UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, ~~2017~~2019

¨ ☐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 ~~1-3157~~001-03157

INTERNATIONAL PAPER COMPANY

(Exact name of registrant as specified in its charter)



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

6400 Poplar Avenue	Memphis,	TN	38197
(Address of principal executive offices)			(Zip Code)

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

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



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

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ý☒ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting 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	ý☒	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 ý☐

The number of shares outstanding of the registrant’s common stock, par value $1.00 per share, as of October ~~27, 2017~~25, 2019 was ~~412,928,210~~392,116,473.

Table of Contents

INDEX



		PAGE NO.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Statement of Operations - Three Months and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	1

	Condensed Consolidated Statement of Comprehensive Income - Three Months and Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	2

	Condensed Consolidated Balance Sheet - September 30, ~~2017~~2019 and December 31, ~~2016~~2018	3

	Condensed Consolidated Statement of Cash Flows - Nine Months Ended September 30, ~~2017~~2019 and ~~2016~~2018	4

	Condensed Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2530

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4247

Item 4.	Controls and Procedures	4247

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4348

Item 1A.	Risk Factors	4348

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4348

Item 6.	Exhibits	4449

Signatures		4550

Table of Contents

PART I. FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS

INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Operations

(Unaudited)

(In millions, except per share amounts)


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016			2019			2018		2019			2018
Net Sales	$	5,913	$	5,266		$	17,196		$	15,698		$	5,568		$	5,901	$	16,878		$	17,355
Costs and Expenses
Cost of products sold	4,024		3,622			12,069			11,345			3,772			3,887		11,602			11,757
Selling and administrative expenses	431		380			1,275			1,142			387			405		1,202			1,277
Depreciation, amortization and cost of timber harvested	373		314			1,075			899			327			335		963			990
Distribution expenses	386		353			1,155			1,012			395			397		1,168			1,166
Taxes other than payroll and income taxes	44		41			132			123			42			44		128			130
Restructuring and other charges	—		46			(16		)	47
Restructuring and other charges, net												21			—		21			48
Net (gains) losses on sales and impairments of businesses	—		5			9			70			8			122		153			122
Litigation settlement	—		—			354			—
Net bargain purchase gain on acquisition of business	—		—			(6		)	—
Antitrust fines												32			—		32			—
Interest expense, net	152		132			431			384			123			133		378			401
Non-operating pension expense												9			25		27			65
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	503		373			718			676			452			553		1,204			1,399
Income tax provision (benefit)	153		107			147			139			137			83		371			302
Equity earnings (loss), net of taxes	45		43			113			151			27			92		221			257
Earnings (Loss) From Continuing Operations	395		309			684			688			342			562		1,054			1,354
Discontinued operations, net of taxes	—		—			—			(5		)	—			—		—			345
Net Earnings (Loss)	395		309			684			683			342			562		1,054			1,699
Less: Net earnings (loss) attributable to noncontrolling interests	—		(3		)	—			(3		)	(2		)	—		(6		)	3
Net Earnings (Loss) Attributable to International Paper Company	$	395	$	312		$	684		$	686		$	344		$	562	$	1,060		$	1,696
Basic Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Earnings (loss) from continuing operations	$	0.96	$	0.76		$	1.65		$	1.68		$	0.88		$	1.38	$	2.67		$	3.28
Discontinued operations, net of taxes	—		—			—			(0.01		)	—			—		—			0.84
Net earnings (loss)	$	0.96	$	0.76		$	1.65		$	1.67		$	0.88		$	1.38	$	2.67		$	4.12
Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Earnings (loss) from continuing operations	$	0.95	$	0.75		$	1.64		$	1.66		$	0.87		$	1.37	$	2.65		$	3.25
Discontinued operations, net of taxes	—		—			—			(0.01		)	—			—		—			0.83
Net earnings (loss)	$	0.95	$	0.75		$	1.64		$	1.65		$	0.87		$	1.37	$	2.65		$	4.08
Average Shares of Common Stock Outstanding – assuming dilution	417.4		415.3			417.4			415.5			395.4			411.4		399.6			416.3
Cash Dividends Per Common Share	$	0.4625	$	0.4400		$	1.3875		$	1.3200
Amounts Attributable to International Paper Company Common Shareholders
Earnings (loss) from continuing operations	$	395	$	312		$	684		$	691
Discontinued operations, net of taxes	—		—			—			(5		)
Net earnings (loss)	$	395	$	312		$	684		$	686

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

INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

(In millions)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Net Earnings (Loss)	$	395		$	309		$	684		$	683		$	342		$	562		$	1,054		$	1,699
Other Comprehensive Income (Loss), Net of Tax:
Amortization of pension and post-retirement prior service costs and net loss:
U.S. plans	59			72			176			471			41			76			122			227
Pension and postretirement liability adjustments:
U.S. plans	—			(53		)	—			(598		)
Non-U.S. plans	—			—			1			17
Change in cumulative foreign currency translation adjustment	100			3			234			373			(179		)	(87		)	(106		)	(467		)
Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period	1			5			9			(5		)	(10		)	1			(6		)	(20		)
Reclassification adjustment for (gains) losses included in net earnings (loss)	(2		)	(3		)	(6		)	(7		)	4			2			5			2
Total Other Comprehensive Income (Loss), Net of Tax	158			24			414			251			(144		)	(8		)	15			(258		)
Comprehensive Income (Loss)	553			333			1,098			934			198			554			1,069			1,441
Net (earnings) loss attributable to noncontrolling interests	—			3			—			3			2			—			6			(3		)
Other comprehensive (income) loss attributable to noncontrolling interests	1			(1		)	(1		)	(1		)	—			2			—			4
Comprehensive Income (Loss) Attributable to International Paper Company	$	554		$	335		$	1,097		$	936		$	200		$	556		$	1,075		$	1,442

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

INTERNATIONAL PAPER COMPANY

Condensed Consolidated Balance Sheet

(In millions)


	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
	(unaudited)						(unaudited)
Assets
Current Assets
Cash and temporary investments	$	998		$	1,033		$	697		$	589
Accounts and notes receivable, net	3,343			3,001			3,305			3,521
Contract assets							388			395
Inventories	2,465			2,438			2,194			2,241
Assets held for sale							278			—
Other current assets	405			198			189			250
Total Current Assets	7,211			6,670			7,051			6,996
Plants, Properties and Equipment, net	14,065			13,990			12,845			13,067
Forestlands	468			456			378			402
Investments	336			360			1,651			1,648
Financial Assets of Special Purpose Entities (Note 13)	7,047			7,033
Financial Assets of Variable Interest Entities (Note 16)							7,084			7,070
Goodwill	3,420			3,364			3,412			3,374
Right of Use Assets							425			—
Deferred Charges and Other Assets	1,266			1,220			1,002			1,019
Total Assets	$	33,813		$	33,093		$	33,848		$	33,576
Liabilities and Equity
Current Liabilities
Notes payable and current maturities of long-term debt	$	958		$	239		$	402		$	639
Accounts payable	2,408			2,309			2,349			2,413
Accrued payroll and benefits	447			430			442			535
Other accrued liabilities	1,056			1,091
Liabilities held for sale							248			—
Other current liabilities							1,288			1,107
Total Current Liabilities	4,869			4,069			4,729			4,694
Long-Term Debt	11,373			11,075			9,957			10,015
Nonrecourse Financial Liabilities of Special Purpose Entities (Note 13)	6,289			6,284
Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)							6,303			6,298
Deferred Income Taxes	3,505			3,127			2,643			2,600
Pension Benefit Obligation	2,069			3,400			1,653			1,762
Postretirement and Postemployment Benefit Obligation	315			330			248			264
Long-Term Lease Obligations							292			—
Other Liabilities	460			449			567			560
Equity
Common stock, $1 par value, 2017 – 448.9 shares and 2016 – 448.9 shares	449			449
Common stock, $1 par value, 2019 – 448.9 shares and 2018 – 448.9 shares							449			449
Paid-in capital	6,176			6,189			6,261			6,280
Retained earnings	4,918			4,818			8,447			7,465
Accumulated other comprehensive loss	(4,949		)	(5,362		)	(5,014		)	(4,500		)
	6,594			6,094			10,143			9,694
Less: Common stock held in treasury, at cost, 2017 – 36.0 shares and 2016 – 37.7 shares	1,680			1,753
Less: Common stock held in treasury, at cost, 2019 – 56.8 shares and 2018 – 48.3 shares							2,702			2,332
Total International Paper Shareholders’ Equity	4,914			4,341			7,441			7,362
Noncontrolling interests	19			18			15			21
Total Equity	4,933			4,359			7,456			7,383
Total Liabilities and Equity	$	33,813		$	33,093		$	33,848		$	33,576

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

INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In millions)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2019			2018
Operating Activities
Net earnings (loss)	$	684		$	683		$	1,054		$	1,699
Depreciation, amortization and cost of timber harvested	1,075			899			963			990
Deferred income tax provision (benefit), net	295			45			68			163
Restructuring and other charges	(16		)	47
Pension plan contributions	(1,250		)	(750		)
Net bargain purchase gain on acquisition of business	(6		)	—
Restructuring and other charges, net							21			48
Net gain on transfer of North American Consumer Packaging business							—			(488		)
Net (gains) losses on sales and impairments of businesses	9			70			153			122
Ilim dividends received	129			58
Equity (earnings) loss, net	(113		)	(151		)
Antitrust fines							32			—
Equity method dividends received							260			130
Equity (earnings) losses, net							(221		)	(257		)
Periodic pension expense, net	237			718			70			172
Other, net	92			67			106			75
Changes in current assets and liabilities
Accounts and notes receivable	(293		)	(83		)	168			(441		)
Contract assets							6			(20		)
Inventories	(70		)	(6		)	(9		)	(120		)
Accounts payable and accrued liabilities	5			(37		)	(11		)	301
Interest payable	(11		)	24			(31		)	(33		)
Other	(198		)	(18		)	53			64
Cash Provided By (Used For) Operations	569			1,566			2,682			2,405
Investment Activities
Invested in capital projects	(935		)	(903		)	(913		)	(1,286		)
Acquisitions, net of cash acquired	(45		)	(56		)	(99		)	—
Net settlement on transfer of North American Consumer Packaging business							—			(40		)
Proceeds from divestitures, net of cash divested	4			105			17			—
Proceeds from sale of fixed assets	22			13			15			12
Other	(54		)	(130		)	(14		)	4
Cash Provided By (Used For) Investment Activities	(1,008		)	(971		)	(994		)	(1,310		)
Financing Activities
Repurchases of common stock and payments of restricted stock tax withholding	(46		)	(132		)	(535		)	(532		)
Issuance of debt	1,366			3,447			381			349
Reduction of debt	(369		)	(1,855		)	(772		)	(242		)
Change in book overdrafts	5			(5		)	(29		)	(33		)
Dividends paid	(573		)	(543		)	(595		)	(588		)
Debt tender premiums paid	(1		)	(31		)
Other	(2		)	(3		)	3			—
Cash Provided By (Used For) Financing Activities	380			878			(1,547		)	(1,046		)
Cash Included in Assets Held for Sale							(19		)	—
Effect of Exchange Rate Changes on Cash	24			39			(14		)	(41		)
Change in Cash and Temporary Investments	(35		)	1,512			108			8
Cash and Temporary Investments
Beginning of period	1,033			1,050			589			1,018
End of period	$	998		$	2,562		$	697		$	1,026

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

INTERNATIONAL PAPER COMPANY

Condensed Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments that are necessary for the fair presentation of International Paper Company’s (International Paper’s, the Company’s or our) financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed herein, such adjustments are of a normal, recurring nature. Results for the first nine months of the year may not necessarily be indicative of full year results. It is suggested that these condensed financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016 and the Company's Current Report on Form 8-K dated July 31, 2017 (collectively the "2016 10-K"), both of~~2018, which have previously been filed with the Securities and Exchange Commission. The Current Report on Form 8-K dated July 31, 2017 was filed to retrospectively adjust portions of the Company's Annual Report on Form 10-K for the year ended December 31, 2016, to reflect the adoption of the required guidance in ASU 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes." In addition, as a result of an internal reorganization in the 2017 first quarter, the net sales and operating profits for the Asian Distribution operations are included in the results of the businesses that manufacture the products, and as such, prior year amounts have been reclassified to conform with the presentation in 2017.

~~During the fourth quarter of 2016, the Company completed the acquisition of Weyerhaeuser's pulp business (see~~ ~~Note 7~~). Subsequent to the acquisition, the Company began reporting Global Cellulose Fibers as a separate reportable business segment in the fourth quarter of 2016 due to the increased materiality of the results of this business. This segment includes the Company's legacy pulp business and the newly acquired pulp business. As such, amounts related to the legacy pulp business have been reclassified out of the Printing Papers' segment and included in the new Global Cellulose Fibers business segment for all prior periods to conform with current year presentation.

NOTE 2 - RECENT ACCOUNTING DEVELOPMENTS

~~Derivatives and Hedging~~Recently Adopted Accounting Pronouncements

Leases

In ~~August 2017,~~February 2016, the FASB issued ASU ~~2017-12, "Derivatives and Hedging~~2016-02, "Leases (Topic ~~815): Targeted Improvements to Accounting for Hedging Activities.~~842)." The objective of this new guidance is the improvement of the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition to that main objective, the amendments in this guidance make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. This guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted. The Company ~~is currently evaluating~~adopted the provisions of this guidance ~~but plans to early adopt~~effective January 1, 2019, using the ~~provisions of this guidance for~~modified retrospective optional transition method. Therefore, the ~~year~~standard was applied beginning January 1, ~~2018.~~2019 and prior periods were not restated. The adoption of the standard did not result in a cumulative-effect adjustment to the opening balance of Retained earnings. The Company elected the package of practical expedients and implemented internal controls and system functionality to enable the preparation of financial information upon adoption.

The adoption of the new standard resulted in the recognition of a right of use asset and short-term and long-term liabilities recorded on the Company's consolidated balance sheet related to operating leases. Accounting for finance leases remained substantially unchanged. In addition, the adoption of the standard did not have a material impact on the Company's results of operations or cash flows.

~~Retirement Benefits~~

Comprehensive Income

In ~~March 2017,~~February 2018, the FASB issued ASU ~~2017-07, "Compensation~~2018-02, "Income Statement - ~~Retirement Benefits~~Reporting Comprehensive Income (Topic ~~715)~~220): ~~Improving the Presentation~~Reclassification of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." Under this new guidance, employers will present the service costs component of the net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arisingCertain Tax Effects from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components separately from the line items(s) that includes the service cost and outside of any subtotal of operating income. In addition, disclosure of the line(s) used to present the other components of net periodic benefit cost will be required if the components are not presented separately in the income statement.Accumulated Other Comprehensive Income." This guidance isgives entities the option to reclassify stranded tax effects caused by the newly-enacted U.S. Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. As a result, the Company adopted this guidance effective ~~for annual reporting periods beginning after December 15, 2017,~~January 1, 2019, and ~~interim periods within those years. Early adoption is permitted as~~recorded a net increase to opening Retained earnings and a decrease to opening Accumulated other comprehensive income of $529 million, due to the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The Company is currently evaluating the provisions of this guidance; however, we expect the adoption of ASU 2017-07 to result in a change in our adjusted operating profit (used to measure the earnings performance of the Company's business segments), which will be offset by a corresponding change in non-operating pension expense to reflect thecumulative impact of ~~presenting~~adopting the amortization of the prior service cost component of net periodic pension expense outside of operating income. We expect to adopt the provisions of this guidance on January 1, 2018 using the retrospective method. We also do not expect ASU 2017-07 to have an impact on our statements of financial position or cash flows.new guidance.

Recently Issued Accounting Pronouncements Not Yet Adopted

Intangibles

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." This guidance eliminates the requirement to calculate the implied fair value of goodwill under Step 2 of today's goodwill impairment test to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value. This guidance should be applied prospectively and is effective for annual reporting periods beginning after December 15, 2019, for any impairment test performed in 2020. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company plans to early adopt this guidance in the fourth quarter of 2019 in conjunction with our annual evaluation for possible goodwill impairment which is ~~currently evaluating~~performed in addition to interim evaluations when management believes that it is more likely than not, that events or circumstances have occurred that would result in the ~~provisions~~impairment of ~~this guidance; however, we do not anticipate adoption having material impact given we have no impairment triggers.~~a reporting unit's goodwill.

~~Business Combinations~~Financial Instruments - Credit Losses

In ~~January 2017,~~June 2016, the FASB issued ASU ~~2017-01, "Business Combinations~~2016-13, "Financial Instruments - Credit Losses (Topic ~~805)~~326): ~~Clarifying~~Measurement of Credit Losses on Financial Instruments." This guidance replaces the ~~Definition of~~current incurred loss impairment method with a Business." Under the new guidance, an entity must first determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set of transferred assets and activities is not a business. If this threshold is not met, the entity then evaluates whether the set meets the requirementmethod that ~~a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.~~reflects expected credit losses. This guidance is effective for annual reporting periods beginning after December 15, ~~2017, and~~2019,

including interim periods within those fiscal years. Early adoption is permitted. This guidance should be applied using the modified-retrospective approach. In May 2019, the FASB issued ASU 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief." The amendments in this Update provide entities with targeted transition relief that is intended to increase comparability of financial statement information for some entities that otherwise would have measured similar financial instruments using different measurement methodologies. The amendments also decrease costs for some financial statement preparers while providing financial statement users with decision-useful information. For entities that have not yet adopted the amendments in Update 2016-13, the effective date and transition methodology for the amendments in this Update are the same as in Update 2016-13. The Company is currently evaluating the provisions of this ~~guidance; however, we do not anticipate~~guidance and plans to adopt this guidance and the ~~adoption having a material impact~~related amendments on its effective date of January 1, 2020, by recognizing any cumulative effect of initially applying the ~~financial statements.~~new standard as an adjustment to the opening balance of Retained earnings.

~~Income Taxes~~Pension Plan Disclosures

In ~~October 2016,~~July 2018, the FASB issued ASU ~~2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers~~2018-09, "Codification Improvements," which included amendments to Subtopic 962-325. This disclosure guidance pertains to the presentation of ~~Assets Other Than Inventory." This ASU requires companies to recognize the income tax effects~~certain types of ~~intercompany sales~~investments and ~~transfers of assets other than inventory in the period in which the transfer occurs rather than defer the income tax effects which is current practice. This new guidance~~ is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. The guidance requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. Early adoption is permitted. The Company does not expect that the adoption of the standard will result in a material impact on the financial statements.

~~Stock Compensation~~

In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting." This guidance clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under this guidance, entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. This guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted, including adoption in any interim period.2018. The Company is currently evaluating the provisions of this ~~guidance; however, we do not anticipate the adoption having a material~~guidance and its potential impact on ~~the financial statements.~~

~~In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." Under this new guidance, all excess tax benefits~~our 2019 annual Form 10-K disclosures and tax deficiencies are recognized in the income statement as they occur and therefore impact the Company's effective tax rate. This guidance replaced previous guidance which required tax benefits that exceed compensation costs (windfalls) to be recognized in equity. The new guidance also changed the cash flow presentation of excess tax benefits, classifying them as operating inflows rather than financing activities as they were previously classified. In addition, the new guidance allows companies to provide net settlement of stock-based compensation to cover tax withholding as long as the net settlement does not exceed the maximum individual statutory tax rate in the employee's tax jurisdiction. Amendments related to pension plan assets.

NOTE 3 - REVENUE RECOGNITION

Generally, the ~~timing of~~Company recognizes revenue on a point-in-time basis when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value were to be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the ~~beginning of the period in which the guidance is adopted. Amendments related~~customer takes title to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement were to be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term were applied prospectively. An entity could elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. This ASU was effective for annual reporting periods beginning after December 15, 2016, and interim periods with those years. The Company prospectively adopted the provisions of this ASU in the first quarter of 2017 with no material impact on the financial statements.

~~Leases~~

In February 2016, the FASB issued ASU 2016-02, "Leases Topic (842): Leases." This ASU will require most leases to be recognized on the balance sheet which will increase reported assets and liabilities. Lessor accounting will remain substantially similar to current U.S. GAAP. This ASU is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those years, and mandates a modified retrospective transition method for all entities. The Company expects to adopt this guidance using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We expect to recognize a liability and corresponding asset associated with in-scope operating and finance leases but are still in the process of determining those amounts and the processes required to account for leasing activity on an ongoing basis.

~~Revenue Recognition~~

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." This guidance replaces most existing revenue recognition guidance and provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and ~~services. This ASU was effective~~assumes the risks and rewards for ~~annual reporting periods beginning after December 15, 2016, and interim periods within those years and permits~~ the use of either the retrospective or cumulative effect transition method; however, in August 2015, the FASB issued ASU 2015-14 which defers the effective date by one year making the guidance effective for annual reporting periods beginning after December 15, 2017. The FASB has continued to clarify this guidance in various updates during 2015, 2016 and 2017, all of which, have the same effective date as the original guidance.

We are currently evaluating the impact of ASU 2014-09 and all related ASU's on our financial statements. During the second quarter of 2017, we finalized our plan to adopt the new revenue guidance effective January 1, 2018 using the modified retrospective transition method. The Company's transition team, including representatives from all of our business segments, continues to review and analyze the impact of the standard on our revenue contracts. Surveys were developed and reviews of customer contracts have been performed in order to gather information and identify areas of the Company's business where potential differences could result in applying the requirements of the new standard to its revenue contracts. The results of the surveys and contract reviews indicate that the adoption of the standard may require acceleration of revenue for products produced by the Company without an alternative future use andgoods. For customized goods where the Company ~~would have~~has a legally enforceable right ofto payment for ~~production~~the goods, the Company recognizes revenue over time which, generally, is as the goods are produced.

Disaggregated Revenue

A geographic disaggregation of ~~products completed~~revenues across our company segmentation in the following tables provides information to ~~date. The Company is continuing to evaluate the terms of its revenue contracts, including~~assist in evaluating the ~~materiality~~nature, timing and uncertainty of revenue and cash flows and how they may be impacted by economic factors.



