# International Paper Co: Form 10-Q for the period ended Mar 31, 2016

- Company: [International Paper Co](/companies/ip.md) (CIK 51434)
- Form: 10-Q
- Filed: 2016-05-05
- Accepted by EDGAR: May 5, 2016, 11:43 ET
- Period: 2016-03-31
- Accession: 0000051434-16-000048
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/51434/000005143416000048/ip-3312016xform10xq.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/51434/000005143416000048/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2016-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2016-01-01 to 2016-03-31 | $5.11bn | us-gaap:SalesRevenueNet |
| Selling, general and administrative | 3 months, 2016-01-01 to 2016-03-31 | $376.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2016-01-01 to 2016-03-31 | $497.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2016-01-01 to 2016-03-31 | $160.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2016-01-01 to 2016-03-31 | $41.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2016-01-01 to 2016-03-31 | $334.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2016-01-01 to 2016-03-31 | $0.81 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2016-01-01 to 2016-03-31 | $0.81 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2016-01-01 to 2016-03-31 | 414,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2016-01-01 to 2016-03-31 | $620.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2016-01-01 to 2016-03-31 | $309.0m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2016-01-01 to 2016-03-31 | $181.0m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2016-01-01 to 2016-03-31 | $131.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2016-03-31 | $1.16bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2016-03-31 | $6.79bn | us-gaap:AssetsCurrent |
| Total assets | at 2016-03-31 | $31.04bn | us-gaap:Assets |
| Current liabilities | at 2016-03-31 | $4.10bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2016-03-31 | $8.82bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2016-03-31 | $551.0m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2016-03-31 | $4.23bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 57,433 characters.

### EXECUTIVE SUMMARY

Operating Earnings (a non-GAAP measure) is defined as net earnings from continuing operations (a GAAP measure) excluding special items and non-operating pension expense. International Paper generated Operating Earnings per share attributable to International Paper common shareholders of $0.80 in the first quarter of 2016, compared with 2015 fourth-quarter earnings of $0.87 and 2015 first-quarter earnings of $0.84. Diluted earnings (loss) per share attributable to International Paper common shareholders were $0.81 in the first quarter of 2016, compared with $0.43 in the fourth quarter of 2015 and $0.74 in the first quarter of 2015.

International Paper delivered solid results in the 2016 first quarter driven by continued strong performance in our North American Industrial Packaging business along with improved results in our global printing papers businesses driven by better conditions and lower costs. The 2016 first quarter results reflect reliable operations and favorable input costs across our businesses in what was a heavy maintenance outage quarter including the Riegelwood conversion. Also, during the 2016 first quarter, we reached a definitive agreement to divest our interest in the Asia Industrial Packaging business, with the transaction expected to close later this year.

Price and mix were lower than the 2015 fourth quarter, primarily driven by lower pricing on export containerboard and box sales in our North American Industrial Packaging business. Volumes were sequentially lower, as expected, in our North American Industrial Packaging business primarily due to seasonality. Input costs were favorable compared to the 2015 fourth quarter, particularly in the case of recycled fiber and freight in our North American Industrial Packaging business. Maintenance outages were higher compared to the 2015 fourth quarter due in large part to significant costs associated with the Riegelwood mill conversion, which was completed in April 2016. Our Ilim joint venture delivered solid results in the 2016 first quarter driven by strong manufacturing performance partially offset by lower pulp prices and seasonally lower volumes. Ilim’s 2016 first quarter results also reflect the favorable impact of non-cash foreign currency movements associated with Ilim’s U.S. dollar denominated debt.

Looking ahead to the 2016 second quarter, we expect a seasonal volume increase in our North American Industrial Packaging business. Volume in the Brazilian Printing Papers business should also improve after moving past the seasonal weakness of the 2016 first quarter. Price and mix are expected to be unfavorable in our North American pulp business due to lower pulp prices and the ramp up of Riegelwood softwood pulp production, respectively. Pricing is also expected to be unfavorable in our North American Industrial Packaging Business due to lower export pricing and the impact of the January Containerboard pricing index adjustment flowing through to North American box contracts. Pricing in our Brazil Printing Papers business should improve as previously announced price increases are implemented. The solid operational performance noted in the 2015 first quarter is expected to continue during the 2016 second quarter with improvement in our North American Industrial Packaging business associated with seasonally stronger demand utilization along with other cost reduction and improvement initiatives. Input costs are expected to remain overall stable across most businesses with some inflationary pressure impacting the EMEA Printing Papers business. Planned maintenance outage costs will continue to be heavy in the 2016 second quarter but overall are expected to be lower than the 2016 first quarter which included significant outage costs at the Riegelwood mill. For our Ilim joint venture, the 2016 second quarter will likely be impacted by pulp pricing pressure, seasonally higher wood cost and heavy maintenance outage spending. Additionally, we expect Ilim’s earnings to be impacted by the absence of the positive impact from foreign currency movements driven by Ilim’s U.S. dollar denominated debt as we assume no change in foreign currency rates in our outlook.

Operating Earnings and Operating Earnings Per Share are non-GAAP measures. Diluted earnings (loss) per share attributable to International Paper Company common shareholders is the most direct comparable GAAP measure. The Company calculates Operating Earnings by excluding the after-tax effect of items considered by management to be unusual from the earnings reported under GAAP, non-operating pension expense, and discontinued operations. 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. The Company believes that using this information, along with the most direct comparable GAAP measure, provides for a more complete analysis of the results of operations.

The following are reconciliations of Operating Earnings per share attributable to International Paper Company common shareholders to diluted earnings (loss) per share attributable to International Paper Company common shareholders.

|  | Three Months Ended March 31, 2016 | 2015 | Three Months Ended December 31, 2015 |
| --- | ---: | ---: | ---: |
| Operating Earnings (Loss) Per Share Attributable to Shareholders | **$0.80** | $0.84 | $0.87 |
| Non-operating pension per share | **(0.07)** | (0.10) | (0.09) |
| Special items per share | **0.09** | — | (0.35) |
| Diluted Earnings (Loss) Per Share from Continuing Operations | **0.82** | 0.74 | 0.43 |
| Discontinued operations per share | **(0.01)** | — | — |
| Diluted Earnings (Loss) Per Share Attributable to Shareholders | **$0.81** | $0.74 | $0.43 |

### RESULTS OF OPERATIONS

For the first quarter of 2016, International Paper Company reported net sales of $5.1 billion, compared with $5.4 billion in the fourth quarter of 2015 and $5.5 billion in the first quarter of 2015.

