<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 1-3157
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INTERNATIONAL PAPER COMPANY
(Exact name of Company as specified in its charter)
NEW YORK 13-0872805
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
TWO MANHATTANVILLE ROAD, PURCHASE, N.Y. 10577
(Address of principal executive offices) (Zip Code)
COMPANY'S TELEPHONE NUMBER, INCLUDING AREA CODE: 914-397-1500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ---------------------------------------------------- ------------------------
<S> <C>
Cumulative $4 Preferred Stock, without par value --
Common Stock, $1 per share par value New York Stock Exchange
5 1/8% Debentures due 2012 New York Stock Exchange
</TABLE>
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the common stock of the Company outstanding
as of February 28, 1994, held by non-affiliates of the Company was
$8,995,743,848, calculated on the basis of the closing price on the Composite
Tape on February 28, 1994. For this computation, the Company has excluded the
market value of all common stock beneficially owned by all executive officers
and directors of the Company and their associates as a group and treasury stock.
Such exclusion is not to signify in any way that members of this group are
'affiliates' of the Company.
The number of shares outstanding of the Company's common stock, as of
February 28, 1994:
<TABLE>
<CAPTION>
OUTSTANDING IN TREASURY
- ----------- -----------
<S> <C>
127,287,796 2,822,329
</TABLE>
The following documents are incorporated by reference into the parts of
this report indicated below:
1993 ANNUAL REPORT TO SHAREHOLDERS
(PP. 2 AND 6 THROUGH 56) PARTS I, II AND IV
PROXY STATEMENT, DATED MARCH 31, 1994 PART III
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
International Paper Company,* a New York corporation incorporated in 1941
as the successor to the New York corporation of the same name organized in 1898,
is a worldwide producer of printing and writing papers, paperboard and
packaging, wood products and distributes paper and office supply products in
both the United States and Europe. It also produces pulp, laminated products,
and specialty products, including photosensitive films and papers, nonwovens,
chemicals and minerals.
In the United States, the Company operates 26 pulp and paper mills, 54
converting and packaging plants, 43 wood products facilities, 15 specialty
panels and laminated products plants, six nonwoven products facilities and seven
envelope plants. Production facilities in Europe, Asia, Latin America and Canada
include 14 pulp and paper mills, 32 converting and packaging plants, three wood
products facilities, three specialty panels and laminated products plants and
five nonwoven products facilities.
The Company distributes fine paper, printing and industrial products and
building materials, primarily manufactured by other companies, through about 255
distribution branches located primarily in the United States. In addition, the
Company produces photosensitive films and papers and photographic equipment
(three U.S. and six international locations) and specialty chemicals (seven U.S.
and two international locations), and engages in domestic oil and gas and real
estate activities.
In March 1994, the Company, through a subsidiary, acquired approximately
one-half of Brierley Investments Limited's (Brierley) holdings in Carter Holt
Harvey Limited (Carter Holt), a major New Zealand forest products and paper
company with substantial assets in Chile. The purchase increased the Company's
ownership of Carter Holt to 24 percent and leaves Brierley with 8 percent.
In April 1993, the Company acquired certain assets of the Los Angeles-based
Ingram Paper Company, a distributor of industrial and fine printing papers. In
December, JB Papers, Inc., a paper distribution company located in Union, N.J.,
was purchased. Also in December, the assets of Monsanto Company's Kentucky-based
Fome-Cor division, a manufacturer of polystyrene foam products, were acquired.
In the first quarter of 1992, the operating assets of Western Paper Company
(Western Pacific), a printing and industrial paper distribution business based
in Portland, Oregon, were purchased. In the second quarter, the Company acquired
an equity interest in Scitex Corporation Ltd. (Scitex), an Israel-based world
leader in color electronic prepress systems for the graphic design, printing and
publishing industries. In the third quarter, Zaklady Celulozowa-Papierniecze
S.A. w Kwidzynie (Kwidzyn) was acquired from the Government of the Republic of
Poland. Kwidzyn is Poland's largest white papers manufacturer and the only
integrated bleached pulp and paper company. In the fourth quarter, certain
assets of the chemical division of Norway-based M. Peterson & Son AS (Peterson)
were acquired.
In the first quarter of 1991, the Company purchased certain packaging and
sheeting facilities located in France (the Rhone Valley packaging business) from
Georgia-Pacific Corporation. In April, the packaging equipment division of
United Dominion Industries Ltd. (Evergreen Packaging Equipment) was purchased.
Also in April, the Company acquired the common stock of Dillard Paper Company, a
wholesale distributor of printing and industrial papers, packaging equipment and
supplies based in the southern United States. In August, the Company completed a
merger with Leslie Paper Co., a paper distribution firm headquartered in
Minneapolis, Minnesota, using the pooling-of-interests method of accounting. In
November, the Company entered into a joint venture agreement with Brierley to
control 32% of Carter Holt. In December, the common stock of Scaldia Papier BV,
a paper distribution company based in Nijmegen, Netherlands, primarily
distributing coated and uncoated papers to the graphics industry, was purchased.
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* Unless otherwise indicated by the context, the terms 'Company' and
'International Paper' are used interchangeably to describe International Paper
Company and its consolidated subsidiaries.
2
<PAGE>
All of the 1993, 1992 and 1991 acquisitions, except the merger with Leslie
Paper Co., were accounted for using the purchase method. The effects of these
mergers and acquisitions, individually or in the aggregate, were not significant
to the Company's consolidated financial statements.
A further discussion of mergers and acquisitions can be found on page 48 of
the Company's 1993 Annual Report to Shareholders (the 'Annual Report'), which
information is incorporated herein by reference.
From 1989 through 1993, International Paper's capital expenditures
approximated $5.7 billion, excluding mergers and acquisitions. These
expenditures reflect continuing efforts to improve product quality,
environmental performance, lower costs, expand production capacity, and acquire
and improve forestlands. Capital spending in 1993 was $954 million and is
expected to exceed $1.1 billion in 1994. A further discussion of capital
expenditures can be found on pages 37 and 38 of the Annual Report, which
information is incorporated herein by reference.
The Company, which owns a majority interest in IP Timberlands, Ltd., a
Texas limited partnership ('IPT'), controlled approximately 6.2 million acres of
forestlands in the United States at December 31, 1993. IPT was formed to succeed
to substantially all of International Paper's forest products business for the
period 1985 through 2035, unless earlier terminated. A further discussion of IPT
can be found on pages 28 and 47 of the Annual Report, which information is
incorporated herein by reference.
FINANCIAL INFORMATION CONCERNING INDUSTRY SEGMENTS
The financial information concerning industry segments is set forth on
pages 37 and 41 of the Annual Report, which information is incorporated herein
by reference.
FINANCIAL INFORMATION ABOUT INTERNATIONAL AND DOMESTIC OPERATIONS
The financial information concerning international and domestic operations
and export sales is set forth on page 40 of the Annual Report, which information
is incorporated herein by reference.
COMPETITION AND COSTS
Despite the size of the Company's manufacturing capacities for paper,
paperboard, packaging and pulp products, the markets in all of the cited product
lines are large and highly fragmented. The markets for wood and specialty
products are similarly large and fragmented. There are numerous competitors, and
the major markets, both domestic and international, in which the Company sells
its principal products are very competitive. These products are in competition
with similar products produced by others, and in some instances, with products
produced by other industries from other materials.
Many factors influence the Company's competitive position, including
prices, costs, product quality and services. Information on the impact of prices
and costs on operating profits is contained on pages 10, 16, 20, 26, 30 and 36
through 39 of the Annual Report, which information is incorporated herein by
reference.
MARKETING AND DISTRIBUTION
Paper and packaging products are sold through the Company's own sales
organization directly to users or converters for manufacture. Sales offices are
located throughout the United States as well as internationally. Significant
volumes of products are also sold through paper merchants and distributors,
including facilities in the Company's distribution network.
The Company's U.S. production of lumber and plywood is marketed through
independent and Company-owned distribution centers. Specialty products are
marketed through various channels of distribution.
3
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DESCRIPTION OF PRINCIPAL PRODUCTS
The Company's principal products are described on pages 6 through 31 of the
Annual Report, which information is incorporated herein by reference.
Production of major products for 1993, 1992 and 1991 was as follows:
PRODUCTION BY PRODUCTS
(UNAUDITED)
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
PRINTING PAPERS
(IN THOUSANDS OF TONS)
White papers and bristols................................................................ 2,920 2,845 2,915
Coated papers............................................................................ 972 1,038 927
Market pulp(1)........................................................................... 1,529 1,495 1,238
----- ----- -----
PACKAGING
(IN THOUSANDS OF TONS)
Containerboard........................................................................... 2,084 2,135 2,074
Bleached packaging board................................................................. 1,004 959 942
Industrial papers........................................................................ 573 573 575
Industrial and consumer packaging(2)..................................................... 2,933 2,667 2,539
----- ----- -----
FOREST PRODUCTS
(IN MILLIONS)
Panels (sq. ft. 3/8-in. basis)(3)........................................................ 778 737 671
Lumber (board feet)...................................................................... 952 915 863
----- ----- -----
</TABLE>
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(1) This excludes market pulp purchases of approximately 600,000 tons annually.
(2) A significant portion of this tonnage was fabricated from paperboard and
paper produced at the Company's own mills and included in the
containerboard, bleached packaging board and industrial papers figures in
this table.
(3) Panels include plywood and oriented strand board.
RESEARCH AND DEVELOPMENT
The Company operates research and development centers at Sterling Forest,
New York; Mobile, Alabama; Erie, Pennsylvania; Kaukauna, Wisconsin; Binghamton,
New York; South Walpole, Massachusetts; St. Charles, Illinois; Jacksonville,
Florida; Holyoke, Massachusetts; Mobberley, United Kingdom; Morley, United
Kingdom; Munich, Germany; Fribourg, Switzerland; Saint-Priest, France; and
Annecy, France; a regional center for applied forest research in Bainbridge,
Georgia; and several product laboratories. Research and development activities
are directed to short-term, long-term and technical assistance needs of
customers and operating divisions; process, equipment and product innovations;
and improvements of profits through tree generation and propagation research.
Activities include studies on improved forest species and management; innovation
and improvement of pulping, bleaching, chemical recovery, papermaking and
coating processes; innovation and improvement of photographic materials and
processes, printing plates, pressroom/plate chemistries and plate processors;
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. Product 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 $94.7 million in 1993, $91.1 million in 1992 and
$82.7 million in 1991.
4
<PAGE>
ENVIRONMENTAL PROTECTION
Control over discharges of pollutants into the air, water and groundwater
to avoid significant adverse impacts on the environment and to achieve 100%
compliance with regulations is a continuing objective of the Company. The
Company has invested substantial funds to modify facilities to assure compliance
with applicable environmental quality laws and plans to make substantial capital
expenditures for these purposes in the future. A total of $100 million was spent
in 1993 to control air and water pollution and to assure environmentally sound
disposal of solid waste. The Company expects to spend in the order of $160
million in 1994 for similar capital programs. Amounts to be spent for
environmental control facilities in future years will depend on new laws and
regulations and other changes in legal requirements, and changes in
environmental concerns. Taking these uncertainties into account, the Company's
preliminary estimate for additional environmental appropriations during the
period 1995 through 1996 is in the range of $500 to $600 million. In December
1993, the United States Environmental Protection Agency ('EPA') proposed new
guidelines for air emissions and water discharge for the pulp and paper industry
to meet in 1998 known as 'Cluster Rulemaking'. It also proposed regulations
implementing the Great Lakes Initiative ('GLI') covering water quality and
implementation procedures. Future spending will be heavily influenced by the
final standards included within each of the sets of proposed regulations. We
estimate the Company's future capital spending to comply with the Cluster
Rulemaking and GLI requirements to be between $700 million and $1.5 billion
depending upon the methods allowed by the regulations to meet overall
requirements. A portion of this spending is reflected in the 1995 to 1996
spending forecast. In addition, annual operating costs, excluding depreciation,
are expected to increase between $60 million and $120 million when these
regulations are fully implemented in 1998. The Company expects the significant
effort it has made in the analysis of environmental issues and the development
of environmental control technology to enable it to keep costs for compliance
with environmental regulations at, or below, industry averages. A further
discussion of environmental issues can be found on pages 33, 34, 38 and 39 of
the Annual Report, which information is incorporated herein by reference.
As of December 31, 1993, $755 million of industrial and pollution control
revenue bonds, secured by Company contractual obligations, were outstanding in
51 political subdivisions of various states, counties and municipalities,
primarily to finance environmental control projects located at or in conjunction
with the Company's plants in those subdivisions. It is contemplated that
additional industrial revenue bonds will be issued from time to time to finance
other environmental control projects, provided tax law changes do not curtail
the Company's access to the municipal bond market.
EMPLOYEES
As of December 31, 1993, the Company had approximately 72,500 employees, of
whom approximately 52,000 were located in the United States and the remainder
overseas. Of these, approximately 44,500 are hourly employees, many of whom are
represented by the United Paperworkers International Union.
During 1993, new labor agreements were reached at the Mobile, Oswego,
Riverdale and Millers Falls mills. At year end, negotiations were still in
progress at the Beckett, Erie and Pine Bluff mills.
During 1994, labor agreements are scheduled to be negotiated at the
following mills: Camden and Natchez. During 1995 labor agreements are scheduled
to be negotiated at the following mills: Georgetown, Turners Falls, Ward and
Hudson River.
During 1993, labor agreements expired at 17 packaging plants, one forest
research facility, one chemical plant, two wood products plants, three specialty
products plants and seven distribution operations. Multiyear labor agreements
were negotiated at each location, except one converted paper products plant in
South San Francisco, California, where negotiations were still in progress at
year end. One packaging plant at Mount Carmel, Pennsylvania and one distribution
operation at Minneapolis, Minnesota have contracts remaining open from a
previous year.
5
<PAGE>
RAW MATERIALS
For information as to the sources and availability of raw materials
essential to the Company's business, see Item 2 'Properties.'
ITEM 2. PROPERTIES.
FORESTLANDS
The principal raw material used by International Paper is wood in various
forms. At December 31, 1993, IPT, a limited partnership in which the Company has
a majority ownership interest, controlled approximately 6.0 million acres of
forestlands in the U.S. while an additional 0.2 million acres are held under
short term leases to International Paper.
During 1993, such forestlands supplied 1.4 million cords of roundwood to
the Company's U.S. facilities. This amounted to the following percentages of the
roundwood requirements of its mills and forest products facilities: 15% in its
Northern mills, 14% in its Southern mills and none in its Western mill. The
balance was acquired from other private industrial and nonindustrial forestland
owners, as well as the United States government. In addition, 3.3 million cords
of IPT's wood were sold to other users in 1993.
MILLS AND PLANTS
A listing of the Company's production facilities can be found in Appendix I
hereto, which information is incorporated herein by reference.
All mills and converting facilities are owned by the Company, except one
mill and 13 plants in the United States and two non-U.S. facilities, which are
leased. The Company believes that these facilities are in good operating
condition and are suited for the purposes for which they are presently being
used. The Company continues to study the economics of modernizing or adopting
other alternatives for higher cost facilities. Further discussions of new mill
and plant projects can be found on pages 37 and 38 of the Annual Report, which
information is incorporated herein by reference.
CAPITAL INVESTMENTS AND DISPOSITIONS
Given the size, scope and complexity of its business interests,
International Paper continuously examines and evaluates a wide variety of
business opportunities and planning alternatives, including possible
acquisitions and sales or other dispositions of properties. Planned capital
investments for 1994, as of December 31, 1993, are set forth on pages 37 and 38
of the Annual Report, which information is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
DIOXIN LITIGATION
On July 31, 1992, 77 plaintiffs, all residents of Arkansas, filed a lawsuit
in the U.S. District Court for the Western District of Arkansas, alleging that
the Company polluted the Sulfur River by discharging chemicals, including
dioxin, from its Domino, Texas plant. This case was settled in December, 1993 at
which time there were 54 plaintiffs remaining in the litigation. The terms of
the settlement are confidential.
On June 11, 1993, a lawsuit purporting to be a class action was filed by
individuals against the Company, Dow Chemical and other individual employees of
both companies in the 18th Judicial District of Louisiana seeking compensatory
and punitive damages of an unspecified amount for alleged claims similar to
those raised in the previously-filed lawsuits. The case has been removed to the
U.S. District Court for the Middle District of Louisiana.
Beginning in November of 1990, the Company has been named as a defendant in
88 lawsuits by individuals filed in state or federal court in Mississippi
alleging that it has polluted and damaged the Pascagoula, Leaf and Escatawpa
Rivers by releasing dioxin and over 40 other chemicals into those rivers.
Georgia-Pacific was initially named in most of these suits but an order severing
it from the Company in all the then pending cases was entered
6
<PAGE>
on September 15, 1992. Following the severance order, nine of the State cases
were removed from state court to Federal District Court for the Southern
District of Mississippi. Of the nine cases that were removed, two have been
dismissed.
On May 24, 1993, a wrongful death action was filed in Mississippi state
court against the Company claiming that decedent's death was related to exposure
to hazardous and toxic substances from the Moss Point mill. The lawsuit also
included the independent survivorship claims of the widow. The complaint raises
claims similar to those in the previously-filed lawsuits and also contains
specific allegations relating to the disposal of sludge by the mill. The
plaintiff seeks compensatory damages of $1 million and punitive damages of $20
million. The case has been removed to the U.S. District Court for the Southern
District of Mississippi.
On June 26, 1993, a lawsuit was filed against the Company, Georgia-Pacific
and individual employees of both companies in Mississippi state court by 20
plaintiffs alleging claims similar to those raised in previously-filed lawsuits.
The plaintiffs seek an unspecified amount of compensatory and punitive damages.
On October 22, 1993, Georgia-Pacific and its individual employee-defendants were
severed from the Company.
On September 28, 1993, 221 plaintiffs filed a lawsuit in the state court of
Mississippi claiming that the Company polluted the Pascagoula and Escatawpa
Rivers by discharging chemicals, including dioxin from its Moss Point mill. The
plaintiffs seek compensatory damages of $33 million, punitive damages of $221
million and injunctive relief.
On December 15, 1992, a lawsuit purporting to be a class action was filed
against the Company in U.S. District Court for the Southern District of
Mississippi (Biloxi). The plaintiffs seek unspecified compensatory and punitive
damages for the alleged violation by the Company of Federal environmental laws
relating to dioxin and other chemicals associated with the operations of the
Moss Point Mill. On February 18, 1994, the judge denied the plaintiffs' motion
to certify the class and the lawsuit will proceed forward with only the two
named individuals as plaintiffs.
In summary, taking into account various dismissals and new filings, there
are 71 cases pending in state court and eight pending in federal court for a
total of 79 Mississippi cases as of February 1, 1994. In these cases, both state
and federal, there are a total of 5,093 plaintiffs seeking total compensatory
damages of approximately $1.0 billion, punitive damages of approximately $8.4
billion and injunctive relief. While any of this litigation has an element of
uncertainty, the Company believes that the outcome of any of these proceedings,
lawsuits or claims, pending or threatened, or all of them combined, will not
have a materially adverse effect on its consolidated financial position or
results of operations.
OTHER LITIGATION
On October 14, 1993, the Town of Jay, Maine assessed a penalty of $394,000
against the Company's Androscoggin mill for violations of its air permit under
the Town's Environmental Control and Improvement Ordinance attributable to
excess emissions of particulate from one of the mill's lime kilns, as well as
violations of certain reporting requirements. The Town's penalty assessment has
been appealed.
The Maine Department of Environmental Protection proposed on October 15,
1992 that the Androscoggin mill enter into an Administrative Consent Agreement
and Enforcement Order and pay a civil penalty of $217,892 because the
particulate emissions from the same lime kiln which was the subject of the
foregoing proceeding with the Town of Jay, had exceeded the limits in the state
air license. Settlement discussions are no longer being conducted and the State
has filed a lawsuit against the Company. Although no specific amount is claimed
in the complaint, presumably the State will seek civil penalties in excess of
the amount it had originally proposed.
On November 15, 1993, the Thilmany division of the Company agreed with the
EPA, Region 5, to pay a penalty of $150,000 for alleged violations of the Clean
Air Act in 1988 at the Thilmany mill located in Kaukauna, Wisconsin. The
settlement in the form of a consent decree must be approved by the federal court
having jurisdiction of the civil action.
In 1990, the Missouri Attorney General's office notified the Company that
it was preparing an enforcement action alleging violations of the hazardous
waste management rules at the Company's treated wood plant in Joplin, Missouri.
Settlement discussions with the Attorney General's office are in progress.
7
<PAGE>
In 1989, Masonite Corporation, a wholly-owned subsidiary of the Company
('Masonite'), modified a production line to make a new product at a facility in
Ukiah, California. The facility obtained the necessary Authority to Construct
permits from the appropriate authority. In May 1992 the EPA, Region 9, issued an
order alleging that an additional Prevention of Significant Deterioration permit
was required for the new product line. The Company and the EPA are in settlement
discussions and civil penalties are anticipated.
Separate lawsuits were filed in the Superior Court, Mendocino County,
California, in July 1992 against Masonite by the Mendocino County Air Pollution
Control District and the California Air Resources Board. Both lawsuits, which
were later consolidated, allege non-compliance with the California Air Toxics
Hot Spots Information and Assessment Act of 1987 by Masonite's Ukiah,
California, facility. The alleged non-compliance relates to an emissions plan
allegedly required to be filed by August 1, 1989 but allegedly not filed until
November 5, 1990. Additionally, the lawsuits allege that the molded products
line was operated without a required permit. The lawsuits were settled in April
1993 for a civil penalty of $250,000 and a commitment to conduct additional
environmental audits. This settlement terminated the proceeding.
In May 1992 the EPA, Region 4, filed an administrative action alleging that
Arizona Chemical Company, a wholly-owned subsidiary of the Company, at a
facility located in Gulfport, Mississippi, failed to comply with regulations
that govern the burning of hazardous wastes in the facility's boiler. The
action, which sought a civil penalty of $274,500, was settled in February 1994
for a civil penalty of $95,000. This settlement terminated the proceedings.
On September 21, 1993 the EPA, Region 4, filed an administrative action
alleging that an Arizona Chemical facility in Panama City, Florida, failed to
comply with regulations that govern the burning of hazardous wastes in the
facility's boiler. The action seeks a civil penalty of $334,600. Settlement
negotiations are in progress.
The Company has been advised by the State of New York of an impending
enforcement action concerning the power boiler at the Company's Ticonderoga, New
York, paper mill. The action would involve civil penalties. Settlement
discussions are in progress.
As of March 30, 1994, there were no other pending judicial proceedings,
brought by governmental authorities against the Company, for alleged violations
of applicable environmental laws or regulations. The Company is engaged in
various administrative proceedings that arise under applicable environmental and
safety laws or regulations, including approximately 62 active proceedings under
the Comprehensive Environmental Response, Compensation and Liability Act
('CERCLA') and comparable state laws. Most of these proceedings involve the
cleanup of hazardous substances at large commercial landfills that received
waste from many different sources. While joint and several liability is
authorized under the CERCLA, as a practical matter, liability for CERCLA
cleanups is allocated among the many waste generators. Based upon previous
experience with respect to the cleanup of hazardous substances and upon
presently available information, the Company believes that it has no or de
minimus liability with respect to 18 of these sites; that liability is not
likely to be significant at 21 sites; and that estimates of liability at 23 of
these sites is likely to be significant but not material to the Company's
consolidated financial position or results of operations.
The Company is also involved in other contractual disputes, administrative
and legal proceedings and investigations of various types. While any litigation,
proceeding or investigation has an element of uncertainty, the Company believes
that the outcome of any proceeding, lawsuit or claim that is pending or
threatened, or all of them combined, will not have a materially adverse effect
on its consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1993.
8
<PAGE>
SPECIAL ITEM. EXECUTIVE OFFICERS OF THE COMPANY.
INTERNATIONAL PAPER COMPANY
EXECUTIVE OFFICERS
AS OF MARCH 31, 1994
INCLUDING NAME, AGE, OFFICES AND POSITIONS HELD* AND
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
JOHN A. GEORGES, 63, chief executive officer and chairman of the board of
directors of the Company. He became president, chief operating officer and a
director in 1981, chief executive officer in 1984 and chairman of the board in
1985.
JOHN T. DILLON, 55, executive vice president-packaging. In 1982, he was
elected vice president and group executive-forest products and assumed
additional responsibilities for the wood products group in late 1985. In 1986,
he was elected a senior vice president-forest products, liquid packaging, and
folding carton and label. He was elected to his present position in 1987 and a
director in 1991.
JAMES P. MELICAN, 53, executive vice president-legal and external affairs.
He was elected vice president and general counsel in 1984, senior vice president
and general counsel in 1987 and assumed his present position in 1991.
C. WESLEY SMITH, 54, executive vice president-printing papers. He was
elected vice president manufacturing-white papers businesses in 1987 and
president-International Paper Europe in 1989. He assumed his present position in
1992.
MARK A. SUWYN, 51, executive vice president-forest and specialty products.
He was senior vice president-imaging systems, medical products and corporate
marketing with E.I. DuPont De Nemours & Company from 1990 to 1991 and prior to
that held the position of group vice president-imaging systems and medical
products from 1988 to 1990. He joined the Company in his present position in
1992.
ROBERT C. BUTLER, 63, senior vice president and chief financial officer. In
1983, he became group executive vice president and chief financial officer of
the National Broadcasting Company. He joined the Company in his present position
in 1988.
ROBERT M. BYRNES, 56, senior vice president-human resources. He was senior
vice president-human resources at Emhart Corporation from 1986 to 1989. He
joined the Company in his present position in 1989.
ANDREW R. LESSIN, 51, controller. He served as a staff vice president and
director-taxes of the Company from 1988 to 1990. He was elected to his current
position in 1990.
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* Officers of International Paper are elected to hold office until the next
annual meeting of the board of directors following the annual meeting of
shareholders and until election of successors, subject to removal by the
board.
9
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Dividend per share data on the Company's common stock and the high and low
sale prices for the Company's common stock for each of the four quarters in 1993
and 1992 are set forth on page 56 of the Annual Report and are incorporated
herein by reference.
As of March 22, 1994, there were 31,237 holders of record of the Company's
common stock.
ITEM 6. SELECTED FINANCIAL DATA.
The comparative columnar table showing selected financial data for the
Company is set forth on pages 54 and 55 of the Annual Report and is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's review and comments on the consolidated financial statements
are set forth on pages 10, 16, 20, 26, 30 and 36 through 39 of the Annual Report
and are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's consolidated financial statements, the notes thereto and the
reports of the independent public accountants and Company management are set
forth on pages 42 through 53 of the Annual Report and are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors of the Company and their business experience are set forth on
pages 6 through 9 of the Company's Notice of 1994 Annual Meeting and Proxy
Statement, dated March 31, 1994 (the 'Proxy Statement') and are incorporated
herein by reference. The discussion of executive officers of the Company is
included in Part I under 'Executive Officers of the Company.'
As required by the Securities and Exchange Commission rules under Section
16 of the Securities Exchange Act of 1934, the Company notes that during 1993,
two officers inadvertently filed untimely reports on transactions in the
Company's common stock: Robert Byrnes, one report regarding two purchases by his
wife and Robert Butler, two reports regarding gifts.
ITEM 11. EXECUTIVE COMPENSATION.
A description of the compensation of the Company's executive officers is
set forth on pages 17, 18 and 20 through 23 of the Proxy Statement and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Company knows of no one owning beneficially more than five percent (5%)
of the Company's common stock other than the State Street Bank and Trust Co.,
N.A., as Trustee of the Company's Salaried Savings Plan and Retirement Savings
Plan, respectively, which in the aggregate own 8.26% of the Company's shares of
common stock as of December 31, 1993. State Street Bank and Trust Co., N.A.
holds 8.924% of the Company's common stock and disclaims beneficial ownership of
the 8.26% which it holds as Trustee for the Company's benefit plans. The table
showing ownership of the Company's common stock by directors and by directors
and executive officers as a group is set forth on pages 5 and 6 of the Proxy
Statement, which information is incorporated herein by reference.
10
<PAGE>
In 1989, the Company announced that it had authorized the purchase, from
time to time, of additional shares of its common stock for use in the Company's
benefit and shareholder plans and for general corporate purposes. As of December
31, 1993, 4.9 million common shares may be repurchased under this program.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None, other than those described under Item 11.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
EXHIBITS:
<TABLE>
<S> <C>
(10) (a) Form of Termination Agreement Tier I*
(b) Form of Termination Agreement, Tier II*
(c) Form of Termination Agreement, Tier III*
(11) Statement of Computation of Per Share Earnings
(13) 1993 Annual Report to Shareholders of the Company
(21) List of Significant Subsidiaries
(22) Proxy Statement, dated March 31, 1994
(23) Consent of Independent Public Accountants
(24) Power of Attorney
(99) (a) Management Incentive Plan*
(b) Long-Term Incentive Compensation Plan*
(c) Supplemental Unfunded Savings Plan for Senior Managers*
</TABLE>
- ------------------
* Previously filed in the Annual Report on Form 10-K, for the year ended
December 31, 1992.
REPORTS ON FORM 8-K
Current Reports on Form 8-K were filed by the Company on October 28, 1993,
February 9, 1994 and March 11, 1994.
FINANCIAL STATEMENT SCHEDULES
The consolidated balance sheets as of December 31, 1993 and 1992 and the
related consolidated statements of earnings, cash flows and common shareholders'
equity for each of the three years ended December 31, 1993 and the related Notes
to Consolidated Financial Statements, together with the report thereon of Arthur
Andersen & Co., dated February 4, 1994, appearing on pages 42 through 53 of the
Annual Report, are incorporated herein by reference. With the exception of the
aforementioned information and the information incorporated by reference in
Items 1, 2 and 5 through 8, the Annual Report is not to be deemed filed as part
of this report. The following additional financial data should be read in
conjunction with the financial statements in the Annual Report. Schedules not
included with this additional financial data have been omitted because they are
not applicable, or the required information is shown in the financial statements
or notes thereto.
11
<PAGE>
ADDITIONAL FINANCIAL DATA
1993, 1992 AND 1991
<TABLE>
<S> <C>
Report of Independent Public Accountants on Financial Statement Schedules ................................. 13
Consolidated Schedules:
V -- Property, Plant and Equipment.......................................................... 14-15
VI -- Accumulated Depreciation, Depletion and Amortization of Property, Plant and 16
Equipment..............................................................................
VIII -- Valuation and Qualifying Accounts...................................................... 17
IX -- Short-Term Borrowings.................................................................. 18
X -- Supplementary Earnings Statement Information........................................... 19
</TABLE>
12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
TO INTERNATIONAL PAPER COMPANY:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the Company's 1993 Annual
Report to Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 4, 1994. Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The
schedules listed in the accompanying index are the responsibility of the
Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN & CO.
New York, N.Y.
February 4, 1994
13
<PAGE>
SCHEDULE V
INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1993
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE AT RETIREMENTS, BALANCE AT
BEGINNING ADDITIONS SALES OR END OF
CLASSIFICATION (A) OF PERIOD AT COST RECLASSIFICATIONS PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plants, Properties and Equipment:
Mills................................................ $ 10,588 $ 554 $146 $ 10,996
Packaging plants..................................... 1,067 91 20 1,138
Wood products facilities............................. 1,082 77 (19) 1,178
Other plants, properties and equipment............... 1,801 172 108 1,865
-------- ----- ---- --------
Total........................................... $ 14,538 $ 894 $255 $ 15,177
-------- ----- ---- --------
-------- ----- ---- --------
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1992
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE AT RETIREMENTS, BALANCE AT
BEGINNING ADDITIONS SALES OR END OF
CLASSIFICATION (A) OF PERIOD AT COST RECLASSIFICATIONS(B) PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plants, Properties and Equipment:
Mills................................................ $ 9,194 $ 1,051 $ (343) $ 10,588
Packaging plants..................................... 922 110 (35) 1,067
Wood products facilities............................. 975 73 (34) 1,082
Other plants, properties and equipment............... 1,642 237 78 1,801
-------- ------- ------ --------
Total........................................... $ 12,733 $ 1,471 $ (334) $ 14,538
-------- ------- ------ --------
-------- ------- ------ --------
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1991
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE AT RETIREMENTS, BALANCE AT
BEGINNING ADDITIONS SALES OR END OF
CLASSIFICATION (A) OF PERIOD AT COST RECLASSIFICATIONS PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plants, Properties and Equipment:
Mills................................................ $ 8,459 $ 836 $101 $ 9,194
Packaging plants..................................... 791 166 35 922
Wood products facilities............................. 913 111 49 975
Other plants, properties and equipment............... 1,493 187 38 1,642
-------- ------- ---- --------
Total........................................... $ 11,656 $ 1,300 $223 $ 12,733
-------- ------- ---- --------
-------- ------- ---- --------
</TABLE>
- ------------------
(A) The Company does not maintain detailed property accounts for all of its
properties classified as to land, buildings, equipment, etc.
(B) Includes currency translation effects, write-downs of assets under the
productivity improvement program and reclassifications related to the
adoption of SFAS No. 109.
- ------------------
Note: Certain reclassifications have been made to prior-year amounts to conform
with the current-year presentation.
14
<PAGE>
SCHEDULE V
INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT--(CONTINUED)
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1993
- ------------------------------------------------------------------------------------------------------------------------------
COST OF
TIMBER
HARVESTED
BALANCE AT RETIREMENTS, CREDITED BALANCE AT
BEGINNING ADDITIONS SALES OR DIRECTLY END OF
CLASSIFICATION OF PERIOD AT COST RECLASSIFICATIONS TO ASSET PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Forestlands.................................... $759 $77 $(10) $(40) $786
---- --- ---- ---- ----
---- --- ---- ---- ----
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1992
- ------------------------------------------------------------------------------------------------------------------------------
COST OF
TIMBER
HARVESTED
BALANCE AT RETIREMENTS, CREDITED BALANCE AT
BEGINNING ADDITIONS SALES OR DIRECTLY END OF
CLASSIFICATION OF PERIOD AT COST RECLASSIFICATIONS TO ASSET PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Forestlands.................................... $743 $60 $(11) $(33) $759
---- --- ---- ---- ----
---- --- ---- ---- ----
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1991
- ------------------------------------------------------------------------------------------------------------------------------
COST OF
TIMBER
HARVESTED
BALANCE AT RETIREMENTS, CREDITED BALANCE AT
BEGINNING ADDITIONS SALES OR DIRECTLY END OF
CLASSIFICATION OF PERIOD AT COST RECLASSIFICATIONS TO ASSET PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Forestlands.................................... $751 $28 $(6) $(30) $743
---- --- --- ---- ----
---- --- --- ---- ----
</TABLE>
- ------------------
Note: Certain reclassifications have been made to prior-year amounts to conform
with the current-year presentation.
