NOTE 18 - BUSINESS SEGMENT INFORMATION

International Paper’s business segments, Industrial Packaging, Global Cellulose Fibers, Printing Papers, and Consumer Packaging, are consistent with the internal structure used to manage these businesses. All segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the Forest Products industry. Subsequent to the acquisition of the Weyerhaeuser pulp business in December 2016, the Company began reporting the Global Cellulose Fibers business as a separate business segment due to the increased materiality of the results of this business. This segment includes the Company's legacy pulp business and the newly acquired pulp business. As such, amounts related to the legacy pulp business have been reclassified out of the Printing Papers business segment and into the new Global Cellulose Fibers business segment for all prior periods.

Business segment operating profits are used by International Paper's management to measure the earnings performance of its businesses. Management believes that this measure allows a better understanding of trends in costs, operating efficiencies, prices and volumes. Business segment operating profits are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of noncontrolling interests, excluding corporate items and corporate special items.

The Company also has a 50% equity interest in Ilim Holding S.A. (Ilim) operating in Russia, that is a separate business segment. The Company recorded equity earnings (losses), net of taxes, of $48 million and $46 million for the three months ended September 30, 2017 and 2016, respectively, and $119 million and $154 million for the nine months ended September 30, 2017 and 2016, respectively, for Ilim. The Company received cash dividends from the joint venture of $129 million during the first nine months of 2017. At September 30, 2017 and December 31, 2016, the Company's investment in Ilim was $279 million and $302 million, respectively, which was $158 million and $164 million, respectively, more than the Company's proportionate share of the joint venture's underlying net assets. The differences primarily relate to purchase price fair value adjustments and currency translation adjustments. The Company is party to a joint marketing agreement with Ilim, under which the Company purchases, markets and sells paper produced by Ilim. Purchases under this agreement were $52 million and $40 million for the three months ended September 30, 2017 and 2016, respectively, and $151 million and $124 million for the nine months ended September 30, 2017 and 2016, respectively.

Sales by business segment for the three months and nine months ended September 30, 2017 and 2016 were as follows:



	Three Months Ended September 30,					Nine Months Ended September 30,
In millions	2017			2016		2017			2016
Industrial Packaging	$	3,734		$	3,491	$	10,939		$	10,422
Global Cellulose Fibers	654			242		1,830			713
Printing Papers	1,039			1,019		3,051			3,003
Consumer Packaging	491			494		1,431			1,490
Corporate and Intersegment Sales	(5		)	20		(55		)	70
Net Sales	$	5,913		$	5,266	$	17,196		$	15,698

Operating profit by business segment for the three months and nine months ended September 30, 2017 and 2016 were as follows:



	Three Months Ended September 30,							Nine Months Ended September 30,
In millions	2017			2016				2017				2016
Industrial Packaging	$	469	(a)	$	423		(f)	$	884		(a)	$	1,277		(f)
Global Cellulose Fibers	49		(b)	(38		)	(g)	(14		)	(b)	(109		)	(g)
Printing Papers	135			167				321			(c)	419
Consumer Packaging	54			61				73			(d)	150			(h)
Business Segment Operating Profits	707			613				1,264				1,737

Earnings (loss) from continuing operations before income taxes and equity earnings	503			373				718				676
Interest expense, net	152			132				431			(e)	384
Noncontrolling interests/equity earnings adjustment (j)	—			1				(1		)		1
Corporate items, net	19			11				34				57
Special items, net	—			54				(16		)		46
Non-operating pension expense	33			42				98				573			(i)
	$	707		$	613			$	1,264			$	1,737

(a)

Includes a charge of $354 million for the nine months ended September 30, 2017 related to the agreement to settle the Kleen Products anti-trust class action lawsuit, a charge of $10 million for the three months and nine months ended September 30, 2017 for the accelerated amortization of an intangible asset in Brazil, a gain of $6 million for the nine months ended September 30, 2017 for a net bargain purchase gain associated with the June 2016 acquisition of Holmen Paper's newsprint mill in Madrid, Spain, and charges of $5 million and $9 million for the three months and nine months ended September 30, 2017, respectively, for other items.

(b)

Includes charges of $6 million and $15 million for the three months and nine months ended September 30, 2017, respectively, for costs associated with the acquisition of the pulp business acquired in December 2016, a charge of $14 million for the nine months ended September 30, 2017 for the amortization of the inventory fair value step-up for that business and charges of $2 million and $3 million for the three months and nine months ended September 30, 2017, respectively, for other items.


(c)	Includes a charge of $2 million for the nine months ended September 30, 2017 for other items.


(d)	Includes a charge of $9 million for the nine months ended September 30, 2017 for the impairment of the assets of our Foodservice business in Asia.


(e)	Includes a gain of $4 million for the nine months ended September 30, 2017 for interest income associated with an income tax refund claim.


(f)	Includes charges of $5 million and $70 million for the three months and nine months ended September 30, 2016, respectively, for the impairment of the assets of our corrugated packaging business in Asia and costs associated with the sale of that business.


(g)	Includes charges of $7 million and $12 million for the three months and nine months ended September 30, 2016, respectively, for costs associated with the agreement to purchase the Weyerhaeuser pulp business.


(h)	Includes a charge of $9 million for the nine months ended September 30, 2016 for costs associated with the Riegelwood conversion to 100% pulp production.


(i)	Includes a charge of $439 million for the nine months ended September 30, 2016 for a settlement accounting charge associated with term-vested lump sum payments.


(j)	Operating profits for business segments include each segment's percentage share of the profits of subsidiaries included in that segment that are less than wholly owned. The pre-tax noncontrolling interest and equity earnings for these subsidiaries are adjusted here to present consolidated earnings before income taxes and equity earnings.