Third Quarter 2012 Earnings | October 25, 2012
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012 2
Forward-Looking Statements
Certain statements in these slides and made during this presentation may be considered forward-
looking statements. These statements reflect management's current views and 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 increases in interest rates; (ii) industry conditions, including but
not limited to changes in the cost or availability of raw materials, energy and transportation costs,
competition we face, cyclicality and changes in consumer preferences, demand and pricing for our
products; (iii) global economic conditions and political changes, including but not limited to the
impairment of financial institutions, changes in currency exchange rates, credit ratings issued by
recognized credit rating organizations, the amount of our future pension funding obligation, changes
in tax laws and pension and health care costs; (iv) unanticipated expenditures related to the cost of
compliance with existing and new environmental and other governmental regulations and to actual or
potential litigation; (v) whether we experience a material disruption at one of our manufacturing
facilities; (vi) risks inherent in conducting business through a joint venture; (vii) the failure to realize
synergies and cost savings from the Temple-Inland Inc. (“Temple-Inland”) transaction or delay in
realization thereof; and (viii) our ability to achieve the benefits we expect from all other strategic
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 in our Securities and Exchange Commission filings. We undertake no obligation to publicly
update any forward-looking statements, whether as a result of new information, future events or
otherwise.
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Statements Relating to Non-GAAP Financial Measures
During the course of this presentation, certain non-U.S. GAAP financial information
will be presented.
A reconciliation of those numbers to U.S. GAAP financial measures is available on
the company’s website at internationalpaper.com under Investors.
3
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Ilim JV Information
All financial information and statistical measures regarding our 50/50 Ilim joint
venture in Russia (“Ilim”), other than historical International Paper Equity Earnings
and dividends received by International Paper, have been prepared by the
management of Ilim. International Paper has not verified or audited any of this
information. Ilim management has indicated that the financial information was
prepared in accordance with International Financial Reporting Standards and
extracted from Ilim’s financial statements. Any projected financial information and
statistical measures reflect the current views of Ilim management and are subject to
risks and uncertainties that could cause actual results to differ materially from those
expressed or implied by such projections. See “Forward-Looking Statements.”
4
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
$977 $878
$976
3Q11 2Q12 3Q12
EBITDA ($MM)
Excellent cash generation
Increased dividend 14% and reduced balance
sheet debt by $800MM
Implemented containerboard price increase
Achieved $300MM run rate in TIN synergies
Continued successful ramp-up and qualification of
Franklin fluff pulp
Start-up of Sun JV paper machine
Lower mill maintenance outages
Higher quarter over quarter market-related
downtime in N.A. packaging businesses
Loss of $33MM in earnings associated with
containerboard mill divestiture
Inputs largely balanced, OCC favorable
Earnings from continuing operations before special items
5
Third Quarter 2012 Results | Strong Results in a Challenging Global Environment
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
3Q12 Financial Snapshot
3Q11 2Q12 3Q12
Sales ($B) $6.6 $7.1 $7.0
EBITDA1
Margin 14.7% 12.4% 13.9%
Cash From Operations ($MM)
$876 $6822 $863
EPS $0.81 $0.46 $0.75
1 Earnings from continuing operations before special items 2 Cash provided by continuing operations, excludes $44MM TIN pension plan contribution and $140MM received from unwinding a timber monetization
6
$6.6
$7.1 $7.0
3Q11 2Q12 3Q12
Sales ($B)
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Balance Sheet | Debt Coverage
7
1Q12 2Q12 3Q12
$ B
illio
n
$2.71 Pension
Gap
3.8x
$2.71 Pension
Gap
3.7x
$11.6 Balance
Sheet
Debt
$11.3 Balance
Sheet
Debt
$1.2 Op. Lease Adj. $1.2 Op. Lease Adj.
$10.5 Balance
Sheet
Debt
$1.2 Op. Lease Adj..