	Three Months Ended September 30, 2019
In millions	Industrial Packaging			Global Cellulose Fibers		Printing Papers			Corporate and Inter-segment Sales			Total
Primary Geographical Markets (a)
United States	$	3,180		$	535	$	486		$	56		$	4,257
EMEA	415			62		315			(1		)	791
Pacific Rim and Asia	20			27		47			3			97
Americas, other than U.S.	205			—		223			(5		)	423
Total	$	3,820		$	624	$	1,071		$	53		$	5,568

Operating Segments
North American Industrial Packaging	$	3,368		$	—	$	—		$	—		$	3,368
EMEA Industrial Packaging	324			—		—			—			324
Brazilian Industrial Packaging	61			—		—			—			61
European Coated Paperboard	92			—		—			—			92
Global Cellulose Fibers	—			624		—			—			624
North American Printing Papers	—			—		492			—			492
Brazilian Papers	—			—		247			—			247
European Papers	—			—		299			—			299
Indian Papers	—			—		38			—			38
Intra-segment Eliminations	(25		)	—		(5		)	—			(30		)
Corporate & Inter-segment Sales				—		—			53			53
Total	$	3,820		$	624	$	1,071		$	53		$	5,568

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



	Nine Months Ended September 30, 2019
In millions	Industrial Packaging			Global Cellulose Fibers		Printing Papers			Corporate and Inter-segment Sales			Total
Primary Geographical Markets (a)
United States	$	9,531		$	1,656	$	1,448		$	174		$	12,809
EMEA	1,263			207		986			(8		)	2,448
Pacific Rim and Asia	50			111		167			9			337
Americas, other than U.S.	672			—		623			(11		)	1,284
Total	$	11,516		$	1,974	$	3,224		$	164		$	16,878

Operating Segments
North American Industrial Packaging	$	10,158		$	—	$	—		$	—		$	10,158
EMEA Industrial Packaging	994			—		—			—			994
Brazilian Industrial Packaging	176			—		—			—			176
European Coated Paperboard	275			—		—			—			275
Global Cellulose Fibers	—			1,974		—			—			1,974
North American Printing Papers	—			—		1,474			—			1,474
Brazilian Papers	—			—		702			—			702
European Papers	—			—		929			—			929
Indian Papers	—			—		144			—			144
Intra-segment Eliminations	(87		)	—		(25		)	—			(112		)
Corporate & Inter-segment Sales				—		—			164			164
Total	$	11,516		$	1,974	$	3,224		$	164		$	16,878

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



	Three Months Ended September 30, 2018
In millions	Industrial Packaging			Global Cellulose Fibers		Printing Papers			Corporate & Intersegment			Total
Primary Geographical Markets (a)
United States	$	3,394		$	602	$	482		$	52		$	4,530
EMEA	396			77		328			(4		)	797
Pacific Rim and Asia	40			35		62			6			143
Americas, other than U.S.	204			—		230			(3		)	431
Total	$	4,034		$	714	$	1,102		$	51		$	5,901

Operating Segments
North American Industrial Packaging	$	3,653		$	—	$	—		$	—		$	3,653
EMEA Industrial Packaging	311			—		—			��			311
Brazilian Industrial Packaging	57			—		—			—			57
European Coated Paperboard	87			—		—			—			87
Global Cellulose Fibers	—			714		—			—			714
North American Printing Papers	—			—		492			—			492
Brazilian Papers	—			—		255			—			255
European Papers	—			—		311			—			311
Indian Papers	—			—		47			—			47
Intra-segment Eliminations	(74		)	—		(3		)	—			(77		)
Corporate & Inter-segment Sales	—			—		—			51			51
Total	$	4,034		$	714	$	1,102		$	51		$	5,901

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



	Nine Months Ended September 30, 2018
In millions	Industrial Packaging			Global Cellulose Fibers		Printing Papers			Corporate & Intersegment			Total
Primary Geographical Markets (a)
United States	$	9,832		$	1,720	$	1,399		$	163		$	13,114
EMEA	1,275			222		988			(13		)	2,472
Pacific Rim and Asia	110			140		185			35			470
Americas, other than U.S.	666			1		643			(11		)	1,299
Total	$	11,883		$	2,083	$	3,215		$	174		$	17,355

Operating Segments
North American Industrial Packaging	$	10,604		$	—	$	—		$	—		$	10,604
EMEA Industrial Packaging	1,017			—		—			—			1,017
Brazilian Industrial Packaging	175			—		—			—			175
European Coated Paperboard	265			—		—			—			265
Global Cellulose Fibers	—			2,083		—			—			2,083
North American Printing Papers	—			—		1,443			—			1,443
Brazilian Papers	—			—		706			—			706
European Papers	—			—		932			—			932
Indian Papers	—			—		150			—			150
Intra-segment Eliminations	(178		)	—		(16		)	—			(194		)
Corporate & Inter-segment Sales	—			—		—			174			174
Total	$	11,883		$	2,083	$	3,215		$	174		$	17,355

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

Revenue Contract Balances

The opening and closing balances of the Company's contract assets and current contract liabilities are as follows:



In millions	Contract Assets (Short-Term)			Contract Liabilities (Short-Term)
Beginning Balance - January 1, 2019	$	395		$	56
Ending Balance -September 30, 2019	388			28
Increase / (Decrease)	$	(7	)	$	(28	)

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

A contract liability is created when customers prepay for goods prior to the ~~repetitive nature~~Company transferring those goods to the customer. The contract liability is reduced once control of the goods is transferred to the customer. The majority of our ~~sales, we do not expect~~customer prepayments are received during the ~~impact of this acceleration~~fourth quarter each year for goods that will be transferred to ~~significantly alter our sales recognition patterns~~customers over ~~time. In addition,~~ the ~~Company continues to assess~~following twelve months.

The difference between the ~~impact of required disclosures around revenue recognition in the notes to the financial statements~~opening and ~~any necessary policy and process changes, in preparation for adoption. The Company does not expect that the adoption~~closing balances of the ~~other elements of~~Company's contract assets and contract liabilities primarily results from the ~~standard will result~~difference between the price and quantity at comparable points in ~~a material impact on its financial statements.~~

time for goods for which we have an unconditional right to payment or receive pre-payment from the customer, respectively.

NOTE 34 - EQUITY

A summary of the changes in equity for the three months and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 is provided below:



	Three Months Ended September 30, 2019
In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total International Paper Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance, July 1	$	449	$	6,229	$	8,302		$	(4,870	)	$	2,628		$	7,482		$	17		$	7,499
Issuance of stock for various plans, net	—		32		—			—			(1		)	33			—			33
Repurchase of stock	—		—		—			—			75			(75		)	—			(75		)
Common stock dividends ($0.5000 per share)	—		—		(199		)	—			—			(199		)	—			(199		)
Transactions of equity method investees	—		—		—			—			—			—			—			—
Comprehensive income (loss)	—		—		344			(144		)	—			200			(2		)	198
Ending Balance, September 30	$	449	$	6,261	$	8,447		$	(5,014	)	$	2,702		$	7,441		$	15		$	7,456

Nine Months Ended
September 30,
2017 2016
In millions, except per share amounts
Total
International
Paper
Shareholders’
Equity

Noncontrolling
Interests

Total
Equity

Total
International
Paper
Shareholders’
Equity

Noncontrolling
Interests

Total
Equity
Balance, January 1 $ 4,341
$ 18
$ 4,359
$ 3,884
$ 25
$ 3,909
Issuance of stock for various plans, net 130
—
130
100
—
100
Repurchase of stock (46 ) —
(46 ) (132 ) —
(132 )
Common stock dividends ($1.3875 per share in 2017 and $1.3200 per share in 2016) (584 ) —
(584 ) (550 ) —
(550 )
Transactions of equity method investees (24 ) —
(24 ) (37 ) —
(37 )
Divestiture of noncontrolling interests —
—
—
—
(3 ) (3 )
Other —
—
—
8
—
8
Comprehensive income (loss) 1,097
1
1,098
936
(2 ) 934
Ending Balance, September 30 $ 4,914
$ 19
$ 4,933
$ 4,209
$ 20
$ 4,229



	Nine Months Ended September 30, 2019
In millions, except per share amounts	Common Stock Issued		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total International Paper Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance, January 1	$	449	$	6,280		$	7,465		$	(4,500	)	$	2,332		$	7,362		$	21		$	7,383
Adoption of ASU 2018-02 reclassification of stranded tax effects resulting from Tax Reform	—		—			529			(529		)	—			—			—			—
Issuance of stock for various plans, net	—		(52		)	—			—			(165		)	113			—			113
Repurchase of stock	—		—			—			—			535			(535		)	—			(535		)
Common stock dividends ($1.5000 per share)	—		—			(607		)	—			—			(607		)	—			(607		)
Transactions of equity method investees	—		33			—			—			—			33			—			33
Comprehensive income (loss)	—		—			1,060			15			—			1,075			(6		)	1,069
Ending Balance, September 30	$	449	$	6,261		$	8,447		$	(5,014	)	$	2,702		$	7,441		$	15		$	7,456



	Three Months Ended September 30, 2018
In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total International Paper Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance, July 1	$	449	$	6,219	$	6,988		$	(4,881	)	$	1,931		$	6,844		$	20		$	6,864
Issuance of stock for various plans, net	—		36		—			—			(1		)	37			—			37
Repurchase of stock	—		—		—			—			201			(201		)	—			(201		)
Common stock dividends ($0.4750 per share)	—		—		(197		)	—			—			(197		)	—			(197		)
Transactions of equity method investees	—		1		—			—			—			1			—			1
Comprehensive income (loss)	—		—		562			(6		)	—			556			(2		)	554
Ending Balance, September 30	$	449	$	6,256	$	7,353		$	(4,887	)	$	2,131		$	7,040		$	18		$	7,058



	Nine Months Ended September 30, 2018
In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total International Paper Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance, January 1	$	449	$	6,206	$	6,180		$	(4,633	)	$	1,680		$	6,522		$	19		$	6,541
Adoption of ASC 606 revenue from contracts with customers	—		—		73			—			—			73			—			73
Issuance of stock for various plans, net	—		31		—			—			(81		)	112			—			112
Repurchase of stock	—		—		—			—			532			(532		)	—			(532		)
Common stock dividends ($1.4250 per share)	—		—		(596		)	—			—			(596		)	—			(596		)
Transactions of equity method investees	—		19		—			—			—			19			—			19
Comprehensive income (loss)	—		—		1,696			(254		)	—			1,442			(1		)	1,441
Ending Balance, September 30	$	449	$	6,256	$	7,353		$	(4,887	)	$	2,131		$	7,040		$	18		$	7,058

NOTE 45 - OTHER COMPREHENSIVE INCOME

The following table presents changes in ~~AOCI~~accumulated other comprehensive income (AOCI) for the ~~three-month period~~three months and nine months ended September 30, ~~2017:~~2019 and 2018:



	Three Months Ended September 30,						Nine Months Ended September 30,
In millions	2019			2018			2019			2018
Defined Benefit Pension and Postretirement Adjustments
Balance at beginning of period	$	(2,362	)	$	(2,376	)	$	(1,916	)	$	(2,527	)
Reclassification of stranded tax effects	—			—			(527		)	—
Amounts reclassified from accumulated other comprehensive income	41			76			122			227
Balance at end of period	(2,321		)	(2,300		)	(2,321		)	(2,300		)
Change in Cumulative Foreign Currency Translation Adjustments
Balance at beginning of period	(2,508		)	(2,489		)	(2,581		)	(2,111		)
Other comprehensive income (loss) before reclassifications	(179		)	(87		)	(110		)	(469		)
Amounts reclassified from accumulated other comprehensive income	—			—			4			2
Other comprehensive income (loss) attributable to noncontrolling interest	—			2			—			4
Balance at end of period	(2,687		)	(2,574		)	(2,687		)	(2,574		)
Net Gains and Losses on Cash Flow Hedging Derivatives
Balance at beginning of period	—			(16		)	(3		)	5
Other comprehensive income (loss) before reclassifications	(10		)	1			(6		)	(20		)
Reclassification of stranded tax effects	—			—			(2		)	—
Amounts reclassified from accumulated other comprehensive income	4			2			5			2
Balance at end of period	(6		)	(13		)	(6		)	(13		)
Total Accumulated Other Comprehensive Income (Loss) at End of Period	$	(5,014	)	$	(4,887	)	$	(5,014	)	$	(4,887	)

In millions Defined Benefit Pension and Postretirement Items (a) Change in Cumulative Foreign Currency Translation Adjustments (a) Net Gains and Losses on Cash Flow Hedging Derivatives (a) Total (a)
Balance, July 1, 2017 $ (2,954 ) $ (2,155 ) $ 1
$ (5,108 )
Other comprehensive income (loss) before reclassifications —
101
1
102
Amounts reclassified from accumulated other comprehensive income 59
(1 ) (2 ) 56
Net Current Period Other Comprehensive Income (Loss) 59
100
(1 ) 158
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest —
1
—
1
Balance, September 30, 2017 $ (2,895 ) $ (2,054 ) $ —
$ (4,949 )


~~(a)~~	~~All amounts are net of tax.~~

~~The following table presents changes in AOCI for the three-month period ended September 30, 2016:~~

In millions Defined Benefit Pension and Postretirement Items (a) Change in Cumulative Foreign Currency Translation Adjustments (a) Net Gains and Losses on Cash Flow Hedging Derivatives (a) Total (a)
Balance, July 1, 2016 $ (3,298 ) $ (2,179 ) $ (4 ) $ (5,481 )
Other comprehensive income (loss) before reclassifications (53 ) 3
5
(45 )
Amounts reclassified from accumulated other comprehensive income 72
—
(3 ) 69
Net Current Period Other Comprehensive Income (Loss) 19
3
2
24
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest —
(1 ) —
(1 )
Balance, September 30, 2016 $ (3,279 ) $ (2,177 ) $ (2 ) $ (5,458 )


~~(a)~~	~~All amounts are net of tax.~~

~~The following table presents changes in AOCI for the nine-month period ended September 30, 2017:~~

In millions Defined Benefit Pension and Postretirement Items (a) Change in Cumulative Foreign Currency Translation Adjustments (a) Net Gains and Losses on Cash Flow Hedging Derivatives (a) Total (a)
Balance, January 1, 2017 $ (3,072 ) $ (2,287 ) $ (3 ) $ (5,362 )
Other comprehensive income (loss) before reclassifications 1
235
9
245
Amounts reclassified from accumulated other comprehensive income 176
(1 ) (6 ) 169
Net Current Period Other Comprehensive Income 177
234
3
414
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest —
(1 ) —
(1 )
Balance, September 30, 2017 $ (2,895 ) $ (2,054 ) $ —
$ (4,949 )


~~(a)~~	~~All amounts are net of tax.~~

~~The following table presents changes in AOCI for the nine-month period ended September 30, 2016:~~

In millions Defined Benefit Pension and Postretirement Items (a) Change in Cumulative Foreign Currency Translation Adjustments (a) Net Gains and Losses on Cash Flow Hedging Derivatives (a) Total (a)
Balance, January 1, 2016 $ (3,169 ) $ (2,549 ) $ 10
$ (5,708 )
Other comprehensive income (loss) before reclassifications (581 ) 376
(5 ) (210 )
Amounts reclassified from accumulated other comprehensive income 471
(3 ) (7 ) 461
Net Current Period Other Comprehensive Income (110 ) 373
(12 ) 251
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest —
(1 ) —
(1 )
Balance, September 30, 2016 $ (3,279 ) $ (2,177 ) $ (2 ) $ (5,458 )


~~(a)~~	~~All amounts are net of tax.~~

The following table presents details of the reclassifications out of AOCI for the ~~three-month~~three months and ~~nine-month periods~~nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018:



In millions:	Amounts Reclassified from Accumulated Other Comprehensive Income													Location of Amount Reclassified from AOCI
	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Defined benefit pension and postretirement items:
Prior-service costs	$	(4	)	$	(4	)	$	(10	)	$	(11	)	(a)	Non-operating pension expense
Actuarial gains (losses)	(50		)	(97		)	(152		)	(291		)	(a)	Non-operating pension expense
Total pre-tax amount	(54		)	(101		)	(162		)	(302		)
Tax (expense) benefit	13			25			40			75
Net of tax	(41		)	(76		)	(122		)	(227		)
Reclassification of stranded tax effects	—			—			527			—				Retained Earnings
Total, net of tax	(41		)	(76		)	405			(227		)

Change in cumulative foreign currency translation adjustments:
Business acquisitions/divestitures	—			—			(4		)	(2		)	(b)	Cost of products sold
Tax (expense) benefit	—			—			—			—
Net of tax	—			—			(4		)	(2		)

Net gains and losses on cash flow hedging derivatives:
Foreign exchange contracts	(6		)	(3		)	(7		)	(3		)	(c)	Cost of products sold
Total pre-tax amount	(6		)	(3		)	(7		)	(3		)
Tax (expense)/benefit	2			1			2			1
Net of tax	(4		)	(2		)	(5		)	(2		)
Reclassification of stranded tax effects	—			—			2			—				Retained Earnings
Total, net of tax	(4		)	(2		)	(3		)	(2		)
Total reclassifications for the period	$	(45	)	$	(78	)	$	398		$	(231	)

Details About Accumulated Other Comprehensive Income Components Amounts Reclassified from Accumulated Other Comprehensive Income Location of Amount Reclassified from AOCI
Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
In millions:
Defined benefit pension and postretirement items:
Prior-service costs $ (6 ) $ (9 ) $ (19 ) $ (27 ) (a) Cost of products sold
Actuarial gains (losses) (89 ) (108 ) (266 ) (739 ) (a) Cost of products sold
Total pre-tax amount (95 ) (117 ) (285 ) (766 )
Tax (expense) benefit 36
45
109
295

Net of tax (59 ) (72 ) (176 ) (471 )

Change in cumulative foreign currency translation adjustments:
Business acquisitions/divestitures 1
—
1
3
Net (gains) losses on sales and impairments of businesses
Tax (expense)/benefit —
—
—
—

Net of tax 1
—
1
3

Net gains and losses on cash flow hedging derivatives:
Foreign exchange contracts 3
5
8
10
(b) Cost of products sold
Total pre-tax amount 3
5
8
10

Tax (expense)/benefit (1 ) (2 ) (2 ) (3 )
Net of tax 2
3
6
7

Total reclassifications for the period $ (56 ) $ (69 ) $ (169 ) $ (461 )


(a)	These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 1619 for additional details).


(b)	Amounts for the three months and nine months ended September 30, 2018 were reclassified to Discontinued operations, net of taxes.


(c)	This accumulated other comprehensive income component is included in our derivatives and hedging activities (see Note 1518 for additional details).

NOTE 56 - EARNINGS PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS

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



	Three Months Ended September 30,				Nine Months Ended September 30,
In millions, except per share amounts	2019		2018		2019		2018
Earnings (loss) from continuing operations attributable to International Paper Company common shareholders	$	344	$	562	$	1,060	$	1,351
Weighted average common shares outstanding	392.6		407.4		396.3		411.4
Effect of dilutive securities
Restricted performance share plan	2.8		4.0		3.3		4.9
Weighted average common shares outstanding – assuming dilution	395.4		411.4		399.6		416.3
Basic earnings (loss) per share from continuing operations	$	0.88	$	1.38	$	2.67	$	3.28
Diluted earnings (loss) per share from continuing operations	$	0.87	$	1.37	$	2.65	$	3.25

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions, except per share amounts 2017 2016 2017 2016
Earnings (loss) from continuing operations $ 395
$ 312
$ 684
$ 691
Effect of dilutive securities —
—
—
—
Earnings (loss) from continuing operations – assuming dilution $ 395
$ 312
$ 684
$ 691
Average common shares outstanding 412.9
411.2
412.6
411.0
Effect of dilutive securities
Restricted stock performance share plan 4.5
4.1
4.8
4.5
Average common shares outstanding – assuming dilution 417.4
415.3
417.4
415.5
Basic earnings (loss) from continuing operations per common share $ 0.96
$ 0.76
$ 1.65
$ 1.68
Diluted earnings (loss) from continuing operations per common share $ 0.95
$ 0.75
$ 1.64
$ 1.66

NOTE 67 - RESTRUCTURING AND OTHER CHARGES, NET

~~2017:~~2019: During the three months ended September 30, 2019, the Company recorded an $11 million pre-tax charge in Corporate, a $6 million pre-tax charge in the Printing Papers segment, and a $4 million pre-tax charge in the Global Cellulose Fibers segment for severance related to an overhead cost reduction initiative. The majority of the severance is expected to be paid over the next twelve months.

There were no restructuring and other charges recorded during the three months and six months ended June 30, 2019.

2018: There were no restructuring and other charges recorded during the three months ended September 30, ~~2017.~~2018.

During the three months ended June 30, ~~2017, restructuring~~2018, the Company recorded a $26 million pre-tax charge, in the Industrial Packaging segment, related to approximately $12 million of severance, $6 million in accelerated depreciation, $2 million in accelerated amortization, and $6 million in other charges ~~totaling a $16 million benefit before taxes were recorded. Details~~in conjunction with the optimization of ~~these charges were as follows:~~our EMEA Packaging business.

In millions Three Months Ended
June 30, 2017
Gain on sale of investment in ArborGen $ (14 )
Other (2 )
Total $ (16 )

~~There were no restructuring and other charges recorded during the three months ended March 31, 2017.~~

~~2016:~~ ~~During the three months ended September 30, 2016, restructuring and other charges totaling $46 million before taxes were recorded. Details of these charges were as follows:~~

In millions Three Months Ended
September 30, 2016
Early debt extinguishment costs $ 29
India packaging evaluation write-off 17
Total $ 46

~~There were no restructuring and other charges recorded during the three months ended June 30, 2016.~~

During the three months ended March 31, ~~2016, restructuring and other~~2018, the Company recorded a $22 million pre-tax charge, in the Industrial Packaging segment, primarily related to severance charges ~~totaling $1 million before taxes were recorded. Details~~in conjunction with the optimization of ~~these charges were as follows:~~

our EMEA Packaging business.

In millions Three Months Ended
March 31, 2016
Gain on sale of investment in Arizona Chemical $ (8 )
Riegelwood mill conversion costs 9
Total $ 1

NOTE 78 - ACQUISITIONS

~~Tangier, Morocco Facility~~

On June ~~30, 2017,~~28, 2019, the Company ~~completed~~closed on the previously announced acquisition of ~~Europac's Tangier, Morocco facility, a corrugated~~two packaging ~~facility, for €40~~businesses located in Portugal (Ovar) and France (Torigni and Cabourg) from DS Smith Packaging. The total purchase consideration, inclusive of working capital adjustments, was approximately €72 million (approximately ~~$46~~$82 million ~~using the~~at June 30, ~~2017~~2019 exchange ~~rate)~~rates), subject to ~~certain~~ post-closing adjustments. Approximately 80% of the fair value has been provisionally allocated to property, plant and equipment. Adjustments, if any, to provisional amounts will be finalized within the measurement period of up to one year from the acquisition date. Pro forma information related to the acquisition of the Europac business has not been included as it is impractical to obtain the information due to the lack of availability of financial data and does not have a material effect on the Company’s consolidated results of operations.

~~Weyerhaeuser Pulp Business~~

On December 1, 2016, the Company completed the acquisition of Weyerhaeuser Company's pulp business for approximately $2.2 billion in cash. Under the terms of the agreement, International Paper acquired four fluff pulp mills, one Northern bleached softwood kraft mill and two converting facilities of modified fiber, located in the United States, Canada and Poland.

The following table summarizes the provisional fair value assigned to assets and liabilities acquired as of ~~December 1, 2016:~~June 28, 2019:



In millions
Cash and temporary investments	$	1
Accounts and notes receivable	23
Inventory	8
Plants, properties and equipment	28
Goodwill	48
Right of use assets	2
Total assets acquired	110
Accounts payable and accrued liabilities	20
Other current liabilities	1
Long-term debt	2
Postretirement and postemployment benefit obligation	3
Long-term lease obligations	2
Total liabilities assumed	28
Net assets acquired	$	82

In millions
Cash and temporary investments $ 12
Accounts and notes receivable 195
Inventory 238
Other current assets 11
Plants, properties and equipment 1,711
Goodwill 52
Other intangible assets 212
Deferred charges and other assets 6
Total assets acquired 2,437
Accounts payable and accrued liabilities 114
Long-term debt 104
Other long-term liabilities 28
Total liabilities assumed 246
Net assets acquired $ 2,191

Since the date of acquisition, Net sales of $25 million and Earnings (loss) from continuing operations before income taxes and equity earnings of $2 million from the acquired business have been included in the Company's consolidated statement of operations for the three months ended September 30, 2019.

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

In connection with the business combination, inventories were written up by $33 million to their estimated fair value. During the first quarter of 2017, $14 million before taxes ($8 million after taxes) were expensed to Cost of products sold as the related inventory was sold.

~~The identifiable intangible assets acquired in connection with the acquisition of the Weyerhaeuser pulp business included the following:~~

In millions Estimated
Fair Value Average
Remaining
Useful Life
Asset Class: (at acquisition
date)
Customer relationships and lists $ 95
24 years
Trade names, patents, trademarks and developed technology 113
8 years
Other 4
10 years
Total $ 212

~~Holmen Paper Newsprint Mill~~

On June 30, 2016, the Company completed the acquisition of Holmen Paper's newsprint mill in Madrid, Spain. Under the terms of the acquisition agreement, International Paper purchased the Madrid newsprint mill, as well as associated recycling operations and a 50% ownership interest in a cogeneration facility. The Company intends to convert the mill during the fourth quarter of 2017, to produce recycled containerboard with an expected capacity of 440,000 tons. Once completed, the converted mill will support the Company's corrugated packaging business in EMEA.

The Company's aggregate purchase price for the mill, recycling operations and 50% ownership of the cogeneration facility was €53 million (approximately $59 million using the June 30, 2016 exchange rate). The assignment of fair value to assets acquired and liabilities assumed was completed in the first quarter of 2017. Approximately $60 million was allocated to property, plant and equipment, $14 million to current assets (primarily cash and accounts receivable), $14 million to equity method investments, $5 million to long-term assets, $9 million to short-term liabilities and $16 million to long-term liabilities related to a supply contract entered into with the seller. The final fair values assigned indicated that the sum of the cash consideration paid was less than the fair value of the underlying net assets, after adjustments, by $6 million, resulting in a bargain purchase gain being recorded on this transaction. Pro forma information ~~related to the acquisition of the Holmen business~~ has not been included as it is ~~impractical~~impracticable to obtain the information due to the lack of availability of historical U.S. GAAP financial ~~data and does~~data. The results of the operations of these businesses do not have a material effect on the ~~Company’s~~Company's consolidated results of operations.

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

NOTE 89 - DIVESTITURES ~~/ SPINOFF~~AND IMPAIRMENTS

~~Other Divestitures and Impairments~~Discontinued Operations

~~2017:~~ On ~~September 7, 2017,~~January 1, 2018, the Company completed the ~~previously announced sale~~transfer of its ~~foodservice~~North American Consumer Packaging business, which included its North American Coated Paperboard and Foodservice businesses, to Graphic Packaging International Partners, LLC (GPIP), a subsidiary of Graphic Packaging Holding Company, in ~~China~~exchange for a 20.5% ownership interest in GPIP. GPIP subsequently transferred the North American Consumer Packaging business to ~~Huhtamaki Hong Kong Limited. Proceeds received totaled approximately RMB 129 million ($18 million using the September 30, 2017 exchange rate). Under the terms~~Graphic Packaging International, LLC (GPI), a wholly owned subsidiary of ~~the transaction, and after post-closing adjustments,~~GPIP. International Paper ~~received approximately RMB 49 million in exchange~~is accounting for its ownership interest in ~~two China foodservice entities~~the combined business under the equity method. The Company determined the fair value of its investment in the combined business and ~~RMB 80~~recorded a pre-tax gain of $516 million ($385 million after taxes) on the transfer in the first quarter of 2018, subject to final working capital settlement. During the second quarter of 2018, the Company recorded a pre-tax charge of $28 million ($21 million after taxes) to adjust the previously recorded gain on the transfer.

