INTERNATIONAL PAPER CO /NEW/

NOTE 1 SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

International Paper (the "Company") is a global producer of renewable fiber-based packaging products with primary

markets and manufacturing operations in North America and Europe and additional markets and manufacturing

operations in Latin America and North Africa. Substantially all of our businesses have experienced, and are likely to

continue to experience, cycles relating to available industry capacity and general economic conditions.

FINANCIAL STATEMENTS

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. Certain amounts from prior year have been reclassified to conform with the current year

financial statement presentation.

DS Smith

As a result of the acquisition of DS Smith, the Chief Operating Decision Maker (CODM) began reviewing and

managing the Company’s financial results and operations under a revised structure that reflects the scope of the

Company’s continuing operations: Packaging Solutions North America (PS NA) and Packaging Solutions EMEA (PS

EMEA). The PS EMEA segment includes the Company's legacy EMEA Industrial Packaging business and the

EMEA DS Smith business. As such, amounts related to the Company's legacy EMEA Industrial Packaging business

have been recast out of the Industrial Packaging segment into the new PS EMEA segment for all prior periods. The

North America DS Smith business has been included in the PS NA segment. Amounts related to the Company's

legacy North America Industrial Packaging business have been reported in the PS NA segment for all prior periods.

See Note 7 for further details regarding the DS Smith acquisition and Note 21 for further details regarding business

segments.

Global Cellulose Fibers Discontinued Operations

Following the announcement on August 21, 2025 of a definitive agreement to sell the Global Cellulose Fibers (GCF)

business, the GCF business is no longer a reportable segment and all current and historical operating results of the

GCF business are presented as Discontinued Operations, net of taxes, in the consolidated statements of

operations. All current and historical assets and liabilities of the Global Cellulose Fibers business are classified as

Assets held for sale and Long-Term Assets Held For Sale and Liabilities held for sale and Long-Term Liabilities Held

For Sale in the accompanying consolidated balance sheets. See Note 8 for further details regarding the Global

Cellulose Fibers business and discontinued operations.

DISCONTINUED OPERATIONS

A discontinued operation may include a component or a group of components of the Company's operations. A

disposal of a component or a group of components is reported in discontinued operations if the disposal represents

a strategic shift that has or will have a major effect on the Company's operations and financial results when the

following occurs: (1) a component (or group of components) meets the criteria to be classified as held for sale; (2)

the component or group of components is disposed of by sale; or (3) the component or group of components is

disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spin-off). For any

component classified as held for sale or disposed of by sale or other than by sale, qualifying for presentation as a

discontinued operation, the Company reports the results of operations of the discontinued operations (including any

gain or loss recognized on the disposal or loss recognized on classification as held for sale of a discontinued

operation), less applicable income taxes (benefit), as a separate component in the consolidated statements of

operations for current and all prior periods presented. The Company also reports assets and liabilities associated

with discontinued operations as separate line items on the consolidated balance sheets. The Company recorded

discontinued operations for the years ended December 31, 2025, 2024 and 2023 in connection with the sale of its

Global Cellulose Fibers business and for the year ended December 31, 2023 in connection with the sale of its equity

method investment in Ilim. See Note 8 and Note 11 for further details.

CONSOLIDATION

The consolidated financial statements include the accounts of International Paper and subsidiaries for which we

have a controlling financial interest, including variable interest entities for which we are the primary beneficiary. All

significant intercompany balances and transactions are eliminated.

EQUITY METHOD INVESTMENTS

The equity method of accounting is applied for investments when the Company has significant influence over the

investee’s operations, or when the investee is structured with separate capital accounts. Our material equity method

investments are described in Note 11.

OTHER-THAN-TEMPORARY IMPAIRMENT

The Company evaluates our equity method investments for other-than-temporary impairment ("OTTI") when

circumstances indicate the investment may be impaired. When a decline in fair value is deemed to be an OTTI, an

impairment is recognized to the extent that the fair value is less than the carrying value of the investment. We

consider various factors in determining whether a loss in value of an investment is other than temporary including:

the length of time and the extent to which the fair value has been below cost, the financial condition of the investee,

and our intent and ability to retain the investment for a period of time sufficient to allow for recovery of value.

