International Paper 2015 Annual Report Download

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2015
ANNUAL
PERFORMANCE
SUMMARY

Table of contents

  • Page 1
    ANNUAL PERFORMANCE SUMMARY 2015

  • Page 2
    TRACK RECORD OF STRONG PERFORMANCE $1.8B average free cash ï¬,ow for last five years $3.65 EPS highest in 20 years

  • Page 3
    NYSE (New York Stock Exchange): IP 11% return on invested capital Four straight years of double-digit percentage dividend increases ANNUAL PERFORMANCE SUMMARY 2015 International Paper's demand for responsibly sourced wood fiber provides an incentive to landowners to sustainably manage millions ...

  • Page 4
    ... plans to sell our corrugated box business in Asia. We will continue to serve customers in Asia with products from our Ilim joint venture, from the United States, and from other regions. We executed our strategy, enabling us to achieve return on invested capital of 11 percent, well above our cost...

  • Page 5
    ...2011 2012 2013 2014 2015 ANNUALIZED DIVIDEND $1.05 $1.20 $1.40 $1.60 $1.76 2011 2012 2013 2014 2015 Industrial Packaging Optimization We announced plans to invest $300 million in 2016 and 2017 to further improve our North American containerboard mill system, enhance product quality...

  • Page 6
    ...is flexible and well-positioned with globally competitive cost positions and with steady access to wood fiber, our primary raw material. We have strong positions in attractive markets and are aligned with strategic customers. We focus on the things we control-serving our customers, strengthening our...

  • Page 7
    ..., Technology, EH&S and Global Sourcing Thomas G. Kadien Senior Vice President, Human Resources, Government Relations and Global Citizenship Jean-Michel Ribieras Senior Vice President & President, International Paper Europe, Middle East, Africa & Russia Mark S. Sutton Chairman and Chief Executive...

  • Page 8
    ... high-quality, sustainable, and innovative products. 13% of total revenue CUSTOMER SEGMENTS Pharmaceuticals Health and beauty Packaged food General consumer goods Quick-service restaurants Specialty coffee Grocery Hospitality Convenience stores 23% Asia 66% North America 11% EMEA/Russia Paper...

  • Page 9
    10-K FORM 10-K FORM

  • Page 10
    ... per share attributable to International Paper Company common shareholders, see page 18. In millions, at December 31 Calculation of Free Cash Flow Cash provided by operations (Less)/Add: Cash invested in capital projects Cash contribution to pension plan, net of tax refunds Tax receivable collected...

  • Page 11
    ...it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. ROIC = Operating Earnings Before Interest / Average Invested Capital Invested Capital = Equity adjusted to remove pension-related amounts in OCI, net of taxes + interest-bearing...

  • Page 12
    ... per share attributable to International Paper Company common shareholders, see page 18. In millions, at December 31 Calculation of Free Cash Flow Cash provided by operations (Less)/Add: Cash invested in capital projects Cash contribution to pension plan, net of tax refunds Tax receivable collected...

  • Page 13
    ...it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. ROIC = Operating Earnings Before Interest / Average Invested Capital Invested Capital = Equity adjusted to remove pension-related amounts in OCI, net of taxes + interest-bearing...

  • Page 14
    ...to the closing price as reported on the New York Stock Exchange, as of the last business day of the registrant's most recently completed second fiscal quarter (June 30, 2015) was approximately $21,026,985,885. The number of shares outstanding of the Company's common stock as of February 19, 2016 was...

  • Page 15
    ... Financial Information About International and U.S. Operations Competition and Costs Marketing and Distribution Description of Principal Products Sales Volumes by Product Research and Development Environmental Protection Climate Change Employees Executive Officers of the Registrant Raw Materials...

  • Page 16
    ... 15. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. EXECUTIVE COMPENSATION. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. PRINCIPAL ACCOUNTANT FEES AND SERVICES. 86...

  • Page 17
    (This page intentionally left blank.)

  • Page 18
    ... site. In the United States, at December 31, 2015, the Company operated 24 pulp, paper and packaging mills, 169 converting and packaging plants, 16 recycling plants and three bag facilities. Production facilities at December 31, 2015 in Europe, Asia, Africa, India, Latin America and South America...

  • Page 19
    ...paper distributors. DESCRIPTION OF PRINCIPAL PRODUCTS The Company's principal products are described on pages 24 and 25 of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. SALES VOLUMES BY PRODUCT Sales volumes of major products for 2015, 2014 and 2013...

