International Paper 2012 Annual Report Download - page 63

Inland. During 2012, International Paper fully repaid
the $1.2 billion term loan.
International Paper utilizes interest rate swaps to
change the mix of fixed and variable rate debt and
manage interest expense. At December 31, 2012,
International Paper had interest rate swaps with a
total notional amount of $150 million and maturities
in 2013 (see Note 13 Derivatives and Hedging Activ-
ities on pages 73 through 77 of Item 8. Financial
Statements and Supplementary Data). During 2012,
existing swaps and the amortization of deferred
gains on previously terminated swaps decreased the
weighted average cost of debt from 6.8% to an effec-
tive rate of 6.6%. The inclusion of the offsetting
interest income from short-term investments
reduced this effective rate to 6.2%.
Other financing activities during 2012 included the
issuance of approximately 1.9 million shares of treas-
ury stock, net of restricted stock withholding, and
1.0 million shares of common stock for various plans,
including stock options exercises that generated
approximately $108 million of cash. Payments of
restricted stock withholding taxes totaled $35 million.
In October 2012, International Paper announced that
the quarterly dividend would be increased from
$0.2625 per share to $0.30 per share, effective for the
2012 fourth quarter.
2011: Financing activities during 2011 included debt
issuances of $1.8 billion and retirements of $517 mil-
lion, for a net increase of $1.3 billion.
In November 2011, International Paper issued $900
million of 4.75% senior unsecured notes with a
maturity date in February 2022 and $600 million of
6% senior unsecured notes with a maturity date in
November 2041.
At December 31, 2011, International Paper had inter-
est rate swaps with a total notional amount of $150
million and maturities in 2013 (see Note 13
Derivatives and Hedging Activities on pages 73
through 77 of Item 8. Financial Statements and Sup-
plementary Data). During 2011, existing swaps
decreased the weighted average cost of debt from
7.1% to an effective rate of 6.9%. The inclusion of the
offsetting interest income from short-term invest-
ments reduced this effective rate to 6.26%.
Other financing activities during 2011 included the
issuance of approximately 0.3 million shares of
treasury stock for various incentive plans and the
acquisition of 1.0 million shares of treasury stock
primarily related to restricted stock tax withholding.
Payment of restricted stock withholding taxes totaled
$30 million.
2010: Financing activities during 2010 included debt
issuances of $193 million and retirements of $576
million, for a net decrease of $383 million.
In June 2010, interest rate swap agreements issued
in the fourth quarter of 2009 and designated as fair
value hedges with a notional value of $100 million
were terminated. The termination was not in con-
nection with the early retirement of debt. The result-
ing gain of $3 million was deferred and recorded in
Long-term debt and will be amortized as an adjust-
ment of interest expense over the life of the under-
lying debt through 2019.
During the first quarter of 2010, International Paper
repaid approximately $120 million of notes with
interest rates ranging from 5.25% to 7.4% and origi-
nal maturities from 2010 to 2027. In connection with
these early debt retirements, previously deferred
gains of $1 million related to earlier swap termi-
nations were recognized in earnings. Pre-tax early
debt retirement costs of $4 million related to these
debt repayments, net of gains on swap terminations,
are included in Restructuring and other charges in
the accompanying consolidated statement of oper-
ations.
Also in the first quarter of 2010, approximately $700
million of fixed-to-floating interest rate swaps, issued
in 2009, were terminated. These terminations were
not in connection with early debt retirements. The
resulting $2 million gain was deferred and recorded
in Long-term debt and is being amortized as an
adjustment of interest expense over the life of the
underlying debt through April 2015.
At December 31, 2010, International Paper had inter-
est rate swaps with a total notional amount of $428
million and maturities ranging from one to six years.
During 2010, existing swaps increased the weighted
average cost of debt from 7.22% to an effective rate
of 7.26%. The inclusion of the offsetting interest
income from short-term investments reduced this
effective rate to 6.86%.
Other financing activities during 2010 included the
issuance of approximately 2.6 million shares of
treasury stock, net of restricted stock withholding,
and 1.8 million shares of common stock for various
plans. Payments of restricted stock withholding taxes
totaled $26 million.
Off-Balance Sheet Variable Interest Entities
Information concerning off-balance sheet variable
interest entities is set forth in Note 11 Variable Inter-
est Entities and Preferred Securities of Subsidiaries
on pages 69 through 72 of Item 8. Financial State-
ments and Supplementary Data for discussion.
Liquidity and Capital Resources Outlook for
2013
Capital Expenditures and Long-Term Debt
International Paper expects to be able to
meet projected capital expenditures, service
existing debt and meet working capital
and dividend requirements during 2013
36