Consolidated Statement of Opera
Consolidated Statement of Operations (USD $) | ||||
In Millions | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Net Sales | $5,919 | $6,808 | $17,389 | $18,283 |
Costs and Expenses | ||||
Cost of products sold | 3,758 | 5,154 | 11,270 | 13,720 |
Selling and administrative expenses | 527 | 507 | 1,535 | 1,438 |
Depreciation, amortization and cost of timber harvested | 378 | 374 | 1,088 | 965 |
Distribution expenses | 299 | 376 | 857 | 962 |
Taxes other than payroll and income taxes | 48 | 48 | 145 | 136 |
Restructuring and other charges | 151 | 97 | 313 | 152 |
Gain on sale of mineral rights | 0 | (261) | 0 | (261) |
Gain on sale of forestlands | 0 | (3) | 0 | (6) |
Net losses on sales and impairments of businesses | 0 | 107 | 48 | 106 |
Interest expense, net | 169 | 144 | 506 | 306 |
Earnings From Continuing Operations Before Income Taxes and Equity Earnings | 589 | 265 | 1,627 | 765 |
Income tax provision | 212 | 118 | 790 | 274 |
Equity earnings (losses), net of taxes | 0 | 5 | (59) | 51 |
Earnings from continuing operations | 377 | 152 | 778 | 542 |
Discontinued operations, net of taxes | 0 | 0 | 0 | (18) |
Net Earnings | 377 | 152 | 778 | 524 |
Net earnings attributable to noncontrolling interests | 6 | 3 | 14 | 15 |
Net earnings attributable to International Paper Company | 371 | 149 | 764 | 509 |
Basic Earnings Per Share Attributable to International Paper Company Shareholders | ||||
Earnings from continuing operations | 0.87 | 0.35 | 1.8 | 1.25 |
Discontinued operations | 0 | 0 | 0 | -0.04 |
Net earnings | 0.87 | 0.35 | 1.8 | 1.21 |
Diluted Earnings Per Share Attributable to International Paper Company Shareholders | ||||
Earnings from continuing operations | 0.87 | 0.35 | 1.79 | 1.24 |
Discontinued operations | 0 | 0 | 0 | -0.04 |
Net earnings | 0.87 | 0.35 | 1.79 | 1.2 |
Average Shares of Common Stock Outstanding - Assuming Dilution | 428.7 | 423.4 | 426.6 | 424.2 |
Cash Dividends Per Common Share | 0.025 | 0.25 | 0.3 | 0.75 |
Amounts Attributable to International Paper Company Common Shareholders | ||||
Earnings from continuing operations, net of taxes | 371 | 149 | 764 | 527 |
Discontinued operations, net of taxes | 0 | 0 | 0 | (18) |
Net earnings attributable to International Paper Company | $371 | $149 | $764 | $509 |
Consolidated Balance Sheet
Consolidated Balance Sheet (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
Current Assets | ||
Cash and temporary investments | $1,652 | $1,144 |
Accounts and notes receivable, net | 3,080 | 3,288 |
Inventories | 2,278 | 2,495 |
Deferred income tax assets | 207 | 261 |
Other current assets | 300 | 172 |
Total Current Assets | 7,517 | 7,360 |
Plants, Properties and Equipment, net | 13,699 | 14,202 |
Forestlands | 749 | 594 |
Investments | 1,102 | 1,274 |
Goodwill | 2,288 | 2,027 |
Deferred Charges and Other Assets | 1,326 | 1,456 |
Total Assets | 26,681 | 26,913 |
Current Liabilities | ||
Notes payable and current maturities of long-term debt | 369 | 828 |
Accounts payable | 2,066 | 2,119 |
Accrued payroll and benefits | 466 | 445 |
Other accrued liabilities | 1,415 | 1,363 |
Total Current Liabilities | 4,316 | 4,755 |
Long-Term Debt | 9,253 | 11,246 |
Deferred Income Taxes | 2,514 | 1,957 |
Pension Benefit Obligation | 3,303 | 3,260 |
Postretirement and Postemployment Benefit Obligation | 632 | 663 |
Other Liabilities | 779 | 631 |
Equity | ||
Common stock, $1 par value, 2009 - 436.6 shares and 2008 - 433.6 shares | 437 | 434 |
Paid-in capital | 5,787 | 5,845 |
Retained earnings | 2,062 | 1,430 |
Accumulated other comprehensive loss | (2,558) | (3,322) |
Total Shareholders' Equity Before Treasury Shares | 5,728 | 4,387 |
Less: Common stock held in treasury, at cost, 2009 - 3.6 shares and 2008 - 6.1 shares | 83 | 218 |
Total Shareholders' Equity | 5,645 | 4,169 |
Noncontrolling interests | 239 | 232 |
Total Equity | 5,884 | 4,401 |
Total Liabilities and Equity | $26,681 | $26,913 |
Statement - Parenthetical Data
Statement - Parenthetical Data to The Consolidated Balance Sheet (USD $) | ||
Share data in Millions | Sep. 30, 2009
| Dec. 31, 2008
|
Equity | ||
Common Stock, Par or Stated Value Per Share | 1 | 1 |
Common Stock, Shares, Outstanding | 436.6 | 433.6 |
Treasury Stock, Shares | 3.6 | 6.1 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Operating Activities | ||
Net earnings attributable to International Paper Company | $764 | $509 |
Net earnings attributable to noncontrolling interests | 14 | 15 |
Discontinued operations, net of taxes | 0 | 18 |
Earnings from continuing operations | 778 | 542 |
Depreciation, amortization and cost of timber harvested | 1,088 | 965 |
Deferred income tax expense (benefit), net | 585 | (51) |
Restructuring and other charges | 313 | 152 |
Payments related to restructuring and legal reserves | (35) | (71) |
Net losses on sales and impairments of businesses | 48 | 106 |
Equity loss (earnings), net | 59 | (51) |
Periodic pension expense, net | 160 | 89 |
Gain on sale of forestlands | 0 | (3) |
Alternative fuel mixture credits receivable | (251) | 0 |
Other, net | 140 | 65 |
Changes in current assets and liabilities | ||
Accounts and notes receivable | 466 | (12) |
Inventories | 262 | (104) |
Accounts payable and accrued liabilities | (38) | 255 |
Interest payable | 21 | (12) |
Other | (26) | 86 |
Cash Provided by Operations | 3,570 | 1,956 |
Investment Activities | ||
Invested in capital projects | (367) | (732) |
Acquisitions, net of cash acquired | (17) | (6,086) |
Proceeds from divestitures | 0 | 14 |
Equity investment in Ilim | 0 | (21) |
Other | (59) | (147) |
Cash Used for Investment Activities | (443) | (6,972) |
Financing Activities | ||
Repurchases of common stock and payments of restricted stock tax withholding | (10) | (47) |
Issuance of common stock | 0 | 1 |
Issuance of debt | 2,490 | 6,011 |
Reduction of debt | (4,911) | (627) |
Change in book overdrafts | (5) | (45) |
Dividends paid | (129) | (321) |
Other | (113) | (69) |
Cash (Used for) Provided by Financing Activities | (2,678) | 4,903 |
Effect of Exchange Rate Changes on Cash | 59 | (21) |
Change in Cash and Temporary Investments | 508 | (134) |
Cash and Temporary Investments | ||
