Table of Contents

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, 2017March 31, 2021
 
¨ ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the Transition Period From              to             
 _________________________________________
Commission File Number 1-3157001-03157
INTERNATIONAL PAPER COMPANY
(Exact name of registrant as specified in its charter)


New York13-0872805
(State or other jurisdiction
of incorporation)
(I.R.S. Employer
Identification No.)
incorporation of organization)Identification No.)
6400 Poplar Avenue, Memphis, TNTennessee38197
(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 classTrading Symbol(s)Name of each exchange on which registered
Common SharesIPNew 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 filerý☒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, 2017April 23, 2021 was 412,928,210.391,739,284.


Table of Contents

INDEX
 
PAGE NO.
PART I. FINANCIAL INFORMATION
PAGE NO.
Item 1.
Condensed Consolidated Statement of Operations - Three Months Ended March 31, 2021 and Nine Months Ended September 30, 2017 and 20162020
1
Condensed Consolidated Statement of Comprehensive Income - Three Months Ended March 31, 2021 and Nine Months Ended September 30, 2017 and 20162020
2
Condensed Consolidated Balance Sheet - September 30, 2017March 31, 2021 and December 31, 20162020
3
Condensed Consolidated Statement of Cash Flows - NineThree Months Ended September 30, 2017March 31, 2021 and 20162020
4
5
25
4241
4241
PART II. OTHER INFORMATION
4342
4342
4342
4443
Signatures
45

Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1.
Signatures
FINANCIAL STATEMENTS
44


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
March 31,
2017 2016 2017 2016 20212020
Net Sales$5,913
 $5,266
 $17,196
 $15,698
Net Sales$5,363 $5,352 
Costs and Expenses       Costs and Expenses
Cost of products sold4,024
 3,622
 12,069
 11,345
Cost of products sold3,847 3,746 
Selling and administrative expenses431
 380
 1,275
 1,142
Selling and administrative expenses361 418 
Depreciation, amortization and cost of timber harvested373
 314
 1,075
 899
Depreciation, amortization and cost of timber harvested309 323 
Distribution expenses386
 353
 1,155
 1,012
Distribution expenses406 407 
Taxes other than payroll and income taxes44
 41
 132
 123
Taxes other than payroll and income taxes44 44 
Restructuring and other charges—
 46
 (16) 47
Restructuring and other charges, netRestructuring and other charges, net30 8 
Net (gains) losses on sales and impairments of businesses—
 5
 9
 70
Net (gains) losses on sales and impairments of businesses2 344 
Litigation settlement—
 —
 354
 —
Net bargain purchase gain on acquisition of business—
 —
 (6) —
Net (gains) losses on sales of equity method investmentsNet (gains) losses on sales of equity method investments(74)(33)
Interest expense, net152
 132
 431
 384
Interest expense, net92 117 
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings503
 373
 718
 676
Non-operating pension expense (income)Non-operating pension expense (income)(53)(6)
Earnings (Loss) Before Income Taxes and Equity EarningsEarnings (Loss) Before Income Taxes and Equity Earnings399 (16)
Income tax provision (benefit)153
 107
 147
 139
Income tax provision (benefit)99 94 
Equity earnings (loss), net of taxes45
 43
 113
 151
Equity earnings (loss), net of taxes49 (31)
Earnings (Loss) From Continuing Operations395
 309
 684
 688
Discontinued operations, net of taxes—
 —
 —
 (5)
Net Earnings (Loss)395
 309
 684
 683
Less: Net earnings (loss) attributable to noncontrolling interests—
 (3) —
 (3)
Net Earnings (Loss) Attributable to International Paper Company$395
 $312
 $684
 $686
Net Earnings (Loss) Attributable to International Paper Company$349 $(141)
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)$0.89 $(0.36)
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)$0.88 $(0.36)
Average Shares of Common Stock Outstanding – assuming dilution417.4
 415.3
 417.4
 415.5
Average Shares of Common Stock Outstanding – assuming dilution394.8 392.6 
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.

1
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INTERNATIONAL PAPER COMPANY
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
(In millions)
 
Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
March 31,
2017 2016 2017 2016 20212020
Net Earnings (Loss)$395
 $309
 $684
 $683
Net Earnings (Loss)$349 $(141)
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. plans59
 72
 176
 471
U.S. plans34 46 
Pension and postretirement liability adjustments:       
U.S. plans—
 (53) —
 (598)
Non-U.S. plans—
 —
 1
 17
Change in cumulative foreign currency translation adjustment100
 3
 234
 373
Change in cumulative foreign currency translation adjustment(143)(544)
Net gains/losses on cash flow hedging derivatives:       Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period1
 5
 9
 (5)Net gains (losses) arising during the period(6)(30)
Reclassification adjustment for (gains) losses included in net earnings (loss)(2) (3) (6) (7)Reclassification adjustment for (gains) losses included in net earnings (loss)3 11 
Total Other Comprehensive Income (Loss), Net of Tax158
 24
 414
 251
Total Other Comprehensive Income (Loss), Net of Tax(112)(517)
Comprehensive Income (Loss)553
 333
 1,098
 934
Comprehensive Income (Loss)237 (658)
Net (earnings) loss attributable to noncontrolling interests—
 3
 —
 3
Other comprehensive (income) loss attributable to noncontrolling interests1
 (1) (1) (1)Other comprehensive (income) loss attributable to noncontrolling interests1 1 
Comprehensive Income (Loss) Attributable to International Paper Company$554
 $335
 $1,097
 $936
Comprehensive Income (Loss) Attributable to International Paper Company$238 $(657)
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		March 31,
2021		December 31,
2020
(unaudited)   (unaudited) 
Assets   Assets
Current Assets   Current Assets
Cash and temporary investments$998
 $1,033
Cash and temporary investments$787 $595 
Accounts and notes receivable, net3,343
 3,001
Accounts and notes receivable, net3,342 3,064 
Contract assetsContract assets437 355 
Inventories2,465
 2,438
Inventories1,828 2,050 
Current financial assets of variable interest entities (Note 16)Current financial assets of variable interest entities (Note 16)4,850 4,850 
Assets held for saleAssets held for sale695 138 
Other current assets405
 198
Other current assets228 184 
Total Current Assets7,211
 6,670
Total Current Assets12,167 11,236 
Plants, Properties and Equipment, net14,065
 13,990
Plants, Properties and Equipment, net11,667 12,217 
Forestlands468
 456
Forestlands285 311 
Investments336
 360
Investments711 1,178 
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)2,261 2,257 
Goodwill3,420
 3,364
Goodwill3,242 3,315 
Right of Use AssetsRight of Use Assets415 459 
Deferred Charges and Other Assets1,266
 1,220
Deferred Charges and Other Assets729 745 
Total Assets$33,813
 $33,093
Total Assets$31,477 $31,718 
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$31 $29 
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 payable2,408
 2,309
Accounts payable2,354 2,320 
Accrued payroll and benefits447
 430
Accrued payroll and benefits363 466 
Other accrued liabilities1,056
 1,091
Liabilities held for saleLiabilities held for sale334 181 
Other current liabilitiesOther current liabilities1,088 1,068 
Total Current Liabilities4,869
 4,069
Total Current Liabilities8,390 8,284 
Long-Term Debt11,373
 11,075
Long-Term Debt7,954 8,064 
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)2,094 2,092 
Deferred Income Taxes3,505
 3,127
Deferred Income Taxes2,756 2,743 
Pension Benefit Obligation2,069
 3,400
Pension Benefit Obligation968 1,055 
Postretirement and Postemployment Benefit Obligation315
 330
Postretirement and Postemployment Benefit Obligation246 251 
Long-Term Lease ObligationsLong-Term Lease Obligations276 315 
Other Liabilities460
 449
Other Liabilities1,022 1,046 
Equity   Equity
Common stock, $1 par value, 2017 – 448.9 shares and 2016 – 448.9 shares449
 449
Common stock, $1 par value, 2021 – 448.9 shares and 2020 – 448.9 sharesCommon stock, $1 par value, 2021 – 448.9 shares and 2020 – 448.9 shares449 449 
Paid-in capital6,176
 6,189
Paid-in capital6,267 6,325 
Retained earnings4,918
 4,818
Retained earnings8,214 8,070 
Accumulated other comprehensive loss(4,949) (5,362)Accumulated other comprehensive loss(4,453)(4,342)
6,594
 6,094
10,477 10,502 
Less: Common stock held in treasury, at cost, 2017 – 36.0 shares and 2016 – 37.7 shares1,680
 1,753
Less: Common stock held in treasury, at cost, 2021 – 57.2 shares and 2020 – 55.8 sharesLess: Common stock held in treasury, at cost, 2021 – 57.2 shares and 2020 – 55.8 shares2,719 2,648 
Total International Paper Shareholders’ Equity4,914
 4,341
Total International Paper Shareholders’ Equity7,758 7,854 
Noncontrolling interests19
 18
Noncontrolling interests13 14 
Total Equity4,933
 4,359
Total Equity7,771 7,868 
Total Liabilities and Equity$33,813
 $33,093
Total Liabilities and Equity$31,477 $31,718 
The accompanying notes are an integral part of these condensed financial statements.

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INTERNATIONAL PAPER COMPANY
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(In millions)
 Three Months Ended
March 31,
 20212020
Operating Activities
Net earnings (loss)$349 $(141)
Depreciation, amortization and cost of timber harvested309 323 
Deferred income tax provision (benefit), net20 35 
Restructuring and other charges, net30 8 
Net (gains) losses on sales of equity method investments(74)(33)
Net (gains) losses on sales and impairments of businesses2 344 
Equity method dividends received4 5 
Equity (earnings) losses, net(49)31 
Periodic pension (income) expense, net(28)11 
Other, net25 166 
Changes in current assets and liabilities
Accounts and notes receivable(186)(107)
Contract assets(83)(33)
Inventories93 60 
Accounts payable and accrued liabilities68 (31)
Interest payable15 (12)
Other17 23 
Cash Provided By (Used For) Operations512 649 
Investment Activities
Invested in capital projects, net of insurance recoveries(89)(286)
Acquisitions, net of cash acquired(61)0 
Proceeds from sales of equity method investments397 250 
Proceeds from sales of businesses, net of cash divested11 0 
Proceeds from sale of fixed assets0 1 
Cash Provided By (Used For) Investment Activities258 (35)
Financing Activities
Repurchases of common stock and payments of restricted stock tax withholding(155)(41)
Issuance of debt2 560 
Reduction of debt(111)(136)
Change in book overdrafts(19)(9)
Dividends paid(202)(202)
Net debt tender premiums paid(19)(7)
Cash Provided By (Used For) Financing Activities(504)165 
Cash Included in Assets Held for Sale(54)(9)
Effect of Exchange Rate Changes on Cash(20)(42)
Change in Cash and Temporary Investments192 728 
Cash and Temporary Investments
Beginning of period595 511 
End of period$787 $1,239 
 Nine Months Ended
September 30,
 2017 2016
Operating Activities   
Net earnings (loss)$684
 $683
Depreciation, amortization and cost of timber harvested1,075
 899
Deferred income tax provision (benefit), net295
 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 businesses9
 70
Ilim dividends received129
 58
Equity (earnings) loss, net(113) (151)
Periodic pension expense, net237
 718
Other, net92
 67
Changes in current assets and liabilities   
Accounts and notes receivable(293) (83)
Inventories(70) (6)
Accounts payable and accrued liabilities5
 (37)
Interest payable(11) 24
Other(198) (18)
Cash Provided By (Used For) Operations569
 1,566
Investment Activities   
Invested in capital projects(935) (903)
Acquisitions, net of cash acquired(45) (56)
Proceeds from divestitures, net of cash divested4
 105
Proceeds from sale of fixed assets22
 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 debt1,366
 3,447
Reduction of debt(369) (1,855)
Change in book overdrafts5
 (5)
Dividends paid(573) (543)
Debt tender premiums paid(1) (31)
Other(2) (3)
Cash Provided By (Used For) Financing Activities380
 878
Effect of Exchange Rate Changes on Cash24
 39
Change in Cash and Temporary Investments(35) 1,512
Cash and Temporary Investments   
Beginning of period1,033
 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 ninethree 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 of2020, which have previously been filed with the Securities and Exchange Commission. The Current Report

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. Since that time, most of our manufacturing and converting facilities have remained open and operational during the pandemic.

We have seen a mixed impact on Form 8-K dated July 31, 2017demand for our products. Demand for printing papers products was filed to retrospectively adjust portions ofsignificantly impacted by the Company's Annual Report on Form 10-K for the year ended December 31, 2016, to reflect the adoption of the required guidance in ASU 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes." In addition, aspandemic, although demand recovered a result of an internal reorganizationbit in the 2017 first quarter the net salesof 2021. Demand for our pulp, containerboard and operating profits for the Asian Distributioncorrugated box products has not been negatively impacted by COVID-19 to date, but our operations are included in the results of the businesses that manufacture the products, and as such, prior year amounts have been reclassified to conform with the presentation in 2017.

During the fourth quarter of 2016, the Company completed the acquisition of Weyerhaeuser's pulp business (see Note 7). Subsequent to the acquisition, the Company began reporting Global Cellulose Fibers as a separate reportable business segment in the fourth quarter of 2016Industrial Packaging experienced higher supply chain costs due to the increased materialityimpacts of COVID-19.

There continue to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the various economic reopening plans and the resurgence of the virus including new variants of the virus in many areas globally; 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 efficacy, availability and efficiency of the distribution of various vaccines; and the ongoing impact of COVID-19 on unemployment, economic activity and consumer confidence. COVID-19 has significantly adversely affected portions of our business, and could have a material adverse effect on our financial condition, results of this business. This segment includes the Company's legacy pulp businessoperations and the newly acquired pulp business. As such, amounts related to the legacy pulp business have been reclassified outcash flows, particularly if negative global economic conditions persist for a significant period 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.time or deteriorate.


NOTE 2 - RECENT ACCOUNTING DEVELOPMENTS


Derivatives and HedgingRecently Issued Accounting Pronouncements Not Yet Adopted


Reference Rate Reform

In August 2017,March 2020, the FASB issued ASU 2017-12, "Derivatives and Hedging2020-04, "Reference Rate Reform (Topic 815)848): Targeted Improvements to Accounting for Hedging Activities." The objective of this new guidance is the improvementFacilitation of the financial reportingEffects of hedging relationshipsReference Rate Reform on Financial Reporting." This guidance provides companies with optional guidance to better portrayease the economic results of an entity’s risk management activities in its financial statements. In additionpotential accounting burden associated with transitioning away from reference rates that are expected 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.be discontinued. This guidance is effective for annual reporting periods beginning afterupon 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 plansguidance.

NOTE 3 - REVENUE RECOGNITION

Generally, the Company recognizes revenue on a point-in-time basis when the customer takes title to early adopt the provisions of this guidancegoods and assumes the risks and rewards for the year beginning January 1, 2018.

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, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." This ASU requires companies to recognize 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 effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. The guidance requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. Early adoption is permitted. The Company does not expect that the adoption of the standard will result in a material impact on the financial statements.

Stock Compensation

In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting." This guidance clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under this guidance, entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. This guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted, including adoption in any interim period. 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.

