UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

_________________________________________

Commission File Number 001-03157

INTERNATIONAL PAPER COMPANY

(Exact name of registrant as specified in its charter)


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

6400 Poplar Avenue, Memphis, Tennessee			38197
(Address of Principal Executive Offices)			(Zip Code)

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

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


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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange

Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, par value $1.00 per share, as of April ~~22, 2022~~21, 2023 was ~~370,629,339.~~347,056,943.

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INDEX


		PAGE NO.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Statement of Operations - Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	1

	Condensed Consolidated Statement of Comprehensive Income - Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	2

	Condensed Consolidated Balance Sheet - March 31, ~~2022~~2023 and December 31, ~~2021~~2022	3

	Condensed Consolidated Statement of Cash Flows - Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	4

	Condensed Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2521

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3733

Item 4.	Controls and Procedures	3733

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3834

Item 1A.	Risk Factors	3834

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3934

Item 3.	Defaults Upon Senior Securities	3934

Item 4.	Mine Safety Disclosures	3934

Item 5.	Other Information	3934

Item 6.	Exhibits	4035

Signatures		4136

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PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Operations

(Unaudited)

(In millions, except per share amounts)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Net Sales	Net Sales	$	5,237	$	4,593	Net Sales	$	5,020	$	5,237
Costs and Expenses	Costs and Expenses					Costs and Expenses
Cost of products sold	Cost of products sold	3,839		3,348		Cost of products sold	3,642		3,839
Selling and administrative expenses	Selling and administrative expenses	341		302		Selling and administrative expenses	381		341
Depreciation, amortization and cost of timber harvested	Depreciation, amortization and cost of timber harvested	261		268		Depreciation, amortization and cost of timber harvested	241		261
Distribution expenses	Distribution expenses	424		335		Distribution expenses	422		424
Taxes other than payroll and income taxes	Taxes other than payroll and income taxes	36		35		Taxes other than payroll and income taxes	36		36
Restructuring and other charges, net		—		30
Net (gains) losses on sales and impairments of businesses		—		2
Net (gains) losses on sales of equity method investments		—		(74)
Net (gains) losses on mark to market investments	Net (gains) losses on mark to market investments	(46)		—		Net (gains) losses on mark to market investments	—		(46)
Interest expense, net	Interest expense, net	69		93		Interest expense, net	62		69
Non-operating pension expense (income)	Non-operating pension expense (income)	(49)		(52)		Non-operating pension expense (income)	15		(49)
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	362		306		Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	221		362
Income tax provision (benefit)	Income tax provision (benefit)	95		88		Income tax provision (benefit)	48		95
Equity earnings (loss), net of taxes	Equity earnings (loss), net of taxes	93		49		Equity earnings (loss), net of taxes	(1)		—
Earnings (Loss) From Continuing Operations	Earnings (Loss) From Continuing Operations	$	360	$	267	Earnings (Loss) From Continuing Operations	$	172	$	267
Discontinued operations, net of taxes	Discontinued operations, net of taxes	—		82		Discontinued operations, net of taxes	—		93
Net Earnings (Loss)	Net Earnings (Loss)	$	360	$	349	Net Earnings (Loss)	$	172	$	360
Less: Net earnings (loss) attributable to noncontrolling interests		—		—
Net Earnings (Loss) Attributable to International Paper Company		$	360	$	349
Basic Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Basic Earnings (Loss) Per Share						Basic Earnings (Loss) Per Share
Earnings (loss) from continuing operations	Earnings (loss) from continuing operations	$	0.96	$	0.68	Earnings (loss) from continuing operations	$	0.49	$	0.71
Discontinued operations, net of taxes	Discontinued operations, net of taxes	—		0.21		Discontinued operations, net of taxes	—		0.25
Net earnings (loss)	Net earnings (loss)	$	0.96	$	0.89	Net earnings (loss)	$	0.49	$	0.96
Diluted Earnings (Loss) Per Share Attributable to International Paper Company Common Shareholders
Diluted Earnings (Loss) Per Share						Diluted Earnings (Loss) Per Share
Earnings (loss) from continuing operations	Earnings (loss) from continuing operations	$	0.95	$	0.68	Earnings (loss) from continuing operations	$	0.49	$	0.70
Discontinued operations, net of taxes	Discontinued operations, net of taxes	—		0.20		Discontinued operations, net of taxes	—		0.25
Net earnings (loss)	Net earnings (loss)	$	0.95	$	0.88	Net earnings (loss)	$	0.49	$	0.95
Average Shares of Common Stock Outstanding – assuming dilution	Average Shares of Common Stock Outstanding – assuming dilution	379.2		394.8		Average Shares of Common Stock Outstanding – assuming dilution	353.3		379.2

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

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INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

(In millions)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Net Earnings (Loss)	Net Earnings (Loss)	$	360	$	349	Net Earnings (Loss)	$	172	$	360
Other Comprehensive Income (Loss), Net of Tax:	Other Comprehensive Income (Loss), Net of Tax:					Other Comprehensive Income (Loss), Net of Tax:
Amortization of pension and post-retirement prior service costs and net loss:	Amortization of pension and post-retirement prior service costs and net loss:					Amortization of pension and post-retirement prior service costs and net loss:
U.S. plans	U.S. plans	20		34		U.S. plans	23		20
Change in cumulative foreign currency translation adjustment	Change in cumulative foreign currency translation adjustment	(48)		(143)		Change in cumulative foreign currency translation adjustment	(9)		(48)
Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period		—		(6)
Reclassification adjustment for (gains) losses included in net earnings (loss)		—		3
Total Other Comprehensive Income (Loss), Net of Tax	Total Other Comprehensive Income (Loss), Net of Tax	(28)		(112)		Total Other Comprehensive Income (Loss), Net of Tax	14		(28)
Comprehensive Income (Loss)	Comprehensive Income (Loss)	332		237		Comprehensive Income (Loss)	186		332
Other comprehensive (income) loss attributable to noncontrolling interests		—		1
Comprehensive Income (Loss) Attributable to International Paper Company		$	332	$	238

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

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INTERNATIONAL PAPER COMPANY

Condensed Consolidated Balance Sheet

(In millions)


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(unaudited)					(unaudited)
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and temporary investments	Cash and temporary investments	$	1,031	$	1,295	Cash and temporary investments	$	636	$	804
Restricted cash	Restricted cash	88		—		Restricted cash	72		—
Accounts and notes receivable, net	Accounts and notes receivable, net	3,363		3,232		Accounts and notes receivable, net	3,196		3,284
Contract assets	Contract assets	491		378		Contract assets	533		481
Inventories	Inventories	1,746		1,814		Inventories	1,939		1,942
Current investments		291		245
Assets held for sale						Assets held for sale	90		133
Other current assets	Other current assets	174		132		Other current assets	149		126
Total Current Assets	Total Current Assets	7,184		7,096		Total Current Assets	6,615		6,770
Plants, Properties and Equipment, net	Plants, Properties and Equipment, net	10,336		10,441		Plants, Properties and Equipment, net	10,453		10,431
Long-Term Investments		608		751
Long-Term Financial Assets of Variable Interest Entities (Note 16)		2,280		2,275
Investments						Investments	187		186
Long-Term Financial Assets of Variable Interest Entities (Note 14)						Long-Term Financial Assets of Variable Interest Entities (Note 14)	2,298		2,294
Goodwill	Goodwill	3,128		3,130		Goodwill	3,042		3,041
Overfunded Pension Plan Assets	Overfunded Pension Plan Assets	653		595		Overfunded Pension Plan Assets	305		297
Right of Use Assets	Right of Use Assets	373		365		Right of Use Assets	422		424
Deferred Charges and Other Assets	Deferred Charges and Other Assets	596		590		Deferred Charges and Other Assets	449		497
Total Assets	Total Assets	$	25,158	$	25,243	Total Assets	$	23,771	$	23,940
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current Liabilities	Current Liabilities					Current Liabilities
Notes payable and current maturities of long-term debt	Notes payable and current maturities of long-term debt	$	197	$	196	Notes payable and current maturities of long-term debt	$	367	$	763
Accounts payable	Accounts payable	2,657		2,606		Accounts payable	2,541		2,708
Accrued payroll and benefits	Accrued payroll and benefits	345		440		Accrued payroll and benefits	350		355
Other current liabilities	Other current liabilities	943		902		Other current liabilities	1,008		1,174
Total Current Liabilities	Total Current Liabilities	4,142		4,144		Total Current Liabilities	4,266		5,000
Long-Term Debt	Long-Term Debt	5,468		5,383		Long-Term Debt	5,471		4,816
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 16)		2,101		2,099
Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 14)						Long-Term Nonrecourse Financial Liabilities of Variable Interest Entities (Note 14)	2,108		2,106
Deferred Income Taxes	Deferred Income Taxes	2,642		2,618		Deferred Income Taxes	1,738		1,732
Underfunded Pension Benefit Obligation	Underfunded Pension Benefit Obligation	375		377		Underfunded Pension Benefit Obligation	283		281
Postretirement and Postemployment Benefit Obligation	Postretirement and Postemployment Benefit Obligation	201		205		Postretirement and Postemployment Benefit Obligation	145		150
Long-Term Lease Obligations	Long-Term Lease Obligations	241		236		Long-Term Lease Obligations	286		283
Other Liabilities	Other Liabilities	1,101		1,099		Other Liabilities	1,085		1,075
Equity	Equity					Equity
Common stock, $1 par value, 2022 – 448.9 shares and 2021 – 448.9 shares		449		449
Common stock, $1 par value, 2023 – 448.9 shares and 2022 – 448.9 shares						Common stock, $1 par value, 2023 – 448.9 shares and 2022 – 448.9 shares	449		449
Paid-in capital	Paid-in capital	4,670		4,668		Paid-in capital	4,699		4,725
Retained earnings	Retained earnings	9,218		9,029		Retained earnings	9,866		9,855
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,694)		(1,666)		Accumulated other comprehensive loss	(1,911)		(1,925)
		12,643		12,480			13,103		13,104
Less: Common stock held in treasury, at cost, 2022 – 78.3 shares and 2021 – 70.4 shares		3,756		3,398
Less: Common stock held in treasury, at cost, 2023 – 101.9 shares and 2022 – 98.6 shares						Less: Common stock held in treasury, at cost, 2023 – 101.9 shares and 2022 – 98.6 shares	4,714		4,607
Total Equity	Total Equity	8,887		9,082		Total Equity	8,389		8,497
Total Liabilities and Equity	Total Liabilities and Equity	$	25,158	$	25,243	Total Liabilities and Equity	$	23,771	$	23,940

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,
2022 2021
Operating Activities
Net earnings (loss) $ 360 $ 349
Depreciation, amortization and cost of timber harvested 261 309
Deferred income tax provision (benefit), net 30 20
Restructuring and other charges, net — 30
Net (gains) losses on mark to market investments (46) —
Net (gains) losses on sales and impairments of businesses — 2
Net (gains) losses on sales of equity method investments — (74)
Equity method dividends received 204 4
Equity (earnings) losses, net (93) (49)
Periodic pension (income) expense, net (28) (28)
Other, net 51 25
Changes in current assets and liabilities
Accounts and notes receivable (146) (186)
Contract assets (114) (83)
Inventories 31 93
Accounts payable and accrued liabilities 89 68
Interest payable 25 15
Other (36) 17
Cash Provided By (Used For) Operations 588 512
Investment Activities
Invested in capital projects, net of insurance recoveries (185) (89)
Acquisitions, net of cash acquired — (61)
Proceeds from sales of equity method investments — 397
Proceeds from sales of businesses, net of cash divested — 11
Proceeds from sale of fixed assets 5 —
Cash Provided By (Used For) Investment Activities (180) 258
Financing Activities
Repurchases of common stock and payments of restricted stock tax withholding (428) (155)
Issuance of debt 88 2
Reduction of debt (3) (111)
Change in book overdrafts (66) (19)
Dividends paid (174) (202)
Net debt tender premiums paid — (19)
Cash Provided By (Used For) Financing Activities (583) (504)
Cash Included in Assets Held for Sale — (54)
Effect of Exchange Rate Changes on Cash and Temporary Investments and Restricted Cash (1) (20)
Change in Cash and Temporary Investments and Restricted Cash (176) 192
Cash and Temporary Investments and Restricted Cash
Beginning of period 1,295 595
End of period $ 1,119 $ 787


	Three Months Ended March 31,
	2023		2022
Operating Activities
Net earnings (loss)	$	172	$	360
Depreciation, amortization and cost of timber harvested	241		261
Deferred income tax provision (benefit), net	(2)		30
Net (gains) losses on mark to market investments	—		(46)
Net (gains) losses on sales and impairments of equity method investments	43		—
Equity method dividends received	—		204
Equity (earnings) losses, net	(42)		(93)
Periodic pension (income) expense, net	26		(28)
Other, net	39		51
Changes in current assets and liabilities
Accounts and notes receivable	103		(146)
Contract assets	(52)		(114)
Inventories	52		31
Accounts payable and accrued liabilities	(203)		89
Interest payable	(5)		25
Other	(27)		(36)
Cash Provided By (Used For) Operations	345		588
Investment Activities
Invested in capital projects, net of insurance recoveries	(341)		(185)
Proceeds from sale of fixed assets	2		5
Cash Provided By (Used For) Investment Activities	(339)		(180)
Financing Activities
Repurchases of common stock and payments of restricted stock tax withholding	(177)		(428)
Issuance of debt	670		88
Reduction of debt	(413)		(3)
Change in book overdrafts	(26)		(66)
Dividends paid	(162)		(174)
Cash Provided By (Used For) Financing Activities	(108)		(583)
Effect of Exchange Rate Changes on Cash and Temporary Investments and Restricted Cash	6		(1)
Change in Cash and Temporary Investments and Restricted Cash	(96)		(176)
Cash and Temporary Investments and Restricted Cash
Beginning of period	804		1,295
End of period	$	708	$	1,119

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 consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments that are necessary for the fair presentation of 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 three months of the year may not necessarily be indicative of full year results. ~~It is suggested that~~You should read 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, ~~2021,~~2022 (the "Annual Report"), which have previously been filed with the Securities and Exchange Commission.

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States that require the use of management’s estimates. Actual results could differ from management’s estimates.

~~Printing Papers Spinoff~~

On October 1, 2021, the Company completed the previously announced spin-off of its Printing Papers segment along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia into a standalone, publicly-traded company, Sylvamo Corporation. The transaction was implemented through the distribution of shares of the standalone company to International Paper's shareholders (the "Distribution"). As a result of the Distribution, Sylvamo Corporation is an independent public company that trades on the New York Stock Exchange under the symbol "SLVM".

In addition to the spin-off of Sylvamo Corporation, the Company completed the sale of its Kwidzyn, Poland mill on August 6, 2021. All historical operating results of the Sylvamo Corporation businesses and Kwidzyn mill have been presented as Discontinued Operations, net of tax, in the condensed consolidated statement of operations. See ~~Note 9 - Divestitures and Impairments of~~ ~~Businesses~~ ~~for further details regarding the Sylvamo Corporation spin-off and discontinued operations.~~

~~Russia/Ukraine~~Russia-Ukraine Conflict

The ~~Russia-Ukraine~~military conflict between Russia and Ukraine, including ~~escalating~~ongoing sanctions, ~~possible~~ actions by the Russian government, and associated domestic and global economic and geopolitical conditions, ~~could materially~~has adversely affected and may continue to adversely affect our Ilim joint venture and ~~could otherwise adversely affect~~ our ~~business,~~businesses, financial condition, results of operations and cash flows. ~~We are currently unable to predict the impact the Russian invasion of Ukraine, sanctions imposed to date or~~On January 24, 2023, we announced that may be imposed in the future, geopolitical instability and the possibility of broadened military conflict may have on us or our Ilim joint venture, including on our receipt of dividends from our Ilim joint venture. Moreover, we have ~~announced~~reached an agreement to sell our ~~intention to explore strategic options with respect to Ilim S.A., including a sale of our 50%~~ equity interest in Ilim S.A. ~~In addition, we~~("Ilim") and have ~~disclosed our intent~~also received from the same purchaser an indication of interest to monetize our remaining equity stake in Sylvamo Corporation (which has certain operations in Russia, and announced in March 2022 that it began the suspension of operations in Russia and that it was continuing to assess various options for its operations in that country). While we may sellpurchase our equity ~~interests~~investment in JSC Ilim Group ("Ilim Group" and together with Ilim, the ~~Ilim~~"Ilim joint ~~venture and/or Sylvamo in the future,~~venture"), however, we cannot be certain if and when ~~this~~the completion of these sales may ~~occur,~~occur. Our ability to complete such sales is subject to various risks, including (i) purchasers’ inability to obtain necessary regulatory approvals or to finance the purchase pursuant to the terms of the agreement, (ii) adverse actions by the Russian government, and (iii) new or expanded sanctions imposed by the U.S., the United Kingdom, or the European Union or its member countries. We are unable to predict the full impact that ~~possible~~Russia’s ongoing invasion of Ukraine, current or potential future sanctions, ongoing or potential disruptions resulting from the conflict, the changing regulatory environment in ~~the capital markets, or~~Russia, negative macroeconomic conditions ~~associated with the Russia-Ukraine~~arising from such conflict, ~~could~~supply chain disruptions, and geopolitical instability and shifts, may have on ~~the value of and~~us or our ability to ~~sell~~complete the sale of our ~~equity interests~~interest in the Ilim joint ~~venture and/or Sylvamo and the timing of any such sales.~~venture.