Beginning of period | 1,144 | 905 |
End of period | $1,652 | $771 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | |
9 Months Ended
Sep. 30, 2009 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments that are necessary for the fair presentation of the Companys financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed herein, such adjustments are of a normal, recurring nature. Results for the first nine months of the year may not necessarily be indicative of full year results. It is suggested that these consolidated financial statements be read in conjunction with the audited financial statements and the notes thereto included in International Paper's (the Company) Annual Report on Form 10-K for the year ended December 31, 2008, and International Papers Current Report on Form 8-K filed on May 13, 2009 to update the historical financial statements included in the Companys Form 10-K for the year ended December 31, 2008 to reflect the retrospective application of guidance issued related to noncontrolling interests in consolidated financial statements (collectively the 2008 10-K), both of which have previously been filed with the Securities and Exchange Commission. International Paper accounts for its investment in Ilim Holding S.A., a separate reportable industry segment, using the equity method of accounting. Due to the complex organizational structure of Ilims operations, and the extended time required to prepare consolidated financial information in accordance with accounting principles generally accepted in the United States, the Company reports its share of Ilims operating results on a one-quarter lag basis. |
RECENT ACCOUNTING DEVELOPMENTS
RECENT ACCOUNTING DEVELOPMENTS | |
9 Months Ended
Sep. 30, 2009 | |
Recent Accounting Developments [Abstract] | |
Recent Accounting Developments | NOTE 2 RECENT ACCOUNTING DEVELOPMENTS Revenue Arrangements with Multiple Deliverables: In September 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2009-13, Multiple-Deliverable Revenue Arrangements, which amends the multiple-element arrangement guidance under Accounting Standards Codification (ASC) 605, Revenue Recognition. This guidance amends the criteria for separating consideration of products or services in multiple-deliverable arrangements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, eliminates the residual method of allocation, and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method. In addition, this guidance significantly expands required disclosures related to a vendors multiple-deliverable revenue arrangements. This guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 (calendar year 2011). The Company is currently evaluating the provisions of this guidance but does not anticipate that it will have a material effect on its consolidated financial statements. Variable Interest Entities: In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), which amends the consolidation guidance that applies to variable interest entities under ASC810, Consolidation (FIN 46(R), Consolidation of Variable Interest Entities). SFAS No. 167 changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. This guidance is effective for financial statements issued in fiscal years (and interim periods) beginning after November 15, 2009 (calendar year 2010). The Company is currently evaluating the provisions of this guidance but does not anticipate that it will have a material effect on its consolidated financial statements. Transfers of Financial Assets: In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets - An Amendment of FASB Statement No. 140, which amends the derecognition guidance in ASC 860, Transfers and Servicing of Financial Assets (SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities). This guidance eliminates the concept of qualifying special-purpose entities, changes the requirements for derecognizing financial assets and requires additional disclosures. This guidance is effective for financial asset transfers occurring after the beginning of an entitys first fiscal year beginning after November 15, 2009 (calendar year 2010). The Company is currently evaluating the provisions of this guidance but does not anticipate that it will have a material effect on its consolidated financial statements. Subsequent Events: In May 2009, the FASB issued ASC 855, Subsequent Events (SFAS No. 165, Subsequent Events) which establishes general standards of accounting for and disclosure of events that occur after the balance sheet d |
EQUITY
EQUITY | |
9 Months Ended
Sep. 30, 2009 | |
[EquityAbstract] | |
Equity | NOTE 3 EQUITY A summary of the changes in equity for the nine month periodsended September 30, 2009 and 2008 is provided below: Nine MonthsEnded September 30, 2009 2008 In millions Total International Paper Shareholders Equity Noncontrolling Interests Total Equity Total International Paper Shareholders Equity Noncontrolling Interests Total Equity Balance, January 1 $ 4,169 $ 232 $ 4,401 $ 8,672 $ 228 $ 8,900 Issuance of stock for various plans, net 91 - 91 99 - 99 Repurchase of stock (10 ) - (10 ) (47 ) - (47 ) Common stock dividends ($0.30 per share in 2009 and $0.75 per share in 2008) (133 ) - (133 ) (325 ) - (325 ) Dividends paid to noncontrolling interests by subsidiary - (6 ) (6 ) - (8 ) (8 ) Noncontrolling interests of acquired entities - (1 ) (1 ) - - - Comprehensive income: Net earnings 764 14 778 509 15 524 Amortization of pension and post-retirement prior service costs and net loss: U.S. plans 82 - 82 62 - 62 Non-U.S. plans 7 - 7 3 - 3 Change in cumulative foreign currency translation adjustment 604 - 604 (163 ) 4 (159 ) Net losses / gains on cash flow hedging derivatives: Net gains arisingduring the period 31 - 31 16 - 16 Less: Reclassification adjustment for losses (gains) included in net income 40 - 40 (61 ) - (61 ) Total comprehensive income 1,542 385 Balance, September 30 $ 5,645 $ 239 $ 5,884 $ 8,765 $ 239 $ 9,004 |
EARNINGS PER SHARE ATTRIBUTABLE
EARNINGS PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | |
9 Months Ended
Sep. 30, 2009 | |
Earnings Per Share Attributable to Parent Company Common Shareholders [Abstract] | |
