International Paper Company CONSOLIDATED STATEMENT OF CASH FLOWS In millions for the years ended December 31 2004 ) 2003 ) 2002 ) Operating Activities Net earnings (loss) $(35) $302) $(880) Discontinued operations, net of taxes and minority interest 513 ) (21) (35) Cumulative effect of accounting changes, net of taxes and minority interest - ) 13) 1,175) Depreciation, amortization and cost of timber harvested 1,565 ) 1,538) 1,497) Deferred income tax benefit, net (114) (397) (389) Restructuring and other charges 211 ) 298) 695) Payments related to restructuring and legal reserves (236) (270) (340) Reversals of reserves no longer required, net (35) (40) (68) Net losses (gains) on sales and impairments of businesses held for sale 144 ) 32) (41) Proceeds on Maine timberlands transaction 242 ) -) - ) Other, net 438 ) 421) 136) Changes in current assets and liabilities Accounts and notes receivable (186) 74) 98) Inventories (66) (21) 53) Accounts payable 93 ) (55) 247) Accrued liabilities (23) (39) (47) Other (123) (13) (7) Cash Provided By Operations 2,388 ) 1,822) 2,094) Investment Activities Invested in capital projects Continuing operations (1,262) (1,094) (936) Businesses sold and held for sale (66) (72) (73) Mergers and acquisitions, net of cash acquired (305) -) (28) Proceeds from divestitures 1,471 ) 78) 535) Other 217 ) (179) 22) Cash Provided By (Used For) Investment Activities 55) (1,267) (480) Financing Activities Issuance of common stock 164 ) 80) 53) Issuance of debt 2,962 ) 2,254) 2,011) Reduction of debt (4,533) (839) (3,017) Redemption of preferred securities of a subsidiary - ) (550) -) CHH share repurchase (158) -) -) Change in book overdrafts (145) 104) (33) Purchases of treasury stock - ) (26) (169) Dividends paid (485) (480) (482) Sale of minority interest - ) 150) 50) Other (240) (102) (145) Cash (Used For) Provided By Financing Activities (2,435) 591) (1,732) Effect of Exchange Rate Changes on Cash 225 ) 143) (32) Change in Cash and Temporary Investments 233 ) 1,289) (150) Cash and Temporary Investments Beginning of the year 2,363 ) 1,074) 1,224) End of the year $2,596 ) $2,363) $1,074) The accompanying notes are an integral part of these financial statements. 40