<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1995 Commission file number 1-3157
INTERNATIONAL PAPER COMPANY
(Exact name of registrant as specified in its charter)
New York 13 0872805
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
Two Manhattanville Road, Purchase, NY 10577
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 914-397-1500
Indicate by check mark whether the registrant (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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common stock outstanding on October 31, 1995: 260,758,197.
<PAGE>
INTERNATIONAL PAPER COMPANY
INDEX
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Earnings -
Three Months and Nine Months Ended
September 30, 1995 and 1994 3
Consolidated Balance Sheet -
September 30, 1995 and December 31, 1994 4-5
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-13
Item 3. Other Financial Information 14
PART II. Other Information
Item 1. Legal Proceedings 15-16
Item 2. Changes in Securities *
Item 3. Defaults upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
* Omitted since no answer is called for, answer is in the negative or
inapplicable.
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL PAPER COMPANY
Consolidated Statement of Earnings
(Unaudited)
(In millions, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------- -------
<S> <C> <C> <C> <C>
Net Sales $5,145 $3,792 $14,721 $10,839
------ ------ ------- -------
Costs and Expenses
Cost of products sold 3,566 2,808 10,322 8,061
Depreciation and amortization 266 221 764 656
Distribution expenses 205 176 589 505
Selling and administrative expenses 342 272 992 774
Taxes other than payroll and income taxes 46 39 132 117
------ ------ ------- -------
Total Costs and Expenses 4,425 3,516 12,799 10,113
------ ------ ------- -------
Earnings Before Interest, Income Taxes, Minority
Interest and Cumulative Effect of Accounting
Change 720 276 1,922 726
Interest expense, net 129 92 371 255
------ ------ ------- -------
Earnings Before Income Taxes, Minority Interest
and Cumulative Effect of Accounting Change 591 184 1,551 471
Provision for income taxes 210 61 551 154
Minority interest expense, net of taxes 53 12 110 39
------ ------ ------- -------
Earnings Before Cumulative Effect of Accounting Change 328 111 890 278
Cumulative effect of change in accounting for
start-up costs (less tax benefit of $50) -- -- -- (75)
------ ------ ------- -------
Net Earnings $ 328 $ 111 $ 890 $ 203
====== ====== ======= =======
Earnings per Common Share
Earnings before cumulative effect of accounting change $ 1.27 $ 0.45 $ 3.49 $ 1.12
Cumulative effect of change in accounting for start-up costs (0.30)
------ ------ ------- -------
Earnings per Common Share $ 1.27 $ 0.45 $ 3.49 $ 0.82
====== ====== ======= =======
Average Shares of Common Stock Outstanding 258.7 249.6 255.1 249.2
====== ====== ======= =======
Cash Dividends per Common Share $ 0.25 $ 0.21 $ 0.67 $ 0.63
====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
INTERNATIONAL PAPER COMPANY
Consolidated Balance Sheet
(Unaudited)
(In millions)
September 30, December 31,
1995 1994
------------- ------------
Assets
Current Assets
Cash and temporary investments $ 372 $ 270
Accounts and notes receivable, net 2,731 2,241
Inventories 2,766 2,075
Other current assets 233 244
------- -------
Total Current Assets 6,102 4,830
------- -------
Plants, Properties and Equipment, Net 10,586 9,139
Forestlands 2,816 802
Investments 1,562 1,032
Goodwill 1,257 763
Deferred Charges and Other Assets 1,373 1,270
------- -------
Total Assets $23,696 $17,836
======= =======
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
INTERNATIONAL PAPER COMPANY
Consolidated Balance Sheet
(Unaudited)
(In millions)
September 30, December 31,
1995 1994
------------- ------------
Current Liabilities
Notes payable and current maturities of
long-term debt $ 2,796 $ 2,083
Accounts payable and accrued liabilities 2,569 1,951
------- -------
Total Current Liabilities 5,365 4,034
------- -------
Long-Term Debt 5,474 4,464
Deferred Income Taxes 1,953 1,612
Other Liabilities 891 870
Minority Interest 1,976 342
International Paper obligated mandatorily
redeemable preferred securities of Trust