  • Page 20
    ...; 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...

  • Page 21
    ...(through transportation fuel efficiency standards), (ii) New Source Performance Standards (NSPS) for new Electrica Generating Units (EGUs), (iii) regulations requiring reporting of GHGs from sources of GHGs greater than 25,000 tons per year, and (iv) in 2015, requirements for states to develop plans...

  • Page 22
    ...corporate development since 2003. Mr. Ealy is a director of Ilim Holding S.A., a Swiss holding company in which International Paper holds a 50% interest, and of its subsidiary, Ilim Group. Mr. Ealy joined International Paper in 1992. William P. Hoel, 59, senior vice president, Container The Americas...

  • Page 23
    ... IP Europe, Middle East, Africa & Russia since June 2013. Mr. Ribieras previously served as president - IP Latin America from 2009 until 2013. Mr. Ribieras is a director of Ilim Holding S.A., a Swiss holding company in which International Paper holds a 50% interest, and of its subsidiary, Ilim Group...

  • Page 24
    ... (principally natural gas, coal and fuel oil) and third-party companies that transport our goods. The market price of virgin wood fiber varies based upon availability and source. In addition, the increase in demand of products manufactured, in whole or in part, from recycled fiber, on a global basis...

  • Page 25
    ... 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...

  • Page 26
    ... regarding current discount rates and expected rates of return on plan assets could increase pension costs. Health care reform under the Patient Protection and Affordable Care Act of 2010 could also increase costs with respect to medical coverage of the Company's full-time employees. Significant...

  • Page 27
    ... publicity and could have a material effect on our business. CERTAIN OPERATIONS ARE CONDUCTED BY JOINT VENTURES THAT WE CANNOT OPERATE SOLELY FOR OUR BENEFIT. Certain operations in Russia are carried on by a joint venture, Ilim. In joint ventures, we share ownership and management of a company...

  • Page 28
    ...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...

  • Page 29
    ... low sales prices for the Company's common stock for each of the four quarters in 2015 and 2014 are set forth on page 83 of Item 8. Financial Statements and Supplementary Data. As of the filing of this Annual Report on Form 10-K, the Company's common shares are traded on the New York Stock Exchange...

  • Page 30
    ... S.A., Klabin S.A., Metsa Board Corporation, Mondi Group, Packaging Corporation of America, Smurfit Kappa Group, Stora Enso Group, and UPM-Kymmene Corp. MeadWestvaco Corp. and Rock-Tenn Company are included in the ROIC Peer Group results through 2014. Note 2: Returns are calculated in $USD. 13

  • Page 31
    ... STOCK PRICES High Low Year-end FINANCIAL RATIOS Current ratio Total debt to capital ratio Return on shareholders' equity CAPITAL EXPENDITURES NUMBER OF EMPLOYEES 1.7 0.71 20.0% $ 1,487 56,000 (b-c) 2015 $ 22,365 20,544 2014 $ 23,617 22,138 (d) 2013 $ 23,483 21,643 2012 $ 21,852 20,214 2011...

  • Page 32
    ... millions Temple-Inland integration Courtland mill shutdown Early debt extinguishment costs Insurance reimbursement related to legal settlement Shut down of paper machine at Augusta mill India Papers tradename and goodwill impairment Fair value adjustment of company airplanes Cass Lake environmental...

  • Page 33
    ... Building Products divestiture xpedx restructuring Total $ $ 2013 14 366 19 19 418 2011: (m) Includes the following pre-tax charges (gains): In millions Temple-Inland acquisition costs Early debt extinguishment costs APPM acquisition costs Reversal of environmental and other reserves related...

  • Page 34
    ...and freight costs. Price declined relative to 2014 driven mainly by lower pricing in our North American Industrial Packaging and Printing Papers and Pulp businesses. Our Ilim joint venture generated record results in 2015 driven by improved operations and increased margins. The positive results were...

  • Page 35
    ...share attributable to International Paper Company common shareholders is the most directly comparable GAAP measure. The Company calculates Operating Earnings by excluding the after-tax effect of items considered by management to be unusual from the earnings reported under GAAP, non-operating pension...

  • Page 36
    ... pension plan withdrawal liability and a net charge of $7 million for other items. Printing Papers' profits of $533 million represented a $549 million increase in operating profits from 2014. The benefits from lower input costs, lower costs associated with the closure of our Courtland, Alabama mill...

