Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information presents the combined historical consolidated statements of operations and consolidated balance sheet of International Paper Company (“International Paper”) and the historical consolidated statements of operations and consolidated balance sheet of Temple-Inland, Inc. (“Temple”) to reflect the acquisition of Temple by International Paper. Those historical financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited pro forma condensed combined financial information is presented in accordance with the rules specified by Article 11 of Regulation S-X promulgated by the SEC, and has been prepared using the assumptions described in the notes thereto. The unaudited pro forma condensed combined balance sheet gives effect to the acquisition as if it had occurred as of the respective balance sheet date. The unaudited pro forma condensed combined statement of operations gives effect to the pending acquisition as if it had occurred as of the beginning of the period presented.
| | • | | Unaudited pro forma condensed combined balance sheet as of December 31, 2011; |
| | • | | Unaudited pro forma condensed combined statement of operations for the year ended December 31, 2011; |
The unaudited pro forma condensed combined financial information should be read in conjunction with the historical financial statements of Temple, including the notes thereto, which were filed as an Exhibit to our Current Report on Form 8-K/A dated as of and filed on March 27, 2012, as well as in conjunction with our historical consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2011.
The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the financial position or results of operations of the combined company. The unaudited pro forma condensed combined financial information does not give effect to any potential cost savings or other operational efficiencies that could result from the acquisition. In addition, the preliminary estimated allocation of the purchase price to the assets and liabilities acquired was based on Temple’s publicly reported financial statements and International Paper’s estimates since the acquisition have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the purchase price allocation pro forma adjustments are preliminary and have been presented solely for the purpose of providing unaudited pro forma condensed combined financial information in this 8-K/A.
INTERNATIONAL PAPER COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET
(In millions)
| | | | | | | | | | | | | | | | |
| | | International
Paper
As of
December 31,
2011
(Historical) | | | Temple-
Inland
As of
December 31,
2011
(Historical) | | | Pro Forma
Adjustments | | | Pro
Forma
Combined | |
ASSETS | | | | | | | | | | | | | | | | |
Current assets | | $ | 10,456 | | | $ | 1,167 | | | $ | 65 | (b) | | $ | 9,127 | |
| | | | | | | | | | | (3 | ) (c) | | | | |
| | | | | | | | | | | (2,558 | ) (d) | | | | |
Plants, properties and equipment, net | | | 11,817 | | | | 1,647 | | | | 2,052 | (e) | | | 15,516 | |
Forestlands | | | 660 | | | | — | | | | — | | | | 660 | |
Investments | | | 632 | | | | — | | | | — | | | | 632 | |
Goodwill | | | 2,346 | | | | 394 | | | | (394 | ) (f) | | | 4,429 | |
| | | | | | | | | | | 2,083 | (g) | | | | |
Deferred charges and other assets | | | 1,082 | | | | 2,736 | (a) | | | 38 | (h) | | | 3,856 | |
| | | | | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 26,993 | | | $ | 5,944 | | | $ | 1,283 | | | $ | 34,220 | |
| | | | | | | | | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | |
Current liabilities | | $ | 4,738 | | | $ | 677 | | | $ | (3 | ) (c) | | $ | 5,412 | |
Long-term debt | | | 9,189 | | | | 2,640 | (a) | | | 1,380 | (h) | | | 13,261 | |
| | | | | | | | | | | 52 | (i) | | | | |
Deferred income taxes | | | 2,497 | | | | 685 | | | | 780 | (j) | | | 3,962 | |
Pension benefit obligation | | | 2,375 | | | | 479 | | | | — | | | | 2,854 | |
Postretirement and postemployment benefit obligation | | | 476 | | | | 101 | | | | — | | | | 577 | |
Other liabilities | | | 758 | | | | 394 | | | | — | | | | 1,152 | |
| | | | | | | | | | | | | | | | |
TOTAL LIABILITIES | | | 20,033 | | | | 4,976 | | | | 2,209 | | | | 27,218 | |
TOTAL EQUITY | | | 6,960 | | | | 968 | | | | (926 | ) (k) | | | 7,002 | |
| | | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 26,993 | | | $ | 5,944 | | | $ | 1,283 | | | $ | 34,220 | |
| | | | | | | | | | | | | | | | |
INTERNATIONAL PAPER COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
(In millions, except per share data)
| | | | | | | | | | | | | | | | |
| | | International
Paper
For the Year
Ended
December 31,
2011
(Historical) | | | Temple-
Inland
For the Year
Ended
December 31,
2011
(Historical) | | | Pro Forma
Adjustments | | | Pro
Forma
Combined | |
NET SALES | | $ | 26,034 | | | $ | 3,961 | | | $ | (49 | ) (m) | | $ | 29,946 | |
COST AND EXPENSES | | | | | | | | | | | | | | | | |
Cost of products sold | | | 18,960 | | | | 3,465 | | | | (40 | ) (m) | | | 22,385 | |
Selling and administrative expenses | | | 1,887 | | | | 295 | | | | — | | | | 2,182 | |
Depreciation, amortization and cost of timber harvested | | | 1,332 | | | | — | (l) | | | 147 | (n) | | | 1,479 | |
Distribution expenses | | | 1,390 | | | | — | (l) | | | — | | | | 1,390 | |
Taxes other than payroll and income taxes | | | 146 | | | | — | (l) | | | — | | | | 146 | |
Restructuring and other charges | | | 102 | | | | — | | | | 50 | (o) | | | 152 | |