15
<PAGE>
SCHEDULE VI
INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1993
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE AT RETIREMENTS, BALANCE AT
BEGINNING SALES OR END OF
CLASSIFICATION OF PERIOD DEPRECIATION RECLASSIFICATIONS PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plants, Properties and Equipment:
Mills................................................ $4,031 $550 $ 70 $4,511
Packaging plants..................................... 460 66 15 511
Wood products facilities............................. 431 71 (7) 509
Other plants, properties and equipment............... 732 140 98 774
------ ---- ---- ------
Total........................................... $5,654 $827 $176 $6,305
------ ---- ---- ------
------ ---- ---- ------
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1992
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE AT RETIREMENTS, BALANCE AT
BEGINNING SALES OR END OF
CLASSIFICATION OF PERIOD DEPRECIATION RECLASSIFICATIONS PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plants, Properties and Equipment:
Mills................................................ $3,520 $535 $ 24 $4,031
Packaging plants..................................... 391 61 (8) 460
Wood products facilities............................. 355 65 (11) 431
Other plants, properties and equipment............... 619 121 8 732
------ ---- ---- ------
Total........................................... $4,885 $782 $ 13 $5,654
------ ---- ---- ------
------ ---- ---- ------
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1991
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE AT RETIREMENTS, BALANCE AT
BEGINNING SALES OR END OF
CLASSIFICATION OF PERIOD DEPRECIATION RECLASSIFICATIONS PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plants, Properties and Equipment:
Mills................................................ $3,115 $461 $ 56 $3,520
Packaging plants..................................... 370 49 28 391
Wood products facilities............................. 348 52 45 355
Other plants, properties and equipment............... 536 106 23 619
------ ---- ---- ------
Total........................................... $4,369 $668 $152 $4,885
------ ---- ---- ------
------ ---- ---- ------
</TABLE>
- ------------------
Note: Certain reclassifications have been made to prior-year amounts to conform
with the current-year presentation.
16
<PAGE>
SCHEDULE VIII
INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------------------------------------------------
BALANCE
BALANCE AT ADDITIONS ADDITIONS DEDUCTIONS AT END
BEGINNING CHARGED TO CHARGED TO FROM OF
DESCRIPTION OF PERIOD EARNINGS OTHER ACCOUNTS RESERVES PERIOD
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserves Applied Against Specific Assets
Shown on Balance Sheet:
Doubtful accounts--current................... $91 $29 $ 0 $(16)(A) $104
--- --- --- ---- ----
--- --- --- ---- ----
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1992
- --------------------------------------------------------------------------------------------------------------------------
BALANCE
BALANCE AT ADDITIONS ADDITIONS DEDUCTIONS AT END
BEGINNING CHARGED TO CHARGED TO FROM OF
DESCRIPTION OF PERIOD EARNINGS OTHER ACCOUNTS RESERVES PERIOD
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserves Applied Against Specific Assets
Shown on Balance Sheet:
Doubtful accounts--current................... $74 $23 $ 9 $(15)(A) $ 91
--- --- --- ---- ----
--- --- --- ---- ----
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1991
- --------------------------------------------------------------------------------------------------------------------------
BALANCE
BALANCE AT ADDITIONS ADDITIONS DEDUCTIONS AT END
BEGINNING CHARGED TO CHARGED TO FROM OF
DESCRIPTION OF PERIOD EARNINGS OTHER ACCOUNTS RESERVES PERIOD
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserves Applied Against Specific Assets
Shown on Balance Sheet:
Doubtful accounts--current................... $57 $32 $ 0 $(15)(A) $ 74
--- --- --- ---- ----
--- --- --- ---- ----
</TABLE>
- ------------------
(A) Primarily write-offs, less recoveries, of accounts determined to be
uncollectible.
17
<PAGE>
SCHEDULE IX
INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1993
- -------------------------------------------------------------------------------------------------------------------------
WEIGHTED
MAXIMUM AVERAGE AVERAGE
WEIGHTED AMOUNT AMOUNT INTEREST
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING RATE
CATEGORY OF AGGREGATE END OF INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD(3) PERIOD(4)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Notes payable(1).................................. $ 766 6.04% $ 1,266 $ 1,159 4.60%
Commercial paper and bank notes(2)................ $1,145 3.53% $ 1,174 $ 1,013 3.53%
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1992
- -------------------------------------------------------------------------------------------------------------------------
WEIGHTED
MAXIMUM AVERAGE AVERAGE
WEIGHTED AMOUNT AMOUNT INTEREST
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING RATE
CATEGORY OF AGGREGATE END OF INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD(3) PERIOD(4)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Notes payable(1).................................. $1,164 5.31% $ 1,164 $ 818 4.49%
Commercial paper and bank notes(2)................ $1,093 4.17% $ 1,098 $ 748 4.11%
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1991
- -------------------------------------------------------------------------------------------------------------------------
WEIGHTED
MAXIMUM AVERAGE AVERAGE
WEIGHTED AMOUNT AMOUNT INTEREST
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING RATE
CATEGORY OF AGGREGATE END OF INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD(3) PERIOD(4)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Notes payable(1).................................. $1,201 6.29% $ 1,201 $ 883 8.38%
Commercial paper and bank notes(2)................ $ 380 5.33% $ 585 $ 308 6.25%
</TABLE>
- ------------------
(1) Consists of domestic and international bank borrowings with various due
dates.
(2) Generally matures thirty days from date of issue with no provisions for
extension of maturity.
(3) Computed based on an average of month-end balances.
(4) Computed using monthly principal balances and stated month-end interest
rates.
18
<PAGE>
SCHEDULE X
INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY EARNINGS STATEMENT INFORMATION
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs.................................. $680 $667 $617
---- ---- ----
---- ---- ----
</TABLE>
19
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
INTERNATIONAL PAPER COMPANY
By: JAMES W. GUEDRY
----------------------------------
JAMES W. GUEDRY, SECRETARY
March 31, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
NAME TITLE DATE
- -------------------------------------------------------------- ----------------------- ---------------
<S> <C> <C>
JOHN A. GEORGES Chairman of the Board, March 31, 1994
- -------------------------------------------------------------- Chief Executive
(JOHN A. GEORGES) Officer and Director
JOHN T. DILLON* Executive Vice March 31, 1994
- -------------------------------------------------------------- President and Director
(JOHN T. DILLON)
WILLARD C. BUTCHER* Director March 31, 1994
- --------------------------------------------------------------
(WILLARD C. BUTCHER)
FREDERICK B. DENT* Director March 31, 1994
- --------------------------------------------------------------
(FREDERICK B. DENT)
WILLIAM M. ELLINGHAUS* Director March 31, 1994
- --------------------------------------------------------------
(WILLIAM M. ELLINGHAUS)
STANLEY C. GAULT* Director March 31, 1994
- --------------------------------------------------------------
(STANLEY C. GAULT)
THOMAS C. GRAHAM* Director March 31, 1994
- --------------------------------------------------------------
(THOMAS C. GRAHAM)
ARTHUR G. HANSEN* Director March 31, 1994
- --------------------------------------------------------------
(ARTHUR G. HANSEN)
WILLIAM G. KUHNS* Director March 31, 1994
- --------------------------------------------------------------
(WILLIAM G. KUHNS)
PATRICK F. NOONAN* Director March 31, 1994
- --------------------------------------------------------------
(PATRICK F. NOONAN)
DONALD F. MCHENRY* Director March 31, 1994
- --------------------------------------------------------------
(DONALD F. MCHENRY)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- -------------------------------------------------------------- ----------------------- ---------------
<S> <C> <C>
JANE C. PFEIFFER* Director March 31, 1994
- --------------------------------------------------------------
(JANE C. PFEIFFER)
SAMUEL R. PIERCE, JR.* Director March 31, 1994
- --------------------------------------------------------------
(SAMUEL R. PIERCE, JR.)
EDMUND T. PRATT, JR.* Director March 31, 1994
- --------------------------------------------------------------
(EDMUND T. PRATT, JR.)
ROGER B. SMITH* Director March 31, 1994
- --------------------------------------------------------------
(ROGER B. SMITH)
ROBERT C. BUTLER Senior Vice President March 31, 1994
- -------------------------------------------------------------- and Chief Financial
(ROBERT C. BUTLER) Officer
ANDREW R. LESSIN Controller and Chief March 31, 1994
- -------------------------------------------------------------- Accounting Officer
(ANDREW R. LESSIN)
By *By JAMES W. GUEDRY
-----------------------------------------------------------
(JAMES W. GUEDRY, ATTORNEY-IN-FACT)
</TABLE>
21
<PAGE>
APPENDIX I
1993 LISTING OF FACILITIES
PRINTING PAPERS
COATED AND UNCOATED
PAPERS AND BRISTOLS
Domestic:
Mobile, Alabama
Selma, Alabama
(Riverdale Mill)
Camden, Arkansas
Pine Bluff, Arkansas
Bastrop, Louisiana
(Louisiana Mill)
Springhill, Louisiana
(C&D Center)
Jay, Maine
(Androscoggin Mill)
Moss Point, Mississippi
Corinth, New York
(Hudson River Mill)
Oswego, New York
Ticonderoga, New York
Erie, Pennsylvania
Lock Haven, Pennsylvania
Georgetown, South Carolina
International:
Cali, Colombia
Coloto, Colombia
Strasbourg, France
(La Robertsau Mill)
Clermont-Ferrand, France
(Corimex Mill)
Annecy, France
(Cran Mill)
Saillat, France
Genoble, France
(Lancey and
Pont De Claix Mills)
Maresquel, France
Saint Die, France
(Anould Mill)
Bergisch Gladbach, Germany
(Gorhrsmuhle Mill)
Duren, Germany
(Reflex and Neumuhl Mills)
Kwidzyn, Poland
PAPER AND SPECIALTY PULPS
Selma, Alabama
(Riverdale Mill)
Jay, Maine
(Androscoggin Mill)
Natchez, Mississippi
Erie, Pennsylvania
Georgetown, South Carolina
Texarkana, Texas
FINE & PRINTING PAPERS
Strathmore Paper Company
Miller Falls, Massachusetts
Turners Falls, Massachusetts
Westfield, Massachusetts
West Springfield, Massachusetts
Woronoco, Massachusetts
Merrill, Wisconsin
Beckett Paper Company
Hamilton, Ohio
PACKAGING
CONTAINERBOARD
Domestic:
Mansfield, Louisiana
Pineville, Louisiana
Vicksburg, Mississippi
Gardiner, Oregon
International:
Arles, France
CORRUGATED CONTAINER
Domestic:
Mobile, Alabama
Russellville, Arkansas
Carson, California
Modesto, California
San Jose, California
Stockton, California
Putnam, Connecticut
Auburndale, Florida
Chicago, Illinois
Shreveport, Louisiana
Springhill, Louisiana
Presque Isle, Maine
Detroit, Michigan
Minneapolis, Minnesota
Geneva, New York
Tallman, New York
Statesville, North Carolina
Cincinnati, Ohio
Wooster, Ohio
Mount Carmel, Pennsylvania
Georgetown, South Carolina
Nashville, Tennessee
Dallas, Texas
Edinburg, Texas
El Paso, Texas
Delevan, Wisconsin
Fond du Lac, Wisconsin
International:
Las Palmas, Canary Islands
Arles, France
Chalon-sur-Saone, France
Chantilly, France
Creil, France
LePuy, France
Mortagne, France
Guadeloupe, French West Indies
Martinique, French West Indies
Bellusco, Italy
Catania, Italy
Pedemonte, Italy
Pomezia, Italy
San Felice, Italy
Barcelona, Spain
Bilbao, Spain
Valladolid, Spain
Winsford, United Kingdom
A-1
<PAGE>
BLEACHED BOARD
Pine Bluff, Arkansas
Bastrop, Louisiana
(Louisiana Mill)
Moss Point, Mississippi
Georgetown, South Carolina
Texarkana, Texas
LIQUID PACKAGING
Domestic:
Turlock, California
Plant City, Florida
Atlanta, Georgia
Cedar Rapids, Iowa
Kansas City, Kansas
Framingham, Massachusetts
Kalamazoo, Michigan
Raleigh, North Carolina
Philadelphia, Pennsylvania
International:
Edmonton, Alberta, Canada
Burnaby, British
Columbia, Canada
London, Ontario, Canada
Longueil, Quebec, Canada
Santiago, Dominican Republic
Tel Aviv, Israel
Perugia, Italy
Kingston, Jamaica
Tokyo, Japan
Seoul, Korea
Taipei, Taiwan
Caracas, Venezuela
FOLDING CARTON
Clinton, lowa
Hopkinsville, Kentucky
Raleigh, North Carolina
Cincinnati, Ohio
Richmond, Virginia
LABEL
Commerce, California
Newark, California
Peoria, Illinois
Bowling Green, Kentucky
KRAFT PACKAGING
Mobile, Alabama
Camden, Arkansas
Jay, Maine (Androscoggin Mill)
Moss Point, Mississippi
GROCERY BAGS & SACKS
Mobile, Alabama
Jackson, Tennessee
MULTIWALL BAGS
Camden, Arkansas
Pittsburg, Kansas
Wilmington, Ohio
ENVELOPES
Glendale, California
Los Angeles, California
San Francisco, California
Chicago, Illinois
Westfield, Massachusetts
Richmond, Virginia (2 plants)
DISTRIBUTION
WHOLESALE AND RETAIL DISTRIBUTION
(255 distribution branches)
ResourceNet
International/Domestic:
Arvey Paper and Office Products
Chicago, Illinois
25 locations nationwide
Carter Rice
Boston, Massachusetts
16 branches in New England,
Middle Atlantic States
and District of Columbia
CDA Distributors
Erlanger, Kentucky
21 branches in the Midwest,
South, New England and
Middle Atlantic States
Dillard Paper
Greensboro, North Carolina
85 branches in the Middle
Atlantic States and
Southeast
Dixon Paper Company
Denver, Colorado
23 branches in the West and
Midwest
Industrial Materials Distributors
Erlanger, Kentucky
13 branches in New England,
and Middle Atlantic States,
Midwest, South and West
Ingram Paper
City of Industry, California
7 locations in the
Southwest and Hawaii
JB Papers, Inc.
Union, New Jersey
3 locations in the
Northeast
Leslie Paper Company
Minneapolis, Minnesota
16 locations in the
Midwest
Western Pacific
Portland, Oregon
3 locations in the Northwest
Western Paper Company
Overland Park, Kansas
43 branches in the West,
Midwest and South
A-2
<PAGE>
International:
Plastic & Paper Sales, Ltd.
Toronto, Ontario, Canada
Aussedat Rey France
Distribution S.A., Pantin, France
Scaldia Papier BV,
Nijmegen, Netherlands
Masonite CP Ltd.
Leeds, United Kingdom
FOREST PRODUCTS
Domestic:
Maplesville, Alabama
Tuscaloosa, Alabama
Gurdon, Arkansas
Leola, Arkansas
Whelen Springs, Arkansas
DeRidder, Louisiana
Springhill, Louisiana
Morton, Mississippi
Wiggins, Mississippi
Joplin, Missouri
Pleasant Hill, Missouri
Madison, New Hampshire
Sampit, South Carolina
Henderson, Texas
Mineola, Texas
Nacogdoches, Texas
New Boston, Texas
Building Products
Ukiah, California
Lisbon Falls, Maine
Laurel, Mississippi
Gulfport, Mississippi
Fiberboard
Spring Hope, North Carolina
Pilot Rock, Oregon
Marion, South Carolina
Particleboard
Danville, Virginia
Stuart, Virginia
Waverly, Virginia
Slaughter
Dallas, Texas
2 branches in the Southwest
and Northwest
McEwen Lumber Company
High Point, North Carolina
14 branches in the Southeast
International:
INTAMASA
Cella, Spain
Masonite Africa Limited
Estcourt Plant
Ezebilt Products (PTY) Ltd.
FORESTLANDS
Approximately 6.2 million
acres in the South, Northeast
and Northwest
REALTY PROJECTS
Haig Point Plantation
Daufuskie Island, South Carolina
SPECIALTY PRODUCTS
NONWOVEN PRODUCTS
Domestic:
Athens, Georgia
Griswoldville, Massachusetts
Walpole, Massachusetts
Lewisburg, Pennsylvania
Bethune, South Carolina
Green Bay, Wisconsin
International:
Liege, Belgium
Toronto, Ontario, Canada
Yokohama, Japan
Braunton, United Kingdom
Hong Kong
IMAGING PRODUCTS
Domestic:
Jacksonville, Florida
Holyoke, Massachusetts
Binghamton, New York
International:
Melbourne, Australia
Saint-Priest, France
Munich, Germany
Mobberley, Great Britain
Morley, Great Britain
Fribourg, Switzerland
CHEMICAL PRODUCTS
Domestic:
Panama City, Florida
Pensacola, Florida
Port St. Joe, Florida
Oakdale, Louisiana
Springhill, Louisiana
Gulfport, Mississippi
Picayune, Mississippi
International:
Sandarne, Sweden
Greaker, Norway
MINERALS
Alvin, Texas
Houston, Texas
Midland, Texas
SPECIALTY PANELS AND LAMINATED PRODUCTS
Domestic:
Chino, California
Cordele, Georgia
Elkhart, Indiana
Newton, Kansas
Glasgow, Kentucky
Louisville, Kentucky
Monticello, Kentucky
Odenton, Maryland
Montevideo, Minnesota
Statesville, North Carolina
Tarboro, North Carolina
Towanda, Pennsylvania
Portland, Tennessee
Marshfield, Wisconsin
Oshkosh, Wisconsin
International:
Bergerac, France (Couze Mill)
Ussel, France
Barcelona, Spain (Durion Mill)
INDUSTRIAL AND PACKAGING PAPERS
Thilmany Pulp & Paper Company
Knoxville, Tennessee
Kaukauna, Wisconsin
Nicolet Paper Company
De Pere, Wisconsin
Jay, Maine
(Androscoggin Mill)
Akrosil
Domestic:
Menasha, Wisconsin
Lancaster, Ohio
International:
Limburg, Netherlands
A-3
<PAGE>
(INTERNATIONAL PAPER LOGO)
PRINTED ON HAMMERMILL PAPERS ACCENT OPAQUE, 50 LBS.
HAMMERMILL PAPERS IS A DIVISION OF INTERNATIONAL PAPER.
<PAGE>
EXHIBIT INDEX
Exhibits: Page No.
--------- --------
(10)(a) Form of Termination Agreement Tier I*
(b) Form of Termination Agreement, Tier II*
(c) Form of Termination Agreement, Tier III*
(11) Statement of Computation of Per Share Earnings
(13) 1993 Annual Report to Shareholders of the Company
(21) List of Significant Subsidiaries
(22) Proxy Statement, dated March 31, 1994
(23) Consent of Independent Public Accountants
(24) Power of Attorney
(99)(a) Management Incentive Plan*
(b) Long-Term Incentive Compensation Plan*
(c) Supplemental Unfunded Savings Plan for Senior Managers*
- ----------
* Previously filed in the Annual Report on Form 10-K, for the year ended
December 31, 1992.
<PAGE>
Exhibit 11
INTERNATIONAL PAPER COMPANY
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31
---------------------------------
1993 1992 1991
---------- --------- ----------
<S> <C> <C> <C>
Net earnings $ 289 $ 86 $ 184
Debenture interest savings, net of taxes,
assuming conversion of convertible
subordinated debentures * * *
-------- ------- -------
Primary and fully diluted net earnings $ 289 $ 86 $ 184
-------- ------- -------
-------- ------- -------
Earnings per common share $ 2.34 $ 0.71 $ 1.66
-------- ------- -------
-------- ------- -------
Primary and fully diluted earnings per share $ 2.34 $ 0.71 $ 1.66
-------- ------- -------
-------- ------- -------
PRIMARY SHARES
Average shares outstanding 123.2 121.4 110.5
Shares assumed to be repurchased using
long-term incentive plan deferred compensation
at average market price (0.4) (0.3) (0.3)
Shares assumed to be issued upon exercise
of stock options, net of treasury buyback
at average maket price 0.4 0.5 0.6
Shares assumed to be issued upon conversion
of convertible subordinated debentures * * *
-------- ------- -------
Primary shares 123.2 121.6 110.8
-------- ------- -------
-------- ------- -------
FULLY DILUTED SHARES
Average shares outstanding 123.2 121.4 110.5
Shares assumed to be repurchased using
long-term incentive plan deferred compensation
at year-end market price
(if higher than average market price) (0.3) (0.3) (0.3)
Shares assumed to be issued upon exercise
of stock options, net of treasury buyback
at year-end market price (if higher than
average market price) 0.5 0.5 0.8
Shares assumed to be issued upon conversion
of convertible subordinated debentures * * *
-------- ------- -------
Fully diluted shares 123.4 121.6 111.0
-------- ------- -------
-------- ------- -------
</TABLE>
- --------------
The Company reports earnings per common share as the effect of dilutive secur-
ities is less than 3%.
* Convertible subordinated debentures are antidilutive in 1993, 1992 and 1991.
<PAGE>
International Paper 1993 Annual Report
Financial Highlights
Dollar amounts and shares in millions,
except per share amounts 1993 1992
- -------------------------------------- ------- -------
FINANCIAL SUMMARY
Net Sales $13,685 $13,598
Operating Profit 832 570 1
Earnings Before Income Taxes,
Extraordinary Item and Cumulative
Effect of Accounting Change 500 206 2
Earnings Before Extraordinary Item and
Cumulative Effect of Accounting
Change 289 3 142 4
Net Earnings 289 3 86 5
Total Assets 16,631 16,516
Common Shareholders' Equity 6,225 6,189
Return on Equity 4.7% 6 1.4% 6
PER SHARE OF COMMON STOCK
Earnings Before Extraordinary Item and
Cumulative Effect of Accounting
Change 2.34 3 1.17 4
Net Earnings 2.34 3 .71 5
Cash Dividends 1.68 1.68
Common Shareholders' Equity 50.25 50.46
SHAREHOLDER PROFILE
Shareholders of Record at December 31 31,750 33,722
Shares Outstanding at December 31 123.9 122.7
Average Shares Outstanding 123.2 121.4
1 $906 million before restructuring and other charges.
2 $604 million before restructuring and other charges.
3 $314 million ($2.54 per share) before $25 million ($.20 per share) of
additional income tax expense to revalue deferred tax balances to
reflect the increase in the U.S. statutory federal income tax rate.
4 $405 million ($3.34 per share) before restructuring and other charges.
5 Includes an after-tax charge of $50 million ($.41 per share) for the
cumulative effect of the adoption of SFAS No. 109.
6 Return on equity was 5.1% in 1993 before the additional income tax
expense. Return on equity was 6.3% in 1992 before the accounting change,
extraordinary item and restructuring and other charges.
Performance Profile
(BAR CHARTS-Appendix A Nos. 1, 2 and 3)
2
<PAGE>
The Reason...
OUR STRENGTH
IN PRINTING PAPERS
(PHOTO-Appendix B No. 1)
Caption
Right: Atapco wanted bright colors for their new line of file folders.
We worked with them to get the colors exactly right. Here Randy Austin
and David Ruff of Printing Papers respond as Atapco's David Hutchison
inspects the final product.
(PHOTO-Appendix B No. 2)
Caption
Far right: Our Corporate Research Center in Tuxedo, N.Y., uses
state-of-the-art laser equipment to ensure that our printing papers are
superior.
Printing Papers serves customers around the world with a wide variety of
products. Our mill system gives us a strong competitive position as
recent capital investments in both Europe and the United States,
combined with cost reduction programs, have increased our efficiency.
With the start-up of new recycling facilities, we are also a leader in
the growing products market segment.
In Uncoated Papers, International Paper is the world's largest producer
of uncoated freesheet, with U.S. production of more than two million
tons representing 17 percent of U.S. supply. These products include
reprographic papers, offset printing papers, and grades that customers
convert for such uses as envelopes and forms. Market franchises include
the renowned Springhill, Hammermill, Strathmore and Beckett brands. In
Coated Papers, International Paper ranks second among U.S. coated
groundwood producers. Our Bristols products are heavyweight papers used
in a variety of end uses, including tags, posters, file folders and
tickets. We also manufacture Pulp, including specialty pulps used to
make rayon and acetate products, fluff pulp for diapers and paper pulps.
A GROWING INTERNATIONAL PRESENCE
International Paper is one of the few U.S. paper companies with a major
international presence, giving us access to large markets where growth
in paper use will continue to exceed that of the United States. Europe
has been the focus of our global expansion, with European-based sales
increasing from 12 percent of our total sales in 1989 to 19 percent in
1993. In Printing Papers, European sales were $1 billion in 1993, one
fourth of the segment total. Aussedat Rey, our subsidiary in France, is
Europe's second largest producer of reprographic papers. Zanders, in
Germany, sells internationally acclaimed coated freesheet papers to more
than 100 countries worldwide. Zanders products are less price-sensitive
to cyclical trends than other papers. Kwidzyn, our printing papers mill
in Poland, is ideally located to serve the growing Eastern European
markets as economic development and industrialization continue there.
Kwidzyn products are also distributed in Western Europe through our
Aussedat Rey distribution system. Cooperative efforts among our
6
<PAGE>
WHY?
o Reprographics, our largest grade, is the fastest growing segment of
the uncoated papers market.
o A leadership position in recycled papers, as increasing numbers of
consumers express their preference for recycled products.
o A commitment to product quality and excellent customer service.
o The ability to provide customers with a diverse array of products.
o Good positioning for a rebound in Europe as improvements at our mills
there have increased productivity and cost efficiency.
(PHOTO-Appendix B No. 3)
Caption
Right: The foundation is laid for a new office papers machine with
recycling capability at our Riverdale mill near Selma, Ala.
7
<PAGE>
WHY?
o Zanders, a producer of the world's finest coated papers.
o Strathmore and Beckett, strongly positioned as premier producers of
fine specialty papers.
o Hammermill and Springhill, long-respected brands in the United
States.
o Adirondack, Saratoga and Miraweb II, high-quality recycled coated
papers.
o Dissolving pulp, a high-value specialty product and a major part of
our pulp business.
o Responsive product development and innovation through state-of-the-art
technology and research.
(PHOTO-Appendix B No. 4)
Caption
Right: With multiple manufacturing locations and an excellent
distribution system, Aussedat Rey is ready to serve the growing European
markets.
8
<PAGE>
European operations, as well as with our U.S. operations, continue to
increase, leading to improved efficiencies.
A LEADER IN RECYCLING
An important strength of International Paper is the progress we have
made in meeting our customers' growing desire for recycled products. We
market nearly 100 different printing and writing grades that include
varying amounts of recycled fiber ranging from 10 to 100 percent. In
1993, we introduced the Springhill Incentive 100 and Unity brands. These
printing and reprographic papers, the nation's first manufactured
entirely from newspapers, magazines and catalogs, are produced at our
Lock Haven, Pa., mill using a de-inking process licensed exclusively by
International Paper.
(PHOTO-Appendix B No. 5)
Caption
Above: Our Lock Haven, Pa., mill is the first to make high-quality
office papers from newspapers, magazines and catalogs. The facility will
use 100,000 tons of waste paper annually.
International Paper holds a leadership position in recycled coated
grades with its Adirondack, Saratoga and Miraweb II publication grades.
In April 1993, we strengthened this position with the start-up of a
proprietary de-inking process at our Hudson River mill in Corinth, N.Y.
At our Androscoggin mill in Jay, Maine, de-inked pulp from our Lock
Haven, Pa., mill will be used in coated publication papers.
A major expansion to produce recycled papers is under way at our
Riverdale mill near Selma, Ala. It includes a 360,000-ton-per-year paper
machine and a 140,000-ton-per-year de-inking plant. The project will
significantly expand our ability to meet the growing demand for recycled
office papers as well as our capacity to produce reprographic papers,
the fastest growing segment of the uncoated freesheet market. Start-up
is expected by mid-1995.
A STRONG COMPETITIVE POSITION
International Paper's large, flexible mill system has the machine mix and
mill scale to support a wide breadth of products. Our goal is to meet
the needs of our customers 100 percent of the time while continually
making our system more efficient. Selective capital investments have
enabled us to lower costs and improve productivity throughout our
system.
Significant expenditures have been made in recent years in Europe as we
modernized or upgraded our mills at Aussedat Rey, Zanders and Kwidzyn,
improving efficiency while increasing quality and customer service.
Aussedat Rey has made great strides in trimming costs with the start-up
in early 1993 of a world-class pulp mill at Saillat, France, that will
significantly reduce system-wide manufacturing costs. At Zanders, the
1992 start-up of a new paper machine has maximized the production of
high-quality base papers for three key product lines. Kwidzyn is a
modern mill with competitive costs. Since acquiring it in 1992, we have
made significant improvements in product quality while reducing
manufacturing costs through improved technology. The first of Kwidzyn's
four machines was rebuilt in 1993 under a $175 million improvement
program. The program will continue with the rebuilding of two other
machines in the first half of 1994.
Domestically, we have focused on investing in low-cost capacity and
making our existing capacity more productive. Our new de-inking facility
at Lock Haven has improved the cost position of the mill through the use
of a low-cost fiber resource. Previously, the mill was nonintegrated. At
Riverdale, the new machine will be highly efficient and, along with
other actions, will reduce our overall uncoated papers cost position by
$50 per ton. Throughout our mill system, we have the flexibility to move
product lines to the most efficient paper machines, giving us the
ability to further reduce our cost base and support more than one
business.
9
<PAGE>
Financial Review
PRINTING PAPERS
(BAR CHARTS-Appendix A No. 4)
Sales of Uncoated Papers, representing 51 percent of segment sales,
increased slightly in 1993 following a decline of 2 percent in 1992.
Although a loss was incurred, 1993 U.S. operating results showed
improvement over 1992 mainly due to price recovery. European results,
however, declined. Overall, 1993 results improved after a sharp
reduction in 1992.
U.S. prices moved up steadily until late in 1993 when
they weakened. However, prices at year-end were about $50 per ton higher
than at the end of 1992. In Europe, sharply lower volumes and prices
caused sales to decline by 13 percent. Operating margins were further
reduced when currencies of our export customers were devalued against
the French franc and German mark. Additionally, the devaluation of
Scandinavian currencies provided cost advantages to these producers,
causing price erosion in almost every market.
For 1994, we estimate that the increase in U.S. industry shipments of
uncoated papers will slightly exceed GDP growth, and operating rates
will sustain price increases. These factors, combined with cost
reduction efforts and the expansion of our line of recycled products,
should improve profitability. We expect 1994 operating results in Europe
to improve as local economies recover. Aussedat Rey implemented a price
increase in early 1994. Operating efficiency should also improve as
demand and sales volumes recover.
Sales of Coated Papers represented 26 percent of segment sales in 1993
compared with 30 percent in 1992 and 1991. Sales declined 12 percent in
1993 (although U.S. sales increased, European sales fell by 21 percent)
after a slight decline in 1992.
Continued low levels of magazine advertising and a surge of imports from
Europe limited our ability to raise prices in the United States. After a
midyear increase, prices retreated to levels slightly above those at
the beginning of the year. For the year, U.S. operating results improved
somewhat but were offset in Europe, where both volumes and prices
declined. Prices for Zanders premium coated products, however, were
relatively stable.
For 1994, we expect recovery in U.S. magazine advertising and growth in
catalogs and direct mail to increase demand for coated products. Price
recovery, however, will depend on the level of imports. In Europe, we
expect operating results to improve as volumes recover and aggressive
cost reduction efforts continue.
Bristols contributed about 8 percent to segment sales. Operating profits
declined 25 percent in 1993 versus a 37 percent decline in 1992. A 12
percent increase in volume was more than offset by lower average prices.
We expect profitability to improve in 1994 as our new product efforts
and marketing programs continue.
Pulp accounted for 15 percent of segment sales in 1993, up from 14
percent in 1992 and 1991.
Weak export markets, high industry inventories and a stronger U.S.
dollar led to weaker paper pulp prices. Additionally, the growing use of
thinner disposable diapers and increased industry capacity depressed
fluff pulp prices. These conditions resulted in an operating loss in
1993. Operating profit declined 5 percent in 1992.
We increased prices on paper pulps in early 1994 as wood shortages in
Scandinavia and increased paper output tightened supplies. However, we
expect pulp earnings to remain under pressure throughout the year.
Longer term improvement will depend on a stronger worldwide economy.
10
<PAGE>
RESULTS
(PIE CHART-Appendix A No. 5)
(PHOTO-Appendix B No. 6)
Caption
Net sales for Printing Papers were $3.9 billion in 1993, down from $4.0
billion in 1992 and $4.1 billion in 1991. An operating loss of $122
million was recorded in 1993 compared with a loss of $70 million (a
profit of $19 million before unusual items) in 1992 and profits of $298
million ($318 million before unusual items) in 1991.
Weak economic conditions, particularly in Europe, and excess capacity in
key product lines lowered operating profits for both our domestic and
European operations. U.S. pricing for uncoated papers increased slightly
in 1993.
We expect price recovery as the U.S. economy strengthens and European
business conditions improve.
Actions to improve our costs and expand our offerings of recycled
products also position International Paper favorably.
11
<PAGE>
The Reason...
OUR STRENGTH
IN PACKAGING
(PHOTO-Appendix B No. 7)
Caption
Right: Our liquid packaging division serves a wide variety of customer
needs worldwide with our full line of packaging materials and filling
systems--a key to success in this global market.
(PHOTO-Appendix B No. 8)
Caption
Far Right: Our container division's superior graphics capabilities
enable us to transform our customers' boxes into powerful sales
promotions.
International Paper's Packaging businesses provide customers with
high-performance products and innovative packaging solutions. Our mills
are efficient and flexible due to investments aimed at quality and
productivity.
Industrial Packaging produces more than two million tons of
containerboard annually. About 60 percent of this is converted by
International Paper's 25 U.S. container plants. We also operate 19
plants throughout Western Europe, making us the second largest producer
of corrugated boxes in the European Community.
Consumer Packaging supplies worldwide markets with the Everest line of
bleached products for folding cartons, liquid packaging for milk and
juice, and food service products such as cups, plates and trays.
International Paper is the world's largest producer of bleached
packaging board, with a 15 percent share, and is the largest U.S.
supplier to international markets. Our Evergreen Packaging Equipment
subsidiary makes machines for filling gable-top cartons.
Kraft Packaging offers the widest range of kraft paper and packaging in
the industry.
EXPANDING SPECIALTY PRODUCTS
International Paper strives to meet customers' needs for
high-performance and specialty products that are cost-effective and
solve packaging problems. This is a win-win strategy as it helps sustain
our earnings during downturns, secures higher prices for our products
and makes entry by competitors more difficult. Our containerboard
division has repositioned its product mix to 33 percent in specialty
grades. By 1997, we plan to increase specialty grades to 40 percent of
the mix. Because visual-appeal grades are expected to grow at three to
four times the rate of conventional kraft linerboard, we recently
reentered the mottled-white market with our KlaWhite brand.
The process of upgrading product mix--a Company-wide strategy--will
continue.
INNOVATIVE PRODUCTS: KEY TO GROWTH
Our container division is an industry leader in design innovations,
notable in the produce markets for its inventive designs for grape and
lettuce boxes. In 1994, we will introduce a new line of
12
<PAGE>
WHY?
o An integrated company offering a wide variety of quality packaging
materials, design capabilities and manufacturing processes.
o A successful strategy focused on growing higher margin, value-added
products.
o A passion for quality and commitment to meet customers' expectations
100 percent of the time.
o The foresight to anticipate the needs of tomorrow and develop new
products to meet those needs.
o High-quality Everest bleached board, widely recognized by discerning
customers.
(PHOTO-Appendix B No. 9)
Caption
Right: We serve a broad base of customers representing the world's most
respected and successful companies.
13
<PAGE>
WHY?
o A flexible mill system that allows production shifts to meet market
needs.
o Modern world-class bleached board mills.
o Dedication to a partnership approach that offers customers higher
quality products, better value and greater satisfaction.
o The supplier of choice for many leading companies.
o Market leaders PineLiner superior stacking-strength containerboard and
ColorBrite premium printing grades.
