NOTE 19 FINANCIAL INFORMATION BY BUSINESS SEGMENT AND GEOGRAPHIC AREA

International Paper’s business segments, Industrial Packaging, Global Cellulose Fibers and Printing Papers, are consistent with the internal structure used to manage these businesses. See the Description of Industry Segments in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for a description of the types of products and services from which each reportable segment derives its revenues. On January 1, 2018, the Company completed the previously announced transfer of its North American Consumer Packaging business, which includes its North American Coated Paperboard and Foodservice businesses, to a subsidiary of Graphic Packaging Holding Company. The North American Consumer Packaging business was historically presented in the Company's Consumer Packaging segment; however, as a result of this transfer, all current and prior year amounts have been adjusted to reflect the North American Consumer Packaging business as a discontinued operation. In addition, after the announced transfer during the fourth quarter of 2017, the chief operating decision maker began evaluating the European Coated Paperboard business, previously presented in the Company's Consumer Packaging business segment, as part of the Industrial Packaging business segment. As such, amounts related to the European Coated Paperboard business have been presented in the Industrial Packaging business segment for all periods presented. All segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the Forest Products industry.

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 equity earnings and noncontrolling interests, excluding corporate items and corporate special items.

External sales by major product is determined by aggregating sales from each segment based on similar products or services. External sales are defined as those that are made to parties outside International Paper’s consolidated group, whereas sales by segment in the Net Sales table are determined using a management approach and include intersegment sales.

The Company also holds a 50% interest in Ilim that is a separate reportable industry segment. The Company recorded equity earnings (losses), net of taxes, of $183 million, $199 million, and $131 million in 2017, 2016, and 2015, respectively, for Ilim. Equity earnings (losses) includes an after-tax foreign exchange gain (loss) of $15 million, $25 million, and $(75) million in 2017, 2016 and 2015, respectively, primarily on the remeasurement of U.S. dollar-denominated net debt.

Summarized financial information for Ilim which is accounted for under the equity method is presented in the following tables. The audited U.S. GAAP financial statements for Ilim are included in Exhibit 99.1 to this Form 10-K.

Balance Sheet



In millions	2017		2016
Current assets	$	689	$	774
Noncurrent assets	1,696		1,351
Current liabilities	1,039		402
Noncurrent liabilities	972		1,426
Noncontrolling interests	6		22

Income Statement



In millions	2017		2016		2015
Net sales	$	2,150	$	1,927	$	1,931
Gross profit	1,047		957		971
Income from continuing operations	379		419		254
Net income attributable to Ilim	362		391		237

At December 31, 2017 and 2016, the Company's investment in Ilim, which is recorded in Investments in the consolidated balance sheet, was $338 million and $302 million, respectively, which was $154 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 $205 million, $170 million and $170 million for the years ended December 31, 2017, 2016 and 2015, respectively.

INFORMATION BY BUSINESS SEGMENT

Net Sales



In millions	2017			2016		2015
Industrial Packaging	$	15,077		$	14,226	$	14,559
Global Cellulose Fibers	2,551			1,092		975
Printing Papers	4,157			4,058		4,056
Corporate and Intersegment Sales (a)	(42		)	119		1,085
Net Sales	$	21,743		$	19,495	$	20,675

Operating Profit



In millions	2017			2016			2015
Industrial Packaging	$	1,547		$	1,741		$	1,938
Global Cellulose Fibers	65			(179		)	68
Printing Papers	457			540			465
Business Segment Operating Profit	2,069			2,102			2,471

Earnings (loss) from continuing operations before income taxes and equity earnings	848			795			1,132
Interest expense, net	572			520			555
Noncontrolling interests / equity earnings adjustment (b)	(2		)	1			8
Corporate items, net (a)	91			121			96
Corporate special items, net (a)	76			55			422
Non-operating pension expense	484			610			258
	$	2,069		$	2,102		$	2,471

Restructuring and Other Charges



In millions	2017		2016		2015
Industrial Packaging	$	—	$	7	$	—
Global Cellulose Fibers	—		—		—
Printing Papers	—		—		—
Corporate (c)	67		47		252
Restructuring and Other Charges	$	67	$	54	$	252

Assets



In millions	2017		2016
Industrial Packaging	$	15,354	$	14,707
Global Cellulose Fibers	3,913		3,845
Printing Papers	4,054		3,965
Corporate and other (d)	10,582		10,576
Assets	$	33,903	$	33,093

Capital Spending



In millions	2017		2016		2015
Industrial Packaging	$	836	$	832	$	871
Global Cellulose Fibers	188		174		129
Printing Papers	235		215		232
Subtotal	1,259		1,221		1,232
Corporate and other (e)	21		20		78
Capital Spending	$	1,280	$	1,241	$	1,310

Depreciation, Amortization and Cost of Timber Harvested (f)



In millions	2017		2016		2015
Industrial Packaging	$	781	$	730	$	739
Global Cellulose Fibers	261		108		73
Printing Papers	245		232		234
Corporate (g)	56		54		121
Depreciation and Amortization	$	1,343	$	1,124	$	1,167

External Sales By Major Product



In millions	2017		2016		2015
Industrial Packaging	$	14,946	$	14,142	$	14,496
Global Cellulose Fibers	2,524		1,090		986
Printing Papers	4,142		4,062		4,082
Other (h)	131		201		1,111
Net Sales	$	21,743	$	19,495	$	20,675

INFORMATION BY GEOGRAPHIC AREA

Net Sales (i)



In millions	2017		2016		2015
United States (j)	$	16,247	$	14,363	$	14,875
EMEA	3,129		2,852		2,759
Pacific Rim and Asia	625		699		1,501
Americas, other than U.S.	1,742		1,581		1,540
Net Sales	$	21,743	$	19,495	$	20,675

Long-Lived Assets (k)



In millions	2017		2016
United States	$	10,545	$	10,532
EMEA	1,302		1,009
Pacific Rim and Asia	236		246
Americas, other than U.S.	1,630		1,672
Long-Lived Assets	$	13,713	$	13,459


(a)	Includes sales of $15 million in 2017, $42 million in 2016 and $931 million in 2015, operating profits (losses) of $0 million in 2017, $(2) million in 2016 and $(62) million in 2015, and corporate special items expense of $9 million in 2017, $9 million in 2016 and $184 million in 2015, from previously divested businesses.


(b)	Operating profits for industry 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 interests and equity earnings for these subsidiaries is added here to present consolidated earnings from continuing operations before income taxes and equity earnings.


(c)	Includes corporate expenses and expenses of $9 million in 2017, $9 million in 2016 and $10 million in 2015, from previously divested businesses.


(d)	Includes corporate assets, assets of businesses held for sale and assets of previously divested businesses.


(e)	Includes corporate assets and assets of previously divested businesses of $0 million in 2017, $1 million in 2016 and $26 million in 2015.


(f)	Excludes accelerated depreciation related to the closure and/or repurposing of mills.


(g)	Includes $1 million in 2017, $2 million in 2016 and $74 million in 2015 from previously divested businesses.


(h)	Includes $15 million in 2017, $42 million in 2016, and $930 million in 2015 from previously divested businesses.


(i)	Net sales are attributed to countries based on the location of the seller.


(j)	Export sales to unaffiliated customers were $2.9 billion in 2017, $1.8 billion in 2016 and $1.8 billion in 2015.


(k)	Long-Lived Assets includes Forestlands and Plants, Properties and Equipment, net.