# International Paper Co: Form 10-K for the period ended Dec 31, 2018

- Company: [International Paper Co](/companies/ip.md) (CIK 51434)
- Form: 10-K
- Filed: 2019-02-20
- Accepted by EDGAR: Feb 20, 2019, 16:24 ET
- Period: 2018-12-31
- Accession: 0000051434-19-000007
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/51434/000005143419000007/a10-k123118.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/51434/000005143419000007/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2018-10-01 to 2018-12-31 | $5.95bn | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 12 months, 2018-01-01 to 2018-12-31 | $23.31bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 12 months, 2018-01-01 to 2018-12-31 | $1.72bn | us-gaap:SellingGeneralAndAdministrativeExpense |
| Interest expense | 12 months, 2018-01-01 to 2018-12-31 | $734.0m | us-gaap:InterestExpense |
| Income tax | 12 months, 2018-01-01 to 2018-12-31 | $445.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2018-10-01 to 2018-12-31 | $316.0m | us-gaap:NetIncomeLoss |
| Net income | 12 months, 2018-01-01 to 2018-12-31 | $2.01bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2018-10-01 to 2018-12-31 | $0.78 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 12 months, 2018-01-01 to 2018-12-31 | $4.85 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2018-10-01 to 2018-12-31 | $0.79 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 12 months, 2018-01-01 to 2018-12-31 | $4.91 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 12 months, 2018-01-01 to 2018-12-31 | 414,200,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2018-01-01 to 2018-12-31 | $3.23bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 12 months, 2018-01-01 to 2018-12-31 | $1.57bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 12 months, 2018-01-01 to 2018-12-31 | $789.0m | us-gaap:PaymentsOfDividends |
| Share repurchases | 12 months, 2018-01-01 to 2018-12-31 | $732.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2018-12-31 | $589.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2018-12-31 | $7.00bn | us-gaap:AssetsCurrent |
| Total assets | at 2018-12-31 | $33.58bn | us-gaap:Assets |
| Current liabilities | at 2018-12-31 | $4.69bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2018-12-31 | $10.02bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2018-12-31 | $639.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2018-12-31 | $7.36bn | us-gaap:StockholdersEquity |

## Business

As filed, 26,450 characters.

### GENERAL

International Paper Company (the Company or International Paper, which may also be referred to as we or us) is a global producer of renewable fiber-based packaging, pulp and paper products with manufacturing operations in North America, Latin America, Europe, North Africa, India and Russia. We are a New York corporation, incorporated in 1941 as the successor to the New York corporation of the same name organized in 1898. You can learn more about us by visiting our website at www.internationalpaper.com.

In the United States, at December 31, 2018, the Company operated 27 pulp, paper and packaging mills, 166 converting and packaging plants, 16 recycling plants and three bag facilities. Production facilities at December 31, 2018 in Canada, Europe, India, North Africa, and Latin America included 16 pulp, paper and packaging mills, 43 converting and packaging plants, and two recycling plants. We operate a printing and packaging products distribution business principally through nine branches in Asia. At December 31, 2018, we owned or managed approximately 329,000 acres of forestland in Brazil and had, through licenses and forest management agreements, harvesting rights on government-owned forestlands in Russia. Substantially all of our businesses have experienced, and are likely to continue to experience, cycles relating to industry capacity and general economic conditions.

For management and financial reporting purposes, our businesses are separated into three segments: Industrial Packaging; Global Cellulose Fibers; and Printing Papers.

A description of these business segments can be found on pages 23 and 24 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Company’s 50% equity interest in Ilim S.A. (Ilim) is also a separate reportable industry segment.

From 2014 through 2018, International Paper’s capital expenditures approximated $7.2 billion, excluding mergers and acquisitions. These expenditures reflect our continuing efforts to use our capital strategically to improve product quality and environmental performance, as well as lower costs and maintain reliability of operations. Capital spending in 2018 was approximately $1.6 billion and is expected to be approximately $1.4 billion in 2019. You can find more information about capital expenditures on page 28 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Discussions of acquisitions can be found on page 29 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You can find discussions of restructuring charges and other special items on pages 22 and 23 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

*Throughout this Annual Report on Form 10-K, we “incorporate by reference” certain information in parts of other documents filed with the Securities and Exchange Commission (SEC). The SEC permits us to disclose important information by referring to it in that manner. Please refer to such information. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, along with all other reports and any amendments thereto filed with or furnished to the SEC, are publicly available free of charge on the Investor Relations section of our website at www.internationalpaper.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained on or connected to our website is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that we filed with or furnished to the SEC.*

### COMPETITION AND COSTS

The pulp, paper and packaging sectors are large and fragmented, and the areas into which the Company sells its principal products are very competitive. Our products compete with similar products produced by other forest products companies. We also compete, in some instances, with companies in other industries and against substitutes for wood-fiber products.

Many factors influence the Company’s competitive position, including price, cost, product quality and services. You can find more information about the impact of these factors on operating profits on pages 17 through 28 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You can find information about the Company’s manufacturing capacities on page A-4 of Appendix II.

### MARKETING AND DISTRIBUTION

The Company sells products directly to end users and converters, as well as through agents, resellers and paper distributors.

### DESCRIPTION OF PRINCIPAL PRODUCTS

The Company’s principal products are described on pages 23 and 24 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

### SALES VOLUMES BY PRODUCT

Sales volumes of major products for 2018, 2017 and 2016 were as follows:

### Sales Volumes by Product (a)

| In thousands of short tons (except as noted) Industrial Packaging | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| Corrugated Packaging (b) | **10,624** | 10,413 | 10,392 |
| Containerboard | **3,229** | 3,294 | 3,091 |
| Recycling | **2,282** | 2,257 | 2,450 |
| Saturated Kraft | **196** | 181 | 182 |
| Gypsum/Release Kraft | **227** | 229 | 200 |
| Bleached Kraft | **31** | 27 | 24 |
| EMEA Packaging (b) (c) | **1,476** | 1,518 | 1,477 |
| Asian Box (b) (d) | **—** | — | 208 |
| Brazilian Packaging (c) | **351** | 357 | 371 |
| European Coated Paperboard | **390** | 398 | 393 |
| Industrial Packaging | **18,806** | 18,674 | 18,788 |
| Global Cellulose Fibers (in thousands of metric tons) (e) | **3,573** | 3,708 | 1,870 |
| Printing Papers |  |  |  |
| U.S. Uncoated Papers | **1,886** | 1,915 | 1,872 |
| European and Russian Uncoated Papers | **1,440** | 1,483 | 1,536 |
| Brazilian Uncoated Papers | **1,125** | 1,167 | 1,114 |
| Indian Uncoated Papers | **263** | 253 | 241 |
| Printing Papers | **4,714** | 4,818 | 4,763 |

*(a) Includes third-party and inter-segment sales and excludes sales of equity investees.*

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

#### (c) Excludes newsprint sales volumes at the Madrid, Spain mill through Q3 2017.

#### (d) Includes sales volumes through the date of sale on June 30, 2016.

*(e) Includes North American, European and Brazilian volumes and internal sales to mills. Includes sales volumes from the pulp business acquired beginning December 1, 2016.*

### RESEARCH AND DEVELOPMENT

The Company operates its primary research and development center in Loveland, Ohio, as well as several other product development facilities, including the Global Cellulose Fibers technology center in Federal Way, Washington.

We direct research and development activities to short-term, long-term and technical assistance needs of customers and operating divisions, and to process, equipment and product innovations. Activities include product development within the operating divisions; studies on innovation and improvement of pulping, bleaching, chemical recovery, paper making, converting and coating processes; packaging design and materials development; mechanical packaging systems, environmentally sensitive printing inks and reduction of environmental discharges; re-use of raw materials in manufacturing processes; recycling of consumer and packaging paper products; energy conservation; applications of computer controls to

manufacturing operations; innovations and improvement of products; and development of various new products. Our development efforts specifically address product safety, as well as the minimization of solid waste. The cost to the Company of its research and development operations was $30 million in 2018, $28 million in 2017, and $20 million in 2016.

We own numerous patents, copyrights, trademarks, trade secrets and other intellectual property rights relating to our products and to the processes for their production. We also license intellectual property rights to and from others where advantageous or necessary. Many of the manufacturing processes are among our trade secrets. Some of our products are covered by U.S. and non-U.S. patents and are sold under well known trademarks. We derive a competitive advantage by protecting our trade secrets, patents, trademarks and other intellectual property rights, and by using them as required to support our businesses.

### ENVIRONMENTAL PROTECTION

International Paper is subject to extensive federal and state environmental regulation, as well as similar regulations internationally. Our continuing objectives include: (1) controlling emissions and discharges from our facilities into the air, water and groundwater to avoid adverse impacts on the environment, and (2) maintaining compliance with applicable laws and regulations. The Company spent $47 million in 2018 for capital projects to control environmental releases into the air and water, and to assure environmentally sound management and disposal of waste. We expect to spend $70 million in 2019 for environmental capital projects. Capital expenditures for 2020 environmental projects are anticipated to be approximately $70 million. Capital expenditures for 2021 environmental projects are estimated to be $95 million.

The Company has completed capital projects to meet the U.S. Environmental Protection Agency's (EPA) Boiler MACT (maximum achievable control technology) regulations that require owners of specified boilers to meet revised air emissions standards for certain substances. Since 2016, lawsuits challenging all or portions of the Boiler MACT regulations have resulted in the U.S. Court of Appeals for the D.C. Circuit remanding certain portions of the Boiler MACT regulations to the EPA for reconsideration of certain standards in the regulations. We have not identified any additional Boiler MACT capital project expenditures that might result from the outcome of the remands to the EPA.

Amendments lowering National Ambient Air Quality Standards (NAAQS) for sulfur dioxide (SO2), nitrogen dioxide (NO2), fine particulate (PM2.5), and ozone have been finalized by the EPA in recent years but to date have not had a material impact on the Company.

### CLIMATE CHANGE

In an effort to mitigate the potential climate change impacts from human activities, various international, national and sub-national (regional, state and local) governmental actions have been or may be undertaken. Presently, these efforts have not materially impacted International Paper, but such efforts may have a material impact on the Company in the future.

### International Efforts

A successor program to the 1997 Kyoto Protocol, the Paris Agreement, went into effect in November 2016 and continued international efforts and voluntary commitments toward reducing the emissions of greenhouse gases (GHGs). Consistent with this objective, participating countries aim to balance GHG

emissions generation and removal in the second half of this century or, in effect, achieve net-zero global GHG emissions.

As part of the Paris Agreement, many countries, including the U.S. and EU member states, established non-binding emissions reduction targets. The U.S. non-binding commitment is for GHG emissions to be 7% below 2005 GHG emissions levels by 2020 and 26% to 28% below by 2025. Other countries in which we do business made similar non-binding commitments. On August 4, 2017, the U.S. filed official notice to withdraw from the Paris Agreement. Notwithstanding the notice of withdrawal by the U.S., the Company’s voluntary GHG reductions, which are set out in our annual Global Citizenship report, remain roughly in line with the percentages of the U.S. prior target reductions. It is not clear at this time what, if any, further reductions by the Company might be required by the countries in which we operate. Due to this uncertainty, it is not possible at this time to estimate the potential impacts of these agreements on the Company.

To assist member countries in meeting obligations under the Kyoto Protocol, the EU established and continues to operate an Emissions Trading System (EU ETS). Currently, we have two sites directly subject to regulation under Phase III of the EU ETS, one in Poland and one in France. Other sites that we operate in the EU experience indirect impacts of the EU ETS through purchased power pricing. Neither the direct nor indirect impacts of the EU ETS have been material to the Company, but they could be material to the Company in the future depending on how the Paris Agreement's non-binding commitments or allocation of and market prices for GHG credits under existing rules evolve over the coming years.

### U.S. Efforts, including State, Regional and Local Measures

In the U.S., the 1997 Kyoto Protocol was not ratified and Congress has not passed GHG legislation. The EPA manages regulations to: (i) control GHGs from mobile sources by adopting transportation fuel efficiency standards; (ii) control GHG emissions from new Electric Generating Units (EGUs); (iii) require reporting of GHGs from sources of GHGs greater than 25,000 tons per year; (iv) in 2015, require states to develop plans to reduce GHGs from utility EGUs and (v) in 2016 EPA took the first steps in the process of developing emissions standards for existing sources in the oil and gas sector.

A few U.S. states have enacted or are considering legal measures to require the reduction of emissions of GHGs by companies and public utilities, primarily through the development of GHG emission inventories or regional GHG cap-and-trade programs. California has already enacted such a program and similar actions are being considered by Washington. The Company does not have any sites currently subject to California's GHG regulatory plan. There may be indirect impacts from changing input costs (such as electricity) at some of our California converting operations but these have yet to manifest themselves in material impacts. Although we are monitoring proposed programs in other states, it is unclear what impacts, if any, state-level GHG rules will have on the Company’s operations.

### Summary

Regulation of GHGs continues to evolve in various countries in which we do business. While it is likely that there will be increased governmental action regarding GHGs and climate change in the future, it is unclear when such actions will occur and at this time it is not reasonably possible to estimate Company costs of compliance with rules that have not yet been adopted or implemented and may not be adopted or implemented in the future. In addition to possible direct impacts, future legislation and regulation could have indirect impacts on International Paper, such as higher prices for transportation, energy and other inputs, as well as more protracted air permitting processes, causing delays and higher costs to implement capital projects. International Paper has controls and procedures in place to stay informed about developments concerning possible climate change legislation and regulation in the U.S. and in other countries where we operate. We regularly assess whether such legislation or regulation may have a material effect on the Company, its operations or financial condition, and whether we have any related disclosure obligations.

International Paper plays a significant role in responding to the climate change challenge. Our entire business depends upon the sustainability of forests. We transform renewable resources into recyclable products that people depend on every day. This cycle begins with sourcing renewable fiber from responsibly managed forests, and at the end of use our products are recycled into new products at a higher rate than any other base material. We will continue to lead the world in responsible forest stewardship to ensure healthy and productive forest ecosystems for generations to come. Our efforts to advance sustainable forest management and restore forest landscapes are an important lever for mitigating climate change through carbon storage in forests. Furthermore, we use biomass and manufacturing residuals (rather than fossil fuels) to generate a substantial majority of the manufacturing energy at our mills.

Additional information regarding climate change and International Paper is available in our 2017 Global Citizenship report found on our website at www.internationalpaper.com, though this information is not incorporated by reference into this Form 10-K and

should not be considered part of this or any other report that we file with or furnish to the SEC.

