<PAGE>
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-K
------------------------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------------
FOR FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-8859
------------------------------
IP TIMBERLANDS, LTD.
(Exact name of Company as specified in its charter)
TEXAS 13-3259241
(State or other jurisdiction of (I.R.S. Employer
incorporation or 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
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Class A Depositary Units New York Stock Exchange
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 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 statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
The aggregate market value of the Class A Depositary Units of the
Registrant as of March 25, 1996, held by non-affiliates of the Registrant was
$1,033,406,345, calculated on the basis of the closing price on the Composite
Tape on March 25, 1996. For this computation, the Registrant has excluded the
market value of all Class A Depositary Units beneficially owned by International
Paper Company, its subsidiaries, and all executive officers and directors of any
of them and their associates as a group. Such exclusion is not to signify in any
way that members of this group are 'affiliates' of the Registrant.
The number of units outstanding of the Registrant's Class A Depositary
Units, as of March 25, 1996:
OUTSTANDING IN TREASURY
----------- -----------
46,445,729 -0-
The following documents are incorporated by reference into the parts of
this report indicated below:
1995 ANNUAL REPORT TO UNITHOLDERS
(PP. 1 AND 8 THROUGH 18) PARTS I, II, III AND IV
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
IP Timberlands, Ltd. (the 'Registrant') is a Texas limited partnership
formed by International Paper Company ('International Paper') to succeed to
substantially all of International Paper's forest resources business. The
Registrant's forest resources business includes the marketing and sale of forest
products for use as sawlogs, poles and pulpwood. In addition, the Registrant may
sell or exchange portions of its forestlands and may acquire additional
properties for cash, additional units or other consideration.
The Registrant operates through IP Timberlands Operating Company, Ltd., a
Texas limited partnership ('IPTO'), in which the Registrant holds a 99% limited
partner's interest. IP Forest Resources Company ('IPFR'), a wholly owned
subsidiary of International Paper, is the managing general partner of the
Registrant and IPTO, and International Paper is the special general partner of
both. A further discussion of the Registrant's organization appears on pages 2
and 14 of the Annual Report to Unitholders (the 'Annual Report'), which
information is incorporated herein by reference.
DESCRIPTION OF PRINCIPAL PRODUCTS
The Registrant's forestlands include merchantable forest products
inventory, approximately 60% of which consists of commercial softwoods,
principally Douglas fir in the Pacific Northwest, southern pine in the South,
and spruce and fir in the Northeast. A variety of hardwoods account for the
remaining 40% of the inventory.
The Registrant sells forest products to International Paper for use in its
pulp mills and wood products plants and to third party customers.
A discussion of the Registrant's harvest plan is presented on page 8 of the
Annual Report, which information is incorporated herein by reference.
COMPETITION AND COSTS
Log and wood fiber consuming facilities tend to purchase raw materials
within relatively small geographic areas, generally within a 100-mile radius.
Competitive factors within a market area generally include price, species, grade
and proximity to wood-consuming facilities. The Registrant competes in the log
and wood fiber market with numerous private industrial and nonindustrial
forestland owners as well as with the U.S. government, principally the U.S.
Forest Service and the Bureau of Land Management. Litigation involving
endangered species and environmental concerns has caused a decline in government
forest products sales volumes and market share in recent years and has resulted
in additional demand and higher prices for private forestland owners.
Many factors influence the Registrant's competitive position, including
costs, prices, product quality and services.
MARKETING
Consistent with International Paper's experience prior to the contribution
of its forestlands to the Registrant, the Registrant has annually sold forest
products from its lands to more than 579 purchasers other than International
Paper. No customer accounted for more than 10% of annual revenues for the years
1995 and 1994.
During 1995, 1994 and 1993, International Paper's facilities consumed
approximately 31%, 30% and 30%, respectively, of the logs and wood fiber
harvested from the Registrant's forestlands, which represented approximately
11%, 10% and 12%, respectively, of its manufacturing facilities' requirements
during such periods. International Paper does not anticipate any change in its
policy of relying on the Registrant's forestlands as an important source of raw
material for its manufacturing facilities, although it is unable to predict what
portion of its requirements will be purchased from the Registrant in the future.
In addition to sales to International Paper for use in its manufacturing
facilities, the Registrant sells trees to International Paper that are harvested
and resold by International Paper to unaffiliated purchasers as logs, poles or
pulpwood.
Additional information on marketing activities, including related parties
and major customers, appears on pages 8, 14 and 15 of the Annual Report, which
information is incorporated herein by reference.
2
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ENVIRONMENTAL PROTECTION AND SUSTAINABLE FOREST MANAGEMENT
Management of the Registrant's forestlands to protect the environment and
maintain the health of its forestlands is a continuing commitment of the
Registrant. The Registrant expends considerable efforts to comply with
regulatory requirements and applicable best management practices regarding the
use of pesticides, protection of wetlands, protection of wildlife and
biodiversity and minimization of stream sedimentation and soil erosion. From
time to time the Registrant volunteers to, or may be required to, clean up
certain solid waste sites, on its forestlands, created by the general public.
Forests are managed in accordance with the Registrant's and International
Paper's Sustainable Forestry Guidelines which were developed in 1995 based on
the American Forest and Paper Association's Sustainable Forestry Principles,
which were adopted by International Paper and the Registrant in 1994.
Environmental protection and forest management costs and capital expenditures
have not been significant and are not expected to be significant in the future.
EMPLOYEES
The Registrant does not have officers or directors. Instead, officers and
directors of IPFR perform all management functions for the Registrant. In most
respects, the Registrant conducts the business formerly conducted by the
Forestlands Division of International Paper. Consequently, the employees of
International Paper or its subsidiaries formerly assigned to such division
continue to carry out the activities of the Registrant. These employees continue
to be employees of International Paper and in some cases are employed solely for
the conduct of the Registrant's business.
ITEM 2. PROPERTIES
FORESTLANDS
Forestlands include approximately 5.4 million acres owned in fee (excluding
any interest in underlying minerals) and approximately 541,000 acres held under
long-term deeds and leases (terms of three years or longer). These forestlands
are located in 14 states in three major regions of the United States. In the
Pacific Northwest, forestlands are located in Oregon and Washington, including
approximately 303,000 acres owned in fee and approximately 1,100 acres covered
by deeds and leases. In the southern and southeastern United States, forestlands
are located in seven states, including approximately 3,607,000 acres owned in
fee and approximately 538,000 acres held under long-term deeds and leases. In
the Northeast, forestlands are located in Maine, New York, Pennsylvania, Vermont
and New Hampshire, including approximately 1,466,000 acres owned in fee and
approximately 1,500 acres held under long-term deeds and leases. The deeds and
leases held by the Registrant generally do not include deeds and leases on
government lands in the western United States nor deeds and leases with terms of
less than three years, which are generally managed by International Paper in
connection with short-term wood procurement for its manufacturing facilities.
In March 1996, the Registrant signed a contract to sell a 98% general
partnership interest in a subsidiary partnership owning all of Registrant's
Western region assets. Additional information on the sale of the Western assets
appears on pages 8, 10 and 16 of the Annual Report, which information is
incorporated herein by reference.
CAPITAL INVESTMENTS
Discussion of the Registrant's capital investments can be found on pages 9
and 10 of the Annual Report, which information is incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS
IPTO and International Paper are parties to a lawsuit involving a long-term
lease on 113,000 acres of forestlands in Mississippi. The lessors sought to have
the lease terminated and IPTO enjoined from further operation on the properties,
as well as approximately $18 million in alleged damages, plus alleged statutory
and trebling damages in excess of $450 million.
Trial in the Mississippi state court case has been stayed pending the
determination of the value for the purchase option relating to the lease lands
located in Mississippi. Over IPTO's objections, a panel of appraisers set the
value of the lands on October 20, 1995 at $38.5 million. On December 19, 1995,
the Hinds County Circuit Court affirmed the award. IPTO and International Paper
believe the value of the purchase option should have been determined by
arbitration process and that the appraised value is excessive. IPTO and
International Paper
3
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have filed a notice of appeal with the Mississippi Supreme Court. On February
15, 1996, the purchase option relating to the Mississippi lease was assigned
from IPTO to International Paper.
The Registrant is involved in various legal proceedings incidental to its
business. While any proceeding or litigation has an element of uncertainty, the
Registrant 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.
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, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The market and cash distribution data on the Registrant's Class A
Depositary Units are set forth below and on pages 2 and 17 of the Annual Report
and are incorporated herein by reference.
As of March 25, 1996, there were 3,206 holders of record of the
Registrant's Class A Depositary Units.
Set forth below are the market price ranges for each quarter of 1995 and
1994 for the Class A Depositary Units on the New York Stock Exchange Composite
Index.
