Good morning. My name is Brandy and I will be your conference operator today. At this time, I would like to welcome everyone to International Paper's fourth quarter and full year 2009 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker’s remark, there will be a question and answer session. (Operator Instructions). I would now like to turn the call over to Tom Cleves, Vice President Investor Relations. Please go ahead sir.

Thanks Tom and good morning everybody and thanks for joining us. As usually we do, over the next 20 to 30 minutes, Tim and I will review our full year and fourth quarter results and the performance of each of our businesses. Then we’ll talk about our first quarter outlook and open it up to your questions. Let me start by saying, we performed very well in 2009 especially considering the magnitude of the challenges we faced here and around the world. Despite the steak drops in demands, we made IP better and stronger in 2009. In 2009 and going forward, it is all about cash flow and 2009 in the fourth quarter; we are strong in that measure. We generated $2.2 billion of cash flow before fuel credits in 2009 that’s more than $5 a share, improved our balance sheet by $4.3 billion, reducing our logs of debt by $3.1 billion, reducing our pension obligation by $400 million and increasing our cash balance by $800 million. We continue to match our production to our customer’s need to limit pressure on pricing. By the time we complete our announced permanent capacity adjustments earlier this year, we will shutdown more than 2.6 million tons containerboard, uncoated free sheet and coated paper board capacity in North America and Western Europe. We also generated more than $500 million in industrial packaging of synergies including $200 million of overhead cost reductions and further reduced our overhead cost by $300 million around the rest of the company of wide industrial packaging. And our 2009 results also include the favorable impact of $600 million of reduced input costs. Slide five is a busy one, but it picks the four major points of our 2009 improvement plan. Let’s just start up in the upper left with capacity…

Okay thanks John. Good morning everyone. Fourth quarter earnings per share were $0.24 and if you exclude the impact land sales earnings from our operating businesses were actually up 50% from the fourth quarter of 2008 while these results were inline with our original expectations for the quarter, we were definitely not satisfied with our manufacturing operations performance. We had had four consecutive quarters of strong operations but in the fourth quarter experience on isolated mill specific operating issues in North America. During the quarter we did generate 500 million in free cash flow and reduced debt by 600 million one of the story there was input cost which after falling all year long hit a turning point and became a $36 million headwinds for the fourth quarter. But if you will turn to slide 13, I want to put the fourth quarter in perspective and the whole year. So, if you look at this chart what it is showing is quarterly EBITDA margin performance for each of the quarters throughout 2009 and the year-over-year change in margins for 2008, 2009. In the fourth quarter, we generated EBITDA margins of 12.4%, which is comparable with our next best competitor but the important point here is that despite bearing the cost of 90% total downtime in our system. Our 2009 EBITDA margins were 17.5% that is 330 basis points greater than 2008 and it is 220 basis points greater than our next best competitor and outside North American our European box business we generated record EBIT and achieved cost capital returns in 2009 and if you turn to printing papers on the next slide, printing papers actually performed quite well what’s usually a seasonally weak quarter, sector earnings of 139 million were comparable to the third quarter. North American paper volume…

Thanks Tim. Let me take a minute to summarize the quarter. We had a solid quarter. We’ve accomplished a great deal during the fourth quarter, but the worse and pluses and minus, we ship higher volumes at exports in North America, which reduced our lack of order downtime costs. Our print papers business in North America, Europe and Russia performed very well during the fourth quarter. We announce price increases in all of our global pulp, paper and packaging businesses and are implementing those during the first quarter. We will start to see the real impact from that on our bottom line in March. We continue to match our production to our customer’s need and made the tough but necessary decisions to make permanent capacity reductions in North America and Western Europe. These reductions let the higher operating rates at the end of the quarter and as I said earlier we could get even more benefits from this capacity management strategy in 2010 as we take out the fixed cost tied up in these facilities. We continue to aggressively manage costs in the fourth quarter and throughout the year and took out 5600 positions in 2009 and 10,000 jobs since June of 2008. We also reduced our CapEx spending by about $500 million in 2009. And we used the resulting free cash flow to continue to pay down debts $600 million in the fourth quarter and $3.1 billion for the full year. On the minus side, during the quarter, input cost went from a tailwind to a headwind. Actually for wood and OCC and as Tim said we’ve experienced some significant isolated operating issues associated with bad weather and wood shortages at our mills in the U.S. So, with that let me move to the first quarter outlook. In a…

Thanks John. Thanks Tim. Brandy we are now ready to begin the Q&A. But before we start let me say that we asked each caller to limit the question to one plus a follow-up, so that everyone has a chance to participate. Okay Brandy, we are ready for our first question.