### EMPLOYEES

As of December 31, 2018, we have approximately 53,000 employees, nearly 33,000 of whom are located in the United States. Of our U.S. employees, approximately 23,000 are hourly, with unions representing approximately 14,000 employees. Approximately 11,000 of this number are represented by the United Steelworkers union (USW).

International Paper, the USW, and several other unions have entered into two master agreements covering various mills and converting facilities. These master agreements cover several specific items, including wages, select benefit programs, successorship, employment security, and health and safety. Individual facilities continue to have local agreements for other subjects not covered by the master agreements. If local facility agreements are not successfully negotiated at the time of expiration, under the terms of the master agreements the local contracts will automatically renew with the same terms in effect. The master agreements cover the majority of our union represented mills and converting facilities. In addition, International Paper is party to a master agreement with District Council 2, International Brotherhood of Teamsters, covering additional converting facilities.

### EXECUTIVE OFFICERS OF THE REGISTRANT

**Mark S. Sutton,** 57, chairman (since January 1, 2015) & chief executive officer (since November 1, 2014). Mr. Sutton previously served as president & chief operating officer from June 1, 2014 to October 31, 2014, senior vice president - industrial packaging from November 2011 to May 31, 2014, senior vice president - printing and communications papers of the Americas from 2010 until 2011, senior vice president - supply chain from 2008 to 2009, vice president - supply chain from 2007 until 2008, and vice president - strategic planning from 2005 until 2007. Mr. Sutton joined International Paper in 1984. Mr. Sutton serves on the board of directors of The Kroger Company. He is a member of The Business Council and the Business Roundtable and serves on the American Forest & Paper Association board of directors and the international advisory board of the Moscow School of Management - Skolkovo. He was appointed chairman of the U.S. Russian Business Council and was also appointed to the U.S. Section of the U.S.-Brazil CEO Forum. He also serves on the board of directors of Memphis Tomorrow and board of governors for New Memphis Institute. Mr. Sutton has been a director since June 1, 2014.

**W. Michael Amick, Jr.,** 55, senior vice president - paper the Americas & India since January 1, 2017. Mr. Amick previously served as senior vice president - North American papers & consumer packaging from July 2016 until December 2016, senior vice president - North American papers, pulp & consumer packaging from November 2014 until June 2016, vice president - president, IP India, from August 2012 to October 2014, and vice president and general manager for the coated paperboard business from 2010 to 2012. Mr. Amick joined International Paper in 1990.

**Tommy S. Joseph,** 59, senior vice president - manufacturing, technology, EH&S and global sourcing since January 2010. Mr. Joseph previously served as senior vice president - manufacturing, technology, EH&S from February 2009 until December 2009, and vice president - technology from 2005 until February 2009. Mr. Joseph is a director of Ilim in which International Paper holds a 50% interest, and of its subsidiary, Ilim Group. Mr. Joseph joined International Paper in 1983.

**Timothy S. Nicholls,** 57, senior vice president & chief financial officer since June 2018. Mr. Nicholls previously served as senior vice president - industrial packaging the Americas from January 2017 through June 2018, senior vice president - industrial packaging from November 2014 through December 2016, senior vice president - printing and communications papers of the Americas from November 2011 through October 2014, senior vice president and chief financial officer from 2007 until 2011, vice president and executive project leader of IP Europe during 2007, and vice president and chief financial officer - IP Europe from 2005 until 2007. Mr. Nicholls joined International Paper in 1991.

**Thomas J. Plath,** 55, senior vice president - human resources and global citizenship since March 1, 2017. Mr. Plath previously served as vice president - human resources, global businesses from November 2014 through February 2017, and vice president - HR manufacturing, technology, EH&S and global supply chain from April 2013 to November 2014. Mr. Plath joined International Paper in 1991.

**Jean-Michel Ribieras,** 56, senior vice president - industrial packaging the Americas since June 2018. Mr. Ribieras previously served as senior vice president - global cellulose fibers from July 2016 through June 2018, senior vice president - president, IP Europe, Middle East, Africa & Russia from 2013 until June 2016, and president - IP Latin America from 2009 until 2013. Mr. Ribieras joined International Paper in 1993.

**Sharon R. Ryan,** 59, senior vice president, general counsel & corporate secretary since November 2011. Ms. Ryan previously served as vice president, acting general counsel & corporate secretary from May 2011

until November 2011, vice president from March 2011 until May 2011, associate general counsel, chief ethics and compliance officer from 2009 until 2011, and associate general counsel from 2006 until 2009. Ms. Ryan joined International Paper in 1988.

**John V. Sims,** 56, senior vice president - president, IP Europe, Middle East, Africa & Russia since July 2016. Mr. Sims previously served as vice president and general manager, European papers from March 2016 until June 2016, vice president & general manager, North American papers from 2013 until February 2016, and vice president, finance and strategy, industrial packaging, from 2009 until 2013. Mr. Sims is a director of Ilim in which International Paper holds a 50% interest, and of its subsidiary, Ilim Group. Mr. Sims joined International Paper in 1994.

**Catherine I. Slater,** 55, senior vice president - global cellulose fibers & IP Asia since June 2018. Ms. Slater previously served as senior vice president - consumer packaging from December 2016 through December 2017. Ms. Slater joined International Paper from Weyerhaeuser Company in December 2016, effective with the completion of the acquisition of Weyerhaeuser’s cellulose fibers business, which she previously led. Ms. Slater’s 24-year career with Weyerhaeuser included leadership roles in manufacturing, printing papers, consumer products, wood products and the cellulose fibers business.

**Gregory T. Wanta,** 53, senior vice president - North American container since November 2016. Mr. Wanta has served in a variety of roles of increasing responsibility in manufacturing and commercial leadership roles in specialty papers, coated paperboard, printing papers, foodservice and industrial packaging, including vice president, central region, Container the Americas, from January 2012 through October 2016. Mr. Wanta joined International Paper in 1991.

### RAW MATERIALS

Raw materials essential to our businesses include wood fiber, purchased in the form of pulpwood, wood chips and old corrugated containers (OCC), and certain chemicals, including caustic soda and starch. For further information concerning fiber supply purchase agreements, see page 30.

### FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K (including the exhibits hereto) 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; and (vii) our ability to achieve the benefits we expect from all acquisitions, divestitures and restructurings. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements are discussed in greater detail below in “Item 1A. Risk Factors.” We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

## Risk factors

As filed, 23,887 characters.

The Company faces risks in the normal course of business and through global, regional, and local events that could have an adverse impact on its reputation, operations, and financial performance. The Board of Directors exercises oversight of the Company’s enterprise risk management program, which includes strategic, operational and financial matters, as well as compliance and legal risks. The Audit and Finance Committee coordinates the risk oversight role exercised by the Board’s standing committees and management, and it receives updates on the risk management processes twice per year.

In addition to the risks and uncertainties discussed elsewhere in this Annual Report on Form 10-K (particularly in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations), or in the Company’s other filings with the Securities and Exchange Commission, the following are some important factors that could cause the Company’s

actual results to differ materially from those projected in any forward-looking statement.

### RISKS RELATING TO INDUSTRY CONDITIONS

**CHANGES IN THE COST OR AVAILABILITY OF RAW MATERIALS, ENERGY AND TRANSPORTATION COULD AFFECT OUR PROFITABILITY.** We rely heavily on the use of certain raw materials (principally virgin wood fiber, recycled fiber, caustic soda and starch), energy sources (principally biomass, natural gas, electricity and fuel oil) and third-party companies that transport our goods. The market price of virgin wood fiber varies based upon availability and source. The global supply and demand for recycled fiber may be affected by trade policies between countries, individual governments' legislation and regulations, as well as changes in the global economy. In addition, the increase in demand of products manufactured, in whole or in part, from recycled fiber, on a global basis, may cause occasional significant fluctuations in recycled fiber prices. Energy prices, in particular prices for oil and natural gas, have fluctuated dramatically in the past and may continue to fluctuate in the future. The availability of labor and the market price for diesel fuel may affect our costs for third-party transportation. Our profitability has been, and will continue to be, affected by changes in the costs and availability of such raw materials, energy sources and transportation sources.

**THE INDUSTRIES IN WHICH WE OPERATE EXPERIENCE BOTH ECONOMIC CYCLICALITY AND CHANGES IN CONSUMER PREFERENCES. FLUCTUATIONS IN THE PRICES OF, AND THE DEMAND FOR, OUR PRODUCTS COULD MATERIALLY AFFECT OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS.** Substantially all of our businesses have experienced, and are likely to continue to experience, cycles relating to industry capacity and general economic conditions. The length and magnitude of these cycles have varied over time and by product. In addition, changes in consumer preferences may increase or decrease the demand for our products. These consumer preferences affect the prices of our products. Consequently, our financial results are sensitive to changes in the pricing and demand for our products.

**COMPETITION IN THE UNITED STATES AND INTERNATIONALLY COULD NEGATIVELY IMPACT OUR FINANCIAL RESULTS.** We operate in a competitive environment, both in the United States and internationally, in all of our operating segments. Product innovations, manufacturing and operating efficiencies, and marketing, distribution and pricing strategies pursued or achieved by competitors could negatively impact our financial results.

### RISKS RELATING TO MARKET AND ECONOMIC FACTORS

**ADVERSE DEVELOPMENTS IN GENERAL BUSINESS AND ECONOMIC CONDITIONS COULD HAVE AN ADVERSE EFFECT ON THE DEMAND FOR OUR PRODUCTS AND OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.** General economic conditions may adversely affect industrial non-durable goods production, consumer spending, commercial printing and advertising activity, white-collar employment levels and consumer confidence, all of which impact demand for our products. In addition, volatility in the capital and credit markets, which impacts interest rates, currency exchange rates and the availability of credit, could have a material adverse effect on our business, financial condition and our results of operations.

**CHANGES IN INTERNATIONAL CONDITIONS COULD ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS.** Our operating results and business prospects could be substantially affected by risks related to the countries outside the United States in which we have manufacturing facilities or sell our products. Specifically, Russia, Brazil, Poland, India, and Turkey, where we have substantial manufacturing facilities, are countries that are exposed to economic and political instability in their respective regions of the world. Fluctuations in the value of local currency versus the U.S. dollar, downturns in economic activity, adverse tax consequences or rulings, nationalization or any change in social, political or labor conditions in any of these countries or regions could negatively affect our financial results. Trade protection measures in favor of local producers of competing products, including governmental subsidies, tax benefits and other measures giving local producers a competitive advantage over International Paper, may also adversely impact our operating results and business prospects in these countries. Likewise, disruption in existing trade agreements or increased trade friction between countries (e.g., the U.S. and China) could have a negative effect on our business and results of operations by restricting the free flow of goods and services across borders. In addition, our international operations are subject to regulation under U.S. law and other laws related to operations in foreign jurisdictions. For example, the Foreign Corrupt Practices Act prohibits U.S. companies and their representatives from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business abroad. Failure to comply with domestic or foreign laws could result in various adverse consequences, including the imposition of civil or criminal sanctions and the prosecution of executives overseeing our international operations.

**THE LEVEL OF OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND IMPAIR OUR ABILITY TO OPERATE OUR BUSINESS.** As of December 31, 2018, International Paper had approximately $10.7 billion of outstanding indebtedness. The level of our indebtedness could have important consequences to our financial condition, operating results and business, including the following:

- it may limit our ability to obtain additional debt or equity financing for working capital, capital expenditures, product development, dividends, share repurchases, debt service requirements, acquisitions and general corporate or other purposes;
- a portion of our cash flows from operations will be dedicated to payments on indebtedness and will not be available for other purposes, including operations, capital expenditures and future business opportunities;
- the debt service requirements of our indebtedness could make it more difficult for us to satisfy other obligations;
- our indebtedness that is subject to variable rates and, in the instance such variable rates use the London Interbank Offered Rate (LIBOR) as a benchmark, exposes us to a possible increase in debt service obligations in the event that the method for determining LIBOR changes, LIBOR is replaced by an alternative reference rate or LIBOR is phased out altogether;
- it may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors that have less debt; and
- it may increase our vulnerability to a downturn in general economic conditions or in our business, and may make us unable to carry out capital spending that is important to our growth.

In addition, we are subject to agreements that require meeting and maintaining certain financial ratios and covenants. A significant or prolonged downturn in general business and economic conditions may affect our ability to comply with these covenants or meet those financial ratios and tests and could require us to take action to reduce our debt or to act in a manner contrary to our current business objectives.

**CHANGES IN CREDIT RATINGS ISSUED BY NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS COULD ADVERSELY AFFECT OUR COST OF FINANCING AND HAVE AN ADVERSE**

**EFFECT ON THE MARKET PRICE OF OUR SECURITIES.** Maintaining an investment-grade credit rating is an important element of our financial strategy, and a downgrade of the Company’s ratings below investment grade will likely eliminate our ability to access the commercial paper market, may limit our access to the capital markets, have an adverse effect on the market price of our securities, increase our cost of borrowing and require us to post collateral for derivatives in a net liability position. The Company’s desire to maintain its investment grade rating may cause the Company to take certain actions designed to improve its cash flow, including sale of assets, suspension or reduction of our dividend and reductions in capital expenditures and working capital.

Under the terms of the agreements governing approximately $1.4 billion of our debt as of December 31, 2018, the applicable interest rate on such debt may increase upon each downgrade in our credit rating below investment grade. As a result, a downgrade in our credit rating below investment grade may lead to an increase in our interest expense. There can be no assurance that such credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant. Any such downgrade, suspension or withdrawal of our credit ratings could adversely affect our cost of borrowing, limit our access to the capital markets or result in more restrictive covenants in agreements governing the terms of any future indebtedness that we may incur.

**DOWNGRADES IN THE CREDIT RATINGS OF BANKS ISSUING CERTAIN LETTERS OF CREDIT WILL INCREASE OUR COST OF MAINTAINING CERTAIN INDEBTEDNESS AND MAY RESULT IN THE ACCELERATION OF DEFERRED TAXES.** We are subject to the risk that a bank with currently issued irrevocable letters of credit supporting installment notes delivered to Temple-Inland in connection with Temple-Inland's 2007 sales of forestlands may be downgraded below a required rating. Since 2007, certain banks have fallen below the required ratings threshold and were successfully replaced, or waivers were obtained regarding their replacement. As a result of continuing uncertainty in the banking environment, a number of the letter-of-credit banks currently in place remain subject to risk of downgrade and the number of qualified replacement banks remains limited. The downgrade of one or more of these banks may subject the Company to additional costs of securing a replacement letter-of-credit bank or could result in an acceleration of payments of up to $538 million in deferred income taxes if replacement banks cannot be obtained. The deferred taxes are currently recorded in the Company's consolidated financial statements. See Note 14, Variable Interest Entities, on pages 65 and 66, and Note

12, Income Taxes, on pages 58 through 62, in Item 8. Financial Statements and Supplementary Data for further information.