Net earnings attributable to International Paper totaled $334 million, or $0.81 per share, in the 2016 first quarter. This compared with $313 million, or $0.74 per share, in the first quarter of 2015 and $178 million or $0.43 per share, in the fourth quarter of 2015.

Earnings from continuing operations attributable to International Paper Company were $339 million in the first quarter of 2016 compared with $313 million in the first quarter of 2015 and $178 million in the fourth quarter of 2015. Compared with the first quarter of 2015, the 2016 first quarter reflects higher sales volumes ($7 million), lower raw material and freight costs ($32 million), lower net interest expense ($9 million) and lower non-operating pension expense ($17 million). These benefits were offset by the net impact of lower average sales price realizations and mix ($48 million), higher operating costs ($11 million), higher mill maintenance outage costs ($33 million) and higher corporate and other costs ($6 million). Equity earnings, net of taxes, relating to International Paper’s investment in Ilim Holding S.A. were $23 million higher in the 2016 first quarter than in the 2015 first quarter. Net special items in the 2016 first quarter were a gain of $36 million compared with no special items in the 2015 first quarter.

Compared with the fourth quarter of 2015, earnings benefited from lower operating costs ($18 million), lower raw material and freight costs ($20 million), lower net interest expense ($7 million) and lower non-operating pension expense ($9 million). These benefits were offset by lower average sales price realizations and an unfavorable mix ($30 million), lower sales volumes

($31 million), higher mill maintenance outage costs ($30 million), higher corporate and other items ($9 million) and higher tax expense ($4 million) reflecting a higher estimated tax rate. Equity earnings, net of taxes, for Ilim Holding, S.A. increased by $28 million versus the 2015 fourth quarter. Net special items in the 2016 first quarter were a gain of $36 million compared with a loss of $147 million in the 2015 fourth quarter.

To measure the performance of the Company’s business segments from period to period without variations caused by special or unusual items, International Paper’s management focuses on industry segment operating profit. This is defined as earnings from continuing operations before taxes, equity earnings and noncontrolling interests, net of taxes, excluding interest expense, corporate charges and corporate special items which may include restructuring charges and (gains) losses on sales and impairments of businesses.

The following table presents a reconciliation of net earnings attributable to International Paper Company to its operating profit:

*In millions*

|  | Three Months Ended March 31 2016 | 2015 | December 31, 2015 |
| --- | ---: | ---: | ---: |
| Earnings (Loss) From Continuing Operations Attributable to International Paper Company | **$339** | $313 | $178 |
| Add back (deduct): |  |  |  |
| Income tax provision (benefit) | **41** | 130 | 120 |
| Equity (earnings) loss, net of taxes | **(63)** | (35) | (33) |
| Noncontrolling interests, net of taxes | **—** | (2) | — |
| Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings | **317** | 406 | 265 |
| Interest expense, net | **123** | 137 | 133 |
| Noncontrolling interests / equity earnings included in operations | **—** | (1) | (2) |
| Corporate items | **21** | 9 | 9 |
| Special items (income) expense | **(8)** | — | 18 |
| Non-operating pension expense | **44** | 72 | 60 |
|  | **$497** | $623 | $483 |
| Industry Segment Operating Profit: |  |  |  |
| Industrial Packaging | **$396** | $468 | $304 |
| Printing Papers | **85** | 109 | 144 |
| Consumer Packaging | **16** | 46 | 35 |
| Total Industry Segment Operating Profit | **$497** | $623 | $483 |

25

### Industry Segment Operating Profit

Total industry segment operating profits of $497 million in the 2016 first quarter were lower than the $623 million in the 2015 first quarter, but higher than the $483 million in the 2015 fourth quarter. Compared with the first quarter of 2015, operating profits in the current quarter benefited from higher sales volumes ($10 million) and lower raw material and freight costs ($48 million). These benefits were offset by the net impact of lower net average sales price realizations and mix ($71 million), higher operating costs ($16 million), higher mill outage costs ($49 million) and higher other costs ($2 million). Special items were a loss of $46 million in the 2016 first quarter compared with no special items in the 2015 first quarter.

Compared with the fourth quarter of 2015, operating profits benefited from lower operating costs ($27 million) and lower raw material and freight costs ($29 million). These benefits were offset by lower average sales price realizations and an unfavorable mix ($44 million), lower sales volumes ($45 million), higher mill outage costs ($44 million) and higher other items ($3 million). Special items were a loss of $46 million in the 2016 first quarter compared with a loss of $140 million in the 2015 fourth quarter.

During the 2016 first quarter, International Paper took approximately 516,000 tons of downtime of which approximately 212,000 tons were economic-related compared with approximately 202,000 tons of downtime, which included about 13,000 tons that were economic-related, in the 2015 first quarter. During the 2015 fourth quarter, International Paper took approximately 402,000 tons of downtime of which approximately 261,000 tons were economic-related. Economic downtime is taken to balance internal supply with our customer demand, while maintenance downtime is taken periodically during the year.

### Sales Volumes by Product (a)

Sales volumes of major products for the three months ended March 31, 2016 and 2015 were as follows:

*In thousands of short tons*

| Industrial Packaging | Three Months Ended March 31, 2016 | 2015 |
| --- | ---: | ---: |
| North American Corrugated Packaging (c) | **2,519** | 2,500 |
| North American Containerboard | **740** | 774 |
| North American Recycling | **607** | 590 |
| North American Saturated Kraft | **47** | 37 |
| North American Gypsum/Release Kraft | **46** | 36 |
| North American Bleached Kraft | **6** | 5 |
| EMEA Industrial Packaging (c) | **374** | 347 |
| Asian Box (c) | **103** | 102 |
| Brazilian Packaging (c) | **77** | 81 |
| Industrial Packaging | **4,519** | 4,472 |
| Printing Papers |  |  |
| U.S. Uncoated Papers | **475** | 466 |
| EMEA and Russian Uncoated Papers | **373** | 380 |
| Brazilian Uncoated Papers | **254** | 235 |
| Indian Uncoated Papers | **63** | 64 |
| Uncoated Papers | **1,165** | 1,145 |
| Market Pulp (b) | **405** | 417 |
| Consumer Packaging |  |  |
| North American Consumer Packaging | **308** | 338 |
| EMEA Coated Paperboard | **94** | 99 |
| Asian Coated Paperboard (d) | **—** | 304 |
| Consumer Packaging | **402** | 741 |

(a) Sales volumes include third party and inter-segment sales and exclude sales of equity investees.

