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~~2020

¨ ☐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 incorporation)			(I.R.S. Employer Identification No.)
~~incorporation of organization)~~			~~Identification No.)~~

6400 Poplar Avenue, Memphis, TNTennessee			38197
(Address of ~~principal executive offices)~~Principal Executive Offices)			(Zip Code)

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

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer		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~~23, 2020 was ~~412,928,210~~.393,095,466.

Table of Contents

INDEX


					PAGE NO.
			PART I. FINANCIAL INFORMATION

				~~PAGE NO.~~
	~~PART I. FINANCIAL INFORMATION~~

Item 1.	Financial Statements

			Condensed Consolidated Statement of Operations - Three Months and Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019		1

			Condensed Consolidated Statement of Comprehensive Income - Three Months and Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019		2

			Condensed Consolidated Balance Sheet - September 30, ~~2017~~2020 and December 31, ~~2016~~2019		3

			Condensed Consolidated Statement of Cash Flows - Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019		4

			Condensed Notes to Consolidated Financial Statements		5

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		2527

Item 3.			Quantitative and Qualitative Disclosures About Market Risk		4245

Item 4.			Controls and Procedures		4245

			PART II. OTHER INFORMATION

Item 1.			Legal Proceedings		4347

Item 1A.			Risk Factors		4347

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

Item 6.			Exhibits		4449

~~Signatures~~		45

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~


~~ITEM 1.~~ Signatures						~~FINANCIAL STATEMENTS~~ 50

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				2020		2019		2020		2019
Net Sales	$	5,913	$	5,266		$	17,196		$	15,698		Net Sales	$	5,123	$	5,568	$	15,341	$	16,878
Costs and Expenses												Costs and Expenses
Cost of products sold	4,024		3,622			12,069			11,345			Cost of products sold	3,541		3,772		10,714		11,602
Selling and administrative expenses	431		380			1,275			1,142			Selling and administrative expenses	360		387		1,110		1,202
Depreciation, amortization and cost of timber harvested	373		314			1,075			899			Depreciation, amortization and cost of timber harvested	320		327		955		963
Distribution expenses	386		353			1,155			1,012			Distribution expenses	377		395		1,149		1,168
Taxes other than payroll and income taxes	44		41			132			123			Taxes other than payroll and income taxes	44		42		129		128
Restructuring and other charges	—		46			(16		)	47
Restructuring and other charges, net												Restructuring and other charges, net	105		21		131		21
Net (gains) losses on sales and impairments of businesses	—		5			9			70			Net (gains) losses on sales and impairments of businesses	(5)		8		347		153
Litigation settlement	—		—			354			—
Net bargain purchase gain on acquisition of business	—		—			(6		)	—
Net (gains) losses on sales of equity method investments												Net (gains) losses on sales of equity method investments	(2)		0		(35)		0
Antitrust fines												Antitrust fines	0		32		0		32
Interest expense, net	152		132			431			384			Interest expense, net	112		123		345		378
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	503		373			718			676
Non-operating pension expense (income)												Non-operating pension expense (income)	(11)		9		(31)		27
Earnings (Loss) Before Income Taxes and Equity Earnings												Earnings (Loss) Before Income Taxes and Equity Earnings	282		452		527		1,204
Income tax provision (benefit)	153		107			147			139			Income tax provision (benefit)	50		137		211		371
Equity earnings (loss), net of taxes	45		43			113			151			Equity earnings (loss), net of taxes	(28)		27		13		221
Earnings (Loss) From Continuing Operations	395		309			684			688
Discontinued operations, net of taxes	—		—			—			(5		)
Net Earnings (Loss)	395		309			684			683			Net Earnings (Loss)	204		342		329		1,054
Less: Net earnings (loss) attributable to noncontrolling interests	—		(3		)	—			(3		)	Less: Net earnings (loss) attributable to noncontrolling interests	0		(2)		0		(6)
Net Earnings (Loss) Attributable to International Paper Company	$	395	$	312		$	684		$	686		Net Earnings (Loss) Attributable to International Paper Company	$	204	$	344	$	329	$	1,060
Basic Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders												Basic Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Earnings (loss) from continuing operations	$	0.96	$	0.76		$	1.65		$	1.68
Discontinued operations, net of taxes	—		—			—			(0.01		)
Net earnings (loss)	$	0.96	$	0.76		$	1.65		$	1.67		Net earnings (loss)	$	0.52	$	0.88	$	0.84	$	2.67
Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders												Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Earnings (loss) from continuing operations	$	0.95	$	0.75		$	1.64		$	1.66
Discontinued operations, net of taxes	—		—			—			(0.01		)
Net earnings (loss)	$	0.95	$	0.75		$	1.64		$	1.65		Net earnings (loss)	$	0.52	$	0.87	$	0.83	$	2.65
Average Shares of Common Stock Outstanding – assuming dilution	417.4		415.3			417.4			415.5			Average Shares of Common Stock Outstanding – assuming dilution	394.6		395.4		394.5		399.6
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.

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INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

(In millions)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
	2017			2016			2017			2016				2020		2019		2020		2019
Net Earnings (Loss)	$	395		$	309		$	684		$	683		Net Earnings (Loss)	$	204	$	342	$	329	$	1,054
Other Comprehensive Income (Loss), Net of Tax:													Other Comprehensive Income (Loss), Net of Tax:
Amortization of pension and post-retirement prior service costs and net loss:													Amortization of pension and post-retirement prior service costs and net loss:
U.S. plans	59			72			176			471
Pension and postretirement liability adjustments:
U.S. plans	—			(53		)	—			(598		)	U.S. plans	42		41		127		122
Non-U.S. plans	—			—			1			17			Non-U.S. plans	1		0		1		0
Change in cumulative foreign currency translation adjustment	100			3			234			373			Change in cumulative foreign currency translation adjustment	(28)		(179)		(515)		(106)
Net gains/losses on cash flow hedging derivatives:													Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period	1			5			9			(5		)	Net gains (losses) arising during the period	(4)		(10)		(34)		(6)
Reclassification adjustment for (gains) losses included in net earnings (loss)	(2		)	(3		)	(6		)	(7		)	Reclassification adjustment for (gains) losses included in net earnings (loss)	6		4		26		5
Total Other Comprehensive Income (Loss), Net of Tax	158			24			414			251			Total Other Comprehensive Income (Loss), Net of Tax	17		(144)		(395)		15
Comprehensive Income (Loss)	553			333			1,098			934			Comprehensive Income (Loss)	221		198		(66)		1,069
Net (earnings) loss attributable to noncontrolling interests	—			3			—			3			Net (earnings) loss attributable to noncontrolling interests	0		2		0		6
Other comprehensive (income) loss attributable to noncontrolling interests	1			(1		)	(1		)	(1		)	Other comprehensive (income) loss attributable to noncontrolling interests	0		0		2		0
Comprehensive Income (Loss) Attributable to International Paper Company	$	554		$	335		$	1,097		$	936		Comprehensive Income (Loss) Attributable to International Paper Company	$	221	$	200	$	(64)	$	1,075

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

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INTERNATIONAL PAPER COMPANY

Condensed Consolidated Balance Sheet

(In millions)


	September 30, 2017			December 31, 2016				September 30, 2020		December 31, 2019
	(unaudited)							(unaudited)
Assets							Assets
Current Assets							Current Assets
Cash and temporary investments	$	998		$	1,033		Cash and temporary investments	$	678	$	511
Accounts and notes receivable, net	3,343			3,001			Accounts and notes receivable, net	3,034		3,280
Contract assets							Contract assets	388		393
Inventories	2,465			2,438			Inventories	2,007		2,208
Current financial assets of variable interest entities (Note 16)							Current financial assets of variable interest entities (Note 16)	4,850		0
Assets held for sale							Assets held for sale	114		0
Other current assets	405			198			Other current assets	217		247
Total Current Assets	7,211			6,670			Total Current Assets	11,288		6,639
Plants, Properties and Equipment, net	14,065			13,990			Plants, Properties and Equipment, net	12,410		13,004
Forestlands	468			456			Forestlands	288		391
Investments	336			360			Investments	1,100		1,721
Financial Assets of Special Purpose Entities (Note 13)	7,047			7,033
Long-Term Financial Assets of Variable Interest Entities (Note 16)							Long-Term Financial Assets of Variable Interest Entities (Note 16)	2,252		7,088
Goodwill	3,420			3,364			Goodwill	3,304		3,347
Right of Use Assets							Right of Use Assets	422		434
Deferred Charges and Other Assets	1,266			1,220			Deferred Charges and Other Assets	776		847
Total Assets	$	33,813		$	33,093		Total Assets	$	31,840	$	33,471
Liabilities and Equity							Liabilities and Equity
Current Liabilities							Current Liabilities
Notes payable and current maturities of long-term debt	$	958		$	239		Notes payable and current maturities of long-term debt	$	179	$	168
Current nonrecourse financial liabilities of variable interest entities (Note 16)							Current nonrecourse financial liabilities of variable interest entities (Note 16)	4,220		4,220
Accounts payable	2,408			2,309			Accounts payable	2,226		2,423
Accrued payroll and benefits	447			430			Accrued payroll and benefits	453		466
Other accrued liabilities	1,056			1,091
Liabilities held for sale							Liabilities held for sale	376		0
Other current liabilities							Other current liabilities	1,022		1,369
Total Current Liabilities	4,869			4,069			Total Current Liabilities	8,476		8,646
Long-Term Debt	11,373			11,075			Long-Term Debt	8,525		9,597
Nonrecourse Financial Liabilities of Special Purpose Entities (Note 13)	6,289			6,284
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)							Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)	2,091		2,085
Deferred Income Taxes	3,505			3,127			Deferred Income Taxes	2,639		2,633
Pension Benefit Obligation	2,069			3,400			Pension Benefit Obligation	1,421		1,578
Postretirement and Postemployment Benefit Obligation	315			330			Postretirement and Postemployment Benefit Obligation	246		270
Long-Term Lease Obligations							Long-Term Lease Obligations	290		304
Other Liabilities	460			449			Other Liabilities	1,056		640
Equity							Equity
Common stock, $1 par value, 2017 – 448.9 shares and 2016 – 448.9 shares	449			449
Common stock, $1 par value, 2020 – 448.9 shares and 2019 – 448.9 shares							Common stock, $1 par value, 2020 – 448.9 shares and 2019 – 448.9 shares	449		449
Paid-in capital	6,176			6,189			Paid-in capital	6,302		6,297
Retained earnings	4,918			4,818			Retained earnings	8,122		8,408
Accumulated other comprehensive loss	(4,949		)	(5,362		)	Accumulated other comprehensive loss	(5,132)		(4,739)
	6,594			6,094				9,741		10,415
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, 2020 – 55.8 shares and 2019 – 56.8 shares							Less: Common stock held in treasury, at cost, 2020 – 55.8 shares and 2019 – 56.8 shares	2,648		2,702
Total International Paper Shareholders’ Equity	4,914			4,341			Total International Paper Shareholders’ Equity	7,093		7,713
Noncontrolling interests	19			18			Noncontrolling interests	3		5
Total Equity	4,933			4,359			Total Equity	7,096		7,718
Total Liabilities and Equity	$	33,813		$	33,093		Total Liabilities and Equity	$	31,840	$	33,471

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

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INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In millions)


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

Nine Months Ended
September 30,
2017 2016
Operating Activities
Net earnings (loss) $ 684
$ 683
Depreciation, amortization and cost of timber harvested 1,075
899
Deferred income tax provision (benefit), net 295
45
Restructuring and other charges (16 ) 47
Pension plan contributions (1,250 ) (750 )
Net bargain purchase gain on acquisition of business (6 ) —
Net (gains) losses on sales and impairments of businesses 9
70
Ilim dividends received 129
58
Equity (earnings) loss, net (113 ) (151 )
Periodic pension expense, net 237
718
Other, net 92
67
Changes in current assets and liabilities
Accounts and notes receivable (293 ) (83 )
Inventories (70 ) (6 )
Accounts payable and accrued liabilities 5
(37 )
Interest payable (11 ) 24
Other (198 ) (18 )
Cash Provided By (Used For) Operations 569
1,566
Investment Activities
Invested in capital projects (935 ) (903 )
Acquisitions, net of cash acquired (45 ) (56 )
Proceeds from divestitures, net of cash divested 4
105
Proceeds from sale of fixed assets 22
13
Other (54 ) (130 )
Cash Provided By (Used For) Investment Activities (1,008 ) (971 )
Financing Activities
Repurchases of common stock and payments of restricted stock tax withholding (46 ) (132 )
Issuance of debt 1,366
3,447
Reduction of debt (369 ) (1,855 )
Change in book overdrafts 5
(5 )
Dividends paid (573 ) (543 )
Debt tender premiums paid (1 ) (31 )
Other (2 ) (3 )
Cash Provided By (Used For) Financing Activities 380
878
Effect of Exchange Rate Changes on Cash 24
39
Change in Cash and Temporary Investments (35 ) 1,512
Cash and Temporary Investments
Beginning of period 1,033
1,050
End of period $ 998
$ 2,562

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

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INTERNATIONAL PAPER COMPANY

Condensed Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments that are necessary for the fair presentation of International Paper Company’s (International Paper’s, the Company’s or our) financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed herein, such adjustments are of a normal, recurring nature. Results for the first nine months of the year may not necessarily be indicative of full year results. It is suggested that these condensed financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016 and the Company's Current Report on Form 8-K dated July 31, 2017 (collectively the "2016 10-K"), both of~~2019, which have previously been filed with the Securities and Exchange Commission.

On March 11, 2020 the World Health Organization (WHO) declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Most of our manufacturing and converting facilities have remained open and operational during the pandemic. The ~~Current Report~~health and safety of our employees and contractors is our most important responsibility as we manage through the COVID-19 pandemic. We have implemented work-systems across the Company, including hygiene, social distancing, site cleaning, contact tracing, and other measures, as recommended by the Centers for Disease Control (CDC) and WHO. Our COVID-19 measures are proving to be effective and we have not had any material disruptions to our operations.

We have seen a significant negative impact on ~~Form 8-K dated July 31, 2017 was filed~~demand for our printing papers products. Demand for our pulp, containerboard and corrugated box products has not been negatively impacted by COVID-19 to ~~retrospectively adjust~~date, but could be unfavorably impacted going forward if negative economic conditions associated with COVID-19 persist or deteriorate. Furthermore, if there is a resurgence of the virus leading to additional governmental measures, such as stay-at-home orders or business and school closures, our supply chain, and therefore our production, could be negatively impacted.

