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, 2021~~March 31, 2022

☐ 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 21, 2021~~April 22, 2022 was ~~387,263,169.~~370,629,339.

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INDEX


		PAGE NO.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Statement of Operations - Three Months Ended March 31, 2022 and ~~Nine Months Ended September 30,~~ 2021 ~~and 2020~~	1

	Condensed Consolidated Statement of Comprehensive Income - Three Months Ended March 31, 2022 and ~~Nine Months Ended September 30,~~ 2021 ~~and 2020~~	2

	Condensed Consolidated Balance Sheet - ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	3

	Condensed Consolidated Statement of Cash Flows - ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	4

	Condensed Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2825

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4637

Item 4.	Controls and Procedures	4637

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4738

Item 1A.	Risk Factors	4738

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4739

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	4840

Signatures		4941

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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 March 31,
		2021		2020		2021		2020			2022		2021
Net Sales	Net Sales	$	5,714	$	5,123	$	16,693	$	15,341	Net Sales	$	5,237	$	4,593
Costs and Expenses	Costs and Expenses									Costs and Expenses
Cost of products sold	Cost of products sold	3,924		3,541		11,684		10,714		Cost of products sold	3,839		3,348
Selling and administrative expenses	Selling and administrative expenses	434		360		1,255		1,110		Selling and administrative expenses	341		302
Depreciation, amortization and cost of timber harvested	Depreciation, amortization and cost of timber harvested	318		320		933		955		Depreciation, amortization and cost of timber harvested	261		268
Distribution expenses	Distribution expenses	446		377		1,272		1,149		Distribution expenses	424		335
Taxes other than payroll and income taxes	Taxes other than payroll and income taxes	42		44		131		129		Taxes other than payroll and income taxes	36		35
Restructuring and other charges, net	Restructuring and other charges, net	39		105		243		131		Restructuring and other charges, net	—		30
Net (gains) losses on sales and impairments of businesses	Net (gains) losses on sales and impairments of businesses	(360)		(5)		(367)		347		Net (gains) losses on sales and impairments of businesses	—		2
Net (gains) losses on sales of equity method investments	Net (gains) losses on sales of equity method investments	(1)		(2)		(205)		(35)		Net (gains) losses on sales of equity method investments	—		(74)
Net (gains) losses on sales of fixed assets		(86)		—		(86)		—
Net (gains) losses on mark to market investments										Net (gains) losses on mark to market investments	(46)		—
Interest expense, net	Interest expense, net	93		112		242		345		Interest expense, net	69		93
Non-operating pension expense (income)	Non-operating pension expense (income)	(51)		(11)		(156)		(31)		Non-operating pension expense (income)	(49)		(52)
Earnings (Loss) Before Income Taxes and Equity Earnings		916		282		1,747		527
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings										Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	362		306
Income tax provision (benefit)	Income tax provision (benefit)	146		50		347		211		Income tax provision (benefit)	95		88
Equity earnings (loss), net of taxes	Equity earnings (loss), net of taxes	94		(28)		247		13		Equity earnings (loss), net of taxes	93		49
Earnings (Loss) From Continuing Operations										Earnings (Loss) From Continuing Operations	$	360	$	267
Discontinued operations, net of taxes										Discontinued operations, net of taxes	—		82
Net Earnings (Loss)	Net Earnings (Loss)	$	864	$	204	$	1,647	$	329	Net Earnings (Loss)	$	360	$	349
Less: Net earnings (loss) attributable to noncontrolling interests	Less: Net earnings (loss) attributable to noncontrolling interests	—		—		2		—		Less: Net earnings (loss) attributable to noncontrolling interests	—		—
Net Earnings (Loss) Attributable to International Paper Company	Net Earnings (Loss) Attributable to International Paper Company	$	864	$	204	$	1,645	$	329	Net Earnings (Loss) Attributable to International Paper Company	$	360	$	349
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
Earnings (loss) from continuing operations										Earnings (loss) from continuing operations	$	0.96	$	0.68
Discontinued operations, net of taxes										Discontinued operations, net of taxes	—		0.21
Net earnings (loss)	Net earnings (loss)	$	2.22	$	0.52	$	4.21	$	0.84	Net earnings (loss)	$	0.96	$	0.89
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
Earnings (loss) from continuing operations										Earnings (loss) from continuing operations	$	0.95	$	0.68
Discontinued operations, net of taxes										Discontinued operations, net of taxes	—		0.20
Net earnings (loss)	Net earnings (loss)	$	2.20	$	0.52	$	4.16	$	0.83	Net earnings (loss)	$	0.95	$	0.88
Average Shares of Common Stock Outstanding – assuming dilution	Average Shares of Common Stock Outstanding – assuming dilution	392.6		394.6		395.3		394.5		Average Shares of Common Stock Outstanding – assuming dilution	379.2		394.8

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,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net Earnings (Loss)	Net Earnings (Loss)	$	864	$	204	$	1,647	$	329	Net Earnings (Loss)	$	360	$	349
Other Comprehensive Income (Loss), Net of Tax:	Other Comprehensive Income (Loss), Net of Tax:									Other Comprehensive Income (Loss), Net of Tax:
Amortization of pension and post-retirement prior service costs and net loss:	Amortization of pension and post-retirement prior service costs and net loss:									Amortization of pension and post-retirement prior service costs and net loss:
U.S. plans	U.S. plans	31		42		101		127		U.S. plans	20		34
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	Change in cumulative foreign currency translation adjustment	(70)		(28)		99		(515)		Change in cumulative foreign currency translation adjustment	(48)		(143)
Net gains/losses on cash flow hedging derivatives:	Net gains/losses on cash flow hedging derivatives:									Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period	Net gains (losses) arising during the period	(4)		(4)		3		(34)		Net gains (losses) arising during the period	—		(6)
Reclassification adjustment for (gains) losses included in net earnings (loss)	Reclassification adjustment for (gains) losses included in net earnings (loss)	(8)		6		(9)		26		Reclassification adjustment for (gains) losses included in net earnings (loss)	—		3
Total Other Comprehensive Income (Loss), Net of Tax	Total Other Comprehensive Income (Loss), Net of Tax	780		17		1,026		(395)		Total Other Comprehensive Income (Loss), Net of Tax	(28)		(112)
Comprehensive Income (Loss)	Comprehensive Income (Loss)	1,644		221		2,673		(66)		Comprehensive Income (Loss)	332		237
Net (earnings) loss attributable to noncontrolling interests		—		—		(2)		—
Other comprehensive (income) loss attributable to noncontrolling interests	Other comprehensive (income) loss attributable to noncontrolling interests	—		—		2		2		Other comprehensive (income) loss attributable to noncontrolling interests	—		1
Comprehensive Income (Loss) Attributable to International Paper Company	Comprehensive Income (Loss) Attributable to International Paper Company	$	1,644	$	221	$	2,673	$	(64)	Comprehensive Income (Loss) Attributable to International Paper Company	$	332	$	238

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, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(unaudited)					(unaudited)
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and temporary investments	Cash and temporary investments	$	2,122	$	595	Cash and temporary investments	$	1,031	$	1,295
Restricted cash	Restricted cash	1,499		—		Restricted cash	88		—
Accounts and notes receivable, net	Accounts and notes receivable, net	3,549		3,064		Accounts and notes receivable, net	3,363		3,232
Contract assets	Contract assets	427		355		Contract assets	491		378
Inventories	Inventories	2,053		2,050		Inventories	1,746		1,814
Current financial assets of variable interest entities (Note 16)		—		4,850
Assets held for sale		—		138
Current investments						Current investments	291		245
Other current assets	Other current assets	246		184		Other current assets	174		132
Total Current Assets	Total Current Assets	9,896		11,236		Total Current Assets	7,184		7,096
Plants, Properties and Equipment, net	Plants, Properties and Equipment, net	11,360		12,217		Plants, Properties and Equipment, net	10,336		10,441
Forestlands		303		311
Investments		713		1,178
Long-Term Investments						Long-Term Investments	608		751
Long-Term Financial Assets of Variable Interest Entities (Note 16)	Long-Term Financial Assets of Variable Interest Entities (Note 16)	2,270		2,257		Long-Term Financial Assets of Variable Interest Entities (Note 16)	2,280		2,275
Goodwill	Goodwill	3,274		3,315		Goodwill	3,128		3,130
Pension Assets		545		5
Overfunded Pension Plan Assets						Overfunded Pension Plan Assets	653		595
Right of Use Assets	Right of Use Assets	405		459		Right of Use Assets	373		365
Deferred Charges and Other Assets	Deferred Charges and Other Assets	705		740		Deferred Charges and Other Assets	596		590
Total Assets	Total Assets	$	29,471	$	31,718	Total Assets	$	25,158	$	25,243
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current Liabilities	Current Liabilities					Current Liabilities
Notes payable and current maturities of long-term debt	Notes payable and current maturities of long-term debt	$	233	$	29	Notes payable and current maturities of long-term debt	$	197	$	196
Current nonrecourse financial liabilities of variable interest entities (Note 16)		—		4,220
Accounts payable	Accounts payable	2,704		2,320		Accounts payable	2,657		2,606
Accrued payroll and benefits	Accrued payroll and benefits	489		466		Accrued payroll and benefits	345		440
Liabilities held for sale		—		181
Other current liabilities	Other current liabilities	1,272		1,068		Other current liabilities	943		902
Total Current Liabilities	Total Current Liabilities	4,698		8,284		Total Current Liabilities	4,142		4,144
Long-Term Debt	Long-Term Debt	8,241		8,064		Long-Term Debt	5,468		5,383
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)	Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)	2,098		2,092		Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)	2,101		2,099
Deferred Income Taxes	Deferred Income Taxes	2,728		2,743		Deferred Income Taxes	2,642		2,618
Pension Benefit Obligation		418		1,055
Underfunded Pension Benefit Obligation						Underfunded Pension Benefit Obligation	375		377
Postretirement and Postemployment Benefit Obligation	Postretirement and Postemployment Benefit Obligation	235		251		Postretirement and Postemployment Benefit Obligation	201		205
Long-Term Lease Obligations	Long-Term Lease Obligations	263		315		Long-Term Lease Obligations	241		236
Other Liabilities	Other Liabilities	1,167		1,046		Other Liabilities	1,101		1,099
Equity	Equity					Equity
Common stock, $1 par value, 2021 – 448.9 shares and 2020 – 448.9 shares		449		449
Common stock, $1 par value, 2022 – 448.9 shares and 2021 – 448.9 shares						Common stock, $1 par value, 2022 – 448.9 shares and 2021 – 448.9 shares	449		449
Paid-in capital	Paid-in capital	6,371		6,325		Paid-in capital	4,670		4,668
Retained earnings	Retained earnings	9,103		8,070		Retained earnings	9,218		9,029
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,314)		(4,342)		Accumulated other comprehensive loss	(1,694)		(1,666)
		12,609		10,502			12,643		12,480
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
Less: Common stock held in treasury, at cost, 2022 – 78.3 shares and 2021 – 70.4 shares						Less: Common stock held in treasury, at cost, 2022 – 78.3 shares and 2021 – 70.4 shares	3,756		3,398
Total Equity	Total Equity	9,623		7,868		Total Equity	8,887		9,082
Total Liabilities and Equity	Total Liabilities and Equity	$	29,471	$	31,718	Total Liabilities and Equity	$	25,158	$	25,243

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,					Three Months Ended March 31,
		2021		2020			2022		2021
Operating Activities	Operating Activities					Operating Activities
Net earnings (loss)	Net earnings (loss)	$	1,647	$	329	Net earnings (loss)	$	360	$	349
Depreciation, amortization and cost of timber harvested	Depreciation, amortization and cost of timber harvested	933		955		Depreciation, amortization and cost of timber harvested	261		309
Deferred income tax provision (benefit), net	Deferred income tax provision (benefit), net	(151)		(5)		Deferred income tax provision (benefit), net	30		20
Restructuring and other charges, net	Restructuring and other charges, net	243		131		Restructuring and other charges, net	—		30
Net (gains) losses on mark to market investments						Net (gains) losses on mark to market investments	(46)		—
Net (gains) losses on sales and impairments of businesses						Net (gains) losses on sales and impairments of businesses	—		2
Net (gains) losses on sales of equity method investments	Net (gains) losses on sales of equity method investments	(205)		(35)		Net (gains) losses on sales of equity method investments	—		(74)
Net (gains) losses on sales and impairments of businesses		(367)		347
Net (gains) losses on sales of fixed assets		(86)		—
Equity method dividends received	Equity method dividends received	149		158		Equity method dividends received	204		4
Equity (earnings) losses, net	Equity (earnings) losses, net	(247)		(13)		Equity (earnings) losses, net	(93)		(49)
Periodic pension (income) expense, net	Periodic pension (income) expense, net	(84)		24		Periodic pension (income) expense, net	(28)		(28)
Other, net	Other, net	129		212		Other, net	51		25
Changes in current assets and liabilities	Changes in current assets and liabilities					Changes in current assets and liabilities
Accounts and notes receivable	Accounts and notes receivable	(510)		96		Accounts and notes receivable	(146)		(186)
Contract assets	Contract assets	(74)		2		Contract assets	(114)		(83)
Inventories	Inventories	(133)		74		Inventories	31		93
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	716		—		Accounts payable and accrued liabilities	89		68
Interest payable	Interest payable	9		(26)		Interest payable	25		15
Other	Other	(46)		25		Other	(36)		17
Cash Provided By (Used For) Operations	Cash Provided By (Used For) Operations	1,923		2,274		Cash Provided By (Used For) Operations	588		512
Investment Activities	Investment Activities					Investment Activities
Invested in capital projects, net of insurance recoveries	Invested in capital projects, net of insurance recoveries	(348)		(657)		Invested in capital projects, net of insurance recoveries	(185)		(89)
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(80)		(64)		Acquisitions, net of cash acquired	—		(61)
Proceeds from sales of equity method investments	Proceeds from sales of equity method investments	843		500		Proceeds from sales of equity method investments	—		397
Proceeds from sales of businesses, net of cash divested	Proceeds from sales of businesses, net of cash divested	827		—		Proceeds from sales of businesses, net of cash divested	—		11
Proceeds from settlement of Variable Interest Entity installment notes		4,850		—
Proceeds from sale of fixed assets	Proceeds from sale of fixed assets	95		3		Proceeds from sale of fixed assets	5		—
Other		(3)		18
Cash Provided By (Used For) Investment Activities	Cash Provided By (Used For) Investment Activities	6,184		(200)		Cash Provided By (Used For) Investment Activities	(180)		258
Financing Activities	Financing Activities					Financing Activities
Repurchases of common stock and payments of restricted stock tax withholding	Repurchases of common stock and payments of restricted stock tax withholding	(425)		(42)		Repurchases of common stock and payments of restricted stock tax withholding	(428)		(155)
Issuance of debt	Issuance of debt	1,511		692		Issuance of debt	88		2
Reduction of debt	Reduction of debt	(1,132)		(1,795)		Reduction of debt	(3)		(111)
Change in book overdrafts	Change in book overdrafts	29		16		Change in book overdrafts	(66)		(19)
Dividends paid	Dividends paid	(602)		(605)		Dividends paid	(174)		(202)
Reduction of Variable Interest Entity loans		(4,220)		—
Net debt tender premiums paid	Net debt tender premiums paid	(221)		(124)		Net debt tender premiums paid	—		(19)
Other		(14)		(1)
Cash Provided By (Used For) Financing Activities	Cash Provided By (Used For) Financing Activities	(5,074)		(1,859)		Cash Provided By (Used For) Financing Activities	(583)		(504)
Cash Included in Assets Held for Sale	Cash Included in Assets Held for Sale	—		(11)		Cash Included in Assets Held for Sale	—		(54)
Effect of Exchange Rate Changes on Cash and Temporary Investments and Restricted Cash	Effect of Exchange Rate Changes on Cash and Temporary Investments and Restricted Cash	(7)		(37)		Effect of Exchange Rate Changes on Cash and Temporary Investments and Restricted Cash	(1)		(20)
Change in Cash and Temporary Investments and Restricted Cash	Change in Cash and Temporary Investments and Restricted Cash	3,026		167		Change in Cash and Temporary Investments and Restricted Cash	(176)		192
Cash and Temporary Investments and Restricted Cash	Cash and Temporary Investments and Restricted Cash					Cash and Temporary Investments and Restricted Cash
Beginning of period	Beginning of period	595		511		Beginning of period	1,295		595
End of period	End of period	$	3,621	$	678	End of period	$	1,119	$	787

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~~("International Paper's", "the Company’s" or ~~our)~~"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~~three 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, ~~2020,~~2021, 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 increasedThese consolidated financial statements have been prepared in conformity with accounting principles generally accepted 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 inthat require the ~~United States has continued but may be threatened by the resurgence~~use of COVID-19 cases and other factors. Most of our manufacturing and converting facilities have remained open and operational during the pandemic and at the current time our manufacturing and converting facilities are generally operational.management’s estimates. Actual results could differ from management’s estimates.