Earnings Per Common Share | NOTE 4 - EARNINGS PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS Basic earnings per common share from continuing operations are computed by dividing earnings from continuing operations by the weighted average number of common shares outstanding. Diluted earnings per common share from continuing operations are computed assuming that all potentially dilutive securities, including "in-the-money" stock options, were converted into common shares at the beginning of each period. In addition, the computation of diluted earnings per share reflects the inclusion of contingently convertible securities in periods where dilutive. A reconciliation of the amounts included in the computation of earnings per common share from continuing operations and diluted earnings per common share from continuing operations is as follows: Three Months Ended September 30, Nine Months Ended September 30, In millions, except per share amounts 2009 2008 2009 2008 Earnings from continuing operations $ 371 $ 149 $ 764 $ 527 Effect of dilutive securities (a) - - - - Earnings from continuing operations assuming dilution $ 371 $ 149 $ 764 $ 527 Average common shares outstanding 426.1 421.2 424.8 421.0 Effect of dilutive securities Restricted stock performance share plan (a) 2.6 2.2 1.8 3.2 Stock options(b) - - - - Average common shares outstanding assuming dilution 428.7 423.4 426.6 424.2 Basic earnings per common share from continuing operations $ 0.87 $ 0.35 $ 1.80 $ 1.25 Diluted earnings per common share from continuing operations $ 0.87 $ 0.35 $ 1.79 $ 1.24 (a) Securities are not included in the table in periods when antidilutive. (b) Options to purchase 22.8 million shares and 25.7 million shares for the three months ended September 30, 2009 and 2008, respectively, and options to purchase 22.8 million shares and 25.7 million shares for the nine months ended September 30, 2009 and 2008, respectively, were not included in the computation of diluted common shares outstanding because their exercise price exceeded the average market price of the Companys common stock for each respective reporting period. |
RESTRUCTURING CHARGES AND OTHER
RESTRUCTURING CHARGES AND OTHER ITEMS | |
9 Months Ended
Sep. 30, 2009 | |
Restructuring Business Improvement And Other Charges [Abstract] | |
Restructuring, Business Improvement and Other Charges | NOTE 5 - RESTRUCTURING CHARGES AND OTHER ITEMS 2009: Restructuring and Other Charges During the third quarter of 2009, restructuring and other charges totaling $151 million before taxes ($95 million after taxes) were recorded, including a $102 million charge before taxes ($62 million after taxes) for costs related to the early extinguishment of debt (see Note 12), a $39 million charge before taxes ($24 million after taxes) for severance and benefit costs associated with the Companys 2008 overhead reduction program, a $7 million charge, before and after taxes, for severance and other costs related to the planned closure of the Companys Etienne mill in France, and a $3 million charge before taxes ($2 million after taxes) for other closure costs. During the second quarter of 2009, restructuring and other charges totaling $79 million before taxes ($55 million after taxes) were recorded, including a $34 million charge before taxes ($21 million after taxes) for severance and benefit costs associated with the Companys 2008 overhead reduction program, a $25 million charge before taxes ($16 million after taxes) related to early debt extinguishment costs, a $15 million charge, before and after taxes, for severance and other costs related to the planned closure of the Companys Etienne mill in France, and a $5 million charge before taxes ($3 million after taxes) for other closure costs. Additionally, the second quarter income tax provision includeda $156 million charge to establish a valuation allowance for deferred tax assets in France and a $26 million credit related to the settlement of certain tax issues(see Note 10). During the first quarter of 2009, restructuring and other charges totaling $83 million before taxes ($65 million after taxes) were recorded, including a $52 million charge before taxes ($32 million after taxes) for severance and benefits associated with the Companys 2008 overhead reduction program, a $23 million charge before taxes ($28 million after taxes) for closure costs related to the Inverurie mill in Scotland, a $6 million charge before taxes ($4 million after taxes) for closure costs for the Franklin, Virginia, lumber mill, sheet converting plant and converting innovations center, and a $2 million pre-tax charge ($1 million after taxes) for costs associated with the reorganization of the Companys Shorewood Packaging operations. Additionally, a $20 million charge was recorded related to certain tax adjustments (see Note 10). Alternative Fuel Mixture Credits The U.S. Internal Revenue Code provides a tax credit for companies that use alternative fuel mixtures to produce energy to operate their businesses. The credit, equal to $0.50 per gallon of alternative fuel contained in the mixture, is refundable to the taxpayer. In January 2009, the Company received notification that its application to be registered as an alternative fuel mixer had been approved. During the first nine months of2009, the Company filed claims for alternative fuel mixture credits covering eligible periods subsequent to November 2008 totaling approximately $1.5 billion, including $251 million recorded inAccounts and notes receivable at Sept |
ACQUISITIONS, EXCHANGES AND JOI
ACQUISITIONS, EXCHANGES AND JOINT VENTURES | |
9 Months Ended
Sep. 30, 2009 | |
Acquisitions, Exchanges and Joint Ventures [Abstract] | |