There continue to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the various economic reopening plans and the resurgence of the virus in many areas; additional actions that may be taken by governmental authorities and private businesses to attempt to contain the COVID-19 outbreak or to mitigate its impact; the extent and duration of social distancing and stay-at-home orders; the possibility of development of a vaccine; and the ongoing impact of COVID-19 on unemployment, economic activity and consumer confidence. Developments related to COVID-19 are significantly adversely affecting portions of ~~the Company's Annual Report~~our business, and could have a material adverse effect 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 theour financial condition, results of ~~the businesses that manufacture the products,~~operations and ~~as such, prior year amounts have been reclassified to conform with the presentation in 2017.~~cash flows, particularly if negative global economic conditions persist for a significant period of time or deteriorate.

~~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

Financial Instruments - Credit Losses

In ~~August 2017,~~June 2016, the FASB issued ASU ~~2017-12, "Derivatives~~2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This guidance replaces the current incurred loss impairment method with a method that reflects expected credit losses. The Company adopted this guidance using the modified retrospective approach on January 1, 2020. As a result of using this approach, the Company recognized a cumulative effect adjustment of $2 million to the opening balance of retained earnings representing the adjustment to our opening allowance for doubtful accounts required to state our trade receivables and ~~Hedging~~contract assets net of their expected credit losses, net of deferred taxes.

Recently Issued Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic ~~815)~~848): ~~Targeted Improvements to Accounting for Hedging Activities." The objective of this new guidance is the improvement~~Facilitation of the ~~financial reporting~~Effects 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.Reference Rate Reform on Financial Reporting." This guidance provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance

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is effective ~~for annual reporting periods beginning after~~upon issuance and generally can be applied through December ~~15, 2018, and interim periods within those years. Early adoption is permitted.~~31, 2022. The Company is currently evaluating the provisions of this ~~guidance, but plans to early adopt the provisions of this guidance for the year beginning January 1, 2018.~~guidance.

~~Retirement Benefits~~

In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation 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 arising 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. This guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted as of 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 the impact of presenting 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.

~~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 is currently evaluating the provisions of this guidance; however, we do not anticipate adoption having material impact given we have no impairment triggers.

~~Business Combinations~~

In January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of 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 requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. This guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the provisions of this guidance; however, we do not anticipate the adoption having a material impact on the financial statements.

Income Taxes

In ~~October 2016,~~December 2019, the FASB issued ASU ~~2016-16,~~2019-12, "Income Taxes (Topic 740): ~~Intra-Entity Transfers of Assets Other Than Inventory." This ASU requires companies to recognize~~Simplifying the income tax effects of intercompany sales 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 effectiveAccounting 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.~~Income Taxes." This guidance ~~clarifies when changes~~removes certain exceptions from recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to ~~the terms or conditions~~reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members 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.consolidated group. This guidance is effective for annual reporting periods beginning after December 15, ~~2017,~~2020, and interim periods within those years. Early adoption of the amendments is permitted, including adoption in any interim ~~period.~~period for public business entities for periods for which financial statements have not yet been issued. The Company ~~is currently evaluating~~plans to early adopt the provisions of this ~~guidance; however, we do not anticipate the adoption having a material 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 and tax deficiencies are recognized~~ in the ~~income statement as they occur~~fourth quarter of 2020 and ~~therefore~~does not expect the 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~~material.

NOTE 3 - REVENUE RECOGNITION

Generally, the ~~cash flow presentation of excess tax benefits, classifying them as operating inflows rather than financing activities as they were previously classified. In addition,~~Company recognizes revenue on a point-in-time basis when 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 relatedcustomer takes title to the timing of 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 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, 2020
In millions	Industrial Packaging		Global Cellulose Fibers		Printing Papers		Corporate and Inter-segment Sales		Total
Primary Geographical Markets (a)
United States	$	3,169	$	479	$	362	$	44	$	4,054
EMEA	394		59		244		(3)		694
Pacific Rim and Asia	15		26		6		10		57
Americas, other than U.S.	190		0		131		(3)		318
Total	$	3,768	$	564	$	743	$	48	$	5,123

Operating Segments
North American Industrial Packaging	$	3,351	$	—	$	—	$	—	$	3,351
EMEA Industrial Packaging	306		—		—		—		306
Brazilian Industrial Packaging	52		—		—		—		52
European Coated Paperboard	90		—		—		—		90
Global Cellulose Fibers	—		564		—		—		564
North American Printing Papers	—		—		362		—		362
Brazilian Papers	—		—		150		—		150
European Papers	—		—		232		—		232
Indian Papers	—		—		0		—		0
Intra-segment Eliminations	(31)		—		(1)		—		(32)
Corporate & Inter-segment Sales	—		—		—		48		48
Total	$	3,768	$	564	$	743	$	48	$	5,123

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

Table of Contents


	Nine Months Ended September 30, 2020
In millions	Industrial Packaging		Global Cellulose Fibers		Printing Papers		Corporate and Inter-segment Sales		Total
Primary Geographical Markets (a)
United States	$	9,364	$	1,507	$	1,069	$	146	$	12,086
EMEA	1,213		175		765		(11)		2,142
Pacific Rim and Asia	43		55		20		20		138
Americas, other than U.S.	600		0		380		(5)		975
Total	$	11,220	$	1,737	$	2,234	$	150	$	15,341

Operating Segments
North American Industrial Packaging	$	9,947	$	—	$	—	$	—	$	9,947
EMEA Industrial Packaging	953		—		—		—		953
Brazilian Industrial Packaging	148		—		—		—		148
European Coated Paperboard	266		—		—		—		266
Global Cellulose Fibers	—		1,737		—		—		1,737
North American Printing Papers	—		—		1,073		—		1,073
Brazilian Papers	—		—		434		—		434
European Papers	—		—		728		—		728
Indian Papers	—		—		0		—		0
Intra-segment Eliminations	(94)		—		(1)		—		(95)
Corporate & Inter-segment Sales	—		—		—		150		150
Total	$	11,220	$	1,737	$	2,234	$	150	$	15,341

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


	Three Months Ended September 30, 2019
In millions	Industrial Packaging		Global Cellulose Fibers		Printing Papers		Corporate & Intersegment		Total
Primary Geographical Markets (a)
United States	$	3,180	$	535	$	486	$	56	$	4,257
EMEA	415		62		315		(1)		791
Pacific Rim and Asia	20		27		47		3		97
Americas, other than U.S.	205		0		223		(5)		423
Total	$	3,820	$	624	$	1,071	$	53	$	5,568

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

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

Table of Contents


	Nine Months Ended September 30, 2019
In millions	Industrial Packaging		Global Cellulose Fibers		Printing Papers		Corporate & Intersegment		Total
Primary Geographical Markets (a)
United States	$	9,531	$	1,656	$	1,448	$	174	$	12,809
EMEA	1,263		207		986		(8)		2,448
Pacific Rim and Asia	50		111		167		9		337
Americas, other than U.S.	672		0		623		(11)		1,284
Total	$	11,516	$	1,974	$	3,224	$	164	$	16,878

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

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

Revenue Contract Balances

A contract asset is created when the Company recognizes revenue on its customized products prior to having an unconditional right to payment from the customer, which generally does not occur until title and risk of loss passes to the ~~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~~fourth quarter each year for goods that will be transferred to customers over the following twelve months. Contract liabilities of ~~this acceleration to significantly alter our sales recognition patterns over time. In addition, the Company continues to assess the impact of required disclosures around revenue recognition~~$20 million and $56 million are included in Other current liabilities in the ~~notes to~~accompanying condensed consolidated balance sheet as of September 30, 2020 and December 31, 2019, respectively.

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

Table of ~~the standard will result in a material impact on its financial statements.~~Contents

NOTE 34 - EQUITY

A summary of the changes in equity for the three months and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 is provided below:


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


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


	Three Months Ended September 30, 2019
In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total International Paper Shareholders’ Equity		Noncontrolling Interests		Total Equity
Balance, July 1	$	449	$	6,229	$	8,302	$	(4,870)	$	2,628	$	7,482	$	17	$	7,499
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	—		0		—		—		—		0		—		0
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

Table of Contents


	Nine Months Ended September 30,
	2017								2016										Nine Months Ended September 30, 2019
In millions, except per share amounts	Total International Paper Shareholders’ Equity			Noncontrolling Interests		Total Equity			Total International Paper Shareholders’ Equity			Noncontrolling Interests			Total Equity			In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total International Paper Shareholders’ Equity		Noncontrolling Interests		Total Equity
Balance, January 1	$	4,341		$	18	$	4,359		$	3,884		$	25		$	3,909		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																		Adoption of ASU 2018-02 reclassification of stranded tax effects resulting from Tax Reform	—		—		529		(529)		—		—		—		0
Issuance of stock for various plans, net	130			—		130			100			—			100			Issuance of stock for various plans, net	—		(52)		—		—		(165)		113		—		113
Repurchase of stock	(46		)	—		(46		)	(132		)	—			(132		)	Repurchase of stock	—		—		—		—		535		(535)		—		(535)
Common stock dividends ($1.3875 per share in 2017 and $1.3200 per share in 2016)	(584		)	—		(584		)	(550		)	—			(550		)
Common stock dividends ($1.5000 per share)																		Common stock dividends ($1.5000 per share)	—		—		(607)		—		—		(607)		—		(607)
Transactions of equity method investees	(24		)	—		(24		)	(37		)	—			(37		)	Transactions of equity method investees	—		33		—		—		—		33		—		33
Divestiture of noncontrolling interests	—			—		—			—			(3		)	(3		)
Other	—			—		—			8			—			8
Comprehensive income (loss)	1,097			1		1,098			936			(2		)	934			Comprehensive income (loss)	—		—		1,060		15		—		1,075		(6)		1,069
Ending Balance, September 30	$	4,914		$	19	$	4,933		$	4,209		$	20		$	4,229		Ending Balance, September 30	$	449	$	6,261	$	8,447	$	(5,014)	$	2,702	$	7,441	$	15	$	7,456

~~NOTE 4~~

N OTE 5 - 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:~~2020 and 2019:


	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Defined Benefit Pension and Postretirement Adjustments
Balance at beginning of period	$	(2,192)	$	(2,362)	$	(2,277)	$	(1,916)
Reclassification of stranded tax effects	0		0		0		(527)
Amounts reclassified from accumulated other comprehensive income	43		41		128		122
Balance at end of period	(2,149)		(2,321)		(2,149)		(2,321)
Change in Cumulative Foreign Currency Translation Adjustments
Balance at beginning of period	(2,950)		(2,508)		(2,465)		(2,581)
Other comprehensive income (loss) before reclassifications	(28)		(179)		(515)		(110)
Amounts reclassified from accumulated other comprehensive income	0		0		0		4
Other comprehensive income (loss) attributable to noncontrolling interest	0		0		2		0
Balance at end of period	(2,978)		(2,687)		(2,978)		(2,687)
Net Gains and Losses on Cash Flow Hedging Derivatives
Balance at beginning of period	(7)		0		3		(3)
Other comprehensive income (loss) before reclassifications	(4)		(10)		(34)		(6)
Reclassification of stranded tax effects	0		0		0		(2)
Amounts reclassified from accumulated other comprehensive income	6		4		26		5
Balance at end of period	(5)		(6)		(5)		(6)
Total Accumulated Other Comprehensive Income (Loss) at End of Period	$	(5,132)	$	(5,014)	$	(5,132)	$	(5,014)

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:~~

Table of Contents

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~~2020 and ~~2016:~~2019:


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,
	2020		2019		2020		2019
Defined benefit pension and postretirement items:
Prior-service costs	$	(5)	$	(4)	$	(15)	$	(10)	(a)	Non-operating pension expense
Actuarial gains (losses)	(52)		(50)		(155)		(152)		(a)	Non-operating pension expense
Total pre-tax amount	(57)		(54)		(170)		(162)
Tax (expense) benefit	14		13		42		40
Net of tax	(43)		(41)		(128)		(122)
Reclassification of stranded tax effects	0		0		0		527			Retained Earnings
Total, net of tax	(43)		(41)		(128)		405

Change in cumulative foreign currency translation adjustments:
Business acquisitions/divestitures	0		0		0		(4)			Cost of products sold
Tax (expense) benefit	0		0		0		0
Net of tax	0		0		0		(4)

Net gains and losses on cash flow hedging derivatives:
Foreign exchange contracts	(8)		(6)		(39)		(7)		(b)	Cost of products sold
Total pre-tax amount	(8)		(6)		(39)		(7)
Tax (expense)/benefit	2		2		13		2
Net of tax	(6)		(4)		(26)		(5)
Reclassification of stranded tax effects	0		0		0		2			Retained Earnings
Total, net of tax	(6)		(4)		(26)		(3)
Total reclassifications for the period	$	(49)	$	(45)	$	(154)	$	398

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

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

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 16 for additional details).~~


~~(b)~~	~~This accumulated other comprehensive income component is included in our derivatives and hedging activities (see Note 15 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 and diluted earnings (loss) per ~~common~~ share is as follows:


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

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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:~~ ~~There were no restructuring and other charges recorded during~~2020: During the three months ended September 30, ~~2017.~~2020, the Company recorded a $105 million pre-tax charge in Corporate related to early debt extinguishment costs.

During the three months ended June 30, ~~2017, restructuring and other charges totaling a $16~~2020, the Company recorded an $18 million ~~benefit before taxes were recorded. Details of these charges were as follows:~~pre-tax charge in Corporate related to early debt extinguishment costs.

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~~2020, the Company recorded an $8 million pre-tax charge in Corporate related to early debt extinguishment costs.

2019: During the three months and ~~other charges totaling $1~~nine months ended September 30, 2019, the Company recorded an $11 million ~~before taxes were recorded. Details~~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 ~~these charges were~~the severance was paid over the next twelve months.

NOTE 8 - ACQUISITIONS

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

an equity method investment.

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 7 - ACQUISITIONS~~

~~Tangier, Morocco Facility~~

2019: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 €71 million (approximately ~~$46~~$81 million ~~using the~~at June 30, ~~2017~~2019 exchange ~~rate), subject to certain post-closing adjustments. Approximately 80% of~~rates).

The following table summarizes the final fair value ~~has been provisionally allocated~~assigned to ~~property, plant~~assets and ~~equipment. Adjustments, if any, to provisional amounts will be finalized within the measurement period~~liabilities acquired as of ~~up to one year from the acquisition date.~~ June 28, 2019:


In millions
Cash and temporary investments	$	2
Accounts and notes receivable	22
Inventory	8
Plants, properties and equipment	37
Goodwill	27
Intangible assets	14
Right of use assets	3
Deferred charges and other assets	2
Total assets acquired	$	115
Short-term debt	$	2
Accounts payable and accrued liabilities	17
Other current liabilities	5
Deferred income taxes	4
Long-term debt	1
Postretirement and postemployment benefit obligation	3
Long-term lease obligations	2
Total liabilities assumed	34
Net assets acquired	$	81

Pro forma information ~~related to the acquisition of the Europac 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 condensed consolidated results of operations.