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 and therefore impact the Company's effective tax rate. This guidance replaced previous guidance which required tax benefits that exceed compensation costs (windfalls) to be recognized in equity. The new guidance also changed the cash flow presentation of excess tax benefits, classifying them as operating inflows rather than financing activities as they were previously classified. In addition, the new guidance allows companies to provide net settlement of stock-based compensation to cover tax withholding as long as the net settlement does not exceed the maximum individual statutory tax rate in the employee's tax jurisdiction. Amendments related to 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 promisedgoods. For customized 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 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 and where the Company would havehas a legally enforceable right ofto payment for productionthe goods, the Company recognizes revenue over time which, generally, is as the goods are produced.










5
Table of products completedContents
Disaggregated Revenue

A geographic disaggregation of 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, includingassist in evaluating the materialitynature, timing and uncertainty of revenue and cash flows and how they may be impacted by economic factors.
Three Months Ended March 31, 2021
In millionsIndustrial PackagingGlobal Cellulose FibersPrinting PapersCorporate and Inter-segment SalesTotal
Primary Geographical Markets (a)
United States$3,257 $483 $363 $47 $4,150 
EMEA491 70 263 (3)821 
Pacific Rim and Asia18 28 9 4 59 
Americas, other than U.S.187 0 146 0 333 
Total$3,953 $581 $781 $48 $5,363 
Operating Segments
North American Industrial Packaging$3,485 $— $— $— $3,485 
EMEA Industrial Packaging396 — — — 396 
European Coated Paperboard98 — — — 98 
Global Cellulose Fibers— 581 — — 581 
North American Printing Papers— — 366 — 366 
Brazilian Papers— — 168 — 168 
European Papers— — 250 — 250 
Intra-segment Eliminations(26)— (3)— (29)
Corporate & Inter-segment Sales— — — 48 48 
Total$3,953 $581 $781 $48 $5,363 
(a) Net sales are attributed to countries based on the location of the potential impactseller.

Three Months Ended March 31, 2020
In millionsIndustrial PackagingGlobal Cellulose FibersPrinting PapersCorporate & IntersegmentTotal
Primary Geographical Markets (a)
United States$3,130 $494 $444 $58 $4,126 
EMEA440 56 302 (2)796 
Pacific Rim and Asia12 18 8 3 41 
Americas, other than U.S.237 0 154 (2)389 
Total$3,819 $568 $908 $57 $5,352 
Operating Segments
North American Industrial Packaging$3,355 $— $— $— $3,355 
EMEA Industrial Packaging350 — — — 350 
Brazilian Industrial Packaging54 — — — 54 
European Coated Paperboard92 — — — 92 
Global Cellulose Fibers— 568 — — 568 
North American Printing Papers— — 446 — 446 
Brazilian Papers— — 176 — 176 
European Papers— — 287 — 287 
Intra-segment Eliminations(32)— (1)— (33)
Corporate & Inter-segment Sales— — — 57 57 
Total$3,819 $568 $908 $57 $5,352 
(a) Net sales are attributed to countries based on the location of the seller.

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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, duecustomer.

A contract liability is created when customers prepay for goods prior to the repetitive natureCompany 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 expectcustomer prepayments are received during the impactfourth 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$41 million and $31 million are included in Other current liabilities in the notes toaccompanying condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020, respectively.

The difference between the financial statementsopening and any necessary policy and process changes, in preparation for adoption. The Company does not expect that the adoptionclosing balances of the other elements ofCompany's contract assets and contract liabilities primarily results from the standard will resultdifference between the price and quantity at comparable points in a material impact on its financial statements.time for goods for which we have an unconditional right to payment or receive pre-payment from the customer, respectively.


NOTE 34 - EQUITY


A summary of the changes in equity for the ninethree months ended September 30, 2017March 31, 2021 and 20162020 is provided below:

Three Months Ended March 31, 2021
In millions, except per share amountsCommon Stock IssuedPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Common Stock Held In Treasury, At CostTotal
International
Paper
Shareholders’
Equity		Noncontrolling
Interests		Total
Equity
Balance, January 1$449 $6,325 $8,070 $(4,342)$2,648 $7,854 $14 $7,868 
Issuance of stock for various plans, net— (58)— — (84)26 — 26 
Repurchase of stock— — — — 155 (155)— (155)
Common stock dividends
$0.5125 per share)
— — (205)— — (205)— (205)
Transactions of equity method investees— 0 — — — 0 — 0 
Comprehensive income (loss)— — 349 (111)— 238 (1)237 
Ending Balance, March 31$449 $6,267 $8,214 $(4,453)$2,719 $7,758 $13 $7,771 

Three Months Ended March 31, 2020
In millions, except per share amountsCommon Stock IssuedPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Common Stock Held In Treasury, At CostTotal
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— (51)— — (92)41 — 41 
Repurchase of stock— — — — 41 (41)— (41)
Common stock dividends ($0.5125 per share)— — (203)— — (203)— (203)
Transactions of equity method investees— 6 — — — 6 — 6 
Comprehensive income (loss)— — (141)(516)— (657)(1)(658)
Ending Balance, March 31$449 $6,252 $8,062 $(5,255)$2,651 $6,857 $4 $6,861 


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Table of Contents
 Nine Months Ended
September 30,
 2017 2016
In millions, except per share amounts
Total
International
Paper
Shareholders’
Equity
 
Noncontrolling
Interests
 
Total
Equity
 
Total
International
Paper
Shareholders’
Equity
 
Noncontrolling
Interests
 
Total
Equity
Balance, January 1$4,341
 $18
 $4,359
 $3,884
 $25
 $3,909
Issuance of stock for various plans, net130
 —
 130
 100
 —
 100
Repurchase of stock(46) —
 (46) (132) —
 (132)
Common stock dividends ($1.3875 per share in 2017 and $1.3200 per share in 2016)(584) —
 (584) (550) —
 (550)
Transactions of equity method investees(24) —
 (24) (37) —
 (37)
Divestiture of noncontrolling interests—
 —
 —
 —
 (3) (3)
Other—
 —
 —
 8
 —
 8
Comprehensive income (loss)1,097
 1
 1,098
 936
 (2) 934
Ending Balance, September 30$4,914
 $19
 $4,933
 $4,209
 $20
 $4,229

NOTE 4NOTE 5 - OTHER COMPREHENSIVE INCOME


The following table presents changes in AOCIaccumulated other comprehensive income (AOCI) for the three-month periodthree months ended September 30, 2017:March 31, 2021 and 2020:
Three Months Ended
March 31,
In millions20212020
Defined Benefit Pension and Postretirement Adjustments
Balance at beginning of period$(1,880)$(2,277)
Amounts reclassified from accumulated other comprehensive income34 46 
Balance at end of period(1,846)(2,231)
Change in Cumulative Foreign Currency Translation Adjustments
Balance at beginning of period(2,457)(2,465)
Other comprehensive income (loss) before reclassifications(143)(544)
Other comprehensive income (loss) attributable to noncontrolling interest1 1 
Balance at end of period(2,599)(3,008)
Net Gains and Losses on Cash Flow Hedging Derivatives
Balance at beginning of period(5)3 
Other comprehensive income (loss) before reclassifications(6)(30)
Amounts reclassified from accumulated other comprehensive income3 11 
Balance at end of period(8)(16)
Total Accumulated Other Comprehensive Income (Loss) at End of Period$(4,453)$(5,255)
In millions Defined Benefit Pension and Postretirement Items (a) Change in Cumulative Foreign Currency Translation Adjustments (a) Net Gains and Losses on Cash Flow Hedging Derivatives (a) Total (a)
Balance, July 1, 2017 $(2,954) $(2,155) $1
 $(5,108)
Other comprehensive income (loss) before reclassifications —
 101
 1
 102
Amounts reclassified from accumulated other comprehensive income 59
 (1) (2) 56
Net Current Period Other Comprehensive Income (Loss) 59
 100
 (1) 158
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interest —
 1
 —
 1
Balance, September 30, 2017 $(2,895) $(2,054) $—
 $(4,949)

(a)All amounts are net of tax.

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

(a)All amounts are net of tax.

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

(a)All amounts are net of tax.


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

(a)All amounts are net of tax.


The following table presents details of the reclassifications out of AOCI for the three-monththree months ended March 31, 2021 and nine-month periods ended September 30, 20172020:

In millions:Amount Reclassified from Accumulated Other Comprehensive IncomeLocation of Amount Reclassified from AOCI
Three Months Ended
March 31,
20212020
Defined benefit pension and postretirement items:
Prior-service costs$(6)$(5)(a)Non-operating pension expense
Actuarial gains (losses)(40)(56)(a)Non-operating pension expense
Total pre-tax amount(46)(61)
Tax (expense) benefit12 15 
Total, net of tax(34)(46)
Net gains and losses on cash flow hedging derivatives:
Foreign exchange contracts(4)(17)(b)Cost of products sold
Total pre-tax amount(4)(17)
Tax (expense)/benefit1 6 
Net of tax(3)(11)
Total reclassifications for the period$(37)$(57)

(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 2016:hedging activities (see Note 18 for additional details).
8
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)   
Table of Contents

(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 5NOTE 6 - EARNINGS PER SHARE ATTRIBUTABLE TO INTERNATIONAL PAPER COMPANY COMMON SHAREHOLDERS


Basic earnings per common share areis computed by dividing earnings by the weighted average number of common shares outstanding. Diluted earnings per common share areis 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
March 31,
In millions, except per share amounts20212020
Earnings (loss) attributable to International Paper Company common shareholders$349 $(141)
Weighted average common shares outstanding392.8 392.6 
Effect of dilutive securities (a)
Restricted performance share plan2.0 0 
Weighted average common shares outstanding – assuming dilution394.8 392.6 
Basic earnings (loss) per share attributable to International Paper Company Common Shareholders$0.89 $(0.36)
Diluted earnings (loss) per share attributable to International Paper Company Common Shareholders$0.88 $(0.36)

(a) Securities are not included in the table in periods when antidilutive

 Three Months Ended
September 30,		 Nine Months Ended
September 30,
In millions, except per share amounts2017 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 outstanding412.9
 411.2
 412.6
 411.0
Effect of dilutive securities       
Restricted stock performance share plan4.5
 4.1
 4.8
 4.5
Average common shares outstanding – assuming dilution417.4
 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 the three months ended September 30, 2017.

During the three months ended June 30, 2017, restructuring and other charges totaling a $16 million benefit before taxes were recorded. Details of these charges were as follows:
In millionsThree Months Ended
June 30, 2017
Gain on sale of investment in ArborGen$(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 millionsThree Months Ended
September 30, 2016
Early debt extinguishment costs$29
India packaging evaluation write-off17
Total$46

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

2021: During the three months ended March 31, 2016, restructuring and other charges totaling $1 million before taxes were recorded. Details of these charges were as follows:
In millionsThree Months Ended
March 31, 2016
Gain on sale of investment in Arizona Chemical$(8)
Riegelwood mill conversion costs9
Total$1

NOTE 7 - ACQUISITIONS

Tangier, Morocco Facility

On June 30, 2017,2021, the Company completedrecorded an $18 million pre-tax charge in Corporate related to early debt extinguishment costs and a $12 million pre-tax charge in the acquisitionIndustrial Packaging segment for severance related to the optimization of Europac's Tangier, Morocco facility, a corrugated packaging facility,our EMEA Packaging business. The majority of the severance is expected to be paid over the next twelve months.

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

NOTE 8 - ACQUISITIONS

2021: On April 1, 2021, the Company acquired two box plants in Spain for €40an aggregate purchase price of €72 million (approximately $46$85 million usingbased on the June 30, 2017March 31, 2021 exchange rate), subject to certain post-closingfinal working capital and net debt adjustments. Approximately 80%Prior to March 31, 2021, the Company made initial down payments on these acquisitions totaling $56 million, which is included in Acquisitions, net of cash acquired in the condensed consolidated stateme nt of cash flows as of March 31, 2021.

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

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

NOTE 9 - DIVESTITURES AND IMPAIRMENTS

Kwidzyn Mill

2021: On February 12, 2021, the Company entered into an agreement to sell our Kwidzyn, Poland mill for €670 million (approximately $786 million using the March 31, 2021 exchange rate) in cash, subject to final working capital and equipment. Adjustments, if any,net debt adjustments. The business includes the pulp and paper mill in Kwidzyn and supporting functions. The transaction is expected to provisional amounts will be finalized withinclose in the measurement periodsecond half of up2021, subject to one year from the acquisition date. Pro forma informationcustomary closing conditions and regulatory approvals.
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Table of Contents

At March 31, 2021, all assets and liabilities related to the acquisition of the Europac business has not been includedKwidzyn mill are classified as it is impractical to obtain the information due to the lack of availability of financial datacurrent assets held for sale and does not have a material effect on the Company’s consolidated results of operations.

Weyerhaeuser Pulp Business

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


The following table summarizes the provisional fair value assigned tomajor classes of assets and liabilities acquired as of this business reconciled to Assets held for sale and Liabilities held for sale in the accompanying condensed consolidated balance sheet.

In millionsMarch 31, 2021
Cash and temporary investments$54
Accounts and notes receivable41
Inventories75
Other current assets9
Plants, properties and equipment271
Goodwill56
Right of use assets38
Deferred charges and other assets14
Total Assets Held for Sale558
Accounts payable and accrued liabilities$57
Other current liabilities14
Deferred income taxes22
Long-term lease obligations35
Other liabilities16
Total Liabilities Held for Sale144

Printing Papers Spinoff

2020: On December 1, 2016:
In millions 
Cash and temporary investments$12
Accounts and notes receivable195
Inventory238
Other current assets11
Plants, properties and equipment1,711
Goodwill52
Other intangible assets212
Deferred charges and other assets6
Total assets acquired2,437
Accounts payable and accrued liabilities114
Long-term debt104
Other long-term liabilities28
Total liabilities assumed246
Net assets acquired$2,191

3, 2020, the Company announced a plan to pursue a spin-off of the Company's Printing Papers segment into a standalone, publicly-traded company. The assignmenttransaction will be implemented through the distribution of shares of the standalone company to fair value is provisionalInternational Paper shareholders. International Paper will retain up to 19.9% of the shares of the standalone company at the time of the separation, with the intent to monetize its investment and could be revised as a result ofto provide additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values, including, but not limitedproceeds to the completion of independent appraisals and valuations related to property, plant and equipment and intangible assets. While we do not anticipate these changesCompany. The Company expects the separation to be significant,tax-free for the provisional amounts will not be finalized untilCompany and its shareholders for U.S. federal income tax purposes and plans to complete the end ofspin-off late in the measurement period of up to one year from the acquisition date.

In connection with the business combination, inventories were written up by $33 million to their estimated fair value. During the firstthird quarter of 2017, $14 million before taxes ($8 million after taxes) were expensed2021, subject to Costthe receipt of products sold as the related inventory was sold.required regulatory approvals.