$2.71 Pension
Gap
3.5x
[3.1x]2 [3.0x]2
Adjusted Debt reflects gross balance sheet debt plus pension gap and operating lease adjustment (Moody’s Methodology)
EBITDA based on 2012 Adjusted First Call EBITDA of $4.1B (Moody’s Methodology) 1 IP pension gap as of 12/31/2011; Temple-Inland pension gap as of 2/13/2012 2 Balance Sheet Debt / 2012 First Call EBITDA of $3.7B
Moody’s Target: Adjusted Debt < 3X Adjusted EBITDA
Significant year-to-date balance
sheet debt reduction - $800MM
in 3Q12
Since Temple-Inland acquisition,
through end of 3Q12, paid down
$1.5B of debt
On track to meet debt reduction
target by year-end 2013
[2.8x]2
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
.46
.75
(.05)
(.02) (.05)
.03
.22 .01 .01 .01
.13
2Q12 Volume & Market
Downtime
Price / Mix Divested Mills
Operations & Costs
Maintenance Outages
Input Costs Interest Tax Ilim JV 3Q12
3Q12 vs. 2Q12 EPS
Earnings from continuing operations before special items
8
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
North American Downtime | Market-Related Downtime up 192M tons vs. 2Q
51 114
23 39
129 94
19
79
93
21
52
214 78 143 300
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
Maintenance Vicksburg Flood Market
17 20
5 15 18
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
1 17 27
18 6
15
23
15
18 53
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
59
29 25 15
45
14
52
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
2
Containerboard1 Uncoated Papers
Market Pulp Coated Paperboard
144
50
214
253
75
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Thousand T
ons
207
1 1Q12 - 3Q12 include Temple-Inland mills
237
36
9
319
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
($14)
$0
$3
$18
Energy Freight Chemicals Fiber
North America Outside North America
$25
($21)
$3
Industrial Packaging
Printing Papers
Consumer Packaging
Wood Energy Chemicals Freight OCC
By Business By Input Type
10
Global Input Costs vs. 2Q12 | $7MM Favorable, or $0.01/Share
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Industrial Packaging | 3Q12 vs. 2Q12
Earnings from continuing operations before special items
11 Earnings Presentation
367
342
(5) (44)
(33)
(35) 52
25 15
2Q12 Price & Mix Volume & Market
Downtime
Divested Mills Operations & Costs
Maintenance Outages
Input Costs
TIN Synergies 3Q12
$ M
illio
n
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
N.A. Industrial Packaging Relative EBITDA Margins
IP EBITDA margins based on North American Industrial Packaging operating profit before special items
Competitor EBITDA margin estimates obtained from public filings and IP analysis
Excludes the Recycling business and revenue from trade volumes
20.9%
16.9%
19.4%
17.7% 19.3%
18.6%
IP Competitor A
3Q11 2Q12 3Q12
12
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Temple-Inland Integration | More Synergies, Faster
13
300 300
400
0
100
200
300
400
500
September 2012
Year End 2013
Synergy Run Rate Ramp
Current Trajectory Original Plan
$M
M
Upside
February
2012
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Temple-Inland Integration | More Synergies, Faster
Synergy Category Description
Current
Outlook
($MM)
3Q12
Run Rate
Annualized
S G & A Eliminate Duplication $115 ~80%
Achieved
Containerboard Mills / Supply
Chain
Grade / Machine Mix
Optimization
Efficiency Improvements
Logistics Optimization
$90 ~55%
Achieved
Box Plants
Efficiency Improvements
(Waste, Freight)
System Streamlining
Customer and Segment
Optimization
$150 ~85%
Achieved
Sourcing Purchasing Consolidation $45 ~75%
Achieved
Synergy Target $400 ~$300
14
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
63
67 (2) (7)
(2)
1
11 3
2Q12 Price & Mix Volume & Market
Downtime
Operations & Costs
Maintenance Outages
Input Costs
Other 3Q12
Consumer Packaging| 3Q12 vs. 2Q12 $
Mill
ion
Earnings from continuing operations before special items
15 Earnings Presentation
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
N.A. Consumer Packaging Relative EBITDA Margins
IP EBITDA margins based on North American Consumer Packaging operating profit before special items.