~~Weyerhaeuser Pulp Business~~

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NOTE 9 - DIVESTITURES AND IMPAIRMENTS

2020:On ~~December 1, 2016,~~March 29, 2020, the Company ~~completed the acquisition of Weyerhaeuser Company's pulp~~announced that it had entered into an agreement to sell its Brazilian Industrial Packaging business for ~~approximately $2.2 billion in cash. Under~~R$330 million (approximately $58.5 million using the ~~terms~~September 30, 2020 exchange rate), with R$280 million to be paid at closing and R$50 million one year thereafter, subject to the final working capital adjustments. This business includes 3 containerboard mills and 4 box plants and the agreement follows International Paper's previously announced strategic review 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.Brazilian Industrial Packaging business.

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

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

The assignment to fair value is provisional and could be revised as a result of 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 property, plant and equipment and intangible assets. While we do not anticipate these changes to be significant, the provisional amounts will not be finalized until the end of the measurement period of up to one year from the acquisition date.

In ~~connection~~conjunction with the ~~business combination, inventories were written up by $33~~announced agreement, a preliminary pre-tax charge of $347 million ~~to their estimated fair value. During the first quarter of 2017, $14 million before taxes~~ ($8340 million after taxes) ~~were expensed to Cost~~was recorded during the first nine months of ~~products sold as~~2020. These charges are included in Net (gains) losses on sales and impairments of businesses in the ~~related inventory was sold.~~

~~The identifiable intangible assets acquired in connection with the acquisition~~accompanying condensed consolidated statement 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~~is included in ~~a cogeneration facility. The Company intends~~the results for the Industrial Packaging segment. Subsequent to ~~convert~~September 30, 2020, the ~~mill~~transaction closed and final working capital adjustments, if any, will be recognized 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.~~2020.

~~The Company's aggregate purchase price for the mill, recycling operations~~At September 30, 2020, all assets 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~~Brazilian Industrial Packaging business are classified as current assets held for sale and current liabilities held for sale in 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 to obtain the information due to the lack of availability of financial data and does not have a material effect on the Company’saccompanying condensed consolidated ~~results of operations.~~balance sheet.

The ~~Company has accounted~~following summarizes the major classes of assets and liabilities of this business reconciled to total Assets held for sale and total Liabilities held for sale in the ~~above acquisitions under ASC 805, "Business Combinations" and the results of operations have been included in International Paper's financial statements beginning with the dates of acquisition.~~accompanying condensed consolidated balance sheet.


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

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

~~NOTE 8 - DIVESTITURES / SPINOFF~~

~~Other Divestitures and Impairments~~

~~2017:~~ 2019:On ~~September 7, 2017,~~October 30, 2019, the Company ~~completed~~closed the previously announced sale of its ~~foodservice business~~controlling interest in China to Huhtamaki Hong Kong Limited. Proceeds received totaled approximately RMB 129 million ($18 million using the September 30, 2017 exchange rate). Under the terms of the transaction, and after post-closing adjustments, International Paper ~~received approximately RMB 49 million in exchange for its ownership interest in two China foodservice entities and RMB 80 million for the sale of notes receivable from the acquired entities.~~

~~Subsequent~~APPM Limited (APPM) to the announced agreement in June 2017, a determination was made that the current book value of the asset group exceeded its estimated fair value of $7 million, which was the agreed upon selling price. As a result, a pre-tax charge of $9 million was recorded duringWest Coast Paper Mills (WCPM). During the second quarter of 2017, in the Company's Consumer Packaging segment, to write down the long-lived assets of this business to their estimated fair value. Amounts related to this business included in the Company's statement of operations were immaterial for both the three months and nine months ended September 30, 2017.

~~2016:~~ ~~On June 30, 2016,~~2020 the Company ~~completed the previously announced sale~~sold substantially all of its ~~corrugated packaging business in China~~remaining investment and ~~Southeast Asia to Xiamen Bridge Hexing Equity Investment Partnership Enterprise. Under~~recorded a gain of $6 million. During the ~~terms~~third quarter of 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. In addition,2020 the Company ~~recorded a pre-tax charge of $24 million~~sold its remaining immaterial investment in the 2016 second quarter 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 in the Company's statement of operations were $7 million and $80 million for the three months and nine months ended September 30, 2016.APPM.

NOTE 910 - SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

Temporary Investments

Temporary investments with an original maturity of three months or less and money market funds with greater than three month maturities but with the right to redeem without notices are treated as cash equivalents and are stated at cost. Temporary investments totaled ~~$663~~$450 million and ~~$757~~$335 million at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.

Accounts and Notes Receivable


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

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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 expected credit losses was $86 million at September 30, 2020 and the allowance for doubtful accounts was ~~$78 million and $70~~$73 million at ~~September 30, 2017 and~~ December 31, ~~2016, respectively.~~2019. Based on the Company's accounting estimates and the facts and circumstances available as of the reporting date, we believe our allowance for expected credit losses is adequate. While we have taken into account certain impacts of COVID-19 in connection with our estimate of the allowance for expected credit losses, it is possible that additional expected credit losses in excess of such allowance could occur if additional containment and mitigation measures are required or negative economic conditions persist or deteriorate as a result of of COVID-19.

Inventories


In millions	September 30, 2020		December 31, 2019
Raw materials	$	257	$	298
Finished pulp, paper and packaging	1,023		1,192
Operating supplies	638		659
Other	89		59
Total	$	2,007	$	2,208

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

Plants, Properties and Equipment

~~Depreciation~~

Accumulated depreciation was ~~$22.7~~$21.0 billion and ~~$21.6~~$20.5 billion at September 30, ~~2017~~2020 and December 31, ~~2016.~~2019, respectively. Depreciation expense was ~~$341~~$300 million and ~~$294~~$305 million for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~$997~~$902 million ~~and $845 million~~ for both the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019.

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

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

Interest

Interest payments made during the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 were ~~$600~~$520 million and ~~$511~~$591 million, respectively.

Amounts related to interest were as follows:


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

Asset Retirement Obligations

The Company had recorded liabilities of $97 million and $96 million related to asset retirement obligations at September 30, 2020 and December 31, 2019, 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 96 years. Total lease cost was $68 million for both the three months ended September 30, 2020 and 2019, and $202 million and $206 million for the nine months ended September 30, 2020 and 2019, respectively.

Table of Contents

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
Supplemental Balance Sheet Information Related to Leases


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

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

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

The Company completed the transfer of its North American Consumer Packaging business in exchange for an initial 20.5% ownership interest (79,911,511 units) in Graphic Packaging International Partners, LLC (GPIP) in 2018. GPIP subsequently transferred the North American Consumer Packaging business to Graphic Packaging International, LLC (GPI), a wholly-owned subsidiary of GPIP that holds the assets of the combined business. On January 29, 2020, the Company exchanged 15,150,784 units of the aggregate units owned by the Company for an aggregated price of $250 million, resulting in a pre-tax gain of $33 million ($25 million after taxes) which was recorded in the first quarter of 2020. On August 7, 2020, the Company exchanged 17,399,414 units of the aggregate units owned by the Company for an aggregated price of $250 million, resulting in an immaterial gain which was recorded in the third quarter of 2020. As of September 30, 2020, the Company's ownership interest in GPIP was 14.8%. The Company recorded equity earnings of $11 million and $10 million for the three months ended September 30, 2020 and 2019, respectively, and $29 million and $37 million for the nine months ended September 30, 2020 and 2019, respectively. The Company received cash dividends from GPIP of $16 million and $20 million during the first nine months of 2020 and 2019, respectively. The Company's investment in GPIP was $693 million and $1.1 billion at September 30, 2020 and December 31, 2019, respectively, which was $347 million and $529 million, respectively, more than the Company's proportionate share of the entity's underlying net assets. The difference primarily relates to the basis difference between the fair value of our investment and the underlying net assets, and is generally amortized in equity earnings over a period consistent with the underlying long-lived assets. The Company is party to various agreements with GPI under which it sells fiber and other products to GPI. Sales under these agreements were $60 million and $69 million for the three months ended September 30, 2020 and 2019, respectively, and $190 million and $212 million for the nine months ended September 30, 2020 and 2019, respectively.

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

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

Balance Sheet


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

Table of Contents

Income Statement


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

Ilim S.A.

The Company has a 50% equity interest in Ilim S.A. (Ilim), which has subsidiaries whose primary operations are in Russia. The Company recorded equity earnings (losses), net of taxes, of $(33) million and $18 million for the three months ended September 30, 2020 and 2019, respectively, and $(5) million and $186 million for the nine months ended September 30, 2020 and 2019, respectively. The Company received cash dividends from the joint venture of $141 million and $239 million during the first nine months of 2020 and 2019, respectively. At September 30, 2020 and December 31, 2019, the Company's investment in Ilim was $322 million and $508 million, respectively, which was $126 million and $136 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 $41 million and $51 million for the three months ended September 30, 2020 and 2019, respectively, and $131 million and $162 million for the nine months ended September 30, 2020 and 2019, respectively.

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

Balance Sheet


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

Income Statement


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

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NOTE 13 - GOODWILL AND OTHER INTANGIBLES

Goodwill

The following table presents changes in goodwill balances as allocated to each business segment for the ~~nine-month period~~nine-months ended September 30, ~~2017:~~2020:

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


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


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


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


~~(d)~~	~~Represents purchase price adjustments related to the the newly acquired pulp business.~~

(a)Represents the effects of foreign currency translations.

Other Intangibles

Identifiable intangible assets comprised the following:


	September 30, 2017				December 31, 2016					September 30, 2020						December 31, 2019
In millions	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		In millions	Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets		Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets
Customer relationships and lists	$	612	$	242	$	605	$	211	Customer relationships and lists	$	534	$	280	$	254	$	560	$	275	$	285
Non-compete agreements	71		71		69		64
Tradenames, patents and trademarks, and developed technology	173		69		173		56		Tradenames, patents and trademarks, and developed technology	170		113		57		170		102		68
Land and water rights	8		2		10		2		Land and water rights	8		2		6		8		2		6
Software	23		22		21		20		Software	25		25		0		26		25		1
Other	50		38		48		26		Other	19		10		9		18		10		8
Total	$	937	$	444	$	926	$	379	Total	$	756	$	430	$	326	$	782	$	414	$	368

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	2020		2019		2020		2019
Amortization expense related to intangible assets	$	17	$	15	$	43	$	40

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~~$203 million and ~~$68~~$245 million for the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, 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$70 million during the next 12 months.

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

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

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and ~~Combined Heat~~Economic Security (CARES) Act ("the CARES Act"). The CARES Act provides various types of economic relief for individuals and ~~Power system expenditures. Under this method,~~businesses due to the ~~investment~~COVID-19 pandemic, including temporary corporate tax ~~credits are recognized as~~relief. We currently do not believe there to be a ~~reduction~~material impact to the income tax ~~expense in~~provision resulting from the ~~year they are earned rather than a reduction in the asset basis. The Company recorded a tax benefit of $29 million in the third quarter related to Investment Tax Credits earned in tax years 2016-2017.~~CARES Act.

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 environmental remediation matters, including those described herein, to be approximately ~~$130~~$186 million ($195 million undiscounted) in the aggregate atas of September 30, ~~2017.~~2020. 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~~wood-treatment facility located in Cass Lake, Minnesota. In June 2011, the United States Environmental Protection Agency (EPA) selected and published a proposed soil remedy at the site with an estimated cost of ~~$46 million. The overall remediation reserve for the site is currently $48~~$45 million ~~to address the selection of an alternative for the soil remediation component of the overall site remedy which includes the ongoing groundwater remedy.~~at September 30, 2020. In ~~October 2011, the EPA released a public statement indicating that the final soil remedy decision would be delayed. In March 2016,~~April 2020, the EPA issued a ~~proposed~~final 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, in excess of the applicable reserve referenced above, which may be incurred.

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

•Operable Unit 5, Area 1: In March 2016, the Company and other PRPs received a special notice letter from the EPA (i) inviting participation in implementing a remedy for a portion of the site known as Operable Unit 5, Area 1, and (ii) demanding reimbursement of EPA past costs ~~related to this portion of the site~~ 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 for this portion of the site.~~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 ~~April 2016,~~September 2017, the EPA issued a ~~separate unilateral administrative order to~~Record of Decision selecting the ~~Company and certain other PRPs~~final remedy for a ~~time-critical removal action (TCRA) of PCB-contaminated sediments from a different~~ portion of the ~~site. The Company responded to~~site known as Operable Unit 5, Area 2, but has not yet issued a special notice letter for implementing the ~~unilateral administrative order, agreeing to comply with the order subject to its sufficient cause defenses.~~remedy.

•Operable Unit 1: In October 2016, the Company and another PRP received a special notice letter from the EPA inviting participation in the remedial design component of the landfill remedy for the Allied Paper ~~Mill.~~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

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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.

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

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

The Company was named as a defendant by Georgia-Pacific Consumer Products LP, Fort James Corporation and Georgia Pacific LLC in a contribution and cost recovery action for alleged pollution at the site. NCR Corporation and Weyerhaeuser Company are also named as defendants in the suit. The suit seeks contribution under CERCLA for costs purportedly expended by plaintiffs ($($79 million as of the filing of the complaint) and for future remediation costs. ~~The suit alleges that a mill, during~~In June 2018, the ~~time it was allegedly owned~~Court issued its Final Judgment and ~~operated by St. Regis, discharged PCB contaminated solids~~Order, which fixed the past cost amount at approximately $50 million (plus interest to be determined) 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 Wisconsinallocated to the ~~District Court~~Company a 15% share of responsibility 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, forthose 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~~Court did not ~~been rendered and it is unclear to what extent the Court will~~ 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~~Judgment. The proposed consent decree by NCR described above, if entered, would result in the ~~outcome or estimate our maximum reasonably possible loss. However, we do not believe that any material loss is probable.~~termination of NCR's involvement in the appeal.

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. ~~On October 25, 2017,~~The EPA’s selected remedy was accompanied by a cost estimate of approximately $115 million ($105 million for the northern impoundment, and $10 million for the southern impoundment). Subsequent to the issuance of the ROD, there have been numerous meetings between the EPA and the PRPs, ~~received a letter from~~and the Company continues to work with the EPA ~~inviting participation~~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 ~~component~~until April 2021. 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 ~~EPA’s~~ROD and not incorporated into the selected remedy), refining areas and volumes of materials to be addressed, determining if an excavation remedy is able to be implemented in a manner protective of human health and the environment, and investigating potential impacts of remediation activities to infrastructure in the vicinity.

