International Paper 2014 Annual Report Download - page 63

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Pulp: Pulp is used in the manufacture of printing, writing
and specialty papers, towel and tissue products and
filtration products. Pulp is also converted into products
such as diapers and sanitary napkins. Pulp products
include fluff, and southern softwood pulp, as well as
southern and birch hardwood paper pulps. These
products are produced in the United States, France,
Poland, Russia, and Brazil and are sold around the
world. International Paper facilities have annual dried
pulp capacity of about 1.8 million tons.
Consumer Packaging
International Paper is the world’s largest producer of
solid bleached sulfate board with annual U.S.
production capacity of about 1.6 million tons. Our
coated paperboard business produces high quality
coated paperboard for a variety of packaging and
commercial printing end uses. Our Everest®, Fortress®,
and Starcote® brands are used in packaging
applications for everyday products such as food,
cosmetics, pharmaceuticals, computer software and
tobacco products. Our Carolina® brand is used in
commercial printing end uses such as greeting cards,
paperback book covers, lottery tickets, direct mail and
point-of-purchase advertising. Our U.S. capacity is
supplemented by about 352,000 tons of capacity at our
mills producing coated board in Poland and Russia and
by our International Paper & Sun Cartonboard Co., Ltd.
joint venture in China which has annual capacity of 1.4
million tons.
Our Foodservice business produces cups, lids, food
containers and plates through three domestic plants
and four international facilities.
Ilim Holding S.A.
In October 2007, International Paper and Ilim Holding
S.A. (Ilim) completed a 50:50 joint venture to operate a
pulp and paper business located in Russia. Ilim’s
facilities include three paper mills located in Bratsk, Ust-
Ilimsk, and Koryazhma, Russia, with combined total
pulp and paper capacity of over 3.2 million tons. Ilim
has exclusive harvesting rights on timberland and forest
areas exceeding 14.1 million acres (5.7 million
hectares).
Products and brand designations appearing in italics
are trademarks of International Paper or a related
company.
INDUSTRY SEGMENT RESULTS
Industrial Packaging
Demand for Industrial Packaging products is closely
correlated with non-durable industrial goods
production, as well as with demand for processed foods,
poultry, meat and agricultural products. In addition to
prices and volumes, major factors affecting the
profitability of Industrial Packaging are raw material and
energy costs, freight costs, manufacturing efficiency
and product mix.
Industrial Packaging net sales and operating profits
include the results of the Temple-Inland packaging
operations from the date of acquisition in February 2012
and the results of the Brazil Packaging business from
the date of acquisition in January 2013. In addition, due
to the acquisition of a majority share of Olmuksa
International Paper Sabanci Ambalaj Sanayi Ve Ticaret
A.S., (now called Olmuksan International Paper or
Olmuksan) net sales for our corrugated packaging
business in Turkey are included in the business
segment totals beginning in the first quarter of 2013 and
the operating profits reflect a higher ownership
percentage than in previous years. Net sales for 2014
increased 1% to $14.9 billion compared with $14.8
billion in 2013, and 13% compared with $13.3 billion in
2012. Operating profits were 5% higher in 2014 than in
2013 and 78% higher than in 2012. Excluding costs
associated with the acquisition and integration of
Temple-Inland, goodwill impairment charges, the
divestiture of three containerboard mills, costs
associated with a multi-employer pension liability and
other special items, operating profits in 2014 were 11%
higher than in 2013 and 52% higher than in 2012.
Benefits from the net impact of higher average sales
price realizations and mix ($308 million) were offset by
lower sales volumes ($12 million), higher operating
costs ($21 million), higher maintenance outage costs
($20 million), higher input costs ($49 million) and higher
other costs ($1 million). Additionally, operating profits
in 2014 include a goodwill impairment charge of $100
million related to our Asia Industrial Packaging
business, costs of $16 million associated with the
integration of Temple-Inland, a charge of $35 million
associated with a multi-employer pension plan
withdrawal liability and a net charge of $7 million for
other items, while operating profits in 2013 include costs
of $62 million associated with the integration of Temple-
Inland, a gain of $13 million related to a bargain
purchase adjustment on the acquisition of a majority
share of our operations in Turkey, and a net gain of $1
million for other items.
Industrial Packaging
In millions 2014 2013 2012
Sales $ 14,944 $ 14,810 $ 13,280
Operating Profit 1,896 1,801 1,066
North American Industrial Packaging net sales were $12.7
billion in 2014 compared with $12.5 billion in 2013 and
$11.6 billion in 2012. Operating profits in 2014 were
$2.0 billion (both including and excluding costs
associated with the integration of Temple-Inland, a
multi-employer pension withdrawal liability and other