NOTE 2 - RECENT ACCOUNTING DEVELOPMENTS

Recently Issued Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This guidance provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective upon issuance and generally can be applied through December 31, ~~2022.~~2024. The Company will apply the amendments in this update to account for contract modifications due to changes in reference rates once those occur. We do not expect these amendments to have a material impact on our consolidated financial statements and related disclosures.

~~Table of Contents~~

~~Government Assistance~~Liabilities - Supplier Finance Programs

In ~~November 2021,~~September 2022, the FASB issued ASU ~~2021-10, "Government Assistance (Topic 832)~~2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50): ~~Disclosures by Business Entities about Government Assistance.~~Disclosure of Supplier Finance Program Obligations." This guidance requires a business entity operating as a buyer in a supplier finance agreement to ~~provide certain disclosures around assistance received from governments.~~disclose qualitative and quantitative information about its supplier finance programs. This guidance is effective for annual reporting periods beginning after December 15, ~~2021.~~2022, and interim periods within those years. The Company ~~is currently evaluating~~adopted the provisions of this guidance in the ~~guidance.~~first quarter of 2023. See Note 8 - Supplemental Financial Information.

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NOTE 3 - REVENUE RECOGNITION

Generally, the Company recognizes revenue on a point-in-time basis when the customer takes title to the goods and assumes the risks and rewards for the goods. For customized goods where the Company has a legally enforceable right to payment for the goods, the Company recognizes revenue over time which, generally, is as the goods are produced.

Disaggregated Revenue

A geographic disaggregation of revenues across our company segmentation in the following tables provides information to assist in evaluating the nature, timing and uncertainty of revenue and cash flows and how they may be impacted by economic factors.


		Three Months Ended March 31, 2022									Three Months Ended March 31, 2023
In millions	In millions	Industrial Packaging		Global Cellulose Fibers		Corporate and Inter-segment Sales		Total		In millions	Industrial Packaging		Global Cellulose Fibers		Corporate & Intersegment		Total
Primary Geographical Markets (a)	Primary Geographical Markets (a)									Primary Geographical Markets (a)
United States	United States	$	3,761	$	662	$	120	$	4,543	United States	$	3,455	$	730	$	126	$	4,311
EMEA	EMEA	410		30		—		440		EMEA	391		25		—		416
Pacific Rim and Asia	Pacific Rim and Asia	10		18		1		29		Pacific Rim and Asia	8		56		—		64
Americas, other than U.S.	Americas, other than U.S.	225		—		—		225		Americas, other than U.S.	229		—		—		229
Total	Total	$	4,406	$	710	$	121	$	5,237	Total	$	4,083	$	811	$	126	$	5,020

Operating Segments	Operating Segments									Operating Segments
North American Industrial Packaging	North American Industrial Packaging	$	4,025	$	—	$	—	$	4,025	North American Industrial Packaging	$	3,724	$	—	$	—	$	3,724
EMEA Industrial Packaging	EMEA Industrial Packaging	410		—		—		410		EMEA Industrial Packaging	391		—		—		391
Global Cellulose Fibers	Global Cellulose Fibers	—		710		—		710		Global Cellulose Fibers	—		811		—		811
Intra-segment Eliminations	Intra-segment Eliminations	(29)		—		—		(29)		Intra-segment Eliminations	(32)		—		—		(32)
Corporate & Inter-segment Sales		—		—		121		121
Corporate & Intersegment Sales										Corporate & Intersegment Sales	—		—		126		126
Total	Total	$	4,406	$	710	$	121	$	5,237	Total	$	4,083	$	811	$	126	$	5,020

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

~~Table of Contents~~


		Three Months Ended March 31, 2021									Three Months Ended March 31, 2022
In millions	In millions	Industrial Packaging		Global Cellulose Fibers		Corporate & Intersegment		Total		In millions	Industrial Packaging		Global Cellulose Fibers		Corporate & Intersegment		Total
Primary Geographical Markets (a)	Primary Geographical Markets (a)									Primary Geographical Markets (a)
United States	United States	$	3,332	$	543	$	47	$	3,922	United States	$	3,761	$	662	$	120	$	4,543
EMEA	EMEA	393		24		(1)		416		EMEA	410		30		—		440
Pacific Rim and Asia	Pacific Rim and Asia	18		28		14		60		Pacific Rim and Asia	10		18		1		29
Americas, other than U.S.	Americas, other than U.S.	187		—		8		195		Americas, other than U.S.	225		—		—		225
Total	Total	$	3,930	$	595	$	68	$	4,593	Total	$	4,406	$	710	$	121	$	5,237

Operating Segments	Operating Segments									Operating Segments
North American Industrial Packaging	North American Industrial Packaging	$	3,560	$	—	$	—	$	3,560	North American Industrial Packaging	$	4,025	$	—	$	—	$	4,025
EMEA Industrial Packaging	EMEA Industrial Packaging	396		—		—		396		EMEA Industrial Packaging	410		—		—		410
Global Cellulose Fibers	Global Cellulose Fibers	—		595		—		595		Global Cellulose Fibers	—		710		—		710
Intra-segment Eliminations	Intra-segment Eliminations	(26)		—		—		(26)		Intra-segment Eliminations	(29)		—		—		(29)
Corporate & Inter-segment Sales		—		—		68		68
Corporate & Intersegment Sales										Corporate & Intersegment Sales	—		—		121		121
Total	Total	$	3,930	$	595	$	68	$	4,593	Total	$	4,406	$	710	$	121	$	5,237

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

Revenue Contract Balances

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

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A contract liability is created when customers prepay for goods prior to the Company transferring those goods to the customer. The contract liability is reduced once control of the goods is transferred to the customer. The majority of our customer prepayments are received during the fourth quarter each year for goods that will be transferred to customers over the following twelve months. Contract liabilities of ~~$22~~$36 million and ~~$27~~$38 million are included in Other current liabilities in the accompanying condensed consolidated balance sheet as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. ~~During the second quarter of 2021, the~~The Company also recorded a contract liability of $115 million related to ~~the April 2021 acquisition disclosed in~~ ~~Note 8~~ ~~- Acquisitions~~.a previous acquisition. The balance of this contract liability was ~~$105~~$97 million and ~~$107~~$99 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and is recorded in Other current liabilities and Other Liabilities in the accompanying condensed consolidated balance sheet.

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

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NOTE 4 - EQUITY

A summary of the changes in equity for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 is provided below:


		Three Months Ended March 31, 2022													Three Months Ended March 31, 2023
In millions, except per share amounts	In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total Equity		In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total Equity
Balance, January 1	Balance, January 1	$	449	$	4,668	$	9,029	$	(1,666)	$	3,398	$	9,082	Balance, January 1	$	449	$	4,725	$	9,855	$	(1,925)	$	4,607	$	8,497
Issuance of stock for various plans, net	Issuance of stock for various plans, net	—		2		—		—		(70)		$	72	Issuance of stock for various plans, net	—		(26)		—		—		(72)		46
Repurchase of stock	Repurchase of stock	—		—		—		—		428		$	(428)	Repurchase of stock	—		—		—		—		179		(179)
Common stock dividends ($0.4625 per share)	Common stock dividends ($0.4625 per share)	—		—		(171)		—		—		$	(171)	Common stock dividends ($0.4625 per share)	—		—		(161)		—		—		(161)
Comprehensive income (loss)	Comprehensive income (loss)	—		—		360		(28)		—		$	332	Comprehensive income (loss)	—		—		172		14		—		186
Ending Balance, March 31	Ending Balance, March 31	$	449	$	4,670	$	9,218	$	(1,694)	$	3,756	$	8,887	Ending Balance, March 31	$	449	$	4,699	$	9,866	$	(1,911)	$	4,714	$	8,389


	Three Months Ended March 31, 2022
In millions, except per share amounts	Common Stock Issued		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held In Treasury, At Cost		Total Equity
Balance, January 1	$	449	$	4,668	$	9,029	$	(1,666)	$	3,398	$	9,082
Issuance of stock for various plans, net	—		2		—		—		(70)		72
Repurchase of stock	—		—		—		—		428		(428)
Common stock dividends ($0.4625 per share)	—		—		(171)		—		—		(171)
Comprehensive income (loss)	—		—		360		(28)		—		332
Ending Balance, March 31	$	449	$	4,670	$	9,218	$	(1,694)	$	3,756	$	8,887

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

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N OTE 5 - OTHER COMPREHENSIVE INCOME

The following table presents changes in ~~accumulated other comprehensive income~~Accumulated Other Comprehensive Income (Loss) (AOCI), net of tax, for the three months ended March 31, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended March 31,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Defined Benefit Pension and Postretirement Adjustments	Defined Benefit Pension and Postretirement Adjustments					Defined Benefit Pension and Postretirement Adjustments
Balance at beginning of period	Balance at beginning of period	$	(962)	$	(1,880)	Balance at beginning of period	$	(1,195)	$	(962)

Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	20		34		Amounts reclassified from accumulated other comprehensive income	23		20
Balance at end of period	Balance at end of period	(942)		(1,846)		Balance at end of period	(1,172)		(942)
Change in Cumulative Foreign Currency Translation Adjustments	Change in Cumulative Foreign Currency Translation Adjustments					Change in Cumulative Foreign Currency Translation Adjustments
Balance at beginning of period	Balance at beginning of period	(694)		(2,457)		Balance at beginning of period	(722)		(694)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(48)		(143)		Other comprehensive income (loss) before reclassifications	(9)		(48)
Other comprehensive income (loss) attributable to noncontrolling interest		—		1

Balance at end of period	Balance at end of period	(742)		(2,599)		Balance at end of period	(731)		(742)
Net Gains and Losses on Cash Flow Hedging Derivatives	Net Gains and Losses on Cash Flow Hedging Derivatives					Net Gains and Losses on Cash Flow Hedging Derivatives
Balance at beginning of period	Balance at beginning of period	(10)		(5)		Balance at beginning of period	(8)		(10)
Other comprehensive income (loss) before reclassifications		—		(6)
Amounts reclassified from accumulated other comprehensive income		—		3

Balance at end of period	Balance at end of period	(10)		(8)		Balance at end of period	(8)		(10)
Total Accumulated Other Comprehensive Income (Loss) at End of Period	Total Accumulated Other Comprehensive Income (Loss) at End of Period	$	(1,694)	$	(4,453)	Total Accumulated Other Comprehensive Income (Loss) at End of Period	$	(1,911)	$	(1,694)

The following table presents details of the reclassifications out of AOCI for the three months ended March 31, ~~2022~~2023 and ~~2021:~~2022:

In millions: Amount Reclassified from Accumulated Other Comprehensive Income Location of Amount Reclassified from AOCI
Three Months Ended
March 31,
2022 2021
Defined benefit pension and postretirement items:
Prior-service costs $ (5) $ (6) (a) Non-operating pension expense
Actuarial gains (losses) (22) (40) (a) Non-operating pension expense
Total pre-tax amount (27) (46)
Tax (expense) benefit 7 12
Total, net of tax (20) (34)
Net gains and losses on cash flow hedging derivatives:
Foreign exchange contracts — (4) (b) Cost of products sold
Total pre-tax amount — (4)
Tax (expense)/benefit — 1
Net of tax — (3)
Total reclassifications for the period $ (20) $ (37)


In millions:	Amount Reclassified from Accumulated Other Comprehensive Income					Location of Amount Reclassified from AOCI
	Three Months Ended March 31,
	2023		2022
Defined benefit pension and postretirement items:
Prior-service costs	$	(6)	$	(5)	(a)	Non-operating pension expense (income)
Actuarial gains (losses)	(24)		(22)		(a)	Non-operating pension expense (income)
Total pre-tax amount	(30)		(27)
Tax (expense) benefit	7		7
Net of tax	(23)		(20)






Total reclassifications for the period	$	(23)	$	(20)

(a)These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 1916 for additional details).

~~(b)~~

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

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

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


		Three Months Ended March 31,					Three Months Ended March 31,
In millions, except per share amounts	In millions, except per share amounts	2022		2021		In millions, except per share amounts	2023		2022
Earnings (loss) from continuing operations attributable to International Paper Company common shareholders		$	360	$	267
Earnings (loss) from continuing operations						Earnings (loss) from continuing operations	$	172	$	267
Weighted average common shares outstanding	Weighted average common shares outstanding	375.2		392.8		Weighted average common shares outstanding	349.3		375.2
Effect of dilutive securities	Effect of dilutive securities					Effect of dilutive securities
Restricted performance share plan	Restricted performance share plan	4.0		2.0		Restricted performance share plan	4.0		4.0
Weighted average common shares outstanding – assuming dilution	Weighted average common shares outstanding – assuming dilution	379.2		394.8		Weighted average common shares outstanding – assuming dilution	353.3		379.2
Basic earnings (loss) per share from continuing operations	Basic earnings (loss) per share from continuing operations	$	0.96	$	0.68	Basic earnings (loss) per share from continuing operations	$	0.49	$	0.71
Diluted earnings (loss) per share from continuing operations	Diluted earnings (loss) per share from continuing operations	$	0.95	$	0.68	Diluted earnings (loss) per share from continuing operations	$	0.49	$	0.70

NOTE 7 - ~~RESTRUCTURING AND OTHER CHARGES, NET~~

~~2022:~~ ~~There were no restructuring and other charges recorded during the three months ended March 31, 2022.~~

~~2021:~~ During the three months ended March 31, 2021, the Company recorded an $18 million pre-tax charge in Corporate related to early debt extinguishment costs and a $12 million pre-tax charge in the Industrial Packaging segment for severance related to the optimization of our EMEA Packaging business.

~~NOTE 8 - ACQUISITIONS~~

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

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


~~In millions~~
~~Cash and temporary investments~~	$	5
~~Accounts and notes receivable~~	10
~~Inventories~~	3
~~Plants, properties and equipment~~	50
~~Goodwill~~	23
~~Intangible assets~~	13
~~Total assets acquired~~	$	~~104~~
~~Short-term debt~~	2
~~Accounts payable and accrued liabilities~~	4
~~Other current liabilities~~	2
~~Long-term debt~~	1
~~Deferred income taxes~~	12
~~Total liabilities assumed~~	21
~~Net assets acquired~~	$	83

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Pro forma information has not been included as it is impracticable to obtain the information due to the lack of availability of historical U.S. GAAP financial data. The results of the operations of these businesses do not have a material effect on the Company's consolidated results of operations.

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

~~2021:~~ In April 2021, the Company received a noncontrolling interest in a U.S-based corrugated packaging producer. In the second quarter of 2021, the Company recorded its investment of $115 million based on the fair value of the noncontrolling interest, and a corresponding contract liability that is amortized over 15 years. The Company is party to various agreements with the entity which includes a containerboard supply agreement. The Company is accounting for its interest as an equity method investment.

~~NOTE 9 -~~ DIVESTITURES AND IMPAIRMENTS

~~Printing Papers Spin-off~~

~~2021:~~On October 1, 2021, the Company completed the previously announced spin-off of its Printing Papers segment along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia into a standalone, publicly-traded company, Sylvamo Corporation. The transaction was implemented through the distribution of shares of the standalone company to International Paper's shareholders (the "Distribution"). The Company retained 19.9% of the shares of Sylvamo at the time of the separation and this investment is discussed further in Note 8 - Supplementary Financial Statement Information. As a result of the Distribution, Sylvamo Corporation is an independent public company that trades on the New York Stock Exchange under the symbol "SLVM".

The Distribution was made to the Company's stockholders of record as of the close of business on September 15, 2021 (the "Record Date"), and such stockholders received one share of Sylvamo Corporation common stock for every 11 shares of International Paper common stock held as of the close of business on the Record Date. The Company retained 19.9% of the shares of Sylvamo at the time of the separation and this retained investment is discussed further in ~~Note 10 - Supplementary Financial Statement Information. The spin-off was tax-free for the Company and its shareholders for U.S. federal income tax purposes.~~

In connection with the Distribution, ~~on September 29, 2021,~~ the Company and Sylvamo ~~Corporation~~ entered into a separation and distribution agreement as well as various other agreements that govern the relationships between the parties following the Distribution, including a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements provide for the allocation between the Company and Sylvamo ~~Corporation~~ of assets, liabilities and obligations attributable to periods prior to, at and after the Distribution and govern certain relationships between the Company and Sylvamo ~~Corporation~~ after the Distribution. The Company ~~is also party to~~has various ongoing operational agreements with Sylvamo ~~Corporation~~ under which it sells fiber, paper and other products. ~~Sales~~Related party sales under these agreements were $198 million for the three months ended March 31, 2022.