(b) Includes North American, European and Brazilian volumes and internal sales to mills.

(c) Volumes for corrugated box sales reflect consumed tons sold (CTS). Board sales for these businesses reflect invoiced tons.

(d) Includes sales volumes through the date of sale in October 2015.

### Income Taxes

An income tax provision of $41 million was recorded for the 2016 first quarter. Excluding a benefit of $74 million related to the tax effects of special items and a benefit of $17 million related to the tax effects of non-operating pension expense, the effective income tax rate for continuing operations was 33% for the quarter.

An income tax provision of $120 million was recorded for the 2015 fourth quarter. Excluding a benefit of $11 million related to the tax effects of special items and a benefit of $24 million related to the tax effects of non-operating pension expense, the effective income tax rate for continuing operations was 32% for the quarter.

An income tax provision of $130 million was recorded for the 2015 first quarter. Excluding a benefit of $28 million related to the tax effects of non-operating pension expense, the effective income tax rate for continuing operations was 33% for the quarter.

### Interest Expense and Corporate Items

Net interest expense for the 2016 first quarter was $123 million compared with $133 million in the 2015 fourth quarter and $137 million in the 2015 first quarter.

Corporate items, net, were $21 million in the 2016 first quarter compared with $9 million in the 2015 fourth quarter, and $9 million in the 2015 first quarter.

### Restructuring and Other Charges

During the three months ended March 31, 2016, net restructuring and other charges totaling $1 million before taxes were recorded. During the three months ended March 31, 2015, no restructuring and other charges were recorded. See discussion in Note 6 to the financial statements for further details.

### BUSINESS SEGMENT OPERATING RESULTS

The following presents business segment discussions for the first quarter of 2016.

### Industrial Packaging

*In millions*

|  | 2016 1st Quarter | 2015 1st Quarter | 4th Quarter |
| --- | ---: | ---: | ---: |
| Sales | **$3,452** | $3,553 | $3,595 |
| Operating Profit | **396** | 468 | 304 |

Industrial Packaging net sales for the first quarter of 2016 were 4% lower than in the fourth quarter of 2015 and 3% lower than in the first quarter of 2015. Operating profits in the first quarter of 2016 included a charge of $37 million to write down the assets of our Asia corrugated packaging business and costs associated with the announced definitive agreement to sell it. Operating profits in the fourth quarter of 2015 included a charge of $137 million for goodwill and trade name impairment charges associated with our Brazil Packaging business. Excluding these items, operating profits in the first quarter of 2016 were 2% lower than in the fourth quarter of 2015 and 7% lower than the first quarter of 2015.

***North American Industrial Packaging*** net sales were $3.0 billion in the first quarter of 2016 compared with $3.1 billion in the fourth quarter of 2015 and $3.1 billion in the first quarter of 2015. Operating profits were $438 million in the first quarter of 2016 compared with $451 million in the fourth quarter of 2015 and $468 million in the first quarter of 2015.

Sales volumes for boxes in the first quarter of 2016 were lower than in the fourth quarter of 2015, reflecting seasonally decreased market demand partially mitigated by two more shipping days. Containerboard shipments to the domestic market were slightly lower, while shipments to the export market increased, recovering from a weak fourth quarter. Total maintenance and economic downtime increased 31,000 tons from 322,000 tons to 353,000 tons which reflects an increase of 50,000 tons for maintenance downtime, partially offset by a decrease of 19,000 tons for economic downtime. Average sales margins for boxes were slightly lower. Average sales price realizations for export containerboard also decreased. Input costs were lower, primarily for recycled fiber and freight. Planned maintenance downtime costs were $10 million higher in the 2016 first quarter compared with the 2015 fourth quarter. Operating costs were lower.

Compared with the first quarter of 2015, sales volumes in the first quarter of 2016 increased for boxes, reflecting stable market demand and one more shipping day. Sales volumes for shipments of containerboard to both domestic and export markets were lower. Total maintenance and economic downtime was 213,000 tons higher in the first quarter of 2016 which comprises an increase of 1,000 tons for maintenance downtime and an increase of 212,000 tons for economic downtime. Average sales price realizations were lower for shipments of containerboard to export markets. Average sales margins for boxes were also lower due to the impact of price and mix. Input costs decreased for energy, chemicals and freight fuel surcharges. Planned maintenance downtime costs were $10 million higher in the first quarter of 2016 compared with the first quarter of 2015.

Entering the second quarter of 2016, sales volumes are expected to be seasonally higher for boxes, reflecting higher daily shipments and one more shipping day. Input costs are expected to be lower for natural gas and wood. Planned maintenance downtime costs should be $6 million higher.

***EMEA Industrial Packaging*** net sales were $294 million in the first quarter of 2016 compared with $293 million in the fourth quarter of 2015 and $282 million in the first quarter of 2015. Operating profits were $7 million in the first quarter of 2016 compared with $4 million in the fourth quarter of 2015 and $4 million in the first quarter of 2015.

Sales volumes for boxes in the first quarter of 2016 were slightly lower than in the fourth quarter of 2015, as decreased shipments in Turkey were largely offset by increases in Morocco and Spain. Average sales margins increased, reflecting lower material costs and higher average box sales prices. Input costs for energy were slightly higher, but were more than offset by lower operating costs.

Compared with the first quarter of 2015, sales volumes in the first quarter of 2016 were higher, reflecting growing market demand in Morocco and the recovery from prior year labor strikes in Turkey. Average sales margins were negatively impacted by currency translations, while box sales price increases offset higher material costs. Input costs for energy were lower.

Looking ahead to the second quarter of 2016, sales volumes are expected to be seasonally higher. Average sales margins are expected to improve reflecting relief from high material costs. Operating costs will be higher due to increased volumes.