Acquisitions, Exchanges and Joint Ventures | NOTE 6 ACQUISITIONS, EXCHANGES AND JOINT VENTURES On August 4, 2008, International Paper completed the acquisition of the assets of Weyerhaeuser Companys Containerboard, Packaging and Recycling business (CBPR) for $6 billion in cash, subject to post-closing adjustments. In June 2008, the Company had issued $3 billion of unsecured senior notes in anticipation of the CBPR business acquisition. The remainder of the purchase price was financed through borrowings under a $2.5 billion bank term loan, $0.4 billion of borrowings under a receivables securitization program and existing cash balances. CBPRs financial position and operating results have been included in International Papers North American Industrial Packaging business from the date of acquisition. The following table summarizes the final allocation of the purchase price, plus direct acquisition costs, to the fair value of assets and liabilities acquired. In millions Cash and temporary investments $ 2 Accounts and notes receivable, net 655 Inventories 568 Other current assets 11 Plants, properties and equipment, net 4,816 Goodwill 445 Other intangible assets 65 Deferred charges and other assets 63 Total assets acquired 6,625 Accounts payable and accrued liabilities 463 Other liabilities 85 Total liabilities assumed 548 Net assets acquired $ 6,077 The identifiable intangible assets acquired in connection with the CBPR acquisition included the following: In millions Estimated Fair Value Average Remaining Useful Life (at acquisition date) Asset Class: Trade names $ 8 4 - 12 years Patented technology 15 4 - 12 years Proprietary software 16 4 - 5 years Power agreements 20 1 - 7 years Water rights 6 Indefinite Total $ 65 Selling and administrative expenses for the three months and nine months ended September 30, 2009 included charges of $18 million before taxes ($11 million after taxes) and $72 million before taxes ($44 million after taxes), respectively, of costs related to the integration of the CBPR business. Additionally, Selling and administrative expenses for the 2008 third quarter included a $19 million charge before taxes ($12 million after taxes) for integration costs associated with this acquisition. The following unaudited pro forma information for the three months and nine months ended September 30, 2008 presents the results of operations of International Paper as if the CBPR acquisition had occurred on January 1, 2008. This pro forma information does not purport to represent International Papers actual results of operations if the transaction described above would have occurred on January 1, 2008, nor is it necessarily indicative of future results. In millions, except per share amounts Three Months Ended September 30, 2008 Nine Months Ended September 30, 2008 Net sales $ 7,298 $ 21,405 Earnings from continuing operations (1) 138 411 Net earnings (1) 138 |
BUSINESSES HELD FOR SALE AND DI
BUSINESSES HELD FOR SALE AND DIVESTITURES | |
9 Months Ended
Sep. 30, 2009 | |
Businesses Held For Sale Divestitures And Impairments [Abstract] | |
Businesses Held for Sale, Divestitures and Impairments | NOTE 7 - BUSINESSES HELD FOR SALE AND DIVESTITURES Discontinued Operations: 2008: During the first quarter of 2008, the Company recorded a pre-tax charge of $25 million ($16 million after taxes) related to the final settlement of a post-closing adjustment to the purchase price received by the Company for the sale of its Beverage Packaging business, and a $2 million charge before taxes ($1 million after taxes) for operating losses related to certain wood products facilities. Forestlands: 2008: During both the second and third quarters of 2008, the Company recorded a $3 million gain before taxes ($2 million after taxes) to reduce estimated transaction costs accrued in connection with the 2006 Transformation Plan forestlands sales. Other Divestitures and Impairments: 2009: During the second quarter of 2009, based on a current strategic plan update of projected future operating results of the Companys Etienne, France mill, a determination was made that the current book value of the mills long-lived assets exceeded their estimated fair value, calculated using the probability-weighted present value of projected future cash flows. As a result, a $48 million charge, before and after taxes, was recorded in the Companys Industrial Packaging industry segment to write down the long-lived assets of the mill to their estimated fair value. This charge is included in Net losses on sales and impairments of businesses in the accompanying consolidated statement of operations. 2008: During the third quarter of 2008, based on a current strategic plan update of projected future operating results of the Companys Inverurie mill, a determination was made that the current book value of the mills long-lived assets exceeded their estimated fair value, calculated using the probability-weighted present value of projected future cash flows. As a result, a $107 million pre-tax charge ($84 million after taxes) was recorded in the Companys Printing Papers industry segment to write down the long-lived assets of the mill to their estimated fair value. This charge is included in Net losses on sales and impairments of businesses in the accompanying consolidated statement of operations. During the first quarter of 2008, a $1 million credit, before and after taxes, was recorded to adjust previously estimated gains/losses of businesses previously sold. |
SUPPLEMENTAL FINANCIAL STATEMEN
SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION | |
9 Months Ended
Sep. 30, 2009 | |
Supplemental Financial Statement Information [Abstract] | |
Supplemental Financial Statement Information | NOTE 8 - SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION Temporary investments with an original maturity of three months or less are treated as cash equivalents and are stated at cost. Temporary investments totaled $1.3 billion and $908 million at September 30, 2009 and December 31, 2008, respectively. Inventories by major category were: In millions September 30, 2009 December 31, 2008 Raw materials $ 377 $ 405 Finished pulp, paper and packaging 1,465 1,658 Operating supplies 376 379 Other 60 53 Total $ 2,278 $ 2,495 Accumulated depreciation was $16.8 billion at September 30, 2009 and $15.6 billion at December 31, 2008.The allowance for doubtful accounts was $136 million at September 30, 2009 and $121 million at December 31, 2008. The gross carrying amount of Intangible Assets, excluding goodwill, was $311 million ($255 million net of accumulated amortization) and $284 million ($246 million net of accumulated amortization) at