  • Page 37
    .... International Paper received payments of approximately $411 million, financed with new debt in Veritiv's capital structure. 2013: On April 1, 2013, the Company finalized the sale of Temple-Inland's 50% interest in Del-Tin Fiber L.L.C. to joint venture partner Deltic Timber Corporation for...

  • Page 38
    ... raw material costs, principally wood, recycled fiber and chemical costs; energy costs; freight costs; salary and benefits costs, including pensions; and manufacturing conversion costs. The following is a discussion of International Paper's results of operations for the year ended December 31, 2015...

  • Page 39
    ... after taxes) related to costs associated with the conversion of the Riegelwood, North Carolina facility to 100% pulp production, net of proceeds from the sale of the Carolina Coated Bristols brand, and a $2 million charge (before and after taxes) for other items. • 2014: During 2014, corporate...

  • Page 40
    ... the fair value of the India Papers reporting unit and resulting impairment charge was due to a change in the strategic outlook for the India Papers operations. Also in the fourth quarter of 2013, the Company calculated the estimated fair value of its xpedx business using the discounted future cash...

  • Page 41
    ...The mills producing uncoated papers are located in the United States, France, Poland, Russia, Brazil and India. The mills have uncoated paper production capacity of approximately 4 million tons annually. Brazilian operations function through International Paper do Brasil, Ltda, which owns or manages...

  • Page 42
    ... cups, lids, food containers and plates through three domestic plants and four international facilities. Ilim Holding S.A. In October 2007, International Paper and Ilim Holding S.A. (Ilim) completed a 50:50 joint venture to operate a pulp and paper business located in Russia. Ilim's facilities...

  • Page 43
    ... improve reflecting a previously announced sales price increase for boxes. Input costs are expected to be stable and operating costs should reflect the benefits of cost savings initiatives. net sales were $601 million in 2015 compared with $625 million in 2014 and $685 million in 2013. Operating...

  • Page 44
    .... North American Printing Papers net sales were $1.9 billion in 2015, $2.1 billion in 2014 and $2.6 billion in 2013. Operating profits in 2015 were $179 million compared with a loss of $398 million (a gain of $156 million excluding costs associated with the shutdown of our Courtland, Alabama mill...

  • Page 45
    ...of goodwill and other assets of the IP-Sun JV, costs associated with the permanent shutdown of a paper machine at our Augusta, Georgia mill and other special items, 2015 operating profits were 15% lower than in 2014, and 24% lower than in 2013. Benefits from higher sales volumes ($14 million), lower...

  • Page 46
    ... plant closure costs) in 2014 and $63 million ($110 million excluding paper machine shutdown costs and costs related to the sale of the Shorewood business) in 2013. 2014 increased in Europe, but decreased in Russia. Average sales margins improved in Russia due to slightly higher average sales price...

  • Page 47
    .... Input costs increased year-over-year for wood, chemicals, fuel and energy. Freight costs also increased. The Company received cash dividends from the joint venture of $35 million in 2015 and $56 million in 2014. No dividends were paid in 2013. Entering the first quarter of 2016, sales volumes are...

  • Page 48
    ... of the tender offer. As of December 31, 2014 and 2015, the Company owned 91.7% of Olmuksan's outstanding and issued shares. 2013: On January 3, 2013, International Paper completed the acquisition (effective date of acquisition on January 1, 2013) of the shares of its joint venture partner, Sabanci...

  • Page 49
    ... during the years ended December 31, 2015, 2014 and 2013 were as follows: In millions Debt reductions (a) Pre-tax early debt extinguishment costs (b) (a) 2015 2014 2013 2015: Financing activities during 2015 included debt issuances of $6.9 billion and retirements of $6.9 billion for a net decrease...

  • Page 50
    ... would be increased from $0.40 per share to $0.44 per share, effective for the 2015 fourth quarter. 2014: Financing activities during 2014 included debt issuances of $2.0 billion and retirements of $2.1 billion, for a net decrease of $113 million. International Paper utilizes interest rate swaps to...

  • Page 51
    ... a number of factors, including the actual earnings and changes in values of plan assets and changes in interest rates. International Paper has announced a voluntary, limited-time opportunity for former employees who are participants in the Retirement Plan of International Paper Company (the Pension...

  • Page 52
    ...management. In calculating the estimated fair value of its reporting units in step one, the Company uses the projected future cash flows to be generated by each unit over the estimated remaining useful operating lives of the unit's assets, discounted using the estimated cost-of-capital discount rate...

