2016

2015

2014

2013

2012

Data include the North American Consumer Packaging business

2017 ANNUAL PERFORMANCE SUMMARY | 3

Improving
our Planet

We tackle the toughest issues in our value chain, improve

our environmental footprint and promote the long-term

sustainability of natural capital.

We work continuously to reduce our global manufacturing

emissions including greenhouse gas, sulfur dioxide, nitrogen

oxides and particulate matter, in order to improve our impact

on the planet. We reduce our air emissions by implementing

efficient manufacturing technologies, investing in energy

efficiency improvements, fuel switching and operating our

mills with nearly 75 percent renewable biomass residuals

energy rather than fossil fuels.

We know that healthy watersheds are essential to people’s

lives, our planet, the manufacturing of our products and our

company’s performance. We return nearly 95 percent of the

water we use back to waterways and work deliberately to

improve the quality of that water.

We set our Vision 2020 Goals using a 2010 baseline; since

then, we’ve reduced our energy use and greenhouse gas and

other air emissions, resulting in an improved environmental

footprint and lower energy costs. We are on pace to meet or

exceed 10 of the 12 goals, have line-of-sight to achieving our

goal for energy efficiency and remain committed to pursuing

our goal for solid waste reduction.

We are committed
to improving our
environmental footprint

95%

of water
returned to
waterways

Nearly 75%
of mill energy derived
from renewable
biomass residuals

Innovative
Products

We create innovative, sustainable and recyclable products

that help our customers achieve their objectives.

We transform renewable resources into recyclable products

that people depend on every day. Our packaging products

protect and promote goods, enable worldwide commerce and

keep consumers safe. Our pulp for diapers, tissue and other

personal hygiene products promote health and wellness and

our papers facilitate education and communication.

In every moment, in every experience, our customers

expect nothing but the best. We understand our customers’

businesses and provide them sustainable solutions — not

just products. We understand the markets we serve and how

our individual roles impact each customer’s success.

In addition to our standard products for a wide-range of

packaging, printing and health and wellness applications,
we work with our customers to provide innovative,

fiber-based solutions:

• Our SpaceKraft® product line, is a bulk container used

to transport non-hazardous liquids. SpaceKraft’s

innovative and sustainable design meets unique filling

and dispensing requirements, and its flexible inner liner

eliminates air exposure making it a leading product for

food safety and aseptic applications.

• With our THRIVE™ products, we provide innovative

solutions by introducing wood fibers to enhance

performance and provide a more environmentally friendly

solution for reinforced plastic composites. THRIVE is

used in automotive and other applications to replace

glass fiber with a lighter, renewable material.

• In this digital age where smartphones are an essential

part of communication, we have developed apps to help

our customers unlock new capabilities to achieve their

goals. By using our IP4D app and incorporating

augmented reality technology into print designs produced
on Accent® Opaque 120 lb. Cover, we demonstrate how
paper and technology integration can create more impact

and value for our customers.

2017 ANNUAL PERFORMANCE SUMMARY | 5

Inspired
Performance

We deliver long-term value for all stakeholders by

establishing advantaged positions in attractive market

segments with safe, efficient manufacturing operations

near sustainable fiber sources.

In 2017, our global businesses generated adjusted EBITDA of

$3.7 billion — 16 percent higher than the prior year — and

adjusted operating earnings per diluted share of $3.49.

Our commercial teams performed well and contributed to

11 percent revenue growth, our Global Cellulose Fibers

business generated $155 million in integration synergies

and exceeded its run-rate target and our Ilim joint venture

contributed $130 million in cash dividends.

On January 1, 2018, we completed the transfer of our

North American Consumer Packaging business to Graphic

Packaging. As a result of the transaction, we now hold a

20.5 percent ownership interest in the subsidiary of Graphic

Packaging that holds the assets of the combined businesses.

This transaction created value for IP’s shareholders by

positioning us to benefit from a much stronger consumer

packaging platform, while allowing us to remain focused on

growing value in our core businesses.

We delivered cost-of-capital returns for the eighth consecutive

year and generated $2 billion in free cash flow, which enabled

us to reduce debt, further de-risk our pension plan, increase

our dividend for the sixth consecutive year and make strategic

investments for growth in our core businesses.

Five-year average:

10% return on
invested capital

Five-year average:

$1.9B free cash flow

6th consecutive year of
dividend increase

8th consecutive year above
cost-of-capital
returns

Free Cash Flow

$2.1B

$2.0B

$1.8B

$1.9B

2013

2014

2015

2016

2017

Return On
Invested Capital

Annualized Dividend

2013

2014

2015

2016

2017

9.7%

9.2%

11.4%

10%

9.9%

$1.85

$1.90

$1.76

$1.60

$1.40

2013

2014

2015

2016

2017

As a result of the transfer of the North American Consumer Packaging business,
all current year and prior year amounts (with the exception of free cash flow)
have been adjusted to reflect this business as a discontinued operation.

Outlook

We committed to increasing EBITDA by 10 percent-plus in 2018

We believe the impact of the Tax Cuts and Jobs Act will

and expect to continue to generate strong free cash flow and

help drive economic growth in the United States and level

returns well above our cost-of-capital. We anticipate healthy

the playing field with our competitors around the world.

demand in our North American Industrial Packaging and

International Paper will benefit from a lower corporate tax

Global Cellulose Fibers businesses and continued realization of

rate, the ability to repatriate foreign cash and accelerated

previous price increases. We also expect to improve margins

depreciation rules.

with continued optimization and cost reduction efforts.

Overall, International Paper is well-positioned to create value for

Our Ilim joint venture remains well-positioned for another

our shareowners and other stakeholders − with the talent and

strong year of performance and we expect to start to see the

resources to execute our strategy of establishing advantaged

benefits of our Graphic Packaging equity position. In the second

positions to serve attractive markets.

half of 2018, we expect to see the benefits of our Madrid Mill

conversion to lightweight, recycled containerboard.

Mark S. Sutton,

Chairman and CEO

Governance Transitions

We believe that strong governance accelerates

Department of Commerce and the National

of International Operations at Zoetis, a

the pursuit of our vision; therefore we continue

Oceanic and Atmospheric Association

global leader in the discovery, development,

to maintain strong leadership on our Board

Administration between 2011 and 2017. Kathy is

manufacture and commercialization of animal

of Directors.

a veteran of three space shuttle missions and is

health medicines and vaccines. He also serves

In December 2017, William G. Walter and

Stacey J. Mobley retired from the Board of

Directors of International Paper, pursuant to

the first American woman to walk in space. She

as treasurer for the International Federation for

serves on the Governance Committee and the

Animal Health, the industry trade association in

Public Policy and Environment Committee.

Europe. Clint serves on the Public Policy

the board’s mandatory retirement policy.

Christopher M. Connor, effective October 1, 2017

Chris retired as executive chairman of The

and Environment Committee and the

Governance Committee.

Bill Walter joined our board in January 2005.

During his tenure, he served on and chaired

both the Management Development and

Compensation Committee and the Audit and

Finance Committee. Bill’s financial expertise,

chief executive experience and affinity for

pressure-testing ideas were key assets

throughout his 13 years of service.

Stacey Mobley joined our board in July 2008.

He served on the Governance Committee since

2009 and was appointed committee chair in May

2011. Stacey also served on the Public Policy

and Environment Committee. During his tenure,

Stacey strengthened our governance practices.

As an attorney with a passion for mentoring and

developing future leaders, he reinforced our

commitment to the highest ethical standards

and advanced our efforts to create and maintain

diverse and inclusive workplaces.

Four new board members were elected in 2017:

Sherwin-Williams Company in December of

Our governance guidelines suggest that the

2016, after more than 30 years at that company.

presiding director position should be rotated

He is chairman of the Rock & Roll Hall of Fame

periodically. In October, the board elected

and serves on the board of directors of

Ilene S. Gordon as its new independent

Eaton Corporation and Yum! Brands. Chris

presiding director, effective January 2018. In

serves on the Audit and Finance Committee

this role, Ilene will provide strong independent

and Management Development and

leadership in the boardroom. Ilene joined

Compensation Committee.

the board in October 2012 and serves on

Jacqueline C. Hinman, effective November 4, 2017

Jacque is former chairman, president and chief

executive officer of CH2M HILL Companies, a

Fortune 500 engineering and consulting firm

focused on delivering infrastructure, energy,

environmental and industrial solutions. She

recently served on the Executive Committee of

the Business Roundtable and is a member of

the Business Council; Jacque is a board director

for Catalyst, a leading nonprofit organization

accelerating progress for women through

workplace inclusion. Jacque serves on the Audit

the Executive Committee, the Governance

Committee and the Management Development

and Compensation Committee. She is executive

chairman of Ingredion Incorporated, a publicly

traded global ingredient solutions company.

She also serves on the board of directors of

Lockheed Martin Corporation, a publicly traded

global security and aerospace company. We wish

to thank J. Steven Whistler for serving as the

previous independent presiding director.

Dr. Kathryn D. Sullivan, effective March 1, 2017

and Finance Committee and the Public Policy

Kathy is ambassador-at-large at the

and Environment Committee.

Smithsonian National Air and Space Museum.

She served in several roles in the U.S.

Clinton A. Lewis Jr., effective November 4, 2017

Clint is Executive Vice President and President

2017 ANNUAL PERFORMANCE SUMMARY | 7

Our Businesses

We transform
renewable resources
into recyclable
products that people
depend on every day.

International Paper is a leading global producer of renewable, fiber-based packaging,

pulp and paper products with 52,000 employees located in more than 24 countries.

Industrial Packaging

% of total revenue

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 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.

Additionally, it includes our EMEA coated paperboard business

which supplies high-quality folding boxboard and liquid

packaging board to customers in a variety of market segments.

Segments

• eCommerce

• Protein

• Fruit & vegetables

• Distribution

• Processed food & beverage

• Durable/non-durable goods

Revenue by region

87% North America

11% EMEA

Brazil

Papers

% of total revenue

International Paper is the world’s largest producer of

uncoated freesheet. Our global Papers businesses

manufacture a wide variety of uncoated papers for

commercial printing, imaging and converting segments.
Customers rely on our signature brands including Accent®,
Chamex®, Hammermill®, POL™, PRO-DESIGN® and REY® to
educate, communicate and advertise.

Segments

Revenue by region

44% North America

29% EMEA
23% Brazil

India

• Consumers

• Schools
• Businesses

• Commercial printing

• Book publishing

• Advertising

• Direct mail, bills
& statements

• Office products

• Retail packaging &
labeling applications

Cellulose Fibers

% of total revenue

International Paper is a premier producer of fluff pulp for

absorbent hygiene products like baby diapers, feminine care,

adult incontinence and other non-woven products, as well

as pulp used for tissue and paper products. Our innovative,

specialty pulps are used for non-absorbent end uses

including textiles, filtration, construction material, paints and

coatings, reinforced plastics and more.

Our cellulose fibers products serve diverse, global customers

who share a common need for confidence in the quality and

convenience of personal hygiene and household products,

and who value innovative solutions.

Segments

Revenue by region

• Absorbent hygiene
products

• Paper & tissue

• Textiles

• Reinforced plastics

• Filtration

• Paints & coatings

The majority of revenue
is generated in North
America, although this
business exports a
significant portion of its
total volume globally.

About International Paper

Senior Leadership Team As of February 28, 2018

Seated Left to Right

Catherine I. Slater
Senior Vice President
International Paper

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

Glenn R. Landau
Senior Vice President
and Chief Financial Officer

Jean-Michel Ribiéras
Senior Vice President
Global Cellulose Fibers

Thomas J. Plath
Senior Vice President
Human Resources and
Global Citizenship

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

Standing Left to Right

C. Cato Ealy
Senior Vice President
Corporate Development

Gregory T. Wanta
Senior Vice President
North American Container

John V. Sims
Senior Vice President
and President International
Paper EMEA

Timothy S. Nicholls
Senior Vice President
Industrial Packaging
The Americas

W. Michael Amick, Jr.
Senior Vice President
Paper The Americas and India

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

Our vision is to
be among the
most successful,
sustainable and
responsible
companies in
the world.

Fortune Magazine’s “World’s
Most Admired Companies®
2018” for 15 years

Ethisphere Institute’s
“World’s Most Ethical
Companies® 2018” for
12 consecutive years

Institutional Investor’s
“Most Honored Company”
2018

Women’s Choice Award® “Best
Companies to Work For —
Millennial Women” 2018

IDG’s Computerworld
“100 Best Places to Work
in IT” 2017

10 | INTERNATIONAL PAPER

F
o
r
m
1
0
K

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

2017

2016

$21,743

$19,495

2,069 (a)
848 (b)
2,144 (b,c)
—
2,144 (b,c)
33,903
6,522

2,102 (a)
795 (d)
902 (d,e)

(2)

904 (d,e)

33,093
4,341

$ 5.19 (b,c)

$ 2.20 (d,e)

$ 5.13 (b,c)

$ 2.18 (d,e)

1.8625
15.79

11,828
412.9
412.7
417.7

1.7825
10.56

12,352
411.2
411.1
415.6

(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 79 for details of operating profit by industry segment.
Includes pre-tax restructuring and other charges of $67 million including charges of $83 million for debt extinguishment costs, a gain of $14 million
related to the sale of our investment in ArborGen and a gain of $2 million for other items. Also included are a charge of $376 million for a settlement
accounting charge associated with an annuity purchase and transfer of pension obligations for approximately 45,000 retirees, a charge of $354 million
related to the agreement to settle the Kleen Products anti-trust class action lawsuit, charges of $20 million for the removal of abandoned property at our
mills, a charge of $14 million to amortize the inventory fair value step-up for the pulp business acquired in December 2016, charges of $33 million for
integration costs associated with the pulp business acquisition, a charge of $9 million for the impairment of the assets of our Foodservice business in
Asia, a charge of $10 million for accelerated amortization of a Brazil Packaging intangible asset, a net bargain purchase gain of $6 million associated
with the June 2016 Holmen Paper mill acquisition in Madrid, Spain and a gain of $5 million for interest income related to income tax refund claims.
Includes a provisional net tax benefit of $1.2 billion related to the enactment of the Tax Cuts and Jobs Act, a tax benefit of $113 million related to income
tax refund claims, a tax expense of $9 million related to an international tax law change, tax expenses of $34 million related to international investment
restructuring and a tax expense of $38 million associated with a 2017 cash pension contribution. Also includes the operating earnings of the North
American Consumer Packaging business, net after-tax charges of $10 million for costs associated with the divestiture of that business and $28 million
for non-operating pension expenses related to curtailment charges and termination benefits.
Includes pre-tax restructuring and other charges of $54 million including charges of $29 million for debt extinguishment costs, charges of $17 million
for costs associated with the write-off of our India Packaging business evaluation, a gain of $8 million related to the sale of our investment in Arizona
Chemical, charges of $9 million for costs associated with the Riegelwood, North Carolina mill conversion to 100% pulp production and a charge of
$7 million for costs associated with the closure of a mill in Turkey. Also included are a charge of $439 million for a settlement accounting charge
associated with term-vested lump sum pension payments, charges of $70 million for the impairment of the assets of our Asia corrugated packaging
business and costs associated with the sale of that business, charges of $31 million associated with the pulp business acquisition, a charge of $19 million to
amortize the acquired pulp business inventory fair value step-up and a charge of $8 million for the write-off of certain regulatory pre-engineering costs.
Includes a tax benefit of $57 million related to the legal restructuring of our Brazil Packaging business, a tax expense of $31 million associated with a
Luxembourg tax rate change, a tax expense of $23 million associated with 2016 cash pension contributions, a tax benefit of $14 million related to the
closure of a U.S. federal tax audit and a tax benefit of $6 million related to an international legal entity restructuring. Also included are the operating
earnings of the North American Consumer Packaging business and an after-tax charge of $5 million for a legal settlement associated with the xpedx
business which was spun-off in 2014.

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
Kleen settlement
Insurance reimbursement for Guaranty Bank settlement

Free Cash Flow

2017

2016

2015

2014

2013

$ 1,757

$ 2,478

$ 2,580

$ 3,077

$ 3,028

(1,391)
1,250
354
—
$ 1,970

(1,348)
750
—
—
$ 1,880

(1,487)
750
—
—
$ 1,843

(1,366)
353
—
—
$ 2,064

(1,198)
31
—
(30)
$ 1,831

Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management
believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available,
after reinvesting in the business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for
future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for
certain items that are not indicative of the Company’s ongoing performance, free cash flow also enables investors to perform meaningful
comparisons between past and present periods.

In millions, at December 31

2017

2016

2015

2014

2013

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

848
572
501
484
2,405
30%
1,684
177
$ 1,861

795
520
182
610
2,107
32%
1,433
198
$ 1,631

$ 1,132
555
559
258
2,504
33%
1,678
117
$ 1,795

$ 734
607
1,046
212
2,599
31%
1,793
(200)
$1,593

$1,092
612
305
323
2,332
26%
1,726
(39)
$1,687

The Company considers adjusted 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

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

In millions, at December 31

Calculation of Adjusted EBITDA
Earnings from Continuing Operations Before Interest, Income Taxes, Equity Earnings and
Cumulative Effect of Accounting Changes
Depreciation, amortization and cost of timber harvested
Special items
Non-operating pension expense
Adjusted EBITDA

2017

2016

$1,420
1,343
491
484
$3,738

$1,315
1,124
182
610
$3,231

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, 2017

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)

New York
(State or other jurisdiction of incorporation or organization)

13-0872805
(I.R.S. Employer Identification No.)

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

Emerging growth company

(Do not check if a
smaller reporting
company)

If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.

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, 2017) was approximately $23,247,397,657.

The number of shares outstanding of the Company’s common stock as of February 16, 2018 was 412,940,532.

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 2018
annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K.

INTERNATIONAL PAPER COMPANY
INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2017
FOR THE YEAR ENDED DECEMBER 31, 2017

INTERNATIONAL PAPER COMPANY

INDEX TO ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2017

PART I.
PART I.

ITEM 1.
ITEM 1.

ITEM 1A.
ITEM 1A.
ITEM 1B.
ITEM 1B.
ITEM 2.
ITEM 2.

ITEM 3.
ITEM 3.
ITEM 4.
ITEM 4.

PART II.
PART II.

ITEM 5.
ITEM 5.

ITEM 6.
ITEM 6.
ITEM 7.
ITEM 7.

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

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

LEGAL PROCEEDINGS.
LEGAL PROCEEDINGS.
MINE SAFETY DISCLOSURES.
MINE SAFETY DISCLOSURES.

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

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

1
1

1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
3
3
3
3
3
3
5
5
5
5
6
6
6
6
7
7
11
11
11
11
11
11
11
11
11
11
11
11
11
11

12
12

12
12
14
14

17
17
17
17
20
20
23
23
24
24
27
27
31
31
35
35
35
35
35
35
35
35
35
35

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

RISK.

ITEM 8.

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

Accounting Firm

Reports of Deloitte & Touche LLP, Independent Registered Public

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)

ITEM 9.

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.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND

DIRECTOR INDEPENDENCE.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

ITEM 9A.

ITEM 9B.

PART III.

ITEM 10.

ITEM 11.

ITEM 12.

PART IV.

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Additional Financial Data

Schedule II – Valuation and Qualifying Accounts

SIGNATURES

APPENDIX I

2017 LISTING OF FACILITIES

APPENDIX II

2017 CAPACITY INFORMATION

A-1

A-4

Financial Information Concerning Industry Segments

Financial Information About International and U.S. Operations

INTERNATIONAL PAPER COMPANY

INDEX TO ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2017

PART I.

ITEM 1.

BUSINESS.

General

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

ITEM 1A.

RISK FACTORS.

ITEM 1B.

UNRESOLVED STAFF COMMENTS.

ITEM 2.

PROPERTIES.

Forestlands

Mills and Plants

Capital Investments and Dispositions

LEGAL PROCEEDINGS.

MINE SAFETY DISCLOSURES.

ITEM 3.

ITEM 4.

PART II.

ITEM 5.

ITEM 6.

ITEM 7.

SECURITIES.

SELECTED FINANCIAL DATA.

AND RESULTS OF OPERATIONS.

Executive Summary

Results of Operations

Description of Industry Segments

Industry Segment Results

Liquidity and Capital Resources

Legal Proceedings

Effect of Inflation

Foreign Currency Effects

Market Risk

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Critical Accounting Policies and Significant Accounting Estimates

Recent Accounting Developments

ITEM 7A.
ITEM 7A.

ITEM 8.
ITEM 8.

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

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

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

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

ITEM 9.
ITEM 9.

ITEM 9A.
ITEM 9A.
ITEM 9B.
ITEM 9B.

PART III.
PART III.

ITEM 10.
ITEM 10.
ITEM 11.
ITEM 11.
ITEM 12.
ITEM 12.

ITEM 13.
ITEM 13.

ITEM 14.
ITEM 14.

PART IV.
PART IV.

ITEM 15.
ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Additional Financial Data
Additional Financial Data
Schedule II – Valuation and Qualifying Accounts
Schedule II – Valuation and Qualifying Accounts

APPENDIX I
APPENDIX I

SIGNATURES
SIGNATURES
2017 LISTING OF FACILITIES
2017 LISTING OF FACILITIES

APPENDIX II
APPENDIX II

2017 CAPACITY INFORMATION
2017 CAPACITY INFORMATION

36
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37
37

37
37

39
39
41
41
42
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43
43
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44
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45
46
46
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81

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85
89
89
90
90
A-1
A-1

A-4
A-4

PART I.
PART I.

ITEM 1. BUSINESS
ITEM 1. BUSINESS

GENERAL
GENERAL

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

In the United States, at December 31, 2017, the
In the United States, at December 31, 2017, the
Company operated 29 pulp, paper and packaging mills,
Company operated 29 pulp, paper and packaging mills,
170 converting and packaging plants, 16 recycling
170 converting and packaging plants, 16 recycling
plants and three bag facilities. Production facilities at
plants and three bag facilities. Production facilities at
December 31, 2017 in Canada, Europe, India, North
December 31, 2017 in Canada, Europe, India, North
Africa, Latin America included 16 pulp, paper and
Africa, Latin America included 16 pulp, paper and
packaging mills, 47 converting and packaging plants,
packaging mills, 47 converting and packaging plants,
and two recycling plants. We operate a printing and
and two recycling plants. We operate a printing and
packaging products distribution business principally
packaging products distribution business principally
through 9 branches in Asia. At December 31, 2017, we
through 9 branches in Asia. At December 31, 2017, we
owned or managed approximately 329,000 acres of
owned or managed approximately 329,000 acres of
forestland in Brazil and had, through licenses and forest
forestland in Brazil and had, through licenses and forest
management agreements, harvesting
rights on
management agreements, harvesting
rights on
government-owned forestlands in Russia. Substantially
government-owned forestlands in Russia. Substantially
all of our businesses have experienced, and are likely
all of our businesses have experienced, and are likely
to continue to experience, cycles relating to industry
to continue to experience, cycles relating to industry
capacity and general economic conditions.
capacity and general economic conditions.

For management and financial reporting purposes, our
For management and financial reporting purposes, our
three segments:
businesses are separated
three segments:
businesses are separated
Industrial Packaging; Global Cellulose Fibers; and
Industrial Packaging; Global Cellulose Fibers; and
Printing Papers.
Printing Papers.

into
into

A description of these business segments can be found
A description of these business segments can be found
on pages 23 and 24 of
Item 7. Management’s
Item 7. Management’s
on pages 23 and 24 of
Discussion and Analysis of Financial Condition and
Discussion and Analysis of Financial Condition and
Results of Operations. The Company’s 50% equity
Results of Operations. The Company’s 50% equity
interest in Ilim Holding S.A. ("Ilim") is also a separate
interest in Ilim Holding S.A. ("Ilim") is also a separate
reportable industry segment.
reportable industry segment.

quality
quality

product
product

From 2013 through 2017, International Paper’s capital
From 2013 through 2017, International Paper’s capital
expenditures approximated $6.8 billion, excluding
expenditures approximated $6.8 billion, excluding
mergers and acquisitions. These expenditures reflect
mergers and acquisitions. These expenditures reflect
our continuing efforts to use our capital strategically to
our continuing efforts to use our capital strategically to
improve
environmental
improve
environmental
performance, as well as lower costs and maintain
performance, as well as lower costs and maintain
reliability of operations. Capital spending in 2017 was
reliability of operations. Capital spending in 2017 was
approximately $1.4 billion and is expected to be
approximately $1.4 billion and is expected to be
approximately $1.5 billion in 2018. You can find more
approximately $1.5 billion in 2018. You can find more
information about capital expenditures on page 28 of
information about capital expenditures on page 28 of
Item 7. Management’s Discussion and Analysis of
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
Financial Condition and Results of Operations.

and
and

Discussions of acquisitions can be found on page 28 of
Discussions of acquisitions can be found on page 28 of
Item 7. Management’s Discussion and Analysis of
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
Financial Condition and Results of Operations.

You can find discussions of restructuring charges and
You can find discussions of restructuring charges and
other special items on pages 22 and 23 of Item 7.
other special items on pages 22 and 23 of Item 7.
Management’s Discussion and Analysis of Financial
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
Condition and Results of Operations.

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

FINANCIAL INFORMATION CONCERNING
FINANCIAL INFORMATION CONCERNING
INDUSTRY SEGMENTS
INDUSTRY SEGMENTS

The financial information concerning segments is set
The financial information concerning segments is set
forth in Note 19 Financial Information by Industry
forth in Note 19 Financial Information by Industry
Segment and Geographic Area on pages 78 through
Segment and Geographic Area on pages 78 through
80 of Item 8. Financial Statements and Supplementary
80 of Item 8. Financial Statements and Supplementary
Data.
Data.

FINANCIAL INFORMATION ABOUT
FINANCIAL INFORMATION ABOUT
INTERNATIONAL AND U.S. OPERATIONS
INTERNATIONAL AND U.S. OPERATIONS

The financial information concerning international and
The financial information concerning international and
U.S. operations and export sales is set forth in Note 19
U.S. operations and export sales is set forth in Note 19
Financial
Industry Segment and
Industry Segment and
Financial
Geographic Area on page 80 of Item 8. Financial
Geographic Area on page 80 of Item 8. Financial
Statements and Supplementary Data.
Statements and Supplementary Data.

Information by
Information by

COMPETITION AND COSTS
COMPETITION AND COSTS

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

27 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 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 23 and 24 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 2017, 2016 and 2015 were as follows:

Sales Volumes by Product (a)

In thousands of short tons (except as noted)

Industrial Packaging

Corrugated Packaging (c)

Containerboard

Recycling

Saturated Kraft

Gypsum/Release Kraft

Bleached Kraft

EMEA Packaging (c) (d)

Asian Box (c) (e)

Brazilian Packaging (c)

European Coated Paperboard

Industrial Packaging

Global Cellulose Fibers (in thousands of metric tons) (b)

Printing Papers

U.S. Uncoated Papers

European and Russian Uncoated Papers

Brazilian Uncoated Papers

Indian Uncoated Papers

Printing Papers

2017

2016

2015

10,413

3,294

2,257

1,518

181

229

—

357

398

18,674

3,708

1,915

1,483

1,167

253

4,818

1,477

1,417

10,392

3,091

2,450

182

200

208

371

393

18,788

1,870

1,872

1,536

1,114

241

4,763

10,284

3,110

2,379

156

171

426

348

381

18,695

1,575

1,879

1,493

1,125

241

4,738

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. Includes sales volumes from the pulp business acquired

(a)

(b)

beginning December 1, 2016.

(c) Volumes for corrugated box sales reflect consumed tons sold (CTS). Board sales by these businesses reflect invoiced tons.

(d) Excludes newsprint sales volumes at Madrid, Spain mill.

(e)

Includes sales volumes through the date of sale on June 30, 2016.

1
1

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 producer of renewable fiber-

based packaging, pulp and paper products with

manufacturing operations in North America, Latin

America, Europe, North Africa, India and Russia. 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 the Internet

is www.internationalpaper.com. You can learn more

about us by visiting that site.

In the United States, at December 31, 2017, the

Company operated 29 pulp, paper and packaging mills,

170 converting and packaging plants, 16 recycling

plants and three bag facilities. Production facilities at

December 31, 2017 in Canada, Europe, India, North

Africa, Latin America included 16 pulp, paper and

packaging mills, 47 converting and packaging plants,

and two recycling plants. We operate a printing and

packaging products distribution business principally

through 9 branches in Asia. At December 31, 2017, we

owned or managed approximately 329,000 acres of

forestland in Brazil and had, through licenses and 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.

For management and financial reporting purposes, our

businesses are separated

into

three segments:

Industrial Packaging; Global Cellulose Fibers; and

Printing Papers.

A description of these business segments can be found

on pages 23 and 24 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. ("Ilim") is also a separate

reportable industry segment.

From 2013 through 2017, International Paper’s capital

expenditures approximated $6.8 billion, excluding

mergers and acquisitions. These expenditures reflect

our continuing efforts to use our capital strategically to

improve

product

quality

and

environmental

performance, as well as lower costs and maintain

reliability of operations. Capital spending in 2017 was

approximately $1.4 billion and is expected to be

approximately $1.5 billion in 2018. You can find more

information about capital expenditures on page 28 of

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations.

Discussions of acquisitions can be found on page 28 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 and 23 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 78 through

80 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

Information by

Industry Segment and

Geographic Area on page 80 of Item 8. Financial

Statements and Supplementary Data.

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
Many factors influence the Company’s competitive
position, including price, cost, product quality and
position, including price, cost, product quality and
services. You can find more information about the impact
services. You can find more information about the impact
of these factors on operating profits on pages 20 through
of these factors on operating profits on pages 20 through
27 of Item 7. Management’s Discussion and Analysis of
27 of Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations. You can
Financial Condition and Results of Operations. You can
find information about the Company’s manufacturing
find information about the Company’s manufacturing
capacities on page A-4 of Appendix II.
capacities on page A-4 of Appendix II.

MARKETING AND DISTRIBUTION
MARKETING AND DISTRIBUTION

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

DESCRIPTION OF PRINCIPAL PRODUCTS
DESCRIPTION OF PRINCIPAL PRODUCTS

The Company’s principal products are described on
The Company’s principal products are described on
pages 23 and 24 of Item 7. Management’s Discussion
pages 23 and 24 of Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of
and Analysis of Financial Condition and Results of
Operations.
Operations.

SALES VOLUMES BY PRODUCT
SALES VOLUMES BY PRODUCT

Sales volumes of major products for 2017, 2016 and 2015 were as follows:
Sales volumes of major products for 2017, 2016 and 2015 were as follows:

Sales Volumes by Product (a)
Sales Volumes by Product (a)

In thousands of short tons (except as noted)
In thousands of short tons (except as noted)
Industrial Packaging
Industrial Packaging

Corrugated Packaging (c)
Corrugated Packaging (c)
Containerboard
Containerboard
Recycling
Recycling
Saturated Kraft
Saturated Kraft
Gypsum/Release Kraft
Gypsum/Release Kraft
Bleached Kraft
Bleached Kraft
EMEA Packaging (c) (d)
EMEA Packaging (c) (d)
Asian Box (c) (e)
Asian Box (c) (e)
Brazilian Packaging (c)
Brazilian Packaging (c)
European Coated Paperboard
European Coated Paperboard

Industrial Packaging
Industrial Packaging

Global Cellulose Fibers (in thousands of metric tons) (b)
Global Cellulose Fibers (in thousands of metric tons) (b)
Printing Papers
Printing Papers

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

Printing Papers
Printing Papers

2017
2017

2016
2016

2015
2015

10,413
10,413
3,294
3,294
2,257
2,257
181
181
229
229
27
27
1,518
1,518
—
—
357
357
398
398
18,674
18,674
3,708
3,708

1,915
1,915
1,483
1,483
1,167
1,167
253
253
4,818
4,818

10,392
10,392
3,091
3,091
2,450
2,450
182
182
200
200
24
24
1,477
1,477
208
208
371
371
393
393
18,788
18,788
1,870
1,870

1,872
1,872
1,536
1,536
1,114
1,114
241
241
4,763
4,763

10,284
10,284
3,110
3,110
2,379
2,379
156
156
171
171
23
23
1,417
1,417
426
426
348
348
381
381
18,695
18,695
1,575
1,575

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

(a)
(a)
(b)
(b)

Includes third-party and inter-segment sales and excludes sales of equity investees.
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. Includes sales volumes from the pulp business acquired
Includes North American, European and Brazilian volumes and internal sales to mills. Includes sales volumes from the pulp business acquired
beginning December 1, 2016.
beginning December 1, 2016.

(c) Volumes for corrugated box sales reflect consumed tons sold (CTS). Board sales by these businesses reflect invoiced tons.
(c) Volumes for corrugated box sales reflect consumed tons sold (CTS). Board sales by these businesses reflect invoiced tons.
(d) Excludes newsprint sales volumes at Madrid, Spain mill.
(d) Excludes newsprint sales volumes at Madrid, Spain mill.
(e)
(e)

Includes sales volumes through the date of sale on June 30, 2016.
Includes sales volumes through the date of sale on June 30, 2016.

2
2

RESEARCH AND DEVELOPMENT
RESEARCH AND DEVELOPMENT

The Company operates its primary research and
The Company operates its primary research and
development center in Loveland, Ohio, as well as
development center in Loveland, Ohio, as well as
several other product development facilities, including
several other product development facilities, including
the Global Cellulose Fibers technology center in
the Global Cellulose Fibers technology center in
Federal Way, Washington.
Federal Way, Washington.

packaging
packaging

We direct research and development activities to short-
We direct research and development activities to short-
term, long-term and technical assistance needs of
term, long-term and technical assistance needs of
customers and operating divisions, and to process,
customers and operating divisions, and to process,
equipment and product innovations. Activities include
equipment and product innovations. Activities include
product development within the operating divisions;
product development within the operating divisions;
studies on innovation and improvement of pulping,
studies on innovation and improvement of pulping,
bleaching, chemical recovery, papermaking, converting
bleaching, chemical recovery, papermaking, converting
and coating processes; packaging design and materials
and coating processes; packaging design and materials
development; mechanical
systems,
systems,
development; mechanical
environmentally sensitive printing inks and reduction of
environmentally sensitive printing inks and reduction of
environmental discharges; re-use of raw materials in
environmental discharges; re-use of raw materials in
manufacturing processes; recycling of consumer and
manufacturing processes; recycling of consumer and
packaging paper products; energy conservation;
packaging paper products; energy conservation;
applications of computer controls to manufacturing
applications of computer controls to manufacturing
operations; innovations and improvement of products;
operations; innovations and improvement of products;
and development of various new products. Our
and development of various new products. Our
development efforts specifically address product safety
development efforts specifically address product safety
as well as the minimization of solid waste. The cost to
as well as the minimization of solid waste. The cost to
the Company of
its research and development
the Company of
its research and development
operations was $28 million in 2017, $20 million in 2016,
operations was $28 million in 2017, $20 million in 2016,
and $27 million in 2015.
and $27 million in 2015.

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

ENVIRONMENTAL PROTECTION
ENVIRONMENTAL PROTECTION

on
on

impacts
impacts

International Paper is subject to extensive federal and
International Paper is subject to extensive federal and
state environmental regulation as well as similar
state environmental regulation as well as similar
regulations internationally. Our continuing objectives
regulations internationally. Our continuing objectives
include: (1) controlling emissions and discharges from
include: (1) controlling emissions and discharges from
our facilities into the air, water and groundwater to avoid
our facilities into the air, water and groundwater to avoid
adverse
and
adverse
and
(2) maintaining compliance with applicable laws and
(2) maintaining compliance with applicable laws and
regulations. The Company spent $86 million in 2017 for
regulations. The Company spent $86 million in 2017 for
capital projects to control environmental releases into
capital projects to control environmental releases into
the air and water, and to assure environmentally sound
the air and water, and to assure environmentally sound
management and disposal of waste. We expect to spend
management and disposal of waste. We expect to spend
$71 million in 2018 for environmental capital projects.
$71 million in 2018 for environmental capital projects.
Capital expenditures for 2019 environmental projects
Capital expenditures for 2019 environmental projects
are anticipated to be approximately $87 million. Capital
are anticipated to be approximately $87 million. Capital

environment,
environment,

the
the

expenditures for 2020 environmental projects are
expenditures for 2020 environmental projects are
estimated to be $73 million.
estimated to be $73 million.

The 2017 spend included costs associated with the U.S.
The 2017 spend included costs associated with the U.S.
Environmental Protection Agency's (EPA) Boiler MACT
Environmental Protection Agency's (EPA) Boiler MACT
(maximum achievable control technology) regulations
(maximum achievable control technology) regulations
that require owners of specified boilers to meet revised
that require owners of specified boilers to meet revised
air emissions standards for certain substances. Several
air emissions standards for certain substances. Several
lawsuits were filed to challenge all or portions of the
lawsuits were filed to challenge all or portions of the
Boiler MACT regulations. On December 23, 2016, the
Boiler MACT regulations. On December 23, 2016, the
U.S. Court of Appeals for the D.C. Circuit remanded the
U.S. Court of Appeals for the D.C. Circuit remanded the
Boiler MACT regulations to the EPA requiring the agency
Boiler MACT regulations to the EPA requiring the agency
to revise emission standards for boiler subcategories
to revise emission standards for boiler subcategories
that had been affected by flawed calculations. The Court
that had been affected by flawed calculations. The Court
determined that the existing MACT standards should
determined that the existing MACT standards should
remain in place while the revised standards are being
remain in place while the revised standards are being
developed, but did not establish a deadline for the EPA
developed, but did not establish a deadline for the EPA
to complete the rulemaking. The Company has
to complete the rulemaking. The Company has
completed its Boiler MACT capital projects to meet the
completed its Boiler MACT capital projects to meet the
existing regulations. We are not able to project any
existing regulations. We are not able to project any
additional Boiler MACT capital project expenditures as
additional Boiler MACT capital project expenditures as
it is uncertain to what extent the EPA will revise Boiler
it is uncertain to what extent the EPA will revise Boiler
MACT standards that are subject to the remand.
MACT standards that are subject to the remand.

Amendments lowering National Ambient Air Quality
Amendments lowering National Ambient Air Quality
Standards (NAAQS) for sulfur dioxide (SO2), nitrogen
Standards (NAAQS) for sulfur dioxide (SO2), nitrogen
dioxide (NO2), fine particulate (PM2.5), and ozone have
dioxide (NO2), fine particulate (PM2.5), and ozone have
been finalized by the EPA in recent years but to date
been finalized by the EPA in recent years but to date
have not had a material impact on the Company.
have not had a material impact on the Company.

CLIMATE CHANGE
CLIMATE CHANGE

In an effort to mitigate the potential climate change
In an effort to mitigate the potential climate change
impacts from human activities, various international,
impacts from human activities, various international,
national and sub-national (regional, state and local)
national and sub-national (regional, state and local)
governmental actions have been or may be undertaken.
governmental actions have been or may be undertaken.
Presently, these efforts have not materially impacted
Presently, these efforts have not materially impacted
International Paper, but such efforts may have a material
International Paper, but such efforts may have a material
impact on the Company in the future.
impact on the Company in the future.

International Efforts
International Efforts

efforts
efforts

international
international

toward reducing
toward reducing

A successor program to the 1997 Kyoto Protocol, the
A successor program to the 1997 Kyoto Protocol, the
Paris Agreement, went into effect in November 2016 and
Paris Agreement, went into effect in November 2016 and
voluntary
continued
voluntary
continued
commitments
the emissions of
the emissions of
commitments
greenhouse gases (GHGs). Consistent with this
greenhouse gases (GHGs). Consistent with this
objective, participating countries aim to balance GHG
objective, participating countries aim to balance GHG
emissions generation and removal in the second half of
emissions generation and removal in the second half of
this century or, in effect, achieve net-zero global GHG
this century or, in effect, achieve net-zero global GHG
emissions.
emissions.

and
and

As part of the Paris Agreement, many countries,
As part of the Paris Agreement, many countries,
including the U.S. and EU member states, established
including the U.S. and EU member states, established
non-binding emissions reduction targets. The U.S. non-
non-binding emissions reduction targets. The U.S. non-
binding commitment is for GHG emissions to be 7%
binding commitment is for GHG emissions to be 7%
below 2005 GHG emissions levels by 2020 and 26% to
below 2005 GHG emissions levels by 2020 and 26% to
28% below by 2025. Other countries in which we do
28% below by 2025. Other countries in which we do
business made similar non-binding commitments. On
business made similar non-binding commitments. On

3
3

August 4, 2017, the U.S. filed official notice to withdraw

if implemented, could pose potential cost increases for

from the Paris Agreement. Notwithstanding the notice

electricity purchased by the Company. The magnitude

of withdrawal by the U.S., the Company’s voluntary GHG

of cost increases to the Company, if any, are not possible

reductions, which are set out in our annual Global

to estimate reliably at this time.

Citizenship report, remain roughly in line with the

percentages of the U.S. prior target reductions. 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 these

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 Paris Agreement's non-

binding commitments or allocation of and market prices

for GHG credits under existing rules evolve over the

coming years.

U.S. Efforts

In the U.S., the 1997 Kyoto Protocol was not ratified and

Congress has not passed GHG legislation. The EPA,

however, enacted regulations to: (i) control GHGs from

mobile sources by adopting

transportation

fuel

efficiency standards; (ii) control GHG emissions from

new Electric Generating Units (EGUs); (iii) require

reporting of GHGs from sources of GHGs greater than

25,000 tons per year; (iv) in 2015, require states to

develop plans to reduce GHGs from utility EGUs and

(v) in 2016 EPA took the first steps in the process of

developing emissions standards for existing sources in

the oil and gas sector. The 2017 change in leadership

of the U.S. executive branch may result in significant

revisions to or rescission of the EPA's GHG regulations.

It is unclear what impacts, if any, the EPA's GHG

regulatory revisions and any other future revisions will

have on the Company’s operations.

In 2015, EPA promulgated the Clean Power Plan (CPP)

rule to address climate change by reducing carbon

dioxide (CO2) and other designated greenhouse gas

pollutant emissions from utility EGUs. In response,

states were to develop and begin implementing

programs to reduce GHGs from EGUs by about 32

percent by the 2022 to 2033 timeframe as compared to

2005 baseline levels. In October 2017, the EPA issued

a regulatory action to withdraw the CPP in its entirety.

Notwithstanding the withdrawal of the CPP, some states

have remained committed to reaching the reduction

targets set out in the CPP. These GHG reduction plans,

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. California has already

enacted such a program and similar actions are being

considered by Oregon. The Company does not have

any sites currently subject

to California's GHG

regulatory plan and since the Oregon program is still

being developed, it is too early to know how or if

Company owned sites in Oregon may be affected.

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 the

withdrawal of the EPA’s CPP.

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

projects.

International Paper has controls and

procedures

in place

to stay

informed about

developments concerning possible climate change

legislation and regulation in the U.S. and in other

countries where we operate. We regularly assess

whether such legislation or regulation may have a

material effect on the Company, its operations or

financial condition, and whether we have any related

disclosure obligations.

International Paper plays a significant role in responding

to the climate change challenge. Our entire business

depends upon the sustainability of forests. We transform

renewable resources into recyclable products that

people depend on every day. This cycle begins with

RESEARCH AND DEVELOPMENT

expenditures for 2020 environmental projects are

estimated to be $73 million.

The Company operates its primary research and

development center in Loveland, Ohio, as well as

The 2017 spend included costs associated with the U.S.

several other product development facilities, including

Environmental Protection Agency's (EPA) Boiler MACT

the Global Cellulose Fibers technology center in

(maximum achievable control technology) regulations

Federal Way, Washington.

We direct research and development activities to short-

term, long-term and technical assistance needs of

customers and operating divisions, and to process,

equipment and product innovations. Activities include

product development within the operating divisions;

studies on innovation and improvement of pulping,

bleaching, chemical recovery, papermaking, converting

and coating processes; packaging design and materials

development; mechanical

packaging

systems,

environmentally sensitive printing inks and reduction of

environmental discharges; re-use of raw materials in

manufacturing processes; recycling of consumer and

packaging paper products; energy conservation;

applications of computer controls to manufacturing

operations; innovations and improvement of products;

and development of various new products. Our

development efforts specifically address product safety

as well as the minimization of solid waste. The cost to

the Company of

its research and development

operations was $28 million in 2017, $20 million in 2016,

and $27 million in 2015.

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

International Paper is subject to extensive federal and

state environmental regulation as well as similar

regulations internationally. Our continuing objectives

include: (1) controlling emissions and discharges from

our facilities into the air, water and groundwater to avoid

adverse

impacts

the

environment,

and

(2) maintaining compliance with applicable laws and

regulations. The Company spent $86 million in 2017 for

capital projects to control environmental releases into

the air and water, and to assure environmentally sound

management and disposal of waste. We expect to spend

$71 million in 2018 for environmental capital projects.

Capital expenditures for 2019 environmental projects

are anticipated to be approximately $87 million. Capital

that require owners of specified boilers to meet revised

air emissions standards for certain substances. Several

lawsuits were filed to challenge all or portions of the

Boiler MACT regulations. On December 23, 2016, the

U.S. Court of Appeals for the D.C. Circuit remanded the

Boiler MACT regulations to the EPA requiring the agency

to revise emission standards for boiler subcategories

that had been affected by flawed calculations. The Court

determined that the existing MACT standards should

remain in place while the revised standards are being

developed, but did not establish a deadline for the EPA

to complete the rulemaking. The Company has

completed its Boiler MACT capital projects to meet the

existing regulations. We are not able to project any

additional Boiler MACT capital project expenditures as

it is uncertain to what extent the EPA will revise Boiler

MACT standards that are subject to the remand.

Amendments lowering National Ambient Air Quality

Standards (NAAQS) for sulfur dioxide (SO2), nitrogen

dioxide (NO2), fine particulate (PM2.5), and ozone have

been finalized by the EPA in recent years but to date

have not had a material impact on the Company.

CLIMATE CHANGE

In an effort to mitigate the potential climate change

impacts from human activities, various international,

national and sub-national (regional, state and local)

governmental actions have been or may be 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

A successor program to the 1997 Kyoto Protocol, the

Paris Agreement, went into effect in November 2016 and

continued

international

efforts

and

voluntary

commitments

toward reducing

the emissions of

greenhouse gases (GHGs). Consistent with this

objective, participating countries aim to balance GHG

emissions generation and removal in the second half of

this century or, in effect, achieve net-zero global GHG

emissions.

As part of the Paris Agreement, many countries,

including the U.S. and EU member states, established

non-binding emissions reduction targets. The U.S. non-

binding commitment is for GHG emissions to be 7%

below 2005 GHG emissions levels by 2020 and 26% to

28% below by 2025. Other countries in which we do

business made similar non-binding commitments. On

August 4, 2017, the U.S. filed official notice to withdraw
August 4, 2017, the U.S. filed official notice to withdraw
from the Paris Agreement. Notwithstanding the notice
from the Paris Agreement. Notwithstanding the notice
of withdrawal by the U.S., the Company’s voluntary GHG
of withdrawal by the U.S., the Company’s voluntary GHG
reductions, which are set out in our annual Global
reductions, which are set out in our annual Global
Citizenship report, remain roughly in line with the
Citizenship report, remain roughly in line with the
percentages of the U.S. prior target reductions. It is not
percentages of the U.S. prior target reductions. It is not
clear at this time what, if any, further reductions by the
clear at this time what, if any, further reductions by the
Company might be required by the countries in which
Company might be required by the countries in which
we operate. Due to this uncertainty, it is not possible at
we operate. Due to this uncertainty, it is not possible at
this time to estimate the potential impacts of these
this time to estimate the potential impacts of these
agreements on the Company.
agreements on the Company.

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

U.S. Efforts
U.S. Efforts

transportation
transportation

In the U.S., the 1997 Kyoto Protocol was not ratified and
In the U.S., the 1997 Kyoto Protocol was not ratified and
Congress has not passed GHG legislation. The EPA,
Congress has not passed GHG legislation. The EPA,
however, enacted regulations to: (i) control GHGs from
however, enacted regulations to: (i) control GHGs from
fuel
mobile sources by adopting
fuel
mobile sources by adopting
efficiency standards; (ii) control GHG emissions from
efficiency standards; (ii) control GHG emissions from
new Electric Generating Units (EGUs); (iii) require
new Electric Generating Units (EGUs); (iii) require
reporting of GHGs from sources of GHGs greater than
reporting of GHGs from sources of GHGs greater than
25,000 tons per year; (iv) in 2015, require states to
25,000 tons per year; (iv) in 2015, require states to
develop plans to reduce GHGs from utility EGUs and
develop plans to reduce GHGs from utility EGUs and
(v) in 2016 EPA took the first steps in the process of
(v) in 2016 EPA took the first steps in the process of
developing emissions standards for existing sources in
developing emissions standards for existing sources in
the oil and gas sector. The 2017 change in leadership
the oil and gas sector. The 2017 change in leadership
of the U.S. executive branch may result in significant
of the U.S. executive branch may result in significant
revisions to or rescission of the EPA's GHG regulations.
revisions to or rescission of the EPA's GHG regulations.
It is unclear what impacts, if any, the EPA's GHG
It is unclear what impacts, if any, the EPA's GHG
regulatory revisions and any other future revisions will
regulatory revisions and any other future revisions will
have on the Company’s operations.
have on the Company’s operations.

In 2015, EPA promulgated the Clean Power Plan (CPP)
In 2015, EPA promulgated the Clean Power Plan (CPP)
rule to address climate change by reducing carbon
rule to address climate change by reducing carbon
dioxide (CO2) and other designated greenhouse gas
dioxide (CO2) and other designated greenhouse gas
pollutant emissions from utility EGUs. In response,
pollutant emissions from utility EGUs. In response,
states were to develop and begin implementing
states were to develop and begin implementing
programs to reduce GHGs from EGUs by about 32
programs to reduce GHGs from EGUs by about 32
percent by the 2022 to 2033 timeframe as compared to
percent by the 2022 to 2033 timeframe as compared to
2005 baseline levels. In October 2017, the EPA issued
2005 baseline levels. In October 2017, the EPA issued
a regulatory action to withdraw the CPP in its entirety.
a regulatory action to withdraw the CPP in its entirety.
Notwithstanding the withdrawal of the CPP, some states
Notwithstanding the withdrawal of the CPP, some states
have remained committed to reaching the reduction
have remained committed to reaching the reduction
targets set out in the CPP. These GHG reduction plans,
targets set out in the CPP. These GHG reduction plans,

if implemented, could pose potential cost increases for
if implemented, could pose potential cost increases for
electricity purchased by the Company. The magnitude
electricity purchased by the Company. The magnitude
of cost increases to the Company, if any, are not possible
of cost increases to the Company, if any, are not possible
to estimate reliably at this time.
to estimate reliably at this time.

State, Regional and Local Measures
State, Regional and Local Measures

A few U.S. states have enacted or are considering legal
A few U.S. states have enacted or are considering legal
measures to require the reduction of emissions of GHGs
measures to require the reduction of emissions of GHGs
by companies and public utilities, primarily through the
by companies and public utilities, primarily through the
development of GHG emission inventories or regional
development of GHG emission inventories or regional
GHG cap-and-trade programs. California has already
GHG cap-and-trade programs. California has already
enacted such a program and similar actions are being
enacted such a program and similar actions are being
considered by Oregon. The Company does not have
considered by Oregon. The Company does not have
to California's GHG
any sites currently subject
any sites currently subject
to California's GHG
regulatory plan and since the Oregon program is still
regulatory plan and since the Oregon program is still
being developed, it is too early to know how or if
being developed, it is too early to know how or if
Company owned sites in Oregon may be affected.
Company owned sites in Oregon may be affected.
There may be indirect impacts from changing input costs
There may be indirect impacts from changing input costs
(such as electricity) at some of our California converting
(such as electricity) at some of our California converting
operations but these have yet to manifest themselves
operations but these have yet to manifest themselves
in material impacts. Although we are monitoring
in material impacts. Although we are monitoring
proposed programs in other states, it is unclear what
proposed programs in other states, it is unclear what
impacts, if any, state-level GHG rules will have on the
impacts, if any, state-level GHG rules will have on the
Company’s operations. Further state measures are
Company’s operations. Further state measures are
under substantive review as they respond to the
under substantive review as they respond to the
withdrawal of the EPA’s CPP.
withdrawal of the EPA’s CPP.

Summary
Summary

Regulation of GHGs continues to evolve in various
Regulation of GHGs continues to evolve in various
countries in which we do business. While it is likely that
countries in which we do business. While it is likely that
there will be increased governmental action regarding
there will be increased governmental action regarding
GHGs and climate change, any material impact to the
GHGs and climate change, any material impact to the
Company is not likely to occur before 2020 and at this
Company is not likely to occur before 2020 and at this
time it is not reasonably possible to estimate Company
time it is not reasonably possible to estimate Company
costs of compliance with rules that have not yet been
costs of compliance with rules that have not yet been
adopted or implemented and may not be adopted or
adopted or implemented and may not be adopted or
implemented in the future. In addition to possible direct
implemented in the future. In addition to possible direct
impacts, future legislation and regulation could have
impacts, future legislation and regulation could have
indirect impacts on International Paper, such as higher
indirect impacts on International Paper, such as higher
prices for transportation, energy and other inputs, as
prices for transportation, energy and other inputs, as
well as more protracted air permitting processes,
well as more protracted air permitting processes,
causing delays and higher costs to implement capital
causing delays and higher costs to implement capital
International Paper has controls and
projects.
International Paper has controls and
projects.
procedures
informed about
informed about
procedures
developments concerning possible climate change
developments concerning possible climate change
legislation and regulation in the U.S. and in other
legislation and regulation in the U.S. and in other
countries where we operate. We regularly assess
countries where we operate. We regularly assess
whether such legislation or regulation may have a
whether such legislation or regulation may have a
material effect on the Company, its operations or
material effect on the Company, its operations or
financial condition, and whether we have any related
financial condition, and whether we have any related
disclosure obligations.
disclosure obligations.

in place
in place

to stay
to stay

International Paper plays a significant role in responding
International Paper plays a significant role in responding
to the climate change challenge. Our entire business
to the climate change challenge. Our entire business
depends upon the sustainability of forests. We transform
depends upon the sustainability of forests. We transform
renewable resources into recyclable products that
renewable resources into recyclable products that
people depend on every day. This cycle begins with
people depend on every day. This cycle begins with

4
4

sourcing renewable fiber from responsibly managed
sourcing renewable fiber from responsibly managed
forests, and at the end of use our products are recycled
forests, and at the end of use our products are recycled
into new products at a higher rate than any other base
into new products at a higher rate than any other base
material. We will continue to lead the world in
material. We will continue to lead the world in
responsible forest stewardship to ensure healthy and
responsible forest stewardship to ensure healthy and
productive forest ecosystems for generations to come.
productive forest ecosystems for generations to come.
Our efforts to advance sustainable forest management
Our efforts to advance sustainable forest management
and restore forest landscapes are an important lever for
and restore forest landscapes are an important lever for
mitigating climate change through carbon storage in
mitigating climate change through carbon storage in
forests. Furthermore, we use biomass and
forests. Furthermore, we use biomass and
manufacturing residuals (rather than fossil fuels) to
manufacturing residuals (rather than fossil fuels) to
generate a substantial majority of the manufacturing
generate a substantial majority of the manufacturing
energy at our mills.
energy at our mills.

Additional information regarding climate change and
Additional information regarding climate change and
International Paper is available in our 2016 Global
International Paper is available in our 2016 Global
Citizenship report found on our Internet Web site at
Citizenship report found on our Internet Web site at
www.internationalpaper.com, though this information is
www.internationalpaper.com, though this information is
not incorporated by reference into this Form 10-K and
not incorporated by reference into this Form 10-K and
should not be considered part of this or any other report
should not be considered part of this or any other report
that we file with or furnish to the SEC.
that we file with or furnish to the SEC.

EMPLOYEES
EMPLOYEES

the United States. Of
the United States. Of

As of December 31, 2017, we have approximately
As of December 31, 2017, we have approximately
56,000 employees, nearly 36,000 of whom are located
56,000 employees, nearly 36,000 of whom are located
in
the U.S. employees,
in
the U.S. employees,
approximately 25,000 are hourly, with unions
approximately 25,000 are hourly, with unions
representing approximately 15,000 employees.
representing approximately 15,000 employees.
Approximately 12,000 of this number are represented
Approximately 12,000 of this number are represented
by the United Steelworkers union (USW).
by the United Steelworkers union (USW).

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

EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS OF THE REGISTRANT

Mark S. Sutton, 56, chairman (since January 1, 2015)
Mark S. Sutton, 56, chairman (since January 1, 2015)
& chief executive officer (since November 1, 2014).
& chief executive officer (since November 1, 2014).
Mr. Sutton previously served as president & chief
Mr. Sutton previously served as president & chief
operating officer from June 1, 2014 to October 31,
operating officer from June 1, 2014 to October 31,
2014, senior vice president - industrial packaging from
2014, senior vice president - industrial packaging from
November 2011 to May 31, 2014, senior vice president
November 2011 to May 31, 2014, senior vice president
- printing and communications papers of the Americas
- printing and communications papers of the Americas

from 2010 until 2011, senior vice president - supply
from 2010 until 2011, senior vice president - supply
chain from 2008 to 2009, vice president - supply chain
chain from 2008 to 2009, vice president - supply chain
from 2007 until 2008, and vice president - strategic
from 2007 until 2008, and vice president - strategic
planning from 2005 until 2007. Mr. Sutton joined
planning from 2005 until 2007. Mr. Sutton joined
International Paper in 1984. Mr. Sutton serves on the
International Paper in 1984. Mr. Sutton serves on the
board of directors of The Kroger Company. He is a
board of directors of The Kroger Company. He is a
member of The Business Council and the Business
member of The Business Council and the Business
Roundtable and serves on the American Forest &
Roundtable and serves on the American Forest &
Paper Association board of directors and
the
Paper Association board of directors and
the
international advisory board of the Moscow School of
international advisory board of the Moscow School of
Management - Skolkovo. He was appointed chairman
Management - Skolkovo. He was appointed chairman
of the U.S. Russian Business Council and was also
of the U.S. Russian Business Council and was also
appointed to the U.S. Section of the U.S.-Brazil CEO
appointed to the U.S. Section of the U.S.-Brazil CEO
Forum. He also serves on the board of directors of
Forum. He also serves on the board of directors of
Memphis Tomorrow and board of governors for New
Memphis Tomorrow and board of governors for New
Memphis Institute. Mr. Sutton has been a director since
Memphis Institute. Mr. Sutton has been a director since
June 1, 2014.
June 1, 2014.

W. Michael Amick, Jr., 54, senior vice president -
W. Michael Amick, Jr., 54, senior vice president -
paper the Americas & India since January 1, 2017. Mr.
paper the Americas & India since January 1, 2017. Mr.
Amick previously served as senior vice president -
Amick previously served as senior vice president -
North American papers & consumer packaging from
North American papers & consumer packaging from
July 2016 until December 2016, senior vice president
July 2016 until December 2016, senior vice president
- North American papers, pulp & consumer packaging
- North American papers, pulp & consumer packaging
from November 2014 until June 2016, vice president
from November 2014 until June 2016, vice president
- president, IP India, from August 2012 to October
- president, IP India, from August 2012 to October
2014, and vice president and general manager for the
2014, and vice president and general manager for the
coated paperboard business from 2010 to 2012. Mr.
coated paperboard business from 2010 to 2012. Mr.
Amick joined International Paper in 1990.
Amick joined International Paper in 1990.

C. Cato Ealy, 61, senior vice president - corporate
C. Cato Ealy, 61, senior vice president - corporate
development since 2003. Mr. Ealy is a director of Ilim
development since 2003. Mr. Ealy is a director of Ilim
Holding S.A., a Swiss holding company in which
Holding S.A., a Swiss holding company in which
International Paper holds a 50% interest, and of its
International Paper holds a 50% interest, and of its
subsidiary, Ilim Group. Mr. Ealy joined International
subsidiary, Ilim Group. Mr. Ealy joined International
Paper in 1992.
Paper in 1992.

Tommy S. Joseph, 58, senior vice president -
Tommy S. Joseph, 58, senior vice president -
manufacturing, technology, EH&S and global sourcing
manufacturing, technology, EH&S and global sourcing
since January 2010. Mr. Joseph previously served as
since January 2010. Mr. Joseph previously served as
senior vice president - manufacturing, technology,
senior vice president - manufacturing, technology,
EH&S from February 2009 until December 2009, and
EH&S from February 2009 until December 2009, and
vice president - technology from 2005 until February
vice president - technology from 2005 until February
2009. Mr. Joseph is a director of Ilim Holding S.A., a
2009. Mr. Joseph is a director of Ilim Holding S.A., a
Swiss Holding Company in which International Paper
Swiss Holding Company in which International Paper
holds a 50% interest, and of its subsidiary, Ilim Group.
holds a 50% interest, and of its subsidiary, Ilim Group.
Mr. Joseph joined International Paper in 1983.
Mr. Joseph joined International Paper in 1983.

Glenn R. Landau, 49, senior vice president & chief
Glenn R. Landau, 49, senior vice president & chief
financial officer since February 22, 2017. Mr. Landau
financial officer since February 22, 2017. Mr. Landau
previously served as senior vice president - finance
previously served as senior vice president - finance
from January 1, 2017 to February 22, 2017, senior vice
from January 1, 2017 to February 22, 2017, senior vice
president - president, IP Latin America from November
president - president, IP Latin America from November
2014 through December 2016, vice president -
2014 through December 2016, vice president -
president IP Latin America from 2013 to October 2014,
president IP Latin America from 2013 to October 2014,
vice president - investor relations from 2011 to 2013,
vice president - investor relations from 2011 to 2013,
vice president and general manager,
and
vice president and general manager,
and
containerboard and recycling from 2007 to 2011. Mr.
containerboard and recycling from 2007 to 2011. Mr.
Landau serves on the board of directors of Factory
Landau serves on the board of directors of Factory

Mutual Insurance Company (FM Global). Mr. Landau

2016

to December 2017.

Ms. Slater

joined

joined International Paper in 1991.

Timothy S. Nicholls, 56, senior vice president -

industrial packaging the Americas since January 1,

International Paper from Weyerhaeuser Company in

December 2016, effective with the completion of the

acquisition of Weyerhaeuser’s cellulose

fibers

business, which she previously led. Ms. Slater’s 24-

2017. Mr. Nicholls previously served as senior vice

year career with Weyerhaeuser included leadership

president - industrial packaging from November 2014

roles in manufacturing, printing papers, consumer

through December 2016, senior vice president -

products, wood products and the cellulose fibers

printing and communications papers of the Americas

business.

from November 2011 through October 2014, senior

vice president and chief financial officer from 2007 until

2011, vice president and executive project leader of IP

Gregory T. Wanta, 52, senior vice president - North

American container since November 2016. Mr. Wanta

Europe during 2007, and vice president and chief

has served in a variety of roles of increasing

financial officer - IP Europe from 2005 until 2007. Mr.

responsibility

in manufacturing and commercial

Nicholls joined International Paper in 1991.

leadership

roles

in specialty papers, coated

paperboard, printing papers,

foodservice and

industrial packaging, including vice president, central

Thomas J. Plath, 54, senior vice president - human

resources and global citizenship since March 1, 2017.

region, Container the Americas, from January 2012

Mr. Plath previously served as vice president - human

through October 2016. Mr. Wanta joined International

resources, global businesses from November 2014

Paper in 1991.

through February 2017, and vice president - HR

manufacturing, technology, EH&S and global supply

chain from April 2013 to November 2014. Mr. Plath

joined International Paper in 1991.

Jean-Michel Ribieras, 55, senior vice president -

global cellulose fibers since July 2016. Mr. Ribieras

previously served as senior vice president - president,

IP Europe, Middle East, Africa & Russia from 2013 until

June 2016, and president - IP Latin America from 2009

until 2013. Mr. Ribieras joined International Paper in

1993.

Sharon R. Ryan, 58, 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.

John V. Sims, 55, senior vice president - president,

IP Europe, Middle East, Africa & Russia since July

2016. Mr. Sims previously served as vice president

and general manager, European papers from March

2016 until June 2016, vice president & general

manager, North American papers from 2013 until

February 2016, and vice president, finance and

strategy, industrial packaging, from 2009 until 2013.

Mr. Sims 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.

Sims joined International Paper in 1994.

Catherine I. Slater, 54, senior vice president since

January 2018. Ms. Slater previously served as senior

vice president - consumer packaging from December

RAW MATERIALS

Raw materials essential to our businesses include wood

fiber, purchased in the form of pulpwood, wood chips

and old corrugated containers (OCC), and certain

chemicals,

including caustic soda and starch.

Information

concerning

fiber

supply purchase

agreements that were entered into in connection with

the Company’s 2006 Transformation Plan, the 2008

acquisition

Weyerhaeuser

Company’s

Containerboard, Packaging and Recycling business,

and the 2016 acquisition of Weyerhaeuser's pulp

business is presented in on page 30.

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K

(including the exhibits hereto) 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

5
5

sourcing renewable fiber from responsibly managed

from 2010 until 2011, senior vice president - supply

forests, and at the end of use our products are recycled

chain from 2008 to 2009, vice president - supply chain

into new products at a higher rate than any other base

from 2007 until 2008, and vice president - strategic

material. We will continue to lead the world in

planning from 2005 until 2007. Mr. Sutton joined

responsible forest stewardship to ensure healthy and

International Paper in 1984. Mr. Sutton serves on the

productive forest ecosystems for generations to come.

board of directors of The Kroger Company. He is a

Our efforts to advance sustainable forest management

member of The Business Council and the Business

and restore forest landscapes are an important lever for

Roundtable and serves on the American Forest &

mitigating climate change through carbon storage in

Paper Association board of directors and

the

forests. Furthermore, we use biomass and

international advisory board of the Moscow School of

manufacturing residuals (rather than fossil fuels) to

Management - Skolkovo. He was appointed chairman

generate a substantial majority of the manufacturing

of the U.S. Russian Business Council and was also

energy at our mills.

appointed to the U.S. Section of the U.S.-Brazil CEO

Forum. He also serves on the board of directors of

Additional information regarding climate change and

Memphis Tomorrow and board of governors for New

International Paper is available in our 2016 Global

Memphis Institute. Mr. Sutton has been a director since

Citizenship report found on our Internet Web site at

June 1, 2014.

www.internationalpaper.com, though this information is

not incorporated by reference into this Form 10-K and

W. Michael Amick, Jr., 54, senior vice president -

should not be considered part of this or any other report

paper the Americas & India since January 1, 2017. Mr.

that we file with or furnish to the SEC.

EMPLOYEES

As of December 31, 2017, we have approximately

56,000 employees, nearly 36,000 of whom are located

the United States. Of

the U.S. employees,

approximately 25,000 are hourly, with unions

representing approximately 15,000 employees.

Approximately 12,000 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 master agreements

cover the majority of our union represented mills and

converting facilities. In addition, International Paper is

party to a master agreement with District Council 2,

International Brotherhood of Teamsters, covering

additional converting facilities.

EXECUTIVE OFFICERS OF THE REGISTRANT

Mark S. Sutton, 56, 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

Amick previously served as senior vice president -

North American papers & consumer packaging from

July 2016 until December 2016, senior vice president

- North American papers, pulp & consumer packaging

from November 2014 until June 2016, vice president

- president, IP India, from August 2012 to October

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, 61, 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.

Tommy S. Joseph, 58, senior vice president -

manufacturing, technology, EH&S and global sourcing

since January 2010. Mr. Joseph previously served as

senior vice president - manufacturing, technology,

EH&S from February 2009 until 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.

Glenn R. Landau, 49, senior vice president & chief

financial officer since February 22, 2017. Mr. Landau

previously served as senior vice president - finance

from January 1, 2017 to February 22, 2017, senior vice

president - president, IP Latin America from November

2014 through December 2016, vice president -

president IP Latin America from 2013 to October 2014,

vice president - investor relations from 2011 to 2013,

and

vice president and general manager,

containerboard and recycling from 2007 to 2011. Mr.

Landau serves on the board of directors of Factory

Mutual Insurance Company (FM Global). Mr. Landau
Mutual Insurance Company (FM Global). Mr. Landau
joined International Paper in 1991.
joined International Paper in 1991.

Timothy S. Nicholls, 56, senior vice president -
Timothy S. Nicholls, 56, senior vice president -
industrial packaging the Americas since January 1,
industrial packaging the Americas since January 1,
2017. Mr. Nicholls previously served as senior vice
2017. Mr. Nicholls previously served as senior vice
president - industrial packaging from November 2014
president - industrial packaging from November 2014
through December 2016, senior vice president -
through December 2016, senior vice president -
printing and communications papers of the Americas
printing and communications papers of the Americas
from November 2011 through October 2014, senior
from November 2011 through October 2014, senior
vice president and chief financial officer from 2007 until
vice president and chief financial officer from 2007 until
2011, vice president and executive project leader of IP
2011, vice president and executive project leader of IP
Europe during 2007, and vice president and chief
Europe during 2007, and vice president and chief
financial officer - IP Europe from 2005 until 2007. Mr.
financial officer - IP Europe from 2005 until 2007. Mr.
Nicholls joined International Paper in 1991.
Nicholls joined International Paper in 1991.

Thomas J. Plath, 54, senior vice president - human
Thomas J. Plath, 54, senior vice president - human
resources and global citizenship since March 1, 2017.
resources and global citizenship since March 1, 2017.
Mr. Plath previously served as vice president - human
Mr. Plath previously served as vice president - human
resources, global businesses from November 2014
resources, global businesses from November 2014
through February 2017, and vice president - HR
through February 2017, and vice president - HR
manufacturing, technology, EH&S and global supply
manufacturing, technology, EH&S and global supply
chain from April 2013 to November 2014. Mr. Plath
chain from April 2013 to November 2014. Mr. Plath
joined International Paper in 1991.
joined International Paper in 1991.

Jean-Michel Ribieras, 55, senior vice president -
Jean-Michel Ribieras, 55, senior vice president -
global cellulose fibers since July 2016. Mr. Ribieras
global cellulose fibers since July 2016. Mr. Ribieras
previously served as senior vice president - president,
previously served as senior vice president - president,
IP Europe, Middle East, Africa & Russia from 2013 until
IP Europe, Middle East, Africa & Russia from 2013 until
June 2016, and president - IP Latin America from 2009
June 2016, and president - IP Latin America from 2009
until 2013. Mr. Ribieras joined International Paper in
until 2013. Mr. Ribieras joined International Paper in
1993.
1993.

Sharon R. Ryan, 58, senior vice president, general
Sharon R. Ryan, 58, senior vice president, general
counsel & corporate secretary since November 2011.
counsel & corporate secretary since November 2011.
Ms. Ryan previously served as vice president, acting
Ms. Ryan previously served as vice president, acting
general counsel & corporate secretary from May 2011
general counsel & corporate secretary from May 2011
until November 2011, vice president from March 2011
until November 2011, vice president from March 2011
until May 2011, associate general counsel, chief ethics
until May 2011, associate general counsel, chief ethics
and compliance officer from 2009 until 2011, and
and compliance officer from 2009 until 2011, and
associate general counsel from 2006 until 2009. Ms.
associate general counsel from 2006 until 2009. Ms.
Ryan joined International Paper in 1988.
Ryan joined International Paper in 1988.

John V. Sims, 55, senior vice president - president,
John V. Sims, 55, senior vice president - president,
IP Europe, Middle East, Africa & Russia since July
IP Europe, Middle East, Africa & Russia since July
2016. Mr. Sims previously served as vice president
2016. Mr. Sims previously served as vice president
and general manager, European papers from March
and general manager, European papers from March
2016 until June 2016, vice president & general
2016 until June 2016, vice president & general
manager, North American papers from 2013 until
manager, North American papers from 2013 until
February 2016, and vice president, finance and
February 2016, and vice president, finance and
strategy, industrial packaging, from 2009 until 2013.
strategy, industrial packaging, from 2009 until 2013.
Mr. Sims is a director of Ilim Holding S.A., a Swiss
Mr. Sims is a director of Ilim Holding S.A., a Swiss
Holding Company in which International Paper holds
Holding Company in which International Paper holds
a 50% interest, and of its subsidiary, Ilim Group. Mr.
a 50% interest, and of its subsidiary, Ilim Group. Mr.
Sims joined International Paper in 1994.
Sims joined International Paper in 1994.

Catherine I. Slater, 54, senior vice president since
Catherine I. Slater, 54, senior vice president since
January 2018. Ms. Slater previously served as senior
January 2018. Ms. Slater previously served as senior
vice president - consumer packaging from December
vice president - consumer packaging from December

6
6

Ms. Slater
Ms. Slater

to December 2017.
to December 2017.

2016
joined
joined
2016
International Paper from Weyerhaeuser Company in
International Paper from Weyerhaeuser Company in
December 2016, effective with the completion of the
December 2016, effective with the completion of the
acquisition of Weyerhaeuser’s cellulose
fibers
fibers
acquisition of Weyerhaeuser’s cellulose
business, which she previously led. Ms. Slater’s 24-
business, which she previously led. Ms. Slater’s 24-
year career with Weyerhaeuser included leadership
year career with Weyerhaeuser included leadership
roles in manufacturing, printing papers, consumer
roles in manufacturing, printing papers, consumer
products, wood products and the cellulose fibers
products, wood products and the cellulose fibers
business.
business.

Gregory T. Wanta, 52, senior vice president - North
Gregory T. Wanta, 52, senior vice president - North
American container since November 2016. Mr. Wanta
American container since November 2016. Mr. Wanta
has served in a variety of roles of increasing
has served in a variety of roles of increasing
in manufacturing and commercial
responsibility
in manufacturing and commercial
responsibility
in specialty papers, coated
roles
roles
leadership
in specialty papers, coated
leadership
paperboard, printing papers,
foodservice and
foodservice and
paperboard, printing papers,
industrial packaging, including vice president, central
industrial packaging, including vice president, central
region, Container the Americas, from January 2012
region, Container the Americas, from January 2012
through October 2016. Mr. Wanta joined International
through October 2016. Mr. Wanta joined International
Paper in 1991.
Paper in 1991.

RAW MATERIALS
RAW MATERIALS

Raw materials essential to our businesses include wood
Raw materials essential to our businesses include wood
fiber, purchased in the form of pulpwood, wood chips
fiber, purchased in the form of pulpwood, wood chips
and old corrugated containers (OCC), and certain
and old corrugated containers (OCC), and certain
including caustic soda and starch.
chemicals,
including caustic soda and starch.
chemicals,
supply purchase
concerning
Information
supply purchase
concerning
Information
agreements that were entered into in connection with
agreements that were entered into in connection with
the Company’s 2006 Transformation Plan, the 2008
the Company’s 2006 Transformation Plan, the 2008
acquisition
Company’s
acquisition
Company’s
Containerboard, Packaging and Recycling business,
Containerboard, Packaging and Recycling business,
and the 2016 acquisition of Weyerhaeuser's pulp
and the 2016 acquisition of Weyerhaeuser's pulp
business is presented in on page 30.
business is presented in on page 30.

Weyerhaeuser
Weyerhaeuser

fiber
fiber

of
of

FORWARD-LOOKING STATEMENTS
FORWARD-LOOKING STATEMENTS

“will,”
“will,”

“may,”
“may,”

the words,
the words,

Certain statements in this Annual Report on Form 10-K
Certain statements in this Annual Report on Form 10-K
(including the exhibits hereto) that are not historical in
(including the exhibits hereto) that are not historical in
nature may be considered “forward-looking” statements
nature may be considered “forward-looking” statements
within the meaning of the Private Securities Litigation
within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are often
Reform Act of 1995. These statements are often
identified by
“should,”
identified by
“should,”
“continue,” “anticipate,” “believe,” “expect,” “plan,”
“continue,” “anticipate,” “believe,” “expect,” “plan,”
“appear,” “project,” “estimate,” “intend,” and words of a
“appear,” “project,” “estimate,” “intend,” and words of a
similar nature. These statements are not guarantees of
similar nature. These statements are not guarantees of
future performance and reflect management’s current
future performance and reflect management’s current
views with respect to future events, which are subject
views with respect to future events, which are subject
to risks and uncertainties that could cause actual results
to risks and uncertainties that could cause actual results
to differ materially from those expressed or implied in
to differ materially from those expressed or implied in
these statements. Factors which could cause actual
these statements. Factors which could cause actual
results to differ include but are not limited to: (i) the level
results to differ include but are not limited to: (i) the level
of our indebtedness and changes in interest rates; (ii)
of our indebtedness and changes in interest rates; (ii)
industry conditions, including but not limited to changes
industry conditions, including but not limited to changes
in the cost or availability of raw materials, energy and
in the cost or availability of raw materials, energy and
transportation costs, competition we face, cyclicality and
transportation costs, competition we face, cyclicality and
changes in consumer preferences, demand and pricing
changes in consumer preferences, demand and pricing
for our products; (iii) global economic conditions and
for our products; (iii) global economic conditions and
political changes, including but not limited to the
political changes, including but not limited to the

impairment of financial institutions, changes in currency
impairment of financial institutions, changes in currency
exchange rates, credit ratings issued by recognized
exchange rates, credit ratings issued by recognized
credit rating organizations, the amount of our future
credit rating organizations, the amount of our future
pension funding obligation, changes in tax laws and
pension funding obligation, changes in tax laws and
pension and health care costs; (iv) unanticipated
pension and health care costs; (iv) unanticipated
expenditures related to the cost of compliance with
expenditures related to the cost of compliance with
existing and new environmental and other governmental
existing and new environmental and other governmental
regulations and to actual or potential litigation; (v)
regulations and to actual or potential litigation; (v)
whether we experience a material disruption at one of
whether we experience a material disruption at one of
our manufacturing facilities; (vi) risks inherent in
our manufacturing facilities; (vi) risks inherent in
conducting business through a joint venture; and (vii)
conducting business through a joint venture; and (vii)
our ability to achieve the benefits we expect from all
our ability to achieve the benefits we expect from all
acquisitions, divestitures and restructurings. These and
acquisitions, divestitures and restructurings. These and
other factors that could cause or contribute to actual
other factors that could cause or contribute to actual
results differing materially from such forward looking
results differing materially from such forward looking
statements are discussed in greater detail below in “Item
statements are discussed in greater detail below in “Item
1A. Risk Factors.” We undertake no obligation to publicly
1A. Risk Factors.” We undertake no obligation to publicly
update any forward-looking statements, whether as a
update any forward-looking statements, whether as a
result of new information, future events or otherwise.
result of new information, future events or otherwise.

ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS

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

RISKS RELATING TO INDUSTRY CONDITIONS
RISKS RELATING TO INDUSTRY CONDITIONS

CHANGES IN THE COST OR AVAILABILITY OF RAW
CHANGES IN THE COST OR AVAILABILITY OF RAW
MATERIALS, ENERGY AND TRANSPORTATION
MATERIALS, ENERGY AND TRANSPORTATION
COULD AFFECT OUR PROFITABILITY. We rely
COULD AFFECT OUR PROFITABILITY. We rely
heavily on the use of certain raw materials (principally
heavily on the use of certain raw materials (principally
virgin wood fiber, recycled fiber, caustic soda and
virgin wood fiber, recycled fiber, caustic soda and
starch), energy sources (principally natural gas, coal
starch), energy sources (principally natural gas, coal
and fuel oil) and third-party companies that transport our
and fuel oil) and third-party companies that transport our
goods. The market price of virgin wood fiber varies
goods. The market price of virgin wood fiber varies
based upon availability and source. In addition, the
based upon availability and source. In addition, the
increase in demand of products manufactured, in whole
increase in demand of products manufactured, in whole
or in part, from recycled fiber, on a global basis, may
or in part, from recycled fiber, on a global basis, may
cause an occasional tightening in the supply of recycled
cause an occasional tightening in the supply of recycled
fiber. Energy prices, in particular prices for oil and natural
fiber. Energy prices, in particular prices for oil and natural
gas, have fluctuated dramatically in the past and may
gas, have fluctuated dramatically in the past and may
continue to fluctuate in the future. Our profitability has
continue to fluctuate in the future. Our profitability has
been, and will continue to be, affected by changes in the
been, and will continue to be, affected by changes in the
costs and availability of such raw materials, energy
costs and availability of such raw materials, energy
sources and transportation sources.
sources and transportation sources.

INDUSTRIES
INDUSTRIES

IN WHICH WE OPERATE
IN WHICH WE OPERATE
THE
THE
EXPERIENCE BOTH ECONOMIC CYCLICALITY
EXPERIENCE BOTH ECONOMIC CYCLICALITY
AND CHANGES IN CONSUMER PREFERENCES.
AND CHANGES IN CONSUMER PREFERENCES.
FLUCTUATIONS IN THE PRICES OF, AND THE
FLUCTUATIONS IN THE PRICES OF, AND THE
DEMAND FOR, OUR PRODUCTS COULD
DEMAND FOR, OUR PRODUCTS COULD
MATERIALLY
FINANCIAL
FINANCIAL
MATERIALLY
CONDITION, RESULTS OF OPERATIONS AND
CONDITION, RESULTS OF OPERATIONS AND

AFFECT
AFFECT

OUR
OUR

CASH FLOWS. Substantially all of our businesses have
CASH FLOWS. Substantially all of our businesses have
experienced, and are likely to continue to experience,
experienced, and are likely to continue to experience,
cycles relating to industry capacity and general
cycles relating to industry capacity and general
economic conditions. The length and magnitude of
economic conditions. The length and magnitude of
these cycles have varied over time and by product. In
these cycles have varied over time and by product. In
addition, changes in consumer preferences may
addition, changes in consumer preferences may
increase or decrease the demand for our products.
increase or decrease the demand for our products.
These consumer preferences affect the prices of our
These consumer preferences affect the prices of our
products. Consequently, our financial results are
products. Consequently, our financial results are
sensitive to changes in the pricing and demand for our
sensitive to changes in the pricing and demand for our
products.
products.

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

RISKS RELATING TO MARKET AND ECONOMIC
RISKS RELATING TO MARKET AND ECONOMIC
FACTORS
FACTORS

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

advertising
advertising

and
and

THE LEVEL OF OUR INDEBTEDNESS COULD
THE LEVEL OF OUR INDEBTEDNESS COULD
ADVERSELY AFFECT OUR FINANCIAL CONDITION
ADVERSELY AFFECT OUR FINANCIAL CONDITION
AND IMPAIR OUR ABILITY TO OPERATE OUR
AND IMPAIR OUR ABILITY TO OPERATE OUR
BUSINESS. As of December 31, 2017, International
BUSINESS. As of December 31, 2017, International
Paper had approximately $11.2 billion of outstanding
Paper had approximately $11.2 billion of outstanding
indebtedness. The level of our indebtedness could have
indebtedness. The level of our indebtedness could have
important consequences to our financial condition,
important consequences to our financial condition,
operating results and business, including the following:
operating results and business, including the following:

•
•

financing
financing

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

a portion of our cash flows from operations will be
a portion of our cash flows from operations will be
dedicated to payments on indebtedness and will
dedicated to payments on indebtedness and will
not be available for other purposes, including
not be available for other purposes, including

7
7

operations, capital expenditures and

future

circumstances so warrant. Any such downgrade of our

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.

CHANGES

IN CREDIT RATINGS

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.

Under

the

terms of

the agreements governing

approximately $1.4 billion of our debt as of

December 31, 2017, the applicable interest rate on such

debt may increase upon each downgrade in our credit

rating below investment grade. As a result, a downgrade

in our credit rating below investment grade 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,

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 the terms of any future indebtedness that we

may incur.

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 $538 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 63 through 64, and

Note 10, Income Taxes, on pages 57 through 60, 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 former U.S. hourly

employees, as well as financial assistance towards the

cost of individual retiree medical coverage for certain

former U.S. salaried 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.

impairment of financial institutions, changes in currency

CASH FLOWS. Substantially all of our businesses have

exchange rates, credit ratings issued by recognized

experienced, and are likely to continue to experience,

credit rating organizations, the amount of our future

cycles relating to industry capacity and general

pension funding obligation, changes in tax laws and

economic conditions. The length and magnitude of

pension and health care costs; (iv) unanticipated

these cycles have varied over time and by product. In

expenditures related to the cost of compliance with

addition, changes in consumer preferences may

existing and new environmental and other governmental

increase or decrease the demand for our products.

regulations and to actual or potential litigation; (v)

These consumer preferences affect the prices of our

whether we experience a material disruption at one of

products. Consequently, our financial results are

our manufacturing facilities; (vi) risks inherent in

sensitive to changes in the pricing and demand for our

conducting business through a joint venture; and (vii)

products.

our ability to achieve the benefits we expect from all

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.

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

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.

THE

INDUSTRIES

IN WHICH WE OPERATE

EXPERIENCE BOTH ECONOMIC CYCLICALITY

AND CHANGES IN CONSUMER PREFERENCES.

FLUCTUATIONS IN THE PRICES OF, AND THE

DEMAND FOR, OUR PRODUCTS COULD

MATERIALLY

AFFECT

OUR

FINANCIAL

CONDITION, RESULTS OF OPERATIONS AND

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 impacts

interest rates, currency exchange rates and the

THE LEVEL OF OUR INDEBTEDNESS COULD

ADVERSELY AFFECT OUR FINANCIAL CONDITION

AND IMPAIR OUR ABILITY TO OPERATE OUR

BUSINESS. As of December 31, 2017, International

Paper had approximately $11.2 billion of outstanding

indebtedness. The level of our indebtedness could have

important consequences to our financial condition,

operating results and business, including the following:

•

it may limit our ability to obtain additional debt or

equity

financing

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

heavily on the use of certain raw materials (principally

availability of credit, could have a material adverse effect

virgin wood fiber, recycled fiber, caustic soda and

on our business, financial condition and our results of

starch), energy sources (principally natural gas, coal

operations.

•
•

operations, capital expenditures and
operations, capital expenditures and
business opportunities;
business opportunities;

future
future

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

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

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

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

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

IN CREDIT RATINGS
IN CREDIT RATINGS

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

to maintain
to maintain

the
the

terms of
terms of

the agreements governing
the agreements governing
Under
Under
approximately $1.4 billion of our debt as of
approximately $1.4 billion of our debt as of
December 31, 2017, the applicable interest rate on such
December 31, 2017, the applicable interest rate on such
debt may increase upon each downgrade in our credit
debt may increase upon each downgrade in our credit
rating below investment grade. As a result, a downgrade
rating below investment grade. As a result, a downgrade
in our credit rating below investment grade may lead to
in our credit rating below investment grade may lead to
an increase in our interest expense. There can be no
an increase in our interest expense. There can be no
assurance that such credit ratings will remain in effect
assurance that such credit ratings will remain in effect
for any given period of time or that such ratings will not
for any given period of time or that such ratings will not
be lowered, suspended or withdrawn entirely by the
be lowered, suspended or withdrawn entirely by the
rating agencies, if, in each rating agency’s judgment,
rating agencies, if, in each rating agency’s judgment,

circumstances so warrant. Any such downgrade of our
circumstances so warrant. Any such downgrade of our
credit ratings could adversely affect our cost of
credit ratings could adversely affect our cost of
borrowing, limit our access to the capital markets or
borrowing, limit our access to the capital markets or
result in more restrictive covenants in agreements
result in more restrictive covenants in agreements
governing the terms of any future indebtedness that we
governing the terms of any future indebtedness that we
may incur.
may incur.

DOWNGRADES IN THE CREDIT RATINGS OF
DOWNGRADES IN THE CREDIT RATINGS OF
BANKS ISSUING CERTAIN LETTERS OF CREDIT
BANKS ISSUING CERTAIN LETTERS OF CREDIT
WILL INCREASE OUR COST OF MAINTAINING
WILL INCREASE OUR COST OF MAINTAINING
CERTAIN INDEBTEDNESS AND MAY RESULT IN
CERTAIN INDEBTEDNESS AND MAY RESULT IN
THE ACCELERATION OF DEFERRED TAXES. We are
THE ACCELERATION OF DEFERRED TAXES. We are
subject to the risk that a bank with currently issued
subject to the risk that a bank with currently issued
irrevocable letters of credit supporting installment notes
irrevocable letters of credit supporting installment notes
delivered to Temple-Inland in connection with Temple-
delivered to Temple-Inland in connection with Temple-
Inland's 2007 sales of forestlands may be downgraded
Inland's 2007 sales of forestlands may be downgraded
below a required rating. Since 2007, certain banks have
below a required rating. Since 2007, certain banks have
fallen below the required ratings threshold and were
fallen below the required ratings threshold and were
successfully replaced, or waivers were obtained
successfully replaced, or waivers were obtained
regarding their replacement. As a result of continuing
regarding their replacement. As a result of continuing
uncertainty in the banking environment, a number of the
uncertainty in the banking environment, a number of the
letter-of-credit banks currently in place remain subject
letter-of-credit banks currently in place remain subject
to risk of downgrade and the number of qualified
to risk of downgrade and the number of qualified
replacement banks remains limited. The downgrade of
replacement banks remains limited. The downgrade of
one or more of these banks may subject the Company
one or more of these banks may subject the Company
to additional costs of securing a replacement letter-of-
to additional costs of securing a replacement letter-of-
credit bank or could result in an acceleration of payments
credit bank or could result in an acceleration of payments
of up to $538 million in deferred income taxes if
of up to $538 million in deferred income taxes if
replacement banks cannot be obtained. The deferred
replacement banks cannot be obtained. The deferred
taxes are currently recorded
the Company's
the Company's
taxes are currently recorded
consolidated financial statements. See Note 12,
consolidated financial statements. See Note 12,
Variable Interest Entities, on pages 63 through 64, and
Variable Interest Entities, on pages 63 through 64, and
Note 10, Income Taxes, on pages 57 through 60, in Item
Note 10, Income Taxes, on pages 57 through 60, in Item
8. Financial Statements and Supplementary Data for
8. Financial Statements and Supplementary Data for
further information.
further information.

in
in

OUR PENSION AND HEALTH CARE COSTS ARE
OUR PENSION AND HEALTH CARE COSTS ARE
SUBJECT TO NUMEROUS FACTORS WHICH
SUBJECT TO NUMEROUS FACTORS WHICH
COULD CAUSE THESE COSTS TO CHANGE. We
COULD CAUSE THESE COSTS TO CHANGE. We
have defined benefit pension plans covering
have defined benefit pension plans covering
substantially all U.S. salaried employees hired prior to
substantially all U.S. salaried employees hired prior to
July 1, 2004 and substantially all hourly and union
July 1, 2004 and substantially all hourly and union
employees regardless of hire date. We provide retiree
employees regardless of hire date. We provide retiree
health care benefits to certain former U.S. hourly
health care benefits to certain former U.S. hourly
employees, as well as financial assistance towards the
employees, as well as financial assistance towards the
cost of individual retiree medical coverage for certain
cost of individual retiree medical coverage for certain
former U.S. salaried employees. Our pension costs are
former U.S. salaried employees. Our pension costs are
dependent upon numerous factors resulting from actual
dependent upon numerous factors resulting from actual
plan experience and assumptions of future experience.
plan experience and assumptions of future experience.
Pension plan assets are primarily made up of equity and
Pension plan assets are primarily made up of equity and
fixed income investments. Fluctuations in actual equity
fixed income investments. Fluctuations in actual equity
market returns, changes in general interest rates and
market returns, changes in general interest rates and
changes in the number of retirees may result in
changes in the number of retirees may result in
increased pension costs in future periods. Likewise,
increased pension costs in future periods. Likewise,
changes in assumptions regarding current discount
changes in assumptions regarding current discount
rates and expected rates of return on plan assets could
rates and expected rates of return on plan assets could
increase pension costs.
increase pension costs.

8
8

OUR PENSION PLANS ARE CURRENTLY
OUR PENSION PLANS ARE CURRENTLY
UNDERFUNDED, AND OVER TIME WE MAY BE
UNDERFUNDED, AND OVER TIME WE MAY BE
REQUIRED TO MAKE CASH PAYMENTS TO THE
REQUIRED TO MAKE CASH PAYMENTS TO THE
PLANS, REDUCING THE CASH AVAILABLE FOR
PLANS, REDUCING THE CASH AVAILABLE FOR
OUR BUSINESS. We record a liability associated with
OUR BUSINESS. We record a liability associated with
our pension plans equal to the excess of the benefit
our pension plans equal to the excess of the benefit
obligation over the fair value of plan assets. The benefit
obligation over the fair value of plan assets. The benefit
liability recorded under the provisions of Accounting
liability recorded under the provisions of Accounting
Standards Codification (ASC) 715, “Compensation –
Standards Codification (ASC) 715, “Compensation –
Retirement Benefits,” at December 31, 2017 was $2.0
Retirement Benefits,” at December 31, 2017 was $2.0
billion. The amount and timing of future contributions will
billion. The amount and timing of future contributions will
depend upon a number of factors, including the actual
depend upon a number of factors, including the actual
earnings and changes in values of plan assets and
earnings and changes in values of plan assets and
changes in interest rates.
changes in interest rates.

of
of

IN
IN

products,
products,

competing
competing

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

laws could
laws could

RISKS RELATING TO LEGAL PROCEEDINGS AND
RISKS RELATING TO LEGAL PROCEEDINGS AND
COMPLIANCE COSTS
COMPLIANCE COSTS

laws,
laws,

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

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

As another example, we are subject to a number of labor
As another example, we are subject to a number of labor
and employment laws and regulations that could
and employment laws and regulations that could
significantly increase our operating costs and reduce
significantly increase our operating costs and reduce
our operational flexibility. Additionally, changing privacy
our operational flexibility. Additionally, changing privacy
laws in the United States, Europe and elsewhere,
laws in the United States, Europe and elsewhere,
including the adoption of the European Union of the
including the adoption of the European Union of the
General Data Protection Regulation (GDPR), which will
General Data Protection Regulation (GDPR), which will
become effective May 2018, creates new individual
become effective May 2018, creates new individual
privacy rights and imposes increased obligations on
privacy rights and imposes increased obligations on
companies handling personal data. Compliance with the
companies handling personal data. Compliance with the
stringent rules under GDPR will require an extensive
stringent rules under GDPR will require an extensive
review of our global data processing systems, which is
review of our global data processing systems, which is
ongoing. A failure to comply with GDPR could result in
ongoing. A failure to comply with GDPR could result in
fines up to 20 million Euros or 4% of annual global
fines up to 20 million Euros or 4% of annual global
revenues, whichever is higher.
revenues, whichever is higher.

As a final example, in December 2017, the U.S.

government enacted comprehensive tax legislation

commonly referred to as the Tax Cuts and Jobs Act (the

"Tax Act"). The Tax Act makes broad and complex

changes to the U.S. tax code. For a discussion of the

immediate and potential impacts to the Company of the

Tax Act and the uncertainties around the Company's

current estimates of such impacts, see Note 10, Income

Taxes.

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

MATERIAL DISRUPTIONS AT ONE OF OUR

MANUFACTURING

FACILITIES

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

operational

facility,

could

cease

operations

unexpectedly due to a number of events, including:

catastrophes;

water supply;

•

the effect of a drought or reduced rainfall on its

•

the effect of other severe weather conditions on

equipment and facilities;

terrorism or threats of terrorism;

•

the world;

unscheduled maintenance outages;

prolonged power failures;

an equipment failure;

a chemical spill or release;

explosion of a boiler or other equipment;

damage or disruptions caused by third parties

operating on or adjacent

to one of our

manufacturing facilities;

•

disruptions in the transportation infrastructure,

including roads, bridges, railroad tracks and

• widespread outbreak of an illness or any other

communicable disease, or any other public health

tunnels;

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.

WE ARE

SUBJECT

INFORMATION

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

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,

inappropriate disclosure of confidential company,

employee, customer or vendor information, could stem

from such

incidents. Any of

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.

domestic and international laws and regulations

source materials, manufacture and ship finished goods

applicable to our Company and our business

and account for orders could be denied or misused.

partners, including joint venture partners, around

Theft of intellectual property or trade secrets, and

•

fires, floods, earthquakes, hurricanes or other

verification, our information technology systems, and

9
9

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, 2017 was $2.0

billion. The amount and timing of 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.

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

competing

products,

including

governmental subsidies,

tax benefits and other

measures giving

local producers a competitive

advantage over International Paper, may also adversely

impact our operating results and business prospects in

these countries. Likewise, disruption in existing trade

agreements (e.g., NAFTA) or increased trade friction

between countries (e.g., the U.S. and China) could have

a negative effect on our business and results of

operations by restricting the free flow of goods and

services across borders. 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 various adverse

consequences, including the imposition of civil or

criminal sanctions and the prosecution of executives

overseeing our international operations.

RISKS RELATING TO LEGAL PROCEEDINGS AND

COMPLIANCE COSTS

WE ARE SUBJECT TO A WIDE VARIETY OF LAWS,

REGULATIONS AND OTHER GOVERNMENT

REQUIREMENTS THAT MAY CHANGE

SIGNIFICANT WAYS, AND THE COST OF

COMPLIANCE WITH SUCH REQUIREMENTS

COULD IMPACT OUR BUSINESS AND RESULTS OF

OPERATIONS. Our operations are subject 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, data privacy, tax 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, 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. Additionally, changing privacy

laws in the United States, Europe and elsewhere,

including the adoption of the European Union of the

General Data Protection Regulation (GDPR), which will

become effective May 2018, creates new individual

privacy rights and imposes increased obligations on

companies handling personal data. Compliance with the

stringent rules under GDPR will require an extensive

review of our global data processing systems, which is

ongoing. A failure to comply with GDPR could result in

fines up to 20 million Euros or 4% of annual global

revenues, whichever is higher.

As a final example, in December 2017, the U.S.
As a final example, in December 2017, the U.S.
government enacted comprehensive tax legislation
government enacted comprehensive tax legislation
commonly referred to as the Tax Cuts and Jobs Act (the
commonly referred to as the Tax Cuts and Jobs Act (the
"Tax Act"). The Tax Act makes broad and complex
"Tax Act"). The Tax Act makes broad and complex
changes to the U.S. tax code. For a discussion of the
changes to the U.S. tax code. For a discussion of the
immediate and potential impacts to the Company of the
immediate and potential impacts to the Company of the
Tax Act and the uncertainties around the Company's
Tax Act and the uncertainties around the Company's
current estimates of such impacts, see Note 10, Income
current estimates of such impacts, see Note 10, Income
Taxes.
Taxes.

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

RISKS RELATING TO OUR OPERATIONS
RISKS RELATING TO OUR OPERATIONS

FACILITIES
FACILITIES

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

facility,
facility,

cease
cease

•
•

fires, floods, earthquakes, hurricanes or other
fires, floods, earthquakes, hurricanes or other
catastrophes;
catastrophes;

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

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

terrorism or threats of terrorism;
terrorism or threats of terrorism;

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

unscheduled maintenance outages;
unscheduled maintenance outages;

prolonged power failures;
prolonged power failures;

an equipment failure;
an equipment failure;

a chemical spill or release;
a chemical spill or release;

10
10

•
•

explosion of a boiler or other equipment;
explosion of a boiler or other equipment;

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

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

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

•
•

labor difficulties; and
labor difficulties; and

other operational problems.
other operational problems.

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

TO
TO

AND
AND

SUBJECT
SUBJECT

EMPLOYEE
EMPLOYEE

WE ARE
INFORMATION
INFORMATION
WE ARE
TECHNOLOGY RISKS RELATED TO BREACHES OF
TECHNOLOGY RISKS RELATED TO BREACHES OF
SECURITY PERTAINING TO SENSITIVE COMPANY,
SECURITY PERTAINING TO SENSITIVE COMPANY,
CUSTOMER,
VENDOR
VENDOR
CUSTOMER,
INFORMATION AS WELL AS BREACHES IN THE
INFORMATION AS WELL AS BREACHES IN THE
TECHNOLOGY USED TO MANAGE OPERATIONS
TECHNOLOGY USED TO MANAGE OPERATIONS
AND OTHER BUSINESS PROCESSES. Our business
AND OTHER BUSINESS PROCESSES. Our business
operations rely upon secure information technology
operations rely upon secure information technology
systems for data capture, processing, storage and
systems for data capture, processing, storage and
reporting. Despite careful security and controls design,
reporting. Despite careful security and controls design,
implementation, updating and independent third party
implementation, updating and independent third party
verification, our information technology systems, and
verification, our information technology systems, and
those of our third party providers, could become subject
those of our third party providers, could become subject
to employee error or malfeasance, cyber attacks, or
to employee error or malfeasance, cyber attacks, or
natural disasters. Network, system, application and data
natural disasters. Network, system, application and data
breaches could result in operational disruptions or
breaches could result in operational disruptions or
information misappropriation including, but not limited
information misappropriation including, but not limited
to, interruption to systems availability, denial of access
to, interruption to systems availability, denial of access
to and misuse of applications required by our customers
to and misuse of applications required by our customers
to conduct business with International Paper. Access to
to conduct business with International Paper. Access to
internal applications required to plan our operations,
internal applications required to plan our operations,
source materials, manufacture and ship finished goods
source materials, manufacture and ship finished goods
and account for orders could be denied or misused.
and account for orders could be denied or misused.
Theft of intellectual property or trade secrets, and
Theft of intellectual property or trade secrets, and
inappropriate disclosure of confidential company,
inappropriate disclosure of confidential company,
employee, customer or vendor information, could stem
employee, customer or vendor information, could stem
these operational
from such
from such
these operational
disruptions and/or misappropriation of information could
disruptions and/or misappropriation of information could
result in lost sales, business delays, negative publicity
result in lost sales, business delays, negative publicity
and could have a material effect on our business.
and could have a material effect on our business.

incidents. Any of
incidents. Any of

ITEM 5. MARKET FOR REGISTRANT’S COMMON

EQUITY, RELATED STOCKHOLDER MATTERS AND

ISSUER PURCHASES OF EQUITY SECURITIES

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 16, 2018, there were

approximately 11,766 record holders of common stock

of the Company.

Dividend per share data on the Company’s common

The table below presents information regarding the

stock and the high and low sales prices for the

Company’s purchase of its equity securities for the time

Company’s common stock for each of the four quarters

periods presented.

in 2017 and 2016 are set forth on page 81 of Item 8.

Financial Statements and Supplementary Data. As of

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

October 1, 2017 - October 31, 2017

November 1, 2017 - November 30, 2017

December 1, 2017 - December 31, 2017

Period

Total

Total Number of Shares

Average Price Paid per

Purchased (a)

78 $

—

5,257

5,335

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)

56.82

—

56.96

— $

—

0.933

(a)

5,335 shares were acquired from employees from share withholdings to pay income taxes under the Company’s restricted stock programs.

During these periods, no shares were purchased under our share repurchase program, which 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 shares of our common stock. As of

February 16, 2018, approximately $933 million shares of our common stock remained authorized for purchase under this program.

