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 ~~June~~September 30, 2023


☐			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 001-40718

________________

SYLVAMO CORPORATION

(Exact Name of Registrant as Specified in its Charter)

________________


Delaware			86-2596371
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)


6077 Primacy Parkway Memphis, Tennessee			38119
(Address of Principal Executive Offices)			(Zip Code)

901-519-8000

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and and former fiscal year if changed since last report)

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 Stock, par value $1.00 per share	SLVM	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, 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 ~~August 4,~~November 3, 2023 was ~~41,864,548.~~41,553,680.

INDEX


		PAGE NO.
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations - Three Months and ~~Six~~Nine Months Ended ~~June~~September 30, 2023 and 2022	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) - Three Months and Nine ~~and Six~~ Months Ended ~~June~~September 3 0 ,30, 2023 and 2022	2
	Condensed Consolidated Balance Sheets - ~~June~~September 30,, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Cash Flows - ~~Six~~Nine Months Ended ~~June~~September 30,, 2023 and 2022	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	30
Item 6.	Exhibits	31
Signatures		32

ITEM 1. FINANCIAL STATEMENTS

SYLVAMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions, except per share amounts)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
NET SALES	NET SALES	$	919	$	912	$	1,860	$	1,733	NET SALES	$	897	$	968	$	2,757	$	2,701
COSTS AND EXPENSES	COSTS AND EXPENSES									COSTS AND EXPENSES
Cost of products sold (exclusive of depreciation, amortization and cost of timber harvested shown separately below)	Cost of products sold (exclusive of depreciation, amortization and cost of timber harvested shown separately below)	721		659		1,390		1,279		Cost of products sold (exclusive of depreciation, amortization and cost of timber harvested shown separately below)	665		687		2,055		1,965
Selling and administrative expenses	Selling and administrative expenses	76		81		159		147		Selling and administrative expenses	89		80		248		227
Depreciation, amortization and cost of timber harvested	Depreciation, amortization and cost of timber harvested	34		32		69		63		Depreciation, amortization and cost of timber harvested	36		30		105		94
Taxes other than payroll and income taxes	Taxes other than payroll and income taxes	6		6		12		12		Taxes other than payroll and income taxes	7		6		19		18
Interest (income) expense, net	Interest (income) expense, net	12		17		19		34		Interest (income) expense, net	9		18		28		52
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	70		117		211		198		INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	91		147		302		345
Income tax provision	Income tax provision	21		33		65		59		Income tax provision	33		38		98		97
NET INCOME FROM CONTINUING OPERATIONS	NET INCOME FROM CONTINUING OPERATIONS	49		84		146		139		NET INCOME FROM CONTINUING OPERATIONS	58		109		204		248
Discontinued operations, net of taxes	Discontinued operations, net of taxes	—		(143)		—		(172)		Discontinued operations, net of taxes	—		(52)		—		(224)
NET INCOME (LOSS)	NET INCOME (LOSS)	$	49	$	(59)	$	146	$	(33)	NET INCOME (LOSS)	$	58	$	57	$	204	$	24
BASIC EARNINGS (LOSS) PER SHARE	BASIC EARNINGS (LOSS) PER SHARE									BASIC EARNINGS (LOSS) PER SHARE
Earnings from continuing operations	Earnings from continuing operations	$	1.16	$	1.90	$	3.44	$	3.15	Earnings from continuing operations	$	1.39	$	2.47	$	4.83	$	5.62
Discontinued operations, net of taxes	Discontinued operations, net of taxes	—		(3.24)		—		(3.90)		Discontinued operations, net of taxes	—		(1.18)		—		(5.08)
Net earnings (loss)	Net earnings (loss)	$	1.16	$	(1.34)	$	3.44	$	(0.75)	Net earnings (loss)	$	1.39	$	1.29	$	4.83	$	0.54
DILUTED EARNINGS (LOSS) PER SHARE	DILUTED EARNINGS (LOSS) PER SHARE									DILUTED EARNINGS (LOSS) PER SHARE
Earnings from continuing operations	Earnings from continuing operations	$	1.14	$	1.89	$	3.40	$	3.13	Earnings from continuing operations	$	1.37	$	2.44	$	4.77	$	5.58
Discontinued operations, net of taxes	Discontinued operations, net of taxes	—		(3.22)		—		(3.87)		Discontinued operations, net of taxes	—		(1.16)		—		(5.04)
Net earnings (loss)	Net earnings (loss)	$	1.14	$	(1.33)	$	3.40	$	(0.74)	Net earnings (loss)	$	1.37	$	1.28	$	4.77	$	0.54

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

SYLVAMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In millions)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
NET INCOME (LOSS)	NET INCOME (LOSS)	$	49	$	(59)	$	146	$	(33)	NET INCOME (LOSS)	$	58	$	57	$	204	$	24
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES	OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES									OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES
Defined Benefit Pension and Postretirement Adjustments:	Defined Benefit Pension and Postretirement Adjustments:									Defined Benefit Pension and Postretirement Adjustments:
Amortization of pension and postretirement loss (less taxes of $0, $0, $0 and $0)	Amortization of pension and postretirement loss (less taxes of $0, $0, $0 and $0)	—		—		—		(1)		Amortization of pension and postretirement loss (less taxes of $0, $0, $0 and $0)	—		—		—		(1)
Change in cumulative foreign currency translation adjustment	Change in cumulative foreign currency translation adjustment	45		(21)		86		78		Change in cumulative foreign currency translation adjustment	(46)		(57)		40		21
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 (less taxes of $9, $1, $9 and $13)		22		4		18		33
Reclassification adjustment for (gains) losses included in net earnings (less taxes of $4, $2, $6 and $5)		(10)		(4)		(14)		(10)
Net gains (losses) arising during the period (less taxes of $0, $2, $9 and $15)										Net gains (losses) arising during the period (less taxes of $0, $2, $9 and $15)	3		7		21		40
Reclassification adjustment for (gains) losses included in net earnings (less taxes of $3, $1, $9 and $6)										Reclassification adjustment for (gains) losses included in net earnings (less taxes of $3, $1, $9 and $6)	(7)		(2)		(21)		(12)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES	TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES	57		(21)		90		100		TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES	(50)		(52)		40		48
COMPREHENSIVE INCOME (LOSS)	COMPREHENSIVE INCOME (LOSS)	$	106	$	(80)	$	236	$	67	COMPREHENSIVE INCOME (LOSS)	$	8	$	5	$	244	$	72

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

SYLVAMO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)


		June 30, 2023		December 31, 2022			September 30, 2023		December 31, 2022
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and temporary investments	Cash and temporary investments	$	164	$	360	Cash and temporary investments	$	194	$	360
Restricted cash						Restricted cash	60		—
Accounts and notes receivable, net	Accounts and notes receivable, net	440		450		Accounts and notes receivable, net	423		450
Contract assets	Contract assets	32		30		Contract assets	25		30
Inventories	Inventories	486		364		Inventories	456		364
Other current assets	Other current assets	39		39		Other current assets	28		39
Total Current Assets	Total Current Assets	1,161		1,243		Total Current Assets	1,186		1,243
Plants, Properties and Equipment, net	Plants, Properties and Equipment, net	960		817		Plants, Properties and Equipment, net	949		817
Forestlands	Forestlands	360		322		Forestlands	346		322
Goodwill	Goodwill	140		128		Goodwill	134		128
Right of Use Assets	Right of Use Assets	43		35		Right of Use Assets	39		35
Deferred Charges and Other Assets	Deferred Charges and Other Assets	159		165		Deferred Charges and Other Assets	131		165
TOTAL ASSETS	TOTAL ASSETS	$	2,823	$	2,710	TOTAL ASSETS	$	2,785	$	2,710
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable	Accounts payable	$	391	$	453	Accounts payable	$	382	$	453
Notes payable and current maturities of long-term debt	Notes payable and current maturities of long-term debt	79		29		Notes payable and current maturities of long-term debt	53		29
Accrued payroll and benefits	Accrued payroll and benefits	50		81		Accrued payroll and benefits	66		81
Other current liabilities	Other current liabilities	147		165		Other current liabilities	173		165
Total Current Liabilities	Total Current Liabilities	667		728		Total Current Liabilities	674		728
Long-Term Debt	Long-Term Debt	954		1,003		Long-Term Debt	946		1,003
Deferred Income Taxes	Deferred Income Taxes	212		183		Deferred Income Taxes	202		183
Other Liabilities	Other Liabilities	128		118		Other Liabilities	127		118
Commitments and Contingent Liabilities (Note 13)	Commitments and Contingent Liabilities (Note 13)					Commitments and Contingent Liabilities (Note 13)
Equity	Equity					Equity
Common stock $1 par value, 200.0 shares authorized, 44.5 shares and 44.2 shares issued and 41.9 shares and 42.6 shares outstanding at June 30, 2023 and December 31, 2022, respectively		45		44
Common stock $1 par value, 200.0 shares authorized, 44.5 shares and 44.2 shares issued and 41.5 shares and 42.6 shares outstanding at September 30, 2023 and December 31, 2022, respectively						Common stock $1 par value, 200.0 shares authorized, 44.5 shares and 44.2 shares issued and 41.5 shares and 42.6 shares outstanding at September 30, 2023 and December 31, 2022, respectively	45		44
Paid-in capital	Paid-in capital	39		25		Paid-in capital	45		25
Retained earnings	Retained earnings	2,153		2,029		Retained earnings	2,185		2,029
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,248)		(1,338)		Accumulated other comprehensive loss	(1,298)		(1,338)
		989		760			977		760
Less: Common stock held in treasury, at cost, 2.6 shares and 1.6 shares at June 30, 2023 and December 31, 2022, respectively		(127)		(82)
Less: Common stock held in treasury, at cost, 2.9 shares and 1.6 shares at September 30, 2023 and December 31, 2022, respectively						Less: Common stock held in treasury, at cost, 2.9 shares and 1.6 shares at September 30, 2023 and December 31, 2022, respectively	(141)		(82)
Total Equity	Total Equity	862		678		Total Equity	836		678
TOTAL LIABILITIES AND EQUITY	TOTAL LIABILITIES AND EQUITY	$	2,823	$	2,710	TOTAL LIABILITIES AND EQUITY	$	2,785	$	2,710

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

SYLVAMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2023		2022			2023		2022
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income from continuing operations	Net income from continuing operations	$	146	$	139	Net income from continuing operations	$	204	$	248
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and cost of timber harvested	Depreciation, amortization, and cost of timber harvested	69		63		Depreciation, amortization, and cost of timber harvested	105		94
Deferred income tax provision (benefit), net	Deferred income tax provision (benefit), net	4		2		Deferred income tax provision (benefit), net	4		4
Stock-based compensation	Stock-based compensation	15		11		Stock-based compensation	21		16
Changes in operating assets and liabilities and other	Changes in operating assets and liabilities and other					Changes in operating assets and liabilities and other
Accounts and notes receivable	Accounts and notes receivable	91		(58)		Accounts and notes receivable	99		(81)
Inventories	Inventories	(60)		(33)		Inventories	(46)		(76)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(147)		(31)		Accounts payable and accrued liabilities	(122)		18
Other	Other	22		37		Other	72		53
CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS	CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS	140		130		CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS	337		276
CASH PROVIDED BY OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	CASH PROVIDED BY OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	—		45		CASH PROVIDED BY OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	—		20
CASH PROVIDED BY OPERATING ACTIVITIES	CASH PROVIDED BY OPERATING ACTIVITIES	140		175		CASH PROVIDED BY OPERATING ACTIVITIES	337		296
INVESTMENT ACTIVITIES	INVESTMENT ACTIVITIES					INVESTMENT ACTIVITIES
Invested in capital projects	Invested in capital projects	(105)		(59)		Invested in capital projects	(147)		(91)