Olmuksan International Paper
The identifiable intangible assets acquired in connection with the acquisition of the Weyerhaeuser pulp business included the following:
In millions Estimated
Fair Value		Average
Remaining
Useful Life
Asset Class:  (at acquisition
date)
Customer relationships and lists $95
24 years
Trade names, patents, trademarks and developed technology 113
8 years
Other 4
10 years
Total $212
 

Holmen Paper Newsprint Mill


On June 30, 2016,January 5, 2021, the Company completed the acquisition of Holmen Paper's newsprint mill in Madrid, Spain. Under the terms of the acquisitionannounced that it had entered into an agreement International Paper purchased the Madrid newsprint mill, as well as associated recycling operations and a 50%with Mondi Group to sell its 90.38% ownership interest in Olmuksan International Paper, a cogeneration facility.corrugated packaging business in Turkey, for €66 million (approximately $78 million using the March 31, 2021 exchange rate). The Company intendstransaction is expected to convertbe completed in the mill duringsecond quarter of 2021, subject to customary closing conditions and regulatory approvals.

In conjunction with the announced agreement in the fourth quarter of 2017, to produce recycled containerboard with an expected capacity of 440,000 tons. Once completed, the converted mill will support the Company's corrugated packaging business in EMEA.

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

The Company has accounted for 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.

NOTE 8 - DIVESTITURES / SPINOFF

Other Divestitures and Impairments

2017: On September 7, 2017, the Company completed the previously announced sale of its foodservice business 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 to the announced agreement in June 2017,2020, a determination was made that the current book value of the assetOlmuksan International Paper disposal group exceeded its estimated fair value of $7$79 million which was based on the agreed upon sellingtransaction price. As a result, a pre-taxpreliminary charge of $9$123 million (before and after taxes) was recorded during the secondfourth quarter of 2017,2020. During the first quarter of 2021, the Company recorded an additional charge of $2 million (before and after taxes) related to the cumulative foreign currency translation loss. This charge is included in the Company's ConsumerNet (gains) losses on sales and impairments of businesses in the accompanying consolidated statement of operations and is included in the results for the Industrial Packaging segment,segment.

At March 31, 2021, all assets and liabilities related to Olmuksan International Paper are classified as current assets held for sale and current liabilities held for sale in the accompanying consolidated balance sheet.

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

In millionsMarch 31, 2021
Cash and temporary investments$2
Accounts and notes receivable71
Inventories13
Other current assets5
Plants, properties and equipment (net of impairment)34
Goodwill6
Deferred charges and other assets6
Total Assets Held for Sale137
Accounts payable and accrued liabilities36
Other current liabilities24
Deferred income taxes1
Other liabilities4
Impairment reserve125
Total Liabilities Held for Sale190

Brazil Industrial Packaging

2020: On October 14, 2020, the Company closed the previously announced sale of its Brazilian Industrial Packaging business for R$330 million ($58.5 million U.S. dollars), with R$280 million ($49.6 million U.S. dollars) paid at closing and R$50 million ($8.9 million U.S. dollars) to be paid one year from closing. This business includes 3 containerboard mills and 4 box plants and the agreement follows International Paper's previously announced strategic review of the Brazilian Industrial Packaging business.

In conjunction with the announced agreement, net pre-tax charges of $347 million ($340 million after taxes) were recorded in 2020. These charges included $327 million related to the cumulative foreign currency translation loss and a $20 million loss related to the write down of the long-lived assets of thisthe Brazilian Industrial Packaging business to their estimated fair value. Amounts related to this businessThese charges are included in Net (gains) losses on sales and impairments of businesses in the accompanying condensed consolidated statement of operations and are included in the Company's statement of operations were immaterialresults for both the three months and nine months ended September 30, 2017.

2016: On June 30, 2016, the Company completed the previously announced sale of its corrugated packaging business in China and Southeast Asia to Xiamen Bridge Hexing Equity Investment Partnership Enterprise. Under the terms 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, the Company recorded a pre-tax charge of $24 million 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.segment.

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$491 million and $757$358 million at September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.
Accounts and Notes Receivable
In millionsMarch 31, 2021December 31, 2020
Accounts and notes receivable, net:
Trade$2,873 $2,776 
Other469 288 
Total$3,342 $3,064 
In millionsSeptember 30, 2017 December 31, 2016
Accounts and notes receivable, net:   
Trade$3,098
 $2,759
Other245
 242
Total$3,343
 $3,001


The allowance for doubtful accountsexpected credit losses was $78$70 million and $70$76 million at September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively. Based on the Company's accounting estimates and the facts and circumstances available as of the reporting date, we believe our allowance for expected credit losses is adequate.

Inventories
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In millionsSeptember 30, 2017 December 31, 2016
Raw materials$275
 $296
Finished pulp, paper and packaging1,453
 1,381
Operating supplies646
 661
Other91
 100
Total$2,465
 $2,438
Inventories

In millionsMarch 31, 2021December 31, 2020
Raw materials$214 $268 
Finished pulp, paper and packaging993 1,091 
Operating supplies571 627 
Other50 64 
Total$1,828 $2,050 
Depreciation

Plants, Properties and Equipment

Accumulated depreciation was $22.7$20.7 billion and $21.6$21.4 billion at September 30, 2017March 31, 2021 and December 31, 2016.2020, respectively. Depreciation expense was $341$294 million and $294$309 million for the three months ended September 30, 2017March 31, 2021 and 2016, respectively,2020, respectively.

Non-cash additions to plants, property and $997equipment included within accounts payable were $40 million and $845$41 million forat March 31, 2021 and December 31, 2020, respectively.

Amounts invested in capital projects in the nineaccompanying condensed consolidated statement of cash flows are presented net of insurance recoveries of $2 million received during the three months ended September 30, 2017March 31, 2021 and 2016, respectively.$30 million received during the three months ended March 31, 2020.


Interest


Interest payments made during the ninethree months ended September 30, 2017March 31, 2021 and 20162020 were $600$112 million and $511$184 million, respectively.


Amounts related to interest were as follows:

 Three Months Ended
March 31,
In millions20212020
Interest expense$124 $163 
Interest income32 46 
Capitalized interest costs2 9 

Asset Retirement Obligations

The Company had recorded liabilities of $113 million and $116 million related to asset retirement obligations at March 31, 2021 and December 31, 2020, respectively.

NOTE 11 - LEASES

International Paper leases various real estate, including certain operating facilities, warehouses, office space and land. The Company also leases material handling equipment, vehicles, and certain other equipment. The Company's leases have remaining lease terms of one year to 33 years. Total lease cost was $72 million and $67 million for the three months ended March 31, 2021 and 2020.












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 Three Months Ended
September 30,		 Nine Months Ended
September 30,
In millions2017 2016 2017 2016
Interest expense$198
 $181
 $571
 $513
Interest income46
 49
 140
 129
Capitalized interest costs6
 7
 18
 21
Supplemental Balance Sheet Information Related to Leases


In millionsClassificationMarch 31, 2021December 31, 2020
Assets
Operating lease assetsRight-of-use assets$415 $459 
Finance lease assetsPlants, properties and equipment, net (a)93 95 
Total leased assets$508 $554 
Liabilities
Current
OperatingOther current liabilities$143 $148 
FinanceNotes payable and current maturities of long-term debt12 13 
Noncurrent
OperatingLong-term lease obligations276 315 
FinanceLong-term debt80 82 
Total lease liabilities$511 $558 
(a)Finance leases are recorded net of accumulated amortization of $55 million and $53 million as of March 31, 2021 and December 31, 2020, respectively.

NOTE 1012 - EQUITY METHOD INVESTMENTS

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

Graphic Packaging International Partners, LLC

The Company completed the transfer of its North American Consumer Packaging business in exchange for an initial 20.5% ownership interest (79,911,511 units) in Graphic Packaging International Partners, LLC (GPIP) in 2018. 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. On February 16, 2021, the Company exchanged 15,307,000 units of the aggregate units owned by the Company for 15,307,000 shares of Graphic Packaging stock. The Company sold the shares in open market transactions for approximately $247 million. Additionally, on February 16, 2021, the Company exchanged 9,281,316 units of the aggregate units owned by the Company for an aggregated price of $150 million. These transactions resulted in a pre-tax gain of $74 million ($56 million after taxes) which was recorded in the first quarter of 2021 and are comprised of a pre-tax gain of $33 million related to the units and shares transactions and a pre-tax gain of $41 million related to the 2018 Tax Receivable Agreement ("TRA") with GPIP. The TRA entitles the Company to 50% of the amount of any tax benefits projected to be realized by GPIP upon the Company's exchange of its units. This amount is recorded in other receivables and is expected to be received within the next 12 months. Additional exchanges of our units will most likely result in additional gains being recognized related to this TRA, but the timing and amounts of those gains are dependent upon the timing of future exchanges.

As of March 31, 2021, the Company's ownership interest in GPIP was 7.4%. The Company recorded equity earnings of $1 million and $7 million for the three months ended March 31, 2021 and 2020, respectively. The Company received cash dividends from GPIP of $4 million and $5 million during the first three months of 2021 and 2020, respectively. The Company's investment in GPIP was $336 million and $702 million at March 31, 2021 and December 31, 2020, respectively, which was $167 million and $345 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 $56 million and $70 million for the three months ended March 31, 2021 and 2020, respectively.

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

Balance Sheet
In millionsMarch 31, 2021December 31, 2020
Current assets$1,904 $2,011 
Noncurrent assets5,835 5,784 
Current liabilities1,241 1,827 
Noncurrent liabilities4,224 3,594 

Income Statement
Three Months Ended
March 31,
In millions20212020
Net sales$1,649 $1,599 
Gross profit249 321 
Income (loss) from continuing operations77 (24)
Net income (loss)77 (24)

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 $49 million and $(35) million for the three months ended March 31, 2021 and 2020, respectively. Equity earnings (losses) included an after-tax foreign exchange loss of $2 million and $51 million for the three months ended March 31, 2021 and 2020, respectively, primarily on the remeasurement of U.S. dollar-denominated net debt. At March 31, 2021 and December 31, 2020, the Company's investment in Ilim was $291 million and $393 million, respectively, which was $125 million and $127 million, respectively, more than the Company's proportionate share of the joint venture's underlying net assets. The differences primarily relate to currency translation adjustments and the basis difference between the fair value of our investment at acquisition and the underlying net assets. The 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 March 31, 2021 and 2020, respectively.

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

Balance Sheet
In millionsMarch 31, 2021December 31, 2020
Current assets$925 $739 
Noncurrent assets2,737 2,733 
Current liabilities856 674 
Noncurrent liabilities2,456 2,249 
Noncontrolling interests19 17 

Income Statement
Three Months Ended
March 31,
In millions20212020
Net sales$531 $482 
Gross profit248 195 
Income (loss) from continuing operations103 (61)
Net income (loss)100 (58)

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




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NOTE 13 - GOODWILL AND OTHER INTANGIBLES


Goodwill


The following table presents changes in goodwill balances as allocated to each business segment for the nine-month periodthree-months ended September 30, 2017:March 31, 2021:
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/reductions5
(c)33
(d)(1) —
 37
Balance as of September 30, 2017         
Goodwill3,326
 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 millionsIndustrial
Packaging		Global Cellulose Fibers Printing
Papers		 Total
Balance as of January 1, 2021
Goodwill$3,410 $52   $1,966   $5,428 
Accumulated impairment losses(296)(52)  (1,765)(2,113)
3,114 0   201   3,315 
Currency translation and other (a)(3)0 (14)(17)
Goodwill additions/reductions0 0 (56)(b)(56)
Accumulated impairment loss additions / reductions0 0 0 0 
Balance as of March 31, 2021
Goodwill3,407 52   1,896   5,355 
Accumulated impairment losses(296)(52)  (1,765) (2,113)
Total$3,111 $0   $131   $3,242 
 
(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.
(b)Represents Kwidzyn held for sale in EMEA.

Other Intangibles


Identifiable intangible assets comprised the following:

September 30, 2017 December 31, 2016 March 31, 2021December 31, 2020
In millions
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
In millionsGross
Carrying
Amount		Accumulated
Amortization		Net Intangible AssetsGross
Carrying
Amount		Accumulated
Amortization		Net Intangible Assets
Customer relationships and lists$612
 $242
 $605
 $211
Customer relationships and lists$535 $296 $239 $542 $294 $248 
Non-compete agreements71
 71
 69
 64
Tradenames, patents and trademarks, and developed technology173
 69
 173
 56
Tradenames, patents and trademarks, and developed technology170 120 50 170 117 53 
Land and water rights8
 2
 10
 2
Land and water rights8 2 6 8 2 6 
Software23
 22
 21
 20
Software17 17 0 25 24 1 
Other50
 38
 48
 26
Other15 11 4 19 10 9 
Total$937
 $444
 $926
 $379
Total$745 $446 $299 $764 $447 $317 


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

 Three Months Ended
March 31,
In millions20212020
Amortization expense related to intangible assets$12 $10 

 Three Months Ended
September 30,		 Nine Months Ended
September 30,
In millions2017 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$17 million and $68$16 million for the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, 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) $(22)
Activity for three months ended March 31, 2017(2) 2
Activity for the three months ended June 30, 2017(42) 1
Activity for the three months ended September 30, 20171
 —
Balance at September 30, 2017$(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$5 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 usesdo Brasil Ltda., a wholly-owned subsidiary of the flow-through method to account for investment tax credits earned on eligible open loop-biomass facilities and Combined Heat and Power system expenditures. Under this method, the investment tax credits are recognized as a reduction to income tax expense in the year they are earned rather than a reduction in the asset basis.Company. The Company recorded areceived assessments for the tax benefit of $29years 2007-2015 totaling approximately $105 million in tax, and $338 million in interest, penalties, and
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fees as of March 31, 2021 (adjusted for variation in currency exchange rates). After a previous favorable ruling challenging the third quarter relatedbasis for these assessments, we received other subsequent unfavorable decisions from the Brazilian Administrative Council of Tax Appeals. The Company has appealed and intends to Investment Tax Credits earned infurther 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 tax years 2016-2017.subsequent to 2015.


NOTE 1215 - COMMITMENTS AND CONTINGENCIES


Environmental


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

Remediation costs are recorded in the consolidated financial statements when they become probable and reasonably estimable. International Paper has estimated the probable liability associated with these environmental remediation matters, including those described herein, to be approximately $130$189 million ($198 million undiscounted) in the aggregate at September 30, 2017.as of March 31, 2021. 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-treatingwood-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 million to address the selection of an alternative for the soil remediation component of the overall site remedy which includes the ongoing groundwater remedy. In October 2011, the EPA released a public statement indicating that the final soil remedy decision would be delayed. In March 2016,April 2020, the EPA issued a proposedfinal 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 partiesPRPs of their intent to perform a Natural Resource Damage Assessment. It is premature to predict the outcome of thisthe 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.



In April 2016, the EPA issued a separate unilateral administrative order to the Company and certain other PRPs for a time-critical removal action (TCRA) of PCB-contaminated sediments from a different portion of the site. The Company responded to the unilateral administrative order, agreeing to comply with the order subject to its sufficient cause defenses.
•Operable Unit 1: In October 2016, the Company and another PRP received a special notice letter from the EPA inviting participation in the remedial design component of the landfill remedy for the Allied Paper Mill.Mill, which is also known as Operable Unit 1. The recordRecord of decisionDecision establishing the final landfill remedy for the Allied Paper Mill was issued by the EPA in September 2016. The Company responded to the Allied Paper Mill special notice letter in late December 2016.2016. In February 2017, the EPA informed the Company that it would make other arrangements for the performance of the remedial design.

