Statement Of Income Alternative
Statement Of Income Alternative (USD $) | |||
In Millions, except Per Share data | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
NET SALES | $23,366 | $24,829 | $21,890 |
COSTS AND EXPENSES | |||
Cost of products sold (Notes 1 and 5) | 15,220 | 18,742 | 16,060 |
Selling and administrative expenses | 2,031 | 1,947 | 1,831 |
Depreciation, amortization and cost of timber harvested | 1,472 | 1,347 | 1,086 |
Distribution expenses | 1,175 | 1,286 | 1,034 |
Taxes other than payroll and income taxes | 188 | 182 | 169 |
Restructuring and other charges | 1,353 | 370 | 95 |
Gain on sale of mineral rights | 0 | (261) | 0 |
Gain on sale of forestlands | 0 | (6) | (9) |
Impairments of goodwill | 0 | 1,777 | 0 |
Net losses (gains) on sales and impairments of businesses | 59 | 106 | (327) |
Interest expense, net | 669 | 492 | 297 |
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY EARNINGS | 1,199 | (1,153) | 1,654 |
Income tax provision | 469 | 162 | 415 |
Equity earnings (losses), net of taxes | (49) | 49 | 0 |
EARNINGS (LOSS) FROM CONTINUING OPERATIONS | 681 | (1,266) | 1,239 |
Discontinued operations, net of taxes | 0 | (13) | (47) |
NET EARNINGS (LOSS) | 681 | (1,279) | 1,192 |
Less: Net earnings attributable to noncontrolling interests | 18 | 3 | 24 |
Net earnings (loss) | 663 | (1,282) | 1,168 |
BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | |||
Earnings (loss) from continuing operations | 1.56 | -3.02 | 2.83 |
Discontinued operations, net of taxes | $0 | -0.03 | -0.11 |
Net earnings (loss) | 1.56 | -3.05 | 2.72 |
DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | |||
Earnings (loss) from continuing operations | 1.55 | -3.02 | 2.81 |
Discontinued operations, net of taxes | $0 | -0.03 | -0.11 |
Net earnings (loss) | 1.55 | -3.05 | 2.7 |
AMOUNTS ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | |||
Earnings (loss) from continuing operations | 663 | (1,269) | 1,215 |
Discontinued operations, net of taxes | 0 | (13) | (47) |
Net earnings (loss) | $663 | ($1,282) | $1,168 |
Statement Of Financial Position
Statement Of Financial Position Classified (USD $) | ||
In Millions | Dec. 31, 2009
| Dec. 31, 2008
|
Current Assets | ||
Cash and temporary investments | $1,892 | $1,144 |
Accounts and notes receivable, less allowances of $136 in 2009 and $121 in 2008 | 2,695 | 3,288 |
Inventories | 2,179 | 2,495 |
Deferred income tax assets | 368 | 261 |
Other current assets | 417 | 172 |
Total Current Assets | 7,551 | 7,360 |
Plants, Properties and Equipment, net | 12,688 | 14,202 |
Forestlands | 757 | 594 |
Investments | 1,077 | 1,274 |
Goodwill | 2,290 | 2,027 |
Deferred Charges and Other Assets | 1,185 | 1,456 |
Total Assets | 25,548 | 26,913 |
Current Liabilities | ||
Notes payable and current maturities of long-term debt | 304 | 828 |
Accounts payable | 2,058 | 2,119 |
Accrued payroll and benefits | 473 | 445 |
Other accrued liabilities | 1,177 | 1,363 |
Total Current Liabilities | 4,012 | 4,755 |
Long-Term Debt | 8,729 | 11,246 |
Deferred Income Taxes | 2,425 | 1,957 |
Pension Benefit Obligation | 2,765 | 3,260 |
Postretirement and Postemployment Benefit Obligation | 538 | 663 |
Other Liabilities | 824 | 631 |
Equity | ||
Common stock $1 par value, 2009 - 437.0 shares and 2008 - 433.6 shares | 437 | 434 |
Paid-in capital | 5,803 | 5,845 |
Retained earnings | 1,949 | 1,430 |
Accumulated other comprehensive loss | (2,077) | (3,322) |
Stockholders Equity Subtotal Before Treasury Stock, Total | 6,112 | 4,387 |
Less: Common stock held in treasury, at cost, 2009 - 3.9 shares and 2008 - 6.1 shares | 89 | 218 |
Total Shareholders' Equity | 6,023 | 4,169 |
Noncontrolling interests | 232 | 232 |
Total Equity | 6,255 | 4,401 |
Total Liabilities and Equity | $25,548 | $26,913 |
1_Statement Of Financial Positi
Statement Of Financial Position Classified (Parenthetical) (USD $) | ||
In Millions, except Per Share data | Dec. 31, 2009
| Dec. 31, 2008
|
Accounts and notes receivable, allowances | $136 | $121 |
Common stock, par value | $1 | $1 |
Common stock, shares | 437 | 433.6 |
Common stock held in treasury, shares | 3.9 | 6.1 |
Statement Of Cash Flows Indirec
Statement Of Cash Flows Indirect (USD $) | |||
In Millions | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
OPERATING ACTIVITIES | |||
Net earnings (loss) attributable to International Paper Company | $663 | ($1,282) | $1,168 |
Net earnings attributable to noncontrolling interests | 18 | 3 | 24 |
Discontinued operations, net of taxes | 0 | 13 | 47 |
EARNINGS (LOSS) FROM CONTINUING OPERATIONS | 681 | (1,266) | 1,239 |
Depreciation, amortization, and cost of timber harvested | 1,472 | 1,347 | 1,086 |
Deferred income tax provision (benefit), net | 160 | (81) | 232 |
Restructuring and other charges | 1,353 | 370 | 95 |
Payments related to restructuring and legal reserves | (38) | (87) | (78) |
Periodic pension expense, net | 213 | 123 | 210 |
Net losses (gains) on sales and impairments of businesses | 59 | 106 | (327) |
Equity (earnings) losses, net | 49 | (49) | 0 |
Gain on sale of forestlands | 0 | (3) | (9) |
Impairments of goodwill | 0 | 1,777 | 0 |
Other, net | 227 | 115 | 39 |
Changes in current assets and liabilities | |||
Accounts and notes receivable | 604 | 451 | (141) |
Inventories | 316 | 48 | (82) |
Accounts payable and accrued liabilities | (321) | (317) | (212) |
Interest payable | (8) | (31) | 122 |
Other | (112) | 166 | (226) |
Cash provided by operations - continuing operations | 4,655 | 2,669 | 1,948 |
Cash used for operations - discontinued operations | 0 | 0 | (61) |
Cash Provided by Operations | 4,655 | 2,669 | 1,887 |
Invested in capital projects | |||
Continuing operations | (534) | (1,002) | (1,288) |
Businesses sold or held for sale | 0 | 0 | (4) |
Acquisitions, net of cash acquired | (17) | (6,086) | (239) |
Proceeds from divestitures | 0 | 14 | 1,675 |
Equity investment in Ilim | 0 | (21) | (578) |
Other | (42) | (102) | 0 |
Cash used for investment activities - continuing operations | (593) | (7,197) | (434) |
Cash used for investment activities - discontinued operations | 0 | 0 | (12) |
Cash Used for Investment Activities | (593) | (7,197) | (446) |
FINANCING ACTIVITIES | |||
Repurchase of common stock and payments of restricted stock tax withholding | (10) | (47) | (1,224) |
Issuance of common stock | 0 | 1 | 128 |
Issuance of debt | 3,229 | 6,024 | 78 |
Reduction of debt | (6,318) | (696) | (875) |
Change in book overdrafts | 20 | (36) | 77 |
Dividends paid | (140) | (428) | (436) |
Other | (157) | 41 | 0 |
Cash provided by (used for) financing activities - continuing operations | (3,376) | 4,859 | (2,252) |
Effect of Exchange Rate Changes on Cash | 62 | (92) | 92 |
Change in Cash and Temporary Investments | 748 | 239 | (719) |
Cash and Temporary Investments | |||
Beginning of the period | 1,144 | 905 | 1,624 |
End of the period | $1,892 | $1,144 | $905 |
Statement Of Shareholders Equit
Statement Of Shareholders Equity And Other Comprehensive Income (USD $) | ||||||||
In Millions | Common Stock Issued
| Paid-in Capital
| Retained Earnings
| Accumulated Other Comprehensive Income (Loss)