Acquisition of business	Acquisition of business	(167)		—		Acquisition of business	(167)		—
CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES FROM CONTINUING OPERATIONS	CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES FROM CONTINUING OPERATIONS	(272)		(59)		CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES FROM CONTINUING OPERATIONS	(314)		(91)
CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	—		(5)		CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	—		(5)
CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES	CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES	(272)		(64)		CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES	(314)		(96)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES

Dividends paid	Dividends paid	(21)		—		Dividends paid	(32)		(5)
Issuance of debt	Issuance of debt	437		—		Issuance of debt	443		—
Reduction of debt	Reduction of debt	(443)		(86)		Reduction of debt	(482)		(174)
Repurchases of common stock	Repurchases of common stock	(40)		—		Repurchases of common stock	(53)		—
Other	Other	(6)		(6)		Other	(7)		(2)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES FROM CONTINUING OPERATIONS	CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES FROM CONTINUING OPERATIONS	(73)		(92)		CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES FROM CONTINUING OPERATIONS	(131)		(181)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	—		—		CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	—		(1)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(73)		(92)		CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(131)		(182)
Effect of Exchange Rate Changes on Cash	Effect of Exchange Rate Changes on Cash	9		42		Effect of Exchange Rate Changes on Cash	2		27
Change in Cash Included in Assets Held for Sale	Change in Cash Included in Assets Held for Sale	—		63		Change in Cash Included in Assets Held for Sale	—		41
Change in Cash and Temporary Investments		(196)		(2)
Cash and Temporary Investments
Change in Cash, Temporary Investments and Restricted Cash						Change in Cash, Temporary Investments and Restricted Cash	(106)		4
Cash, Temporary Investments and Restricted Cash						Cash, Temporary Investments and Restricted Cash
Beginning of the period	Beginning of the period	360		159		Beginning of the period	360		159
End of the period	End of the period	$	164	$	157	End of the period	$	254	$	163

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

SYLVAMO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated 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 Sylvamo Corporation’s ("Sylvamo's", "the Company’s" or "our") financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed herein, such adjustments are of a normal, recurring nature. Results for the first ~~six~~nine months of the year may not necessarily be indicative of full year results due to factors such as the Company’s planned maintenance outage schedule at its mills. All intercompany transactions have been eliminated. Intra-Europe paper revenue and related cost of products sold for the year-to-date period ended June 30, 2023, reflect the correction of an immaterial error which reduced both net sales and cost of products sold by $18 million for three-month period ended March 31, 2023. You should read these condensed consolidated financial statements 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, 2022 (the "Annual Report"), which have previously been filed with the Securities and Exchange Commission. These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States that require the use of management’s estimates. Actual results could differ from management’s estimates.

Acquisition of Nymölla

On January 2, 2023, the Company completed the previously announced acquisition of Stora Enso’s uncoated freesheet paper mill in Nymölla, Sweden. Sylvamo accounted for the acquisition under ASC 805, “Business Combinations” and the Nymölla mill’s results of operations are included in Sylvamo’s condensed consolidated financial statements from the date of acquisition. See Note 7 Acquisitions for further details.

Divestiture of Russian Operations

During the second quarter of 2022, management committed to a plan to sell the Company’s Russian operations, which were previously part of the Europe business segment. As a result, all historical operating results of the Russian operations are presented as “Discontinued operations, net of taxes” in the condensed consolidated statement of operations and the notes to the condensed consolidated financial statements. In October 2022, the Company completed the sale of its Russian operations to Pulp Invest Limited Liability Company, a company incorporated in the Russian Federation. See Note 8 Divestiture and Impairment of Business for further details.

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are described in Note 2 Significant Accounting Policies to the audited consolidated and combined financial statements included in our 2022 Form 10-K. There have been no material changes to the significant accounting policies for the ~~six~~nine months ended ~~June~~September 30, 2023.

Recently Issued Accounting Pronouncements

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” which was subsequently amended by ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of Sunset Date of Topic 848,“ issued in December 2022. Together 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, 2024.

During the three months ended June 30, 2023, the Company transitioned its LIBOR-based debt arrangements and the related interest rate swaps from a reference rate of LIBOR to SOFR (“Standard Overnight Financing Rate”). See Note 14 Long-Term Debt for further details. The impact of the reference rate transition to the debt arrangements and the related interest rate swaps, along with the adoption of the provisions from this standard, did not have a material impact on our condensed consolidated financial statements. At this time, the Company does not plan to enter into additional contracts using LIBOR as a reference rate.

NOTE 3 REVENUE RECOGNITION

External Net Sales by Product

External net sales by major products were as follows by business segment:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2023		2022		2023		2022		In millions	2023		2022		2023		2022
Europe	Europe									Europe
Uncoated Papers	Uncoated Papers	$	192	$	112	$	395	$	202	Uncoated Papers	$	162	$	103	$	558	$	305
Market Pulp	Market Pulp	18		23		45		50		Market Pulp	22		27		66		77
Europe	Europe	210		135		440		252		Europe	184		130		624		382
Latin America (a)	Latin America (a)									Latin America (a)
Uncoated Papers	Uncoated Papers	215		215		401		396		Uncoated Papers	225		235		626		631
Market Pulp	Market Pulp	20		13		40		28		Market Pulp	12		14		52		42
Latin America	Latin America	235		228		441		424		Latin America	237		249		678		673
North America	North America									North America
Uncoated Papers	Uncoated Papers	463		528		949		1,013		Uncoated Papers	464		569		1,413		1,582
Market Pulp	Market Pulp	11		21		30		44		Market Pulp	12		20		42		64
North America	North America	474		549		979		1,057		North America	476		589		1,455		1,646
Total	Total	$	919	$	912	$	1,860	$	1,733	Total	$	897	$	968	$	2,757	$	2,701

(a) Prior period amounts have been corrected to reflect market pulp sales.

Revenue Contract Balances

A contract asset is created when the Company recognizes revenue on its customized products for which we have an enforceable right to payment.

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 when control of the goods is transferred to the customer, satisfying our performance obligation. Contract liabilities of ~~$13~~$5 million are included in “Other current liabilities” as of ~~June~~September 30, 2023. There were no contract liabilities included in “Other current liabilities” as of December 31, 2022.

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 which we have an unconditional right to payment or receive prepayment from the customer, respectively.

NOTE 4 EQUITY

A summary of changes in equity for the three months and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 is provided below:


Three Months Ended June 30, 2023
Three Months Ended September 30, 2023															Three Months Ended September 30, 2023
In millions	In millions	Shares	Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Common Stock Held In Treasury, At Cost		Total Equity		In millions	Shares	Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Common Stock Held In Treasury, At Cost		Total Equity
Balance, March 31, 2023		44	$	44	$	32	$	2,116	$	(1,305)	$	(97)	$	790
Balance, June 30, 2023															Balance, June 30, 2023	45	$	45	$	39	$	2,153	$	(1,248)	$	(127)	$	862
Stock-based employee compensation	Stock-based employee compensation	—	1		7		—		—		—		8		Stock-based employee compensation	—	—		6		—		—		—		6
Share repurchases	Share repurchases	—	—		—		—		—		(30)		(30)		Share repurchases	—	—		—		—		—		(14)		(14)
Dividends ($0.25 per share)		—	—		—		(12)		—		—		(12)
Dividends ($0.60 per share)															Dividends ($0.60 per share)	—	—		—		(26)		—		—		(26)
Comprehensive income (loss)	Comprehensive income (loss)	—	—		—		49		57		—		106		Comprehensive income (loss)	—	—		—		58		(50)		—		8
Balance, June 30, 2023		44	$	45	$	39	$	2,153	$	(1,248)	$	(127)	$	862
Balance, September 30, 2023															Balance, September 30, 2023	45	$	45	$	45	$	2,185	$	(1,298)	$	(141)	$	836


Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023																Nine Months Ended September 30, 2023
In millions	In millions	Shares		Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Common Stock Held In Treasury, At Cost		Total Equity		In millions	Shares	Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Common Stock Held In Treasury, At Cost		Total Equity
Balance, December 31, 2022	Balance, December 31, 2022	$	44	$	44	$	25	$	2,029	$	(1,338)	$	(82)	$	678	Balance, December 31, 2022	44	$	44	$	25	$	2,029	$	(1,338)	$	(82)	$	678
Stock-based employee compensation	Stock-based employee compensation	—		1		14		—		—		(5)		10		Stock-based employee compensation	1	1		20		—		—		(5)		16
Share repurchases	Share repurchases	—		—		—		—		—		(40)		(40)		Share repurchases	—	—		—		—		—		(54)		(54)
Dividends ($0.50 per share)		—		—		—		(22)		—		—		(22)
Dividends ($1.10 per share)																Dividends ($1.10 per share)	—	—		—		(48)		—		—		(48)
Comprehensive income (loss)	Comprehensive income (loss)	—		—		—		146		90				236		Comprehensive income (loss)	—	—		—		204		40		—		244
Balance, June 30, 2023		44		$	45	$	39	$	2,153	$	(1,248)	$	(127)	$	862
Balance, September 30, 2023																Balance, September 30, 2023	45	$	45	$	45	$	2,185	$	(1,298)	$	(141)	$	836


Three Months Ended June 30, 2022
Three Months Ended September 30, 2022															Three Months Ended September 30, 2022
In millions	In millions	Shares	Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Common Stock Held In Treasury, At Cost		Total Equity		In millions	Shares	Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Common Stock Held In Treasury, At Cost		Total Equity
Balance, March 31, 2022		44	$	44	$	8	$	1,961	$	(1,680)	$	(2)	$	331
Balance, June 30, 2022															Balance, June 30, 2022	44	$	44	$	14	$	1,897	$	(1,701)	$	(2)	$	252
Stock-based employee compensation	Stock-based employee compensation	—	—		6		—		—		—		6		Stock-based employee compensation	—	—		6		—		—		—		6
Dividends ($0.1125 per share)	Dividends ($0.1125 per share)	—	—				(5)		—		—		(5)		Dividends ($0.1125 per share)	—	—		—		(5)		—		—		(5)
Comprehensive income (loss)	Comprehensive income (loss)	—	—		—		(59)		(21)		—		(80)		Comprehensive income (loss)	—	—		—		57		(52)		—		5
Balance, June 30, 2022		44	$	44	$	14	$	1,897	$	(1,701)	$	(2)	$	252
Balance, September 30, 2022															Balance, September 30, 2022	44	$	44	$	20	$	1,949	$	(1,753)	$	(2)	$	258


Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022															Nine Months Ended September 30, 2022
In millions	In millions	Shares	Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Common Stock Held In Treasury, At Cost		Total Equity		In millions	Shares	Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Common Stock Held In Treasury, At Cost		Total Equity
Balance, December 31, 2021	Balance, December 31, 2021	44	$	44	$	4	$	1,935	$	(1,801)	$	—	182		Balance, December 31, 2021	44	$	44	$	4	$	1,935	$	(1,801)	$	—	182
Stock-based employee compensation	Stock-based employee compensation	—	—		10		—		—		(2)		8		Stock-based employee compensation	—	—		16		—		—		(2)		14
Dividends ($0.1125 per share)		—	—		—		(5)		—		—		(5)
Dividends ($0.2250 per share)															Dividends ($0.2250 per share)	—	—		—		(10)		—		—		(10)
Comprehensive income (loss)	Comprehensive income (loss)	—	—		—		(33)		100				67		Comprehensive income (loss)	—	—		—		24		48		—		72
Balance, June 30, 2022		44	$	44	$	14	$	1,897	$	(1,701)	$	(2)	$	252
Balance, September 30, 2022															Balance, September 30, 2022	44	$	44	$	20	$	1,949	$	(1,753)	$	(2)	$	258

