INTERIM FINANCIAL RESULTS (UNAUDITED)



In millions, except per share amounts and stock prices	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Year
2012
Net sales	$	6,655		$	7,077		$	7,026		$	7,075		$	27,833
Gross margin (a)	1,671			1,807			1,886			1,882			7,246
Earnings (loss) from continuing operations before income taxes and equity earnings	213		(b)	204		(c)	320		(d)	287		(e)	1,024		(b-e)
Gain from discontinued operations	5			16			14			10			45
Net earnings (loss) attributable to International Paper Company	188		(b)	134		(c)	237		(d)	235		(e,f)	794		(b-f)
Basic earnings (loss) per share attributable to International Paper Company common shareholders:
Earnings (loss) from continuing operations	$	0.42	(b)	$	0.27	(c)	$	0.51	(d)	$	0.52	(e)	$	1.72	(b-e)
Gain from discontinued operations	0.01			0.04			0.03			0.02			0.10
Net earnings (loss)	0.43		(b)	0.31		(c)	0.54		(d)	0.54		(e,f)	1.82		(b-f)
Diluted earnings (loss) per share attributable to International Paper Company common shareholders:
Earnings (loss) from continuing operations	0.42		(b)	0.27		(c)	0.51		(d)	0.51		(e)	1.70		(b-e)
Gain from discontinued operations	0.01			0.04			0.03			0.02			0.10
Net earnings (loss)	0.43		(b)	0.31		(c)	0.54		(d)	0.53		(e,f)	1.80		(b-f)
Dividends per share of common stock	0.2625			0.2625			0.2625			0.3000			1.0875
Common stock prices
High	$	36.50		$	35.59		$	37.25		$	39.88		$	39.88
Low	29.45			27.29			28.29			32.95			27.29
2011
Net sales	$	6,387		$	6,648		$	6,632		$	6,367		$	26,034
Gross margin (a)	1,762			1,768			1,839			1,705			7,074
Earnings (loss) from continuing operations before income taxes and equity earnings	368		(g)	293		(j)	381		(k)	416		(m)	1,458		(g,j,k,m)
Gain from discontinued operations	49		(h)	—			—			—			49		(h)
Net earnings (loss) attributable to International Paper Company	354		(g-i)	219		(j)	468		(k,l)	281		(m,n)	1,322		(g-n)
Basic earnings (loss) per share attributable to International Paper Company common shareholders:
Earnings (loss) from continuing operations	$	0.71	(g,i)	$	0.51	(j)	$	1.08	(k,l)	$	0.65	(m,n)	$	2.95	(g,i,j,k,l,m,n)
Gain from discontinued operations	0.11		(h)	—			—			—			0.11		(h)
Net earnings (loss)	0.82		(g-i)	0.51		(j)	1.08		(k,l)	0.65		(m,n)	3.06		(g-n)
Diluted earnings (loss) per share attributable to International Paper Company common shareholders:
Earnings (loss) from continuing operations	0.70		(g,i)	0.51		(j)	1.08		(k,l)	0.65		(m,n)	2.92		(g,i,j,k,l,m,n)
Gain from discontinued operations	0.11		(h)	—			—			—			0.11		(h)
Net earnings (loss)	0.81		(g-i)	0.51		(j)	1.08		(k,l)	0.65		(m,n)	3.03		(g-n)
Dividends per share of common stock	0.1875			0.2625			0.2625			0.2625			0.9750
Common stock prices
High	$	30.44		$	33.01		$	31.57		$	29.85		$	33.01
Low	24.88			26.25			22.90			21.55			21.55

Note: Since basic and diluted earnings per share are computed independently for each period and category, full year per share amounts may not equal the sum of the four quarters.

Footnotes to Interim Financial Results


(a)	Gross margin represents net sales less cost of products sold, excluding depreciation, amortization and cost of timber harvested.

(b)

Includes a pre-tax charge of $20 million ($12 million after taxes) related to the write-up of the Temple-Inland inventories to fair value, a pre-tax charge of $21 million ($16 million after taxes) for an inventory write-off, severance and other charges related to the restructuring of the Company's xpedx operations, a pre-tax charge of $43 million ($33 million after taxes) for integration costs associated with the acquisition of Temple-Inland, a pre-tax charge of $16 million ($10 million after taxes) for early debt extinguishment costs, a pre-tax gain of $7 million ($6 million after taxes) for adjustments related to the sale of the Shorewood business, and a gain of $1 million (before and after taxes) for other items.

(c)

Includes a pre-tax charge of $12 million ($8 million after taxes) for an inventory write-off, severance and other charges related to the restructuring of the Company's xpedx operations, a pre-tax charge of $35 million ($22 million after taxes) for integration costs associated with the acquisition of Temple-Inland, a pre-tax charge of $10 million ($6 million after taxes) for debt extinguishment costs, a pre-tax charge of $62 million ($38 million after taxes) to adjust the long-lived assets of the Hueneme mill in Oxnard, California to their fair value in anticipation of its divestiture, a pre-tax charge of $9 million ($5 million after taxes) for costs associated with the third-quarter 2012 divestiture of the Hueneme mill and two other containerboard mills, a pre-tax charge of $6 million ($4 million after taxes) for an adjustment related to the sale of Shorewood, and charges of $2 million (before and after taxes) for other items.

