
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2007			2006			2007			2006			2008			2007
Net Sales	$	5,541		$	5,429		$	16,049		$	16,671		$	5,668		$	5,217

Costs and Expenses
Cost of products sold		4,086			3,906			11,818			12,345			4,261			3,851
Selling and administrative expenses		455			465			1,331			1,394			472			435
Depreciation, amortization and cost of timber harvested		277			287			808			883			286			262
Distribution expenses		255			267			765			828			285			256
Taxes other than payroll and income taxes		42			52			131			160			44			42
Restructuring and other charges		42			92			86			189			42			18
Insurance recoveries		—			—			—			(19	)
Forestland sales		(9	)		(304	)		(9	)		(366	)
Net losses (gains) on sales and impairments of businesses		1			(74	)		(314	)		1,346
Net gains on sales and impairments of businesses														(1	)		(314	)
Interest expense, net		77			144			218			441			81			61

Earnings (Loss) From Continuing Operations Before Income Taxes and Minority Interest		315			594			1,215			(530	)
Earnings From Continuing Operations Before Income Taxes, Equity Earnings and Minority Interest														198			606
Income tax provision		89			204			321			221			59			143
Equity earnings, net of taxes														16			—
Minority interest expense, net of taxes		6			5			17			14			5			6

Earnings (Loss) From Continuing Operations		220			385			877			(765	)
Earnings From Continuing Operations														150			457
Discontinued operations, net of taxes and minority interest		(3	)		(161	)		(36	)		(164	)		(17	)		(23	)

Net Earnings (Loss)	$	217		$	224		$	841		$	(929	)
Net Earnings													$	133		$	434

Basic Earnings (Loss) Per Common Share
Earnings (loss) from continuing operations	$	0.52		$	0.81		$	2.03		$	(1.57	)
Basic Earnings Per Common Share
Earnings from continuing operations													$	0.36		$	1.03
Discontinued operations		(0.01	)		(0.34	)		(0.08	)		(0.34	)		(0.04	)		(0.05	)

Net earnings (loss)	$	0.51		$	0.47		$	1.95		$	(1.91	)
Net earnings													$	0.32		$	0.98

Diluted Earnings (Loss) Per Common Share
Earnings (loss) from continuing operations	$	0.52		$	0.80		$	2.01		$	(1.57	)
Diluted Earnings Per Common Share
Earnings from continuing operations													$	0.35		$	1.02
Discontinued operations		(0.01	)		(0.34	)		(0.08	)		(0.34	)		(0.04	)		(0.05	)

Net earnings (loss)	$	0.51		$	0.46		$	1.93		$	(1.91	)
Net earnings													$	0.31		$	0.97

Average Shares of Common Stock Outstanding - assuming dilution		425.6			484.9			435.7			485.2			423.3			448.4

Cash Dividends Per Common Share	$	0.25		$	0.25		$	0.75		$	0.75		$	0.25		$	0.25


	September 30, 2007			December 31, 2006			March 31, 2008			December 31, 2007
	(Unaudited)						(Unaudited)
Assets
Current Assets
Cash and temporary investments	$	1,702		$	1,624		$	880		$	905
Accounts and notes receivable, net		3,080			2,704			3,206			3,152
Inventories		2,030			1,909			2,147			2,071
Assets of businesses held for sale		21			1,778			—			24
Deferred income tax assets		516			490			206			213
Other current assets		156			132			273			370

Total Current Assets		7,505			8,637			6,712			6,735

Plants, Properties and Equipment, net		9,842			8,993			10,290			10,141
Forestlands		735			259			778			770
Investments		608			641			1,317			1,276
Goodwill		3,652			2,929			3,658			3,650
Assets Held for Exchange		—			1,324
Deferred Charges and Other Assets		1,373			1,251			1,600			1,587

Total Assets	$	23,715		$	24,034		$	24,355		$	24,159

Liabilities and Common Shareholders’ Equity
Current Liabilities
Notes payable and current maturities of long-term debt	$	586		$	692		$	727		$	267
Accounts payable		2,070			1,907			2,184			2,145
Accrued payroll and benefits		347			466			279			400
Liabilities of businesses held for sale		5			333			—			4
Other accrued liabilities		1,021			1,243			955			1,026

Total Current Liabilities		4,029			4,641			4,145			3,842

Long-Term Debt		6,191			6,531			6,037			6,353
Deferred Income Taxes		2,751			2,233			3,117			2,919
Other Liabilities		2,567			2,453			1,823			2,145
Minority Interest		221			213			234			228
Common Shareholders’ Equity
Common stock, $1 par value, 493.6 shares in 2007 and 493.3 shares in 2006		494			493
Common stock, $1 par value, 493.6 shares in 2008 and 2007								494			494
Paid-in capital		6,718			6,735			6,671			6,755
Retained earnings		4,154			3,737			4,396			4,375
Accumulated other comprehensive loss		(1,030	)		(1,564	)		(179	)		(471	)

		10,336			9,401			11,382			11,153
Less: Common stock held in treasury, at cost, 65.4 shares in 2007 and 39.8 shares in 2006		2,380			1,438
Less: Common stock held in treasury, at cost, 65.9 shares in 2008 and 68.4 shares in 2007								2,383			2,481

Total Common Shareholders’ Equity		7,956			7,963			8,999			8,672

Total Liabilities and Common Shareholders’ Equity	$	23,715		$	24,034		$	24,355		$	24,159


	Nine Months Ended September 30,						Three Months Ended March 31,
	2007			2006			2008			2007
Operating Activities
Net earnings (loss)	$	841		$	(929	)
Net earnings							$	133		$	434
Discontinued operations, net of taxes and minority interest		36			164			17			23

Earnings (loss) from continuing operations		877			(765	)
Earnings from continuing operations								150			457
Depreciation, amortization and cost of timber harvested		808			883			286			262
Deferred income tax expense, net		125			133
Deferred income tax (benefit) expense, net								(130	)		74
Restructuring and other charges		86			189			42			18
Payments related to restructuring and legal reserves		(60	)		(65	)		(22	)		(22	)
Insurance recoveries		—			(19	)
Net (gains) losses on sales and impairments of businesses		(314	)		1,346
Gain on sales of forestlands		(9	)		(366	)
Net gains on sales and impairments of businesses								(1	)		(314	)
Equity earnings, net								(16	)		—
Periodic pension expense, net		158			283			28			52
Other, net		145			184			81			51
Changes in current assets and liabilities
Accounts and notes receivable		(6	)		(249	)		5			(81	)
Inventories		(91	)		(32	)		(32	)		(129	)
Accounts payable and accrued liabilities		(313	)		152			(75	)		(61	)
Other		1			(182	)		118			(11	)

Cash provided by operations - continuing operations		1,407			1,492			434			296
Cash (used for) provided by operations - discontinued operations		(56	)		146
Cash used for operations - discontinued operations								—			(44	)

Cash Provided by Operations		1,351			1,638			434			252

Investment Activities
Invested in capital projects		(804	)		(764	)		(215	)		(178	)
Acquisitions, net of cash acquired		(227	)		—
Proceeds from divestititures		1,675			2,163			14			1,633
Other		(135	)		(241	)		(140	)		(118	)

Cash provided by investment activities - continuing operations		509			1,158
Cash (used for) provided by investment activities - continuing operations								(341	)		1,337
Cash used for investment activities - discontinued operations		(12	)		(57	)		—			(11	)

Cash Provided by Investment Activities		497			1,101
Cash (Used for) Provided by Investment Activities								(341	)		1,326

Financing Activities
Repurchases of common stock		(1,124	)		(1,385	)
Repurchases of common stock and payments of restricted stock tax withholding								(47	)		(398	)
Issuance of common stock		122			26			1			30
Issuance of debt		15			1,258			83			—
Reduction of debt		(528	)		(3,156	)		(26	)		(362	)
Change in book overdrafts		(3	)		(50	)		(39	)		20
Dividends paid		(330	)		(372	)		(112	)		(114	)
Other		—			(2	)		—			(3	)

Cash used for financing activities - continuing operations		(1,848	)		(3,681	)
Cash provided by financing activities - discontinued operations		—			22

Cash Used for Financing Activities		(1,848	)		(3,659	)		(140	)		(827	)

Effect of Exchange Rate Changes on Cash - Continuing operations		78			14
Effect of Exchange Rate Changes on Cash - Discontinued operations		—			1
Effect of Exchange Rate Changes on Cash								22			15

Change in Cash and Temporary Investments		78			(905	)		(25	)		766
Cash and Temporary Investments
Beginning of the period		1,624			1,641			905			1,624

End of the period	$	1,702		$	736		$	880		$	2,390

The accompanying notes are an ~~intergral~~integral part of these financial statements.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of Management, include all adjustments that are necessary for the fair presentation of the Company’s financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed herein, such adjustments are of a normal, recurring nature. Results for the first ~~nine~~three months of the year may not necessarily be indicative of full year results. It is suggested that these consolidated financial statements be read in conjunction with the audited financial statements and the notes thereto included in International Paper’s (the Company) Annual Report on Form 10-K for the year ended December 31, ~~2006, and in International Paper’s Current Report on Form 8-K filed on August 14,~~ 2007 ~~to update the historical financial statements included in the Company’s Form 10-K for the year ended December 31, 2006, both of~~ which ~~have~~has previously been filed with the Securities and Exchange Commission.

Financial information by industry segment is presented on page ~~24. In connection with sales~~19. Effective January 1, 2008, the Company changed its method of ~~businesses under~~allocating corporate overhead to increase the ~~Transformation Plan and the resulting changes in the Company’s business portfolio, a review of the Company’s operating~~expense amounts allocated to its business segments ~~was conducted during the first quarter of 2007 under the provisions of Statement of Financial Accounting Standards No. 131. While this review resulted~~ in ~~no changes in the Company’s reportable segments, a decision was made~~reports reviewed by its chief executive officer to ~~include the Company’s European coated paperboard operations, previously reported in the Printing Papers segment,~~facilitate performance comparisons with other ~~similar operations in~~companies. Accordingly, the ~~Consumer Packaging segment. Accordingly, prior period~~Company has revised its presentation of industry segment ~~information has been revised~~operating profit to reflect this ~~presentation.~~change in allocation method, and has restated all comparative prior period information on this basis, reducing reported industry segment operating profits by $127 million and $145 million for the three months ended March 31, 2007 and December 31, 2007, respectively, with no effect on reported net income.

Basic earnings per common share from continuing operations are computed by dividing earnings from continuing operations by the weighted average number of common shares outstanding. Diluted earnings per common share from continuing operations are computed assuming that all potentially dilutive securities, including “in-the-money” stock options, are converted into common shares at the beginning of each period. A reconciliation of the amounts included in the computation of earnings per common share from continuing operations, and diluted earnings per common share from continuing operations is as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

In millions, except per share amounts
   2007    2006    2007    2006
Earnings (loss) from continuing operations
   $ 220    $ 385    $ 877    $ (765 )
Effect of dilutive securities
   —      �� —      —      —

Earnings (loss) from continuing operations - assuming dilution
   $ 220    $ 385    $ 877    $ (765 )

Average common shares outstanding
   422.3    482.5    431.8    485.2
Effect of dilutive securities

Restricted stock performance share plan
   2.9    2.1    3.4    —
Stock options (a)
   0.4    0.3    0.5    —

Average common shares outstanding - assuming dilution
   425.6    484.9    435.7    485.2

Earnings (loss) per common share from continuing operations
   $ 0.52    $ 0.81    $ 2.03    $ (1.57 )

Diluted earnings (loss) per common share from continuing operations
   $ 0.52    $ 0.80    $ 2.01    $ (1.57 )

During the ~~third~~first quarter of ~~2007,~~2008, restructuring and other charges totaling $42 million before taxes ($26 million after taxes) were ~~recorded. These charges consisted of~~recorded, including a ~~pre-tax~~$40 million charge ~~of $27 million~~before taxes ($~~17 million after taxes) of accelerated depreciation charges for the Terre Haute mill, a pre-tax charge of $10 million ($6~~25 million after taxes) for ~~closure~~adjustments of legal reserves ~~associated with the Terre Haute mill,~~(see Note 9), a ~~pre-tax~~$5 million charge ~~of $3 million~~before taxes ($23 million after taxes) related to the ~~restructuring~~reorganization of the Company’s ~~Brazil~~Shorewood operations in Canada and a ~~pre-tax charge of $2~~$3 million credit before taxes ($12 million after taxes) for ~~organizational restructuring programs~~adjustments to previously recorded reserves associated with the Company’s ~~Transformation Plan. Additionally, a $3 million increase to the income tax provision was recorded related to the settlement of a prior year tax audit.~~

~~During the second quarter of 2007, restructuring and other charges totaling $26 million before taxes ($16 million after taxes) were recorded for~~ organizational restructuring ~~programs associated with the Company’s Transformation Plan, including $17 million ($11 million after taxes) of accelerated depreciation expense for long-lived assets being removed from service.~~programs.

During the first quarter of 2007, restructuring and other charges totaling $18 million before taxes ($11 million after taxes) were recorded for organizational restructuring programs associated with the Company’s Transformation Plan, including $12 million before taxes ($7 million after taxes) of accelerated depreciation charges for long-lived assets being removed from service. Additionally, a $2 million pre-tax credit ($1 million after taxes) was recorded in Interest expense, net, for interest received from the Canadian government on refunds of prior-year softwood lumber duties.

~~During~~On March 17, 2008, International Paper announced that it had signed an agreement with Weyerhaeuser Company to purchase its Containerboard, Packaging and Recycling (CBPR) business for $6 billion in cash, subject to post-closing adjustments. International Paper expects to finance the purchase with debt financing. The business will become part of International Paper’s North American Packaging business. The transaction has been approved by United States regulators but additional pre-merger approvals are required in other jurisdictions. The acquisition is expected to close in the third quarter of ~~2006, restructuring~~2008, subject to customary closing conditions. The agreement provides that a termination fee of $100 million could become payable to Weyerhaeuser Company if International Paper were unable to obtain sufficient financing for the acquisition and certain other ~~charges totaling $92 million before taxes ($56 million after taxes)~~conditions were recorded. These charges consisted of a pre-tax charge of $57 million ($35 million after taxes), including severance and other termination benefit costs of approximately $15 million, $25 million of lease termination costs and $17 million of other charges associated with the Company’s Transformation Plan, and a $35 million pre-tax charge ($21 million after taxes) for adjustments to legal reserves (see Note 9).met.

During the second quarter of 2006, restructuring and other charges totaling $53 million before taxes ($32 million after taxes) were recorded. Included in these charges were a pre-tax charge of $49 million ($29 million after taxes) for organizational restructuring programs, including severance and other termination benefits costs of approximately $31 million ($19 million after taxes) and other charges associated with the Company’s Transformation Plan, and a $4 million pre-tax charge ($3 million after taxes) for legal settlements.

During the first quarter of 2006, restructuring and other charges totaling $44 million before taxes ($27 million after taxes) were recorded. Included in these charges were a pre-tax charge of $18 million ($11 million after taxes) for organizational restructuring programs, principally severance costs associated with the Company’s Transformation Plan, a pre-tax charge of $8 million ($5 million after taxes) for losses on early extinguishment of debt, and a pre-tax charge of $18 million ($11 million after taxes) for adjustments to legal reserves. Also recorded was a pre-tax credit of $19 million ($12 million after taxes) for net insurance recoveries related to the hardboard siding and roofing litigation (see Note 9) and a charge of $3 million for tax adjustments.

On August 24, 2007, International Paper completed the acquisition of Central Lewmar LLC, ~~one of the largest~~a privately held paper and packaging ~~distributors~~distributor in the United States, for $189 million. ~~International Paper’s distribution business, xpedx, will operate Central Lewmar as a business unit within its multiple brand strategy.~~

~~The following table summarizes~~During the ~~preliminary~~first quarter of 2008, the Company finalized the allocation of the purchase price to the fair value of the assets and liabilities ~~acquired. The final allocation is expected to be completed by March 31, 2008:~~acquired as follows:


*In millions*
Accounts receivable	$	114	$	116
Inventory		31		31
Other current assets		7		7
Plants, properties and equipment, net		3		2
Goodwill		96		78
Deferred tax asset				5
Other intangible assets		15		33
Other long-term assets		3

Total assets acquired		269		272

Other current liabilities		79		79
Other liabilities		1		4

Total liabilities assumed		80		83

Net assets acquired	$	189	$	189

The identifiable intangible assets acquired in connection with the Central Lewmar acquisition included the following:

Central Lewmar’s financial position and results of operations have been included in International Paper’s consolidated financial statements since its acquisition on August 24, 2007.

In October 2005, International Paper acquired approximately 65% of Compagnie Marocaine des Cartons et des Papiers (CMCP) in Morocco. On July 31, 2007, the Company completed the purchase of the remaining shares of CMCP for approximately $40 million. The Moroccan packaging company is now wholly owned by International Paper and fully managed as part of the Company’s European Container business.Exchanges:

~~Total identifiable intangible assets acquired in connection with both of the CMCP acquisitions included the following:~~

On February 1, 2007, the Company completed the non-cash exchange of certain pulp and paper assets in Brazil with Votorantim Celulose e Papel S.A. (VCP) that had been announced in the fourth quarter of 2006. The Company exchanged its in-progress pulp mill project and certain forestland operations including approximately 100,000 hectares of surrounding forestlands in Tres Lagoas, Brazil, for VCP’s Luiz Antonio uncoated paper and pulp mill and approximately 55,000 hectares of forestlands in the state of Sao Paulo, Brazil. The exchange improved the Company’s competitive position by adding a globally cost-competitive paper mill, thereby expanding the Company’s uncoated freesheet capacity in Latin America and providing additional growth opportunities in the region. The exchange was accounted for based on the fair value of assets exchanged, resulting in the recognition in the 2007 first quarter of a pre-tax gain of $205 million ($164 million after taxes) representing the difference between the fair value and book value of the assets exchanged. This gain is included in Net ~~losses (gains)~~gains on sales and impairments of businesses in the accompanying consolidated statement of operations. ~~The net assets exchanged were included as Assets held for exchange in the accompanying consolidated balance sheet at December 31, 2006.~~

The following table summarizes the ~~preliminary~~final allocation of the fair value of the assets exchanged to the assets and liabilities acquired. ~~The final allocation is expected to be completed by December 31, 2007:~~


*In millions*
Accounts receivable	$	55
Inventory		19
Other current assets		40
Plants, properties and equipment, net		582
Forestlands		434
Goodwill		521
Other intangible assets		154
Other long-term assets		9

Total assets acquired		1,814

Other current liabilities		18
Deferred income taxes		270
Other liabilities		6

Total liabilities assumed		294

Net assets acquired	$	1,520


*In millions*	Estimated Fair Value		Average Remaining Useful Life	Estimated Fair Value		Average Useful Life
Asset Class:
Non-competition agreement	$	10	2 years	$	10	2 years
Customer relationships		144	10-20 years
Customer lists					144	10 - 20 years

Total	$	154		$	154

The following unaudited pro forma information for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 ~~and 2006~~ presents the results of operations of International Paper as if ~~these acquisitions~~the Central Lewmar acquisition and the Luiz Antonio asset exchange had occurred on January 1, ~~2006.~~2007. This pro forma information does not purport to represent International Paper’s actual results of operations if the transactions described above would have occurred on January 1, ~~2006,~~2007, nor is it necessarily indicative of future results.

