International Paper 2015 Annual Report Download - page 48

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31
Alternative Fuel Mixture Credit
On July 19, 2011, the Company filed an amended 2009
tax return claiming alternative fuel mixture tax credits
as non-taxable income. The amended position has
been accepted by the Internal Revenue Service (IRS)
in the closing of the IRS tax audit for the years 2006 -
2009. As a result, during 2013, the Company
recognized an income tax benefit of $753 million related
to the non-taxability of the alternative fuel mixture tax
credits.
Investment Activities
Investment activities in 2015 were up from 2014
reflecting an increase in capital spending and the use
of $198 million of cash in conjunction with the timber
monetization restructuring (see Note 12 Variable
Interest Entities and Preferred Securities of
Subsidiaries on pages 64 through 66 of Item 8. Financial
Statements and Supplementary Data) in 2015. In
addition, 2014 investment activity includes the receipt
of approximately $400 million in connection with the
spin-off of the xpedx distribution business. The
Company maintains an average capital spending target
around depreciation or amortization levels or modestly
above due to strategic plans over the course of an
economic cycle. Capital spending was $1.5 billion in
2015, or 115% of depreciation and amortization,
compared with $1.4 billion in 2014, or 97% of
depreciation and amortization, and $1.2 billion, or 77%
of depreciation and amortization in 2013. Across our
businesses, capital spending as a percentage of
depreciation and amortization ranged from 118% to
100% in 2015.
The following table shows capital spending for
operations by business segment for the years ended
December 31, 2015, 2014 and 2013.
In millions 2015 2014 2013
Industrial Packaging $ 858 $ 754 $ 629
Printing Papers 361 318 294
Consumer Packaging 216 233 208
Distribution ——9
Subtotal 1,435 1,305 1,140
Corporate and other 52 61 58
Total $1,487 $1,366 $1,198
Capital expenditures in 2016 are currently expected to
be about $1.3 billion, or 100% of depreciation and
amortization.
Acquisitions and Joint Ventures
OLMUKSAN
2014: In May 2014, the Company conducted a
voluntary tender offer for the remaining outstanding
12.6% public shares of Olmuksan. The Company also
purchased outstanding shares of Olmuksan outside of
the tender offer. As of December 31, 2014 and 2015,
the Company owned 91.7% of Olmuksan's outstanding
and issued shares.
2013: On January 3, 2013, International Paper
completed the acquisition (effective date of acquisition
on January 1, 2013) of the shares of its joint venture
partner, Sabanci Holding, in the Turkish corrugated
packaging company, Olmuksa International Paper
Sabanci Ambalaj Sanayi ve Ticaret A.S., now called
Olmuksan International Paper Ambalaj Sanayi ve
Ticaret A.S. (Olmuksan), for a purchase price of $56
million. The acquired shares represented 43.7% of
Olmuksan's shares. Prior to this acquisition,
International Paper held a 43.7% equity interest in
Olmuksan.
Because the transaction resulted in International Paper
becoming the majority shareholder, owning 87.4% of
Olmuksan's outstanding and issued shares, its
completion triggered a mandatory call for tender of the
remaining public shares which began in March 2013
and ended in April 2013, with no shares tendered. As
a result, the 12.6% owned by other parties were
considered non-controlling interests. Olmuksan's
financial results have been consolidated with the
Company's Industrial Packaging segment beginning
January 1, 2013, the effective date which International
Paper obtained majority control of the entity.
Following the transaction, the Company's previously
held 43.7% equity interest in Olmuksan was
remeasured to a fair value of $75 million, resulting in a
gain of $9 million. In addition, the cumulative translation
adjustment balance of $17 million relating to the
previously held equity interest was reclassified, as
expense, from accumulated other comprehensive
income.
The final purchase price allocation indicated that the
sum of the cash consideration paid, the fair value of the
noncontrolling interest and the fair value of the
previously held interest was less than the fair value of
the underlying assets by $21 million, resulting in a
bargain purchase price gain being recorded on this
transaction. The aforementioned remeasurement of
equity interest gain, the cumulative translation
adjustment to expense, and the bargain purchase gain
are included in the Net bargain purchase gain on
acquisition of business in the accompanying
consolidated statement of operations.
ORSA
2014: On April 8, 2014, the Company acquired the
remaining 25% of shares of Orsa International Paper
Embalangens S.A. (Orsa IP) from its joint venture