<TABLE>
<CAPTION>
1995 1994
------------ ------------
QUARTER HIGH LOW HIGH LOW
- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
1st.... 26 1/2 21 7/8 31 1/8 25 1/8
2nd.... 23 1/4 19 1/4 28 1/4 21 1/2
3rd.... 23 1/2 21 3/8 26 23 3/4
4th.... 23 3/4 20 25 1/2 22 3/8
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for 1995, 1994 and 1993 is set forth on page 1 of
the Annual Report and is incorporated herein by reference. Selected financial
data for 1992 and 1991 is as follows (in thousands, except per unit data):
<TABLE>
<CAPTION>
1992 1991
---------- ----------
<S> <C> <C>
Total Revenues..................... $ 297,023 $ 237,448
Net Partnership Earnings........... 206,318 150,252
Earnings per Class A Unit.......... 3.42 3.09
Distributions per Class A Unit..... 2.88 2.88
Total Assets....................... $1,115,678 $1,040,154
</TABLE>
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 8 through 10 of the Annual Report and are incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Registrant's consolidated financial statements, the notes thereto and
the report of independent public accountants are set forth on pages 11 through
16 and 18 of the Annual Report and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
FORWARD-LOOKING INFORMATION
THIS 1995 ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS CONCERNING REGISTRANT'S BUSINESS PROSPECTS, POSSIBLE DECLINES IN
DISTRIBUTIONS AND THE PRICE OF THE CLASS A UNITS. OVERALL MARKET CONDITIONS
COULD INFLUENCE THE EXPECTED PRICE DECLINE OF THE CLASS A UNITS AND THE
POSSIBILITY OF A DECLINE IN THE DISTRIBUTION TO CLASS A UNITHOLDERS.
4
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of IPFR(1) and their business
experiences are as set forth below:
JOHN A. GEORGES, 65, Chairman and Chief Executive Officer of IPFR since
1985(2). He has been chairman and chief executive officer of International Paper
Company since 1985. He is a director of AK Steel Holding Corporation,
International Paper Company, Ryder Systems, Inc., Scitex Corporation Ltd. and
Warner-Lambert Company. He is a member of The Business Council and the Policy
Committee 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 president
of the University of Illinois Foundation.
Director since January 8, 1985.
**THOMAS C. GRAHAM, 69, Chairman of the Board of AK Steel Corporation since
1994, and previously thereto he was also the Chief Executive Officer. He was
elected to the aforementioned posts concurrent with the formation of AK Steel
Holding Corporation, a publicly held corporation which emerged from the
privately-held Armco Steel Company, L.P. in April of 1994. He had been named
president and chief executive officer of Armco Steel in June 1992. He was
formerly chairman and chief executive officer of Washington Steel Corporation
until he assumed his current position in 1992. He was 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 and International Paper Company.
Director since April 12, 1994.
**ARTHUR G. HANSEN, 71, 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. and International Paper
Company. He is a member of the National Academy of Engineering, a Commissioner
of the Indiana Commission for Higher Education and a fellow of the American
Association for the Advancement of Science.
Director since February 1, 1990.
**JANE C. PFEIFFER, 63, Management Consultant. She is a director of
Ashland, Inc., International Paper Company, 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, the Overseas Development Council and a
member of The Council on Foreign Relations.
Director since January 13, 1988.
**ROGER B. SMITH, 70, former Chairman and Chief Executive Officer of
General Motors Corporation from 1981 to 1990, when he retired. He is a director
of Citicorp, International Paper Company, 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 April 12, 1994.
- ------------------
(1) Managing General Partner of the Registrant.
(2) Mr. Georges has announced his retirement as a director and Chairman and
Chief Executive Officer of IPFR, effective March 31, 1996. Mr. John T.
Dillon has been elected to succeed Mr. Georges as a director and Chairman
and Chief Executive Officer of IPFR, effective April 1, 1996.
** Member of the Audit Committee of IPFR. The Audit Committee reviews policies
and practices of the Registrant dealing with various matters (including
accounting and financial practices) as to which conflicts of interest with
the special general partner may arise. The Audit Committee consists of
nonemployee directors of IPFR.
5
<PAGE>
EXECUTIVE OFFICERS
AS OF MARCH 31, 1995
INCLUDING NAME, AGE, OFFICES AND POSITIONS HELD*,
AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
EDWARD J. KOBACKER, 57, president since August 1992. He was general manager
and group executive of the kraft paper group of International Paper from 1987 to
1992, when he assumed his current position and was elected vice president and
general manager--forestlands division of International Paper.
FREDERICK L. BLEIER, 47, treasurer and controller since July 1993;
controller from 1991. He has been sector controller-forest products of
International Paper since July 1993. He was director-corporate accounting of
International Paper from 1990 to 1993. He joined International Paper as
manager-financial reporting in 1988.
ITEM 11. EXECUTIVE COMPENSATION
The four nonemployee directors of IPFR receive a retainer of $7,000 per
year plus a fee of $1,200 for each IPFR Board and committee meeting attended.
These fees are paid by IPFR. The Registrant has no employees. All management and
services are performed by International Paper on behalf of the Registrant.
International Paper pays the personnel used in the Registrant's business, with
certain expenses reimbursed to it by the Registrant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Registrant knows of no one owning beneficially more than five percent
(5%) of the Registrant's Class A Depositary Units except International Paper,
which owns approximately eighty-four percent (84%). The following table shows,
as of March 25, 1996, the number of Class A Depositary Units in the Registrant
beneficially owned (as defined by the Securities and Exchange Commission) or
otherwise claimed by current IPFR directors and by all IPFR directors and
executive officers as a group (if no name appears, no Class A Depositary Units
are owned or claimed).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
UNITS PERCENT OF TOTAL
BENEFICIALLY CLASS A DEPOSITARY
NAME OF INDIVIDUAL OR GROUP OWNED (1) UNITS OUTSTANDING
- --------------------------------------------------------------------------------
<S> <C> <C>
A. G. Hansen........................ 200
J.C. Pfeiffer....................... 300 No director or officer owns
All directors and executive officers as much as 1/10 of 1%
as a group........................ 500
</TABLE>
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(1) Ownership shown includes securities over which the individual has or shares,
directly or indirectly, voting or investment powers, including units owned
by a spouse or 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 units, but they are included for the purpose of computing the holdings
and the percentages of Class A Depositary Units owned.
The certificate of incorporation of IPFR ('IPFR Charter') provides for two
classes of common stock: Class A Common Stock and Class B Common Stock, of which
International Paper is the sole owner. The Class B Common Stock possesses
exclusive voting rights and the holder or holders thereof are entitled to
cumulative voting for the election of directors of IPFR. Except with respect to
voting rights, the Class B Common Stock of IPFR is equal in all other respects
to the Class A Common Stock of IPFR. However, the Class B Common Stock
represents only .00005 of 1% of the total authorized Common Stock of IPFR, all
of which has been issued and is outstanding.
The IPFR Charter further provides that in the event International Paper
owns, or as a result of certain events would own, less than 50% of either the
outstanding Class A Depositary Units or Class B Depositary Units, then (i)
International Paper must sell all of the shares of Class B Common Stock to the
directors of IPFR, on a pro rata
- ------------------
* Officers of IPFR are elected to hold office until the next annual meeting of
the board of directors and until election of successors, subject to removal by
the board.
6
<PAGE>
basis, at a price equal to $100.00 per share in cash; (ii) any director who does
not purchase his pro rata shares of Class B Common Stock must resign; and (iii)
the directors of IPFR are then required, as soon as practicable but not later
than the next annual meeting of stockholders of IPFR, to vote or cause their
shares of Class B Common Stock to be voted to elect a Board of Directors of IPFR
comprised entirely of persons who are not employees, officers, directors or
affiliates of International Paper or of any affiliate of International Paper
(other than IPFR). Each director of IPFR is further required to execute a voting
trust agreement, pursuant to which the Class B Common Stock will be held and
voted, and a stockholders' agreement, pursuant to which transfer of ownership in
the Class B Common Stock is restricted to persons who are directors of IPFR. In
order to maintain the independence of IPFR's Board of Directors, the IPFR
Charter further provides that (i) each director, upon resigning as a director of
IPFR, must sell his shares of Class B Common Stock to IPFR, and (ii) each
subsequent director elected to replace any director so resigning must similarly
purchase shares of Class B Common Stock and enter into the voting trust
agreement and stockholders' agreement described above. International Paper
believes that the foregoing arrangement for the possible ownership of the Class
B Common Stock of IPFR assists in reducing the potential for conflicts of
interests should International Paper's ownership of units decrease
significantly.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A description of certain relationships and related transactions is set
forth on pages 14 through 16 of the Annual Report and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
EXHIBITS
(13) 1995 Annual Report to Unitholders of the Registrant
(24) Power of Attorney
(27) Financial Data Schedule
REPORTS ON FORM 8-K
A Current Report on Form 8-K was filed on February 2, 1996, as amended
February 21, 1996.
FINANCIAL STATEMENT SCHEDULES
The consolidated balance sheets as of December 31, 1995 and 1994, and the
related consolidated statements of earnings and cash flows for each of the three
years in the period ended December 31, 1995, together with the report thereon of
Arthur Andersen LLP, dated February 13, 1996, appearing on pages 11 through 16
and 18 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, 5 through 8, and 13, the Annual Report is not to be
deemed filed as part of this report.
7
<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.
IP TIMBERLANDS, LTD.