(PHOTO-Appendix B No. 10)
Caption
Right: International Paper actively promotes milk and juice carton
recycling nationwide. Shown here are students in Montoursville, Pa.,
contributing to their community's efforts.
14
<PAGE>
corrugated pallets that are reuseable, reduce customers' shipping costs
with their light weight and are recyclable.
Because environmental concerns are critical to our customers, our liquid
packaging division has responded with creative solutions. One example is
Space-Pak, a half-pint milk carton used widely in schools. It flattens
when pressed along scores on two sides, reducing volume and taking less
space in landfills. Among other new products, one developed by our
folding carton division is an environmentally friendly paperboard
beverage ring, designed to replace plastic six-pack carriers. And the
eat-in-tray, made with dual-ovenable QRX board, allows food to be
packaged, heated and served all in one package.
(PHOTO-Appendix B No. 11)
Caption
Above: The graphic design department at our new label plant in Bowling
Green, Ky., provides creative support to help food packagers comply with
new U.S. food-labeling regulations.
A DEDICATION TO QUALITY
The quality of our containerboard is among the highest in the industry.
PineLiner superior stacking-strength containerboard and ColorBrite
premium printing grades are market leaders in high-growth segments.
Everest bleached board is recognized as one of the best in the industry
and commands a premium price in the marketplace. It offers an
exceptional printing surface, important in high-end folding carton
applications.
The Quality Improvement Process is an ongoing program aimed at improving
our products and service as we strive to meet customer expectations 100
percent of the time. International Paper also supports the goals of the
International Standards Organization (ISO), an internationally
recognized effort that seeks a global standard of quality control and
quality assurance systems. We use the ISO 9000 series as a benchmark for
identifying opportunities for improvement. In 1993, mills at Pine Bluff,
Ark., and Pineville, La., and container plants in Arles, Creil and
Mortagne, France, successfully completed the ISO registration process.
FINANCIAL STRENGTH LEADS TO IMPROVEMENT
International Paper's balance sheet is one of the strongest in the paper
industry. This strength has allowed us to improve and modernize our
facilities, transforming International Paper into one of the industry's
lowest cost producers. Investments also foster improvements in quality
and new products.
One such project was the completion in 1993 of a new label plant in
Bowling Green, Ky. Equipped with high-speed presses and a sophisticated
electronic prepress system, the plant will design and produce labels for
a broad range of food and consumer products. Whereas industry turnaround
for lables is three to four weeks, we are targeting a much shorter cycle
time.
A proposed new machine to produce recycled containerboard at our
Mansfield, La., mill will provide new grades and will enable us to add
recycled fiber to the two existing machines there. A decision on this
project is expected in 1994.
GROWTH IN EXPORT MARKETS
International Paper is a primary exporter of containerboard to China,
Japan and Europe, with long-standing relationships in each of these
regions. We will continue to expand our presence in these markets as
well as in Latin America, where our specialty grades are compatible with
the major end-use markets, particularly agricultural products. Overseas
markets show great potential for the future. In 1993, we introduced new
high-speed aseptic filling equipment and wrote our first orders for
Evergreen equipment and packaging materials in China, Russia and Brazil.
Finally, the expansion of our Raleigh, N.C., plant will allow us to
produce aseptic packaging for worldwide markets.
15
<PAGE>
Financial Review
PACKAGING
(BAR CHARTS-Appendix A No. 6)
Industrial Packaging accounts for just over 50 percent of segment sales.
Operating profits declined by 67 percent from 1992 due to depressed
U.S. and international economies, major shifts in exchange rates and
significant price erosion. In 1992, operating profits were slightly
ahead of 1991.
Despite 1993 growth of more than 5 percent in U.S. box shipments,
containerboard prices weakened until the final quarter of the year.
Increased U.S. consumption of containerboard was not sufficient to
offset a decline of 6 percent in exports. Containerboard inventories
declined, reaching a six-year low in October. These factors allowed
implementation of a $25 per-ton price increase in the United States in
the fourth quarter.
The U.S. container division benefited from increased demand for
high-performance linerboard for poultry and other food applications.
Competitive conditions, however, adversely affected prices. Despite
depressed economic conditions throughout Europe, our international
container division remained a strong contributor to earnings in 1993.
We are optimistic about 1994. U.S. containerboard capacity is expected
to grow at a rate of less than 2 percent in 1994, with operating rates
above 95 percent. Exports should recover as European economies improve
and China replenishes low inventories. Another price increase of $30 per
ton has been announced in the United States, as well as in European and
Asian markets.
Consumer Packaging accounted for 37 percent of segment sales in 1993
compared with 36 percent in 1992 and 39 percent in 1991. Operating
profits declined by 30 percent, after falling by 27 percent in 1992.
The principal source of pressure on bleached board industry profits over
the past few years has been a relatively rapid expansion in capacity,
forcing operating rates steadily downward. Over-supply, combined with
sharp devaluation of Scandinavian currencies in late 1992, has led to
aggressive pricing across world markets. Prices for major grades, which
began to decline in 1991, fell an additional 10 percent in 1993. Strong
customer acceptance of our high-quality Everest product line helped
limit the decline in operating profits. Prices for liquid packaging
products were also lower in 1993 and we incurred costs to realign
production facilities.
While we expect U.S. consumption of bleached folding carton board to
increase in 1994, we believe that industry operating rates will remain
static as the full impact of new capacity reaches the market and the
1993 buildup of inventory is consumed. Prices are trending downward,
with only limited recovery expected by late 1994. However, liquid
packaging results are expected to benefit from restructuring and
product development efforts.
Kraft Packaging contributed 13 percent of segment sales in 1993 and 12
percent in 1992. Operating profits declined 34 percent from 1992 due to
lower prices. We expect earnings to improve in 1994, as a result of
operating enhancements and modest price improvements.
16
<PAGE>
RESULTS
(PIE CHART-Appendix A No. 7)
Packaging net sales were $3.1 billion in 1993 compared with $3.2 billion
in 1992 and $3.0 billion in 1991. Operating profits declined to $188
million in 1993 from $308 million ($330 million before unusual items)
in 1992 and $334 million ($346 million before unusual items) in 1991.
The decline in earnings in 1993 and 1992 is attributable to weak
economic conditions, eroding prices in key product lines, and sharp
devaluation of Scandinavian currencies.
A program of cost reduction and efficiency improvement has established a
base for an earnings rebound as general business conditions improve in
1994.
(PHOTO-Appendix B No. 12)
Caption
17
<PAGE>
The Reason...
OUR STRENGTH
IN DISTRIBUTION
(PHOTO-Appendix B No. 13)
Caption
Right: ResourceNet International's sales and marketing reach, as well as
its coordinated operations, enables us to serve customers across the
United States.
ResourceNet International, our U.S.- based distribution business in more
than 250 North American locations, offers 30,000 different products and
serves as a link between customers and the many suppliers of printing
papers, industrial packaging, janitorial and maintenance supplies,
graphic arts supplies and equipment, and other products.
ResourceNet International is joined by International Paper's Scaldia and
Aussedat Rey subsidiaries in Europe.
About 20 percent of Distribution sales are products produced by
International Paper's own facilities.
COORDINATED OPERATIONS
International Paper's distribution group adopted the name ResourceNet
International in 1993, reflecting the broad resources and value we bring
to customers in local and national markets. Shared inventories and an
exchange of marketplace data and operational procedures help achieve
cost savings and superior service capabilities. ResourceNet
International's coordinated operations foster national relationships
while meeting the needs of customers at the local level. For an
increasing number of customers, ResourceNet International is a
single-source supplier, providing everything from office supplies to
industrial products. These national accounts capitalize on ResourceNet
International's strengths, including its broad geographic reach and
responsive service.
Further coordinating its operations, ResourceNet International has
pushed ahead on the implementation of a market-focused information
system to enhance on-time delivery and inventory availability while
helping reduce operating costs.
HIGHLY QUALIFIED PEOPLE
ResourceNet International's 6,000 employees are among the most skilled
and experienced in the business. With only a few proprietary
products--most of our products are also sold by our competitors--we
differentiate ourselves by providing problem-solving services to
thousands of customers. Technical services are the critical advantage we
bring to the markets we serve.
MARKET POSITION
The ability to represent the best suppliers in the world, economically
taking their products to market, is key to our success. Continued growth
and ever-broadening geographic coverage enhance our value to both
suppliers and customers.
18
<PAGE>
WHY?
o A group of top-flight local and regional distribution companies that
supplies a broad selection of competitively priced products and valuable
services to customers here and abroad.
o Coordinated operations of our national accounts group that foster
national relationships as well as meet customers' needs at the local
level.
o Our employees, among the most skilled and experienced in the industry,
who provide problem-solving and technical service.
o The ability to represent the best suppliers in the world, economically
taking their products to market.
(PHOTO-Appendix B No. 14)
Caption
Right: ResourceNet International delivers to more than 200 Kinko's
locations nationwide.
19
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Financial Review
DISTRIBUTION
(BAR CHARTS-Appendix A No. 8)
Net sales for Distribution were $3.1 billion in 1993, up from $3.0
billion in 1992 and $2.6 billion in 1991. Operating profits for 1993
were $58 million compared with $52 million ($58 million before unusual
items) in 1992 and $53 million ($54 million before unusual items) in
1991. Acquisitions, aggressive marketing and cost control enabled us to
achieve solid results despite a sluggish printing market and a
competitive climate for reprographic papers.
Earnings of ResourceNet International, our U.S.-based distribution
business, increased 5 percent in 1993 after growing 10 percent in 1992.
Overall margins were down slightly in 1993, the result of a shift in the
sales mix toward direct sales. Margins on warehouse sales were
maintained and profits improved as we progressed in coordinating
nationwide operations. These changes began with the establishment of
geographic trading regions in early 1991 and included investments in
marketing, customer service and distribution logistics.
The benefits of these investments are being realized in the Greater
Boston market, where ResourceNet International is reconfiguring its
regional distribution system. Carter Rice, a fine paper merchant, and
The Dowd Company, an industrial products merchant, are joining to form a
single merchant organization that will capitalize on the strengths of
both businesses. The new Carter-Rice-Dowd organization will realize
additional efficiencies by consolidating sales, warehouse and
administrative functions. In other major markets, ResourceNet
International has identified similar opportunities and continues to
pursue them.
Significant resources have been committed to training sales and support
organizations and to the development of an integrated business and
customer information system.
In 1993, we broadened our North American group with two acquisitions:
Ingram Paper Company, expanding our West Coast market presence, and JB
Papers, Inc., serving printing papers markets in the New York
metropolitan area. Acquisitions in markets that will strengthen our
business will continue to be a part of our growth strategy. In 1991,
Dillard Paper Company, which serves Southeastern markets, and Leslie
Paper Company joined our system.
In Europe, poor demand and lower prices led to 1993 sales that were 15
percent lower than 1992 and to a larger operating loss. Most European
operations are in France, where the recession deepened in 1993.
Consolidating operations and reducing costs partially offset the lower
prices. We expect European business conditions to improve in 1994.
As International Paper expands its worldwide distribution business, we
will continue to improve productivity and customer response time and
reduce operating costs and working capital. Market position and earnings
should improve in 1994, although both demand in the printing market and
pricing will influence the extent and timing of improvement in results.
20
<PAGE>
RESULTS
(PIE CHART-Appendix A No. 9)
Distribution recorded net sales of $3.1 billion in 1993, up from $3.0
billion in 1992 and $2.6 billion in 1991. Operating profits totaled $58
million in 1993 versus $52 million ($58 million before unusual items) in
1992 and $53 million ($54 million before unusual items) in 1991.
In the U.S., earnings increased. In Europe, poor demand and lower prices
led to lower sales and a larger operating loss than in 1992.
In 1994, we expect sales and earnings to improve as the U.S. economy
grows and additional efficiencies from coordination efforts and improved
logistics are realized. European operations will improve as local
economies recover.
(PHOTO-Appendix B No. 15)
Caption
21
<PAGE>
The Reason...
OUR STRENGTH
IN SPECIALTY PRODUCTS
(PHOTO-Appendix B No. 16)
Caption
Right: Veratec is expanding its spunbond capacity to meet vigorous
growth in demand for light- to medium-weight nonwovens.
(PHOTO-Appendix B No. 17)
Caption
Far right: Arizona Chemical offers a family of environmentally friendly
NIREZ specialty ink solvents to the printing industry.
Specialty Products is a diverse group of profitable businesses that
complement and add value to International Paper's paper and forest
products businesses. A logical extension of our core businesses, they
use the same raw materials or similar processes, or have the same
customers. They also tend to be less sensitive to the cyclicality of the
paper industry. Specialty Products includes: Imaging Products, Specialty
Panels, Specialty Industrial Papers, Nonwovens, Chemicals and Petroleum.
RESPONSIVE TO CHANGING MARKETS
Imaging Products serves two primary markets: professional photography
and graphic arts. In graphic arts, Anitec and Horsell sell photographic
films, papers and plates to the printing market. Ilford specializes in
monochrome and color photographic films for the professional photography
market. Ilford is the market leader in monochrome photographic films in
Europe, attributable to a continuing stream of new and improved
products, systems and processes.
The growth of electronic imaging is leading to fast-paced changes in the
graphic arts market, particularly in the way commercial printers and
publishers approach their work. We have responded by introducing new
imagesetting films and papers and consolidating operations to reduce
costs and increase productivity. At the same time, electronic imaging is
stimulating color printing, leading to the use of more printing plates
and pressroom chemicals. Our Horsell subsidiary is at the forefront of
printing plate development and is one of the leaders worldwide.
Our equity investment in Scitex, a leading producer of color electronic
prepress systems, has allowed us to tailor our new film and plate
products to emerging technology. In 1993, Horsell introduced a plate
that is imaged directly by laser, thereby shortening "make-ready" times
for printing. International Paper and Scitex have also developed
cooperative marketing programs in the graphic arts and professional
photographic laboratory markets.
DISTINCTIVE PRODUCTS
The Specialty Panels businesses serve the building and furniture
markets. Nevamar produces solid surfacing, decorative laminates and
acrylic
22
<PAGE>
WHY?
o A group of profitable businesses that complement our core paper
business by sharing raw materials, processes and customers.
o Imaging Products, which is positioned for growth in changing printing
markets.
o Arizona Chemical, a world leader in crude tall oil processing.
o A strong position in the growing market for pressure-sensitive base
papers.
(PHOTO-Appendix B No. 18)
Caption
Right: CraftMaster door facings offer exceptional beauty at a fraction
of the cost of solid wood for today's discriminating homeowner.
23
<PAGE>
WHY?
o Veratec--positioned to become a leader in the growing spunbond market.
o Oil and gas reserves that serve as a hedge against fluctuating energy
prices.
o Responsiveness to changing markets and customer needs.
o Continued sales growth of CraftMaster molded interior door facings.
(PHOTO-Appendix B No. 19)
Caption
Right: Since discovering the Sugg Ranch field in West Texas in 1987,
International Paper has drilled over 670 oil and gas wells on it. Shown
here are Petroleum operations employees (from left) Mike Senich and Gary
Weber discussing the next well location. Sugg Ranch is one of the
largest discoveries in West Texas in over 20 years.
24
<PAGE>
sheets. Polyrey markets specialty laminates in Europe. Masonite
provides high-quality engineered panel products. These include
CraftMaster interior door facings, which produce an attractive upgrade
to flat panel doors by offering style, economy and performance, and
OmniWood, a composite wood siding launched in late 1992 made from a
unique oriented strand substrate with a wood fiber overlay. In 1994, we
expect continued growth for both siding and door facings as the building
and repair and remodeling markets remain strong. Export markets for door
facings are also growing.
(PHOTO-Appendix B No. 20)
Caption
Above: In 1993, Horsell introduced a revolutionary computer-to-plate
system that allows printing plates to be imaged directly by laser from
digital data. Here Horsell's Simon Waite examines a plate imaged using
the computer-to-plate system at the group's headquarters in Morley,
England.
POSITIONED IN GROWING NICHE MARKETS
Specialty Industrial Papers offers highly specialized products for
industrial and consumer applications, and papers for laminating, tape,
and release applications, such as pressure-sensitive labels. Nicolet's
pressure-sensitive base papers market has been expanding at more than 10
percent annually and is expected to continue to grow. In 1993, Nicolet
announced plans to expand to meet growing demand.
In 1993, Specialty Industrial Papers was reclassified to the Specialty
Products segment from Packaging to more accurately reflect the unique
features of these product lines.
A LEADER IN NONWOVENS TECHNOLOGY
Nonwovens are produced by Veratec, the fourth largest producer
worldwide, from natural and synthetic fibers in a process similar to
papermaking. Consumer disposables--diapers and feminine hygiene and
incontinence products--is our most important market. This market is
undergoing a major change as customers switch from traditional drylaid
products to lightweight spunbond fabrics. Spunbond fabrics are lower in
cost and have high projected market growth. Anticipating this change,
Veratec acquired rights to technology in North America for a lightweight
spunbond process and started up a spunbond unit in 1991. Our second unit
in Toronto, Canada, will start up in late 1994, tripling capacity. We
are also increasing sales in other high-growth segments and
rationalizing our manufacturing operations to reduce costs.
OPTIMIZING COMPANY RESOURCES
Chemicals is a logical extension of our pulp and paper business because
the raw materials used are natural by-products of the papermaking
process: these are crude tall oil and crude sulfate turpentine. Arizona
Chemical is the world leader in tall oil, with a broad and stable raw
material base. Our strategy to increase sales of higher margin products
continues, with more than half of the division's sales now in specialty
chemicals. This approach also reduces our exposure to volatility in
commodity pricing. In 1993, we began construction of resin solution
units at Oakdale, La., and Gulfport, Miss., to increase capacity of
these specialty chemicals used in printing inks.
Petroleum plays an important part in our energy strategy by developing
oil and gas reserves. These assets not only contribute to earnings, but
also serve as a hedge against fluctuating energy prices. Since 1986, oil
and gas reserves have increased tenfold to more than 58 million
energy-equivalent barrels of oil (BOE). In 1993, the division produced
more than eight million BOE, equal to more than 50 percent of the energy
used by our U.S. paper mills. We will explore for new reserves while
developing our current oil and gas properties. During 1993, oil and gas
drilling on our fee properties in Texas, Louisiana and Alabama added
more than two million BOE to our reserves.
25
<PAGE>
Financial Review
SPECIALTY PRODUCTS
(BAR CHARTS-Appendix A No. 10)
Imaging Products sales represented 28 percent of segment sales in 1993
compared with 31 percent in 1992 and 34 percent in 1991. Continuing weak
economic conditions, as well as technological changes, depressed margins
in the graphic arts and film businesses. Currency translation effects
also contributed to lower margins, particularly in Europe, the
division's largest market. These factors led to declines of 9 percent in
sales and 64 percent in operating profit in 1993. Market share gains in
the offset plate and professional photography markets were a positive
factor. Also, extensive restructuring in the graphic arts business has
reduced manufacturing costs. Introduction of improved imagesetting films
and cooperative programs with Scitex are strengthening our position in
the expanding electronic imaging market. Emphasis on electronic imaging,
new products and reduced operating costs position the business to grow
in commercial printing markets, and should lead to improved earnings.
Specialty Panels accounted for 28 percent of segment sales in 1993
versus 25 percent in 1992 and 21 percent in 1991. Operating profit
improved 22 percent in 1993. The major contributor, CraftMaster molded
interior door facings, had volume increases in all markets . In
addition, siding products experienced strong demand. The outlook for
1994 is for even higher sales and earnings, led by door facings sales.
The December 1993 acquisition of Fome-Cor, a manufacturer of paper-faced
polystyrene foam boards that complements our graphic arts and signage
panels businesses, will also contribute to 1994 earnings.
Specialty Industrial Papers contributed 17 percent to segment sales.
Earnings improved 42 percent in 1993 after declining 25 percent in 1992.
Strong demand for release backing papers led to record shipments.
Successful cost reduction programs more than offset weak demand for
other products. Despite some downward pressure on prices, earnings
should remain strong in 1994 as shipments improve and further
productivity actions take effect.
Nonwovens contributed 12 percent to segment sales. Sales fell modestly
in 1993 as a result of technological changes in the consumer disposables
market, whereby major diaper manufacturers shifted from use of our
drylaid diaper coverstock to spunbond products. Growth in specialty
applications partially offset the sales decline. The start-up of a new
spunbond line in Toronto, Canada, in late 1994 and growth in new
products should strengthen sales and earnings.
Chemicals and Petroleum contributed 15 percent to segment sales in 1993.
Petroleum achieved record sales and earnings as the Sugg Ranch, a major
field in West Texas, increased production. Chemicals earnings increased
over 1992, most markedly in Europe. Contributing factors were lower raw
material costs, price increases and growth in specialty resins. In the
United States, specialty resin sales grew, offset by a decline in
commodity product volume and price. For 1994, we expect Petroleum will
experience a decline in earnings due to lower oil prices. However,
Chemicals sales and earnings should improve as commodity prices rise and
sales of specialty chemicals grow.
26
<PAGE>
RESULTS
(PIE CHART-Appendix A No. 11)
Specialty Products net sales totaled $2.5 billion in 1993 and 1992, up
from $2.3 billion in 1991. Operating profits were $263 million compared
with $83 million ($238 million before unusual items) in 1992 and $227
million ($244 million before unsual items) in 1991.
Improvement in 1993 was led by Specialty Panels, with sales of door
facings growing in both domestic and export markets. Weak economic
conditions in Europe resulted in lower sales and earnings for Imaging
Products.
We expect improved profitability for the segment in 1994. Specialty
Panels will lead the group in sales growth. Imaging Products
profitability will improve as a result of restructuring actions in
graphics arts and as we develop our position in commercial printing
markets.
(PHOTO-Appendix B No. 21)
Caption
27
<PAGE>
The Reason...
OUR STRENGTH
IN FOREST PRODUCTS
(PHOTO-Appendix B No. 22)
Caption
Right: A $750,000 capital investment at our Gurdon, Ark., wood products
plant resulted in a higher quality medium-density-overlay panel.
International Paper's six million acres of Forestlands, mostly in the
southern United States, are managed through IP Timberlands, Ltd. (IPT).
IPT's total harvest represents 36 percent of our U.S. log and fiber
needs. International Paper purchases 30 percent of IPT's harvest for our
manufacturing operations. We manage our forestlands on a sustainable
basis, seeking to maintain a balance between financial returns and
environmental stewardship.
Wood Products manufactures a broad range of quality lumber, panel and
oriented strand board products at 17 mills, principally in the South.
ENVIRONMENTAL STEWARDSHIP
International Paper is a leader in responsible stewardship of forest
resources. Examples include the 53 million SuperTrees planted on more
than 90,000 acres in 1993. In partnership with the U.S. Fish and
Wildlife Service, in 1993 International Paper completed a Habitat
Conservation Plan under the Endangered Species Act to save the habitat
of the threatened Red Hills salamander. A similar plan to protect the
gopher tortoise will be completed in 1995. To safeguard a delicate
coastal ecosystem, in 1993 we provided 2,000 acres for South Carolina's
Lewis Ocean Bay preserve, bringing the total to 10,000 acres.
INCREASING PRODUCTIVITY
Every harvested acre of our land is regenerated to maintain a profitable
long-term fiber supply. With nearly a century's experience in refining
our silvicultural practices, we grow more fiber than we harvest.
Over the past five years, the wood products division has lowered costs
and increased productivity. Since 1988, lumber production has increased
150 million board feet, the equivalent of adding a mill. During the same
period, panel production increased by 75 million square feet.
A LEADER IN SAFETY
International Paper was the first industry member to have a wood
products plant earn the Star Level of OSHA's prestigious Voluntary
Protection Program (VPP) when our New Boston, Texas, mill was honored in
1992. In 1993, our facilities in the Arkansas communities of Leola and
Gurdon achieved Star status, and additional facilities are presently
under consideration.
28
<PAGE>
WHY?
o Responsible stewardship of forest resources, conservation of wildlife,
and creation of recreational opportunities for the public.
o A balanced approach to responsible care for the environment while
ensuring economic viability.
o A leader in the genetic improvement of trees, providing healthier
forests with better yields.
o Strategically located wood products plants with state-of-the-art
technology that bring a wide variety of products to our customers.
o A vigilance in safety with the goal of a totally accident-free
workplace.
(PHOTO-Appendix B No. 23)
Caption
Right: At our nursery near Selma, Ala., (from left) Mike Shanks, Andrew
Blevins and Henry Hughes inspect SuperTree pine seedlings. The 170
million SuperTrees grown annually at our five nurseries are planted on
our forestlands, or are sold or donated to other landowners.
29
<PAGE>
Financial Review
FOREST PRODUCTS
(BAR CHARTS-Appendix A No. 12)
Forestland revenues reached record levels in 1993, increasing 15 percent
compared with an 11 percent increase in 1992. A surge in U.S. housing
starts combined with ongoing logging restrictions on federal lands in
the West led to 1993 stumpage prices that exceeded high prices set in
1992.
In the South, record lumber and panel prices spurred a significant
increase in demand for sawlogs as mills sought to increase production.
As a result, pine sawlog prices reached record levels by year-end.
Further, pulpwood prices advanced as greater use of small logs by wood
products plants, an increase in exports of hardwood chips and poor
weather conditions early in 1993 forced paper mills to compete for
available fiber. In the Northeast, strong demand for spruce-fir logs
from Canadian and U.S. lumber mills caused prices to increase. In the
West, domestic and export log prices also reached record levels in 1993
before softening slightly as the year ended.
Taking advantage of strong demand and record prices, IPT increased
harvest volumes 8 percent in 1993. The 1992 harvest was slightly below
1991 levels. The strong prices also supported an increase in sales of
nonstrategic forestlands in 1993. Together with stringent control over
operating expenses, the higher volumes and prices led to a 56 percent
increase in IPT's operating profits in 1993 after a 37 percent increase
in 1992.
Operating results in 1994 should continue to be strong as both prices
and demand were favorable as the year began. Expected further growth in
housing starts, resumption of exports to Japan, and continued strength
in repair and remodeling markets should cause prices to remain strong.
However, a short-term decline in the inventory of mature trees is
expected to lead to lower IPT harvests over the next several years.
Future harvests may be supplemented through forestland purchases where
economically advantageous.
Wood Products benefited from an increase in U.S. housing starts, which
were up 7 percent in 1993 after a 19 percent increase in 1992, reaching
the highest level since 1989. Combined with an improving U.S. economy,
this led to steadily increasing demand for lumber and panels as the year
progressed. In general, prices increased sharply in the first quarter
and, after easing during the summer months, trended steadily higher to
finish the year at record levels. Sales for the year were up 24 percent
after a 23 percent increase in 1992. Despite higher fiber costs due to
increased competition for tight stumpage supplies, operating earnings
for wood products were about double those of 1992.
Current favorable prices and continued strength in housing starts and
the repair and remodeling markets present an optimistic outlook for wood
products operations as 1994 begins.
30
<PAGE>
RESULTS
(PIE CHART-Appendix A No. 13)
Forest Products net sales were $1.7 billion in 1993, up from $1.4
billion in 1992 and $1.2 billion in 1991. Operating profits totaled $445
million in 1993, up considerably from $197 million ($261 million before
unusual items) in 1992 and $126 million in 1991.
International Paper took advantage of strong demand and record prices
for trees and sawlogs by increasing its harvest and selling nonstrategic
forestlands. An improving U.S. economy and strong housing starts led to
stronger demand for lumber and panels. Prices increased sharply, ending
the year at record levels.
We expect operating results in 1994 to again be favorable as both prices
and demand remain strong.
(PHOTO-Appendix B No. 24)
31
<PAGE>
(PHOTO-Appendix B No. 25)
Caption
Right: Balancing environmental and economic issues through research and
sound management practices is our goal. The 16,000-acre Southland
Experiment Forest near Bainbridge, Ga., is the hub of our forest
research efforts.
32
<PAGE>
The Environment
The environmental challenges facing the paper and forest products
industry take many forms, from endangered species and wetlands issues
affecting our forestlands, to air and water emissions and solid and
hazardous waste disposal at our manufacturing facilities, to recycling
and packaging reduction initiatives focused on our products.
For each of the last several years, International Paper has spent $100
million or more addressing these issues--and has made excellent progress.
For example, we have voluntarily:
o Reduced the already small amount of dioxin in the water discharged
from our bleached pulp mills by more than 95 percent;
o Slashed air and water emissions of 17 toxic chemicals specifically
targeted by the Environmental Protection Agency (EPA) by 72 percent;
o Cut solid waste going to landfills by more than 50 percent;
o Converted one of our paper machines to make 100 percent recycled
printing papers from old newspapers and magazines; and
o Established an innovative and widely applauded habitat conservation
plan for a threatened species--the Red Hills salamander.
The progress we have made is set forth in a 28-page report, "A
Commitment to Environment, Health and Safety Excellence by International
Paper," published in November 1993 (see page 60 for details on how to
obtain a copy).
We realize that our environmental performance impacts the public's
perception of our Company, and that governmental officials, opinion
leaders in the communities where we operate and many of our shareholders
are as likely to measure us by that standard as by our financial
returns. Further discussion of these matters can be found on pages 38-39
of this annual report. Overall, our goal is to continue to reduce the
environmental impact of our products and operations, but to do so in an
efficient and cost-effective manner. Just as we have a responsibility to
protect the environment, so too do we have a responsibility to spend
capital wisely.
To this end, we have voluntarily adopted ambitious environmental goals
that will significantly lessen the impact of our products and processes on
the environment. For 1994, our goals call for a 15 percent reduction in
environmental incidents compared with 1993.
ELIMINATION OF ELEMENTAL CHLORINE
We plan to eliminate the use of elemental chlorine in our processes by
converting our bleached mills to elemental chlorine-free (ECF)
technology within three years.
For many years, chlorine has been used for bleaching because it
effectively produces pulp having the strength, cleanliness, absorbency,
softness and brightness needed to produce paper and paperboard.
Recently, the use of chlorine in the bleaching process has come into
question following the initial discovery in the mid-'80s that dioxin is
an unwanted by-product that could enter the environment in the water
discharged by a paper mill. Following this discovery, International
Paper took a leading role in responding to regulatory and public
concerns about dioxin.
We have already reduced dioxin discharges by more than 95 percent by
modifying processes and partially substituting chlorine dioxide for
elemental chlorine. At our bleached mills today, International Paper
discharges less than four tenths of an ounce of dioxin per year--a level
that cannot be detected at any facility using the EPA's standard
dioxin-testing measurement.
TOXIC EMISSIONS
Using 1990 as the baseline, International Paper has also committed
itself to reducing its emissions of chemicals included in the EPA's Toxic
Release Inventory (TRI) by 75 percent before the end of the century. Our
manufacturing facilities presently report air or water emissions on 50
of the more than 300 chemicals included in the TRI. We are making steady
progress in reducing those emissions. Through the end of 1992, the last
year for which we have complete data, we have reduced TRI emissions from
1990 levels by 17 percent, and we believe we can cut these emissions by
three fourths within a 10-year period.
33
<PAGE>
Additionally, we have volunteered to participate in the EPA's Industrial
Toxics Project, to reduce emissions of 17 particularly prevalent and
potentially toxic chemicals by 33 percent by the end of 1992 and 50
percent by the end of 1995 (using 1988 as the baseline). International
Paper has far exceeded that goal, having reduced those chemicals by 72
percent through 1992. Our new goal is to reduce these emissions by 85
percent by the year 2000.
SOLID WASTE
Several years ago, we set a goal of reducing the amount of solid waste
sent from our facilities to landfills in 1988 by 50 percent by the end of
1994. Since then, we have focused on using the dirt and rocks from logs
for landscaping purposes, burning sawdust and tree bark to produce power
for our facilities, and spreading ash from the bark boilers to return
beneficial nutrients to the soil. As a result, International Paper
exceeded its target by achieving a 52 percent reduction by the end of
1993--a year early. Our ambitious new goal is a 75 percent reduction by
year-end 1996. In 1993, we reduced solid waste 28 percent from
year-earlier levels, and we will be seeking a further 10 percent
reduction in 1994.
HAZARDOUS WASTE
International Paper is also striving to reduce the generation of
hazardous waste. Much of this waste is made up of used solvents,
characterized as hazardous because they are flammable. We have a program
in place to reduce the quantity and toxicity of these wastes, such as by
substituting substances that are other than oil-based to clean
equipment. Our corporate goal is to reduce hazardous waste shipments
off-site by 60 percent in the year 2000 compared with a 1992 baseline.
The 1994 goal is a 10 percent reduction compared with 1993.
ODOR REDUCTION AND WATER CONSERVATION
International Paper has established two other important goals relating
to mill operations. The first is to reduce odor-causing emissions (total
reduced sulfur, or TRS) by 30 percent in 1996 and 75 percent in 1998,
using a 1990 baseline. The other is to conserve on the usage of water in
our largest facilities by reducing the discharge flow by 10 percent in
1994 compared with 1993.
FORESTLAND STEWARDSHIP
In our forestland operations, there are programs in place to minimize
the environmental effects of our forest management activities. Several
years ago, we voluntarily developed a set of forest environmental
quality guidelines, which are strictly enforced on our forestlands.
These guidelines empower our foresters to cancel a harvesting operation
if environmental quality is threatened. We make every effort to lessen
the potential environmental and aesthetic effects when we do harvest, by
maintaining natural buffers, establishing streamside management zones
and limiting the size of the tract harvested. We reforest, either
through natural regeneration or by systematic replanting, all Company
land we harvest.
We also continually monitor our lands for the presence of threatened and
endangered species. In 1993, with the U.S. Fish and Wildlife Service, we
developed a habitat conservation plan to protect the Red Hills
salamander on our forestlands in southern Alabama. We are developing a
similar plan for the gopher tortoise in parts of Mississippi and
Alabama, where it is threatened. We have conducted comprehensive soil
surveys of all of our land in the South to identify wetlands under our
stewardship, and we have a strict set of guidelines designed to protect
wetland functions and values.
International Paper intends to continue its leadership role in
proactively developing environmentally sound forest management
practices, and in promoting or requiring the use of those practices by
our suppliers and contractors. Our goal is to be--and to be recognized
as--the most responsible steward of our nation's forests in our
industry.
34
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Financial Review
Management's Discussion and Analysis 36
Financial Information by Geographic Area 40
Financial Information by Industry Segment 41
Report of Management on Financial Statements 42
Report of Independent Public Accountants 42
Consolidated Statement of Earnings 43
Consolidated Balance Sheet 44
Consolidated Statement of Cash Flows 45
Consolidated Statement of Common Shareholders' Equity 46
Notes to Consolidated Financial Statements 47
Eleven-Year Financial Summary 54
Interim Financial Results 56
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
International Paper's 1993 consolidated net sales were $13.7 billion,
slightly higher than 1992 sales of $13.6 billion and 8% above 1991 sales
of $12.7 billion. Full-year contributions of companies acquired in 1991
were a major factor in the 1992 increase.
Sales from operations outside the United States decreased to $2.9
billion in 1993 from $3.4 billion in 1992 and $3.2 billion in 1991. Poor
European economic conditions resulted in lower prices and shipments.
U.S. export sales were $1.1 billion in 1993 compared with $1.2 billion
in 1992 and $1.1 billion in 1991.
