International Paper 2015 Annual Report Download - page 37

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related to the sale of our 55% equity share of the IP-
Sun JV in Asia, a net cost of $8 million related to
costs to convert our Riegelwood mill to 100% pulp
production, net of proceeds from the sale of the
Carolina Coated Bristols brand, and $2 million of
sheet plant closure costs. Operating profits in 2014
included $8 million of sheet plant closure costs.
Corporate items, net, of $36 million of expense in 2015
were lower than the $51 million of expense in 2014 due
to the absence of a one-time non-cash foreign exchange
charge related to the administrative restructuring of some
international entities in 2014. The decrease in 2014 from
the expense of $61 million in 2013 is due to lower pension
costs partially offset by the one-time non-cash foreign
exchange charge.
Corporate special items, including restructuring and other
items and net losses on sales and impairments of
businesses were a loss of $238 million in 2015 compared
with a loss of $320 million in 2014 and a loss of $4 million
in 2013. The loss in 2015 is due to debt premium costs,
costs associated with the restructure of our timber
monetization and a legal liability reserve adjustment. The
loss in 2014 is primarily due to debt extinguishment costs
and a loss on the sale of a business by ASG, which was
formerly referred to as AGI-Shorewood and in which we
hold an investment, and the subsequent partial
impairment of our ASG investment.
Interest expense, net, was $555 million in 2015 compared
with $607 million ($601 million excluding special items net
interest expense reported in the Printing Papers business
segment) in 2014 and $612 million in 2013. The decrease
in 2015 compared with 2014 is due to lower average
interest rates. The decrease in 2014 compared with 2013
also reflects lower average interest rates.
A net income tax provision of $466 million was recorded
for 2015, including a tax benefit of $62 million related to
internal restructurings, an expense of $23 million for the
tax impact of the 2015 cash pension contribution of $750
million and a tax expense of $2 million for other items.
The 2014 income tax provision of $123 million includes a
tax benefit of $90 million related to internal restructurings
and a net tax expense of $9 million for other items. The
2013 income tax benefit of $498 million includes a tax
benefit of $770 million associated with the settlement of
tax audits and a net tax benefit of $4 million for other items.
Discontinued Operations
2014: On July 1, 2014, International Paper completed
the spinoff of its distribution business, xpedx, which
subsequently merged with Unisource Worldwide, Inc.,
with the combined companies now operating as Veritiv
Corporation (Veritiv). The xpedx business had historically
represented the Company's Distribution reportable
segment.
The spinoff was accomplished by the contribution of the
xpedx business to Veritiv and the distribution of 8,160,000
shares of Veritiv common stock on a pro-rata basis to
International Paper shareholders. International Paper
received payments of approximately $411 million,
financed with new debt in Veritiv's capital structure.
2013: On April 1, 2013, the Company finalized the sale
of Temple-Inland's 50% interest in Del-Tin Fiber L.L.C. to
joint venture partner Deltic Timber Corporation for $20
million in assumed liabilities and cash.
On July 19, 2013 the Company finalized the sale of its
Temple-Inland Building Products division to Georgia-
Pacific Building Products, LLC for approximately $726
million in cash.
Liquidity and Capital Resources
For the year ended December 31, 2015, International
Paper generated $2.6 billion of cash flow from operations
compared with $3.1 billion in 2014 and $3.0 billion in 2013.
Cash flow from operations included $750 million, $353
and $31 million of cash pension contributions in 2015,
2014 and 2013, respectively. Capital spending for 2015
totaled $1.5 billion, or 115% of depreciation and
amortization expense. Net decreases in debt totaled $74
million. Our liquidity position remains strong, supported
by approximately $2.1 billion of credit facilities that we
believe are adequate to meet future liquidity
requirements. Maintaining an investment-grade credit
rating for our long-term debt continues to be an important
element in our overall financial strategy.
We expect to generate strong free cash flow again in 2016
and will continue our balanced use of cash through
investments in capital projects, the reduction of total debt,
including the Company’s unfunded pension obligation,
returning value to shareholders and strengthening our
businesses through strategic acquisitions, as
appropriate.
Capital spending for 2016 is targeted at $1.3 billion, or
about 100% of depreciation and amortization.
Legal
See Note 11 Commitments and Contingent Liabilities on
pages 61 through 64 of Item 8. Financial Statements and
Supplementary Data for a discussion of legal matters.
CORPORATE OVERVIEW
While the operating results for International Paper’s
various business segments are driven by a number of
business-specific factors, changes in International
Paper’s operating results are closely tied to changes in
general economic conditions in North America, Europe,
Russia, Latin America, Asia, Africa and the Middle East.
Factors that impact the demand for our products include