UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

_________________________________________

Commission File Number 001-03157

INTERNATIONAL PAPER COMPANY

(Exact name of registrant as specified in its charter)


New York			13-0872805
(State or other jurisdiction of incorporation)			(I.R.S. Employer Identification No.)

6400 Poplar Avenue, Memphis, Tennessee			38197
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s telephone number, including area code: (901) 419-7000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	IP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange

Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, par value $1.00 per share, as of October ~~23, 2020~~21, 2021 was ~~393,095,466.~~387,263,169.

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INDEX


		PAGE NO.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Statement of Operations - Three Months and Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020	1

	Condensed Consolidated Statement of Comprehensive Income - Three Months and Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020	2

	Condensed Consolidated Balance Sheet - September 30, ~~2020~~2021 and December 31, ~~2019~~2020	3

	Condensed Consolidated Statement of Cash Flows - Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020	4

	Condensed Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2728

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4546

Item 4.	Controls and Procedures	4546

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4847

Item 6.	Exhibits	4948

Signatures		5049

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PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Operations

(Unaudited)

(In millions, except per share amounts)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net Sales	Net Sales	$	5,123	$	5,568	$	15,341	$	16,878	Net Sales	$	5,714	$	5,123	$	16,693	$	15,341
Costs and Expenses	Costs and Expenses									Costs and Expenses
Cost of products sold	Cost of products sold	3,541		3,772		10,714		11,602		Cost of products sold	3,924		3,541		11,684		10,714
Selling and administrative expenses	Selling and administrative expenses	360		387		1,110		1,202		Selling and administrative expenses	434		360		1,255		1,110
Depreciation, amortization and cost of timber harvested	Depreciation, amortization and cost of timber harvested	320		327		955		963		Depreciation, amortization and cost of timber harvested	318		320		933		955
Distribution expenses	Distribution expenses	377		395		1,149		1,168		Distribution expenses	446		377		1,272		1,149
Taxes other than payroll and income taxes	Taxes other than payroll and income taxes	44		42		129		128		Taxes other than payroll and income taxes	42		44		131		129
Restructuring and other charges, net	Restructuring and other charges, net	105		21		131		21		Restructuring and other charges, net	39		105		243		131
Net (gains) losses on sales and impairments of businesses	Net (gains) losses on sales and impairments of businesses	(5)		8		347		153		Net (gains) losses on sales and impairments of businesses	(360)		(5)		(367)		347
Net (gains) losses on sales of equity method investments	Net (gains) losses on sales of equity method investments	(2)		0		(35)		0		Net (gains) losses on sales of equity method investments	(1)		(2)		(205)		(35)
Antitrust fines		0		32		0		32
Net (gains) losses on sales of fixed assets										Net (gains) losses on sales of fixed assets	(86)		—		(86)		—
Interest expense, net	Interest expense, net	112		123		345		378		Interest expense, net	93		112		242		345
Non-operating pension expense (income)	Non-operating pension expense (income)	(11)		9		(31)		27		Non-operating pension expense (income)	(51)		(11)		(156)		(31)
Earnings (Loss) Before Income Taxes and Equity Earnings	Earnings (Loss) Before Income Taxes and Equity Earnings	282		452		527		1,204		Earnings (Loss) Before Income Taxes and Equity Earnings	916		282		1,747		527
Income tax provision (benefit)	Income tax provision (benefit)	50		137		211		371		Income tax provision (benefit)	146		50		347		211
Equity earnings (loss), net of taxes	Equity earnings (loss), net of taxes	(28)		27		13		221		Equity earnings (loss), net of taxes	94		(28)		247		13
Net Earnings (Loss)	Net Earnings (Loss)	204		342		329		1,054		Net Earnings (Loss)	$	864	$	204	$	1,647	$	329
Less: Net earnings (loss) attributable to noncontrolling interests	Less: Net earnings (loss) attributable to noncontrolling interests	0		(2)		0		(6)		Less: Net earnings (loss) attributable to noncontrolling interests	—		—		2		—
Net Earnings (Loss) Attributable to International Paper Company	Net Earnings (Loss) Attributable to International Paper Company	$	204	$	344	$	329	$	1,060	Net Earnings (Loss) Attributable to International Paper Company	$	864	$	204	$	1,645	$	329
Basic Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders	Basic Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders									Basic Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Net earnings (loss)	Net earnings (loss)	$	0.52	$	0.88	$	0.84	$	2.67	Net earnings (loss)	$	2.22	$	0.52	$	4.21	$	0.84
Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders	Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders									Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Net earnings (loss)	Net earnings (loss)	$	0.52	$	0.87	$	0.83	$	2.65	Net earnings (loss)	$	2.20	$	0.52	$	4.16	$	0.83
Average Shares of Common Stock Outstanding – assuming dilution	Average Shares of Common Stock Outstanding – assuming dilution	394.6		395.4		394.5		399.6		Average Shares of Common Stock Outstanding – assuming dilution	392.6		394.6		395.3		394.5

The accompanying notes are an integral part of these condensed financial statements.

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INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

(In millions)

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Net Earnings (Loss) $ 204 $ 342 $ 329 $ 1,054
Other Comprehensive Income (Loss), Net of Tax:
Amortization of pension and post-retirement prior service costs and net loss:
U.S. plans 42 41 127 122
Non-U.S. plans 1 0 1 0
Change in cumulative foreign currency translation adjustment (28) (179) (515) (106)
Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period (4) (10) (34) (6)
Reclassification adjustment for (gains) losses included in net earnings (loss) 6 4 26 5
Total Other Comprehensive Income (Loss), Net of Tax 17 (144) (395) 15
Comprehensive Income (Loss) 221 198 (66) 1,069
Net (earnings) loss attributable to noncontrolling interests 0 2 0 6
Other comprehensive (income) loss attributable to noncontrolling interests 0 0 2 0
Comprehensive Income (Loss) Attributable to International Paper Company $ 221 $ 200 $ (64) $ 1,075


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net Earnings (Loss)	$	864	$	204	$	1,647	$	329
Other Comprehensive Income (Loss), Net of Tax:
Amortization of pension and post-retirement prior service costs and net loss:
U.S. plans	31		42		101		127
Non-U.S. plans	—		1		—		1
Pension and postretirement adjustments:
U.S. plans	826		—		826		—
Non-U.S. plans	5		—		6		—
Change in cumulative foreign currency translation adjustment	(70)		(28)		99		(515)
Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period	(4)		(4)		3		(34)
Reclassification adjustment for (gains) losses included in net earnings (loss)	(8)		6		(9)		26
Total Other Comprehensive Income (Loss), Net of Tax	780		17		1,026		(395)
Comprehensive Income (Loss)	1,644		221		2,673		(66)
Net (earnings) loss attributable to noncontrolling interests	—		—		(2)		—
Other comprehensive (income) loss attributable to noncontrolling interests	—		—		2		2
Comprehensive Income (Loss) Attributable to International Paper Company	$	1,644	$	221	$	2,673	$	(64)

The accompanying notes are an integral part of these condensed financial statements.

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INTERNATIONAL PAPER COMPANY

Condensed Consolidated Balance Sheet

(In millions)

September 30,
2020 December 31,
2019
(unaudited)
Assets
Current Assets
Cash and temporary investments $ 678 $ 511
Accounts and notes receivable, net 3,034 3,280
Contract assets 388 393
Inventories 2,007 2,208
Current financial assets of variable interest entities (Note 16) 4,850 0
Assets held for sale 114 0
Other current assets 217 247
Total Current Assets 11,288 6,639
Plants, Properties and Equipment, net 12,410 13,004
Forestlands 288 391
Investments 1,100 1,721
Long-Term Financial Assets of Variable Interest Entities (Note 16) 2,252 7,088
Goodwill 3,304 3,347
Right of Use Assets 422 434
Deferred Charges and Other Assets 776 847
Total Assets $ 31,840 $ 33,471
Liabilities and Equity
Current Liabilities
Notes payable and current maturities of long-term debt $ 179 $ 168
Current nonrecourse financial liabilities of variable interest entities (Note 16) 4,220 4,220
Accounts payable 2,226 2,423
Accrued payroll and benefits 453 466
Liabilities held for sale 376 0
Other current liabilities 1,022 1,369
Total Current Liabilities 8,476 8,646
Long-Term Debt 8,525 9,597
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16) 2,091 2,085
Deferred Income Taxes 2,639 2,633
Pension Benefit Obligation 1,421 1,578
Postretirement and Postemployment Benefit Obligation 246 270
Long-Term Lease Obligations 290 304
Other Liabilities 1,056 640
Equity
Common stock, $1 par value, 2020 – 448.9 shares and 2019 – 448.9 shares 449 449
Paid-in capital 6,302 6,297
Retained earnings 8,122 8,408
Accumulated other comprehensive loss (5,132) (4,739)
9,741 10,415
Less: Common stock held in treasury, at cost, 2020 – 55.8 shares and 2019 – 56.8 shares 2,648 2,702
Total International Paper Shareholders’ Equity 7,093 7,713
Noncontrolling interests 3 5
Total Equity 7,096 7,718
Total Liabilities and Equity $ 31,840 $ 33,471


	September 30, 2021		December 31, 2020
	(unaudited)
Assets
Current Assets
Cash and temporary investments	$	2,122	$	595
Restricted cash	1,499		—
Accounts and notes receivable, net	3,549		3,064
Contract assets	427		355
Inventories	2,053		2,050
Current financial assets of variable interest entities (Note 16)	—		4,850
Assets held for sale	—		138
Other current assets	246		184
Total Current Assets	9,896		11,236
Plants, Properties and Equipment, net	11,360		12,217
Forestlands	303		311
Investments	713		1,178
Long-Term Financial Assets of Variable Interest Entities (Note 16)	2,270		2,257
Goodwill	3,274		3,315
Pension Assets	545		5
Right of Use Assets	405		459
Deferred Charges and Other Assets	705		740
Total Assets	$	29,471	$	31,718
Liabilities and Equity
Current Liabilities
Notes payable and current maturities of long-term debt	$	233	$	29
Current nonrecourse financial liabilities of variable interest entities (Note 16)	—		4,220
Accounts payable	2,704		2,320
Accrued payroll and benefits	489		466
Liabilities held for sale	—		181
Other current liabilities	1,272		1,068
Total Current Liabilities	4,698		8,284
Long-Term Debt	8,241		8,064
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)	2,098		2,092
Deferred Income Taxes	2,728		2,743
Pension Benefit Obligation	418		1,055
Postretirement and Postemployment Benefit Obligation	235		251
Long-Term Lease Obligations	263		315
Other Liabilities	1,167		1,046
Equity
Common stock, $1 par value, 2021 – 448.9 shares and 2020 – 448.9 shares	449		449
Paid-in capital	6,371		6,325
Retained earnings	9,103		8,070
Accumulated other comprehensive loss	(3,314)		(4,342)
	12,609		10,502
Less: Common stock held in treasury, at cost, 2021 – 61.7 shares and 2020 – 55.8 shares	2,987		2,648
Total International Paper Shareholders’ Equity	9,622		7,854
Noncontrolling interests	1		14
Total Equity	9,623		7,868
Total Liabilities and Equity	$	29,471	$	31,718

The accompanying notes are an integral part of these condensed financial statements.

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INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In millions)

Nine Months Ended
September 30,
2020 2019
Operating Activities
Net earnings (loss) $ 329 $ 1,054
Depreciation, amortization and cost of timber harvested 955 963
Deferred income tax provision (benefit), net (5) 68
Restructuring and other charges, net 131 21
Net (gains) losses on sales and impairments of businesses 347 153
Net (gains) losses on sales of equity method investments (35) 0
Antitrust fines 0 32
Equity method dividends received 158 260
Equity (earnings) losses, net (13) (221)
Periodic pension expense, net 24 70
Other, net 212 106
Changes in current assets and liabilities
Accounts and notes receivable 96 168
Contract assets 2 6
Inventories 74 (9)
Accounts payable and accrued liabilities 0 (11)
Interest payable (26) (31)
Other 25 53
Cash Provided By (Used For) Operations 2,274 2,682
Investment Activities
Invested in capital projects, net of insurance recoveries (657) (913)
Acquisitions, net of cash acquired (64) (99)
Proceeds from sales of equity method investments 500 0
Proceeds from sales of businesses, net of cash divested 0 17
Proceeds from sale of fixed assets 3 15
Other 18 (14)
Cash Provided By (Used For) Investment Activities (200) (994)
Financing Activities
Repurchases of common stock and payments of restricted stock tax withholding (42) (535)
Issuance of debt 692 381
Reduction of debt (1,795) (772)
Change in book overdrafts 16 (29)
Dividends paid (605) (595)
Debt tender premiums paid (124) 0
Other (1) 3
Cash Provided By (Used For) Financing Activities (1,859) (1,547)
Cash Included in Assets Held for Sale (11) (19)
Effect of Exchange Rate Changes on Cash (37) (14)
Change in Cash and Temporary Investments 167 108
Cash and Temporary Investments
Beginning of period 511 589
End of period $ 678 $ 697


	Nine Months Ended September 30,
	2021		2020
Operating Activities
Net earnings (loss)	$	1,647	$	329
Depreciation, amortization and cost of timber harvested	933		955
Deferred income tax provision (benefit), net	(151)		(5)
Restructuring and other charges, net	243		131
Net (gains) losses on sales of equity method investments	(205)		(35)
Net (gains) losses on sales and impairments of businesses	(367)		347
Net (gains) losses on sales of fixed assets	(86)		—
Equity method dividends received	149		158
Equity (earnings) losses, net	(247)		(13)
Periodic pension (income) expense, net	(84)		24
Other, net	129		212
Changes in current assets and liabilities
Accounts and notes receivable	(510)		96
Contract assets	(74)		2
Inventories	(133)		74
Accounts payable and accrued liabilities	716		—
Interest payable	9		(26)
Other	(46)		25
Cash Provided By (Used For) Operations	1,923		2,274
Investment Activities
Invested in capital projects, net of insurance recoveries	(348)		(657)
Acquisitions, net of cash acquired	(80)		(64)
Proceeds from sales of equity method investments	843		500
Proceeds from sales of businesses, net of cash divested	827		—
Proceeds from settlement of Variable Interest Entity installment notes	4,850		—
Proceeds from sale of fixed assets	95		3
Other	(3)		18
Cash Provided By (Used For) Investment Activities	6,184		(200)
Financing Activities
Repurchases of common stock and payments of restricted stock tax withholding	(425)		(42)
Issuance of debt	1,511		692
Reduction of debt	(1,132)		(1,795)
Change in book overdrafts	29		16
Dividends paid	(602)		(605)
Reduction of Variable Interest Entity loans	(4,220)		—
Net debt tender premiums paid	(221)		(124)
Other	(14)		(1)
Cash Provided By (Used For) Financing Activities	(5,074)		(1,859)
Cash Included in Assets Held for Sale	—		(11)
Effect of Exchange Rate Changes on Cash and Temporary Investments and Restricted Cash	(7)		(37)
Change in Cash and Temporary Investments and Restricted Cash	3,026		167
Cash and Temporary Investments and Restricted Cash
Beginning of period	595		511
End of period	$	3,621	$	678

The accompanying notes are an integral part of these condensed financial statements.

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INTERNATIONAL PAPER COMPANY

Condensed Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments that are necessary for the fair presentation of International Paper Company’s (International Paper’s, the Company’s or our) financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed herein, such adjustments are of a normal, recurring nature. Results for the first nine months of the year may not necessarily be indicative of full year results. It is suggested that these condensed financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, which have previously been filed with the Securities and Exchange Commission.

On March 11, 2020 the World Health Organization (WHO) declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. During the third quarter of 2021, the number of COVID-19 cases and deaths increased in the United States and numerous other countries, and restrictive measures, including mask and vaccine requirements, have been implemented or reinstituted by various governmental authorities and private businesses. Economic recovery in the United States has continued but may be threatened by the resurgence of COVID-19 cases and other factors. Most of our manufacturing and converting facilities have remained open and operational during the ~~pandemic. The health~~pandemic and ~~safety of~~at the current time our ~~employees~~manufacturing and contractors is our most important responsibility as we manage through the COVID-19 pandemic. We have implemented work-systems across the Company, including hygiene, social distancing, site cleaning, contact tracing, and other measures, as recommended by the Centers for Disease Control (CDC) and WHO. Our COVID-19 measuresconverting facilities are ~~proving to be effective and we have not had any material disruptions to our operations.~~generally operational.

~~We have seen~~The pandemic has had a ~~significant negative~~mixed impact on demand for our products. Initially, demand for printing papers ~~products.~~products was significantly impacted by the pandemic, but has seen a steady increase over the first nine months of 2021. Demand for our pulp, containerboard and corrugated box products has not been negatively impacted and in some cases has been positively impacted by COVID-19 to ~~date, but could be unfavorably impacted going forward if negative economic conditions associated with COVID-19 persist or deteriorate. Furthermore, if there is a resurgence~~date. However, all of ~~the virus leading~~our operations continue to ~~additional governmental measures, such as stay-at-home orders or business and school closures, our~~experience higher supply chain costs and ~~therefore our production, could be negatively impacted.~~a constrained transportation environment due in part to the impacts of COVID-19.

There continue to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the ~~various economic reopening plans and the~~ resurgence of new variants of the virus in many ~~areas;~~areas globally; the additional actions ~~that may be~~ taken by governmental authorities and private businesses, including mask and vaccine requirements, to attempt to contain the COVID-19 outbreak or to mitigate its impact; the ~~extent~~efficacy, acceptance and ~~duration~~availability of ~~social distancing~~various vaccines and ~~stay-at-home orders;~~booster shots, as well as the possibility that strains of ~~development of a vaccine;~~the virus may be resistant to current available vaccines; and the ~~ongoing~~ impact of COVID-19 on ~~unemployment,~~economic conditions, including with respect to labor market conditions, economic activity, consumer behavior, supply shortages and ~~consumer confidence. Developments related to~~disruptions and inflationary pressures. COVID-19 ~~are significantly adversely affecting~~has had a significant adverse effect on portions of our business, and could have a material adverse effect on our financial condition, results of operations and cash flows ~~particularly~~ if ~~negative~~public health and/or global economic conditions ~~persist~~deteriorate.

Printing Papers Spinoff

On October 1, 2021, the Company completed the previously announced spin-off of its Printing Papers segment along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia into a standalone, publicly-traded company, Sylvamo Corporation. The transaction was implemented through the distribution of shares of the standalone company to International Paper's shareholders (the "Distribution"). As a result of the Distribution, Sylvamo Corporation is an independent public company that trades on the New York Stock Exchange under the symbol "SLVM".

The Distribution was made to the Company's stockholders of record as of the close of business on September 15, 2021 (the "Record Date"), and such stockholders received one share of Sylvamo Corporation common stock for every 11 shares of International Paper common stock held as of the close of business on the Record Date. The Company retained 19.9% of the shares of Sylvamo at the time of the separation, with the intent to monetize its investment and to provide additional proceeds to the Company. The Company is accounting for its ownership interest in Sylvamo at fair value as an investment in equity securities. In the third quarter of 2021, Sylvamo incurred $1.5 billion in debt in anticipation of a ~~significant period~~net cash distribution of ~~time or deteriorate.~~$1.4 billion to be made to the Company as part of the spin-off. See Note 17 – Debt for further details regarding the Sylvamo debt.

All current and historical operating results of the Sylvamo Corporation businesses will be presented as Discontinued Operations, net of tax, in the consolidated statement of operations in the fourth quarter of 2021. The spin-off was tax-free for the Company and its shareholders for U.S. federal income tax purposes.

In connection with the Distribution, on September 29, 2021, the Company and Sylvamo Corporation entered into a separation and distribution agreement as well as various other agreements that govern the relationships between the parties following the Distribution, including a transition services agreement, a tax matters agreement and an employee matters agreement. These

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agreements provide for the allocation between International Paper Company and Sylvamo Corporation of assets, liabilities and obligations attributable to periods prior to, at and after the Distribution and govern certain relationships between International Paper and Sylvamo Corporation after the Distribution.

NOTE 2 - RECENT ACCOUNTING DEVELOPMENTS

~~Recently Adopted Accounting Pronouncements~~

~~Financial Instruments - Credit Losses~~

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This guidance replaces the current incurred loss impairment method with a method that reflects expected credit losses. The Company adopted this guidance using the modified retrospective approach on January 1, 2020. As a result of using this approach, the Company recognized a cumulative effect adjustment of $2 million to the opening balance of retained earnings representing the adjustment to our opening allowance for doubtful accounts required to state our trade receivables and contract assets net of their expected credit losses, net of deferred taxes.

Recently Issued Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This guidance provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance

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is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the provisions of this guidance.

~~Income Taxes~~

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This guidance removes certain exceptions from recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This guidance is effective for annual reporting periods beginning after December 15, 2020, and interim periods within those years. Early adoption of the amendments is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. The Company plans to early adopt the provisions of this guidance in the fourth quarter of 2020 and does not expect the impact to be material.

NOTE 3 - REVENUE RECOGNITION

Generally, the Company recognizes revenue on a point-in-time basis when the customer takes title to the goods and assumes the risks and rewards for the goods. For customized goods where the Company has a legally enforceable right to payment for the goods, the Company recognizes revenue over time which, generally, is as the goods are produced.

Disaggregated Revenue

A geographic disaggregation of revenues across our company segmentation in the following tables provides information to assist in evaluating the nature, timing and uncertainty of revenue and cash flows and how they may be impacted by economic factors.

Three Months Ended September 30, 2020
In millions Industrial Packaging Global Cellulose Fibers Printing Papers Corporate and Inter-segment Sales Total
Primary Geographical Markets (a)
United States $ 3,169 $ 479 $ 362 $ 44 $ 4,054
EMEA 394 59 244 (3) 694
Pacific Rim and Asia 15 26 6 10 57
Americas, other than U.S. 190 0 131 (3) 318
Total $ 3,768 $ 564 $ 743 $ 48 $ 5,123
Operating Segments
North American Industrial Packaging $ 3,351 $ — $ — $ — $ 3,351
EMEA Industrial Packaging 306 — — — 306
Brazilian Industrial Packaging 52 — — — 52
European Coated Paperboard 90 — — — 90
Global Cellulose Fibers — 564 — — 564
North American Printing Papers — — 362 — 362
Brazilian Papers — — 150 — 150
European Papers — — 232 — 232
Indian Papers — — 0 — 0
Intra-segment Eliminations (31) — (1) — (32)
Corporate & Inter-segment Sales — — — 48 48
Total $ 3,768 $ 564 $ 743 $ 48 $ 5,123


	Three Months Ended September 30, 2021
In millions	Industrial Packaging		Global Cellulose Fibers		Printing Papers		Corporate and Inter-segment Sales		Total
Primary Geographical Markets (a)
United States	$	3,514	$	623	$	425	$	50	$	4,612
EMEA	383		69		232		(1)		683
Pacific Rim and Asia	12		37		8		3		60
Americas, other than U.S.	178		—		181		—		359
Total	$	4,087	$	729	$	846	$	52	$	5,714

Operating Segments
North American Industrial Packaging	$	3,738	$	—	$	—	$	—	$	3,738
EMEA Industrial Packaging	331		—		—		—		331
European Coated Paperboard	52		—		—		—		52
Global Cellulose Fibers	—		729		—		—		729
North American Printing Papers	—		—		425		—		425
Brazilian Papers	—		—		200		—		200
European Papers	—		—		218		—		218
Intra-segment Eliminations	(34)		—		3		—		(31)
Corporate & Inter-segment Sales	—		—		—		52		52
Total	$	4,087	$	729	$	846	$	52	$	5,714

(a) Net sales are attributed to countries based on the location of the seller.

Table of Contents

Nine Months Ended September 30, 2020
In millions Industrial Packaging Global Cellulose Fibers Printing Papers Corporate and Inter-segment Sales Total
Primary Geographical Markets (a)
United States $ 9,364 $ 1,507 $ 1,069 $ 146 $ 12,086
EMEA 1,213 175 765 (11) 2,142
Pacific Rim and Asia 43 55 20 20 138
Americas, other than U.S. 600 0 380 (5) 975
Total $ 11,220 $ 1,737 $ 2,234 $ 150 $ 15,341
Operating Segments
North American Industrial Packaging $ 9,947 $ — $ — $ — $ 9,947
EMEA Industrial Packaging 953 — — — 953
Brazilian Industrial Packaging 148 — — — 148
European Coated Paperboard 266 — — — 266
Global Cellulose Fibers — 1,737 — — 1,737
North American Printing Papers — — 1,073 — 1,073
Brazilian Papers — — 434 — 434
European Papers — — 728 — 728
Indian Papers — — 0 — 0
Intra-segment Eliminations (94) — (1) — (95)
Corporate & Inter-segment Sales — — — 150 150
Total $ 11,220 $ 1,737 $ 2,234 $ 150 $ 15,341


	Nine Months Ended September 30, 2021
In millions	Industrial Packaging		Global Cellulose Fibers		Printing Papers		Corporate and Inter-segment Sales		Total
Primary Geographical Markets (a)
United States	$	10,125	$	1,682	$	1,195	$	139	$	13,141
EMEA	1,371		209		765		(6)		2,339
Pacific Rim and Asia	44		90		25		10		169
Americas, other than U.S.	556		—		488		—		1,044
Total	$	12,096	$	1,981	$	2,473	$	143	$	16,693

Operating Segments
North American Industrial Packaging	$	10,810	$	—	$	—	$	—	$	10,810
EMEA Industrial Packaging	1,121		—		—		—		1,121
European Coated Paperboard	252		—		—		—		252
Global Cellulose Fibers	—		1,981		—		—		1,981
North American Printing Papers	—		—		1,201		—		1,201
Brazilian Papers	—		—		557		—		557
European Papers	—		—		723		—		723
Intra-segment Eliminations	(87)		—		(8)		—		(95)
Corporate & Inter-segment Sales	—		—		—		143		143
Total	$	12,096	$	1,981	$	2,473	$	143	$	16,693

(a) Net sales are attributed to countries based on the location of the seller.

