<Page>
[INTERNATIONAL PAPER LOGO]
INTERNATIONAL PAPER PLAZA
400 ATLANTIC STREET
STAMFORD, CT 06921
News Release
Media Contacts: Stacy Wygant, 901-568-4084
Investor Contacts: Darial Sneed, 203-541-8541
Brian Turcotte, 203-541-8632
International Paper Reports Third-Quarter 2003 Earnings
o EPS of $0.25 per share improves from $0.19 in second quarter as the
company lowered costs and improved product mix
o Significant increase in wood products pricing offset by pricing
declines in paper and packaging -- the company's largest segments
Stamford, Conn. - Oct. 27, 2003 - International Paper (NYSE: IP) today reported
third-quarter 2003 net earnings of $122 million ($0.25 per share), compared with
net earnings of $145 million ($0.30 per share) in the third quarter of 2002 and
net earnings of $88 million ($0.19 per share) in the second quarter of 2003.
Amounts in all periods include the effects of special items.
Before special items, earnings for the third quarter of 2003 were $117 million
($0.24 per share), compared with $153 million ($0.32 per share) in the 2002
third quarter and $89 million ($0.19 per share) in the second quarter of 2003.
Net sales for the third quarter totaled $6.4 billion, the same as the third
quarter of 2002 and up from $6.2 billion in the second quarter of 2003.
Third quarter 2003 earnings included a $15 million reduction in the provision
for income taxes ($0.03 per share) reflecting a reduction in the full year
estimated effective tax rate, excluding special items, to 25 percent from the 28
percent estimate in the 2003 second quarter. The reduction in the tax rate
projection is due to a higher proportion of taxable income in lower tax rate
jurisdictions.
"Despite continuing difficult market conditions and declining prices, our
ongoing internal efforts resulted in improved earnings versus the second
quarter," said John Dillon, International Paper chairman and chief executive
officer. "While volumes were seasonally higher, underlying demand is still weak
and energy and wood costs remain high. We continue to largely offset these
external factors by focusing on our internal improvement programs, which are
gaining significant momentum. Our operational performance has improved
throughout the year, and we are lowering our overhead costs, which will position
us well when the economy improves."
<Page>
Commenting on the company outlook, Dillon said, "Looking at the fourth quarter,
the external environment continues to look tough with seasonally lower demand
and continued higher energy and wood prices, which is why we remain intensely
focused on the internal factors we can control. More importantly, as we look
into 2004, there are signs of a general improvement in the economy, which will
benefit our business over the long term."
Effects of Special Items
Special items in the 2003 third quarter included a pre-tax charge of $93 million
($59 million after taxes), including $33 million for facility closure costs, $38
million for severance costs associated with organizational restructuring
programs, $8 million for early debt retirement costs, and $14 million for
additional legal reserves; a pre-tax charge of $1 million ($1 million after
taxes) to adjust costs of businesses previously sold; and a pre-tax credit of $8
million ($5 million after taxes) for the reversal of restructuring and
realignment reserves no longer required. In addition, a decrease in the income
tax provision of $60 million was recorded reflecting a favorable revision of
estimated tax reserves upon filing of the 2002 Federal income tax return and
increased research and development credits. The net after-tax effect of these
special items was an increase of $0.01 per share.
Special items in the 2002 third quarter consisted of a pre-tax charge of $10
million ($4 million after taxes and minority interest) for business realignment
severance costs, a pre-tax charge of $9 million ($5 million after taxes and
minority interest) for asset impairment charges, and a net $3 million gain
before taxes ($1 million after taxes) related to adjustments of gains (losses)
of businesses previously sold. The net after-tax effect of these special items
was a decrease of $0.02 per share.
Special items in the second quarter of 2003 included charges of $81 million
before taxes ($50 million after taxes), consisting of $43 million for facility
shut-down costs, and $38 million for severance costs associated with
organizational restructuring programs, early debt extinguishment costs, and
legal reserves. Special items also included a $10 million pre-tax adjustment ($6
million after taxes) for previous divestitures and a $9 million pre-tax reserve
reversal ($5 million after taxes and minority interest). In addition, a $50
million tax provision reduction was recorded in the quarter reflecting
settlements of prior period tax issues. The net after-tax effect of these
special items was $0.00 per share.