holding solely International Paper
subordinated debentures 450 --
Common Shareholders' Equity
Common stock, $1 par value, issued
1995 - 263.3 shares, 1994 - 256.4 shares 263 256
Paid-in capital 1,957 1,658
Retained earnings 5,430 4,711
------- -------
7,650 6,625
Less: Common stock held in treasury,
at cost; 1995 - 2.4 shares,
1994 - 4.6 shares 63 111
------- -------
Total Common Shareholders' Equity 7,587 6,514
------- -------
Total Liabilities and
Common Shareholders' Equity $23,696 $17,836
======= =======
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
INTERNATIONAL PAPER COMPANY
Consolidated Statement of Cash Flows
(Unaudited)
(In millions)
Nine Months Ended
September 30,
-------------------
1995 1994
------- -------
Operating Activities
Net earnings $ 890 $ 203
Cumulative effect of accounting change -- 75
Noncash items
Depreciation and amortization 764 656
Deferred income taxes 123 8
Other, net (12) (9)
Changes in current assets and liabilities
Accounts and notes receivable (178) (325)
Inventories (326) 6
Other current assets (6) (18)
Accounts payable and accrued liabilities 214 119
------- -------
Cash Provided by Operations 1,469 715
------- -------
Investment Activities
Invested in capital projects (916) (746)
Acquisitions and investments, net of cash acquired (1,108) (303)
Consolidation of equity investment 241
Other (198) (45)
------- -------
Cash Used for Investment Activities (1,981) (1,094)
------- -------
Financing Activities
Issuance of common stock 64 62
Issuance of preferred securities by subsidiary 450 --
Issuance of debt 970 834
Reduction of debt (744) (170)
Change in bank overdrafts 91 (41)
Dividends paid (171) (158)
Other (51) (199)
------- -------
Cash Provided by Financing Activities 609 328
------- -------
Effect of Exchange Rate Changes on Cash 5 5
------- -------
Change in Cash and Temporary Investments 102 (46)
Cash and Temporary Investments
Beginning of the period 270 242
------- -------
End of the period $ 372 $ 196
======= =======
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
INTERNATIONAL PAPER COMPANY
Notes to Consolidated Financial Statements
(Unaudited)
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the
opinion of Management, include all adjustments (consisting only of normal
recurring accruals) which are necessary for the fair presentation of results
for the interim periods. It is suggested that these consolidated financial
statements be read in conjunction with the audited financial statements and
the notes thereto incorporated by reference in the Company's Form 10-K for
the year ended December 31, 1994, which has previously been filed with the
Commission.
2. In late April 1995, the Company acquired from Brierley Investments Limited,
131.8 million shares of Carter Holt Harvey Limited (CHH), a major New
Zealand forest and paper products company (representing approximately 8% of
the company) for NZ $470 million (approximately $316 million). Also in late
April, an additional 325.8 million CHH shares were acquired through
open-market purchases for NZ $3.80 per share (approximately $834 million)
bringing the Company's total ownership in CHH to 50.2% on a fully diluted
basis. All of the above share purchases, including the acquisition from
Brierley, were financed with additional borrowings totaling approximately
$1.1 billion. The Company's financial statements reflect the consolidation
of CHH effective May 1, 1995.
In January 1995, the Company acquired the assets of both Seaman-Patrick
Paper Company and Carpenter Paper Company, two Michigan-based paper
distribution companies, by issuing approximately 988,000 shares of
common stock. In July 1995, the common stock of Papeteries de Lana, a paper
distribution company located in France was acquired. In September 1995,
the high pressure laminates business of Westinghouse located in Hampton,
South Carolina was acquired.
In March 1994, the Company acquired from Brierley Investments Limited an 8%
interest in CHH. The purchase increased the Company's ownership of CHH to
approximately 24 percent. In December 1994, the Company completed a merger
with Kirk Paper Corporation, a California-based paper distribution company.