Competitor adjusted EBITDA margins obtained from public filings and IP analysis; reflects Food & Beverage segment
18.8%
14.3% 15.3%
13.8%
17.7%
14.1%
IP Competitor A
3Q11 2Q12 3Q12
16
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
IP-Sun JV | Coated Paperboard Capital Expansion
17 Earnings Presentation
PM26 Start-up on Sept. 19
Sheet on reel two months ahead of
plan
333 construction days
Machine tuning in progress
Start-up costs in 3Q
Incremental ramp-up costs in 4Q
~$300 MM investment
550M tons of annual capacity
IP-Sun JV,
Yanzhou
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Printing Papers & Pulp | 3Q12 vs. 2Q12
Earnings from continuing operations before special items
18 Earnings Presentation
106
201
(1)
(21)
(3)
14
28
78
2Q12 Price & Mix Volume Operations & Costs
Maintenance Outages
Input Costs
Other 3Q12
$ M
illio
n
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Printing Papers & Pulp | Global volume up 5% year to date
19 Earnings Presentation
N.A.
Papers
N.A.
Pulp
Europe
/Russia Brazil India
Volume
Change
ytd1
(3%) Domestic
14% 5%
13% Domestic
8%2
68% Export
(2%) Export
1 9M11 vs. 9M12 2 2011 provided by APPM
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
N.A. Printing Papers & Pulp | IP Customer Fluff Pulp Demand Ahead of Plan
20
0
100
200
300
400
2012 2013 2014 2015
Current Projection Original Plan
Franklin Incremental Fluff Pulp Sales
M s
ho
rt t
on
s
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Distribution | 3Q12 vs. 2Q12
$ Million 3Q11 2Q12 3Q12
Sales $1,710 $1,500 $1,535
Earnings $27 $17 $24
Daily Sales Change vs. 3Q11 vs. 2Q12
Printing (12%) 8%
Packaging (2%) 5%
Facility Solutions (3%) 1%
Quarter over quarter volume improvement, particularly in
Printing and Packaging
Decline in commercial print margins; Packaging and Facility
Solutions margins up
Earnings from continuing operations before special items
21 xpedx
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Ilim Joint Venture | 3Q12 vs. 2Q12
$ Million 3Q11 2Q12 3Q12
Sales Volume (M Tons) 652 672 644
Sales $580 $513 $471
Operational EBITDA1 $141 $81 $77
F/X (Impact of USD Debt2) ($85) ($100) $49
EBITDA $56 ($19) $126
IP Equity Earnings3 $1 ($25) $33
Ilim JV results are on an IFRS basis with the exception of IP Equity Earnings which is USGAAP 1 Before F/X impact 2 3Q12 Ilim JV USD-denominated debt balance of ~$1B; Ilim Group’s functional currency is the Ruble (RUR); Non-functional-denominated currency balances are
measured monthly using the month-end exchange rate
3 IP Equity Earnings for 3Q11 & 2Q12 include an after-tax f/x loss of $34MM and $41MM, respectively; 3Q12 earnings include an after-tax f/x gain of $21MM
22
Weaker export pricing, partially offset by domestic seasonality
Solid operations and forestry performance
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
3Q12 Financial Summary
Excellent cash generation
Continued good progress with Temple-Inland integration
Achieved initial synergy target in less than one year
Building Products sale process proceeding well
Signed settlement agreement related to Guaranty Bank litigation
Implemented containerboard price increase
Seasonally lower maintenance outages
Favorable currency impact at Ilim JV
Higher market-related downtime in N.A. packaging businesses
Loss of earnings associated with three divested containerboard mills
Non-cash LIFO inventory valuation adjustment and Temple-Inland purchase accounting true-ups
