International Paper 2012 Annual Report Download - page 54

Uncoated papers also produces a variety of grades
that are converted by our customers into envelopes,
tablets, business forms and file folders. Uncoated
papers are sold under private label and International
Paper brand names that include Hammermill,
Springhill, Williamsburg, Postmark, Accent, Great
White, Chamex, Ballet,Rey, Pol, and Svetocopy. The
mills producing uncoated papers are located in the
United States, France, Poland, Russia, Brazil and
India. The mills have uncoated paper production
capacity of approximately 5 million tons annually.
Brazilian operations function through International
Paper do Brasil, Ltda, which owns or manages
approximately 327,000 acres of forestlands in Brazil.
Pulp: Pulp is used in the manufacture of printing,
writing and specialty papers, towel and tissue prod-
ucts 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 1.7 million
tons.
Consumer Packaging
International Paper is the world’s largest producer of
solid bleached sulfate board with annual U.S. pro-
duction capacity of about 1.7 million tons. Our
coated paperboard business produces high quality
coated paperboard for a variety of packaging and
commercial printing end uses. Our Everest®,For-
tress®,andStarcote®brands are used in packaging
applications for everyday products such as food,
cosmetics, pharmaceuticals, computer software and
tobacco products. Our Carolina®brandisusedin
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 365,000 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 1.0 million tons.
Our Foodservice business produces cups, lids, food
containers and plates through three domestic plants
and four international facilities.
Distribution
xpedx, our North American merchant distribution
business, distributes products and services to a
number of customer markets including: commercial
printers with printing papers and graphic pre-press,
printing presses and post-press equipment; building
services and away-from-home markets with facility
supplies; manufacturers with packaging supplies and
equipment; and to a growing number of customers,
we exclusively provide distribution capabilities
including warehousing and delivery services. xpedx
is a leading wholesale distribution marketer in these
customer and product segments in North America,
operating 108 warehouse locations in the U.S. and
Mexico.
Forest Products
International Paper sold our remaining land portfolio
in 2010 and beginning in 2011 is no longer reporting
Forest Products as a separate industry segment.
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 2.6 million tons.
Ilim has exclusive harvesting rights on timberland
and forest areas exceeding 14.3 million acres (5.8
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 pro-
duction, 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 effi-
ciency and product mix.
Industrial Packaging net sales and operating
profits for 2012 include the results of the Temple-
Inland packaging operations from the date of
acquisition. Net sales for 2012 increased 27% to
$13.3 billion compared with $10.4 billion in 2011,
and 35% compared with $9.8 billion in 2010.
Operating profits were 7% lower in 2012 than in
2011 and 29% higher than in 2010. Excluding costs
associated with the acquisition and integration of
Temple-Inland, the divestiture of three container-
board mills and other special items, operating prof-
its in 2012 were 17% higher than in 2011 and 60%
higher than in 2010. Benefits from Temple-Inland
synergies and sales volumes ($375 million) and
lower input costs ($124 million) were partially 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 unfavorable
mix ($20 million), higher operating costs
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