Also in December, the Company acquired additional stock of Zanders
Feinpapiere AG, a majority-owned German paper company.
With the exception of Kirk Paper Corporation, which was accounted for as a
pooling-of-interests, all of the 1995 and 1994 acquisitions were accounted
for using the purchase method.
The consolidated balance sheet at September 30, 1995, includes preliminary
purchase price allocations for Seaman-Patrick, Carpenter Paper, the high
pressure laminates business acquired from Westinghouse, and the additional
purchases of CHH and Zanders. Except for CHH and the high pressure laminates
business acquisition, final allocations for the above acquisitions will be
completed in 1995. Final allocations for these two acquisitions will be
completed in 1996.
7
<PAGE>
3. Inventories by major category include:
September 30, December 31,
1995 1994
------------- ------------
(In millions)
Raw materials $ 601 $ 365
Finished pulp, paper and packaging products 1,259 1,067
Finished imaging products 159 152
Finished lumber and panel products 214 77
Operating supplies 373 335
Other 160 79
------ ------
Total $2,766 $2,075
====== ======
4. Interest payments made during the nine months ended September 30, 1995 and
1994 were $430 million and $279 million, respectively, including payments of
$167 million and $115 million for the 1995 and 1994 third quarters. Income
tax payments made during each of the nine month periods ended September 30,
1995 and 1994 were $126 million and $77 million, respectively.
5. Temporary investments with a maturity of three months or less are treated
as cash equivalents and are stated at cost. Temporary investments totaled
$200 million and $102 million at September 30, 1995 and December 31, 1994,
respectively.
6. Certain reclassifications have been made to prior-year amounts to conform
with the current-year presentation.
7. In the Company's consolidated statement of cash flows, the acquisition of
the additional 26% interest in CHH in late April 1995 is presented net of
26% of the cash acquired. The consolidated statement of cash flows also
reflects $241 million of CHH's cash and temporary investments balance as of
the acquisition date. This cash and temporary investments balance was
previously not included in the Company's consolidated cash and temporary
investments balance because the equity method was used to account for the
investment in CHH before a controlling interest was acquired.
8. In the third quarter of 1995, International Paper Capital Trust (the
"Trust") issued $450 million of International Paper obligated mandatorily
redeemable preferred securities. The Trust is a wholly owned consolidated
subsidiary of International Paper. The Trust's sole assets are
International Paper 5 1/4% percent convertible subordinated debentures. The
obligations of the Trust related to its preferred securities are
unconditionally guaranteed by International Paper Company. These preferred
securities are convertible into International Paper common stock.
8
<PAGE>
9. The following unaudited pro forma financial information for the nine months
ended September 30, 1995 and 1994 presents the combined results of the
continuing operations of International Paper; Carter Holt Harvey (CHH);
Carpenter Paper Company; Seaman-Patrick Paper Company; the high pressure
laminates business of Westinghouse and Papeteries de Lana.
The acquisition of 26.5% of CHH common stock was completed in April 1995,
thereby increasing the Company's total ownership to 50.3% (50.2% on fully
diluted basis). CHH was accounted for under the equity method in the
Company's historical financial statements until May 1, 1995, at which time
it was consolidated. CHH is consolidated in the pro forma information
presented for each period.
The assets of Carpenter Paper Company and Seaman-Patrick Paper Company were
acquired in January 1995 in exchange for International Paper common stock.
The common stock of Papeteries de Lana was acquired in July 1995. The high
pressure laminates business of Westinghouse was acquired in September of
1995.
The pro forma information is prepared as if the transactions occurred as of
the beginning of each respective period. The pro forma adjustments are
based on available information, estimated purchase price allocations and
certain assumptions that the Company believes are reasonable. There can be
no assurance that the assumptions and estimates will be realized. The pro
forma information does not purport to represent the Company's actual results
of operations if the transactions described above would have occurred at the
beginning of the respective periods. In addition, the information is
not indicative of future results.