The following summarizes the major classes of line items comprising Earnings (Loss) Before Income Taxes and Equity Earnings reconciled to Discontinued operations, net of tax, related to the transfer of the North American Consumer Packaging business for all periods presented in the consolidated statement of operations:



	Three Months Ended September 30,		Nine Months Ended September 30,
In millions	2018		2018
Net Sales	$	—	$	—
Costs and Expenses
Selling and administrative expenses	—		25
(Gain) loss on transfer of business	—		(488		)
Earnings (Loss) Before Income Taxes and Equity Earnings	—		463
Income tax provision (benefit)	—		118
Discontinued Operations, Net of Taxes	$	—	$	345

Total cash used for operations related to the North American Consumer Packaging business of $25 million for the ~~sale~~nine months ended September 30, 2018, is included in Cash Provided By (Used For) Operations in the consolidated statement of ~~notes receivable from~~cash flows. Total cash used for investing activities related to the ~~acquired entities.~~North American Consumer Packaging business of $40 million for the nine months ended September 30, 2018, is included in Cash Provided By (Used For) Investing Activities in the consolidated statement of cash flows.

~~Subsequent~~Other Divestitures

On May 29, 2019, the Company announced that it had entered into an agreement with West Coast Paper Mills Limited (WCPM) to sell its controlling interest in International Paper APPM Limited (APPM), an India-based paper business, for ₨275 (Indian Rupees) per share. International Paper then owned approximately 30 million shares, or 75% of the outstanding shares of APPM.

In conjunction with the announced agreement in ~~June 2017,~~the second quarter of 2019, a determination was made that the current book value of the ~~asset~~APPM disposal group exceeded its estimated fair value of $7$119 million which was based on the agreed upon ~~selling~~transaction price. As a result, a preliminary pre-tax charge of $9$152 million ($150 million after taxes) was recorded during the second quarter of ~~2017,~~2019. During the third quarter of 2019, the Company recorded an additional charge of $8 million (before and after taxes), which included $2 million related to the change in cumulative foreign currency translation loss and a $6 million loss related to the change in the ~~Company's Consumer Packaging segment, to write down~~book value of the long-lived assets of ~~this business~~APPM compared to ~~their~~the estimated fair ~~value. Amounts related to this business~~value of the disposal group. These charges are included in the ~~Company's~~Net (gains) losses on sales and impairments of businesses line item in the accompanying consolidated statement of operations ~~were immaterial~~and is included in the results for ~~both~~ the ~~three months and nine months ended September 30, 2017.~~Printing Papers segment. A year-to-

~~2016:~~ ~~On June~~date loss of $9 million (before and after taxes) has been allocated to the noncontrolling interest related to the impairment of the long-lived assets of APPM.

The transaction closed on October 30, ~~2016,~~2019 and the Company ~~completed~~retained a passive investment of 20% in APPM. During the ~~previously announced sale~~fourth quarter of ~~its corrugated packaging business in China and Southeast Asia~~2019, a final immaterial adjustment to ~~Xiamen Bridge Hexing Equity Investment Partnership Enterprise. Under~~ the ~~terms of~~impairment charge to reflect the difference between the proceeds received from the transaction and after post-closing adjustments, International Paper received a total of approximately RMB 957 million (approximately $144 million at the June 30, 2016 exchange rate), which included the buyer's assumption of the liability for outstanding loans of approximately $55 million which are payable up to three years from the closing ~~of the sale. The remaining balance of the outstanding loans payable to International Paper as of September 30, 2017, totaled $9 million.~~

~~Subsequent to the announced agreement in March 2016, a determination was made that the current~~ book value of the asset group exceeded its estimated fair value of $155 million which was the agreed upon selling price, less costs incurred to sell. As a result, a pre-tax charge of $41 million was recorded during the six months ended June 30, 2016 in the Company's Industrial Packaging segment to write down the long-lived assets ~~of this business to their estimated fair value.~~will be recorded. In addition, the Company ~~recorded a pre-tax charge of $24 million~~will record our retained investment at fair value.

At September 30, 2019, all assets and liabilities related to APPM are classified as current assets held for sale and current liabilities held for sale in the ~~2016 second quarter~~accompanying consolidated balance sheet. The following summarizes the major classes of assets and liabilities of APPM reconciled to total Assets held for ~~severance that was contingent upon the~~ sale ~~of this business. The amount of pre-tax losses related to this IP Asia Packaging business included~~and total Liabilities held for sale in the ~~Company's statement of operations were $7 million and $80 million for the three months and nine months ended September 30, 2016.~~accompanying consolidated balance sheet:



In millions	September 30, 2019
Cash and temporary investments	$	19
Accounts and notes receivable	16
Inventories	23
Other current assets	19
Plants, properties and equipment	195
Deferred charges and other assets	6
Total Assets Held for Sale	$	278

Accounts payable and accrued liabilities	$	18
Other current liabilities	22
Deferred income taxes	47
Other liabilities	1
Net impairment reserve	160
Total Liabilities Held for Sale	$	248

NOTE 910 - SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

Temporary Investments

Temporary investments with an original maturity of three months or less are treated as cash equivalents and are stated at cost. Temporary investments totaled ~~$663~~$484 million and ~~$757~~$402 million at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.

Accounts and Notes Receivable



In millions	September 30, 2019		December 31, 2018
Accounts and notes receivable, net:
Trade	$	3,055	$	3,249
Other	250		272
Total	$	3,305	$	3,521

In millions September 30, 2017 December 31, 2016
Accounts and notes receivable, net:
Trade $ 3,098
$ 2,759
Other 245
242
Total $ 3,343
$ 3,001

The allowance for doubtful accounts was ~~$78~~$77 million and ~~$70~~$81 million at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.

Inventories



In millions	September 30, 2019		December 31, 2018
Raw materials	$	270	$	260
Finished pulp, paper and packaging	1,140		1,241
Operating supplies	637		641
Other	147		99
Total	$	2,194	$	2,241

~~Inventories~~Plants, Properties and Equipment

In millions September 30, 2017 December 31, 2016
Raw materials $ 275
$ 296
Finished pulp, paper and packaging 1,453
1,381
Operating supplies 646
661
Other 91
100
Total $ 2,465
$ 2,438

~~Depreciation~~

Accumulated depreciation was ~~$22.7~~$20.4 billion and ~~$21.6~~$20.5 billion at September 30, ~~2017~~2019 and December 31, ~~2016.~~2018, respectively. Depreciation expense was ~~$341~~$305 million and ~~$294~~$315 million for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~$997~~$902 million and ~~$845~~$930 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

Non-cash additions to plants, property and equipment included within accounts payable were $104 million and $135 million at September 30, 2019 and December 31, 2018, respectively.

Interest

Interest payments made during the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 were ~~$600~~$591 million and ~~$511~~$606 million, respectively.

Amounts related to interest were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2019		2018		2019		2018
Interest expense	$	177	$	184	$	538	$	547
Interest income	54		51		160		146
Capitalized interest costs	7		9		21		26

Asset Retirement Obligations

The Company had recorded liabilities of $95 million and $86 million related to asset retirement obligations at September 30, 2019 and December 31, 2018, respectively.

NOTE 11 - LEASES

International Paper leases various real estate, including certain operating facilities, warehouses, office space and land. The Company also leases material handling equipment, vehicles, and certain other equipment. The Company's leases have remaining lease terms of one year to 97 years. Leases having a lease term of twelve months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the term of the lease. In addition, the Company has applied the practical expedient to account for the lease and non-lease components as a single lease component for all of the Company's leases.

Right of use (ROU) assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Effective January 1, 2019, operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The Company's leases may include options to extend or terminate the lease. These options to extend are included in the lease term when it is reasonably certain that we will exercise that option. Some leases have variable payments, however, because they are not based on an index or rate, they are not included in the ROU assets and liabilities. Variable payments for real estate leases primarily relate to common area maintenance, insurance, taxes and utilities. Variable payments for equipment, vehicles, and leases within supply agreements primarily relate to usage, repairs, and maintenance. As the implicit rate is not readily determinable for most of the Company's leases, the Company applies a portfolio approach using an estimated incremental borrowing rate to determine the initial present value of lease payments over the lease terms on a collateralized basis over a similar term, which is based on market and company specific information. We use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate, and apply the rate based on the currency of the lease, which is updated on a quarterly basis for measurement of new lease liabilities.

Components of Lease Expense



In millions	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease costs	$	39	$	115
Variable lease costs	16		53
Short-term lease costs	9		27
Finance lease cost
Amortization of lease assets	3		8
Interest on lease liabilities	1		3
Total lease cost, net	$	68	$	206

Supplemental Balance Sheet Information Related to Leases

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2017 2016 2017 2016
Interest expense $ 198
$ 181
$ 571
$ 513
Interest income 46
49
140
129
Capitalized interest costs 6
7
18
21



In millions	Classification	September 30, 2019
Assets
Operating lease assets	Right-of-use assets	$	425
Finance lease assets	Plants, properties and equipment, net (a)	105
Total leased assets		$	530
Liabilities
Current
Operating	Other current liabilities	$	136
Finance	Notes payable and current maturities of long-term debt	13
Noncurrent
Operating	Long-term lease obligations	292
Finance	Long-term debt	91
Total lease liabilities		$	532


(a)	Finance leases are recorded net of accumulated amortization of $37 million.

Lease Term and Discount Rate



In millions	September 30, 2019
Weighted average remaining lease term (years)
Operating leases	9.8 years
Finance leases	11.3 years
Weighted average discount rate
Operating leases	3.24	%
Finance leases	4.74	%

Supplemental Cash Flow Information Related to Leases



In millions	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows related to operating leases	$	110
Operating cash flows related to financing leases	3
Financing cash flows related to finance leases	7

Maturity of Lease Liabilities



	September 30, 2019
In millions	Operating Leases		Financing Leases		Total
2019 (remainder of year)	$	39	$	4	$	43
2020	138		17		155
2021	97		15		112
2022	64		13		77
2023	35		11		46
2024	18		10		28
Thereafter	95		65		160
Total lease payments	486		135		621
Less: Interest (a)	58		31		89
Present value of lease liabilities	$	428	$	104	$	532


(a)	Calculated using the interest rate for each lease.

At December 31, 2018, total future minimum commitments under existing non-cancelable operating leases were as follows:



In millions	2019		2020		2021		2022		2023		Thereafter
Lease obligations	$	160	$	125	$	77	$	49	$	28	$	118

NOTE 1012 - EQUITY METHOD INVESTMENTS

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

Graphic Packaging International Partners, LLC

On January 1, 2018, the Company completed the transfer of its North American Consumer Packaging business, which included its North American Coated Paperboard and Foodservice businesses, to a subsidiary of Graphic Packaging International Partners, LLC (GPIP), a subsidiary of Graphic Packaging Holding Company, in exchange for a 20.5% ownership interest in GPIP. GPIP subsequently transferred the North American Consumer Packaging business to Graphic Packaging International, LLC (GPI), a wholly-owned subsidiary of GPIP that holds the assets of the combined business. As of September 30, 2019, the Company's ownership interest in GPIP was 21.6%. The Company recorded equity earnings of $10 million and $19 million for the three months ended September 30, 2019 and 2018, respectively, and $37 million and $36 million for the nine months ended September 30, 2019 and 2018, respectively. The Company received cash dividends from GPIP of $20 million and $12 million during the first nine months of 2019 and 2018, respectively. The Company's investment in GPIP was $1.1 billion at both September 30, 2019 and December 31, 2018, which was $534 million and $562 million, respectively, more than the Company's proportionate share of the entity's underlying net assets. The difference primarily relates to the basis difference between the fair value of our investment and the underlying net assets, and is generally amortized in equity earnings over a period consistent with the underlying long-lived assets. The Company is party to various agreements with GPI under which it sells fiber and other products to GPI. Sales under these agreements were $69 million and $62 million for the three months ended September 30, 2019 and 2018, respectively, and $212 million and $180 million for the nine months ended September 30, 2019 and 2018, respectively.

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

Balance Sheet



In millions	September 30, 2019		December 31, 2018
Current assets	$	1,765	$	1,757
Noncurrent assets	5,419		5,292
Current liabilities	1,067		1,148
Noncurrent liabilities	3,325		3,156

Income Statement



	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2019		2018		2019		2018
Net sales	$	1,581	$	1,530	$	4,640	$	4,515
Gross profit	266		256		820		714
Income from continuing operations	83		135		283		278
Net income	83		135		283		278

Ilim S.A.

The Company has a 50% equity interest in Ilim S.A. (Ilim), which has subsidiaries whose primary operations are in Russia. The Company recorded equity earnings, net of taxes, of $18 million and $74 million for the three months ended September 30, 2019 and 2018, respectively, and $186 million and $223 million for the nine months ended September 30, 2019 and 2018, respectively. The Company received cash dividends from the joint venture of $239 million and $118 million during the first nine months of 2019 and 2018, respectively. At September 30, 2019 and December 31, 2018, the Company's investment in Ilim was $477 million and $478 million, respectively, which was $146 million and $145 million, respectively, more than the Company's proportionate share of the joint venture's underlying net assets. The differences primarily relate to currency translation adjustments and the basis difference between the fair value of our investment at acquisition and the underlying net assets. The Company is party to a joint marketing agreement with JSC Ilim Group, a subsidiary of Ilim, under which the Company purchases, markets and sells paper produced by JSC Ilim Group. Purchases under this agreement were $51 million and $50 million for the three months ended September 30, 2019 and 2018, respectively, and $162 million and $159 million for the nine months ended September 30, 2019 and 2018, respectively.

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

Balance Sheet



In millions	September 30, 2019		December 31, 2018
Current assets	$	749	$	981
Noncurrent assets	2,392		1,710
Current liabilities	947		545
Noncurrent liabilities	1,509		1,470
Noncontrolling interests	22		11

Income Statement



	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2019		2018		2019		2018
Net sales	$	479	$	655	$	1,692	$	2,030
Gross profit	196		376		836		1,152
Income from continuing operations	41		149		388		454
Net income	40		143		375		438

NOTE 13 - GOODWILL AND OTHER INTANGIBLES

Goodwill

The following table presents changes in goodwill balances as allocated to each business segment for the ~~nine-month period~~nine-months ended September 30, ~~2017:~~2019:

In millions
Industrial
Packaging
Global Cellulose Fibers
Printing
Papers

Consumer
Packaging
Total
Balance as of January 1, 2017
Goodwill $ 3,316
$ 19
   $ 2,143
   $ 1,664
$ 7,142
Accumulated impairment losses (a) (237 ) —
   (1,877 ) (1,664 ) (3,778 )
3,079
19
   266
   —
3,364
Reclassifications and other (b) 5
—
14
—
19
Additions/reductions 5
(c) 33
(d) (1 ) —
37
Balance as of September 30, 2017
Goodwill 3,326
52
   2,156
   1,664
7,198
Accumulated impairment losses (a) (237 ) —
   (1,877 ) (1,664 ) (3,778 )
Total $ 3,089
$ 52
   $ 279
   $ —
$ 3,420



In millions	Industrial Packaging				Global Cellulose Fibers		Printing Papers				Total
Balance as of January 1, 2019
Goodwill	$	3,379			$	52	$	2,116			$	5,547
Accumulated impairment losses	(296		)		—		(1,877		)		(2,173		)
	3,083				52		239				3,374
Currency translation and other (a)	(2		)		—		(14		)		(16		)
Goodwill additions/reductions	54			(b)	—		(112		)	(c)	(58		)
Accumulated impairment loss additions / reductions	—				—		112			(c)	112
Balance as of September 30, 2019
Goodwill	3,431				52		1,990				5,473
Accumulated impairment losses	(296		)		—		(1,765		)		(2,061		)
Total	$	3,135			$	52	$	225			$	3,412


(a)	Represents ~~accumulated goodwill impairment charges since~~ the ~~adoption~~effects of ~~ASC 350, “Intangibles – Goodwill and Other” in 2002.~~foreign currency translations.


(b)	~~Represents~~Reflects the ~~effects~~provisional goodwill for the acquisitions of ~~foreign currency translations and reclassifications.~~Industrial Packaging box plants in EMEA.


(c)	Reflects the ~~acquisition~~reclassification of ~~the newly acquired Moroccan box plant.~~


~~(d)~~	~~Represents purchase price adjustments related~~India goodwill and accumulated impairment losses to ~~the the newly acquired pulp business.~~held for sale.

Other Intangibles

Identifiable intangible assets comprised the following:



	September 30, 2019						December 31, 2018
In millions	Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets		Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets
Customer relationships and lists	$	541	$	266	$	275	$	542	$	247	$	295
Non-compete agreements	26		26		—		67		67		—
Tradenames, patents and trademarks, and developed technology	173		101		72		174		90		84
Land and water rights	8		2		6		8		2		6
Software	26		25		1		26		25		1
Other	25		18		7		30		23		7
Total	$	799	$	438	$	361	$	847	$	454	$	393

September 30, 2017 December 31, 2016
In millions
Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization
Customer relationships and lists $ 612
$ 242
$ 605
$ 211
Non-compete agreements 71
71
69
64
Tradenames, patents and trademarks, and developed technology 173
69
173
56
Land and water rights 8
2
10
2
Software 23
22
21
20
Other 50
38
48
26
Total $ 937
$ 444
$ 926
$ 379

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



	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2019		2018		2019		2018
Amortization expense related to intangible assets	$	15	$	15	$	40	$	44

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2017 2016 2017 2016
Amortization expense related to intangible assets $ 27
$ 14
$ 60
$ 39

NOTE 1114 - INCOME TAXES

International Paper made income tax payments, net of refunds, of ~~$122~~$245 million and ~~$68~~$195 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

~~The following table presents a rollforward of unrecognized tax benefits and related accrued estimated interest and penalties for the nine months ended September 30, 2017:~~

In millions
Unrecognized
Tax Benefits

Accrued Estimated
Interest and Tax
Penalties
Balance at December 31, 2016 $ (98 ) $ (22 )
Activity for three months ended March 31, 2017 (2 ) 2
Activity for the three months ended June 30, 2017 (42 ) 1
Activity for the three months ended September 30, 2017 1
—
Balance at September 30, 2017 $ (141 ) $ (19 )

The Company currently estimates, that as a result of ongoing discussions, pending tax settlements and expirations of statutes of limitations, the amount of unrecognized tax benefits could be reduced by approximately $4$10 million during the next 12 months.

International Paper uses the flow-through method to account for investment tax credits earned on eligible open loop-biomass facilities and Combined Heat and Power system expenditures. Under this method, the investment tax credits are recognized as a reduction to income tax expense in the year they are earned rather than a reduction in the asset basis. The Company recorded a tax benefit of ~~$29~~$8 million and $6 million for the nine months ended September 30, 2019 and 2018, respectively.

The Brazilian Federal Revenue Service has challenged the deductibility of goodwill amortization generated in a 2007 acquisition by International Paper do Brasil Ltda., a wholly-owned subsidiary of the Company. The Company received assessments for the tax years 2007-2015 totaling approximately $146 million in tax, and $379 million in interest and penalties as of September 30, 2019 (adjusted for variation in currency exchange rates). After a previous favorable ruling challenging the ~~third quarter related~~basis for these assessments, we received an unfavorable decision in October 2018 from the Brazilian Administrative Council of Tax Appeals. The Company has appealed this judgment to ~~Investment Tax Credits earned in~~the Brazilian federal courts; however, this tax litigation matter may take many years to resolve. The Company believes that it has appropriately evaluated the transaction underlying these assessments, and has concluded based on Brazilian tax law, that its position would be sustained. The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for tax years ~~2016-2017.~~

subsequent to 2015.

NOTE 1215 - COMMITMENTS AND CONTINGENCIES

Environmental

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

Remediation costs are recorded in the consolidated financial statements when they become probable and reasonably estimable. International Paper has estimated the probable liability associated with these matters to be approximately ~~$130~~$145 million ($155 million undiscounted) in the aggregate atas of September 30, ~~2017.~~2019. Other than as described ~~above,~~below, completion of required remedial actions is not expected to have a material effect on our consolidated financial statements.

Cass Lake: One of the matters included above arises out of a closed wood-treating facility located in Cass Lake, Minnesota. In June 2011, the United States Environmental Protection Agency (EPA) selected and published a proposed soil remedy at the site with an estimated cost of $46 million. The overall remediation reserve for the site is currently ~~$48~~$47 million to address the selection of an alternative for the soil remediation component of the overall site remedy, which includes the ongoing groundwater remedy. In October 2011, the EPA released a public statement indicating that the final soil remedy decision would be delayed. In ~~March 2016,~~June 2019, the EPA issued a revised proposed plan concerning clean-up standards at a portion of the site, the estimated cost of which is included within the ~~$48 million~~ reserve referenced above. In October 2012, the Natural Resource Trustees for this site provided notice to International Paper and other ~~potentially responsible parties~~PRPs of their intent to perform a Natural Resource Damage Assessment. It is premature to predict the outcome of ~~this~~the assessment or to estimate a loss or range of loss, if any, which may be incurred.

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

•

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

Operable Unit 5, Area 2: In September 2017, the EPA issued a Record of Decision selecting the final remedy for a portion of the site and (ii) demanding reimbursement of EPA past costs related to this portion of the site totaling $37 million, including $19 million in past costs previously demanded by the EPA. The Company responded to theknown as Operable Unit 5, Area 2, but has not yet issued a special notice ~~letter. In December 2016,~~letter for implementing the EPA issued a unilateral administrative order to the Company and other PRPs to perform the remedy for this portion of the site. The Company responded to the unilateral administrative order agreeing to comply with the order subject to its sufficient cause defenses.remedy.

Operable Unit 5, Area 3: In April 2016, the EPA issued a separate unilateral administrative order to the Company and certain other PRPs for a time-critical removal action (TCRA) of PCB-contaminated banks and sediments from a ~~different~~ portion of the ~~site.~~site known as Operable Unit 5, Area 3. The Company responded to the unilateral administrative order ~~agreeing~~and agreed along with two other parties to comply with the order subject to its sufficient cause ~~defenses.~~defenses.The removal work has been completed.

Operable Unit 1: In October 2016, the Company and another PRP received a special notice letter from the EPA inviting participation in the remedial design component of the landfill remedy for the Allied Paper ~~Mill.~~Mill, which is also known as Operable Unit 1. The ~~record~~Record of ~~decision~~Decision establishing the final landfill remedy for the Allied Paper Mill was issued by the EPA in September 2016. The Company responded to the Allied Paper Mill special notice letter in ~~late~~ December ~~2016~~.2016. In February 2017, the EPA informed the Company that it would make other arrangements for the performance of the remedial design.

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

The Company was named as a defendant by Georgia-Pacific Consumer Products LP, Fort James Corporation and Georgia Pacific LLC in a contribution and cost recovery action for alleged pollution at the site. The suit seeks contribution under CERCLA for costs purportedly expended by plaintiffs ($79 million as of the filing of the complaint) and for future remediation costs. The suit alleges that a mill, during the time it was allegedly owned and operated by St. Regis, discharged PCB contaminated solids and paper residuals resulting from paper de-inking and recycling. NCR Corporation and Weyerhaeuser Company are also named as defendants in the suit. In mid-2011, the suit was transferred from the District Court for the Eastern District of Wisconsin to the District Court for the Western District of Michigan.

The trial of the initial liability phase took place in February 2013. Weyerhaeuser conceded prior to trial that it was a liable party with respect to the site. In September 2013, an opinion and order was issued in the suit. The order concluded that the Company (as the successor to St. Regis) was not an “operator,” but was an “owner,” of the mill at issue during a portion of the relevant period and is therefore liable under CERCLA. The order also determined that NCR is a liable party as an "arranger for disposal" of PCBs in waste paper that was de-inked and recycled by mills along the Kalamazoo River. The order did not address the Company's responsibility, if any, for past or future costs. The parties’ responsibility, including that of the Company, was the subject of a second trial, which was concluded in late 2015. ~~A decision has not been rendered and it is unclear to what extent~~In June 2018, the Court ~~will~~issued its Final Judgment and Order, which fixed the past cost amount at approximately $50 million (plus interest to be determined) and allocated to the Company a 15% share of responsibility for those past costs. The Court did not address responsibility for future costs in its decision. In July 2018, the Company and each of the other parties filed notices appealing the Final Judgment and prior orders incorporated into that ~~decision. We are unable to predict the outcome or estimate our maximum reasonably possible loss. However, we do not believe that any material loss is probable.~~Judgment.