During the first quarter of 2020, through a series of meetings among the Company, MIMC/WMI, our consultants, the EPA and the Texas Commission on Environmental Quality (TCEQ), progress was made to resolve key technical issues previously preventing the Company from determining the manner in which the selected remedy for the ~~site, and the Company plans to participate in this remedial design process to determine if and how the remedy can~~northern impoundment would be ~~accomplished. We expect this process will include additional studies to determine feasible alternatives and costs to complete this final remedy. Consequently, while additional losses are probable as~~feasibly implemented. As a result of these developments, as of September 30, 2020, the ~~selected remedy,~~Company has reserved the following amounts in relation to remediation at this site: (a) $10 million for the southern impoundment; and (b) $55 million for the northern impoundment, which represents the Company's 50% share of our estimate of the low end of the range of probable remediation costs.

Although key technical issues have been resolved, we still face significant challenges remediating the northern impoundment in a cost-efficient manner and without a release to the environment and therefore our discussions with the EPA on the best approach to remediation will continue. Because of ongoing questions regarding cost effectiveness, timing and gathering other technical data, additional losses in excess of our recorded liability are possible. We are currently unable to ~~determine~~ reasonably estimate

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any further adjustment to our ~~immaterial~~ recorded ~~liability. It is 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 case is still in the discovery phase, it is premature to predict the outcomeliability or ~~to estimate a~~any loss or range of loss ifin excess of such liability; however, we believe it is unlikely any ~~which may~~adjustment would be ~~incurred.~~material.

Asbestos-Related Matters

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

Antitrust

Italy: In March 2017, the Italian Competition Authority (ICA) commenced an investigation into the Italian packaging industry to determine whether producers of corrugated sheets and boxes violated the applicable European competition law. In April 2019, the ICA concluded its investigation and issued initial findings alleging that ~~International Paper violated Tennessee law by conspiring to limit~~over 30 producers, including our Italian packaging subsidiary (IP Italy), improperly coordinated the ~~supply~~production and ~~fix~~sale of corrugated sheets and boxes. On August 6, 2019, the ~~prices~~ICA issued its decision and assessed IP Italy a fine of ~~containerboard from mid-2005~~€29 million (approximately $32 million at current exchange rates) which was recorded in the third quarter of 2019. However, we are vigorously appealing this decision of the ICA to the ~~present. Plaintiffs in the state court action seek certification of a class of Tennessee indirect purchasers of containerboard products, damages~~Italian courts and ~~costs, including attorneys' fees. No class certification materials~~ have ~~been filed to date in the Tennessee action.~~numerous and strong bases for our appeal.

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

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~~Court issued a judgment on December 14, 2017, awarding the plaintiffs a total of approximately $137 million in actual and consequential damages, fees, costs and pre-judgment interest, and awarding post-judgment interest. The Company appealed this judgment and, on April 30, 2020, the Court of Appeals for the Thirteenth District of Texas issued a decision affirming in part and reversing and rendering judgment in favor of the Company in part. The Court affirmed approximately $14.8 million of the judgment. Otherwise, the Court rendered judgment in favor of the Company on the remainder of the jury’s verdict. The Company continues to have strong bases by which to challenge the affirmed portions of the award and has presented those arguments on appeal to the Supreme Court of Texas. The plaintiffs have also appealed the decision of the appellate court. We do not expect that potential losses, if any, related to this lawsuit will be material.

Taxes Other Than Payroll Taxes

In 2017, the Brazilian Federal Supreme Court decided that the state value-added tax (VAT) should not be ~~final until post-trial motions~~included in the basis of federal VAT calculations. In 2018 and 2019, the Brazilian tax authorities published both an internal consultation and a normative ruling with a narrow interpretation of the effects of the case. We have determined that any related federal VAT refunds should be recognized when they are ~~decided,~~both probable and reasonably estimable. Based upon the ~~Company will appeal the final judgment thereafter. The Company has numerous and strong bases for appeal, and~~best information available to us, we ~~believe we will prevail on appeal. Because post-trial proceedings are in a preliminary stage, we are unable to estimate a range of reasonably possible loss, but we expect~~have determined that the amount of ~~any loss~~refund that is probable of being realized is limited to ~~be immaterial.~~

~~Tax~~

~~On October 16, 2015, the Company was notified of a $110 million tax assessment issued~~that determined by the ~~state~~tax authorities' narrow interpretation, for which we have recognized a receivable of ~~Sao Paulo, Brazil (State) for tax years 2011 through 2013. The assessment pertained to invoices issued by the Company related to the sale~~$11 million as of ~~paper to the editorial segment, which~~September 30, 2020. It is ~~exempt~~possible that future court decisions and guidance from the ~~payment~~tax authorities could expand the scope 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.federal VAT refunds.

General

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

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

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

Variable Interest Entities

As of September 30, ~~2017,~~2020, the fair value of the Timber Notes and Extension Loans ~~is $4.80~~was $4.92 billion and ~~$4.32~~$4.24 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 1417 in the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

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

Failure to extend these third-party loans to August 2021 prior to their respective maturity dates in November and December of 2020 could necessitate a disposition of the installment notes to facilitate the $4.22 billion debt payment. We are confident we would be able to dispose of the installment notes, if necessary.

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		In millions	2020		2019		2020		2019
Revenue (a)	$	24	$	24	$	71	$	71	Revenue (a)	$	24	$	24	$	71	$	71
Expense (a)	32		32		96		96		Expense (a)	32		32		96		96
Cash receipts (b)	48		47		95		76		Cash receipts (b)	48		48		95		95
Cash payments (c)	64		64		128		98		Cash payments (c)	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.~~

(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,~~2020, the fair value of the Timber Notes and Extension Loans ~~is $2.23~~was $2.29 billion and ~~$2.09~~$2.12 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 1417 in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

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		In millions	2020		2019		2020		2019
Revenue (a)	$	12	$	8	$	35	$	26	Revenue (a)	$	7	$	19	$	35	$	61
Expense (b)	13		10		36		26		Expense (b)	8		19		36		60
Cash receipts (c)	7		4		19		10		Cash receipts (c)	5		16		28		48
Cash payments (d)	10		7		28		19		Cash payments (d)	8		17		34		53


~~(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 and 2016, respectively, of accretion income for the amortization of the purchase accounting 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 and 2016, respectively, of accretion expense for the amortization of the purchase accounting 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.~~

(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, 2020 and 2019, respectively, of accretion income for the amortization of the basis difference adjustment on the Financial assets of special purpose entities.

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

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

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

NOTE 1417 - DEBT

~~In August 2017, International Paper issued $1.0 billion~~The borrowing capacity 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.~~

~~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, International Paper entered into a~~ commercial paper program ~~with a borrowing capacity of $750 million.~~is $1.0 billion. Under the terms of the program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. As of September 30, ~~2017,~~2020, the Company had ~~$445~~$140 million of borrowings outstanding under the program at ~~a weighted average~~weighted-average interest rate of ~~1.39%~~0.17%.

In March 2020, the Company entered into a $750 million contractually committed 364-day revolving credit agreement with a syndicate of banks and other financial institutions which augments the Company's access to liquidity due to current macroeconomic conditions and supplements the Company's $1.5 billion five-year credit agreement. In October 2020, the company extended the expiration date of the $1.5 billion credit agreement from December 2021 to December 2022. As of September 30, 2020, the Company had 0 borrowings outstanding under either the $750 million revolving credit agreement or the $1.5 billion credit agreement.

In April 2020, the Company's receivable securitization program was amended from an uncommitted financing arrangement to a committed financing arrangement with a borrowing limit up to $550 million based on eligible receivable balances that expires in April 2022. As of September 30, 2020, the Company had 0 borrowings outstanding under the program.

In July 2020, International Paper refinanced $122 million of industrial development bonds that now have interest rates ranging from 1.38% to 1.60% and maturity dates in 2025.

As a result of a debt tender offer in September 2020, the Company economically retired $700 million of corporate bonds with interest rates ranging from 3.00% to 3.80% and maturity dates ranging from 2024 to 2027. This is in addition to the August 2020 economical debt extinguishment of $203 million of corporate bonds with an interest rate of 7.50% due in 2021 and brings the full year-to-date debt reductions related to the 2021 bonds to $406 million.

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

At September 30, ~~2017,~~2020, the fair value of International Paper’s ~~$12.3~~$8.7 billion of debt was approximately ~~$13.5~~$10.7 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 1417 in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

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.

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

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.~~


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

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

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


	Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)										Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)
	Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2017		2016		2017		2016			In millions	2020		2019		2020		2019
Derivatives in Cash Flow Hedging Relationships:										Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts	$	1	$	5	$	9	$	6		Foreign exchange contracts	$	(4)	$	(10)	$	(34)	$	(6)

Total										Total	$	(4)	$	(10)	$	(34)	$	(6)
Derivatives in Net Investment Hedging Relationships:										Derivatives in Net Investment Hedging Relationships:
Interest rate contracts	—		—		—		(11		)	Interest rate contracts	$	0	$	18	$	24	$	15
Total	$	1	$	5	$	9	$	(5	)	Total	$	0	$	18	$	24	$	15

During the next 12 months, the amount of the September 30, ~~2017~~2020 AOCI balance, after tax, that is expected to be reclassified to earnings is a ~~gain~~loss of $2$4 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)
	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts	$	(6)	$	(4)	$	(26)	$	(5)	Cost of products sold
Total	$	(6)	$	(4)	$	(26)	$	(5)

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	Gain (Loss) Reclassified from AOCI (Effective Portion)								Location of Gain (Loss) Reclassified from AOCI (Effective Portion)		Gain (Loss) Recognized								Location of Gain (Loss) In Statement of Operations
	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			In millions	2020		2019		2020		2019
Derivatives in Cash Flow Hedging Relationships:
Derivatives in Fair Value Hedging Relationships:										Derivatives in Fair Value Hedging Relationships:
Interest rate contracts										Interest rate contracts	$	0	$	11	$	38	$	42	Interest expense, net
Debt										Debt	0		(11)		(38)		(42)		Interest expense, net
Total										Total	$	0	$	0	$	0	$	0
Derivatives in Net Investment Hedging Relationships:										Derivatives in Net Investment Hedging Relationships:
Foreign exchange contracts	$	2	$	3	$	6	$	7	Cost of products sold	Foreign exchange contracts	$	1	$	0	$	2	$	0	Net (gains) losses on sales and impairments of businesses
Total	$	2	$	3	$	6	$	7		Total	$	1	$	0	$	2	$	0
Derivatives Not Designated as Hedging Instruments:										Derivatives Not Designated as Hedging Instruments:
Electricity contract										Electricity contract	$	1	$	(5)	$	(2)	$	0	Cost of products sold
Foreign exchange contracts										Foreign exchange contracts	0		(1)		0		(2)		Cost of products sold
Total										Total	$	1	$	(6)	$	(2)	$	(2)

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			In millions	September 30, 2020			December 31, 2019			September 30, 2020			December 31, 2019
Derivatives designated as hedging instruments													Derivatives designated as hedging instruments
Foreign exchange contracts – cash flow	$	9	(a)	$	3	(b)	$	3	(c)	$	4	(e)	Foreign exchange contracts – cash flow	$	2		$	10		$	16		$	4

Interest rate contracts - net investment													Interest rate contracts - net investment	0			11			0			0
Interest rate contracts - fair value													Interest rate contracts - fair value	0			47			0			0
Total derivatives designated as hedging instruments	9			3			3			4			Total derivatives designated as hedging instruments	2			68			16			4
Derivatives not designated as hedging instruments													Derivatives not designated as hedging instruments
Electricity contract	—			—			8		(d)	2		(e)	Electricity contract	0			0			0			2
Foreign exchange contracts													Foreign exchange contracts	0			0			0			1
Total derivatives not designated as hedging instruments	—			—			8			2			Total derivatives not designated as hedging instruments	0			0			0			3
Total derivatives	$	9		$	3		$	11		$	6		Total derivatives	$	2	(a)	$	68	(b)	$	16	(c)	$	7	(d)


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


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


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


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


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

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

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

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

(d)Included in Other current liabilities in the accompanying consolidated balance sheet.

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

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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 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; 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.unit.

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

~~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,							Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2017			2016			2017			2016			In millions	2020		2019		2020		2019
Service cost	$	39		$	41		$	118		$	114		Service cost	$	21	$	17	$	64	$	51
Interest cost	138			135			415			449			Interest cost	98		110		294		330
Expected return on plan assets	(192		)	(199		)	(577		)	(611		)	Expected return on plan assets	(167)		(158)		(501)		(473)
Actuarial loss	87			103			260			293			Actuarial loss	51		50		152		150
Amortization of prior service cost	7			11			21			31			Amortization of prior service cost	5		4		15		12
Settlement	—			3			—			442
Net periodic pension expense	$	79		$	94		$	237		$	718		Net periodic pension expense	$	8	$	23	$	24	$	70

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 0 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.~~2020 or 2019. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled ~~$34~~$22 million for the nine months ended September 30, ~~2017.~~2020.

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~~2020, 8.4 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	2020		2019		2020		2019
Total stock-based compensation expense (selling and administrative)	$	17	$	31	$	48	$	94
Income tax benefits related to stock-based compensation	1		(2)		18		31

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

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At September 30, ~~2017, $110~~2020, $85 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~~1.7 years.

Performance Share Plan

During the first nine months of ~~2017,~~2020, the Company granted 2.2 million performance units at an average grant date fair value of ~~$51.78.~~$49.15.

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 noncontrolling interests, excluding interest expense, net, corporate items, net, corporate net special items, business net special items and ~~corporate~~non-operating pension expense. In the fourth quarter of 2019, the Company changed its measure of business segment operating profits to exclude items considered by management to be unusual (business net special ~~items.~~

~~The Company also has a 50% equity interest in Ilim Holding S.A. (Ilim) operating in Russia, that is a separate~~items) from the normal operations of the business segment. ~~The Company recorded equity earnings (losses), net of taxes, of $48 million and $46 million for~~As a result, all prior periods have been restated to reflect the ~~three months~~current measure.

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~~Net sales by business segment for the three months and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 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		In millions	2020		2019		2020		2019
Industrial Packaging	$	3,734		$	3,491	$	10,939		$	10,422	Industrial Packaging	$	3,768	$	3,820	$	11,220	$	11,516
Global Cellulose Fibers	654			242		1,830			713		Global Cellulose Fibers	564		624		1,737��		1,974
Printing Papers	1,039			1,019		3,051			3,003		Printing Papers	743		1,071		2,234		3,224
Consumer Packaging	491			494		1,431			1,490
Corporate and Intersegment Sales	(5		)	20		(55		)	70		Corporate and Intersegment Sales	48		53		150		164
Net Sales	$	5,913		$	5,266	$	17,196		$	15,698	Net Sales	$	5,123	$	5,568	$	15,341	$	16,878

Operating profit (loss) by business segment for the three months and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 were as follows:


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

Earnings (loss) before income taxes and equity earnings	$	282	$	452	$	527	$	1,204
Interest expense, net	112		123		345		378
Noncontrolling interests adjustment	0		2		0		4
Corporate expenses, net	(20)		21		9		45
Corporate net special items	108		48		195		48
Business net special items	2		46		368		224
Non-operating pension expense (income)	(11)		9		(31)		27
Business Segment Operating Profits	$	473	$	701	$	1,413	$	1,930

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

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~~(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.