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

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


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

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


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

~~In anticipation of the spin-off, Sylvamo incurred $1.5 billion in debt~~ during the third quarter ~~of 2021 with the proceeds used for a distribution to the Company and other expenses associated with the transaction. The Company was an obligor of the debt prior to the spin-off as~~2022, Sylvamo ~~was a wholly-owned subsidiary. Subsequent to the distribution of the net assets, the Company was~~is no longer an obligor of the Sylvamo debt. The $1.5 billion of borrowings was comprised of $450 million of 7.00% senior unsecured notes due 2029 issued in September 2021. It was also comprised of the senior secured credit facility that Sylvamo entered into in September 2021 which consisted of $450 million of borrowingsconsidered a related to its term loan “B” facility, $520 million of borrowings related to its term loan “F” facility, and the $100 million draw on its revolving credit facility which had a capacity of $450 million. Additionally, at the time of the spin-off in the fourth quarter of 2021, the Company distributed $130 million to Sylvamo.

~~Kwidzyn Mill~~

~~2021:~~ ~~On August 6,~~2021, the Company completed the sale of its Kwidzyn, Poland mill for €669 million (approximately $794 million using the July 31, 2021 exchange rate) in cash. The business included the pulp and paper mill in Kwidzyn and supporting functions. During the third quarter of 2021, the Company recorded a net gain of $360 million ($350 million after taxes) including a gain of $404 million ($394 million after taxes) related to the sale of net assets and a loss of $44 million (before and after taxes) related to the cumulative foreign currency translation loss. During the fourth quarter of 2021, the Company incurred $9 million ($6 million after taxes) of costs related to the sale of Kwidzyn. All historical operating results for Kwidzyn have been presented as Discontinued Operations, net of tax, in the condensed consolidated statement of operations.

~~Olmuksan International Paper~~

~~2021:~~ On May 31, 2021, the Company completed the sale of its 90.38% ownership interest in Olmuksan International Paper, a corrugated packaging business in Turkey, to Mondi Group for €66 million (approximately $81 million using the May 31, 2021 exchange rate). During the second quarter of 2021, the Company recorded a gain of $6 million ($0 after taxes) related to the business working capital adjustment.

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In conjunction with the announced agreement in the fourth quarter of 2020, a determination was made that the current book value of the Olmuksan International Paper disposal group exceeded its estimated fair value of $79 million which was based on the agreed upon transaction price. As a result, a preliminary charge of $123 million (before and after taxes) was recorded during the fourth quarter of 2020. During the first quarter of 2021, the Company recorded an additional charge of $2 million (before and after taxes) related to the cumulative foreign currency translation loss. This charge is included in the Net (gains) losses on sales and impairments of businesses in the accompanying condensed consolidated statement of operations and is included in the results for the Industrial Packaging segment.

party.

NOTE 108 - 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 ~~$889~~$534 million and ~~$1.1 billion~~$690 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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Restricted Cash

A reconciliation of cash and temporary investments and restricted cash in the condensed consolidated balance sheet to cash and temporary investments and restricted cash in the condensed consolidated statement of cash flows for the three months ended March 31, 2023 and 2022, respectively is below. ~~The Company had no restricted cash at March 31, 2021.~~


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


	Three Months Ended March 31,
In millions	2023		2022
Cash and Temporary Investments	$	636	$	1,031
Restricted Cash	72		88
Total Cash and Temporary Investments and Restricted Cash	$	708	$	1,119

The Company's restricted cash at March 31, 2023 consists of the cash proceeds from the ~~$88~~$72 million first quarter ~~2022 debt~~2023 environmental development bond (EDB) issuance. Proceeds from this debt issuance were used to repay ~~debt~~an EDB maturing on April 1, ~~2022.~~2023. See Note 1715 - Debt for further details regarding the first quarter ~~2022 debt~~2023 EDB issuance and the expected debt repayment.

Accounts and Notes Receivable


In millions	In millions	March 31, 2022		December 31, 2021		In millions	March 31, 2023		December 31, 2022
Accounts and notes receivable, net:	Accounts and notes receivable, net:					Accounts and notes receivable, net:
Trade (less allowances of $31 in 2022 and $34 in 2021)		$	3,124	$	3,027
Trade (less allowances of $33 in 2023 and $31 in 2022)						Trade (less allowances of $33 in 2023 and $31 in 2022)	$	2,935	$	3,064
Other	Other	239		205		Other	261		220
Total	Total	$	3,363	$	3,232	Total	$	3,196	$	3,284

Inventories


In millions	In millions	March 31, 2022		December 31, 2021		In millions	March 31, 2023		December 31, 2022
Raw materials	Raw materials	$	251	$	245	Raw materials	$	242	$	267
Finished pulp, paper and packaging	Finished pulp, paper and packaging	986		1,014		Finished pulp, paper and packaging	1,043		1,071
Operating supplies	Operating supplies	458		486		Operating supplies	583		516
Other	Other	51		69		Other	71		88
Total	Total	$	1,746	$	1,814	Total	$	1,939	$	1,942

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Current Investments

As a result of the 2021 spin-off of Sylvamo, ~~Corporation,~~ the Company retained 19.9% of the shares of ~~Sylvamo. The~~Sylvamo with the intent is to monetize its investment and to provide additional proceeds to the Company. ~~The Company is accounting for its ownership interest in Sylvamo at fair value as an investment in equity securities. The investment was valued at $291 million and $245 million at March 31,~~In the second quarter 2022, ~~and December 31, 2021, respectively, and is recorded in Current investments in the accompanying condensed consolidated balance sheet.~~

~~In April 2022, the Company borrowed approximately $144 million under a term loan credit agreement with a third-party lender. Subsequently,~~ the Company exchanged 4,132,000 shares of Sylvamo ~~Corporation~~ common stock owned by the Company in exchange and as repayment ~~of the~~for an approximately $144 million term loan ~~obligation. After this transaction,~~obligation which resulted in the reversal of a $31 million deferred tax liability due to the tax-free exchange of the Sylvamo Corporation common stock. In the third quarter 2022, the Company ~~owns~~exchanged the remaining 4,614,358 ~~or approximately 10.5% of the~~ shares of Sylvamo common stock owned by the Company in exchange for $167 million and as partial repayment of a $210 million term loan obligation. This also resulted in the reversal of a $35 million deferred tax liability due to the tax-free exchange of the Sylvamo Corporation common stock. As of the end of the third quarter 2022, the Company no longer had an ownership interest in Sylvamo.

Plants, Properties and Equipment

Accumulated depreciation was ~~$17.8~~$18.6 billion and ~~$17.6~~$18.4 billion at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Depreciation expense was ~~$250~~$232 million and ~~$258~~$250 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Non-cash additions to plants, properties and equipment included within accounts payable were ~~$68~~$94 million and ~~$106~~$185 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

~~Amounts invested in capital projects in the accompanying condensed consolidated statement of cash flows are presented net of~~There were no insurance recoveries ~~of $18 million received during~~included within capital spending for the three months ended March 31, ~~2022 and $2~~2023. Insurance recoveries included in capital spending were $18 million ~~received during~~for the three months ended March 31, ~~2021.~~2022.

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Accounts Payable

Under a supplier finance program, IP agrees to pay a bank the stated amount of confirmed invoices from its designated suppliers on the original maturity dates of the invoices. IP or the bank may terminate the agreement upon at least 90 days’ notice. The supplier invoices that have been confirmed as valid under the program require payment in full with the payment date not to exceed 180 days past the invoice date. The accounts payable balance included $142 million and $122 million of supplier finance program liabilities as of March 31, 2023 and December 31, 2022, respectively.

Interest

Interest payments made during the three months ended March 31, 2023 and 2022 ~~and 2021~~ were ~~$56~~$114 million and ~~$111~~$56 million, respectively.

Amounts related to interest were as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Interest expense	Interest expense	$	77	$	124	Interest expense	$	103	$	77
Interest income	Interest income	8		31		Interest income	41		8
Capitalized interest costs	Capitalized interest costs	4		2		Capitalized interest costs	5		4

Asset Retirement Obligations

The Company had recorded liabilities of ~~$107~~$104 million and $105 million related to asset retirement obligations at March 31, ~~2022~~2023 and December 31, ~~2021.~~

2022, respectively.

NOTE 119 - LEASES

International Paper leases various real estate, including certain operating facilities, warehouses, office space and land. The Company also leases material handling equipment, vehicles, and certain other equipment. The Company's leases have a remaining lease term of up to 3130 years. Total lease costs were $75 million and $60 million for ~~both of~~ the three months ended March 31, 2023 and 2022, ~~and 2021.~~respectively.

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Supplemental Balance Sheet Information Related to Leases

In millions Classification March 31, 2022 December 31, 2021
Assets
Operating lease assets Right-of-use assets $ 373 $ 365
Finance lease assets Plants, properties and equipment, net (a) 55 57
Total leased assets $ 428 $ 422
Liabilities
Current
Operating Other current liabilities $ 137 $ 132
Finance Notes payable and current maturities of long-term debt 10 10
Noncurrent
Operating Long-term lease obligations 241 236
Finance Long-term debt 54 56
Total lease liabilities $ 442 $ 434


In millions	Classification	March 31, 2023		December 31, 2022
Assets
Operating lease assets	Right-of-use assets	$	422	$	424
Finance lease assets	Plants, properties and equipment, net (a)	48		49
Total leased assets		$	470	$	473
Liabilities
Current
Operating	Other current liabilities	$	143	$	147
Finance	Notes payable and current maturities of long-term debt	10		10
Noncurrent
Operating	Long-term lease obligations	286		283
Finance	Long-term debt	47		49
Total lease liabilities		$	486	$	489

(a)Finance leases are recorded net of accumulated amortization of ~~$52~~$62 million and ~~$51~~$59 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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NOTE 1210 - EQUITY METHOD INVESTMENTS

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

Ilim S.A.

The Company has a 50% equity interest in Ilim S.A. (Ilim), which has subsidiaries, including JSC Ilim Group ("Ilim Group" and together with Ilim, the "Ilim joint venture"), whose primary operations are in Russia. The Company announced in January 2023 that it had entered into an agreement to sell its interest in Ilim to its joint venture partners for $484 million. The completion of the sale is subject to various closing conditions, including the receipt of regulatory approvals in Russia.

The Company also received an indication of interest from its Ilim joint venture partners to purchase all of the Company’s shares (constituting a 2.39% stake) in Ilim Group for $24 million, on terms and conditions to be agreed. The Company intends to pursue an agreement to sell the Ilim Group shares, and to divest other non-material residual interests associated with Ilim, to its Ilim joint venture partners.

In conjunction with the entry into the announced agreement, a determination was made that the book value of the Ilim and Ilim Group investments plus associated cumulative translation losses, exceeded fair value, based upon the agreed upon transaction price for Ilim and the offer price for Ilim Group. As a result, an other than temporary impairment of $43 million and $533 million was recorded in the first quarter of 2023 and fourth quarter of 2022, respectively, to write down these investments to fair value. The impairment charges included approximately $43 million and $375 million of foreign currency cumulative translation adjustment loss in the first quarter of 2023 and fourth quarter of 2022, respectively. As of March 31, 2023, the approximately $418 million of cumulative translation adjustment loss remained within AOCI with the recognition of this loss recorded as an offset to the investment balance.

The Company also evaluated facts and circumstances as of March 31, 2023 and concluded that the held for sale balance sheet classification criteria had been met as of that date and therefore have classified the Ilim joint venture investment balance, net of impairment, as Assets held for sale.

All current and historical results of the Ilim joint venture investment are presented as Discontinued Operations, net of taxes in the consolidated statement of operations. The Company recorded equity earnings, net of taxes, of ~~$93~~$43 million and ~~$49~~$93 million for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively. Foreign exchange losses included in equity earnings for the three months ended March 31, 2022 were $15 million, primarily on the remeasurement of U.S. dollar denominated payables. JSC Ilim Group had no U.S. dollar-denominated debt outstanding as of March 31, 2022. Equity earnings (losses) for the three months ended March 31, 2021 included after-tax foreign exchange losses of $2 million primarily on the remeasurement of U.S. dollar-denominated debt. The Company received cash dividends from the Ilim joint venture of $0 million and $204 million during the first three months of ~~2022.~~2023 and 2022, respectively. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company's investment in the Ilim joint venture, which is recorded in ~~Long-Term Investments~~Assets held for sale in the condensed consolidated balance sheets, was ~~$413~~$90 million and ~~$557~~$133 million, respectively, which was ~~$125~~$442 million and ~~$121~~$403 million, respectively, ~~more~~lower than the Company's proportionate share of the Ilim joint venture's underlying net assets. The differences primarily relate to currency translation adjustments and the basis difference between the fair value of our investment at acquisition and the underlying net assets. Prior to the spin-off of the Printing Papers segment on October 1, 2021, the Company was party to a joint marketing agreement with JSC Ilim Group, a subsidiary of Ilim, under which the Company purchased, marketed and sold paper produced by JSC Ilim Group. Purchases under this agreement were $41 million for the three months ended March 31, 2021. The joint marketing agreement was conveyed to Sylvamo Corporation as part of the spin-off transaction on October 1, 2021.

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

Balance Sheet


In millions	In millions	March 31, 2022	December 31, 2021		In millions	March 31, 2023		December 31, 2022
Current assets	Current assets	772	$	1,010	Current assets	$	717	$	766
Noncurrent assets	Noncurrent assets	2,830	3,145		Noncurrent assets	3,377		3,663
Current liabilities	Current liabilities	1,404	1,212		Current liabilities	1,365		1,275
Noncurrent liabilities	Noncurrent liabilities	1,595	2,047		Noncurrent liabilities	1,627		2,040
Noncontrolling interests	Noncontrolling interests	27	24		Noncontrolling interests	39		40

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Income Statement


		Three Months Ended March 31,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Net sales	Net sales	$	707	$	531	Net sales	$	622	$	707
Gross profit	Gross profit	399		248		Gross profit	277		399
Income (loss) from continuing operations	Income (loss) from continuing operations	182		103		Income (loss) from continuing operations	84		182
Net income (loss)	Net income (loss)	177		100		Net income (loss)	80		177

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

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NOTE 1311 - GOODWILL AND OTHER INTANGIBLES

Goodwill

The following table presents changes in goodwill balances as allocated to each business segment for the three-months ended March 31, ~~2022:~~2023:


In millions	In millions	Industrial Packaging		Global Cellulose Fibers		Total		In millions	Industrial Packaging		Global Cellulose Fibers		Total
Balance as of January 1, 2022
Balance as of January 1, 2023								Balance as of January 1, 2023
Goodwill	Goodwill	$	3,426	$	52	$	3,478	Goodwill	$	3,413	$	52	$	3,465
Accumulated impairment losses	Accumulated impairment losses	(296)		(52)		(348)		Accumulated impairment losses	(372)		(52)		(424)
		3,130		—		3,130			3,041		—		3,041
Currency translation and other (a)	Currency translation and other (a)	(2)		—		(2)		Currency translation and other (a)	1		—		1
Goodwill additions/reductions		—		—		—
Accumulated impairment loss additions / reductions	Accumulated impairment loss additions / reductions	—		—		—		Accumulated impairment loss additions / reductions	—		—		—
Balance as of March 31, 2022
Balance as of March 31, 2023								Balance as of March 31, 2023
Goodwill	Goodwill	3,424		52		3,476		Goodwill	3,414		52		3,466
Accumulated impairment losses	Accumulated impairment losses	(296)		(52)		(348)		Accumulated impairment losses	(372)		(52)		(424)
Total	Total	$	3,128	$	—	$	3,128	Total	3,042		—		3,042

(a)Represents the effects of foreign currency translations.

Other Intangibles

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


		March 31, 2022						December 31, 2021							March 31, 2023						December 31, 2022
In millions	In millions	Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets		Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets		In millions	Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets		Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets
Customer relationships and lists	Customer relationships and lists	$	491	$	279	$	212	$	493	$	273	$	220	Customer relationships and lists	$	492	$	312	$	180	$	490	$	303	$	187
Tradenames, patents and trademarks, and developed technology	Tradenames, patents and trademarks, and developed technology	170		135		35		170		131		39		Tradenames, patents and trademarks, and developed technology	170		148		22		170		146		24
Land and water rights	Land and water rights	8		2		6		8		2		6		Land and water rights	8		2		6		8		2		6
Other	Other	24		21		3		24		21		3		Other	21		18		3		23		20		3
Total	Total	$	693	$	437	$	256	$	695	$	427	$	268	Total	$	691	$	480	$	211	$	691	$	471	$	220

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


		Three Months Ended March 31,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Amortization expense related to intangible assets	Amortization expense related to intangible assets	$	11	$	11	Amortization expense related to intangible assets	$	9	$	11

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NOTE 1412 - INCOME TAXES

International Paper made income tax payments, net of refunds, of ~~$20~~$169 million and ~~$17~~$20 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

The Company currently estimates, that as a result of ongoing discussions, pending tax settlements and expirations of statutes of limitations, the amount of unrecognized tax benefits could be reduced by approximately ~~$13~~$30 million during the next 12 months.