Nine Months Ended
September 30,
1995 1994
------------ ------------
(Unaudited)
Net Sales $ 15,476 $ 12,206
Earnings Before Cumulative Effect of
Accounting Change $ 908 $ 275
Net Earnings $ 908 $ 200
Earnings Per Common Share Before Cumulative
Effect of Accounting Change $ 3.56 $ 1.10
Earnings Per Common Share $ 3.56 $ 0.80
9
<PAGE>
10. On November 6, 1995, International Paper and Federal Paper Board announced
that they have agreed to merge. Once the merger is complete, Federal Paper
Board, a diversified forest products company, will become a wholly owned
subsidiary of International Paper. The transaction, which is valued at
approximately $3.5 billion, including assumption of debt, is subject to
approval by Federal Paper Board's shareholders, as well as by regulatory
authorities. It is expected to close in the first quarter of 1996. Under
the terms of the merger agreement, Federal Paper Board's shareholders will
be entitled to receive at their election, either $55 in cash per share or
$55 worth of International Paper common stock per share, subject to the
limitation that not more than 1.612 and not less than 1.275 International
Paper common shares will be issued for each Federal Paper Board share
exchanged for International Paper common stock. The shareholder election to
receive cash or International Paper common stock will be subject to
adjustment so that, in the aggregate, approximately 49 percent of the
Federal Paper Board shares will be exchanged for cash. The merger is
intended to qualify as a tax-free reorganization.
In October 1995, the ink resin business of DSM located in Niort, France was
acquired.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
International Paper reported record quarterly earnings of $328 million or $1.27
per share for the third quarter of 1995, a threefold increase over 1994
third-quarter net earnings of $111 million or $.45 per share and ahead of
second-quarter 1995 net earnings of $316 million or $1.25 per share. Nine-month
net earnings were $890 million or $3.49 per share compared with $203 million or
$.82 per share ($278 million or $1.12 per share before the cumulative effect of
a change in accounting for start-up costs) for the nine months of 1994.
Third-quarter net sales of $5.1 billion represented a 36% increase over 1994
third-quarter sales of $3.8 billion and were slightly ahead of the 1995
second-quarter. Net sales for the nine months were $14.7 billion compared with
$10.8 billion for the 1994 nine-month period. Sharp gains in sales and earnings
from year to year are primarily due to higher prices worldwide across all paper
products. Revenues should continue to grow as several new facilities come on
stream during the next six months. Demand for most of the company's products
continued at robust levels, however, demand eased during the quarter from the
first half of the year for containerboard and uncoated printing paper as some
customers adjusted their inventories. Company operations were curtailed as
necessary to keep inventories in balance.
International Paper's sales and earnings reflect the consolidation of Carter
Holt Harvey (CHH), a New Zealand-based forest and paper products company,
beginning May 1, 1995. For the 1995 third quarter, CHH's sales represented
about 10% of International Paper's consolidated net sales and accounted for
about 38% of the increase in sales over the 1994 third quarter. CHH's results
are included in each business segment although their segment results have been
adjusted to conform with International Paper's classifications.
Printing Papers 1995 third-quarter net sales increased to $1.6 billion from $1.1
billion in the 1994 third quarter with CHH contributing about 15% of the
increase. Nine-month sales in 1995 totaled $4.7 billion compared with $3.1
billion for the comparable 1994 period. Third-quarter net sales were about even
with the 1995 second quarter. Third-quarter operating profits were well ahead
of 1994 levels and increased roughly 15% over the 1995 second quarter primarily
due to higher worldwide prices.
Packaging 1995 third-quarter net sales rose to $1.2 billion from $875 million in
the comparable 1994 quarter with CHH contributing just under half of the
increase. Third-quarter sales were up slightly over the 1995 second quarter.
Net sales for the 1995 nine-month period were $3.3 billion compared with $2.5
billion in 1994. Third-quarter 1995 Packaging earnings, which more than
doubled over the 1994 third quarter, declined slightly from the 1995 second
quarter as demand for containerboard eased.