NOTE 5 OTHER COMPREHENSIVE INCOME

The following table presents the changes in Accumulated Other Comprehensive Income (Loss) (“AOCI”), net of taxes, reported in the condensed consolidated financial statements:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2023		2022		2023		2022		In millions	2023		2022		2023		2022
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	$	(76)	$	(81)	$	(76)	$	(80)	Balance at beginning of period	$	(76)	$	(81)	$	(76)	$	(80)
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	—		—		—		(1)		Amounts reclassified from accumulated other comprehensive income	—		—		—		(1)
Balance at end of period	Balance at end of period	(76)		(81)		(76)		(81)		Balance at end of period	(76)		(81)		(76)		(81)
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	(1,247)		(1,620)		(1,288)		(1,719)		Balance at beginning of period	(1,202)		(1,641)		(1,288)		(1,719)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	45		(21)		86		78		Other comprehensive income (loss) before reclassifications	(46)		(57)		40		21
Balance at end of period	Balance at end of period	(1,202)		(1,641)		(1,202)		(1,641)		Balance at end of period	(1,248)		(1,698)		(1,248)		(1,698)
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	18		21		26		(2)		Balance at beginning of period	30		21		26		(2)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	22		4		18		33		Other comprehensive income (loss) before reclassifications	3		7		21		40
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	(10)		(4)		(14)		(10)		Amounts reclassified from accumulated other comprehensive income	(7)		(2)		(21)		(12)
Balance at end of period	Balance at end of period	30		21		30		21		Balance at end of period	26		26		26		26
Total Accumulated Other Comprehensive Income (Loss) at End of Period	Total Accumulated Other Comprehensive Income (Loss) at End of Period	$	(1,248)	$	(1,701)	$	(1,248)	$	(1,701)	Total Accumulated Other Comprehensive Income (Loss) at End of Period	$	(1,298)	$	(1,753)	$	(1,298)	$	(1,753)

NOTE 6 EARNINGS PER SHARE

Basic earnings per share from continuing operations is computed by dividing net income from continuing operations by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share from continuing operations is computed by dividing net income from continuing operations by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potentially dilutive shares of common stock been issued. The dilutive effect of restricted stock units is reflected in diluted earnings per share by applying the treasury stock method. Basic and dilutive earnings per share from discontinued operations are computed under the same approach utilizing the same weighted-average number of shares of common stock outstanding during the period and dilutive shares.

There are no adjustments required to be made to net income from continuing operations for purposes of computing basic and diluted earnings per share from continuing operations.

Basic and diluted earnings per share from continuing operations are calculated as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions, except per share amounts	In millions, except per share amounts	2023		2022		2023		2022		In millions, except per share amounts	2023		2022		2023		2022
Net income from continuing operations	Net income from continuing operations	$	49	$	84	$	146	$	139	Net income from continuing operations	$	58	$	109	$	204	$	248
Weighted average common shares outstanding	Weighted average common shares outstanding	42.4		44.1		42.4		44.1		Weighted average common shares outstanding	41.8		44.1		42.2		44.1
Effect of dilutive securities	Effect of dilutive securities	0.4		0.4		0.6		0.2		Effect of dilutive securities	0.6		0.5		0.6		0.4
Weighted average common shares outstanding - assuming dilution	Weighted average common shares outstanding - assuming dilution	42.8		44.5		43.0		44.3		Weighted average common shares outstanding - assuming dilution	42.4		44.6		42.8		44.5
Earnings per share from continuing operations - basic	Earnings per share from continuing operations - basic	$	1.16	$	1.90	$	3.44	$	3.15	Earnings per share from continuing operations - basic	$	1.39	$	2.47	$	4.83	$	5.62
Earnings per share from continuing operations - diluted	Earnings per share from continuing operations - diluted	$	1.14	$	1.89	$	3.40	$	3.13	Earnings per share from continuing operations - diluted	$	1.37	$	2.44	$	4.77	$	5.58
Anti-dilutive common shares (a)	Anti-dilutive common shares (a)	0.4		0.2		0.3		0.1		Anti-dilutive common shares (a)	0.3		0.2		0.3		0.2

(a) Common stock related to service-based restricted stock units and performance-based restricted stock units were outstanding but excluded from the computation of diluted earnings per share because their effect would be anti-dilutive under the treasury stock method or because the shares were subject to performance conditions that had not been met.

NOTE 7 ACQUISITIONS

In January 2023, the Company completed the previously announced acquisition of Stora Enso’s uncoated freesheet paper mill in Nymölla, Sweden, for €157 million (approximately $167 million) after post-close working capital adjustments. The integrated mill has the capacity to produce approximately 500,000 short tons of uncoated freesheet on two paper machines.

Sylvamo accounted for the acquisition under ASC 805, “Business Combinations” and the Nymölla mill’s results of operations are included in Sylvamo’s consolidated financial statements from the date of acquisition. ~~Due to the timing of the closing of the acquisition, the~~The purchase price allocation is preliminary and could be significantly revised as a result of additional information obtained regarding assets acquired and liabilities assumed and revisions of estimates of fair values of ~~both~~ tangible ~~and intangible~~ assets and related deferred tax assets and liabilities. ~~These revisions may include, but are not limited to, the completion of independent appraisals and valuations related to property, plant and equipment and intangible assets.~~ The Company will finalize its valuation and the allocation of the purchase price, along with required retrospective adjustments, if any, within a year following the acquisition date.

The following table summarizes the preliminary allocation of the purchase price to the fair value assigned to assets and liabilities acquired as of January 2, 2023:


In millions
Accounts receivable	$	63
Inventory	67
Plants, properties and equipment	~~116~~115
Other assets	2
Total assets acquired	~~248~~247
Accounts payable	51
Other liabilities	3029
Total liabilities assumed	8180
Net assets acquired	$	167

In connection with the allocation of fair value, inventories were written up by $9 million to their estimated fair value. During the first quarter of 2023, $9 million before taxes ($7 million after taxes) was expensed related to the impact of the step-up of acquired Nymölla inventory sold during the quarter.

Net sales of ~~$104~~$88 million and ~~$217~~$305 million and Income from continuing operations before income taxes of $8$4 million and ~~$17~~$21 million from the acquired business are included in the Company's condensed consolidated statement of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively. Additionally, Selling and administrative expenses for the three and ~~six~~

nine months ended ~~June~~September 30, 2023 include $1$3 million and $5$8 million in charges before taxes ($12 million and $4$6 million after taxes) for transaction costs associated with the acquisition, respectively.

On an unaudited pro forma basis, assuming the acquisition of the Nymölla mill had closed January 1, 2022, the condensed consolidated results would have reflected Net sales of ~~$1.0~~$1.1 billion and ~~$2.0~~$3.1 billion and Income from continuing operations before income taxes of ~~$144~~$179 million and ~~$227~~$406 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

The 2022 pro forma information includes adjustments for non-recurring transaction costs associated with the acquisition of $5$8 million, and incremental expense of $9 million incurred related to the impact of the step-up of acquired Nymölla inventory sold during the first quarter.

The unaudited pro forma condensed consolidated financial information was prepared for comparative purposes only and includes certain adjustments, as noted above. This does not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma information does not purport to represent Sylvamo's actual results of operations as if the transaction described above would have occurred as of January 1, 2022, nor is it necessarily an indicator of future results.

NOTE 8 DIVESTITURE AND IMPAIRMENT OF BUSINESS

RUSSIAN OPERATIONS

During the first quarter of 2022, as a result of the significant changes in the business climate impacting our Russian operations, a determination was made that the current carrying value of our Russian operations exceeded the estimated fair value. The fair value of the Russian operations was estimated based on a probability-weighted average approach of the potential cash flows from various paths the Company evaluated to exit the business. As a result, a pre-tax charge of $68 million ($57 million) was recorded for the impairment of the Russian fixed assets during the first quarter of 2022. These charges are included in “Impairment of business” within the summarized income statement for our Russian operations included in this footnote and is included in “Discontinued operations, net of taxes” in the condensed consolidated statement of operations.

During the second quarter of 2022, management committed to a plan to sell the Company’s Russian operations. In October 2022, the Company completed the sale of its Russian operations to Pulp Invest Limited Liability Company, a company incorporated in the Russian Federation, for $420 million. After transaction and foreign currency exchange costs of $35 million, Sylvamo received $385 million in cash proceeds.

As a result, all historical operating results of the Russian operations are presented as “Discontinued operations, net of taxes” in the condensed consolidated statement of operations. The Russian operations were previously part of the Europe business segment. The following summarizes the major classes of line items comprising Income (Loss) Before Income Taxes reconciled

to Discontinued Operations, net of taxes, related to the Russian operations for all periods presented in the condensed consolidated statement of operations.


In millions	In millions	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022		In millions	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
NET SALES	NET SALES	$	157	$	313	NET SALES	$	205	$	518
COSTS AND EXPENSES	COSTS AND EXPENSES					COSTS AND EXPENSES
Cost of products sold (exclusive of depreciation, amortization and cost of timber harvested shown separately below)	Cost of products sold (exclusive of depreciation, amortization and cost of timber harvested shown separately below)	146		259		Cost of products sold (exclusive of depreciation, amortization and cost of timber harvested shown separately below)	165		425
Selling and administrative expenses	Selling and administrative expenses	3		4		Selling and administrative expenses	6		10
Depreciation, amortization and cost of timber harvested	Depreciation, amortization and cost of timber harvested	—		4		Depreciation, amortization and cost of timber harvested	—		4
Taxes other than payroll and income taxes	Taxes other than payroll and income taxes	1		1		Taxes other than payroll and income taxes	—		1
Impairment of business	Impairment of business	156		224		Impairment of business	78		302
Interest (income) expense, net	Interest (income) expense, net	(2)		(3)		Interest (income) expense, net	—		(3)
INCOME (LOSS) BEFORE INCOME TAXES	INCOME (LOSS) BEFORE INCOME TAXES	(147)		(176)		INCOME (LOSS) BEFORE INCOME TAXES	(44)		(221)
Income tax provision (benefit)	Income tax provision (benefit)	(4)		(4)		Income tax provision (benefit)	8		3
DISCONTINUED OPERATIONS, NET OF TAXES	DISCONTINUED OPERATIONS, NET OF TAXES	$	(143)	$	(172)	DISCONTINUED OPERATIONS, NET OF TAXES	$	(52)	$	(224)

The following summarizes the total cash provided by operating activities from discontinued operations, net and total cash provided by (used for) investing activities from discontinued operations, net and included in the condensed consolidated statement of cash flows:


In millions for the ~~six~~nine months ended ~~June~~September 30	2022
Cash Provided by Operating Activities	$	4520
Cash Provided by (Used for) Investment Activities (a)	$	(5)

(a) Includes cash invested in capital projects of $5 million.

NOTE 9 SUPPLEMENTARY 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 notice are treated as cash equivalents and are stated at cost. Temporary investments totaled ~~$84~~$92 million and $80 million at ~~June~~September 30, 2023 and December 31, 2022, respectively.

Restricted Cash

Restricted cash of $60 million as of September 30, 2023 represents funds held in escrow related to the Brazil Tax Dispute. See Note 14 Long-Term Debt for further details.