On March 16, 2016, the Company announced that it had entered into a binding agreement with Holmen Paper to purchase Holmen's newsprint mill in Madrid, Spain, and intends to convert the facility to produce recycled containerboard. Under the terms of the agreement, International Paper will purchase the Madrid newsprint mill, as well as associated recycling operations and a 50% ownership interest in a cogeneration facility. The transaction is expected to close during the second quarter of 2016, subject to certain regulatory approvals.

***Brazilian Industrial Packaging*** net sales were $42 million in the first quarter of 2016 compared with $48 million in the fourth quarter of 2015 and $62 million in the first quarter of 2015. Operating profits were a loss of $8 million in the first quarter of 2016 compared with a loss of $149 million (a loss of $12 million excluding goodwill and trade name impairment charges) in the fourth quarter of 2015 and a loss of $3 million in the first quarter of 2015.

Sales volumes in the first quarter of 2016 were lower than in the fourth quarter of 2015 due to continuing weak economic conditions. Average sales margins were slightly lower as the partial realization of a previously announced box sales price increase was offset by an unfavorable customer and product mix. Input costs were flat.

Compared with the first quarter of 2015, sales volumes in the first quarter of 2016 were lower due to continued poor economic conditions. Average sales price realizations increased slightly, while input costs were higher, primarily for starch and chemicals. Operating costs were also higher.

Looking ahead to the second quarter of 2016, sales volumes are expected to be seasonally higher, although the weak economic conditions are expected to continue. Average sales price realizations are also expected to improve due to the continuing realization of box sales price increases. Input costs should be higher, primarily for recycled fiber. Planned maintenance downtime costs should be $2 million higher with an outage scheduled at the Nova Campina mill.

***Asian Industrial Packaging*** net sales were $126 million in the first quarter of 2016 compared with $156 million in the fourth quarter of 2015 and $146 million in the first quarter of 2015. Operating profits were a loss of $41 million (a loss of $4 million excluding asset write-down and costs associated with the sale of the business) in the first quarter of 2016 compared with a loss of $2 million in the fourth quarter of 2015 and a loss of $1 million in the first quarter of 2015.

Sales volumes for boxes in the first quarter of 2016 were lower than in the fourth quarter of 2015 reflecting continued soft market demand. Lower average sales margins were due to competitive pressure on sales prices and flat linerboard costs. Compared with the first quarter of 2015, corrugated box sales volumes in the first quarter of 2016 were higher. Average sales margins decreased due to competitive pressure and weak economic conditions. Distribution sales were lower in the first quarter of 2016 compared with both the fourth quarter of 2015 and the first quarter of 2015. Operating profits in the second quarter of 2016 are expected to continue to be affected by the difficult market conditions. Sales volumes for boxes are expected to be similar to the first quarter, while average sales margins are forecasted to improve.

On March 14, 2016, the Company announced that it has entered into a definitive agreement to sell its corrugated packaging business in China and Southeast Asia to Xiamen Bridge Hexing Equity Investment Partnership Enterprise. The transaction is expected to be completed during the second quarter, subject to satisfaction of closing conditions, including obtaining governmental approvals.

### Printing Papers

*In millions*

|  | 2016 1st Quarter | 2015 1st Quarter | 4th Quarter |
| --- | ---: | ---: | ---: |
| Sales | **$1,184** | $1,228 | $1,296 |
| Operating Profit | **85** | 109 | 144 |

Printing Papers net sales for the first quarter of 2016 were 9% lower than in the fourth quarter of 2015 and 4% lower than in the first quarter of 2015. Operating profits in the first quarter of 2016 were 41% lower than in the fourth quarter of 2015 and 22% lower than in the first quarter of 2015.

***North American Printing Papers*** net sales were $481 million in the first quarter of 2016 compared with $489 million in the fourth quarter of 2015 and $482 million in the first quarter of 2015. Operating profits were $61 million in the first quarter of 2016 compared with $33 million in the fourth quarter of 2015 and $34 million in the first quarter of 2015.

Sales volumes in the first quarter of 2016 were even with the fourth quarter of 2015 reflecting stable market demand for uncoated freesheet paper in the domestic market. However, average sales price realizations for uncoated freesheet paper were slightly lower. Input costs decreased slightly. Planned maintenance downtime costs in the first quarter of 2016, which included an outage at the Georgetown mill, were $15 million lower than in the fourth quarter of 2015 which included outages at the Riverdale and Eastover mills. Manufacturing operating costs were lower.

Compared with the first quarter of 2015, sales volumes in the first quarter of 2016 were slightly higher reflecting increased shipments of uncoated freesheet paper to the domestic market, partially offset by lower export shipments. Average sales price realizations for domestic sales of uncoated freesheet paper were lower. Input costs and operating costs were significantly lower. Planned maintenance downtime costs in the first quarter of 2016 were flat compared with the first quarter of 2015.

Entering the second quarter of 2016, sales volumes are expected to improve for uncoated freesheet paper in the North American market. Average sales price realizations are expected to increase slightly due to the implementation of the announced sales price increase for uncoated freesheet rolls. Input costs are expected to be flat. Planned maintenance downtime costs should be $10 million higher with outages scheduled at the Georgetown, Eastover and Ticonderoga mills in the second quarter.

***European Printing Papers*** net sales were $289 million in the first quarter of 2016 compared with $306 million in the fourth quarter of 2015 and $293 million in the first quarter of 2015. Operating profits were $45 million in the first quarter of 2016 compared with $48 million in the fourth quarter of 2015 and $35 million in the first quarter of 2015.

Compared with the fourth quarter of 2015, sales volumes for uncoated freesheet paper in the first quarter of 2016 were seasonally lower in Russia, but flat in Europe. Sales volumes for pulp were lower in both Europe and Russia. Average sales price realizations for uncoated freesheet paper increased in both Europe and Russia reflecting the partial implementation of announced price increases. However, average sales price realizations for pulp decreased. Input costs improved in Europe, primarily for energy and wood, but were flat in Russia. Planned maintenance downtime costs were $1 million lower in the first quarter of 2016. Manufacturing operating costs were lower.