| Treasury Stock
| Total International Paper Shareholders' Equity
| Noncontrolling Interest
| Total
|
Beginning Balance at Dec. 31, 2006 | $493 | $6,735 | $3,737 | ($1,564) | $1,438 | $7,963 | $213 | $8,176 |
Issuance of stock for various plans, net | 1 | 20 | (181) | 202 | 202 | |||
Repurchase of stock | 1,224 | (1,224) | (1,224) | |||||
Cash dividends - Common Stock | (436) | (436) | (436) | |||||
Dividends paid to noncontrolling interests by subsidiary | (10) | (10) | ||||||
Repurchase of noncontrolling interests | (28) | (28) | ||||||
Noncontrolling interests of acquired entities | 25 | 25 | ||||||
Comprehensive income (loss): | ||||||||
Net earnings (loss) | 1,168 | 1,168 | 24 | 1,192 | ||||
Amortization of pension and postretirement prior service costs and net loss: | ||||||||
U.S. plans (less tax of $75 in 2009, $58 in 2008 and $72 in 2007) | 98 | 98 | 98 | |||||
Pension and postretirement liability adjustments: | ||||||||
U.S. plans (less tax of $259 in 2009, $1,128 in 2008 and $228 in 2007) | 367 | 367 | 367 | |||||
Non-U.S. plans (less tax of $3 in 2009, $1 in 2008 and $7 in 2007) | 26 | 26 | 26 | |||||
Change in cumulative foreign currency translation adjustment | 591 | 591 | 4 | 595 | ||||
Net gains (losses) on cash flow hedging derivatives: | ||||||||
Net gains (losses) arising during the period (less tax of $17 in 2009, $61 in 2008 and $5 in 2007) | 33 | 33 | 33 | |||||
Less: Reclassification adjustment for gains (losses) included in net earnings (less tax of $41 in 2009, $16 in 2008 and $3 in 2007) | (22) | (22) | (22) | |||||
Adoption of FIN 48 (Note 2) | (94) | (94) | (94) | |||||
Ending Balance at Dec. 31, 2007 | 494 | 6,755 | 4,375 | (471) | 2,481 | 8,672 | 228 | 8,900 |
Issuance of stock for various plans, net | (34) | (143) | 109 | 109 | ||||
Repurchase of stock | 47 | (47) | (47) | |||||
Retirement of treasury stock | (60) | (876) | (1,231) | (2,167) | 0 | 0 | ||
Cash dividends - Common Stock | (432) | (432) | (432) | |||||
Dividends paid to noncontrolling interests by subsidiary | (10) | (10) | ||||||
Noncontrolling interests of acquired entities | 9 | 9 | ||||||
Comprehensive income (loss): | ||||||||
Net earnings (loss) | (1,282) | (1,282) | 3 | (1,279) | ||||
Amortization of pension and postretirement prior service costs and net loss: | ||||||||
U.S. plans (less tax of $75 in 2009, $58 in 2008 and $72 in 2007) | 82 | 82 | 82 | |||||
Pension and postretirement liability adjustments: | ||||||||
U.S. plans (less tax of $259 in 2009, $1,128 in 2008 and $228 in 2007) | (1,857) | (1,857) | (1,857) | |||||
Non-U.S. plans (less tax of $3 in 2009, $1 in 2008 and $7 in 2007) | (26) | (26) | (26) | |||||
Change in cumulative foreign currency translation adjustment | (889) | (889) | 2 | (887) | ||||
Net gains (losses) on cash flow hedging derivatives: | ||||||||
Net gains (losses) arising during the period (less tax of $17 in 2009, $61 in 2008 and $5 in 2007) | (106) | (106) | (106) | |||||
Less: Reclassification adjustment for gains (losses) included in net earnings (less tax of $41 in 2009, $16 in 2008 and $3 in 2007) | (55) | (55) | (55) | |||||
Ending Balance at Dec. 31, 2008 | 434 | 5,845 | 1,430 | (3,322) | 218 | 4,169 | 232 | 4,401 |
Issuance of stock for various plans, net | 3 | (42) | (139) | 100 | 100 | |||
Repurchase of stock | 10 | (10) | (10) | |||||
Cash dividends - Common Stock | (144) | (144) | (144) | |||||
Dividends paid to noncontrolling interests by subsidiary | (17) | (17) | ||||||
Noncontrolling interests of acquired entities | (1) | (1) | ||||||
Comprehensive income (loss): | ||||||||
Net earnings (loss) | 663 | 663 | 18 | 681 | ||||
Amortization of pension and postretirement prior service costs and net loss: | ||||||||
U.S. plans (less tax of $75 in 2009, $58 in 2008 and $72 in 2007) | 109 | 109 | 109 | |||||
Pension and postretirement liability adjustments: | ||||||||
U.S. plans (less tax of $259 in 2009, $1,128 in 2008 and $228 in 2007) | 351 | 351 | 351 | |||||
Non-U.S. plans (less tax of $3 in 2009, $1 in 2008 and $7 in 2007) | 19 | 19 | 19 | |||||
Change in cumulative foreign currency translation adjustment | 672 | 672 | 672 | |||||
Net gains (losses) on cash flow hedging derivatives: | ||||||||
Net gains (losses) arising during the period (less tax of $17 in 2009, $61 in 2008 and $5 in 2007) | 40 | 40 | 40 | |||||
Less: Reclassification adjustment for gains (losses) included in net earnings (less tax of $41 in 2009, $16 in 2008 and $3 in 2007) | 54 | 54 | 54 | |||||
Ending Balance at Dec. 31, 2009 | $437 | $5,803 | $1,949 | ($2,077) | $89 | $6,023 | $232 | $6,255 |
2_Statement Of Shareholders Equ
Statement Of Shareholders Equity And Other Comprehensive Income (Parenthetical) (USD $) | |||
In Millions | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Pension and postretirement divestitures, amortization of prior service costs and net loss: U.S. plans, tax | $75 | $58 | $72 |
Pension and postretirement liability adjustments: U. S. plans, tax | 259 | 1,128 | 228 |
Pension and postretirement liability adjustments: Non-U. S. plans, tax | 3 | 1 | 7 |
Net gains (losses) arising during the period, tax | 17 | 61 | 5 |
Reclassification adjustment for gains (losses) included in net earnings, tax | $41 | $16 | $3 |
SUMMARY OF BUSINESS AND SIGNIFI
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF OUR BUSINESS International Paper (the Company) is a global paper and packaging company that is complemented by an extensive North American merchant distribution system, with primary markets and manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Substantially all of our businesses have experienced, and are likely to continue to experience, cycles relating to available industry capacity and general economic conditions. FINANCIAL STATEMENTS These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States that require the use of managements estimates. Actual results could differ from managements estimates. 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. International Paper accounts for its investment in Ilim Holding S.A. (Ilim), 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. Investments in affiliated companies where the Company has significant influence over their operations are accounted for by the equity method. International Papers share of affiliates earnings totaled a loss of $49 million and earnings of $49 million in 2009 and 2008, respectively. REVENUE RECOGNITION 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 transactions designated f.o.b. destination, revenue is recorded when the product is delivered to the customers delivery site, when title and risk of loss are transferred. Timber and timberland sales revenue is generally recognized when title and risk of loss pass to the buyer. ALTERNATIVE FUEL MIXTURE CREDITS COST OF PRODUCTS SOLD The U.S. Internal Revenue Code provides a tax credit for companies that use alternative fuel mixtures to produce energy to operate their businesses. As these credits represent a reduction of energy costs at the Companys U.S. manufacturing facilities, the credits are included as a reduction of Cost of products sold in the accompanying consolidated statement of operations. See Alternative Fuel Mixture Credits in Note 5 for a further discussion of these credits. SHIPPING AND HANDLING COSTS Shipping and handling costs, such as freight to our customers destinations, are included in distribution expenses in the consolidated statement of operations. When shipping and handling costs are included in the sales price charged for our products, they are recognized in net sales. ANNUAL M |