Harris County:International Paper and McGinnis Industrial Maintenance Corporation (MIMC), a subsidiary of Waste Management, Inc. (WMI), are PRPs at the San Jacinto River Waste Pits Superfund Site in Harris County, Texas. The PRPs have been actively participating in the activities at the ~~site.~~site and share the costs of these activities. In September 2016, the EPA issued a proposed remedial action plan (PRAP) for the site, which identified the preferred remedy as the removal of the contaminated material currently protected by an armored cap. In addition, the EPA selected a preferred remedy for the separate southern impoundment that requires offsite disposal. In January 2017, the PRPs submitted comments on the PRAP.

On October 11, 2017, the EPA issued a Record of Decision (ROD) selecting the final remedy for the site: removal and relocation of the waste material from both the northern and southern impoundments. The EPA did not specify the methods or practices needed to perform this work. While the EPA’s selected remedy was accompanied by a cost estimate of approximately $115 million, we do not believe that estimate provides a reasonable basis for accrual under GAAP because the estimate was based on a technological method for performing the work that we believe is not feasible. Subsequent to the issuance of the ROD, there have been numerous meetings between the EPA and the PRPs, and the Company continues to work with the EPA and MIMC/WMI to develop the remedial design.

To this end, in April 2018, the PRPs entered into an Administrative Order on Consent (AOC) with the EPA, agreeing to work together to develop the remedial design over the subsequent 29 months. The AOC does not include any agreement to perform waste removal or other construction activity at the site. Rather, it involves adaptive management techniques and a pre-design

investigation, the objectives of which include filling data gaps (including but not limited to post-Hurricane Harvey technical data generated prior to the ROD and not incorporated into the selected remedy), refining areas and volumes of materials to be addressed, determining if an excavation remedy is able to be implemented in a manner protective of human health and the environment, and investigating potential impacts of remediation activities to infrastructure in the vicinity. On October ~~25, 2017,~~14, 2019, the PRPs received a special notice letter from the EPA (i) inviting participation in implementing the ~~remedial design component~~remedy described in the ROD, and (ii) demanding reimbursement of EPA past costs totaling $8 million. The PRPs are preparing their response to the special notice letter.

The Company has identified a number of concerns and uncertainties regarding the remedy described in the ROD and regarding the EPA’s ~~selected remedy~~estimates for the ~~site,~~costs and time required to implement the selected remedy. The Company ~~plans~~has determined, however, that even if the ROD cannot be implemented, a sheet pile "engineered barrier" can be constructed, which would enhance the existing remedy and could also be used should the ROD be determined to ~~participate in~~be feasible and implementable. In the third quarter of 2018, we increased our recorded liability accordingly to reflect the estimated cost of constructing this ~~remedial design process to determine if~~barrier. Because of ongoing questions regarding cost effectiveness, technical feasibility, timing and other technical data, however, it is uncertain how the ~~remedy can~~ROD will be ~~accomplished. We expect this process will include additional studies to determine feasible alternatives and costs to complete this final remedy.~~implemented. Consequently, while additional losses are probable as a result of the selected remedy, we are currently unable to determine any further adjustment to our immaterial recorded liability. It isremains reasonably possible that additional losses could be material as the remedial design process with the EPA continues over the coming quarters.

International Paper and MIMC/WMI are also defending an additional lawsuit related to the site brought by approximately 600 individuals who allege property damage and personal injury. ~~Because this~~This case is still in the discovery phase, and it is premature to predict the outcome or to estimate aour maximum reasonably possible loss. However, we do not believe that any material loss ~~or range of loss, if any, which may be incurred.~~is probable.

Antitrust

Containerboard: ~~On June 27, 2017, the Company entered into a settlement agreement with the class plaintiffs in the class action lawsuit captionedKleen Products LLC et al. v. International Paper Co. et al. (N.D. Ill.)~~ ~~which was filed in September~~

2010, and is pending in the United States District Court for the Northern District of Illinois. Eight containerboard producers, including the Company, Temple-Inland and Weyerhaeuser Company (the "Released Defendants"), were named as defendants in the lawsuit which alleges a civil violation of Section 1 of the Sherman Act. In particular, the lawsuit alleges that the defendants conspired to limit the supply and thereby increase prices of containerboard products during the period from February 15, 2004, through November 8, 2010. Four similar complaints were filed and consolidated in the Northern District of Illinois. In March 2015, the District Court certified a plaintiff class consisting of all persons who purchased containerboard products directly from the defendant for use or delivery in the United States during the class period.

Under the terms of the settlement agreement, on August 1, 2017, the Company paid $354 million into a settlement fund in return for a dismissal of the Released Defendants and release of all claims and alleged damages asserted against the Released Defendants in the lawsuit or that are related to or arise from the direct purchase of containerboard products from the Released Defendants by the class members from the beginning of time up to preliminary approval of the settlement agreement by the district court, which occurred on July 13, 2017. Any attorneys' fees awarded by the district court and all costs of notice and claims administration will be paid from the settlement fund. On October 17, 2017, the district court granted final approval of the settlement agreement and thus the release is now effective as to all class members.

~~In June 2016, a lawsuit captioned~~ ~~Ashley Furniture Indus., Inc. v. Packaging Corporation of America (W.D. Wis.), was filed in federal court in Wisconsin against ten defendants, including the Company, Temple-Inland and Weyerhaeuser Company. The~~ ~~Ashley Furniture~~ ~~lawsuit closely tracks the allegations found in the~~ ~~Kleen Products~~ ~~complaint, alleging a practically identical civil violation of Section 1 of the Sherman Act, but also asserts Wisconsin state antitrust claims.~~ In January 2011, International Paper was named as a defendant in a lawsuit filed in state court in Cocke County, Tennessee alleging that International Paper violated Tennessee law by conspiring to limit the supply and fix the prices of containerboard from mid-2005 to the present. Plaintiffs in the state court action seek certification of a class of Tennessee indirect purchasers of containerboard products, damages and costs, including attorneys' fees. No class certification materials have been filed to date in the Tennessee action.

The Company ~~continues to dispute~~disputes the allegations made in the ~~Ashley Furniture~~Tennessee lawsuit and ~~Tennessee lawsuits and~~is vigorously ~~defend each.~~defending it. At this time, however, because the ~~actions are~~action is in a preliminary stage, we are unable to predict an outcome or estimate a range of reasonably possible loss.

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

Contract

Signature: In August 2014, a lawsuit captioned Signature Industrial Services LLC et al. v. International Paper Company was filed in state court in Texas. The Signature lawsuit arises out of approximately $1$1 million in disputed invoices related to the installation of new equipment at the Company's Orange, Texas mill. In addition to the invoices in dispute, Signature and its president allege consequential damages arising from the Company's nonpayment of those invoices. The lawsuit was tried before a jury in Beaumont, Texas, in May 2017. On June 1, 2017, the jury returned a verdict awarding approximately ~~$125~~$125 million in damages to the plaintiffs. The ~~verdict will not be final until post-trial motions are decided,~~Court issued a judgment on December 14, 2017, awarding the plaintiffs a total of approximately $137 million in actual and ~~the Company will appeal the final judgment thereafter.~~consequential damages, fees, costs and pre-judgment interest, and awarding post-judgment interest. The Company has appealed this judgment. The Company has presented in its briefing numerous and strong bases for appeal, and we believe we will prevail on appeal. Because ~~post-trial~~the appellate proceedings are ~~in a preliminary stage,~~ongoing, we are unable to estimate a range of reasonably possible loss, but we expect the amount of any loss to be immaterial.

~~Tax~~

On October 16, 2015, the Company was notified of a $110 million tax assessment issued by the state of Sao Paulo, Brazil (State) for tax years 2011 through 2013. The assessment pertained to invoices issued by the Company related to the sale of paper to the editorial segment, which is exempt from the payment of ICMS value-added tax. During the second quarter of 2016, the Company received a favorable first instance judgment vacating the State's assessment. During the third quarter of 2017, the Company received a favorable decision on the second instance judgment after the State appealed the first instance. In October of 2017, the Company was notified the State will not appeal the second instance judgment, making the decision final and canceling the tax assessment.

General

The Company is involved in various other inquiries, administrative proceedings and litigation relating to environmental and safety matters, personal injury, labor and employment, contracts, sales of property, intellectual property, tax, antitrust and other

matters, some of which allege substantial monetary damages. While any proceeding or litigation has the element of uncertainty, the Company believes that the outcome of any of these other lawsuits or claims that are pending or threatened or all of them combined (other than those that cannot be assessed due to their preliminary nature) will not have a material effect on its consolidated financial statements. See Note 14 for details regarding a tax matter.

NOTE 1316 - VARIABLE INTEREST ENTITIES ~~AND PREFERRED SECURITIES OF SUBSIDIARIES~~

Variable Interest Entities

As of September 30, ~~2017,~~2019, the fair value of the Timber Notes and Extension Loans is ~~$4.80~~$4.84 billion and ~~$4.32~~$4.27 billion, respectively, for the 2015 Financing Entities. The Timber Notes and Extension Loans are classified as Level 2 within the fair value hierarchy, which is further defined in Note 1416 in the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2017		2016		2017		2016		2019		2018		2019		2018
Revenue (a)	$	24	$	24	$	71	$	71	$	24	$	24	$	71	$	71
Expense (a)	32		32		96		96		32		32		96		96
Cash receipts (b)	48		47		95		76		48		48		95		95
Cash payments (c)	64		64		128		98		64		64		128		128


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


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


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

As of September 30, ~~2017,~~2019, the fair value of the Timber Notes and Extension Loans is ~~$2.23~~$2.28 billion and ~~$2.09~~$2.11 billion, respectively, for the 2007 Financing Entities. The Timber Notes and Extension Loans are classified as Level 2 within the fair value hierarchy, which is further defined in Note 1416 in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2017		2016		2017		2016		2019		2018		2019		2018
Revenue (a)	$	12	$	8	$	35	$	26	$	19	$	19	$	61	$	52
Expense (b)	13		10		36		26		19		18		60		48
Cash receipts (c)	7		4		19		10		16		15		48		34
Cash payments (d)	10		7		28		19		17		16		53		40


(a)	The revenue is included in Interest expense, net in the accompanying statement of operations and includes approximately $5 million and $14 million for ~~the~~ three and nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, of accretion income for the amortization of the ~~purchase accounting~~basis difference adjustment on the Financial assets of special purpose entities.

(b)

The expense is included in Interest expense, net in the accompanying statement of operations and includes approximately $2 million and $5 million for the three and nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, of accretion expense for the amortization of the ~~purchase accounting~~basis difference adjustment on the Nonrecourse financial liabilities of special purpose entities.


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


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

NOTE 1417 - DEBT

In ~~August 2017,~~June 2019, International Paper issued ~~$1.0 billion~~$200 million of ~~4.35%~~3.55% senior unsecured notes with a maturity date in ~~2048.~~2029. The proceeds from this offering, together with a combination of available cash and other borrowings, were used ~~to make a $1.25 billion voluntary cash contribution to the Company's pension plan.~~for general corporate purposes, including repayment of outstanding commercial paper borrowings and other existing indebtedness.

~~Subsequent to September 30, 2017, International Paper repaid approximately $382 million of notes with an interest rate of 7.95% and an original maturity date in 2018.~~

In June ~~2016,~~2018, the borrowing capacity of International ~~Paper entered into a~~Paper's commercial paper program ~~with a borrowing capacity of~~was increased from $750 ~~million.~~million to $1.0 billion. Under the terms of the program, individual maturities on borrowings may vary, but not exceed one year from the

date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. As of September 30, ~~2017,~~2019, the Company had ~~$445~~$245 million of borrowings outstanding under the program at a weighted average interest rate of ~~1.39%~~2.29%.

At September 30, ~~2017,~~2019, the fair value of International Paper’s ~~$12.3~~$10.4 billion of debt was approximately ~~$13.5~~$11.4 billion. The fair value of the Company’s long-term debt is estimated based on the quoted market prices for the same or similar issues. International Paper’s long-term debt is classified as Level 2 within the fair value hierarchy, which is further defined in Note 1416 in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

In October 2019, International Paper issued $127 million of industrial development bonds with interest rates ranging from 1.90% to 2.10% and maturity dates in 2024. The proceeds from this offering will be used to repay other existing industrial development bonds.

NOTE 1518 - DERIVATIVES AND HEDGING ACTIVITIES

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

For detailed information regarding the Company’s hedging activities and related accounting, refer to Note 14 in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

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



In millions	September 30, 2019		December 31, 2018
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts	$	570	$	407
Derivatives in Fair Value Hedging Relationships:
Interest rate contracts	700		700
Derivatives in Net Investment Hedging Relationships:
Interest rate contracts	475		—
Derivatives Not Designated as Hedging Instruments:
Electricity contract	19		8
Foreign exchange contracts	11		19

In millions September 30, 2017 December 31, 2016
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts (a) $ 348
$ 275

Derivatives Not Designated as Hedging Instruments:
Electricity contract 12
6

Foreign exchange contracts 11
24


~~(a)~~	~~These contracts had maturities of two years or less as of September 30, 2017.~~

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



	Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)
	Three Months Ended September 30,					Nine Months Ended September 30,
In millions	2019			2018		2019			2018
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts	$	(10	)	$	1	$	(6	)	$	(18	)
Interest rate contracts	—			—		—			(2		)
Total	$	(10	)	$	1	$	(6	)	$	(20	)
Derivatives in Net Investment Hedging Relationships:
Interest rate contracts	$	18		$	—	$	15		$	—
Total	$	18		$	—	$	15		$	—

Gain (Loss)
Recognized in
AOCI
on Derivatives
(Effective Portion)
Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2017 2016 2017 2016
Foreign exchange contracts $ 1
$ 5
$ 9
$ 6
Interest rate contracts —
—
—
(11 )
Total $ 1
$ 5
$ 9
$ (5 )

During the next 12 months, the amount of the September 30, ~~2017~~2019 AOCI balance, after tax, that is expected to be reclassified to earnings is a ~~gain~~loss of $2$3 million.

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


	Gain (Loss) Reclassified from AOCI (Effective Portion)								Location of Gain (Loss) Reclassified from AOCI (Effective Portion)	Gain (Loss) Reclassified from AOCI (Effective Portion)												Location of Gain (Loss) Reclassified from AOCI (Effective Portion)
	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,						Nine Months Ended September 30,
In millions	2017		2016		2017		2016			2019			2018			2019			2018
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts	$	2	$	3	$	6	$	7	Cost of products sold	$	(4	)	$	(2	)	$	(5	)	$	(2	)	Cost of products sold
Total	$	2	$	3	$	6	$	7		$	(4	)	$	(2	)	$	(5	)	$	(2	)



	Gain (Loss) Recognized										Location of Gain (Loss) In Statement of Operations
	Three Months Ended September 30,					Nine Months Ended September 30,
In millions	2019			2018		2019			2018
Derivatives in Fair Value Hedging Relationships:
Interest rate contracts	$	11		$	—	$	42		$	—	Interest expense, net
Debt	(11		)	—		(42		)	—		Interest expense, net
Total	—			—		—			—
Derivatives Not Designated as Hedging Instruments:
Electricity contract	$	(5	)	$	2	$	—		$	1	Cost of products sold
Foreign exchange contracts	(1		)	3		(2		)	4		Cost of products sold
Total	$	(6	)	$	5	$	(2	)	$	5

Gain (Loss) Recognized
Location of Gain (Loss)
In
Statement
of Operations
Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2017 2016 2017 2016
Derivatives Not Designated as Hedging Instruments:
Electricity contract $ (8 ) $ —
$ (10 ) $ —
Cost of products sold
Foreign exchange contracts —
—
—
—
Cost of products sold
Interest rate contracts —

2
—
5
Interest expense, net
Total $ (8 ) $ 2
$ (10 ) $ 5

~~The following activity is related to fully effective interest rate swaps designated as fair value hedges:~~

2017

2016

In millions Issued
Terminated
Undesignated

Issued

Terminated
Undesignated
Third Quarter $ —
$ —
$ —
$ —
$ —
$ —
Second Quarter —
—
   —
—
—
—
First Quarter —
—
   —
—

55

—
Total $ —
   $ —
   $ —
$ —
$ 55
   $ —

~~Fair Value Measurements~~

For a discussion of the Company’s fair value measurement policies under the fair value hierarchy, refer to Note 14 in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

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

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

Fair Value Measurements

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

Fair Value Measurements

Level 2 – Significant Other Observable Inputs


	Assets						Liabilities						Assets						Liabilities
In millions	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
Derivatives designated as hedging instruments
Foreign exchange contracts – cash flow	$	9	(a)	$	3	(b)	$	3	(c)	$	4	(e)	$	5		$	3		$	13		$	10
Interest rate contracts - net investment													20			—			—			—
Interest rate contracts - fair value													59			16			—			—
Total derivatives designated as hedging instruments	9			3			3			4			84			19			13			10
Derivatives not designated as hedging instruments
Electricity contract	—			—			8		(d)	2		(e)	—			—			5			4
Foreign exchange contracts													—			—			2			1
Total derivatives not designated as hedging instruments	—			—			8			2			—			—			7			5
Total derivatives	$	9		$	3		$	11		$	6		$	84	(a)	$	19	(b)	$	20	(c)	$	15	(d)


(a)	Includes $8 million recorded in Other current assets and $1$76 million recorded in Deferred charges and other assets in the accompanying consolidated balance sheet.


(b)	~~Included~~Includes $2 million recorded in Other current assets and $17 million recorded in Deferred charges and other assets in the accompanying consolidated balance sheet.


(c)	Includes $2$15 million recorded in Other accrued liabilities and $1$5 million recorded in Other liabilities in the accompanying consolidated balance sheet.


(d)	~~Includes~~ ~~$4 million~~ ~~recorded~~Included in Other ~~accrued liabilities and~~ ~~$4 million~~ ~~recorded in Other~~current liabilities in the accompanying consolidated balance sheet.


~~(e)~~	~~Included in Other accrued liabilities in the accompanying balance sheet.~~

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

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

~~Credit-Risk-Related Contingent Features~~

Certain of the Company’s financial instruments used in hedging transactions are governed by standard credit support arrangements with counterparties. If the lower of the Company’s credit rating by Moody’s or S&P were to drop below investment grade, the Company would be required to post collateral for all of its derivatives in a net liability position, although no derivatives would terminate. The fair values of derivative instruments containing credit risk-related contingent features in a net liability position were $2 million and $3 million as of September 30, 2017 and December 31, 2016, respectively. The Company was not required to post any collateral as of September 30, 2017 or December 31, 2016. For more information on credit-risk-related contingent features, refer to Note 14 in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

NOTE 1619 - RETIREMENT PLANS

International Paper sponsors and maintains the Retirement Plan of International Paper Company (the Pension Plan), a tax-qualified defined benefit pension plan that provides retirement benefits to substantially all U.S. salaried employees and hourly employees (receiving salaried benefits) hired prior to July 1, 2004, and substantially all other U.S. hourly and union employees who work at a participating business unit regardless of hire date. These employees generally are eligible to participate in the Pension Plan upon attaining 21 years of age and completing ~~one~~1 year of eligibility service. U.S. salaried employees and hourly employees (receiving salaried benefits) hired after June 30, 2004, are not eligible for the Pension Plan, but receive a company contribution to their ~~individual savings plan accounts;~~Retirement Savings Account under the International Paper Company Salaried Savings Plan; however, salaried employees hired by Temple Inland prior to March 1, 2007 or Weyerhaeuser Company's Cellulose Fibers division prior to December 1, 2011 also participate in the Pension Plan.

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

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

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



	Three Months Ended September 30,						Nine Months Ended September 30,
In millions	2019			2018			2019			2018
Service cost	$	17		$	40		$	51		$	119
Interest cost	110			118			330			356
Expected return on plan assets	(158		)	(200		)	(473		)	(600		)
Actuarial loss	50			95			150			285
Amortization of prior service cost	4			4			12			12
Net periodic pension expense	$	23		$	57		$	70		$	172

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2017 2016 2017 2016
Service cost $ 39
$ 41
$ 118
$ 114
Interest cost 138
135
415
449
Expected return on plan assets (192 ) (199 ) (577 ) (611 )
Actuarial loss 87
103
260
293
Amortization of prior service cost 7
11
21
31
Settlement —
3
—
442
Net periodic pension expense $ 79
$ 94
$ 237
$ 718

InThe components of net periodic pension expense other than the ~~first quarter of 2016, International Paper offered a voluntary, limited-time opportunity for former employees who were participants~~Service cost component are included in Non-operating pension expense in the ~~Retirement Plan~~Consolidated Statement of International Paper Company (the Pension Plan) to request early payment of their entire Pension Plan benefit in the form of a single lump sum payment. The amount of total payments under this program was approximately $1.2 billion, and were made from Plan trust assets on June 30, 2016. Based on the level of payments made, settlement accounting rules applied and resulted in a plan remeasurement as of the June 30, 2016 payment date. The discount rate used in the plan remeasurement was 3.80%, down from 4.40% at December 31, 2015. As a result of settlement accounting, the Company recognized a pro-rata portion of the unamortized net actuarial loss, after remeasurement, resulting in a $439 million non-cash charge to the Company's earnings in the second quarter of 2016. Additional payments of $8 million were made during the third quarter of 2016 due to mandatory cash payouts and a small lump sum payout project, and the pension plan was subsequently remeasured at September 30, 2016 using a discount rate of 3.60%, down from 3.80% at June 30, 2016. As a result of settlement accounting, the Company recognized a pro-rata portion of the unamortized net actuarial loss, after remeasurement, resulting in a $3 million non-cash charge to the Company's earnings in the third quarter of 2016.Operations.

The Company’s funding policy for our pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plan, tax deductibility, the cash flows generated by the Company, and other factors. The Company made no voluntary cash contributions ~~of $1.25 billion and $750 million~~ to the qualified pension plan in the first nine months of ~~2017 and 2016, respectively.~~2019 or 2018. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled ~~$34~~$21 million for the nine months ended September 30, ~~2017.~~2019.

On September 26, 2017, the Company entered into an agreement with The Prudential Insurance Company of America to purchase a group annuity contract and transfer approximately $1.3 billion of International Paper's U.S. qualified pension plan projected benefit obligations, subject to customary closing conditions. The transaction closed on October 3, 2017 and was funded with pension plan assets. Under the transaction, at the end of 2017, Prudential will assume responsibility for pension benefits and annuity administration for approximately 45,000 retirees or their beneficiaries receiving less than $450 in monthly benefit payments from the plan. The Company expects to recognize a non-cash pension settlement charge of approximately $400 million before tax in the fourth quarter of 2017.

NOTE 1720 - STOCK-BASED COMPENSATION

International Paper has an Incentive Compensation Plan (ICP) which is administered by the Management Development and Compensation Committee of the Board of Directors (the Committee). The ICP authorizes the grants of restricted stock, restricted or deferred stock units, performance awards payable in cash or stock upon the attainment of specified performance goals, dividend equivalents, stock options, stock appreciation rights, other stock-based awards and cash-based awards at the discretion of the Committee. As of September 30, ~~2017, 13.1~~2019, 9.8 million shares were available for grant under the ICP.

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



	Three Months Ended September 30,						Nine Months Ended September 30,
In millions	2019			2018			2019		2018
Total stock-based compensation expense (selling and administrative)	$	31		$	35		$	94	$	102
Income tax benefits related to stock-based compensation	(2		)	(6		)	31		16

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2017 2016 2017 2016
Total stock-based compensation expense (selling and administrative) $ 38
$ 33
$ 120
$ 100
Income tax benefits related to stock-based compensation (2 ) —
45
33

At September 30, ~~2017, $110~~2019, $124 million, net of estimated forfeitures, of compensation cost related to unvested restricted performance shares, executive continuity awards and restricted stock attributable to future service had not yet been recognized. This amount will be recognized in expense over a weighted-average period of 1.8 years.

Performance Share Plan

During the first nine months of ~~2017,~~2019, the Company granted ~~2.2~~2.4 million performance units at an average grant date fair value of ~~$51.78.~~$43.49.

NOTE 1821 - BUSINESS SEGMENT INFORMATION

International Paper’s business segments, Industrial Packaging, Global Cellulose Fibers and Printing Papers, ~~and Consumer Packaging,~~ are consistent with the internal structure used to manage these businesses. All segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the Forest Products industry. Subsequent to the acquisition of the Weyerhaeuser pulp business in December 2016, the Company began reporting the Global Cellulose Fibers business as a separate business segment due to the increased materiality of the results of this business. This segment includes the Company's legacy pulp business and the newly acquired pulp business. As such, amounts related to the legacy pulp business have been reclassified out of the Printing Papers business segment and into the new Global Cellulose Fibers business segment for all prior periods.