Sales volumes for uncoated freesheet paper in the first quarter of 2016 were lower compared with the first quarter of 2015 in both Europe and Russia. Average sales price realizations increased for uncoated freesheet paper due to price increases implemented during 2015 and the first quarter of 2016. In Europe, input costs were lower for wood and energy, while in Russia costs for wood and energy were higher.

Looking forward to the second quarter of 2016, sales volumes for uncoated freesheet paper are expected to be stable. Average sales price realizations for uncoated freesheet paper are expected to reflect the continued implementation of the price increases begun in Russia in the first quarter. Input costs are expected to be slightly higher for wood. Planned maintenance downtime costs should be $8 million higher in the second quarter of 2016 which includes outages scheduled at the Svetogorsk and Kwidzyn mills.

***Brazilian Printing Papers*** net sales were $190 million in the first quarter of 2016 compared with $252 million in the fourth quarter of 2015 and $197 million in the first quarter of 2015. Operating profits were $35 million in the first quarter of 2016, $58 million in the fourth quarter of 2015 and $37 million in the first quarter of 2015.

Sales volumes in the first quarter of 2016 decreased compared with the fourth quarter of 2015 due to seasonally weaker demand. Average sales price realizations were higher in the domestic market due to the partial realization of announced price increases for cutsize and offset paper, but average sales price realizations to other Latin American markets were flat. Average sales margins were negatively impacted by an unfavorable mix. Input costs were stable, while manufacturing operating costs were slightly higher.

Compared with the first quarter of 2015, sales volumes in the first quarter of 2016 increased despite weak economic conditions due to market demand related to the upcoming Olympic games. Average sales price realizations were higher reflecting the partial realization of the first-quarter 2016 domestic price increase. Input costs were higher for energy and wood. Planned maintenance downtime costs were $6 million lower than in the first quarter of 2015.

Entering the second quarter of 2016, sales volumes are expected to be seasonally stronger for uncoated freesheet paper in the domestic market. Average sales price realizations are expected to be higher reflecting the continued realization of the first-quarter 2016 price increases for cutsize paper and offset paper in the domestic Brazilian market. Average sales margins should benefit from a more favorable mix. Input costs are expected to be higher, for starch and chemicals. Planned maintenance outage costs should be $6 million higher in the second quarter with outages scheduled at the Mogi Guacu and Luiz Antonio mills.

***Indian Printing Papers*** net sales were $43 million in the first quarter of 2016 compared with $41 million in the fourth quarter of 2015 and $47 million in the first quarter of 2015. Operating profits were a loss of $1 million in the first quarter of 2016, a loss of $2 million in the fourth quarter of 2015 and a loss of $2 million in the first quarter of 2015.

Compared with the fourth quarter of 2015, sales volumes in the first quarter of 2016 were higher reflecting increased market demand from the education segment and market demand growth for cut-size products. Average sales price realizations were flat due to continuing competitive pressures. Input costs were slightly lower for fiber and chemicals, while operating costs increased. Compared with the first quarter of 2015, sales volumes in the first quarter of 2016 were flat. Average sales price realizations were also flat, while input costs were lower for wood.

Looking ahead to the second quarter of 2016, market demand is expected to be moderately lower with a seasonal decline beginning in June. Average sales margins should remain stable. Input costs for fiber are expected to be slightly lower.

***U.S. Market Pulp*** net sales were $181 million in the first quarter of 2016 compared with $208 million in the fourth quarter of 2015 and $209 million in the first quarter of 2015. Operating profits were a loss of $55 million in the first quarter of 2016 compared with profits of $7 million in the fourth quarter of 2015 and $5 million in the first quarter of 2015.

Sales volumes in the first quarter of 2016 decreased compared with the fourth quarter of 2015, primarily for fluff pulp, due to capacity constraints related to annual maintenance outages. Average sales price realizations were lower for both fluff pulp and market pulp. Operating costs were higher principally due to costs related to the Riegelwood conversion. Input costs were flat. Planned maintenance downtime costs in the first quarter of 2016 included annual outages at the Georgetown and Riegelwood mills plus outage work related to the Riegelwood conversion and were $45 million higher than in the fourth quarter of 2015, which included an outage at the Pensacola mill.

Compared with the first quarter of 2015, sales volumes were lower in the first quarter of 2016 primarily for market pulp shipments. Average sales price realizations were lower for fluff pulp and softwood pulp. Input costs decreased for energy and chemicals. Higher operating costs in the first quarter of 2016 were largely related to the Riegelwood conversion. Planned maintenance downtime and conversion costs were $39 million higher in the first quarter of 2016.

Entering the second quarter of 2016, sales volumes in total are expected to be higher. However, average sales margins will reflect a less favorable product mix resulting from the ramp-up of the Riegelwood mill as it starts up the new machine on lower margin softwood pulp and begins the fluff pulp qualification process. Input costs are expected to be flat, but distribution costs should increase. Planned maintenance downtime costs should be $39 million lower in the second quarter of 2016, but will include some additional costs associated with the Riegelwood conversion. Operating costs associated with the Riegelwood conversion are expected to be lower.

### Consumer Packaging

*In millions*

|  | 2016 1st Quarter | 2015 1st Quarter | 4th Quarter |
| --- | ---: | ---: | ---: |
| Sales | **$495** | 778 | $556 |
| Operating Profit | **16** | 46 | 35 |

Consumer Packaging net sales in the first quarter of 2016 were 11% lower than in the fourth quarter of 2015 and 36% lower than in the first quarter of 2015. Operating profits in the first quarter of 2016 and in the fourth quarter of 2015 included charges of $9 million and $15 million, respectively, related to the conversion of our Riegelwood mill to 100% pulp production. Operating profits in the fourth quarter of 2015 also included a gain of $12 million associated with the sale of the IP-Sun JV. Excluding these items, operating profits in the first quarter of 2016 were 34% lower than in the fourth quarter of 2015 and 46% lower than in the first quarter of 2015.

***North American Consumer Packaging*** net sales in the first quarter of 2016 were $418 million compared with $475 million in the fourth quarter of 2015 and $470 million in the first quarter of 2015. Operating profits were a loss of $10 million (a loss of $1 million excluding costs associated with the conversion of the Riegelwood mill to 100% pulp production) in the first quarter of 2016 compared with a loss of $3 million (a gain of $12 million excluding costs associated with the conversion of the Riegelwood mill) in the fourth quarter of 2015 and a gain of $22 million in the first quarter of 2015.