Three Months Ended September 30, 2019
In millions Industrial Packaging Global Cellulose Fibers Printing Papers Corporate & Intersegment Total
Primary Geographical Markets (a)
United States $ 3,180 $ 535 $ 486 $ 56 $ 4,257
EMEA 415 62 315 (1) 791
Pacific Rim and Asia 20 27 47 3 97
Americas, other than U.S. 205 0 223 (5) 423
Total $ 3,820 $ 624 $ 1,071 $ 53 $ 5,568
Operating Segments
North American Industrial Packaging $ 3,368 $ — $ — $ — $ 3,368
EMEA Industrial Packaging 324 — — — 324
Brazilian Industrial Packaging 61 — — — 61
European Coated Paperboard 92 — — — 92
Global Cellulose Fibers — 624 — — 624
North American Printing Papers — — 492 — 492
Brazilian Papers — — 247 — 247
European Papers — — 299 — 299
Indian Papers — — 38 — 38
Intra-segment Eliminations (25) — (5) — (30)
Corporate & Inter-segment Sales — — — 53 53
Total $ 3,820 $ 624 $ 1,071 $ 53 $ 5,568


	Three Months Ended September 30, 2020
In millions	Industrial Packaging		Global Cellulose Fibers		Printing Papers		Corporate & Intersegment		Total
Primary Geographical Markets (a)
United States	$	3,169	$	479	$	362	$	44	$	4,054
EMEA	394		59		244		(3)		694
Pacific Rim and Asia	15		26		6		10		57
Americas, other than U.S.	190		—		131		(3)		318
Total	$	3,768	$	564	$	743	$	48	$	5,123

Operating Segments
North American Industrial Packaging	$	3,351	$	—	$	—	$	—	$	3,351
EMEA Industrial Packaging	306		—		—		—		306
Brazilian Industrial Packaging	52		—		—		—		52
European Coated Paperboard	90		—		—		—		90
Global Cellulose Fibers	—		564		—		—		564
North American Printing Papers	—		—		362		—		362
Brazilian Papers	—		—		150		—		150
European Papers	—		—		232		—		232
Intra-segment Eliminations	(31)		—		(1)		—		(32)
Corporate & Inter-segment Sales	—		—		—		48		48
Total	$	3,768	$	564	$	743	$	48	$	5,123

(a) Net sales are attributed to countries based on the location of the seller.

Table of Contents

Nine Months Ended September 30, 2019
In millions Industrial Packaging Global Cellulose Fibers Printing Papers Corporate & Intersegment Total
Primary Geographical Markets (a)
United States $ 9,531 $ 1,656 $ 1,448 $ 174 $ 12,809
EMEA 1,263 207 986 (8) 2,448
Pacific Rim and Asia 50 111 167 9 337
Americas, other than U.S. 672 0 623 (11) 1,284
Total $ 11,516 $ 1,974 $ 3,224 $ 164 $ 16,878
Operating Segments
North American Industrial Packaging $ 10,158 $ — $ — $ — $ 10,158
EMEA Industrial Packaging 994 — — — 994
Brazilian Industrial Packaging 176 — — — 176
European Coated Paperboard 275 — — — 275
Global Cellulose Fibers — 1,974 — — 1,974
North American Printing Papers — — 1,474 — 1,474
Brazilian Papers — — 702 — 702
European Papers — — 929 — 929
Indian Papers — — 144 — 144
Intra-segment Eliminations (87) — (25) — (112)
Corporate & Inter-segment Sales — — — 164 164
Total $ 11,516 $ 1,974 $ 3,224 $ 164 $ 16,878


	Nine Months Ended September 30, 2020
In millions	Industrial Packaging		Global Cellulose Fibers		Printing Papers		Corporate & Intersegment		Total
Primary Geographical Markets (a)
United States	$	9,364	$	1,507	$	1,069	$	146	$	12,086
EMEA	1,213		175		765		(11)		2,142
Pacific Rim and Asia	43		55		20		20		138
Americas, other than U.S.	600		—		380		(5)		975
Total	$	11,220	$	1,737	$	2,234	$	150	$	15,341

Operating Segments
North American Industrial Packaging	$	9,947	$	—	$	—	$	—	$	9,947
EMEA Industrial Packaging	953		—		—		—		953
Brazilian Industrial Packaging	148		—		—		—		148
European Coated Paperboard	266		—		—		—		266
Global Cellulose Fibers	—		1,737		—		—		1,737
North American Printing Papers	—		—		1,073		—		1,073
Brazilian Papers	—		—		434		—		434
European Papers	—		—		728		—		728
Intra-segment Eliminations	(94)		—		(1)		—		(95)
Corporate & Inter-segment Sales	—		—		—		150		150
Total	$	11,220	$	1,737	$	2,234	$	150	$	15,341

(a) Net sales are attributed to countries based on the location of the seller.

Revenue Contract Balances

A contract asset is created when the Company recognizes revenue on its customized products prior to having an unconditional right to payment from the customer, which generally does not occur until title and risk of loss passes to the customer.

A contract liability is created when customers prepay for goods prior to the Company transferring those goods to the customer. The contract liability is reduced once control of the goods is transferred to the customer. The majority of our customer prepayments are received during the fourth quarter each year for goods that will be transferred to customers over the following twelve months. Contract liabilities of ~~$20~~$25 million and ~~$56~~$31 million are included in Other current liabilities in the accompanying condensed consolidated balance sheet as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. During the second quarter of 2021, the Company also recorded a contract liability of $115 million related to the April 2021 acquisition disclosed in Note 8.

The difference between the opening and closing balances of the Company's contract assets and contract liabilities primarily results from the difference between the price and quantity at comparable points in time for goods for which we have an unconditional right to payment or receive ~~pre-payment~~prepayment from the customer, respectively.

Table of Contents

NOTE 4 - EQUITY

A summary of the changes in equity for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 is provided below:

Three Months Ended September 30, 2020
In millions, except per share amounts Common Stock Issued Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Common Stock Held In Treasury, At Cost Total
International
Paper
Shareholders’
Equity Noncontrolling
Interests Total
Equity
Balance, July 1 $ 449 $ 6,283 $ 8,123 $ (5,149) $ 2,649 $ 7,057 $ 3 $ 7,060
Issuance of stock for various plans, net — 18 — — (2) 20 — 20
Repurchase of stock — — — — 1 (1) — (1)
Common stock dividends
($0.5125 per share)
— — (205) — — (205) — (205)
Transactions of equity method investees — 1 — — — 1 — 1
Comprehensive income (loss) — — 204 17 — 221 0 221
Ending Balance, September 30 $ 449 $ 6,302 $ 8,122 $ (5,132) $ 2,648 $ 7,093 $ 3 $ 7,096


	Three Months Ended September 30, 2021
In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total International Paper Shareholders’ Equity		Noncontrolling Interests		Total Equity
Balance, July 1	$	449	$	6,330	$	8,442	$	(4,094)	$	2,775	$	8,352	$	2	$	8,354
Issuance of stock for various plans, net	—		41		—		—		—		41		—		41
Repurchase of stock	—		—		—		—		212		(212)		—		(212)
Common stock dividends ($0.5125 per share)	—		—		(203)		—		—		(203)		—		(203)

Divestiture of noncontrolling interests	—		—		—		—		—		—		(1)		(1)
Comprehensive income (loss)	—		—		864		780		—		1,644		—		1,644
Ending Balance, September 30	$	449	$	6,371	$	9,103	$	(3,314)	$	2,987	$	9,622	$	1	$	9,623

Nine Months Ended September 30, 2020
In millions, except per share amounts Common Stock Issued Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Common Stock Held In Treasury, At Cost Total
International
Paper
Shareholders’
Equity Noncontrolling
Interests Total
Equity
Balance, January 1 $ 449 $ 6,297 $ 8,408 $ (4,739) $ 2,702 $ 7,713 $ 5 $ 7,718
Adoption of ASU 2016-13 measurement of credit losses on financial instruments — — (2) — — (2) — (2)
Issuance of stock for various plans, net — (31) — — (96) 65 — 65
Repurchase of stock — — — — 42 (42) — (42)
Common stock dividends
($1.5375 per share)
— — (613) — — (613) — (613)
Transactions of equity method investees — 36 — — — 36 — 36
Comprehensive income (loss) — — 329 (393) — (64) (2) (66)
Ending Balance, September 30 $ 449 $ 6,302 $ 8,122 $ (5,132) $ 2,648 $ 7,093 $ 3 $ 7,096


		Three Months Ended September 30, 2019																	Nine Months Ended September 30, 2021
In millions, except per share amounts	In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total International Paper Shareholders’ Equity		Noncontrolling Interests		Total Equity		In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total International Paper Shareholders’ Equity		Noncontrolling Interests		Total Equity
Balance, July 1		$	449	$	6,229	$	8,302	$	(4,870)	$	2,628	$	7,482	$	17	$	7,499
Balance, January 1																		Balance, January 1	$	449	$	6,325	$	8,070	$	(4,342)	$	2,648	$	7,854	$	14	$	7,868
Issuance of stock for various plans, net	Issuance of stock for various plans, net	—		32		—		—		(1)		33		—		33		Issuance of stock for various plans, net	—		27		—		—		(86)		113		—		113
Repurchase of stock	Repurchase of stock	—		—		—		—		75		(75)		—		(75)		Repurchase of stock	—		—		—		—		425		(425)		—		(425)
Common stock dividends ($0.5000 per share)		—		—		(199)		—		—		(199)		—		(199)
Common stock dividends ($1.5375 per share)																		Common stock dividends ($1.5375 per share)	—		—		(612)		—		—		(612)		—		(612)
Transactions of equity method investees	Transactions of equity method investees	—		0		—		—		—		0		—		0		Transactions of equity method investees	—		19		—		—		—		19		—		19
Divestiture of noncontrolling interests																		Divestiture of noncontrolling interests	—		—		—		—		—		—		(13)		(13)
Comprehensive income (loss)	Comprehensive income (loss)	—		—		344		(144)		—		200		(2)		198		Comprehensive income (loss)	—		—		1,645		1,028		—		2,673		—		2,673
Ending Balance, September 30	Ending Balance, September 30	$	449	$	6,261	$	8,447	$	(5,014)	$	2,702	$	7,441	$	15	$	7,456	Ending Balance, September 30	$	449	$	6,371	$	9,103	$	(3,314)	$	2,987	$	9,622	$	1	$	9,623

Table of Contents


		Nine Months Ended September 30, 2019																	Three Months Ended September 30, 2020
In millions, except per share amounts	In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total International Paper Shareholders’ Equity		Noncontrolling Interests		Total Equity		In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total International Paper Shareholders’ Equity		Noncontrolling Interests		Total Equity
Balance, January 1		$	449	$	6,280	$	7,465	$	(4,500)	$	2,332	$	7,362	$	21	$	7,383
Adoption of ASU 2018-02 reclassification of stranded tax effects resulting from Tax Reform		—		—		529		(529)		—		—		—		0
Balance, July 1																		Balance, July 1	$	449	$	6,283	$	8,123	$	(5,149)	$	2,649	$	7,057	$	3	$	7,060
Issuance of stock for various plans, net	Issuance of stock for various plans, net	—		(52)		—		—		(165)		113		—		113		Issuance of stock for various plans, net	—		18		—		—		(2)		20		—		20
Repurchase of stock	Repurchase of stock	—		—		—		—		535		(535)		—		(535)		Repurchase of stock	—		—		—		—		1		(1)		—		(1)
Common stock dividends ($1.5000 per share)		—		—		(607)		—		—		(607)		—		(607)
Common stock dividends ($0.5125 per share)																		Common stock dividends ($0.5125 per share)	—		—		(205)		—		—		(205)		—		(205)
Transactions of equity method investees	Transactions of equity method investees	—		33		—		—		—		33		—		33		Transactions of equity method investees	—		1		—		—		—		1		—		1
Comprehensive income (loss)	Comprehensive income (loss)	—		—		1,060		15		—		1,075		(6)		1,069		Comprehensive income (loss)	—		—		204		17		—		221		—		221
Ending Balance, September 30	Ending Balance, September 30	$	449	$	6,261	$	8,447	$	(5,014)	$	2,702	$	7,441	$	15	$	7,456	Ending Balance, September 30	$	449	$	6,302	$	8,122	$	(5,132)	$	2,648	$	7,093	$	3	$	7,096


	Nine Months Ended September 30, 2020
In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total International Paper Shareholders’ Equity		Noncontrolling Interests		Total Equity
Balance, January 1	$	449	$	6,297	$	8,408	$	(4,739)	$	2,702	$	7,713	$	5	$	7,718
Adoption of ASU 2016-13 measurement of credit losses on financial instruments	—		—		(2)		—		—		(2)		—		(2)
Issuance of stock for various plans, net	—		(31)		—		—		(96)		65		—		65
Repurchase of stock	—		—		—		—		42		(42)		—		(42)
Common stock dividends ($1.5375 per share)	—		—		(613)		—		—		(613)		—		(613)
Transactions of equity method investees	—		36		—		—		—		36		—		36
Comprehensive income (loss)	—		—		329		(393)		—		(64)		(2)		(66)
Ending Balance, September 30	$	449	$	6,302	$	8,122	$	(5,132)	$	2,648	$	7,093	$	3	$	7,096

Table of Contents

N OTE 5 - OTHER COMPREHENSIVE INCOME

The following table presents changes in accumulated other comprehensive income (AOCI) for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020		2021		2020
Defined Benefit Pension and Postretirement Adjustments	Defined Benefit Pension and Postretirement Adjustments									Defined Benefit Pension and Postretirement Adjustments
Balance at beginning of period	Balance at beginning of period	$	(2,192)	$	(2,362)	$	(2,277)	$	(1,916)	Balance at beginning of period	$	(1,809)	$	(2,192)	$	(1,880)	$	(2,277)
Reclassification of stranded tax effects		0		0		0		(527)
Other comprehensive income (loss) before reclassifications										Other comprehensive income (loss) before reclassifications	831		—		832		—
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	43		41		128		122		Amounts reclassified from accumulated other comprehensive income	31		43		101		128
Balance at end of period	Balance at end of period	(2,149)		(2,321)		(2,149)		(2,321)		Balance at end of period	(947)		(2,149)		(947)		(2,149)
Change in Cumulative Foreign Currency Translation Adjustments	Change in Cumulative Foreign Currency Translation Adjustments									Change in Cumulative Foreign Currency Translation Adjustments
Balance at beginning of period	Balance at beginning of period	(2,950)		(2,508)		(2,465)		(2,581)		Balance at beginning of period	(2,286)		(2,950)		(2,457)		(2,465)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(28)		(179)		(515)		(110)		Other comprehensive income (loss) before reclassifications	(114)		(28)		(85)		(515)
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	0		0		0		4		Amounts reclassified from accumulated other comprehensive income	44		—		184		—
Other comprehensive income (loss) attributable to noncontrolling interest	Other comprehensive income (loss) attributable to noncontrolling interest	0		0		2		0		Other comprehensive income (loss) attributable to noncontrolling interest	—		—		2		2
Balance at end of period	Balance at end of period	(2,978)		(2,687)		(2,978)		(2,687)		Balance at end of period	(2,356)		(2,978)		(2,356)		(2,978)
Net Gains and Losses on Cash Flow Hedging Derivatives	Net Gains and Losses on Cash Flow Hedging Derivatives									Net Gains and Losses on Cash Flow Hedging Derivatives
Balance at beginning of period	Balance at beginning of period	(7)		0		3		(3)		Balance at beginning of period	1		(7)		(5)		3
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(4)		(10)		(34)		(6)		Other comprehensive income (loss) before reclassifications	(4)		(4)		3		(34)
Reclassification of stranded tax effects		0		0		0		(2)

Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	6		4		26		5		Amounts reclassified from accumulated other comprehensive income	(8)		6		(9)		26
Balance at end of period	Balance at end of period	(5)		(6)		(5)		(6)		Balance at end of period	(11)		(5)		(11)		(5)
Total Accumulated Other Comprehensive Income (Loss) at End of Period	Total Accumulated Other Comprehensive Income (Loss) at End of Period	$	(5,132)	$	(5,014)	$	(5,132)	$	(5,014)	Total Accumulated Other Comprehensive Income (Loss) at End of Period	$	(3,314)	$	(5,132)	$	(3,314)	$	(5,132)

~~Table of Contents~~

The following table presents details of the reclassifications out of AOCI for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


In millions:	In millions:	Amounts Reclassified from Accumulated Other Comprehensive Income									Location of Amount Reclassified from AOCI	In millions:	Amount Reclassified from Accumulated Other Comprehensive Income									Location of Amount Reclassified from AOCI
		Three Months Ended September 30,				Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019					2021		2020		2021		2020
Defined benefit pension and postretirement items:	Defined benefit pension and postretirement items:											Defined benefit pension and postretirement items:
Prior-service costs	Prior-service costs	$	(5)	$	(4)	$	(15)	$	(10)	(a)	Non-operating pension expense	Prior-service costs	$	(5)	$	(5)	$	(17)	$	(15)	(a)	Non-operating pension expense
Actuarial gains (losses)	Actuarial gains (losses)	(52)		(50)		(155)		(152)		(a)	Non-operating pension expense	Actuarial gains (losses)	(36)		(52)		(118)		(155)		(a)	Non-operating pension expense
Total pre-tax amount	Total pre-tax amount	(57)		(54)		(170)		(162)				Total pre-tax amount	(41)		(57)		(135)		(170)
Tax (expense) benefit	Tax (expense) benefit	14		13		42		40				Tax (expense) benefit	10		14		34		42
Net of tax		(43)		(41)		(128)		(122)
Reclassification of stranded tax effects		0		0		0		527			Retained Earnings
Total, net of tax	Total, net of tax	(43)		(41)		(128)		405				Total, net of tax	(31)		(43)		(101)		(128)

Change in cumulative foreign currency translation adjustments:	Change in cumulative foreign currency translation adjustments:											Change in cumulative foreign currency translation adjustments:
Business acquisitions/divestitures	Business acquisitions/divestitures	0		0		0		(4)			Cost of products sold	Business acquisitions/divestitures	(44)		—		(184)		—			Net (gains) losses on sales and impairments of businesses and Cost of products sold
Tax (expense) benefit	Tax (expense) benefit	0		0		0		0				Tax (expense) benefit	—		—		—		—
Net of tax	Net of tax	0		0		0		(4)				Net of tax	(44)		—		(184)		—

Net gains and losses on cash flow hedging derivatives:	Net gains and losses on cash flow hedging derivatives:											Net gains and losses on cash flow hedging derivatives:
Foreign exchange contracts	Foreign exchange contracts	(8)		(6)		(39)		(7)		(b)	Cost of products sold	Foreign exchange contracts	10		(8)		12		(39)		(b)	Cost of products sold
Total pre-tax amount	Total pre-tax amount	(8)		(6)		(39)		(7)				Total pre-tax amount	10		(8)		12		(39)
Tax (expense)/benefit	Tax (expense)/benefit	2		2		13		2				Tax (expense)/benefit	(2)		2		(3)		13
Net of tax	Net of tax	(6)		(4)		(26)		(5)				Net of tax	8		(6)		9		(26)
Reclassification of stranded tax effects		0		0		0		2			Retained Earnings
Total, net of tax		(6)		(4)		(26)		(3)

Total reclassifications for the period	Total reclassifications for the period	$	(49)	$	(45)	$	(154)	$	398			Total reclassifications for the period	$	(67)	$	(49)	$	(276)	$	(154)

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(a)These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 19 for additional details).

(b)This accumulated other comprehensive income component is included in our derivatives and hedging activities (see Note 18 for additional details).

NOTE 6 - EARNINGS PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS

Basic earnings per share is computed by dividing earnings by the weighted average number of common shares outstanding. Diluted earnings per share is computed assuming that all potentially dilutive securities were converted into common shares. There are no adjustments required to be made to net income for purposes of computing basic and diluted earnings per share. A reconciliation of the amounts included in the computation of basic earnings (loss) per share and diluted earnings (loss) per share is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions, except per share amounts	In millions, except per share amounts	2020		2019		2020		2019		In millions, except per share amounts	2021		2020		2021		2020
Earnings (loss) attributable to International Paper Company common shareholders	Earnings (loss) attributable to International Paper Company common shareholders	$	204	$	344	$	329	$	1,060	Earnings (loss) attributable to International Paper Company common shareholders	$	864	$	204	$	1,645	$	329
Weighted average common shares outstanding	Weighted average common shares outstanding	393.1		392.6		392.9		396.3		Weighted average common shares outstanding	388.8		393.1		391.0		392.9
Effect of dilutive securities	Effect of dilutive securities									Effect of dilutive securities
Restricted performance share plan	Restricted performance share plan	1.5		2.8		1.6		3.3		Restricted performance share plan	3.8		1.5		4.3		1.6
Weighted average common shares outstanding – assuming dilution	Weighted average common shares outstanding – assuming dilution	394.6		395.4		394.5		399.6		Weighted average common shares outstanding – assuming dilution	392.6		394.6		395.3		394.5
Basic earnings (loss) per share attributable to International Paper Company Common Shareholders	Basic earnings (loss) per share attributable to International Paper Company Common Shareholders	$	0.52	$	0.88	$	0.84	$	2.67	Basic earnings (loss) per share attributable to International Paper Company Common Shareholders	$	2.22	$	0.52	$	4.21	$	0.84
Diluted earnings (loss) per share attributable to International Paper Company Common Shareholders	Diluted earnings (loss) per share attributable to International Paper Company Common Shareholders	$	0.52	$	0.87	$	0.83	$	2.65	Diluted earnings (loss) per share attributable to International Paper Company Common Shareholders	$	2.20	$	0.52	$	4.16	$	0.83

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NOTE 7 - RESTRUCTURING AND OTHER CHARGES, NET

2021: During the three months ended September 30, 2021, the Company recorded a $35 million pre-tax charge in Corporate related to early debt extinguishment costs and a $4 million pre-tax charge in Corporate for severance. The majority of the severance is expected to be paid over the next twelve months.

During the three months ended June 30, 2021, the Company recorded a $170 million pre-tax charge in Corporate related to early debt extinguishment costs and a $4 million pre-tax charge in Corporate for severance. The majority of the severance is expected to be paid over the next twelve months.

During the three months ended March 31, 2021, the Company recorded an $18 million pre-tax charge in Corporate related to early debt extinguishment costs and a $12 million pre-tax charge in the Industrial Packaging segment for severance related to the optimization of our EMEA Packaging business. The majority of the severance is expected to be paid over the next twelve months.

In connection with our Building a Better IP initiative, we expect to incur additional restructuring charges over the course of the initiative, which could be material. At this time, the plans have not been finalized.

2020: During the three months ended September 30, 2020, the Company recorded a $105 million pre-tax charge in Corporate related to early debt extinguishment costs.

During the three months ended June 30, 2020, the Company recorded an $18 million pre-tax charge in Corporate related to early debt extinguishment costs.

During the three months ended March 31, 2020, the Company recorded an $8 million pre-tax charge in Corporate related to early debt extinguishment costs.

~~2019:~~ During the three months and nine months ended September 30, 2019, the Company recorded an $11 million pre-tax charge in Corporate, a $6 million pre-tax charge in the Printing Papers segment and a $4 million pre-tax charge in the Global Cellulose Fibers segment for severance related to an overhead cost reduction initiative. The majority of the severance was paid over the next twelve months.

NOTE 8 - ACQUISITIONS

~~2020:~~2021: In May 2020, the Company increased its noncontrolling interest in an entity that produces corrugated sheets. The equity purchase price was $64 million. The Company is party to various agreements with the entity which includes a containerboard supply agreement. The Company will account for its interest as an equity method investment.

~~2019:~~On ~~June 28, 2019,~~April 1, 2021, the Company closed on the previously announced acquisition of two ~~packaging businesses~~box plants located in ~~Portugal (Ovar) and France (Torigni and Cabourg) from DS Smith Packaging.~~Spain. The total purchase consideration, inclusive of working capital adjustments, was approximately €71 million (approximately ~~$81~~$83 million ~~at June 30, 2019~~based on the April 1, 2021 exchange ~~rates).~~

rate), subject to post-closing adjustments.

The following table summarizes the ~~final~~provisional fair value assigned to assets and liabilities acquired as of ~~June 28, 2019:~~April 1, 2021:

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In millions
Cash and temporary investments	$	25
Accounts and notes receivable	2210
~~Inventory~~Inventories	83
Plants, properties and equipment	3738
Goodwill	2730
Intangible assets	14
~~Right of use assets~~	3
~~Deferred charges and other assets~~	2
Total assets acquired	$	~~115~~100
Short-term debt	$		23
Accounts payable and accrued liabilities	174
Other current liabilities	51
Deferred income taxes	4
~~Long-term debt~~	1
~~Postretirement and postemployment benefit obligation~~	3
~~Long-term lease obligations~~	29
Total liabilities assumed	3417
Net assets acquired	$	8183

Since the date of acquisition, Net sales of $9 million and $18 million and Earnings from continuing operations before income taxes and equity earnings of $0 and $1 million have been included in the Company's consolidated statement of operations for the three months and year to date ended September 30, 2021, respectively.

The purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals and valuations related to inventory, property, plant and equipment and acquired intangible assets. Adjustments to provisional amounts will be finalized as new information becomes available, but within the adjustment period of up to one year from the acquisition date.

Pro forma information has not been included as it is impracticable to obtain the information due to the lack of availability of historical U.S. GAAP financial data. The results of the operations of these businesses do not have a material effect on the Company's ~~condensed~~ consolidated results of operations.

The Company has accounted for the above acquisition under ASC 805, "Business Combinations" and the results of operations have been included in International Paper's financial statements beginning with the date of acquisition.

In April 2021, the Company received a noncontrolling interest in a U.S-based corrugated packaging producer. In the second quarter, the Company recorded its investment of $115 million based on the fair value of the noncontrolling interest, and a corresponding contract liability that is amortized over 15 years. The Company is party to various agreements with the entity which includes a containerboard supply agreement. The Company is accounting for its interest as an equity method investment.

2020: In May 2020, the Company increased its noncontrolling interest in an entity that produces corrugated sheets. The equity purchase price was $56 million. The Company is party to various agreements with the entity which includes a containerboard supply agreement. The Company is accounting for its interest as an equity method investment.