  • Page 53
    ... long-term rate of return on plan assets, the discount rate used to calculate plan liabilities, the projected rate of future compensation increases and health care cost trend rates. Benefit obligations and fair values of plan assets as of December 31, 2015, for International Paper's pension and...

  • Page 54
    ... effect on net postretirement benefit cost from a 1% increase or decrease in the annual health care cost trend rate would be approximately $1 million. Actual rates of return earned on U.S. pension plan assets for each of the last 10 years were: Year 2015 2014 2013 2012 2011 Return 1.3% 6.4% 14.1% 14...

  • Page 55
    ... plan in 2016. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled $62 million for the year ended December 31, 2015. Accounting for Stock-Based Compensation The Company has a Performance Share Plan, which grants performance-based restricted stock...

  • Page 56
    ...31, 2015 and 2014 are stated at cost, which approximates market due to their short-term nature. Our interest rate risk exposure related to these investments was not material. We issue fixed and floating rate debt in a proportion consistent with International Paper's targeted capital structure, while...

  • Page 57
    ... have been prepared using accounting principles generally accepted in the United States of America considered appropriate in the circumstances to present fairly the Company's consolidated financial position, results of operations and cash flows on a consistent basis. Management has also prepared the...

  • Page 58
    ... 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 CAROL L. ROBERTS SENIOR VICE PRESIDENT AND CHIEF...

  • Page 59
    ...present fairly, in all material respects, the financial position of International Paper Company and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting...

  • Page 60
    ... with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2015 of the Company and our report dated February 25, 2016 expressed an unqualified opinion on...

  • Page 61
    CONSOLIDATED STATEMENT OF OPERATIONS In millions, except per share amounts, for the years ended December 31 NET SALES COSTS AND EXPENSES Cost of products sold Selling and administrative expenses Depreciation, amortization and cost of timber harvested Distribution expenses Taxes other than payroll ...

  • Page 62
    ... millions for the years ended December 31 NET EARNINGS (LOSS) OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX Amortization of pension and postretirement prior service costs and net loss: U.S. plans (less tax of $186, $154 and $195) Pension and postretirement liability adjustments: U.S. plans (less tax...

  • Page 63
    ... 12) Deferred Income Taxes Pension Benefit Obligation Postretirement and Postemployment Benefit Obligation Other Liabilities Commitments and Contingent Liabilities (Note 11) Equity Common stock $1 par value, 2015 & 2014 - 448.9 shares Paid-in capital Retained earnings Accumulated other comprehensive...

  • Page 64
    ... for the years ended December 31 OPERATING ACTIVITIES Net earnings (loss) Depreciation, amortization, and cost of timber harvested Deferred income tax provision (benefit), net Restructuring and other charges Pension plan contribution Net bargain purchase gain on acquisition of business Periodic...

  • Page 65
    ... plans, net Repurchase of stock Dividends Dividends paid to noncontrolling interests by subsidiary Noncontrolling interests of acquired entities Comprehensive income (loss) BALANCE, DECEMBER 31, 2013 Issuance of stock for various plans, net Repurchase of stock xpedx spinoff Dividends Acquisition...

  • Page 66
    ... OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS SHIPPING AND HANDLING COSTS International Paper (the Company) is a global paper and packaging company with primary markets and manufacturing operations in North America, Europe, Latin America, Russia, Asia, Africa and the Middle...

  • Page 67
    ... statements based on the grant-date fair value of the equity or liability instruments issued. Compensation cost is recognized over the period that an employee provides service in exchange for the award. ENVIRONMENTAL REMEDIATION COSTS International Paper uses the asset and liability method of...

  • Page 68
    ... been issued. The Company is currently evaluating the provisions of this guidance. INVENTORY 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...

  • Page 69
    ... Restricted performance share plan Stock options (b) Average common shares outstanding - assuming dilution Basic earnings (loss) per share from continuing operations $ 3.2 - 420.6 2.25 2.23 4.2 0.1 432.0 $ 1.33 $ 1.31 4.5 0.3 448.1 $ 3.85 $ 3.80 $ $ 2015 938 - 938 417.4 $ 2014 $ 568 - 568 427.7 2013...