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

~~NOTE 19 - SUBSEQUENT EVENT~~

~~On October 23, 2017,~~The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included in "Financial Statements and Supplementary Data" of this Quarterly Report on Form 10-Q (this "Form 10-Q") and the ~~Company entered into an agreement~~Company's Annual Report on Form 10-K for the year ended December 31, 2019 (our "Annual Report"). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute ~~its North American Consumer Packaging business, which includes its North American Coated Paperboard~~to those differences include those discussed below and ~~Foodservice businesses, to a subsidiary~~in our Annual Report, particularly in "Risk Factors" and "Forward-Looking Statements" 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 approvalthis Form 10-Q and ~~certain other closing conditions.~~our Annual Report.


~~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~~$204 million ($~~0.95~~0.52 per diluted share) in the third quarter of ~~2017,~~2020, compared with ~~$80~~$266 million ($~~0.19~~0.67 per diluted share) in the second quarter of ~~2017~~2020 and ~~$312~~$344 million ($~~0.75~~0.87 per diluted share) in the third quarter of ~~2016. 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.~~2019. International Paper generated Adjusted Operating Earnings Attributable to International Paper Common Shareholders (a non-GAAP measure defined below) of ~~$449~~$280 million ($~~1.08~~0.71 per diluted share) in the third quarter of ~~2017,~~2020, compared with ~~$270~~$305 million ($~~0.65~~0.77 per diluted share) in the ~~2017~~ second quarter of 2020 and ~~$380~~$431 million ($~~0.91~~1.09 per diluted share) in the ~~2016~~ third ~~quarter.~~quarter of 2019.

In the third quarter 2020, International Paper delivered solid earnings and generated robust cash from operations in a dynamic environment. We continued to deliver strong ~~results in the 2017 third quarter,~~commercial and operational performance, with ~~sequential earnings growth~~outstanding cost management across all our businesses. In the third quarter 2020, we generated $735 million in cash from operations and $616 million in free cash flow, bringing cash generated from operations and free cash flow to $2.3 billion and $1.6 billion, respectively, through the first three quarters of 2020. The Company’s solid performance reinforces our financial strength and commitment to our capital allocation framework. We continued to use cash consistent with our capital allocation framework to maintain a strong balance sheet, return cash to shareowners and invest to create value. During the third quarter, we reduced debt by $760 million, bringing year-to-date debt reduction to $1.1 billion. In October, the board of directors approved the fourth quarter dividend, bringing the full-year authorizations to $800 million.

Relative to demand, recovery trends continue to vary by business and end-use consumer segments. ~~This earnings growth was driven by continued solid global demand~~Demand for corrugated packaging accelerated in the third quarter and ~~price realization, particularly~~that momentum continues in the fourth quarter. In our ~~North American Industrial Packaging and~~ Global Cellulose Fibers business, we experienced seasonally lower demand and destocking across most regions, as expected. In our Printing Papers business, we are in the early stages of recovery as office and school activities restart. Against this backdrop, our commercial, supply chain and manufacturing organizations are collaborating at a high level to ensure we meet our customers’ changing needs, leveraging the scale and flexibility of our system and optimizing costs. We remain committed to our COVID-19 principles and will continue to focus on what we need to do to further strengthen the Company for all our stakeholders in the short-term and the long-term.

Comparing performance in the third quarter 2020 to the second quarter 2020, price and mix was essentially flat across our businesses. ~~During the quarter, results were negatively impacted~~Volume was favorable, driven by ~~operational headwinds related to Hurricanes Harvey~~strong demand for corrugated packaging in North America and ~~Irma along with record high OCC prices. The Global Cellulose Fibers~~improved demand for printing papers across all regions. Operations and costs benefited from improved fixed cost absorption on higher volume. Our businesses continued to ~~generate~~do an excellent job managing costs and delivered strong ~~results during~~operational performance to mitigate 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 subsidiaryimpact 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~~hurricanes in the ~~2017~~ third quarter. Third quarter ~~versus the 2017 second quarter, particularly in our North American Industrial Packaging and Global Cellulose Fibers businesses. The North American Industrial Packaging business continues to benefit~~performance also benefited from higher pricing and flow-through in export containerboard exports. Volume 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 approximatelyabout $30 million of ~~costs tied to mill~~one-time items, which favorably impacted operations and ~~box plant disruptions caused by Hurricanes Harvey and Irma.~~costs. As expected, maintenance outage ~~expenses were significantly lower~~costs reduced earnings in the ~~2017~~ third quarter, ~~versus the 2017 second quarter.~~which is our highest planned maintenance quarter this year. Input costs ~~continued to be a significant headwind~~were favorable, mostly due to ~~elevated OCC~~lower recovered fiber costs. We did experience higher energy and distribution costs as we exited the third quarter, which ~~continued~~we see as a positive sign of an improving economy. Corporate expense and taxes were favorable compared to ~~rise above 2017~~the second quarter ~~levels, reaching a new historical high. In the 2017 third quarter,~~2020, reflecting foreign currency translation gains and favorable adjustments to our federal tax provision after finalizing our 2019 tax return. Equity earnings from our Ilim joint venture ~~again delivered strong results driven by improved pricing, partially offset by lower volume. Equity earnings also benefited from~~were a loss of $33 million and include a $55 million non-cash foreign exchange ~~gain~~loss primarily associated with foreign currency translation on ~~the joint venture's U.S.~~Ilim’s US dollar denominated net debt.

Looking ahead to the ~~Company is well positioned for strong~~ fourth quarter ~~results and cash generation. In~~2020, as compared to the third quarter of 2020, in our ~~North American~~ Industrial Packaging business, we expect stable price and mix in our North America and European Packaging businesses. Volume is expected to ~~see flow-through benefits from containerboard~~decrease modestly, with continued strong demand for corrugated packaging offsetting the impact of three less days in the fourth quarter. Operations and ~~box price increases from~~costs are expected to be negatively impacted by the ~~first half~~non-repeat of ~~2017, along with further realization of prior price increases~~favorable one-time items in ~~exports. We anticipate additional price realization in~~the third quarter. Planned maintenance outage expense is expected to be lower, and input costs are expected to be higher, mostly due to higher energy and transportation costs. In our Global Cellulose Fibers business, ~~tied~~we expect price and mix to ~~continued strong global~~be modestly lower in the fourth quarter. Volume is expected to be stable while operations and costs are expected to negatively impact earnings associated

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with the non-repeat of favorable one-time items. We expect increased planned maintenance outage expenses, and input costs are expected to be stable. In our Printing Papers business, we expect price and mix to be stable. Volume is expected to improve on higher seasonal demand ~~particularly~~ in ~~China. Demand in our North American Industrial Packaging business will~~Latin America. Operations and costs are expected to be ~~unfavorably~~negatively impacted by ~~one less shipping day; however, we anticipate stable volumes across all~~the non-repeat of ~~our other businesses~~favorable one-time items in the third quarter, along with ~~some~~higher seasonal ~~improvement in our EMEA Printing Papers~~energy costs. Planned maintenance outage expenses are expected to decrease, and Global Cellulose Fibers businesses. Manufacturing performance should improve as we move past the effects of the previously mentioned hurricanes and other one-off operational issues experienced at some of our mills during the 2017 third quarter. Inputinput costs ~~in our North American Industrial Packaging business should benefit from declining OCC prices, partly offset by~~are expected to increase on higher wood and ~~chemical~~energy costs. ~~We expect higher input costs~~Lastly, in ~~our other businesses, partly due to the lingering effects of the hurricanes, particularly in the case of wood and chemicals. Finally, for~~ our Ilim joint venture, we expect improved ~~operational results~~earnings on the non-repeat of the foreign currency loss on U.S. dollar denominated net debt incurred in the ~~2017 fourth quarter~~third quarter.

On March 11, 2020 the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Most of our manufacturing and converting facilities have remained open and operational during the pandemic. The health and safety of our employees and contractors is our most important responsibility as we manage through the COVID-19 pandemic. We have implemented work-systems across the Company, including hygiene, social distancing, site cleaning, contact tracing, and other measures, as recommended by the CDC and WHO. Our COVID-19 measures are proving to be effective and we have not had any material disruptions to our operations.

We have seen a significant negative impact on ~~strong, demand-driven market fundamentals.~~demand for our printing papers products. Demand for our pulp, containerboard and corrugated box products has not been negatively impacted by COVID-19 to date, but could be unfavorably impacted going forward if negative economic conditions associated with COVID-19 persist or deteriorate. Furthermore, if there is a resurgence of the virus leading to additional governmental measures, such as stay-at-home orders or business and school shut downs, our supply chain, and therefore our production, could be negatively impacted.

Adjusted Operating Earnings and Adjusted Operating Earnings Per Share are non-GAAP ~~measures. Diluted~~measures and are defined as net earnings (loss) attributable to International Paper (a GAAP measure) excluding net special items and non-operating pension expense (income). Net earnings (loss) and Diluted earnings (loss) per share attributable to common shareholders are the most ~~direct~~directly comparable GAAP measures. The Company calculates Adjusted Operating Earnings by excluding the after-tax effect of non-operating pension expense (income) and items considered by management to be unusual (net special items) from the earnings reported under ~~GAAP, 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,
In millions	2020		2019		2020
Net Earnings (Loss) Attributable to Shareholders	$	204	$	344	$	266
Add Back - Non-operating pension expense (income)	(11)		9		(14)
Add Back - Net special items expense (income)	109		94		68
Income tax effect - Non-operating pension and net special items expense	(22)		(16)		(15)
Adjusted Operating Earnings (Loss) Attributable to International Paper Company	$	280	$	431	$	305

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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	2020		2019		2020
Diluted Earnings (Loss) Per Share Attributable to Shareholders	$	0.52	$	0.87	$	0.67
Add Back - Non-operating pension expense (income) per share	(0.03)		0.02		(0.04)
Add Back - Net special items expense (income) per share	0.28		0.24		0.17
Income tax effect per share - Non-operating pension and net special items expense	(0.06)		(0.04)		(0.03)
Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders	$	0.71	$	1.09	$	0.77

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

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


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

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

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

RESULTS OF OPERATIONS

For the third quarter of ~~2017,~~2020, International Paper Company reported net sales of ~~$5.9~~$5.1 billion, compared with ~~$5.8~~$4.9 billion in the second quarter of ~~2017~~2020 and ~~$5.3~~$5.6 billion in the third quarter of ~~2016.~~2019.

Net earnings (loss) attributable to International Paper totaled ~~$395~~$204 million, or ~~$0.95~~$0.52 per diluted share, in the ~~2017~~ third ~~quarter.~~quarter of 2020. This compared with ~~$80~~$266 million, or ~~$0.19~~$0.67 per diluted share, in the second quarter of ~~2017~~2020 and ~~$312~~$344 million, or ~~$0.75~~$0.87 per diluted share, in the third quarter of ~~2016.~~2019.

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~~Earnings from continuing operations attributable to International Paper Company were $395 million in the third quarter of 2017 compared~~

Compared with ~~$312 million in the third quarter of 2016 and $80 million in~~ the second quarter of ~~2017. Compared with the third quarter of 2016, the 2017 third quarter reflects~~2020, earnings benefited from higher ~~average~~ sales ~~price realizations net of an unfavorable mix~~volumes ($~~164~~50 million), lower ~~mill maintenance outage~~operating costs ($2123 million), ~~the operating results for the recently acquired pulp business which was not included in the prior year~~lower raw material and freight costs ($3625 million), lower corporate and other items ($13 million), lower net interest expense ($2 million) and lower tax expense ($~~16 million) reflecting a lower estimated tax rate, and lower non-operating pension expense ($6~~28 million). These benefits were offset by lower average sales ~~volumes~~prices net of a favorable mix ($69 million), higher ~~operating~~mill maintenance outage costs ($7257 million)~~, higher raw material and freight costs ($66 million), higher corporate and other costs ($12 million),~~ and higher ~~net interest~~non-operating pension expense ($144 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$100 million ~~higher in the 2017 third quarter~~lower than in the ~~2016 third quarter.~~second quarter of 2020. Net special items in the ~~2017~~ third quarter of 2020 were a loss of ~~$34~~$83 million compared with a loss of ~~$42~~$50 million in the ~~2016 third quarter.~~second quarter of 2020.

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Compared with the ~~second~~third quarter of ~~2017, earnings benefited from higher average sales price realizations net~~2019, the third quarter of ~~an unfavorable mix~~2020 reflects lower raw material and freight costs ($7629 million), lower ~~mill maintenance outage~~corporate and other costs ($~~123~~30 million), lower net interest expense ($7 million), lower tax expense ($1334 million) ~~reflecting a lower estimated tax rate~~ and lower non-operating pension expense ($114 million). These benefits were offset by lower average sales prices and an unfavorable mix ($114 million), lower sales volumes ($1128 million), higher operating costs ($~~10 million), higher raw material and freight costs ($16 million), higher corporate and other items ($15~~7 million) and higher ~~net interest expense~~mill maintenance outage costs ($847 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~~$55 million ~~higher~~lower in the third quarter of 2020 than in the ~~2017 second quarter.~~third quarter of 2019. Net special items in the ~~2017~~ third quarter of 2020 were a loss of ~~$34~~$83 million compared with a loss of ~~$169~~$80 million in the ~~2017 second quarter.~~third quarter of 2019.

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 corporate items and corporate special items.

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

~~The following table presents a reconciliation of net earnings attributable to International Paper Company to its Total Business Segment Operating Profit:~~

Three Months Ended
September 30 June 30,
In millions 2017 2016 2017
Earnings (Loss) From Continuing Operations Attributable to International Paper Company $ 395
$ 312
$ 80
Add back (deduct):
Income tax provision (benefit) 153
107
(89 )
Equity (earnings) loss, net of taxes (45 ) (43 ) (20 )
Noncontrolling interests, net of taxes —
(3 ) —
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings 503
373
(29 )
Interest expense, net 152
132
137
Noncontrolling interests / equity earnings included in operations —
1
(1 )
Corporate items 19
11
4
Special items (income) expense —
54
(16 )
Non-operating pension expense 33
42
34
Adjusted Operating Profit $ 707
$ 613
$ 129
Business Segment Operating Profit:
Industrial Packaging $ 469
$ 423
$ 50
Global Cellulose Fibers 49
(38 ) 7
Printing Papers 135
167
86
Consumer Packaging 54
61
(14 )
Total Business Segment Operating Profit $ 707
$ 613
$ 129

~~Business Segment Operating Profit~~

Total business segment operating profits of $707 million in the 2017 third quarter were higher than the $613 million in the 2016 third quarter and the $129 million in the 2017 second quarter. Compared with the third quarter of 2016, operating profits in the current quarter benefited from higher average sales price realizations net of an unfavorable mix ($236 million), 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 million). These benefits were offset by lower sales volumes ($9 million), higher operating costs ($104 million), higher raw material and freight costs ($95 million), and higher other costs ($5 million). Special items were a loss of $23 million in the 2017 third quarter compared with a loss of $12 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.