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NOTE 9 - DIVESTITURES AND IMPAIRMENTS

Kwidzyn Mill

2021: On August 6,2021, the Company completed the sale of its Kwidzyn, Poland mill for €669 million (approximately $794 million using the July 31, 2021 exchange rate) in cash, subject to final working capital and net debt adjustments. The business includes the pulp and paper mill in Kwidzyn and supporting functions. During the third quarter of 2021, the Company recorded a net gain of $360 million ($350 million after taxes) including a gain of $404 million ($394 million after taxes) related to the sale of net assets and a loss of $44 million (before and after taxes) related to the cumulative foreign currency translation loss. These charges are included in the Net (gains) losses on sales and impairments of businesses in the accompanying consolidated statement of operations and are included in the results of the Printing Papers segment. All current year and historical operating results for Kwidzyn will be presented as Discontinued Operations, net of tax, in the consolidated statement of operations in the fourth quarter of 2021.

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Olmuksan International Paper

2021: On May 31, 2021, the Company completed the sale of its 90.38% ownership interest in Olmuksan International Paper, a corrugated packaging business in Turkey, to Mondi Group for €66 million (approximately $81 million using the May 31, 2021 exchange rate). During the second quarter of 2021, the Company recorded a gain of $6 million ($0 after taxes) related to the business working capital adjustment. This charge is included in the Net (gains) losses on sales and impairments of businesses in the accompanying consolidated statement of operations and is included in the results for the Industrial Packaging segment.

In conjunction with the announced agreement in the fourth quarter of 2020, a determination was made that the current book value of the Olmuksan International Paper disposal group exceeded its estimated fair value of $79 million which was based on the agreed upon transaction price. As a result, a preliminary charge of $123 million (before and after taxes) was recorded during the fourth quarter of 2020. During the first quarter of 2021, the Company recorded an additional charge of $2 million (before and after taxes) related to the cumulative foreign currency translation loss. This charge is included in the Net (gains) losses on sales and impairments of businesses in the accompanying consolidated statement of operations and is included in the results for the Industrial Packaging segment.

Brazil Industrial Packaging

2020: On ~~March 29,~~October 14, 2020, the Company closed the previously announced ~~that it had entered into an agreement to sell~~sale of its Brazilian Industrial Packaging business for R$330 million ~~(approximately $58.5~~($58.5 million ~~using the September 30, 2020 exchange rate)~~U.S. dollars), with R$280 million ~~to be~~($49.6 million U.S. dollars) paid at closing and R$50 million ($8.9 million U.S. dollars) to be paid one year ~~thereafter, subject to the final working capital adjustments.~~from closing. This business includes 3 containerboard mills and 4 box plants and the agreement follows International Paper's previously announced strategic review of the Brazilian Industrial Packaging business.

In conjunction with the announced agreement, ~~a preliminary~~net pre-tax ~~charge~~charges of $347 million ($340 million after taxes) ~~was~~were recorded ~~during~~in 2020. These charges included $327 million related to the ~~first nine months~~cumulative foreign currency translation loss and a $20 million loss related to the write down of ~~2020.~~the long-lived assets of the Brazilian Industrial Packaging business to their estimated fair value. These charges are included in Net (gains) losses on sales and impairments of businesses in the accompanying condensed consolidated statement of operations and isare included in the results for the Industrial Packaging segment. ~~Subsequent to September 30, 2020, the transaction closed and final working capital adjustments, if any, will be recognized during the fourth quarter of 2020.~~

At September 30, 2020, all assets and liabilities related to the Brazilian Industrial Packaging business are classified as current assets held for sale and current liabilities held for sale in the accompanying condensed consolidated balance sheet.

The following summarizes the major classes of assets and liabilities of this business reconciled to total Assets held for sale and total Liabilities held for sale in the accompanying condensed consolidated balance sheet.


~~In millions~~	~~September 30, 2020~~
~~Cash and temporary investments~~	$	11
~~Accounts and notes receivable~~	41
~~Inventories~~	22
~~Other current assets~~	1
~~Plants, properties and equipment (net of impairment)~~	28
~~Deferred charges and other assets~~	11
~~Total Assets Held for Sale~~	$	~~114~~

~~Accounts payable and accrued liabilities~~	$	36
~~Deferred income taxes~~	3
~~Other liabilities~~	8
~~Impairment reserve (cumulative foreign currency translation)~~	~~329~~
~~Total Liabilities Held for Sale~~	$	~~376~~

~~2019:~~ On October 30, 2019, the Company closed the previously announced sale of its controlling interest in International Paper APPM Limited (APPM) to West Coast Paper Mills (WCPM). During the second quarter of 2020 the Company sold substantially all of its remaining investment and recorded a gain of $6 million. During the third quarter of 2020 the Company sold its remaining immaterial investment in APPM.

NOTE 10 - SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

Temporary Investments

Temporary investments with an original maturity of three months or less and money market funds with greater than three month maturities but with the right to redeem without notices are treated as cash equivalents and are stated at cost. Temporary investments totaled ~~$450 million~~$3.2 billion and ~~$335~~$358 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Restricted Cash

A reconciliation of cash and temporary investments and restricted cash in the consolidated balance sheet to cash and temporary investments and restricted cash in the consolidated statement of cash flows for the nine months ended September 30, 2021 and 2020 is as follows:


	Nine Months Ended September 30,
In millions	2021		2020
Cash and Temporary Investments	$	2,122	$	678
Restricted Cash	1,499		—
Total Cash and Temporary Investments and Restricted Cash	$	3,621	$	678

The Company's restricted cash consists of the cash proceeds from the debt incurred by Sylvamo Corporation as part of the Printing Papers segment spin-off that was completed on October 1, 2021. Of this amount, approximately $1.4 billion was remitted to the Company in the form of a cash distribution. See Note 17 - Debt for further details regarding the Sylvamo debt and the use of the cash proceeds from the debt issuances.

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Accounts and Notes Receivable

In millions September 30, 2020 December 31, 2019
Accounts and notes receivable, net:
Trade $ 2,789 $ 3,020
Other 245 260
Total $ 3,034 $ 3,280


In millions	September 30, 2021		December 31, 2020
Accounts and notes receivable, net:
Trade	$	3,222	$	2,776
Other	327		288
Total	$	3,549	$	3,064

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The allowance for expected credit losses was ~~$86~~$64 million and $76 million at September 30, ~~2020~~2021 and ~~the allowance for doubtful accounts was $73 million at~~ December 31, ~~2019.~~2020, respectively. Based on the Company's accounting estimates and the facts and circumstances available as of the reporting date, we believe our allowance for expected credit losses is adequate. While we have taken into account certain impacts of COVID-19 in connection with our estimate of the allowance for expected credit losses, it is possible that additional expected credit losses in excess of such allowance could occur if additional containment and mitigation measures are required or negative economic conditions persist or deteriorate as a result of of COVID-19.

Inventories


In millions	In millions	September 30, 2020		December 31, 2019		In millions	September 30, 2021		December 31, 2020
Raw materials	Raw materials	$	257	$	298	Raw materials	$	241	$	268
Finished pulp, paper and packaging	Finished pulp, paper and packaging	1,023		1,192		Finished pulp, paper and packaging	1,156		1,091
Operating supplies	Operating supplies	638		659		Operating supplies	569		627
Other	Other	89		59		Other	87		64
Total	Total	$	2,007	$	2,208	Total	$	2,053	$	2,050

Plants, Properties and Equipment

Accumulated depreciation was ~~$21.0~~$21.2 billion and ~~$20.5~~$21.4 billion at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Depreciation expense was ~~$300~~$302 million and ~~$305~~$300 million for the three months ended September 30, 2021 and 2020, respectively, and ~~2019, respectively,~~$888 million and $902 million for ~~both~~ the nine months ended September 30, 2021 and 2020, ~~and 2019.~~respectively.

Non-cash additions to plants, property and equipment included within accounts payable were ~~$33~~$61 million and ~~$164~~$41 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Amounts invested in capital projects in the accompanying condensed consolidated statement of cash flows are presented net of insurance recoveries of $6 million received during the nine months ended September 30, 2021 and $40 million received during the nine months ended September 30, 2020. ~~There were 0 insurance recoveries received during the nine months ended September 30, 2019.~~

Interest

Interest payments made during the nine months ended September 30, 2021 and 2020 ~~and 2019~~ were ~~$520~~$357 million and ~~$591~~$520 million, respectively.

Amounts related to interest were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020		2021		2020
Interest expense	Interest expense	$	148	$	177	$	467	$	538	Interest expense	$	117	$	148	$	358	$	467
Interest income	Interest income	36		54		122		160		Interest income	24		36		116		122
Capitalized interest costs	Capitalized interest costs	9		7		27		21		Capitalized interest costs	3		9		8		27

Asset Retirement Obligations

The Company had recorded liabilities of ~~$97~~$135 million and ~~$96~~$116 million related to asset retirement obligations at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

NOTE 11 - LEASES

International Paper leases various real estate, including certain operating facilities, warehouses, office space and land. The Company also leases material handling equipment, vehicles, and certain other equipment. The Company's leases have a

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remaining lease ~~terms~~term of ~~one year~~up to 9632 years. Total lease cost was $73 million and $68 million for ~~both~~ the three months ended September 30, 2021 and 2020, respectively, and ~~2019,~~$216 million and $202 ~~million and $206~~ million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

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Supplemental Balance Sheet Information Related to Leases

In millions Classification September 30, 2020 December 31, 2019
Assets
Operating lease assets Right-of-use assets $ 422 $ 434
Finance lease assets Plants, properties and equipment, net (a) 95 103
Total leased assets $ 517 $ 537
Liabilities
Current
Operating Other current liabilities $ 137 $ 134
Finance Notes payable and current maturities of long-term debt 12 12
Noncurrent
Operating Long-term lease obligations 290 304
Finance Long-term debt 83 88
Total lease liabilities $ 522 $ 538


In millions	Classification	September 30, 2021		December 31, 2020
Assets
Operating lease assets	Right-of-use assets	$	405	$	459
Finance lease assets	Plants, properties and equipment, net (a)	87		95
Total leased assets		$	492	$	554
Liabilities
Current
Operating	Other current liabilities	$	146	$	148
Finance	Notes payable and current maturities of long-term debt	12		13
Noncurrent
Operating	Long-term lease obligations	263		315
Finance	Long-term debt	75		82
Total lease liabilities		$	496	$	558

(a)Finance leases are recorded net of accumulated amortization of ~~$49~~$62 million and ~~$40~~$53 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

NOTE 12 - EQUITY METHOD INVESTMENTS

The Company accounts for the following investments ~~in affiliated companies~~ under the equity method of accounting.

Graphic Packaging International Partners, LLC

The Company completed the transfer of its North American Consumer Packaging business in exchange for an initial 20.5% ownership interest ~~(79,911,511~~(79,911,591 units) in Graphic Packaging International Partners, LLC (GPIP) in 2018. The Company has since fully monetized its investment in GPIP subsequently transferred the North American Consumer Packaging business to Graphic Packaging International, LLC (GPI), a wholly-owned subsidiary of GPIP that holds the assets of the combined business. On January 29, 2020, the Company exchanged 15,150,784 units of the aggregate units owned by the Company for an aggregated price of $250 million, resulting in a pre-tax gain of $33 million ($25 million after taxes) which was recordedwith transactions beginning in the first quarter ~~of 2020. On August 7,~~ 2020 through the second quarter 2021.

GPIP Monetization Transactions


Date	Transaction Type	Units	Proceeds		Pre-tax Gain		After-Tax Gain
In millions except units
2020 First Quarter	Units exchange	15,150,784	$	250	$	33	$	25
2020 Third Quarter	Units exchange	17,399,414	250		—		—
2021 First Quarter	Units exchange and open market sale	24,588,316	397		33		25
2021 First Quarter	TRA				41		31
2021 Second Quarter	Units exchange and open market sale	22,773,077	402		64		48
2021 Second Quarter	TRA (a)				66		50

(a) The TRA entitles the Company ~~exchanged 17,399,414 units~~to 50% of the ~~aggregate units owned~~amount of any tax benefits projected to be realized by GPIP upon the Company's exchange of its units. This amount is recorded in other receivables and is expected to be received within the next 12 months.

As of June 30, 2021, the Company ~~for~~no longer had an ~~aggregated price of $250 million, resulting in an immaterial gain which was recorded in the third quarter of 2020. As of September 30, 2020, the Company's~~ ownership interest in ~~GPIP was 14.8%.~~GPIP. The Company recorded equity earnings of $11 ~~million and $10~~ million for the three months ended September 30, 2020 and ~~2019, respectively,~~$4 million and $29 ~~million and $37~~ million for the nine months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively. There were no equity earnings recorded for the three months ended September 30, 2021. The Company received cash dividends from GPIP of ~~$16~~$5 million and ~~$20~~$16 million during the first nine months of ~~2020~~2021 and ~~2019, respectively. The Company's investment in GPIP was $693 million and $1.1 billion at September 30,~~ 2020, and December 31, 2019, respectively, which was $347 million and $529 million, respectively, more than the Company's proportionate share of the entity's underlying net assets. The difference primarily relates to the basis difference between the fair value of our investment and the underlying net assets, and is generally amortized in equity earnings over a period consistent with the underlying long-lived assets. The Company is party to various agreements with GPI under which it sells fiber and other products to GPI. Sales under these agreements were $60 million and $69 million for the three months ended September 30, 2020 and 2019, respectively, and $190 million and $212 million for the nine months ended September 30, 2020 and 2019, respectively.

~~The Company continues to evaluate its investment in GPI relative to options available to further monetize this investment.~~

~~Summarized financial information for GPIP is presented in the following tables:~~

~~Balance Sheet~~

In millions September 30, 2020 December 31, 2019
Current assets $ 2,013 $ 1,796
Noncurrent assets 5,662 5,482
Current liabilities 1,692 1,178
Noncurrent liabilities 3,617 3,244

1516

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~~Income Statement~~

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2020 2019 2020 2019
Net sales $ 1,698 $ 1,581 $ 4,908 $ 4,640
Gross profit 255 266 838 820
Income from continuing operations 89 83 146 283
Net income 89 83 146 283

Ilim S.A.

The Company has a 50% equity interest in Ilim S.A. (Ilim), which has subsidiaries whose primary operations are in Russia. The Company recorded equity earnings (losses), net of taxes, of ~~$(33)~~$95 million and ~~$18~~$(33) million for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$(5)~~$245 million and ~~$186~~$(5) million for the nine months ended September 30, 2021 and 2020, respectively. Foreign exchange gains (losses) included in equity earnings for the three months and ~~2019, respectively.~~nine months ended September 30, 2021, were not material and JSC Ilim Group had no U.S. dollar-denominated debt outstanding as of September 30, 2021. Equity earnings (losses) for the three months and nine months ended September 30, 2020, included after-tax foreign exchange losses of $55 million and $72 million, respectively, primarily on the remeasurement of U.S. dollar-denominated net debt. The Company received cash dividends from the joint venture of ~~$141~~$144 million and ~~$239~~$141 million during the first nine months of ~~2020~~2021 and ~~2019,~~2020, respectively. At September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company's investment in Ilim was ~~$322~~$517 million and ~~$508~~$393 million, respectively, which was ~~$126~~$131 million and ~~$136~~$127 million, respectively, more than the Company's proportionate share of the joint venture's underlying net assets. The differences primarily relate to currency translation adjustments and the basis difference between the fair value of our investment at acquisition and the underlying net assets. ~~The~~Prior to the spin-off of the Printing Papers segment on October 1, 2021, the Company iswas party to a joint marketing agreement with JSC Ilim Group, a subsidiary of Ilim, under which the Company ~~purchases, markets~~purchased, marketed and ~~sells~~sold paper produced by JSC Ilim Group. Purchases under this agreement were ~~$41~~$42 million and ~~$51~~$41 million for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$131~~$125 million and ~~$162~~$131 million for the nine months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively. The joint marketing agreement was conveyed to Sylvamo Corporation as part of the spin-off transaction on October 1, 2021.

Summarized financial information for Ilim is presented in the following tables:

Balance Sheet

In millions September 30, 2020 December 31, 2019
Current assets $ 592 $ 804
Noncurrent assets 2,442 2,813
Current liabilities 613 1,015
Noncurrent liabilities 2,015 1,844
Noncontrolling interests 13 16

~~Income Statement~~

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2020 2019 2020 2019
Net sales $ 498 $ 479 $ 1,474 $ 1,692
Gross profit 191 196 597 836
Income (loss) from continuing operations (62) 41 7 388
Net income (loss) (60) 40 7 375


In millions	September 30, 2021		December 31, 2020
Current assets	$	935	$	739
Noncurrent assets	3,069		2,733
Current liabilities	711		674
Noncurrent liabilities	2,487		2,249
Noncontrolling interests	34		17

Income Statement


	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2021		2020		2021		2020
Net sales	$	729	$	498	$	1,993	$	1,474
Gross profit	393		191		1,051		597
Income (loss) from continuing operations	190		(62)		498		7
Net income (loss)	182		(60)		481		7

The Company's remaining equity method investments are not material.

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NOTE 13 - GOODWILL AND OTHER INTANGIBLES

Goodwill

The following table presents changes in goodwill balances as allocated to each business segment for the nine-months ended September 30, ~~2020:~~2021:

In millions Industrial
Packaging Global Cellulose Fibers Printing
Papers Total
Balance as of January 1, 2020
Goodwill $ 3,410 $ 52    $ 1,998    $ 5,460
Accumulated impairment losses (296) (52)    (1,765) (2,113)
3,114 0    233    3,347
Currency translation and other (a) 1 0 (45) (44)
Goodwill additions/reductions 1 0 0 1
Accumulated impairment loss additions / reductions 0 0 0 0
Balance as of September 30, 2020
Goodwill 3,412 52    1,953    5,417
Accumulated impairment losses (296) (52)    (1,765) (2,113)
Total $ 3,116 $ 0    $ 188    $ 3,304

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In millions	Industrial Packaging			Global Cellulose Fibers		Printing Papers			Total
Balance as of January 1, 2021
Goodwill	$	3,410		$	52	$	1,966		$	5,428
Accumulated impairment losses	(296)			(52)		(1,765)			(2,113)
	3,114			—		201			3,315
Currency translation and other (a)	(5)			—		(8)			(13)
Goodwill additions/reductions	29		(b)	—		(57)		(c)	(28)
Accumulated impairment loss additions / reductions	—			—		—			—
Balance as of September 30, 2021
Goodwill	3,434			52		1,901			5,387
Accumulated impairment losses	(296)			(52)		(1,765)			(2,113)
Total	$	3,138		$	—	$	136		$	3,274

(a)Represents the effects of foreign currency translations.

(b)Reflects the box plant acquisitions in EMEA.

(c)Reflects the Kwidzyn sale.

Other Intangibles

Identifiable intangible assets comprised the following:


		September 30, 2020						December 31, 2019							September 30, 2021						December 31, 2020
In millions	In millions	Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets		Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets		In millions	Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets		Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets
Customer relationships and lists	Customer relationships and lists	$	534	$	280	$	254	$	560	$	275	$	285	Customer relationships and lists	$	552	$	314	$	238	$	542	$	294	$	248
Tradenames, patents and trademarks, and developed technology	Tradenames, patents and trademarks, and developed technology	170		113		57		170		102		68		Tradenames, patents and trademarks, and developed technology	170		128		42		170		117		53
Land and water rights	Land and water rights	8		2		6		8		2		6		Land and water rights	8		2		6		8		2		6
Software	Software	25		25		0		26		25		1		Software	17		17		—		25		24		1
Other	Other	19		10		9		18		10		8		Other	14		10		4		19		10		9
Total	Total	$	756	$	430	$	326	$	782	$	414	$	368	Total	$	761	$	471	$	290	$	764	$	447	$	317

The Company recognized the following amounts as amortization expense related to intangible assets:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020		2021		2020
Amortization expense related to intangible assets	Amortization expense related to intangible assets	$	17	$	15	$	43	$	40	Amortization expense related to intangible assets	$	12	$	17	$	35	$	43

NOTE 14 - INCOME TAXES

International Paper made income tax payments, net of refunds, of ~~$203~~$389 million and ~~$245~~$203 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The Company currently estimates, that as a result of ongoing discussions, pending tax settlements and expirations of statutes of limitations, the amount of unrecognized tax benefits could be reduced by approximately ~~$70~~$11 million during the next 12 months.

The Brazilian Federal Revenue Service has challenged the deductibility of goodwill amortization generated in a 2007 acquisition by ~~International Paper~~Sylvamo do Brasil Ltda., a wholly-owned subsidiary of the Company. The Company received

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assessments for the tax years 2007-2015 totaling approximately $107 million in tax, and ~~$342~~$351 million in interest, penalties, and fees as of September 30, ~~2020~~2021 (adjusted for variation in currency exchange rates). After a previous favorable ruling challenging the basis for these assessments, we received other subsequent unfavorable decisions from the Brazilian Administrative Council of Tax Appeals. The Company has appealed and intends to further appeal these and any future unfavorable administrative judgments to the Brazilian federal courts; however, this tax litigation matter may take many years to resolve. The Company believes that it has appropriately evaluated the transaction underlying these assessments, and has concluded based on Brazilian tax law, that its position would be sustained.

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The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for tax years subsequent to 2015.

~~On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act ("the CARES Act"). The CARES Act provides various types~~ This assessment pertains to a business that was conveyed to Sylvamo Corporation as of ~~economic relief for individuals and businesses due~~October 1, 2021, as part of our spin-off transaction. Pursuant to the ~~COVID-19 pandemic,~~terms of the tax matters agreement entered into between the Company and Sylvamo Corporation, the Company will pay 60% and Sylvamo will pay 40%, on up to $300 million of any assessment related to this matter, and the Company will pay all amounts of the assessment over $300 million. The Brazilian government may enact a tax amnesty program that would allow Sylvamo do Brasil Ltda. to resolve this dispute for less than the assessed amount. In addition, all decisions concerning the conduct of the litigation related to this matter, including ~~temporary corporate tax relief. We currently do not believe there~~strategy settlement, pursuit and abandonment, will continue to be ~~a material impact~~made by the Company. Sylvamo will thus have no control over any decision related to this ongoing litigation. As of October 1, 2021, in connection with the ~~income tax provision~~recording of the distribution of assets and liabilities resulting from the ~~CARES Act.~~spin-off transaction, International Paper will establish a liability on the Company's balance sheet representing the initial fair value of the contingent obligation under the tax matters agreement. The Company's fair value estimate is in process and the Company is currently unable to quantify the liability to be recognized in the fourth quarter. It is possible the amount could be material.

NOTE 15 - COMMITMENTS AND CONTINGENCIES

Environmental

~~International Paper~~The Company has been named as a potentially responsible party (PRP) in environmental remediation actions under various federal and state laws, including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Many of these proceedings involve the cleanup of hazardous substances at large commercial landfills that received waste from many different sources. While joint and several liability is authorized under CERCLA and equivalent state laws, as a practical matter, liability for CERCLA cleanups is typically allocated among the many PRPs. There are other remediation costs typically associated with the cleanup of hazardous substances at the Company’s current, closed or formerly-owned facilities, and recorded as liabilities in the balance sheet.

Remediation costs are recorded in the consolidated financial statements when they become probable and reasonably estimable. ~~International Paper~~The Company has estimated the probable liability associated with these environmental remediation matters, including those described herein, to be approximately ~~$186~~$187 million ($195 million undiscounted) in the aggregate as of September 30, ~~2020.~~2021. Other than as described below, completion of required remedial actions is not expected to have a material effect on our consolidated financial statements.

Cass Lake: One of the matters included above arises out of a closed wood-treatment facility located in Cass Lake, Minnesota. In June 2011, the United States Environmental Protection Agency (EPA) selected and published a proposed soil remedy at the site with an estimated cost of ~~$45 million at September 30, 2020.~~$46 million. In April 2020, the EPA issued a final plan concerning clean-up standards at a portion of the site, the estimated cost of which is included within the reserve referenced above. In October 2012, the Natural Resource Trustees for this site provided notice to International Paper and other PRPs of their intent to perform a Natural Resource Damage Assessment. It is premature to predict the outcome of the assessment or to estimate a loss or range of loss, if any, in excess of the applicable reserve referenced above, which may be incurred.

Kalamazoo River: The Company is a PRP with respect to the Allied Paper, Inc./Portage Creek/Kalamazoo River Superfund Site in Michigan. The EPA asserts that the site is contaminated by polychlorinated biphenyls (PCBs) primarily as a result of discharges from various paper mills located along the Kalamazoo River, including a paper mill (the Allied Paper Mill) formerly owned by St. Regis Paper Company (St. Regis). The Company is a successor in interest to St. Regis.

•Operable Unit 5, Area 1: In March 2016, the Company and other PRPs received a special notice letter from the EPA (i) inviting participation in implementing a remedy for a portion of the site known as Operable Unit 5, Area 1, and (ii) demanding reimbursement of EPA past costs totaling $37 million, including $19 million in past costs previously demanded by the EPA. The Company responded to the special notice letter. In December 2016, the EPA issued a unilateral administrative order to the Company and other PRPs to perform the remedy. The Company responded to the unilateral administrative order, agreeing to comply with the order subject to its sufficient cause defenses.

•Operable Unit 5, Area 2: In September 2017, the EPA issued a Record of Decision selecting the final remedy for a portion of the site known as Operable Unit 5, Area 2, but has not yet issued a special notice letter for implementing the remedy.

•~~Operable Unit~~ 1: In October 2016, the Company and another PRP received a special notice letter from the EPA inviting participation in the remedial design component of the landfill remedy for the Allied Paper Mill, which is also known as Operable Unit 1. The Record of Decision establishing the final landfill remedy for the Allied Paper Mill was

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issued by the EPA in September 2016. The Company responded to the Allied Paper Mill special notice letter in December 2016. In February 2017, the EPA informed the Company that it would make other arrangements for the performance of the remedial design.

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In addition, in December 2019, the United States published notice in the Federal Register of a proposed consent decree with NCR Corporation (one of the parties to the allocation/apportionment litigation described below), the State of Michigan and natural resource trustees under which NCR would make payments of more than $100 million and perform work ~~at the Site~~in Operable Unit 5, Areas 2, 3, and 4 at an estimated cost of $135.7 million. ~~The public comment period with respect to~~In December 2020, the Federal District Court approved the proposed consent ~~decree closed in February 2020 and we are awaiting the court's final decision.~~decree.

