International Paper 2012 Annual Report Download - page 89

INVENTORIES
In millions at December 31 2012 2011
Raw materials $ 360 $ 368
Finished pulp, paper and packaging products 1,728 1,503
Operating supplies 588 390
Other 54 59
Inventories $2,730 $2,320
The last-in, first-out inventory method is used to
value most of International Paper’s U.S. inventories.
Approximately 64% of total raw materials and fin-
ished products inventories were valued using this
method. If the first-in, first-out method had been
used, it would have increased total inventory balan-
ces by approximately $381 million and $350 million
at December 31, 2012 and 2011, respectively.
PLANTS, PROPERTIES AND EQUIPMENT
In millions at December 31 2012 2011
Pulp, paper and packaging facilities
Mills $23,625 $22,494
Packaging plants 7,184 6,358
Other plants, properties and equipment 2,074 1,556
Gross cost 32,883 30,408
Less: Accumulated depreciation 18,934 18,591
Plants, properties and equipment, net $13,949 $11,817
In millions 2012 2011 2010
Depreciation expense $1,399 $1,263 $1,396
INTEREST
Cash payments related to interest were as follows:
In millions 2012 2011 2010
Interest payments $740 $629 $657
Amounts related to interest were as follows:
In millions 2012 2011 2010
Interest expense (a) $743 $596 $643
Interest income (a) 71 55 35
Capitalized interest costs 37 22 14
(a) Interest expense and interest income exclude approximately
$49 million, $49 million and $44 million in 2012, 2011 and 2010,
respectively, related to investments in and borrowings from
variable interest entities for which the Company has a legal
right of offset (see Note 11).
SALE OF FORESTLANDS
On September 23, 2010, the Company finalized the
sale of 163,000 acres of properties located in the
southeastern United States to an affiliate of Rock
Creek Capital (the Partnership) for $199 million,
resulting in a $50 million pre-tax gain ($31 million
after taxes), after expenses. Cash of $160 million was
received at closing, with the balance of $39 million,
plus interest, to be received no later than three years
from closing. In addition, the Company has retained
a 20% profit interest in the Partnership. The gain on
this sale is included in Cost of products sold in the
accompanying consolidated statement of operations.
NOTE 8 GOODWILL AND OTHER INTANGIBLES
GOODWILL
The following tables present changes in the goodwill
balances as allocated to each business segment for
the years ended December 31, 2012 and 2011:
In millions
Industrial
Packaging Printing Papers Consumer Packaging Distribution Total
Balance as of
January 1, 2012
Goodwill $ 1,157 $ 2,439 $ 1,779 $ 400 $ 5,775
Accumulated
impairment
losses (a) — (1,765) (1,664) — (3,429)
1,157 674 115 400 2,346
Reclassifications
and other (b) 1 (40) 1 — (38)
Additions/
reductions 2,007 (c) (3) (d) 3 (e) — 2,007
Balance as of
December 31,
2012
Goodwill 3,165 2,396 1,783 400 7,744
Accumulated
impairment
losses (a) — (1,765) (1,664) — (3,429)
Total $ 3,165 $ 631 $ 119 $ 400 $ 4,315
(a) Represents accumulated goodwill impairment charges since
the adoption of ASC 350, “Intangibles – Goodwill and Other” in
2002.
(b) Represents the effects of foreign currency translations and
reclassifications.
(c) Reflects the acquisition of Temple-Inland, net of amounts writ-
ten off related to the divestiture of two Temple-Inland mills
(Ontario, California and New Johnsonville, Tennessee) and one
International Paper mill (Oxnard (Hueneme), California). Also
excludes the goodwill for Building Products which was
reclassified to Businesses Held for Sale.
(d) Reflects an increase related to a purchase price adjustment for
Andhra Pradesh Paper Mills in India partially offset by a reduc-
tion from tax benefits generated by the deduction of goodwill
amortization for tax purposes in Brazil.
(e) Represents the impact of the change in estimate of the con-
tributed land in the Shandong IP & Sun Food Packaging Co.,
Ltd. joint venture in China entered into in 2011.
In millions
Industrial
Packaging Printing Papers Consumer Packaging Distribution Total
Balance as of
January 1, 2011
Goodwill $1,151 $ 2,418 $ 1,768 $400 $ 5,737
Accumulated
impairment
losses (a) — (1,765) (1,664) — (3,429)
1,151 653 104 400 2,308
Reclassifications and
other (b) (1) (67) 5 — (63)
Additions/reductions 7(c) 88(d) 6(e) — 101
Balance as of
December 31,
2011
Goodwill 1,157 2,439 1,779 400 5,775
Accumulated
impairment
losses (a) — (1,765) (1,664) — (3,429)
Total $1,157 $ 674 $ 115 $400 $ 2,346
62