International Paper

1. International Paper Warrior Investment club Officer Group

2. What does IP do? • International Paper Company operates as a paper and packaging company in North America, Europe, Latin America, Russia, Asia, and North Africa. The company's Industrial Packaging segment manufactures containerboards, including linerboard, medium, whitetop, recycled linerboard, recycled medium, and saturating kraft. Its Printing Papers segment produces printing and writing papers, such as uncoated and coated papers used in copiers, desktop, and laser printers, and digital imaging; pulp for use in the manufacture of printing, writing, and specialty papers, as well as towel and tissue products, and filtration products; and uncoated bristols. The company's Consumer Packaging segment offers coated paperboard for various packaging and commercial printing end uses, such as food, cosmetics, pharmaceuticals, computer software, tobacco products, greeting cards, paperback book covers, lottery tickets, direct mail, and point-of-purchase advertising under the Everest, Fortress, Starcote, and Carolina brands. This segment also produces cups, lids, food containers, and plates. Its Distribution segment distributes products and services to various customer markets, including commercial printers with printing papers and graphic pre-press, printing presses, and post-press equipment; building services and away-from-home markets with facility supplies; and manufacturers with packaging supplies and equipment, as well as offers warehousing and delivery services. The company, through its joint venture with Ilim Holding S.A., operates a pulp and paper business in Russia. International Paper Company sells its paper, packaging products, and other products directly to end users and converters, as well as through agents, resellers, and paper distributors. The company was founded in 1898 and is based in Memphis, Tennessee.

3. Valuation Ratios

5. Bull Case • With the acquistion of Temple-Inland, IP has established a dominant market share lead in corrugated packaging that will offer it scale advantages versus competitors and more stable profit margins • IP has paper and packaging operators in each of the BRIC countries, which could fuel top- and bottom-line growth in the medium term. • A rebound in U.S. based manufacturing will provide a tailwind to IP’s packaging segment. *Morningstar analyst report

6. Bear Case • The new competitive dynamics in containerboard have yet to be tested in a recessionary environment, and any perceived pricing rationality could be broken down. • The paper industry is in secular decline in developed markets, and the rapid adoption of digital technology will stifle growth potential in emerging markets. • Competitors have taken notice of augmented containerboard industry profit margins and have begun to add capacity to the domestic market.

7. Where does this fit in our portfolio? • Solid Dividend • $1.40 (3.10%) • Cyclical Stock • Grows with economy • Oligopoly • ~33% of the market share of the North American containerboard industry

8. One year Chart

9. Five year Chart

10. Income Statement

12. Balance Sheet

14. Cash Flow Statement

16. Discounted Cash Flow Analysis

17. Analysis Findings • 10 year averages used for estimations • (some outliers eliminated) • Revenue Growth: 2.76% • EBITDA Margin: 10.13% • EBIT Margin: 5.20% • Depreciation & Amortization:6.35% • Cash Growth: 5.43% • Accounts Receivable Growth: 3.19% • Inventories Growth: 0.30% • Prepaid Expenses Growth: 4.73% • Accrued Expenses Growth: 2.86% • Accounts Payable Growth: 0.67% • Long Term Debt Increase: 0.51% • Capital Expenditures Growth: 2.40% • Tax Rate for 2013: 22% • Credit Rating: BBB+ • 20 yr. Corporate Bond Rate: 6.69% • Dividends Paid in 2012: $1.40 • 5 Year Dividend Growth Rate: 13.5%

18. Equity Fair Value • Estimated $46.63 per share • (Morningstar Fair Value estimate of $46) • Yahoo Finance’s One Year Estimate: $54.24

19. Questions & Answers