On October ~~and November 2006,~~5, 2007, International Paper ~~paid~~and Ilim Holding S.A. announced the completion of the formation of a 50:50 joint venture to operate in Russia as Ilim Group. To form the joint venture, International Paper purchased 50% of Ilim Holding S.A. (Ilim) for approximately ~~$82~~$620 million, including $545 million in cash and $75 million of notes payable. The Company’s investment in Ilim totaled $697 million at March 31, 2008, which is approximately $350 million higher than the Company’s share of the underlying net assets of Ilim. Based on initial estimates, approximately $150 million of this basis difference, principally related to the estimated fair value write-up of Ilim plant, property and equipment, is being amortized as a reduction of reported net income over the estimated remaining useful lives of the related assets. An estimated $200 million of the difference represents estimated goodwill.

International Paper is accounting for its investment in Ilim, a ~~50% interest~~separate reportable industry segment, using the equity method of accounting. Due to the complex organization structure of Ilim’s operations, and the extended time required for Ilim to prepare consolidated financial information in accordance with accounting principles generally accepted in the ~~International Paper & Sun Cartonboard Co., Ltd. joint venture that currently operates two coated paperboard machines in Yanzhou City, China. In December 2006, a 50% interest with~~United States, the ~~same partner was acquired in a second joint venture, Shandong International Paper & Sun Coated Paperboard Co., Ltd., for approximately $28 million. The operating results~~Company is reporting its share of ~~these consolidated joint ventures did not have a material effect on the Company’s consolidated~~Ilim’s results of operations inon a one-quarter lag basis. Accordingly, the accompanying consolidated statement of operations for the three months ended March 31, 2008 includes the Company’s share of Ilim’s operating results for the three-month period ended December 31, 2007 ~~or 2006.~~under the caption Equity earnings, net of taxes.

During the ~~third~~first quarter of ~~2007,~~2008, the Company ~~completed~~recorded a pre-tax charge of $25 million ($16 million after taxes) related to the final settlement of a post-closing adjustment to the purchase price received by the Company for the sale of ~~the remainder of~~ its ~~non-U.S.~~ Beverage Packaging ~~business.~~

~~During the second quarter of 2007, the Company recorded pre-tax charges of $7~~business (see Note 9), and a $2 million charge before taxes ($41 million after taxes) ~~and $4 million ($3 million after taxes) relating~~for operating losses related to ~~adjustments to estimated losses on the sales of its Wood Products and Beverage Packaging businesses, respectively.~~certain wood products facilities.

During the first quarter of 2007, the Company recorded pre-tax credits of $21 million ($9 million after taxes) and $6 million ($4 million after taxes) relating to the sales of its Wood Products and Kraft Papers businesses, respectively. In addition, a $15 million pre-tax charge ($39 million after taxes) was recorded for adjustments to the loss on the completion of the sale of most of the Beverage Packaging business. Finally, a pre-tax credit of approximately $10 million ($6 million after taxes) was recorded for refunds received from the Canadian government of duties paid by the Company’s former Weldwood of Canada Limited business.

During the fourth quarter of 2006, the Company entered into an agreement to sell its Beverage Packaging business to Carter Holt Harvey Limited for approximately $500 million, subject to certain adjustments (see Note 9). The sale of the North American Beverage Packaging operations subsequently closed on January 31, 2007, and the sale of the remaining non-U.S. operations closed in the third quarter of 2007.

Also during the fourth quarter of 2006, the Company entered into separate agreements for the sale of 13 lumber mills for approximately $325 million, and five wood products plants for approximately $237 million, both subject to various adjustments at closing. Both of the sales were completed in March 2007.

The Company determined that the accounting requirements for both businesses under Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” as discontinued operations were met. Accordingly, the operating results for these businesses are included in Discontinued operations for all periods presented.

~~Revenues, earnings(loss) and earnings(loss) per share related to the Beverage Packaging business were as follows:~~

~~Revenues, earnings(loss) and earnings(loss) per share related to the Wood Products business were as follows:~~

During the 2006 third quarter, International Paper completed the sale of its Brazilian Coated Papers business. The operating results of this business are included in Discontinued operations for all applicable periods presented.

~~Revenues, earnings and earnings per share related to the Brazilian Coated Papers business were as follows:~~

During the first quarter of 2006, the Company determined that the accounting requirements under SFAS No. 144 for reporting the Kraft Papers business as a discontinued operation were met. Accordingly, a $100 million pre-tax charge ($61 million after taxes) was recorded to reduce the carrying value of the net assets of this business to their estimated fair value. The sale of this business was completed in January 2007. The operating results of this business are included in Discontinued operations for all applicable periods presented.

~~Revenues, earnings(loss) and earnings(loss) per share related to the Kraft Papers business were as follows:~~

During the third quarter of 2007, a pre-tax gain of $9 million ($5 million after taxes) was recorded to reduce estimated transaction costs accrued in connection with the 2006 Transformation Plan forestland sales.

During the third quarter of 2006, the Company completed the sales of approximately 476,000 acres of forestlands for approximately $401 million, including $265 million in cash and $136 million of installment notes, resulting in a pre-tax gain of $304 million ($185 million after taxes).

During the second quarter of 2006, the Company completed the sales of approximately 76,000 acres of forestlands for approximately $97 million, resulting in a pre-tax gain of approximately $62 million ($39 million after taxes).

During the ~~second~~first quarter of ~~2007,~~2008, a $1 million ~~net~~ pre-tax credit ~~(a $7~~($1 million ~~charge~~ after ~~taxes, including a $5 million tax charge in Brazil)~~taxes) was recorded to adjust previously estimated gains/losses of businesses previously sold.

During the first quarter of 2007, a $103 million pre-tax gain ($96 million after taxes) was recorded upon the completion of the sale of the Company’s Arizona Chemical business. As part of the transaction, International Paper acquired a minority interest of approximately 10% in the resulting new entity. Since the interest acquired represents significant continuing involvement in the operations of the business under U.S. Generally Accepted Accounting Principles, the operating results for Arizona Chemical have been included in continuing operations in the accompanying consolidated statement of operations through the date of sale.

In addition, during the first quarter of 2007, a $6 million pre-tax credit ($4 million after taxes) was recorded to adjust previously estimated gains/losses of businesses previously sold.

These gains are included, along with the gain on the exchange for the Luiz Antonio mill in Brazil (see Note 4), in Net ~~losses (gains)~~gains on sales and impairments of businesses in the accompanying consolidated statement of operations.

During the third quarter of 2006, a net pre-tax gain of $74 million ($44 million after taxes) was recorded for losses (gains) on sales and impairments of businesses. This net gain included the recognition of a previously deferred $110 million pre-tax gain ($68 million after taxes) related to a 2004 sale of forestlands in Maine, a pre-tax charge of $38 million ($23 million after taxes) to reflect the completion of the sale of the Company’s Coated and Supercalendered Papers business in the 2006 third quarter, and a net pre-tax gain of $2 million (a $1 million loss after taxes) related to other smaller sales.

During the 2006 second quarter, the Company recorded a pre-tax charge of $85 million ($53 million after taxes) to adjust the carrying value of the assets of the Company’s Coated and Supercalendered Papers business to their estimated fair value. This charge, together with a pre-tax charge of $52 million ($37 million after taxes) recorded to write down the carrying value of certain assets in Brazil to their estimated fair value, is included in Net losses (gains) on sales and impairments of businesses in the accompanying consolidated statement of operations.

During the first quarter, a pre-tax charge of $1.3 billion was recorded to write down the assets of the Company’s Coated and Supercalendered Papers business to their estimated fair value, as management had committed to a plan to sell this business. In addition, other pre-tax charges totaling $3 million ($2 million after taxes) were recorded to adjust estimated losses of certain smaller operations held for sale.

At December 31, 2006, assets and liabilities of businesses held for sale included the Kraft Papers business, the Beverage Packaging business, the Wood Products business, and the Arizona Chemical business, and consisted of:

Temporary investments with an original maturity of three months or less are treated as cash equivalents and are stated at cost. Temporary investments totaled ~~$961~~$598 million and ~~$1.4 billion~~$578 million at ~~September 30, 2007~~March 31, 2008 and December 31, ~~2006,~~2007, respectively.


*In millions*	September 30, 2007		December 31, 2006		March 31, 2008		December 31, 2007
Raw materials	$	315	$	265	$	409	$	320
Finished pulp, paper and packaging products		1,372		1,341		1,380		1,413
Operating supplies		304		271		314		308
Other		39		32		44		30

Total	$	2,030	$	1,909	$	2,147	$	2,071

Interest payments made during the nine-month periods ended September 30, 2007 and 2006 were $344 million and $507 million, respectively. Capitalized interest costs were $25 million and $13 million for the nine months ended September 30, 2007 and 2006, respectively. Total interest expenseAccumulated depreciation was $360 million for the first nine months of 2007 and $498 million for the first nine months of 2006. Distributions under preferred securities paid by Southeast Timber, Inc., a consolidated subsidiary of International Paper, were $10 million during the first nine months of both 2007 and 2006. The expense related to these preferred securities was included in minority interest expense in the consolidated statement of operations. Income tax payments of $243 million and $109 million were made during the first nine months of 2007 and 2006, respectively.

~~Accumulated depreciation was $14.7~~$15.3 billion at ~~September 30, 2007~~March 31, 2008 and ~~$14.0~~$14.9 billion at December 31, ~~2006.~~2007. Theallowance for doubtful accounts was ~~$101~~$102 million at ~~September 30, 2007~~March 31, 2008 and ~~$85~~$95 million at December 31, ~~2006.~~2007.

The following tables present changes in ~~the~~ goodwill balances as allocated to each business segment for the ~~nine-month~~three-month periods ended ~~September 30, 2007~~March 31, 2008 and ~~2006:~~2007:


*In millions*	Balance December 31, 2006		Reclassifications and Other (a)		Additions/ (Reductions)			Balance September 30, 2007		Balance December 31, 2007		Reclassifications and Other (a)		Additions/ (Reductions)			Balance March 31, 2008
Printing Papers	$	1,441	$	81	$	531	(b)	$	2,053	$	2,043	$	11	$	(7	)(b)	$	2,047
Industrial Packaging		670		3		(6	)(c)		667		683		3		—			686
Consumer Packaging		510		4		14	(d)		528		530		4		—			534
Distribution		308		—		96	(e)		404		394		—		(3	)(c)		391

Total	$	2,929	$	88	$	635		$	3,652	$	3,650	$	18	$	(10	)	$	3,658

~~The following table presents an analysis of~~There was no material activity related toasset retirement obligationsduring either the first quarter of 2008 or 2007.

Interest payments made during the three-month periods ended March 31, 2008 and 2007 were $86 million and $96 million, respectively. Capitalized interest costs were $4 million and $11 million for the three months ended March 31, 2008 and 2007, respectively.Total interest expense was $99 million for the first three months of 2008 and $112 million for the first three months of 2007.Interest income was $18 million and $51 million for the three months ended March 31, 2008 and 2007, respectively. Interest expense and interest income in 2008 and 2007 exclude approximately $74 million and $83 million, respectively, related to investments in and borrowings from variable interest entities for which the Company has a legal right of offset.Distributions under preferred securitiespaid by Southeast Timber, Inc., a consolidated subsidiary of International Paper, were $3 million during the first three months of both 2008 and 2007. The expense related to these preferred securities was included in Minority interest expense in the consolidated statement of operations.Income tax payments of $19 million and $33 million were made during the first three months of 2008 and 2007, respectively.

Equity earnings, net of taxes includes the Company’s ~~asset retirement obligations:~~share of earnings from its investment in Ilim Holding S.A. ($17 million) and certain other smaller investments.

~~This obligation is included in Other liabilities in the accompanying consolidated balance sheet.~~

In accordance with the provisions of FASB Staff Position FAS 157-2 (see Note 7), the Company has partially applied the provisions of SFAS No. 157 only to its financial assets and liabilities recorded at fair value, which consist of derivative contracts, including interest rate swaps, foreign currency forward contracts, and other financial instruments that are used to hedge exposures to interest rate, commodity and currency risks. For these financial instruments, fair value is determined at each balance sheet date using an income approach, which consists of a discounted cash flow model that takes into account the present value of future cash flows under the terms of the contracts using current market information as of the reporting date, such as prevailing interest rates and foreign currency spot and forward rates. The following table provides a summary of the inputs used to develop these estimated fair values under the hierarchy defined in SFAS No. 157:


	Fair Value Measurements at March 31, 2008 Using
*In millions*	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Interest rate swaps (a)	$	69	$	—	$	69	$	—
Commodity forward contracts (b)		32		—		32		—
Foreign currency forward contracts (c)		126		—		126		—

Total	$	227	$	—	$	227	$	—

Liabilities:
Foreign currency forward contracts (d)	$	6	$	—	$	6	$	—

Total	$	6	$	—	$	6	$	—

In April 2008, the Financial Accounting Standards Board (FASB) issued FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets,” which amends the factors that should be considered in developing renewal or extension assumptions used in determining the useful life of a recognized intangible asset. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008 (calendar year 2009). The Company is currently evaluating the provisions of this FSP.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – An Amendment of FASB Statement No. 133.” This statement requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of, and gains and losses on, derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. Statement No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008 (calendar year 2009). The Company is currently evaluating the provisions of this statement.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” Statement No. 141(R) establishes principles and requirements for how an acquiring entity in a business combination recognizes and measures the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. This statement will be effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (calendar year 2009). The Company is currently evaluating the provisions of this statement.

In December 2007, the FASB also issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51.” This statement clarifies that a noncontrolling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and noncontrolling interest, with disclosure on the face of the consolidated income statement of the amounts attributed to the parent and to the noncontrolling interest. This statement will be effective prospectively for fiscal years beginning after December 15, 2008 (calendar year 2009), with presentation and disclosure requirements applied retrospectively to comparative financial statements. The Company is currently evaluating the provisions of this statement.

In February 2007, the ~~Financial Accounting Standards Board (FASB)~~FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115.” This statement permits an entity to measure certain financial assets and financial liabilities at fair value, which would result in the reporting of unrealized gains and losses in earnings at each subsequent reporting date. The fair value option may be elected on an instrument-by-instrument basis, with few exceptions, as long as it is applied to the instrument in its entirety. The statement establishes presentation and disclosure requirements to help financial statement users understand the effect of an entity’s election on its earnings, but does not eliminate the disclosure requirements of other accounting standards. This statement will be effective as of the beginning of the first fiscal year that begins after November 15, 2007 (calendar year 2008), and is to be applied prospectively as of the beginning of the year in which it is initially applied. The Company ~~is currently evaluating~~elected not to apply the ~~provisions~~fair value option to any of ~~this statement.~~its financial assets or liabilities.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which provides a single definition of fair value, together with a framework for measuring it, and requires additional ~~disclosure~~disclosures about the use of fair value to measure assets and liabilities. It also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. ~~This statement will be~~In February 2008, the FASB issued FSP FAS 157-2 which delays the effective date of Statement No. 157 for ~~financial statements issued for~~all nonrecurring fair value measurements of nonfinancial assets and liabilities until fiscal years beginning after November 15, ~~2007~~2008 (calendar year ~~2008),~~2009). The Company partially adopted the provisions of SFAS No. 157 with respect to its financial assets and ~~interim periods within those fiscal years, and is to be applied prospectively as of the beginning of the year in which it is initially applied.~~liabilities that are measured at fair value effective January 1, 2008 (see Note 6). The Company is currently evaluating the ~~provisions of this statement.~~

In September 2006, the FASB issued FASB Staff Position (FSP) No. AUG AIR-1, “Accounting for Planned Major Maintenance Activities,” which permits the application of three alternative methods of accounting for planned major maintenance activities: the direct expense, built-in-overhaul, and deferral methods. The FSP was effective for the first fiscal year beginning after December 15, 2006. International Paper adopted the direct expense method of accounting for these costs in the first quarter of 2007 with no impact on its annual consolidated financial statements. See Note 13 for a discussioneffects of the ~~effects of this accounting change on quarterly financial information.~~

In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on classification, interest and penalties, accounting in interim periods and transition, and significantly expands income tax disclosure requirements. It applies to all tax positions accounted for in accordance with SFAS No. 109 and was effective for fiscal years beginning after December 15, 2006. International Paper applied theremaining provisions ~~of this interpretation beginning January 1, 2007. See Note 8 for a discussion of the effects of this accounting change.~~

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments – an Amendment of FASB Statements No. 133 and 140,” which provides entities with relief from having to separately determine the fair value of an embedded derivative that would otherwise be required to be bifurcated from its host contract in accordance with SFAS No. 133. This statement allows an entity to make an irrevocable election to measure such a hybrid financial instrument at fair value in its entirety, with changes in fair value recognized in earnings. This statement was effective for International Paper for all financial instruments acquired, issued, or subject to a remeasurement event occurring after January 1, 2007. The adoption of SFAS No. ~~155 did not have a material impact on the Company’s consolidated financial statements.~~157.