Business segment operating profits are used by International Paper's management to measure the earnings performance of its businesses. Management believes that this measure allows a better understanding of trends in costs, operating efficiencies, prices and volumes. Business segment operating profits are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of equity earnings and noncontrolling interests, excluding interest expense, net, corporate ~~items and~~expenses, net, corporate special ~~items.~~items, net and non-operating pension expense.

The Company also has a 50% equity interest in Ilim Holding S.A. (Ilim) operating in Russia, that is a separate business segment. The Company recorded equity earnings (losses), net of taxes, of $48 million and $46 million for the three months

ended September 30, 2017 and 2016, respectively, and $119 million and $154 million for the nine months ended September 30, 2017 and 2016, respectively, for Ilim. The Company received cash dividends from the joint venture of $129 million during the first nine months of 2017. At September 30, 2017 and December 31, 2016, the Company's investment in Ilim was $279 million and $302 million, respectively, which was $158 million and $164 million, respectively, more than the Company's proportionate share of the joint venture's underlying net assets. The differences primarily relate to purchase price fair value adjustments and currency translation adjustments. The Company is party to a joint marketing agreement with Ilim, under which the Company purchases, markets and sells paper produced by Ilim. Purchases under this agreement were $52 million and $40 million for the three months ended September 30, 2017 and 2016, respectively, and $151 million and $124 million for the nine months ended September 30, 2017 and 2016, respectively.

Sales by business segment for the three months and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2019		2018		2019		2018
Industrial Packaging	$	3,820	$	4,034	$	11,516	$	11,883
Global Cellulose Fibers	624		714		1,974		2,083
Printing Papers	1,071		1,102		3,224		3,215
Corporate and Intersegment Sales	53		51		164		174
Net Sales	$	5,568	$	5,901	$	16,878	$	17,355

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2017 2016 2017 2016
Industrial Packaging $ 3,734
$ 3,491
$ 10,939
$ 10,422

Global Cellulose Fibers 654
242
1,830
713

Printing Papers 1,039
1,019
3,051
3,003

Consumer Packaging 491
494
1,431
1,490

Corporate and Intersegment Sales (5 ) 20
(55 ) 70

Net Sales $ 5,913
$ 5,266
$ 17,196
$ 15,698

Operating profit by business segment for the three months and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 were as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
In millions	2019			2018			2019		2018
Industrial Packaging	$	510		$	472		$	1,421	$	1,446
Global Cellulose Fibers	(3		)	83			27		160
Printing Papers	148			183			258		341
Business Segment Operating Profits	$	655		$	738		$	1,706	$	1,947

Earnings (loss) from continuing operations before income taxes and equity earnings	$	452		$	553		$	1,204	$	1,399
Interest expense, net	123			133			378		401
Noncontrolling interests/equity earnings adjustment	2			(2		)	4		(7		)
Corporate expenses, net	21			20			45		59
Corporate special items, net	48			9			48		30
Non-operating pension expense	9			25			27		65
Business Segment Operating Profits	$	655		$	738		$	1,706	$	1,947

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2017 2016 2017 2016
Industrial Packaging $ 469
(a) $ 423
(f) $ 884
(a) $ 1,277
(f)
Global Cellulose Fibers 49
(b) (38 ) (g) (14 ) (b) (109 ) (g)
Printing Papers 135

167

321
(c) 419

Consumer Packaging 54

61

73
(d) 150
(h)
Business Segment Operating Profits 707
   613
   1,264
1,737

Earnings (loss) from continuing operations before income taxes and equity earnings 503
373
718
   676

Interest expense, net 152

132
431
(e) 384

Noncontrolling interests/equity earnings adjustment (j) —
   1
   (1 )    1

Corporate items, net 19
11
34
57

Special items, net —
54
(16 ) 46

Non-operating pension expense 33
42

98
573
(i)

$ 707
   $ 613
   $ 1,264
$ 1,737

~~(a)~~

Includes a charge of $354 million for the nine months ended September 30, 2017 related to the agreement to settle the Kleen Products anti-trust class action lawsuit, a charge of $10 million for the three months and nine months ended September 30, 2017 for the accelerated amortization of an intangible asset in Brazil, a gain of $6 million for the nine months ended September 30, 2017 for a net bargain purchase gain associated with the June 2016 acquisition of Holmen Paper's newsprint mill in Madrid, Spain, and charges of $5 million and $9 million for the three months and nine months ended September 30, 2017, respectively, for other items.

~~(b)~~

Includes charges of $6 million and $15 million for the three months and nine months ended September 30, 2017, respectively, for costs associated with the acquisition of the pulp business acquired in December 2016, a charge of $14 million for the nine months ended September 30, 2017 for the amortization of the inventory fair value step-up for that business and charges of $2 million and $3 million for the three months and nine months ended September 30, 2017, respectively, for other items.


~~(c)~~	~~Includes a charge of $2 million for the nine months ended September 30, 2017 for other items.~~


~~(d)~~	~~Includes a charge of $9 million for the nine months ended September 30, 2017 for the impairment of the assets of our Foodservice business in Asia.~~


~~(e)~~	~~Includes a gain of $4 million for the nine months ended September 30, 2017 for interest income associated with an income tax refund claim.~~


~~(f)~~	~~Includes charges of~~ ~~$5 million~~ ~~and~~ ~~$70 million~~ for the three months and nine months ended September 30, 2016, respectively, for the impairment of the assets of our corrugated packaging business in Asia and costs associated with the sale of that business.


~~(g)~~	~~Includes charges of~~ ~~$7 million~~ ~~and $12 million for the three months and nine months ended September 30, 2016, respectively, for costs associated with the agreement to purchase the Weyerhaeuser pulp business.~~


~~(h)~~	~~Includes a charge of~~ ~~$9 million~~ ~~for the nine months ended September 30, 2016 for costs associated with the Riegelwood conversion to~~ ~~100%~~ ~~pulp production.~~


~~(i)~~	~~Includes a charge of~~ ~~$439 million~~ ~~for the nine months ended September 30, 2016 for a settlement accounting charge associated with term-vested lump sum payments.~~


~~(j)~~	Operating profits for business segments include each segment's percentage share of the profits of subsidiaries included in that segment that are less than wholly owned. The pre-tax noncontrolling interest and equity earnings for these subsidiaries are adjusted here to present consolidated earnings before income taxes and equity earnings.

~~NOTE 19 - SUBSEQUENT EVENT~~

On October 23, 2017, the Company entered into an agreement to contribute its North American Consumer Packaging business, which includes its North American Coated Paperboard and Foodservice businesses, to a subsidiary of Graphic Packaging Holding Company, in a transaction valued at $1.8 billion. International Paper will receive a 20.5% ownership interest, valued at $1.14 billion, in a subsidiary of Graphic Packaging Holding Company that will hold the assets of the combined business. International Paper plans to use $660 million in cash proceeds from a new loan expected to be entered into prior to closing to pay down existing debt. The new loan will be assumed by a subsidiary of Graphic Packaging Holding Company on the transaction closing date. The transaction is expected to close in early 2018, subject to the receipt of regulatory approval and certain other closing conditions.


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

EXECUTIVE SUMMARY

Net earnings (loss) attributable to International Paper common shareholders were ~~$395~~$344 million ($~~0.95~~0.87 per diluted share) in the third quarter of ~~2017,~~2019, compared with ~~$80~~$292 million ($~~0.19~~0.73 per diluted share) in the second quarter of ~~2017~~2019 and ~~$312~~$562 million ($~~0.75~~1.37 per diluted share) in the third quarter of ~~2016.~~2018. Adjusted Operating Earnings is a non-GAAP measure and is defined as net earnings from continuing operations (a GAAP measure) excluding special items and non-operating pension expense. International Paper generated Adjusted Operating Earnings Attributable to International Paper Common Shareholders of ~~$449~~$431 million ($~~1.08~~1.09 per diluted share) in the third quarter of ~~2017,~~2019, compared with ~~$270~~$460 million ($~~0.65~~1.15 per diluted share) in the ~~2017~~ second quarter of 2019 and ~~$380~~$641 million ($~~0.91~~1.56 per diluted share) in the ~~2016~~ third ~~quarter.~~quarter of 2018.

International Paper delivered another quarter of solid earnings and strong cash generation in a challenging global environment. These results demonstrate the strength and resilience of our cash generation and the flexibility to perform well in the ~~2017~~face of challenging conditions. Demand in the third quarter of 2019 was mixed with ~~sequential earnings growth across all~~seasonal improvement in the North American packaging business, largely in line with our ~~business segments. This earnings growth was~~expectations, but with lower export containerboard and pulp shipments driven by pressure from challenging supply and demand conditions. Operational performance was strong and we optimized our system and managed costs well across our three businesses, taking advantage of our system flexibility. Our continued ~~solid global demand~~strong cash generation has enabled us to return $1.1 billion to shareholders during the first three quarters of 2019 through dividends and ~~price realization, particularly~~share repurchases and reduce debt by $400 million.

Comparing performance with the second quarter of 2019, prices were lower in ~~our~~the third quarter mainly due to the impact of prior index movements in North ~~American Industrial~~America Packaging and Global Cellulose Fibers, ~~businesses. During~~as well as the quarter, results were negatively impacted by operational headwinds related to Hurricanes Harvey and Irma along with record high OCC prices. The Global Cellulose Fibers continued to generate strong results during the quarter, delivering more synergies at a faster pace than expected. Finally, in October 2017, we signed an agreement to transfer our North American Consumer Packaging business, which includes the North American Coated Paperboard mills and Foodservice operations, to a subsidiaryflow through of ~~Graphic Packaging Holding Company in a transaction valued at $1.8 billion.~~

~~Prices were up across the Company’s portfolio, driving significant earnings improvement in the 2017 third quarter versus the 2017 second quarter, particularly~~lower prices for export containerboard. Volume was seasonally higher in our North American ~~Industrial Packaging and Global Cellulose Fibers businesses. The North American Industrial Packaging~~packaging business, ~~continues to benefit from higher pricing and flow-through in~~along with improved export containerboard ~~exports. Volume~~volume, while relatively flat across the rest of the businesses. Operations and cost performance was lower on a sequential quarter basis primarily due to one less shipping day in our North American corrugated box business. Operations were negatively impacted by approximately $30 million of costs tied to mill and box plant disruptions caused by Hurricanes Harvey and Irma. As expected,favorable following the heavy maintenance ~~outage expenses were significantly lower~~activity in the ~~2017 third quarter versus the 2017~~2019 second quarter. Input costs ~~continued to be a significant headwind due to elevated OCC~~were favorable versus the prior quarter, with lower wood and recovered fiber costs ~~which continued to rise above 2017 second quarter levels, reaching a new historical high. In the 2017 third quarter,~~across our businesses. Our Ilim joint venture ~~again~~ delivered ~~strong results driven~~solid operational performance, but its earnings were impacted by ~~improved pricing, partially offset by~~sequentially lower ~~volume. Equity earnings~~export pulp prices and higher planned maintenance outage expenses, which also ~~benefited from a non-cash foreign exchange gain on~~drove lower volume in the ~~joint venture's U.S. dollar denominated net debt.~~quarter.

Looking ahead to the ~~Company is well positioned for strong~~ fourth quarter ~~results~~of 2019, overall across our businesses we expect lower price and ~~cash generation.~~mix, improved seasonal volume and export shipments, lower input costs and significantly lower maintenance outage costs due to completing most of that work in the prior quarters. In ~~our North American~~ Industrial Packaging, ~~business,~~ we expect lower price and mix tied to ~~see flow-through benefits from containerboard and box price increases from~~ the ~~first half of 2017, along with further realization~~impact of prior price ~~increases~~index movements and price flow-through on exports along with the negative mix impact from export volume recovery. Volume is expected to improve on improved demand in ~~exports. We anticipate additional price realization in our Global Cellulose Fibers business tied~~North America and continued export volume recovery. Operations and costs are expected to ~~continued strong global demand, particularly in China. Demand in our North American Industrial Packaging business will~~ be unfavorably impacted by ~~one less shipping day; however, we anticipate stable volumes across all~~the non-repeat of ~~our other businesses with some seasonal improvement~~favorable items in ~~our EMEA Printing Papers and~~the third quarter of 2019. Maintenance outage expense will be lower while input costs should be stable. In Global Cellulose Fibers, ~~businesses. Manufacturing performance should improve~~we expect lower price and mix driven by the impact of prior index movements. Volume is expected to be stable as higher fluff volume is offset by lower softwood volume. Operations and costs are expected to be higher driven by higher seasonal energy consumption, while input costs are expected to remain stable. In Printing Papers, we ~~move past the effects of the previously mentioned hurricanes~~expect lower price and ~~other one-off operational issues experienced at some of our mills during the 2017 third quarter. Input costs in~~mix primarily related to our North ~~American Industrial Packaging business~~America and Latin America businesses as well as unfavorable geographic mix. This should ~~benefit from declining OCC prices, partly~~be offset by ~~higher wood~~improved volume on seasonally stronger demand in North America and ~~chemical costs. We expect higher input~~Brazil. Operations and costs ~~in our other businesses, partly~~are expected to negatively impact earnings due to higher seasonal energy consumption and the ~~lingering effects~~non-repeat of ~~the hurricanes, particularly~~favorable items in the ~~case~~third quarter of ~~wood and chemicals.~~2019. Finally, ~~for~~in our Ilim joint venture, we expect ~~improved operational results in the 2017 fourth quarter on strong, demand-driven market fundamentals.~~higher sales volumes, lower input costs and lower maintenance outage expenses to be offset by continued price and mix pressure.

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

The following are reconciliations of ~~Diluted earnings~~Earnings (loss) attributable to ~~common~~ shareholders to Adjusted Operating Earnings (Loss) attributable to ~~common~~ shareholders.

Three Months Ended
September 30, Three Months Ended June 30,
2017 2016 2017
Diluted Earnings (Loss) Attributable to Shareholders $ 395
$ 312
$ 80
Add back - Discontinued operations (gain) loss —
—
—
Diluted Earnings (Loss) from Continuing Operations 395
312
80
Add Back - Non-operating pension (income) expense 33
43
34
Add Back - Net special items expense (income) 23
65
353
Income tax effect - Non-operating pension and special items expense (2 ) (40 ) (197 )
Adjusted Operating Earnings (Loss) Attributable to Shareholders $ 449
$ 380
$ 270



	Three Months Ended September 30,						Three Months Ended June 30,
In millions	2019			2018			2019
Net Earnings (Loss) Attributable to International Paper Company	$	344		$	562		$	292
Less - Discontinued operations (gain) loss	—			—			—
Earnings (Loss) from Continuing Operations	344			562			292
Add Back - Non-operating pension expense (income)	9			25			8
Add Back - Net special items expense (income)	94			142			158
Income tax effect - Non-operating pension and special items expense	(16		)	(88		)	2
Adjusted Operating Earnings (Loss) Attributable to International Paper Company	$	431		$	641		$	460

Three Months Ended
September 30, Three Months Ended June 30,
2017 2016 2017
Diluted Earnings (Loss) Per Share Attributable to Shareholders $ 0.95
$ 0.75
$ 0.19
Add Back - Discontinued operations (gain) loss per share —
—
—
Diluted Earnings (Loss) Per Share from Continuing Operations 0.95
0.75
0.19
Add Back - Non-operating pension (income) expense per share 0.08
0.10
0.08
Add Back - Net special items expense (income) per share 0.05
0.16
0.85
Income tax effect per share - Non-operating pension and special items expense —
(0.10 ) (0.47 )
Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders $ 1.08
$ 0.91
$ 0.65



	Three Months Ended September 30,						Three Months Ended June 30,
In millions	2019			2018			2019
Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders	$	0.87		$	1.37		$	0.73
Less - Discontinued operations (gain) loss per share	—			—			—
Diluted Earnings (Loss) Per Share from Continuing Operations	0.87			1.37			0.73
Add Back - Non-operating pension expense (income) per share	0.02			0.06			0.02
Add Back - Net special items expense (income) per share	0.24			0.34			0.40
Income tax effect per share - Non-operating pension and special items expense	(0.04		)	(0.21		)	—
Adjusted Operating Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders	$	1.09		$	1.56		$	1.15

Cash provided by operations totaled $2.7 billion and $2.4 billion for the first nine months of 2019 and 2018, respectively. The Company generated free cash flow of approximately $1.8 billion and $1.1 billion in the first nine months of 2019 and 2018, respectively. Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by 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, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company's ongoing performance, free cash flow also enables investors to perform meaningful comparisons between past and present periods.

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



	Nine Months Ended September 30,
In millions	2019			2018
Cash provided by operations	$	2,682		$	2,405
Adjustments:
Cash invested in capital projects	(913		)	(1,286		)
Free Cash Flow	$	1,769		$	1,119

RESULTS OF OPERATIONS

For the third quarter of ~~2017,~~2019, International Paper Company reported net sales of ~~$5.9~~$5.6 billion, compared with ~~$5.8~~$5.7 billion in the second quarter of ~~2017~~2019 and ~~$5.3~~$5.9 billion in the third quarter of ~~2016.~~2018.

Net earnings attributable to International Paper totaled ~~$395~~$344 million, or ~~$0.95~~$0.87 per diluted share, in the ~~2017~~ third ~~quarter.~~quarter of 2019. This compared with ~~$80~~$292 million, or ~~$0.19~~$0.73 per diluted share, in the second quarter of ~~2017~~2019 and ~~$312~~$562 million, or ~~$0.75~~$1.37 per diluted share, in the third quarter of ~~2016.~~

2018.

Earnings from continuing operations attributable to International Paper Company were ~~$395~~$344 million in the third quarter of ~~2017 compared with $312~~2019, $292 million in the second quarter of 2019 and $562 million in the third quarter of ~~2016 and $80 million in~~2018.

Compared with the second quarter of ~~2017. Compared with the third quarter of 2016, the 2017 third quarter reflects~~2019, earnings benefited from higher ~~average~~ sales ~~price realizations net of an unfavorable mix~~volumes ($~~164~~9 million), lower operating costs ($10 million), lower raw material and freight costs ($23 million) and lower mill maintenance outage costs ($21 million), the operating results for the recently acquired pulp business which was not included in the prior year ($36 million), lower tax expense ($16 million) reflecting a lower estimated tax rate, and lower non-operating pension expense ($6127 million). These benefits were offset by lower average sales ~~volumes~~prices and an unfavorable mix ($~~6 million), higher operating costs ($72 million), higher raw material and freight costs ($66~~115 million), higher corporate and other ~~costs~~items ($1214 million), ~~and~~ higher net interest expense ($141 million), higher tax expense ($15 million) and higher non-operating pension expense ($1 million). Equity earnings, net of taxes, relating to International Paper’s ~~investment~~investments in Ilim ~~Holding~~ S.A., Graphic Packaging International Partners, LLC, and other investments were $2$53 million ~~higher in the 2017 third quarter~~lower than in the ~~2016 third quarter.~~second quarter of 2019. Net special items in the ~~2017~~ third quarter of 2019 were a loss of ~~$34~~$80 million compared with a loss of ~~$42~~$162 million in the ~~2016 third quarter.~~second quarter of 2019.

Compared with the ~~second~~third quarter of ~~2017, earnings benefited from higher average sales price realizations net~~2018, the third quarter of ~~an unfavorable mix~~2019 reflects lower raw material and freight costs ($7640 million), lower mill maintenance outage costs ($~~123~~8 million), lower ~~tax~~net interest expense ($138 million) ~~reflecting a lower estimated tax rate~~ and lower non-operating pension expense ($112 million). These benefits were offset by lower average sales prices and an unfavorable mix ($130 million), lower sales volumes ($1131 million), higher operating costs ($~~10 million), higher raw material and freight costs ($16~~17 million), higher corporate and other ~~items~~costs ($152 million) and higher ~~net interest~~tax expense ($821 million). Equity earnings, net of taxes, ~~for~~relating to International Paper’s investments in Ilim ~~Holding,~~ S.A., Graphic Packaging International Partners, LLC, and other investments were ~~$27~~$65 million ~~higher~~lower in the third quarter of 2019 than in the ~~2017 second quarter.~~third quarter of 2018. Net special items in the ~~2017~~ third quarter of 2019 were a loss of ~~$34~~$80 million compared with a loss of ~~$169~~$60 million in the ~~2017 second quarter.~~third quarter of 2018.

Business Segment Operating Profits are used by International Paper's management to measure the earnings performance of its businesses. Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. International Paper believes that using this ~~measure allows~~information, along with net earnings, provides a ~~better understanding~~more complete analysis of ~~trends in costs, operating efficiencies, prices and volumes.~~the results of operations by quarter. Business Segment Operating Profits are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of equity earnings and noncontrolling interests, and excluding interest expense, net, corporate ~~items and~~expenses, net, corporate special ~~items.~~items, net and non-operating pension expense.

International Paper operates in ~~four~~three segments: Industrial Packaging, Global Cellulose Fibers and Printing ~~Papers and Consumer Packaging.~~Papers.

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


	Three Months Ended									Three Months Ended
	September 30						June 30,			September 30,						June 30,
In millions	2017			2016			2017			2019			2018			2019
Earnings (Loss) From Continuing Operations Attributable to International Paper Company	$	395		$	312		$	80
Net Earnings (Loss) From Continuing Operations Attributable to International Paper Company										$	344		$	562		$	292
Add back (deduct):
Income tax provision (benefit)	153			107			(89		)	137			83			128
Equity (earnings) loss, net of taxes	(45		)	(43		)	(20		)	(27		)	(92		)	(80		)
Noncontrolling interests, net of taxes	—			(3		)	—			(2		)	—			(6		)
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	503			373			(29		)	452			553			334
Interest expense, net	152			132			137			123			133			122
Noncontrolling interests / equity earnings included in operations	—			1			(1		)	2			(2		)	5
Corporate items	19			11			4
Special items (income) expense	—			54			(16		)
Corporate expenses, net										21			20			3
Corporate special items (income) expense										48			9			—
Non-operating pension expense	33			42			34			9			25			8
Adjusted Operating Profit	$	707		$	613		$	129		$	655		$	738		$	472
Business Segment Operating Profit:
Industrial Packaging	$	469		$	423		$	50		$	510		$	472		$	507
Global Cellulose Fibers	49			(38		)	7			(3		)	83			(2		)
Printing Papers	135			167			86			148			183			(33		)
Consumer Packaging	54			61			(14		)
Total Business Segment Operating Profit	$	707		$	613		$	129		$	655		$	738		$	472

Business Segment Operating Profit

Total business segment operating profits ~~of $707~~were $655 million in the ~~2017~~ third quarter ~~were higher than the $613~~of 2019, $472 million in the ~~2016 third~~second quarter of 2019 and ~~the $129~~$738 million in the ~~2017~~third quarter of 2018.

Compared with the second ~~quarter.~~ quarter of 2019, operating profits benefited from higher sales volumes ($12 million), lower operating costs ($14 million), lower raw material and freight costs ($31 million) and lower mill outage costs ($169 million). These benefits were offset by lower average sales prices and an unfavorable mix ($154 million). Special items were a loss of $46 million in the third quarter of 2019 compared with a loss of $157 million in the second quarter of 2019.

Compared with the third quarter of ~~2016,~~2018, operating profits in the current quarter benefited from ~~higher average sales price realizations net of an unfavorable mix~~lower raw material and freight costs ($~~236~~52 million), and lower mill outage costs ($~~30 million) and the operating results for the recently acquired pulp business which are not included in the prior year ($52~~11 million). These benefits were offset by lower average sales prices and an unfavorable mix ($170 million), lower sales volumes ($941 million), and higher operating costs ($~~104 million), higher raw material and freight costs ($95 million), and higher other costs ($5~~22 million). Special items were a loss of ~~$23~~$46 million in the ~~2017~~ third quarter of 2019 compared with a loss of ~~$12~~$133 million in the ~~2016~~ third ~~quarter.~~

~~Compared with the second~~ quarter of 2017, operating profits benefited from higher average sales price realizations net of an unfavorable mix ($109 million) and lower mill outage costs ($176 million). These benefits were offset by lower sales volumes ($15 million), higher operating costs ($14 million), higher raw material and freight costs ($23 million) and higher other items ($5 million). Special items were a loss of $23 million in the 2017 third quarter compared with a loss of $373 million in the 2017 second quarter.2018.