September 30, 2009 and December 31, 2008, respectively. The Company recognized amortization expense of intangible assets of approximately $25 million and $24 million for the first nine months of 2009 and 2008, respectively. There was no material activity related to asset retirement obligations during either the first nine months of 2009 or 2008. Interest payments made during the nine-month periods ended September 30, 2009 and 2008 were $444 million and $321 million, respectively. Capitalized interest costs were $9 million and $19 million for the nine months ended September 30, 2009 and 2008, respectively. Total interest expense was $530 million for the first nine months of 2009 and $374 million for the first nine months of 2008. Interest income was $24 million and $68 million for the nine months ended September 30, 2009 and 2008, respectively. Interest expense and interest income in 2009 and 2008 exclude approximately $98 million and $179 million, respectively, related to investments in and borrowings from variable interest entities for which the Company has a legal right of offset. Distributions under preferred securities paid by Southeast Timber, Inc., a consolidated subsidiary of International Paper, were $5 million and $8 million during the first nine months of 2009 and 2008, respectively. The expense related to these preferred securities was included as a component of Net earnings attributable to noncontrolling interests. Income tax payments of $49 million and $104 million were made during the first nine months of 2009 and 2008, respectively. Equity earnings, net of taxes includes the Companys share of earnings from its investment in Ilim Holding S.A. (a loss of $56 million and earnings of $54 million for the nine months ended September 30, 2009 and 2008, respectively) and certain other smaller investments. The components of the Companys postretirement benefit cost were as follows: Three Months Ended September 30, Nine Months Ended September 30, In millions 2009 2008 2009 2008 Service cost $ - $ 1 $ 1 $ 2 Interest c |
GOODWILL
GOODWILL | |
9 Months Ended
Sep. 30, 2009 | |
Goodwill [Abstract] | |
Goodwill | NOTE 9 - GOODWILL The following tables present changes in goodwill balances as allocated to each business segment for the nine-month periods ended September 30, 2009 and 2008: In millions Balance December 31, 2008 Reclassifications and Other (a) Additions/ (Reductions) Balance September 30, 2009 Industrial Packaging $ 989 $ 3 $ 140 (b) $ 1,132 Printing Papers 537 135 (18 ) (c) 654 Consumer Packaging 102 - - 102 Distribution 399 - 1 400 Total $ 2,027 $ 138 $ 123 $ 2,288 (a) Represents the effects of foreign currency translations and reclassifications. (b) Reflects purchase accounting adjustments related to the CBPR acquisition. (c) Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in Brazil. In millions Balance December 31, 2007 Reclassifications and Other (a) Additions/ (Reductions) Balance September 30, 2008 Industrial Packaging $ 683 $ (2 ) $ 281 (b) $ 962 Printing Papers 2,043 (43 ) (21 ) (c) 1,979 Consumer Packaging 530 6 5 (d) 541 Distribution 394 - 1 395 Total $ 3,650 $ (39 ) $ 266 $ 3,877 (a) Represents the effects of foreign currency translations and reclassifications. (b) Reflects $279 million related to the CBPR acquisition and $2 million in purchase accounting adjustments related to the Compagnie Marocaine des Cartons et des Papiers (CMCP) exchange. (c) Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in Brazil. (d) Reflects additional goodwill related to joint ventures in China. In the fourth quarter of 2008, the Company performed an interim test for possible goodwill impairment as of December 31, 2008, and recorded preliminary estimated impairment charges of $379 million, representing all of the goodwill for the U.S. Coated Paperboard business, and $1.3 billion, representing all of the goodwill for the U.S. Printing Papers business. During the first quarter of 2009, the Company finalized the testing for these businesses resulting in no changes to the recorded impairment charges. |
INCOME TAXES
INCOME TAXES | |
9 Months Ended
Sep. 30, 2009 | |
Income Taxes [Abstract] | |
Income Taxes | NOTE 10 INCOME TAXES At December 31, 2008, cumulative unrecognized tax benefits totaled $435 million. During the first two quarters of 2009, unrecognized tax benefits decreased by $157 million, primarily as a result of an agreement reached with the U.S. Internal Revenue Service on the Companys 2004 and 2005 U.S. federal income tax audits. In the third quarter of 2009, unrecognized tax benefits decreased by $20 million to $258 million, and accrued interest and tax penalties increased by $2 million to $76 million, primarily due to the state tax impact of the settlement of the Companys 2004 and 2005 U.S. federal tax audits. The Company currently estimates that, as a result of ongoing discussions, pending tax settlements and expirations of statutes of limitations, the amount of unrecognized tax benefits could be reduced by approximately $80 million during the next twelve months. During the 2009 second quarter, in connection with the ongoing evaluation of the Companys Etienne mill in France, the Company determined that the future realization of previously recorded deferred tax assets in France, including net operating loss carryforwards, no longer met the more likely than not standard for asset recognition. Accordingly, a charge of $156 million, before and after taxes, was recorded in the quarter to establish a valuation allowance for 100% of these assets. Additionally during the quarter, as a result of the agreement on the 2004 and 2005 U.S. federal income tax audit and related state income tax effects, a $26 million credit was recorded. These two items are included in the Income tax provision for the nine months ended September 30, 2009 in the accompanying consolidated statement of operations. During the 2009 first quarter, the Company recorded in income tax expense charges totaling $20 million, consisting of a $14 million adjustment of deferred income taxes relating to incentive compensation payments during the quarter and a $6 million charge relating to recent state income tax legislation. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | |
9 Months Ended
Sep. 30, 2009 | |
Commitments And Contingent Liabilities [Abstract] | |
Commitments and Contingent Liabilities | NOTE 11 - COMMITMENTS AND CONTINGENCIES In May 2008, a recovery boiler at the Companys Vicksburg, Mississippi facility exploded, resulting in one fatality and injuries to employees of contractors working on the site. The Company resolved four of the eight pending lawsuits and believes that it has adequate insurance to resolve remaining matters. The Company believes that the settlement of these lawsuits will not have a material adverse effect on its consolidated financial statements. During the 2009 third quarter, in connection with an environmental site remediation action under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), International Paper submitted to the Environmental Protection Agency (EPA) a feasibility study for this site. The EPA has indicated that, during the fourth quarter of 2009, it intends to select a proposed remedial action alternative from those identified in the study and to present this proposal for public comment. Since it is not currently possible to determine the final remedial action that will be required, the Company has accrued, as of September 30, 2009, an estimate of the minimum costs that could be required for this site. When the remediation plan is finalized by the EPA, it is possible that the remediation costs could be significantly higher than amounts currently recorded. Exterior Siding and Roofing Litigation: International Paper has established reserves relating to the settlement, during 1998 and 1999, of three nationwide class action lawsuits against the Company and Masonite Corp., a former wholly-owned subsidiary of the Company. Those settlements relate to (1) exterior hardboard siding installed during the 1980s and 1990s (the Hardboard Claims); (2) Omniwood siding installed during the 1990s (the Omniwood Claims); and (3) Woodruf roofing installed during the 1980s and 1990s (the Woodruf Claims). Each of these settlements is discussed in detail in Note 11, Commitments and Contingent Liabilities, to the financial statements included in International Papers 2008 10-K. All Hardboard Claims were required to be made by January 15, 2008, while all Omniwood and Woodruf Claims were required to be made by January 6, 2009. Net settlement payments for the nine-month period ended September 30, 2009 totaled $35 million. Remaining reserve balances for these settlements totaled $6 million at September 30, 2009. Other Legal Matters: International Paper is involved in various other inquiries, administrative proceedings and litigation relating to contracts, real property, intellectual property, environmental, safety, tax, antitrust, personal injury, labor and employment and other matters. While any proceeding or litigation has the element of uncertainty, the Company believes that the outcome of any of the lawsuits or claims that are pending or threatened, or all of them combined, will not have a material adverse effect on its consolidated financial statements. |
DEBT
DEBT | |
9 Months Ended
Sep. 30, 2009 | |
Debt [Abstract] | |
Debt | NOTE 12 DEBT In August 2009, International Paper issued $1 billion of 7.5% senior unsecured notes with a maturity date in August 2021. The proceeds from this borrowing were used to repay approximately $942 million of notes with interest rates ranging from 5.125% to 7.4% and original maturities from 2012 to 2026. During the nine months ended September 30, 2009, International Paper repaid approximately $1.4 billion ($1.1 billion in the third quarter) of the $2.5 billion long-term debt issued in connection with the CBPR business acquisition. Pre-tax early debt retirement costs of $118 million related to third quarter debt repayments are included in Restructuring and other charges in the accompanying consolidated statement of operations. In May 2009, International Paper issued $1 billion of 9.375% senior unsecured notes with a maturity date in May 2019. The proceeds from this borrowing were used to repay approximately $875 million of notes with interest rates ranging from 4.0% to 9.25% and original maturities from 2010 to 2012.Also during the second quarter, International Paper Company Europe Ltd, a wholly-owned subsidiary of International Paper, repaid $75 million of notes issued in connection with the Ilim Holdings S.A. joint ventures that matured during the quarter. Pre-tax early debt retirement costs of $25 million related to second quarter debt repayments are included in Restructuring and other charges in the accompanying consolidated statement of operations. In March 2009, International Paper Investments (Luxembourg)S.a.r.l, a wholly-owned subsidiary of International Paper, borrowed $468 million of long-term debt with an initial interest rate of LIBOR plus a margin of 450 basis points that can vary depending upon the credit rating of the Company, and a maturity date in March 2012. International Paper used the $468 million of proceeds from the loan and cash of approximately $170 million to repay its 500 million euro-denominated debt (equivalent to $638 million at date of payment) with an original maturity date in August 2009.As of the end of the third quarter of 2009, the $468 million loan has been repaid.Other debt activities in the first quarter of 2009 included the repayment of approximately $366 million of notes with interest rates ranging from 4.25% to 5.0% that had matured. In August 2008, International Paper borrowed $2.5 billion of long-term debt with an initial interest rate of LIBOR plus a margin of 162.5 basis points. The margin can vary depending upon the credit rating of the Company. The debt requires quarterly principal payments, which started in the fourth quarter of 2008, and has a final maturity in August 2013. Debt issuance costs of approximately $50 million related to this borrowing were recorded in Deferred charges and other assets in the accompanying consolidated balance sheet and are being amortized over the term of the loan. Also, in August 2008, International Paper borrowed approximately $395 million under its receivables securitization program. These funds, together with the $3 billion from unsecured senior notes borrowed in the second quarter discussed below and other available cash, were used fo |