A reconciliation of earnings before special items to net earnings (loss),
including information regarding the cumulative effect of accounting changes and
special items and a statement relating to the use of these non-GAAP measures, is
presented in a table in this press release.
Segment Information
While operating profits of $489 million for the third quarter of 2003 were above
second quarter totals of $448 million, operating profits were down compared with
$523 million the third quarter of 2002 largely due to higher energy and wood
costs and lower volumes and average pricing in paper and packaging, partially
offset by improved operational performance, overhead cost savings and better
lumber and plywood pricing.
<Page>
Third-quarter 2003 segment operating profits and business trends compared with
the second quarter were as follows:
Third-quarter operating profits for Printing Papers were $120 million compared
with second-quarter operating profits of $143 million as a result of lower
average prices, which were partially offset by seasonally higher volumes and
favorable mill operations. In addition, the mills took more downtime in the
quarter in order to balance production with customer demand.
Industrial and Consumer Packaging operating profits were $107 million in the
third quarter, compared with $121 million in the second quarter due to lower
average pricing in Industrial Packaging, despite higher box volumes and improved
results in the Consumer Packaging businesses. Improved mill operations and lower
overhead costs were offset by increased downtime taken to balance production
with customer demand, particularly in Containerboard.
The company's distribution business, xpedx, reported operating profits of $24
million for the third quarter compared with operating profits in the second
quarter of $22 million. The increase was largely due to seasonally higher sales
in packaging and lower overhead costs.
Third-quarter Forest Products operating profits of $201 million were up from
$143 million in the second quarter primarily due to much higher lumber and
plywood prices and slightly higher harvest volumes. Earnings from timberland
sales were relatively flat with the second quarter.
Operating profits at Carter Holt Harvey, International Paper's 50.5 percent
owned subsidiary in New Zealand, were $19 million in the third quarter, up from
$9 million in the second quarter, reflecting the resolution of the Kinleith Mill
labor strike.
Corporate expenses, net, increased to $138 million in the third quarter
primarily due to higher pension expense due to an annual review of demographic
assumptions and benefit-related expenses. The increase in corporate expenses
from $71 million in the third quarter of 2002 also reflected the higher pension
and benefit-related expenses plus supply chain initiative costs and lower
foreign exchange gains.
In connection with the adoption of Statement of Financial Accounting Standards
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity", in the third quarter of 2003, approximately $1.3
billion of mandatorily redeemable preferred securities, previously classified as
a separate line item in the Company's consolidated balance sheet, were
reclassified as Long-term debt. In addition, $22 million of related preferred
dividends were included in interest expense in the Company's consolidated income
statement for the 2003 third quarter. Preferred dividends for periods prior to
the 2003 third quarter continue to be reported as Minority interest expense, as
required under the standard.
The company will hold a webcast to discuss earnings and current market
conditions at 10 a.m. (EST) today. All interested parties are invited to listen
to the webcast live via the company's Internet site at
http://www.internationalpaper.com by clicking on the Investor Information
button. Persons who wish to listen to the live earnings webcast must
pre-register at the site prior to the webcast. A replay of the webcast will also
be available on the Web site beginning at 1 p.m. (EST) this afternoon.
<Page>
International Paper (http://www.internationalpaper.com) is the world's largest
paper and forest products company. Businesses include paper, packaging, and
forest products. As one of the largest private forest landowners in the world,
the company manages its forests under the principles of the Sustainable Forestry
Initiative 'r' (SFI) program, a system that ensures the continual planting,
growing and harvesting of trees while protecting wildlife, plants, soil, air and
water quality. Headquartered in the United States, International Paper has
operations in over 40 countries and sells its products in more than 120 nations.
# # #
Statements in this press release that are not historical are forward-looking.
These statements are subject to risks and uncertainties that could cause actual
results to differ materially, including but not limited to, the strength of
demand for the company's products and changes in overall demand, the effects of
competition from foreign and domestic producers, the level of housing starts,
changes in the cost or availability of raw materials, unanticipated expenditures
related to the cost of compliance with environmental and other governmental
regulations, the ability of the company to continue to realize anticipated cost
savings, performance of the company's manufacturing operations, results of legal
proceedings, changes related to international economic conditions, changes in
currency exchange rates, particularly the relative value of the U.S. dollar to
the Euro, economic conditions in developing countries, specifically Brazil and
Russia, the current military action in Iraq and the war on terrorism. We
undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. These and
other factors that could cause or contribute to actual results differing
materially from such forward looking statements are discussed in greater detail
in the company's Securities and Exchange Commission filings.