Coated Paperboard sales volumes in the first quarter of 2016 were lower than in the fourth quarter of 2015 primarily reflecting the absence of the coated bristols product line, while sales volumes for the remaining product lines increased. The business took no market related downtime in the 2016 first quarter compared with about 30,000 tons in the 2015 fourth quarter. Average sales price realizations were lower for folding carton board and platestock. Planned maintenance downtime costs were $5 million higher in the 2016 first quarter which included an outage at the Augusta mill compared with the 2015 fourth quarter which had an outage at the Texarkana mill. Input costs were flat.

Compared with the first quarter of 2015, sales volumes in the first quarter of 2016 were lower primarily due to the absence of the coated bristols product line. The business took 13,000 tons of market related downtime in the first quarter of 2015. Average sales price realizations were lower due to competitive pressures. Average sales margins were also negatively affected by an unfavorable customer and product mix. Input costs were lower, primarily for energy and chemicals. Planned maintenance downtime costs were $4 million higher.

Foodservice sales volumes in the first quarter of 2016 were seasonally lower than in the fourth quarter of 2015. Average sales prices decreased primarily due to the pass-through of lower resin costs. Average sales margins were also impacted by a favorable customer and product mix. Compared with the first quarter of 2015, sales volumes in the first quarter of 2016 increased due to continued growth with major customers. Average sales margins decreased reflecting lower average sales price realizations. Operating costs were higher.

Looking forward to the second quarter of 2016, coated paperboard sales volumes are expected to be stable. Average sales margins are expected to benefit from a more favorable mix. Planned maintenance downtime costs should be $19 million lower with no outages scheduled in the second quarter of 2016. Input costs are expected to be slightly lower, primarily for wood. Foodservice sales volumes are expected to be seasonally higher, and average sales margins are expected to increase due to a more favorable customer and product mix.

***European Consumer Packaging*** net sales were $77 million in the first quarter of 2016 compared with $81 million in the fourth quarter of 2015 and $83 million in the first quarter of 2015. Operating profits in the first quarter of 2016 were $26 million compared with $26 million in the fourth quarter of 2015 and $25 million in the first quarter of 2015.

Sales volumes in the first quarter of 2016 compared with the fourth quarter of 2015 were lower in both Europe and Russia. Average sales margins decreased in Europe, reflecting lower sales price realizations and a unfavorable mix, while in Russia average sale prices increased. Input costs were lower for energy and wood in Europe. Operating costs were lower in both Europe and Russia. Compared with the first quarter of 2015, sales volumes decreased in both Europe and Russia. Average sales price realizations increased in Russia, but decreased in Europe. Input costs for energy and wood decreased in Europe, but increased in Russia.

Entering the second quarter of 2016, sales volumes are expected to be higher. Average sales margins are expected to be slightly lower primarily reflecting an unfavorable mix. Planned maintenance downtime costs are expected to be $4 million higher with outages scheduled at the Svetogorsk and Kwidzyn mills. Input costs for wood are expected to be higher.

***Asian Consumer Packaging*** net sales were $225 million in the first quarter of 2015. Operating profits were $12 million ($0 million excluding a gain associated with the sale of the IP-Sun JV) in the fourth quarter of 2015 and a loss of $1 million in the first quarter of 2015. The Company sold its 55% equity share in the IP-Sun JV in October 2015.

### Equity Earnings, Net of Taxes – Ilim

Since October 2007, International Paper and Ilim Holding S.A. (Ilim) have operated a 50:50 joint venture in Russia. Ilim is a separate reportable industry segment. The Company recorded equity earnings, net of taxes, of $62 million in the first quarter of 2016, compared with $34 million in the fourth quarter of 2015 and $39 million in the first quarter of 2015. In the first quarter of 2016, the after-tax foreign exchange impact primarily on the remeasurement of U.S. dollar-denominated net debt was a gain of $11 million compared with a loss of $19 million in the fourth quarter of 2015. Compared with the fourth quarter of 2015, sales volumes in the first quarter of 2016 were lower, primarily for sales of softwood and hardwood pulp in China and other export markets and sales of containerboard in the Russian domestic market. Average sales price realizations decreased, primarily for export sales of hardwood and softwood pulp. Costs for energy and distribution increased, but operating costs were lower.

Compared with the first quarter of 2015, sales volumes in the first quarter of 2016 increased for sales of softwood and hardwood pulp to China and hardwood pulp and paper in the Russian domestic market, but were partially offset by decreased sales volumes of softwood pulp in the domestic market and to other export markets. Average sales price realizations were lower, primarily for export sales of softwood pulp. Input costs for wood, chemicals and distribution increased. Operating costs were flat. An after-tax foreign exchange loss of $18 million primarily on the remeasurement of U.S. dollar-denominated net debt was recorded in the first quarter of 2015.

Looking forward to the second quarter of 2016, sales volumes are expected to be stable. Average sales price realizations are expected to decrease compared with the first quarter of 2016 primarily for export sales of hardwood pulp. Input costs are expected to be seasonally higher for wood and for distribution. Planned maintenance downtime costs are expected to be incurred in the second quarter of 2016 with outages scheduled at the Bratsk and Koyazhma mills.

### LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations totaled $620 million for the first three months of 2016, compared with $638 million for the comparable 2015 three-month period. Earnings from operations adjusted for non-cash charges were $674 million for the first three months of 2016 compared to $794 million for the first three months of 2015. Cash used for working capital components totaled $54 million for the first three months of 2016 compared to $156 million for the comparable 2015 three-month period.

The Company generated free cash flow of approximately $311 million and $319 million in the first three months of 2016 and 2015, respectively. Free cash flow is a non-GAAP measure and the most comparable GAAP measure is cash provided by operations. Management uses free cash flow as a liquidity metric because it measures the amount of cash generated that is available to maintain our assets, make investments or acquisitions, pay dividends, reduce debt, and fund other activities.