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NOTE 1513 - COMMITMENTS AND CONTINGENCIES

Guarantees

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

Brazil Goodwill Tax Matter: The Brazilian Federal Revenue Service has challenged the deductibility of goodwill amortization generated in a 2007 acquisition by Sylvamo do Brasil Ltda. ("Sylvamo Brazil"), a wholly-owned subsidiary of the Company, ~~("Sylvamo Brazil")~~ until the October 1, 2021 spin-off of the Printing Papers business after which it became a subsidiary of ~~Sylvamo Corporation.~~Sylvamo. Sylvamo Brazil received assessments for the tax years 2007-2015 totaling approximately ~~$123~~$111 million in tax, and ~~$414~~$375 million in interest, penalties, and fees as of March 31, ~~2022~~2023 (adjusted for variation in currency exchange rates). After ~~a previous~~an initial favorable ruling challenging the basis for these assessments, Sylvamo Brazil received subsequent unfavorable decisions from the Brazilian Administrative Council of Tax Appeals. Sylvamo Brazil has appealed these decisions and intends to appeal any future unfavorable administrative judgments to the Brazilian federal courts; however, this tax litigation matter may take many years to resolve. Sylvamo Brazil and International Paper believe the transaction underlying these assessments was appropriately evaluated, and that Sylvamo Brazil's tax position would be sustained, based on Brazilian tax law.

This matter pertains to a business that was conveyed to Sylvamo ~~Corporation~~ as of October 1, 2021, as part of our spin-off transaction. Pursuant to the terms of the tax matters agreement entered into between the Company and Sylvamo, ~~Corporation,~~ the Company will pay pay 60% and Sylvamo will pay 40%, on up to $300 million of any assessment related to this matter, and the Company will pay all amounts of the assessment over $300 million. Under the terms of the agreement, decisions concerning the conduct of the litigation related to this matter, including strategy, settlement, pursuit and abandonment, will be made by the Company. Sylvamo ~~Corporation~~ thus has no control over any decision related to this ongoing litigation. The Company intends to vigorously defend this historic tax position against the current assessments and any similar assessments that may be issued for tax years subsequent to 2015. The Brazilian government may enact a tax amnesty program that would allow Sylvamo ~~do Brasil Ltda.~~Brazil to resolve this dispute for less than the assessed amount. As of October 1, 2021, in connection with the recording of the distribution of assets and liabilities resulting from the spin-off transaction, the Company ~~has~~ established a liability representing the initial fair value of the contingent liability under the tax matters agreement. The contingent liability was determined in accordance with ASC 460 "Guarantees" based on the probability weighting of various possible outcomes. The initial fair value estimate and recorded liability as of December 31, ~~2021~~2022 was $48 million and remains this amount at March 31, ~~2022.~~2023. This liability will not be ~~adjusted~~increased in subsequent periods unless facts and circumstances change such that an amount greater than the initial recognized liability becomes probable and estimable.

Environmental

The Company has been named as a potentially responsible party (PRP) in environmental remediation actions under various federal and state laws, including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Many of these proceedings involve the cleanup of hazardous substances at large commercial landfills that received waste from many different sources. While joint and several liability is authorized under CERCLA and equivalent state laws, as a practical matter, liability for CERCLA cleanups is typically allocated among the many PRPs. There are other remediation costs typically associated with the cleanup of hazardous substances at the Company’s current, closed orand 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 ~~$182~~$240 million ($~~190~~248 million undiscounted) in the aggregate as of March 31, ~~2022.~~2023. Other than as described below, completion of required environmental remedial actions is not expected to have a material effect on our consolidated financial statements.

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Cass Lake: One of the matters included above arises out of a closed wood-treatment facility located in Cass Lake, Minnesota. In June 2011, the United States Environmental Protection Agency (EPA) selected and published a proposed soil remedy at the site with an estimated cost of $46 million. In April 2020, the EPA issued a final plan concerning clean-up standards at a portion of the site, the estimated cost of which is included within the soil remedy referenced above.

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

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discharges from various paper mills located along the Kalamazoo River, including a paper mill formerly owned by St. Regis Paper Company (St. Regis). The Company is a successor in interest to St. Regis.

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

•Operable Unit 1: In October 2016, the Company and another PRP received a special notice letter from the EPA inviting participation in the remedial design (RD) component of the landfill remedy for the Allied Paper Mill, which is also known as Operable Unit 1. The Record of Decision (ROD) establishing the final landfill remedy for the Allied Paper Mill was issued by the EPA in September 2016. The Company responded to the Allied Paper Mill special notice letter in December 2016. In February 2017, the EPA informed the Company that it would make other arrangements for the performance of the RD. In the summer 2021, remedial ~~design.~~action (RA) activities were initiated by the EPA. In October 2022, the Company received a unilateral administrative order to perform the RA. As a result, the Company increased its reserve by $27 million in the fourth quarter of 2022. The total reserve for the Kalamazoo River superfund site was $37 million as of March 31, 2023 and December 31, 2022.

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 $136 million. In December 2020, the Federal District Court approved the proposed consent decree.

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

The Company was named as a defendant by Georgia-Pacific Consumer Products LP, Fort James Corporation and Georgia Pacific LLC (collectively, GP) in a contribution and cost recovery action for alleged pollution at the site. NCR Corporation and Weyerhaeuser Company are also named as defendants in the suit. The suit seeks contribution under CERCLA for costs purportedly expended by plaintiffs ($79 million as of the filing of the complaint) and for future remediation costs. In June 2018, the Court issued its Final Judgment and Order, which fixed the past cost amount at approximately $50 million (plus interest to be determined) and allocated to the Company a 15% share of responsibility for those past costs. The Court did not address responsibility for future costs in its decision. In July 2018, the Company and each of the other parties filed notices appealing the Final Judgment and prior orders incorporated into that Judgment. On April 25, 2022, the appellate court reversed the Judgment of the Court, finding that the suit against the Company was time-barred by the applicable statute of limitations. On May 9, 2022, GP filed a petition for remaining with the Sixth Circuit Court of Appeals. The Sixth Circuit issued an order denying GP's petition on July 14, 2022. On November 14, 2022, GP filed a petition for writ of certiorari with the U.S. Supreme Court. The Company has filed a brief in opposition to this writ.

Harris County: International Paper and McGinnis Industrial Maintenance Corporation (MIMC), a subsidiary of Waste Management, Inc. (WMI), are PRPs at the San Jacinto River Waste Pits Superfund Site in Harris County, Texas. The PRPs have been actively participating in the activities at the site and share the costs of these activities.

In October 2017, the EPA issued a ~~Record of Decision (ROD)~~ROD selecting the final remedy for the site: removal and relocation of the waste material from both the northern and southern impoundments. The EPA did not specify the methods or practices needed to perform this work. The EPA’s selected remedy was accompanied by a cost estimate of approximately $115 million ($105 million for the northern impoundment, and $10 million for the southern impoundment). Subsequent to the issuance of the ROD, there have been numerous meetings between the EPA and the PRPs, and the Company continues to work with the EPA and MIMC/WMI to develop the remedial design.

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To this end, in April 2018, the PRPs entered into an Administrative Order on Consent (AOC) with the EPA, agreeing to work together to develop the remedial design for the northern impoundment. That remedial design work is ongoing. The AOC does

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not include any agreement to perform waste removal or other construction activity at the site. Rather, it involves adaptive management techniques and a pre-design investigation, the objectives of which include filling data gaps (including but not limited to post-Hurricane Harvey technical data generated prior to the ROD and not incorporated into the selected remedy), refining areas and volumes of materials to be addressed, determining if an excavation remedy is able to be implemented in a manner protective of human health and the environment, and investigating potential impacts of remediation activities to infrastructure in the vicinity.

During the first quarter of 2020, through a series of meetings among the Company, MIMC/WMI, our consultants, the EPA and the Texas Commission on Environmental Quality (TCEQ), progress was made to resolve key technical issues previously preventing the Company from determining the manner in which the selected remedy for the northern impoundment would be feasibly implemented. As a result of these developments, the Company reserved the following amounts in relation to remediation at this site: (a) $10 million for the southern impoundment; and (b) $55 million for the northern impoundment, which represents the Company's 50% share of our estimate of the low end of the range of probable remediation costs.

We ~~have~~ submitted the Final Design Package for the southern impoundment to the EPA, and the EPA approved this plan May 7, 2021. The EPA issued a Unilateral Administrative Order for Remedial Action of the southern impoundment on August 5, 2021. An addendum to the Final 100% Remedial Design (Amended April 2021) was submitted to the EPA for the southern impoundment on June 2, 2022. This addendum incorporated additional data collected to date which indicated that additional waste material removal will be required, lengthening the time to complete the remedial action.

With respect to the northern impoundment, ~~although~~the respondents submitted final component of the 90% remedial design to the EPA on November 8, 2022. Upon submittal of the final component, an updated engineering estimate was developed and the Company increased the reserved amount by approximately $21 million, which represents the Company's 50% share of our estimate of the low end of the range of probable remediation costs. While several key technical issues have been resolved, werespondents still face significant challenges remediating this area in a cost-efficient manner and without a release to the environment, and therefore our discussions with the EPA on the best approach to remediation will continue. Because of ongoing questions regarding cost effectiveness, timing and gathering other technical data, additional losses in excess of our recorded liability are possible. ~~We are currently unable to reasonably estimate any further adjustment to our recorded liability or any loss or range~~The total reserve for the southern and northern impoundment was $95 million as of ~~loss in excess of such liability; however, we believe it is unlikely any adjustment would be material.~~both March 31, 2023 and December 31, 2022.

Asbestos-Related Matters

We have been named as a defendant in various asbestos-related personal injury litigation, in both state and federal court, primarily in relation to the prior operations of certain companies previously acquired by the Company. ~~As of March 31, 2022, the~~The Company's total recorded liability with respect to pending and future asbestos-related claims was ~~$101~~$107 million, net of estimated insurance ~~recoveries.~~recoveries and $105 million, net of estimated insurance recoveries as of March 31, 2023 and December 31, 2022, respectively. While it is reasonably possible that the Company may incur losses in excess of its recorded liability with respect to asbestos-related matters, we are unable to estimate any loss or range of loss in excess of such liability, and do not believe additional material losses are probable.

Antitrust

In March 2017, the Italian Competition Authority (ICA) commenced an investigation into the Italian packaging industry to determine whether producers of corrugated sheets and boxes violated the applicable European competition law. In April 2019, the ICA concluded its investigation and issued initial findings alleging that over 30 producers, including our Italian packaging subsidiary (IP Italy), improperly coordinated the production and sale of corrugated sheets and boxes. OnIn August 6, 2019, the ICA issued its decision and assessed IP Italy a fine of €29 million (approximately ~~$32~~$31 million at ~~current~~the then-current exchange rates) which was recorded in the third quarter of 2019. We appealed the ICA decision and our appeal was denied onin May ~~25,~~ 2021. ~~However, we continue to believe we have numerous and strong bases to challenge the ICA decision, and we have~~We further appealed the decision to the Italian Council of ~~State.~~State, and in March 2023 the Council of State largely upheld the ICA’s findings, but referred the calculation of IP Italy’s fine back to the ICA, finding that it was disproportionately high based on the conduct found. We are evaluating whether to further appeal the Italian Council of State decision to uphold the ICA’s findings. The Company and other producers also have been named in lawsuits, and we have received other claims, by a number of customers in Italy for damages associated with the alleged anticompetitive conduct. We do not believe material losses arising from such private lawsuits and claims are probable.

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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. Assessments of lawsuits and claims can involve a series of complex judgments about future events, can rely heavily on estimates and assumptions, and are otherwise subject to significant uncertainties. As a result, there can be no certainty that the Company will not ultimately incur charges in excess of presently recorded liabilities. The Company believes that loss contingencies arising from pending matters including the matters described herein, will not have a material effect on the consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in pending or threatened legal matters, some of which are beyond the Company's control, and the large or indeterminate damages sought in some of these matters, a future adverse ruling, settlement,

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unfavorable development, or increase in accruals with respect to these matters could result in future charges that could be material to the Company's results of operations or cash flows in any particular reporting period.

NOTE 1614 - VARIABLE INTEREST ENTITIES

Variable Interest Entities

As of March 31, ~~2022,~~2023, the fair value of the Timber Notes and Extension Loans for the 2007 Financing Entities was $2.3 billion and $2.1 billion, respectively. The Timber Notes and Extension Loans are classified as Level 2 within the fair value hierarchy, which is further defined in Note 171 in the Company’s Annual ~~Report on Form 10-K for the year ended December 31, 2021.~~Report.

The Timber Notes of $2.3 billion and the Extension Loans of $2.1 billion both mature in 2027 and are shown in Long-term nonrecourse financial assets of variable interest entities and Long-term nonrecourse financial liabilities of variable interest entities, respectively, on the accompanying condensed consolidated balance sheet.

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


		Three Months Ended March 31,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Revenue (a)	Revenue (a)	$	7	$	7	Revenue (a)	$	33	$	7
Expense (b)	Expense (b)	6		6		Expense (b)	31		6
Cash receipts (c)	Cash receipts (c)	1		2		Cash receipts (c)	27		1
Cash payments (d)	Cash payments (d)	4		4		Cash payments (d)	27		4

(a)The revenue is included in Interest expense, net in the accompanying statement of operations and includes approximately $5 million and $5 million for the three months and three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, of accretion income for the amortization of the basis difference adjustment on the Financial assets of special purpose entities.

(b)The expense is included in Interest expense, net in the accompanying statement of operations and includes approximately $2 million and $2 million for the three months and three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, of accretion expense for the amortization of the basis difference adjustment on the Nonrecourse financial liabilities of special purpose entities.

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

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

~~In August 2021,~~On September 2, 2022, the ~~Timber Notes of $4.8 billion~~Company and the ~~Extension Loans~~Internal Revenue Service agreed to settle the previously disclosed timber monetization restructuring tax matter involving wholly-owned, special purpose entities (the "2015 Financing Entities"). Under this agreement, the Company will fully resolve the matter and pay $252 million in U.S. federal income taxes. As a result, interest will also be charged upon closing of ~~$4.2 billion related to~~the audit. The amount of interest expense recognized in 2022 was $58 million. As of March 31, 2023, $252 million in U.S. federal income taxes and $58 million in interest expense have been paid as a result of the settlement agreement. The Company paid $163 million in U.S. federal income taxes and $30 million in interest during the first quarter of 2023 and has now fully satisfied the payment terms of the settlement agreement regarding the 2015 Financing Entities both matured. We settled the Extension Loans at their maturity with the proceeds from the Timber Notes. This resulted in cash proceeds of approximately $630 million representing our equity in the variable interest entities. Maturitytimber monetization restructuring tax matter. The reversal of the ~~installment notes and termination of the monetization structure also resulted in a $72 million tax liability that was paid in the fourth quarter of 2021.~~

~~As of March 31, 2022, the Company's~~Company’s remaining deferred tax liability associated with the 2015 Financing Entities of $604 million was $813 million. The 2015 timber monetization restructuring is currently under examination by the Internal Revenue Service. An unfavorable resolution in such current examination, future administrative procedures, or future tax litigation could result in material, accelerated cash tax paymentsrecognized as a ~~result~~one-time tax benefit in the third quarter of ~~all or a portion of deferred tax liability becoming payable.~~2022.

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


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

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

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

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

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N ~~OTE 17~~NOTE 15 - DEBT

The borrowing capacity of the Company's commercial paper program is $1.0 billion supported by its $1.5 billion credit agreement. Under the terms of the program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. As of March 31, ~~2022,~~2023, the Company had no borrowings outstanding under the program.

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At March 31, ~~2022,~~2023, International Paper’s credit facilities totaled ~~$2.1~~$2 billion. The Agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. The Agreements include a $1.5 billion contractually committed bank facility with a maturity date of June 2026. The liquidity facilities also ~~include~~included up to ~~$550~~$500 million of uncommitted financings based on eligible receivables balances under a receivables securitization program with the expiration date in April 2022. The receivables securitization program was renewed on April 27, 2022 with up to $500 million of uncommitted financings based on eligible receivables balances with the expiration datethat expires in April 2024. At March 31, ~~2022,~~2023, there were no borrowings outstanding under either the bank facility or receivables securitization program.