**OUR PENSION AND HEALTH CARE COSTS ARE SUBJECT TO NUMEROUS FACTORS WHICH COULD CAUSE THESE COSTS TO CHANGE.** We have defined benefit pension plans covering substantially all U.S. salaried employees hired prior to July 1, 2004 (or later for certain acquired populations, as described in Note 18. Retirement Plans, on pages 70 through 77, in Item 8. Financial Statements and Supplementary Data) and substantially all hourly and union employees regardless of hire date. The Company has frozen participation under these plans for U.S. salaried employees, including credited services and compensation on or after January 1, 2019; however, the pension freeze does not affect benefits accrued through December 31, 2018. We provide retiree health care benefits to certain former U.S. hourly employees, as well as financial assistance towards the cost of individual retiree medical coverage for certain former U.S. salaried employees. Our pension costs are dependent upon numerous factors resulting from actual plan experience and assumptions of future experience. Pension plan assets are primarily made up of equity and fixed income investments. Fluctuations in actual equity market returns, changes in general interest rates and changes in the number of retirees may result in increased pension costs in future periods. Likewise, changes in assumptions regarding current discount rates and expected rates of return on plan assets could increase pension costs.

**OUR PENSION PLANS ARE CURRENTLY UNDERFUNDED ON A PROJECTED BENEFIT OBLIGATION BASIS, AND OVER TIME WE MAY BE REQUIRED TO MAKE CASH PAYMENTS TO THE PLANS, REDUCING THE CASH AVAILABLE FOR OUR BUSINESS.** We record a liability associated with our pension plans equal to the excess of the benefit obligation over the fair value of plan assets. The benefit liability recorded under the provisions of Accounting Standards Codification (ASC) 715, “Compensation – Retirement Benefits,” at December 31, 2018 was $1.8 billion. The amount and timing of future contributions will depend upon a number of factors, including the actual earnings and changes in values of plan assets and changes in interest rates.

### RISKS RELATING TO OUR OPERATIONS

**MATERIAL DISRUPTIONS AT ONE OF OUR MANUFACTURING FACILITIES COULD NEGATIVELY IMPACT OUR FINANCIAL RESULTS.** We operate our facilities in compliance with applicable rules and regulations and take measures to minimize the risks of disruption at our facilities. A material disruption at our corporate headquarters or one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales and/or negatively impact our financial condition. Any of our manufacturing facilities, or any of our machines within an otherwise operational facility, could cease operations unexpectedly due to a number of events, including:

- fires, floods, earthquakes, hurricanes or other catastrophes;
- the effect of a drought or reduced rainfall on its water supply;
- the effect of other severe weather conditions on equipment and facilities;
- terrorism or threats of terrorism;
- domestic and international laws and regulations applicable to our Company and our business partners, including joint venture partners, around the world;
- unscheduled maintenance outages;
- prolonged power failures;
- an equipment failure;
- a chemical spill or release;
- explosion of a boiler or other equipment;
- damage or disruptions caused by third parties operating on or adjacent to one of our manufacturing facilities;
- disruptions in the transportation infrastructure, including roads, bridges, railroad tracks and tunnels;
- widespread outbreak of an illness or any other communicable disease, or any other public health crisis;
- labor difficulties; and
- other operational problems.

Any such downtime or facility damage could prevent us from meeting customer demand for our products and/or require us to make unplanned expenditures. If one of these machines or facilities were to incur significant downtime, our ability to meet our production targets and satisfy customer requirements could be impaired, resulting in lower sales and having a negative effect on our business and financial results.

**CERTAIN OPERATIONS ARE CONDUCTED BY JOINT VENTURES THAT WE CANNOT OPERATE SOLELY FOR OUR BENEFIT.** Certain operations in Russia are carried on by a joint venture, Ilim. In joint ventures, we share ownership and management of a company with one or more parties who may or may not

have the same goals, strategies, priorities or resources as we do. In general, joint ventures are intended to be operated for the benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities as well as time-consuming procedures for sharing information and making decisions. In joint ventures, we are required to pay more attention to our relationship with our co-owners as well as with the joint venture, and if a co-owner changes, our relationship may be adversely affected. In addition, the benefits from a successful joint venture are shared among the co-owners, so we receive only our portion of those benefits.

**WE MAY NOT ACHIEVE THE EXPECTED BENEFITS FROM ACQUISITIONS, JOINT VENTURES, DIVESTITURES, CAPITAL INVESTMENTS AND OTHER CORPORATE TRANSACTIONS.** Our strategy for long-term growth, productivity and profitability depends, in part, on our ability to accomplish prudent acquisitions, joint ventures, divestitures, capital investments and other corporate transactions and to realize the benefits we expect from such transactions, and we are subject to the risk that we may not achieve the expected benefits. Among the benefits we expect from potential as well as completed acquisitions and joint ventures are synergies, cost savings, growth opportunities or access to new markets (or a combination thereof), and in the case of divestitures, the realization of proceeds from the sale of businesses and assets to purchasers who place higher strategic value on such businesses and assets than does International Paper. In January 2018, for example, we completed a transaction transferring our North American Consumer Packaging business to Graphic Packaging in exchange for, among other things, an equity interest in the combined business of 20.5%. The success of the transaction and the value of our equity interest will depend on variables we do not control, such as the financial performance of the combined business and on the ability of the combined business to realize anticipated growth opportunities, cost savings and other synergies.

**WE ARE SUBJECT TO INFORMATION TECHNOLOGY RISKS RELATED TO BREACHES OF SECURITY PERTAINING TO SENSITIVE COMPANY, CUSTOMER, EMPLOYEE AND VENDOR INFORMATION AS WELL AS BREACHES IN THE TECHNOLOGY USED TO MANAGE OPERATIONS AND OTHER BUSINESS PROCESSES.** Our business operations rely upon secure information technology systems for data capture, processing, storage and reporting. Despite careful security and controls design, implementation, updating and independent third party verification, our information technology systems, and those of our third party providers, could become subject to employee error or malfeasance, cyber attacks, or natural disasters. Network, system, application and data breaches could result in operational disruptions or information misappropriation including, but not limited to, interruption to systems availability, denial of access to and misuse of applications required by our customers to conduct business with International Paper. Access to internal applications required to plan our operations, source materials, manufacture and ship finished goods and account for orders could be denied or misused. Theft of intellectual property or trade secrets, and inappropriate disclosure of confidential company, employee, customer or vendor information, could stem from such incidents. Any of these operational disruptions and/or misappropriation of information could result in lost sales, business delays, negative publicity, government enforcement and could have a material effect on our business.

### RISKS RELATING TO LEGAL PROCEEDINGS AND COMPLIANCE COSTS

**WE ARE SUBJECT TO A WIDE VARIETY OF LAWS, REGULATIONS AND OTHER GOVERNMENT REQUIREMENTS THAT MAY CHANGE IN SIGNIFICANT WAYS, AND THE COST OF COMPLIANCE WITH SUCH REQUIREMENTS COULD IMPACT OUR BUSINESS AND RESULTS OF OPERATIONS.** Our operations are subject to regulation under a wide variety of U.S. federal and state and non-U.S. laws, regulations and other government requirements -- including, among others, those relating to the environment, health and safety, labor and employment, data privacy, tax, trade and health care. There can be no assurance that laws, regulations and government requirements will not be changed, applied or interpreted in ways that will require us to modify our operations and objectives or affect our returns on investments by restricting existing activities and products, subjecting them to escalating costs.

For example, we have incurred, and expect that we will continue to incur, significant capital, operating and other expenditures complying with applicable environmental laws and regulations. There can be no assurance that future remediation requirements and compliance with existing and new laws and requirements, including with global climate change laws and regulations, will not require significant expenditures, or that existing reserves for specific matters will be adequate to cover future costs. We could also incur substantial fines or sanctions, enforcement actions (including orders limiting our operations or requiring corrective measures), natural resource damages claims, cleanup and closure costs, and third-party claims for property damage and personal injury as a result of violations of, or liabilities under, environmental laws, regulations, codes and common law. The amount and timing of environmental expenditures is difficult to predict, and, in some cases, liability may be imposed without regard to

contribution or to whether we knew of, or caused, the release of hazardous substances.

As another example, we are subject to a number of labor and employment laws and regulations that could significantly increase our operating costs and reduce our operational flexibility. Additionally, we are subject to complex and evolving U.S. and international privacy laws and regulations, including those pertaining to the handling of personal data, such as the General Data Protection Regulation (GDPR). Government authorities around the world are considering, or are in the process of implementing, new data protection regulations. Many of these laws and regulations are subject to uncertain application, interpretation or enforcement standards that could result in claims, changes to our business practices, penalties, increased operating costs or other impacts on our businesses.

As a final example, the application of tax law is subject to interpretation and is subject to audit by taxing authorities. Additionally, administrative guidance can be incomplete or vary from legislative intent, and therefore the application of the tax law is uncertain. While we believe the positions reported by the Company comply with relevant tax laws and regulations, taxing authorities could interpret our application of certain laws and regulations differently. We are currently subject to tax audits in the U.S., Brazil, Poland, Russia and other taxing jurisdictions around the world. In some cases, we have appealed and may continue to appeal, assessments by taxing authorities in the court system. As such, tax controversy matters may result in previously unrecorded tax expenses, higher future tax expenses or the assessment of interest and penalties.

**RESULTS OF LEGAL PROCEEDINGS COULD HAVE A MATERIAL EFFECT ON OUR CONSOLIDATED FINANCIAL STATEMENTS.** The costs and other effects of pending litigation against us cannot be determined with certainty. Although we do not believe that the outcome of any pending or threatened lawsuits or claims will have a material effect on our business or consolidated financial statements, there can be no assurance that the outcome of any lawsuit or claim will be as expected.

## Properties

As filed, 1,536 characters.

### FORESTLANDS

As of December 31, 2018, the Company owned or managed approximately 329,000 acres of forestlands in Brazil, and had, through licenses and forest management agreements, harvesting rights on government-owned forestlands in Russia. All owned lands in Brazil are independently third-party certified for sustainable forestry under the Brazilian National Forest Certification Program (CERFLOR) and the Forest Stewardship Council (FSC).

### MILLS AND PLANTS

A listing of our production facilities by segment, the vast majority of which we own, can be found in Appendix I hereto, which is incorporated herein by reference.

The Company’s facilities are in good operating condition and are suited for the purposes for which they are presently being used. We continue to study the economics of modernization or adopting other alternatives for higher cost facilities.

### CAPITAL INVESTMENTS AND DISPOSITIONS

Given the size, scope and complexity of our business interests, we continually examine and evaluate a wide variety of business opportunities and planning alternatives, including possible acquisitions and sales or other dispositions of properties. You can find a discussion about the level of planned capital investments for 2019 on page 30, and dispositions and restructuring activities as of December 31, 2018, on pages 21 through 23 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and on page 52 and pages 54 and 55 of Item 8. Financial Statements and Supplementary Data.

## Legal proceedings

As filed, 731 characters.

Information concerning the Company’s legal proceedings is set forth in Note 13 Commitments and Contingent Liabilities on pages 62 through 65 of Item 8. Financial Statements and Supplementary Data.

Additionally, in the third quarter of 2018, the Company received a natural resource damages penalty assessment of RUB 18.8 million (approximately $275,000) arising from the Company’s voluntary disclosure of mercury contamination identified in sediment in a river tributary that traverses the site of the Company’s mill in Svetogorsk, Russia. The mercury contamination is associated with a former manufacturing facility located on the Svetogorsk mill site. The Company is cooperating with the Russian government to resolve the matter.

## Management's discussion and analysis

As filed, 94,682 characters.

### EXECUTIVE SUMMARY

Full-year 2018 net earnings were $2.0 billion ($4.85 per diluted share) compared with net earnings of $2.1 billion ($5.13 per diluted share) for full-year 2017. Full-year 2017 net earnings included a provisional net tax benefit of $1.2 billion ($2.93 per diluted share) related to the U.S. enactment of the Tax Cuts and Jobs Act of 2017 reported as a special item.

International Paper delivered strong earnings, returns and cash generation in 2018, driven by solid commercial and operational performance across our three businesses. Business segment operating profit improved by approximately $800 million to $2.9 billion in 2018, driven primarily by price and mix improvements, with revenue growth of 7.2%. We continued to grow value for our shareholders with a return which was significantly above our cost of capital and marks our ninth consecutive year with value-creating returns. The Company made strategic investments to strengthen our businesses. Among these, we completed the final phase of our multi-year North American containerboard mill system optimization projects, which gives us the added flexibility we need around capacity, products and geographies. We also invested in our North American corrugated packaging system to enhance our capabilities and strengthen our position with the fastest growing segments. In our EMEA Packaging business, we completed the conversion of the Madrid, Spain mill and started production of high-performance, lightweight recycled containerboard to capture the integrated margin with our EMEA box system. International Paper continued to deliver strong cash generation in 2018, which we used to strengthen our balance sheet and return cash to shareholders. We decreased balance sheet debt by about $500 million, and we returned $1.5 billion to shareholders through dividends of about $800 million and share repurchases of about $700 million. The Company increased its dividend for the seventh consecutive year and reduced shares outstanding by 3%.

The Company’s 2018 results include significant price and mix improvements driven by price realization across our three business segments. Improved mix contributed to the Company’s strong performance, particularly in our Global Cellulose Fibers business where we continued to grow fluff pulp volume. Weather events in North America and startup costs associated with the Madrid, Spain mill negatively impacted operations, and planned maintenance outages were higher. Input costs increased in 2018, driven by higher wood fiber, chemicals, distribution and energy costs, and were partially offset by lower recovered fiber costs. Equity earnings increased

by $159 million to $336 million in 2018, driven by excellent commercial and operational performance in our Ilim joint venture and first-year equity earnings from Graphic Packaging International Partners, LLC (GPIP). In total, our equity investments provided $153 million in cash dividends to International Paper in 2018.

