Corporate Items and Interest Expense Minority interest expense, net of taxes, decreased to $62 million in 2004 compared with $111 million in 2003 and $118 million in 2002. The decreases in 2004 and 2003 reflect a reduction in minority interest related to preferred securities that were replaced by debt obligations in the second half of 2003. This decrease was partially offset in 2004 by higher earnings at Carter Holt Harvey. Interest expense, net, decreased to $743 million compared with $772 million in 2003 and $785 million in 2002. The decline reflects lower interest rates from the refinancing of high coupon debt, the impact of interest rate swaps, and, in 2004, higher interest income from Carter Holt Harvey, net of the additional expense of $36 million for the preferred debt securities discussed above. For the twelve months ended December 31, 2004, corporate items totaled $469 million compared with $466 million of expense in 2003 and $253 million in 2002. The increased expense in 2004 compared with 2003 is due to higher pension, inventory-related and supply chain initiative costs, and lower gains on energy hedging transactions, offset in part by reduced administrative overhead costs. Higher pension, inventory-related and supply chain costs were also factors in 2003 as compared with 2002, which also included income from an insurance company demutualization and foreign exchange gains. Our supply chain project, begun in late 2002, is a corporate- wide initiative to improve customer service capabilities and implement “best practice” supply chain business processes for order management, supply and demand planning, product scheduling and tracking, transportation and warehousing, and procurement. Expenses related to this program in 2005, should be approximately $100 million above the 2004 level of $84 million. The associated benefits are reflected in business earnings as the programs are implemented. International Paper continually evaluates its operations for opportunities for improvement. These evaluations are targeted to (a) focus our portfolio on our core businesses of paper, packaging and forest products, (b) rationalize and realign capacity to operate fewer facilities with the same revenue capability and close high cost facilities, and (c) reduce costs. Annually, strategic operating plans are developed by each of our businesses to demonstrate that they will achieve a return at least equal to their cost of capital over an economic cycle. If it subsequently becomes apparent that a facility’s plan will not be achieved, a decision is then made to (a) invest additional capital to upgrade the facility, (b) shut down the facility and record the corresponding charge, or (c) evaluate the expected recovery of the carrying value of the facility to determine if an impairment of the asset value of the facility has occurred under SFAS No. 144. In recent years, this policy has led to the shutdown of a number of facilities and the recording of significant asset impairment charges and severance costs. As this profit improvement initiative is ongoing, it is possible that additional charges and costs will be incurred in future periods should such triggering events occur. 2004: During 2004, restructuring and other charges before taxes and minority interest of $211 million ($124 million after taxes and minority interest) were recorded. These charges included a $74 million charge before taxes and minority interest ($43 million after taxes and minority interest) for organizational restructuring programs, a $92 million charge before taxes ($57 million after taxes) for early debt retirement costs, a $35 million charge before minority interest ($18 million after minority interest) for a goodwill impairment charge, and a $10 million charge before taxes ($6 million after taxes) for a litigation settlement. Also in 2004, a $123 million credit before taxes ($76 million after taxes) was recorded for insurance recoveries related to the hardboard siding and roofing litigation, and a $35 million credit before taxes and minority interest ($22 million after taxes and minority interest) was recorded for the net reversal of restructuring reserves no longer required. 2003: During 2003, restructuring and other charges before taxes and minority interest of $298 million ($184 million after taxes and minority interest) were recorded. These charges included a $236 million charge before taxes and minority interest ($144 million after taxes and minority interest) for asset shutdowns of excess internal capacity and cost reduction actions, a $63 million charge before taxes ($39 million after taxes) for legal reserves, and a $1 million credit before taxes ($1 million charge after taxes) for early debt retirement costs. In addition, a $40 million credit before taxes and minority interest ($25 million after taxes and minority interest) was recorded for the net reversal of restructuring reserves no longer required. 2002: During 2002, restructuring and other charges before taxes and minority interest of $695 million ($435 million after taxes and minority interest) were recorded. These charges included a $199 million charge before taxes and minority interest ($130 million after taxes and minority interest) for asset shutdowns of excess internal capacity and cost reduction actions, a $450 million pre-tax charge ($278 million after taxes) for additional exterior siding legal reserves, and a charge of $46 million before taxes and minority interest ($27 million after taxes and minority interest) for early debt 13 Special Items Restructuring and Other Charges