International Paper adopted ~~FIN~~FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48), on January 1, 2007. The adoption of this standard resulted in a charge to the beginning balance of retained earnings of $94 million at the date of adoption. Total unrecognized tax benefits at the date of adoption including this cumulative effect charge were $919 ~~million, including $562 million that would reduce~~million. At December 31, 2007, unrecognized tax benefits totaled $794 million.

~~The major jurisdictions where~~first quarter of 2008, the Company ~~files income tax returns are the United States, Brazil, France, Poland and Russia. Generally, tax years 2001 through 2006 remain open and subject~~settled certain issues relating to examination by the relevant tax authorities. The Company is typically engaged in various tax examinations at any given time, both in the United States and in other countries. Currently, the Company is engaged in discussions with the U.S. Internal Revenue Service ~~to conclude the~~ examination of tax years 2001 –through 2003. As a result of these ~~discussions, other pending audit~~ settlements and ~~the expiration~~other current period transactions, unrecognized tax benefits were reduced by $282 million to $512 million and accrued estimated interest and tax penalties were reduced by $19 million to $72 million at March 31, 2008 with no effect on net earnings. The Company currently estimates that, as a result of ongoing discussions, pending tax settlements and expirations of statutes of ~~limitation, the Company currently estimates that~~limitations, the amount of unrecognized tax benefits could be reduced by up to ~~$500~~$75 million during the next ~~twelve months, with no significant impact on earnings or cash tax payments.~~12 months.

The Company accrues interest on unrecognized tax benefits as a component of interest expense. Penalties, if incurred, would be recognized as a component of income tax expense. As of the date of adoption of this standard, the Company had approximately $88 million of such accrued interest and penalties included in Other accrued liabilities associated with unrecognized tax benefits.

~~Under~~As previously disclosed, under the terms of the sale agreement for the Beverage Packaging business, the initial purchase price of ~~approximately~~ $500 million received by the Company iswas subject to a possible post-closing adjustment based on adjusted annualized earnings of the Beverage Packaging business for the first six months of 2007 and other

factors. ~~In September~~As of December 31, 2007, the purchaser of the business had proposed a reduction in the purchase price ~~of $59~~totaling $48 million for this ~~adjustment. While it is possible that such an~~ adjustment ~~could be required when this matter is finalized,~~and the Company ~~believes, based on a preliminary review of the purchaser’s proposal,~~believed that no such adjustment iswas required under the sale agreement.

During the first quarter of 2008, representatives of the Company met with representatives of the purchaser of the business in an effort to resolve this matter. After considering many factors, including the prospect of protracted litigation, the complexity of this matter and other commercial relationships between the parties, the matter was settled for $25 million, and this amount was accrued on the balance sheet as of March 31, 2008. In April, a net payment of approximately $20 million was paid to the purchaser of the business for this adjustment, net of a separate post-closing adjustment amount owed by the purchaser to the Company.

International Paper has established reserves relating to the settlement, during 1998 and 1999, of three nationwide class action lawsuits against the Company and Masonite Corp., a former wholly-owned subsidiary of the Company. Those settlements relate to (1) exterior hardboard siding installed during the 1980’s (the 1980’s Hardboard Claims) and during the 1990’s (the 1990’s Hardboard Claims, and together with the 1980’s Hardboard Claims, the Hardboard Claims); (2) Omniwood siding installed during the 1990’s (the Omniwood Claims); and (3) Woodruf roofing installed during the 1980’s and 1990’s (the Woodruf Claims). Each of these settlements is discussed in detail in Note 10, Commitments and Contingent Liabilities, to the Financial Statements included in International Paper’s Annual Report on Form 10-K for the year ended December 31, ~~2006.~~2007. All Hardboard Claims ~~must~~were required to be made by January 15, 2008, while all Omniwood and Woodruf Claims must be made by January 6, 2009.

~~Throughout 2006 and~~Claims activity for the ~~first nine months of 2007,~~Hardboard, Omniwood and Woodruf claims ~~activity has been~~during 2007 was generally in line with ~~projections. However, activity for Hardboard claims~~updated projections made in the first three quarters of 2006 was in excess of projected amounts. Accordingly, additional pre-tax charges totaling $50 million were recorded in the first three quarters of 2006 to reflect this higher claims activity pending completion of an updated projection by the Company’s third-party consultant. In the fourth quarter of 2006, ~~this updated projection was completed, resulting~~although in connection with the January 15, 2008 filing deadline for Hardboard siding claims, the Company received a large number of claims at the end of 2007 and the beginning of 2008. During the first quarter of 2008, based on a current estimate of payments to be made for all claims received to date and projected future claim filings, an additional ~~pre-tax~~ charge of $40 million was recorded to increase the reserve to management’s best estimate of the amount required for future projected payments for claims and expenses that have been filed by the end of the claims period. Claims activity for Hardboard claims for the first three quarters of 2007 has been generally in line with these updated projections.payments.

The following table presents the claims activity of the Hardboard Claims for the ~~nine-month~~three-month period ended ~~September 30, 2007:~~March 31, 2008:


*In thousands*	Single Family		Multi- Family		Total		Single Family		Multi- Family		Total
December 31, 2006	21.8		2.1		23.9
December 31, 2007							29.8		2.2		32.0
No. of Claims Filed	18.9		1.0		19.9		8.7		1.5		10.2
No. of Claims Paid	(12.8	)	(0.8	)	(13.6	)	(4.6	)	(0.2	)	(4.8	)
No. of Claims Dismissed	(3.9	)	(0.2	)	(4.1	)	(2.0	)	(0.4	)	(2.4	)

September 30, 2007	24.0		2.1		26.1
March 31, 2008							31.9		3.1		35.0

The average settlement cost per claim for the ~~nine-month~~three-month period ended ~~September 30, 2007~~March 31, 2008 for the Hardboard settlement was ~~$2,233.~~$2,164.

The following table presents the claims activity of the Omniwood Claims and the Woodruf Claims for the ~~nine-month~~three-month period ended ~~September 30, 2007:~~March 31, 2008:


														Omniwood				Woodruf			Total				Total
	Omniwood				Woodruf			Total						Single		Multi-		Single		Multi-	Single		Multi-
*In thousands*	Single Family		Multi- Family		Single Family		Multi- Family	Single Family		Multi- Family		Total		Family		Family		Family		Family	Family		Family
December 31, 2006	2.7		0.6		0.8		0.3	3.5		0.9		4.4
December 31, 2007														3.1		0.6		1.0		0.3	4.1		0.9		5.0
No. of Claims Filed	4.5		0.2		0.3		—	4.8		0.2		5.0		1.9		—		0.1		—	2.0		—		2.0
No. of Claims Paid	(3.6	)	(0.1	)	(0.3	)	—	(3.9	)	(0.1	)	(4.0	)	(0.9	)	(0.1	)	(0.1	)	—	(1.0	)	(0.1	)	(1.1	)
No. of Claims Dismissed	(0.7	)	—		(0.1	)	—	(0.8	)	—		(0.8	)	(0.3	)	—		(0.3	)	—	(0.6	)	—		(0.6	)

September 30, 2007	2.9		0.7		0.7		0.3	3.6		1.0		4.6
March 31, 2008														3.8		0.5		0.7		0.3	4.5		0.8		5.3

The average settlement costs per claim for the ~~nine-month~~three-month period ended ~~September 30, 2007~~March 31, 2008 for the Omniwood and Woodruf settlements were ~~$4,121~~$3,925 and ~~$3,783,~~$2,829, respectively.

The following table presents an analysis of the net reserve activity for the ~~nine-month~~three-month period ended ~~September 30, 2007:~~March 31, 2008:


*In millions*	Hardboard			Omniwood			Woodruf			Total			Hardboard			Omniwood			Woodruf			Total
Balance, December 31, 2006	$	72		$	49		$	3		$	124
Balance, December 31, 2007													$	20		$	25		$	1		$	46
Additional Provisions		—			—			—			—			34			4			2			40
Payments		(41	)		(18	)		(1	)		(60	)		(16	)		(5	)		(1	)		(22	)

Balance, September 30, 2007	$	31		$	31		$	2		$	64
Balance, March 31, 2008													$	38		$	24		$	2		$	64

International Paper is involved in various other inquiries, administrative proceedings and litigation relating to contracts, sales of property, environmental ~~permits,~~matters, taxes, personal injury, ~~labor and employment~~ and other ~~matters.~~matters, some of which allege substantial monetary damages. While any ~~administrative~~ proceeding ~~litigation~~ or ~~claim~~litigation has the element of uncertainty, ~~International Paper~~the Company believes that the outcome of any of ~~these matters~~the lawsuits or claims that are pending or threatened, or all of them combined, will not have a material adverse effect on its consolidated financial statements.

~~Long-term debt plus Notes payable and current maturities of long-term debt totaled approximately $6.8 billion at September 30, 2007, down from approximately $7.2 billion at December 31, 2006.~~

~~In the second quarter of 2007, International Paper repurchased $35 million of 5.85% notes with an original maturity in October 2012.~~

In March 2007, International Paper Investments (Luxembourg) S.ar.l, a wholly-owned subsidiary of International Paper, repaid $143 million of long-term debt with an interest rate of LIBOR plus 40 basis points and a maturity date in November 2010. Other debt activity in the first quarter included the repayment of $198 million of 7.625% notes that matured in the quarter.

In August 2006, International Paper used approximately $320 million of cash to repay its maturing 5.375% euro-denominated notes that were designated as a hedge of euro functional currency net investments. Other debt activity in the third quarter included the repayment of $143 million of 7.875% notes and $96 million of 7% debentures, all maturing within the quarter.

In June 2006, International Paper paid approximately $1.2 billion to repurchase substantially all of its zero-coupon convertible debentures at a price equal to their accreted principal value plus interest, using proceeds from divestitures and $730 million of third party commercial paper issued under the Company’s receivables securitization program. At December 31, 2006, International Paper had repaid all of the commercial paper borrowed under this program.

In February 2006, International Paper repurchased $195 million of 6.4% debentures with an original maturity date of February 2026. Other reductions in the first quarter 2006 included early payment of approximately $495 million of notes with coupon rates ranging from 4% to 8.875% and original maturities from 2007 to 2029. Pre-tax early debt retirement costs of $8 million related to first quarter 2006 debt reductions are included in Restructuring and other charges in the accompanying consolidated statement of operations.

At September 30, 2007 and December 31, 2006, International Paper classified $112 million and $100 million, respectively, of Notes payable and current maturities of long-term debt as Long-term debt. International Paper has the intent and ability to renew or refinance these obligations as evidenced by its contractually committed $1.5 billion bank credit agreement.

At December 31, 2006, International Paper had unused contractually committed bank credit agreements totaling $3.0 billion. In March 2007, International Paper’s 364-day $500 million fully-committed bank credit agreement expired and was not renewed by the Company after reviewing its liquidity position. This leaves approximately $2.5 billion of committed liquidity, consisting of a $1.5 billion contractually committed bank credit agreement that expires in March 2011, and a $1.0 billion receivables securitization program that expires in October 2009.

Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At September 30, 2007, the Company held long-term credit ratings of BBB (stable outlook) and Baa3 (stable outlook) by Standard & Poor’s (S&P) and Moody’s Investor Services (Moody’s), respectively. The Company currently has short-term credit ratings by S&P and Moody’s of A-2 and P-3, respectively.

International Paper maintains pension plans that provide retirement benefits to substantially all U.S. employees hired prior to July 1, 2004. These employees generally are eligible to participate in the plans upon completion of one year of service and attainment of age 21. Employees hired after June 30, 2004, who are not eligible for these pension plans, receive an additional company contribution to their individual savings plans.

The pension plans provide defined benefits based on years of credited service and either final average earnings (salaried employees), hourly job rates or specified benefit rates (hourly and union employees). A detailed discussion of these plans is presented in Note 15 to the Financial Statements included in International Paper’s Annual Report on Form 10-K for the year ended December 31, ~~2006.~~2007.

Net periodic pension expense for our qualified and nonqualified U.S. defined benefit plans consisted of the following:


	Three Months Ended March 31,
*In millions*	2008			2007
Service cost	$	25		$	27
Interest cost		133			131
Expected return on plan assets		(167	)		(159	)
Actuarial loss		30			48
Amortization of prior service cost		7			5

Net periodic pension expense	$	28		$	52

For its qualified plan, International Paper makes contributions that are sufficient to fully fund its actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act (ERISA). International Paper made ~~voluntary~~no contributions ~~of $1.0 billion~~ to the qualified plan in ~~December 2006, but does not expect~~2007, and none are expected to ~~make any contributions~~be required in ~~2007.~~2008. The nonqualified defined benefit plans are funded to the extent of benefit payments, which equaled ~~$25~~$5 million through ~~September 30, 2007.~~March 31, 2008.

International Paper has a Long-Term Incentive Compensation Plan (LTICP) that includes a performance share program, a service-based restricted stock award program, an executive continuity award program that provides for tandem grants of restricted stock and stock options, and a stock option program that has been discontinued as described below. The LTICP is administered by the Management Development and Compensation Committee of the Board of Directors (the Committee). Non-employee directors are not eligible for awards under the LTICP. A detailed discussion of these plans is presented in Note 17 to the Financial Statements included in International Paper’s Annual Report on Form 10-K for the year ended ~~December~~ December��31, ~~2006.~~2007. As of ~~September 30, 2007, 26.4~~March 31, 2008, 26.5 million shares were available for grant under the LTICP.

Total stock-based compensation cost recognized in Selling and administrative expense in the accompanying consolidated statement of operations for the ~~nine~~three months ended ~~September 30,~~March 31, 2008 and 2007 ~~and 2006~~ was ~~$94~~$29 million and ~~$99~~$26 million, respectively. The actual tax benefit realized for stock-based compensation costs was ~~$15 million~~$19,000 and $3 million for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2008 and 2007, ~~and 2006,~~ respectively. At ~~September 30, 2007, $103~~March 31, 2008, $139 million, net of estimated forfeitures, of compensation cost related to unvested restricted performance shares, executive continuity awards and restricted stock attributable to future performance had not yet been recognized. This amount will be recognized in expense over a weighted-average period of ~~one year.~~two years.

Under the Performance Share Program (PSP), contingent awards of International Paper common stock are granted by the Committee to approximately 900 employees. Awards are earned based on the achievement of defined performance rankings of return on investment (ROI) and total shareholder return (TSR) compared to ROI and TSR peer groups of companies. Awards are weighted 75% for ROI and 25% for TSR for all participants except for ~~certain members of senior management~~officers for whom awards are weighted 50% for ROI and 50% for TSR. The ROI component of the PSP awards is valued at the closing stock price on the day prior to the grant date. As the ROI component contains a performance condition, compensation expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable number of awards expected to vest. The TSR component of the PSP awards is valued using a Monte Carlo simulation as the TSR component contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on the expected term of the award, risk-free rate, expected dividends, and the expected volatility for the Company and its competitors. The expected term was estimated based on the vesting period of the awards, the risk-free rate was based on the yield on U.S. Treasury securities matching the vesting period, the expected dividends were assumed to be zero for all companies, and the volatility was based on the Company’s historical volatility over the expected term.

PSP awards issued to ~~the~~certain members of senior management ~~group~~ are liability awards, which are required to be remeasured at fair value at each balance sheet date. The valuation of these PSP liability awards is computed based on the same methodology as other PSP awards.

The following table sets forth the assumptions used to determine compensation cost for the market condition component of the PSP consistent with the requirements of SFAS No. 123(R):

The following summarizes the activity for PSP for the ~~nine~~three months ended ~~September 30, 2007:~~March 31, 2008:

The Company discontinued its stock option program in 2004 for members of executive management, and in 2005 for all other eligible U.S. and non-U.S. employees. Stock-based compensation expense totaling $5,300 related to a stock option reload was recorded for the nine months ended September 30, 2007. The expense was calculated under the Black-Scholes option pricing model using 20.46% expected volatility, an interest rate of 4.92%, a 2.74% expected dividend yield and a term of two years.

A summary of option activity under the plan as of ~~September 30, 2007~~March 31, 2008 is presented below:


	Options		Weighted Average Exercise Price		Weighted Average Remaining Life (years)	Aggregate Intrinsic Value (thousands)		Options		Weighted Average Exercise Price		Weighted Average Remaining Life (years)	Aggregate Intrinsic Value (thousands)
Outstanding at December 31, 2006	35,982,698		$	39.52
Outstanding at December 31, 2007								28,013,735		$	39.81
Granted	1,120			36.54				—			—
Exercised	(3,513,671	)		34.41				(14,800	)		31.55
Forfeited	(410,128	)		47.51				(38,768	)		43.60
Expired	(3,126,869	)		41.61				(1,455,974	)		40.58

Outstanding at September 30, 2007	28,933,150		$	39.80	4.57	$	1,152
Outstanding at March 31, 2008								26,504,193		$	39.77	4.3316	$	1,054

All options were fully vested and exercisable as of ~~September 30, 2007.~~March 31, 2008.

The following summarizes the activity of the Executive Continuity and Restricted Stock Award Program for the ~~nine~~three months ended ~~September 30, 2007:~~March 31, 2008:

Effective January 1, 2007, International Paper adopted FASB Staff Position (FSP) No. AUG AIR-1, “Accounting for Planned Major Maintenance Activities.” Prior to January 1, 2007, International Paper accounted for the cost of planned major maintenance by expensing the costs ratably throughout the year. Effective January 1, 2007, International Paper adopted the direct expense method of accounting whereby all costs for repair and maintenance activities are expensed in the month that the related activity is performed. International Paper retrospectively applied the effects of the adoption of this FSP, resulting in an increase in net earnings of $22 million, or $0.04 per share and a reduction of $8 million, or $0.01 per share for the three and nine-month periods ended September 30, 2006, respectively. However, this accounting change had no effect on previously reported full-year operating results or on the December 31, 2006 balance sheet.

On ~~October 5, 2007,~~Saturday May 3, 2008, a recovery boiler at International Paper Company’s Vicksburg, Mississippi containerboard mill exploded, resulting in one fatality and ~~Ilim Holding S.A. announced~~injuries to 17 others who were employees of contractors working on the ~~completion~~site. The mill had been undergoing its annual maintenance outage and was in the process of starting back up when the incident occurred. The situation is now contained and an investigation of the ~~formation~~incident is underway.