The pandemic has had a mixed impact on demand for our products. Initially, demand for printing papers 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. However, all of our operations continue to experience higher supply chain costs and 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 resurgence of new variants of the virus in many areas globally; the additional actions 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 efficacy, acceptance and availability of various vaccines and booster shots, as well as the possibility that strains of the virus may be resistant to current available vaccines; and the impact of COVID-19 on economic conditions, including with respect to labor market conditions, economic activity, consumer behavior, supply shortages and disruptions and inflationary pressures. COVID-19 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 if public health and/or global economic conditions 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~~In addition 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~~spin-off 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 net cash distribution of $1.4 billion to be made to the Company ~~as part~~completed the sale of ~~the spin-off. See~~ ~~Note 17 – Debt~~ ~~for further details regarding the Sylvamo debt.~~

its Kwidzyn, Poland mill on August 6, 2021. All ~~current and~~ historical operating results of the Sylvamo Corporation businesses ~~will be~~and Kwidzyn mill have been presented as Discontinued Operations, net of tax, in the condensed consolidated statement of ~~operations in~~operations. See Note 9 - Divest itures and Impairments of Businesses for further details regarding the ~~fourth quarter of 2021. The~~Sylvamo Corporation spin-off ~~was tax-free for the Company~~ and ~~its shareholders for U.S. federal income tax purposes.~~discontinued operations.

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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.Russia/Ukraine Conflict

The Russia-Ukraine conflict, including escalating sanctions, possible actions by the Russian government, and associated domestic and global economic and geopolitical conditions, could materially and adversely affect our Ilim joint venture and could otherwise adversely affect our business, financial condition, results of operations and cash flows. We are currently unable to predict the impact the Russian invasion of Ukraine, sanctions imposed to date or that may be imposed in the future, geopolitical instability and the possibility of broadened military conflict may have on us or our Ilim joint venture, including on our receipt of dividends from our Ilim joint venture. Moreover, we have announced our intention to explore strategic options with respect to Ilim S.A., including a sale of our 50% equity interest in Ilim S.A. In addition, we have disclosed our intent to monetize our remaining equity stake in Sylvamo Corporation (which has certain operations in Russia, and announced in March 2022 that it began the suspension of operations in Russia and that it was continuing to assess various options for its operations in that country). While we may sell our equity interests in the Ilim joint venture and/or Sylvamo in the future, we cannot be certain if and when this may occur, or the impact that possible disruptions in the capital markets, or conditions associated with the Russia-Ukraine conflict, could have on the value of and our ability to sell our equity interests in the Ilim joint venture and/or Sylvamo and the timing of any such sales.

NOTE 2 - RECENT ACCOUNTING DEVELOPMENTS

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 is effective upon issuance and generally can be applied through December 31, 2022. The Company will apply the amendments in this update to account for contract modifications due to changes in reference rates once those occur. We do not expect these amendments to have a material impact on our consolidated financial statements and related disclosures.

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Government Assistance

In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance." This guidance requires a business entity to provide certain disclosures around assistance received from governments. This guidance is effective for annual reporting periods beginning after December 15, 2021. The Company is currently evaluating the provisions of ~~this~~the guidance.

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, 2021											Three Months Ended March 31, 2022
In millions	In millions	Industrial Packaging		Global Cellulose Fibers		Printing Papers		Corporate and Inter-segment Sales		Total		In millions	Industrial Packaging		Global Cellulose Fibers		Corporate and Inter-segment Sales		Total
Primary Geographical Markets (a)	Primary Geographical Markets (a)											Primary Geographical Markets (a)
United States	United States	$	3,514	$	623	$	425	$	50	$	4,612	United States	$	3,761	$	662	$	120	$	4,543
EMEA	EMEA	383		69		232		(1)		683		EMEA	410		30		—		440
Pacific Rim and Asia	Pacific Rim and Asia	12		37		8		3		60		Pacific Rim and Asia	10		18		1		29
Americas, other than U.S.	Americas, other than U.S.	178		—		181		—		359		Americas, other than U.S.	225		—		—		225
Total	Total	$	4,087	$	729	$	846	$	52	$	5,714	Total	$	4,406	$	710	$	121	$	5,237

Operating Segments	Operating Segments											Operating Segments
North American Industrial Packaging	North American Industrial Packaging	$	3,738	$	—	$	—	$	—	$	3,738	North American Industrial Packaging	$	4,025	$	—	$	—	$	4,025
EMEA Industrial Packaging	EMEA Industrial Packaging	331		—		—		—		331		EMEA Industrial Packaging	410		—		—		410
European Coated Paperboard		52		—		—		—		52
Global Cellulose Fibers	Global Cellulose Fibers	—		729		—		—		729		Global Cellulose Fibers	—		710		—		710
North American Printing Papers		—		—		425		—		425
Brazilian Papers		—		—		200		—		200
European Papers		—		—		218		—		218
Intra-segment Eliminations	Intra-segment Eliminations	(34)		—		3		—		(31)		Intra-segment Eliminations	(29)		—		—		(29)
Corporate & Inter-segment Sales	Corporate & Inter-segment Sales	—		—		—		52		52		Corporate & Inter-segment Sales	—		—		121		121
Total	Total	$	4,087	$	729	$	846	$	52	$	5,714	Total	$	4,406	$	710	$	121	$	5,237

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

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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, 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.~~

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		Nine Months Ended September 30, 2020											Three Months Ended March 31, 2021
In millions	In millions	Industrial Packaging		Global Cellulose Fibers		Printing Papers		Corporate & Intersegment		Total		In millions	Industrial Packaging		Global Cellulose Fibers		Corporate & Intersegment		Total
Primary Geographical Markets (a)	Primary Geographical Markets (a)											Primary Geographical Markets (a)
United States	United States	$	9,364	$	1,507	$	1,069	$	146	$	12,086	United States	$	3,332	$	543	$	47	$	3,922
EMEA	EMEA	1,213		175		765		(11)		2,142		EMEA	393		24		(1)		416
Pacific Rim and Asia	Pacific Rim and Asia	43		55		20		20		138		Pacific Rim and Asia	18		28		14		60
Americas, other than U.S.	Americas, other than U.S.	600		—		380		(5)		975		Americas, other than U.S.	187		—		8		195
Total	Total	$	11,220	$	1,737	$	2,234	$	150	$	15,341	Total	$	3,930	$	595	$	68	$	4,593

Operating Segments	Operating Segments											Operating Segments
North American Industrial Packaging	North American Industrial Packaging	$	9,947	$	—	$	—	$	—	$	9,947	North American Industrial Packaging	$	3,560	$	—	$	—	$	3,560
EMEA Industrial Packaging	EMEA Industrial Packaging	953		—		—		—		953		EMEA Industrial Packaging	396		—		—		396
Brazilian Industrial Packaging		148		—		—		—		148
European Coated Paperboard		266		—		—		—		266
Global Cellulose Fibers	Global Cellulose Fibers	—		1,737		—		—		1,737		Global Cellulose Fibers	—		595		—		595
North American Printing Papers		—		—		1,073		—		1,073
Brazilian Papers		—		—		434		—		434
European Papers		—		—		728		—		728
Intra-segment Eliminations	Intra-segment Eliminations	(94)		—		(1)		—		(95)		Intra-segment Eliminations	(26)		—		—		(26)
Corporate & Inter-segment Sales	Corporate & Inter-segment Sales	—		—		—		150		150		Corporate & Inter-segment Sales	—		—		68		68
Total	Total	$	11,220	$	1,737	$	2,234	$	150	$	15,341	Total	$	3,930	$	595	$	68	$	4,593

(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 ~~$25~~$22 million and ~~$31~~$27 million are included in Other current liabilities in the accompanying condensed consolidated balance sheet as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 - Acquisitions. The balance of this contract liability was $105 million and $107 million at March 31, 2022 and December 31, 2021, respectively, and is recorded in Other current liabilities and Other Liabilities in the accompanying condensed consolidated balance sheet.

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 prepayment from the customer, respectively.

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NOTE 4 - EQUITY

A summary of the changes in equity for the three months March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ is provided below:

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, 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, January 1 $ 449 $ 6,325 $ 8,070 $ (4,342) $ 2,648 $ 7,854 $ 14 $ 7,868
Issuance of stock for various plans, net — 27 — — (86) 113 — 113
Repurchase of stock — — — — 425 (425) — (425)
Common stock dividends
($1.5375 per share)
— — (612) — — (612) — (612)
Transactions of equity method investees — 19 — — — 19 — 19
Divestiture of noncontrolling interests — — — — — — (13) (13)
Comprehensive income (loss) — — 1,645 1,028 — 2,673 — 2,673
Ending Balance, September 30 $ 449 $ 6,371 $ 9,103 $ (3,314) $ 2,987 $ 9,622 $ 1 $ 9,623

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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 — 221
Ending Balance, September 30 $ 449 $ 6,302 $ 8,122 $ (5,132) $ 2,648 $ 7,093 $ 3 $ 7,096


		Nine Months Ended September 30, 2020																	Three Months Ended March 31, 2022
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 Equity
Balance, January 1	Balance, January 1	$	449	$	6,297	$	8,408	$	(4,739)	$	2,702	$	7,713	$	5	$	7,718	Balance, January 1	$	449	$	4,668	$	9,029	$	(1,666)	$	3,398	$	9,082
Adoption of ASU 2016-13 measurement of credit losses on financial instruments		—		—		(2)		—		—		(2)		—		(2)
Issuance of stock for various plans, net	Issuance of stock for various plans, net	—		(31)		—		—		(96)		65		—		65		Issuance of stock for various plans, net	—		2		—		—		(70)		$	72
Repurchase of stock	Repurchase of stock	—		—		—		—		42		(42)		—		(42)		Repurchase of stock	—		—		—		—		428		$	(428)
Common stock dividends ($1.5375 per share)		—		—		(613)		—		—		(613)		—		(613)
Transactions of equity method investees		—		36		—		—		—		36		—		36
Common stock dividends ($0.4625 per share)																		Common stock dividends ($0.4625 per share)	—		—		(171)		—		—		$	(171)
Comprehensive income (loss)	Comprehensive income (loss)	—		—		329		(393)		—		(64)		(2)		(66)		Comprehensive income (loss)	—		—		360		(28)		—		$	332
Ending Balance, September 30		$	449	$	6,302	$	8,122	$	(5,132)	$	2,648	$	7,093	$	3	$	7,096
Ending Balance, March 31																		Ending Balance, March 31	$	449	$	4,670	$	9,218	$	(1,694)	$	3,756	$	8,887


	Three Months Ended March 31, 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, January 1	$	449	$	6,325	$	8,070	$	(4,342)	$	2,648	$	7,854	$	14	$	7,868
Issuance of stock for various plans, net	—		(58)		—		—		(84)		26		—		26
Repurchase of stock	—		—		—		—		155		(155)		—		(155)
Common stock dividends ($0.5125 per share)	—		—		(205)		—		—		(205)		—		(205)
Comprehensive income (loss)	—		—		349		(111)		—		238		(1)		237
Ending Balance, March 31	$	449	$	6,267	$	8,214	$	(4,453)	$	2,719	$	7,758	$	13	$	7,771

108

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N OTE 5 - OTHER COMPREHENSIVE INCOME

The following table presents changes in accumulated other comprehensive income (AOCI) for the three months ended March 31, 2022 and ~~nine months ended September 30, 2021 and 2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
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	$	(1,809)	$	(2,192)	$	(1,880)	$	(2,277)	Balance at beginning of period	$	(962)	$	(1,880)
Other comprehensive income (loss) before reclassifications		831		—		832		—
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	31		43		101		128		Amounts reclassified from accumulated other comprehensive income	20		34
Balance at end of period	Balance at end of period	(947)		(2,149)		(947)		(2,149)		Balance at end of period	(942)		(1,846)
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	(2,286)		(2,950)		(2,457)		(2,465)		Balance at beginning of period	(694)		(2,457)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(114)		(28)		(85)		(515)		Other comprehensive income (loss) before reclassifications	(48)		(143)
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	—		—		2		2		Other comprehensive income (loss) attributable to noncontrolling interest	—		1
Balance at end of period	Balance at end of period	(2,356)		(2,978)		(2,356)		(2,978)		Balance at end of period	(742)		(2,599)
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	1		(7)		(5)		3		Balance at beginning of period	(10)		(5)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(4)		(4)		3		(34)		Other comprehensive income (loss) before reclassifications	—		(6)

Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	(8)		6		(9)		26		Amounts reclassified from accumulated other comprehensive income	—		3
Balance at end of period	Balance at end of period	(11)		(5)		(11)		(5)		Balance at end of period	(10)		(8)
Total Accumulated Other Comprehensive Income (Loss) at End of Period	Total Accumulated Other Comprehensive Income (Loss) at End of Period	$	(3,314)	$	(5,132)	$	(3,314)	$	(5,132)	Total Accumulated Other Comprehensive Income (Loss) at End of Period	$	(1,694)	$	(4,453)

The following table presents details of the reclassifications out of AOCI for the three months ended March 31, 2022 and ~~nine months ended September 30, 2021 and 2020:~~2021:

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,
2021 2020 2021 2020
Defined benefit pension and postretirement items:
Prior-service costs $ (5) $ (5) $ (17) $ (15) (a) Non-operating pension expense
Actuarial gains (losses) (36) (52) (118) (155) (a) Non-operating pension expense
Total pre-tax amount (41) (57) (135) (170)
Tax (expense) benefit 10 14 34 42
Total, net of tax (31) (43) (101) (128)
Change in cumulative foreign currency translation adjustments:
Business acquisitions/divestitures (44) — (184) — Net (gains) losses on sales and impairments of businesses and Cost of products sold
Tax (expense) benefit — — — —
Net of tax (44) — (184) —
Net gains and losses on cash flow hedging derivatives:
Foreign exchange contracts 10 (8) 12 (39) (b) Cost of products sold
Total pre-tax amount 10 (8) 12 (39)
Tax (expense)/benefit (2) 2 (3) 13
Net of tax 8 (6) 9 (26)
Total reclassifications for the period $ (67) $ (49) $ (276) $ (154)

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In millions:	Amount Reclassified from Accumulated Other Comprehensive Income					Location of Amount Reclassified from AOCI
	Three Months Ended March 31,
	2022		2021
Defined benefit pension and postretirement items:
Prior-service costs	$	(5)	$	(6)	(a)	Non-operating pension expense
Actuarial gains (losses)	(22)		(40)		(a)	Non-operating pension expense
Total pre-tax amount	(27)		(46)
Tax (expense) benefit	7		12
Total, net of tax	(20)		(34)

Net gains and losses on cash flow hedging derivatives:
Foreign exchange contracts	—		(4)		(b)	Cost of products sold
Total pre-tax amount	—		(4)
Tax (expense)/benefit	—		1
Net of tax	—		(3)
Total reclassifications for the period	$	(20)	$	(37)

(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).