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

JOINT
JOINT

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

On January 1, 2018, for example, we completed a
On January 1, 2018, for example, we completed a
transaction transferring our North American Consumer
transaction transferring our North American Consumer
Packaging business to Graphic Packaging in exchange
Packaging business to Graphic Packaging in exchange
for, among other things, an equity interest in the
for, among other things, an equity interest in the
combined business of 20.5%, as of immediately
combined business of 20.5%, as of immediately
following the closing, and the assumption by the
following the closing, and the assumption by the
combined business of $660 million of indebtedness that
combined business of $660 million of indebtedness that
we incurred prior to closing of the transaction. The
we incurred prior to closing of the transaction. The
success of the transaction will depend, in part, on the
success of the transaction will depend, in part, on the
financial performance of the combined business and on
financial performance of the combined business and on
the ability of the combined business to realize
the ability of the combined business to realize
anticipated growth opportunities, cost savings and other
anticipated growth opportunities, cost savings and other
synergies. The success of the combined business in
synergies. The success of the combined business in
realizing these growth opportunities, cost savings and
realizing these growth opportunities, cost savings and
other synergies, and the timing of this realization, will
other synergies, and the timing of this realization, will
depend on the successful integration of our North
depend on the successful integration of our North
American Consumer Packaging business with Graphic
American Consumer Packaging business with Graphic
Packaging's business.
Packaging's business.

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS

PART II.

None.
None.

ITEM 2. PROPERTIES

FORESTLANDS
FORESTLANDS

through
through

licenses and
licenses and

As of December 31, 2017, the Company owned or
As of December 31, 2017, the Company owned or
managed approximately 329,000 acres of forestlands in
managed approximately 329,000 acres of forestlands in
forest
Brazil, and had,
Brazil, and had,
forest
rights on
management agreements, harvesting
rights on
management agreements, harvesting
government-owned forestlands in Russia. All owned
government-owned forestlands in Russia. All owned
lands in Brazil are independently third-party certified for
lands in Brazil are independently third-party certified for
sustainable forestry under the Brazilian National Forest
sustainable forestry under the Brazilian National Forest
Certification Program (CERFLOR) and the Forest
Certification Program (CERFLOR) and the Forest
Stewardship Council (FSC).
Stewardship Council (FSC).

MILLS AND PLANTS
MILLS AND PLANTS

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

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

CAPITAL INVESTMENTS AND DISPOSITIONS
CAPITAL INVESTMENTS AND DISPOSITIONS

Given the size, scope and complexity of our business
Given the size, scope and complexity of our business
interests, we continually examine and evaluate a wide
interests, we continually examine and evaluate a wide
variety of business opportunities and planning
variety of business opportunities and planning
alternatives, including possible acquisitions and sales or
alternatives, including possible acquisitions and sales or
other dispositions of properties. You can find a
other dispositions of properties. You can find a
discussion about the level of planned capital investments
discussion about the level of planned capital investments
for 2018 on page 28, and dispositions and restructuring
for 2018 on page 28, and dispositions and restructuring
activities as of December 31, 2017, on pages 21 and 22
activities as of December 31, 2017, on pages 21 and 22
of Item 7. Management’s Discussion and Analysis of
of Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations, and on
Financial Condition and Results of Operations, and on
pages 51 and pages 53 through 55 of Item 8. Financial
pages 51 and pages 53 through 55 of Item 8. Financial
Statements and Supplementary Data.
Statements and Supplementary Data.

ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS

concerning
concerning

Information
legal
legal
Information
proceedings is set forth in Note 11 Commitments and
proceedings is set forth in Note 11 Commitments and
Contingencies on pages 60 through 63 of Item 8.
Contingencies on pages 60 through 63 of Item 8.
Financial Statements and Supplementary Data.
Financial Statements and Supplementary Data.

the Company’s
the Company’s

ITEM 4. MINE SAFETY DISCLOSURES
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
Not applicable.

11
11

CERTAIN OPERATIONS ARE CONDUCTED BY

ITEM 1B. UNRESOLVED STAFF COMMENTS

PART II.
PART II.

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

Dividend per share data on the Company’s common
Dividend per share data on the Company’s common
stock and the high and low sales prices for the
stock and the high and low sales prices for the
Company’s common stock for each of the four quarters
Company’s common stock for each of the four quarters
in 2017 and 2016 are set forth on page 81 of Item 8.
in 2017 and 2016 are set forth on page 81 of Item 8.
Financial Statements and Supplementary Data. As of
Financial Statements and Supplementary Data. As of

the filing of this Annual Report on Form 10-K, the
the filing of this Annual Report on Form 10-K, the
Company’s common shares are traded on the New York
Company’s common shares are traded on the New York
Stock Exchange. As of February 16, 2018, there were
Stock Exchange. As of February 16, 2018, there were
approximately 11,766 record holders of common stock
approximately 11,766 record holders of common stock
of the Company.
of the Company.

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

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

Period
Period

October 1, 2017 - October 31, 2017
October 1, 2017 - October 31, 2017

November 1, 2017 - November 30, 2017
November 1, 2017 - November 30, 2017

December 1, 2017 - December 31, 2017
December 1, 2017 - December 31, 2017

Total
Total

(a)
(a)

Total Number of Shares
Total Number of Shares
Purchased (a)
Purchased (a)

Average Price Paid per
Average Price Paid per
Share
Share

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

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

78 $
78 $

—
—

5,257
5,257

5,335
5,335

56.82
56.82

—
—

56.96
56.96

— $
— $

—
—

0.933
0.933

5,335 shares were acquired from employees from share withholdings to pay income taxes under the Company’s restricted stock programs.
5,335 shares were acquired from employees from share withholdings to pay income taxes under the Company’s restricted stock programs.
During these periods, no shares were purchased under our share repurchase program, which was approved by our Board of Directors and
During these periods, no shares were purchased under our share repurchase program, which 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
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 shares of our common stock. As of
transactions (including block trades), privately negotiated transactions or otherwise, up to $1.5 billion shares of our common stock. As of
February 16, 2018, approximately $933 million shares of our common stock remained authorized for purchase under this program.
February 16, 2018, approximately $933 million shares of our common stock remained authorized for purchase under this program.

JOINT VENTURES THAT WE CANNOT OPERATE

SOLELY FOR OUR BENEFIT. Certain operations in

None.

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

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

venture often

requires additional organizational

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 we receive only our portion of those benefits.

WE MAY NOT ACHIEVE THE EXPECTED BENEFITS

FROM ACQUISITIONS,

JOINT

VENTURES,

DIVESTITURES AND OTHER CORPORATE

TRANSACTIONS. Our strategy for long-term growth,

productivity and profitability depends, in part, on our

ability

to accomplish prudent 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 who place higher

strategic value on such businesses and assets than

does International Paper.

On January 1, 2018, for example, we completed a

transaction transferring our North American Consumer

Packaging business to Graphic Packaging in exchange

for, among other things, an equity interest in the

combined business of 20.5%, as of immediately

following the closing, and the assumption by the

combined business of $660 million of indebtedness that

we incurred prior to closing of the transaction. The

success of the transaction will depend, in part, on the

financial performance of the combined business and on

the ability of the combined business to realize

anticipated growth opportunities, cost savings and other

synergies. The success of the combined business in

realizing these growth opportunities, cost savings and

other synergies, and the timing of this realization, will

depend on the successful integration of our North

American Consumer Packaging business with Graphic

Packaging's business.

ITEM 2. PROPERTIES

FORESTLANDS

As of December 31, 2017, the Company owned or

managed approximately 329,000 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).

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 the level of planned capital investments

for 2018 on page 28, and dispositions and restructuring

activities as of December 31, 2017, on pages 21 and 22

of Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations, and on

pages 51 and pages 53 through 55 of Item 8. Financial

Statements and Supplementary Data.

ITEM 3. LEGAL PROCEEDINGS

Information

concerning

the Company’s

legal

proceedings is set forth in Note 11 Commitments and

Contingencies on pages 60 through 63 of Item 8.

Financial Statements and Supplementary Data.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

12
12

PERFORMANCE GRAPH
PERFORMANCE GRAPH

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

The following graph compares a $100 investment in
The following graph compares a $100 investment in
Company stock on December 31, 2012 with a $100
Company stock on December 31, 2012 with a $100
investment in our Return on Invested Capital (ROIC)
investment in our Return on Invested Capital (ROIC)
Peer Group and the S&P 500 also made at market close
Peer Group and the S&P 500 also made at market close
on December 31, 2012. The graph portrays total return,
on December 31, 2012. The graph portrays total return,
2012–2017, assuming reinvestment of dividends.
2012–2017, assuming reinvestment of dividends.

Note 1: The companies included in the ROIC Peer Group are Domtar Inc., Fibria Celulose S.A., Graphic Packaging Holding Company, Klabin
Note 1: The companies included in the ROIC Peer Group are Domtar Inc., Fibria Celulose S.A., Graphic Packaging Holding Company, Klabin
S.A., Metsa Board Corporation, Mondi Group, Packaging Corporation of America, Smurfit Kappa Group, Stora Enso Group, and UPM-
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 and
Kymmene Corp. MeadWestvaco Corp. and Rock-Tenn Company are included in the ROIC Peer Group results through 2014 and
subsequently, after the merger of those companies, WestRock was added to the Peer group beginning in 2015.
subsequently, after the merger of those companies, WestRock was added to the Peer group beginning in 2015.

Note 2: Returns are calculated in $USD.
Note 2: Returns are calculated in $USD.

Current assets less current liabilities

$ 3,175

2,601

2,244

2,719

3,597

ITEM 6. SELECTED FINANCIAL DATA

FIVE-YEAR FINANCIAL SUMMARY (a)

Dollar amounts in millions, except per share

amounts and stock prices

RESULTS OF OPERATIONS

Net sales

Costs and expenses, excluding interest

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

Plants, properties and equipment, net

Forestlands

Total assets

term debt

Long-term debt

Notes payable and current maturities of long-

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

2017

2016

2015

2014

2013

$ 21,743

20,323

$ 19,495

18,180

$ 20,675

18,988

$ 21,889

20,548

$ 21,244

19,540

848

177

2,144

(b)

(c)

(b-d)

—

(e)

(f)

(e-g)

795

198

102

902

(2)

1,132

(h)

734

(k)

1,092

(n)

117

917

(21)

(i)

(h-j)

(200)

536

(19)

(l)

(k-m)

(39)

(215)

(o)

1,378

(n-p)

(17)

2,144

(b-d)

904

(e-g)

938

(h-j)

555

(k-m)

1,395

(n-p)

13,265

448

33,903

311

10,846

6,522

5.11

0.08

5.19

5.05

0.08

5.13

1.863

15.79

$ 58.96

49.60

57.94

13,003

456

33,093

239

11,075

4,341

1.95

0.25

2.20

1.93

0.25

2.18

1.783

10.56

32.50

53.06

11,000

366

30,271

426

8,844

3,884

2.05

0.20

2.25

2.03

0.20

2.23

1.640

9.43

36.76

37.70

11,794

507

28,369

742

8,584

5,115

1.12

0.18

1.30

1.10

0.19

1.29

1.450

12.18

44.24

53.58

1.6

0.63

43.9%

1.6

0.72

22.1%

1.6

0.70

20.0%

$ 1,391

56,000

1,348

55,000

1,487

56,000

1.5

0.65

7.7%

$1,366

58,000

12,745

557

31,242

661

8,787

8,105

3.63

(0.48)

3.15

3.59

(0.48)

3.11

1.250

18.57

39.47

49.03

1.7

0.54

20.2%

$1,198

64,000

54.68

57.90

55.73

50.33

13
13

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, 2012 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, 2012. The graph portrays total return,

2012–2017, assuming reinvestment of dividends.

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA

FIVE-YEAR FINANCIAL SUMMARY (a)
FIVE-YEAR FINANCIAL SUMMARY (a)

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

RESULTS OF OPERATIONS
RESULTS OF OPERATIONS

Net sales
Net sales

Costs and expenses, excluding interest
Costs and expenses, excluding interest

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

Equity earnings (loss), net of taxes
Equity earnings (loss), net of taxes

Discontinued operations, net of taxes
Discontinued operations, net of taxes

Net earnings (loss)
Net earnings (loss)

Noncontrolling interests, net of taxes
Noncontrolling interests, net of taxes

Net earnings (loss) attributable to International
Net earnings (loss) attributable to International
Paper Company
Paper Company

FINANCIAL POSITION
FINANCIAL POSITION

2017
2017

2016
2016

2015
2015

2014
2014

2013
2013

$ 21,743
$ 21,743

20,323
20,323

$ 19,495
$ 19,495

18,180
18,180

$ 20,675
$ 20,675

18,988
18,988

$ 21,889
$ 21,889

20,548
20,548

$ 21,244
$ 21,244

19,540
19,540

848
848

177
177

34
34

2,144
2,144

(b)
(b)

(b-d)
(b-d)

—
—

(e)
(e)

(f)
(f)

(e-g)
(e-g)

795
795

198
198

102
102

902
902

(2)
(2)

1,132
1,132

(h)
(h)

734
734

(k)
(k)

1,092
1,092

(n)
(n)

117
117

85
85

917
917

(21)
(21)

(i)
(i)

(h-j)
(h-j)

(200)
(200)

77
77

536
536

(19)
(19)

(l)
(l)

(k-m)
(k-m)

(39)
(39)

(215)
(215)

(o)
(o)

1,378
1,378

(n-p)
(n-p)

(17)
(17)

2,144
2,144

(b-d)
(b-d)

904
904

(e-g)
(e-g)

938
938

(h-j)
(h-j)

555
555

(k-m)
(k-m)

1,395
1,395

(n-p)
(n-p)

Current assets less current liabilities
Current assets less current liabilities

$ 3,175
$ 3,175

$
$

2,601
2,601

$
$

2,244
2,244

$
$

2,719
2,719

$
$

3,597
3,597

Note 1: The companies included in the ROIC Peer Group are Domtar Inc., Fibria Celulose S.A., Graphic Packaging Holding Company, 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 and

subsequently, after the merger of those companies, WestRock was added to the Peer group beginning in 2015.

Note 2: Returns are calculated in $USD.

Plants, properties and equipment, net
Plants, properties and equipment, net

Forestlands
Forestlands

Total assets
Total assets

Notes payable and current maturities of long-
Notes payable and current maturities of long-
term debt
term debt

Long-term debt
Long-term debt

Total shareholders’ equity
Total shareholders’ equity

BASIC EARNINGS PER SHARE
BASIC EARNINGS PER SHARE
ATTRIBUTABLE TO INTERNATIONAL
ATTRIBUTABLE TO INTERNATIONAL
PAPER COMPANY COMMON
PAPER COMPANY COMMON
SHAREHOLDERS
SHAREHOLDERS

Earnings (loss) from continuing operations
Earnings (loss) from continuing operations

Discontinued operations
Discontinued operations

Net earnings (loss)
Net earnings (loss)

DILUTED EARNINGS PER SHARE
DILUTED EARNINGS PER SHARE
ATTRIBUTABLE TO INTERNATIONAL
ATTRIBUTABLE TO INTERNATIONAL
PAPER COMPANY COMMON
PAPER COMPANY COMMON
SHAREHOLDERS
SHAREHOLDERS

Earnings (loss) from continuing operations
Earnings (loss) from continuing operations

Discontinued operations
Discontinued operations

Net earnings (loss)
Net earnings (loss)

Cash dividends
Cash dividends

Total shareholders’ equity
Total shareholders’ equity

COMMON STOCK PRICES
COMMON STOCK PRICES

High
High

Low
Low

Year-end
Year-end

FINANCIAL RATIOS
FINANCIAL RATIOS

Current ratio
Current ratio

Total debt to capital ratio
Total debt to capital ratio

Return on shareholders’ equity
Return on shareholders’ equity

CAPITAL EXPENDITURES
CAPITAL EXPENDITURES

NUMBER OF EMPLOYEES
NUMBER OF EMPLOYEES

13,265
13,265

448
448

33,903
33,903

311
311

10,846
10,846

6,522
6,522

$
$

5.11
5.11

0.08
0.08

5.19
5.19

5.05
5.05

0.08
0.08

5.13
5.13

1.863
1.863

15.79
15.79

$ 58.96
$ 58.96

49.60
49.60

57.94
57.94

1.6
1.6

0.63
0.63

43.9%
43.9%

13,003
13,003

456
456

33,093
33,093

239
239

11,075
11,075

4,341
4,341

1.95
1.95

0.25
0.25

2.20
2.20

1.93
1.93

0.25
0.25

2.18
2.18

1.783
1.783

10.56
10.56

$
$

11,000
11,000

366
366

30,271
30,271

426
426

8,844
8,844

3,884
3,884

$
$

2.05
2.05

0.20
0.20

2.25
2.25

2.03
2.03

0.20
0.20

2.23
2.23

1.640
1.640

9.43
9.43

11,794
11,794

507
507

28,369
28,369

742
742

8,584
8,584

5,115
5,115

1.12
1.12

0.18
0.18

1.30
1.30

1.10
1.10

0.19
0.19

1.29
1.29

1.450
1.450

12.18
12.18

$
$

12,745
12,745

557
557

31,242
31,242

661
661

8,787
8,787

8,105
8,105

$
$

3.63
3.63

(0.48)
(0.48)

3.15
3.15

$
$

3.59
3.59

(0.48)
(0.48)

3.11
3.11

1.250
1.250

18.57
18.57

$
$

54.68
54.68

$
$

57.90
57.90

$
$

55.73
55.73

$
$

50.33
50.33

32.50
32.50

53.06
53.06

1.6
1.6

0.72
0.72

22.1%
22.1%

36.76
36.76

37.70
37.70

1.6
1.6

0.70
0.70

20.0%
20.0%

44.24
44.24

53.58
53.58

1.5
1.5

0.65
0.65

7.7%
7.7%

$1,366
$1,366

58,000
58,000

39.47
39.47

49.03
49.03

1.7
1.7

0.54
0.54

20.2%
20.2%

$1,198
$1,198

64,000
64,000

$ 1,391
$ 1,391

56,000
56,000

$
$

1,348
1,348

55,000
55,000

$
$

1,487
1,487

56,000
56,000

14
14

FINANCIAL GLOSSARY
FINANCIAL GLOSSARY

Current ratio—
Current ratio—

current assets divided by current liabilities.
current assets divided by current liabilities.

Total debt to capital ratio—
Total debt to capital ratio—

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

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

In millions
In millions

International legal entity restructuring
International legal entity restructuring

Income tax refund claims
Income tax refund claims

Cash pension contribution
Cash pension contribution

International Tax Law Change
International Tax Law Change

Tax benefit of Tax Cuts and Jobs Act
Tax benefit of Tax Cuts and Jobs Act

Tax impact of other special items
Tax impact of other special items

2017
2017

$
$

34
34

(113)
(113)

38
38

9
9

(1,222)
(1,222)

$ (1,254)
$ (1,254)

Return on shareholders’ equity—
Return on shareholders’ equity—

2016:
2016:

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

(e) Includes the following charges (gains):
(e) Includes the following charges (gains):

FOOTNOTES TO FIVE-YEAR FINANCIAL SUMMARY
FOOTNOTES TO FIVE-YEAR FINANCIAL SUMMARY

In millions
In millions

2016
2016

Before
Before
Tax
Tax

After
After
Tax
Tax

Riegelwood mill conversion costs
Riegelwood mill conversion costs

$
$

9
9

$
$

(a) All periods presented have been restated to reflect the North
(a) All periods presented have been restated to reflect the North
American Consumer Packaging business, xpedx business, and
American Consumer Packaging business, xpedx business, and
the Temple-Inland Building Products business as discontinued
the Temple-Inland Building Products business as discontinued
operations (excluding cash flow related items) and prior period
operations (excluding cash flow related items) and prior period
amounts have been adjusted to conform with current year
amounts have been adjusted to conform with current year
presentation, if applicable.
presentation, if applicable.

2017:
2017:

(b) Includes the following charges (gains):
(b) Includes the following charges (gains):

In millions
In millions

2017
2017

Before
Before
Tax
Tax

After
After
Tax
Tax

India Packaging evaluation write-off
India Packaging evaluation write-off

Write-off of certain regulatory pre-engineering
Write-off of certain regulatory pre-engineering
costs
costs

Early debt extinguishment costs
Early debt extinguishment costs

Costs associated with the newly acquired pulp
Costs associated with the newly acquired pulp
business
business

Asia Box impairment / restructuring
Asia Box impairment / restructuring

Gain on sale of investment in Arizona Chemical
Gain on sale of investment in Arizona Chemical

Turkey mill closure
Turkey mill closure

Amortization of Weyerhaeuser inventory fair
Amortization of Weyerhaeuser inventory fair
value step-up
value step-up

Total special items
Total special items

Gain on sale of investment in ArborGen
Gain on sale of investment in ArborGen

$
$

(14) $
(14) $

(9)
(9)

Non-operating pension expense
Non-operating pension expense

Total
Total

17
17

8
8

29
29

31
31

70
70

(8)
(8)

7
7

6
6

11
11

5
5

18
18

21
21

58
58

(5)
(5)

6
6

19
19

182
182

610
610

792
792

$
$

11
11

131
131

375
375

506
506

$
$

Costs associated with the pulp business
Costs associated with the pulp business
acquired in 2016
acquired in 2016

Amortization of Weyerhaeuser inventory fair
Amortization of Weyerhaeuser inventory fair
value step-up
value step-up

Holmen bargain purchase gain
Holmen bargain purchase gain

Abandoned property removal
Abandoned property removal

Kleen Products settlement
Kleen Products settlement

Asia Foodservice sale
Asia Foodservice sale

Brazil Packaging wood supply accelerated
Brazil Packaging wood supply accelerated
amortization
amortization

Debt extinguishment costs
Debt extinguishment costs

Interest income on income tax refund claims
Interest income on income tax refund claims

Other items
Other items

Total special items
Total special items

Non-operating pension expense
Non-operating pension expense

Total
Total

33
33

14
14

(6)
(6)

20
20

354
354

9
9

10
10

83
83

(5)
(5)

(2)
(2)

$
$

496
496

484
484

980
980

$
$

20
20

8
8

(6)
(6)

13
13

219
219

4
4

7
7

51
51

(3)
(3)

(2)
(2)

302
302

298
298

600
600

(c) Includes the operating earnings of the North American Consumer
(c) Includes the operating earnings of the North American Consumer

Packaging business for the full year. Also includes the following
Packaging business for the full year. Also includes the following
charges (gains):
charges (gains):

In millions
In millions

North American Consumer Packaging
North American Consumer Packaging
transaction costs
transaction costs

Non-operating pension expense
Non-operating pension expense

Total
Total

2017
2017

Before
Before
Tax
Tax

After
After
Tax
Tax

$
$

17
17

45
45

62
62

$
$

10
10

28
28

38
38

(f) Includes the operating earnings of the North American Consumer
(f) Includes the operating earnings of the North American Consumer
Packaging business for the full year. Also includes the following
Packaging business for the full year. Also includes the following
charges (gains):
charges (gains):

2014:

(k) Includes the following charges (gains):

In millions
In millions

xpedx legal settlement
xpedx legal settlement

Total
Total

2016
2016

Before
Before
Tax
Tax

After
After
Tax
Tax

$
$

8
8

$
$

5
5

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

In millions

Temple-Inland integration

Courtland mill shutdown

Early debt extinguishment costs

India legal contingency resolution

Multi-employer pension plan withdrawal

liability

In millions
In millions

2016
2016

Foreign tax amnesty program

Cash pension contribution
Cash pension contribution

$
$

U.S. Federal audit
U.S. Federal audit

Brazil goodwill
Brazil goodwill

International legal entity restructuring
International legal entity restructuring

Luxembourg tax rate change
Luxembourg tax rate change

23
23

(14)
(14)

(57)
(57)

(6)
(6)

31
31

Asia Industrial Packaging goodwill impairment

Loss on sale by investee and impairment of

investment

Other items

Total special items

$ 1,052

Non-operating pension expense

Tax impact of other special items
Tax impact of other special items

$
$

(23)
(23)

Total

$ 1,264

2014

Before

Tax

After

Tax

554

276

(20)

100

212

338

169

(20)

100

680

129

809

2015:

(h) Includes the following charges (gains):

(l) Includes the operating earnings of the North American Consumer

Packaging business and the xpedx business prior to the spin-off

and the following charges (gains):

In millions

Riegelwood mill conversion costs, net of

proceeds from sale of the Carolina Coated

Bristols brand

Timber monetization restructuring

Early debt extinguishment costs

IP-Sun JV impairment

Legal reserve adjustment

Refund and state tax credits

intangible

Other items

Total special items

Non-operating pension expense

Total

Impairment of Orsa goodwill and trade name

2015

Before

Tax

After

Tax

207

174

(4)

137

559

258

817

133

180

(2)

137

476

157

633

(i) Includes the operating earnings of the North American Consumer

Packaging business for the full year .

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

In millions

IP-Sun JV impairment

Cash pension contribution

Other items

2015

(67)

Tax impact of other special items

(37)

In millions

xpedx spinoff

Building Products divestiture

xpedx restructuring

Total

2014

Before

Tax

After

Tax

(1)

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

In millions

State legislative tax change

Internal restructuring

Other items

Tax impact of other special items

2014

(90)

(1)

(81)

2013:

(n) Includes the following charges (gains):

2013

Before

Tax

After

Tax

(30)

(19)

127

122

118

(13)

(5)

299

323

622

400

(13)

227

197

424

366

In millions

Temple-Inland integration

Courtland mill shutdown

Early debt extinguishment costs

Insurance reimbursement related to legal

settlement

impairment

India Papers tradename and goodwill

Fair value adjustment of company airplanes

Cass Lake environmental reserve

Bargain purchase adjustment - Turkey

Other items

Total special items

Non-operating pension expense

Total

(o) Includes the operating earnings of the North American Consumer

Packaging business and 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 charges (gains):

In millions

xpedx spinoff

xpedx goodwill impairment

Building products divestiture

xpedx restructuring

Total

Shut down of paper machine at Augusta mill

2013

Before

Tax

After

Tax

522

446

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

Settlement of U.S. federal tax audits

Income tax reserve release

In millions

Other items

Tax impact of other special items

2013

(744)

(31)

(774)

15
15

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.

In millions

International legal entity restructuring

Income tax refund claims

Cash pension contribution

International Tax Law Change

Tax benefit of Tax Cuts and Jobs Act

Tax impact of other special items

Return on shareholders’ equity—

2016:

net earnings attributable to International Paper

Company divided by average shareholders’ equity

(computed monthly).

(e) Includes the following charges (gains):

Riegelwood mill conversion costs

In millions

costs

business

India Packaging evaluation write-off

Write-off of certain regulatory pre-engineering

Early debt extinguishment costs

Costs associated with the newly acquired pulp

Asia Box impairment / restructuring

Gain on sale of investment in Arizona Chemical

Amortization of Weyerhaeuser inventory fair

Turkey mill closure

value step-up

Total special items

Total

2017

(113)

(1,222)

$ (1,254)

2016

Before

Tax

After

Tax

(8)

(5)

182

610

792

131

375

506

2016

Before

Tax

After

Tax

2016

(14)

(57)

(6)

FOOTNOTES TO FIVE-YEAR FINANCIAL SUMMARY

(a) All periods presented have been restated to reflect the North

American Consumer Packaging business, xpedx business, and

the Temple-Inland Building Products business as discontinued

operations (excluding cash flow related items) and prior period

amounts have been adjusted to conform with current year

presentation, if applicable.

2017:

(b) Includes the following charges (gains):

In millions

Costs associated with the pulp business

acquired in 2016

Amortization of Weyerhaeuser inventory fair

value step-up

Holmen bargain purchase gain

Abandoned property removal

Kleen Products settlement

Asia Foodservice sale

Brazil Packaging wood supply accelerated

amortization

Debt extinguishment costs

Interest income on income tax refund claims

Other items

Total special items

Non-operating pension expense

Total

In millions

North American Consumer Packaging

transaction costs

Non-operating pension expense

Total

2017

Before

Tax

After

Tax

(6)

354

(5)

(2)

496

484

980

(6)

219

(3)

(2)

302

298

600

2017

Before

Tax

After

Tax

Packaging business for the full year. Also includes the following

charges (gains):

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

2015:
2015:

(h) Includes the following charges (gains):
(h) Includes the following charges (gains):

(l) Includes the operating earnings of the North American Consumer
(l) Includes the operating earnings of the North American Consumer
Packaging business and the xpedx business prior to the spin-off
Packaging business and the xpedx business prior to the spin-off
and the following charges (gains):
and the following charges (gains):

In millions
In millions

2015
2015

Before
Before
Tax
Tax

After
After
Tax
Tax

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

$
$

8
8

$
$

Timber monetization restructuring
Timber monetization restructuring

Early debt extinguishment costs
Early debt extinguishment costs

IP-Sun JV impairment
IP-Sun JV impairment

Legal reserve adjustment
Legal reserve adjustment

Refund and state tax credits
Refund and state tax credits

Impairment of Orsa goodwill and trade name
Impairment of Orsa goodwill and trade name
intangible
intangible

Other items
Other items

Total special items
Total special items

Non-operating pension expense
Non-operating pension expense

Total
Total

16
16

207
207

174
174

15
15

(4)
(4)

137
137

6
6

559
559

258
258

817
817

$
$

4
4

10
10

133
133

180
180

9
9

(2)
(2)

137
137

5
5

476
476

157
157

633
633

(i) Includes the operating earnings of the North American Consumer
(i) Includes the operating earnings of the North American Consumer

Packaging business for the full year .
Packaging business for the full year .

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

In millions
In millions

IP-Sun JV impairment
IP-Sun JV impairment

Cash pension contribution
Cash pension contribution

Other items
Other items

2015
2015

$
$

(67)
(67)

23
23

7
7

Gain on sale of investment in ArborGen

(14) $

(9)

Non-operating pension expense

Tax impact of other special items
Tax impact of other special items

$
$

(37)
(37)

(f) Includes the operating earnings of the North American Consumer

Packaging business for the full year. Also includes the following

charges (gains):

2014:
2014:

(k) Includes the following charges (gains):
(k) Includes the following charges (gains):

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

In millions

xpedx legal settlement

Total

In millions

Cash pension contribution

U.S. Federal audit

Brazil goodwill

International legal entity restructuring

Luxembourg tax rate change

In millions
In millions

Temple-Inland integration
Temple-Inland integration

Courtland mill shutdown
Courtland mill shutdown

Early debt extinguishment costs
Early debt extinguishment costs

India legal contingency resolution
India legal contingency resolution

Multi-employer pension plan withdrawal
Multi-employer pension plan withdrawal
liability
liability

Foreign tax amnesty program
Foreign tax amnesty program

Asia Industrial Packaging goodwill impairment
Asia Industrial Packaging goodwill impairment

Loss on sale by investee and impairment of
Loss on sale by investee and impairment of
investment
investment

Other items
Other items

Total special items
Total special items

Non-operating pension expense
Non-operating pension expense

Tax impact of other special items

(23)

Total
Total

2014
2014

Before
Before
Tax
Tax

After
After
Tax
Tax

$
$

16
16

$
$

554
554

276
276

(20)
(20)

35
35

32
32

100
100

47
47

12
12

$ 1,052
$ 1,052

$
$

212
212

$ 1,264
$ 1,264

$
$

10
10

338
338

169
169

(20)
(20)

21
21

17
17

100
100

36
36

9
9

680
680

129
129

809
809

16
16

In millions
In millions

xpedx spinoff
xpedx spinoff

Building Products divestiture
Building Products divestiture

xpedx restructuring
xpedx restructuring

Total
Total

2014
2014

Before
Before
Tax
Tax

After
After
Tax
Tax

$
$

24
24

16
16

1
1

$
$

41
41

$
$

16
16

9
9

(1)
(1)

24
24

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

In millions
In millions

State legislative tax change
State legislative tax change

Internal restructuring
Internal restructuring

Other items
Other items

Tax impact of other special items
Tax impact of other special items

2014
2014

$
$

10
10

(90)
(90)

(1)
(1)

(81)
(81)

2013:
2013:

(n) Includes the following charges (gains):
(n) Includes the following charges (gains):

In millions
In millions

Temple-Inland integration
Temple-Inland integration

Courtland mill shutdown
Courtland mill shutdown

Early debt extinguishment costs
Early debt extinguishment costs

Insurance reimbursement related to legal
Insurance reimbursement related to legal
settlement
settlement

India Papers tradename and goodwill
India Papers tradename and goodwill
impairment
impairment

Fair value adjustment of company airplanes
Fair value adjustment of company airplanes

Cass Lake environmental reserve
Cass Lake environmental reserve

Bargain purchase adjustment - Turkey
Bargain purchase adjustment - Turkey

Other items
Other items

Total special items
Total special items

Non-operating pension expense
Non-operating pension expense

Total
Total

2013
2013

Before
Before
Tax
Tax

After
After
Tax
Tax

$
$

62
62

$
$

118
118

25
25

38
38

72
72

16
16

(30)
(30)

(19)
(19)

127
127

122
122

9
9

6
6

(13)
(13)

(5)
(5)

299
299

323
323

622
622

$
$

5
5

4
4

(13)
(13)

2
2

227
227

197
197

424
424

$
$

(o) Includes the operating earnings of the North American Consumer
(o) Includes the operating earnings of the North American Consumer
Packaging business and the xpedx business for the full year, and
Packaging business and the xpedx business for the full year, and
the Temple-Inland Building Products business through the date of
the Temple-Inland Building Products business through the date of
sale in July 2013. Also includes the following charges (gains):
sale in July 2013. Also includes the following charges (gains):

In millions
In millions

xpedx spinoff
xpedx spinoff

xpedx goodwill impairment
xpedx goodwill impairment

Building products divestiture
Building products divestiture

Shut down of paper machine at Augusta mill
Shut down of paper machine at Augusta mill

xpedx restructuring
xpedx restructuring

Total
Total

2013
2013

Before
Before
Tax
Tax

After
After
Tax
Tax

$
$

22
22

$
$

400
400

23
23

45
45

32
32

14
14

366
366

19
19

28
28

19
19

$
$

522
522

$
$

446
446

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

In millions
In millions

Settlement of U.S. federal tax audits
Settlement of U.S. federal tax audits

Income tax reserve release
Income tax reserve release

Other items
Other items

Tax impact of other special items
Tax impact of other special items

2013
2013

$
$

(744)
(744)

(31)
(31)

1
1

$
$

(774)
(774)

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

EXECUTIVE SUMMARY
EXECUTIVE SUMMARY

International Paper delivered a year of strong
International Paper delivered a year of strong
performance in 2017, driven by excellent commercial
performance in 2017, driven by excellent commercial
execution across our businesses. Our Global Cellulose
execution across our businesses. Our Global Cellulose
Fibers business is on track to achieve the estimated
Fibers business is on track to achieve the estimated
transaction synergies. We continued to grow value for
transaction synergies. We continued to grow value for
our shareholders with our return on invested capital
our shareholders with our return on invested capital
solidly exceeding our cost of capital for the eighth
solidly exceeding our cost of capital for the eighth
consecutive year. We made substantial progress in
consecutive year. We made substantial progress in
further strengthening our portfolio during 2017. We
further strengthening our portfolio during 2017. We
accelerated strategic investments for growth in the
accelerated strategic investments for growth in the
Industrial Packaging business, providing the Company
Industrial Packaging business, providing the Company
with the flexibility we need around capacity, products and
with the flexibility we need around capacity, products and
geography to support our customers. In addition, the
geography to support our customers. In addition, the
Company made an important strategic move to transfer
Company made an important strategic move to transfer
the North American Consumer Packaging business,
the North American Consumer Packaging business,
which included the North American Coated Paperboard
which included the North American Coated Paperboard
and Foodservice businesses, to a subsidiary of Graphic
and Foodservice businesses, to a subsidiary of Graphic
Packaging Holding Company. This strategic move
Packaging Holding Company. This strategic move
enables us to focus on growing value in our core
enables us to focus on growing value in our core
businesses and establish a 20.5% ownership interest in
businesses and establish a 20.5% ownership interest in
the subsidiary of Graphic Packaging Holding Company
the subsidiary of Graphic Packaging Holding Company
that holds the assets of the combined business. Finally,
that holds the assets of the combined business. Finally,
we generated strong free cash flow which enabled us to
we generated strong free cash flow which enabled us to
increase our annual dividend for the sixth consecutive
increase our annual dividend for the sixth consecutive
year.
year.

Our 2017 results reflect significant pricing and mix
Our 2017 results reflect significant pricing and mix
improvement, which accelerated throughout the year.
improvement, which accelerated throughout the year.
The improvement in price and mix was primarily driven
The improvement in price and mix was primarily driven
by price realization on price increases announced in prior
by price realization on price increases announced in prior
quarters in our North American Industrial Packaging and
quarters in our North American Industrial Packaging and
Global Cellulose Fibers businesses. Operations were
Global Cellulose Fibers businesses. Operations were
negatively impacted by hurricanes and the Pensacola
negatively impacted by hurricanes and the Pensacola
event earlier in the year; however, 2017 was a lower
event earlier in the year; however, 2017 was a lower
maintenance outage year. Input costs were higher
maintenance outage year. Input costs were higher
compared to 2016, driven by significantly higher
compared to 2016, driven by significantly higher
recovered fiber costs, as well as, higher energy and
recovered fiber costs, as well as, higher energy and
transportation costs during the latter part of the year. Our
transportation costs during the latter part of the year. Our
Ilim joint venture delivered solid operational and financial
Ilim joint venture delivered solid operational and financial
results, driven by pricing and strong volume, and
results, driven by pricing and strong volume, and
provided more than $130 million in cash dividends to
provided more than $130 million in cash dividends to
International Paper in 2017. Finally, our 2017 results
International Paper in 2017. Finally, our 2017 results
reflect the provisional net tax benefit associated with the
reflect the provisional net tax benefit associated with the
impact of the December 2017 enactment of the Tax Cuts
impact of the December 2017 enactment of the Tax Cuts
and Jobs Act.
and Jobs Act.

Looking ahead to the 2018 first quarter, overall industry
Looking ahead to the 2018 first quarter, overall industry
conditions are expected to remain strong, and we should
conditions are expected to remain strong, and we should
continue to benefit from announced price increases, cost
continue to benefit from announced price increases, cost
reduction initiatives and additional synergies. We expect
reduction initiatives and additional synergies. We expect
higher export price realization in our North American
higher export price realization in our North American
Industrial Packaging business and improved pricing in
Industrial Packaging business and improved pricing in
our Printing Papers segment, as price increases
our Printing Papers segment, as price increases

implemented in 2017 are realized. We also expect 2018
implemented in 2017 are realized. We also expect 2018
first quarter sales volumes for North American Industrial
first quarter sales volumes for North American Industrial
Packaging and Brazil Papers to be down due to
Packaging and Brazil Papers to be down due to
seasonally lower demand. Our North American mill
seasonally lower demand. Our North American mill
operations have been affected by the severe cold
operations have been affected by the severe cold
weather experienced at the beginning of 2018 which is
weather experienced at the beginning of 2018 which is
expected to impact operating costs. Costs will be higher
expected to impact operating costs. Costs will be higher
in our European Packaging business related to the
in our European Packaging business related to the
Madrid Mill conversion. In addition, planned maintenance
Madrid Mill conversion. In addition, planned maintenance
outages are expected to increase due to a heavy outage
outages are expected to increase due to a heavy outage
quarter, as 70% of the Company outages are planned
quarter, as 70% of the Company outages are planned
during the first half of 2018. Input costs are expected to
during the first half of 2018. Input costs are expected to
increase across our businesses, driven by higher wood,
increase across our businesses, driven by higher wood,
energy and transportation costs. Additionally, we expect
energy and transportation costs. Additionally, we expect
equity earnings for Ilim to be sequentially higher, driven
equity earnings for Ilim to be sequentially higher, driven
by price realization across the pulp portfolio which will be
by price realization across the pulp portfolio which will be
partly offset by seasonally lower volumes.
partly offset by seasonally lower volumes.

Looking to full year 2018, our focus will be on value
Looking to full year 2018, our focus will be on value
creation in our growth businesses. We anticipate another
creation in our growth businesses. We anticipate another
year of strong growth, driven by a continued strong
year of strong growth, driven by a continued strong
outlook in our core businesses and the full-year price flow
outlook in our core businesses and the full-year price flow
through of the 2017 increases. We continue to see
through of the 2017 increases. We continue to see
healthy demand and solid fundamentals across our
healthy demand and solid fundamentals across our
portfolio. We expect higher maintenance outage
portfolio. We expect higher maintenance outage
expenses due to the calendar impact of mills on an
expenses due to the calendar impact of mills on an
eighteen-month cycle and extended outages at several
eighteen-month cycle and extended outages at several
of our mills, as we position them for longer maintenance
of our mills, as we position them for longer maintenance
cycle schedules in the future. We are planning for $1.5
cycle schedules in the future. We are planning for $1.5
billion
including
billion
including
approximately $500 million that will be invested in
approximately $500 million that will be invested in
strategic projects, including the Madrid Mill conversion
strategic projects, including the Madrid Mill conversion
and the Riverdale conversion. Also, we will see the
and the Riverdale conversion. Also, we will see the
positive cash tax impact associated with tax reform. Our
positive cash tax impact associated with tax reform. Our
Ilim joint venture is well positioned for another strong year
Ilim joint venture is well positioned for another strong year
of performance, and we will start to see the benefits of
of performance, and we will start to see the benefits of
our investment in Graphic Packaging. All in, we expect
our investment in Graphic Packaging. All in, we expect
another year of strong cash generation enabling us to
another year of strong cash generation enabling us to
continue to allocate capital to grow value for our
continue to allocate capital to grow value for our
shareholders.
shareholders.

in capital expenditures
in capital expenditures

in 2018,
in 2018,

Adjusted Operating Earnings and Adjusted Operating
Adjusted Operating Earnings and Adjusted Operating
Earnings Per Share are non-GAAP measures and are
Earnings Per Share are non-GAAP measures and are
defined as net earnings from continuing operations (a
defined as net earnings from continuing operations (a
GAAP measure) excluding special items and non-
GAAP measure) excluding special items and non-
operating pension expense. Diluted earnings (loss) and
operating pension expense. Diluted earnings (loss) and
Diluted earnings (loss) per share attributable to common
Diluted earnings (loss) per share attributable to common
shareholders are the most direct comparable GAAP
shareholders are the most direct comparable GAAP
measures. The Company calculates Adjusted Operating
measures. The Company calculates Adjusted Operating
Earnings by excluding the after-tax effect of items
Earnings by excluding the after-tax effect of items
considered by management to be unusual, from the
considered by management to be unusual, from the
earnings reported under GAAP, non-operating pension
earnings reported under GAAP, non-operating pension
expense (includes all U.S. pension costs, excluding
expense (includes all U.S. pension costs, excluding
service costs and prior service costs), and discontinued
service costs and prior service costs), and discontinued
operations. Adjusted Operating Earnings Per Share is
operations. Adjusted Operating Earnings Per Share is
calculated by dividing Adjusted Operating Earnings by
calculated by dividing Adjusted Operating Earnings by
diluted average shares of common stock outstanding.
diluted average shares of common stock outstanding.
Management uses this measure to focus on on-going
Management uses this measure to focus on on-going
operations, and believes that it is useful to investors
operations, and believes that it is useful to investors

17
17

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 direct comparable GAAP measure, provides for

a more complete analysis of the results of operations.

The following are reconciliations of Diluted earnings

(loss) attributable to common shareholders to Adjusted

operating earnings attributable to common shareholders.

Diluted Earnings (Loss) Attributable

to Shareholders

Add back - Discontinued operations

(gain) loss

Diluted Earnings (Loss) from

Continuing Operations

Add back - Non-operating pension

(income) expense

Add back - Net special items expense

(income)

Income tax effect - Non-operating

pension and special items expense

Adjusted Operating Earnings (Loss)

Attributable to Shareholders

Diluted Earnings (Loss) Per Share

Attributable to Shareholders

Add back - Discontinued operations

(gain) loss per share

Diluted Earnings (Loss) Per Share

from Continuing Operations

Add back - Non-operating pension

(income) expense

Add back - Net special items expense

(income)

Income tax effect - Non-operating

pension and special items expense

Adjusted Operating Earnings (Loss)

Per Share Attributable to

Shareholders

2017

2016

2015

$ 2,144 $ 904 $ 938

(34)

(102)

(85)

2,110

802

853

484

496

610

258

182

559

(1,634)

(309)

(221)

$ 1,456 $ 1,285 $ 1,449

2017

2016

2015

$ 5.13 $ 2.18 $ 2.23

(0.08)

(0.25)

(0.20)

5.05

1.93

2.03

1.16

1.47

0.61

1.19

0.44

1.33

(3.91)

(0.75)

(0.52)

$ 3.49 $ 3.09 $ 3.45

Three Months

December 31,

September 30,

December 31,

Ended

2017

Ended

2016

Ended

2017

1,460

395

218

(29)

(24)

1,468

366

194

386

106

(1,430)

(2)

530

420

279

Three Months

December 31,

September 30,

December 31,

Ended

2017

Ended

2016

Ended

2017

3.50

0.95

0.53

0.02

(0.07)

(0.06)

3.52

0.92

0.25

0.88

0.47

0.08

0.09

0.05

0.11

(3.42)

—

Diluted Earnings

(Loss) Attributable

to Shareholders

Add back -

Discontinued

operations (gain)

loss

Diluted Earnings

(Loss) from

Continuing

Operations

Add back - Non-

operating pension

(income) expense

Add back - Net

special items

expense (income)

Income tax effect -

Non-operating

pension and special

items expense

Adjusted Operating

Earnings (Loss)

Attributable to

Shareholders

Diluted Earnings

(Loss) Per Share

Attributable to

Shareholders

Add back -

Discontinued

operations (gain)

loss per share

Diluted Earnings

(Loss) Per Share

from Continuing

Operations

Add back - Non-

operating pension

(income) expense

per share

Add back - Net

special items

expense (income)

per share

Income tax effect

per share - Non-

operating pension

and special items

expense

Adjusted Operating

Earnings (Loss)

Per Share

Attributable to

Shareholders

1.27

1.01

0.67

Free Cash Flow is a non-GAAP measure and the most

directly comparable GAAP measure is cash provided by

operations. Management believes that Free Cash Flow

is useful to investors as a liquidity measure because it

measures the amount of cash generated that is available,

after reinvesting in the business, to maintain a strong

balance sheet, pay dividends, repurchase stock, repay

debt and make investments for future growth. It should

not be inferred that the entire free cash flow amount is

available for discretionary expenditures. By adjusting for

certain items that are not indicative of the Company's

ongoing performance, free cash flow also enables

them
them

it enables
it enables

because
to perform meaningful
to perform meaningful
because
comparisons of past and present operating results. The
comparisons of past and present operating results. The
Company believes that using this information, along with
Company believes that using this information, along with
the most direct comparable GAAP measure, provides for
the most direct comparable GAAP measure, provides for
a more complete analysis of the results of operations.
a more complete analysis of the results of operations.

ITEM 7. MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

EXECUTIVE SUMMARY

International Paper delivered a year of strong

performance in 2017, driven by excellent commercial

execution across our businesses. Our Global Cellulose

Fibers business is on track to achieve the estimated

transaction synergies. We continued to grow value for

our shareholders with our return on invested capital

solidly exceeding our cost of capital for the eighth

consecutive year. We made substantial progress in

further strengthening our portfolio during 2017. We

accelerated strategic investments for growth in the

Industrial Packaging business, providing the Company

with the flexibility we need around capacity, products and

geography to support our customers. In addition, the

Company made an important strategic move to transfer

the North American Consumer Packaging business,

which included the North American Coated Paperboard

and Foodservice businesses, to a subsidiary of Graphic

Packaging Holding Company. This strategic move

enables us to focus on growing value in our core

businesses and establish a 20.5% ownership interest in

the subsidiary of Graphic Packaging Holding Company

that holds the assets of the combined business. Finally,

we generated strong free cash flow which enabled us to

increase our annual dividend for the sixth consecutive

year.

Our 2017 results reflect significant pricing and mix

improvement, which accelerated throughout the year.

The improvement in price and mix was primarily driven

by price realization on price increases announced in prior

quarters in our North American Industrial Packaging and

Global Cellulose Fibers businesses. Operations were

negatively impacted by hurricanes and the Pensacola

event earlier in the year; however, 2017 was a lower

maintenance outage year. Input costs were higher

compared to 2016, driven by significantly higher

recovered fiber costs, as well as, higher energy and

transportation costs during the latter part of the year. Our

Ilim joint venture delivered solid operational and financial

results, driven by pricing and strong volume, and

provided more than $130 million in cash dividends to

International Paper in 2017. Finally, our 2017 results

reflect the provisional net tax benefit associated with the

impact of the December 2017 enactment of the Tax Cuts

and Jobs Act.

Looking ahead to the 2018 first quarter, overall industry

conditions are expected to remain strong, and we should

continue to benefit from announced price increases, cost

reduction initiatives and additional synergies. We expect

higher export price realization in our North American

Industrial Packaging business and improved pricing in

our Printing Papers segment, as price increases

implemented in 2017 are realized. We also expect 2018

first quarter sales volumes for North American Industrial

Packaging and Brazil Papers to be down due to

seasonally lower demand. Our North American mill

operations have been affected by the severe cold

weather experienced at the beginning of 2018 which is

expected to impact operating costs. Costs will be higher

in our European Packaging business related to the

Madrid Mill conversion. In addition, planned maintenance

outages are expected to increase due to a heavy outage

quarter, as 70% of the Company outages are planned

during the first half of 2018. Input costs are expected to

increase across our businesses, driven by higher wood,

energy and transportation costs. Additionally, we expect

equity earnings for Ilim to be sequentially higher, driven

by price realization across the pulp portfolio which will be

partly offset by seasonally lower volumes.

Looking to full year 2018, our focus will be on value

creation in our growth businesses. We anticipate another

year of strong growth, driven by a continued strong

outlook in our core businesses and the full-year price flow

through of the 2017 increases. We continue to see

healthy demand and solid fundamentals across our

portfolio. We expect higher maintenance outage

expenses due to the calendar impact of mills on an

eighteen-month cycle and extended outages at several

of our mills, as we position them for longer maintenance

cycle schedules in the future. We are planning for $1.5

billion

in capital expenditures

in 2018,

including

approximately $500 million that will be invested in

strategic projects, including the Madrid Mill conversion

and the Riverdale conversion. Also, we will see the

positive cash tax impact associated with tax reform. Our

Ilim joint venture is well positioned for another strong year

of performance, and we will start to see the benefits of

our investment in Graphic Packaging. All in, we expect

another year of strong cash generation enabling us to

continue to allocate capital to grow value for our

shareholders.

Adjusted Operating Earnings and Adjusted Operating

Earnings Per Share are non-GAAP measures and are

defined as net earnings from continuing operations (a

GAAP measure) excluding special items and non-

operating pension expense. Diluted earnings (loss) and

Diluted earnings (loss) per share attributable to common

shareholders are the most direct comparable GAAP

measures. The Company calculates Adjusted 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 (includes all U.S. pension costs, excluding

service costs and prior service costs), and discontinued

operations. Adjusted Operating Earnings Per Share is

calculated by dividing Adjusted Operating Earnings by

diluted average shares of common stock outstanding.

Management uses this measure to focus on on-going

operations, and believes that it is useful to investors

The following are reconciliations of Diluted earnings
The following are reconciliations of Diluted earnings
(loss) attributable to common shareholders to Adjusted
(loss) attributable to common shareholders to Adjusted
operating earnings attributable to common shareholders.
operating earnings attributable to common shareholders.

Diluted Earnings (Loss) Attributable
Diluted Earnings (Loss) Attributable
to Shareholders
to Shareholders

Add back - Discontinued operations
Add back - Discontinued operations
(gain) loss
(gain) loss

Diluted Earnings (Loss) from
Diluted Earnings (Loss) from
Continuing Operations
Continuing Operations

Add back - Non-operating pension
Add back - Non-operating pension
(income) expense
(income) expense

Add back - Net special items expense
Add back - Net special items expense
(income)
(income)

Income tax effect - Non-operating
Income tax effect - Non-operating
pension and special items expense
pension and special items expense

Adjusted Operating Earnings (Loss)
Adjusted Operating Earnings (Loss)
Attributable to Shareholders
Attributable to Shareholders

Diluted Earnings (Loss) Per Share
Diluted Earnings (Loss) Per Share
Attributable to Shareholders
Attributable to Shareholders

Add back - Discontinued operations
Add back - Discontinued operations
(gain) loss per share
(gain) loss per share

Diluted Earnings (Loss) Per Share
Diluted Earnings (Loss) Per Share
from Continuing Operations
from Continuing Operations

Add back - Non-operating pension
Add back - Non-operating pension
(income) expense
(income) expense

Add back - Net special items expense
Add back - Net special items expense
(income)
(income)

Income tax effect - Non-operating
Income tax effect - Non-operating
pension and special items expense
pension and special items expense

Adjusted Operating Earnings (Loss)
Adjusted Operating Earnings (Loss)
Per Share Attributable to
Per Share Attributable to
Shareholders
Shareholders

2017
2017

2016
2016

2015
2015

$ 2,144 $ 904 $ 938
$ 2,144 $ 904 $ 938

(34)
(34)

(102)
(102)

(85)
(85)

2,110
2,110

802
802

853
853

484
484

496
496

610
610

258
258

182
182

559
559

(1,634)
(1,634)

(309)
(309)

(221)
(221)

$ 1,456 $ 1,285 $ 1,449
$ 1,456 $ 1,285 $ 1,449

2017
2017

2016
2016

2015
2015

$ 5.13 $ 2.18 $ 2.23
$ 5.13 $ 2.18 $ 2.23

(0.08)
(0.08)

(0.25)
(0.25)

(0.20)
(0.20)

5.05
5.05

1.93
1.93

2.03
2.03

1.16
1.16

1.47
1.47

0.61
0.61

1.19
1.19

0.44
0.44

1.33
1.33

(3.91)
(3.91)

(0.75)
(0.75)

(0.52)
(0.52)

$ 3.49 $ 3.09 $ 3.45
$ 3.49 $ 3.09 $ 3.45

18
18

Three Months
Three Months
Ended
Ended
December 31,
December 31,
2017
2017

Three Months
Three Months
Ended
Ended
September 30,
September 30,
2017
2017

Three Months
Three Months
Ended
Ended
December 31,
December 31,
2016
2016

$
$

1,460
1,460

$
$

395
395

$
$

218
218

8
8

(29)
(29)

(24)
(24)

1,468
1,468

366
366

194
194

386
386

106
106

(1,430)
(1,430)

33
33

23
23

(2)
(2)

37
37

45
45

3
3

$
$

530
530

$
$

420
420

$
$

279
279

Three Months
Three Months
Ended
Ended
December 31,
December 31,
2017
2017

Three Months
Three Months
Ended
Ended
September 30,
September 30,
2017
2017

Three Months
Three Months
Ended
Ended
December 31,
December 31,
2016
2016

$
$

3.50
3.50

$
$

0.95
0.95

$
$

0.53
0.53

0.02
0.02

(0.07)
(0.07)

(0.06)
(0.06)

3.52
3.52

0.92
0.92

0.25
0.25

0.88
0.88

0.47
0.47

0.08
0.08

0.09
0.09

0.05
0.05

0.11
0.11

(3.42)
(3.42)

—
—

$
$

1.27
1.27

$
$

1.01
1.01

$
$

0.67
0.67

Diluted Earnings
Diluted Earnings
(Loss) Attributable
(Loss) Attributable
to Shareholders
to Shareholders

Add back -
Add back -
Discontinued
Discontinued
operations (gain)
operations (gain)
loss
loss

Diluted Earnings
Diluted Earnings
(Loss) from
(Loss) from
Continuing
Continuing
Operations
Operations

Add back - Non-
Add back - Non-
operating pension
operating pension
(income) expense
(income) expense

Add back - Net
Add back - Net
special items
special items
expense (income)
expense (income)

Income tax effect -
Income tax effect -
Non-operating
Non-operating
pension and special
pension and special
items expense
items expense

Adjusted Operating
Adjusted Operating
Earnings (Loss)
Earnings (Loss)
Attributable to
Attributable to
Shareholders
Shareholders

Diluted Earnings
Diluted Earnings
(Loss) Per Share
(Loss) Per Share
Attributable to
Attributable to
Shareholders
Shareholders

Add back -
Add back -
Discontinued
Discontinued
operations (gain)
operations (gain)
loss per share
loss per share

Diluted Earnings
Diluted Earnings
(Loss) Per Share
(Loss) Per Share
from Continuing
from Continuing
Operations
Operations

Add back - Non-
Add back - Non-
operating pension
operating pension
(income) expense
(income) expense
per share
per share

Add back - Net
Add back - Net
special items
special items
expense (income)
expense (income)
per share
per share

Income tax effect
Income tax effect
per share - Non-
per share - Non-
operating pension
operating pension
and special items
and special items
expense
expense

Adjusted Operating
Adjusted Operating
Earnings (Loss)
Earnings (Loss)
Per Share
Per Share
Attributable to
Attributable to
Shareholders
Shareholders

Free Cash Flow is a non-GAAP measure and the most
Free Cash Flow is a non-GAAP measure and the most
directly comparable GAAP measure is cash provided by
directly comparable GAAP measure is cash provided by
operations. Management believes that Free Cash Flow
operations. Management believes that Free Cash Flow
is useful to investors as a liquidity measure because it
is useful to investors as a liquidity measure because it
measures the amount of cash generated that is available,
measures the amount of cash generated that is available,
after reinvesting in the business, to maintain a strong
after reinvesting in the business, to maintain a strong
balance sheet, pay dividends, repurchase stock, repay
balance sheet, pay dividends, repurchase stock, repay
debt and make investments for future growth. It should
debt and make investments for future growth. It should
not be inferred that the entire free cash flow amount is
not be inferred that the entire free cash flow amount is
available for discretionary expenditures. By adjusting for
available for discretionary expenditures. By adjusting for
certain items that are not indicative of the Company's
certain items that are not indicative of the Company's
ongoing performance, free cash flow also enables
ongoing performance, free cash flow also enables

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

$
$

1,188 $
1,188 $

(709) $
(709) $

912
912

Interest expense, net
Interest expense, net

Noncontrolling interests/equity earnings
Noncontrolling interests/equity earnings
included in operations
included in operations

(456)
(456)

(271)
(271)

(445)
(445)

Corporate items
Corporate items

—
—

1,250
1,250

354
354

—
—

Corporate special items (income)
Corporate special items (income)
expense
expense

Non-operating pension expense
Non-operating pension expense

Free Cash Flow
Free Cash Flow

$
$

732 $
732 $

624 $
624 $

467
467

Business Segment Operating Profit
Business Segment Operating Profit

Industrial Packaging
Industrial Packaging

Global Cellulose Fibers
Global Cellulose Fibers

Printing Papers
Printing Papers

848
848

572
572

(2)
(2)

91
91

76
76

484
484

795
795

520
520

1
1

121
121

55
55

610
610

1,132
1,132

555
555

8
8

96
96

422
422

258
258

$ 2,069 $ 2,102 $ 2,471
$ 2,069 $ 2,102 $ 2,471

$ 1,547 $ 1,741 $ 1,938
$ 1,547 $ 1,741 $ 1,938

65
65

457
457

(179)
(179)

540
540

68
68

465
465

investors to perform meaningful comparisons between
investors to perform meaningful comparisons between
past and present periods.
past and present periods.

The Company generated Free Cash Flow of
The Company generated Free Cash Flow of
approximately $2.0 billion, $1.9 billion and $1.8 billion in
approximately $2.0 billion, $1.9 billion and $1.8 billion in
2017, 2016 and 2015, respectively. The following are
2017, 2016 and 2015, respectively. The following are
reconciliations of free cash flow to cash provided by
reconciliations of free cash flow to cash provided by
operations:
operations:

2017
2017

2016
2016

2015
2015

$
$

1,757 $
1,757 $

2,478 $
2,478 $

2,580
2,580

(1,391)
(1,391)

(1,348)
(1,348)

(1,487)
(1,487)

1,250
1,250

354
354
1,970 $
1,970 $

$
$

750
750

—
—

750
750

—
—

1,880 $
1,880 $

1,843
1,843

Three
Three
Months
Months
Ended
Ended
December
December
31, 2017
31, 2017

Three
Three
Months
Months
Ended
Ended
September
September
30, 2017
30, 2017

Three
Three
Months
Months
Ended
Ended
December
December
31, 2016
31, 2016

In millions
In millions

Cash provided by
Cash provided by
operations
operations

Adjustments:
Adjustments:

Cash invested in capital
Cash invested in capital
projects
projects

Cash contribution to
Cash contribution to
pension plan
pension plan

Cash payment for Kleen
Cash payment for Kleen
Settlement
Settlement

Free Cash Flow
Free Cash Flow

In millions
In millions

Cash provided by
Cash provided by
operations
operations

Adjustments:
Adjustments:

Cash invested in capital
Cash invested in capital
projects
projects

Cash contribution to
Cash contribution to
pension plan
pension plan

Cash payment for Kleen
Cash payment for Kleen
Settlement
Settlement

Results of Operations
Results of Operations

Business Segment Operating Profits are used by
Business Segment Operating Profits are used by
International Paper’s management to measure the
International Paper’s management to measure the
earnings performance of its businesses. Management
earnings performance of its businesses. Management
believes that this measure allows a better understanding
believes that this measure allows a better understanding
of trends in costs, operating efficiencies, prices and
of trends in costs, operating efficiencies, prices and
volumes. Business Segment Operating Profits are
volumes. Business Segment Operating Profits are
defined as earnings (loss) from continuing operations
defined as earnings (loss) from continuing operations
before income taxes and equity earnings, but including
before income taxes and equity earnings, but including
the impact of equity earnings and noncontrolling
the impact of equity earnings and noncontrolling
interests, excluding corporate items and corporate
interests, excluding corporate items and corporate
special items. Business Segment Operating Profits are
special items. Business Segment Operating Profits are
defined by the Securities and Exchange Commission as
defined by the Securities and Exchange Commission as
a non-GAAP financial measure, and are not GAAP
a non-GAAP financial measure, and are not GAAP
alternatives to net income or any other operating
alternatives to net income or any other operating
measure prescribed by accounting principles generally
measure prescribed by accounting principles generally
accepted in the United States.
accepted in the United States.

in
in

three segments:
three segments:
International Paper operates
International Paper operates
Industrial Packaging, Global Cellulose Fibers and
Industrial Packaging, Global Cellulose Fibers and
Printing Papers. During 2017, as a result of the transfer
Printing Papers. During 2017, as a result of the transfer
of the North American Coated Paperboard business and
of the North American Coated Paperboard business and
the associated reclassification of this business to
the associated reclassification of this business to
Discontinued Operations, the remaining sales and
Discontinued Operations, the remaining sales and
operating profits previously reported in the Consumer
operating profits previously reported in the Consumer

Packaging segment have been reclassified for segment
Packaging segment have been reclassified for segment
reporting for all periods presented. The European
reporting for all periods presented. The European
Coated Paperboard business is now included in the
Coated Paperboard business is now included in the
Industrial Packaging segment and sales and earnings
Industrial Packaging segment and sales and earnings
historically included in the Consumer Packaging
historically included in the Consumer Packaging
segment associated with previously divested businesses
segment associated with previously divested businesses
are now included in Corporate items.
are now included in Corporate items.

The following table presents a reconciliation of net
The following table presents a reconciliation of net
earnings (loss) from continuing operations attributable to
earnings (loss) from continuing operations attributable to
International Paper Company to its total Business
International Paper Company to its total Business
Segment Operating Profit:
Segment Operating Profit:

In millions
In millions

2017
2017

2016
2016

2015
2015

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

Add back (deduct)
Add back (deduct)

$ 2,110 $ 802 $ 853
$ 2,110 $ 802 $ 853

The principal changes in operating profit by business

segment were as follows:

Income tax provision (benefit)
Income tax provision (benefit)

(1,085)
(1,085)

193
193

417
417

Equity (earnings) loss, net of taxes
Equity (earnings) loss, net of taxes

(177)
(177)

(198)
(198)

(117)
(117)

Noncontrolling interests, net of taxes
Noncontrolling interests, net of taxes

—
—

(2)
(2)

(21)
(21)

for the amortization of the inventory fair value

adjustment associated with that acquisition.

• Printing Papers’ profits of $457 million represented

a $83 million decrease in operating profits from

2016. The benefits from higher sales volumes, lower

maintenance outage costs and lower other costs

were more than offset by lower average sales price

realizations and mix, higher operating costs and

higher input costs. Operating profits in 2017

included charges of $2 million for the removal of

abandoned property at our mills.

Liquidity and Capital Resources

For the year ended December 31, 2017, International

Paper generated $1.8 billion of cash flow from operations

compared with $2.5 billion in 2016 and $2.6 billion in

2015. Cash flow from operations included $1.25 billion,

$750 million and $750 million of cash pension

contributions in 2017, 2016 and 2015, respectively.

Capital spending for 2017 totaled $1.4 billion, or 98% of

depreciation and amortization expense. Our liquidity

position remains strong, supported by approximately

$2.1 billion of credit facilities that we believe are adequate

to meet future liquidity requirements. Maintaining an

investment-grade credit rating for our long-term debt

continues to be an important element in our overall

financial strategy.

We expect strong cash generation again in 2018,

including the benefits of U.S. tax reform, and will continue

our balanced use of cash through the payment of

dividends, reducing total debt and making investments

for future growth.

Capital spending for 2018 is targeted at $1.5 billion, or

about 111% of depreciation and amortization.

Legal

See Note 11 Commitments and Contingent Liabilities on

pages 60 through 63 of Item 8. Financial Statements and

Supplementary Data for a discussion of legal matters.

RESULTS OF OPERATIONS

While the operating results for International Paper’s

various business segments are driven by a number of

business-specific

factors, changes

International

Paper’s operating results are closely tied to changes in

general economic conditions in North America, Europe,

Russia, Latin America, India, North 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

•

Industrial Packaging’s profits of $1.5 billion were

$194 million lower than in 2016 as the benefits of

higher average sales price realizations and mix and

higher sales volumes were partially offset by higher

operating costs, higher maintenance outage costs,

higher input costs and higher other costs. In

addition, operating profits in 2017 included a charge

of $354 million related to the agreement to settle the

Kleen Products anti-trust class action lawsuit,

charges of $14 million for the removal of abandoned

property at our mills, a charge of $10 million for the

accelerated amortization of an intangible asset in

Brazil and a gain of $6 million for a net bargain

purchase gain associated with the 2016 acquisition

of Holmen Paper's newsprint mill in Madrid, Spain.

In 2016, operating profits included a charge of $70

million for impairment and other costs associated

with the sale of our corrugated packaging business

in Asia and a charge of $7 million related to the

closure of a mill in Turkey.

• Global Cellulose Fibers' operating profit of $65

million was $244 million favorable versus 2016 as

the benefits of higher average sales price

realizations and mix, lower operating costs, lower

maintenance outage costs and lower input costs

were partially offset by higher other costs. Operating

profits in 2017 included $33 million of costs

associated with the acquisition and integration of

the pulp business acquired in late 2016 from

Weyerhaeuser, a charge of $14 million for the

amortization of the remaining inventory fair value

adjustment associated with that acquisition and a

charge of $4 million for the removal of abandoned

property at our mills. Results for 2017 also reflect

the transaction synergies associated with the

Weyerhaeuser acquisition. In 2016, the operating

loss included $31 million of costs associated with

the acquisition of the pulp business and $19 million

Business Segment Operating Profit
Business Segment Operating Profit

$ 2,069 $ 2,102 $ 2,471
$ 2,069 $ 2,102 $ 2,471

Business Segment Operating Profits in 2017 included a
Business Segment Operating Profits in 2017 included a
net loss from special items of $425 million compared with
net loss from special items of $425 million compared with
$127 million in 2016 and $137 million in 2015.
$127 million in 2016 and $137 million in 2015.
Operationally, compared with 2016, the benefits from
Operationally, compared with 2016, the benefits from
higher average sales price realizations and mix ($605
higher average sales price realizations and mix ($605
million), higher sales volumes ($33 million), lower
million), higher sales volumes ($33 million), lower
the
maintenance outage costs ($55 million) and
the
maintenance outage costs ($55 million) and
incremental operating earnings from the pulp business
incremental operating earnings from the pulp business
acquired in late 2016 ($117 million) were offset by higher
acquired in late 2016 ($117 million) were offset by higher
operating costs ($172 million), higher input costs ($362
operating costs ($172 million), higher input costs ($362
million) and higher other costs ($11 million).
million) and higher other costs ($11 million).

Corporate items includes operating profits (losses) of
Corporate items includes operating profits (losses) of
previously divested businesses of $0 million in 2017, ($2)
previously divested businesses of $0 million in 2017, ($2)
million in 2016 and ($62) million in 2015.
million in 2016 and ($62) million in 2015.

19
19

investors to perform meaningful comparisons between

Packaging segment have been reclassified for segment

past and present periods.

The Company generated Free Cash Flow of

approximately $2.0 billion, $1.9 billion and $1.8 billion in

2017, 2016 and 2015, respectively. The following are

reconciliations of free cash flow to cash provided by

operations:

In millions

Cash provided by

operations

Adjustments:

2017

2016

2015

1,757 $

2,478 $

2,580

Cash invested in capital

projects

Cash contribution to

pension plan

Cash payment for Kleen

Settlement

(1,391)

(1,348)

(1,487)

1,250

354

750

—

750

—

Free Cash Flow

1,970 $

1,880 $

1,843

reporting for all periods presented. The European

Coated Paperboard business is now included in the

Industrial Packaging segment and sales and earnings

historically included in the Consumer Packaging

segment associated with previously divested businesses

are now included in Corporate items.

The following table presents a reconciliation of net

earnings (loss) from continuing operations attributable to

International Paper Company to its total Business

Segment Operating Profit:

In millions

2017

2016

2015

Earnings (Loss) From Continuing

Operations Attributable to

International Paper Company

Add back (deduct)

848

572

(2)

484

795

520

121

610

1,132

555

422

258

$ 2,069 $ 2,102 $ 2,471

$ 1,547 $ 1,741 $ 1,938

457

(179)

540

465

In millions

Cash provided by

operations

Adjustments:

Cash invested in capital

projects

Cash contribution to

pension plan

Cash payment for Kleen

Settlement

Three

Months

Ended

Three

Months

Ended

Three

Months

Ended

December

31, 2017

September

December

30, 2017

31, 2016

1,188 $

(709) $

912

Earnings (Loss) From Continuing

Operations Before Income Taxes and

Equity Earnings

Interest expense, net

Noncontrolling interests/equity earnings

included in operations

Corporate special items (income)

expense

Non-operating pension expense

(456)

(271)

(445)

Corporate items

—

1,250

354

—

Free Cash Flow

732 $

624 $

467

Business Segment Operating Profit

Results of Operations

Business Segment Operating Profits are used by

International Paper’s management to measure the

earnings performance of its businesses. Management

Industrial Packaging

Global Cellulose Fibers

Printing Papers

Business Segment Operating Profit

$ 2,069 $ 2,102 $ 2,471

believes that this measure allows a better understanding

Business Segment Operating Profits in 2017 included a

of trends in costs, operating efficiencies, prices and

net loss from special items of $425 million compared with

volumes. Business Segment Operating Profits are

$127 million in 2016 and $137 million in 2015.

defined as earnings (loss) from continuing operations

Operationally, compared with 2016, the benefits from

before income taxes and equity earnings, but including

higher average sales price realizations and mix ($605

the impact of equity earnings and noncontrolling

million), higher sales volumes ($33 million), lower

interests, excluding corporate items and corporate

maintenance outage costs ($55 million) and

the

special items. Business Segment Operating Profits are

incremental operating earnings from the pulp business

defined by the Securities and Exchange Commission as

acquired in late 2016 ($117 million) were offset by higher

a non-GAAP financial measure, and are not GAAP

operating costs ($172 million), higher input costs ($362

alternatives to net income or any other operating

million) and higher other costs ($11 million).

measure prescribed by accounting principles generally

accepted in the United States.

Corporate items includes operating profits (losses) of

previously divested businesses of $0 million in 2017, ($2)

International Paper operates

three segments:

million in 2016 and ($62) million in 2015.

Industrial Packaging, Global Cellulose Fibers and

Printing Papers. During 2017, as a result of the transfer

of the North American Coated Paperboard business and

the associated reclassification of this business to

Discontinued Operations, the remaining sales and

operating profits previously reported in the Consumer

$ 2,110 $ 802 $ 853

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

Income tax provision (benefit)

(1,085)

193

417

Equity (earnings) loss, net of taxes

(177)

(198)

(117)

Noncontrolling interests, net of taxes

—

(2)

(21)

•
•

Industrial Packaging’s profits of $1.5 billion were
Industrial Packaging’s profits of $1.5 billion were
$194 million lower than in 2016 as the benefits of
$194 million lower than in 2016 as the benefits of
higher average sales price realizations and mix and
higher average sales price realizations and mix and
higher sales volumes were partially offset by higher
higher sales volumes were partially offset by higher
operating costs, higher maintenance outage costs,
operating costs, higher maintenance outage costs,
higher input costs and higher other costs. In
higher input costs and higher other costs. In
addition, operating profits in 2017 included a charge
addition, operating profits in 2017 included a charge
of $354 million related to the agreement to settle the
of $354 million related to the agreement to settle the
Kleen Products anti-trust class action lawsuit,
Kleen Products anti-trust class action lawsuit,
charges of $14 million for the removal of abandoned
charges of $14 million for the removal of abandoned
property at our mills, a charge of $10 million for the
property at our mills, a charge of $10 million for the
accelerated amortization of an intangible asset in
accelerated amortization of an intangible asset in
Brazil and a gain of $6 million for a net bargain
Brazil and a gain of $6 million for a net bargain
purchase gain associated with the 2016 acquisition
purchase gain associated with the 2016 acquisition
of Holmen Paper's newsprint mill in Madrid, Spain.
of Holmen Paper's newsprint mill in Madrid, Spain.
In 2016, operating profits included a charge of $70
In 2016, operating profits included a charge of $70
million for impairment and other costs associated
million for impairment and other costs associated
with the sale of our corrugated packaging business
with the sale of our corrugated packaging business
in Asia and a charge of $7 million related to the
in Asia and a charge of $7 million related to the
closure of a mill in Turkey.
closure of a mill in Turkey.

• Global Cellulose Fibers' operating profit of $65
• Global Cellulose Fibers' operating profit of $65
million was $244 million favorable versus 2016 as
million was $244 million favorable versus 2016 as
the benefits of higher average sales price
the benefits of higher average sales price
realizations and mix, lower operating costs, lower
realizations and mix, lower operating costs, lower
maintenance outage costs and lower input costs
maintenance outage costs and lower input costs
were partially offset by higher other costs. Operating
were partially offset by higher other costs. Operating
profits in 2017 included $33 million of costs
profits in 2017 included $33 million of costs
associated with the acquisition and integration of
associated with the acquisition and integration of
the pulp business acquired in late 2016 from
the pulp business acquired in late 2016 from
Weyerhaeuser, a charge of $14 million for the
Weyerhaeuser, a charge of $14 million for the
amortization of the remaining inventory fair value
amortization of the remaining inventory fair value
adjustment associated with that acquisition and a
adjustment associated with that acquisition and a
charge of $4 million for the removal of abandoned
charge of $4 million for the removal of abandoned
property at our mills. Results for 2017 also reflect
property at our mills. Results for 2017 also reflect
the transaction synergies associated with the
the transaction synergies associated with the
Weyerhaeuser acquisition. In 2016, the operating
Weyerhaeuser acquisition. In 2016, the operating
loss included $31 million of costs associated with
loss included $31 million of costs associated with
the acquisition of the pulp business and $19 million
the acquisition of the pulp business and $19 million

20
20

for the amortization of the inventory fair value
for the amortization of the inventory fair value
adjustment associated with that acquisition.
adjustment associated with that acquisition.

• Printing Papers’ profits of $457 million represented
• Printing Papers’ profits of $457 million represented
a $83 million decrease in operating profits from
a $83 million decrease in operating profits from
2016. The benefits from higher sales volumes, lower
2016. The benefits from higher sales volumes, lower
maintenance outage costs and lower other costs
maintenance outage costs and lower other costs
were more than offset by lower average sales price
were more than offset by lower average sales price
realizations and mix, higher operating costs and
realizations and mix, higher operating costs and
higher input costs. Operating profits in 2017
higher input costs. Operating profits in 2017
included charges of $2 million for the removal of
included charges of $2 million for the removal of
abandoned property at our mills.
abandoned property at our mills.

Liquidity and Capital Resources
Liquidity and Capital Resources

For the year ended December 31, 2017, International
For the year ended December 31, 2017, International
Paper generated $1.8 billion of cash flow from operations
Paper generated $1.8 billion of cash flow from operations
compared with $2.5 billion in 2016 and $2.6 billion in
compared with $2.5 billion in 2016 and $2.6 billion in
2015. Cash flow from operations included $1.25 billion,
2015. Cash flow from operations included $1.25 billion,
$750 million and $750 million of cash pension
$750 million and $750 million of cash pension
contributions in 2017, 2016 and 2015, respectively.
contributions in 2017, 2016 and 2015, respectively.
Capital spending for 2017 totaled $1.4 billion, or 98% of
Capital spending for 2017 totaled $1.4 billion, or 98% of
depreciation and amortization expense. Our liquidity
depreciation and amortization expense. Our liquidity
position remains strong, supported by approximately
position remains strong, supported by approximately
$2.1 billion of credit facilities that we believe are adequate
$2.1 billion of credit facilities that we believe are adequate
to meet future liquidity requirements. Maintaining an
to meet future liquidity requirements. Maintaining an
investment-grade credit rating for our long-term debt
investment-grade credit rating for our long-term debt
continues to be an important element in our overall
continues to be an important element in our overall
financial strategy.
financial strategy.

We expect strong cash generation again in 2018,
We expect strong cash generation again in 2018,
including the benefits of U.S. tax reform, and will continue
including the benefits of U.S. tax reform, and will continue
our balanced use of cash through the payment of
our balanced use of cash through the payment of
dividends, reducing total debt and making investments
dividends, reducing total debt and making investments
for future growth.
for future growth.

Capital spending for 2018 is targeted at $1.5 billion, or
Capital spending for 2018 is targeted at $1.5 billion, or
about 111% of depreciation and amortization.
about 111% of depreciation and amortization.

Legal
Legal

See Note 11 Commitments and Contingent Liabilities on
See Note 11 Commitments and Contingent Liabilities on
pages 60 through 63 of Item 8. Financial Statements and
pages 60 through 63 of Item 8. Financial Statements and
Supplementary Data for a discussion of legal matters.
Supplementary Data for a discussion of legal matters.

RESULTS OF OPERATIONS
RESULTS OF OPERATIONS

in
in

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

Product prices are affected by general economic trends,
Product prices are affected by general economic trends,
inventory levels, currency exchange rate movements and
inventory levels, currency exchange rate movements and

worldwide capacity utilization. In addition to these
worldwide capacity utilization. In addition to these
revenue-related factors, net earnings are impacted by
revenue-related factors, net earnings are impacted by
various cost drivers, the more significant of which include
various cost drivers, the more significant of which include
changes in raw material costs, principally wood, recycled
changes in raw material costs, principally wood, recycled
fiber and chemical costs; energy costs; freight costs;
fiber and chemical costs; energy costs; freight costs;
salary and benefits costs, including pensions; and
salary and benefits costs, including pensions; and
manufacturing conversion costs.
manufacturing conversion costs.

The following is a discussion of International Paper’s
The following is a discussion of International Paper’s
results of operations for the year ended December 31,
results of operations for the year ended December 31,
2017, and the major factors affecting these results
2017, and the major factors affecting these results
compared to 2016 and 2015.
compared to 2016 and 2015.

For the year ended December 31, 2017, International
For the year ended December 31, 2017, International
Paper reported net sales of $21.7 billion, compared with
Paper reported net sales of $21.7 billion, compared with
$19.5 billion in 2016 and $20.7 billion in 2015.
$19.5 billion in 2016 and $20.7 billion in 2015.
International net sales (including U.S. exports) totaled
International net sales (including U.S. exports) totaled
$8.4 billion or 39% of total sales in 2017. This compares
$8.4 billion or 39% of total sales in 2017. This compares
with international net sales of $6.9 billion in 2016 and $7.6
with international net sales of $6.9 billion in 2016 and $7.6
billion in 2015.
billion in 2015.

Full year 2017 net earnings attributable to International
Full year 2017 net earnings attributable to International
Paper Company totaled $2.1 billion ($5.13 per diluted
Paper Company totaled $2.1 billion ($5.13 per diluted
share), compared with net earnings of $904 million ($2.18
share), compared with net earnings of $904 million ($2.18
per diluted share) in 2016 and $938 million ($2.23 per
per diluted share) in 2016 and $938 million ($2.23 per
diluted share) in 2015. Amounts in all periods include the
diluted share) in 2015. Amounts in all periods include the
results of discontinued operations.
results of discontinued operations.

Earnings from continuing operations attributable to
Earnings from continuing operations attributable to
International Paper Company after taxes in 2017, 2016
International Paper Company after taxes in 2017, 2016
and 2015 were as follows:
and 2015 were as follows:

In millions
In millions

2017
2017

2016
2016

2015
2015

Earnings from continuing
Earnings from continuing
operations attributable to
operations attributable to
International Paper
International Paper
Company
Company

$ 2,110 (a) $ 802 (b) $ 853 (c)
$ 2,110 (a) $ 802 (b) $ 853 (c)

(a) Includes $952 million of net special items income which included
(a) Includes $952 million of net special items income which included
a provisional net tax benefit of $1.2 billion related to the enactment
a provisional net tax benefit of $1.2 billion related to the enactment
of the Tax Cut and Jobs Act and $298 million of non-operating
of the Tax Cut and Jobs Act and $298 million of non-operating
pension expense which included a pre-tax charge of $376 million
pension expense which included a pre-tax charge of $376 million
($232 million after taxes) for a settlement accounting charge
($232 million after taxes) for a settlement accounting charge
associated with an annuity purchase and transfer of pension
associated with an annuity purchase and transfer of pension
obligations for approximately 45,000 retirees.
obligations for approximately 45,000 retirees.

(b) Includes $108 million of net special items charges and $375 million
(b) Includes $108 million of net special items charges and $375 million
of non-operating pension expense which included a pre-tax
of non-operating pension expense which included a pre-tax
charge of $439 million ($270 million after taxes) for a settlement
charge of $439 million ($270 million after taxes) for a settlement
accounting charge associated with payments under a term-
accounting charge associated with payments under a term-
vested lump sum buyout.
vested lump sum buyout.

(c) Includes $439 million of net special items charges and $157 million
(c) Includes $439 million of net special items charges and $157 million

of non-operating pension expense.
of non-operating pension expense.

Compared with 2016, the benefits from higher sales
Compared with 2016, the benefits from higher sales
volumes, higher average sales price realizations and mix,
volumes, higher average sales price realizations and mix,
lower maintenance outage costs, incremental earnings
lower maintenance outage costs, incremental earnings
from the acquisition of Weyerhaeuser's pulp business,
from the acquisition of Weyerhaeuser's pulp business,
lower other costs, and lower tax expense were partially
lower other costs, and lower tax expense were partially
offset by higher operating costs, higher input costs and
offset by higher operating costs, higher input costs and
higher net interest expense. In addition, 2017 results
higher net interest expense. In addition, 2017 results

included lower equity earnings, net of taxes, relating to
included lower equity earnings, net of taxes, relating to
the Company’s investment in Ilim Holding, SA.
the Company’s investment in Ilim Holding, SA.

Income Taxes

Special Items

A net income tax benefit of $1.1 billion was recorded for

Restructuring and Other Charges

2017, including a provisional net tax benefit of $1.2 billion

related to the enactment of the Tax Cuts and Jobs Act,

tax benefits of $113 million related to income tax refund

claims, a tax expense of $9 million related to an

international tax law change, tax expenses of $34 million

related to international investment restructuring and a tax

expense of $38 million associated with a cash pension

contribution. Excluding these items, a $194 million net tax

benefit for other special items and a $186 million tax

benefit related to non-operating pension expense, the tax

provision was $549 million, or 30% of pre-tax earnings

before equity earnings.

International Paper continually evaluates its operations

for improvement opportunities targeted to (a) focus our

portfolio on our core businesses, (b) 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, among other outcomes, (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

A net income tax provision of $193 million was recorded

determine if an impairment of the assets have occurred.

for 2016 including tax benefits of $63 million related to

In recent years, this policy has led to the shutdown of a

legal entity restructurings, a tax expense of $31 million

number of facilities and the recording of significant asset

associated with a tax rate change in Luxembourg, a tax

impairment charges and severance costs. It is possible

expense of $23 million associated with a $750 million cash

that additional charges and costs will be incurred in future

pension contribution, and a tax benefit of $14 million

periods in our core businesses should such triggering

related to the closure of a federal tax audit. Excluding

events occur.

these items, a $51 million tax benefit for other special

items and a $235 million tax benefit related to non-

operating pension expense, the tax provision was $502

million, or 32% of pre-tax earnings before equity earnings.

A net income tax provision of $417 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 a 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

During 2017, 2016 and 2015, pre-tax restructuring and

other charges totaling $67 million, $54 million and $252

million were recorded. Details of these charges are as

follows:

Restructuring and Other

Business Segments

In millions

2017

2016

2015

Turkey mill closure

$ —

7 (a) $ —

—

other special items and a $101 million tax benefit related

Corporate

to non-operating pension expense, the tax provision was

$638 million, or 33% of pre-tax earnings before equity

Early debt extinguishment

costs (see Note 13)

$ 207

earnings.

Equity Earnings, Net of Taxes

Equity earnings, net of taxes in 2017, 2016 and 2015

consisted principally of the Company’s share of earnings

from its 50% investment in Ilim Holding S.A. in Russia

(see page 27).

Interest Expense and Noncontrolling Interest

Net corporate interest expense totaled $572 million in

2017, $520 million in 2016 and $555 million in 2015. Net

interest expense in 2017 includes $5 million of interest

income associated with income tax refund claims. The

average outstanding debt. The decrease in 2016

compared with 2015 reflects lower average interest rates.

There were no net earnings attributable to noncontrolling

interests in 2017, compared with a loss of $2 million in

2016 and a loss of $21 million in 2015. The decrease

from 2015 reflects the sale of our equity share of the IP-

Sun JV in 2015.

Gain on sale of investment

in ArborGen

(14)

India Packaging business

evaluation write-off

Gain on sale of investment

in Arizona Chemical

Riegelwood mill conversion

costs net of proceeds from

the sale of Carolina Coated

Bristols brand

Timber monetization

restructuring

Legal liability reserve

adjustment

Other Items

—

(2)

—

(8)

—

252

$ 252

(a) Recorded in the Industrial Packaging business segment.

increase in 2017 compared with 2016 is due to higher

Total

See Business Segment Results on pages 24 through 27
See Business Segment Results on pages 24 through 27
for a discussion of the impact of these factors by segment.
for a discussion of the impact of these factors by segment.

Discontinued Operations
Discontinued Operations

2017:
2017:

On January 1, 2018, the Company completed the transfer
On January 1, 2018, the Company completed the transfer
of its North American Consumer Packaging business,
of its North American Consumer Packaging business,
which includes its North American Coated Paperboard
which includes its North American Coated Paperboard
and Foodservice businesses, to a subsidiary of Graphic
and Foodservice businesses, to a subsidiary of Graphic
Packaging Holding Company.
International Paper
International Paper
Packaging Holding Company.
received a 20.5% ownership interest in a subsidiary of
received a 20.5% ownership interest in a subsidiary of
Graphic Packaging Holding Company that holds the
Graphic Packaging Holding Company that holds the
assets of the combined business. As a result of this
assets of the combined business. As a result of this
transfer, all current and prior year amounts have been
transfer, all current and prior year amounts have been
adjusted to reflect the North American Consumer
adjusted to reflect the North American Consumer
Packaging business as a discontinued operation. See
Packaging business as a discontinued operation. See
Note 7 on pages 53 through 55 of Item 8. Financial
Note 7 on pages 53 through 55 of Item 8. Financial
Statements and Supplementary Data
further
further
Statements and Supplementary Data
discussion.
discussion.

for
for

Included in discontinued operations were the operating
Included in discontinued operations were the operating
earnings of the North American Consumer Packaging
earnings of the North American Consumer Packaging
business, an after-tax charge of $10 million for costs
business, an after-tax charge of $10 million for costs
associated with the transfer and an after-tax charge of
associated with the transfer and an after-tax charge of
$28 million for non-operating pension expenses related
$28 million for non-operating pension expenses related
to curtailment charges and termination benefits in
to curtailment charges and termination benefits in
connection with this same transaction.
connection with this same transaction.

2016:
2016:

In 2016, discontinued operations included the operating
In 2016, discontinued operations included the operating
earnings of the North American Consumer Packaging
earnings of the North American Consumer Packaging
business and an after-tax charge of $5 million expense
business and an after-tax charge of $5 million expense
associated with a legal settlement related to the xpedx
associated with a legal settlement related to the xpedx
business.
business.

2015:
2015:

In 2015, discontinued operations included the operating
In 2015, discontinued operations included the operating
earnings of the North American Consumer Packaging
earnings of the North American Consumer Packaging
business.
business.

21
21

worldwide capacity utilization. In addition to these

included lower equity earnings, net of taxes, relating to

Income Taxes
Income Taxes

Special Items
Special Items

revenue-related factors, net earnings are impacted by

the Company’s investment in Ilim Holding, SA.

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,

2017, and the major factors affecting these results

compared to 2016 and 2015.

For the year ended December 31, 2017, International

Paper reported net sales of $21.7 billion, compared with

$19.5 billion in 2016 and $20.7 billion in 2015.

International net sales (including U.S. exports) totaled

$8.4 billion or 39% of total sales in 2017. This compares

with international net sales of $6.9 billion in 2016 and $7.6

billion in 2015.

Full year 2017 net earnings attributable to International

Paper Company totaled $2.1 billion ($5.13 per diluted

share), compared with net earnings of $904 million ($2.18

per diluted share) in 2016 and $938 million ($2.23 per

diluted share) in 2015. Amounts in all periods include the

results of discontinued operations.

Earnings from continuing operations attributable to

International Paper Company after taxes in 2017, 2016

and 2015 were as follows:

In millions

2017

2016

2015

Earnings from continuing

operations attributable to

International Paper

Company

$ 2,110 (a) $ 802 (b) $ 853 (c)

(a) Includes $952 million of net special items income which included

a provisional net tax benefit of $1.2 billion related to the enactment

of the Tax Cut and Jobs Act and $298 million of non-operating

pension expense which included a pre-tax charge of $376 million

($232 million after taxes) for a settlement accounting charge

associated with an annuity purchase and transfer of pension

obligations for approximately 45,000 retirees.

of non-operating pension expense which included a pre-tax

charge of $439 million ($270 million after taxes) for a settlement

accounting charge associated with payments under a term-

vested lump sum buyout.

of non-operating pension expense.

Compared with 2016, the benefits from higher sales

volumes, higher average sales price realizations and mix,

lower maintenance outage costs, incremental earnings

from the acquisition of Weyerhaeuser's pulp business,

lower other costs, and lower tax expense were partially

(b) Includes $108 million of net special items charges and $375 million

2016:

offset by higher operating costs, higher input costs and

business.

higher net interest expense. In addition, 2017 results

See Business Segment Results on pages 24 through 27

for a discussion of the impact of these factors by segment.

Discontinued Operations

2017:

On January 1, 2018, the Company completed the transfer

of its North American Consumer Packaging business,

which includes its North American Coated Paperboard

and Foodservice businesses, to a subsidiary of Graphic

Packaging Holding Company.

International Paper

received a 20.5% ownership interest in a subsidiary of

Graphic Packaging Holding Company that holds the

assets of the combined business. As a result of this

transfer, all current and prior year amounts have been

adjusted to reflect the North American Consumer

Packaging business as a discontinued operation. See

Note 7 on pages 53 through 55 of Item 8. Financial

Statements and Supplementary Data

for

further

discussion.

Included in discontinued operations were the operating

earnings of the North American Consumer Packaging

business, an after-tax charge of $10 million for costs

associated with the transfer and an after-tax charge of

$28 million for non-operating pension expenses related

to curtailment charges and termination benefits in

connection with this same transaction.

In 2016, discontinued operations included the operating

earnings of the North American Consumer Packaging

business and an after-tax charge of $5 million expense

associated with a legal settlement related to the xpedx

business.

2015:

In 2015, discontinued operations included the operating

earnings of the North American Consumer Packaging

A net income tax benefit of $1.1 billion was recorded for
A net income tax benefit of $1.1 billion was recorded for
2017, including a provisional net tax benefit of $1.2 billion
2017, including a provisional net tax benefit of $1.2 billion
related to the enactment of the Tax Cuts and Jobs Act,
related to the enactment of the Tax Cuts and Jobs Act,
tax benefits of $113 million related to income tax refund
tax benefits of $113 million related to income tax refund
claims, a tax expense of $9 million related to an
claims, a tax expense of $9 million related to an
international tax law change, tax expenses of $34 million
international tax law change, tax expenses of $34 million
related to international investment restructuring and a tax
related to international investment restructuring and a tax
expense of $38 million associated with a cash pension
expense of $38 million associated with a cash pension
contribution. Excluding these items, a $194 million net tax
contribution. Excluding these items, a $194 million net tax
benefit for other special items and a $186 million tax
benefit for other special items and a $186 million tax
benefit related to non-operating pension expense, the tax
benefit related to non-operating pension expense, the tax
provision was $549 million, or 30% of pre-tax earnings
provision was $549 million, or 30% of pre-tax earnings
before equity earnings.
before equity earnings.

A net income tax provision of $193 million was recorded
A net income tax provision of $193 million was recorded
for 2016 including tax benefits of $63 million related to
for 2016 including tax benefits of $63 million related to
legal entity restructurings, a tax expense of $31 million
legal entity restructurings, a tax expense of $31 million
associated with a tax rate change in Luxembourg, a tax
associated with a tax rate change in Luxembourg, a tax
expense of $23 million associated with a $750 million cash
expense of $23 million associated with a $750 million cash
pension contribution, and a tax benefit of $14 million
pension contribution, and a tax benefit of $14 million
related to the closure of a federal tax audit. Excluding
related to the closure of a federal tax audit. Excluding
these items, a $51 million tax benefit for other special
these items, a $51 million tax benefit for other special
items and a $235 million tax benefit related to non-
items and a $235 million tax benefit related to non-
operating pension expense, the tax provision was $502
operating pension expense, the tax provision was $502
million, or 32% of pre-tax earnings before equity earnings.
million, or 32% of pre-tax earnings before equity earnings.

A net income tax provision of $417 million was recorded
A net income tax provision of $417 million was recorded
for 2015 including a tax benefit of $62 million related to
for 2015 including a tax benefit of $62 million related to
internal restructurings, a tax expense of $23 million for
internal restructurings, a tax expense of $23 million for
the tax impact of a cash pension contribution of $750
the tax impact of a cash pension contribution of $750
million and a $2 million tax expense for other items.
million and a $2 million tax expense for other items.
Excluding these items, an $83 million net tax benefit for
Excluding these items, an $83 million net tax benefit for
other special items and a $101 million tax benefit related
other special items and a $101 million tax benefit related
to non-operating pension expense, the tax provision was
to non-operating pension expense, the tax provision was
$638 million, or 33% of pre-tax earnings before equity
$638 million, or 33% of pre-tax earnings before equity
earnings.
earnings.

Equity Earnings, Net of Taxes
Equity Earnings, Net of Taxes

Equity earnings, net of taxes in 2017, 2016 and 2015
Equity earnings, net of taxes in 2017, 2016 and 2015
consisted principally of the Company’s share of earnings
consisted principally of the Company’s share of earnings
from its 50% investment in Ilim Holding S.A. in Russia
from its 50% investment in Ilim Holding S.A. in Russia
(see page 27).
(see page 27).

Interest Expense and Noncontrolling Interest
Interest Expense and Noncontrolling Interest

Net corporate interest expense totaled $572 million in
Net corporate interest expense totaled $572 million in
2017, $520 million in 2016 and $555 million in 2015. Net
2017, $520 million in 2016 and $555 million in 2015. Net
interest expense in 2017 includes $5 million of interest
interest expense in 2017 includes $5 million of interest
income associated with income tax refund claims. The
income associated with income tax refund claims. The
increase in 2017 compared with 2016 is due to higher
increase in 2017 compared with 2016 is due to higher
average outstanding debt. The decrease in 2016
average outstanding debt. The decrease in 2016
compared with 2015 reflects lower average interest rates.
compared with 2015 reflects lower average interest rates.

There were no net earnings attributable to noncontrolling
There were no net earnings attributable to noncontrolling
interests in 2017, compared with a loss of $2 million in
interests in 2017, compared with a loss of $2 million in
2016 and a loss of $21 million in 2015. The decrease
2016 and a loss of $21 million in 2015. The decrease
from 2015 reflects the sale of our equity share of the IP-
from 2015 reflects the sale of our equity share of the IP-
Sun JV in 2015.
Sun JV in 2015.

Restructuring and Other Charges
Restructuring and Other Charges

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

During 2017, 2016 and 2015, pre-tax restructuring and
During 2017, 2016 and 2015, pre-tax restructuring and
other charges totaling $67 million, $54 million and $252
other charges totaling $67 million, $54 million and $252
million were recorded. Details of these charges are as
million were recorded. Details of these charges are as
follows:
follows:

Restructuring and Other
Restructuring and Other

In millions
In millions

2017
2017

2016
2016

2015
2015

Business Segments
Business Segments

Turkey mill closure
Turkey mill closure

$ —
$ —

$
$

7 (a) $ —
7 (a) $ —

—
—

7
7

—
—

Corporate
Corporate

Early debt extinguishment
Early debt extinguishment
costs (see Note 13)
costs (see Note 13)

$
$

83
83

$
$

29
29

$ 207
$ 207

Gain on sale of investment
Gain on sale of investment
in ArborGen
in ArborGen

(14)
(14)

India Packaging business
India Packaging business
evaluation write-off
evaluation write-off

Gain on sale of investment
Gain on sale of investment
in Arizona Chemical
in Arizona Chemical

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

Timber monetization
Timber monetization
restructuring
restructuring

Legal liability reserve
Legal liability reserve
adjustment
adjustment

Other Items
Other Items

Total
Total

$
$

—
—

(2)
(2)

67
67

—
—

17
17

(8)
(8)

9
9

—
—

47
47

54
54

$
$

—
—

8
8

16
16

15
15

6
6

252
252

$ 252
$ 252

(a) Recorded in the Industrial Packaging business segment.
(a) Recorded in the Industrial Packaging business segment.

22
22

Other Corporate Special Items
Other Corporate Special Items

In addition, other corporate special items totaling $0
In addition, other corporate special items totaling $0
million, $8 million and $(4) million were recorded in 2017,
million, $8 million and $(4) million were recorded in 2017,
2016 and 2015, respectively. Details of these charges
2016 and 2015, respectively. Details of these charges
were as follows:
were as follows:

Other Corporate Items
Other Corporate Items

In millions
In millions

Write-off of certain regulatory pre-
Write-off of certain regulatory pre-
engineering costs
engineering costs

Other
Other

Total
Total

Impairments of Goodwill
Impairments of Goodwill

2017
2017

2016
2016

2015
2015

$ — $
$ — $

8 $ —
8 $ —

—
—

$ — $
$ — $

8 $
8 $

(4)
(4)

one
one

include
include

recycled
recycled

operations
operations

white paper through our 18 recycling plants. In EMEA,
white paper through our 18 recycling plants. In EMEA,
our
fiber
our
fiber
containerboard mill in Morocco and 27 container plants
containerboard mill in Morocco and 27 container plants
in France, Italy, Spain, Morocco and Turkey. During
in France, Italy, Spain, Morocco and Turkey. During
2016, we acquired a newsprint mill in Spain which we
2016, we acquired a newsprint mill in Spain which we
are in the process of converting to a recycled
are in the process of converting to a recycled
containerboard mill. In Brazil our operations include
containerboard mill. In Brazil our operations include
three containerboard mills and four box plants. Our
three containerboard mills and four box plants. Our
container plants are supported by regional design
container plants are supported by regional design
centers, which offer total packaging solutions and supply
centers, which offer total packaging solutions and supply
chain initiatives.
chain initiatives.

International Paper also produces high quality coated
International Paper also produces high quality coated
paperboard for a variety of packaging end uses with
paperboard for a variety of packaging end uses with
431,000 tons of capacity at our mills in Poland and
431,000 tons of capacity at our mills in Poland and
Russia.
Russia.

No goodwill impairment charges were recorded in 2017
No goodwill impairment charges were recorded in 2017
or 2016.
or 2016.

Global Cellulose Fibers
Global Cellulose Fibers

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

Net Losses on Sales and Impairments of Businesses
Net Losses on Sales and Impairments of Businesses

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 $9 million
included in special items totaled a pre-tax loss of $9 million
in 2017, a pre-tax loss of $70 million in 2016 and a pre-
in 2017, a pre-tax loss of $70 million in 2016 and a pre-
tax loss of $174 million in 2015. See Note 7 Divestitures
tax loss of $174 million in 2015. See Note 7 Divestitures
on pages 53 through 55 of Item 8. Financial Statements
on pages 53 through 55 of Item 8. Financial Statements
and Supplementary Data) for further discussion.
and Supplementary Data) for further discussion.

DESCRIPTION OF BUSINESS SEGMENTS
DESCRIPTION OF BUSINESS SEGMENTS

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

Industrial Packaging
Industrial Packaging

in
in

International Paper is the largest manufacturer of
International Paper is the largest manufacturer of
containerboard
the United States. Our U.S.
containerboard
the United States. Our U.S.
production capacity is over 13 million tons annually. Our
production capacity is over 13 million tons annually. Our
products include linerboard, medium, whitetop, recycled
products include linerboard, medium, whitetop, recycled
linerboard, recycled medium and saturating kraft. About
linerboard, recycled medium and saturating kraft. About
80% of our production is converted domestically into
80% of our production is converted domestically into
corrugated boxes and other packaging by our 178 North
corrugated boxes and other packaging by our 178 North
American container plants. Additionally, we recycle
American container plants. Additionally, we recycle
approximately one million tons of OCC and mixed and
approximately one million tons of OCC and mixed and

Our cellulose fibers product portfolio includes fluff,
Our cellulose fibers product portfolio includes fluff,
market and specialty pulps. Our fluff pulp is used to make
market and specialty pulps. Our fluff pulp is used to make
absorbent hygiene products like baby diapers, feminine
absorbent hygiene products like baby diapers, feminine
care, adult incontinence and other non-woven products,
care, adult incontinence and other non-woven products,
and our market pulp is used for tissue and paper
and our market pulp is used for tissue and paper
products. We continue to invest in exploring new
products. We continue to invest in exploring new
innovative uses for our products, such as our specialty
innovative uses for our products, such as our specialty
pulps, which are used for non-absorbent end uses
pulps, which are used for non-absorbent end uses
including textiles, filtration, construction material, paints
including textiles, filtration, construction material, paints
and coatings, reinforced plastics and more. Our
and coatings, reinforced plastics and more. Our
products are made in the United States, Canada,
products are made in the United States, Canada,
France, Poland, and Russia and are sold around the
France, Poland, and Russia and are sold around the
world. International Paper facilities have annual dried
world. International Paper facilities have annual dried
pulp capacity of about 4 million metric tonnes.
pulp capacity of about 4 million metric tonnes.