During the 2017 third quarter, International Paper took approximately 93,000 tons of downtime of which none were economic-related, compared with approximately 226,000 tons of downtime, which included about 107,000 tons that were economic-related, in the 2016 third quarter. During the 2017 second quarter, International Paper took approximately 291,000 tons of downtime of which none were economic-related. Economic downtime ~~is taken~~results from the amount of production required to ~~balance internal supply with~~meet our customer ~~demand, while~~demand. Planned maintenance downtime is taken periodically ~~during~~throughout the year. The following table details North American planned maintenance and economic-related downtime:



in thousands of tons	Three Months Ended September 30, 2019	Three Months Ended September 30, 2018	Three Months Ended June 30, 2019
Economic-related downtime	287	—	339
Maintenance downtime	125	197	303

Sales Volumes by Product (a)

Sales volumes of major products for the three months and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 were as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
In thousands of short tons (except as noted) 2017 2016 2017 2016
Industrial Packaging
North American Corrugated Packaging (c) 2,599
2,640
7,784
7,801
North American Containerboard 828
801
2,438
2,311
North American Recycling 924
977
2,799
2,873
North American Saturated Kraft 45
51
132
142
North American Gypsum/Release Kraft 54
49
165
142
North American Bleached Kraft 7
7
20
18
EMEA Industrial Packaging (c) (d) 350
344
1,124
1,091
Asian Box (c) (e) —
—
—
208
Brazilian Packaging (c) 93
93
266
254
Industrial Packaging 4,900
4,962
14,728
14,840
Cellulose Fibers (in thousands of metric tons) (b)
933
415
2,706
1,233
Printing Papers
North American Uncoated Papers 497
467
1,451
1,402
EMEA and Russian Uncoated Papers 365
358
1,104
1,120
Brazilian Uncoated Papers 280
274
832
800
Indian Uncoated Papers 58
51
186
175
Uncoated Papers 1,200
1,150
3,573
3,497
Consumer Packaging
North American Consumer Packaging 296
301
876
915
EMEA Coated Paperboard 103
105
296
298
Consumer Packaging 399
406
1,172
1,213



	Three Months Ended September 30,		Nine Months Ended September 30,
In thousands of short tons (except as noted)	2019	2018	2019	2018
Industrial Packaging
Corrugated Packaging (b)	2,651	2,666	7,810	7,969
Containerboard	736	853	2,140	2,436
Recycling	556	566	1,790	1,700
Saturated Kraft	47	51	140	149
Gypsum/Release Kraft	49	56	149	176
Bleached Kraft	5	8	17	24
EMEA Packaging (b)	375	329	1,124	1,113
Brazilian Packaging (b)	96	92	272	263
European Coated Paperboard	106	98	312	284
Industrial Packaging	4,621	4,719	13,754	14,114
Global Cellulose Fibers (in thousands of metric tons) (c)	878	886	2,606	2,665
Printing Papers
U.S. Uncoated Papers	451	461	1,340	1,415
European and Russian Uncoated Papers	352	363	1,073	1,066
Brazilian Uncoated Papers	301	293	828	818
Indian Uncoated Papers	49	62	183	195
Printing Papers	1,153	1,179	3,424	3,494


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


(b)	~~Includes North American, European and Brazilian volumes and internal sales to mills. Includes sales volumes from the pulp business acquired beginning December 1, 2016.~~


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


~~(d)~~	~~Excludes newsprint sales volumes at the Madrid, Spain mill.~~


~~(e)~~(c)	Includes North American, European and Brazilian volumes and internal sales ~~volumes through the date of sale on June 30, 2016.~~to mills.

Discontinued Operations

See discussion in Note 9 - Divestitures and Impairments in the Condensed Notes to the Consolidated Financial Statements.

Income Taxes

An income tax provision of ~~$153~~$137 million was recorded for the ~~2017~~ third quarter of 2019 and the reported effective income tax rate ~~for continuing operations~~ was ~~30.5%~~30%. Excluding ~~an expense~~a benefit of ~~$11~~$14 million related to the tax effects of special items and a benefit of ~~$13~~$2 million related to the tax effects of non-operating pension expense, the effective income tax rate ~~for continuing operations~~ was ~~28.0%~~27% for the quarter.

An income tax ~~benefit~~provision of ~~$89~~$128 million was recorded for the ~~2017~~ second quarter of 2019 and the reported effective income tax rate ~~for continuing operations~~ was ~~298%~~38%. Excluding ~~a benefit~~an expense of ~~$184~~$4 million related to the tax effects of special items and a benefit of ~~$13~~$2 million related to the tax effects of non-operating pension expense, the effective income tax rate ~~for continuing operations~~ was ~~30.0%~~25% for the quarter.

An income tax provision of ~~$107~~$83 million was recorded for the ~~2016~~ third quarter of 2018 and the reported effective income tax rate ~~for continuing operations~~ was ~~29%~~15%. Excluding a benefit of ~~$24~~$82 million related to the tax effects of special items and a benefit of ~~$16~~$6 million related to the tax effects of non-operating pension expense, the effective income tax rate ~~for continuing operations~~ was ~~30.5%~~24% for the quarter.

Interest Expense ~~and Noncontrolling Interest~~

Net interest expense ~~for~~was $123 million in the ~~2017~~ third quarter ~~was $152 million~~of 2019, compared with ~~$137~~$122 million which includes interest ~~income~~expense of $4$1 million related to ~~income~~the settlement of foreign tax ~~refund claims~~audits in the ~~2017~~ second quarter of 2019 and ~~$132~~$133 million in the ~~2016~~ third ~~quarter.~~quarter of 2018.

Effects of Special Items and Non-Operating Pension Expense

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

Three Months Ended
September 30 June 30,
2017 2016 2017
In millions Before Tax After Tax Before Tax After Tax Before Tax After Tax
Business Segments
Kleen Products anti-trust class action lawsuit settlement $ —
$ —
$ —
$ —
$ 354
$ 219
Weyerhaeuser pulp business integration costs 6
4
7
4
5
3
Asia Packaging restructuring and impairment —
—
5
4
—
—
Foodservice Asia impairment —
—
—
—
9
4
Brazil intangible asset accelerated amortization 10
7
—
—
—
—
Abandoned property 7
4
—
—
5
3
Business Segments Total 23
15
12
8
373
229
Corporate
Debt extinguishment —
—
29
18
—
—
Write-off of certain regulatory pre-engineering costs —
—
8
5
—
—
India Packaging business evaluation write-off —
—
17
11
(2 ) (2 )
Gain on sale of investment in ArborGen —
—
—
—
(14 ) (9 )
Interest income related to income tax refund claim —
—
—
—
(4 ) (2 )
Corporate Total —
—
54
34
(20 ) (13 )
Total special items 23
15
66
42
353
216
Non-operating pension expense 33
20
42
26
34
21
Total $ 56
$ 35
$ 108
$ 68
$ 387
$ 237



	Three Months Ended
	September 30,										June 30,
	2019						2018				2019
In millions	Before Tax			After Tax			Before Tax		After Tax		Before Tax		After Tax
Business Segments
India impairment	$	6		$	6		$	—	$	—	$	145	$	143
Brazil Packaging impairment	—			—			122		81		—		—
Italian antitrust fine	32			32			—		—		—		—
Overhead cost reduction initiative	10			8			—		—		—		—
Multi-employer pension plan exit liability	(7		)	(6		)	—		—		—		—
Gain on sale of previously closed Oregon mill site	(9		)	(7		)	—		—		—		—
Abandoned property removal	13			10			6		4		11		8
Riverdale mill conversion	1			1			5		4		1		1
Business Segments Total	46			44			133		89		157		152
Corporate
Litigation reserves	22			17			—		—		—		—
Environmental remediation reserve adjustment	15			11			9		7		—		—
Overhead cost reduction initiative	11			8			—		—		—		—
Interest expense related to settlement of foreign tax audits	—			—			—		—		1		1
Corporate Total	48			36			9		7		1		1
Total special items	94			80			142		96		158		153
Non-operating pension expense	9			7			25		19		8		6
Total special items and non-operating pension expense	$	103		$	87		$	167	$	115	$	166	$	159

Special items include the following tax expenses (benefits):

Three Months Ended
September 30 June 30,
In millions 2017 2016 2017
Income tax refund claims $ —
$ —
$ (85 )
Pension contribution return to accrual —
—
38
International investment restructuring 19
—
—
Total $ 19
$ —
$ (47 )



	Three Months Ended
	September 30,					June 30,
In millions	2019		2018			2019
Luxembourg tax law rate change	$	—	$	—		$	9
Tax benefits from Tax Cuts and Jobs Act	—		(36		)	—
State income tax legislative changes	—		—			(3		)
Settlement of foreign tax audits	—		—			3
Total	$	—	$	(36	)	$	9

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

Nine Months Ended
September 30
2017 2016
In millions Before Tax After Tax Before Tax After Tax
Business Segments
Kleen Products anti-trust class action lawsuit settlement $ 354
$ 219
$ —
$ —
Pulp business acquisition inventory fair value step-up amortization 14
8
—
—
Weyerhaeuser pulp business integration costs 15
9
12
7
Holmen mill net bargain purchase gain (6 ) (6 ) —
—
Riegelwood mill conversion costs —
—
9
6
Asia Packaging restructuring and impairment —
—
70
58
Foodservice Asia impairment 9
4
—
—
Abandoned property 14
9
—
—
Brazil Packaging Intangible Asset Accelerated Amortization 10
7
—
—
Business Segments Total 410
250
91
71
Corporate
Debt extinguishment —
—
29
18
Write-off of certain regulatory pre-engineering costs —
—
8
5
Gain on sale of investment in Arizona Chemical —
—
(8 ) (5 )
India Packaging business evaluation write-off (2 ) (2 ) 17
11
Gain on sale of investment in ArborGen (14 ) (9 ) —
—
Interest income related to income tax refund claim (4 ) (2 ) —
—
Corporate Total (20 ) (13 ) 46
29
Total special items 390
237
137
100
Non-operating pension expense 98
60
573
352
Total $ 488
$ 297
$ 710
$ 452



	Nine Months Ended
	September 30,
	2019						2018
In millions	Before Tax			After Tax			Before Tax		After Tax
Business Segments
India impairment	$	151		$	149		$	—	$	—
Brazil Packaging impairment	—			—			122		81
Italian antitrust fine	32			32			—		—
Overhead cost reduction initiative	10			8			—		—
Multi-employer pension plan exit liability	9			6			—		—
Gain on sale of previously closed Oregon mill site	(9		)	(7		)	—		—
Gain on sale of EMEA Packaging box plant	(7		)	(6		)	—		—
EMEA Packaging optimization	—			—			48		35
Abandoned property removal	35			26			24		18
Riverdale mill conversion	3			3			5		4
Business Segments Total	224			211			199		138
Corporate
Litigation reserves	22			17			—		—
Environmental remediation reserve adjustment	15			11			9		7
Overhead cost reduction initiative	11			8			—		—
Smurfit-Kappa acquisition proposal costs	—			—			12		9
Interest expense related to settlement of foreign tax audits	1			1			—		—
Legal settlement	—			—			9		7
Corporate Total	49			37			30		23
Total special items	273			248			229		161
Non-operating pension expense	27			21			65		49
Total special items and non-operating pension expense	$	300		$	269		$	294	$	210

Special items include the following tax expenses (benefits):

Nine Months Ended
September 30
In millions 2017 2016
Income tax refund claims $ (85 ) $ —
Pension contribution return to accrual 38
23
International investment restructuring 34
(63 )
Federal income tax audit closure —
(14 )
Total $ (13 ) $ (54 )



	Nine Months Ended
	September 30,
In millions	2019			2018
Luxembourg tax law rate change	$	9		$	—
Tax benefits from Tax Cuts and Jobs Act	—			(36		)
State income tax legislative changes	(3		)	9
Settlement of foreign tax audits	3			—
Total	$	9		$	(27	)

BUSINESS SEGMENT OPERATING RESULTS

The following tables present net sales and operating profit (loss) which is the Company's measure of segment profitability. The tables include a detail of special items in each year, where applicable, in order to show operating profit before special items. The Company calculates Operating Profit Before Special Items (non-GAAP) by excluding the pre-tax effect of items considered by management to be unusual from the earnings reported under U.S. generally accepted accounting principles ~~(“GAAP”)~~(GAAP). Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. International Paper believes that using this information, along with net earnings, provides for a more complete analysis of the results of operations by quarter. Net earnings attributable to International Paper is the most directly comparable GAAP measure. See Note 1821 - Business Segment

Information in the Condensed Notes to the Consolidated Financial Statements for the GAAP reconciliation of segment operating profit.

Industrial Packaging


Total Industrial Packaging	2017							2016						2019								2018
In millions	3rd Quarter		2nd Quarter		Nine Months			3rd Quarter		2nd Quarter		Nine Months		3nd Quarter			2nd Quarter		Nine Months			3rd Quarter		2nd Quarter		Nine Months
Sales	$	3,734	$	3,706	$	10,939		$	3,491	$	3,520	$	10,422	$	3,820		$	3,864	$	11,516		$	4,034	$	4,022	$	11,883
Operating Profit	$	469	$	50	$	884		$	423	$	458	$	1,277	$	510		$	507	$	1,421		$	472	$	537	$	1,446
Asia Packaging restructuring and impairment	—		—		—			5		28		70
Holmen mill bargain purchase gain	—		—		(6		)	—		—		—
Kleen Products anti-trust settlement	—		354		354			—		—		—
Brazil Intangible Asset Accelerated Amortization	10		—		10			—		—		—
Other	5		3		9			—		—		—
Italian antitrust fine														32			—		32			—		—		—
Gain on sale of previously closed Oregon mill site														(9		)	—		(9		)	—		—		—
Multi-employer pension plan exit liability														(7		)	—		9			—		—		—
Gain on sale of EMEA Packaging box plant														—			—		(7		)	—		—		—
Brazil Packaging impairment														—			—		—			122		—		122
EMEA Packaging optimization														—			—		—			—		26		48
Abandoned property removal														9			8		25			4		6		15
Operating Profit Before Special Items	$	484	$	407	$	1,251		$	428	$	486	$	1,347	$	535		$	515	$	1,471		$	598	$	569	$	1,631

Industrial Packaging net sales for the third quarter of ~~2017~~2019 were 1% ~~higher~~lower than in the second quarter of ~~2017~~2019 and ~~were 7% higher~~5% lower than in the third quarter of ~~2016.~~2018. Operating profit before special items was ~~19%~~4% higher in the third quarter of ~~2017~~2019 than in the second quarter of ~~2017~~2019 and ~~13% higher~~11% lower than in the third quarter of ~~2016.~~2018.


North American Industrial Packaging	2017						2016						2019								2018
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		3nd Quarter			2nd Quarter		Nine Months			3rd Quarter		2nd Quarter		Nine Months
Sales (a)	$	3,383	$	3,336	$	9,874	$	3,151	$	3,138	$	9,344	$	3,368		$	3,414	$	10,158		$	3,653	$	3,582	$	10,604
Operating Profit	$	487	$	51	$	899	$	439	$	496	$	1,373	$	532		$	507	$	1,434		$	618	$	574	$	1,651
Kleen Products anti-trust settlement	—		354		354		—		—		—
Other	5		3		9		—		—		—
Gain on sale of previously closed Oregon mill site													(9		)	—		(9		)	—		—		—
Multi-employer pension plan exit liability													(7		)	—		9			—		—		—
Abandoned property removal													9			8		25			4		6		15
Operating Profit Before Special Items	$	492	$	408	$	1,262	$	439	$	496	$	1,373	$	525		$	515	$	1,459		$	622	$	580	$	1,666

(a)

Includes intra-segment sales of ~~$50~~$25 million and ~~$35~~$74 million for the three months ended September 30, ~~2017~~2019 and ~~2016, respectively,~~2018, respectively; $31 million and ~~$32~~$46 million for the three months ended June 30, ~~2017~~2019 and ~~2016, respectively,~~2018, respectively; and ~~$113~~$87 million and ~~$112~~$178 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

North American Industrial Packaging sales volumes in the third quarter of 2019 increased compared to the second quarter of 2019, reflecting seasonally higher shipments for boxes and higher export containerboard volumes as customer inventory levels began to return to normal. Total maintenance and economic downtime was 249,000 tons lower in the third quarter of 2019. Average sales margins were lower, driven by lower average sales prices for boxes and export containerboard. Operating costs were seasonally higher for our box plants and our mills continued to perform well. Planned maintenance downtime costs were $73 million lower in the third quarter of 2019 compared with the second quarter of 2019. Input costs were favorable, primarily for recycled fiber and wood, partially offset by higher distribution costs.

Compared with the third quarter of 2018, sales volumes were lower in the third quarter of 2019 for export containerboard and boxes. Total maintenance and economic downtime was 120,000 tons higher in the third quarter of 2019. Box prices were lower as were export containerboard prices resulting from weaker global demand. Manufacturing costs were stable, driven by strong operational performance at our mills offset by inflation. Planned maintenance downtime costs were $18 million lower in the third quarter of 2019 compared with the third quarter of 2018. Input costs were significantly lower, driven by recycled fiber.

Entering the fourth quarter of 2019, sales volumes for boxes are expected to be seasonally higher. Export containerboard shipments are also expected to increase, as demand continues to improve. Average sales margins for boxes and export containerboard are expected to be lower, reflecting the impact of prior price index movement, mix and export pressure. Operating costs are expected to be higher. Planned maintenance downtime costs should be $44 million lower in the fourth quarter of 2019 than in the third quarter of 2019. Input costs are projected to be slightly favorable, with lower wood costs mostly offset by higher recycled fiber and energy costs.



EMEA Industrial Packaging	2019									2018
In millions	3nd Quarter			2nd Quarter			Nine Months			3rd Quarter			2nd Quarter			Nine Months
Sales	$	324		$	331		$	994		$	311		$	344		$	1,017
Operating Profit	$	(33	)	$	(7	)	$	(48	)	$	(37	)	$	(43	)	$	(114	)
Italian antitrust fine	32			—			32			—			—			—
Gain on sale of EMEA Packaging box plant	—			—			(7		)	—			—			—
EMEA Packaging optimization	—			—			—			—			26			48
Operating Profit Before Special Items	$	(1	)	$	(7	)	$	(23	)	$	(37	)	$	(17	)	$	(66	)

EMEA Industrial Packagingsales volumes for boxes in the third quarter of ~~2017~~2019 were lower than in the second quarter of ~~2017 reflecting one less shipping day~~2019, primarily driven by lower seasonal box demand in Morocco and the impact of Hurricanes Harvey and Irma. Containerboard shipments to export markets increased, but were more than offset by lower domestic shipments. Total maintenance downtime decreased 72,000 tons from 157,000 tons to 85,000 tons. There was no economic ~~downtime taken~~conditions in ~~either period.~~Turkey. Average sales margins ~~for boxes~~improved in all regions driven by lower containerboard prices and stable box prices. Operating costs improved, reflecting the continued improved performance at the Madrid mill. There were ~~higher due to~~no planned maintenance downtime costs in either the ~~realization~~third quarter of ~~box sales price increases. Average sales price realizations for containerboard also increased in both~~2019 or the ~~domestic and export markets.~~second quarter of 2019. Input costs were ~~higher, primarily for recycled fiber, but also for energy, wood and chemicals. Planned maintenance downtime costs were $62 million lower~~stable. Earnings benefited from favorable foreign currency impacts in the 2017 third quarter compared with the 2017 second quarter. Operating costs were higher including the hurricane-related temporary shutdown of two mills. The total negative impact of the hurricanes was approximately $20 million during the quarter.Turkey.

Compared with the third quarter of ~~2016,~~2018, sales volumes ~~for boxes were lower~~ in the third quarter of ~~2017 which included two fewer shipping days. Sales volumes~~2019 were lower, primarily due to the recession in Turkey. Average sales margins for boxes improved, reflecting sales price increases during 2018 and lower containerboard ~~increased~~costs. Operating costs significantly improved from the ramp-up of the Madrid mill. Earnings also benefited from the box plant acquisitions completed in ~~export markets, while domestic shipments decreased. Total~~the first half of 2019. There were no planned maintenance ~~and economic~~ downtime ~~was 108,000 tons lower~~costs in the third quarter of 2017 which comprises a decrease of 1,000 tons for maintenance downtime and a decrease of 107,000 tons for economic downtime. Average sales margins for boxes increased primarily due to higher average sales price realizations. Average sales price realizations in both domestic and export containerboard markets were also higher.2018. Input costs ~~for recycled fiber~~ were significantly higher, while slightly higher costs for energy, chemicals and freight were offset by lower wood costs. Planned maintenance downtime costs were $6 million lower in the third quarter of 2017 compared with the third quarter of 2016.stable. Earnings were ~~also impacted~~positively affected by ~~higher mill operating costs.~~favorable foreign currency impacts, primarily in Turkey.

~~Entering~~Looking ahead to the fourth quarter of ~~2017,~~2019, sales volumes for boxes are expected to be seasonally higher in Morocco and Turkey, and stable ~~but will include one less shipping day. Containerboard export shipments are expected to decrease. Input costs for recycled fiber are expected to be significantly lower,~~in the Eurozone. Average sales margins should improve in Morocco and Turkey, partially offset by ~~higher energy, chemical~~lower average sales margins in the Eurozone. Operating and ~~freight costs. Planned~~input costs should be stable. There are no planned maintenance downtime costs ~~should be $8 million lower.~~

in the fourth quarter of 2019.


EMEA Industrial Packaging	2017								2016
Brazilian Industrial Packaging															2019									2018
In millions	3rd Quarter			2nd Quarter		Nine Months			3rd Quarter		2nd Quarter		Nine Months		3nd Quarter			2nd Quarter			Nine Months			3rd Quarter			2nd Quarter			Nine Months
Sales	$	333		$	341	$	991		$	313	$	295	$	902	$	61		$	58		$	176		$	57		$	56		$	175
Operating Profit	$	(5	)	$	5	$	14		$	—	$	6	$	13	$	(6	)	$	(1	)	$	(12	)	$	(127	)	$	(11	)	$	(146	)
Holmen mill net bargain purchase gain	—			—		(6		)	—		—		—
Brazil Packaging impairment															—			—			—			122			—			122
Operating Profit Before Special Items	$	(5	)	$	5	$	8		$	—	$	6	$	13	$	(6	)	$	(1	)	$	(12	)	$	(5	)	$	(11	)	$	(24	)

~~EMEA~~Brazilian Industrial Packaging sales volumes ~~for boxes~~ in the third quarter of ~~2017 were seasonally lower than in~~2019 compared with the second quarter of ~~2017 in Morocco~~2019 were higher for boxes and ~~the Euro-zone.~~lower for containerboard. Average sales margins ~~decreased due to~~reflected higher ~~input~~sales prices for boxes and a favorable product mix, partially offset by lower containerboard prices. Planned maintenance downtime costs ~~for containerboard.~~were $2 million higher in the third quarter of 2019 compared with the second quarter of 2019. Input costs were higher for ~~energy were flat, while distribution costs decreased due to lower export shipments from Turkey~~rollstock, recycled fiber, chemicals and ~~Morocco. Operating costs were lower.~~energy.

Compared with the third quarter of ~~2016,~~2018, sales volumes in the third quarter of ~~2017~~2019 were ~~higher.~~higher for both boxes and containerboard. Average sales ~~margins decreased~~prices increased for boxes and containerboard. Operating costs were flat. Input costs increased, primarily for recycled fiber and energy. Planned maintenance downtime costs were $2 million higher in the ~~Euro-zone and Morocco due to higher containerboard costs. Input costs for energy were lower, but distribution costs were higher due to increased export shipments.~~third quarter of 2019 than in the third quarter of 2018.

Looking ahead to the fourth quarter of ~~2017,~~2019, sales volumes for boxes and containerboard are expected to be seasonally ~~stronger.~~lower. Average sales margins are expected to ~~recover due to the realization of prior price increases and~~be higher, reflecting a ~~more~~ favorable mix. ~~Earnings will~~Planned maintenance downtime costs should be ~~negatively impacted by~~$2 million lower in the fourth quarter of 2019 than in the third quarter of 2019. Input costs ~~at the Madrid mill during its conversion~~are projected to be lower for recycled ~~containerboard production.~~fiber.


Brazilian Industrial Packaging	2017									2016
European Coated Paperboard																			2019						2018
In millions	3rd Quarter			2nd Quarter			Nine Months			3rd Quarter			2nd Quarter			Nine Months			3nd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	68		$	60		$	187		$	62		$	51		$	155		$	92	$	92	$	275	$	87	$	86	$	265
Operating Profit	$	(13	)	$	(6	)	$	(29	)	$	(9	)	$	(12	)	$	(29	)	$	17	$	8	$	47	$	18	$	17	$	55
Brazil Intangible Asset Accelerated Amortization	10			—			10			—			—			—
Operating Profit Before Special Items	$	(3	)	$	(6	)	$	(19	)	$	(9	)	$	(12	)	$	(29	)

~~Brazilian Industrial Packaging~~European Coated Paperboard sales volumes in the third quarter of ~~2017~~2019 compared with the second quarter of ~~2017~~2019 were ~~higher for boxes, but slightly lower for containerboard. Improved~~flat in both Europe and Russia. Average sales margins improved in Europe driven by a favorable mix. In Russia, average sales margins ~~reflect higher sales prices for both boxes and containerboard, partially offset by an unfavorable mix.~~were slightly lower. Operating costs were higher in both Europe and Russia. Operating costs in Europe were negatively impacted by recovery boiler issues in Kwidzyn. Planned maintenance downtime costs were $8 million lower in the third quarter

of 2019 compared with the second quarter of 2019. Input costs were favorable ~~while~~in Europe primarily for purchased pulp and energy. In Russia, input costs were stable. Earnings benefited from favorable foreign currency impacts, primarily ~~for natural gas, were higher.~~in Russia.