<Page>
International Paper
Summary of Consolidated Earnings
Preliminary and Unaudited
(In millions except for net sales and per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ------------------------------
2003 2002 2003 2002
---------- --------- ----------- -----------
Net Sales (In billions) $6.4 $6.4 $18.7 $18.7
---------- --------- ----------- -----------
Earnings Before Interest, Income Taxes,
Minority Interest, and Cumulative Effect
of Accounting Changes 286 (a) 454 (g) 886 (d) 1,233 (h)
Interest expense, net 203 (b) 186 581 (b) 590
---------- --------- ----------- -----------
Earnings Before Income Taxes, Minority
Interest, and Cumulative Effect of
Accounting Changes 83 (a) 268 (g) 305 (d) 643 (h)
Income tax provision (benefit) (59)(a,c) 85 (g) (58)(d,e) 118 (h)
Minority interest expense, net of taxes 20 (b) 38 (g) 99 (b,d) 100 (h)
---------- --------- ----------- -----------
Earnings Before Cumulative Effect of
Accounting Changes 122 (a,c) 145 (g) 264 (d,e) 425 (h)
Cumulative Effect of Accounting Changes:
Asset Retirement Obligations, net
of taxes -- -- (10) (f) --
Transitional goodwill impairment
charge, net of minority interest -- -- -- (1,175)(i)
---------- --------- ----------- -----------
Net Earnings (Loss) $122 (a,c) $145 (g) $254 (d,e,f) $(750) (h,i)
========== ========= =========== ===========
Earnings Per Common Share Before
Cumulative Effect of Accounting Changes $0.25 (a,c) $0.30 (g) $0.55 (d,e) $0.88 (h)
Earnings (Loss) Per Common Share -
Cumulative Effect of Accounting Changes:
Asset Retirement Obligations - SFAS 143 -- -- (0.02) (f) --
Goodwill Impairment - SFAS 142 -- -- -- $(2.44) (i)
---------- --------- ---------- -----------
Earnings (Loss) Per Common Share $0.25 (a,c) $0.30 (g) $0.53 (d,e,f) $(1.56) (h,i)
========== ========= ========== ===========
Earnings (Loss) Per Common Share -
Assuming Dilution $0.25 (a,c) $0.30 (g) $0.53 (d,e,f) $(1.56) (h,i)
========== ========= =========== ===========
Average Shares of Common Stock Outstanding 479.8 481.1 479.3 482.0
========== ========= =========== ===========
(a) Includes a pre-tax charge of $93 million ($59 million after taxes) for
facility shutdown costs, severance costs associated with
organizational restructuring, early debt extinguishment costs, and
legal reserves, a pre-tax charge of $1 million ($1 million after
taxes) to adjust accrued costs of businesses sold, and a pre-tax
credit of $8 million ($5 million after taxes) for the net reversal of
restructuring and realignment reserves no longer required.
(b) Includes the effect of $22 million of interest on mandatorily
redeemable preferred securities reclassified from minority interest
expense as required under SFAS No. 150.
<Page>
(c) Includes a decrease of $60 million in the income tax provision
reflecting a favorable revision of estimated tax reserves upon filing
of the 2002 Federal income tax return, and a $15 million adjustment to
reduce the estimated full year effective tax rate, excluding special
and unusual items, to 25% from the second quarter estimate of 28%.
(d) Includes a $197 million charge before taxes and minority interest
($123 million after taxes and minority interest) for facility shutdown
costs, severance costs associated with organizational restructuring,
early debt extinguishment costs, and legal reserves, a pre-tax charge
of $11 million ($7 million after taxes) to adjust accrued costs of
businesses sold, and a credit of $17 million before taxes and minority
interest ($10 million after taxes and minority interest) for the net
reversal of restructuring and realignment reserves no longer required.
(e) Includes decreases of $110 million in the income tax provision
reflecting a revision of estimated tax reserves upon filing of the
2002 Federal income tax return and settlements of prior period tax
issues.
(f) Includes a pre-tax charge of $15 million ($10 million after taxes) for
the adoption of SFAS No. 143, "Asset Retirement Obligations."