During the first quarter of ~~2022,~~2023, the Company entered into a variable term loan agreement providing for a $600 million term loan which was fully drawn on the date of such loan agreement and matures in 2028. The $600 million debt was issued following the repayment of $410 million of commercial paper earlier in 2023 and will be used to repay debt maturing later in 2023 and general corporate purposes. Additionally during the first quarter of 2023, the Company issued an approximately ~~$88~~$72 million ~~of debt~~EDB with an interest rate of ~~2.65%~~4.00% and a maturity date of ~~2037.~~April 1, 2026. The proceeds from this issuance were ~~held in a trust at March 31, 2022 and were~~ used to repay an approximately ~~$88~~$72 million of outstanding ~~debt maturing~~EDB that matured on April 1, ~~2022.~~2023.

The Company’s financial covenants require the maintenance of a minimum net worth, as defined in our debt agreements, of $9 billion and a total debt-to-capital ratio of less than 60%. Net worth is defined as the sum of common stock, paid-in capital and retained earnings, less treasury stock plus any cumulative goodwill impairment charges. The calculation also excludes accumulated other comprehensive income/loss and both the current and long-term Nonrecourse Financial Liabilities of Variable Interest Entities. The total debt-to-capital ratio is defined as total debt divided by the sum of total debt plus net worth. As of March 31, ~~2022,~~2023, we were in compliance with our debt covenants.

At March 31, ~~2022,~~2023, the fair value of International Paper’s ~~$5.7~~$5.8 billion of debt was approximately ~~$6.3~~$5.6 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 171 in the Company’s Annual ~~Report on Form 10-K for the year ended December 31, 2021.~~

~~NOTE 18 - DERIVATIVES AND HEDGING ACTIVITIES~~

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

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

In millions March 31, 2022 December 31, 2021
Derivatives Not Designated as Hedging Instruments:
Electricity contract (MWh) 0.5 0.5

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

Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)
Three Months Ended
March 31,
In millions 2022 2021
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts $ — $ (6)
Total $ — $ (6)
Derivatives in Net Investment Hedging Relationships:
Foreign exchange contracts $ — $ 17
Total $ — $ 17

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

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

Gain (Loss) Reclassified from AOCI Into Income (Effective Portion) Location of Gain (Loss)
Reclassified from AOCI
(Effective Portion)
Three Months Ended
March 31,
In millions 2022 2021
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts $ — $ (3) Discontinued operations, net of taxes
Total $ — $ (3)

Gain (Loss) Recognized in Income Location of Gain (Loss)
In
Statement
of Operations
Three Months Ended
March 31,
In millions 2022 2021
Derivatives Not Designated as Hedging Instruments:
Electricity contract $ 8 $ 2 Cost of products sold
Total $ 8 $ 2

~~Fair Value Measurements~~

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

~~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
In millions March 31, 2022 December 31, 2021
Derivatives not designated as hedging instruments
Electricity contract $ 17 $ 10
Total derivatives $ 17 (a) $ 10 (b)

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

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

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

NOTE 1916 - RETIREMENT PLANS

International Paper sponsors and maintains the Retirement Plan of International Paper Company (the ~~Pension Plan)~~"Pension Plan"), a tax-qualified defined benefit pension plan that provides retirement benefits to substantially all hourly and union employees who work at a participating business unit. The ~~plan~~Pension Plan was frozen as of January 1, 2019 for salaried participants.

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

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


		Three Months Ended March 31,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Service cost	Service cost	$	23	$	27	Service cost	$	12	$	23
Interest cost	Interest cost	84		83		Interest cost	116		84
Expected return on plan assets	Expected return on plan assets	(162)		(183)		Expected return on plan assets	(132)		(162)
Actuarial loss	Actuarial loss	21		39		Actuarial loss	24		21
Amortization of prior service cost	Amortization of prior service cost	6		6		Amortization of prior service cost	6		6
Net periodic pension (income) expense		$	(28)	$	(28)
Net periodic pension expense (income)						Net periodic pension expense (income)	$	26	$	(28)

The components of net periodic pension expense (income) ~~expense~~ other than the Service cost component are included in Non-operating pension expense (income) ~~expense~~ in the Condensed Consolidated Statement of Operations.

The Company’s funding policy for our pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plan, tax deductibility, the cash flows generated by the Company, and other factors. The Company made no voluntary cash contributions to the qualified pension plan in the first three months of ~~2022~~2023 or ~~2021.~~2022. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled $5 million for the three months ended March 31, ~~2022.~~2023.

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NOTE 2017 - STOCK-BASED COMPENSATION

~~International Paper~~The Company 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 March 31, ~~2022, 7.2~~2023, 5.5 million shares were available for grant under the ICP.

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


		Three Months Ended March 31,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Total stock-based compensation expense (selling and administrative)	Total stock-based compensation expense (selling and administrative)	$	66	$	14	Total stock-based compensation expense (selling and administrative)	$	34	$	66
Income tax benefits related to stock-based compensation	Income tax benefits related to stock-based compensation	12		17		Income tax benefits related to stock-based compensation	11		12

At March 31, ~~2022, $188~~2023, $174 million, net of estimated forfeitures, of compensation cost related to ~~unvested restricted performance~~time-based and performance-based 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 ~~2.2~~1.7 years.

~~Performance Share~~Long-Term Incentive Plan

During the first three months of ~~2022,~~2023, the Company granted ~~1.9~~1.6 million performance units at an average grant date fair value of ~~$50.32.~~

$37.83 and 1.3 million time-based units at an average grant date fair value of $34.63.

NOTE 2118 - BUSINESS SEGMENT INFORMATION

International Paper’s business segments, Industrial Packaging and Global Cellulose Fibers, are consistent with the internal structure used to manage these businesses. ~~All~~Both segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the Forest Products industry. On October 1, 2021, the Company completed the previously announced spin-off of its Printing Papers business into a new, publicly-traded company, Sylvamo Corporation, listed on the New York Stock Exchange. Additionally, on August 6, 2021, the Company completed the sale of its Kwidzyn, Poland mill which included the pulp and paper mill in Kwidzyn and supporting functions. As a result of the Sylvamo Corporation spin-off and the sale of Kwidzyn, the Company no longer has a Printing Papers segment, and all prior year amounts have been adjusted to reflect the Sylvamo Corporation and Kwidzyn businesses as a discontinued operation.

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

Net sales by business segment for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 were as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Industrial Packaging	Industrial Packaging	$	4,406	$	3,930	Industrial Packaging	$	4,083	$	4,406
Global Cellulose Fibers	Global Cellulose Fibers	710		595		Global Cellulose Fibers	811		710
Corporate and Intersegment Sales	Corporate and Intersegment Sales	121		68		Corporate and Intersegment Sales	126		121
Net Sales	Net Sales	$	5,237	$	4,593	Net Sales	$	5,020	$	5,237

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Operating profit (loss) by business segment for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 were as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Industrial Packaging	Industrial Packaging	$	397	$	421	Industrial Packaging	$	322	$	397
Global Cellulose Fibers	Global Cellulose Fibers	(49)		(81)		Global Cellulose Fibers	(16)		(49)
Business Segment Operating Profits	Business Segment Operating Profits	$	348	340		Business Segment Operating Profits	$	306	348

Earnings (loss) from continuing operations before income taxes and equity earnings	Earnings (loss) from continuing operations before income taxes and equity earnings	$	362	$	306	Earnings (loss) from continuing operations before income taxes and equity earnings	$	221	$	362
Interest expense, net	Interest expense, net	69		93		Interest expense, net	62		69
Noncontrolling interests adjustment		—		(1)
Corporate expenses, net	Corporate expenses, net	12		36		Corporate expenses, net	8		12
Corporate net special items	Corporate net special items	(46)		(56)		Corporate net special items	—		(46)
Business net special items		—		14
Non-operating pension expense (income)	Non-operating pension expense (income)	(49)		(52)		Non-operating pension expense (income)	15		(49)
Business Segment Operating Profits	Business Segment Operating Profits	$	348	$	340	Business Segment Operating Profits	$	306	$	348

2420

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included in "Financial Statements and Supplementary Data" of this Quarterly Report on Form 10-Q (this "Form 10-Q") and the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (our "Annual Report"). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and in our Annual Report, particularly under "Risk Factors" and "Forward-Looking Statements" of this Form 10-Q and our Annual Report.

EXECUTIVE SUMMARY

Net earnings (loss) ~~attributable to International Paper common shareholders~~ were $172 million ($0.49 per diluted share) in the first quarter of 2023, compared with $(318) million ($(0.90) per diluted share) in the fourth quarter of 2022 and $360 million ($0.95 per diluted share) in the first quarter of ~~2022,~~2022. The Company generated Adjusted operating earnings (a non-GAAP measure defined below) of $185 million ($0.53 per diluted share) in the first quarter of 2023, compared with ~~$107~~$309 million ($~~0.28~~0.87 per diluted share) in the fourth quarter of ~~2021~~2022 and ~~$349~~$195 million ($~~0.88~~0.51 per diluted share) in the first quarter of 2021. International Paper generated Adjusted operating earnings attributable to International Paper common shareholders (a non-GAAP measure defined below) of $288 million ($0.76 per diluted share) in the first quarter of 2022, compared with $301 million ($0.78 per diluted share) in the fourth quarter of 2021 and $198 million ($0.50 per diluted share) in the first quarter of 2021.2022.

International ~~Paper delivered~~Paper’s first quarter 2023 earnings ~~that were better than our outlook, driven by strong price realization and~~reflect solid operations, overcoming significantly higher input costs. We also delivered another quarter of strong cash generation. Constraints associated with the Covid-19 Omicron variant impacted volume in our Industrial Packaging businessperformance in the ~~early part~~face of a challenging macroeconomic environment. During the ~~first~~ quarter, ~~2022. Shipments recovered, as expected throughout the first quarter, with demand stabilizing at elevated levels as~~ we exited the quarter. Our mills and converting system performed well, as we managed through continued logistics constraints which negatively impacted operating costs. We successfully executed our highest maintenance outage quarter of 2022 and expect to complete about 70% of full-year planned maintenance outages by the end of the second quarter. We achieved $40delivered $65 million of year-over-year incremental earnings ~~through~~benefit from our Building a Better IP ~~initiatives, which~~initiatives. Additionally, our mill system continued to perform well as we successfully executed our highest planned maintenance outage quarter of 2023. As we entered 2023, we recognized there were macroeconomic uncertainties ahead of us and that our businesses are not immune to these risks. These macro trends shifted in the latter half of the first quarter 2023 resulting in a weaker demand environment as our customers and the broader supply chain worked through elevated inventories of their products. We also believe inflationary pressure, rising interest rates and the pull forward of goods during the pandemic are weighing on consumers resulting in lower demand for our products as consumer priorities remain focused on ~~materially lowering~~non-discretionary goods and services in the near term. Margins were also under pressure from lower prices across our ~~cost structure~~portfolio, partially offset by lower input costs. Our customers and ~~accelerating profitable growth.~~the broader supply chain continued to work through elevated inventories of their products which has constrained demand. While we believe most of the destocking through the retail chain has been resolved, it continues throughout the rest of the supply chain, especially our manufacturer customers. We believe this will run its course through the second quarter, resulting in an improved demand environment in the second half of 2023. Regarding capital allocation in the first quarter 2023, we returned ~~$580~~$319 million to ~~shareholders,~~shareowners, including ~~dividends and approximately $400~~$157 million of share repurchases. During the first quarter ~~2022, we announced that we are actively exploring options, including~~2023, cash from operations was $345 million and free cash flow was $4 million. First quarter cash from operations and free cash flow included a $193 million final payment to the IRS for the timber monetization restructuring settlement. Finally, with respect to the sale of our ~~50% equity investment~~interest in the Ilim ~~Group.~~joint venture, we made good progress in the quarter toward the completion of the sale, with the buyers receiving an important required approval from a Russian commission overseeing exits by foreign companies, but we are still awaiting approval from the Russian competition authority. We are ~~working with urgency~~optimistic this approval will be received soon and we plan to ~~complete this work. We have engaged advisors and had discussions with interested parties, which are ongoing.~~close shortly thereafter.

Comparing our performance in the first quarter ~~2022~~2023 to the fourth quarter ~~2021,~~2022, price and mix ~~improved significantly, driven by price realization of our August 2021 price increase~~was lower in our North American Industrial Packaging business ~~as well as price realization from prior increases~~due to index movements and lower export prices. Price in our Global Cellulose Fibers ~~business. Volumes were slightly~~business was relatively flat as the earnings benefit from contract restructuring was offset by unfavorable mix as a result of lower ~~compared to the fourth quarter 2021, as expected, due to seasonally lower demand~~absorbent pulp shipments and ~~Omicron variant impacts early in the quarter~~prior index movements. Volume in our North American Industrial Packaging business ~~along with on-going~~was flat as weaker demand and customer inventory destocking was offset by four additional shipping ~~constraints~~days in the first quarter 2023. Volume in our Global Cellulose Fibers ~~business. In~~business was similarly impacted by customer inventory destocking in addition to the negative volume impact from the Chinese new year. Operations and costs were higher in our North American Industrial Packaging ~~business, operations~~ and Global Cellulose Fibers businesses, in spite of the mills running well, on the non-repeat of favorable one-time items from the fourth quarter 2022 associated with lower employee benefits costs, ~~improved sequentially. Our mills~~workers’ compensation costs and ~~converting system performed well and made good progress normalizing containerboard inventories across our packaging system. In~~medical claims. Additionally, our Global Cellulose Fibers business ~~volume and operating costs were negatively~~was impacted by ~~on-going logistics constraints.~~higher economic downtime due to the lower demand environment. Maintenance outages were sequentially higher as the first quarter 2023 represents the highest planned maintenance outage quarter in 2023. Input costs were significantly lower in both business segments, ~~as we completed the highest maintenance outage quarter of 2022. Input costs were significantly higher sequentially in both business segments due to higher~~driven by lower energy, ~~chemicals~~freight and ~~distribution costs. These higher costs were partially offset by moderately lower~~ recovered fiber costs.

Looking ahead to the second quarter ~~2022,~~2023, as compared to the first quarter ~~2022,~~2023, in our Industrial Packaging business, we expect ~~higher~~ price and mix onto be lower primarily due to prior index movements along with lower prices in the ~~flow-through of prior price increases in North America.~~export market to date. Volume is expected to ~~improve on~~be seasonally ~~stronger demand.~~higher in North America, partially offset by one less shipping day. Operations and costs are expected to be ~~slightly~~ higher ondue to the ~~non-repeat~~timing of spending in the ~~Prattville insurance proceeds.~~second quarter 2023. Maintenance outage expense is expected to

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decrease ~~as we step down from our highest~~relative to the first quarter 2023. The second quarter 2023 will represent approximately 40% of total planned maintenance ~~quarter~~outage with approximately 80% of ~~2022.~~the annual outages completed through the first half of 2023. Input costs are expected to ~~increase on higher~~be lower driven by lower costs for energy ~~chemicals~~ and ~~distribution costs.~~freight. In our Global Cellulose Fibers business, we expect price and mix to ~~improve~~decrease earnings on ~~price realization of~~ prior ~~price increases.~~index movements. Volume is expected to be ~~slightly lower.~~seasonally higher demand. Operations and costs are expected to ~~increase on continued logistics constraints.~~be favorable due to lower supply chain costs, lower unabsorbed fixed costs due to higher volume and seasonality. Maintenance outage ~~expenses are~~expense is expected to ~~decrease, and~~be lower along with lower input costs, ~~are expected~~primarily due to ~~increase, again driven by higher~~lower energy ~~chemicals~~ and ~~distribution~~fiber costs.

The Russia-Ukraine conflict, including escalating sanctions, possible actions by the Russian government, and associated domestic and global economic and geopolitical conditions, could materially and adversely affect our Ilim joint venture and could otherwise adversely affect our business, financial condition, results of operations and cash flows. We are currently unable to predict the impact the Russian invasion of Ukraine, sanctions imposed to date or that may be imposed in the future,

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geopolitical instability and the possibility of broadened military conflict may have on us or our Ilim joint venture, including on our receipt of dividends from our Ilim joint venture. Moreover, we have announced our intention to explore strategic options with respect to Ilim S.A., including a sale of our 50% equity interest in Ilim S.A. In addition, we have disclosed our intent to monetize our remaining equity stake in Sylvamo Corporation (which has certain operations in Russia, and announced in March 2022 that it began the suspension of operations in Russia and that it was continuing to assess various options for its operations in that country). While we may sell our equity interests in the Ilim joint venture and/or Sylvamo in the future, we cannot be certain if and when this may occur, or the impact that possible disruptions in the capital markets, or conditions associated with the Russia-Ukraine conflict, could have on the value of and our ability to sell our equity interests in the Ilim joint venture and/or Sylvamo and the timing of any such sales.