RECENT ACCOUNTING DEVELOPMENTS
RECENT ACCOUNTING DEVELOPMENTS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
RECENT ACCOUNTING DEVELOPMENTS | NOTE 2 RECENT ACCOUNTING DEVELOPMENTS ACCOUNTING FOR DECREASES IN OWNERSHIP OF A SUBSIDIARY In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2010-02, Accounting and Reporting for Decreases in Ownership of a Subsidiary, which clarifies the scope of the guidance for the decrease in ownership of a subsidiary in Accounting Standards Codification (ASC) 810, Consolidations, and expands the disclosures required for the deconsolidation of a subsidiary or derecognition of a group of assets. This guidance was effective on January1, 2009. The application of the requirements of this guidance had no effect on accompanying consolidated financial statements. ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS In January 2010, the FASB issued ASU 2010-01, Accounting for Distributions to Shareholders with Components of Stock and Cash, which clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend for purposes of applying ASC 505, Equity, and ASC 260, Earnings Per Share. This guidance is effective for interim and annual periods ending on or after December15, 2009 (calendar year 2009), and should be applied on a retrospective basis. The application of the requirements of this guidance had no effect on the accompanying consolidated financial statements. REVENUE ARRANGEMENTS WITH MULTIPLE DELIVERABLES In September 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, which amends the multiple-element arrangement guidance under ASC 605, Revenue Recognition. This guidance amends the criteria for separating consideration for 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 June15, 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 ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which amends the consolidation guidance that applies to variable interest entities under ASC 810, Consolidation. This guidance changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be conso |
INDUSTRY SEGMENT INFORMATION
INDUSTRY SEGMENT INFORMATION | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
INDUSTRY SEGMENT INFORMATION | NOTE 3 INDUSTRY SEGMENT INFORMATION Financial information by industry segment and geographic area for 2009, 2008 and 2007 is presented on pages 47 and 48. Effective January1, 2008, the Company changed its method of allocating corporate overhead expenses to its business segments to increase the expense amounts allocated to these businesses in reports reviewed by its chief executive officer to facilitate performance comparisons with other companies. Accordingly, the Company has revised its presentation of industry segment operating profit to reflect this change in allocation method, and has adjusted all comparative prior period information on this basis. |
EARNINGS PER SHARE ATTRIBUTABLE
EARNINGS PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
EARNINGS PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS | 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 year. In addition, the computation of diluted earnings per share reflects the inclusion of contingently convertible securities in periods when dilutive. A reconciliation of the amounts included in the computation of basic earnings per common share from continuing operations, and diluted earnings per common share from continuing operations is as follows: In millions except per share amounts 2009 2008 2007 Earnings (loss) from continuing operations $ 663 $ (1,269 ) $ 1,215 Effect of dilutive securities (a) Earnings (loss) from continuing operations assuming dilution $ 663 $ (1,269 ) $ 1,215 Average common shares outstanding 425.3 421.0 428.9 Effect of dilutive securities Restricted performance share plan (a) 2.7 3.7 Stock options (b) 0.4 Average common shares outstanding assuming dilution 428.0 421.0 433.0 Basic earnings (loss) per common share from continuing operations $ 1.56 $ (3.02 ) $ 2.83 Diluted earnings (loss) per common share from continuing operations $ 1.55 $ (3.02 ) $ 2.81 (a) Securities are not included in the table in periods when antidilutive. (b) Options to purchase 22.2million, 25.1million and 17.5million shares for the years ended December31, 2009, 2008 and 2007, 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 date. |
RESTRUCTURING AND OTHER CHARGES
RESTRUCTURING AND OTHER CHARGES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
RESTRUCTURING AND OTHER CHARGES | NOTE 5 RESTRUCTURING AND OTHER CHARGES This footnote discusses restructuring and other charges recorded for each of the three years included in the period ended December31, 2009. It includes a summary of activity for each year, a rollforward associated with severance and other cash costs arising in each year, and tables presenting details of the 2009, 2008 and 2007 organizational restructuring programs. RESTRUCTURING AND OTHER CHARGES 2009: During 2009, total restructuring and other charges of $1.4 billion before taxes ($853 million after taxes) were recorded. These charges included: a $148 million charge before taxes ($92 million after taxes) for severance and benefit costs associated with the Companys 2008 overhead reduction initiative, a $185 million charge before taxes ($113 million after taxes) for costs related to the early extinguishment of debt (see Notes 13 and 14), a $469 million charge before taxes ($286 million after taxes) for closure costs related to the Companys containerboard mill in Albany, Oregon, a $290 million charge before taxes ($177 million after taxes) for closure costs related to the paper mill and associated operations in Franklin, Virginia (additional charges of approximately $320 million before taxes will be incurred prior to final closure), a $102 million charge before taxes ($62 million after taxes) for closure costs related to the Companys containerboard mill in Pineville, Louisiana, an $82 million charge before taxes ($50 million after taxes) for costs related to the permanent shut down of a paper machine at the Companys Valliant, Oklahoma containerboard mill, a $31 million charge, before and after taxes, for severance and other costs related to the planned closure of the Companys Etienne mill in France, a $23 million charge before taxes ($28 million after taxes) for closure costs related to the Inverurie mill in Scotland, and a $23 million charge before taxes ($14 million after taxes) for other items. The following table presents a detail of the $1.4 billion restructuring and other charges by business: In millions First Quarter Second Quarter Third Quarter Fourth Quarter Total Industrial Packaing $ $ 15 (a) $ 7 (a) $ 662 (a,b) $ 684 Printing Papers 29 (c,d) 4 (d) 1 (d) 223 (e) 257 Consumer Packaging 2 (f) 1 (f) 2 (f) 69 (f,g) 74 Distribution 5 5 Corporate 52 59 141 81 333 Total $ 83 $ 79 $ 151 $ 1,040 $ 1,353 (a) Includes $19 million of severance charges and $12 million of other charges related to the shutdown of the Etienne mill in France. (b) Includes $82 million of accelerated depreciation and other noncash charges, $9 million of severance charges, $10 million of environmental charges and $1 million of other charges related to the shutdown of the Pineville, Louisiana mill; $438 million of accelerated depreciation and other noncash charges, $21 |