In addition, in December 2019, the United States published notice in the Federal Register of a proposed consent decree with NCR Corporation (one of the parties to the allocation/apportionment litigation described below), the State of Michigan and natural resource trustees under which NCR would make payments of more than $100 million and perform work in Operable Unit 5, Areas 2, 3, and 4 at an estimated cost of $135.7 million. In December 2020, the Federal District Court approved the proposed consent decree.

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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 believeWe 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, duringIn June 2018, the time it was allegedly ownedCourt issued its Final Judgment and operated by St. Regis, discharged PCB contaminated solidsOrder, 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 CourtCompany 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 hasCourt 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 the outcome or estimate our maximum reasonably possible loss. However, we do not believe that any material lossJudgment. The Company appeal is probable.pending.

Harris County:International Paper and McGinnis Industrial Maintenance Corporation (MIMC), a subsidiary of Waste Management, Inc. (WMI), are PRPs at the San Jacinto River Waste Pits Superfund Site in Harris County, Texas. The PRPs have been actively participating in the activities at the site. 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 fromand the Company continues to work with the EPA inviting participationand 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 componentfor the northern impoundment. That remedial design work is ongoing. The AOC does not include any agreement to perform waste removal or other construction activity at the site. Rather, it involves adaptive management techniques and a pre-design investigation, the objectives of which include filling data gaps (including but not limited to post-Hurricane Harvey technical data generated prior to the EPA’sROD 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 cannorthern 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 asfeasibly 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 several 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 have submitted the Final Design Package for the southern impoundment to EPA, and EPA approval of this plan is anticipated shortly. We are currently unable to determinereasonably estimate 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 aany loss or range of loss ifin excess of such liability; however, we believe it is unlikely any which mayadjustment 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 wasWe have been named as a defendant in a lawsuit filedvarious asbestos-related personal injury litigation, in both state and federal court, primarily in Cocke County, Tennesseerelation to the prior operations of certain companies previously acquired by the Company. As of March 31, 2021, the Company's total recorded liability with respect to pending and future asbestos-related claims was $114 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.
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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 limitover 30 producers, including our Italian packaging subsidiary (IP Italy), improperly coordinated the supplyproduction and fixsale of corrugated sheets and boxes. On August 6, 2019, the pricesICA 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, damagesItalian courts and costs, including attorneys' fees. No class certification materials have been filed to date in the Tennessee action.

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 million in disputed invoices related to the installation of new equipment at the Company's Orange, Texas mill. In addition to the invoices in dispute, Signature and its president allege consequential damages arising from the Company's nonpayment of those invoices. The lawsuit was tried before a jury in Beaumont, Texas, in May 2017. On June 1, 2017, the jury returned a verdict awarding approximately $125 million in damages to the plaintiffs. The verdict will not be final until post-trial motions are decided, and the Company will appeal the final judgment thereafter. The Company has numerous and strong bases for appeal,our appeal.

Taxes Other Than Payroll Taxes

In 2017, the Brazilian Federal Supreme Court decided that the state value-added tax (VAT) should not be included in the basis of federal VAT calculations. In 2018 and 2019, the Brazilian tax authorities published both an internal consultation and a normative ruling with a narrow interpretation of the effects of the case. We have determined that any related federal VAT refunds should be recognized when they are both probable and reasonably estimable. Based upon the best information available to us, 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 expecthave determined that the amount of any lossrefund 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 issuedthat determined by the statetax 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, whichMarch 31, 2021. It is exemptpossible that future court decisions and guidance from the paymenttax 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 hasSee Note 14 for details regarding a tax matter. Assessments of lawsuits and claims can involve a series of complex judgments about future events, can rely heavily on estimates and assumptions, and are otherwise subject to significant uncertainties. As a result, there can be no certainty that the elementCompany will not ultimately incur charges in excess of uncertainty, thepresently 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 itsthe 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,March 31, 2021, the fair value of the Timber Notes and Extension Loans is $4.80was $4.9 billion and $4.32$4.2 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’sCompany's Annual Report on Form 10-K for the year ended December 31, 2016.2020.


The Timber Notes of $4.8 billion mature in August 2021. The Extension Loans of $4.2 billion were extended in the fourth quarter of 2020 to extend the maturity dates to August 2021. 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. We will settle the third-party loans at their maturity in August 2021 with the proceeds from the installment notes which also mature in August 2021 resulting in expected cash proceeds of approximately $0.6 billion representing our equity in the variable interest entities. Maturity of the installment notes and termination of the monetization structure is expected to result in a $75 million cash tax payment in 2021.








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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
March 31,
In millions2017 2016 2017 2016In millions20212020
Revenue (a)$24
 $24
 $71
 $71
Revenue (a)$24 $24 
Expense (a)32
 32
 96
 96
Expense (a)13 32 
Cash receipts (b)48
 47
 95
 76
Cash receipts (b)47 47 
Cash payments (c)64
 64
 128
 98
Cash payments (c)14 64 
 
(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,March 31, 2021, the fair value of the Timber Notes and Extension Loans is $2.23was $2.3 billion and $2.09$2.1 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, 2016.2020.


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
March 31,
In millions2017 2016 2017 2016In millions20212020
Revenue (a)$12
 $8
 $35
 $26
Revenue (a)$7 $16 
Expense (b)13
 10
 36
 26
Expense (b)6 16 
Cash receipts (c)7
 4
 19
 10
Cash receipts (c)2 12 
Cash payments (d)10
 7
 28
 19
Cash payments (d)4 15 
 
(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 for both of the three months ended March 31, 2021 and 2020 of accretion income for the amortization of the basis difference adjustment on the Financial assets of special purpose entities.

(b)The expense is included in Interest expense, net in the accompanying statement of operations and includes approximately $2 million for both the three months ended March 31, 2021 and 2020, 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 billionThe 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,March 31, 2021, the Company had $445 million ofno borrowings outstanding under the programprogram.

At March 31, 2021, International Paper’s credit facilities totaled $2.1 billion. The Agreements generally provide for interest rates at a weighted averagefloating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. The Agreements include a $1.5 billion contractually committed bank facility that expires in December 2022. The liquidity facilities also include up to $550 million of uncommitted financings based on eligible receivables balances under a receivables securitization program. In February of 2021 after considering the Company’s liquidity position in relation to COVID-19 and the current macroeconomic environment, the Company amended the receivable securitization program from a committed financing arrangement to an uncommitted financing arrangement. The borrowing limit of up to $550 million based on eligible receivables balances and the expiration date in April 2022 remained unchanged from the previous agreement. At March 31, 2021, there were no borrowings under either the bank facility or receivables securitization program.

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

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

The Company’s financial covenants require the maintenance of 1.39%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 March 31, 2021, we were in compliance with our debt covenants.


At September 30, 2017,March 31, 2021, the fair value of International Paper’s $12.3$8.0 billion of debt was approximately $13.5$9.6 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, 2016.2020.


NOTE 1518 - DERIVATIVES AND HEDGING ACTIVITIES


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


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

The notional amounts of qualifying and non-qualifying financial instruments used in hedging transactions were as follows:
In millionsSeptember 30, 2017 December 31, 2016 
Derivatives in Cash Flow Hedging Relationships:    
Foreign exchange contracts (a)$348
 $275
 
Derivatives Not Designated as Hedging Instruments:    
Electricity contract12
 6
 
Foreign exchange contracts11
 24
 


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

In millionsMarch 31, 2021 December 31, 2020
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts (USD)$112 $85 
Foreign exchange contracts (EUR)192 187 
Derivatives in Net Investment Hedging Relationships:
Foreign exchange contracts (EUR)6700 
Derivatives Not Designated as Hedging Instruments:
Electricity contract (MWh)0.2 0.2 

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

Gain (Loss)
Recognized in
AOCI
on Derivatives
(Effective Portion)
 Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)
Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
March 31,
In millions2017 2016 2017 2016In millions20212020
Derivatives in Cash Flow Hedging Relationships:Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contractsForeign exchange contracts$(6)$(30)
TotalTotal$(6)$(30)
Derivatives in Net Investment Hedging Relationships:Derivatives in Net Investment Hedging Relationships:
Foreign exchange contracts$1
 $5
 $9
 $6
Foreign exchange contracts$17 $0 
Interest rate contracts—
 —
 —
 (11)Interest rate contracts0 20 
Total$1
 $5
 $9
 $(5)Total$17 $20 


During the next 12 months, the amount of the September 30, 2017March 31, 2021 AOCI balance, after tax, that is expected to be reclassified to earnings is a gainloss of $2$5 million.








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The amounts of gains and losses recognized in the statement of operations on qualifying and non-qualifying financial instruments used in hedging transactions were as follows:
Gain (Loss)
Reclassified from
AOCI
(Effective Portion)
Location of Gain (Loss)
Reclassified from AOCI
(Effective Portion)
 Gain (Loss) Reclassified from AOCI Into Income (Effective Portion)Location of Gain (Loss)
Reclassified from AOCI
(Effective Portion)
Three Months Ended
September 30,		 Nine Months Ended
September 30,		  Three Months Ended
March 31,		 
In millions2017 2016 2017 2016 In millions20212020 
Derivatives in Cash Flow Hedging Relationships:        Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts$2
 $3
 $6
 $7
Cost of products soldForeign exchange contracts$(3)$(11)Cost of products sold
Total$2
 $3
 $6
 $7
 Total$(3)$(11)


 Gain (Loss) Recognized in IncomeLocation of Gain (Loss)
In 
Statement
of Operations
 Three Months Ended
March 31,		 
In millions20212020 
Derivatives in Fair Value Hedging Relationships:
Interest rate contracts$0 $38 Interest expense, net
Debt0 (38)Interest expense, net
Total$0 $0 
Derivatives Not Designated as Hedging Instruments:
Electricity contract$2 $(3)Cost of products sold
Total$2 $(3)
 Gain (Loss) Recognized
Location of Gain (Loss)
In 
Statement
of Operations
 Three Months Ended
September 30,		 Nine Months Ended
September 30,		 
In millions2017 2016 2017 2016 
Derivatives Not Designated as Hedging Instruments:        
Electricity contract$(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 millionsIssued
 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 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
Level 2 – Significant Other Observable Inputs
 
Assets Liabilities  Assets Liabilities 
In millionsSeptember 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016 In millionsMarch 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 
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$3 $5 $13 $8 
Foreign exchange contracts - net investmentForeign exchange contracts - net investment28 0 0 0 
Total derivatives designated as hedging instruments9
  3
 3
  4
  Total derivatives designated as hedging instruments31 5 13 8 
Derivatives not designated as hedging instruments        Derivatives not designated as hedging instruments
Electricity contract—

—

8
(d)2
(e)Electricity contract1 0 0 1 
Total derivatives not designated as hedging instruments—
  —
 8
  2
  Total derivatives not designated as hedging instruments1   0 0 1 
Total derivatives$9
  $3
 $11
  $6
  Total derivatives$32 (a)$5 (a)$13 (b)$9 (c)
 
(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 $11 million recorded in Other current liabilities and $2 million recorded in Other liabilities in the accompanying consolidated balance sheet.
(c)Includes $7 million recorded in Other current liabilities and $2 million recorded in Other liabilities in the accompanying consolidated balance sheet.
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The above contracts are subject to enforceable master netting arrangements that provide rights of offset with each counterparty when amounts are payable on the same date in the same currency or in the case of certain specified defaults. Management has made an accounting policy election to not offset the fair value of recognized derivative assets and derivative liabilities in the

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

Credit-Risk-Related Contingent Features

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

NOTE 1619 - RETIREMENT PLANS


International Paper sponsors and maintains the Retirement Plan of International Paper Company (the Pension Plan), a tax-qualified defined benefit pension plan that provides retirement benefits to substantially all U.S. salaried employees and hourly employees (receiving salaried benefits) hired prior to July 1, 2004, and substantially all other U.S. hourly and union employees who work at a participating business unit regardless of hire date. These employees generally are eligible to participate in the Pension Plan upon attaining 21 years of age and completing one 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).


TheEffective January 1, 2019, the Company will freezefroze 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 willdoes 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 (income) expense for our qualified and nonqualified U.S. defined benefit plans comprised the following:

Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
March 31,
In millions2017 2016 2017 2016In millions20212020
Service cost$39
 $41
 $118
 $114
Service cost$27 $20 
Interest cost138
 135
 415
 449
Interest cost83 98 
Expected return on plan assets(192) (199) (577) (611)Expected return on plan assets(183)(167)
Actuarial loss87
 103
 260
 293
Actuarial loss39 55 
Amortization of prior service cost7
 11
 21
 31
Amortization of prior service cost6 5 
Settlement—
 3
 —
 442
Net periodic pension expense$79
 $94
 $237
 $718
Net periodic pension (income) expenseNet periodic pension (income) expense$(28)$11 


InThe components of net periodic pension (income) expense other than the first quarter of 2016, International Paper offered a voluntary, limited-time opportunity for former employees who were participantsService cost component are included in Non-operating pension (income) expense in the Retirement PlanConsolidated 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 ninethree months of 2017 and 2016, respectively.2021 or 2020. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled $34$5 million for the ninethree months ended September 30, 2017.March 31, 2021.

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, 13.1March 31, 2021, 7.2 million shares were available for grant under the ICP.

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

Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
March 31,
In millions2017 2016 2017 2016In millions20212020
Total stock-based compensation expense (selling and administrative)$38
 $33
 $120
 $100
Total stock-based compensation expense (selling and administrative)$14 $26 
Income tax benefits related to stock-based compensation(2) —
 45
 33
Income tax benefits related to stock-based compensation17 17 


At September 30, 2017, $110March 31, 2021, $125 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 1.82.2 years.


Performance Share Plan


During the first ninethree months of 2017,2021, the Company granted 2.22.0 million performance units at an average grant date fair value of $51.78.$53.15.


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 special items.non-operating pension expense.