Looking ahead to the first quarter 2019, domestic industry conditions remain healthy. We anticipate lower seasonal demand in North America Industrial Packaging and Brazil Papers, as well as lower export volume in Industrial Packaging, as customer destocking continues. In Global Cellulose Fibers we anticipate lower volume due to slower growth in developing markets and customer destocking, as well as a temporary setback in fluff pulp volume resulting from poor execution of a mix improvement plan. Consequently, we expect downward pressure on export price and mix in Industrial Packaging and Global Cellulose Fibers during the first quarter. Operating costs are expected to increase in our three business segments due to lower volume, higher seasonal energy consumption and timing of spending. In addition, planned maintenance outage expense is expected to increase significantly as we move from a low-outage fourth quarter to a heavy-outage first quarter, with first-half 2019 representing nearly 80% of total planned maintenance outage expense in 2019. Input costs are expected to be stable in Industrial Packaging and Global Cellulose Fibers and increase modestly in Printing Papers, mainly due to higher wood costs in North America. Lastly, we expect equity earnings for our Ilim joint venture to remain stable in the first quarter.

Looking to full-year 2019, we remain focused on maximizing value creation for our shareholders. We anticipate meaningful growth in cash generation driven by commercial and operational excellence, lower capital expenditures and higher dividends from our equity investments. We continue to see healthy box demand in North America Industrial Packaging and expect solid demand growth for fluff pulp used in absorbent hygiene products. In Global Cellulose Fibers we expect our fluff pulp volume to recover as we execute on our mix improvement initiatives. In Printing Papers, the business is performing very well and we have good momentum as we move into 2019, with expected price realization from recent price increases. In Europe, the benefits of the Madrid, Spain mill will accelerate through the year. We expect lower planned maintenance outage expense and capital investments of $1.4 billion, which is about $200 million lower than 2018. Our Ilim joint venture is well positioned to thrive through near-term destocking in softwood market pulp in China and we expect to receive about $200 million in cash dividends from the joint venture in 2019. All in, we expect strong cash generation, which we will use to maximize value for our shareholders by strengthening our balance sheet and returning cash to shareholders. We are committed to a strong and competitive dividend and have a $2.2 billion share repurchase authority remaining.

Adjusted Operating Earnings and Adjusted Operating Earnings Per Share are non-GAAP measures and are defined as net earnings from continuing operations (a GAAP measure) excluding special items and non-operating pension expense. Net earnings (loss) and Diluted earnings (loss) per share attributable to common shareholders are the most directly comparable GAAP measures. The Company calculates Adjusted Operating Earnings by excluding the after-tax effect of non-operating pension expense, items considered by management to be unusual and discontinued operations from the earnings reported under GAAP. Adjusted Operating Earnings Per Share is calculated by dividing Adjusted Operating Earnings by diluted average shares of common stock outstanding. 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 Earnings (loss) attributable to common shareholders to Adjusted operating earnings (loss) attributable to common shareholders.

|  | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Earnings (Loss) Attributable to Shareholders** | **$2,012** | $2,144 | $904 |
| Less - Discontinued operations (gain) loss | **(345)** | (34) | (102) |
| **Earnings (Loss) from Continuing Operations** | **1,667** | 2,110 | 802 |
| Add back - Non-operating pension expense (income) | **494** | 484 | 610 |
| Add back - Net special items expense (income) | **214** | 496 | 182 |
| Income tax effect - Non-operating pension and special items expense | **(171)** | (1,634) | (309) |
| **Adjusted Operating Earnings (Loss) Attributable to Shareholders** | **$2,204** | $1,456 | $1,285 |

|  | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Diluted Earnings (Loss) Per Share Attributable to Shareholders** | **$4.85** | $5.13 | $2.18 |
| Less - Discontinued operations (gain) loss per share | **(0.83)** | (0.08) | (0.25) |
| **Diluted Earnings (Loss) Per Share from Continuing Operations** | **4.02** | 5.05 | 1.93 |
| Add back - Non-operating pension expense (income) per share | **1.19** | 1.16 | 1.47 |
| Add back - Net special items expense (income) per share | **0.52** | 1.19 | 0.44 |
| Income tax effect per share - Non-operating pension and special items expense | **(0.41)** | (3.91) | (0.75) |
| Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders | **$5.32** | $3.49 | $3.09 |

|  | Three Months Ended December 31, 2018 | Three Months Ended September 30, 2018 | Three Months Ended December 31, 2017 |
| --- | ---: | ---: | ---: |
| **Earnings (Loss) Attributable to Shareholders** | **$316** | $562 | $1,460 |
| Less - Discontinued operations (gain) loss | **—** | — | 8 |
| **Earnings (Loss) from Continuing Operations** | **316** | 562 | 1,468 |
| Add back - Non-operating pension expense (income) | **429** | 25 | 386 |
| Add back - Net special items expense (income) | **(15)** | 142 | 106 |
| Income tax effect - Non-operating pension and special items expense | **(60)** | (88) | (1,430) |
| **Adjusted Operating Earnings (Loss) Attributable to Shareholders** | **$670** | $641 | $530 |

|  | Three Months Ended December 31, 2018 | Three Months Ended September 30, 2018 | Three Months Ended December 31, 2017 |
| --- | ---: | ---: | ---: |
| **Diluted Earnings (Loss) Per Share Attributable to Shareholders** | **$0.78** | $1.37 | $3.50 |
| Less - Discontinued operations (gain) loss per share | **—** | — | 0.02 |
| Diluted Earnings (Loss) Per Share from Continuing Operations | **0.78** | 1.37 | 3.52 |
| Add back - Non-operating pension expense (income) per share | **1.05** | 0.06 | 0.92 |
| Add back - Net special items expense (income) per share | **(0.04)** | 0.34 | 0.25 |
| Income tax effect per share - Non-operating pension and special items expense | **(0.14)** | (0.21) | (3.42) |
| **Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders** | **$1.65** | $1.56 | $1.27 |

18

Free Cash Flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company's ongoing performance, free cash flow also enables investors to perform meaningful comparisons between past and present periods.

The Company generated Free Cash Flow of approximately $1.7 billion, $2.0 billion and $1.9 billion in 2018, 2017 and 2016, respectively. The following are reconciliations of free cash flow to cash provided by operations:

*In millions*

|  | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| Cash provided by operations | **$3,226** | $1,757 | $2,478 |
| Adjustments: |  |  |  |
| Cash invested in capital projects | **(1,572)** | (1,391) | (1,348) |
| Cash contribution to pension plan | **—** | 1,250 | 750 |
| Cash payment for Kleen Settlement | **—** | 354 | — |
| **Free Cash Flow** | **$1,654** | $1,970 | $1,880 |

*In millions*

|  | Three Months Ended December 31, 2018 | Three Months Ended September 30, 2018 | Three Months Ended December 31, 2017 |
| --- | ---: | ---: | ---: |
| Cash provided by operations | **$821** | $941 | $1,188 |
| Adjustments: |  |  |  |
| Cash invested in capital projects | **(286)** | (357) | (456) |
| **Free Cash Flow** | **$535** | $584 | $732 |

### Results of Operations

Business Segment Operating Profits are used by International Paper’s management to measure the earnings performance of its businesses. 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, provides a more complete analysis of the results of operations by year. Business Segment Operating Profits are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including

the impact of equity earnings and noncontrolling interests, excluding interest expense, net, corporate items, net, corporate special items, net, and non-operating pension expense. Business Segment Operating Profits are defined by the Securities and Exchange Commission as a non-GAAP financial measure, and are not GAAP alternatives to net income or any other operating measure prescribed by accounting principles generally accepted in the United States.

International Paper operates in three segments: Industrial Packaging, Global Cellulose Fibers and Printing Papers.

The following table presents a reconciliation of net earnings (loss) from continuing operations attributable to International Paper Company to its total Business Segment Operating Profit:

*In millions*

|  | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Earnings (Loss) From Continuing Operations Attributable to International Paper Company** | **$1,667** | $2,110 | $802 |
| Add back (deduct) |  |  |  |
| Income tax provision (benefit) | **445** | (1,085) | 193 |
| Equity (earnings) loss, net of taxes | **(336)** | (177) | (198) |
| Noncontrolling interests, net of taxes | **5** | — | (2) |
| **Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings** | **1,781** | 848 | 795 |
| Interest expense, net | **536** | 572 | 520 |
| Noncontrolling interests/equity earnings included in operations | **(10)** | (2) | 1 |
| Corporate items, net | **67** | 91 | 121 |
| Corporate special items, net (income) expense | **9** | 76 | 55 |
| Non-operating pension expense | **494** | 484 | 610 |
|  | **$2,877** | $2,069 | $2,102 |
| **Business Segment Operating Profit** |  |  |  |
| Industrial Packaging | **$2,093** | $1,547 | $1,741 |
| Global Cellulose Fibers | **251** | 65 | (179) |
| Printing Papers | **533** | 457 | 540 |
| **Business Segment Operating Profit** | **$2,877** | $2,069 | $2,102 |

Business Segment Operating Profits in 2018 included a net loss from special items of $205 million compared with $425 million in 2017 and $127 million in 2016. Operationally, compared with 2017, the benefits from higher average sales price realizations and mix ($1.3 billion) and higher sales volumes ($13 million) were partially offset by higher input costs ($180 million), higher maintenance outage costs ($122 million) and higher operating costs ($472 million).

Corporate items, net, includes operating profits (losses) of previously divested businesses of $0 million in both 2018 and 2017 and $(2) million in 2016.

The principal changes in operating profit by business segment were as follows:

- Industrial Packaging’s profits of $2.1 billion were $546 million higher than in 2017 as the benefits of higher average sales price realizations, net of mix, higher sales volumes and lower input costs were partially offset by higher operating costs and higher maintenance outage costs. In addition, operating profits in 2018 included a charge of $122 million related to the impairment of fixed assets and an intangible asset in our Brazil Packaging business, charges of $47 million related to the optimization of our EMEA Packaging business, charges of $20 million for the removal of abandoned property at our mills and income of $5 million related to a litigation settlement recovery. In 2017, operating profits included a charge of $354 million related to the settlement of the Kleen Products anti-trust class action lawsuit, charges of $14 million for the removal of abandoned property at our mills, a charge of $10 million for the accelerated amortization of an intangible asset in Brazil and a gain of $6 million for a net bargain purchase gain associated with the 2016 acquisition of Holmen Paper's newsprint mill in Madrid, Spain.
- Global Cellulose Fibers' operating profit of $251 million was $186 million favorable versus 2017 as the benefits of higher average sales price realizations and improved mix were partially offset by lower sales volumes, higher input costs, higher maintenance outage costs and higher operating costs. Operating profits in 2018 included a charge of $11 million for the removal of abandoned property at our mills. In 2017, operating earnings included $33 million of costs associated with the acquisition and integration of the pulp business acquired in late 2016 from Weyerhaeuser, a charge of $14 million for the amortization of the remaining inventory fair value adjustment associated with that acquisition and a charge of $4 million for the removal of abandoned property at our mills.
- Printing Papers’ profits of $533 million represented a $76 million increase in operating profits from 2017. The benefits from higher average sales price realizations, net of mix, were partially offset by lower sales volumes, higher input costs, higher maintenance outage costs and higher operating costs. Operating profits in 2018 included charges of $9 million associated with the announced conversion of a paper machine at our Riverdale mill to containerboard production and a charge of $1 million for the removal of abandoned property at our mills. Operating profits in 2017 included charges of $2 million for the removal of abandoned property at our mills.

### Liquidity and Capital Resources

For the year ended December 31, 2018, International Paper generated $3.2 billion of cash flow from operations compared with $1.8 billion in 2017 and $2.5 billion in 2016. Cash flow from operations included $1.25 billion and $750 million of cash pension contributions in 2017 and 2016, respectively. Capital spending for 2018 totaled $1.6 billion, or 118% of depreciation and amortization expense. Our liquidity position remains strong, supported by approximately $2.1 billion of credit facilities that we believe are adequate to meet future liquidity requirements. Maintaining an investment-grade credit rating for our long-term debt continues to be an important element in our overall financial strategy.

We expect another strong year of cash generation in 2019, which we will use to maximize shareholder value by strengthening our balance sheet, returning meaningful cash to shareholders through dividends and share repurchases and investing organically to grow future cash generation.

Capital spending for 2019 is planned at $1.4 billion, or about 104% of depreciation and amortization, including approximately $400 million of strategic investments.

### RESULTS OF OPERATIONS

While the operating results for International Paper’s various business segments are driven by a number of business-specific factors, changes in International Paper’s operating results are closely tied to changes in general economic conditions in North America, Europe, Russia, Latin America, India, North Africa and the Middle East. Factors that impact the demand for our products include industrial non-durable goods production, consumer spending, commercial printing and advertising activity, white-collar employment levels, and movements in currency exchange rates.

Product prices are affected by general economic trends, inventory levels, currency exchange rate movements and worldwide capacity utilization. In addition to these revenue-related factors, net earnings are impacted by various cost drivers, the more significant of which include changes in raw material costs, principally wood, recycled fiber and chemical costs; energy costs; freight costs; mill outage costs; salary and benefits costs, including pensions; and manufacturing conversion costs.

The following is a discussion of International Paper’s results of operations for the year ended December 31, 2018, and the major factors affecting these results compared to 2017 and 2016.

For the year ended December 31, 2018, International Paper reported net sales of $23.3 billion, compared with $21.7 billion in 2017 and $19.5 billion in 2016. International net sales (including U.S. exports) totaled $8.8 billion or 38% of total sales in 2018. This compares with international net sales of $8.4 billion in 2017 and $6.9 billion in 2016.

Full year 2018 net earnings attributable to International Paper Company totaled $2.0 billion ($4.85 per diluted share), compared with net earnings of $2.1 billion ($5.13 per diluted share) in 2017 and $904 million ($2.18 per diluted share) in 2016. Amounts in all periods include the results of discontinued operations.