Printing Papers
Printing Papers

International Paper is one of the world’s largest
International Paper is one of the world’s largest
producers of printing and writing papers. The primary
producers of printing and writing papers. The primary
product in this segment is uncoated papers. This
product in this segment is uncoated papers. This
business produces papers for use in copiers, desktop
business produces papers for use in copiers, desktop
and laser printers and digital imaging. End use
and laser printers and digital imaging. End use
applications
include advertising and promotional
applications
include advertising and promotional
materials such as brochures, pamphlets, greeting cards,
materials such as brochures, pamphlets, greeting cards,
books, annual reports and direct mail. Uncoated papers
books, annual reports and direct mail. Uncoated papers
also produces a variety of grades that are converted by
also produces a variety of grades that are converted by
our customers into envelopes, tablets, business forms
our customers into envelopes, tablets, business forms
and file folders. Uncoated papers are sold under private
and file folders. Uncoated papers are sold under private
label and International Paper brand names that include
label and International Paper brand names that include
Hammermill, Springhill, Williamsburg, Postmark,
Hammermill, Springhill, Williamsburg, Postmark,
Accent, Great White, Chamex, Ballet, Rey, Pol, and
Accent, Great White, Chamex, Ballet, Rey, Pol, and
Svetocopy. The mills producing uncoated papers are
Svetocopy. The mills producing uncoated papers are
located in the United States, France, Poland, Russia,
located in the United States, France, Poland, Russia,
Brazil and India. The mills have uncoated paper
Brazil and India. The mills have uncoated paper
production capacity of over 4 million tons annually.
production capacity of over 4 million tons annually.
Brazilian operations function through International
Brazilian operations function through International
Paper do Brasil, Ltda, which owns or manages
Paper do Brasil, Ltda, which owns or manages
approximately 329,000 acres of forestlands in Brazil.
approximately 329,000 acres of forestlands in Brazil.

23
23

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 metric tons. Ilim

has exclusive harvesting rights on timberland and forest

areas exceeding 16.4 million acres

(6.6 million

hectares).

Products and brand designations appearing in italics are

trademarks of International Paper or a related company.

BUSINESS SEGMENT RESULTS

The following tables present net sales and operating

profit (loss) which is the Company's measure of segment

profitability. The tables include a detail of special items

in each year, where applicable, in order to show operating

profit before special items.

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

In millions

Net Sales

2017

2016

2015

$ 15,077 $ 14,226 $ 14,559

Operating Profit (Loss)

1,547 $ 1,741 $ 1,938

Asia Packaging restructuring

and impairment

Holmen mill bargain purchase

gain

Kleen Products anti-trust

settlement

Brazil Packaging Wood Supply

Accelerated Amortization

Turkey mill closure

Brazil Packaging goodwill and

trade name impairment

Other

Items

Operating Profit Before Special

—

(6)

354

—

137

—

1,919 $ 1,818 $ 2,075

Industrial Packaging net sales for 2017 increased 6% to

$15.1 billion compared with $14.2 billion in 2016, and 4%

compared with $14.6 billion in 2015. Operating profits in

2017 were 11% lower than in 2016 and 20% lower than

in 2015. Comparing 2017 with 2016, benefits from higher

average sales price realizations and mix ($593 million)

and higher sales volumes ($75 million) were offset by

higher operating

costs

($245 million), higher

maintenance outage costs ($1 million), higher input costs

($304 million) and higher other costs ($17 million).

North American Industrial Packaging

In millions

Net Sales (a)

2017

2016

2015

$ 13,329 $ 12,450 $ 12,618

Operating Profit (Loss)

1,504 $ 1,757 $ 2,009

Kleen Products anti-trust

settlement

Other

354

—

Operating Profit Before Special

Items

1,872 $ 1,757 $ 2,009

(a) Includes intra-segment sales of $172 million for 2017 and

$143 million for 2016.

North American

Industrial Packaging's sales volumes

increased in 2017 compared with 2016 reflecting higher

box shipments and higher shipments of containerboard

to export markets. In 2017, the business took about

416,000 tons of total downtime of which about 35,000

were economic downtime and 381,000 were

maintenance downtime. The business

took about

914,000 tons of total downtime in 2016 of which 445,000

were economic downtime and 469,000 were

maintenance downtime. Average sales prices for boxes

and average sales price realizations for containerboard

in export markets were significantly higher. Input costs

were significantly higher, primarily for recycled fiber, but

also for energy, chemicals and freight, while wood costs

were lower. Planned maintenance downtime costs were

$5 million higher in 2017 than in 2016.

Looking ahead to the first quarter of 2018, compared with

the fourth quarter of 2017, sales volumes for boxes are

expected to be seasonally lower despite two more

shipping days. Shipments of containerboard to export

markets are also expected to decrease. Average sales

price realizations should reflect the continuing realization

of containerboard export price increases. Input costs are

expected to be higher for wood, energy and chemicals.

Planned maintenance downtime spending is expected to

be about $53 million higher. Operating costs are expected

to be negatively impacted by the severe winter weather

conditions in the 2018 first quarter.

$ — $

8 $ —

chain initiatives.

2017

2016

2015

—

$ — $

8 $

(4)

Other Corporate Special Items

In addition, other corporate special items totaling $0

million, $8 million and $(4) million were recorded in 2017,

2016 and 2015, respectively. Details of these charges

were as follows:

Other Corporate Items

In millions

Write-off of certain regulatory pre-

engineering costs

Other

Total

or 2016.

Impairments of Goodwill

No goodwill impairment charges were recorded in 2017

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 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.

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 $9 million

in 2017, a pre-tax loss of $70 million in 2016 and a pre-

tax loss of $174 million in 2015. See Note 7 Divestitures

on pages 53 through 55 of Item 8. Financial Statements

and Supplementary Data) for further discussion.

DESCRIPTION OF BUSINESS SEGMENTS

International Paper’s business 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

International Paper is the largest manufacturer of

containerboard

the United States. Our U.S.

production capacity is over 13 million tons annually. Our

products include 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 178 North

American 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

one

recycled

fiber

containerboard mill in Morocco and 27 container plants

in France, Italy, Spain, Morocco and Turkey. During

2016, we acquired a newsprint mill in Spain which we

are in the process of converting to a recycled

containerboard mill. In Brazil our operations include

three containerboard mills and four box plants. Our

container plants are supported by regional design

centers, which offer total packaging solutions and supply

International Paper also produces high quality coated

paperboard for a variety of packaging end uses with

431,000 tons of capacity at our mills in Poland and

Russia.

Global Cellulose Fibers

Our cellulose fibers product portfolio includes fluff,

market and specialty pulps. Our fluff pulp is used to make

absorbent hygiene products like baby diapers, feminine

care, adult incontinence and other non-woven products,

and our market pulp is used for tissue and paper

products. We continue to invest in exploring new

innovative uses for our products, such as our specialty

pulps, which are used for non-absorbent end uses

including textiles, filtration, construction material, paints

and coatings, reinforced plastics and more. Our

products are made in the United States, Canada,

France, Poland, and Russia and are sold around the

world. International Paper facilities have annual dried

pulp capacity of about 4 million metric tonnes.

Printing Papers

International Paper is one of the world’s largest

producers of printing and writing papers. The primary

product in this segment is 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 that 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 over 4 million tons annually.

Brazilian operations function through International

Paper do Brasil, Ltda, which owns or manages

approximately 329,000 acres of forestlands in Brazil.

Ilim Holding S.A.
Ilim Holding S.A.

In October 2007, International Paper and Ilim Holding
In October 2007, International Paper and Ilim Holding
S.A. (Ilim) completed a 50:50 joint venture to operate a
S.A. (Ilim) completed a 50:50 joint venture to operate a
pulp and paper business located in Russia. Ilim’s
pulp and paper business located in Russia. Ilim’s
facilities include three paper mills located in Bratsk, Ust-
facilities include three paper mills located in Bratsk, Ust-
Ilimsk, and Koryazhma, Russia, with combined total pulp
Ilimsk, and Koryazhma, Russia, with combined total pulp
and paper capacity of over 3.4 million metric tons. Ilim
and paper capacity of over 3.4 million metric tons. Ilim
has exclusive harvesting rights on timberland and forest
has exclusive harvesting rights on timberland and forest
areas exceeding 16.4 million acres
(6.6 million
areas exceeding 16.4 million acres
(6.6 million
hectares).
hectares).

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

BUSINESS SEGMENT RESULTS
BUSINESS SEGMENT RESULTS

The following tables present net sales and operating
The following tables present net sales and operating
profit (loss) which is the Company's measure of segment
profit (loss) which is the Company's measure of segment
profitability. The tables include a detail of special items
profitability. The tables include a detail of special items
in each year, where applicable, in order to show operating
in each year, where applicable, in order to show operating
profit before special items.
profit before special items.

Industrial Packaging
Industrial Packaging

Demand for Industrial Packaging products is closely
Demand for Industrial Packaging products is closely
correlated with non-durable industrial goods production,
correlated with non-durable industrial goods production,
as well as with demand for processed foods, poultry, meat
as well as with demand for processed foods, poultry, meat
and agricultural products. In addition to prices and
and agricultural products. In addition to prices and
volumes, major factors affecting the profitability of
volumes, major factors affecting the profitability of
Industrial Packaging are raw material and energy costs,
Industrial Packaging are raw material and energy costs,
freight costs, manufacturing efficiency and product mix.
freight costs, manufacturing efficiency and product mix.

Industrial Packaging
Industrial Packaging
In millions
In millions

Net Sales
Net Sales

Operating Profit (Loss)
Operating Profit (Loss)

Asia Packaging restructuring
Asia Packaging restructuring
and impairment
and impairment

Holmen mill bargain purchase
Holmen mill bargain purchase
gain
gain

Kleen Products anti-trust
Kleen Products anti-trust
settlement
settlement

Brazil Packaging Wood Supply
Brazil Packaging Wood Supply
Accelerated Amortization
Accelerated Amortization

Turkey mill closure
Turkey mill closure

Brazil Packaging goodwill and
Brazil Packaging goodwill and
trade name impairment
trade name impairment

Other
Other

2017
2017

2016
2016
$ 15,077 $ 14,226 $ 14,559
$ 15,077 $ 14,226 $ 14,559
1,547 $ 1,741 $ 1,938
1,547 $ 1,741 $ 1,938
$
$

2015
2015

—
—

(6)
(6)

354
354

10
10

—
—

14
14

70
70

—
—

7
7

—
—

137
137

—
—

Operating Profit Before Special
Operating Profit Before Special
Items
Items

$
$

1,919 $ 1,818 $ 2,075
1,919 $ 1,818 $ 2,075

24
24

Industrial Packaging net sales for 2017 increased 6% to
Industrial Packaging net sales for 2017 increased 6% to
$15.1 billion compared with $14.2 billion in 2016, and 4%
$15.1 billion compared with $14.2 billion in 2016, and 4%
compared with $14.6 billion in 2015. Operating profits in
compared with $14.6 billion in 2015. Operating profits in
2017 were 11% lower than in 2016 and 20% lower than
2017 were 11% lower than in 2016 and 20% lower than
in 2015. Comparing 2017 with 2016, benefits from higher
in 2015. Comparing 2017 with 2016, benefits from higher
average sales price realizations and mix ($593 million)
average sales price realizations and mix ($593 million)
and higher sales volumes ($75 million) were offset by
and higher sales volumes ($75 million) were offset by
higher operating
($245 million), higher
($245 million), higher
higher operating
maintenance outage costs ($1 million), higher input costs
maintenance outage costs ($1 million), higher input costs
($304 million) and higher other costs ($17 million).
($304 million) and higher other costs ($17 million).

costs
costs

North American Industrial Packaging
North American Industrial Packaging

In millions
In millions

Net Sales (a)
Net Sales (a)
Operating Profit (Loss)
Operating Profit (Loss)

Kleen Products anti-trust
Kleen Products anti-trust
settlement
settlement

Other
Other

2017
2017

2016
2016
$ 13,329 $ 12,450 $ 12,618
$ 13,329 $ 12,450 $ 12,618
1,504 $ 1,757 $ 2,009
1,504 $ 1,757 $ 2,009
$
$

2015
2015

354
354

14
14

—
—

Operating Profit Before Special
Operating Profit Before Special
Items
Items

$
$

1,872 $ 1,757 $ 2,009
1,872 $ 1,757 $ 2,009

(a) Includes intra-segment sales of $172 million for 2017 and
(a) Includes intra-segment sales of $172 million for 2017 and

$143 million for 2016.
$143 million for 2016.

Industrial Packaging's sales volumes
Industrial Packaging's sales volumes
North American
North American
increased in 2017 compared with 2016 reflecting higher
increased in 2017 compared with 2016 reflecting higher
box shipments and higher shipments of containerboard
box shipments and higher shipments of containerboard
to export markets. In 2017, the business took about
to export markets. In 2017, the business took about
416,000 tons of total downtime of which about 35,000
416,000 tons of total downtime of which about 35,000
were economic downtime and 381,000 were
were economic downtime and 381,000 were
maintenance downtime. The business
took about
maintenance downtime. The business
took about
914,000 tons of total downtime in 2016 of which 445,000
914,000 tons of total downtime in 2016 of which 445,000
were economic downtime and 469,000 were
were economic downtime and 469,000 were
maintenance downtime. Average sales prices for boxes
maintenance downtime. Average sales prices for boxes
and average sales price realizations for containerboard
and average sales price realizations for containerboard
in export markets were significantly higher. Input costs
in export markets were significantly higher. Input costs
were significantly higher, primarily for recycled fiber, but
were significantly higher, primarily for recycled fiber, but
also for energy, chemicals and freight, while wood costs
also for energy, chemicals and freight, while wood costs
were lower. Planned maintenance downtime costs were
were lower. Planned maintenance downtime costs were
$5 million higher in 2017 than in 2016.
$5 million higher in 2017 than in 2016.

Looking ahead to the first quarter of 2018, compared with
Looking ahead to the first quarter of 2018, compared with
the fourth quarter of 2017, sales volumes for boxes are
the fourth quarter of 2017, sales volumes for boxes are
expected to be seasonally lower despite two more
expected to be seasonally lower despite two more
shipping days. Shipments of containerboard to export
shipping days. Shipments of containerboard to export
markets are also expected to decrease. Average sales
markets are also expected to decrease. Average sales
price realizations should reflect the continuing realization
price realizations should reflect the continuing realization
of containerboard export price increases. Input costs are
of containerboard export price increases. Input costs are
expected to be higher for wood, energy and chemicals.
expected to be higher for wood, energy and chemicals.
Planned maintenance downtime spending is expected to
Planned maintenance downtime spending is expected to
be about $53 million higher. Operating costs are expected
be about $53 million higher. Operating costs are expected
to be negatively impacted by the severe winter weather
to be negatively impacted by the severe winter weather
conditions in the 2018 first quarter.
conditions in the 2018 first quarter.

EMEA Industrial Packaging
EMEA Industrial Packaging

In millions
In millions

2017
2017

2016
2016

2015
2015

Net Sales
Net Sales
Operating Profit (Loss)
Operating Profit (Loss)

Holmen mill net bargain
Holmen mill net bargain
purchase gain
purchase gain

Turkey Mill Closure
Turkey Mill Closure

$
$
$
$

1,334 $ 1,227 $ 1,114
1,334 $ 1,227 $ 1,114
13
13

15 $
15 $

6 $
6 $

(6)
(6)

—
—

7
7

—
—

13
13

Operating Profit Before Special
Operating Profit Before Special
Items
Items

$
$

— $
— $

22 $
22 $

EMEA Industrial Packaging's sales volumes in 2017 were
EMEA Industrial Packaging's sales volumes in 2017 were
higher than in 2016 reflecting improved market demand,
higher than in 2016 reflecting improved market demand,
particularly in Morocco and Turkey while sales volumes
particularly in Morocco and Turkey while sales volumes
in the Eurozone were negatively impacted by poor
in the Eurozone were negatively impacted by poor
weather conditions. Average sales margins improved
weather conditions. Average sales margins improved
due to sales price increases and a more favorable mix
due to sales price increases and a more favorable mix
that more than offset higher containerboard costs and the
that more than offset higher containerboard costs and the
impact of unfavorable currency translation. Input costs
impact of unfavorable currency translation. Input costs
for energy were higher and operating costs were
for energy were higher and operating costs were
negatively impacted by inflation.
negatively impacted by inflation.

Entering the first quarter of 2018, compared with the
Entering the first quarter of 2018, compared with the
fourth quarter of 2017 sales volumes are expected to be
fourth quarter of 2017 sales volumes are expected to be
slightly lower. Average sales margins are expected to be
slightly lower. Average sales margins are expected to be
lower due to continuing higher containerboard prices.
lower due to continuing higher containerboard prices.
of
of
Operating costs will be higher due to the conversion
Operating costs will be higher due to the conversion
the Madrid mill.
the Madrid mill.

Brazilian Industrial Packaging
Brazilian Industrial Packaging

In millions
In millions

Net Sales
Net Sales

Operating Profit (Loss)
Operating Profit (Loss)

Brazil Packaging goodwill and
Brazil Packaging goodwill and
trade name impairment
trade name impairment

Operating Profit Before Special
Operating Profit Before Special
Items
Items

2017
2017

2016
2016

2015
2015

251 $
251 $
(35) $
(35) $

232 $
232 $

(43) $
(43) $

228
228
(163)
(163)

10
10

—
—

137
137

(25) $
(25) $

(43) $
(43) $

(26)
(26)

$
$

reflecting
reflecting

Brazilian Industrial Packaging's sales volumes in 2017
Brazilian Industrial Packaging's sales volumes in 2017
for boxes and
increased compared with 2016
for boxes and
increased compared with 2016
containerboard,
economic
containerboard,
economic
conditions. Average sales price realizations were also
conditions. Average sales price realizations were also
higher. Input costs decreased, primarily for recycled fiber
higher. Input costs decreased, primarily for recycled fiber
and wood. Operating costs were higher largely due to
and wood. Operating costs were higher largely due to
the effects of inflation. Planned maintenance downtime
the effects of inflation. Planned maintenance downtime
costs were $1 million lower in 2017 compared with 2016.
costs were $1 million lower in 2017 compared with 2016.

improving
improving

Looking ahead to the first quarter of 2018, compared with
Looking ahead to the first quarter of 2018, compared with
the fourth quarter of 2017, sales volumes are expected
the fourth quarter of 2017, sales volumes are expected
to be higher for boxes, but lower for containerboard and
to be higher for boxes, but lower for containerboard and
sheets. Average sales margins should improve, reflecting
sheets. Average sales margins should improve, reflecting
a sales price increase for boxes. Input costs are expected
a sales price increase for boxes. Input costs are expected
to be flat, but operating costs will be higher due to other
to be flat, but operating costs will be higher due to other
costs. Planned maintenance downtime costs are
costs. Planned maintenance downtime costs are
expected to be $1 million higher.
expected to be $1 million higher.

European Coated Paperboard
European Coated Paperboard

In millions
In millions

Net Sales
Net Sales

Operating Profit (Loss)
Operating Profit (Loss)

2017
2017

2016
2016

2015
2015

$
$

335 $
335 $
72 $
72 $

327 $
327 $

93 $
93 $

319
319

87
87

European Coated Paperboard's sales volumes in 2017
European Coated Paperboard's sales volumes in 2017
compared with 2016 increased in Europe, but decreased
compared with 2016 increased in Europe, but decreased
in Russia. Average sales price realizations were lower in
in Russia. Average sales price realizations were lower in
Russia while in Europe average sales margins increased
Russia while in Europe average sales margins increased
reflecting higher average sales prices and a more
reflecting higher average sales prices and a more
favorable mix. Input costs for wood, energy and
favorable mix. Input costs for wood, energy and
purchased pulp were higher. Planned maintenance
purchased pulp were higher. Planned maintenance
downtime costs were $3 million lower in 2017.
downtime costs were $3 million lower in 2017.

lower
lower

Looking forward to the first quarter of 2018, compared
Looking forward to the first quarter of 2018, compared
with the fourth quarter of 2017, sales volumes are
with the fourth quarter of 2017, sales volumes are
expected to increase in Europe, but expected to be
expected to increase in Europe, but expected to be
seasonally
in Russia. Average sales price
in Russia. Average sales price
seasonally
realizations are expected to be higher in both Europe and
realizations are expected to be higher in both Europe and
Russia. Input costs are expected to be lower. Planned
Russia. Input costs are expected to be lower. Planned
maintenance outage costs are expected to be $5 million
maintenance outage costs are expected to be $5 million
higher in the first quarter of 2018 due to a planned outage
higher in the first quarter of 2018 due to a planned outage
at the Kwidzyn mill.
at the Kwidzyn mill.

Asian Industrial Packaging
Asian Industrial Packaging

In millions
In millions

Net Sales
Net Sales

Operating Profit (Loss)
Operating Profit (Loss)

Asia Packaging restructuring
Asia Packaging restructuring
and impairment
and impairment

Operating Profit Before Special
Operating Profit Before Special
Items
Items

$
$

2017
2017

2016
2016

2015
2015

— $
— $
— $
— $

133 $
133 $

(81) $
(81) $

280
280
(8)
(8)

—
—

70
70

— $
— $

(11) $
(11) $

—
—

(8)
(8)

On June 30, 2016, the Company completed the sale of
On June 30, 2016, the Company completed the sale of
its corrugated packaging business
in China and
in China and
its corrugated packaging business
Southeast Asia
to Xiamen Bridge Hexing Equity
to Xiamen Bridge Hexing Equity
Southeast Asia
Investment Partnership Enterprise. See Note 7
Investment Partnership Enterprise. See Note 7
Divestitures on pages 53 through 55 of Item 8. Financial
Divestitures on pages 53 through 55 of Item 8. Financial
Statements and Supplementary Data
further
further
Statements and Supplementary Data
discussion of the sale of this business.
discussion of the sale of this business.

for
for

Global Cellulose Fibers
Global Cellulose Fibers

Demand
is closely
is closely
for Cellulose Fibers products
for Cellulose Fibers products
Demand
correlated with changes in demand for absorbent hygiene
correlated with changes in demand for absorbent hygiene
products and is further affected by changes in currency
products and is further affected by changes in currency
rates that can benefit or hurt producers in different
rates that can benefit or hurt producers in different
geographic regions. Principal cost drivers include
geographic regions. Principal cost drivers include
manufacturing efficiency, raw material and energy costs
manufacturing efficiency, raw material and energy costs
and freight costs.
and freight costs.

Global Cellulose Fibers
Global Cellulose Fibers
In millions
In millions

Net Sales
Net Sales

2017
2017

2016
2016

2015
2015

$ 2,551 $ 1,092 $
$ 2,551 $ 1,092 $

975
975

Operating Profit (Loss)
Operating Profit (Loss)

$
$

65 $
65 $

(179) $
(179) $

Acquisition costs
Acquisition costs

Inventory fair value step-up
Inventory fair value step-up
amortization
amortization

Other
Other

33
33

14
14

4
4

31
31

19
19

—
—

Operating Profit Before Special
Operating Profit Before Special
Items
Items

$
$

116 $
116 $

(129) $
(129) $

68
68

—
—

68
68

Global Cellulose Fibers results include the net sales and
Global Cellulose Fibers results include the net sales and
operating profit associated with the pulp business
operating profit associated with the pulp business
acquired from Weyerhaeuser from the date of acquisition
acquired from Weyerhaeuser from the date of acquisition

on December 1, 2016. See Note 6 Acquisitions and Joint

Ventures on pages 51 through 53 of Item 8. Financial

Statements and Supplementary Data for additional

information about the acquisition.

Net sales for 2017 increased to $2.6 billion compared

with $1.1 billion in 2016 and $975 million in 2015.

Operating profits in 2017 were significantly higher than

in 2016 and 4% lower than in 2015. Comparing 2017 with

2016 for the legacy business, benefits from higher

average sales price realizations and mix ($61 million),

lower planned maintenance downtime costs ($39

million), lower input costs ($5 million), lower operating

costs ($1 million) and lower other costs ($6 million) were

offset by

lower sales volumes ($5 million). The

incremental operating profits from the acquired business

were $117 million in 2017.

For the legacy business, sales volumes were lower.

Average sales margins increased, reflecting higher sales

price realizations for both fluff pulp and softwood market

pulp and a favorable product mix. Input costs were slightly

lower. Planned maintenance downtime costs were $39

million lower in 2017 primarily due to the non-recurrence

of the 2016 costs associated with the conversion of the

Riegelwood mill to 100% fluff pulp production. Operating

costs were flat, while input costs were lower. In Europe

and Russia, average sales margins

increased

significantly and planned maintenance downtime costs

were $3 million lower than in 2016.

Entering the first quarter of 2018, sales volumes will be

lower due to capacity constraints resulting from planned

maintenance downtime. Average sales price realizations

are expected to be stable and product mix should be

favorable. Operating costs are expected to be higher,

partly due to the severe winter weather experienced in

January. Input costs are expected to increase for energy,

wood and chemicals. Planned maintenance downtime

costs should be $52 million higher than in the fourth

quarter of 2017. In addition, a fourth-quarter favorable

inventory valuation adjustment will not repeat.

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. Principal

cost

drivers

include

manufacturing efficiency, raw material and energy costs

and freight costs.

Printing Papers

In millions

Net Sales

Operating Profit (Loss)

Other

Items

Operating Profit Before Special

2017

2016

2015

$ 4,157 $ 4,058 $ 4,056

457 $

540 $

—

465

—

459 $

540 $

465

Printing Papers net sales for 2017 of $4.2 billion increased

2% compared with $4.1 billion in both 2016 and 2015.

Operating profits in 2017 were 15% lower than in 2016

and 2% lower than in 2015. Comparing 2017 with 2016,

benefits from higher sales volumes ($25 million), lower

planned maintenance downtime costs ($15 million) and

lower other costs ($12 million) were more than offset by

lower average sales price realizations and mix ($61

million), higher operating costs ($31 million) and higher

input costs ($41 million).

North American Printing Papers

In millions

Net Sales

Other

Items

Operating Profit (Loss)

Operating Profit Before Special

2017

2016

2015

$ 1,833 $ 1,890 $ 1,942

132 $

236 $

—

179

—

134 $

236 $

179

North American Printing Papers' sales volumes for 2017 were

higher than in 2016. Average sales price realizations

decreased for both cut size paper and rolls. Average sales

decreased for both cutsize paper and rolls. Average sales

margins were also impacted by an unfavorable mix. Input

costs were higher for energy and chemicals, partially

offset by lower wood costs. Planned maintenance

downtime costs were $12 million higher in 2017.

Operating costs were lower.

Entering the first quarter of 2018, sales volumes are

expected to be seasonally higher. Average sales margins

should be relatively flat. Operating costs are expected to

be higher, partly due to the severe winter weather

experienced in January. Input costs should be higher.

Planned maintenance downtime costs will increase by

about $22 million in the 2018 first quarter.

Brazilian Papers

In millions

Net Sales (a)

Operating Profit (Loss)

2017

2016

2015

972 $

194 $

897 $

173 $

878

186

(a) Includes intra-segment sales of $24 million for 2017 and $5

million for 2016.

25
25

EMEA Industrial Packaging

In millions

Net Sales

Operating Profit (Loss)

Holmen mill net bargain

purchase gain

Turkey Mill Closure

Operating Profit Before Special

Items

2017

2016

2015

1,334 $ 1,227 $ 1,114

6 $

15 $

(6)

—

— $

22 $

—

European Coated Paperboard's sales volumes in 2017

compared with 2016 increased in Europe, but decreased

in Russia. Average sales price realizations were lower in

Russia while in Europe average sales margins increased

reflecting higher average sales prices and a more

favorable mix. Input costs for wood, energy and

purchased pulp were higher. Planned maintenance

downtime costs were $3 million lower in 2017.

Looking forward to the first quarter of 2018, compared

EMEA Industrial Packaging's sales volumes in 2017 were

with the fourth quarter of 2017, sales volumes are

higher than in 2016 reflecting improved market demand,

expected to increase in Europe, but expected to be

particularly in Morocco and Turkey while sales volumes

seasonally

lower

in Russia. Average sales price

in the Eurozone were negatively impacted by poor

realizations are expected to be higher in both Europe and

weather conditions. Average sales margins improved

Russia. Input costs are expected to be lower. Planned

due to sales price increases and a more favorable mix

maintenance outage costs are expected to be $5 million

that more than offset higher containerboard costs and the

higher in the first quarter of 2018 due to a planned outage

impact of unfavorable currency translation. Input costs

at the Kwidzyn mill.

for energy were higher and operating costs were

negatively impacted by inflation.

Entering the first quarter of 2018, compared with the

fourth quarter of 2017 sales volumes are expected to be

slightly lower. Average sales margins are expected to be

lower due to continuing higher containerboard prices.

Operating costs will be higher due to the conversion

the Madrid mill.

Brazilian Industrial Packaging

In millions

Net Sales

Operating Profit (Loss)

Brazil Packaging goodwill and

trade name impairment

Operating Profit Before Special

Items

2017

2016

2015

251 $

(35) $

232 $

228

(43) $

(163)

—

137

(25) $

(43) $

(26)

Asian Industrial Packaging

In millions

Net Sales

Operating Profit (Loss)

Asia Packaging restructuring

and impairment

Operating Profit Before Special

Items

2017

2016

2015

— $

133 $

(81) $

280

(8)

—

— $

(11) $

—

(8)

On June 30, 2016, the Company completed the sale of

its corrugated packaging business

in China and

Southeast Asia

to Xiamen Bridge Hexing Equity

Investment Partnership Enterprise. See Note 7

Divestitures on pages 53 through 55 of Item 8. Financial

Statements and Supplementary Data

for

further

discussion of the sale of this business.

Global Cellulose Fibers

Brazilian Industrial Packaging's sales volumes in 2017

Demand

for Cellulose Fibers products

is closely

increased compared with 2016

for boxes and

correlated with changes in demand for absorbent hygiene

containerboard,

reflecting

improving

economic

products and is further affected by changes in currency

conditions. Average sales price realizations were also

rates that can benefit or hurt producers in different

higher. Input costs decreased, primarily for recycled fiber

geographic regions. Principal cost drivers include

and wood. Operating costs were higher largely due to

manufacturing efficiency, raw material and energy costs

the effects of inflation. Planned maintenance downtime

and freight costs.

costs were $1 million lower in 2017 compared with 2016.

Looking ahead to the first quarter of 2018, compared with

the fourth quarter of 2017, sales volumes are expected

to be higher for boxes, but lower for containerboard and

sheets. Average sales margins should improve, reflecting

a sales price increase for boxes. Input costs are expected

to be flat, but operating costs will be higher due to other

costs. Planned maintenance downtime costs are

expected to be $1 million higher.

European Coated Paperboard

In millions

Net Sales

Operating Profit (Loss)

2017

2016

2015

335 $

327 $

72 $

93 $

319

Global Cellulose Fibers

In millions

Net Sales

2017

2016

2015

$ 2,551 $ 1,092 $

975

Operating Profit (Loss)

65 $

(179) $

Acquisition costs

Inventory fair value step-up

amortization

Other

—

Operating Profit Before Special

Items

116 $

(129) $

—

Global Cellulose Fibers results include the net sales and

operating profit associated with the pulp business

acquired from Weyerhaeuser from the date of acquisition

on December 1, 2016. See Note 6 Acquisitions and Joint
on December 1, 2016. See Note 6 Acquisitions and Joint
Ventures on pages 51 through 53 of Item 8. Financial
Ventures on pages 51 through 53 of Item 8. Financial
Statements and Supplementary Data for additional
Statements and Supplementary Data for additional
information about the acquisition.
information about the acquisition.

Net sales for 2017 increased to $2.6 billion compared
Net sales for 2017 increased to $2.6 billion compared
with $1.1 billion in 2016 and $975 million in 2015.
with $1.1 billion in 2016 and $975 million in 2015.
Operating profits in 2017 were significantly higher than
Operating profits in 2017 were significantly higher than
in 2016 and 4% lower than in 2015. Comparing 2017 with
in 2016 and 4% lower than in 2015. Comparing 2017 with
2016 for the legacy business, benefits from higher
2016 for the legacy business, benefits from higher
average sales price realizations and mix ($61 million),
average sales price realizations and mix ($61 million),
lower planned maintenance downtime costs ($39
lower planned maintenance downtime costs ($39
million), lower input costs ($5 million), lower operating
million), lower input costs ($5 million), lower operating
costs ($1 million) and lower other costs ($6 million) were
costs ($1 million) and lower other costs ($6 million) were
lower sales volumes ($5 million). The
offset by
offset by
lower sales volumes ($5 million). The
incremental operating profits from the acquired business
incremental operating profits from the acquired business
were $117 million in 2017.
were $117 million in 2017.

For the legacy business, sales volumes were lower.
For the legacy business, sales volumes were lower.
Average sales margins increased, reflecting higher sales
Average sales margins increased, reflecting higher sales
price realizations for both fluff pulp and softwood market
price realizations for both fluff pulp and softwood market
pulp and a favorable product mix. Input costs were slightly
pulp and a favorable product mix. Input costs were slightly
lower. Planned maintenance downtime costs were $39
lower. Planned maintenance downtime costs were $39
million lower in 2017 primarily due to the non-recurrence
million lower in 2017 primarily due to the non-recurrence
of the 2016 costs associated with the conversion of the
of the 2016 costs associated with the conversion of the
Riegelwood mill to 100% fluff pulp production. Operating
Riegelwood mill to 100% fluff pulp production. Operating
costs were flat, while input costs were lower. In Europe
costs were flat, while input costs were lower. In Europe
increased
and Russia, average sales margins
increased
and Russia, average sales margins
significantly and planned maintenance downtime costs
significantly and planned maintenance downtime costs
were $3 million lower than in 2016.
were $3 million lower than in 2016.

Entering the first quarter of 2018, sales volumes will be
Entering the first quarter of 2018, sales volumes will be
lower due to capacity constraints resulting from planned
lower due to capacity constraints resulting from planned
maintenance downtime. Average sales price realizations
maintenance downtime. Average sales price realizations
are expected to be stable and product mix should be
are expected to be stable and product mix should be
favorable. Operating costs are expected to be higher,
favorable. Operating costs are expected to be higher,
partly due to the severe winter weather experienced in
partly due to the severe winter weather experienced in
January. Input costs are expected to increase for energy,
January. Input costs are expected to increase for energy,
wood and chemicals. Planned maintenance downtime
wood and chemicals. Planned maintenance downtime
costs should be $52 million higher than in the fourth
costs should be $52 million higher than in the fourth
quarter of 2017. In addition, a fourth-quarter favorable
quarter of 2017. In addition, a fourth-quarter favorable
inventory valuation adjustment will not repeat.
inventory valuation adjustment will not repeat.

Printing Papers
Printing Papers

is closely
for Printing Papers products
Demand
is closely
for Printing Papers products
Demand
correlated with changes in commercial printing and
correlated with changes in commercial printing and
advertising activity, direct mail volumes and, for uncoated
advertising activity, direct mail volumes and, for uncoated
cut-size products, with changes
in white-collar
cut-size products, with changes
in white-collar
employment levels that affect the usage of copy and laser
employment levels that affect the usage of copy and laser
printer
include
include
printer
manufacturing efficiency, raw material and energy costs
manufacturing efficiency, raw material and energy costs
and freight costs.
and freight costs.

paper. Principal
paper. Principal

drivers
drivers

cost
cost

26
26

Printing Papers
Printing Papers
In millions
In millions

Net Sales
Net Sales
Operating Profit (Loss)
Operating Profit (Loss)

Other
Other

2017
2017

2016
2016
$ 4,157 $ 4,058 $ 4,056
$ 4,157 $ 4,058 $ 4,056
465
465
$
$

540 $
540 $

2015
2015

457 $
457 $
2
2

—
—

Operating Profit Before Special
Operating Profit Before Special
Items
Items

$
$

459 $
459 $

540 $
540 $

465
465

Printing Papers net sales for 2017 of $4.2 billion increased
Printing Papers net sales for 2017 of $4.2 billion increased
2% compared with $4.1 billion in both 2016 and 2015.
2% compared with $4.1 billion in both 2016 and 2015.
Operating profits in 2017 were 15% lower than in 2016
Operating profits in 2017 were 15% lower than in 2016
and 2% lower than in 2015. Comparing 2017 with 2016,
and 2% lower than in 2015. Comparing 2017 with 2016,
benefits from higher sales volumes ($25 million), lower
benefits from higher sales volumes ($25 million), lower
planned maintenance downtime costs ($15 million) and
planned maintenance downtime costs ($15 million) and
lower other costs ($12 million) were more than offset by
lower other costs ($12 million) were more than offset by
lower average sales price realizations and mix ($61
lower average sales price realizations and mix ($61
million), higher operating costs ($31 million) and higher
million), higher operating costs ($31 million) and higher
input costs ($41 million).
input costs ($41 million).

North American Printing Papers
North American Printing Papers

In millions
In millions

Net Sales
Net Sales

Operating Profit (Loss)
Operating Profit (Loss)

Other
Other

2017
2017

2016
2016
$ 1,833 $ 1,890 $ 1,942
$ 1,833 $ 1,890 $ 1,942
179
179
$
$

236 $
236 $

2015
2015

132 $
132 $
2
2

—
—

Operating Profit Before Special
Operating Profit Before Special
Items
Items

$
$

134 $
134 $

236 $
236 $

179
179

North American Printing Papers' sales volumes for 2017 were
North American Printing Papers' sales volumes for 2017 were
higher than in 2016. Average sales price realizations
higher than in 2016. Average sales price realizations
decreased for both cutsize paper and rolls. Average sales
decreased for both cut size paper and rolls. Average sales
margins were also impacted by an unfavorable mix. Input
margins were also impacted by an unfavorable mix. Input
costs were higher for energy and chemicals, partially
costs were higher for energy and chemicals, partially
offset by lower wood costs. Planned maintenance
offset by lower wood costs. Planned maintenance
downtime costs were $12 million higher in 2017.
downtime costs were $12 million higher in 2017.
Operating costs were lower.
Operating costs were lower.

Entering the first quarter of 2018, sales volumes are
Entering the first quarter of 2018, sales volumes are
expected to be seasonally higher. Average sales margins
expected to be seasonally higher. Average sales margins
should be relatively flat. Operating costs are expected to
should be relatively flat. Operating costs are expected to
be higher, partly due to the severe winter weather
be higher, partly due to the severe winter weather
experienced in January. Input costs should be higher.
experienced in January. Input costs should be higher.
Planned maintenance downtime costs will increase by
Planned maintenance downtime costs will increase by
about $22 million in the 2018 first quarter.
about $22 million in the 2018 first quarter.

Brazilian Papers
Brazilian Papers

In millions
In millions

Net Sales (a)
Net Sales (a)

Operating Profit (Loss)
Operating Profit (Loss)

2017
2017

2016
2016

2015
2015

$
$

972 $
972 $

194 $
194 $

897 $
897 $

173 $
173 $

878
878

186
186

(a) Includes intra-segment sales of $24 million for 2017 and $5
(a) Includes intra-segment sales of $24 million for 2017 and $5

million for 2016.
million for 2016.

Brazilian Papers' sales volumes for uncoated freesheet
Brazilian Papers' sales volumes for uncoated freesheet
paper in 2017 were higher compared with 2016 reflecting
paper in 2017 were higher compared with 2016 reflecting
improving economic conditions. Average sales price
improving economic conditions. Average sales price
realizations increased primarily for domestic uncoated
realizations increased primarily for domestic uncoated
freesheet paper due to the realization of price increases
freesheet paper due to the realization of price increases
in 2016, while export sales price
implemented
in 2016, while export sales price
implemented
increased. Raw material costs
realizations also
increased. Raw material costs
realizations also
decreased for pulp, but were partly offset by higher costs
decreased for pulp, but were partly offset by higher costs
for chemicals and virgin fiber. Operating costs were lower
for chemicals and virgin fiber. Operating costs were lower
than in 2016. Planned maintenance downtime costs
than in 2016. Planned maintenance downtime costs
were $4 million lower.
were $4 million lower.

Looking ahead to 2018, compared with the fourth quarter
Looking ahead to 2018, compared with the fourth quarter
of 2017, sales volumes for uncoated freesheet paper in
of 2017, sales volumes for uncoated freesheet paper in
the first quarter are expected to be seasonally weaker in
the first quarter are expected to be seasonally weaker in
both domestic and export markets. Average sales price
both domestic and export markets. Average sales price
realizations should increase due to the implementation
realizations should increase due to the implementation
of sales price increases in both domestic and export
of sales price increases in both domestic and export
markets. Input costs are expected to be slightly higher
markets. Input costs are expected to be slightly higher
for wood, chemicals and energy. Planned maintenance
for wood, chemicals and energy. Planned maintenance
downtime costs are expected to be $5 million higher in
downtime costs are expected to be $5 million higher in
the first quarter of 2018.
the first quarter of 2018.

European Papers
European Papers

In millions
In millions

Net Sales
Net Sales

Operating Profit (Loss)
Operating Profit (Loss)

2017
2017

2016
2016
$ 1,187 $ 1,109 $ 1,064
$ 1,187 $ 1,109 $ 1,064
111
111
$
$

136 $
136 $

142 $
142 $

2015
2015

European Papers' sales volumes for uncoated freesheet
European Papers' sales volumes for uncoated freesheet
paper in 2017 were lower in Russia and about flat in
paper in 2017 were lower in Russia and about flat in
Europe compared with 2016. Average sales price
Europe compared with 2016. Average sales price
realizations improved for uncoated freesheet paper
realizations improved for uncoated freesheet paper
following price increases implemented in 2017. Input
following price increases implemented in 2017. Input
costs were higher for wood, energy, chemicals and
costs were higher for wood, energy, chemicals and
purchased pulp. Planned maintenance downtime costs
purchased pulp. Planned maintenance downtime costs
were $22 million lower in 2017 than in 2016.
were $22 million lower in 2017 than in 2016.

Entering 2018, sales volumes for uncoated freesheet
Entering 2018, sales volumes for uncoated freesheet
paper in the first quarter are expected to be stable.
paper in the first quarter are expected to be stable.
Average sales price realizations are expected to be
Average sales price realizations are expected to be
slightly lower in Russia, but higher in Europe. Input costs
slightly lower in Russia, but higher in Europe. Input costs
should be slightly lower, mainly for wood. Planned
should be slightly lower, mainly for wood. Planned
maintenance downtime costs in the first quarter of 2018
maintenance downtime costs in the first quarter of 2018
should be $8 million higher than in the fourth quarter of
should be $8 million higher than in the fourth quarter of
2017.
2017.

Indian Papers
Indian Papers

In millions
In millions

Net Sales
Net Sales

Operating Profit (Loss)
Operating Profit (Loss)

2017
2017

2016
2016

2015
2015

$
$

189 $
189 $
(5) $
(5) $

167 $
167 $
(11) $
(11) $

172
172
(11)
(11)

Indian Papers' average sales price realizations in 2017
Indian Papers' average sales price realizations in 2017
were higher than in 2016. Sales volumes also increased.
were higher than in 2016. Sales volumes also increased.
Input costs were lower for wood, partially offset by higher
Input costs were lower for wood, partially offset by higher
chemical costs. Operating costs were higher in 2017,
chemical costs. Operating costs were higher in 2017,
while planned maintenance downtime costs were even
while planned maintenance downtime costs were even
with 2016. Looking ahead to the first quarter of 2018,
with 2016. Looking ahead to the first quarter of 2018,
sales volumes are expected to be slightly lower than in
sales volumes are expected to be slightly lower than in
the 2017 fourth quarter, but seasonally strong. Average
the 2017 fourth quarter, but seasonally strong. Average
sales price realizations are expected to increase.
sales price realizations are expected to increase.

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

Cash Provided by Operating Activities

Acquisitions and Joint Ventures

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

The Company recorded equity earnings, net of taxes,
The Company recorded equity earnings, net of taxes,
related to Ilim of $183 million in 2017 compared with
related to Ilim of $183 million in 2017 compared with
earnings of $199 million in 2016 and earnings of $131
earnings of $199 million in 2016 and earnings of $131
million in 2015. Operating results recorded in 2017
million in 2015. Operating results recorded in 2017
included an after-tax noncash foreign exchange gain of
included an after-tax noncash foreign exchange gain of
$15 million compared with an after-tax foreign exchange
$15 million compared with an after-tax foreign exchange
gain of $25 million in 2016 and an after-tax foreign
gain of $25 million in 2016 and an after-tax foreign
exchange loss of $75 million in 2015 primarily on the
exchange loss of $75 million in 2015 primarily on the
remeasurement of Ilim's U.S. dollar denominated net
remeasurement of Ilim's U.S. dollar denominated net
debt.
debt.

Sales volumes for the joint venture decreased year over
Sales volumes for the joint venture decreased year over
year for shipments to China of softwood pulp and
year for shipments to China of softwood pulp and
linerboard, but were partially offset by increased sales of
linerboard, but were partially offset by increased sales of
hardwood pulp to China. Sales volumes in the Russian
hardwood pulp to China. Sales volumes in the Russian
market decreased for softwood pulp and hardwood pulp,
market decreased for softwood pulp and hardwood pulp,
but increased for linerboard. Average sales price
but increased for linerboard. Average sales price
realizations were higher in 2017 for sales of softwood
realizations were higher in 2017 for sales of softwood
pulp, hardwood pulp and linerboard to China and other
pulp, hardwood pulp and linerboard to China and other
export markets. Average sales price realizations in
export markets. Average sales price realizations in
Russian markets increased year over year for all
Russian markets increased year over year for all
products. Input costs also increased in 2017 for wood,
products. Input costs also increased in 2017 for wood,
energy and fuel. Distribution costs were higher in 2017.
energy and fuel. Distribution costs were higher in 2017.
The Company received cash dividends from the joint
The Company received cash dividends from the joint
venture of $133 million in 2017, $58 million in 2016, and
venture of $133 million in 2017, $58 million in 2016, and
$35 million in 2015.
$35 million in 2015.

Entering the first quarter of 2018, sales volumes are
Entering the first quarter of 2018, sales volumes are
expected to be lower than in the fourth quarter of 2017
expected to be lower than in the fourth quarter of 2017
due to the seasonal slowdown in Russia and export
due to the seasonal slowdown in Russia and export
markets. Average sales price realizations are expected
markets. Average sales price realizations are expected
to increase for hardwood pulp, softwood pulp and
to increase for hardwood pulp, softwood pulp and
linerboard to China. Input costs are expected to be lower,
linerboard to China. Input costs are expected to be lower,
while distribution costs are projected to increase.
while distribution costs are projected to increase.

LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES

Overview
Overview

A major factor in International Paper’s liquidity and capital
A major factor in International Paper’s liquidity and capital
resource planning is its generation of operating cash flow,
resource planning is its generation of operating cash flow,
which is highly sensitive to changes in the pricing and
which is highly sensitive to changes in the pricing and
demand for our major products. While changes in key
demand for our major products. While changes in key
cash operating costs, such as energy, raw material and
cash operating costs, such as energy, raw material and
transportation costs, do have an effect on operating cash
transportation costs, do have an effect on operating cash
generation, we believe that our focus on pricing and cost
generation, we believe that our focus on pricing and cost
controls has improved our cash flow generation over an
controls has improved our cash flow generation over an
operating cycle.
operating cycle.

Cash uses during 2017 were primarily focused on
Cash uses during 2017 were primarily focused on
working capital requirements, capital spending, debt
working capital requirements, capital spending, debt
reductions, pension contributions, and returning cash to
reductions, pension contributions, and returning cash to
shareholders.
shareholders.

Cash provided by operations, including discontinued

operations, totaled $1.8 billion in 2017 compared with

$2.5 billion for 2016 and $2.6 billion for 2015. Cash used

by working capital components (accounts receivable and

inventory less accounts payable and accrued liabilities,

interest payable and other) totaled $402 million in 2017,

compared with cash provided by working capital

components of $71 million in 2016 and a cash use for

working capital components of $222 million in 2015. The

increase in 2017 working capital is largely due to growth

in receivables primarily tied to year-over-year price

increases.

Investment Activities

Including discontinued operations, investment activities

in 2017 decreased from 2016 as 2016 included the

purchase of Weyerhaeuser's pulp business for $2.2

billion in cash, the purchase of the Holmen business for

$57 million in cash, net of cash acquired, and proceeds

from the sale of the Asia Packaging business of $108

million, net of cash divested. In 2015, investment activity

includes higher 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 63 through

64 of Item 8. Financial Statements and Supplementary

Data). The Company maintains an average capital

spending target around depreciation and amortization

levels or modestly above due to strategic plans over the

course of an economic cycle. Capital spending was $1.4

billion in 2017, or 98% of depreciation and amortization,

compared with $1.3 billion in 2016, or 110% of

depreciation and amortization, and $1.5 billion, or 115%

of depreciation and amortization in 2015. Across our

businesses, capital spending as a percentage of

depreciation and amortization ranged from 37.5% to

107.0% in 2017.

The

following

table shows capital spending

for

operations by business segment for the years ended

December 31, 2017, 2016 and 2015, excluding amounts

related to discontinued operations of $111 million in 2017,

$107 million in 2016 and $177 million in 2015.

In millions

Industrial Packaging

Global Cellulose Fibers

Printing Papers

Subtotal

Corporate and other

Capital Spending

2017

2016

2015

836 $

832 $ 871

188

235

1,259

174

215

129

232

1,221

1,232

$ 1,280 $ 1,241 $1,310

Capital expenditures in 2018 are currently expected to

be about $1.5 billion, or 111% of depreciation and

amortization.

See Note 6 Acquisitions and Joint Ventures on pages 51

through 53 of Item 8. Financial Statements and

Supplementary Data for a discussion of the Company's

acquisitions.

Financing Activities

Amounts related to early debt extinguishment during the

years ended December 31, 2017, 2016 and 2015 were

as follows:

In millions

Debt reductions (a)

Pre-tax early debt extinguishment costs

(b)

207

2017

2016

2015

$ 993 $ 266 $ 2,151

(a) Reductions related to notes with interest rates ranging from

1.57% to 9.38% with original maturities from 2015 to 2030 for

the years ended December 31, 2017, 2016 and 2015. Includes

the $630 million payment for a portion of the Special Purpose

Entity Liability for the year ended December 31, 2015 (see Note

12 Variable Interest Entities).

(b) Amounts are included in Restructuring and other charges in the

accompanying consolidated statements of operations.

2017: Financing activities during 2017 included debt

issuances of $1.9 billion and retirements of $1.4 billion

for a net increase of $483 million.

International Paper utilizes interest rate swaps to change

the mix of fixed and variable rate debt and manage

interest expense. At December 31, 2017, International

Paper had no interest rate swap contracts outstanding

(see Note 14 Derivatives and Hedging Activities on pages

65 through 69 of Item 8. Financial Statements and

Supplementary Data). During 2017, the inclusion of the

offsetting interest income from short-term investments

reduced the effective interest rate from 5.0% to 4.7%.

In 2017, International Paper issued $1.0 billion of 4.35%

senior unsecured notes with a maturity date in 2048. The

proceeds from this offering, together with a combination

of available cash and other borrowings, were used to

make a $1.25 billion voluntary cash contribution to the

Company's pension plan.

In December 2017,

International Paper received $660 million in cash

proceeds from a new loan entered into as part of the

transfer of the North American Consumer Packaging

business to a subsidiary of Graphic Packing Holding

Company discussed in Note 7. The Company used the

cash proceeds, together with available cash, to pay down

existing debt of approximately $900 million of notes with

interest rates ranging from 1.92% to 9.38% and original

maturities from 2018 to 2021. Pre-tax early debt

retirement costs of $83 million related to the debt

repayments, including $82 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, 2017. The $660

27
27

Brazilian Papers' sales volumes for uncoated freesheet

paper in 2017 were higher compared with 2016 reflecting

improving economic conditions. Average sales price

realizations increased primarily for domestic uncoated

freesheet paper due to the realization of price increases

implemented

in 2016, while export sales price

realizations also

increased. Raw material costs

decreased for pulp, but were partly offset by higher costs

for chemicals and virgin fiber. Operating costs were lower

than in 2016. Planned maintenance downtime costs

were $4 million lower.

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 $183 million in 2017 compared with

earnings of $199 million in 2016 and earnings of $131

million in 2015. Operating results recorded in 2017

included an after-tax noncash foreign exchange gain of

$15 million compared with an after-tax foreign exchange

Looking ahead to 2018, compared with the fourth quarter

gain of $25 million in 2016 and an after-tax foreign

of 2017, sales volumes for uncoated freesheet paper in

exchange loss of $75 million in 2015 primarily on the

the first quarter are expected to be seasonally weaker in

remeasurement of Ilim's U.S. dollar denominated net

both domestic and export markets. Average sales price

debt.

realizations should increase due to the implementation

of sales price increases in both domestic and export

Sales volumes for the joint venture decreased year over

markets. Input costs are expected to be slightly higher

year for shipments to China of softwood pulp and

for wood, chemicals and energy. Planned maintenance

linerboard, but were partially offset by increased sales of

downtime costs are expected to be $5 million higher in

hardwood pulp to China. Sales volumes in the Russian

the first quarter of 2018.

European Papers

In millions

Net Sales

Operating Profit (Loss)

2017

2016

2015

$ 1,187 $ 1,109 $ 1,064

136 $

142 $

111

European Papers' sales volumes for uncoated freesheet

paper in 2017 were lower in Russia and about flat in

Europe compared with 2016. Average sales price

realizations improved for uncoated freesheet paper

following price increases implemented in 2017. Input

costs were higher for wood, energy, chemicals and

purchased pulp. Planned maintenance downtime costs

were $22 million lower in 2017 than in 2016.

Entering 2018, sales volumes for uncoated freesheet

paper in the first quarter are expected to be stable.

Average sales price realizations are expected to be

slightly lower in Russia, but higher in Europe. Input costs

should be slightly lower, mainly for wood. Planned

maintenance downtime costs in the first quarter of 2018

should be $8 million higher than in the fourth quarter of

2017.

Indian Papers

In millions

Net Sales

Operating Profit (Loss)

2017

2016

2015

189 $

(5) $

167 $

(11) $

172

(11)

Indian Papers' average sales price realizations in 2017

were higher than in 2016. Sales volumes also increased.

Input costs were lower for wood, partially offset by higher

chemical costs. Operating costs were higher in 2017,

while planned maintenance downtime costs were even

with 2016. Looking ahead to the first quarter of 2018,

sales volumes are expected to be slightly lower than in

the 2017 fourth quarter, but seasonally strong. Average

sales price realizations are expected to increase.

market decreased for softwood pulp and hardwood pulp,

but increased for linerboard. Average sales price

realizations were higher in 2017 for sales of softwood

pulp, hardwood pulp and linerboard to China and other

export markets. Average sales price realizations in

Russian markets increased year over year for all

products. Input costs also increased in 2017 for wood,

energy and fuel. Distribution costs were higher in 2017.

The Company received cash dividends from the joint

venture of $133 million in 2017, $58 million in 2016, and

$35 million in 2015.

Entering the first quarter of 2018, sales volumes are

expected to be lower than in the fourth quarter of 2017

due to the seasonal slowdown in Russia and export

markets. Average sales price realizations are expected

to increase for hardwood pulp, softwood pulp and

linerboard to China. Input costs are expected to be lower,

while distribution costs are projected 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 2017 were primarily focused on

working capital requirements, capital spending, debt

reductions, pension contributions, and returning cash to

shareholders.

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

Cash Provided by Operating Activities
Cash Provided by Operating Activities

Acquisitions and Joint Ventures
Acquisitions and Joint Ventures

Cash provided by operations, including discontinued
Cash provided by operations, including discontinued
operations, totaled $1.8 billion in 2017 compared with
operations, totaled $1.8 billion in 2017 compared with
$2.5 billion for 2016 and $2.6 billion for 2015. Cash used
$2.5 billion for 2016 and $2.6 billion for 2015. Cash used
by working capital components (accounts receivable and
by working capital components (accounts receivable and
inventory less accounts payable and accrued liabilities,
inventory less accounts payable and accrued liabilities,
interest payable and other) totaled $402 million in 2017,
interest payable and other) totaled $402 million in 2017,
compared with cash provided by working capital
compared with cash provided by working capital
components of $71 million in 2016 and a cash use for
components of $71 million in 2016 and a cash use for
working capital components of $222 million in 2015. The
working capital components of $222 million in 2015. The
increase in 2017 working capital is largely due to growth
increase in 2017 working capital is largely due to growth
in receivables primarily tied to year-over-year price
in receivables primarily tied to year-over-year price
increases.
increases.

Investment Activities
Investment Activities

Including discontinued operations, investment activities
Including discontinued operations, investment activities
in 2017 decreased from 2016 as 2016 included the
in 2017 decreased from 2016 as 2016 included the
purchase of Weyerhaeuser's pulp business for $2.2
purchase of Weyerhaeuser's pulp business for $2.2
billion in cash, the purchase of the Holmen business for
billion in cash, the purchase of the Holmen business for
$57 million in cash, net of cash acquired, and proceeds
$57 million in cash, net of cash acquired, and proceeds
from the sale of the Asia Packaging business of $108
from the sale of the Asia Packaging business of $108
million, net of cash divested. In 2015, investment activity
million, net of cash divested. In 2015, investment activity
includes higher capital spending and the use of $198
includes higher capital spending and the use of $198
million of cash in conjunction with the timber monetization
million of cash in conjunction with the timber monetization
restructuring (see Note 12 Variable Interest Entities and
restructuring (see Note 12 Variable Interest Entities and
Preferred Securities of Subsidiaries on pages 63 through
Preferred Securities of Subsidiaries on pages 63 through
64 of Item 8. Financial Statements and Supplementary
64 of Item 8. Financial Statements and Supplementary
Data). The Company maintains an average capital
Data). The Company maintains an average capital
spending target around depreciation and amortization
spending target around depreciation and amortization
levels or modestly above due to strategic plans over the
levels or modestly above due to strategic plans over the
course of an economic cycle. Capital spending was $1.4
course of an economic cycle. Capital spending was $1.4
billion in 2017, or 98% of depreciation and amortization,
billion in 2017, or 98% of depreciation and amortization,
compared with $1.3 billion in 2016, or 110% of
compared with $1.3 billion in 2016, or 110% of
depreciation and amortization, and $1.5 billion, or 115%
depreciation and amortization, and $1.5 billion, or 115%
of depreciation and amortization in 2015. Across our
of depreciation and amortization in 2015. Across our
businesses, capital spending as a percentage of
businesses, capital spending as a percentage of
depreciation and amortization ranged from 37.5% to
depreciation and amortization ranged from 37.5% to
107.0% in 2017.
107.0% in 2017.

following
following

table shows capital spending
table shows capital spending

The
for
for
The
operations by business segment for the years ended
operations by business segment for the years ended
December 31, 2017, 2016 and 2015, excluding amounts
December 31, 2017, 2016 and 2015, excluding amounts
related to discontinued operations of $111 million in 2017,
related to discontinued operations of $111 million in 2017,
$107 million in 2016 and $177 million in 2015.
$107 million in 2016 and $177 million in 2015.

In millions
In millions
Industrial Packaging
Industrial Packaging
Global Cellulose Fibers
Global Cellulose Fibers
Printing Papers
Printing Papers
Subtotal
Subtotal
Corporate and other
Corporate and other

Capital Spending
Capital Spending

$
$

2017
2017

2016
2016

836 $
836 $
188
188

2015
2015
832 $ 871
832 $ 871
129
129
174
174
232
215
232
215
1,232
1,221
1,232
1,221
78
78
$ 1,280 $ 1,241 $1,310
$ 1,280 $ 1,241 $1,310

235
235
1,259
1,259

20
20

21
21

Capital expenditures in 2018 are currently expected to
Capital expenditures in 2018 are currently expected to
be about $1.5 billion, or 111% of depreciation and
be about $1.5 billion, or 111% of depreciation and
amortization.
amortization.

28
28

See Note 6 Acquisitions and Joint Ventures on pages 51
See Note 6 Acquisitions and Joint Ventures on pages 51
through 53 of Item 8. Financial Statements and
through 53 of Item 8. Financial Statements and
Supplementary Data for a discussion of the Company's
Supplementary Data for a discussion of the Company's
acquisitions.
acquisitions.

Financing Activities
Financing Activities

Amounts related to early debt extinguishment during the
Amounts related to early debt extinguishment during the
years ended December 31, 2017, 2016 and 2015 were
years ended December 31, 2017, 2016 and 2015 were
as follows:
as follows:

In millions
In millions

Debt reductions (a)
Debt reductions (a)

2017
2017

2016
2016

2015
2015

$ 993 $ 266 $ 2,151
$ 993 $ 266 $ 2,151

Pre-tax early debt extinguishment costs
Pre-tax early debt extinguishment costs
(b)
(b)

83
83

29
29

207
207

(a) Reductions related to notes with interest rates ranging from
(a) Reductions related to notes with interest rates ranging from
1.57% to 9.38% with original maturities from 2015 to 2030 for
1.57% to 9.38% with original maturities from 2015 to 2030 for
the years ended December 31, 2017, 2016 and 2015. Includes
the years ended December 31, 2017, 2016 and 2015. Includes
the $630 million payment for a portion of the Special Purpose
the $630 million payment for a portion of the Special Purpose
Entity Liability for the year ended December 31, 2015 (see Note
Entity Liability for the year ended December 31, 2015 (see Note
12 Variable Interest Entities).
12 Variable Interest Entities).

(b) Amounts are included in Restructuring and other charges in the
(b) Amounts are included in Restructuring and other charges in the

accompanying consolidated statements of operations.
accompanying consolidated statements of operations.

2017: Financing activities during 2017 included debt
2017: Financing activities during 2017 included debt
issuances of $1.9 billion and retirements of $1.4 billion
issuances of $1.9 billion and retirements of $1.4 billion
for a net increase of $483 million.
for a net increase of $483 million.

International Paper utilizes interest rate swaps to change
International Paper utilizes interest rate swaps to change
the mix of fixed and variable rate debt and manage
the mix of fixed and variable rate debt and manage
interest expense. At December 31, 2017, International
interest expense. At December 31, 2017, International
Paper had no interest rate swap contracts outstanding
Paper had no interest rate swap contracts outstanding
(see Note 14 Derivatives and Hedging Activities on pages
(see Note 14 Derivatives and Hedging Activities on pages
65 through 69 of Item 8. Financial Statements and
65 through 69 of Item 8. Financial Statements and
Supplementary Data). During 2017, the inclusion of the
Supplementary Data). During 2017, the inclusion of the
offsetting interest income from short-term investments
offsetting interest income from short-term investments
reduced the effective interest rate from 5.0% to 4.7%.
reduced the effective interest rate from 5.0% to 4.7%.

In 2017, International Paper issued $1.0 billion of 4.35%
In 2017, International Paper issued $1.0 billion of 4.35%
senior unsecured notes with a maturity date in 2048. The
senior unsecured notes with a maturity date in 2048. The
proceeds from this offering, together with a combination
proceeds from this offering, together with a combination
of available cash and other borrowings, were used to
of available cash and other borrowings, were used to
make a $1.25 billion voluntary cash contribution to the
make a $1.25 billion voluntary cash contribution to the
In December 2017,
Company's pension plan.
In December 2017,
Company's pension plan.
International Paper received $660 million in cash
International Paper received $660 million in cash
proceeds from a new loan entered into as part of the
proceeds from a new loan entered into as part of the
transfer of the North American Consumer Packaging
transfer of the North American Consumer Packaging
business to a subsidiary of Graphic Packing Holding
business to a subsidiary of Graphic Packing Holding
Company discussed in Note 7. The Company used the
Company discussed in Note 7. The Company used the
cash proceeds, together with available cash, to pay down
cash proceeds, together with available cash, to pay down
existing debt of approximately $900 million of notes with
existing debt of approximately $900 million of notes with
interest rates ranging from 1.92% to 9.38% and original
interest rates ranging from 1.92% to 9.38% and original
maturities from 2018 to 2021. Pre-tax early debt
maturities from 2018 to 2021. Pre-tax early debt
retirement costs of $83 million related to the debt
retirement costs of $83 million related to the debt
repayments, including $82 million of cash premiums, are
repayments, including $82 million of cash premiums, are
included in restructuring and other charges in the
included in restructuring and other charges in the
accompanying consolidated statement of operations for
accompanying consolidated statement of operations for
the twelve months ended December 31, 2017. The $660
the twelve months ended December 31, 2017. The $660

million term loan was subsequently assumed by Graphic
million term loan was subsequently assumed by Graphic
Packaging International, LLC on January 1, 2018 and is
Packaging International, LLC on January 1, 2018 and is
classified as Liabilities held for sale in the accompanying
classified as Liabilities held for sale in the accompanying
consolidated balance sheet.
consolidated balance sheet.

In December 2016, International Paper entered into a
In December 2016, International Paper entered into a
new $1.5 billion contractually committed credit facility that
new $1.5 billion contractually committed credit facility that
expires in December 2021 and has a facility fee of 0.15%
expires in December 2021 and has a facility fee of 0.15%
payable annually.
payable annually.

2015.

operations for the twelve months ended December 31,

Contractual obligations for future payments under

In June 2016, International Paper entered into a
In June 2016, International Paper entered into a
commercial paper program with a borrowing capacity of
commercial paper program with a borrowing capacity of
$750 million. Under the terms of the program, individual
$750 million. Under the terms of the program, individual
maturities on borrowings may vary, but not exceed one
maturities on borrowings may vary, but not exceed one
year from the date of issue. Interest bearing notes may
year from the date of issue. Interest bearing notes may
be issued either as fixed notes or floating rate notes. As
be issued either as fixed notes or floating rate notes. As
of December 31, 2017 and 2016, the Company had $180
of December 31, 2017 and 2016, the Company had $180
million and $165 million, respectively, outstanding under
million and $165 million, respectively, outstanding under
this commercial paper program.
this commercial paper program.

Other financing activities during 2017 included the net
Other financing activities during 2017 included the net
issuance of approximately 1.7 million shares of treasury
issuance of approximately 1.7 million shares of treasury
stock, including restricted stock withholding. Payments
stock, including restricted stock withholding. Payments
of restricted stock withholding taxes totaled $47.0 million.
of restricted stock withholding taxes totaled $47.0 million.

In October 2017, International Paper announced that the
In October 2017, International Paper announced that the
quarterly dividend would be increased from $0.4625 per
quarterly dividend would be increased from $0.4625 per
share to $0.4750 per share, effective for the 2017 fourth
share to $0.4750 per share, effective for the 2017 fourth
quarter.
quarter.

2016: Financing activities during 2016 included debt
2016: Financing activities during 2016 included debt
issuances of $3.8 billion and retirements of $1.9 billion
issuances of $3.8 billion and retirements of $1.9 billion
for a net increase of $1.9 billion.
for a net increase of $1.9 billion.

International Paper utilizes interest rate swaps to change
International Paper utilizes interest rate swaps to change
the mix of fixed and variable rate debt and manage
the mix of fixed and variable rate debt and manage
interest expense. At December 31, 2016, International
interest expense. At December 31, 2016, International
Paper had no interest rate swap contracts outstanding
Paper had no interest rate swap contracts outstanding
(see Note 14 Derivatives and Hedging Activities on pages
(see Note 14 Derivatives and Hedging Activities on pages
65 through 69 of Item 8. Financial Statements and
65 through 69 of Item 8. Financial Statements and
Supplementary Data). During 2016, the amortization of
Supplementary Data). During 2016, the amortization of
deferred gains on previously terminated swaps had no
deferred gains on previously terminated swaps had no
impact on the weighted average cost of long-term
impact on the weighted average cost of long-term
recourse debt. The inclusion of the offsetting interest
recourse debt. The inclusion of the offsetting interest
the
income
the
income
effective rate from 5.3% to 4.8%.
effective rate from 5.3% to 4.8%.

investments reduced
investments reduced

from short-term
from short-term

In 2016, International Paper issued $1.1 billion of 3.00%
In 2016, International Paper issued $1.1 billion of 3.00%
senior unsecured notes with a maturity date in 2027, and
senior unsecured notes with a maturity date in 2027, and
$1.2 billion of 4.40% senior unsecured notes with a
$1.2 billion of 4.40% senior unsecured notes with a
maturity date in 2047, the proceeds from which were
maturity date in 2047, the proceeds from which were
primarily used to fund the acquisition of Weyerhaeuser's
primarily used to fund the acquisition of Weyerhaeuser's
the Company repaid
pulp business.
pulp business.
the Company repaid
approximately $266 million of notes with an interest rate
approximately $266 million of notes with an interest rate
of 7.95% and an original maturity of 2018. Pre-tax early
of 7.95% and an original maturity of 2018. Pre-tax early
debt retirement costs of $29 million related to the debt
debt retirement costs of $29 million related to the debt
repayments, including the $31 million of cash premiums,
repayments, including the $31 million of cash premiums,
are included in restructuring and other charges in the
are included in restructuring and other charges in the
accompanying consolidated statement of operations for
accompanying consolidated statement of operations for
the twelve months ended December 31, 2016.
the twelve months ended December 31, 2016.

In addition,
In addition,

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 option 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.

Variable Interest Entities

Information concerning variable interest entities is set

forth in Note 12 Variable Interest Entities on pages 63

through 64 of Item 8. Financial Statements and

Supplementary Data for discussion.

Liquidity and Capital Resources Outlook for 2018

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 2018

with current cash balances and cash from operations.

Additionally, the Company has existing credit facilities

totaling $2.1 billion available at December 31, 2017.

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. The Company was in compliance

with all its debt covenants at December 31, 2017 and was

well below the thresholds stipulated under the covenants

as defined in the credit agreements.

Maintaining an investment grade credit rating is an

important element of International Paper’s financing

strategy. At December 31, 2017, the Company held long-

term credit ratings of BBB (stable outlook) and Baa2

(stable outlook) by S&P and Moody’s, respectively.

existing debt and lease commitments and purchase

obligations at December 31, 2017, were as follows:

In millions

2018

2019

2020

2021

2022

Thereafter

Maturities of long-term

debt (a)

Lease obligations

Purchase obligations (b)

311 $

126 $

164 $

440 $

956 $

9,160

130

3,415

102

680

583

523

463

141

2,197

Total (c)

$ 3,856 $

908 $

824 $ 1,016 $ 1,456 $

11,498

(a) Total debt includes scheduled principal payments only.

(b)

Includes $1.6 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. Also includes $1.2 billion relating to fiber supply

agreements assumed in conjunction with the 2016 acquisition

of Weyerhaeuser's pulp business.

amount and timing of the payment are unrecognized tax benefits

of approximately $134 million.

We consider the undistributed earnings of our foreign

subsidiaries as of December 31, 2017, to be permanently

reinvested and, accordingly, no U.S. income taxes have

been provided thereon. As a result of recent U.S. tax

legislation, the Company is evaluating this assertion (see

Note 10 Income Taxes on pages 57 through 60 of Item

8. Financial Statements and Supplementary Data). As of

December 31, 2017, the amount of cash associated with

permanently

reinvested

foreign

earnings was

approximately $590 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, 2017, the projected benefit obligation

for the Company’s U.S. defined benefit plans determined

under U.S. GAAP was approximately $1.9 billion higher

than the fair value of plan assets. Approximately $1.5

billion of this amount relates to plans that are subject to

minimum funding requirements. Under current IRS

funding rules, the calculation of minimum funding

requirements differs from the calculation of the present

value of plan benefits(the projected benefit obligation) for

accounting purposes. In December 2008, the Worker,

Retiree and Employer Recovery Act of 2008 (WERA) was

passed by the U.S. Congress which provided for pension

funding relief and

technical corrections. Funding

contributions depend on the funding method selected by

the Company, and the timing of its implementation, as

Other financing activities during 2016 included the net
Other financing activities during 2016 included the net
repurchase of approximately 0.9 million shares of
repurchase of approximately 0.9 million shares of
treasury stock, including restricted stock withholding.
treasury stock, including restricted stock withholding.
Repurchases of common stock and payments of
Repurchases of common stock and payments of
restricted stock withholding taxes totaled $132.3 million,
restricted stock withholding taxes totaled $132.3 million,
including $100.1 million related to shares repurchased
including $100.1 million related to shares repurchased
under the Company's share repurchase program.
under the Company's share repurchase program.

In October 2016, International Paper announced that the
In October 2016, International Paper announced that the
quarterly dividend would be increased from $0.44 per
quarterly dividend would be increased from $0.44 per
share to $0.46 per share, effective for the 2016 fourth
share to $0.46 per share, effective for the 2016 fourth
quarter.
quarter.

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

During 2015, the Company restructured the timber
During 2015, the Company restructured the timber
monetization which resulted in the use of $630 million in
monetization which resulted in the use of $630 million in
cash to pay down a portion of the third party bank loans
cash to pay down a portion of the third party bank loans
and refinance the loans on nonrecourse terms. (see Note
and refinance the loans on nonrecourse terms. (see Note
12 Variable Interest Entities on pages 63 through 64 of
12 Variable Interest Entities on pages 63 through 64 of
Item 8. Financial Statements and Supplementary Data).
Item 8. Financial Statements and Supplementary Data).

International Paper utilizes interest rate swaps to change
International Paper utilizes interest rate swaps to change
the mix of fixed and variable rate debt and manage
the mix of fixed and variable rate debt and manage
interest expense. At December 31, 2015, International
interest expense. At December 31, 2015, International
Paper had interest rate swaps with a total notional amount
Paper had interest rate swaps with a total notional amount
of $17 million and maturities in 2018 (see Note 14
of $17 million and maturities in 2018 (see Note 14
Derivatives and Hedging Activities on pages 65 through
Derivatives and Hedging Activities on pages 65 through
69 of Item 8. Financial Statements and Supplementary
69 of Item 8. Financial Statements and Supplementary
Data). During 2015, existing swaps and the amortization
Data). During 2015, existing swaps and the amortization
of deferred gains on previously terminated swaps
of deferred gains on previously terminated swaps
decreased the weighted average cost of debt from 5.9%
decreased the weighted average cost of debt from 5.9%
to an effective rate of 5.8%. The inclusion of the offsetting
to an effective rate of 5.8%. The inclusion of the offsetting
interest income from short-term investments reduced this
interest income from short-term investments reduced this
effective rate to 5.1%.
effective rate to 5.1%.

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

29
29

million term loan was subsequently assumed by Graphic

In December 2016, International Paper entered into a

Packaging International, LLC on January 1, 2018 and is

new $1.5 billion contractually committed credit facility that

classified as Liabilities held for sale in the accompanying

expires in December 2021 and has a facility fee of 0.15%

consolidated balance sheet.

payable annually.

In June 2016, International Paper entered into a

Other financing activities during 2016 included the net

commercial paper program with a borrowing capacity of

repurchase of approximately 0.9 million shares of

$750 million. Under the terms of the program, individual

treasury stock, including restricted stock withholding.

maturities on borrowings may vary, but not exceed one

Repurchases of common stock and payments of

year from the date of issue. Interest bearing notes may

restricted stock withholding taxes totaled $132.3 million,

be issued either as fixed notes or floating rate notes. As

including $100.1 million related to shares repurchased

of December 31, 2017 and 2016, the Company had $180

under the Company's share repurchase program.

million and $165 million, respectively, outstanding under

this commercial paper program.

Other financing activities during 2017 included the net

issuance of approximately 1.7 million shares of treasury

stock, including restricted stock withholding. Payments

of restricted stock withholding taxes totaled $47.0 million.

In October 2017, International Paper announced that the

quarterly dividend would be increased from $0.4625 per

share to $0.4750 per share, effective for the 2017 fourth

quarter.

2016: Financing activities during 2016 included debt

issuances of $3.8 billion and retirements of $1.9 billion

for a net increase of $1.9 billion.

International Paper utilizes interest rate swaps to change

the mix of fixed and variable rate debt and manage

interest expense. At December 31, 2016, International

Paper had no interest rate swap contracts outstanding

(see Note 14 Derivatives and Hedging Activities on pages

65 through 69 of Item 8. Financial Statements and

Supplementary Data). During 2016, the amortization of

deferred gains on previously terminated swaps had no

impact on the weighted average cost of long-term

recourse debt. The inclusion of the offsetting interest

income

from short-term

investments reduced

the

effective rate from 5.3% to 4.8%.

In 2016, International Paper issued $1.1 billion of 3.00%

senior unsecured notes with a maturity date in 2027, and

$1.2 billion of 4.40% senior unsecured notes with a

maturity date in 2047, the proceeds from which were

primarily used to fund the acquisition of Weyerhaeuser's

pulp business.

In addition,

the Company repaid

approximately $266 million of notes with an interest rate

of 7.95% and an original maturity of 2018. Pre-tax early

debt retirement costs of $29 million related to the debt

repayments, including the $31 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, 2016.

In October 2016, International Paper announced that the

quarterly dividend would be increased from $0.44 per

share to $0.46 per share, effective for the 2016 fourth

quarter.

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 63 through 64 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 65 through

69 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 repayments, including 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,
operations for the twelve months ended December 31,
2015.
2015.

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

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

Variable Interest Entities
Variable Interest Entities

Information concerning variable interest entities is set
Information concerning variable interest entities is set
forth in Note 12 Variable Interest Entities on pages 63
forth in Note 12 Variable Interest Entities on pages 63
through 64 of Item 8. Financial Statements and
through 64 of Item 8. Financial Statements and
Supplementary Data for discussion.
Supplementary Data for discussion.

Liquidity and Capital Resources Outlook for 2018
Liquidity and Capital Resources Outlook for 2018

Capital Expenditures and Long-Term Debt
Capital Expenditures and Long-Term Debt

International Paper expects to be able to meet projected
International Paper expects to be able to meet projected
capital expenditures, service existing debt and meet
capital expenditures, service existing debt and meet
working capital and dividend requirements during 2018
working capital and dividend requirements during 2018
with current cash balances and cash from operations.
with current cash balances and cash from operations.
Additionally, the Company has existing credit facilities
Additionally, the Company has existing credit facilities
totaling $2.1 billion available at December 31, 2017.
totaling $2.1 billion available at December 31, 2017.

The Company will continue to rely upon debt and capital
The Company will continue to rely upon debt and capital
markets for the majority of any necessary long-term
markets for the majority of any necessary long-term
funding not provided by operating cash flows. Funding
funding not provided by operating cash flows. Funding
decisions will be guided by our capital structure planning
decisions will be guided by our capital structure planning
objectives. The primary goals of the Company’s capital
objectives. The primary goals of the Company’s capital
structure planning are to maximize financial flexibility and
structure planning are to maximize financial flexibility and
preserve liquidity while reducing interest expense. The
preserve liquidity while reducing interest expense. The
majority of International Paper’s debt is accessed
majority of International Paper’s debt is accessed
through global public capital markets where we have a
through global public capital markets where we have a
wide base of investors. The Company was in compliance
wide base of investors. The Company was in compliance
with all its debt covenants at December 31, 2017 and was
with all its debt covenants at December 31, 2017 and was
well below the thresholds stipulated under the covenants
well below the thresholds stipulated under the covenants
as defined in the credit agreements.
as defined in the credit agreements.

Maintaining an investment grade credit rating is an
Maintaining an investment grade credit rating is an
important element of International Paper’s financing
important element of International Paper’s financing
strategy. At December 31, 2017, the Company held long-
strategy. At December 31, 2017, the Company held long-
term credit ratings of BBB (stable outlook) and Baa2
term credit ratings of BBB (stable outlook) and Baa2
(stable outlook) by S&P and Moody’s, respectively.
(stable outlook) by S&P and Moody’s, respectively.

30
30

Contractual obligations for future payments under
Contractual obligations for future payments under
existing debt and lease commitments and purchase
existing debt and lease commitments and purchase
obligations at December 31, 2017, were as follows:
obligations at December 31, 2017, were as follows:

In millions
In millions

2018
2018

2019
2019

2020
2020

2021
2021

2022
2022

Thereafter
Thereafter

Maturities of long-term
Maturities of long-term
debt (a)
debt (a)

Lease obligations
Lease obligations

Purchase obligations (b)
Purchase obligations (b)

$
$

311 $
311 $

126 $
126 $

164 $
164 $

440 $
440 $

956 $
956 $

9,160
9,160

130
130

3,415
3,415

102
102

680
680

77
77

583
583

53
53

523
523

37
37

463
463

141
141

2,197
2,197

Total (c)
Total (c)

$ 3,856 $
$ 3,856 $

908 $
908 $

824 $ 1,016 $ 1,456 $
824 $ 1,016 $ 1,456 $

11,498
11,498

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

Includes $1.6 billion relating to fiber supply agreements entered
Includes $1.6 billion relating to fiber supply agreements entered
into at the time of the 2006 Transformation Plan forestland sales
into at the time of the 2006 Transformation Plan forestland sales
and in conjunction with the 2008 acquisition of Weyerhaeuser
and in conjunction with the 2008 acquisition of Weyerhaeuser
Company’s Containerboard, Packaging and Recycling
Company’s Containerboard, Packaging and Recycling
business. Also includes $1.2 billion relating to fiber supply
business. Also includes $1.2 billion relating to fiber supply
agreements assumed in conjunction with the 2016 acquisition
agreements assumed in conjunction with the 2016 acquisition
of Weyerhaeuser's pulp business.
of Weyerhaeuser's pulp business.

(c) Not included in the above table due to the uncertainty of the
(c) Not included in the above table due to the uncertainty of the
amount and timing of the payment are unrecognized tax benefits
amount and timing of the payment are unrecognized tax benefits
of approximately $134 million.
of approximately $134 million.

We consider the undistributed earnings of our foreign
We consider the undistributed earnings of our foreign
subsidiaries as of December 31, 2017, to be permanently
subsidiaries as of December 31, 2017, to be permanently
reinvested and, accordingly, no U.S. income taxes have
reinvested and, accordingly, no U.S. income taxes have
been provided thereon. As a result of recent U.S. tax
been provided thereon. As a result of recent U.S. tax
legislation, the Company is evaluating this assertion (see
legislation, the Company is evaluating this assertion (see
Note 10 Income Taxes on pages 57 through 60 of Item
Note 10 Income Taxes on pages 57 through 60 of Item
8. Financial Statements and Supplementary Data). As of
8. Financial Statements and Supplementary Data). As of
December 31, 2017, the amount of cash associated with
December 31, 2017, the amount of cash associated with
earnings was
permanently
earnings was
permanently
approximately $590 million. We do not anticipate the
approximately $590 million. We do not anticipate the
need to repatriate funds to the United States to satisfy
need to repatriate funds to the United States to satisfy
domestic liquidity needs arising in the ordinary course of
domestic liquidity needs arising in the ordinary course of
business, including liquidity needs associated with our
business, including liquidity needs associated with our
domestic debt service requirements.
domestic debt service requirements.

reinvested
reinvested

foreign
foreign

Pension Obligations and Funding
Pension Obligations and Funding

At December 31, 2017, the projected benefit obligation
At December 31, 2017, the projected benefit obligation
for the Company’s U.S. defined benefit plans determined
for the Company’s U.S. defined benefit plans determined
under U.S. GAAP was approximately $1.9 billion higher
under U.S. GAAP was approximately $1.9 billion higher
than the fair value of plan assets. Approximately $1.5
than the fair value of plan assets. Approximately $1.5
billion of this amount relates to plans that are subject to
billion of this amount relates to plans that are subject to
minimum funding requirements. Under current IRS
minimum funding requirements. Under current IRS
funding rules, the calculation of minimum funding
funding rules, the calculation of minimum funding
requirements differs from the calculation of the present
requirements differs from the calculation of the present
value of plan benefits(the projected benefit obligation) for
value of plan benefits(the projected benefit obligation) for
accounting purposes. In December 2008, the Worker,
accounting purposes. In December 2008, the Worker,
Retiree and Employer Recovery Act of 2008 (WERA) was
Retiree and Employer Recovery Act of 2008 (WERA) was
passed by the U.S. Congress which provided for pension
passed by the U.S. Congress which provided for pension
technical corrections. Funding
funding relief and
technical corrections. Funding
funding relief and
contributions depend on the funding method selected by
contributions depend on the funding method selected by
the Company, and the timing of its implementation, as
the Company, and the timing of its implementation, as

well as on actual demographic data and the targeted
well as on actual demographic data and the targeted
funding level. The Company continually reassesses the
funding level. The Company continually reassesses the
amount and timing of any discretionary contributions and
amount and timing of any discretionary contributions and
elected to make contributions totaling $1,250 million and
elected to make contributions totaling $1,250 million and
$750 million for the years ended December 31, 2017 and
$750 million for the years ended December 31, 2017 and
2016, respectively. At this time, we do not expect to have
2016, respectively. At this time, we do not expect to have
any required contributions to our plans in 2018, although
any required contributions to our plans in 2018, although
the Company may elect to make future voluntary
the Company may elect to make future voluntary
contributions. The
future
contributions. The
future
contributions, which could be material, will depend on a
contributions, which could be material, will depend on a
number of factors, including the actual earnings and
number of factors, including the actual earnings and
changes in values of plan assets and changes in interest
changes in values of plan assets and changes in interest
rates.
rates.

timing and amount of
timing and amount of

During the fourth quarter of 2017, the Company entered
During the fourth quarter of 2017, the Company entered
into an agreement with The Prudential Insurance
into an agreement with The Prudential Insurance
Company of America to purchase a group annuity
Company of America to purchase a group annuity
contract and transfer approximately $1.3 billion of
contract and transfer approximately $1.3 billion of
International Paper's U.S. qualified pension plan
International Paper's U.S. qualified pension plan
projected benefit obligations. The transaction closed on
projected benefit obligations. The transaction closed on
October 3, 2017 and was funded with pension plan
October 3, 2017 and was funded with pension plan
assets. Under the transaction, at the end of 2017,
assets. Under the transaction, at the end of 2017,
Prudential assumed responsibility for pension benefits
Prudential assumed responsibility for pension benefits
and annuity administration for approximately 45,000
and annuity administration for approximately 45,000
retirees or their beneficiaries receiving less than $450 in
retirees or their beneficiaries receiving less than $450 in
monthly benefit payments from the plan. Settlement
monthly benefit payments from the plan. Settlement
accounting rules required a remeasurement of the
accounting rules required a remeasurement of the
qualified plan as of October 3, 2017 and the Company
qualified plan as of October 3, 2017 and the Company
recognized a non-cash pension settlement charge of
recognized a non-cash pension settlement charge of
$376 million before tax in the fourth quarter of 2017. In
$376 million before tax in the fourth quarter of 2017. In
addition, large payments from the non-qualified pension
addition, large payments from the non-qualified pension
plan also required a remeasurement as of October 2,
plan also required a remeasurement as of October 2,
2017 and a non-cash settlement charge of $7 million was
2017 and a non-cash settlement charge of $7 million was
also recognized in the fourth quarter of 2017.
also recognized in the fourth quarter of 2017.

During the first quarter of 2016, International Paper
During the first quarter of 2016, International Paper
announced a voluntary, limited-time opportunity for
announced a voluntary, limited-time opportunity for
former employees who are participants in the Retirement
former employees who are participants in the Retirement
Plan of International Paper Company (the Pension Plan)
Plan of International Paper Company (the Pension Plan)
to request early payment of their entire Pension Plan
to request early payment of their entire Pension Plan
benefit in the form of a single lump sum payment. The
benefit in the form of a single lump sum payment. The
amount of total payments under this program was
amount of total payments under this program was
approximately $1.2 billion, and were made from Plan trust
approximately $1.2 billion, and were made from Plan trust
assets on June 30, 2016. Based on the level of payments
assets on June 30, 2016. Based on the level of payments
made, settlement accounting rules applied and resulted
made, settlement accounting rules applied and resulted
in a plan remeasurement as of the June 30, 2016
in a plan remeasurement as of the June 30, 2016
payment date. As a result of settlement accounting, the
payment date. As a result of settlement accounting, the
Company
the
Company
the
unamortized net actuarial loss, after remeasurement,
unamortized net actuarial loss, after remeasurement,
resulting in a $439 million non-cash charge to the
resulting in a $439 million non-cash charge to the
Company's earnings in the second quarter of 2016.
Company's earnings in the second quarter of 2016.
Additional payments of $8 million and $9 million were
Additional payments of $8 million and $9 million were
made during the third and fourth quarters, respectively,
made during the third and fourth quarters, respectively,
due to mandatory cash payouts and a small lump sum
due to mandatory cash payouts and a small lump sum
payout, and the Pension Plan was subsequently
payout, and the Pension Plan was subsequently
remeasured at September 30, 2016 and December 31,
remeasured at September 30, 2016 and December 31,
2016. As a result of settlement accounting, the Company
2016. As a result of settlement accounting, the Company
recognized non-cash settlement charges of $3 million in
recognized non-cash settlement charges of $3 million in
both the third and fourth quarters of 2016.
both the third and fourth quarters of 2016.

recognized a pro-rata portion of
recognized a pro-rata portion of

Ilim Holding S.A. Shareholder’s Agreement
Ilim Holding S.A. Shareholder’s Agreement

regarding projected outcomes and range of loss based

that the fair values of the Company's reporting units were

In October 2007, in connection with the formation of the
In October 2007, in connection with the formation of the
Ilim Holding S.A. joint venture, International Paper
Ilim Holding S.A. joint venture, International Paper
entered into a shareholder’s agreement that includes
entered into a shareholder’s agreement that includes
provisions relating to the reconciliation of disputes among
provisions relating to the reconciliation of disputes among
the partners. This agreement provides that at any time,
the partners. This agreement provides that at any time,
either the Company or its partners may commence
either the Company or its partners may commence
procedures specified under the deadlock agreement. If
procedures specified under the deadlock agreement. If
these or any other deadlock procedures under the
these or any other deadlock procedures under the
shareholder's agreement are commenced, although it is
shareholder's agreement are commenced, although it is
not obligated to do so, the Company may in certain
not obligated to do so, the Company may in certain
situations choose to purchase its partners' 50% interest
situations choose to purchase its partners' 50% interest
in Ilim. Any such transaction would be subject to review
in Ilim. Any such transaction would be subject to review
and approval by Russian and other relevant anti-trust
and approval by Russian and other relevant anti-trust
authorities. Based on the provisions of the agreement,
authorities. Based on the provisions of the agreement,
the Company estimates that the current purchase price
the Company estimates that the current purchase price
for its partners' 50% interests would be approximately
for its partners' 50% interests would be approximately
$1.5 billion, which could be satisfied by payment of cash
$1.5 billion, which could be satisfied by payment of cash
International Paper common stock, or some
or
International Paper common stock, or some
or
combination of the two, at the Company's option. The
combination of the two, at the Company's option. The
purchase by the Company of its partners’ 50% interest
purchase by the Company of its partners’ 50% interest
in Ilim would result in the consolidation of Ilim's financial
in Ilim would result in the consolidation of Ilim's financial
position and results of operations in all subsequent
position and results of operations in all subsequent
periods. The parties have informed each other that they
periods. The parties have informed each other that they
have no current intention to commence procedures
have no current intention to commence procedures
specified under
the
specified under
the
shareholder’s agreement.
shareholder’s agreement.

the deadlock provisions of
the deadlock provisions of

CRITICAL ACCOUNTING POLICIES AND
CRITICAL ACCOUNTING POLICIES AND
SIGNIFICANT ACCOUNTING ESTIMATES
SIGNIFICANT ACCOUNTING ESTIMATES

on historical experience and recommendations of legal

less than the carrying values of the reporting units.

counsel. Liabilities for environmental matters require

evaluations of relevant environmental regulations and

estimates of future remediation alternatives and costs.

In addition, the Company considered whether there were

any events or circumstances subsequent to the annual

test that would reduce the fair value of its reporting units

We calculate our workers' compensation reserves based

below their carrying amounts and necessitate another

on estimated actuarially calculated development factors.

goodwill impairment test. In consideration of all relevant

The workers' compensation reserves are reviewed at

factors, there were no indicators that would require

least quarterly to determine the adequacy of the accruals

goodwill impairment subsequent to October 1, 2017.

and related financial statement disclosure. While we

believe that our assumptions are appropriate, the

No goodwill impairment charges were recorded in 2017

ultimate settlement of workers' compensation reserves

or 2016.

may differ significantly from amounts we have accrued

in our consolidated financial statements.

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

In the fourth quarter of 2015, in conjunction with the

annual

testing of

its reporting units

for goodwill

impairment, 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.

Pension and Postretirement Benefit Obligations

possible impairment of goodwill and intangible asset

The charges

recorded

for pension and other

balances is required annually. The amount and timing of

postretirement benefit obligations are determined

any impairment charges based on these assessments

annually

in conjunction with

International Paper’s

require the estimation of future cash flows and the fair

consulting actuary, and are dependent upon various

market value of

the

related assets based on

assumptions including the expected long-term rate of

management’s best estimates of certain key factors,

return on plan assets, discount rates, projected future

including future selling prices and volumes, operating,

compensation increases, health care cost trend rates and

raw material, energy and freight costs, and various other

mortality rates.

projected operating economic factors. As these key

factors change in future periods, the Company will update

its impairment analyses to reflect its latest estimates and

projections.

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

ASU 2011-08, "Intangibles - Goodwill and Other," allows

long-term rate of return on plan assets, the discount rate

entities testing goodwill for impairment the option of

used to calculate plan liabilities, the projected rate of

performing a qualitative ("Step 0") assessment before

future compensation increases and health care cost trend

calculating the fair value of a reporting unit for the goodwill

rates.

impairment test. If a Step 0 assessment is performed, an

entity is no longer required to calculate the fair value of

a reporting unit unless the entity determines that, based

on that Step 0 assessment, it is more likely than not that

its fair value is less than its carrying value.

The Company performed its annual testing of its reporting

units for possible goodwill impairments by applying the

qualitative Step 0 analysis to its reporting units as of

October 1, 2017. For the current year test, the Company

assessed

various

assumptions,

events

and

circumstances that would have affected the estimated

fair value of the reporting units. The results of this

assessment indicated that it is not more likely than not

Benefit obligations and fair values of plan assets as of

December 31, 2017, 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

Fair Value of

Plan Assets

12,895 $

11,368

369

270

247

—

176

—

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

Contingent Liabilities
Contingent Liabilities

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

31
31

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

International Paper
International Paper

requires
requires

well as on actual demographic data and the targeted

Ilim Holding S.A. Shareholder’s Agreement

funding level. The Company continually reassesses the

amount and timing of any discretionary contributions and

elected to make contributions totaling $1,250 million and

$750 million for the years ended December 31, 2017 and

2016, respectively. At this time, we do not expect to have

any required contributions to our plans in 2018, 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.

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 provides that at any time,

either the Company or its partners may commence

procedures specified under the deadlock agreement. If

these or any other deadlock procedures under the

shareholder's agreement are commenced, although it is

not obligated to do so, the Company may in certain

situations choose to purchase its partners' 50% interest

in Ilim. Any such transaction would be subject to review

During the fourth quarter of 2017, the Company entered

and approval by Russian and other relevant anti-trust

into an agreement with The Prudential Insurance

authorities. Based on the provisions of the agreement,

Company of America to purchase a group annuity

the Company estimates that the current purchase price

contract and transfer approximately $1.3 billion of

for its partners' 50% interests would be approximately

International Paper's U.S. qualified pension plan

$1.5 billion, which could be satisfied by payment of cash

projected benefit obligations. The transaction closed on

International Paper common stock, or some

October 3, 2017 and was funded with pension plan

combination of the two, at the Company's option. The

assets. Under the transaction, at the end of 2017,

purchase by the Company of its partners’ 50% interest

Prudential assumed responsibility for pension benefits

in Ilim would result in the consolidation of Ilim's financial

and annuity administration for approximately 45,000

position and results of operations in all subsequent

retirees or their beneficiaries receiving less than $450 in

periods. The parties have informed each other that they

monthly benefit payments from the plan. Settlement

have no current intention to commence procedures

accounting rules required a remeasurement of the

specified under

the deadlock provisions of

the

qualified plan as of October 3, 2017 and the Company

shareholder’s agreement.

recognized a non-cash pension settlement charge of

$376 million before tax in the fourth quarter of 2017. In

addition, large payments from the non-qualified pension

plan also required a remeasurement as of October 2,

2017 and a non-cash settlement charge of $7 million was

also recognized in the fourth quarter of 2017.

During the first quarter of 2016, International Paper

announced a voluntary, limited-time opportunity for

former employees who are participants in 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. The

amount of total payments under this program was

approximately $1.2 billion, and were made from Plan trust

assets on June 30, 2016. Based on the level of payments

made, settlement accounting rules applied and resulted

in a plan remeasurement as of the June 30, 2016

payment date. As a result of settlement accounting, the

Company

recognized a pro-rata portion of

the

unamortized net actuarial loss, after remeasurement,

resulting in a $439 million non-cash charge to the

Company's earnings in the second quarter of 2016.

Additional payments of $8 million and $9 million were

made during the third and fourth quarters, respectively,

due to mandatory cash payouts and a small lump sum

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

payout, and the Pension Plan was subsequently

Accruals for contingent liabilities, including legal, and

remeasured at September 30, 2016 and December 31,

environmental matters, are recorded when it is probable

2016. As a result of settlement accounting, the Company

that a liability has been incurred or an asset impaired and

recognized non-cash settlement charges of $3 million in

the amount of the loss can be reasonably estimated.

both the third and fourth quarters of 2016.

Liabilities accrued for legal matters require judgments

regarding projected outcomes and range of loss based
regarding projected outcomes and range of loss based
on historical experience and recommendations of legal
on historical experience and recommendations of legal
counsel. Liabilities for environmental matters require
counsel. Liabilities for environmental matters require
evaluations of relevant environmental regulations and
evaluations of relevant environmental regulations and
estimates of future remediation alternatives and costs.
estimates of future remediation alternatives and costs.

We calculate our workers' compensation reserves based
We calculate our workers' compensation reserves based
on estimated actuarially calculated development factors.
on estimated actuarially calculated development factors.
The workers' compensation reserves are reviewed at
The workers' compensation reserves are reviewed at
least quarterly to determine the adequacy of the accruals
least quarterly to determine the adequacy of the accruals
and related financial statement disclosure. While we
and related financial statement disclosure. While we
believe that our assumptions are appropriate, the
believe that our assumptions are appropriate, the
ultimate settlement of workers' compensation reserves
ultimate settlement of workers' compensation reserves
may differ significantly from amounts we have accrued
may differ significantly from amounts we have accrued
in our consolidated financial statements.
in our consolidated financial statements.

Impairment of Long-Lived Assets and Goodwill
Impairment of Long-Lived Assets and Goodwill

its
its

future operations. Additionally,
future operations. Additionally,

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

testing
testing

the
the

ASU 2011-08, "Intangibles - Goodwill and Other," allows
ASU 2011-08, "Intangibles - Goodwill and Other," allows
entities testing goodwill for impairment the option of
entities testing goodwill for impairment the option of
performing a qualitative ("Step 0") assessment before
performing a qualitative ("Step 0") assessment before
calculating the fair value of a reporting unit for the goodwill
calculating the fair value of a reporting unit for the goodwill
impairment test. If a Step 0 assessment is performed, an
impairment test. If a Step 0 assessment is performed, an
entity is no longer required to calculate the fair value of
entity is no longer required to calculate the fair value of
a reporting unit unless the entity determines that, based
a reporting unit unless the entity determines that, based
on that Step 0 assessment, it is more likely than not that
on that Step 0 assessment, it is more likely than not that
its fair value is less than its carrying value.
its fair value is less than its carrying value.

The Company performed its annual testing of its reporting
The Company performed its annual testing of its reporting
units for possible goodwill impairments by applying the
units for possible goodwill impairments by applying the
qualitative Step 0 analysis to its reporting units as of
qualitative Step 0 analysis to its reporting units as of
October 1, 2017. For the current year test, the Company
October 1, 2017. For the current year test, the Company
assessed
and
assessed
and
circumstances that would have affected the estimated
circumstances that would have affected the estimated
fair value of the reporting units. The results of this
fair value of the reporting units. The results of this
assessment indicated that it is not more likely than not
assessment indicated that it is not more likely than not

assumptions,
assumptions,

various
various

events
events

32
32

that the fair values of the Company's reporting units were
that the fair values of the Company's reporting units were
less than the carrying values of the reporting units.
less than the carrying values of the reporting units.

In addition, the Company considered whether there were
In addition, the Company considered whether there were
any events or circumstances subsequent to the annual
any events or circumstances subsequent to the annual
test that would reduce the fair value of its reporting units
test that would reduce the fair value of its reporting units
below their carrying amounts and necessitate another
below their carrying amounts and necessitate another
goodwill impairment test. In consideration of all relevant
goodwill impairment test. In consideration of all relevant
factors, there were no indicators that would require
factors, there were no indicators that would require
goodwill impairment subsequent to October 1, 2017.
goodwill impairment subsequent to October 1, 2017.

No goodwill impairment charges were recorded in 2017
No goodwill impairment charges were recorded in 2017
or 2016.
or 2016.

testing of
testing of

its reporting units
its reporting units

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

Pension and Postretirement Benefit Obligations
Pension and Postretirement Benefit Obligations

recorded
recorded

in conjunction with
in conjunction with

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

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

Benefit obligations and fair values of plan assets as of
Benefit obligations and fair values of plan assets as of
December 31, 2017, for International Paper’s pension
December 31, 2017, for International Paper’s pension
and postretirement plans were as follows:
and postretirement plans were as follows:

In millions
In millions

U.S. qualified pension
U.S. qualified pension
U.S. nonqualified pension
U.S. nonqualified pension
U.S. postretirement
U.S. postretirement
Non-U.S. pension
Non-U.S. pension
Non-U.S. postretirement
Non-U.S. postretirement

Benefit
Benefit
Obligation
Obligation

Fair Value of
Fair Value of
Plan Assets
Plan Assets

$
$

12,895 $
12,895 $

11,368
11,368

369
369
270
270
247
247
25
25

—
—
—
—
176
176
—
—

The
table below shows assumptions used by
table below shows assumptions used by
The
International Paper to calculate U.S. pension obligations
International Paper to calculate U.S. pension obligations
for the years shown:
for the years shown:

Discount rate
Discount rate

Rate of compensation increase
Rate of compensation increase

2017
2017

2016
2016

2015
2015

3.60%
3.60%

3.75%
3.75%

4.10%
4.10%

3.75%
3.75%

4.40%
4.40%

3.75%
3.75%

Inland assets were combined in October 2014. The
Inland assets were combined in October 2014. The
annualized time-weighted rate of return earned on U.S.
annualized time-weighted rate of return earned on U.S.
pension plan assets was 9.4% and 7.2% for the past five
pension plan assets was 9.4% and 7.2% for the past five
and ten years, respectively. The following graph shows
and ten years, respectively. The following graph shows
the growth of a $1,000 investment in International Paper’s
the growth of a $1,000 investment in International Paper’s
U.S. Pension Plan Master Trust. The graph portrays the
U.S. Pension Plan Master Trust. The graph portrays the
time-weighted rate of return from 2007 – 2017.
time-weighted rate of return from 2007 – 2017.

