International Paper 2012 Annual Report Download - page 53

transaction, International Paper retained a minority
interest of approximately 40% in the newly com-
bined AGI-Shorewood business outside the U.S.
Since the interest retained represents significant
continuing involvement in the operations of the
business, the operating results of the Shorewood
business were included in continuing operations in
the accompanying consolidated statement of oper-
ations instead of Discontinued operations. The sale
of the U.S. portion of the Shorewood business to
Atlas Holdings closed on December 31, 2011. The
sale of the remainder of the Shorewood business
occurred during January 2012. The assets of the
remainder of the Shorewood business, totaling $196
million at December 31, 2011, are included in Assets
of businesses held for sale in current assets in the
accompanying consolidated balance sheet. The
liabilities of the remainder of the Shorewood busi-
ness totaling $43 million at December 31, 2011 are
included in Liabilities of businesses held for sale in
current liabilities in the accompanying consolidated
balance sheet. Additionally, approximately $33 mil-
lion of currency translation adjustment was reflected
in OCI related to the remainder of the Shorewood
business at December 31, 2011.
Also during 2011, the Company recorded charges
totaling $11 million (before and after taxes) to further
write down the long-lived assets of its Inverurie,
Scotland mill to their estimated fair value.
2010: During 2010, the Company recorded a pre-tax
gain of $25 million ($15 million after taxes) as a
result of the partial redemption of the 10% interest
the Company retained in its Arizona Chemical busi-
ness after the sale of the business in 2006. The
Company received $37 million in cash from the
redemption of this interest.
Industry Segment Operating Profits
Industry segment operating profits of $2.0 billion in
2012 decreased from $2.2 billion in 2011. The bene-
fits from Temple-Inland volumes and synergies ($379
million) and lower input costs ($113 million) were
more than offset by higher costs associated with
Temple-Inland step-up depreciation and the impact
of the divestiture of three containerboard mills ($141
million), lower average sales price realizations and
an unfavorable mix ($313 million), higher operating
costs ($186 million) and higher mill maintenance
outage costs ($31 million). Special items were a $335
million net loss in 2012 compared with a net loss of
$253 million in 2011.
Market-related downtime in 2012 increased to
approximately 683,000 tons from approximately
421,000 tons in 2011.
Looking ahead to the first quarter of 2013, demand
for North American and Asian paper and packaging
is expected to be stable, while demand in Europe
and Brazil is expected to seasonally decrease. Aver-
age sales price realizations in North America are
expected to be steady in the domestic paper market,
but increase in packaging markets. Average sales
prices in Europe are likely to be steady for both
paper and packaging. In Brazil, paper prices are
expected to increase in the domestic market, but
decrease for sales to export markets. Input costs in
North America are expected to increase for wood,
energy and recycled fiber. Planned maintenance
downtime costs should decrease in North America,
while higher costs in Europe should be offset by
lower costs in Brazil. Earnings from our xpedx dis-
tribution business are expected to reflect seasonally
lower sales volumes, partially offset by cost reduc-
tions resulting from the business reorganization.
Equity earnings from our Ilim joint venture are
expected to be lower.
DESCRIPTION OF INDUSTRY SEGMENTS
International Paper’s industry segments discussed
below are consistent with the internal structure used
to manage these businesses. All segments are
differentiated on a common product, common cus-
tomer basis consistent with the business segmenta-
tion generally used in the forest products industry.
Industrial Packaging
International Paper is the largest manufacturer of
containerboard in the United States. Our production
capacity is about 14 million tons annually. Our prod-
ucts include linerboard, medium, whitetop, recycled
linerboard, recycled medium and saturating kraft.
About 80% of our production is converted domes-
tically into corrugated boxes and other packaging by
our 178 U.S. container plants. Additionally, we
recycle approximately one million tons of OCC and
mixed and white paper through our 20 recycling
plants. In Europe, our operations include one
recycled fiber containerboard mill in Morocco and 20
container plants in France, Italy, Spain, and Morocco.
In Asia, our operations include 19 container plants in
China and additional container plants in Indonesia,
Malaysia, Singapore, and Thailand. Our container
plants are supported by regional design centers,
which offer total packaging solutions and supply
chain initiatives.
Printing Papers
International Paper is one of the world’s leading
producers of printing and writing papers. Products in
this segment include uncoated and coated papers,
uncoated bristols and pulp.
Uncoated Papers: This business produces
papers for use in copiers, desktop and laser printers
and digital imaging. End use applications include
advertising and promotional materials such as bro-
chures, pamphlets, greeting cards, books, annual
reports and direct mail.
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