The Company’s CERCLA liability has not been finally determined with respect to these or any other portions of the site, and except as noted above, the Company has declined to perform any work or reimburse the EPA at this time. As noted below, the Company is involved in allocation/apportionment litigation with regard to the site. Accordingly, it is premature to predict the outcome or estimate our maximum reasonably possible loss or range of loss with respect to this site. We have recorded a liability for future remediation costs at the site that are probable and reasonably estimable, and it remains reasonably possible that additional losses in excess of this recorded liability could be material.

The Company was named as a defendant by Georgia-Pacific Consumer Products LP, Fort James Corporation and Georgia Pacific LLC in a contribution and cost recovery action for alleged pollution at the site. NCR Corporation and Weyerhaeuser Company are also named as defendants in the suit. The suit seeks contribution under CERCLA for costs purportedly expended by plaintiffs ($79 million as of the filing of the complaint) and for future remediation costs. In June 2018, the Court issued its Final Judgment and Order, which fixed the past cost amount at approximately $50 million (plus interest to be determined) and allocated to the Company a 15% share of responsibility for those past costs. The Court did not address responsibility for future costs in its decision. In July 2018, the Company and each of the other parties filed notices appealing the Final Judgment and prior orders incorporated into that Judgment. The ~~proposed consent decree by NCR described above, if entered, would result in the termination of NCR's involvement in the appeal.~~Company appeal is pending.

Harris County: International Paper and McGinnis Industrial Maintenance Corporation (MIMC), a subsidiary of Waste Management, Inc. (WMI), are PRPs at the San Jacinto River Waste Pits Superfund Site in Harris County, Texas. The PRPs have been actively participating in the activities at the site and share the costs of these activities.

In October 2017, the EPA issued a Record of Decision (ROD) selecting the final remedy for the site: removal and relocation of the waste material from both the northern and southern impoundments. The EPA did not specify the methods or practices needed to perform this work. The EPA’s selected remedy was accompanied by a cost estimate of approximately $115 million ($105 million for the northern impoundment, and $10 million for the southern impoundment). Subsequent to the issuance of the ROD, there have been numerous meetings between the EPA and the PRPs, and the Company continues to work with the EPA and MIMC/WMI to develop the remedial design.

To this end, in April 2018, the PRPs entered into an Administrative Order on Consent (AOC) with the EPA, agreeing to work together to develop the remedial design ~~until April 2021.~~for the northern impoundment. That remedial design work is ongoing. The AOC does not include any agreement to perform waste removal or other construction activity at the site. Rather, it involves adaptive management techniques and a pre-design investigation, the objectives of which include filling data gaps (including but not limited to post-Hurricane Harvey technical data generated prior to the ROD and not incorporated into the selected remedy), refining areas and volumes of materials to be addressed, determining if an excavation remedy is able to be implemented in a manner protective of human health and the environment, and investigating potential impacts of remediation activities to infrastructure in the vicinity.

During the first quarter of 2020, through a series of meetings among the Company, MIMC/WMI, our consultants, the EPA and the Texas Commission on Environmental Quality (TCEQ), progress was made to resolve key technical issues previously preventing the Company from determining the manner in which the selected remedy for the northern impoundment would be feasibly implemented. As a result of these developments, ~~as of September 30, 2020,~~ the Company ~~has~~ reserved the following amounts in relation to remediation at this site: (a) $10 million for the southern impoundment; and (b) $55 million for the northern impoundment, which represents the Company's 50% share of our estimate of the low end of the range of probable remediation costs.

~~Although~~We have submitted the Final Design Package for the southern impoundment to the EPA, and the EPA approved this plan May 7, 2021. With respect to the northern impoundment, although several key technical issues have been resolved, we still face significant challenges remediating ~~the northern impoundment~~this area in a cost-efficient manner and without a release to the environment and therefore our discussions with the EPA on the best approach to remediation will continue. Because of ongoing questions regarding cost effectiveness, timing and gathering other technical data, additional losses in excess of our recorded liability are possible. We are currently unable to reasonably estimate

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any further adjustment to our recorded liability or any loss or range of loss in excess of such liability; however, we believe it is unlikely any adjustment would be material.

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Asbestos-Related Matters

We have been named as a defendant in various asbestos-related personal injury litigation, in both state and federal court, primarily in relation to the prior operations of certain companies previously acquired by the Company. The Company regularly conducts a comprehensive legal review of its asbestos liabilities and reviews recent and historical claims data. During the second quarter of 2020, as previously disclosed, we adjusted our estimated net liability associated with asbestos-related litigation concerning products sold by Champion International Corporation prior to our acquisition of Champion in 2000 to revise the time period associated with anticipated future claims through 2059, a commonly viewed end point when such claims are more predictable. We concluded the adjustment of $43 million to increase this net liability, which resulted in a liability of $75 million, net of estimated insurance recoveries, was not material to any period. As of September 30, ~~2020,~~2021, the Company's total recorded liability with respect to pending and future asbestos-related claims was ~~$117~~$112 million, net of estimated insurance recoveries. While it is reasonably possible that the Company may incur losses in excess of its recorded liability with respect to asbestos-related matters, we do not believe additional material losses are probable.

Antitrust

~~Italy:~~In March 2017, the Italian Competition Authority (ICA) commenced an investigation into the Italian packaging industry to determine whether producers of corrugated sheets and boxes violated the applicable European competition law. In April 2019, the ICA concluded its investigation and issued initial findings alleging that over 30 producers, including our Italian packaging subsidiary (IP Italy), improperly coordinated the production and sale of corrugated sheets and boxes. On August 6, 2019, the ICA issued its decision and assessed IP Italy a fine of €29 million (approximately $32 million at current exchange rates) which was recorded in the third quarter of 2019. We appealed the ICA decision and our appeal was denied on May 25, 2021. However, we ~~are vigorously appealing this decision of the ICA~~continue to ~~the Italian courts and~~believe we have numerous and strong bases ~~for our appeal.~~

~~Contract~~

~~Signature:~~ In August 2014, a lawsuit captioned Signature Industrial Services LLC et al. v. International Paper Company was filed in state court in Texas. The Signature lawsuit arises out of approximately $1 million in disputed invoices related to the installation of new equipment at the Company's Orange, Texas mill. In addition to the invoices in dispute, Signature and its president allege consequential damages arising from the Company's nonpayment of those invoices. The lawsuit was tried before a jury in Beaumont, Texas, in May 2017. On June 1, 2017, the jury returned a verdict awarding approximately $125 million in damages to the plaintiffs. The Court issued a judgment on December 14, 2017, awarding the plaintiffs a total of approximately $137 million in actual and consequential damages, fees, costs and pre-judgment interest, and awarding post-judgment interest. The Company appealed this judgment and, on April 30, 2020, the Court of Appeals for the Thirteenth District of Texas issued a decision affirming in part and reversing and rendering judgment in favor of the Company in part. The Court affirmed approximately $14.8 million of the judgment. Otherwise, the Court rendered judgment in favor of the Company on the remainder of the jury’s verdict. The Company continues to have strong bases by which to challenge the ~~affirmed portions of the award~~ICA decision, and ~~has presented those arguments on appeal to the Supreme Court of Texas. The plaintiffs~~we have ~~also~~further appealed the decision to the Italian Council of ~~the appellate court. We do not expect that potential losses, if any, related to this lawsuit will be material.~~State.

Taxes Other Than Payroll Taxes

In 2017, the Brazilian Federal Supreme Court decided that the state value-added tax (VAT) should not be included in the basis of federal VAT calculations. In 2018 and 2019, the Brazilian tax authorities published both an internal consultation and a normative ruling with a narrow interpretation of the effects of the case. ~~We have determined that any related federal VAT refunds should be recognized when they are both probable and reasonably estimable.~~ Based upon the best information available to us at that time, we ~~have~~ determined ~~that the amount of~~an estimated refund ~~that is~~was probable of being ~~realized is limited to that determined by the tax authorities' narrow interpretation, for which~~realized. As of March 31, 2021, we ~~have~~had recognized a receivable of $11 million based upon the authorities narrow interpretation. On May 13, 2021, the Brazilian Federal Supreme Court ruled again on the case. This ruling provides a much broader definition of the state VAT, which increased the exclusion amount from the Federal VAT calculations. Therefore, we recognized an additional receivable of $70 million during the three months ended June 30, 2021, which brought the total receivable to $81 million as of June 30, 2021. The $70 million of income recognized during the second quarter of 2021 included income of $42 million in Cost of Products sold and income of $28 million in Interest expense, net in the accompanying condensed consolidated statement of operations. A portion of this receivable has been consumed by offsetting various taxes payable. After giving effect to this offset, the ending balance of the total receivable is $48 million as of September 30, ~~2020. It~~2021. The issue is ~~possible that future court decisions~~now considered fully resolved, and ~~guidance from~~no further ruling by either the Brazilian Supreme Court or the Brazilian tax authorities ~~could expand the scope~~is expected. This receivable pertains to a business that was conveyed to Sylvamo Corporation as of ~~the federal VAT refunds.~~October 1, 2021, as part of our spin-off transaction.

General

The Company is involved in various other inquiries, administrative proceedings and litigation relating to environmental and safety matters, personal injury, product liability, labor and employment, contracts, sales of property, intellectual property, tax, and other matters, some of which allege substantial monetary damages. See Note 14 for details regarding a tax matter. Assessments of lawsuits and claims can involve a series of complex judgments about future events, can rely heavily on

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estimates and assumptions, and are otherwise subject to significant uncertainties. As a result, there can be no certainty that the Company will not ultimately incur charges in excess of presently recorded liabilities. The Company believes that loss contingencies arising from pending matters including the matters described herein, will not have a material effect on the consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in pending or threatened legal matters, some of which are beyond the Company's control, and the large or indeterminate damages sought in some of these matters, a future adverse ruling, settlement, unfavorable development, or increase in accruals with respect to these matters could result in future charges that could be material to the Company's results of operations or cash flows in any particular reporting period.

NOTE 16 - VARIABLE INTEREST ENTITIES

Variable Interest Entities

In August 2021, the Timber Notes of $4.8 billion and the Extension Loans of $4.2 billion related to the 2015 Financing Entities both matured. We settled the Extension Loans at their maturity with the proceeds from the Timber Notes. This resulted in cash proceeds of approximately $630 million representing our equity in the variable interest entities. Maturity of the installment notes and termination of the monetization structure also resulted in a $72 million tax liability that is expected to be paid in the fourth quarter of 2021.

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As of September 30, ~~2020,~~2021, the ~~fair value of the Timber Notes and Extension Loans was $4.92 billion and $4.24 billion, respectively, for~~Company's remaining deferred tax liability associated with the 2015 Financing ~~Entities.~~Entities was $815 million. The ~~Timber Notes~~nature and ~~Extension Loans are classified as Level 2 within the fair value hierarchy, which is further defined in Note 17 in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.~~

The Timber Notes of $4.85 billion mature in August 2021. The Extension Loans of $4.22 billion mature in November and December of 2020, and we are currently negotiating the extension of these third-party loans to August 2021 and expect to complete the extension before the maturity dates. The Timber Notes and Extension Loans are shown in Current nonrecourse financial assets of variable interest entities and Current nonrecourse financial liabilities of variable interest entities, respectively, on the accompanying balance sheet.

~~Failure to extend these third-party loans to August 2021 prior to their respective maturity dates in November and December of 2020 could necessitate a disposition~~timing of the ~~installment notes~~income tax due related to ~~facilitate~~these transactions is currently under review by the ~~$4.22 billion debt payment. We are confident we would be able to dispose of the installment notes, if necessary.~~Internal Revenue Service.

Activity between the Company and the 2015 Financing Entities was as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2020 2019 2020 2019
Revenue (a) $ 24 $ 24 $ 71 $ 71
Expense (a) 32 32 96 96
Cash receipts (b) 48 48 95 95
Cash payments (c) 64 64 128 128


	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2021		2020		2021		2020
Revenue (a)	$	14	$	24	$	61	$	71
Expense (a)	8		32		34		96
Cash receipts (b)	48		48		95		95
Cash payments (c)	24		64		38		128

(a)The revenue and expense are included in Interest expense, net in the accompanying statement of operations.

(b)The cash receipts are interest received on the Financial assets of special purpose entities.

(c)The cash payments represent interest paid on Nonrecourse financial liabilities of special purpose entities.

As of September 30, ~~2020,~~2021, the fair value of the Timber Notes and Extension Loans ~~was $2.29 billion and $2.12 billion, respectively,~~ for the 2007 Financing ~~Entities.~~Entities was $2.3 billion and $2.1 billion, respectively. The Timber Notes and Extension Loans are classified as Level 2 within the fair value hierarchy, which is further defined in Note 17 in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

The Timber Notes of $2.3 billion and the Extension Loans of $2.1 billion both mature in 2027 and are shown in Long-term nonrecourse financial assets of variable interest entities and Long-term nonrecourse financial liabilities of variable interest entities, respectively, on the accompanying balance sheet.

Activity between the Company and the 2007 Financing Entities was as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020		2021		2020
Revenue (a)	Revenue (a)	$	7	$	19	$	35	$	61	Revenue (a)	$	5	$	7	$	18	$	35
Expense (b)	Expense (b)	8		19		36		60		Expense (b)	6		8		18		36
Cash receipts (c)	Cash receipts (c)	5		16		28		48		Cash receipts (c)	1		5		4		28
Cash payments (d)	Cash payments (d)	8		17		34		53		Cash payments (d)	4		8		12		34

(a)The revenue is included in Interest expense, net in the accompanying statement of operations and includes approximately $5 million and $14 million for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, of accretion income for the amortization of the basis difference adjustment on the Financial assets of special purpose entities.

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(b)The expense is included in Interest expense, net in the accompanying statement of operations and includes approximately $2 million and $5 million for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, of accretion expense for the amortization of the basis difference adjustment on the Nonrecourse financial liabilities of special purpose entities.

(c)The cash receipts are interest received on the Financial assets of special purpose entities.

(d)The cash payments are interest paid on Nonrecourse financial liabilities of special purpose entities.

NOTE 17 - DEBT

The borrowing capacity of the Company's commercial paper program is $1.0 billion. Under the terms of the program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. As of September 30, ~~2020,~~2021, the Company had ~~$140 million of~~no borrowings outstanding under the program.

At September 30, 2021, International Paper’s credit facilities totaled $2.1 billion. The Agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. The Agreements include a $1.5 billion contractually committed bank facility. In June 2021, the Company extended the maturity date of the $1.5 billion credit facility from December 2022 to June 2026. The liquidity facilities also include up to $550 million of uncommitted financings based on eligible receivables balances under a receivables securitization program. In February of 2021, after considering the Company’s liquidity position in relation to the macroeconomic environment at such time, the Company

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amended the receivable securitization program ~~at weighted-average interest rate~~from a committed financing arrangement to an uncommitted financing arrangement. In August of ~~0.17%.~~2021, the Company amended the receivable securitization program to remove receivable balances related to Sylvamo. The borrowing limit of up to $550 million based on eligible receivables balances and the expiration date in April 2022 were unchanged by the February 2021 and August 2021 amendments. At September 30, 2021, there were no borrowings under either the bank facility or receivables securitization program.

In March 2020, the Company entered into a $750 million contractually committed 364-day revolving credit agreement with a syndicate of banks and other financial institutions which ~~augments~~augmented the Company's access to liquidity due to ~~current~~the macroeconomic conditions related to COVID-19 and ~~supplements~~supplemented the Company's $1.5 billion ~~five-year~~ credit agreement. ~~In October 2020,~~After considering the ~~company extended~~Company’s liquidity position in relation to the ~~expiration date of the $1.5 billion credit agreement from December 2021 to December 2022. As of September 30, 2020,~~macroeconomic environment at such time, the Company ~~had 0 borrowings outstanding under either~~determined not to extend the $750 million ~~revolving~~ credit agreement ~~or the $1.5 billion credit agreement.~~after its expiration on March 24, 2021.

In ~~April 2020,~~anticipation of the ~~Company's receivable securitization program was amended from an uncommitted financing arrangement~~spin-off, Sylvamo incurred $1.5 billion in debt during the third quarter of 2021 with the proceeds to be used for a ~~committed financing arrangement with a borrowing limit up~~distribution to ~~$550 million based on eligible receivable balances that expires in April 2022. As of September 30, 2020,~~ the Company ~~had 0~~and other expenses associated with the transaction. The Company was an obligor of the debt prior to the spin-off as Sylvamo was a wholly-owned subsidiary. Subsequent to the distribution of the net assets, the Company was no longer an obligor of the Sylvamo debt. The $1.5 billion of borrowings ~~outstanding under~~is comprised of $450 million of 7.00% senior unsecured notes due 2029 issued in September 2021. It is also comprised of the ~~program.~~senior secured credit facility that Sylvamo entered into in September 2021 which consisted of $450 million of borrowings related to its term loan “B” facility, $520 million of borrowings related to its term loan “F” facility, and the $100 million draw on its revolving credit facility which has a capacity of $450 million.

~~In July 2020, International Paper refinanced $122~~The Company's early debt reductions in the third quarter of 2021 were a debt tender in August 2021 of approximately $200 million related to debt with an interest rate of ~~industrial development bonds that now have~~3.55% and a maturity date of 2029.

The Company’s early debt reductions in the second quarter of 2021 were a debt tender in June 2021 of approximately $558 million related to debt with interest rates ranging from ~~1.38%~~4.35% to ~~1.60%~~4.40% and maturity dates ~~in 2025.~~

~~As a result~~ranging from 2047 to 2048 and open market repurchases of aapproximately $232 million related to debt ~~tender offer in September 2020, the Company economically retired $700 million of corporate bonds~~ with interest rates ranging from 3.00% to ~~3.80%~~5.15% and maturity dates ranging from ~~2024~~2027 to ~~2027. This is in addition to the August 2020 economical debt extinguishment of $203 million of corporate bonds with an interest rate of 7.50% due in 2021 and brings the full year-to-date~~2046.

The Company’s early debt reductions in the first quarter of 2021 were open market repurchases of approximately $107 million related to ~~the 2021 bonds~~debt with interest rates ranging from 3.00% to ~~$406 million.~~4.80% and maturities dates from 2027 to 2048.

The Company’s financial covenants require the maintenance of a minimum net worth, as defined in our debt agreements, of $9 billion and a total debt-to-capital ratio of less than 60%. Net worth is defined as the sum of common stock, paid-in capital and retained earnings, less treasury stock plus any cumulative goodwill impairment charges. The calculation also excludes accumulated other comprehensive income/loss and both the current and long-term Nonrecourse Financial Liabilities of Variable Interest Entities. The total debt-to-capital ratio is defined as total debt divided by the sum of total debt plus net worth. As of September 30, ~~2020,~~2021, we were in compliance with our debt covenants.

At September 30, ~~2020,~~2021, the fair value of International Paper’s ~~$8.7~~$8.5 billion of debt was approximately ~~$10.7~~$10.2 billion. The fair value of the Company’s long-term debt is estimated based on the quoted market prices for the same or similar issues. International Paper’s long-term debt is classified as Level 2 within the fair value hierarchy, which is further defined in Note 17 in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

2020.

NOTE 18 - DERIVATIVES AND HEDGING ACTIVITIES

As a multinational company, International Paper is exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices.

~~Table of Contents~~

The notional amounts of qualifying and non-qualifying financial instruments used in hedging transactions were as follows:

In millions September 30, 2020 December 31, 2019
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts $ 245 $ 407
Derivatives in Fair Value Hedging Relationships:
Interest rate contracts 0 700
Derivatives in Net Investment Hedging Relationships:
Interest rate contracts 0 475
Foreign exchange contracts 50 0
Derivatives Not Designated as Hedging Instruments:
Electricity contract 12 16
Foreign exchange contracts 0 7


In millions	September 30, 2021		December 31, 2020
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts (USD)	$	108	$	85
Foreign exchange contracts (EUR)	—		187



Derivatives Not Designated as Hedging Instruments:
Electricity contract (MWh)	0.3		0.2

~~During the first quarter~~

Table of 2020, International Paper terminated its interest rate contracts in fair value hedging relationships. These contracts had a notional value of $700 million and an approximate fair value of $85 million at the time of termination. Subsequent to the termination of the interest rate swaps, the fair value basis adjustment is accounted for as a debt premium for the previously hedged debt. During the first and second quarter of 2020, International Paper also terminated interest rate contracts in net investment hedging relationships with a notional value of $475 million. These contracts had an approximate fair value of $33 million at the time of termination. Subsequent to the termination of the net investment hedges, the fair value is accounted for in other comprehensive income as cumulative translation adjustment for the previously hedged net investments.Contents

The following table shows gains or losses recognized in AOCI, net of tax, related to derivative instruments:


		Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)									Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020		2021		2020
Derivatives in Cash Flow Hedging Relationships:	Derivatives in Cash Flow Hedging Relationships:									Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts	Foreign exchange contracts	$	(4)	$	(10)	$	(34)	$	(6)	Foreign exchange contracts	$	(4)	$	(4)	$	3	$	(34)

Total	Total	$	(4)	$	(10)	$	(34)	$	(6)	Total	$	(4)	$	(4)	$	3	$	(34)
Derivatives in Net Investment Hedging Relationships:	Derivatives in Net Investment Hedging Relationships:									Derivatives in Net Investment Hedging Relationships:
Foreign exchange contracts										Foreign exchange contracts	$	6	$	—	$	18	$	—
Interest rate contracts	Interest rate contracts	$	0	$	18	$	24	$	15	Interest rate contracts	—		—		—		24
Total	Total	$	0	$	18	$	24	$	15	Total	$	6	$	—	$	18	$	24

During the next 12 months, the amount of the September 30, ~~2020~~2021 AOCI balance, after tax, that is expected to be reclassified to earnings is a loss of $4$2 million.

The amounts of gains and losses recognized in the statement of operations on qualifying and non-qualifying financial instruments used in hedging transactions were as follows:


		Gain (Loss) Reclassified from AOCI (Effective Portion)								Location of Gain (Loss) Reclassified from AOCI (Effective Portion)		Gain (Loss) Reclassified from AOCI Into Income (Effective Portion)								Location of Gain (Loss) Reclassified from AOCI (Effective Portion)
		Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019			In millions	2021		2020		2021		2020
Derivatives in Cash Flow Hedging Relationships:	Derivatives in Cash Flow Hedging Relationships:										Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts	Foreign exchange contracts	$	(6)	$	(4)	$	(26)	$	(5)	Cost of products sold	Foreign exchange contracts	$	8	$	(6)	$	9	$	(26)	Cost of products sold
Total	Total	$	(6)	$	(4)	$	(26)	$	(5)		Total	$	8	$	(6)	$	9	$	(26)


	Gain (Loss) Recognized in Income								Location of Gain (Loss) In Statement of Operations
	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2021		2020		2021		2020
Derivatives in Fair Value Hedging Relationships:
Interest rate contracts	$	—	$	—	$	—	$	38	Interest expense, net
Debt	—		—		—		(38)		Interest expense, net
Total	$	—	$	—	$	—	$	—
Derivatives in Net Investment Hedging Relationships:
Foreign exchange contracts	—		1		—		2		Net (gain) losses on sales and impairments of businesses
Total	$	—	$	1	$	—	$	2
Derivatives Not Designated as Hedging Instruments:
Electricity contract	$	6	$	1	$	13	$	(2)	Cost of products sold
Foreign exchange contracts	5		—		(1)		—		Cost of products sold

Total	$	11	$	1	$	12	$	(2)

~~Table of Contents~~

Gain (Loss) Recognized Location of Gain (Loss)
In
Statement
of Operations
Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2020 2019 2020 2019
Derivatives in Fair Value Hedging Relationships:
Interest rate contracts $ 0 $ 11 $ 38 $ 42 Interest expense, net
Debt 0 (11) (38) (42) Interest expense, net
Total $ 0 $ 0 $ 0 $ 0
Derivatives in Net Investment Hedging Relationships:
Foreign exchange contracts $ 1 $ 0 $ 2 $ 0 Net (gains) losses on sales and impairments of businesses
Total $ 1 $ 0 $ 2 $ 0
Derivatives Not Designated as Hedging Instruments:
Electricity contract $ 1 $ (5) $ (2) $ 0 Cost of products sold
Foreign exchange contracts 0 (1) 0 (2) Cost of products sold
Total $ 1 $ (6) $ (2) $ (2)

~~Fair Value Measurements~~

The Company has not changed its valuation techniques for measuring the fair value of any financial assets or liabilities during the year. Transfers between levels, if any, are recognized at the end of the reporting period.

~~The following table provides a summary of the impact of our derivative instruments in the balance sheet:~~

Fair Value Measurements

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The following table provides a summary of the impact of our derivative instruments in the balance sheet:

Fair Value Measurements

Level 2 – Significant Other Observable Inputs

Assets Liabilities
In millions September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019
Derivatives designated as hedging instruments
Foreign exchange contracts – cash flow $ 2 $ 10 $ 16 $ 4
Interest rate contracts - net investment 0 11 0 0
Interest rate contracts - fair value 0 47 0 0
Total derivatives designated as hedging instruments 2 68 16 4
Derivatives not designated as hedging instruments
Electricity contract 0 0 0 2
Foreign exchange contracts 0 0 0 1
Total derivatives not designated as hedging instruments 0 0 0 3
Total derivatives $ 2 (a) $ 68 (b) $ 16 (c) $ 7 (d)


	Assets						Liabilities
In millions	September 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Derivatives designated as hedging instruments
Foreign exchange contracts – cash flow	$	3		$	5		$	5		$	8



Total derivatives designated as hedging instruments	3			5			5			8
Derivatives not designated as hedging instruments
Electricity contract	11			—			—			1

Total derivatives not designated as hedging instruments	11			—			—			1
Total derivatives	$	14	(a)	$	5	(b)	$	5	(c)	$	9	(d)

(a)~~Included in Other current assets in the accompanying consolidated balance sheet.~~

~~(b)~~Includes ~~$14~~$13 million recorded in Other current assets and ~~$54~~$1 million recorded in Deferred charges and other assets in the accompanying consolidated balance sheet.

(b)Included in Other current assets in the accompanying consolidated balance sheet.

(c)Includes ~~$14~~$4 million recorded in Other current liabilities and $2$1 million recorded in Other liabilities in the accompanying consolidated balance sheet.