Assuming that discount rates, expected long-term

specific tax regulations and facts of each matter.

returns on plan assets and rates of future compensation

Changes to recorded liabilities are only made when an

increases remain the same as of December 31, 2017,

identifiable event occurs that changes the likely outcome,

projected future net periodic pension and postretirement

such as settlement with the relevant tax authority, the

plan expenses would be as follows:

2019

2018

the matter.

expiration of statutes of limitation for the subject tax year,

change in tax laws, or a recent court case that addresses

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

in
in

Discount rate
Discount rate

Health care cost trend rate assumed for
Health care cost trend rate assumed for
next year
next year

Rate that the cost trend rate gradually
Rate that the cost trend rate gradually
declines to
declines to

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

2017
2017

2016
2016

3.50%
3.50%

4.00%
4.00%

6.50%
6.50%

5.00%
5.00%

2022
2022

International Paper determines
these actuarial
these actuarial
International Paper determines
assumptions, after consultation with our actuaries, on
assumptions, after consultation with our actuaries, on
liability
to calculate
to calculate
December 31 of each year
December 31 of each year
liability
that date and pension and
information as of
that date and pension and
information as of
postretirement expense for the following year. The
postretirement expense for the following year. The
expected long-term rate of return on plan assets is based
expected long-term rate of return on plan assets is based
on projected rates of return for current and planned asset
on projected rates of return for current and planned asset
classes in the plan’s investment portfolio. The discount
classes in the plan’s investment portfolio. The discount
rate assumption was determined based on a hypothetical
rate assumption was determined based on a hypothetical
settlement portfolio selected from a universe of high
settlement portfolio selected from a universe of high
quality corporate bonds.
quality corporate bonds.

The expected long-term rate of return on U.S. pension
The expected long-term rate of return on U.S. pension
plan assets used to determine net periodic cost for the
plan assets used to determine net periodic cost for the
year ended December 31, 2017 was 7.50%.
year ended December 31, 2017 was 7.50%.

Increasing (decreasing) the expected long-term rate of
Increasing (decreasing) the expected long-term rate of
return on U.S. plan assets by an additional 0.25% would
return on U.S. plan assets by an additional 0.25% would
decrease
(increase) 2018 pension expense by
decrease
(increase) 2018 pension expense by
approximately $27 million, while a (decrease) increase
approximately $27 million, while a (decrease) increase
of 0.25% in the discount rate would (increase) decrease
of 0.25% in the discount rate would (increase) decrease
pension expense by approximately $35 million. The effect
pension expense by approximately $35 million. The effect
on net postretirement benefit cost from a 1% increase or
on net postretirement benefit cost from a 1% increase or
decrease in the annual health care cost trend rate would
decrease in the annual health care cost trend rate would
be approximately $1 million.
be approximately $1 million.

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

Year
Year

2017
2017
2016
2016
2015
2015
2014
2014
2013
2013

Return
Return

19.3%
19.3%
7.1%
7.1%
1.3%
1.3%
6.4%
6.4%
14.1%
14.1%

Year
Year
2012
2012
2011
2011
2010
2010
2009
2009
2008
2008

14.1 %
14.1 %
2.5 %
2.5 %
15.1 %
15.1 %
23.8 %
23.8 %
(23.6)%
(23.6)%

The 2012, 2013 and 2014 returns above represent
The 2012, 2013 and 2014 returns above represent
weighted averages of International Paper and Temple-
weighted averages of International Paper and Temple-
Inland asset returns. International Paper and Temple-
Inland asset returns. International Paper and Temple-

ASC 715, “Compensation – Retirement Benefits,”
ASC 715, “Compensation – Retirement Benefits,”
provides for delayed recognition of actuarial gains and
provides for delayed recognition of actuarial gains and
losses, including amounts arising from changes in the
losses, including amounts arising from changes in the
estimated projected plan benefit obligation due to
estimated projected plan benefit obligation due to
changes in the assumed discount rate, differences
changes in the assumed discount rate, differences
between the actual and expected return on plan assets,
between the actual and expected return on plan assets,
and other assumption changes. These net gains and
and other assumption changes. These net gains and
losses are recognized in pension expense prospectively
losses are recognized in pension expense prospectively
over a period that approximates the average remaining
over a period that approximates the average remaining
service period of active employees expected to receive
service period of active employees expected to receive
benefits under the plans to the extent that they are not
benefits under the plans to the extent that they are not
offset by gains and losses in subsequent years. The
offset by gains and losses in subsequent years. The
estimated net loss and prior service cost that will be
estimated net loss and prior service cost that will be
amortized
from accumulated other comprehensive
from accumulated other comprehensive
amortized
income into net periodic pension cost for the U.S. pension
income into net periodic pension cost for the U.S. pension
plans over the next fiscal year are $327 million and $17
plans over the next fiscal year are $327 million and $17
million, respectively.
million, respectively.

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

In millions
In millions

Pension expense
Pension expense

2017
2017

2016
2016

2015
2015

2014
2014

2013
2013

U.S. plans (non-cash) $ 717 $ 809
U.S. plans (non-cash) $ 717 $ 809
Non-U.S. plans
Non-U.S. plans

4
4

5
5

$461
$461

$387
$387

$545
$545

6
6

8
8

5
5

—
—

5
5

7
7

(1)
(1)

7
7

17
17

1
1

13
13

1
1

Postretirement
Postretirement
expense
expense

U.S. plans
U.S. plans

Return
Return

Non-U.S. plans
Non-U.S. plans

Net expense
Net expense

$ 740 $ 827
$ 740 $ 827

$480
$480

$401
$401

$556
$556

The decrease in 2017 U.S. pension expense reflects
The decrease in 2017 U.S. pension expense reflects
lower settlement losses and lower actuarial losses
lower settlement losses and lower actuarial losses
partially offset by lower asset returns due to the annuity
partially offset by lower asset returns due to the annuity
purchase as well as curtailment and special termination
purchase as well as curtailment and special termination
benefit charges.
benefit charges.

33
33

In millions

Pension expense

U.S. plans (non-cash)

Non-U.S. plans

Postretirement expense

U.S. plans

Non-U.S. plans

Net expense

30 $

167

50 $

188

The Company estimates that it will record net pension

expense of approximately $167 million for its U.S. defined

benefit plans in 2018, compared to expense of $717

million in 2017. The 2017 expense includes $45 million

of curtailment and special pension benefits associated

with the North American Consumer Packaging business

and $383 million of settlement accounting charges.

Excluding these settlement charges and curtailment and

special pension benefits, the estimated decrease in net

pension expense in 2018 is primarily due to lower interest

cost on the reduced pension obligation and a higher

expected return on assets associated with the increased

pension asset balance.

The market value of plan assets for International Paper’s

U.S. qualified pension plan at December 31, 2017 totaled

approximately $11.4 billion, consisting of approximately

49% equity securities, 36% debt securities, 10% real

estate and 5% other assets.

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 the funded status of the plan, tax deductibility,

the cash flows generated by the Company, and other

factors. The Company continually reassesses the

amount and timing of any discretionary contributions and

could elect to make voluntary contributions in the future.

There are no required contributions to the U.S. qualified

plan in 2018. The nonqualified defined benefit plans are

funded to the extent of benefit payments, which totaled

$40 million for the year ended December 31, 2017.

Income Taxes

International Paper records its global tax provision

International Paper records its global tax provision based

based on the respective tax rules and regulations

on the respective tax rules and regulations for the

for the jurisdictions in which it operates. Where the

jurisdictions in which it operates. Where the Company

Company believes that a tax position is supportable for

believes that a tax position is supportable for income tax

income tax purposes, the item is included in its income

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

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.

While International Paper believes that these judgments

and estimates are appropriate and reasonable under the

circumstances, actual resolution of these matters may

differ from recorded estimated amounts.

The Company’s effective income tax rates, before equity

earnings and discontinued operations, were (128)%,

24% and 37% for 2017, 2016 and 2015, respectively. The

income tax benefit in 2017 was primarily driven by the

recent U.S. tax legislation in December 2017 (see Note

10 Income Taxes on pages 57 through 60 of Item 8.

Financial Statements and Supplementary Data). 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. However, as a result of recent U.S. tax

legislation, which includes a reduction of the U.S. income

tax rate from 35% to 21%, we will have a lower worldwide

effective income tax rate going forward. Excluding these

special items, the effective income tax rate for 2017 was

30% of pre-tax earnings compared with 32% in 2016 and

33% in 2015. We estimate that the 2018 effective income

tax rate will be approximately 25-27% based on expected

earnings and business conditions.

Business Combinations

The Company’s acquisitions of businesses are

accounted for in accordance with ASC 805, "Business

Combinations", as amended. We allocate the total

consideration of the assets acquired and liabilities

assumed based on their estimated fair value as of the

business combination date. In developing estimates of

fair values for long-lived assets, including identifiable

intangible assets, the Company utilizes a variety of inputs

including forecasted cash flows, anticipated growth rates,

discount rates, estimated replacement costs and

depreciation and obsolescence factors. Determining the

fair value for specifically identified intangible assets such

The

table below shows assumptions used by

Inland assets were combined in October 2014. The

International Paper to calculate U.S. pension obligations

annualized time-weighted rate of return earned on U.S.

pension plan assets was 9.4% and 7.2% for the past five

and ten years, respectively. The following graph shows

the growth of a $1,000 investment in International Paper’s

U.S. Pension Plan Master Trust. The graph portrays the

time-weighted rate of return from 2007 – 2017.

for the years shown:

Discount rate

Rate of compensation increase

2017

2016

2015

3.60%

3.75%

4.10%

3.75%

4.40%

3.75%

Additionally, health care cost trend rates and other

assumptions used

the calculation of U.S.

postretirement obligations for the years shown were:

Discount rate

next year

declines to

Health care cost trend rate assumed for

Rate that the cost trend rate gradually

Year that the rate reaches the rate it is

assumed to remain

2017

2016

3.50%

4.00%

6.50%

5.00%

2022

International Paper determines

these actuarial

assumptions, after consultation with our actuaries, on

December 31 of each year

to calculate

liability

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, 2017 was 7.50%.

Increasing (decreasing) the expected long-term rate of

return on U.S. plan assets by an additional 0.25% would

decrease

(increase) 2018 pension expense by

approximately $27 million, while a (decrease) increase

of 0.25% in the discount rate would (increase) decrease

pension expense by approximately $35 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

2017

2016

2015

2014

2013

19.3%

7.1%

1.3%

6.4%

14.1%

Year

2012

2011

2010

2009

2008

14.1 %

2.5 %

15.1 %

23.8 %

(23.6)%

The 2012, 2013 and 2014 returns above represent

weighted averages of International Paper and Temple-

Inland asset returns. International Paper and Temple-

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 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 $327 million and $17

million, respectively.

Net periodic pension and postretirement plan expenses,

calculated for all of International Paper’s plans, were as

2017

2016

2015

2014

2013

U.S. plans (non-cash) $ 717 $ 809

$461

$387

$545

Non-U.S. plans

—

follows:

In millions

Pension expense

Postretirement

expense

U.S. plans

Net expense

$ 740 $ 827

$480

$401

$556

The decrease in 2017 U.S. pension expense reflects

lower settlement losses and lower actuarial losses

partially offset by lower asset returns due to the annuity

purchase as well as curtailment and special termination

benefit charges.

Assuming that discount rates, expected long-term
Assuming that discount rates, expected long-term
returns on plan assets and rates of future compensation
returns on plan assets and rates of future compensation
increases remain the same as of December 31, 2017,
increases remain the same as of December 31, 2017,
projected future net periodic pension and postretirement
projected future net periodic pension and postretirement
plan expenses would be as follows:
plan expenses would be as follows:

In millions
In millions

Pension expense
Pension expense

U.S. plans (non-cash)
U.S. plans (non-cash)

Non-U.S. plans
Non-U.S. plans

Postretirement expense
Postretirement expense

U.S. plans
U.S. plans

Non-U.S. plans
Non-U.S. plans

Net expense
Net expense

2019
2019

2018
2018

$
$

30 $
30 $

167
167

5
5

14
14

1
1

4
4

16
16

1
1

$
$

50 $
50 $

188
188

The Company estimates that it will record net pension
The Company estimates that it will record net pension
expense of approximately $167 million for its U.S. defined
expense of approximately $167 million for its U.S. defined
benefit plans in 2018, compared to expense of $717
benefit plans in 2018, compared to expense of $717
million in 2017. The 2017 expense includes $45 million
million in 2017. The 2017 expense includes $45 million
of curtailment and special pension benefits associated
of curtailment and special pension benefits associated
with the North American Consumer Packaging business
with the North American Consumer Packaging business
and $383 million of settlement accounting charges.
and $383 million of settlement accounting charges.
Excluding these settlement charges and curtailment and
Excluding these settlement charges and curtailment and
special pension benefits, the estimated decrease in net
special pension benefits, the estimated decrease in net
pension expense in 2018 is primarily due to lower interest
pension expense in 2018 is primarily due to lower interest
cost on the reduced pension obligation and a higher
cost on the reduced pension obligation and a higher
expected return on assets associated with the increased
expected return on assets associated with the increased
pension asset balance.
pension asset balance.

The market value of plan assets for International Paper’s
The market value of plan assets for International Paper’s
U.S. qualified pension plan at December 31, 2017 totaled
U.S. qualified pension plan at December 31, 2017 totaled
approximately $11.4 billion, consisting of approximately
approximately $11.4 billion, consisting of approximately
49% equity securities, 36% debt securities, 10% real
49% equity securities, 36% debt securities, 10% real
estate and 5% other assets.
estate and 5% other assets.

The Company’s funding policy for its qualified pension
The Company’s funding policy for its qualified pension
plans is to contribute amounts sufficient to meet legal
plans is to contribute amounts sufficient to meet legal
funding requirements, plus any additional amounts that
funding requirements, plus any additional amounts that
the Company may determine
to be appropriate
the Company may determine
to be appropriate
considering the funded status of the plan, tax deductibility,
considering the funded status of the plan, tax deductibility,
the cash flows generated by the Company, and other
the cash flows generated by the Company, and other
factors. The Company continually reassesses the
factors. The Company continually reassesses the
amount and timing of any discretionary contributions and
amount and timing of any discretionary contributions and
could elect to make voluntary contributions in the future.
could elect to make voluntary contributions in the future.
There are no required contributions to the U.S. qualified
There are no required contributions to the U.S. qualified
plan in 2018. The nonqualified defined benefit plans are
plan in 2018. The nonqualified defined benefit plans are
funded to the extent of benefit payments, which totaled
funded to the extent of benefit payments, which totaled
$40 million for the year ended December 31, 2017.
$40 million for the year ended December 31, 2017.

Return

Non-U.S. plans

(1)

Income Taxes
Income Taxes

International Paper records its global tax provision
International Paper records its global tax provision based
based on the respective tax rules and regulations
on the respective tax rules and regulations for the
for the jurisdictions in which it operates. Where the
jurisdictions in which it operates. Where the Company
Company believes that a tax position is supportable for
believes that a tax position is supportable for income tax
income tax purposes, the item is included in its income
purposes, the item is included in its income
tax returns. Where treatment of a position is uncertain,
tax returns. Where treatment of a position is uncertain,
liabilities are recorded based upon the Company’s
liabilities are recorded based upon the Company’s
evaluation of the “more likely than not” outcome
evaluation of the “more likely than not” outcome
considering technical merits of the position based on
considering technical merits of the position based on

34
34

specific tax regulations and facts of each matter.
specific tax regulations and facts of each matter.
Changes to recorded liabilities are only made when an
Changes to recorded liabilities are only made when an
identifiable event occurs that changes the likely outcome,
identifiable event occurs that changes the likely outcome,
such as settlement with the relevant tax authority, the
such as settlement with the relevant tax authority, the
expiration of statutes of limitation for the subject tax year,
expiration of statutes of limitation for the subject tax year,
change in tax laws, or a recent court case that addresses
change in tax laws, or a recent court case that addresses
the matter.
the matter.

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

taxable
taxable

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

The Company’s effective income tax rates, before equity
The Company’s effective income tax rates, before equity
earnings and discontinued operations, were (128)%,
earnings and discontinued operations, were (128)%,
24% and 37% for 2017, 2016 and 2015, respectively. The
24% and 37% for 2017, 2016 and 2015, respectively. The
income tax benefit in 2017 was primarily driven by the
income tax benefit in 2017 was primarily driven by the
recent U.S. tax legislation in December 2017 (see Note
recent U.S. tax legislation in December 2017 (see Note
10 Income Taxes on pages 57 through 60 of Item 8.
10 Income Taxes on pages 57 through 60 of Item 8.
Financial Statements and Supplementary Data). These
Financial Statements and Supplementary Data). These
effective tax rates include the tax effects of certain special
effective tax rates include the tax effects of certain special
items that can significantly affect the effective income tax
items that can significantly affect the effective income tax
rate in a given year, but may not recur in subsequent
rate in a given year, but may not recur in subsequent
years. Management believes that the effective tax rate
years. Management believes that the effective tax rate
computed after excluding these special items may
computed after excluding these special items may
provide a better estimate of the rate that might be
provide a better estimate of the rate that might be
expected in future years if no additional special items
expected in future years if no additional special items
were to occur. However, as a result of recent U.S. tax
were to occur. However, as a result of recent U.S. tax
legislation, which includes a reduction of the U.S. income
legislation, which includes a reduction of the U.S. income
tax rate from 35% to 21%, we will have a lower worldwide
tax rate from 35% to 21%, we will have a lower worldwide
effective income tax rate going forward. Excluding these
effective income tax rate going forward. Excluding these
special items, the effective income tax rate for 2017 was
special items, the effective income tax rate for 2017 was
30% of pre-tax earnings compared with 32% in 2016 and
30% of pre-tax earnings compared with 32% in 2016 and
33% in 2015. We estimate that the 2018 effective income
33% in 2015. We estimate that the 2018 effective income
tax rate will be approximately 25-27% based on expected
tax rate will be approximately 25-27% based on expected
earnings and business conditions.
earnings and business conditions.

Business Combinations
Business Combinations

The Company’s acquisitions of businesses are
The Company’s acquisitions of businesses are
accounted for in accordance with ASC 805, "Business
accounted for in accordance with ASC 805, "Business
Combinations", as amended. We allocate the total
Combinations", as amended. We allocate the total
consideration of the assets acquired and liabilities
consideration of the assets acquired and liabilities
assumed based on their estimated fair value as of the
assumed based on their estimated fair value as of the
business combination date. In developing estimates of
business combination date. In developing estimates of
fair values for long-lived assets, including identifiable
fair values for long-lived assets, including identifiable
intangible assets, the Company utilizes a variety of inputs
intangible assets, the Company utilizes a variety of inputs
including forecasted cash flows, anticipated growth rates,
including forecasted cash flows, anticipated growth rates,
discount rates, estimated replacement costs and
discount rates, estimated replacement costs and
depreciation and obsolescence factors. Determining the
depreciation and obsolescence factors. Determining the
fair value for specifically identified intangible assets such
fair value for specifically identified intangible assets such

as customer lists and developed technology involves
as customer lists and developed technology involves
judgment. We may refine our estimates and make
judgment. We may refine our estimates and make
adjustments to the assets acquired and liabilities
adjustments to the assets acquired and liabilities
assumed over a measurement period, not to exceed one
assumed over a measurement period, not to exceed one
year. Upon the conclusion of the measurement period or
year. Upon the conclusion of the measurement period or
the final determination of the values of assets acquired
the final determination of the values of assets acquired
and liabilities assumed, whichever comes first, any
and liabilities assumed, whichever comes first, any
subsequent adjustments are charged to the consolidated
subsequent adjustments are charged to the consolidated
statements of earnings. Subsequent actual results of the
statements of earnings. Subsequent actual results of the
underlying business activity supporting the specifically
underlying business activity supporting the specifically
identified intangible assets could change, requiring us to
identified intangible assets could change, requiring us to
record impairment charges or adjust their economic lives
record impairment charges or adjust their economic lives
in future periods.
in future periods.

RECENT ACCOUNTING DEVELOPMENTS
RECENT ACCOUNTING DEVELOPMENTS

See Note 2 Recent Accounting Developments on pages
See Note 2 Recent Accounting Developments on pages
48 through 49 of Item 8. Financial Statements and
48 through 49 of Item 8. Financial Statements and
Supplementary Data for a discussion of new accounting
Supplementary Data for a discussion of new accounting
pronouncements.
pronouncements.

LEGAL PROCEEDINGS
LEGAL PROCEEDINGS

legal proceedings
legal proceedings

Information concerning the Company’s environmental
Information concerning the Company’s environmental
in Note 11
and
in Note 11
and
Commitments and Contingencies on pages 60 through
Commitments and Contingencies on pages 60 through
63 of Item 8. Financial Statements and Supplementary
63 of Item 8. Financial Statements and Supplementary
Data.
Data.

is set
is set

forth
forth

EFFECT OF INFLATION
EFFECT OF INFLATION

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

FOREIGN CURRENCY EFFECTS
FOREIGN CURRENCY EFFECTS

indirect
indirect

impacts on
impacts on

local currency
local currency

the Company’s
the Company’s

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

The objective of our commodity exposure management

is to minimize volatility in earnings due to large

See the preceding discussion and Note 14 Derivatives

fluctuations in the price of commodities. Commodity swap

and Hedging Activities on pages 65 through 69 of Item 8.

or forward purchase contracts may be used to manage

Financial Statements and Supplementary Data.

ITEM 7A. QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

risks associated with market fluctuations in energy prices.

The net fair value of such outstanding energy hedge

contract at December 31, 2017 and 2016 was

approximately a $8 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, 2017 and 2016, respectively.

Foreign Currency Risk

International Paper

transacts business

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 entering into cross-currency and interest rate swaps,

or foreign exchange contracts. At December 31, 2017

and 2016, the net fair value of financial instruments with

exposure to foreign currency risk was approximately a

$10 million asset and a $1 million liability, 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 $29 million and $23 million at

December 31, 2017 and 2016, respectively.

MARKET RISK
MARKET RISK

Commodity Price Risk

We use financial instruments, including fixed and variable
We use financial instruments, including fixed and variable
rate debt, to finance operations, for capital spending
rate debt, to finance operations, for capital spending
programs and
for general corporate purposes.
programs and
for general corporate purposes.
Additionally, financial instruments, including various
Additionally, financial instruments, including various
derivative contracts, are used to hedge exposures to
derivative contracts, are used to hedge exposures to
interest rate, commodity and foreign currency risks. We
interest rate, commodity and foreign currency risks. We
do not use financial instruments for trading purposes.
do not use financial instruments for trading purposes.
Information
International Paper’s debt
Information
International Paper’s debt
obligations is included in Note 13 Debt and Lines of Credit
obligations is included in Note 13 Debt and Lines of Credit
on pages 64 and 65 of Item 8. Financial Statements and
on pages 64 and 65 of Item 8. Financial Statements and
Supplementary Data. A discussion of derivatives and
Supplementary Data. A discussion of derivatives and
hedging activities is included in Note 14 Derivatives and
hedging activities is included in Note 14 Derivatives and
Hedging Activities on pages 65 through 69 of Item 8.
Hedging Activities on pages 65 through 69 of Item 8.
Financial Statements and Supplementary Data.
Financial Statements and Supplementary Data.

related
related

to
to

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

Interest Rate Risk
Interest Rate Risk

Our exposure to market risk for changes in interest rates
Our exposure to market risk for changes in interest rates
relates primarily to short- and long-term debt obligations
relates primarily to short- and long-term debt obligations
and investments in marketable securities. We invest in
and investments in marketable securities. We invest in
investment-grade securities of financial institutions and
investment-grade securities of financial institutions and
money market mutual funds with a minimum rating of AAA
money market mutual funds with a minimum rating of AAA
and limit exposure to any one issuer or fund. Our
and limit exposure to any one issuer or fund. Our
investments in marketable securities at December 31,
investments in marketable securities at December 31,
2017 and 2016 are stated at cost, which approximates
2017 and 2016 are stated at cost, which approximates
market due to their short-term nature. Our interest rate
market due to their short-term nature. Our interest rate
risk exposure related to these investments was not
risk exposure related to these investments was not
material.
material.

We issue fixed and floating rate debt in a proportion that
We issue fixed and floating rate debt in a proportion that
management deems appropriate based on current and
management deems appropriate based on current and
projected market conditions. Derivative instruments,
projected market conditions. Derivative instruments,
such as, interest rate swaps, may be used to execute this
such as, interest rate swaps, may be used to execute this
strategy. At December 31, 2017 and 2016, the fair value
strategy. At December 31, 2017 and 2016, the fair value
of the net liability of financial instruments with exposure
of the net liability of financial instruments with exposure
to interest rate risk was approximately $11.1 billion and
to interest rate risk was approximately $11.1 billion and
$11.3 billion, respectively. The potential loss in fair value
$11.3 billion, respectively. The potential loss in fair value
resulting from a 10% adverse shift in quoted interest rates
resulting from a 10% adverse shift in quoted interest rates
would have been approximately $679 million and $623
would have been approximately $679 million and $623
million at December 31, 2017 and 2016, respectively.
million at December 31, 2017 and 2016, respectively.

35
35

ITEM 7A. QUANTITATIVE AND QUALITATIVE
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
DISCLOSURES ABOUT MARKET RISK

See the preceding discussion and Note 14 Derivatives
See the preceding discussion and Note 14 Derivatives
and Hedging Activities on pages 65 through 69 of Item 8.
and Hedging Activities on pages 65 through 69 of Item 8.
Financial Statements and Supplementary Data.
Financial Statements and Supplementary Data.

MARKET RISK

Commodity Price Risk
Commodity Price Risk

The objective of our commodity exposure management
The objective of our commodity exposure management
is to minimize volatility in earnings due to large
is to minimize volatility in earnings due to large
fluctuations in the price of commodities. Commodity swap
fluctuations in the price of commodities. Commodity swap
or forward purchase contracts may be used to manage
or forward purchase contracts may be used to manage
risks associated with market fluctuations in energy prices.
risks associated with market fluctuations in energy prices.
The net fair value of such outstanding energy hedge
The net fair value of such outstanding energy hedge
contract at December 31, 2017 and 2016 was
contract at December 31, 2017 and 2016 was
approximately a $8 million and a $2 million liability,
approximately a $8 million and a $2 million liability,
respectively. The potential loss in fair value resulting from
respectively. The potential loss in fair value resulting from
a 10% adverse change in the underlying commodity
a 10% adverse change in the underlying commodity
prices would have been approximately $1 million at
prices would have been approximately $1 million at
December 31, 2017 and 2016, respectively.
December 31, 2017 and 2016, respectively.

Foreign Currency Risk
Foreign Currency Risk

transacts business
transacts business

International Paper
in many
in many
International Paper
currencies and is also subject to currency exchange rate
currencies and is also subject to currency exchange rate
risk through investments and businesses owned and
risk through investments and businesses owned and
operated in foreign countries. Our objective in managing
operated in foreign countries. Our objective in managing
the associated foreign currency risks is to minimize the
the associated foreign currency risks is to minimize the
effect of adverse exchange rate fluctuations on our after-
effect of adverse exchange rate fluctuations on our after-
tax cash flows. We address these risks on a limited basis
tax cash flows. We address these risks on a limited basis
by entering into cross-currency and interest rate swaps,
by entering into cross-currency and interest rate swaps,
or foreign exchange contracts. At December 31, 2017
or foreign exchange contracts. At December 31, 2017
and 2016, the net fair value of financial instruments with
and 2016, the net fair value of financial instruments with
exposure to foreign currency risk was approximately a
exposure to foreign currency risk was approximately a
$10 million asset and a $1 million liability, respectively.
$10 million asset and a $1 million liability, respectively.
The potential loss in fair value for such financial
The potential loss in fair value for such financial
instruments from a 10% adverse change in quoted
instruments from a 10% adverse change in quoted
foreign currency exchange rates would have been
foreign currency exchange rates would have been
approximately $29 million and $23 million at
approximately $29 million and $23 million at
December 31, 2017 and 2016, respectively.
December 31, 2017 and 2016, respectively.

as customer lists and developed technology involves

judgment. We may refine our estimates and make

adjustments to the assets acquired and liabilities

assumed over a measurement period, not to exceed one

year. Upon the conclusion of the measurement period or

the final determination of the values of assets acquired

and liabilities assumed, whichever comes first, any

subsequent adjustments are charged to the consolidated

statements of earnings. Subsequent actual results of the

underlying business activity supporting the specifically

identified intangible assets could change, requiring us to

record impairment charges or adjust their economic lives

in future periods.

RECENT ACCOUNTING DEVELOPMENTS

See Note 2 Recent Accounting Developments on pages

48 through 49 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 60 through

63 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

international operations’

local currency

financial

statements into U.S. dollars and the remeasurement

impact associated with non-functional currency financial

assets and liabilities. Indirect impacts include the change

in competitiveness of imports into, and exports out of, the

United States (and the impact on local currency pricing

of products that are traded internationally). In general, a

weaker U.S. dollar and stronger local currency is

beneficial to International Paper. The currencies that

have the most impact are the Euro, the Brazilian real, the

Polish zloty and the Russian ruble.

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

International Paper’s debt

obligations is included in Note 13 Debt and Lines of Credit

on pages 64 and 65 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 65 through 69 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,

2017 and 2016 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 that

management deems appropriate based on current and

projected market conditions. Derivative instruments,

such as, interest rate swaps, may be used to execute this

strategy. At December 31, 2017 and 2016, the fair value

of the net liability of financial instruments with exposure

to interest rate risk was approximately $11.1 billion and

$11.3 billion, respectively. The potential loss in fair value

resulting from a 10% adverse shift in quoted interest rates

would have been approximately $679 million and $623

million at December 31, 2017 and 2016, respectively.

36
36

ITEM 8. FINANCIAL STATEMENTS AND
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
SUPPLEMENTARY DATA

REPORT OF MANAGEMENT ON:
REPORT OF MANAGEMENT ON:

Financial Statements
Financial Statements

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

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

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

Internal Control Over Financial Reporting
Internal Control Over Financial Reporting

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

financial statements
financial statements

the Sarbanes-Oxley Act of 2002. The Committee has

reviewed and discussed the consolidated financial

statements for the year ended December 31, 2017,

including critical accounting policies and significant

management judgments, with management and the

independent auditors. The Committee’s

report

recommending

the

inclusion of such

financial

statements in this Annual Report on Form 10-K will be

set forth in our Proxy Statement.

MARK S. SUTTON

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

GLENN R. LANDAU

OFFICER

SENIOR VICE PRESIDENT AND CHIEF FINANCIAL

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

financial
financial

The Company has assessed the effectiveness of its
The Company has assessed the effectiveness of its
internal control over
reporting as of
reporting as of
internal control over
December 31, 2017. In making this assessment, it used
December 31, 2017. In making this assessment, it used
the criteria described in “Internal Control – Integrated
the criteria described in “Internal Control – Integrated
Framework (2013)” issued by the Committee of
Framework (2013)” issued by the Committee of
Sponsoring Organizations of the Treadway Commission
Sponsoring Organizations of the Treadway Commission
(COSO). Based on this assessment, management
(COSO). Based on this assessment, management
believes that, as of December 31, 2017, the Company’s
believes that, as of December 31, 2017, the Company’s
internal control over financial reporting was effective.
internal control over financial reporting was effective.

The Company’s
registered public
registered public
independent
independent
The Company’s
accounting firm, Deloitte & Touche LLP, has issued its
accounting firm, Deloitte & Touche LLP, has issued its
report on the effectiveness of the Company’s internal
report on the effectiveness of the Company’s internal
control over financial reporting. The report appears on
control over financial reporting. The report appears on
pages 39 and 40.
pages 39 and 40.

Internal Control Environment And Board Of
Internal Control Environment And Board Of
Directors Oversight
Directors Oversight

in
in

legal standards
legal standards

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

the performance of
the performance of

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

37
37

the
the

inclusion of such
inclusion of such

the Sarbanes-Oxley Act of 2002. The Committee has
the Sarbanes-Oxley Act of 2002. The Committee has
reviewed and discussed the consolidated financial
reviewed and discussed the consolidated financial
statements for the year ended December 31, 2017,
statements for the year ended December 31, 2017,
including critical accounting policies and significant
including critical accounting policies and significant
management judgments, with management and the
management judgments, with management and the
independent auditors. The Committee’s
report
independent auditors. The Committee’s
report
financial
financial
recommending
recommending
statements in this Annual Report on Form 10-K will be
statements in this Annual Report on Form 10-K will be
set forth in our Proxy Statement.
set forth in our Proxy Statement.

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

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.

The Company has assessed the effectiveness of its

internal control over

financial

reporting as of

December 31, 2017. In making this assessment, it used

the criteria described in “Internal Control – Integrated

Framework (2013)” issued by the Committee of

Sponsoring Organizations of the Treadway Commission

(COSO). Based on this assessment, management

believes that, as of December 31, 2017, the Company’s

internal control over financial reporting was effective.

position, results of operations and cash flows on a

The Company’s

independent

registered public

consistent basis. Management has also prepared the

accounting firm, Deloitte & Touche LLP, has issued its

other information in this annual report and is responsible

report on the effectiveness of the Company’s internal

for its accuracy and consistency with the consolidated

control over financial reporting. The report appears on

financial statements.

pages 39 and 40.

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

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

financial statements

for external

purposes. All internal control systems have inherent

limitations, including the possibility of circumvention and

overriding of controls, and therefore can provide only

reasonable assurance of achieving the designed control

objectives. The Company’s internal control system is

Internal Control Environment And Board Of

Directors Oversight

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

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 Board of Directors, assisted by the Audit and

Finance Committee (Committee), monitors the integrity

of the Company’s financial statements and financial

reporting procedures,

the performance of

the

Company’s internal audit function and independent

auditors, and other matters set forth in its charter. The

Committee, which consists of independent directors,

meets regularly with representatives of management,

and with the independent auditors and the Internal

Auditor, with and without management representatives

in attendance, to review their activities. The 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

MARK S. SUTTON
MARK S. SUTTON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

GLENN R. LANDAU
GLENN R. LANDAU
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
OFFICER

38
38

REPORT OF INDEPENDENT REGISTERED
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PUBLIC ACCOUNTING FIRM

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

Opinion on the Financial Statements
Opinion on the Financial Statements

We have audited the accompanying consolidated
We have audited the accompanying consolidated
balance sheets of International Paper Company and
balance sheets of International Paper Company and
subsidiaries (the "Company") as of December 31, 2017
subsidiaries (the "Company") as of December 31, 2017
and 2016, the related consolidated statements of
and 2016, the related consolidated statements of
operations, comprehensive income, changes in equity,
operations, comprehensive income, changes in equity,
and cash flows for each of the three years in the period
and cash flows for each of the three years in the period
ended December 31, 2017, and the related notes and
ended December 31, 2017, and the related notes and
the schedule listed in the Index at Item 15 (collectively
the schedule listed in the Index at Item 15 (collectively
referred to as the "financial statements"). In our opinion,
referred to as the "financial statements"). In our opinion,
the financial statements present fairly, in all material
the financial statements present fairly, in all material
respects, the financial position of the Company as of
respects, the financial position of the Company as of
December 31, 2017 and 2016, and the results of its
December 31, 2017 and 2016, and the results of its
operations and its cash flows for each of the three years
operations and its cash flows for each of the three years
in the period ended December 31, 2017, in conformity
in the period ended December 31, 2017, in conformity
with accounting principles generally accepted in the
with accounting principles generally accepted in the
United States of America.
United States of America.

We have also audited, in accordance with the standards
We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board
of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal
(United States) (PCAOB), the Company's internal
control over financial reporting as of December 31,
control over financial reporting as of December 31,
2017, based on criteria established in Internal Control -
2017, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee
Integrated Framework (2013) issued by the Committee
the Treadway
of Sponsoring Organizations of
the Treadway
of Sponsoring Organizations of
Commission and our report dated February 22, 2018,
Commission and our report dated February 22, 2018,
expressed an unqualified opinion on the Company's
expressed an unqualified opinion on the Company's
internal control over financial reporting.
internal control over financial reporting.

Basis for Opinion
Basis for Opinion

the Company's
the Company's

These financial statements are the responsibility of the
These financial statements are the responsibility of the
Company's management. Our responsibility is to
Company's management. Our responsibility is to
financial
express an opinion on
financial
express an opinion on
statements based on our audits. We are a public
statements based on our audits. We are a public
accounting firm registered with the PCAOB and are
accounting firm registered with the PCAOB and are
required to be independent with respect to the Company
required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and
in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities
the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that
standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
assurance about whether the financial statements are
free of material misstatement, whether due to error or
free of material misstatement, whether due to error or
fraud. Our audits included performing procedures to
fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial
assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and
statements, whether due to error or fraud, and
performing procedures that respond to those risks.
performing procedures that respond to those risks.
Such procedures included examining, on a test basis,
Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the
evidence regarding the amounts and disclosures in the

financial statements. Our audits also
included
included
financial statements. Our audits also
evaluating
the accounting principles used and
the accounting principles used and
evaluating
significant estimates made by management, as well as
significant estimates made by management, as well as
evaluating the overall presentation of the financial
evaluating the overall presentation of the financial
statements. We believe that our audits provide a
statements. We believe that our audits provide a
reasonable basis for our opinion.
reasonable basis for our opinion.

to express an opinion on the Company's internal control

Because of the inherent limitations of internal control

over financial reporting based on our audit. We are a

over financial reporting, including the possibility of

public accounting firm registered with the PCAOB and

collusion or improper management override of controls,

are required to be independent with respect to the

material misstatements due to error or fraud may not be

Company in accordance with the U.S. federal securities

prevented or detected on a

timely basis. Also,

laws and the applicable rules and regulations of the

projections of any evaluation of the effectiveness of the

Securities and Exchange Commission and the PCAOB.

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.

/s/ Deloitte & Touche LLP

Memphis, Tennessee

February 22, 2018

We conducted our audit in accordance with the

standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we

plan and perform the audit to obtain reasonable

assurance about whether effective internal control over

financial reporting was maintained in all material

respects. Our audit included obtaining an understanding

of internal control over 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.

Definition and Limitations of Internal Control over

Financial Reporting

A company's internal control over financial reporting is

a process designed 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 as necessary to permit

preparation of financial statements in accordance with

generally accepted accounting principles, and that

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.

/s/ Deloitte & Touche LLP
/s/ Deloitte & Touche LLP

Memphis, Tennessee
Memphis, Tennessee
February 22, 2018
February 22, 2018

We have served as the Company's auditor since
We have served as the Company's auditor since
2002.
2002.

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

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

Opinion on
Opinion on
Reporting
Reporting

Internal Control over Financial
Internal Control over Financial

We have audited the internal control over financial
We have audited the internal control over financial
reporting of
International Paper Company and
reporting of
International Paper Company and
subsidiaries (the "Company") as of December 31, 2017,
subsidiaries (the "Company") as of December 31, 2017,
based on criteria established in Internal Control -
based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee
Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of
the Treadway
of Sponsoring Organizations of
the Treadway
Commission. In our opinion, the Company maintained,
Commission. In our opinion, the Company maintained,
in all material respects, effective internal control over
in all material respects, effective internal control over
financial reporting as of December 31, 2017, based on
financial reporting as of December 31, 2017, based on
the criteria established in Internal Control - Integrated
the criteria established in Internal Control - Integrated
the Committee of
Framework (2013)
the Committee of
issued by
Framework (2013)
issued by
the Treadway
Sponsoring Organizations
the Treadway
Sponsoring Organizations
Commission.
Commission.

of
of

We have also audited, in accordance with the standards
We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board
of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements
(United States), the consolidated financial statements
and financial statement schedule as of and for the year
and financial statement schedule as of and for the year
ended December 31, 2017 of the Company and our
ended December 31, 2017 of the Company and our
report dated February 22, 2018 expressed an
report dated February 22, 2018 expressed an
unqualified opinion on those financial statements and
unqualified opinion on those financial statements and
financial statement schedule.
financial statement schedule.

Basis for Opinion
Basis for Opinion

is responsible
is responsible

The Company's management
for
for
The Company's management
maintaining effective internal control over financial
maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of
reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the
internal control over financial reporting, included in the
accompanying Report of Management on Internal
accompanying Report of Management on Internal
Control over Financial Reporting. Our responsibility is
Control over Financial Reporting. Our responsibility is

39
39

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

financial statements. Our audits also

included

evaluating

the accounting principles used and

significant estimates made by management, as well as

To the Board of Directors and Shareholders of

evaluating the overall presentation of the financial

International Paper Company:

statements. We believe that our audits provide a

Opinion on the Financial Statements

reasonable basis for our opinion.

We have audited the accompanying consolidated

balance sheets of International Paper Company and

/s/ Deloitte & Touche LLP

subsidiaries (the "Company") as of December 31, 2017

and 2016, 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, 2017, and the related notes and

the schedule listed in the Index at Item 15 (collectively

referred to as the "financial statements"). In our opinion,

the financial statements present fairly, in all material

respects, the financial position of the Company as of

December 31, 2017 and 2016, and the results of its

operations and its cash flows for each of the three years

in the period ended December 31, 2017, in conformity

with accounting principles generally accepted in the

United States of America.

We have also audited, in accordance with the standards

of the Public Company Accounting Oversight Board

(United States) (PCAOB), the Company's internal

control over financial reporting as of December 31,

2017, based on criteria established in Internal Control -

Integrated Framework (2013) issued by the Committee

of Sponsoring Organizations of

the Treadway

Commission and our report dated February 22, 2018,

expressed an unqualified opinion on the Company's

internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the

Company's management. Our responsibility is to

express an opinion on

the Company's

financial

statements based on our audits. We are a public

accounting firm registered with the PCAOB and are

required to be independent with respect to the Company

in accordance with the U.S. federal securities laws and

the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB. Those standards require that

we plan and perform the audit to obtain reasonable

assurance about whether the financial statements are

free of material misstatement, whether due to error or

fraud. Our audits included performing procedures to

assess the risks of material misstatement of the financial

statements, whether due to error or fraud, and

performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the

Memphis, Tennessee

February 22, 2018

We have served as the Company's auditor since

2002.

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM, ON INTERNAL CONTROL

OVER FINANCIAL REPORTING

To the Board of Directors and Shareholders of

International Paper Company:

Opinion on

Internal Control over Financial

Reporting

We have audited the internal control over financial

reporting of

International Paper Company and

subsidiaries (the "Company") as of December 31, 2017,

based on criteria established in Internal Control -

Integrated Framework (2013) issued by the Committee

of Sponsoring Organizations of

the Treadway

Commission. In our opinion, the Company maintained,

in all material respects, effective internal control over

financial reporting as of December 31, 2017, 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, 2017 of the Company and our

report dated February 22, 2018 expressed an

unqualified opinion on those financial statements and

financial statement schedule.

Basis for Opinion

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
to express an opinion on the Company's internal control
over financial reporting based on our audit. We are a
over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and
public accounting firm registered with the PCAOB and
are required to be independent with respect to the
are required to be independent with respect to the
Company in accordance with the U.S. federal securities
Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the
laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
Securities and Exchange Commission and the PCAOB.

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

Definition and Limitations of Internal Control over
Definition and Limitations of Internal Control over
Financial Reporting
Financial Reporting

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

/s/ Deloitte & Touche LLP
/s/ Deloitte & Touche LLP

Memphis, Tennessee
Memphis, Tennessee
February 22, 2018
February 22, 2018

reporting
reporting

financial statements
financial statements

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

40
40

CONSOLIDATED STATEMENT OF OPERATIONS
CONSOLIDATED STATEMENT OF OPERATIONS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

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 $280, $343 and $186)

Pension and postretirement liability adjustments:

U.S. plans (less tax of $69, $283 and $206)

Non-U.S. plans (less tax of $1, $4 and $0)

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 $4, $3 and $3)

Reclassification adjustment for (gains) losses included in net earnings (less tax of $2, $3 and $8)

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

2017

2016

2015

2,144 $

902 $

917

486

177

730

2,874

(7)

—

(1)

545

296

(451)

260

(329)

(2)

(1,042)

344

1,246

(1,068)

(151)

(6)

(7)

(3)

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY

2,873 $

1,250 $

(124)

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

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

NET SALES
NET SALES

COSTS AND EXPENSES
COSTS AND EXPENSES

Cost of products sold
Cost of products sold

Selling and administrative expenses
Selling and administrative expenses

Depreciation, amortization and cost of timber harvested
Depreciation, amortization and cost of timber harvested

Distribution expenses
Distribution expenses

Taxes other than payroll and income taxes
Taxes other than payroll and income taxes

Restructuring and other charges
Restructuring and other charges

Impairment of goodwill and other intangibles
Impairment of goodwill and other intangibles

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

Litigation settlement
Litigation settlement

Net bargain purchase gain on acquisition of business
Net bargain purchase gain on acquisition of business

Interest expense, net
Interest expense, net

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

Income tax provision (benefit)
Income tax provision (benefit)

Equity earnings (loss), net of taxes
Equity earnings (loss), net of taxes

EARNINGS (LOSS) FROM CONTINUING OPERATIONS
EARNINGS (LOSS) FROM CONTINUING OPERATIONS

Discontinued operations, net of taxes
Discontinued operations, net of taxes

NET EARNINGS (LOSS)
NET EARNINGS (LOSS)

Less: Net earnings (loss) attributable to noncontrolling interests
Less: Net earnings (loss) attributable to noncontrolling interests

NET EARNINGS (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER
NET EARNINGS (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER
COMPANY
COMPANY

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

Earnings (loss) from continuing operations
Earnings (loss) from continuing operations

Discontinued operations, net of taxes
Discontinued operations, net of taxes

Net earnings (loss)
Net earnings (loss)

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

Earnings (loss) from continuing operations
Earnings (loss) from continuing operations

Discontinued operations, net of taxes
Discontinued operations, net of taxes

Net earnings (loss)
Net earnings (loss)

AMOUNTS ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS
AMOUNTS ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS

Earnings (loss) from continuing operations
Earnings (loss) from continuing operations

Discontinued operations, net of taxes
Discontinued operations, net of taxes

Net earnings (loss)
Net earnings (loss)

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

2017
2017

2016
2016

2015
2015

$ 21,743 $ 19,495 $ 20,675
$ 21,743 $ 19,495 $ 20,675

15,300
15,300

14,057
14,057

14,313
14,313

1,653
1,653

1,343
1,343

1,434
1,434

169
169

67
67

—
—

9
9

354
354

(6)
(6)

572
572

848
848

(1,085)
(1,085)

177
177

2,110
2,110

34
34

2,144
2,144

—
—

1,484
1,484

1,124
1,124

1,237
1,237

154
154

54
54

—
—

70
70

—
—

520
520

795
795

193
193

198
198

800
800

102
102

902
902

1,539
1,539

1,167
1,167

1,248
1,248

158
158

252
252

137
137

174
174

—
—

555
555

1,132
1,132

417
417

117
117

832
832

85
85

917
917

(2)
(2)

(21)
(21)

$
$

2,144 $
2,144 $

904 $
904 $

938
938

$
$

5.11 $
5.11 $

1.95 $
1.95 $

0.08
0.08

0.25
0.25

5.19 $
5.19 $

2.20 $
2.20 $

5.05 $
5.05 $

1.93 $
1.93 $

0.08
0.08

0.25
0.25

5.13 $
5.13 $

2.18 $
2.18 $

2,110 $
2,110 $

802 $
802 $

34
34

102
102

2,144 $
2,144 $

904 $
904 $

2.05
2.05

0.20
0.20

2.25
2.25

2.03
2.03

0.20
0.20

2.23
2.23

853
853

85
85

938
938

41
41

CONSOLIDATED STATEMENT OF OPERATIONS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

In millions for the years ended December 31
In millions for the years ended December 31

NET EARNINGS (LOSS)
NET EARNINGS (LOSS)

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

Amortization of pension and postretirement prior service costs and net loss:
Amortization of pension and postretirement prior service costs and net loss:

U.S. plans (less tax of $280, $343 and $186)
U.S. plans (less tax of $280, $343 and $186)

Pension and postretirement liability adjustments:
Pension and postretirement liability adjustments:

U.S. plans (less tax of $69, $283 and $206)
U.S. plans (less tax of $69, $283 and $206)

Non-U.S. plans (less tax of $1, $4 and $0)
Non-U.S. plans (less tax of $1, $4 and $0)

Change in cumulative foreign currency translation adjustment
Change in cumulative foreign currency translation adjustment

Net gains/losses on cash flow hedging derivatives:
Net gains/losses on cash flow hedging derivatives:

Net gains (losses) arising during the period (less tax of $4, $3 and $3)
Net gains (losses) arising during the period (less tax of $4, $3 and $3)

Reclassification adjustment for (gains) losses included in net earnings (less tax of $2, $3 and $8)
Reclassification adjustment for (gains) losses included in net earnings (less tax of $2, $3 and $8)

TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

Comprehensive Income (Loss)
Comprehensive Income (Loss)

Net (Earnings) Loss Attributable to Noncontrolling Interests
Net (Earnings) Loss Attributable to Noncontrolling Interests

Other Comprehensive (Income) Loss Attributable to Noncontrolling Interests
Other Comprehensive (Income) Loss Attributable to Noncontrolling Interests

2017
2017

2016
2016

2015
2015

$
$

2,144 $
2,144 $

902 $
902 $

917
917

486
486

56
56

3
3

177
177

15
15

(7)
(7)

730
730

2,874
2,874

—
—

(1)
(1)

545
545

296
296

(451)
(451)

3
3

260
260

(6)
(6)

(7)
(7)

(329)
(329)

(2)
(2)

(1,042)
(1,042)

(3)
(3)

12
12

344
344

1,246
1,246

(1,068)
(1,068)

(151)
(151)

2
2

21
21

6
6

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY

$
$

2,873 $
2,873 $

1,250 $
1,250 $

(124)
(124)

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

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

Litigation settlement

Interest expense, net

Net bargain purchase gain on acquisition of business

EARNINGS (LOSSES)

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

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

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)

COMMON SHAREHOLDERS

Earnings (loss) from continuing operations

Discontinued operations, net of taxes

Net earnings (loss)

Earnings (loss) from continuing operations

Discontinued operations, net of taxes

Net earnings (loss)

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

AMOUNTS ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS

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

2017

2016

2015

$ 21,743 $ 19,495 $ 20,675

15,300

14,057

14,313

1,653

1,343

1,434

169

—

354

(6)

572

848

(1,085)

177

2,110

2,144

—

1,484

1,124

1,237

154

—

520

795

193

198

800

102

902

(2)

(21)

2,144 $

904 $

938

5.11 $

1.95 $

0.08

0.25

5.19 $

2.20 $

5.05 $

1.93 $

0.08

0.25

5.13 $

2.18 $

2,110 $

802 $

102

2,144 $

904 $

1,539

1,167

1,248

158

252

137

174

—

555

417

117

832

917

1,132

2.05

0.20

2.25

2.03

0.20

2.23

853

938

42
42

CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CASH FLOWS

In millions, except per share amounts, at December 31
In millions, except per share amounts, at December 31

2017
2017

2016
2016

In millions for the years ended December 31

ASSETS
ASSETS

Current Assets
Current Assets

Cash and temporary investments
Cash and temporary investments

Accounts and notes receivable, less allowances of $73 in 2017 and $70 in 2016
Accounts and notes receivable, less allowances of $73 in 2017 and $70 in 2016

Inventories
Inventories

Assets held for sale
Assets held for sale

Other current assets
Other current assets

Total Current Assets
Total Current Assets

Plants, Properties and Equipment, net
Plants, Properties and Equipment, net

Forestlands
Forestlands

Investments
Investments

Financial Assets of Special Purpose Entities (Note 12)
Financial Assets of Special Purpose Entities (Note 12)

Long-Term Assets Held for Sale
Long-Term Assets Held for Sale

Goodwill
Goodwill

Deferred Charges and Other Assets
Deferred Charges and Other Assets

TOTAL ASSETS
TOTAL ASSETS

LIABILITIES AND EQUITY
LIABILITIES AND EQUITY

Current Liabilities
Current Liabilities

Notes payable and current maturities of long-term debt
Notes payable and current maturities of long-term debt

Accounts payable
Accounts payable

Accrued payroll and benefits
Accrued payroll and benefits

Liabilities held for sale
Liabilities held for sale

Other accrued liabilities
Other accrued liabilities

Total Current Liabilities
Total Current Liabilities

Long-Term Liabilities Held for Sale
Long-Term Liabilities Held for Sale

Long-Term Debt
Long-Term Debt

Nonrecourse Financial Liabilities of Special Purpose Entities (Note 12)
Nonrecourse Financial Liabilities of Special Purpose Entities (Note 12)

Deferred Income Taxes
Deferred Income Taxes

Pension Benefit Obligation
Pension Benefit Obligation

Postretirement and Postemployment Benefit Obligation
Postretirement and Postemployment Benefit Obligation

Other Liabilities
Other Liabilities

Commitments and Contingent Liabilities (Note 11)
Commitments and Contingent Liabilities (Note 11)

Equity
Equity

Common stock $1 par value, 2017 - 448.9 shares & 2016 – 448.9 shares
Common stock $1 par value, 2017 - 448.9 shares & 2016 – 448.9 shares

Paid-in capital
Paid-in capital

Retained earnings
Retained earnings

Accumulated other comprehensive loss
Accumulated other comprehensive loss

Less: Common stock held in treasury, at cost, 2017 – 35.975 shares and 2016 – 37.671 shares
Less: Common stock held in treasury, at cost, 2017 – 35.975 shares and 2016 – 37.671 shares

Total International Paper Shareholders’ Equity
Total International Paper Shareholders’ Equity

Noncontrolling interests
Noncontrolling interests

Total Equity
Total Equity

TOTAL LIABILITIES AND EQUITY
TOTAL LIABILITIES AND EQUITY

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

$ 1,018 $ 1,033
$ 1,018 $ 1,033

3,287
3,287

2,313
2,313

1,377
1,377

282
282

8,277
8,277

2,852
2,852

2,233
2,233

361
361

191
191

6,670
6,670

13,265
13,265

13,003
13,003

448
448

390
390

7,051
7,051

—
—

3,411
3,411

1,061
1,061

456
456

360
360

7,033
7,033

1,018
1,018

3,364
3,364

1,189
1,189

$ 33,903 $ 33,093
$ 33,903 $ 33,093

$
$

311 $
311 $

239
239

2,458
2,458

2,199
2,199

485
485

805
805

1,043
1,043

5,102
5,102

—
—

401
401

161
161

1,069
1,069

4,069
4,069

8
8

10,846
10,846

11,075
11,075

6,291
6,291

2,291
2,291

1,939
1,939

326
326

567
567

449
449

6,206
6,206

6,180
6,180

6,284
6,284

3,127
3,127

3,400
3,400

330
330

441
441

449
449

6,189
6,189

4,818
4,818

(4,633)
(4,633)

(5,362)
(5,362)

8,202
8,202

1,680
1,680

6,522
6,522

19
19

6,094
6,094

1,753
1,753

4,341
4,341

18
18

6,541
6,541

4,359
4,359

$ 33,903 $ 33,093
$ 33,903 $ 33,093

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

Periodic pension expense, net

Net bargain purchase gain on acquisition of business

Net (gains) losses on sales and impairments of businesses

Ilim dividends received

Equity (earnings) losses, net of taxes

Impairment of goodwill and other intangible assets

Other, net

Changes in current assets and liabilities

Accounts and notes receivable

Accounts payable and accrued liabilities

Inventories

Interest payable

Other

INVESTMENT ACTIVITIES

Invested in capital projects

Acquisitions, net of cash acquired

Proceeds from divestitures

Investment in Special Purpose Entities

Proceeds from sale of fixed assets

Other

Issuance of common stock

Issuance of debt

Reduction of debt

Change in book overdrafts

Dividends paid

Debt tender premiums paid

Other

CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES

FINANCING ACTIVITIES

Repurchase of common stock and payments of restricted stock tax withholding

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.

43
43

2017

2016

2015

2,144 $

902 $

917

1,227

1,294

1,423

(1,113)

(1,250)

717

(6)

133

(177)

—

212

(370)

(87)

114

(60)

—

(47)

—

1,907

(1,424)

(769)

(84)

(8)

(399)

(15)

(198)

(117)

136

(750)

809

—

(94)

108

—

281

252

(750)

461

—

174

137

118

(131)

(89)

(17)

(1,487)

—

(198)

(132)

—

(605)

3,830

6,873

(1,938)

(6,947)

—

(733)

(31)

(14)

982

(17)

(14)

(685)

(211)

(14)

(1,601)

(71)

(831)

(1,391)

(45)

(1,348)

(2,228)

(49)

(114)

(1,391)

(3,498)

(1,739)

1,033

1,050

1,881

1,018 $

1,033 $

1,050

CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES

1,757

2,478

2,580

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS

In millions, except per share amounts, at December 31

2017

2016

In millions for the years ended December 31
In millions for the years ended December 31

$ 1,018 $ 1,033

Depreciation, amortization, and cost of timber harvested
Depreciation, amortization, and cost of timber harvested

Deferred income tax provision (benefit), net
Deferred income tax provision (benefit), net

OPERATING ACTIVITIES
OPERATING ACTIVITIES

Net earnings (loss)
Net earnings (loss)

Restructuring and other charges
Restructuring and other charges

Pension plan contribution
Pension plan contribution

Periodic pension expense, net
Periodic pension expense, net

Net bargain purchase gain on acquisition of business
Net bargain purchase gain on acquisition of business

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

Ilim dividends received
Ilim dividends received

Equity (earnings) losses, net of taxes
Equity (earnings) losses, net of taxes

Impairment of goodwill and other intangible assets
Impairment of goodwill and other intangible assets

Other, net
Other, net

Changes in current assets and liabilities
Changes in current assets and liabilities

Accounts and notes receivable
Accounts and notes receivable

Inventories
Inventories

Accounts payable and accrued liabilities
Accounts payable and accrued liabilities

Interest payable
Interest payable

Other
Other

2017
2017

2016
2016

2015
2015

$
$

2,144 $
2,144 $

902 $
902 $

917
917

1,423
1,423

(1,113)
(1,113)

67
67

(1,250)
(1,250)

717
717

(6)
(6)

9
9

133
133

(177)
(177)

—
—

212
212

(370)
(370)

(87)
(87)

114
114

1
1

(60)
(60)

1,227
1,227

1,294
1,294

136
136

54
54

(750)
(750)

809
809

—
—

70
70

58
58

281
281

252
252

(750)
(750)

461
461

—
—

174
174

35
35

(198)
(198)

(117)
(117)

—
—

99
99

(94)
(94)

11
11

98
98

41
41

15
15

137
137

118
118

7
7

(131)
(131)

(89)
(89)

(17)
(17)

8
8

CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES

1,757
1,757

2,478
2,478

2,580
2,580

INVESTMENT ACTIVITIES
INVESTMENT ACTIVITIES

Invested in capital projects
Invested in capital projects

Acquisitions, net of cash acquired
Acquisitions, net of cash acquired

Proceeds from divestitures
Proceeds from divestitures

Investment in Special Purpose Entities
Investment in Special Purpose Entities

Proceeds from sale of fixed assets
Proceeds from sale of fixed assets

Other
Other

10,846

11,075

CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES
CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES

FINANCING ACTIVITIES
FINANCING ACTIVITIES

Repurchase of common stock and payments of restricted stock tax withholding
Repurchase of common stock and payments of restricted stock tax withholding

Issuance of common stock
Issuance of common stock

Issuance of debt
Issuance of debt

Reduction of debt
Reduction of debt

Change in book overdrafts
Change in book overdrafts

Dividends paid
Dividends paid

Debt tender premiums paid
Debt tender premiums paid

Other
Other

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES

Effect of Exchange Rate Changes on Cash
Effect of Exchange Rate Changes on Cash

Change in Cash and Temporary Investments
Change in Cash and Temporary Investments

Cash and Temporary Investments
Cash and Temporary Investments

Beginning of the period
Beginning of the period

End of the period
End of the period

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

(1,391)
(1,391)

(45)
(45)

(1,348)
(1,348)

(2,228)
(2,228)

4
4

—
—

26
26

15
15

108
108

—
—

19
19

(49)
(49)

(1,487)
(1,487)

—
—

23
23

(198)
(198)

37
37

(114)
(114)

(1,391)
(1,391)

(3,498)
(3,498)

(1,739)
(1,739)

(47)
(47)

—
—

1,907
1,907

(1,424)
(1,424)

26
26

(769)
(769)

(84)
(84)

(8)
(8)

(399)
(399)

18
18

(15)
(15)

(132)
(132)

—
—

(605)
(605)

2
2

3,830
3,830

6,873
6,873

(1,938)
(1,938)

(6,947)
(6,947)

—
—

(733)
(733)

(31)
(31)

(14)
(14)

982
982

21
21

(17)
(17)

(14)
(14)

(685)
(685)

(211)
(211)

(14)
(14)

(1,601)
(1,601)

(71)
(71)

(831)
(831)

1,033
1,033

1,050
1,050

1,881
1,881

$
$

1,018 $
1,018 $

1,033 $
1,033 $

1,050
1,050

Plants, Properties and Equipment, net

13,265

13,003

Accounts and notes receivable, less allowances of $73 in 2017 and $70 in 2016

ASSETS

Current Assets

Cash and temporary investments

Inventories

Assets held for sale

Other current assets

Total Current Assets

Forestlands

Investments

Long-Term Assets Held for Sale

Goodwill

Deferred Charges and Other Assets

TOTAL ASSETS

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable

Accrued payroll and benefits

Liabilities held for sale

Other accrued liabilities

Total Current Liabilities

Long-Term Liabilities Held for Sale

Long-Term Debt

Deferred Income Taxes

Pension Benefit Obligation

Financial Assets of Special Purpose Entities (Note 12)

Notes payable and current maturities of long-term debt

Nonrecourse Financial Liabilities of Special Purpose Entities (Note 12)

Postretirement and Postemployment Benefit Obligation

Commitments and Contingent Liabilities (Note 11)

Other Liabilities

Equity

Paid-in capital

Retained earnings

Common stock $1 par value, 2017 - 448.9 shares & 2016 – 448.9 shares

Accumulated other comprehensive loss

(4,633)

(5,362)

Less: Common stock held in treasury, at cost, 2017 – 35.975 shares and 2016 – 37.671 shares

Total International Paper Shareholders’ Equity

Noncontrolling interests

Total Equity

TOTAL LIABILITIES AND EQUITY

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

$ 33,903 $ 33,093

311 $

239

2,458

2,199

3,287

2,313

1,377

282

8,277

448

390

7,051

—

3,411

1,061

485

805

1,043

5,102

—

6,291

2,291

1,939

326

567

449

6,206

6,180

8,202

1,680

6,522

2,852

2,233

361

191

6,670

456

360

7,033

1,018

3,364

1,189

401

161

1,069

4,069

6,284

3,127

3,400

330

441

449

6,189

4,818

6,094

1,753

4,341

6,541

4,359

$ 33,903 $ 33,093

44
44

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

In millions
In millions

BALANCE, JANUARY 1,
BALANCE, JANUARY 1,
2015
2015

Issuance of stock for various
Issuance of stock for various
plans, net
plans, net

Repurchase of stock
Repurchase of stock

Dividends
Dividends

Transactions of equity
Transactions of equity
method investees
method investees

Divestiture of noncontrolling
Divestiture of noncontrolling
interests
interests

Comprehensive income
Comprehensive income
(loss)
(loss)

BALANCE, DECEMBER 31,
BALANCE, DECEMBER 31,
2015
2015

Issuance of stock for various
Issuance of stock for various
plans, net
plans, net

Repurchase of stock
Repurchase of stock

Dividends
Dividends

Transactions of equity
Transactions of equity
method investees
method investees

Divestiture of noncontrolling
Divestiture of noncontrolling
interests
interests

Other
Other

Comprehensive income
Comprehensive income
(loss)
(loss)

BALANCE, DECEMBER 31,
BALANCE, DECEMBER 31,
2016
2016

Issuance of stock for
Issuance of stock for
various plans, net
various plans, net

Repurchase of stock
Repurchase of stock

Dividends
Dividends

Transactions of equity
Transactions of equity
method investees
method investees

Comprehensive income
Comprehensive income
(loss)
(loss)

Common
Common
Stock
Stock
Issued
Issued

Paid-in
Paid-in
Capital
Capital

Retained
Retained
Earnings
Earnings

Accumulated
Accumulated
Other
Other
Comprehensive
Comprehensive
Income (Loss)
Income (Loss)

Treasury
Treasury
Stock
Stock

Total
Total
International
International
Paper
Paper
Shareholders’
Shareholders’
Equity
Equity

Noncontrolling
Noncontrolling
Interests
Interests

Total
Total
Equity
Equity

$
$

449 $
449 $

6,245 $
6,245 $

4,409 $
4,409 $

(4,646) $
(4,646) $

1,342 $
1,342 $

5,115 $
5,115 $

148 $
148 $

5,263
5,263

—
—

35
35

—
—

(37)
(37)

—
—

(698)
(698)

—
—

938
938

—
—

(1,062)
(1,062)

(198)
(198)

605
605

—
—

449
449

6,243
6,243

4,649
4,649

(5,708)
(5,708)

1,749
1,749

—
—

(6)
(6)

—
—

(48)
(48)

—
—

(743)
(743)

—
—

8
8

904
904

—
—

346
346

(128)
(128)

132
132

—
—

449
449

6,189
6,189

4,818
4,818

(5,362)
(5,362)

1,753
1,753

—
—

42
42

—
—

(25)
(25)

—
—

(782)
(782)

—
—

2,144
2,144

—
—

729
729

(120)
(120)

47
47

—
—

233
233

(605)
(605)

(698)
(698)

(37)
(37)

—
—

(124)
(124)

3,884
3,884

122
122

(132)
(132)

(743)
(743)

(48)
(48)

—
—

8
8

1,250
1,250

4,341
4,341

162
162

(47)
(47)

(782)
(782)

(25)
(25)

2,873
2,873

—
—

(96)
(96)

(27)
(27)

25
25

—
—

(3)
(3)

—
—

(4)
(4)

18
18

—
—

1
1

233
233

(605)
(605)

(698)
(698)

(37)
(37)

(96)
(96)

(151)
(151)

3,909
3,909

122
122

(132)
(132)

(743)
(743)

(48)
(48)

(3)
(3)

8
8

1,246
1,246

4,359
4,359

162
162

(47)
(47)

(782)
(782)

(25)
(25)

2,874
2,874

BALANCE, DECEMBER 31,
BALANCE, DECEMBER 31,
2017
2017

$
$

449 $
449 $

6,206 $
6,206 $

6,180 $
6,180 $

(4,633) $
(4,633) $

1,680 $
1,680 $

6,522 $
6,522 $

19 $
19 $

6,541
6,541

The accompanying notes are an integral part of these financial statements.
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, North Africa, India and Russia. Substantially all

of our businesses have experienced, and are likely to

continue to experience, cycles relating to available

industry capacity and general economic conditions.

transactions designated f.o.b. destination, revenue is

recorded when the product is delivered to the customer’s

delivery site, when title and risk of loss are transferred.

Timber and forestland sales revenue is generally

recognized when title and risk of loss pass to the buyer.

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.

FINANCIAL STATEMENTS

ANNUAL MAINTENANCE COSTS

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. Prior-period

amounts have been adjusted to conform with current year

presentation.

On January 1, 2018, the Company completed the

previously announced transfer of its North American

Consumer Packaging business, which includes its North

American Coated Paperboard and Foodservice

businesses, to a subsidiary of Graphic Packaging Holding

Company. The Company received a 20.5% ownership

interest in a subsidiary of Graphic Packaging Holding

Company that holds the assets of the combined business.

As a result of this transfer, all current and prior year

amounts have been adjusted to reflect the North American

Consumer Packaging business as a discontinued

operation. See Note 7 for further discussion.

CONSOLIDATION

The consolidated

financial statements

include

the

accounts of International Paper and its wholly-owned,

controlled majority-owned and financially controlled

subsidiaries. All significant intercompany balances and

transactions are eliminated.

Investments in affiliated companies where the Company

has significant influence over their operations are

accounted for by the equity method. International Paper’s

share of affiliates’ results of operations totaled earnings

(loss) of $177 million, $198 million and $117 million in

2017, 2016 and 2015, respectively.

REVENUE RECOGNITION

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.

PLANTS, PROPERTIES AND EQUIPMENT

Plants, properties and equipment are stated at cost, less

accumulated depreciation. Expenditures for betterments

are capitalized, whereas normal repairs and maintenance

are expensed as incurred. The units-of-production

method of depreciation is used for pulp and paper mills,

and the straight-line method is used for other plants and

equipment.

GOODWILL

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.

Revenue is recognized when the customer takes title and

assumes the risks and rewards of ownership. Revenue

is recorded at the time of shipment for terms designated

f.o.b. (free on board) shipping point. For sales

The Company has the option to assess goodwill for

impairment by first performing a qualitative ("Step 0")

assessment to determine whether it is more likely than

not that the fair value of a reporting unit is less than its

45
45

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Common

Stock

Issued

Paid-in

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss)

Treasury

Stock

Shareholders’

Noncontrolling

Equity

Interests

Total

Equity

International

Total

Paper

449 $

6,245 $

4,409 $

(4,646) $

1,342 $

5,115 $

148 $

5,263

938

(1,062)

449

6,243

4,649

(5,708)

1,749

—

(37)

(6)

—

(48)

—

(25)

—

(698)

—

(743)

—

(782)

—

(198)

605

(128)

132

—

(120)

233

(605)

(698)

(37)

—

(124)

3,884

122

(132)

(743)

(48)

—

1,250

4,341

162

(47)

(782)

(25)

2,873

—

(96)

(27)

—

(3)

—

(4)

—

233

(605)

(698)

(37)

(96)

(151)

3,909

122

(132)

(743)

(48)

(3)

1,246

4,359

162

(47)

(782)

(25)

2,874

904

346

449

6,189

4,818

(5,362)

1,753

In millions

BALANCE, JANUARY 1,

2015

Issuance of stock for various

plans, net

Repurchase of stock

Dividends

Transactions of equity

method investees

Divestiture of noncontrolling

interests

Comprehensive income

(loss)

2015

BALANCE, DECEMBER 31,

Issuance of stock for various

plans, net

Repurchase of stock

Dividends

Transactions of equity

method investees

Divestiture of noncontrolling

interests

Other

(loss)

2016

Comprehensive income

BALANCE, DECEMBER 31,

Issuance of stock for

various plans, net

Repurchase of stock

Dividends

Transactions of equity

method investees

Comprehensive income

(loss)

2017

BALANCE, DECEMBER 31,

2,144

729

449 $

6,206 $

6,180 $

(4,633) $

1,680 $

6,522 $

19 $

6,541

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

NOTES TO CONSOLIDATED FINANCIAL
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
STATEMENTS

NOTE 1 SUMMARY OF BUSINESS AND
NOTE 1 SUMMARY OF BUSINESS AND
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS
NATURE OF BUSINESS

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

transactions designated f.o.b. destination, revenue is
transactions designated f.o.b. destination, revenue is
recorded when the product is delivered to the customer’s
recorded when the product is delivered to the customer’s
delivery site, when title and risk of loss are transferred.
delivery site, when title and risk of loss are transferred.
Timber and forestland sales revenue is generally
Timber and forestland sales revenue is generally
recognized when title and risk of loss pass to the buyer.
recognized when title and risk of loss pass to the buyer.

SHIPPING AND HANDLING COSTS
SHIPPING AND HANDLING COSTS

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

FINANCIAL STATEMENTS
FINANCIAL STATEMENTS

ANNUAL MAINTENANCE COSTS
ANNUAL MAINTENANCE COSTS

These consolidated financial statements have been
These consolidated financial statements have been
in conformity with accounting principles
prepared
prepared
in conformity with accounting principles
generally accepted in the United States that require the
generally accepted in the United States that require the
use of management’s estimates. Actual results could
use of management’s estimates. Actual results could
from management’s estimates. Prior-period
differ
differ
from management’s estimates. Prior-period
amounts have been adjusted to conform with current year
amounts have been adjusted to conform with current year
presentation.
presentation.

On January 1, 2018, the Company completed the
On January 1, 2018, the Company completed the
previously announced transfer of its North American
previously announced transfer of its North American
Consumer Packaging business, which includes its North
Consumer Packaging business, which includes its North
American Coated Paperboard and Foodservice
American Coated Paperboard and Foodservice
businesses, to a subsidiary of Graphic Packaging Holding
businesses, to a subsidiary of Graphic Packaging Holding
Company. The Company received a 20.5% ownership
Company. The Company received a 20.5% ownership
interest in a subsidiary of Graphic Packaging Holding
interest in a subsidiary of Graphic Packaging Holding
Company that holds the assets of the combined business.
Company that holds the assets of the combined business.
As a result of this transfer, all current and prior year
As a result of this transfer, all current and prior year
amounts have been adjusted to reflect the North American
amounts have been adjusted to reflect the North American
Consumer Packaging business as a discontinued
Consumer Packaging business as a discontinued
operation. See Note 7 for further discussion.
operation. See Note 7 for further discussion.

CONSOLIDATION
CONSOLIDATION

financial statements
financial statements

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

include
include

Investments in affiliated companies where the Company
Investments in affiliated companies where the Company
has significant influence over their operations are
has significant influence over their operations are
accounted for by the equity method. International Paper’s
accounted for by the equity method. International Paper’s
share of affiliates’ results of operations totaled earnings
share of affiliates’ results of operations totaled earnings
(loss) of $177 million, $198 million and $117 million in
(loss) of $177 million, $198 million and $117 million in
2017, 2016 and 2015, respectively.
2017, 2016 and 2015, respectively.

REVENUE RECOGNITION
REVENUE RECOGNITION

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

TEMPORARY INVESTMENTS
TEMPORARY INVESTMENTS

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

INVENTORIES
INVENTORIES

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

labor
labor

PLANTS, PROPERTIES AND EQUIPMENT
PLANTS, PROPERTIES AND EQUIPMENT

Plants, properties and equipment are stated at cost, less
Plants, properties and equipment are stated at cost, less
accumulated depreciation. Expenditures for betterments
accumulated depreciation. Expenditures for betterments
are capitalized, whereas normal repairs and maintenance
are capitalized, whereas normal repairs and maintenance
are expensed as incurred. The units-of-production
are expensed as incurred. The units-of-production
method of depreciation is used for pulp and paper mills,
method of depreciation is used for pulp and paper mills,
and the straight-line method is used for other plants and
and the straight-line method is used for other plants and
equipment.
equipment.

GOODWILL
GOODWILL

Annual testing for possible goodwill impairment is
Annual testing for possible goodwill impairment is
performed as of the beginning of the fourth quarter of each
performed as of the beginning of the fourth quarter of each
year, with additional interim testing performed when
year, with additional interim testing performed when
management believes that it is more likely than not events
management believes that it is more likely than not events
or circumstances have occurred that would result in the
or circumstances have occurred that would result in the
impairment of a reporting unit’s goodwill.
impairment of a reporting unit’s goodwill.

46
46

Revenue is recognized when the customer takes title and
Revenue is recognized when the customer takes title and
assumes the risks and rewards of ownership. Revenue
assumes the risks and rewards of ownership. Revenue
is recorded at the time of shipment for terms designated
is recorded at the time of shipment for terms designated
f.o.b. (free on board) shipping point. For sales
f.o.b. (free on board) shipping point. For sales

The Company has the option to assess goodwill for
The Company has the option to assess goodwill for
impairment by first performing a qualitative ("Step 0")
impairment by first performing a qualitative ("Step 0")
assessment to determine whether it is more likely than
assessment to determine whether it is more likely than
not that the fair value of a reporting unit is less than its
not that the fair value of a reporting unit is less than its

carrying amount. If the Company determines that it is not
carrying amount. If the Company determines that it is not
more likely than not that the fair value of a reporting unit
more likely than not that the fair value of a reporting unit
is less than its carrying amounts, then the two-step
is less than its carrying amounts, then the two-step
goodwill impairment test is not required to be performed.
goodwill impairment test is not required to be performed.
If the company determines that it is more likely than not
If the company determines that it is more likely than not
that the fair value of a reporting unit is less than its carrying
that the fair value of a reporting unit is less than its carrying
amount, or if the Company does not elect the option to
amount, or if the Company does not elect the option to
perform an initial qualitative assessment, the Company
perform an initial qualitative assessment, the Company
performs the two-step goodwill impairment test. In
performs the two-step goodwill impairment test. In
performing this testing, the Company estimates the fair
performing this testing, the Company estimates the fair
value of its reporting units using the projected future cash
value of its reporting units using the projected future cash
flows to be generated by each unit, discounted for each
flows to be generated by each unit, discounted for each
reporting unit. These estimated fair values are then
reporting unit. These estimated fair values are then
analyzed for reasonableness by comparing them to
analyzed for reasonableness by comparing them to
historic market transactions for businesses in the industry,
historic market transactions for businesses in the industry,
and by comparing the sum of the reporting unit fair values
and by comparing the sum of the reporting unit fair values
and other corporate assets and liabilities divided by
and other corporate assets and liabilities divided by
diluted common shares outstanding to the Company’s
diluted common shares outstanding to the Company’s
traded stock price on the testing date. For reporting units
traded stock price on the testing date. For reporting units
whose recorded value of net assets plus goodwill is in
whose recorded value of net assets plus goodwill is in
excess of their estimated fair values, the fair values of the
excess of their estimated fair values, the fair values of the
individual assets and liabilities of the respective reporting
individual assets and liabilities of the respective reporting
units are then determined to calculate the amount of any
units are then determined to calculate the amount of any
goodwill impairment charge required, if any.
goodwill impairment charge required, if any.

The Company performed its annual testing of its reporting
The Company performed its annual testing of its reporting
units for possible goodwill impairments by applying the
units for possible goodwill impairments by applying the
qualitative Step 0 analysis to its reporting units as of
qualitative Step 0 analysis to its reporting units as of
October 1, 2017. For the current year test, the Company
October 1, 2017. For the current year test, the Company
assessed
and
assessed
and
circumstances that would have affected the estimated fair
circumstances that would have affected the estimated fair
value of the reporting units. The results of this assessment
value of the reporting units. The results of this assessment
indicated that it is not more likely than not that the fair
indicated that it is not more likely than not that the fair
values of the Company's reporting units were less than
values of the Company's reporting units were less than
the carrying values of the reporting units.
the carrying values of the reporting units.

assumptions,
assumptions,

various
various

events
events

In addition, the Company considered whether there were
In addition, the Company considered whether there were
any events or circumstances subsequent to the annual
any events or circumstances subsequent to the annual
test that would reduce the fair value of its reporting units
test that would reduce the fair value of its reporting units
below their carrying amounts and necessitate another
below their carrying amounts and necessitate another
goodwill impairment test. In consideration of all relevant
goodwill impairment test. In consideration of all relevant
factors, there were no indicators that would require
factors, there were no indicators that would require
goodwill impairment subsequent to October 1, 2017. See
goodwill impairment subsequent to October 1, 2017. See
Note 9 for further discussion.
Note 9 for further discussion.

IMPAIRMENT OF LONG-LIVED ASSETS
IMPAIRMENT OF LONG-LIVED ASSETS

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

INCOME TAXES
INCOME TAXES

International Paper uses the asset and liability method of
International Paper uses the asset and liability method of
accounting for income taxes whereby deferred income
accounting for income taxes whereby deferred income
taxes are recorded for the future tax consequences
taxes are recorded for the future tax consequences

attributable to differences between the financial statement
attributable to differences between the financial statement
and tax bases of assets and liabilities. Deferred tax assets
and tax bases of assets and liabilities. Deferred tax assets
and liabilities are measured using enacted tax rates
and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered
those temporary differences are expected to be recovered
or settled. Deferred tax assets and liabilities are
or settled. Deferred tax assets and liabilities are
remeasured to reflect new tax rates in the periods rate
remeasured to reflect new tax rates in the periods rate
changes are enacted.
changes are enacted.

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

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

ENVIRONMENTAL REMEDIATION COSTS
ENVIRONMENTAL REMEDIATION COSTS

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

future expenditures
future expenditures

TRANSLATION OF FINANCIAL STATEMENTS
TRANSLATION OF FINANCIAL STATEMENTS

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

resulting
resulting

financial
financial

from
from

NOTE 2 RECENT ACCOUNTING DEVELOPMENTS

annual reporting periods beginning after December 15,

2017, and interim periods within those years. Early

Other than as described below, no new accounting

adoption is permitted as of the beginning of an annual

pronouncement issued or effective during the fiscal year

period for which financial statement (interim or annual)

has had or is expected to have a material impact on the

have not been issued or made available for issuance.

consolidated financial statements.

COMPREHENSIVE INCOME

In February 2018, the FASB issued ASU 2018-02,

"Income Statement - Reporting Comprehensive Income

(Topic 220): Reclassification of Certain Tax Effects from

Accumulated Other Comprehensive Income." This

guidance gives entities the option to reclassify stranded

tax effects caused by the newly-enacted U.S. Tax Cuts

and Jobs Act from accumulated other comprehensive

income to retained earnings. This guidance is effective

for annual reporting periods beginning after December

15, 2018, and interim periods within those years. The

Company is currently evaluating the provisions of this

guidance.

DERIVATIVES AND HEDGING

In August 2017, the FASB issued ASU 2017-12,

"Derivatives and Hedging (Topic 815): Targeted

Improvements to Accounting for Hedging Activities."

The objective of this new guidance is the improvement

of the financial reporting of hedging relationships to

better portray the economic results of an entity's risk

management activities in its financial statements. In

addition to that main objective, the amendments in this

guidance make certain targeted improvements to

simplify the application of the hedge accounting

guidance in current GAAP. This guidance is effective for

annual reporting periods beginning after December 15,

2018, and interim periods within those years. Early

adoption is permitted. The Company early adopted the

provisions of this guidance effective January 1, 2018,

with no material impact on the financial statements.

RETIREMENT BENEFITS

In March 2017, the FASB issued ASU 2017-07,

"Compensation - Retirement Benefits (Topic 715):

Improving the Presentation of Net Periodic Pension

Costs and Net Periodic Postretirement Benefit Cost."

Under this new guidance, employers will present the

service costs component of the net periodic benefit cost

in the same income statement line item(s) as other

employee compensation costs arising from services

rendered during the period. In addition, only the service

cost component will be eligible for capitalization in

assets. Employers will present the other components

separately from the Line item(s) that includes the service

cost and outside of any subtotal of operating income. In

addition, disclosure of the Line(s) used to present the

other components of net periodic benefit cost will be

required if the components are not presented separately

in the income statement. This guidance is effective for

The Company adopted the provisions of the guidance

on January 1, 2018, using the retrospective method. The

adoption resulted in a change in our adjusted operating

profit (used to measure the earnings performance of the

Company's business segments), which is offset by a

corresponding change

in non-operating pension

expense to reflect the impact of presenting the

amortization of the prior service cost component of net

periodic pension expense outside of operating income.

This guidance had no impact on our statements of

financial position or cash flows.

INTANGIBLES

In January 2017, the FASB issued ASU 2017-04,

"Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment." This

guidance eliminates the requirement to calculate the

implied fair value of goodwill under Step 2 of today's

goodwill impairment test to measure a goodwill

impairment charge. Instead, entities will record an

impairment charge based on the excess of a reporting

unit's carrying amount over its fair value. This guidance

should be applied prospectively and is effective for

annual reporting periods beginning after December 15,

2019, for any impairment test performed in 2020. Early

adoption is permitted for annual and interim goodwill

impairment testing dates after January 1, 2017. The

Company is currently evaluating the provisions of this

guidance; however, we do not anticipate adoption

having a material impact on the financial statements.

INCOME TAXES

In October 2016, the FASB issued ASU 2016-16,

"Income Taxes (Topic 740): Intra-Entity Transfers of

Assets Other Than Inventory." This ASU requires

companies to recognize the income tax effects of

intercompany sales and transfers of assets other than

inventory in the period in which the transfer occurs rather

than defer the income tax effects which is current

practice. This new guidance is effective for annual

reporting periods beginning after December 15, 2017,

and interim periods within those years. The guidance

requires companies to apply a modified retrospective

approach with a cumulative catch-up adjustment to

opening retained earnings in the period of adoption.

Early adoption is permitted. The Company does not

expect that the adoption of this standard will result in a

material impact on the financial statements.

STOCK COMPENSATION

In May 2017,

the FASB

issued ASU 2017-09,

Compensation - Stock Compensation (Topic 718):

"Scope of Modification Accounting." This guidance

47
47

more likely than not that the fair value of a reporting unit

and tax bases of assets and liabilities. Deferred tax assets

is less than its carrying amounts, then the two-step

and liabilities are measured using enacted tax rates

goodwill impairment test is not required to be performed.

expected to apply to taxable income in the years in which

If the company determines that it is more likely than not

those temporary differences are expected to be recovered

that the fair value of a reporting unit is less than its carrying

or settled. Deferred tax assets and liabilities are

amount, or if the Company does not elect the option to

remeasured to reflect new tax rates in the periods rate

perform an initial qualitative assessment, the Company

changes are enacted.

performs the two-step goodwill impairment test. In

performing this testing, the Company estimates the fair

International Paper records its worldwide tax provision

value of its reporting units using the projected future cash

based on the respective tax rules and regulations for the

flows to be generated by each unit, discounted for each

jurisdictions in which it operates. Where the Company

reporting unit. These estimated fair values are then

believes that a tax position is supportable for income tax

analyzed for reasonableness by comparing them to

purposes, the item is included in its income tax returns.

historic market transactions for businesses in the industry,

Where treatment of a position is uncertain, liabilities are

and by comparing the sum of the reporting unit fair values

recorded based upon the Company’s evaluation of the

and other corporate assets and liabilities divided by

“more likely than not” outcome considering the technical

diluted common shares outstanding to the Company’s

merits of the position based on specific tax regulations

traded stock price on the testing date. For reporting units

and the facts of each matter. Changes to recorded

whose recorded value of net assets plus goodwill is in

liabilities are made only when an identifiable event occurs

excess of their estimated fair values, the fair values of the

that changes the likely outcome, such as settlement with

units are then determined to calculate the amount of any

limitation for the subject tax year, a change in tax laws,

goodwill impairment charge required, if any.

or a recent court case that addresses the matter.

The Company performed its annual testing of its reporting

units for possible goodwill impairments by applying the

qualitative Step 0 analysis to its reporting units as of

October 1, 2017. For the current year test, the Company

assessed

various

assumptions,

events

and

circumstances that would have affected the estimated fair

value of the reporting units. The results of this assessment

indicated that it is not more likely than not that the fair

values of the Company's reporting units were less than

the carrying values of the reporting units.

In addition, the Company considered whether there were

any events or circumstances subsequent to the annual

test that would reduce the fair value of its reporting units

below their carrying amounts and necessitate another

goodwill impairment test. In consideration of all relevant

factors, there were no indicators that would require

goodwill impairment subsequent to October 1, 2017. 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

International Paper uses the asset and liability method of

accounting for income taxes whereby deferred income

taxes are recorded for the future tax consequences

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

adjustments that could materially affect future financial

statements.

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 estimable.

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.

carrying amount. If the Company determines that it is not

attributable to differences between the financial statement

NOTE 2 RECENT ACCOUNTING DEVELOPMENTS
NOTE 2 RECENT ACCOUNTING DEVELOPMENTS

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

COMPREHENSIVE INCOME
COMPREHENSIVE INCOME

In February 2018, the FASB issued ASU 2018-02,
In February 2018, the FASB issued ASU 2018-02,
"Income Statement - Reporting Comprehensive Income
"Income Statement - Reporting Comprehensive Income
(Topic 220): Reclassification of Certain Tax Effects from
(Topic 220): Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income." This
Accumulated Other Comprehensive Income." This
guidance gives entities the option to reclassify stranded
guidance gives entities the option to reclassify stranded
tax effects caused by the newly-enacted U.S. Tax Cuts
tax effects caused by the newly-enacted U.S. Tax Cuts
and Jobs Act from accumulated other comprehensive
and Jobs Act from accumulated other comprehensive
income to retained earnings. This guidance is effective
income to retained earnings. This guidance is effective
for annual reporting periods beginning after December
for annual reporting periods beginning after December
15, 2018, and interim periods within those years. The
15, 2018, and interim periods within those years. The
Company is currently evaluating the provisions of this
Company is currently evaluating the provisions of this
guidance.
guidance.

individual assets and liabilities of the respective reporting

the relevant tax authority, the expiration of statutes of

DERIVATIVES AND HEDGING
DERIVATIVES AND HEDGING

In August 2017, the FASB issued ASU 2017-12,
In August 2017, the FASB issued ASU 2017-12,
"Derivatives and Hedging (Topic 815): Targeted
"Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities."
Improvements to Accounting for Hedging Activities."
The objective of this new guidance is the improvement
The objective of this new guidance is the improvement
of the financial reporting of hedging relationships to
of the financial reporting of hedging relationships to
better portray the economic results of an entity's risk
better portray the economic results of an entity's risk
management activities in its financial statements. In
management activities in its financial statements. In
addition to that main objective, the amendments in this
addition to that main objective, the amendments in this
guidance make certain targeted improvements to
guidance make certain targeted improvements to
simplify the application of the hedge accounting
simplify the application of the hedge accounting
guidance in current GAAP. This guidance is effective for
guidance in current GAAP. This guidance is effective for
annual reporting periods beginning after December 15,
annual reporting periods beginning after December 15,
2018, and interim periods within those years. Early
2018, and interim periods within those years. Early
adoption is permitted. The Company early adopted the
adoption is permitted. The Company early adopted the
provisions of this guidance effective January 1, 2018,
provisions of this guidance effective January 1, 2018,
with no material impact on the financial statements.
with no material impact on the financial statements.

RETIREMENT BENEFITS
RETIREMENT BENEFITS

In March 2017, the FASB issued ASU 2017-07,
In March 2017, the FASB issued ASU 2017-07,
"Compensation - Retirement Benefits (Topic 715):
"Compensation - Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension
Improving the Presentation of Net Periodic Pension
Costs and Net Periodic Postretirement Benefit Cost."
Costs and Net Periodic Postretirement Benefit Cost."
Under this new guidance, employers will present the
Under this new guidance, employers will present the
service costs component of the net periodic benefit cost
service costs component of the net periodic benefit cost
in the same income statement line item(s) as other
in the same income statement line item(s) as other
employee compensation costs arising from services
employee compensation costs arising from services
rendered during the period. In addition, only the service
rendered during the period. In addition, only the service
cost component will be eligible for capitalization in
cost component will be eligible for capitalization in
assets. Employers will present the other components
assets. Employers will present the other components
separately from the Line item(s) that includes the service
separately from the Line item(s) that includes the service
cost and outside of any subtotal of operating income. In
cost and outside of any subtotal of operating income. In
addition, disclosure of the Line(s) used to present the
addition, disclosure of the Line(s) used to present the
other components of net periodic benefit cost will be
other components of net periodic benefit cost will be
required if the components are not presented separately
required if the components are not presented separately
in the income statement. This guidance is effective for
in the income statement. This guidance is effective for

48
48

annual reporting periods beginning after December 15,
annual reporting periods beginning after December 15,
2017, and interim periods within those years. Early
2017, and interim periods within those years. Early
adoption is permitted as of the beginning of an annual
adoption is permitted as of the beginning of an annual
period for which financial statement (interim or annual)
period for which financial statement (interim or annual)
have not been issued or made available for issuance.
have not been issued or made available for issuance.
The Company adopted the provisions of the guidance
The Company adopted the provisions of the guidance
on January 1, 2018, using the retrospective method. The
on January 1, 2018, using the retrospective method. The
adoption resulted in a change in our adjusted operating
adoption resulted in a change in our adjusted operating
profit (used to measure the earnings performance of the
profit (used to measure the earnings performance of the
Company's business segments), which is offset by a
Company's business segments), which is offset by a
in non-operating pension
corresponding change
in non-operating pension
corresponding change
expense to reflect the impact of presenting the
expense to reflect the impact of presenting the
amortization of the prior service cost component of net
amortization of the prior service cost component of net
periodic pension expense outside of operating income.
periodic pension expense outside of operating income.
This guidance had no impact on our statements of
This guidance had no impact on our statements of
financial position or cash flows.
financial position or cash flows.

INTANGIBLES
INTANGIBLES

In January 2017, the FASB issued ASU 2017-04,
In January 2017, the FASB issued ASU 2017-04,
"Intangibles - Goodwill and Other (Topic 350):
"Intangibles - Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment." This
Simplifying the Test for Goodwill Impairment." This
guidance eliminates the requirement to calculate the
guidance eliminates the requirement to calculate the
implied fair value of goodwill under Step 2 of today's
implied fair value of goodwill under Step 2 of today's
goodwill impairment test to measure a goodwill
goodwill impairment test to measure a goodwill
impairment charge. Instead, entities will record an
impairment charge. Instead, entities will record an
impairment charge based on the excess of a reporting
impairment charge based on the excess of a reporting
unit's carrying amount over its fair value. This guidance
unit's carrying amount over its fair value. This guidance
should be applied prospectively and is effective for
should be applied prospectively and is effective for
annual reporting periods beginning after December 15,
annual reporting periods beginning after December 15,
2019, for any impairment test performed in 2020. Early
2019, for any impairment test performed in 2020. Early
adoption is permitted for annual and interim goodwill
adoption is permitted for annual and interim goodwill
impairment testing dates after January 1, 2017. The
impairment testing dates after January 1, 2017. The
Company is currently evaluating the provisions of this
Company is currently evaluating the provisions of this
guidance; however, we do not anticipate adoption
guidance; however, we do not anticipate adoption
having a material impact on the financial statements.
having a material impact on the financial statements.

INCOME TAXES
INCOME TAXES

In October 2016, the FASB issued ASU 2016-16,
In October 2016, the FASB issued ASU 2016-16,
"Income Taxes (Topic 740): Intra-Entity Transfers of
"Income Taxes (Topic 740): Intra-Entity Transfers of
Assets Other Than Inventory." This ASU requires
Assets Other Than Inventory." This ASU requires
companies to recognize the income tax effects of
companies to recognize the income tax effects of
intercompany sales and transfers of assets other than
intercompany sales and transfers of assets other than
inventory in the period in which the transfer occurs rather
inventory in the period in which the transfer occurs rather
than defer the income tax effects which is current
than defer the income tax effects which is current
practice. This new guidance is effective for annual
practice. This new guidance is effective for annual
reporting periods beginning after December 15, 2017,
reporting periods beginning after December 15, 2017,
and interim periods within those years. The guidance
and interim periods within those years. The guidance
requires companies to apply a modified retrospective
requires companies to apply a modified retrospective
approach with a cumulative catch-up adjustment to
approach with a cumulative catch-up adjustment to
opening retained earnings in the period of adoption.
opening retained earnings in the period of adoption.
Early adoption is permitted. The Company does not
Early adoption is permitted. The Company does not
expect that the adoption of this standard will result in a
expect that the adoption of this standard will result in a
material impact on the financial statements.
material impact on the financial statements.

STOCK COMPENSATION
STOCK COMPENSATION

issued ASU 2017-09,
issued ASU 2017-09,
In May 2017,
In May 2017,
Compensation - Stock Compensation (Topic 718):
Compensation - Stock Compensation (Topic 718):
"Scope of Modification Accounting." This guidance
"Scope of Modification Accounting." This guidance

the FASB
the FASB

clarifies when changes to the terms or conditions of a
clarifies when changes to the terms or conditions of a
share-based payment award must be accounted for as
share-based payment award must be accounted for as
modifications. Under this guidance, entities will apply
modifications. Under this guidance, entities will apply
the modification accounting guidance if the value,
the modification accounting guidance if the value,
vesting conditions or classification of the award
vesting conditions or classification of the award
changes. This guidance is effective for annual reporting
changes. This guidance is effective for annual reporting
periods beginning after December 15, 2017, and interim
periods beginning after December 15, 2017, and interim
periods within those years. Early adoption is permitted,
periods within those years. Early adoption is permitted,
including in any interim period. The Company adopted
including in any interim period. The Company adopted
the provisions of this guidance on January 1, 2018, with
the provisions of this guidance on January 1, 2018, with
no material impact on the financial statements.
no material impact on the financial statements.

LEASES
LEASES

In February 2016, the FASB issued ASU 2016-02,
In February 2016, the FASB issued ASU 2016-02,
Leases Topic (842): "Leases." This ASU will require
Leases Topic (842): "Leases." This ASU will require
most leases to be recognized on the balance sheet
most leases to be recognized on the balance sheet
which will increase reported assets and liabilities. Lessor
which will increase reported assets and liabilities. Lessor
accounting will remain substantially similar to current
accounting will remain substantially similar to current
U.S. GAAP. This ASU is effective for annual reporting
U.S. GAAP. This ASU is effective for annual reporting
periods beginning after December 15, 2018, and interim
periods beginning after December 15, 2018, and interim
periods within those years, and mandates a modified
periods within those years, and mandates a modified
retrospective transition method for all entities. The
retrospective transition method for all entities. The
Company expects to adopt this guidance using a
Company expects to adopt this guidance using a
modified retrospective transition approach for leases
modified retrospective transition approach for leases
existing at, or entered into after, the beginning of the
existing at, or entered into after, the beginning of the
earliest comparative period presented in the financial
earliest comparative period presented in the financial
statements. We expect to recognize a liability and
statements. We expect to recognize a liability and
corresponding asset associated with in-scope operating
corresponding asset associated with in-scope operating
and finance leases but we are still in the process of
and finance leases but we are still in the process of
determining those amounts and the processes required
determining those amounts and the processes required
to account for leasing activity on an ongoing basis.
to account for leasing activity on an ongoing basis.

BUSINESS COMBINATIONS
BUSINESS COMBINATIONS

fair value of
fair value of

the gross assets acquired
the gross assets acquired

In January 2017, the FASB issued ASU 2017-01,
In January 2017, the FASB issued ASU 2017-01,
"Business Combinations (Topic 805) - Clarifying the
"Business Combinations (Topic 805) - Clarifying the
Definition of a Business." Under the new guidance, an
Definition of a Business." Under the new guidance, an
entity must first determine whether substantially all of
entity must first determine whether substantially all of
the
is
the
is
concentrated in a single identifiable asset or a group of
concentrated in a single identifiable asset or a group of
similar identifiable assets. If this threshold is met, the
similar identifiable assets. If this threshold is met, the
set of transferred assets and activities is not a business.
set of transferred assets and activities is not a business.
If this threshold is not met, the entity then evaluates
If this threshold is not met, the entity then evaluates
whether the set meets the requirement that a business
whether the set meets the requirement that a business
include, at a minimum, an input and a substantive
include, at a minimum, an input and a substantive
process that together significantly contribute to the
process that together significantly contribute to the
ability to create outputs. This guidance is effective for
ability to create outputs. This guidance is effective for
annual reporting periods beginning after December 15,
annual reporting periods beginning after December 15,
2017, and interim periods within those years. Early
2017, and interim periods within those years. Early
adoption is permitted. The Company adopted the
adoption is permitted. The Company adopted the
provisions of this guidance on January 1, 2018 with no
provisions of this guidance on January 1, 2018 with no
material impact on the financial statements.
material impact on the financial statements.

REVENUE RECOGNITION
REVENUE RECOGNITION

In May 2014, the FASB issued ASU 2014-09, "Revenue
In May 2014, the FASB issued ASU 2014-09, "Revenue
from Contracts with Customers." This guidance
from Contracts with Customers." This guidance
replaces most existing revenue recognition guidance
replaces most existing revenue recognition guidance
and provides that an entity should recognize revenue to
and provides that an entity should recognize revenue to
depict the transfer of promised goods or services to
depict the transfer of promised goods or services to
customers in an amount that reflects the consideration
customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange
to which the entity expects to be entitled in exchange
for those goods and services. This ASU was effective
for those goods and services. This ASU was effective
for annual reporting periods beginning after December
for annual reporting periods beginning after December
15, 2016, and interim periods within those years and
15, 2016, and interim periods within those years and
permits the use of either the retrospective or cumulative
permits the use of either the retrospective or cumulative
effect transition method; however, in August 2015, the
effect transition method; however, in August 2015, the
FASB issued ASU 2015-14 which defers the effective
FASB issued ASU 2015-14 which defers the effective
date by one year making the guidance effective for
date by one year making the guidance effective for
annual reporting periods beginning after December 15,
annual reporting periods beginning after December 15,
2017. The FASB has continued to clarify this guidance
2017. The FASB has continued to clarify this guidance
in various updates during 2015 and 2016, all of which,
in various updates during 2015 and 2016, all of which,
have the same effective date as the original guidance.
have the same effective date as the original guidance.

team,
team,

We have evaluated the impact of ASU 2014-09 and all
We have evaluated the impact of ASU 2014-09 and all
related ASUs on our consolidated financial statements.
related ASUs on our consolidated financial statements.
including
transition
The Company's
including
transition
The Company's
representatives from all of our business segments, has
representatives from all of our business segments, has
finalized its review and analysis of the impact of the
finalized its review and analysis of the impact of the
standard on our revenue contracts. Surveys were
standard on our revenue contracts. Surveys were
developed and reviews of customer contracts were
developed and reviews of customer contracts were
performed in order to gather information and identify
performed in order to gather information and identify
areas of the Company's business where potential
areas of the Company's business where potential
differences could result in applying the requirements of
differences could result in applying the requirements of
the new standard to its revenue contracts. The results
the new standard to its revenue contracts. The results
of the surveys, contract reviews and legal analysis
of the surveys, contract reviews and legal analysis
indicate that the adoption of the standard will require
indicate that the adoption of the standard will require
acceleration of revenue for products produced by the
acceleration of revenue for products produced by the
Company without an alternative future use and where
Company without an alternative future use and where
the Company has a legally enforceable right of payment
the Company has a legally enforceable right of payment
for production of products completed to date. The
for production of products completed to date. The
Company adopted the new revenue guidance effective
Company adopted the new revenue guidance effective
January 1, 2018, using the modified retrospective
January 1, 2018, using the modified retrospective
transition method. Due to the repetitive nature of our
transition method. Due to the repetitive nature of our
sales, we do not expect the impact of this acceleration
sales, we do not expect the impact of this acceleration
to significantly alter our reported sales over time. In
to significantly alter our reported sales over time. In
addition, we do not expect the net impact of adoption to
addition, we do not expect the net impact of adoption to
have a material impact on our consolidated results.
have a material impact on our consolidated results.