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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 March 31,
In millions, except per share amounts	In millions, except per share amounts	2021		2020		2021		2020		In millions, except per share amounts	2022		2021
Earnings (loss) attributable to International Paper Company common shareholders		$	864	$	204	$	1,645	$	329
Earnings (loss) from continuing operations attributable to International Paper Company common shareholders										Earnings (loss) from continuing operations attributable to International Paper Company common shareholders	$	360	$	267
Weighted average common shares outstanding	Weighted average common shares outstanding	388.8		393.1		391.0		392.9		Weighted average common shares outstanding	375.2		392.8
Effect of dilutive securities	Effect of dilutive securities									Effect of dilutive securities
Restricted performance share plan	Restricted performance share plan	3.8		1.5		4.3		1.6		Restricted performance share plan	4.0		2.0
Weighted average common shares outstanding – assuming dilution	Weighted average common shares outstanding – assuming dilution	392.6		394.6		395.3		394.5		Weighted average common shares outstanding – assuming dilution	379.2		394.8
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		$	2.20	$	0.52	$	4.16	$	0.83
Basic earnings (loss) per share from continuing operations										Basic earnings (loss) per share from continuing operations	$	0.96	$	0.68
Diluted earnings (loss) per share from continuing operations										Diluted earnings (loss) per share from continuing operations	$	0.95	$	0.68

NOTE 7 - RESTRUCTURING AND OTHER CHARGES, NET

~~2021:~~2022: ~~During~~There were no restructuring and other charges recorded 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.March 31, 2022.

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.

2021:

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.~~

NOTE 8 - ACQUISITIONS

2021: On April 1, 2021, the Company closed on the previously announced acquisition of two box plants located in Spain. The total purchase consideration, inclusive of working capital adjustments, was approximately €71 million (approximately $83 million based on the April 1, 2021 exchange rate)~~, subject to post-closing adjustments.~~.

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

~~Table of Contents~~


In millions
Cash and temporary investments	$	5
Accounts and notes receivable	10
Inventories	3
Plants, properties and equipment	3850
Goodwill	3023
Intangible assets	1413
Total assets acquired	$	~~100~~104
Short-term debt	32
Accounts payable and accrued liabilities	4
Other current liabilities	2
Long-term debt	1
Deferred income taxes	912
Total liabilities assumed	1721
Net assets acquired	$	83

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~~

Table 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.Contents

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 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.

2021: In April 2021, the Company received a noncontrolling interest in a U.S-based corrugated packaging producer. In the second quarter of 2021, 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.

NOTE 9 - DIVESTITURES AND IMPAIRMENTS

Printing Papers Spin-off

2021: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 and this retained investment is discussed further in Note 10 - Supplementary Financial Statement Information. 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 agreements provide for the allocation between the Company and Sylvamo Corporation of assets, liabilities and obligations attributable to periods prior to, at and after the Distribution and govern certain relationships between the Company and Sylvamo Corporation after the Distribution. The Company is also party to various ongoing operational agreements with Sylvamo Corporation under which it sells fiber, paper and other products. Sales under these agreements were $198 million for the three months ended March 31, 2022.

All historical operating results of the Sylvamo Corporation businesses, as well as the results of our Kwidzyn, Poland mill that was sold on August 6, 2021, are presented as Discontinued Operations, net of tax, in the consolidated statement of operations. Kwidzyn was previously part of the Printing Papers business prior to its sale in August 2021. See Kwidzyn Mill section below for further details regarding this sale.

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The following summarizes the major classes of line items comprising Earnings (Loss) Before Income Taxes and Equity Earnings reconciled to Discontinued Operations, net of tax, related to the Sylvamo Corporation businesses and Kwidzyn for the three months ended March 31, 2021 in the condensed consolidated statement of operations:


In millions	Three Months Ended March 31, 2021
Net Sales	$	770
Costs and Expenses
Cost of products sold	499
Selling and administrative expenses	59
Depreciation, amortization and cost of timber harvested	41
Distribution expenses	70
Taxes other than payroll and income taxes	8
Earnings (Loss) Before Income Taxes and Equity Earnings	93
Income tax provision (benefit)	11
Discontinued Operations, Net of Taxes	$	82

The following summarizes the total cash provided by operations and total cash used for investing activities related to the Sylvamo Corporation businesses and Kwidzyn and included in the condensed consolidated statement of cash flows for the three months ended March 31, 2021:


In millions	Three Months Ended March 31, 2021
Cash Provided by (Used For) Operating Activities	$	79
Cash Provided by (Used For) Investment Activities	$	(19)

In anticipation of the spin-off, Sylvamo incurred $1.5 billion in debt during the third quarter of 2021 with the proceeds used for a distribution to the Company 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 was comprised of $450 million of 7.00% senior unsecured notes due 2029 issued in September 2021. It was also comprised of the 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 had a capacity of $450 million. Additionally, at the time of the spin-off in the fourth quarter of 2021, the Company distributed $130 million to Sylvamo.

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.~~cash. The business ~~includes~~included 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~~During the ~~Net (gains) losses on sales and impairments~~fourth quarter of ~~businesses in~~2021, the ~~accompanying consolidated statement~~Company incurred $9 million ($6 million after taxes) of ~~operations and are included in~~costs related to the ~~results~~sale of ~~the Printing Papers segment.~~Kwidzyn. All ~~current year and~~ historical operating results for Kwidzyn ~~will be~~have been presented as Discontinued Operations, net of tax, in the condensed consolidated statement of ~~operations in the fourth quarter of 2021.~~operations.

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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.

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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 condensed consolidated statement of operations and is included in the results for the Industrial Packaging segment.

~~Brazil Industrial Packaging~~

~~2020:~~ On October 14, 2020, the Company closed the previously announced sale of its Brazilian Industrial Packaging business for R$330 million ($58.5 million U.S. dollars), with R$280 million ($49.6 million U.S. dollars) paid at closing and R$50 million ($8.9 million U.S. dollars) to be paid one year 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, net pre-tax charges of $347 million ($340 million after taxes) were recorded in 2020. These charges included $327 million related to the cumulative foreign currency translation loss and a $20 million loss related to the write down of 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 are included in the results for the Industrial Packaging segment.

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 ~~$3.2~~$889 million and $1.1 billion ~~and $358 million~~ at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Restricted Cash

A reconciliation of cash and temporary investments and restricted cash in the condensed consolidated balance sheet to cash and temporary investments and restricted cash in the condensed consolidated statement of cash flows for the ~~nine~~three months ended ~~September 30, 2021 and 2020~~March 31, 2022 is ~~as follows:~~below. The Company had no restricted cash at March 31, 2021.

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


	Three Months Ended March 31,
In millions	2022
Cash and Temporary Investments	$	1,031
Restricted Cash	88
Total Cash and Temporary Investments and Restricted Cash	$	1,119

The Company's restricted cash consists of the cash proceeds from the $88 million first quarter 2022 debt ~~incurred by Sylvamo Corporation as part of the Printing Papers segment spin-off that was completed~~issuance. Proceeds from this debt issuance were used to repay debt maturing on ~~October~~April 1, ~~2021. Of this amount, approximately $1.4 billion was remitted to the Company in the form of a cash distribution.~~2022. See Note 17 - Debt for further details regarding the ~~Sylvamo~~first quarter 2022 debt issuance and the ~~use of the cash proceeds from the~~expected debt ~~issuances.~~

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repayment.

Accounts and Notes Receivable


In millions	In millions	September 30, 2021		December 31, 2020		In millions	March 31, 2022		December 31, 2021
Accounts and notes receivable, net:	Accounts and notes receivable, net:					Accounts and notes receivable, net:
Trade		$	3,222	$	2,776
Trade (less allowances of $31 in 2022 and $34 in 2021)						Trade (less allowances of $31 in 2022 and $34 in 2021)	$	3,124	$	3,027
Other	Other	327		288		Other	239		205
Total	Total	$	3,549	$	3,064	Total	$	3,363	$	3,232

The allowance for expected credit losses was $64 million and $76 million at September 30, 2021 and December 31, 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.Inventories


In millions	March 31, 2022		December 31, 2021
Raw materials	$	251	$	245
Finished pulp, paper and packaging	986		1,014
Operating supplies	458		486
Other	51		69
Total	$	1,746	$	1,814

~~Inventories~~

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In millions September 30, 2021 December 31, 2020
Raw materials $ 241 $ 268
Finished pulp, paper and packaging 1,156 1,091
Operating supplies 569 627
Other 87 64
Total $ 2,053 $ 2,050

Current Investments

As a result of the 2021 spin-off of Sylvamo Corporation, the Company retained 19.9% of the shares of Sylvamo. The intent is 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. The investment was valued at $291 million and $245 million at March 31, 2022 and December 31, 2021, respectively, and is recorded in Current investments in the accompanying condensed consolidated balance sheet.

In April 2022, the Company borrowed approximately $144 million under a term loan credit agreement with a third-party lender. Subsequently, the Company exchanged 4,132,000 shares of Sylvamo Corporation common stock owned by the Company in exchange and as repayment of the approximately $144 million term loan obligation. After this transaction, the Company owns 4,614,358, or approximately 10.5% of the shares, of Sylvamo Corporation common stock.

Plants, Properties and Equipment

Accumulated depreciation was ~~$21.2~~$17.8 billion and ~~$21.4~~$17.6 billion at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Depreciation expense was ~~$302~~$250 million and ~~$300~~$258 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $888 million and $902 million for the nine months ended September 30, 2021 and 2020,~~ respectively.

Non-cash additions to plants, ~~property~~properties and equipment included within accounts payable were ~~$61~~$68 million and ~~$41~~$106 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Amounts invested in capital projects in the accompanying condensed consolidated statement of cash flows are presented net of insurance recoveries of $6$18 million received during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~$40~~$2 million received during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021.

Interest

Interest payments made during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$357~~$56 million and ~~$520~~$111 million, respectively.

Amounts related to interest were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
Interest expense	Interest expense	$	117	$	148	$	358	$	467	Interest expense	$	77	$	124
Interest income	Interest income	24		36		116		122		Interest income	8		31
Capitalized interest costs	Capitalized interest costs	3		9		8		27		Capitalized interest costs	4		2

Asset Retirement Obligations

The Company had recorded liabilities of ~~$135 million and $116~~$107 million related to asset retirement obligations at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020, respectively.~~2021.

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 remaining lease term of up to 31 years. Total lease costs were $60 million for both of the three months ended March 31, 2022 and 2021.

1514

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remaining lease term of up to 32 years. Total lease cost was $73 million and $68 million for the three months ended September 30, 2021 and 2020, respectively, and $216 million and $202 million for the nine months ended September 30, 2021 and 2020, respectively.

Supplemental Balance Sheet Information Related to Leases


In millions	In millions	Classification	September 30, 2021		December 31, 2020		In millions	Classification	March 31, 2022		December 31, 2021
Assets	Assets						Assets
Operating lease assets	Operating lease assets	Right-of-use assets	$	405	$	459	Operating lease assets	Right-of-use assets	$	373	$	365
Finance lease assets	Finance lease assets	Plants, properties and equipment, net (a)	87		95		Finance lease assets	Plants, properties and equipment, net (a)	55		57
Total leased assets	Total leased assets		$	492	$	554	Total leased assets		$	428	$	422
Liabilities	Liabilities						Liabilities
Current	Current						Current
Operating	Operating	Other current liabilities	$	146	$	148	Operating	Other current liabilities	$	137	$	132
Finance	Finance	Notes payable and current maturities of long-term debt	12		13		Finance	Notes payable and current maturities of long-term debt	10		10
Noncurrent	Noncurrent						Noncurrent
Operating	Operating	Long-term lease obligations	263		315		Operating	Long-term lease obligations	241		236
Finance	Finance	Long-term debt	75		82		Finance	Long-term debt	54		56
Total lease liabilities	Total lease liabilities		$	496	$	558	Total lease liabilities		$	442	$	434

(a)Finance leases are recorded net of accumulated amortization of ~~$62~~$52 million and ~~$53~~$51 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

NOTE 12 - EQUITY METHOD INVESTMENTS

The Company accounts for the following investments 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 (79,911,591 units) in Graphic Packaging International Partners, LLC (GPIP) in 2018. The Company has since fully monetized its investment in GPIP with transactions beginning in the first quarter 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 to 50% of the 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 no longer had an ownership interest in GPIP. The Company recorded equity earnings of $11 million for the three months ended September 30, 2020 and $4 million and $29 million for the nine months ended September 30, 2021 and 2020, respectively. There were no equity earnings recorded for the three months ended September 30, 2021. The Company received cash dividends from GPIP of $5 million and $16 million during the first nine months of 2021 and 2020, respectively.

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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 ~~$95~~$93 million and ~~$(33)~~$49 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $245 million and $(5) million for the nine months ended September 30, 2021 and 2020,~~ respectively. Foreign exchange ~~gains (losses)~~losses included in equity earnings for the three months ~~and nine months~~ ended ~~September 30, 2021,~~March 31, 2022 were ~~not material and~~$15 million, primarily on the remeasurement of U.S. dollar denominated payables. JSC Ilim Group had no U.S. dollar-denominated debt outstanding as of ~~September 30, 2021.~~March 31, 2022. Equity earnings (losses) for the three months ~~and nine months~~ ended ~~September 30, 2020,~~March 31, 2021 included after-tax foreign exchange losses of ~~$55~~$2 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 ~~$144 million and $141~~$204 million during the first ~~nine~~three months of ~~2021 and 2020, respectively.~~2022. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company's investment in Ilim, which is recorded in Long-Term Investments in the condensed consolidated balance sheets, was ~~$517~~$413 million and ~~$393~~$557 million, respectively, which was ~~$131~~$125 million and ~~$127~~$121 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. Prior to the spin-off of the Printing Papers segment on October 1, 2021, the Company was party to a joint marketing agreement with JSC Ilim Group, a subsidiary of Ilim, under which the Company purchased, marketed and sold paper produced by JSC Ilim Group. Purchases under this agreement were ~~$42 million and~~ $41 million for the three months ended ~~September 30, 2021 and 2020, respectively, and $125 million and $131 million for the nine months ended September 30, 2021 and 2020, respectively.~~March 31, 2021. 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, 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


In millions	March 31, 2022	December 31, 2021
Current assets	772	$	1,010
Noncurrent assets	2,830	3,145
Current liabilities	1,404	1,212
Noncurrent liabilities	1,595	2,047
Noncontrolling interests	27	24

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Income Statement


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
Net sales	Net sales	$	729	$	498	$	1,993	$	1,474	Net sales	$	707	$	531
Gross profit	Gross profit	393		191		1,051		597		Gross profit	399		248
Income (loss) from continuing operations	Income (loss) from continuing operations	190		(62)		498		7		Income (loss) from continuing operations	182		103
Net income (loss)	Net income (loss)	182		(60)		481		7		Net income (loss)	177		100

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

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~~three-months ended ~~September 30, 2021:~~

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March 31, 2022:


In millions	In millions	Industrial Packaging			Global Cellulose Fibers		Printing Papers			Total		In millions	Industrial Packaging		Global Cellulose Fibers		Total
Balance as of January 1, 2021
Balance as of January 1, 2022												Balance as of January 1, 2022
Goodwill	Goodwill	$	3,410		$	52	$	1,966		$	5,428	Goodwill	$	3,426	$	52	$	3,478
Accumulated impairment losses	Accumulated impairment losses	(296)			(52)		(1,765)			(2,113)		Accumulated impairment losses	(296)		(52)		(348)
		3,114			—		201			3,315			3,130		—		3,130
Currency translation and other (a)	Currency translation and other (a)	(5)			—		(8)			(13)		Currency translation and other (a)	(2)		—		(2)
Goodwill additions/reductions	Goodwill additions/reductions	29		(b)	—		(57)		(c)	(28)		Goodwill additions/reductions	—		—		—
Accumulated impairment loss additions / reductions	Accumulated impairment loss additions / reductions	—			—		—			—		Accumulated impairment loss additions / reductions	—		—		—
Balance as of September 30, 2021
Balance as of March 31, 2022												Balance as of March 31, 2022
Goodwill	Goodwill	3,434			52		1,901			5,387		Goodwill	3,424		52		3,476
Accumulated impairment losses	Accumulated impairment losses	(296)			(52)		(1,765)			(2,113)		Accumulated impairment losses	(296)		(52)		(348)
Total	Total	$	3,138		$	—	$	136		$	3,274	Total	$	3,128	$	—	$	3,128

(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 are recorded in Deferred Charges and Other Assets in the accompanying condensed consolidated balance sheet and comprised the following:


		September 30, 2021						December 31, 2020							March 31, 2022						December 31, 2021
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	$	552	$	314	$	238	$	542	$	294	$	248	Customer relationships and lists	$	491	$	279	$	212	$	493	$	273	$	220
Tradenames, patents and trademarks, and developed technology	Tradenames, patents and trademarks, and developed technology	170		128		42		170		117		53		Tradenames, patents and trademarks, and developed technology	170		135		35		170		131		39
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		17		17		—		25		24		1
Other	Other	14		10		4		19		10		9		Other	24		21		3		24		21		3
Total	Total	$	761	$	471	$	290	$	764	$	447	$	317	Total	$	693	$	437	$	256	$	695	$	427	$	268

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 March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
Amortization expense related to intangible assets	Amortization expense related to intangible assets	$	12	$	17	$	35	$	43	Amortization expense related to intangible assets	$	11	$	11

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NOTE 14 - INCOME TAXES

International Paper made income tax payments, net of refunds, of ~~$389~~$20 million and ~~$203~~$17 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 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 ~~$11~~$13 million during the next 12 months.