Management makes certain judgments and estimates in its assessment including but not limited to: identifying if

circumstances indicate a decline in value is other than temporary, expectations about operations, as well as

industry, financial, regulatory and market factors.

BUSINESS COMBINATIONS

The Company allocates the total consideration of the assets acquired and liabilities assumed based on their

estimated fair value as of the business combination date. In developing estimates of fair values for long-lived

assets, including identifiable intangible assets, the Company utilizes a variety of inputs including forecasted cash

flows, anticipated growth rates, discount rates, customer attrition rates, estimated replacement costs and

depreciation and obsolescence factors. Determining the fair value for specifically identified intangible assets such as

customer relationships and lists and developed technology involves judgment. We may refine our estimates and

make adjustments to the assets acquired and liabilities assumed over a measurement period, not to exceed one

year. Upon the conclusion of the measurement period or the final determination of the values of assets acquired and

liabilities assumed, whichever comes first, any subsequent adjustments are charged to the consolidated statements

of operations. Subsequent actual results of the underlying business activity supporting the specifically identified

intangible assets could change, requiring us to record impairment charges or adjust their economic lives in future

periods. See Note 7 for further details.

RESTRUCTURING LIABILITIES AND COSTS

For operations to be closed or restructured, a liability and related expense is recorded when a present obligation

exists and the amount of the obligation can be reasonably estimated. For termination costs associated with

employees covered by a written or substantive plan, a liability is recorded when it is probable that employees will be

entitled to benefits and the amount can be reasonably estimated. For termination costs associated with employees

not covered by a written and broadly communicated policy covering involuntary termination benefits (severance

plan), a liability is recorded for costs to terminate employees (one-time termination benefits) when the termination

plan has been approved and committed to by management, the employees to be terminated have been identified,

the termination plan benefit terms are communicated, the employees identified in the plan have been notified and

actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or

that the plan will be withdrawn. The timing and amount of an accrual is dependent upon the type of benefits granted,

the timing of communication and other provisions that may be provided in the benefit plan. The accounting for each

termination is evaluated individually. See Note 6 for further details.

REVENUE RECOGNITION

Generally, the Company recognizes revenue on a point-in-time basis when the Company transfers control of the

goods to the customer. 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.

The Company’s revenue is primarily derived from fixed consideration; however, we do have contract terms that give

rise to variable consideration, primarily volume rebates, early payment discounts and other customer refunds. The

Company estimates its volume rebates at the individual customer level based on the most likely amount method

outlined in ASC 606 "Revenue from Contracts with Customers". The Company estimates early payment discounts

and other customer refunds based on the historical experience across the Company's portfolio of customers to

record reductions in revenue that is consistent with the expected value method outlined in ASC 606. Management

has concluded that these methods result in the best estimate of the consideration the Company will be entitled to

from its customers.

The Company has elected to present all sales taxes on a net basis, account for shipping and handling activities as

fulfillment activities, recognize the incremental costs of obtaining a contract as expense when incurred if the

amortization period of the asset the Company would recognize is one year or less, and not record interest income or

interest expense when the difference in timing of control or transfer and customer payment is one year or less. See

Note 3 for further details.

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 notice are treated as cash equivalents and are stated at

cost, which approximates market value. See Note 9 for further details.

INVENTORIES

Inventories include all costs directly associated with manufacturing products: materials, labor, and manufacturing

overhead. In the United States, costs of raw materials and finished paper products are generally determined using

the last-in, first-out method. These inventories are measured at the lower of cost or market. Other inventories are

valued using the first-in, first-out or average cost methods. These inventories are measured at the lower of cost or

net realizable value. See Note 9 for further details.