Your first question comes from the line of Gail Glazerman with UBS.

Hi, good morning. If you please speak on the operating issues and a quick follow-up on downtime. Are you know, you brought into the first quarter, are you seeing relief from these issues, the weather is still choppy or you still having operating problems.

January was just the repeat of December, you know Gail, in terms of cold weather. We had basically 2 weeks of below 20 degree of weather across the South, just had another ice storm come through Texas and Oklahoma and we have had a huge amount of wet weather that is not going to last forever, but that is- January is kind of a repeat of December.

Okay and looking for the first quarter in terms of the downtime cost, with the mills closed in the late in the quarter, so if you are seeing any improvement there and could you help us to quantify it at all?

Okay, I guess I will get back in the queue at this time.

All right.

(Operator Instructions). The next question comes from the line of Mark Wilde with Deutsche Bank.

Good morning.

Hi, Mark.

Okay but I was wondering about John specifically is one of your competitors last week showed a big quarter-to-quarter jump in incentive comp in the fourth quarter now whether you had anything of the like in your numbers?

Yeah I agree there is a huge quarter-to-quarter change that the fourth quarter was probably higher. There is a year-to-year change that’s done significant this week obviously covered with other cost production.

Okay. Great. I will get back in the queue

Your next question comes from the line of Claudia Hueston with JPMorgan

Morning thanks very much.

Claudia good morning.

I just had a question on the input on fixed cost you talked about on slide 23 about 120 million sequential increase, can you just talk a little bit about what you are assuming for things like OCC and then John I think you have said you could see an additional 100 to 120 million, was that in addition to that 120 that you have talked about in the chart?

That is 100 to 120.

Okay and then could you just talk about what you are assuming for those component?

(Inaudible)

Excuse me.

We saw an OCC onward thinking about what’s going to happen with that quarter-to-quarter OCC can go up by 50 bucks and it hasn’t yet, you know, it is moved up and now moving sideways so I hope we are wrong, we could easily wrong, you know, we are not buying any wood, any OCC other than what we need on the spot basis.

Okay thanks very much.

Your next question comes from the line of Mark Connelly with Sterne Agee.

Thank you. Hi John. Couple of things you talked about 300 million of additional optimization in industrial packaging, and I wonder if you could tell us a little bit more about that is that, is that more on the supply chain side, or is it more of a driven now and my second question comes back to your first comment which was, you told that cash on - -we see your CAPEX coming in under $600 million this year which is found, an amazing drop particularly you have given where IP has been in the past. I tend to assume that maintenance system were between 300 and 350, and as you talk about your cash priorities is a billion still the right number for us to be thinking about over the next couple of years?

And Mark I just to add to that we won’t see a significant decrease in capital for the close the mill closure that we announced because we had already started retailing capital in those operations. We will pick up reduction and maintenance terms.

Right great.

So Carol, you want to talk about it.

Hey Mark this is Carol. Relative to the continued improvement that we can achieve now I think what is the most exciting is, we are done integration and we are really moving onto optimization and there is a bit of differentiation and if you look that where a lot of synergies savings came from given how we operated last year one year that we really have not had a chance to really optimize yet, it is a new system. We ran with the significant amount of downtime last year and so with our footprint change and then getting our new system to run away we know we can’t that’s a lot of upside there. Unfortunately, we are not operating in that condition right now. We are not at our best yet due to the conditions and challenge as John and Tim talked about. In addition to that there is more supply chain upside. Once again that is not an area that we have been able to optimize yet. We have made some progress but will be better there. We also see more opportunity to improve the box plan. We made a lot progress but there is continued cost improvement there as well as box composition, which reflects itself in margin and then the other piece that really not a significant part of the 300 but due to influence but it’s upside to it and just going back into our volume overtime. We have a lot of potential to do the right things overtime and increase our volume because you know where, you know, we can start run for even with our new- we haven’t been full. So all that says there is a lot of upside run away in the Industrial Packaging business to make the business better.