(d)~~Included~~Includes $7 million recorded in Other current liabilities and $2 million recorded in Other liabilities in the accompanying consolidated balance sheet.

The above contracts are subject to enforceable master netting arrangements that provide rights of offset with each counterparty when amounts are payable on the same date in the same currency or in the case of certain specified defaults. Management has made an accounting policy election to not offset the fair value of recognized derivative assets and derivative liabilities in the

~~Table of Contents~~

balance sheet. The amounts owed to the counterparties and owed to the Company are considered immaterial with respect to each counterparty and in the aggregate with all counterparties.

NOTE 19 - RETIREMENT PLANS

International Paper sponsors and maintains the Retirement Plan of International Paper Company (the Pension Plan), a tax-qualified defined benefit pension plan that provides retirement benefits to substantially all U.S. salaried and hourly and union employees who work at a participating business unit.

The Pension Plan provides defined pension benefits based on years of credited service and either final average earnings (salaried employees and hourly employees receiving salaried benefits), hourly job rates or specified benefit rates (hourly and union employees).

Effective January 1, 2019, the Company froze participation, including credited service and compensation, for salaried employees under the Pension Plan, the Pension Restoration Plan and the SERP plan. This change does not affect benefits accrued through December 31, 2018. For service after December 31, 2018, employees affected by the freeze receive a company contribution to their individual Retirement Savings Account.

In advance of the spin-off of the Printing Papers segment into a standalone, publicly-traded company, Sylvamo, a legally separate Sylvamo Pension Plan was established to transfer both pension liabilities and qualified pension assets for the approximately 900 active qualified pension participants who transitioned to Sylvamo. Effective September 1, 2021, the Retirement Plan of International Paper (“IP Pension Plan”) and the Sylvamo Pension Plan were legally separated and remeasured as of that date. The remeasurement resulted in a net asset balance of $520 million for the IP Pension Plan, which has been classified as part of the Pension Assets balance on the Consolidated Balance Sheet. Based on the September 1, 2021 remeasurement, the IP Pension Plan completed the transfer of approximately $286 million in projected benefit obligation and approximately $263 million in qualified pension assets to the Sylvamo Pension Plan.

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Net periodic pension (income) expense for our qualified and nonqualified U.S. defined benefit plans comprised the following:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020		2021		2020
Service cost	Service cost	$	21	$	17	$	64	$	51	Service cost	$	26	$	21	$	78	$	64
Interest cost	Interest cost	98		110		294		330		Interest cost	84		98		251		294
Expected return on plan assets	Expected return on plan assets	(167)		(158)		(501)		(473)		Expected return on plan assets	(177)		(167)		(543)		(501)
Actuarial loss	Actuarial loss	51		50		152		150		Actuarial loss	35		51		114		152
Amortization of prior service cost	Amortization of prior service cost	5		4		15		12		Amortization of prior service cost	5		5		16		15
Net periodic pension expense		$	8	$	23	$	24	$	70
Net periodic pension (income) expense										Net periodic pension (income) expense	$	(27)	$	8	$	(84)	$	24

The components of net periodic pension (income) expense other than the Service cost component are included in Non-operating pension (income) expense in the Consolidated Statement of Operations.

The Company’s funding policy for our pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plan, tax deductibility, the cash flows generated by the Company, and other factors. The Company made 0no voluntary cash contributions to the qualified pension plan in the first nine months of ~~2020~~2021 or ~~2019.~~2020. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled ~~$22~~$16 million for the nine months ended September 30, ~~2020.~~2021.

NOTE 20 - STOCK-BASED COMPENSATION

International Paper has an Incentive Compensation Plan (ICP) which is administered by the Management Development and Compensation Committee of the Board of Directors (the Committee). The ICP authorizes the grants of restricted stock, restricted or deferred stock units, performance awards payable in cash or stock upon the attainment of specified performance goals, dividend equivalents, stock options, stock appreciation rights, other stock-based awards and cash-based awards at the discretion of the Committee. As of September 30, ~~2020, 8.4~~2021, 7.6 million shares were available for grant under the ICP.

Stock-based compensation expense and related income tax benefits were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020		2021		2020
Total stock-based compensation expense (selling and administrative)	Total stock-based compensation expense (selling and administrative)	$	17	$	31	$	48	$	94	Total stock-based compensation expense (selling and administrative)	$	42	$	17	$	103	$	48
Income tax benefits related to stock-based compensation	Income tax benefits related to stock-based compensation	1		(2)		18		31		Income tax benefits related to stock-based compensation	(2)		1		13		18

~~Table of Contents~~

At September 30, ~~2020, $85~~2021, $107 million, net of estimated forfeitures, of compensation cost related to unvested restricted performance shares, executive continuity awards and restricted stock attributable to future service had not yet been recognized. This amount will be recognized in expense over a weighted-average period of ~~1.7~~1.9 years.

Performance Share Plan

During the first nine months of ~~2020,~~2021, the Company granted ~~2.2~~2.0 million performance units at an average grant date fair value of ~~$49.15.~~$53.15.

NOTE 21 - BUSINESS SEGMENT INFORMATION

International Paper’s business segments, Industrial Packaging, Global Cellulose Fibers and Printing Papers, are consistent with the internal structure used to manage these businesses. All segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the Forest Products industry. On October 1, 2021, the Company completed the previously announced spin-off of its Printing Papers segment into a standalone, publicly-traded company, Sylvamo Corporation. As a result of the spin-off, the Company no longer operated this Printing Papers segment effective October 1, 2021, and all current and historical financial results will be adjusted to reflect the Printing Papers segment as a discontinued operation in the fourth quarter of 2021. In addition, certain limited historical and ongoing business activities will be included in our Industrial Packaging and Global Cellulose Fibers segments.

Table of Contents

Business segment operating profits are used by International Paper's management to measure the earnings performance of its businesses. Management believes that this measure allows a better understanding of trends in costs, operating efficiencies, prices and volumes. Business segment operating profits are defined as earnings (loss) before income taxes and equity earnings, but including the impact of noncontrolling interests, and excluding interest expense, net, corporate ~~items,~~expenses, net, corporate net special items, business net special items and non-operating pension expense. In the fourth quarter of 2019, the Company changed its measure of business segment operating profits to exclude items considered by management to be unusual (business net special items) from the normal operations of the business segment. As a result, all prior periods have been restated to reflect the current measure.

Net sales by business segment for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020		2021		2020
Industrial Packaging	Industrial Packaging	$	3,768	$	3,820	$	11,220	$	11,516	Industrial Packaging	$	4,087	$	3,768	$	12,096	$	11,220
Global Cellulose Fibers	Global Cellulose Fibers	564		624		1,737��		1,974		Global Cellulose Fibers	729		564		1,981		1,737
Printing Papers	Printing Papers	743		1,071		2,234		3,224		Printing Papers	846		743		2,473		2,234
Corporate and Intersegment Sales	Corporate and Intersegment Sales	48		53		150		164		Corporate and Intersegment Sales	52		48		143		150
Net Sales	Net Sales	$	5,123	$	5,568	$	15,341	$	16,878	Net Sales	$	5,714	$	5,123	$	16,693	$	15,341

Operating profit (loss) by business segment for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020		2021		2020
Industrial Packaging	Industrial Packaging	$	469	$	535	$	1,388	$	1,471	Industrial Packaging	$	429	$	469	$	1,284	$	1,388
Global Cellulose Fibers	Global Cellulose Fibers	(59)		4		(123)		39		Global Cellulose Fibers	96		(59)		24		(123)
Printing Papers	Printing Papers	63		162		148		420		Printing Papers	106		63		262		148
Business Segment Operating Profits	Business Segment Operating Profits	$	473	$	701	$	1,413	$	1,930	Business Segment Operating Profits	$	631	473		$	1,570	$	1,413

Earnings (loss) before income taxes and equity earnings	Earnings (loss) before income taxes and equity earnings	$	282	$	452	$	527	$	1,204	Earnings (loss) before income taxes and equity earnings	$	916	$	282	$	1,747	$	527
Interest expense, net	Interest expense, net	112		123		345		378		Interest expense, net	93		112		242		345
Noncontrolling interests adjustment	Noncontrolling interests adjustment	0		2		0		4		Noncontrolling interests adjustment	(1)		—		(3)		—
Corporate expenses, net	Corporate expenses, net	(20)		21		9		45		Corporate expenses, net	12		(20)		44		9
Corporate net special items	Corporate net special items	108		48		195		48		Corporate net special items	11		108		81		195
Business net special items	Business net special items	2		46		368		224		Business net special items	(349)		2		(385)		368
Non-operating pension expense (income)	Non-operating pension expense (income)	(11)		9		(31)		27		Non-operating pension expense (income)	(51)		(11)		(156)		(31)
Business Segment Operating Profits	Business Segment Operating Profits	$	473	$	701	$	1,413	$	1,930	Business Segment Operating Profits	$	631	$	473	$	1,570	$	1,413

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included in "Financial Statements and Supplementary Data" of this Quarterly Report on Form 10-Q (this "Form 10-Q") and the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (our "Annual Report"). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and in our Annual Report, particularly ~~in "Risk Factors" and~~under "Forward-Looking Statements" of this Form 10-Q and "Risk Factors" and "Forward-Looking Statements" of our Annual Report.

EXECUTIVE SUMMARY

Net earnings (loss) attributable to International Paper common shareholders were $864 million ($2.20 per diluted share) in the third quarter of 2021, compared with $432 million ($1.09 per diluted share) in the second quarter of 2021 and $204 million ($0.52 per diluted share) in the third quarter of ~~2020,~~2020. International Paper generated Adjusted operating earnings attributable to International Paper common shareholders (a non-GAAP measure defined below) of $532 million ($1.35 per diluted share) in the third quarter of 2021, compared with ~~$266~~$421 million ($~~0.67~~1.06 per diluted share) in the second quarter of ~~2020~~2021 and $344 million ($0.87 per diluted share) in the third quarter of 2019. International Paper generated Adjusted Operating Earnings Attributable to International Paper Common Shareholders (a non-GAAP measure defined below) of $280 million ($0.71 per diluted share) in the third quarter of ~~2020, compared with $305 million ($0.77 per diluted share)~~2020.

During the third quarter 2021, International Paper grew revenue, margins and earnings, and generated strong cash from operations. The strong demand environment in the second quarter ~~of 2020 and $431 million ($1.09 per diluted share)~~2021 continued in the third quarter, ~~of 2019.~~

Inwith strong demand for corrugated packaging and solid demand for absorbent pulp. Our Industrial Packaging and Global Cellulose Fibers businesses made strong progress on price realization from prior price increases in the third quarter ~~2020, International Paper delivered solid earnings~~to mitigate the impact of a very challenging supply chain and ~~generated robust cash from operations~~input cost environment. Input costs affected results much more than anticipated in ~~a dynamic environment. We continued to deliver strong commercial and operational performance, with outstanding cost management across all our businesses. In~~ the third quarter, ~~2020,~~mostly due to higher fiber and energy costs. The widespread supply chain constraints limited our ability to capture the full opportunity that comes with the strong demand environment. Our mills performed well; however, stretched supply chains constrained volumes in our Industrial Packaging and Global Cellulose Fibers businesses. Additionally, due to labor market constraints, we ~~generated $735 million~~have had to increase overtime while we try to hire additional permanent employees. This has led to higher labor costs, particularly at our converting facilities. Containerboard inventories in ~~cash from operations and $616 million~~our packaging network improved in ~~free cash flow, bringing cash generated from operations and free cash flow~~the latter part of the third quarter, putting us in a much healthier position as we enter the seasonally stronger fourth quarter. With respect to ~~$2.3 billion and $1.6 billion, respectively, through the first three quarters of 2020. The Company’s solid performance reinforces our financial strength and commitment to our~~ capital allocation, ~~framework. We continued to use cash consistent with our capital allocation framework to maintain a strong balance sheet, return cash to shareowners and invest to create value. During~~in the third quarter, we reduced debt by ~~$760~~approximately $235 million ~~bringing year-to-date debt reduction~~and returned $411 million to ~~$1.1 billion. In October, the board~~shareholders through dividends of ~~directors approved the fourth quarter dividend, bringing the full-year authorizations to $800~~$199 million and share repurchases of $212 million.

~~Relative to demand, recovery trends continue to vary by~~Finally, the Printing Papers business delivered strong performance and ~~end-use consumer segments. Demand for corrugated packaging accelerated~~carried good momentum in the third quarter, ahead of the spin-off of the business, which was completed on October 1, 2021. In consideration for the Printing Papers business spin-off, International Paper received a payment of $1.4 billion from Sylvamo and ~~that momentum continues~~retained a 19.9% interest in the ~~fourth quarter.~~new company, which we intend to monetize within one year.

Comparing our performance in the third quarter 2021 to the second quarter 2021, price and mix improved, driven by strong realization of prior price increases across the three businesses. Input costs were a significant headwind in the third quarter, increasing by more than two times what we had anticipated, mostly due to higher fiber and energy costs. Volumes decreased sequentially. Supply chain constraints limited our ability to capture the full benefit of a strong demand backdrop. In our Global Cellulose Fibers business, demand for absorbent pulp remains solid; however, shipments were constrained by significant port congestion. Our mills performed well and we experienced seasonally lower demand and destocking across most regions, as expected. In our Printing Papers business, we are in the early stages of recovery as office and school activities restart. Against this backdrop, our commercial, supply chain and manufacturing organizations are collaborating at a high level to ensure we meet our customers’ changing needs, leveraging the scale and flexibility of our system and optimizing costs. We remain committed to our COVID-19 principles and will continue to focus on what we need to do to further strengthen the Company for all our stakeholders in the short-term and the long-term.

~~Comparing performance~~also benefited from one-time items in the third quarter, ~~2020~~including insurance recovery in the Industrial Packaging business related to the second quarter 2020, price and mix was essentially flat across our businesses. Volume was favorable, driven by strong demand for corrugated packaging in North America and improved demand for printing papers across all regions. Operations and costs benefited from improved fixed cost absorption on higher volume. Our businesses continued to do an excellent job managing costs and delivered strong operational performance to mitigate the impact of hurricaneswinter storms early in the ~~third quarter. Third quarter performance also benefited from about $30 million~~year and the sale of nitrogen credits in the Global Cellulose Fibers business. These one-time ~~items, which favorably~~benefits were largely offset by higher unplanned maintenance in Industrial Packaging and higher supply chain costs in Global Cellulose Fibers. We continue to be impacted ~~operations~~by a highly stressed supply chain environment that is affecting both inbound materials and ~~costs. As~~outbound shipments. Every mode of transportation is tight, and is expected to remain so for the foreseeable future. Planned maintenance outage costs reduced earnings in the third quarter, which is our highest planned maintenance quarter this year. Input costs were favorable, mostly due to lower recovered fiber costs. We did experience higher energy and distribution costsdecreased sequentially as we exited the third quarter, which we see as a positive sign of an improving economy. Corporate expense and taxes were favorable compared to the second quarter 2020, reflecting foreign currency translation gains and favorable adjustments to our federal tax provision after finalizing our 2019 tax return. Equity earnings from ourexpected. Our Ilim joint venture ~~were a loss~~delivered another strong performance with equity earnings of ~~$33 million and include a $55 million non-cash foreign exchange loss primarily associated with foreign currency translation on Ilim’s US dollar denominated net debt.~~$95 million.

Looking ahead to the fourth quarter ~~2020,~~2021, as compared to the third quarter of ~~2020,~~2021, in our Industrial Packaging business, we expect ~~stable~~higher price and mix primarily on the realization of our August 2021 price increases in ~~our~~ North America, ~~and European Packaging businesses.~~partially offset by mix as we start to recover some export backlogs. Volume is expected to ~~decrease modestly, with continued strong~~improve sequentially on higher seasonal demand ~~for corrugated packaging offsetting the impact of~~despite three ~~less~~fewer shipping days in the fourth quarter. Operations and costs are expected to ~~be negatively impacted by the non-repeat of favorable one-time items in the third quarter. Planned maintenance~~improve moderately. Supply chains are expected to remain stretched, however, our North America packaging network will benefit from improved containerboard inventory levels, as planned. Maintenance outage expense is expected to be ~~lower, and input~~relatively flat. Input costs are expected to beincrease, driven primarily by higher ~~mostly due to higher energy~~average costs for fiber and ~~transportation costs.~~energy. In our Global Cellulose Fibers business, we expect price and mix to be stable. Volume is expected to decrease modestly, ~~lower~~primarily due to persistent port congestion, which is expected to impact absorbent pulp shipments again in the fourth quarter. ~~Volume is expected to be stable while operations~~Operations and costs are expected to ~~negatively impact earnings associated~~be unfavorable due to the non-repeat of the previously mentioned nitrogen credit sales in the third quarter. Maintenance outage expenses are expected increase while

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with the non-repeat of favorable one-time items. We expect increased planned maintenance outage expenses, and input costs are expected to be stable. In our Printing Papers business, we expect price and mix to be stable. Volume is expected to improve on higher seasonal demand in Latin America. Operations and costs are expected to be negatively impacted by the non-repeat of favorable one-time items in the third quarter, along with higher seasonal energy costs. Planned maintenance outage expenses are expected to decrease, and input costs are expected to increase on higher wood fiber and energy costs. ~~Lastly, in~~Equity earnings from our Ilim joint venture ~~we expect improved earnings on~~are expected decrease modestly.

Finally, following the ~~non-repeat~~completion of the ~~foreign currency loss~~Printing Papers spin-off on ~~U.S. dollar denominated net debt incurred~~October 1, 2021, the historical results of the business will be treated as a discontinued operation with a full recast of previously presented periods to reflect this treatment. Third quarter earnings included $134 million of Business Segment Operating Profit attributed to the Sylvamo spin-off and Kwidzyn mill, which are no longer part of International Paper in the ~~third~~fourth quarter.

On March 11, 2020 the World Health Organization (WHO) declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. During the third quarter of 2021, the number of COVID-19 cases and deaths increased in the United States and numerous other countries, and restrictive measures, including mask and vaccine requirements, have been implemented or reinstituted by various governmental authorities and private businesses. Economic recovery in the United States has continued but may be threatened by the resurgence of COVID-19 cases and other factors. Most of our manufacturing and converting facilities have remained open and operational during the ~~pandemic. The health~~pandemic and ~~safety of~~at the current time our ~~employees~~manufacturing and contractors is our most important responsibility as we manage through the COVID-19 pandemic. We have implemented work-systems across the Company, including hygiene, social distancing, site cleaning, contact tracing, and other measures, as recommended by the CDC and WHO. Our COVID-19 measuresconverting facilities are ~~proving to be effective and we have not had any material disruptions to our operations.~~generally operational.

~~We have seen~~The pandemic has had a ~~significant negative~~mixed impact on demand for our products. Initially, demand for printing papers ~~products.~~products was significantly impacted by the pandemic, but has seen a steady increase over the first nine months of 2021. Demand for our pulp, containerboard and corrugated box products has not been negatively impacted and in some cases has been positively impacted by COVID-19 to ~~date, but could be unfavorably impacted going forward if negative economic conditions associated with COVID-19 persist or deteriorate. Furthermore, if there is a resurgence~~date. However, all of ~~the virus leading~~our operations continue to ~~additional governmental measures, such as stay-at-home orders or business and school shut downs, our~~experience higher supply chain costs and ~~therefore our production, could be negatively impacted.~~a constrained transportation environment due in part to the impacts of COVID-19.

There continue to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the ~~various economic reopening plans and the~~ resurgence of new variants of the virus in many ~~areas;~~areas globally; the additional actions ~~that may be~~ taken by governmental authorities and private businesses, including mask and vaccine requirements, to attempt to contain the COVID-19 outbreak or to mitigate its impact; the ~~extent~~efficacy, acceptance and ~~duration~~availability of ~~social distancing~~various vaccines and ~~stay-at-home orders;~~booster shots, as well as the possibility that strains of ~~development of a vaccine;~~the virus may be resistant to current available vaccines; and the ~~ongoing~~ impact of COVID-19 on ~~unemployment,~~economic conditions, including with respect to labor market conditions, economic activity, consumer behavior, supply chain shortages and ~~consumer confidence. Developments related to~~disruptions and inflationary pressures. COVID-19 ~~are significantly adversely affecting~~has had a significant adverse effect on portions of our business, and could have a material adverse effect on our financial condition, results of operations and cash flows ~~particularly~~ if ~~negative~~public health and/or global economic conditions ~~persist for a significant period of time or~~ deteriorate.

Adjusted ~~Operating Earnings~~operating earnings and Adjusted ~~Operating Earnings Per Share~~operating earnings per share are non-GAAP measures and are defined as net earnings (loss) attributable to International Paper (a GAAP measure) excluding net special items and non-operating pension expense (income). Net earnings (loss) and Diluted earnings (loss) per share attributable to common shareholders are the most directly comparable GAAP measures. The Company calculates Adjusted ~~Operating Earnings~~operating earnings by excluding the after-tax effect of non-operating pension expense (income) and items considered by management to be unusual (net special items) from the earnings reported under GAAP. Adjusted ~~Operating Earnings Per Share~~operating earnings per share is calculated by dividing Adjusted ~~Operating Earnings~~operating earnings by diluted average shares of common stock outstanding. Management uses ~~this measure~~these measures to focus on on-going operations, and believes that ~~it is~~these measures are useful to investors because ~~it enables them~~such measures enable investors to perform meaningful comparisons of past and present consolidated operating results. The Company believes that using this information, along with the most directly comparable GAAP ~~measure, provides~~measures, provide for a more complete analysis of the results of operations.

The following are reconciliations of Earnings (loss) attributable to common shareholders to Adjusted ~~Operating Earnings (Loss)~~operating earnings (loss) attributable to ~~shareholders.~~common shareholders on a total and per share basis. Additional detail is provided later in this Form 10-Q regarding the net special items referenced in the charts below.

Three Months Ended
September 30, Three Months Ended June 30,
In millions 2020 2019 2020
Net Earnings (Loss) Attributable to Shareholders $ 204 $ 344 $ 266
Add Back - Non-operating pension expense (income) (11) 9 (14)
Add Back - Net special items expense (income) 109 94 68
Income tax effect - Non-operating pension and net special items expense (22) (16) (15)
Adjusted Operating Earnings (Loss) Attributable to International Paper Company $ 280 $ 431 $ 305


	Three Months Ended September 30,				Three Months Ended June 30,
In millions	2021		2020		2021
Net Earnings (Loss) Attributable to International Paper Company	$	864	$	204	$	432
Add Back - Non-operating pension expense (income)	(51)		(11)		(52)
Add Back - Net special items expense (income)	(330)		109		23
Income tax effect - Non-operating pension and net special items expense	49		(22)		18
Adjusted Operating Earnings (Loss) Attributable to International Paper Company	$	532	$	280	$	421

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		Three Months Ended September 30,				Three Months Ended June 30,			Three Months Ended September 30,				Three Months Ended June 30,
In millions	In millions	2020		2019		2020		In millions	2021		2020		2021
Diluted Earnings (Loss) Per Share Attributable to Shareholders		$	0.52	$	0.87	$	0.67
Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders								Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders	$	2.20	$	0.52	$	1.09
Add Back - Non-operating pension expense (income) per share	Add Back - Non-operating pension expense (income) per share	(0.03)		0.02		(0.04)		Add Back - Non-operating pension expense (income) per share	(0.13)		(0.03)		(0.13)
Add Back - Net special items expense (income) per share	Add Back - Net special items expense (income) per share	0.28		0.24		0.17		Add Back - Net special items expense (income) per share	(0.84)		0.28		0.06
Income tax effect per share - Non-operating pension and net special items expense	Income tax effect per share - Non-operating pension and net special items expense	(0.06)		(0.04)		(0.03)		Income tax effect per share - Non-operating pension and net special items expense	0.12		(0.06)		0.04
Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders		$	0.71	$	1.09	$	0.77
Adjusted Operating Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders								Adjusted Operating Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders	$	1.35	$	0.71	$	1.06

Cash provided by operations totaled ~~$2.3~~$1.9 billion and ~~$2.7~~$2.3 billion for the first nine months of ~~2020~~2021 and ~~2019,~~2020, respectively. The Company generated free cash flow of approximately $1.6 billion ~~and $1.8 billion~~ in each of the first nine months of ~~2020~~2021 and ~~2019, respectively.~~2020. Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management utilizes this measure in connection with managing our business and believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company's ongoing performance, we believe that free cash flow also enables investors to perform meaningful comparisons between past and present periods.

The following is a reconciliation of cash provided by operations to free cash flow:


		Three Months Ended September 30,				Nine Months Ended September 30,					Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020
Cash provided by operations	Cash provided by operations	$	735	$	882	$	2,274	$	2,682	Cash provided by operations	$	1,923	$	2,274
Adjustments:	Adjustments:									Adjustments:
Cash invested in capital projects, net of insurance recoveries	Cash invested in capital projects, net of insurance recoveries	(119)		(285)		(657)		(913)		Cash invested in capital projects, net of insurance recoveries	(348)		(657)
Free Cash Flow	Free Cash Flow	$	616	$	597	$	1,617	$	1,769	Free Cash Flow	$	1,575	$	1,617

The non-GAAP financial measures presented in this ~~Quarter Report on~~ Form 10-Q as referenced above have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies utilize identical calculations, the Company's presentation of non-GAAP measures in this ~~Quarterly Report on~~ Form 10-Q may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as the Company.

RESULTS OF OPERATIONS

For the third quarter of ~~2020,~~2021, International Paper ~~Company~~ reported net sales of ~~$5.1~~$5.7 billion, compared with ~~$4.9~~$5.6 billion in the second quarter of ~~2020~~2021 and ~~$5.6~~$5.1 billion in the third quarter of ~~2019.~~2020.