NOTE 15 - COMMITMENTS AND CONTINGENCIES

Guarantees

In connection with sales of businesses, property, equipment, forestlands and other assets, International Paper commonly makes representations and warranties relating to such businesses or assets, and may agree to indemnify buyers with respect to tax and environmental liabilities, breaches of representations and warranties, and other matters. Where liabilities for such matters are determined to be probable and reasonably estimable, accrued liabilities are recorded at the time of sale as a cost of the transaction.

Brazil Goodwill Tax Matter:The Brazilian Federal Revenue Service has challenged the deductibility of goodwill amortization generated in a 2007 acquisition by Sylvamo do Brasil Ltda., a wholly-owned subsidiary of the ~~Company. The~~ Company ("Sylvamo Brazil") until the October 1, 2021 spin-off of the Printing Papers business after which it became a subsidiary of Sylvamo Corporation. Sylvamo Brazil received assessments for the tax years 2007-2015 totaling approximately ~~$107~~$123 million in tax, and ~~$351~~$414 million in interest, penalties, and fees as of ~~September 30, 2021~~March 31, 2022 (adjusted for variation in currency exchange rates). After a previous favorable ruling challenging the basis for these assessments, weSylvamo Brazil received ~~other~~ subsequent unfavorable decisions from the Brazilian Administrative Council of Tax Appeals. ~~The Company~~Sylvamo Brazil has appealed these 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~~Sylvamo Brazil and International Paper believe the transaction underlying these assessments was appropriately evaluated, and ~~has concluded~~that Sylvamo Brazil's tax position would be sustained, based on Brazilian tax ~~law, that its position would be sustained.~~law.

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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.~~ This ~~assessment~~matter pertains to a business that was conveyed to Sylvamo Corporation as of October 1, 2021, as part of our spin-off transaction. Pursuant to the terms of the tax matters agreement entered into between the Company and Sylvamo Corporation, the Company will ~~pay~~ 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. Under the terms of the agreement, decisions concerning the conduct of the litigation related to this matter, including strategy, settlement, pursuit and abandonment, will be made by the Company. Sylvamo Corporation thus has no control over any decision related to this ongoing litigation. The Company intends to vigorously defend this historic tax position against the current assessments and any similar assessments that may be issued for tax years subsequent to 2015. 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 strategy settlement, pursuit and abandonment, will continue to be 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 recording of the distribution of assets and liabilities resulting from the spin-off transaction, ~~International Paper will establish~~the Company has established a liability ~~on the Company's balance sheet~~ representing the initial fair value of the contingent ~~obligation~~liability under the tax matters agreement. The ~~Company's~~contingent liability was determined in accordance with ASC 460 "Guarantees" based on the probability weighting of various possible outcomes. The initial fair value estimate isand recorded liability as of December 31, 2021 was $48 million and remains this amount at March 31, 2022. This liability will not be adjusted in ~~process~~subsequent periods unless facts and circumstances change such that an amount greater than the ~~Company is currently unable to quantify the~~initial recognized liability ~~to be recognized in the fourth quarter. It is possible the amount could be material.~~

~~NOTE 15 - COMMITMENTS AND CONTINGENCIES~~becomes probable and estimable.

Environmental

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. ~~The Company~~International Paper has estimated the probable liability associated with these environmental remediation matters, including those described herein, to be approximately ~~$187~~$182 million ($~~195~~190 million undiscounted) in the aggregate as of ~~September 30, 2021.~~March 31, 2022. Other than as described below, completion of required environmental remedial actions is not expected to have a material effect on our consolidated financial statements.

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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 $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~~soil remedy 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 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 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 in Operable Unit 5, Areas 2, 3, and 4 at an estimated cost of ~~$135.7~~$136 million. In December 2020, the Federal District Court approved the proposed consent 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 Company appeal is pending.~~On April 25, 2022, the appellate court reversed the Judgment of the Court.

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.

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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 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, the Company 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.

We have submitted the Final Design Package for the southern impoundment to the EPA, and the EPA approved this plan May 7, 2021. The EPA issued a Unilateral Administrative Order for Remedial Action of the southern impoundment on August 5, 2021.

With respect to the northern impoundment, although several key technical issues have been resolved, we still face significant challenges remediating 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 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. As of ~~September 30, 2021,~~March 31, 2022, the Company's total recorded liability with respect to pending and future asbestos-related claims was ~~$112~~$101 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 are unable to estimate any loss or range in excess of such liability, and do not believe additional material losses are probable.

Antitrust

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 continue to believe we have numerous and strong bases to challenge the ICA decision, and we have further appealed the decision to the Italian Council of 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. Based upon the best information available to us at that time, we determined an estimated refund was probable of being realized. As of March 31, 2021, we 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, 2021. The issue is now considered fully resolved, and no further ruling by either the Brazilian Supreme Court or the Brazilian tax authorities is expected. This receivable pertains to a business that was conveyed to Sylvamo Corporation as of 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 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,

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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

As of March 31, 2022, the fair value of the Timber Notes and Extension Loans for the 2007 Financing 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, 2021.

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 March 31,
In millions	2022		2021
Revenue (a)	$	7	$	7
Expense (b)	6		6
Cash receipts (c)	1		2
Cash payments (d)	4		4

(a)The revenue is included in Interest expense, net in the accompanying statement of operations and includes approximately $5 million and $5 million for the three months and three months ended March 31, 2022 and 2021, respectively, of accretion income for the amortization of the basis difference adjustment on the Financial assets of special purpose entities.

(b)The expense is included in Interest expense, net in the accompanying statement of operations and includes approximately $2 million and $2 million for the three months and three months ended March 31, 2022 and 2021, 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.

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~~was paid in the fourth quarter of 2021.

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As of ~~September 30, 2021,~~March 31, 2022, the Company's remaining deferred tax liability associated with the 2015 Financing Entities was ~~$815~~$813 million. The ~~nature and timing of the income tax due related to these transactions~~2015 timber monetization restructuring is currently under ~~review~~examination by the Internal Revenue Service. An unfavorable resolution in such current examination, future administrative procedures, or future tax litigation could result in material, accelerated cash tax payments as a result of all or a portion of deferred tax liability becoming payable.

Activity between the Company and the 2015 Financing Entities for the three months ended March 31, 2021 was as follows:

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


	Three Months Ended March 31,
In millions	2021
Revenue (a)	$	24
Expense (a)	13
Cash receipts (b)	47
Cash payments (c)	14

(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.

Table of September 30, 2021, the fair value of the Timber Notes and Extension Loans for the 2007 Financing 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, 2020.

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

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2021 2020 2021 2020
Revenue (a) $ 5 $ 7 $ 18 $ 35
Expense (b) 6 8 18 36
Cash receipts (c) 1 5 4 28
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, 2021 and 2020, respectively, of accretion income for the amortization of the basis difference adjustment on the Financial assets of special purpose entities.

~~(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, 2021 and 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~~N OTE 17 - DEBT

The borrowing capacity of the Company's commercial paper program is $1.0 ~~billion.~~billion supported by its $1.5 billion credit agreement. 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, 2021,~~March 31, 2022, the Company had no borrowings outstanding under the program.

At ~~September 30, 2021,~~March 31, 2022, 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~~facility with a 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~~program with the ~~Company’s liquidity position~~expiration date in ~~relation to the macroeconomic environment at such time, the Company~~

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~~amended the receivable~~April 2022. The receivables securitization program from a committed financing arrangement to an uncommitted financing arrangement. In August of 2021, the Company amended the receivable securitization program to remove receivable balances related to Sylvamo. The borrowing limit ofwas renewed on April 27, 2022 with up to ~~$550~~$500 million of uncommitted financings based on eligible receivables balances ~~and~~with the expiration date in April ~~2022 were unchanged by the February 2021 and August 2021 amendments.~~2024. At ~~September 30, 2021,~~March 31, 2022, there were no borrowings outstanding under either the bank facility or receivables securitization program.

~~In March 2020,~~During the first quarter of 2022, the Company ~~entered into a $750~~issued approximately $88 million ~~contractually committed 364-day revolving credit agreement with a syndicate~~ of banks and other financial institutions which augmented the Company's access to liquidity due to the macroeconomic conditions related to COVID-19 and supplemented the Company's $1.5 billion credit agreement. After considering the Company’s liquidity position in relation to the macroeconomic environment at such time, the Company determined not to extend the $750 million credit agreement after its expiration on March 24, 2021.

In anticipation of the spin-off, Sylvamo incurred $1.5 billion in debt during the third quarter of 2021 with the proceeds to be used for a distribution to the Company 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 is comprised of $450 million of 7.00% senior unsecured notes due 2029 issued in September 2021. It is also comprised of the 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.

~~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 ~~3.55%~~2.65% and a maturity date of ~~2029.~~

2037. The ~~Company’s early~~proceeds from this issuance were held in a trust at March 31, 2022 and were used to repay approximately $88 million of outstanding 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 4.35% to 4.40% and maturity dates ranging from 2047 to 2048 and open market repurchases of approximately $232 million related to debt with interest rates ranging from 3.00% to 5.15% and maturity dates ranging from 2027 to 2046.

The Company’s early debt reductions in the first quarter of 2021 were open market repurchases of approximately $107 million related to debt with interest rates ranging from 3.00% to 4.80% and maturities dates from 2027 to 2048.maturing on April 1, 2022.

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, 2021,~~March 31, 2022, we were in compliance with our debt covenants.

At ~~September 30, 2021,~~March 31, 2022, the fair value of International Paper’s ~~$8.5~~$5.7 billion of debt was approximately ~~$10.2~~$6.3 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, ~~2020.~~2021.

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.

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

In millions

September 30, 2021

December 31, 2020

In millions

March 31, 2022

December 31, 2021

Derivatives in Cash Flow Hedging Relationships:

Foreign exchange contracts (USD)

108

Foreign exchange contracts (EUR)

—

187

Derivatives Not Designated as Hedging Instruments:

Electricity contract (MWh)

0.3

0.2

Electricity contract (MWh)

0.5

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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 March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
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)	$	(4)	$	3	$	(34)	Foreign exchange contracts	$	—	$	(6)
Total	Total	$	(4)	$	(4)	$	3	$	(34)	Total	$	—	$	(6)
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	$	—	Foreign exchange contracts	$	—	$	17
Interest rate contracts		—		—		—		24

Total	Total	$	6	$	—	$	18	$	24	Total	$	—	$	17

During the next 12 months, the amount of the ~~September 30, 2021~~March 31, 2022 AOCI balance, after tax, that is expected to be reclassified to earnings is a loss of $2$1 million.

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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 Into Income (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 March 31,
In millions	In millions	2021		2020		2021		2020			In millions	2022		2021
Derivatives in Cash Flow Hedging Relationships:	Derivatives in Cash Flow Hedging Relationships:										Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts	Foreign exchange contracts	$	8	$	(6)	$	9	$	(26)	Cost of products sold	Foreign exchange contracts	$	—	$	(3)	Discontinued operations, net of taxes
Total	Total	$	8	$	(6)	$	9	$	(26)		Total	$	—	$	(3)


		Gain (Loss) Recognized in Income								Location of Gain (Loss) In Statement of Operations		Gain (Loss) Recognized in Income				Location of Gain (Loss) In Statement of Operations
		Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
In millions	In millions	2021		2020		2021		2020			In millions	2022		2021
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:	Derivatives Not Designated as Hedging Instruments:										Derivatives Not Designated as Hedging Instruments:
Electricity contract	Electricity contract	$	6	$	1	$	13	$	(2)	Cost of products sold	Electricity contract	$	8	$	2	Cost of products sold
Foreign exchange contracts		5		—		(1)		—		Cost of products sold

Total	Total	$	11	$	1	$	12	$	(2)		Total	$	8	$	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.

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

Fair Value Measurements

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							Assets
In millions	In millions	September 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020			In millions	March 31, 2022			December 31, 2021
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	Derivatives not designated as hedging instruments													Derivatives not designated as hedging instruments
Electricity contract	Electricity contract	11			—			—			1			Electricity contract	$	17		$	10

Total derivatives not designated as hedging instruments		11			—			—			1

Total derivatives	Total derivatives	$	14	(a)	$	5	(b)	$	5	(c)	$	9	(d)	Total derivatives	$	17	(a)	$	10	(b)

(a)Includes $13 million recorded in Other current assets and $1$4 million recorded in Deferred charges and other assets in the accompanying condensed consolidated balance sheet.

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

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

~~(d)Includes $7 million recorded in Other current liabilities and $2 million recorded in Other liabilities in the accompanying~~condensed 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 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 plan was frozen as of January 1, 2019 for salaried participants.

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 March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
Service cost	Service cost	$	26	$	21	$	78	$	64	Service cost	$	23	$	27
Interest cost	Interest cost	84		98		251		294		Interest cost	84		83
Expected return on plan assets	Expected return on plan assets	(177)		(167)		(543)		(501)		Expected return on plan assets	(162)		(183)
Actuarial loss	Actuarial loss	35		51		114		152		Actuarial loss	21		39
Amortization of prior service cost	Amortization of prior service cost	5		5		16		15		Amortization of prior service cost	6		6
Net periodic pension (income) expense	Net periodic pension (income) expense	$	(27)	$	8	$	(84)	$	24	Net periodic pension (income) expense	$	(28)	$	(28)

The components of net periodic pension (income) expense other than the Service cost component are included in Non-operating pension (income) expense in the Condensed 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 no voluntary cash contributions to the qualified pension plan in the first ~~nine~~three months of ~~2021~~2022 or ~~2020.~~2021. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled ~~$16~~$5 million for the ~~nine~~three months ended ~~September 30, 2021.~~

March 31, 2022.

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, 2021, 7.6~~March 31, 2022, 7.2 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 March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
Total stock-based compensation expense (selling and administrative)	Total stock-based compensation expense (selling and administrative)	$	42	$	17	$	103	$	48	Total stock-based compensation expense (selling and administrative)	$	66	$	14
Income tax benefits related to stock-based compensation	Income tax benefits related to stock-based compensation	(2)		1		13		18		Income tax benefits related to stock-based compensation	12		17

At ~~September 30, 2021, $107~~March 31, 2022, $188 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 ~~1.9~~2.2 years.

Performance Share Plan

During the first ~~nine~~three months of ~~2021,~~2022, the Company granted ~~2.0~~1.9 million performance units at an average grant date fair value of ~~$53.15.~~$50.32.