Perfect, it’s really helpful, thank you.

Your next question comes from the line of Rick Skidmore with Goldman Sachs

Well, like Carol talked about the Industrial Packaging stuff and then I will come on in the free mills came out.

Yeah, when the timing, you know, our goal is to hit that, you know, run rate basis by the end of this year, that’s our goal.

On the fixed cost associated with the mills, Rick, we shut down two mills in Europe in the beginning of the year, so we got most of the benefit, I say, we took a nine months benefit in 2009, we shut down our small recycle mill in France Etienne in November and that’s going to be a $10 million plus year-over-year for us, and that just not have any loss associated with that and you know, the biggest chunk of fixed cost reduction comes to Franklin, Franklin mill does not come full y out until end of the second quarter and that’s about $90.0 million bucks and the rest of it of the amount which is probably 50 or 60 is Pineville and Albany and those mills are shut so we will see how that savings flow in the first second, throughout the year.

Right and then just a follow up question on previous question about the operating cost in the packaging business in the quarter that $56 million of operating issues did that primarily occur in December or is that

Yeah, our tight wood situation started to manifest itself in November until we started to see you know, some higher cost as we move things around in freight cost and what not but really December was the more difficult challenge. We had like another example of the weather we had Springfield, Springfield mill down for their annual outage, out in Oregon and believe it or not when we went to start up it was below freezing for un extended in Oregon that we just don’t expect that so that was difficult so I would say the majority were of the operating issues were December but some of the wood issues started to really show up in the November time frame.

And the wood issues aren’t structural and we are not out buying wood from month at a time, I mean, this is really transportation, there is a little bit of stoppage on the hardwood side, it has gone up and the real incremental wood cost is around transportation because everybody is going out further to buy wood, so w will cut that off real quick as you know, weather conditions improve and they will.

And as John said that you know the challenging condition as he mentioned after tentative January but I am very optimistic that they are working on layout, and we are going to end the first quarter in a heck of a lot of better condition than we ended the quarter. Actually, you know, our Industrial Packaging our wood situation is probably a little bit better now than it was three years ago.

Absolutely.

Thank you.

Your next question comes from the line of Steve Chercover with D.A. Davidson.

Oh, one thing (indiscernible) was very good at, that’s predict in the pulp market because you don’t have seen all that, demand signals a co-transparency that are going on in China but I would say International Papers got a pretty (indiscernible) side and you know, we buy pulp in China for the Sun JV, we sell pulp in China through Ilim and we also had a trading operation, big distribution business which by themselves pulp in China and as best we can tell, so we are kind of being in all three parts of that business, the demand is real, you know, China is, you know, a huge increment of all the world’s increase in pulp shipments and that’s going into the domestic economy and so I think that’s going to be the driver the engine of the pulp demand going forward and that economy now, China is now the biggest paper and packaging market in the world, just in Containerboard now they have a box market in the U.S. so it’s real and it start shrinking.

Thank you.

Your next question comes from the line of Chip Dillon with Credit Suisse

Yes, good morning, I just had a question about the pension plan, you mentioned that you have no cash contribution this year and so, I would imagine that $234.0 million expenses is obviously a cash you know, in flow relative to earnings could you just refresh our memories last year how much did you put into the pension plan?

We didn’t put anything into the last year ship and we were not required to make the contribution this year, we may do so in a voluntarily basis. The last time we put money into the pension plan was at the end of 2006.

Just on the last point some potential for changing tax follow ups you probably impacts a lot of the analysis that we do around many things so will pick that into account. We will have those price conversation about how people do this potential tax changes but what we try to communicate in June of last year and have done so since then was that we were looking through the cycles or less than three times debt EBITDA and that was including not only balance sheet debt but our unfunded pension obligations as well. So around the dividend there is a motivation that we want to see the dividend, read the dividend policy changed and reinstated but we have taken the view that until we have more clarity and certainly around economic performance and how viable it is and how sustainable on what pace and until we see ourselves with line of side meaning we have accomplish to debt target objective but we can see clearly how we get there that we would forego making a change in dividend policy.