ACQUISITIONS, EXCHANGES AND JOI
ACQUISITIONS, EXCHANGES AND JOINT VENTURES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
ACQUISITIONS, EXCHANGES AND JOINT VENTURES | NOTE 6 ACQUISITIONS, EXCHANGES AND JOINT VENTURES ACQUISITIONS 2008: On August4, 2008, International Paper completed the acquisition of the assets of Weyerhaeuser Companys Containerboard, Packaging and Recycling (CBPR) business for approximately $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 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. The CBPR operating results are 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 Inventory 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 FairValue Average Remaining Useful Life Asset Class: (atacquisition date ) Tradenames $ 8 4-12years Patented technology 15 4-12 years Proprietary software 16 4-5 years Power agreements 20 1-7 years Water rights 6 Indefinite Total $ 65 In connection with the purchase price allocation, inventories were written up by approximately $39 million before taxes ($24 million after taxes) to their estimated fair value. As the related inventories were sold during the 2008 third quarter, this amount was included in Cost of products sold for the quarter. Additionally, Selling and administrative expenses for the years ended 2009 and 2008 included $87 million in charges before taxes ($54 million after taxes) and $45 million in charges before taxes ($28 million after taxes), respectively, for integration costs associated with the acquisition. 2007: On August24, 2007, International Paper completed the acquisition of Central Lewmar LLC, a privately held paper and packaging distributor in the United States, for $189 million. International Papers distribution business, xpedx, now operates Central Lewmar as a business within its multiple brand strategy. Central Lewmars financial position and results of operations have been included in International Papers consolidated financial statements since its acquisition. During the first quarter of 2008, the Company finalized the allocation of the purchase price to the fair value of the assets and liabilities acquired as follows: |
BUSINESSES HELD FOR SALE, DIVES
BUSINESSES HELD FOR SALE, DIVESTITURES AND IMPAIRMENTS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
BUSINESSES HELD FOR SALE, DIVESTITURES AND IMPAIRMENTS | NOTE 7 BUSINESSES HELD FOR SALE, DIVESTITURES AND IMPAIRMENTS DISCONTINUED OPERATIONS 2008: During the fourth quarter of 2008, the Company recorded pre-tax gains of $9 million ($5 million after taxes) for adjustments to reserves associated with the sale of discontinued operations. 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 $3 million charge before taxes ($2 million after taxes) for 2008 operating losses related to certain wood products facilities. 2007: During the fourth quarter of 2007, the Company recorded a pre-tax charge of $9 million ($6 million after taxes) and a pre-tax credit of $4 million ($3 million after taxes) relating to adjustments to estimated losses on the sales of its Beverage Packaging and Wood Products businesses, respectively. Additionally, during the fourth quarter, a $4 million pre-tax charge ($3 million after taxes) was recorded for additional taxes associated with the sale of the Companys former Weldwood of Canada Limited business. During the third quarter of 2007, the Company completed the sale of the remainder of its non-U.S. Beverage Packaging business. During the second quarter of 2007, the Company recorded pre-tax charges of $6 million ($4 million after taxes) and $5 million ($3 million after taxes) relating to adjustments to estimated losses on the sales of its Wood Products and Beverage Packaging businesses, respectively. During the first quarter of 2007, the Company recorded pre-tax credits of $21 million ($9 million after taxes) and $6 million ($4 million after taxes) relating to the sales of its Wood Products and Kraft Papers businesses, respectively. In addition, a $15 million pre-tax charge ($39 million after taxes) was recorded for adjustments to the loss on the completion of the sale of most of the Beverage Packaging business. Finally, a pre-tax credit of approximately $10 million ($6 million after taxes) was recorded for refunds received from the Canadian government of duties paid by the Companys former Weldwood of Canada Limited business. Revenues, earnings (loss) and earnings (loss) per share related to the Beverage Packaging, Wood Products, Brazilian Coated Papers, Kraft Papers and Weldwood of Canada Limited businesses for 2007 were as follows: In millions, except per share amounts 2007 Revenues $ 394 Loss from discontinued operations Loss from operations $ (19 ) Income tax benefit 8 Loss from operations, net of taxes (11 ) Loss on sales and impairments (4 ) Income tax expense (32 ) Loss on sales and impairments, net of taxes (36 ) Loss from discontinued operations, net of taxes $ (47 ) Loss per common share from discontinued operations assuming dilution Loss from operations $ (0.03 ) Loss on sales and impairments (0.08 ) Loss per common share from discontinued operations, net of taxes assuming dilution $ (0 |
SUPPLEMENTARY FINANCIAL STATEME
SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION | NOTE 8 SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION Inventories by major category were: In millions at December31 2009 2008 Raw materials $ 307 $ 405 Finished pulp, paper and packaging products 1,443 1,658 Operating supplies 377 379 Other 52 53 Inventories $ 2,179 $ 2,495 The last-in, first-out inventory method is used to value most of International Papers U.S. inventories. Approximately 72% of total raw materials and finished products inventories were valued using this method. If the first-in, first-out method had been used, it would have increased total inventory balances by approximately $306 million and $313 million at December31, 2009 and 2008, respectively. Plants, properties and equipment by major classification were: In millions at December31 2009 2008 Pulp, paper and packaging facilities Mills $ 22,615 $ 21,819 Packaging plants 6,348 6,485 Other plants, properties and equipment 1,542 1,511 Gross cost 30,505 29,815 Less: Accumulated depreciation 17,817 15,613 Plants, properties and equipment, net $ 12,688 $ 14,202 The gross carrying amount of Intangible Assets, excluding goodwill, was $360 million ($248 million net of accumulated