The following table provides a reconciliation of cash, temporary investments and restricted cash in the condensed consolidated balance sheets to total cash, temporary investments and restricted cash in the condensed consolidated statements of cash flows:


In millions	September 30, 2023		December 31, 2022
Cash and temporary investments	$	194	$	360
Restricted cash	60		—
Total cash, temporary investments and restricted cash in the statements of cash flows	$	254	$	360

Accounts and Notes Receivable

Accounts and notes receivable, net, by classification were:

In millions June 30, 2023 December 31, 2022
Accounts and notes receivable:
Trade $ 416 $ 430
Notes and other 24 20
Total $ 440 $ 450


In millions	September 30, 2023		December 31, 2022
Accounts and notes receivable:
Trade	$	403	$	430
Notes and other	20		20
Total	$	423	$	450

The allowance for expected credit losses was ~~$25~~$23 million and $20 million at ~~June~~September 30, 2023 and December 31, 2022, 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	In millions	June 30, 2023		December 31, 2022		In millions	September 30, 2023		December 31, 2022
Raw materials	Raw materials	$	77	$	40	Raw materials	$	61	$	40
Finished paper and pulp products	Finished paper and pulp products	293		226		Finished paper and pulp products	269		226
Operating supplies	Operating supplies	104		78		Operating supplies	110		78
Other	Other	12		20		Other	16		20
Total	Total	$	486	$	364	Total	$	456	$	364

Plants, Properties and Equipment, Net

Accumulated depreciation was $3.7 billion and $3.6 billion at ~~June~~September 30, 2023 and December 31, 2022, respectively. Depreciation expense was ~~$28~~$30 million and ~~$27~~$25 million for the three months and ~~$58~~$88 million and ~~$52~~$77 million for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively.

Non-cash additions to plants, property and equipment included within accounts payable were $9 million and $36 million each at ~~June~~September 30, 2023 and December 31, 2022.

Other Liabilities and Costs

During the three and nine months ended September 30, 2023, the Company recorded approximately $13 million before taxes ($10 million after taxes) of severance costs related to a planned reduction in our salaried workforce, of which $3 million is included within Cost of products sold and $10 million is included within Selling and administrative expenses in our condensed consolidated statements of operations. Of these total costs, $2 million, $3 million and $8 million are related to our Europe, Latin America and North America business segments, respectively. These severance amounts are reflected in Other current liabilities in our condensed consolidated balance sheet and we expect substantially all of the severance-related liabilities to be paid in cash during 2024.

Interest

Interest payments of ~~$37~~$54 million and ~~$34~~$55 million were made during the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively.

Amounts related to interest were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2023		2022		2023		2022		In millions	2023		2022		2023		2022
Interest expense (a)	Interest expense (a)	$	15	$	20	$	34	$	39	Interest expense (a)	$	15	$	21	$	49	$	59
Interest income (b)	Interest income (b)	(2)		(2)		(13)		(4)		Interest income (b)	(5)		(2)		(18)		(5)
Capitalized interest cost	Capitalized interest cost	(1)		(1)		(2)		(1)		Capitalized interest cost	(1)		(1)		(3)		(2)
Total	Total	$	12	$	17	$	19	$	34	Total	$	9	$	18	$	28	$	52

(a) Interest expense for the ~~six~~nine months ended ~~June~~September 30, 2023 includes $5 million of debt extinguishment cost related to the tender offer for our 7.00% 2029 Senior Notes.

(b) Interest income for the ~~six~~nine months ended ~~June~~September 30, 2023 includes $9 million of interest income related to tax settlements.

ASSET RETIREMENT OBLIGATIONS

At both ~~June~~September 30, 2023 and December 31, 2022, we had recorded liabilities of $26 million related to asset retirement obligations. These amounts are included in “Other liabilities.”

NOTE 10 LEASES

The Company 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 15 years. Total lease cost was $16 million and $15 million for the three months and ~~$33~~$49 million and ~~$30~~$45 million for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively.

Supplemental Balance Sheet Information Related to Leases


In millions	In millions	Classification	June 30, 2023		December 31, 2022		In millions	Classification	September 30, 2023		December 31, 2022
Assets	Assets						Assets
Operating lease assets	Operating lease assets	Right of use assets	$	43	$	35	Operating lease assets	Right of use assets	$	39	$	35
Finance lease assets	Finance lease assets	Plants, properties, and equipment, net (a)	23		24		Finance lease assets	Plants, properties, and equipment, net (a)	23		24
Total leased assets	Total leased assets		$	66	$	59	Total leased assets		$	62	$	59
Liabilities	Liabilities						Liabilities
Current	Current						Current
Operating	Operating	Other current liabilities	$	17	$	13	Operating	Other current liabilities	$	17	$	13
Finance	Finance	Notes payable and current maturities of long-term debt	3		3		Finance	Notes payable and current maturities of long-term debt	3		3
Noncurrent	Noncurrent						Noncurrent
Operating	Operating	Other Liabilities	33		28		Operating	Other Liabilities	29		28
Finance	Finance	Long-term debt	14		14		Finance	Long-term debt	14		14
Total lease liabilities	Total lease liabilities		$	67	$	58	Total lease liabilities		$	63	$	58

(a)Finance leases are recorded net of accumulated amortization of $14 million and $13 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

NOTE 11 GOODWILL AND OTHER INTANGIBLES

Goodwill

The following table presents changes in the goodwill balance as allocated to each business segment for the ~~six~~nine months ended ~~June~~September 30, 2023:


In millions	In millions	Europe		Latin America		North America		Total		In millions	Europe		Latin America		North America		Total
Balance as of December 31, 2022	Balance as of December 31, 2022									Balance as of December 31, 2022
Goodwill	Goodwill	$	11	$	118	$	—	$	129	Goodwill	$	11	$	118	$	—	$	129
Accumulated impairment losses	Accumulated impairment losses	(1)		—		—		(1)		Accumulated impairment losses	(1)		—		—		(1)
		$	10	$	118	$	—	$	128		$	10	$	118	$	—	$	128
Currency translation and other (a)	Currency translation and other (a)	—		12		—		12		Currency translation and other (a)	—		6		—		6
Balance as of June 30, 2023
Balance as of September 30, 2023										Balance as of September 30, 2023
Goodwill	Goodwill	11		130		—		141		Goodwill	11		124		—		135
Accumulated impairment losses	Accumulated impairment losses	(1)		—		—		(1)		Accumulated impairment losses	(1)		—		—		(1)
Total	Total	$	10	$	130	$	—	$	140	Total	$	10	$	124	$	—	$	134

(a)Represents the effects of foreign currency translations and reclassifications.

Other Intangibles

Identifiable intangible assets comprised the following:


		June 30, 2023						December 31, 2022							September 30, 2023						December 31, 2022
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	$	56	$	(50)	$	6	$	56	$	(50)	$	6	Customer relationships and lists	$	56	$	(50)	$	6	$	56	$	(50)	$	6
Other	Other	7		(6)		1		7		(6)		1		Other	7		(6)		1		7		(6)		1
Total	Total	$	63	$	(56)	$	7	$	63	$	(56)	$	7	Total	$	63	$	(56)	$	7	$	63	$	(56)	$	7

Amortization expense related to intangibles was immaterial for each of the three months and ~~six~~nine month periods ended ~~June~~September 30, 2023 and 2022, respectively.

NOTE 12 INCOME TAXES

An income tax provision of ~~$21~~$33 million and ~~$65~~$98 million was recorded for the three and ~~six~~nine months ended ~~June~~September 30, 2023, and the reported effective income tax rate from continuing operations was ~~30%~~36% and ~~31%~~33%, respectively. An income tax provision of ~~$33~~$38 million and ~~$59~~$97 million was recorded for the three and ~~six~~nine months ended ~~June~~September 30, 2022, and the reported effective income tax rate was ~~28%~~26% and ~~30%~~28%, respectively.

The Brazilian Federal Revenue Service has challenged the deductibility of goodwill amortization generated in a 2007 acquisition by International Paper do Brasil Ltda., now named Sylvamo do Brasil Ltda. (“Sylvamo Brasil”), a wholly-owned subsidiary of the Company (the “Brazil Tax Dispute”). Sylvamo Brasil received assessments for the tax years 2007-2015 totaling approximately ~~$121~~$120 million in tax, and ~~$414~~$418 million in interest, penalties and fees as of ~~June~~September 30, 2023 (adjusted for variation in currency exchange rates). International Paper challenged and is managing the litigation of this matter pursuant to the tax matters agreement between us and International Paper. After a previous favorable ruling challenging the basis for these assessments, there were subsequent unfavorable decisions from the Brazilian Administrative Council of Tax Appeals. On behalf of Sylvamo Brasil, International Paper has appealed and at present, has advised us that it 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 the transaction underlying these assessments was appropriately evaluated, and that the Company’s tax position would be sustained, based on Brazilian tax law.

Pursuant to the terms of the tax matters agreement entered into between International Paper and Sylvamo, International Paper will pay 60%, and Sylvamo will pay 40% on up to $300 million of any assessment related to this matter, and International Paper will pay all amounts of the assessment over $300 million. Also in connection with this agreement, all decisions concerning the conduct of the litigation related to this matter, including strategy, settlement, pursuit and abandonment, will continue to be made by International Paper, which is vigorously defending Sylvamo Brasil’s historic tax position against the current assessments and any similar assessments that may be issued for tax years subsequent to 2015.

NOTE 13 COMMITMENTS AND CONTINGENT LIABILITIES

Environmental and Legal Proceedings

The Company is subject to environmental and legal proceedings in the countries in which we operate. Accruals for contingent liabilities, such as environmental remediation costs, are recorded in the condensed consolidated financial statements when it is probable that a liability has been incurred or an asset impaired and the amount of the loss can be reasonably estimated. The Company has estimated some probable liability associated with environmental remediation matters that is immaterial in the aggregate as of ~~June~~September 30, 2023.

At the Company’s Mogi Guaçu mill, there are legacy basin areas that were formerly lagoons used for treatment of mill wastewater from pulp and paper manufacturing. In coordination with and in response to a request by the Environmental Company of the State of São Paulo (“CETESB”), which is the state environmental regulatory authority, there has been

continuous regulatory monitoring and sampling of the former basins, which began prior to their closure in 2006, both to assess for contamination and evaluate whether additional remediation is needed beyond the basins’ ongoing natural vegetation growth. This monitoring and sampling detected metal contamination, with the main constituent of potential environmental impact being mercury. The Company has presented CETESB with proposals for studies and other actions to further assess the scope and type of contamination and the possible need for an additional remediation approach.

Additionally, in October 2022, CETESB requested that the Company expand its efforts to include providing CETESB with a proposed pilot intervention (remediation) plan for a portion of the former basins. The purpose of the pilot intervention plan is to facilitate determination of the appropriate actions to take for the basins generally, guided by the results of the pilot intervention plan in the subset portion of the basins. In the fourth quarter of 2023, CETESB partially approved the pilot intervention plan and requested additional analysis. The Company ~~has submitted its pilot invention plan to CETESB and~~ is ~~waiting for CETESB to determine if it approves~~evaluating the ~~plan set forth in the response.~~additional analysis requested by CETESB.

As of ~~June~~September 30, 2023, the Company has recorded an immaterial liability for the ongoing and additional environmental studies and sampling of the basins. While this matter could in the future have a material impact on our results of operations or cash flows, the Company is unable to estimate its potential additional liability, including the costs of executing certain elements of the proposed pilot intervention plan, because the further studies to be conducted and the remediation that may be required, both for the pilot intervention plan and for the ultimate intervention, will depend on CETESB’s approval of the ~~proposed~~ pilot intervention plan, the results of the pilot intervention plan, the Company’s environmental studies assessing the existence of ecological risk due to the contamination and what intervention may be required beyond vegetation of the basins, the extent to which there is eventual risk of harm from the contamination, and CETESB’s approval of any ultimate intervention plan for the basins.

Taxes Other Than Payroll Taxes

See Note 12 Income Taxes for a discussion of a goodwill amortization tax matter in Brazil.