Got it. Thank you.

It is pretty amazing I mean, your net debt is almost back to the free Weyerhaeuser acquisition level and of course it is turned out better so thank you.

We did see an improvement on our unfunded pension against the obligation of 400 million, it is in the package so I think in the appendix somewhere but Tom is telling me on page 32 but we have very strong return on assets and that was that 400 million improvement with a slight deterioration in the discount rate.

So these assets last year this time or in the first quarter when we look at reinstating the dividend. We would have said we have no idea because frankly we had no idea but it is probably not soon. I think we feel very differently about that now. It cannot be specific but it is always tough we were worried about this it is behind us.

Got you. Thank you.

Your next question comes from the line of Peter Ruschmeier with Barclays Capital.

Thank you and good morning. Wanted to come back to the question of fiber cost, I am curious on the 44 million tons of wood that you buy, can you remind us on how you buy, is it basically the quarterly prices in the marketplace or do you have some percentage of that those purchases that are on longer term contracts?

We do not have any meaningful long-term contracts I say meaning I cannot take if any of it we have, the wood that we used to buy is about 25% of our wood come from IP forest with the long-term contracts and net wood’s price of what we buy the remaining 75% so that works I think on a quarter or monthly like I think it is quarter like but 75% we were buying is basically gate wood we were out there buying wood everyday and one of the things we got done is may long-term permissions for wood at a fixed price.

Okay so is it fair John in your outlook that perhaps the first quarter fiber cost if you have a couple of months of high fiber cost might be higher than the fourth quarter but then as you looked to the second quarter and things try out if you are expecting out to come back down.

You map out fiber cost over the last five years. There is a lot of seasonality whether fiber cost are 40 bucks down to 25 bucks at a time winter months are always higher than the summer months so no question about that.

That’s helpful. John could you also, last question, could you just provide an update strategic update on where you stand on the Ilim venture on how you would like to proceed going forward in the mix to that but where would you like to take it and what are the difference scenarios that we can expect the possible outcome we can expect?

Well, we are well into the second year or I guess into the third year, the Ilim joint venture of the first year financially was a great year, record year for Ilim. The second year was not a great year because what happened to the pulp markets and so average do we are right back, just about bang on where we thought would be. We had the delay of the business plan. We remember we invest $650 million at the initial investment that gives us the opportunity to invest off Ilim’s cash flow and balance sheet to reduced cost and improved product quality, and expand capacity. We still want to do those projects, had a (indiscernible) business of what happened in the credit markets and we are well along on getting that capital playing together and Ilim’s well along on getting the financing together and I would expect as we go to 2010, decline in the- come together and we will likely get started. So the same strategy we had and I would say the Ilim joint venture has gone well. We are working well with our partners. We now know each other a lot better than we did 2 years ago and you know, so far so good. And I say today, we are pretty positive about demand in Russia and demand in China 65% of what Ilim sells is export, most of that is China.

Okay. Thanks very much John.

Your next question comes from the line of George Staphos with Bank of America.

Hi George. George didn’t show up. Operator your line goes to the next question. I think the George is in the queue.

Okay his line is now open.

Hi folks. Good morning and congratulations again. I guess 2 question, one longer term, you know if we look at recent performance you have done a wonderful job through supply management of really taking the edge off of what have otherwise would have been a much more difficult year through capital plan and supply management, but all industries are doing that to some degree and we could expect them to do that as we go into the recovery including your supply. So, as we think about you know earnings in the cycle, John, do you think that if you have taken out some of the drop that you might see in trough and a recession, have we also seen or we like to see some what would have been a normal peak number taken away from the industry. How would you think about it and what would you have us think about.