Earnings from continuing operations attributable to International Paper Company after taxes in 2018, 2017 and 2016 were as follows:

*In millions*

|  | 2018 |  | 2017 |  | 2016 |  |
| --- | ---: | --- | ---: | --- | ---: | --- |
| Earnings from continuing operations attributable to International Paper Company | **$1,667** | **(a)** | $2,110 | (b) | $802 | (c) |

*(a) Includes $166 million of net special items charges and $371 million of non-operating pension expense which included a pre-tax charge of $424 million ($318 million after taxes) for a settlement accounting charge associated with an annuity purchase and transfer of pension obligations for approximately 23,000 retirees.*

*(b) Includes $952 million of net special items income which included a provisional net tax benefit of $1.2 billion related to the enactment of the Tax Cut and Jobs Act and $298 million of non-operating pension expense which included a pre-tax charge of $376 million ($232 million after taxes) for a settlement accounting charge associated with an annuity purchase and transfer of pension obligations for approximately 45,000 retirees.*

*(c) Includes $108 million of net special items charges and $375 million of non-operating pension expense which included a pre-tax charge of $439 million ($270 million after taxes) for a settlement accounting charge associated with payments under a term-vested lump sum buyout.*

Compared with 2017, the benefits from higher sales volumes, higher average sales price realizations, net of mix, lower corporate and other costs, lower net interest expense and lower tax expense, were partially offset by higher operating costs, higher input costs and higher maintenance outage costs. In addition, 2018 results

included higher equity earnings, net of taxes, relating to the Company’s investments in Ilim and GPIP.

See Business Segment Results on pages 24 through 28 for a discussion of the impact of these factors by segment.

### Discontinued Operations

**2018:**

In 2018, discontinued operations included an after-tax gain of $364 million on the transfer of the North American Consumer Packaging business and after-tax charges of $19 million for costs associated with the transfer.

### 2017:

On January 1, 2018, the Company completed the transfer of its North American Consumer Packaging business, which included its North American Coated Paperboard and Foodservice businesses, to a subsidiary of Graphic Packaging Holding Company. International Paper received a 20.5% ownership interest in GPIP, a subsidiary of Graphic Packaging Holding Company, that holds the assets of the combined business. As a result of this transfer, all prior year amounts have been adjusted to reflect the North American Consumer Packaging business as a discontinued operation. See Note 8 Divestitures and Impairments on pages 54 and 55 of Item 8. Financial Statements and Supplementary Data for further discussion.

Included in discontinued operations were the operating earnings of the North American Consumer Packaging business, an after-tax charge of $10 million for costs associated with the transfer and an after-tax charge of $28 million for non-operating pension expenses related to curtailment charges and termination benefits in connection with this same transaction.

### 2016:

In 2016, discontinued operations included the operating earnings of the North American Consumer Packaging business and an after-tax charge of $5 million expense associated with a legal settlement related to the xpedx business.

### Income Taxes

A net income tax provision of $445 million was recorded for 2018, including a tax benefit of $36 million to revise our 2017 estimated tax related to the enactment of the Tax Cuts and Jobs Act, tax expense of $25 million related to foreign tax audits, tax expense of $19 million related to an international investment restructuring and tax expense of $9 million related to state income tax legislative changes. Excluding these items, a $65 million net tax benefit for other special items and a $123 million tax benefit related to non-operating pension expense, the tax provision was $616 million, or 25% of pre-tax earnings before equity earnings.

A net income tax benefit of $1.1 billion was recorded for 2017, including a provisional net tax benefit of $1.2 billion related to the enactment of the Tax Cuts and Jobs Act, tax benefits of $113 million related to income tax refund claims, tax expense of $9 million related to an international tax law change, tax expense of $34 million related to international investment restructuring and tax expense of $38 million associated with a cash pension contribution. Excluding these items, a $194 million net tax benefit for other special items and a $186 million tax benefit related to non-operating pension expense, the tax provision was $549 million, or 30% of pre-tax earnings before equity earnings.

A net income tax provision of $193 million was recorded for 2016, including tax benefits of $63 million related to legal entity restructurings, tax expense of $31 million associated with a tax rate change in Luxembourg, tax expense of $23 million associated with a $750 million cash pension contribution, and a tax benefit of $14 million related to the closure of a federal tax audit. Excluding these items, a $51 million net tax benefit for other special items and a $235 million tax benefit related to non-operating pension expense, the tax provision was $502 million, or 32% of pre-tax earnings before equity earnings.

### Equity Earnings, Net of Taxes

Equity earnings, net of taxes, consisted principally of the Company’s share of earnings from its 50% investment in Ilim of $290 million, $183 million and $199 million in 2018, 2017 and 2016, respectively, and from its 20.5% ownership interest in GPIP of $46 million in 2018 (see pages 27 and 28).

### Interest Expense and Noncontrolling Interest

Net corporate interest expense totaled $536 million in 2018, $572 million in 2017 and $520 million in 2016. Net interest expense in 2017 includes $5 million of interest

income associated with income tax refund claims. The decrease in 2018 compared with 2017 was due to lower average outstanding debt. The increase in 2017 compared with 2016 was due to higher average outstanding debt.

Net earnings attributable to noncontrolling interests were $5 million in 2018, compared with $0 million in 2017 and a loss of $2 million in 2016. The increase in 2018 was primarily due to improved earnings in our India Papers business.

### Special Items

#### Restructuring and Other Charges, Net

International Paper continually evaluates its operations for improvement opportunities targeted to (a) focus our portfolio on our core businesses, (b) realign capacity to operate fewer facilities with the same revenue capability and close high cost facilities, and (c) reduce costs.

During 2018, 2017 and 2016, pre-tax restructuring and other charges, net totaling $29 million, $67 million and $54 million were recorded. Details of these charges were as follows:

*In millions*

| Restructuring and Other, Net Business Segments | 2018 |  | 2017 | 2016 |  |
| --- | ---: | --- | ---: | ---: | --- |
| EMEA Packaging optimization | **$47** | **(a)** | $— | $— |  |
| Riverdale mill paper machine conversion severance reserve | **3** | **(b)** | — | — |  |
| Turkey mill closure | **—** |  | — | 7 | (a) |
|  | **50** |  | **—** | **7** |  |
| **Corporate** |  |  |  |  |  |
| Early debt extinguishment costs (see Note 15) | **$10** |  | $83 | $29 |  |
| Gain on sale of investment in Liaison Technologies | **(31)** |  | — | — |  |
| Gain on sale of investment in ArborGen | **—** |  | (14) | — |  |
| India Packaging business evaluation write-off | **—** |  | — | 17 |  |
| Gain on sale of investment in Arizona Chemical | **—** |  | — | (8) |  |
| Riegelwood mill conversion costs net of proceeds from the sale of Carolina Coated Bristols brand | **—** |  | — | 9 |  |
| Other Items | **—** |  | (2) | — |  |
|  | **(21)** |  | 67 | 47 |  |
| **Total** | **$29** |  | $67 | $54 |  |

#### (a) Recorded in the Industrial Packaging business segment.

#### (b) Recorded in the Printing Papers business segment.

#### Other Corporate Special Items

In addition, other pre-tax corporate special items totaling $30 million, $0 million and $8 million were recorded in 2018, 2017 and 2016, respectively. Details of these charges were as follows:

*In millions*

| Other Corporate Items | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| Smurfit-Kappa acquisition proposal costs | **$12** | $— | $— |
| Environmental remediation reserve adjustment | **9** | — | — |
| Legal settlement | **9** | — | — |
| Write-off of certain regulatory pre-engineering costs | **—** | — | 8 |
| **Total** | **$30** | $— | $8 |

#### Impairments of Goodwill

No goodwill impairment charges were recorded in 2018, 2017 or 2016.

#### Net Losses on Sales and Impairments of Businesses

Net losses on sales and impairments of businesses included in special items totaled a pre-tax loss of $122 million in 2018 related to the impairment of an intangible asset and fixed assets in the Brazil Packaging business, a pre-tax loss of $9 million in 2017 related to the write down of the long-lived assets of the Company's Asia foodservice business to fair value and a pre-tax loss of $70 million related to severance and the impairment of the IP Asia Packaging business in 2016. See Note 8 Divestitures and Impairments on pages 54 and 55 of Item 8. Financial Statements and Supplementary Data for further discussion.

### DESCRIPTION OF BUSINESS SEGMENTS

International Paper’s business segments discussed below are consistent with the internal structure used to manage these businesses. All segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the forest products industry.

### Industrial Packaging

International Paper is the largest manufacturer of containerboard in the United States. Our U.S. production capacity is over 13 million tons annually. Our products include linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft. About 80% of our production is converted into corrugated boxes and other packaging by our 179 North American container plants. Additionally, we recycle approximately

one million tons of OCC and mixed and white paper through our 18 recycling plants. Our container plants are

supported by regional design centers, which offer total packaging solutions and supply chain initiatives. In EMEA, our operations include one recycled fiber containerboard mill in Morocco, a recycled containerboard mill in Spain and 26 container plants in France, Italy, Spain, Morocco and Turkey. In Brazil, our operations include three containerboard mills and four box plants.

International Paper also produces high quality coated paperboard for a variety of packaging end uses with 428,000 tons of annual capacity at our mills in Poland and Russia.

### Global Cellulose Fibers

Our cellulose fibers product portfolio includes fluff, market and specialty pulps. International Paper is the largest producer of fluff pulp which is used to make absorbent hygiene products like baby diapers, feminine care, adult incontinence and other non-woven products. Our market pulp is used for tissue and paper products. We continue to invest in exploring new innovative uses for our products, such as our specialty pulps, which are used for non-absorbent end uses including textiles, filtration, construction material, paints and coatings, reinforced plastics and more. Our products are made in the United States, Canada, France, Poland, and Russia and are sold around the world. International Paper facilities have annual dried pulp capacity of about 4 million metric tons.

### Printing Papers

International Paper is one of the world’s largest producers of printing and writing papers. The primary product in this segment is uncoated papers. This business produces papers for use in copiers, desktop and laser printers and digital imaging. End-use applications include advertising and promotional materials such as brochures, pamphlets, greeting cards, books, annual reports and direct mail. Uncoated papers also produces a variety of grades that are converted by our customers into envelopes, tablets, business forms and file folders. Uncoated papers are sold under private label and International Paper brand names that include *Hammermill, Springhill, Williamsburg, Postmark, Accent, Great White, Chamex, Ballet, Rey, Pol, and Svetocopy*. The mills producing uncoated papers are located in the United States, France, Poland, Russia, Brazil and India. The mills have uncoated paper production capacity of over 4 million tons annually. Brazilian operations function through International Paper do Brasil, Ltda, which owns or manages approximately 329,000 acres of forestlands in Brazil.

### Ilim

In October 2007, International Paper and Ilim completed a 50:50 joint venture to operate a pulp and paper business located in Russia. Ilim’s facilities include three paper mills located in Bratsk, Ust-Ilimsk, and Koryazhma, Russia, with combined total pulp and paper capacity of over 3.4 million metric tons. Ilim has

exclusive harvesting rights on timberland and forest areas exceeding 18.9 million acres (7.66 million hectares).

### GPIP

On January 1, 2018, the Company completed the transfer of its North American Consumer Packaging business, which includes its North American Coated Paperboard and Foodservice businesses, to Graphic Packaging International Partners, LLC (GPIP), a subsidiary of Graphic Packaging Holding Company, in exchange for a 20.5% ownership interest in GPIP. GPIP subsequently transferred the North American Consumer Packaging business to Graphic Packaging International, LLC (GPI), a wholly-owned subsidiary of GPIP that holds the assets of the combined business.

*Products and brand designations appearing in italics are trademarks of International Paper or a related company.*

### BUSINESS SEGMENT RESULTS

The following tables present net sales and operating profit (loss) which is the Company's measure of segment profitability. The tables include a detail of special items in each year, where applicable, in order to show operating profit before special items.

### Industrial Packaging

Demand for Industrial Packaging products is closely correlated with non-durable industrial goods production, as well as with demand for processed foods, poultry, meat and agricultural products. In addition to prices and volumes, major factors affecting the profitability of Industrial Packaging are raw material and energy costs, freight costs, mill outage costs, manufacturing efficiency and product mix.

*In millions*

| Industrial Packaging | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$15,900** | $15,077 | $14,226 |
| **Operating Profit (Loss)** | **$2,093** | $1,547 | $1,741 |
| Brazil Packaging impairment | **122** | — | — |
| EMEA Packaging optimization | **47** | — | — |
| Litigation settlement recovery | **(5)** | — | — |
| Abandoned property removal | **20** | 14 | — |
| Kleen Products anti-trust settlement | **—** | 354 | — |
| Holmen mill bargain purchase gain | **—** | (6) | — |
| Brazil Packaging wood supply accelerated amortization | **—** | 10 | — |
| Turkey mill closure | **—** | — | 7 |
| Asia Packaging restructuring and impairment | **—** | — | 70 |
| **Operating Profit Before Special Items** | **$2,277** | $1,919 | $1,818 |

**Industrial Packaging** net sales for 2018 increased 5% to $15.9 billion compared with $15.1 billion in 2017, and 12% compared with $14.2 billion in 2016. Operating profits before special items in 2018 were 19% higher than in 2017 and 25% higher than in 2016. Comparing 2018 with 2017, benefits from higher average sales price realizations, net of mix ($712 million), higher sales volumes ($33 million) and lower input costs ($2 million) were partially offset by higher operating costs ($333 million) and higher maintenance outage costs ($56 million).

*North American Industrial Packaging*

*In millions*

|  | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales (a)** | **$14,187** | $13,329 | $12,450 |
| **Operating Profit (Loss)** | **$2,292** | $1,504 | $1,757 |
| Litigation settlement recovery | **(5)** | — | — |
| Abandoned property removal | **20** | 14 | — |
| Kleen Products anti-trust settlement | **—** | 354 | — |
| **Operating Profit Before Special Items** | **$2,307** | $1,872 | $1,757 |

*(a) Includes intra-segment sales of $233 million for 2018, $172 million for 2017 and $143 million for 2016.*

**North American Industrial Packaging's** sales volumes increased in 2018 compared with 2017 reflecting higher box shipments, partially offset by lower shipments of containerboard to both the domestic and export markets. In 2018, the business took about 518,000 tons of maintenance downtime compared with about 416,000 tons of total downtime in 2017, of which about 35,000 were non-maintenance downtime and 381,000 were maintenance downtime. Average sales prices were significantly higher for boxes and for containerboard in export markets. Substantially lower input costs for recycled fiber were partially offset by higher costs for wood, energy, chemicals and freight. Planned maintenance downtime costs were $50 million higher in 2018, than in 2017. Operating costs increased due to inflation, distribution costs and weather-related production constraints in early 2018.

