Problem 1

How does P & P determine the value for Levels 1, 2 and 3 investments?

Problem 3

Why would foreign currency translation decrease from 2013 to 2014?

Problem 5

Using the following format compare P & P to the industry average. Overall how is P & P performing relative to the industry?

• Ratio Formula Use Evaluation as?Compared to the Industry Average

Industry Average

Net Profit Margin 3.1% Price to free cash flow -84.2 Return on Equity 5.4% Total Debt/Equity 77.9 Dividend Yield 3.6%

P & P Products, Inc. A Comprehensive Financial and Sustainability Case ISBN: 9780986165856 2016 Edition . Returns: No returns after 30 days of registration. support@capstoneeducationalpublishing.com Case Contents 1. Unaudited Financial Statements 2. Sustainability Report 3. Accounting Assignments a. b. c. d. e. f. g. h. i. j. k. l. Cash Problems Receivable Problems Inventory Problems Investment Problems Construction Accounting Problem Property, Plant and Equipment Problems Current Liabilities and Contingencies Problems Lease Problems Long-Term Liabilities Problems Deferred Tax Problems Stockholder's Equity Problems Disclosure and Miscellaneous Problems 4. Sustainability Problems P&P Products Corporation (unaudited statements prepared for formal submission to the SEC) To be reviewed by the CFO or her representative Annotated Management Discussion and Analysis Business The Packaging Resources segment produces paperboard used in packaging for food, beverage, tobacco, healthcare, and beauty and personal care markets. This segment's products include bleached paperboard (\"SBS\") and Coated paperboard (\"CNK \") that are manufactured at three mills located in the U.S. and corrugated packaging that is manufactured at two mills located in Brazil. SBS is principally used in packaging solutions for higher-value branded consumer products in global food, tobacco, cosmetics and pharmaceuticals markets. SBS is also used in liquid packaging applications for shelf-stable dairy products and other liquid food and beverage products. CNK is used for a range of packaging applications, the largest of which for P&P PRODUCTS are multi-pack beverage packaging and food packaging. P&P Products' corrugated packaging business is focused on fresh produce, frozen meat and consumer products markets in South America. The Consumer Solutions segment designs and produces packaging solutions and systems for the food, beverage, tobacco, beauty and personal care, healthcare, and home and garden markets. This segment manufactures multi-pack cartons primarily for the global beverage take-home market, highend packaging for the global tobacco market, injection-molded plastic and paperboard packaging for prescription drugs, and dispensing and sprayer systems for personal care, fragrance, healthcare, food, home cleaning, and garden and lawn maintenance products. Paperboard and plastic are converted into packaging products at plants located in North America, South America, Europe and Asia. This segment also has pharmaceutical packaging contracts with retailers, including mass-merchants. In addition, this segment manufactures equipment that is leased or sold to its beverage and dairy customers to package their products. The Specialty Chemicals segment manufactures, markets and distributes specialty chemicals derived from sawdust and other by-products of the papermaking process in North America, Europe, South America and Asia. Products include performance chemicals derived from pine chemicals used in printing inks, asphalt paving and adhesives as well as the agricultural, paper and petroleum industries. This segment also includes products based on activated carbon used in gas vapor emission control systems for automobiles and trucks and applications for air, water and food purification. The Community Development and Land Management segment is responsible for maximizing the value of the company's landholdings in the Southeastern region of the U.S. Operations of the segment include real estate development, forestry operations and leasing activities. Real estate development includes (i) selling non-core forestlands primarily for recreational and residential uses, (ii) entitling and improving high-value tracts, and (iii) master planning select landholdings. Forestry operations include growing and harvesting softwood and hardwood on the company's forestlands for external consumption and for use by the company's mill-based business. Leasing activities include fees from third parties undertaking mineral extraction operations, as well as fees from recreational leases on the company's forestlands. P&P Products has a large number of foreign and domestic trademarks, trade names, patents, patent rights and licenses relating to its business. While, in the aggregate, intellectual property rights are material to our business, the loss of any one or any related group of such rights would not have a material adverse effect on our business, with the exception of the \"P&P \" trademark. Competition P&P Products operates in a very challenging global marketplace and competes with many large, well-established and highly competitive manufacturers and service providers. In addition, our business is affected by a range of macroeconomic conditions, including industry capacity changes, global competition, economic conditions in the U.S. and abroad, and currency exchange rates. We compete principally through quality, price, value-added products and services such as packaging solutions, customer service, innovation, technology, and product design. Our proprietary trademarks and patents, in the aggregate, are also important to our competitive position in certain markets. Research 1 P&P Products conducts research and development in the areas of packaging and chemicals. Innovative product development and manufacturing process improvement are the main objectives of these efforts. The company also evaluates and adapts for use new and emerging technologies that may enable new product development and manufacturing cost reductions. Expenditures