International Paper 2012 Annual Report Download - page 104

The following table provides a summary of the impact of our derivative instruments in the consolidated balance
sheet:
Fair Value Measurements
Level 2 – Significant Other Observable Inputs
Assets Liabilities
In millions
December 31,
2012
December 31,
2011
December 31,
2012
December 31,
2011
Derivatives designated as hedging instruments
Foreign exchange contracts – cash flow $7(a) $— $ 21(d) $ 53(f)
Natural gas contracts – cash flow ———10(e)
Total derivatives designated as hedging instruments $ 7 $— $21 $63
Derivatives not designated as hedging instruments
Electricity contract $— $— $1(e) $—
Embedded derivatives 1(b) 5(c) ——
Foreign exchange contracts 1(b) 1(b) ——
Interest rate contracts ——1(e) 5(g)
Total derivatives not designated as hedging instruments $ 2 $6 $2 $5
Total derivatives $ 9 $6 $23 $68
(a) Includes $3 million recorded in Other current assets and $4 mil-
lion recorded in Deferred charges and other assets in the
accompanying consolidated balance sheet.
(b) Included in Other current assets in the accompanying con-
solidated balance sheet.
(c) Included in Deferred charges and other assets in the
accompanying consolidated balance sheet.
(d) Includes $20 million recorded in Other accrued liabilities and $1
million recorded in Other liabilities in the accompanying con-
solidated balance sheet.
(e) Included in Other accrued liabilities in the accompanying con-
solidated balance sheet.
(f) Includes $32 million recorded in Other accrued liabilities and
$21 million recorded in Other liabilities in the accompanying
consolidated balance sheet.
(g) Included in Other liabilities in the accompanying consolidated
balance sheet.
Credit-Risk-Related Contingent Features
International Paper evaluates credit risk by monitor-
ing its exposure with each counterparty to ensure that
exposure stays within acceptable policy limits. Credit
risk is also mitigated by contractual provisions with
the majority of our banks. Most of the contracts
include a credit support annex that requires the post-
ing of collateral by the counterparty or International
Paper based on each party’s rating and level of
exposure. Based on the Company’s current credit
rating, the collateral threshold is generally $10 mil-
lion.
If the lower of the Company’s credit rating by
Moody’s or S&P were to drop below investment
grade, the Company would be required to post collat-
eral for all of its derivatives in a net liability position,
although no derivatives would terminate. The fair
values of derivative instruments containing credit-
risk-related contingent features in a net liability posi-
tion were $18 million as of December 31, 2012 and
$67 million as of December 31, 2011. The Company
was not required to post any collateral as of
December 31, 2012 or 2011. In addition, existing
derivative contracts (except foreign exchange con-
tracts) provide for netting across most derivative
positions in the event a counterparty defaults on a
payment obligation. International Paper currently
does not expect any of the counterparties to default
on their obligations.
NOTE 14 CAPITAL STOCK
The authorized capital stock at both December 31,
2012 and 2011, consisted of 990,850,000 shares of
common stock, $1 par value; 400,000 shares of cumu-
lative $4 preferred stock, without par value (stated
value $100 per share); and 8,750,000 shares of serial
preferred stock, $1 par value. The serial preferred
stock is issuable in one or more series by the Board of
Directors without further shareholder action.
The following is a rollforward of shares of common
stock for the three years ended December 31, 2012,
2011 and 2010:
77