By: IP Forest Resources Company
(as managing general partner)
By: JAMES W. GUEDRY
JAMES W. GUEDRY, VICE PRESIDENT
AND SECRETARY
March 29, 1996
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 29, 1996
(JOHN A. GEORGES) Chief Executive
Officer and Director
THOMAS C. GRAHAM* Director March 29, 1996
(THOMAS C. GRAHAM)
ARTHUR G. HANSEN* Director March 29, 1996
(ARTHUR G. HANSEN)
JANE C. PFEIFFER* Director March 29, 1996
(JANE C. PFEIFFER)
ROGER B. SMITH* Director March 29, 1996
(ROGER B. SMITH)
FREDERICK L. BLEIER Treasurer and March 29, 1996
(FREDERICK L. BLEIER) Controller and Chief
Financial and
Accounting Officer
*By JAMES W. GUEDRY
(JAMES W. GUEDRY, ATTORNEY-IN-FACT)
</TABLE>
8
<PAGE>
[IP TIMBERLANDS, LTD. LOGO]
PRINTED ON HAMMERMILL PAPERS, ACCENT OPAQUE, 50 LBS.
HAMMERMILL PAPERS IS A DIVISION OF INTERNATIONAL PAPER
<PAGE>
[LOGO] IP Timberlands, Ltd.
IP Timberlands, Ltd.
Two Manhattanville Road
Purchase, N.Y. 10577
<PAGE>
[LOGO] IP Timberlands, Ltd.
[GRAPHIC]
Seedlings
1995 Annual Report
<PAGE>
Inside This Report
1 Financial Highlights
2 About IP Timberlands, Ltd.
3 To Our Unitholders
4 Commonly Asked Questions About IPT
6 Partnership Performance
7 Sustainable Forestry Principles
8 Management's Discussion and Analysis
11 Financial Statements
19 Directors andManagers
20 Unitholder Tax Information
20 Partnership Information
Cover
SuperTree seedlings are planted on Partnership lands in the South and
also sold to other public and private landowners.
<PAGE>
Paper Used in This Annual Report Strathmore Americana, Nantucket Ivory, 80 lb.
cover Beckett Concept, Desert Haze, 70 lb. text
Copy Rights 1996 IP Timberlands, Ltd. All rights reserved.
<PAGE>
FINANCIAL HIGHLIGHTS
Years Ended December 31
-----------------------------
In millions, except per unit data 1995 1994 1993
----- ----- -----
Total Revenues $ 360 $ 369 $ 426
Operating Earnings(1) 249 259 314
Net Partnership Earnings 261 274 323
Earnings Allocated to Class A
Limited Partners 255 255 276
Per Class A Unit
Earnings 5.50 5.49 5.94
Distributions 6.88(2) 2.88 6.88(2)
Operating Cash Flow Attributable
to Class A Units 271 280 234
Total Class A Unit Distributions Declared $ 320(2) $ 134 $ 320(2)
Weighted Average Class A Units Outstanding 46 46 46
----- ----- -----
December 31
-----------------------------
1995 1994 1993
----- ----- -----
Working Capital $ 398 $ 439 $ 308
Forestlands and Roads 772 775 772
Long-Term Debt 750
Total Assets $1,187 $1,227 $1,094
----- ----- -----
(1) Operating earnings equal total revenues less operating costs and expenses.
Operating earnings are lower than net Partnership earnings because
operating earnings exclude net interest income.
(2) Includes special distributions of $186 million ($4.00 per Class A Unit)
paid on October 1, 1993 and March 31, 1995.
1
<PAGE>
ABOUT IP TIMBERLANDS, LTD.
Background of the Partnership
IP Timberlands, Ltd. (IPT) began operations in 1985 as a publicly traded
limited partnership to succeed to substantially all of International Paper's
forest resources business. International Paper contributed 6.3 million acres
of forestlands it owned or held under long-term leases to IPT.
The Partnership has two types of securities: Class A and Class B
Depositary Units. Presently, 16 percent of the Class A Units are publicly
traded. The remainder of the Class A Units and all the Class B Units are
owned by International Paper.
Description of the Class A
Depositary Units
IP Timberlands, Ltd. Class A Units trade on the New York Stock Exchange under
the symbol "IPT." During 1995, the units traded in a price range of $19.25 to
$26.50.
The Class A Unit generally entitles the holder to share in 95
percent of the net cash flow and earnings generated from the sale of trees
harvested during the Initial Term, the first 15 years of the Partnership
(1985-1999). Thereafter, the majority of the benefit goes to the Class B
unitholders, with the Class A unitholders' share reduced to four percent of
total Partnership activities, which include reforestation and land management
costs as well as stumpage sales. The general partners' share is one percent.
During 1995, the Partnership declared regular per unit distributions to
Class A unitholders of $.72 per quarter or $2.88 for the year. In addition,
a special distribution of $4.00 per Class A Unit was paid on March 31, 1995,
to unitholders of record on March 24, 1995.
- ------------------------------------------------------------------------------
Less than four years remain in the Initial Term of the Partnership. Because
of this, and due to the decrease in their share of earnings from 95 percent to
four percent when the Initial Term of the Partnership expires, Class A
unitholders should expect the market price of Class A Units to begin to
decrease well before December 31, 1999.
However, if the Partnership continues until that time, Class A unitholders
will be entitled to 95 percent of any cash remaining in the Primary Account.
Some or all of this amount may be distributed prior to the end of the Initial
Term, depending on future cash flows and requirements, and the Partnership's
distribution policy. Net liquid assets attributable to Class A Units in that
account totaled $6.34 per unit at December 31, 1995.
- ------------------------------------------------------------------------------
Tax Consequences of IPT
Under the Partnership tax structure, all income and expenses
flow directly to the unitholder. Unitholders are liable for taxes on their
share of Partnership taxable earnings. The quarterly cash
distributions paid by the Partnership represent a tax-free return of capital
until a unitholder's cost basis equals zero. No tax is paid on cash
distributions until that time.
The unitholder's original cost basis is the price paid for the unit when
purchased. This cost basis is adjusted upward by the unitholder's share of
Partnership taxable earnings and downward by cash distributions received. When
selling the unit, the taxable gain or loss is the difference between the sales
price and the adjusted cost basis.
Foreign investors in IPT are subject to U.S. withholding tax on their
distributions.
Each year, IPT prepares customized tax information for each unitholder.
See Unitholder Tax Information (page 20) for details.
2
<PAGE>
TO OUR UNITHOLDERS
In 1995, IP Timberlands, Ltd. (IPT) earned $261 million on revenues of $360
million, down slightly from 1994's earnings of $274 million on revenues of
$369 million. Earnings per Class A Depositary Unit were $5.50 compared with
$5.49 in 1994. Stumpage sales, which principally benefit the Class A Units,
were 11 percent higher in 1995 than in 1994. Cash flow attributable to Class
A Units of $271 million or $5.83 per unit was slightly below 1994's total of
$280 million or $6.02 per unit.
Demand for Partnership stumpage was strong in 1995 due principally to
higher pulpwood sales, particularly early in the year when low customer
inventories at pulp and paper mills boosted sales in our Southern and
Northeastern regions. As a result, harvest volumes rose 16 percent in 1995.
Average prices for Partnership products were four percent lower than in 1994.
Strong pulpwood sales during the first quarter in the South led to a 23
percent increase in harvest volumes. Prices averaged about the same as in
1994, although some softening occurred toward year-end. Declining lumber
prices and weak export markets led to a lower harvest and weaker prices for
Western region products. In the Northeast, average prices rose, bolstered by
strong demand for sawlogs early in the year. However, we experienced a
falloff in demand from pulp and paper customers toward year-end.
Harvest volumes for 1996 are projected to decline approximately 10
percent from 1995 levels, principally in the South, where lower pulpwood
sales are anticipated. Pulpwood and sawlog prices entering 1996 are well
below January 1995 levels. As a result, we expect lower revenues and earnings
for the Partnership in 1996.
In March of 1996, we announced that a subsidiary partnership that holds
our Western forestlands had signed a contract to sell a 98% general
partnership interest. West Coast stumpage prices are near historic highs,
which allowed this transaction to be arranged on terms we found very
attractive to IPT. When this transaction is completed, IPT will recognize a
book gain of approximately $635 million. The amount to be credited to Class A
unitholders is expected to be approximately $200 million or $4.30 per unit.
In addition, IPT will retain a 1% limited partner interest and a preferred
interest currently estimated to have a liquidation value of approximately
$135 million. Class A Unitholders will have an estimated 30% share of the
$135 million preferred interest and of the 1% limited partner interest, equal
in the aggregate to about $.90 per Class A Unit.
Early in the second quarter of 1996, we expect to declare an
extraordinary distribution to Class A unitholders. Since the earnings
contribution of the Western forestlands (about one-third of Partnership
earnings in 1995 and 1994, excluding forestland sales) will no longer be
available to the Partnership in the future, a decrease in the regular
quarterly distribution is likely to occur.
This past year was an important year for the forest products industry as a
whole. During 1995, a commitment was required of all members of the American
Forest and Paper Association (AF&PA) to follow its Sustainable Forestry
Principles as a condition of membership in the Association. Consistent with
IPT's tradition of continuous improvement, we have integrated these guidelines
with our already successful forest management program. The result is our
Sustainable Forestry Guidelines that, as a minimum, follow the AF&PA guidelines
and, where appropriate due to local circumstances, go beyond them. These
guidelines exemplify our commitment to ensure that a continuous supply of
forest resources are available now and will continue for generations to come.