(d)

Includes a pre-tax charge of $9 million ($5 million after taxes) for an inventory write-off, severance and other charges related to the restructuring of the Company's xpedx operations, a pre-tax charge of $58 million ($34 million after taxes) for integration costs associated with the acquisition of Temple-Inland, a pre-tax charge of $13 million ($8 million after taxes) for debt extinguishment costs, a pre-tax charge of $16 million ($11 million after taxes) for costs associated with the restructuring of the Company's Packaging business in Europe, a pre-tax charge of $19 million ($49 million after taxes) for costs associated with the containerboard mill divestitures and a pre-tax gain of $5 million ($0 million after taxes) for other items.

(e)

Includes a pre-tax charge of $28 million ($19 million after taxes) for integration costs associated with the acquisition of Temple-Inland, a pre-tax charge of $9 million ($6 million after taxes) for debt extinguishment costs, a pre-tax charge of $7 million ($4 million after taxes) for costs associated with the restructuring of our xpedx operations, a gain of $2 million (before and after taxes) for proceeds associated with the 2010 sale of the Arizona Chemical business, a gain of $2 million (before and after taxes) for adjustments related to the sale of the Company's Shorewood operations, a charge of $1 million (before and after taxes) for costs associated with the containerboard mill divestitures, and pre-tax charges of $5 million ($4 million after taxes) for other items.


(f)	Includes a net expense of $14 million related to internal restructurings and a $5 million expense to adjust deferred tax assets related to post-retirement prescription drug coverage (Medicare Part D reimbursements).


(g)	Includes a pre-tax charge of $32 million ($19 million after taxes) for early debt extinguishment costs, a pre-tax charge of $7 million ($4 million after taxes) for costs associated with the restructuring of the Company’s xpedx operations, and a charge of $8 million (before and after taxes) for asset impairment costs associated with the Inverurie, Scotland mill which was closed in 2009.

(h)

Includes a pre-tax gain of $50 million ($30 million after taxes) for an earnout provision related to the sale of the Company’s Kraft Papers business completed in January 2007. Also, the Company sold its Brazilian Coated Paper business in the third quarter 2006. Local country tax contingency reserves were included in the business’ operating results in 2005 and 2006 for which the related statute of limitations has expired. The reserves were reversed and a tax benefit of $15 million plus associated interest income of $6 million ($4 million after taxes) was recorded.


(i)	Includes a gain of $7 million (before and after taxes) related to a bargain price adjustment on an acquisition by our joint venture in Turkey.

(j)

Includes a pre-tax charge of $27 million ($17 million after taxes) for an environmental reserve related to the Company’s property in Cass Lake, Minnesota, a pre-tax gain of $21 million ($13 million after taxes) related to the reversal of environmental reserves due to the announced repurposing of a portion of the Franklin mill, a pre-tax charge of $10 million ($6 million after taxes) for costs associated with the restructuring of the Company’s xpedx operations, and a pre-tax charge of $129 million ($104 million after taxes) for a fixed-asset impairment of the North American Shorewood business.

(k)

Includes a pre-tax charge of $16 million ($10 million after taxes) for costs associated with the acquisition of a majority share of Andhra Pradesh Paper Mills Limited in India, a pre-tax charge of $18 million ($13 million after taxes) for costs associated with the restructuring of the Company’s xpedx operations, a pre-tax charge of $8 million ($5 million after taxes) for costs associated with signing an agreement to acquire Temple-Inland, a pre-tax charge of $6 million ($4 million after taxes) for costs associated with the sale of the Company’s Shorewood operations, and a pre-tax charge of $82 million (a gain of $140 million after taxes) to reduce the carrying value of the Shorewood business based on the terms of the definitive agreement to sell this business.


(l)	Includes a tax benefit of $222 million related to the reduction of the carrying value of the Shorewood business and the write-off of a deferred tax liability associated with Shorewood, and noncontrolling interest income of $8 million (before and after taxes) associated with the fixed asset impairment of Shorewood Mexico.

(m)

Includes a pre-tax charge of $17 million ($13 million after taxes) for an inventory write-off, severance and other costs associated with the restructuring of the Company’s xpedx operations, a pre-tax charge of $12 million ($7 million after taxes) for costs associated with the signing of an agreement to acquire Temple-Inland, a pre-tax gain of $4 million ($3 million after taxes) for an adjustment to the previously recorded loss to reduce the carrying value of the Company’s Shorewood business, a charge of $3 million (before and after taxes) for asset impairment charges at our Inverurie, Scotland mill which was closed in 2009, and a gain of $6 million (before and after taxes) for interest associated with a tax claim.


(n)	Includes a $24 million expense related to internal restructurings, a $9 million expense for costs associated with our acquisition of a majority interest in Andhra Pradesh Paper Mills Limited, a $13 million tax benefit related to the release of a deferred tax asset valuation allowance, and a $2 million expense for other items.