amortization) and $284 million ($246 million net of accumulated amortization) at December31, 2009 and 2008, respectively. The Company recognized amortization expense for intangible assets of approximately $34 million, $36 million and $27 million in 2009, 2008 and 2007, respectively. Based on current intangibles subject to amortization, estimated amortization expense for each of the succeeding years is as follows: 2010 $34million, 2011 $31million, 2012 $24million, 2013 $20million, 2014 $20million, and cumulatively thereafter $117 million. Interest costs related to the development of certain long-term assets are capitalized and amortized over the related assets estimated useful lives. Capitalized net interest costs were $12 million, $27 million and $30 million in 2009, 2008 and 2007, respectively. Interest payments made during 2009, 2008 and 2007 were $656 million, $597 million and $452 million, respectively. Total interest expense was $702 million, $572 million and $451 million in 2009, 2008 and 2007, respectively. Interest income was $33 million, $80 million and $154 million in 2009, 2008 and 2007, respectively. Interest expense and interest income exclude approximately $117 million and $233 million in 2009 and 2008, respectively, related to investments in and borrowings from variable interest entities for which the Company has a legal right of offset (see Note 12). Equity earnings, net of taxes includes the Companys share of earnings from its investment in Ilim Holding S.A. ($50 million of losses and $54 million of earnings for the years ended December31, 2009 and 2008, respectively) and certain other smaller investments. |
GOODWILL
GOODWILL | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
GOODWILL | NOTE 9 GOODWILL The following tables present changes in the goodwill balances as allocated to each business segment for the years ended December31, 2009 and 2008: In millions Industrial Packaging Printing Papers Consumer Packaging Distribution Total Balance as of January1, 2009 Goodwill $ 989 $ 2,302 $ 1,766 $ 399 $ 5,456 Accumulated impairment losses (a) (1,765 ) (1,664 ) (3,429 ) $ 989 $ 537 $ 102 $ 399 $ 2,027 Reclassifications and other (b) 2 146 148 Additions/reductions 140 (c) (25 )(d) (1 ) 1 115 Balance as of December31, 2009 Goodwill 1,131 2,423 1,765 400 5,719 Accumulated impairment losses (a) (1,765 ) (1,664 ) (3,429 ) Total $ 1,131 $ 658 $ 101 $ 400 $ 2,290 (a) Represents accumulated goodwill impairment charges since the adoption of ASC 350, IntangiblesGoodwill and Other in 2002. (b) Represents the effects of foreign currency translations and reclassifications. (c) Reflects purchase accounting adjustments related to the CBPR acquisition. (d) Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in Brazil. In millions Industrial Packaging Printing Papers Consumer Packaging Distribution Total Balance as of January1, 2008 Goodwill $ 683 $ 2,469 $ 1,756 $ 394 $ 5,302 Accumulated impairment losses (a) (426 ) (1,226 ) (1,652 ) $ 683 $ 2,043 $ 530 $ 394 $ 3,650 Reclassifications and other (b) (2 ) (140 ) 6 (136 ) Additions/reductions 308 (c) (27 )(d) 4 (f) 5 290 Impairment losses (1,339 )(e) (438 )(g) (1,777 ) Balance as of December31, 2008 Goodwill 989 2,302 1,766 399 5,456 Accumulated impairment losses (a) (1,765 ) (1,664 ) (3,429 ) Total $ 989 $ 537 $ 102 $ 399 $ 2,027 (a) Represents accumulated goodwill impairment charges since the adoption of ASC 350, IntangiblesGoodwill and Other in 2002. (b) Represents the effects of foreign currency translations and reclassifications. (c) Reflects $306 million in purchase accounting adjustments related to the CBPR acquisition, and a $2 million purchase accounting adjustment related to the Compagnie Marocaine des Cartons et des Papiers (CMCP) exchange. (d) Reflects a reduction from tax benefits generated by the deduction of goodwill amortization for tax purposes in Brazil. (e) Reflects charges related to the interim impairment testing of the U.S. Printing Papers business. (f) Reflec |
INCOME TAXES
INCOME TAXES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
INCOME TAXES | NOTE 10 INCOME TAXES The components of International Papers earnings from continuing operations before income taxes and equity earnings by taxing jurisdiction were: In millions 2009 2008 2007 Earnings (loss) U.S. $ 905 $ (1,365 ) $ 801 Non-U.S. 294 212 853 Earnings (loss) from continuing operations before income taxes and equity earnings $ 1,199 $ (1,153 ) $ 1,654 The provision (benefit) for income taxes by taxing jurisdiction was: In millions 2009 2008 2007 Current tax provision (benefit) U.S. federal $ 228 $ 159 $ 67 U.S. state and local 7 (2 ) 20 Non-U.S. 74 86 96 $ 309 $ 243 $ 183 Deferred tax provision (benefit) U.S. federal $ (63 ) $ (26 ) $ 163 U.S. state and local 41 (16 ) (17 ) Non-U.S. 182 (39 ) 86 $ 160 $ (81 ) $ 232 Income tax provision $ 469 $ 162 $ 415 The Companys deferred income tax provision (benefit) includes a $1 million provision, a $14 million provision and a $2 million provision for 2009, 2008 and 2007, respectively, for the effect of changes in non-U.S. and U.S. state tax rates. International Paper made income tax payments, net of refunds, of $97 million, $131 million and $328 million in 2009, 2008 and 2007, respectively. A reconciliation of income tax expense using the statutory U.S. income tax rate compared with actual income tax provision follows: In millions 2009 2008 2007 Earnings (loss) from continuing operations before income taxes and equity earnings $ 1,199 $ (1,153 ) $ 1,654 Statutory U.S. income tax rate 35 % 35 % 35 % Tax expense (benefit) using statutory U.S. income tax rate 420 (404 ) 579 State and local income taxes 32 (12 ) 2 Tax rate and permanent differences on non-U.S. earnings 162 (30 ) (124 ) Net U.S. tax on non-U.S. dividends 11 46 13 Tax benefit on export sales and manufacturing activities (2 ) (13 ) (3 ) Non-deductible business expenses 7 4 5 Sales of non-strategic assets and goodwill impairments 622 9 Retirement plan dividends (2 ) (3 ) (6 ) Alternative fuel mixture credits (133 ) Tax credits (11 ) (22 ) (10 ) Medicare subsidy (7 ) (8 ) (8 ) Tax audits (16 ) (4 ) (36 ) Other, net 8 (14 ) (6 ) Income tax provision $ 469 $ 162 $ 415 Effective income tax rate 39 % (14 )% 25 % The tax effects of significant temporary differences, representing deferred tax assets and liabilities at December31, 2009 and 2008, were as follows: In millions 2009 2008 Deferred tax assets: Postretirement benefit accruals $ 301 |
COMMITMENTS AND CONTINGENT LIAB
COMMITMENTS AND CONTINGENT LIABILITIES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