23
Earnings Presentation | Third Quarter 2012 24
North America EMEA Brazil Asia
Volume Paper Stable Stable Seasonal Increase Stable
Packaging Seasonal Decrease Seasonal Increase Stable
Pricing / Mix Paper Export Price/Mix Stable
Seasonal Mix
Improvement Stable
Packaging Increase Stable Stable
Operations & Other
Paper Stable Stable Stable Stable
Packaging TIN Purchase
Acct. True-Up1 Stable
Sun JV PM Ramp-up Costs
Inputs & Freight
Paper Higher Wood &
Energy Stable Stable Stable
Packaging Higher Fiber &
Energy Stable Stable
Mill Maintenance Outages
Paper Increase
$35MM
Decrease $16MM
Decrease $2MM
None Scheduled
Packaging Increase
$65MM None Scheduled
Distribution Stable
ILIM JV Currency Impact1
Fourth Quarter Outlook | Changes from 3Q12
1 Impact of non-repeating item
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012 25
4Q & 2013 Outlook | Momentum Continues in Challenging Global Environment
U.S. and global demand
More of the same
Earnings runway drivers ramp-up
NA Industrial Packaging trajectory
Franklin Fluff Pulp
IP-Sun JV PM26
Brazil Biomass Boiler
Ilim JV build-out
India optimization
Input cost inflation – fiber & energy
Higher non-cash pension expense
Excellent cash generation
Continued balance sheet debt
reduction
Seasonally weaker volumes in North
America offset by Europe and Brazil
North America box price increase
realization – 4Q exit rate near 100%
Continued weak pricing in pulp and
export papers markets
Seasonally higher consumption and
input costs
Higher scheduled maintenance
outages of $82MM
Incremental ramp-up costs
associated with IP-Sun JV
4Q12 Outlook 2013 Outlook
Earnings Presentation | Third Quarter 2012
IP’s Balanced Use of Cash | Increasing Shareholder Value
26
Return Cash to Shareowners
14% Dividend Increase to $1.20/share
Debt Reduction
$1.5B Balance Sheet Debt Repayment
Selective Reinvestment
Temple-Inland
Olmuksa – Turkey
Grupo Orsa – Brazil
Free Cash Flow
Corrugated
Packaging
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
IP Latin America | Strengthening our Position in Brazil
27
Strategic Entry into Corrugated Packaging
Uncoated Freesheet Paper
Machine Option Extension
IP and Grupo Orsa have agreed to form a corrugated packaging business in Brazil, expanding IP’s leading global platform within Latin America
Grupo Orsa’s industrial packaging assets, including three mills and four box plants, will be separated from its pulp and forestry businesses and transferred to the new company
IP will hold a 75% stake, valued at approximately US$470MM
Expect to complete the transaction in the first quarter 2013
IP and Fibria have agreed to extend IP’s option to build a second uncoated freesheet paper machine at the Tres Lagoas mill site
The new agreement gives IP the option to start a second paper machine between 2016 and 2018, which better matches incremental capacity with our customers’ demand
Investment would add 250M tons and reinforce IP’s leadership in Latin America
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Brazil Corrugated Packaging | Strategic Rationale
28
Growing Market
Core IP Business
Attractive acquisition, optimization
and build-out opportunities
Good Margins
Attractive Returns
IP Management in Place
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012 29
7.2 8.7
19.6
29.1
36.6
Brazil China France Japan U.S.
16.0
26.0
54.0
63.0
77.0
Brazil China Germany Italy U.S.
