International Paper 2012 Annual Report Download - page 61

taxable income. If that amended position is not
upheld, the Company will re-evaluate its position
with regard to alternative fuel mixture gallons pro-
duced in 2009.
During 2009, the Company produced 64 million gal-
lons of black liquor that were not eligible for the
alternative fuel mixture credit. The Company claimed
these gallons for the cellulosic bio-fuel credit by
amending the Company’s 2009 tax return. The
impact of this amendment was included in the
Company’s 2010 fourth quarter Income tax provision
(benefit), resulting in a $40 million net credit to tax
expense. Temple-Inland also recognized an income
tax benefit of $83 million in 2010 related to cellulosic
bio-fuel credits.
As is the case with other tax credits, taxpayer claims
are subject to possible future review by the IRS
which has the authority to propose adjustments to
the amounts claimed, or credits received.
Investment Activities
Investment activities in 2012 were up from 2011
reflecting an increase in capital spending and the
acquisition of Temple-Inland. The Company main-
tains an average capital spending target of $1.0 bil-
lion per year over the course of an economic cycle.
Capital spending for continuing operations was $1.4
billion in 2012, or 93% of depreciation and amor-
tization, compared with $1.2 billion in 2011, or 87%
of depreciation and amortization, and $775 million,
or 53% of depreciation and amortization in 2010.
Across our businesses, capital spending as a
percentage of depreciation and amortization ranged
from 75% to 151% in 2012.
The following table shows capital spending for con-
tinuing operations by business segment for the years
ended December 31, 2012, 2011 and 2010.
In millions 2012 2011 2010
Industrial Packaging $ 565 $ 426 $301
Printing Papers 449 364 283
Consumer Packaging 296 310 159
Distribution 10 85
Forest Products ——3
Subtotal 1,320 1,108 751
Corporate and other 63 51 24
Total from Continuing Operations $1,383 $1,159 $775
Capital expenditures in 2013 are currently expected
to be about $1.4 billion, or 93% of depreciation and
amortization.
Acquisitions
2013: On January 3, 2013, International Paper com-
pleted the acquisition (effective date of acquisition
on January 1, 2013) of the shares of its joint venture
partner, Sabanci Holding, in the Turkish corrugated
packaging company, Olmuksa International Paper
Sabanci Ambalaj Sanayi ve Ticaret A.S. (Olmuksa),
for a purchase price of $56 million. The acquired
shares represent 43.7% of Omulksa’s shares, and
prior to this acquisition, International Paper already
held a 43.7% equity interest in Olmuksa. Thus, Inter-
national Paper now owns 87.4% of Olmuksa’s out-
standing and issued shares. The Company has not
completed the valuation of assets acquired and
liabilities assumed; however, the Company antici-
pates providing a preliminary purchase price alloca-
tion in its 2013 first quarter Form 10-Q filing.
Because the transaction resulted in International
Paper becoming the majority shareholder, owning
87.4% of Olmuksa’s shares, its completion triggered
a mandatory call for tender of the remaining public
shares. Also as a result of International Paper taking
majority control of the entity, Olmuksa’s financial
results will be consolidated with our Industrial Pack-
aging segment beginning with the effective date
International Paper obtained majority control of the
entity on January 1, 2013.
2012: On February 13, 2012, International Paper
completed the acquisition of Temple-Inland, Inc.
(Temple-Inland). International Paper acquired all of
the outstanding common stock of Temple-Inland for
$32.00 per share in cash, totaling approximately $3.7
billion, and assumed approximately $700 million of
Temple-Inland’s debt. As a condition to allowing the
transaction to proceed, the Company entered into an
agreement on a Final Judgment with the Antitrust
Division of the U.S. Department of Justice (DOJ) that
required the Company to divest three containerboard
mills, with approximately 970,000 tons of aggregate
containerboard capacity. On July 2, 2012, Interna-
tional Paper sold its Ontario and Oxnard (Hueneme),
California containerboard mills to New-Indy
Containerboard LLC, and its New Johnsonville,
Tennessee containerboard mill to Hood Container
Corporation. By completing these transactions, the
Company satisfied its divestiture obligations under
the Final Judgment. See Note 6 for further details of
these divestitures, as well as the planned divestiture
of Temple-Inland’s Building Products business.
Temple-Inland’s results of operations are included in
the consolidated financial statements from the date
of acquisition on February 13, 2012.
2011: On October 14, 2011, International Paper com-
pleted the acquisition of a 75% stake in Andhra Pra-
desh Paper Mills Limited (APPM). The Company
purchased 53.5% of APPM for a purchase price of
$226 million in cash plus assumed debt from private
investors. These sellers also entered into a covenant
not to compete for which they received a cash pay-
ment of $58 million. Additionally, the Company pur-
chased a 21.5% stake of APPM in a public tender offer
completed on October 8, 2011 for $105 million in cash.
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