COMMITMENTS AND CONTINGENT LIABILITIES | NOTE 11 COMMITMENTS AND CONTINGENT LIABILITIES Certain property, machinery and equipment are leased under cancelable and non-cancelable agreements. Unconditional purchase obligations have been entered into in the ordinary course of business, principally for capital projects and the purchase of certain pulpwood, logs, wood chips, raw materials, energy and services, including fiber supply agreements to purchase pulpwood that were entered into concurrently with the Companys 2006 Transformation Plan forestland sales. At December31, 2009, total future minimum commitments under existing non-cancelable operating leases and purchase obligations were as follows: In millions 2010 2011 2012 2013 2014 Thereafter Lease obligations $ 177 $ 148 $ 124 $ 96 $ 79 $ 184 Purchase obligations (a) 2,262 657 623 556 532 3,729 Total $ 2,439 $ 805 $ 747 $ 652 $ 611 $ 3,913 (a) Includes $2.8 billion relating to fiber supply agreements entered into at the time of the Companys 2006 Transformation Plan forestland sales. Rent expense was $216 million, $205 million and $168 million for 2009, 2008 and 2007, 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 to indemnify buyers with respect to tax and environmental liabilities, breaches of representations and warranties, and other matters. Where liabilities for such matters are determined to be probable and subject to reasonable estimation, accrued liabilities are recorded at the time of sale as a cost of the transaction. 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 five of the eight pending lawsuits arising from this matter 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 CERCLA, International Paper submitted to the EPA a feasibility study for this site. The EPA has indicated that it intends to select a proposed remedial action alternative from those identified in the study and present this proposal for public comment. Since it is not currently possible todetermine the final remedial action that will berequired, the Company has accrued, as of December31, 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 an |
VARIABLE INTEREST ENTITIES AND
VARIABLE INTEREST ENTITIES AND PREFERRED SECURITIES OF SUBSIDIARIES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
VARIABLE INTEREST ENTITIES AND PREFERRED SECURITIES OF SUBSIDIARIES | NOTE 12 VARIABLE INTEREST ENTITIES AND PREFERRED SECURITIES OF SUBSIDIARIES VARIABLE INTEREST ENTITIES In connection with the 2006 sale of approximately 5.6million 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 August 2016 maturity, are supported by irrevocable letters of credit obtained by the buyers of the forestlands. During the 2006 fourth quarter, International Paper contributed the Timber Notes to newly formed entities (the Borrower Entities) in exchange for ClassA and Class B interests in these entities. Subsequently, International Paper contributed its $200 million ClassA interests in the Borrower Entities, along with approximately $400 million of International Paper promissory notes, to other newly formed entities (the Investor Entities) in exchange for ClassA and Class B interests in these entities, and simultaneously sold its ClassA interest in the Investor Entities to a third party investor. As a result, at December31, 2006, International Paper held Class B interests in the Borrower Entities and Class B interests in the Investor entities valued at approximately $5.0 billion. International Paper has no obligation to make any further capital contributions to these entities and did not provide financial or other support during 2009, 2008 or 2007 that was not previously contractually required. Based on an analysis of these entities under guidance that considers the potential magnitude of the variability in the structure and which party bears a majority of the gains or losses, International Paper determined that it is not the primary beneficiary of these entities, and therefore, should not consolidate its investments in these entities. It was also determined that the source of variability in the structure comes from changes in the value of the Timber Notes. The credit quality of the Timber Notes are enhanced by irrevocable letters of credit which are 100% cash collateralized to loss as a result of its involvement with the structure. Also during 2006, the Borrower entities acquired approximately $4.8 billion of International Paper debt obligations for cash, resulting in a total of approximately $5.2 billion of International Paper debt obligations held by the Borrower and Investor entities at December31, 2006. The various agreements entered into in connection with these transactions provide that International Paper has, and International Paper intends to affect, a legal right to offset its obligation under these debt instruments with its investments in the entities. Accordingly, for financial reporting purposes, International Paper has offset approximately $5.1 billion of Class B interests in the entities against $5.1 billion of International Paper debt obligations held by these entities at December31, 2009 and 2008. Remaining borrowings of $144 million and $154 million for 2009 and 2008, respectively, are included in floating rate notes due 2010 2016 in the summary of long-term debt in Note 13. Additional debt related to the above transaction of $46 million and $48 million is i |
DEBT AND LINES OF CREDIT
DEBT AND LINES OF CREDIT | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
DEBT AND LINES OF CREDIT | NOTE 13 DEBT AND LINES OF CREDIT In December 2009, International Paper issued $750 million of 7.3% senior unsecured notes with a maturity date in November 2039. The proceeds from this borrowing, along with available cash, were used to repay the remaining $1 billion of the $2.5 billion long-term debt issued in connection with the CBPR business acquisition. During 2009, additional repayments related to this debt totaled approximately $1.4 billion. Also during the fourth quarter, International Paper Investments (Luxembourg) S.a.r.l, a wholly-owned subsidiary of International Paper, repaid $214 million of notes with an interest rate of LIBOR plus a margin of 40 basis points and an original maturity in 2010. Other debt activity in the fourth quarter of 2009 included the repayment of approximately $235 million of notes with interest rates ranging from 4.0% to 9.375% and original maturities from 2009 to 2038. Pre-tax early debt retirement costs of $36 million related to fourth-quarter debt repayments are included in Restructuring and other charges in the accompanying consolidated statement of operations. 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. 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 venture that matured during the quarter. Pre-tax early debt retirement costs of $46 million related to second quarter debt repayments are included in Restructuring and other charges in the accompanying consolidated statement of operations. In March 2009, Luxembourg borrowed $468 million of long-term debt with an initial interest rate of LIBOR plus a margin of 450 basis points that varied 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 500million 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 was repaid. Other debt activity 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 |
DERIVATIVES AND HEDGING ACTIVIT
DERIVATIVES AND HEDGING ACTIVITIES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