NOTE 21 - BUSINESS SEGMENT INFORMATION

International Paper’s business segments, Industrial Packaging and 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~~business into a ~~standalone,~~new, publicly-traded company, Sylvamo ~~Corporation.~~Corporation, listed on the New York Stock Exchange. Additionally, on August 6, 2021, the Company completed the sale of its Kwidzyn, Poland mill which included the pulp and paper mill in Kwidzyn and supporting functions. As a result of the Sylvamo Corporation spin-off and the sale of Kwidzyn, the Company no longer ~~operated this~~has a Printing Papers segment, ~~effective October 1, 2021,~~ and all ~~current and historical financial results will be~~prior year amounts have been adjusted to reflect the ~~Printing Papers segment~~Sylvamo Corporation and Kwidzyn businesses 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.~~

operation.

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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) from continuing operations 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.

Net sales by business segment for the three months March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
Industrial Packaging	Industrial Packaging	$	4,087	$	3,768	$	12,096	$	11,220	Industrial Packaging	$	4,406	$	3,930
Global Cellulose Fibers	Global Cellulose Fibers	729		564		1,981		1,737		Global Cellulose Fibers	710		595
Printing Papers		846		743		2,473		2,234
Corporate and Intersegment Sales	Corporate and Intersegment Sales	52		48		143		150		Corporate and Intersegment Sales	121		68
Net Sales	Net Sales	$	5,714	$	5,123	$	16,693	$	15,341	Net Sales	$	5,237	$	4,593

Operating profit (loss) by business segment for the three months ended March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
Industrial Packaging	Industrial Packaging	$	429	$	469	$	1,284	$	1,388	Industrial Packaging	$	397	$	421
Global Cellulose Fibers	Global Cellulose Fibers	96		(59)		24		(123)		Global Cellulose Fibers	(49)		(81)
Printing Papers		106		63		262		148
Business Segment Operating Profits	Business Segment Operating Profits	$	631	473		$	1,570	$	1,413	Business Segment Operating Profits	$	348	340

Earnings (loss) before income taxes and equity earnings		$	916	$	282	$	1,747	$	527
Earnings (loss) from continuing operations before income taxes and equity earnings										Earnings (loss) from continuing operations before income taxes and equity earnings	$	362	$	306
Interest expense, net	Interest expense, net	93		112		242		345		Interest expense, net	69		93
Noncontrolling interests adjustment	Noncontrolling interests adjustment	(1)		—		(3)		—		Noncontrolling interests adjustment	—		(1)
Corporate expenses, net	Corporate expenses, net	12		(20)		44		9		Corporate expenses, net	12		36
Corporate net special items	Corporate net special items	11		108		81		195		Corporate net special items	(46)		(56)
Business net special items	Business net special items	(349)		2		(385)		368		Business net special items	—		14
Non-operating pension expense (income)	Non-operating pension expense (income)	(51)		(11)		(156)		(31)		Non-operating pension expense (income)	(49)		(52)
Business Segment Operating Profits	Business Segment Operating Profits	$	631	$	473	$	1,570	$	1,413	Business Segment Operating Profits	$	348	$	340

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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, ~~2020~~2021 (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 under "Risk Factors" and "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~~$360 million ($~~2.20~~0.95 per diluted share) in the ~~third~~first quarter of ~~2021,~~2022, compared with ~~$432~~$107 million ($~~1.09~~0.28 per diluted share) in the ~~second~~fourth quarter of 2021 and ~~$204~~$349 million ($~~0.52~~0.88 per diluted share) in the ~~third~~first quarter of ~~2020.~~2021. International Paper generated Adjusted operating earnings attributable to International Paper common shareholders (a non-GAAP measure defined below) of ~~$532~~$288 million ($~~1.35~~0.76 per diluted share) in the ~~third~~first quarter of ~~2021,~~2022, compared with ~~$421~~$301 million ($~~1.06~~0.78 per diluted share) in the ~~second~~fourth quarter of 2021 and ~~$280~~$198 million ($~~0.71~~0.50 per diluted share) in the ~~third~~first quarter of ~~2020.~~2021.

~~During the third quarter 2021,~~ International Paper ~~grew revenue, margins~~delivered first quarter earnings that were better than our outlook, driven by strong price realization and ~~earnings, and generated~~solid operations, overcoming significantly higher input costs. We also delivered another quarter of strong cash from operations. The strong demand environment in the second quarter 2021 continued in the third quarter, with 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 to mitigate the impact of a very challenging supply chain and input cost environment. Input costs affected results much more than anticipated in the third quarter, mostly due to higher fiber and energy costs. The widespread supply chain constraints limited our ability to capture the full opportunity that comesgeneration. Constraints associated with the ~~strong demand environment. Our mills performed well; however, stretched supply chains constrained volumes~~Covid-19 Omicron variant impacted volume in our Industrial Packaging and Global Cellulose Fibers businesses. Additionally, due to labor market constraints, we 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 our packaging network improvedbusiness in the ~~latter~~early part of the ~~third~~first quarter ~~putting us in a much healthier position~~2022. Shipments recovered, as expected throughout the first quarter, with demand stabilizing at elevated levels as we ~~enter~~exited the ~~seasonally stronger fourth~~ quarter. ~~With respect~~Our mills and converting system performed well, as we managed through continued logistics constraints which negatively impacted operating costs. We successfully executed our highest maintenance outage quarter of 2022 and expect to complete about 70% of full-year planned maintenance outages by the end of the second quarter. We achieved $40 million of earnings through our Building a Better IP initiatives, which are focused on materially lowering our cost structure and accelerating profitable growth. Regarding capital allocation, in the ~~third~~first quarter we ~~reduced debt by approximately $235 million and~~ returned ~~$411~~$580 million to shareholders, ~~through~~including dividends and approximately $400 million of ~~$199 million~~share repurchases. During the first quarter 2022, we announced that we are actively exploring options, including a sale of our 50% equity investment in Ilim Group. We are working with urgency to complete this work. We have engaged advisors and ~~share repurchases of $212 million.~~

~~Finally, the Printing Papers business delivered strong performance and carried good momentum in the third quarter, ahead of the spin-off of the business,~~had discussions with interested parties, 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 retained a 19.9% interest in the new company, which we intend to monetize within one year.are ongoing.

Comparing our performance in the ~~third~~first quarter ~~2021~~2022 to the ~~second~~fourth quarter 2021, price and mix improved significantly, driven by ~~strong~~price realization of our August 2021 price increase in our North American Industrial Packaging business, as well as price realization from prior ~~price~~ increases ~~across~~in our Global Cellulose Fibers business. Volumes were slightly lower compared to the ~~three businesses. Input costs were a significant headwind~~fourth quarter 2021, as expected, due to seasonally lower demand and Omicron variant impacts early in the ~~third~~ quarter ~~increasing by more than two times what we had anticipated, mostly due to higher fiber~~in our North American Industrial Packaging business along with on-going shipping constraints in our Global Cellulose Fibers business. In our North American Industrial Packaging business, operations and ~~energy costs. Volumes decreased~~costs improved sequentially. ~~Supply chain constraints limited~~Our mills and converting system performed well and made good progress normalizing containerboard inventories across our ~~ability to capture the full benefit of a strong demand backdrop.~~packaging system. In our Global Cellulose Fibers business, ~~demand for absorbent pulp remains solid; however, shipments~~volume and operating costs were ~~constrained~~negatively impacted by ~~significant port congestion. Our mills performed well~~on-going logistics constraints. Maintenance outages were sequentially higher in both business segments as we completed the highest maintenance outage quarter of 2022. Input costs were significantly higher sequentially in both business segments due to higher energy, chemicals and we also benefited from one-time items in the third quarter, including insurance recovery in the Industrial Packaging business related to the winter storms early in the year and the sale of nitrogen credits in the Global Cellulose Fibers business.distribution costs. These ~~one-time benefits~~higher costs were ~~largely~~partially offset by higher unplanned maintenance in Industrial Packaging and higher supply chain costs in Global Cellulose Fibers. We continue to be impacted by a highly stressed supply chain environment that is affecting both inbound materials and outbound shipments. Every mode of transportation is tight, and is expected to remain so for the foreseeable future. Planned maintenance outage costs decreased sequentially as expected. Our Ilim joint venture delivered another strong performance with equity earnings of $95 million.moderately lower recovered fiber costs.

Looking ahead to the ~~fourth~~second quarter ~~2021,~~2022, as compared to the ~~third~~first quarter ~~of 2021,~~2022, in our Industrial Packaging business, we expect higher price and mix ~~primarily~~ on the ~~realization~~flow-through of ~~our August 2021~~prior price increases in North ~~America, partially offset by mix as we start to recover some export backlogs.~~America. Volume is expected to improve ~~sequentially~~ on ~~higher seasonal demand despite three fewer shipping days in the fourth quarter.~~seasonally stronger demand. Operations and costs are expected to ~~improve moderately. Supply chains are expected to remain stretched, however, our North America packaging network will benefit from improved containerboard inventory levels, as planned.~~be slightly higher on the non-repeat of the Prattville insurance proceeds. Maintenance outage expense is expected to ~~be relatively flat.~~decrease as we step down from our highest maintenance quarter of 2022. Input costs are expected to increase ~~driven primarily by~~on higher ~~average costs for fiber~~energy, chemicals and ~~energy.~~distribution costs. In our Global Cellulose Fibers business, we expect price and mix to ~~be stable.~~improve on price realization of prior price increases. Volume is expected to ~~decrease modestly, primarily due to persistent port congestion, which is expected to impact absorbent pulp shipments again in the fourth quarter.~~be slightly lower. Operations and costs are expected to ~~be unfavorable due to the non-repeat of the previously mentioned nitrogen credit sales in the third quarter.~~increase on continued logistics constraints. Maintenance outage expenses are expected to decrease, and input costs are expected to increase, ~~while~~again driven by higher energy, chemicals and distribution costs.

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~~input costs are expected to increase~~geopolitical instability and the possibility of broadened military conflict may have on ~~higher wood fiber and energy costs. Equity earnings~~us or our Ilim joint venture, including on our receipt of dividends from our Ilim joint ~~venture are expected decrease modestly.~~

~~Finally, following~~venture. Moreover, we have announced our intention to explore strategic options with respect to Ilim S.A., including a sale of our 50% equity interest in Ilim S.A. In addition, we have disclosed our intent to monetize our remaining equity stake in Sylvamo Corporation (which has certain operations in Russia, and announced in March 2022 that it began the ~~completion~~suspension of ~~the Printing Papers spin-off on October 1, 2021, the historical results of the business will be treated as a discontinued operation with a full recast of previously presented periods~~operations in Russia and that it was continuing 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 Paperassess various options for its operations in that country). While we may sell our equity interests in the ~~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 increasedIlim joint venture and/or Sylvamo in the ~~United States~~future, we cannot be certain if and ~~numerous other countries, and restrictive measures, including mask and vaccine requirements, have been implemented~~when this may occur, or ~~reinstituted by various governmental authorities and private businesses. Economic recovery~~the impact that possible disruptions 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 and at the current time our manufacturing and converting facilities are generally operational.

~~There continue to be significant uncertainties~~capital markets, or conditions associated with the ~~COVID-19 pandemic, including with respect~~Russia-Ukraine conflict, could have on the value of and our ability to sell our equity interests in the resurgence of new variants of the virus in many areas globally; the additional actions taken by governmental authorities and private businesses, including mask and vaccine requirements, to attempt to contain the COVID-19 outbreak Ilim joint venture and/or to mitigate its impact; the efficacy, acceptance and availability of various vaccines and booster shots, as well as the possibility that strains of the virus may be resistant to current available vaccines;Sylvamo and the ~~impact~~timing of COVID-19 on economic conditions, including with respect to labor market conditions, economic activity, consumer behavior, supply chain shortages and disruptions and inflationary pressures. COVID-19 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 if public health and/or global economic conditions deteriorate.any such sales.

Adjusted operating earnings and Adjusted operating earnings per share are non-GAAP measures and are defined as net earnings (loss) attributable to International Paper (a GAAP measure) excluding discontinued operations, 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 by excluding the after-tax effect of discontinued operations, non-operating pension expense (income) and items considered by management to be unusual or otherwise not reflective of on-going operations (net special items) from ~~the~~net earnings (loss) attributable to shareholders reported under GAAP. Adjusted operating earnings per share is calculated by dividing Adjusted operating earnings by diluted average shares of common stock outstanding. Management uses these measures to focus on on-going operations, and believes that these measures are useful to investors because 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 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) attributable to 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 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


	Three Months Ended March 31,				Three Months Ended December 31,
In millions	2022		2021		2021
Net earnings (loss) attributable to shareholders	$	360	$	349	$	107
Less - Discontinued operations (gain) loss	—		$	(82)	$	8
Earnings (loss) from continuing operations	360		267		115
Add back - Non-operating pension expense (income)	(49)		(52)		(47)
Add back - Net special items expense (income)	(46)		(42)		295
Income tax effect - Non-operating pension and net special items expense	23		25		(62)
Adjusted operating earnings (loss) attributable to shareholders	$	288	$	198	$	301

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Three Months Ended
September 30, Three Months Ended June 30,
In millions 2021 2020 2021
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 (0.13) (0.03) (0.13)
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 0.12 (0.06) 0.04
Adjusted Operating Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders $ 1.35 $ 0.71 $ 1.06


	Three Months Ended March 31,				Three Months Ended December 31,
In millions	2022		2021		2021
Diluted earnings (loss) per share attributable to shareholders	$	0.95	$	0.88	$	0.28
Less - Discontinued operations (gain) loss per share	—		(0.20)		0.02
Diluted earnings (loss) per share from continuing operations	0.95		0.68		0.30
Add back - Non-operating pension expense (income) per share	(0.13)		(0.13)		(0.12)
Add back - Net special items expense (income) per share	(0.12)		(0.11)		0.77
Income tax effect per share - Non-operating pension and net special items expense	0.06		0.06		(0.17)
Adjusted operating earnings (loss) per share attributable to shareholders	$	0.76	$	0.50	$	0.78

Cash provided by operations totaled ~~$1.9 billion~~$588 million and ~~$2.3 billion~~$512 million for the first ~~nine~~three months of ~~2021~~2022 and ~~2020,~~2021, respectively. The Company generated free cash flow of approximately ~~$1.6 billion~~$403 million and $423 million in ~~each of~~ the first ~~nine~~three months of 2022 and 2021, ~~and 2020.~~respectively. 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

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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:


		Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2021		2020		In millions	2022		2021
Cash provided by operations	Cash provided by operations	$	1,923	$	2,274	Cash provided by operations	$	588	$	512
Adjustments:	Adjustments:					Adjustments:
Cash invested in capital projects, net of insurance recoveries	Cash invested in capital projects, net of insurance recoveries	(348)		(657)		Cash invested in capital projects, net of insurance recoveries	(185)		(89)
Free Cash Flow	Free Cash Flow	$	1,575	$	1,617	Free Cash Flow	$	403	$	423

The non-GAAP financial measures presented in this 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 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~~first quarter of ~~2021,~~2022, International Paper reported net sales of ~~$5.7~~$5.2 billion, compared with ~~$5.6~~$5.1 billion in the ~~second~~fourth quarter of 2021 and ~~$5.1~~$4.6 billion in the ~~third~~first quarter of ~~2020.~~2021.

Net earnings (loss) attributable to International Paper totaled ~~$864~~$360 million, or ~~$2.20~~$0.95 per diluted share, in the ~~third~~first quarter of ~~2021.~~2022. This compared with ~~$432~~$107 million, or ~~$1.09~~$0.28 per diluted share, in the ~~second~~fourth quarter of 2021 and ~~$204~~$349 million, or ~~$0.52~~$0.88 per diluted share, in the ~~third~~first quarter of ~~2020.~~2021.

