International Paper 2015 Annual Report Download - page 49

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partner, Jari Celulose, Papel e Embalagens S.A. (Jari),
a Grupo Orsa company, for approximately $127 million,
of which $105 million was paid in cash with the
remaining $22 million held back pending satisfaction of
certain indemnification obligations by Jari. International
Paper will release the amount held back, or any amount
for which we have not notified Jari of a claim, by March
30, 2016. An additional $11 million, which was not
included in the purchase price, was placed in an escrow
account pending resolution of certain open matters.
During 2014, these open matters were successfully
resolved, which resulted in $9 million paid out of escrow
to Jari and correspondingly added to the final purchase
consideration. The remaining $2 million was released
back to the Company. As a result of this transaction,
the Company reversed the $168 million of Redeemable
noncontrolling interest included on the March 31, 2014
consolidated balance sheet. The net difference
between the Redeemable noncontrolling interest
balance plus $14 million of currency translation
adjustment reclassified out of Other comprehensive
income less the 25% purchase price was reflected as
an increase to Retained earnings on the consolidated
balance sheet.
2013: On January 14, 2013, International Paper and
Jari formed Orsa IP with International Paper holding a
75% stake. The value of International Paper's
investment in Orsa IP was approximately $471 million.
Because International Paper acquired a majority control
of the joint venture, Orsa IP's financial results have been
consolidated with our Industrial Packaging segment
from the date of formation on January 14, 2013. The
25% owned by Jari was considered a redeemable
noncontrolling interest and met the requirements to be
classified outside permanent equity. As such, the
Company reported $163 million in Redeemable
noncontrolling interest in the December 31, 2013
consolidated balance sheet.
Financing Activities
Amounts related to early debt extinguishment during
the years ended December 31, 2015, 2014 and 2013
were as follows:
In millions 2015 2014 2013
Debt reductions (a) $2,151 $1,625 $574
Pre-tax early debt extinguishment costs
(b) 207 276 25
(a) Reductions related to notes with interest rates ranging from
2.00% to 9.38% with original maturities from 2014 to 2031 for
the years ended December 31, 2015, 2014 and 2013. Includes
the $630 million payment for a portion of the Special Purpose
Entity Liability (see Note 12 Variable Interest Entities on pages
64 through 66 of Item 8. Financial Statements and
Supplementary Data ).
(b) Amounts are included in Restructuring and other charges in
the accompanying consolidated statements of operations.
2015: Financing activities during 2015 included debt
issuances of $6.9 billion and retirements of $6.9 billion
for a net decrease of $74 million.
During 2015, the Company restructured the timber
monetization which resulted in the use of $630 million
in cash to pay down a portion of the third party bank
loans and refinance the loans on nonrecourse terms.
(see Note 12 Variable Interest Entities on pages 64
through 66 of Item 8. Financial Statements and
Supplementary Data).
International Paper utilizes interest rate swaps to
change the mix of fixed and variable rate debt and
manage interest expense. At December 31, 2015,
International Paper had interest rate swaps with a total
notional amount of $17 million and maturities in 2018
(see Note 14 Derivatives and Hedging Activities on
pages 67 through 71 of Item 8. Financial Statements
and Supplementary Data). During 2015, existing swaps
and the amortization of deferred gains on previously
terminated swaps decreased the weighted average
cost of debt from 5.9% to an effective rate of 5.8%. The
inclusion of the offsetting interest income from short-
term investments reduced this effective rate to 5.1%.
In 2015, International Paper issued $700 million of
3.80% senior unsecured notes with a maturity date in
2026, $600 million of 5.00% senior unsecured notes
with a maturity date in 2035, and $700 million of 5.15%
senior unsecured notes with a maturity date in 2046.
The proceeds from this borrowing were used to repay
approximately $1.0 billion of notes with interest rates
ranging from 4.75% to 9.38% and original maturities
from 2018 to 2022, along with $211 million of cash
premiums associated with the debt repayments.
Additionally, the proceeds from this borrowing were
used to make a $750 million voluntary cash contribution
to the Company's pension plan. Pre-tax early debt
retirement costs of $207 million related to the debt
repayments, including the $211 million of cash
premiums, are included in restructuring and other
charges in the accompanying consolidated statement
of operations for the twelve months ended December
31, 2015.
Other financing activities during 2015 included the net
repurchase of approximately 8.0 million shares of
treasury stock, including restricted stock withholding,
and the issuance of 62,000 shares of common stock
for various plans, including stock options exercises that
generated approximately $2.4 million of cash.
Repurchases of common stock and payments of
restricted stock withholding taxes totaled $604.6
million, including $522.6 million related to shares
repurchased under the Company's share repurchase
program.