/s/ JOHN A. GEORGES
John A. Georges
Chairman and Chief Executive Officer
/s/ EDWARD J. KOBACKER
Edward J. Kobacker
President
March 15, 1996
3
<PAGE>
COMMONLY ASKED QUESTIONS ABOUT IPT
Below are answers to some of the most commonly asked questions about IPT.
Cash Distributions
How does IP Forest Resources Company (IPFR) determine the amount of quarterly
distributions?
IPT makes quarterly cash distributions to Class A unitholders based on the
amount of cash available from operations after provisions for working capital
needs, possible asset acquisitions and such other reserves as are deemed
appropriate by IPFR, the managing general partner of IPT.
What happens to any excess of cash flow generated over the amount distributed
in a given quarter?
Any cash from operations that is retained for working capital, asset
acquisitions and reserves is loaned to International Paper until the funds
are needed by the Partnership. These loans, which are due on demand, earn
interest at market rates.
When will any undistributed cash be paid to the unitholders?
Any undistributed cash remaining in the Primary Account at the end of the
Initial Term will be distributed to unitholders in accordance with their
respective Primary Account percentage interests. Class A unitholders will
receive approximately 95 percent of these distributions. Any undistributed
Secondary Account cash remains in the Partnership until the Partnership is
terminated. At December 31, 1995, Primary Account liquid assets totaled $6.34
per Class A Unit, of which $.72 was used to pay the February 1996 quarterly
distribution.
Harvest Activity
What is the Partnership's harvest to date and what is the projected harvest
through 1999?
At the Partnership's inception, it was estimated that approximately 44 to 54
million cunits would be harvested during the Initial Term. Through 1995,
approximately 38 million cunits have been harvested. The harvest has averaged
about 3.5 million cunits for the last three years; however, a lower annual
harvest is expected for the remainder of the Initial Term due principally to
the recent Western forestlands transaction. In addition, the age classes of the
Partnership's southern pine plantations will lead to some reduction in harvest
volume.
Will the Partnership's commitment to follow the American Forest and Paper
Association's Sustainable Forestry Principles significantly affect future
harvests?
The Partnership has long been committed to ensure that healthy, productive
forests are sustained for the use and enjoyment of future generations, and
has managed its forestlands for many years to maximize their value for both
economic and public interests. Accordingly, we anticipate that little adverse
economic impact will occur through our application of these principles.
Income Tax Consequences
How are Partnership earnings taxed?
Under the Partnership tax structure, all income and expenses flow directly to
the unitholders, who are responsible for taxes on their share of Partnership
taxable earnings. Customized tax information concerning current-year earnings
and distributions is provided to unitholders in late February.
Are Class A Unit distributions taxable?
Class A unitholders pay taxes on their annual share of IPT's taxable
earnings, as noted above. Quarterly cash distributions represent a tax-free
return of capital until a unitholder's cost basis equals zero. No tax is
payable on cash distributions until that time. Foreign investors in IPT are
subject to U.S. withholding tax on their distributions.
How is a unitholder's cost basis calculated?
A unitholder's cost basis is the original cost of the units adjusted upward
by the unitholder's annual share of IPT's taxable earnings attributable to
the units and adjusted downward by the unitholder's share of cash
distributions attributable to the units. IPT annually provides the
information needed to make these calculations.
4
<PAGE>
How is the sale of Class A Units taxed?
Sales proceeds are compared with a unitholder's cost basis in the units. If
the result is a gain, the unitholder will be taxed at the existing capital
gains rate. If the result is a loss, the unitholder will be allowed to offset
the loss against other capital gains.
Partnership Units
What happens at the end of the Initial Term?
At December 31, 1999, the end of the Initial Term, the Primary Account will
be closed and all remaining Primary Account cash will be distributed. Class A
unitholders will receive 95 percent of this distribution, the same as their
interest in the Partnership during the Initial Term. After this date, Class A
unitholders' participation falls to four percent of all activities of the
Partnership, including reforestation and land management costs.
Why is the value of Class A Units expected to decline as the end of the
Initial Term approaches?
The value of a unitholder's investment in Class A Units is based on the
expected level of future cash distributions. Class A unitholders'
participation in any distributions after the end of the Initial Term declines
to four percent from 95 percent, or a small fraction of current distribution
levels. Thus, it is expected that the market price of Class A Units will
decline substantially by December 31, 1999.
How are Partnership earnings and cash flows allocated between Class A and
Class B Units?
Class A unitholders are generally entitled to 95 percent, and Class B
unitholders to four percent, of net earnings and cash flows associated with
the harvest and sale of trees during the Initial Term (the first 15 years of
the Partnership, ending at December 31, 1999). Subsequently, Class A
unitholders' participation drops to four percent of total Partnership net
earnings and cash flows including reforestation and land management costs,
with Class B unitholders sharing in 95 percent of such net earnings and cash
flows. The general partners of IPT receive one percent of Partnership net
earnings and cash flows throughout the life of the Partnership.
Why do the sharing percentages change after 1999?
While the Class A unitholders are principally benefiting from the sale of
trees cut during the first 15 years of the Partnership (1985-1999), Class B
unitholders fund the land management and reforestation costs. Since the trees
grown under the reforestation program will mature after the end of the
Initial Term, the benefits from sales of such trees will accrue to the Class
B unitholders.
5
<PAGE>
PARTNERSHIP PERFORMANCE
At December 31, 1995, the end of its eleventh year of operations, IP
Timberlands, Ltd. managed 5.9 million acres of U.S. forestlands in 14 states.
Most of the fiber harvested from its forestlands, a total of 3.7 million
cunits in 1995, is pulpwood used in the manufacture of paper. The remainder
is sawlogs used in the production of lumber, plywood and poles.
The Partnership's forestlands also sustain a wide variety of plant and
animal life and provide recreational opportunities for the public. We manage
our forestlands to strike a balance between the public's need for forest
products and the well-being of the forest environment. We utilize advanced
land management techniques that allow us to harvest our lands economically
while providing for watershed protection, wildlife habitat preservation and
recreation opportunities. We adhere to environmentally sound, science-based
forestry practices since ensuring the health and vitality of our forests is
not only good stewardship but is also good business.
During 1995, a number of other initiatives were under way in each of our
regions to protect the environment while earning a good economic return for
our unitholders. The discussion that follows highlights some of these
initiatives.
Southern Region
In the South, where IPT controls 4.1 million acres of forestlands in seven
states, a habitat conservation plan is being developed in cooperation with
the U.S. Fish and Wildlife Service to protect the gopher tortoise, an
endangered species. The project involves over 194,000 acres of IPT
forestlands in southeast Mississippi and southwest Alabama, and defines how
harvesting activity will be conducted to ensure that the critical habitat of
this species is protected. Also in 1995, our efforts in the South to protect
the pitcher plant and Henslow sparrow were recognized by the National
Biological Survey.
Finally, a formal agreement was reached with the state of North Carolina
to preserve nearly 6,000 acres of environmentally sensitive wetlands known as
Friar's swamp. These wetlands are the primary water source for Lake Waccamaw,
the largest freshwater lake in the eastern United States outside Florida and
the home of several endangered species.
Northeast Region
Partnership forestlands in the Northeast consist of 1.5 million acres in
Maine, New Hampshire, Vermont, New York and Pennsylvania, including over
400,000 acres of spruce-fir forests, 300,000 acres of mixed conifer-hardwood
forests and 700,000 acres of hardwood forests containing some of the finest
stands of black cherry in the world. Forest managers in this region continue
to work with state authorities to improve forestry laws to ensure that the
forest ecosystem is protected without imposing an undue economic burden on
harvest activity. Region managers in Maine participated in a program to help
the public better understand the forest management and harvesting process.
This will help prevent revisions to state forestry practices that could
reduce allowable harvest levels in northern Maine by up to 50 percent while
dramatically increasing harvesting costs.
Western Region
In the West, where the Partnership controls 300,000 acres of forestlands, a
partnership agreement was signed with the National Wild Turkey Federation
providing for cooperative development of management strategies and projects
to increase wild turkey populations on IPT lands in Oregon and Washington.
IPT is the first major forest owner in the Pacific Northwest to enter into
such an agreement.
These are some examples that illustrate our commitment to protect the
environment while earning a good economic return for our unitholders through
responsible harvesting of our forest resources. We continue to believe that
responsible environmental stewardship with sustained economic growth must be
our objective both now and in the future.
6
<PAGE>
SUSTAINABLE FORESTRY PRINCIPLES
The commitment in 1995 by members of the American Forest and Paper
Association (AF&PA) to follow its Sustainable Forestry Principles as a
condition of membership in AF&PA demonstrates their commitment to improving
forest management. These Principles are consistent with the internal
standards and respective state best management practices followed by the
Partnership for many years. The Partnership has integrated these Principles
into its own guidelines, which go beyond the AF&PA guidelines where
appropriate, to ensure that our forestlands will remain healthy and
productive for generations to come.