Looking ahead to the first quarter of 2019, compared with the fourth quarter of 2018, sales volumes for boxes are expected to be seasonally lower despite two more shipping days. Shipments of containerboard to export markets are also expected to decline, reflecting slowing market demand in China and EMEA. Based on pricing to date in the current quarter, average sales prices for boxes are expected to be flat, while average sales prices for export containerboard are expected to be lower. Input costs, primarily for wood and energy, are expected to be higher. Planned maintenance downtime spending should be about $102 million higher. Manufacturing operating costs will be negatively impacted by lower volume and inflation, while distribution costs are also expected to increase.

*In millions*

| EMEA Industrial Packaging | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$1,355** | $1,334 | $1,227 |
| **Operating Profit (Loss)** | **$(120)** | $6 | $15 |
| EMEA Packaging optimization | **47** | — | — |
| Holmen mill net bargain purchase gain | **—** | (6) | — |
| Turkey mill closure | **—** | — | 7 |
| **Operating Profit Before Special Items** | **$(73)** | $— | $22 |

**EMEA Industrial Packaging's** sales volumes in 2018 were lower than in 2017, reflecting weaker market demand for fruit and vegetable boxes in the Euro-zone and slowing economic conditions in Turkey. Average sales margins decreased slightly, as higher containerboard costs were only partially offset by higher sales prices for boxes. Input costs for energy were flat. Operating costs rose due to inflation and higher costs associated with the new plant in Tangier, Morocco. Earnings were also negatively impacted by the conversion and ramp-up of the Madrid mill.

Entering the first quarter of 2019, compared with the fourth quarter of 2018, sales volumes are expected to be seasonally higher. Average sales margins are expected

to reflect the full realization of box price increases and further board cost reductions. Operating costs will benefit from the continued integration of our Madrid mill. Earnings are expected to be favorably impacted by the increased production volumes of recycled containerboard at the Madrid mill.

*In millions*

| Brazilian Industrial Packaging | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$232** | $251 | $232 |
| **Operating Profit (Loss)** | **$(151)** | $(35) | $(43) |
| Brazil Packaging impairment | **122** | — | — |
| Brazil Packaging wood supply accelerated amortization | **—** | 10 | — |
| **Operating Profit Before Special Items** | **$(29)** | $(25) | $(43) |

**Brazilian Industrial Packaging's** sales volumes in 2018 increased, compared with 2017 for boxes, but this was offset by decreased containerboard shipments. Average sales margins improved reflecting higher sales prices, partially offset by an unfavorable mix. Input costs increased, primarily for recycled fiber, utilities and chemicals. Operating costs were negatively impacted by inflation, but benefited from lower overhead costs. Planned maintenance downtime costs were $1 million lower in 2018, compared with 2017. In addition, a nationwide truckers' strike during the second quarter negatively impacted operating profit by approximately $3 million.

Looking ahead to the first quarter of 2019, compared with the fourth quarter of 2018, sales volumes are expected to be higher, primarily for containerboard. Based on pricing to date in the current quarter, average sales margins are expected to improve. Input costs are expected to be lower for recycled fiber and freight, and operating costs will also be lower. In late 2018, the Company announced that it was exploring strategic options for its Brazil Packaging business.

*In millions*

| European Coated Paperboard | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$359** | $335 | $327 |
| **Operating Profit (Loss)** | **$72** | $72 | $93 |

**European Coated Paperboard's** sales volumes in 2018 compared with 2017, decreased in Europe, but were partially offset by an increase in Russia. Average sales margins were higher in both Russia and Europe, reflecting higher average sales prices and a more favorable mix. Input costs were higher mainly for wood and energy in both regions. Planned maintenance downtime costs were $6 million higher in 2018 than in 2017, primarily at the Kwidzyn mill.

Looking forward to the first quarter of 2019, compared with the fourth quarter of 2018, sales volumes are expected to be stable in both Europe and Russia.

Average sales margins are expected to be higher in Europe due to a more favorable mix. In Russia, average sales margins should be stable. Input costs are expected to be lower for purchased pulp, wood and energy. Maintenance outage costs should be flat due to no outages in the fourth quarter and no planned outages in the first quarter.

*In millions*

| Asian Industrial Packaging | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$—** | $— | $133 |
| **Operating Profit (Loss)** | **$—** | $— | $(81) |
| Asia Packaging restructuring and impairment | **—** | — | 70 |
| **Operating Profit Before Special Items** | **$—** | $— | $(11) |

On June 30, 2016, the Company completed the sale of its corrugated packaging business in China and Southeast Asia to Xiamen Bridge Hexing Equity Investment Partnership Enterprise. See Note 8 Divestitures and Impairments on pages 54 and 55 of Item 8. Financial Statements and Supplementary Data for further discussion of the sale of this business.

### Global Cellulose Fibers

Demand for Cellulose Fibers products is closely correlated with changes in demand for absorbent hygiene products and is further affected by changes in currency rates that can benefit or hurt producers in different geographic regions. Principal cost drivers include manufacturing efficiency, raw material and energy costs, mill outage costs, and freight costs.

*In millions*

| Global Cellulose Fibers | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$2,819** | $2,551 | $1,092 |
| **Operating Profit (Loss)** | **$251** | $65 | $(179) |
| Acquisition and integration costs | **—** | 33 | 31 |
| Abandoned property removal | **11** | 4 | — |
| Inventory fair value step-up amortization | **—** | 14 | 19 |
| **Operating Profit Before Special Items** | **$262** | $116 | $(129) |

**Global Cellulose Fibers** results include the net sales and operating profit associated with the pulp business acquired from Weyerhaeuser, from the date of acquisition on December 1, 2016. See Note 7 Acquisitions and Joint Ventures on pages 52 through 54 of Item 8. Financial Statements and Supplementary Data for additional information about the acquisition.

Net sales for 2018 increased to $2.8 billion, compared with $2.6 billion in 2017 and $1.1 billion in 2016. Operating profits before special items in 2018 were significantly higher than in both 2017 and 2016. Comparing 2018 with 2017, benefits from higher average sales price realizations and mix ($328 million) were

partially offset by lower sales volumes ($3 million), higher input costs ($41 million), higher planned maintenance downtime costs ($41 million) and higher operating costs ($97 million).

Sales volumes in 2018 were about flat with 2017. Sales prices increased across all product lines. Average sales margins also benefited from a favorable product mix reflecting an increase in sales of absorbent pulp. Input costs were higher, primarily for wood and chemicals. Planned maintenance downtime costs were $31 million higher in 2018. Operating costs increased due to higher distribution and inventory valuation costs. Hurricane Florence negatively impacted earnings by $38 million, net of insurance proceeds. In Europe and Russia, average sales prices increased significantly. Input costs were higher for wood, energy and chemicals. Planned maintenance downtime costs were $10 million higher in 2018 than in 2017, primarily at the Saillat mill.

Entering the first quarter of 2019, sales volumes will be lower due to production constraints resulting from planned maintenance outages, softer market demand in developing markets and customer destocking, as well as a temporary setback in fluff pulp volume resulting from poor execution of a mix improvement plan. Based on pricing to date in the current quarter, average sales prices are expected to decrease particularly fo softwood pulp in China. Input costs are expected to decrease for chemicals. Planned maintenance downtime costs should be $20 million higher than in the fourth quarter of 2018. Manufacturing operating costs are expected to rise due to lower volume, seasonality and inflation. In Europe and Russia, sales volumes are expected to be lower, while sales margins should be stable.

### Printing Papers

Demand for Printing Papers products is closely correlated with changes in commercial printing and advertising activity, direct mail volumes and, for uncoated cut-size products, with changes in white-collar employment levels that affect the usage of copy and laser printer paper. Principal cost drivers include manufacturing efficiency, raw material and energy costs, mill outage costs and freight costs.

*In millions*

| Printing Papers | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$4,375** | $4,157 | $4,058 |
| **Operating Profit (Loss)** | **$533** | $457 | $540 |
| Riverdale mill conversion | **9** | — | — |
| Abandoned property removal | **1** | 2 | — |
| **Operating Profit Before Special Items** | **$543** | $459 | $540 |

**Printing Papers** net sales for 2018 of $4.4 billion increased 5%, compared with $4.2 billion in 2017, and 8%, compared with $4.1 billion in 2016. Operating profits before special items in 2018 were 18% higher than in

2017 and 1% higher than in 2016. Comparing 2018 with 2017, benefits from higher average sales price realizations, net of mix ($309 million), were partially offset by lower sales volumes ($17 million), higher input costs ($141 million), higher planned maintenance downtime costs ($25 million) and higher operating costs ($42 million).

*In millions*

| North American Printing Papers | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$1,956** | $1,833 | $1,890 |
| **Operating Profit (Loss)** | **$160** | $132 | $236 |
| Riverdale mill conversion | **9** | — | — |
| Abandoned property removal | **1** | 2 | — |
| **Operating Profit Before Special Items** | **$170** | $134 | $236 |

**North American Printing Papers'** sales volumes for 2018 were lower than in 2017, primarily due to lower sales to export markets. Average sales margins improved due to sales price increases for both cutsize paper and rolls, net of an unfavorable mix. Input costs were higher for wood and chemicals. Planned maintenance downtime costs were $1 million higher in 2018. Operating costs were higher primarily due to inflation and distribution costs, and included $5 million, net of insurance recoveries, related to Hurricane Florence.

Entering the first quarter of 2019, sales volumes are expected to be lower due to capacity constraints resulting from planned maintenance outages. Average sales margins should be steady, reflecting the full-quarter impact of late-2018 sales price increases. Operating costs are expected to be higher due to seasonality and inflation. Input costs should be higher, primarily for wood and chemicals. Planned maintenance downtime costs will increase by about $3 million in the 2019 first quarter.

*In millions*

| Brazilian Papers | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales (a)** | **$978** | $972 | $897 |
| **Operating Profit (Loss)** | **$227** | $194 | $173 |

*(a) Includes intra-segment sales of $13 million for 2018, $24 million for 2017 and $5 million for 2016.*

**Brazilian Papers'** sales volumes for uncoated freesheet paper in 2018, were lower compared with 2017 in both the domestic and export markets. Average domestic and export sales prices were higher due to the realization of multiple price increases implemented in 2018. Raw material costs increased for pulp, chemicals and energy. Operating costs were negatively impacted by inflation and a nationwide truckers' strike in the second quarter. Planned maintenance downtime costs were $4 million higher in 2018.

Looking ahead to 2019, compared with the fourth quarter of 2018, sales volumes for uncoated freesheet paper in the first quarter are expected to be seasonally weaker in

the domestic market. Average sales margins are expected to decrease as price pressures in the Latin American export markets and an unfavorable mix more than offset the partial realization of announced domestic sales price increases. Input costs are expected to be stable. Maintenance outage costs should be flat due to no outages in the fourth quarter and no planned outages in the first quarter.

*In millions*

| European Papers | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$1,252** | $1,187 | $1,109 |
| **Operating Profit (Loss)** | **$129** | $136 | $142 |

**European Papers'** sales volumes for uncoated freesheet paper in 2018 were higher in Russia, but lower in Europe compared with 2017. Average sales prices increased for uncoated freesheet paper in both regions following price increases implemented in late 2017, and throughout 2018. Input costs were higher for wood, energy, purchased pulp and chemicals. Planned maintenance downtime costs were $20 million higher in 2018, than in 2017, primarily at the Saillat mill.

Entering 2019, sales volumes for uncoated freesheet paper in the first quarter are expected to increase in Europe, but decrease in Russia. Average sales prices are expected to be higher in Europe due to the continued realization of a fourth-quarter 2018 price increase, and higher in Russia. Input costs should be lower in Europe, mainly for wood and energy, but higher in Russia, primarily for wood and chemicals. Maintenance outage costs should be flat due to no outages in the fourth quarter and no planned outages in the first quarter.

*In millions*

| Indian Papers | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$202** | $189 | $167 |
| **Operating Profit (Loss)** | **$17** | $(5) | $(11) |

**Indian Papers'** sales volumes in 2018 were higher than in 2017 due to improved paper machine productivity. Average sales prices also increased. Input costs were higher for chemicals and recycled fiber, but were partially offset by lower wood costs. Operating costs were lower in 2018, reflecting improved mill performance efficiencies, while planned maintenance downtime costs were flat compared with 2017.

Looking ahead to the first quarter of 2019, sales volumes are expected to be slightly higher than in the 2018 fourth quarter. Based on pricing to date in the current quarter, average sales prices are expected to be stable.

### Equity Earnings, Net of Taxes – Ilim

International Paper accounts for its investment in Ilim , a separate reportable industry segment, using the equity method of accounting.

The Company recorded equity earnings, net of taxes, related to Ilim of $290 million in 2018, compared with earnings of $183 million in 2017, and $199 million in 2016. Operating results recorded in 2018 included an after-tax non-cash foreign exchange loss of $82 million, compared with an after-tax foreign exchange gain of $15 million in 2017 and an after-tax foreign exchange gain of $25 million in 2016, primarily on the remeasurement of Ilim's U.S. dollar denominated net debt.

Ilim delivered outstanding performance in 2018, driven largely by higher price realization and strong demand. Sales volumes for the joint venture increased year over year for shipments to China of softwood pulp and linerboard, but were offset by decreased sales of hardwood pulp to China. Sales volumes in the Russian market increased for softwood pulp and hardwood pulp, but decreased for linerboard. Average sales price realizations were significantly higher in 2018 for sales of softwood pulp, hardwood pulp and linerboard to China and other export markets. Average sales price realizations in Russian markets increased year over year for all products. Input costs were higher in 2018, primarily for wood, fuel and chemicals. Distribution costs were negatively impacted by tariffs and inflation. The Company received cash dividends from the joint venture of $128 million in 2018, $133 million in 2017 and $58 million in 2016.

Entering the first quarter of 2019, sales volumes are expected to be lower than in the fourth quarter of 2018, due to the seasonal slowdown in China and fewer trading days. Based on pricing to date in the current quarter, average sales prices are expected to decrease for hardwood pulp, softwood pulp and linerboard to China. Input costs are projected to be relatively flat, while distribution costs are expected to increase.

### Equity Earnings - GPIP

International Paper recorded equity earnings of $46 million on its 20.5% ownership position in GPIP in 2018. The Company received cash dividends from the investment of $25 million in 2018.