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

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

SalesNet sales by business segment for the three months ended March 31, 2021 and nine months ended September 30, 2017 and 20162020 were as follows:

 Three Months Ended
March 31,
In millions20212020
Industrial Packaging$3,953 $3,819 
Global Cellulose Fibers581 568 
Printing Papers781 908 
Corporate and Intersegment Sales48 57 
Net Sales$5,363 $5,352 

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Table of Contents
 Three Months Ended
September 30,		 Nine Months Ended
September 30,		 
In millions2017 2016 2017 2016 
Industrial Packaging$3,734
 $3,491
 $10,939
 $10,422
 
Global Cellulose Fibers654
 242
 1,830
 713
 
Printing Papers1,039
 1,019
 3,051
 3,003
 
Consumer Packaging491
 494
 1,431
 1,490
 
Corporate and Intersegment Sales(5) 20
 (55) 70
 
Net Sales$5,913
 $5,266
 $17,196
 $15,698
 

Operating profit (loss) by business segment for the three months ended March 31, 2021 and nine months ended September 30, 2017 and 20162020 were as follows:

 Three Months Ended
March 31,
In millions20212020
Industrial Packaging$447 $470 
Global Cellulose Fibers(82)(54)
Printing Papers80 96 
Business Segment Operating Profits$445 $512 
Earnings (loss) before income taxes and equity earnings$399 $(16)
Interest expense, net92 117 
Noncontrolling interests adjustment(1)0 
Corporate expenses, net25 32 
Corporate net special items(31)33 
Business net special items14 352 
Non-operating pension expense (income)(53)(6)
Business Segment Operating Profits$445 $512 

24
 Three Months Ended
September 30,		 Nine Months Ended
September 30,		 
In millions2017 2016 2017 2016 
Industrial Packaging$469
(a)$423
(f)$884
(a)$1,277
(f)
Global Cellulose Fibers49
(b)(38)(g)(14)(b)(109)(g)
Printing Papers135

167

321
(c)419
 
Consumer Packaging54

61

73
(d)150
(h)
Business Segment Operating Profits707
  613
  1,264
 1,737
 
         
Earnings (loss) from continuing operations before income taxes and equity earnings503
 373
 718
  676
 
Interest expense, net152

132
 431
(e)384
 
Noncontrolling interests/equity earnings adjustment (j)—
  1
  (1)  1
 
Corporate items, net19
 11
 34
 57
 
Special items, net—
 54
 (16) 46
 
Non-operating pension expense33
 42

98
 573
(i)

$707
  $613
  $1,264
 $1,737
 
Table of Contents
(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 agreementCompany's Annual Report on Form 10-K for the year ended December 31, 2020 (our "Annual Report"). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute its North American Consumer Packaging business, which includes its North American Coated Paperboardto those differences include those discussed below and Foodservice businesses, to a subsidiaryin 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$349 million ($0.950.88 per diluted share) in the thirdfirst quarter of 2017,2021, compared with $80$153 million ($0.190.39 per diluted share) in the secondfourth quarter of 20172020 and $312$(141) million ($0.75(0.36) per diluted share) in the thirdfirst 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.2020. International Paper generated Adjusted Operating Earnings Attributable to International Paper Common Shareholders (a non-GAAP measure defined below) of $449$299 million ($1.080.76 per diluted share) in the thirdfirst quarter of 2017,2021, compared with $270$296 million ($0.650.75 per diluted share) in the 2017 secondfourth quarter of 2020 and $380$226 million ($0.910.57 per diluted share) in the 2016first quarter of 2020.

During the first quarter 2021, International Paper delivered solid earnings and strong cash generation. Our mill and converting system performed well to mitigate the significant impact of the winter storm and support strong customer demand across all our packaging channels. The winter storm in the United States impacted pre-tax earnings by $80 million, primarily affecting operations and input costs. Input costs and transportation were a headwind in the first quarter, especially for energy which was impacted by the duration of the severe cold temperatures in the southern United States. Momentum continued to build in the first quarter across our three businesses with very strong demand for corrugated packaging and containerboard and solid demand for absorbent pulp. In our Printing Papers business, we saw an improved supply/demand backdrop in all of our key geographies. Our performance again demonstrates the agility and resilience of International Paper to perform well across many different circumstances. Additionally, we made solid progress on the spin-off of our Printing Papers business which we expect to complete late in the third quarter.


International Paper delivered strong resultsComparing our performance in the 2017 thirdfirst quarter with sequential earnings growth across all our business segments. This earnings growth was2021 to the fourth quarter 2020, price and mix increased significantly, driven by continued solid global demand and price realization particularlyof our prior period price increases in our North American Industrial Packaging and Global Cellulose Fibers businesses. DuringVolumes were essentially flat compared to the fourth quarter results2020, as strong demand for corrugated packaging and pulp was offset by a seasonal decline in demand in our Brazil Printing Papers business. Operations and costs were negatively impacted by operational headwinds related to Hurricanes Harvey and Irma along with record high OCC prices. The Global Cellulose Fibers continued to generate strong results during the quarter, delivering more synergies at a faster pace than expected. Finally, in October 2017, we signed an agreement to transferfavorable as our North American Consumer Packaging business, which includes the North American Coated Paperboard mills and Foodservice operations, to a subsidiaryconverting plants performed well, which partly mitigated the impact of Graphic Packaging Holding Company in a transaction valued at $1.8 billion.

Prices were up across the Company’s portfolio, driving significant earnings improvementwinter storm in the 2017 thirdfirst quarter versus the 2017 second quarter, particularly2021. Planned maintenance outage costs increased sequentially, driven by higher planned maintenance in our North American Industrial Packaging and Global Cellulose Fibers businesses. The North American Industrial Packaging business continuesPrinting Papers businesses. Input costs were unfavorable driven by higher energy and chemicals costs. Overall, we’re seeing higher costs for recovered fiber, energy, chemicals and distribution, which we expect to benefitcontinue in the second quarter 2021. Additionally, transportation conditions are challenging and we’re experiencing significant rail, truck and ocean transportation congestion. Equity earnings decreased from higher pricing and flow-through in export containerboard exports. Volume was lower on a sequentialthe fourth quarter basis2020 primarily due to one less shipping day inlower earnings from our North American corrugated box business. Operations were negatively impacted by approximately $30Graphic Packaging investment, which reflects our lower ownership interest following our first quarter 2021 monetization. Subsequent to the first quarter, we received a $144 million of costs tied to mill and box plant disruptions caused by Hurricanes Harvey and Irma. As expected, maintenance outage expenses were significantly lower in the 2017 third quarter versus the 2017 second quarter. Input costs continued to be a significant headwind due to elevated OCC costs which continued to rise above 2017 second quarter levels, reaching a new historical high. In the 2017 third quarter,cash dividend from our Ilim joint venture again delivered strong results driven by improved pricing, partially offset by lower volume. Equity earnings also benefited from a non-cash foreign exchange gain on the joint venture's U.S. dollar denominated net debt.interest.

Looking ahead to the Company is well positioned for strong fourthsecond quarter results and cash generation. In2021, as compared to the first quarter of 2021, in our North American Industrial Packaging business, we expect higher price and mix on the flow-through of our March 2021 price increase in North America. Volume is expected to see flow-through benefits from containerboarddecrease modestly on lower seasonal demand in Morocco and box price increases fromSpain. Operations and costs are expected to improve due to the non-repeat of winter storm costs in the first half of 2017, along with further realization of prior price increasesquarter 2021, partially offset by higher incentive compensation accruals related to a stronger outlook in exports. We anticipate additional price realization in2021. Maintenance outage expense is expected to be higher. Input costs are also expected to be higher driven by higher recovered fiber costs, energy, raw materials and distribution costs. In our Global Cellulose Fibers business, tiedwe expect price and mix to continued strong global demand, particularly in China. Demand in our North American Industrial Packaging business will be unfavorably impacted by one less shipping day; however, we anticipate stable volumes across allimprove significantly on price realization of our other businesses with some seasonal improvement inprior period increases. Volume is expected to be flat sequentially. Maintenance outage expenses are expected to decrease and input costs are expected to be stable. In our EMEA Printing Papers business, we expect price and Global Cellulose Fibers businesses. Manufacturing performance should improve as we move pastmix to increase. Volume is expected to be essentially flat to the effects of the previously mentioned hurricanesprior quarter. Operations and other one-off operational issues experienced at some of our mills during the 2017 third quarter. Input costs in our North American Industrial Packaging business should benefit from declining OCC prices, partly offset by higher wood and chemical costs. We expect higher input costs in our other businesses, partlyare expected to lower earnings mostly due to the lingering effectsnon-repeat of a favorable foreign currency gain in Brazil in the first quarter 2021. Maintenance outage expenses are expected to increase and input costs are expected to rise moderately.

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. Since that time, most of our manufacturing and converting facilities have remained open and operational during the pandemic.
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We have seen a mixed impact on demand for our products. Demand for printing papers products was significantly impacted by the pandemic, although demand recovered a bit in the first quarter of 2021. Demand for our pulp, containerboard and corrugated box products has not been negatively impacted by COVID-19 to date, but our operations in Industrial Packaging experienced higher supply chain costs due to the impacts of COVID-19.

There continue to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the various economic reopening plans and the resurgence of the hurricanes,virus including new variants of the virus in many areas globally; 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 efficacy, availability and efficiency of the distribution of various vaccines; and the ongoing impact of COVID-19 on unemployment, economic activity and consumer confidence. COVID-19 has significantly adversely affected portions of our business, and could have a material adverse effect on our financial condition, results of operations and cash flows, particularly in the caseif negative global economic conditions persist for a significant period of wood and chemicals. Finally, for our Ilim joint venture, we expect improved operational results in the 2017 fourth quarter on strong, demand-driven market fundamentals.time or deteriorate.

Adjusted Operating Earningsoperating earnings and Adjusted Operating Earnings Per Shareoperating earnings per share are non-GAAP measures. Dilutedmeasures 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 directdirectly comparable GAAP measures. The Company calculates Adjusted Operating Earningsoperating 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 Shareoperating earnings per share is calculated by dividing Adjusted Operating Earningsoperating 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 directdirectly comparable GAAP measure, provides for a more complete analysis of the results of operations.


The following are reconciliations of Diluted earningsEarnings (loss) attributable to common shareholders to Adjusted Operating Earningsoperating earnings (loss) attributable to common shareholders. Additional detail is provided later in this Form 10-Q regarding the net special items referenced in the charts below.
 Three Months Ended
March 31,		Three Months Ended December 31,
In millions202120202020
Net Earnings (Loss) Attributable to International Paper Company$349 $(141)$153 
Add Back - Non-operating pension expense (income)(53)(6)(10)
Add Back - Net special items expense (income)(17)384 201 
Income tax effect - Non-operating pension and net special items expense20 (11)(48)
Adjusted Operating Earnings (Loss) Attributable to International Paper Company$299 $226 $296 

 Three Months Ended
March 31,		Three Months Ended December 31,
In millions202120202020
Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders$0.88 $(0.36)$0.39 
Add Back - Non-operating pension expense (income) per share(0.13)(0.01)(0.03)
Add Back - Net special items expense (income) per share(0.04)0.97 0.51 
Income tax effect per share - Non-operating pension and net special items expense0.05 (0.03)(0.12)
Adjusted Operating Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders$0.76 $0.57 $0.75 

Cash provided by operations totaled $512 million and $649 million for the first three months of 2021 and 2020, respectively. The Company generated free cash flow of approximately $423 million and $363 million in the first three months of 2021 and 2020, respectively. Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management utilizes this measure in connection with managing our business and believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting
26
Table of Contents
 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 Operations395
 312
 80
Add Back - Non-operating pension (income) expense33
 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
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
March 31,
In millions20212020
Cash provided by operations$512 $649 
Adjustments:
Cash invested in capital projects, net of insurance recoveries(89)(286)
Free Cash Flow$423 $363 

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

 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 Operations0.95
 0.75
 0.19
Add Back - Non-operating pension (income) expense per share0.08
 0.10
 0.08
Add Back - Net special items expense (income) per share0.05
 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 thirdfirst quarter of 2017,2021, International Paper Company reported net sales of $5.9$5.4 billion, compared with $5.8$5.2 billion in the secondfourth quarter of 20172020 and $5.3$5.4 billion in the thirdfirst quarter of 2016.2020.
Net earnings (loss) attributable to International Paper totaled $395$349 million, or $0.95$0.88 per diluted share, in the 2017 third quarter.first quarter of 2021. This compared with $80$153 million, or $0.19$0.39 per diluted share, in the secondfourth quarter of 20172020 and $312$(141) million, or $0.75$(0.36) per diluted share, in the thirdfirst quarter of 2016.2020.
continuingopsgrapha54.jpg



ip-20210331_g1.jpg
Earnings from continuing operations attributable to International Paper Company were $395 million in the third quarter
27
Table of 2017 compared with $312 million in the third quarter of 2016 and $80 million in the second quarter of 2017. Contents
Compared with the thirdfourth quarter of 2016, the 2017 third quarter reflects2020, earnings benefited from higher average sales price realizationsprices net of an unfavorable mix ($164108 million), lower mill maintenance outageoperating costs ($2141 million), the operating results for the recently acquired pulp business which was not included in the prior yearlower net interest expense ($365 million), lower tax expense ($169 million) reflecting a lower estimated tax rate, and lower non-operating pension expense ($632 million). These benefits were offset by lower sales volumes ($6 million), higher operating costs ($728 million), higher raw material and freight costs ($6664 million), higher mill maintenance outage costs ($43 million) and higher corporate and other costsitems ($12 million), and higher net interest expense ($1430 million). Equity earnings, net of taxes, relating to International Paper’s investmentinvestments in Ilim Holding S.A., Graphic Packaging International Partners, LLC, and other investments were $2$15 million higher in the 2017 third quarterlower than in the 2016 third quarter.fourth quarter of 2020. Net special items in the 2017 thirdfirst quarter of 2021 were a lossgain of $34$10 million compared with a loss of $42$151 million in the 2016 third quarter.fourth quarter of 2020.
ip-20210331_g2.jpg


Compared with the secondfirst quarter of 2017, earnings benefited from2020, the first quarter of 2021 reflects higher average sales price realizations net of an unfavorableprices and a favorable mix ($76106 million), lower mill maintenance outagecorporate and other costs ($1236 million), lower net interest expense ($18 million), lower tax expense ($1316 million) reflecting a lower estimated tax rate and lower non-operating pension expense ($135 million). These benefits were offset by lower sales volumes ($1110 million), higher operating costs ($1045 million), higher raw material and freight costs ($16 million), higher corporate and other items ($1589 million) and higher net interest expensemill maintenance outage costs ($89 million). Equity earnings, net of taxes, forrelating to International Paper’s investments in Ilim Holding, S.A., Graphic Packaging International Partners, LLC, and other investments were $27$80 million higher in the first quarter of 2021 than in the 2017 second quarter.first quarter of 2020. Net special items in the 2017 thirdfirst quarter of 2021 were a lossgain of $34$10 million compared with a loss of $169$372 million in the 2017 second quarter.first quarter of 2020.
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 millions2017 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 Earnings503
 373
 (29)
Interest expense, net152
 132
 137
Noncontrolling interests / equity earnings included in operations—
 1
 (1)
Corporate items19
 11
 4
Special items (income) expense—
 54
 (16)
Non-operating pension expense33
 42
 34
Adjusted Operating Profit$707
 $613
 $129
Business Segment Operating Profit:     
Industrial Packaging$469
 $423
 $50
Global Cellulose Fibers49
 (38) 7
Printing Papers135
 167
 86
Consumer Packaging54
 61
 (14)
Total Business Segment Operating Profit$707
 $613
 $129


Business Segment Operating Profit
segmentopsgrapha46.jpg

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 Containerboard828
 801
 2,438
 2,311
North American Recycling924
 977
 2,799
 2,873
North American Saturated Kraft45
 51
 132
 142
North American Gypsum/Release Kraft54
 49
 165
 142
North American Bleached Kraft7
 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 Packaging4,900
 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 Papers497
 467
 1,451
 1,402
EMEA and Russian Uncoated Papers365
 358
 1,104
 1,120
Brazilian Uncoated Papers280
 274
 832
 800
Indian Uncoated Papers58
 51
 186
 175
Uncoated Papers1,200
 1,150
 3,573
 3,497
Consumer Packaging       
North American Consumer Packaging296
 301
 876
 915
EMEA Coated Paperboard103
 105
 296
 298
Consumer Packaging399
 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. 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) attributable to International Paper Company to its Total business segment operating profit:

 Three Months Ended
 March 31,December 31,
In millions202120202020
Net Earnings (Loss) Attributable to International Paper Company$349 $(141)$153 
Add back (deduct):
Income tax provision (benefit)99 94 34 
Equity (earnings) loss, net of taxes(49)31 (64)
Noncontrolling interests, net of taxes— — — 
Earnings (Loss) Before Income Taxes and Equity Earnings399 (16)123 
Interest expense, net92 117 99 
Noncontrolling interests included in operations(1)— — 
Corporate expenses, net25 32 (16)
Corporate net special items(31)33 79 
Business net special items14 352 122 
Non-operating pension expense (income)(53)(6)(10)
Adjusted Operating Profit$445 $512 $397 
Business Segment Operating Profit (Loss):
Industrial Packaging$447 $470 $431 
Global Cellulose Fibers(82)(54)(114)
Printing Papers80 96 80 
Total Business Segment Operating Profit$445 $512 $397 

































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Business Segment Operating Profit

Total business segment operating profits were $445 million in the first quarter of 2021, $397 million in the fourth quarter of 2020 and $512 million in the first quarter of 2020.

ip-20210331_g3.jpg

Compared with the fourth quarter of 2020, operating profits benefited from higher average sales prices net of an unfavorable mix ($147 million) and lower operating costs ($56 million). These benefits were offset by lower sales volumes ($11 million), higher raw material and freight costs ($86 million) and higher mill outage costs ($58 million).