Well our input cost, if you look at input cost over a 3-4 year period, are still significantly up. We got $600 million that has been for cost release last year, but that was against a runoff of about close to $2 billion in total input cost. So, yeah, you know your point about supply management is true, but there is a lot of input cost kind of inflation or kind of access to normal inflation that’s we are still sticking with this. That may stick around for a while. I mean it may stick around forever. So, we got to be prepared to improve our margins with that input cost, those input costs kind of currently where they are and that is what our plan is based on. We are not assuming that we are going to get a lot or margin expansion from lower input cost.

Well I guess the question, I think you answered it. You know, as we go into the recovery demands picks up, your pricing improves. Do you expect that your suppliers would be in a position to take away what would have been a normal upturn the incremental profitability that you would have seen in past years. Do you think you would be able to after this transition, you know, outrage those potential input cost down the road?

I think we are going to get margin expansion as we look forward. Certainly in the industrial packaging, we have done a very hard wire program as Carol said you know improving our earning and cash flow in that business from internal initiates by $300 plus million and none of that based on lowered input cost. We have got $200 million of capital projects that are great short payback consumption reduction projects and so, using less caustics, using less chemical, using less woods, using less energy is a great way to offset input cost inflation (indiscernible).

Okay. Well we hope your success on those efforts. I guess the last question I had regarding China, you mentioned given the three windows you have into the market relative to pulp and (inaudible) initially, you feel that demand for pulp is real relative to the amount of production that we are seeing in terms of board and paper in the market. From what you can see at least over the intermediate term. Do you think the mastic consumption of paper and board is in line with the production of paper and board in China. Thanks.

Well, the best way to answer that is to talk about the Sun joint venture. Our volume is up 60% year over year. There is, I don’t think any of the Sun board that is being explored that there is might be a couple of thousand tons that of 800, so we are exporting very little and most of our customer base in China are companies that are selling products domestically, not selling products and exporting them. So, as we see and look at the Chinese economy, it could get even stronger because the export sector really has not come back and China is growing an 8 to 9% really on the basis of domestic demand, not export demand. It is pretty clear the Chinese government trying to slow down there growth which is probably the wise thing to do. So, it is very-very strong domestically. Our box business in China has waited to domestic customers and that is the double digits. So, the demand there is real. It is not real estate that is driving the economy, you know some of it is demand for products and our bleach board business and our box business that’s what we are doing, making packaging for products.

Okay thanks very much guys. Good luck in the quarter.

Your next question comes from the line of Mark Weintraub with Buckingham Research.

Thank you. Looking at the industry statistics for the corrugated box and container board business. It looks like we saw a little bit of improvement in December. Did you see that in your business and can you give us a sense of how 2010 has started out?

I think I will let Carol answer that as Mark since she is right on it every day.

Superb.

Yeah Mark, we did see a better December than the month before and so we’ve seeing that improvement. I will call the improvement modest but nonetheless it is improvement. That improvement continued into the first part of January which is pretty strong. It slow down a little bit in the later part, but I believe that had lot to do with some of the weather and some of the other condition. So, we remained cautiously optimistic about the outlook for box demand.

And presumably with the price having gone up in January that is indicative that supply demand balance is in good shape. What are the risks that you see, because I guess one thing that struck me is that John you talked about, I think that John you said 2010 you expected to do better in each of your businesses than in 2009 and given that cost inflation has probably eaten up a lot of January in the Industrial Packaging business that the price increase. To get there either you got to have enormous amounts of internal improvements or you have got another price increase and what are kind of variables that we have got a keep a eye almost closely that would either enable you or not enable you to get another price increase?

Let me comment on that once again. I cannot comment on future price increases but I will talk about how I view the outlook generally for our business and I remained very optimistic about where we are heading in our ability to our earnings capability. We are not at our best right now. We are not at our best in December. We were not at our best in January relative to our operations. The things that are important, operating rates in the industry, inventory levels in the industry, inventory levels down at (indiscernible) are all very good things. So, once again I just remained optimistic about our ability to perform better than we are performing today with potential for the future that I feel very confident and good about.

Mark at other place where there is a lot of margin expansion that people probably overlook somewhat there we think about boxes. You know, there has been a huge spread in the export and domestic line of board price and you know that spread is shrinking rapidly and for us we are big exporter of line of board and have been and will continue to be and so there is easily $50 to $100 bucks a ton of you know price gap to be made up and which will get made up in a tight situation between export and domestic pricing and that’s a million and half ton gross and that is a big number.