Net earnings were $289 million or $2.34 per share in 1993 ($314 million
or $2.54 per share before the revaluation of deferred taxes to reflect
the increase in the U.S. federal income tax rate) versus $86 million or
$.71 per share in 1992 ($405 million or $3.34 per share before the
effects of an accounting change, an extraordinary item, and charges for
a profitability improvement program and for environmental costs) and
$184 million or $1.66 per share in 1991 ($452 million or $4.09 per share
before an accounting change and a charge for severance costs).
Profits continued to decrease in 1993 as the U.S. economy recovered
slowly and European economic conditions worsened. A continuing focus on
cost reduction helped minimize the decrease in profits. However,
generally weak prices led to reductions in Printing Papers and Packaging
results, offsetting a record-breaking year by our Forest Products
operations. Although Printing Papers prices in the United States
generally improved as the year progressed, European prices continued to
fall, with the segment losing $122 million in 1993. Price increases in
containerboard and some Printing Papers grades were announced in early
1994.
(BAR CHARTS-Appendix A No. 14)
Accounting Changes
As of January 1, 1992, International Paper adopted SFAS No. 109,
"Accounting for Income Taxes," which requires the liability method of
determining deferred income taxes. Net earnings were reduced by $50
million or $.41 per share for the cumulative effect of this change.
Also, in adopting SFAS No. 109, we revised our accounting for prior
acquisitions. As a result, 1992 depreciation expense increased by $41
million. However, there was no impact on net earnings because of an
offsetting deferred tax benefit.
The 1991 adoption of SFAS No. 106, requiring accrual accounting for
postretirement benefits, reduced 1991 earnings by $231 million or $2.10
per share. Of this, $215 million or $1.95 per share related to the
cumulative effect of the accounting change as of the beginning of the
year.
Restructuring and Other Charges
In 1992, International Paper recorded pre-tax charges of $370 million to
establish a productivity improvement reserve and $28 million for
environmental remediation and clean-up. These charges totaled $398
million ($263 million after taxes or $2.17 per share).
The productivity improvement charge was primarily for asset write-downs
and related severance costs to shift production from older, less
efficient facilities to newer or modernized plants, costs to consolidate
operations and write-downs of some facilities with marginal returns.
Asset write-downs were estimated at $250 million with accruals for
one-time cash costs of $120 million (for employee severance, legal,
warranty, leases and miscellaneous items). Approximately 40% of the cash
costs were incurred in 1993 and, except for legal costs, we expect the
remainder to be spent equally in 1994 and 1995. We had projected that
annual savings-composed of lower personnel costs and depreciation and
the elimination of operating losses-would approach $75 million by the
end of 1994. We have realized 45% of the annual savings in 1993, and we
expect to reach 85% by the end of 1994 and to exceed $75 million in 1995
when actions are completed. No overall adjustment to the reserve balance
is anticipated at this time.
In 1991, a $60 million pre-tax charge ($37 million after taxes or $.33
per share) was recorded for personnel reductions of more than 1,000
positions worldwide. These reductions have now been implemented with
annual savings of over $30 million.
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash Flow From Operations
International Paper continued to generate substantial cash flow in 1993
despite lower operating earnings. However, cash provided by operations
of $929 million in 1993 was below the $1.1 billion in 1992 and $1.2
billion in 1991. During 1993, working capital increased $290 million,
most of which was from lower accounts payable and accrued liabilities.
An increase in depreciation and amortization charges in 1993 to $898
million from $850 million in 1992 and $725 million in 1991 mitigated the
effect of lower net earnings on cash flow.
Capital Expenditures by Industry Segment
In millions for the years ended December 31 1993 1992 1991
- ------------------------------------------- ---- ------ ------
Printing Papers $429 $ 740 $ 604
Packaging 181 201 246
Distribution 13 14 14
Specialty Products 155 245 209
Forest Products 145 104 79
---- ------ ------
923 1,304 1,152
Corporate 31 64 45
---- ------ ------
Consolidated Total $954 $1,368 $1,197
---- ------ ------
---- ------ ------
Investment Activities
Capital spending of $954 million in 1993 was well below the $1.4 billion
and $1.2 billion spent in 1992 and 1991. This reduced spending reflects
completion of several major projects in late 1992 including Zanders' new
paper machine for the production of high-quality base papers and
expansion of Aussedat Rey's Saillat pulp mill.
As in recent years, 1993 capital spending largely focused on further
reduction of production costs, plant upgrades and incremental capacity
expansions, quality and productivity improvements, and environmental and
safety programs. During 1993, the project at Lock Haven, Pa., to produce
100% recycled-paper grades from postconsumer newspapers and magazines
was completed and started production late in the year. Also, one paper
machine at Kwidzyn, in Poland, was upgraded to improve productivity.
Capital spending for 1994 is expected to exceed $1.1 billion. Major
projects will focus on printing papers and packaging facilities. In the
United States, the design for a new, low-cost uncoated paper machine at
the Riverdale mill near Selma, Ala., was completed and the majority of
spending for this project will occur during 1994. In Europe, the $175
million capital investment program for Kwidzyn will continue.
Spending for acquisitions decreased substantially in 1993. In 1993, $35
million was spent and $22 million of debt was assumed to acquire certain
assets of Los Angeles-based Ingram Paper Company, a distributor of
industrial and fine writing papers, and the assets of Monsanto Company's
Fome-Cor division, a manufacturer of polystyrene foam boards. The
Company also acquired the assets of JB Papers, Inc., a paper
distribution company located in Union, N.J., by issuing 117,000 shares
of Company common stock.
In 1992, $153 million was spent and $30 million accrued, principally for
the acquisitions of Kwidzyn in Poland and Western Pacific in Oregon. The
Company also spent $209 million to acquire an equity interest in Scitex,
a world leader in color electronic prepress systems.
In 1991, $457 million was spent and $50 million of debt assumed to
acquire the Rhone Valley Packaging business, Evergreen Packaging
Equipment, Dillard Paper Company and Scaldia Papier BV. A merger with
Leslie Paper Company and the formation of a joint venture to control 32%
of Carter Holt Harvey Limited were also completed in 1991.
(BAR CHARTS-Appendix A Nos. 15 and 16)
37
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financing Activities
In 1993, the Company issued $600 million of long-term debt as follows:
in March, $200 million of debentures due in 2023; in October, $200
million of debentures due in 2023; and in November, $200 million of
debentures due in 2003. The proceeds of all debentures were used mainly
to reduce short-term borrowings and secure favorable long-term interest
rates. Interest rate swaps were utilized to obtain the equivalent of
short-term rates during the first year of the October and November
financings.
In 1992, taking advantage of low interest rates, the Company increased
short-term borrowings by $657 million to, in part, retire $255 million
of high-rate long-term debt. Also, in January, 9.2 million shares of
common stock were sold in a public offering yielding $650 million, and
$200 million of 7 5/8% notes due in 2007 were issued. These proceeds were
principally used to retire higher rate debt outstanding at that time.
Net borrowings were $994 million in 1991, principally used to finance
acquisitions and large capital projects.
Common stock dividends per share were $.42 per quarter ($1.68 on an
annual basis) in 1993, 1992 and 1991. Payments were $208 million in
1993, $206 million in 1992 and $186 million in 1991.
Capital Resource Outlook for 1994
Cash flow from operations is expected to be adequate to meet internal
capital expenditures, working capital and dividend requirements. A
strong balance sheet (debt to capital ratio of 39% in 1993, up from 38%
in 1992 and comparable with 39% in 1991) supporting an investment-grade
debt rating allows ready access to financial markets to take advantage
of external investment and favorable financing opportunities.
(BAR CHART-Appendix A No. 17)
Other Financial Statement Items
Net interest expense increased to $310 million in 1993 from $247 million
in 1992 and down from $315 million in 1991. 1992's net interest
benefited from tax-related interest income and higher capitalized
interest related to two major European capital projects that are now
completed.
The effective tax rate for 1993 increased to 42% (37% before the
revaluation of deferred tax balances) of pre-tax income compared with
31% in 1992 and 37% in 1991. The adoption of SFAS No. 109 and the tax
benefit at statutory rates of the productivity improvement and other
charges in 1992 contributed to 1992's lower rate. The increase in the
rate for 1993 results from the increase in the U. S. statutory federal
income tax rate of 1%, which also increased deferred taxes by $25
million.
During 1993, the Company recognized tax benefits amounting to $55
million related to losses at certain of its non-U.S. operations,
increasing noncurrent deferred tax assets to $115 million at December
31, 1993. The Company believes that it is more likely than not that
these assets will be realized.
Environmental Issues
Given the nature of its businesses, International Paper is closely
linked to the environment. Increasingly demanding environmental laws and
regulations have resulted in significant capital spending to meet or
exceed air, water and solid waste disposal standards. Environmental
capital expenditures totaled $100 million in 1993, $126 million in 1992
and $107 million in 1991. Capital spending to increase recycling
capacity totaled $102 million, $35 million and $5 million in 1993, 1992
and 1991, respectively.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
International Paper has made good progress protecting the environment.
For example, the Company has reduced by 72% the release of certain
chemicals targeted by the Environmental Protection Agency (EPA) under a
voluntary program and met its 1995 goal ahead of schedule. Further, the
Company reached agreement with the U.S. Fish and Wildlife Service to
protect the habitats of threatened species, and initiated a program to
recover and recycle milk and juice cartons.
In 1993, the EPA released its proposal, known as "Cluster Rulemaking,"
to coordinate and integrate the requirements for air emissions and water
discharge for the pulp and paper industry to meet in 1998. Further in
1993, the EPA issued proposed regulations implementing the "Great Lakes
Initiative" (GLI), which covers minimum water quality and implementation
procedures. Spending to meet the GLI regulations, which still need to be
finalized and then adopted by the participating states, is not likely to
occur until 1998. Future spending will be heavily influenced by the
final standards included within each of the sets of proposed
regulations. However, we estimate the Company's future capital spending
to comply with the Cluster Rulemaking and GLI requirements to be between
$700 million and $1.5 billion, depending upon the methods allowed by the
regulations to meet overall requirements. In addition, annual operating
costs, excluding depreciation, are expected to increase between $60
million and $120 million when these changes are fully implemented in
1998.
The Company paid fines and penalties related to environmental issues of
$400,000, $1.6 million and $3.6 million for the years 1993, 1992 and
1991, respectively. Reviews have been completed by federal and state
environmental agencies at certain Company facilities to determine if all
permits required under law have been obtained. Any fines arising from
these reviews should not have a material effect on the Company's future
financial condition or results of operations.
In the fourth quarter of 1992, agreement was reached with the State of
New York concluding an investigation of the Company's Anitec facility in
Binghamton, N.Y. Under the agreement, the Company agreed to pay a civil
penalty, reimburse state expenses, fund a community emergency planning
program, and implement a remediation plan to clean up soil and
groundwater contamination. Estimated costs of remediation were accrued
in 1992.
In May 1992, the EPA issued an order alleging that Masonite failed to
obtain a permit required for operation of a production line added in
1989 to its Ukiah, Calif., facility. Two additional lawsuits related to
the facility were filed by state and county officials alleging
noncompliance with certain aspects of state law and late filing of a
required emissions plan. The state and county lawsuits were settled
during 1993 and settlement of the EPA action is expected in 1994. None
of the settlements had or will have a material effect on the Company's
future financial condition or results of operations.
Beginning in late 1990, several lawsuits were filed against paper
producers alleging property damage, business loss or risk of personal
injury resulting from the presence of dioxin in mill discharges.
International Paper was named in a number of these lawsuits. Although no
International Paper case has yet gone to trial, one case involving the
Company's Texarkana, Texas, facility was settled in late 1993 without
any admission or finding of liability. Due to aggressive solicitations
by plaintiffs' attorneys, cumulative damage claims totaled more than
$9.4 billion by the end of 1993, principally in punitive damages.
Management believes these suits are without merit and expects to prevail
upon final resolution.
International Paper is also a party to a number of other environmental
remediation actions under various federal and state laws, including the
Comprehensive Environmental Response, Compensation and Liability Act.
Related costs are recorded in the financial statements when reasonably
estimable. Although these costs have increased in recent years,
completion of these actions is not expected to have a material adverse
effect on the Company's future financial condition or results of
operations.
Further details with respect to these cases can be found in the
Company's quarterly reports on Form 10-Q and annual report on Form 10-K
filed with the Securities and Exchange Commission. Copies can be
obtained as indicated on page 60 of this annual report.
Effects of Inflation
General inflation has had minimal impact on International Paper's
operating results in the last three years. Sales prices and volumes are
more strongly influenced by supply and demand factors in specific
markets and by exchange rate fluctuations than by inflationary factors.
Financial Review by Segment
Management's Discussion and Analysis of results of operations by
industry segment is set forth on pages 10 (Printing Papers), 16
(Packaging), 20 (Distribution), 26 (Specialty Products) and 30 (Forest
Products), and is incorporated herein by reference.
39
<PAGE>
FINANCIAL INFORMATION BY GEOGRAPHIC AREA
Net Sales
In millions 1993 1992 1991
- ----------- ------- ------- -------
United States 1 $11,085 $10,524 $ 9,811
Europe 2,586 3,030 2,833
Other 340 347 318
Less: Intergeographic Sales (326) (303) (259)
------- ------- -------
Net Sales $13,685 $13,598 $12,703
------- ------- -------
------- ------- -------
1 Export sales to unafliated customers (in millions) were $1,100 in
1993, $1,200 in 1992 and $1,100 in 1991.
Assets
In millions 1993 1992 1991
- ----------- ------- ------- -------
United States $10,999 $10,680 $10,207
Europe 3,512 3,832 3,153
Other 2 820 812 518
Corporate 1,300 1,192 1,063
------- ------- -------
Assets $16,631 $16,516 $14,941
------- ------- -------
------- ------- -------
2 Includes investments in Scitex Corporation Ltd. (1993 and 1992).
Operating Profit
In millions 1993 1992 1991
- ----------- ------- ------- -------
United States 3 $833 $511 $871
Europe 3,4,5 (23) 41 143
Other 22 18 24
------- ------- -------
Operating Profit $832 $570 6 $1,038 7
------- ------- -------
------- ------- -------
3 Includes additional depreciation related to SFAS No. 109 of $22
million in the United States and $19 million in Europe in 1993 and 1992.
4 Includes amounts, net of goodwill amortization, for Aussedat Rey,
Ilford, Zanders, the Horsell graphic arts businesses, the Rhone Valley
Packaging business, Scaldia Papier BV and Kwidzyn from the dates of
acquisition. See Note 3 on page 48.
5 While net sales includes 100% of Zanders' sales, operating profit is
adjusted for minority interests.
6 Includes restructuring and other charges totaling $336 million.
7 Includes a $50 million restructuring charge.
Sales in the United States increased in 1993 to $11.1 billion, up 5%
from 1992, after a 7% increase in 1992. However, European sales declined
15% in 1993 to $2.6 billion after a 7% increase in 1992 to $3.0 billion.
While the European units within our Packaging and Specialty Products
segments remained profitable, European operations as a whole produced an
operating loss of $23 million in 1993 compared with a $41 million profit
in 1992 ($74 million before the productivity improvement charge) and
$143 million in 1991.
France and Germany, the predominant European economies, were in a
recession in 1993 with real GDP falling by .8% and 1.9%, respectively.
These weak economic conditions, combined with strong currencies in these
countries where much of our European paper production is sited,
resulted in sharply lower prices and shipments, particularly for coated
and uncoated papers. While cost reductions helped limit the impact of
the downturn, our European Printing Papers operations realized a loss in
1993.
We believe that prices have now reached their cyclical lows and results
should improve in the latter part of 1994 as European economies resume
growth. An indicator of this improvement is the price increases
implemented by Aussedat Rey early in 1994.
European Sales by Business Segment
In millions 1993 1992 1991
- ----------- ------ ------ ------
Printing Papers $1,016 $1,172 $1,150
Packaging 513 675 580
Distribution 284 335 282
Specialty Products 710 791 794
Forest Products 63 57 27
------ ------ ------
European Sales $2,586 $3,030 $2,833
------ ------ ------
------ ------ ------
Equity Investments (unaudited)
International Paper owns a 12% interest in Scitex Corporation Ltd., a
world leader in color electronic prepress systems for the graphic
design, printing and publishing industries. Scitex, with annual 1993
revenues of $623 million, is headquartered in Israel, with most of its
sales to European, North American and Japanese customers. For the year
ended December 31, 1993, Scitex reported net income of $94 million,
which was 23% below 1992 and about equal to 1991. The 1993 results were
adversely impacted by a decline in revenues in Europe and lower gross
margins related to product mix. Focused research and development,
aggressive marketing and strong cost control point to continued
long-term growth.
The Company is a partner in a 50:50 joint venture that holds 32% of
Carter Holt Harvey Limited (CHH), a New Zealand-based forest products
company with substantial assets in Chile. CHH has annual sales of about
$1.3 billion. For the six months ended September 30, 1993, CHH reported
a 47% increase in profits to about $90 million. Results were led by
forest and wood products operations with record-high prices for export
logs to Asia.
40
<PAGE>
FINANCIAL INFORMATION BY INDUSTRY SEGMENT
Net Sales
In millions 1993 1992 1991
- ----------- ------- ------- -------
Printing Papers $ 3,905 $ 4,040 $ 4,075
Packaging 3,095 3,245 3,030
Distribution 3,140 2,980 2,590
Specialty Products 2,460 2,460 2,335
Forest Products 1,700 1,410 1,190
Less: Intersegment Sales (615) (537) (517)
------- ------- -------
Net Sales $13,685 $13,598 $12,703
------- ------- -------
------- ------- -------
Operating Profit
In millions 1993 1992 1991
- ----------- ----- ----- ------
Printing Papers $(122) $(70) $ 298
Packaging 188 308 334
Distribution 58 52 53
Specialty Products 263 83 227
Forest Products 445 197 126
----- ----- ------
Operating Profit 832 570 1,038
Interest Expense, net (310) (247) (315)
Corporate Items, net (22) (117) (85)
----- ----- ------
Earnings Before Income
Taxes, Extraordinary
Item and Cumulative
Effect of Accounting
Changes $ 500 $ 206 $ 638
----- ----- ------
----- ----- ------
Assets
In millions 1993 1992 1991
- ----------- ------- ------- -------
Printing Papers $ 6,466 $ 6,566 $ 5,448
Packaging 3,011 3,090 3,118
Distribution 1,085 1,062 1,008
Specialty Products 2,607 2,585 2,427
Forest Products 1,603 1,522 1,619
Investment in:
Carter Holt Harvey 331 285 258
Scitex 228 214
Corporate 1 1,300 1,192 1,063
------- ------- -------
Assets $16,631 $16,516 $14,941
------- ------- -------
------- ------- -------
1 Corporate assets are principally cash and temporary investments,
investments and other assets that are not identifiable with industry
segments.
Depreciation, Depletion and Amortization
In millions 1993 1992 1991
- ----------- ---- ---- ----
Printing Papers $414 $392 $328
Packaging 213 211 191
Distribution 28 30 20
Specialty Products 180 152 129
Forest Products 93 84 76
Corporate 10 14 11
---- ---- ----
Depreciation, Depletion
and Amortization $938 2 $883 2 $755
---- ---- ----
---- ---- ----
2 Increased by $41 million in both 1993 and 1992 for additional
depreciation related to the adoption of SFAS No. 109.
Industry Segment Contributions
Earnings before income taxes were $500 million in 1993, $206 million
($604 million before the $370 million productivity improvement charge
and $28 million of environmental charges) in 1992 and $638 million ($698
million before the reduction in force charge) in 1991. Discussions of
operating results by business segment are set forth on pages 10
(Printing Papers), 16 (Packaging), 20 (Distribution), 26 (Specialty
Products) and 30 (Forest Products). The following table portrays 1993,
1992 and 1991 industry segment contributions:
<TABLE>
<CAPTION>
Restruct-
Operating Profit turing
Before and
Restructuring and Other Operating
Other Charges Charges Profit
-------------------- ---------- --------------------
In millions 1993 1992 1991 1992 1991 1993 1992 1991
- ----------- ----- ----- ------ ---- ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Printing Papers $(122) $ 19 $ 318 $ 89 $20 $(122) $ (70) $ 298
Packaging 188 330 346 22 12 188 308 334
Distribution 58 58 54 6 1 58 52 53
Specialty Products 263 238 244 155 17 263 83 227
Forest Products 445 261 126 64 445 197 126
----- ----- ------ ---- --- ----- ----- ------
Operating Profit 832 906 1,088 336 50 832 570 1,038
Interest Expense, net (310) (247) (315) (310) (247) (315)
Corporate Items, net (22) (55) (75) 62 10 (22) (117) (85)
----- ----- ------ ---- --- ----- ----- ------
Earnings Before Income Taxes,
Extraordinary Item and Cumulative
Effect of Accounting Changes $ 500 $ 604 $ 698 $398 $60 $ 500 $ 206 $ 638
----- ----- ------ ---- --- ----- ----- ------
----- ----- ------ ---- --- ----- ----- ------
</TABLE>
Industry segment data for 1992 and 1991 has been restated to reclassify
certain operations from Packaging and Forest Products to Specialty
Products to conform with the current-year presentation.
41
<PAGE>
REPORT OF MANAGEMENT ON FINANCIAL STATEMENTS
The management of International Paper Company is responsible for the
fair presentation of the information contained in the financial
statements in this annual report. The statements are prepared in
accordance with generally accepted accounting principles and reflect
management's best judgment as to the Company's financial position,
results of operations and cash flows.
The Company maintains a system of internal accounting controls designed
to provide reasonable assurance that transactions are properly recorded
and summarized so that reliable financial records and reports can be
prepared and assets safeguarded.
An important part of the internal controls system is the Company's
Policy on Ethical Business Conduct, which requires employees to maintain
the highest ethical and legal standards in their conduct of Company
business. The internal controls system further includes careful
selection and training of supervisory and management personnel,
appropriate delegation of authority and division of responsibility,
dissemination of accounting and business policies throughout the
Company, and an extensive program of internal audits with management
follow-up. During 1993, the Company instituted a toll-free telephone
"compliance line" whereby any employee may report suspected violations of
law or Company policy.
The independent public accountants provide an objective, independent
review of management's discharge of its responsibility for the fairness
of the Company's financial statements. They review the Company's
internal accounting controls and conduct tests of procedures and
accounting records to enable them to form the opinion set forth in their
report.
The Board of Directors monitors management's administration of the
Company's financial and accounting policies and practices, and the
preparation of these financial statements. The Audit Committee, which
consists of five nonemployee directors, meets regularly with
representatives of management, the independent public accountants and
the internal Auditor to review their activities. At the annual meeting,
the Audit Committee presents a summary of its findings to the
shareholders and recommends that the shareholders approve the
appointment of the independent public accountants to conduct the annual
audit.
The independent public accountants and the internal Auditor both have
free access to the Audit Committee and meet regularly with the Audit
Committee, with and without management representatives in attendance.
Robert C. Butler
Robert C. Butler
Senior Vice President and Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of International Paper Company:
We have audited the accompanying consolidated balance sheets of
International Paper Company (a New York corporation) and subsidiaries as
of December 31, 1993 and 1992, and the related consolidated statements
of earnings, common shareholders' equity and cash flows for each of the
three years ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
International Paper Company and subsidiaries as of December 31, 1993 and
1992, and the results of their operations and their cash flows for each
of the three years ended December 31, 1993, in conformity with generally
accepted accounting principles.
As explained in Notes 5 and 11 to the financial statements, effective
January 1, 1992, the Company changed its method of accounting for income
taxes, and effective January 1, 1991, changed its method of accounting
for postretirement benefits.
Arthur Anderson & Co.
New York, N.Y.
February 4, 1994
42
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
In millions, except per share amounts,
for the years ended December 31 1993 1992 1991
- -------------------------------------- ------- ------- -------
Net Sales $13,685 $13,598 $12,703
------- ------- -------
Costs and Expenses
Cost of products sold 10,191 10,137 9,316
Depreciation and amortization 898 850 725
Distribution expenses 634 629 569
Selling and administrative expenses 999 981 945
Taxes other than payroll and income taxes 153 150 135
Restructuring charges 370 60
Other 28
------- ------- -------
Total Costs and Expenses 12,875 13,145 11,750
------- ------- -------
Earnings Before Interest, Income Taxes,
Extraordinary Item and Cumulative Effect of
Accounting Changes 810 453 953
Interest expense, net 310 247 315
------- ------- -------
Earnings Before Income Taxes, Extraordinary Item
and Cumulative Effect of Accounting Changes 500 206 638
Provision for income taxes (includes $25 in
1993 related to the increase in the U.S.
statutory federal income tax rate) 211 64 239
------- ------- -------
Earnings Before Extraordinary Item and Cumulative
Effect of Accounting Changes 289 142 399
Extraordinary item--loss on extinguishment of
debt (less tax benefit of $3)--Note 8 (6)
Cumulative effect of change in accounting for
income taxes--Note 5 (50)
Cumulative effect of change in accounting for
postretirement benefits (less deferred tax
benefit of $135)--Note 11 (215)
------- ------- -------
Net Earnings $ 289 $ 86 $ 184
------- ------- -------
------- ------- -------
Earnings per Common Share
Earnings before extraordinary item and
cumulative effect of accounting changes $ 2.34 $ 1.17 $ 3.61
Extraordinary item--loss on extinguishment
of debt--Note 8 (.05)
Cumulative effect of change in accounting for
income taxes--Note 5 (.41)
Cumulative effect of change in accounting for
postretirement benefits--Note 11 (1.95)
------- ------- -------
Earnings per Common Share $ 2.34 $ .71 $ 1.66
------- ------- -------
------- ------- -------
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
CONSOLIDATED BALANCE SHEET
In millions at December 31 1993 1992
- -------------------------- ------- -------
Assets
Current Assets
Cash and temporary investments, at cost,
which approximates market $ 242 $ 225
Accounts and notes receivable, less allowances of
$104 in 1993 and $91 in 1992 1,856 1,861
Inventories 2,024 1,938
Other current assets 279 342
------- -------
Total Current Assets 4,401 4,366
------- -------
Plants, Properties and Equipment, Net 8,872 8,884
Forestlands 786 759
Investments 631 599
Goodwill 754 772
Deferred Charges and Other Assets 1,187 1,136
------- -------
Total Assets $16,631 $16,516
------- -------
------- -------
Liabilities and Common Shareholders' Equity
Current Liabilities
Notes payable and current maturities of long-term debt $ 2,089 $ 2,356
Accounts payable 1,089 1,259
Accrued payroll and benefits 181 173
Accrued income taxes 97 104
Other accrued liabilities 553 639
------- -------
Total Current Liabilities 4,009 4,531
------- -------
Long-Term Debt 3,601 3,096
Deferred Income Taxes 1,614 1,474
Minority Interest and Other Liabilities 1,182 1,226
Commitments and Contingent Liabilities--Note 6
Common Shareholders' Equity
Common stock, $1 par value; issued 1993--127.3 shares,
1992--127.0 shares 127 127
Paid-in capital 1,704 1,792
Retained earnings 4,553 4,472
------- -------
6,384 6,391
Less: Common stock held in treasury, at cost;
1993--3.4 shares, 1992--4.3 shares 159 202
------- -------
Total Common Shareholders' Equity 6,225 6,189
------- -------
Total Liabilities and Common Shareholders' Equity $16,631 $16,516
------- -------
------- -------
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
In millions for the years ended December 31 1993 1992 1991
- ------------------------------------------- ------- ------- -------
Operating Activities
Net earnings $ 289 $ 86 $ 184
Cumulative effect of accounting changes 50 215
Noncash items
Depreciation and amortization 898 850 725
Deferred income taxes 54 (99) 30
Restructuring and other charges 398 60
Other, net (22) (95) 45
Changes in current assets and liabilities
Accounts and notes receivable 78 2 79
Inventories (93) (127) (74)
Accounts payable and accrued liabilities (272) (2) (122)
Other (3) 15 35
------- ------- -------
Cash Provided by Operations 929 1,078 1,177
------- ------- -------
Investment Activities
Invested in capital projects (954) (1,368)(1,197)
Mergers and acquisitions
Plants, properties and equipment (17) (163) (131)
Goodwill (9) (13) (211)
Other assets and liabilities, net (9) 23 (115)
Investments in affiliated companies (9) (247) (258)
Other (124) (104) (56)
------- ------- -------
Cash Used for Investment Activities (1,122) (1,872) (1,968)
------- ------- -------
Financing Activities
Issuance of common stock 60 703 45
Sale of limited partnership interests 165
Issuance of debt 1,276 1,852 1,583
Reduction of debt (1,016) (1,458) (589)
Dividends paid (208) (206) (186)
Other (62) (102) (76)
------- ------- -------
Cash Provided by Financing Activities 215 789 777
------- ------- -------
Effect of Exchange Rate Changes on Cash (5) (8) (4)
------- ------- -------
Change in Cash and Temporary Investments 17 (13) (18)
Cash and Temporary Investments
Beginning of the year 225 238 256
------- ------- -------
End of the year $ 242 $ 225 $ 238
------- ------- -------
------- ------- -------
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Common Stock Common
Issued Treasury Stock Share-
---------------- Paid-In Retained --------------- holders'
In millions, except share amounts in thousands Shares Amount Capital 1 Earnings Shares Amount Equity
- ---------------------------------------------- ------- ------ --------- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1991 117,303 $117 $1,243 $4,581 7,594 $309 $5,632
Conversion of subordinated debentures 33 (1,244) (43) 76
Issuance of stock for merger (7) 13 (512) (13) 19
Issuance of stock for various plans 275 1 39 (714) (18) 58
Cash dividends--Common stock ($1.68 per
share) (186) (186)
Foreign currency translation (less tax
benefit of $10) (44) (44)
Net earnings 184 184
------- ---- ------ ------ ------ ---- ------
Balance, December 31, 1991 117,578 118 1,264 4,592 5,124 235 5,739
Issuance of stock in a public offering 9,200 9 641 650
Issuance of stock for various plans 215 27 (793) (33) 60
Cash dividends--Common stock ($1.68 per
share) (206) (206)
Foreign currency translation (less tax
benefit of $58) (140) (140)
Net earnings 86 86
------- ---- ------ ------ ------ ---- ------
Balance, December 31, 1992 126,993 127 1,792 4,472 4,331 202 6,189
Issuance of stock for acquisition 2 (117) (5) 7
Issuance of stock for various plans 294 38 (815) (38) 76
Cash dividends--Common stock ($1.68 per
share) (208) (208)
Foreign currency translation (less tax
benefit of $14) (128) (128)
Net earnings 289 289
------- ---- ------ ------ ------ ---- ------
Balance, December 31, 1993 127,287 $127 $1,704 $4,553 3,399 $159 $6,225
------- ---- ------ ------ ------ ---- ------
------- ---- ------ ------ ------ ---- ------
</TABLE>
1 The cumulative foreign currency translation adjustment was $(280)
million, $(152) million and $(12) million at December 31, 1993, 1992
and 1991, respectively.
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of
International Paper Company and its subsidiaries (the Company). Minority
interest represents minority shareholders' proportionate share of the
equity in several of the Company's consolidated subsidiaries, primarily
IP Timberlands, Ltd. (IPT), Zanders Feinpapiere AG, Georgetown Equipment
Leasing Associates, L.P. and Trout Creek Equipment Leasing, L.P. All
significant intercompany balances and transactions are eliminated.
Investments in affiliated companies owned 20% or more, and the Company's
investments in Carter Holt Harvey Limited and Scitex Corporation Ltd.
where the Company has the ability to exercise significant influence, are
accounted for by the equity method. The Company's share of affiliates'
earnings is included in the consolidated statement of earnings.
Temporary Investments
Temporary investments with an original maturity of three months or less
are treated as cash equivalents and are stated at cost.
Inventories
Inventory values include all costs directly associated with
manufacturing products: materials, labor and manufacturing overhead.
These values are presented at cost or market if it is lower. Costs of
raw materials and finished pulp and paper products are generally
determined on the last-in, first-out method. Other inventories are
primarily stated using the first-in, first-out or average cost method.
Plants, Properties and Equipment
Plants, properties and equipment are stated at cost, less accumulated
depreciation. For financial reporting purposes, the Company uses the
units-of-production method for depreciating its major pulp and paper
mills and certain wood products facilities and the straight-line method
for other plants and equipment. Annual straight-line depreciation rates
are buildings, 2 1/2% to 8%, and machinery and equipment, 5% to 33%.
For tax purposes, depreciation is computed utilizing accelerated
methods.
Start-up costs on major projects are capitalized and amortized over a
five-year period. Unamortized start-up costs were $125 million, $126
million and $93 million at December 31, 1993, 1992 and 1991,
respectively.
Interest costs for the construction of certain long-term assets are
capitalized and amortized over the related assets' estimated useful
lives. The Company capitalized net interest costs of $12 million in
1993, $42 million in 1992 and $36 million in 1991. Interest payments
during 1993, 1992 and 1991 were $372 million, $363 million and $385
million, respectively.
Forestlands
The Company, which currently owns 84% and 100% of IPT's Class A and
Class B Units, respectively, controlled approximately 6.2 million acres
of forestlands in the United States at December 31, 1993. Forestlands
are stated at cost, less accumulated depletion representing the cost of
timber harvested. Forestlands include owned property as well as certain
timber harvesting rights with terms of one or more years. Costs
attributable to timber are charged against income as trees are cut. The
depletion rate charged is determined annually based on the relationship
of remaining costs to estimated recoverable volume.
Translation of International Currencies
Balance sheets of the Company's international operations are translated
into U.S. dollars at year-end exchange rates, while statements of
earnings are translated at average rates. Adjustments resulting from
financial statement translations are included as cumulative translation
adjustments in paid-in capital. Gains and losses resulting from foreign
currency transactions are included in earnings.
The Company enters into foreign exchange contracts to hedge a portion of
its investment in overseas operations. Gains and losses resulting from
these contracts are determined monthly based on published currency
exchange rates and are recorded as translation adjustments in paid-in
capital. At December 31, 1993, contracts in various currencies totaling
$2.6 billion were outstanding based on year-end exchange rates. Gains of
$68 million related to these outstanding contracts have been included in
paid-in capital. These gains are offset by losses from the revaluation
of the net assets being hedged.
Amortization of Intangible Assets
Goodwill, the cost in excess of assigned value of businesses acquired,
is amortized over 40 years. Accumulated amortization was $101 million
and $77 million at December 31, 1993 and 1992, respectively.
Revenue Recognition
The Company generally recognizes revenues when goods are shipped.
Earnings per Common Share
Earnings per common share were computed on the basis of the following
average number of shares outstanding (in millions): 1993--123.2;
1992--121.4; 1991--110.5. The effect of all dilutive securities is
immaterial.
Reclassifications
Certain reclassifications have been made to prior-year amounts to
conform with the current-year presentation.
47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Industry Segment Information
Financial information by industry segment and geographic area for 1993,
1992 and 1991 is presented on pages 37, 40 and 41.
Note 3. Mergers and Acquisitions
In April 1993, the Company acquired certain assets of the Los
Angeles-based Ingram Paper Company (Ingram), a distributor of industrial
and fine printing papers. In December, JB Papers, Inc. (JB Papers), a
paper distribution company located in Union, N.J., was purchased. Also
in December, the assets of Monsanto Company's Kentucky-based Fome-Cor
division, a manufacturer of polystyrene foam boards, were acquired. The
consolidated balance sheet as of December 31, 1993 includes a
preliminary allocation of the purchase prices for Ingram, JB Papers and
Fome-Cor, which will be finalized in 1994.