The mill is currently not operating. While it is still too early to predict an estimated start-up date, the loss of productive capacity will tighten the Company’s supply/demand balance. However, all efforts will be made to meet customer needs on a ~~50:50 joint venture~~case-by-case basis. The Company has both business interruption insurance and property damage insurance that ~~will operate in Russia as Ilim Group (Ilim). To form the joint venture, International Paper purchased 50% of Ilim Holding, S.A., for approximately $620~~are subject to deductibles and retention amounts up to $20 million. ~~A key element of the proposed joint venture strategy~~However, it is a long-term investment program in which the joint venture will invest, through cash from operations and additional borrowings by the joint venture, approximately $1.5 billion in Ilim’s four mills over approximately five years. This planned investmentstill too early in the ~~Russian pulp and paper industry will be used~~investigation to ~~upgrade equipment, increase production capacity and allow for new high-value uncoated paper, pulp and corrugated packaging product development.~~determine the amount of any loss potentially not covered by insurance.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2007			2006			2007			2006			2008			2007
Printing Papers ~~(2)~~	$	1,660		$	1,610	(3)	$	4,810		$	5,225	(3)	$	1,715		$	1,540
Industrial Packaging		1,305			1,250			3,855			3,665			1,445			1,235
Consumer Packaging ~~(2)~~		775			705			2,315			1,950			770			715
Distribution		1,880			1,730			5,275			5,070			1,985			1,675
Forest Products		120			135			295			575			25			85
Other Businesses ~~(6)~~(4)		—			245			135			705			—			135
Corporate and Inter-segment Sales		(199	)		(246	)		(636	)		(519	)		(272	)		(168	)

Net Sales	$	5,541		$	5,429		$	16,049		$	16,671		$	5,668		$	5,217

Sales Volumes represent supplemental information that is not included in Part I, Item 1. Financial Information.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

International Paper reported solid operating results for the 2008 first quarter, excluding land sales, despite a significant increase in raw material, energy and freight input costs during the quarter. Compared with the first quarter of 2007, ~~third~~operating results reflect improved average price realizations and margins and lower operating costs, but these improvements were largely offset by the rapid rise in input costs. Operating profits for the quarter ~~reflecting the best quarterly~~also reflect an expected decline in earnings ~~since 2000.~~ from Forest Products land sales.

Compared with the 2007 ~~second~~first quarter, ~~product pricing~~higher operating profits for ~~uncoated paper, pulp and packaging grades improved during the quarter. Mill operations continued to be strong, and we began the production of lightweight linerboard at~~ our Pensacola, Florida mill in September. Raw material costs were somewhat higher driven by increases for wood and chemicals, partially offset by favorable energy costs. Sales volumes and earnings from land sales were about flat.

~~Our~~ North American Printing Papers business ~~posted its best quarterly earnings since 1995, benefiting from~~in the 2008 first quarter reflected higher average ~~prices~~sales price realizations, largely offset by lower U.S. Market Pulp profits. Profits for the quarter increased in Brazil, reflecting improved price realizations and ~~reduced planned maintenance outage costs. Brazilian Printing Papers earnings improved significantly driven by higher average prices~~contributions from the Luiz Antonio mill acquired in February 2007. Industrial Packaging operating profits increased in both North America and ~~improved~~Europe, as improvements in price realizations, sales volumes and ~~product mix. Our xpedx distribution business~~operating costs offset higher wood, energy and chemical costs. Consumer Packaging profits declined versus the 2007 first quarter as higher input costs and unfavorable manufacturing operations offset the benefits of higher average price realizations. Shorewood’s earnings also ~~reported solid quarterly~~declined. Operating results also reflected an expected decline in Forest Products earnings ~~benefiting from increased sales volumes and~~for the ~~addition of one month’s earnings from the newly acquired Central Lewmar LLC.~~quarter.

Looking ahead to the ~~fourth~~second quarter of 2008, we expect ~~slightly higher earnings from continuing operations and before special items than in the 2007 third quarter, including higher earnings from land sales. Average~~average paper price realizations to improve as announced increases are realized, while containerboard prices should ~~improve moderately as we continue~~be similar to ~~implement announced North American price increases in paper, pulp, containerboard and corrugated boxes. Sales volumes~~first-quarter levels. Demand for ~~containerboard~~printing papers is expected to decline slightly in North America, with some improvement in Europe and Brazil, while market pulp sales volumes should increase. Containerboard sales volumes should decline slightly due to increased planned maintenance outage production limitations in the second quarter. Maintenance costs should be about $60 million higher reflecting these outages, although improvements in operations should largely offset this increase. Raw material, energy, chemical and freight input costs are expected to ~~benefit from~~remain high. Overall, despite an expected weak U.S. economy, if input costs remain similar to the ~~additional capacity at our Pensacola mill, and European paper and packaging volumes should increase from a seasonally weak third quarter. However, sales volumes~~high first-quarter levels, operating profits in ~~other business segments~~the second quarter are expected to slow seasonally toward year end. Forest Products earnings are expected to increase due to the timing of land sale transactions. Costs for wood, energy and transportation are expected to continue to rise, and we expect that interest expense and income taxes will both be higher. Corporate expenses are expected to reflect increased LIFO inventory and incentive compensation costs, although these charges are dependent upon factors that cannot be accurately determined until year end.higher than first-quarter totals.

For the ~~third~~first quarter of ~~2007,~~2008, International Paper reported net sales of ~~$5.5~~$5.7 billion, compared with ~~$5.4~~$5.2 billion in the ~~third~~first quarter of ~~2006~~2007 and ~~$5.3~~$5.8 billion in the ~~second~~fourth quarter of 2007.

Net earnings totaled ~~$217~~$133 million, or ~~$0.51~~$0.31 per share, in the ~~2007 third~~2008 first quarter. This compared with earnings of ~~$224~~$434 million, or ~~$0.46~~$0.97 per share, in the ~~third~~first quarter of ~~2006~~2007 and earnings of ~~$190~~$327 million, or ~~$0.44~~$0.78 per share, in the ~~second~~fourth quarter of 2007.

Earnings from continuing operations were ~~$220~~$150 million in the ~~third~~first quarter of 2008 compared with $457 million in the first quarter of 2007 ~~compared with earnings of $385 million in the third quarter of 2006~~ and ~~earnings of $200~~$338 million in the 2007 ~~second~~fourth quarter. Compared with the ~~third~~first quarter of ~~2006,~~2007, earnings in the ~~2007 third~~2008 first quarter benefited from higher average price realizations ($4789 million), slightly higher sales volumes ($3 million), lower operating costs and a more favorable mix of products sold ($3215 million), lower mill production outages costs ($17 million), and a lower ~~freight costs~~income tax provision ($32 million). reflecting a slightly lower estimated effective tax rate in 2008. These benefits were offset by ~~the net effect of slightly lower sales volumes and decreased market-related downtime ($4 million),~~significantly higher raw material and freight costs ($43107 million), lower gains from land sales ($2049 million), and higher ~~costs for planned mill production outages~~net interest expense ($2112 million). Costs associated with the ~~shutdown~~ramp-up of the paper machine at the Pensacola mill ~~for conversion~~converted to the production of ~~linerboard~~containerboard also reduced earnings ($183 million). Corporate items and other costs decreased ($30 million), principally due to lower pension costs. Net interest expense also decreased ($49 million) reflecting lower average debt balances and interest rates due to debt refinancings and repayments. The ~~net impact of acquisitions and divestitures resulted in lower~~2008 first quarter benefited from equity earnings, ~~($27 million). Income taxes were $1 million higher in the 2007 third quarter. Special items,~~ net of taxes, ~~resulted~~relating to International Paper’s investment in Ilim Holding S.A. ($17 million). Additionally, net special items were a loss of ~~$23~~$25 million in the ~~2007 third~~2008 first quarter versus a gain of ~~$169~~$254 million in the ~~2006 third quarter.~~first quarter of 2007.

Compared with the ~~second~~fourth quarter of 2007, earnings from continuing operations benefited from higher average price realizations ($1719 million), and lower costs associated with the ramp-up of the converted paper machine at the Pensacola mill ~~outage costs~~ ($~~24 million), and higher gains from land sales ($2~~6 million). These benefits were offset by higher raw material and freight costs ($1264 million), lower sales volumes and increased market-related downtime ($112 million), higher manufacturing costs ($109 million), higher mill outage costs ($5 million), lower gains from land sales ($102 million), and ~~costs associated with the conversion of the paper machine at the Pensacola mill~~a slightly higher income tax provision ($71 million). Corporate items and other costs decreased ($533 million), while net interest expense increased slightly ($1 million). ~~Net interest expense decreased ($2 million). Special items,~~Equity earnings, net of taxes, ~~resulted in~~for Ilim Holding, S.A. increased earnings $17 million. Net special items were a loss of ~~$23~~$25 million in the ~~both~~2008 first quarter versus a gain of $44 million in the ~~2007 second~~fourth quarter ~~and the 2007 third quarter.~~of 2007.

To measure the performance of the Company’s business segments from period to period without variations caused by special or unusual items, International Paper’s management focuses on business segment operating

profit. This is defined as earnings before taxes, equity earnings and minority interest, excluding interest expense, corporate charges and special items that include restructuring charges, early debt extinguishment costs, legal reserves, insurance recoveries, ~~(losses)~~ gains on sales and impairments of businesses, and the reversal of reserves no longer required. ~~Prior-period information has been revised to reflect the retrospective application of a change in accounting for planned major maintenance activities.~~

The following table presents a reconciliation of International Paper’s net earnings to its operating profit:


	Three Months Ended									Three Months Ended
	September 30,						June 30, 2007			March 31,						December 31,
*In millions*	2007			2006			June 30, 2007			2008			2007			2007
Net Earnings	$	217		$	224		$	190		$	133		$	434		$	327
Deduct - Discontinued operations:
Losses (earnings) from operations		3			(4	)		3			1			(3	)		8
Loss on sales or impairments		—			165			7			16			26			3

Earnings From Continuing Operations		220			385			200			150			457			338
Add back:
Income tax provision		89			204			89			59			143			94
Equity earnings, net of taxes											(16	)		—			—
Minority interest expense, net of taxes		6			5			5			5			6			7

Earnings From Continuing Operations
Before Income Taxes and Minority Interest		315			594			294
Before Income Taxes, Equity Earnings and Minority Interest											198			606			439
Interest expense, net		77			144			80			81			61			79
Minority interest included in operations		(4	)		—			(6	)
Minority interest/equity earnings included in operations											(4	)		(5	)		(4	)
Corporate items		188			221			179			21			37			56
Special items:
Restructuring and other charges		42			92			26			37			18			9
Gains on forestland sales		(9	)		(304	)		—
Net losses (gains) on sales and impairments of businesses		1			(61	)		(1	)
Net gains on sales and impairments of businesses											(1	)		(314	)		(13	)

	$	610		$	686		$	572		$	332		$	403		$	566

Industry Segment Operating Profit(1)
Printing Papers	$	307		$	251		$	249		$	185		$	167		$	243
Industrial Packaging		115			152			139			97			73			109
Consumer Packaging		49			62			48			9			40			15
Distribution		40			34			38			16			20			28
Forest Products		99			166			98			25			97			171
Specialty Businesses and Other		—			21			—
Other Businesses											—			6			—

Total Industry Segment Operating Profit(2)	$	610		$	686		$	572		$	332		$	403		$	566

Industry segment operating profits of $332 million in the 2008 first quarter were ~~$610~~lower than both $403 million in the 2007 ~~third quarter compared with $686 million in the 2006 third~~first quarter and ~~$572~~$566 million in the 2007 ~~second~~fourth quarter. Compared with the ~~third~~first quarter of ~~2006,~~2007, earnings in the current quarter benefited from significantly higher average ~~prices~~price realizations ($65132 million), higher sales volumes ($4 million), lower ~~manufacturing~~ operating costs and a more ~~profitable~~favorable mix of products sold ($~~44 million), lower freight costs ($4~~22 million), and ~~other items~~lower costs due to mill production outages ($1025 million). These benefits were ~~more than~~ offset by significantly higher raw material and freight costs ($~~60 million), the net impact of lower sales volumes and decreased market-related downtime ($6 million), higher costs due to mill outages ($30~~157 million), lower gains from land sales ($2872 million), and higher corporate items and other costs ($16 million). Costs associated with the ramp-up of the paper machine at the Pensacola mill converted to the production of containerboard also reduced earnings ($4 million). Special items consisted of a loss of $5 million in the 2008 first quarter.

Compared with the 2007 fourth quarter, operating profits benefited from higher average price realizations ($28 million) and lower costs associated with the conversion of the paper machine at the Pensacola mill ($~~25 million). The net impact of acquisitions and divestitures resulted in lower earnings ($37 million). Net special items consisted of a gain of $13 million in the 2006 third quarter.~~

Compared with the 2007 second quarter, operating profits benefited from higher average prices ($24 million), lower costs due to mill outages ($34 million), higher gains from land sales ($3 million), and other items ($128 million). These benefits were ~~partially~~ offset by higher raw material ~~costs ($8 million), higher~~and freight costs ($292 million), ~~the impact of~~ lower sales volumes ~~and increased market-related downtime~~ ($118 million), higher manufacturing ~~operating~~ costs ~~and a less profitable mix of products sold~~ ($1413 million), higher mill outage costs ($7 million), and significantly lower gains from land sales ($147 million). Other costs ~~associated with~~decreased ($12 million). Special items consisted of a loss of $5 million in the ~~conversion of the paper machine at the Pensacola mill ($10 million).~~2008 first quarter.

During the ~~2007 third~~2008 first quarter, International Paper took approximately ~~105,000~~120,000 tons of downtime, ~~including 7,000 tons for~~none of which was market-related, ~~downtime,~~ compared with approximately ~~110,000~~180,000 tons of downtime in the ~~third~~first quarter of ~~2006,~~2007, which included ~~28,000~~35,000 tons of market-related downtime. During the 2007 ~~second~~fourth quarter, International Paper ~~had taken~~took approximately ~~145,000~~110,000 tons of downtime, including ~~4,000~~7,000 tons for market-related downtime. Market-related downtime is taken to balance internal supply with our customer demand to help manage inventory levels, while maintenance downtime, which makes up the majority of the difference between total downtime and market-related downtime, is taken periodically during the year.

During the ~~second~~first quarter of 2008, the Company recorded a pre-tax charge of $25 million ($16 million after taxes) related to the final settlement of a post-closing adjustment of the purchase price received by the Company for the sale of its Beverage Packaging business.

During the first quarter of 2007, the Company recorded pre-tax ~~charges~~credits of $7$21 million ($9 million after taxes) and $6 million ($4 million after taxes) ~~and $4 million ($3 million after taxes)~~ relating to ~~adjustments to estimated losses on~~ the sales of its Wood Products and Kraft Papers businesses, respectively. In addition, a $15 million pre-tax charge ($39 million after taxes) was recorded for adjustments to the loss on the completion of the sale of most of the Beverage Packaging ~~businesses, respectively.~~

~~During the third quarter of 2006, the Company recorded~~business. Finally, a pre-tax credit of ~~$101~~approximately $10 million ($806 million after taxes) was recorded for refunds received from the ~~gain on~~Canadian government of duties paid by the ~~sale~~Company’s former Weldwood of the Brazilian coated papers business, pre-tax losses of $115 million and $165 million ($82 million and $165 million after taxes) to adjust the carrying values of the Beverage Packaging and Wood Products businesses, respectively, to estimated fair values, and a net $11 million pre-tax gain ($2 million after taxes) related to other smaller items.Canada Limited business.

The income tax provision was ~~$89~~$59 million for the ~~2007 third~~2008 first quarter. Excluding ~~an $11~~a $16 million benefit relating to the tax effects of special items, the effective income tax rate for continuing operations was ~~29%~~31.5% for the quarter.

In the 2007 ~~second~~fourth quarter the income tax provision was ~~also $89~~$94 million. Excluding a $2$40 million benefit relating to the tax effects of special items, the effective income tax rate for continuing operations was ~~29%~~31% for the quarter.

The income tax provision totaled ~~$204~~$143 million in the ~~2006 third~~2007 first quarter. Excluding a ~~$117~~$44 million expense related to the tax effects of special items, the effective income tax rate for continuing operations before special items ~~for the 2006 third quarter~~ was ~~28%~~32%.

Net interest expense for the ~~2007 third~~2008 first quarter was ~~$77~~$81 million compared with ~~$80~~$79 million for the 2007 ~~second~~fourth quarter and ~~$144~~$61 million for the ~~2006 third~~2007 first quarter. The ~~lower~~higher net expense compared with the prior year reflects lower ~~average debt balances and~~ interest ~~rates due to debt repayments and refinancings.~~income from investment of available cash balances.

Corporate items, net, of ~~$188~~$21 million in the ~~2007 third~~2008 first quarter were ~~higher~~lower than both the 2007 ~~second-quarter~~fourth-quarter and 2007 first-quarter net expenses of ~~$179~~$56 million ~~but were lower than the net expenses of $221~~and $37 million, in the third quarter of 2006. The $9 million increase in the 2007 third quarter compared with the second quarter reflects small increases in various expense categories. Compared with the third quarter of 2006, the benefits fromrespectively, due to lower pension ~~expenses and benefit-related costs were partially offset by higher supply chain project costs.~~expenses.

~~Terre Haute mill, a pre-tax charge of $10 million ($6 million after taxes) for estimated environmental closure costs associated with the Terre Haute mill, and a pre-tax charge of $3 million ($2~~3 million after taxes) related to the ~~restructuring~~reorganization of the Company’s ~~Brazil operations.~~Shorewood operations in Canada and a $3 million credit before taxes ($2 million after taxes) for adjustments to reserves associated with the Company’s organizational restructuring programs.