We have other open tax matters awaiting resolution in Brazil, which are at various stages of review in various administrative and judicial proceedings. We routinely assess these tax matters for materiality and probability of loss or gain, and appropriate amounts have been recorded in our financial statements for any open items where the risk of loss is deemed probable. We currently do not consider any of these other tax matters to be material individually. However, it is reasonably possible that settlement of any of these matters concurrently could result in a material loss or that over time a matter could become material, for example, if interest were accruing on the amount at issue for a significant period of time. Also, future exchange rate fluctuations could be unfavorable to the U.S. dollar and significant enough to cause an open matter to become material. The expected timing for resolution of these open matters ranges from one year to ten years.

General

The Company is involved in various other inquiries, administrative proceedings and litigation relating to environmental and safety matters, taxes (including VAT), personal injury, product liability, labor and employment, contracts, sales of property and other matters, some of which allege substantial monetary damages. 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, 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 14 LONG-TERM DEBT

Long-term debt is summarized in the following table:


In millions	In millions	June 30, 2023		December 31, 2022		In millions	September 30, 2023		December 31, 2022
Term Loan F - due 2027 (a)	Term Loan F - due 2027 (a)	$	484	$	496	Term Loan F - due 2027 (a)	$	477	$	496
Term Loan A - due 2028 (b)	Term Loan A - due 2028 (b)	294		—		Term Loan A - due 2028 (b)	290		—
7.00% Senior Notes - due 2029 (c)	7.00% Senior Notes - due 2029 (c)	89		444		7.00% Senior Notes - due 2029 (c)	89		444
Securitization Program	Securitization Program	115		75		Securitization Program	117		75
Other	Other	16		17		Other	16		17
Less: current portion	Less: current portion	(44)		(29)		Less: current portion	(43)		(29)
Total	Total	$	954	$	1,003	Total	$	946	$	1,003

(a) As of ~~June~~September 30, 2023 and December 31, 2022, presented net of $4 million and $4 million in unamortized debt issuance costs, respectively.

(b) As of ~~June~~September 30, 2023, presented net of $3 million in unamortized debt issuance costs.

(c) As of ~~June~~September 30, 2023 and December 31, 2022, presented net of $1 million and $6 million in unamortized debt issuance costs, respectively.

In addition to the debt noted above, the Company has the ability to access a cash flow-based revolving credit facility with a total borrowing capacity of $450 million (“Revolving Credit Facility”), which matures in 2026. As of ~~June~~September 30, 2023, the Company had ~~$35~~$10 million outstanding borrowings on the Revolving Credit Facility and ~~$23~~$21 million of letters of credit related to the Revolving Credit Facility, resulting in an available borrowing capacity of ~~$392~~$419 million. As of December 31, 2022, the Company had no outstanding borrowings on the Revolving Credit Facility and $24 million of letters of credit related to the Revolving Credit Facility, resulting in an available borrowing capacity of $426 million. The outstanding borrowings on the Revolving Credit Facility are recorded within “Notes payable and current maturities of long-term debt” in the condensed consolidated balance sheet.

In the first quarter of 2023, the Company announced the commencement of a cash tender offer to purchase any and all of the Company’s outstanding 2029 Senior Notes. The Company also solicited consents from holders of the 2029 Senior Notes to amend certain provisions of the indenture with respect to the notes. In connection with the tender offer and the consent solicitation, the Company entered into a new senior secured term loan facility amendment which provided an aggregate principal amount of $300 million (“Term Loan A”) maturing in 2028. Term Loan A, together with $60 million of borrowings under the Revolving Credit Facility, were used to pay the total consideration for all notes tendered in the tender offer, plus accrued interest and all fees and expenses incurred in connection with the tender offer and consent solicitation. Upon close in the first quarter, $360 million aggregate principal of the notes were tendered, resulting in a debt extinguishment cost of $5 million, which includes the write-off of debt issuance costs. This cost was recorded within “Interest expense (income), net.”

Sylvamo North America LLC, a wholly owned subsidiary of the Company, maintains a $120 million accounts receivable finance facility (the “Securitization Program”), maturing in 2025. The Company sells substantially all of its North American accounts receivable balances to Sylvamo Receivables, LLC, a special purpose entity, which pledges the receivables as collateral for the Securitization Program. The borrowing availability under this facility is limited by the balance of eligible receivables

within the program. ~~As of June 30, 2023 and December 31, 2022, the Company had $115 million and $75 million outstanding borrowings under the receivables securitization program, respectively.~~ The average interest rate for the quarters ended ~~June~~September 30, 2023 and December 31, 2022 was ~~5.87%~~6.19% and 5.19%, respectively.

The 2029 Senior Notes are unsecured bonds with a 7.00% fixed interest rate, payable semi-annually. The obligations under the Term Loan F, Term Loan A and the Revolving Credit Facility are secured by substantially all the tangible and intangible assets of Sylvamo and its subsidiaries, subject to certain exceptions, and along with the 2029 Senior Notes facility are guaranteed by Sylvamo and certain subsidiaries.

Effective May 31, 2023, in accordance with the existing credit agreement, the Company transitioned LIBOR-based interest rates to a benchmark reference rate of SOFR. The interest rates applicable to the Term Loan F and Revolving Credit Facility are now based on a fluctuating rate of interest measured by reference to SOFR plus a fixed percentage of 1.85% and 1.60%, respectively, payable monthly, with a SOFR floor of 0.00%. The interest rate applicable to the Term Loan A is based on a fluctuating rate of interest measured in reference to SOFR plus a fixed percentage of 1.85%, subject to a SOFR floor of 0.00%.

We are receiving interest patronage credits under the Term Loan F. Patronage distributions, which are made primarily in cash but also in equity in the lenders, are generally received in the first quarter of the year following that in which they were earned. Expected patronage credits are accrued in accounts and notes receivable as a reduction to interest expense in the period earned. After giving effect to expected patronage distributions of 90 basis points, of which 70 basis points is expected as a cash rebate, the effective net interest rate on the Term Loan F was approximately ~~6.05%~~6.27% and 5.23% as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

In connection with the Term Loan F, the Company ~~entered into~~was party to interest rate swaps with various counterparties with a notional amount of ~~$400~~$200 million maturing in 2024 and ~~maturities ranging from 2024 to~~$200 million maturing in 2026. In the first quarter, the Company received cash proceeds of $12 million from the unwind of the four interest rate swaps maturing in 2024 with a total notional amount of $200 million. ~~Subsequently,~~In the third quarter, the Company received $19 million from the unwind of the four interest rate swaps maturing in 2026, with a total notional value of $200 million. The resulting gain from unwinds will be amortized over the original contract term of the swaps, of which one year is remaining for the swaps originally maturing in 2024 and three years is remaining for the swaps originally maturing in 2026. The related gain from all swap proceeds has been deferred within “Accumulated other comprehensive loss” in the condensed consolidated balance sheet.

In the first quarter, the Company entered into four new interest rate swaps with various counterparties with a notional amount of $200 million, ~~which mature~~maturing in 2025. The ~~related gain has been deferred within “Accumulated other comprehensive loss” in the condensed consolidated balance sheet and will be amortized over the contracts’ original term of~~ ~~two~~ ~~remaining years. These~~ interest rate swaps are designated as cash flow hedges, and are utilized to manage interest rate risk. The interest rate swaps allow for the Company to exchange the difference in the variable rates on Term Loan F determined in reference to SOFR and the fixed interest rate per notional amount ranging from ~~1.14%~~3.72% to 3.75%. ~~All~~

During the second quarter, all outstanding interest rate swap agreements related to Term Loan F were amended ~~during the quarter ended June 30, 2023~~ to provide a hedge against changes in variable rate cash flows regarding fluctuations in SOFR as compared to the previous benchmark rate of one-month LIBOR. The revisions to the interest rate swap agreements did not impact our hedge accounting because we applied the accounting expedients outlined in ASU 2020-04 and ASU 2021-01 of ASC Topic 848, Reference Rate Reform.

As of ~~June~~September 30, 2023 and December 31, 2022, the fair value of the interest rate swaps related to Term Loan F was an asset of ~~$23~~$4 million and $30 million, respectively. Assets resulting from interest rate swaps are reflected in “Deferred charges and other assets.”

In connection with the issuance of Term Loan A, the Company entered into interest rate swaps with a current aggregate notional amount of ~~$296~~$293 million that amortize each quarter and mature in 2028. These interest rate swaps allow for the Company to exchange the difference in the variable rates on Term Loan A determined in reference to SOFR and the fixed interest rate per notional amount ranging from 4.13% to 4.16%. As of ~~June~~September 30, 2023, the fair value of these interest rate swaps resulted in ~~a liability~~an asset of $2$3 million, recorded within ~~“Other liabilities.~~“Deferred charges and other assets.”

The Company is subject to certain covenants limiting, among other things, the ability of most of its subsidiaries to: (a) incur additional indebtedness or issue certain preferred shares; (b) pay dividends on or make distributions in respect of the Company’s or its subsidiaries’ capital stock or make investments or other restricted payments; (c) create restrictions on the ability of the Company’s restricted subsidiaries to pay dividends to the Company or make certain other intercompany transfers; (d) sell certain assets; (e) create liens; (f) consolidate, merge, sell or otherwise dispose of all or substantially all of the Company’s assets; and (g) enter into certain transactions with its affiliates. The Company is currently subject to a maximum consolidated total leverage ratio of 3.75 to 1.00.

The limit on restricted payments that we may make prior to the resolution of the Brazil Tax Dispute is $60 million if our pro-forma consolidated leverage ratio is less than 2.50 to 1.00 and greater than or equal to 2.00 to 1.00, or $90 million if the pro-forma consolidated leverage ratio is less than 2.00 to 1.00. However, limitations imposed on restricted payments are eliminated prior to the final settlement of the Brazil Tax Dispute if (i) we deposit $120 million in an account subject to the control of the administrative agent under our credit agreement, or (ii) we deposit $60 million in such an account and maintain $225 million of available liquidity at the time we make restricted payments. The funds deposited in the account would be used to pay the Company’s share of the settlement of the Brazil Tax Dispute, with any excess funds returned to us if our portion of any final settlement amount is less than the amount on deposit. ~~If we meet these conditions,~~As of September 30, 2023, the Company has deposited $60 million in an account subject to the control of the administrative agent. Therefore, our ability to make restricted payments under the credit agreement ~~would then be~~is governed by the provisions in the credit agreement in effect as if the Brazil Tax Dispute is ~~settled. No amounts have been deposited as~~settled, if at the time of ~~June 30, 2023.~~any restricted payments we maintain $225 million of available liquidity.

As of ~~June~~September 30, 2023, we were in compliance with our debt covenants.

NOTE 15 PENSION AND POSTRETIREMENT BENEFIT PLANS

Defined Benefit Plans

The Company sponsors and maintains pension plans for the benefit of certain of the Company’s employees. The service and non-service cost components of net periodic pension expense for these employees is recorded within cost of products sold and

selling and administrative expenses. The assets and liabilities related to plans sponsored by the Company are reflected in deferred charges and other assets and other liabilities, respectively.

Net periodic pension expense (benefit) for all pension plans sponsored by the Company for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 was immaterial.

The Company’s funding policy for the 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 plans, tax deductibility, cash flow generated by the Company, and other factors. The Company continually reassesses the amount and timing of any discretionary contributions. Generally, the non-U.S. pension plans are funded using the projected benefit as a target, except in certain countries where funding of benefit plans is not required.

NOTE 16 INCENTIVE PLANS

The Company has adopted the Sylvamo 2021 Incentive Compensation Plan, which includes shares under its long-term incentive plan (“LTIP”) that grants certain employees, consultants, or non-employee directors of the Company different forms of awards, including time-based and performance-based restricted stock units. As of ~~June~~September 30, 2023, ~~2,821,985~~2,812,160 shares remain available for future grants.