During the first quarter of 1992, the operating assets of Western Paper
Company (Western Pacific), a printing and industrial distribution
business based in Portland, Ore., were purchased. In the second quarter,
the Company acquired an equity interest in Scitex Corporation Ltd.
(Scitex), an Israeli-based world leader in color electronic prepress
systems for the graphic design, printing and publishing industries. In
the third quarter, Zaklady Celulozowa-Papierniecze S.A. w Kwidzynie
(Kwidzyn) was acquired from the Government of the Republic of Poland.
Kwidzyn is Poland's largest white papers manufacturer and only
integrated bleached pulp and paper company. In the fourth quarter,
certain assets of the chemical division of M. Peterson & Son AS
(Peterson) were acquired.
During the first quarter of 1991, the Company purchased certain
packaging and sheeting facilities located in France previously owned by
Georgia-Pacific Corporation (the Rhone Valley Packaging business). In
April, the packaging equipment division of United Dominion Industries
Ltd. (Evergreen Packaging Equipment) was purchased. Also in April, the
Company acquired the common stock of Dillard Paper Company, a domestic
wholesale distributor of printing and industrial papers, packaging
equipment and supplies. In August, the Company completed a merger with
Leslie Paper Company, a paper distribution firm headquartered in
Minneapolis, Minn. In November, the Company entered into an agreement
with Brierley Investments Limited to control 32% of Carter Holt Harvey
Limited, a major New Zealand forest products and paper company. In
December, the common stock of Scaldia Papier BV, a paper distribution
company based in Nijmegen, Netherlands, was purchased.
All of the 1993, 1992 and 1991 acquisitions, except the merger with
Leslie Paper Company, were accounted for using the purchase method. The
operating results of these mergers and acquisitions have been included
in the consolidated statement of earnings from the dates of acquisition.
The effects of these mergers and acquisitions, individually or in the
aggregate, were not significant to the Company's consolidated financial
statements.
During 1993, the Company contributed assets with a fair market value of
approximately $900 million to two newly formed limited partnerships,
Georgetown Equipment Leasing Associates, L.P. and Trout Creek Equipment
Leasing, L.P. These partnerships are separate and distinct legal
entities from the Company and have separate assets, liabilities,
business functions and operations. However, for accounting purposes, the
Company continues to consolidate these assets, and the minority
shareholders' interest is reflected as minority interest in the
accompanying financial statements. The purpose of the partnerships is to
invest in and manage a portfolio of assets including pulp and paper
equipment used at the Georgetown, S.C., and Ticonderoga, N.Y., mills.
This equipment is leased to the Company under long-term leases.
Partnership assets also include floating-rate notes and cash. During
1993, outside investors purchased a portion of the Company's
limited-partner interests for $132 million and also contributed an
additional $33 million to one of these partnerships.
At December 31, 1993, the Company held aggregate general and
limited-partner interests totaling 83.5% in Georgetown Equipment Leasing
Associates, L.P. and 81.2% in Trout Creek Equipment Leasing, L.P. The
Company also held $197 million of borrowings from these partnerships.
These funds are being used for general corporate purposes.
Note 4. Restructuring and Other Charges
In November 1992, the Company recorded pre-tax charges of $370 million
to establish a productivity improvement reserve and $28 million for
environmental remediation and clean-up. Of the total productivity
improvement charge, $328 million was for plant shutdowns ($126 million),
consolidations and other write-offs ($138 million) and severance and
employee relocation ($64 million). Other costs included in the
productivity charge concerned legal, warranty and miscellaneous items
amounting to $42 million.
In December 1991, the Company recorded a $60 million ($37 million after
taxes or $.33 per share) reduction in force charge to cover severance
costs associated with the elimination of more than 1,000 positions from
its worldwide work force.
48
<PAGE>
Notes to Consolidated Financial Statements
Note 5. Income Taxes
The Company uses the liability method required by Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No.
109), whereby deferred income taxes are recorded based upon differences
between the financial statement and tax bases of assets and liabilities.
Deferred tax assets and liabilities must be revalued to reflect new tax
rates in the periods rate changes are enacted. Accordingly, the 1993
provision for income taxes includes a charge of $25 million ($.20 per
share) for deferred tax expense resulting from the August enactment of
the Omnibus Budget Reconciliation Act of 1993, which raised the federal
income tax rate by 1% retroactive to January 1, 1993.
The Company adopted the provisions of SFAS No. 109 in the fourth quarter
of 1992. First-quarter operations were restated to record an after-tax
charge of $50 million ($.41 per share) as the cumulative effect of the
accounting change as of January 1, 1992. For 1992 this change also
increased depreciation and amortization expense and decreased the
provision for income taxes by approximately $41 million. In addition,
plants, properties and equipment and deferred income taxes each
increased by approximately $500 million as of January 1, 1992.
The components of earnings before income taxes, extraordinary item and
cumulative effect of accounting changes and the provision for income
taxes by taxing jurisdiction were:
In millions 1993 1992 1991
- ----------- ---- ---- ----
Earnings (losses)
U.S. $577 $134 $505
Non-U.S. (77) 72 133
---- ---- ----
Earnings before income taxes,
extraordinary item and cumulative
effect of accounting changes $500 $206 $638
---- ---- ----
---- ---- ----
In millions 1993 1992 1991
- ----------- ---- ---- ----
Current tax provision
U.S. federal $114 $120 $151
U.S. state and local 12 14 9
Non-U.S. 31 29 49
---- ---- ----
157 163 209
---- ---- ----
Deferred tax provision
U.S. federal 64 (79) 15
U.S. state and local 20 (17) 5
Non-U.S. (55) (3) 10
U.S. federal rate change 25
---- ---- ----
54 (99) 30
---- ---- ----
Provision for income taxes $211 $ 64 $239
---- ---- ----
---- ---- ----
Major components of deferred income taxes relate to alternative minimum
tax credits, non-U.S. net operating losses, accelerated depreciation,
restructuring accruals, pension cost funding, adoption of SFAS No. 109
and the U.S. statutory federal income tax rate change.
The Company made income tax payments of $156 million, $130 million and
$247 million in 1993, 1992 and 1991, respectively.
A reconciliation of income tax expense using the statutory U.S. income
tax rate compared to the Company's actual income tax expense follows:
In millions 1993 1992 1991
- ----------- ---- ---- ----
Earnings before income taxes,
extraordinary item and cumulative
effect of accounting changes $500 $206 $638
Statutory U.S. income tax rate 35% 34% 34%
---- ---- ----
Tax expense using statutory U.S.
income tax rate 175 70 217
State and local taxes 21 (2) 9
Goodwill 7 18 4
Foreign sales corporation benefit (6) (6) (9)
U.S. federal rate change 25
Tax credits (9) (6) (1)
Other, net (2) (10) 19
---- ---- ----
Provision for income taxes $211 $ 64 $239
---- ---- ----
Effective income tax rate 42% 31% 37%
---- ---- ----
---- ---- ----
The net deferred income tax liability as of December 31, 1993 and 1992
includes the following components:
In millions 1993 1992
- ----------- ------- -------
Current deferred tax asset $ 176 $ 213
Noncurrent deferred tax asset 115 57
Noncurrent deferred tax liability (1,614) (1,474)
------- -------
Total $(1,323) $(1,204)
------- -------
------- -------
The tax effects of significant temporary differences representing
deferred tax assets and liabilities at December 31, 1993 and 1992 were
as follows:
In millions 1993 1992
- ----------- ------- -------
Plants, properties and equipment $(1,644) $(1,460)
Prepaid pension costs (204) (156)
Postretirement benefit accruals 150 163
Alternative minimum tax credit
carryforwards 92 70
Non-U.S. net operating losses 115 57
Other 168 122
------- -------
Total $(1,323) $(1,204)
------- -------
------- -------
At December 31, 1993, the Company had alternative minimum tax credit
carryforwards of approximately $92 million that can be carried forward
indefinitely. The Company had net operating loss carryforwards
applicable to non-U.S. subsidiaries of which $137 million expires in
years 1997 through 2003 and $206 million can be carried forward
indefinitely.
Deferred taxes are not provided for temporary differences of
approximately $385 million and $440 million as of December 31, 1993 and
1992, respectively, representing earnings of non-U.S. subsidiaries that
are intended to be permanently reinvested. If these earnings were
remitted, the Company believes that U.S. foreign tax credits would
eliminate any significant impact on future income tax provisions.
49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Commitments and Contingent Liabilities
The Company leases certain property, machinery and equipment under
cancelable and noncancelable lease agreements. At December 31, 1993,
total future minimum rental commitments under noncancelable leases were
$305 million, due as follows: 1994--$68 million, 1995--$55 million,
1996--$46 million, 1997--$39 million, 1998--$35 million and
thereafter--$62 million.
The Company is involved in various inquiries, administrative proceedings
and litigation relating to contracts, sales of property, environmental
protection, tax, anti-trust and other matters, some of which allege
substantial monetary damages. While any proceeding or litigation has the
element of uncertainty, the Company believes that the outcome of any
lawsuit or claim that is pending or threatened, or all of them combined,
will not have a material adverse effect on its consolidated financial
position or results of operations.
Note 7. Supplementary Balance Sheet Information
Inventories by major category were:
In millions at December 31 1993 1992
- -------------------------- ------ ------
Raw materials $ 380 $ 354
Finished pulp, paper and packaging
products 1,017 964
Finished imaging products 164 192
Finished lumber and panel products 79 70
Operating supplies 324 310
Other 60 48
------ ------
Inventories $2,024 $1,938
------ ------
------ ------
Total inventories at December 31, 1991 were approximately $1.8 billion.
Approximately 72% of the Company's total raw materials and finished
products inventories were valued using the last-in, first-out method. If
the first-in, first-out method had been used, it would have increased
total inventory balances by approximately $160 million, $168 million
and $183 million at December 31, 1993, 1992 and 1991, respectively.
Plants, properties and equipment by major classification were:
In millions at December 31 1993 1992
- -------------------------- ------- -------
Pulp, paper and packaging facilities
Mills $10,996 $10,588
Packaging plants 1,138 1,067
Wood products facilities 1,178 1,082
Other plants, properties and equipment 1,865 1,801
------- -------
Gross cost 15,177 14,538
Less: Accumulated depreciation 6,305 5,654
------- -------
Plants, properties and equipment, net $ 8,872 $ 8,884
------- -------
------- -------
Note 8. Debt and Lines of Credit
A summary of long-term debt follows:
In millions at December 31 1993 1992
- -------------------------- ------ ------
9.4% to 9.7% notes--due 1995-2002 $ 400 $ 400
7 5/8% notes--due 2007 199 199
7 5/8% notes--due 2023 199
6 1/8% notes--due 2003 199
6 7/8% notes--due 2023 197
Medium-term notes--due 1994-2006 1 549 589
9 3/8% French franc note--due 1994 95 94
5 1/8% debentures--due 2012 78 77
5 3/4% convertible subordinated debentures--
due 2002 2 199 199
Environmental and industrial development bonds 3,4 747 750
Commercial paper 5 516 473
Other 6 401 414
------ ------
Total 3,779 7 3,195
Less: Current maturities 178 99
------ ------
Long-term debt $3,601 $3,096
------ ------
------ ------
1 The weighted average interest rate on these notes was 8.7% in both
1993 and 1992.
2 The 5 3/4% convertible subordinated debentures are convertible into
Company common stock at a conversion price of $68.50 per share. These
debentures are redeemable at par.
3 The weighted average interest rate on these bonds was 5.3% in 1993 and
6.4% in 1992.
4 Includes $279 million and $284 million of bonds at December 31,1993
and 1992, respectively, which may be tendered at various dates and/or
under certain circumstances.
5 The average interest rate based on a weighted average of stated
month-end rates was 3.5% in 1993 and 4.2% in 1992.
6 Includes $95 million in 1993 and $104 million in 1992 of French franc
borrowings with a weighted average interest rate of 5.6% in 1993
and 6.6% in 1992, and $214 million in 1993 and $190 million in
1992 of German mark borrowings with a weighted average interest rate of
6.6% in 1993 and 5.1% in 1992.
7 The fair market value is approximately $4.0 billion.
At December 31, 1993 and 1992, the Company classified $795 and $760
million, respectively, of tenderable bonds and commercial paper as
long-term debt. The Company has the intent and ability to renew or
convert these obligations through 1994 and into future periods.
Total maturities of long-term debt over the next five years are:
1994--$178 million, 1995--$1,104 million, 1996--$234 million, 1997--$152
million and 1998--$123 million. The 1995 amount includes $795 million
under a revolving credit agreement that will be rolled over before
maturity.
At December 31, 1993, the Company had unused bank lines of credit of
approximately $1.5 billion. The lines generally provide for interest at
market rates plus a margin based on the Company's current bond rating.
The principal line provides for $795 million of credit through November
1995, cancelable only if the Company's bond rating drops below
investment grade. A facility fee of .125% to .25% of the line is payable
annually.
50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes payable at December 31, 1993 included $245 million of French
franc-denominated borrowings with a weighted average interest rate of
7.6%.
The Company has entered into certain cross-currency and interest rate
swap agreements. In November 1993, the Company entered into interest
rate swap agreements that effectively converted $400 million of
fixed-rate 10- and 30-year notes with interest rates of 6 1/8% to 6 7/8%
to adjustable-rate debt. During the first year, interest rates are
adjustable at six-month intervals based on LIBOR. After the first year,
interest is payable at fixed rates slightly above the stated coupon
rates. Additionally, a cross-currency swap agreement provides that in
April 1994, the Company will pay 14 million British pounds plus interest
at an 11.34% average rate and will receive about $21 million plus
interest based on commercial paper rates. The risk of loss to the
Company for nonperformance by any party to these agreements is not
significant.
In 1992, an extraordinary loss of $6 million after taxes ($.05 per
share) was recorded for the extinguishment of high-interest-rate debt.
Note 9. Capital Stock
The authorized capital stock of the Company at December 31, 1993 and
1992 consisted of 400,000,000 shares of common stock, $1 par value;
400,000 shares of cumulative $4 nonredeemable preferred stock, without
par value (stated value of $100 per share); and 8,750,000 shares of
serial preferred stock, $1 par value. The serial preferred stock is
issuable in one or more series by the Board of Directors without further
shareholder action.
In January 1992, 9.2 million shares of common stock were sold in a
public offering. Proceeds of $650 million were used to repay long-term
and short-term borrowings.
The Company has stock rights under a Shareholder Rights Plan whereby
each share of common stock has one right. Each right entitles
shareholders to purchase one common stock share at an exercise price of
$155. The rights will become exercisable 10 days after anyone acquires
or tenders for 20% or more of the Company's common stock. If,
thereafter, anyone acquires 30% or more of the common stock, or a 20% or
more owner combines with the Company in a reverse merger in which the
Company survives and its common stock is not changed, each right will
entitle its holder to purchase Company common stock with a value of
twice the $155 exercise price. If, following an acquisition of 20% or
more of the common stock, the Company is acquired in a merger or sells
50% of its assets or earnings power, each right will entitle its holder
to purchase stock of the acquiring company with a value of twice the
$155 exercise price.
Note 10. Retirement Plans
The Company maintains numerous noncontributory pension plans that
provide retirement benefits to substantially all employees. Employees
generally are eligible to participate in the plans upon commencement of
employment and become fully vested after five years of service.
The plans provide defined benefits based on years of credited service
and either final average earnings (salaried employees), hourly job rates
or specified benefit rates (hourly and union employees). The Company
makes contributions that are sufficient to fully fund its actuarially
determined costs, generally equal to the minimum amounts required by
ERISA.
Net periodic pension income for the Company's qualified and nonqualified
defined benefit plans comprised the following:
In millions 1993 1992 1991
- ----------- ----- ----- -----
Service cost--benefits earned during the period $ (43) $ (43) $ (40)
Interest cost on projected benefit obligation (143) (136) (129)
Actual return on plan assets 291 135 565
Net amortization and deferrals (18) 125 (331)
----- ----- -----
Net periodic pension income $ 87 $ 81 $ 65
----- ----- -----
----- ----- -----
The actuarial assumptions used in determining net periodic pension costs
for the years presented were:
1993 1992 1991
----- ----- ----
Discount rate 8.0% 8.0% 8.5%
Expected long-term return on plan assets 10.0% 10.0% 9.5%
Weighted average rate of increase in
compensation levels 5.0% 5.0% 5.5%
----- ----- -----
----- ----- -----
The discount rates and the rates of increase in future compensation
levels used to determine the projected benefit obligations at December
31, 1993 were 7.25% and 4.0%, respectively, and at December 31, 1992
were 8.0% and 5.0%, respectively.
The following table presents the funded status of the Company's pension
plans and the amounts reflected in the accompanying consolidated balance
sheet:
In millions at December 31 1993 1992
- -------------------------- ------ ------
Actuarial present value of benefit obligations
Vested benefits $1,835 $1,575
------ ------
Accumulated benefit obligation $1,986 $1,682
------ ------
Projected benefit obligation $2,145 $1,828
Plan assets at fair value 2,671 2,523
------ ------
Projected benefit obligation less than plan assets 526 695
Unrecognized net loss/(gain) 58 (131)
Balance of unrecorded transition asset (136) (164)
Other 59 21
------ ------
Prepaid pension cost $ 507 $ 421
------ ------
------ ------
51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Plan assets are held primarily in master trust accounts and comprised
the following:
In millions at December 31 1993 1992
- -------------------------- ------ ------
Temporary investments $ 101 $ 108
Fixed income securities 774 628
Corporate stocks 1,290 1,305
International Paper common stock 351 347
Income-producing real estate 155 135
------ ------
Total plan assets $2,671 $2,523
------ ------
------ ------
The Company sponsors several defined contribution plans to provide
substantially all U.S. salaried and certain hourly employees of the
Company an opportunity to accumulate personal funds for their
retirement. Contributions may be made on a before-tax basis to
substantially all of these plans.
As determined by the provisions of each plan, the Company matches the
employees' voluntary contributions. Company matching contributions to
the plans were approximately $38 million, $30 million and $28 million
for the plan years ending in 1993, 1992 and 1991, respectively. The net
assets of these plans approximated $1.3 billion as of the 1993 plan
year-ends.
Note 11. Postretirement Benefits
The Company provides certain retiree health care and life insurance
benefits covering substantially all U.S. salaried and certain hourly
employees. Employees are generally eligible for benefits upon retirement
and completion of a specified number of years of creditable service. A
plan amendment in 1992 limits the maximum annual Company contribution
for health care benefits for retirees after January 1, 1992 based on age
at retirement and years of service after age 50. The Company does not
pre-fund these benefits and has the right to modify or terminate certain
of these plans in the future.
In the fourth quarter of 1991, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," changing to
the accrual method of accounting for these benefits effective January 1,
1991. Prior to 1991, postretirement benefit expense was recognized when
claims were paid. The Company restated 1991 first-quarter operations to
record a pre-tax charge of $350 million ($215 million after taxes or
$1.95 per share) as the cumulative effect of an accounting change at
that date. This change also increased 1991 pre-tax postretirement
benefit expense by $25 million.
In 1992, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." The impact of this change was not significant.
Postretirement benefit expense was $18 million, $12 million and $42
million in 1993, 1992 and 1991, respectively. Plan amendments in 1992
decreased expense by approximately $33 million. The components of
expense in 1993 and 1992 were as follows:
In millions 1993 1992
- ----------- ---- ----
Service cost--benefits earned during the period $ 8 $ 7
Interest cost on accumulated postretirement
benefit obligation 25 23
Net amortization of plan amendments (15) (18)
---- ----
Net postretirement benefit cost $ 18 $ 12
---- ----
---- ----
The accumulated postretirement benefit obligation, included in minority
interest and other liabilities in the accompanying consolidated balance
sheet, comprised the following components:
In millions at December 31 1993 1992
- -------------------------- ---- ----
Retirees $249 $209
Fully eligible active plan participants 16 44
Other active plan participants 83 58
---- ----
Total accumulated postretirement benefit
obligation 348 311
Unrecognized net loss (58) (28)
Unrecognized effect of plan amendments 104 115
---- ----
Accrued postretirement benefit obligation $394 $398
---- ----
---- ----
Future benefit costs were estimated assuming medical costs would
increase at a 15% annual rate starting in 1991, decreasing to a 5%
annual growth rate ratably over the next 13 years and then remaining at
a 5% annual growth rate thereafter. A 1% increase in this annual trend
rate would have increased the accumulated postretirement benefit
obligation at December 31, 1993 by $24 million, with an immaterial
effect on 1993 postretirement benefit expense. The weighted average
discount rate used to estimate the accumulated postretirement benefit
obligation at December 31, 1993 was 7.25%, down from 8.0% at December
31, 1992.
52
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Incentive Plans
The Company has a Long-Term Incentive Compensation Plan that includes a
Restricted Performance Share Plan, a Stock Option Plan and an Executive
Continuity Award Plan, administered by a committee of nonemployee
members of the Board of Directors who are not eligible for awards. The
plan allows stock appreciation rights to be awarded either separately or
in combination with other awards, although none were awarded in 1993,
1992 or 1991.
Under the Restricted Performance Share Plan, contingent awards of
Company common stock are granted by the committee. Awards are earned if
the Company's financial performance over a five-year period meets or
exceeds that of other forest products companies using standards
determined by the committee. In 1992 and 1991, 163,000 shares and
141,000 shares, respectively, were earned. The awards for 1993 have not
yet been determined.
The Stock Option Plan provides for the granting of incentive stock
options and nonqualified stock options to key employees. The committee
determines the option price, the number of shares for which an option is
granted and the term (which cannot exceed 10 years). The option price
is the market price of the stock at the date of grant. Upon exercise of
an option, a replacement option may be granted with the exercise price
equal to the current market price and with a term extending to the
expiration date of the original option. Options awarded under the plan
are restricted for a period of four years after the date of grant.
The following summarizes stock option transactions under stock option
plans for the three years ended December 31, 1993:
Shares Option Price
--------- -------------
Balance at 1/1/91 1 2,274,364 13.930-58.750
Granted 1,077,392 52.875-76.750
Exercised (657,682) 13.930-63.625
--------- -------------
Balance at 12/31/91 1 2,694,074 13.930-76.750
Granted 1,091,369 60.750-78.000
Exercised (561,634) 13.930-70.625
--------- -------------
Balance at 12/31/92 1 3,223,809 13.930-78.000
Granted 941,900 59.375-69.250
Exercised (425,196) 13.930-64.000
--------- -------------
Balance at 12/31/93 1 3,740,513 13.930-78.000
--------- -------------
--------- -------------
1 All options are exercisable under the plan upon grant; however, the
underlying shares cannot be sold or are otherwise restricted for
various periods.
The Executive Continuity Award Plan provides for the granting of tandem
awards of restricted stock and nonqualified stock options to key
executives. Grants are restricted and awards conditioned on attainment
of specified age and years of service requirements. Exercise of the
options results in the cancellation of the related restricted shares. In
1993, 1992 and 1991, restricted shares of 32,000, 20,000 and 8,000,
respectively, were awarded under this plan. In each of the years 1992
and 1991, grants for 20,000 shares were forfeited.
At December 31, 1993 and 1992, a total of 3.7 million shares and 4.7
million shares, respectively, were available for grant under incentive
plans.
Provisions for awards under the Long-Term Incentive Compensation Plan
and all other incentive plans amounted to $31 million, $29 million and
$32 million in 1993, 1992 and 1991, respectively. The provisions include
charges for recently acquired companies, and adjustments of prior-year
awards due to changes in the market price of Company stock and final
determination of Restricted Performance Share Plan awards.
53
<PAGE>
ELEVEN-YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
Dollar amounts in millions, except
per share amounts and stock prices 1993 1992 1991
- ---------------------------------- ------- ------- -------
<S> <C> <C> <C>
Results of Operations
Net sales $13,685 $13,598 $12,703
Costs and expenses, excluding
interest 12,875 13,145 2 11,750 3
Earnings before income taxes,
extraordinary item and
cumulative effect of
accounting changes 500 206 2 638 3
Extraordinary item (6)
Cumulative effect of accounting
changes (50) (215)
Net earnings 289 1 86 2 184 3
Earnings applicable to common
shares 289 1 86 2 184 3
Financial Position
Working capital $ 392 $ (165) 5 $ 404
Plants, properties and
equipment, net 8,872 8,884 7,848
Forestlands 786 759 743
Total assets 16,631 16,516 14,941
Long-term debt 3,601 3,096 3,351
Common shareholders' equity 6,225 6,189 5,739
Per Share of Common Stock 6
Earnings before extraordinary
item and cumulative effect of
accounting changes $ 2.34 1 $ 1.17 2 $ 3.61 3
Extraordinary item (.05)
Cumulative effect of accounting
changes (.41) (1.95)
Net earnings 2.34 1 .71 2 1.66 3
Cash dividends 1.68 1.68 1.68
Common shareholders' equity 50.25 50.46 51.03
Common Stock Prices 6
High 69 7/8 78 1/2 78 1/4
Low 56 5/8 58 1/2 50 1/2
Year-end 67 3/4 66 5/8 70 3/4
Financial Ratios
Current ratio 1.1 .96 5 1.1
Total debt to capital ratio 38.7 38.0 39.1
Return on equity 4.7 1,7 1.4 2,7 3.2 3,7
Return on capital employed 3.8 1,7 1.2 2,7 3.5 3,7
Capital Expenditures $ 954 $ 1,368 $ 1,197
Number of Employees 72,500 73,000 70,500
</TABLE>
Financial Glossary
Current ratio--current assets divided by current liabilities
Total debt to capital ratio--long-term debt plus notes payable and
current maturities of long-term debt divided by long-term debt, notes
payable and current maturities of long-term debt, deferred income taxes,
minority interest and other liabilities, preferred stock and total
common shareholders' equity
Return on equity--net earnings divided by average common shareholders'
equity (computed monthly)
Return on capital employed--net earnings plus after-tax interest expense
and provision for deferred income taxes divided by total assets minus
accounts payable and accrued liabilities at the beginning of the year
54
<PAGE>
ELEVEN-YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
Dollar amounts in millions, except
per share amounts and stock prices 1990 1989 1988 1987 1986 1985 1984 1983
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales $12,960 $11,378 $9,587 $7,800 $5,540 $4,530 $4,750 $4,423
Costs and expenses, excluding
interest 11,737 4 9,768 8,224 6,952 5,030 4,379 4,590 4,190
Earnings before income taxes,
extraordinary item and
cumulative effect of
accounting changes 946 4 1,405 1,198 681 454 159 144 253
Extraordinary item
Cumulative effect of accounting
changes
Net earnings 569 4 864 754 407 305 133 120 255
Earnings applicable to common
shares 569 4 845 733 387 284 107 94 229
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 784 $ 366 $ 781 $ 657 $ 296 $ 350 $ 574 $ 652
Plants, properties and
equipment, net 7,287 6,238 5,456 5,125 4,788 3,725 3,2763,129
Forestlands 751 764 772 780 783 741 780 780
Total assets 13,669 11,582 9,462 8,710 7,848 6,039 5,795 5,617
Long-term debt 3,096 2,324 1,853 1,937 1,764 1,191 1,015 940
Common shareholders' equity 5,632 5,147 4,557 4,052 3,664 3,195 3,2983,321
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK 6
Earnings before extraordinary
item and cumulative effect of
accounting changes $ 5.21 4 $ 7.72 $ 6.57 $ 3.68 $ 2.89 $ 1.08 $ .94 $ 2.31
Extraordinary item
Cumulative effect of accounting
changes
Net earnings 5.21 4 7.72 6.57 3.68 2.89 1.08.94 2.31
Cash dividends 1.68 1.53 1.28 1.20 1.20 1.20 1.20 1.20
Common shareholders' equity 51.34 47.35 41.1436.35 35.04 33.34 33.0233.39
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCK PRICES 6
High 59 3/4 58 3/4 49 3/8 57 3/4 40 28 7/8 29 7/8 30
Low 42 3/4 45 1/8 36 1/2 27 24 1/4 22 1/8 23 23
Year-end 53 1/2 56 1/2 46 3/8 42 1/4 37 1/2 25 3/8 26 7/8 29 1/2
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Current ratio 1.2 1.11.5 1.4 1.2 1.51.9 2.2
Total debt to capital ratio 36.1 33.9 25.8 31.6 31.2 24.1 20.7 19.4
Return on equity 10.5 4 17.8 17.0 10.0 8.3 3.32.8 7.0
Return on capital employed 8.0 4 13.4 13.8 10.2 8.4 2.52.2 6.6
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES $ 1,267 $ 887 $ 645 $ 603 $ 576 $ 79 $ 628 $ 738
NUMBER OF EMPLOYEES 69,000 63,500 55,500 45,500 44,000 32,000 33,500 33,600
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Includes $25 million ($.20 per share) of additional income tax expense
to revalue deferred tax balances to reflect the increase in the U.S.
statutory federal income tax rate.
2 Includes restructuring and other charges totaling $398 million ($263
million after taxes or $2.17 per share).
3 Includes a $60 million pre-tax restructuring charge ($37 million after
taxes or $.33 per share) and additional expenses related to the adoption
of SFAS No. 106 of $25 million ($16 million after taxes or $.15 per
share).
4 Includes a $212 million pre-tax restructuring charge ($137 million
after taxes or $1.26 per share).
5 Reflects increase in short-term versus long-term borrowings due to
favorable interest rates.
6 Appropriate per share amounts and common stock prices have been
adjusted to reflect the 2-for-1 stock split in May 1987.
7 Return on equity was 5.1% and return on capital employed was 3.8% in
1993 before the additional income tax expense. Return on equity was 6.3%
and return on capital employed was 3.7% in 1992 before the accounting
change, extraordinary item and restructuring and other charges. Return
on equity was 7.8% and return on capital employed was 5.9% in 1991
before the accounting change, restructuring charge and additional
expenses related to the adoption of SFAS No. 106.
55
<PAGE>
INTERIM FINANCIAL RESULTS (unaudited)
<TABLE>
<CAPTION>
Quarter
In millions, except per share amounts ---------------------------------------------------------------------------
and stock prices First Second Third Fourth Year
- ----------------------------------------------------------------------------------------------------------------------
1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $3,362 $3,506 $3,405 $3,412 $13,685
Gross Margin 1 819 887 862 926 3,494
Earnings Before Income Taxes 101 122 119 158 500
Net Earnings 64 77 48 2 100 289 2
Per Common Share
Earnings $ .52 $ .62 $ .39 2 $ .81 $ 2.34 2
Dividends .42 .42 .42 .42 1.68
Stock Price
High 69 7/8 68 68 3/8 68 5/8 69 7/8
Low 60 3/4 61 3/4 58 56 5/8 56 5/8
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
1992
- ----------------------------------------------------------------------------------------------------------------------
Net Sales $ 3,356 $ 3,386 $ 3,478 $ 3,378 $13,598
Gross Margin 1 860 873 866 862 3,461
Earnings (Loss) Before Income Taxes,
Extraordinary Item and Cumulative
Effect of Accounting Change 157 174 152 (277) 3 206 3
Earnings (Loss) Before Extraordinary Item and
Cumulative Effect of Accounting Change 104 114 100 (176) 3 142 3
Extraordinary Item (2) (2) (2) (6)
Cumulative Effect of Accounting Change (50) (50)
Net Earnings (Loss) 52 112 98 (176) 3 86 3
Per Common Share
Earnings (Loss) Before Extraordinary Item and
Cumulative Effect of Accounting Change $ .87 $ .94 $ .82 $ (1.46) 3 $ 1.17 3
Extraordinary Item (.02) (.02) (.01) (.05)
Cumulative Effect of Accounting Change (.41) (.41)
Earnings (Loss) .44 .92 .81 (1.46) 3 .71 3
Dividends .42 .42 .42 .42 1.68
Stock Price
High 78 1/2 77 70 3/8 67 3/8 78 1/2
Low 68 1/8 64 1/2 61 58 1/2 58 1/2
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Gross margin represents net sales less cost of products sold.
2 A charge of $25 million ($.20 per share) was recorded in the 1993
third quarter to revalue deferred tax balances to reflect the increase in
the U.S. statutory federal income tax rate.
3 Restructuring and other charges totaling $398 million ($263 million
after taxes or $2.17 per share) were recorded in the 1992 fourth
quarter.
56
<PAGE>
International Paper
1993 Annual Report to Shareholders
Exhibit 13
APPENDIX A
CHARTS
1--NET SALES (PAGE 2)
Bar chart of NET SALES for the years 1988 through 1993, in billions of dollars.
Data points as follows:
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
9.6 11.4 13.0 12.7 13.6 13.7
2--NET EARNINGS (PAGE 2)
Bar chart of NET EARNINGS for the years 1988 through 1993, in millions of
dollars. Charts contain color keys for the years 1990 through 1993 to
highlight the following unusual or nonrecurring items: In 1990, Restructuring
charge; in 1991, Accrual effect of SFAS No. 106, restructuring charge, and
accounting change; in 1992, Restructuring and other charges, extraordinary
item and accounting change; in 1993, Adjustment of deferred tax balances to
reflect the federal tax rate change. Data points as follows:
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
NET EARNINGS BEFORE UNUSUAL ITEMS 754 864 706 452 405 314
Adjustment of deferred tax balances (25)
Restructuring and other charges (263)
Restructuring charge (137) (37)
Accounting change-SFAS No. 109 (50)
Extraordinary item (6)
Accounting change-SFAS No. 106 (215)
Accrual effect of SFAS No. 106 (16)
---- ---- ---- ---- ---- ----
NET EARNINGS 754 864 569 184 86 289
3--EARNINGS PER SHARE (PAGE 2)
Bar chart of EARNINGS PER SHARE for the years 1988 through 1993, in dollars.
Charts contain color keys for the years 1990 through 1993 to highlight the
following unusual or nonrecurring items: In 1990, Restructuring charge; in
1991, Accrual effect of SFAS No. 106, restructuring charge, and accounting
change; in 1992, Restructuring and other charges, extraordinary item and
accounting change; in 1993, Adjustment of deferred tax balances to reflect
the federal tax rate change. Data points as follows:
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
EARNINGS PER SHARE BEFORE
UNUSUAL ITEMS 6.57 7.72 6.47 4.09 3.34 2.54
Adjustment of deferred tax balances (0.20)
Restructuring and other charges (2.17)
Restructuring charge (1.26) (0.33)
Accounting change-SFAS No. 109 (0.41)
Extraordinary item (0.05)
Accounting change-SFAS No. 106 (1.95)
Accrual effect of SFAS No. 106 (0.15)
---- ---- ---- ---- ---- ----
EARNINGS PER SHARE 6.57 7.72 5.21 1.66 0.71 2.34
4--PRINTING PAPERS--NET SALES AND OPERATING PROFIT (PAGE 10)
Bar charts of NET SALES and OPERATING PROFIT for the segment for the
years 1991 through 1993, in millions of dollars. NET SALES chart contains
color keys to show breakdown of U.S. and non-U.S. sales. OPERATING
PROFIT chart contains color key to highlight restructuring charge in 1991 and
1992.