Adjusted ~~operating earnings~~Operating Earnings and Adjusted ~~operating earnings per share~~Operating Earnings Per Share are non-GAAP measures and are defined as net earnings (loss) ~~attributable to International Paper~~ (a GAAP measure) excluding discontinued operations, net special items and non-operating pension expense (income). Net earnings (loss) and Diluted earnings (loss) per share ~~attributable to common shareholders~~ are the most directly comparable GAAP measures. The Company calculates Adjusted ~~operating earnings~~Operating Earnings by excluding the after-tax effect of discontinued operations, non-operating pension expense (income) and items considered by management to be unusual ~~or otherwise not reflective of on-going operations~~ (net special items) from net earnings (loss) ~~attributable to shareholders~~ reported under GAAP. Adjusted ~~operating earnings per share~~Operating Earnings Per Share is calculated by dividing Adjusted ~~operating earnings~~Operating Earnings by diluted average shares of common stock outstanding. Management uses ~~these measures~~this measure to focus on on-going operations, and believes that ~~these measures are~~it is useful to investors because ~~such measures enable investors~~it enables them to perform meaningful comparisons of past and present consolidated operating ~~results.~~results from continuing operations. The Company believes that using this information, along with the most ~~directly~~direct comparable GAAP ~~measures, provide~~measure, provides for a more complete analysis of the results of operations.

The following are reconciliations of ~~Earnings~~Net earnings (loss) ~~attributable to common shareholders~~ to Adjusted operating earnings (loss) ~~attributable to common shareholders~~ on a total and per share basis. Additional detail is provided later in this Form 10-Q regarding the net special items expense (income) referenced in the charts below.


		Three Months Ended March 31,				Three Months Ended December 31,			Three Months Ended March 31,				Three Months Ended December 31,
In millions	In millions	2022		2021		2021		In millions	2023		2022		2022
Net earnings (loss) attributable to shareholders		$	360	$	349	$	107
Net earnings (loss)								Net earnings (loss)	$	172	$	360	$	(318)
Less - Discontinued operations (gain) loss	Less - Discontinued operations (gain) loss	—		$	(82)	$	8	Less - Discontinued operations (gain) loss	—		(93)		489
Earnings (loss) from continuing operations	Earnings (loss) from continuing operations	360		267		115		Earnings (loss) from continuing operations	172		267		171
Add back - Non-operating pension expense (income)	Add back - Non-operating pension expense (income)	(49)		(52)		(47)		Add back - Non-operating pension expense (income)	15		(49)		(48)
Add back - Net special items expense (income)	Add back - Net special items expense (income)	(46)		(42)		295		Add back - Net special items expense (income)	3		(46)		144
Income tax effect - Non-operating pension and net special items expense		23		25		(62)
Adjusted operating earnings (loss) attributable to shareholders		$	288	$	198	$	301
Income tax effect - Non-operating pension and net special items expense (income)								Income tax effect - Non-operating pension and net special items expense (income)	(5)		23		42
Adjusted operating earnings (loss)								Adjusted operating earnings (loss)	$	185	$	195	$	309


		Three Months Ended March 31,				Three Months Ended December 31,			Three Months Ended March 31,				Three Months Ended December 31,
In millions		2022		2021		2021
Diluted earnings (loss) per share attributable to shareholders		$	0.95	$	0.88	$	0.28
									2023		2022		2022
Diluted earnings (loss) per share								Diluted earnings (loss) per share	$	0.49	$	0.95	$	(0.90)
Less - Discontinued operations (gain) loss per share	Less - Discontinued operations (gain) loss per share	—		(0.20)		0.02		Less - Discontinued operations (gain) loss per share	—		(0.25)		1.38
Diluted earnings (loss) per share from continuing operations	Diluted earnings (loss) per share from continuing operations	0.95		0.68		0.30		Diluted earnings (loss) per share from continuing operations	0.49		0.70		0.48
Add back - Non-operating pension expense (income) per share	Add back - Non-operating pension expense (income) per share	(0.13)		(0.13)		(0.12)		Add back - Non-operating pension expense (income) per share	0.04		(0.13)		(0.13)
Add back - Net special items expense (income) per share	Add back - Net special items expense (income) per share	(0.12)		(0.11)		0.77		Add back - Net special items expense (income) per share	0.01		(0.12)		0.41
Income tax effect per share - Non-operating pension and net special items expense		0.06		0.06		(0.17)
Adjusted operating earnings (loss) per share attributable to shareholders		$	0.76	$	0.50	$	0.78
Income tax effect per share - Non-operating pension and net special items expense (income)								Income tax effect per share - Non-operating pension and net special items expense (income)	(0.01)		0.06		0.11
Adjusted operating earnings (loss) per share								Adjusted operating earnings (loss) per share	$	0.53	$	0.51	$	0.87

Cash provided by operations, including discontinued operations, totaled ~~$588~~$345 million and ~~$512~~$588 million for the first three months of ~~2022~~2023 and ~~2021,~~2022, respectively. The Company generated free cash flow of approximately ~~$403~~$4 million and ~~$423~~$403 million in the first three months of ~~2022~~2023 and ~~2021,~~2022, respectively. Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management utilizes this measure in connection with managing our business and believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting

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for certain items that are not indicative of the Company's ongoing performance, we believe that free cash flow also enables investors to perform meaningful comparisons between past and present periods.

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


		Three Months Ended March 31,					Three Months Ended March 31,
In millions	In millions	2022		2021		In millions	2023		2022
Cash provided by operations	Cash provided by operations	$	588	$	512	Cash provided by operations	$	345	$	588
Adjustments:	Adjustments:					Adjustments:
Cash invested in capital projects, net of insurance recoveries	Cash invested in capital projects, net of insurance recoveries	(185)		(89)		Cash invested in capital projects, net of insurance recoveries	(341)		(185)
Free Cash Flow	Free Cash Flow	$	403	$	423	Free Cash Flow	$	4	$	403

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

RESULTS OF OPERATIONS

For the first quarter of ~~2022,~~2023, International Paper reported net sales of ~~$5.2~~$5.0 billion, compared with $5.1 billion in the fourth quarter of ~~2021~~2022 and ~~$4.6~~$5.2 billion in the first quarter of ~~2021.~~2022.

Net earnings (loss) ~~attributable to International Paper~~ totaled $172 million, or $0.49 per diluted share, in the first quarter of 2023. This compared with $(318) million, or $(0.90) per diluted share, in the fourth quarter of 2022 and $360 million, or $0.95 per diluted share, in the first quarter of 2022. ~~This compared with $107 million, or $0.28 per diluted share, in the fourth quarter of 2021 and $349 million, or $0.88 per diluted share, in the first quarter of 2021.~~

Compared with the fourth quarter of ~~2021,~~2022, earnings from continuing operations benefited from lower raw material and freight costs ($100 million) and lower tax expense ($8 million). These benefits were offset by lower average sales prices and an unfavorable mix ($38 million), lower sales volumes ($4 million), higher operating costs ($93 million), higher mill maintenance outage costs ($74 million), higher corporate and other items ($23 million), higher net interest expense ($2 million) and higher non-operating pension expense ($47 million). Equity earnings, net of taxes, were $2 million higher in the first quarter of 2023 than in the fourth quarter of 2022. Net special items in the first quarter of 2023 were a charge of $2 million compared with a charge of $174 million in the fourth quarter of 2022.

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Compared with the first quarter of 2022, the first quarter of 2023 reflects higher average sales prices ($227 million), lower raw material and ~~a favorable mix~~freight costs ($~~106~~87 million), lower mill maintenance outage costs ($4 million), lower corporate and other ~~items~~costs ($283 million), lower net interest expense ($67 million) and lower ~~non-operating pension~~tax expense ($111 million). These benefits were offset by lower sales volumes ($873 million), higher operating costs ($~~31 million), higher raw material and freight costs ($18 million), higher mill maintenance outage costs ($102~~275 million) and higher ~~tax~~non-operating pension expense ($2148 million). Equity earnings, net of taxes, ~~relating to International Paper’s investments~~were $1 million lower in ~~Ilim S.A. and other~~

~~Table~~the first quarter of ~~Contents~~

~~investments were $27 million higher~~2023 than in the ~~fourth~~first quarter of ~~2021.~~2022. Net special items in the first quarter of ~~2022~~2023 were a ~~gain~~charge of ~~$35 million compared with a loss of $222 million in the fourth quarter of 2021.~~

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

Business segment operating profits are used by International Paper's management to measure the earnings performance of its businesses. Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results. International Paper believes that using this information, along with net earnings, provides a more complete analysis of the results of operations by quarter. Business segment operating profits are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of ~~noncontrolling interests,~~less than wholly owned subsidiaries, 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.

The Company currently operates in two segments: Industrial Packaging and Global Cellulose Fibers. On January 24, 2023, the Company announced an agreement to sell its Ilim equity investment and, as a result, all current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes and our equity investment is no longer a separate reportable industry segment.

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


		Three Months Ended							Three Months Ended
		March 31,				December 31,			March 31,				December 31,
In millions	In millions	2022		2021		2021		In millions	2023		2022		2022
Net Earnings (Loss) from Continuing Operations Attributable to International Paper Company		$	360	$	267	$	115
Net Earnings (Loss) from Continuing Operations								Net Earnings (Loss) from Continuing Operations	$	172	$	267	$	171
Add back (deduct):	Add back (deduct):							Add back (deduct):
Income tax provision (benefit)	Income tax provision (benefit)	95		88		(5)		Income tax provision (benefit)	48		95		148
Equity (earnings) loss, net of taxes	Equity (earnings) loss, net of taxes	(93)		(49)		(66)		Equity (earnings) loss, net of taxes	1		—		3
Noncontrolling interests, net of taxes		—		—		—
Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	362		306		44		Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings	221		362		322
Interest expense, net	Interest expense, net	69		93		76		Interest expense, net	62		69		59
Noncontrolling interests included in operations		—		(1)		(2)
Less than wholly owned subsidiaries included in operations								Less than wholly owned subsidiaries included in operations	—		—		(3)
Corporate expenses, net	Corporate expenses, net	12		36		49		Corporate expenses, net	8		12		(20)
Corporate net special items	Corporate net special items	(46)		(56)		282		Corporate net special items	—		(46)		65
Business net special items	Business net special items	—		14		13		Business net special items	—		—		76
Non-operating pension expense (income)	Non-operating pension expense (income)	(49)		(52)		(47)		Non-operating pension expense (income)	15		(49)		(48)
Adjusted Operating Profit	Adjusted Operating Profit	$	348	$	340	$	415	Adjusted Operating Profit	$	306	$	348	$	451
Business Segment Operating Profit (Loss):	Business Segment Operating Profit (Loss):							Business Segment Operating Profit (Loss):
Industrial Packaging	Industrial Packaging	$	397	$	421	$	414	Industrial Packaging	$	322	$	397	$	416
Global Cellulose Fibers	Global Cellulose Fibers	(49)		(81)		1		Global Cellulose Fibers	(16)		(49)		35
Total Business Segment Operating Profit	Total Business Segment Operating Profit	$	348	$	340	$	415	Total Business Segment Operating Profit	$	306	$	348	$	451

Business Segment Operating Profit

Total business segment operating profits were $306 million in the first quarter of 2023, $451 million in the fourth quarter of 2022 and $348 million in the first quarter of ~~2022, $415 million in the fourth quarter of 2021 and $340 million in the first quarter of 2021.~~2022.

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Compared with the fourth quarter of ~~2021,~~2022, operating profits benefited from ~~higher average sales prices~~lower raw material and ~~a favorable mix~~freight costs ($~~131~~134 million). These benefits were offset by lower average sales prices and an unfavorable mix ($51 million), lower sales volumes ($105 million), higher operating costs ($~~39 million), higher raw material and freight costs ($22~~124 million) and higher mill outage costs ($~~127~~99 million).

Compared with the first quarter of ~~2021,~~2022, operating profits in the current quarter benefited from higher average sales prices ($311 million), lower raw material and ~~a favorable mix~~freight costs ($~~595~~119 million) and lower mill outage costs ($5 million). These benefits were offset by lower sales volumes ($9100 million), and higher operating costs ($~~131 million), higher raw material and freight costs ($364 million) and higher mill outage costs ($83~~377 million).

Sales Volumes by Product (a)

Sales volumes of major products for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 were as follows:


		Three Months Ended March 31,			Three Months Ended March 31,
In thousands of short tons (except as noted)	In thousands of short tons (except as noted)	2022	2021	In thousands of short tons (except as noted)	2023	2022
Industrial Packaging	Industrial Packaging			Industrial Packaging
Corrugated Packaging (b)	Corrugated Packaging (b)	2,618	2,684	Corrugated Packaging (b)	2,381	2,618
Containerboard	Containerboard	712	709	Containerboard	544	712
Recycling	Recycling	564	558	Recycling	560	564
Saturated Kraft	Saturated Kraft	44	45	Saturated Kraft	34	44
Gypsum/Release Kraft	Gypsum/Release Kraft	54	55	Gypsum/Release Kraft	60	54
EMEA Packaging (b)	EMEA Packaging (b)	368	435	EMEA Packaging (b)	335	368
Industrial Packaging	Industrial Packaging	4,360	4,486	Industrial Packaging	3,914	4,360
Global Cellulose Fibers (in thousands of metric tons) (c)	Global Cellulose Fibers (in thousands of metric tons) (c)	712	755	Global Cellulose Fibers (in thousands of metric tons) (c)	688	712

(a)Sales volumes include third party and ~~inter-segment~~intersegment 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 volumes and internal sales to mills.

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Discontinued Operations

On ~~October 1, 2021,~~January 24, 2023, the Company ~~completed the previously~~ announced ~~spin-off~~it had reached an agreement to sell its equity investment in Ilim and had also received an indication of interest to purchase its ~~Printing Papers business along with certain mixed-use coated paperboard~~equity investment in Ilim Group. All current and pulp businesses in North America, France and Russia into a standalone, publicly-traded company, Sylvamo Corporation. On August 6, 2021, the Company completed the sale of its Kwidzyn, Poland mill which included the pulp and paper mill in Kwidzyn and supporting functions. As a resulthistorical results of the ~~Sylvamo Corporation spin-off and sale~~Ilim joint venture investment are presented as Discontinued Operations, net of ~~Kwidzyn,~~taxes in the Company no longer has a Printing Papers business segment, and all historical results have been adjusted to reflect the Kwidzyn and the Printing Papers business and other businesses conveyed to Sylvamo Corporation as discontinuedconsolidated statement of operations. ~~See~~This transaction is discussed further in Note 910 - ~~Divestitures and Impairments~~Equity Method Investments ofItem 1. Financial Statements ~~for further discussion.~~.

Discontinued operations include the ~~operating~~equity earnings of the ~~businesses noted above.~~Ilim joint venture. Discontinued operations also includes an after-tax net special items ~~charge~~charges of ~~$20~~$43 million and $8$533 million for the three months ended March 31, ~~2021~~2023 and December 31, ~~2021,~~2022, respectively.

Details of these charges were as follows:

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


	Three Months				Three Months
	March 31,				December 31,
	2023				2022
In millions	Before Tax		After Tax		Before Tax		After Tax
Ilim equity method investment impairment	$	43	$	43	$	533	$	533
Total	$	43	$	43	$	533	$	533

Income Taxes

An income tax provision of $48 million was recorded for the first quarter of 2023 and the reported effective income tax rate was 22%. Excluding a benefit of $1 million related to the tax effects of net special items and a benefit of $4 million related to the tax effects of non-operating pension expense, the operational effective income tax rate was 22% for the quarter. The effective tax rate for the first quarter of 2023 was lower than the prior quarter primarily due to a decrease in state income taxes in the first quarter of 2023.

An income tax provision of $148 million was recorded for the fourth quarter of 2022 and the reported effective income tax rate was 46%. Excluding expense of $30 million related to the tax effects of net special items and expense of $12 million related to the tax effects of non-operating pension expense, the operational effective income tax rate was 25% for the quarter.

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

~~An income tax benefit of $5 million was recorded for the fourth quarter of 2021 and the reported~~ The higher operational effective income tax rate in the first quarter of 2022 was ~~(11)%. Excluding a benefit of $73 million related~~primarily due to reduced tax benefits for equity-based compensation.

The operational tax provision and rate are non-GAAP measures and are calculated by adjusting the income tax provision from continuing operations and rate to exclude the tax ~~effects~~effect of net special items and ~~expense of $11 million related to the tax effects of~~ non-operating pension expense (income). Management believes that the ~~effective~~presentation provides useful information to investors by providing a more meaningful comparison of the income tax rate ~~was 20% for the quarter.~~between past and present periods.

An income tax provision of $88 million was recorded for the first quarter of 2021 and the reported effective income tax rate was 29%. Excluding expense of $12 million related to the tax effects of net special items and expense of $13 million related to the tax effects of non-operating pension expense, the effective income tax rate was 30% for the quarter.

Interest Expense

Net interest expense was $62 million in the first quarter of 2023, compared with $59 million in the fourth quarter of 2022 and $69 million in the first quarter of ~~2022, compared with $76 million in the~~2022. The first quarter of 2023 and fourth quarter of ~~2021 and $93~~2022 include $3 million inof interest expense related to the ~~first quarter~~previously announced settlement of ~~2021.~~the timber monetization restructuring tax matter.