The objective of these Principles, shown on the right, is to raise the
level of environmental performance across the forest products industry. The
Principles include a commitment to reforest all harvested lands by planting
or direct reseeding within two years of harvest, or by planned natural
regeneration within five years; limiting the average size of clearcut harvests
to a maximum of 120 acres; and allowing all newly reforested lands to grow at
least three years, or to a height of five feet, before harvesting is begun on
adjacent lands. The Partnership further renewed its commitment to protect
water quality and wildlife habitat on the lands it owns and manages.
Furthermore, in the states where the Partnership operates, we are working
with logging and forestry associations to develop training and education
programs for nonindustrial landowners and loggers. The training will include
forest regeneration, water quality, and protection of threatened and
endangered species, and will enable them to benefit from our expertise in
forest management technology.
The adoption of these Principles serves as another example of our
commitment to ensure that healthy, productive forests are sustained as a
legacy for future generations. We remain convinced that adherence to
environmentally sound, scientifically based forestry principles will provide
the maximum benefits for both economic and public interests in years to come.
- ------------------------------------------------------------------------------
The American Forest and Paper Association's Sustainable Forestry Principles
I. To practice sustainable forestry to meet the needs of the present without
compromising the ability of future generations to meet their own needs by
practicing a land stewardship ethic that integrates the reforestation,
managing, growing, nurturing and harvesting of trees for useful products with
the conservation of soil, air and water quality, wildlife and fish habitats,
and aesthetics.
II. To use in its own forests, and promote among other forest landowners,
sustainable forestry practices that are economically and environmentally
responsible.
III. To protect forests from wildfire, pests, diseases and other damaging
agents in order to maintain and improve long-term forest health and
productivity.
IV. To manage its forests and lands of special significance (e.g.,
biologically, geologically or historically significant) in a manner that takes
into account their unique qualities.
V. To continuously improve the practice of forest management and also to
monitor, measure and report the performance of our members in achieving our
commitment to sustainable forestry.
- ------------------------------------------------------------------------------
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Revenues from stumpage sales in 1995 were $316 million, up from $286 million in
1994 and $305 million in 1993 as strong demand allowed a 16% increase in
harvest levels, compared with 1994. Total revenues, however, declined to $360
million from $369 million in 1994 and $426 million in 1993 as lower forestland
sales offset the increase in stumpage sales. Net Partnership earnings were $261
million compared with $274 million in 1994 and $323 million in 1993.
In the Southern region, low customer inventories and wet weather conditions
led to strong demand for stumpage early in the year. Together with an increase
in sales of pulpwood later in the year, this led to a 23% increase in harvest
volumes in 1995. Prices averaged slightly higher in 1995, although some
softening occurred as the year progressed. In the West, harvest volumes were 7%
below 1994 levels, while prices averaged 3% lower. Lower prices for lumber
products kept domestic stumpage prices down, while a weak Japanese economy led
to a softer market for export products. Prices for stumpage in the Northeast
rose 11% in 1995, reflecting good demand for sawlogs early in the year by
Canadian lumber mills. However, a buildup of customer log inventories and
softening of pulp and paper markets caused prices to soften as the year
progressed.
Forestland sales, which are made when current market prices for selected
tracts exceed the values expected from future operations, declined to $30
million in 1995 from $71 million in 1994 and $108 million in 1993.
Harvest volumes for 1996 are projected to decline by approximately 10% from
1995 levels, principally in the South, where lower pulpwood sales are
anticipated due to high mill inventories and softer paper markets entering the
new year. As a result, Partnership revenues and earnings are expected to
decline in 1996.
In March 1996, a subsidiary partnership that owns all of IPT's Western
region assets signed a contract to sell a 98% general partnership interest.
When this transaction is completed, scheduled for the end of March, it will
result in a book gain to IPT of approximately $635 million. IPT will retain a
1% limited partner's interest and a preferred interest currently estimated to
have a liquidation value of approximately $135 million. IPFR will own the
remaining 1% interest. Approximately $200 million of this gain ($4.30 per Class
A Unit) will be attributed to Class A unitholders, of which $191 million ($3.90
per Class A Unit) represents amounts allocated to the Primary Account. Class A
unitholders will also have an estimated 30% share of the $135 million preferred
interest and of the 1% limited partner interest, equal to about $.90 per Class
A Unit.
Proceeds from the sale, together with a related partnership borrowing of
$450 million, will be used to repay a $750 million loan allocated to the
Secondary Account. The Secondary Account will repay the Primary Account for
its share of the sale proceeds and of the $450 million loan.
On December 31, 1995, Primary Account liquid assets totaled $6.34 per
Class A Unit. Early in the second quarter of 1996 after provisions for
working capital needs, possible asset acquisitions and other reserves deemed
appropriate by IPFR have been made, IPT anticipates declaring an
extraordinary distribution. Since the earnings generated by the Western
region assets, about one-third of Partnership earnings in 1995 and 1994
(excluding forestland sales), will no longer be available to the Partnership
in the future, a decrease in the regular quarterly distribution is likely to
occur.
The following table presents major earnings statement revenue categories
attributable to the Primary and Secondary Accounts:
In thousands 1995 1994 1993
---- ---- ----
Stumpage sales
Primary Account $293,742 $285,792 $303,147
Secondary Account 22,519 2,159
------- ------- -------
$316,261 $285,792 $305,306
------- ------- -------
Forestland sales
Primary Account $ 9,286 $ 27,621 $ 33,505
Secondary Account 20,807 42,980 74,449
------- ------- -------
$ 30,093 $ 70,601 $107,954
------- ------- -------
Volumes related to stumpage sales were:
In thousand cunits 1995 1994 1993
---- ---- ----
Used in International Paper facilities 1,149 985 1,045
Resold by International Paper 583 609 725
Sales to unafliated parties 1,941 1,582 1,762
----- ----- -----
3,673 3,176 3,532
----- ----- -----
Operating Costs and Expenses
Operating costs and expenses attributable to the Primary and Secondary
Accounts were as follows:
In thousands 1995 1994 1993
---- ---- ----
Primary Account $ 58,436 $ 64,108 $ 64,504
Secondary Account 52,618 46,666 47,578
------- ------- -------
$111,054 $110,774 $112,082
------- ------- -------
Depletion and the cost of forestlands sold are generally attributed to
the Primary and Secondary Accounts in the same proportion as revenues from
stumpage sales and forestland sales, respectively. Road amortization is fully
attributed to the Secondary Account.
8
<PAGE>
Costs related to land and forest management and administration of IPT are
associated to some extent with both the Primary Account and the Secondary
Account because the benefits derived from such expenditures will be realized
both during and after the Initial Term. Forest operating costs and general
and administrative expenses are allocated between the Primary and Secondary
Accounts based on the timing of the estimated future benefits. This
allocation is reviewed annually by IPFR to determine that it is fair and
reasonable. In 1995, a higher proportion of these costs were allocated to the
Secondary Account. Increased reforestation and fertilization costs incurred
to increase future forest productivity, which are principally charged to the
Secondary Account, led to a $3.1 million increase in forest operations
expenses in 1995.
General and administrative expenses are a combination of direct costs
charged to IPT plus indirect overhead costs that are allocated to IPT by
International Paper.
Impact of Inflation
Prices for stumpage may be subject to sharp cyclical fluctuations due to
market or other economic conditions and generally do not directly follow
inflationary trends. Costs of forest management and operations generally tend
to reflect inflationary trends.
Liquidity and Capital Resources
At December 31, 1995, IP Timberlands, Ltd. had cash and temporary investments
of $11.9 million, an intercompany account receivable from International Paper
of $7.3 million, and notes receivable from International Paper of $371.4
million, totaling $390.6 million in liquid assets. Cash is either invested in
temporary investments or loaned to International Paper at market rates.
In thousands, except per unit data 1995 1994
---- ----
Cash, temporary investments and intercompany
accounts and notes receivable
Primary Account $310,083 $313,742
Secondary Account 80,487 124,326
------- -------
$390,570 $438,068
------- -------
Total per Class A Unit $ 6.41 $ 6.52
------- -------
Cash flows from operations and existing liquid assets are expected to be
adequate to meet anticipated future cash requirements of the Primary Account.
Costs charged to the Secondary Account, which include reforestation costs,
road construction and a significant portion of forest management expenses,
may exceed revenues credited to such account. To the extent that future
Secondary Account cash flows and existing cash balances do not cover cash
costs charged to such account, IPT will fund such shortfalls through the sale
of additional units (principally Class B Units) to International Paper,
borrowings from International Paper or unaffiliated parties, or other
financing alternatives.
In contrast to other depletable natural resources such as oil and gas,
forest resources are managed to regenerate over a period of time generally
ranging from 25 to 55 years. IPT believes that the size and diversity of its
forest resource base should provide recurring annual revenues without the
need for a major reinvestment of cash to acquire additional resources.
However, future investments in forestlands and roads, which include
expenditures for reforestation, road construction and capitalized leases, may
exceed current-year expenditures as the Partnership takes advantage of
favorable market opportunities.
In November 1995, the Partnership borrowed $750 million from a consortium
of banks and distributed the proceeds to its general and limited partners.