DERIVATIVES AND HEDGING ACTIVITIES | 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 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 Accumulated other comprehensive income (AOCI) 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 in earnings to offset the remeasurement of the related assets and liabilities, totaled a loss of approximately $50 million and $30 million for the years ended December31, 2009 and 2008, respectively, and a gain of $20 million for the year ended December31, 2007. As of December31, 2009 and 2008, outstanding undesignated foreign exchange contracts included the following: In millions December31, 2009 December31, 2008 Sell / Buy Sell Notional Sell Notional U.S. dollar / European euro 108 618 U.S. dollar / Swiss franc 68 European euro / Great British pounds 29 58 European euro / Polish zloty 39 5 European euro/ U.S. dollar 9 65 South Korean won/ U.S. dollar 3,629 Chinese renminbi/ U.S. dollar 62 Russian ruble/ U.S. dollar 570 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 December31, 2009 and December31, 2008, the outstanding notional amounts of interest rate swap agreements that qualify as fully effective fair value hedges were approximately $1.1 billion and $484 million, respectively. In the fourth quarter of 2009, th |
CAPITAL STOCK
CAPITAL STOCK | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
CAPITAL STOCK | NOTE 15 CAPITAL STOCK The authorized capital stock at both December31, 2009 and 2008, consisted of 990,850,000 shares of common stock, $1 par value; 400,000 shares of cumulative $4 preferred stock, without par value (stated value $100 per share); and 8,750,000 shares of serial preferred stock, $1 par value. The serial preferred stock is issuable in one or more series by the Board of Directors without further shareholder action. During 2007, the Company purchased 33.6million shares of its common stock on the open market for an average price of $36.43 per share, plus costs to acquire the shares, for a total cost of $1.2 billion. In December 2008, the Company retired 60million shares of its common stock held in treasury. The following is a rollforward of common stock activity for the three years ended December31, 2009, 2008 and 2007: Common Stock In thousands Issued Treasury Balance at January1, 2007 493,340 39,844 Issuance of stock for various plans, net 216 (4,991 ) Repurchase of stock 33,583 Balance at December31, 2007 493,556 68,436 Issuance of stock for various plans, net (3,840 ) Repurchase of stock 1,462 Retirement of treasury stock (60,000 ) (60,000 ) Balance at December31, 2008 433,556 6,058 Issuance of stock for various plans, net 3,466 (3,484 ) Repurchase of stock 1,288 Balance at December31, 2009 437,022 3,862 |
RETIREMENT PLANS
RETIREMENT PLANS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
RETIREMENT PLANS | NOTE 16 RETIREMENT PLANS U.S. Defined Benefit Plans International Paper maintains pension plans that provide retirement benefits to substantially all salaried employees hired prior to July1, 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 June30, 2004, are not eligible for these pension plans but receive an additional company contribution to their savings plan (see Other Plans on page89). The 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). Former Weyerhaeuser salaried employees acquired by International Paper in the CBPR acquisition became participants in International Papers pension plans if they had been hired by Weyerhaeuser prior to July1, 2004. Acquired salaried employees hired by Weyerhaeuser after June30, 2004 are not eligible and instead received an additional company contribution to their savings plan. The Company makes required minimum funding contributions to its qualified defined benefit pension plans to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plans, tax deductibility, cash flow generated by the Company, and other factors. The Company expects that no cash funding contribution will be required for this plan in 2010, and no con tributions were made in 2009 or 2008. 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. An additional plan was acquired in 2008 with the CBPR acquisition. The plan covers hourly workers at the Albany, Oregon mill and was merged with the Retirement Plan of International Paper as of December31, 2009. The Company also has two unfunded nonqualified defined benefit pension plans: a Pension Restoration Plan available to employees hired prior to July1, 2004 that provides retirement benefits based on eligible compensation in excess of limits set by the Internal Revenue Service, and a supplemental retirement plan 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 $35 million, $24 million and $29 million in 2009, 2008 and 2007, respectively, and which are expected to be $41 million in 2010. 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 pl |
POSTRETIREMENT BENEFITS
POSTRETIREMENT BENEFITS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
POSTRETIREMENT BENEFITS | NOTE 17 POSTRETIREMENT BENEFITS U.S. POSTRETIREMENT BENEFITS International Paper provides certain retiree health care and life insurance benefits covering certain U.S. salaried and hourly employees. These employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Excluded from company-provided medical benefits are salaried employees whose age plus years of employment with the Company totaled less than 60 as of January1, 2004. International Paper does not fund these benefits prior to payment and has the right to modify or terminate certain of these plans in the future. The components of postretirement benefit expense in 2009, 2008 and 2007, were as follows: In millions 2009 2008 2007 Service cost $ 2 $ 3 $ 1 Interest cost 31 34 34 Actuarial loss 23 29 23 Amortization of prior service credits (29 ) (38 ) (43 ) Net postretirement benefit expense (a) $ 27 $ 28 $ 15 (a) Excludes $0.8 million and $0.7 million of curtailment gains in 2008 and 2007, respectively, and $2.8 million and $0.5 million of termination benefits in 2009 and 2008, respectively, related to cost reduction programs and facility rationalizations that were recorded in Restructuring and other charges in the consolidated statement of operations. Also excludes $13.2 million in curtailment gains in 2007 and $3.3 million of termination benefits in 2007 related to certain divestitures recorded in Net losses (gains) on sales and impairments of businesses in the consolidated financial statements. International Paper evaluates its actuarial assumptions annually as of December31 (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 rates used to determine net cost for the years ended December31, 2009, 2008 and 2007 were as follows: 2009 2008 2007 Discount rate 5.90 % 5.90 % 5.75 % The weighted average assumptions used to determine the benefit obligation at December31, 2009 and 2008 were as follows: 2009 2008 Discount rate 5.40 % 5.90 % Health care cost trend rate assumed for next year 9.00 % 9.50 % Rate that the cost trend rate gradually declines to 5.00 % 5.00 % Year that the rate reaches the rate it is assumed to remain 2017 2017 A 1% increase in the assumed annual health care cost trend rate would have increased the accumulated postretirement benefit obligation at December31, 2009 by approximately $24 million. A 1% decrease in the annual trend rate would have decreased the accumulated postretirement benefit obligation at December31, 2009 by approximately $21 million. The effect on net postretirement benefit cost from a 1% increase or decrease would be approximately $2 million. The plan is only funded in an amount equal to benefits paid. The following table presents the changes in benefit o |