  • Page 70
    ... (b) (493) (b) (502) 195 (307) Cost of products sold Cost of products sold Amount Reclassified from Accumulated Other Comprehensive Income (a) 2015 2014 2013 Location of Amount Reclassified from AOCI Business acquisition/divestiture Tax (expense)/benefit Net of tax Net gains and losses on cash flow...

  • Page 71
    ... the Printing Papers segment. (b) Includes $15 million of severance charges. On July 19, 2011 the Company filed an amended 2009 tax return claiming alternative fuel mixture tax credits as non-taxable income. The amended position has been accepted by the Internal Revenue Service (IRS) in the closing...

  • Page 72
    ... of the tender offer. As of December 31, 2014 and 2015, the Company owned 91.7% of Olmuksan's outstanding and issued shares. 2013: On January 3, 2013, International Paper completed the acquisition (effective date of acquisition on January 1, 2013) of the shares of its joint venture partner, Sabanci...

  • Page 73
    ... 471 States, the Company reports Orsa IP's operating results on a one-month lag basis. NOTE 7 DIVESTITURES / SPINOFF DISCONTINUED OPERATIONS 2014: On July 1, 2014, International Paper completed the spinoff of its distribution business, xpedx, which subsequently merged with Unisource Worldwide, Inc...

  • Page 74
    ..., net of allowances, by classification were: In millions at December 31 Accounts and notes receivable: Trade Other Total INVENTORIES In millions at December 31 Raw materials Finished pulp, paper and packaging products Operating supplies Other Inventories $ $ 2015 339 $ 1,248 563 78 2,228 $ 2014 494...

  • Page 75
    ... a change in the strategic outlook for the business. In the fourth quarter of 2013, in conjunction with the annual testing of its reporting units for possible goodwill impairments, the Company calculated the estimated fair value of its India Papers business using the discounted future cash flows and...

  • Page 76
    ... business expenses Non-deductible impairments Sale of non-strategic assets Tax audits Subsidiary liquidation Retirement plan dividends Tax basis adjustments Tax credits Other, net Income tax provision (benefit) Effective income tax rate $ 2015 2014 2013 The Company recognized the following amounts...

  • Page 77
    ...interest and penalties associated with unrecognized tax benefits at December 31, 2015 and 2014, respectively. The major jurisdictions where the Company files income tax returns are the United States, Brazil, France, Poland and Russia. Generally, tax years 2003 through 2014 remain open and subject to...

  • Page 78
    ..., wood chips, raw materials, energy and services, including fiber supply agreements to purchase pulpwood that were entered into concurrently with the Company's 2006 Transformation Plan forestland sales and in conjunction with the 2008 acquisition of Weyerhaeuser Company's Containerboard, Packaging...

  • Page 79
    ... 31, 2015. Cass Lake: One of the matters included above arises out of a closed wood treating facility located in Cass Lake, Minnesota. During 2009, in connection with an environmental site remediation action under CERCLA, International Paper submitted to the United States Environmental Protection...

  • Page 80
    ... or otherwise reached agreements to: (1) raise prices of gypsum board either from 2008 or 2011 through the present; (2) avoid price erosion by ceasing the practice of issuing job quotes; and (3) restrict supply through downtime and limiting order fulfillment. On April 8, 2013, the Judicial Panel...

  • Page 81
    ... of a $92 million tax assessment issued by the state of Sao Paulo, Brazil for tax years 2011 through 2013. The assessment pertains to invoices issued by the Company related to the sale of paper to the editorial segment, which is exempt from the payment of ICMS value-added tax. This assessment is in...

  • Page 82
    ... 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) (a) 2015 2014 2013...

  • Page 83
    ... to maintain minimum credit ratings on their long-term debt. In the third quarter of 2012, International Paper completed its preliminary analysis of the acquisition date fair value of the notes and determined it to be $2.09 billion. As of December 31, 2015 and 2014, the fair value of the notes...

  • Page 84
    ... the bank facility or receivables securitization program. Maintaining an investment grade credit rating is an important element of International Paper's financing strategy. At December 31, 2015, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and...

  • Page 85
    ...cash flow and fair value hedges, which is not material for any year presented, is immediately recognized in earnings. FOREIGN CURRENCY RISK MANAGEMENT We manufacture and sell our products and finance operations in a number of countries throughout the world and, as a result, are exposed to movements...