Total stock-based compensation cost recognized by the Company was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2023		2022		2023		2022		In millions	2023		2022		2023		2022
Total stock-based compensation expense (included in selling and administrative expense)	Total stock-based compensation expense (included in selling and administrative expense)	$	8	$	7	$	15	$	11	Total stock-based compensation expense (included in selling and administrative expense)	$	6	$	5	$	21	$	16

As of ~~June~~September 30, 2023, ~~$25~~$21 million of compensation cost, net of estimated forfeitures, related to all stock-based compensation arrangements for Company employees had not yet been recognized. This amount will be recognized in expense over a weighted-average period of 1.4 years.

NOTE 17 FINANCIAL INFORMATION BY BUSINESS SEGMENT AND GEOGRAPHIC AREA

The Company’s business segments, Europe, Latin America and North America, are differentiated on a geographic basis which is 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.~~

Business segment operating profit is used by the Company’s management to measure the earnings performance of its businesses. Management believes that this measure provides investors and analysts useful insights into our operating

performance. Business segment operating profit is defined as income from continuing operations before income taxes, excluding interest (income) expense, net, and net special items.

External sales are defined as those that are made to parties outside the Company’s combined group, whereas sales by segment in the Net Sales table are determined using a management approach and include intersegment sales.

Information By Business Segment

Net Sales


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2023		2022		2023		2022		In millions	2023		2022		2023		2022
Europe	Europe	$	210	$	135	$	440	$	252	Europe	$	184	$	130	$	624	$	382
Latin America	Latin America	250		249		472		464		Latin America	246		270		718		734
North America	North America	474		549		979		1,057		North America	476		589		1,455		1,646
Intersegment Sales	Intersegment Sales	(15)		(21)		(31)		(40)		Intersegment Sales	(9)		(21)		(40)		(61)
Net Sales	Net Sales	$	919	$	912	$	1,860	$	1,733	Net Sales	$	897	$	968	$	2,757	$	2,701

Business Segment Operating Profit


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2023		2022		2023		2022		In millions	2023		2022		2023		2022
Europe	Europe	$	(11)	$	17	$	12	$	19	Europe	$	(14)	$	19	$	(2)	$	38
Latin America	Latin America	48		59		94		98		Latin America	55		58		149		156
North America	North America	45		66		142		128		North America	75		98		217		226
Business Segment Operating Profit	Business Segment Operating Profit	$	82	$	142	$	248	$	245	Business Segment Operating Profit	$	116	$	175	$	364	$	420
Income from continuing operations before income taxes	Income from continuing operations before income taxes	$	70	$	117	$	211	$	198	Income from continuing operations before income taxes	$	91	$	147	$	302	$	345
Interest (income) expense, net	Interest (income) expense, net	12		17		19		34		Interest (income) expense, net	9		18		28		52
Net special items expense (income) (a)	Net special items expense (income) (a)	—		8		18		13		Net special items expense (income) (a)	16		10		34		23
Business Segment Operating Profit	Business Segment Operating Profit	$	82	$	142	$	248	$	245	Business Segment Operating Profit	$	116	$	175	$	364	$	420

(a) Special items represent income or expenses that are incurred periodically, rather than on a regular basis. Net special items in the periods presented primarily include transaction costs related to the Nymölla acquisition, professional and legal fees related to negotiations resulting in a shareholder cooperation agreement, the impact of the step-up of acquired Nymölla inventory sold during the first quarter, certain severance costs related to our salaried workforce and one-time costs incurred in the prior year associated with the spin-off.

NOTE 18 RELATED PARTY TRANSACTIONS

Prior to the spin-off on October 1, 2021, we historically operated as part of International Paper and not as a standalone company. As a result of the spin-off on October 1, 2021, Sylvamo became an independent public company. On September 12, 2022, International Paper sold its remaining shares of Sylvamo stock. Therefore, International Paper is no longer a related party. The following discussion summarizes activity between the Company and International Paper both prior and subsequent to the spin-off and up to the time International Paper was deemed to no longer be a related party.

Related Party Sales and Purchases

The Company purchases certain of its products from International Paper which are produced in facilities that remained with International Paper. The Company continues to purchase uncoated freesheet and bristols pursuant to offtake agreements between the Company and International Paper. The Company purchased inventory associated with the offtake agreements of ~~$147~~$462 million for the ~~six~~nine months ended ~~June~~September 30, 2022.

The Company purchases fiber pursuant to fiber purchase agreements between the Company and International Paper. The Company purchased inventory associated with the fiber supply agreements of ~~$47~~$153 million for the ~~six~~nine months ended ~~June~~September 30, 2022.

The Company also purchases certain packaging materials from International Paper. These packaging purchases totaled $4$12 million for the ~~six~~nine months ended ~~June~~September 30, 2022.

Transition Services Agreement

Pursuant to the Transition Services Agreement, International Paper and Sylvamo provided certain services to one another on an interim, transitional basis. The services included certain information technology services, finance and accounting services and human resources and employee benefits services. The agreed-upon charges for such services were generally intended to allow the providing company to recover all costs and expenses for providing such services. The total amount of expenses incurred by the Company under the Transition Services Agreement for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$16~~$21 million. The Company is no longer receiving services under this agreement as of October 1, 2022.

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 Information” of this Quarterly Report on Form 10-Q (this “Form 10-Q”) and the Company’s Form 10-K for the three years ended December 31, 2022, 2021 and 2020. 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 stated and implied in any forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Form 10-Q and in our 2022 Form 10-K, particularly under the headings “Risk Factors” and “Forward-Looking Statements.”

EXECUTIVE SUMMARY

~~Second~~Third quarter 2023 net income from continuing operations was $58 million ($1.37 per diluted share) compared with $49 million ($1.14 per diluted share) ~~compared with $84 million ($1.89 per diluted share)~~ for the second ~~quarter of 2022.~~quarter. Net sales ~~increased to $919~~were $897 million in the current quarter compared with ~~$912~~$919 million in the second ~~quarter of 2022.~~quarter. Cash from operations was ~~$77~~$197 million compared to ~~$76~~$77 million in the ~~second quarter of 2022.~~prior quarter. Adjusted EBITDA was ~~$124~~$158 million and our adjusted EBITDA margin was ~~13.5%~~17.6% compared to ~~$189~~$124 million and ~~an adjusted EBITDA~~ margin of ~~20.7%~~13.5% in the second ~~quarter of 2022.~~quarter. Free cash flow was ~~$33~~$155 million compared to ~~$39~~$33 million in the ~~second quarter of 2022.~~prior quarter.

Comparing our performance in the ~~second~~third quarter to the ~~first~~second quarter, price and mix decreased primarily due to lower paper prices in Europe and Latin American export markets, as well as lower global pulp prices. Volume was ~~unfavorable reflecting continued channel inventory corrections and weaker than expected demand~~slightly favorable in ~~Europe~~Latin America and North ~~America.~~America and stable in Europe. Operations and costs were ~~higher than the first quarter~~flat, driven by better operating and supply chain results that were offset by higher unabsorbed fixed costs due to increased economic ~~downtime and~~downtime. Additionally, we ~~conducted four~~had no major planned ~~maintenance~~ outages in the ~~second quarter compared with no outages in the first~~third quarter. ~~These headwinds more than offset lower input~~Input and transportation costs improved in the current quarter, driven by favorable ~~energy,~~fiber, chemical and transportation costs. ~~Additionally,~~During the third quarter, we ~~generated $33~~initiated a cost reduction program to streamline our organization and cost structures. Before inflation, we are targeting run rate savings of at least $110 million by the end of ~~free cash flow~~2024. Approximately two-thirds of the target will come from operational improvements in our mills and ~~returned $41 million in cash to shareowners through dividends~~supply chains. The balance will consist of selling and ~~share repurchases in~~administrative cost reductions, including the ~~second quarter.~~elimination of approximately 150 positions, or nearly 7% of our global salaried workforce.

Looking ahead to the ~~third~~fourth quarter of ~~2023,~~2024, we expect price and mix to be unfavorable primarily reflecting prior paper price decreases in Europe and ~~the realization of prior price decreases for pulp.~~unfavorable geographical mix in Latin America and North America. Volume is expected to improve, reflecting seasonally stronger volume in Latin America, and the completion of destocking in Europe and North America. Operations and costs are expected to increase primarily due to higher seasonal operating costs in Europe and North America. We expect stable unabsorbed fixed costs as we continue to match supply to our ~~customers’ demand.~~customers demand and right-size our inventory levels. Planned maintenance outage expenses will be ~~lower~~higher coming out of the ~~second~~third quarter, ~~which was~~where we did not have any outages, as we have planned maintenance outages across all three of our ~~heaviest outage quarter of the year.~~business regions. Additionally, input and transportation costs are expected to ~~be lower~~increase due to favorable trends in fiber and chemicals. Despite the challenging demand environment in Europe and North America, we are committed to our strong financial position and returning $125 million of cash to shareowners in 2023.seasonally higher energy costs.

Acquisition of Nymölla

Divestiture of Russian Operations

During the second quarter of 2022, management committed to a plan to sell the Company’s Russian operations (which were sold on October 2, 2022). As a result, the operating results of the Company’s Russian operations have been classified as “Discontinued operations, net of taxes” for all periods presented in the condensed consolidated statement of operations. See Note 8 Divestiture and Impairment of Business for further details.

BUSINESS SEGMENT RESULTS

Overview

Management provides business segment operating profit, a non-GAAP financial measure, to supplement our GAAP financial information, and it should be considered in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Management believes that business segment operating profit provides investors and analysts useful insights into our operating performance. Business segment operating profit is reconciled to Income from continuing operations before income taxes, the most directly comparable GAAP measure. Business segment operating profit may be determined or calculated differently by other companies and therefore may not be comparable among companies.

The following table presents a comparison of Income from continuing operations before taxes to business segment operating profit:


		Three Months Ended June 30,				Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,

In millions	In millions	2023		2022				2023			2022	In millions			2023			2022			2023			2022
Income From Continuing Operations Before Income Taxes	Income From Continuing Operations Before Income Taxes	$	70	$	117	$	211		$	198	Income From Continuing Operations Before Income Taxes		$	91		$	147		$	302		$	345
Interest (income) expense, net	Interest (income) expense, net	12		17		19			34		Interest (income) expense, net		9			18			28			52
Net special items expense (income) (b)	Net special items expense (income) (b)	—		8		18			13		Net special items expense (income) (b)		16			10			34			23
Business Segment Operating Profit (a)	Business Segment Operating Profit (a)	$	82	$	142	$	248		$	245	Business Segment Operating Profit (a)		$	116		$	175		$	364		$	420
Europe	Europe	$	(11)	$	17	$	12		$	19	Europe		$	(14)		$	19		$	(2)		$	38
Latin America	Latin America	48		59		94			98		Latin America		55			58			149			156
North America	North America	45		66		142			128		North America		75			98			217			226
Business Segment Operating Profit (a)	Business Segment Operating Profit (a)	$	82	$	142	$	248		$	245	Business Segment Operating Profit (a)		$	116		$	175		$	364		$	420

(a) We define business segment operating profit as our income from continuing operations before income taxes calculated in accordance with GAAP, excluding net interest expense (income) and net special items. We believe that business segment operating profit is an important indicator of operating performance as it 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.

(b) Net special items represent income or expenses that are incurred periodically, rather than on a regular basis. Net special items in the periods presented primarily include transaction costs related to the Nymölla acquisition, professional and legal fees related to negotiations resulting in a shareholder cooperation agreement, the impact of the step-up of acquired Nymölla inventory sold during the first quarter, certain severance costs related to our salaried workforce and one-time costs incurred in the prior year associated with the spin-off.

