INTERNATIONAL PAPER CO NEW

NOTE 17 - RETIREMENT PLANS

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

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

The components of net periodic pension expense (income) other than the Service cost component are included in Non-operating pension expense (income) 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 madeno voluntary cash contributions to the qualified pension plan in the first nine months of 2024 or 2023. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled $16 million for the nine months ended September 30, 2024.

NOTE 18 - STOCK-BASED COMPENSATION

On February 13, 2024, the Company's Board of Directors, upon recommendation of the Management Development and Compensation Committee (the "Committee"), authorized adoption of a 2024 Long-Term Incentive Compensation Plan (the "2024 LTICP") to replace the 2009 Amended and Restated Incentive Compensation Plan (the "2009 Plan"), subject to shareholder approval at the Company's annual meeting of shareholders held on May 13, 2024. The 2024 LTICP became effective following approval by shareholders at the May 13, 2024 annual meeting and replaced the 2009 Plan. The 2024 LTICP authorized up to 9,250,000 shares of our Class A common stock, par value $1.00 per share, available for future grants in the form of restricted stock, restricted or deferred stock units, performance awards payable in cash or stock upon the attainment of specified performance goals, dividend equivalents, options, stock appreciation rights, other stock-based awards and cash-based awards at the discretion of the Committee. The LTICP is administered by the Committee. As of September 30, 2024,9.2 million shares were available for grant under the 2024 LTICP.

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

At September 30, 2024, $79 million, net of estimated forfeitures, of compensation cost related to time-based and performance-based shares and restricted stock attributable to future service had not yet been recognized. This amount will be recognized in expense over a weighted-average period of 1.5 years.

Long-Term Incentive Plan

During the first nine months of 2024, the Company granted 2.0 million performance units at an average grant date fair value of $35.25 and 1.4 million time-based units at an average grant date fair value of $36.15.

NOTE 19 - 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. Both segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the Forest Products industry.

Business segment operating profits (losses) 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 (losses) are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of 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 and nine months ended September 30, 2024 and 2023 were as follows:

Operating profit (loss) by business segment for the three months and nine months ended September 30, 2024 and 2023 were as follows:

NOTE 20 - SUBSEQUENT EVENT

The Company announced in the fourth quarter of 2024, the decision to review strategic options for our Global Cellulose Fibers (GCF) business. The decision to explore alternatives for the GCF business is consistent with the Company's strategy to focus on sustainable packaging solutions.

Additionally, the Company announced on October 31, 2024, the permanent closure of its Georgetown, South Carolina pulp mill. The mill will shut down in stages with a full closure expected by the end of 2024. The Company expects to recognize costs associated with the closure in the fourth quarter of 2024, including accelerated depreciation and pre-tax cash severance and other shutdown charges. The Company expects closure of this mill to reduce its workforce by approximately 675 employees. The Georgetown, South Carolina mill produces fluff pulp designed for a range of consumer applications. It also produces uncoated freesheet papers which it sells to Sylvamo under a strategic supply contract. The Company and Sylvamo mutually agreed to terminate this contract effective December 31, 2024.

Industrial Packaging

The Company completed the sale of the permanently closed Orange, Texas containerboard mill on October 31, 2024 for approximately $85 million in cash. The Company expects to recognize an approximate $60 million gain in the fourth quarter of 2024 on the sale of the mill.