Acquisition of Temple-Inland February 10, 2012
2
Forward-Looking Statements
Certain statements in these slides and made during this presentation may be considered
forward-looking statements. These statements reflect management's current views and are
subject to risks and uncertainties that could cause actual results to differ materially from those
expressed or implied in these statements. Factors which could cause actual results to differ
include but are not limited to: (i) the level of our indebtedness and increases in interest rates; (ii)
industry conditions, including but not limited to changes in the cost or availability of raw
materials, energy and transportation costs, competition we face, cyclicality and changes in
consumer preferences, demand and pricing for our products; (iii) global economic conditions and
political changes, including but not limited to the impairment of financial institutions, changes in
currency exchange rates, credit ratings issued by recognized credit rating organizations, the
amount of our future pension funding obligation, changes in tax laws and pension and health
care costs; (iv) unanticipated expenditures related to the cost of compliance with existing and
new environmental and other governmental regulations and to actual or potential litigation; (v)
whether we experience a material disruption at one of our manufacturing facilities and risks
inherent in conducting business through a joint venture; (vi) risk and uncertainties associated
with the divestitures required by the U.S. Department of Justice consent decree that allows the
Temple-Inland Inc. (“Temple-Inland”) transaction to proceed; (vii) the failure to realize synergies
and cost savings from the Temple-Inland transaction or delay in realization thereof; and (viii) our
ability to achieve the benefits we expect from all other strategic acquisitions, divestitures and
restructurings. These and other factors that could cause or contribute to actual results differing
materially from such forward-looking statements are discussed in greater detail in the company’s
Securities and Exchange Commission filings. We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future events or otherwise.
3
Statements Relating to Non-GAAP Financial Measures
During the course of this presentation, certain non-U.S. GAAP financial information will be presented.
A reconciliation of those numbers to U.S. GAAP financial measures is available on the company’s website at internationalpaper.com under Investors.
4
Transaction Overview
In September 2011, International Paper agreed to acquire Temple-Inland, a leading North American corrugated packaging manufacturer
On February 10, 2012, the companies entered into a settlement agreement with the U.S. Department of Justice clearing the way to complete the planned merger
Purchase price of $32.00/share
Total purchase consideration of $4.4 Billion, including Temple-Inland net debt at closing estimated at $600 Million1
1 TIN net debt disclosed as of 9/30/11
5
2011 Sales1 of $4.0 Billion
2011 EBITDA1 of $405 Million
4 Million Tons of
Containerboard Capacity
7 Containerboard Mills
59 Box Plants
14 Building Products Plants
Segment Assets
Temple-Inland at a Glance Predominately a Corrugated Packaging Company
1 TIN reflects 9M11 actual results annualized
Building Products
18%
Corrugated Products
82%
6
Consistent with IP’s focus on paper & packaging and generating cost of capital returns
Makes IP’s good N.A. corrugated packaging business an excellent one
- Shared focus on low-cost mills; complementary converting systems; high level of box integration
- Compelling strategic and industrial logic
- Improved capabilities to serve combined customer base
- Powerful cash flow engine
Significant synergies
Accretive within 12 months, highly accretive over time
IP is a proven outstanding operator with demonstrated track record of success integrating acquisitions
Compelling Strategic Acquisition
7
Purchase Price Overview
Purchase Price $4.4B
EBITDA1 Multiple 8.6x
Synergies at Full Run Rate $300MM
EBITDA1 Multiple (with expected Synergies)
5.4x
1 First Call FY12 EBITDA estimate as of 2/8/2012
8
Financing Overview
Committed Financing
Cash $2.4B Bond Issuance $1.5B @ 5.25%
Debt Rollover ~ $0.6B1
Term Loan $1.4B @ LIBOR + 1.4%
$4.4B
Rapid repayment of debt
Targeted Debt / EBITDA of ~3x
1 TIN net debt disclosed as of 9/30/11
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Transaction Details
Consideration $32.00 per TIN share, all cash
Expected
Synergies
At least $300 Million of annual run-rate synergies, to be
achieved within 24 months of close
Timing Expected closing the week of February 13th 2012
Financing Committed financing from a UBS-led bank syndicate
Consent
Decree w/DOJ
The combined company will undertake the post close
divestiture of 970 thousand tons of containerboard mill
capacity within four months, with the possibility of two
30-day extensions.