LEASED ASSETS

Operating lease right of use ("ROU") assets and liabilities are recognized at the commencement date of the lease

based on the present value of lease payments over the lease term. The Company's leases may include options to

extend or terminate the lease. These options to extend are included in the lease term when it is reasonably certain

that we will exercise that option. Some leases have variable payments, however, because they are not based on an

index or rate, they are not included in the ROU assets and liabilities. Variable payments for real estate leases

primarily relate to common area maintenance, insurance, taxes and utilities. Variable payments for equipment,

vehicles, and leases within supply agreements primarily relate to usage, repairs and maintenance. As the implicit

rate is not readily determinable for most of the Company's leases, the Company applies a portfolio approach using

an estimated incremental borrowing rate to determine the initial present value of lease payments over the lease

terms on a collateralized basis over a similar term, which is based on market and company specific information. We

use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate, and apply the rate

based on the currency of the lease, which is updated on a quarterly basis for measurement of new lease liabilities.

Leases having a lease term of twelve months or less are not recorded on the balance sheet and the related lease

expense is recognized on a straight-line basis over the term of the lease. In addition, the Company has applied the

practical expedient to account for the lease and non-lease components as a single lease component for all of the

Company's leases. See Note 10 for further details.

PLANTS, PROPERTIES AND EQUIPMENT

Plants, properties and equipment, net are stated at cost, less accumulated depreciation. Expenditures for

betterments are capitalized, whereas normal repairs and maintenance are expensed as incurred. Depreciation for

the majority of paper mills, as well as other plants and equipment, is calculated using the straight‑line method and

depreciation for certain paper mills is based on the units‑of‑production method. If a decision is made to abandon

plants, properties or equipment before the end of its useful life, depreciation expense is revised to reflect the

shortened useful life. See Note 9 for further details.

GOODWILL

Annual evaluation for possible goodwill impairment is performed as of the beginning of the fourth quarter of each

year, with additional interim evaluation performed when management believes that it is more likely than not, that

events or circumstances have occurred that would result in the impairment of a reporting unit’s goodwill.

The Company has the option to evaluate goodwill for impairment by first performing a qualitative assessment of

events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less

than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines that it

is not more likely than not that the fair value of a reporting unit is less than its carrying amounts, then the

quantitative goodwill impairment test is not required to be performed. If the Company determines that it is more

likely than not that the fair value of a reporting unit is less than its carrying amount, or if the Company does not elect

the option to perform an initial qualitative assessment, the Company is required to perform the quantitative goodwill

impairment test. In performing this evaluation, the Company estimates the fair value of its reporting unit using a

weighted approach based on discounted future cash flows and market multiples. The determination of fair value

using the discounted cash flow approach requires management to make significant estimates and assumptions

related to forecasts of future revenues, operating margins and discount rates. The determination of fair value using

market multiples requires management to make significant assumptions related to adjusted earnings before interest,

taxes, depreciation, and amortization ("EBITDA") multiples. For reporting units whose carrying amount is in excess

of their estimated fair value, the reporting unit will record an impairment charge by the amount that the carrying

amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting

unit.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that

indicate that the carrying value of the assets may not be recoverable. A recoverability test is performed by

comparing the undiscounted cash flows to carrying value of the assets. The inputs related to the undiscounted cash

flows requires judgments as to whether assets are held and used or held for sale, the weighting of operational

alternatives being considered by management and estimates of the amount and timing of expected future cash

flows from the use of the long-lived assets generated by their use. If the carrying amount is less than the

undiscounted cash flows, the fair value of the assets is compared to the carrying value to determine if they are

impaired. We estimate fair value using discounted cash flows and other valuation techniques as needed. Impaired

assets are recorded at their estimated fair value.

INCOME TAXES

International Paper uses the asset and liability method of accounting for income taxes whereby deferred income

taxes are recorded for the future tax consequences attributable to differences between the financial statement and

tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected

to apply to taxable income in the years in which those temporary differences are expected to be recovered or

settled. Deferred tax assets and liabilities are remeasured to reflect new tax rates in the periods rate changes are

enacted.