Compared with the third quarter of ~~2016,~~2018, sales volumes increased in Europe but were slightly lower in Russia. Average sales margins were flat in Europe but improved in Russia, reflecting a favorable mix. Operating costs were higher in Europe, reflecting the recovery boiler issues in Kwidzyn. In Russia, operating costs were lower. There were no planned maintenance downtime costs in either the third quarter of ~~2017~~2019 or the third quarter of 2018. Input costs were lower in Europe for purchased pulp and energy, slightly offset by higher wood costs. In Russia, input costs were higher for ~~boxes, but~~chemicals and energy, offset by lower ~~for containerboard, while average sales price realizations for~~wood costs. Earnings were negatively affected by unfavorable foreign currency impacts in both ~~boxes~~Europe and ~~containerboard increased. Input costs, primarily for recycled fiber and wood, decreased. Operating costs were also lower.~~Russia.

~~Looking ahead to~~Entering the fourth quarter of ~~2017,~~2019, sales volumes are expected to be ~~about flat.~~higher in Russia but lower in Europe. Average sales margins are expected to increase ~~reflecting prior sales price realizations for~~in both ~~boxes and containerboard, partially offset~~regions. Operating costs are expected to be lower in Europe, as the third quarter was negatively impacted by ~~an unfavorable mix. Input costs should be slightly higher and~~the recovery boiler issues in Kwidzyn. In Russia, operating costs are expected to ~~increase, primarily due to labor costs.~~

Asian Industrial Packaging 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ —
$ —
$ —
$ —
$ 68
$ 133
Operating Profit $ —
$ —
$ —
$ (7 ) $ (32 ) $ (80 )
Asia Packaging Restructuring and Impairment —
—
—
5
28
70
Operating Profit Before Special Items $ —
$ —
$ —
$ (2 ) $ (4 ) $ (10 )

~~Asian Industrial Packaging~~

~~On June 30, 2016, the Company completed the sale of its corrugated packaging business in China and Southeast Asia to Xiamen Bridge Hexing Equity Investment Partnership Enterprise. See~~ ~~Note 8 - Divestitures / Spinoff~~ be higher. There are no planned maintenance downtime outages in the ~~Condensed Notes~~fourth quarter of 2019. Input costs are expected to ~~the Consolidated Financial Statements~~be lower in Europe, primarily for ~~further discussion of the sale of this business.~~purchased pulp and wood, and stable in Russia.

Global Cellulose Fibers


Total Global Cellulose Fibers	2017							2016									2019								2018
In millions	3rd Quarter		2nd Quarter		Nine Months			3rd Quarter			2nd Quarter			Nine Months			3nd Quarter			2nd Quarter			Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	654	$	612	$	1,830		$	242		$	259		$	713		$	624		$	661		$	1,974	$	714	$	692	$	2,083
Operating Profit	$	49	$	7	$	(14	)	$	(38	)	$	(21	)	$	(109	)	$	(3	)	$	(2	)	$	27	$	83	$	66	$	160
Acquisition costs	6		5		15			7			5			12
Inventory fair value step-up amortization	—		—		14			—			—			—
Other	2		—		3			—			—			—
Overhead cost reduction initiative																	4			—			4		—		—		—
Abandoned property removal																	3			2			8		2		3		9
Operating Profit Before Special Items	$	57	$	12	$	18		$	(31	)	$	(16	)	$	(97	)	$	4		$	—		$	39	$	85	$	69	$	169

Global Cellulose Fibers ~~includes the results of the pulp business acquired from Weyerhaeuser beginning in December 2016. See~~ ~~Note 7 - Acquisitions~~ ~~in the Condensed Notes to Consolidated Financial Statements for further discussion of this acquisition. Net~~ net sales were ~~7% higher~~6% lower in the third quarter of ~~2017~~2019 than in the second quarter of ~~2017~~2019 and ~~significantly higher~~13% lower than in the third quarter of ~~2016 due to the acquisition.~~2018. Operating profit before special items ~~was 375% higher~~ in the third quarter of ~~2017~~2019 was slightly higher than in the second quarter of ~~2017~~2019 and ~~284% higher~~95% lower than in the third quarter of ~~2016.~~2018.

Sales volumes in the third quarter of ~~2017 increased~~2019 compared with the second quarter of ~~2017 reflecting steady demand. Average sales price realizations~~2019 were higher ~~primarily~~ for fluff pulp, ~~but were~~ partially offset by anlower market pulp volumes. Total maintenance and economic downtime was 11,000 tons higher in the third quarter of 2019. Average sales margins decreased, reflecting lower average pulp prices driven by unfavorable ~~product mix.~~supply/demand conditions associated with historically high industry inventory levels, trade and tariff uncertainty and regional economic conditions. Operating costs were favorable as our mills improved reliability and ~~input costs were flat.~~reduced spending to overcome the impact of Hurricane Dorian. Planned maintenance downtime costs in the third quarter of ~~2017~~2019 were ~~$37~~$51 million lower than in the second quarter of ~~2017. Costs associated with Hurricane Irma negatively impacted the business by approximately~~2019. Earnings benefited $5 million ~~in the quarter. In Europe and Russia, sales volumes were lower, while average sales price realizations were favorable.~~

~~Compared with the third quarter of 2016, for the legacy business sales volumes increased~~ in the third quarter of ~~2017.~~2019 and $10 million in the second quarter of 2019 from insurance proceeds related to Hurricane Florence. Input costs were favorable, primarily for wood, energy and chemicals. Sales volumes were higher in Russia, but lower in Europe. Average sales ~~price realizations improved reflecting a stronger pricing environment.~~prices were lower in both regions. Planned maintenance downtime costs in the third quarter of ~~2017~~2019 were ~~$14~~$4 million lower than in the second quarter of 2019 in Europe and Russia. Operating costs were unfavorable in Europe and flat in Russia. Input costs were stable in both Europe and Russia.

Compared with the third quarter of 2018, sales volumes in the third quarter of 2019 were slightly higher. Total maintenance and economic downtime was 56,000 tons higher in the third quarter of 2019. Average sales prices were lower for both fluff and market pulp. Operating costs were favorable. Planned maintenance downtime costs in the third quarter of 2019 were $10 million lower than in the third quarter of ~~2016.~~2018. Input costs ~~decreased~~were slightly ~~although~~favorable. Sales volumes increased, primarily in Russia. Average sales margins were lower, reflecting lower average sales prices. Operating costs were unfavorable in Europe and ~~Russia input~~favorable in Russia. There were no planned maintenance downtime costs in either the third quarter of 2019 or the third quarter of 2018 in Europe and Russia. Input costs were ~~higher for wood, energy~~flat in both Europe and ~~purchased pulp.~~Russia. Earnings benefited from favorable foreign currency impacts in Europe, slight offset by unfavorable impacts in Russia.

Entering the fourth quarter of 2019, sales volumes are expected to be flat. Average sales margins are expected to be lower, reflecting the continuing effects of historically high industry inventory levels, slower growth in developing markets, tariff uncertainty, regional economic conditions and expected increases in operating costs. Planned maintenance downtime costs in the fourth quarter of 2019 should be $8 million lower than in the third quarter of 2019. Input costs are expected to be slightly higher. In Europe and Russia, sales volumes ~~decreased~~are expected to be stable in Europe and ~~average~~lower in Russia. Average sales margins are expected to be lower in both regions. Operating costs are expected to be stable in Europe and higher in Russia. Planned maintenance downtime costs in the fourth quarter of 2019 should be $7 million higher than in the third quarter of 2019 in Europe and Russia.

Printing Papers



Total Printing Papers	2019							2018
In millions	3nd Quarter		2nd Quarter			Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	1,071	$	1,088		$	3,224	$	1,102	$	1,060	$	3,215
Operating Profit	$	148	$	(33	)	$	258	$	183	$	94	$	341
India impairment	6		145			151		—		—		—
Abandoned property removal	1		1			2		—		—		—
Overhead cost reduction initiative	6		—			6		—		—		—
Riverdale mill conversion	1		1			3		5		—		5
Operating Profit Before Special Items	$	162	$	114		$	420	$	188	$	94	$	346

Printing Papers net sales for the third quarter of 2019 were 2% lower than in the second quarter of 2019 and 3% lower than in the third quarter of 2018. Operating profit before special items in the third quarter of 2019 was 42% higher than in the second quarter of 2019 and 14% lower than in the third quarter of 2018.



North American Papers	2019						2018
In millions	3nd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	492	$	486	$	1,474	$	492	$	493	$	1,443
Operating Profit	$	69	$	39	$	164	$	59	$	25	$	85
Abandoned property removal	1		1		2		—		—		—
Overhead cost reduction initiative	5		—		5		—		—		—
Riverdale mill conversion	1		1		3		5		—		5
Operating Profit Before Special Items	$	76	$	41	$	174	$	64	$	25	$	90

North American Papers sales volumes in the third quarter of 2019 were higher than in the second quarter of 2019 for uncoated freesheet paper, primarily driven by increased export volume. Total maintenance and economic downtime was 8,000 tons higher in the third quarter of 2019. Average sales margins were ~~unfavorably impacted~~unfavorable, reflecting an unfavorable geographic mix. Operating costs were lower. Planned maintenance downtime costs were $19 million lower in the third quarter of 2019, compared with the second quarter of 2019. Input costs were lower, primarily for wood.

Compared with the third quarter of 2018, sales volumes in the third quarter of 2019 were lower for uncoated freesheet paper, primarily driven by ~~lower~~weaker demand for commercial printing paper. Total maintenance and economic downtime was 39,000 tons higher in the third quarter of 2019. Average sales prices were higher, reflecting the impact of price ~~realizations partially offset by a favorable mix.~~increases in 2018. Operating costs were favorable. Planned maintenance downtime costs were $11 million higher than in the third quarter of 2018. Input costs increased, primarily for wood.

Entering the fourth quarter of ~~2017,~~2019, sales volumes are expected to be ~~seasonally higher.~~higher, driven by increased export volumes, partially offset by lower cutsize volumes. Average sales ~~price realizations~~margins are expected to ~~reflect the further recognition of recent price increases. Average sales margins will also benefit from a more favorable product mix. Input~~be lower. Operating costs are expected to be higher. Planned maintenance downtime costs should be ~~$5 million higher in the fourth quarter of 2017. Sales volumes and average sales price realizations are expected to increase in Europe and Russia.~~

~~Printing Papers~~

Total Printing Papers 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 1,039
$ 1,017
$ 3,051
$ 1,019
$ 1,012
$ 3,003
Operating Profit $ 135
$ 86
$ 321
$ 167
$ 117
$ 419
Other —
2
2
—
—
—
Operating Profit Before Special Items $ 135
$ 88
$ 323
$ 167
$ 117
$ 419

Printing Papers net sales for the third quarter of 2017 were 2% higher than in the second quarter of 2017 and 2% higher than in the third quarter of 2016. Operating profit before special items in the third quarter of 2017 was 53% higher than in the second quarter of 2017 but 19% lower than in the third quarter of 2016.

North American Papers 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 470
$ 446
$ 1,384
$ 477
$ 466
$ 1,425
Operating Profit $ 54
$ 19
$ 106
$ 81
$ 51
$ 193
Other —
2
2
—
—
—
Operating Profit Before Special Items $ 54
$ 21
$ 108
$ 81
$ 51
$ 193

~~North American Papers~~ sales volumes in the third quarter of 2017 were higher than in the second quarter of 2017 reflecting seasonally higher domestic demand. Average sales price realizations for uncoated freesheet paper were lower due to competitive pressures. Average sales margins were also negatively impacted by an unfavorable mill sourcing mix. Input costs were slightly higher, primarily for wood. Planned maintenance downtime costs were $34$7 million lower in the ~~third quarter of 2017, which included no outages, compared with the second quarter of 2017.~~

Compared with the third quarter of 2016, sales volumes in the third quarter of 2017 were higher primarily due to increased shipments of uncoated freesheet paper to export markets. Average sales price realizations were lower, reflecting weaker market conditions. Average sales margins were also impacted by unfavorable geographic and mill sourcing mix. Input costs increased.

~~Entering the~~ fourth quarter of 2017, sales volumes are expected to be seasonally lower, while average sales price realizations are expected to be stable with the partial realization of a previous sales price increase for uncoated freesheet paper.quarter. Input costs are expected to be ~~steady. Planned maintenance downtime costs should be $11 million higher with an outage scheduled in the fourth quarter at our Eastover mill.~~

favorable, primarily for wood.


European Papers	2017						2016						2019						2018
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		3nd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	292	$	299	$	865	$	278	$	288	$	825	$	299	$	321	$	929	$	311	$	302	$	932
Operating Profit	$	38	$	26	$	93	$	40	$	34	$	114	$	40	$	29	$	116	$	46	$	15	$	82
Overhead cost reduction initiative													1		—		1		—		—		—
Operating Profit Before Special Items													$	41	$	29	$	117	$	46	$	15	$	82

European Papers sales volumes for uncoated freesheet paper in the third quarter of ~~2017~~2019 compared with the second quarter of ~~2017~~2019 were lower in ~~both Russia and Europe.~~Europe, but higher in Russia. In Europe, the recovery boiler issues at Kwidzyn negatively impacted volumes. Average sales margins for uncoated freesheet paper ~~increased~~decreased in Europe ~~due to the partial realization of a~~and Russia, reflecting lower average sales ~~price increase,~~prices resulting from weaker demand and ~~in Russia due to a favorable geographic~~an unfavorable mix. ~~Input~~Operating costs were higher ~~primarily for wood and energy.~~in Europe, reflecting the impact of the recovery boiler issues at Kwidzyn. Operating costs were flat in Russia. Planned maintenance downtime costs were $20 million lower in the third quarter of ~~2017 were $6 million lower than in~~2019 compared to the second quarter of ~~2017 which included an outage at the Svetogorsk mill. Manufacturing operating~~2019. Input costs were ~~lower.~~stable in both regions. Earnings benefited from favorable foreign currency impacts in Europe.

Sales volumes for uncoated freesheet paper in the third quarter of ~~2017~~2019, compared with the third quarter of ~~2016,~~2018, were lower in Europe, ~~but higher in Russia.~~partially due to the impact of the recovery boiler issues at Kwidzyn. In Russia, sales volumes were higher. Average sales ~~price realizations~~margins for uncoated freesheet paper increased in both regions, reflecting price increases implemented in late 2018 and in 2019, net of an unfavorable mix. Operating costs were higher in Europe ~~but were~~and slightly lower in Russia. ~~Input costs, primarily for wood and energy,~~There were ~~higher. Planned~~no planned maintenance downtime costs in either the third quarter of ~~2017 were $9 million lower than in~~2019 or the third quarter of ~~2016 which included an outage at the Kwidzyn mill.~~2018. In Europe, input costs were higher for wood and chemicals, partially offset by lower energy costs. In Russia, input costs also increased, primarily for chemicals and energy, partially offset by lower wood costs. Earnings were negatively affected by unfavorable foreign currency impacts in both Europe and Russia.

Looking forward to the fourth quarter of ~~2017,~~2019, sales volumes for uncoated freesheet paper are expected to ~~increase. Average~~be higher in both Europe and Russia. In Europe, average sales ~~price realizations~~margins are expected to be lower. In Russia, average sales margins will be negatively impacted by an unfavorable mix. Operating costs should be higher in both Europe and Russia. Planned maintenance downtime costs should be $8 million higher in the fourth quarter. Input costs are expected to be ~~higher for wood in Russia and higher~~stable in Europe ~~for wood~~ and ~~energy.~~Russia.


Brazilian Papers	2017						2016						2019						2018
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		3nd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales (a)	$	239	$	232	$	685	$	229	$	219	$	637	$	247	$	240	$	702	$	255	$	222	$	706
Operating Profit	$	46	$	43	$	128	$	54	$	34	$	123	$	44	$	37	$	114	$	75	$	49	$	164

(a)

Includes intra-segment sales of ~~$6 million and $0 million for the three months ended September 30, 2017 and 2016, respectively, $7~~$5 million and $3 million for the three months ended September 30, 2019 and 2018, respectively; $12 million and $8 million for the three months ended June 30, ~~2017~~2019 and ~~2016, respectively,~~2018, respectively; and ~~$22~~$25 million and $4$16 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

Brazilian Papers sales volumes in the third quarter of ~~2017 were lower than in~~2019, compared with the second quarter of ~~2017 reflecting~~2019, were seasonally higher ~~than anticipated export~~for domestic shipments ~~in the second quarter along with the negative impact~~ of ~~logistical issues in the third quarter,~~uncoated freesheet, partially offset by ~~seasonally stronger demand in Brazil. Average sales margins were higher due to increased~~lower export volumes. Export average sales ~~price realizations~~prices were lower for both Latin American and other export ~~uncoated freesheet papers, as well as a favorable geographic mix. Input~~locations, reflecting higher supply availability in Latin America and softer demand conditions, while domestic average sales prices were stable. Operating costs ~~increased for purchased pulp and energy.~~were favorable. Planned maintenance outage downtime costs were $3 million ~~lower than~~higher in the third quarter of 2019, compared with the second quarter of ~~2017 which included an outage at the Mogi Guacu mill.~~2019. Input costs were flat.

Compared with the third quarter of ~~2016,~~2018, sales volumes for uncoated freesheet paper in the third quarter of ~~2017 increased in other Latin American countries,~~2019 were slightly higher for export, but lower for the domestic shipments, reflecting challenging demand conditions impacted by a government textbook program delay. Lower export sales prices and an unfavorable geographic and product mix were ~~flat in Brazil. Average sales margins improved, reflecting~~slightly offset by higher average ~~sales price realizations for export markets, improved customer mix~~domestic prices. Operating costs were unfavorable. Planned maintenance outage expenses were $3 million higher in ~~Brazil and a favorable geographic mix, partially offset by an unfavorable product mix.~~the third quarter of 2019. Input costs were ~~stable.~~higher, primarily for wood and energy.

Entering the fourth quarter of ~~2017,~~2019, sales volumes for uncoated freesheet paper are expected to be seasonally ~~higher in Brazil while~~stronger domestically, partially offset by lower export ~~shipments should also increase due to the recovery from the logistical issues that occurred during the third quarter.~~volumes. Average sales margins ~~should benefit from a more favorable geographic mix. Input costs~~ are expected to be ~~higher, particularly for purchased pulp and energy.~~

Indian Papers 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 44
$ 47
$ 139
$ 35
$ 42
$ 120
Operating Profit $ (3 ) $ (2 ) $ (6 ) $ (8 ) $ (2 ) $ (11 )

~~Indian Papers~~stable domestically, while export sales volumes in the third quarter of 2017 compared with the second quarter of 2017 were lower due to reduced production capacity associated with a planned maintenance outage and a 6-day contract workers' strike. Average sales price realizations were slightly lower. Input costs were lower, primarily for wood and coal, but this benefit was more than offset by higher operating costs. Planned maintenance outage costs were $1 million higher than in the second quarter of 2017 due to an

outage at the Rajahmundry mill. Compared with the third quarter of 2016, sales volumes in the third quarter of 2017 were higher and average sales price realizations increased. Input costs were lower for wood, partially offset by higher chemical costs.

~~Looking ahead to the fourth quarter of 2017, sales volumes~~margins are expected to be ~~higher as the third-quarter production constraints do not recur. Average sales price realizations~~lower. Operating costs should be slightly ~~higher.~~favorable. Planned maintenance outage ~~costs~~expenses are expected to be $1 million lower ~~than in the third quarter of 2017 with no outages scheduled~~ in the fourth quarter.

~~Consumer Packaging~~

Total Consumer Packaging 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 491
$ 474
$ 1,431
$ 494
$ 501
$ 1,490
Operating Profit $ 54
$ (14 ) $ 73
$ 61
$ 73
$ 150
Riegelwood mill conversion costs —
—
—
—
—
9
Foodservice Asia asset impairment —
9
9
—
—
—
Operating Profit Before Special Items $ 54
$ (5 ) $ 82
$ 61
$ 73
$ 159

Consumer Packaging net sales in the third quarter of 2017 were 4% higher than in the second quarter of 2017, but 1% lower than in the third quarter of 2016. Operating profit before special items was higher in the third quarter of 2017 than in the second quarter of 2017, but 11% lower than in the third quarter of 2016.

North American Consumer Packaging 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 403
$ 395
$ 1,186
$ 407
$ 416
$ 1,241
Operating Profit $ 33
$ (28 ) $ 19
$ 39
$ 48
$ 77
Riegelwood mill conversion costs —
—
—
—
—
9
Foodservice Asia asset impairment —
9
9
—
—
—
Operating Profit Before Special Items $ 33
$ (19 ) $ 28
$ 39
$ 48
$ 86

~~North American Consumer Packaging~~ Coated paperboard sales volumes in the third quarter of 2017 were higher than in the second quarter of 2017. Average sales price realizations increased reflecting the effect of a 2017 second quarter sales price increase. Planned maintenance downtime costs were $33 million lower than in the second quarter of 2017 which included outages at our Augusta and Texarkana mills. Operating costs improved due to the resolution of some performance issues at our Augusta mill during the 2017 second quarter. Input ~~costs for wood were slightly lower.~~

Compared with the third quarter of 2016, sales volumes in the third quarter of 2017 were slightly lower. Average sales price realizations increased slightly, reflecting the realization of second-quarter 2017 sales price increases offset by competitive price erosion. Operating costs were higher due to reliability issues at our Augusta mill, while input costs were steady.

Foodservice sales volumes in the third quarter of 2017 were seasonally lower than in the second quarter of 2017. Average sales margins increased, reflecting higher average sales price realizations partially offset by an unfavorable customer mix. Distribution costs were lower due to the impact of freight savings initiatives. Compared with the third quarter of 2016, sales volumes in the third quarter of 2017 decreased slightly reflecting weaker customer demand. Average sales margin decreased as higher input costs for resin and board were only partially offset by the realization of 2017 second quarter sales price increases.

Looking forward to the fourth quarter of 2017, coated paperboard sales volumes are expected to be seasonally weaker. Average prior sales price realizations are expected to be flat, but average sales margins should benefit from a favorable mix. Input costs for wood and polystyrene costs are expected to be higher following the hurricanes that occurred in the third quarter. Planned maintenance downtime costs should be $4 million higher in the fourth quarter of 2017 with an outage scheduled at our Texarkana mill. Operating costs are expected to recover. For Foodservice, sales volumes are expected to be seasonally higher while average sales margins should be relatively flat.favorable.


European Consumer Packaging	2017						2016
Indian Papers													2019									2018
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		3nd Quarter			2nd Quarter			Nine Months			3rd Quarter		2nd Quarter		Nine Months
Sales	$	88	$	79	$	245	$	87	$	85	$	249	$	38		$	53		$	144		$	47	$	51	$	150
Operating Profit	$	21	$	14	$	54	$	22	$	25	$	73	$	(5	)	$	(138	)	$	(136	)	$	3	$	5	$	10
India Impairment													6			145			151			—		—		—
Operating Profit Before Special Items													$	1		$	7		$	15		$	3	$	5	$	10

~~European Consumer Packaging~~ ~~sales volumes~~On May 29, 2019, International Paper announced it had entered into an agreement to sell its controlling interest in the third quarter of 2017 compared with the second quarter of 2017 were higher in both Europe and Russia. Average sales margins decreased in both regions, reflecting lower sales price realizations partially mitigated by favorable mix. Input costs were higher in both Europe and Russia. Planned maintenance downtime costs

~~were $2 million lower in the third quarter of 2017 compared with the second quarter of 2017. Operating costs were also favorable.~~

Compared with the third quarter of 2016, sales volumes decreased in both Europe and Russia. In Russia, average sales margins decreased due to lower average sales price realizations, but in Europe sales margins reflected higher average sales price realizations and a more favorable mix. Input costs increased for wood, energy and purchased pulp. Planned maintenance downtime costs were $3 million lower in the third quarter of 2017 than in the third quarter of 2016.

Entering the fourth quarter of 2017, sales volumes are expected to be higher in Russia, but about flat in Europe. Average sales margins are expected to increase, reflecting higher sales price realizations in Europe. Input costs for wood and energy are expected to be higher.its Indian Papers business. The transaction closed on October 30, 2019.