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ip-20210331_g4.jpg

Compared with the first quarter of 2020, operating profits in the current quarter benefited from higher average sales prices and a favorable mix ($148 million). These benefits were offset by lower sales volumes ($14 million), higher operating costs ($63 million), higher raw material and freight costs ($125 million) and higher mill outage costs ($13 million).


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Sales Volumes by Product (a)
Sales volumes of major products for the three months ended March 31, 2021 and 2020 were as follows:

 Three Months Ended
March 31,
In thousands of short tons (except as noted)20212020
Industrial Packaging
Corrugated Packaging (b)2,684 2,624 
Containerboard709 827 
Recycling558 569 
Saturated Kraft45 48 
Gypsum/Release Kraft55 56 
Bleached Kraft7 7 
EMEA Packaging (b)435 441 
Brazilian Packaging (b)— 90 
European Coated Paperboard109 111 
Industrial Packaging4,602 4,773 
Global Cellulose Fibers (in thousands of metric tons) (c)
898 901 
Printing Papers
U.S. Uncoated Papers346 415 
European and Russian Uncoated Papers307 360 
Brazilian Uncoated Papers254 240 
Printing Papers907 1,015 
(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 $99 million was recorded for the first quarter of 2021 and the reported effective income tax rate was 25%. Excluding expense of $7 million related to the tax effects of net special items and expense of $13 million related to the tax effects of non-operating pension expense, the effective income tax rate was 24% for the quarter.
An income tax provision of $34 million was recorded for the fourth quarter of 2020 and the reported effective income tax rate was 28%. Excluding a benefit of $50 million related to the tax effects of net special items and expense of $2 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 $94 million was recorded for the first quarter of 2020 and the reported effective income tax rate was (588)%. Excluding a benefit of $12 million related to the tax effects of net special items and expense of $1 million related to the tax effects of non-operating pension expense, the effective income tax rate was 29% for the quarter.
Interest Expense
Net interest expense was $92 million in the first quarter of 2021, compared with $99 million in the fourth quarter of 2020 and $117 million in the first quarter of 2020.










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Effects of Net Special Items and Non-Operating Pension Expense
Details of net special items and non-operating pension expense (income) for the three months ended are as follows:
Three Months Ended
March 31,December 31,
202120202020
In millionsBefore TaxAfter TaxBefore TaxAfter TaxBefore TaxAfter Tax
Business Segments
EMEA Packaging business optimization$12 $10 (a)$— $— $— $— 
EMEA Packaging impairment - Turkey2 2 (a)— — 123 123 (a)
Brazil Packaging impairment— — 344 337 (a)— — 
Abandoned property removal— — 9 7 (b)— — 
Riverdale mill conversion— — 1 1 (c)— — 
Foreign value-added tax refund accrual— — (2)(1)(a)— — 
Other— — — — (1)(1)(d)
Business Segments Total14 12 352 344 122 122 
Corporate
Printing Papers spin-off / Build a Better IP25 20 — — 9 8 
Debt extinguishment costs18 14 8 6 65 49 
Environmental remediation reserve adjustment— — 41 31 — — 
India transaction— — 17 17 — — 
Gain on sale of portion of equity investment in Graphic Packaging(74)(56)(33)(25)— — 
Other— — (1)(1)5 4 
Corporate Total(31)(22)32 28 79 61 
Total net special items(17)(10)384 372 201 183 
Non-operating pension expense (income)(53)(40)(6)(5)(10)(8)
Total net special items and non-operating pension expense (income)$(70)$(50)$378 $367 $191 $175 

(a) Recorded in the Industrial Packaging segment.
(b) Includes $6 million ($5 million after taxes) recorded in the Industrial Packaging segment and $3 million ($2 million after taxes) recorded in the Global Cellulose Fibers segment.
(c) Recorded in the Printing Papers segment.
(d) Includes income of $5 million ($4 million after taxes) recorded in the Industrial Packaging segment and charges of $4 million ($3 million after taxes) recorded in the Printing Papers segment..

Net special items include the following tax expenses (benefits):
Three Months Ended
March 31,December 31,
In millions202120202020
Settlement of tax audits$— $— $(32)
Total$— $— $(32)

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 reconciliationCompany's measure of segment operating profit.profitability.


Industrial Packaging

Total Industrial Packaging20212020
In millions1st Quarter1st Quarter4th Quarter
Sales$3,953 $3,819 $3,813 
Operating Profit (Loss)$447 $470 $431 

33
Total Industrial Packaging2017 2016
In millions3rd 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 Amortization10
 —
 10
 —
 —
 —
Other5
 3
 9
 —
 —
 —
Operating Profit Before Special Items$484
 $407
 $1,251
 $428
 $486
 $1,347
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Industrial Packaging net sales for the thirdfirst quarter of 20172021 were 1%4% higher compared with the fourth quarter of 2020 and 4% higher compared with the first quarter of 2020. Operating profit was 4% higher in the first quarter of 2021 compared with the fourth quarter of 2020 and 5% lower compared with the first quarter of 2020.

North American Industrial Packaging20212020
In millions1st Quarter1st Quarter4th Quarter
Sales (a)$3,485 $3,355 $3,371 
Operating Profit (Loss)$395 $437 $396 

(a)Includes intra-segment sales of $26 million, $32 million and $22 million for the three months ended March 31, 2021, March 31, 2020 and December 31, 2020, respectively.
North American Industrial Packaging sales volumes in the first quarter of 2021 were lower compared to the fourth quarter of 2020, reflecting lower shipments for boxes. Export containerboard sales volumes were stable. Strong demand was more than offset by the winter storm impact in the first quarter of 2021. E-commerce demand continues to be strong and demand in food service segments is improving. Total maintenance and economic downtime was about 53,000 tons higher in the first quarter of 2021 compared with the fourth quarter of 2020, driven by higher maintenance downtime. Average sales margins were significantly higher reflecting higher average sales prices for boxes and export containerboard. Operating costs were higher, as strong operations and cost management were more than offset by winter storm impacts and the non-repeat of favorable one-time items in the fourth quarter of 2020. Planned maintenance downtime costs were $63 million higher in the first quarter of 2021 compared with the fourth quarter of 2020. Input costs were significantly higher, primarily for recovered fiber, energy and distribution. The winter storm negatively impacted earnings by $75 million in the first quarter of 2021.
Compared with the first quarter of 2020, sales volumes were higher in the first quarter of 2021 for boxes and lower for export containerboard and reflect the impact of the winter storm in the first quarter of 2021. The COVID-19 pandemic has had a mixed impact on box demand as strong growth in the e-commerce and shipping and distribution segments is partially offset by food service related segments. Food service related demand is improving but is not at pre-pandemic levels. Total maintenance and economic downtime was about 52,000 tons lower in the first quarter of 2021, primarily driven by lower economic downtime. Export containerboard and box prices were significantly higher reflecting previously announced price increases in late 2020. Operating costs increased, driven by the winter storm. Planned maintenance downtime costs were $17 million higher in the first quarter of 2021 compared with the first quarter of 2020. Input costs were significantly higher driven by recovered fiber and energy.
Entering the second quarter of 2021, sales volumes for boxes and export containerboard are expected to be flat as slightly higher domestic demand is offset by the impact of a high planned maintenance outage quarter and lower exports. Average sales margins are expected to be higher, reflecting previously announced price increases. Operating costs are expected to improve without the impact of the winter storm that occurred in the first quarter of 2021. Planned maintenance downtime costs are expected to be $69 million higher in the second quarter of 2017 and were 7% higher than in2021 compared with the thirdfirst quarter of 2016. Operating profit before special items was 19%2021. Input costs are expected to be higher in the third quarter of 2017 than in the second quarter of 2017 and 13% higher than in the third quarter of 2016.primarily for recovered fiber.

North American Industrial Packaging2017 2016
In millions3rd 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
 —
 —
 —
Other5
 3
 9
 —
 —
 —
Operating Profit Before Special Items$492
 $408
 $1,262
 $439
 $496
 $1,373
EMEA Industrial Packaging20212020
In millions1st Quarter1st Quarter4th Quarter
Sales$396 $350 $364 
Operating Profit (Loss)$26 $10 $20 
(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 thirdfirst quarter of 20172021 were lower than inhigher compared with the secondfourth quarter of 2017 reflecting one less shipping day and the impact of Hurricanes Harvey and Irma. Containerboard shipments to export markets increased, but were more than offset2020 driven by lower domestic shipments. Total maintenance downtime decreased 72,000 tons from 157,000 tons to 85,000 tons. There was no economic downtime takenseasonally higher volumes in either period.Morocco. Average sales margins for boxes were higher due tolower reflecting increased containerboard costs. Operating costs were lower. There were no planned maintenance downtime outages in either the realizationfirst quarter of box sales price increases. Average sales price realizations for containerboard also increased in both2021 or the domestic and export markets.fourth quarter of 2020. Input costs were higher, primarily for recycled fiber but also for energy, wood and chemicals.energy. Earnings benefited from favorable foreign currency impacts.

Compared with the first quarter of 2020, sales volumes in the first quarter of 2021 were slightly higher, reflecting recovery of the impacts of the COVID-19 pandemic. Average sales margins were lower driven by higher containerboard costs. Operating costs improved reflecting strong operations and cost management. Planned maintenance downtime costs were $62$1 million lower in the 2017 thirdfirst quarter of 2021 compared with the 2017 second quarter. Operatingfirst quarter of 2020. Input costs were higher includinghigher. Earnings benefits from favorable foreign currency impacts, primarily in Morocco and Turkey.

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Looking ahead to the hurricane-related temporary shutdown of two mills. The total negative impact of the hurricanes was approximately $20 million during the quarter.
Compared with the thirdsecond quarter of 2016, sales volumes for boxes were lower in the third quarter of 2017 which included two fewer shipping days. Sales volumes for containerboard increased in export markets, while domestic shipments decreased. Total maintenance and economic downtime was 108,000 tons lower 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 2017 compared with the third quarter of 2016. Earnings were also impacted by higher mill operating costs.
Entering the fourth quarter of 2017,2021, 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 fiberseasonally lower, primarily in Morocco. Average sales margins are expected to be significantly lower, partially offset by higher energy, chemical and freight costs. Plannedlower. Operating costs are expected to be higher. There are no planned maintenance downtime costs should be $8 million lower.

EMEA Industrial Packaging2017 2016
In millions3rd 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 Industrial Packaging sales volumes for boxes in the third quarter of 2017 were seasonally lower thanoutages in the second quarter of 20172021. Input costs are expected to be higher, primarily for fiber.

Brazilian Industrial Packaging20212020
In millions1st Quarter1st Quarter4th Quarter
Sales$— $54 $— 
Operating Profit (Loss)$— $(1)$— 

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 Paperboard20212020
In millions1st Quarter1st Quarter4th Quarter
Sales$98 $92 $100 
Operating Profit (Loss)$26 $24 $15 

European Coated Paperboard sales volumes in Moroccothe first quarter of 2021 compared with the fourth quarter of 2020 were higher in both Europe and Russia as demand continued to improve from the Euro-zone.initial decline due to the COVID-19 pandemic. Average sales margins decreased due towere higher input costs for containerboard. Input costs for energy were flat, while distribution costs decreased due to lower export shipments from Turkeyin both regions driven by higher average sales prices in Europe and Morocco.Russia and a favorable mix in Russia. Operating costs were lower.lower in both regions. There were no planned maintenance outages in either the first quarter of 2021 or the fourth quarter of 2020. Input costs were higher in Europe primarily for wood and energy. In Russia, input costs were stable. Earnings were negatively impacted by unfavorable foreign currency impacts in Russia.
Compared with the thirdfirst quarter of 2016,2020, sales volumes were lower in both regions reflecting the third quarterdemand impact of 2017 were higher.the COVID-19 pandemic. Average sales margins decreasedwere higher in the Euro-zoneboth regions, reflecting higher prices and Morocco due to higher containerboard costs. Inputa favorable mix. Operating costs for energy were lower but distributionin both Europe and Russia. There were no planned maintenance outages in either the first quarter of 2021 or the first quarter of 2020. Input costs were higher, due to increased export shipments.primarily for wood and energy in Europe and wood in Russia.
Looking ahead toEntering the fourthsecond quarter of 2017,2021, sales volumes are expected to be seasonally stronger.lower in both regions. Average sales margins are expected to recover duebe stable in both regions. Operating costs are expected to the realization of prior price increases and a more favorable mix. Earnings will be negatively impacted bylower in Europe but higher in Russia. Planned maintenance downtime costs at the Madrid mill during its conversionare expected to recycled containerboard production.
Brazilian Industrial Packaging2017 2016
In millions3rd 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) $(29)
Brazil Intangible Asset Accelerated Amortization10
 —
 10
 —
 —
 —
Operating Profit Before Special Items$(3) $(6) $(19) $(9) $(12) $(29)
Brazilian Industrial Packaging sales volumesbe $8 million higher in the third quarter of 2017 compared with the second quarter of 2017 were higher for boxes, but slightly lower for containerboard. Improved average sales margins reflect higher sales prices for both boxes and containerboard, partially offset by an unfavorable mix. Operating costs were favorable while input costs, primarily for natural gas, were higher.
Compared2021 compared with the thirdfirst quarter of 2016, sales volumes in the third quarter of 2017 were higher for boxes, but lower for containerboard, while average sales price realizations for both boxes and containerboard increased.2021. Input costs primarily for recycled fiber and wood, decreased. Operating costs were also lower.
Looking ahead to the fourth quarter of 2017, sales volumes are expected to be about flat. Average sales margins are expected to increase reflecting prior sales price realizationshigher in Europe primarily for both boxes and containerboard, partially offset by an unfavorable mix. Input costs should be slightly higher and operatingpurchased pulp. In Russia, input costs are expected to increase, primarily due to labor costs.be stable.
Asian Industrial Packaging2017 2016
In millions3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales$—
 $—
 $—
 $—
 $68
 $133
Operating Profit$—
 $—
 $—
 $(7) $(32) $(80)
Asia Packaging Restructuring and Impairment—
 —
 —
 5
 28
 70
Operating Profit Before Special Items$—
 $—
 $—
 $(2) $(4) $(10)
Asian Industrial Packaging
On June 30, 2016, the Company completed the sale of its corrugated packaging business in China and Southeast Asia to Xiamen Bridge Hexing Equity Investment Partnership Enterprise. See Note 8 - Divestitures / Spinoff in the Condensed Notes to the Consolidated Financial Statements for further discussion of the sale of this business.