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Compared with the ~~second~~fourth quarter of 2021, earnings benefited from higher average sales prices and a favorable mix ($~~171~~106 million), lower ~~operating costs~~corporate and other items ($928 million), lower ~~mill maintenance outage costs~~net interest expense ($~~134~~6 million) and lower ~~tax~~non-operating pension expense ($151 million). These benefits were offset by lower sales volumes ($248 million), higher operating costs ($31 million), higher raw material and freight costs ($~~182~~18 million), higher corporate and other items ($2 million) and higher non-operating pension expense ($1 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 ($54102 million)~~, lower net interest expense ($23 million), lower~~ and higher 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 ($2521 million). Equity earnings, net of taxes, relating to International Paper’s investments in Ilim S.A.~~, Graphic Packaging International Partners, LLC,~~ and other

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investments were ~~$122~~$27 million higher ~~in the third quarter of 2021~~ than in the ~~third~~fourth quarter of ~~2020.~~2021. Net special items in the ~~third~~first quarter of ~~2021~~2022 were a gain of ~~$294~~$35 million compared with a loss of ~~$83~~$222 million in the ~~third~~fourth quarter of ~~2020.~~2021.

Compared with the first quarter of 2021, the first quarter of 2022 reflects higher average sales prices and a favorable mix ($418 million), lower corporate and other costs ($16 million), lower net interest expense ($17 million) and lower tax expense ($7 million). These benefits were offset by lower sales volumes ($6 million), higher operating costs ($92 million), higher raw material and freight costs ($58 million), higher mill maintenance outage costs ($256 million) and higher non-operating pension expense ($2 million). Equity earnings, net of taxes, relating to International Paper’s investments in Ilim S.A. and other investments were $44 million higher in the first quarter of 2022 than in the first quarter of 2021. Net special items in the first quarter of 2022 were a gain of $35 million compared with a gain of $30 million in the first quarter of 2021.

Business 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 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 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 operated~~The Company currently operates in ~~three~~two segments: Industrial Packaging and 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.~~

Fibers.

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The following table presents a reconciliation of Net earnings (loss) attributable to International Paper Company to its Total business segment operating profit:


		Three Months Ended							Three Months Ended
		September 30,				June 30,			March 31,				December 31,
In millions	In millions	2021		2020		2021		In millions	2022		2021		2021
Net Earnings (Loss) Attributable to International Paper Company		$	864	$	204	$	432
Net Earnings (Loss) from Continuing Operations Attributable to International Paper Company								Net Earnings (Loss) from Continuing Operations Attributable to International Paper Company	$	360	$	267	$	115
Add back (deduct):	Add back (deduct):							Add back (deduct):
Income tax provision (benefit)	Income tax provision (benefit)	146		50		102		Income tax provision (benefit)	95		88		(5)
Equity (earnings) loss, net of taxes	Equity (earnings) loss, net of taxes	(94)		28		(104)		Equity (earnings) loss, net of taxes	(93)		(49)		(66)
Noncontrolling interests, net of taxes	Noncontrolling interests, net of taxes	—		—		2		Noncontrolling interests, net of taxes	—		—		—
Earnings (Loss) Before Income Taxes and Equity Earnings		916		282		432
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings								Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	362		306		44
Interest expense, net	Interest expense, net	93		112		57		Interest expense, net	69		93		76
Noncontrolling interests included in operations	Noncontrolling interests included in operations	(1)		—		(1)		Noncontrolling interests included in operations	—		(1)		(2)
Corporate expenses, net	Corporate expenses, net	12		(20)		7		Corporate expenses, net	12		36		49
Corporate net special items	Corporate net special items	11		108		101		Corporate net special items	(46)		(56)		282
Business net special items	Business net special items	(349)		2		(50)		Business net special items	—		14		13
Non-operating pension expense (income)	Non-operating pension expense (income)	(51)		(11)		(52)		Non-operating pension expense (income)	(49)		(52)		(47)
Adjusted Operating Profit	Adjusted Operating Profit	$	631	$	473	$	494	Adjusted Operating Profit	$	348	$	340	$	415
Business Segment Operating Profit (Loss):	Business Segment Operating Profit (Loss):							Business Segment Operating Profit (Loss):
Industrial Packaging	Industrial Packaging	$	429	$	469	$	408	Industrial Packaging	$	397	$	421	$	414
Global Cellulose Fibers	Global Cellulose Fibers	96		(59)		10		Global Cellulose Fibers	(49)		(81)		1
Printing Papers		106		63		76
Total Business Segment Operating Profit	Total Business Segment Operating Profit	$	631	$	473	$	494	Total Business Segment Operating Profit	$	348	$	340	$	415

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Business Segment Operating Profit

Total business segment operating profits were ~~$631~~$348 million in the ~~third~~first quarter of ~~2021, $494~~2022, $415 million in the ~~second~~fourth quarter of 2021 and ~~$473~~$340 million in the ~~third~~first quarter of ~~2020.~~2021.

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Compared with the ~~second~~fourth quarter of 2021, operating profits benefited from higher average sales prices and a favorable mix ($~~216 million), lower operating costs ($12 million) and lower mill outage costs ($170~~131 million). These benefits were offset by lower sales volumes ($3010 million) ~~and~~, higher operating costs ($39 million), higher raw material and freight costs ($~~231~~22 million) and higher mill outage costs ($127 million).

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Compared with the ~~third~~first quarter of ~~2020,~~2021, 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 mill outage costs ($67~~595 million). These benefits were offset by lower sales volumes ($9 million), higher operating costs ($~~102~~131 million) ~~and~~, higher raw material and freight costs ($~~401~~364 million) and higher mill outage costs ($83 million).

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Sales Volumes by Product (a)

Sales volumes of major products for the three months ended March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ were as follows:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
In thousands of short tons (except as noted)	In thousands of short tons (except as noted)	2021	2020	2021	2020	In thousands of short tons (except as noted)	2022	2021
Industrial Packaging	Industrial Packaging					Industrial Packaging
Corrugated Packaging (b)	Corrugated Packaging (b)	2,689	2,705	8,106	7,900	Corrugated Packaging (b)	2,618	2,684
Containerboard	Containerboard	710	760	2,118	2,370	Containerboard	712	709
Recycling	Recycling	521	541	1,647	1,630	Recycling	564	558
Saturated Kraft	Saturated Kraft	45	36	140	123	Saturated Kraft	44	45
Gypsum/Release Kraft	Gypsum/Release Kraft	56	50	179	154	Gypsum/Release Kraft	54	55
Bleached Kraft		5	7	18	22
EMEA Packaging (b)	EMEA Packaging (b)	334	374	1,179	1,190	EMEA Packaging (b)	368	435
Brazilian Packaging (b)		—	98	—	271
European Coated Paperboard		56	102	267	308
Industrial Packaging	Industrial Packaging	4,416	4,673	13,654	13,968	Industrial Packaging	4,360	4,486
Global Cellulose Fibers (in thousands of metric tons) (c)	Global Cellulose Fibers (in thousands of metric tons) (c)	856	886	2,605	2,752	Global Cellulose Fibers (in thousands of metric tons) (c)	712	755
Printing Papers
U.S. Uncoated Papers		379	336	1,104	998
European and Russian Uncoated Papers		248	298	882	929
Brazilian Uncoated Papers		275	208	801	598
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.

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Discontinued Operations

On October 1, 2021, the Company completed the previously announced spin-off of its Printing Papers business along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia into a standalone, publicly-traded company, Sylvamo Corporation. On August 6, 2021, the Company completed the sale of its Kwidzyn, Poland mill which included the pulp and paper mill in Kwidzyn and supporting functions. As a result of the Sylvamo Corporation spin-off and sale of Kwidzyn, the Company no longer has a Printing Papers business segment, and all historical results have been adjusted to reflect the Kwidzyn and the Printing Papers business and other businesses conveyed to Sylvamo Corporation as discontinued operations. See Note 9 - Divestitures and Impairments of Item 1. Financial Statements for further discussion.

Discontinued operations include the operating earnings of the businesses noted above. Discontinued operations also includes an after-tax net special items charge of $20 million and $8 million for the three months ended March 31, 2021 and December 31, 2021, respectively.

Details of these charges were as follows:


	Three Months Ended
	March 31,				December 31,
	2021				2021
In millions	Before Tax		After Tax		Before Tax		After Tax
Printing Papers spin-off	$	25	$	20	$	10	$	5
Gain on sale of Kwidzyn, Poland mill	—		—		9		6
Foreign and state taxes related to Printing Papers spin-off	—		—		—		(3)
Total	$	25	$	20	$	19	$	8

Income Taxes

An income tax provision of ~~$146~~$95 million was recorded for the ~~third~~first quarter of 2022 and the reported effective income tax rate was 26%. Excluding expense of $11 million related to the tax effects of net special items and expense of $12 million related to the tax effects of non-operating pension expense, the effective income tax rate was 27% for the quarter.

An income tax benefit of $5 million was recorded for the fourth quarter of 2021 and the reported effective income tax rate was ~~16%~~(11)%. Excluding a benefit of $73 million related to the tax effects of net special items and expense of $11 million related to the tax effects of non-operating pension expense, the effective income tax rate was 20% for the quarter.

An income tax provision of $88 million was recorded for the first quarter of 2021 and the reported effective income tax rate was 29%. Excluding expense of ~~$36~~$12 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%30% for the quarter.

Interest Expense

Net interest expense was $69 million in the first quarter of 2022, compared with $76 million in the fourth quarter of 2021 and $93 million in the ~~third~~first quarter of 2021, compared with $57 million in the second quarter of 2021 and $112 million in the third quarter of 2020. Net interest expense includes interest expense of $8 million, interest income of $28 million and interest income of $1 million for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively, related to a foreign value-added tax credit accrual.

2021.

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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 September 30,											Three Months Ended
													March 31,									December 31,
		2021					2020						2022				2021					2021
In millions	In millions	Before Tax		After Tax			Before Tax		After Tax			In millions	Before Tax		After Tax		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)	$	—	$	—		EMEA Packaging business optimization	$	—	$	—	$	12	$	10	(a)	$	—	$	—
Printing Papers spin-off		4		4		(c)	—		—
Brazil Packaging impairment		—		—			349		342		(a)
Abandoned property removal		—		—			14		11		(b)
Environmental remediation reserve adjustment		—		—			7		6		(c)
Riverdale mill conversion		—		—			1		1		(c)
Gain on sale of Kwidzyn, Poland mill		(360)		(350)		(c)	—		—
Foreign value-added tax credit accrual		(35)		(23)		(c)	(2)		(1)		(a)
EMEA Packaging impairment - Turkey	EMEA Packaging impairment - Turkey	(6)		—		(a)	—		—			EMEA Packaging impairment - Turkey	—		—		2		2		(a)	—		—
Building a Better IP												Building a Better IP	—		—		—		—			14		11		(b)
Other	Other	—		—			$	(1)	$	(1)	(d)	Other	—		—		—		—			(1)		(1)		(a)
Business Segments Total	Business Segments Total	(385)		(359)			$	368	$	358		Business Segments Total	—		—		14		12			13		10
Corporate	Corporate											Corporate
Sylvamo investment - fair value adjustment												Sylvamo investment - fair value adjustment	(46)		(35)		—		—			32		24
Debt extinguishment costs	Debt extinguishment costs	223		168			131		98			Debt extinguishment costs	—		—		18		14			238		179
Printing Papers spin-off / Building a Better IP		106		90			—		—
Real estate - office impairment		21		16			—		—
Environmental remediation reserve adjustment		10		7			41		31
Asbestos litigation reserve adjustment		—		—			43		33
India transaction		—		—			11		11
Building a Better IP												Building a Better IP	—		—		—		—			17		13
Legal reserve adjustment												Legal reserve adjustment	—		—		—		—			(5)		(4)
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 equity investment in Graphic Packaging	—		—		(74)		(56)			—		—
Gain on sale of La Mirada, California distribution center		(86)		(65)			—		—
Other		11		8			2		1

Corporate Total	Corporate Total	81		70			$	195	$	149		Corporate Total	(46)		(35)		(56)		(42)			282		212
Total net special items	Total net special items	(304)		(289)			563		507			Total net special items	(46)		(35)		(42)		(30)			295		222
Non-operating pension expense (income)	Non-operating pension expense (income)	(156)		(117)			(31)		(23)			Non-operating pension expense (income)	(49)		(37)		(52)		(39)			(47)		(36)
Total net special items and non-operating pension expense (income)	Total net special items and non-operating pension expense (income)	$	(460)	$	(406)		$	532	$	484		Total net special items and non-operating pension expense (income)	$	(95)	$	(72)	$	(94)	$	(69)		$	248	$	186

(a) Recorded in the Industrial Packaging segment.

(b) Includes $9a charge of $11 million ($79 million after taxes) ~~for the nine months ended September 30, 2020~~ recorded in the Industrial Packaging segment and $5$3 million ($42 million after taxes) ~~for the nine months ended September 30, 2020~~ recorded in the Global Cellulose Fibers segment.

~~(c) 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.

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

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 2021 2020
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 4,087 $ 4,056 $ 12,096 $ 3,768 $ 3,633 $ 11,220
Operating Profit (Loss) $ 429 $ 408 $ 1,284 $ 469 $ 449 $ 1,388


Total Industrial Packaging	2022		2021
In millions	1st Quarter		1st Quarter		4th Quarter
Sales	$	4,406	$	3,930	$	4,255
Operating Profit (Loss)	$	397	$	421	$	414

Industrial Packaging net sales for the ~~third~~first quarter of ~~2021~~2022 were 1%4% higher compared with the ~~second~~fourth quarter of 2021 and 8%12% higher compared with the ~~third~~first quarter of ~~2020.~~2021. Operating profit was ~~5% higher~~4% lower in the ~~third~~first quarter of ~~2021~~2022 compared with the ~~second~~fourth quarter of 2021 and 9%6% lower compared with the ~~third~~first quarter of ~~2020.~~2021.


North American Industrial Packaging	North American Industrial Packaging	2021						2020						North American Industrial Packaging	2022		2021
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	1st Quarter		1st Quarter		4th Quarter
Sales (a)	Sales (a)	$	3,738	$	3,587	$	10,810	$	3,351	$	3,241	$	9,947	Sales (a)	$	4,025	$	3,560	$	3,907
Operating Profit (Loss)	Operating Profit (Loss)	$	418	$	377	$	1,190	$	455	$	434	$	1,326	Operating Profit (Loss)	$	400	$	395	$	415

(a)Includes intra-segment sales of ~~$34~~$29 million, $26 million and ~~$31~~$39 million for the three months ended ~~September 30,~~March 31, 2022 and 2021 and ~~2020, respectively; $27 million and $31 million for the three months ended June 30,~~December 31, 2021, ~~and 2020, respectively; and $87 million and $94 million for the nine months ended September 30, 2021 and 2020,~~ respectively.

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North American Industrial Packaging sales volumes in the ~~third~~first quarter of ~~2021~~2022 were lower compared to the ~~second~~fourth quarter of 2021 ~~reflecting lower shipments~~ for corrugated boxes and ~~domestic~~export containerboard ~~partially offset~~driven by ~~higher shipments for export containerboard. Box shipments were~~seasonality and fewer shipping days. Omicron labor constraints also impacted ~~by constrained containerboard availability as supply chains remain stretched.~~volumes. Total maintenance and economic downtime was about ~~202,000~~121,000 tons ~~lower~~higher in the ~~third~~first quarter of 2022 compared with the fourth quarter of 2021, ~~compared with the second~~due to higher maintenance downtime. The first quarter of ~~2021, driven by lower~~2022 was the highest maintenance ~~downtime.~~quarter of the year. Average sales margins were significantly higher reflecting higher average sales prices for boxes and export ~~containerboard.~~containerboard and a favorable mix in our box system. Operating costs were lower, driven by strong converting and mill ~~operations partially offset by higher converting costs.~~operations. Planned maintenance downtime costs were ~~$123~~$119 million ~~lower~~higher in the ~~third~~first quarter of ~~2021~~2022 compared with the ~~second~~fourth quarter of 2021. Input costs were ~~substantially~~flat as higher ~~primarily for wood,~~freight costs were offset by lower recovered fiber costs. Earnings benefited from insurance recoveries in both the first quarter of 2022 and ~~energy.~~the fourth quarter of 2021.