### LIQUIDITY AND CAPITAL RESOURCES

### Overview

A major factor in International Paper’s liquidity and capital resource planning is its generation of operating cash flow, which is highly sensitive to changes in the pricing and demand for our major products. While changes in key cash operating costs, such as energy, raw material, mill outage and transportation costs, do have an effect on operating cash generation, we believe that our focus on pricing and cost controls has improved our cash flow generation over an operating cycle.

Cash uses during 2018 were primarily focused on working capital requirements, capital spending, debt reductions and returning cash to shareholders through dividends and share repurchases under the Company's share repurchase program.

### Cash Provided by Operating Activities

Cash provided by operations, including discontinued operations, totaled $3.2 billion in 2018, compared with $1.8 billion for 2017, and $2.5 billion for 2016. Cash used by working capital components (accounts receivable, contract assets and inventory less accounts payable and accrued liabilities, interest payable and other) totaled $439 million in 2018, compared with cash used by working capital components of $402 million in 2017, and cash provided by working capital components of $71 million in 2016.

### Investment Activities

Including discontinued operations, investment activities in 2018 increased from 2017, as 2018 included higher capital spending. In 2016, investment activity included the purchase of Weyerhaeuser's pulp business for $2.2 billion in cash, the purchase of the Holmen business for $57 million in cash, net of cash acquired, and proceeds from the sale of the Asia Packaging business of $108 million, net of cash divested. The Company maintains an average capital spending target around depreciation and amortization levels, or modestly above, due to strategic plans over the course of an economic cycle. Capital spending was $1.6 billion in 2018, or 118% of depreciation and amortization, compared with $1.4 billion in 2017, or 98% of depreciation and amortization, and $1.3 billion, or 110% of depreciation and amortization in 2016. Across our segments, capital spending as a percentage of depreciation and amortization ranged from 69.8% to 132.1% in 2018.

The following table shows capital spending for operations by business segment for the years ended December 31, 2018, 2017 and 2016, excluding amounts related to discontinued operations of $111 million in 2017 and $107 million in 2016.

*In millions*

|  | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| Industrial Packaging | **$1,061** | $836 | $832 |
| Global Cellulose Fibers | **183** | 188 | 174 |
| Printing Papers | **303** | 235 | 215 |
| Subtotal | **1,547** | 1,259 | 1,221 |
| Corporate and other | **25** | 21 | 20 |
| **Capital Spending** | **$1,572** | $1,280 | $1,241 |

Capital expenditures in 2019 are currently expected to be about $1.4 billion, or 104% of depreciation and amortization, including approximately $400 million of strategic investments.

### Acquisitions and Joint Ventures

See Note 7 Acquisitions and Joint Ventures on pages 52 through 54 of Item 8. Financial Statements and Supplementary Data for a discussion of the Company's acquisitions.

### Financing Activities

Amounts related to early debt extinguishment during the years ended December 31, 2018, 2017 and 2016 were as follows:

*In millions*

|  | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| Debt reductions (a) | **$780** | $993 | $266 |
| Pre-tax early debt extinguishment costs (b) | **10** | 83 | 29 |

*(a) Reductions related to notes with interest rates ranging from 1.57% to 9.38% with original maturities from 2018 to 2032 for the years ended December 31, 2018, 2017 and 2016.*

*(b) Amounts are included in Restructuring and other charges in the accompanying consolidated statements of operations.*

**2018:** Financing activities during 2018 included debt issuances of $490 million and retirements of $1.0 billion for a net decrease of $518 million.

International Paper utilizes interest rate swaps to change the mix of fixed and variable rate debt and manage interest expense. At December 31, 2018, International Paper had interest rate swaps with a notional amount of $700 million and maturities ranging from 2024 to 2026 (see Note 16 Derivatives and Hedging Activities on pages 67 through 70 of Item 8. Financial Statements and Supplementary Data). During 2018, the inclusion of the offsetting interest income from short-term investments reduced the effective interest rate from 4.8% to 4.6%.

In June 2018, the borrowing capacity of the commercial paper program was increased from $750 million to $1.0 billion. Under the terms of the program, individual maturities on borrowings may vary, but may not exceed one year from the date of issuance. Interest bearing notes may be issued either as fixed notes or floating rate notes. As of December 31, 2018, 2017 and 2016, the Company had $465 million, $180 million and $165 million, respectively, outstanding under this program.

Other financing activities during 2018 included the net repurchase of approximately 12.3 million shares of treasury stock, including restricted stock tax withholding. Repurchases of common stock and payments of restricted stock withholding taxes totaled $732 million, including $700 million related to shares repurchased under the Company's share repurchase program. On October 9, 2018, the Company announced an authorization to repurchase $2 billion of the Company's common stock to supplement remaining amounts under prior share repurchase authorizations, bringing total

share repurchase authorizations since 2013 to $5.0 billion. The Company will continue to repurchase such shares in open market repurchase transactions. Under the $5.0 billion share repurchase program, the Company has repurchased 58.0 million shares at an average price of $47.68, for a total of approximately $2.8 billion, as of December 31, 2018.

In October 2018, International Paper announced that the quarterly dividend would be increased from $0.4750 per share to $0.50 per share, effective for the 2018 fourth quarter.

**2017:** Financing activities during 2017 included debt issuances of $1.9 billion and retirements of $1.4 billion for a net increase of $483 million.

At December 31, 2017, International Paper had no interest rate swap contracts outstanding. During 2017, the inclusion of the offsetting interest income from short-term investments reduced the effective interest rate from 5.0% to 4.7%.

In 2017, International Paper issued $1.0 billion of 4.35% senior unsecured notes with a maturity date in 2048. The proceeds from this offering, together with a combination of available cash and other borrowings, were used to make a $1.25 billion voluntary cash contribution to the Company's pension plan. In December 2017, International Paper received $660 million in cash proceeds from a new loan entered into by International Paper as part of the transfer of the North American Consumer Packaging business to a subsidiary of Graphic Packing Holding Company discussed in Note 8 Divestitures and Impairments on pages 54 and 55 of Item 8. Financial Statements and Supplementary Data). The Company used the cash proceeds, together with available cash, to pay down existing debt of approximately $900 million of notes with interest rates ranging from 1.92% to 9.38% and original maturities from 2018 to 2021. Pre-tax early debt retirement costs of $83 million related to the debt repayments, including $82 million of cash premiums, are included in Restructuring and other charges in the accompanying consolidated statement of operations for the year ended December 31, 2017. The $660 million term loan was subsequently assumed by a subsidiary of GPIP from International Paper on January 1, 2018, and was classified as Liabilities held for sale at December 31, 2017, in the accompanying consolidated balance sheet.

Other financing activities during 2017 included the net issuance of approximately 1.7 million shares of treasury stock, including restricted stock tax withholding. Payments of restricted stock withholding taxes and repurchases totaled $47 million.

In October 2017, International Paper announced that the quarterly dividend would be increased from $0.4625 per share to $0.4750 per share, effective for the 2017 fourth quarter.

**2016:** Financing activities during 2016 included debt issuances of $3.8 billion and retirements of $1.9 billion for a net increase of $1.9 billion.

At December 31, 2016, International Paper had no interest rate swap contracts outstanding. During 2016, the amortization of deferred gains on previously terminated swaps had no impact on the weighted average cost of long-term recourse debt. The inclusion of the offsetting interest income from short-term investments reduced the effective rate from 5.3% to 4.8%.

In 2016, International Paper issued $1.1 billion of 3.00% senior unsecured notes with a maturity date in 2027, and $1.2 billion of 4.40% senior unsecured notes with a maturity date in 2047, the proceeds from which were primarily used to fund the acquisition of Weyerhaeuser's pulp business. In addition, the Company repaid approximately $266 million of notes with an interest rate of 7.95% and an original maturity of 2018. Pre-tax early debt retirement costs of $29 million related to the debt repayments, including the $31 million of cash premiums, are included in restructuring and other charges in the accompanying consolidated statement of operations for the twelve months ended December 31, 2016.

In December 2016, International Paper entered into a new $1.5 billion contractually committed credit facility that expires in December 2021, and has a facility fee of 0.15% payable annually.

Other financing activities during 2016 included the net repurchase of approximately 0.9 million shares of treasury stock, including restricted stock tax withholding. Repurchases of common stock and payments of restricted stock withholding taxes totaled $132 million, including $100 million related to shares repurchased under the Company's share repurchase program.

In October 2016, International Paper announced that the quarterly dividend would be increased from $0.44 per share to $0.46 per share, effective for the 2016 fourth quarter.

#### Variable Interest Entities

Information concerning variable interest entities is set forth in Note 14 Variable Interest Entities on pages 65 and 66 of Item 8. Financial Statements and Supplementary Data.

### Liquidity and Capital Resources Outlook for 2019

#### Capital Expenditures and Long-Term Debt

International Paper expects to be able to meet projected capital expenditures, service existing debt and meet working capital and dividend requirements during 2019 with current cash balances and cash from operations. Additionally, the Company has existing credit facilities totaling $2.1 billion at December 31, 2018.

The Company will continue to rely upon 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. The Company was in compliance with all its debt covenants at December 31, 2018, and was well below the thresholds stipulated under the covenants as defined in our credit agreements.

Maintaining an investment grade credit rating is an important element of International Paper’s financing strategy. At December 31, 2018, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and Moody’s, respectively.

Contractual obligations for future payments under existing debt and lease commitments and purchase obligations at December 31, 2018, were as follows:

*In millions*

|  | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Debt maturities | $639 | $83 | $441 | $487 | $348 | $8,656 |
| Lease obligations | 160 | 125 | 77 | 49 | 28 | 118 |
| Purchase obligations (a) | 3,211 | 654 | 578 | 487 | 413 | 1,857 |
| Total (b) | $4,010 | $862 | $1,096 | $1,023 | $789 | $10,631 |

*(a) Includes $1.4 billion relating to fiber supply agreements entered into at the time of the 2006 Transformation Plan forestland sales and in conjunction with the 2008 acquisition of Weyerhaeuser Company’s Containerboard, Packaging and Recycling business. Also includes $1.1 billion relating to fiber supply agreements assumed in conjunction with the 2016 acquisition of Weyerhaeuser's pulp business.*

*(b) Not included in the above table due to the uncertainty of the amount and timing of the payment are unrecognized tax benefits of approximately $193 million. Also not included in the above table is $206 million of Deemed Repatriation Transition Tax associated with the 2017 Tax Cuts and Jobs Act which will be settled from 2019 - 2026.*

We consider the undistributed earnings of our foreign subsidiaries as of December 31, 2018, to be permanently reinvested and, accordingly, no U.S. income taxes have been provided thereon (see Note 12 Income Taxes on pages 58 through 62 of Item 8. Financial Statements and Supplementary Data). We do not anticipate the need to repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

#### Pension Obligations and Funding

At December 31, 2018, the projected benefit obligation for the Company’s U.S. defined benefit plans determined under U.S. GAAP was approximately $1.7 billion higher than the fair value of plan assets, excluding non-U.S. plans. Approximately $1.5 billion of this amount relates to plans that are subject to minimum funding requirements. Under current IRS funding rules, the calculation of minimum funding requirements differs from the calculation of the present value of plan benefits (the projected benefit obligation) for accounting purposes. In December 2008, the Worker, Retiree and Employer Recovery Act of 2008 (WERA) was passed by the U.S. Congress which provided for pension funding relief and technical corrections. Funding contributions depend on the funding method selected by the Company, and the timing of its implementation, as well as on actual demographic data and the targeted funding level. The Company continually reassesses the amount and timing of any discretionary contributions and elected to make contributions totaling $1.25 billion for the year ended December 31, 2017 and $750 million for the year ended December 31, 2016. No voluntary contributions were made in 2018. At this time, we do not expect to have any required contributions to our plans in 2019, although the Company may elect to make future voluntary contributions. The timing and amount of future contributions, which could be material, will depend on a number of factors, including the actual earnings and changes in values of plan assets and changes in interest rates.

During the fourth quarter of 2018, the Company entered into an agreement with The Prudential Insurance Company of America to purchase a group annuity contract and transfer approximately $1.6 billion of International Paper's U.S. qualified pension plan projected benefit obligations, subject to customary closing conditions. The transaction closed on October 2, 2018 and was funded with pension plan assets. Under the transaction, at the end of 2018, Prudential assumed responsibility for pension benefits and annuity administration for approximately 23,000 retirees or their beneficiaries receiving less than $1,000 in monthly benefit payments from the plan. Settlement accounting rules required a remeasurement of the qualified plan as of October 2, 2018 and the Company recognized a non-cash pension settlement charge of $424 million before tax in the fourth quarter of 2018.

During the fourth quarter of 2017, the Company entered into an agreement with The Prudential Insurance Company of America to purchase a group annuity

contract and transfer approximately $1.3 billion of International Paper's U.S. qualified pension plan projected benefit obligations. The transaction closed on October 3, 2017 and was funded with pension plan assets. Under the transaction, at the end of 2017, Prudential assumed responsibility for pension benefits and annuity administration for approximately 45,000 retirees or their beneficiaries receiving less than $450 in monthly benefit payments from the plan. Settlement accounting rules required a remeasurement of the qualified plan as of October 3, 2017 and the Company recognized a non-cash pension settlement charge of $376 million before tax in the fourth quarter of 2017. In addition, large payments from the non-qualified pension plan also required a remeasurement as of October 2, 2017 and a non-cash settlement charge of $7 million was also recognized in the fourth quarter of 2017.

During 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. The amount of total payments under this program was approximately $1.2 billion, and were made from Plan trust assets on June 30, 2016. Based on the level of payments made, settlement accounting rules applied and resulted in a plan remeasurement as of the June 30, 2016 payment date. As a result of settlement accounting, the Company recognized a pro-rata portion of the unamortized net actuarial loss, after remeasurement, resulting in a $439 million non-cash charge to the Company's earnings in the second quarter of 2016. Additional payments of $8 million and $9 million were made during the third and fourth quarters, respectively, due to mandatory cash payouts and a small lump sum payout, and the Pension Plan was subsequently remeasured at September 30, 2016 and December 31, 2016. As a result of settlement accounting, the Company recognized non-cash settlement charges of $3 million in both the third and fourth quarters of 2016.

