International Paper 2014 Annual Report Download - page 58

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impairment of the goodwill and a trade name
intangible asset of the Company's India Papers
business.
• Consumer Packaging’s profits of $178 million were
$17 million higher than in 2013. The benefits from
higher average sales price realizations and a
favorable mix were more than offset by lower sales
volumes, higher operating costs, higher planned
maintenance downtime costs, higher input costs and
higher other expenses. Operating profits in 2014
included $8 million of sheet plant closure costs.
Operating profits in 2013 included costs of $45
million associated with the permanent shutdown of
a paper machine at our Augusta, Georgia mill.
Corporate items, net, of $51 million of expense in 2014
were lower than the $61 million of expense in 2013 due
to lower pension costs partially offset by a one-time non-
cash foreign exchange charge related to the
administrative restructuring of some international entities.
The decrease in 2013 from the expense of $87 million in
2012 primarily reflects lower supply chain initiative
expenses.
Corporate special items, including restructuring and other
items and net losses on sales and impairments of
businesses were a loss of $320 million in 2014 compared
with a loss of $4 million in 2013 and a loss of $49 million
in 2012. The higher loss in 2014 is due to higher debt
extinguishment costs and a loss on the sale of a business
by ASG, in which we hold an investment, and the
subsequent partial impairment of our ASG investment
Interest expense, net, was $607 million ($601 million
excluding special items net interest expense reported in
the Printing Papers business segment) in 2014 compared
with $612 million in 2013 and $671 million in 2012. The
decrease in 2014 compared with 2013 reflects lower
average interest rates. The decrease in 2013 compared
with 2012 reflects lower average debt levels and the
reversal of interest reserves related to U.S. federal
income tax audits.
A net income tax provision of $123 million was recorded
for 2014, including a tax benefit of $90 million related to
internal restructurings and a net tax expense of $9 million
for other items. The 2013 income tax benefit of $498
million includes a tax benefit of $770 million associated
with the settlement of tax audits and a net tax benefit of
$4 million for other items. The 2012 income tax provision
of $306 million includes a net expense of $14 million
related to internal restructurings and an expense of $5
million to adjust deferred tax assets related to post-
retirement prescription drug coverage (Medicare Part D
reimbursements).
Discontinued Operations
2014: On July 1, 2014, International Paper completed
the spinoff of its distribution business, xpedx, which
subsequently merged with Unisource Worldwide, Inc.,
with the combined companies now operating as Veritiv
Corporation (Veritiv). The xpedx business had historically
represented the Company's Distribution reportable
segment.
The spinoff was accomplished by the contribution of the
xpedx business to Veritiv and the distribution of 8,160,000
shares of Veritiv common stock on a pro-rata basis to
International Paper shareholders. International Paper
received payments of approximately $411 million,
financed with new debt in Veritiv's capital structure.
2013: On April 1, 2013, the Company finalized the sale
of Temple-Inland's 50% interest in Del-Tin Fiber L.L.C. to
joint venture partner Deltic Timber Corporation for $20
million in assumed liabilities and cash.
On July 19, 2013 the Company finalized the sale of its
Temple-Inland Building Products division to Georgia-
Pacific Building Products, LLC for approximately $726
million in cash.
2012: Upon the acquisition of Temple-Inland,
management committed to a plan to sell the Temple-
Inland Building Products business, and on December 12,
2012, International Paper reached an agreement to sell
the business (including Del-Tin Fiber L.L.C.) to Georgia-
Pacific for $750 million in cash, subject to satisfaction of
customary closing conditions, including satisfactory
review by the DOJ, and to certain pre-and post-closing
purchase price adjustments. The assets to be sold
included 16 manufacturing facilities.
Liquidity and Capital Resources
For the year ended December 31, 2014, International
Paper generated $3.1 billion of cash flow from operations
compared with $3.0 billion in 2013. Cash flow from
operations included $353 million and $31 million of cash
pension contributions in 2014 and 2013, respectively.
Capital spending for 2014 totaled $1.4 billion, or 97% of
depreciation and amortization expense. Net decreases in
debt totaled $113 million. Our liquidity position remains
strong, supported by approximately $2.0 billion of credit
facilities that we believe are adequate to meet future
liquidity requirements. Maintaining an investment-grade
credit rating for our long-term debt continues to be an
important element in our overall financial strategy.
We expect to generate strong free cash flow again in 2015
and will continue our balanced use of cash through
investments in capital projects, the reduction of total debt,
including the Company’s unfunded pension obligation,
returning value to shareholders and strengthening our