During the ~~second~~first quarter of 2007, restructuring and other charges totaling ~~$26~~$18 million before taxes ($1611 million after taxes) were recorded for organizational restructuring programs associated with the Company’s Transformation ~~Plan, including $17 million ($11 million after taxes) of accelerated depreciation expense for long-lived assets being removed from service.~~

~~During the third quarter of 2006, restructuring and other charges totaling $92 million before taxes ($56 million after taxes) were recorded. These charges consisted of~~Plan. Additionally, a pre-tax charge of $57 million ($35 million after taxes), including severance and other termination benefit costs of approximately $15 million, $25 million of lease termination costs and $17 million of other charges associated with the Company’s Transformation Plan, and a $35$2 million pre-tax ~~charge~~credit ($~~21 million after taxes) for adjustments to legal reserves.~~

~~During the third quarter of 2007, a pre-tax gain of $9 million ($5~~1 million after taxes) was recorded ~~to reduce estimated transaction costs accrued~~ in ~~connection with~~Interest expense for interest received from the ~~Transformation Plan forestland sales in 2006.~~

~~During the third quarter~~Canadian government on refunds of 2006, the Company completed the sales of approximately 476,000 acres of forestlands for approximately $401 million, including $265 million in cash and $136 million of installment notes, resulting in a pre-tax gain of $304 million ($185 million after taxes).prior-year softwood lumber duties.

During the ~~second~~first quarter of ~~2007,~~2008, a $1 million pre-tax credit ~~(a $7~~($1 million ~~charge~~ after ~~taxes, including a $5 million tax adjustment in Brazil)~~taxes) was recorded to adjust previously estimated gains/losses of businesses previously sold.

During the ~~third~~first quarter of ~~2006,~~2007, a ~~net~~$103 million pre-tax gain ~~of $74 million~~ ($4496 million after taxes) was recorded upon the sale of the Company’s Arizona Chemical business. As part of the transaction, International Paper acquired a minority interest of approximately 10% in the resulting new entity.

In addition, a $6 million pre-tax credit ($4 million after taxes) was recorded to adjust previously estimated gains/losses of businesses previously sold.

These gains are included, along with the $205 million pre-tax gain ($164 million after taxes) on the exchange for ~~losses (gains)~~the Luiz Antonio mill in Brazil (see Note 4), in Net gains on sales and impairments of businesses ~~including a $13 million pre-tax gain on a sale of property in Spain recorded~~ in the ~~Industrial Packaging business. This net gain also included the recognition~~accompanying consolidated statement of a previously deferred $110 million pre-tax gain ($68 million after taxes) related to a 2004 sale of forestlands in Maine, a pre-tax charge of $38 million ($23 million after taxes) to reflect the completion of the sale of the Company’s Coated and Supercalendered Papers business in the 2006 third quarter, and a net pre-tax gain of $2 million (a $1 million loss after taxes) related to other smaller sales.operations.

The following presents business segment discussions for the ~~third~~first quarter of ~~2007.~~2008.


	2007						2006						2008		2007
*In millions*	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		1st Quarter		1st Quarter		4th Quarter
Sales	$	1,660	$	1,610	$	4,810	$	1,610	$	1,810	$	5,225	$	1,715	$	1,540	$	1,720
Operating Profit		307		249		787		251		217		573		185		167		243

Printing Papers net sales for the ~~third~~first quarter of ~~2007~~2008 were ~~3% higher than both~~about even with the ~~second~~fourth quarter of 2007 and 11% higher than the ~~third~~first quarter of ~~2006.~~2007. Operating profits in the ~~third~~first quarter of 2008 were 24% lower than the fourth quarter of 2007, ~~were 23%~~but 11% higher than the ~~second~~first quarter of ~~2007 and 22% higher than the third quarter of 2006.~~2007.

North American Printing Papersnet sales were ~~$870~~$885 million in the ~~third~~first quarter of ~~2007~~2008 compared with ~~$875~~$865 million in the ~~second~~fourth quarter of 2007 and ~~$910~~$885 million in the ~~third~~first quarter of ~~2006 (excluding $140 million from the Coated and Supercalendered Papers business sold in 2006).~~2007. Operating earnings of ~~$165~~$106 million were up slightly compared with ~~$114~~$101 million in the ~~second~~fourth quarter of 2007 and ~~slightly higher than $152~~$94 million ~~(excluding $17 million from the Coated and Supercalendered Papers business)~~ in the ~~third~~first quarter of ~~2006.~~2007.

Sales volumes in the ~~third~~first quarter of ~~2007~~2008 were ~~lower than in~~about even with the ~~second~~fourth quarter of ~~2007 reflecting seasonally lower demand for cut-size paper, partially offset by stronger sales to the commercial printing market and higher export sales.~~2007. Average sales price realizations were higher reflecting benefits from announced first-quarter price increases for ~~cut-size paper increased during the quarter reflecting the full realization~~uncoated freesheet paper. Additionally, sales margins improved due to a smaller proportion of ~~a $60/ton price increase announced in the second quarter.~~lower-margin export sales. Planned maintenance downtime costs in the first quarter were about ~~$35 million lower in~~even with the ~~third quarter reflecting downtime at one mill in the third quarter versus maintenance outages at five mills in the second~~fourth quarter. ~~Other manufacturing costs were favorable largely due to lower energy consumption. Input costs were slightly unfavorable due to higher costs for starch and caustic soda, partially offset by lower~~However, input costs for wood, energy and ~~energy.~~chemicals were higher, and manufacturing operations reflected unfavorable operating disruptions at two of our mills.

InCompared with the ~~third~~first quarter of ~~2006, net~~2007, sales and earnings included one month of the Coated and Supercalendered Papers business which was sold in the third quarter. Excluding the impact of this business, earnings in 2007 improved year over year. Sales volumes were lower in the ~~third~~first quarter of ~~2007 compared with the third quarter of 2006~~2008, primarily due to ~~reduced production~~a reduction of uncoated freesheet paper capacity resulting from the conversion of one of the ~~paper machine~~machines at the Pensacola mill to the production of lightweight linerboard for our Industrial Packaging ~~segment. Sales volumes were also affected by softer market demand for uncoated freesheet paper.~~segment in the third quarter of 2007. Average sales price realizations were up significantly in the ~~third~~first quarter of ~~2007~~2008 reflecting the realization of price increases implemented during 2007 and announced price increases for cut-size paper and rolls in ~~late 2006 and~~the first quarter of 2008. Sales margins were positively impacted by a decrease in ~~2007.~~lower-margin export sales. Manufacturing costs improved with the conversion of the higher cost Pensacola machine and the beginning of the conversion of the Louisiana mill to pulp production. These benefits were ~~favorable reflecting improved operating performance and lower maintenance spending. Raw material~~partially offset by significantly higher costs ~~were higher~~ for energy, caustic soda, ~~starch~~wood and ~~wood.~~chemicals, and the current quarter unfavorable manufacturing operating issues. Freight costs were ~~lower as the result of the implementation of various supply chain initiatives.~~also unfavorable.

Looking ahead to the ~~2007 fourth~~2008 second quarter, ~~earnings~~sales volumes are expected to decline slightly ~~from third-quarter levels. Sales volumes are typically seasonally lower.~~as a result of the capacity impact of the spring maintenance outages. Average sales price realizations are expected to improve with the full realization of price increases announced in the ~~announced roll price increase for commercial printing and converting markets. Planned~~first quarter. Higher planned maintenance expenses will be ~~higher reflecting planned~~incurred during the period with four mills taking downtime ~~at our Franklin mill in October. Manufacturing~~during the quarter, which should be largely offset by improved manufacturing operating costs. Input costs for energy and chemicals are expected to continue to increase, ~~due to seasonally higher energy consumption. Wood~~but wood costs ~~are also expected to be higher reflecting the impact of wet weather conditions in certain areas of the United States.~~should decrease slightly.

European Printing Papersnet sales were ~~$370 million in both the third and second quarters of 2007 compared with $310~~$435 million in the ~~third~~first quarter of ~~2006.~~2008 compared with $415 million in the fourth quarter of 2007 and $355 million in the first quarter of 2007. Operating earnings in the ~~third~~first quarter of ~~2007~~2008 were ~~$45~~$42 million compared with ~~$55~~$53 million in the ~~second~~fourth quarter of 2007 and ~~$28~~$40 million in the ~~third~~first quarter of ~~2006.~~2007.

Sales volumes in the ~~third~~first quarter of 2008 were higher than the fourth quarter of 2007 ~~for~~reflecting increased sales from the new bleached chemical thermal mechanical pulp (BCTMP) production facility at Svetogorsk, Russia. Sales volumes of uncoated freesheet paper were ~~essentially flat with~~seasonally affected by the ~~second quarter of 2007.~~Russian new year holiday period, but this was more than offset by higher sales in western European markets. Average sales price realizations ~~improved~~ in ~~the third quarter, principally~~eastern Europe improved due to the implementation of a ~~September~~ price increase in ~~Russia.~~Russia in February, but remained relatively flat in western Europe. Manufacturing costs were ~~higher~~favorable, reflecting ~~expenses associated with annual outages at the Kwidzyn and Saillat mills.~~improved operating performance. Raw material costs for wood ~~moderated slightly during~~were higher in Russia due to abnormally high demand in anticipation of an export tariff increase, and a seasonal increase in inventories to avoid potential supply disruptions due to weather. Energy costs were also significantly higher than in the ~~third~~fourth quarter ~~but energy and chemical costs increased.~~of 2007 across all regions.

Compared with the ~~third~~first quarter of ~~2006,~~2007, sales volumes in the ~~third~~first quarter of ~~2007 were slightly lower, although uncoated~~2008 improved largely due to the higher BCTMP sales. Uncoated freesheet paper volumes were ~~in line with the 2006 third quarter.~~also higher. Average sales price realizations were significantly higher due to the realization of price increases implemented throughout 2007 across all regions, and in ~~the latter part of 2006 and throughout 2007.~~February 2008 in Russia. Manufacturing costs were unfavorable ~~largely~~as operating performance in the first two months of the year was below the excellent performance in the first quarter of 2007. Input costs were significantly unfavorable reflecting higher wood, chemical and energy costs.

In the 2008 second quarter, sales volumes should be higher than in the first quarter due to the ~~timing of the annual Saillat mill outage compared to 2006. Input costs were~~higher BCTMP sales, and average sales price realizations should also ~~unfavorable due to higher wood and chemical costs, partially offset by lower energy prices~~improve as price increases in ~~Western Europe.~~

~~In the 2007 fourth quarter, earnings~~western Europe are realized. Planned maintenance downtime expenses are expected to be ~~significantly~~ higher, ~~than in the third quarter reflecting no scheduled planned maintenance outages during the quarter and seasonally higher sales volumes. Average sales price realizations are likely~~but raw material costs should decline due to ~~improve with a full-quarter benefit of previously announced price increases~~lower wood costs in Russia ~~and Western Europe. Higher wood costs and seasonally higher energy prices and consumption are expected.~~as demand returns to more normal levels.

Brazilian Printing Papersnet sales were ~~$250~~$225 million in the ~~third~~first quarter of ~~2007~~2008 compared with ~~$205~~$255 million in the ~~second~~fourth quarter of 2007 and ~~$120~~$140 million in the ~~third~~first quarter of ~~2006.~~2007. Operating earnings in the ~~third~~first quarter of ~~2007~~2008 were ~~$72~~$33 million compared with ~~$57~~$61 million in the ~~second~~fourth quarter of 2007 and ~~$33~~$18 million in the ~~third~~first quarter of ~~2006. Results in 2007 benefited from~~2007. Operating results reflect the acquisition of the Luiz Antonio mill ~~completed~~ in February 2007.

Sales volumes in the ~~third~~first quarter of 2008 were lower than the fourth quarter of 2007 ~~increased compared with~~due to seasonal decreases in paper demand and the ~~second quarter primarily for uncoated freesheet paper.~~impact of planned maintenance outages on pulp production capacity and shipments. Average sales price realizations were lower reflecting competitive pressure in Brazil for domestic cut-size paper and offset paper, but were higher for export shipments. Margins were negatively affected by an increased proportion of lower-margin export sales. Input costs were significantly higher, primarily for electricity where hydroelectric power costs peaked during the quarter due to ~~the full-quarter impact~~a lack of ~~a second-quarter price increase for domestic uncoated freesheet paper, as well as improved export pricing. Earnings~~rainfall in ~~the third quarter also benefited from a $7 million gain on a bulk timber sale.~~late 2007.

Compared with the ~~third~~first quarter of ~~2006, excluding the impact of~~2007, sales volumes were higher for both domestic cut-size paper and offset paper, including a full quarter contribution from sales for the Luiz Antonio ~~acquisition, sales volumes were slightly higher.~~mill acquired in February 2007. Average sales price realizations improved, reflecting price increases ~~for uncoated freesheet paper~~ realized during 2007. Input costs, however, were negatively impacted by the ~~second half~~increased cost of ~~2006 and the first half of 2007. Both manufacturing costs and input costs were unfavorable. Earnings contributions from the Luiz Antonio mill added $35 million to 2007 third-quarter earnings.~~electricity.

Looking ahead to the ~~fourth~~second quarter, ~~earnings are expected to decrease slightly from third-quarter levels reflecting the absence of the earnings from the third-quarter timber sale. Sales~~sales volumes ~~are expected to~~and margins should benefit from ~~increased~~seasonally higher domestic cut-size paper demand. AnAverage sales price realizations should increase ~~in higher margin~~reflecting an announced price increase for domestic ~~sales~~cut-size paper. Input costs should ~~have some positive impact on earnings. Operating costs are expected to~~ be slightly ~~higher~~lower as ~~costs will be impacted by increased labor costs.~~the cost of electricity declines from first-quarter peak levels.

Asian Printing Papersnet sales were approximately $5 million for all periods presented. Operating earnings ~~increased slightly in the 2007 third quarter, but~~ were close to breakeven for all periods presented.

U.S. Market Pulpnet sales were $165 million in the ~~third~~first quarter of 2008 compared with $180 million in the fourth quarter of 2007 ~~compared with~~and $155 million in the ~~second~~first quarter of 2007. Operating earnings were $4 million in the first quarter of 2008 compared with $27 million in the fourth quarter of 2007 and ~~$130~~$15 million in the ~~third~~first quarter of ~~2006. Operating earnings were $25 million in the third quarter of 2007 compared with $24 million in the second quarter of 2007 and $21 million in the third quarter of 2006.~~2007.

Sales volumes in the ~~third~~first quarter of 2008 were lower than in the fourth quarter of 2007, ~~were up slightly compared with the second quarter~~despite continued strong market demand, due to lower production resulting from planned maintenance outages, operational disruptions and export constraints caused by tight availability of ~~2007 as demand for market~~shipping containers and ~~fluff pulp remained strong.~~vessels. Average sales price realizations improved ~~during~~with the ~~quarter as~~full-quarter benefit from sales price increases ~~for paper~~implemented in the fourth quarter of 2007, and ~~tissue~~the partial realization of a hardwood pulp ~~and fluff pulp~~price increase announced in ~~June~~the 2008 first quarter. Manufacturing costs were ~~realized.~~higher due to unfavorable operating performance at several mills. Planned maintenance downtime costs were about $5 million higher in the ~~third~~first quarter than in the ~~second~~fourth quarter reflecting ~~planned downtime~~a maintenance outage at our ~~Riegelwood~~Georgetown mill.

Compared with the ~~third~~first quarter of ~~2006,~~2007, sales volumes ~~increased, principally due to the continuing strength in demand, particularly from Asia.~~were slightly lower. Average sales price realizations were significantly higher reflecting sales price increases ~~for fluff pulp and softwood pulp in both Europe and North America. Planned~~implemented during 2007. While planned maintenance downtime costs were ~~$6 million higher due to the third-quarter annual maintenance shutdown at the Riegelwood mill which occurred in the fourth quarter in 2006. Manufacturing~~about flat, manufacturing operating costs were ~~higher~~unfavorable in the current quarter ~~reflecting effects associated with~~due to the ~~Riegelwood mill shutdown.~~production issues at several mills. Input costs increased for wood, energy and chemicals, ~~as well as for freight.~~while freight costs also increased.

Entering the ~~2007 fourth~~2008 second quarter, ~~earnings are expected to improve. Sales~~sales volumes ~~are expected to increase slightly~~should be higher as demand for pulp remains ~~strong.~~strong, and with the shift in production from paper to pulp at the Louisiana mill. Average sales price realizations should

improve with the full-quarter realization of price increases implemented in the first quarter and the realization of price increases announced for the second quarter for both softwood and hardwood pulp in Europe. Planned mill maintenance downtime costs should be comparable ~~with~~to the ~~third~~first quarter. ~~There~~Manufacturing operations are ~~no shutdowns planned for the fourth quarter. Wood costs are~~also expected to ~~be seasonally higher.~~improve.


	2007						2006						2008		2007
*In millions*	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		1st Quarter		1st Quarter		4th Quarter
Sales	$	1,305	$	1,315	$	3,855	$	1,250	$	1,240	$	3,665	$	1,445	$	1,235	$	1,390
Operating Profit		115		139		357		152		86		267		97		73		109

Industrial Packaging net sales for the ~~third~~first quarter of ~~2007~~2008 were ~~essentially even with~~4% higher than in the ~~second~~fourth quarter of 2007 and 4%17% higher than in the ~~third~~first quarter of ~~2006.~~2007. Operating profits in the ~~third~~first quarter of ~~2007~~2008 were ~~17%~~11% lower than in the ~~second~~fourth quarter of 2007, ~~and 24% lower~~but 33% higher than the ~~third~~first quarter of ~~2006.~~2007.

North American Industrial Packagingnet sales were ~~$975 million in both the third and second quarters of 2007 and $955 million~~$1.05 billion in the ~~third~~first quarter of ~~2006. Operating earnings were $99 million~~2008 compared with $1.0 billion in the ~~third quarter of 2007 compared with $109 million in the second~~fourth quarter of 2007 and ~~$128~~$925 million in the ~~third~~first quarter of ~~2006.~~2007. Operating earnings were $79 million in the first quarter of 2008 compared with $90 million in the fourth quarter of 2007 and $57 million in the first quarter of 2007.

Containerboard shipments in the ~~2007 third~~2008 first quarter were ~~essentially flat compared~~ahead of the fourth quarter of 2007 as demand remained strong. Average sales price realizations were higher due to a full-quarter benefit from sales price increases implemented in the 2007 fourth quarter and a price increase for saturated kraft board implemented in the 2008 first quarter. Planned maintenance downtime costs were about $16 million higher than in the fourth quarter reflecting outages at the Mansfield, Savannah and Vicksburg mills. Input costs continued to move higher, primarily for energy and chemicals.