Compared with the ~~third quarter of 2020, sales volumes were lower in the third~~first quarter of 2021, sales volumes in the first quarter of 2022 were higher for domestic containerboard but decreased for export ~~containerboard partially offset by higher shipments for domestic~~ containerboard. Sales volumes for corrugated boxes were ~~slightly~~ lower reflecting ~~the impact of the challenging supply chain environment.~~Omicron labor constraints. Total maintenance and economic downtime was about ~~40,000~~74,000 tons ~~lower~~higher in the ~~third~~first quarter of ~~2021, driven by lower~~2022, due to higher maintenance downtime. Export containerboard and box prices were significantly higher reflecting previous price increases. Operating costs increased, driven by inflation ~~and increased converting and transportation costs.~~partially offset by strong mill operations. Distribution costs increased. Planned maintenance downtime costs were ~~$17~~$74 million ~~lower~~higher in the ~~third~~first quarter of ~~2021~~2022 compared with the ~~third~~first quarter of ~~2020.~~2021. Input costs were significantly higher driven by recovered fiber, wood, energy ~~chemicals~~ and ~~wood.~~freight.

Entering the ~~fourth~~second quarter of ~~2021,~~2022, sales volumes for corrugated boxes and export containerboard are expected to be higher compared to the ~~third~~first quarter of ~~2021.~~2022. Average sales margins are also expected to be higher, reflecting previous price increases. Operating costs are expected to be ~~lower.~~higher. Planned maintenance downtime costs are expected to be $4$60 million ~~higher~~lower in the ~~fourth~~second quarter of ~~2021~~2022 compared with the ~~third~~first quarter of ~~2021.~~2022. Input costs are expected to be ~~higher primarily for recovered fiber, energy and chemicals.~~higher.


EMEA Industrial Packaging	EMEA Industrial Packaging	2021						2020						EMEA Industrial Packaging	2022		2021
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	1st Quarter		1st Quarter		4th Quarter
Sales	Sales	$	331	$	394	$	1,121	$	306	$	297	$	953	Sales	$	410	$	396	$	387
Operating Profit (Loss)	Operating Profit (Loss)	$	(4)	$	12	$	34	$	3	$	5	$	18	Operating Profit (Loss)	$	(3)	$	26	$	(1)

EMEA Industrial Packaging sales volumes for corrugated boxes in the ~~third~~first quarter of 2022 were stable compared with the fourth quarter of 2021 as seasonally higher volumes in Morocco were ~~lower compared with the second quarter of 2021 driven~~offset by ~~seasonally~~ lower volumes in ~~Morocco.~~the Eurozone. Average sales margins for corrugated boxes were higher reflecting higher average sales prices in the Eurozone. Average sales margins in Morocco were lower ~~reflecting increased containerboard costs, partially offset~~driven by higher ~~box prices.~~containerboard costs. Operating costs were ~~lower.~~higher. Planned maintenance downtime costs were ~~$2 million higher~~lower in the ~~third~~first quarter of ~~2021~~2022 compared with the ~~second~~fourth quarter of 2021. Input costs were significantly higher, primarily for ~~recovered fiber and~~ energy. ~~The company completed the sale of its business in Turkey during the second quarter of 2021.~~

Compared with the ~~third~~first quarter of ~~2020,~~2021, sales volumes in the ~~third~~first quarter of ~~2021~~2022 were ~~higher, reflecting recovery~~lower driven by the sale of our EMEA Packaging business in Turkey in the ~~impacts~~second quarter of ~~the COVID-19 pandemic.~~2021. Average sales margins for corrugated boxes were lower driven by higher containerboard costs. Average sales margins for containerboard were higher, reflecting higher average sales prices. Operating costs ~~improved reflecting strong~~

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~~operations and cost management. Planned~~were higher. There were no planned maintenance ~~downtime were $1 million lower~~outages in either the ~~third~~first quarter of ~~2021 compared with~~2022 or the ~~third~~first quarter of ~~2020.~~2021. Input costs were significantly higher, primarily for energy and recovered ~~fiber and energy. Earnings benefited from the recent box plant acquisitions in Spain.~~fiber.

Looking ahead to the ~~fourth~~second quarter of ~~2021,~~2022, sales volumes for corrugated boxes are expected to be ~~higher.~~lower, reflecting seasonally lower volumes in Morocco. Average sales margins are expected to be ~~lower due to continued rising containerboard pricing.~~higher. Operating costs are expected to be higher. ~~Planned~~There are no planned maintenance ~~downtime costs are expected to be $1 million lower in~~outages scheduled for the ~~fourth~~second quarter of ~~2021 compared with the third quarter of 2021.~~2022. Input costs are expected to ~~be higher due to rising energy costs.~~increase.

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 2021 2020
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 52 $ 102 $ 252 $ 90 $ 84 $ 266
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 2021 compared with the second quarter of 2021 were higher. Average sales margins were flat reflecting higher average sales prices offset by an unfavorable mix. Operating costs were stable. Planned maintenance downtime costs were $5 million lower in the third quarter of 2021 compared with the second quarter of 2021 in Russia. Input costs were flat.

Compared with the third quarter of 2020, sales volumes were lower. Average sales margins were higher reflecting higher average sales prices and a favorable mix. Operating costs were flat. There were no planned maintenance downtime outages in either the third quarter of 2021 or the third quarter of 2020 in Russia. Input costs were slightly higher primarily for wood and chemicals.

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

Global Cellulose Fibers


Total Global Cellulose Fibers	Total Global Cellulose Fibers	2021						2020						Total Global Cellulose Fibers	2022		2021
In millions	In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	1st Quarter		1st Quarter		4th Quarter
Sales	Sales	$	729	$	671	$	1,981	$	564	$	605	$	1,737	Sales	$	710	$	595	$	717
Operating Profit (Loss)	Operating Profit (Loss)	$	96	$	10	$	24	$	(59)	$	(10)	$	(123)	Operating Profit (Loss)	$	(49)	$	(81)	$	1

Global Cellulose Fibers net sales in the ~~third~~first quarter of ~~2021~~2022 were ~~9% higher~~1% lower compared with the ~~second~~fourth quarter of 2021 and ~~29%~~19% higher than in the ~~third~~first quarter of ~~2020.~~2021. Operating profit in the ~~third~~first quarter of ~~2021 improved significantly~~2022 decreased compared to ~~both~~ the ~~second~~fourth quarter of 2021 and improved compared to the ~~third~~first quarter of ~~2020.~~2021.

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~~first quarter of ~~2021~~2022 compared with the ~~second~~fourth quarter of 2021 were ~~flat and continue to be impacted by shipping delays due to significant port congestion in the U.S.~~slightly lower reflecting continuing supply chain challenges. Total maintenance and economic downtime was about ~~28,000~~4,000 tons lower in the ~~third~~first quarter of ~~2021~~2022 compared with the ~~second~~fourth quarter of 2021 due to maintenance downtime. Average sales margins improved, ~~significantly,~~ reflecting ~~flow through of previous~~higher average sales price ~~increases~~for both fluff pulp and ~~an improved product mix.~~market pulp. Operating costs were ~~lower, partially offset~~higher driven by ~~higher~~seasonality and distribution ~~costs reflecting the challenging export supply chain~~

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~~environment.~~costs. Planned maintenance downtime costs in the ~~third~~first quarter of ~~2021~~2022 were ~~$18~~$9 million ~~lower~~higher compared with the ~~second~~fourth quarter of 2021. Input costs were higher, primarily for wood, chemicals and energy.

Compared with the ~~third~~first quarter of ~~2020,~~2021, sales volumes in the ~~third~~first quarter of ~~2021~~2022 were ~~higher but were impacted~~lower driven by ~~the shipping delays due to port congestion.~~on-going logistics challenges. Total maintenance and economic downtime was about ~~80,000~~1,000 tons lower in the ~~third~~first quarter of ~~2021, driven by~~2022, due to maintenance ~~and economic~~ downtime. Average sales prices were significantly higher for both fluff and market pulp. Operating costs were higher due to logistics challenges and inflation. Distribution costs were also higher. Planned maintenance downtime costs in the ~~third~~first quarter of ~~2021~~2022 were ~~$26~~$9 million ~~lower~~higher compared with the ~~third~~first quarter of ~~2020.~~2021. Input costs were higher primarily for wood, chemicals and energy.

Entering the ~~fourth~~second quarter of ~~2021,~~2022, sales volumes are expected to be slightly ~~lower.~~lower driven by continued logistics challenges. Average sales margins are expected to be ~~stable.~~higher. Planned maintenance downtime costs in the ~~fourth~~second quarter of ~~2021~~2022 are expected to be ~~$36~~$26 million ~~higher~~lower compared with the ~~third~~first quarter of ~~2021.~~2022. Operating costs are expected to be seasonally lower. Distribution costs are expected to be higher. Input costs are expected to increase for ~~wood, chemicals and energy.~~

~~Printing Papers~~

Total Printing Papers 2021 2020
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 846 $ 846 $ 2,473 $ 743 $ 583 $ 2,234
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 2021 were flat compared with the second quarter of 2021 and 14% higher than in the third quarter of 2020. Operating profit in the third quarter of 2021 was 39% higher compared with the second quarter of 2021 and 68% higher compared with the third quarter of 2020.

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

~~North American Papers~~ sales volumes in the third quarter of 2021 were 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, sales volumes in the third quarter of 2021 were higher reflecting demand recovery from the COVID-19 pandemic. Total maintenance and economic downtime was about 78,000 tons lower in the third quarter of 2021 compared with the third quarter of 2020 primarily due to economic downtime. Average sales margins were higher, driven by higher average sales prices. Operating costs were lower. Planned maintenance downtime costs were $6 million lower in the third quarter of 2021 compared with the third quarter of 2020. Input costs were higher, primarily for wood, energy and chemicals.

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 sale of our Kwidzyn, Poland mill. The third quarter of 2021 reflects one month of the Kwidzyn, Poland mill sales and operating profit.~~

~~European Papers~~ sales volumes for uncoated freesheet paper in the third quarter of 2021, compared with the second quarter of 2021, were higher in Russia and flat in Europe. Average sales margins for uncoated freesheet paper were higher in Europe reflecting higher average sales prices. In Russia, average sales margins were stable. Operating costs were higher in both regions. Excluding Kwidzyn, planned maintenance downtime costs were $8 million lower in the third quarter of 2021 compared

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to the second quarter of 2021. Input costs were higher in both regions, primarily for energy in Europe and packaging in Russia. Earnings benefited from favorable foreign currency impacts, primarily in Russia.

Sales volumes for uncoated freesheet paper in the third quarter of 2021 compared with the third quarter of 2020 were higher in both Europe and Russia, reflecting recovery of the significant decline in demand due to the COVID-19 pandemic. Earnings in both regions were negatively impacted by economic downtime in the third quarter of 2020 driven by the COVID-19 pandemic. Average sales margins for uncoated freesheet paper were lower in 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 higher in both regions. Excluding Kwidzyn, planned maintenance downtime costs were flat compared with the third quarter of 2020. Input costs were higher in both regions, primarily for energy in Europe and packaging in Russia.

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

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

~~Brazilian Papers~~ sales volumes in the third quarter of 2021, compared with the second quarter of 2021, were higher for both domestic and export shipments of uncoated freesheet 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 costs were $7 million higher in the third quarter of 2021 compared with the second quarter of 2021. Input costs were higher primarily for purchased pulp, chemicals and energy.

Compared with the third quarter of 2020, sales volumes for uncoated freesheet paper in the third quarter of 2021 increased in both domestic and export markets reflecting recovery from the negative demand impact of the COVID-19 pandemic. Average sales margins were higher reflecting higher average domestic and export sales prices and a favorable geographic mix. Operating costs were slightly higher. Planned maintenance outage expenses were $5 million higher in the third quarter of 2021 compared with the third quarter of 2020. Input costs 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~~with primary operations ~~are~~ in Russia. During the first quarter of 2022, the Company announced its intention to explore options, including a sale of its 50% ownership in Ilim Group. The Company recorded equity earnings, ~~(loss),~~ net of taxes, of ~~$95~~$93 million in the ~~third~~first quarter of ~~2021,~~2022, compared with ~~$101~~$66 million in the ~~second~~fourth quarter of 2021 and ~~$(33)~~$49 million in the ~~third~~first quarter of ~~2020.~~2021. In the ~~second~~first quarter of 2022 and ~~third quarters~~fourth quarter of 2021, ~~the~~ foreign exchange gains (losses) of $(15) million and ~~losses~~$5 million, respectively, are included in equity ~~earnings were not material and~~earnings. Ilim Group had no US dollar-denominated debt outstanding at ~~September 30,~~March 31, 2022 and December 31, 2021. There is no recourse of Ilim Group debt to International Paper.

Compared with the ~~second~~fourth quarter of 2021, sales volumes in the ~~third~~first quarter of ~~2021~~2022 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~~5% higher as logistical constraints at the Chinese border were ~~slightly lower, but increased in other export markets.~~resolved. Average sales ~~margins increased~~prices for softwood pulp, hardwood 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~~lower. Costs for fuel and ~~chemicals~~distribution were ~~higher. Following maintenance outages at the Ust-Ilimsk, Bratsk~~higher and ~~Koryazhma mills in the third quarter of 2021, repair and maintenance expenses increased. Distribution~~wood costs were ~~higher primarily due to the global shortage of shipping containers and increased tariffs.~~seasonally lower.

Compared with the ~~third~~first quarter of ~~2020,~~2021, sales volumes in the ~~third~~first quarter of 2021 decreased overall by 5%, primarily for sales of softwood pulp and hardwood pulp in China, partially offset by higher sales of softwood pulp and hardwood pulp in Russia. Sales of containerboard in China and other export markets2022 increased, as logistical constraints at the Chinese border were ~~higher, but declined in Russia.~~resolved. Average sales margins for softwood pulp, hardwood pulp and containerboard increased reflecting higher average sales prices in all regions. Input costs, primarily for wood, fuel and chemicals were higher. Distribution costs increased. An after-tax foreign exchange net loss of $55 million primarily on the remeasurement of U.S. dollar denominated net debt was recorded in the third quarter of 2020.

Looking forward to the ~~fourth~~second quarter of ~~2021,~~2022, sales volumes are expected to ~~increase. Based on pricing to date in the current quarter, average~~be stable. Average sales margins are projected to ~~decrease compared with the third quarter of 2021.~~increase for softwood pulp and hardwood pulp. Repair and maintenance costs ~~will decrease as there~~ are ~~no scheduled mill outages~~projected to increase in the ~~fourth~~second quarter. Input costs for wood are expected to be ~~moderately~~seasonally higher. ~~Distribution costs are projected to increase.~~

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~~Equity Earnings – GPIP~~

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. As of June 30, 2021, the Company no longer had an ownership interest in GPIP.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations totaled ~~$1.9 billion~~$588 million for the first ~~nine~~three months of ~~2021,~~2022, compared with ~~$2.3 billion~~$512 million for the comparable ~~2020 nine-month~~2021 three-month period.

Investments in capital projects, net of insurance recoveries, totaled ~~$348~~$185 million in the first ~~nine~~three months of ~~2021,~~2022, compared to ~~$657~~$89 million in the first ~~nine~~three months of ~~2020.~~2021. Full-year ~~2021~~2022 capital spending is currently expected to be approximately ~~$600 million,~~$1.1 billion, or ~~49%~~96% of depreciation and amortization.

Financing activities for the first ~~nine~~three months of ~~2021~~2022 included a ~~$379~~$85 million net increase in debt versus a ~~$1.1 billion~~$109 million net decrease in debt during the comparable ~~2020 nine-month~~2021 three-month period.