for research and development were $47 million, $41 million and $43 million for the years ended December 31, 2014, 2013 and 2012, respectively. Environmental laws and regulations Our operations are subject to extensive regulation by federal, state and local authorities, as well as regulatory authorities with jurisdiction over foreign operations of the company. Due to changes in environmental laws and regulations, the application of such regulations, and changes in environmental control technology, it is not possible for us to predict with certainty the amount of capital expenditures to be incurred for environmental purposes. Taking these uncertainties into account, we estimate that we will incur $48 million and $66 million in environmental capital expenditures in 2014 and 2015, respectively. Approximately $52 million was spent on environmental capital projects in 2014. The company has been notified by the U.S. Environmental Protection Agency or by various state or local governments that it may be liable under federal environmental laws or under applicable state or local laws with respect to the cleanup of hazardous substances at sites previously operated or used by the company. The company is currently named as a potentially responsible party (\"PRP\"), or has received third-party requests for contribution under the Comprehensive Environmental Response, Compensation and Liability Act (\"CERCLA\") and similar state or local laws with respect to numerous sites. There are other sites which may contain contamination or which may be potential Superfund sites, but for which P&P Products has not received any notice or claim. The potential liability for all these sites will depend upon several factors, including the extent of contamination, the method of remediation, insurance coverage and contribution by other PRPs. The company regularly evaluates its potential liability at these various sites. At December 31, 2014, P&P Products had recorded liabilities of approximately $24 million for estimated potential cleanup costs based upon its close monitoring of ongoing activities and its past experience with these matters. The company believes that it is reasonably possible that costs associated with these sites may exceed amounts of recorded liabilities by an amount that could range from an insignificant amount to as much as $20 million. This estimate is less certain than the estimate upon which the environmental liabilities were based. After consulting with legal counsel and after considering established liabilities, it is our judgment that the resolution of pending litigation and proceedings is not expected to have a material adverse effect on the company's consolidated financial condition or liquidity. In any given period or periods, however, it is possible such proceedings or matters could have a material effect on the results of operations. Employees P&P Products currently employs approximately 17,000 people worldwide, of whom approximately half are employed in the U.S. and half are employed internationally. Approximately half of the company's employees around the world are represented by labor unions under various collective bargaining agreements. The company engages in negotiations with labor unions for new collective bargaining agreements from time to time and will be negotiating new collective agreements at various manufacturing locations around the world during the course of 2014. The company considers its relationships with its unions and other employee representatives to be generally good. While it is the company's objective to reach agreements without work stoppages, it cannot predict the outcome of any negotiations. International operations P&P Products' operations outside the U.S. are conducted through subsidiaries located in Canada, Mexico, South America, Europe and Asia. While there are risks inherent in foreign investments, we do not believe at this time that such risks are material to our overall business prospects. P&P Products' sales that were attributable to U.S. operations, including export sales, were 66% for both of the years ended December 31, 2014 and 2013 and 67% for the year ended December 31, 2012. Export sales from P&P Products' U.S. operations were 16% for the year ended December 31, 2014 and 15% for both of the years ended December 31, 2013, and 2012. Sales that were attributable to foreign operations were 34% for both of the years ended December 31, 2014 and 2013 and 33% for the year ended December 31, 2012. A limited number of P&P Products' facilities are owned, in whole or in part, by municipal or other public authorities pursuant to standard industrial revenue bond financing arrangements and are accounted for as property owned by P&P Products. P&P Products holds options under which it may purchase each of these facilities from such authorities by paying a nominal purchase price and assuming the indebtedness of the industrial revenue bonds at the time of the purchase. As of December 31, 2014, P&P Products owned approximately 701,000 acres of forestlands and other landholdings in the Southeastern region in the U.S. and approximately 135,000 acres of forestlands in Brazil (more than 1,200 miles from the Amazon rainforest). Legal Proceedings P&P Products is involved in various litigation and administrative proceedings arising in the normal course of business. Although the ultimate outcome of such matters cannot be predicted with certainty, P&P Products does not believe that the currently expected outcome of any proceeding, lawsuit or claim that is pending or threatened, or all of them combined, will have a material adverse effect on its consolidated financial condition or liquidity. In any given period or periods, however, it is possible such proceedings or matters could have a material effect on the results of operations. P&P Products' officers are elected by the Board of Directors annually for one-year terms. There are no family relationships among executive officers or understandings between any executive officer and any other person pursuant to which the officer was selected as an officer. Item 5. 