International Paper 2012 Annual Report Download - page 111

The components of the $4 million increase in the
amounts recognized in OCI during 2012 consisted of:
In millions
Curtailment $2
Current year actuarial loss 44
Amortization of actuarial loss (10)
Current year prior service credit (62)
Amortization of prior service credit 30
$4
The portion of the change in the funded status that
was recognized in either net periodic benefit cost or
OCI was $0 million, $47 million and $5 million in
2012 , 2011 and 2010, respectively.
The estimated amounts of net loss and prior service
credit that will be amortized from OCI into net post-
retirement benefit cost in 2013 are expected to be
$12 million and $(25) million, respectively.
At December 31, 2012 , estimated total future post-
retirement benefit payments, net of participant con-
tributions and estimated future Medicare Part D
subsidy receipts, were as follows:
In millions
Benefit
Payments
Subsidy
Receipts
2013 $ 63 $ 3
2014 49 3
2015 41 3
2016 39 3
2017 37 3
2018 – 2022 155 13
NON-U.S. POSTRETIREMENT BENEFITS
In addition to the U.S. plan, certain Brazilian and
Moroccan employees are eligible for retiree health
care and life insurance benefits. Net postretirement
benefit cost for our non-U.S. plans was $1 million for
2012 , $2 million for 2011 and $1 million for 2010.
The benefit obligation for these plans was $22 mil-
lion at December 31, 2012 and $23 million at
December 31, 2011.
NOTE 17 INCENTIVE PLANS
International Paper currently has an Incentive Com-
pensation Plan (ICP) which, upon the approval by the
Company’s shareholders in May 2009, replaced the
Company’s Long-Term Incentive Compensation Plan
(LTICP). The ICP authorizes grants of restricted stock,
restricted or deferred stock units, performance
awards payable in cash or stock upon the attainment
of specified performance goals, dividend equiv-
alents, stock options, stock appreciation rights, other
stock-based awards, and cash-based awards at the
discretion of the Management Development and
Compensation Committee of the Board of Directors
(the Committee) that administers the ICP. Restricted
stock units (RSU’s) were also awarded to certain
non-U.S. employees with 0 and 350 units out-
standing at December 31, 2012 and 2011,
respectively. Additionally, restricted stock, which
may be deferred into RSU’s, may be awarded under
a Restricted Stock and Deferred Compensation Plan
for Non-Employee Directors.
STOCK OPTION PROGRAM
International Paper accounts for stock options in
accordance with guidance under ASC 718,
“Compensation – Stock Compensation.” Compensa-
tion expense is recorded over the related service
period based on the grant-date fair market value.
Since all outstanding options were vested as of
July 14, 2005, only replacement option grants are
expensed. No replacement options were granted in
2010 or 2011.
During each reporting period, diluted earnings per
share is calculated by assuming that “in-the-money”
options are exercised and the exercise proceeds are
used to repurchase shares in the marketplace. When
options are actually exercised, option proceeds are
credited to equity and issued shares are included in
the computation of earnings per common share,
with no effect on reported earnings. Equity is also
increased by the tax benefit that International Paper
will receive in its tax return for income reported by
the employees in their individual tax returns.
Under the program, upon exercise of an option, a
replacement option may be granted under certain
circumstances with an exercise price equal to the
market price at the time of exercise and with a term
extending to the expiration date of the original
option.
The Company has discontinued the issuance of stock
options for all eligible U.S. and non-U.S. employees.
In the United States, the stock option program was
replaced with a performance-based restricted share
program to more closely tie long-term incentive
compensation to Company performance on two key
performance drivers: return on investment (ROI) and
total shareholder return (TSR).
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