11
<PAGE>
Distribution net sales for the 1995 third quarter increased 45% to $1.3 billion
from $890 million in the 1994 third quarter and were even with the 1995 second
quarter. Nine-month 1995 sales were $3.8 billion up from $2.5 billion in the
same period of 1994. Third-quarter operating profits for the distribution
businesses were higher than the 1994 third quarter but declined moderately from
the 1995 second quarter. The 1995 acquisitions of Seaman Patrick and Carpenter
Paper and the 1994 merger with Kirk Paper Corporation contributed to the
year-over-year increase.
Specialty Products 1995 third-quarter net sales increased to $870 million from
$650 million in the 1994 third quarter with approximately 70% of the increase
from CHH. Third-quarter sales were also ahead of the 1995 second quarter.
Nine-month net sales increased to $2.4 billion from $1.9 billion for the 1994
period. Operating profits declined from the previous quarter and the 1994 third
quarter due to lower prices and volumes for certain products.
Forest Products 1995 third-quarter net sales increased to $570 million from $430
million in the 1994 third quarter. Without CHH, sales would have decreased
approximately 18%. Nine-month sales were $1.5 billion and $1.3 billion for 1995
and 1994, respectively. Although improved over the 1995 second quarter,
operating earnings were down from the 1994 third quarter reflecting a decline in
lumber prices.
CONSOLIDATION OF CARTER HOLT HARVEY
The Company acquired approximately 26% of Carter Holt Harvey, a New
Zealand-based forest and paper products company, in late April 1995 for $1.1
billion. The acquisition increased International Paper's ownership to just over
50%. As a result, CHH was consolidated into International Paper's financial
statements beginning on May 1, 1995. Prior to this date, the equity accounting
method was utilized.
Approximately 38% of the $1.4 billion increase in 1995 third-quarter net sales
as compared with the 1994 third quarter related to the consolidation, and CHH's
impact on the increases in the components of costs and expenses was between 30%
and 100%. Interest expense rose as a result of the higher International Paper
short-term borrowings used for the acquisition.
Each of the increases in property, plant and equipment, forestlands,
investments, goodwill, long-term debt and the minority interest liability were
primarily the result of the consolidation of CHH. This consolidation also
contributed, but to a lesser extent, to the increases in accounts receivable and
inventories. Higher sales volumes and prices were the principle drivers of
these increases.
The consolidated balance sheet reflects a preliminary purchase price allocation
for this acquisition.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Operating cash flow totaled $1.5 billion for the nine months of 1995, up
substantially from $715 million in the comparable 1994 period. Significantly
higher earnings and noncash charges exceeded higher working capital requirements
resulting in the improvement over the prior-year period.
Investments in capital projects totaled $916 million for the nine months,
reflecting spending on major capital projects which have been completed or are
scheduled for completion later this year and in early 1996. This is up from the
$746 million spent in the comparable 1994 period.
The acquisition of the additional 26% of CHH in late April for approximately
$1.1 billion was financed primarily with short-term borrowings.
During the third quarter, nine million shares of 5 1/4% convertible preferred
securities (International Paper obligated mandatorily redeemable preferred
securities of Trust holding solely International Paper subordinated debentures)
totaling $450 million were issued. The proceeds from the issuance of these
preferred securities were used to retire short-term indebtedness and for other
general corporate purposes. Additionally, in an unrelated transaction, $200
million of 5 3/4% convertible subordinated debentures were called by the Company
and converted into approximately 5.8 million shares (adjusted for the
two-for-one stock split) of International Paper common stock.
Dividend payments were $171 million or $.67 per common share for the nine-month
period. This amount reflects the increase in the quarterly dividend to $.25 per
common share during the third quarter and is adjusted for the two-for-one stock
split effective August 18, 1995.
The Company anticipates that cash flow generated by operations, supplemented as
necessary by short- or long-term borrowings, will be adequate to fund its
capital expenditures, which are expected to be about $1.5 billion for 1995.