Amounts related to early debt extinguishment during the three and ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
Early debt reductions (a)	Early debt reductions (a)	$	200	$	903	$	1,097	$	1,190	Early debt reductions (a)	$	—	$	107
Pre-tax early debt extinguishment (gain) loss, net	Pre-tax early debt extinguishment (gain) loss, net	35		105		223		131		Pre-tax early debt extinguishment (gain) loss, net	—		18

(a)~~Reductions~~There were no early debt reductions for the three months ended March 31, 2022. There were 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 for the three months ended September 30, 2021 and 2020, respectively, and from 3.00% to 5.15%~~4.80% with original maturities from 2027 to 2048 ~~and from 3.00% to 7.50% with original maturities from 2021 to 2048~~ for the ~~nine~~three months ended ~~September 30, 2021 and 2020, respectively.~~March 31, 2021.

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At ~~September 30, 2021,~~March 31, 2022, contractual obligations for future payments of debt maturities (including finance lease liabilities disclosed in Note 11 - Leases and excluding the timber monetization structures disclosed in Note 16 - Variable Interest Entities) by calendar year were as follows: ~~$113 million in 2021; $224~~$195 million in 2022; ~~$409~~$358 million in 2023; ~~$200~~$149 million in 2024; ~~$257~~$206 million in 2025; $73 million in 2026; and ~~$7.3~~$4.7 billion thereafter.

Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At ~~September 30, 2021,~~March 31, 2022, 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, 2021,~~March 31, 2022, International Paper’s credit agreements totaled $2.1 billion, which is comprised of 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, 2021,~~March 31, 2022, the Company had no borrowings outstanding under 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, 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, 2021~~March 31, 2022 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 $2.1 billion capacity under the Company's credit agreements, International Paper has a commercial paper program with a borrowing capacity of $1.0 ~~billion.~~billion supported by its $1.5 billion credit agreement. 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, 2021,~~March 31, 2022, the Company had no borrowings outstanding under the program.

On October 28, 2021, the Company launched a debt tender to purchase up to $500 million of the Company's outstanding debt with interest 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, meet working capital and dividend requirements and make common stock and/or debt repurchases for the next 12 months and for the foreseeable future thereafter 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, and we have ~~purchased,~~repurchased, and may continue to repurchase, our common stock (under our existing share repurchase program) and debt (including in open market purchases) 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. During 2020, management took various actions to further strengthen the Company’s liquidity position in response to the COVID-19 pandemic. This included the Company 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 payroll taxes will be paid by December 31, 2021 and the remainder will be paid by December 31, 2022. We believe that our credit agreements, commercial paper program, and the actions taken in response to COVID-19 provide us with sufficient liquidity to operate in the current environment; however, an extended period of economic disruption could impact our access to additional sources of liquidity.

During the first ~~nine~~three months of ~~2021,~~2022, International Paper used ~~1.8~~1.5 million shares of treasury stock for various incentive plans. International Paper also acquired ~~7.7~~9.4 million shares of treasury stock, including restricted stock tax withholdings. Repurchases of common stock and payments of restricted stock withholding taxes totaled ~~$425~~$428 million, including ~~$398~~$406 million related to shares repurchased under the Company's repurchase program. ~~In addition,~~Our current share repurchase program approved by our Board of Directors on October 12, 2021, ~~the Company announced that its board~~which does not have an expiration date, has approximately $2.52 billion aggregate amount 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~~remaining authorized for purchase ~~which was $1.3 billion~~ as of ~~September 30, 2021).~~March 31, 2022.

During the first ~~nine~~three months of ~~2020,~~2021, International Paper used approximately ~~2.0~~1.8 million shares of treasury stock for various incentive plans. International Paper also acquired ~~1.0~~3.1 million shares of treasury stock, including restricted stock tax withholding. Repurchases of common stock and payments of restricted stock withholding taxes totaled ~~$42~~$155 million, including ~~$14~~$129 million related to shares repurchased under the Company's repurchase program.

Cash dividend payments related to common stock totaled ~~$602~~$174 million and ~~$605~~$202 million for the first ~~nine~~three months of ~~2021~~2022 and ~~2020,~~2021, respectively. Dividends were ~~$1.5375~~$0.4625 per share and ~~$1.5375~~$0.5125 per share for the first ~~nine~~three months in 2022 and 2021, ~~and 2020,~~ 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.

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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, ~~2020.~~2021. 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 held installment notes of $4.8 billion and third-party loans of $4.2 billion ~~that~~which both matured in August 2021. We settled the third-party loans at their maturity with the proceeds from the installment 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. As of ~~September 30, 2021,~~March 31, 2022, the Company's remaining deferred tax liability associated with the 2015 Financing Entities was ~~$815~~$813 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 with an initial 15-year term expiring in October 2022 that ~~includes provisions relating~~automatically renews for successive five-year terms, unless terminated by either party. We have announced our intention to ~~the reconciliation~~explore strategic options with respect to Ilim S.A., including a sale 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'our 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 $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%equity interest in Ilim ~~would result~~S.A. While we may sell our equity interests in the ~~consolidation~~Ilim joint venture in the future, we cannot be certain if and when this may occur, or the impact that possible disruptions in the capital markets, or conditions associated with the Russia-Ukraine conflict, could have on the value of ~~Ilim's financial position~~ and ~~results~~our ability to sell our equity interests in the Ilim joint venture and the timing 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.any such sales.

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.

The Company has included in its ~~2020~~2021 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~~three months of ~~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.2022.

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” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as ~~“expects”, “anticipates”, “believes”,~~“expects,” “anticipates,” “believes,” “estimates” and similar expressions identify forward-looking statements. These statements are not guarantees of future performance and reflect management’s current views 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) risks with respect to climate change and global, regional, and local weather conditions, as well as risks related to our ability to meet targets and goals with respect to climate change and the emission of GHGs and other environmental, social and governance matters; (ii) the impact of the conflict involving Russia and Ukraine, including in connection with related escalated sanctions imposed by the United States, the European Union, G7 and other countries and possible actions by the Russian government, and the impact of such developments on domestic and global economic and geopolitical conditions in general and on us and our Ilim joint venture, which could be materially and adversely affected by such developments, and our inability to predict the impact of the Russian invasion of Ukraine, sanctions imposed to date, geopolitical instability and the broadened military conflict on our Ilim joint venture and on our receipt of dividends from our Ilim joint venture; (iii) the possible impact of these developments involving Ukraine and Russia and possible resulting disruptions in the capital markets on the value of and our ability to sell all or a portion of our remaining equity stake in Sylvamo Corporation and the timing of any such sales; (iv) the impact of and developments related to the COVID-19 pandemic, including the spread of new variants of the virus, the effectiveness, acceptance and availability of vaccines and booster shots, and associated levels of vaccination as well as the possibility that strains of the virus may be resistant to currently available vaccines, impacts of 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, consumer preferences and demand, supply chain shortages and disruptions, inflationary pressures and disruptions in the credit or financial markets; (ii)pandemic; (v) the level of our indebtedness and changes in interest rates; ~~(iii)~~(vi) the impact of global and domestic economic conditions and industry conditions, including ~~but not limited~~with respect to commercial activity, inflationary pressures and changes in the cost or availability of raw materials, energy sources and transportation sources, supply chain shortages and disruptions, the availability of labor, ~~and competitive~~particularly in light of current labor market conditions which are exceptionally tight, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products, ~~(including any such changes resulting from~~and conditions impacting the ~~COVID-19 pandemic); (iv)~~credit, capital and financial markets; (vii) domestic and global ~~economic~~geopolitical conditions, ~~and political changes,~~ changes in currency exchange rates, trade protectionist policies, downgrades in our credit ratings, and/or the credit ratings of banks issuing certain letters of credit, issued by

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recognized credit rating ~~organizations, (v)~~organizations; (viii) the amount of our future pension funding obligations, and pension and ~~health care~~healthcare costs; ~~(vi)~~(ix) unanticipated expenditures or other adverse developments related to ~~the cost of~~ compliance with existing and new environmental, tax, labor and employment, privacy, anti-bribery and anti-corruption, and other U.S. and non-U.S. governmental laws and ~~regulations (including new legal requirements arising from the COVID-19 pandemic); (vii)~~regulations; (x) any material disruption at any of our manufacturing facilities or other adverse impact on our operations due to severe weather, natural disasters, climate change or other causes; ~~(viii)~~(xi) risks inherent in conducting business through joint ventures; ~~(ix)~~(xii) our ability to achieve the benefits expected from, and other risks associated with, acquisitions, joint ventures, divestitures, spin-offs and other corporate transactions, ~~(x)~~(xiii) cybersecurity and information technology risks; ~~(xi)~~(xiv) loss contingencies and pending, threatened or future litigation, including with respect to environmental related matters; ~~(xii)~~(xv) our ~~ability~~exposure to claims under our agreements with Sylvamo Corporation; (xvi) our failure to realize the anticipated benefits of the spin-off ~~transaction; and (xiii) the impact~~ of ~~the spin-off transaction on the Company~~Sylvamo Corporation and the ~~relationship between the two companies going forward, including the ongoing commercial agreements~~qualification of such spin-off as a tax-free transaction for U.S. federal income tax purposes; and ~~arrangements between us~~(xvii) our ability to attract and ~~Sylvamo.~~retain qualified personnel. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements can be found in our press releases and ~~U.S. Securities and Exchange Commission~~SEC filings. In addition, other risks and uncertainties not presently known to the Company or that we currently believe to be immaterial could affect the accuracy of any forward-looking statements. 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 38~~pages 39-40 of International Paper’s ~~2020~~2021 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, ~~2020.~~2021.

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 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, 2021~~March 31, 2022 (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, 2021~~March 31, 2022 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, ~~2020~~2021 (Part I, Item 1A). other than as discussed below.

Our financial results and businesses, including our Ilim joint venture and equity interest in Sylvamo Corporation, may be adversely affected by the current military conflict between Russia and Ukraine, including new sanctions and export controls targeting Russia and other responses to Russia's invasion of Ukraine.

The global economy has been, and may continue to be, negatively impacted by Russia’s invasion of Ukraine. As a result of Russia's invasion of Ukraine, the United States, the United Kingdom, the European Union and other G7 countries, among other countries, have imposed coordinated financial and economic sanctions and export-control measures on certain industry sectors and parties in Russia. Some of these measures include: (i) comprehensive financial sanctions against major Russian banks; (ii) additional designations of Russian individuals with significant business interests and government connections; (iii) designations of individuals and entities involved in Russian military activities; and (iv) enhanced export controls and trade sanctions targeting Russia's import of various goods. The negative impacts arising from the conflict and these sanctions may include reduced consumer demand, supply chain disruptions and increased costs for transportation, energy, and raw materials. We will continue to monitor the conflict and the potential impact of financial and economic sanctions on the regional and global economy.

We have a 50% equity interest in Ilim S.A., the holding company of Ilim Group JSC, whose primary operations are in Russia. Specifically, Ilim Group’s facilities include three paper mills located in Bratsk, Ust-Ilimsk, and Koryazhma, Russia, with combined total pulp and paper capacity of over 3.6 million metric tons. In joint ventures, such as the Ilim joint venture, we share ownership and management of a company with one or more parties who may or may not have the same goals, strategies, priorities or resources as we do. We also have an equity interest in Sylvamo Corporation, which is a standalone, publicly traded company created by the spin-off of our Printing Papers business in October 2021. Sylvamo Corporation reported that Russian operations accounted for roughly 15% of its 2021 total revenue, and in March 2022 announced that it began the suspension of its operations in Russia as it continues to assess various options for its operations in that country.

The military conflict between Russia and Ukraine, including escalating sanctions, possible actions by the Russian government, and associated domestic and global economic and geopolitical conditions, could materially adversely affect our Ilim joint venture and our businesses, financial condition, results of operations and cash flows.We are currently unable to predict the impact Russia’s invasion of Ukraine, sanctions imposed to date or that may be imposed in the future, potential embargoes, supply chain disruptions, geopolitical instability and shifts, and the possibility of broadened military conflict may have on us or our Ilim joint venture, including on whether our Ilim joint venture will be able to continue to pay dividends to us. We are actively exploring strategic options, including a sale of our equity interest in the Ilim joint venture and are selling our interest in Sylvamo Corporation, but we cannot be certain if and when this may occur. Further, we cannot be certain of possible resulting disruptions (including in the capital markets) on the value of and our ability to sell all or a portion of our equity interest in Sylvamo Corporation or our interest in the Ilim joint venture and the timing of any such sales. In addition, the effects of escalated or prolonged military conflict could heighten many of our known risks described in Part I, Item 1A. “Risk Factors” in our Annual Report Form 10-K for fiscal year 2021.Such risks include, but are not limited to, adverse effects on global business and economic conditions, including increased volatility in the price and demand of oil and natural gas and inflation and demand for our products, increased cyber security risks, adverse changes in trade policies, taxes, government regulations, our ability to implement and execute our business strategy including with respect to joint ventures, divestitures, spin-offs, capital investments and other corporate transactions that we have pursued or may pursue, disruptions in global supply chains, risks related to employees and contracts in the affected regions, our exposure to foreign currency fluctuations and potential nationalizations and asset seizures in Russia, constraints, volatility, or disruption in the capital markets and our sources of liquidity, and our potential inability to service our remaining performance obligations and potential contractual breaches and litigations.

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In particular, our investments in Ilim S.A. and Sylvamo Corporation involve certain legal, geopolitical, investment, repatriation, and transparency risks not typically associated with investments in companies operating in the U.S, including: (i) the legal framework of Russia may rapidly evolve and it is not possible to accurately predict the content or implications of changes in their statutes or regulations. The Russian Parliament is considering legislation that could result in nationalization, expropriation or other unfavorable regulations and may be introduced at any time without prior warning or consultation; (ii) legal frameworks may be unfairly or unevenly enforced, and courts may decline to enforce legal protections covering our investments altogether. The cost and difficulties of litigation in Russia may make enforcement of our rights impractical or impossible.; (iii) the risk we may inadvertently violate sanctions that may be imposed by the United States or foreign governments, including Russia, given the complexity and rapidly changing nature of the situation; (iv) financial and economic sanctions and export-control measures imposed on certain industry sectors and parties in Russia as well as counter-sanctions measures implemented by Russia could lead to further disruptions in supply chains and adversely affect operations in Russia; (v) increased risks of economic, political, or social instability, escalating military conflicts with Ukraine or new conflicts with any other countries, war, or terrorism, which could adversely affect the economies of Russia or lead to a material adverse change in the value of our investments in Russia; and (vi) disclosure, accounting, and financial standards and requirements in Russia may rapidly evolve and it is not possible to accurately predict the content or implications of changes in their disclosure requirements.

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, 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


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)
January 1, 2022 - January 31, 2022	2,210,462	$48.02	2,208,740	$2.82
February 1, 2022 - February 28, 2022	2,926,019	46.55	2,458,000	2.70
March 1, 2022 - March 31, 2022	4,263,950	43.63	4,263,950	2.52
Total	9,400,431

(a) ~~2,226~~469,741 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. The remainder ~~were~~was purchased under a share repurchase program. Under current Board authorization that was increased on October 12, 2021, we are authorized to purchase, in open market transactions (including block trades), privately negotiated transactions or otherwise, up to $3.3 billion of shares of our common stock. This repurchase program does not have an expiration date. As of ~~September 30, 2021,~~March 31, 2022, approximately ~~$1.3~~$2.52 billion aggregate amount of shares of our common stock remained authorized for purchase under this ~~program before the increase.~~program.

ITEM 3 . DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 . M INE SAFETY DISCLOSURES

Not applicable.

ITEM 5 . OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS


~~10.1~~						Share Purchase Agreement for the Divestiture of International Paper-Kwidzyn SP. Z.O.O. by and among International Paper (Poland) Holding SP. Z.O.O., Mayr-Melnhof Containerboard International, GMBH, Mayr-Melnhof Karton AG and 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 28, 2021~~April 29, 2022	By	/s/ Tim S. Nicholls
		Tim S. Nicholls
		Senior Vice President and Chief Financial Officer

~~October 28, 2021~~April 29, 2022	By	/s/ Vincent P. Bonnot
		Vincent P. Bonnot
		Vice President – Finance and Controller

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	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


	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


	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


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


	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


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


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


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