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Effects of Net Special Items Expense (Income) and Non-Operating Pension Expense

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

Three Months Ended
March 31, December 31,
2022 2021 2021
In millions Before Tax After Tax Before Tax After Tax Before Tax After Tax
Business Segments
EMEA Packaging business optimization $ — $ — $ 12 $ 10 (a) $ — $ —
EMEA Packaging impairment - Turkey — — 2 2 (a) — —
Building a Better IP — — — — 14 11 (b)
Other — — — — (1) (1) (a)
Business Segments Total — — 14 12 13 10
Corporate
Sylvamo investment - fair value adjustment (46) (35) — — 32 24
Debt extinguishment costs — — 18 14 238 179
Building a Better IP — — — — 17 13
Legal reserve adjustment — — — — (5) (4)
Gain on sale of equity investment in Graphic Packaging — — (74) (56) — —
Corporate Total (46) (35) (56) (42) 282 212
Total net special items (46) (35) (42) (30) 295 222
Non-operating pension expense (income) (49) (37) (52) (39) (47) (36)
Total net special items and non-operating pension expense (income) $ (95) $ (72) $ (94) $ (69) $ 248 $ 186


	Three Months Ended
	March 31,								December 31,
	2023				2022				2022
In millions	Before Tax		After Tax		Before Tax		After Tax		Before Tax		After Tax
Business Segments
Net (gains) losses on sales and impairments of businesses	$	—	$	—	$	—	$	—	$	76	$	76
Business Segments Total	—		—		—		—		76		76
Corporate
Environmental remediation reserve adjustment	$	—	$	—	$	—	$	—	$	48	$	36
Sylvamo investment	—		—		(46)		(35)		—		—
Legal reserve adjustments	—		—		—		—		11		8
Foreign currency cumulative translation loss related to sale of equity method investment	—		—		—		—		10		10
Other	—		—		—		—		(4)		(3)
Corporate Total	—		—		(46)		(35)		65		51
Total net special items expense (income)	—		—		(46)		(35)		141		127
Non-operating pension expense (income)	15		11		(49)		(37)		(48)		(36)
Total net special items and non-operating pension expense (income)	$	15	$	11	$	(95)	$	(72)	$	93	$	91

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

~~(a) Recorded in the Industrial Packaging segment.~~

~~(b) Includes a charge of $11 million ($9 million after taxes) recorded in the Industrial Packaging segment and $3 million ($2 million after taxes) recorded in the Global Cellulose Fibers segment.~~


	Three Months Ended
	March 31,				December 31,
In millions	2023		2022		2022
Foreign deferred tax valuation allowance	$	—	$	—	$	45

Total	$	—	$	—	$	45

BUSINESS SEGMENT OPERATING RESULTS

The following tables present net sales and business segment operating profit (loss) which is the Company's measure of segment profitability.

Industrial Packaging


Total Industrial Packaging	Total Industrial Packaging	2022		2021				Total Industrial Packaging	2023		2022
In millions	In millions	1st Quarter		1st Quarter		4th Quarter		In millions	1st Quarter		1st Quarter		4th Quarter
Sales	Sales	$	4,406	$	3,930	$	4,255	Sales	$	4,083	$	4,406	$	4,169
Operating Profit (Loss)	Operating Profit (Loss)	$	397	$	421	$	414	Operating Profit (Loss)	$	322	$	397	$	416

Industrial Packaging net sales for the first quarter of ~~2022~~2023 were ~~4% higher~~2% lower compared with the fourth quarter of ~~2021~~2022 and ~~12% higher compared with the first quarter of 2021. Operating profit was 4% lower in the first quarter of 2022 compared with the fourth quarter of 2021 and 6%~~7% lower compared with the first quarter of ~~2021.~~2022. Operating profit was 23% lower in the first quarter of 2023 compared with the fourth quarter of 2022 and 19% lower compared with the first quarter of 2022.

North American Industrial Packaging 2022 2021
In millions 1st Quarter 1st Quarter 4th Quarter
Sales (a) $ 4,025 $ 3,560 $ 3,907
Operating Profit (Loss) $ 400 $ 395 $ 415


North American Industrial Packaging	2023		2022
In millions	1st Quarter		1st Quarter		4th Quarter
Sales (a)	$	3,724	$	4,025	$	3,805
Operating Profit (Loss)	$	302	$	400	$	416

(a)Includes intra-segment sales of $32 million, $29 million ~~$26 million~~ and ~~$39~~$30 million for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 and December 31, ~~2021,~~2022, respectively.

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North American Industrial Packaging sales volumes in the first quarter of ~~2022~~2023 were lower compared to the fourth quarter of ~~2021~~2022 for corrugated boxes ~~and export containerboard~~in all segments driven by ~~seasonality~~the macroeconomic environment reflecting consumer focus on non-discretionary and ~~fewer shipping days. Omicron labor constraints also impacted volumes.~~value spending and retailer and manufacturer inventory reduction. Containerboard sales volumes were flat. Total maintenance and economic downtime was about ~~121,000~~45,000 short tons ~~higher~~lower in the first quarter of ~~2022~~2023 compared with the fourth quarter of ~~2021, due to~~2022, driven by lower economic downtime partially offset by higher maintenance downtime. ~~The first quarter of 2022 was the highest maintenance quarter of the year.~~ Average sales margins were ~~significantly higher~~lower reflecting ~~higher~~lower average sales prices for boxes and ~~export~~ containerboard ~~and~~partially offset by a favorable ~~mix in our box system.~~mix. Operating costs were ~~lower,~~higher driven by ~~strong converting~~the non-repeat of favorable one-time items for employee benefit costs and ~~mill operations.~~medical claims in the fourth quarter of 2022 partially offset by lower distribution costs. Planned maintenance downtime costs were ~~$119~~$92 million higher in the first quarter of ~~2022~~2023 compared with the fourth quarter of ~~2021.~~2022. Input costs were ~~flat as higher freight costs were offset~~lower driven by ~~lower~~energy, recovered fiber ~~costs. Earnings benefited from insurance recoveries in both the first quarter of 2022~~ and ~~the fourth quarter of 2021.~~wood.

Compared with the first quarter of ~~2021,~~2022, sales volumes in the first quarter of ~~2022~~2023 were ~~higher~~lower for ~~domestic containerboard but decreased for export~~corrugated boxes and containerboard. Sales volumes for corrugated boxes were lower reflecting ~~Omicron labor constraints.~~inflation impacts on consumer spending as well as inventory destocking by retailers and manufacturers. Total maintenance and economic downtime was about ~~74,000~~409,000 short tons higher in the first quarter of ~~2022,~~2023, primarily due to higher ~~maintenance~~economic downtime. ~~Export containerboard and box~~Average sales prices for boxes were ~~significantly~~ higher reflecting previous price increases. Export containerboard prices were lower. Operating costs increased, driven by economic downtime, inflation ~~partially offset by strong mill operations. Distribution costs increased.~~on goods and services and distribution costs. Planned maintenance downtime costs were ~~$74~~$4 million ~~higher~~lower in the first quarter of ~~2022~~2023 compared with the first quarter of ~~2021.~~2022. Input costs were significantly ~~higher~~lower driven by recovered fiber ~~wood, energy and freight.~~costs.

Entering the second quarter of ~~2022,~~2023, sales volumes ~~for corrugated boxes and export containerboard~~ are expected to be seasonally higher compared to the first quarter of ~~2022.~~2023. There is one less shipping day in the second quarter. Average sales margins are ~~also~~ expected to be ~~higher, reflecting previous price increases.~~lower. Operating costs are expected to be higher. Planned maintenance downtime costs are expected to be ~~$60~~$10 million lower in the second quarter of ~~2022~~2023 compared with the first quarter of ~~2022.~~2023. Input costs are expected to be ~~higher.~~lower driven by energy, wood and freight.


EMEA Industrial Packaging	EMEA Industrial Packaging	2022		2021				EMEA Industrial Packaging	2023		2022
In millions	In millions	1st Quarter		1st Quarter		4th Quarter		In millions	1st Quarter		1st Quarter		4th Quarter
Sales	Sales	$	410	$	396	$	387	Sales	$	391	$	410	$	394
Operating Profit (Loss)	Operating Profit (Loss)	$	(3)	$	26	$	(1)	Operating Profit (Loss)	$	20	$	(3)	$	—

EMEA Industrial Packaging sales volumes for corrugated boxes in the first quarter of ~~2022~~2023 were stable compared with the fourth quarter of ~~2021~~2022 seasonally as ~~seasonally~~ higher volumes in Morocco were offset by lower volumes in Europe. Average sales margins for corrugated boxes were stable. Average sales margins for containerboard were lower. Operating costs were stable. Planned maintenance outage costs were $4 million lower in the first quarter of 2023 compared with the fourth quarter of 2022. Input costs were lower driven by energy costs.

Compared with the first quarter of 2022, sales volumes in the first quarter of 2023 were lower reflecting softening demand in the Eurozone. Average sales margins for corrugated boxes were higher ~~reflecting higher average sales prices in the Eurozone. Average sales margins in Morocco were lower~~ driven by ~~higher~~lower containerboard costs. Operating costs were ~~higher. Planned maintenance downtime costs were lower in the first quarter of 2022 compared with the fourth quarter of 2021. Input costs were significantly~~ higher ~~primarily for energy.~~

~~Compared with the first quarter of 2021, sales volumes in the first quarter of 2022 were lower~~ driven by the sale of our EMEA Packaging business in Turkey in the second quarter of 2021. Average sales margins for corrugated boxes were lower driven by higher containerboard costs. Average sales margins for containerboard were higher, reflecting higher average sales prices. Operatinginflation on goods and services. Distribution costs were higher. There were no planned maintenance outages in either the first quarter of ~~2022~~2023 or the first quarter of ~~2021.~~2022. Input costs were ~~significantly higher,~~lower primarily for ~~energy and recovered fiber.~~energy.

Looking ahead to the second quarter of ~~2022,~~2023, sales volumes for corrugated boxes are expected to be ~~lower, reflecting~~higher in Europe and seasonally lower ~~volumes~~ in Morocco. Average sales margins are expected to be ~~higher.~~lower. Operating costs are expected to be higher. There are no planned maintenance outages ~~scheduled for~~in the second quarter of ~~2022.~~2023. Input costs are expected to ~~increase.~~be lower.

Global Cellulose Fibers


Total Global Cellulose Fibers	Total Global Cellulose Fibers	2022		2021				Total Global Cellulose Fibers	2023		2022
In millions	In millions	1st Quarter		1st Quarter		4th Quarter		In millions	1st Quarter		1st Quarter		4th Quarter
Sales	Sales	$	710	$	595	$	717	Sales	$	811	$	710	$	842
Operating Profit (Loss)	Operating Profit (Loss)	$	(49)	$	(81)	$	1	Operating Profit (Loss)	$	(16)	$	(49)	$	35

Global Cellulose Fibers net sales in the first quarter of ~~2022~~2023 were 1%4% lower compared with the fourth quarter of ~~2021~~2022 and ~~19%~~14% higher than in the first quarter of ~~2021.~~2022. Operating profit was lower in the first quarter of ~~2022 decreased~~2023 compared towith the fourth quarter of ~~2021~~2022 and improved compared towith the first quarter of ~~2021.~~2022.

Sales volumes in the first quarter of ~~2022~~2023 compared with the fourth quarter of ~~2021~~2022 were ~~slightly~~ lower ~~reflecting continuing supply chain challenges.~~due to seasonality and customer inventory destocking. Total maintenance and economic downtime was about ~~4,000~~100,000 short tons ~~lower~~higher in the first quarter of ~~2022~~2023 compared with the fourth quarter of ~~2021 due to maintenance~~2022 driven by economic downtime. Average sales margins ~~improved, reflecting higher average sales price for both fluff pulp and market pulp. Operating costs~~ were ~~higher driven by seasonality and distribution~~slightly lower as the

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benefits from contract restructuring was offset by price index movement and an unfavorable product mix. Operating costs were higher driven by economic downtime and the non-repeat of favorable one-time items for employee benefit costs and medical claims in the fourth quarter of 2022. Planned maintenance downtime costs in the first quarter of 2023 were $11 million higher compared with the fourth quarter of 2022. Input costs were lower, primarily for energy and wood.

Compared with the first quarter of 2022, sales volumes in the first quarter of 2023 were lower driven by customer inventory destocking. Total maintenance and economic downtime was about 132,000 short tons higher in the first quarter of 2023, mainly due to economic downtime. Average sales margins were higher reflecting higher average sales prices partially offset by an unfavorable product mix. Operating costs were higher driven by economic downtime and distribution costs. Planned maintenance downtime costs in the first quarter of ~~2022~~2023 were $9$1 million ~~higher~~lower compared with the ~~fourth~~first quarter of ~~2021.~~2022. Input costs were higher primarily for ~~wood,~~ chemicals and ~~energy.~~

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

Entering the second quarter of ~~2022,~~2023, sales volumes are expected to be ~~slightly lower driven by continued logistics challenges.~~higher. Average sales margins are expected to be ~~higher.~~lower. Planned maintenance downtime costs in the second quarter of ~~2022~~2023 are expected to be ~~$26~~$33 million lower compared with the first quarter of ~~2022.~~2023. Operating costs are expected to be ~~seasonally~~ lower. ~~Distribution~~Input costs are expected to be ~~higher. Input costs are expected to increase for energy and chemicals.~~lower.

Equity Earnings, Net of Taxes – Ilim

~~International Paper accounts for~~On January 24, 2023, the Company announced it had reached an agreement to sell its ~~50%~~ equity ~~interest~~investment in Ilim ~~S.A. (Ilim) using~~and also received from the same purchasers an indication of interest to purchase its equity ~~method~~investment in Ilim Group. This transaction is discussed further in Note 10 - Equity Method Investments of ~~accounting.~~Item 1. Financial Statements .

In conjunction with the entry into the announced agreement, a determination was made that the book value of the Ilim isand Ilim Group investments plus associated cumulative translation losses, exceeded fair value, based upon the agreed upon transaction price for Ilim and the offer price for Ilim Group. As a ~~separate reportable industry segment with primary operations~~result, an other than temporary impairment of $43 million and $533 million was recorded in ~~Russia. During~~ the first quarter of 2023 and fourth quarter of 2022, respectively, to write down these investments to fair value. The impairment charges included approximately $43 million and $375 million of foreign currency cumulative translation adjustment loss in the ~~Company announced its intention~~first quarter of 2023 and fourth quarter of 2022, respectively. As of March 31, 2023, the approximately $418 million of cumulative translation adjustment loss remained within AOCI with the recognition of this loss recorded as an offset to ~~explore options, including a sale~~the investment balance.

All current and historical results of ~~its 50% ownership~~the Ilim joint venture investment are presented as Discontinued Operations, net of taxes in ~~Ilim Group.~~the consolidated statement of operations. The Company recorded equity earnings, net of taxes, related to Ilim of $43 million in the first quarter 2023, compared with earnings of $45 million in the fourth quarter 2022 and $93 million in the first quarter of ~~2022, compared with $66 million in the fourth quarter of 2021 and $49 million in the first quarter of 2021.~~2022. In the first quarter of 2022, ~~and fourth quarter of 2021,~~ foreign exchange gains (losses) of ~~$(15)~~($15) million, ~~and $5 million, respectively, are~~were included in equity earnings.Ilim Group had no US dollar-denominated debt outstanding at March 31, ~~2022~~2023 and December 31 ~~2021. There is no recourse of Ilim Group debt to International Paper.~~2022.

Compared with the fourth quarter of ~~2021,~~2022, results in the first quarter of 2023 were relatively flat, reflecting the negative impact of lower volumes and lower average sales prices, offset by lower operating costs and the positive impact of a weaker ruble. Sales volumes in the first quarter of ~~2022~~2023 were 5%10% lower driven primarily by lower sales of softwood pulp in China, other export markets and Russia. Sales of hardwood pulp declined sharply in other export markets and Russia, but were partially offset by higher ~~as logistical constraints at the Chinese border~~sales of hardwood pulp in China. Containerboard sales declined in China and other export markets, but were ~~resolved.~~more than offset by significantly higher sales of containerboard in Russia. Average sales ~~prices~~margins were markedly lower for sales of softwood pulp, hardwood pulp and containerboard ~~were lower. Costs for fuel and distribution were higher and wood~~reflecting lower average sales prices in all markets. Input costs were ~~seasonally lower.~~relatively flat. Lower maintenance and no outages in the first quarter of 2023 contributed to a decrease in operating costs.

