International Paper 2012 Annual Report Download - page 51

A net income tax provision of $311 million was
recorded for 2011, including a tax benefit of $222
million related to the reduction of the carrying value
of the Shorewood business and the write-off of a
deferred tax liability associated with Shorewood, a
$24 million expense related to internal restructur-
ings, a $9 million expense for costs associated with
our acquisition of a majority share of Andhra Pra-
desh Paper Mills Limited in India, a $13 million bene-
fit related to the release of a deferred tax asset
valuation allowance, and a $2 million expense for
other items. Excluding these items and the tax effect
of other special items, the tax provision was $577
million, or 32% of pre-tax earnings before equity
earnings.
A net income tax provision of $221 million was
recorded for 2010, including a $14 million tax
expense and a $32 million tax expense for incentive
compensation and Medicare Part D deferred tax
write-offs, respectively, and a net $40 million tax
benefit related to cellulosic bio-fuel tax credits. See
discussion on pages 33 and 34. Excluding these
items and the tax effect of other special items, the
tax provision was $364 million, or 30% of pre-tax
earnings before equity earnings.
Equity Earnings, Net of Taxes
Equity earnings, net of taxes in 2012, 2011 and 2010
consisted principally of the Company’s share of
earnings from its 50% investment in Ilim Holding
S.A. in Russia (see page 32).
Corporate Items and Interest Expense
Corporate items totaled $51 million of expense for
the year ended December 31, 2012 compared with
$102 million in 2011 and $142 million in 2010. The
decrease in 2012 from 2011 reflects lower supply
chain initiative expenses. The decrease in 2011 from
2010 reflects lower supply chain initiative expenses.
Net interest expense totaled $672 million in 2012,
$541 million in 2011 and $608 million in 2010. The
increase in 2012 compared with 2011 is due to inter-
est expense associated with the Temple-Inland
acquisitions. The decrease in 2011 compared with
2010 reflects lower average debt levels.
Net earnings attributable to noncontrolling interests
totaled $5 million in 2012 compared with $14 million
in 2011 and $21 million in 2010. The decrease in 2012
primarily reflects lower earnings for the Shandong
IP & Sun Food Packaging Co., Ltd. joint venture in
China due to start-up costs associated with a new
paper machine. The decrease in 2011 reflects lower
earnings for Shorewood Mexico due to the impair-
ment of the business’ fixed assets.
Special Items
Restructuring and Other Charges
International Paper continually evaluates its oper-
ations for improvement opportunities targeted to
(a) focus our portfolio on our core businesses,
(b) rationalize and realign capacity to operate fewer
facilities with the same revenue capability and close
high cost facilities, and (c) reduce costs. Annually,
strategic operating plans are developed by each of
our businesses. If it subsequently becomes apparent
that a facility’s plan will not be achieved, a decision is
then made to (a) invest additional capital to upgrade
the facility, (b) shut down the facility and record the
corresponding charge, or (c) evaluate the expected
recovery of the carrying value of the facility to
determine if an impairment of the asset value of the
facility has occurred. In recent years, this policy has
led to the shutdown of a number of facilities and the
recording of significant asset impairment charges
and severance costs. It is possible that additional
charges and costs will be incurred in future periods
in our core businesses should such triggering events
occur.
2012: During 2012, corporate restructuring and
other charges totaling $51 million before taxes ($35
million after taxes) were recorded. These charges
included:
• a $48 million charge before taxes ($30 million
after taxes) for costs related to the early
extinguishment of debt (see Note 12 Debt and
Lines of Credit on pages 72 and 73 of Item 8.
Financial Statements and Supplementary Data),
and
• a $3 million charge before taxes ($5 million after
taxes) for other items.
In addition, restructuring and other charges totaling
$58 million before taxes ($39 million after taxes)
were recorded in the Industrial Packaging and Dis-
tribution industry segments including:
• a $17 million charge before taxes ($12 million
after taxes) related to the restructuring of our
Packaging business in Europe,
• a $44 million charge before taxes ($28 million
after taxes) for restructuring costs related to the
Company’s xpedx business, and
• a $3 million gain before taxes ($1 million after
taxes) for other items.
2011: During 2011, corporate restructuring and
other charges totaling $55 million before taxes ($33
million after taxes) were recorded. These charges
included:
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