Equity Earnings, Net of Taxes – Ilim

~~Since October 2007,~~ International Paper ~~and~~accounts for its 50% equity interest in Ilim ~~Holding~~ S.A. (Ilim) ~~have operated a 50:50 joint venture in Russia.~~using the equity method of accounting. Ilim is a separate reportable ~~business segment.~~industry segment whose primary operations are in Russia. The Company recorded equity earnings, net of taxes, of ~~$48~~$18 million in the third quarter of ~~2017,~~2019, compared with ~~$21~~$67 million in the second quarter of ~~2017~~2019 and ~~$46~~$74 million in the third quarter of ~~2016.~~2018. In the third quarter of ~~2017,~~2019, the after-tax foreign exchange impact primarily on the remeasurement of U.S. dollar-denominated net debt was a ~~gain~~loss of $7$4 million, compared with a ~~loss~~gain of ~~$18~~$7 million in the second quarter of ~~2017.~~ 2019.

Compared with the second quarter of ~~2017,~~2019, sales volumes in the third quarter of ~~2017~~2019 were 9% lower, ~~primarily for sales of softwood pulp and containerboard in China, partially offset by higher sales of hardwood pulp and containerboard in Russia. Average sales price realizations increased,~~ primarily for sales of hardwood pulp and containerboard in China, and softwood pulp in Russian and other export ~~markets, partially offset by~~locations. Average sales price

realizations were lower for softwood ~~and~~pulp, hardwood pulp and containerboard ~~sales~~ in ~~Russia.~~China, Russia and other export locations. Input costs for wood and fuel, were relatively ~~flat, while~~flat. Outage and repair costs were $10 million higher than in the second quarter of 2019 due to the planned maintenance ~~downtime costs were higher in~~mill outages at the ~~third quarter of 2017.~~Bratsk and Ust-Ilimsk mills.

Compared with the third quarter of ~~2016,~~2018, sales volumes in the third quarter of ~~2017 were relatively flat~~2019 decreased overall ~~while~~by 7%, primarily due to sales of ~~hardwood pulp to~~containerboard in China and ~~containerboard sales in~~ Russia ~~increased, but were partially offset by lower sales of~~and softwood pulp ~~to China and Russia. Average sales price realizations were higher, primarily for sales of softwood~~ and hardwood pulp in Russian and other export locations. Average sales prices for softwood pulp, hardwood pulp and containerboard in China and other export locations and containerboard in Russia ~~and for sales of containerboard in all countries.~~were lower. Input costs, primarily for wood and ~~energy,~~chemicals, were higher. ~~Operating~~Distribution costs were ~~negatively impacted by the planned maintenance downtime taken in the third quarter of 2017.~~also higher. An after-tax foreign exchange ~~gain~~loss of $3$23 million primarily on the remeasurement of U.S. dollar denominated net debt was recorded in the third quarter of ~~2016.~~2018.

Looking forward to the fourth quarter of ~~2017,~~2019, sales volumes are expected to ~~increase.~~be higher following the start-up of the newly upgraded containerboard machine at the Bratsk mill and the recently modernized pulp line at the Ust-Ilimsk mill. Average sales ~~price realizations~~margins are ~~expected~~projected to ~~increase~~decrease compared with the third quarter of ~~2017,~~2019, primarily ~~for export sales of softwood and~~due to hardwood pulp ~~and containerboard.~~in China. Input costs are expected to decrease. Mill maintenance outage costs will be ~~seasonally higher for wood~~lower as there are no outages scheduled in the fourth quarter of 2019.

Equity Earnings – GPIP

International Paper recorded equity earnings of $10 million in the third quarter of 2019, compared with $14 million in the second quarter of 2019 and ~~energy.~~$19 million in the third quarter of 2018. As of September 30, 2019, the Company's ownership interest in GPIP was 21.6%.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations totaled $~~569 million~~2.7 billion for the first nine months of ~~2017~~2019, compared with $~~1.6~~2.4 billion for the comparable ~~2016~~2018nine-month period. Cash ~~used for~~provided by working capital components totaled $~~567~~176 million for the first nine months of ~~2017~~2019, compared to cash used by working capital components of $~~120~~249 million for the comparable ~~2016nine-month~~2018 nine-month period. ~~The increase to working capital in 2017 includes income tax receivables primarily driven by the pension contribution and the Kleen Products litigation settlement.~~

~~The Company generated free cash flow of approximately~~ ~~$1.2 billion~~ ~~and $1.4 billion in the first~~ ~~nine~~ ~~months of~~ ~~2017~~ ~~and~~ ~~2016~~, respectively. Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by 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, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company's ongoing performance, free cash flow also enables investors to perform meaningful comparisons between past and present periods.

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

Nine Months Ended
September 30,
In millions 2017 2016
Cash provided by operations $ 569
$ 1,566
Adjustments:
Cash invested in capital projects (935 ) (903 )
Cash contribution to pension plan 1,250
750
Cash payment for Kleen settlement 354
—
Free Cash Flow $ 1,238
$ 1,413

Investments in capital projects totaled $~~935~~913 million in the first nine months of ~~2017~~2019, compared to $~~903 million~~1.3 billion in the first nine months of ~~2016~~2018. Full-year ~~2017~~2019 capital spending is currently expected to be approximately ~~$1.5~~$1.3 billion, or about ~~107%~~99% of depreciation and amortization, ~~expense for our current businesses.~~including approximately $400 million of strategic investments.

Financing activities for the first nine months of ~~2017~~2019 included a ~~$997~~$391 million net ~~increase~~decrease in debt versus a ~~$1.6 billion~~$107 million net increase in debt during the comparable ~~2016~~2018 nine-month period. During the third quarter of 2017, the Company issued $1.0 billion of 4.35% senior unsecured notes with a maturity date in 2048. The proceeds from this offering, together with a combination of available cash and other borrowings, were used to make a $1.25 billion voluntary cash contribution to the Company's pension plan.

Amounts related to early debt extinguishment during the three ~~months~~ and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2017		2016		2017		2016		2019		2018		2019			2018
Early debt reductions (a)	$	95	$	266	$	122	$	266	$	77	$	75	$	245		$	79
Pre-tax early debt extinguishment costs	2		29		2		29
Pre-tax early debt extinguishment (gain) loss, net									2		1		(1		)	1

(a)

Reductions related to notes with interest rates ranging from ~~4.63%~~3.00% to ~~6.63%~~4.40% with original maturities from ~~2018~~2027 to ~~2031~~2047 and from ~~1.57%~~3.00% to ~~6.63%~~7.00% with original maturities from ~~2018~~2022 to ~~2031~~2032 for the three months ended September 30, 2019 and 2018, respectively, and from 3.00% to 9.50% with original maturities from 2024 to 2048 and from 3.00% to 7.00% with original maturities from 2022 to 2032 for the nine months ended September 30, ~~2017,~~2019 and ~~7.95% with an original maturity in~~ 2018, ~~for the three and nine months ended September 30, 2016.~~respectively.

At September 30, ~~2017,~~2019, contractual obligations for future payments of debt maturities (including finance lease liabilities disclosed in Note 11 - Leases) by calendar year were as follows: ~~$476 million in 2017; $461 million in 2018; $422~~$298 million in 2019; ~~$159~~$97 million in 2020; ~~$663~~$448 million in 2021; ~~$923~~$490 million in 2022; $354 million in 2023; and ~~$9.23~~$8.7 billion thereafter.

Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At September 30, ~~2017~~2019, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and Moody’s, respectively. In addition, the Company held short-term credit ratings of A2 and P2 by S&P and Moody's, respectively, for borrowings ~~during the current quarter~~ under the Company's commercial paper program.

At September 30, ~~2017,~~2019, International Paper’s credit agreements totaled $2.1 billion, which management believes are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. The liquidity facilities include a $1.5 billion contractually committed bank credit agreement that expires in December 2021 and has a facility fee of 0.15% per annum payable quarterly. The liquidity facilities also include up to $600 million of uncommitted financings based on eligible receivable balances ~~($600 million available at September 30, 2017)~~ under a receivables securitization program that expires in December ~~2017.~~2019. At

September 30, 2019, there were no outstanding borrowings under the credit facility nor under the receivables securitization program.

In June ~~2016, International Paper entered into a~~2018, the borrowing capacity of the commercial paper program ~~with a borrowing capacity of~~was increased from $750 ~~million.~~million to $1.0 billion. Under the terms of the program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed notes or floating rate notes. As of September 30, ~~2017,~~2019, the Company had ~~$445~~$245 million of borrowings outstanding under this program at a weighted average interest rate of ~~1.39%~~2.29%.

~~Subsequent to September 30, 2017, International Paper repaid approximately $382 million of notes with an interest rate of 7.95% and an original maturity date in 2018.~~

During the first nine months of ~~2017,~~2019, International Paper used ~~2.6~~3.4 million shares of treasury stock for various incentive plans. International Paper also acquired ~~0.9~~11.9 million shares of treasury stock, including ~~shares for the payment of~~ restricted stock tax ~~withholding.~~withholdings. Repurchases of common stock and payments of restricted stock withholding taxes totaled ~~$46 million. In~~

~~September 2013,~~$535 million, including $486 million related to shares repurchased under the Company's repurchase program. On October 9, 2018, the Company announced ~~a share~~an authorization to repurchase ~~program to acquire up to $1.5~~$2 billion ~~of the Company's common stock in open market repurchase transactions. In addition, in July 2014, the Company announced that it would acquire up to $1.5 billion of additional shares~~ of the Company's common stock to supplement ~~the $1.5 billion~~remaining amounts under prior share repurchase ~~program authorized in September~~authorizations, bringing total share repurchase authorizations since 2013 ~~and would~~to $5.0 billion. The Company will continue to repurchase such shares in open market repurchase transactions. Under ~~this $3.0~~the $5.0 billion share repurchase program, the Company has repurchased ~~44.6~~68.9 million shares at an average price of ~~$46.40,~~$47.23, for a total of approximately ~~$2.1~~$3.3 billion, as of September 30, ~~2017.~~2019.

During the first nine months of ~~2016,~~2018, International Paper used approximately ~~2.7~~1.7 million shares of treasury stock for various incentive plans. International Paper also acquired ~~3.6~~9.6 million shares of treasury stock, including restricted stock tax withholding. Repurchases of common stock and payments of restricted stock withholding taxes totaled ~~$131.7 million, including $100.1 million related to shares repurchased under the Company's $3.0 billion share repurchase program.~~$532 million. Cash dividend payments related to common stock totaled ~~$573~~$595 million and ~~$543~~$588 million for the first nine months of ~~2017~~2019 and ~~2016,~~2018, respectively. Dividends were ~~$1.3875~~$1.50 per share and ~~$1.3200~~$1.42 per share for the first nine months in ~~2017~~2019 and ~~2016,~~2018, respectively.

International Paper expects to be able to meet projected capital expenditures, service existing debt and meet working capital and dividend requirements during ~~2017~~the remainder of 2019 with current cash balances and cash from operations, supplemented as required by its existing credit facilities. The Company will continue to rely on debt and capital markets for the majority of any necessary long-term funding not provided by operating cash flows. Funding decisions will be guided by our capital structure planning objectives. The primary goals of the Company’s capital structure planning are to maximize financial flexibility and preserve liquidity while reducing interest expense. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors.

~~Acquisitions~~

~~See discussion in~~ ~~Note 7 - Acquisitions~~ ~~in the Condensed Notes to the Consolidated Financial Statements.~~

Ilim ~~Holding~~ S.A. Shareholders’ Agreement

In October 2007, in connection with the formation of the Ilim ~~Holding~~ S.A. joint venture (Ilim), International Paper entered into a ~~shareholder’s~~shareholders' agreement that includes provisions relating to the reconciliation of disputes among the partners. This agreement provides that at any time, either the Company or its partners may commence procedures specified under the deadlock agreement. If these or any other deadlock procedures under the ~~shareholder's~~shareholders' agreement are commenced, although it is not obligated to do so, the Company may in certain situations choose to purchase its partners' 50% interest in Ilim. Any such transaction would be subject to review and approval by Russian and other relevant anti-trust authorities. Based on the provisions of the agreement, the Company estimates that the current purchase price for its partners' 50% ~~interests~~interest would be approximately ~~$1.3~~$1.9 billion, which could be satisfied by payment of cash or International Paper common stock, or some combination of the two, at the Company's option. The purchase by the Company of its partners’ 50% interest in Ilim would result in the consolidation of Ilim's financial position and results of operations in all subsequent periods. The parties have informed each other that they have no current intention to commence procedures specified under the deadlock provisions of the ~~shareholder’s~~shareholders' agreement.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES

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

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

The Company has included in its ~~2016~~2018 Form 10-K a discussion of these critical accounting policies, which are important to the portrayal of the Company’s financial condition and results of operations and require management’s judgments. The Company has not made any changes in these critical accounting policies during the first nine months of ~~2017, other than a change in the timing of the annual impairment testing of goodwill which is referenced in Note 1 in the Condensed Notes to the Consolidated Financial Statements and discussed below.~~2019.

~~Pension Accounting~~

~~Net pension expense totaled approximately~~ ~~$237 million~~ ~~for International Paper’s U.S. plans for the nine months ended~~ ~~September 30, 2017, or about $481 million less than the pension expense for the first~~ ~~nine~~ ~~months of~~ ~~2016. The decrease in U.S. plan expense was due to $442 million plan settlement accounting charges in the second and third quarters of 2016, and~~

~~lower amortization of unrecognized actuarial losses and prior service cost. Net pension expense for non-U.S. plans was about $3 million for the first nine months of~~ ~~2017~~ ~~and~~ ~~2016~~.

In the first quarter of 2016, International Paper offered a voluntary, limited-time opportunity for former employees who were participants in the Retirement Plan of International Paper Company (the Pension Plan) to request early payment of their entire Pension Plan benefit in the form of a single lump sum payment. The amount of total payments under this program was approximately $1.2 billion, and were made from Plan trust assets on June 30, 2016. Based on the level of payments made, settlement accounting rules applied and resulted in a plan remeasurement as of the June 30, 2016 payment date. The discount rate used in the plan remeasurement was 3.80%, down from 4.40% at December 31, 2015. As a result of settlement accounting, the Company recognized a pro-rata portion of the unamortized net actuarial loss, after remeasurement, resulting in a $439 million non-cash charge to the Company's earnings in the second quarter of 2016. Additional payments of $8 million were made during the third quarter of 2016 due to mandatory cash payouts and a small lump sum payout project, and the pension plan was subsequently remeasured at September 30, 2016 using a discount rate of 3.60%, down from 3.80% at June 30, 2016. As a result of settlement accounting, the Company recognized a pro-rata portion of the unamortized net actuarial loss, after remeasurement, resulting in a $3 million non-cash charge to the Company's earnings in the third quarter of 2016.

After consultation with our actuaries, International Paper determines key actuarial assumptions on December 31 of each year that are used to calculate liability information as of that date and pension expense for the following year. Key assumptions affecting pension expense include the discount rate, the expected long-term rate of return on plan assets, the projected rate of future compensation increases, and various demographic assumptions including expected mortality. The discount rate assumption is determined based on approximately 500 Aa-rated bonds appropriate to provide the projected benefit payments of the plan. A bond portfolio is selected and a single rate is determined that equates the market value of the bonds purchased to the discounted value of the plan’s benefit payments. The expected long-term rate of return on plan assets is based on projected rates of return for current and planned asset classes in the plan’s investment portfolio. At September 30, 2017, the market value of plan assets for International Paper’s U.S. plans totaled approximately $12.4 billion, consisting of approximately 45% equity securities, 36% fixed income securities, and 19% real estate and other assets. Plan assets did not include International Paper common stock.

The Company’s funding policy for our pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plan, tax deductibility, the cash flows generated by the Company, and other factors. The Company made voluntary cash contributions of $1.25 billion and $750 million to the qualified pension plan in the first nine months of 2017 and 2016, respectively. The U.S. nonqualified plans are only funded to the extent of benefits paid, which totaled $34 million for the nine months ended September 30, 2017.

FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q that are not historical in nature may be considered “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are often identified by the words, “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “appear,” “project,” “estimate,” “intend,” and words of a similar nature. These statements are not guarantees of future performance and reflect management’s current views with respect to future events, which are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Factors which could cause actual results to differ include but are not limited to: (i) the level of our indebtedness and changes in interest rates; (ii) industry conditions, including but not limited to changes in the cost or availability of raw materials, energy and transportation costs, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products; (iii) global economic conditions and political changes, including but not limited to trade protection measures, the impairment of financial institutions, changes in currency exchange rates, credit ratings issued by recognized credit rating organizations, the amount of our future pension funding obligation, changes in tax laws and pension and health care costs; (iv) unanticipated expenditures related to the cost of compliance with existing and new environmental and other governmental regulations and to actual or potential litigation; (v) whether we experience a material disruption at one of our manufacturing facilities; (vi) risks inherent in conducting business through joint ventures; (vii) the failure to realize the expected synergies and cost-savings from our purchase of the pulp business of Weyerhaeuser Company or delay in realization thereof; (viii) purchase price adjustments relating to our pending transaction to transfer our North American

consumer packaging business to Graphic Packaging Holding Company in exchange for, among other things, an equity interest in an entity that will hold the assets for the combined business; (ix) receipt of regulatory approvals for the Graphic Packing transaction and the successful fulfillment or waiver of all other closing conditions without unexpected delays or conditions; (x) the successful closing of the Graphic Packing transaction within the estimated timeframe; (xi) the uncertainty of the expected financial performance of the combined business following completion of the Graphic Packaging transaction; (xii) the failure of the combined business to realize the expected synergies, cost-savings and other benefits from the Graphic Packaging transaction or delay in realization thereof; (xiii) the successful financing of the Graphic Packaging transaction; (ix) unforeseen tax treatment relating to the Graphic Packaging transaction, (xv) litigation related to the Graphic Packaging transaction or limitations or restrictions imposed by regulatory authorities that may delay or negatively impact the Graphic Packaging transaction; and (xvi) our ability to achieve the benefits we expect from ~~all other~~ strategic acquisitions, divestitures, restructurings and ~~restructurings;~~capital investments, and ~~(xvii)~~(viii) other factors you can find in our press releases and filings with the Securities and Exchange Commission, including the risk factors identified in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016, as updated in Item 1A of Part II of this Quarterly Report on Form 10-Q ("Risk Factors").~~2018. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information relating to quantitative and qualitative disclosures about market risk is shown on page 3835 of International Paper’s ~~2016~~2018 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, ~~2016~~2018.


ITEM 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported (and accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure) within the time periods specified in the Securities and Exchange Commission’s rules and forms. As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, ~~2017~~2019 (the end of the period covered by this report).

Changes in Internal Control over Financial Reporting:

There have been no changes in our internal control over financial reporting during the quarter ended September 30, ~~2017~~2019 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

A discussion of material developments in the Company’s litigation matters occurring in the period covered by this report is found in Note 1215 of the Condensed Notes to the ~~financial statements~~Consolidated Financial Statements in this Form 10-Q.


ITEM 1A.	RISK FACTORS

Our proposed transaction to contribute our North American Consumer Packaging business to Graphic Packaging may not be completed within the expected timeframe, or at all, and we may not achieve the expected benefits from this transaction or from other strategic acquisitions, joint ventures, divestitures and other corporate transactions. On October 23, 2017, we entered into an agreement to contribute our North American Consumer Packaging business to Graphic Packaging in exchange for, among other things, an equity interest in the combined business and the assumption by the combined business of $660 million of indebtedness that we intend to incur prior to closing of the transaction. No assurances can be given about the timing, availability or cost of such financing. The transaction is expected to close in the first quarter of 2018. Completion of the transaction is subject to the satisfaction or waiver of certain conditions that are beyond our control and may prevent, delay or otherwise negatively affect its completion. These conditions include U.S. antitrust clearance. The Antitrust Division of the U.S. Department of Justice or other regulatory agencies may refuse to approve the acquisition or seek to make its approval subject to compliance with unanticipated or onerous conditions that could reduce the anticipated benefits of the transaction.

The success of the transaction will depend, in part, on the financial performance of the combined business and on the ability of the combined business to realize anticipated growth opportunities, cost savings and other synergies. The combined business’s success in realizing these growth opportunities, cost savings and other synergies, and the timing of this realization, will depend on the successful integration of our North American Consumer Packaging business with Graphic Packaging’s business.

More broadly, our strategy for long-term growth, productivity and profitability depends, in part, on our ability to make prudent strategic acquisitions, joint ventures, divestitures and other corporate transactions and to realize the benefits we expect from them.

~~Otherwise, there~~There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2018 (Part I, Item 1A).


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

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

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
July 1, 2017 - July 31, 2017 646
$ 56.41
—
$0.933
August 1, 2017 - August 31, 2017 —
—
—
0.933
September 1, 2017 - September 30, 2017 173
56.82
—
0.933
Total 819



Period	Total Number of Shares Purchased (a)	Average Price Paid per Share	Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in billions)
July 1, 2019 - July 31, 2019	1,329,575	$43.04	1,329,064	$1.76
August 1, 2019 - August 31, 2019	436,700	38.93	436,700	1.75
September 1, 2019 - September 30, 2019	917	40.57	—	1.75
Total	1,767,192

(a) ~~819~~1,429 shares were acquired from employees ~~from~~or board members as a result of share withholdings to pay income taxes under the Company's restricted stock programs. The remainder were purchased under a share repurchase program that was approved and increased twice by our Board of Directors and announced on September 10, 2013, July 8, 2014 and October 9, 2018. Through this program, which does not have an expiration date, we were authorized to purchase, in open market transactions (including block trades), privately negotiated transactions or otherwise, up to $5 billion of shares of our common stock. As of September 30, 2019, approximately $1.75 billion aggregate amount of shares of our common stock remained authorized for purchase under this program.


~~ITEM 6.~~	~~EXHIBITS~~

ITEM 6. EXHIBITS



10.1		~~Commitment Agreement, dated September 26, 2017, between~~Amendment No. 9 to the International Paper Company ~~and Prudential Insurance Company of America, relating to the~~Unfunded Supplemental Retirement Plan of International Paper Company.*for Senior Managers, effective November 1, 2019.

11		~~Statement of Computation of Per Share Earnings.~~

12		~~Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.~~

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.~~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.


*	~~Confidential treatment has been requested for certain information pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.~~

SIGNATURES

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



	INTERNATIONAL PAPER COMPANY (Registrant)

November ~~3, 2017~~1, 2019	By	/s/ ~~Glenn R. Landau~~Tim S. Nicholls
		~~Glenn R. Landau~~Tim S. Nicholls
		Senior Vice President and Chief Financial Officer

November ~~3, 2017~~1, 2019	By	/s/ Vincent P. Bonnot
		Vincent P. Bonnot
		Vice President – Finance and Controller

4550



In millions	Three Months Ended June 30, 2017
Gain on sale of investment in ArborGen	$	(14	)
Other	(2		)
Total	$	(16	)



In millions	Three Months Ended September 30, 2016
Early debt extinguishment costs	$	29
India packaging evaluation write-off	17
Total	$	46



In millions	Three Months Ended March 31, 2016
Gain on sale of investment in Arizona Chemical	$	(8	)
Riegelwood mill conversion costs	9
Total	$	1



In millions	Estimated Fair Value		Average Remaining Useful Life
Asset Class:			(at acquisition date)
Customer relationships and lists	$	95	24 years
Trade names, patents, trademarks and developed technology	113		8 years
Other	4		10 years
Total	$	212



In millions	Unrecognized Tax Benefits			Accrued Estimated Interest and Tax Penalties
Balance at December 31, 2016	$	(98	)	$	(22	)
Activity for three months ended March 31, 2017	(2		)	2
Activity for the three months ended June 30, 2017	(42		)	1
Activity for the three months ended September 30, 2017	1			—
Balance at September 30, 2017	$	(141	)	$	(19	)



Asian Industrial Packaging	2017						2016
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter			2nd Quarter			Nine Months
Sales	$	—	$	—	$	—	$	—		$	68		$	133
Operating Profit	$	—	$	—	$	—	$	(7	)	$	(32	)	$	(80	)
Asia Packaging Restructuring and Impairment	—		—		—		5			28			70
Operating Profit Before Special Items	$	—	$	—	$	—	$	(2	)	$	(4	)	$	(10	)



Total Consumer Packaging	2017							2016
In millions	3rd Quarter		2nd Quarter			Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	491	$	474		$	1,431	$	494	$	501	$	1,490
Operating Profit	$	54	$	(14	)	$	73	$	61	$	73	$	150
Riegelwood mill conversion costs	—		—			—		—		—		9
Foodservice Asia asset impairment	—		9			9		—		—		—
Operating Profit Before Special Items	$	54	$	(5	)	$	82	$	61	$	73	$	159



North American Consumer Packaging	2017							2016
In millions	3rd Quarter		2nd Quarter			Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	403	$	395		$	1,186	$	407	$	416	$	1,241
Operating Profit	$	33	$	(28	)	$	19	$	39	$	48	$	77
Riegelwood mill conversion costs	—		—			—		—		—		9
Foodservice Asia asset impairment	—		9			9		—		—		—
Operating Profit Before Special Items	$	33	$	(19	)	$	28	$	39	$	48	$	86