International Paper records its global tax provision based on the respective tax rules and regulations for the

jurisdictions in which it operates. Where the Company believes that a tax position is supportable for income tax

purposes, the item is included in its income tax returns. Where treatment of a position is uncertain, liabilities are

recorded based upon the Company’s evaluation of the “more likely than not” outcome considering technical merits

of the position based on specific tax regulations and facts of each matter. Changes to recorded liabilities are only

made when an identifiable event occurs that changes the likely outcome, such as settlement with the relevant tax

authority, the expiration of statutes of limitation for the subject tax year, change in tax laws, or recent court cases

that are relevant to the matter. Accrued interest related to these uncertain tax positions is recorded in our

consolidated statements of operations in Interest expense, net.

The judgments and estimates made by the Company are based on management’s evaluation of the technical merits

of a matter, assisted as necessary by consultation with outside consultants, historical experience and other

assumptions that management believes are appropriate and reasonable under current circumstances. Actual

resolution of these matters may differ from recorded estimated amounts, resulting in adjustments that could

materially affect future financial statements. See Note 13 for further details.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will

not be realized. Significant judgment is required in assessing the need for and magnitude of appropriate valuation

allowances against deferred tax assets. This assessment is completed by tax jurisdiction and relies on both positive

and negative evidence available, with significant weight placed on recent financial results. Cumulative reported pre-

tax income is considered objectively verifiable positive evidence of our ability to generate positive pre-tax income in

the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little or no weight

placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. When necessary, we

use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable

income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the

use of estimates are required when scheduling the reversal of deferred tax assets and liabilities, and the exercise is

inherently complex and subjective. The realization of these assets is dependent on generating future taxable

income, as well as successful implementation of various tax planning strategies.

International Paper uses the flow-through method to account for investment tax credits earned on eligible open-loop

biomass facilities and combined heat and power system expenditures. Under this method, the investment tax

credits are recognized as a reduction to income tax expense in the year they are earned rather than a reduction in

the asset basis.

ENVIRONMENTAL REMEDIATION COSTS

Costs associated with environmental remediation obligations are accrued when such costs are probable and

reasonably estimable. Such accruals are adjusted as further information develops or circumstances change. See

Note 14 for further details.

DERIVATIVES AND HEDGING

The Company and its subsidiaries are exposed to certain risks relating to its ongoing financial arrangements. The

Company uses derivative financial instruments, primarily commodity swaps and forward contracts, to manage

currency and commodity risks associated with the Company’s underlying business activities and the financing of

these activities. As a matter of policy, we do not use financial instruments for speculative purposes.

ASC 815 requires entities to recognize all derivative instruments as either assets or liabilities in the statement of

financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative

instrument depends on whether it has been designated and qualifies as part of a hedge accounting relationship and,

further, on the type of hedge accounting relationship. The cash flows related to derivatives and hedges are

classified in the same category as the underlying transaction.

For those derivative or nonderivative instruments that are designated and qualify as hedging instruments under ASC

815, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value

hedge, cash flow hedge, or a net investment hedge.

Gains or losses on cash flow hedges are deferred as a component of AOCL and are reclassified into earnings at the

time the hedged item affects earnings, presented in the same income statement line item as the underlying hedged

item (i.e., in “cost of products sold” when the hedged transactions are commodity cash flows associated with energy

purchases to facilitate operations). If it becomes probable that a forecasted transaction will not occur, previously

deferred gains and losses related to those forecasted transactions would be recognized in earnings in the current

period.

Gains and losses on net investment hedges are recorded in the cumulative translation adjustment component of

AOCL, offsetting the translation adjustment of the net investment being hedged. Any deferred gains or losses

previously recorded in the cumulative translation adjustment component of AOCL will remain in AOCL until the

hedged net investment is sold or substantially liquidated, at which time the cumulative deferred gains or losses are

reclassified into earnings as a component of gain or loss on the sale of the hedged net investment.