The company agreed to divest TIN’s facilities in Ontario,
CA and New Johnsonville, TN, and IP’s facility in
Hueneme, CA.
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Settlement Agreement Assessment
Preserves strategic and industrial logic
Original target of at least $300MM of synergies intact
FCF expected to be in the range of initial estimates
Potential to pay down debt faster with divestitures
Increases box integration to >85%
Maintains enhanced market access
No box plant divestitures
Domestic & global open market reach unchanged
Improved value proposition for customer base intact
More favorable fiber balance
Three year off-take agreement(s) likely post divestiture(s)
Overall transaction expected to earn cost of capital returns
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Combined Mill Assets 13 Million Ton System
New IP Profile 17 Mills
31 Paper Machines 13 MM tons
5,775 employees 86% Integrated
12 Mills
22 Paper Machines
9.78 MM tons
~4,400 Employees
77% Integrated
5 Mills
9 Paper Machines
3.25 MM tons
~1,375 Employees
109% Integrated
IP Mills
TIN Mills
International Paper
Facility Locations - N.A.
Temple-Inland
Facility Locations - N.A.
3 Mills
3 Paper Machines
0.97 MM tons
~425 Employees
Mills
Mills Held for Sale
Facility Locations - N.A.
12
$0
$200
$400
$600
$800
$1,000
$1,200
0 5,000 10,000 15,000 20,000 25,000 30,000
Ma
nu
fac
turi
ng
Co
sts
($
/Sh
ort
To
n)
Cumulative Annual Capacity (Thousand Short Tons)
Cash Costs + Delivery to Chicago
Global Cost Curve 90% of capacity in 1st & 2nd cost quartiles
Source: Poyry Costrac 3Q11 42# and 26# Global Linerboard cash cost per ton delivered to Chicago
Prattville 1
Mansfield 1
Prattville 2 Savannah 6
Savannah 8
Cedar Rapids 2 Valliant 1
Campti 1
Campti 2
Pine Hill 1
Springfield 2
Vicksburg 6
Rome 1
Rome 2
Bogalusa 8
Pensacola 6
Bogalusa 7 Maysville 1
Orange 2
Orange 1
Henderson 1
Ontario 1
TIN Mill
IP Mill
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U.S. Containerboard Mill Scale IP + TIN Combined
820
580
740
0
200
400
600
800
TIN IP + TIN Before
Divestitures
IP + TIN After
Divestitures
Avera
ge T
ho
usan
d T
on
s P
er
Mill
# of Mills 7 19 16
Combined
Average
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Combined Converting Assets 11+ Million Ton Run Rate
New Profile ~ 180 Facilities
Over 140+ Box Plants
15
Key Observations Temple-Inland Mills & Box Plants
Talented, Engaged People
Quality Assets
Good Scale
Well Maintained
Supply Chain Integration Opportunities
Increased Capabilities in Attractive End-Use Segments
16
Significant Targeted Synergies Reaffirm at least $300 Million
S G & A Eliminate Duplication
IT Integration
Mills Grade / Machine Mix Optimization
Efficiency Improvements
Supply Chain Logistics Optimization
Purchasing Consolidation
Box Plants System Streamlining
Customer and Segment Optimization
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At least $300MM of Synergies Intact Headroom offsets divestiture losses
EX
PE
CT
ED
SY
NE
RG
IES
$300MM
Target
Modest Supply
Chain Impact
Planned Upside: Mill Efficiency
Improvements
Box Plant
Customer &
Segment
Optimization
Reduction
due to Divestitures
Identified
Headroom $300MM
Target
Reaffirmed
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Strategic Rationale Strengthening Our Packaging Business
IP North
American
Industrial
Packaging
TIN
Packaging
Business1
Mill
Divestitures
Run Rate
Synergies
IP + TIN
after Divestitures
& Run Rate
Synergies
2011
Sales
($ Billion)
$8.6 $3.3 - - $11.9
2011
EBITDA
($ Billion)