2011 Per Capita Consumption (Kg per person per year)
Uncoated Freesheet Corrugated Boxes
Brazil Packaging & Paper | Attractive Growth Potential
Source: IP Analysis, Santander, Census, McKinsey Global Institute
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Brazil Packaging & Paper | Attractive Growth Potential
30
3.9
1.4
4.9
1.7
0
2
4
6
Containerboard Uncoated Freesheet
Mil
lio
n M
etr
ic T
on
s
2011 2017
1
RISI Forecast of Brazilian Demand Growth
3.6% CAGR 3.4% CAGR
1 Includes Sack Kraft
Source: RISI
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Grupo Orsa | Company at a Glance
31
Paulinia Mill
Manaus Box Plant
Box plant
Mill
Rio Verde Box Plant
Paulinia Box Plant Suzano Box Plant Franco da Rocha Mill
Nova Campina Mill
2011 Sales of US$380 Million1
2011 EBITDA of US$76 Million1
365 Thousand Tons of
Containerboard Capacity
Three Containerboard Mills
Four Box Plants
Corrugated Supply Position ~9%
Sustainable Fiber Supply
1 Financials provided by seller
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Grupo Orsa | Purchase Overview
32
All figures translated at $ = 2.03 R$
Enterprise Value ($MM) R$1270 / ~US$625
Deal Structure IP investment in with current owner on a 75/25 basis
Purchase Price ($MM) R$952 / ~US$470
Financing ~50% cash on hand in Brazil; remainder financed locally
EBITDA Multiple (2011) 8.2x
IRR 18%
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012 33
Grupo Orsa | Strategic Assessment
Creates Shareholder Value R
Consistent with Strategy R
Strengthens IP’s Portfolio R
Better than Cost of Capital Returns R
Greater Cash Flow Generation R
Quality Assets in High Demand Growth Market R
Attractive Optimization Opportunities R
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Appendix Investor Relations Contacts
Glenn R. Landau 901-419-1731
Michele Vargas 901-419-7287
Media Contact
Tom Ryan 901-419-4333
34
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Guaranty Bank | Settlement Agreement Update
35 Earnings Presentation
We have reached a settlement with the Liquidation Trustee for the estate of
Guaranty Financial Group Inc. (“GFG”) and the Federal Deposit Insurance
Corporation (“FDIC”) to resolve liability associated with the spin-off and
subsequent failure of GFG and its subsidiary Guaranty Bank
The settlement agreement is conditioned upon and subject to bankruptcy court
approval
In exchange for this full release from liability, we have agreed to make $80 million
in payments; this amount was previously reserved in anticipation of this
agreement
The agreement protects our tax position and tax assets
We are seeking to recover a portion of the settlement amount from insurers
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Key Financial Statistics
$ Million (Except as noted)
2010 2011 2012 Estimate
Capital Spending $775 $1.2 B ~ $1.5 B
Depreciation &
Amortization $1.5 B $1.3 B ~ $1.5 B
Net Interest Expense $608 $541 ~ $680
Corporate Items $226 $145 ~$210
Effective Tax Rate 30% 32% ~ 32%
Before special items and excluding Ilim
36
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
$ Million 3Q11 2Q12 3Q12
Cash Provided by Continuing Operations
$876 $6821 $863
Less Capital Investment ($315) ($420) ($296)
Free Cash Flow $561 $262 $567
1 Excludes $44 MM cash paid for Temple-Inland pension plan contribution and $140 MM cash received from unwinding a timber monetization
Free Cash Flow
37
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Capital Investment | 9M12 vs. 9M11
38
726
1,001
71 84
80 18 22
9M11 Sun JV PM #26 Franklin Mill TIN Brazil Biomass Boiler
EMEA Box Plants 9M12
$ M
illio
n
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Maintenance Outages Expenses | 2012
$ Million 1Q12 2Q12 3Q12 4Q12E 2012E
Industrial Packaging $67 $63 $11 $63 $204
Printing Papers Total $27 $102 $23 $45 $197
North America 27 60 5 40 132
Europe 0 33 11 0 44
Brazil 0 1 7 5 13
India 0 8 0 0 8
Consumer Packaging $0 $21 $11 $19 $51
North America 0 18 6 19 43
Europe 0 3 5 0 8