Data points for NET SALES as follows:
1991 1992 1993
----- ----- -----
U.S. 2,818 2,747 2,746
Non-U.S. 1,257 1,293 1,159
----- ----- -----
NET SALES 4,075 4,040 3,905
Data points for OPERATING PROFIT as follows:
1991 1992 1993
----- ----- -----
Operating profit before restructuring charge 318 19 (122)
Restructuring charge (20) (89)
----- ----- -----
OPERATING PROFIT 298 (70) (122)
5--PRINTING PAPERS--SEGMENT SALES (PAGE 11)
A pie chart showing 1993 PRINTING PAPERS industry segment sales in relation to
total Company sales. Chart contains color keys to show breakdown of U.S. and
non-U.S. sales for the segment. Data points as follows: Segment sales as percent
of total Company sales, 27%; U.S. 70%, non-U.S. 30%. Chart is labeled to
indicate that segment sales were $3.9 billion, 27% of total sales and that U.S.
and non-U.S. segment sales were 70% and 30%, respectively.
6--PACKAGING--NET SALES AND OPERATING PROFIT (PAGE 16)
Bar charts of NET SALES and OPERATING PROFIT for the segment for the
years 1991 through 1993, in millions of dollars. NET SALES chart contains
color keys to show breakdown of U.S. and non-U.S. sales. OPERATING
PROFIT chart contains color keys to highlight restructuring charge in 1991 and
1992.
Data points for NET SALES as follows:
1991 1992 1993
----- ----- -----
U.S. 2,252 2,381 2,366
Non-U.S. 778 864 729
----- ----- -----
NET SALES 3,030 3,245 3,095
Data points for OPERATING PROFIT as follows:
1991 1992 1993
----- ----- -----
Operating profit before restructuring charge 346 330 188
Restructuring charge (12) (22)
----- ----- -----
OPERATING PROFIT 334 308 188
7--PACKAGING--SEGMENT SALES (PAGE 17)
A pie chart showing 1993 PACKAGING industry segment sales in relation to total
Company sales. Chart contains color keys to show breakdown of U.S. and non-U.S.
sales for the segment. Data points as follows: Segment sales as percent of
total Company sales, 22%; U.S. 76%, non-U.S. 24%. Chart is labeled to indicate
that segment sales were $3.1 billion, 22% of total sales and that U.S. and
non-U.S. segment sales were 76% and 24%, respectively.
8--DISTRIBUTION--NET SALES AND OPERATING PROFIT (PAGE 20)
Bar charts of NET SALES and OPERATING PROFIT for the segment for the
years 1991 through 1993, in millions of dollars. NET SALES chart contains
color keys to show breakdown of U.S. and non-U.S. sales. OPERATING
PROFIT chart contains color key to highlight restructuring charge in 1991 and
1992.
Data points for NET SALES as follows:
1991 1992 1993
----- ----- -----
U.S. 2,275 2,617 2,853
Non-U.S. 315 363 287
----- ----- -----
NET SALES 2,590 2,980 3,140
Data points for OPERATING PROFIT as follows:
1991 1992 1993
----- ----- -----
Operating profit before restructuring charge 54 58 58
Restructuring charge (1) (6)
----- ----- -----
OPERATING PROFIT 53 52 58
9--DISTRIBUTION--SEGMENT SALES (PAGE 21)
A pie chart showing 1993 DISTRIBUTION industry segment sales in relation to
total Company sales. Chart contains color keys to show breakdown of U.S. and
non-U.S. sales for the segment. Data points as follows: Segment sales as percent
of total Company sales, 22%; U.S. 91%, non-U.S. 9%. Chart is labeled to indicate
that segment sales were $3.1 billion, 22% of total sales and that U.S. and
non-U.S. segment sales were 91% and 9%, respectively.
10--SPECIALTY PRODUCTS--NET SALES AND OPERATING PROFIT (PAGE 26)
Bar charts of NET SALES and OPERATING PROFIT for the segment for the
years 1991 through 1993, in millions of dollars. NET SALES chart contains
color keys to show breakdown of U.S. and non-U.S. sales. OPERATING
PROFIT chart contains color key to highlight restructuring and other charges
in 1991 and 1992.
Data points for NET SALES as follows:
1991 1992 1993
----- ----- -----
U.S. 1,540 1,656 1,749
Non-U.S. 795 804 711
----- ----- -----
NET SALES 2,335 2,460 2,460
Data points for OPERATING PROFIT as follows:
1991 1992 1993
----- ----- -----
Operating profit before restructuring and
other charges 244 238 263
Restructuring and other charges (17) (155)
----- ----- -----
OPERATING PROFIT 227 83 263
11--SPECIALTY PRODUCTS--SEGMENT SALES (PAGE 27)
A pie chart showing 1993 SPECIALTY PRODUCTS industry segment in relation to
total Company sales. Chart contains color keys to show breakdown of U.S. and
non-U.S. sales for the segment. Data points as follows: Segment sales as percent
of total Company sales, 17%, U.S. 71%, non-U.S. 29%. Chart is labeled to
indicate that segment sales were $2.5 billion, 17% of total sales and that U.S.
and non-U.S. segment sales were 71% and 29%, respectively.
12--FOREST PRODUCTS--NET SALES AND OPERATING PROFIT (PAGE 30)
Bar charts of NET SALES and OPERATING PROFIT for the segment for the
years 1991 through 1993, in millions of dollars. NET SALES chart contains
color keys to show breakdown of U.S. and non-U.S. sales. OPERATING
PROFIT chart contains color key to highlight restructuring and other charges
in 1991 and 1992.
Data points for NET SALES as follows:
1991 1992 1993
----- ----- -----
U.S. 1,121 1,313 1,597
Non-U.S. 69 97 103
----- ----- -----
NET SALES 1,190 1,410 1,700
Data points for OPERATING PROFIT as follows:
1991 1992 1993
----- ----- -----
Operating profit before restructuring and
other charges 126 261 445
Restructuring and other charges (64)
----- ----- -----
OPERATING PROFIT 126 197 445
13--FOREST PRODUCTS-SEGMENT SALES (PAGE 31)
A pie chart showing 1993 FOREST PRODUCTS industry segment sales in relation to
total Company sales. Chart contains color keys to show breakdown of U.S. and
non-U.S. sales for the segment. Data points as follows: Segment sales as percent
of total Company sales, 12%; U.S. 94%; non-U.S. 6%. Chart is labeled to indicate
that segment sales were $1.7 billion, 12% of total sales and that U.S. and
non-U.S. segment sales were 94% and 6%, respectively.
14--NET SALES (PAGE 36)
Bar charts of NET SALES for the years 1991 through 1993, in billions of
dollars. Data points as follows:
1991 1992 1993
----- ----- -----
12.7 13.6 13.7
15--CASH FLOW FROM OPERATIONS (PAGE 37)
Bar chart of CASH FLOW FROM OPERATIONS for the years 1991 through 1993,
in millions of dollars. Data points as follows:
1991 1992 1993
----- ----- -----
1,177 1,078 929
16--RETURN ON EQUITY (PAGE 37)
Bar chart of RETURN ON EQUITY for the years 1991 through 1993, expressed as a
percent. Chart contains color keys for the years 1991 through 1993 to highlight
the following unusual or nonrecurring items: In 1991, accrual effect of SFAS No.
106, restructuring charge, and accounting change; in 1992. Restructuring and
other charges, extraordinary item and accounting change; in 1993. Adjustment of
deferred tax balances to reflect the federal tax rate change. Data points as
follows:
1991 1992 1993
----- ----- -----
RETURN ON EQUITY BEFORE UNUSUAL ITEMS 7.8 6.3 5.1
Adjustment of deferred tax balances .4
Restructuring and other charges 4.1
Restructing charge .6
Accounting change-SFAS No. 109 .7
Extraordinary item .1
Accounting change-SFAS No. 106 3.7
Accrual effect of SFAS No. 106 .3
----- ----- -----
RETURN ON EQUITY 3.2 1.4 4.7
17--TOTAL DEBT TO CAPITAL RATIO (PAGE 38)
Bar chart of TOTAL DEBT TO CAPITAL RATIO for the years 1991 through 1993,
expressed as a percent. Data points as follows:
1991 1992 1993
----- ----- -----
39.1 38.0 38.7
<PAGE>
International Paper
1993 Annual Report to Shareholders
Exhibit 13
Appendix B
PHOTOGRAPHS
1. Color photograph of two printing papers empolyees and a customer examining
bright colored file folders surrounded by rolls of file folder paper stock.
(Page 6)
2. Color photograph of a researcher examining paper through test instrument.
(Page 6)
3. Color photograph of construction site containing various pieces of
construction equipment and cement trucks and initial work completed at the
site. The site is the Riverdale mill near Selma, Alabama. (Page 7)
4. Color photograph of street scene and delivery person unloading reprographic
papers produced by International Paper's French subsidiary Aussedat Rey.
(Page 8)
5. Color photograph of warehouse containing waste paper used to make high
quality office papers and bailing machine, with bailed waste paper exiting
the machine. (Page 9)
6. Color photograph of various printing papers manufactured by International
Paper. (Page 11)
7. Color photograph of a customer's filling plant and two empoyees examining
aseptic liquid packaging produced using International Paper's packaging
materials and equipment. (Page 12)
8. Color photograph of corrugated boxes produced by International Paper.
(Page 12)
9. Color photograph of street scene and a Federal Express employee holding
corrugated boxes made by International Paper. (Page 13)
10. Color photograph of students and teachers standing behind a container of
milk and juice cartons collected for recycling. (Page 14)
11. Color phograph of International Paper employee at a state-of-the-art
computer equipment terminal used for designing labels, with various other
video screens displaying various labels. (Page 15)
12. Color photograph of various International Paper packaging products.
(Page 17)
13. Color photograph of a map of the United States with pins inserted in
locations where International Paper's distribution business, ResourceNet
International has operations. (Page 18)
14. Color photograph of a street scene and an employee of ResourceNet
International's Carter Rice operations delivering various products.
(Page 19)
15. Color photographs of various products distributed by International Paper's
distribution business. (Page 21)
16. Color photograph of an International Paper Veratec division employee
examining spunbond nonwoven product, with rolls of the product in the
background. (Page 22)
17. Color photograph of various ink solvents produced by International Paper's
Arizona Chemical Company blending together. (Page 22)
18. Color photograph of woman and child seated in front of a white CraftMaster
door facing. (Page 23)
19. Color photograph of two International Paper petroleum operations employees
(one seated, the other standing) reviewing and discussing the next well
location on the Sugg Ranch field in west Texas, with a computer video
terminal and various charts in the background. (Page 24)
20. Color photograph of an International Paper Horsell group employee
examining a plate image produced by Horsell's computer-to-plate system.
(Page 25)
21. Color photograph of various products produced by International Paper's
Specialty Products businesses. (Page 27)
22. Color photograph of two International Paper wood products employees
unloading medium-density-overlay panels from a machine. (Paage 28)
23. Color photograph of three International Paper employees inspecting
SuperTree seedlings at a SuperTree nursery near Selma, Alabama. (Page 29)
24. Color photograph of various wood panel and molding products produced by
International Paper's Forest Products segment. (Page 31)
25. Color photograph of International Paper's Southland Experimental Forest
near Bainbridge, Georgia. (Page 32)
<PAGE>
EXHIBIT (21)
Company and Subsidiary:
Percentage of voting
Sovereign power securities owned by
under which organized immediate parent
--------------------- --------------------
International Paper
Company (the "Company") New York Parent
IP Timberlands, Ltd.* Texas The Company owns 100%
of the Class A Common
Stock and Class B
Common Stock of IP
Forest Resources
Company, managing
general partner of IPT,
and 84% of the Class A
Depositary Units of IPT.
Names of subsidiaries which, if considered in the aggregate as a single
subsidiary would not constitute a significant subsidiary, have been omitted.
* For Regulation S-X purposes.
<PAGE>
EXHIBIT 22
INTERNATIONAL PAPER
Two Manhattanville Road
Purchase, New York 10577
JOHN A. GEORGES
Chairman
March 31, 1994
Dear Fellow Shareholders:
The annual meeting of International Paper will be held this year at the
Hotel Crescent Court, 400 Crescent Court, Dallas, Texas. The meeting will start
at 9:30 a.m., on Tuesday, May 10, 1994. You are cordially invited to attend this
meeting and we look forward to seeing you there.
The following Proxy Statement outlines the business to be conducted at the
meeting, which includes the election of one class of directors and three
directors to the remaining term of their designated class; approval of the
appointment of Arthur Andersen & Co. as independent auditors for 1994; and
approve amendments to the Long-Term Incentive Compensation Plan.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOUR REPRESENTATION AND VOTE
ARE IMPORTANT. WE URGE YOU TO VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD.
Attendance at the meeting will be limited to shareholders of record as of
the close of business March 22, 1994, or their duly appointed proxy holder (not
to exceed one proxy per shareholder), and to guests of management. If you or
your proxy holder plan to attend this meeting, please complete, sign, detach and
return the enclosed Request for Admittance card.
Thank you for your continued support.
Sincerely,
/s/ JOHN A. GEORGES
JOHN A. GEORGES
<PAGE>
INTERNATIONAL PAPER
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE OWNERS OF COMMON STOCK OF
INTERNATIONAL PAPER COMPANY:
The annual meeting of shareholders of International Paper Company will be held
Tuesday, May 10, 1994, at 9:30 a.m. at the Hotel Crescent Court, 400 Crescent
Court, Dallas, Texas, to:
1. Elect one class of directors comprised of three members to the Board of
Directors and three directors to the remaining term of their designated class;
2. Approve the appointment of Arthur Andersen & Co. as independent auditors for
1994;
3. Approve amendments to the Long-Term Incentive Compensation Plan; and
4. Transact such other business as may properly come before the meeting or any
adjournments thereof.
YOUR BOARD OF DIRECTORS URGES SHAREHOLDERS TO VOTE FOR ITEMS: 1, 2 AND 3.
Shareholders of record at the close of business on March 22, 1994, will be
entitled to vote at the meeting or any adjournments thereof.
By order of the Board of Directors
JAMES W. GUEDRY
Secretary
March 31, 1994
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INTERNATIONAL PAPER COMPANY PROXY STATEMENT
TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
(914) 397-1500
------------------------
GENERAL INFORMATION
This statement is furnished by the Board of Directors of International
Paper Company (the "Company") in connection with the solicitation of proxies to
be voted at the annual meeting of shareholders to be held on May 10, 1994.
Owners of shares of common stock outstanding are entitled to one vote for each
share of common stock held of record at the close of business on March 22, 1994.
As of that date, there were 124,587,410 shares of common stock outstanding.
The annual report, including the audited financial statements of the
Company for the fiscal year ended December 31, 1993, has been mailed to
shareholders separately from this Proxy Statement and should be read carefully
in conjunction with this Proxy Statement before voting on any proposals
contained herein, as it contains details of the Company's operations and other
relevant disclosures.
PROXY PROCEDURE
Shares eligible to be voted and for which a proxy is properly signed and
returned, will be voted in accordance with the instructions specified thereon.
Where no instruction is received, eligible shares will be voted as recommended
by the Board of Directors in this Proxy Statement. If any other matters come
before the meeting, including any proposal submitted by a shareholder which was
omitted from this Proxy Statement in accordance with the applicable provisions
of the federal securities laws, the persons voting the proxies will vote them in
accordance with their best judgment. As of the time this Proxy Statement was
printed, management was not aware of any other matters to be voted upon. Any
proxy may be revoked at any time before its exercise by submitting a written
revocation or a new proxy, or by the shareholder's attendance and vote at the
annual meeting.
Solicitation of proxies from the Company's shareholders may be undertaken
by directors, officers and employees, as well as by Georgeson & Company Inc.
Payments to that firm as compensation are estimated at approximately $15,000
plus reimbursable expenses. This solicitation may be carried out either by mail,
telephone, telegraph, other electronic communication, or personal interview. The
cost of any such solicitation will be borne by the Company.
The Company has adopted a policy of confidentiality in the voting of
shareholder proxies generally and uses the services of its registrar and
transfer agent, Chemical Bank, as independent inspectors of election to receive
and tabulate proxy votes.
This Proxy Statement and the form of Proxy were sent to shareholders,
commencing on or about March 31, 1994.
MEETING ADMITTANCE PROCEDURES
Shareholders of record as of the close of business on March 22, 1994 (or
their duly appointed proxy holder upon verification--not to exceed one proxy per
shareholder) will be entitled to vote and attend the meeting. The following
procedures have been adopted to insure that no inconvenience or delays are
caused to the Company's shareholders or their proxy holders when entering the
meeting.
If you plan to attend the annual meeting in person or will appoint a proxy
to attend the meeting (other than the proxies set forth on the proxy card),
please complete (including the name of the appointed proxy, if any), sign,
detach and return the enclosed Request for Admittance promptly so that an
admittance card can be reserved for you or your proxy in advance of the meeting.
These admittance cards will be delivered to you or your proxy holder upon
verification of identification at the shareholders' admittance counter at the
meeting.
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Record shareholders who do not have admittance cards reserved for them at
the meeting will be admitted upon verification of ownership at the shareholders'
admittance counter. If you have not appointed a proxy in advance or have changed
the appointed proxy on the Request for Admittance, your duly appointed proxy who
will attend the meeting will be required to present evidence of your signature
on the proxy (a copy of your driver's license or employment identification card
or other identification with your signature) in order to determine that only
valid proxies are admitted and voted.
Beneficial owners of record on March 22, 1994 (or their duly appointed
proxy holder upon verification--not to exceed one proxy per shareholder) can
obtain admittance cards only at the shareholders' admittance counter by
presenting evidence of common stock ownership in the Company. This evidence
could be a proxy from the institution that is the record holder of the stock or
your most recent bank or brokerage firm account statement, along with proper
identification. If you are a beneficial shareholder who will appoint a proxy to
attend the meeting on your behalf, your duly appointed proxy will be required to
comply with the procedures in this paragraph, as well as the admittance
procedures described above for duly appointed proxies not designated in advance
on the Request for Admittance.
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
The Board is classified into three classes of directors: Class I directors,
of which there are currently five, were elected at the 1992 annual meeting to
serve until the 1995 annual meeting; Class II directors, of which there are
currently five, were elected at the 1993 annual meeting to serve until the 1996
annual meeting; and Class III directors, of which there are currently four, were
elected at the 1991 annual meeting to serve until the 1994 annual meeting. Each
class is elected for a three-year term.
Eleven regular meetings and seven special meetings of the Board of
Directors were held in 1993. In addition, there were 28 Committee meetings. Each
director attended at least 80% of the meetings of the Board and the Committees
on which he or she serves. All of the directors attended an average of 96% of
such meetings of the Board and the Committees on which he or she serves.
With respect to the Company's director, Samuel R. Pierce, Jr., former
Secretary of Housing and Urban Development of the United States, an independent
counsel was appointed on March 1, 1990 to inquire into whether the Secretary or
other HUD employees engaged in a conspiracy to defraud the United States by
directing housing grants to political associates.
As mentioned in the Company's 1992 annual report, in December 1992, the
Company announced the donation of a 15,000 acre tract of forestlands, in the
Adirondack Park in New York, to The Conservation Fund, in recognition of the
100th anniversary of that Park. Following an independent appraisal which valued
the donation at $3,977,000, the transaction was finalized last year. Mr. Noonan,
who is chairman and chief executive officer of The Conservation Fund, joined the
Board in December 1993.
Beneficial ownership of current directors in equity securities of the
Company is shown in the table on page 5.
AUDIT COMMITTEE
The functions of the Audit Committee of the Board are to assist the Board
in carrying out its responsibilities for monitoring management's accounting for
the Company's financial results and for the timeliness and adequacy of the
reporting of those results; to discuss and make inquiry into the audits of the
Company's books made internally and by outside independent auditors, the
Company's financial and accounting policies, its internal controls and its
financial reporting; and to investigate and make a recommendation to the Board
each year with respect to the appointment of independent auditors for the
following year.
2
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Current members of the Committee, none of whom is an employee of the
Company, are W.M. Ellinghaus (Chairman), F.B. Dent, A.G. Hansen, W.G. Kuhns and
J.C. Pfeiffer.
Four meetings of the Committee were held in 1993.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
The functions of the Management Development and Compensation Committee are
to review Company policies and programs for the development of management
personnel; to make recommendations to the Board with respect to any proposals
for compensation or compensation adjustments of officers who are also directors
of the Company; to authorize compensation or compensation adjustments for other
elected officers of the Company; to administer the Company's executive bonus and
Long-Term Incentive Compensation Plan; to review and endorse changes in Company
employee retirement and benefits plans; to review officer candidates and endorse
nominees for election as officers; and to make recommendations to the Board with
respect to directors' compensation.
Current members of the Committee, none of whom is an employee of the
Company, are S.C. Gault (Chairman), W.C. Butcher, T.C. Graham, S.R. Pierce, Jr.
and E.T. Pratt, Jr.
Eight meetings of the Committee were held in 1993.
NOMINATING COMMITTEE
The functions of the Nominating Committee are to review the size and
composition of the Board; to review possible director candidates and director
nominations properly presented by shareholders; to recommend to the Board
individuals suitable for election as directors; and to review and recommend
annually to the full Board the slate of nominees for election by the Company's
shareholders.
Current members of the Committee, none of whom is an employee of the
Company, are J.C. Pfeiffer (Chairman), W.C. Butcher, F.B. Dent, W.M. Ellinghaus,
D.F. McHenry and E.T. Pratt, Jr.
Three meetings of the Committee were held in 1993.
ENVIRONMENT, HEALTH AND TECHNOLOGY COMMITTEE
The functions of the Environment, Health & Technology Committee are to
discuss and make inquiries into the environmental and safety audits performed by
the Company's internal auditors; to review environmental, safety and health and
technological policies and programs throughout the Company, to assure that they
are appropriate to the short and long-term objectives of the Company in terms of
industry leadership, compliance with federal and state laws and regulations and
social responsibility; and to advise the Board of the effectiveness of these
policies and programs.
Current members of the Committee are T.C. Graham (Chairman), F.B. Dent,
J.T. Dillon, S.C. Gault, A.G. Hansen, P.F. Noonan and S.R. Pierce, Jr.
Four meetings of the Committee were held in 1993.
OTHER COMMITTEES
Membership of the other regular Committees of the Board of Directors is
shown on page 58 of the Company's annual report.
FUTURE SHAREHOLDER PROPOSALS AND NOMINATIONS
Any shareholder proposal intended to be presented at the 1995 annual
meeting must be made in writing and received by the Secretary of the Company at
the Company's principal executive offices by December 1, 1994, for inclusion in
the 1995 Proxy Statement and form of proxy relating to the meeting.
3
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Nomination by shareholders for directors, at a meeting called for the purpose of
electing directors, shall be made in accordance with Article II, Section 9 of
the Company's By-laws, as set forth below:
"Nominations for election to the Board of Directors of the Corporation
at a meeting of the Stockholders may be made by the Board, or on behalf of
the Board by any nominating committee appointed by the Board, or by any
Stockholder of the Corporation entitled to vote for the election of
Directors at such meeting. Such nominations, other than those made by or on
behalf of the Board, shall be made by notice in writing delivered or mailed
by first class United States mail, postage prepaid, to the Secretary of the
Corporation, and received by him not less than thirty (30) days nor more
than sixty (60) days prior to any meeting of the Stockholders called for
the election of Directors; provided, however, that if less than thirty-five
(35) days notice of the meeting is given to the Stockholders, such
nomination shall have been mailed or delivered to the Secretary of the
Corporation not later than the close of business on the seventh (7th) day
following the day on which the notice of meeting was mailed. Such notice
shall set forth as to each proposed nominee who is not an incumbent
Director (i) the name, age, business address and, if known, residence
address of each nominee proposed in such notice, (ii) the principal
occupation or employment of each such nominee, (iii) the number of shares
of stock of the Corporation which are beneficially owned by each such
nominee and by the nominating Stockholder, and (iv) any other information
concerning the nominee that must be disclosed of nominees in proxy
solicitations pursuant to Rule 14(a) of the Securities Exchange Act of
1934. Such notice shall be accompanied by the written consent of each
proposed nominee to serve as a Director of the Corporation. No person shall
be eligible for election as a Director of the Corporation unless nominated
in accordance with the procedures set forth herein.
"The Presiding Officer of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded."
The effect of this By-law is that shareholder nominations for the 1995
election of directors must be received by the Secretary of the Company not
earlier than March 11, 1995, or later than April 11, 1995, if the annual meeting
is held on the second Tuesday of May, 1995.
4
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COMMON STOCK OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table shows, as of March 22, 1994, the number of shares of
Company common stock beneficially owned (as defined by the Securities and
Exchange Commission) or otherwise claimed by each current director and each
nominee for director and by all directors and executive officers of the Company
as a group. To the best knowledge of the Company, no person or group
beneficially owns more than 5% of the Company's common stock outstanding, except
as set forth below in the table.
<TABLE>
<CAPTION>
SHARES PERCENT OF TOTAL
NAME OF INDIVIDUAL BENEFICIALLY COMMON STOCK
OR GROUP OWNED(1) OUTSTANDING
- -------------------------------------------------------------------- ------------- ----------------------------
<S> <C> <C>
W.C. Butcher........................................................ 2,592
F.B. Dent.......................................................... 2,920
J.T. Dillon......................................................... 89,016
W.M. Ellinghaus.................................................... 1,970
S.C. Gault.......................................................... 7,963
J.A. Georges........................................................ 210,630
T.C. Graham......................................................... 6,580
A.G. Hansen......................................................... 2,308
No director or executive
W.G. Kuhns.......................................................... 3,960 officer owns as much
D.F. McHenry........................................................ 2,627 as 1/5th of 1%
P.F. Noonan......................................................... 125
J.C. Pfeiffer....................................................... 2,369
S.R. Pierce, Jr..................................................... 1,880
E.T. Pratt, Jr...................................................... 2,580
R.B. Smith.......................................................... 2,300
J.P. Melican........................................................ 55,082
C.W. Smith.......................................................... 59,464
M.A. Suwyn.......................................................... 35,832
All directors and executive officers as a group..................... 599,803 0.48%
Bank trustee under Company and subsidiary employee benefit plans
(2)................................................................. 10,213,760 8.26%
</TABLE>
- ---------------
(1) Ownership shown includes securities over which the individual has or shares,
directly or indirectly, voting or investment powers, including shares held
in the Restricted Stock Plan for Non-Employee Directors, shares owned by a
spouse or certain relatives and ownership by trusts for the benefit of such
relatives, as required to be reported by the Securities and Exchange
Commission. Certain individuals may disclaim beneficial ownership of some of
these shares, but they are included for the purpose of computing the
holdings and the percentages of common stock owned. Interests in shares
resulting from participation in the Company's Salaried Savings Plan,
Performance Share Awards, and Executive Continuity Awards, are included
above. The above table does not include 384,284 shares represented by stock
options granted executive officers under the Long-Term Incentive
Compensation Plan, including options for 146,700 shares for Mr. Georges,
59,300 shares for Mr. Dillon, 54,684 shares for Mr. Melican, 25,700 shares
for Mr. Smith and 12,950 shares for Mr. Suwyn. In addition, under the
Nonfunded Deferred Compensation Plan for Directors or the Supplemental
Unfunded Savings Plan for Senior Managers, the Directors and executive
officers listed below own the non-voting stock-equivalent Units set forth in
the following chart:
(Footnotes continued on following page)
5
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(Footnotes continued from preceding page)
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
STOCK STOCK
UNITS UNITS
--------- ---------
<S> <C> <C> <C>
W.C. Butcher........................... 4,314 D.F. McHenry........................... 2,072
F.B. Dent............................. 4,423 P.F. Noonan............................ 45
J.T. Dillon............................ 8,239 E.T. Pratt............................. 13,184
W.M. Ellinghaus....................... 3,487 R.B. Smith............................. 3,823
J.A. Georges........................... 33,824 J.P. Melican........................... 6,467
T.C. Graham............................ 6,191 C.W. Smith............................. 4,159
A.G. Hansen............................ 3,980 M.A. Suwyn............................. 1,347
</TABLE>
(2) As of December 31, 1993, State Street Bank & Trust Co., N.A. holds such
shares as the independent trustee in trust funds for employee savings,
thrift, and similar employee benefit plans of the Company and its
subsidiaries ("Company Trust Funds"). In addition, State Street Bank & Trust
Co., N.A. is trustee for various third party trusts and employee benefits
plans and is an Investment Advisor. As a result of its holdings in all
capacities, State Street Bank & Trust Co., N.A. is the record holder of
11,031,412 shares of common stock of the Company. The trustee disclaims
beneficial ownership of 10,213,760 shares of common stock it holds as
trustee. The common stock held by the Company Trust Funds is allocated to
participants' accounts and such stock or the cash equivalent will be
distributed to participants upon termination of employment or pursuant to
withdrawal rights. The trustee votes the shares of common stock held in the
Company Trust Funds in accordance with the instructions of the participants;
shares for which no instructions are received are voted proportionately to
those shares voted by participants.
MATTERS TO BE CONSIDERED AT THE MEETING
ITEM NO. 1--ELECTION OF DIRECTORS
Three directors, Mr. Frederick B. Dent (Class III director), Mr. William M.
Ellinghaus (Class III director) and Mr. William G. Kuhns (Class I director),
after many years of outstanding service to the Company, will not stand for
election at the annual meeting since they have reached the mandatory retirement
age. The three classes of directors will therefore be reorganized as set forth
below.
Three (3) directors are to be elected as Class III directors for three-year
terms expiring in 1997. Two (2) directors are to be elected as Class I directors
and one (1) is to be elected a Class II director for terms expiring in 1995 and
1996, respectively. Each nominee is currently a director of the Company.
Election requires the affirmative vote by the holders of a plurality of
outstanding common stock voting at the annual meeting of shareholders. A
plurality means that the six (6) nominees receiving the largest number of votes
cast will be elected. Votes which are withheld from any nominee, as well as
broker non-votes, will not be counted in such nominee's favor. Shareholders
voting at the meeting may not vote for more than the number of nominees listed
in the Proxy Statement. Proxies given to management to vote will be voted
according to instructions given, but only for nominees listed in the Proxy
Statement.
The term of the present Class III directors expires at the adjournment of
the 1994 annual meeting. The three nominees for election at that meeting as
Class III directors are listed below:
CLASS III NOMINEES--TERM EXPIRING IN 1997
(PHOTO) JOHN A. GEORGES, 63, Chairman and Chief Executive Officer. He
was elected president in 1981, chief executive officer in 1984
and became chairman and chief executive officer in 1985. He
has been a director and chairman of the board of IP Forest
Resources Company (the managing general partner of IP
Timberlands, Ltd.) since 1985. He is a director of Ryder
Systems, Inc., Scitex Corporation Ltd. and Warner-Lambert
Company. He is a member of The Business Council and the
Planning and Policy Committees of the Business Roundtable. He
is a board member of the Business Council of New York State, a
member of The Trilateral Commission, the President's Advisory
Committee for Trade Policy and Negotiations and a trustee of
Drexel University.
Director since February 1, 1980
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(PHOTO) DONALD F. MCHENRY, 57, University Research Professor of
Diplomacy and International Affairs at Georgetown University
since 1981. He is president of the IRC Group, Inc. and a
director of American Telephone and Telegraph Company, The
Coca-Cola Company, Bank of Boston Corporation, the First
National Bank of Boston, SmithKline Beecham plc and the
Institute for International Economics. He is also a director
of the Council on Foreign Relations. He is a trustee of the
Johnson Foundation, The Brookings Institution, and chairman of
the board of Africare.
Director since April 14, 1981
(PHOTO) PATRICK F. NOONAN, 51, Chairman and Chief Executive Officer
since 1993 of The Conservation Fund (a nonprofit organization
dedicated to conserving America's land and water resources).
Previously, he was president of the Fund and has been with the
Fund since 1985. Prior to that he was president of The Nature
Conservancy. He is a trustee of The National Geographic
Society, the American Farmland Trust and the American
Conservation Association. He is also a director of Ashland
Oil, Inc., the Fund for Government Investors, Saul Centers
(REIT) and the American Gas Association Index Fund. He is a
member of the Board of Visitors of Duke University School of
the Environment.
Director since December 14, 1993
The following nominees for election to Class I and Class II directors are
currently Class III directors and a Class I director, respectively. The three
nominees for election as Class I and Class II directors are listed below:
CLASS I NOMINEES--TERM EXPIRING IN 1995
(PHOTO) STANLEY C. GAULT, 68, Chairman and Chief Executive Officer of
The Goodyear Tire & Rubber Company since June 1991. Previously
thereto, he was chairman and chief executive officer of
Rubbermaid Incorporated (1980-1991). He is a director of Avon
Products, Inc., PPG Industries, Inc., The New York Stock
Exchange, Inc., Rubbermaid Incorporated and The Timken
Company. He is a trustee and chairman of the board of The
College of Wooster, a director of the National Association of
Manufacturers, and a member of the President's Advisory
Committee for Trade Policy and Negotiations.
Director since January 8, 1980
(PHOTO) ROGER B. SMITH, 68, former Chairman and Chief Executive
Officer of General Motors Corporation from 1981 to 1990, when
he retired. He is a director of Citicorp, Johnson & Johnson
and PepsiCo, Inc. He is a member of The Business Council and
is a trustee of the Michigan Colleges Foundation, Inc. and the
Sloan Foundation.
Director since December 1, 1989
7
<PAGE>
CLASS II NOMINEE--TERM EXPIRING IN 1996
(PHOTO) JANE C. PFEIFFER, 61, management consultant. She is a director
of Ashland Oil, Inc., IP Forest Resources Company (the
managing general partner of IP Timberlands, Ltd.), J.C. Penney
Company, Inc. and The Mutual Life Insurance Company of New
York. She is a trustee of the Conference Board, The University
of Notre Dame and the Overseas Development Council and a
member of The Council on Foreign Relations.
Director since June 14, 1977
Other directors who will continue to serve are listed below under their
respective classes. None of these directors is being elected at the 1993 annual
meeting.
CLASS I DIRECTORS--TERM EXPIRING IN 1995
(PHOTO) JOHN T. DILLON, 54, Executive Vice President-- packaging since
1987. He was elected a senior vice president--land and timber,
liquid packaging and folding carton and label in 1986 and was
vice president and group executive--land and timber from 1982,
assuming in 1985 the additional responsibility of the wood
products group. He is a director of Carter Holt Harvey
Limited, (a New Zealand forest products and paper company). He
is a member of the Board of Trustees of the Executive
Committee of The Joint Council on Economic Education. He is
the chairman of the Forest Industries Committee on Timber
Valuation and Taxation.
Director since March 1, 1991
(PHOTO) ARTHUR G. HANSEN, 69, educational consultant. He was director
of research of the Hudson Institute from 1987 to 1988,
chancellor of the Texas A&M University System from 1982 to
1986, president of Purdue University from 1971 to 1982 and
president of Georgia Institute of Technology from 1969 to
1971. He is a director of American Electric Power Company,
Inc., The Interlake Corporation, IP Forest Resources Company
(the managing general partner of IP Timberlands, Ltd.) and
Navistar International Corporation. He is a member of the
National Academy of Engineering, chairman of the Corporation
for Educational Technology and a fellow of the American
Association for the Advancement of Science.
Director since February 10, 1976
(PHOTO) SAMUEL R. PIERCE, JR., 71, attorney-at-law; former Secretary
of Housing and Urban Development of the United States from
1981 to 1989. Prior to his cabinet appointment, he was a
senior partner in the New York law firm of Battle, Fowler,
Jaffin, Pierce & Kheel. He also served on the board of
directors of the Company from 1973--1981. He is a consultant
to The Turner Corporation. He is a former judge of the New
York Court of General Sessions and former General Counsel of
the US Treasury Department.