This amount includes the capital spending activities of CHH.
On November 6, 1995, International Paper announced a merger with Federal Paper
Board, a diversified forest products company. See the discussion of the merger
in footnote 10 of the notes to consolidated financial statements on page 10.
MINORITY INTEREST
The current and prior-year financial statements have been adjusted to present
minority interest expense separately. Minority interest expense was previously
included as a component of cost of products sold, and a reduction in operating
profit, because the amounts were not material. Additionally, both current and
prior-year segment operating profit amounts reflect 100% of all majority-owned
subsidiaries. Segment operating profit amounts do not include equity earnings
from unconsolidated subsidiaries or minority interest expense related to
minority shareholders of consolidated subsidiaries. Minority interest expense
represents the relative share of earnings attributable to minority shareholders
of consolidated subsidiaries.
13
<PAGE>
ITEM 3. OTHER FINANCIAL INFORMATION
Industry Segment Data
(Unaudited)
Sales by Industry Segment (In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
-------- -------- ------- -------
Printing Papers $1,595 $1,135 $ 4,670 $ 3,125
Packaging 1,175 875 3,290 2,455
Distribution 1,290 890 3,775 2,510
Specialty Products 870 650 2,400 1,915
Forest Products 570 430 1,470 1,300
Less: Intersegment Sales (355) (188) (884) (466)
------ ------ ------- -------
Net Sales $5,145 $3,792 $14,721 $10,839
====== ====== ======= =======
Production by Products
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
1995(D) 1994(E) 1995(D)/(E) 1994(E)
--------- ------- ----------- -------
Printing Papers (In thousands of tons)
White Papers and Bristols 875 830 2,570 2,420
Coated Papers 255 260 885 765
Market Pulp (A) 445 385 1,310 1,210
Newsprint 20 5 65 35
Packaging (In thousands of tons)
Containerboard 650 555 1,825 1,595
Bleached Packaging Board 295 255 835 780
Industrial Papers 170 205 490 550
Industrial and Consumer Packaging (B) 740 735 2,300 2,205
Specialty Products (In thousands
of tons)
Tissue 25 -- 40 --
Forest Products (In millions)
Panels (sq. ft. 3/8" basis) (C) 215 205 630 620
Lumber (board feet) 320 245 810 720
(A) This excludes market pulp purchases.
(B) 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 amounts in
this table.
(C) Panels include plywood and oriented strand board.
(D) Includes amounts for Carter Holt Harvey as applicable from May 1, 1995.
(E) Certain reclassifications and adjustments have been made to year-to-date
and prior year amounts.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
DIOXIN LITIGATION
As reported in the Annual Report on Form 10-K for the year ended December 31,
1994 (the "Annual Report"), and as updated by the Form 10-Q for the quarter
ended March 31, 1995, the action pending before the U.S. District Court for the
Middle District of Louisiana, which was argued in the U.S. Fifth Circuit Court
of Appeals, was remanded and is now scheduled for a determination of class
certification. The court has ordered final briefings by both parties of the
class certification issues, and it is expected that the court will rule, either
certifying or denying the class, within the next six months.
The five cases that have been pending in the U.S. Federal District
Court for the Southern District of Mississippi alleging that the Company
polluted and damaged the Pascagoula and Escatawpa Rivers by releasing dioxin and
40 other chemicals have all been determined by either Summary Judgment in favor
of the Company or voluntary dismissals by the plaintiffs. At the present time,
there are no cases in Federal Court pending in Mississippi arising from the
allegations of pollution and damages as the result of chemicals from the Moss
Point mill.
