International Paper authorizes $3 billion share repurchase program

Jul 13, 2006. /Lesprom Network/. International Paper announced on July 13 that its board of directors has authorized a share repurchase program to acquire up to $3 billion of the company's stock. The $3 billion share repurchase amounts to approximately 20% of the company's outstanding shares at yesterday's closing price of $32.12. International Paper plans to begin the program in the third quarter of 2006 and intends to repurchase a significant amount of shares before the end of the year. The company is considering various forms of share repurchase vehicles, including tender offers, accelerated share repurchases and/or open market purchases, with the intention of completing the program before the end of 2007. "A year ago, International Paper announced its transformation plan, and committed to a balanced and disciplined use of proceeds from planned divestitures. The board's decision to return up to $3 billion to our shareowners is another milestone in delivering on that promise," said John Faraci, IP chairman and chief executive. "In addition to returning value to our shareowners through the share repurchase, we are reducing debt to strengthen our balance sheet and we are exploring attractive reinvestment opportunities that will improve our global uncoated paper and packaging businesses." International Paper plans to spend approximately $6 billion to $7 billion to strengthen the balance sheet through debt repayment and potential voluntary cash contributions to its U.S. pension fund. As of the end of the first quarter of 2006, the company had approximately $11.5 billion in debt, having reduced its debt by approximately $600 million using proceeds from the September 2005 sale of its interest in Carter Holt Harvey Limited. The company is considering voluntary cash contributions to its U.S. pension fund, in the range of $500 million to $1 billion, to begin satisfying longer-term funding requirements and to lower its pension expense. "This approach to strengthening our balance sheet is consistent with our intent to maintain our investment-grade credit rating," Faraci said. "Reducing debt through expected improvements in cash flow from operations, combined with divestiture proceeds, will reduce our annual interest expense by about $350 million and will increase our financial flexibility." The announcement is part of the transformation plan International Paper announced in July 2005, to strengthen the company by: • focusing on two global platform businesses (uncoated papers and packaging, along with xpedx, its merchant distribution business) and improving profitability of those key businesses; • evaluating additional assets with an eye toward divestiture; and • using proceeds from divestitures to return value to shareowners, strengthen the company's balance sheet, and selectively reinvest in its key platform businesses. Headquartered in the United States, International Paper has been a leader in the forest products industry for more than 100 years. The company is currently transforming its operations to focus on its global uncoated papers and packaging businesses, which operate and serve customers in the U.S., Europe, South America and Asia. These businesses are complemented by an extensive North American merchant distribution system. International Paper is committed to environmental, economic and social sustainability, and has a long-standing policy of using no wood from endangered forests.