NOTE 3 EARNINGS PER SHARE ATTRIBUTABLE

TO INTERNATIONAL PAPER COMPANY COMMON

SHAREHOLDERS

Basic earnings per share is computed by dividing

earnings by the weighted average number of common

shares outstanding. Diluted earnings per share is

computed assuming that all potentially dilutive securities

were converted into common shares.

There are no adjustments required to be made to net

income for purposes of computing basic and diluted EPS.

A reconciliation of

the amounts

included

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

2017

2016

2015

Earnings (loss) from continuing

operations attributable to

International Paper common

shareholders

Weighted average common shares

outstanding

Effect of dilutive securities:

$ 2,110

$ 802

$ 853

412.7

411.1

417.4

Restricted performance share plan

5.0

4.5

3.2

Weighted average common shares

outstanding – assuming dilution

417.7

415.6

420.6

Basic earnings (loss) per share

from continuing operations

Diluted earnings (loss) per share

from continuing operations

$ 5.11

$ 1.95

$ 2.05

$ 5.05

$ 1.93

$ 2.03

The following table presents changes in AOCI, net of tax, reported in the consolidated financial statements for the years

NOTE 4 OTHER COMPREHENSIVE INCOME

ended December 31:

In millions

Defined Benefit Pension and Postretirement Adjustments

Balance at beginning of period

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive income

Change in Cumulative Foreign Currency Translation Adjustments

Balance at end of period

Balance at beginning of period

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive income

Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest

Balance at end of period

Net Gains and Losses on Cash Flow Hedging Derivatives

Balance at beginning of period

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive income

Balance at end of period

2017

2016

2015

(3,072) $

(3,169) $

(3,134)

486

(448)

545

(331)

296

(2,527)

(3,072)

(3,169)

(2,287)

178

(2,549)

263

(2,111)

(2,287)

(2,549)

(1,513)

(1,002)

(40)

(3)

(6)

(7)

(3)

(1)

(3)

(7)

Total Accumulated Other Comprehensive Income (Loss) at End of Period

(4,633) $

(5,362) $

(5,708)

49
49

clarifies when changes to the terms or conditions of a

share-based payment award must be accounted for as

modifications. Under this guidance, entities will apply

the modification accounting guidance if the value,

vesting conditions or classification of the award

changes. This guidance is effective for annual reporting

periods beginning after December 15, 2017, and interim

periods within those years. Early adoption is permitted,

including in any interim period. The Company adopted

the provisions of this guidance on January 1, 2018, with

no material impact on the financial statements.

LEASES

In February 2016, the FASB issued ASU 2016-02,

Leases Topic (842): "Leases." This ASU will require

most leases to be recognized on the balance sheet

which will increase reported assets and liabilities. Lessor

accounting will remain substantially similar to current

U.S. GAAP. This ASU is effective for annual reporting

periods beginning after December 15, 2018, and interim

periods within those years, and mandates a modified

retrospective transition method for all entities. The

Company expects to adopt this guidance using a

modified retrospective transition approach for leases

existing at, or entered into after, the beginning of the

earliest comparative period presented in the financial

statements. We expect to recognize a liability and

corresponding asset associated with in-scope operating

and finance leases but we are still in the process of

determining those amounts and the processes required

to account for leasing activity on an ongoing basis.

BUSINESS COMBINATIONS

In January 2017, the FASB issued ASU 2017-01,

"Business Combinations (Topic 805) - Clarifying the

Definition of a Business." Under the new guidance, an

entity must first determine whether substantially all of

the

fair value of

the gross assets acquired

concentrated in a single identifiable asset or a group of

similar identifiable assets. If this threshold is met, the

set of transferred assets and activities is not a business.

If this threshold is not met, the entity then evaluates

whether the set meets the requirement that a business

include, at a minimum, an input and a substantive

process that together significantly contribute to the

ability to create outputs. This guidance is effective for

annual reporting periods beginning after December 15,

2017, and interim periods within those years. Early

adoption is permitted. The Company adopted the

provisions of this guidance on January 1, 2018 with no

material impact on the financial statements.

REVENUE RECOGNITION

In May 2014, the FASB issued ASU 2014-09, "Revenue

from Contracts with Customers." This 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 was effective

for annual reporting periods beginning after December

15, 2016, and interim periods within those years and

permits the use of either the retrospective or cumulative

effect transition method; however, in August 2015, the

FASB issued ASU 2015-14 which defers the effective

date by one year making the guidance effective for

annual reporting periods beginning after December 15,

2017. The FASB has continued to clarify this guidance

in various updates during 2015 and 2016, all of which,

have the same effective date as the original guidance.

We have evaluated the impact of ASU 2014-09 and all

related ASUs on our consolidated financial statements.

The Company's

transition

team,

including

representatives from all of our business segments, has

finalized its review and analysis of the impact of the

standard on our revenue contracts. Surveys were

developed and reviews of customer contracts were

performed in order to gather information and identify

areas of the Company's business where potential

differences could result in applying the requirements of

the new standard to its revenue contracts. The results

of the surveys, contract reviews and legal analysis

indicate that the adoption of the standard will require

acceleration of revenue for products produced by the

Company without an alternative future use and where

the Company has a legally enforceable right of payment

for production of products completed to date. The

Company adopted the new revenue guidance effective

January 1, 2018, using the modified retrospective

transition method. Due to the repetitive nature of our

sales, we do not expect the impact of this acceleration

to significantly alter our reported sales over time. In

addition, we do not expect the net impact of adoption to

have a material impact on our consolidated results.

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

Basic earnings per share is computed by dividing
Basic earnings per share is computed by dividing
earnings by the weighted average number of common
earnings by the weighted average number of common
shares outstanding. Diluted earnings per share is
shares outstanding. Diluted earnings per share is
computed assuming that all potentially dilutive securities
computed assuming that all potentially dilutive securities
were converted into common shares.
were converted into common shares.

There are no adjustments required to be made to net
There are no adjustments required to be made to net
income for purposes of computing basic and diluted EPS.
income for purposes of computing basic and diluted EPS.

the amounts
the amounts

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

included
included

the
the

in
in

In millions, except per share amounts
In millions, except per share amounts

2017
2017

2016
2016

2015
2015

Earnings (loss) from continuing
Earnings (loss) from continuing
operations attributable to
operations attributable to
International Paper common
International Paper common
shareholders
shareholders

Weighted average common shares
Weighted average common shares
outstanding
outstanding

Effect of dilutive securities:
Effect of dilutive securities:

$ 2,110
$ 2,110

$ 802
$ 802

$ 853
$ 853

412.7
412.7

411.1
411.1

417.4
417.4

Restricted performance share plan
Restricted performance share plan

5.0
5.0

4.5
4.5

3.2
3.2

Weighted average common shares
Weighted average common shares
outstanding – assuming dilution
outstanding – assuming dilution

417.7
417.7

415.6
415.6

420.6
420.6

Basic earnings (loss) per share
Basic earnings (loss) per share
from continuing operations
from continuing operations

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

$ 5.11
$ 5.11

$ 1.95
$ 1.95

$ 2.05
$ 2.05

$ 5.05
$ 5.05

$ 1.93
$ 1.93

$ 2.03
$ 2.03

NOTE 4 OTHER COMPREHENSIVE INCOME
NOTE 4 OTHER COMPREHENSIVE INCOME

The following table presents changes in AOCI, net of tax, reported in the consolidated financial statements for the years
The following table presents changes in AOCI, net of tax, reported in the consolidated financial statements for the years
ended December 31:
ended December 31:

In millions
In millions
Defined Benefit Pension and Postretirement Adjustments
Defined Benefit Pension and Postretirement Adjustments

Balance at beginning of period
Balance at beginning of period
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income
Amounts reclassified from accumulated other comprehensive income
Balance at end of period
Balance at end of period

Change in Cumulative Foreign Currency Translation Adjustments
Change in Cumulative Foreign Currency Translation Adjustments

Net Gains and Losses on Cash Flow Hedging Derivatives
Net Gains and Losses on Cash Flow Hedging Derivatives

Total Accumulated Other Comprehensive Income (Loss) at End of Period
Total Accumulated Other Comprehensive Income (Loss) at End of Period

2017
2017

2016
2016

2015
2015

$
$

(3,072) $
(3,072) $
59
59
486
486
(2,527)
(2,527)

(3,169) $
(3,169) $
(448)
(448)
545
545
(3,072)
(3,072)

(2,287)
(2,287)
178
178
(1)
(1)
(1)
(1)
(2,111)
(2,111)

(2,549)
(2,549)
263
263
(3)
(3)
2
2
(2,287)
(2,287)

(3)
(3)
15
15
(7)
(7)
5
5
(4,633) $
(4,633) $

10
10
(6)
(6)
(7)
(7)
(3)
(3)
(5,362) $
(5,362) $

(3,134)
(3,134)
(331)
(331)
296
296
(3,169)
(3,169)

(1,513)
(1,513)
(1,002)
(1,002)
(40)
(40)
6
6
(2,549)
(2,549)

1
1
(3)
(3)
12
12
10
10
(5,708)
(5,708)

50
50

Reclassifications out of AOCI for the three years ended December 31 were as follows:
Reclassifications out of AOCI for the three years ended December 31 were as follows:

In millions
In millions

Defined benefit pension and postretirement items:
Defined benefit pension and postretirement items:

Prior-service costs
Prior-service costs

Actuarial gains/(losses)
Actuarial gains/(losses)

Total pre-tax amount
Total pre-tax amount

Tax (expense)/benefit
Tax (expense)/benefit

Net of tax
Net of tax

Change in cumulative foreign currency translation
Change in cumulative foreign currency translation
adjustments:
adjustments:

Business acquisitions/divestiture
Business acquisitions/divestiture

Tax (expense)/benefit
Tax (expense)/benefit

Net of tax
Net of tax

Net gains and losses on cash flow hedging derivatives:
Net gains and losses on cash flow hedging derivatives:

Foreign exchange contracts
Foreign exchange contracts

Total pre-tax amount
Total pre-tax amount

Tax (expense)/benefit
Tax (expense)/benefit

Net of tax
Net of tax

Amount Reclassified from Accumulated
Amount Reclassified from Accumulated
Other Comprehensive Income
Other Comprehensive Income

2017
2017

2016
2016

2015
2015

Location of Amount
Location of Amount
Reclassified from AOCI
Reclassified from AOCI

$
$

(33) $
(33) $

(37) $
(37) $

(33) (a) Cost of products sold
(33) (a) Cost of products sold

(733)
(733)

(766)
(766)

280
280

(486)
(486)

1
1

—
—

1
1

9
9

(2)
(2)

7
7

(851)
(851)

(888)
(888)

343
343

(545)
(545)

3
3

—
—

3
3

10
10

(3)
(3)

7
7

(449) (a) Cost of products sold
(449) (a) Cost of products sold

(482)
(482)

186
186

(296)
(296)

40
40

—
—

40
40

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

(20) (b) Cost of products sold
(20) (b) Cost of products sold

(20)
(20)

8
8

(12)
(12)

(268)
(268)

Total reclassifications for the period, net of tax
Total reclassifications for the period, net of tax

$
$

(478) $
(478) $

(535) $
(535) $

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 16 for
(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 16 for

additional details).
additional details).

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

details).
details).

NOTE 5 RESTRUCTURING CHARGES AND
NOTE 5 RESTRUCTURING CHARGES AND
OTHER ITEMS
OTHER ITEMS

(b)
(b)

Includes $4 million of accelerated depreciation and $3 million
Includes $4 million of accelerated depreciation and $3 million
of severance charges which is related to 85 employees.
of severance charges which is related to 85 employees.

2017: During 2017, restructuring and other charges
2017: During 2017, restructuring and other charges
totaling $67 million before taxes were recorded. These
totaling $67 million before taxes were recorded. These
charges included:
charges included:

In millions
In millions

Early debt extinguishment costs (see Note 13)
Early debt extinguishment costs (see Note 13)

Gain on sale of investment in ArborGen
Gain on sale of investment in ArborGen

Other
Other

Total
Total

2017
2017

83
83

(14)
(14)

(2)
(2)

67
67

$
$

2016: During 2016, total restructuring and other
2016: During 2016, total restructuring and other
charges of $54 million before taxes were recorded.
charges of $54 million before taxes were recorded.
These charges included:
These charges included:

In millions
In millions

2016
2016

Early debt extinguishment costs (see Note 13)
Early debt extinguishment costs (see Note 13)

$
$

India packaging evaluation write-off
India packaging evaluation write-off

Gain on sale of investment in Arizona Chemical
Gain on sale of investment in Arizona Chemical

Riegelwood mill conversion costs (a)
Riegelwood mill conversion costs (a)

Turkey mill closure (b)
Turkey mill closure (b)

Total
Total

$
$

29
29

17
17

(8)
(8)

9
9

7
7

54
54

(a)
(a)

Includes $3 million of accelerated depreciation, $3 million of
Includes $3 million of accelerated depreciation, $3 million of
inventory write-off charges and $3 million of other charges.
inventory write-off charges and $3 million of other charges.

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

In millions
In millions

2015
2015

Early debt extinguishment costs (see Note 13)
Early debt extinguishment costs (see Note 13)

$
$

Timber monetization restructuring
Timber monetization restructuring

Legal liability reserve adjustment
Legal liability reserve adjustment

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

207
207

16
16

15
15

8
8

6
6

$
$

252
252

Other
Other

Total
Total

(a)
(a)

Includes $5 million of severance charges, which is related to
Includes $5 million of severance charges, which is related to
69 employees, $24 million of accelerated depreciation, sale
69 employees, $24 million of accelerated depreciation, sale
proceeds of $22 million and $1 million of other charges.
proceeds of $22 million and $1 million of other charges.

NOTE 6 ACQUISITIONS AND JOINT VENTURES
NOTE 6 ACQUISITIONS AND JOINT VENTURES

Canada and Poland.

TANGIER, MOROCCO FACILITY
TANGIER, MOROCCO FACILITY

2017: On June 30, 2017, the Company completed the
2017: On June 30, 2017, the Company completed the
acquisition of Europac's Tangier, Morocco facility, a
acquisition of Europac's Tangier, Morocco facility, a
for €40 million
corrugated packaging
for €40 million
corrugated packaging
(approximately $46 million using the June 30, 2017
(approximately $46 million using the June 30, 2017
exchange rate). After working capital and other post-
exchange rate). After working capital and other post-

facility,
facility,

51
51

close adjustments, final consideration exchanged was

€33 million (approximately $38 million using the June

The following table summarizes the final fair values

December 1, 2016

In millions

assigned to assets and liabilities acquired as of

30, 2017 exchange rate).

The following table summarizes the provisional fair

value assigned to assets and liabilities acquired as of

The following table summarizes the provisional fair

June 30, 2017:

value assigned to assets and liabilities acquired as of

June 30, 2017

June 30, 2017:

In millions

Cash and temporary investments

Accounts and notes receivable

Inventory

Plants, properties and equipment

Goodwill

Other intangible assets

Deferred charges and other assets

Total assets acquired

Accounts payable and accrued liabilities

Long-term debt

Other long-term liabilities

Total liabilities assumed

Net assets acquired

Adjustments, if any, to provisional amounts will be

finalized within the measurement period of up to one

Adjustments, if any, to provisional amounts will be

year from the acquisition date. Since the date of

finalized within the measurement period of up to one

acquisition, Net sales of $6 million and Earnings (loss)

year from the acquisition date. Since the date of

from continuing operations before income taxes and

acquisition, Net sales of $6 million and Earnings (loss)

equity earnings of $(1) million from the acquired

from continuing operations before income taxes and

business have been included in the Company's

equity earnings of $(1) million from the acquired

consolidated statement of operations for the year ended

business have been included in the Company's

December 31, 2017. Pro forma information related to

consolidated statement of operations for the year ended

the acquisition of the Europac business has not been

December 31, 2017. Pro forma information related to

included as it is impractical to obtain the information due

the acquisition of the Europac business has not been

to the lack of availability of financial data and does not

included as it is impractical to obtain the information due

have a material effect on the Company's consolidated

to the lack of availability of financial data and does not

results of operations.

have a material effect on the Company's consolidated

results of operations.

WEYERHAEUSER PULP BUSINESS

2016: On December 1, 2016, the Company finalized the

purchase of Weyerhaeuser's pulp business

2016: On December 1, 2016, the Company finalized the

for

approximately $2.2 billion in cash, subject to post-

purchase of Weyerhaeuser's pulp business

for

closing adjustments. Under the terms of the agreement,

approximately $2.2 billion in cash, subject to post-

International Paper acquired four fluff pulp mills, one

closing adjustments. Under the terms of the agreement,

northern bleached softwood kraft mill and two converting

International Paper acquired four fluff pulp mills, one

facilities of modified fiber, located in the United States,

northern bleached softwood kraft mill and two converting

Canada and Poland.

facilities of modified fiber, located in the United States,

The following table summarizes the final fair values

assigned to assets and liabilities acquired as of

December 1, 2016:

Cash and temporary investments

December 1, 2016:

Accounts and notes receivable

In millions

Inventory

Cash and temporary investments

Other current assets

Accounts and notes receivable

Plants, properties and equipment

Inventory

Goodwill

Other current assets

Other intangible assets

Plants, properties and equipment

Deferred charges and other assets

Goodwill

Total assets acquired

Other intangible assets

Accounts payable and accrued liabilities

Deferred charges and other assets

Long-term debt

Total assets acquired

Other long-term liabilities

Accounts payable and accrued liabilities

Total liabilities assumed

Long-term debt

Net assets acquired

Other long-term liabilities

December 1, 2016

195

238

195

1,711

238

212

1,711

2,437

212

114

104

2,437

114

246

104

2,191

Total liabilities assumed

In connection with the allocation of fair value, inventories

246

were written up by $33 million to their estimated fair

Net assets acquired

2,191

value. During 2017 and 2016, $14 million before taxes

($8 million after taxes) and $19 million before taxes ($12

In connection with the allocation of fair value, inventories

million after taxes), respectively, were expensed to Cost

were written up by $33 million to their estimated fair

of products sold as the related inventory was sold.

value. During 2017 and 2016, $14 million before taxes

($8 million after taxes) and $19 million before taxes ($12

Since the date of acquisition, Net sales of $111 million

million after taxes), respectively, were expensed to Cost

and Earnings (loss) from continuing operations before

of products sold as the related inventory was sold.

income taxes and equity earnings of $(21) million from

the acquired business are included in the Company's

Since the date of acquisition, Net sales of $111 million

consolidated statement of operations for the year ended

and Earnings (loss) from continuing operations before

December 31, 2016. Additionally, Selling and

income taxes and equity earnings of $(21) million from

administrative expenses for 2016 include $28 million in

the acquired business are included in the Company's

charges before taxes ($18 million after taxes) for

consolidated statement of operations for the year ended

integration costs associated with the acquisition.

December 31, 2016. Additionally, Selling and

administrative expenses for 2016 include $28 million in

The identifiable intangible assets acquired in connection

charges before taxes ($18 million after taxes) for

with the acquisition of the Weyerhaeuser pulp business

integration costs associated with the acquisition.

included the following:

The identifiable intangible assets acquired in connection

Average

with the acquisition of the Weyerhaeuser pulp business

Remaining

Estimated

Fair Value

Useful Life

In millions

included the following:

Asset Class:

Customer relationships and lists

In millions

Trade names, patents, trademarks

and developed technology

Estimated

Fair Value

113

(at acquisition

8 years

Asset Class:

Other

Customer relationships and lists

Trade names, patents, trademarks

and developed technology

Total

Other

Total

212

113

212

(at acquisition

date)

Average

Remaining

24 years

Useful Life

date)

10 years

24 years

8 years

10 years

Reclassifications out of AOCI for the three years ended December 31 were as follows:

In millions

Defined benefit pension and postretirement items:

Change in cumulative foreign currency translation

Prior-service costs

Actuarial gains/(losses)

Total pre-tax amount

Tax (expense)/benefit

Net of tax

adjustments:

Business acquisitions/divestiture

Tax (expense)/benefit

Net of tax

Foreign exchange contracts

Total pre-tax amount

Tax (expense)/benefit

Net of tax

Net gains and losses on cash flow hedging derivatives:

Amount Reclassified from Accumulated

Other Comprehensive Income

2017

2016

2015

Location of Amount

Reclassified from AOCI

(33) $

(37) $

(33) (a) Cost of products sold

(449) (a) Cost of products sold

(733)

(766)

280

(486)

—

(2)

(851)

(888)

343

(545)

—

(3)

(482)

186

(296)

—

(20)

(12)

(268)

Net (gains) losses on sales and

impairments of businesses

(20) (b) Cost of products sold

Total reclassifications for the period, net of tax

(478) $

(535) $

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 16 for

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

additional details).

details).

NOTE 5 RESTRUCTURING CHARGES AND

OTHER ITEMS

(b)

Includes $4 million of accelerated depreciation and $3 million

of severance charges which is related to 85 employees.

2017: During 2017, restructuring and other charges

totaling $67 million before taxes were recorded. These

2015: During 2015, total restructuring and other

charges of $252 million before taxes were recorded.

These charges included:

2017

In millions

charges included:

In millions

Early debt extinguishment costs (see Note 13)

Gain on sale of investment in ArborGen

Other

Total

(14)

(2)

(8)

2016: During 2016, total restructuring and other

charges of $54 million before taxes were recorded.

These charges included:

In millions

2016

Early debt extinguishment costs (see Note 13)

India packaging evaluation write-off

Gain on sale of investment in Arizona Chemical

Riegelwood mill conversion costs (a)

Turkey mill closure (b)

Total

(a)

Includes $3 million of accelerated depreciation, $3 million of

inventory write-off charges and $3 million of other charges.

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)

Other

Total

2015

207

252

(a)

Includes $5 million of severance charges, which is related to

69 employees, $24 million of accelerated depreciation, sale

proceeds of $22 million and $1 million of other charges.

NOTE 6 ACQUISITIONS AND JOINT VENTURES

TANGIER, MOROCCO FACILITY

2017: On June 30, 2017, the Company completed the

acquisition of Europac's Tangier, Morocco facility, a

corrugated packaging

facility,

for €40 million

(approximately $46 million using the June 30, 2017

exchange rate). After working capital and other post-

close adjustments, final consideration exchanged was
close adjustments, final consideration exchanged was
€33 million (approximately $38 million using the June
€33 million (approximately $38 million using the June
30, 2017 exchange rate).
30, 2017 exchange rate).
The following table summarizes the provisional fair
value assigned to assets and liabilities acquired as of
The following table summarizes the provisional fair
June 30, 2017:
value assigned to assets and liabilities acquired as of
June 30, 2017:
In millions

June 30, 2017

In millions
Cash and temporary investments

Cash and temporary investments
Accounts and notes receivable

Accounts and notes receivable
Inventory

Inventory
Plants, properties and equipment

Plants, properties and equipment
Goodwill

Goodwill
Other intangible assets

Other intangible assets
Deferred charges and other assets

Deferred charges and other assets
Total assets acquired

Total assets acquired
Accounts payable and accrued liabilities

Accounts payable and accrued liabilities
Long-term debt

Long-term debt
Other long-term liabilities

Other long-term liabilities
Total liabilities assumed

Total liabilities assumed
Net assets acquired

Net assets acquired

June 30, 2017

1
7

7
3

3
32

32
4

4
5

5
4

4
56

56
5

5
11

11
2

2
18

18
38

Adjustments, if any, to provisional amounts will be
finalized within the measurement period of up to one
Adjustments, if any, to provisional amounts will be
year from the acquisition date. Since the date of
finalized within the measurement period of up to one
acquisition, Net sales of $6 million and Earnings (loss)
year from the acquisition date. Since the date of
from continuing operations before income taxes and
acquisition, Net sales of $6 million and Earnings (loss)
equity earnings of $(1) million from the acquired
from continuing operations before income taxes and
business have been included in the Company's
equity earnings of $(1) million from the acquired
consolidated statement of operations for the year ended
business have been included in the Company's
December 31, 2017. Pro forma information related to
consolidated statement of operations for the year ended
the acquisition of the Europac business has not been
December 31, 2017. Pro forma information related to
included as it is impractical to obtain the information due
the acquisition of the Europac business has not been
to the lack of availability of financial data and does not
included as it is impractical to obtain the information due
have a material effect on the Company's consolidated
to the lack of availability of financial data and does not
results of operations.
have a material effect on the Company's consolidated
results of operations.
WEYERHAEUSER PULP BUSINESS

WEYERHAEUSER PULP BUSINESS
2016: On December 1, 2016, the Company finalized the
purchase of Weyerhaeuser's pulp business
for
2016: On December 1, 2016, the Company finalized the
approximately $2.2 billion in cash, subject to post-
for
purchase of Weyerhaeuser's pulp business
closing adjustments. Under the terms of the agreement,
approximately $2.2 billion in cash, subject to post-
International Paper acquired four fluff pulp mills, one
closing adjustments. Under the terms of the agreement,
northern bleached softwood kraft mill and two converting
International Paper acquired four fluff pulp mills, one
facilities of modified fiber, located in the United States,
northern bleached softwood kraft mill and two converting
Canada and Poland.
facilities of modified fiber, located in the United States,
Canada and Poland.
The following table summarizes the final fair values
assigned to assets and liabilities acquired as of
December 1, 2016:

52
52

December 1, 2016

The following table summarizes the final fair values
In millions
assigned to assets and liabilities acquired as of
Cash and temporary investments
December 1, 2016:
Accounts and notes receivable
In millions
Inventory
Cash and temporary investments
Other current assets
Accounts and notes receivable
Plants, properties and equipment
Inventory
Goodwill
Other current assets
Other intangible assets
Plants, properties and equipment
Deferred charges and other assets
Goodwill
Total assets acquired
Other intangible assets
Accounts payable and accrued liabilities
Deferred charges and other assets
Long-term debt
Total assets acquired
Other long-term liabilities
Accounts payable and accrued liabilities
Total liabilities assumed
Long-term debt
Net assets acquired
Other long-term liabilities

195
December 1, 2016
238
12
11
195
1,711
238
52
11
212
1,711
6
52
2,437
212
114
6
104
2,437
28
114
246
104
2,191
28

246

2,191

In connection with the allocation of fair value, inventories
Total liabilities assumed
were written up by $33 million to their estimated fair
Net assets acquired
value. During 2017 and 2016, $14 million before taxes
($8 million after taxes) and $19 million before taxes ($12
In connection with the allocation of fair value, inventories
million after taxes), respectively, were expensed to Cost
were written up by $33 million to their estimated fair
of products sold as the related inventory was sold.
value. During 2017 and 2016, $14 million before taxes
($8 million after taxes) and $19 million before taxes ($12
Since the date of acquisition, Net sales of $111 million
million after taxes), respectively, were expensed to Cost
and Earnings (loss) from continuing operations before
of products sold as the related inventory was sold.
income taxes and equity earnings of $(21) million from
the acquired business are included in the Company's
Since the date of acquisition, Net sales of $111 million
consolidated statement of operations for the year ended
and Earnings (loss) from continuing operations before
December 31, 2016. Additionally, Selling and
income taxes and equity earnings of $(21) million from
administrative expenses for 2016 include $28 million in
the acquired business are included in the Company's
charges before taxes ($18 million after taxes) for
consolidated statement of operations for the year ended
integration costs associated with the acquisition.
December 31, 2016. Additionally, Selling and
administrative expenses for 2016 include $28 million in
The identifiable intangible assets acquired in connection
charges before taxes ($18 million after taxes) for
with the acquisition of the Weyerhaeuser pulp business
integration costs associated with the acquisition.
included the following:

The identifiable intangible assets acquired in connection
with the acquisition of the Weyerhaeuser pulp business
In millions
included the following:

Average
Remaining
Useful Life

Estimated
Fair Value

Asset Class:

Customer relationships and lists
In millions
Trade names, patents, trademarks
and developed technology
Asset Class:
Other
Customer relationships and lists
Total
Trade names, patents, trademarks
and developed technology

Other

Total

(at acquisition
date)

Average
Remaining
Useful Life

24 years

Estimated
$
95
Fair Value

(at acquisition
8 years
date)
10 years
24 years

8 years

10 years

113

4
95
212

113

212

$
$

On an unaudited pro forma basis, assuming the
On an unaudited pro forma basis, assuming the
acquisition of the newly acquired pulp business had
acquisition of the newly acquired pulp business had
closed January 1, 2015, the consolidated results would
closed January 1, 2015, the consolidated results would
have reflected Net sales of $20.8 billion and $22.2 billion
have reflected Net sales of $20.8 billion and $22.2 billion
and Earnings (loss) from continuing operations before
and Earnings (loss) from continuing operations before
income taxes and equity earnings of $942 million and
income taxes and equity earnings of $942 million and
$1.3 billion for the years ended December 31, 2016 and
$1.3 billion for the years ended December 31, 2016 and
2015, respectively.
2015, respectively.

The 2016 pro forma information includes adjustments
The 2016 pro forma information includes adjustments
for additional amortization expense on identifiable
for additional amortization expense on identifiable
intangible assets of $18 million and eliminating the write-
intangible assets of $18 million and eliminating the write-
off of the estimated fair value of inventory of $19 million
off of the estimated fair value of inventory of $19 million
and non-recurring integration costs associated with the
and non-recurring integration costs associated with the
acquisition of $30 million, including $12 million of deal
acquisition of $30 million, including $12 million of deal
costs.
costs.

The 2015 pro forma information includes adjustments
The 2015 pro forma information includes adjustments
for additional amortization expense on identifiable
for additional amortization expense on identifiable
intangible assets of $18 million, non-recurring
intangible assets of $18 million, non-recurring
integration costs associated with the acquisition of $30
integration costs associated with the acquisition of $30
million, and incremental expense of $33 million
million, and incremental expense of $33 million
associated with the write-off of the estimated fair value
associated with the write-off of the estimated fair value
of inventory.
of inventory.

forma consolidated
forma consolidated

The unaudited pro
financial
financial
The unaudited pro
information was prepared for comparative purposes
information was prepared for comparative purposes
only and includes certain adjustments, as noted above.
only and includes certain adjustments, as noted above.
They do not reflect the effect of costs or synergies that
They do not reflect the effect of costs or synergies that
would have been expected to result from the integration
would have been expected to result from the integration
of the acquisition. The pro forma information does not
of the acquisition. The pro forma information does not
purport to represent International Paper's actual results
purport to represent International Paper's actual results
of operations as if the transaction described above
of operations as if the transaction described above
would have occurred as of January 1, 2015, nor is it
would have occurred as of January 1, 2015, nor is it
necessarily an indicator of future results.
necessarily an indicator of future results.

HOLMEN PAPER NEWSPRINT MILL
HOLMEN PAPER NEWSPRINT MILL

2016: On June 30, 2016, the Company completed the
2016: On June 30, 2016, the Company completed the
previously announced acquisition of Holmen Paper's
previously announced acquisition of Holmen Paper's
newsprint mill in Madrid, Spain. Under the terms of the
newsprint mill in Madrid, Spain. Under the terms of the
acquisition agreement, International Paper purchased
acquisition agreement, International Paper purchased
the Madrid newsprint mill, as well as, associated
the Madrid newsprint mill, as well as, associated
recycling operations and a 50% ownership interest in a
recycling operations and a 50% ownership interest in a
cogeneration facility. The Company is in the process of
cogeneration facility. The Company is in the process of
converting the mill to produce recycled containerboard
converting the mill to produce recycled containerboard
with an expected capacity of 440,000 tons. Once
with an expected capacity of 440,000 tons. Once
completed,
the
completed,
the
Company's corrugated packaging business in EMEA.
Company's corrugated packaging business in EMEA.

the converted mill will support
the converted mill will support

The Company's aggregate purchase price for the mill,
The Company's aggregate purchase price for the mill,
recycling operations and 50% ownership of the
recycling operations and 50% ownership of the
cogeneration facility was €53 million (approximately $59
cogeneration facility was €53 million (approximately $59
million using June 30, 2016 exchange rate). The
million using June 30, 2016 exchange rate). The
assignment of fair value to assets acquired and liabilities
assignment of fair value to assets acquired and liabilities
assumed was completed in the first quarter of 2017 and
assumed was completed in the first quarter of 2017 and
is presented in the table below.
is presented in the table below.

In millions
In millions

Current assets
Current assets

Equity method investments
Equity method investments

Plants, properties and equipment
Plants, properties and equipment

Other long-term assets
Other long-term assets

Total assets acquired
Total assets acquired

Short-term liabilities
Short-term liabilities

Long-term liabilities
Long-term liabilities

Total liabilities assumed
Total liabilities assumed

Net assets acquired
Net assets acquired

$
$

June 30, 2016
June 30, 2016

14
14

60
60

5
5

93
93

9
9

16
16

25
25

68
68

The final fair values assigned indicated that the sum of
The final fair values assigned indicated that the sum of
the cash consideration paid was less than the fair value
the cash consideration paid was less than the fair value
of the underlying net assets, after adjustments, by $6
of the underlying net assets, after adjustments, by $6
million, resulting in a bargain purchase gain being
million, resulting in a bargain purchase gain being
recorded on this transaction. The amount of revenue
recorded on this transaction. The amount of revenue
and earnings recognized since the acquisition date are
and earnings recognized since the acquisition date are
$90 million and a net loss of $2 million, respectively, for
$90 million and a net loss of $2 million, respectively, for
the year ended December 31, 2016. Pro forma
the year ended December 31, 2016. Pro forma
information related to the acquisition of the Holmen
information related to the acquisition of the Holmen
businesses has not been included as it is impractical to
businesses has not been included as it is impractical to
obtain the information due to the lack of availability of
obtain the information due to the lack of availability of
financial data and does not have a material effect on the
financial data and does not have a material effect on the
Company's consolidated results of operations.
Company's consolidated results of operations.

The Company has accounted for the above acquisitions
The Company has accounted for the above acquisitions
under ASC 805, "Business Combinations" and the
under ASC 805, "Business Combinations" and the
results of operations have been included in International
results of operations have been included in International
Paper's financial statements beginning with the dates
Paper's financial statements beginning with the dates
of acquisition.
of acquisition.

NOTE 7 DIVESTITURES
NOTE 7 DIVESTITURES

DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS

2017: On January 1, 2018, the Company completed the
2017: On January 1, 2018, the Company completed the
previously announced transfer of its North American
previously announced transfer of its North American
Consumer Packaging business, which includes its North
Consumer Packaging business, which includes its North
American Coated Paperboard and Foodservice
American Coated Paperboard and Foodservice
businesses, to a subsidiary of Graphic Packaging
businesses, to a subsidiary of Graphic Packaging
Holding Company in exchange for a 20.5% ownership
Holding Company in exchange for a 20.5% ownership
interest in a subsidiary of Graphic Packaging Holding
interest in a subsidiary of Graphic Packaging Holding
Company that holds the assets of the combined
Company that holds the assets of the combined
business. As part of the transaction, International Paper
business. As part of the transaction, International Paper
also received $660 million in cash proceeds from a new
also received $660 million in cash proceeds from a new
loan entered into on December 8, 2017, which the
loan entered into on December 8, 2017, which the
Company used to pay down existing debt. The loan was
Company used to pay down existing debt. The loan was
subsequently assumed by Graphic Packaging
subsequently assumed by Graphic Packaging
International, LLC on the transaction closing date and
International, LLC on the transaction closing date and
is classified as Liabilities held
the
in
in
is classified as Liabilities held
the
accompanying consolidated balance sheet as of
accompanying consolidated balance sheet as of

for sale
for sale

transaction's impact to segment reporting, see Note 19.

Accounts payable

Long-term assets held for sale

1,046 (a)

1,018

$ 1,377

104

$ 1,379

110

December 31, 2017. International Paper will account for

its ownership interest in the combined business under

the equity method. The Company has not finalized the

fair value of its investment in the combined business,

but expects to record a gain on the transfer in the first

quarter of 2018.

The North American Consumer Packaging business

was historically presented in the Company's Consumer

Packaging segment. For further discussion of the

All current and historical operating results for North

American Consumer Packaging are

included

Discontinued operations, net of

tax,

the

accompanying consolidated statement of operations.

The following summarizes the major classes of line

items comprising Earnings (Loss) Before Income Taxes

and Equity Earnings reconciled

to Discontinued

Operations, net of tax, related to the transfer of the North

American Consumer Packaging business for all periods

presented in the consolidated statement of operations:

In millions

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

Interest expense, net

Earnings (Loss) Before

Income Taxes and Equity

Earnings

Income tax provision

(benefit)

Discontinued Operations,

Net of Taxes

2017

2016

2015

1,559 $

1,584 $

1,690

1,179

1,095

1,155

110

126

103

124

—

161

106

127

158

—

134

34 $

107 $

All current and historical assets and liabilities of North

American Consumer Packaging are classified as

current and long-term assets held for sale and current

and

long-term

liabilities held

for sale

the

accompanying consolidated balance sheet. The

following summarizes the major classes of assets and

liabilities of North American Consumer Packaging

reconciled to total Assets held for sale and total

Liabilities held

for sale

the accompanying

consolidated balance sheet:

Accounts and notes receivable

In millions

Inventories

Other current assets

Current assets held for sale

Plants, properties and equipment

Deferred charges and other assets

Total Assets Held for Sale

Accrued payroll and benefits

Other accrued liabilities

Current liabilities held for sale

Long-term debt

Other liabilities

2017

143

185

331

1,021

146

651

2016

149

205

361

987

161

—

Long-term liabilities held for sale

659 (a)

Total Liabilities Held for Sale

805

169

(a) As a result of the January 1, 2018 transfer of the North American

Consumer Packaging business, these amounts have been

included in current assets held for sale of $1.4 billion and current

liabilities held for sale of $805 million in the accompanying

consolidated balance sheet as of December 31, 2017.

Total cash provided by operations related to the North

American Consumer Packaging business of $207

million, $268 million and $197 million for 2017, 2016 and

2015, respectively, is included in Cash Provided By

(Used For) Operations in the consolidated statement of

cash flows. Total cash used for investing activities

related to the North American Consumer Packaging

business of $111 million, $114 million and $178 million

for 2017, 2016 and 2015, respectively, is included in

Cash Provided By (Used For) Investing Activities in the

consolidated statement of cash flows.

OTHER DIVESTITURES AND IMPAIRMENTS

2017: On September 7, 2017, the Company completed

the sale of its foodservice business in China to

Huhtamaki Hong Kong Limited. Proceeds received

totaled approximately RMB 129 million ($18 million

using the September 30, 2017 exchange rate). Under

the terms of the transaction, and after post-closing

adjustments,

International

Paper

received

approximately RMB 49 million in exchange for its

ownership interest in two China foodservice entities and

RMB 80 million for the sale of notes receivable from the

acquired entities.

Subsequent to the announced agreement in June 2017,

a determination was made that the current book value

of the asset group exceeded its estimated fair value of

$7 million, which was the agreed upon selling price. As

a result, a pre-tax charge of $9 million was recorded

during the second quarter of 2017, to write down the

long-lived assets of this business to their estimated fair

value. Amounts related to this business included in the

53
53

On an unaudited pro forma basis, assuming the

acquisition of the newly acquired pulp business had

closed January 1, 2015, the consolidated results would

have reflected Net sales of $20.8 billion and $22.2 billion

and Earnings (loss) from continuing operations before

income taxes and equity earnings of $942 million and

$1.3 billion for the years ended December 31, 2016 and

2015, respectively.

The 2016 pro forma information includes adjustments

for additional amortization expense on identifiable

intangible assets of $18 million and eliminating the write-

off of the estimated fair value of inventory of $19 million

and non-recurring integration costs associated with the

acquisition of $30 million, including $12 million of deal

costs.

The 2015 pro forma information includes adjustments

for additional amortization expense on identifiable

intangible assets of $18 million, non-recurring

integration costs associated with the acquisition of $30

million, and incremental expense of $33 million

associated with the write-off of the estimated fair value

of inventory.

The unaudited pro

forma consolidated

financial

information was prepared for comparative purposes

only and includes certain adjustments, as noted above.

They do not reflect the effect of costs or synergies that

would have been expected to result from the integration

of the acquisition. The pro forma information does not

purport to represent International Paper's actual results

of operations as if the transaction described above

would have occurred as of January 1, 2015, nor is it

necessarily an indicator of future results.

HOLMEN PAPER NEWSPRINT MILL

2016: On June 30, 2016, the Company completed the

previously announced acquisition of Holmen Paper's

newsprint mill in Madrid, Spain. Under the terms of the

acquisition agreement, International Paper purchased

the Madrid newsprint mill, as well as, associated

recycling operations and a 50% ownership interest in a

cogeneration facility. The Company is in the process of

converting the mill to produce recycled containerboard

with an expected capacity of 440,000 tons. Once

completed,

the converted mill will support

the

Company's corrugated packaging business in EMEA.

The Company's aggregate purchase price for the mill,

recycling operations and 50% ownership of the

cogeneration facility was €53 million (approximately $59

million using June 30, 2016 exchange rate). The

assignment of fair value to assets acquired and liabilities

assumed was completed in the first quarter of 2017 and

is presented in the table below.

In millions

Current assets

Equity method investments

Plants, properties and equipment

Other long-term assets

Total assets acquired

Short-term liabilities

Long-term liabilities

Total liabilities assumed

Net assets acquired

June 30, 2016

The final fair values assigned indicated that the sum of

the cash consideration paid was less than the fair value

of the underlying net assets, after adjustments, by $6

million, resulting in a bargain purchase gain being

recorded on this transaction. The amount of revenue

and earnings recognized since the acquisition date are

$90 million and a net loss of $2 million, respectively, for

the year ended December 31, 2016. Pro forma

information related to the acquisition of the Holmen

businesses has not been included as it is impractical to

obtain the information due to the lack of availability of

financial data and does not have a material effect on the

Company's consolidated results of operations.

The Company has accounted for the above acquisitions

under ASC 805, "Business Combinations" and the

results of operations have been included in International

Paper's financial statements beginning with the dates

of acquisition.

NOTE 7 DIVESTITURES

DISCONTINUED OPERATIONS

2017: On January 1, 2018, the Company completed the

previously announced transfer of its North American

Consumer Packaging business, which includes its North

American Coated Paperboard and Foodservice

businesses, to a subsidiary of Graphic Packaging

Holding Company in exchange for a 20.5% ownership

interest in a subsidiary of Graphic Packaging Holding

Company that holds the assets of the combined

business. As part of the transaction, International Paper

also received $660 million in cash proceeds from a new

loan entered into on December 8, 2017, which the

Company used to pay down existing debt. The loan was

subsequently assumed by Graphic Packaging

International, LLC on the transaction closing date and

is classified as Liabilities held

for sale

the

accompanying consolidated balance sheet as of

December 31, 2017. International Paper will account for
December 31, 2017. International Paper will account for
its ownership interest in the combined business under
its ownership interest in the combined business under
the equity method. The Company has not finalized the
the equity method. The Company has not finalized the
fair value of its investment in the combined business,
fair value of its investment in the combined business,
but expects to record a gain on the transfer in the first
but expects to record a gain on the transfer in the first
quarter of 2018.
quarter of 2018.

The North American Consumer Packaging business
The North American Consumer Packaging business
was historically presented in the Company's Consumer
was historically presented in the Company's Consumer
Packaging segment. For further discussion of the
Packaging segment. For further discussion of the
transaction's impact to segment reporting, see Note 19.
transaction's impact to segment reporting, see Note 19.

tax,
tax,

included
included

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

in
in

In millions
In millions

Net Sales
Net Sales

Costs and Expenses
Costs and Expenses

Cost of products sold
Cost of products sold

Selling and administrative
Selling and administrative
expenses
expenses

Depreciation, amortization
Depreciation, amortization
and cost of timber harvested
and cost of timber harvested

Distribution expenses
Distribution expenses

Taxes other than payroll and
Taxes other than payroll and
income taxes
income taxes

Interest expense, net
Interest expense, net

Earnings (Loss) Before
Earnings (Loss) Before
Income Taxes and Equity
Income Taxes and Equity
Earnings
Earnings

Income tax provision
Income tax provision
(benefit)
(benefit)

Discontinued Operations,
Discontinued Operations,
Net of Taxes
Net of Taxes

2017
2017

2016
2016

2015
2015

$
$

1,559 $
1,559 $

1,584 $
1,584 $

1,690
1,690

1,179
1,179

1,095
1,095

1,155
1,155

110
110

80
80

126
126

11
11

1
1

52
52

18
18

91
91

103
103

124
124

10
10

—
—

161
161

54
54

$
$

34 $
34 $

107 $
107 $

106
106

127
127

158
158

10
10

—
—

134
134

49
49

85
85

long-term
long-term

liabilities held
liabilities held

All current and historical assets and liabilities of North
All current and historical assets and liabilities of North
American Consumer Packaging are classified as
American Consumer Packaging are classified as
current and long-term assets held for sale and current
current and long-term assets held for sale and current
and
the
and
the
accompanying consolidated balance sheet. The
accompanying consolidated balance sheet. The
following summarizes the major classes of assets and
following summarizes the major classes of assets and
liabilities of North American Consumer Packaging
liabilities of North American Consumer Packaging
reconciled to total Assets held for sale and total
reconciled to total Assets held for sale and total
Liabilities held
the accompanying
for sale
for sale
Liabilities held
the accompanying
consolidated balance sheet:
consolidated balance sheet:

for sale
for sale

in
in

54
54

In millions
In millions

Accounts and notes receivable
Accounts and notes receivable

$
$

Inventories
Inventories

Other current assets
Other current assets

Current assets held for sale
Current assets held for sale

Plants, properties and equipment
Plants, properties and equipment

Deferred charges and other assets
Deferred charges and other assets

2017
2017

143
143

185
185

3
3

331
331

1,021
1,021

25
25

$
$

2016
2016

149
149

205
205

7
7

361
361

987
987

31
31

Long-term assets held for sale
Long-term assets held for sale

1,046 (a)
1,046 (a)

1,018
1,018

Total Assets Held for Sale
Total Assets Held for Sale

Accounts payable
Accounts payable

Accrued payroll and benefits
Accrued payroll and benefits

Other accrued liabilities
Other accrued liabilities

Current liabilities held for sale
Current liabilities held for sale

Long-term debt
Long-term debt

Other liabilities
Other liabilities

$ 1,377
$ 1,377

$
$

104
104

$ 1,379
$ 1,379

$
$

110
110

25
25

17
17

146
146

651
651

8
8

29
29

22
22

161
161

—
—

8
8

Long-term liabilities held for sale
Long-term liabilities held for sale

659 (a)
659 (a)

Total Liabilities Held for Sale
Total Liabilities Held for Sale

$
$

805
805

$
$

169
169

(a) As a result of the January 1, 2018 transfer of the North American
(a) As a result of the January 1, 2018 transfer of the North American
Consumer Packaging business, these amounts have been
Consumer Packaging business, these amounts have been
included in current assets held for sale of $1.4 billion and current
included in current assets held for sale of $1.4 billion and current
liabilities held for sale of $805 million in the accompanying
liabilities held for sale of $805 million in the accompanying
consolidated balance sheet as of December 31, 2017.
consolidated balance sheet as of December 31, 2017.

Total cash provided by operations related to the North
Total cash provided by operations related to the North
American Consumer Packaging business of $207
American Consumer Packaging business of $207
million, $268 million and $197 million for 2017, 2016 and
million, $268 million and $197 million for 2017, 2016 and
2015, respectively, is included in Cash Provided By
2015, respectively, is included in Cash Provided By
(Used For) Operations in the consolidated statement of
(Used For) Operations in the consolidated statement of
cash flows. Total cash used for investing activities
cash flows. Total cash used for investing activities
related to the North American Consumer Packaging
related to the North American Consumer Packaging
business of $111 million, $114 million and $178 million
business of $111 million, $114 million and $178 million
for 2017, 2016 and 2015, respectively, is included in
for 2017, 2016 and 2015, respectively, is included in
Cash Provided By (Used For) Investing Activities in the
Cash Provided By (Used For) Investing Activities in the
consolidated statement of cash flows.
consolidated statement of cash flows.

OTHER DIVESTITURES AND IMPAIRMENTS
OTHER DIVESTITURES AND IMPAIRMENTS

2017: On September 7, 2017, the Company completed
2017: On September 7, 2017, the Company completed
the sale of its foodservice business in China to
the sale of its foodservice business in China to
Huhtamaki Hong Kong Limited. Proceeds received
Huhtamaki Hong Kong Limited. Proceeds received
totaled approximately RMB 129 million ($18 million
totaled approximately RMB 129 million ($18 million
using the September 30, 2017 exchange rate). Under
using the September 30, 2017 exchange rate). Under
the terms of the transaction, and after post-closing
the terms of the transaction, and after post-closing
received
adjustments,
received
adjustments,
approximately RMB 49 million in exchange for its
approximately RMB 49 million in exchange for its
ownership interest in two China foodservice entities and
ownership interest in two China foodservice entities and
RMB 80 million for the sale of notes receivable from the
RMB 80 million for the sale of notes receivable from the
acquired entities.
acquired entities.

International
International

Paper
Paper

Subsequent to the announced agreement in June 2017,
Subsequent to the announced agreement in June 2017,
a determination was made that the current book value
a determination was made that the current book value
of the asset group exceeded its estimated fair value of
of the asset group exceeded its estimated fair value of
$7 million, which was the agreed upon selling price. As
$7 million, which was the agreed upon selling price. As
a result, a pre-tax charge of $9 million was recorded
a result, a pre-tax charge of $9 million was recorded
during the second quarter of 2017, to write down the
during the second quarter of 2017, to write down the
long-lived assets of this business to their estimated fair
long-lived assets of this business to their estimated fair
value. Amounts related to this business included in the
value. Amounts related to this business included in the

Company's statement of operations were immaterial for
Company's statement of operations were immaterial for
all periods presented.
all periods presented.

2016: On June 30, 2016, the Company completed the
2016: On June 30, 2016, the Company completed the
sale of its corrugated packaging business in China and
sale of its corrugated packaging business in China and
Southeast Asia to Xiamen Bridge Hexing Equity
Southeast Asia to Xiamen Bridge Hexing Equity
Investment Partnership Enterprise. Under the terms of
Investment Partnership Enterprise. Under the terms of
the transaction and after post-closing adjustments,
the transaction and after post-closing adjustments,
International Paper received a total of approximately
International Paper received a total of approximately
RMB 957 million (approximately $144 million at the June
RMB 957 million (approximately $144 million at the June
30, 2016 exchange rate), which included the buyer's
30, 2016 exchange rate), which included the buyer's
assumption of a liability for outstanding loans of
assumption of a liability for outstanding loans of
approximately $55 million which are payable up to three
approximately $55 million which are payable up to three
years from the closing of the sale. The remaining
years from the closing of the sale. The remaining
to
balance of
to
balance of
International Paper as of December 31, 2017, totaled
International Paper as of December 31, 2017, totaled
$9 million.
$9 million.

the outstanding
the outstanding

loans payable
loans payable

Based on the final sales price, a determination was
Based on the final sales price, a determination was
made that the current book value of the asset group was
made that the current book value of the asset group was
not recoverable. As a result, a pre-tax charge of $46
not recoverable. As a result, a pre-tax charge of $46
million was recorded during 2016 in the Company's
million was recorded during 2016 in the Company's
Industrial Packaging segment to write down the long-
Industrial Packaging segment to write down the long-
lived assets of this business to their estimated fair value.
lived assets of this business to their estimated fair value.
In addition, the Company recorded a pre-tax charge of
In addition, the Company recorded a pre-tax charge of
$24 million for severance that was contingent upon the
$24 million for severance that was contingent upon the
sale of this business. The 2016 net loss totaling $70
sale of this business. The 2016 net loss totaling $70
million related to the impairment and severance of IP
million related to the impairment and severance of IP
Asia Packaging is included in Net (gains) losses on sales
Asia Packaging is included in Net (gains) losses on sales
and impairments of businesses in the accompanying
and impairments of businesses in the accompanying
consolidated statement of operations.
consolidated statement of operations.

The amount of pre-tax losses related to the IP Asia
The amount of pre-tax losses related to the IP Asia
Packaging business
the Company's
the Company's
included
included
Packaging business
consolidated statement of operations were $83 million,
consolidated statement of operations were $83 million,
and $8 million for years ended December 31, 2016 and
and $8 million for years ended December 31, 2016 and
2015.
2015.

in
in

2015: On October 13, 2015, the Company finalized the
2015: On October 13, 2015, the Company finalized the
sale of its 55% interest in IP Asia Coated Paperboard
sale of its 55% interest in IP Asia Coated Paperboard
(IP-Sun JV) business to its Chinese coated board joint
(IP-Sun JV) business to its Chinese coated board joint
venture partner, Shandong Sun Holding Group Co., Ltd.
venture partner, Shandong Sun Holding Group Co., Ltd.
for RMB 149 million (approximately USD $23 million).
for RMB 149 million (approximately USD $23 million).
During the third quarter of 2015, a determination was
During the third quarter of 2015, a determination was
made that the current book value of the asset group was
made that the current book value of the asset group was
not recoverable. As a result, the net pre-tax impairment
not recoverable. As a result, the net pre-tax impairment
charge of $174 million ($113 million after taxes) was
charge of $174 million ($113 million after taxes) was
recorded to write down the long-lived assets of this
recorded to write down the long-lived assets of this
business to its estimated fair value. The impairment
business to its estimated fair value. The impairment
charge is included in Net (gains) losses on sales and
charge is included in Net (gains) losses on sales and
impairments of businesses in the accompanying
impairments of businesses in the accompanying
consolidated statement of operations. The amount of
consolidated statement of operations. The amount of
pre-tax losses related to noncontrolling interest of the
pre-tax losses related to noncontrolling interest of the
IP-Sun JV included in the Company's consolidated
IP-Sun JV included in the Company's consolidated
statement of operations for the year ended December
statement of operations for the year ended December
31, 2015 was $19 million. The amount of pre-tax losses
31, 2015 was $19 million. The amount of pre-tax losses
related to the IP-Sun JV included in the Company's
related to the IP-Sun JV included in the Company's
consolidated statement of operations for the year ended
consolidated statement of operations for the year ended
December 31, 2015 was $226 million.
December 31, 2015 was $226 million.

INTEREST

ASSET RETIREMENT OBLIGATIONS

Interest payments of $782 million, $682 million and $680

million were made during the years ended December

31, 2017, 2016 and 2015, respectively.

At December 31, 2017 and December 31, 2016, we had

recorded liabilities of $86 million and $83 million,

respectively, related to asset retirement obligations.

The following table presents changes in the goodwill balances as allocated to each business segment for the years ended

Amounts related to interest were as follows:

In millions

Interest expense (a)

Interest income (a)

Capitalized interest costs

2017

2016

2015

758 $

695 $

644

186

175

(a)

Interest expense and interest income exclude approximately

$25 million in 2015 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

December 31, 2017 and 2016:

Balance as of December 31, 2015

In millions

Goodwill

Accumulated impairment losses

Reclassifications and other (a)

Additions/reductions

Impairment loss

Balance as of December 31, 2016

Goodwill

Accumulated impairment losses

Reclassifications and other (a)

Additions/reductions

Impairment loss

Balance as of December 31, 2017

Goodwill

Total

Accumulated impairment losses

Industrial

Packaging

Global

Cellulose

Fibers

Printing

Papers

Total

3,384

2,124

5,508

(296)

3,088

(4)

(5) (b)

—

3,375

(296)

3,079

—

3,382

(296)

—

19 (c)

—

(1,877)

247

(14) (d)

—

2,143

(1,877)

266

(1)

—

2,150

(1,877)

(2,173)

3,335

—

5,537

(2,173)

3,364

5,584

(2,173)

4 (e)

33 (c)

3,086

273

3,411

(a) Represents the effects of foreign currency translations and reclassifications.

(b) Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in the U.S.

(d) Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in Brazil.

(e) Reflects the acquisition of the newly acquired Moroccan box plant.

NOTE 8 SUPPLEMENTARY FINANCIAL
NOTE 8 SUPPLEMENTARY FINANCIAL
STATEMENT INFORMATION
STATEMENT INFORMATION
TEMPORARY INVESTMENTS
TEMPORARY INVESTMENTS
Temporary investments with an original maturity of three
Temporary investments with an original maturity of three
months or less are treated as cash equivalents and are
months or less are treated as cash equivalents and are
stated at cost. Temporary investments totaled $661
stated at cost. Temporary investments totaled $661
million and $757 million at December 31, 2017 and 2016,
million and $757 million at December 31, 2017 and 2016,
respectively.
respectively.
ACCOUNTS AND NOTES RECEIVABLE
ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable, net of allowances, by
Accounts and notes receivable, net of allowances, by
classification were:
classification were:
In millions at December 31
In millions at December 31
Accounts and notes receivable:
Accounts and notes receivable:

2017
2017

2016
2016

Trade
Trade
Other
Other
Total
Total

$ 3,017 $ 2,612
$ 3,017 $ 2,612
240
240
$ 3,287 $ 2,852
$ 3,287 $ 2,852

270
270

INVENTORIES
INVENTORIES
In millions at December 31
In millions at December 31
Raw materials
Raw materials
Finished pulp, paper and packaging
products
Finished pulp, paper and packaging
products
Operating supplies
Operating supplies
Other
Other
Inventories
Inventories

2017
2017

2016
2016

$
$

274 $
274 $

286
286
1,231
1,231
616
616
100
100
$ 2,313 $ 2,233
$ 2,313 $ 2,233

1,337
1,337
615
615
87
87

International Paper’s U.S.
International Paper’s U.S.

The last-in, first-out inventory method is used to value
The last-in, first-out inventory method is used to value
inventories.
most of
inventories.
most of
Approximately 71% of total raw materials and finished
Approximately 71% of total raw materials and finished
products inventories were valued using this method.
products inventories were valued using this method.
The last-in, first-out inventory reserve was $293 million
The last-in, first-out inventory reserve was $293 million
and $290 million at December 31, 2017 and 2016,
and $290 million at December 31, 2017 and 2016,
respectively.
respectively.
PLANTS, PROPERTIES AND EQUIPMENT
PLANTS, PROPERTIES AND EQUIPMENT
In millions at December 31
In millions at December 31
Pulp, paper and packaging facilities
Pulp, paper and packaging facilities
Other properties and equipment
Other properties and equipment
Gross cost
Gross cost
Less: Accumulated depreciation
Less: Accumulated depreciation
Plants, properties and equipment, net
Plants, properties and equipment, net

$ 32,523 $ 30,943
$ 32,523 $ 30,943
1,308
1,308
32,251
32,251
19,248
19,248
$ 13,265 $ 13,003
$ 13,265 $ 13,003

1,291
1,291
33,814
33,814
20,549
20,549

2017
2017

2016
2016

Annual straight-line depreciable lives generally are, for
Annual straight-line depreciable lives generally are, for
buildings - 20 to 40 years, and for machinery and
buildings - 20 to 40 years, and for machinery and
equipment - 3 to 20 years. Depreciation expense was
equipment - 3 to 20 years. Depreciation expense was
$1.2 billion, $1.0 billion and $1.1 billion for the years
$1.2 billion, $1.0 billion and $1.1 billion for the years
ended December 31, 2017, 2016 and 2015,
ended December 31, 2017, 2016 and 2015,
respectively. Cost of products sold excludes
respectively. Cost of products sold excludes
depreciation and amortization expense.
depreciation and amortization expense.

55
55

Company's statement of operations were immaterial for

all periods presented.

2016: On June 30, 2016, the Company completed the

sale of its corrugated packaging business in China and

Southeast Asia to Xiamen Bridge Hexing Equity

Investment Partnership Enterprise. Under the terms of

the transaction and after post-closing adjustments,

International Paper received a total of approximately

RMB 957 million (approximately $144 million at the June

30, 2016 exchange rate), which included the buyer's

assumption of a liability for outstanding loans of

approximately $55 million which are payable up to three

years from the closing of the sale. The remaining

balance of

the outstanding

loans payable

International Paper as of December 31, 2017, totaled

$9 million.

Based on the final sales price, a determination was

made that the current book value of the asset group was

not recoverable. As a result, a pre-tax charge of $46

million was recorded during 2016 in the Company's

Industrial Packaging segment to write down the long-

lived assets of this business to their estimated fair value.

In addition, the Company recorded a pre-tax charge of

$24 million for severance that was contingent upon the

sale of this business. The 2016 net loss totaling $70

million related to the impairment and severance of IP

Asia Packaging is included in Net (gains) losses on sales

and impairments of businesses in the accompanying

consolidated statement of operations.

The amount of pre-tax losses related to the IP Asia

Packaging business

included

the Company's

consolidated statement of operations were $83 million,

and $8 million for years ended December 31, 2016 and

2015.

2015: On October 13, 2015, the Company finalized the

sale of its 55% interest in IP Asia Coated Paperboard

(IP-Sun JV) business 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 was

not recoverable. As a result, the net pre-tax impairment

charge of $174 million ($113 million after taxes) was

recorded to write down the long-lived assets of this

business to its estimated fair value. The impairment

charge is included in Net (gains) losses on sales and

impairments of businesses in the accompanying

consolidated statement of operations. 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 year ended December

31, 2015 was $19 million. The amount of pre-tax losses

related to the IP-Sun JV included in the Company's

consolidated statement of operations for the year ended

December 31, 2015 was $226 million.

NOTE 8 SUPPLEMENTARY FINANCIAL

STATEMENT INFORMATION

TEMPORARY INVESTMENTS

Temporary investments with an original maturity of three

months or less are treated as cash equivalents and are

stated at cost. Temporary investments totaled $661

million and $757 million at December 31, 2017 and 2016,

respectively.

ACCOUNTS AND NOTES RECEIVABLE

Accounts and notes receivable, net of allowances, by

classification were:

In millions at December 31

Accounts and notes receivable:

Trade

Other

Total

INVENTORIES

In millions at December 31

Raw materials

Finished pulp, paper and packaging

products

Finished pulp, paper and packaging

products

Operating supplies

Other

Inventories

2017

2016

$ 3,017 $ 2,612

240

270

$ 3,287 $ 2,852

270

240

$ 3,287 $ 2,852

2017

2016

2017

274 $

2016

286

274 $

1,337

615

286

1,231

616

100

$ 2,313 $ 2,233

100

$ 2,313 $ 2,233

The last-in, first-out inventory method is used to value

International Paper’s U.S.

inventories.

most of

Approximately 71% of total raw materials and finished

International Paper’s U.S.

inventories.

Approximately 71% of total raw materials and finished

products inventories were valued using this method.

The last-in, first-out inventory reserve was $293 million

and $290 million at December 31, 2017 and 2016,

respectively.

PLANTS, PROPERTIES AND EQUIPMENT

In millions at December 31

Pulp, paper and packaging facilities

Other properties and equipment

Gross cost

Less: Accumulated depreciation

Plants, properties and equipment, net

2017

2016

2017

$ 32,523 $ 30,943

2016

$ 32,523 $ 30,943

1,308

1,291

33,814

20,549

1,308

32,251

19,248

20,549

$ 13,265 $ 13,003

19,248

$ 13,265 $ 13,003

Annual straight-line depreciable lives generally are, for

buildings - 20 to 40 years, and for machinery and

equipment - 3 to 20 years. Depreciation expense was

$1.2 billion, $1.0 billion and $1.1 billion for the years

ended December 31, 2017, 2016 and 2015,

respectively. Cost of products sold excludes

depreciation and amortization expense.

INTEREST
INTEREST

ASSET RETIREMENT OBLIGATIONS
ASSET RETIREMENT OBLIGATIONS

Interest payments of $782 million, $682 million and $680
Interest payments of $782 million, $682 million and $680
million were made during the years ended December
million were made during the years ended December
31, 2017, 2016 and 2015, respectively.
31, 2017, 2016 and 2015, respectively.

At December 31, 2017 and December 31, 2016, we had
At December 31, 2017 and December 31, 2016, we had
recorded liabilities of $86 million and $83 million,
recorded liabilities of $86 million and $83 million,
respectively, related to asset retirement obligations.
respectively, related to asset retirement obligations.

Amounts related to interest were as follows:
Amounts related to interest were as follows:

In millions
In millions

Interest expense (a)
Interest expense (a)

Interest income (a)
Interest income (a)

Capitalized interest costs
Capitalized interest costs

2017
2017

2016
2016

2015
2015

$
$

758 $
758 $

695 $
695 $

644
644

186
186

25
25

175
175

28
28

89
89

25
25

(a)
(a)

Interest expense and interest income exclude approximately
Interest expense and interest income exclude approximately
$25 million in 2015 related to investments in and borrowings
$25 million in 2015 related to investments in and borrowings
from variable interest entities for which the Company has a
from variable interest entities for which the Company has a
legal right of offset (see Note 12).
legal right of offset (see Note 12).

NOTE 9 GOODWILL AND OTHER INTANGIBLES
NOTE 9 GOODWILL AND OTHER INTANGIBLES

GOODWILL
GOODWILL

The following table presents changes in the goodwill balances as allocated to each business segment for the years ended
The following table presents changes in the goodwill balances as allocated to each business segment for the years ended
December 31, 2017 and 2016:
December 31, 2017 and 2016:

In millions
In millions

Balance as of December 31, 2015
Balance as of December 31, 2015

Goodwill
Goodwill

Accumulated impairment losses
Accumulated impairment losses

Reclassifications and other (a)
Reclassifications and other (a)

Additions/reductions
Additions/reductions

Impairment loss
Impairment loss

Balance as of December 31, 2016
Balance as of December 31, 2016

Goodwill
Goodwill

Accumulated impairment losses
Accumulated impairment losses

Reclassifications and other (a)
Reclassifications and other (a)

Additions/reductions
Additions/reductions

Impairment loss
Impairment loss

Balance as of December 31, 2017
Balance as of December 31, 2017

Goodwill
Goodwill

Accumulated impairment losses
Accumulated impairment losses

Total
Total

Industrial
Industrial
Packaging
Packaging

Global
Global
Cellulose
Cellulose
Fibers
Fibers

Printing
Printing
Papers
Papers

Total
Total

$
$

3,384
3,384

$
$

(296)
(296)

3,088
3,088

(4)
(4)

(5) (b)
(5) (b)

—
—

3,375
3,375

(296)
(296)

3,079
3,079

3
3

4 (e)
4 (e)

—
—

3,382
3,382

(296)
(296)

—
—

19 (c)
19 (c)

—
—

19
19

—
—

19
19

—
—

33 (c)
33 (c)

—
—

52
52

—
—

$
$

2,124
2,124

$
$

5,508
5,508

(1,877)
(1,877)

247
247

33
33

(14) (d)
(14) (d)

—
—

2,143
2,143

(1,877)
(1,877)

266
266

8
8

(1)
(1)

—
—

2,150
2,150

(1,877)
(1,877)

(2,173)
(2,173)

3,335
3,335

29
29

—
—

5,537
5,537

(2,173)
(2,173)

3,364
3,364

11
11

36
36

—
—

5,584
5,584

(2,173)
(2,173)

$
$

3,086
3,086

$
$

52
52

$
$

273
273

$
$

3,411
3,411

(a) Represents the effects of foreign currency translations and reclassifications.
(a) Represents the effects of foreign currency translations and reclassifications.
(b) Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in the U.S.
(b) Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in the U.S.
(c) Reflects the acquisition and purchase price adjustments of the newly acquired pulp business.
(c) Reflects the acquisition and purchase price adjustments of the newly acquired pulp business.
(d) Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in Brazil.
(d) Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in Brazil.
(e) Reflects the acquisition of the newly acquired Moroccan box plant.
(e) Reflects the acquisition of the newly acquired Moroccan box plant.

56
56

OTHER INTANGIBLES
OTHER INTANGIBLES

Identifiable intangible assets comprised the following:
Identifiable intangible assets comprised the following:

Our accounting for the following elements of the Tax Act

and, accordingly deferred income taxes were not

is incomplete. However, we were able to make

provided for such basis differences which totaled

reasonable estimates of those elements and, therefore,

approximately $5.9 billion at December 31, 2016. While

In millions at December 31
In millions at December 31

Customer relationships and lists
Customer relationships and lists
Non-compete agreements
Non-compete agreements
Tradenames, patents and trademarks, and
Tradenames, patents and trademarks, and
developed technology
developed technology

Land and water rights
Land and water rights
Software
Software
Other
Other
Total
Total

2017
2017

2016
2016

Gross
Gross
Carrying
Carrying
Amount
Amount

Accumulated
Accumulated
Amortization
Amortization

Net
Net
Intangible
Intangible
Assets
Assets

Gross
Gross
Carrying
Carrying
Amount
Amount

Accumulated
Accumulated
Amortization
Amortization

Net Intangible
Net Intangible
Assets
Assets

$
$

610 $
610 $
72
72

172
172

8
8
24
24
38
38
924 $
924 $

247 $
247 $
72
72

72
72

2
2
23
23
26
26
442 $
442 $

363 $
363 $
—
—

100
100

6
6
1
1
12
12
482 $
482 $

605 $
605 $
69
69

173
173

10
10
21
21
48
48
926 $
926 $

211 $
211 $
64
64

56
56

2
2
20
20
26
26
379 $
379 $

394
394
5
5

117
117

8
8
1
1
22
22
547
547

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

In millions
In millions

Amortization expense related to intangible assets
Amortization expense related to intangible assets

2017
2017

2016
2016

2015
2015

$
$

77 $
77 $

54 $
54 $

60
60

Based on current intangibles subject to amortization, estimated amortization expense for each of the succeeding years
Based on current intangibles subject to amortization, estimated amortization expense for each of the succeeding years
is as follows: 2018 – $55 million, 2019 – $52 million, 2020 – $51 million, 2021 – $51 million, 2022 – $49 million, and
is as follows: 2018 – $55 million, 2019 – $52 million, 2020 – $51 million, 2021 – $51 million, 2022 – $49 million, and
cumulatively thereafter – $217 million.
cumulatively thereafter – $217 million.

NOTE 10 INCOME TAXES
NOTE 10 INCOME TAXES

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

In millions
In millions

Earnings (loss)
Earnings (loss)

U.S.
U.S.

Non-U.S.
Non-U.S.

2017
2017

2016
2016

2015
2015

$
$

297 $
297 $

411 $ 1,013
411 $ 1,013

551
551

384
384

119
119

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

$
$

848 $
848 $

795 $ 1,132
795 $ 1,132

On December 22, 2017, the U.S. government enacted
On December 22, 2017, the U.S. government enacted
comprehensive tax legislation commonly referred to as
comprehensive tax legislation commonly referred to as
the Tax Cuts and Jobs Act ("the Tax Act.") The Tax Act
the Tax Cuts and Jobs Act ("the Tax Act.") The Tax Act
makes broad and complex changes to the U.S. tax code,
makes broad and complex changes to the U.S. tax code,
including, but not limited to, (1) reducing the U.S. federal
including, but not limited to, (1) reducing the U.S. federal
corporate tax rate from 35% to 21%; (2) requiring
corporate tax rate from 35% to 21%; (2) requiring
companies to pay a one-time deemed repatriation
companies to pay a one-time deemed repatriation
transition tax (the “Transition Tax”) on certain earnings
transition tax (the “Transition Tax”) on certain earnings
of foreign subsidiaries; (3) generally eliminating U.S.
of foreign subsidiaries; (3) generally eliminating U.S.
federal income taxes on dividends from foreign
federal income taxes on dividends from foreign
subsidiaries; (4) requiring a current inclusion in U.S.
subsidiaries; (4) requiring a current inclusion in U.S.
federal taxable income of certain earnings of controlled
federal taxable income of certain earnings of controlled
foreign corporations; (5) eliminating the corporate
foreign corporations; (5) eliminating the corporate
alternative minimum tax (“AMT”) and changing how AMT
alternative minimum tax (“AMT”) and changing how AMT
credits can be realized; (6) capital expensing; (7)
credits can be realized; (6) capital expensing; (7)
eliminating the deduction on U.S. manufacturing
eliminating the deduction on U.S. manufacturing
activities; and (8) creating new limitations on deductible
activities; and (8) creating new limitations on deductible
interest expense and executive compensation.
interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff
The Securities Exchange Commission staff issued Staff
Accounting Bulletin (“SAB”) 118 which provides
Accounting Bulletin (“SAB”) 118 which provides
guidance on accounting for the tax effects of the Tax Act.
guidance on accounting for the tax effects of the Tax Act.
SAB 118 provides a measurement period that should
SAB 118 provides a measurement period that should
not extend beyond one year from the Tax Act enactment
not extend beyond one year from the Tax Act enactment
date for companies to complete the accounting under
date for companies to complete the accounting under
ASC 740. In accordance with SAB 118, a company must
ASC 740. In accordance with SAB 118, a company must
reflect the income tax effects of those aspects of the Tax
reflect the income tax effects of those aspects of the Tax
Act for which the accounting under ASC 740 is complete.
Act for which the accounting under ASC 740 is complete.
To the extent that a company’s accounting for certain
To the extent that a company’s accounting for certain
income tax effects of the Tax Act is incomplete but it is
income tax effects of the Tax Act is incomplete but it is
able to determine a reasonable estimate, it must record
able to determine a reasonable estimate, it must record
a provisional estimate in the financial statements. If a
a provisional estimate in the financial statements. If a
company cannot determine a provisional estimate to be
company cannot determine a provisional estimate to be
included in the financial statements, it should continue
included in the financial statements, it should continue
to apply ASC 740 on the basis of the provisions of the
to apply ASC 740 on the basis of the provisions of the
tax laws that were in effect immediately before the
tax laws that were in effect immediately before the
enactment of the Tax Act.
enactment of the Tax Act.

In connection with our initial analysis of the impact of
In connection with our initial analysis of the impact of
the Tax Act, we have recorded a provisional net tax
the Tax Act, we have recorded a provisional net tax
benefit of $1.22 billion in the period ending December
benefit of $1.22 billion in the period ending December
31, 2017. The net tax benefit primarily consists of a net
31, 2017. The net tax benefit primarily consists of a net
tax benefit for the re-measurement of U.S. deferred
tax benefit for the re-measurement of U.S. deferred
taxes of $1.454 billion and an expense for the Transition
taxes of $1.454 billion and an expense for the Transition
Tax of $231 million. For various reasons that are
Tax of $231 million. For various reasons that are
discussed more fully below, we have not completed our
discussed more fully below, we have not completed our
accounting for the income tax effects of the Tax Act.
accounting for the income tax effects of the Tax Act.

recorded provisional adjustments as follows:

Reduction of U.S. federal corporate tax rate: The Tax

Act reduces the corporate tax rate to 21%, effective

January 1, 2018. For certain of our deferred tax assets

and liabilities, we have recorded a provisional net

decrease of $1.451 billion with a corresponding

adjustment to deferred income tax benefit in the same

amount for the year ended December 31, 2017. While

we are able to make a reasonable estimate of the impact

of the reduction in the corporate rate, it may be affected

by other analysis related to the Tax Act, including but

not limited to, the state tax effect of adjustments made

to federal temporary differences.

Deemed Repatriation Transition Tax: This is a tax on

previously untaxed accumulated and current earnings

and profits (“E&P”) of foreign subsidiaries. To determine

the amount of the transition tax, we must determine, in

addition to other factors, the amount of post-1986 E&P

of the relevant subsidiaries, as well as the amount of

non-U.S. income taxes paid on such earnings. We are

able to make a reasonable estimate of the Transition

Tax and recorded a provisional Transition Tax obligation

of $231 million. The provisional amount of current tax

liability related to the Transition Tax recorded in Other

accrued liabilities is $17 million. However, we are

continuing to gather additional information, which may

result in our ability to more precisely compute the

amount of the Transition Tax.

Valuation Allowances: The Company has assessed

whether its U.S. state and local income tax valuation

allowance analysis is affected by various aspects of the

Tax Act (e.g. deemed repatriation of foreign income,

acceleration of cost recovery). Since, as discussed

herein, the Company has recorded provisional amounts

related to elements of the Tax Act, any corresponding

determination of the need for or change in a valuation

allowance is also provisional. For certain of our state

deferred tax assets, we have recorded a net $3 million

provisional decrease

the

recorded valuation

allowance with a corresponding adjustment to deferred

income tax benefit in the same amount for the year

ended December 31, 2017. While we are able to make

a reasonable estimate of the impact of the Tax Act on

state attributes, the resolution of, or changes from, other

factors noted herein may result in changes in our

recorded valuation allowance.

The Tax Act may impact decisions surrounding the

Company’s permanent reinvestment assertions related

to its foreign investments and could have an impact on

the Company’s accounting for untaxed outside basis

differences. We previously considered the earnings in

our non-U.S. subsidiaries to be permanently reinvested,

the transition tax resulted in a reduction in these basis

differences, an actual repatriation from our non-U.S.

subsidiaries could still be subject to additional taxes,

including, but not limited to, foreign withholding taxes

and U.S. state income taxes. In light of the Tax Act, the

Company is evaluating its global cash management and

non-U.S. repatriation strategy but we have yet to

determine whether we plan to change our prior

assertion. Accordingly, we have not recorded any

deferred taxes attributable to our investments in our non-

U.S. subsidiaries.

These estimates may change materially due to, among

other things, further clarification of existing guidance that

may be issued by U.S. taxing authorities or regulatory

bodies and/or changes

interpretations and

assumptions we have preliminarily made. We will

continue to analyze the Tax Act to finalize its financial

statement impact, including the mandatory deemed

repatriation of foreign earnings, re-measurement of

deferred taxes and all other provisions of the legislation

and will record the effects of any changes to provisional

amounts in the period we can complete our analysis or

are first able to make a reasonable estimate, but no later

than December 2018.

The provision (benefit) for income taxes from continuing

operations (excluding noncontrolling interests) by taxing

jurisdiction was as follows:

In millions

2017

2016

2015

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.

(73) $

(7) $

(23)

112

(12)

16 $

57 $

$ (1,150) $

134 $

$ (1,101) $

(25)

136 $

193 $

111

149

306

(70)

268

417

Income tax provision (benefit)

$ (1,085) $

The Company’s deferred income tax provision (benefit)

includes a $1.459 billion benefit, a $18 million provision

and a $3 million provision for 2017, 2016 and 2015,

respectively, for the effect of various changes in non-

U.S. and U.S. federal and state tax rates.

International Paper made income tax payments, net of

refunds, of $7 million, $90 million and $149 million in

2017, 2016 and 2015, respectively.

57
57

OTHER INTANGIBLES

Identifiable intangible assets comprised the following:

2017

2016

Gross

Carrying

Amount

Accumulated

Amortization

Net

Intangible

Assets

Gross

Carrying

Amount

247 $

363 $

Accumulated

Amortization

Net Intangible

Assets

211 $

394

610 $

172

—

100

605 $

173

924 $

442 $

482 $

926 $

379 $

117

547

In millions at December 31

Customer relationships and lists

Non-compete agreements

Tradenames, patents and trademarks, and

developed technology

Land and water rights

Software

Other

Total

In millions

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

Amortization expense related to intangible assets

2017

2016

2015

77 $

54 $

Based on current intangibles subject to amortization, estimated amortization expense for each of the succeeding years

is as follows: 2018 – $55 million, 2019 – $52 million, 2020 – $51 million, 2021 – $51 million, 2022 – $49 million, and

cumulatively thereafter – $217 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.

2017

2016

2015

297 $

411 $ 1,013

551

384

119

Earnings (loss) from continuing

operations before income taxes

and equity earnings

848 $

795 $ 1,132

On December 22, 2017, the U.S. government enacted

comprehensive tax legislation commonly referred to as

the Tax Cuts and Jobs Act ("the Tax Act.") The Tax Act

makes broad and complex changes to the U.S. tax code,

including, but not limited to, (1) reducing the U.S. federal

corporate tax rate from 35% to 21%; (2) requiring

companies to pay a one-time deemed repatriation

transition tax (the “Transition Tax”) on certain earnings

of foreign subsidiaries; (3) generally eliminating U.S.

federal income taxes on dividends from foreign

subsidiaries; (4) requiring a current inclusion in U.S.

federal taxable income of certain earnings of controlled

foreign corporations; (5) eliminating the corporate

alternative minimum tax (“AMT”) and changing how AMT

credits can be realized; (6) capital expensing; (7)

eliminating the deduction on U.S. manufacturing

activities; and (8) creating new limitations on deductible

interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff

Accounting Bulletin (“SAB”) 118 which provides

guidance on accounting for the tax effects of the Tax Act.

SAB 118 provides a measurement period that should

not extend beyond one year from the Tax Act enactment

date for companies to complete the accounting under

ASC 740. In accordance with SAB 118, a company must

reflect the income tax effects of those aspects of the Tax

Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain

income tax effects of the Tax Act is incomplete but it is

able to determine a reasonable estimate, it must record

a provisional estimate in the financial statements. If a

company cannot determine a provisional estimate to be

included in the financial statements, it should continue

to apply ASC 740 on the basis of the provisions of the

tax laws that were in effect immediately before the

enactment of the Tax Act.

In connection with our initial analysis of the impact of

the Tax Act, we have recorded a provisional net tax

benefit of $1.22 billion in the period ending December

31, 2017. The net tax benefit primarily consists of a net

tax benefit for the re-measurement of U.S. deferred

taxes of $1.454 billion and an expense for the Transition

Tax of $231 million. For various reasons that are

discussed more fully below, we have not completed our

accounting for the income tax effects of the Tax Act.

Our accounting for the following elements of the Tax Act
Our accounting for the following elements of the Tax Act
is incomplete. However, we were able to make
is incomplete. However, we were able to make
reasonable estimates of those elements and, therefore,
reasonable estimates of those elements and, therefore,
recorded provisional adjustments as follows:
recorded provisional adjustments as follows:

Reduction of U.S. federal corporate tax rate: The Tax
Reduction of U.S. federal corporate tax rate: The Tax
Act reduces the corporate tax rate to 21%, effective
Act reduces the corporate tax rate to 21%, effective
January 1, 2018. For certain of our deferred tax assets
January 1, 2018. For certain of our deferred tax assets
and liabilities, we have recorded a provisional net
and liabilities, we have recorded a provisional net
decrease of $1.451 billion with a corresponding
decrease of $1.451 billion with a corresponding
adjustment to deferred income tax benefit in the same
adjustment to deferred income tax benefit in the same
amount for the year ended December 31, 2017. While
amount for the year ended December 31, 2017. While
we are able to make a reasonable estimate of the impact
we are able to make a reasonable estimate of the impact
of the reduction in the corporate rate, it may be affected
of the reduction in the corporate rate, it may be affected
by other analysis related to the Tax Act, including but
by other analysis related to the Tax Act, including but
not limited to, the state tax effect of adjustments made
not limited to, the state tax effect of adjustments made
to federal temporary differences.
to federal temporary differences.

Deemed Repatriation Transition Tax: This is a tax on
Deemed Repatriation Transition Tax: This is a tax on
previously untaxed accumulated and current earnings
previously untaxed accumulated and current earnings
and profits (“E&P”) of foreign subsidiaries. To determine
and profits (“E&P”) of foreign subsidiaries. To determine
the amount of the transition tax, we must determine, in
the amount of the transition tax, we must determine, in
addition to other factors, the amount of post-1986 E&P
addition to other factors, the amount of post-1986 E&P
of the relevant subsidiaries, as well as the amount of
of the relevant subsidiaries, as well as the amount of
non-U.S. income taxes paid on such earnings. We are
non-U.S. income taxes paid on such earnings. We are
able to make a reasonable estimate of the Transition
able to make a reasonable estimate of the Transition
Tax and recorded a provisional Transition Tax obligation
Tax and recorded a provisional Transition Tax obligation
of $231 million. The provisional amount of current tax
of $231 million. The provisional amount of current tax
liability related to the Transition Tax recorded in Other
liability related to the Transition Tax recorded in Other
accrued liabilities is $17 million. However, we are
accrued liabilities is $17 million. However, we are
continuing to gather additional information, which may
continuing to gather additional information, which may
result in our ability to more precisely compute the
result in our ability to more precisely compute the
amount of the Transition Tax.
amount of the Transition Tax.

and, accordingly deferred income taxes were not
and, accordingly deferred income taxes were not
provided for such basis differences which totaled
provided for such basis differences which totaled
approximately $5.9 billion at December 31, 2016. While
approximately $5.9 billion at December 31, 2016. While
the transition tax resulted in a reduction in these basis
the transition tax resulted in a reduction in these basis
differences, an actual repatriation from our non-U.S.
differences, an actual repatriation from our non-U.S.
subsidiaries could still be subject to additional taxes,
subsidiaries could still be subject to additional taxes,
including, but not limited to, foreign withholding taxes
including, but not limited to, foreign withholding taxes
and U.S. state income taxes. In light of the Tax Act, the
and U.S. state income taxes. In light of the Tax Act, the
Company is evaluating its global cash management and
Company is evaluating its global cash management and
non-U.S. repatriation strategy but we have yet to
non-U.S. repatriation strategy but we have yet to
determine whether we plan to change our prior
determine whether we plan to change our prior
assertion. Accordingly, we have not recorded any
assertion. Accordingly, we have not recorded any
deferred taxes attributable to our investments in our non-
deferred taxes attributable to our investments in our non-
U.S. subsidiaries.
U.S. subsidiaries.

in
in

These estimates may change materially due to, among
These estimates may change materially due to, among
other things, further clarification of existing guidance that
other things, further clarification of existing guidance that
may be issued by U.S. taxing authorities or regulatory
may be issued by U.S. taxing authorities or regulatory
interpretations and
bodies and/or changes
bodies and/or changes
interpretations and
assumptions we have preliminarily made. We will
assumptions we have preliminarily made. We will
continue to analyze the Tax Act to finalize its financial
continue to analyze the Tax Act to finalize its financial
statement impact, including the mandatory deemed
statement impact, including the mandatory deemed
repatriation of foreign earnings, re-measurement of
repatriation of foreign earnings, re-measurement of
deferred taxes and all other provisions of the legislation
deferred taxes and all other provisions of the legislation
and will record the effects of any changes to provisional
and will record the effects of any changes to provisional
amounts in the period we can complete our analysis or
amounts in the period we can complete our analysis or
are first able to make a reasonable estimate, but no later
are first able to make a reasonable estimate, but no later
than December 2018.
than December 2018.

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

In millions
In millions

2017
2017

2016
2016

2015
2015

Valuation Allowances: The Company has assessed
Valuation Allowances: The Company has assessed
whether its U.S. state and local income tax valuation
whether its U.S. state and local income tax valuation
allowance analysis is affected by various aspects of the
allowance analysis is affected by various aspects of the
Tax Act (e.g. deemed repatriation of foreign income,
Tax Act (e.g. deemed repatriation of foreign income,
acceleration of cost recovery). Since, as discussed
acceleration of cost recovery). Since, as discussed
herein, the Company has recorded provisional amounts
herein, the Company has recorded provisional amounts
related to elements of the Tax Act, any corresponding
related to elements of the Tax Act, any corresponding
determination of the need for or change in a valuation
determination of the need for or change in a valuation
allowance is also provisional. For certain of our state
allowance is also provisional. For certain of our state
deferred tax assets, we have recorded a net $3 million
deferred tax assets, we have recorded a net $3 million
recorded valuation
provisional decrease
recorded valuation
provisional decrease
allowance with a corresponding adjustment to deferred
allowance with a corresponding adjustment to deferred
income tax benefit in the same amount for the year
income tax benefit in the same amount for the year
ended December 31, 2017. While we are able to make
ended December 31, 2017. While we are able to make
a reasonable estimate of the impact of the Tax Act on
a reasonable estimate of the impact of the Tax Act on
state attributes, the resolution of, or changes from, other
state attributes, the resolution of, or changes from, other
factors noted herein may result in changes in our
factors noted herein may result in changes in our
recorded valuation allowance.
recorded valuation allowance.

the
the

in
in

58
58

The Tax Act may impact decisions surrounding the
The Tax Act may impact decisions surrounding the
Company’s permanent reinvestment assertions related
Company’s permanent reinvestment assertions related
to its foreign investments and could have an impact on
to its foreign investments and could have an impact on
the Company’s accounting for untaxed outside basis
the Company’s accounting for untaxed outside basis
differences. We previously considered the earnings in
differences. We previously considered the earnings in
our non-U.S. subsidiaries to be permanently reinvested,
our non-U.S. subsidiaries to be permanently reinvested,

Current tax provision (benefit)
Current tax provision (benefit)

U.S. federal
U.S. federal

U.S. state and local
U.S. state and local

Non-U.S.
Non-U.S.

Deferred tax provision (benefit)
Deferred tax provision (benefit)

U.S. federal
U.S. federal

U.S. state and local
U.S. state and local

Non-U.S.
Non-U.S.

$
$

(73) $
(73) $

(7) $
(7) $

(23)
(23)

112
112

(12)
(12)

76
76

$
$

16 $
16 $

57 $
57 $

$ (1,150) $
$ (1,150) $

134 $
134 $

9
9

40
40

$ (1,101) $
$ (1,101) $

27
27

(25)
(25)

136 $
136 $

193 $
193 $

35
35

3
3

111
111

149
149

306
306

32
32

(70)
(70)

268
268

417
417

Income tax provision (benefit)
Income tax provision (benefit)

$ (1,085) $
$ (1,085) $

The Company’s deferred income tax provision (benefit)
The Company’s deferred income tax provision (benefit)
includes a $1.459 billion benefit, a $18 million provision
includes a $1.459 billion benefit, a $18 million provision
and a $3 million provision for 2017, 2016 and 2015,
and a $3 million provision for 2017, 2016 and 2015,
respectively, for the effect of various changes in non-
respectively, for the effect of various changes in non-
U.S. and U.S. federal and state tax rates.
U.S. and U.S. federal and state tax rates.

International Paper made income tax payments, net of
International Paper made income tax payments, net of
refunds, of $7 million, $90 million and $149 million in
refunds, of $7 million, $90 million and $149 million in
2017, 2016 and 2015, respectively.
2017, 2016 and 2015, respectively.

(a) The net change in the total valuation allowance for the years
(a) The net change in the total valuation allowance for the years
ended December 31, 2017 and 2016 was an increase of $26
ended December 31, 2017 and 2016 was an increase of $26
million and a decrease of $27 million, respectively.
million and a decrease of $27 million, respectively.

Deferred income tax assets and liabilities are recorded
Deferred income tax assets and liabilities are recorded
in the accompanying consolidated balance sheet under
in the accompanying consolidated balance sheet under
the captions Deferred charges and other assets and
the captions Deferred charges and other assets and
Deferred income taxes. There was a decrease in
Deferred income taxes. There was a decrease in
deferred income tax assets principally relating to the
deferred income tax assets principally relating to the
U.S. tax rate change, the impact of changes in qualified
U.S. tax rate change, the impact of changes in qualified
pension liabilities, and the utilization of tax credits and
pension liabilities, and the utilization of tax credits and
net operating loss carryforwards. Deferred tax liabilities
net operating loss carryforwards. Deferred tax liabilities
decreased primarily due to the U.S. tax rate change
decreased primarily due to the U.S. tax rate change
offset by tax greater than book depreciation. Of the $1.5
offset by tax greater than book depreciation. Of the $1.5
billion
installment sales, and
billion
installment sales, and
investment in subsidiary deferred tax liability, $884
investment in subsidiary deferred tax liability, $884
million is attributable to an investment in subsidiary and
million is attributable to an investment in subsidiary and
relates to a 2006 International Paper installment sale of
relates to a 2006 International Paper installment sale of
forestlands and $538 million is attributable to a 2007
forestlands and $538 million is attributable to a 2007
Temple-Inland installment sale of forestlands (see Note
Temple-Inland installment sale of forestlands (see Note
12).
12).

forestlands, related
forestlands, related

A reconciliation of the beginning and ending amount of
A reconciliation of the beginning and ending amount of
the years ended
unrecognized
the years ended
unrecognized
December 31, 2017, 2016 and 2015 is as follows:
December 31, 2017, 2016 and 2015 is as follows:

tax benefits
tax benefits

for
for

In millions
In millions

2017
2017

2016
2016

2015
2015

Balance at January 1
Balance at January 1

$
$

(98) $
(98) $

(150) $
(150) $

(158)
(158)

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

Additions for tax positions of prior
Additions for tax positions of prior
years
years

Reductions for tax positions of
Reductions for tax positions of
prior years
prior years

Settlements
Settlements

Expiration of statutes of
Expiration of statutes of
limitations
limitations

(54)
(54)

(40)
(40)

4
4

6
6

1
1

(7)
(7)

(4)
(4)

(3)
(3)

33
33

19
19

5
5

2
2

(6)
(6)

7
7

2
2

4
4

7
7

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

In millions
In millions

2017
2017

2016
2016

2015
2015

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

$
$

848
848

$ 795
$ 795

$ 1,132
$ 1,132

Statutory U.S. income tax rate
Statutory U.S. income tax rate

35 %
35 %

35%
35%

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

State and local income taxes
State and local income taxes

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

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

Tax expense (benefit) on
Tax expense (benefit) on
manufacturing activities
manufacturing activities

Non-deductible business
Non-deductible business
expenses
expenses

Non-deductible impairments
Non-deductible impairments

Sale of non-strategic assets
Sale of non-strategic assets

Tax audits
Tax audits

297
297

(7)
(7)

(36)
(36)

44
44

23
23

7
7

—
—

U.S. federal tax rate change
U.S. federal tax rate change

(1,451)
(1,451)

Foreign tax credits
Foreign tax credits

Subsidiary liquidation
Subsidiary liquidation

Deemed repatriation, net of
Deemed repatriation, net of
foreign tax credits
foreign tax credits

General business and other tax
General business and other tax
credits
credits

Other, net
Other, net

(96)
(96)

—
—

231
231

(86)
(86)

(11)
(11)

278
278

8
8

396
396

20
20

(26)
(26)

(44)
(44)

21
21

12
12

(10)
(10)

(12)
(12)

9
9

—
—

12
12

(14)
(14)

—
—

(11)
(11)

(63)
(63)

—
—

(15)
(15)

4
4

8
8

109
109

(61)
(61)

—
—

(15)
(15)

4
4

Income tax provision (benefit)
Income tax provision (benefit)

$(1,085)
$(1,085)

$ 193
$ 193

$ 417
$ 417

Effective income tax rate
Effective income tax rate

(128)%
(128)%

24%
24%

37%
37%

The tax effects of significant temporary differences,
The tax effects of significant temporary differences,
representing deferred income tax assets and liabilities
representing deferred income tax assets and liabilities
at December 31, 2017 and 2016, were as follows:
at December 31, 2017 and 2016, were as follows:

In millions
In millions

Deferred income tax assets:
Deferred income tax assets:

Postretirement benefit accruals
Postretirement benefit accruals

$
$

102 $
102 $

165
165

Pension obligations
Pension obligations

Alternative minimum and other tax
Alternative minimum and other tax
credits
credits

Net operating and capital loss
Net operating and capital loss
carryforwards
carryforwards

Compensation reserves
Compensation reserves

Other
Other

Gross deferred income tax assets
Gross deferred income tax assets

Less: valuation allowance (a)
Less: valuation allowance (a)

Net deferred income tax asset
Net deferred income tax asset

Deferred income tax liabilities:
Deferred income tax liabilities:

Intangibles
Intangibles

Plants, properties and equipment
Plants, properties and equipment

Forestlands, related installment sales,
Forestlands, related installment sales,
and investment in subsidiary
and investment in subsidiary

516
516

416
416

665
665

174
174

139
139

1,344
1,344

270
270

662
662

257
257

251
251

$
$

2,012
2,012

(429)
(429)

2,949
2,949

(403)
(403)

1,583 $
1,583 $

2,546
2,546

(139) $
(139) $

(231)
(231)

(2,000)
(2,000)

(2,828)
(2,828)

(1,454)
(1,454)

(2,260)
(2,260)

Gross deferred income tax liabilities
Gross deferred income tax liabilities

$ (3,593) $ (5,319)
$ (3,593) $ (5,319)

Net deferred income tax liability
Net deferred income tax liability

$ (2,010) $ (2,773)
$ (2,010) $ (2,773)

2017
2017

2016
2016

Currency translation adjustment
Currency translation adjustment

Balance at December 31
Balance at December 31

$
$

(188) $
(188) $

(98) $
(98) $

(150)
(150)

If the Company were to prevail on the unrecognized tax
If the Company were to prevail on the unrecognized tax
benefits recorded, substantially all of the balances at
benefits recorded, substantially all of the balances at
December 31, 2017, 2016 and 2015 would benefit the
December 31, 2017, 2016 and 2015 would benefit the
effective tax rate.
effective tax rate.

The Company accrues interest on unrecognized tax
The Company accrues interest on unrecognized tax
benefits as a component of interest expense. Penalties,
benefits as a component of interest expense. Penalties,
if incurred, are recognized as a component of income
if incurred, are recognized as a component of income
tax expense. The Company had approximately $17
tax expense. The Company had approximately $17
million and $22 million accrued for the payment of
million and $22 million accrued for the payment of
estimated
interest and penalties associated with
estimated
interest and penalties associated with
unrecognized tax benefits at December 31, 2017 and
unrecognized tax benefits at December 31, 2017 and
2016, respectively.
2016, respectively.

The major jurisdictions where the Company files income
The major jurisdictions where the Company files income
tax returns are the United States, Brazil, France, Poland
tax returns are the United States, Brazil, France, Poland
and Russia. Generally, tax years 2006 through 2016
and Russia. Generally, tax years 2006 through 2016
remain open and subject to examination by the relevant
remain open and subject to examination by the relevant

59
59

tax authorities. The Company is typically engaged in

GUARANTEES

various tax examinations at any given time, both in the

United States and overseas. Pending audit settlements

and the expiration of statute of limitations could reduce

the uncertain tax positions by $5 million during the next

twelve months. While the Company believes that it is

adequately accrued for possible audit adjustments, the

final resolution of these examinations cannot be

determined at this time and could result in final

settlements that differ from current estimates.

International Paper uses the flow-through method to

account for investment tax credits earned on eligible

open-loop biomass facilities and combined heat and

power system expenditures. Under this method, the

investment tax credits are recognized as a reduction to

income tax expense in the year they are earned rather

than a reduction in the asset basis. The Company

recorded a tax benefit of $68 million during 2017 related

Investment Tax Credits earned

tax years

2013-2017.

The following details the scheduled expiration dates of

the Company’s net operating loss and income tax credit

carryforwards:

In millions

U.S. federal and

non-U.S. NOLs

State taxing

jurisdiction NOLs

U.S. federal, non-

U.S. and state tax

credit carryforwards

U.S. federal and

state capital loss

carryforwards

2028

Through

2018

2027

2037

Indefinite

Total

65 $

2 $

432 $

499

147

199

—

215

269

486

—

Total

413 $

88 $

701 $

1,202

NOTE 11 COMMITMENTS AND CONTINGENT

LIABILITIES

OPERATING LEASES

leases were as follows:

In millions

2018

2019

2020

2021

2022 Thereafter

Lease

obligations

130 $ 102 $

77 $

53 $

37 $

141

Rent expense was $157 million, $150 million and $157

million for 2017, 2016 and 2015, respectively.

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

indemnify buyers with

respect

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 AND LEGAL PROCEEDINGS

Environmental

International Paper has been named as a potentially

responsible party (PRP) in environmental remediation

actions under various federal and state laws, including

the Comprehensive Environmental 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 PRPs. There are other remediation costs typically

associated with the cleanup of hazardous substances

at the Company’s current, closed or formerly-owned

facilities, and recorded as liabilities in the balance sheet.

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 $128 million ($141 million

undiscounted) in the aggregate as of December 31,

2017. Other than as described below, completion of

required remedial actions is not expected to have a

material effect on our consolidated financial statements.

Cass Lake: One of the matters included above arises

out of a closed wood-treating facility located in Cass

Environmental Protection Agency (EPA) selected and

published a proposed soil remedy at the site with an

the selection of an alternative for the soil remediation

component of the overall site remedy, which includes

the ongoing groundwater remedy. In October 2011, the

EPA released a public statement indicating that the final

soil remedy decision would be delayed. In March 2016,

the EPA issued a proposed plan concerning clean-up

standards at a portion of the site, the estimated cost of

which is included within the reserve referenced above.

In October 2012, the Natural Resource Trustees for this

site provided notice to International Paper and other

Certain property, machinery and equipment are leased

Lake, Minnesota. In June 2011, the United States

under cancelable and non-cancelable agreements.

At December 31, 2017,

total

future minimum

estimated cost of $46 million. The overall remediation

commitments under existing non-cancelable operating

reserve for the site is currently $47 million to address

Investment Tax Credits earned
Investment Tax Credits earned

International Paper uses the flow-through method to
International Paper uses the flow-through method to
account for investment tax credits earned on eligible
account for investment tax credits earned on eligible
open-loop biomass facilities and combined heat and
open-loop biomass facilities and combined heat and
power system expenditures. Under this method, the
power system expenditures. Under this method, the
investment tax credits are recognized as a reduction to
investment tax credits are recognized as a reduction to
income tax expense in the year they are earned rather
income tax expense in the year they are earned rather
than a reduction in the asset basis. The Company
than a reduction in the asset basis. The Company
recorded a tax benefit of $68 million during 2017 related
recorded a tax benefit of $68 million during 2017 related
tax years
to
tax years
to
2013-2017.
2013-2017.

tax authorities. The Company is typically engaged in
tax authorities. The Company is typically engaged in
various tax examinations at any given time, both in the
various tax examinations at any given time, both in the
United States and overseas. Pending audit settlements
United States and overseas. Pending audit settlements
and the expiration of statute of limitations could reduce
and the expiration of statute of limitations could reduce
the uncertain tax positions by $5 million during the next
the uncertain tax positions by $5 million during the next
twelve months. While the Company believes that it is
twelve months. While the Company believes that it is
adequately accrued for possible audit adjustments, the
adequately accrued for possible audit adjustments, the
final resolution of these examinations cannot be
final resolution of these examinations cannot be
determined at this time and could result in final
determined at this time and could result in final
settlements that differ from current estimates.
settlements that differ from current estimates.