  • Page 86
    ...rate contracts Total (a) (b) $ $ (7) - (4) 13 (a) 2 $ $ (2) - (1) 12 (b) 9 $ $ 4 (1) (5) 21 19 $ $ 3 (3) - $ $ 1 (1) - $ $ (1) 1 - 2015 2014 2013 Location of Gain (Loss) in Consolidated Statement of Operations Interest expense, net Interest expense, net Cost of products sold Interest expense, net...

  • Page 87
    ... contract counterparties, discounted to present value. The fair value of the future purchase payments is determined by comparing the contract price to the forward price and present valued using International Paper's cost of capital. Embedded Derivative Interest rate contracts are valued using swap...

  • Page 88
    ... hired by Temple Inland prior to March 1, 2007 also participate in the Pension Plan. The Pension Plan provides defined pension benefits based on years of credited service and either final average earnings (salaried employees and hourly employees receiving salaried benefits), hourly job rates or...

  • Page 89
    ...-Inland Retirement Plan, a defined benefit plan which covers substantially all employees of Temple-Inland. The Temple-Inland Retirement Plan merged with the Retirement Plan of International Paper Company on December 31, 2014. The Company also has three unfunded nonqualified defined benefit pension...

  • Page 90
    ... of foreign currency exchange rate movements 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...

  • Page 91
    ... the present value of the plan's projected benefit payments. To calculate pension expense for 2016, the Company will use an expected long-term rate of return on plan assets of 7.75% for the Retirement Plan of International Paper, a discount rate of 4.40% and an assumed rate of compensation increase...

  • Page 92
    ...101 376 - 2,873 The 2014 actual allocations shown represent a weighted average of International Paper and TempleInland plan assets as the TIN plan was fully merged into the IP plan by 2015. The fair values of International Paper's pension plan assets at December 31, 2015 and 2014 by asset class are...

  • Page 93
    ... December 31, 2014 Actual return on plan assets: Relating to assets still held at the reporting date Relating to assets sold during the period Purchases, sales and settlements Transfers in and/or out of Level 3 Ending balance at December 31, 2015 FUNDING AND CASH FLOWS $ $ Other fixed income Hedge...

  • Page 94
    ... net U.S. and nonU.S. postretirement benefit cost for the years ended December 31, 2015, 2014 and 2013 were as follows: 2015 U.S. Plans Discount rate NonU.S. Plans U.S. Plans 2014 NonU.S. Plans U.S. Plans 2013 NonU.S. Plans International Paper provides certain retiree health care and life insurance...

  • Page 95
    ... Current year prior service cost Amortization of prior service credit Currency impact The portion of the change in the funded status that was recognized in either net periodic benefit cost or OCI for the U.S. plans was $17 million, $33 million and $63 million in 2015, 2014 and 2013, respectively...

  • Page 96
    ... eligible U.S. and non-U.S. employees. In the United States, the stock option program was replaced with a performance-based restricted share program to more closely tie long-term incentive compensation to Company performance on two key performance drivers: return on invested capital (ROIC) and total...

  • Page 97
    ...Total stock-based compensation expense (included in selling and administrative expense) Income tax benefits related to stockbased compensation 2015 2014 2013 Share/Units Outstanding at December 31, 2012 Granted Shares issued Forfeited Outstanding at December 31, 2013 Granted Shares issued Forfeited...

  • Page 98
    ... 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...

  • Page 99
    ...AREA Net Sales (e) In millions United States (f) EMEA Pacific Rim and Asia Americas, other than U.S. Net Sales 2015 $ 16,554 2,770 1,501 1,540 $ 22,365 2014 $ 16,645 3,273 1,951 1,748 $ 23,617 2013 $ 16,371 3,250 2,114 1,748 $ 23,483 Capital Spending In millions Industrial Packaging Printing Papers...

  • Page 100
    ... RESULTS (UNAUDITED) In millions, except per share amounts and stock prices 2015 Net sales Gross margin (a) Earnings (loss) from continuing operations before income taxes and equity earnings Gain (loss) from discontinued operations Net earnings (loss) attributable to International Paper Company...

  • Page 101
    ... discontinued operations. (d) Includes the following pre-tax charges (gains): 2014 Q1 Temple-Inland integration Courtland mill shutdown Early debt extinguishment costs India legal contingency resolution Multi-employer pension plan withdrawal liability Foreign tax amnesty program Asia Industrial...

  • Page 102
    ..., as defined by Rule 13a-15 under the Exchange Act. Based upon this evaluation, our principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures were effective as of December 31, 2015. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER...