The Annual Report and the subsequent Form 10-Q filings in 1995, referenced 70
cases currently pending in the Mississippi State Court and consolidated before
one judge. It was also noted that a bellwether trial had been set to commence
on November 27, 1995. However, in a recent ruling involving another paper
company, the Mississippi Supreme Court issued an opinion which would preclude
the plaintiffs from prosecuting their lawsuits absent a showing of increased
levels of toxic chemicals in their bodies, for personal injury purposes, or on
their property, for trespass and nuisance purposes. It is not believed that the
plaintiffs have conducted any tests or otherwise have evidence available to
sustain such a burden of proof. In light of the current posture of discovery it
is difficult to contemplate how such evidence can be obtained. The Company on
November 10, 1995, argued a Motion for Summary Judgment, which raised these
issues along with other issues which are believed to be determinative of the
case. The judge handling the bellwether case has indicated he will rule on the
motion following the Mississippi Supreme Court's disposition of a petition for
reconsideration filed in the case referenced above. In the meantime, the
November 27, 1995 trial date has been postponed. The Company currently has no
other cases set for trial in Mississippi.
As a result of all that has transpired in these Mississippi litigations, there
are now pending 66 State Court cases and no Federal Court cases. These
remaining cases involve a total of 5,077 plaintiffs.
OTHER LITIGATION
As reported in the Annual Report, 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
15
<PAGE>
requirements. The Town's penalty assessment was appealed. On September 28,
1994, the Maine Superior Court vacated most of the penalty the Town had
assessed, leaving $22,000 in place but providing the Town with the opportunity
to reassess the penalty on four violations. The Town appealed this decision to
the Maine Supreme Judicial Court, the State's highest court, sitting as the Law
Court. By decision, dated October 6, 1995, the Law Court affirmed the decision
of the Superior Court. On October 20, 1995, the Town asked the Law Court to
reconsider its decision. On November 10, 1995, the Law Court denied the Town's
request.
On September 26, 1994, the Environmental Protection Agency issued a
Complaint and Compliance Order alleging that a facility in Gulfport, Mississippi
operated by Arizona Chemical Company ("Arizona"), a wholly-owned subsidiary of
the Company, violated regulations governing the burning of hazardous waste fuel
in an industrial boiler. On September 29, 1995, Arizona settled that matter on
terms which include a civil penalty of $442,150.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(11) Statement of Computation of Per Share Earnings
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K was filed on August 30, 1995 and November 13, 1995.
17
<PAGE>
SIGNATURES
Pursuant to the requirements 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
(Registrant)
Date: November 14, 1995 /s/ Marianne M. Parrs
Marianne M. Parrs
Senior Vice President
and Chief Financial Officer
Date: November 14, 1995 /s/ Andrew R. Lessin
Andrew R. Lessin
Controller and Chief
Accounting Officer
18
(Exhibit 11)
INTERNATIONAL PAPER COMPANY
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
(In millions, except per-share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
Net earnings $ 328 $ 111 $ 890 $ 203
Debenture interest savings, net of
taxes, assuming conversion of
convertible subordinated debentures 1 1 4 5
------ ------ ------ ------
Primary net earnings 329 112 894 208
Reduction in minority interest expense,
net of taxes assuming conversion of
preferred securities of subsidiary 3 -- 3 --
------ ------ ------ ------
Fully diluted net earnings $ 332 $ 112 $ 897 $ 208
====== ====== ====== ======
Earnings per common share $ 1.27 $ 0.45 $ 3.49 $ 0.82
====== ====== ====== ======
Primary earnings per share $ 1.26 $ 0.44 $ 3.44 $ 0.81
====== ====== ====== ======
Fully diluted earnings per share $ 1.24 $ 0.44 $ 3.41 $ 0.81
====== ====== ====== ======
PRIMARY SHARES
Average shares outstanding 258.7 249.6 255.1 249.2
Shares assumed to be repurchased using
long-term incentive plan deferred
compensation at average market price (0.5) (0.4) (0.6) (0.6)
Shares assumed to be issued upon
exercise of stock options, net of
treasury buyback at average market
price 1.5 1.2 1.2 1.0
Shares assumed to be issued upon
conversion of convertible
subordinated debentures 1.7 5.8 4.3 5.8
------ ------ ------ ------
Primary shares 261.4 256.2 260.0 255.4
====== ====== ====== ======
FULLY DILUTED SHARES
Average shares outstanding 258.7 249.6 255.1 249.2
Shares assumed to be repurchased
using long-term incentive plan
deferred compensation at period-end
market price (if higher than average
market price) (0.5) (0.4) (0.5) (0.4)
Shares assumed to be issued upon
exercise of stock options, net of
treasury buyback at period-end
market price (if higher than average
market price) 1.5 1.6 1.6 1.6
Shares assumed to be issued upon
conversion of convertible subordinated
debentures 1.7 5.8 4.3 5.8
Shares assumed to be issued upon
conversion of preferred securities
of subsidiary 7.1 -- 2.6 --
------ ------ ------ ------
Fully diluted shares 268.5 256.6 263.1 256.2
====== ====== ====== ======
Note: The Company reports earnings per common share as the effect of dilutive
securities is less than 3%.