Net earnings (loss) attributable to International Paper totaled $864 million, or $2.20 per diluted share, in the third quarter of 2021. This compared with $432 million, or $1.09 per diluted share, in the second quarter of 2021 and $204 million, or $0.52 per diluted share, in the third quarter of 2020. ~~This compared with $266 million, or $0.67 per diluted share, in the second quarter of 2020 and $344 million, or $0.87 per diluted share, in the third quarter of 2019.~~

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Compared with the second quarter of ~~2020,~~2021, earnings benefited from higher average sales ~~volumes~~prices and a favorable mix ($50171 million), lower operating costs ($239 million), lower ~~raw material and freight~~mill maintenance outage costs ($~~25 million), lower corporate and other items ($13 million), lower net interest expense ($2~~134 million) and lower tax expense ($2815 million). These benefits were offset by lower ~~average~~ sales ~~prices net of a favorable mix~~volumes ($924 million), higher ~~mill maintenance outage~~raw material and freight costs ($57182 million), higher corporate and other items ($2 million) and higher non-operating pension expense ($41 million). Net interest expense was flat. Equity earnings, net of taxes, relating to International Paper’s investments in Ilim S.A., Graphic Packaging International Partners, LLC, and other investments were $10 million lower than in the second quarter of 2021. Net special items in the third quarter of 2021 were a gain of $294 million compared with a loss of $28 million in the second quarter of 2021.

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Compared with the third quarter of 2020, the third quarter of 2021 reflects higher average sales prices and a favorable mix ($478 million), higher sales volumes ($2 million), lower mill maintenance outage costs ($54 million), lower net interest expense ($23 million), lower tax expense ($6 million) and lower non-operating pension expense ($31 million). These benefits were offset by higher operating costs ($83 million), higher raw material and freight costs ($325 million) and higher corporate and other costs ($25 million). Equity earnings, net of taxes, relating to International Paper’s investments in Ilim S.A., Graphic Packaging International Partners, LLC, and other investments were ~~$100~~$122 million ~~lower~~higher in the third quarter of 2021 than in the ~~second~~third quarter of 2020. Net special items in the third quarter of ~~2020~~2021 were a ~~loss~~gain of ~~$83~~$294 million compared with a loss of ~~$50 million in the second quarter of 2020.~~

~~Table of Contents~~

Compared with the third quarter of 2019, the third quarter of 2020 reflects lower raw material and freight costs ($29 million), lower corporate and other costs ($30 million), lower net interest expense ($7 million), lower tax expense ($34 million) and lower non-operating pension expense ($14 million). These benefits were offset by lower average sales prices and an unfavorable mix ($114 million), lower sales volumes ($28 million), higher operating costs ($7 million) and higher mill maintenance outage costs ($47 million). Equity earnings, net of taxes, relating to International Paper’s investments in Ilim S.A., Graphic Packaging International Partners, LLC, and other investments were $55 million lower in the third quarter of 2020 than in the third quarter of 2019. Net special items in the third quarter of 2020 were a loss of $83 ~~million compared with a loss of $80~~ million in the third quarter of ~~2019.~~2020.

Business ~~Segment Operating Profits~~segment operating profits are used by International Paper's management to measure the earnings performance of its businesses. Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. International Paper believes that using this information, along with net earnings, provides a more complete analysis of the results of operations by quarter. Business ~~Segment Operating Profits~~segment operating profits are defined as earnings (loss) before income taxes and equity earnings, but including the impact of noncontrolling interests, and excluding interest expense, net, corporate expenses, net, corporate net special items, business net special items and non-operating pension expense. Business ~~Segment Operating Profits~~segment operating profits is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280.

In the third quarter, International Paper ~~operates~~operated in three segments: Industrial Packaging, Global Cellulose Fibers and Printing Papers.

As of October 1, 2021, the Company completed the spin-off of its Printing Papers segment into a standalone, publicly- traded company, Sylvamo Corporation.

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The following table presents a reconciliation of ~~net~~Net earnings (loss) ~~from continuing operations~~ attributable to International Paper Company to its Total ~~Business Segment Operating Profit:~~business segment operating profit:

Three Months Ended
September 30, June 30,
In millions 2020 2019 2020
Net Earnings (Loss) Attributable to International Paper Company $ 204 $ 344 $ 266
Add back (deduct):
Income tax provision (benefit) 50 137 67
Equity (earnings) loss, net of taxes 28 (27) (72)
Noncontrolling interests, net of taxes — (2) —
Earnings (Loss) Before Income Taxes and Equity Earnings 282 452 261
Interest expense, net 112 123 116
Noncontrolling interests included in operations — 2 —
Corporate expenses, net (20) 21 (3)
Corporate net special items 108 48 54
Business net special items 2 46 14
Non-operating pension expense (income) (11) 9 (14)
Adjusted Operating Profit $ 473 $ 701 $ 428
Business Segment Operating Profit (Loss):
Industrial Packaging $ 469 $ 535 $ 449
Global Cellulose Fibers (59) 4 (10)
Printing Papers 63 162 (11)
Total Business Segment Operating Profit $ 473 $ 701 $ 428


	Three Months Ended
	September 30,				June 30,
In millions	2021		2020		2021
Net Earnings (Loss) Attributable to International Paper Company	$	864	$	204	$	432
Add back (deduct):
Income tax provision (benefit)	146		50		102
Equity (earnings) loss, net of taxes	(94)		28		(104)
Noncontrolling interests, net of taxes	—		—		2
Earnings (Loss) Before Income Taxes and Equity Earnings	916		282		432
Interest expense, net	93		112		57
Noncontrolling interests included in operations	(1)		—		(1)
Corporate expenses, net	12		(20)		7
Corporate net special items	11		108		101
Business net special items	(349)		2		(50)
Non-operating pension expense (income)	(51)		(11)		(52)
Adjusted Operating Profit	$	631	$	473	$	494
Business Segment Operating Profit (Loss):
Industrial Packaging	$	429	$	469	$	408
Global Cellulose Fibers	96		(59)		10
Printing Papers	106		63		76
Total Business Segment Operating Profit	$	631	$	473	$	494

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Business Segment Operating Profit

Total business segment operating profits were $631 million in the third quarter of 2021, $494 million in the second quarter of 2021 and $473 million in the third quarter of ~~2020, $428 million in the second quarter of 2020 and $701 million in the third quarter of 2019.~~2020.

Compared with the second quarter of ~~2020,~~2021, operating profits benefited from higher average sales ~~volumes~~prices and a favorable mix ($68216 million), lower operating costs ($3112 million) and lower ~~raw material and freight~~mill outage costs ($34170 million). These benefits were offset by lower ~~average~~ sales ~~prices net of a favorable mix~~volumes ($1130 million) and higher ~~mill outage~~raw material and freight costs ($77231 million).

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Compared with the third quarter of ~~2019,~~2020, operating profits in the current quarter benefited from higher average sales prices and a favorable mix ($591 million) and higher sales volumes ($3 million) and lower ~~raw material and freight~~mill outage costs ($4067 million). These benefits were offset by ~~lower average sales prices and an unfavorable mix ($156 million), lower sales volumes ($38 million),~~ higher operating costs ($9102 million) and higher ~~mill outage~~raw material and freight costs ($65401 million).

Economic-related downtime results from the amount of production required to meet our customer demand. Planned maintenance downtime is taken periodically throughout the year. The following table details North American planned maintenance and economic-related downtime:

In thousands of tons Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Three Months Ended June 30, 2020
Economic-related downtime 126 283 328
Maintenance downtime 170 125 51

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Sales Volumes by Product (a)

Sales volumes of major products for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,		Nine Months Ended September 30,
In thousands of short tons (except as noted)	In thousands of short tons (except as noted)	2020	2019	2020	2019	In thousands of short tons (except as noted)	2021	2020	2021	2020
Industrial Packaging	Industrial Packaging					Industrial Packaging
Corrugated Packaging (b)	Corrugated Packaging (b)	2,705	2,651	7,900	7,810	Corrugated Packaging (b)	2,689	2,705	8,106	7,900
Containerboard	Containerboard	760	736	2,370	2,140	Containerboard	710	760	2,118	2,370
Recycling	Recycling	460	556	1,388	1,790	Recycling	521	541	1,647	1,630
Saturated Kraft	Saturated Kraft	36	47	123	140	Saturated Kraft	45	36	140	123
Gypsum/Release Kraft	Gypsum/Release Kraft	50	49	154	149	Gypsum/Release Kraft	56	50	179	154
Bleached Kraft	Bleached Kraft	7	5	22	17	Bleached Kraft	5	7	18	22
EMEA Packaging (b)	EMEA Packaging (b)	374	375	1,190	1,124	EMEA Packaging (b)	334	374	1,179	1,190
Brazilian Packaging (b)	Brazilian Packaging (b)	98	96	271	272	Brazilian Packaging (b)	—	98	—	271
European Coated Paperboard	European Coated Paperboard	102	106	308	312	European Coated Paperboard	56	102	267	308
Industrial Packaging	Industrial Packaging	4,592	4,621	13,726	13,754	Industrial Packaging	4,416	4,673	13,654	13,968
Global Cellulose Fibers (in thousands of metric tons) (c)	Global Cellulose Fibers (in thousands of metric tons) (c)	886	878	2,752	2,606	Global Cellulose Fibers (in thousands of metric tons) (c)	856	886	2,605	2,752
Printing Papers	Printing Papers					Printing Papers
U.S. Uncoated Papers	U.S. Uncoated Papers	336	451	998	1,340	U.S. Uncoated Papers	379	336	1,104	998
European and Russian Uncoated Papers	European and Russian Uncoated Papers	298	352	929	1,073	European and Russian Uncoated Papers	248	298	882	929
Brazilian Uncoated Papers	Brazilian Uncoated Papers	208	301	598	828	Brazilian Uncoated Papers	275	208	801	598
Indian Uncoated Papers		—	49	—	183
Printing Papers	Printing Papers	842	1,153	2,525	3,424	Printing Papers	902	842	2,787	2,525

(a)Sales volumes include third party and inter-segment sales and exclude sales of equity investees.

(b)Volumes for corrugated box sales reflect consumed tons sold (CTS). Board sales for these businesses reflect invoiced tons.

(c)Includes North American, European and Brazilian volumes and internal sales to mills.

Income Taxes

An income tax provision of $146 million was recorded for the third quarter of 2021 and the reported effective income tax rate was 16%. Excluding expense of $36 million related to the tax effects of net special items and expense of $13 million related to the tax effects of non-operating pension expense, the effective income tax rate was 18% for the quarter.

An income tax provision of $102 million was recorded for the second quarter of 2021 and the reported effective income tax rate was 24%. Excluding expense of $5 million related to the tax effects of net special items and expense of $13 million related to the tax effects of non-operating pension expense, the effective income tax rate was 21% for the quarter.

An income tax provision of $50 million was recorded for the third quarter of 2020 and the reported effective income tax rate was 18%. Excluding a benefit of $26 million related to the tax effects of net special items and expense of $4 million related to the tax effects of non-operating pension expense, the effective income tax rate was 19% for the quarter.

An income tax provision of $67 million was recorded for the second quarter of 2020 and the reported effective income tax rate was 26%. Excluding a benefit of $18 million related to the tax effects of net special items and expense of $3 million related to the tax effects of non-operating pension expense, the effective income tax rate was 26% for the quarter.

An income tax provision of $137 million was recorded for the third quarter of 2019 and the reported effective income tax rate was 30%. Excluding a benefit of $14 million related to the tax effects of net special items and a benefit of $2 million related to the tax effects of non-operating pension expense, the effective income tax rate was 27% for the quarter.

Interest Expense

Net interest expense was $93 million in the third quarter of 2021, compared with $57 million in the second quarter of 2021 and $112 million in the third quarter of ~~2020, compared with $116~~2020. Net interest expense includes interest expense of $8 million, ~~in the second quarter of 2020 and $123 million in the third quarter of 2019.~~

~~Table of Contents~~

~~Effects of Net Special Items and Non-Operating Pension Expense~~

~~Details of net special items and non-operating pension expense (income) for the three months and nine months ended are as follows:~~

Three Months Ended
September 30, June 30,
2020 2019 2020
In millions Before Tax After Tax Before Tax After Tax Before Tax After Tax
Business Segments
Environmental remediation reserve adjustment $ 7 $ 6 (a) $ — $ — $ — $ —
Brazil Packaging impairment (4) (2) (b) — — 9 7 (b)
Abandoned property removal — — 13 10 (d) 5 4 (d)
Italian antitrust fine — — 32 32 (b) — —
Overhead cost reduction initiative — — 10 8 (e) — —
India Papers impairment — — 6 6 (a) — —
Riverdale mill conversion — — 1 1 (a) — —
Gain on sale of previously closed Oregon mill site — — (9) (7) (b) — —
Multi-employer pension plan exit liability — — (7) (6) (b) — —
Other (1) (1) (c) — — — —
Business Segments Total 2 3 46 44 14 11
Corporate
Debt extinguishment costs 105 79 — — 18 13
Asbestos litigation reserve adjustment — — — — 43 33
Gain on sale of portion of investment in India — — — — (6) (6)
Litigation reserves — — 22 17 — —
Environmental remediation reserve adjustment — — 15 11 — —
Overhead cost reduction initiative — — 11 8 — —
Other 2 1 — — (1) (1)
Corporate Total 107 80 48 36 54 39
Total net special items 109 83 94 80 68 50
Non-operating pension expense (income) (11) (7) 9 7 (14) (11)
Total net special items and non-operating pension expense (income) $ 98 $ 76 $ 103 $ 87 $ 54 $ 39

~~(a) Recorded in the Printing Papers segment.~~

~~(b) Recorded in the Industrial Packaging segment.~~

~~(c) Includes~~interest income of $2$28 million ~~(before~~ and ~~after taxes) recorded in the Printing Papers segment and charges~~interest income of $1 million ~~(before and after taxes) recorded in the Industrial Packaging segment.~~

(d) Includes $3 million ($2 million after taxes) and $9 million ($7 million after taxes) for the three months ended June 30, 2020 and September 30, 2019, respectively, recorded in the Industrial Packaging segment; $2 million (before and after taxes) and $3 million ($2 million after taxes) for the three months ended June 30, 2020 and September 30, 2019, respectively, recorded in the Global Cellulose Fibers segment; $1 million (before and after taxes) for the three months ended September 30, ~~2019, recorded in the Printing Papers segment.~~

~~(e) Includes $4 million ($3 million after taxes) recorded in the Global Cellulose Fibers segment~~2021, June 30, 2021 and ~~$6 million ($5 million after taxes) recorded in the Printing Papers segment.~~

September 30, 2020, respectively, related to a foreign value-added tax credit accrual.

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Effects of Net Special Items and Non-Operating Pension Expense

Details of net special items and non-operating pension expense (income) for the three months ended are as follows:


	Three Months Ended
	September 30,											June 30,
	2021					2020						2021
In millions	Before Tax		After Tax			Before Tax			After Tax			Before Tax		After Tax
Business Segments
Foreign value-added tax credit accrual	$	7	$	5	(a)	$	—		$	—		$	(42)	$	(28)	(a)
Printing Papers spin-off	4		4		(a)	—			—			—		—
Environmental remediation reserve adjustment	—		—			7			6		(a)	—		—
Gain on sale of Kwidzyn, Poland mill	(360)		(350)		(a)	—			—			—		—
EMEA Packaging impairment - Turkey	—		—			—			—			(8)		(2)		(b)
Brazil Packaging impairment	—		—			(4)		`	(2)		(b)	—		—
Other	—		—			(1)			(1)		(c)	—		—
Business Segments Total	(349)		(341)			2			3			(50)		(30)
Corporate
Debt extinguishment costs	35		26			105			79			170		128
Printing Papers spin-off / Building a Better IP	53		47			—			—			28		23
Environmental remediation reserve adjustment	5		4			—			—			5		3
Real estate - office impairment	—		—			—			—			21		16
Gain on sale of La Mirada, California distribution center	(86)		(65)			—			—			—		—
Gain on sale of equity investment in Graphic Packaging	—		—			—			—			(130)		(98)
Other	4		3			3			2			7		5
Corporate Total	11		15			108			81			101		77
Total net special items	(338)		(326)			110			84			51		47
Non-operating pension expense (income)	(51)		(38)			(11)			(7)			(52)		(39)
Total net special items and non-operating pension expense (income)	$	(389)	$	(364)		$	99		$	77		$	(1)	$	8

(a) Recorded in the Printing Papers segment.

(b) Recorded in the Industrial Packaging segment.

(c) Includes a charge of $1 million (before and after taxes) recorded in the Industrial Packaging segment and income of $2 million (before and after taxes) recorded in the Printing Papers segment.

Net special items include the following tax expenses (benefits):


	Three Months Ended
	September 30,				June 30,
In millions	2021		2020		2021
Foreign and state taxes related to Printing Papers spin-off	$	27	$	—	$	—
Total	$	27	$	—	$	—

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Details of net special items and non-operating pension expense for the nine months ended are as follows:


		Nine Months Ended											Nine Months Ended September 30,
		September 30,
		2020					2019						2021					2020
In millions	In millions	Before Tax		After Tax			Before Tax		After Tax			In millions	Before Tax		After Tax			Before Tax		After Tax
Business Segments	Business Segments											Business Segments
EMEA Packaging business optimization												EMEA Packaging business optimization	$	12	$	10	(a)	$	—	$	—
Printing Papers spin-off												Printing Papers spin-off	4		4		(c)	—		—
Brazil Packaging impairment	Brazil Packaging impairment	$	349	$	342	(a)	$	—	$	—		Brazil Packaging impairment	—		—			349		342		(a)
Abandoned property removal	Abandoned property removal	14		11		(b)	35		26		(b)	Abandoned property removal	—		—			14		11		(b)
Environmental remediation reserve adjustment	Environmental remediation reserve adjustment	7		6		(c)	—		—			Environmental remediation reserve adjustment	—		—			7		6		(c)
Riverdale mill conversion	Riverdale mill conversion	1		1		(c)	3		3		(c)	Riverdale mill conversion	—		—			1		1		(c)
Foreign value-added tax refund accrual		(2)		(1)		(a)	—		—
India Papers impairment		—		—			151		149		(c)
Italian antitrust fine		—		—			32		32		(a)
Overhead cost reduction initiative		—		—			10		8		(e)
Multi-employer pension plan exit liability		—		—			9		6		(a)
Gain on sale of previously closed Oregon mill site		—		—			(9)		(7)		(a)
Gain on sale of EMEA Packaging box plant		—		—			(7)		(6)		(a)
Gain on sale of Kwidzyn, Poland mill												Gain on sale of Kwidzyn, Poland mill	(360)		(350)		(c)	—		—
Foreign value-added tax credit accrual												Foreign value-added tax credit accrual	(35)		(23)		(c)	(2)		(1)		(a)
EMEA Packaging impairment - Turkey												EMEA Packaging impairment - Turkey	(6)		—		(a)	—		—
Other	Other	(1)		(1)		(d)	—		—			Other	—		—			$	(1)	$	(1)	(d)
Business Segments Total	Business Segments Total	368		358			224		211			Business Segments Total	(385)		(359)			$	368	$	358
Corporate	Corporate											Corporate
Debt extinguishment costs	Debt extinguishment costs	131		98			—		—			Debt extinguishment costs	223		168			131		98
Printing Papers spin-off / Building a Better IP												Printing Papers spin-off / Building a Better IP	106		90			—		—
Real estate - office impairment												Real estate - office impairment	21		16			—		—
Environmental remediation reserve adjustment												Environmental remediation reserve adjustment	10		7			41		31
Asbestos litigation reserve adjustment	Asbestos litigation reserve adjustment	43		33			—		—			Asbestos litigation reserve adjustment	—		—			43		33
Gain on sale of portion of investment in India		(6)		(6)			—		—
India investment fair value adjustment		17		17			—		—
Environmental remediation reserve adjustment		41		31			15		11
Gain on sale of portion of equity investment in Graphic Packaging		(33)		(25)			—		—
Litigation reserves		—		—			22		17
Overhead cost reduction initiative		—		—			11		8
Interest expense related to foreign tax audits		—		—			1		1
India transaction												India transaction	—		—			11		11
Gain on sale of equity investment in Graphic Packaging												Gain on sale of equity investment in Graphic Packaging	(204)		(154)			(33)		(25)
Gain on sale of La Mirada, California distribution center												Gain on sale of La Mirada, California distribution center	(86)		(65)			—		—
Other	Other	—		(1)			—		—			Other	11		8			2		1
Corporate Total	Corporate Total	193		147			49		37			Corporate Total	81		70			$	195	$	149
Total net special items	Total net special items	561		505			273		248			Total net special items	(304)		(289)			563		507
Non-operating pension expense (income)	Non-operating pension expense (income)	(31)		(23)			27		21			Non-operating pension expense (income)	(156)		(117)			(31)		(23)
Total net special items and non-operating pension expense (income)	Total net special items and non-operating pension expense (income)	$	530	$	482		$	300	$	269		Total net special items and non-operating pension expense (income)	$	(460)	$	(406)		$	532	$	484

(a) Recorded in the Industrial Packaging segment.

(b) Includes $9 million ($7 million after taxes) for the nine months ended September 30, 2020 recorded in the Industrial Packaging segment and ~~$25~~$5 million ($194 million after taxes) for the nine months ended September 30, 2020 and September 30, 2019, respectively, recorded in the Industrial Packaging segment; $5 million ($4 million after taxes) and $8 million ($5 million after taxes) for the nine months ended September 30, 2020 and September 30, 2019, respectively, recorded in the Global Cellulose Fibers ~~segment; and $2 million (before and after taxes) for the nine months ended September 30, 2019, recorded in the Printing Papers~~ segment.

(d) Includes income of $2 million (before and after taxes) recorded in the Printing Papers segment and charges of $1 million (before and after taxes) recorded in the Industrial Packaging segment.

~~(e) Includes charges of $4 million ($3 million after taxes) recorded in the Global Cellulose Fibers segment and charges of $6 million ($5 million after taxes) recorded in the Printing Papers segment.~~

Net special items include the following tax expenses (benefits):

Nine Months Ended
September 30,
In millions 2020 2019
Luxembourg tax law rate change $ — $ 9
State income tax legislative changes — (3)
Settlement of foreign tax audits — 3
Total $ — $ 9

~~Table of Contents~~


	Nine Months Ended
	September 30,
In millions	2021		2020
Foreign and state taxes related to Printing Papers spin-off	$	27	$	—
Total	$	27	$	—

BUSINESS SEGMENT OPERATING RESULTS

The following tables present net sales and business segment operating profit (loss) which is the Company's measure of segment profitability.

Table of Contents

Industrial Packaging


Total Industrial Packaging	Total Industrial Packaging	2020						2019						Total Industrial Packaging	2021						2020
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	Sales	$	3,768	$	3,633	$	11,220	$	3,820	$	3,864	$	11,516	Sales	$	4,087	$	4,056	$	12,096	$	3,768	$	3,633	$	11,220
Operating Profit (Loss)	Operating Profit (Loss)	$	469	$	449	$	1,388	$	535	$	515	$	1,471	Operating Profit (Loss)	$	429	$	408	$	1,284	$	469	$	449	$	1,388

Industrial Packaging net sales for the third quarter of ~~2020~~2021 were 4%1% higher compared with the second quarter of ~~2020~~2021 and 1%8% higher compared with the third quarter of 2020. Operating profit was 5% higher in the third quarter of 2021 compared with the second quarter of 2021 and 9% lower compared with the third quarter of ~~2019. Operating profit was 4% higher in the third quarter of 2020 compared with the second quarter of 2020 and 12% lower compared with the third quarter of 2019.~~2020.


North American Industrial Packaging	North American Industrial Packaging	2020						2019						North American Industrial Packaging	2021						2020
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales (a)	Sales (a)	$	3,351	$	3,241	$	9,947	$	3,368	$	3,414	$	10,158	Sales (a)	$	3,738	$	3,587	$	10,810	$	3,351	$	3,241	$	9,947
Operating Profit (Loss)	Operating Profit (Loss)	$	455	$	434	$	1,326	$	525	$	515	$	1,459	Operating Profit (Loss)	$	418	$	377	$	1,190	$	455	$	434	$	1,326

(a)Includes intra-segment sales of ~~$31~~$34 million and ~~$25~~$31 million for the three months ended September 30, 2021 and 2020, respectively; $27 million and ~~2019, respectively;~~ $31 million for ~~each of~~ the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively; and ~~$94~~$87 million and ~~$87~~$94 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

North American Industrial Packaging sales volumes in the third quarter of ~~2020 increased~~2021 were lower compared to the second quarter of ~~2020,~~2021, reflecting lower shipments for boxes and domestic containerboard partially offset by higher shipments for ~~boxes, partially offset by lower~~ export containerboard volumes. The COVID-19 pandemic continues to have a mixed impact on box demand reflecting strong growth in the eCommerce segment as online shopping continues to be a major spending channel for consumers amid COVID-19 pandemic concerns. The shipping and distribution and protein segmentscontainerboard. Box shipments were ~~also favorably impacted. Demand for produce, processed foods and beverage in addition to non-essential items within the durable and non-durable segments were negatively~~ impacted by ~~COVID-19 restrictions and lower discretionary spending.~~constrained containerboard availability as supply chains remain stretched. Total maintenance and economic downtime was about ~~51,000~~202,000 tons lower in the third quarter of ~~2020~~2021 compared with the second quarter of ~~2020, primarily~~2021, driven by lower ~~economic~~maintenance downtime. Average sales margins were ~~stable as lower~~significantly higher reflecting higher average sales prices for boxes ~~was~~and export containerboard. Operating costs were lower, driven by strong mill operations partially offset by higher ~~export containerboard prices and a favorable mix. Operating costs were higher, driven by multiple weather events impacting our mix system and seasonality in our box plants.~~converting costs. Planned maintenance downtime costs were ~~$20~~$123 million ~~higher~~lower in the third quarter of ~~2020~~2021 compared with the second quarter of ~~2020.~~2021. Input costs were ~~lower,~~substantially higher, primarily for wood, recovered fiber and wood, partially offset by higher energy costs. Earnings in both the third quarter and the second quarter of 2020 benefited from insurance recoveries related to the Rome fire and Bogalusa recovery boiler event.energy.