And I believe some of that already is being made up. Can you give us a sense as to if we were to look today or perhaps more easily. What you look at your export pricing in February. How does that contrast to where it was in fourth quarter?

It is getting better, but it is very by reaching the world and we does still want to go into regional pricing, but as I said some part of world are tighten up a lot faster than others, but there are all going to get tighter.

Okay and then one real quick one. Obviously, you got a lot of cash on the balance sheet right now, what is the thought process there?

Well, primarily we continued to reduce out debt levels, Mark. I mean we made a significant improvement in the fourth quarter and nothing has really changed as we entered in 2010. I guess the one thing that has changed as John mentioned is the balance sheet is quickly approaching the kind of shape that we would want to have it down on a sustainable basis. So, mostly the debt reduction is going to come, could come around potential pension contributions.

Okay. Thank you.

Your next question is a follow-up question from the line of Gail Glazerman with UBS.

Hi. Just a couple of quick follow-ups. You talked in depth of box demand. Can you talk may be a little bit about some of what turns you are seeing in early 2010 and some of the other business?

Yeah I can just (indiscernible). Gail we are seeing the paper business which kind of way into pretty deep recession last year in terms of year-over-year volume. I think like direct mails are coming back. Our envelope (indiscernible) more optimistic, you know, we could not really tell last year is how much of the paper decline was structural, and inventory correction related and you know there were huge declines in direct mail especially in the financial services sector which in financial services sector there is a big user of direct mail and that stuff is showing some signs of not just stabilizing but getting better. So, you know that is the plus. Our businesses outside North America, all feel pretty good from the demands standpoint. We had a very strong fourth quarter in Europe, our box demand, our industrial, you know, we not had a strong investable session in Europe, but we had strong industrial growth which has frankly surprised us. Turkey had its best fourth quarter ever. In North America, it does not feel like 5% to 6% GDP growth. You looked at this fourth quarter GDP numbers, where was it. You look at xpedx sales per day, you know, they are not up. You are up 5% from the second quarter, but they are not up 5 or 6% in the fourth quarter compared to the third and you know we are in the 100 geographies with 100s of customers buying lots of products and so you see what FedEx and UPS are saying about package volume. If that is real, we are going to start to see in some of our business, but we have not yet. That’s make us feel good that means there is upside and we are not running full and some of our competitors may be closer to running full than we are, so we’ve got more volumes upside than anybody else and whatever the economic conditions are. I think that is the last, one more question.

Your final question comes from the line of Mark Wilde with Deutsche Bank.

John, I wondered if you could just talk briefly about what the potential is for IP over the next 2 or 3 years from energy related products and projects and then also what your opportunity might be in terms of state by state renewal energy credits?

Well, we don’t have time for the 2 hour answer or 2 hour discussion. We still have that is probably close to a $1 billion in total in terms of energy cost on a global basis. Lots of opportunities to reduce energy consumptions, I cannot say right at the top of my head, but there are $200 million of cost reductions we are spending. I would say most of it is aimed at energy and at $6 gaps those projects are darn good projects. So, we are going to continue to manage consumption reduction as aggressive as we can, but running going to invest in projects where we got long term competitive facilities. We are not going to be investing facilities. We don’t think they are going to be part of IP future. So, I feel we get pretty capital runway there, but it is not billions of dollars.

Okay. Those renewal energy credits because some other companies are starting to report gains on the sales of those credits

We are getting energy credits at Europe because of the cap-and-trade system that is in place there, but I am not really sure what are you talking about there, Mark.

Take it that offline then.

Thanks. We are not just defining it differently then somebody else is, but we will get back to you on that.

Okay.

At this time, I would like to turn the call back to Tom Cleves for closing comments.

Thank you Brandy. Emily Nicks and I will be available for follow-up questions via the telephone and we will not ask you to limited to one plus follow-up. So, if you like to talk more, give us a call. Thank you for joining our call today. Thanks Brandy.

This concludes today’s International Paper’s Fourth Quarter and Full Year 2009 earnings call. You may now disconnect.