INDUSTRY SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2013

INDUSTRY SEGMENT INFORMATION

NDUSTRY SEGMENT INFORMATION

International Paper’s industry segments, Industrial Packaging, Printing Papers, Consumer Packaging and Distribution, 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.

The Company also has a 50% equity interest in Ilim in Russia that is a separate reportable industry segment.

Sales by industry segment for the three months and six months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
In millions	2013			2012			2013			2012
Industrial Packaging	$	3,780		$	3,450		$	7,340		$	6,565
Printing Papers	1,540			1,510			3,080			3,070
Consumer Packaging	855			780			1,685			1,590
Distribution	1,405			1,500			2,790			2,975
Corporate and Intersegment Sales	(245		)	(163		)	(470		)	(468		)
Net Sales	$	7,335		$	7,077		$	14,425		$	13,732

Operating profit by industry segment for the three months and six months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,								Six Months Ended June 30,
In millions	2013				2012				2013				2012
Industrial Packaging	$	474		(a)	$	260		(e)	829			(a)	$	475		(e)
Printing Papers	76				104			(f)	225				250			(f)
Consumer Packaging	51			(b)	57			(g)	58			(b)	160			(g)
Distribution	—			(c)	5			(h)	(5		)	(c)	3			(h)
Operating Profit	601				426				$	1,107			888
Interest expense, net	(168		)		(172		)		(332		)	(d)	(340		)
Noncontrolling interests/equity earnings adjustment (i)	4				4				4				8
Corporate items, net	—				(3		)		(22		)		(35		)
Restructuring and other charges	9				(9		)		3				(25		)
Non-operating pension expense	(83		)		(42		)		(167		)		(79		)
Earnings (loss) from continuing operations before income taxes and equity earnings	$	363			$	204			$	593			$	417
Equity earnings (loss), net of taxes – Ilim	$	(34	)		$	(25	)		$	(45	)		$	15

(a) Includes charges of $14 million for the three months ended June 30, 2013 and $26 million for the six months ended June 30, 2013 for the integration costs associated with the acquisition of Temple-Inland, gains of $13 million for the three months ended June 30, 2013 and $14 million for the six months ended June 30, 2013 for a bargain purchase adjustment on the first quarter 2013 acquisition of a majority share of our operations in Turkey, and charges of $2 million for the three months ended June 30, 2013 and $5 million for the six months ended June 30, 2013 for other items.

(b) Includes charges of $1 million for the three months ended June 30, 2013 and $45 million for the six months ended June 30, 2013 for costs associated with the permanent shutdown of a paper machine at our Augusta, Georgia mill.

(c) Includes charges of $17 million for the three months ended June 30, 2013 and $24 million for the six months ended June 30, 2013 for costs associated with the restructuring of the Company's xpedx operations.

(d) Includes a gain of $6 million for interest related to the settlement of an IRS tax audit.

(e) Includes a charge of $62 million for the three months and six months ended June 30, 2012 to adjust the value of the long-lived assets of the Hueneme mill in Oxnard, California to their fair value in anticipation of its divestiture, charges of $35 million for the three months ended June 30, 2012 and $78 million for the six months ended June 30, 2012 for integration costs associated with the Temple-Inland acquisition, charges of $9 million for the three months and six months ended June 30, 2012 for costs associated with the announced third quarter 2012 divestiture of the Hueneme mill and two other containerboard mills, a charge of $1 million for the three months and six months ended June 30, 2012 related to the closure of the Etienne mill in France, and a charge of $20 million for the six months ended June 30, 2012 related to the write-up of the Temple-Inland inventory to fair value.

(f) Includes a loss of $2 million for the three months ended June 30, 2012 and a loss of $1 million for the six months ended June 30, 2012 related to the acquisition of the majority interest in Andhra Pradesh Paper Mills Limited.

(g) Includes a loss of $6 million for the three months ended June 30, 2012 and a gain of $1 million for the six months ended June 30, 2012 for adjustments related to the sale of the Shorewood business.

(h) Includes charges of $12 million for the three months ended June 30, 2012 and $33 million for the six months ended June 30, 2012 for costs associated with the restructuring of the Company's xpedx operation.

(i) Operating profits for industry segments include each segment’s percentage share of the profits of subsidiaries included in that segment that are less than wholly owned. The pre-tax noncontrolling interest and equity earnings for these subsidiaries are adjusted here to present consolidated earnings before income taxes and equity earnings.