Total Impact $94 $186 $45 $127 $452
39
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Special Items Pre-Tax ($Million) 3Q11 2Q12 3Q12
Industrial Packaging
Acquisition and Integration Costs ($8) ($35) ($58)
Mill Divestiture Costs ($71) ($19)
European Packaging Restructuring ($16)
Other ($1) $6
Printing Papers
Facility Closure Costs $1
Other ($2) $1
Consumer Packaging
Fixed Asset Impairment or Adjustment ($82)
Shorewood Sale Adjustments ($6)
Reorganization $1
xpedx Reorganization ($18) ($12) ($9)
Corporate
Debt Extinguishment ($10) ($13)
Acquisition Costs ($16)
Restructuring & Other ($9) $1 ($2)
Total Special Items Before Tax & Noncontrolling Interest ($131) ($136) ($110)
40
Special Items Before Tax & Noncontrolling Interest | Continuing Operations
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Special Items Net of Taxes
2Q12 3Q12
$ Million EPS $ Million EPS
Earnings Before Special Items $203 $0.46 $330 $0.75
Special Items Net of Taxes:
Tax Items ($3)
Debt Extinguishment Costs ($6) ($8)
Shorewood Sale Adjustments ($4)
Acquisition and Integration Costs ($24) ($33)
Mill Divestiture Costs ($43) ($49)
Reorganization ($8) ($16)
Other $2
Total Special Items Net of Taxes ($85) ($0.19) ($107) ($0.24)
Discontinued Operations Net of Taxes $16 $0.04 $14 $0.03
Net Earnings $134 $0.31 $237 $0.54
41
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Operating Profit $ Million
D & A $ Million
Tons Thousand
EBITDA per Ton
EBITDA Margin
Industrial Packaging
North America1 328 188 3,535 146 19%
Printing Papers & Pulp
N.A. Papers2 110 45 698 222 22%
Europe 51 17 326 209 20%
Brazil 45 31 290 262 27%
India (3) 9 59 102 13%
N.A. Pulp (3) 13 311 32 5%
Consumer Packaging
North America3 45 39 378 222 18%
Europe 21 5 93 280 27%
Earnings from continuing operations before special items 1 Excludes Recycling business and revenue from trade volumes; includes Saturating Kraft & Bag business 2 Includes Bleached Kraft business 3 Includes Foodservice business
42
3Q12 EBITDA | Integrated Mill Business Margins
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Operating Profits by Industry Segment | Continuing Operations
$ Million 3Q11 2Q12 3Q12
Industrial Packaging $301 $367 $342
Printing Papers $238 $106 $201
Consumer Packaging $103 $63 $67
Distribution $27 $17 $24
Operating Profit $669 $553 $634
Net Interest Expense ($130) ($172) ($163)
Noncontrolling Interest / Equity Earnings Adjustment $7 $4 $0
Corporate Items ($34) ($45) ($41)
Special Items ($131) ($136) ($110)
Earnings from continuing operations before income taxes, equity earnings & noncontrolling interest $381 $204 $320
Equity Earnings, net of taxes - Ilim $1 ($25) $33
43
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Geographic Business Segment Operating Results | Before Special Items
$ Million Sales Operating Profit
3Q11 2Q12 3Q12 3Q11 2Q12 3Q12
Industrial Packaging
North America $2,210 $3,035 $2,935 $291 $354 $328
Europe $275 $255 $230 $9 $12 $12
Asia $175 $160 $170 $1 $1 $2
Printing Papers
North American $705 $670 $695 $127 $69 $110
Europe $350 $335 $345 $48 $20 $51
Brazil $290 $285 $280 $37 $51 $45
Asia / India $20 $60 $70 - ($8) ($2)
N.A. Pulp $185 $160 $190 $26 ($26) ($3)
Consumer Packaging
North America $640 $495 $475 $76 $37 $45
Europe $90 $90 $95 $19 $21 $21
Asia (Sun JV) $225 $195 $195 $8 $5 $1
xpedx $1,710 $1,500 $1,535 $27 $17 $24
Does not reflect total company sales and operating profit
44
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
1 Assuming dilution 2 A reconciliation to GAAP EPS is available at www.internationalpaper.com under the Investors tab at Webcasts and Presentations
2012 Earnings from Continuing Operations
Pre-Tax $MM
Tax $MM
Non-controlling
Interest $MM
Equity Earnings
Net Income
$MM
Estimated Tax Rate
Average Shares1
MM
Diluted EPS2
Before Special Items
1Q12 $305 ($98) ($4) $44 $247 32% 439 0.57
2Q12 $340 ($108) ($3) ($26) $203 32% 438 0.46
3Q12 $430 ($133) ($1) $34 $330 31% 440 0.75
Special Items
1Q12 ($92) $28 $0 $0 ($64) 30% 439 (0.15)