Compared with the ~~second~~first quarter of 2007, containerboard markets were stronger. Sales volumes were higher, partially due to the increased capacity resulting from the conversion of the Pensacola mill to the production of lightweight linerboard in the third quarter of 2007. Average sales price realizations were ~~slightly~~significantly higher with the ~~partial~~ realization of ~~a $40/ton~~ price ~~increase~~increases implemented during ~~the quarter. Planned maintenance~~2007. However, input costs were ~~about $10~~significantly higher for wood, energy, chemicals, and recycled fiber, while freight costs also increased reflecting higher fuel costs. Costs associated with planned maintenance downtime were $24 million lower than in the second quarter reflecting fewer planned mill outages. Manufacturing performance was unfavorable compared with a very strong second quarter. Input costs were higher for wood, chemicals and recycled fiber. Expenses related to the conversion and start-up of the Pensacola mill linerboard machine were $10 million higher than in the second quarter. Linerboard production at the mill began late in the third quarter.

~~Compared with the third~~first quarter of 2006, domestic containerboard shipments were essentially the same, while export shipments were higher offsetting weaker shipments of boxes. Manufacturing performance improved with stronger operations, although2007 reflecting planned maintenance downtime was about $5 million higher due to the timing of mill outages. Input costs continued to be significantly higher than in the third quarter of 2006, principally for wood and recycled fiber. Costs associated with the conversion and start-up of the Pensacola mill of $25 million also affected 2007 third-quarter profits.outages at fewer mills.

U.S. Converting shipments in the ~~third~~first quarter of ~~2007~~2008 were ~~slightly~~seasonally lower than in the ~~second quarter. Average box~~fourth quarter of 2007. Efforts to recover previous containerboard cost increases through higher container prices resulted in higher average sales price realizations ~~were about the same as in the second quarter although margins declined slightly due to reduced customer demand for higher margin products.~~and improved margins. Manufacturing costs were slightly ~~unfavorable, and~~favorable, but raw material and freight costs ~~increased slightly.~~were significantly higher. Compared with the ~~third~~first quarter of ~~2006,~~2007, shipments were ~~slightly lower reflecting softer customer~~essentially flat as box demand ~~for boxes.~~remained steady. Margins benefited from ~~improved waste performance~~higher average sales price realizations. Raw material and ~~mix improvement initiatives. Input cost increases~~freight costs, however, were ~~offset by improved waste fiber pricing.~~significantly higher.

Looking ahead to the ~~fourth~~2008 second quarter, ~~earnings for~~ North American Industrial Packaging ~~are expected to improve. Sales volumes~~operating results will include higher costs for ~~containerboard should increase, although box volumes should be seasonally lower. Average sales price realizations should be significantly higher with continued realization of~~significant planned maintenance work scheduled for the ~~previously announced containerboard price increase. Planned maintenance downtime expenses~~second quarter. Containerboard shipments are expected to be ~~higher. Distribution costs are also expected to be~~lower reflecting decreased production associated with the maintenance downtime, but box sales volumes should increase with seasonally higher shipments, particularly in the agricultural segment. Price increases for both containerboard and boxes have been announced, while ~~recycled fiber~~raw material costs are expected to ~~remain~~continue to be high. ~~Linerboard production at the Pensacola mill will contribute to operating results for the entire quarter.~~

European Industrial Packagingnet sales were $315 million for the first quarter of 2008 compared with $300 million for the fourth quarter of 2007 and $265 million for the ~~third~~first quarter of ~~2007~~2007. Operating earnings were $18 million in the first quarter of 2008 compared with ~~$270~~$19 million ~~for~~in the ~~second~~fourth quarter of 2007 and ~~$250 million for the third quarter of 2006. Operating earnings were~~ $15 million in the ~~third~~first quarter of ~~2007 compared with $28 million in the second quarter of 2007 and $23 million in the third quarter of 2006.~~2007. The Company completed the purchase of the minority shares of its operations in Morocco during the 2007 third quarter. ~~The 2006 results include contributions from the box plants in the United Kingdom and Ireland which were sold at the end of 2006.~~

Sales volumes in the ~~third~~first quarter of ~~2007~~2008 were ~~lower~~higher than in the ~~second~~2007 fourth quarter, ~~reflecting a poor~~benefiting from container sales for the tomato and citrus fruit ~~and vegetable season~~seasons in ~~France and Spain, although Italy benefited from a strong agricultural season and growth in industrial markets.~~Morocco. Sales margins ~~increased slightly over~~were essentially flat with the ~~second quarter reflecting higher container prices in France, Spain and Italy. Conversion costs were slightly unfavorable.~~fourth quarter. Raw material costs were higher ~~reflecting~~due to increased energy ~~costs. Second quarter earnings had benefited from a $6 million insurance recovery from a fire at a plant in Turkey.~~costs, while operating costs were slightly unfavorable.

Compared to the ~~third~~first quarter of ~~2006,~~2007, sales volumes in the ~~2007 third~~2008 first quarter were updown slightly reflecting ~~strong growth~~a weaker market for industrial products throughout Europe as well as weaker agricultural seasons in ~~industrial markets in Italy, partially offset by weaker fruit~~Spain and ~~vegetable box volumes in France and Spain.~~Italy. Sales margins were higher due to the realization of price increases ~~implemented earlier in the current year. Earnings in the 2006 third quarter had included a $13 million pre-tax gain on a sale of property in Spain.~~and declining costs for kraft and recycled containerboard. These benefits were partially offset by higher energy and operating costs.

Entering the ~~fourth~~second quarter, ~~earnings are expected improve. Sales~~sales volumes should be higher aswith the ~~citrus season begins in Spain and Morocco. Operating results will also benefit from a full-quarter’s 100% ownership~~onset of the ~~Morocco operations. Margins~~summer fruit and vegetable seasons in France and Spain. However, margins are expected to decline slightly due to some pressure on box prices following a ~~change~~decline in ~~the geographic mix of sales. Costs for energy~~recycled paper prices. Energy costs are expected to be seasonally ~~higher.~~improve.

Asian Industrial Packagingnet sales were ~~$65~~$80 million in the ~~third~~first quarter of ~~2007~~2008 compared with ~~$70~~$85 million in the ~~second~~fourth quarter of 2007 and $45 million in the ~~third~~first quarter of ~~2006.~~2007. Operating earnings were ~~$1 million~~close to breakeven in ~~the third quarter of 2007 compared with $2 million in the second quarter of 2007 and $1 million in the third quarter of 2006.~~all periods presented.


	2008		2007
*In millions*	1st Quarter		1st Quarter		4th Quarter
Sales	$	770	$	715	$	780
Operating Profit		9		40		15

Consumer Packaging net sales for the ~~third~~first quarter of ~~2007~~2008 were 2%1% lower than in the ~~second~~fourth quarter of 2007, but ~~10%~~8% higher than in the ~~third~~first quarter of ~~2006.~~2007. Operating profits in the ~~third~~first quarter of ~~2007~~2008 were ~~2% higher than in the second quarter of 2007, but 21%~~40% lower than in the ~~third~~fourth quarter of ~~2006.~~2007 and 78% lower than in the first quarter of 2007.

North American Consumer Packagingnet sales were $600 million in the first quarter of 2008 compared with $620 million in the ~~third quarter of 2007 compared with $640 million in the second~~fourth quarter of 2007 and ~~$645~~$570 million in the ~~third~~first quarter of ~~2006.~~2007. Operating earnings were ~~$39~~a loss of $3 million in the ~~third~~first quarter of ~~2007~~2008 compared with ~~$37~~gains of $4 million in the ~~second~~fourth quarter of 2007 and ~~$52~~$25 million in the ~~third~~first quarter of ~~2006.~~2007.

Coated paperboard sales volumes ~~were slightly higher~~ in the ~~third~~first quarter of 2008 were up slightly compared with the fourth quarter of 2007 ~~compared with the second quarter of 2007 reflecting increases in folding carton board and tobacco board shipments, partially offset by decreases in cupstock shipments.~~as demand remained solid. Average sales prices improved with the realization of ~~price~~ increases for cup stock, folding carton board and coated bristols. Planned maintenance downtime costs were ~~about $5~~$14 million lower than in the ~~second~~fourth quarter. Manufacturing operating costs were ~~favorable~~unfavorable reflecting ~~improved mill operations, particularly~~operational issues at the Augusta ~~mill.~~and Riegelwood mills. Input costs were higher, particularly for ~~wood.~~ energy.

Compared with the ~~third~~first quarter of ~~2006,~~2007, sales volumes were ~~up slightly.~~higher, primarily due to strong demand for cup stock and bristols. Average sales prices were significantly higher with the realization of ~~sales price~~ increases implemented during ~~the latter part of 2006 as well as increases announced in the first half of~~ 2007. ~~Planned~~However, input costs were also significantly higher, particularly for energy and polyethylene, while planned maintenance downtime expenses were slightly higher. ~~Freight costs were favorable, but input costs were higher, particularly for wood.~~

Shorewood sales volumes in the ~~third~~first quarter of 2008 decreased from the fourth quarter of 2007 ~~increased from the second quarter due to higher demand~~reflecting a seasonal decline in the home entertainment segment ~~partially offset by reduced~~and slightly softer demand in the tobacco and consumer products segments. ~~Raw~~Overall, raw material costs were ~~up slightly due to~~about flat despite an increase in bleached board ~~cost increases, and freight~~ costs ~~were higher reflecting increased shipping volumes. Third~~during the quarter. First quarter results also included $4$5 million of ~~additional costs~~expenses related to the ~~closures~~reorganization of Shorewood’s Canadian operations. Compared with the ~~Edison, N.J. and the Waterbury, CT plants. Sales~~first quarter of 2007, sales volumes in the ~~third~~first quarter of ~~2007~~2008 were lower ~~than in the third quarter of 2006~~ due to softer demand in the tobacco, consumer products and display segments, partially

offset by improvement in the home entertainment ~~segments. Average sales price realizations~~segment. Sales margins were ~~slightly higher, but these benefits were~~lower reflecting declines in both the home entertainment and consumer products segments, partially offset by ~~a decline~~an increase in ~~sales margins reflecting a less profitable mix. Raw material costs were slightly higher due to cost increases for bleached board.~~the display segment.

Foodservice sales volumes in the ~~third~~first quarter of ~~2007~~2008 were ~~seasonally~~up slightly ~~lower than in~~from the ~~2007 second quarter.~~fourth quarter of 2007. Average sales price realizations ~~were about flat.~~improved reflecting price increases in January 2008. Converting operating costs were ~~unfavorable reflecting lower~~favorable with improved efficiencies from higher production levels. Raw material costs were higher due to increases in coated board and resin costs. Compared with the ~~third~~first quarter of ~~2006,~~2007, sales volumes in the ~~2007 third~~2008 first quarter increased slightly. ~~Higher~~Sales margins improved with the benefits of higher average sales prices ~~and~~partially offset by a ~~more~~less favorable mix of products sold. Results also benefited from higher ~~margin hot cups~~production levels and ~~food containers resulted in~~ improved ~~margins.~~operational efficiencies. Raw material costs were unfavorable due to higher board and ~~polystyrene~~resin costs.

Looking ahead to the ~~fourth~~second quarter, coated paperboard ~~earnings~~sales volumes are expected to ~~decline, due principally to significantly higher planned maintenance expenses and moderately higher input costs. Sales volumes should reflect seasonal declines, although average~~remain at about first-quarter levels as markets remain solid. Average sales price realizations should continue to improve with further realization of a folding carton board price increase implemented in the first quarter and the announced second-quarter price increases ~~announced~~for cup stock and coated bristols. Manufacturing operations are expected to improve, although planned maintenance costs will be higher with major outages at the Texarkana and Augusta mills. Despite some expected improvements in ~~the third quarter.~~sales volumes and costs, Shorewood’s operating results ~~should improve slightly in the fourth quarter. Foodservice earnings~~ are expected to ~~continue strong, but showing a slight seasonal decline.~~be slightly lower in the second quarter due to additional expenses related to the reorganization of the Canadian operations. Foodservice operating results should benefit from seasonally higher sales volumes and operating efficiency cost improvements.

European Consumer Packagingnet sales were $75 million in the first quarter of 2008 compared with $75 million in the fourth quarter of 2007 and $70 million in the ~~third~~first quarter of ~~2007 compared with $65~~2007. Operating earnings were $9 million in the ~~second~~first quarter of ~~2007 and $60 million in the third quarter of 2006. Operating earnings were $5 million in the third quarter of 2007~~2008 compared with $7 million in the ~~second~~fourth quarter of 2007 and ~~$10~~$14 million in the ~~third~~first quarter of ~~2006.~~2007.

Sales volumes in the ~~third~~first quarter of 2008 were about even with the fourth quarter of 2007, while average sales price realizations improved. Manufacturing costs were ~~higher than~~favorable, reflecting strong operating performance. Compared with the ~~second~~first quarter of 2007, reflecting higher sales from the Svetogorsk mill following a maintenance outage in the second quarter. Sales volumes from the Kwidzyn mill were not impacted by an annual outage in the third quarter due to available inventory, but a seasonal improvement in domestic demand was balanced by a reduction in export sales. Average sales price

realizations improved in the third quarter due to a better geographic mix of sales. Manufacturing costs were higher as annual maintenance costs for the third quarter outage at the Kwidzyn mill were higher than for the Svetogorsk mill outage in the 2007 second quarter. Compared with the third quarter of 2006, sales volumes in the ~~2007 third~~first quarter of 2008 were lower with a decline in export market sales versus 2007. Average sales price realizations improved, due in part to ~~increased~~the decline in sales to the lower-margin export market, ~~share following~~but also due to higher prices realized in European domestic markets. Operating results in the ~~capacity expansion at~~2008 second quarter will reflect costs associated with the ~~Kwidzyn~~annual planned maintenance shutdown of the Svetogorsk mill. ~~Average price realizations were higher. In the fourth quarter, earnings are expected to improve reflecting a seasonal increase in demand and no scheduled annual maintenance outages.~~

Asian Consumer Packagingnet sales were $95 million in the first quarter of 2008 compared with $85 million in ~~both~~ the ~~third~~fourth quarter of 2007 and $75 million in the ~~second~~first quarter of 2007. ~~International Paper acquired a 50% ownership interest in International Paper & Sun Cartonboard Ltd. during the fourth quarter of 2006.~~ Operating earnings in the ~~third~~first quarter of ~~2007~~2008 were $5$3 million compared with $4 million in the ~~second~~fourth quarter of 2007 and $1 million in the first quarter of 2007.


	2007						2006						2008		2007
*In millions*	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		1st Quarter		1st Quarter		4th Quarter
Sales	$	1,880	$	1,720	$	5,275	$	1,730	$	1,690	$	5,070	$	1,985	$	1,675	$	2,045
Operating Profit		40		38		107		34		36		97		16		20		28

Distribution’s~~2007 third~~2008 first quarter sales were ~~9% higher~~3% lower than in the ~~second~~fourth quarter of 2007, while operating profits ~~increased 5%~~decreased 43%. Compared to the ~~2006 third~~2007 first quarter, sales rose 9%19%, while operating profits ~~increased 18%~~decreased 20%.

First quarter 2008 sales of printing papers and graphic arts supplies and equipment totaled ~~$1.2~~$1.3 billion compared with $1.3 billion in the fourth quarter of 2007 and $1.1 billion in the 2007 first quarter. Sales to the publishing market in the first quarter were about the same as in the fourth quarter of 2007. However, compared with the first quarter of 2007, increased sales to the book publishing and catalog markets resulted in a significant increase in mill direct sales. Stock sales were about even with 2007 fourth quarter levels, and were up from the first quarter of 2007 due to price and volume gains and acquisition of Central Lewmar in the third quarter of 2007. Compared to the fourth quarter of 2007, ~~including $100 million from Central Lewmar acquired on August 24, 2007, compared with $1.1 billion in both the 2007 second quarter and the 2006 third quarter. Trade~~trade margins for printing ~~products~~papers were unchanged, but they decreased infrom the ~~third~~first quarter of 2007 ~~compared with the second quarter of 2007 reflecting changes~~due to an increase in lower-margin mill direct sales.

Packaging sales ~~mix, and~~ were ~~substantially unchanged from the third quarter of 2006.~~

~~Revenues from packaging products totaled $390~~$400 million in the ~~third~~first quarter of ~~2007 compared with $380 million in~~2008, about the ~~second quarter~~same as the fourth and first quarters of ~~2007 and $382 million in the third quarter of 2006, principally due to increased unit volumes.~~2007. Trade margins for packaging products ~~decreased in~~were lower than the ~~third~~fourth quarter of 2007, reflecting a change in product and service mix, but were about even with the first quarter of 2007.

Sales of facility supply products were $300 million in the first quarter of 2008 compared with $300 million and $200 million in the ~~second~~fourth and first quarters of 2007, respectively. Trade margins for facility supplies increased in the first quarter of 2008 compared to both the fourth quarter and first quarter of 2007 due to a more favorable product mix.

Operating profits totaled $16 million in the first quarter of 2008 compared with $28 million in the fourth quarter of 2007 and ~~the third quarter of 2006, reflecting changes in product mix.~~

~~Facility supplies revenues totaled $269~~$20 million in the ~~third~~first quarter of 2007. Compared with the fourth quarter of 2007, operating profits declined due to lower sales volumes and higher bad debt expenses, partially offset by lower operating costs. Profits declined slightly compared with ~~$258 million~~the 2007 first quarter reflecting slightly higher allocated corporate overhead costs, higher bad debt expenses and start-up expenses for operations in Canada. Looking ahead to the 2008 second quarter, of 2007 and $248 million in the third quarter of 2006 reflecting increased sales volumes. Trade margins in the third quarter of 2007 were substantially unchanged from the second quarter of 2007, and decreased from the third quarter of 2006 as a result of changes in sales mix.

Operating profits were $40 million in the third quarter of 2007 compared with $38 million in the second quarter of 2007 and $34 million in the third quarter of 2006. The increase in operating profits in the third quarter of 2007 was principally due to the revenue increases. Second quarter 2007 operating results ~~also included a $2 million gain related to a sale of real estate. Higher revenues were the primary cause for the higher operating profit versus the 2006 third quarter.~~

~~Looking ahead, operating results in the 2007 fourth quarter~~ are expected to ~~be strong, comparable to third-quarter levels.~~benefit from improved sales volumes and higher margins.