Global Cellulose Fibers

Total Global Cellulose Fibers2017 2016
In millions3rd 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 costs6
 5
 15
 7
 5
 12
Inventory fair value step-up amortization—
 —
 14
 —
 —
 —
Other2
 —
 3
 —
 —
 —
Operating Profit Before Special Items$57
 $12
 $18
 $(31) $(16) $(97)
Total Global Cellulose Fibers20212020
In millions1st Quarter1st Quarter4th Quarter
Sales$581 $568 $582 
Operating Profit (Loss)$(82)$(54)$(114)

Global Cellulose Fibers includes the results of the pulp business acquired from Weyerhaeuser beginning in December 2016. See Note 7 - Acquisitions net sales in the Condensed Notes to Consolidated Financial Statements for further discussion of this acquisition. Net sales were 7% higher in the thirdfirst quarter of 2017 than in2021 were flat compared with the secondfourth quarter of 20172020 and significantly2% higher than in the thirdfirst quarter of 2016 due2020. Operating profit in the first quarter of 2021 improved compared to the acquisition. Operating profit before special items was 375% higher in the thirdfourth quarter of 2017 than in2020 and was lower compared with the secondfirst quarter of 2017 and 284% higher than in the third quarter of 2016.2020.
Sales volumes in the thirdfirst quarter of 2017 increased2021 compared with the secondfourth quarter of 2017 reflecting steady demand.2020 were lower and reflect shipping delays related to port congestion. Total maintenance and economic downtime was about 3,000 tons higher in the first quarter of 2021 compared with the fourth quarter of 2020 due to maintenance downtime. Average sales margins improved, reflecting flow through of previous sales price realizations were higher, primarily for fluff pulp, but were partially offset by an unfavorableincreases and a favorable product mix. Operating costs were lower as seasonality was more than offset by strong operations and input costs were flat.cost management and the non-repeat of unfavorable one-time items in the fourth quarter of 2020. Planned maintenance downtime costs in the thirdfirst quarter of 20172021 were $37$7 million lower than incompared with the secondfourth quarter of 2017. Costs associated with Hurricane Irma negatively impacted the business by approximately $5 million in the quarter. In Europe2020. Input costs were higher, primarily for wood and Russia, sales volumes were lower, while average sales price realizations were favorable.energy.
Compared with the thirdfirst quarter of 2016, for the legacy business2020, sales volumes increased in the thirdfirst quarter of 2017.2021 were lower reflecting shipping delays due to port congestion and higher planned maintenance downtime. The first quarter of 2020 included the initial COVID-19 pandemic demand surge related to customer stocking of absorbent products. Total maintenance and economic downtime was about 19,000 tons higher in the first quarter of 2021, due to maintenance downtime. Average sales price realizations improvedprices were significantly higher for both fluff and market pulp. Operating costs were higher reflecting a stronger pricing environment.non-repeat one-time benefits in the first quarter of 2020. Planned
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maintenance downtime costs in the thirdfirst quarter of 20172021 were $14$17 million lower than inhigher compared with the thirdfirst quarter of 2016.2020. Input costs decreased slightly, although in Europe and Russia input costs were higher primarily 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.energy.
Entering the fourthsecond quarter of 2017,2021, sales volumes are expected to be seasonally higher.stable. Average sales price realizations are expected to reflect the further recognition of recent price increases. Average sales margins will also benefit from a more favorable product mix. Input costs are expected to be higher. Planned maintenance downtime costs should be $5 million higher in the fourthsecond quarter of 2017. Sales volumes and average sales price realizations2021 are expected to increase in Europe and Russia.be $10 million lower compared with the first quarter of 2021. Operating costs are expected to be stable. Input costs are expected to be stable.
Printing Papers

Total Printing Papers2017 2016Total Printing Papers20212020
In millions3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine MonthsIn millions1st Quarter1st Quarter4th Quarter
Sales$1,039
 $1,017
 $3,051
 $1,019
 $1,012
 $3,003
Sales$781 $908 $802 
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)$80 $96 $80 

Printing Papers net sales for the thirdfirst quarter of 20172021 were 2%3% lower than in the fourth quarter of 2020 and 14% lower than in the first quarter of 2020. Operating profit in the first quarter of 2021 was flat compared with the fourth quarter of 2020 and 17% lower compared with the first quarter of 2020.

North American Papers20212020
In millions1st Quarter1st Quarter4th Quarter
Sales$366 $446 $363 
Operating Profit (Loss)$15 $23 $22 

North American Papers sales volumes in the first quarter of 2021 were stable compared with the fourth quarter of 2020. Total maintenance and economic downtime was about 25,000 tons lower in the first quarter of 2021 compared with the fourth quarter of 2020 primarily due to lower economic downtime. Average sales margins were stable. Operating costs were flat. Planned maintenance downtime costs were $2 million higher thanin the first quarter of 2021, compared with the fourth quarter of 2020. Input costs were higher, primarily for wood and energy.
Compared with the first quarter of 2020, sales volumes in the first quarter of 2021 were significantly lower across all grades for uncoated freesheet paper driven by the demand impact of the COVID-19 pandemic. Total maintenance and economic downtime was about 15,000 tons lower in the first quarter of 2021 compared with the first quarter of 2020 primarily due to lower maintenance downtime. Average sales margins were lower, driven by lower average sales prices net of a favorable geographic mix. Operating costs were lower reflecting strong operations and cost management. Planned maintenance downtime costs were $23 million lower in the first quarter of 2021 compared with the first quarter of 2020. Input costs were higher, primarily for energy, freight and chemicals.
Entering the second quarter of 2021, sales volumes are expected to improve. Average sales margins are expected to be higher. Operating costs are expected to be seasonally lower. Planned maintenance downtime costs are expected to be $13 million higher in the second quarter of 2017 and 2% higher than in the third quarter of 2016. Operating profit before special items in the third quarter of 2017 was 53% higher than in the second quarter of 2017 but 19% lower than in the third quarter of 2016.
North American Papers2017 2016
In millions3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales$470
 $446
 $1,384
 $477
 $466
 $1,425
Operating Profit$54
 $19
 $106
 $81
 $51
 $193
Other—
 2
 2
 —
 —
 —
Operating Profit Before Special Items$54
 $21
 $108
 $81
 $51
 $193
North American Papers sales volumes in the third quarter of 2017 were higher than in the second quarter of 2017 reflecting seasonally higher domestic demand. Average sales price realizations for uncoated freesheet paper were lower due to competitive pressures. Average sales margins were also negatively impacted by an unfavorable mill sourcing mix. Input costs were slightly higher, primarily for wood. Planned maintenance downtime costs were $34 million lower in the third quarter of 2017, which included no outages, compared with the second quarter of 2017.

Compared with the third quarter of 2016, sales volumes in the third quarter of 2017 were higher primarily due to increased shipments of uncoated freesheet paper to export markets. Average sales price realizations were lower, reflecting weaker market conditions. Average sales margins were also impacted by unfavorable geographic and mill sourcing mix. Input costs increased.
Entering the fourth quarter of 2017, sales volumes are expected to be seasonally lower, while average sales price realizations are expected to be stable with the partial realization of a previous sales price increase for uncoated freesheet paper.2021. 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.stable.
European Papers20212020
In millions1st Quarter1st Quarter4th Quarter
Sales$250 $287 $248 
Operating Profit (Loss)$22 $41 $21 
European Papers2017 2016
In millions3rd 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 in the thirdfirst quarter of 20172021, compared with the secondfourth quarter of 20172020, were seasonally lower in both Russia, andpartially offset by higher sales volumes in Europe. Economic downtime driven by the COVID-19 pandemic demand impact was lower in the first quarter of 2021 compared to the fourth quarter of 2020. Average sales margins for uncoated freesheet paper increasedwere lower in both regions, reflecting lower average sales prices and an unfavorable mix. Operating costs were lower in Europe, duebut higher in Russia. Planned maintenance downtime costs were $1 million lower in the first quarter of 2021 compared to the partial realizationfourth quarter of a sales price increase, and in Russia due to a favorable geographic mix.2020. Input costs were higher in Europe, 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 operatingInput costs were lower.stable in Russia. Earnings benefited from favorable foreign currency impacts primarily in Russia.
Sales volumes for uncoated freesheet paper in the thirdfirst quarter of 20172021 compared with the thirdfirst quarter of 2016,2020 were lower in both Europe but higherand Russia, reflecting the decline in Russia.demand due to the COVID-19 pandemic. Earnings in both regions were negatively impacted by economic downtime in the first quarter of 2021 driven by the COVID-19 pandemic. Average sales price realizationsmargins for uncoated freesheet paper increasedwere 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
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costs were $2 million higher in the first quarter of 2021 compared with the first quarter of 2020. Input costs were higher, primarily for energy in Europe butand wood in both regions. Earnings were slightly lowerbenefited from favorable foreign currency impacts in Russia. Input costs, primarily for wood and energy, were higher. Planned maintenance downtime costsEurope, mostly offset by unfavorable foreign currency impacts 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.Russia.

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 Papers2017 2016
In millions3rd 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 with the negative impact of logistical issues in the third quarter, partially offset by seasonally stronger demand in Brazil. Average sales margins were higher due to increased 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 2017,2021, sales volumes for uncoated freesheet paper are expected to be seasonally higherstable in Brazil while export shipments should also increase due to the recovery from the logistical issues that occurred during the third quarter.both regions. Average sales margins should benefit from a more favorable geographic mix. Inputare expected to improve in both regions. Operating costs are expected to be higher, particularly for purchased pulp and energy.
Indian Papers2017 2016
In millions3rd 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 Packaging2017 2016
In millions3rd 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 Packaging2017 2016
In millions3rd Quarter 2nd Quarter Nine Months 3rd Quarter 2nd Quarter Nine Months
Sales$403
 $395
 $1,186
 $407
 $416
 $1,241
Operating Profit$33
 $(28) $19
 $39
 $48
 $77
Riegelwood mill conversion costs—
 —
 —
 —
 —
 9
Foodservice Asia asset impairment—
 9
 9
 —
 —
 —
Operating Profit Before Special Items$33
 $(19) $28
 $39
 $48
 $86
North American Consumer Packaging Coated paperboard sales volumes in the third quarter of 2017 were higher than in the second quarter of 2017. Average sales price realizations increased reflecting the effect of a 2017 second quarter sales price increase. Planned maintenance downtime costs were $33 million lower than in the second quarter of 2017 which included outages at our Augusta and Texarkana mills. Operating costs improved due to the resolution of some performance issues at our Augusta mill during the 2017 second quarter. Input costs for wood were slightly lower.
Compared with the third quarter of 2016, sales volumes in the third quarter of 2017 were slightly lower. Average sales price realizations increased slightly, reflecting the realization of second-quarter 2017 sales price increases offset by competitive price erosion. Operating costs were higher due to reliability issues at our Augusta mill, while input costs were steady.
Foodservice sales volumes in the third quarter of 2017 were seasonally lower than in the second quarter of 2017. Average sales margins increased, reflecting higher average sales price realizations partially offset by an unfavorable customer mix. Distribution costs were lower due to the impact of freight savings initiatives. Compared with the third quarter of 2016, sales volumes in the third quarter of 2017 decreased slightly reflecting weaker customer demand. Average sales margin decreased as higher input costs for resin and board were only partially offset by the realization of 2017 second quarter sales price increases.
Looking forward to the fourth quarter of 2017, coated paperboard sales volumes are expected to be seasonally weaker. Average prior sales price realizations are expected to be flat, but average sales margins should benefit from a favorable mix. Input costs for wood and polystyrene costs are expected to be higher following the hurricanes that occurred in the third quarter. Planned maintenance downtime costs should be $4 million higher in the fourth quarter of 2017 with an outage scheduled at our Texarkana mill. Operating costs are expected to recover. For Foodservice, sales volumes are expected to be seasonally higher while average sales margins should be relatively flat.
European Consumer Packaging2017 2016
In millions3rd 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 are expected to be $10 million lowerhigher in the third quarter of 2017 compared with the second quarter of 2017. Operating costs were also favorable.
Compared2021 compared with the thirdfirst 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.2021. Input costs increased for wood, energy and purchased pulp. Planned maintenance downtime costs were $3 million lower in the third quarter of 2017 than in the third quarter of 2016.
Entering the fourth quarter of 2017, sales volumes are expected to be higher in Russia, but about flatboth regions, primarily for purchased pulp in Europe.Europe and wood and chemicals in both regions.