(g) Includes a $19 million charge before taxes and minority interest ($9
million after taxes and minority interest) for facility closures,
administrative realignment and related severance costs, and a pre-tax
credit of $3 million ($1 million after taxes) to adjust accrued costs
of businesses sold.
(h) Includes a $98 million charge before taxes and minority interest ($59
million after taxes and minority interest) for facility closures,
administrative realignment and related severance costs, a credit of
$31 million before taxes and minority interest ($97 million after
taxes and minority interest) to adjust accrued costs of businesses
sold, and a pre-tax credit of $10 million ($7 million after taxes) for
the net reversal of restructuring and realignment reserves no longer
required.
(i) Includes a $1,236 million charge before minority interest ($1,175
million after minority interest) for the transitional goodwill
impairment charge from the adoption of SFAS No. 142, "Goodwill and
Other Intangible Assets."
<Page>
International Paper
Reconciliation of Earnings Before
Special Items to Net Earnings (Loss)
Preliminary and Unaudited
(In millions except for per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ----------------------------
2003 2002 2003 2002
------------ ------------ ----------- -----------
Earnings Before Special Items (1) $ 117 $ 153 $ 274 $ 380
Restructuring and other charges (59) (9) (123) (59)
Reversal of reserves no longer required 5 -- 10 7
Net gains (losses) on sales and impairments
of businesses held for sale (1) 1 (7) 97
Income tax adjustments 60 -- 110 --
Cumulative effect of change in accounting
for asset retirement obligations -- -- (10) --
Cumulative effect of change in accounting
for transitional goodwill
impairment charge -- -- -- (1,175)
------------ ------------ ----------- ------------
Net Earnings (Loss) as Reported $ 122 $ 145 $ 254 $ (750)
============ ============ =========== ============
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ----------------------------
2003 2002 2003 2002
------------ ------------ ----------- -----------
Earnings Per Common Share
Before Special Items (1) $ 0.24 $ 0.32 $ 0.57 $ 0.79
Restructuring and other charges (0.13) (0.02) (0.26) (0.12)
Reversal of reserves no longer required 0.01 -- 0.02 0.01
Net gains (losses) on sales and impairments
of businesses held for sale -- -- (0.01) 0.20
Income tax adjustments 0.13 -- 0.23 --
Cumulative effect of change in accounting
for asset retirement obligations -- -- (0.02) --
Cumulative effect of change in accounting
for transitional goodwill
impairment charge -- -- -- (2.44)
------------ ------------ ----------- -----------
Earnings (Loss) Per Common Share as Reported $ 0.25 $ 0.30 $ 0.53 $ (1.56)
============ ============ =========== ===========
(1) The company calculates Earnings Before Special Items by excluding the
after-tax effect of the adoption of new accounting standards and items
considered by management to be unusual from the net earnings (loss)
reported under generally accepted accounting principles ("GAAP").
Management uses this measure to focus on on-going operations, and believes
that it is useful to investors because it enables them to perform
meaningful comparisons of past and present operating results. International
Paper believes that using this information along with net earnings (loss)
provides for a more complete analysis of the results of operations by
quarter. Net earnings (loss) is the most directly comparable GAAP measure.
<Page>
International Paper
Sales and Earnings by Industry Segment
Preliminary and Unaudited
(In millions)
Sales by Industry Segment
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Printing Papers $ 1,915 $ 1,965 $ 5,670 $ 5,600
Industrial and Consumer Packaging 1,535 1,565 4,600 4,555
Distribution 1,565 1,605 4,665 4,715
Forest Products 800 745 2,215 2,325
Carter Holt Harvey 590 500 1,615 1,390
Specialty Businesses and Other (1) 315 340 1,005 1,205
Less: Intersegment Sales (347) (377) (1,058) (1,104)
----------- ----------- ----------- -----------
$ 6,373 $ 6,343 $ 18,712 $ 18,686
=========== =========== =========== ===========
Earnings by Industry Segment
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Printing Papers $ 120 $ 180 $ 385 $ 362
Industrial and Consumer Packaging 107 128 317 401
Distribution 24 23 61 64
Forest Products 201 164 505 544
Carter Holt Harvey 19 16 44 40
Specialty Businesses and Other (1) 18 12 35 38
----------- ----------- ----------- -----------
489 523 1,347 1,449
Operating Profit
Interest expense, net (203) (186) (581) (590)
Minority interest (2) 21 18 52 43
Corporate items, net (138) (71) (322) (202)
Restructuring and other charges (93) (19) (197) (98)
Net (gains) losses on sales and impairments of
businesses held for sale (1) 3 (11) 31
Reversal of reserves no longer required 8 -- 17 10
----------- ----------- ----------- -----------
Earnings before income taxes, minority interest and
cumulative effect of accounting changes $ 83 $ 268 $ 305 $ 643
=========== =========== =========== ===========
(1) Includes Arizona Chemical, Industrial Papers, and Chemical Cellulose Pulp,
as well as other smaller businesses identified in our divestiture program.