Forest Products net sales in the ~~third~~first quarter of ~~2007~~2008 were ~~33% higher than in the second quarter of 2007, but 11%~~87% lower than in the ~~third~~fourth quarter of ~~2006.~~2007 and 71% lower than in the first quarter of 2007. Operating earnings in the ~~third~~first quarter of ~~2007~~2008 were ~~1% higher than in the second quarter of 2007, but 40%~~85% lower than in the ~~third~~fourth quarter of ~~2006. This reduction reflects the impact of the 5.6 million acres of forestland sold in 2006 as part of the Company’s Transformation Plan, primarily~~2007, and 74% lower than in the ~~fourth~~first quarter ~~that significantly reduced the Company’s forestland acreage.~~of 2007.

Forest Productsearnings from forestland sales in the ~~third~~first quarter of 2008 were $135 million lower than in the fourth quarter of 2007 ~~were $8 million higher than in~~due to the ~~second quarter~~timing of ~~2007.~~the completion of forestland sale transactions. Harvest, recreational and ~~recreational~~minerals income ~~declined $2~~increased $5 million versus the ~~second~~fourth quarter. Profits from sales of real estate properties decreased by $3$21 million. Forestland operating expenses were $2$5 million ~~higher~~lower in the current quarter. Compared with the ~~2006 third~~2007 first quarter, earnings from forestland sales declined ~~$26~~$69 million. Harvest, recreational and ~~recreational~~minerals income decreased ~~$60 million reflecting the impact of the 2006 Transformation Plan forestland sales.~~$1 million. Forestland operating expenses were ~~$21 million lower than~~even with the first quarter of 2007, while profits from sales of real estate properties decreased $2 million. Operating results in the ~~third~~2008 second quarter ~~of 2006 due to the reduced level of business operations. In the 2007 fourth quarter, earnings~~ are expected to ~~improve with~~benefit from a ~~planned~~projected increase in forestland sales. However, the timing and ~~amount~~mix of ~~these~~forestland sales can change due to various ~~factors, with a corresponding impact on actual operating profits.~~factors.


	2007						2006						2008		2007
*In millions*	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		1st Quarter		1st Quarter		4th Quarter
Sales	$	—	$	—	$	135	$	245	$	235	$	705	$	—	$	135	$	—
Operating Profit		—		—		6		21		17		51		—		6		—

This segment ~~principally~~ includes the operating results of Arizona Chemical, as well as certain smaller businesses. The Arizona Chemical business was sold in February 2007; and thus operating results in 2007 reflect only two months of activity.

On October 5, 2007, International Paper and Ilim Holding S.A. (“Ilim”) announced the completion of a 50:50 joint venture to operate in Russia. Due to the complex organizational structure of Ilim’s operations, and the extended time required for Ilim to prepare consolidated financial information in accordance with accounting principles generally accepted in the United States, the Company is reporting its share of Ilim’s operating results on a one-quarter lag basis. Accordingly, the accompanying consolidated statement of operations for the three months ended March 31, 2008 includes the Company’s 50% share of Ilim’s operating results for the three-month period ended December 31, 2007 under the caption “Equity earnings, net of taxes.” Ilim will be reported as a separate reportable industry segment.

The Company recorded equity earnings, net of taxes, of $17 million in the first quarter of 2008. These results reflected strong market demand and strong pricing for both pulp and containerboard export shipments. Average sales price realizations for Russian domestic pulp, containerboard and wall paper all increased during the fourth quarter of 2007. Manufacturing operations were near capacity, with some impacts from a wood supply shortage in November at the Kotlas mill.

International Paper’s share of after-tax equity earnings also reflected a $4 million foreign exchange gain on the remeasurement of U.S. dollar-denominated debt into Russian rubles and a one-time $6 million charge reflecting the write-up of finished goods and work-in-process inventory to fair value as of the acquisition date.

In the second quarter of 2008, market conditions are expected to continue to be strong, allowing operations to run at full production capacity. Sales prices to export markets should continue to be strong; however, input costs, including wood, are also expected to remain high.

Cash provided by continuing operations totaled ~~$1.4 billion~~$434 million for the first ~~nine~~three months of ~~2007, down~~2008, up from ~~$1.5 billion~~$296 million for the comparable ~~2006 nine-month~~2007 three-month period, reflecting ~~an increase in cash used for~~improved working capital ~~items.~~management. Earnings adjusted for non-cash charges were ~~$1.8 billion~~$418 million for ~~both~~ the ~~2007 and 2006 nine-month periods.~~first three months of 2008 compared to $578 million for the first three months of 2007. Cash ~~used for~~provided by working capital components totaled ~~$409~~$16 million for the first ~~nine~~three months of ~~2007,~~2008, up from ~~$311~~a use of $282 million for the comparable ~~2006 nine-month~~2007 three-month period. ~~However, in the 2007 third quarter, cash used for working capital components decreased by $168 million compared with the six months ended June 30, 2007.~~

Cash proceeds from divestitures totaled approximately ~~$1.7 billion~~$14 million for the first ~~nine~~three months of ~~2007,~~2008, relating to the sales of ~~the Kraft Papers, Beverage Packaging,~~certain remaining Wood Products ~~and Arizona Chemical businesses. Approximately $2.2 billion of cash had been generated from divestitures in~~facilities during the first nine months of 2006. The Company used $227 million of cash in the first nine months of 2007 for the acquisition of Central Lewmar LLC and the purchase of the remaining interests in Compagnie Marocaine des Cartons et des Papiers (CMCP) in Morocco.quarter. Investments in capital projects totaled ~~$804~~$215 million in the 2008 first ~~nine months of~~

~~2007, slightly above $764~~quarter compared with $178 million in the 2007 first ~~nine months of 2006.~~quarter. The increase in the 2008 first quarter reflects spending for a new uncoated paperboard machine at our joint venture in China and spending associated with the new uncoated paper machine in Brazil. Full-year ~~2007~~2008 capital spending is currently expected to be approximately ~~$1.3~~$1.1 billion, or about ~~$200 million above estimated~~equal to depreciation and amortization expense.

Financing activities for the first ~~nine~~three months of ~~2007~~2008 included a ~~$513~~$57 million net ~~reduction~~increase in debt versus a ~~$1.9 billion~~$362 million decrease during the comparable ~~2006 nine-month~~2007 three-month period. Activity for the second quarter of 2007 included the repurchase of $35 million of 5.85% notes with an original maturity in October 2012. First quarter 2007 activity included the repayment by International Paper Investments (Luxembourg) S.ar.l, a wholly-owned subsidiary of International Paper, of $143 million of long-term debt with an interest rate of LIBOR plus 40 basis points and a maturity date in November 2010. Other debt activity in the first quarter included the repayment of $198 million of 7.625% notes that matured within the quarter.

In August 2006, International Paper used approximately $320 million of cash to repay its maturing 5.375% euro-denominated notes that were designated as a hedge of euro functional currency net investments. Other debt activity in the 2006 third quarter included the repayment of $143 million of 7.875% notes and $96 million of 7% debentures, all maturing within the quarter.

In June 2006, International Paper had paid approximately $1.2 billion to repurchase substantially all of its zero-coupon convertible debentures at a price equal to their accreted principal value plus interest, using proceeds from divestitures and $730 million of third party commercial paper issued under the Company’s receivables securitization program. At December 31, 2006, International Paper had repaid all of the commercial paper borrowed under this program. First quarter 2006 activity had included the repurchase of $195 million 6.4% debentures with an original maturity date of February 2026, and early payment of approximately $495 million of notes with coupon rates ranging from 4% to 8.875% and original maturities from 2007 to 2029.

At ~~September 30, 2007~~March 31, 2008 and December 31, ~~2006,~~2007, International Paper classified ~~$112~~$108 million and ~~$100~~$112 million, respectively, of ~~Notes payable~~commercial paper and ~~current maturities of long-term debt~~bank notes as Long-term debt. International Paper has the intent and ability, as evidenced by its fully committed credit facility, to renew or convert these obligations.

~~Also during~~During the first ~~nine~~three months of ~~2007, the Company purchased 30.6 million shares of its common stock through open market purchases for approximately $1.1 billion, and~~2008, International Paper issued approximately ~~5.0~~2.5 million shares of treasury stock for various incentive plans, including stock option exercises that generated approximately ~~$122~~$1 million of cash and restricted stock that did not generate cash. Payments of restricted stock tax withholding totaled $47 million. During the first ~~nine~~three months of ~~2006, approximately 2.8~~2007, the Company purchased 11.2 million shares of its common stock ~~had been~~through open market purchases for approximately $398 million, and issued approximately 2.7 million shares of treasury stock for various incentive plans, including stock option exercises that generated ~~$26~~approximately $30 million of cash and restricted stock that did not generate cash. Common stock dividend payments totaled ~~$330~~$112 million and ~~$372~~$114 million for the first ~~nine~~three months of ~~2007~~2008 and ~~2006,~~2007, respectively. Quarterly dividends were $.25 per share in both years.

Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At ~~September 30, 2007,~~March 31, 2008, the Company held long-term credit ratings of BBB ~~(stable outlook)~~ and Baa3 ~~(stable outlook)~~ by Standard & Poor’s (S&P) and Moody’s Investor Services (Moody’s), respectively. In the first quarter of 2008, in conjunction with the announcement of International Paper’s intent to purchase Weyerhaeuser Company’s packaging business for $6 billion, S&P revised the outlook on the Company’s long-term credit rating from stable to credit watch with negative implications and Moody’s revised the outlook from stable to negative. The Company currently has short-term credit ratings by S&P and Moody’s of ~~A-2~~A-3 and P-3, respectively. During the first quarter of 2008, S&P downgraded the Company’s short-term credit rating from A-2 to A-3 while the Company’s short-term ratings by Moody’s were affirmed.

International Paper expects to be able to meet projected capital expenditures, service existing debt and meet working capital and dividend requirements through 2008 using existing cash balances plus cash from operations, supplemented as required by its existing credit facilities.

At ~~September 30, 2007,~~March 31, 2008, International Paper has approximately $2.5 billion of committed liquidity, including a $1.5 billion contractually committed bank credit agreement that expires in March 2011 and a receivables securitization program that expires in October 2009. There were no outstanding borrowings under the fully committed bank credit agreement or the receivables securitization program at ~~September 30, 2007.~~

Additionally, International Paper Investments (Luxembourg) S.ar.l and International Paper (Europe) S.A., both wholly-owned subsidiaries of International Paper, jointly have a $100 million bank credit agreement maturing in December 2007, with no borrowings outstanding as of September 30, 2007.March 31, 2008.

The Company will continue to rely upon debt and capital markets for the majority of any necessary funding not provided by existing cash balances, operating cash flow or divestiture proceeds. The Company expects to finance the $6 billion purchase price for Weyerhaeuser Company’s containerboard, packaging and recycling business (expected to close in the third quarter of 2008) with debt financing. Funding decisions will be guided by our capital structure planning and ~~liability~~debt management practices. The primary goals of the Company’s capital structure planning are to maximize financial flexibility and preserve liquidity while reducing interest expense. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors.

During the first quarter of 2007, the Company completed the sales of its North American Beverage Packaging operations, its Kraft Papers business, its Arizona Chemical business, and most of its Wood Products business. This substantially completed divestitures under the Company’s Transformation Plan. As reported in the first quarter, these proceeds have been used to: (1) reduce long-term debt and fund a voluntary contribution to the Company’s U.S. qualified pension plan, (2) return value to shareholders through the purchase of its common stock, and (3) for identified selective reinvestments. During the 2007 second quarter, the Company purchased an additional 17.9 million shares of its common stock for approximately $675 million. During the 2007 third quarter, the Company purchased an additional 1.5 million shares of its common stock for approximately $50 million, and additional share repurchases may be made in the 2007 fourth quarter. Additionally, the Company is continuing to make progress on improving its key platform businesses. For the first nine months of 2007, excluding Forest Products, operating profits as a percent of sales improved by 190 basis points. Given declining demand for paper and packaging in North America during 2007, we managed our capacity to meet our customers’ demand, and achieved improved profit margins through higher prices and non-price improvements. Going forward, the Company intends to continue to focus on all factors affecting margin expansion, including price.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires International Paper to establish accounting policies and to make estimates that affect both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require judgments about matters that are inherently uncertain.

Accounting policies whose application may have a significant effect on the reported results of operations and financial position of International Paper, and that can require judgments by management that affect their application, include SFAS No. 5, “Accounting for Contingencies,” SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” SFAS No. 142, “Goodwill and Other Intangible Assets,” SFAS No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” as amended by SFAS No. 132 and 132(R), “Employers’

Disclosures About Pension and Other Postretirement Benefits,” SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” and SFAS No. 109, “Accounting for Income Taxes,” including recent accounting requirements under FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.”

The Company has included in its Annual Report on Form 10-K for the year ended December 31, ~~2006,~~2007, a discussion of these critical accounting policies, which are important to the portrayal of the Company’s financial condition and results of operations and require management’s judgments. ~~Other than the adoption of FIN 48, the~~The Company has not made any changes in any of these critical accounting policies during the first ~~nine~~three months of ~~2007.~~2008.

Pension Accounting. Net pension expense totaled approximately ~~$158~~$28 million for International Paper’s U.S. plans for the ~~nine~~three months ended ~~September 30, 2007,~~March 31, 2008, or about ~~$125~~$24 million less than the pension expense ~~recorded~~ for the first ~~nine~~three months of ~~2006.~~2007. Net pension expense for non-U.S. plans was about $3$2 million and ~~$13~~$1 million for the first ~~nine~~three months of ~~2007~~2008 and ~~2006,~~2007, respectively. The decrease in U.S. plan pension expense was principally due to ~~earnings on a $1 billion contribution made to the plan in the fourth quarter of 2006, lower amortization of unrecognized actuarial losses,~~ an increase in the assumed discount rate to 6.20% in 2008 from 5.75% in 2007 ~~from 5.50% in 2006,~~ and ~~a decrease in active plan participants due to divestitures. The decrease in non-U.S. expense is related to the sales~~lower amortization of ~~Arizona Chemical and Beverage Packaging.~~unrecognized actuarial losses.

After consultation with our actuaries, International Paper determines key actuarial assumptions on December 31 of each year that are used to calculate liability information as of that date and pension expense for the following year. Key assumptions affecting pension expense include the discount rate, the expected long-term rate of return on plan assets, the expected rate of future salary increases, and various demographic assumptions including expected mortality. The discount rate assumption is determined based on a yield curve that incorporates approximately 500-550 Aa-graded bonds. The plan’s projected cash flows are then matched to the yield curve to develop the discount rate. The expected long-term rate of return on plan assets is based on projected rates of return for current and planned asset classes in the plan’s investment portfolio. At ~~September 30, 2007,~~March 31, 2008, the market value of plan assets for International Paper’s U.S. plans totaled approximately ~~$8.6~~$8.0 billion, consisting of approximately ~~60%~~55% equity securities, ~~31%~~34% fixed income securities, and 9%11% real estate and other assets.

For its U.S. qualified defined benefit pension plan, International Paper makes contributions that are sufficient to fully fund its actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act (ERISA). International Paper made ~~voluntary~~no contributions ~~of $1.0 billion~~ to the qualified defined benefit plan in ~~2006~~2007 and does not expect to make any contributions in ~~2007.~~2008. The U.S. nonqualified plans are only funded to the extent of benefits paid which are expected to be ~~$37~~$27 million in ~~2007.~~2008.

Accounting for Share-Based Compensation Plans. The Company discontinued its stock option program in 2004 for members of executive management, and in 2005 for all other eligible U.S. and non-U.S. employees. In the United States, the stock option program was replaced with a performance-based restricted share program for approximately 1,250 employees to more closely tie long-term compensation to Company performance on two key performance drivers: return on investment (ROI) and total shareholder return (TSR). As part of this shift in focus away from stock options to performance-base restricted stock, the Company accelerated the vesting of all 14 million unvested stock options to July 12, 2005.

The Company adopted SFAS No. 123(R), “Share-Based Payment,” effective January 1, 2006 using the modified prospective transition method. This standard requires that compensation cost related to share-based payments be recognized in the financial statements. The amount of compensation cost is measured based on the grant date fair value of the award. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period. The adoption of SFAS No. 123(R) resulted in a $1 million increase in stock-based compensation expense for the three months ended March 31, 2006, with no effect on prior periods. Prior to January 1, 2006, the Company had accounted for share-based compensation in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees.”

The Company adopted the provisions of FIN 48 on January 1, 2007. This interpretation requires management to make judgments regarding the probability that certain income tax positions taken by the Company in filing tax returns in the various jurisdictions in which it operates will be sustained upon examination by the respective tax authorities based on the technical merits of these tax positions, and to make estimates of the amount of tax benefits that will be realized upon the settlement of these positions. The adoption of this interpretation resulted in a charge to the 2007 beginning balance of retained earnings of $94 million.

Certain statements in this Quarterly Report on Form 10-Q, and in particular, statements found in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are not historical in nature may constitute forward-looking statements. These statements are often identified by the words, “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “appear,” “project,” “estimate,” “intend,” and words of similar import. Such statements reflect the current views of International Paper with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. ~~Item 1A. Risk~~ Factors ~~contained~~that could cause actual results to differ include, among other things, the following: changes in the ~~Company’s Annual Report on Form 10-K~~cost or availability of raw materials and energy; changes in transportation availability or costs; the effects of competition from foreign and domestic producers; changes in our product mix; delays in implementing previously announced price increases; the strength of demand for our product and changes in overall demand; changes in credit ratings issued by nationally recognized statistical rating organizations; the ~~year ended December 31, 2006 (as updated by subsequent Quarterly Reports on Form 10-Q) contains~~availability of credit; pension and health care costs; changes related to international economic conditions; changes in currency exchange rates, particularly the relative value of the U.S. dollar to the euro; unanticipated expenditures relating to the cost of compliance with environmental and other governmental regulations; results of legal proceedings; whether we experience a ~~specific list~~material disruption at one of ~~risks~~our manufacturing facilities; whether expected non-price improvements can be realized; increases in interest rates; our substantial indebtedness and ~~uncertainties that you should carefully read and consider.~~our ability to meet our debt service obligations. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Information relating to quantitative and qualitative disclosures about market risk is shown on page 42 of International Paper’s Annual Report on Form 10-K for the year ended December 31, ~~2006,~~2007, which information is incorporated herein by reference. There have not been any material changes in the Company’s exposure to market risk since December 31, ~~2006.~~2007.