Compared with the third quarter of ~~2019,~~2020, sales volumes were ~~higher~~lower in the third quarter of ~~2020~~2021 for ~~both~~export containerboard partially offset by higher shipments for domestic containerboard. Sales volumes for boxes ~~and export containerboard.~~were slightly lower reflecting the impact of the challenging supply chain environment. Total maintenance and economic downtime was about ~~173,000~~40,000 tons lower in the third quarter of ~~2020, primarily~~2021, driven by lower ~~economic~~maintenance downtime. Export containerboard and box prices were significantly ~~lower~~higher reflecting ~~prior index movements throughout 2019 and early 2020.~~previous price increases. Operating costs increased, driven by ~~multiple weather events impacting our mill system~~inflation and ~~costs associated with the Riverdale conversion.~~increased converting and transportation costs. Planned maintenance downtime costs were ~~$13~~$17 million ~~higher~~lower in the third quarter of 2020 compared with the third quarter of 2019. Input costs were lower driven by lower wood, energy and distribution costs, partially offset by higher recovered fiber costs. Earnings in the third quarter of 2020 benefited from insurance recoveries related to the Rome fire and Bogalusa recovery boiler event.

Entering the fourth quarter of 2020, sales volumes for boxes are expected to be lower, driven by three fewer shipping days compared with the third quarter of 2020. Demand continues to be mixed reflecting continued strong demand for eCommerce, protein and shipping and distribution, offset by slower demand for fresh foods and durable and other non-durable goods. Export containerboard volumes are expected to be modestly higher. Average sales margins for boxes are expected to be lower, slightly offset by higher export containerboard average sales margins. Operating costs are expected to improve without the cost of weather related events that occurred in the third quarter of 2020. Planned maintenance downtime costs are expected to be $35 million lower in the fourth quarter of 20202021 compared with the third quarter of 2020. Input costs were significantly higher driven by recovered fiber, energy, chemicals and wood.

Entering the fourth quarter of 2021, sales volumes for boxes and export containerboard are expected to be higher compared to the third quarter of 2021. Average sales margins are also expected to be higher, reflecting previous price increases. Operating costs are expected to be lower. Planned maintenance downtime costs are expected to be $4 million higher in the fourth quarter of 2021 compared with the third quarter of 2021. Input costs are expected to be higher primarily for ~~energy.~~recovered fiber, energy and chemicals.

~~Table of Contents~~


EMEA Industrial Packaging	EMEA Industrial Packaging	2020						2019						EMEA Industrial Packaging	2021						2020
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	Sales	$	306	$	297	$	953	$	324	$	331	$	994	Sales	$	331	$	394	$	1,121	$	306	$	297	$	953
Operating Profit (Loss)	Operating Profit (Loss)	$	3	$	5	$	18	$	(1)	$	(7)	$	(23)	Operating Profit (Loss)	$	(4)	$	12	$	34	$	3	$	5	$	18

EMEA Industrial Packaging sales volumes for boxes in the third quarter of ~~2020~~2021 were ~~higher~~lower compared with the second quarter of ~~2020 as the impacts of the COVID-19 pandemic showed some recovery in all regions at the end of the third quarter, partially offset~~2021 driven by seasonally lower volumes in Morocco. Average sales margins for boxes were ~~stable in Europe and seasonally~~ lower ~~in Morocco and Turkey.~~reflecting increased containerboard costs, partially offset by higher box prices. Operating costs were lower. Planned maintenance downtime costs were $3$2 million higher in the third quarter of ~~2020~~2021 compared with the second quarter of ~~2020 with an outage at our Madrid, Spain mill.~~2021. Input costs were ~~lower. Earnings were negatively affected by unfavorable foreign currency impacts,~~higher, primarily for recovered fiber and energy. The company completed the sale of its business in ~~Morocco.~~Turkey during the second quarter of 2021.

Compared with the third quarter of ~~2019,~~2020, sales volumes in the third quarter of ~~2020~~2021 were ~~slightly lower, primarily due to~~higher, reflecting recovery of the impacts of the COVID-19 ~~pandemic mostly offset by strong year over year recovery in Turkey.~~pandemic. Average sales margins ~~improved significantly, reflecting stable sales prices~~ for boxes ~~and~~were lower driven by higher containerboard costs. Average sales margins for containerboard were higher reflecting higher sales prices. Operating costs improved ~~from the ramp-up~~reflecting strong

Table of ~~the Madrid mill.~~Contents

operations and cost management. Planned maintenance downtime ~~costs~~ were $3$1 million ~~higher~~lower in the third quarter of ~~2020~~2021 compared with the third quarter of ~~2019.~~2020. Input costs were ~~lower.~~higher, primarily for recovered fiber and energy. Earnings ~~were negatively affected by unfavorable foreign currency impacts~~benefited from the recent box plant acquisitions in ~~Turkey.~~Spain.

Looking ahead to the fourth quarter of ~~2020,~~2021, sales volumes for boxes are expected to be ~~seasonally higher, primarily in Morocco.~~higher. Average sales margins are expected to be ~~slightly higher.~~lower due to continued rising containerboard pricing. Operating costs are expected to be higher. Planned maintenance downtime costs are expected to be $3$1 million lower in the fourth quarter of ~~2020~~2021 compared with the third quarter of ~~2020.~~2021. Input costs are expected to be higher ~~primarily for energy.~~due to rising energy costs.

Brazilian Industrial Packaging 2020 2019
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 52 $ 42 $ 148 $ 61 $ 58 $ 176
Operating Profit (Loss) $ — $ (2) $ (3) $ (6) $ (1) $ (12)


Brazilian Industrial Packaging	2021						2020
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	—	$	—	$	—	$	52	$	42	$	148
Operating Profit (Loss)	$	—	$	—	$	—	$	—	$	(2)	$	(3)

On March 29, 2020 International Paper announced that it had entered into an agreement to sell its Brazilian Industrial Packaging business. The transaction closed October 14, 2020.


European Coated Paperboard	European Coated Paperboard	2020						2019						European Coated Paperboard	2021						2020
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	Sales	$	90	$	84	$	266	$	92	$	92	$	275	Sales	$	52	$	102	$	252	$	90	$	84	$	266
Operating Profit (Loss)	Operating Profit (Loss)	$	11	$	12	$	47	$	17	$	8	$	47	Operating Profit (Loss)	$	15	$	19	$	60	$	11	$	12	$	47

On August 6, 2021 International Paper completed the sale of our Kwidzyn, Poland mill, which included our coated paperboard business in Europe. The third quarter of 2021 reflects one month of coated paperboard sales and operating profit in Europe. The discussion below focuses on our remaining coated paperboard business in Russia.

European Coated Paperboard sales volumes in the third quarter of ~~2020~~2021 compared with the second quarter of ~~2020~~2021 were ~~higher in both Europe and Russia as the negative demand impact of the COVID-19 pandemic showed some improvement.~~higher. Average sales margins were ~~lower in both regions driven~~flat reflecting higher average sales prices offset by an unfavorable mix. Operating costs were ~~higher in Europe and flat in Russia.~~stable. Planned maintenance downtime costs were $3$5 million ~~higher~~lower in the third quarter of ~~2020~~2021 compared with the second quarter of ~~2020.~~2021 in Russia. Input costs were ~~higher in Europe primarily for energy and purchased pulp. In Russia, input costs were lower, driven by wood and chemicals. Earnings benefited from favorable foreign currency impacts in both regions.~~flat.

Compared with the third quarter of ~~2019,~~2020, sales volumes ~~increased in Russia, but decreased in Europe reflecting the demand impact of the COVID-19 pandemic.~~were lower. Average sales margins were ~~lower in both regions,~~higher reflecting ~~lower~~higher average sales prices and ~~an unfavorable~~a favorable mix. Operating costs were ~~higher in Europe and lower in Russia. Planned~~flat. There were no planned maintenance downtime ~~costs were $7 million higher~~outages in either the third quarter of 2021 or the third quarter of 2020 ~~compared with the third quarter of 2019.~~in Russia. Input costs were ~~lower in Europe~~slightly higher primarily for ~~purchased pulp, energy~~wood and ~~wood. In Russia, input costs were stable. Earnings benefited from favorable foreign currency impacts in both regions.~~chemicals.

~~Entering~~On October 1, 2021, International Paper successfully completed the ~~fourth quarter~~spin-off of ~~2020, sales volumes are expected to be lower~~our global papers business, including our remaining coated paperboard business in Russia, and stable in Europe. Average sales margins are expected to be stable in Europe and higher in Russia. Operating costs are expected to be higher in both regions. Planned maintenance downtime costs are expected to be $7 million lower in the fourth quarter of 2020 compared with the third quarter of 2020. Input costs are expected to be stable in both regions.into a standalone, publicly traded company named Sylvamo Corporation.

~~Table of Contents~~

Global Cellulose Fibers


Total Global Cellulose Fibers	Total Global Cellulose Fibers	2020						2019						Total Global Cellulose Fibers	2021						2020
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	Sales	$	564	$	605	$	1,737	$	624	$	661	$	1,974	Sales	$	729	$	671	$	1,981	$	564	$	605	$	1,737
Operating Profit (Loss)	Operating Profit (Loss)	$	(59)	$	(10)	$	(123)	$	4	$	—	$	39	Operating Profit (Loss)	$	96	$	10	$	24	$	(59)	$	(10)	$	(123)

Global Cellulose Fibers net sales ~~were 7% lower~~ in the third quarter of ~~2020 than in~~2021 were 9% higher compared with the second quarter of ~~2020~~2021 and ~~10% lower~~29% higher than in the third quarter of ~~2019.~~2020. Operating profit in the third quarter of ~~2020 was~~2021 improved significantly ~~lower~~ compared to both the second quarter of ~~2020~~2021 and the third quarter of ~~2019.~~2020.

On August 6, 2021 International Paper completed the sale of our Kwidzyn, Poland mill, including its cellulose fibers business. The third quarter of 2021 reflects one month of the Kwidzyn, Poland mill sales and operating profit. On October 1, 2021, International Paper successfully completed the spin-off of our global papers business, including our cellulose fibers business in France and Russia, into a standalone, publicly traded company named Sylvamo Corporation.

Sales volumes in the third quarter of ~~2020~~2021 compared with the second quarter of ~~2020~~2021 were ~~seasonally lower~~flat and ~~reflect slower COVID-19 pandemic-related consumer demand. Weakened demand~~continue to be impacted by shipping delays due to significant port congestion in the ~~paper segment was partially offset by increased consumer demand for absorbent hygiene and tissue and towel products.~~U.S. Total maintenance and economic downtime was about ~~96,000~~28,000 tons ~~higher~~lower in the third quarter of ~~2020~~2021 compared with the second quarter of ~~2020 primarily~~2021 due to ~~higher~~ maintenance downtime. Average sales margins improved significantly, reflecting flow through of previous sales price ~~increases.~~increases and an improved product mix. Operating costs were lower, ~~driven~~partially offset by ~~seasonality and one-time items.~~higher distribution costs reflecting the challenging export supply chain

Table of Contents

environment. Planned maintenance downtime costs in the third quarter of ~~2020~~2021 were ~~$43~~$18 million ~~higher~~lower compared with the second quarter of 2021. Input costs were higher, primarily for wood, chemicals and energy.

Compared with the third quarter of 2020, sales volumes in the third quarter of 2021 were higher but were impacted by the shipping delays due to port congestion. Total maintenance and economic downtime was about 80,000 tons lower in the third quarter of 2021, driven by maintenance and economic downtime. Average sales prices were significantly higher for both fluff and market pulp. Operating costs were higher due to inflation. Distribution costs were also higher. Planned maintenance downtime costs in the third quarter of 2021 were $26 million lower compared with the third quarter of 2020. Input costs were higher primarily for wood, ~~energy~~chemicals and ~~chemicals.~~

Compared with the third quarter of 2019, sales volumes in the third quarter of 2020 were lower for both fluff and market pulp driven by slowing demand reflecting customer destocking related to the COVID-19 pandemic. Total maintenance and economic downtime was about 13,000 tons higher in the third quarter of 2020, primarily due to higher maintenance downtime. Average sales prices were significantly lower for both fluff and market pulp. Operating costs were favorable reflecting one-time benefits in the third quarter of 2020 and the negative impacts of Hurricane Dorian in the third quarter of 2019. Planned maintenance downtime costs in the third quarter of 2020 were $32 million higher compared with the third quarter of 2019. Input costs were stable.energy.

Entering the fourth quarter of ~~2020,~~2021, sales volumes are expected to be ~~stable.~~slightly lower. Average sales margins are expected to be ~~lower.~~stable. Planned maintenance downtime costs in the fourth quarter of ~~2020~~2021 are expected to be $4$36 million higher compared with the third quarter of ~~2020.~~2021. Operating costs are expected to be seasonally higher. ~~Operating costs will be negatively affected by the non-repeat of one-time benefits in the third quarter of 2020.~~ Input costs are expected to ~~be higher primarily~~increase for wood, chemicals and energy.

Printing Papers


Total Printing Papers	Total Printing Papers	2020						2019						Total Printing Papers	2021						2020
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	Sales	$	743	$	583	$	2,234	$	1,071	$	1,088	$	3,224	Sales	$	846	$	846	$	2,473	$	743	$	583	$	2,234
Operating Profit (Loss)	Operating Profit (Loss)	$	63	$	(11)	$	148	$	162	$	114	$	420	Operating Profit (Loss)	$	106	$	76	$	262	$	63	$	(11)	$	148

On October 1, 2021, International Paper successfully completed the spin-off of our global papers business into a standalone, publicly traded company named Sylvamo Corporation.

Printing Papers net sales for the third quarter of ~~2020~~2021 were ~~27% higher than in~~flat compared with the second quarter of ~~2020~~2021 and ~~31% lower~~14% higher than in the third quarter of ~~2019.~~2020. Operating profit in the third quarter of ~~2020~~2021 was ~~significantly~~39% higher compared with the second quarter of ~~2020~~2021 and ~~significantly lower~~68% higher compared with the third quarter of ~~2019.~~2020.


North American Papers	North American Papers	2020						2019						North American Papers	2021						2020
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	Sales	$	362	$	265	$	1,073	$	492	$	486	$	1,474	Sales	$	425	$	410	$	1,201	$	362	$	265	$	1,073
Operating Profit (Loss)	Operating Profit (Loss)	$	31	$	(23)	$	31	$	76	$	41	$	174	Operating Profit (Loss)	$	45	$	18	$	78	$	31	$	(23)	$	31

North American Papers sales volumes in the third quarter of ~~2020~~2021 were ~~higher~~flat compared with the second quarter of 2021. Total maintenance and economic downtime was about 9,000 tons lower in the third quarter of 2021 compared with the second quarter of 2021 due to maintenance downtime. Average sales margins improved reflecting higher sales prices. Operating costs were lower reflecting strong mill operations. Planned maintenance downtime costs were $19 million lower in the third quarter of 2021, compared with the second quarter of 2021. Input costs were higher, primarily for wood, energy and chemicals.

Compared with the third quarter of 2020, ~~across all grades for uncoated freesheet paper~~sales volumes in the third quarter of 2021 were higher reflecting ~~signs of~~demand recovery from ~~the unprecedented demand decline due to~~ the COVID-19 pandemic. Total maintenance and economic downtime was about ~~128,000~~78,000 tons lower in the third quarter of ~~2020~~2021 compared with the ~~second~~third quarter of 2020 primarily due to economic downtime. Average sales margins were ~~stable. Operating costs were flat. Planned maintenance downtime costs were $1 million~~ higher, ~~in the third quarter of 2020, compared with the second quarter of 2020. Input costs were flat.~~

~~Compared with the third quarter of 2019, sales volumes in the third quarter of 2020 were significantly lower across all grades for uncoated freesheet paper~~ driven by ~~the demand impact of the COVID-19 pandemic. Total maintenance and economic~~

~~Table of Contents~~

~~downtime was about 48,000 tons~~ higher ~~in the third quarter of 2020 compared with the third quarter of 2019 primarily due to economic downtime associated with the COVID-19 pandemic. Average sales margins were lower, reflecting lower~~ average sales prices. Operating costs were ~~stable.~~lower. Planned maintenance downtime costs were $3$6 million lower in the third quarter of ~~2020~~2021 compared with the third quarter of ~~2019.~~2020. Input costs were ~~favorable,~~higher, primarily for wood, energy and chemicals.

~~Entering~~


European Papers	2021						2020
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	218	$	255	$	723	$	232	$	209	$	728
Operating Profit (Loss)	$	16	$	15	$	53	$	17	$	13	$	71

On August 6, 2021 International Paper completed the ~~fourth~~sale of our Kwidzyn, Poland mill. The third quarter of ~~2020,~~2021 reflects one month of the Kwidzyn, Poland mill sales volumes are expected to be slightly higher driven by export sales. Average sales margins are expected to be stable. Operating costs are expected to be seasonally higher. Planned maintenance downtime costs are expected to be slightly lower in the fourth quarter of 2020. Input costs are expected to be higher, primarily for energy and ~~wood.~~

European Papers 2020 2019
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 232 $ 209 $ 728 $ 299 $ 321 $ 929
Operating Profit (Loss) $ 17 $ 13 $ 71 $ 41 $ 29 $ 117

operating profit.

European Papers sales volumes for uncoated freesheet paper in the third quarter of ~~2020~~2021, compared with the second quarter of ~~2020~~2021, were ~~stable in Europe and~~ higher in Russia ~~but continue to be impacted by the unprecedented demand decline due to the COVID-19 pandemic. Economic downtime due to the COVID-19 pandemic demand impact was lower~~and flat in ~~the third quarter of 2020 compared to the second quarter of 2020.~~Europe. Average sales margins for uncoated freesheet paper ~~decreased~~were higher in ~~both regions,~~Europe reflecting ~~lower~~higher average sales ~~prices and an unfavorable mix in Russia.~~prices. In Russia, average sales margins were stable. Operating costs were ~~lower in Europe, but~~ higher in ~~Russia. Planned~~both regions. Excluding Kwidzyn, planned maintenance downtime costs were $8 million ~~higher~~lower in the third quarter of ~~2020~~2021 compared

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to the second quarter of ~~2020.~~2021. Input costs were ~~lower~~higher in both regions, primarily for ~~wood~~energy in Europe and ~~chemicals.~~packaging in Russia. Earnings benefited from favorable foreign currency impacts, primarily in ~~Russia, partially offset by unfavorable foreign currency impacts in Europe.~~Russia.

Sales volumes for uncoated freesheet paper in the third quarter of ~~2020,~~2021 compared with the third quarter of ~~2019,~~2020 were ~~lower~~higher in both Europe and Russia, reflecting recovery of the ~~negative~~significant decline in demand ~~impact of~~due to the COVID-19 pandemic. Earnings in both regions were negatively impacted by economic downtime in the third quarter of 2020 ~~due to~~driven by the COVID-19 ~~demand impact.~~pandemic. Average sales margins for uncoated freesheet paper were lower in ~~both regions~~Europe reflecting lower average sales prices and an unfavorable mix. In Russia, average sales margins were higher driven by higher average sales prices. Operating costs were ~~lower~~higher in both ~~Europe and Russia reflecting strong cost management. Planned~~regions. Excluding Kwidzyn, planned maintenance downtime costs were $16 million higher in the third quarter of 2020 compared with the third quarter of 2019. In Europe, input costs were lower, primarily for wood, energy and chemicals. In Russia, input costs were flat. Earnings were negatively affected by unfavorable foreign currency impacts in Europe, mostly offset by favorable foreign currency impacts in Russia.

Looking forward to the fourth quarter of 2020, sales volumes for uncoated freesheet paper are expected to improve in both regions. Average sales margins are expected to be stable in both regions. Operating costs are expected to be higher in both Europe and Russia. Planned maintenance downtime costs are expected to be $14 million lower in the fourth quarter of 2020flat compared with the third quarter of 2020. Input costs ~~are expected to be~~were higher in both regions, primarily for energy ~~wood~~in Europe and ~~chemicals.~~packaging in Russia.


Brazilian Papers	Brazilian Papers	2020						2019						Brazilian Papers	2021						2020
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales (a)	Sales (a)	$	150	$	108	$	434	$	247	$	240	$	702	Sales (a)	$	200	$	189	$	557	$	150	$	108	$	434
Operating Profit (Loss)	Operating Profit (Loss)	$	15	$	(1)	$	46	$	44	$	37	$	114	Operating Profit (Loss)	$	45	$	43	$	131	$	15	$	(1)	$	46

(a)Includes intra-segment sales of $1$(3) million and $5$1 million for the three months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively; ~~$(1)~~$8 million and ~~$12~~$(1) million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively; and $1$8 million and ~~$25 million~~$1 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Brazilian Papers sales volumes in the third quarter of ~~2020,~~2021, compared with the second quarter of ~~2020,~~2021, were higher for both domestic and export shipments of uncoated freesheet ~~paper reflecting some improvement from the unprecedented decline in demand due to the COVID-19 pandemic. Economic~~paper. Average sales margins improved driven by higher domestic and export sales prices and a favorable geographic mix. Operating costs were slightly higher. Planned maintenance outage downtime ~~due to the demand impact of the COVID-19 pandemic was lower~~costs were $7 million higher in the third quarter of ~~2020~~2021 compared with the second quarter of 2020. Average sales margins were lower driven by lower export sales prices and an unfavorable geographic mix. Operating costs were stable. Planned maintenance outage downtime costs were $1 million lower in the third quarter of 2020 compared with the second quarter of 2020.2021. Input costs were ~~flat.~~higher primarily for purchased pulp, chemicals and energy.

Compared with the third quarter of ~~2019,~~2020, sales volumes for uncoated freesheet paper in the third quarter of ~~2020 were lower~~2021 increased in both ~~export~~domestic and ~~domestic~~export markets reflecting recovery from the ~~demand impact of the COVID-19 pandemic. Earnings were negatively impacted by economic downtime due to the~~negative demand impact of the COVID-19 pandemic. Average sales margins were ~~lower~~higher reflecting ~~lower~~higher average domestic and export sales prices and ~~an unfavorable geographic mix. Operating costs were lower. Planned maintenance~~

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~~outage expenses were $1 million lower in the third quarter of 2020 compared with the third quarter of 2019. Input costs were lower, primarily for virgin fiber and pulp.~~

Entering the fourth quarter of 2020, sales volumes for uncoated freesheet paper are expected to improve for both domestic and export shipments as demand continues to recover from COVID-19 negative demand impacts. Average sales margins are expected to be higher driven by a favorable geographic mix. Operating costs ~~are expected to be stable.~~were slightly higher. Planned maintenance outage expenses ~~are expected to be lower~~were $5 million higher in the ~~fourth~~third quarter of ~~2020~~2021 compared with the third quarter of 2020. Input costs ~~are expected to be higher.~~

Indian Papers 2020 2019
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ — $ — $ — $ 38 $ 53 $ 144
Operating Profit (Loss) $ — $ — $ — $ 1 $ 7 $ 15

~~On May 29, 2019, International Paper announced it had entered into an agreement to sell its controlling interest in its Indian Papers business. The transaction closed on October 30, 2019.~~were higher, primarily for purchased pulp, chemicals and energy.

Equity Earnings, Net of Taxes – Ilim

International Paper accounts for its 50% equity interest in Ilim S.A. (Ilim) using the equity method of accounting. Ilim is a separate reportable industry segment whose primary operations are in Russia. The Company recorded equity earnings (loss), net of taxes, of $95 million in the third quarter of 2021, compared with $101 million in the second quarter of 2021 and $(33) million in the third quarter of ~~2020, compared~~2020. In the second and third quarters of 2021, the foreign exchange gains and losses included in equity earnings were not material and Ilim Group had no US dollar-denominated debt outstanding at September 30, 2021.

Compared with ~~$63 million in~~ the second quarter of ~~2020 and $18 million~~2021, sales volumes in the third quarter of ~~2019. In~~2021 were 8% lower overall, primarily for sales of softwood pulp in China, other export markets and Russia, and sales of hardwood pulp in China. Containerboard sales in China and Russia were slightly lower, but increased in other export markets. Average sales margins increased for softwood pulp and containerboard in all markets. Average sales margins for hardwood pulp were relatively flat in China, but increased in Russia and other export markets. Input costs for fuel and chemicals were higher. Following maintenance outages at the Ust-Ilimsk, Bratsk and Koryazhma mills in the third quarter of ~~2020,~~2021, repair and maintenance expenses increased. Distribution costs were higher primarily due to the ~~after-tax foreign exchange impact primarily on the remeasurement~~global shortage of ~~U.S. dollar-denominated net debt was a loss of $55 million, compared with a gain of $34 million in the second quarter of 2020.~~shipping containers and increased tariffs.

Compared with the ~~second~~third quarter of 2020, sales volumes in the third quarter of ~~2020 were 3% higher~~2021 decreased overall by 5%, primarily for sales of softwood pulp and hardwood pulp in China, partially offset by ~~lower~~higher sales of ~~hardwood pulp and containerboard in Russia and lower sales of softwood pulp in other export markets. Average sales price realizations decreased for~~ softwood pulp and hardwood pulp in China, Russia and other export markets. Average sales price realizations for containerboard increased in all regions. Input costs were relatively flat. Repair and outage costs were higher due to scheduled maintenance outages at the Koryzhama and Bratsk mills in the third quarter.

Compared with the third quarter of 2019, sales volumes in the third quarter of 2020 increased overall by 20%, primarily from increased sales of softwood pulp in China, Russia and other export markets, partially offset by lower sales of hardwood pulp in China and Russia. Sales of containerboard in China and other export markets ~~improved.~~were higher, but declined in Russia. Average sales ~~price realizations~~margins for softwood pulp, ~~and~~ hardwood pulp ~~were lower~~and containerboard increased in all regions. ~~Average sales price realizations for containerboard were slightly higher in China, but lower in Russia and other export markets.~~ Input costs, primarily for wood, ~~increased.~~fuel and chemicals were higher. Distribution costs ~~were higher.~~increased. An after-tax foreign exchange net loss of $4$55 million primarily on the remeasurement of U.S. dollar denominated net debt was recorded in the third quarter of ~~2019.~~2020.

Looking forward to the fourth quarter of ~~2020,~~2021, sales volumes are expected to ~~be higher.~~increase. Based on pricing to date in the current quarter, average sales ~~price realizations~~margins are projected to ~~increase primarily for softwood pulp and containerboard~~decrease compared with the third quarter of ~~2020.~~2021. Repair and maintenance costs will decrease as there are no scheduled mill outages in the fourth quarter. Input costs for wood ~~and fuel~~ are expected to be ~~seasonally~~moderately higher. Distribution costs are projected to increase.