DERIVATIVES AND HEDGING ACTIVIT
DERIVATIVES AND HEDGING ACTIVITIES | |
9 Months Ended
Sep. 30, 2009 | |
Derivatives and Hedging Activities [Abstract] | |
Derivatives and Hedging Activities | NOTE 13 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 transactions 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, as well as the risk management objective and strategy for undertaking each hedge transaction. Derivatives are recorded in the consolidated balance sheet at fair value, determined using available market information or other appropriate valuation methodologies, in Other current assets, Deferred charges and other assets, Other accrued liabilities or Other liabilities. The earnings impact resulting from changes in the fair value of derivative instruments is recorded in the same line item in the consolidated statement of operations as the underlying exposure being hedged or in Other comprehensive income for derivatives that qualify as cash flow hedges. Any ineffective portion of a financial instruments change in fair value is recognized currently in earnings together with changes in the fair value of any derivatives not designated as hedges. Foreign exchange contracts are used by International Paper to offset the earnings impact relating to the variability in exchange rates on certain monetary assets and liabilities denominated in non-functional currencies and are not designated as hedges. Changes in the fair value of these instruments, recognized currently in earnings to offset the remeasurement of the related assets and liabilities, totaled losses of approximately $50 million and $27 million for the nine months ended September 30, 2009 and 2008, respectively. Fair Value Hedges For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in earnings. International Paper utilizes interest rate swaps as fair value hedges of the benchmark interest rates of fixed rate debt. At September 30, 2009 and December 31, 2008, the outstanding notional amounts of interest rate swap agreements that qualify as fully effective fair value hedges were approximately $112 million and $484 million, respectively. In the third quarter of 2009, the Company entered into a fixed-to-floating interest rate swap agreement with a notional value of $100 million. The interest rate swap was effective August 2009 and matures April 2015. The interest rate swap is being accounted for as a fair value hedge of the benchmark interest rate. Also in the third quarter of 2009, in connection with various early debt retirements, interest rate swap hedges with a notional value of $520 million, including $500 million of the swaps issued in the second quarter, were terminated or undesignated as an effective fair value hedge resulting in a gain of approximately $9 million. In addition, a previously |
RETIREMENT PLANS
RETIREMENT PLANS | |
9 Months Ended
Sep. 30, 2009 | |
Retirement Plans [Abstract] | |
Retirement Plans | NOTE 14 RETIREMENT PLANS International Paper maintains pension plans that provide retirement benefits to substantially all salaried U.S. employees hired prior to July 1, 2004 and substantially all hourly and union employees regardless of hire date. These employees generally are eligible to participate in the plans upon completion of one year of service and attainment of age 21. Salaried employees hired after June 30, 2004, who are not eligible for these pension plans, receive an additional company contribution to their individual savings plans. The pension plans provide defined benefits based on years of credited service and either final average earnings (salaried employees), hourly job rates or specified benefit rates (hourly and union employees). A detailed discussion of these plans is presented in Note 16 to the financial statements included in International Papers 2008 10-K. Net periodic pension expense for qualified and nonqualified U.S. defined benefit plans consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, In millions 2009 2008 2009 2008 Service cost $ 30 $ 28 $ 90 $ 76 Interest cost 134 135 402 404 Expected return on plan assets (159 ) (168 ) (475 ) (503 ) Actuarial loss 40 30 120 90 Amortization of prior service cost 8 7 23 22 Net periodic pension expense (a) $ 53 $ 32 $ 160 $ 89 (a) Excludes charges of $15 million and $62 million for the three-month and nine-month periods ended September 30, 2009, respectively, for termination benefits related to cost reduction programs recorded in Restructuring and other charges in the consolidated statement of operations. The Companys 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 has no obligation to fund its domestic qualified plan in 2009. The Company continually reassesses the amount and timing of any discretionary contributions and could elect to make such a contribution in the next twelve months. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled $24 million through September 30, 2009. |
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION | |
9 Months Ended
Sep. 30, 2009 | |
Stock-based Compensation [Abstract] | |
Compensation Related Costs, General [Text Block] | NOTE 15 STOCK-BASED COMPENSATION International Paper has an Incentive Compensation Plan (ICP) which, upon the approval by the Companys shareholders in May 2009, replaced the Companys Long-Term Incentive Compensation Plan (LTICP). The ICP authorizes the 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 in the discretion of the Committee, and cash-based awards. The ICP is administered by the Management Development and Compensation Committee of the Board of Directors (the Committee). A detailed discussion of the LTICP, including the stock option program and executive continuity award program that provided for tandem grants of restricted stock and stock options, is presented in Note 18 to the financial statements included in International Papers 2008 10-K. As of September 30, 2009, 16.6 million shares were available for grant under the ICP. Total stock-based compensation