Brazilian Papers20212020
In millions1st Quarter1st Quarter4th Quarter
Sales (a)$168 $176 $198 
Operating Profit (Loss)$43 $32 $37 

(a)Includes intra-segment sales of $3 million, $1 million and $7 million for the three months ended March 31, 2021, March 31, 2020 and December 31, 2020, respectively.
Brazilian Papers sales volumes in the first quarter of 2021, compared with the fourth quarter of 2020, were seasonally lower for both domestic and export shipments of uncoated freesheet paper. Average sales margins improved driven by higher domestic and export sales prices net of an unfavorable geographic mix. Operating costs were lower. Planned maintenance outage downtime costs were $1 million higher in the first quarter of 2021 compared with the fourth quarter of 2020. Input costs were higher primarily for chemicals, packaging and energy. Earnings benefited from favorable foreign currency impacts in the first quarter of 2021 compared with the fourth quarter of 2020.
Compared with the first quarter of 2020, sales volumes for uncoated freesheet paper in the first quarter of 2021 increased in domestic markets as the negative demand impact of the COVID-19 pandemic for cutsize and tablet was more than offset by increased offset volumes. Sales volumes to export markets were lower reflecting the demand impact of the COVID-19 pandemic. Average sales margins were stable reflecting higher average domestic sales prices and a favorable geographic mix mostly offset by lower average export sales prices. Operating costs were lower. Planned maintenance outage expenses were $1 million higher in the first quarter of 2021 compared with the first quarter of 2020. Input costs were higher, primarily for chemicals and packaging.
Entering the second quarter of 2021, sales volumes for uncoated freesheet paper are expected to be higher for domestic shipments and stable for export shipments. Average sales margins are expected to increase, reflecting higher sales price realizationsbe higher. Operating costs are expected to be stable. Planned maintenance outage expenses are expected to be lower in Europe.the second quarter of 2021 compared with the first quarter of 2021. Input costs for wood and energy are expected to be higher.
Equity Earnings, Net of Taxes – Ilim
Since October 2007, International Paper andaccounts 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$49 million in the thirdfirst quarter of 2017,2021, compared with $21$53 million in the secondfourth quarter of 20172020 and $46$(35) million in the thirdfirst quarter of 2016.2020. In the thirdfirst quarter of 2017,2021, the after-tax foreign exchange impact primarily on the remeasurement of U.S. dollar-denominated net debt was a gainloss of $7$2 million, compared with a lossgain of $18$22 million in the secondfourth quarter of 2017. 2020.
Compared with the secondfourth quarter of 2017,2020, sales volumes in the thirdfirst quarter of 20172021 were 15% lower primarily for salesoverall, due in part to the Chinese holidays. Sales of softwood pulp and containerboardhardwood pulp in China and other export markets were lower, but were partially offset by higher sales of softwood pulp and hardwood pulp in Russia. Average sales margins increased in the first quarter of 2021 reflecting higher sales prices for softwood pulp, hardwood pulp and containerboard in Russia. Average sales price realizations increased, primarilyChina, Russia and other export markets. Input costs for wood declined due to seasonal factors, but were higher for chemicals and fuel. Maintenance and repair costs were lower.
Sales volumes in the first quarter of 2021 compared with the first quarter of 2020, were relatively flat as lower sales of softwood pulp in China and softwood pulp and hardwood pulp andin export markets were offset by higher sales of 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 lowerbetter sales of softwood pulp to China and Russia. Average sales price realizations were higher, primarily for sales of softwood and hardwood pulp in Russia. Average sales margins increased reflecting higher sales prices for softwood pulp in China and in Russiaother export markets and forhigher sales ofprices for containerboard in all countries.areas. Input costs primarily for wood, chemicals and energy were higher. OperatingDistribution costs were negatively impacted by the planned maintenance downtime taken in the third quarter of 2017.also higher. An after-tax foreign exchange gainloss of $3$51 million primarily on the remeasurement of U.S. dollar denominated net debt was recorded in the thirdfirst quarter of 2016.2020.
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Looking forward to the fourthsecond quarter of 2017,2021, sales volumes are expected to increase. Averagebe higher. Based on pricing to date in the current quarter, average sales price realizationsmargins are expectedprojected to increase compared with the third quarter of 2017, primarily for export sales of softwood and hardwood pulp, and containerboard.increase. Input costs for wood and fuel are expected to be seasonally higher for woodhigher. Planned maintenance outages are scheduled at the Koryazhma and energy.Bratsk mills in the second quarter of 2021.
Equity Earnings – GPIP

International Paper recorded equity earnings of $1 million in the first quarter of 2021, compared with $11 million in the fourth quarter of 2020 and $7 million in the first quarter of 2020. As of March 31, 2021, the Company's ownership interest in GPIP was 7.4%.

LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations totaled $569$512 million for the first ninethree months of 2017,2021, compared with $1.6 billion$649 million for the comparable 2016nine-month2020 three-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 millions2017 2016
Cash provided by operations$569
 $1,566
Adjustments:   
Cash invested in capital projects(935) (903)
Cash contribution to pension plan1,250
 750
Cash payment for Kleen settlement354
 —
Free Cash Flow$1,238
 $1,413
Investments in capital projects, net of insurance recoveries, totaled $935$89 million in the first ninethree months of 20172021, compared to $903$286 million in the first ninethree months of 2016.2020. Full-year 20172021 capital spending is currently expected to be approximately $1.5 billion,$800 million, or about 107%61% of depreciation and amortization expense for our current businesses.amortization.

Financing activities for the first ninethree months of 20172021 included a $997$109 million net increasedecrease in debt versus a $1.6 billion$424 million net increase in debt during the comparable 2016 nine-month2020 three-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 ended March 31, 2021 and nine months ended September 30, 2017 and 20162020 were as follows:
 Three Months Ended
March 31,
In millions20212020
Early debt reductions (a)$107 $72 
Pre-tax early debt extinguishment (gain) loss, net18 8 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
In millions2017 2016 2017 2016
Early debt reductions (a)$95
 $266
 $122
 $266
Pre-tax early debt extinguishment costs2
 29
 2
 29


(a)Reductions related to notes with interest rates ranging from 3.00% to 4.80% with original maturities from 2027 to 2048 and from 3.00% to 4.40% with original maturities from 2026 to 2048 for the three months ended March 31, 2021 and 2020, 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,March 31, 2021, contractual obligations for future payments of debt maturities (including finance lease liabilities disclosed in Note 11 - Leases and excluding the timber monetization structures disclosed in Note 16 - Variable Interest Entities) by calendar year were as follows: $476 million in 2017; $461 million in 2018; $422 million in 2019; $159 million in 2020; $663$27 million in 2021; $923$198 million in 2022; $361 million in 2023; $152 million in 2024; $209 million in 2025; and $9.23$7.0 billion thereafter.
Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At September 30, 2017,March 31, 2021, the Company held long-term credit ratings of BBBBBB+ (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 P2P1 by S&P and Moody's, respectively, for borrowings during the current quarter under the Company's commercial paper program.
At September 30, 2017,March 31, 2021, International Paper’s credit agreements totaled $2.1 billion, which managementis comprised of the $1.5 billion contractually committed bank credit agreement and up to $550 million under the receivables securitization program. Management believes these credit agreements are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. The liquidity facilities include aAt March 31, 2021, the Company had no borrowings outstanding under the $1.5 billion contractually committed bank credit agreement that expiresor 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 2021Note 17 - Debt, and has a facility fee of 0.15% per annum payable quarterly. The liquidity facilities also include up to $600 million of uncommitted financings based on eligible receivable balances ($600 million available at September 30, 2017)the borrowings under athe receivables securitization program that expiresbeing limited by eligible receivables. The Company was in December 2017.compliance with all its debt covenants at March 31, 2021 and was well below the thresholds stipulated under the covenants as defined in the credit agreements. Further the financial covenants do not restrict any borrowings under the credit agreements.
In June 2016,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 augmented the Company's access to liquidity due to the macroeconomic conditions related to COVID-19 and supplemented the Company's $1.5 billion credit agreement. After considering the Company’s liquidity position in relation to COVID-19 and the current macroeconomic environment, the company determined not to extend the $750 million credit agreement after its expiration on March 24, 2021.
In addition to the $2.1 billion in credit agreements, International Paper entered intohas 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
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from the date of issue. Interest bearing notes may be issued either as fixed notes or floating rate notes. As of September 30, 2017,March 31, 2021, the Company had $445 million ofno borrowings outstanding under this program at a weighted average interest rate of 1.39%.the program.
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 2017for 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 preservemaintain appropriate levels of liquidity to meet our needs while reducingmanaging 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. During 2020, management took various actions to further strengthen the Company’s liquidity position in response to the COVID-19
Acquisitionspandemic. This included the Company deferring the payment of our payroll taxes as allowed under CARES Act. The CARES Act allows for the deferral of the payment of the employer portion of Social Security taxes accrued between March 27, 2020, and December 31, 2020. Under the CARES Act 50% of the deferred payroll taxes will be paid by December 31, 2021 and the remainder will be paid by December 31, 2022. We believe that our credit agreements, commercial paper program, and the actions taken in response to COVID-19 provide us with sufficient liquidity to operate in this uncertain environment; however, an extended period of economic disruption could impact our access to additional sources of liquidity.
See discussion
During the first three months of 2021, International Paper used 1.8 million shares of treasury stock for various incentive plans. International Paper also acquired 3.1 million shares of treasury stock, including restricted stock tax withholdings. Repurchases of common stock and payments of restricted stock withholding taxes totaled $155 million, including $129 million related to shares repurchased under the Company's repurchase program.

During the first three months of 2020, International Paper used approximately 2.0 million shares of treasury stock for various incentive plans. International Paper also acquired 1.2 million shares of treasury stock, including restricted stock tax withholding. Repurchases of common stock and payments of restricted stock withholding taxes totaled $41 million, including $14 million related to shares repurchased under the Company's repurchase program.

Cash dividend payments related to common stock totaled $202 million and $202 million for the first three months of 2021 and 2020, respectively. Dividends were $0.5125 per share and $0.5125 per share for the first three months in 2021 and 2020, 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 - Acquisitions15 in the Condensed NotesCompany's Annual Report on Form 10-K for the year ended December 31, 2020. In connection with the 2006 International Paper installment sale of forestlands, we received $4.8 billion of installment notes. These installment notes were used by variable interest entities as collateral for borrowings from third-party lenders. These variable interest entities were restructured in 2015 when the installment notes and third-party loans were extended. The restructured variable interest entities hold installment notes of $4.8 billion that mature in August 2021 and third-party loans of $4.2 billion that were extended to mature in August 2021. These third-party loans are shown in Current nonrecourse financial liabilities of variable interest entities on the Consolidated Financial Statements.accompanying consolidated balance sheet. We will settle the third-party loans at their maturity in August 2021 with the proceeds from the installment notes which also mature in August 2021 resulting in expected cash proceeds of approximately $0.6 billion representing our equity in the variable interest entities. Maturity of the installment notes and termination of the monetization structure is expected to result in a $75 million cash tax payment in 2021.

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’sshareholders' 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'sshareholders' 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% interestsinterest would be approximately $1.3 billion,$800 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
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informed each other that they have no current intention to commence procedures specified under the deadlock provisions of the shareholder’sshareholders' agreement.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires International Paper to establish accounting policies and to make estimates that affect both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require judgments about matters that are inherently uncertain.
Accounting policies whose application may have a significant effect on the reported results of operations and financial position of International Paper, and that can require judgments by management that affect their application, include accounting for contingencies, impairment or disposal of long-lived assets, goodwill and other intangible assets, pensions postretirement benefits other than pensions,and income taxes and business combinations.taxes.
The Company has included in its 20162020 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 ninethree months of 2017, other than a change2021.
While we have taken into account certain impacts arising from COVID-19 in connection with the timingaccounting estimates reflected in this Quarterly Report on Form 10-Q, the full impact of the annual impairment testing of goodwill whichCOVID-19 is referenced in Note 1 in the Condensed Notes to the Consolidated Financial Statementsunknown 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 settlementcannot 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 appliedfacts and resulted in a plan remeasurementcircumstances available as of the June 30, 2016 paymentreporting 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.


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.
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 spread of new variants of the virus, the effectiveness and distribution of vaccines, continuing negative global economic conditions arising from the pandemic, 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 ourInternational Paper’s future pension funding obligation, changes in tax lawsobligations, 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 oneany of ourInternational 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)(ix) International Paper’s ability to achieve the failurebenefits expected from, and other risks associated with, acquisitions, joint ventures, divestitures and other corporate transactions, (x) information technology risks, and (xi) loss contingencies and pending, threatened or future litigation, including with respect to realizeenvironmental related matters (xii) 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 forrelating to the Graphic Packingspin-off transaction and the successful fulfillment or waiver of all other closing conditions without unexpected delays or conditions; (x)(xiii) our ability to successfully separate the successful closingSpinCo business (known as Sylvamo Corporation) and realize the anticipated benefits of the Graphic Packingspin-off transaction; (xiv) our ability to satisfy any necessary conditions to consummate the spin-off transaction within the estimated timeframe; (xi)timeframes or at all; and (xv) the uncertaintyfinal terms and conditions of any spin-off transaction, including the amount of any dividend by Sylvamo to us and the terms of any ongoing commercial agreements and arrangements between us and Sylvamo following any such transaction, the costs of any such transaction, the nature and amount of indebtedness incurred by Sylvamo, the qualification of the expected financial performancespin-off transaction as a tax-free transaction for U.S. federal income tax purposes (including whether an IRS ruling will be obtained), diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties, and the impact of any such transaction on the businesses of the combined businessCompany and Sylvamo and the relationship between the two companies following completion of the Graphic Packaging transaction; (xii) the failure of the combined business to realize the expected synergies, cost-savingsany such transaction. These and other benefitsfactors that could cause or contribute to actual results differing materially from the Graphic Packaging transaction or delaysuch forward-looking statements can be found in realization thereof; (xiii) the successful financingInternational
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Table of the Graphic Packaging transaction; (ix) unforeseen tax treatment relating to the Graphic Packaging transaction, (xv) litigation related to the Graphic Packaging transaction or limitations or restrictions imposed by regulatory authorities that may delay or negatively impact the Graphic Packaging transaction; and (xvi) our ability to achieve the benefits we expect from all other strategic acquisitions, divestitures and restructurings; and (xvii) other factors you can find in ourContents
Paper’s press releases and filings with theU.S. Securities and Exchange Commission includingfilings. 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 1Aaccuracy 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 undertakeany 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 38 of International Paper’s 20162020 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, 2016.2020.

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 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, 2017March 31, 2021 (the end of the period covered by this report).
Changes in Internal Control over Financial Reporting:
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2017March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II. OTHER INFORMATION
 
ITEM 1.LEGAL PROCEEDINGS
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 statementsConsolidated 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, thereThere 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, 20162020 (Part I, Item 1A). other than as discussed below.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
PeriodTotal Number of Shares Purchased (a)Average Price Paid per ShareTotal Number of Shares Purchased as Part of a Publicly Announced Plan or ProgramMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
July 1, 2017 - July 31, 2017646
$56.41
—
$0.933
August 1, 2017 - August 31, 2017—
—
—
0.933
September 1, 2017 - September 30, 2017173
56.82
—
0.933
Total819
   
PeriodTotal Number of Shares Purchased (a)Average Price Paid per ShareTotal Number of Shares Purchased as Part of a Publicly Announced Plan or ProgramMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in billions)
January 1, 2021 - January 31, 20215,579 $49.85— $1.73
February 1, 2021 - February 28, 20212,022,676 48.33 1,464,637 1.66 
March 1, 2021 - March 31, 20211,095,419 52.27 1,095,355 1.60 
Total3,123,674 
(a) 819563,682 shares were acquired from employees fromor board members as a result of share withholdings to pay income taxes under the Company's restricted stock programs.program. The remainder were purchased under a share repurchase program that 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 March 31, 2021, approximately $1.60 billion aggregate amount of shares of our common stock remained authorized for purchase under this program.


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ITEM 6. EXHIBITS
ITEM 6.2.1EXHIBITS
Share Purchase Agreement, dated February 12, 2021, by and between International Paper Investments (Luxembourg) S.a.r.l, Mayr-Melnhoff Cartonboard International GmbH, Mayr-Melnhof Karton AG, International Paper (Poland) Holding Sp. Z O.O., and International Paper Company*
10.131.1
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
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101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema.
101.CALXBRL Taxonomy Extension Calculation Linkbase.
101.DEFXBRL Taxonomy Extension Definition Linkbase.
101.LABXBRL Taxonomy Extension Label Linkbase.
101.PREXBRL Extension Presentation Linkbase.

*101.PREConfidential treatment has been requested for certain information pursuant to Rule 24b-2 under the Securities Exchange Act of 1934,XBRL Extension Presentation Linkbase.
104Cover Page Interactive Data File (formatted as amended.Inline XBRL, and contained in Exhibit 101).


*    Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the U.S. Securities and Exchange Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
INTERNATIONAL PAPER COMPANY
                        (Registrant)                         
April 30, 2021
INTERNATIONAL PAPER COMPANY
                        (Registrant)                         
By		/s/ Tim S. Nicholls
Tim S. Nicholls
November 3, 2017By/s/ Glenn R. Landau
Glenn R. Landau
Senior Vice President and Chief

Financial Officer
November 3, 2017April 30, 2021By/s/ Vincent P. Bonnot
Vincent P. Bonnot
Vice President – Finance and Controller


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