Director 1973-1981 and since February 14, 1989
8
<PAGE>
CLASS II DIRECTORS--TERM EXPIRING IN 1996
(PHOTO) WILLARD C. BUTCHER, 67, former Chairman and Chief Executive
Officer of The Chase Manhattan Bank, N.A. He is a director of
ASARCO, Incorporated, Celgene Corporation, Olympia & York
Companies (U.S.A.) and Texaco Inc. He is a member of The
Business Council, the Advisory Committee for Daimler-Benz of
North America and vice chairman of the Lincoln Center for the
Performing Arts, Inc. He is a trustee emeritus of the American
Enterprise Institute for Public Policy Research, a fellow
emeritus of Brown University and a trustee of Business
Committee for the Arts, Inc.
Director since August 1, 1989
(PHOTO) THOMAS C. GRAHAM, 67, President and Chief Executive Officer of
Armco Steel Company L.P. He was formerly chairman and chief
executive officer of Washington Steel Corporation until he
assumed his current position in 1992. He was formerly vice
chairman-steel and diversified group and executive director of
USX Corporation from 1986 to 1991. He joined the former U.S.
Steel Corporation as vice chairman and chief operating
officer--steel and related resources in 1983. Prior to that
time he served as president and chief executive officer of
Jones & Laughlin Steel Corporation. He is a director of
Hershey Foods Corporation. He is a trustee of The Carnegie and
the Committee for Economic Development. He also serves as a
director of the American Iron & Steel Institute.
Director since October 14, 1986
(PHOTO) EDMUND T. PRATT, JR., 67, former Chairman of the Board (from
1972 to 1992) and Chief Executive Officer from (1972 to 1991)
of Pfizer, Inc. He is chairman emeritus and a director of
Pfizer, Inc., a director of Celgene Corporation, Minerals
Technologies, Inc., The Chase Manhattan Corporation, The Chase
Manhattan Bank, N.A. and General Motors Corporation. He is a
member of the Board of Trustees of Logistics Management
Institute.
Director since September 9, 1975
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<PAGE>
ITEM NO. 2--APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN & CO. AS INDEPENDENT
AUDITORS FOR 1994
The Audit Committee has considered the qualifications of Arthur Andersen &
Co. and recommended that the Board of Directors appoint them as independent
auditors of the consolidated financial statements of the Company for the year
1994. This included a review of their performance in prior years, as well as
their reputation for integrity and competence in the fields of accounting and
auditing. The Committee has expressed its satisfaction with Arthur Andersen in
all of these respects. The Committee's review also included inquiry concerning
litigation involving Arthur Andersen and the existence of any investigations by
the Securities and Exchange Commission into the financial reporting practices of
the companies audited by them. In this respect, the Committee concluded that the
ability of Arthur Andersen to perform services for the Company is not in any way
adversely affected by any such investigation or litigation.
The Board of Directors desires to obtain shareholders' approval of the
Board's action in appointing Arthur Andersen & Co., as independent auditors of
the consolidated financial statements of the Company for the year 1994.
A representative of Arthur Andersen & Co. will be present at the annual
meeting to respond to appropriate questions and to make a statement if he or she
desires and answer appropriate questions.
APPROVAL OF ITEM NO. 2 REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A
MAJORITY OF THE SHARES VOTING ON THIS PROPOSAL. ABSTENTIONS AND BROKER NON-VOTES
WILL NOT BE COUNTED AS HAVING VOTED ON THIS ITEM NO. 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE APPOINTMENT OF ARTHUR ANDERSEN & CO. AS
INDEPENDENT AUDITORS OF THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE COMPANY FOR
1994.
10
<PAGE>
ITEM NO. 3--APPROVAL OF 1989 LONG-TERM INCENTIVE COMPENSATION PLAN AMENDMENTS
The 1989 Long-Term Incentive Compensation Plan (the "Plan") was adopted by
the Board of Directors and approved by shareholders at the 1989 annual meeting.
The Plan is administered by the Management Development and Compensation
Committee of the Board (the "Committee") which is composed solely of
non-employee directors.
The Board of Directors believes that the Plan has promoted the Company's
interests and those of shareholders by providing opportunities to attract,
retain, and motivate key employees through awards of stock options and
restricted stock and that the Company should continue to utilize such awards as
part of a competitive compensation program and as a means of encouraging its
executives to own stock in the Company. Accordingly, the Board of Directors
proposes to amend the Plan in the following principal respects:
. To increase the number of shares available for future Plan awards by
5,000,000 shares thus providing an aggregate of said 5,000,000 shares
together with the approximately 2,300,000 shares remaining for awards under
the Plan prior to this amendment;
. To provide that stock option exercise proceeds may be used to
purchase Company stock in the open market for future issuance as options or
awards; and
. To allow the Company to maximize the deductibility for federal
income tax purposes of the compensation of its executives.
The complete text of the amended Plan is set forth in Appendix A to this
Proxy Statement which is incorporated herein by reference. The following
summarizes the material features of the Plan, as amended, but it does not
purport to be complete and is qualified in its entirety by reference
to Appendix A.
EXPLANATION OF PLAN CHANGES
The changes to the Plan are recommended by the Board to ensure that the
Company continues to be properly positioned to compete for executive talent with
forest products companies and other enterprises. At the same time, the Board
believes that awards made under the Plan should minimize ownership dilution to
existing shareholders when shares are issued under the Plan.
The number of shares which the amended Plan may use in the future is the
aggregate of the following: 5,000,000 shares to be newly authorized for use
under the amended Plan; 2,300,000 unused shares carried forward from the earlier
7,000,000 share authorization originally approved by shareholders in 1989;
shares forfeited, exchanged or not delivered as explained below; and the shares
to be purchased in the open market with stock option exercise proceeds.
Currently, the Plan provides that the following shares covered by Plan
awards may be utilized for subsequent awards under the Plan: shares that are
forfeited; shares not earned; shares exchanged or delivered to the Company in
exercising stock options; shares covered by Plan awards that are distributed in
cash; and any shares that are used to settle tax withholding payment obligations
triggered by Plan awards.
The amended Plan will expand the share replenishment provisions by
permitting amounts equal to cash proceeds received by the Company since January
1, 1989, upon the exercise of stock options granted under the Plan and the
predecessor 1983 Plans, to be used to reacquire shares of Company stock on the
open market. The number of shares so reacquired under this provision cannot
exceed the number of shares exercised which generated the cash proceeds. By way
of illustration, between January 1, 1989 and February 28, 1994, the Company
received approximately $80,000,000 in cash proceeds from the exercise of stock
options. Based on a stock price of $70.80 per share (the average closing price
of a share of Company stock trading on the New York Stock Exchange from March 1
through March
11
<PAGE>
20, 1994), 1,129,944 shares could be acquired from time to time in the open
market and made available for future awards under the amended Plan.
Shares reacquired would be held in the form of segregated treasury shares,
i.e., they would be held in a separate treasury account and would not be
outstanding until issued as future Plan awards. Shares issued in settlement of
Plan awards result in some dilution to shareholders, since more shares are
subsequently outstanding. This dilutive effect is minimized by reacquiring
outstanding shares with stock option exercise proceeds and using these shares
for Plan purposes.
Other Plan changes are proposed in order to help ensure that compensation
paid to participants under the Plan is deductible by the Company for federal
income tax purposes in view of recent federal tax law changes.
As amended, the Plan will (1) limit the number of shares that can be
covered by stock options and stock appreciation rights ("SARs") to any one
person to 900,000 over any consecutive three-year period; (2) limit the number
of shares that can be covered by a Performance Share award made to any one
person for any Award Period to 50,000; and (3) limit the total number of shares
available under the amended Plan for all awards, options and SARs to executive
officers of the Company subject to Section 16 of the 1934 Act to 7,300,000.
The Performance Share portion of the Plan (see "Performance Share Awards"
below) is being amended to set forth the measurement criteria to be used by the
Committee in presetting the goals for determining the number of Performance
Shares earned by participants during a Award Period.
The Plan will be changed so that a Continuity Award will consist solely of
a stock option. Under the tax law change, this will preserve the deductibility
for the Company of compensation realized under a Continuity Award.
Additional changes have been made to provide the Committee with the
necessary authority and flexibility to determine the terms and conditions
governing awards made under the Plan, and to allow participants to make such
transfers or assignments of Plan awards as may be permitted by law. The Plan is
also being amended to give the Committee increased flexibility over the terms
and conditions, including forfeiture restrictions, contained in award agreements
which participants must sign. The amended Plan removes certain specific terms
and conditions from the text of the Plan and allows the Committee to place such
items in the award agreements. It is anticipated that terms and conditions at
least as restrictive as those removed from the text of the Plan will be included
by the Committee in award agreements under the Plan. Finally, changes have been
made to consolidate certain common terms and to clarify wording.
PLAN DESCRIPTION--GENERAL
Participation in the Plan is determined solely by the Committee and is
limited to senior managers of the Company and its subsidiaries. In 1993,
approximately 670 employees participated in the stock option portion of the
Plan; approximately 80 employees participated in the Performance Share portion;
and fewer than 20 employees participated in the Continuity Award portion. These
numbers should not be affected by the proposed amendment to the Plan.
The Board of Directors may amend the Plan to take into account or comply
with any changes in applicable securities or tax laws and regulations, and may
otherwise modify the Plan, without shareholder approval, except that no
modification shall increase the total number of shares for which awards and
stock options may be granted under the Plan without shareholder approval.
STOCK OPTION AWARDS
The stock option features of the Plan are essentially unchanged, except as
noted above. Stock options may be in the form of Incentive Stock Options (within
the meaning of Section 422 of the Code)
12
<PAGE>
or options which do not qualify for favorable federal tax treatment
("nonqualified stock options") or combinations of both. The Committee determines
the recipients of stock options, the number of shares covered by each award, and
the other terms and conditions of the option, except that the exercise price
cannot be less than the fair market value of a share of the Company's common
stock at the time of award grant. An Incentive Stock Option may not extend
beyond ten years from the date of grant. Other options may be for longer terms.
Restrictions, as determined by the Committee, on the exercise of the option
and on the stock acquired under an option are contained in stock option award
agreements. Such award agreements to date have provided that if the option is
exercised within four years of the date of grant, the Company will have the
right to repurchase the acquired stock at the exercise price for the balance of
the four-year period. These restrictions lapse upon a change of control of the
Company, or upon death, retirement after age 62 or permanent disability. The
Committee may continue to grant stock options with this restriction provision or
it may grant options with other provisions. As noted above, several provisions
in the Plan text containing restrictive terms and conditions are being
eliminated by the amendment; however, it is anticipated that the Committee will
determine to include terms and conditions at least as restrictive in future
award agreements. All conditions and terms regarding the disposition of stock
options upon termination of employment with the Company shall be made by the
Committee.
Options may be exercised by payment of the option price in cash or, at the
discretion of the Committee, by delivering stock of the Company, including
restricted stock awarded under the Plan. If an option is exercised by delivery
of Performance Shares, the participant will receive an equal number of
identically restricted shares, and the remaining option exercise shares will
contain any applicable restrictions which are included in the stock option
agreement. At the discretion of the Committee, a plan participant who exercises
an option may receive a replacement option for the same number of shares that
the participant purchases in exercising the original option. The exercise price
of the replacement option will be equal to the current fair market value at the
time the replacement option is issued, and the term of the replacement option
will be the same as the remaining balance of the term of the original option.
PERFORMANCE SHARE AWARDS
Performance Share Awards have been granted to senior management as
described below under "Plan Benefits." These contingent awards have been in the
form of shares of restricted stock ("Performance Shares"). The awards are earned
by a participant over a specified award period commencing with the year of award
("Award Period"). The length of the Award Period will be determined by the
Committee and is presently five years.
During an Award Period, the participant is the beneficial owner of the
Performance Shares and is entitled to vote the shares. Certificates are issued
in the participant's name with restrictive legends and are retained by the
Company. Dividends are reinvested in additional shares of restricted stock. A
new Performance Share Award can be made each year by the Committee, with a new
Award Period commencing at the beginning of each calendar year.
Performance Share Awards are earned over the Award Period as determined by
the Committee, presently based on a comparison of the Company's earnings per
share and return on equity with similar financial tests of a representative
group of forest products companies. At the end of an Award Period, the Committee
measures the degree to which the established performance goals have been met.
The contingent award is reduced if the goal is not met, or supplemented if the
goal is exceeded. At such time, restrictions are removed on 50% of the award so
earned (the "earned award").
The remaining 50% of the earned award remains restricted for three years
from the date of determination of the earned award. Performance Share Awards are
subject to forfeiture and cancellation by the Committee in the event a
participant terminates employment, other than by reason of death, disability or
retirement after age 62. Dividends on earned awards are paid in cash.
13
<PAGE>
In the event of a participant's death, disability, or retirement after age
62, the restrictions may be removed on earned restricted shares and on a portion
of the outstanding Performance Shares equal to the pro-rata portion of each
award that would have been earned if Company performance reached the established
goals for those Award Periods.
The Plan is being amended to specify the measurement criteria to be used by
the Committee in determining whether the Company has achieved performance goals
preset by the Committee. Thus, the Committee may in the future use any one or
more of the following measurements of performance including: earnings per share,
return on equity, return on assets, growth in earnings, growth in sales revenue
or shareholder returns. These can be measured in comparison to the performance
of a group of peer companies selected by the Committee or based on the Company's
results. In applying any of these criteria, the Committee may calculate earnings
excluding discontinued operations and extraordinary items.
The specific Plan provisions regarding earning of Performance Share Awards
and removing restrictions, as described in the foregoing paragraphs, are being
removed from the text of the Plan. It is the present intention of the Committee
to continue to include these provisions in the award agreements which
participants are required to execute upon receipt of awards.
In the event of a "change of control" of the Company, all restrictions will
be removed on earned awards and on a pro rata portion of the contingent awards
for each uncompleted award period based on the number of months completed prior
to the change of control. As used in this Proxy Statement and in the Plan, a
change of control is defined as the acquisition by any person (other than
Company employee-benefit plans) of beneficial ownership of 20% or more of the
Company's outstanding stock, or a change of more than 50% of the members of the
Board over a period of two years or less (except for changes approved by
two-thirds of the directors who were in office at the beginning of the period).
A Performance Share Award may be denominated in share units, as well as
actual restricted shares, or a combination of both. Under the amended Plan , the
maximum number of Performance Shares that can be earned by any individual for
any one Award Period is 50,000 shares.
CONTINUITY AWARDS
Continuity Awards may consist of a contingent grant of restricted stock, or
a tandem grant of restricted stock together with a related nonqualified stock
option, in such amount and upon such terms and conditions as determined by the
Committee. The amended Plan will provide that a Continuity Award may also
consist solely of a nonqualified stock option. Under the Plan, at the discretion
of the Committee, SARs may be awarded separately or in combination with other
awards or grants.
Generally, the amendments to the Plan will not change the operation of the
Continuity Award provisions of the Plan. The participant is entitled to vote the
restricted shares included in the award. Dividends are reinvested in additional
shares of restricted stock, subject to the same restrictions, terms and
conditions. Upon attainment of age 65, or the permanent disability or death of
the executive, or upon a change of control of the Company, the restrictions on
the award are removed and the award will vest in the following manner: (a) if
the current realizable gain on the tandem stock option is greater than the
current fair market value of the related shares of restricted stock (including
reinvested dividends), then all such shares of restricted stock will be
cancelled and the stock option will continue for its remaining term; (b) if the
current fair market value of the shares of restricted stock (including
reinvested dividends) is greater than the current realizable gain on the related
tandem stock option, then the option will be cancelled and the restrictions will
be removed from all of the related shares of restricted stock.
If the option is exercised prior to age 65, then the related shares of
restricted stock will be cancelled, and the additional shares issued upon the
exercise of the option will be restricted and subject to forfeiture or
repurchase by the Company at the option exercise price for a period ranging up
to twelve
14
<PAGE>
years, or longer, from the date of the award as set forth in the award
agreement. If there is a change of control of the Company, all restrictions on
the Continuity Award will be removed.
The exercise price of each option will not be less than the fair market
value of the underlying stock at the time the option is granted. The option may
be exercised by full payment of the option price in cash or, at the discretion
of the Committee, by delivering stock of the Company including Performance
Shares awarded under the Plan.
At the discretion of the Committee, a participant who exercises an option
may receive a replacement option for the same number of shares that the
participant purchases in exercising the original option. The exercise price of
the replacement option will be equal to the fair market value at the time the
replacement option is issued, and the term of the replacement option will be the
same as the remaining balance of the term of the original option. Shares
received upon exercise of an option will be subject to the restrictions included
in the award agreement.
PLAN BENEFITS
Because the Committee makes all determinations regarding the selection of
participants and the size of each award made to a participant, it is impossible
to estimate or predict the benefits or amounts that any person or persons will
receive in the future (except that they will not exceed the maximums set forth
above). Information regarding past awards made to persons named in the Summary
Compensation Table under the Plan is provided elsewhere in this Proxy Statement
as part of the disclosure of the executive compensation program for management.
The following summarizes the awards made in 1993 under the Plan to all current
executive officers of the Company and all other employees:
<TABLE>
<CAPTION>
NUMBER OF SHARES COVERED
BY 1993 AWARDS
--------------------------
ALL EXECUTIVE ALL OTHER
OFFICERS EMPLOYEES
------------- -----------
<S> <C> <C>
Stock Options(1)................................................. 64,000 877,900
Performance Shares(2)............................................ 26,373 48,558
Continuity Award Shares(3)....................................... 20,000 12,000
</TABLE>
- ---------------
(1) Includes replacement options granted in 1993. These figures do not include
the tandem option awards made as part of the Continuity Awards of
stock/options, insofar as these are characterized as contingent restricted
stock awards.
(2) Includes the total number of shares contingently awarded in 1993 under the
Plan to be earned over five years by participants.
(3) Includes the total number of shares contingently awarded in 1993 under the
Plan as Continuity Awards of stock/options, to be fully vested upon reaching
certain ages unless the options are exercised.
APPROVAL OF ITEM NO. 3 REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF RECORD OF
A MAJORITY OF OUTSTANDING SHARES OF COMMON STOCK ENTITLED TO VOTE. ABSTENTIONS
AND BROKER NON-VOTES WILL NOT BE COUNTED AS HAVING VOTED FOR THE ITEM NO. 3 AND,
ACCORDINGLY, WILL HAVE THE EFFECT OF A VOTE AGAINST ITEM NO. 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ADOPTION OF THE AMENDED LONG-TERM INCENTIVE
COMPENSATION PLAN AS SET FORTH
IN APPENDIX A
15
<PAGE>
STATEMENT ON THE COMPANY'S
SOUTH AFRICAN AFFILIATE'S OPERATIONS
The Company strives to uphold responsible business practices in its
operations around the world. Its commitment to human rights and equality is
evidenced by company policies such as those on equal employment opportunity,
community responsibility and ethical business conduct.
In South Africa, its affiliate, Masonite (Africa) Limited, has done
business in a highly responsible manner that it believes has been a positive
example in that country. In that regard, Masonite (Africa) Limited's facilities
in South Africa have a totally integrated workforce and wage policies are
identical for whites and non-whites. It provides its employees with benefit
programs, which include medical benefits, financial aid and in-kind support for
schools and adult training programs. Masonite (Africa) Limited believes its
policies and practices are consonant with the Code of Conduct for Business
Operating in South Africa endorsed by the South African Council of Churches
(SACC), Southern African Catholic Bishops Conference and Jewish Board of
Deputies. Masonite (Africa) Limited intends to continue to implement its
policies concerning human rights and equality in South Africa, which it believes
will cause it to maintain the ethical standards promoted by the SACC Code of
Business Conduct. Masonite (Africa) Limited also intends, through continued
example of responsible operations, to promote responsible practices by all
companies operating in South Africa.
16
<PAGE>
REPORT OF THE MANAGEMENT DEVELOPMENT
AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Management Development and Compensation Committee ("the Committee")
consists of five outside directors: Willard C. Butcher, Stanley C. Gault, Thomas
C. Graham, Samuel R. Pierce, Jr. and Edmund T. Pratt, Jr. Mr. Gault is chairman.
No member of this Committee is an executive officer of a company on whose board
an executive officer of International Paper serves as a director.
The Committee met eight times in 1993 with a 98% attendance record. The
chairman and chief executive officer of the Company was not present during any
discussion of his compensation.
GENERAL
Total compensation received by the named executive officers consists of
salary, cash bonus, stock options and restricted stock. The cash bonus and
long-term incentives introduce considerable risk in the total executive
compensation package, since the value of these components may vary significantly
from year to year based on Company performance, individual performance and
Company stock price.
The Committee periodically reviews each component of the Company's
executive compensation program to ensure that pay levels and incentive
opportunities are competitive and that incentive opportunities are linked to
Company performance. The companies used to measure competitiveness include the
fifteen largest forest products companies (including the "Peer Paper Group" of
eight companies which comprise the peer line of the performance graph on page
19) and which are surveyed annually by Management Compensation Services, a
subsidiary of the independent compensation consulting firm, Hewitt Associates.
In 1993, the Company also used the Hay Associates and F.W. Cook executive
compensation surveys which cover similar positions in companies similar in size
and complexity to International Paper across all industries. In 1993, the
Company's compensation levels were targeted to the median of the competitive
surveys, and competitiveness was determined by evaluating total cash
compensation and long-term incentive compensation.
The Company's Management Incentive Plan (MIP) links payment of an annual
cash bonus directly to achievement of a specified level of net earnings, which
accounts for 80% of target bonus funds available, and predetermined targets for
qualitative nonfinancial performance factors, which were quality, safety and
female and minority employee development, which account for the remainder. In
1993, the Company achieved a level of net earnings and performance compared to
predetermined nonfinancial targets which generated a bonus fund. Performance
against the financial target was above threshold but did not achieve 100% of
goal, thus generating a smaller bonus fund in 1993 than in 1992 or 1991.
Performance compared to the nonfinancial targets met or exceeded the goals for
1993.
The Company's Long-Term Incentive Compensation Plan, which was approved by
the shareholders in 1989, provides for awards of stock options and restricted
stock in the form of performance shares which are made in amounts which the
Committee determines to be competitive based on the surveys described above.
Stock options are granted at fair market value at the time of the award and are
restricted for four years. Contingent awards of performance shares are made in
December of the year preceding a five-year Award Period. At the end of the
five-year Award Period, the number of shares earned is determined by financial
performance which the Committee measures by comparing and weighing equally the
Company's and Peer Paper Group's five-year average return on equity and earnings
per share. If the threshold level of performance is not attained, no shares are
earned. Above the threshold, the contingent award is reduced if the target goal
is not met or supplemented if the target goal is exceeded. Payouts of earned
performance shares are made in Company stock at the end of the five-year Award
Period. One half of the shares earned is mandatorily deferred for an additional
three years, and payout is subject to the executive's continued employment
throughout that period.
From time to time executive continuity awards are made which are designed
to encourage retention of a small number of executives designated by the
Committee. The size of an award, and any
17
<PAGE>
adjustments is determined by the Committee to reflect an executive's level of
responsibility and individual performance. As provided by the Company's
Long-Term Incentive Compensation Plan, a continuity award may consist of
restricted stock or a tandem grant of restricted stock together with a related
non-qualified stock option which is granted at fair market value and restricted
until a specified age. If the stock option is exercised, then the related
restricted shares are cancelled; if the stock option is not exercised by age 65,
then the less valuable component of the tandem award is cancelled.
The Committee has considered the provisions of the Omnibus Budget
Reconciliation Act of 1993 which limit deductibility of compensation paid to
named executive officers which exceeds $1,000,000. The Committee has endorsed
amendments to the Company's Long-Term Incentive Compensation Plan to make
certain sections of the plan compatible with those provisions, while maintaining
the Committee's flexibility to exercise business judgment in determining awards
to take account of business conditions or the performance of individual
executives. In that regard, the Committee will retain discretion to make awards
which may not be fully deductible in certain cases.
1993 EXECUTIVE OFFICERS' COMPENSATION
The Committee approved promotional and merit salary increases for the named
executive officers based on competitiveness of the executives' pay and personal
performance. In June 1993, Mr. Georges received an 8.3% merit salary increase,
covering the eighteen-month time period since his last salary adjustment (5.5%
annualized). Promotional increases were awarded to two of the named executive
officers. Salaries paid to the named executive officers in 1993, including Mr.
Georges's salary, were slightly below the median of the survey companies.
MIP awards for the named executive officers in 1993 were determined by the
Committee after review of respective levels of responsibility, personal
performance and Company performance compared to the predetermined 1993 financial
and nonfinancial goals. Actual awards to all named executive officers
represented 10.6% of the bonus fund. Mr. Georges's MIP award and the awards of
two other named executive officers decreased compared to 1992. The 1993 MIP
award of one named executive officer increased compared to 1992 insofar as 1992
represented only a partial year award for that individual.
The performance share guidelines described above were used by the Committee
to determine contingent performance share awards in December 1993 to the named
executive officers for the 1994-1998 Award Period and the payout in 1993 of
earned shares for the 1988-1992 Award Period. As shown in the Summary
Compensation Table, the pretax values of Mr. Georges's performance share awards
in 1993 were: $546,448 in contingent restricted stock for the 1994-1998 Award
Period; $198,803 in deferred restricted stock for the 1988-1992 Award Period;
and $198,803 in earned shares (long-term incentive payout) for the 1988-1992
Award Period. The shares earned for the 1988-1992 Award Period reflect Company
performance which exceeded performance of the Peer Paper Group.
The Committee granted stock options in 1993 based on competitive surveys
described earlier, without consideration of the amount of stock options already
held by named executive officers. Mr. Georges's 1993 stock option award was
19,000 shares, the same as his awards in 1992 and 1991.
In 1993, previously granted continuity awards of restricted stock and a
related option to two named executive officers were increased based on
promotions.
The Management Development and Compensation
Committee of the Board of Directors
Willard C. Butcher
Stanley A. Gault, chairman
Thomas C. Graham
Samuel R. Pierce, Jr.
Edmund T. Pratt, Jr.
18
<PAGE>
PERFORMANCE GRAPH
The following chart compares a $100 investment in International Paper stock
with a similar investment in a peer group of eight key competitor companies and
the S&P 500. The charts portray total nominal return, 1988-1993, assuming
reinvestment of dividends.
(PERFORMANCE GRAPH)
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN*
DECEMBER 31,
1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C>
International Paper 100 126 123 167 161 168
S&P 500 Index 100 132 127 166 179 197
Peer Group** 100 110 89 121 135 153
</TABLE>
Assumes $100 Invested on December 31, 1988.
* Total return assumes reinvestment of Dividends.
** Includes Boise Cascade, Champion, Georgia Pacific, Mead,
Stone Container, Union Camp, Westvaco, and Weyerhaeuser.
19
<PAGE>
ADDITIONAL INFORMATION
REGARDING EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is approved by the
Committee except for the compensation of the officer-directors, which is
recommended by the Committee and approved by the Board of Directors.
The following tables set forth information with respect to the Chairman and
Chief Executive Officer and the four most highly compensated executive officers
of the Company for the years 1991-1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION CONTINGENT AWARDS
---------------------- -----------------------
(A) (B) (C) (D) (E) (F) (G)
RESTRICTED ALL OTHER
SALARY BONUS STOCK AWARD OPTIONS COMPENSATION
NAME AND POSITION YEAR ($)(1) ($)(2) ($)(3) (#)(4) ($)(5)
- ---------------------------------------------------- --------- ---------- ---------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
John A. Georges..................................... 1993 $ 880,833 $ 525,000 $ 819,672 19,000 $ 136,571
as Chief Executive Officer 1992 $ 840,000 $ 555,000 $ 794,195 112,632 $ 85,304
1991 $ 775,833 $ 580,721 $ 770,385 41,618 $ 85,718
John T. Dillon...................................... 1993 $ 396,667 $ 230,000 $ 332,316 8,000 $ 77,234
as Executive Vice President 1992 $ 367,500 $ 240,000 $ 322,040 54,900 $ 33,397
1991 $ 327,333 $ 250,000 $ 311,190 7,000 $ 32,554
James P. Melican.................................... 1993 $ 386,667 $ 215,000 $ 302,430 7,700 $ 69,747
as Executive Vice President 1992 $ 357,917 $ 225,000 $ 293,084 16,238 $ 20,578
1991 $ 322,333 $ 235,000 $ 284,056 6,800 $ 31,148
Mark A. Suwyn....................................... 1993 $ 323,333 $ 210,000 $ 1,193,205 6,800 $ 53,528
as Executive Vice President 1992 $ 250,000 $ 175,000 $ 2,612,669 6,150 $ 24,546
1991 $ 0 $ 0 $ 0 0 $ 0
C. Wesley Smith..................................... 1993 $ 283,333 $ 190,000 $ 944,705 6,800 $ 55,390
as Executive Vice President 1992 $ 238,000 $ 190,000 $ 786,035 4,300 $ 132,037
1991 $ 200,000 $ 120,000 $ 177,986 10,300 $ 52,433
</TABLE>
- ---------------
(1) Salary paid in 1993 including amounts deferred pursuant to Section 401(k) of
the Internal Revenue Code or pursuant to unfunded deferral arrangements.
(2) Management Incentive Plan awards paid in 1994, 1993 and 1992 attributable to
1993, 1992 and 1991 respectively, including amounts deferred pursuant to
Section 401(k) of the Internal Revenue Code or pursuant to unfunded deferral
arrangements reported in the year earned.
(3) Represents (a) 150% of the value of gross target restricted performance
shares contingently awarded in 1993 for the 1994-1998 award period, in 1992
for the 1993-1997 award period and in 1991 for the 1992-1996 award period,
which is the maximum achievable for those award periods; only 100% of the
target restricted performance shares are earned if the target goal is met
for an award period, with the awards being reduced if the goal is not met or
entirely forfeited if a predetermined threshold goal is not met; (b) 150% of
the value of incremental maximum awards for prior award periods made upon
promotion, subject to the same contingencies; and (c) the value of
continuity awards of $745,500 and $591,000 in 1993 and 1992 respectively for
Mr. Suwyn and $497,000 in 1993 for Mr. Smith. The number and dollar value of
restricted stock holdings at December 31, 1993 are as follows:
106,136/$7,190,714 for Mr. Georges; 46,373/$3,141,771 for Mr. Dillon;
42,153/$2,855,866 for Mr. Melican; 34,067/$2,308,039 for Mr. Suwyn; and
39,594/$2,682,494 for Mr. Smith. These numbers include the restricted stock
portion of the tandem awards of restricted stock/options made to the
respective individuals under continuity awards. Dividends are paid on
restricted shares.
(4) Includes replacement options if applicable; only new ten-year stock options
were awarded to the named officers in 1993. These figures do not include the
tandem option awards made as part of the continuity awards referred to in
footnote (3) above insofar as the awards are characterized as restricted
stock awards. Such tandem options were for 60,000 and 40,000 shares for Mr.
Suwyn in 1992 and 1993, respectively, and for 40,000 shares for Mr. Smith in
1993 and are restricted as to exercise prior to age 62.
(5) 1993 totals represent Company contributions to the Salaried Savings Plan and
Unfunded Savings Plan, premium payments grossed up for taxes for the
Executive Supplemental Insurance Plan (ESIP) and accruals for ESIP lump sum
dividend payments as follows: $68,920, $57,820 and $9,831 for Mr. Georges;
$30,560, $43,200 and $3,474 for Mr. Dillon; $29,360, $37,000 and $3,387 for
Mr. Melican; $23,920, $29,608 and $0 for Mr. Suwyn; and $22,720, $29,800 and
$2,870 for Mr. Smith.
20
<PAGE>
The table below sets out information on the option grants made in 1993 to
the named executive officers:
OPTION GRANTS IN 1993
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED COMPOUND
ANNUAL GROWTH RATES OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (2)
---------------------------------------------------- ------------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H)
% OF TOTAL
OPTIONS
OPTIONS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME AND POSITION (#) (1) 1993 ($/SH) DATE 0% 5% 10%
- ---------------------- --------- ------------- ----------- ------------- ----------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
John A. Georges....... 19,000 2.02% $ 63.000 01/11/2003 $ 0 $659,940 $1,625,463
as Chief Executive
Officer
John T. Dillon........ 8,000 0.85% $ 63.000 01/11/2003 $ 0 $277,869 $684,406
as Executive Vice
President
James P. Melican...... 7,700 0.82% $ 63.000 01/11/2003 $ 0 $267,449 $658,740
as Executive Vice
President
Mark A. Suwyn......... 6,800 0.72% $ 63.000 01/11/2003 $ 0 $236,189 $581,745
as Executive Vice
President
C. Wesley Smith....... 6,800 0.72% $ 63.000 01/11/2003 $ 0 $236,189 $581,745
as Executive Vice
President
Executive Officer
Group............... 64,000 6.79% (3) (3) $0 $2,208,615 $5,433,534
All shareholders...... N/A N/A N/A N/A $ 0 (4) $4,955,037,864(4) $12,557,038,808
</TABLE>
- ---------------
(1) Each option granted may be replaced upon exercise. This means that a new
option is granted for the same number of shares as is exercised, with the
then current market value becoming the new exercise price. The replacement
option does not extend the term of the original option. Options may not be
replaced more than three times. These numbers do not include any options
granted as part of the tandem awards of restricted stock/options made as
continuity awards in 1993; the restricted stock is reported as part of the
total holdings of the respective individuals under footnote 3 to the Summary
Compensation Table.
(2) The dollar amounts under these columns are the result of calculations at 0%,
and at the 5% and 10% rates set by the SEC and therefore are not intended to
forecast possible future appreciation, if any, of the stock price. The
Company did not use an alternative formula for a grant date valuation, as it
is not aware of any formula which will determine with reasonable accuracy a
present value based on future unknown or volatile factors.
(3) Other than replacement grants, all stock option grants in 1993 were at an
exercise price of $63.00 per share, expiring January 11, 2003. No
replacement grants were awarded to the named executives.
(4) No gain to the optionee is possible without an increase in stock price,
which will benefit all shareholders commensurately. A zero percent gain in
stock price will result in zero dollars for the optionee.
21
<PAGE>
The table below sets out information on options exercised and options
outstanding.
AGGREGATED OPTION EXERCISES IN 1993
AND DECEMBER 31, 1993 OPTION VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F) (G)
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/93 OPTIONS AT 12/31/93
(#)(3) ($)(3)
VALUE ------------------------- -------------------------
SHARES ACQUIRED REALIZED UNRESTRICTED RESTRICTED UNRESTRICTED RESTRICTED
NAME AND POSITION ON EXERCISE (#) ($) (1) (1) (2) (2)
- --------------------------- ----------------- ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
John A. Georges............ No Exercises N/A 70,700 76,000 $ 204,279 $ 175,750
as Chief Executive Officer
John T. Dillon............. No Exercises N/A 29,300 30,000 $ 69,588 $ 71,250
as Executive Vice President
James P. Melican........... No Exercises N/A 26,334 28,350 $ 381,686 $ 204,606
as Executive Vice President
Mark A. Suwyn.............. No Exercises N/A 0 12,950 $ 0 $ 32,300
as Executive Vice President
C. Wesley Smith............ No Exercises N/A 6,000 19,700 $ 16,500 $ 143,025
as Executive Vice President
</TABLE>
- ---------------
(1) All options are exercisable under the plan upon grant; however, columns (e)
and (g) indicate the number and value of options, the underlying shares of
which, while exercisable, cannot be sold or are otherwise restricted.