To qualify for hedge accounting, a specified level of hedge effectiveness between the hedging instrument and the

item being hedged must be achieved at inception and maintained throughout the hedged period. We formally

document our risk management objectives, our strategies for undertaking the hedge transactions, the nature of and

relationships between the hedging instruments and hedged items, and the method for assessing hedge

effectiveness. Additionally, for qualified hedges of forecasted transactions, we specifically identify the significant

characteristics and expected terms of the forecasted transactions. Our designated derivative contracts include

commodity swap contracts and forward contracts. Commodity swap contracts effectively modify the Company’s

exposure to changes in natural gas and electricity prices by allowing the Company to purchase energy on a fixed-

rate basis. Forward contracts effectively modify the Company’s exposure to fluctuations in the cost of carbon credits

by allowing the Company to purchase carbon credits on a fixed-rate basis. These agreements involve the receipt of

floating-rate amounts in exchange for fixed-rate amounts over the life of the agreements. See Note 17 for further

details.

TRANSLATION OF FINANCIAL STATEMENTS

Balance sheets of non-U.S. dollar functional currency entities are translated into U.S. dollars at year-end exchange

rates, while statements of operations are translated at average rates. Adjustments resulting from financial statement

translations are included as cumulative translation adjustments in Accumulated other comprehensive income (loss).

FAIR VALUE MEASUREMENTS

The guidance for fair value measurements and disclosures sets out a fair value hierarchy that groups fair value

measurement inputs into the following three classifications:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs other than quoted prices included within Level 1 that are observable for

the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability reflecting the reporting entity’s own assumptions or external

inputs from inactive markets.

Transfers between levels are recognized at the end of the reporting period.

NOTE 2 RECENT ACCOUNTING DEVELOPMENTS

Other than as described below, no new accounting pronouncement issued or effective during the fiscal year has had

or is expected to have a material impact on the consolidated financial statements.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

Income Taxes

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax

Disclosures." This guidance requires companies to enhance income tax disclosures, particularly around rate

reconciliations and income taxes paid information. This guidance is effective for annual reporting periods beginning

after December 15, 2024. The Company adopted this guidance on a prospective basis effective January 1, 2025 -

see Note 13 - Income Taxes for impacts to the related disclosures.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

Government Grants

In December 2025, the FASB issued ASU 2025-10, "Government Grants (Topic 832): Accounting for Government

Grants Received by Business Entities." This guidance establishes accounting for government grants received by a

business including guidance for grants related to assets and grants related to income. This guidance is effective for

annual reporting periods beginning after December 15, 2028 and interim periods within that fiscal year. Early

adoption is permitted. The Company is currently evaluating the provisions of this guidance.

Derivatives and Hedging

In November 2025, the FASB issued ASU 2025-09, "Derivatives and Hedging (Topic 815): Hedge Accounting

Improvements." This guidance includes changes to more closely align hedge accounting with the economics of an

entity's risk management activities. This guidance is effective for annual reporting periods beginning after December

15, 2026 and interim periods within that fiscal year. Early adoption is permitted. The Company is currently

evaluating the provisions of this guidance.

Intangible Assets

In September 2025, the FASB issued ASU 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software

(Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software." This guidance provides

criteria that must be met for entities to capitalize software development costs and factors to consider if there is

significant uncertainty associated with the development activities of the software. This guidance is effective for

annual reporting periods beginning after December 15, 2027 and interim periods within that fiscal year. Early

adoption is permitted. The Company is currently evaluating the provisions of this guidance.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income -

Expense Disaggregation Disclosures (Subtopic 220-40)." This guidance requires companies to provide more

detailed information of certain income statement expenses within the footnotes to the financial statements. This

guidance is effective for annual reporting periods beginning after December 15, 2026 and interim periods within

fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating

the provisions of this guidance.

NOTE 3 REVENUE RECOGNITION

DISAGGREGATED REVENUE

(a)Net sales are attributed to countries based on the location of the reportable segment making the sale.

(a) Net sales are attributed to countries based on the location of the reportable segment making the sale.

(a)Net sales are attributed to countries based on the location of the reportable segment making the sale.

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.