Compared with the first quarter of ~~2021,~~2022, lower sales volumes, declining average sales margins, higher input costs due to inflation, and higher operating costs contributed to lower earnings in the first quarter of 2023. Sales volumes in the first quarter of ~~2022 increased,~~2023 were 7% lower as ~~logistical constraints at the Chinese border were resolved. Average sales margins for~~shipments of softwood pulp, hardwood pulp and containerboard ~~increased reflecting~~to Europe and other export countries declined, but were partially offset by higher ~~average~~shipments of those products to China. In Russia, sales ~~prices in all regions.~~

~~Looking forward to the second quarter~~ of ~~2022,~~containerboard were higher, but were partially offset by lower sales ~~volumes are expected to be stable. Average sales margins are projected to increase for~~of softwood pulp and hardwood pulp. ~~Repair~~Average sales margins were significantly lower reflecting lower average sales prices for sales of containerboard in China, Russia and ~~maintenance costs are projected to increase~~other export markets, partially offset by higher average sales margins for sales of softwood pulp and hardwood pulp in ~~the second quarter.~~all markets. Input costs for wood ~~are expected to be seasonally higher.~~and fuel increased. The sale of timber and saw logs declined. Transportation costs decreased as transportation tariffs and shipping routes were changed. The Company received cash dividends from the joint venture of $0 million in the first three months of 2023 and $204 million in the first three months of 2022.

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LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations totaled ~~$588~~$345 million for the first three months of ~~2022,~~2023, compared with ~~$512~~$588 million for the comparable ~~2021~~2022 three-month period.

Investments in capital projects, net of insurance recoveries, totaled $341 million in the first three months of 2023, compared to $185 million in the first three months of ~~2022, compared to $89 million in the first three months of 2021.~~2022. Full-year ~~2022~~2023 capital spending is currently expected to be approximately ~~$1.1~~$1.0 billion to $1.2 billion, or ~~96%~~99% to 118% of depreciation and amortization.

Financing activities for the first three months of ~~2022~~2023 included a $257 million net increase in debt versus a $85 million net increase in debt ~~versus a $109 million net decrease in debt~~ during the comparable ~~2021~~2022 three-month period.

~~Amounts related to early debt extinguishment~~See Note 15 - Debt of Item 1. Financial Statements for a discussion of various debt-related actions taken by the Company during the ~~three and three months ended March 31, 2022 and 2021 were as follows:~~

Three Months Ended
March 31,
In millions 2022 2021
Early debt reductions (a) $ — $ 107
Pre-tax early debt extinguishment (gain) loss, net — 18
first quarter of 2023.

~~(a)~~There were no early debt reductions for the three months ended March 31, ~~2022. There were reductions related to notes with interest rates ranging from 3.00% to 4.80% with original maturities from 2027 to 2048 for the three months ended March 31, 2021.~~2023 and 2022, respectively.

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At March 31, ~~2022,~~2023, contractual obligations for future payments of debt maturities (including finance lease liabilities disclosed in Note 119 - Leases and excluding the timber monetization ~~structures~~structure disclosed in Note 1614 - Variable Interest Entities) by calendar year were as follows: ~~$195 million in 2022; $358~~$352 million in 2023; ~~$149~~$148 million in 2024; ~~$206~~$191 million in 2025; ~~$73~~$144 million in 2026; $298 million in 2027; and $4.7 billion thereafter.

Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At March 31, ~~2022,~~2023, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and Moody’s, respectively. In addition, the Company held short-term credit ratings of A2 and P2 by S&P and Moody's, respectively, for borrowings under the Company's commercial paper program.

At March 31, ~~2022,~~2023, International Paper’s credit agreements totaled ~~$2.1~~$2.0 billion, which is comprised of the $1.5 billion contractually committed bank credit agreement and up to ~~$550~~$500 million under the receivables securitization program. Management believes these credit agreements are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. At March 31, ~~2022,~~2023, the Company had no borrowings outstanding under the $1.5 billion credit agreement or the ~~$550~~$500 million receivables securitization program. The Company’s credit agreements are not subject to any restrictive covenants other than the financial covenants as disclosed in Note 1715 - Debt, and the borrowings under the receivables securitization program being limited by eligible receivables. The Company was in compliance with all its debt covenants at March 31, ~~2022~~2023 and was well below the thresholds stipulated under the covenants as defined in the credit agreements. Further the financial covenants do not restrict any borrowings under the credit agreements.

In addition to the ~~$2.1~~$2.0 billion capacity under the Company's credit agreements, International Paper has a commercial paper program with a borrowing capacity of $1.0 billion supported by its $1.5 billion credit agreement. Under the terms of the program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. As of March 31, ~~2022,~~2023, the Company had no borrowings outstanding under the program.

During the first quarter of 2023, the Company entered into a variable term loan agreement providing for a $600 million term loan which was fully drawn on the date of such loan agreement and matures in 2028. The $600 million debt was issued following the repayment of $410 million of commercial paper earlier in 2023 and will be used to repay debt maturing later in 2023 and general corporate purposes.

International Paper expects to be able to meet projected capital expenditures, service existing debt, meet working capital and dividend requirements and make common stock and/or debt repurchases for the next 12 months and for the foreseeable future thereafter with current cash balances and cash from operations, supplemented as required by its existing credit facilities. The Company will continue to rely on debt and capital markets for the majority of any necessary long-term funding not provided by operating cash flows. Funding decisions will be guided by our capital structure planning objectives. The primary goals of the Company’s capital structure planning are to maximize financial flexibility and maintain appropriate levels of liquidity to meet our needs while managing balance sheet debt and interest expense, and we have repurchased, and may continue to repurchase, our common stock (under our existing share repurchase program) and debt (including in open market purchases) to the extent consistent with this capital structure planning. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors.

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During the first three months of 2023, International Paper used 1.5 million shares of treasury stock for various incentive plans. International Paper also acquired 4.8 million shares of treasury stock, including restricted stock tax withholdings. Repurchases of common stock and payments of restricted stock withholding taxes totaled $177 million, including $157 million related to shares repurchased under the Company's repurchase program. Our current share repurchase program approved by our Board of Directors on October 11, 2022, which does not have an expiration date, has approximately $3.01 billion aggregate amount of shares of common stock remaining authorized for purchase as of March 31, 2023.

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

During the first three months of 2021, International Paper used approximately 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 withholding. 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.

Cash dividend payments related to common stock totaled ~~$174~~$162 million and ~~$202~~$174 million for the first three months of ~~2022~~2023 and ~~2021,~~2022, respectively. Dividends were $0.4625 per share ~~and $0.5125 per share~~ for the both of the first three months ~~in 2022~~of 2023 and ~~2021, respectively.~~2022.

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

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Variable Interest Entities

Information concerning variable interest entities is set forth in Note 15 in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. In connection with the 2006 International Paper installment sale of forestlands, we received $4.8 billion of installment notes. These installment notes were used by variable interest entities as collateral for borrowings from third-party lenders. These variable interest entities were restructured in 2015 when the installment notes and third-party loans were extended. The restructured variable interest entities held installment notes of $4.8 billion and third-party loans of $4.2 billion which both matured in August 2021. We settled the third-party loans at their maturity with the proceeds from the installment notes. This resulted in cash proceeds of approximately $630 million representing our equity in the variable interest entities. Maturity of the installment notes and termination of the monetization structure also resulted in a $72 million tax liability that was paid in the fourth quarter of 2021. On September 2, 2022, the Company and the Internal Revenue Service agreed to settle the 2015 Financing Entities timber monetization restructuring tax matter. Under this agreement, the Company will fully resolve the matter and pay $252 million in U.S. federal income taxes. As a result, interest will also be charged upon closing of the audit. The amount of interest expense recognized in 2022 was $58 million. As of March 31, ~~2022,~~2023, $252 million in U.S. federal income taxes and $58 million in interest expense have been paid as a result of the ~~Company's~~settlement agreement. The Company has now fully satisfied the payment terms of the settlement agreement regarding the 2015 Financing Entities timber monetization restructuring tax matter. The reversal of the Company’s remaining deferred tax liability associated with the 2015 Financing Entities of $604 million was ~~$813 million. The nature and timing of the income~~recognized as a one-time tax ~~due related to these transactions is currently under review by the Internal Revenue Service.~~

~~Ilim S.A. Shareholders’ Agreement~~

In October 2007, in connection with the formation of the Ilim joint venture, International Paper entered into a shareholders' agreement with an initial 15-year term expiring in October 2022 that automatically renews for successive five-year terms, unless terminated by either party. We have announced our intention to explore strategic options with respect to Ilim S.A., including a sale of our 50% equity interest in Ilim S.A. While we may sell our equity interestsbenefit in the Ilim joint venture in the future, we cannot be certain if and when this may occur, or the impact that possible disruptions in the capital markets, or conditions associated with the Russia-Ukraine conflict, could have on the valuethird quarter of ~~and our ability to sell our equity interests in the Ilim joint venture and the timing of any such sales.~~2022.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES

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

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

The Company has included in its ~~2021 Form 10-K~~Annual Report 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 three months of ~~2022.~~2023.

FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q that are not historical in nature may be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “believes,” “estimates” and similar expressions identify forward-looking statements. These statements are not guarantees of future performance and reflect management’s current views and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Factors which could cause actual

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results to differ include but are not limited to: (i) risks with respect to climate change and global, regional, and local weather conditions, as well as risks related to our ability to meet targets and goals with respect to climate change and the emission of GHGs and other environmental, social and governance matters; (ii) the level of our indebtedness and changes in interest rates (including the impact of current elevated interest rate levels); (iii) the impact of global and domestic economic conditions and industry conditions, including with respect to current negative macroeconomic conditions, inflationary pressures and changes in the cost or availability of raw materials, energy sources and transportation sources, supply chain shortages and disruptions, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products, and conditions impacting the credit, capital and financial markets, including possible instability in such markets and/or disruptions to the banking system due to potential or actual bank failures; (iv) domestic and global geopolitical conditions, changes in currency exchange rates, trade protectionist policies, downgrades in our credit ratings, and/or the credit ratings of banks issuing certain letters of credit, issued by recognized credit rating organizations; (v) the amount of our future pension funding obligations, and pension and healthcare costs; (vi) unanticipated expenditures or other adverse developments related to compliance with existing and new environmental, tax, labor and employment, privacy, anti-bribery and anti-corruption, and other U.S. and non-U.S. governmental laws and regulations; (vii) any material disruption at any of our manufacturing facilities or other adverse impact on our operations due to severe weather, natural disasters, climate change or other causes; (viii) the impact of the conflict involving Russia and Ukraine, including in connection with related escalated sanctions imposed by the United States, the European Union, G7 and other countries and possible actions by the Russian government, and the impact of such developments on domestic and global economic and geopolitical conditions in general and on us and our Ilim joint venture, which could be materially and adversely affected by such developments, and our inability to predict the full impact of the Russian invasion of Ukraine, current or future sanctions, ~~imposed to date,~~current or future actions by the Russian government, geopolitical instability and the possibility of broadened military conflict on our Ilim joint venture, ~~and~~ on our receipt of dividends from our Ilim joint ~~venture; (iii)~~venture and on our ability to complete the ~~possible impact~~sale of ~~these developments involving Ukraine and Russia and possible resulting disruptions~~our interest in the ~~capital markets~~Ilim joint venture under the terms of the agreement with our joint venture partners to purchase our interest (and, if we are unable to complete such a sale, on the value of and our ability to sell ~~all or a portion of~~ our ~~remaining equity stake in Sylvamo Corporation and the timing of any such sales; (iv) the impact of and developments related~~interest to the COVID-19 pandemic; (v) the level of our indebtedness and changes in interest rates; (vi) the impact of global and domestic economic conditions and industry conditions, including with respect to commercial activity, inflationary pressures and changes in the cost or availability of raw materials, energy sources and transportation sources, supply chain shortages and disruptions, the availability of labor, particularly in light of current labor market conditions which are exceptionally tight, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products, and conditions impacting the credit, capital and financial markets; (vii) domestic and global geopolitical conditions, changes in currency exchange rates, trade protectionist policies, downgrades in our credit ratings, and/or the credit ratings of banks issuing certain letters of credit, issued by

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~~recognized credit rating organizations; (viii) the amount of our future pension funding obligations, and pension and healthcare costs;~~another purchaser); (ix) unanticipated expenditures or other adverse developments related to compliance with existing and new environmental, tax, labor and employment, privacy, anti-bribery and anti-corruption, and other U.S. and non-U.S. governmental laws and regulations; (x) any material disruption at any of our manufacturing facilities or other adverse impact on our operations due to severe weather, natural disasters, climate change or other causes; (xi) risks inherent in conducting business through joint ventures; ~~(xii)~~(x) our ability to achieve the benefits expected from, and other risks associated with, acquisitions, joint ventures, divestitures, ~~spin-offs~~spinoffs and other corporate transactions, ~~(xiii)~~(xi) cybersecurity and information technology risks; ~~(xiv)~~(xii) loss contingencies and pending, threatened or future litigation, including with respect to environmental related matters; ~~(xv)~~(xiii) our exposure to claims under our agreements with Sylvamo Corporation; ~~(xvi)~~(xiv) our failure to realize the anticipated benefits of the spin-off of Sylvamo Corporation and the qualification of such spin-off as a tax-free transaction for U.S. federal income tax purposes; and ~~(xvii)~~(xv) our ability to attract and retain qualified ~~personnel.~~personnel, particularly in light of current labor market conditions. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements can be found in our press releases and SEC filings. In addition, other risks and uncertainties not presently known to the Company or that we currently believe to be immaterial could affect the accuracy of any forward-looking statements. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information relating to quantitative and qualitative disclosures about market risk is shown on pages ~~39-40~~41-42 of International Paper’s ~~2021 Form 10-K,~~Annual Report, which information is incorporated herein by reference. There have been no material changes in the Company’s exposure to market risk since December 31, ~~2021.~~2022.

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,~~Form 10-Q, 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 March 31, ~~2022~~2023 (the end of the period covered by this ~~report)~~Form 10-Q).

Changes in Internal Control over Financial Reporting:

There have been no changes in our internal control over financial reporting during the quarter ended March 31, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

A discussion of material developments inregarding certain legal proceedings involving the ~~Company’s litigation matters~~Company occurring in the period covered by this ~~report~~Form 10-Q is found inNote 1513 of the Condensed Notes to the Consolidated Financial Statements in this Form 10-Q, which is incorporated by ~~reference.~~reference herein. The Company is not subject to any administrative or judicial proceeding arising under any Federal, State or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that is likely to result in monetary sanctions of $1 million or more.

ITEM 1A.RISK FACTORS

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 (Part I, Item 1A) ~~other than as discussed below.~~

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

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

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

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

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

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

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in billions)
January 1, 2022 - January 31, 2022 2,210,462 $48.02 2,208,740 $2.82
February 1, 2022 - February 28, 2022 2,926,019 46.55 2,458,000 2.70
March 1, 2022 - March 31, 2022 4,263,950 43.63 4,263,950 2.52
Total 9,400,431


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share	Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in billions)
January 1, 2023 - January 31, 2023	213,568	$34.74	211,409	$3.15
February 1, 2023 - February 28, 2023	2,225,142	39.04	1,739,884	3.09
March 1, 2023 - March 31, 2023	2,313,792	35.88	2,314,259	3.00
Total	4,752,502

(a) ~~469,741~~486,951 shares were acquired from employees or board members as a result of share withholdings to pay income taxes under the Company's restricted stock program. The remainder ~~was~~were purchased under a share repurchase program. Under current Board authorization that was increased on October 12, 2021, we are authorized to purchase, in open market transactions (including block trades), privately negotiated transactions or otherwise, up to $3.3As of March 31, 2023 approximately $3.01 billion ofaggregate shares of our common ~~stock.~~stock remained authorized for repurchase under a previous Board authorization. This authorization was increased by our Board on October 11, 2022, up to a total of $3.35 billion shares. This repurchase program does not have an expiration date. ~~As of March 31, 2022, approximately $2.52 billion aggregate amount of shares of our common stock remained authorized for purchase under this program.~~

ITEM 3 . 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 . M ~~INE~~4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 . 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS


31.1						Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema.

101.CAL						XBRL Taxonomy Extension Calculation Linkbase.

101.DEF						XBRL Taxonomy Extension Definition Linkbase.

101.LAB						XBRL Taxonomy Extension Label Linkbase.

101.PRE						XBRL Extension Presentation Linkbase.

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

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Table of Contents

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 ~~29, 2022~~28, 2023	By	/s/ Tim S. Nicholls
		Tim S. Nicholls
		Senior Vice President and Chief Financial Officer

April ~~29, 2022~~28, 2023	By	/s/ ~~Vincent P. Bonnot~~Holly G. Goughnour
		~~Vincent P. Bonnot~~Holly G. Goughnour
		Vice President – Finance and Corporate Controller

4136


	Gain (Loss) Reclassified from AOCI Into Income (Effective Portion)				Location of Gain (Loss) Reclassified from AOCI (Effective Portion)
	Three Months Ended March 31,
In millions	2022		2021
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts	$	—	$	(3)	Discontinued operations, net of taxes
Total	$	—	$	(3)


	Gain (Loss) Recognized in Income				Location of Gain (Loss) In Statement of Operations
	Three Months Ended March 31,
In millions	2022		2021
Derivatives Not Designated as Hedging Instruments:
Electricity contract	$	8	$	2	Cost of products sold


Total	$	8	$	2