The following is a reconciliation of free cash flow to cash provided by operations:

*In millions*

|  | Three Months Ended March 31, 2016 | 2015 |
| --- | ---: | ---: |
| Cash provided by operations | **$620** | $638 |
| Adjustments: |  |  |
| Cash invested in capital projects | **(309)** | (319) |
| Free Cash Flow | **$311** | $319 |

Investments in capital projects totaled $309 million in the first three months of 2016 compared to $319 million in the first three months of 2015. Full-year 2016 capital spending is currently expected to be approximately $1.3 billion, or about 100% of depreciation and amortization expense for our current businesses.

Amounts related to early debt extinguishment during the three months ended March 31, 2016 and 2015 were as follows:

*In millions*

|  | Three Months Ended March 31, 2016 | 2015 |
| --- | ---: | ---: |
| Early debt reductions (a) | **$—** | $217 |
| Pre-tax early debt extinguishment costs | **—** | 1 |

(a) Reductions related to notes with interest rates ranging from 5.30% to 6.25% with original maturities from 2015 to 2025 for the three months ended March 31, 2015.

Financing activities for the first three months of 2016 included a $145 million net increase in debt versus a $240 million net decrease in debt during the comparable 2015 three-month period.

During the first three months of 2016, International Paper used 2.7 million shares of treasury stock for various incentive plans. International Paper also acquired 3.6 million shares of treasury stock, including shares for the payment of restricted stock tax withholding. Repurchases of common stock and payments of restricted stock withholding taxes totaled $131.0 million, including $100.1 million related to shares repurchased under the Company's share repurchase program. In September 2013, the Company announced a share repurchase program to acquire up to $1.5 billion of the Company's common stock over the next two to three years in open market repurchase transactions. In addition, in July 2014, the Company announced that it would acquire up to $1.5 billion of additional shares of the Company's common stock to supplement the $1.5 billion share repurchase program authorized in September 2013 and intends to continue to repurchase such shares in open market repurchase transactions. The Company has repurchased 44.6 million shares at an average price of $46.40, for a total of approximately $2.1 billion, as of March 31, 2016.

During the first three months of 2015, International Paper issued approximately 60,000 shares of common stock and used approximately 4.2 million shares of treasury stock for various incentive plans, including stock option exercises that generated approximately $2 million of cash. International Paper also acquired 2.6 million shares of treasury stock, including restricted stock tax withholding. Repurchases of common stock and payments of restricted stock withholding taxes totaled $141 million, including $59 million related to shares repurchased under the Company's share repurchase program. Cash dividend payments related to common stock totaled $181 million and $169 million for the first three months of 2016 and 2015, respectively. Dividends were $0.4400 per share and $0.4000 per share for the first three months in 2016 and 2015, respectively.

At March 31, 2016, contractual obligations for future payments of debt maturities by calendar year were as follows: $533 million in 2016; $53 million in 2017; $784 million in 2018; $413 million in 2019; $176 million in 2020; $640 million in 2021; and $6.8 billion thereafter.

Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At March 31, 2016, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and Moody’s, respectively.

At March 31, 2016, International Paper’s credit agreements totaled $2.1 billion, which management believes are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. The liquidity facilities include a $1.5 billion contractually committed bank credit agreement that expires in August 2019 and has a facility fee of 0.15% payable annually. The liquidity facilities also include up to $600 million of uncommitted commercial paper-based financings based on eligible receivable balances ($385 million available at March 31, 2016) under a receivables securitization program that expires in December 2016. Subsequent to March 31, 2016, International Paper entered into a $250 million contractually committed bank credit facility that expires on December 31, 2016 and has a facility fee of 0.15% payable quarterly. In April 2016, the Company borrowed $230 million on the bank credit facility. The proceeds from this borrowing were used to pay off $261 million of debt maturing in April 2016.

International Paper expects to be able to meet projected capital expenditures, service existing debt and meet working capital and dividend requirements during 2016 with current cash balances and cash from operations, supplemented as required by its existing credit facilities. The Company will continue to rely on debt and capital markets for the majority of any necessary long-term funding not provided by operating cash flows. Funding decisions will be guided by our capital structure planning objectives. The primary goals of the Company’s capital structure planning are to maximize financial flexibility and preserve liquidity while reducing interest expense. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors.

### Acquisitions and Joint Ventures

See discussion in Note 7 to the financial statements.

### Ilim Holding S.A. Shareholders’ Agreement

In October 2007, in connection with the formation of the Ilim Holding S.A. joint venture, International Paper entered into a shareholder’s agreement that includes provisions relating to the reconciliation of disputes among the partners. This agreement was amended May 7, 2014. Pursuant to the amended agreement, beginning on January 1, 2017, either the Company or its partners may commence certain procedures specified under the deadlock provisions. If these or any other deadlock procedures are commenced, although it is not obligated to do so, the Company may in certain situations, choose to purchase its partners' 50% interest in Ilim. Any such transaction would be subject to review and approval by Russian and other relevant anti-trust authorities. The purchase of Ilim's 50% interest by International Paper would result in the consolidation of Ilim's financial position and results of operations in all subsequent periods.

### CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires International Paper to establish accounting policies and to make estimates that affect both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require judgments about matters that are inherently uncertain.

Accounting policies whose application may have a significant effect on the reported results of operations and financial position of International Paper, and that can require judgments by management that affect their application, include accounting for contingencies, impairment or disposal of long-lived assets, goodwill and other intangible assets, pensions, postretirement benefits other than pensions, stock options and income taxes.

The Company has included in its 2015 Form 10-K a discussion of these critical accounting policies, which are important to the portrayal of the Company’s financial condition and results of operations and require management’s judgments. The Company has not made any changes in these critical accounting policies during the first three months of 2016.

### Pension Accounting

Net pension expense totaled approximately $91 million for International Paper’s U.S. plans for the three months ended March 31, 2016, or about $31 million less than the pension expense for the first three months of 2015. The decrease in U.S. plan expense was due to an increase in the assumed discount rate to 4.40% in 2016 from 4.10% in 2015, updated demographic assumptions, and lower amortization of unrecognized actuarial losses. Net pension expense for non-U.S. plans was about $1 million and $2 million for the first three months of 2016 and 2015, respectively.