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 to balance internal supply with our customer demand, while maintenance downtime is taken periodically during the year.

~~Sales Volumes by Product (a)~~

~~Sales volumes of major products for the three months and nine months ended September 30, 2017 and 2016 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


~~(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)~~	~~Includes sales volumes through the date of sale on June 30, 2016.~~

~~Income Taxes~~

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

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

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

~~Interest Expense and Noncontrolling Interest~~

Net interest expense for the 2017 third quarter was $152 million compared with $137 million which includes interest income of $4 million related to income tax refund claims in the 2017 second quarter and $132 million in the 2016 third quarter.

~~Effects of Special Items~~

~~Details of special items for the three months 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

~~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 )

~~Details of special items for the nine months 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

~~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 )

~~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”). 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~~Business Segment Operating Profits are defined as earnings (loss) before income taxes and equity earnings, but including the impact of noncontrolling interests, and excluding interest expense, net, corporate expenses, net, corporate net special items, business net special items and non-operating pension expense. Business Segment Operating Profits is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280.

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

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

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Business Segment Operating Profit

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

Compared with the second quarter of 2020, operating profits benefited from higher sales volumes ($68 million), lower operating costs ($31 million) and lower raw material and freight costs ($34 million). These benefits were offset by lower average sales prices net of a favorable mix ($11 million) and higher mill outage costs ($77 million).

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Compared with the third quarter of 2019, operating profits in the current quarter benefited from lower raw material and freight costs ($40 million). These benefits were offset by lower average sales prices and an unfavorable mix ($156 million), lower sales volumes ($38 million), higher operating costs ($9 million) and higher mill outage costs ($65 million).

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


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

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Sales Volumes by Product (a)

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


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

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

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

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

Income Taxes

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

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

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

Interest Expense

Net interest expense was $112 million in the third quarter of 2020, compared with $116 million in the second quarter of 2020 and $123 million in the third quarter of 2019.

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Effects of Net Special Items and Non-Operating Pension Expense

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


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

(a) Recorded in the Printing Papers segment.

(b) Recorded in the Industrial Packaging segment.

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

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

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

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


	Nine Months Ended
	September 30,
	2020					2019
In millions	Before Tax		After Tax			Before Tax		After Tax
Business Segments
Brazil Packaging impairment	$	349	$	342	(a)	$	—	$	—
Abandoned property removal	14		11		(b)	35		26		(b)
Environmental remediation reserve adjustment	7		6		(c)	—		—
Riverdale mill conversion	1		1		(c)	3		3		(c)
Foreign value-added tax refund accrual	(2)		(1)		(a)	—		—
India Papers impairment	—		—			151		149		(c)
Italian antitrust fine	—		—			32		32		(a)
Overhead cost reduction initiative	—		—			10		8		(e)
Multi-employer pension plan exit liability	—		—			9		6		(a)
Gain on sale of previously closed Oregon mill site	—		—			(9)		(7)		(a)
Gain on sale of EMEA Packaging box plant	—		—			(7)		(6)		(a)
Other	(1)		(1)		(d)	—		—
Business Segments Total	368		358			224		211
Corporate
Debt extinguishment costs	131		98			—		—
Asbestos litigation reserve adjustment	43		33			—		—
Gain on sale of portion of investment in India	(6)		(6)			—		—
India investment fair value adjustment	17		17			—		—
Environmental remediation reserve adjustment	41		31			15		11
Gain on sale of portion of equity investment in Graphic Packaging	(33)		(25)			—		—
Litigation reserves	—		—			22		17
Overhead cost reduction initiative	—		—			11		8
Interest expense related to foreign tax audits	—		—			1		1
Other	—		(1)			—		—
Corporate Total	193		147			49		37
Total net special items	561		505			273		248
Non-operating pension expense (income)	(31)		(23)			27		21
Total net special items and non-operating pension expense (income)	$	530	$	482		$	300	$	269

(a) Recorded in the Industrial Packaging segment.

(b) Includes $9 million ($7 million after taxes) and $25 million ($19 million after taxes) for the nine months ended September 30, 2020 and September 30, 2019, respectively, recorded in the Industrial Packaging segment; $5 million ($4 million after taxes) and $8 million ($5 million after taxes) for the nine months ended September 30, 2020 and September 30, 2019, respectively, recorded in the Global Cellulose Fibers segment; and $2 million (before and after taxes) for the nine months ended September 30, 2019, recorded in the Printing Papers segment.

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

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

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


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

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BUSINESS SEGMENT OPERATING RESULTS

The following tables present net sales and business segment operating profit (loss) which is the ~~most directly comparable GAAP measure. See~~ ~~Note 18 - Business Segment Information~~ ~~in the Condensed Notes to the Consolidated Financial Statements for the GAAP reconciliation~~Company's measure of segment ~~operating profit.~~profitability.

Industrial Packaging

Total Industrial Packaging 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 3,734
$ 3,706
$ 10,939
$ 3,491
$ 3,520
$ 10,422
Operating Profit $ 469
$ 50
$ 884
$ 423
$ 458
$ 1,277
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
—
—
—
Operating Profit Before Special Items $ 484
$ 407
$ 1,251
$ 428
$ 486
$ 1,347


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

Industrial Packaging net sales for the third quarter of ~~2017~~2020 were 1%4% higher ~~than in~~compared with the second quarter of ~~2017~~2020 and ~~were 7% higher than in~~1% lower compared with the third quarter of ~~2016.~~2019. Operating profit ~~before special items~~ was ~~19%~~4% higher in the third quarter of ~~2017 than in~~2020 compared with the second quarter of ~~2017~~2020 and ~~13% higher than~~12% lower compared with the third quarter of 2019.


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

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

North American Industrial Packaging sales volumes in the third quarter of ~~2016.~~2020 increased compared to the second quarter of 2020, reflecting higher shipments for boxes, partially offset by lower export containerboard volumes. The COVID-19 pandemic continues to have a mixed impact on box demand reflecting strong growth in the eCommerce segment as online shopping continues to be a major spending channel for consumers amid COVID-19 pandemic concerns. The shipping and distribution and protein segments were also favorably impacted. Demand for produce, processed foods and beverage in addition to non-essential items within the durable and non-durable segments were negatively impacted by COVID-19 restrictions and lower discretionary spending. Total maintenance and economic downtime was about 51,000 tons lower in the third quarter of 2020 compared with the second quarter of 2020, primarily driven by lower economic downtime. Average sales margins were stable as lower average sales prices for boxes was offset by higher export containerboard prices and a favorable mix. Operating costs were higher, driven by multiple weather events impacting our mix system and seasonality in our box plants. Planned maintenance downtime costs were $20 million higher in the third quarter of 2020 compared with the second quarter of 2020. Input costs were lower, primarily for recovered fiber and wood, partially offset by higher energy costs. Earnings in both the third quarter and the second quarter of 2020 benefited from insurance recoveries related to the Rome fire and Bogalusa recovery boiler event.

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

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

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North American Industrial Packaging 2017 2016
In millions 3rd 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
Operating Profit $ 487
$ 51
$ 899
$ 439
$ 496
$ 1,373
Kleen Products anti-trust settlement —
354
354
—
—
—
Other 5
3
9
—
—
—
Operating Profit Before Special Items $ 492
$ 408
$ 1,262
$ 439
$ 496
$ 1,373


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


~~(a)~~	Includes intra-segment sales of $50 million and $35 million for the three months ended September 30, 2017 and 2016, respectively, $31 million and $32 million for the three months ended June 30, 2017 and 2016, respectively, and $113 million and $112 million for the nine months ended September 30, 2017 and 2016, respectively.

~~North American~~

EMEA Industrial Packagingsales volumes for boxes in the third quarter of ~~2017~~2020 were ~~lower than in~~higher compared with the second quarter of ~~2017 reflecting one less shipping day and~~2020 as the ~~impact~~impacts of ~~Hurricanes Harvey and Irma. Containerboard shipments to export markets increased, but were more than~~the COVID-19 pandemic showed some recovery in all regions at the end of the third quarter, partially offset by seasonally lower ~~domestic shipments. Total maintenance downtime decreased 72,000 tons from 157,000 tons to 85,000 tons. There was no economic downtime taken~~volumes in ~~either period.~~Morocco. Average sales margins ~~for boxes~~ were ~~higher due to the realization of box sales price increases. Average sales price realizations for containerboard also increased~~stable in ~~both the domestic~~Europe and ~~export markets. Input~~seasonally lower in Morocco and Turkey. Operating costs were ~~higher, primarily for recycled fiber, but also for energy, wood and chemicals.~~lower. Planned maintenance downtime costs were ~~$62~~$3 million ~~lower~~higher in the ~~2017~~ third quarter of 2020 compared with the ~~2017~~ second ~~quarter. Operating~~quarter of 2020 with an outage at our Madrid, Spain mill. Input 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.~~lower. Earnings were negatively affected by unfavorable foreign currency impacts, primarily in Morocco.

Compared with the third quarter of ~~2016,~~2019, sales volumes ~~for boxes were lower~~ in the third quarter of ~~2017 which included two fewer shipping days. Sales volumes~~2020 were slightly lower, primarily due to the impacts of the COVID-19 pandemic mostly offset by strong year over year recovery in Turkey. Average sales margins improved significantly, reflecting stable sales prices for boxes and lower containerboard ~~increased in export markets, while domestic shipments decreased. Total~~costs. Operating costs improved from the ramp-up of the Madrid mill. Planned maintenance ~~and economic~~ downtime ~~was 108,000 tons lower~~costs were $3 million higher 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. 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 20172020 compared with the third quarter of ~~2016.~~2019. Input costs were lower. Earnings were ~~also impacted~~negatively affected by ~~higher mill operating costs.~~unfavorable foreign currency impacts in Turkey.

~~Entering~~

Looking ahead to the fourth quarter of ~~2017,~~2020, sales volumes for boxes are expected to be ~~stable, but will include one less shipping day. Containerboard export shipments are expected to decrease. Input costs for recycled fiber~~seasonally higher, primarily in Morocco. Average sales margins are expected to be ~~significantly lower, partially offset by higher energy, chemical and freight costs.~~slightly higher. Operating costs are expected to be higher. Planned maintenance downtime costs ~~should~~are expected to be $8$3 million ~~lower.~~lower in the fourth quarter of 2020 compared with the third quarter of 2020. Input costs are expected to be higher, primarily for energy.


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

EMEA Industrial Packaging 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 333
$ 341
$ 991
$ 313
$ 295
$ 902
Operating Profit $ (5 ) $ 5
$ 14
$ —
$ 6
$ 13
Holmen mill net bargain purchase gain —
—
(6 ) —
—
—
Operating Profit Before Special Items $ (5 ) $ 5
$ 8
$ —
$ 6
$ 13

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


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

European Coated Paperboard sales volumes ~~for boxes~~ in the third quarter of ~~2017 were seasonally lower than in~~2020 compared with the second quarter of ~~2017~~2020 were higher in ~~Morocco~~both Europe and Russia as the ~~Euro-zone.~~negative demand impact of the COVID-19 pandemic showed some improvement. Average sales margins ~~decreased due to higher input costs for containerboard. Input costs for energy~~ were ~~flat, while distribution costs decreased due to~~ lower ~~export shipments from Turkey and Morocco.~~in both regions driven by an unfavorable mix. Operating costs were ~~lower.~~higher in Europe and flat in Russia. Planned maintenance downtime costs were $3 million higher in the third quarter of 2020 compared with the second quarter of 2020. Input costs were higher in Europe primarily for energy and purchased pulp. In Russia, input costs were lower, driven by wood and chemicals. Earnings benefited from favorable foreign currency impacts in both regions.

Compared with the third quarter of ~~2016,~~2019, sales volumes increased in Russia, but decreased in Europe reflecting the demand impact of the COVID-19 pandemic. Average sales margins were lower in both regions, reflecting lower prices and an unfavorable mix. Operating costs were higher in Europe and lower in Russia. Planned maintenance downtime costs were $7 million higher in the third quarter of ~~2017 were higher. Average sales margins decreased in~~2020 compared with the ~~Euro-zone and Morocco due to higher containerboard costs.~~third quarter of 2019. Input costs ~~for energy~~ were lower ~~but distribution~~in Europe for purchased pulp, energy and wood. In Russia, input costs were ~~higher due to increased export shipments.~~stable. Earnings benefited from favorable foreign currency impacts in both regions.

~~Looking ahead to~~Entering the fourth quarter of ~~2017,~~2020, sales volumes are expected to be ~~seasonally stronger.~~lower in Russia and stable in Europe. Average sales margins are expected to ~~recover due~~be stable in Europe and higher in Russia. Operating costs are expected to ~~the realization of prior price increases and a more favorable mix. Earnings will~~ be ~~negatively impacted by~~higher in both regions. Planned maintenance downtime costs ~~at the Madrid mill during its conversion~~are expected to ~~recycled containerboard production.~~

Brazilian Industrial Packaging 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 68
$ 60
$ 187
$ 62
$ 51
$ 155
Operating Profit $ (13 ) $ (6 ) $ (29 ) $ (9 ) $ (12 ) $ (29 )
Brazil Intangible Asset Accelerated Amortization 10
—
10
—
—
—
Operating Profit Before Special Items $ (3 ) $ (6 ) $ (19 ) $ (9 ) $ (12 ) $ (29 )

~~Brazilian Industrial Packaging~~ ~~sales volumes~~be $7 million lower in the ~~third~~fourth quarter of ~~2017~~2020 compared with the second quarter of 2017 were higher for boxes, but slightly lower for containerboard. Improved average sales margins reflect higher sales prices for both boxes and containerboard, partially offset by an unfavorable mix. Operating costs were favorable while input costs, primarily for natural gas, were higher.

~~Compared~~ with the third quarter of ~~2016, sales volumes in the third quarter of 2017 were higher for boxes, but lower for containerboard, while average sales price realizations for both boxes and containerboard increased.~~2020. Input costs ~~primarily for recycled fiber and wood, decreased. Operating costs were also lower.~~

~~Looking ahead to the fourth quarter of 2017, sales volumes~~ are expected to be ~~about flat. Average sales margins are expected to increase reflecting prior sales price realizations for~~stable in both ~~boxes and containerboard, partially offset by an unfavorable mix. Input costs should be slightly higher and operating costs are expected to increase, primarily due to labor costs.~~regions.