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$18 million and$30 million are included in Other

current liabilities in the accompanying consolidated balance sheet as of December 31, 2025 and 2024, respectively.

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 which we

have an unconditional right to payment or receive prepayment from the customer, respectively.

PERFORMANCE OBLIGATIONS AND SIGNIFICANT JUDGMENTS

International Paper's principal business is to manufacture and sell fiber-based packaging goods. As a general rule,

none of our businesses provide equipment installation or other ancillary services outside of producing and shipping

packaging products to customers.

The nature of the Company's contracts can vary based on the business, customer type and region; however, in all

instances it is International Paper's customary business practice to receive a valid order from the customer, in which

each parties' rights and related payment terms are clearly identifiable.

Contracts or purchase orders with customers could include a single type of product or it could include multiple

types/grades of products. Regardless, the contracted price with the customer is agreed to at the individual product

level outlined in the customer contracts or purchase orders. The Company does not bundle prices; however, we do

negotiate with customers on pricing and rebates for the same products based on a variety of factors (e.g. level of

contractual volume, geographical location, etc.).

Management has concluded that the prices negotiated with each individual customer are representative of the

stand-alone selling price of the product.

NOTE 4 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 (loss) 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

(loss) per share.

A reconciliation of the amounts included in the computation of basic earnings (loss) per share from continuing

operations and diluted earnings (loss) per share from continuing operations is as follows:

(a)4.5 million of securities were anti-dilutive for 2025 and were not included in the table.

NOTE 5 OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents changes in Accumulated Other Comprehensive Loss ("AOCL"), net of tax, reported in

the consolidated financial statements for the years ended December 31:

Reclassifications out of AOCL for the three years ended December 31 were as follows:

(a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost (see Note

19 - Retirement and Postretirement Plans for additional details).

(b) See Note 11 - Equity Method Investments for additional details for 2023 amounts.

NOTE 6 RESTRUCTURING CHARGES, NET

2025: During 2025, restructuring and other charges, net, totaling$626 million before taxes were recorded. The

(a) Includes severance charges of$18 million, the majority of which have been paid, inventory charges of$26 million and other charges of$40

million for the year ended December 31, 2025. Inventory charges of$19 million are recorded in Inventories, severance charges of$5 million are

recorded in Accrued payroll and benefits and other costs of$32 million are recorded in Other current liabilities and Other Liabilities in the

accompanying consolidated balance sheet as of December 31, 2025.

(b) Includes severance charges of$30 million, inventory charges of$38 million and other charges of$57 million for the year ended December 31,

2025. Severance charges of$12 million are recorded in Accrued payroll and benefits,$33 million of inventory charges are recorded in Inventories

and other costs of$56 million are recorded in Other current liabilities and Other Liabilities in the accompanying consolidated balance sheet as of

December 31, 2025. The remaining severance charges will be paid in 2026.

(c) Includes severance charges of$12 million, the majority of which have been paid, inventory charges of$29 million and other charges of$55

million for the year ended December 31, 2025. Severance charges of$4 million are recorded in Accrued payroll and benefits, inventory charges

of$25 million are recorded in Inventories and other costs of$16 million are recorded in Other current liabilities and Other Liabilities in the

accompanying consolidated balance sheet as of December 31, 2025.

(d) Includes costs of$262 million for the year ended December 31, 2025 for PS EMEA. Severance charges of$137 million are recorded in

Accrued payroll and benefits and other costs of$83 million are recorded in Other current liabilities and Other Liabilities in the accompanying

(e) Includes costs of$59 million for the year ended December 31, 2025 for PS NA. Severance charges of$47 million are recorded in Accrued

payroll and benefits in the accompanying consolidated balance sheet as of December 31, 2025. The severance charges are expected to be paid

within the next twelve months.

2024: During 2024, restructuring and other charges, net, totaling$103 million before taxes were recorded. The

(a)Severance and other costs related to the resource realignment component of our 80/20 approach. The severance charges are recorded in

Accrued payroll and benefits and Other Liabilities in the accompanying consolidated balance sheet. The majority of these charges were paid

in 2025.