After consultation with our actuaries, International Paper determines key actuarial assumptions on December 31 of each year that are used to calculate liability information as of that date and pension expense for the following year. Key assumptions affecting pension expense include the discount rate, the expected long-term rate of return on plan assets, the projected rate of future compensation increases, and various demographic assumptions including expected mortality. The discount rate assumption is determined based on approximately 500 Aa-rated bonds appropriate to provide the projected benefit payments of the plan. A bond portfolio is selected and a single rate is determined that equates the market value of the bonds purchased to the discounted value of the plan’s benefit payments. The expected long-term rate of return on plan assets is based on projected rates of return for current and planned asset classes in the plan’s investment portfolio. At March 31, 2016, the market value of plan assets for International Paper’s U.S. plans totaled approximately $10.9 billion, consisting of approximately 44% equity securities, 37% fixed income securities, and 19% real estate and other assets. Plan assets did not include International Paper common stock.

In the first quarter of 2016, International Paper announced a voluntary, limited-time opportunity for former employees who are participants in the Retirement Plan of International Paper Company (the Pension Plan) to request early payment of their entire Pension Plan benefit in the form of a single lump sum payment. Eligible participants who wished to receive the lump sum payment were required to make an election between February 29 and April 29, 2016, and payment is scheduled to be made on or before June 30, 2016. All payments will be made from the Pension Plan trust assets. The target population has a total liability of $3 billion. Based upon the participation rate of eligible participants, the amount of total payments is expected to be approximately $1.2 billion. Because of the expected level of payments, settlement accounting rules will apply in the period in which the payments are made. This will result in a plan remeasurement and the recognition in earnings of a pro-rata portion of unamortized net actuarial loss in the second quarter of 2016.

The Company’s funding policy for its qualified pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plans, tax deductibility, the cash flow generated by the Company, and other factors. The U.S. nonqualified plans are only funded to the extent of benefits paid which are expected to be $22 million in 2016.

### FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q that are not historical in nature may be considered “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are often identified by the words, “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “appear,” “project,” “estimate,” “intend,” and words of a similar nature. These statements are not guarantees of future performance and reflect management’s current views with respect to future events, which are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Factors which could cause actual results to differ include but are not limited to: (i) the level of our indebtedness and changes in interest rates; (ii) industry conditions, including but not limited to changes in the cost or availability of raw materials, energy and transportation costs, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products; (iii) global economic conditions and political changes, including but not limited to the impairment of financial institutions, changes in currency exchange rates, credit ratings issued by recognized credit rating organizations, the amount of our future pension funding obligation, changes in tax laws and pension and health care costs; (iv) unanticipated expenditures related to the cost of compliance with existing and new environmental and other governmental regulations and to actual or potential litigation; (v) whether we experience a material disruption at one of our manufacturing facilities; (vi) risks inherent in conducting business through a joint venture; (vii) the successful closing of the sale of our corrugated box business in China and Southeast Asia within the estimated timeframe; (viii)the receipt of governmental and other approvals and favorable rulings associated with the purchase of the pulp business of Weyerhaeuser Company and the successful fulfillment or waiver of all closing conditions for the transaction without unexpected delays or conditions; (ix) the failure to realize anticipated synergies and cost savings from the acquisition of the pulp business of Weyerhaeuser Company or delay in realization thereof; (x) our ability to achieve the benefits we expect from all strategic acquisitions, divestitures and restructurings; and (xi) other factors you can find in our press releases and filings with the Securities and Exchange Commission, including the risk factors identified in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as updated in Item 1A of Part II of this Quarterly Report on Form 10-Q ("Risk Factors"). We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. All financial information and statistical measures regarding our 50/50 Ilim joint venture in Russia (“Ilim”), other than historical International Paper Equity Earnings and dividends received by International Paper, have been prepared by the management of Ilim. Ilim management has indicated that the financial information was prepared in accordance with International Financial Reporting Standards and extracted from Ilim’s financial statements, but International Paper has not verified or audited any of this information. Any projected financial information and statistical measures reflect the current views of Ilim management and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such projections.

## Market risk

As filed, 300 characters.

Information relating to quantitative and qualitative disclosures about market risk is shown on page 39 of International Paper’s 2015 Form 10-K, which information is incorporated herein by reference. There have been no material changes in the Company’s exposure to market risk since December 31, 2015.

## Controls and procedures

As filed, 1,477 characters.

### Evaluation of Disclosure Controls and Procedures:

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported (and accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure) within the time periods specified in the Securities and Exchange Commission’s rules and forms. As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2016 (the end of the period covered by this report).

### Changes in Internal Control over Financial Reporting:

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 2,378 characters.

***Our proposed acquisition of Weyerhaeuser’s pulp business may not be completed within the expected timeframe, or at all, and we may not achieve the expected benefits from this acquisition or from other strategic acquisitions, joint ventures, divestitures and other corporate transactions.*** On May 1, 2016, we entered into an agreement to purchase the pulp business of Weyerhaeuser Company for $2.2 billion in cash, subject to certain adjustments. The acquisition is expected to close in the fourth quarter of 2016. Completion of the acquisition is subject to the satisfaction or waiver of certain conditions that are beyond our control and may prevent, delay or otherwise negatively affect its completion. These conditions include U.S. antitrust clearance. The Antitrust Division of the U.S. Department of Justice or other regulatory agencies may refuse to approve the acquisition or seek to make its approval subject to compliance with unanticipated or onerous conditions that could reduce the anticipated benefits of the acquisition. We intend to finance the purchase price of the acquisition from available cash and borrowings under existing or new financing facilities, but no assurances can be given about the timing, availability or cost of such financing.

The success of the acquisition will depend, in part, on our ability to realize the anticipated synergies, cost savings and growth opportunities from integrating the acquired business with our existing businesses. The integration process may be complex, costly and time-consuming, and we may not accomplish the integration of the business smoothly, successfully or within the anticipated costs or timeframe. Potential integration risks include, among other things, our ability to successfully implement our business plan for the combined business, retain key customers, suppliers and employees, and retain and obtain required regulatory approvals, licenses and permits.

More broadly, our strategy for long-term growth, productivity and profitability depends, in part, on our ability to make prudent strategic acquisitions, joint ventures, divestitures and other corporate transactions and to realize the benefits we expect from them.

Otherwise, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (Part I, Item 1A).

Filed May 5, 2016.
Source: SEC EDGAR, the filing index for accession 0000051434-16-000048. Last ingested by Listed: Nov 10, 2026, 17:11 ET. No prices; not investment advice.