Net (gains) losses on sales and impairments of businesses | | | 218 | | | | 39 | | | | — | | | | 257 | |
Other operating (income) expense | | | 0 | | | | 30 | | | | — | | | | 30 | |
Interest expense, net | | | 541 | | | | 58 | | | | 97 | (p) | | | 696 | |
| | | | | | | | | | | | | | | | |
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY EARNINGS | | | 1,458 | | | | 74 | | | | (303 | ) | | | 1,229 | |
Income tax provision (benefit) | | | 311 | | | | 31 | | | | (104 | ) (q) | | | 238 | |
Equity earnings (losses), net of taxes | | | 159 | | | | — | | | | — | | | | 159 | |
| | | | | | | | | | | | | | | | |
NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS | | | 1,306 | | | | 43 | | | | (199 | ) | | | 1,150 | |
Less: Net earnings attributable to noncontrolling interests | | | 14 | | | | — | | | | — | | | | 14 | |
| | | | | | | | | | | | | | | | |
NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO PARENT | | $ | 1,292 | | | $ | 43 | | | $ | (199 | ) | | $ | 1,136 | |
| | | | | | | | | | | | | | | | |
BASIC EARNINGS PER COMMON SHARE | | | | | | | | | | | | | | | | |
Earnings from continuing operations | | $ | 2.99 | | | | | | | | | | | $ | 2.63 | |
| | | | | | | | | | | | | | | | |
Average common shares outstanding | | | 432.2 | | | | | | | | | | | | 432.2 | |
| | | | | | | | | | | | | | | | |
DILUTED EARNINGS PER COMMON SHARE | | | | | | | | | | | | | | | | |
Earnings from continuing operations | | $ | 2.96 | | | | | | | | | | | $ | 2.60 | |
| | | | | | | | | | | | | | | | |
Average common shares outstanding – assuming dilution | | | 437.0 | | | | | | | | | | | | 437.0 | |
| | | | | | | | | | | | | | | | |
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On February 13, 2012, International Paper, upon regulatory approval, completed the previously announced acquisition of Temple. International Paper acquired all of the outstanding common stock of Temple for $32.00 per share in cash and assumed approximately $740 million of Temple’s debt. The total transaction is valued at approximately $4.5 billion. As a condition to allowing the transaction to proceed, the Antitrust Division of the U.S. Department of Justice entered into an agreement with International Paper that requires the divestiture of three containerboard mills, with approximately 970,000 tons of aggregate containerboard capacity, within four months of closing (with the possibility of two 30-day extensions).
The preliminary allocation of the purchase price to the assets and liabilities acquired reflected in Note 2 below is based on Temple’s publicly-reported financial statements and International Paper’s estimates since the acquisition have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, these purchase price allocation pro forma adjustments are preliminary.
The following notes relate to the unaudited pro forma condensed combined balance sheet:
| (a) | Includes approximately $2.5 billion of notes receivable in Deferred charges and other assets, and $2.14 billion in non-recourse loans borrowed by Temple and secured only by the $2.38 billion of notes and the letters of credit received when Temple sold its timberlands in 2007. |
| (b) | Represents the preliminary fair value adjustment for Temple’s inventory. |
| (c) | Reflects the elimination of intercompany receivables and payables between International Paper and Temple. |
| (d) | Represents $2.5 billion of acquisition consideration paid from cash on hand. Also represents the payment of debt issuance costs and acquisition costs in cash. |
| (e) | Represents a preliminary adjustment to value plants, properties and equipment acquired at estimated fair value. |
| (f) | Represents the elimination of Temple’s pre-acquisition goodwill. |
| (g) | Represents the preliminary estimated goodwill related to the Temple acquisition. |
| (h) | Represents the $1.3 billion of long-term debt to finance the acquisition, and the capitalization of $38 million of related debt issuance costs. |
| (i) | Represents the fair value adjustment of Temple’s debt. |
| (j) | Represents deferred taxes on the preliminary adjustment of Temple’s plants, properties and equipment and debt to estimated fair value. |
| (k) | Represents the elimination of Temple’s equity, excluding noncontrolling interest, and the recognition of expense related to transaction costs paid in cash. |
The following notes relate to the unaudited pro forma condensed combined statement of operations:
| (l) | Temple does not separately disclose amounts for these captions. |
| (m) | Represents the elimination of sales between Temple and International Paper. |
| (n) | Represents additional depreciation resulting from the preliminary adjustment of Temple’s plants, properties and equipment to estimated fair value based on a preliminary estimated average useful life of 14 years. |
| (o) | Reflects expense related to costs to effect the acquisition. |
| (p) | Represents preliminary estimated additional interest expense incurred in connection with financing the acquisition, plus the straight-line amortization of debt issuance costs incurred to finance the acquisition over the term of the related debt. Also includes amortization related to the fair value adjustment of Temple debt over the life of the related debt. |
| (q) | Represents the tax effect of the above pro forma adjustments that are deductible based upon a combined statutory federal and state tax rate of 39%. |