2 Market for the registrant's common equity, related stockholder matters and issuer purchases of equity securities (a) Market and price range of common stock P&P Products' common stock is traded on the New York Stock Exchange. Year ended December 31, 2014 Year ended December 31, 2013 STOCK PRICES High Low High Low First quarter Second quarter Third quarter Fourth quarter $ 30.92 34.51 34.23 30.55 $ 26.28 30.40 24.56 22.75 $ 29.74 28.69 25.35 27.12 $ 22.25 21.96 20.81 23.74 This table reflects the range of market prices of P&P Products common stock as quoted in the New York Stock Exchange Composite Transactions. (b) Approximate number of common shareholders At December 31, 2014, the number of shareholders of record of P&P Products common stock was approximately 20,000. This number includes approximately 11,000 current or former employees of the company who were P&P Products shareholders by virtue of their participation in our savings and investment plans. (c) Dividends The following table reflects historical dividend information for P&P Products for the periods indicated. Year ended December 31, 2014 DIVIDENDS PER SHARE First quarter Second quarter Third quarter Fourth quarter (d) Year ended December 31, 2013 $ 0.25 0.25 0.25 0.25 $ 0.23 0.23 0.23 0.25 $ 1.00 $ 0.94 Stock repurchases The company did not repurchase any shares in the fourth quarter of 2014. At December 31, 2014, there were 3.2 million shares available for purchase under an existing authorized stock repurchase plan. Item 6. Selected financial data Dollars in millions, except per share data 2014 EARNINGS Net sales Income from continuing operations attributable to the company (Loss) income from discontinued operations Net income attributable to the company Income from continuing operations: Per share - basic Per share - diluted Net income per share - basic Net income per share - diluted Depreciation, depletion and amortization expense COMMON STOCK Number of common shareholders Weighted average number of shares outstanding: Basic Diluted 3 $ 6,060 258 (12) 2013 $ 5,693 262 (156) Years ended December 31, 2012 $ 5,406 240 (15) 2011 $ 2010 5,809 91 (1) $ 5,515 255 30 2461 1062 2253 904 2855 1.52 1.49 1.45 1.42 393 1.54 1.52 0.62 0.62 389 1.40 1.38 1.31 1.30 406 0.52 0.52 0.52 0.52 426 1.40 1.39 1.56 1.56 430 20,000 21,000 22,500 23,400 24,700 170 174 170 173 171 173 172 173 183 184 Dividends paid Per share: Dividends declared Book value FINANCIAL POSITION Working capital Current ratio Property, plant, equipment and forestlands, net Total assets Long-term debt, excluding current maturities Shareholders' equity Debt to total capital (shareholders' equity and total debt) OPERATIONS Primary production of paperboard (thousands, in tons) New investment in property, plant, equipment and forestlands on a continuing operations basis Acres of forestlands owned (thousands) Number of employees at December 31 $ 170 $ 1.00 18.62 $ $ 762 1.5 3,531 8,763 1,880 3,182 40% 670 836 17,000 $ 0.94 19.52 $ $ 2,848 $ 160 1,220 2.0 3,255 8,814 2,042 3,286 38% 242 865 18,000 $ 0.92 19.89 $ $ 2,804 $ 157 1,285 2.0 3,301 9,021 2,153 3,406 39% 218 890 20,000 $ 0.92 17.37 $ $ 2,697 $ 159 887 1.7 3,333 8,455 2,309 2,967 45% 0.92 21.33 $ $ 3,033 $ 274 932 23,000 169 712 1.5 3,564 9,837 2,375 3,708 40% 3,106 $ 308 952 23,000 1 2014 results include after-tax charges associated with the forthcoming spin-off of the Consumer & Office Products business of $47 million, or $0.27 per share, and after-tax restructuring charges of $20 million, or $0.11 per share. 2014 results also include an after-tax loss from discontinued operations of $12 million, or $0.07 per share. 2 2013 results include after-tax restructuring charges of $35 million, or $0.20 per share, tax benefits of $29 million, or $0.17 per share, from cellulosic biofuel producer credits and audit settlements, an after-tax gain of $5 million, or $0.03 per share, related to post-retirement and pension curtailments, and an after-tax charge of $4 million, or $0.02 per share, from early extinguishment of debt. 2013 results also include an after-tax loss from discontinued operations of $156 million, or $0.90 per share. 3 2012 results include after-tax income from alternative fuel mixture credits of $242 million, or $1.40 per share, after-tax restructuring charges of $111 million, or $0.65 per share, charges of $32 million, or $0.18 per share, related to domestic and foreign tax audits, after-tax charges of $14 million, or $0.08 per share, from early extinguishments of debt, after-tax income of $13 million, or $0.07 per share, from a change to employee vacation policy, an after-tax expense of $12 million, or $0.07 per share, from a contribution to the P&P Products Foundation, after-tax gains of $11 million, or $0.07 per share, related to sales of certain assets, and an after-tax gain of $4 million, or $0.02 per share, related to a pension curtailment. 2012 results also include an after-tax loss from discontinued operations of $15 million, or $0.08 per share. 4 2011 results include after-tax restructuring charges of $33 million, or $0.19 per share, after-tax gains of $10 million, or $0.05 per share, related to sales of certain assets, and an after-tax gain of $6 million, or $0.04 per share, related to a pension curtailment. 2011 results also include an after-tax loss from discontinued operations of $1 million, or $0.00 per share. 5 2010 results include after-tax restructuring charges of $46 million, or $0.25 per share, after-tax one-time costs related to the company's cost initiative of $15 million, or $0.08 per share, and after-tax gains of $155 million, or $0.84 per share, from sales of large-tract forestlands. 2010 results also include after-tax income from discontinued operations of $30 million, or $0.17 per share. Management's discussion and analysis of financial condition and results of operations OVERVIEW For the year ended December 31, 2014, P&P Products Corporation (\"P&P Products\