The borrowing and proceeds were allocated to the Secondary Account, which is
responsible for repayment of the loan. The distribution, paid from the
Secondary Account, included $29.7 million (or $.64 per Class A Unit) to Class
A unitholders paid as part of the regular $.72 per Class A Unit distribution
in the fourth quarter, $705.4 million to Class B unitholders, and $14.9
million to the general partners of IPT and IPTO. Repayment of the loan is
guaranteed by International Paper, which will make future capital
contributions to the Partnership if the Secondary Account does not generate
sufficient cash flows to service the loan.
It is IPT's policy to make quarterly cash distributions from the Primary
Account based on the amount of cash available from operations after
provisions for working capital, asset acquisitions and such reserves as IPFR
deems appropriate. The distribution rate also balances any large nonrecurring
inflows from forestland sales in the current year against expected future
cash flows based on IPT's projected harvest plan. The partners participate in
distributions in the same ratio in which they share revenues and costs. In
the case of the Primary Account, the Class A Units receive 95% of the total
IPT distributions, with the Class B Units and general partners receiving 4%
and 1%, respectively. Class A Units' participation in distributions will
decline significantly to 4%, and Class B Units' participation will increase
to 95%, after the end of the Initial Term.
In 1995, 1994 and 1993, IPT paid regular quarterly distributions to Class
A unitholders of $.72 per quarter. In October 1993 and March 1995, IPT paid
special cash distributions of $4.00 per Class A Unit. These special
distributions were paid because management believed that existing cash
balances plus projected future cash flows would be adequate for capital
expenditure, working capital
9
<PAGE>
and regular quarterly distribution requirements during the remainder of the
Initial Term.
Early in the second quarter of 1996, an extraordinary distribution to
Class A unitholders is anticipated. Since the earnings generated by the
Western region assets will no longer be available to the Partnership, a
decrease in future regular distributions is likely to occur.
The following table presents cash flow from operations, after provision for
capital expenditures, attributable to Class A Units. It also shows cash
distributions declared for Class A Units for the same period, including the
$4.00 per unit special distributions paid in 1995 and 1993.
Primary Secondary IPT
In thousands Account Account Total
------- --------- -----
Year Ended December 31, 1995
Cash provided by operations $295,759 $(14,169) $281,590
Investment in forestlands and roads (5,925) (22,272) (28,197)
IPTO general partners' interest in above (2,898) 364 (2,534)
------- ------- -------
Cash flow after capital expenditures 286,936 (36,077) 250,859
Class A Unit allocation factor 95% 4%
Cash flow attributable to Class A Units $272,589 $(1,443) $271,146
------- ------- -------
Distributions declared for Class A Units $289,847 $ 29,700 $319,547
------- ------- -------
Year Ended December 31, 1994
Cash provided by operations $318,165 $ 17,197 $335,362
Investment in forestlands and roads (20,752) (17,243) (37,995)
IPTO general partners' interest in above (2,974) (2,974)
------- ------- -------
Cash flow after capital expenditures 294,439 (46) 294,393
Class A Unit allocation factor 95% 4%
Cash flow attributable to Class A Units $279,717 $ (2) $279,715
------- ------- -------
Distributions declared for Class A Units $133,764 $133,764
-------- ------- --------
Year Ended December 31, 1993
Cash provided by operations $284,456 $ 88,982 $373,438
Investment in forestlands and roads (38,890) (14,851) (53,741)
IPTO general partners' interest in above (2,456) (741) (3,197)
------- ------- -------
Cash flow after capital expenditures 243,110 73,390 316,500
Class A Unit allocation factor 95% 4%
Cash flow attributable to Class A Units $230,955 $ 2,936 $233,891
------- ------- -------
Distributions declared for Class A Units $319,547 $319,547
-------- ------- --------
At the end of the Initial Term, the Primary Account will be closed and
all cash remaining after payment of borrowings and liabilities will be
distributed. Class A unitholders will receive 95% of this cash distribution.
As of December 31, 1995, 95% of the Primary Account liquid assets was $295
million or $6.34 per Class A Unit.
10
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
Years Ended December 31
----------------------------------------
In thousands, except per unit data 1995 1994 1993
--------- --------- ---------
Revenues
Stumpage sales
International Paper $ 194,294 $ 172,083 $ 185,372
Unaffiliated parties 121,967 113,709 119,934
Forestland sales 30,093 70,601 107,954
Other income, net 13,600 12,950 12,774
--------- --------- ---------
Total Revenues 359,954 369,343 426,034
--------- --------- ---------
Operating Costs and Expenses
Depletion
International Paper 12,375 10,553 10,126
Unaffiliated parties 14,812 11,522 11,835
Cost of forestlands sold 2,465 10,093 12,780
Amortization of roads 2,154 2,119 2,180
Forest operations 43,813 40,689 38,190
General and administrative 20,542 19,497 20,359
Property and severance taxes 14,893 16,301 16,612
--------- --------- ---------
Total Operating Costs and Expenses 111,054 110,774 112,082
--------- --------- ---------
Operating Earnings 248,900 258,569 313,952
Interest Income 20,868 17,946 12,159
Interest Expense (6,069)
General Partners' Interest in IPTO (2,637) (2,765) (3,261)
--------- --------- ---------
Net Partnership Earnings $ 261,062 $ 273,750 $ 322,850
--------- --------- ---------
Earnings per Class A Unit (Note 4) $ 5.50 $ 5.49 $ 5.94
--------- --------- ---------
The accompanying notes are an integral part of these financial statements.
11
<PAGE> CONSOLIDATED BALANCE SHEET
December 31
------------------------
In thousands 1995 1994
---------- ----------
Assets
Current Assets
Cash and temporary investments, at cost,
which approximates market $ 11,899 $ 7,922
Notes receivable-International Paper 371,378 430,146
Due from International Paper 7,293 3,328
Accounts and notes receivable 23,558 8,716
---------- ----------
Total current assets 414,128 450,112
---------- ----------
Notes Receivable 1,027 1,174
Forestlands 734,200 739,136
Roads, net of accumulated amortization of
$49,618 (1995) and $47,504 (1994) 38,026 36,097
---------- ----------
Total Assets $1,187,381 $1,226,519
---------- ----------
Liabilities and Partners' Capital
Current Liabilities
Accounts payable and accrued liabilities $ 372 $ 354
Accrued interest 5,983
Accrued property and severance taxes 6,286 5,868
Customer advance payments 3,797 4,658
---------- ----------
Total current liabilities 16,438 10,880
---------- ----------
Long-Term Debt 750,000
Lease Obligations 1,231 1,443
General Partners' Interest in IPTO 26,662 34,607
Commitments and Contingent Liabilities
Partners' Capital
General partners 25,786 33,651
Limited partners 367,264 1,145,938
---------- ----------
Total Liabilities and Partners' Capital $1,187,381 $1,226,519
---------- ----------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31
---------------------------------
In thousands 1995 1994 1993
--------- --------- ---------
Operating Activities
Net Partnership earnings
$ 261,062 $ 273,750 $ 322,850
Noncash items
Depletion 27,187 22,075 21,961
Cost of forestlands sold 2,465 10,093 12,780
Amortization of roads 2,154 2,119 2,180
Other, net 2,036 3,193 2,786
Changes in current assets and liabilities
Accounts and notes receivable (14,695) 29,261 18,875
Due from International Paper (3,965) (7,153) (7,567)
Accrued Interest 5,983
Customer advance payments (861) 1,933 (1,601)
Other, net 224 91 1,174
--------- --------- ---------
Cash Provided by Operations 281,590 335,362 373,438
--------- --------- ---------
Investment Activities
Investment in forestlands and roads (28,197) (37,995) (53,741)
Loans to International Paper (257,608) (345,744) (328,226)
Repayment of loans by International Paper 316,376 191,744 348,444
--------- --------- ---------
Cash Provided by (Used for)
Investment Activities 30,571 (191,995) (33,523)
--------- --------- ---------
Financing Activities
Issuance of long-term debt 750,000
Distributions to partners of IPT and IPTO (1,058,184) (142,227) (339,763)
--------- --------- ---------
Cash Used for Financing Activities (308,184) (142,227) (339,763)
--------- --------- ---------
Change in Cash and Temporary Investments 3,977 1,140 152
Cash and Temporary Investments
Beginning of the year 7,922 6,782 6,630
--------- --------- ---------
End of the year $ 11,899 $ 7,922 $ 6,782
--------- --------- ---------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Nature of Operations
IP Timberlands, Ltd. (IPT), a Texas limited partnership, was formed to succeed
to substantially all of the forest resources business of International Paper.
IP Forest Resources Company (IPFR), a wholly owned subsidiary of International
Paper, is the managing general partner of IPT, and International Paper is the
special general partner.
International Paper received IPT Class A Depositary Units (Class A Units) and
IPT Class B Depositary Units (Class B Units) in exchange for the contribution
of approximately 6.3 million acres of forestlands owned in fee or held under
long-term leases as well as certain deeds and other assets. IPT operates
through IP Timberlands Operating Company, Ltd. (IPTO), a Texas limited
partnership, in which IPT holds a 99% limited partners' interest. IPFR is also
the managing general partner of IPTO, and International Paper is the special
general partner.