(2) Operating profits for industry segments include each segment's percentage
share of the profits of subsidiaries included in that segment that are less
than wholly owned. The pre-tax minority interest for these subsidiaries is
added here to present consolidated earnings before income taxes, minority
interest, and cumulative effect of accounting changes.
<Page>
International Paper
Supplemental Financial Data
Preliminary and Unaudited
Financial Data (In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
2003 2002 2003 2002
------------ ----------- ----------- ----------
Depreciation, amortization and cost of
timber harvested $ 416 $ 407 $ 1,226 $ 1,194
============ =========== =========== ==========
Investment in capital projects (1) $ 276 $ 231 $ 703 $ 617
============ =========== =========== ==========
(1) Includes $4 million of spending for businesses held for sale for the nine
months ended September 30, 2002.
Sales Volumes by Product (1) (2)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -------------------------
2003 2002 2003 2002
----------- ----------- ----------- ---------
Printing Papers (In thousands of short tons)
Uncoated Papers and Bristols 1,605 1,664 4,774 4,899
Coated Papers 575 615 1,581 1,657
Market Pulp 630 654 1,810 1,853
Packaging (In thousands of short tons)
Containerboard 560 611 1,696 1,695
Bleached Packaging Board 361 343 1,062 994
Kraft 148 159 455 472
Industrial and Consumer Packaging 1,137 1,122 3,386 3,403
Forest Products (In millions)
Panels (sq. ft. 3/8" - basis) 600 585 1,699 1,905
Lumber (board feet) 1,047 1,099 3,066 3,222
MDF and Particleboard (sq. ft. 3/4" - basis) 155 130 441 500
(1) Includes third party and inter-segment sales, and 100 percent of volumes
sold by Carter Holt Harvey.
(2) Sales volumes for divested businesses are included through the date of
sale.
<Page>
INTERNATIONAL PAPER COMPANY
Consolidated Balance Sheet
Preliminary and Unaudited
(In Millions)
September 30, December 31,
2003 2002
------------------- ------------------
Assets
Current Assets
Cash and temporary investments $ 1,564 $ 1,074
Accounts and notes receivable, net 2,948 2,780
Inventories 2,942 2,879
Assets of businesses held for sale 148 128
Other current assets 911 877
------------------- ------------------
Total Current Assets 8,513 7,738
------------------- ------------------
Plants, Properties and Equipment, net 14,029 14,167
Forestlands 3,932 3,846
Investments 248 227
Goodwill 5,332 5,307
Deferred Charges and Other Assets 2,545 2,507
------------------- ------------------
Total Assets $34,599 $33,792
=================== ==================
Liabilities and Common Shareholders' Equity
Current Liabilities
Notes payable and current maturities of long-term debt $ 637 $ --
Liabilities of businesses held for sale 41 44
Accounts payable and accrued liabilities 4,475 4,535
------------------- ------------------
Total Current Liabilities 5,153 4,579
------------------- ------------------
Long-Term Debt (a) 14,469 13,042
Deferred Income Taxes 1,663 1,765
Other Liabilities 3,783 3,778
Minority Interest 1,736 1,449
Mandatorily Redeemable Preferred Securities (a) -- 1,805
Common Shareholders' Equity
Invested capital 4,639 4,114
Retained earnings 3,156 3,260
------------------- ------------------
Total Common Shareholders' Equity 7,795 7,374
------------------- ------------------
Total Liabilities and Common Shareholders' Equity $34,599 $33,792
=================== ==================
(a) Reflects the reclassification of approximately $1.3 billion of mandatorily
redeemable preferred securities to long-term debt as of September 30, 2003
as required under SFAS No. 150.