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~~Table of ~~its corrugated packaging business in China and Southeast Asia to Xiamen Bridge Hexing Equity Investment Partnership Enterprise. See~~ ~~Note 8 - Divestitures / Spinoff~~ Contents~~in the Condensed Notes to the Consolidated Financial Statements for further discussion of the sale of this business.~~

Global Cellulose Fibers

Total Global Cellulose Fibers 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 654
$ 612
$ 1,830
$ 242
$ 259
$ 713
Operating Profit $ 49
$ 7
$ (14 ) $ (38 ) $ (21 ) $ (109 )
Acquisition costs 6
5
15
7
5
12
Inventory fair value step-up amortization —
—
14
—
—
—
Other 2
—
3
—
—
—
Operating Profit Before Special Items $ 57
$ 12
$ 18
$ (31 ) $ (16 ) $ (97 )


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

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~~lower in the third quarter of ~~2017~~2020 than in the second quarter of ~~2017~~2020 and ~~significantly higher~~10% lower than in the third quarter of ~~2016 due to the acquisition.~~2019. Operating profit ~~before special items was 375% higher~~ in the third quarter of ~~2017 than in~~2020 was significantly lower compared to the second quarter of ~~2017~~2020 and ~~284% higher than in~~ the third quarter of ~~2016.~~2019.

Sales volumes in the third quarter of ~~2017 increased~~2020 compared with the second quarter of ~~2017 reflecting steady~~2020 were seasonally lower and reflect slower COVID-19 pandemic-related consumer demand. ~~Average sales price realizations were higher, primarily for fluff pulp, but were~~Weakened demand in the paper segment was partially offset by ~~an unfavorable product mix.~~increased consumer demand for absorbent hygiene and tissue and towel products. Total maintenance and economic downtime was about 96,000 tons higher in the third quarter of 2020 compared with the second quarter of 2020 primarily due to higher maintenance downtime. Average sales margins improved, reflecting flow through of previous sales price increases. Operating costs were lower driven by seasonality and ~~input costs were flat.~~one-time items. Planned maintenance downtime costs in the third quarter of ~~2017~~2020 were ~~$37~~$43 million ~~lower than in~~higher compared with the second quarter of ~~2017. Costs associated with Hurricane Irma negatively impacted the business by approximately $5 million in the quarter. In Europe~~2020. Input costs were higher, primarily for wood, energy and ~~Russia, sales volumes were lower, while average sales price realizations were favorable.~~chemicals.

Compared with the third quarter of ~~2016, for the legacy business~~2019, sales volumes ~~increased~~ in the third quarter of ~~2017.~~2020 were lower for both fluff and market pulp driven by slowing demand reflecting customer destocking related to the COVID-19 pandemic. Total maintenance and economic downtime was about 13,000 tons higher in the third quarter of 2020, primarily due to higher maintenance downtime. Average sales ~~price realizations improved~~prices were significantly lower for both fluff and market pulp. Operating costs were favorable reflecting ~~a stronger pricing environment.~~one-time benefits in the third quarter of 2020 and the negative impacts of Hurricane Dorian in the third quarter of 2019. Planned maintenance downtime costs in the third quarter of ~~2017~~2020 were ~~$14~~$32 million ~~lower than in~~higher compared with the third quarter of ~~2016.~~2019. Input costs ~~decreased slightly, although in Europe and Russia input costs~~ were higher for wood, energy and purchased pulp. In Europe and Russia, sales volumes decreased and average sales margins were unfavorably impacted by lower sales price realizations partially offset by a favorable mix.stable.

Entering the fourth quarter of ~~2017,~~2020, sales volumes are expected to be ~~seasonally higher.~~stable. Average sales ~~price realizations~~margins are expected to ~~reflect~~be lower. Planned maintenance downtime costs in the ~~further recognition~~fourth quarter of ~~recent price increases. Average sales margins~~2020 are expected to be $4 million higher compared with the third quarter of 2020. Operating costs are expected to be seasonally higher. Operating costs will ~~also benefit from a more favorable product mix.~~be negatively affected by the non-repeat of one-time benefits in the third quarter of 2020. Input costs are expected to be ~~higher. Planned maintenance downtime costs should be $5 million~~ higher ~~in the fourth quarter of 2017. Sales volumes~~primarily for wood, chemicals and ~~average sales price realizations are expected to increase in Europe and Russia.~~energy.

Printing Papers


Total Printing Papers	2017						2016						Total Printing Papers	2020						2019
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	1,039	$	1,017	$	3,051	$	1,019	$	1,012	$	3,003	Sales	$	743	$	583	$	2,234	$	1,071	$	1,088	$	3,224
Operating Profit	$	135	$	86	$	321	$	167	$	117	$	419
Other	—		2		2		—		—		—
Operating Profit Before Special Items	$	135	$	88	$	323	$	167	$	117	$	419
Operating Profit (Loss)													Operating Profit (Loss)	$	63	$	(11)	$	148	$	162	$	114	$	420

Printing Papers net sales for the third quarter of ~~2017~~2020 were 2%27% higher than in the second quarter of ~~2017~~2020 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%~~31% lower than in the third quarter of ~~2016.~~2019. Operating profit in the third quarter of 2020 was significantly higher compared with the second quarter of 2020 and significantly lower compared with the third quarter of 2019.


North American Papers	2017						2016						North American Papers	2020						2019
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months		In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	470	$	446	$	1,384	$	477	$	466	$	1,425	Sales	$	362	$	265	$	1,073	$	492	$	486	$	1,474
Operating Profit	$	54	$	19	$	106	$	81	$	51	$	193
Other	—		2		2		—		—		—
Operating Profit Before Special Items	$	54	$	21	$	108	$	81	$	51	$	193
Operating Profit (Loss)													Operating Profit (Loss)	$	31	$	(23)	$	31	$	76	$	41	$	174

North American Papers sales volumes in the third quarter of ~~2017~~2020 were higher ~~than in~~compared with the second quarter of ~~2017 reflecting seasonally higher domestic demand. Average sales price realizations~~2020 across all grades for uncoated freesheet paper ~~were lower~~reflecting signs of recovery from the unprecedented demand decline 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~~the COVID-19 pandemic. Total maintenance and economic downtime ~~costs were $34 million~~was about 128,000 tons lower in the third quarter of ~~2017, which included no outages,~~2020 compared with the second quarter of ~~2017.~~

2020 primarily due to economic downtime. Average sales margins were stable. Operating costs were flat. Planned maintenance downtime costs were $1 million higher in the third quarter of 2020, compared with the second quarter of 2020. Input costs were flat.

Compared with the third quarter of ~~2016,~~2019, sales volumes in the third quarter of ~~2017~~2020 were ~~higher primarily due to increased shipments of~~significantly lower across all grades for uncoated freesheet paper ~~to export markets. Average sales price realizations were lower, reflecting weaker market conditions. Average sales margins were also impacted~~driven by ~~unfavorable geographic~~the demand impact of the COVID-19 pandemic. Total maintenance 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. 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.economic

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European Papers 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 292
$ 299
$ 865
$ 278
$ 288
$ 825
Operating Profit $ 38
$ 26
$ 93
$ 40
$ 34
$ 114

~~European Papers~~ ~~sales volumes for uncoated freesheet paper~~downtime was about 48,000 tons higher in the third quarter of 2017 compared with the second quarter of 2017 were lower in both Russia and Europe. Average sales margins for uncoated freesheet paper increased in Europe due to the partial realization of a sales price increase, and in Russia due to a favorable geographic mix. Input costs were higher, primarily for wood and energy. Planned maintenance downtime costs in the third quarter of 2017 were $6 million lower than in the second quarter of 2017 which included an outage at the Svetogorsk mill. Manufacturing operating costs were lower.

~~Sales volumes for uncoated freesheet paper in the third quarter of 2017~~2020 compared with the third quarter of ~~2016, were lower in Europe, but higher in Russia. Average sales price realizations for uncoated freesheet paper increased in Europe, but were slightly lower in Russia. Input costs,~~2019 primarily ~~for wood and energy, were higher. Planned maintenance~~due to economic downtime ~~costs in the third quarter of 2017 were $9 million lower than in the third quarter of 2016 which included an outage at the Kwidzyn mill.~~

Looking forward to the fourth quarter of 2017, sales volumes for uncoated freesheet paper are expected to increase. Average sales price realizations should be higher in both Europe and Russia. Input costs are expected to be higher for wood in Russia and higher in Europe for wood and energy.

Brazilian Papers 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales (a) $ 239
$ 232
$ 685
$ 229
$ 219
$ 637
Operating Profit $ 46
$ 43
$ 128
$ 54
$ 34
$ 123


~~(a)~~	Includes intra-segment sales of $6 million and $0 million for the three months ended September 30, 2017 and 2016, respectively, $7 million and $3 million for the three months ended June 30, 2017 and 2016, respectively, and $22 million and $4 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Brazilian Papers~~ ~~sales volumes in the third quarter of 2017 were lower than in the second quarter of 2017 reflecting higher than anticipated export shipments in the second quarter along~~associated with the ~~negative impact of logistical issues in the third quarter, partially offset by seasonally stronger demand in Brazil.~~COVID-19 pandemic. Average sales margins were ~~higher due to increased~~lower, reflecting lower average sales price realizations for export uncoated freesheet papers, as well as a favorable geographic mix. Input costs increased for purchased pulp and energy. Planned maintenance downtime costs were $3 million lower than in the second quarter of 2017 which included an outage at the Mogi Guacu mill.

Compared with the third quarter of 2016, sales volumes for uncoated freesheet paper in the third quarter of 2017 increased in other Latin American countries, but were flat in Brazil. Average sales margins improved, reflecting higher average sales price realizations for export markets, improved customer mix in Brazil and a favorable geographic mix, partially offset by an unfavorable product mix. Input costs were stable.

Entering the fourth quarter of 2017, sales volumes for uncoated freesheet paper are expected to be seasonally higher in Brazil while export shipments should also increase due to the recovery from the logistical issues that occurred during the third quarter. 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~~ 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 are expected to be higher as the third-quarter production constraints do not recur. Average sales price realizations should be slightly higher. Planned maintenance outage costs 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.prices. 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.

European Consumer Packaging 2017 2016
In millions 3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales $ 88
$ 79
$ 245
$ 87
$ 85
$ 249
Operating Profit $ 21
$ 14
$ 54
$ 22
$ 25
$ 73

~~European Consumer Packaging~~ sales volumes 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.stable. Planned maintenance downtime costs were $3 million lower in the third quarter of ~~2017 than in~~2020 compared with the third quarter of ~~2016.~~2019. Input costs were favorable, primarily for wood, energy and chemicals.

Entering the fourth quarter of ~~2017,~~2020, sales volumes are expected to be slightly higher ~~in Russia, but about flat in Europe.~~driven by export sales. Average sales margins are expected to ~~increase, reflecting higher sales price realizations in Europe. Input~~be stable. Operating costs ~~for wood and energy~~ are expected to be seasonally higher. Planned maintenance downtime costs are expected to be slightly lower in the fourth quarter of 2020. Input costs are expected to be higher, primarily for energy and wood.


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

European Papers sales volumes for uncoated freesheet paper in the third quarter of 2020 compared with the second quarter of 2020 were stable in Europe and higher in Russia but continue to be impacted by the unprecedented demand decline due to the COVID-19 pandemic. Economic downtime due to the COVID-19 pandemic demand impact was lower in the third quarter of 2020 compared to the second quarter of 2020. Average sales margins for uncoated freesheet paper decreased in both regions, reflecting lower average sales prices and an unfavorable mix in Russia. Operating costs were lower in Europe, but higher in Russia. Planned maintenance downtime costs were $8 million higher in the third quarter of 2020 compared to the second quarter of 2020. Input costs were lower in both regions, primarily for wood and chemicals. Earnings benefited from favorable foreign currency impacts in Russia, partially offset by unfavorable foreign currency impacts in Europe.

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

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


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

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

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

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

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

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


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

On May 29, 2019, International Paper announced it had entered into an agreement to sell its controlling interest in its Indian Papers business. The transaction closed on October 30, 2019.

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 (loss), net of taxes, of ~~$48~~$(33) million in the third quarter of ~~2017,~~2020, compared with ~~$21~~$63 million in the second quarter of ~~2017~~2020 and ~~$46~~$18 million in the third quarter of ~~2016.~~2019. In the third quarter of ~~2017,~~2020, the after-tax foreign exchange impact primarily on the remeasurement of U.S. dollar-denominated net debt was a ~~gain~~loss of $7$55 million, compared with a ~~loss~~gain of ~~$18~~$34 million in the second quarter of ~~2017.~~ 2020.

Compared with the second quarter of ~~2017,~~2020, sales volumes in the third quarter of ~~2017~~2020 were ~~lower primarily for sales of softwood pulp and containerboard in China, partially offset by~~3% 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 other export markets, partially offset by softwood and hardwood pulp and containerboard sales in Russia. Input costs were relatively flat, while planned maintenance downtime costs were higher in the third quarter of 2017.

~~Compared with the third quarter of 2016, sales volumes in the third quarter of 2017 were relatively flat~~ overall, while sales of hardwood pulp to China and containerboard sales in Russia increased, but were partially offset by lower sales of softwood pulp to China and Russia. Average sales price realizations were higher, primarily for sales of softwood and hardwood pulp in China, partially offset by lower sales of hardwood pulp and containerboard in Russia and lower sales of softwood pulp in other export markets. Average sales price realizations decreased for softwood pulp and hardwood pulp in China, Russia and other export markets. Average sales price realizations for containerboard increased in all regions. Input costs were relatively flat. Repair and outage costs were higher due to scheduled maintenance outages at the Koryzhama and Bratsk mills in the third quarter.

Compared with the third quarter of 2019, sales volumes in the third quarter of 2020 increased overall by 20%, primarily from increased sales of softwood pulp in China, Russia and other export markets, partially offset by lower sales of hardwood pulp in China and Russia. Sales of containerboard in China and other export markets improved. Average sales price realizations for softwood pulp and hardwood pulp were lower in all ~~countries.~~regions. Average sales price realizations for containerboard were slightly higher in China, but lower in Russia and other export markets. Input costs, primarily for wood ~~and energy,~~increased. Distribution costs were higher. ~~Operating costs were negatively impacted by the planned maintenance downtime taken in the third quarter of 2017.~~ An after-tax foreign exchange ~~gain~~loss of $3$4 million primarily on the remeasurement of U.S. dollar denominated net debt was recorded in the third quarter of ~~2016.~~2019.

Looking forward to the fourth quarter of ~~2017,~~2020, sales volumes are expected to ~~increase. Average~~be higher. Based on pricing to date in the current quarter, average sales price realizations are ~~expected~~projected to increase primarily for softwood pulp and containerboard compared with the third quarter of ~~2017, primarily~~2020. Input costs for ~~export sales of softwood~~wood and ~~hardwood pulp, and containerboard. Input costs~~fuel are expected to be seasonally ~~higher for wood~~higher. Distribution costs are projected to increase.