The Partnerships have no officers, directors or employees. The officers,
directors and employees of International Paper and IPFR perform all management
and business activities for the Partnerships.
IPT manages its forestlands principally for the sale of sawlogs, used for
lumber and plywood production, and pulpwood, used in the manufacture of paper.
It operates mainly in the South, with regions also located in the West and
Northeast.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of IPT and IPTO. All
significant intercompany items and transactions have been eliminated.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles which require the use of management
estimates and will not be the basis for reporting taxable income to
unitholders.
Temporary Investments
Temporary investments with an original maturity of three months or less are
stated at cost. Temporary investments at December 31, 1995 and 1994 were $6.5
million.
Income Taxes
IPT is not a taxable entity for federal, state or local income tax purposes.
Any taxable earnings or losses and certain other items are reported by the
partners on their own tax returns in accordance with their Partnership
Agreement.
Forestlands
Forestlands, including capitalized harvesting rights, are stated at cost. IPT
capitalizes cutting contracts where the total price to be paid is fixed and the
term is in excess of one year. The portion of the costs of forestlands
attributed to the trees is charged against earnings as the trees are cut, at
rates determined annually based on the relationship of unamortized costs to the
estimated recoverable harvest volumes.
Roads
Roads are stated at cost, less accumulated amortization. The depreciable
portion of the cost is amortized over the economic lives of the roads using the
straight-line method (eight to 20 years.)
Revenue Recognition
Stumpage sales are recognized when legal ownership and the risk of loss pass to
the purchaser and the quantity sold is determined. This generally occurs when
the purchaser severs and measures the volumes. Bulk sales, included in stumpage
sales in the accompanying statement of earnings, represent the sale of standing
timber. Revenues from bulk sales and forestland sales are recognized when legal
ownership and the risk of loss pass, normally at the time of sale.
3. Transactions With International Paper and Major Customers
IPT is a major source of fiber and wood used in International Paper's pulp,
paper, lumber and panel manufacturing facilities. The cost associated with
sales to International Paper was $12.4 million (1995), $10.6 million (1994) and
$10.1 million (1993).
14
<PAGE>
IPT does not compensate IPFR or International Paper for services as general
partners. However, IPT does reimburse them for direct costs and expenses
(included in forest operations and general and administrative expenses)
associated with the management and operations of the Partnerships and indirect
costs, principally general and administrative expenses, allocated to the
Partnerships. Charges for indirect expenses were $9.3 million (1995 and 1994)
and $10.2 million (1993). In the opinion of IPFR management, the allocation
methods and amounts are reasonable.
Notes with International Paper bear interest at market rates. Interest income
from notes with International Paper was $20.1 million (1995), $16.6 million
(1994) and $10.7 million (1993).
No unaffiliated customer accounted for sales in excess of 10% of total revenues
in 1995, 1994 or 1993.
4. Computation of Earnings per Class A Unit
Holders of Class A Units participate principally in the revenues and costs
associated with IPT's stumpage sales through December 31, 1999 (the Initial
Term), and to a significantly lesser extent in such revenues and costs after
the Initial Term.
Holders of the Class B Units participate principally in revenues and costs
associated with IPT's stumpage sales after the Initial Term, and to a
significantly lesser extent in such revenues and costs during the Initial Term.
In order to implement the sharing of revenues and costs between the Class A
Units and the Class B Units, the Partnership Agreement of IPT created two
accounting units - the Primary Account and the Secondary Account. The Primary
Account is credited with all revenues and costs associated with the sale of
trees harvested during the Initial Term. For forestland sales or bulk sales,
the proceeds and costs associated with such sales are allocated by the managing
general partner between the Primary Account and the Secondary Account based on
the relative asset values of the forestlands and trees and the projected
harvest schedule during and after the Initial Term. Other revenues not
associated with the harvesting and sale of trees, such as revenues from
permits, leases, easements and similar items, generally are credited to the
Primary Account. Interest income on the short-term investment of proceeds from
stumpage sales is treated in the same manner as revenues and costs associated
with the harvesting and sale of trees.
The Class A Units are credited with 95% of the revenues and costs of the
Primary Account and 4% of the revenues and costs of the Secondary Account. The
Class B Units are credited with 95% of the revenues and costs of the Secondary
Account and 4% of the revenues and costs of the Primary Account. International
Paper and IPFR are credited with 1% in the aggregate of the revenues and costs
of the Primary Account and the Secondary Account.
The following table presents the computation of earnings per Class A Unit.
Years Ended December 31
--------------------------------------
In thousands, except per unit data 1995 1994 1993
--------- --------- ---------
Allocation to Primary Account $ 269,225 $ 268,273 $ 288,856
Allocation to Secondary Account (8,163) 5,477 33,994
--------- --------- ---------
Net Partnership Earnings $ 261,062 $ 273,750 $ 322,850
--------- --------- ---------
95% of the Primary Account(1) $ 255,763 $ 254,860 $ 274,413
4% of the Secondary Account(1) (326) 219 1,360
--------- --------- ---------
Earnings Allocated to
Class A Limited Partners 255,437 255,079 275,773
Weighted Average Class A Units
Outstanding 46,446 46,446 46,446
--------- --------- ---------
Earnings per Class A Unit $ 5.50 $ 5.49 $ 5.94
--------- --------- ---------
(1)Class B Units are allocated 4% of Primary Account and 95% of Secondary
Account earnings. The general partners are allocated 1% of each account.
5. Receivables
The major components of Accounts and Notes Receivable are presented below. No
allowance for doubtful accounts was required in either year.
In thousands at December 31 1995 1994
-------- --------
Notes receivable - trade $ 22,730 $ 7,487
Accounts receivable - trade 275 609
Accrued interest and other receivables 553 620
-------- --------
$ 23,558 $ 8,716
-------- --------
Notes receivable-trade at December 31, 1995 included $18.5 million from a
1995 fourth quarter bulk sale.
6. Long-Term Debt
On November 15, 1995, the Partnership borrowed $750 million under a credit
agreement with a consortium of banks. The proceeds were then distributed to
unitholders. Principal repayments of $250 million are due annually on November
14, 1998, 1999 and 2000. Interest at 6.11% is due quarterly beginning February
14, 1996. Repayment of both principal and interest is guaranteed by
International Paper. The credit agreement contains certain provisions that,
among other things, place limitations on the amounts of
15
<PAGE>
future indebtedness and distributions. Additionally, upon early retirement of
the borrowing, the Partnership would be required to reimburse participating
banks for certain losses resulting from such prepayment.
7. Partners' Capital
The following table presents the activity in the Partners' Capital accounts.
General Limited
In thousands Partners Partners Total
----------- ----------- -----------
Balance - January 1, 1993 $ 32,456 $ 1,027,703 $ 1,060,159
Net earnings for the period 3,229 319,621 322,850
Partner distributions (3,364) (333,001) (336,365)
----------- ----------- -----------
Balance - December 31, 1993 32,321 1,014,323 1,046,644
Net earnings for the period 2,738 271,012 273,750
Partner distributions (1,408) (139,397) (140,805)
----------- ----------- -----------
Balance - December 31, 1994 33,651 1,145,938 1,179,589
Net earnings for the period 2,611 258,451 261,062
Partner distributions (10,476) (1,037,125) (1,047,601)
----------- ----------- -----------
Balance - December 31, 1995 $ 25,786 $ 367,264 $ 393,050
----------- ----------- -----------
Distributions in 1995 and 1993 include special distributions of $186 million
($4.00 per Class A Unit). Distributions in 1995 also include $750 million paid
from the Partnership's Secondary Account, of which $29.7 million or $.64 per
Class A Unit was paid to Class A unitholders as part of the regular $.72
fourth-quarter distribution.
The authorized and outstanding Class A and Class B Units at December 31, 1995,
1994 and 1993, which represent the limited partnership interests of IPT, are
presented below. The Class B Units are 100% owned by International Paper and
affiliates.
Class A Depositary Units
---------------------------------------
International Unaffiliated Class B
Paper and Third Depositary
Affiliates Parties Total Units
------------- ---------- ---------- ----------
Number of units 39,146,229 7,299,500 46,445,729 50,976,480
Percentage of total 84% 16% 100% 100%
------------- ---------- ---------- ----------
Under the terms of the Partnership Agreement, International Paper has the right
to purchase, at any time, all outstanding Class A Units at a price equal to
133% of the market price at that time.
8. Commitments and Contingent Liabilities
IPTO and International Paper have been parties in two lawsuits involving
long-term leases and options on 210,000 acres of forestlands in Louisiana and
Mississippi. The lessors sought to have the two leases terminated and IPTO
enjoined from further operation on the properties, and alleged certain damages.
A jury trial in the Louisiana suit resulted in a verdict substantially in favor
of IPTO and International Paper. This verdict was sustained on appeal. The
lessor's case in Mississippi remains open but has been stayed pending a
determination of land value. Since ownership of the lands themselves does not
affect IPTO's right to harvest on the Louisiana or Mississippi properties, the
purchase options for the lands have been assigned from IPTO to International
Paper.