Three Months Ended ~~June~~September 30, 2023 Compared to the Three Months Ended ~~June~~September 30, 2022

~~Six~~Nine Months Ended ~~June~~September 30, 2023 Compared to the ~~Six~~Nine Months Ended ~~June~~September 30, 2022

The following tables present net sales and operating profit, which is the Company’s measure of business segment profitability, for each of the Company’s segments. See Note 17 Financial Information by Business Segment and Geographic Area for more information on the Company’s segments.

Europe


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2023		2022		2023		2022		In millions	2023		2022		2023		2022
Net Sales	Net Sales	$	210	$	135	$	440	$	252	Net Sales	$	184	$	130	$	624	$	382
Operating Profit	Operating Profit	$	(11)	$	17	$	12	$	19	Operating Profit	$	(14)	$	19	$	(2)	$	38

Three Months Ended ~~June~~September 30, 2023 Compared to the Three Months Ended ~~June~~September 30, 2022

Our Europe business segment net sales increased ~~$75~~$54 million, compared to the same period in 2022, primarily due to net sales contributed by Nymölla ($88 million), which more than offset by lower ~~volumes.~~volumes ($5 million) and decreased sales prices and mix ($27 million).

Europe operating profit was ~~$28~~$33 million lower than the same period in 2022, driven primarily by ~~higher planned maintenance outages~~lower sales prices and product mix ($2127 million), higher unabsorbed fixed costs due to economic downtime ($79 million), lower volumes ($1 million), slightly higher planned maintenance outages ($1 million) and higher operating costs ($6 million), ~~higher~~which were partially offset by lower input costs, primarily for ~~purchased fiber~~energy ($37 million) and ~~lower sales prices and product mix ($1 million), which more than offset~~ operating profit contributed by Nymölla ($~~8 million) and lower operating costs ($2~~4 million).

~~Six~~Nine Months Ended ~~June~~September 30, 2023 Compared to the ~~Six~~Nine Months Ended ~~June~~September 30, 2022

Our Europe business segment net sales increased ~~$188~~$242 million, compared to the same period in 2022, primarily due to net sales contributed by Nymölla ($305 million), which more than offset decreased sales volumes ($51 million) and ~~increased~~decreased sales prices and ~~mix.~~mix ($4 million).

Europe operating profit was $7$40 million lower than the same period in 2022, driven primarily by higher planned maintenance outages ($22 million), higher input costs, primarily for purchased fiber and chemicals ($125 million), higher unabsorbed fixed costs due to economic downtime ($1020 million), lower volumes ($9 million), lower sales prices and ~~slightly~~mix ($5 million) and higher operating costs ($19 million), which more than offset operating profit contributed by Nymölla ($~~25 million) and higher sales prices and more favorable product mix ($22~~30 million).

Latin America


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2023		2022		2023		2022		In millions	2023		2022		2023		2022
Net Sales	Net Sales	$	250	$	249	$	472	$	464	Net Sales	$	246	$	270	$	718	$	734
Operating Profit	Operating Profit	$	48	$	59	$	94	$	98	Operating Profit	$	55	$	58	$	149	$	156

Three Months Ended ~~June~~September 30, 2023 Compared to the Three Months Ended ~~June~~September 30, 2022

Our Latin America business segment net sales ~~were consistent with~~decreased $24 million, compared to the same period in 2022 due to decreased sales volumes ($14 million), as well as decreased sales ~~volumes were offset by increased sales~~ prices and ~~mix.~~mix ($15 million).

Operating profit for Latin America was ~~$11~~$3 million lower than the same period in 2022, due to ~~higher input costs, primarily for purchased fiber~~lower sales prices and ~~pulp~~mix ($1415 million)~~, higher planned maintenance outages ($5 million),~~ and lower volumes ($5 million), ~~and higher operating costs ($2 million)~~ which more than offset the benefits of ~~increased sales prices~~lower planned maintenance outages ($7 million), lower input costs, primarily for chemicals and ~~more favorable product mix~~pulp ($159 million) and slightly lower operating costs ($1 million).

~~Six~~Nine Months Ended ~~June~~September 30, 2023 Compared to the ~~Six~~Nine Months Ended ~~June~~September 30, 2022

Our Latin America business segment net sales ~~increased $8~~decreased $16 million, compared to the same period in 2022, primarily driven by ~~an increase in the market price~~lower sales volumes ($54 million) that were partially offset by increased sales prices and mix ~~of uncoated freesheet and pulp for both export and domestic markets in the first six months of 2023.~~($34 million).

Operating profit for Latin America was $4$7 million lower than the same period in 2022, ~~due to~~as increased sales prices and more favorable product mix ($34 million), lower operating costs ($6 million) and lower planned maintenance outages ($2 million), were more than offset by higher input costs, primarily for purchased fiber and pulp ($3627 million), and lower volumes ($1722 million).

North America


	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2023		2022		2023		2022
Net Sales	$	476	$	589	$	1,455	$	1,646
Operating Profit	$	75	$	98	$	217	$	226

Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

Our North America business segment net sales was $113 million lower, compared to the same period in 2022, due to lower sales volumes ($98 million), as well as decreased sales prices and product mix ($13 million).

Operating profit for North America was $23 million lower than the same period in 2022, primarily due to lower volumes ($33 million), higher unabsorbed fixed costs due to economic downtime ($29 million) and decreased sales price and mix ($13 million), which more than offset the benefits of lower planned maintenance outages ($51 million), lower input costs, primarily for energy and distribution costs, as well as purchased fiber ($51 million).

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Our North America business segment net sales were $191 million lower, compared to the same period in 2022, as lower sales volumes ($264 million) were partially offset by increased sales prices and product mix ($85 million).

Operating profit for North America was $9 million lower than the same period in 2022, primarily due to lower volumes ($85 million) and higher unabsorbed fixed costs due to economic downtime ($61 million), which more than offset the benefits of increased sales prices and more favorable product mix ($5085 million) ~~and lower operating costs ($4 million).~~

~~North America~~

Three Months Ended
June 30, Six Months Ended
June 30,
In millions 2023 2022 2023 2022
Net Sales $ 474 $ 549 $ 979 $ 1,057
Operating Profit $ 45 $ 66 $ 142 $ 128

~~Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022~~

Our North America business segment net sales was $75 million lower, compared to the same period in 2022, as lower sales volumes ($109 million) were only partially offset by increased sales prices and product mix ($35 million).

~~Operating profit for North America was $21 million lower than the same period in 2022, primarily due to lower volumes ($35 million)~~, higher unabsorbed fixed costs due to economic downtime ($21 million) and higher planned maintenance outages ($9 million), which more than offset the benefits of increased sales prices and product mix ($28 million), lower input costs ($13 million) and lower operating costs ($3 million).

~~Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022~~

Our North America business segment net sales were $78 million lower, compared to the same period in 2022, as lower sales volumes ($177 million) were partially offset by increased sales prices and product mix ($105 million).

~~Operating profit for North America was $14 million higher than the same period in 2022, primarily due to increased sales prices and more favorable product mix ($98 million) and~~ lower operating costs ($7 million) ~~which more than offset lower volumes ($52 million), higher unabsorbed fixed costs due to economic downtime ($32 million), increased~~and decreased input costs, ~~($6 million),~~ primarily for ~~purchased fiber~~energy and ~~chemicals, and higher planned maintenance outages~~distribution costs ($145 million).

Non-GAAP Financial Measures

Management provides Adjusted EBITDA, a non-GAAP financial measure, to supplement our GAAP financial information, and it should be considered in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Management uses this measure in managing the operating performance of our business and believes that Adjusted EBITDA provide investors and analysts meaningful insights into our operating performance and is a relevant metric for the third-party debt. Adjusted EBITDA is reconciled to Net income, the most directly comparable GAAP measure. Adjusted EBITDA may be determined or calculated differently by other companies and therefore may not be comparable among companies.


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
In millions	In millions	2023			2022			2023			2022			In millions	2023			2022			2023			2022
Net Income (Loss)	Net Income (Loss)	$	49		$	(59)		$	146		$	(33)		Net Income (Loss)	$	58		$	57		$	204		$	24
Less: Discontinued operations, net of taxes	Less: Discontinued operations, net of taxes	—			(143)			—			(172)			Less: Discontinued operations, net of taxes	—			(52)			—			(224)
Net Income From Continuing Operations	Net Income From Continuing Operations	49			84			146			139			Net Income From Continuing Operations	58			109			204			248
Income tax provision	Income tax provision	21			33			65			59			Income tax provision	33			38			98			97
Interest (income) expense, net	Interest (income) expense, net	12			17			19			34			Interest (income) expense, net	9			18			28			52
Depreciation, amortization and cost of timber harvested	Depreciation, amortization and cost of timber harvested	34			32			69			63			Depreciation, amortization and cost of timber harvested	36			30			105			94
Stock-based compensation	Stock-based compensation	8			7			15			11			Stock-based compensation	6			5			21			16
Transition service agreement expense	Transition service agreement expense	—			8			—			16			Transition service agreement expense	—			6			—			21
Net special items expense (income) (a)	Net special items expense (income) (a)	—			8			18			13			Net special items expense (income) (a)	16			10			34			23
Adjusted EBITDA (b)	Adjusted EBITDA (b)	$	124		$	189		$	332		$	335		Adjusted EBITDA (b)	$	158		$	216		$	490		$	551
Net Sales	Net Sales	$	919		$	912		$	1,860		$	1,733		Net Sales	$	897		$	968		$	2,757		$	2,701
Adjusted EBITDA Margin	Adjusted EBITDA Margin	13.5		%	20.7		%	17.8		%	19.3		%	Adjusted EBITDA Margin	17.6		%	22.3		%	17.8		%	20.4		%

(b) We define Adjusted EBITDA (non-GAAP) as net income (GAAP) excluding discontinued operations, net of taxes plus the sum of income taxes, net interest expense (income), depreciation, amortization and cost of timber harvested, transition service agreement expense, stock-based compensation, and, when applicable for the periods reported, special items.

Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operating activities from continuing operations. Management 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 and service debt, and return cash to shareowners. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company’s ongoing performance, free cash flow also enables investors to perform meaningful comparisons between past and present periods.

The following is a reconciliation of Cash provided by continuing operations to Free Cash Flow:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
In millions	In millions	2023		2022		2023		2022		In millions	2023		2022		2023		2022
Cash provided by operating activities from continuing operations	Cash provided by operating activities from continuing operations	$	77	$	76	$	140	$	130	Cash provided by operating activities from continuing operations	$	197	$	146	$	337	$	276
Adjustments:	Adjustments:									Adjustments:
Cash invested in capital projects	Cash invested in capital projects	(44)		(37)		(105)		(59)		Cash invested in capital projects	(42)		(32)		(147)		(91)
Free Cash Flow	Free Cash Flow	$	33	$	39	$	35	$	71	Free Cash Flow	$	155	$	114	$	190	$	185

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.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our ability to fund the Company’s cash needs depends on our ongoing ability to generate cash from operations and obtain financing on acceptable terms. Based upon our history of generating strong operating cash flow, we believe we will be able to meet our short-term liquidity needs. We believe we will meet known or reasonably likely future cash requirements through the combination of cash flows from operating activities, available cash balances and available borrowings through the issuance of third-party debt, as needed.

A major factor in our liquidity and capital resource planning is our generation of operating cash flow, which is highly sensitive to changes in the pricing and demand for our products. While changes in key operating cash costs, such as raw materials, energy, mill outages and distribution expenses do have an effect on operating cash generation, we believe that our focus on commercial and operational excellence, as well as our ability to manage costs and working capital, will provide sufficient cash flow generation to meet our operational and capital spending needs.

The terms of the agreements governing our debt contain customary limitations for the financing as well as other provisions. These provisions may also restrict our business and, in the event we cannot meet the terms of those provisions, may adversely impact our financial condition, results of operations or cash flows.