2Q12 ($136) $51 $0 $0 ($85) 38% 438 (0.19)
3Q12 ($110) $3 $0 $0 ($107) 2% 440 (0.24)
Earnings
1Q12 $213 ($70) ($4) $44 $183 33% 439 0.42
2Q12 $204 ($57) ($3) ($26) $118 28% 438 0.27
3Q12 $320 ($130) ($1) $34 $223 41% 440 0.51
45
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
.60
.53
.28
.05
.14 .12 .12
.32 .33
.14
.24 .23
.12
.43 .43
.36
.29
.12 .12
.40
.47 .45
.57
.73
.45
.41
.15
.07
.38
.22
.06
.85
.71
.77
.81
.72
.57
.75
.13
.35
.19
.33 .31
.35
.52 .49
.27
.46
.79
.46
.75 .42
.08
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
Operating Business EPS | Demonstrated Step Change in Performance
2003 2004 2005 2006 2007 2010 2002 2000 2001 2008
Impact of Mineral
Rights Gain
2009
Earnings from continuing operations and before special items
2000-2006 as originally reported
2007-2011 reflects earnings adjusted for elimination of the Ilim JV reporting lag
.83
2011
.93 Final
Land
Sale
Transformation
2012
46
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
.81
.75
(.13)
(.19) (.07)
(.05) (.01)
.06
.04
.10 .12 .07
3Q11 Volume / LOO
Price / Mix Operations & Costs
Maintenance Outages
Input Costs
Corporate & Other
TIN Synergies
Interest Tax Ilim JV 3Q12
3Q12 vs. 3Q11 EPS
Earnings from continuing operations before special items
47
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Industrial Packaging | 3Q12 vs. 3Q11
Earnings from continuing operations before special items
48 Earnings Presentation
301
342
(10) (104) 21
4
55
75
3Q11 Price & Mix Volume & Market
Downtime
Operations & Costs
Maintenance Outages
Input Costs
TIN Synergies 3Q12
$ M
illio
n
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
3Q12 vs. 2Q12 3Q12 vs. 3Q11
Business Volume Price /
Ton Volume
Price / Ton
N.A. Container1 (3%) ($6) (5%) ($5)
European Container2 (5%) €5 1% (€30)
Average IP volume and price realization (includes the impact of mix across all segments) 1 N.A. Container Volume on FBA reporting basis (excludes shipments from the Display & Bulk Segment and facilities in Mexico and Latin America but
includes shipments from domestic Sheet Plants); All periods include full quarter of Temple-Inland volume 2 European Container Volume reflects box shipments only (includes shipments from the non-consolidated joint venture in Turkey)
49
Industrial Packaging | Volume and Pricing Trends
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
238
201
(58)
(14) (5)
(17) 30
27
3Q11 Price & Mix Volume Operations & Costs
Maintenance Outages
Input Costs
Other 3Q12
Printing Papers | 3Q12 vs. 3Q11 $
Mill
ion
Earnings from continuing operations before special items
50 Earnings Presentation
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
3Q12 vs. 2Q12 3Q12 vs. 3Q11
Business Volume Price / Ton Volume Price / Ton
N.A. Paper 4% ($1) 2% ($31)
N.A. Pulp1 21% ($30) 20% ($107)
European Paper 5% (€1) 13% (€34)
Average IP volume and price realization (includes the impact of mix across all grades)
1 Reflects Fluff and Market pulp combined
51
Printing Papers | Volume and Pricing Trends
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
$ Million 3Q11 2Q12 3Q12
Sales $290 $285 $280
Earnings $37 $51 $45
EBITDA Margin 26% 29% 27%
3Q12 vs. 2Q12 3Q12 vs. 3Q11
Business Volume Price/Ton Volume Price/Ton
Uncoated Freesheet (2%) $8 3% ($14)
Domestic 21% $10 22% $54
Export (18%) $7 (12%) ($89)
IP Brazil results are reported in the Printing Papers segment
Earnings and EBITDA from continuing operations before special items
Average IP Brazil price realization (includes the impact of mix across all grades)
52
Printing Papers | IP Brazil
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
103
67
(19)
(5) (11)
(5)
(7) 11
3Q11 Price & Mix Volume & Market
Downtime
Operations & Costs
Maintenance Outages
Input Costs
Other 3Q12
Consumer Packaging | 3Q12 vs. 3Q11 $
Mill
ion
Earnings from continuing operations before special items
53 Earnings Presentation
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Average IP price realization (includes the impact of mix across all grades)