2023: During 2023, restructuring and other charges, net, totaling$65 million before taxes were recorded. The

(a) Includes$25 million of severance charges,$30 million of inventory charges and $26 million of other costs associated with the closure of our

containerboard mill in Orange, Texas. The majority of the severance charges were paid in 2024.

(b) Revision of severance estimates related to our Building a Better IP initiative.

NOTE 7 ACQUISITIONS

On January 31, 2025, the Company completed its acquisition of the entire issued and to be issued share capital of

DS Smith, a leading provider of sustainable paper-based packaging solutions across Europe and North America.

This acquisition combinestwo complementary businesses to create a global leader in sustainable packaging

solutions with industry leading positions intwo geographies, Europe and North America. The acquisition is expected

to enhance the efficiency of the Company's core operations in North America with the integration of DS Smith’s

complementary U.S. business and strengthen the Company's capabilities to advance its strategy to be a truly global

sustainable packaging solutions leader.

Upon closing, IP issued 0.1285 shares for each DS Smith share, resulting in the issuance of 178,126,631 new

shares of IP common stock ("New Company Common Stock"). As a result of the share issuance, the holders of the

New Company Common Stock own approximately 34.1% of the Company's outstanding share capital. Based on the

issuance of 178,126,631 new shares and the closing price of 55.63 on the close of January 31, 2025, the total

purchase consideration for the completed acquisition was approximately$9.9 billion. Acquisition-related costs were

$96 million and$86 million for the years ended December 31, 2025 and December 31, 2024, respectively, and were

recorded in Selling and administrative expenses and Taxes other than payroll and income taxes in the

accompanying consolidated statements of operations. On February 4, 2025, the Company began trading the New

Company Common Stock and continues to be listed on the New York Stock Exchange under the trading symbol "IP"

and via a secondary listing on the London Stock Exchange under the trading symbol "IPC." The headquarters of the

combined company is based in Memphis, Tennessee, and the EMEA headquarters has been established at DS

Smith's existing main office in London.

The Company is accounting for the 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.

The following table summarizes the fair value assigned to assets and liabilities acquired as of January 31, 2025:

(a) Revisions to the preliminary purchase price allocation were made as the Company refined its initial estimates within the adjustment period.

These adjustments were not driven by events or changes that occurred after the acquisition date.

The fair value assigned to the assets and liabilities acquired above were measured using Level 2 and Level 3

inputs, which are further defined in Note 1. The estimated fair value of inventory was determined using the

Comparative Sales and Replacement Cost methods. Fair value estimates related to the trade name and patents

identified intangible assets were determined using the Relief from Royalty method. The fair value estimates related

to customer relationships and lists identified intangible assets were determined using the Multi-Period Excess

Earnings method. The plants, properties and equipment, specifically the machinery and equipment and buildings

and improvements, were valued using either the indirect or direct methods of the Cost Approach, while the land was

valued using the Sales Comparison Approach. The allocation of the consideration transferred to the assets acquired

and liabilities assumed has been finalized. Goodwill is not deductible for local income tax purposes and is primarily

related to the value of new customers through expansion opportunities not reflected in the fair value of the existing

customers relationships and the value of the intellectual property beyond selected life for trade names.

Since acquisition, Net sales of$7.9 billion and Net earnings (loss) of$(3.5) billion have been included in the

Company's consolidated statement of operations for the year ended December 31, 2025.

The identifiable intangible assets acquired in connection with the acquisition of DS Smith included the following:

(a) Of this balance,$57 million has been placed in service and$33 million is in development.

(b) Includes$10 million of intangible assets with indefinite lives.

Below are the consolidated results on an unaudited pro forma basis assuming the DS Smith acquisition had closed

on January 1, 2024:

The unaudited pro forma information for the twelve months ended December 31, 2025 includes additional

amortization expense on identifiable intangible assets of$16 million and additional depreciation expense on

identifiable fixed assets of$28 million and excludes the write-off of the estimated fair value of inventory of$30

million and the non-recurring integration costs associated with the acquisition of$113 million.