  • Page 103
    ... reporting during the quarter ended December 31, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. PART III. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information...

  • Page 104
    ... 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 8K dated February 8, 2016). (4.1) Indenture, dated as of April 12, 1999, between International Paper and The Bank of New York, as Trustee...

  • Page 105
    ... Stock Unit Award Agreement (stock settled). (incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013). + (10.10) Form of Performance Share Plan award certificate. * + (10.11) Pension Restoration Plan for Salaried Employees...

  • Page 106
    ... to Fixed Charges and Preferred Stock Dividends. * (21) List of Subsidiaries of Registrant. * (23) Consent of Independent Registered Public Accounting Firm. * (24) Power of Attorney (contained on the signature page to the Company's Annual Report on Form 10-K for the year ended December 31, 2015...

  • Page 107
    ... INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In millions) Balance at Beginning of Period Description Reserves Applied Against Specific Assets Shown on Balance Sheet: Doubtful accounts - current Restructuring reserves For the Year Ended...

  • Page 108
    ... of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /S/ MARK S. SUTTON Mark S. Sutton Chairman of the Board & Chief Executive Officer and Director February 25, 2016 /S/ DAVID...

  • Page 109
    ... February 25, 2016 /S/ RAY G. YOUNG Ray G. Young Director February 25, 2016 /S/ CAROL L. ROBERTS Carol L. Roberts Senior Vice President and Chief Financial Officer February 25, 2016 /S/ TERRI L. HERRINGTON Terri L. Herrington Vice President - Finance and Controller February 25, 2016 92

  • Page 110
    ... I 2015 LISTING OF FACILITIES (all facilities are owned except noted otherwise) PRINTING PAPERS Uncoated Papers and Pulp U.S.: Selma, Alabama (Riverdale Mill) Cantonment, Florida (Pensacola Mill) Ticonderoga, New York Riegelwood, North Carolina Eastover, South Carolina Georgetown, South Carolina...

  • Page 111
    ..., New Jersey Milltown, New Jersey Spotswood, New Jersey Thorofare, New Jersey Binghamton (Conklin), New York Buffalo, New York Rochester, New York Scotia, New York Utica, New York Charlotte, North Carolina (2 locations) 1 leased Lumberton, North Carolina Manson, North Carolina Newton, North Carolina...

  • Page 112
    ... DISTRIBUTION IP Asia International: China (8 locations) Malaysia Taiwan Thailand Vietnam FOREST PRODUCTS Bags U.S.: Buena Park, California Beaverton, Oregon Grand Prairie, Texas CONSUMER PACKAGING Coated Paperboard Augusta, Georgia Riegelwood, North Carolina Prosperity, South Carolina Texarkana...

  • Page 113
    ... II 2015 CAPACITY INFORMATION CONTINUING OPERATIONS Americas, other than U.S. (in thousands of short tons) Industrial Packaging Containerboard (a) Printing Papers Uncoated Freesheet Bristols Uncoated Papers and Bristols Dried Pulp Newsprint Total Printing Papers Consumer Packaging Coated Paperboard...

  • Page 114
    ... Information Officer Information Technology Patrick Wilczynski Vice President Coated Paperboard Ron P. Wise Vice President Commercial and National Accounts Container The Americas Ann B. Wrobleski Vice President Global Government Relations ILIM GROUP SENIOR LEADERSHIP Franz Josef Marx Chief Executive...

  • Page 115
    ... Research Scholar Columbia University School of International and Public Affairs John L. Townsend, III Former Managing Partner and Chief Operating Officer Tiger Management, LLC William G. Walter Retired Chairman and Chief Executive Officer FMC Corporation J. Steven Whisler Presiding Director Retired...

  • Page 116
    ...PAPER BOARD OF DIRECTORS As of March 1, 2016 GLOBAL HEADQUARTERS International Paper Company 6400 Poplar Avenue Memphis, TN 38197, U.S.A. REGIONAL HEADQUARTERS International Paper Asia 17-18F , West Building Greenland Center 600 Middle Longhua Road Shanghai, China 200032 International Paper India...

  • Page 117
    ...by Sustainable Forestry Initiative Inc. "World's Most Ethical Companies" and "Ethisphere" names and marks are registered trademarks of Ethisphere LLC. From FORTUNE Magazine, March 15, 2016 ©2016 Time Inc. Used under license. FORTUNE and Time Inc. are not affiliated with, and do not endorse products...