A reconciliation of income tax expense using the

statutory U.S. income tax rate compared with the actual

income tax provision follows:

In millions

2017

2016

2015

Earnings (loss) from continuing

operations before income taxes

and equity earnings

848

$ 795

$ 1,132

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 expense (benefit) on

manufacturing activities

Non-deductible business

expenses

Non-deductible impairments

Sale of non-strategic assets

Tax audits

Foreign tax credits

Subsidiary liquidation

Deemed repatriation, net of

foreign tax credits

General business and other tax

credits

Other, net

297

(7)

(36)

—

(96)

—

231

(86)

(11)

278

396

(26)

(44)

(10)

(12)

—

(14)

—

(11)

(63)

—

(15)

109

(61)

—

(15)

U.S. federal tax rate change

(1,451)

Income tax provision (benefit)

$(1,085)

$ 193

$ 417

Effective income tax rate

(128)%

24%

37%

The tax effects of significant temporary differences,

representing deferred income tax assets and liabilities

at December 31, 2017 and 2016, were as follows:

Postretirement benefit accruals

102 $

165

In millions

Deferred income tax assets:

Pension obligations

Alternative minimum and other tax

credits

Net operating and capital loss

carryforwards

Compensation reserves

Other

Gross deferred income tax assets

Less: valuation allowance (a)

Net deferred income tax asset

Deferred income tax liabilities:

Intangibles

Plants, properties and equipment

Forestlands, related installment sales,

and investment in subsidiary

516

416

665

174

139

270

662

257

251

2,012

(429)

2,949

(403)

1,583 $

2,546

(139) $

(231)

(2,000)

(2,828)

(1,454)

(2,260)

Gross deferred income tax liabilities

$ (3,593) $ (5,319)

Net deferred income tax liability

$ (2,010) $ (2,773)

(a) The net change in the total valuation allowance for the years

ended December 31, 2017 and 2016 was an increase of $26

million and a decrease of $27 million, respectively.

Deferred income tax assets and liabilities are recorded

in the accompanying consolidated balance sheet under

the captions Deferred charges and other assets and

Deferred income taxes. There was a decrease in

deferred income tax assets principally relating to the

U.S. tax rate change, the impact of changes in qualified

pension liabilities, and the utilization of tax credits and

net operating loss carryforwards. Deferred tax liabilities

decreased primarily due to the U.S. tax rate change

offset by tax greater than book depreciation. Of the $1.5

billion

forestlands, related

installment sales, and

investment in subsidiary deferred tax liability, $884

million is attributable to an investment in subsidiary and

relates to a 2006 International Paper installment sale of

forestlands and $538 million is attributable to a 2007

Temple-Inland installment sale of forestlands (see Note

12).

A reconciliation of the beginning and ending amount of

unrecognized

tax benefits

for

the years ended

December 31, 2017, 2016 and 2015 is as follows:

In millions

2017

2016

2015

Balance at January 1

(98) $

(150) $

(158)

(Additions) reductions based on

tax positions related to current

Additions for tax positions of prior

Reductions for tax positions of

year

years

prior years

Settlements

Expiration of statutes of

limitations

(54)

(40)

(7)

(4)

(3)

(6)

2017

2016

Currency translation adjustment

Balance at December 31

(188) $

(98) $

(150)

1,344

If the Company were to prevail on the unrecognized tax

benefits recorded, substantially all of the balances at

December 31, 2017, 2016 and 2015 would benefit the

effective tax rate.

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 $17

million and $22 million accrued for the payment of

estimated

interest and penalties associated with

unrecognized tax benefits at December 31, 2017 and

2016, respectively.

The major jurisdictions where the Company files income

tax returns are the United States, Brazil, France, Poland

and Russia. Generally, tax years 2006 through 2016

remain open and subject to examination by the relevant

The following details the scheduled expiration dates of
The following details the scheduled expiration dates of
the Company’s net operating loss and income tax credit
the Company’s net operating loss and income tax credit
carryforwards:
carryforwards:

In millions
In millions

U.S. federal and
U.S. federal and
non-U.S. NOLs
non-U.S. NOLs

State taxing
State taxing
jurisdiction NOLs
jurisdiction NOLs

U.S. federal, non-
U.S. federal, non-
U.S. and state tax
U.S. and state tax
credit carryforwards
credit carryforwards

U.S. federal and
U.S. federal and
state capital loss
state capital loss
carryforwards
carryforwards

2018
2018
Through
Through
2027
2027

2028
2028
Through
Through
2037
2037

Indefinite
Indefinite

Total
Total

$
$

65 $
65 $

2 $
2 $

432 $
432 $

499
499

147
147

199
199

2
2

68
68

18
18

—
—

215
215

269
269

486
486

—
—

2
2

Total
Total

$
$

413 $
413 $

88 $
88 $

701 $
701 $

1,202
1,202

NOTE 11 COMMITMENTS AND CONTINGENT
NOTE 11 COMMITMENTS AND CONTINGENT
LIABILITIES
LIABILITIES

OPERATING LEASES
OPERATING LEASES

Certain property, machinery and equipment are leased
Certain property, machinery and equipment are leased
under cancelable and non-cancelable agreements.
under cancelable and non-cancelable agreements.

At December 31, 2017,
future minimum
future minimum
At December 31, 2017,
commitments under existing non-cancelable operating
commitments under existing non-cancelable operating
leases were as follows:
leases were as follows:

total
total

In millions
In millions

2018
2018

2019
2019

2020
2020

2021
2021

2022 Thereafter
2022 Thereafter

Lease
Lease
obligations
obligations

$
$

130 $ 102 $
130 $ 102 $

77 $
77 $

53 $
53 $

37 $
37 $

141
141

Rent expense was $157 million, $150 million and $157
Rent expense was $157 million, $150 million and $157
million for 2017, 2016 and 2015, respectively.
million for 2017, 2016 and 2015, respectively.

60
60

in
in

GUARANTEES
GUARANTEES

indemnify buyers with
indemnify buyers with

In connection with sales of businesses, property,
In connection with sales of businesses, property,
equipment, forestlands and other assets, International
equipment, forestlands and other assets, International
Paper commonly makes representations and warranties
Paper commonly makes representations and warranties
relating to such businesses or assets, and may agree
relating to such businesses or assets, and may agree
tax and
to
tax and
to
environmental liabilities, breaches of representations
environmental liabilities, breaches of representations
and warranties, and other matters. Where liabilities for
and warranties, and other matters. Where liabilities for
such matters are determined to be probable and subject
such matters are determined to be probable and subject
to reasonable estimation, accrued
liabilities are
to reasonable estimation, accrued
liabilities are
recorded at the time of sale as a cost of the transaction.
recorded at the time of sale as a cost of the transaction.

respect
respect

to
to

ENVIRONMENTAL AND LEGAL PROCEEDINGS
ENVIRONMENTAL AND LEGAL PROCEEDINGS

Environmental
Environmental

International Paper has been named as a potentially
International Paper has been named as a potentially
responsible party (PRP) in environmental remediation
responsible party (PRP) in environmental remediation
actions under various federal and state laws, including
actions under various federal and state laws, including
the Comprehensive Environmental Response,
the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA). Many of
Compensation and Liability Act (CERCLA). Many of
these proceedings involve the cleanup of hazardous
these proceedings involve the cleanup of hazardous
substances at large commercial landfills that received
substances at large commercial landfills that received
waste from many different sources. While joint and
waste from many different sources. While joint and
several liability is authorized under CERCLA and
several liability is authorized under CERCLA and
equivalent state laws, as a practical matter, liability for
equivalent state laws, as a practical matter, liability for
CERCLA cleanups is typically allocated among the
CERCLA cleanups is typically allocated among the
many PRPs. There are other remediation costs typically
many PRPs. There are other remediation costs typically
associated with the cleanup of hazardous substances
associated with the cleanup of hazardous substances
at the Company’s current, closed or formerly-owned
at the Company’s current, closed or formerly-owned
facilities, and recorded as liabilities in the balance sheet.
facilities, and recorded as liabilities in the balance sheet.

Remediation costs are recorded in the consolidated
Remediation costs are recorded in the consolidated
financial statements when they become probable and
financial statements when they become probable and
International Paper has
reasonably estimable.
reasonably estimable.
International Paper has
estimated the probable liability associated with these
estimated the probable liability associated with these
matters to be approximately $128 million ($141 million
matters to be approximately $128 million ($141 million
undiscounted) in the aggregate as of December 31,
undiscounted) in the aggregate as of December 31,
2017. Other than as described below, completion of
2017. Other than as described below, completion of
required remedial actions is not expected to have a
required remedial actions is not expected to have a
material effect on our consolidated financial statements.
material effect on our consolidated financial statements.

Cass Lake: One of the matters included above arises
Cass Lake: One of the matters included above arises
out of a closed wood-treating facility located in Cass
out of a closed wood-treating facility located in Cass
Lake, Minnesota. In June 2011, the United States
Lake, Minnesota. In June 2011, the United States
Environmental Protection Agency (EPA) selected and
Environmental Protection Agency (EPA) selected and
published a proposed soil remedy at the site with an
published a proposed soil remedy at the site with an
estimated cost of $46 million. The overall remediation
estimated cost of $46 million. The overall remediation
reserve for the site is currently $47 million to address
reserve for the site is currently $47 million to address
the selection of an alternative for the soil remediation
the selection of an alternative for the soil remediation
component of the overall site remedy, which includes
component of the overall site remedy, which includes
the ongoing groundwater remedy. In October 2011, the
the ongoing groundwater remedy. In October 2011, the
EPA released a public statement indicating that the final
EPA released a public statement indicating that the final
soil remedy decision would be delayed. In March 2016,
soil remedy decision would be delayed. In March 2016,
the EPA issued a proposed plan concerning clean-up
the EPA issued a proposed plan concerning clean-up
standards at a portion of the site, the estimated cost of
standards at a portion of the site, the estimated cost of
which is included within the reserve referenced above.
which is included within the reserve referenced above.
In October 2012, the Natural Resource Trustees for this
In October 2012, the Natural Resource Trustees for this
site provided notice to International Paper and other
site provided notice to International Paper and other

PRPs of their intent to perform a Natural Resource
PRPs of their intent to perform a Natural Resource
Damage Assessment. It is premature to predict the
Damage Assessment. It is premature to predict the
outcome of the assessment or to estimate a loss or
outcome of the assessment or to estimate a loss or
range of loss, if any, which may be incurred.
range of loss, if any, which may be incurred.

Kalamazoo River: The Company is a PRP with respect
Kalamazoo River: The Company is a PRP with respect
to the Allied Paper, Inc./Portage Creek/Kalamazoo River
to the Allied Paper, Inc./Portage Creek/Kalamazoo River
Superfund Site in Michigan. The EPA asserts that the
Superfund Site in Michigan. The EPA asserts that the
site is contaminated by polychlorinated biphenyls
site is contaminated by polychlorinated biphenyls
(PCBs) primarily as a result of discharges from various
(PCBs) primarily as a result of discharges from various
paper mills located along the Kalamazoo River,
paper mills located along the Kalamazoo River,
including a paper mill (the Allied Paper Mill) formerly
including a paper mill (the Allied Paper Mill) formerly
owned by St. Regis Paper Company (St. Regis). The
owned by St. Regis Paper Company (St. Regis). The
Company is a successor in interest to St. Regis.
Company is a successor in interest to St. Regis.

• In March 2016, the Company and other PRPs
• In March 2016, the Company and other PRPs
received a special notice letter from the EPA (i)
received a special notice letter from the EPA (i)
inviting participation in implementing a remedy for a
inviting participation in implementing a remedy for a
portion of the site, and (ii) demanding reimbursement
portion of the site, and (ii) demanding reimbursement
of EPA past costs totaling $37 million, including $19
of EPA past costs totaling $37 million, including $19
million in past costs previously demanded by the
million in past costs previously demanded by the
EPA. The Company responded to the special notice
EPA. The Company responded to the special notice
letter. In December 2016, EPA issued a unilateral
letter. In December 2016, EPA issued a unilateral
administrative order to the Company and other PRPs
administrative order to the Company and other PRPs
to perform the remedy. The unilateral administrative
to perform the remedy. The unilateral administrative
order has not yet become effective and the Company
order has not yet become effective and the Company
is evaluating its response.
is evaluating its response.

• In April 2016, the EPA issued a separate unilateral
• In April 2016, the EPA issued a separate unilateral
administrative order to the Company and certain
administrative order to the Company and certain
other PRPs for a time-critical removal action (TCRA)
other PRPs for a time-critical removal action (TCRA)
of PCB-contaminated sediments from a different
of PCB-contaminated sediments from a different
portion of the site. The Company responded to the
portion of the site. The Company responded to the
unilateral administrative order and agreed along with
unilateral administrative order and agreed along with
two other parties to comply with the order subject to
two other parties to comply with the order subject to
its sufficient cause defenses.
its sufficient cause defenses.

• In October 2016, the Company and another PRP
• In October 2016, the Company and another PRP
received a special notice letter from the EPA inviting
received a special notice letter from the EPA inviting
participation in the remedial design component of the
participation in the remedial design component of the
landfill remedy for the Allied Paper Mill. The record
landfill remedy for the Allied Paper Mill. The record
of decision establishing the final landfill remedy for
of decision establishing the final landfill remedy for
the Allied Paper Mill was issued by the EPA in
the Allied Paper Mill was issued by the EPA in
September 2016. The Company responded to the
September 2016. The Company responded to the
Allied Paper Mill special notice letter in late
Allied Paper Mill special notice letter in late
December 2016.
December 2016.

The Company’s CERCLA liability has not been finally
The Company’s CERCLA liability has not been finally
determined with respect to these or any other portions
determined with respect to these or any other portions
of the site, and except as noted above, the Company
of the site, and except as noted above, the Company
has declined to perform any work or reimburse the EPA
has declined to perform any work or reimburse the EPA
at this time. As noted below, the Company is involved
at this time. As noted below, the Company is involved
in allocation/apportionment litigation with regard to the
in allocation/apportionment litigation with regard to the
site. Accordingly, it is premature to predict the outcome
site. Accordingly, it is premature to predict the outcome
or estimate our maximum reasonably possible loss with
or estimate our maximum reasonably possible loss with
respect to this site. However, we do not believe that any
respect to this site. However, we do not believe that any
material loss is probable.
material loss is probable.

The Company was named as a defendant by Georgia-
The Company was named as a defendant by Georgia-
Pacific Consumer Products LP, Fort James Corporation
Pacific Consumer Products LP, Fort James Corporation
and Georgia Pacific LLC in a contribution and cost
and Georgia Pacific LLC in a contribution and cost
recovery action for alleged pollution at the site. The suit
recovery action for alleged pollution at the site. The suit
seeks contribution under CERCLA for costs purportedly
seeks contribution under CERCLA for costs purportedly
expended by plaintiffs ($79 million as of the filing of the
expended by plaintiffs ($79 million as of the filing of the
complaint) and for future remediation costs. The suit
complaint) and for future remediation costs. The suit
alleges that a mill, during the time it was allegedly owned
alleges that a mill, during the time it was allegedly owned
and operated by St. Regis, discharged PCB
and operated by St. Regis, discharged PCB
contaminated solids and paper residuals resulting from
contaminated solids and paper residuals resulting from
paper de-inking and recycling. NCR Corporation and
paper de-inking and recycling. NCR Corporation and
Weyerhaeuser Company are also named as defendants
Weyerhaeuser Company are also named as defendants
in the suit. In mid-2011, the suit was transferred from
in the suit. In mid-2011, the suit was transferred from
the District Court for the Eastern District of Wisconsin
the District Court for the Eastern District of Wisconsin
to the District Court for the Western District of Michigan.
to the District Court for the Western District of Michigan.
The trial of the initial liability phase took place in February
The trial of the initial liability phase took place in February
2013. Weyerhaeuser conceded prior to trial that it was
2013. Weyerhaeuser conceded prior to trial that it was
a liable party with respect to the site. In September 2013,
a liable party with respect to the site. In September 2013,
an opinion and order was issued in the suit. The order
an opinion and order was issued in the suit. The order
concluded that the Company (as the successor to St.
concluded that the Company (as the successor to St.
Regis) was not an “operator,” but was an “owner,” of the
Regis) was not an “operator,” but was an “owner,” of the
mill at issue during a portion of the relevant period and
mill at issue during a portion of the relevant period and
is therefore liable under CERCLA. The order also
is therefore liable under CERCLA. The order also
determined that NCR is a liable party as an "arranger
determined that NCR is a liable party as an "arranger
for disposal" of PCBs in waste paper that was de-inked
for disposal" of PCBs in waste paper that was de-inked
and recycled by mills along the Kalamazoo River. The
and recycled by mills along the Kalamazoo River. The
order did not address the Company's responsibility, if
order did not address the Company's responsibility, if
any, for past or future costs. The parties’ responsibility,
any, for past or future costs. The parties’ responsibility,
including that of the Company, was the subject of a
including that of the Company, was the subject of a
second trial, which was concluded in late 2015. A
second trial, which was concluded in late 2015. A
decision has not been rendered and it is unclear to what
decision has not been rendered and it is unclear to what
extent the Court will address responsibility for future
extent the Court will address responsibility for future
costs in that decision. We are unable to predict the
costs in that decision. We are unable to predict the
outcome or estimate our maximum reasonably possible
outcome or estimate our maximum reasonably possible
loss. However, we do not believe that any material loss
loss. However, we do not believe that any material loss
is probable.
is probable.

Harris County: International Paper and McGinnis
Harris County: International Paper and McGinnis
Industrial Maintenance Corporation
(MIMC), a
Industrial Maintenance Corporation
(MIMC), a
subsidiary of Waste Management, Inc. (WMI), are PRPs
subsidiary of Waste Management, Inc. (WMI), are PRPs
at the San Jacinto River Waste Pits Superfund Site in
at the San Jacinto River Waste Pits Superfund Site in
Harris County, Texas. The PRPs have been actively
Harris County, Texas. The PRPs have been actively
participating in the activities at the site and share the
participating in the activities at the site and share the
costs of these activities. In September 2016, the EPA
costs of these activities. In September 2016, the EPA
issued a proposed remedial action plan (PRAP) for the
issued a proposed remedial action plan (PRAP) for the
site, which identified the preferred remedy as the
site, which identified the preferred remedy as the
removal of
the contaminated material currently
removal of
the contaminated material currently
protected by an armored cap. In addition, the EPA
protected by an armored cap. In addition, the EPA
selected a preferred remedy for the separate southern
selected a preferred remedy for the separate southern
impoundment that requires offsite disposal. In January
impoundment that requires offsite disposal. In January
2017, the PRPs submitted comments on the PRAP.
2017, the PRPs submitted comments on the PRAP.

On October 11, 2017, the EPA issued a Record of
On October 11, 2017, the EPA issued a Record of
Decision (ROD) selecting the final remedy for the site:
Decision (ROD) selecting the final remedy for the site:
removal and relocation of the waste material from both
removal and relocation of the waste material from both
the northern and southern impoundments. The EPA did
the northern and southern impoundments. The EPA did
not specify the methods or practices needed to perform
not specify the methods or practices needed to perform
this work. While the EPA’s selected remedy was
this work. While the EPA’s selected remedy was
accompanied by a cost estimate of approximately $115
accompanied by a cost estimate of approximately $115

million, we do not believe that estimate provides a

litigation, alleging a practically identical civil violation of

reasonable basis for accrual under GAAP because the

Section 1 of the Sherman Act (in particular, that

estimate was based on a technological method for

defendants conspired to limit the supply and thereby

performing the work that we believe is not feasible. On

increase prices of containerboard products), but also

October 25, 2017, the PRPs received a letter from the

asserts Wisconsin state antitrust claims. In January

EPA inviting participation in the remedial design

2011, International Paper was named as a defendant in

component of the EPA’s selected remedy for the site,

a lawsuit filed in state court in Cocke County, Tennessee

and the Company plans to participate in this remedial

alleging that International Paper violated Tennessee law

design process to determine if and how the remedy can

by conspiring to limit the supply and fix the prices of

be accomplished. We expect this process will include

containerboard from mid-2005 to the present. Plaintiffs

additional studies to determine feasible alternatives and

in the state court action seek certification of a class of

costs to complete this final remedy, and we have

Tennessee

indirect purchasers of containerboard

accrued reasonably estimable costs related to this

products, damages and costs, including attorneys' fees.

process. Subsequent to the issuance of the ROD, there

No class certification materials have been filed to date

have been several meetings between the EPA and the

in the Tennessee action.

PRPs, and the Company anticipates working with the

EPA and other PRPs to develop the remedial design,

The Company disputes the allegations made in the

including adaptive management techniques and a

Ashley Furniture and Tennessee lawsuits and is

predesign investigation expected to commence in the

vigorously defending each. At this time, however,

first quarter of 2018. The objectives of the predesign

because the actions are in a preliminary stage, we are

investigation include filling data gaps (including but not

unable to predict an outcome or estimate a range of

limited

to post-Hurricane Harvey

technical data

reasonably possible loss.

generated prior to the ROD and not incorporated into

the selected remedy), refining areas and volumes of

materials to be addressed, determining if the excavation

remedy is able to be implemented in a manner protective

of human health and the environment, and investigating

potential impacts to infrastructure in the vicinity. The

Company has identified a number of concerns and

uncertainties regarding the remedy described in the

ROD and regarding the EPA’s estimates for the costs

and time required to implement the selected remedy.

Because of ongoing questions

regarding cost

effectiveness, technical feasibility, timing and other

technical data, it is uncertain how the ROD will be

implemented. Consequently, while additional losses are

probable as a result of the selected remedy, we are

currently unable to determine any adjustment to our

immaterial recorded liability. It remains reasonably

possible that additional losses could be material as the

remedial design process with the EPA continues over

the coming quarters.

International Paper and MIMC/WMI are also defending

an additional lawsuit related to the site brought by

approximately 600 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, in any,

which may be incurred.

Antitrust

Containerboard: In June 2016, a lawsuit captioned

Ashley Furniture Indus., Inc. v. Packaging Corporation

of America (W.D. Wis.), was filed in federal court in

Wisconsin against

ten defendants,

including

the

Company, Temple-Inland and Weyerhaeuser Company.

The Ashley Furniture

lawsuit closely

tracks

the

allegations found in the now-settled Kleen Products

Contract

Signature: In August 2014, a lawsuit captioned

Signature Industrial Services LLC et al. v. International

Paper Company was filed in state court in Texas. The

Signature lawsuit arises out of approximately $1 million

in disputed invoices related to the installation of new

equipment at the Company's Orange, Texas mill. In

addition to the invoices in dispute, Signature and its

president allege consequential damages arising from

the Company's nonpayment of those invoices. The

lawsuit was tried before a jury in Beaumont, Texas, in

May 2017. On June 1, 2017, the jury returned a verdict

awarding approximately $125 million in damages to the

plaintiffs. The Court issued a judgment on December

14, 2017, awarding the plaintiffs a total of approximately

$137 million in actual and consequential damages, fees,

costs and pre-judgment interest, and awarding post-

judgment interest. The judgment will not be final until

post-trial motions are decided, and the Company will

appeal the final judgment thereafter. The Company has

numerous and strong bases for appeal, and we believe

we will prevail on appeal. Because post-trial

proceedings are in a preliminary stage, we are unable

to estimate a range of reasonably possible loss, but we

expect the amount of any loss to be immaterial.

General

The Company is involved in various other inquiries,

administrative proceedings and litigation relating to

environmental and safety matters, personal injury, labor

and employment, contracts, sales of property,

intellectual property 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

61
61

PRPs of their intent to perform a Natural Resource

The Company was named as a defendant by Georgia-

Damage Assessment. It is premature to predict the

Pacific Consumer Products LP, Fort James Corporation

outcome of the assessment or to estimate a loss or

and Georgia Pacific LLC in a contribution and cost

range of loss, if any, which may be incurred.

Kalamazoo River: The Company is a 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 (the Allied Paper Mill) formerly

owned by St. Regis Paper Company (St. Regis). The

Company is a successor in interest to St. Regis.

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.

• In March 2016, the Company and other PRPs

The trial of the initial liability phase took place in February

received a special notice letter from the EPA (i)

2013. Weyerhaeuser conceded prior to trial that it was

inviting participation in implementing a remedy for a

a liable party with respect to the site. In September 2013,

portion of the site, and (ii) demanding reimbursement

an opinion and order was issued in the suit. The order

of EPA past costs totaling $37 million, including $19

concluded that the Company (as the successor to St.

million in past costs previously demanded by the

Regis) was not an “operator,” but was an “owner,” of the

EPA. The Company responded to the special notice

mill at issue during a portion of the relevant period and

letter. In December 2016, EPA issued a unilateral

is therefore liable under CERCLA. The order also

administrative order to the Company and other PRPs

determined that NCR is a liable party as an "arranger

to perform the remedy. The unilateral administrative

for disposal" of PCBs in waste paper that was de-inked

order has not yet become effective and the Company

and recycled by mills along the Kalamazoo River. The

is evaluating its response.

order did not address the Company's responsibility, if

any, for past or future costs. The parties’ responsibility,

• In April 2016, the EPA issued a separate unilateral

including that of the Company, was the subject of a

administrative order to the Company and certain

second trial, which was concluded in late 2015. A

other PRPs for a time-critical removal action (TCRA)

decision has not been rendered and it is unclear to what

of PCB-contaminated sediments from a different

extent the Court will address responsibility for future

portion of the site. The Company responded to the

costs in that decision. We are unable to predict the

unilateral administrative order and agreed along with

outcome or estimate our maximum reasonably possible

two other parties to comply with the order subject to

loss. However, we do not believe that any material loss

its sufficient cause defenses.

is probable.

• In October 2016, the Company and another PRP

received a special notice letter from the EPA inviting

participation in the remedial design component of the

landfill remedy for the Allied Paper Mill. The record

of decision establishing the final landfill remedy for

the Allied Paper Mill was issued by the EPA in

September 2016. The Company responded to the

Allied Paper Mill special notice letter in late

December 2016.

The Company’s CERCLA liability has not been finally

determined with respect to these or any other portions

of the site, and except as noted above, the Company

has declined to perform any work or reimburse the EPA

at this time. As noted below, the Company is involved

in allocation/apportionment litigation with regard to the

site. 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.

Harris County: International Paper and McGinnis

Industrial Maintenance Corporation

(MIMC), a

subsidiary of Waste Management, Inc. (WMI), are PRPs

at the San Jacinto River Waste Pits Superfund Site in

Harris County, Texas. The PRPs have been actively

participating in the activities at the site and share the

costs of these activities. In September 2016, the EPA

issued a proposed remedial action plan (PRAP) for the

site, which identified the preferred remedy as the

removal of

the contaminated material currently

protected by an armored cap. In addition, the EPA

selected a preferred remedy for the separate southern

impoundment that requires offsite disposal. In January

2017, the PRPs submitted comments on the PRAP.

On October 11, 2017, the EPA issued a Record of

Decision (ROD) selecting the final remedy for the site:

removal and relocation of the waste material from both

the northern and southern impoundments. The EPA did

not specify the methods or practices needed to perform

this work. While the EPA’s selected remedy was

accompanied by a cost estimate of approximately $115

million, we do not believe that estimate provides a
million, we do not believe that estimate provides a
reasonable basis for accrual under GAAP because the
reasonable basis for accrual under GAAP because the
estimate was based on a technological method for
estimate was based on a technological method for
performing the work that we believe is not feasible. On
performing the work that we believe is not feasible. On
October 25, 2017, the PRPs received a letter from the
October 25, 2017, the PRPs received a letter from the
EPA inviting participation in the remedial design
EPA inviting participation in the remedial design
component of the EPA’s selected remedy for the site,
component of the EPA’s selected remedy for the site,
and the Company plans to participate in this remedial
and the Company plans to participate in this remedial
design process to determine if and how the remedy can
design process to determine if and how the remedy can
be accomplished. We expect this process will include
be accomplished. We expect this process will include
additional studies to determine feasible alternatives and
additional studies to determine feasible alternatives and
costs to complete this final remedy, and we have
costs to complete this final remedy, and we have
accrued reasonably estimable costs related to this
accrued reasonably estimable costs related to this
process. Subsequent to the issuance of the ROD, there
process. Subsequent to the issuance of the ROD, there
have been several meetings between the EPA and the
have been several meetings between the EPA and the
PRPs, and the Company anticipates working with the
PRPs, and the Company anticipates working with the
EPA and other PRPs to develop the remedial design,
EPA and other PRPs to develop the remedial design,
including adaptive management techniques and a
including adaptive management techniques and a
predesign investigation expected to commence in the
predesign investigation expected to commence in the
first quarter of 2018. The objectives of the predesign
first quarter of 2018. The objectives of the predesign
investigation include filling data gaps (including but not
investigation include filling data gaps (including but not
limited
technical data
limited
technical data
generated prior to the ROD and not incorporated into
generated prior to the ROD and not incorporated into
the selected remedy), refining areas and volumes of
the selected remedy), refining areas and volumes of
materials to be addressed, determining if the excavation
materials to be addressed, determining if the excavation
remedy is able to be implemented in a manner protective
remedy is able to be implemented in a manner protective
of human health and the environment, and investigating
of human health and the environment, and investigating
potential impacts to infrastructure in the vicinity. The
potential impacts to infrastructure in the vicinity. The
Company has identified a number of concerns and
Company has identified a number of concerns and
uncertainties regarding the remedy described in the
uncertainties regarding the remedy described in the
ROD and regarding the EPA’s estimates for the costs
ROD and regarding the EPA’s estimates for the costs
and time required to implement the selected remedy.
and time required to implement the selected remedy.
Because of ongoing questions
regarding cost
regarding cost
Because of ongoing questions
effectiveness, technical feasibility, timing and other
effectiveness, technical feasibility, timing and other
technical data, it is uncertain how the ROD will be
technical data, it is uncertain how the ROD will be
implemented. Consequently, while additional losses are
implemented. Consequently, while additional losses are
probable as a result of the selected remedy, we are
probable as a result of the selected remedy, we are
currently unable to determine any adjustment to our
currently unable to determine any adjustment to our
immaterial recorded liability. It remains reasonably
immaterial recorded liability. It remains reasonably
possible that additional losses could be material as the
possible that additional losses could be material as the
remedial design process with the EPA continues over
remedial design process with the EPA continues over
the coming quarters.
the coming quarters.

to post-Hurricane Harvey
to post-Hurricane Harvey

International Paper and MIMC/WMI are also defending
International Paper and MIMC/WMI are also defending
an additional lawsuit related to the site brought by
an additional lawsuit related to the site brought by
approximately 600 individuals who allege property
approximately 600 individuals who allege property
damage and personal injury. Because this case is still
damage and personal injury. Because this case is still
in the discovery phase, it is premature to predict the
in the discovery phase, it is premature to predict the
outcome or to estimate a loss or range of loss, in any,
outcome or to estimate a loss or range of loss, in any,
which may be incurred.
which may be incurred.

Antitrust
Antitrust

Containerboard: In June 2016, a lawsuit captioned
Containerboard: In June 2016, a lawsuit captioned
Ashley Furniture Indus., Inc. v. Packaging Corporation
Ashley Furniture Indus., Inc. v. Packaging Corporation
of America (W.D. Wis.), was filed in federal court in
of America (W.D. Wis.), was filed in federal court in
Wisconsin against
the
Wisconsin against
the
Company, Temple-Inland and Weyerhaeuser Company.
Company, Temple-Inland and Weyerhaeuser Company.
The Ashley Furniture
the
the
The Ashley Furniture
allegations found in the now-settled Kleen Products
allegations found in the now-settled Kleen Products

ten defendants,
ten defendants,

lawsuit closely
lawsuit closely

including
including

tracks
tracks

litigation, alleging a practically identical civil violation of
litigation, alleging a practically identical civil violation of
Section 1 of the Sherman Act (in particular, that
Section 1 of the Sherman Act (in particular, that
defendants conspired to limit the supply and thereby
defendants conspired to limit the supply and thereby
increase prices of containerboard products), but also
increase prices of containerboard products), but also
asserts Wisconsin state antitrust claims. In January
asserts Wisconsin state antitrust claims. In January
2011, International Paper was named as a defendant in
2011, International Paper was named as a defendant in
a lawsuit filed in state court in Cocke County, Tennessee
a lawsuit filed in state court in Cocke County, Tennessee
alleging that International Paper violated Tennessee law
alleging that International Paper violated Tennessee law
by conspiring to limit the supply and fix the prices of
by conspiring to limit the supply and fix the prices of
containerboard from mid-2005 to the present. Plaintiffs
containerboard from mid-2005 to the present. Plaintiffs
in the state court action seek certification of a class of
in the state court action seek certification of a class of
Tennessee
indirect purchasers of containerboard
indirect purchasers of containerboard
Tennessee
products, damages and costs, including attorneys' fees.
products, damages and costs, including attorneys' fees.
No class certification materials have been filed to date
No class certification materials have been filed to date
in the Tennessee action.
in the Tennessee action.

The Company disputes the allegations made in the
The Company disputes the allegations made in the
Ashley Furniture and Tennessee lawsuits and is
Ashley Furniture and Tennessee lawsuits and is
vigorously defending each. At this time, however,
vigorously defending each. At this time, however,
because the actions are in a preliminary stage, we are
because the actions are in a preliminary stage, we are
unable to predict an outcome or estimate a range of
unable to predict an outcome or estimate a range of
reasonably possible loss.
reasonably possible loss.

Contract
Contract

Signature: In August 2014, a lawsuit captioned
Signature: In August 2014, a lawsuit captioned
Signature Industrial Services LLC et al. v. International
Signature Industrial Services LLC et al. v. International
Paper Company was filed in state court in Texas. The
Paper Company was filed in state court in Texas. The
Signature lawsuit arises out of approximately $1 million
Signature lawsuit arises out of approximately $1 million
in disputed invoices related to the installation of new
in disputed invoices related to the installation of new
equipment at the Company's Orange, Texas mill. In
equipment at the Company's Orange, Texas mill. In
addition to the invoices in dispute, Signature and its
addition to the invoices in dispute, Signature and its
president allege consequential damages arising from
president allege consequential damages arising from
the Company's nonpayment of those invoices. The
the Company's nonpayment of those invoices. The
lawsuit was tried before a jury in Beaumont, Texas, in
lawsuit was tried before a jury in Beaumont, Texas, in
May 2017. On June 1, 2017, the jury returned a verdict
May 2017. On June 1, 2017, the jury returned a verdict
awarding approximately $125 million in damages to the
awarding approximately $125 million in damages to the
plaintiffs. The Court issued a judgment on December
plaintiffs. The Court issued a judgment on December
14, 2017, awarding the plaintiffs a total of approximately
14, 2017, awarding the plaintiffs a total of approximately
$137 million in actual and consequential damages, fees,
$137 million in actual and consequential damages, fees,
costs and pre-judgment interest, and awarding post-
costs and pre-judgment interest, and awarding post-
judgment interest. The judgment will not be final until
judgment interest. The judgment will not be final until
post-trial motions are decided, and the Company will
post-trial motions are decided, and the Company will
appeal the final judgment thereafter. The Company has
appeal the final judgment thereafter. The Company has
numerous and strong bases for appeal, and we believe
numerous and strong bases for appeal, and we believe
we will prevail on appeal. Because post-trial
we will prevail on appeal. Because post-trial
proceedings are in a preliminary stage, we are unable
proceedings are in a preliminary stage, we are unable
to estimate a range of reasonably possible loss, but we
to estimate a range of reasonably possible loss, but we
expect the amount of any loss to be immaterial.
expect the amount of any loss to be immaterial.

General
General

The Company is involved in various other inquiries,
The Company is involved in various other inquiries,
administrative proceedings and litigation relating to
administrative proceedings and litigation relating to
environmental and safety matters, personal injury, labor
environmental and safety matters, personal injury, labor
and employment, contracts, sales of property,
and employment, contracts, sales of property,
intellectual property and other matters, some of which
intellectual property and other matters, some of which
allege substantial monetary damages. While any
allege substantial monetary damages. While any
proceeding or litigation has the element of uncertainty,
proceeding or litigation has the element of uncertainty,
the Company believes that the outcome of any of these
the Company believes that the outcome of any of these

62
62

lawsuits or claims that are pending or threatened or all
lawsuits or claims that are pending or threatened or all
of them combined (other than those that cannot be
of them combined (other than those that cannot be
assessed due to their preliminary nature) will not have
assessed due to their preliminary nature) will not have
a material effect on
financial
financial
a material effect on
statements.
statements.

its consolidated
its consolidated

NOTE 12 VARIABLE INTEREST ENTITIES
NOTE 12 VARIABLE INTEREST ENTITIES

forestlands,
forestlands,

In connection with the 2006 sale of approximately 5.6
In connection with the 2006 sale of approximately 5.6
million acres of
International Paper
million acres of
International Paper
received installment notes (the Timber Notes) totaling
received installment notes (the Timber Notes) totaling
approximately $4.8 billion. The Timber Notes, which do
approximately $4.8 billion. The Timber Notes, which do
not require principal payments prior to their maturity are
not require principal payments prior to their maturity are
supported by irrevocable letters of credit obtained by the
supported by irrevocable letters of credit obtained by the
buyers of the forestlands.
buyers of the forestlands.

The Timber Notes were used as collateral for borrowings
The Timber Notes were used as collateral for borrowings
from third party lenders, which effectively monetized the
from third party lenders, which effectively monetized the
Timber Notes through the creation of newly formed
Timber Notes through the creation of newly formed
(the Entities). The
special purposes entities
(the Entities). The
special purposes entities
monetization structure preserved the $1.4 billion tax
monetization structure preserved the $1.4 billion tax
deferral that resulted from the 2006 forestlands sales.
deferral that resulted from the 2006 forestlands sales.
As a result of tax reform legislation in the fourth quarter
As a result of tax reform legislation in the fourth quarter
of 2017, described in Note 10 Income Taxes, this
of 2017, described in Note 10 Income Taxes, this
deferred tax liability was remeasured to be $884 million.
deferred tax liability was remeasured to be $884 million.

tax
tax

During 2015, International Paper initiated a series of
During 2015, International Paper initiated a series of
actions in order to extend the 2006 monetization
actions in order to extend the 2006 monetization
structure and maintain the long-term nature of the $884
structure and maintain the long-term nature of the $884
million deferred
International Paper
liability.
million deferred
International Paper
liability.
acquired the Class A interests in the Investor Entities
acquired the Class A interests in the Investor Entities
from a third party for $198 million in cash. As a result,
from a third party for $198 million in cash. As a result,
International Paper became the owner of all of the Class
International Paper became the owner of all of the Class
A and Class B interests in the Entities and became the
A and Class B interests in the Entities and became the
primary beneficiary of the Entities. The assets and
primary beneficiary of the Entities. The assets and
liabilities of the Entities, primarily consisting of the
liabilities of the Entities, primarily consisting of the
Timber Notes and third party bank loans, were recorded
Timber Notes and third party bank loans, were recorded
at fair value as of the acquisition date of the Class A
at fair value as of the acquisition date of the Class A
interests. The Entities, with assets and liabilities
interests. The Entities, with assets and liabilities
primarily consisting of the Timber Notes and third-party
primarily consisting of the Timber Notes and third-party
bank loans, were restructured which resulted in the
bank loans, were restructured which resulted in the
formation of wholly-owned, bankruptcy-remote special
formation of wholly-owned, bankruptcy-remote special
purpose entities (the 2015 Financing Entities) during the
purpose entities (the 2015 Financing Entities) during the
third quarter of 2015. Also, during the third quarter of
third quarter of 2015. Also, during the third quarter of
2015, the 2015 Financing Entities used $630 million in
2015, the 2015 Financing Entities used $630 million in
cash to pay down a portion of the third party bank loans
cash to pay down a portion of the third party bank loans
and refinanced approximately $4.2 billion of those loans
and refinanced approximately $4.2 billion of those loans
on nonrecourse terms (the 2015 Refinance Loans).
on nonrecourse terms (the 2015 Refinance Loans).

During the fourth quarter of 2015, International Paper
During the fourth quarter of 2015, International Paper
extended the maturity date on the Timber Notes for an
extended the maturity date on the Timber Notes for an
additional five years. The Timber Notes are shown in
additional five years. The Timber Notes are shown in
Financial assets of special purpose entities on the
Financial assets of special purpose entities on the
accompanying consolidated balance sheet and mature
accompanying consolidated balance sheet and mature
in August 2021 unless extended for an additional five
in August 2021 unless extended for an additional five
years. These notes are supported by approximately
years. These notes are supported by approximately
$4.8 billion of irrevocable letters of credit. In addition,
$4.8 billion of irrevocable letters of credit. In addition,
the Company extinguished the 2015 Refinance Loans
the Company extinguished the 2015 Refinance Loans
scheduled to mature in May 2016 and entered into new
scheduled to mature in May 2016 and entered into new

loans
loans

third party bank
third party bank

nonrecourse
totaling
totaling
nonrecourse
approximately $4.2 billion (the Extension Loans).
approximately $4.2 billion (the Extension Loans).
Provisions of loan agreements related to approximately
Provisions of loan agreements related to approximately
$1.1 billion of the Extension Loans require the bank
$1.1 billion of the Extension Loans require the bank
issuing letters of credit supporting the Timber Notes
issuing letters of credit supporting the Timber Notes
pledged as collateral to maintain a credit rating at or
pledged as collateral to maintain a credit rating at or
above a specified threshold. In the event the credit rating
above a specified threshold. In the event the credit rating
of the letter of credit bank is downgraded below the
of the letter of credit bank is downgraded below the
specified threshold, the letters of credit must be replaced
specified threshold, the letters of credit must be replaced
within 60 days with letters of credit from a qualifying
within 60 days with letters of credit from a qualifying
financial institution. The Extension Loans are shown in
financial institution. The Extension Loans are shown in
Nonrecourse financial liabilities of special purpose
Nonrecourse financial liabilities of special purpose
entities on the accompanying consolidated balance
entities on the accompanying consolidated balance
sheet and mature in the fourth quarter of 2020. The
sheet and mature in the fourth quarter of 2020. The
extinguishment of the 2015 Refinance Loans of
extinguishment of the 2015 Refinance Loans of
approximately $4.2 billion and the issuance of the
approximately $4.2 billion and the issuance of the
Extension Loans of approximately $4.2 billion are shown
Extension Loans of approximately $4.2 billion are shown
as part of reductions of debt and issuances of debt,
as part of reductions of debt and issuances of debt,
the
respectively,
respectively,
the
consolidated statement of cash flows for the year ended
consolidated statement of cash flows for the year ended
December 31, 2015.
December 31, 2015.

financing activities of
financing activities of

the
the

in
in

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

The transactions described in these paragraphs result
The transactions described in these paragraphs result
in continued long-term classification of the $884 million
in continued long-term classification of the $884 million
deferred tax liability related to the 2006 forestlands sale.
deferred tax liability related to the 2006 forestlands sale.

As of December 31, 2017 and 2016, the fair value of the
As of December 31, 2017 and 2016, the fair value of the
Timber Notes was $4.8 billion and $4.7 billion,
Timber Notes was $4.8 billion and $4.7 billion,
respectively, and the fair value of the Extension Loans
respectively, and the fair value of the Extension Loans
was $4.3 billion for both the years ended 2017 and 2016.
was $4.3 billion for both the years ended 2017 and 2016.
The Timber Notes and Extension Loans are classified
The Timber Notes and Extension Loans are classified
as Level 2 within the fair value hierarchy, which is further
as Level 2 within the fair value hierarchy, which is further
defined in Note 14.
defined in Note 14.

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

In millions
In millions
Revenue (a)
Revenue (a)
Expense (a)
Expense (a)
Cash receipts (b)
Cash receipts (b)
Cash payments (c)
Cash payments (c)

2015
2015
2016
2016
2017
2017
$ 95 $ 95 $ 43
$ 95 $ 95 $ 43
81
81
128
128
21
21
77
77
71
71
98
98

95
95
128
128

128
128

is
is

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

included
included

in
in

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.

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 $831 million tax

deferral that resulted from the 2007 Temple-Inland

timberlands sales. As a result of tax reform legislation

in the fourth quarter of 2017, described in Note 10

Income Taxes, this deferred tax liability was remeasured

to be $538 million, 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 $2.4 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 $2.4 billion of irrevocable letters of credit

issued by three banks, which are required to maintain

minimum credit ratings on their long-term debt. As of

December 31, 2017 and 2016, the fair value of the notes

was $2.3 billion and $2.2 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 $2.1 billion shown in

Nonrecourse financial liabilities of special purpose

entities. The loans are repayable in 2027 and are

secured only by the $2.4 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. As of December 31, 2017

and 2016, the fair value of this debt was $2.1 billion for

both the years ended 2017 and 2016. 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)

2017

2016

2015

$ 49 $ 37 $ 27

(a) The revenue is included in Interest expense, net in the

accompanying consolidated statement of operations and

includes approximately $19 million for the years ended

December 31, 2017, 2016 and 2015, 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 for the years ended

December 31, 2017, 2016 and 2015, 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 2017, International Paper issued $1.0 billion of 4.35%

senior unsecured notes with a maturity date in 2048.

The proceeds from this offering, together with a

combination of available cash and other borrowings,

were used to make a $1.25 billion voluntary cash

contribution

the Company's pension plan.

December 2017, International Paper received $660

million in cash proceeds from a new loan entered into

as part of the transfer of the North American Consumer

Packaging business to a subsidiary of Graphic Packing

Holding Company discussed in Note 7. The Company

used the cash proceeds, together with available cash,

to pay down existing debt of approximately $900 million

of notes with interest rates ranging from 1.92% to 9.38%

and original maturities from 2018 to 2021. Pre-tax early

debt retirement costs of $83 million related to the debt

repayments, including $82 million of cash premiums, are

included in Restructuring and other charges in the

accompanying consolidated statement of operations for

the year ended December 31, 2017. The $660 million

term loan was subsequently assumed by Graphic

Packaging International, LLC on January 1, 2018 and

is classified as Liabilities held for sale at December 31,

2017, in the accompanying consolidated balance sheet.

In 2016, International Paper issued $1.1 billion of 3.00%

senior unsecured notes with a maturity date in 2027,

and $1.2 billion of 4.40% senior unsecured notes with

a maturity date in 2047. In addition, the Company repaid

approximately $266 million of notes with an interest rate

of 7.95% and an original maturity of 2018. Pre-tax early

debt retirement costs of $29 million related to the debt

repayments, including $31 million of cash premiums, are

included in Restructuring and other charges in the

63
63

lawsuits or claims that are pending or threatened or all

nonrecourse

third party bank

loans

totaling

of them combined (other than those that cannot be

approximately $4.2 billion (the Extension Loans).

assessed due to their preliminary nature) will not have

Provisions of loan agreements related to approximately

a material effect on

its consolidated

financial

$1.1 billion of the Extension Loans require the bank

statements.

NOTE 12 VARIABLE INTEREST ENTITIES

In connection with the 2006 sale of approximately 5.6

million acres of

forestlands,

International Paper

received installment notes (the Timber Notes) totaling

approximately $4.8 billion. The Timber Notes, which do

not require principal payments prior to their maturity are

supported by irrevocable letters of credit obtained by the

buyers of the forestlands.

The Timber Notes were used as collateral for borrowings

from third party lenders, which effectively monetized the

Timber Notes through the creation of newly formed

special purposes entities

(the Entities). The

monetization structure preserved the $1.4 billion tax

deferral that resulted from the 2006 forestlands sales.

As a result of tax reform legislation in the fourth quarter

of 2017, described in Note 10 Income Taxes, this

deferred tax liability was remeasured to be $884 million.

During 2015, International Paper initiated a series of

actions in order to extend the 2006 monetization

structure and maintain the long-term nature of the $884

million deferred

tax

liability.

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. The Entities, with assets and liabilities

primarily consisting of the Timber Notes and third-party

bank loans, were restructured which resulted in the

formation of wholly-owned, bankruptcy-remote special

purpose entities (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 of the third party bank loans

and refinanced approximately $4.2 billion of those loans

on nonrecourse terms (the 2015 Refinance Loans).

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

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 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,

the

financing activities of

the

consolidated statement of cash flows for the year ended

December 31, 2015.

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.

The transactions described in these paragraphs result

in continued long-term classification of the $884 million

deferred tax liability related to the 2006 forestlands sale.

As of December 31, 2017 and 2016, the fair value of the

Timber Notes was $4.8 billion and $4.7 billion,

respectively, and the fair value of the Extension Loans

was $4.3 billion for both the years ended 2017 and 2016.

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)

2017

2016

2015

$ 95 $ 95 $ 43

128

(a) The net expense related to the Company’s interest in the

Entities

included

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
expense are included in Interest expense, net in the
accompanying consolidated statement of operations.
accompanying consolidated statement of operations.

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

(c) The cash payments are interest payments on the associated
(c) The cash payments are interest payments on the associated
debt obligations discussed above. After formation of the 2015
debt obligations discussed above. After formation of the 2015
Financing Entities, the payments represent interest paid on
Financing Entities, the payments represent interest paid on
Nonrecourse financial liabilities of special purpose entities.
Nonrecourse financial liabilities of special purpose entities.

In connection with the acquisition of Temple-Inland in
In connection with the acquisition of Temple-Inland in
February 2012, two special purpose entities became
February 2012, two special purpose entities became
wholly-owned subsidiaries of International Paper.
wholly-owned subsidiaries of International Paper.

The use of the two wholly-owned special purpose
The use of the two wholly-owned special purpose
entities discussed below preserved the $831 million tax
entities discussed below preserved the $831 million tax
deferral that resulted from the 2007 Temple-Inland
deferral that resulted from the 2007 Temple-Inland
timberlands sales. As a result of tax reform legislation
timberlands sales. As a result of tax reform legislation
in the fourth quarter of 2017, described in Note 10
in the fourth quarter of 2017, described in Note 10
Income Taxes, this deferred tax liability was remeasured
Income Taxes, this deferred tax liability was remeasured
to be $538 million, which will be settled with the maturity
to be $538 million, which will be settled with the maturity
of the notes in 2027.
of the notes in 2027.

In October 2007, Temple-Inland sold 1.55 million acres
In October 2007, Temple-Inland sold 1.55 million acres
of timberland for $2.4 billion. The total consideration
of timberland for $2.4 billion. The total consideration
consisted almost entirely of notes due in 2027 issued
consisted almost entirely of notes due in 2027 issued
by the buyer of the timberland, which Temple-Inland
by the buyer of the timberland, which Temple-Inland
contributed to two wholly-owned, bankruptcy-remote
contributed to two wholly-owned, bankruptcy-remote
special purpose entities. The notes are shown in
special purpose entities. The notes are shown in
Financial assets of special purpose entities in the
Financial assets of special purpose entities in the
accompanying consolidated balance sheet and are
accompanying consolidated balance sheet and are
supported by $2.4 billion of irrevocable letters of credit
supported by $2.4 billion of irrevocable letters of credit
issued by three banks, which are required to maintain
issued by three banks, which are required to maintain
minimum credit ratings on their long-term debt. As of
minimum credit ratings on their long-term debt. As of
December 31, 2017 and 2016, the fair value of the notes
December 31, 2017 and 2016, the fair value of the notes
was $2.3 billion and $2.2 billion, respectively. These
was $2.3 billion and $2.2 billion, respectively. These
notes are classified as Level 2 within the fair value
notes are classified as Level 2 within the fair value
hierarchy, which is further defined in Note 14.
hierarchy, which is further defined in Note 14.

In December 2007, Temple-Inland's two wholly-owned
In December 2007, Temple-Inland's two wholly-owned
special purpose entities borrowed $2.1 billion shown in
special purpose entities borrowed $2.1 billion shown in
Nonrecourse financial liabilities of special purpose
Nonrecourse financial liabilities of special purpose
entities. The loans are repayable in 2027 and are
entities. The loans are repayable in 2027 and are
secured only by the $2.4 billion of notes and the
secured only by the $2.4 billion of notes and the
irrevocable letters of credit securing the notes and are
irrevocable letters of credit securing the notes and are
nonrecourse to us. The loan agreements provide that if
nonrecourse to us. The loan agreements provide that if
a credit rating of any of the banks issuing the letters of
a credit rating of any of the banks issuing the letters of
credit is downgraded below the specified threshold, the
credit is downgraded below the specified threshold, the
letters of credit issued by that bank must be replaced
letters of credit issued by that bank must be replaced
within 30 days with letters of credit from another
within 30 days with letters of credit from another
qualifying financial institution. As of December 31, 2017
qualifying financial institution. As of December 31, 2017
and 2016, the fair value of this debt was $2.1 billion for
and 2016, the fair value of this debt was $2.1 billion for
both the years ended 2017 and 2016. This debt is
both the years ended 2017 and 2016. This debt is
classified as Level 2 within the fair value hierarchy, which
classified as Level 2 within the fair value hierarchy, which
is further defined in Note 14.
is further defined in Note 14.

64
64

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

In millions
In millions

Revenue (a)
Revenue (a)

Expense (b)
Expense (b)

Cash receipts (c)
Cash receipts (c)

Cash payments (d)
Cash payments (d)

2015
2015
2016
2016
2017
2017
$ 49 $ 37 $ 27
$ 49 $ 37 $ 27
27
27

37
37

48
48
28
28
39
39

15
15

27
27

7
7
18
18

(a) The revenue is included in Interest expense, net in the
(a) The revenue is included in Interest expense, net in the
accompanying consolidated statement of operations and
accompanying consolidated statement of operations and
includes approximately $19 million for the years ended
includes approximately $19 million for the years ended
December 31, 2017, 2016 and 2015, respectively, of accretion
December 31, 2017, 2016 and 2015, respectively, of accretion
income for the amortization of the purchase accounting
income for the amortization of the purchase accounting
adjustment on the Financial assets of special purpose entities.
adjustment on the Financial assets of special purpose entities.
(b) The expense is included in Interest expense, net in the
(b) The expense is included in Interest expense, net in the
accompanying consolidated statement of operations and
accompanying consolidated statement of operations and
includes approximately $7 million for the years ended
includes approximately $7 million for the years ended
December 31, 2017, 2016 and 2015, respectively, of accretion
December 31, 2017, 2016 and 2015, respectively, of accretion
expense for the amortization of the purchase accounting
expense for the amortization of the purchase accounting
adjustment on the Nonrecourse financial liabilities of special
adjustment on the Nonrecourse financial liabilities of special
purpose entities.
purpose entities.

(c) The cash receipts are interest received on the Financial assets
(c) The cash receipts are interest received on the Financial assets

of special purpose entities.
of special purpose entities.

(d) The cash payments are interest paid on Nonrecourse financial
(d) The cash payments are interest paid on Nonrecourse financial

liabilities of special purpose entities.
liabilities of special purpose entities.

NOTE 13 DEBT AND LINES OF CREDIT
NOTE 13 DEBT AND LINES OF CREDIT

to
to

the Company's pension plan.
the Company's pension plan.

In 2017, International Paper issued $1.0 billion of 4.35%
In 2017, International Paper issued $1.0 billion of 4.35%
senior unsecured notes with a maturity date in 2048.
senior unsecured notes with a maturity date in 2048.
The proceeds from this offering, together with a
The proceeds from this offering, together with a
combination of available cash and other borrowings,
combination of available cash and other borrowings,
were used to make a $1.25 billion voluntary cash
were used to make a $1.25 billion voluntary cash
contribution
In
contribution
In
December 2017, International Paper received $660
December 2017, International Paper received $660
million in cash proceeds from a new loan entered into
million in cash proceeds from a new loan entered into
as part of the transfer of the North American Consumer
as part of the transfer of the North American Consumer
Packaging business to a subsidiary of Graphic Packing
Packaging business to a subsidiary of Graphic Packing
Holding Company discussed in Note 7. The Company
Holding Company discussed in Note 7. The Company
used the cash proceeds, together with available cash,
used the cash proceeds, together with available cash,
to pay down existing debt of approximately $900 million
to pay down existing debt of approximately $900 million
of notes with interest rates ranging from 1.92% to 9.38%
of notes with interest rates ranging from 1.92% to 9.38%
and original maturities from 2018 to 2021. Pre-tax early
and original maturities from 2018 to 2021. Pre-tax early
debt retirement costs of $83 million related to the debt
debt retirement costs of $83 million related to the debt
repayments, including $82 million of cash premiums, are
repayments, including $82 million of cash premiums, are
included in Restructuring and other charges in the
included in Restructuring and other charges in the
accompanying consolidated statement of operations for
accompanying consolidated statement of operations for
the year ended December 31, 2017. The $660 million
the year ended December 31, 2017. The $660 million
term loan was subsequently assumed by Graphic
term loan was subsequently assumed by Graphic
Packaging International, LLC on January 1, 2018 and
Packaging International, LLC on January 1, 2018 and
is classified as Liabilities held for sale at December 31,
is classified as Liabilities held for sale at December 31,
2017, in the accompanying consolidated balance sheet.
2017, in the accompanying consolidated balance sheet.

In 2016, International Paper issued $1.1 billion of 3.00%
In 2016, International Paper issued $1.1 billion of 3.00%
senior unsecured notes with a maturity date in 2027,
senior unsecured notes with a maturity date in 2027,
and $1.2 billion of 4.40% senior unsecured notes with
and $1.2 billion of 4.40% senior unsecured notes with
a maturity date in 2047. In addition, the Company repaid
a maturity date in 2047. In addition, the Company repaid
approximately $266 million of notes with an interest rate
approximately $266 million of notes with an interest rate
of 7.95% and an original maturity of 2018. Pre-tax early
of 7.95% and an original maturity of 2018. Pre-tax early
debt retirement costs of $29 million related to the debt
debt retirement costs of $29 million related to the debt
repayments, including $31 million of cash premiums, are
repayments, including $31 million of cash premiums, are
included in Restructuring and other charges in the
included in Restructuring and other charges in the

accompanying consolidated statement of operations for
accompanying consolidated statement of operations for
the year ended December 31, 2016.
the year ended December 31, 2016.

In June 2016, International Paper entered into a
In June 2016, International Paper entered into a
commercial paper program with a borrowing capacity of
commercial paper program with a borrowing capacity of
$750 million. Under the terms of the program, individual
$750 million. Under the terms of the program, individual
maturities on borrowings may vary, but not exceed one
maturities on borrowings may vary, but not exceed one
year from the date of issue. Interest bearing notes may
year from the date of issue. Interest bearing notes may
be issued either as fixed notes or floating rate notes. As
be issued either as fixed notes or floating rate notes. As
of December 31, 2017, the Company had $180 million
of December 31, 2017, the Company had $180 million
outstanding under this program.
outstanding under this program.

In millions
In millions

Debt reductions (a)
Debt reductions (a)

2017
2017

2016
2016

2015
2015

$
$

993 $ 266 $ 2,151
993 $ 266 $ 2,151

Pre-tax early debt extinguishment
Pre-tax early debt extinguishment
costs (b)
costs (b)

83
83

29
29

207
207

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

A summary of long-term debt follows:
A summary of long-term debt follows:

In millions at December 31
In millions at December 31

9 3/8% note – due 2019
9 3/8% note – due 2019

8.7% note – due 2038
8.7% note – due 2038

7.95% debenture – due 2018
7.95% debenture – due 2018

7.5% note – due 2021
7.5% note – due 2021

7.3% note – due 2039
7.3% note – due 2039

6 7/8% notes – due 2023 – 2029
6 7/8% notes – due 2023 – 2029

6.65% note – due 2037
6.65% note – due 2037

6 5/8% note – due 2018
6 5/8% note – due 2018

6.4% to 7.75% debentures due 2025 – 2027
6.4% to 7.75% debentures due 2025 – 2027

6.0% note – due 2041
6.0% note – due 2041

2017
2017

2016
2016

$
$

— $
— $

264
264

—
—

409
409

721
721

131
131

4
4

—
—

143
143

585
585

295
295

264
264

382
382

598
598

721
721

131
131

4
4

72
72

142
142

585
585

5.00% to 5.15% notes – due 2035 – 2046
5.00% to 5.15% notes – due 2035 – 2046

1,281
1,281

1,280
1,280

4.8% note – due 2044
4.8% note – due 2044

4.75% note – due 2022
4.75% note – due 2022

3.00% to 4.40% notes – due 2024 – 2048
3.00% to 4.40% notes – due 2024 – 2048

Floating rate notes – due 2017 – 2025 (a)
Floating rate notes – due 2017 – 2025 (a)

Environmental and industrial development
Environmental and industrial development
bonds – due 2017 – 2035 (b)
bonds – due 2017 – 2035 (b)

Other (c)
Other (c)

Total (d)
Total (d)

Less: current maturities
Less: current maturities

Long-term debt
Long-term debt

796
796

817
817

4,775
4,775

650
650

585
585

(4)
(4)

796
796

810
810

3,786
3,786

763
763

681
681

4
4

11,157
11,157

11,314
11,314

311
311

239
239

$ 10,846 $ 11,075
$ 10,846 $ 11,075

(a) The weighted average interest rate on these notes was 2.6%
(a) The weighted average interest rate on these notes was 2.6%

in 2017 and 2.2% in 2016.
in 2017 and 2.2% in 2016.

(b) The weighted average interest rate on these bonds was 6.0%
(b) The weighted average interest rate on these bonds was 6.0%

in 2017 and 5.9% in 2016.
in 2017 and 5.9% in 2016.
Includes $70 million and $69 million of debt issuance costs as
Includes $70 million and $69 million of debt issuance costs as
of December 31, 2017 and 2016, respectively.
of December 31, 2017 and 2016, respectively.

(d) The fair market value was approximately $12.3 billion at
(d) The fair market value was approximately $12.3 billion at

December 31, 2017 and $12.0 billion at December 31, 2016.
December 31, 2017 and $12.0 billion at December 31, 2016.

Total maturities of long-term debt over the next five years
Total maturities of long-term debt over the next five years
are 2018 – $311 million; 2019 – $126 million; 2020 –
are 2018 – $311 million; 2019 – $126 million; 2020 –
$164 million; 2021 – $440 million; and 2022 – $956
$164 million; 2021 – $440 million; and 2022 – $956
million.
million.

At December 31, 2017, International Paper’s credit
At December 31, 2017, International Paper’s credit
facilities (the Agreements) totaled $2.1 billion. The
facilities (the Agreements) totaled $2.1 billion. The
Agreements generally provide for interest rates at a
Agreements generally provide for interest rates at a
floating rate index plus a pre-determined margin
floating rate index plus a pre-determined margin
dependent upon International Paper’s credit rating. The
dependent upon International Paper’s credit rating. The
Agreements
include a $1.5 billion contractually
Agreements
include a $1.5 billion contractually
committed bank facility that expires in December 2021
committed bank facility that expires in December 2021
and has a facility fee of 0.15% payable annually. The
and has a facility fee of 0.15% payable annually. The
liquidity facilities also include up to $600 million of
liquidity facilities also include up to $600 million of
uncommitted financings based on eligible receivables
uncommitted financings based on eligible receivables
balances under a receivables securitization program
balances under a receivables securitization program
that expires in December 2018. At December 31, 2017,
that expires in December 2018. At December 31, 2017,
there were no borrowings under either the bank facility
there were no borrowings under either the bank facility
or receivables securitization program.
or receivables securitization program.

financial covenants require
financial covenants require

the
the
The Company’s
The Company’s
maintenance of a minimum net worth of $9 billion and
maintenance of a minimum net worth of $9 billion and
a total debt-to-capital ratio of less than 60%. Net worth
a total debt-to-capital ratio of less than 60%. Net worth
is defined as the sum of common stock, paid-in capital
is defined as the sum of common stock, paid-in capital
and retained earnings, less treasury stock plus any
and retained earnings, less treasury stock plus any
charges. The
cumulative goodwill
charges. The
cumulative goodwill
calculation
other
other
calculation
comprehensive income/loss and Nonrecourse Financial
comprehensive income/loss and Nonrecourse Financial
Liabilities of Special Purpose Entities. The total debt-to-
Liabilities of Special Purpose Entities. The total debt-to-
capital ratio is defined as total debt divided by the sum
capital ratio is defined as total debt divided by the sum
of total debt plus net worth. As of December 31, 2017,
of total debt plus net worth. As of December 31, 2017,
we were in compliance with our debt covenants.
we were in compliance with our debt covenants.

accumulated
accumulated

impairment
impairment

excludes
excludes

also
also

NOTE 14 DERIVATIVES AND HEDGING
NOTE 14 DERIVATIVES AND HEDGING
ACTIVITIES
ACTIVITIES

International Paper periodically uses derivatives and
International Paper periodically uses derivatives and
other financial instruments to hedge exposures to
other financial instruments to hedge exposures to
interest
risks.
risks.
rate, commodity and currency
rate, commodity and currency
interest
International Paper does not hold or issue financial
International Paper does not hold or issue financial
instruments for trading purposes. For hedges that meet
instruments for trading purposes. For hedges that meet
the hedge accounting criteria, International Paper, at
the hedge accounting criteria, International Paper, at
inception, formally designates and documents the
inception, formally designates and documents the
instrument as a fair value hedge, a cash flow hedge or
instrument as a fair value hedge, a cash flow hedge or
a net investment hedge of a specific underlying
a net investment hedge of a specific underlying
exposure.
exposure.

INTEREST RATE RISK MANAGEMENT
INTEREST RATE RISK MANAGEMENT

Our policy is to manage interest cost using a mixture of
Our policy is to manage interest cost using a mixture of
fixed-rate and variable-rate debt. To manage this risk in
fixed-rate and variable-rate debt. To manage this risk in
a cost-efficient manner, we enter into interest rate swaps
a cost-efficient manner, we enter into interest rate swaps
whereby we agree to exchange with the counterparty,
whereby we agree to exchange with the counterparty,
at specified intervals, the difference between fixed and
at specified intervals, the difference between fixed and
variable interest amounts calculated by reference to a
variable interest amounts calculated by reference to a
notional amount.
notional amount.

65
65

Interest rate swaps that meet specific accounting criteria

Derivative instruments are reported in the consolidated

are accounted for as fair value or cash flow hedges. For

balance sheets at their fair values, unless the derivative

fair value hedges, the changes in the fair value of both

instruments qualify for the normal purchase normal sale

the hedging instruments and the underlying debt

("NPNS") exception under GAAP and such exception

obligations are immediately recognized in interest

has been elected. If the NPNS exception is elected, the

expense. For cash flow hedges, the effective portion of

fair values of such contracts are not recognized on the

the changes in the fair value of the hedging instrument

balance sheet.

is reported in Accumulated other comprehensive

income (“AOCI”) and reclassified into interest expense

Contracts that qualify are designated as cash flow

over the life of the underlying debt. The ineffective

hedges of forecasted commodity purchases. The

portion for both cash flow and fair value hedges, which

effective portion of the changes in fair value for these

is not material for any year presented, is immediately

instruments is reported in AOCI and reclassified into

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

follows:

as cash flow hedges of certain forecasted transactions

In millions

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.

The change

in value of certain non-qualifying

instruments used

to manage

foreign exchange

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.

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

Derivatives in Cash Flow

Hedging Relationships:

Foreign exchange contracts

(a)

Derivatives Not Designated as

Hedging Instruments:

Electricity contract

Foreign exchange contracts

December 31,

2017

2016

329

275

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

December 31, 2017.

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

2017

2016

2015

Foreign exchange

contracts

Interest rate contracts

Total

15 $

—

15 $

4 $

(10)

(6) $

(3)

—

(3)

During the next 12 months, the amount of the

December 31, 2017 AOCI balance, after tax, that is

expected to be reclassified to earnings is a gain of $6

million.

accompanying consolidated statement of operations for

the year ended December 31, 2016.

In June 2016, International Paper entered into a

commercial paper program with a borrowing capacity of

$750 million. Under the terms of the program, individual

maturities on borrowings may vary, but not exceed one

year from the date of issue. Interest bearing notes may

be issued either as fixed notes or floating rate notes. As

of December 31, 2017, the Company had $180 million

outstanding under this program.

Amounts related to early debt extinguishment during the

years ended December 31, 2017, 2016 and 2015 were

as follows:

In millions

Debt reductions (a)

Pre-tax early debt extinguishment

costs (b)

207

2017

2016

2015

993 $ 266 $ 2,151

(a) Reductions related to notes with interest rates ranging from

1.57% to 9.38% with original maturities from 2015 to 2030 for

the years ended December 31, 2017, 2016 and 2015. Includes

the $630 million payment for a portion of the Special Purpose

Entity Liability for the year ended December 31, 2015 (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:

6.4% to 7.75% debentures due 2025 – 2027

6.0% note – due 2041

5.00% to 5.15% notes – due 2035 – 2046

1,281

1,280

In millions at December 31

9 3/8% note – due 2019

8.7% note – due 2038

7.95% debenture – due 2018

7.5% note – due 2021

7.3% note – due 2039

6 7/8% notes – due 2023 – 2029

6.65% note – due 2037

6 5/8% note – due 2018

4.8% note – due 2044

4.75% note – due 2022

3.00% to 4.40% notes – due 2024 – 2048

Floating rate notes – due 2017 – 2025 (a)

Environmental and industrial development

bonds – due 2017 – 2035 (b)

Other (c)

Total (d)

Less: current maturities

Long-term debt

2017

2016

— $

295

264

382

598

721

131

142

585

796

810

3,786

763

681

264

—

409

721

131

—

143

585

796

817

4,775

650

585

(4)

11,157

11,314

311

239

$ 10,846 $ 11,075

(d) The fair market value was approximately $12.3 billion at

December 31, 2017 and $12.0 billion at December 31, 2016.

Total maturities of long-term debt over the next five years

are 2018 – $311 million; 2019 – $126 million; 2020 –

$164 million; 2021 – $440 million; and 2022 – $956

million.

At December 31, 2017, 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 December 2021

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 under a receivables securitization program

that expires in December 2018. At December 31, 2017,

there were no borrowings under either the bank facility

or receivables securitization program.

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. As of December 31, 2017,

we were in compliance with our debt covenants.

NOTE 14 DERIVATIVES AND HEDGING

ACTIVITIES

International Paper periodically uses derivatives and

other financial instruments to hedge exposures to

interest

rate, commodity and currency

risks.

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

(a) The weighted average interest rate on these notes was 2.6%

(b) The weighted average interest rate on these bonds was 6.0%

in 2017 and 2.2% in 2016.

in 2017 and 5.9% in 2016.

(c)

Includes $70 million and $69 million of debt issuance costs as

notional amount.

of December 31, 2017 and 2016, respectively.

Interest rate swaps that meet specific accounting criteria
Interest rate swaps that meet specific accounting criteria
are accounted for as fair value or cash flow hedges. For
are accounted for as fair value or cash flow hedges. For
fair value hedges, the changes in the fair value of both
fair value hedges, the changes in the fair value of both
the hedging instruments and the underlying debt
the hedging instruments and the underlying debt
obligations are immediately recognized in interest
obligations are immediately recognized in interest
expense. For cash flow hedges, the effective portion of
expense. For cash flow hedges, the effective portion of
the changes in the fair value of the hedging instrument
the changes in the fair value of the hedging instrument
is reported in Accumulated other comprehensive
is reported in Accumulated other comprehensive
income (“AOCI”) and reclassified into interest expense
income (“AOCI”) and reclassified into interest expense
over the life of the underlying debt. The ineffective
over the life of the underlying debt. The ineffective
portion for both cash flow and fair value hedges, which
portion for both cash flow and fair value hedges, which
is not material for any year presented, is immediately
is not material for any year presented, is immediately
recognized in earnings.
recognized in earnings.

FOREIGN CURRENCY RISK MANAGEMENT
FOREIGN CURRENCY RISK MANAGEMENT

We manufacture and sell our products and finance
We manufacture and sell our products and finance
operations in a number of countries throughout the world
operations in a number of countries throughout the world
and, as a result, are exposed to movements in foreign
and, as a result, are exposed to movements in foreign
currency exchange rates. The purpose of our foreign
currency exchange rates. The purpose of our foreign
currency hedging program is to manage the volatility
currency hedging program is to manage the volatility
associated with the changes in exchange rates.
associated with the changes in exchange rates.

To manage this exchange rate risk, we have historically
To manage this exchange rate risk, we have historically
utilized a combination of forward contracts, options and
utilized a combination of forward contracts, options and
currency swaps. Contracts that qualify are designated
currency swaps. Contracts that qualify are designated
as cash flow hedges of certain forecasted transactions
as cash flow hedges of certain forecasted transactions
denominated in foreign currencies. The effective portion
denominated in foreign currencies. The effective portion
of the changes in fair value of these instruments is
of the changes in fair value of these instruments is
reported in AOCI and reclassified into earnings in the
reported in AOCI and reclassified into earnings in the
same financial statement line item and in the same
same financial statement line item and in the same
period or periods during which the related hedged
period or periods during which the related hedged
transactions affect earnings. The ineffective portion,
transactions affect earnings. The ineffective portion,
which is not material for any year presented, is
which is not material for any year presented, is
immediately recognized in earnings.
immediately recognized in earnings.

in value of certain non-qualifying
The change
in value of certain non-qualifying
The change
instruments used
foreign exchange
foreign exchange
to manage
to manage
instruments used
exposure of intercompany financing transactions and
exposure of intercompany financing transactions and
certain balance sheet items subject to revaluation is
certain balance sheet items subject to revaluation is
in earnings, substantially
immediately recognized
in earnings, substantially
immediately recognized
offsetting the foreign currency mark-to-market impact of
offsetting the foreign currency mark-to-market impact of
the related exposure.
the related exposure.

COMMODITY RISK MANAGEMENT
COMMODITY RISK MANAGEMENT

Certain raw materials used in our production processes
Certain raw materials used in our production processes
are subject to price volatility caused by weather, supply
are subject to price volatility caused by weather, supply
conditions, political and economic variables and other
conditions, political and economic variables and other
unpredictable factors. To manage the volatility in
unpredictable factors. To manage the volatility in
earnings due to price fluctuations, we may utilize swap
earnings due to price fluctuations, we may utilize swap
contracts or forward purchase contracts.
contracts or forward purchase contracts.

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

Contracts that qualify are designated as cash flow
Contracts that qualify are designated as cash flow
hedges of forecasted commodity purchases. The
hedges of forecasted commodity purchases. The
effective portion of the changes in fair value for these
effective portion of the changes in fair value for these
instruments is reported in AOCI and reclassified into
instruments is reported in AOCI and reclassified into
earnings in the same financial statement line item and
earnings in the same financial statement line item and
in the same period or periods during which the hedged
in the same period or periods during which the hedged
transactions affect earnings. The ineffective and non-
transactions affect earnings. The ineffective and non-
qualifying portions, which are not material for any year
qualifying portions, which are not material for any year
presented, are immediately recognized in earnings.
presented, are immediately recognized in earnings.
The change in the fair value of certain non-qualifying
The change in the fair value of certain non-qualifying
instruments used to reduce commodity price volatility is
instruments used to reduce commodity price volatility is
immediately recognized in earnings.
immediately recognized in earnings.

The notional amounts of qualifying and non-qualifying
The notional amounts of qualifying and non-qualifying
instruments used in hedging transactions were as
instruments used in hedging transactions were as
follows:
follows:

In millions
In millions

Derivatives in Cash Flow
Derivatives in Cash Flow
Hedging Relationships:
Hedging Relationships:

Foreign exchange contracts
Foreign exchange contracts
(a)
(a)

Derivatives Not Designated as
Derivatives Not Designated as
Hedging Instruments:
Hedging Instruments:

Electricity contract
Electricity contract

Foreign exchange contracts
Foreign exchange contracts

December 31,
December 31,
2017
2017

December 31,
December 31,
2016
2016

329
329

275
275

13
13

10
10

6
6

24
24

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

December 31, 2017.
December 31, 2017.

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

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

In millions
In millions

2017
2017

2016
2016

2015
2015

Foreign exchange
Foreign exchange
contracts
contracts

Interest rate contracts
Interest rate contracts

Total
Total

$
$

15 $
15 $

—
—

15 $
15 $

4 $
4 $

(10)
(10)

(6) $
(6) $

(3)
(3)

—
—

(3)
(3)

During the next 12 months, the amount of the
During the next 12 months, the amount of the
December 31, 2017 AOCI balance, after tax, that is
December 31, 2017 AOCI balance, after tax, that is
expected to be reclassified to earnings is a gain of $6
expected to be reclassified to earnings is a gain of $6
million.
million.

66
66

The amounts of gains and losses recognized in the consolidated statement of operations on qualifying and non-qualifying
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:
financial instruments used in hedging transactions were as follows:

Interest Rate Contracts

significant inputs are readily available in public markets,

or can be derived from observable market transactions.

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

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

In millions
In millions

2017
2017

2016
2016

2015
2015

Derivatives in Cash Flow Hedging Relationships:
Derivatives in Cash Flow Hedging Relationships:

Foreign exchange contracts
Foreign exchange contracts

Interest rate contracts
Interest rate contracts

Total
Total

$
$

8
8

(1)
(1)
7
7

$
$

7
7

—
—

7
7

$ (12)
$ (12)

Cost of products sold
Cost of products sold

—
—

Interest expense, net
Interest expense, net

$ (12)
$ (12)

derived interest rate curve.

Foreign Exchange Contracts

In millions
In millions

2017
2017

2016
2016

2015
2015

Derivatives in Fair Value Hedging Relationships:
Derivatives in Fair Value Hedging Relationships:

Gain (Loss)
Gain (Loss)
Recognized
Recognized
in Income
in Income

Location of Gain
Location of Gain
(Loss)
(Loss)
in Consolidated
in Consolidated
Statement of
Statement of
Operations
Operations

Interest rate contracts
Interest rate contracts

Debt
Debt

Total
Total

Derivatives Not Designated as Hedging Instruments:
Derivatives Not Designated as Hedging Instruments:

Electricity Contracts
Electricity Contracts

Foreign exchange contracts
Foreign exchange contracts

Interest rate contracts
Interest rate contracts

Total
Total

$ —
$ —

$
$

3
3

Interest expense, net
Interest expense, net

—
—

(3)
(3)

Interest expense, net
Interest expense, net

$ —
$ —

$ (10)
$ (10)

$ —
$ —

$
$

—
—

1 (a)
1 (a)

—
—

$
$

(9)
(9)

$
$

5
5

$
$

2
2

(7)
(7)

(4)
(4)

Cost of products sold
Cost of products sold

5 (b)
5 (b)

13 (c)
13 (c)

Interest expense, net
Interest expense, net

(a) Excluding gain of $1 million related to debt reduction recorded to Restructuring and other charges.
(a) Excluding gain of $1 million related to debt reduction recorded to Restructuring and other charges.
(b) Excluding gain of $2 million related to debt reduction recorded to Restructuring and other charges.
(b) Excluding gain of $2 million related to debt reduction recorded to Restructuring and other charges.
(c) Excluding gain of $3 million related to debt reduction recorded to Restructuring and other charges.
(c) Excluding gain of $3 million related to debt reduction recorded to Restructuring and other charges.

In 2016, fully effective interest rate swaps designated
In 2016, fully effective interest rate swaps designated
as fair value hedges with a notional value of $55 million
as fair value hedges with a notional value of $55 million
terminated early. The resulting gain was
were
terminated early. The resulting gain was
were
immaterial.
immaterial.

Fair Value Measurements
Fair Value Measurements

International Paper’s financial assets and liabilities that
International Paper’s financial assets and liabilities that
are recorded at fair value consist of derivative contracts,
are recorded at fair value consist of derivative contracts,
including interest rate swaps, foreign currency forward
including interest rate swaps, foreign currency forward
contracts, options and other financial instruments that
contracts, options and other financial instruments that
are used to hedge exposures to interest rate, commodity
are used to hedge exposures to interest rate, commodity
and currency risks. For these financial instruments, fair
and currency risks. For these financial instruments, fair
value is determined at each balance sheet date using
value is determined at each balance sheet date using
an income approach.
an income approach.

for
for

The guidance
fair value measurements and
fair value measurements and
The guidance
disclosures sets out a fair value hierarchy that groups
disclosures sets out a fair value hierarchy that groups
fair value measurement inputs into the following three
fair value measurement inputs into the following three
classifications:
classifications:

Level 1: Quoted market prices in active markets for
Level 1: Quoted market prices in active markets for
identical assets or liabilities.
identical assets or liabilities.

Level 2: Observable market-based inputs other than
Level 2: Observable market-based inputs other than
quoted prices
that are
quoted prices
that are
observable for the asset or liability, either directly or
observable for the asset or liability, either directly or
indirectly.
indirectly.

included within Level 1
included within Level 1

Level 3: Unobservable inputs for the asset or liability
Level 3: Unobservable inputs for the asset or liability
reflecting the reporting entity’s own assumptions or
reflecting the reporting entity’s own assumptions or
external inputs from inactive markets.
external inputs from inactive markets.
Transfers between levels are recognized at the end of
Transfers between levels are recognized at the end of
the reporting period. All of International Paper’s
the reporting period. All of International Paper’s
derivative fair value measurements use Level 2 inputs.
derivative fair value measurements use Level 2 inputs.
Below is a description of the valuation calculation and
Below is a description of the valuation calculation and
the inputs used for each class of contract:
the inputs used for each class of contract:

67
67

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

Electricity Contract

of all future interest payments between the contract

The electricity contract is valued using the Mid-C index

counterparties, discounted to present value. The fair

forward curve obtained

from

the

Intercontinental

value of the future interest payments is determined by

Exchange. The market value of the contract is the sum

comparing the contract rate to the derived forward

of the fair value of all future purchase payments between

interest rate and present valued using the appropriate

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.

Foreign currency forward and option contracts are

valued using standard valuation models. Significant

Since the volume and level of activity of the markets that

inputs used in these standard valuation models are

each of the above contracts are traded in has been

foreign currency forward and interest rate curves and

normal, the fair value calculations have not been

a volatility measurement. The fair value of each contract

adjusted for inactive markets or disorderly transactions.

is present valued using the applicable interest rate. All

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

Total derivatives not designated as hedging

Electricity contract

instruments

Total derivatives

Assets

Liabilities

December 31,

2017

2016

2017

2016

11 (a) $

3 (b) $

—

1 (c) $

8 (d)

4 (c)

2 (c)

(a)

Includes $10 million recorded in Other current assets and $1 million recorded in Deferred charges and other assets in the accompanying

consolidated balance sheet.

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

Included in Other accrued liabilities in the accompanying consolidated balance sheet.

(b)

(c)

(d)

sheet.

Includes $5 million recorded in Other accrued liabilities and $3 million recorded in Other liabilities in the accompanying consolidated balance

The above contracts are subject to enforceable master

netting arrangements that provide rights of offset with

Credit-Risk-Related Contingent Features

each counterparty when amounts are payable on the

International Paper evaluates credit risk by monitoring

same date in the same currency or in the case of certain

its exposure with each counterparty to ensure that

specified defaults. Management has made an

exposure stays within acceptable policy limits. Credit

accounting policy election to not offset the fair value of

risk is also mitigated by contractual provisions with the

recognized derivative assets and derivative liabilities in

majority of our banks. Certain of the contracts include a

the consolidated balance sheet. The amounts owed to

credit support annex that requires the posting of

the counterparties and owed to the Company are

collateral by the counterparty or International Paper

considered immaterial with respect to each counterparty

based on each party’s rating and level of exposure.

and in the aggregate with all counterparties.

Based on the Company’s current credit rating, the

collateral threshold is generally $15 million.

the
the

from
from

Since the volume and level of activity of the markets that
Since the volume and level of activity of the markets that
each of the above contracts are traded in has been
each of the above contracts are traded in has been
normal, the fair value calculations have not been
normal, the fair value calculations have not been
adjusted for inactive markets or disorderly transactions.
adjusted for inactive markets or disorderly transactions.

significant inputs are readily available in public markets,
significant inputs are readily available in public markets,
or can be derived from observable market transactions.
or can be derived from observable market transactions.

Electricity Contract
Electricity Contract

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

The amounts of gains and losses recognized in the consolidated statement of operations on qualifying and non-qualifying

Interest Rate Contracts
Interest Rate Contracts

financial instruments used in hedging transactions were as follows:

Interest rate contracts are valued using swap curves
Interest rate contracts are valued using swap curves
obtained from an independent market data provider. The
obtained from an independent market data provider. The
market value of each contract is the sum of the fair value
market value of each contract is the sum of the fair value
of all future interest payments between the contract
of all future interest payments between the contract
counterparties, discounted to present value. The fair
counterparties, discounted to present value. The fair
value of the future interest payments is determined by
value of the future interest payments is determined by
comparing the contract rate to the derived forward
comparing the contract rate to the derived forward
interest rate and present valued using the appropriate
interest rate and present valued using the appropriate
derived interest rate curve.
derived interest rate curve.

Foreign Exchange Contracts
Foreign Exchange Contracts

Foreign currency forward and option contracts are
Foreign currency forward and option contracts are
valued using standard valuation models. Significant
valued using standard valuation models. Significant
inputs used in these standard valuation models are
inputs used in these standard valuation models are
foreign currency forward and interest rate curves and
foreign currency forward and interest rate curves and
a volatility measurement. The fair value of each contract
a volatility measurement. The fair value of each contract
is present valued using the applicable interest rate. All
is present valued using the applicable interest rate. All

In millions

2017

2016

2015

Derivatives in Cash Flow Hedging Relationships:

Foreign exchange contracts

Interest rate contracts

Total

Gain (Loss)

Reclassified from

AOCI

into Income

(Effective Portion)

Location of Gain

(Loss)

Reclassified

from AOCI

into Income

(Effective Portion)

(1)

—

$ (12)

Cost of products sold

—

Interest expense, net

$ (12)

Gain (Loss)

Recognized

in Income

Location of Gain

(Loss)

in Consolidated

Statement of

Operations

$ —

Interest expense, net

—

(3)

Interest expense, net

$ —

$ (10)

$ —

—

1 (a)

—

(9)

(7)

(4)

Cost of products sold

5 (b)

13 (c)

Interest expense, net

In millions

2017

2016

2015

Derivatives in Fair Value Hedging Relationships:

Interest rate contracts

Derivatives Not Designated as Hedging Instruments:

Debt

Total

Electricity Contracts

Foreign exchange contracts

Interest rate contracts

(a) Excluding gain of $1 million related to debt reduction recorded to Restructuring and other charges.

(b) Excluding gain of $2 million related to debt reduction recorded to Restructuring and other charges.

as fair value hedges with a notional value of $55 million

identical assets or liabilities.

were

terminated early. The resulting gain was

immaterial.

Fair Value Measurements

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.

International Paper’s financial assets and liabilities that

are recorded at fair value consist of derivative contracts,

Level 3: Unobservable inputs for the asset or liability

including interest rate swaps, foreign currency forward

reflecting the reporting entity’s own assumptions or

contracts, options and other financial instruments that

external inputs from inactive markets.

are used to hedge exposures to interest rate, commodity

Transfers between levels are recognized at the end of

and currency risks. For these financial instruments, fair

the reporting period. All of International Paper’s

value is determined at each balance sheet date using

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:

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:

The following table provides a summary of the impact of our derivative instruments in the consolidated balance sheet:
The following table provides a summary of the impact of our derivative instruments in the consolidated balance sheet:

Fair Value Measurements
Fair Value Measurements
Level 2 – Significant Other Observable Inputs
Level 2 – Significant Other Observable Inputs

In 2016, fully effective interest rate swaps designated

Level 1: Quoted market prices in active markets for

Electricity contract
Electricity contract

Total derivatives not designated as hedging
Total derivatives not designated as hedging
instruments
instruments

Total derivatives
Total derivatives

In millions
In millions

Derivatives designated as hedging instruments
Derivatives designated as hedging instruments

Foreign exchange contracts – cash flow
Foreign exchange contracts – cash flow

Total derivatives designated as hedging instruments
Total derivatives designated as hedging instruments

Derivatives not designated as hedging instruments
Derivatives not designated as hedging instruments

Assets
Assets

Liabilities
Liabilities

December 31,
December 31,
2017
2017

December 31,
December 31,
2016
2016

December 31,
December 31,
2017
2017

December 31,
December 31,
2016
2016

$
$

11 (a) $
11 (a) $

11
11

—
—

11
11

$
$

3 (b) $
3 (b) $

3
3

—
—

3
3

$
$

1 (c) $
1 (c) $

1
1

8 (d)
8 (d)

8
8

9
9

$
$

4 (c)
4 (c)

4
4

2 (c)
2 (c)

2
2

6
6

(a)
(a)

(b)
(b)
(c)
(c)
(d)
(d)

Includes $10 million recorded in Other current assets and $1 million recorded in Deferred charges and other assets in the accompanying
Includes $10 million recorded in Other current assets and $1 million recorded in Deferred charges and other assets in the accompanying
consolidated balance sheet.
consolidated balance sheet.
Included in Other current assets in the accompanying consolidated balance sheet.
Included in Other current assets in the accompanying consolidated balance sheet.
Included in Other accrued liabilities in the accompanying consolidated balance sheet.
Included in Other accrued liabilities in the accompanying consolidated balance sheet.
Includes $5 million recorded in Other accrued liabilities and $3 million recorded in Other liabilities in the accompanying consolidated balance
Includes $5 million recorded in Other accrued liabilities and $3 million recorded in Other liabilities in the accompanying consolidated balance
sheet.
sheet.

The above contracts are subject to enforceable master
The above contracts are subject to enforceable master
netting arrangements that provide rights of offset with
netting arrangements that provide rights of offset with
each counterparty when amounts are payable on the
each counterparty when amounts are payable on the
same date in the same currency or in the case of certain
same date in the same currency or in the case of certain
specified defaults. Management has made an
specified defaults. Management has made an
accounting policy election to not offset the fair value of
accounting policy election to not offset the fair value of
recognized derivative assets and derivative liabilities in
recognized derivative assets and derivative liabilities in
the consolidated balance sheet. The amounts owed to
the consolidated balance sheet. The amounts owed to
the counterparties and owed to the Company are
the counterparties and owed to the Company are
considered immaterial with respect to each counterparty
considered immaterial with respect to each counterparty
and in the aggregate with all counterparties.
and in the aggregate with all counterparties.

Credit-Risk-Related Contingent Features
Credit-Risk-Related Contingent Features

International Paper evaluates credit risk by monitoring
International Paper evaluates credit risk by monitoring
its exposure with each counterparty to ensure that
its exposure with each counterparty to ensure that
exposure stays within acceptable policy limits. Credit
exposure stays within acceptable policy limits. Credit
risk is also mitigated by contractual provisions with the
risk is also mitigated by contractual provisions with the
majority of our banks. Certain of the contracts include a
majority of our banks. Certain of the contracts include a
credit support annex that requires the posting of
credit support annex that requires the posting of
collateral by the counterparty or International Paper
collateral by the counterparty or International Paper
based on each party’s rating and level of exposure.
based on each party’s rating and level of exposure.
Based on the Company’s current credit rating, the
Based on the Company’s current credit rating, the
collateral threshold is generally $15 million.
collateral threshold is generally $15 million.

68
68

If the lower of the Company’s credit rating by Moody’s
If the lower of the Company’s credit rating by Moody’s
or S&P were to drop below investment grade, the
or S&P were to drop below investment grade, the
Company would be required to post collateral for all of
Company would be required to post collateral for all of
its derivatives in a net liability position, although no
its derivatives in a net liability position, although no
derivatives would terminate. As of December 31, 2017,
derivatives would terminate. As of December 31, 2017,
there were no derivative instruments containing credit-
there were no derivative instruments containing credit-
risk-related contingent features in a net liability position.
risk-related contingent features in a net liability position.
The fair value of derivative instruments containing
The fair value of derivative instruments containing
credit-risk-related contingent features in a net liability
credit-risk-related contingent features in a net liability
position was $3 million as of December 31, 2016. The
position was $3 million as of December 31, 2016. The
Company was not required to post any collateral as of
Company was not required to post any collateral as of
December 31, 2017 or 2016.
December 31, 2017 or 2016.

NOTE 15 CAPITAL STOCK
NOTE 15 CAPITAL STOCK

The authorized capital stock at both December 31,
The authorized capital stock at both December 31,
2017 and 2016, consisted of 990,850,000 shares of
2017 and 2016, consisted of 990,850,000 shares of
common stock, $1 par value; 400,000 shares of
common stock, $1 par value; 400,000 shares of
cumulative $4 preferred stock, without par value (stated
cumulative $4 preferred stock, without par value (stated
value $100 per share); and 8,750,000 shares of serial
value $100 per share); and 8,750,000 shares of serial
preferred stock, $1 par value. The serial preferred stock
preferred stock, $1 par value. The serial preferred stock
is issuable in one or more series by the Board of
is issuable in one or more series by the Board of
Directors without further shareholder action.
Directors without further shareholder action.

The following is a rollforward of shares of common stock
The following is a rollforward of shares of common stock
for the three years ended December 31, 2017, 2016
for the three years ended December 31, 2017, 2016
and 2015:
and 2015:

In thousands
In thousands

Balance at January 1, 2015
Balance at January 1, 2015

Issuance of stock for various plans, net
Issuance of stock for various plans, net

Repurchase of stock
Repurchase of stock

Balance at December 31, 2015
Balance at December 31, 2015

Issuance of stock for various plans, net
Issuance of stock for various plans, net

Repurchase of stock
Repurchase of stock

Common Stock
Common Stock

Issued
Issued
448,854
448,854

Treasury
Treasury
28,734
28,734

(4,230)
(4,230)
62
62
— 12,272
— 12,272
36,776
36,776

448,916
448,916

—
—

(2,745)
(2,745)
3,640
3,640

Balance at December 31, 2016
Balance at December 31, 2016

448,916
448,916

37,671
37,671

Issuance of stock for various plans, net
Issuance of stock for various plans, net

Repurchase of stock
Repurchase of stock

—
—

Balance at December 31, 2017
Balance at December 31, 2017

448,916
448,916

(2,577)
(2,577)

881
881
35,975
35,975

NOTE 16 RETIREMENT PLANS
NOTE 16 RETIREMENT PLANS

the
the
International Paper sponsors and maintains
International Paper sponsors and maintains
Retirement Plan of International Paper Company (the
Retirement Plan of International Paper Company (the
“Pension Plan”), a tax-qualified defined benefit pension
“Pension Plan”), a tax-qualified defined benefit pension
plan that provides retirement benefits to substantially all
plan that provides retirement benefits to substantially all
U.S. salaried employees and hourly employees
U.S. salaried employees and hourly employees
(receiving salaried benefits) hired prior to July 1, 2004,
(receiving salaried benefits) hired prior to July 1, 2004,
and substantially all other U.S. hourly and union
and substantially all other U.S. hourly and union
employees who work at a participating business unit
employees who work at a participating business unit
regardless of hire date. These employees generally are
regardless of hire date. These employees generally are
eligible to participate in the Pension Plan upon attaining
eligible to participate in the Pension Plan upon attaining
21 years of age and completing one year of eligibility
21 years of age and completing one year of eligibility
service. U.S. salaried employees and hourly employees
service. U.S. salaried employees and hourly employees
(receiving salaried benefits) hired after June 30, 2004
(receiving salaried benefits) hired after June 30, 2004
are not eligible to participate in the Pension Plan, but
are not eligible to participate in the Pension Plan, but
receive a company contribution to their individual
receive a company contribution to their individual
savings plan accounts (see Other U.S. Plans); however,
savings plan accounts (see Other U.S. Plans); however,
salaried employees hired by Temple Inland prior to
salaried employees hired by Temple Inland prior to
March 1, 2007 or Weyerhaeuser Company's Cellulose
March 1, 2007 or Weyerhaeuser Company's Cellulose
Fibers division prior to December 1, 2011 also
Fibers division prior to December 1, 2011 also
participate in the Pension Plan. The Pension Plan
participate in the Pension Plan. The Pension Plan
provides defined pension benefits based on years of
provides defined pension benefits based on years of
credited service and either final average earnings
credited service and either final average earnings
(salaried employees and hourly employees receiving
(salaried employees and hourly employees receiving
salaried benefits), hourly job rates or specified benefit
salaried benefits), hourly job rates or specified benefit
rates (hourly and union employees).
rates (hourly and union employees).

The Company also has three unfunded nonqualified
The Company also has three unfunded nonqualified
defined benefit pension plans: a Pension Restoration
defined benefit pension plans: a Pension Restoration
Plan available to employees hired prior to July 1, 2004
Plan available to employees hired prior to July 1, 2004
that provides retirement benefits based on eligible
that provides retirement benefits based on eligible
compensation in excess of limits set by the Internal
compensation in excess of limits set by the Internal
Revenue Service, and two supplemental retirement
Revenue Service, and two supplemental retirement
plans for senior managers (SERP), which is an
plans for senior managers (SERP), which is an
alternative retirement plan for salaried employees who
alternative retirement plan for salaried employees who
are senior vice presidents and above or who are
are senior vice presidents and above or who are
designated by the chief executive officer as participants.
designated by the chief executive officer as participants.
These nonqualified plans are only funded to the extent
These nonqualified plans are only funded to the extent
of benefits paid, which totaled $40 million, $21 million
of benefits paid, which totaled $40 million, $21 million
and $62 million in 2017, 2016 and 2015, respectively,
and $62 million in 2017, 2016 and 2015, respectively,
and which are expected to be $30 million in 2018.
and which are expected to be $30 million in 2018.

freeze participation,
freeze participation,

including
including
The Company will
The Company will
for salaried
credited service and compensation,
for salaried
credited service and compensation,
employees under the Pension Plan, the Pension
employees under the Pension Plan, the Pension
Restoration Plan and the two SERP plans for all service
Restoration Plan and the two SERP plans for all service
on or after January 1, 2019. This change will not affect
on or after January 1, 2019. This change will not affect
benefits accrued through December 31, 2018. For
benefits accrued through December 31, 2018. For
service after this date, employees affected by the freeze
service after this date, employees affected by the freeze
will receive Retirement Savings Account contributions
will receive Retirement Savings Account contributions
as described later in this Note 16.
as described later in this Note 16.

Many non-U.S. employees are covered by various

The components of the $901 million and $5 million

retirement benefit arrangements, some of which are

change related to U.S. plans and non-U.S. plans,

considered to be defined benefit pension plans for

respectively, in the amounts recognized in OCI during

accounting purposes.

2017 consisted of:

OBLIGATIONS AND FUNDED STATUS

The following table shows the changes in the benefit

obligation and plan assets for 2017 and 2016, and the

plans’ funded status.

In millions

obligation:

Change in projected benefit

Benefit obligation,

January 1

Service cost

Interest cost

Settlements

Actuarial loss (gain)

Acquisitions

Divestitures

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:

2017

2016

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

$13,683 $ 219 $14,438 $ 204

(1,295)

(4)

(1,222)

160

536

913

—

158

580

495

—

(8)

(769)

(767)

—

(21)

$13,264 $ 247 $13,683 $ 219

$10,312 $ 153 $10,923 $ 155

1,830

1,290

(769)

(1,295)

—

(8)

(4)

607

771

(767)

(1,222)

—

$11,368 $ 176 $10,312 $ 153

$ (1,896) $

(71) $ (3,371) $

(66)

(2)

—

(1)

(9)

(2)

—

(16)

(3)

(69)

(66)

Non-current asset

— $

Current liability

(30)

(3)

— $

(40)

Non-current liability

(1,866)

(73)

(3,331)

$ (1,896) $

(71) $ (3,371) $

Amounts recognized in

accumulated other

comprehensive income

under ASC 715 (pre-tax):

Prior service cost

Net actuarial loss

88 $

(1) $

125 $ —

3,893

4,757

$ 3,981 $

66 $ 4,882 $

U.S.

Plans

Non-

U.S.

Plans

In millions

Current year actuarial (gain) loss

Amortization of actuarial loss

Current year prior service cost

Amortization of prior service cost

Settlements

Curtailments

Effect of foreign currency exchange

rate movements

(143) $

(339)

(28)

(383)

(11)

—

(901) $

(2)

—

(1)

—

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 $(184) million, $626 million and $505

million in 2017, 2016 and 2015, respectively. The portion

of the change in funded status for the non-U.S. plans

was $10 million, $23 million, and $8 million in 2017,

2016 and 2015, respectively.

The accumulated benefit obligation at December 31,

2017 and 2016 was $13.2 billion and $13.5 billion,

respectively, for our U.S. defined benefit plans and $230

million and $205 million, respectively, at December 31,

2017 and 2016 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, 2017 and 2016:

2017

2016

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

$ 13,264 $ 215 $ 13,683 $

190

13,161

11,368

200

139

13,535

10,312

177

118

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

69
69

If the lower of the Company’s credit rating by Moody’s

or S&P were to drop below investment grade, the

NOTE 16 RETIREMENT PLANS

Company would be required to post collateral for all of

International Paper sponsors and maintains

the

its derivatives in a net liability position, although no

Retirement Plan of International Paper Company (the

derivatives would terminate. As of December 31, 2017,

“Pension Plan”), a tax-qualified defined benefit pension

there were no derivative instruments containing credit-

plan that provides retirement benefits to substantially all

risk-related contingent features in a net liability position.

U.S. salaried employees and hourly employees

The fair value of derivative instruments containing

(receiving salaried benefits) hired prior to July 1, 2004,

credit-risk-related contingent features in a net liability

and substantially all other U.S. hourly and union

position was $3 million as of December 31, 2016. The

employees who work at a participating business unit

Company was not required to post any collateral as of

regardless of hire date. These employees generally are

December 31, 2017 or 2016.

NOTE 15 CAPITAL STOCK

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

The authorized capital stock at both December 31,

are not eligible to participate in the Pension Plan, but

2017 and 2016, consisted of 990,850,000 shares of

receive a company contribution to their individual

common stock, $1 par value; 400,000 shares of

savings plan accounts (see Other U.S. Plans); however,

cumulative $4 preferred stock, without par value (stated

salaried employees hired by Temple Inland prior to

value $100 per share); and 8,750,000 shares of serial

March 1, 2007 or Weyerhaeuser Company's Cellulose

preferred stock, $1 par value. The serial preferred stock

Fibers division prior to December 1, 2011 also

is issuable in one or more series by the Board of

participate in the Pension Plan. The Pension Plan

Directors without further shareholder action.

provides defined pension benefits based on years of

credited service and either final average earnings

The following is a rollforward of shares of common stock

(salaried employees and hourly employees receiving

for the three years ended December 31, 2017, 2016

salaried benefits), hourly job rates or specified benefit

and 2015:

rates (hourly and union employees).

In thousands

Balance at January 1, 2015

Issuance of stock for various plans, net

Repurchase of stock

Common Stock

Issued

Treasury

448,854

28,734

(4,230)

— 12,272

Balance at December 31, 2015

448,916

36,776

Balance at December 31, 2016

448,916

37,671

Issuance of stock for various plans, net

Repurchase of stock

Issuance of stock for various plans, net

Repurchase of stock

—

(2,745)

3,640

(2,577)

881

Balance at December 31, 2017

448,916

35,975

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 $40 million, $21 million

and $62 million in 2017, 2016 and 2015, respectively,

and which are expected to be $30 million in 2018.

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. This change will not affect

benefits accrued through December 31, 2018. For

service after this date, employees affected by the freeze

will receive Retirement Savings Account contributions

as described later in this Note 16.

Many non-U.S. employees are covered by various
Many non-U.S. employees are covered by various
retirement benefit arrangements, some of which are
retirement benefit arrangements, some of which are
considered to be defined benefit pension plans for
considered to be defined benefit pension plans for
accounting purposes.
accounting purposes.