(2) Total value of options (market value minus exercise price) based on fair
market value of Company stock of $67.75, as of December 31, 1993.
(3) Options granted as part of the tandem awards of restricted stock/options
made as continuity awards are not included; these awards are counted as
restricted stock awards and holdings.
RETIREMENT BENEFITS
The following table shows the total estimated annual pension benefits
payable under the Company's qualified and supplementary retirement plans upon
retirement at age 65, calculated on a straight life annuity basis and reduced by
a Social Security offset:
COMBINED RETIREMENT PLANS TABLE OF ESTIMATED BENEFITS
<TABLE>
<CAPTION>
CREDITABLE YEARS OF SERVICE
----------------------------------------------------------------------------
PENSIONABLE REMUNERATION 5 10 15 20 25 30
- ----------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$400,000........................... $ 100,000 $ 125,601 $ 188,401 $ 193,232 $ 193,232 $ 193,632
$600,000........................... $ 150,000 $ 190,601 $ 285,901 $ 293,232 $ 293,232 $ 293,832
$800,000........................... $ 200,000 $ 255,601 $ 383,401 $ 393,232 $ 393,232 $ 394,032
$1,000,000......................... $ 250,000 $ 320,601 $ 480,901 $ 493,232 $ 493,232 $ 494,232
$1,500,000......................... $ 375,000 $ 483,101 $ 724,651 $ 743,232 $ 743,232 $ 744,732
</TABLE>
- ---------------
"Pensionable Remuneration" for purposes of the table above means salary, bonus
and compensation deferred under the Unfunded Savings Plan or awards deferred
under the MIP.
Retirement benefits are payable under one or more of the following plans: a
qualified plan covering all salaried employees which provides pension benefits
based on final average earnings; a supplementary plan which provides a make-up
of qualified plan benefits limited by the imposition of statutory Code
22
<PAGE>
limitations; and a supplementary plan covering designated senior managers which
provides supplemental benefits to the qualified plan. At December 31, 1993, the
number of creditable years of service and the currently applicable average
pensionable remuneration under the retirement plans for Mr. Georges were 14.58
years and $1,405,833; for Mr. Dillon, 26.92 years and $626,667; for Mr. Melican,
9.92 years and $601,667; for Mr. Smith, 13.33 years and $473,333; and for Mr.
Suwyn, 1.83 years and $533,333.
COMPENSATION OF DIRECTORS
The compensation of each non-employee director of the Company is a retainer
fee of $36,000 per year plus fees of $1,100 for each board and committee or
other meeting attended. Directors may elect to defer receipt of all or part of
their remuneration until a later date under a deferred compensation plan, at
which time the director will be paid in cash equal to (1) the cash amount
deferred plus interest at the higher of 6% per annum or the yield of U.S.
Treasury bills or (2) the value at the time of payment of units equivalent to
the value of Company common stock credited to the director's account at the time
of each deferral, plus dividend equivalents. Employees of the Company who are
also directors receive no compensation for services as a director or for
attendance at board or committee meetings.
The Company has established a Retirement Plan for Non-Employee Directors
which provides that directors who retire from service when they attain the
mandatory retirement age of 72 and have ten years of service, will receive an
annual retirement benefit equal to 100% of the annual retainer fee. The Plan
also provides for early retirement after attaining age 65 with at least five
years of service. If early retirement is taken, the retirement benefit is
reduced by increments of 10% for each year less than ten years of service, and
is further reduced by increments of 4% for each year prior to age 72 that the
early retirement payments begin.
In addition, under the Non-Employee Directors Restricted Stock Plan, awards
of 900 shares of common stock are made upon the election or re-election of a
director to a full three-year term, or the appointment of a non-employee
director to fill an unexpired term (in which latter event the number of shares
to be awarded will be a pro-rata portion of the number issued to non-employee
directors elected to serve for a full term at the most recent annual meeting of
shareholders). Awards made in 1993 were 900 shares each for Class II directors
and a pro-rata award of 125 shares for a newly elected director. Directors
receive dividend payments represented by the shares awarded under the Restricted
Stock Plan, currently at $0.42 per share per quarter.
Further, four of the non-employee directors of the Company serve as
directors of IP Forest Resources Company ("IPFR"), a wholly-owned subsidiary
which acts as the managing general partner of IP Timberlands, Ltd., a New York
Stock Exchange-listed limited partnership. As such, each of the four
non-employee directors receives a retainer fee of $7,000 per year plus a fee of
$1,100 for each IPFR board meeting attended. These fees are paid by IPFR. There
were five meetings of the board in 1993.
INDEMNIFICATION INSURANCE AND CONTRACTS
The Company provides liability insurance for the company's directors and
all elected officers, as well as contractual arrangements with directors and
certain officers of the Company, agreeing to compensate them for costs and
liabilities incurred in actions brought against them while acting as directors
or officers. On June 15, 1993, the Company amended the aforementioned policies
with Federal Insurance Company at a current annual premium cost aggregating
$584,250, such policies expiring on June 15, 1994. No monies have been paid
under such policies by the carrier or by the Company under the contractual
arrangements.
23
<PAGE>
TERMINATION AGREEMENTS
The Company has agreements with members of the executive officer group,
providing for payments and other benefits if there is a change of control of the
Company and the officer's employment is terminated (i) by the Company or its
successor, other than for cause, disability or retirement, or (ii) by the
officer if the chief executive officer of the Company ceases to hold that
position for reasons other than cause, retirement or disability, or if the
officer determines that by reason of adverse changes in, among other things, the
officer's authority, compensation, duties, office location or responsibilities,
the officer is unable to perform the duties and responsibilities of the position
the officer held immediately prior to the change in control. These agreements
provide that if the officer's employment terminates under the circumstances
described above, the officer will receive: (a) continuation of medical and
dental insurance coverage until age 65 or eligibility to join a comparable plan
sponsored by another employer; (b) retiree medical coverage comparable to the
Company's pre-change of control retiree medical plan; (c) a lump-sum payment
equal to (i) his annual salary at termination together with his most recent
short-term annual incentive compensation payment during the year preceding
termination, multiplied by the smaller of the number "three" or the number of
years between the termination date and the date he reaches age 65 and (ii) an
amount necessary to offset any special federal excise tax on all payments
received under the termination agreement. In addition to the foregoing
provisions Mr. Georges' agreement can be triggered by a voluntary termination at
any time within 18 months of the change in control. The agreement provides him
with the above benefits as well as (a) payment of vested benefits under the
pension plan which entitlement shall include payments made under the agreement
which constitute "compensation" under the pension plan; (b) a lump-sum payment
equal to the difference between (i) the actuarial value on termination date of
accrued vested pension benefits and (ii) the actuarial value on termination date
of what accrued pension benefits would have been if the period and payments set
out in (c)(i) and (c)(ii) below were recognized under the pension plan; (c) a
lump-sum payment equal to (i) his annual salary at termination, (ii) the average
of his short-term incentive compensation award for three years preceding
termination and (iii) the value of his average earned award under the PSP for
three years preceding termination, multiplied by the number of years between the
termination date and the date he reaches age 65; (d) a lump-sum payment equal to
the value of any deferred incentive compensation or PSP awards and unvested
Company matching contributions under the SSP; (e) stock options equal to the
average number of options awarded during the three years preceding termination,
multiplied by the number of years between the termination date and the date he
reaches age 65, plus the extension of each option held until the end of the
normal term of such option if he had not left the Company.
In addition to the foregoing, the Long-Term Incentive Compensation Plan
contains provisions that release restrictions from stock awards and stock
options for all members of the group if there is a change of control of the
company. Also, the Supplemental Retirement Plan for senior managers provides
that if a change of control of the Company occurs, pension benefits will vest
immediately and the minimum benefit will be increased from 25% to 50% of
pensionable remuneration.
The Company has authorized a grantor trust under Sections 671 through 677
of the Code in connection with the Company's benefit plans and termination
agreements. Under the grantor trust, the trustee will pay the beneficiaries of
the trust the amounts to which they are entitled under such plans and agreements
subject to claims of the Company's creditors.
24
<PAGE>
APPENDIX A
INTERNATIONAL PAPER COMPANY
LONG-TERM INCENTIVE COMPENSATION PLAN
The International Paper Company Long-Term Incentive Compensation Plan is
hereby amended to delete the words and phrases indicated by brackets, e.g.
(omit) and to add the words and phrases indicated by italics, e.g. add.
1. PURPOSE AND EFFECTIVE DATE
This plan shall be known as the International Paper Company Long-Term
Incentive Compensation Plan (the "Plan"). The purpose of this Plan is to provide
incentive for senior management officers and employees of the Company and its
subsidiaries (the "Company") to improve the performance of the Company on a
long-term basis, and to attract and retain in the employ of the Company persons
of outstanding competence. The terms "subsidiary" and "subsidiaries" as used
herein shall mean corporations which are owned or controlled by International
Paper Company, directly or indirectly.
The effective date of this Plan is (shall be) January 1, 1989. S(s)ubject
to approval of this Plan by a majority of shareholders of the Company entitled
to vote on the matter at the 1994 (89) annual meeting of shareholders certain
amendments to the Plan will also be effective. (Upon share owner approval of
this) The Plan (it will) supersedes and replaces the International Paper Company
Performance Share Plan and the International Paper Company Stock Option Plan
which were approved by shareholders in 1983 (the "1983 Plans"). No further
contingent awards or grants of options will be made under the 1983 Plans, and
outstanding contingent awards and deferred awards under the 1983 Plans and
earlier plans will be converted to comparable awards under the provisions of
this Plan with the consent of the award holders.
2. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by a committee (the "Committee") which
shall be composed of members of the Board of Directors of the Company and which
shall be constituted so as to permit the Plan to comply with the provisions of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended ("1934 Act")
(or any successor rule) and Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Committee is authorized to administer and interpret
the Plan, to authorize, change, and waive the restrictions and conditions
imposed on awards and stock options under the Plan, and to adopt such rules and
regulations for carrying out the Plan as it may deem appropriate. Decisions of
the Committee on all matters relating to the Plan shall be in the Committee's
sole discretion and shall be conclusive and binding on all parties, including
the Company, the shareholders and the participants.
(b) No member of the Committee or any employee acting on its behalf shall
incur any liability for any action or failure to act in connection with this
Plan. The Company shall indemnify each member of the Committee and any employee
acting on its behalf against any and all claims, losses, damages, expenses and
liabilities arising from any action or failure to act.
3. PARTICIPANTS
(a) Participation in this Plan shall be limited to senior managers and
other key employees of the Company as determined by the Committee. Awards of
stock and stock appreciation rights and grants of stock options may be made to
such (members of senior management) employees and for such respective numbers of
Shares, as the Committee in its absolute discretion shall determine (all such
individuals to whom awards and options shall be granted being herein called
"participants").
A-1
<PAGE>
(b) Members of the Board of Directors who are also employees of the Company
shall be eligible to participate in the Plan. However, members of the Board of
Directors who are not also employees of the Company shall be ineligible for
awards under this Plan. Notwithstanding the foregoing, any members of the Board
of Directors who are also retired employees of the Company shall be entitled to
the portions of their awards which are (is) earned or vested pursuant to the
provisions of the Plan.
(c) A person who is compensated on the basis of a fee or retainer, as
distinguished from salary, shall not be eligible for participation in the Plan.
(d) Participation in this Plan, or receipt of an award or option under this
Plan, shall not give a participant any right to a subsequent award or option,
nor any right to continued employment by the Company for any period, nor shall
the granting of an award or option give the Company any right to continued
services of the participant for any period. Likewise, participation in the Plan
will not in any way affect the Company's right to terminate the employment of
the participant at any time with or without cause.
4. DEFINITIONS
(a) "Stock" or "Share" shall mean a share of the common stock of $1.00 par
value of International Paper Company.
(b) "Performance Shares" shall mean Shares contingently awarded with
respect to an Award Period and issued with the restriction that the holder may
not sell, transfer, pledge, or assign such Shares, and with such other
restrictions as the Committee in its sole discretion may determine (including,
without limitation, restrictions with respect to forfeiture of the Shares and
with respect to reinvestment of dividends in additional restricted Shares),
which restrictions may lapse separately or in combination at such time or times
(in installments or otherwise) as the Committee may determine.
(c) "Stock Appreciation Right" or "SAR" shall mean a right included in an
award under this Plan to receive upon exercise of the SAR a payment equal to the
amount of the appreciation in the fair market value of a Share over the exercise
price which is set forth in the SAR provided that the exercise price is not less
than the fair market value of a Share on the date the SAR is granted. Payment
upon exercise of an SAR may be in the form of cash, or restricted stock, or
unrestricted stock, or a combination, as determined by the Committee in its sole
discretion. SARs may be awarded separately or in combination with other awards
and stock options under this Plan pursuant to terms and conditions contained in
an award agreement as determined by the Committee.
(d) "Change of Control of the Company" shall mean a change in control of a
nature that would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A promulgated under the (Securities Exchange) 1934
Act (of 1934, as amended ("Exchange Act")); provided that, without limitation,
such a change in control shall be deemed to have occurred if (i) any "person" as
such term is used in Sections 13(d) and 14(d)(2) of the (Exchange) 1934 Act
(other than employee benefit plans sponsored by the Company) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company, cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election, by the Company's
shareholders of each new director was approved by a vote of at least two-thirds
of the directors still in office who were directors at the beginning of the
period.
5. STOCK AVAILABLE FOR THE PLAN
An aggregate of (seven) five million Shares shall be available under the
Plan as amended by the shareholders at the 1994 Annual Meeting for delivery
pursuant to the future awards, and options granted pursuant to the (this) Plan,
together with any Shares previously authorized by shareholders
A-2
<PAGE>
under the 1983 Plans or the Plan which are not yet issued to, or are reacquired
from, participants in the 1983 Plans or the Plan. Such Shares shall be either
previously unissued Shares or reacquired Shares. Shares covered by awards which
are not earned, or which are settled in cash, or which are forfeited or
terminated for any reason, and options which expire unexercised or which are
exchanged for other awards, shall again be available for other awards and stock
options under the Plan. Shares received by the Company in connection with the
exercise of stock options by delivery of other Shares, and received in
connection with payment of withholding taxes, shall again be available for
delivery under the Plan. Shares reacquired by the Company on the open market
using the cash proceeds received by the Company from the exercise of stock
options granted under the Plan and the 1983 Plans shall be available for awards
and options up to the number of Shares issued upon option exercises which
generated such proceeds, provided any such exercise occurred on or after January
1, 1989. Notwithstanding the foregoing, the maximum number of Shares available
for delivery pursuant to future awards, options and SARs to executive officers
of the Company who, at the time of grant, are subject to the provisions of
Section 16 of the 1934 Act shall not exceed 7,300,000 Shares, subject to the
adjustments permitted by Section 6 of the Plan. Notwithstanding any other
provision of this Plan, subject, however, to the adjustments permitted by
Section 6 of the Plan, the aggregate number of Shares that can be covered by
future stock options or SARs granted to any individual in any period of three
consecutive fiscal years shall be 900,000.
6. CHANGES IN STOCK AND EXERCISE PRICE OF STOCK OPTIONS AND SARS
In the event of any stock dividend, split-up, reclassification or other
analogous change in capitalization or any distribution (other than regular cash
dividends) to holders of the Company's common stock, the Committee shall make
such adjustments, if any, as it deems to be equitable in the exercise price of
outstanding options and SARs, and in the number of Performance Shares awarded
and earned, and in the number of Shares covered by any outstanding stock options
and SARs, granted under this Plan, and in the aggregate number of Shares covered
by this Plan.
7. TIME OF GRANTING AWARDS AND STOCK OPTIONS
Nothing contained in this Plan, or in any resolution adopted or to be
adopted by the Board of Directors or the shareholders of the Company, shall
constitute the granting of an award or stock option under this Plan. The
granting of an award or stock option pursuant to the Plan shall take place only
when authorized by the Committee. (No award and no rights thereunder shall be
transferable or assignable except at death pursuant to Section 8.)
8. DEATH OR DISABILITY OF A PARTICIPANT
In the event of the death of a participant, a stock option or an SAR may be
exercised within one year of the participant's death by the participant's
designated beneficiary or beneficiaries (or if no beneficiary has been
designated or survives the participant, by the person or persons who have
acquired the rights of the participant by will or under the laws of descent and
distribution). If a participant becomes disabled, the participant may exercise a
stock option or an SAR within one year after the date of the disability.
(Disability shall cause Incentive Stock Options to be treated for federal
income tax purposes as Non-qualified Stock Options on a date which is one year
after the date of the disability.) For purposes of this Plan, the term
"disabled" shall refer to the condition of (permanent) total disability defined
in the Company's long-term disability plan.
A participant may file with the Committee a designation of a beneficiary or
beneficiaries on a form approved by the Committee, which designation may be
changed or revoked by the participant's sole action, provided that the change or
revocation is filed with the Committee on a form approved by it. In case of the
death of the participant, before termination of employment or after retirement
or disability,
A-3
<PAGE>
any portions of the participant's award to which the participant's designated
beneficiary or estate is entitled under the Plan and the award agreement, shall
be paid to the beneficiary or beneficiaries so designated or, if no beneficiary
has been designated or survives such participant, shall be delivered as directed
by the executor or administrator of the participant's estate.
9. RETIREMENT OF HOLDER OF STOCK OPTION OR SAR
If a participant retires under a Company pension plan, the participant may
exercise a stock option or an SAR within its remaining term unless otherwise
provided in the award agreement. Retirement under any of the Company's pension
plans shall cause incentive stock options to be treated for federal income tax
purposes as non-qualified stock options on a date which is three months after
the date of retirement. For purposes of this section, retirement shall be given
the meaning used under the Company's pension plan for salaried employees.
10. NON-TRANSFERABILITY OF AWARDS
No award, (or) stock option or SAR under this Plan, and no rights or
interests therein, shall be assignable or transferable by a participant (or
legal representative), except at death by will or by the laws of descent and
distribution unless otherwise permitted by the Committee and by law and, in the
case of incentive stock options, to the extent consistent with Section 422 of
the Code. (During the lifetime of a participant, stock options, SARs and rights
under the Plan may be exercised only by the participant (or legal
representative), and payments and distributions under the Plan will be made only
to the participant (or legal representative).)
11. MODIFICATION OF THE PLAN
The Board of Directors, without further approval of the shareholders, may
at any time amend the Plan to take into account and comply with any changes in
applicable securities or federal income tax laws and regulations, or other
applicable laws and regulations, including without limitation, any modifications
to Rule 16b-3 under the (Exchange) 1934 Act or Section 162(m) of the Code (or
any successor rule, provision or regulation), terminate or modify or suspend
(and if suspended, may reinstate) any or all of the provisions of this Plan,
except that no modification of this Plan shall without the approval of the
Company's shareholders increase the total number of Shares for which awards,
(and) stock options and SARs may be granted under the Plan (except pursuant to
Section 6).
RESTRICTED PERFORMANCE SHARE AWARDS
12. TERMS AND CONDITIONS OF AWARDS OF PERFORMANCE SHARES
(a) Each award of Performance Shares under this Plan shall be contingently
awarded with respect to a period of consecutive calendar years as determined by
the Committee (herein called an "Award Period") and shall be made from
reacquired Shares. Outstanding contingent awards and deferred awards under the
1983 Performance Share Plan shall be converted to comparable awards under this
Plan with the consent of the award holders. The first complete Award Period
under this Plan shall begin with the year 1989. A new Award Period shall
commence at the beginning of each calendar year.
(b) The Performance Shares awarded under this Plan will be earned by a
participant on the basis of the Company's financial performance over the Award
Period for which it was awarded, (as) on the basis of pre-established
performance goals determined by the Committee in its sole discretion. (The
restrictions on the Shares constituting the portion of the award which has been
earned as determined by the Committee shall be removed as described in Section
13, and all unearned Performance Shares relating to that Award Period shall be
forfeited to the Company and shall again be available for other awards under the
Plan. Additional Shares and Performance Shares may be issued at the end of the
Award Period if the Committee determines that the Company's performance exceeded
the goal established by the Committee for such Award Period.) The Performance
measurement criteria used for
A-4
<PAGE>
Performance Shares shall be limited to one or more of: earnings per share,
return on stockholders equity, return on assets, growth in earnings, growth in
sales revenue, and shareholder returns. Such criteria may be measured based on
the Company's results or on the Company's performance as measured against a
group of peer companies selected by the Committee. In applying such criteria,
earnings may be calculated based on the exclusion of discontinued operations and
extraordinary items. Subject to the adjustments permitted by Section 6 of the
Plan, the maximum number of Performance Shares that can be earned for any one
individual for any future Award Period commencing after the effective date of
the amendment to the Plan is 50,000. Subject to such maximum number of Shares,
the amount, if any, that may be earned by a participant receiving Performance
Shares may vary in accordance with the level of achievement of the performance
goal or goals established by the Committee.
(c) A participant's rights with respect to all unearned Performance Shares
shall terminate at the end of each Award Period.
(d) The number of Shares determined by the Committee to have been earned
with respect to any Award Period shall be final, conclusive and binding upon all
parties, including the Company, the shareholders and the participants.
(e) All dividend(s) (paid) equivalents credited on Performance Shares
during an Award Period shall be reinvested in additional Performance Shares
(which shall be allocated to the same Award Period, and shall be subject to
being earned by the participant on the same basis as the original award).
(f) All dividends paid on earned restricted Shares under this part of the
Plan shall be paid in cash.
(g) As a condition of any award of Performance Shares under this Plan, each
participant shall enter into an award agreement authorized by the Committee.
(and may be required to file an election pursuant to Section 83(b) of the
Internal Revenue Code (or comparable provisions of the Code as amended from time
to time) electing to treat the award as taxable income in the year of the award,
and the number of Performance Shares delivered shall be appropriately reduced
for payment of the applicable withholding taxes due with respect to the award.
The Committee may, in its discretion, include additional conditions and
restrictions in the award agreements.) The Committee may in its sole discretion,
include additional conditions and restrictions in the award agreement entered
into under this Plan. Settlements in Shares may be subject to forfeiture and
other contingencies as the Committee may determine.
(h) At the discretion of the Committee, SARs may be awarded separately or
in combination with other awards or grants under this portion of the Plan.
(13. METHOD OF EARNING AWARD AND REMOVAL OF RESTRICTIONS)
((a) As soon as practicable after each Award Period, fifty percent (50%) of
the number of Performance Shares determined by the Committee to have been earned
by each participant during such Award Period shall become unrestricted Shares.
The remaining fifty (50%) of the number of Performance Shares earned by each
participant during such Award Period shall continue to be restricted Shares
until the earlier of death, becoming disabled, retirement after attaining age
62, or the third anniversary of the date of determination of the number of
Shares earned by such participant. In the event of any other termination of
employment, earned Performance Shares shall be subject to forfeiture and
cancellation at the discretion of the Committee.)
((b) All Performance Shares shall be subject to being forfeited and
cancelled by the Committee, in the Committee's discretion, if the participant
terminates employment, other than by reason of death or becoming disabled or
retirement after attaining age 62.)
((c) In the event of a participant's death during an Award Period, the
participant's beneficiary shall receive Shares which are free of restrictions in
an amount equal to the pro rata portion of each
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award that would have been earned were Company performance to reach the goals
established by the Committee for the Award Periods currently underway. In the
event of a participant's retirement after attaining age 62 or upon becoming
disabled, the participant shall receive Shares which are free of restrictions in
an amount equal to the pro rata portion of each award that would have been
earned were Company performance to reach the goals established by the Committee
for the Award Periods currently underway.)
(i)((d)) In the event a Change of Control of the Company occurs, then
(i) all restrictions shall be immediately removed with respect to all
earned Performance Shares and
(ii) a pro rata portion of each outstanding Award that would have been
earned were Company performance to reach the goals established by the
Committee for each uncompleted Award Period shall be deemed earned (based
on the number of months of the total Award Period which have been completed
prior to the Change of Control), and all restrictions shall be immediately
removed with respect to that number of shares; the remaining portion of
each Award shall remain outstanding as Performance Shares subject to the
provisions of this Plan and the participant's award agreements.
STOCK OPTION AWARDS
13.(14.) TERMS AND CONDITIONS OF STOCK OPTIONS)
((a) The Committee shall have the sole authority to grant stock options
under this Plan. Such grants may consist of n(N)on-qualified s(S)tock
o(O)ptions, or Incentive Stock Options, or any combination thereof, as the
Committee shall decide from time to time. The aggregate fair market value
(determined at the time the option is granted) of the Stock with respect to
which Incentive Stock Options are exercisable for the first time by an
individual during a calendar year shall not exceed $100,000 as determined under
Section 422A of the Internal Revenue Code or comparable legislation. The maximum
number of Shares for which stock options can be awarded to any one individual
over any consecutive three-year period commencing on the effective date of the
amendment to the Plan is 900,000 Shares.
(b) The term of each option granted under the Plan shall be set by the
Committee, but in no event shall an Incentive Stock Option be exercised after
ten years following the date of its grant under this Plan.
(c) The exercise price of each option granted under the Plan shall be no
less than the fair market value of the underlying Stock at the time the option
is granted as determined by the Committee.
(d) Prior to the exercise of the option and delivery of the Stock
represented thereby, the participant shall have no rights to any dividends nor
be entitled to any voting rights on any Stock represented by outstanding
options.
(e) As a condition of any grant of a stock option under this Plan, each
participant shall enter into an award agreement authorized by the Committee. The
Committee may, in its sole discretion, include additional conditions and
restrictions in the award agreement entered into under this Plan.
(f) At the discretion of the Committee, SARs may be awarded separately or
in combination with other awards or grants under this part of the Plan.
14.(15.) EXERCISE OF STOCK OPTIONS
(a) Each stock option granted under this Plan shall be exercisable as
provided in accordance with the document evidencing the option by full payment
of the option price in cash or at the discretion of the Committee in Stock owned
by the participant (including Performance Shares and other restricted Shares
awarded under this Plan). Unless otherwise provided herein, a participant may
exercise a stock
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option only if he or she is an employee of the Company and has continuously been
an employee of the Company since the date the option was granted.
((b) If a participant terminates employment with the Company other than by
reason of retirement after attaining age 62, death, or disability, any and all
outstanding stock options granted under this Plan shall be terminated unless the
Committee in its absolute discretion determines that, because of unusual
circumstances, all or any portion of the outstanding option shall remain
exercisable by such participant for such period as the Committee determines. If
the Committee determines to extend all or any portion of the outstanding stock
option, the option so extended shall then be treated, for federal income tax
purposes, as a Non-qualified Stock Option.)
(b)(c) If a stock option under the 1983 Plan or this Plan is exercised by a
participant, then, at the discretion of the Committee, the participant may
receive a replacement option under this part of the Plan to purchase a number of
Shares equal to the number of Shares which the participant purchased on the
exercise of the option, with an exercise price equal to the current fair market
value, and with a term extending to the expiration date of the original stock
option. If a stock option is exercised by delivery of restricted Shares, then
the participant shall receive an equal number of identically restricted Shares;
the remaining option exercise Shares shall contain any applicable restrictions
which are set forth in the participant's award agreement and shall otherwise be
unrestricted.
((d) Any tax withholding obligation in connection with an exercise of a
stock option under the 1983 Plan or this Plan will be satisfied by authorizing
the Company to withhold an appropriate number of Shares deliverable (subject to
compliance with applicable securities laws and regulation).)
(c)(e) In the event a Change of Control of the Company occurs, all stock
options granted under this part of the Plan shall be immediately exercisable,
and all restrictions on Shares issued under this plan pursuant to the exercise
of stock option shall be immediately removed.
EXECUTIVE CONTINUITY AWARDS
15.(16). TERMS AND CONDITIONS OF EXECUTIVE CONTINUITY AWARDS
(a) Executive continuity awards may be made from time to time under this
Plan at the discretion of the Committee, in such amounts and upon such terms and
conditions as are established by the Committee under this portion of the Plan.
(b) An executive continuity award shall consist of a stock option or grant
of restricted Shares, or a tandem grant of restricted Shares together with a
related n(N)on-qualified s(S)tock o(O)ption (options to be granted in accordance
with the provisions of sections 13-14 (14-15) of this Plan) to purchase a
specified number of Shares, in such amounts as may be determined by the
Committee. All dividends paid on the restricted Shares shall be reinvested in
additional shares of restricted Shares (subject to the same restrictions, terms
and conditions). Upon attainment of age 65, (or death or the executive's
becoming disabled as such condition is determined in the sole discretion of the
Committee, if earlier) or upon a Change of Control of the Company (as limited
under subsection (h) below), the restrictions on the award will be removed, and
the award will vest in the following manner:
(i) If the current realizable gain on a tandem stock option is greater
than the current market value of the related restricted Shares (including
re-invested dividends), then all such shares of restricted Shares shall be
cancelled and the term of the stock option shall continue for the term set
forth in the award agreement.
(ii) If the current market value of the restricted Shares (including
re-invested dividends) is greater than the current realizable gain on any
related tandem stock option, then the option shall be cancelled and the
restrictions shall be removed from all of the related restricted Shares.
(c) If a stock option granted under this portion of the Plan is exercised
prior to the executive's attainment of age 65, the related shares of restricted
Shares shall be cancelled, and the additional
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Shares issued upon the exercise of the stock option shall be restricted and
subject to either forfeiture or repurchase by the Company at the option exercise
price for a period ranging up to 12 years from the date of the grant of the
option, or longer, as determined by the Committee and set forth in the award
agreement.
(d) A stock option granted under this portion of the Plan shall be
exercisable as provided in accordance with the document evidencing the option by
full payment of the option price in cash or, at the discretion of the Committee,
in Stock owned by the participant (including Performance Shares awarded under
this Plan). At the discretion of the Committee, the participant may receive a
replacement stock option to purchase a number of shares equal to the number of
shares purchased by the participant in exercising the option, with an exercise
price equal to the current market value, and with a term extending to the
expiration date of the original stock option. If an option is exercised by
delivery of restricted Shares, then the participant shall receive an equal
number of identically restricted Shares; the remaining option exercise Shares
shall be subject to the Company's right to impose restrictions on such Shares as
described in subsection (c) above.
((e) Tax withholding obligations in connection with the vesting of
restricted Shares will be satisfied by withholding Shares (subject to compliance
with applicable securities laws and regulations) equal in value to the required
withholding amount.)
(e)((f)) As a condition of any executive continuity award under this Plan,
each participant shall enter into an award agreement authorized by the
Committee. The Committee may, in its sole discretion, include additional
conditions and restrictions in the award agreement.
(f)((g)) At the discretion of the Committee, SARs may be awarded separately
or in combination with other awards or grants under this portion of the Plan.
(g)((h)) In the event a Change of Control of the Company occurs, all
restrictions shall be immediately removed with respect to the exercise of stock
options under this part of the Plan and with respect to Shares issued upon the
exercise of any stock option. A Change of Control, for these purposes, shall not
include a transaction initiated by management such as a management led buyout or
recapitalization except where such transaction (i) is in response to the
acquisition of 10% or more of the Company's stock or the announcement of a
tender offer for 20% or more of the Company's stock (other than by employee
benefit plans sponsored by the Company); or (ii) is approved by the Board in
accordance with the standards set forth in Section 717 of the New York Business
Corporation Law or any successor provision.
MISCELLANEOUS
16. PRIOR AWARDS
Awards of stock options and Performance Shares made under the Plan prior to
the amendments approved by shareholders at the 1994 annual meeting shall
continue to be subject to the terms of the Plan and the instruments evidencing
such awards prior to such amendments becoming effective.
17. TAX WITHHOLDING
The Company shall have the right to deduct from any settlement of an award
made under the Plan, including the delivery or vesting of Shares, a sufficient
amount to cover withholding of any federal, state, local or foreign jurisdiction
taxes required by law, or to take such other action as may be necessary to
satisfy any such withholding obligations. The Committee may permit or require
Shares to be used to satisfy required tax withholding and such Shares shall be
valued at the fair market value as of the settlement date of the applicable
award.
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INTERNATIONAL PAPER
TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
PRINTED ON HAMMERMILL PAPERS ACCENT OPAQUE 40 LBS.
HAMMERMILL PAPERS IS A DIVISION OF INTERNATIONAL PAPER.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of our
reports included (or incorporated by reference) in this Form 10-K, into the
Company's previously filed Form S-3 Registration Statement No. 33-32527, Form
S-3 Registration Statement No. 33-44855, Form S-3 Registration Statement No.
33-48167, Form S-8 Registration Statement No. 2-86945, Form S-8 Registration
Statement No. 2-57646 and post-effective amendments thereto, Form S-8
Registration Statement No. 33-11117, Form S-8 Registration Statement No.
33-38133, Form S-8 Registration Statement No. 33-50438 and Form S-3 Registration
Statement No. 33-51447 and post-effective amendments thereto.
ARTHUR ANDERSEN & CO.
New York, New York,
March 28, 1994
EXHIBIT (24)
POWER OF ATTORNEY
Know all Men By These Presents, that the undersigned hereby
constitutes and appoints JAMES W. GUEDRY, JAMES P. MELICAN and JAMES A.
WILDEROTTER, and each of them (with full power to each of them to act
alone) their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for them on their behalf and
in their name, place and stead, in any and all capacities, to sign,
execute and affix their seal thereto and file the Annual Report of
International Paper Company on Form 10-K (or any other appropriate
form), under the Securities Exchange Act of 1934, as amended, together
with any and all amendments to such Annual Report and to file the same,
with all exhibits thereto, and other documents in connection therewith,
with the Securities Exchange Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and
perform each every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same, for all intents
and purposes, and that the undersigned hereby ratify and confirm all
that said attorneys-in-fact and agents, or any of them, may lawfully do
or cause to be done by virtue hereof.
Executed on the date set forth opposite their names.
NAME TITLE DATE
---- ----- ----
/s/ JOHN T. DILLON
..................... Executive Vice March 8, 1994
(John T. Dillon) President and Director
/s/ WILLARD C. BUTCHER
....................... Director March 8, 1994
(Willard C. Butcher)
/s/ FREDERICK B. DENT
..................... Director March 8, 1994
(Frederick B. Dent)
/s/ WILLIAM M. ELLINGHAUS
......................... Director March 8, 1994
(William M. Ellinghaus)
/s/ STANLEY C. GAULT
..................... Director March 8, 1994
(Stanley C. Gault)
/s/ THOMAS C. GRAHAM
..................... Director March 8, 1994
(Thomas C. Graham)
/s/ ARTHUR G. HANSEN
..................... Director March 8, 1994
(Arthur G. Hansen)
NAME TITLE DATE
---- ----- ----
/s/ WILLIAM G. KUHNS
..................... Director March 8, 1994
(William G. Kuhns)
/s/ DONALD F. MCHENRY
..................... Director March 8, 1994
(Donald F. McHenry)
/s/ PATRICK F. NOONAN
..................... Director March 8, 1994
(Patrick F. Noonan)
/s/ JANE C. PFEIFFER
..................... Director March 8, 1994
(Jane C. Pfeiffer)
/s/ SAMUEL R. PIERCE, JR.
......................... Director March 8, 1994
(Samuel R. Pierce, Jr.)
/s/ EDMUND T. PRATT, JR.
........................ Director March 8, 1994
(Edmund T. Pratt, Jr.)
/s/ ROGER B. SMITH
..................... Director March 8, 1994
(Roger B. Smith)