(Exhibit 12)
INTERNATIONAL PAPER COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in millions)
(Unaudited)
<TABLE>
<CAPTION>
For the Years Ended December 31, Nine Months Ended
September 30,
TITLE 1990 1991 1992 1993 1994 1994 1995
- -------------------------------- -------- -------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
A) Earnings before income taxes,
minority interest,
extraordinary item and
accounting changes $ 988.0 $ 693.0 $226.0 $538.0 $ 715.0 $ 471.0 $1,551.0
B) Less: Minority interest expense,
net of taxes (33.0) (42.0) (15.0) (36.0) (47.0) (39.0) (110.0)
C) Add: Fixed charges excluding
capitalized interest 336.2 380.3 325.3 365.3 412.3 298.4 435.7
D) Add: Amortization of
previously capitalized
interest 8.6 9.9 9.9 12.2 12.8 9.4 9.7
E) Less: Equity in
undistributed earnings of
affiliates (9.4) (10.8) (19.1) (25.9) (49.1) (38.7) (80.8)
-------- -------- ------ ------ -------- ------ -------
F) Earnings before income taxes,
minority interest,
extraordinary item,
accounting changes and
fixed charges $1,290.4 $1,030.4 $527.1 $853.6 $1,044.0 $701.1 $1,805.6
======== ======== ====== ====== ======== ====== ========
Fixed Charges
G) Interest and amortization of
debt expense $ 309.5 $ 351.1 $297.1 $334.5 $ 371.0 $268.9 $406.6
H) Interest factor attributable
to rentals 26.7 29.2 28.2 30.8 41.3 29.5 29.1
I) Capitalized interest 26.3 36.4 42.0 12.2 18.0 10.5 22.4
-------- -------- ------ ------ -------- ------ -------
J) Total fixed charges $ 362.5 $ 416.7 $367.3 $377.5 $ 430.3 $308.9 $458.1
======== ======== ====== ====== ======== ====== =======
K) Ratio of earnings to
fixed charges 3.56 2.47 1.44 2.26 2.43 2.27 3.94
======== ======== ====== ====== ======== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 372
<SECURITIES> 0
<RECEIVABLES> 2,840
<ALLOWANCES> (109)
<INVENTORY> 2,766
<CURRENT-ASSETS> 6,102
<PP&E> 19,060
<DEPRECIATION> (8,474)
<TOTAL-ASSETS> 23,696
<CURRENT-LIABILITIES> 5,365
<BONDS> 5,474
<COMMON> 263
0
0
<OTHER-SE> 7,324
<TOTAL-LIABILITY-AND-EQUITY> 23,696
<SALES> 14,721
<TOTAL-REVENUES> 14,721
<CGS> 10,322
<TOTAL-COSTS> 12,799
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 22
<INTEREST-EXPENSE> 371
<INCOME-PRETAX> 1,551
<INCOME-TAX> 551
<INCOME-CONTINUING> 890
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 890
<EPS-PRIMARY> 3.44
<EPS-DILUTED> 3.41
</TABLE>