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Equity Earnings – GPIP

~~International Paper recorded~~There were no Graphic Packaging equity earnings in the third quarter of 2021, compared with $3 million in the second quarter of 2021 and $11 million in the third quarter of ~~2020, compared with $11 million in the second quarter of 2020 and $10 million in the third quarter of 2019.~~2020. As of ~~September~~June 30, ~~2020,~~2021, the ~~Company's~~Company no longer had an ownership interest in ~~GPIP was 14.8%.~~GPIP.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations totaled ~~$2.3~~$1.9 billion for the first nine months of ~~2020,~~2021, compared with ~~$2.7~~$2.3 billion for the comparable ~~2019~~2020 nine-month period.

Investments in capital projects, net of insurance recoveries, totaled $348 million in the first nine months of 2021, compared to $657 million in the first nine months of ~~2020, compared to $913 million in the first nine months of 2019.~~2020. Full-year ~~2020~~2021 capital spending is currently expected to be approximately ~~$800~~$600 million, ~~which represents a reduction of approximately $200 million from our initial plan. This represents 62%~~or 49% of depreciation and ~~amortization, including approximately $290 million of strategic investments.~~

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amortization.

Financing activities for the first nine months of ~~2020~~2021 included a $379 million net increase in debt versus a $1.1 billion net decrease in debt ~~versus a $391 million net decrease in debt~~ during the comparable ~~2019~~2020 nine-month period.

Amounts related to early debt extinguishment during the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2020		2019		2020		2019		In millions	2021		2020		2021		2020
Early debt reductions (a)	Early debt reductions (a)	$	903	$	77	$	1,190	$	245	Early debt reductions (a)	$	200	$	903	$	1,097	$	1,190
Pre-tax early debt extinguishment (gain) loss, net	Pre-tax early debt extinguishment (gain) loss, net	105		2		131		(1)		Pre-tax early debt extinguishment (gain) loss, net	35		105		223		131

(a)Reductions related to notes with interest rates of 3.55% with original maturities of 2029 and ranging from 3.00% to 7.50% with original maturities from 2021 to 2027 ~~and from 3.00% to 4.40% with original maturities from 2027 to 2047~~ for the three months ended September 30, 2021 and 2020, respectively, and ~~2019, respectively,~~from 3.00% to 5.15% with original maturities from 2027 to 2048 and from 3.00% to 7.50% with original maturities from 2021 to 2048 ~~and from 3.00% to 9.50% with original maturities from 2024 to 2048~~ for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

At September 30, ~~2020,~~2021, contractual obligations for future payments of debt maturities (including finance lease liabilities disclosed in N~~ote~~Note 11 - Leases ~~of the Condensed Notes to the Consolidated Financial Statements~~ and excluding the timber monetization structures disclosed in Note 16 - Variable Interest Entities ~~of the Condensed Notes to the Consolidated Financial Statements~~) by calendar year were as follows: ~~$146 million in 2020; $50~~$113 million in 2021; $224 million in 2022; $409 million in 2023; $200 million in ~~2022; $361~~2024; $257 million in ~~2023; $532 million in 2024;~~2025; and ~~$7.4~~$7.3 billion thereafter.

Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At September 30, ~~2020,~~2021, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and Moody’s, respectively. In addition, the Company held short-term credit ratings of A2 and P2 by S&P and Moody's, respectively, for borrowings under the Company's commercial paper program.

At September 30, ~~2020,~~2021, International Paper’s credit agreements totaled ~~$2.8~~$2.1 billion, which is comprised of ~~the $750 million contractually committed revolving credit agreement,~~ the $1.5 billion contractually committed bank credit agreement and up to $550 million under the receivables securitization program. Management believes these credit agreements are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. At September 30, ~~2020,~~2021, the Company had no borrowings outstanding under ~~the $750 million revolving credit agreement,~~ the $1.5 billion credit agreement or the $550 million receivables securitization program. The Company’s credit agreements are not subject to any restrictive covenants other than the financial covenants as disclosed in Note 17 - Debt ~~of the Condensed Notes to the Consolidated Financial Statements~~, and the borrowings under the receivables securitization program being limited by eligible receivables. The Company was in compliance with all its debt covenants at September 30, ~~2020~~2021 and was well below the thresholds stipulated under the covenants as defined in the credit agreements. Further the financial covenants do not restrict any borrowings under the credit agreements.

In addition to the ~~$2.8~~$2.1 billion incapacity under the Company's credit agreements, International Paper has a commercial paper program with a borrowing capacity of $1.0 billion. Under the terms of the program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. As of September 30, ~~2020,~~2021, the Company had ~~$140 million of~~no borrowings outstanding under the ~~program at~~program.

On October 28, 2021, the Company launched a ~~weighted average~~debt tender to purchase up to $500 million of the Company's outstanding debt with interest ~~rate of 0.17%.~~rates ranging from 4.35% to 6.00% and maturity dates ranging from 2035 to 2048.

International Paper expects to be able to meet projected capital expenditures, service existing debt, ~~and~~ meet working capital and dividend requirements and make common stock and/or debt repurchases for the next 12 months with current cash balances and

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cash from operations, supplemented as required by its existing credit facilities. The Company will continue to rely on debt and capital markets for the majority of any necessary long-term funding not provided by operating cash flows. Funding decisions will be guided by our capital structure planning objectives. The primary goals of the Company’s capital structure planning are to maximize financial flexibility and maintain appropriate levels of liquidity to meet our needs while managing balance sheet debt and interest ~~expense.~~expense, and we have purchased, and may continue to repurchase, our common stock (under our existing share repurchase program) and debt to the extent consistent with this capital structure planning. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors. ~~The COVID-19 pandemic has negatively impacted the global economy and created significant volatility and disruption of capital and financial markets. As a result of the current economic environment,~~During 2020, management ~~has taken~~took various actions to further strengthen the Company’s liquidity ~~position. In addition~~position in response to the ~~Company entering into a $750 million revolving credit agreement and~~COVID-19 pandemic. This included the Company amending the receivable securitization program from uncommitted to committed financing, the Company is also on track to reduce capital expenditures by approximately $200 million from the initial 2020 plan, has indefinitely suspended the Company’s share repurchase program beginning April 2020, and has been deferring the payment of our payroll taxes as allowed under CARES Act. The CARES Act allows for the deferral of the payment of the employer portion of Social Security taxes accrued between March 27, 2020, and December 31, 2020. Under the CARES Act 50% of the deferred

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payroll taxes will be paid by December 31, 2021 and the remainder will be paid by December 31, 2022. We believe that ~~these~~our credit agreements, commercial paper program, and the actions taken in response to COVID-19 provide us with sufficient liquidity to operate in ~~this uncertain~~the current environment; however, an extended period of economic disruption could impact our access to additional sources of liquidity.

During the first nine months of 2021, International Paper used 1.8 million shares of treasury stock for various incentive plans. International Paper also acquired 7.7 million shares of treasury stock, including restricted stock tax withholdings. Repurchases of common stock and payments of restricted stock withholding taxes totaled $425 million, including $398 million related to shares repurchased under the Company's repurchase program. In addition, on October 12, 2021, the Company announced that its board of directors authorized the repurchase of $2 billion additional shares of common stock under the Company's repurchase program (in addition to the existing amount available for purchase, which was $1.3 billion as of September 30, 2021).

During the first nine months of 2020, International Paper used approximately 2.0 million shares of treasury stock for various incentive plans. International Paper also acquired 1.0 million shares of treasury stock, including restricted stock tax ~~withholdings.~~withholding. Repurchases of common stock and payments of restricted stock withholding taxes totaled $42 million, including $14 million related to shares repurchased under the Company's repurchase program. ~~The Company indefinitely suspended its repurchase program in April 2020.~~

During the first nine months of 2019, International Paper used approximately 3.4 million shares of treasury stock for various incentive plans. International Paper also acquired 11.9 million shares of treasury stock, including restricted stock tax withholding. Repurchases of common stock and payments of restricted stock withholding taxes totaled $535 million, including $486 million related to shares repurchased under the Company's repurchase program.

Cash dividend payments related to common stock totaled ~~$605~~$602 million and ~~$595~~$605 million for the first nine months of ~~2020~~2021 and ~~2019,~~2020, respectively. Dividends were $1.5375 per share and ~~$1.5000~~$1.5375 per share for the first nine months in 2021 and 2020, ~~and 2019,~~ respectively. The Company announced on October 12, 2021, a decrease in the Company's quarterly dividend from $0.5125 per share to $0.4625 per share for the fourth quarter of 2021, which takes into account the fact that the spin-off completed on October 1, 2021, will result in a decrease in the amount of cash generated by the Company based on the historical performance of the Printing Papers business included in the spin-off.

Our pension plan is currently sufficiently funded and we do not anticipate any required contributions for the next 12 months.

Variable Interest Entities

Information concerning variable interest entities is set forth in Note 15 in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. In connection with the 2006 International Paper installment sale of forestlands, we received $4.8 billion of installment notes. These installment notes were used by variable interest entities as collateral for borrowings from third-party lenders. These variable interest entities were restructured in 2015 when the installment notes and third-party loans were extended. The restructured variable interest entities ~~hold~~held installment notes of ~~$4.85~~$4.8 billion ~~that mature in August 2021~~ and third-party loans of ~~$4.22~~$4.2 billion that ~~mature~~both matured in ~~November and December of 2020. These third-party loans are shown in Current nonrecourse financial liabilities of variable interest entities on the accompanying consolidated balance sheet.~~August 2021. We ~~are currently negotiating the extension of~~settled the third-party loans ~~to August 2021 and expect to complete~~at their maturity with the ~~extension before~~proceeds from the ~~maturity dates.~~

~~Failure to extend these third-party loans to August 2021 prior to their respective maturity dates~~installment notes. This resulted in ~~November and December~~cash proceeds of ~~2020 could necessitate a disposition~~approximately $630 million representing our equity in the variable interest entities. Maturity of the installment notes ~~to facilitate the $4.22 billion debt payment. We are confident we would be able to dispose~~and termination of the ~~installment notes, if necessary.~~monetization structure also resulted in a $72 million tax liability that is expected to be paid in the fourth quarter of 2021. As of September 30, 2021, the Company's remaining deferred tax liability associated with the 2015 Financing Entities was $815 million. The nature and timing of the income tax due related to these transactions is currently under review by the Internal Revenue Service.

Ilim S.A. Shareholders’ Agreement

In October 2007, in connection with the formation of the Ilim S.A. joint venture (Ilim), International Paper entered into a shareholders' agreement that includes provisions relating to the reconciliation of disputes among the partners. This agreement provides that at any time, either the Company or its partners may commence procedures specified under the deadlock agreement. If these or any other deadlock procedures under the shareholders' agreement are commenced, although it is not obligated to do so, the Company may in certain situations choose to purchase its partners' 50% interest in Ilim. Any such transaction would be subject to review and approval by Russian and other relevant anti-trust authorities. Based on the provisions of the agreement, the Company estimates that the current purchase price for its partners' 50% interest would be

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approximately ~~$900 million,~~$2.1 billion, which could be satisfied by payment of cash or International Paper common stock, or some combination of the two, at the Company's option. The purchase by the Company of its partners’ 50% interest in Ilim would result in the consolidation of Ilim's financial position and results of operations in all subsequent periods. The parties have informed each other that they have no current intention to commence procedures specified under the deadlock provisions of the shareholders' agreement.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires International Paper to establish accounting policies and to make estimates that affect both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require judgments about matters that are inherently uncertain.

Accounting policies whose application may have a significant effect on the reported results of operations and financial position of International Paper, and that can require judgments by management that affect their application, include accounting for contingencies, impairment or disposal of long-lived assets, goodwill and other intangible assets, pensions and income taxes.

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The Company has included in its ~~2019~~2020 Form 10-K a discussion of these critical accounting policies, which are important to the portrayal of the Company’s financial condition and results of operations and require management’s judgments. The Company has not made any changes in these critical accounting policies during the first nine months of ~~2020.~~2021.

While we have taken into account certain impacts arising from COVID-19 in connection with the accounting estimates reflected in this Quarterly Report on Form 10-Q, the full impact of COVID-19 is unknown and cannot be reasonably estimated. However, we have made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are differences between these estimates and actual results, our consolidated financial statements may be affected.

FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q that are not historical in nature may be considered ~~“forward-looking” statements~~“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are often identified by the words “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “appear,” “project,” “estimate,” “intend”Words such as “expects”, “anticipates”, “believes”, “estimates” and ~~words of a~~ similar ~~nature.~~expressions identify forward-looking statements. These statements are not guarantees of future performance and reflect management’s current views ~~with respect to future events, which~~and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Factors which could cause actual results to differ include but are not limited to: (i) developments related to the COVID-19 pandemic, including the ~~severity, magnitude and duration~~spread of new variants of the ~~pandemic, negative global economic conditions arising from~~virus, the ~~pandemic,~~effectiveness, acceptance and availability of vaccines and booster shots, and associated levels of vaccination as well as the ~~development, availability and effectiveness~~possibility that strains of ~~treatments and~~the virus may be resistant to currently available vaccines, impacts of ~~governments’~~government responses to the pandemic on our operations, including vaccine mandates, impacts of the pandemic on global and domestic economic conditions, including with respect to commercial activity, our customers and business partners, ~~and~~ consumer preferences and demand, supply chain shortages and disruptions, inflationary pressures and disruptions in the ~~capital~~credit or financial markets; (ii) the level of our indebtedness and changes in interest rates; (iii) industry conditions, including but not limited to changes in the cost or availability of raw materials, energy sources and transportation ~~costs,~~sources, the availability of labor and competitive labor market conditions, competition ~~International Paper faces,~~we face, cyclicality and changes in consumer preferences, demand and pricing for ~~International Paper~~our products (including any such changes resulting from the COVID-19 pandemic); (iv) domestic and global economic conditions and political changes, changes in currency exchange rates, trade protectionist policies, downgrades in ~~International Paper’s~~our credit ratings, and/or the credit ratings of banks issuing certain letters of credit, issued by recognized credit rating ~~organizations;~~organizations, (v) the amount of ~~International Paper’s~~our future pension funding obligations, and pension and health care costs; (vi) unanticipated expenditures or other adverse developments related to the cost of compliance with existing and new environmental, tax, labor and employment, privacy, and other U.S. and non-U.S. governmental laws and regulations (including new legal requirements arising from the COVID-19 pandemic); (vii) any material disruption at any of ~~International Paper’s~~our manufacturing facilities or other adverse impact on our operations due to severe weather, natural disasters, climate change or other ~~causes (including as the result of the COVID-19 pandemic);~~causes; (viii) risks inherent in conducting business through joint ventures; (ix) ~~International Paper’s~~our ability to achieve the benefits expected from, and other risks associated with, acquisitions, joint ventures, divestitures and other corporate transactions, (x) information technology ~~risks, and~~risks; (xi) loss contingencies and pending, threatened or future litigation, including with respect to environmental related ~~matters.~~matters; (xii) our ability to realize the anticipated benefits of the spin-off transaction; and (xiii) the impact of the spin-off transaction on the Company and the relationship between the two companies going forward, including the ongoing commercial agreements and arrangements between us and Sylvamo. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements can be found in ~~International Paper’s~~our press releases and U.S. Securities and Exchange Commission filings. In addition, other risks and uncertainties not presently known to ~~International Paper~~the Company or that itwe currently ~~believes~~believe to be immaterial could affect the accuracy of any forward-looking statements. ~~International Paper~~The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information relating to quantitative and qualitative disclosures about market risk is shown on page 3638 of International Paper’s ~~2019~~2020 Form 10-K, which information is incorporated herein by reference. There have been no material changes in the Company’s exposure to market risk since December 31, ~~2019.~~2020.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported (and accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure) within the time periods specified in the Securities and Exchange Commission’s rules and forms. As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of

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the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, ~~2020~~2021 (the end of the period covered by this report).

Changes in Internal Control over Financial Reporting:

There have been no changes in our internal control over financial reporting during the quarter ended September 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

A discussion of material developments in the Company’s litigation matters occurring in the period covered by this report is found in Note 15 of the Condensed Notes to the Consolidated Financial Statements in this Form 10-Q, which is incorporated by reference. The Company is not subject to any administrative or judicial proceeding arising under any Federal, State or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that is likely to result in monetary sanctions of $1 million or more.

ITEM 1A.RISK FACTORS

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 (Part I, Item 1A) ~~other than as discussed below.~~

The current COVID-19 pandemic has had an adverse effect on portions of our business, and may have material adverse effects on our business, financial condition, results of operations and cash flows, particularly if negative economic conditions associated with COVID-19 persist or deteriorate.

The COVID-19 pandemic has resulted in authorities throughout the world implementing widespread measures attempting to contain the spread and impact of COVID-19, such as travel bans and restrictions, quarantines, stay-at-home orders, the promotion of social distancing and limitations on business activity, including business closures. These measures and the pandemic have caused a significant global economic downturn, disrupting supply chains, significantly increasing unemployment and underemployment levels, and adversely impacting consumer confidence and spending. The continued spread of COVID-19 has also led to significant disruption and volatility in the global capital and financial markets.

Although governments of countries in which we operate have generally considered forest products and the supply chain on which we depend to be “essential industries” that should remain operational during this pandemic, any significant disruption in operations at one or more of our mills, plants or other facilities as a result of the COVID-19 pandemic, including precautionary measures we take or taken by governmental authorities that limits in-person workplace contact at any of our facilities to reduce the potential for employee exposure to COVID-19, could have an adverse effect on our business or operations. If a significant portion of our workforce is unable to work effectively due to measures taken in response to the COVID-19 pandemic such as those described herein, our operations will likely be negatively impacted.

COVID-19 has had a significant negative impact on demand for our printing papers products. In addition, demand for our pulp, containerboard and corrugated box products could be unfavorably impacted if the negative economic conditions associated with COVID-19 persist or deteriorate.

In ~~addition to the reduction in demand for our products that the COVID-19 pandemic has had or could have, other negative impacts on our business, include, but are not limited to, the following:~~

•We rely on a global workforce, and we take measures to protect the health and safety of our employees, customers and others with whom we do business, while continuing to effectively manage our employees and maintain business operations. During the pandemic, we have taken additional measures and incurred additional expenses to protect the health and safety of our employees to comply with applicable government requirements and safety guidance. Our business operations may be additionally disrupted if a significant portion of our workforce is unable to work safely and effectively due to illness, quarantines, government actions, or other restrictions or measures responsive to the pandemic. Measures taken across our business operations to address health and safety may not be sufficient to prevent the spread of COVID-19 among our employee base, customers and others.

•A significant number of our employees as well as customers and others with whom we do business, continue to work remotely in response to the COVID-19 pandemic. Our business operations may be disrupted, and we may experience increased risk of adverse effects to our business, if a significant portion of our workforce or certain business operations are negatively impacted as a result of remote work arrangements, including due to cyber risks or other disruption to our technology infrastructure.

•Cost management and various cost-containment actions implemented across our business in response to the COVID-19 pandemic could hinder execution of our business strategy, including deferral of planned capital expenditures, and could adversely affect our business and results of operations.

~~Table of Contents~~

While we are closely monitoring the impact of the pandemic on all aspects of our business, the extent of the impact on our results of operations, cash flow, liquidity, and financial performance, as well as our ability to execute near-term and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and which we cannot predict or control, and some of which we are not currently aware, including, but not limited to: (a) the duration, severity and scope of the pandemic, including additional waves, increases and spikes in the number of COVID-19 cases in certain areas; (b) rapidly-changing governmental and public health directives to contain and combat the outbreak, including the duration, degree and effectiveness of directives, as well as the easing, removal and potential reinstitution of directives; (c) the development, availability and effectiveness of treatments and vaccines for COVID-19; (d) the extent and duration of the pandemic’s adverse effect on economic and social activity, consumer confidence, discretionary spending and preferences, labor and healthcare costs, and unemployment rates, any of which may reduce demand for our products; (e) any temporary reduction in our workforce, closures of our offices and facilities and our ability to adequately staff and maintain our operations; and (f) the ability of our customers and suppliers to continue their operations, which could result in terminations of contracts, losses of revenue, adverse effects to our supply chain. If the pandemic continues to create disruptions or turmoil in the credit or financial markets, or impacts our credit ratings, it could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs.

Given the inherent uncertainty surrounding COVID-19, we expect the pandemic will continue to have an adverse impact on portions of our business in the near term. If these conditions persist for a prolonged period, the COVID-19 pandemic, including any of the above factors and others that are currently unknown, may have a material adverse effect on our business, results of operations, cash flow, liquidity, or financial condition..

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in billions)
July 1, 2020 - July 31, 2020 3,415 $35.15 — $1.73
August 1, 2020 - August 31, 2020 1,663 34.79 — 1.73
September 1, 2020 - September 30, 2020 549 40.28 — 1.73
Total 5,627


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share	Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in billions)
July 1, 2021 - July 31, 2021	1,102,595	$59.94	1,101,415	$1.48
August 1, 2021 - August 31, 2021	1,979,380	58.65	1,978,334	1.37
September 1, 2021 - September 30, 2021	500,841	59.24	500,841	1.34
Total	3,582,816

(a) ~~5,627~~2,226 shares were acquired from employees or board members as a result of share withholdings to pay income taxes under the Company's restricted stock program. AThe remainder were purchased under a share repurchase ~~program~~program. Under current Board authorization that was ~~approved~~increased on ~~September 10, 2013, and increased twice on July 8, 2014, and~~ October ~~9, 2018. Through this program, which does not have an expiration date,~~12, 2021, we ~~were~~are authorized to purchase, in open market transactions (including block trades), privately negotiated transactions or otherwise, up to $5$3.3 billion of shares of our common stock. This repurchase program does not have an expiration date. As of September 30, ~~2020,~~2021, approximately ~~$1.73~~$1.3 billion aggregate amount of shares of our common stock remained authorized for purchase under this ~~program. The Company indefinitely suspended its repurchase~~ program ~~in April 2020.~~before the increase.

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ITEM 6. EXHIBITS


10.1						Share Purchase Agreement ~~Regarding Continued Employment, Termination, Severance~~for the Divestiture of International Paper-Kwidzyn SP. Z.O.O. by and ~~General Release dated September 8, 2020 between~~among International Paper ~~Company~~(Poland) Holding SP. Z.O.O., Mayr-Melnhof Containerboard International, GMBH, Mayr-Melnhof Karton AG and ~~Catherine I. Slater (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed on September 11, 2020)~~International Paper dated August 4, 2021 .

31.1						Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema.

101.CAL						XBRL Taxonomy Extension Calculation Linkbase.

101.DEF						XBRL Taxonomy Extension Definition Linkbase.

101.LAB						XBRL Taxonomy Extension Label Linkbase.

101.PRE						XBRL Extension Presentation Linkbase.

104						Cover Page Interactive Data File (formatted as Inline XBRL, and contained in Exhibit 101).

* Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the U.S. Securities and Exchange Commission upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	INTERNATIONAL PAPER COMPANY (Registrant)

October ~~30, 2020~~28, 2021	By	/s/ Tim S. Nicholls
		Tim S. Nicholls
		Senior Vice President and Chief Financial Officer

October ~~30, 2020~~28, 2021	By	/s/ Vincent P. Bonnot
		Vincent P. Bonnot
		Vice President – Finance and Controller

5049


	September 30, 2020		December 31, 2019
	(unaudited)
Assets
Current Assets
Cash and temporary investments	$	678	$	511
Accounts and notes receivable, net	3,034		3,280
Contract assets	388		393
Inventories	2,007		2,208
Current financial assets of variable interest entities (Note 16)	4,850		0
Assets held for sale	114		0
Other current assets	217		247
Total Current Assets	11,288		6,639
Plants, Properties and Equipment, net	12,410		13,004
Forestlands	288		391
Investments	1,100		1,721
Long-Term Financial Assets of Variable Interest Entities (Note 16)	2,252		7,088
Goodwill	3,304		3,347
Right of Use Assets	422		434
Deferred Charges and Other Assets	776		847
Total Assets	$	31,840	$	33,471
Liabilities and Equity
Current Liabilities
Notes payable and current maturities of long-term debt	$	179	$	168
Current nonrecourse financial liabilities of variable interest entities (Note 16)	4,220		4,220
Accounts payable	2,226		2,423
Accrued payroll and benefits	453		466
Liabilities held for sale	376		0
Other current liabilities	1,022		1,369
Total Current Liabilities	8,476		8,646
Long-Term Debt	8,525		9,597
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)	2,091		2,085
Deferred Income Taxes	2,639		2,633
Pension Benefit Obligation	1,421		1,578
Postretirement and Postemployment Benefit Obligation	246		270
Long-Term Lease Obligations	290		304
Other Liabilities	1,056		640
Equity
Common stock, $1 par value, 2020 – 448.9 shares and 2019 – 448.9 shares	449		449
Paid-in capital	6,302		6,297
Retained earnings	8,122		8,408
Accumulated other comprehensive loss	(5,132)		(4,739)
	9,741		10,415
Less: Common stock held in treasury, at cost, 2020 – 55.8 shares and 2019 – 56.8 shares	2,648		2,702
Total International Paper Shareholders’ Equity	7,093		7,713
Noncontrolling interests	3		5
Total Equity	7,096		7,718
Total Liabilities and Equity	$	31,840	$	33,471


	Gain (Loss) Recognized								Location of Gain (Loss) In Statement of Operations
	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Derivatives in Fair Value Hedging Relationships:
Interest rate contracts	$	0	$	11	$	38	$	42	Interest expense, net
Debt	0		(11)		(38)		(42)		Interest expense, net
Total	$	0	$	0	$	0	$	0
Derivatives in Net Investment Hedging Relationships:
Foreign exchange contracts	$	1	$	0	$	2	$	0	Net (gains) losses on sales and impairments of businesses
Total	$	1	$	0	$	2	$	0
Derivatives Not Designated as Hedging Instruments:
Electricity contract	$	1	$	(5)	$	(2)	$	0	Cost of products sold
Foreign exchange contracts	0		(1)		0		(2)		Cost of products sold
Total	$	1	$	(6)	$	(2)	$	(2)


In thousands of tons	Three Months Ended September 30, 2020	Three Months Ended September 30, 2019	Three Months Ended June 30, 2020
Economic-related downtime	126	283	328
Maintenance downtime	170	125	51


Indian Papers	2020						2019
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	—	$	—	$	—	$	38	$	53	$	144
Operating Profit (Loss)	$	—	$	—	$	—	$	1	$	7	$	15