The components of the $901 million and $5 million
The components of the $901 million and $5 million
change related to U.S. plans and non-U.S. plans,
change related to U.S. plans and non-U.S. plans,
respectively, in the amounts recognized in OCI during
respectively, in the amounts recognized in OCI during
2017 consisted of:
2017 consisted of:

OBLIGATIONS AND FUNDED STATUS
OBLIGATIONS AND FUNDED STATUS

The following table shows the changes in the benefit
The following table shows the changes in the benefit
obligation and plan assets for 2017 and 2016, and the
obligation and plan assets for 2017 and 2016, and the
plans’ funded status.
plans’ funded status.

2017
2017

2016
2016

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

$13,683 $ 219 $14,438 $ 204
$13,683 $ 219 $14,438 $ 204

160
160

536
536

4
4

9
9

158
158

580
580

(1,295)
(1,295)

(4)
(4)

(1,222)
(1,222)

913
913

—
—

33
33

3
3

(769)
(769)

2
2

5
5

—
—

(8)
(8)

495
495

1
1

—
—

(767)
(767)

4
4

9
9

(2)
(2)

35
35

—
—

(1)
(1)

(9)
(9)

—
—

20
20

—
—

(21)
(21)

$13,264 $ 247 $13,683 $ 219
$13,264 $ 247 $13,683 $ 219

$10,312 $ 153 $10,923 $ 155
$10,312 $ 153 $10,923 $ 155

1,830
1,830

1,290
1,290

(769)
(769)

(1,295)
(1,295)

—
—

10
10

(8)
(8)

(4)
(4)

3
3

12
12

607
607

771
771

(767)
(767)

(1,222)
(1,222)

—
—

17
17

8
8

(9)
(9)

(2)
(2)

—
—

(16)
(16)

$11,368 $ 176 $10,312 $ 153
$11,368 $ 176 $10,312 $ 153

$ (1,896) $
$ (1,896) $

(71) $ (3,371) $
(71) $ (3,371) $

(66)
(66)

In millions
In millions

Change in projected benefit
Change in projected benefit
obligation:
obligation:

Benefit obligation,
Benefit obligation,
January 1
January 1

Service cost
Service cost

Interest cost
Interest cost

Settlements
Settlements

Actuarial loss (gain)
Actuarial loss (gain)

Acquisitions
Acquisitions

Divestitures
Divestitures

Plan amendments
Plan amendments

Benefits paid
Benefits paid

Effect of foreign currency
Effect of foreign currency
exchange rate movements
exchange rate movements

Benefit obligation,
Benefit obligation,
December 31
December 31

Change in plan assets:
Change in plan assets:

Fair value of plan assets,
Fair value of plan assets,
January 1
January 1

Actual return on plan
Actual return on plan
assets
assets

Company contributions
Company contributions

Benefits paid
Benefits paid

Settlements
Settlements

Other
Other

Effect of foreign currency
Effect of foreign currency
exchange rate movements
exchange rate movements

Fair value of plan
Fair value of plan
assets, December 31
assets, December 31

Funded status,
Funded status,
December 31
December 31

Amounts recognized in the
Amounts recognized in the
consolidated balance sheet:
consolidated balance sheet:

Non-current asset
Non-current asset

$
$

— $
— $

Current liability
Current liability

(30)
(30)

5$
5$

(3)
(3)

— $
— $

(40)
(40)

Non-current liability
Non-current liability

(1,866)
(1,866)

(73)
(73)

(3,331)
(3,331)

$ (1,896) $
$ (1,896) $

(71) $ (3,371) $
(71) $ (3,371) $

6
6

(3)
(3)

(69)
(69)

(66)
(66)

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

Prior service cost
Prior service cost

Net actuarial loss
Net actuarial loss

$
$

88 $
88 $

(1) $
(1) $

125 $ —
125 $ —

3,893
3,893

67
67

4,757
4,757

$ 3,981 $
$ 3,981 $

66 $ 4,882 $
66 $ 4,882 $

61
61

In millions
In millions

Current year actuarial (gain) loss
Current year actuarial (gain) loss

$
$

Amortization of actuarial loss
Amortization of actuarial loss

Current year prior service cost
Current year prior service cost
Amortization of prior service cost
Amortization of prior service cost
Settlements
Settlements
Curtailments
Curtailments

Effect of foreign currency exchange
Effect of foreign currency exchange
rate movements
rate movements

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

(143) $
(143) $
(339)
(339)
3
3
(28)
(28)
(383)
(383)
(11)
(11)

—
—

$
$

(901) $
(901) $

2
2
(2)
(2)
—
—
—
—
(1)
(1)
—
—

6
6

5
5

The portion of the change in the funded status that was
The portion of the change in the funded status that was
recognized in either net periodic benefit cost or OCI for
recognized in either net periodic benefit cost or OCI for
the U.S. plans was $(184) million, $626 million and $505
the U.S. plans was $(184) million, $626 million and $505
million in 2017, 2016 and 2015, respectively. The portion
million in 2017, 2016 and 2015, respectively. The portion
of the change in funded status for the non-U.S. plans
of the change in funded status for the non-U.S. plans
was $10 million, $23 million, and $8 million in 2017,
was $10 million, $23 million, and $8 million in 2017,
2016 and 2015, respectively.
2016 and 2015, respectively.

The accumulated benefit obligation at December 31,
The accumulated benefit obligation at December 31,
2017 and 2016 was $13.2 billion and $13.5 billion,
2017 and 2016 was $13.2 billion and $13.5 billion,
respectively, for our U.S. defined benefit plans and $230
respectively, for our U.S. defined benefit plans and $230
million and $205 million, respectively, at December 31,
million and $205 million, respectively, at December 31,
2017 and 2016 for our non-U.S. defined benefit plans.
2017 and 2016 for our non-U.S. defined benefit plans.

The following table summarizes information for pension
The following table summarizes information for pension
plans with an accumulated benefit obligation in excess
plans with an accumulated benefit obligation in excess
of plan assets at December 31, 2017 and 2016:
of plan assets at December 31, 2017 and 2016:

2017
2017

2016
2016

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

$ 13,264 $ 215 $ 13,683 $
$ 13,264 $ 215 $ 13,683 $

190
190

13,161
13,161

11,368
11,368

200
200

139
139

13,535
13,535

10,312
10,312

177
177

118
118

In millions
In millions

Projected benefit
Projected benefit
obligation
obligation

Accumulated benefit
Accumulated benefit
obligation
obligation

Fair value of plan assets
Fair value of plan assets

ASC 715, “Compensation – Retirement Benefits”
ASC 715, “Compensation – Retirement Benefits”
provides for delayed recognition of actuarial gains and
provides for delayed recognition of actuarial gains and
losses, including amounts arising from changes in the
losses, including amounts arising from changes in the
estimated projected plan benefit obligation due to
estimated projected plan benefit obligation due to
changes in the assumed discount rate, differences
changes in the assumed discount rate, differences
between the actual and expected return on plan assets
between the actual and expected return on plan assets
and other assumption changes. These net gains and
and other assumption changes. These net gains and
losses are recognized prospectively over a period that
losses are recognized prospectively over a period that
approximates the average remaining service period of
approximates the average remaining service period of
active employees expected to receive benefits under
active employees expected to receive benefits under
the plans to the extent that they are not offset by gains
the plans to the extent that they are not offset by gains
in subsequent years. The estimated net loss and prior
in subsequent years. The estimated net loss and prior
service cost that will be amortized from AOCI into net
service cost that will be amortized from AOCI into net
periodic pension cost for the U.S. plans during the next
periodic pension cost for the U.S. plans during the next

70
70

fiscal year are expected to be $327 million and $17
fiscal year are expected to be $327 million and $17
million, respectively.
million, respectively.

NET PERIODIC PENSION EXPENSE
NET PERIODIC PENSION EXPENSE

Service cost is the actuarial present value of benefits
Service cost is the actuarial present value of benefits
attributed by the plans’ benefit formula to services
attributed by the plans’ benefit formula to services
rendered by employees during the year. Interest cost
rendered by employees during the year. Interest cost
represents the increase in the projected benefit
represents the increase in the projected benefit
obligation, which is a discounted amount, due to the
obligation, which is a discounted amount, due to the
passage of time. The expected return on plan assets
passage of time. The expected return on plan assets
reflects the computed amount of current-year earnings
reflects the computed amount of current-year earnings
from the investment of plan assets using an estimated
from the investment of plan assets using an estimated
long-term rate of return.
long-term rate of return.

for qualified and
for qualified and
Net periodic pension expense
Net periodic pension expense
nonqualified U.S. and non-U.S. defined benefit plans
nonqualified U.S. and non-U.S. defined benefit plans
comprised the following:
comprised the following:

2017
2017

2016
2016

2015
2015

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

In millions
In millions

Service cost
Service cost

$ 160 $
$ 160 $

4 $ 158 $
4 $ 158 $

4 $ 161 $
4 $ 161 $

Interest cost
Interest cost

536
536

9
9

580
580

9
9

597
597

6
6

10
10

Expected return
Expected return
on plan assets
on plan assets

Actuarial loss /
Actuarial loss /
(gain)
(gain)

Amortization of
Amortization of
prior service cost
prior service cost

Curtailment
Curtailment
loss / (gain) (a)
loss / (gain) (a)

Settlement loss
Settlement loss

Special
Special
termination
termination
benefits (a)
benefits (a)

Net periodic
Net periodic
pension
pension
expense
expense

(774)
(774)

(11)
(11)

(815)
(815)

(10)
(10)

(783)
(783)

(11)
(11)

339
339

2
2

400
400

1
1

428
428

1
1

28
28

23
23

383
383

—
—

1
1

41
41

—
—

445
445

—
—

43
43

—
—

15
15

22
22

—
—

$ 717 $
$ 717 $

5 $ 809 $
5 $ 809 $

4 $ 461 $
4 $ 461 $

6
6

(a) Recorded in Discontinued operations in the consolidated
(a) Recorded in Discontinued operations in the consolidated

statement of operations.
statement of operations.

The decrease in 2017 pension expense reflects lower
The decrease in 2017 pension expense reflects lower
settlement losses and lower actuarial losses partially
settlement losses and lower actuarial losses partially
offset by lower asset returns due to the annuity purchase
offset by lower asset returns due to the annuity purchase
as well as curtailment and special termination benefit
as well as curtailment and special termination benefit
charges.
charges.

On September 26, 2017, the Company entered into an
On September 26, 2017, the Company entered into an
agreement with The Prudential Insurance Company of
agreement with The Prudential Insurance Company of
America to purchase a group annuity contract and
America to purchase a group annuity contract and
transfer approximately $1.3 billion of International
transfer approximately $1.3 billion of International
Paper's U.S. qualified pension plan projected benefit
Paper's U.S. qualified pension plan projected benefit
obligations, subject to customary closing conditions.
obligations, subject to customary closing conditions.
The transaction closed on October 3, 2017 and was
The transaction closed on October 3, 2017 and was
funded with pension plan assets. Under the transaction,
funded with pension plan assets. Under the transaction,

at the end of 2017, Prudential assumed responsibility
at the end of 2017, Prudential assumed responsibility
for pension benefits and annuity administration for
for pension benefits and annuity administration for
approximately 45,000 retirees or their beneficiaries
approximately 45,000 retirees or their beneficiaries
receiving less than $450 in monthly benefit payments
receiving less than $450 in monthly benefit payments
from the plan. Settlement accounting rules required a
from the plan. Settlement accounting rules required a
remeasurement of the qualified plan as of October 3,
remeasurement of the qualified plan as of October 3,
2017 and the Company recognized a non-cash pension
2017 and the Company recognized a non-cash pension
settlement charge of $376 million before tax in the fourth
settlement charge of $376 million before tax in the fourth
quarter of 2017. In addition, large payments from the
quarter of 2017. In addition, large payments from the
non-qualified pension plan also
required a
non-qualified pension plan also
required a
remeasurement as of October 2, 2017 and a non-cash
remeasurement as of October 2, 2017 and a non-cash
settlement charge of $7 million was also recognized in
settlement charge of $7 million was also recognized in
the fourth quarter of 2017.
the fourth quarter of 2017.

in
in

In the first quarter of 2016 International Paper
In the first quarter of 2016 International Paper
announced a voluntary, limited-time opportunity for
announced a voluntary, limited-time opportunity for
former employees who are participants
the
the
former employees who are participants
Retirement Plan of International Paper Company (the
Retirement Plan of International Paper Company (the
Pension Plan) to request early payment of their entire
Pension Plan) to request early payment of their entire
Pension Plan benefit in the form of a single lump sum
Pension Plan benefit in the form of a single lump sum
payment. The amount of total payments under this
payment. The amount of total payments under this
program was approximately $1.2 billion, and were made
program was approximately $1.2 billion, and were made
from Plan trust assets on June 30, 2016. Based on the
from Plan trust assets on June 30, 2016. Based on the
level of payments made, settlement accounting rules
level of payments made, settlement accounting rules
applied and resulted in a plan remeasurement as of the
applied and resulted in a plan remeasurement as of the
June 30, 2016 payment date. As a result of settlement
June 30, 2016 payment date. As a result of settlement
accounting, the Company recognized a pro-rata portion
accounting, the Company recognized a pro-rata portion
loss, after
of
loss, after
of
remeasurement, resulting in a $439 million non-cash
remeasurement, resulting in a $439 million non-cash
charge to the Company's earnings in the second quarter
charge to the Company's earnings in the second quarter
of 2016. Additional payments of $8 million and $9 million
of 2016. Additional payments of $8 million and $9 million
were made during the third and fourth quarters,
were made during the third and fourth quarters,
respectively, due to mandatory cash payouts and a small
respectively, due to mandatory cash payouts and a small
lump sum payout, and
the Pension Plan was
lump sum payout, and
the Pension Plan was
subsequently remeasured at September 30, 2016 and
subsequently remeasured at September 30, 2016 and
December 31, 2016. As a result of settlement
December 31, 2016. As a result of settlement
recognized non-cash
accounting,
recognized non-cash
accounting,
settlement charges of $3 million in both the third and
settlement charges of $3 million in both the third and
fourth quarters of 2016.
fourth quarters of 2016.

the unamortized net actuarial
the unamortized net actuarial

the Company
the Company

ASSUMPTIONS
ASSUMPTIONS

accounting
accounting

International Paper evaluates its actuarial assumptions
International Paper evaluates its actuarial assumptions
annually as of December 31 (the measurement date)
annually as of December 31 (the measurement date)
and considers changes in these long-term factors based
and considers changes in these long-term factors based
upon market conditions and the requirements for
upon market conditions and the requirements for
employers’
pensions. These
employers’
pensions. These
assumptions are used to calculate benefit obligations
assumptions are used to calculate benefit obligations
as of December 31 of the current year and pension
as of December 31 of the current year and pension
expense to be recorded in the following year (i.e., the
expense to be recorded in the following year (i.e., the
discount rate used to determine the benefit obligation
discount rate used to determine the benefit obligation
as of December 31, 2017 was also the discount rate
as of December 31, 2017 was also the discount rate
used to determine net pension expense for the 2018
used to determine net pension expense for the 2018
year).
year).

for
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:

Actuarial assumptions used to determine net periodic pension cost for years ended

Discount rate

Rate of compensation increase

December 31:

Discount rate (a)

Expected long-term rate of return on plan assets

Rate of compensation increase

2017

2016

2015

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

3.60% 3.59% 4.10% 3.88% 4.40% 4.64%

3.75% 4.06% 3.75% 4.20% 3.75% 4.12%

4.03% 3.88% 4.05% 4.72% 4.10% 4.72%

7.50% 6.73% 7.75% 6.55% 7.75% 6.64%

3.75% 4.20% 3.75% 4.03% 3.75% 4.03%

(a) Represents the weighted average rate for the U.S. qualified plans in 2017 and 2016 due to the remeasurements.

The expected long-term rate of return on plan assets is

The following illustrates the effect on pension expense

based on projected rates of return for current and

for 2018 of a 25 basis point decrease in the above

planned asset classes in the plan’s investment portfolio.

assumptions:

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 2018, the Company will use an

expected long-term rate of return on plan assets of

7.50% for the Retirement Plan of International Paper, a

discount rate of 3.60% and an assumed rate of

compensation increase of 3.75%. The Company

estimates that it will record net pension expense of

approximately $167 million for its U.S. defined benefit

plans in 2018, compared to expense of $717 million in

2017. The 2017 expense includes $45 million of

curtailment and special pension benefits associated

with the North American Consumer Packaging business

and $383 million of settlement accounting charges.

Excluding these settlement charges and curtailment and

special pension benefits, the estimated decrease in net

pension expense in 2018 is primarily due to lower

interest cost on the reduced pension obligation and a

higher expected return on assets associated with the

increased pension asset balance.

For non-U.S. pension plans, assumptions reflect

economic assumptions applicable to each country.

In millions

Expense/(Income):

Discount rate

PLAN ASSETS

Expected long-term rate of return on plan assets

Rate of compensation increase

2018

(1)

International Paper’s Board of Directors has appointed

a Fiduciary Review Committee that is responsible for

fiduciary oversight of the U.S. Pension Plan, approving

investment policy and reviewing the management and

control of plan assets. Pension Plan assets are invested

to maximize returns within prudent levels of risk.

The Pension Plan maintains a strategic asset allocation

policy that designates target allocations by asset class.

Investments are diversified across classes and within

each class to minimize the risk of large losses.

Derivatives, including swaps, forward and futures

contracts, may be used as asset class substitutes or for

hedging or other risk management purposes. Periodic

reviews are made of investment policy objectives and

investment manager performance. For non-U.S. plans,

assets consist principally of common stock and fixed

income securities.

International Paper’s U.S. pension allocations by type

of fund at December 31, and target allocations were as

follows:

Asset Class

Equity accounts

Fixed income accounts

Real estate accounts

Other

Total

2017

2016

Target

Allocations

42% - 53%

32% - 44%

7% - 13%

3% - 8%

51%

27%

10%

12%

49%

36%

10%

100%

71
71

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:

2017

2016

2015

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

Service cost

$ 160 $

4 $ 158 $

4 $ 161 $

Interest cost

536

580

597

(774)

(11)

(815)

(10)

(783)

(11)

339

400

428

383

—

445

—

In millions

Expected return

on plan assets

Actuarial loss /

(gain)

Amortization of

prior service cost

Curtailment

loss / (gain) (a)

Settlement loss

Special

termination

benefits (a)

Net periodic

pension

expense

$ 717 $

5 $ 809 $

4 $ 461 $

(a) Recorded in Discontinued operations in the consolidated

statement of operations.

The decrease in 2017 pension expense reflects lower

settlement losses and lower actuarial losses partially

offset by lower asset returns due to the annuity purchase

as well as curtailment and special termination benefit

charges.

On September 26, 2017, the Company entered into an

agreement with The Prudential Insurance Company of

America to purchase a group annuity contract and

transfer approximately $1.3 billion of International

Paper's U.S. qualified pension plan projected benefit

obligations, subject to customary closing conditions.

The transaction closed on October 3, 2017 and was

funded with pension plan assets. Under the transaction,

—

for pension benefits and annuity administration for

approximately 45,000 retirees or their beneficiaries

receiving less than $450 in monthly benefit payments

from the plan. Settlement accounting rules required a

remeasurement of the qualified plan as of October 3,

2017 and the Company recognized a non-cash pension

settlement charge of $376 million before tax in the fourth

quarter of 2017. In addition, large payments from the

non-qualified pension plan also

required a

remeasurement as of October 2, 2017 and a non-cash

settlement charge of $7 million was also recognized in

the fourth quarter of 2017.

In the first quarter of 2016 International Paper

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. The amount of total payments under this

program was approximately $1.2 billion, and were made

from Plan trust assets on June 30, 2016. Based on the

level of payments made, settlement accounting rules

applied and resulted in a plan remeasurement as of the

June 30, 2016 payment date. As a result of settlement

accounting, the Company recognized a pro-rata portion

the unamortized net actuarial

loss, after

remeasurement, resulting in a $439 million non-cash

charge to the Company's earnings in the second quarter

of 2016. Additional payments of $8 million and $9 million

were made during the third and fourth quarters,

respectively, due to mandatory cash payouts and a small

lump sum payout, and

the Pension Plan was

subsequently remeasured at September 30, 2016 and

December 31, 2016. As a result of settlement

accounting,

the Company

recognized non-cash

settlement charges of $3 million in both the third and

fourth quarters of 2016.

ASSUMPTIONS

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

employers’

accounting

for

pensions. These

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, 2017 was also the discount rate

used to determine net pension expense for the 2018

year).

fiscal year are expected to be $327 million and $17

at the end of 2017, Prudential assumed responsibility

Major actuarial assumptions used in determining the benefit obligations and net periodic pension cost for our defined
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:
benefit plans are presented in the following table:

Actuarial assumptions used to determine benefit obligations as of December 31:
Actuarial assumptions used to determine benefit obligations as of December 31:

Discount rate
Discount rate

Rate of compensation increase
Rate of compensation increase

Actuarial assumptions used to determine net periodic pension cost for years ended
Actuarial assumptions used to determine net periodic pension cost for years ended
December 31:
December 31:

Discount rate (a)
Discount rate (a)

Expected long-term rate of return on plan assets
Expected long-term rate of return on plan assets

Rate of compensation increase
Rate of compensation increase

2017
2017

2016
2016

2015
2015

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

3.60% 3.59% 4.10% 3.88% 4.40% 4.64%
3.60% 3.59% 4.10% 3.88% 4.40% 4.64%

3.75% 4.06% 3.75% 4.20% 3.75% 4.12%
3.75% 4.06% 3.75% 4.20% 3.75% 4.12%

4.03% 3.88% 4.05% 4.72% 4.10% 4.72%
4.03% 3.88% 4.05% 4.72% 4.10% 4.72%

7.50% 6.73% 7.75% 6.55% 7.75% 6.64%
7.50% 6.73% 7.75% 6.55% 7.75% 6.64%

3.75% 4.20% 3.75% 4.03% 3.75% 4.03%
3.75% 4.20% 3.75% 4.03% 3.75% 4.03%

(a) Represents the weighted average rate for the U.S. qualified plans in 2017 and 2016 due to the remeasurements.
(a) Represents the weighted average rate for the U.S. qualified plans in 2017 and 2016 due to the remeasurements.

The expected long-term rate of return on plan assets is
The expected long-term rate of return on plan assets is
based on projected rates of return for current and
based on projected rates of return for current and
planned asset classes in the plan’s investment portfolio.
planned asset classes in the plan’s investment portfolio.
Projected rates of return are developed through an
Projected rates of return are developed through an
asset/liability study in which projected returns for each
asset/liability study in which projected returns for each
of the plan’s asset classes are determined after
of the plan’s asset classes are determined after
analyzing historical experience and future expectations
analyzing historical experience and future expectations
of returns and volatility of the various asset classes.
of returns and volatility of the various asset classes.

Based on the target asset allocation for each asset class,
Based on the target asset allocation for each asset class,
the overall expected rate of return for the portfolio is
the overall expected rate of return for the portfolio is
developed considering the effects of active portfolio
developed considering the effects of active portfolio
management and expenses paid from plan assets. The
management and expenses paid from plan assets. The
discount rate assumption was determined from a
discount rate assumption was determined from a
universe of high quality corporate bonds. A settlement
universe of high quality corporate bonds. A settlement
portfolio is selected and matched to the present value
portfolio is selected and matched to the present value
of the plan’s projected benefit payments. To calculate
of the plan’s projected benefit payments. To calculate
pension expense for 2018, the Company will use an
pension expense for 2018, the Company will use an
expected long-term rate of return on plan assets of
expected long-term rate of return on plan assets of
7.50% for the Retirement Plan of International Paper, a
7.50% for the Retirement Plan of International Paper, a
discount rate of 3.60% and an assumed rate of
discount rate of 3.60% and an assumed rate of
compensation increase of 3.75%. The Company
compensation increase of 3.75%. The Company
estimates that it will record net pension expense of
estimates that it will record net pension expense of
approximately $167 million for its U.S. defined benefit
approximately $167 million for its U.S. defined benefit
plans in 2018, compared to expense of $717 million in
plans in 2018, compared to expense of $717 million in
2017. The 2017 expense includes $45 million of
2017. The 2017 expense includes $45 million of
curtailment and special pension benefits associated
curtailment and special pension benefits associated
with the North American Consumer Packaging business
with the North American Consumer Packaging business
and $383 million of settlement accounting charges.
and $383 million of settlement accounting charges.
Excluding these settlement charges and curtailment and
Excluding these settlement charges and curtailment and
special pension benefits, the estimated decrease in net
special pension benefits, the estimated decrease in net
pension expense in 2018 is primarily due to lower
pension expense in 2018 is primarily due to lower
interest cost on the reduced pension obligation and a
interest cost on the reduced pension obligation and a
higher expected return on assets associated with the
higher expected return on assets associated with the
increased pension asset balance.
increased pension asset balance.

For non-U.S. pension plans, assumptions reflect
For non-U.S. pension plans, assumptions reflect
economic assumptions applicable to each country.
economic assumptions applicable to each country.

The following illustrates the effect on pension expense
The following illustrates the effect on pension expense
for 2018 of a 25 basis point decrease in the above
for 2018 of a 25 basis point decrease in the above
assumptions:
assumptions:

In millions
In millions

Expense/(Income):
Expense/(Income):

Discount rate
Discount rate

Expected long-term rate of return on plan assets
Expected long-term rate of return on plan assets

Rate of compensation increase
Rate of compensation increase

PLAN ASSETS
PLAN ASSETS

2018
2018

$
$

35
35

27
27
(1)
(1)

International Paper’s Board of Directors has appointed
International Paper’s Board of Directors has appointed
a Fiduciary Review Committee that is responsible for
a Fiduciary Review Committee that is responsible for
fiduciary oversight of the U.S. Pension Plan, approving
fiduciary oversight of the U.S. Pension Plan, approving
investment policy and reviewing the management and
investment policy and reviewing the management and
control of plan assets. Pension Plan assets are invested
control of plan assets. Pension Plan assets are invested
to maximize returns within prudent levels of risk.
to maximize returns within prudent levels of risk.

The Pension Plan maintains a strategic asset allocation
The Pension Plan maintains a strategic asset allocation
policy that designates target allocations by asset class.
policy that designates target allocations by asset class.
Investments are diversified across classes and within
Investments are diversified across classes and within
each class to minimize the risk of large losses.
each class to minimize the risk of large losses.
Derivatives, including swaps, forward and futures
Derivatives, including swaps, forward and futures
contracts, may be used as asset class substitutes or for
contracts, may be used as asset class substitutes or for
hedging or other risk management purposes. Periodic
hedging or other risk management purposes. Periodic
reviews are made of investment policy objectives and
reviews are made of investment policy objectives and
investment manager performance. For non-U.S. plans,
investment manager performance. For non-U.S. plans,
assets consist principally of common stock and fixed
assets consist principally of common stock and fixed
income securities.
income securities.

International Paper’s U.S. pension allocations by type
International Paper’s U.S. pension allocations by type
of fund at December 31, and target allocations were as
of fund at December 31, and target allocations were as
follows:
follows:

Asset Class
Asset Class

2017
2017

2016
2016

Equity accounts
Equity accounts
Fixed income accounts
Fixed income accounts
Real estate accounts
Real estate accounts
Other
Other

Total
Total

49%
49%
36%
36%
10%
10%
5%
5%

51%
51%
27%
27%
10%
10%
12%
12%

100%
100%

Target
Target
Allocations
Allocations

42% - 53%
42% - 53%
32% - 44%
32% - 44%
7% - 13%
7% - 13%
3% - 8%
3% - 8%

72
72

The fair values of International Paper’s pension plan
The fair values of International Paper’s pension plan
assets at December 31, 2017 and 2016 by asset class
assets at December 31, 2017 and 2016 by asset class
are shown below. Plan assets included an immaterial
are shown below. Plan assets included an immaterial
amount of International Paper common stock at
amount of International Paper common stock at
December 31, 2016. Hedge funds disclosed in the
December 31, 2016. Hedge funds disclosed in the
following table are allocated equally between equity and
following table are allocated equally between equity and
fixed income accounts for target allocation purposes.
fixed income accounts for target allocation purposes.

Fair Value Measurement at December 31, 2017
Fair Value Measurement at December 31, 2017

Quoted
Quoted
Prices
Prices
in
in
Active
Active
Markets
Markets
For
For
Identical
Identical
Assets
Assets
(Level 1)
(Level 1)

Total
Total

Significant
Significant
Observable
Observable
Inputs
Inputs
(Level 2)
(Level 2)

Significant
Significant
Unobservable
Unobservable
Inputs
Inputs
(Level 3)
(Level 3)

Asset Class
Asset Class

In millions
In millions

—
—

1
1

12
12

—
—

16
16

—
—

Equities – domestic
Equities – domestic

$ 1,291 $
$ 1,291 $

1,291 $
1,291 $

— $
— $

2,119
2,119

—
—

397
397

13
13

1,177
1,177

2,778
2,778

—
—

(814)
(814)

—
—

(8)
(8)

—
—

Equities – international
Equities – international

Corporate bonds
Corporate bonds

Government securities
Government securities

Mortgage backed securities
Mortgage backed securities

Other fixed income
Other fixed income

Commodities
Commodities

Derivatives
Derivatives

Cash and cash equivalents
Cash and cash equivalents

Other investments:
Other investments:

Equities - domestic
Equities - domestic

Equities - international
Equities - international

Corporate bonds
Corporate bonds

Other fixed income
Other fixed income

Hedge funds
Hedge funds

Private equity
Private equity

Real estate
Real estate

2,132
2,132

1,177
1,177

2,778
2,778

1
1

(802)
(802)

—
—

8
8

397
397

708
708

866
866

66
66

232
232

927
927

481
481

1,106
1,106

Total Investments
Total Investments

$11,368 $
$11,368 $

3,807 $
3,807 $

3,146 $
3,146 $

29
29

Fair Value Measurement at December 31, 2016
Fair Value Measurement at December 31, 2016

Quoted
Quoted
Prices
Prices
in
in
Active
Active
Markets
Markets
For
For
Identical
Identical
Assets
Assets
(Level 1)
(Level 1)

Total
Total

Significant
Significant
Observable
Observable
Inputs
Inputs
(Level 2)
(Level 2)

Significant
Significant
Unobservable
Unobservable
Inputs
Inputs
(Level 3)
(Level 3)

Asset Class
Asset Class

In millions
In millions

Equities – domestic
Equities – domestic

$ 2,208 $
$ 2,208 $

1,380 $
1,380 $

828 $
828 $

1,806
1,806

—
—

322
322

769
769

1,018
1,018

870
870

40
40

234
234

324
324

—
—

Equities – international
Equities – international

Corporate bonds
Corporate bonds

Government securities
Government securities

Mortgage backed securities
Mortgage backed securities

Other fixed income
Other fixed income

Commodities
Commodities

Derivatives
Derivatives

Cash and cash equivalents
Cash and cash equivalents

Other investments:
Other investments:

Hedge funds
Hedge funds

Private equity
Private equity

Real estate
Real estate

Risk parity funds
Risk parity funds

2,575
2,575

1,018
1,018

870
870

41
41

245
245

324
324

(71)
(71)

322
322

891
891

472
472

1,015
1,015

402
402

—
—

1
1

11
11

—
—

(71)
(71)

—
—

Total Investments
Total Investments

$10,312 $
$10,312 $

3,508 $
3,508 $

4,083 $
4,083 $

(59)
(59)

In accordance with accounting standards, the following
In accordance with accounting standards, the following
investments are measured at NAV and are not classified
investments are measured at NAV and are not classified
in the fair value hierarchy. Some of the investments have
in the fair value hierarchy. Some of the investments have

limitations,
limitations,

Total
Total

$
$

4,386 $
4,386 $

866
866

66
66

232
232

927
927

481
481

1,106
1,106

$
$

708 $
708 $

— Daily to monthly
— Daily to monthly

1-5 days
1-5 days

restrictions, and notice
restrictions, and notice

Equities -
Equities -
domestic
domestic

Equities -
Equities -
international
international

Corporate
Corporate
bonds
bonds

Other fixed
Other fixed
income
income

Hedge funds
Hedge funds

Private equity
Private equity

Real estate
Real estate

redemption
redemption
requirements which are further explained below.
requirements which are further explained below.

— Daily to monthly
— Daily to monthly

1-5 days
1-5 days

— Daily to monthly
— Daily to monthly

1-5 days
1-5 days

— Daily to monthly
— Daily to monthly

1-5 days
1-5 days

— Daily to annually
— Daily to annually

1 - 100 days
1 - 100 days

None
None

Quarterly
Quarterly

45 - 60 days
45 - 60 days

262
262

121
121

383
383

Other Investments at December 31, 2017
Other Investments at December 31, 2017

valued based upon the net asset values of the underlying

Investment
Investment

Fair Value
Fair Value

Unfunded
Unfunded
Commitments
Commitments

Redemption
Redemption
Frequency
Frequency

Remediation
Remediation
Notice Period
Notice Period

investments in hedge funds.

and primarily by applying a market or income valuation

underlying investments which include inputs such as

methodology as appropriate depending on the specific

cost, discounted cash flows, independent appraisals

type of security or instrument held. Funds-of-funds are

and market based comparable data.

Derivative

investments such as

futures,

forward

contracts, options and swaps are used to help manage

Private equity consists of interests in partnerships that

risks. Derivatives are generally employed as an asset

invest in U.S. and non-U.S. debt and equity securities.

class substitutes (such as when employed in a portable

Partnership interests are valued using the most recent

alpha

strategy),

for managing

asset/liability

general partner statement of fair value, updated for any

mismatches, or bona fide hedging or other appropriate

subsequent partnership interest cash flows.

risk management purposes. Derivative instruments are

generally valued by the investment managers or in

Real estate includes commercial properties, land and

certain instances by third-party pricing sources.

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

The following is a reconciliation of the assets that are classified using significant unobservable inputs (Level 3) at

December 31, 2017.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

In millions

Beginning balance at December 31, 2015

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, 2016

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, 2017

FUNDING AND CASH FLOWS

The Company’s funding policy for the Pension Plan is

to contribute amounts sufficient to meet legal funding

follows:

requirements, plus any additional amounts that the

In millions

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 $1.25 billion, $750 million

and $750 million were made by the Company in 2017,

2016 and 2015, 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.

2018

2019

2020

2021

2022

2023-2027

OTHER U.S. PLANS

Mortgage

backed

securities

Other

fixed

income Derivatives

Total

— $

10 $

(20) $

(10)

1 $

11 $

(71) $

(59)

—

(66)

(24)

—

(23)

—

(65)

(24)

—

(23)

—

708

709

718

727

735

3,763

1 $

12 $

16 $

At December 31, 2017, projected future pension benefit

payments, excluding any termination benefits, were as

International Paper sponsors the International Paper

Company Salaried Savings Plan and the International

Paper Company Hourly Savings Plan, both of which are

Other Investments at December 31, 2016
Other Investments at December 31, 2016

Investment
Investment

Fair Value
Fair Value

Unfunded
Unfunded
Commitments
Commitments

Redemption
Redemption
Frequency
Frequency

Remediation
Remediation
Notice Period
Notice Period

Hedge funds
Hedge funds

$
$

891 $
891 $

— Daily to annually
— Daily to annually

1 - 100 days
1 - 100 days

Private equity
Private equity

Real estate
Real estate

Risk parity
Risk parity
funds
funds

472
472

1,015
1,015

402
402

Total
Total

$
$

2,780 $
2,780 $

226
226

224
224

—
—

450
450

None
None

Quarterly
Quarterly

45 - 60 days
45 - 60 days

Monthly
Monthly

5 - 15 days
5 - 15 days

Equity securities consist primarily of publicly traded U.S.
Equity securities consist primarily of publicly traded U.S.
companies and international companies. Publicly traded
companies and international companies. Publicly traded
equities are valued at the closing prices reported in the
equities are valued at the closing prices reported in the
active market in which the individual securities are
active market in which the individual securities are
traded.
traded.

Fixed income consists of government securities,
Fixed income consists of government securities,
mortgage-backed securities, corporate bonds and
mortgage-backed securities, corporate bonds and
common collective funds. Government securities are
common collective funds. Government securities are
valued by third-party pricing sources. Mortgage-backed
valued by third-party pricing sources. Mortgage-backed
security holdings consist primarily of agency-rated
security holdings consist primarily of agency-rated
holdings. The fair value estimates for mortgage
holdings. The fair value estimates for mortgage
securities are calculated by third-party pricing sources
securities are calculated by third-party pricing sources
chosen by the custodian’s price matrix. Corporate bonds
chosen by the custodian’s price matrix. Corporate bonds
are valued using either the yields currently available on
are valued using either the yields currently available on
comparable securities of issuers with similar credit
comparable securities of issuers with similar credit
ratings or using a discounted cash flows approach that
ratings or using a discounted cash flows approach that
utilizes observable inputs, such as current yields of
utilizes observable inputs, such as current yields of
similar instruments, but includes adjustments for certain
similar instruments, but includes adjustments for certain
risks that may not be observable, such as credit and
risks that may not be observable, such as credit and
liquidity risks. Common collective funds are valued at
liquidity risks. Common collective funds are valued at
the net asset value per share multiplied by the number
the net asset value per share multiplied by the number
of shares held as of the measurement date.
of shares held as of the measurement date.

Hedge funds are investment structures for managing
Hedge funds are investment structures for managing
private, loosely-regulated investment pools that can
private, loosely-regulated investment pools that can
pursue a diverse array of investment strategies with a
pursue a diverse array of investment strategies with a
wide range of different securities and derivative
wide range of different securities and derivative
instruments. These investments are made through
instruments. These investments are made through
funds-of-funds
fund
funds-of-funds
fund
structures) and through direct investments in individual
structures) and through direct investments in individual
hedge funds. Hedge funds are primarily valued by each
hedge funds. Hedge funds are primarily valued by each
fund’s
the
the
fund’s
valuation of the underlying securities and instruments
valuation of the underlying securities and instruments

third-party administrator based upon
third-party administrator based upon

(commingled, multi-manager
(commingled, multi-manager

73
73

The fair values of International Paper’s pension plan

redemption

limitations,

restrictions, and notice

assets at December 31, 2017 and 2016 by asset class

requirements which are further explained below.

Equities – domestic

$ 1,291 $

1,291 $

— $

Equities – international

2,119

Total

4,386 $

are shown below. Plan assets included an immaterial

amount of International Paper common stock at

December 31, 2016. 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, 2017

Quoted

Prices

Active

Markets

For

Identical

Assets

(Level 1)

Significant

Observable

Significant

Unobservable

Inputs

(Level 2)

Inputs

(Level 3)

—

1,177

2,778

—

(814)

—

(8)

—

Significant

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Quoted

Prices

Active

Markets

For

Identical

Assets

(Level 1)

1,806

—

322

769

1,018

870

234

324

—

(71)

—

Cash and cash equivalents

397

Asset Class

In millions

Corporate bonds

Government securities

Mortgage backed securities

Other fixed income

Commodities

Derivatives

Other investments:

Equities - domestic

Equities - international

Corporate bonds

Other fixed income

Hedge funds

Private equity

Real estate

Asset Class

In millions

Equities – international

Corporate bonds

Government securities

Mortgage backed securities

Other fixed income

Commodities

Derivatives

Cash and cash equivalents

Other investments:

Hedge funds

Private equity

Real estate

Risk parity funds

Total

2,132

1,177

2,778

(802)

—

708

866

232

927

481

1,106

Total

2,575

1,018

870

245

324

(71)

322

891

472

1,015

402

Total Investments

$11,368 $

3,807 $

3,146 $

Fair Value Measurement at December 31, 2016

Equities – domestic

$ 2,208 $

1,380 $

828 $

Total Investments

$10,312 $

3,508 $

4,083 $

(59)

In accordance with accounting standards, the following

investments are measured at NAV and are not classified

in the fair value hierarchy. Some of the investments have

262

121

383

226

224

—

450

Other Investments at December 31, 2017

Investment

Fair Value

Unfunded

Commitments

Redemption

Frequency

Remediation

Notice Period

708 $

— Daily to monthly

1-5 days

Equities -

domestic

Equities -

international

Corporate

bonds

Other fixed

income

Hedge funds

Private equity

Real estate

866

232

927

481

1,106

— Daily to monthly

1-5 days

— Daily to monthly

1-5 days

— Daily to monthly

1-5 days

— Daily to annually

1 - 100 days

None

Quarterly

45 - 60 days

Other Investments at December 31, 2016

Investment

Fair Value

Unfunded

Commitments

Redemption

Frequency

Remediation

Notice Period

Hedge funds

891 $

— Daily to annually

1 - 100 days

Private equity

Real estate

Risk parity

funds

472

1,015

402

Total

2,780 $

None

Quarterly

45 - 60 days

Monthly

5 - 15 days

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 for certain

risks 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.

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

(commingled, multi-manager

fund

structures) and through direct investments in individual

hedge funds. Hedge funds are primarily valued by each

fund’s

third-party administrator based upon

the

valuation of the underlying securities and instruments

and primarily by applying a market or income valuation
and primarily by applying a market or income valuation
methodology as appropriate depending on the specific
methodology as appropriate depending on the specific
type of security or instrument held. Funds-of-funds are
type of security or instrument held. Funds-of-funds are
valued based upon the net asset values of the underlying
valued based upon the net asset values of the underlying
investments in hedge funds.
investments in hedge funds.

Private equity consists of interests in partnerships that
Private equity consists of interests in partnerships that
invest in U.S. and non-U.S. debt and equity securities.
invest in U.S. and non-U.S. debt and equity securities.
Partnership interests are valued using the most recent
Partnership interests are valued using the most recent
general partner statement of fair value, updated for any
general partner statement of fair value, updated for any
subsequent partnership interest cash flows.
subsequent partnership interest cash flows.

Real estate includes commercial properties, land and
Real estate includes commercial properties, land and
timberland, and generally includes, but is not limited to,
timberland, and generally includes, but is not limited to,
retail, office, industrial, multifamily and hotel properties.
retail, office, industrial, multifamily and hotel properties.
Real estate fund values are primarily reported by the
Real estate fund values are primarily reported by the
fund manager and are based on valuation of the
fund manager and are based on valuation of the

underlying investments which include inputs such as
underlying investments which include inputs such as
cost, discounted cash flows, independent appraisals
cost, discounted cash flows, independent appraisals
and market based comparable data.
and market based comparable data.

futures,
futures,

investments such as
investments such as

Derivative
forward
forward
Derivative
contracts, options and swaps are used to help manage
contracts, options and swaps are used to help manage
risks. Derivatives are generally employed as an asset
risks. Derivatives are generally employed as an asset
class substitutes (such as when employed in a portable
class substitutes (such as when employed in a portable
alpha
asset/liability
alpha
asset/liability
mismatches, or bona fide hedging or other appropriate
mismatches, or bona fide hedging or other appropriate
risk management purposes. Derivative instruments are
risk management purposes. Derivative instruments are
generally valued by the investment managers or in
generally valued by the investment managers or in
certain instances by third-party pricing sources.
certain instances by third-party pricing sources.

for managing
for managing

strategy),
strategy),

The following is a reconciliation of the assets that are classified using significant unobservable inputs (Level 3) at
The following is a reconciliation of the assets that are classified using significant unobservable inputs (Level 3) at
December 31, 2017.
December 31, 2017.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

In millions
In millions

Beginning balance at December 31, 2015
Beginning balance at December 31, 2015

Actual return on plan assets:
Actual return on plan assets:

Relating to assets still held at the reporting date
Relating to assets still held at the reporting date

Relating to assets sold during the period
Relating to assets sold during the period

Purchases, sales and settlements
Purchases, sales and settlements

Transfers in and/or out of Level 3
Transfers in and/or out of Level 3

Ending balance at December 31, 2016
Ending balance at December 31, 2016

Actual return on plan assets:
Actual return on plan assets:

Relating to assets still held at the reporting date
Relating to assets still held at the reporting date

Relating to assets sold during the period
Relating to assets sold during the period

Purchases, sales and settlements
Purchases, sales and settlements

Transfers in and/or out of Level 3
Transfers in and/or out of Level 3

Ending balance at December 31, 2017
Ending balance at December 31, 2017

FUNDING AND CASH FLOWS
FUNDING AND CASH FLOWS

The Company’s funding policy for the Pension Plan is
The Company’s funding policy for the Pension Plan is
to contribute amounts sufficient to meet legal funding
to contribute amounts sufficient to meet legal funding
requirements, plus any additional amounts that the
requirements, plus any additional amounts that the
Company may determine to be appropriate considering
Company may determine to be appropriate considering
the funded status of the plans, tax deductibility, cash
the funded status of the plans, tax deductibility, cash
flow generated by the Company, and other factors. The
flow generated by the Company, and other factors. The
Company continually reassesses the amount and
Company continually reassesses the amount and
timing of any discretionary contributions. Contributions
timing of any discretionary contributions. Contributions
to the qualified plan totaling $1.25 billion, $750 million
to the qualified plan totaling $1.25 billion, $750 million
and $750 million were made by the Company in 2017,
and $750 million were made by the Company in 2017,
2016 and 2015, respectively. Generally, International
2016 and 2015, respectively. Generally, International
Paper’s non-U.S. pension plans are funded using the
Paper’s non-U.S. pension plans are funded using the
projected benefit as a target, except in certain countries
projected benefit as a target, except in certain countries
where funding of benefit plans is not required.
where funding of benefit plans is not required.

Mortgage
Mortgage
backed
backed
securities
securities

Other
Other
fixed
fixed

income Derivatives
income Derivatives

Total
Total

$
$

— $
— $

10 $
10 $

(20) $
(20) $

(10)
(10)

—
—

1
1

—
—

1
1

—
—

(66)
(66)

(24)
(24)

39
39

—
—

(65)
(65)

(24)
(24)

40
40

—
—

$
$

1 $
1 $

11 $
11 $

(71) $
(71) $

(59)
(59)

—
—

1
1

—
—

94
94

(23)
(23)

16
16

—
—

$
$

1 $
1 $

12 $
12 $

16 $
16 $

95
95

(23)
(23)

16
16

—
—

29
29

At December 31, 2017, projected future pension benefit
At December 31, 2017, projected future pension benefit
payments, excluding any termination benefits, were as
payments, excluding any termination benefits, were as
follows:
follows:

In millions
In millions

2018
2018

2019
2019

2020
2020

2021
2021

2022
2022

2023-2027
2023-2027

OTHER U.S. PLANS
OTHER U.S. PLANS

$
$

708
708

709
709

718
718

727
727

735
735

3,763
3,763

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

74
74

tax-qualified defined contribution 401(k) savings plans.
tax-qualified defined contribution 401(k) savings plans.
Substantially all U.S. salaried and certain hourly
Substantially all U.S. salaried and certain hourly
employees are eligible to participate and may make
employees are eligible to participate and may make
elective deferrals to such plans to save for retirement.
elective deferrals to such plans to save for retirement.
International Paper makes matching contributions to
International Paper makes matching contributions to
participant accounts on a specified percentage of
participant accounts on a specified percentage of
employee deferrals as determined by the provisions of
employee deferrals as determined by the provisions of
each plan. For eligible employees hired after June 30,
each plan. For eligible employees hired after June 30,
2004, the Company makes Retirement Savings Account
2004, the Company makes Retirement Savings Account
contributions equal to a percentage of an eligible
contributions equal to a percentage of an eligible
employee’s pay.
employee’s pay.

The Company also sponsors the International Paper
The Company also sponsors the International Paper
Company Deferred Compensation Savings Plan, which
Company Deferred Compensation Savings Plan, which
is an unfunded nonqualified defined contribution plan.
is an unfunded nonqualified defined contribution plan.
This plan permits eligible employees to continue to make
This plan permits eligible employees to continue to make
deferrals and receive company matching contributions
deferrals and receive company matching contributions
(and Retirement Savings Account contributions) when
(and Retirement Savings Account contributions) when
their contributions to the International Paper Salaried
their contributions to the International Paper Salaried
Savings Plan are stopped due to limitations under U.S.
Savings Plan are stopped due to limitations under U.S.
tax law. Participant deferrals and company contributions
tax law. Participant deferrals and company contributions
are not invested in a separate trust, but are paid directly
are not invested in a separate trust, but are paid directly
from International Paper’s general assets at the time
from International Paper’s general assets at the time
benefits become due and payable.
benefits become due and payable.

contributions
contributions

Company
totaled
totaled
Company
approximately $117 million, $106 million and $100
approximately $117 million, $106 million and $100
million for the plan years ending in 2017, 2016 and 2015,
million for the plan years ending in 2017, 2016 and 2015,
respectively.
respectively.

the plans
the plans

to
to

NOTE 17 POSTRETIREMENT BENEFITS
NOTE 17 POSTRETIREMENT BENEFITS

U.S. POSTRETIREMENT BENEFITS
U.S. POSTRETIREMENT BENEFITS

International Paper provides certain retiree health care
International Paper provides certain retiree health care
and life insurance benefits covering certain U.S.
and life insurance benefits covering certain U.S.
salaried and hourly employees. These employees are
salaried and hourly employees. These employees are
generally eligible for benefits upon retirement and
generally eligible for benefits upon retirement and
completion of a specified number of years of creditable
completion of a specified number of years of creditable
service. International Paper does not fund these
service. International Paper does not fund these
benefits prior to payment and has the right to modify or
benefits prior to payment and has the right to modify or
terminate certain of these plans in the future.
terminate certain of these plans in the future.

In addition to the U.S. plan, certain Brazilian and
In addition to the U.S. plan, certain Brazilian and
Moroccan employees are eligible for retiree health care
Moroccan employees are eligible for retiree health care
and life insurance benefits.
and life insurance benefits.

The components of postretirement benefit expense in
The components of postretirement benefit expense in
2017, 2016 and 2015 were as follows:
2017, 2016 and 2015 were as follows:

In millions
In millions

2017
2017

2016
2016

2015
2015

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

$
$

1 $ — $
1 $ — $

1 $
1 $

11
11

8
8

2
2

3
3

11
11

5
5

3
3

2
2

11
11

6
6

1
1

5
5

1
1

(3)
(3)

(4)
(4)

(10)
(10)

(2)
(2)

plans.

$
$

17 $
17 $

1 $
1 $

13 $
13 $

1 $
1 $

8 $
8 $

5
5

Service cost
Service cost

Interest cost
Interest cost

Actuarial loss
Actuarial loss

Amortization of
Amortization of
prior service
prior service
credits
credits

Net
Net
postretirement
postretirement
(benefit)
(benefit)
expense
expense

International Paper evaluates its actuarial assumptions
International Paper evaluates its actuarial assumptions
annually as of December 31 (the measurement date)
annually as of December 31 (the measurement date)
and considers changes in these long-term factors
and considers changes in these long-term factors
based upon market conditions and the requirements of
based upon market conditions and the requirements of
employers’ accounting for postretirement benefits other
employers’ accounting for postretirement benefits other
than pensions. The discount rate assumption was
than pensions. The discount rate assumption was
determined based on a hypothetical settlement portfolio
determined based on a hypothetical settlement portfolio
selected from a universe of high quality corporate
selected from a universe of high quality corporate
bonds.
bonds.

The discount rates used to determine net U.S. and non-
The discount rates used to determine net U.S. and non-
U.S. postretirement benefit cost for the years ended
U.S. postretirement benefit cost for the years ended
December 31, 2017, 2016 and 2015 were as follows:
December 31, 2017, 2016 and 2015 were as follows:

2017
2017

2016
2016

2015
2015

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

Discount rate
Discount rate

4.00% 10.53% 4.20% 12.23% 3.90% 11.52%
4.00% 10.53% 4.20% 12.23% 3.90% 11.52%

The weighted average assumptions used to determine
The weighted average assumptions used to determine
the benefit obligation at December 31, 2017 and 2016
the benefit obligation at December 31, 2017 and 2016
were as follows:
were as follows:

2017
2017

2016
2016

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

Discount rate
Discount rate

3.50% 9.38% 4.00% 10.53%
3.50% 9.38% 4.00% 10.53%

Health care cost trend rate
Health care cost trend rate
assumed for next year
assumed for next year

Rate that the cost trend rate
Rate that the cost trend rate
gradually declines to
gradually declines to

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

6.50% 10.27% 6.50% 10.90%
6.50% 10.27% 6.50% 10.90%

5.00% 5.15% 5.00% 5.81%
5.00% 5.15% 5.00% 5.81%

2022
2022

2028
2028

2022
2022

2027
2027

A 1% increase in the assumed annual health care cost

The non-current portion of the liability is included with

trend rate would have increased the U.S. and non-U.S.

the postemployment liability in the accompanying

accumulated postretirement benefit obligations at

consolidated balance sheet under Postretirement and

December 31, 2017 by approximately $12 million and

postemployment benefit obligation.

$6 million, respectively. A 1% decrease in the annual

trend rate would have decreased the U.S. and non-U.S.

The components of the $8 million and $2 million change

accumulated postretirement benefit obligation at

in the amounts recognized in OCI during 2017 for U.S.

December 31, 2017 by approximately $10 million and

and non-U.S. plans, respectively, consisted of:

$4 million, respectively. The effect on net postretirement

benefit cost from a 1% increase or decrease would be

approximately $1 million for both U.S. and non-U.S.

In millions

The plans are only funded in an amount equal to

benefits paid. The following table presents the changes

in benefit obligation and plan assets for 2017 and 2016:

In millions

2017

2016

Current year actuarial loss

Amortization of actuarial (loss) gain

Current year prior service cost

Amortization of prior service credit

Currency impact

U.S.

Plans

Non-

U.S.

Plans

14 $

(8)

—

8 $

(3)

—

Benefit obligation, January 1

$ 280 $

23 $ 275 $

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

—

(2)

—

(42)

(44)

—

(35)

(1)

—

$ 270 $

25 $ 280 $

$ — $ — $ — $ —

(42)

—

(2)

(44)

—

(1)

$ — $ — $ — $ —

Change in projected benefit

obligation:

Service cost

Interest cost

Participants’ contributions

Actuarial (gain) loss

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

Amounts recognized in the

consolidated balance sheet

under ASC 715:

Amounts recognized in

accumulated other

comprehensive income under

ASC 715 (pre-tax):

Funded status, December 31

$ (270) $ (25) $ (280) $ (23)

Current liability

$ (28) $

(1) $ (29) $

Non-current liability

(242)

(24)

(251)

(2)

(21)

$ (270) $ (25) $ (280) $ (23)

2023 – 2027

Prior service credit

Net actuarial loss (gain)

74 $

19 $

68 $

(6)

(30)

(8)

(34)

68 $ (11) $

60 $ (13)

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 $25 million, $42 million and $17

million in 2017, 2016 and 2015, respectively. The

portion of the change in funded status for the non-U.S.

plans was $3 million, $(25) million, and $0 million in

2017, 2016 and 2015, 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 2018 are expected to be

$8 million and $(2) million, respectively. The estimated

amounts for non-U.S. plans in 2018 are expected to be

$2 million and $(4) million, respectively.

At December 31, 2017, estimated

total

future

postretirement benefit payments, net of participant

contributions and estimated future Medicare Part D

subsidy receipts, were as follows:

In millions

2018

2019

2020

2021

2022

Benefit

Payments

Subsidy

Receipts

Benefit

Payments

U.S.

Plans

U.S.

Plans

29 $

1 $

Non-

U.S.

Plans

—

75
75

tax-qualified defined contribution 401(k) savings plans.

The components of postretirement benefit expense in

Substantially all U.S. salaried and certain hourly

2017, 2016 and 2015 were as follows:

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,

2004, the Company makes Retirement Savings 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

(and Retirement Savings Account contributions) when

their contributions to the International Paper Salaried

Savings Plan are stopped due to limitations under U.S.

tax law. Participant deferrals and company 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.

Company

contributions

the plans

totaled

approximately $117 million, $106 million and $100

million for the plan years ending in 2017, 2016 and 2015,

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. 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.

In millions

2017

2016

2015

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

1 $ — $

1 $

(3)

(4)

(10)

(2)

Service cost

Interest cost

Actuarial loss

Amortization of

prior service

credits

Net

postretirement

(benefit)

expense

17 $

1 $

13 $

1 $

8 $

International Paper evaluates its actuarial assumptions

annually as of December 31 (the measurement date)

and considers changes in these long-term factors

based upon market conditions and the requirements of

employers’ accounting for postretirement benefits other

than pensions. The discount rate assumption was

determined based on a hypothetical settlement portfolio

selected from a universe of high quality corporate

bonds.

The discount rates used to determine net U.S. and non-

U.S. postretirement benefit cost for the years ended

December 31, 2017, 2016 and 2015 were as follows:

2017

2016

2015

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

Discount rate

4.00% 10.53% 4.20% 12.23% 3.90% 11.52%

The weighted average assumptions used to determine

the benefit obligation at December 31, 2017 and 2016

were as follows:

2017

2016

U.S.

Plans

Non-

U.S.

Plans

U.S.

Plans

Non-

U.S.

Plans

Discount rate

3.50% 9.38% 4.00% 10.53%

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

6.50% 10.27% 6.50% 10.90%

5.00% 5.15% 5.00% 5.81%

2022

2028

2022

2027

A 1% increase in the assumed annual health care cost
A 1% increase in the assumed annual health care cost
trend rate would have increased the U.S. and non-U.S.
trend rate would have increased the U.S. and non-U.S.
accumulated postretirement benefit obligations at
accumulated postretirement benefit obligations at
December 31, 2017 by approximately $12 million and
December 31, 2017 by approximately $12 million and
$6 million, respectively. A 1% decrease in the annual
$6 million, respectively. A 1% decrease in the annual
trend rate would have decreased the U.S. and non-U.S.
trend rate would have decreased the U.S. and non-U.S.
accumulated postretirement benefit obligation at
accumulated postretirement benefit obligation at
December 31, 2017 by approximately $10 million and
December 31, 2017 by approximately $10 million and
$4 million, respectively. The effect on net postretirement
$4 million, respectively. The effect on net postretirement
benefit cost from a 1% increase or decrease would be
benefit cost from a 1% increase or decrease would be
approximately $1 million for both U.S. and non-U.S.
approximately $1 million for both U.S. and non-U.S.
plans.
plans.

The plans are only funded in an amount equal to
The plans are only funded in an amount equal to
benefits paid. The following table presents the changes
benefits paid. The following table presents the changes
in benefit obligation and plan assets for 2017 and 2016:
in benefit obligation and plan assets for 2017 and 2016:

In millions
In millions

2017
2017

2016
2016

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

Change in projected benefit
Change in projected benefit
obligation:
obligation:

Benefit obligation, January 1
Benefit obligation, January 1

$ 280 $
$ 280 $

23 $ 275 $
23 $ 275 $

Service cost
Service cost

Interest cost
Interest cost

Participants’ contributions
Participants’ contributions

Actuarial (gain) loss
Actuarial (gain) loss

Plan amendments
Plan amendments

Benefits paid
Benefits paid

Less: Federal subsidy
Less: Federal subsidy

Currency Impact
Currency Impact

Benefit obligation,
Benefit obligation,
December 31
December 31

Change in plan assets:
Change in plan assets:

Fair value of plan assets,
Fair value of plan assets,
January 1
January 1

Company contributions
Company contributions

Participants’ contributions
Participants’ contributions

Benefits paid
Benefits paid

Fair value of plan assets,
Fair value of plan assets,
December 31
December 31

1
1

11
11

5
5

14
14

—
—

(42)
(42)

1
1

—
—

2
2

—
—

2
2

—
—

(2)
(2)

—
—

1
1

11
11

5
5

31
31

—
—

(44)
(44)

1
1

—
—

45
45

—
—

3
3

—
—

5
5

(35)
(35)

(1)
(1)

—
—

6
6

$ 270 $
$ 270 $

25 $ 280 $
25 $ 280 $

23
23

$ — $ — $ — $ —
$ — $ — $ — $ —

37
37

5
5

(42)
(42)

2
2

—
—

(2)
(2)

39
39

5
5

(44)
(44)

1
1

—
—

(1)
(1)

$ — $ — $ — $ —
$ — $ — $ — $ —

Funded status, December 31
Funded status, December 31

$ (270) $ (25) $ (280) $ (23)
$ (270) $ (25) $ (280) $ (23)

Amounts recognized in the
Amounts recognized in the
consolidated balance sheet
consolidated balance sheet
under ASC 715:
under ASC 715:

Current liability
Current liability

$ (28) $
$ (28) $

(1) $ (29) $
(1) $ (29) $

Non-current liability
Non-current liability

(242)
(242)

(24)
(24)

(251)
(251)

(2)
(2)

(21)
(21)

$ (270) $ (25) $ (280) $ (23)
$ (270) $ (25) $ (280) $ (23)

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

Net actuarial loss (gain)
Net actuarial loss (gain)

Prior service credit
Prior service credit

$
$

74 $
74 $

19 $
19 $

68 $
68 $

21
21

(6)
(6)

(30)
(30)

(8)
(8)

(34)
(34)

68 $ (11) $
68 $ (11) $

60 $ (13)
60 $ (13)

76
76

The non-current portion of the liability is included with
The non-current portion of the liability is included with
the postemployment liability in the accompanying
the postemployment liability in the accompanying
consolidated balance sheet under Postretirement and
consolidated balance sheet under Postretirement and
postemployment benefit obligation.
postemployment benefit obligation.

The components of the $8 million and $2 million change
The components of the $8 million and $2 million change
in the amounts recognized in OCI during 2017 for U.S.
in the amounts recognized in OCI during 2017 for U.S.
and non-U.S. plans, respectively, consisted of:
and non-U.S. plans, respectively, consisted of:

In millions
In millions

U.S.
U.S.
Plans
Plans

Non-
Non-
U.S.
U.S.
Plans
Plans

Current year actuarial loss
Current year actuarial loss

$
$

14 $
14 $

Amortization of actuarial (loss) gain
Amortization of actuarial (loss) gain

Current year prior service cost
Current year prior service cost

Amortization of prior service credit
Amortization of prior service credit

Currency impact
Currency impact

(8)
(8)

—
—

2
2

—
—

$
$

8 $
8 $

1
1

(3)
(3)

—
—

4
4

—
—

2
2

The portion of the change in the funded status that was
The portion of the change in the funded status that was
recognized in either net periodic benefit cost or OCI for
recognized in either net periodic benefit cost or OCI for
the U.S. plans was $25 million, $42 million and $17
the U.S. plans was $25 million, $42 million and $17
million in 2017, 2016 and 2015, respectively. The
million in 2017, 2016 and 2015, respectively. The
portion of the change in funded status for the non-U.S.
portion of the change in funded status for the non-U.S.
plans was $3 million, $(25) million, and $0 million in
plans was $3 million, $(25) million, and $0 million in
2017, 2016 and 2015, respectively.
2017, 2016 and 2015, respectively.

The estimated amounts of net loss and prior service
The estimated amounts of net loss and prior service
credit that will be amortized from OCI into net U.S.
credit that will be amortized from OCI into net U.S.
postretirement benefit cost in 2018 are expected to be
postretirement benefit cost in 2018 are expected to be
$8 million and $(2) million, respectively. The estimated
$8 million and $(2) million, respectively. The estimated
amounts for non-U.S. plans in 2018 are expected to be
amounts for non-U.S. plans in 2018 are expected to be
$2 million and $(4) million, respectively.
$2 million and $(4) million, respectively.

At December 31, 2017, estimated
future
future
At December 31, 2017, estimated
postretirement benefit payments, net of participant
postretirement benefit payments, net of participant
contributions and estimated future Medicare Part D
contributions and estimated future Medicare Part D
subsidy receipts, were as follows:
subsidy receipts, were as follows:

total
total

In millions
In millions

Benefit
Benefit
Payments
Payments

Subsidy
Subsidy
Receipts
Receipts

Benefit
Benefit
Payments
Payments

2018
2018

2019
2019

2020
2020

2021
2021

2022
2022

2023 – 2027
2023 – 2027

U.S.
U.S.
Plans
Plans

$
$

29 $
29 $

1 $
1 $

Non-
Non-
U.S.
U.S.
Plans
Plans

27
27

25
25

24
24

22
22

91
91

1
1

5
5

1
1

—
—

4
4

PERFORMANCE SHARE PLAN
PERFORMANCE SHARE PLAN

Outstanding at December 31, 2015
Outstanding at December 31, 2015

NOTE 18 INCENTIVE PLANS
NOTE 18 INCENTIVE PLANS

Incentive
International Paper currently has an
Incentive
International Paper currently has an
Compensation Plan (ICP) which, upon the approval by
Compensation Plan (ICP) which, upon the approval by
the Company’s shareholders in May 2009, replaced the
the Company’s shareholders in May 2009, replaced the
Company’s Long-Term Incentive Compensation Plan
Company’s Long-Term Incentive Compensation Plan
(LTICP). The ICP authorizes grants of restricted stock,
(LTICP). The ICP authorizes grants of restricted stock,
restricted or deferred stock units, performance awards
restricted or deferred stock units, performance awards
payable in cash or stock upon the attainment of specified
payable in cash or stock upon the attainment of specified
performance goals, dividend equivalents, stock options,
performance goals, dividend equivalents, stock options,
stock appreciation rights, other stock-based awards,
stock appreciation rights, other stock-based awards,
and cash-based awards at the discretion of the
and cash-based awards at the discretion of the
Management Development
and Compensation
and Compensation
Management Development
Committee of the Board of Directors (the Committee)
Committee of the Board of Directors (the Committee)
that administers the ICP. Additionally, restricted stock,
that administers the ICP. Additionally, restricted stock,
which may be deferred into RSU’s, may be awarded
which may be deferred into RSU’s, may be awarded
under a Restricted Stock and Deferred Compensation
under a Restricted Stock and Deferred Compensation
Plan for Non-Employee Directors.
Plan for Non-Employee Directors.

Under the Performance Share Plan (PSP), contingent
Under the Performance Share Plan (PSP), contingent
awards of International Paper common stock are
awards of International Paper common stock are
granted by the Committee. The PSP awards are earned
granted by the Committee. The PSP awards are earned
over a three-year period. PSP awards are earned based
over a three-year period. PSP awards are earned based
on the achievement of defined performance rankings of
on the achievement of defined performance rankings of
ROIC and TSR compared to ROIC and TSR peer groups
ROIC and TSR compared to ROIC and TSR peer groups
of companies. Awards are weighted 75% for ROIC and
of companies. Awards are weighted 75% for ROIC and
25% for TSR for all participants except for officers for
25% for TSR for all participants except for officers for
whom the awards are weighted 50% for ROIC and 50%
whom the awards are weighted 50% for ROIC and 50%
for TSR. The ROIC component of the PSP awards is
for TSR. The ROIC component of the PSP awards is
valued at the closing stock price on the day prior to the
valued at the closing stock price on the day prior to the
grant date. As the ROIC component contains a
grant date. As the ROIC component contains a
performance condition, compensation expense, net of
performance condition, compensation expense, net of
estimated forfeitures, is recorded over the requisite
estimated forfeitures, is recorded over the requisite
service period based on the most probable number of
service period based on the most probable number of
awards expected to vest. The TSR component of the
awards expected to vest. The TSR component of the
PSP awards is valued using a Monte Carlo simulation
PSP awards is valued using a Monte Carlo simulation
as the TSR component contains a market condition. The
as the TSR component contains a market condition. The
Monte Carlo simulation estimates the fair value of the
Monte Carlo simulation estimates the fair value of the
TSR component based on the expected term of the
TSR component based on the expected term of the
award, a risk-free rate, expected dividends, and the
award, a risk-free rate, expected dividends, and the
expected volatility for the Company and its competitors.
expected volatility for the Company and its competitors.
The expected term is estimated based on the vesting
The expected term is estimated based on the vesting
period of the awards, the risk-free rate is based on the
period of the awards, the risk-free rate is based on the
yield on U.S. Treasury securities matching the vesting
yield on U.S. Treasury securities matching the vesting
period, and the volatility is based on the Company’s
period, and the volatility is based on the Company’s
historical volatility over the expected term. PSP grants
historical volatility over the expected term. PSP grants
are made in performance-based restricted stock units.
are made in performance-based restricted stock units.

Outstanding at December 31, 2014
Outstanding at December 31, 2014

Granted
Granted

Shares issued
Shares issued

Forfeited
Forfeited

Granted
Granted

Shares issued
Shares issued

Forfeited
Forfeited

Outstanding at December 31, 2016
Outstanding at December 31, 2016

Granted
Granted

Shares issued
Shares issued

Forfeited
Forfeited

Weighted
Weighted
Average
Average
Grant Date
Grant Date
Fair Value
Fair Value

$34.98
$34.98

53.25
53.25

37.09
37.09

53.97
53.97

38.69
38.69

37.26
37.26

43.82
43.82

43.61
43.61

35.89
35.89

51.78
51.78

51.00
51.00

45.96
45.96

Share/Units
Share/Units

7,275,934
7,275,934

1,863,623
1,863,623

(2,959,160)
(2,959,160)

(322,664)
(322,664)

5,857,733
5,857,733

2,617,982
2,617,982

(2,316,085)
(2,316,085)

(209,500)
(209,500)

5,950,130
5,950,130

2,163,912
2,163,912

(1,876,134)
(1,876,134)

(438,024)
(438,024)

The following table sets forth the assumptions used to
The following table sets forth the assumptions used to
determine compensation cost for the market condition
determine compensation cost for the market condition
component of the PSP plan:
component of the PSP plan:

At December 31, 2017, 2016 and 2015 a total of 13.2

Business segment operating profits are used by

million, 14.3 million and 16.2 million shares,

International Paper’s management to measure the

respectively, were available for grant under the ICP.

Expected volatility
Expected volatility

Risk-free interest rate
Risk-free interest rate

Twelve Months Ended
Twelve Months Ended
December 31, 2017
December 31, 2017

22.75%-23.39%
22.75%-23.39%

1.10%-1.47%
1.10%-1.47%

The following summarizes PSP activity for the three
The following summarizes PSP activity for the three
years ending December 31, 2017:
years ending December 31, 2017:

Stock-based compensation expense and related

of trends in costs, operating efficiencies, prices and

earnings performance of its businesses. Management

believes that this measure allows a better understanding

volumes. Business segment operating profits are

defined as earnings (loss) from continuing operations

before income taxes and equity earnings, but including

the impact of equity earnings and noncontrolling

interests, excluding corporate items and corporate

special items.

External sales by major product is determined by

aggregating sales from each segment based on similar

products or services. External sales are defined as those

that are made to parties outside International Paper’s

consolidated group, whereas sales by segment in the

Net Sales table are determined using a management

approach and include intersegment sales.

The Company also holds a 50% interest in Ilim that is a

separate reportable industry segment. The Company

recorded equity earnings (losses), net of taxes, of $183

million, $199 million, and $131 million in 2017, 2016,

and 2015, respectively, for Ilim. Equity earnings (losses)

includes an after-tax foreign exchange gain (loss) of $15

million, $25 million, and $(75) million in 2017, 2016 and

2015, respectively, primarily on the remeasurement of

U.S. dollar-denominated net debt.

Summarized financial information for Ilim which is

accounted for under the equity method is presented in

the following tables. The audited U.S. GAAP financial

statements for Ilim are included in Exhibit 99.1 to this

Form 10-K.

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

2017

2016

2015

$2,150

$1,927

$1,931

1,047

379

362

957

419

391

971

254

237

2017

2016

$ 689

$ 774

1,696

1,039

972

1,351

402

1,426

income tax benefits were as follows:

In millions

2017

2016

2015

Total stock-based compensation

expense (included in selling and

administrative expense)

Income tax benefits related to stock-

based compensation

147 $

124 $

107

At December 31, 2017, $86 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 1.8 years.

NOTE 19 FINANCIAL INFORMATION BY BUSINESS

SEGMENT AND GEOGRAPHIC AREA

International Paper’s business segments, Industrial

Packaging, Global Cellulose Fibers and Printing Papers,

are consistent with the internal structure used to manage

these businesses. See the Description of Industry

Segments in Part II. Item 7. Management's Discussion

and Analysis of Financial Condition and Results of

Operations for a description of the types of products and

services from which each reportable segment derives its

revenues. On January 1, 2018, the Company completed

the previously announced transfer of its North American

Consumer Packaging business, which includes its North

American Coated Paperboard and Foodservice

businesses, to a subsidiary of Graphic Packaging

Holding Company. The North American Consumer

Packaging business was historically presented in the

Company's Consumer Packaging segment; however, as

a result of this transfer, all current and prior year amounts

have been adjusted to reflect the North American

Consumer Packaging business as a discontinued

operation. In addition, after the announced transfer

during the fourth quarter of 2017, the chief operating

decision maker began evaluating the European Coated

Paperboard business, previously presented in the

Company's Consumer Packaging business segment, as

part of the Industrial Packaging business segment. As

such, amounts related

the European Coated

Paperboard business have been presented in the

Industrial Packaging business segment for all periods

presented. All segments are differentiated on a common

product, common customer basis consistent with the

business segmentation generally used in the Forest

Products industry.

Outstanding at December 31, 2017
Outstanding at December 31, 2017

5,799,884
5,799,884

$36.17
$36.17

RESTRICTED STOCK AWARD PROGRAMS
RESTRICTED STOCK AWARD PROGRAMS

The service-based Restricted Stock Award program
The service-based Restricted Stock Award program
(RSA), designed for recruitment, retention and special
(RSA), designed for recruitment, retention and special
recognition purposes, provides for awards of restricted
recognition purposes, provides for awards of restricted
stock to key employees.
stock to key employees.

The following summarizes the activity of the RSA
The following summarizes the activity of the RSA
program for the three years ending December 31, 2017:
program for the three years ending December 31, 2017:

Outstanding at December 31, 2014
Outstanding at December 31, 2014

Granted
Granted
Shares issued
Shares issued
Forfeited
Forfeited
Outstanding at December 31, 2015
Outstanding at December 31, 2015
Granted
Granted
Shares issued
Shares issued
Forfeited
Forfeited

Outstanding at December 31, 2016
Outstanding at December 31, 2016

Granted
Granted
Shares issued
Shares issued
Forfeited
Forfeited

Outstanding at December 31, 2017
Outstanding at December 31, 2017

Weighted
Weighted
Average
Average
Grant Date
Grant Date
Fair Value
Fair Value
$47.03
$47.03
50.06
50.06
45.35
45.35
50.04
50.04
48.24
48.24
42.81
42.81
47.14
47.14
39.36
39.36
45.34
45.34

57.24
57.24
47.90
47.90
53.53
53.53
$48.63
$48.63

Shares
Shares

114,599
114,599
36,300
36,300
(27,365)
(27,365)
(3,166)
(3,166)
120,368
120,368
117,881
117,881
(59,418)
(59,418)
(9,500)
(9,500)
169,331
169,331

63,319
63,319
(59,650)
(59,650)
(6,700)
(6,700)
166,300
166,300

77
77

NOTE 18 INCENTIVE PLANS

The following table sets forth the assumptions used to

determine compensation cost for the market condition

International Paper currently has an

Incentive

component of the PSP plan:

PERFORMANCE SHARE PLAN

Outstanding at December 31, 2015

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.

Under the Performance Share Plan (PSP), contingent

awards of International Paper common stock are

granted by the Committee. The PSP awards are earned

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. PSP grants

are made in performance-based restricted stock units.

Expected volatility

Risk-free interest rate

Twelve Months Ended

December 31, 2017

22.75%-23.39%

1.10%-1.47%

The following summarizes PSP activity for the three

years ending December 31, 2017:

Outstanding at December 31, 2014

Granted

Shares issued

Forfeited

Granted

Shares issued

Forfeited

Granted

Shares issued

Forfeited

Outstanding at December 31, 2016

Weighted

Average

Grant Date

Fair Value

$34.98

53.25

37.09

53.97

38.69

37.26

43.82

43.61

35.89

51.78

51.00

45.96

Share/Units

7,275,934

1,863,623

(2,959,160)

(322,664)

5,857,733

2,617,982

(2,316,085)

(209,500)

5,950,130

2,163,912

(1,876,134)

(438,024)

Outstanding at December 31, 2017

5,799,884

$36.17

RESTRICTED STOCK AWARD PROGRAMS

The service-based Restricted Stock Award program

(RSA), designed for recruitment, retention and special

recognition purposes, provides for awards of restricted

stock to key employees.

The following summarizes the activity of the RSA

program for the three years ending December 31, 2017:

Outstanding at December 31, 2014

Outstanding at December 31, 2015

Outstanding at December 31, 2016

Granted

Shares issued

Forfeited

Granted

Shares issued

Forfeited

Granted

Shares issued

Forfeited

Weighted

Average

Grant Date

Fair Value

$47.03

50.06

45.35

50.04

48.24

42.81

47.14

39.36

45.34

57.24

47.90

53.53

114,599

36,300

(27,365)

(3,166)

120,368

117,881

(59,418)

(9,500)

169,331

63,319

(59,650)

(6,700)

Outstanding at December 31, 2017

166,300

$48.63

At December 31, 2017, 2016 and 2015 a total of 13.2
At December 31, 2017, 2016 and 2015 a total of 13.2
million, 14.3 million and 16.2 million shares,
million, 14.3 million and 16.2 million shares,
respectively, were available for grant under the ICP.
respectively, were available for grant under the ICP.

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

In millions
In millions

2017
2017

2016
2016

2015
2015

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

Income tax benefits related to stock-
Income tax benefits related to stock-
based compensation
based compensation

$
$

147 $
147 $

124 $
124 $

107
107

45
45

34
34

88
88

At December 31, 2017, $86 million of compensation
At December 31, 2017, $86 million of compensation
cost, net of estimated forfeitures, related to unvested
cost, net of estimated forfeitures, related to unvested
restricted performance shares, executive continuity
restricted performance shares, executive continuity
awards and restricted stock attributable to future
awards and restricted stock attributable to future
performance had not yet been recognized. This amount
performance had not yet been recognized. This amount
will be recognized in expense over a weighted-average
will be recognized in expense over a weighted-average
period of 1.8 years.
period of 1.8 years.

NOTE 19 FINANCIAL INFORMATION BY BUSINESS
NOTE 19 FINANCIAL INFORMATION BY BUSINESS
SEGMENT AND GEOGRAPHIC AREA
SEGMENT AND GEOGRAPHIC AREA

International Paper’s business segments, Industrial
International Paper’s business segments, Industrial
Packaging, Global Cellulose Fibers and Printing Papers,
Packaging, Global Cellulose Fibers and Printing Papers,
are consistent with the internal structure used to manage
are consistent with the internal structure used to manage
these businesses. See the Description of Industry
these businesses. See the Description of Industry
Segments in Part II. Item 7. Management's Discussion
Segments in Part II. Item 7. Management's Discussion
and Analysis of Financial Condition and Results of
and Analysis of Financial Condition and Results of
Operations for a description of the types of products and
Operations for a description of the types of products and
services from which each reportable segment derives its
services from which each reportable segment derives its
revenues. On January 1, 2018, the Company completed
revenues. On January 1, 2018, the Company completed
the previously announced transfer of its North American
the previously announced transfer of its North American
Consumer Packaging business, which includes its North
Consumer Packaging business, which includes its North
American Coated Paperboard and Foodservice
American Coated Paperboard and Foodservice
businesses, to a subsidiary of Graphic Packaging
businesses, to a subsidiary of Graphic Packaging
Holding Company. The North American Consumer
Holding Company. The North American Consumer
Packaging business was historically presented in the
Packaging business was historically presented in the
Company's Consumer Packaging segment; however, as
Company's Consumer Packaging segment; however, as
a result of this transfer, all current and prior year amounts
a result of this transfer, all current and prior year amounts
have been adjusted to reflect the North American
have been adjusted to reflect the North American
Consumer Packaging business as a discontinued
Consumer Packaging business as a discontinued
operation. In addition, after the announced transfer
operation. In addition, after the announced transfer
during the fourth quarter of 2017, the chief operating
during the fourth quarter of 2017, the chief operating
decision maker began evaluating the European Coated
decision maker began evaluating the European Coated
Paperboard business, previously presented in the
Paperboard business, previously presented in the
Company's Consumer Packaging business segment, as
Company's Consumer Packaging business segment, as
part of the Industrial Packaging business segment. As
part of the Industrial Packaging business segment. As
such, amounts related
the European Coated
the European Coated
to
to
such, amounts related
Paperboard business have been presented in the
Paperboard business have been presented in the
Industrial Packaging business segment for all periods
Industrial Packaging business segment for all periods
presented. All segments are differentiated on a common
presented. All segments are differentiated on a common
product, common customer basis consistent with the
product, common customer basis consistent with the
business segmentation generally used in the Forest
business segmentation generally used in the Forest
Products industry.
Products industry.

Business segment operating profits are used by
Business segment operating profits are used by
International Paper’s management to measure the
International Paper’s management to measure the
earnings performance of its businesses. Management
earnings performance of its businesses. Management
believes that this measure allows a better understanding
believes that this measure allows a better understanding
of trends in costs, operating efficiencies, prices and
of trends in costs, operating efficiencies, prices and
volumes. Business segment operating profits are
volumes. Business segment operating profits are
defined as earnings (loss) from continuing operations
defined as earnings (loss) from continuing operations
before income taxes and equity earnings, but including
before income taxes and equity earnings, but including
the impact of equity earnings and noncontrolling
the impact of equity earnings and noncontrolling
interests, excluding corporate items and corporate
interests, excluding corporate items and corporate
special items.
special items.

External sales by major product is determined by
External sales by major product is determined by
aggregating sales from each segment based on similar
aggregating sales from each segment based on similar
products or services. External sales are defined as those
products or services. External sales are defined as those
that are made to parties outside International Paper’s
that are made to parties outside International Paper’s
consolidated group, whereas sales by segment in the
consolidated group, whereas sales by segment in the
Net Sales table are determined using a management
Net Sales table are determined using a management
approach and include intersegment sales.
approach and include intersegment sales.

The Company also holds a 50% interest in Ilim that is a
The Company also holds a 50% interest in Ilim that is a
separate reportable industry segment. The Company
separate reportable industry segment. The Company
recorded equity earnings (losses), net of taxes, of $183
recorded equity earnings (losses), net of taxes, of $183
million, $199 million, and $131 million in 2017, 2016,
million, $199 million, and $131 million in 2017, 2016,
and 2015, respectively, for Ilim. Equity earnings (losses)
and 2015, respectively, for Ilim. Equity earnings (losses)
includes an after-tax foreign exchange gain (loss) of $15
includes an after-tax foreign exchange gain (loss) of $15
million, $25 million, and $(75) million in 2017, 2016 and
million, $25 million, and $(75) million in 2017, 2016 and
2015, respectively, primarily on the remeasurement of
2015, respectively, primarily on the remeasurement of
U.S. dollar-denominated net debt.
U.S. dollar-denominated net debt.

Summarized financial information for Ilim which is
Summarized financial information for Ilim which is
accounted for under the equity method is presented in
accounted for under the equity method is presented in
the following tables. The audited U.S. GAAP financial
the following tables. The audited U.S. GAAP financial
statements for Ilim are included in Exhibit 99.1 to this
statements for Ilim are included in Exhibit 99.1 to this
Form 10-K.
Form 10-K.

Balance Sheet
Balance Sheet

In millions
In millions

Current assets
Current assets

Noncurrent assets
Noncurrent assets
Current liabilities
Current liabilities

Noncurrent liabilities
Noncurrent liabilities

Noncontrolling interests
Noncontrolling interests

Income Statement
Income Statement

2017
2017

2016
2016

$ 689
$ 689
1,696
1,696

1,039
1,039

972
972

6
6

$ 774
$ 774
1,351
1,351

402
402

1,426
1,426

22
22

In millions
In millions
Net sales
Net sales
Gross profit
Gross profit
Income from continuing operations
Income from continuing operations

Net income attributable to Ilim
Net income attributable to Ilim

2017
2017
$2,150
$2,150
1,047
1,047

379
379

362
362

2016
2016
$1,927
$1,927
957
957
419
419

2015
2015
$1,931
$1,931
971
971
254
254

391
391

237
237

78
78

At December 31, 2017 and 2016, the Company's
At December 31, 2017 and 2016, the Company's
investment in Ilim, which is recorded in Investments in
investment in Ilim, which is recorded in Investments in
the consolidated balance sheet, was $338 million and
the consolidated balance sheet, was $338 million and
$302 million, respectively, which was $154 million and
$302 million, respectively, which was $154 million and
$164 million, respectively, more than the Company's
$164 million, respectively, more than the Company's
proportionate share of the joint venture's underlying net
proportionate share of the joint venture's underlying net
assets. The differences primarily relate to purchase price
assets. The differences primarily relate to purchase price
fair value adjustments and currency
translation
translation
fair value adjustments and currency
adjustments. The Company is party to a joint marketing
adjustments. The Company is party to a joint marketing
agreement with
the Company
Ilim, under which
agreement with
the Company
Ilim, under which
purchases, markets and sells paper produced by Ilim.
purchases, markets and sells paper produced by Ilim.
Purchases under this agreement were $205 million,
Purchases under this agreement were $205 million,
$170 million and $170 million for the years ended
$170 million and $170 million for the years ended
December 31, 2017, 2016 and 2015, respectively.
December 31, 2017, 2016 and 2015, respectively.

INFORMATION BY BUSINESS SEGMENT
INFORMATION BY BUSINESS SEGMENT

Net Sales
Net Sales

In millions
In millions
Industrial Packaging
Industrial Packaging
Global Cellulose Fibers
Global Cellulose Fibers
Printing Papers
Printing Papers

Corporate and Intersegment
Corporate and Intersegment
Sales (a)
Sales (a)

2017
2017
$ 15,077
$ 15,077
2,551
2,551
4,157
4,157

2016
2016
$ 14,226
$ 14,226
1,092
1,092
4,058
4,058

2015
2015
$ 14,559
$ 14,559
975
975
4,056
4,056

(42)
(42)

119
119

1,085
1,085

Net Sales
Net Sales

$ 21,743
$ 21,743

$ 19,495
$ 19,495

$ 20,675
$ 20,675

Operating Profit
Operating Profit

In millions
In millions

2017
2017

2016
2016

2015
2015

Industrial Packaging
Industrial Packaging

$
$

1,547
1,547

$
$

1,741
1,741

$
$

1,938
1,938

Global Cellulose Fibers
Global Cellulose Fibers

Printing Papers
Printing Papers

Business Segment Operating
Business Segment Operating
Profit
Profit

65
65

457
457

(179)
(179)

540
540

68
68

465
465

2,069
2,069

2,102
2,102

2,471
2,471

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

Interest expense, net
Interest expense, net

Noncontrolling interests /
Noncontrolling interests /
equity earnings adjustment (b)
equity earnings adjustment (b)

Corporate items, net (a)
Corporate items, net (a)

Corporate special items, net
Corporate special items, net
(a)
(a)

Non-operating pension
Non-operating pension
expense
expense

848
848

572
572

(2)
(2)

91
91

76
76

484
484

795
795

520
520

1
1

121
121

55
55

610
610

1,132
1,132

555
555

8
8

96
96

422
422

258
258

$
$

2,069
2,069

$
$

2,102
2,102

$
$

2,471
2,471

Global Cellulose Fibers
Global Cellulose Fibers

Printing Papers
Printing Papers

Corporate (c)
Corporate (c)

Restructuring and Other
Restructuring and Other
Charges
Charges

Assets
Assets

In millions
In millions

Industrial Packaging
Industrial Packaging

Global Cellulose Fibers
Global Cellulose Fibers

Printing Papers
Printing Papers

Corporate and other (d)
Corporate and other (d)

Assets
Assets

Capital Spending
Capital Spending

Restructuring and Other Charges
Restructuring and Other Charges

INFORMATION BY GEOGRAPHIC AREA

In millions
In millions

2017
2017

2016
2016

2015
2015

Industrial Packaging
Industrial Packaging

$
$

— $
— $

7
7

$
$

—
—

67
67

—
—

47
47

—
—

252
252

$
$

67
67

$
$

54
54

$
$

252
252

Net Sales

$ 21,743

$ 19,495

$ 20,675

2017
2017
$ 15,354
$ 15,354
3,913
3,913
4,054
4,054

10,582
10,582
$ 33,903
$ 33,903

2016
2016
$ 14,707
$ 14,707
3,845
3,845

3,965
3,965

10,576
10,576
$ 33,093
$ 33,093

Net Sales (i)

In millions

United States (j)

EMEA

Pacific Rim and Asia

Americas, other than U.S.

Long-Lived Assets (k)

In millions

United States

EMEA

Pacific Rim and Asia

Americas, other than U.S.

Long-Lived Assets

2017

2016

2015

$ 16,247

$ 14,363

$ 14,875

3,129

625

1,742

2,852

699

1,581

2,759

1,501

1,540

2017

2016

$ 10,545

$ 10,532

1,302

236

1,630

1,009

246

1,672

$ 13,713

$ 13,459

(a)

Includes sales of $15 million in 2017, $42 million in 2016 and

$931 million in 2015, operating profits (losses) of $0 million in

2017, $(2) million in 2016 and $(62) million in 2015, and

corporate special items expense of $9 million in 2017, $9 million

in 2016 and $184 million in 2015, from previously divested

businesses.

(b) 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.

(c)

Includes corporate expenses and expenses of $9 million in 2017,

$9 million in 2016 and $10 million in 2015, from previously

divested businesses.

(d)

Includes corporate assets, assets of businesses held for sale

and assets of previously divested businesses.

(e)

Includes corporate assets and assets of previously divested

businesses of $0 million in 2017, $1 million in 2016 and $26

(f) Excludes accelerated depreciation related to the closure and/or

million in 2015.

repurposing of mills.

(g)

Includes $1 million in 2017, $2 million in 2016 and $74 million

in 2015 from previously divested businesses.

(h)

Includes $15 million in 2017, $42 million in 2016, and $930

million in 2015 from previously divested businesses.

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

the seller.

(j) Export sales to unaffiliated customers were $2.9 billion in 2017,

$1.8 billion in 2016 and $1.8 billion in 2015.

(k) Long-Lived Assets includes Forestlands and Plants, Properties

and Equipment, net.

In millions
In millions

2017
2017

2016
2016

2015
2015

Industrial Packaging
Industrial Packaging

$
$

Global Cellulose Fibers
Global Cellulose Fibers

Printing Papers
Printing Papers

Subtotal
Subtotal

Corporate and other (e)
Corporate and other (e)

836
836

188
188

235
235

1,259
1,259

21
21

$
$

832
832

174
174

215
215

1,221
1,221

20
20

871
871

129
129

232
232

1,232
1,232

78
78

Capital Spending
Capital Spending

$
$

1,280
1,280

$
$

1,241
1,241

$
$

1,310
1,310

Depreciation, Amortization and Cost of Timber
Depreciation, Amortization and Cost of Timber
Harvested (f)
Harvested (f)

In millions
In millions

2017
2017

2016
2016

2015
2015

Industrial Packaging
Industrial Packaging

$
$

Global Cellulose Fibers
Global Cellulose Fibers

Printing Papers
Printing Papers

Corporate (g)
Corporate (g)

Depreciation and
Depreciation and
Amortization
Amortization

$
$

781
781

261
261

245
245

56
56

$
$

730
730

108
108

232
232

54
54

739
739

73
73

234
234

121
121

$
$

1,343
1,343

$
$

1,124
1,124

$
$

1,167
1,167

External Sales By Major Product
External Sales By Major Product

In millions
In millions
Industrial Packaging
Industrial Packaging
Global Cellulose Fibers
Global Cellulose Fibers
Printing Papers
Printing Papers
Other (h)
Other (h)

Net Sales
Net Sales

2017
2017

$ 14,946
$ 14,946

2,524
2,524

4,142
4,142

131
131

$ 21,743
$ 21,743

2016
2016
$ 14,142
$ 14,142
1,090
1,090
4,062
4,062

201
201
$ 19,495
$ 19,495

2015
2015
$ 14,496
$ 14,496
986
986
4,082
4,082
1,111
1,111
$ 20,675
$ 20,675

79
79

(a)
(a)

Includes sales of $15 million in 2017, $42 million in 2016 and
Includes sales of $15 million in 2017, $42 million in 2016 and
$931 million in 2015, operating profits (losses) of $0 million in
$931 million in 2015, operating profits (losses) of $0 million in
2017, $(2) million in 2016 and $(62) million in 2015, and
2017, $(2) million in 2016 and $(62) million in 2015, and
corporate special items expense of $9 million in 2017, $9 million
corporate special items expense of $9 million in 2017, $9 million
in 2016 and $184 million in 2015, from previously divested
in 2016 and $184 million in 2015, from previously divested
businesses.
businesses.

interests and equity earnings
interests and equity earnings

(b) Operating profits for industry segments include each segment’s
(b) Operating profits for industry segments include each segment’s
percentage share of the profits of subsidiaries included in that
percentage share of the profits of subsidiaries included in that
segment that are less than wholly-owned. The pre-tax
segment that are less than wholly-owned. The pre-tax
noncontrolling
these
these
noncontrolling
subsidiaries is added here to present consolidated earnings from
subsidiaries is added here to present consolidated earnings from
continuing operations before income taxes and equity earnings.
continuing operations before income taxes and equity earnings.
Includes corporate expenses and expenses of $9 million in 2017,
Includes corporate expenses and expenses of $9 million in 2017,
$9 million in 2016 and $10 million in 2015, from previously
$9 million in 2016 and $10 million in 2015, from previously
divested businesses.
divested businesses.
Includes corporate assets, assets of businesses held for sale
Includes corporate assets, assets of businesses held for sale
and assets of previously divested businesses.
and assets of previously divested businesses.
Includes corporate assets and assets of previously divested
Includes corporate assets and assets of previously divested
businesses of $0 million in 2017, $1 million in 2016 and $26
businesses of $0 million in 2017, $1 million in 2016 and $26
million in 2015.
million in 2015.

(d)
(d)

(e)
(e)

for
for

(f) Excludes accelerated depreciation related to the closure and/or
(f) Excludes accelerated depreciation related to the closure and/or

(g)
(g)

(h)
(h)

repurposing of mills.
repurposing of mills.
Includes $1 million in 2017, $2 million in 2016 and $74 million
Includes $1 million in 2017, $2 million in 2016 and $74 million
in 2015 from previously divested businesses.
in 2015 from previously divested businesses.
Includes $15 million in 2017, $42 million in 2016, and $930
Includes $15 million in 2017, $42 million in 2016, and $930
million in 2015 from previously divested businesses.
million in 2015 from previously divested businesses.

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

the seller.
the seller.

(j) Export sales to unaffiliated customers were $2.9 billion in 2017,
(j) Export sales to unaffiliated customers were $2.9 billion in 2017,

$1.8 billion in 2016 and $1.8 billion in 2015.
$1.8 billion in 2016 and $1.8 billion in 2015.

(k) Long-Lived Assets includes Forestlands and Plants, Properties
(k) Long-Lived Assets includes Forestlands and Plants, Properties

and Equipment, net.
and Equipment, net.

INFORMATION BY GEOGRAPHIC AREA
INFORMATION BY GEOGRAPHIC AREA
Net Sales (i)
Net Sales (i)

In millions
In millions

United States (j)
United States (j)

EMEA
EMEA

Pacific Rim and Asia
Pacific Rim and Asia

Americas, other than U.S.
Americas, other than U.S.

2017
2017

2016
2016

2015
2015

$ 16,247
$ 16,247

$ 14,363
$ 14,363

$ 14,875
$ 14,875

3,129
3,129

625
625

1,742
1,742

2,852
2,852

699
699

1,581
1,581

2,759
2,759

1,501
1,501

1,540
1,540

Net Sales
Net Sales

$ 21,743
$ 21,743

$ 19,495
$ 19,495

$ 20,675
$ 20,675

Long-Lived Assets (k)
Long-Lived Assets (k)

In millions
In millions
United States
United States
EMEA
EMEA
Pacific Rim and Asia
Pacific Rim and Asia
Americas, other than U.S.
Americas, other than U.S.

Long-Lived Assets
Long-Lived Assets

2017
2017
$ 10,545
$ 10,545
1,302
1,302

236
236
1,630
1,630

$ 13,713
$ 13,713

2016
2016
$ 10,532
$ 10,532
1,009
1,009

246
246
1,672
1,672
$ 13,459
$ 13,459

At December 31, 2017 and 2016, the Company's

investment in Ilim, which is recorded in Investments in

the consolidated balance sheet, was $338 million and

$302 million, respectively, which was $154 million and

$164 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 $205 million,

$170 million and $170 million for the years ended

December 31, 2017, 2016 and 2015, respectively.

INFORMATION BY BUSINESS SEGMENT

Restructuring and Other Charges

In millions

2017

2016

2015

Industrial Packaging

— $

—

252

Global Cellulose Fibers

Printing Papers

Corporate (c)

Restructuring and Other

Charges

Assets

In millions

Industrial Packaging

Global Cellulose Fibers

Printing Papers

Corporate and other (d)

Assets

2017

2016

$ 15,354

$ 14,707

3,913

4,054

10,582

3,845

3,965

10,576

$ 33,903

$ 33,093

Net Sales

In millions

Global Cellulose Fibers

Printing Papers

Corporate and Intersegment

Sales (a)

Net Sales

Operating Profit

Industrial Packaging

$ 15,077

$ 14,226

$ 14,559

2017

2016

2015

Capital Spending

2,551

4,157

1,092

4,058

975

4,056

In millions

2017

2016

2015

Industrial Packaging

(42)

119

1,085

$ 21,743

$ 19,495

$ 20,675

Global Cellulose Fibers

Printing Papers

Subtotal

Corporate and other (e)

836

188

235

1,259

832

174

215

1,221

871

129

232

1,232

Capital Spending

1,280

1,241

1,310

In millions

2017

2016

2015

Industrial Packaging

1,547

1,741

1,938

Depreciation, Amortization and Cost of Timber

Global Cellulose Fibers

Printing Papers

Business Segment Operating

Profit

457

(179)

540

465

2,069

2,102

2,471

Harvested (f)

Earnings (loss) from

continuing operations before

income taxes and equity

earnings

Interest expense, net

Noncontrolling interests /

equity earnings adjustment (b)

Corporate items, net (a)

Corporate special items, net

(a)

Non-operating pension

expense

848

572

(2)

484

795

520

121

610

1,132

555

422

258

2,069

2,102

2,471

In millions

2017

2016

2015

Industrial Packaging

Global Cellulose Fibers

Printing Papers

Corporate (g)

Depreciation and

Amortization

781

261

245

730

108

232

739

234

121

1,343

1,124

1,167

External Sales By Major Product

In millions

2017

2016

2015

Industrial Packaging

$ 14,946

$ 14,142

$ 14,496

Global Cellulose Fibers

Printing Papers

Other (h)

Net Sales

2,524

4,142

131

1,090

4,062

201

986

4,082

1,111

$ 21,743

$ 19,495

$ 20,675

80
80

INTERIM FINANCIAL RESULTS (UNAUDITED)
INTERIM FINANCIAL RESULTS (UNAUDITED)

Note: Since basic and diluted earnings per share are computed

In millions, except per share amounts
In millions, except per share amounts
and stock prices
and stock prices

1st
1st
Quarter
Quarter

2nd
2nd
Quarter
Quarter

3rd
3rd
Quarter
Quarter

4th
4th
Quarter
Quarter

Year
Year

2017
2017

Net sales
Net sales

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

Gain (loss) from discontinued
Gain (loss) from discontinued
operations
operations

Net earnings (loss) attributable to
Net earnings (loss) attributable to
International Paper Company
International Paper Company

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

Earnings (loss) from continuing
Earnings (loss) from continuing
operations
operations

Gain (loss) from discontinued
Gain (loss) from discontinued
operations
operations

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

Earnings (loss) from continuing
Earnings (loss) from continuing
operations
operations

Gain (loss) from discontinued
Gain (loss) from discontinued
operations
operations

$ 5,132
$ 5,132

$ 5,383
$ 5,383

$ 5,517
$ 5,517

$ 5,711
$ 5,711

$ 21,743
$ 21,743

217 (a)
217 (a)

(23) (a)
(23) (a)

457 (a)
457 (a)

197 (a)
197 (a)

848 (a)
848 (a)

17 (b)
17 (b)

(4) (b)
(4) (b)

29 (b)
29 (b)

(8) (b)
(8) (b)

34 (b)
34 (b)

209 (a-c)
209 (a-c)

80 (a-c)
80 (a-c)

395 (a-c)
395 (a-c)

1,460 (a-c)
1,460 (a-c)

2,144 (a-c)
2,144 (a-c)

$
$

0.47 (a)
0.47 (a)

$
$

0.20 (a)
0.20 (a)

$
$

0.89 (a)
0.89 (a)

$
$

3.56 (a)
3.56 (a)

$
$

5.11 (a)
5.11 (a)

Total

$ 7

$ (184) $ 11

$(1,282)

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)

Includes the following pre-tax charges (gains):

In millions

2017

$ — $ (14) $ — $ —

Gain on sale of investment

in ArborGen

Costs associated with the

pulp business acquired in

2016

Amortization of

Weyerhaeuser inventory fair

value step-up

Holmen bargain purchase

gain

Abandoned property

removal

Asia Foodservice sale

Brazil Packaging wood

supply accelerated

amortization

Debt extinguishment costs

Interest income on income

tax refund claims

Other items

Non-operating pension

expense

Total

(6)

—

(4)

(2)

—

(1)

—

386

$ 45

$ 387

$ 56

$ 492

(b) Includes the operating earnings of the North American Consumer

Packaging business for the full year. Also includes the following

pre-tax charges (gains):

2017

In millions

North American Consumer

Packaging transaction costs

Non-operating pension

expense

Total

$ — $ — $ — $ 17

—

$ — $ — $ — $ 62

In millions

2017

International legal entity

restructuring

Income tax refund

claims

Cash pension

contribution

International Tax Law

Change

Tax benefit of Tax Cuts

and Jobs Act

Tax impact of other

special items

$ 15

$ — $ 19

$ —

—

(85)

—

(28)

—

— (1,222)

(8)

(137)

(8)

(41)

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

In millions

costs

write-off

costs

Riegelwood mill conversion

India Packaging evaluation

Early debt extinguishment

Write-off of certain

regulatory pre-engineering

Costs associated with the

newly acquired pulp

business

Asia Box impairment /

restructuring

Gain on sale of investment

in Arizona Chemical

Turkey mill closure

Amortization of

Weyerhaeuser inventory fair

value step-up

Non-operating pension

expense

Total

2016

$ — $ — $ —

—

(8)

—

487

—

$ 82

$ 520

$ 108

$ 82

(e) Includes the operating earnings of the North American Consumer

Packaging business for the full year and a pre-tax charge of $8

million for a legal settlement associated with the xpedx business.