Equity Earnings – GPIP

International Paper recorded equity earnings of $11 million in the third quarter of 2020, compared with $11 million in the second quarter of 2020 and ~~energy.~~$10 million in the third quarter of 2019. As of September 30, 2020, the Company's ownership interest in GPIP was 14.8%.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations totaled ~~$569 million~~$2.3 billion for the first nine months of ~~2017~~,2020, compared with ~~$1.6~~$2.7 billion for the comparable ~~2016nine-month~~2019 nine-month period. ~~Cash used for working capital components totaled~~ ~~$567 million~~ ~~for the first~~ ~~nine~~ ~~months of~~ ~~2017~~ ~~compared to~~ ~~$120 million~~ ~~for the comparable~~ ~~2016nine-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, net of insurance recoveries, totaled ~~$935~~$657 million in the first nine months of ~~2017~~2020, compared to ~~$903~~$913 million in the first nine months of ~~2016~~.2019. Full-year ~~2017~~2020 capital spending is currently expected to be approximately ~~$1.5 billion, or about 107%~~$800 million, which represents a reduction of approximately $200 million from our initial plan. This represents 62% of depreciation and amortization, ~~expense for our current businesses.~~including approximately $290 million of strategic investments.

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Financing activities for the first nine months of ~~2017~~2020 included a ~~$997 million~~$1.1 billion net ~~increase~~decrease in debt versus a ~~$1.6 billion~~$391 million net ~~increase~~decrease in debt during the comparable ~~2016~~2019 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~~2020 and ~~2016~~2019 were as follows:


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

Three Months Ended
September 30, Nine Months Ended
September 30,
In millions 2017 2016 2017 2016
Early debt reductions (a) $ 95
$ 266
$ 122
$ 266
Pre-tax early debt extinguishment costs 2
29
2
29

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


~~(a)~~	Reductions related to notes with interest rates ranging from 4.63% to 6.63% with original maturities from 2018 to 2031 and from 1.57% to 6.63% with original maturities from 2018 to 2031 for the three and nine months ended September 30, 2017, and 7.95% with an original maturity in 2018 for the three and nine months ended September 30, 2016.

At September 30, ~~2017,~~2020, contractual obligations for future payments of debt maturities (including finance lease liabilities disclosed in Note 11 - Leases of the Condensed Notes to the Consolidated Financial Statements and excluding the timber monetization structures disclosed in Note 16 - Variable Interest Entities of the Condensed Notes to the Consolidated Financial Statements) by calendar year were as follows: ~~$476 million in 2017; $461 million in 2018; $422 million in 2019; $159~~$146 million in 2020; ~~$663~~$50 million in 2021; ~~$923~~$200 million in 2022; $361 million in 2023; $532 million in 2024; and ~~$9.23~~$7.4 billion thereafter.

Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At September 30, ~~2017~~,2020, 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,~~2020, International Paper’s credit agreements totaled ~~$2.1~~$2.8 billion, which ~~management~~is comprised of the $750 million contractually committed revolving credit agreement, the $1.5 billion contractually committed bank credit agreement, and up to $550 million under the receivables securitization program. Management believes these credit agreements are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. ~~The liquidity facilities include a~~At September 30, 2020, the Company had no borrowings outstanding under the $750 million revolving credit agreement, the $1.5 billion ~~contractually committed bank~~ credit agreement, ~~that expires~~or the $550 million receivables securitization program. The Company’s credit agreements are not subject to any restrictive covenants other than the financial covenants as disclosed in ~~December 2021~~Note 17 - Debt of the Condensed Notes to the Consolidated Financial Statements, and ~~has a facility fee of 0.15% per annum payable quarterly.~~the borrowings under the receivables securitization program being limited by eligible receivables. The ~~liquidity facilities also include up to $600 million of uncommitted financings based on eligible receivable balances ($600 million available~~Company was in compliance with all its debt covenants at September 30, ~~2017)~~2020 and was well below the thresholds stipulated under ~~a receivables securitization program that expires~~the covenants as defined in ~~December 2017.~~the credit agreements. Further the financial covenants do not restrict any borrowings under the credit agreements.

In ~~June 2016,~~addition to the $2.8 billion in credit agreements, International Paper ~~entered into~~has a commercial paper program with a borrowing capacity of ~~$750 million.~~$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,~~2020, the Company had ~~$445~~$140 million of borrowings outstanding under ~~this~~the program at a weighted average interest rate of ~~1.39%~~0.17%.

~~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, International Paper used 2.6 million shares of treasury stock for various incentive plans. International Paper also acquired 0.9 million shares of treasury stock, including shares for the payment of restricted stock tax withholding. Repurchases of common stock and payments of restricted stock withholding taxes totaled $46 million. In

September 2013, the Company announced a share repurchase program to acquire up to $1.5 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 share repurchase program authorized in September 2013 and would continue to repurchase such shares in open market repurchase transactions. Under this $3.0 billion share repurchase program, the Company has repurchased 44.6 million shares at an average price of $46.40, for a total of approximately $2.1 billion, as of September 30, 2017.

During the first nine months of 2016, International Paper used approximately 2.7 million shares of treasury stock for various incentive plans. International Paper also acquired 3.6 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. Cash dividend payments related to common stock totaled $573 million and $543 million for the first ~~nine~~ ~~months of 2017 and 2016, respectively. Dividends were $1.3875 per share and $1.3200 per share for the first~~ ~~nine~~ ~~months in 2017 and 2016, respectively.~~

International Paper expects to be able to meet projected capital expenditures, service existing debt and meet working capital and dividend requirements ~~during~~ ~~2017~~for the next 12 months 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~~maintain appropriate levels of liquidity to meet our needs while ~~reducing~~managing balance sheet debt and interest expense. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors. The COVID-19 pandemic has negatively impacted the global economy and created significant volatility and disruption of capital and financial markets. As a result of the current economic environment, management has taken various actions to further strengthen the Company’s liquidity position. In addition to the Company entering into a $750 million revolving credit agreement and the Company amending the receivable securitization program from uncommitted to committed financing, the Company is also on track to reduce capital expenditures by approximately $200 million from the initial 2020 plan, has indefinitely suspended the Company’s share repurchase program beginning April 2020, and has been deferring the payment of our payroll taxes as allowed under CARES Act. The CARES Act allows for the deferral of the payment of the employer portion of Social Security taxes accrued between March 27, 2020, and December 31, 2020. Under the CARES Act 50% of the deferred

~~Acquisitions~~

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~~See discussion~~payroll taxes will be paid by December 31, 2021 and the remainder will be paid by December 31, 2022. We believe that these actions provide us with sufficient liquidity to operate in this uncertain environment; however, an extended period of economic disruption could impact our access to additional sources of liquidity.

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

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

Cash dividend payments related to common stock totaled $605 million and $595 million for the first nine months of 2020 and 2019, respectively. Dividends were $1.5375 per share and $1.5000 per share for the first nine months in 2020 and 2019, respectively.

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

Variable Interest Entities

Information concerning variable interest entities is set forth in Note ~~7 - Acquisitions~~15 in the ~~Condensed Notes~~Company's Annual Report on Form 10-K for the year ended December 31, 2019. In connection with the 2006 International Paper installment sale of forestlands, we received $4.8 billion of installment notes. These installment notes were used by variable interest entities as collateral for borrowings from third-party lenders. These variable interest entities were restructured in 2015 when the installment notes and third-party loans were extended. The restructured variable interest entities hold installment notes of $4.85 billion that mature in August 2021 and third-party loans of $4.22 billion that mature in November and December of 2020. These third-party loans are shown in Current nonrecourse financial liabilities of variable interest entities on the accompanying consolidated balance sheet. We are currently negotiating the extension of the third-party loans to August 2021 and expect to complete the ~~Consolidated Financial Statements.~~extension before the maturity dates.

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 billion,~~$900 million, 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.

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The Company has included in its ~~2016~~2019 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~~2020.

While we have taken into account certain impacts arising from COVID-19 in connection with the ~~timing~~accounting estimates reflected in this Quarterly Report on Form 10-Q, the full impact of ~~the annual impairment testing of goodwill which~~COVID-19 is ~~referenced in Note 1 in the Condensed Notes to the Consolidated Financial Statements~~unknown and ~~discussed below.~~

~~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~~cannot be reasonably estimated. However, we have made appropriate 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. Basedestimates based on the ~~level of payments made, settlement accounting rules applied~~facts and ~~resulted in a plan remeasurement~~circumstances available as of the ~~June 30, 2016 payment~~reporting 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 toTo the extent ~~of benefits paid, which totaled $34 million for the nine months ended September 30, 2017.~~there are differences between these estimates and actual results, our consolidated financial statements may be affected.

FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q that are not historical in nature may be considered “forward-looking” statements 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,”~~“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) developments related to the COVID-19 pandemic, including the severity, magnitude and duration of the pandemic, negative global economic conditions arising from the pandemic, the development, availability and effectiveness of treatments and vaccines, impacts of governments’ responses to the pandemic on our operations, impacts of the pandemic on commercial activity, our customers and business partners and consumer preferences and demand, supply chain disruptions, and disruptions in the capital or financial markets; (ii) the level of ~~our~~ indebtedness and changes in interest rates; ~~(ii)~~(iii) industry conditions, including but not limited to changes in the cost or availability of raw materials, energy and transportation costs, competition ~~we face,~~International Paper faces, cyclicality and changes in consumer preferences, demand and pricing for ~~our products; (iii)~~International Paper products (including changes resulting from the COVID-19 pandemic); (iv) domestic and global economic conditions and political changes, ~~including but not limited to the impairment of financial institutions,~~ changes in currency exchange rates, trade protectionist policies, downgrades in International Paper’s credit ratings, and/or the credit ratings of banks issuing certain letters of credit, issued by recognized credit rating ~~organizations,~~organizations; (v) the amount of ~~our~~International Paper’s future pension funding ~~obligation, changes in tax laws~~obligations, and pension and health care costs; ~~(iv)~~(vi) unanticipated expenditures or other adverse developments related to the cost of compliance with existing and new environmental, tax, labor and employment, privacy and other U.S. and non-U.S. governmental laws and regulations ~~and to actual or potential litigation; (v) whether we experience a~~(including new legal requirements arising from the COVID-19 pandemic); (vii) any material disruption at ~~one~~any of ~~our~~International Paper’s manufacturing ~~facilities; (vi)~~facilities due to severe weather, natural disasters or other causes (including as the result of the COVID-19 pandemic); (viii) 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) ourInternational Paper’s ability to achieve the benefits ~~we expect~~expected from, ~~all~~and other ~~strategic~~risks associated with, acquisitions, joint ventures, divestitures and ~~restructurings;~~other corporate transactions, (x) information technology risks, and ~~(xvii)~~(xi) loss contingencies and pending, threatened or future litigation, including with respect to environmental related matters. These and other factors ~~you~~that could cause or contribute to actual results differing materially from such forward-looking statements can ~~find~~be found in ~~our~~International Paper’s press releases and ~~filings with the~~U.S. Securities and Exchange Commission ~~including~~filings. In addition, other risks and uncertainties not presently known to International Paper or that it currently believes to be immaterial could affect the ~~risk factors identified in Item 1A~~accuracy 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"). We undertake~~any forward-looking statements. International Paper undertakes 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~~

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information relating to quantitative and qualitative disclosures about market risk is shown on page 3836 of International Paper’s ~~2016~~2019 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~~.2019.

ITEM 4.CONTROLS AND PROCEDURES


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~

Evaluation of Disclosure Controls and Procedures:

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

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the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, ~~2017~~2020 (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~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS


~~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.~~10-Q, which is incorporated by reference.


~~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.ITEM 1A.RISK FACTORS

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~~2019 (Part I, Item 1A). other than as discussed below.

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

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

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

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

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

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

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

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

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

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

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

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

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

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

(a) ~~819~~5,627 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.~~program. A share repurchase program was approved on September 10, 2013, and increased twice on July 8, 2014, and October 9, 2018. Through this program, which does not have an expiration date, 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, 2020, approximately $1.73 billion aggregate amount of shares of our common stock remained authorized for purchase under this program. The Company indefinitely suspended its repurchase program in April 2020.

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ITEM 6. EXHIBITS


~~ITEM 6.~~10.1			~~EXHIBITS~~

Agreement Regarding Continued Employment, Termination, Severance and General Release dated September 8, 2020 between International Paper Company and Catherine I. Slater (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed on September 11, 2020).



~~10.1~~31.1		Commitment Agreement, dated September 26, 2017, between International Paper Company and Prudential Insurance Company of America, relating to the Retirement Plan of International Paper Company.*

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.~~


*101.PRE	~~Confidential treatment has been requested for certain information pursuant to Rule 24b-2 under the Securities Exchange Act of 1934,~~	XBRL Extension Presentation Linkbase.

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

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SIGNATURES

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


		INTERNATIONAL PAPER COMPANY (Registrant)

October 30, 2020		~~INTERNATIONAL PAPER COMPANY~~ ~~(Registrant)~~ By	/s/ Tim S. Nicholls
			Tim S. Nicholls
~~November 3, 2017~~		By	~~/s/ Glenn R. Landau~~
	~~Glenn R. Landau~~
	Senior Vice President and Chief Financial Officer

~~November 3, 2017~~October 30, 2020		By	/s/ Vincent P. Bonnot
			Vincent P. Bonnot
			Vice President – Finance and Controller



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	)



	Three Months Ended
	September 30						June 30,
In millions	2017			2016			2017
Earnings (Loss) From Continuing Operations Attributable to International Paper Company	$	395		$	312		$	80
Add back (deduct):
Income tax provision (benefit)	153			107			(89		)
Equity (earnings) loss, net of taxes	(45		)	(43		)	(20		)
Noncontrolling interests, net of taxes	—			(3		)	—
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	503			373			(29		)
Interest expense, net	152			132			137
Noncontrolling interests / equity earnings included in operations	—			1			(1		)
Corporate items	19			11			4
Special items (income) expense	—			54			(16		)
Non-operating pension expense	33			42			34
Adjusted Operating Profit	$	707		$	613		$	129
Business Segment Operating Profit:
Industrial Packaging	$	469		$	423		$	50
Global Cellulose Fibers	49			(38		)	7
Printing Papers	135			167			86
Consumer Packaging	54			61			(14		)
Total Business Segment Operating Profit	$	707		$	613		$	129



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



European Consumer Packaging	2017						2016
In millions	3rd Quarter		2nd Quarter		Nine Months		3rd Quarter		2nd Quarter		Nine Months
Sales	$	88	$	79	$	245	$	87	$	85	$	249
Operating Profit	$	21	$	14	$	54	$	22	$	25	$	73