3Q12 vs. 2Q12 3Q12 vs. 3Q11
Volume Price/Ton Volume Price/Ton
N.A. Coated Paperboard 2% ($3) (4%) ($25)
Revenue Price Revenue Price
Converting Businesses (5%) NA 6% NA
54
Consumer Packaging | Volume and Pricing Trends
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Ilim Joint Venture | Volume and Pricing Trends
3Q12 vs. 2Q12 3Q12 vs. 3Q11
Business Volume Price/Ton Volume Price/Ton
Pulp (5%) ($30) (2%) ($155)
Containerboard (3%) ($4) (1%) ($104)
55
Average Ilim JV (100%) volume and price realization (includes the impact of mix across all grades)
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
Total Cash Cost Components | 3Q12 YTD
Fiber 30%
Materials 15%
Labor 12%
Chemicals 10%
Freight 17%
Energy 8%
Overhead 8%
North American Mills Only (Including Temple Inland Mills)
56
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
($9) ($8)
$20
$58
Freight Chemicals Energy Fiber
North America Outside North America
$55
($4)
$10
Industrial Packaging
Printing Papers
Consumer Packaging
Wood Energy Chemicals Freight OCC
By Business By Input Type
Input costs for continuing businesses
Global Input Costs vs. 3Q11 | $61MM Favorable, or $0.10 per share
57
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
($45) ($32)
$62
$128
Chemicals Freight Energy Fiber
North America Outside North America
$114
($17)
$16
Industrial Packaging
Printing Papers
Consumer Packaging
Wood Energy Chemicals Freight OCC
By Business By Input Type
Input costs for continuing businesses
Global Input Costs vs. 9M11 | $113MM Favorable, or $0.18 per share
58
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
2006 2007 2008 2009 2010 2011 90
95
100
105
110
115
120
125
130
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
2012
U.S. Mill Wood Delivered Cost Trend | Flat vs. 2Q12 Average Cost
Cost Indexed to January 2006 values
59
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
2006 2007 2008 2009 2010 2011 60
80
100
120
140
160
180
200
220
240
260
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
2012
2006-2007 represents WY PKG delivered costs; 2008-2010 represents delivered costs to the integrated system Cost Indexed to January 2006 values
U.S. OCC Delivered Cost Trend | 22% Decrease vs. 2Q12 Average Cost
60
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
2006 2007 2008 2009 2010 2011 0
50
100
150
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
2012
NYMEX Natural Gas closing prices
Natural Gas Costs Trend | 26% Increase vs. 2Q12 Average Cost
Cost Indexed to January 2006 values
61
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
2006 2007 2008 2009 2010 2011 40
60
80
100
120
140
160
180
200
220
240
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
2012
U.S. Fuel Oil Trend | 11% Decrease vs. 2Q12 Average Cost
WTI Crude prices Cost Indexed to January 2006 values
62
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
2006 2007 2008 2009 2010 2011 75
100
125
150
175
200
225
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
2012
U.S. Chemical Composite Index Trend |1% Increase vs. 2Q12 Average Cost
Delivered cost to U.S. facilities: includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid 2006 - 2008 excludes WY PKG Cost Indexed to January 2006 values
63
Earnings Presentation | Third Quarter 2012 Earnings Presentation | Third Quarter 2012
2012 Global Consumption | Annual Purchase Estimates for Key Inputs
Commodity U. S. Non – U. S.
Energy
Natural Gas (MM BTUs) 67,000,000 12,000,000
Fuel Oil (Barrels) 850,000 400,000
Coal (Tons) 485,000 500,000
Fiber Wood (Tons) 53,000,000 12,000,000
Old Corrugated Containers (Tons) 3,700,000 100,000
Chemicals
Caustic Soda (Tons) 380,000 100,000
Starch (Tons) 400,000 97,000
Sodium Chlorate (Tons) 190,000 50,000
LD Polyethylene (Tons) 40,000 -
Latex (Tons) 22,000 7,000
Does not include Asian or Ilim JV consumption Estimates are based on normal operations and may be impacted by downtime Excludes consumption related to divested TIN mills and TIN Building Products
64