$1.6 $0.4 ($0.1)2 $0.3 $2.2
2011
EBITDA
Margin
18% 12% - - 18%
Capacity
(000 TPY) 10,000 4,000 (970) - 13,030
Earnings from continuing operations before special items
1 TIN reflects 9M11 actual results annualized; EBITDA includes overhead allocation
2 Mill divesture estimate reflects EBITDA associated with 970M tons at avg. EBITDA/Ton
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Strengthening International Paper Combination Strongly Cash Accretive
International
Paper Temple-Inland1
IP + TIN
after Divestitures &
Run Rate Synergies
2011 Sales
($ Billion) $26.0 $4.0 $30.0
2011 EBITDA
($ Billion) $3.7 $0.4 $4.33
2011 EBITDA
Margin 14% 10% 14%3
2011 Free
Cash Flow2
($ Billion)
$1.7 $0.1 $1.93
Earnings from continuing operations before special items 1 TIN reflects 9M11 actual results annualized 2 FCF = Total Funds From Ops – CapEx; IP+TIN FCF reduced by ~$75 million incremental interest expense, net of taxes 3 Includes ($0.1) billion of mill divestitures and $0.3 billion in run rate synergies, net of taxes
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External Environment Timing is right
Better U.S. economic data /demand
U.S. Box demand improving – January year over year IP box sales up nearly 4%
Very strong interest for containerboard assets held for sale
Global Containerboard markets steady
Export prices have stabilized / begun to recover
Signs of improving housing market should positively impact building products results and potential valuation
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373 378
390 396
405 401
380 379 380
391 391 395 390
374
345
357 359 359 366
381 385
250
275
300
325
350
375
400
425
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
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11
2012
2013
2014
2015
BS
F
RISI Forecast
2012-2015 Demand Still Recovering
Source: Fibre Box Association
2012-2015: 2.3% CAGR (RISI)
U.S. Box Shipments
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New Segment & Global Portfolio IP + TIN Combined
Industrial Packaging
50% Printing Papers
35%
Consumer Packaging
13%
Distribution 2%
North America
75%
Russia 9%
Europe 8%
Brazil 7%
Asia 1%
EBITDA
by Segment EBITDA
by Region
Based on 2011 earnings from continuing operations before special items; Combined EBITDA reflects TIN 9M11 actual results
annualized and includes ($100) million of mill divestitures and $300 million in run rate synergies.
Russia includes the Svetogorsk mill and IP’s share of Ilim JV equity earnings.
IP’s share of Ilim JV equity earnings reflect approximate proportional adjustments for interest & tax.
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Path Forward
Close Transaction (week of Feb 13Th)
Day ONE
Execute Integration Plan
Deliver Synergies on or ahead of Projected Timeline
Divest Assets / Enter into Sale Agreement(s)
Receive Court Approval of Consent Decree
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Acquisition Summary
Consistent with strategy
Financially attractive
- Neutral to EPS over 10 months of 20121
- Accretive in 2013 with ramp up of synergies
- Highly accretive over time
Strengthens IP’s portfolio
Makes IP’s good Industrial Packaging business an excellent one
Significant synergy opportunities
Creates shareholder value 1 Slightly accretive excluding building products
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Investor Relations Contacts
Glenn R. Landau 901-419-1731
Emily Nix 901-419-4987
Media Contact
Tom Ryan 901-419-4333
Contacts
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