Operating Activities

Cash provided by operating activities from continuing operations totaled ~~$140~~$337 million for the ~~six~~nine months ended ~~June~~September 30, 2023, compared with cash provided by operating activities from continuing operations of ~~$130~~$276 million for the ~~six~~nine months ~~ended~~

~~June~~ended September 30, 2022. The increase in cash provided by operating activities in 2023 relates primarily to ~~higher net income offset by~~ changes in working capital.

Cash ~~used for~~provided by working capital components (accounts and notes receivable, inventories, accounts payable and accrued liabilities, and other) was ~~$94~~$3 million for the ~~six~~nine months ended ~~June~~September 30, 2023, compared with cash used for working capital components of ~~$85~~$86 million for the ~~six~~nine months ended ~~June~~September 30, 2022. The ~~six~~nine months ended ~~June~~September 30, 2023 working capital components primarily reflect ~~$91~~$99 million and ~~$22~~$72 million of cash provided by our accounts and notes receivable and other operating activities, respectively, offset by ~~$60~~$46 million and ~~$147~~$122 million in cash used for our inventories and accounts payable and accrued liabilities balances, respectively. The ~~six~~nine months ended ~~June~~September 30, 2022 working capital components primarily reflect ~~$58 million, $33~~$81 million and ~~$31~~$76 million of cash used for our accounts and notes receivable and inventories, respectively, offset by $18 million and $53 million of cash provided by our accounts payable and accrued liabilities balances ~~respectively, offset by $37 million of cash provided by our~~and other operating activities.

Investment Activities

The total cash used for investing activities from continuing operations for the ~~six~~nine months ended ~~June~~September 30, 2023 increased from the ~~six~~nine months ended ~~June~~September 30, 2022, primarily due to the purchase of the Nymölla mill and the increase in capital spending in the current year.

The following table shows capital spending by business segment:


		Six Months Ended June 30,					Nine Months Ended September 30,
In millions	In millions	2023		2022		In millions	2023		2022
Europe	Europe	$	19	$	2	Europe	$	24	$	4
Latin America	Latin America	51		21		Latin America	77		45
North America	North America	31		13		North America	42		20
Corporate	Corporate	4		23		Corporate	4		22
Total	Total	$	105	$	59	Total	$	147	$	91

Capital spending primarily consists of purchases of machinery and equipment ~~and reforestation costs~~ related to our global mill ~~operations.~~operations and reforestation costs in Latin America.

Financing Activities

Cash used for financing activities from continuing operations for the ~~six~~nine months ended ~~June~~September 30, 2023, primarily reflects the payments of ~~$35~~$60 million, ~~$30~~$34 million, ~~$13~~$20 million, and $4$8 million on our outstanding principal debt balances for the Revolving Credit Facility, AR Securitization, Term Loan F and Term Loan A, respectively. Additionally, $360 million was paid to bond holders as part of our tender offer. These amounts are primarily offset by the issuance of Term Loan A, draws on our Revolving Credit Facility and AR Securitization of $300 million, $70 million and $70 million, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2023, the Company also paid ~~$21~~$32 million in dividends and repurchased ~~$40~~$53 million of our shares pursuant to our share repurchase program. Cash used for financing activities from continuing operations for the ~~six~~nine months ended ~~June~~September 30, 2022, primarily reflects the payments of ~~$55~~$140 million, $20 million and $7$10 million on our outstanding principal debt balances for Term Loan B, the Revolving Credit Facility and Term Loan F, respectively.

Contractual Obligations

Our 2022 Form 10-K included disclosures of our contractual obligations and commitments as of December 31, 2022. We continue to make the contractually required payments, and, therefore, the 2022 obligations and commitments described in our 2022 Form 10-K have been reduced by the required payments.

Capital Expenditures

For the ~~six~~nine months ended ~~June~~September 30, 2023, we have invested approximately ~~$105~~$147 million, or ~~5.6%~~5.3% of net sales, in total capital expenditures. Over that period, we spent approximately ~~$95~~$131 million, or ~~5.1%~~4.8% of net sales, in maintenance, regulatory ~~and reforestation capital expenditures, and approximately $10 million, or 0.5% of net sales, in high-return capital projects. Our~~

and reforestation capital expenditures, and approximately $16 million, or 0.6% of net sales, in high-return capital projects. Our annual maintenance, regulatory and reforestation capital expenditures are expected to be in the range of approximately $175 to $190 million per year for the next several years, which we believe will be sufficient to maintain our operations and productivity. In addition, we expect to spend ~~approximately~~up to $35 ~~million to $40~~ million on high-return projects in 2023.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires the Company 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 subjective 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 the Company, and that can require judgments by management that affect their application, include the accounting for impairment or disposal of long-lived assets and goodwill, business combinations and income taxes.

The Company has included in the 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 ~~six~~nine months of 2023.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains information that includes or is based upon forward-looking statements. Forward-looking statements forecast or state expectations concerning future events. These statements often can be identified by the fact that they do not relate strictly to historical or current facts. They typically use words such as “anticipate,” “assume,” “could,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “should,” “will” and other words and terms of similar meaning, or they are tied to future periods in connection with discussions of the Company’s performance. Some examples of forward-looking statements include those relating to our business and operating outlook, future obligations and anticipated expenditures.

Forward-looking statements are not guarantees of future performance. Any or all forward-looking statements may turn out to be incorrect, and actual results could differ materially from those expressed or implied in forward-looking statements. Forward-looking statements are based on current expectations and the current economic environment. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors that are difficult to predict.

Although it is not possible to identify all of these risks, uncertainties and other factors, the following factors, among others, could cause our actual results to differ from those in the forward-looking statements: the deterioration of economic and political conditions where we operate such as continuing inflation that increases our costs of operating, conditions such as economic recession decreasing demand for our products, and the war in Ukraine potentially spreading or causing significant economic disruption, particularly in Europe where we operate; workforce, natural gas, fuel and transportation shortages experienced by us and our suppliers creating challenges for our and their operations to overcome, increasing suppliers’ prices charged us and increasing our costs of operating; a resurgence of the COVID-19 pandemic or the occurrence of another public health crisis that results in new governmental measures implemented to address it that impede our, our suppliers’ or our customers’ operations, and that exacerbates inflation, workforce and transportation shortages; climate change and physical and financial risks to us associated with fluctuating regional and global weather conditions or patterns; reduced truck, rail and ocean freight availability resulting in higher costs to us or poor service; information technology risks related to potential breaches of security which may result in the distribution of company, customer, employee and vendor information; extensive environmental laws and regulations, as well as tax and other laws, in the United States, Brazil and other countries in which we operate, which could result in substantial costs to us as a result of compliance with, violations of or liabilities under these laws; failure to attract and retain senior management and other key and skilled employees, particularly in the current tight labor market; the loss of our commercial agreements with International Paper; failure of our separation from International Paper to qualify as a tax-free transaction for U.S. federal income tax purposes; our indebtedness and its impact on our ability to operate and satisfy our debt obligations; the limited trading history of our common stock; and the factors disclosed in Item 1A. Risk Factors in our annual report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”), as such disclosures may be amended, supplemented or superseded from time to time by other reports that we file with the Securities and Exchange Commission, including subsequent quarterly reports on Form 10-Q, annual reports on Form 10-K and current reports on Form 8-K.

We assume no obligation to update any forward-looking statements made in this quarterly report to reflect subsequent events or circumstances or actual outcomes.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information relating to quantitative and qualitative disclosures about market risk is shown on page 44 of the Company’s 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, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure of Controls and Procedures:

Management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~June~~September 30, 2023. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date and designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is: recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

In January 2023, the Company completed the previously announced acquisition of Stora Enso’s uncoated freesheet paper mill in Nymölla, Sweden. Due to the timing of this acquisition, we have excluded this business from our evaluation of the effectiveness of internal control over financial reporting.

Changes in Internal Control over Financial Reporting:

The Company is in the process of integrating the recently acquired Nymölla mill into the Company's internal control over financial reporting. As a result of these integration activities, certain controls ~~being evaluated~~ may be changed. Excluding the Nymölla acquisition, there were no changes in our internal control over financial reporting that occurred in the ~~second~~third quarter of 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Sylvamo may be involved in legal proceedings arising from time to time in the ordinary course of business. Sylvamo is not involved in any legal proceedings that we believe will result, individually or in the aggregate, in a material adverse effect upon our financial condition or results of operations. Note 12 Income Taxes and Note 13 Commitments and Contingent Liabilities of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q are incorporated into this Item 1 by reference.

Item 103 of Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions, unless we reasonably believe the monetary sanctions will not equal or exceed a threshold of $1 million (which is the threshold we elected to use as permitted by this regulation). The matters set forth in Note 13 Commitments and Contingent Liabilities and incorporated herein are disclosed in accordance with such requirement.

ITEM 1A. RISK FACTORS

The risk factors that affect our business and financial results are set forth under Part I, Item 1A, “Risk Factors,” in our 2022 Form 10-K. There have been no material changes to the risk factors described in the 2022 Form 10-K. The risk factors in “Item 1A. Risk Factors,” in our 2022 Form 10-K and the risks described in this Form 10-Q or our other SEC filings could cause our actual results to differ materially from those stated in any forward-looking statements.

ITEM 2. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares (or Units) Purchased as Part of the Publicly Announced Program Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program (in millions)
April 1, 2023 - April 30, 2023 644 $ 46.26 — $ 60
May 1, 2023 - May 31, 2023 (a) 277,152 $ 41.46 275,938 $ 49
June 1, 2023 - June 30, 2023 (a) 437,928 $ 42.39 437,899 $ 30
Total 715,724 713,837


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares (or Units) Purchased as Part of the Publicly Announced Program	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program (in millions)
July 1, 2023 - July 31, 2023	—	$	—	—	$	30
August 1, 2023 - August 31, 2023 (a)	76,816	$	39.73	74,518	$	27
September 1, 2023 - September 30, 2023	242,702	$	41.57	242,702	$	167
Total	319,518			317,220

(a) ~~1,887~~2,298 shares were acquired from employees from share withholdings under the Company’s long term incentive compensation program.

On May 18, 2022, the Board approved aan initial share repurchase program under which the Company may purchase up to an aggregate amount of $150 million of shares of its common stock (the “Repurchase Program”). In the third quarter of 2023, the Board authorized an additional $150 million for the Repurchase Program, bringing the total program capacity to $300 million, of which $167 million remains available for repurchases. Pursuant to the Repurchase Program, the Company may repurchase in amounts, at prices and at such times as it deems appropriate, subject to market conditions and other considerations, including all applicable legal requirements. Repurchases may include purchases on the open market or privately negotiated transfers, under Rule 10b5-1 trading plans, under accelerated share repurchase programs, in tender offers and otherwise. The Repurchase Program does not obligate the Company to acquire any particular amount of shares of its common stock and may be modified or suspended at any time at the Company’s discretion. The Company repurchased ~~$30~~$13 million of shares during the three months ended ~~June~~September 30, 2023.

ITEM 6. EXHIBITS


3.1						Amended and Restated Certificate of Incorporation of Sylvamo Corporation (incorporated by reference to Exhibit 3.1 to Sylvamo Corporation’s Registration Statement on Form S-8 filed with the SEC on September 28, 2021).

3.2						Amended and Restated By-Laws of Sylvamo Corporation (incorporated by reference to Exhibit 3.2 to Sylvamo Corporation’s Current Report on Form 8-K filed with the SEC on October 1, 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).

* Filed herewith

** Furnished herewith

Items 3, 4 and 5 are not applicable and have been omitted.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.


	SYLVAMO CORPORATION

Date: ~~August~~November 9, 2023	By:	/s/ Kevin W. Ferguson
	Name:	Kevin W. Ferguson
	Title:	Vice-President and Controller