International Paper 2012 Annual Report Download - page 84

The following table presents a rollforward of the
severance and other costs for approximately 1,650
employees included in the 2010 restructuring charg-
es:
In millions
Severance
and Other
Opening balance (recorded first quarter 2010) $ 20
Additions and adjustments 26
Cash charges in 2010 (32)
Cash charges in 2011 (8)
Cash charges in 2012 (4)
Balance, December 31, 2012 $2
As of December 31, 2012 , 1,638 employees had left
the Company under these programs.
CELLULOSIC BIO-FUEL TAX CREDIT
In a memorandum dated June 28, 2010, the IRS
concluded that black liquor would qualify for the
cellulosic bio-fuel tax credit of $1.01 per gallon pro-
duced in 2009. On October 15, 2010, the IRS ruled
that companies may qualify in the same year for the
$0.50 per gallon alternative fuel mixture credit and
the $1.01 cellulosic bio-fuel tax credit for 2009, but
not for the same gallons of fuel produced and con-
sumed. To the extent a taxpayer changes its position
and uses the $1.01 credit, it must re-pay the refunds
they received as alternative fuel mixture credits
attributable to the gallons converted to the cellulosic
bio-fuel credit. The repayment of this refund must
include interest.
One important difference between the two credits is
that the $1.01 credit must be credited against a
company’s Federal tax liability, and the credit may be
carried forward through 2015. In contrast, the $0.50
credit is refundable in cash. Also, the cellulosic bio-
fuel credit is required to be included in Federal tax-
able income.
The Company filed an application with the IRS on
November 18, 2010, to receive the required registra-
tion code to become a registered cellulosic bio-fuel
producer. The Company received its registration
code on February 28, 2011.
The Company has evaluated the optimal use of the
two credits with respect to gallons produced in 2009.
Considerations include uncertainty around future
Federal taxable income, the taxability of the alter-
native fuel mixture credit, future liquidity and uses of
cash such as, but not limited to, acquisitions, debt
repayments and voluntary pension contributions
versus repayment of alternative fuel mixture credits
with interest. At the present time, the Company does
not intend to convert any gallons under the alter-
native fuel mixture credit to gallons under the
cellulosic bio-fuel credit. On July 19, 2011 the Com-
pany filed an amended 2009 tax return claiming
alternative fuel mixture tax credits as non-taxable
income. If that amended position is not upheld, the
Company will re-evaluate its position with regard to
alternative fuel mixture gallons produced 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, Inc. 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.
NOTE 5 ACQUISITIONS AND JOINT VENTURES
ACQUISITIONS
2013: On January 3, 2013, International Paper
completed the acquisition (effective date of acquis-
ition on January 1, 2013) of the shares of its joint
venture partner, Sabanci Holding, in the Turkish
corrugated packaging company, Olmuksa Interna-
tional Paper Sabanci Ambalaj Sanayi ve Ticaret A.S.
(Olmuksa), for a purchase price of $56 million. The
acquired shares represent 43.7% of Olmuksa’s
shares, and prior to this acquisition, International
Paper already held a 43.7% equity interest in Olmuk-
sa. Thus, International Paper now owns 87.4% of
Olmuksa’s outstanding and issued shares. The
Company 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.
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.
Pro forma information related to the acquisition of
Olmuksa has not been included as it does not have a
material effect on the Company’s consolidated
results of operations.
2012: On February 13, 2012, International Paper com-
pleted 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,
57