cost recognized in Selling and administrative expenses in the accompanying consolidated statement of operations for the nine months ended September 30, 2009 and 2008 was $72 million and $83 million, respectively. The actual tax deduction realized for stock-based compensation costs related to non-qualified stock options was $0 and $19,000 for the nine-month periods ended September 30, 2009 and 2008, respectively. The actual tax deduction realized for stock-based compensation costs related to restricted and performance shares was $28 million and $130 million for the nine-month periods ended September 30, 2009 and 2008, respectively. At September 30, 2009, $67 million, net of estimated forfeitures, of compensation cost 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 1.3 years. Performance-Based Restricted Share Program: Under the Performance Share Program (PSP), contingent awards of International Paper common stock are granted by the Committee to approximately 1,100 employees. Awards are earned based on the achievement of defined performance rankings of return on investment (ROI) and total shareholder return (TSR) compared to peer groups. Awards are weighted 75% for ROI and 25% for TSR for all participants except for officers for whom awards are weighted 50% for ROI and 50% for TSR. The ROI component of the PSP awards is valued at the closing stock price on the day prior to the grant date. As the ROI component contains a performance condition, compensation expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable number of awards expected to vest. The TSR component of the PSP awards is valued using a Monte Carlo simulation as the TSR component contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on the expected term of the award, the risk-free rate, expected dividends, and the |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | |
9 Months Ended
Sep. 30, 2009 | |
Subsequent Events [Abstract] | |
Note 16 - Subsequent Events | NOTE 16 SUBSEQUENT EVENTS On October 22, 2009, International Paper announced plans to close its paper mill and associated operations in Franklin, Virginia, and its containerboard mills in Pineville, Louisiana and Albany, Oregon. The Company also announced that it would permanently shut down the previously idled No. 3 machine at its Valliant, Oklahoma containerboard mill. The Valliant mills other two machines will continue to operate. These permanent shutdowns will reduce the Companys North American paper and containerboard capacity by 2.1 million tons. The closures will impact about 1,600 employees. The Company estimates that these closures will result in noncash asset write-off and accelerated depreciation charges of approximately $1.1 billion and cash severance charges of approximately $60 million to be recorded in the fourth quarter of 2009 and first quarter of 2010, plus additional closure costs to be determined and recorded as the facilities are closed. |
INDUSTRY SEGMENT INFORMATION
INDUSTRY SEGMENT INFORMATION | |
9 Months Ended
Sep. 30, 2009 | |
Industry Segment Information [Abstract] | |
Industry Segment Information [Text Block] | INTERNATIONAL PAPER COMPANY Financial Information by Industry Segment (Unaudited) (In millions) Sales by Industry Segment Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 Industrial Packaging $ 2,230 $ 2,320 $ 6,680 $ 5,235 Printing Papers 1,470 1,800 4,155 5,305 Consumer Packaging 790 830 2,275 2,395 Distribution 1,665 2,075 4,850 6,030 Forest Products 5 55 20 135 Corporate and Inter-segment Sales (241 ) (272 ) (591 ) (817 ) Net Sales $ 5,919 $ 6,808 $ 17,389 $ 18,283 Operating Profit by Industry Segment (1) Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 Industrial Packaging $ 410 (2,3,4) $ 95 (5) $ 1,152 (2,3,4) $ 279 (5) Printing Papers 363 (2,6) 103 (7) 954 (2,6) 514 (7) Consumer Packaging 144 (2,8) (2 ) (8) 370 (2,8) 20 (8) Distribution 21 35 24 77 Forest Products 2 305 7 371 Operating Profit 940 536 2,507 1,261 Interest expense, net (169 ) (144 ) (506 ) (306 ) Noncontrolling interests/equity earnings adjustment (9) 5 (1 ) 19 11 Corporate items, net (46 ) (40 ) (141 ) (82 ) Restructuring and other charges (141 ) (89 ) (252 ) (126 ) Sale of forestlands - 3 - 6 Net gains on sales and impairments of businesses - - - 1 Earnings from continuing operations before income taxes and equity earnings $ 589 $ 265 $ 1,627 $ 765 Equity earnings (loss) in Ilim Holding S.A., net of taxes (1) $ - $ 5 $ (56 ) $ 54 (1) In addition to the operating profits shown above, International Paper recorded equity earnings, net of taxes, of $0 million for the three months ended September 30, 2009, equity losses, net of taxes, of $56 million for the nine months ended September 30, 2009, and equity earnings, net of taxes, of $5 million and $54 million for the three months and nine months ended September 30, 2008, respectively, related to its equity investment in Ilim Holding S.A., a separate reportable industry segment. (2) Includes gains of $221 million and $637 million for the Industrial Packaging segment, $226 million and $663 million for the Printing Papers segment, and $78 million and $247 million for the Consumer Packaging segment for the three months and nine months ended September 30, 2009, respectively, relating to alternative fuel mixture credits. (3) Includes charges of $18 million and $72 million for the three months and nine months ended September 30, 2009, respectively, for CBPR integration costs. (4) Includes charges of $7 million and $22 million for the three months and nine months ende |
Document Information
Document Information | |
9 Months Ended
Sep. 30, 2009 | |
[DocumentInformationLineItems] | |
Document Type | 10-Q |
Document Period End Date | 2009-09-30 |
Amendment Flag | false |
Entity Information
Entity Information (USD $) | ||
9 Months Ended
Sep. 30, 2009 | Jun. 30, 2008
| |
[EntityInformationLineItems] | ||
Entity Registrant Name | INTERNATIONAL PAPER CO /NEW/ | |
Entity Central Index Key | 0000051434 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well Known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Public Float | $9,887,280,215 | |
Entity Common Stock Shares Outstanding | 432,972,436 |