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and completely and accurately reported (and accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure) within the time periods specified in the Securities and Exchange Commission’s rules and forms. As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

There ~~were~~have been no changes in our internal ~~controls~~control over financial reporting ~~or other factors~~during the quarter ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect, ~~these~~our internal ~~controls~~control over financial ~~reporting during the period covered by this report.~~reporting.

During the 2007 first quarter, the Company completed the non-cash exchange of assets for the Luiz Antonio mill in Brazil. ~~Integration activities, including an~~The integration of financial business systems is continuing. We are in the process of conducting our annual assessment of internal controls over financial reporting ~~are currently in process and are expected to be completed in early 2008.~~

over the course of our normal 2008 assessment cycle. During the 2007 third quarter, the Company completed the acquisition of Central Lewmar LLC. ~~Integration activities, including an~~The integration of financial processes and business systems is continuing. We are in the process of conducting our annual assessment of internal controls over financial reporting ~~are currently in process~~over the course of our normal 2008 assessment cycle. These two operations contributed approximately 3% of net sales for the year ended December 31, 2007, and ~~are expected to be completed in early 2008.~~approximately 4% of total assets as of December 31, 2007.

The Company ~~does have~~has ongoing initiatives to standardize and upgrade ~~certain of~~ its financial, operating and supply chain systems. The system upgrades will be implemented in stages, by business, over the next several years. Management believes the necessary procedures are in place to maintain effective internal controls over financial reporting as these initiatives continue.

A discussion of material developments in the Company’s litigation and settlement matters occurring in the period covered by this report is found in Note 9 to the Financial Statements in this Form 10-Q.

The Company’s Annual Report on Form 10-K for the year ended December 31, 2006 (Annual Report) contains important risk factors that could cause the Company’s actual results to differ materially from those projected in any forward-looking statement. Since the Company has substantially completed the divestitures under its Transformation Plan, the Company no longer faces the risks described in the Annual Report under the heading “The Ability to Successfully Execute Sales Transactions Currently Under Contract.” Second, the risk factor “Risks Relating to Industry Conditions – Demand for our Products” has been amended and restated in its entirety as follows:

~~Demand For Our Products.~~ Demand for our products is affected by general economic conditions globally. Changes in industrial non-durable goods production, consumer spending, commercial printing and advertising activity, white-collar employment levels, interest rates, the availability of credit (particularly as it may affect our land sales) and currency exchange rates may adversely affect our businesses and our financial results.

~~There are no other significant changes to the risk factors described in the Annual Report.~~

On March 13, 2008, the Company entered into a series of agreements to make immaterial modifications to its securitization facility, including removing International Paper Financial Services, Inc. from the structure. The changes were reflected in the following agreements:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


New York		13-0872805
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification No.)

6400 Poplar Avenue, Memphis, TN		38197
(Address of principal executive offices)		(Zip Code)


Large accelerated filer x		Accelerated filer ¨
Non-accelerated filer ¨		Smaller company ¨
(Do not check if a smaller reporting company)


		PAGE NO.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statement of Operations - Three Months Ended March 31, 2008 and ~~Nine Months Ended September 30,~~ 2007 ~~and 2006~~	1

	Consolidated Balance Sheet - ~~September 30, 2007~~March 31, 2008 and December 31, ~~2006~~2007	2

	Consolidated Statement of Cash Flows - ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2008 and 2007 ~~and 2006~~	3

	Consolidated Statement of Changes in Common Shareholders’ Equity - ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2008 and 2007 ~~and 2006~~	4

	Condensed Notes to Consolidated Financial Statements	5

	Financial Information by Industry Segment	2419

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2621

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4337

Item 4.	Controls and Procedures	4438

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4539

Item 1A.	Risk Factors	~~Risk Factors~~	45*

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4639

Item 3.	Defaults upon Senior Securities	*

Item 4.	Submission of Matters to a Vote of Security Holders	*

Item 5.	Other Information	~~Other Information~~	*39

Item 6.	Exhibits	4740

Signatures			4841


	Three Months Ended September 30,				Nine Months Ended September 30,
*In millions, except per share amounts*	2007		2006		2007		2006
Net sales	$	5,669	$	5,775	$	16,627	$	17,613
Earnings (loss) from continuing operations		225		414		886		(707	)
Net earnings (loss)		222		253		851		(871	)
Earnings (loss) from continuing operations per common share		0.53		0.85		2.03		(1.46	)
Net earnings (loss) per common share		0.52		0.52		1.95		(1.80	)


*In millions, except per share amounts*	Three Months Ended March 31, 2007
Net sales	$	5,539
Earnings from continuing operations		483
Net earnings		460
Earnings from continuing operations per common share		1.08
Net earnings per common share		1.03


	Common Stock Issued			Paid-in			Retained			Accumulated Other Comprehensive			Treasury Stock					Total Common Shareholders’
	Shares	Amount		Capital			Earnings			(Loss) Income			Shares		Amount			Equity
Balance, December 31, 2006	493,340	$	493	$	6,735		$	3,737		$	(1,564	)	39,844		$	1,438		$	7,963
Issuance of stock for various plans, net	216		1		(17	)		—			—		(5,031	)		(182	)		166
Repurchase of stock	—		—		—			—			—		30,577			1,124			(1,124	)
Cash dividends - Common stock ($0.75 per share)	—		—		—			(330	)		—		—			—			(330	)
Comprehensive income (loss):
Net earnings	—		—		—			841			—		—			—			841
Pension and post retirement divestitures, amortization of prior service costs and net loss	—		—		—			—			78		—			—			78
Change in cumulative foreign currency translation adjustment (less tax of $0)	—		—		—			—			451		—			—			451
Net gains on cash flow hedging derivatives:
Net gain arising during the period (less tax of $0)	—		—		—			—			17		—			—			17
Less: Reclassification adjustment for gains included in net income (less tax of $1)	—		—		—			—			(12	)	—			—			(12	)

Total comprehensive income																			1,375
Adoption of FIN 48 (Note 8)	—		—		—			(94	)		—		—			—			(94	)

Balance, September 30, 2007	493,556	$	494	$	6,718		$	4,154		$	(1,030	)	65,390		$	2,380		$	7,956


Nine Months Ended September 30, 2006

	Common Stock Issued			Paid-in			Retained			Accumulated Other Comprehensive			Treasury Stock					Total Common Shareholders’
	Shares	Amount		Capital			Earnings			(Loss) Income			Shares		Amount			Equity
Balance, December 31, 2005	490,501	$	491	$	6,627		$	3,172		$	(1,935	)	112		$	4		$	8,351
Issuance of stock for various plans, net	2,802		3		83			—			—		(115	)		(4	)		90
Repurchase of stock	—		—		—			—			—		38,465			1,392			(1,392	)
Cash dividends - Common stock ($0.75 per share)	—		—		—			(372	)		—		—			—			(372	)
Comprehensive income (loss):
Net loss	—		—		—			(929	)		—		—			—			(929	)
Change in cumulative foreign currency translation adjustment (less tax of $8)	—		—		—			—			135		—			—			135
Net gains (losses) on cash flow hedging derivatives:
Net loss arising during the period (less tax of $6)	—		—		—			—			(9	)	—			—			(9	)
Less: Reclassification adjustment for gains included in net income (less tax of $0)	—		—		—			—			(8	)	—			—			(8	)

Total comprehensive loss																			(811	)

Balance, September 30, 2006	493,303	$	494	$	6,710		$	1,871		$	(1,817	)	38,462		$	1,392		$	5,866


	Common Stock Issued			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Treasury Stock					Total Common Shareholders’ Equity
	Shares	Amount		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Shares		Amount			Total Common Shareholders’ Equity
Balance, December 31, 2007	493,556	$	494	$	6,755		$	4,375		$	(471	)	68,436		$	2,481		$	8,672
Issuance of stock for various plans, net	—		—		(84	)		—			—		(2,501	)		(98	)		14
Cash dividends - Common stock ($0.25 per share)	—		—		—			(112	)		—		—			—			(112	)
Comprehensive income (loss):
Net earnings	—		—		—			133			—		—			—			133
Amortization of pension and post retirement prior service costs and net loss:
U.S. plans (less tax of $15)	—		—		—			—			20		—			—			20
Non-U.S. plans (less tax of $0)	—		—		—			—			3		—			—			3
Change in cumulative foreign currency translation adjustment (less tax of $0)	—		—		—			—			246		—			—			246
Net gains on cash flow hedging derivatives:
Net gain arising during the period
(less tax of $17)	—		—		—			—			36		—			—			36
Less: Reclassification adjustment for gains included in net income (less tax of $4)	—		—		—			—			(13	)	—			—			(13	)

Total comprehensive income																			425

Balance, March 31, 2008	493,556	$	494	$	6,671		$	4,396		$	(179	)	65,935		$	2,383		$	8,999


Three Months Ended March 31, 2007

	Common Stock Issued			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Treasury Stock					Total Common Shareholders’ Equity
	Shares	Amount		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Shares		Amount			Total Common Shareholders’ Equity
Balance, December 31, 2006	493,340	$	493	$	6,735		$	3,737		$	(1,564	)	39,844		$	1,438		$	7,963
Issuance of stock for various plans, net	2		—		(75	)		—			—		(2,681	)		(97	)		22
Repurchase of stock	—		—		—			—			—		11,231			398			(398	)
Cash dividends - Common stock ($0.25 per share)	—		—		—			(114	)		—		—			—			(114	)
Comprehensive income (loss):
Net earnings	—		—		—			434			—		—			—			434
Amortization of pension and post-retirement prior service costs and net loss (less tax of $10)	—		—		—			—			18		—			—			18
Change in cumulative foreign currency translation adjustment (less tax of $0)	—		—		—			—			88		—			—			88
Net gains on cash flow hedging derivatives:
Net gain arising during the period (less tax of $1)	—		—		—			—			10		—			—			10
Less: Reclassification adjustment for gains included in net income (less tax of $0)	—		—		—			—			(4	)	—			—			(4	)
Total comprehensive income																			546

Adoption of FIN 48 (Note 8)	—		—		—			(94	)		—		—			—			(94	)

Balance, March 31, 2007	493,342	$	493	$	6,660		$	3,963		$	(1,452	)	48,394		$	1,739		$	7,925


*In millions, except per share amounts*	Three Months Ended September 30, 2006			Nine Months Ended September 30, 2006
Revenues	$	33		$	127

Earnings from discontinued operation
Earnings from operation	$	2		$	20
Income tax expense		—			(9	)

Earnings from operation, net of taxes		2			11

Gain on sale		101			101
Income tax expense		(21	)		(21	)

Gain on sale, net of taxes		80			80

Earnings from discontinued operation, net of taxes	$	82		$	91

Earnings per common share from discontinued operation - assuming dilution
Earnings from operation	$	—		$	0.02
Gain on sale		0.16			0.16

Earnings per common share from discontinued operation, net of taxes - assuming dilution	$	0.16		$	0.18


*In millions*	December 31, 2006
Accounts receivable, net	$	298
Inventories		401
Plants, properties and equipment, net		995
Goodwill		10
Other assets		74

Assets of businesses held for sale	$	1,778

Accounts payable	$	184
Accrued payroll and benefits		50
Other accrued liabilities		32
Other liabilities		67

Liabilities of businesses held for sale	$	333


*In millions*	Balance December 31, 2005 (a)		Reclassifications and Other (b)		Additions/ (Reductions)			Balance September 30, 2006
Printing Papers	$	1,616	$	—	$	—		$	1,616
Industrial Packaging		676		3		11	(c)		690
Consumer Packaging		1,019		1		(1	)(d)		1,019
Distribution		299		—		—			299
Corporate		11		—		—			11

Total	$	3,621	$	4	$	10		$	3,635


	Nine Months Ended Septemebr 30,
*In millions*	2007			2006
Asset retirement obligation, January 1	$	29		$	33
New liabilities		—			1
Liabilities settled		(3	)		(3	)
Net adjustments to existing liabilities		1			1
Accretion expense		1			1

Asset retirement obligation, September 30	$	28		$	33


	~~Three Months Ended~~ ~~September 30, 2007~~		~~Nine Months Ended~~ ~~September 30, 2007~~
~~Expected volatility~~	~~21.20 - 21.37~~	%	~~20.02 - 21.37~~	%
~~Risk-free interest rate~~	~~4.318 - 4.425~~	%	~~4.318 - 4.84~~	%


	Three Months Ended March 31,
	2008	2007
Expected volatility	19.57% - 25.46%	20.33% - 20.46%
Risk-free interest rate	1.199% - 3.497%	4.64% - 4.75%


	Nonvested Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2006	5,504,458		$	38.61
Granted	2,492,194			33.75
Shares Issued (a)	(1,502,910	)		36.22
Forfeited	(147,726	)		39.41

Outstanding at September 30, 2007	6,346,016		$	37.25


	Nonvested Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2007	6,217,012		$	35.67
Granted	3,983,300			36.25
Shares Issued (a)	(3,553,038	)		41.72
Forfeited	(177,350	)		34.90

Outstanding at March 31, 2008	6,469,924		$	32.73


	Three Months Ended March 31,
	2008			2007 (2)
Printing Papers	$	185		$	167
Industrial Packaging		97			73
Consumer Packaging		9	(3)		40
Distribution		16			20
Forest Products		25			97
Other Businesses (4)		—			6

Operating Profit (1)		332			403
Interest expense, net		(81	)		(61	)
Minority interest/equity earnings adjustment (5)		4			5
Corporate items, net		(21	)		(37	)
Restructuring and other charges		(37	)		(18	)
Net gains on sales and impairments of businesses		1			314

Earnings from continuing operations before income taxes, equity earnings and minority interest	$	198		$	606

Equity earnings, net of taxes - Ilim Holding S.A. (1)	$	17		$	—


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2007 - July 31, 2007	15,384	$	38.72	—	—
August 1, 2007 - August 31, 2007	1,476,200	$	33.98	—	—
September 1, 2007 - September 30, 2007	6,000	$	33.96	—	—

Total	1,497,584		—	—	—


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2008 - January 31, 2008	838	$	31.02	—	—
February 1, 2008 - February 29, 2008	1,458,246		31.85	—	—
Total	1,459,084		—	—	—



10.1		~~Share~~ Purchase Agreement dated August 16, 2007, in respect of Ilim Holdings S.A. by and among International Paper Investments (Luxembourg) S.ar.l., Pulp Holding Luxembourg S.ar.l., Ilim Holding Luxembourg S.ar.l., Ilim Holding S.A.,between International Paper Company ~~Mr. Zakhar Smushkin, Mr. Mikhail Zingarevich, Mr. Leonid Eruhimovich~~ and ~~Mr. Boris Zingarevich~~Weyerhaeuser Company dated as of March 15, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 20, 2008).

10.2		~~First Amendment Deed to Share Purchase Agreement, dated October 4, 2007, in respect of Ilim Holdings S.A.~~Debt Commitment Letter by and among International Paper ~~Investments (Luxembourg) S.ar.l.~~Company and JPMorgan Chase Bank, N.A., ~~Pulp Holding Luxembourg S.ar.l.~~Bank of America, N.A., ~~Ilim Holding Luxembourg S.ar.l.~~UBS Loan Finance LLC, Deutsche Bank AG New York Branch, The Royal Bank of Scotland PLC, J.P. Morgan Securities Inc., ~~Ilim Holding S.A.~~Banc of America Securities LLC, Deutsche Bank Securities Inc., UBS Securities LLC, Deutsche Bank AG Cayman Islands Branch and RBS Securities Corporation d/b/a RBS Greenwich Capital dated March 15, 2008 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated March 20, 2008).

10.3		Fourth Amendment, dated as of March 13, 2008, to the Amended and Restated Credit and Security Agreement, by and among Red Bird Receivables, LLC (formerly known as Red Bird Receivables, Inc.), as Borrower, International Paper Financial Services, Inc., as withdrawing Servicer, International Paper Company, ~~Mr. Zakhar Smushkin, Mr. Mikhail Zingarevich, Mr. Leonid Eruhimovich~~as successor Servicer, Variable Funding Capital Company, Gotham Funding Corporation, Park Avenue Receivables Company, LLC, Starbird Funding Corporation, CAFCO, LLC, each as Conduits, Citibank, N.A., The Bank of Tokyo-Mitsubishi UFJ Ltd., individually and ~~Mr. Boris Zingarevich~~as Co-Agent, JP Morgan Chase Bank, N.A., individually and as Co-Agent, BNP Paribas, New York Branch, individually and as a Co-Agent, Citicorp North America, Inc., as a Co-Agent and Wachovia Bank, National Association, as a Co-Agent and as Administrative Agent.

10.4		Second Amended and Restated Credit and Security Agreement, dated as of March 13, 2008, among Red Bird Receivables, LLC, as Borrower, International Paper Company, as Servicer, the Conduits and Liquidity Banks from time to time a party thereto, The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, as Gotham Agent, JPMorgan Chase Bank, N.A., as PARCO Agent, BNP Paribas, acting through its New York Branch, as Starbird Agent, Citicorp North America, Inc., as CAFCO Agent and as Administrative Agent. Certain confidential portions have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

10.5		Receivables Sale and Contribution Agreement, dated as of March 13, 2008, between International Paper Company and Red Bird Receivables, LLC.

10.6		2008 Management Incentive Plan, amended and restated as of January 1, 2008.

10.7		Amendment, effective April 1, 2008, to the International Paper Company Long-Term Incentive Compensation plan, as amended and restated February 7, 2005.

11		Statement of Computation of Per Share Earnings

12		Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends

31.1		Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


	INTERNATIONAL PAPER COMPANY
	(Registrant)

Date: ~~November 7, 2007~~May 9, 2008	By	/s/ ~~MARIANNE M. PARRS~~TIM S. NICHOLLS
		~~Marianne M. Parrs~~Tim S. Nicholls
		~~Executive~~ Senior Vice President and Chief Financial Officer



Date: ~~November 7, 2007~~May 9, 2008	By	/s/ ROBERT J. GRILLET
		Robert J. Grillet
		Vice President – Finance and Controller