INCENTIVE PLANS
INCENTIVE PLANS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
INCENTIVE PLANS | NOTE 18 INCENTIVE PLANS International Paper currently has an Incentive Compensation Plan (ICP) that, upon the approval by the Companys shareholders in May 2009, replaced the Companys 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, stock appreciation rights (SARs) have been awarded to employees of a non-U.S. subsidiary, with 3,310 rights outstanding at December31, 2009 and 2008. Restricted stock units (RSUs) were also awarded to certain non-U.S. employees in 2008 with 44,100 and 59,100 units outstanding at December31, 2009 and 2008, respectively. Additionally, restricted stock, which may be deferred into RSUs, may be awarded under a Restricted Stock and Deferred Compensation Plan for Non-Employee Directors. STOCK OPTION PROGRAM International Paper accounts for stock options in accordance with guidance under ASC 718, Compensation Stock Compensation. Compensation expense is recorded over the related service period based on the grant-date fair market value. Since all outstanding options were vested as of July14, 2005, only replacement option grants were expensed in 2007. No replacement options were granted in 2008 or 2009. During each reporting period, diluted earnings per share is calculated by assuming that in-the-money options are exercised and the exercise proceeds are used to repurchase shares in the marketplace. When options are actually exercised, option proceeds are credited to equity and issued shares are included in the computation of earnings per common share, with no effect on reported earnings. Equity is also increased by the tax benefit that International Paper will receive in its tax return for income reported by the optionees in their individual tax returns. Under the program, upon exercise of an option, a replacement option may be granted under certain circumstances with an exercise price equal to the market price at the time of exercise and with a term extending to the expiration date of the original option. The Company has discontinued the issuance of stock options for all eligible U.S. and non-U.S. employees. In the United States, the stock option program was replaced with a performance-based restricted share program to more closely tie long-term incentive compensation to Company performance on two key performance drivers: return on investment (ROI) and total shareholder return (TSR). The fair market value of each option grant has been estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2007: 2007 Replacement Options (a) Risk-free interest rate 4.92 % Price volatility 20.46 % Dividend yield 2.74 % Expected term in years 2 |
INTERIM FINANCIAL RESULTS
INTERIM FINANCIAL RESULTS (UNAUDITED) | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
INTERIM FINANCIAL RESULTS (UNAUDITED) | INTERIM FINANCIAL RESULTS (UNAUDITED) In millions, except per share amounts and stock prices 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year 2009 Net sales $ 5,668 $ 5,802 $ 5,919 $ 5,977 $ 23,366 Gross margin (a) 1,937 2,021 2,161 2,027 8,146 Earnings (loss) from continuing operations before income taxes and equity earnings 518 (b) 520 (c) 589 (e) (428 )(f) 1,199 (b,c,e,f) Net earnings (loss) attributable to International Paper Company 257 (b) 136 (c,d) 371 (e) (101 )(f,g) 663 (b-g) Basic earnings (loss) per share attributable to International Paper Company common shareholders $ 0.61 (b) $ 0.32 (c,d) $ 0.87 (e) $ (0.24 )(f,g) $ 1.56 (b-g) Diluted earnings (loss) per share attributable to International Paper Company common shareholders 0.61 (b) 0.32 (c,d) 0.87 (e) (0.24 )(f,g) 1.55 (b-g) Dividends per share of common stock 0.25 0.025 0.025 0.025 0.325 Common stock prices High $ 12.74 $ 15.96 $ 25.30 $ 27.79 $ 27.79 Low 3.93 6.80 13.82 20.38 3.93 2008 Net sales $ 5,668 $ 5,807 $ 6,808 $ 6,546 $ 24,829 Gross margin (a) 1,407 1,502 1,654 1,524 6,087 Earnings (loss) from continuing operations before income taxes and equity earnings 198 (h) 302 (j) 265 (k) (1,918 )(l) (1,153 )(h,j,k,l) Gain (loss) from discontinued operations (17 )(i) (1) 5 (m) (13 )(i,m) Net earnings (loss) attributable to International Paper Company 133 (h,i) 227 (j) 149 (k) (1,791 )(l,m,n) (1,282 )(h-n) Basic earnings (loss) per share attributable to International Paper Company common shareholders: Earnings (loss) from continuing operations $ 0.36 (h) $ 0.54 (j) $ 0.35 (k) $ (4.26 )(l) $ (3.02 )(h,j,k,l) Gain (loss) from discontinued operations (0.04 )(i) 0.01 (m) (0.03 )(i,m) Net earnings (loss) 0.32 (h,i) 0.54 (j) 0.35 (k) (4.25 )(l,m,n) (3.05 )(h-n) Diluted earnings (loss) per share attributable to International Paper Company common shareholders: Earnings (loss) from continuing operations $ 0.35 (h) $ 0.54 (j) $ 0.35 (k) $ (4.26 )(l) $ (3.02 )(h,j,k,l) Gain (loss) from discontinued operations (0.04 )(i) 0.01 (m) (0.03 )(i,m) Net earnings (loss) 0.31 (h,i) 0.54 (j) 0.35 (k) (4.25 )(l,m,n) (3.05 )(h-n) Dividends per share of common stock 0.25 0.25 0.25 0.25 1.00 Common stock prices High $ 33.77 $ 29.37 $ 31.07 $ 26.64 $ 33.77 Low 26.59 23.14 21.66 10. |
SCHEDULE II - VALUATION AND QUA
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (In millions) For the Year Ended December31, 2009 Balance at Beginning of Period Additions Chargedto Earnings Additions Chargedto Other Accounts Deductions from Reserves Balance atEndof Period Description Reserves Applied Against Specific Assets Shown on Balance Sheet: Doubtful accounts current $ 121 $ 54 $ $ (39)(a) $ 136 Restructuring reserves 96 251 (263)(b) 84 For the Year Ended December31, 2008 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 $ 95 $ 29 $ 13 (c) $ (16)(a) $ 121 Restructuring reserves 7 120 (31)(b) 96 For the Year Ended December31, 2007 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 $ 85 $ 14 $ $ (4) (a) $ 95 Restructuring reserves 56 30 (79)(b) 7 (a) Includes write-offs, less recoveries, of accounts determined to be uncollectible and other adjustments. (b) Includes payments and deductions for reversals of previously established reserves that were no longer required. (c) Allowance for doubtful accounts acquired in the Weyerhaeuser Containerboard, Packaging and Recycling acquisition. |
Document Information
Document Information | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Document Type | 10-K |
Amendment Flag | false |
Document Period End Date | 2009-12-31 |
Entity Information
Entity Information (USD $) | |||
12 Months Ended
Dec. 31, 2009 | Feb. 19, 2010
| Jun. 30, 2009
| |
Trading Symbol | IP | ||
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 Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 436,149,732 | ||
Entity Public Float | $6,494,044,065 |