International Paper 2012 Annual Report Download - page 62

International Paper recognized an unfavorable cur-
rency transaction loss of $9 million due to
strengthening of the dollar against the Indian Rupee
prior to the closing date, resulting from cash balan-
ces deposited in Indian Rupee denominated escrow
accounts.
In November 2011, International Paper appealed a
directive from the Securities and Exchange Board of
India (SEBI) that would require us to pay to the ten-
dering shareholders the equivalent per share value
of the non-compete payment that was paid to the
previous controlling shareholders. The Company has
deposited approximately $25 million into an escrow
account to fund the additional non-compete pay-
ments in the event SEBI’s direction is upheld. By an
order dated September 12, 2012, the Indian Secu-
rities Appellate Tribunal (SAT) upheld the SEBI
directive. As a result of this initial unfavorable ruling,
International Paper included the $25 million
escrowed cash amount in the final purchase price
consideration of APPM. On October 8, 2012, Interna-
tional Paper appealed the SAT’s decision to the
Indian Supreme Court.
APPM’s results of operations are included in the
consolidated financial statements from the date of
acquisition on October 14, 2011.
2010: On June 30, 2010, International Paper com-
pleted the acquisition of SCA Packaging Asia (SCA)
for a purchase price of $202 million, including $168
million in cash plus assumed debt of $34 million. The
SCA packaging business in Asia consists of 13
corrugated box plants and two specialty packaging
facilities, which are primarily in China, along with
locations in Singapore, Malaysia and Indonesia.
SCA’s results of operations are included in the con-
solidated financial statements from the date of
acquisition on June 30, 2010.
Joint Ventures
2013: On January 14, 2013, International Paper and
Brazilian corrugated packaging producer, Jari
Celulose Embalagens e Papel S.A (Jari), a Grupo
Orsa company, formed Orsa International Paper
Embalagens S.A. (ORSA IP). The new entity, in which
International Paper holds a 75% stake, includes three
containerboard mills and four box plants, which
make up Jari’s former industrial packaging assets.
This acquisition supports the Company’s strategy of
growing its global packaging presence and better
serving its global customer base.
The value of International Paper’s investment in
ORSA IP is approximately $470 million. The Com-
pany has not completed the valuation of assets
acquired and liabilities assumed; however, the
Company anticipates providing a preliminary pur-
chase price allocation in its 2013 first quarter Form
10-Q filing. Pro forma information related to our
investment in the joint venture is not included as it
does not have a material effect on the Company’s
consolidated results of operations. Because Interna-
tional Paper acquired majority control of the joint
venture, ORSA IP’s financial results will be con-
solidated with our Industrial Packaging segment
from the date of formation on January 14, 2013.
2011: On April 15, 2011, International Paper and Sun
Paper Industry Co. Ltd. entered into a Cooperative
Joint Venture agreement to establish Shandong IP &
Sun Food Packaging Co., Ltd. in China. During
December 2011, the business license was obtained
and International Paper contributed $55 million in
cash for a 55% interest in the joint venture and Sun
Paper Industry Co. Ltd. contributed land-use rights
valued at approximately $28 million, representing a
45% interest. The purpose of the joint venture is to
build and operate a new production line to manu-
facture coated paperboard for food packaging with a
designed annual production capacity of 500,000 tons.
The financial position and results of operations of
this joint venture have been included in International
Paper’s consolidated financial statements from the
date of formation in December 2011.
Additionally, during 2011 the Company recorded a
gain of $7 million (before and after taxes) related to a
bargain purchase price adjustment on an acquisition
by our joint venture in Turkey. This gain is included
in Equity earnings (losses), net of taxes in the
accompanying consolidated statement of operations.
Financing Activities
Amounts related to early debt extinguishment during
the years ended December 31, 2012, 2011 and 2010
were as follows:
In millions 2012 2011 2010
Debt reductions (a) $1,272 $129 $393
Pre-tax early debt extinguishment costs (b) 48 32 39
(a) Reductions related to notes with interest rates ranging from
1.625% to 9.375% with original maturities from 2010 to 2041 for
the years ended December 31, 2012, 2011 and 2010.
(b) Amounts are included in Restructuring and other charges in
the accompanying consolidated statements of operations.
2012: Financing activities during 2012 included debt
issuances of $2.1 billion and retirements of $2.5 bil-
lion, for a net decrease of $0.4 billion.
In February 2012, International Paper issued a $1.2
billion term loan with an initial interest rate of
LIBOR plus a margin of 138 basis points that var-
ies depending on the credit rating of the Company
and a $200 million term loan with an interest rate
of LIBOR plus a margin of 175 basis points, both
with maturity dates in 2017. The proceeds from
these borrowings were used, along with available
cash, to fund the acquisition of Temple-
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