IPT is involved in various legal proceedings incidental to its business. While
any proceeding or litigation has an element of uncertainty, IPT 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.
9. Subsequent Event
In March 1996, a subsidiary partnership that owns all of IPT's Western region
assets signed a contract to sell a 98% general partnership interest for
consideration that will result in a book gain to IPT of approximately $635
million, a retained preferred interest and a 1% common interest. Class A
unitholders will receive approximately $200 million of the gain or $4.30 per
Class A Unit, and will have an estimated 30% share of the preferred interest
and of the 1% common interest. Exact amounts will not be determined until the
transaction is completed. The closing is scheduled for the end of
March.
16
<PAGE>
INTERIM FINANCIAL RESULTS (UNAUDITED)
Quarter
-----------------------------------------
In thousands, except per unit data First Second Third Fourth
-------- -------- -------- --------
1995
- ----
Total revenues $ 82,267 $ 72,932 $ 82,237 $122,518(2)
Operating earnings 56,752 46,833 54,375 90,940
Net Partnership earnings 63,120 50,563 58,227 89,152
Per Class A Unit
Earnings $ 1.36 $ 1.27 $ 1.33 $ 1.54
Distributions 4.72(1) .72 .72 .72
-------- -------- -------- --------
1994
- ----
Total revenues $109,579 $ 88,990 $ 98,443 $ 72,331
Operating earnings 79,905 63,051 68,024 47,589
Net Partnership earnings 81,898 66,100 72,363 53,389
Per Class A Unit
Earnings $ 1.49 $ 1.09 $ 1.47 $ 1.44
Distributions .72 .72 .72 .72
-------- -------- -------- --------
1 Distributions for the first quarter of 1995 include a special distribution of
$4.00 per Class A Unit.
2 Includes $51.3 million of forestland and bulk sales in the fourth quarter.
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of IP Timberlands, Ltd.:
We have audited the accompanying consolidated balance sheets of IP Timberlands,
Ltd. (a Texas limited partnership) and subsidiary as of December 31, 1995 and
1994, and the related consolidated statements of earnings and cash flows for
each of the three years ended December 31, 1995. These financial statements are
the responsibility of the Partnership'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 IP Timberlands, Ltd. and
subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years ended December 31,
1995 in conformity with generally accepted accounting principles.
/s/ Authur Andersen LLP
New York, N.Y.
February 13, 1996
(except with respect to the matter discussed
in Note 9, as to which the date is March 6, 1996)
RESPONSIBILITY FOR FINANCIAL STATEMENTS
IP Timberlands, Ltd., through the participation of IP Forest Resources
Company, "IPFR," (the managing general partner) and International Paper Company
(the special general partner), is responsible for the fair presentation of the
information contained in the financial statements in this annual report. The
statements were prepared in accordance with generally accepted accounting
principles and reflect management's best judgment as to the Partnership's
financial position, the results of its operations and cash flows.
A system of internal accounting controls is maintained and designed to provide
reasonable assurance that transactions are properly recorded and summarized so
that reliable financial records and reports can be prepared and assets can be
safeguarded. An important part of the internal controls system is the
involvement of the general partners, who provide all required services to
ensure the adequacy of internal controls. Procedures are also in place to
assess compliance with the terms of the Partnership Agreement and identify and
resolve any business issues arising between the Partnership and the general
partners.
Compliance with the internal controls system is monitored by internal audit
with management follow-up. The independent public accountants provide an
objective, independent review of management's discharge of its responsibility
for the fairness of the Partnership's financial statements. They review the
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 of IPFR monitors management's administration of the
Partnership's financial policies and practices and the preparation of financial
reports. The Audit Committee, consisting of nonemployee directors, meets
regularly with representatives of management, the independent public
accountants and the Internal Auditor to review their activities. The
independent public accountants and the Internal Auditor both have free access
to the Audit Committee, with and without management representatives in
attendance.
/s/ Frederick L. Bleier
Frederick L. Bleier
Treasurer and Controller
18
<PAGE>
DIRECTORS
John A. Georges*
Chairman and Chief Executive Officer
International Paper
Thomas C. Graham++
Chairman and Chief Executive Officer
AK Steel Corporation
Arthur G. Hansen++
Educational Consultant
Jane C. Pfeiffer++
Management Consultant
Roger B. Smith++
Former Chairman and Chief Executive Officer
General Motors Corporation
*On March 31, 1996, Mr. John A. Georges will retire as
director and Mr. John T. Dillon will join the Board as a
director, effective April 1, 1996.
++Member of the Audit Committee
Directors of IP Forest Resources Company,
Managing General Partner of IP Timberlands, Ltd.
MANAGERS
John A. Georges*
Chairman and Chief Executive Ofcer
Edward J. Kobacker
President
John A. Cureton
Vice President
James W. Guedry
Vice President and Secretary
Robert W. Hintze
Vice President
Robert A. Kriscunas
Vice President and General Counsel
John A. Nugent
Vice President
David R. Titzer
Vice President
Richard R. Yarbrough
Vice President
Frederick L. Bleier
Treasurer and Controller
Carl Q. Carter
Chief Tax Ofcer
Dennis G. Schroeder
Auditor
*On March 31, 1996, Mr. John A. Georges retires and
Mr. John T. Dillon will succeed him as the Chairman
and Chief Executive Officer of both International Paper
and IP Forest Resources Company.
Managers of IP Forest Resources Company,
Managing General Partner of IP Timberlands, Ltd.
19
<PAGE>
UNITHOLDER TAX INFORMATION
Each year IPT prepares a customized tax package for each unitholder showing the
unitholder's share of the Partnership's capital gain, ordinary income (or loss)
and other information required for the unit-holder's federal income tax return.
The package also includes information regarding state tax reporting
requirements for those states in which the Partnership has operations.
Unitholders should discuss the requirement for state tax reporting with their
tax advisers.
IPT makes available upon request a generalized tax package providing detailed
instructions for determining the capital gain, ordinary income (or loss) and
other tax results on a per unit basis.
Tax packages for 1995 were mailed to unitholders in late February 1996.
Information pertaining to customized or generalized tax packages may be
obtained by calling 1-800-942-4555.
THIS 1995 ANNUAL REPORT TO UNITHOLDERS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS CONCERNING IPT'S BUSINESS PROSPECTS, POSSIBLE DECLINES IN
DISTRIBUTIONS AND THE PRICE OF THE CLASS A UNITS. OVERALL MARKET CONDITIONS
COULD INFLUENCE THE EXPECTED PRICE DECLINE OF THE CLASS A UNITS AND THE
POSSIBILITY OF A DECLINE IN THE DISTRIBUTION TO CLASS A UNITHOLDERS.
PARTNERSHIP INFORMATION
Partnership Headquarters
IP Timberlands, Ltd.
Two Manhattanville Road
Purchase, N.Y. 10577
1-800-634-8050
Stock Transfer Agent and Registrar
For questions concerning change of address, lost certicates or cash
distribution checks, or change in registered ownership, write or call:
Chemical Mellon Shareholder Services, L.L.C.
450 West 33rd Street
New York, N.Y. 10001
Within the U.S., call 1-800-851-9677.
Outside the U.S., call collect 0-212-613-7427.
Investor Services
For questions concerning your units other than those noted directly above,
contact the Investor Relations Department at 1-800-634-8050.
Independent Public Accountants
Arthur Andersen LLP
1345 Avenue of the Americas
New York, N.Y. 10105
Reports and Publications
For additional copies of this annual report, or copies of SEC filings, or to
have your name added to our mailing list, call 1-800-634-8050 or write to the
Investor Relations Department at Partnership headquarters.
20
EXHIBIT (24)
POWER OF ATTORNEY
Know all Men By These Presents, that the undersigned hereby constitutes and
appoints JAMES W. GUEDRY, WILLIAM B. LYTTON and JAMES P. MELICAN 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 IP Timberlands, Ltd. 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 and 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 this 12th day of March, 1996, at New York, New York.
Name Title
---- -----
/s/ Thomas C. Graham Director
---------------------
(Thomas C. Graham*)
/s/ Arthur G. Hansen Director
---------------------
(Arthur G. Hansen*)
/s/ Jane C. Pfeiffer Director
---------------------
(Jane C. Pfeiffer*)
/s/ Roger B. Smith Director
---------------------
(Roger B. Smith*)
* Directors of IP Forest Resources Company, managing general partner
of IP Timberlands, Ltd.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Earnings and the Consolidated Balance Sheet of IP
Timberlands, Ltd. and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 11,899
<SECURITIES> 0
<RECEIVABLES> 402,229
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 414,128
<PP&E> 772,226
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,187,381
<CURRENT-LIABILITIES> 16,438
<BONDS> 0
<COMMON> 393,050
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,187,381
<SALES> 346,354
<TOTAL-REVENUES> 359,954
<CGS> 0
<TOTAL-COSTS> 111,054
<OTHER-EXPENSES> 2,637
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14,799)
<INCOME-PRETAX> 261,062
<INCOME-TAX> 0
<INCOME-CONTINUING> 261,062
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 261,062
<EPS-PRIMARY> 5.50
<EPS-DILUTED> 5.50
</TABLE>