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

2016

In millions

Cash pension contribution

$ — $ 23

$ — $ —

U.S. Federal audit

Brazil goodwill

International legal entity

restructuring

Luxembourg tax rate

Tax impact of other special

change

items

Total

(14)

(57)

—

(6)

—

(3)

(10)

(24)

(14)

$ (74) $

$ (24) $ 17

Net earnings (loss)
Net earnings (loss)

0.51 (a-c)
0.51 (a-c)

0.19 (a-c)
0.19 (a-c)

0.96 (a-c)
0.96 (a-c)

3.54 (a-c)
3.54 (a-c)

0.04 (b)
0.04 (b)

(0.01) (b)
(0.01) (b)

0.07 (b)
0.07 (b)

(0.02) (b)
(0.02) (b)

0.08 (b)
0.08 (b)

5.19 (a-c)
5.19 (a-c)

0.08 (b)
0.08 (b)

5.13 (a-c)
5.13 (a-c)

0.46 (a)
0.46 (a)

0.20 (a)
0.20 (a)

0.88 (a)
0.88 (a)

3.52 (a)
3.52 (a)

5.05 (a)
5.05 (a)

Kleen Products settlement

— 354

Net earnings (loss)
Net earnings (loss)

0.50 (a-c)
0.50 (a-c)

0.19 (a-c)
0.19 (a-c)

0.95 (a-c)
0.95 (a-c)

3.50 (a-c)
3.50 (a-c)

0.04 (b)
0.04 (b)

(0.01) (b)
(0.01) (b)

0.07 (b)
0.07 (b)

(0.02) (b)
(0.02) (b)

Dividends per share of common stock
Dividends per share of common stock

0.4625
0.4625

0.4750
0.4750

1.8625
1.8625

Common stock prices
Common stock prices

High
High

Low
Low

2016
2016

Net sales
Net sales

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

Gain (loss) from discontinued operations
Gain (loss) from discontinued operations

Net earnings (loss) attributable to
Net earnings (loss) attributable to
International Paper Company
International Paper Company

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

Earnings (loss) from continuing
Earnings (loss) from continuing
operations
operations

$ 58.86
$ 58.86

$ 57.24
$ 57.24

$ 58.95
$ 58.95

$ 58.96
$ 58.96

49.62
49.62

49.60
49.60

51.28
51.28

53.10
53.10

49.60
49.60

$ 4,717
$ 4,717

$ 4,914
$ 4,914

$ 4,864
$ 4,864

$ 5,000
$ 5,000

$ 19,495
$ 19,495

307 (d)
307 (d)

4 (e)
4 (e)

(76) (d)
(76) (d)

40 (e)
40 (e)

320 (d)
320 (d)

34 (e)
34 (e)

244 (d)
244 (d)

24 (e)
24 (e)

795 (d)
795 (d)

102 (e)
102 (e)

334 (d-f)
334 (d-f)

40 (d-f)
40 (d-f)

312 (d-f)
312 (d-f)

218 (d-f)
218 (d-f)

904 (d-f)
904 (d-f)

$
$

0.80 (d)
0.80 (d)

$
$

0.00 (d)
0.00 (d)

$
$

0.68 (d)
0.68 (d)

$
$

0.47 (d)
0.47 (d)

$
$

1.95 (d)
1.95 (d)

Gain (loss) from discontinued operations
Gain (loss) from discontinued operations

0.01 (e)
0.01 (e)

0.10 (e)
0.10 (e)

0.08 (e)
0.08 (e)

0.06 (e)
0.06 (e)

0.25 (e)
0.25 (e)

Net earnings (loss)
Net earnings (loss)

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

Earnings (loss) from continuing
Earnings (loss) from continuing
operations
operations

Gain (loss) from discontinued operations
Gain (loss) from discontinued operations

0.81 (d-f)
0.81 (d-f)

0.10 (d-f)
0.10 (d-f)

0.76 (d-f)
0.76 (d-f)

0.53 (d-f)
0.53 (d-f)

2.20 (d-f)
2.20 (d-f)

0.80 (d)
0.80 (d)

0.01 (e)
0.01 (e)

0.00 (d)
0.00 (d)

0.10 (e)
0.10 (e)

0.67 (d)
0.67 (d)

0.08 (e)
0.08 (e)

0.47 (d)
0.47 (d)

0.06 (e)
0.06 (e)

1.93 (d)
1.93 (d)

0.25 (e)
0.25 (e)

Net earnings (loss)
Net earnings (loss)

0.81 (d-f)
0.81 (d-f)

0.10 (d-f)
0.10 (d-f)

0.75 (d-f)
0.75 (d-f)

0.53 (d-f)
0.53 (d-f)

2.18 (d-f)
2.18 (d-f)

Dividends per share of common stock
Dividends per share of common stock

0.4400
0.4400

0.4625
0.4625

1.7825
1.7825

Common stock prices
Common stock prices

High
High

Low
Low

$ 42.09
$ 42.09

$ 44.60
$ 44.60

$ 49.90
$ 49.90

$ 54.68
$ 54.68

32.50
32.50

39.24
39.24

41.08
41.08

43.55
43.55

32.50
32.50

81
81

0.46 (a)

0.20 (a)

0.88 (a)

3.52 (a)

5.05 (a)

Kleen Products settlement
Kleen Products settlement

— 354
— 354

INTERIM FINANCIAL RESULTS (UNAUDITED)

In millions, except per share amounts

and stock prices

1st

Quarter

2nd

Quarter

3rd

Quarter

4th

Quarter

Year

$ 5,132

$ 5,383

$ 5,517

$ 5,711

$ 21,743

217 (a)

(23) (a)

457 (a)

197 (a)

848 (a)

17 (b)

(4) (b)

29 (b)

(8) (b)

34 (b)

209 (a-c)

80 (a-c)

395 (a-c)

1,460 (a-c)

2,144 (a-c)

Note: Since basic and diluted earnings per share are computed
Note: Since basic and diluted earnings per share are computed
independently for each period and category, full year per share
independently for each period and category, full year per share
amounts may not equal the sum of the four quarters. In addition, the
amounts may not equal the sum of the four quarters. In addition, the
unaudited selected consolidated financial data are derived from our
unaudited selected consolidated financial data are derived from our
audited consolidated financial statements and have been revised to
audited consolidated financial statements and have been revised to
reflect discontinued operations.
reflect discontinued operations.

Footnotes to Interim Financial Results
Footnotes to Interim Financial Results

(a)
(a)

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

In millions
In millions

Q1
Q1

Q2
Q2

Q3
Q3

Q4
Q4

2017
2017

0.08 (b)

5.19 (a-c)

0.08 (b)

5.13 (a-c)

2017

Net sales

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

Diluted earnings (loss) per share

attributable to International Paper

Company common shareholders:

Earnings (loss) from continuing

operations

Gain (loss) from discontinued

Common stock prices

High

Low

2016

Net sales

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

Net earnings (loss)

Diluted earnings (loss) per share

attributable to International Paper

Company common shareholders:

Earnings (loss) from continuing

operations

0.47 (a)

0.20 (a)

0.89 (a)

3.56 (a)

5.11 (a)

Net earnings (loss)

0.51 (a-c)

0.19 (a-c)

0.96 (a-c)

3.54 (a-c)

0.04 (b)

(0.01) (b)

0.07 (b)

(0.02) (b)

Net earnings (loss)

0.50 (a-c)

0.19 (a-c)

0.95 (a-c)

3.50 (a-c)

Dividends per share of common stock

0.4625

0.4750

1.8625

0.04 (b)

(0.01) (b)

0.07 (b)

(0.02) (b)

$ 58.86

$ 57.24

$ 58.95

$ 58.96

49.62

49.60

51.28

53.10

49.60

$ 4,717

$ 4,914

$ 4,864

$ 5,000

$ 19,495

307 (d)

4 (e)

(76) (d)

40 (e)

320 (d)

34 (e)

244 (d)

24 (e)

795 (d)

102 (e)

334 (d-f)

40 (d-f)

312 (d-f)

218 (d-f)

904 (d-f)

Gain (loss) from discontinued operations

0.01 (e)

0.10 (e)

0.08 (e)

0.06 (e)

0.25 (e)

0.80 (d)

0.00 (d)

0.68 (d)

0.47 (d)

1.95 (d)

0.81 (d-f)

0.10 (d-f)

0.76 (d-f)

0.53 (d-f)

2.20 (d-f)

Gain (loss) from discontinued operations

0.80 (d)

0.01 (e)

0.00 (d)

0.10 (e)

0.67 (d)

0.08 (e)

0.47 (d)

0.06 (e)

1.93 (d)

0.25 (e)

Net earnings (loss)

0.81 (d-f)

0.10 (d-f)

0.75 (d-f)

0.53 (d-f)

2.18 (d-f)

Dividends per share of common stock

0.4400

0.4625

1.7825

Common stock prices

High

Low

$ 42.09

$ 44.60

$ 49.90

$ 54.68

32.50

39.24

41.08

43.55

32.50

4
4

5
5

6
6

18
18

Total
Total

$ 7
$ 7

$ (184) $ 11
$ (184) $ 11

$(1,282)
$(1,282)

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

Gain on sale of investment
Gain on sale of investment
in ArborGen
in ArborGen

Costs associated with the
Costs associated with the
pulp business acquired in
pulp business acquired in
2016
2016

Amortization of
Amortization of
Weyerhaeuser inventory fair
Weyerhaeuser inventory fair
value step-up
value step-up

Holmen bargain purchase
Holmen bargain purchase
gain
gain

Abandoned property
Abandoned property
removal
removal

Asia Foodservice sale
Asia Foodservice sale

Brazil Packaging wood
Brazil Packaging wood
supply accelerated
supply accelerated
amortization
amortization

Debt extinguishment costs
Debt extinguishment costs

Interest income on income
Interest income on income
tax refund claims
tax refund claims

Other items
Other items

Non-operating pension
Non-operating pension
expense
expense

Total
Total

$ — $ (14) $ — $ —
$ — $ (14) $ — $ —

14
14

(6)
(6)

2
2

—
—

5
5

—
—

9
9

—
—

(4)
(4)

(2)
(2)

—
—

7
7

—
—

10
10

—
—

6
6

—
—

83
83

(1)
(1)

—
—

31
31

34
34

33
33

386
386

$ 45
$ 45

$ 387
$ 387

$ 56
$ 56

$ 492
$ 492

In millions
In millions

Q1
Q1

Q2
Q2

Q3
Q3

Q4
Q4

2017
2017

International legal entity
International legal entity
restructuring
restructuring

Income tax refund
Income tax refund
claims
claims

Cash pension
Cash pension
contribution
contribution

International Tax Law
International Tax Law
Change
Change
Tax benefit of Tax Cuts
Tax benefit of Tax Cuts
and Jobs Act
and Jobs Act
Tax impact of other
Tax impact of other
special items
special items

$ 15
$ 15

$ — $ 19
$ — $ 19

$ —
$ —

—
—

(85)
(85)

38
38

—
—

(28)
(28)

—
—

9
9

— (1,222)
— (1,222)

(8)
(8)

(137)
(137)

(8)
(8)

(41)
(41)

In millions
In millions

Q1
Q1

Q2
Q2

Q3
Q3

Q4
Q4

2016
2016

Riegelwood mill conversion
Riegelwood mill conversion
costs
costs

India Packaging evaluation
India Packaging evaluation
write-off
write-off

Early debt extinguishment
Early debt extinguishment
costs
costs

Write-off of certain
Write-off of certain
regulatory pre-engineering
regulatory pre-engineering
costs
costs
Costs associated with the
Costs associated with the
newly acquired pulp
newly acquired pulp
business
business

Asia Box impairment /
Asia Box impairment /
restructuring
restructuring

Gain on sale of investment
Gain on sale of investment
in Arizona Chemical
in Arizona Chemical

Turkey mill closure
Turkey mill closure

Amortization of
Amortization of
Weyerhaeuser inventory fair
Weyerhaeuser inventory fair
value step-up
value step-up
Non-operating pension
Non-operating pension
expense
expense

$
$

9
9

$ — $ — $ —
$ — $ — $ —

—
—

37
37

(8)
(8)

—
—

44
44

—
—

5
5

28
28

—
—

487
487

17
17

29
29

8
8

7
7

5
5

—
—

42
42

—
—

19
19

—
—

7
7

19
19

37
37

Total
Total

$ 82
$ 82

$ 520
$ 520

$ 108
$ 108

$ 82
$ 82

(e) Includes the operating earnings of the North American Consumer
(e) Includes the operating earnings of the North American Consumer
Packaging business for the full year and a pre-tax charge of $8
Packaging business for the full year and a pre-tax charge of $8
million for a legal settlement associated with the xpedx business.
million for a legal settlement associated with the xpedx business.

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

2016
2016

In millions
In millions

Q1
Q1

Q2
Q2

Q3
Q3

Q4
Q4

Cash pension contribution
Cash pension contribution

$ — $ 23
$ — $ 23

$ — $ —
$ — $ —

U.S. Federal audit
U.S. Federal audit

Brazil goodwill
Brazil goodwill

International legal entity
International legal entity
restructuring
restructuring
Luxembourg tax rate
Luxembourg tax rate
change
change
Tax impact of other special
Tax impact of other special
items
items

Total
Total

(14)
(14)

(57)
(57)

—
—

(6)
(6)

—
—

31
31

(3)
(3)

(10)
(10)

(24)
(24)

(14)
(14)

$ (74) $
$ (74) $

7
7

$ (24) $ 17
$ (24) $ 17

(b) Includes the operating earnings of the North American Consumer
(b) Includes the operating earnings of the North American Consumer
Packaging business for the full year. Also includes the following
Packaging business for the full year. Also includes the following
pre-tax charges (gains):
pre-tax charges (gains):

2017
2017

In millions
In millions

Q1
Q1

Q2
Q2

Q3
Q3

Q4
Q4

North American Consumer
North American Consumer
Packaging transaction costs
Packaging transaction costs

Non-operating pension
Non-operating pension
expense
expense

Total
Total

$ — $ — $ — $ 17
$ — $ — $ — $ 17

—
—

45
45

$ — $ — $ — $ 62
$ — $ — $ — $ 62

82
82

ITEM 9. CHANGES IN AND DISAGREEMENTS
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND
WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
FINANCIAL DISCLOSURE

None.
None.

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND
EVALUATION OF DISCLOSURE CONTROLS AND
PROCEDURES
PROCEDURES

“Exchange Act”),
“Exchange Act”),

We maintain disclosure controls and procedures that
We maintain disclosure controls and procedures that
are designed to ensure that information required to be
are designed to ensure that information required to be
disclosed by us in the reports we file or submit under
disclosed by us in the reports we file or submit under
the Securities and Exchange Act of 1934, as amended
the Securities and Exchange Act of 1934, as amended
recorded, processed,
is
(the
(the
recorded, processed,
is
summarized and reported within the time periods
summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such
specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to
information is accumulated and communicated to
management, including our principal executive officer
management, including our principal executive officer
and principal financial officer, as appropriate, to allow
and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. As of
timely decisions regarding required disclosure. As of
December 31, 2017, an evaluation was carried out
December 31, 2017, an evaluation was carried out
under the supervision and with the participation of the
under the supervision and with the participation of the
including our principal
Company’s management,
including our principal
Company’s management,
executive officer and principal financial officer, of the
executive officer and principal financial officer, of the
effectiveness of our disclosure controls and procedures,
effectiveness of our disclosure controls and procedures,
as defined by Rule 13a-15 under the Exchange Act.
as defined by Rule 13a-15 under the Exchange Act.
Based upon this evaluation, our principal executive
Based upon this evaluation, our principal executive
officer and principal financial officer have concluded that
officer and principal financial officer have concluded that
the Company’s disclosure controls and procedures were
the Company’s disclosure controls and procedures were
effective as of December 31, 2017.
effective as of December 31, 2017.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
FINANCIAL REPORTING

Our management is responsible for establishing and
Our management is responsible for establishing and
maintaining adequate internal control over our financial
maintaining adequate internal control over our financial
reporting. Internal control over financial reporting is the
reporting. Internal control over financial reporting is the
process designed by, or under the supervision of, our
process designed by, or under the supervision of, our
principal executive officer and principal financial officer,
principal executive officer and principal financial officer,
and effected by our Board of Directors, management
and effected by our Board of Directors, management
and other personnel, to provide reasonable assurance
and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
regarding the reliability of financial reporting and the
preparation of
for external
preparation of
for external
purposes in accordance with accounting principles
purposes in accordance with accounting principles
generally accepted in the United States (GAAP). Our
generally accepted in the United States (GAAP). Our
internal control over financial reporting includes those
internal control over financial reporting includes those
policies and procedures that:
policies and procedures that:

financial statements
financial statements

•
•

pertain to the maintenance of records that, in
pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets;
transactions and dispositions of our assets;

provide reasonable assurance that transactions
provide reasonable assurance that transactions
are recorded as necessary to allow for the
are recorded as necessary to allow for the
preparation of financial statements in accordance
preparation of financial statements in accordance
with GAAP, and that our receipts and expenditures
with GAAP, and that our receipts and expenditures
are being made only
in accordance with
are being made only
in accordance with
authorizations of our management and directors;
authorizations of our management and directors;

•
•

assurance
assurance

reasonable
reasonable

provide reasonable assurance as to the detection
provide reasonable assurance as to the detection
of fraud.
of fraud.

provide
regarding
regarding
provide
prevention or timely detection of unauthorized
prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that
acquisition, use or disposition of our assets that
could have a material effect on our consolidated
could have a material effect on our consolidated
financial statements; and
financial statements; and

employee may report suspected violations of law or our

The Company’s Code of Business Ethics (Code) is

policy; and an office of ethics and business practice. The

applicable to all employees of the Company, including

internal control system further includes careful selection

the chief executive officer and senior financial officers,

and training of supervisory and management personnel,

as well as the Board of Directors. We disclose any

appropriate delegation of authority and division of

amendments to our Code and any waivers from a

responsibility, dissemination of accounting and

provision of our Code granted to our directors, chief

business policies throughout the Company, and an

executive officer and senior financial officers on our

extensive program of internal audits with management

Internet Web site within four business days following

follow-up. Our Board of Directors, assisted by the Audit

such amendment or waiver. To date, no waivers of the

and Finance Committee, monitors the integrity of our

Code have been granted.

financial statements and financial reporting procedures,

the performance of our 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, to review their activities.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL

REPORTING

There have been no changes in our internal control over

financial

reporting during

the quarter ended

December 31, 2017, 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

following

the annual meeting of

shareholders and, until the election of successors,

subject to removal by the Board.

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.

All internal control systems have inherent limitations,
All internal control systems have inherent limitations,
including the possibility of circumvention and overriding
including the possibility of circumvention and overriding
of controls, and therefore can provide only reasonable
of controls, and therefore can provide only reasonable
assurance of achieving the designed control objectives.
assurance of achieving the designed control objectives.
The Company’s internal control system is supported by
The Company’s internal control system is supported by
written policies and procedures, contains self-
written policies and procedures, contains self-
monitoring mechanisms, and is audited by the internal
monitoring mechanisms, and is audited by the internal
audit function. Appropriate actions are taken by
audit function. Appropriate actions are taken by
management to correct deficiencies as they are
management to correct deficiencies as they are
identified.
identified.

As of December 31, 2017, management has assessed
As of December 31, 2017, management has assessed
the effectiveness of the Company’s internal control over
the effectiveness of the Company’s internal control over
financial reporting. In a report included on pages 37 and
financial reporting. In a report included on pages 37 and
38, management concluded that the Company’s internal
38, management concluded that the Company’s internal
control over financial reporting was effective as of
control over financial reporting was effective as of
December 31, 2017.
December 31, 2017.

In making this assessment, we used the criteria
In making this assessment, we used the criteria
described in “Internal Control – Integrated Framework
described in “Internal Control – Integrated Framework
(2013)” issued by the Committee of Sponsoring
(2013)” issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
Organizations of the Treadway Commission.

Our independent registered public accounting firm,
Our independent registered public accounting firm,
Deloitte & Touche LLP, with direct access to our Board
Deloitte & Touche LLP, with direct access to our Board
of Directors through our Audit and Finance Committee,
of Directors through our Audit and Finance Committee,
has audited the consolidated financial statements
has audited the consolidated financial statements
prepared by us. Deloitte & Touche LLP has also issued
prepared by us. Deloitte & Touche LLP has also issued
an attestation report on our internal control over financial
an attestation report on our internal control over financial
reporting. Their report on the consolidated financial
reporting. Their report on the consolidated financial
statements and attestation report are included in Part II,
statements and attestation report are included in Part II,
Item 8 of this Annual Report under the heading
Item 8 of this Annual Report under the heading
“Financial Statements and Supplementary Data.”
“Financial Statements and Supplementary Data.”

MANAGEMENT’S PROCESS TO ASSESS THE
MANAGEMENT’S PROCESS TO ASSESS THE
EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL
EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL
REPORTING
REPORTING

To comply with the requirements of Section 404 of the
To comply with the requirements of Section 404 of the
followed a
Sarbanes-Oxley Act of 2002, we
followed a
Sarbanes-Oxley Act of 2002, we
comprehensive compliance process across
the
comprehensive compliance process across
the
enterprise to evaluate our internal control over financial
enterprise to evaluate our internal control over financial
reporting, engaging employees at all levels of the
reporting, engaging employees at all levels of the
organization. Our internal control environment includes
organization. Our internal control environment includes
an enterprise-wide attitude of integrity and control
an enterprise-wide attitude of integrity and control
consciousness that establishes a positive “tone at the
consciousness that establishes a positive “tone at the
top.” This is exemplified by our ethics program that
top.” This is exemplified by our ethics program that
includes long-standing principles and policies on ethical
includes long-standing principles and policies on ethical
business conduct that require employees to maintain
business conduct that require employees to maintain
the highest ethical and legal standards in the conduct
the highest ethical and legal standards in the conduct
of our business, which have been distributed to all
of our business, which have been distributed to all
employees; a toll-free telephone helpline whereby any
employees; a toll-free telephone helpline whereby any

83
83

ITEM 9. CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

None.

•

provide

reasonable

assurance

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

ITEM 9A. CONTROLS AND PROCEDURES

•

provide reasonable assurance as to the detection

EVALUATION OF DISCLOSURE CONTROLS AND

PROCEDURES

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

“Exchange Act”),

recorded, processed,

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, 2017, 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, 2017.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER

FINANCIAL REPORTING

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, 2017, management has assessed

the effectiveness of the Company’s internal control over

financial reporting. In a report included on pages 37 and

38, management concluded that the Company’s internal

control over financial reporting was effective as of

December 31, 2017.

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,

Our management is responsible for establishing and

has audited the consolidated financial statements

maintaining adequate internal control over our financial

prepared by us. Deloitte & Touche LLP has also issued

reporting. Internal control over financial reporting is the

an attestation report on our internal control over financial

process designed by, or under the supervision of, our

reporting. Their report on the consolidated financial

principal executive officer and principal financial officer,

statements and attestation report are included in Part II,

and effected by our Board of Directors, management

Item 8 of this Annual Report under the heading

and other personnel, to provide reasonable assurance

“Financial Statements and Supplementary Data.”

reasonable detail, accurately and fairly reflect the

reporting, engaging employees at all levels of the

regarding the reliability of financial reporting and the

preparation of

financial statements

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:

•

pertain to the maintenance of records that, in

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;

MANAGEMENT’S PROCESS TO ASSESS THE

EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL

REPORTING

To comply with the requirements of Section 404 of the

Sarbanes-Oxley Act of 2002, we

followed a

comprehensive compliance process across

the

enterprise to evaluate our internal control over financial

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
employee may report suspected violations of law or our
policy; and an office of ethics and business practice. The
policy; and an office of ethics and business practice. The
internal control system further includes careful selection
internal control system further includes careful selection
and training of supervisory and management personnel,
and training of supervisory and management personnel,
appropriate delegation of authority and division of
appropriate delegation of authority and division of
responsibility, dissemination of accounting and
responsibility, dissemination of accounting and
business policies throughout the Company, and an
business policies throughout the Company, and an
extensive program of internal audits with management
extensive program of internal audits with management
follow-up. Our Board of Directors, assisted by the Audit
follow-up. Our Board of Directors, assisted by the Audit
and Finance Committee, monitors the integrity of our
and Finance Committee, monitors the integrity of our
financial statements and financial reporting procedures,
financial statements and financial reporting procedures,
the performance of our internal audit function and
the performance of our internal audit function and
independent auditors, and other matters set forth in its
independent auditors, and other matters set forth in its
charter. The Committee, which consists of independent
charter. The Committee, which consists of independent
directors, meets regularly with representatives of
directors, meets regularly with representatives of
management, and with the independent auditors and
management, and with the independent auditors and
the Internal Auditor, with and without management
the Internal Auditor, with and without management
representatives in attendance, to review their activities.
representatives in attendance, to review their activities.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL
CHANGES IN INTERNAL CONTROL OVER FINANCIAL
REPORTING
REPORTING

reporting during
reporting during

There have been no changes in our internal control over
There have been no changes in our internal control over
the quarter ended
financial
financial
the quarter ended
December 31, 2017, that have materially affected, or
December 31, 2017, that have materially affected, or
are reasonably likely to materially affect, our internal
are reasonably likely to materially affect, our internal
control over financial reporting.
control over financial reporting.

ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION

None.
None.

PART III.
PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE
AND CORPORATE GOVERNANCE

Information concerning our directors
is hereby
is hereby
Information concerning our directors
incorporated by reference to our definitive proxy
incorporated by reference to our definitive proxy
statement that will be filed with the Securities and
statement that will be filed with the Securities and
Exchange Commission (SEC) within 120 days of the
Exchange Commission (SEC) within 120 days of the
close of our fiscal year. The Audit and Finance
close of our fiscal year. The Audit and Finance
Committee of the Board of Directors has at least one
Committee of the Board of Directors has at least one
member who is a financial expert, as that term is defined
member who is a financial expert, as that term is defined
in Item 401(d)(5) of Regulation S-K. Further information
in Item 401(d)(5) of Regulation S-K. Further information
concerning the composition of the Audit and Finance
concerning the composition of the Audit and Finance
Committee and our audit committee financial experts
Committee and our audit committee financial experts
is hereby incorporated by reference to our definitive
is hereby incorporated by reference to our definitive
proxy statement that will be filed with the SEC within
proxy statement that will be filed with the SEC within
120 days of the close of our fiscal year. Information with
120 days of the close of our fiscal year. Information with
respect to our executive officers is set forth on pages 5
respect to our executive officers is set forth on pages 5
and 6 in Part I of this Form 10-K under the caption,
and 6 in Part I of this Form 10-K under the caption,
“Executive Officers of the Registrant.”
“Executive Officers of the Registrant.”

Executive officers of International Paper are elected to
Executive officers of International Paper are elected to
hold office until the next annual meeting of the Board
hold office until the next annual meeting of the Board
the annual meeting of
of Directors
of Directors
the annual meeting of
shareholders and, until the election of successors,
shareholders and, until the election of successors,
subject to removal by the Board.
subject to removal by the Board.

following
following

The Company’s Code of Business Ethics (Code) is
The Company’s Code of Business Ethics (Code) is
applicable to all employees of the Company, including
applicable to all employees of the Company, including
the chief executive officer and senior financial officers,
the chief executive officer and senior financial officers,
as well as the Board of Directors. We disclose any
as well as the Board of Directors. We disclose any
amendments to our Code and any waivers from a
amendments to our Code and any waivers from a
provision of our Code granted to our directors, chief
provision of our Code granted to our directors, chief
executive officer and senior financial officers on our
executive officer and senior financial officers on our
Internet Web site within four business days following
Internet Web site within four business days following
such amendment or waiver. To date, no waivers of the
such amendment or waiver. To date, no waivers of the
Code have been granted.
Code have been granted.

We make available free of charge on our Internet Web
We make available free of charge on our Internet Web
site at www.internationalpaper.com, and in print to any
site at www.internationalpaper.com, and in print to any
shareholder who requests
them, our Corporate
shareholder who requests
them, our Corporate
Governance Principles, our Code of Business Ethics
Governance Principles, our Code of Business Ethics
and the Charters of our Audit and Finance Committee,
and the Charters of our Audit and Finance Committee,
Management Development and Compensation
Management Development and Compensation
Committee, Governance Committee and Public Policy
Committee, Governance Committee and Public Policy
and Environment Committee. Requests for copies may
and Environment Committee. Requests for copies may
be directed to the corporate secretary at our corporate
be directed to the corporate secretary at our corporate
headquarters.
headquarters.

Information with respect to compliance with Section 16
Information with respect to compliance with Section 16
(a) of the Securities and Exchange Act and our
(a) of the Securities and Exchange Act and our
corporate governance is hereby incorporated by
corporate governance is hereby incorporated by
reference to our definitive proxy statement that will be
reference to our definitive proxy statement that will be
filed with the SEC within 120 days of the close of our
filed with the SEC within 120 days of the close of our
fiscal year.
fiscal year.

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION

Information with respect to the compensation of
Information with respect to the compensation of
executives and directors of the Company is hereby
executives and directors of the Company is hereby
incorporated by reference to our definitive proxy
incorporated by reference to our definitive proxy
statement that will be filed with the SEC within 120 days
statement that will be filed with the SEC within 120 days
of the close of our fiscal year.
of the close of our fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND
BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
RELATED STOCKHOLDER MATTERS

A description of the security ownership of certain
A description of the security ownership of certain
beneficial owners and management and equity
beneficial owners and management and equity
compensation plan information is hereby incorporated
compensation plan information is hereby incorporated
by reference to our definitive proxy statement that will
by reference to our definitive proxy statement that will
be filed with the SEC within 120 days of the close of our
be filed with the SEC within 120 days of the close of our
fiscal year.
fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR
RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
INDEPENDENCE

A description of certain relationships and related
A description of certain relationships and related
transactions is hereby incorporated by reference to our
transactions is hereby incorporated by reference to our
definitive proxy statement that will be filed with the SEC
definitive proxy statement that will be filed with the SEC
within 120 days of the close of our fiscal year.
within 120 days of the close of our fiscal year.

84
84

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES
SERVICES

Information with respect to fees paid to, and services
Information with respect to fees paid to, and services
rendered by, our principal accountant, and our policies
rendered by, our principal accountant, and our policies
and procedures for pre-approving those services, is
and procedures for pre-approving those services, is
hereby incorporated by reference to our definitive proxy
hereby incorporated by reference to our definitive proxy
statement that will be filed with the SEC within 120 days
statement that will be filed with the SEC within 120 days
of the close of our fiscal year.
of the close of our fiscal year.

PART IV.
PART IV.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
SCHEDULES

(1) Financial Statements – See Item 8. Financial
(1) Financial Statements – See Item 8. Financial

Statements and Supplementary Data.
Statements and Supplementary Data.

the consolidated
the consolidated

(2) Financial Statement Schedules – The following
(2) Financial Statement Schedules – The following
additional financial data should be read in
additional financial data should be read in
financial
conjunction with
financial
conjunction with
statements in Item 8. Schedules not included with
statements in Item 8. Schedules not included with
this additional financial data have been omitted
this additional financial data have been omitted
because they are not applicable, or the required
because they are not applicable, or the required
information is shown in the consolidated financial
information is shown in the consolidated financial
statements or the notes thereto.
statements or the notes thereto.

Additional Financial Data
Additional Financial Data

2017, 2016 and 2015
2017, 2016 and 2015

Consolidated Schedule:
Consolidated Schedule:
II-Valuation and
II-Valuation and
Qualifying Accounts.
Qualifying Accounts.

89
89

(2.1) Purchase Agreement dated as of May 1,
(2.1) Purchase Agreement dated as of May 1,
2016,
between Weyerhaeuser NR
2016,
between Weyerhaeuser NR
Company and International Paper Company
Company and International Paper Company
(incorporated by reference to Exhibit 2.1 to
(incorporated by reference to Exhibit 2.1 to
the Company’s Quarterly Report on Form
the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2016).
10-Q for the quarter ended June 30, 2016).

(2.2) Transaction Agreement, dated October 23,
(2.2) Transaction Agreement, dated October 23,
2017, by and among the Company, Graphic
2017, by and among the Company, Graphic
Packaging Holding Company, Gazelle
Packaging Holding Company, Gazelle
Newco LLC and Graphic Packaging
Newco LLC and Graphic Packaging
by
International,
International,
by
reference to Exhibit 2.1 to the Company’s
reference to Exhibit 2.1 to the Company’s
Current Report on Form 8-K filed October
Current Report on Form 8-K filed October
24, 2017).
24, 2017).

(incorporated
(incorporated

Inc.
Inc.

(3.1) Restated Certificate of
(3.1) Restated Certificate of
Paper
Paper

Incorporation
Incorporation
of International
Company
Company
of International
(incorporated by reference to Exhibit 3.1 to
(incorporated by reference to Exhibit 3.1 to
the Company’s Current Report on Form 8-
the Company’s Current Report on Form 8-
K dated May 13, 2013).
K dated May 13, 2013).

(3.2) By-laws of International Paper Company, as
(3.2) By-laws of International Paper Company, as
amended
through February 9, 2016
amended
through February 9, 2016
(incorporated by reference to Exhibit 3.1 to
(incorporated by reference to Exhibit 3.1 to
the Company’s Current Report on Form 8-
the Company’s Current Report on Form 8-
K dated February 8, 2016).
K dated February 8, 2016).

(4.1) Indenture, dated as of April 12, 1999,
(4.1) Indenture, dated as of April 12, 1999,
between International Paper and The Bank
between International Paper and The Bank
of New York, as Trustee (incorporated by
of New York, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company’s
reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K dated June 29,
Current Report on Form 8-K dated June 29,
2000).
2000).

(4.2) Supplemental Indenture (including the form
(4.2) Supplemental Indenture (including the form
of Notes), dated as of June 4, 2008, between
of Notes), dated as of June 4, 2008, between
International Paper Company and The Bank
International Paper Company and The Bank
of New York, as Trustee (incorporated by
of New York, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company’s
reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K dated June 4,
Current Report on Form 8-K dated June 4,
2008).
2008).

(4.3) Supplemental Indenture (including the form
(4.3) Supplemental Indenture (including the form
of Notes), dated as of May 11, 2009,
of Notes), dated as of May 11, 2009,
between International Paper Company and
between International Paper Company and
The Bank of New York Mellon, as trustee
The Bank of New York Mellon, as trustee
(incorporated by reference to Exhibit 4.1 to
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
the Company's Current Report on Form 8-
K dated May 11, 2009).
K dated May 11, 2009).

(4.4) Supplemental Indenture (including the form
(4.4) Supplemental Indenture (including the form
of Notes), dated as of August 10, 2009,
of Notes), dated as of August 10, 2009,
between International Paper Company and
between International Paper Company and
The Bank of New York Mellon, as trustee
The Bank of New York Mellon, as trustee
(incorporated by reference to Exhibit 4.1 to
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
the Company's Current Report on Form 8-
K dated August 10, 2009).
K dated August 10, 2009).

(4.5) Supplemental Indenture (including the form
(4.5) Supplemental Indenture (including the form
of Notes), dated as of December 7, 2009,
of Notes), dated as of December 7, 2009,
between International Paper Company and
between International Paper Company and
The Bank of New York Mellon Trust
The Bank of New York Mellon Trust
Company, N.A., as trustee (incorporated by
Company, N.A., as trustee (incorporated by
reference to Exhibit 4.1 to the Company's
reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K dated
Current Report on Form 8-K dated
December 7, 2009).
December 7, 2009).

(4.6) Supplemental Indenture (including the form
(4.6) Supplemental Indenture (including the form
of Notes), dated as of November 16, 2011,
of Notes), dated as of November 16, 2011,
between the Company and The Bank of New
between the Company and The Bank of New
York Mellon Trust Company, N.A., as trustee
York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.1 to
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
the Company's Current Report on Form 8-
K dated November 16, 2011).
K dated November 16, 2011).

(4.7) Supplemental Indenture (including the form
(4.7) Supplemental Indenture (including the form
of Notes), dated as of June 10, 2014,
of Notes), dated as of June 10, 2014,
between the Company and The Bank of New
between the Company and The Bank of New
York Mellon Trust Company, N.A., as trustee
York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.1 to
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
the Company's Current Report on Form 8-
K dated June 10, 2014).
K dated June 10, 2014).

(4.8) Supplemental Indenture (including the form
(4.8) Supplemental Indenture (including the form
of Notes), dated as of May 26, 2015,
of Notes), dated as of May 26, 2015,
between the Company and The Bank of New
between the Company and The Bank of New
York Mellon Trust Company, N.A., as trustee
York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.1 to
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
the Company's Current Report on Form 8-
K dated May 26, 2015).
K dated May 26, 2015).

(4.9) Supplemental Indenture (including the form

(10.10) Amendment No. 2 to the International Paper

of Notes), dated as of August 11, 2016,

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 August 11, 2016).

(4.10) Supplemental Indenture (including the form

of Notes), dated as of August 9, 2017,

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 August 9, 2017).

(4.11) In

accordance

with

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) Restricted

Stock

and

Deferred

Compensation Plan

for Non-Employee

Directors, Amended and Restated as of May

10, 2010 (incorporated by reference to

Exhibit 10.1 to the Company’s Quarterly

Report on Form 10-Q for the quarter ended

June 30, 2010). +

(10.3) Form of Restricted Stock Award Agreement.

* +

(10.4) Form of Restricted Stock Unit Award

Agreement (cash settled). * +

(10.5) Form of Restricted Stock Unit Award

Agreement (stock settled). * +

(10.6) Form of Performance Share Plan award

certificate. * +

(10.7) 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). +

(10.8) 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

Form 10-K

for

the

fiscal year ended

December 31, 2007). +

(10.9) Amendment No. 1 to the International Paper

Company

Unfunded

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). +

Company

Unfunded

Supplemental

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). +

(10.11) Amendment No. 3 to the International Paper

Company

Unfunded

Supplemental

Retirement Plan for Senior Managers,

effective December 8, 2008 (incorporated

by reference

to Exhibit 10.20

the

Company’s Annual Report on Form 10-K for

the fiscal year ended December 31, 2008).

(10.12) Amendment No. 4 to the International Paper

Company

Unfunded

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). +

(10.13) Amendment No. 5 to the International Paper

Company

Unfunded

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). +

(10.14) Amendment No. 6 to the International Paper

Company

Unfunded

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). +

(10.15) Form of Non-Competition Agreement,

entered into by certain Company employees

(including named executive officers) who

have received restricted stock (incorporated

by reference

to Exhibit 10.22

the

Company’s Annual Report on Form 10-K for

the fiscal year ended December 31, 2008).

(10.16) Form of Non-Solicitation Agreement,

entered into by certain Company employees

(including named executive officers) who

have received restricted stock (incorporated

reference

to Exhibit 10.5

the

Company’s Quarterly Report on Form 10-Q

for the quarter ended March 31, 2006). +

(10.17) 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). +

85
85

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.

SCHEDULES

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT

2008).

(4.9) Supplemental Indenture (including the form
(4.9) Supplemental Indenture (including the form
of Notes), dated as of August 11, 2016,
of Notes), dated as of August 11, 2016,
between the Company and The Bank of New
between the Company and The Bank of New
York Mellon Trust Company, N.A., as trustee
York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.1 to
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
the Company's Current Report on Form 8-
K dated August 11, 2016).
K dated August 11, 2016).

(4.10) Supplemental Indenture (including the form
(4.10) Supplemental Indenture (including the form
of Notes), dated as of August 9, 2017,
of Notes), dated as of August 9, 2017,
between the Company and The Bank of New
between the Company and The Bank of New
York Mellon Trust Company, N.A., as trustee
York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.1 to
(incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-
the Company's Current Report on Form 8-
K dated August 9, 2017).
K dated August 9, 2017).

(4.11) In
(4.11) In

with
with

accordance
accordance

Item 601
Item 601
(b) (4) (iii) (A) of Regulation S-K, certain
(b) (4) (iii) (A) of Regulation S-K, certain
instruments respecting long-term debt of the
instruments respecting long-term debt of the
Company have been omitted but will be
Company have been omitted but will be
furnished to the Commission upon request.
furnished to the Commission upon request.

(10.1) Amended and Restated 2009 Incentive
(10.1) Amended and Restated 2009 Incentive
Compensation Plan (ICP) (incorporated by
Compensation Plan (ICP) (incorporated by
reference to Exhibit 99.1 to the Company's
reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated February
Current Report on Form 8-K dated February
10, 2014). +
10, 2014). +

(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,

(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).

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).

(1) Financial Statements – See Item 8. Financial

Statements and Supplementary Data.

(2) Financial Statement Schedules – The following

additional financial data should be read in

conjunction with

the consolidated

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

2017, 2016 and 2015

Consolidated Schedule:

II-Valuation and

Qualifying Accounts.

2016,

between Weyerhaeuser NR

Company and International Paper Company

(incorporated by reference to Exhibit 2.1 to

the Company’s Quarterly Report on Form

10-Q for the quarter ended June 30, 2016).

(2.2) Transaction Agreement, dated October 23,

2017, by and among the Company, Graphic

Packaging Holding Company, Gazelle

Newco LLC and Graphic Packaging

International,

Inc.

(incorporated

reference to Exhibit 2.1 to the Company’s

Current Report on Form 8-K filed October

24, 2017).

(3.1) Restated Certificate of

Incorporation

of International

Paper

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).

(2.1) Purchase Agreement dated as of May 1,

(4.6) Supplemental Indenture (including the form

(10.3) Form of Restricted Stock Award Agreement.
(10.3) Form of Restricted Stock Award Agreement.

* +
* +

(10.4) Form of Restricted Stock Unit Award
(10.4) Form of Restricted Stock Unit Award

Agreement (cash settled). * +
Agreement (cash settled). * +

(10.5) Form of Restricted Stock Unit Award
(10.5) Form of Restricted Stock Unit Award

Agreement (stock settled). * +
Agreement (stock settled). * +

(10.6) Form of Performance Share Plan award
(10.6) Form of Performance Share Plan award

certificate. * +
certificate. * +

(10.7) Pension Restoration Plan
(10.7) Pension Restoration Plan

for Salaried
for Salaried
Employees (incorporated by reference to
Employees (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly
Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended
Report on Form 10-Q for the quarter ended
March 31, 2009). +
March 31, 2009). +

(10.8) Unfunded Supplemental Retirement Plan
(10.8) Unfunded Supplemental Retirement Plan
for Senior Managers, as amended and
for Senior Managers, as amended and
restated effective January 1, 2008
restated effective January 1, 2008
(incorporated by reference to Exhibit 10.21
(incorporated by reference to Exhibit 10.21
the Company’s Annual Report on
to
the Company’s Annual Report on
to
Form 10-K
fiscal year ended
Form 10-K
fiscal year ended
December 31, 2007). +
December 31, 2007). +

Deferred
Deferred
Stock
Stock
Compensation Plan
for Non-Employee
for Non-Employee
Compensation Plan
Directors, Amended and Restated as of May
Directors, Amended and Restated as of May
10, 2010 (incorporated by reference to
10, 2010 (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly
Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended
Report on Form 10-Q for the quarter ended
June 30, 2010). +
June 30, 2010). +

86
86

Unfunded
Unfunded

(10.9) Amendment No. 1 to the International Paper
(10.9) Amendment No. 1 to the International Paper
Company
Supplemental
Supplemental
Company
Retirement Plan for Senior Managers,
Retirement Plan for Senior Managers,
effective October 13, 2008 (incorporated by
effective October 13, 2008 (incorporated by
reference to Exhibit 10.3 to the Company’s
reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K dated October
Current Report on Form 8-K dated October
17, 2008). +
17, 2008). +

(10.2) Restricted
(10.2) Restricted

and
and

the
the

for
for

Unfunded
Unfunded

(10.10) Amendment No. 2 to the International Paper
(10.10) Amendment No. 2 to the International Paper
Company
Supplemental
Company
Supplemental
Retirement Plan for Senior Managers,
Retirement Plan for Senior Managers,
effective October 14, 2008 (incorporated by
effective October 14, 2008 (incorporated by
reference to Exhibit 10.5 to the Company’s
reference to Exhibit 10.5 to the Company’s
Current Report on Form 8-K dated October
Current Report on Form 8-K dated October
17, 2008). +
17, 2008). +

Unfunded
Unfunded

(10.11) Amendment No. 3 to the International Paper
(10.11) Amendment No. 3 to the International Paper
Company
Supplemental
Company
Supplemental
Retirement Plan for Senior Managers,
Retirement Plan for Senior Managers,
effective December 8, 2008 (incorporated
effective December 8, 2008 (incorporated
the
by reference
the
by reference
Company’s Annual Report on Form 10-K for
Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008).
the fiscal year ended December 31, 2008).
+
+

to Exhibit 10.20
to Exhibit 10.20

to
to

Unfunded
Unfunded

(10.12) Amendment No. 4 to the International Paper
(10.12) Amendment No. 4 to the International Paper
Company
Supplemental
Supplemental
Company
Retirement Plan for Senior Managers,
Retirement Plan for Senior Managers,
effective January 1, 2009 (incorporated by
effective January 1, 2009 (incorporated by
reference to Exhibit 10.1 to the Company’s
reference to Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the
Quarterly Report on Form 10-Q for the
quarter ended September 30, 2009). +
quarter ended September 30, 2009). +

Unfunded
Unfunded

(10.13) Amendment No. 5 to the International Paper
(10.13) Amendment No. 5 to the International Paper
Company
Supplemental
Company
Supplemental
Retirement Plan for Senior Managers,
Retirement Plan for Senior Managers,
effective October 31, 2009 (incorporated by
effective October 31, 2009 (incorporated by
reference to Exhibit 10.17 to the Company’s
reference to Exhibit 10.17 to the Company’s
Annual Report on Form 10-K for the fiscal
Annual Report on Form 10-K for the fiscal
year ended December 31, 2009). +
year ended December 31, 2009). +

Unfunded
Unfunded

(10.14) Amendment No. 6 to the International Paper
(10.14) Amendment No. 6 to the International Paper
Company
Supplemental
Company
Supplemental
Retirement Plan for Senior Managers,
Retirement Plan for Senior Managers,
effective January 1, 2012 (incorporated by
effective January 1, 2012 (incorporated by
reference to Exhibit 10.21 to the Company's
reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the fiscal
Annual Report on Form 10-K for the fiscal
year ended December 31, 2011). +
year ended December 31, 2011). +

(10.15) Form of Non-Competition Agreement,
(10.15) Form of Non-Competition Agreement,
entered into by certain Company employees
entered into by certain Company employees
(including named executive officers) who
(including named executive officers) who
have received restricted stock (incorporated
have received restricted stock (incorporated
by reference
the
by reference
the
Company’s Annual Report on Form 10-K for
Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008).
the fiscal year ended December 31, 2008).
+
+

to Exhibit 10.22
to Exhibit 10.22

to
to

(10.16) Form of Non-Solicitation Agreement,
(10.16) Form of Non-Solicitation Agreement,
entered into by certain Company employees
entered into by certain Company employees
(including named executive officers) who
(including named executive officers) who
have received restricted stock (incorporated
have received restricted stock (incorporated
by
the
the
by
Company’s Quarterly Report on Form 10-Q
Company’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2006). +
for the quarter ended March 31, 2006). +

to Exhibit 10.5
to Exhibit 10.5

reference
reference

to
to

(10.17) Form of Change-in-Control Agreement - Tier
(10.17) Form of Change-in-Control Agreement - Tier
I, for the Chief Executive Officer and all
I, for the Chief Executive Officer and all
"grandfathered" senior vice presidents
"grandfathered" senior vice presidents
elected prior to 2012 (all named executive
elected prior to 2012 (all named executive
- approved September 2013
officers)
officers)
- approved September 2013
(incorporated by reference to Exhibit 10.1 to
(incorporated by reference to Exhibit 10.1 to
the Company’s Quarterly Report on Form
the Company’s Quarterly Report on Form
10-Q for the quarter ended September 30,
10-Q for the quarter ended September 30,
2013). +
2013). +

(10.18) Form of Change-in-Control Agreement - Tier
(10.18) Form of Change-in-Control Agreement - Tier
II, for all future senior vice presidents and all
II, for all future senior vice presidents and all
"grandfathered" vice presidents elected
"grandfathered" vice presidents elected
prior
- approved
- approved
prior
September 2013 (incorporated by reference
September 2013 (incorporated by reference
to Exhibit 10.2 to the Company’s Quarterly
to Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended
Report on Form 10-Q for the quarter ended
September 30, 2013). +
September 30, 2013). +

to February 2008
to February 2008

(10.19) Form of Indemnification Agreement for
(10.19) Form of Indemnification Agreement for
Directors (incorporated by reference to
Directors (incorporated by reference to
Exhibit 10.13 to the Company’s Annual
Exhibit 10.13 to the Company’s Annual
Report on Form 10-K for the fiscal year
Report on Form 10-K for the fiscal year
ended December 31, 2003). +
ended December 31, 2003). +

(10.20) Board Policy on Severance Agreements
(10.20) Board Policy on Severance Agreements
with Senior Executives (incorporated by
with Senior Executives (incorporated by
reference to Exhibit 10.1 to the Company’s
reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on October
Current Report on Form 8-K filed on October
18, 2005). +
18, 2005). +

(10.21) Board Policy on Change of Control
(10.21) Board Policy on Change of Control
Agreements (incorporated by reference to
Agreements (incorporated by reference to
Exhibit 10.2 to the Company’s Current
Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed on October 18,
Report on Form 8-K filed on October 18,
2005). +
2005). +

(10.22) Time Sharing Agreement, dated October 17,
(10.22) Time Sharing Agreement, dated October 17,
2014 (and effective November 1, 2014), by
2014 (and effective November 1, 2014), by
and between Mark S. Sutton and
and between Mark S. Sutton and
International Paper Company (incorporated
International Paper Company (incorporated
the
by
by
the
Company’s Current Report on Form 8-K
Company’s Current Report on Form 8-K
dated October 14, 2014). +
dated October 14, 2014). +

to Exhibit 99.1
to Exhibit 99.1

reference
reference

to
to

(10.23) Five-Year Credit Agreement dated as of
(10.23) Five-Year Credit Agreement dated as of
December 12, 2016, among International
December 12, 2016, among International
Paper Company, JPMorgan Chase Bank,
Paper Company, JPMorgan Chase Bank,
N.A., individually and as administrative
N.A., individually and as administrative
agent, and certain lenders (incorporated by
agent, and certain lenders (incorporated by
reference to Exhibit 99.1 to the Company’s
reference to Exhibit 99.1 to the Company’s
Current Report on Form 8-K filed June 6,
Current Report on Form 8-K filed June 6,
2017).
2017).

(10.24) Settlement Agreement dated June 27, 2017,
(10.24) Settlement Agreement dated June 27, 2017,
by and between
International Paper
by and between
International Paper
Company, Temple-Inland Inc., n/k/a Temple-
Company, Temple-Inland Inc., n/k/a Temple-
Inland LLC, TIN Inc., n/k/a TIN LLC, and
Inland LLC, TIN Inc., n/k/a TIN LLC, and
Weyerhaeuser Company, and Kleen
Weyerhaeuser Company, and Kleen
Products LLC, R.P.R. Enterprises, Inc.,
Products LLC, R.P.R. Enterprises, Inc.,
Mighty Pac, Inc., Ferraro Foods, Inc.,
Mighty Pac, Inc., Ferraro Foods, Inc.,
Ferraro Foods of North Carolina, LLC, MTM
Ferraro Foods of North Carolina, LLC, MTM
Packaging Solutions of Texas, LLC, RHE
Packaging Solutions of Texas, LLC, RHE
Hatco, Inc., and Chandler Packaging, Inc.,
Hatco, Inc., and Chandler Packaging, Inc.,
the plaintiff class representatives, both
the plaintiff class representatives, both
individually and on behalf of the plaintiff
individually and on behalf of the plaintiff
class (incorporated by reference to Exhibit
class (incorporated by reference to Exhibit
10.1 to the Company’s Quarterly Report on
10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30,
Form 10-Q for the quarter ended June 30,
2017).
2017).

(101.INS) XBRL Instance Document *

(101.SCH) XBRL Taxonomy Extension Schema *

(101.CAL) XBRL Taxonomy Extension Calculation

(101.DEF) XBRL Taxonomy Extension Definition

(101.LAB) XBRL Taxonomy Extension Label

(101.PRE) XBRL Extension Presentation Linkbase

Linkbase *

+ Management contract or compensatory plan or arrangement.

* Filed herewith

(10.25) Commitment Agreement, dated September
(10.25) Commitment Agreement, dated September
26, 2017, between International Paper
26, 2017, between International Paper
Company and The Prudential Insurance
Company and The Prudential Insurance
Company of America, relating
the
the
Company of America, relating
Retirement Plan of International Paper
Retirement Plan of International Paper
Company (incorporated by reference to
Company (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly
Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended
Report on Form 10-Q for the quarter ended
September 30, 2017).
Confidential
Confidential
September 30, 2017).
treatment has been granted for certain
treatment has been granted for certain
information pursuant to Rule 24b-2 under
information pursuant to Rule 24b-2 under
the Securities Exchange Act of 1934, as
the Securities Exchange Act of 1934, as
amended.
amended.

to
to

(10.26) Credit Agreement, dated December 8,
(10.26) Credit Agreement, dated December 8,

2017, by and among the Company, Bank
2017, by and among the Company, Bank
of America, N.A. and BNP Paribas
of America, N.A. and BNP Paribas
(incorporated by reference to Exhibit 10.1
(incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form
to the Company’s Current Report on Form
8-K filed December 12, 2017).
8-K filed December 12, 2017).

(11) Statement of Computation of Per Share
(11) Statement of Computation of Per Share

Earnings. *
Earnings. *

(12) Computation of Ratio of Earnings to Fixed
(12) Computation of Ratio of Earnings to Fixed

Charges and Preferred Stock Dividends. *
Charges and Preferred Stock Dividends. *

(21) Subsidiaries and Joint Ventures.*
(21) Subsidiaries and Joint Ventures.*

(23.1) Consent of Independent Registered Public
(23.1) Consent of Independent Registered Public

Accounting Firm. *
Accounting Firm. *

(23.2) Consent of Independent Auditors. *
(23.2) Consent of Independent Auditors. *

(24) Power of Attorney (contained on
(24) Power of Attorney (contained on

the
the
signature page to the Company’s Annual
signature page to the Company’s Annual
Report on Form 10-K for the year ended
Report on Form 10-K for the year ended
December 31, 2017). *
December 31, 2017). *

(31.1) Certification by Mark S. Sutton, Chairman
(31.1) Certification by Mark S. Sutton, Chairman
and Chief Executive Officer, pursuant to
and Chief Executive Officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of
Section 302 of the Sarbanes-Oxley Act of
2002. *
2002. *

(31.2) Certification by Glenn R. Landau, Chief
(31.2) Certification by Glenn R. Landau, Chief
Financial Officer, pursuant to Section 302 of
Financial Officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. *
the Sarbanes-Oxley Act of 2002. *

(32) Certification pursuant to 18 U.S.C. Section
(32) Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906
1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.*
of the Sarbanes-Oxley Act of 2002.*

(99.1) Audited Financial Statements
(99.1) Audited Financial Statements

Ilim
Ilim
Holding S.A. and its subsidiaries as of and
Holding S.A. and its subsidiaries as of and
for the year ended December 31, 2017 and
for the year ended December 31, 2017 and
2016. *
2016. *

for
for

87
87

(10.25) Commitment Agreement, dated September

(101.INS) XBRL Instance Document *
(101.INS) XBRL Instance Document *

(101.SCH) XBRL Taxonomy Extension Schema *
(101.SCH) XBRL Taxonomy Extension Schema *

(101.CAL) XBRL Taxonomy Extension Calculation
(101.CAL) XBRL Taxonomy Extension Calculation

Linkbase *
Linkbase *

(101.DEF) XBRL Taxonomy Extension Definition
(101.DEF) XBRL Taxonomy Extension Definition

Linkbase *
Linkbase *

(101.LAB) XBRL Taxonomy Extension Label
(101.LAB) XBRL Taxonomy Extension Label

Linkbase *
Linkbase *

(101.PRE) XBRL Extension Presentation Linkbase
(101.PRE) XBRL Extension Presentation Linkbase

*
*

+ Management contract or compensatory plan or arrangement.
+ Management contract or compensatory plan or arrangement.

* Filed herewith
* Filed herewith

(10.18) Form of Change-in-Control Agreement - Tier

II, for all future senior vice presidents and all

"grandfathered" vice presidents elected

prior

to February 2008

- approved

September 2013 (incorporated by reference

to Exhibit 10.2 to the Company’s Quarterly

Report on Form 10-Q for the quarter ended

September 30, 2013). +

(10.19) 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). +

(10.20) 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). +

(10.21) 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). +

(10.22) Time Sharing Agreement, dated October 17,

2014 (and effective November 1, 2014), by

and between Mark S. Sutton and

International Paper Company (incorporated

reference

to Exhibit 99.1

the

Company’s Current Report on Form 8-K

dated October 14, 2014). +

(10.23) Five-Year Credit Agreement dated as of

December 12, 2016, among International

Paper Company, JPMorgan Chase Bank,

N.A., individually and as administrative

agent, and certain lenders (incorporated by

reference to Exhibit 99.1 to the Company’s

Current Report on Form 8-K filed June 6,

2017).

(10.24) Settlement Agreement dated June 27, 2017,

by and between

International Paper

Company, Temple-Inland Inc., n/k/a Temple-

Inland LLC, TIN Inc., n/k/a TIN LLC, and

Weyerhaeuser Company, and Kleen

Products LLC, R.P.R. Enterprises, Inc.,

Mighty Pac, Inc., Ferraro Foods, Inc.,

Ferraro Foods of North Carolina, LLC, MTM

Packaging Solutions of Texas, LLC, RHE

Hatco, Inc., and Chandler Packaging, Inc.,

the plaintiff class representatives, both

individually and on behalf of the plaintiff

class (incorporated by reference to Exhibit

10.1 to the Company’s Quarterly Report on

Form 10-Q for the quarter ended June 30,

2017).

26, 2017, between International Paper

Company and The Prudential Insurance

Company of America, relating

the

Retirement Plan of International Paper

Company (incorporated by reference to

Exhibit 10.1 to the Company’s Quarterly

Report on Form 10-Q for the quarter ended

September 30, 2017).

Confidential

treatment has been granted for certain

information pursuant to Rule 24b-2 under

the Securities Exchange Act of 1934, as

amended.

(10.26) Credit Agreement, dated December 8,

2017, by and among the Company, Bank

of America, N.A. and BNP Paribas

(incorporated by reference to Exhibit 10.1

to the Company’s Current Report on Form

8-K filed December 12, 2017).

(11) Statement of Computation of Per Share

Earnings. *

(12) Computation of Ratio of Earnings to Fixed

Charges and Preferred Stock Dividends. *

(21) Subsidiaries and Joint Ventures.*

(23.1) Consent of Independent Registered Public

Accounting Firm. *

(23.2) Consent of Independent Auditors. *

(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, 2017). *

(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 Glenn R. Landau, 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.*

(99.1) Audited Financial Statements

for

Ilim

Holding S.A. and its subsidiaries as of and

for the year ended December 31, 2017 and

2016. *

88
88

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

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

For the Year Ended December 31, 2017
For the Year Ended December 31, 2017
Additions
Additions
Charged to
Charged to
Other
Other
Accounts
Accounts

Deductions
Deductions
from
from
Reserves
Reserves

Additions
Additions
Charged to
Charged to
Earnings
Earnings

Balance at
Balance at
Beginning
Beginning
of Period
of Period

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

SIGNATURES

February 22, 2018

Balance at
Balance at
End of
End of
Period
Period

By:

/S/ SHARON R. RYAN

Sharon R. Ryan

Senior Vice President, General Counsel

and Corporate Secretary

Description
Description
Reserves Applied Against Specific
Reserves Applied Against Specific
Assets Shown on Balance Sheet:
Assets Shown on Balance Sheet:
Doubtful accounts – current
Doubtful accounts – current
Restructuring reserves
Restructuring reserves

Description
Description
Reserves Applied Against Specific
Reserves Applied Against Specific
Assets Shown on Balance Sheet:
Assets Shown on Balance Sheet:

$
$

70 $
70 $
6
6

5 $
5 $
—
—

—
—
—
—

(2)(a) $
(2)(a) $
(4)(b)
(4)(b)

73
73
2
2

For the Year Ended December 31, 2016
For the Year Ended December 31, 2016
Additions
Additions
Charged to
Charged to
Other
Other
Accounts
Accounts

Deductions
Deductions
from
from
Reserves
Reserves

Additions
Additions
Charged to
Charged to
Earnings
Earnings

Balance at
Balance at
End of
End of
Period
Period

Balance at
Balance at
Beginning
Beginning
of Period
of Period

$
$

70 $
70 $
10
10

9 $
9 $
3
3

—
—
—
—

(9)(a) $
(9)(a) $
(7)(b)
(7)(b)

70
70
6
6

For the Year Ended December 31, 2015
For the Year Ended December 31, 2015

Balance at
Balance at
Beginning
Beginning
of Period
of Period

Additions
Additions
Charged to
Charged to
Earnings
Earnings

Additions
Additions
Charged to
Charged to
Other
Other
Accounts
Accounts

Deductions
Deductions
from
from
Reserves
Reserves

Balance at
Balance at
End of
End of
Period
Period

Doubtful accounts – current
Doubtful accounts – current

$
$

Restructuring reserves
Restructuring reserves

82 $
82 $
16
16

11 $
11 $

5
5

—
—

(23)(a) $
(23)(a) $

(11)(b)
(11)(b)

70
70

10
10

(a)
(a)
(b)
(b)

Includes write-offs, less recoveries, of accounts determined to be uncollectible and other adjustments.
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.
Includes payments and deductions for reversals of previously established reserves that were no longer required.

89
89

POWER OF ATTORNEY

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 22, 2018

/S/ DAVID J. BRONCZEK

Director

February 22, 2018

/S/ WILLIAM J. BURNS

Director

February 22, 2018

David J. Bronczek

Willliam J. Burns

Christopher M. Connor

Ahmet C. Dorduncu

Ilene S. Gordon

Jacqueline C. Hinman

Jay L. Johnson

/S/ CHRISTOPHER M. CONNOR Director

February 22, 2018

/S/ AHMET C. DORDUNCU

Director

February 22, 2018

/S/ ILENE S. GORDON

Director

February 22, 2018

/S/ JACQUELINE C. HINMAN

Director

February 22, 2018

/S/ JAY L. JOHNSON

Director

February 22, 2018

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

(In millions)

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this
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.
report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES
SIGNATURES

For the Year Ended December 31, 2017

Balance at

Beginning

of Period

Additions

Charged to

Earnings

Additions

Charged to

Other

Accounts

Deductions

Balance at

from

Reserves

End of

Period

Description

Reserves Applied Against Specific

Assets Shown on Balance Sheet:

Doubtful accounts – current

Restructuring reserves

70 $

5 $

—

(2)(a) $

(4)(b)

For the Year Ended December 31, 2016

Balance at

Beginning

of Period

Additions

Charged to

Earnings

Additions

Charged to

Other

Accounts

Deductions

Balance at

from

Reserves

End of

Period

Description

Reserves Applied Against Specific

Assets Shown on Balance Sheet:

Doubtful accounts – current

Restructuring reserves

70 $

9 $

—

(9)(a) $

(7)(b)

For the Year Ended December 31, 2015

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

82 $

11 $

—

(23)(a) $

(11)(b)

(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.

INTERNATIONAL PAPER COMPANY
INTERNATIONAL PAPER COMPANY

By:
By:

/S/ SHARON R. RYAN
/S/ SHARON R. RYAN
Sharon R. Ryan
Sharon R. Ryan
Senior Vice President, General Counsel
Senior Vice President, General Counsel
and Corporate Secretary
and Corporate Secretary

POWER OF ATTORNEY
POWER OF ATTORNEY

February 22, 2018
February 22, 2018

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
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
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,
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
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-
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,
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
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.
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
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:
persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature
Signature

Title
Title

Date
Date

/S/ MARK S. SUTTON
/S/ MARK S. SUTTON

Mark S. Sutton
Mark S. Sutton

Chairman of the Board & Chief
Chairman of the Board & Chief
Executive Officer and Director
Executive Officer and Director

February 22, 2018
February 22, 2018

/S/ DAVID J. BRONCZEK
/S/ DAVID J. BRONCZEK

Director
Director

February 22, 2018
February 22, 2018

David J. Bronczek
David J. Bronczek

/S/ WILLIAM J. BURNS
/S/ WILLIAM J. BURNS

Director
Director

February 22, 2018
February 22, 2018

Willliam J. Burns
Willliam J. Burns

/S/ CHRISTOPHER M. CONNOR Director
/S/ CHRISTOPHER M. CONNOR Director

February 22, 2018
February 22, 2018

Christopher M. Connor
Christopher M. Connor

/S/ AHMET C. DORDUNCU
/S/ AHMET C. DORDUNCU

Director
Director

February 22, 2018
February 22, 2018

Ahmet C. Dorduncu
Ahmet C. Dorduncu

/S/ ILENE S. GORDON
/S/ ILENE S. GORDON

Director
Director

February 22, 2018
February 22, 2018

Ilene S. Gordon
Ilene S. Gordon

/S/ JACQUELINE C. HINMAN
/S/ JACQUELINE C. HINMAN

Director
Director

February 22, 2018
February 22, 2018

Jacqueline C. Hinman
Jacqueline C. Hinman

/S/ JAY L. JOHNSON
/S/ JAY L. JOHNSON

Director
Director

February 22, 2018
February 22, 2018

Jay L. Johnson
Jay L. Johnson

90
90

/s/ CLINTON A. LEWIS, JR.
/s/ CLINTON A. LEWIS, JR.

Director
Director

February 22, 2018
February 22, 2018

Clinton A. Lewis, Jr.
Clinton A. Lewis, Jr.

2017 LISTING OF FACILITIES

(all facilities are owned except noted otherwise)

APPENDIX I

/S/ KATHRYN D. SULLIVAN
/S/ KATHRYN D. SULLIVAN

Director
Director

February 22, 2018
February 22, 2018

Kathryn D. Sullivan
Kathryn D. Sullivan

/S/ JOHN L. TOWNSEND III Director
/S/ JOHN L. TOWNSEND III Director

February 22, 2018
February 22, 2018

Selma, Alabama (Riverdale Mill)

Maysville, Kentucky

John L. Townsend III
John L. Townsend III

/S/ J. STEVEN WHISLER
/S/ J. STEVEN WHISLER

Director
Director

February 22, 2018
February 22, 2018

J. Steven Whisler
J. Steven Whisler

/S/ RAY G. YOUNG
/S/ RAY G. YOUNG

Director
Director

February 22, 2018
February 22, 2018

Ray G. Young
Ray G. Young

/S/ GLENN R. LANDAU
/S/ GLENN R. LANDAU

Glenn R. Landau
Glenn R. Landau

Senior Vice President and Chief
Senior Vice President and Chief

Financial Officer
Financial Officer

February 22, 2018
February 22, 2018

/S/ VINCENT P. BONNOT
/S/ VINCENT P. BONNOT

Vice President – Finance and
Vice President – Finance and

Controller
Controller

February 22, 2018
February 22, 2018

Vincent P. Bonnot
Vincent P. Bonnot

PRINTING PAPERS

Uncoated Papers

U.S.:

Ticonderoga, New York

Eastover, South Carolina

Georgetown, South Carolina

Sumter, South Carolina

International:

Saillat, France

Kadiam, India

Rajahmundry, India

Kwidzyn, Poland

Svetogorsk, Russia

GLOBAL CELLULOSE FIBERS

Pulp

U.S.:

Flint River, Georgia

Port Wentworth, Georgia

Columbus, Mississippi

Savannah, Georgia

Cayuga, Indiana

Cedar Rapids, Iowa

Henderson, Kentucky

Bogalusa, Louisiana

Campti, Louisiana

Mansfield, Louisiana

Vicksburg, Mississippi

Valliant, Oklahoma

Springfield, Oregon

Veracruz, Mexico

Kenitra, Morocco

Madrid, Spain

Corrugated Container

U.S.:

Bay Minette, Alabama

Huntsville, Alabama

Conway, Arkansas

Tracy, California

Golden, Colorado

Wheat Ridge, Colorado

Putnam, Connecticut

Orlando, Florida

Plant City, Florida

Tampa, Florida leased

Columbus, Georgia

Forest Park, Georgia

Griffin, Georgia

Kennesaw, Georgia leased

Lithonia, Georgia

Savannah, Georgia

Belleville, Illinois

Carol Stream, Illinois

Des Plaines, Illinois

Lincoln, Illinois

Montgomery, Illinois

Northlake, Illinois

Rockford, Illinois

Butler, Indiana

Fort Wayne, Indiana

Hammond, Indiana

Luiz Antônio, São Paulo, Brazil

Orange, Texas

Mogi Guacu, São Paulo, Brazil

Três Lagoas, Mato Grosso do Sul, Brazil

International:

Stone Mountain, Georgia leased

Franco da Rocha, São Paulo, Brazil

Tucker, Georgia

Nova Campina, São Paulo, Brazil

Aurora, Illinois (3 locations)

Paulinia, São Paulo, Brazil

leased

Bedford Park, Illinois (2 locations) 1

Cantonment, Florida (Pensacola Mill)

Decatur, Alabama

Dothan, Alabama leased

Crawfordsville, Indiana

New Bern, North Carolina

Fort Smith, Arkansas (2 locations)

Indianapolis, Indiana (2 locations)

Riegelwood, North Carolina

Russellville, Arkansas (2 locations)

Saint Anthony, Indiana

Eastover, South Carolina

Georgetown, South Carolina

Franklin, Virginia

Tolleson, Arizona

Yuma, Arizona

Anaheim, California

Tipton, Indiana

Cedar Rapids, Iowa

Waterloo, Iowa

Buena Park, California leased

Garden City, Kansas

International:

Camarillo, California

Kansas City, Kansas

Grand Prairie, Albert, Canada

Carson, California

Bowling Green, Kentucky

INDUSTRIAL PACKAGING

Los Angeles, California

Gilroy, California (2 locations)

Lafayette, Louisiana

Cerritos, California leased

Compton, California

Elk Grove, California

Exeter, California

Modesto, California

Ontario, California

Salinas, California

Sanger, California

Lexington, Kentucky

Louisville, Kentucky

Walton, Kentucky

Bogalusa, Louisiana

Shreveport, Louisiana

Springhill, Louisiana

Auburn, Maine

Three Rivers, Michigan

Arden Hills, Minnesota

Saillat, France

Gdansk, Poland

Kwidzyn, Poland

Svetogorsk, Russia

Containerboard

U.S.:

Pine Hill, Alabama

Prattville, Alabama

Cantonment, Florida (Pensacola Mill)

locations)

Fridley, Minnesota

Rome, Georgia

Stockton, California

Minneapolis, Minnesota leased

San Leandro, California leased

Austin, Minnesota

Santa Fe Springs, California (2

91
91

A-1

/S/ JOHN L. TOWNSEND III Director

February 22, 2018

Selma, Alabama (Riverdale Mill)
Selma, Alabama (Riverdale Mill)

Maysville, Kentucky
Maysville, Kentucky

2017 LISTING OF FACILITIES
2017 LISTING OF FACILITIES
(all facilities are owned except noted otherwise)
(all facilities are owned except noted otherwise)

PRINTING PAPERS
PRINTING PAPERS

Uncoated Papers
Uncoated Papers

U.S.:
U.S.:

Savannah, Georgia
Savannah, Georgia

Cayuga, Indiana
Cayuga, Indiana

Cedar Rapids, Iowa
Cedar Rapids, Iowa

Henderson, Kentucky
Henderson, Kentucky

Ticonderoga, New York
Ticonderoga, New York

Eastover, South Carolina
Eastover, South Carolina

Georgetown, South Carolina
Georgetown, South Carolina

Sumter, South Carolina
Sumter, South Carolina

International:
International:

Bogalusa, Louisiana
Bogalusa, Louisiana

Campti, Louisiana
Campti, Louisiana

Mansfield, Louisiana
Mansfield, Louisiana

Vicksburg, Mississippi
Vicksburg, Mississippi

Valliant, Oklahoma
Valliant, Oklahoma

Springfield, Oregon
Springfield, Oregon

Luiz Antônio, São Paulo, Brazil
Luiz Antônio, São Paulo, Brazil

Orange, Texas
Orange, Texas

Mogi Guacu, São Paulo, Brazil
Mogi Guacu, São Paulo, Brazil

APPENDIX I
APPENDIX I

Tracy, California
Tracy, California

Golden, Colorado
Golden, Colorado

Wheat Ridge, Colorado
Wheat Ridge, Colorado

Putnam, Connecticut
Putnam, Connecticut

Orlando, Florida
Orlando, Florida

Plant City, Florida
Plant City, Florida

Tampa, Florida leased
Tampa, Florida leased

Columbus, Georgia
Columbus, Georgia

Forest Park, Georgia
Forest Park, Georgia

Griffin, Georgia
Griffin, Georgia

Kennesaw, Georgia leased
Kennesaw, Georgia leased

Lithonia, Georgia
Lithonia, Georgia

Savannah, Georgia
Savannah, Georgia

Três Lagoas, Mato Grosso do Sul, Brazil
Três Lagoas, Mato Grosso do Sul, Brazil

International:
International:

Stone Mountain, Georgia leased
Stone Mountain, Georgia leased

/s/ CLINTON A. LEWIS, JR.

Director

February 22, 2018

/S/ KATHRYN D. SULLIVAN

Director

February 22, 2018

Clinton A. Lewis, Jr.

Kathryn D. Sullivan

John L. Townsend III

J. Steven Whisler

Ray G. Young

/S/ GLENN R. LANDAU

Glenn R. Landau

Vincent P. Bonnot

/S/ J. STEVEN WHISLER

Director

February 22, 2018

/S/ RAY G. YOUNG

Director

February 22, 2018

Senior Vice President and Chief

Financial Officer

February 22, 2018

/S/ VINCENT P. BONNOT

Vice President – Finance and

Controller

February 22, 2018

Franco da Rocha, São Paulo, Brazil
Franco da Rocha, São Paulo, Brazil

Tucker, Georgia
Tucker, Georgia

Nova Campina, São Paulo, Brazil
Nova Campina, São Paulo, Brazil

Aurora, Illinois (3 locations)
Aurora, Illinois (3 locations)

Saillat, France
Saillat, France

Kadiam, India
Kadiam, India

Rajahmundry, India
Rajahmundry, India

Kwidzyn, Poland
Kwidzyn, Poland

Svetogorsk, Russia
Svetogorsk, Russia

GLOBAL CELLULOSE FIBERS
GLOBAL CELLULOSE FIBERS

Pulp
Pulp

U.S.:
U.S.:

Paulinia, São Paulo, Brazil
Paulinia, São Paulo, Brazil

Veracruz, Mexico
Veracruz, Mexico

Kenitra, Morocco
Kenitra, Morocco

Madrid, Spain
Madrid, Spain

Corrugated Container
Corrugated Container

U.S.:
U.S.:

Bay Minette, Alabama
Bay Minette, Alabama

Bedford Park, Illinois (2 locations) 1
Bedford Park, Illinois (2 locations) 1

leased
leased

Belleville, Illinois
Belleville, Illinois

Carol Stream, Illinois
Carol Stream, Illinois

Des Plaines, Illinois
Des Plaines, Illinois

Lincoln, Illinois
Lincoln, Illinois

Montgomery, Illinois
Montgomery, Illinois

Northlake, Illinois
Northlake, Illinois

Rockford, Illinois
Rockford, Illinois

Butler, Indiana
Butler, Indiana

Cantonment, Florida (Pensacola Mill)
Cantonment, Florida (Pensacola Mill)

Decatur, Alabama
Decatur, Alabama

Flint River, Georgia
Flint River, Georgia

Port Wentworth, Georgia
Port Wentworth, Georgia

Columbus, Mississippi
Columbus, Mississippi

Dothan, Alabama leased
Dothan, Alabama leased

Crawfordsville, Indiana
Crawfordsville, Indiana

Huntsville, Alabama
Huntsville, Alabama

Conway, Arkansas
Conway, Arkansas

Fort Wayne, Indiana
Fort Wayne, Indiana

Hammond, Indiana
Hammond, Indiana

New Bern, North Carolina
New Bern, North Carolina

Fort Smith, Arkansas (2 locations)
Fort Smith, Arkansas (2 locations)

Indianapolis, Indiana (2 locations)
Indianapolis, Indiana (2 locations)

Riegelwood, North Carolina
Riegelwood, North Carolina

Russellville, Arkansas (2 locations)
Russellville, Arkansas (2 locations)

Saint Anthony, Indiana
Saint Anthony, Indiana

Eastover, South Carolina
Eastover, South Carolina

Georgetown, South Carolina
Georgetown, South Carolina

Franklin, Virginia
Franklin, Virginia

Tolleson, Arizona
Tolleson, Arizona

Yuma, Arizona
Yuma, Arizona

Anaheim, California
Anaheim, California

Tipton, Indiana
Tipton, Indiana

Cedar Rapids, Iowa
Cedar Rapids, Iowa

Waterloo, Iowa
Waterloo, Iowa

Buena Park, California leased
Buena Park, California leased

Garden City, Kansas
Garden City, Kansas

International:
International:

Camarillo, California
Camarillo, California

Kansas City, Kansas
Kansas City, Kansas

Grand Prairie, Albert, Canada
Grand Prairie, Albert, Canada

Carson, California
Carson, California

Bowling Green, Kentucky
Bowling Green, Kentucky

Saillat, France
Saillat, France

Gdansk, Poland
Gdansk, Poland

Kwidzyn, Poland
Kwidzyn, Poland

Svetogorsk, Russia
Svetogorsk, Russia

Cerritos, California leased
Cerritos, California leased

Compton, California
Compton, California

Elk Grove, California
Elk Grove, California

Exeter, California
Exeter, California

Lexington, Kentucky
Lexington, Kentucky

Louisville, Kentucky
Louisville, Kentucky

Walton, Kentucky
Walton, Kentucky

Bogalusa, Louisiana
Bogalusa, Louisiana

Gilroy, California (2 locations)
Gilroy, California (2 locations)

Lafayette, Louisiana
Lafayette, Louisiana

INDUSTRIAL PACKAGING
INDUSTRIAL PACKAGING

Los Angeles, California
Los Angeles, California

Containerboard
Containerboard

U.S.:
U.S.:

Pine Hill, Alabama
Pine Hill, Alabama

Prattville, Alabama
Prattville, Alabama

Cantonment, Florida (Pensacola Mill)
Cantonment, Florida (Pensacola Mill)

Modesto, California
Modesto, California

Ontario, California
Ontario, California

Salinas, California
Salinas, California

Sanger, California
Sanger, California

Shreveport, Louisiana
Shreveport, Louisiana

Springhill, Louisiana
Springhill, Louisiana

Auburn, Maine
Auburn, Maine

Three Rivers, Michigan
Three Rivers, Michigan

Arden Hills, Minnesota
Arden Hills, Minnesota

San Leandro, California leased
San Leandro, California leased

Austin, Minnesota
Austin, Minnesota

Santa Fe Springs, California (2
Santa Fe Springs, California (2

locations)
locations)

Fridley, Minnesota
Fridley, Minnesota

A-1
A-1

Rome, Georgia
Rome, Georgia

Stockton, California
Stockton, California

Minneapolis, Minnesota leased
Minneapolis, Minnesota leased

CONSUMER PACKAGING

DISTRIBUTION

IP Asia

International:

Guangzhou, China

Hong Kong, China

Shanghai, China

Japan

Korea

Singapore

Taiwan

Thailand

Vietnam

FOREST PRODUCTS

Forest Resources

International:

Approximately 329,400 acres

in Brazil

Coated Paperboard

U.S.:

Augusta, Georgia 2

Prosperity, South Carolina 2

Texarkana, Texas 2

International:

Kwidzyn, Poland

Svetogorsk, Russia

Foodservice

U.S.:

Visalia, California 2

Shelbyville, Illinois 2

Kenton, Ohio 2

International:

Shanghai, China 1

Tianjin, China 1

Bogota, Colombia

Cheshire, England leased 2

1) Sold September 2017

2) Transferred January 2018

Shakopee, Minnesota
Shakopee, Minnesota

Laurens, South Carolina
Laurens, South Carolina

Silao, Mexico
Silao, Mexico

White Bear Lake, Minnesota
White Bear Lake, Minnesota

Lexington, South Carolina
Lexington, South Carolina

Villa Nicolas Romero, Mexico
Villa Nicolas Romero, Mexico

Houston, Mississippi
Houston, Mississippi

Jackson, Mississippi
Jackson, Mississippi

Ashland City, Tennessee leased
Ashland City, Tennessee leased

Zapopan, Mexico
Zapopan, Mexico

Cleveland, Tennessee
Cleveland, Tennessee

Agadir, Morocco
Agadir, Morocco

Magnolia, Mississippi leased
Magnolia, Mississippi leased

Elizabethton, Tennessee leased
Elizabethton, Tennessee leased

Casablanca, Morocco
Casablanca, Morocco

Olive Branch, Mississippi
Olive Branch, Mississippi

Fenton, Missouri
Fenton, Missouri

Kansas City, Missouri
Kansas City, Missouri

Morristown, Tennessee
Morristown, Tennessee

Murfreesboro, Tennessee
Murfreesboro, Tennessee

Amarillo, Texas
Amarillo, Texas

Kenitra, Morocco
Kenitra, Morocco

Tangier, Morocco
Tangier, Morocco

Almeria, Spain
Almeria, Spain

Maryland Heights, Missouri
Maryland Heights, Missouri

Carrollton, Texas (2 locations)
Carrollton, Texas (2 locations)

Barcelona, Spain
Barcelona, Spain

North Kansas City, Missouri leased
North Kansas City, Missouri leased

Edinburg, Texas
Edinburg, Texas

St. Joseph, Missouri
St. Joseph, Missouri

St. Louis, Missouri
St. Louis, Missouri

Omaha, Nebraska
Omaha, Nebraska

Barrington, New Jersey
Barrington, New Jersey

Bellmawr, New Jersey
Bellmawr, New Jersey

Milltown, New Jersey
Milltown, New Jersey

Spotswood, New Jersey
Spotswood, New Jersey

Thorofare, New Jersey
Thorofare, New Jersey

Binghamton, New York
Binghamton, New York

Buffalo, New York
Buffalo, New York

Rochester, New York
Rochester, New York

Scotia, New York
Scotia, New York

Utica, New York
Utica, New York

Bilbao, Spain
Bilbao, Spain

Gandia, Spain
Gandia, Spain

El Paso, Texas
El Paso, Texas

Ft. Worth, Texas leased
Ft. Worth, Texas leased

Las Palmas, Spain
Las Palmas, Spain

Grand Prairie, Texas
Grand Prairie, Texas

Hidalgo, Texas
Hidalgo, Texas

McAllen, Texas
McAllen, Texas

Madrid, Spain
Madrid, Spain

Tenerife, Spain
Tenerife, Spain

Adana, Turkey
Adana, Turkey

San Antonio, Texas (2 locations)
San Antonio, Texas (2 locations)

Bursa. Turkey
Bursa. Turkey

Sealy, Texas
Sealy, Texas

Waxahachie, Texas
Waxahachie, Texas

Lynchburg, Virginia
Lynchburg, Virginia

Petersburg, Virginia
Petersburg, Virginia

Richmond, Virginia
Richmond, Virginia

Corlu, Turkey
Corlu, Turkey

Corum, Turkey
Corum, Turkey

Gebze, Turkey
Gebze, Turkey

Izmir, Turkey
Izmir, Turkey

Moses Lake, Washington
Moses Lake, Washington

Olympia, Washington
Olympia, Washington

Recycling
Recycling

U.S.:
U.S.:

Charlotte, North Carolina (2 locations) 1
Charlotte, North Carolina (2 locations) 1
leased
leased

Lumberton, North Carolina
Lumberton, North Carolina

Manson, North Carolina
Manson, North Carolina

Newton, North Carolina
Newton, North Carolina

Yakima, Washington
Yakima, Washington

Fond du Lac, Wisconsin
Fond du Lac, Wisconsin

Manitowoc, Wisconsin
Manitowoc, Wisconsin

Phoenix, Arizona
Phoenix, Arizona

Fremont, California
Fremont, California

Norwalk, California
Norwalk, California

West Sacramento, California
West Sacramento, California

Statesville, North Carolina
Statesville, North Carolina

International:
International:

Itasca, Illinois
Itasca, Illinois

Byesville, Ohio
Byesville, Ohio

Delaware, Ohio
Delaware, Ohio

Eaton, Ohio
Eaton, Ohio

Madison, Ohio
Madison, Ohio

Marion, Ohio
Marion, Ohio

Marysville, Ohio leased
Marysville, Ohio leased

Middletown, Ohio
Middletown, Ohio

Mt. Vernon, Ohio
Mt. Vernon, Ohio

Newark, Ohio
Newark, Ohio

Streetsboro, Ohio
Streetsboro, Ohio

Wooster, Ohio
Wooster, Ohio

Manaus, Amazonas, Brazil
Manaus, Amazonas, Brazil

Des Moines, Iowa
Des Moines, Iowa

Paulinia, São Paulo, Brazil
Paulinia, São Paulo, Brazil

Wichita, Kansas
Wichita, Kansas

Rio Verde, Goias, Brazil
Rio Verde, Goias, Brazil

Roseville, Minnesota
Roseville, Minnesota

Suzano, São Paulo, Brazil
Suzano, São Paulo, Brazil

Omaha, Nebraska
Omaha, Nebraska

Rancagua, Chile
Rancagua, Chile

Arles, France
Arles, France

Charlotte, North Carolina
Charlotte, North Carolina

Beaverton, Oregon
Beaverton, Oregon

Chalon-sur-Saone, France
Chalon-sur-Saone, France

Springfield, Oregon leased
Springfield, Oregon leased

Creil, France
Creil, France

Carrollton, Texas
Carrollton, Texas

LePuy, France (Espaly Box Plant)
LePuy, France (Espaly Box Plant)

Salt Lake City, Utah
Salt Lake City, Utah

Mortagne, France
Mortagne, France

Richmond, Virginia
Richmond, Virginia

Guadeloupe, French West Indies
Guadeloupe, French West Indies

Kent, Washington
Kent, Washington

Oklahoma City, Oklahoma
Oklahoma City, Oklahoma

Beaverton, Oregon (3 locations)
Beaverton, Oregon (3 locations)

Hillsboro, Oregon
Hillsboro, Oregon

Portland, Oregon
Portland, Oregon

Salem, Oregon leased
Salem, Oregon leased

Bellusco, Italy
Bellusco, Italy

Catania, Italy
Catania, Italy

Pomezia, Italy
Pomezia, Italy

San Felice, Italy
San Felice, Italy

Apodaco (Monterrey), Mexico
Apodaco (Monterrey), Mexico
leased
leased

Biglerville, Pennsylvania (2 locations)
Biglerville, Pennsylvania (2 locations)

Ixtaczoquitlan, Mexico
Ixtaczoquitlan, Mexico

Eighty-four, Pennsylvania
Eighty-four, Pennsylvania

Hazleton, Pennsylvania
Hazleton, Pennsylvania

Juarez, Mexico leased
Juarez, Mexico leased

Los Mochis, Mexico
Los Mochis, Mexico

Kennett Square, Pennsylvania
Kennett Square, Pennsylvania

Puebla, Mexico leased
Puebla, Mexico leased

Lancaster, Pennsylvania
Lancaster, Pennsylvania

Reynosa, Mexico
Reynosa, Mexico

Mount Carmel, Pennsylvania
Mount Carmel, Pennsylvania

San Jose Iturbide, Mexico
San Jose Iturbide, Mexico

Georgetown, South Carolina
Georgetown, South Carolina

Santa Catarina, Mexico
Santa Catarina, Mexico

International:
International:

Monterrey, Mexico leased
Monterrey, Mexico leased

Xalapa, Veracruz, Mexico leased
Xalapa, Veracruz, Mexico leased

Bags
Bags

U.S.:
U.S.:

Buena Park, California
Buena Park, California

Beaverton, Oregon
Beaverton, Oregon

Grand Prairie, Texas
Grand Prairie, Texas

A-2
A-2

A-3

CONSUMER PACKAGING
CONSUMER PACKAGING

DISTRIBUTION
DISTRIBUTION

IP Asia
IP Asia

International:
International:

Guangzhou, China
Guangzhou, China

Hong Kong, China
Hong Kong, China

Shanghai, China
Shanghai, China

Japan
Japan

Korea
Korea

Singapore
Singapore

Taiwan
Taiwan

Thailand
Thailand

Vietnam
Vietnam

FOREST PRODUCTS
FOREST PRODUCTS

Forest Resources
Forest Resources

International:
International:

Approximately 329,400 acres
Approximately 329,400 acres

in Brazil
in Brazil

Coated Paperboard
Coated Paperboard

U.S.:
U.S.:
Augusta, Georgia 2
Augusta, Georgia 2
Prosperity, South Carolina 2
Prosperity, South Carolina 2
Texarkana, Texas 2
Texarkana, Texas 2

International:
International:

Kwidzyn, Poland
Kwidzyn, Poland

Svetogorsk, Russia
Svetogorsk, Russia

Foodservice
Foodservice

U.S.:
U.S.:
Visalia, California 2
Visalia, California 2
Shelbyville, Illinois 2
Shelbyville, Illinois 2
Kenton, Ohio 2
Kenton, Ohio 2

International:
International:
Shanghai, China 1
Shanghai, China 1
Tianjin, China 1
Tianjin, China 1

Bogota, Colombia
Bogota, Colombia
Cheshire, England leased 2
Cheshire, England leased 2

1) Sold September 2017
1) Sold September 2017

2) Transferred January 2018
2) Transferred January 2018

Shakopee, Minnesota

Laurens, South Carolina

Silao, Mexico

White Bear Lake, Minnesota

Lexington, South Carolina

Villa Nicolas Romero, Mexico

Houston, Mississippi

Jackson, Mississippi

Ashland City, Tennessee leased

Zapopan, Mexico

Cleveland, Tennessee

Agadir, Morocco

Magnolia, Mississippi leased

Elizabethton, Tennessee leased

Casablanca, Morocco

Olive Branch, Mississippi

Fenton, Missouri

Kansas City, Missouri

Morristown, Tennessee

Murfreesboro, Tennessee

Amarillo, Texas

Kenitra, Morocco

Tangier, Morocco

Almeria, Spain

Maryland Heights, Missouri

Carrollton, Texas (2 locations)

Barcelona, Spain

North Kansas City, Missouri leased

Edinburg, Texas

Ft. Worth, Texas leased

Las Palmas, Spain

El Paso, Texas

Grand Prairie, Texas

Hidalgo, Texas

McAllen, Texas

Sealy, Texas

Waxahachie, Texas

Lynchburg, Virginia

Petersburg, Virginia

Richmond, Virginia

Bilbao, Spain

Gandia, Spain

Madrid, Spain

Tenerife, Spain

Adana, Turkey

Corlu, Turkey

Corum, Turkey

Gebze, Turkey

Izmir, Turkey

San Antonio, Texas (2 locations)

Bursa. Turkey

Moses Lake, Washington

Olympia, Washington

Recycling

U.S.:

Charlotte, North Carolina (2 locations) 1

leased

Lumberton, North Carolina

Manson, North Carolina

Newton, North Carolina

Yakima, Washington

Fond du Lac, Wisconsin

Manitowoc, Wisconsin

Phoenix, Arizona

Fremont, California

Norwalk, California

West Sacramento, California

Statesville, North Carolina

International:

Itasca, Illinois

St. Joseph, Missouri

St. Louis, Missouri

Omaha, Nebraska

Barrington, New Jersey

Bellmawr, New Jersey

Milltown, New Jersey

Spotswood, New Jersey

Thorofare, New Jersey

Binghamton, New York

Buffalo, New York

Rochester, New York

Scotia, New York

Utica, New York

Byesville, Ohio

Delaware, Ohio

Eaton, Ohio

Madison, Ohio

Marion, Ohio

Marysville, Ohio leased

Middletown, Ohio

Mt. Vernon, Ohio

Newark, Ohio

Streetsboro, Ohio

Wooster, Ohio

Manaus, Amazonas, Brazil

Des Moines, Iowa

Paulinia, São Paulo, Brazil

Wichita, Kansas

Rio Verde, Goias, Brazil

Roseville, Minnesota

Suzano, São Paulo, Brazil

Omaha, Nebraska

Rancagua, Chile

Arles, France

Charlotte, North Carolina

Beaverton, Oregon

Chalon-sur-Saone, France

Springfield, Oregon leased

Creil, France

Carrollton, Texas

LePuy, France (Espaly Box Plant)

Salt Lake City, Utah

Mortagne, France

Richmond, Virginia

Guadeloupe, French West Indies

Kent, Washington

Oklahoma City, Oklahoma

Beaverton, Oregon (3 locations)

Hillsboro, Oregon

Portland, Oregon

Salem, Oregon leased

Bellusco, Italy

Catania, Italy

Pomezia, Italy

San Felice, Italy

Apodaco (Monterrey), Mexico

leased

Biglerville, Pennsylvania (2 locations)

Ixtaczoquitlan, Mexico

Eighty-four, Pennsylvania

Hazleton, Pennsylvania

Juarez, Mexico leased

Los Mochis, Mexico

Kennett Square, Pennsylvania

Puebla, Mexico leased

Lancaster, Pennsylvania

Reynosa, Mexico

Mount Carmel, Pennsylvania

San Jose Iturbide, Mexico

Georgetown, South Carolina

Santa Catarina, Mexico

International:

Monterrey, Mexico leased

Xalapa, Veracruz, Mexico leased

Bags

U.S.:

Buena Park, California

Beaverton, Oregon

Grand Prairie, Texas

A-2

A-3
A-3

2017 CAPACITY INFORMATION

APPENDIX II

(in thousands of short tons except as noted)

U.S.

EMEA

Americas,
other
than U.S.

India

Total

Industrial Packaging
Containerboard (a)

Coated Paperboard

Total Industrial Packaging

Global Cellulose Fibers

Dried Pulp (in thousands of metric tons)

Printing Papers
Uncoated Freesheet & Bristols (b)

Newsprint

Total Printing Papers

13,488

—

13,488

431

476

363

—

363

2,912

302

535

1,990

—

1,990

1,193

312

1,505

1,135

—

1,135

—

266

—

266

13,896

431

14,327

3,749

4,584

312

4,896

(a) In addition to Containerboard, this also includes saturated kraft, kraft bag, and gypsum.
(b) In addition to Uncoated Freesheet and Bristols, includes bleached multiwall bag and plate.

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)

329

1,047

—

1,376

A-4

(in thousands of short tons except as noted)

U.S.

EMEA

India

Total

Americas,

other

than U.S.

2017 CAPACITY INFORMATION

Industrial Packaging

Containerboard (a)

Coated Paperboard

Total Industrial Packaging

Global Cellulose Fibers

Dried Pulp (in thousands of metric tons)

Printing Papers

Uncoated Freesheet & Bristols (b)

Newsprint

Total Printing Papers

APPENDIX II

13,488

—

13,488

431

476

363

—

363

2,912

302

535

1,990

—

1,990

1,193

312

1,505

1,135

—

1,135

—

266

—

266

13,896

431

14,327

3,749

4,584

312

4,896

(a) In addition to Containerboard, this also includes saturated kraft, kraft bag, and gypsum.

(b) In addition to Uncoated Freesheet and Bristols, includes bleached multiwall bag and plate.

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:

We have harvesting rights in:

Brazil

Russia

Poland

Total

(M Acres)

329

1,047

—

1,376

A-4

INTERNATIONAL PAPER LEADERSHIP
As of February 28, 2018

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

W. Michael Amick, Jr.
Senior Vice President
Paper The Americas and India

C. Cato Ealy
Senior Vice President
Corporate Development

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

Glenn R. Landau
Senior Vice President and
Chief Financial Officer

Timothy S. Nicholls
Senior Vice President
Industrial Packaging
The Americas

Thomas J. Plath
Senior Vice President
Human Resources and
Global Citizenship

Jean-Michel Ribiéras
Senior Vice President
Global Cellulose Fibers

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

John V. Sims
Senior Vice President
and President
International Paper
Europe, Middle East,
Africa and Russia

Catherine I. Slater
Senior Vice President
International Paper

Gregory T. Wanta
Senior Vice President
North American Container

Russell D. Anawalt
Vice President
Sales and Marketing
Global Cellulose Fibers

David W. Apollonio
Vice President
South Area
North American Container

Santiago Arbelaez
Vice President
Industrial Packaging
International Paper Brazil

Mark M. Azzarello
Vice President
Human Resources, Global
Compensation and Benefits

Greg C. Gibson
Vice President and
General Manager
North American Papers

Marcio Bertoldo
Vice President
Manufacturing
Latin America

Hans M. Bjorkman
Vice President and
General Manager
European Papers

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

Paul J. Blanchard
Vice President
Supply Chain
Industrial Packaging

Vincent P. Bonnot
Vice President
Finance, Controller and
Chief Accounting Officer

Eric Chartrain
Vice President and
General Manager
Europe, Middle East and
Africa Packaging

Thomas A. Cleves
Vice President
Global Citizenship

Kirt Cuevas
Vice President
Environment,
Health and Safety

Rodrigo Davoli
President International Paper
Brazil Vice President and
General Manager
Latin America Printing Papers

Donald P. Devlin
Vice President and President
International Paper India

Clay R. Ellis
Vice President
Manufacturing
Global Cellulose Fibers

Roman B. Gallo
Vice President
Manufacturing
Containerboard

Gary M. Gavin
Vice President
West Area
North American Container

John F. Grover
Vice President
Enterprise Converting
Optimization
North American Container

Guillermo Gutierrez
Vice President
Investor Relations

William T. Hamic
Vice President and
General Manager
Containerboard and Recycling

Errol A. Harris
Vice President and Treasurer

Russell V. Harris
Vice President
Manufacturing
North American Papers

Peter G. Heist
Vice President
North Area
North American Container

Robert M. Hunkeler
Vice President
Trust Investments

Chris J. Keuleman
Vice President
Global Government Relations

David A. Liebetreu
Vice President
Global Sourcing

Allison B. Magness
Vice President
Manufacturing
Containerboard

Brian N.G. McDonald
Vice President
Strategic Planning

Kevin G. McWilliams
Vice President
Tax

Brett A. Mosley
Vice President
Manufacturing
Containerboard

Chris R. Read
Vice President
Manufacturing
Europe, Middle East, Africa
and Russia

James P. Royalty, Jr.
Vice President
Strategic Projects

A-6

Bathsheba T. Sams
Vice President
Human Resources
Global Cellulose Fibers,
International Paper Asia and
HR for HR

Fred A. Towler
Vice President
Supply Chain,
North American Papers and
Supply Chain Operations

Keith R. Townsend
Vice President and President
International Paper Russia

Marc Van Lieshout
Vice President
Corporate Audit

Deon Vaughan
Vice President
Deputy General Counsel, Chief
Ethics and Compliance Officer

Shiela P. Vinczeller
Chief Diversity Officer and
Vice President
Human Resources,
Talent Management and
Global Mobility

Kent L. Walker
Vice President
Product Development,
Innovation and
Customer Technical Service
Global Cellulose Fibers

Robert W. Wenker
Vice President and
Chief Information Officer

Hunter Whiteley
Vice President
Manufacturing
Enterprise Initiatives

Patrick Wilczynski
Vice President
Technology and
Strategic Initiatives

Ron P. Wise
Vice President
Commercial and
National Accounts
North American Container

ILIM GROUP
SENIOR LEADERSHIP

Ksenia Sosnina
Chief Executive Officer

BOARD OF DIRECTORS
As of February 28, 2018

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

David J. Bronczek
President and Chief Operating Officer
FedEx Corporation

William J. Burns
President
The Carnegie Endowment for International Peace

Christopher M. Connor
Retired Executive Chairman
The Sherwin-Williams Company

Ahmet C. Dorduncu
Chief Executive Officer
Akkök Group

Ilene S. Gordon
Presiding Director
Executive Chairman
Ingredion Incorporated

Jacqueline C. Hinman
Former Chairman, President & Chief Executive Officer
CH2M HILL Companies, Ltd.

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

Clinton A. Lewis, Jr.
Executive Vice President & President of International Operations
Zoetis Inc.

Kathryn D. Sullivan
Ambassador-at-Large at the Smithsonian National Air and
Space Museum

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

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

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

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 7, 2018.

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.)
(201) 680-6578 (International)

MAILING ADDRESSES
Shareholder correspondence should be mailed to:

Computershare Investor Services
P.O. Box 505000
Louisville, KY 40233-5000
USA

Overnight mail delivery:
Computershare Investor Services
462 South 4th Street, Ste. 1600
Louisville, KY 40202
USA

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.

A-7

International Paper

Board of Directors

Board of Directors
Seated left to right

Ilene S. Gordon
Presiding Director
Executive Chairman
Ingredion Incorporated

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

David J. Bronczek
President and
Chief Operating Officer
FedEx Corporation

Standing left to right

Stacey J. Mobley
(Retired December 31, 2017)
Retired Senior Vice President,
Chief Administrative Officer
and General Counsel
DuPont

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

William J. Burns
President
The Carnegie Endowment
for International Peace

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

Clinton A. Lewis, Jr.
Executive Vice President
and President of International
Operations
Zoetis Inc.

Christopher M. Connor
Retired Executive Chairman
The Sherwin-Williams Company

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

William G. Walter
(Retired December 31, 2017)
Retired Chairman and
Chief Executive Officer
FMC Corporation

Ahmet C. Dorduncu
Chief Executive Officer
Akkök Group

Kathryn D. Sullivan
Ambassador-at-Large
Smithsonian National Air
and Space Museum

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

Jacqueline C. Hinman
Former Chairman, President
and Chief Executive Officer
CH2M HILL Companies, Ltd.

Global Headquarters

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

Regional Headquarters

International Paper Asia
8F, Building A
Xuhui Vanke Center
55 Ding An Road
Shanghai, 200235, China

International Paper Brazil
Avenida Engenheiro Luís Carlos Berrini,
105 - 16 andar - São Paulo -
SP - Brazil

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

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

InternationalPaper.com

©2018 International Paper Company. All rights reserved. Accent, Chamex, Hammermill, International Paper logo, PRO-DESIGN, Rey and SpaceKraft are registered trademarks of International Paper Company or its affiliates. Pol and THRIVE are trademarks of International Paper Company or its affiliates.“World’s Most Ethical Companies” and “Ethisphere” names and marks are registered trademarks of Ethisphere LLC. “FORTUNE and The World’s Most Admired Companies are registered trademarks of Time Inc. and are used under license.” From FORTUNE Magazine, February 1, 2018. ©2018 Time Inc. used under license. FORTUNE and Time Inc. are not affiliated with, and do not endorse products or services of, International Paper Company.Annual Performance Summary printed on Accent® Opaque Cover Smooth 100lb. and Text Smooth 100lb. 10K printed on Williamsburg Opaque Offset Smooth 50lb.