#### Ilim Shareholder’s Agreement

In October 2007, in connection with the formation of the Ilim joint venture, International Paper entered into a shareholder’s agreement that includes provisions relating to the reconciliation of disputes among the partners. This agreement provides that at any time, either the Company or its partners may commence procedures specified under the deadlock agreement. If these or any other deadlock procedures under the shareholder's agreement 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. Based on the provisions of the agreement, the Company estimates that the current purchase price for its partners' 50% interests would be approximately $2.4 billion, which could be satisfied by payment of cash or International Paper common stock, or some combination of the two, at the Company's option. The purchase by the Company of its partners’ 50% interest in Ilim would result in the consolidation of Ilim's financial position and results of operations in all subsequent periods. The parties have informed each other that they have no current intention to commence procedures specified under the deadlock provisions of the shareholder’s agreement.

### 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 the accounting for contingencies, impairment or disposal of long-lived assets and goodwill, pensions and income taxes. The Company has discussed the selection of critical accounting policies and the effect of significant estimates with the Audit and Finance Committee of the Company’s Board of Directors.

### Contingent Liabilities

Accruals for contingent liabilities, including legal, and environmental matters, are recorded when it is probable that a liability has been incurred or an asset impaired and the amount of the loss can be reasonably estimated. Liabilities accrued for legal matters require judgments regarding projected outcomes and range of loss based on historical experience and recommendations of legal counsel. Liabilities for environmental matters require evaluations of relevant environmental regulations and estimates of future remediation alternatives and costs. The Company utilizes its in-house legal and environmental experts to develop estimates of its legal and environmental obligations, supplemented as needed by third-party specialists to analyze its most complex contingent liabilities.

We calculate our workers' compensation reserves based on estimated actuarially calculated development factors. The workers' compensation reserves are reviewed at least quarterly to determine the adequacy of the accruals and related financial statement disclosure. While we believe that our assumptions are appropriate, the ultimate settlement of workers' compensation reserves

may differ significantly from amounts we have accrued in our consolidated financial statements.

### Impairment of Long-Lived Assets and Goodwill

An impairment of a long-lived asset exists when the asset’s carrying amount exceeds its fair value, and is recorded when the carrying amount is not recoverable through cash flows from future operations or disposals. A goodwill impairment exists when the carrying amount of goodwill exceeds its fair value. Assessments of possible impairments of long-lived assets and goodwill are made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. Additionally, evaluation for possible impairment of goodwill and intangible asset balances is required annually. The amount and timing of any impairment charges based on these assessments may require the estimation of future cash flows or the fair market value of the related assets based on management’s best estimates of certain key factors, including future selling prices and volumes, operating, raw material, energy and freight costs, and various other projected operating economic factors and other intended uses of the assets. As these key factors change in future periods, the Company will update its impairment analysis to reflect its latest estimates and projections.

ASU 2011-08, "Intangibles - Goodwill and Other," allows entities testing goodwill for impairment the option of performing a qualitative (Step 0) assessment before calculating the fair value of a reporting unit for the goodwill impairment test. If a Step 0 assessment is performed, an entity is no longer required to calculate the fair value of a reporting unit unless the entity determines that, based on that Step 0 assessment, it is more likely than not that its fair value is less than its carrying value.

During 2018, a determination was made that the current carrying value of the long-lived assets of the Brazil Packaging business exceeded their estimated fair value due to a change in the outlook for the business. Management engaged a third party to assist with determining the fair value of the business and the fixed assets. The fair value of the business was calculated using a probability-weighted approach based on discounted future cash flows, market multiples, and transaction multiples and the fair value of the fixed assets was determined using a market approach. As a result, a pre-tax charge of $122 million ($81 million, net of tax) was recorded related to the impairment of an intangible asset and fixed assets.

The Company performed its annual testing of its reporting units for possible goodwill impairments by applying the qualitative Step 0 analysis to its reporting units as of October 1, 2018. For the current year evaluation, the Company assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units. The results of this assessment indicated that it is not more likely than not that the fair values of the Company's reporting units were less than the carrying values of the reporting units.

In addition, the Company considered whether there were any events or circumstances outside of the annual evaluation that would reduce the fair value of its reporting units below their carrying amounts and necessitate a goodwill impairment evaluation. In consideration of all relevant factors, there were no indicators that would require goodwill impairment subsequent to October 1, 2018.

No goodwill impairment charges were recorded in 2018, 2017 or 2016.

### Pension Benefit Obligations

The charges recorded for pension benefit obligations are determined annually in conjunction with International Paper’s consulting actuary, and are dependent upon various assumptions including the expected long-term rate of return on plan assets, discount rates, projected future compensation increases and mortality rates.

The calculations of pension obligations and expenses require decisions about a number of key assumptions that can significantly affect liability and expense amounts, including the expected long-term rate of return on plan assets and the discount rate used to calculate plan liabilities.

Benefit obligations and fair values of plan assets as of December 31, 2018, for International Paper’s pension plan were as follows:

*In millions*

|  | Benefit Obligation | Fair Value of Plan Assets |
| --- | ---: | ---: |
| U.S. qualified pension | **$10,124** | **$8,735** |
| U.S. nonqualified pension | **343** | **—** |
| Non-U.S. pension | **215** | **161** |

The table below shows assumptions used by International Paper to calculate U.S. pension obligations for the years shown:

|  | 2018 | 2017 | 2016 |
| --- | ---: | ---: | ---: |
| Discount rate | **4.30%** | 3.60% | 4.10% |
| Rate of compensation increase | **2.25%** | 3.75% | 3.75% |

International Paper determines these actuarial assumptions, after consultation with our actuaries, on December 31 of each year or more frequently if required, to calculate liability information as of that date and pension expense for the following year. 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. The discount rate assumption was determined based on a hypothetical

settlement portfolio selected from a universe of high quality corporate bonds.

The expected long-term rate of return on U.S. pension plan assets used to determine net periodic cost for the year ended December 31, 2018 was 7.50%.

Increasing (decreasing) the expected long-term rate of return on U.S. plan assets by an additional 0.25% would decrease (increase) 2019 pension expense by approximately $22 million, while a (decrease) increase of 0.25% in the discount rate would (increase) decrease pension expense by approximately $27 million.

Actual rates of return earned on U.S. pension plan assets for each of the last 10 years were:

| Year | Return | Year | Return |
| --- | ---: | --- | ---: |
| **2018** | **(3.0)%** | 2013 | 14.1% |
| 2017 | 19.3% | 2012 | 14.1% |
| 2016 | 7.1% | 2011 | 2.5% |
| 2015 | 1.3% | 2010 | 15.1% |
| 2014 | 6.4% | 2009 | 23.8% |

The 2012, 2013 and 2014 returns above represent weighted averages of International Paper and Temple-Inland asset returns. International Paper and Temple-Inland assets were combined in October 2014. The annualized time-weighted rate of return earned on U.S. pension plan assets was 6.0% and 9.8% for the past five and ten years, respectively. The following graph shows the growth of a $1,000 investment in International Paper’s U.S. Pension Plan Master Trust. The graph portrays the time-weighted rate of return from 2008 – 2018.

ASC 715, “Compensation – Retirement Benefits,” provides for delayed recognition of actuarial gains and losses, including amounts arising from changes in the estimated projected plan benefit obligation due to changes in the assumed discount rate, differences between the actual and expected return on plan assets, and other assumption changes. These net gains and losses are recognized in pension expense prospectively over a period that approximates the average remaining service period of active employees expected to receive benefits under the plans to the extent that they are not offset by gains and losses in subsequent years.

Net periodic pension plan expenses, calculated for all of International Paper’s plans, were as follows:

*In millions*

| Pension expense | 2018 | 2017 | 2016 | 2015 | 2014 |
| --- | ---: | ---: | ---: | ---: | ---: |
| U.S. plans | **$632** | $717 | $809 | $461 | $387 |
| Non-U.S. plans | **4** | 5 | 4 | 6 | — |
| **Net expense** | **$636** | $722 | $813 | $467 | $387 |

The decrease in 2018 pension expense primarily reflects lower interest cost on a lower 2018 projected benefit obligation along with the current year absence of a curtailment loss and special termination benefits associated with the North American Consumer Packaging transaction, partially offset by a higher settlement loss in the current year associated with the October 2018 annuity purchase transaction.

Assuming that discount rates, expected long-term returns on plan assets and rates of future compensation increases remain the same as of December 31, 2018, projected future net periodic pension plan expenses would be as follows:

*In millions*

| Pension expense | 2020 | 2019 |
| --- | ---: | ---: |
| U.S. plans | $88 | $103 |
| Non-U.S. plans | 4 | 4 |
| **Net expense** | $92 | $107 |

The Company estimates that it will record net pension expense of approximately $103 million for its U.S. defined benefit plans in 2019, compared to expense of $632 million in 2018. The 2018 expense includes $424 million of settlement accounting charges. Excluding these settlement charges, the estimated decrease in net pension expense in 2019 is primarily due to lower amortization of actuarial losses and lower service cost partially offset by lower asset returns due to the annuity purchase and a decrease in the expected long-term return on asset assumption from 7.50% in 2018 to 7.25% in 2019.

The market value of plan assets for International Paper’s U.S. qualified pension plan at December 31, 2018 totaled approximately $8.7 billion, consisting of approximately 32% equity securities, 51% debt securities, 11% real estate funds and 6% other assets.

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 plan, tax deductibility, the cash flows generated by the Company, and other factors. The Company continually reassesses the amount and timing of any discretionary contributions and

could elect to make voluntary contributions in the future. There are no required contributions to the U.S. qualified plan in 2019. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled $29 million for the year ended December 31, 2018.

### Income Taxes

International Paper records its global tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where the Company believes that a tax position is supportable for income tax purposes, the item is included in its income tax returns. Where treatment of a position is uncertain, liabilities are recorded based upon the Company’s evaluation of the “more likely than not” outcome considering technical merits of the position based on specific tax regulations and facts of each matter. Changes to recorded liabilities are only made when an identifiable event occurs that changes the likely outcome, such as settlement with the relevant tax authority, the expiration of statutes of limitation for the subject tax year, change in tax laws, or recent court cases that are relevant to the matter.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax assets. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies.

While International Paper believes that these judgments and estimates are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts.

### RECENT ACCOUNTING DEVELOPMENTS

See Note 2 Recent Accounting Developments on pages 47 and 48 of Item 8. Financial Statements and Supplementary Data for a discussion of new accounting pronouncements.

### LEGAL PROCEEDINGS

Information concerning the Company’s environmental and legal proceedings is set forth in Note 13 Commitments and Contingent Liabilities on pages 62 through 65 of Item 8. Financial Statements and Supplementary Data.

### EFFECT OF INFLATION

While inflationary increases in certain input costs, such as energy, wood fiber and chemical costs, have an impact on the Company’s operating results, changes in general inflation have had minimal impact on our operating results in each of the last three years. Sales prices and volumes are more strongly influenced by economic supply and demand factors in specific markets and by exchange rate fluctuations than by inflationary factors.

### FOREIGN CURRENCY EFFECTS

International Paper has operations in a number of countries. Its operations in those countries also export to, and compete with, imports from other regions. As such, currency movements can have a number of direct and indirect impacts on the Company’s financial statements. Direct impacts include the translation of international operations’ local currency financial statements into U.S. dollars and the remeasurement impact associated with non-functional currency financial assets and liabilities. Indirect impacts include the change in competitiveness of imports into, and exports out of, the United States (and the impact on local currency pricing of products that are traded internationally). In general, a weaker U.S. dollar and stronger local currency is beneficial to International Paper. The currencies that have the most impact are the Euro, the Brazilian real, the Polish zloty and the Russian ruble.

### MARKET RISK

We use financial instruments, including fixed and variable rate debt, to finance operations, for capital spending programs and for general corporate purposes. Additionally, financial instruments, including various derivative contracts, are used to hedge exposures to interest rate, commodity and foreign currency risks. We do not use financial instruments for trading purposes. Information related to International Paper’s debt obligations is included in Note 15 Debt and Lines of Credit on pages 66 and 67 of Item 8. Financial Statements and Supplementary Data. A discussion of derivatives and hedging activities is included in Note 16 Derivatives and Hedging Activities on pages 67 through 70 of Item 8. Financial Statements and Supplementary Data.

The fair value of our debt and financial instruments varies due to changes in market interest and foreign currency rates and commodity prices since the inception of the related instruments. We assess this market risk utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and currency rates and commodity prices.

### Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to short- and long-term debt obligations and investments in marketable securities. We invest in

investment-grade securities of financial institutions and money market mutual funds with a minimum rating of AAA and limit exposure to any one issuer or fund. Our investments in marketable securities at December 31, 2018 and 2017 are stated at cost, which approximates market due to their short-term nature. Our interest rate risk exposure related to these investments was not material.

We issue fixed and floating rate debt in a proportion that management deems appropriate based on current and projected market conditions. Derivative instruments, such as, interest rate swaps, may be used to execute this strategy. At December 31, 2018 and 2017, the fair value of the net liability of financial instruments with exposure to interest rate risk was approximately $9.2 billion and $11.1 billion, respectively. The potential decline in fair value resulting from a 10% adverse shift in quoted interest rates would have been approximately $538 million and $679 million at December 31, 2018 and 2017, respectively.

### Commodity Price Risk

The objective of our commodity exposure management is to minimize volatility in earnings due to large fluctuations in the price of commodities. Commodity swap or forward purchase contracts may be used to manage risks associated with market fluctuations in energy prices.

### Foreign Currency Risk

International Paper transacts business in many currencies and is also subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries. Our objective in managing the associated foreign currency risks is to minimize the effect of adverse exchange rate fluctuations on our after-tax cash flows. We address these risks on a limited basis by entering into cross-currency and interest rate swaps, or foreign exchange contracts. At December 31, 2018 and 2017, the net fair value of financial instruments with exposure to foreign currency risk was approximately a $8 million liability and a $10 million asset, respectively.

The potential loss in fair value for such financial instruments from a 10% adverse change in quoted foreign currency exchange rates would have been approximately $29 million at both December 31, 2018 and 2017.

## Market risk

As filed, 154 characters.

See the preceding discussion and Note 16 Derivatives and Hedging Activities on pages 67 through 70 of Item 8. Financial Statements and Supplementary Data.

## Controls and procedures

As filed, 866 characters.

As of December 31, 2018, an evaluation was carried out under the supervision and with the participation of the Company’s management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures and internal control over financial reporting. Based upon this evaluation, our principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2018.

### CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Feb 20, 2019.
Source: SEC EDGAR, the filing index for accession 0000051434-19-000007. Last ingested by Listed: Nov 4, 2026, 18:37 ET. No prices; not investment advice.