International Paper 2015 Annual Report Download - page 26

9
Pension plan assets are primarily made up of equity
and fixed income investments. Fluctuations in actual
equity market returns, changes in general interest rates
and changes in the number of retirees may result in
increased pension costs in future periods. Likewise,
changes in assumptions regarding current discount
rates and expected rates of return on plan assets could
increase pension costs. Health care reform under the
Patient Protection and Affordable Care Act of 2010
could also increase costs with respect to medical
coverage of the Company’s full-time employees.
Significant changes in any of these factors may
adversely impact our cash flows, financial condition and
results of operations.
OUR PENSION PLANS ARE CURRENTLY
UNDERFUNDED, AND OVER TIME WE MAY BE
REQUIRED TO MAKE CASH PAYMENTS TO THE
PLANS, REDUCING THE CASH AVAILABLE FOR
OUR BUSINESS. We record a liability associated with
our pension plans equal to the excess of the benefit
obligation over the fair value of plan assets. The benefit
liability recorded under the provisions of Accounting
Standards Codification (ASC) 715, “Compensation –
Retirement Benefits,” at December 31, 2015 was
$3.6 billion. The amount and timing of future
contributions will depend upon a number of factors,
including the actual earnings and changes in values of
plan assets and changes in interest rates. As described
elsewhere in this Annual Report on Form 10-K, during
the first half of 2016, former employees who are
participants in our pension plan will be able to request
early payment of their entire plan benefit in the form of
a single lump sum payment. While all payments will be
made from the plan's trust assets, the target population
has a total liability of $3.0 billion. For further information,
see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -
Liquidity and Capital Resources on page 34.
CHANGES IN INTERNATIONAL CONDITIONS
COULD ADVERSELY AFFECT OUR BUSINESS AND
RESULTS OF OPERATIONS. Our operating results
and business prospects could be substantially affected
by risks related to the countries outside the United
States in which we have manufacturing facilities or sell
our products. Specifically, Russia, Brazil, Poland, India,
and Turkey, where we have substantial manufacturing
facilities, are countries that are exposed to economic
and political instability in their respective regions of the
world. Fluctuations in the value of local currency versus
the U.S. dollar, downturns in economic activity, adverse
tax consequences, nationalization or any change in
social, political or labor conditions in any of these
countries or regions could negatively affect our financial
results. Trade protection measures in favor of local
producers of competing products, including
governmental subsidies, tax benefits and other
measures giving local producers a competitive
advantage over International Paper, may also
adversely impact our operating results and business
prospects in these countries. In addition, our
international operations are subject to regulation under
U.S. law and other laws related to operations in foreign
jurisdictions. For example, the Foreign Corrupt
Practices Act prohibits U.S. companies and their
representatives from offering, promising, authorizing or
making payments to foreign officials for the purpose of
obtaining or retaining business abroad. Failure to
comply with domestic or foreign laws could result in
various adverse consequences, including the
imposition of civil or criminal sanctions and the
prosecution of executives overseeing our international
operations.
RISKS RELATING TO LEGAL PROCEEDINGS AND
COMPLIANCE COSTS
WE ARE SUBJECT TO A WIDE VARIETY OF LAWS,
REGULATIONS AND OTHER GOVERNMENT
REQUIREMENTS THAT MAY CHANGE IN
SIGNIFICANT WAYS, AND THE COST OF
COMPLIANCE WITH SUCH REQUIREMENTS
COULD IMPACT OUR BUSINESS AND RESULTS OF
OPERATIONS. Our operations are subject to
regulation under a wide variety of U.S. federal and state
and non-U.S. laws, regulations and other government
requirements -- including, among others, those relating
to the environment, health and safety, labor and
employment and health care. There can be no
assurance that laws, regulations and government
requirements will not be changed, applied or interpreted
in ways that will require us to modify our operations and
objectives or affect our returns on investments by
restricting existing activities and products, subjecting
them to escalating costs. For example, we have
incurred, and expect that we will continue to incur,
significant capital, operating and other expenditures
complying with applicable environmental laws and
regulations. There can be no assurance that future
remediation requirements and compliance with existing
and new laws and requirements, including with global
climate change laws and regulations, Boiler MACT and
NAAQSs, will not require significant expenditures, or
that existing reserves for specific matters will be
adequate to cover future costs. We could also incur
substantial fines or sanctions, enforcement actions
(including orders limiting our operations or requiring
corrective measures), natural resource damages
claims, cleanup and closure costs, and third-party
claims for property damage and personal injury as a
result of violations of, or liabilities under, environmental
laws, regulations, codes and common law. The amount
and timing of environmental expenditures is difficult to
predict, and, in some cases, liability may be imposed
without regard to contribution or to whether we knew
of, or caused, the release of hazardous substances. As
another example, we are subject to a number of labor