The unaudited pro forma information for the twelve months ended December 31, 2024 includes additional

amortization expense on identifiable intangible assets of$192 million, additional depreciation expense on

identifiable fixed assets of$336 million, incremental expense of$30 million associated with the write-off of the

estimated fair value of inventory and non-recurring integration costs associated with the acquisition of$113 million.

The unaudited pro forma consolidated financial information was prepared for comparative purposes only and

includes certain adjustments, as noted above. The adjustments are estimates based on currently available

information and actual amounts may have differed materially from these estimates. They do not reflect the effect of

costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma

information does not purport to represent International Paper's actual results of operations as if the transaction

described above would have occurred as of January 1, 2024, nor is it necessarily an indicator of future results.

In connection with the DS Smith acquisition, the European Commission issued its Phase I clearance of the business

combination between International Paper and DS Smith on January 31, 2025, with the condition that International

Paper commit to divest five European plants in Mortagne, Saint-Amand, and Cabourg (France), Ovar (Portugal) and

Bilbao (Spain). On June 30, 2025, the Company completed the sale of these locations to Palm Group of Germany

for€125 million (approximately$147 million at the June 30, 2025 exchange rate) in cash. In conjunction with the

completed sale, the Company recorded a net gain of$46 million for the year ended December 31, 2025, which is

included in Net (gains) losses on sales and impairments of businesses in the accompanying consolidated statement

of operations.

NOTE 8 -DIVESTITURE

On January 23, 2026, the Company completed the previously announced sale of its Global Cellulose Fibers

business to AIP for$1.5 billion, including the issuance of preferred stock with an aggregate initial liquidation

preference of$190 million. The fair value of the preferred stock is estimated using an income approach, which is

classified as Level 2 within the fair value hierarchy. The fair value is calculated as the probability-weighted present

value over all future modelled payoffs.

In conjunction with this previous announcement and subsequent sale, the Company recorded a net pre-tax charge

of$1.07 billion ($805 million after taxes) for the year ended December 31, 2025 related to the impairment of the

Global Cellulose Fibers business. This non-cash charge is included in Discontinued Operations, net of taxes in the

accompanying consolidated statements of operations.

All current and historical operating results of the Global Cellulose Fibers business are presented as Discontinued

Operations, net of taxes, in the consolidated statements of operations. All current and historical assets and liabilities

of the Global Cellulose Fibers business are classified as Assets held for sale and Long-Term Assets Held For Sale

and Liabilities held for sale and Long-Term Liabilities Held For Sale in the accompanying consolidated balance

sheets.

The following summarizes the major classes of line items comprising Earnings (Loss) Before Income Taxes and

Equity Earnings reconciled to Discontinued Operations, net of taxes, related to the Global Cellulose Fibers business

for all current and prior periods presented in the consolidated statements of operations:

The following summarizes the major classes of assets and liabilities of the Global Cellulose Fibers business and

reconciled to Assets held for sale and Liabilities held for sale as of December 31, 2025 in the accompanying

The impairment charge represents the adjustment to reduce the carrying value of the disposal group to the fair

value of the disposal group, defined as the sale price less estimated selling costs, which are Level 2 inputs.

The following summarizes the major classes of assets and liabilities of the Global Cellulose Fibers business and

reconciled to Assets held for sale, Long-Term Assets Held For Sale, Liabilities held for sale and Long-Term

Liabilities Held For Sale as of December 31, 2024 in the accompanying consolidated balance sheet:

The following summarizes the cash provided by (used for) operations and cash provided by (used for) investment

activities related to the Global Cellulose Fibers business and included in the consolidated statements of cash flows:

NOTE 9 SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

TEMPORARY INVESTMENTS

Temporary investments totaled$477 million and$892 million at December 31, 2025 and 2024, respectively.

ACCOUNTS AND NOTES RECEIVABLE

Accounts and notes receivable, net, by classification were:

As a result of the DS Smith acquisition, IP has a trade receivable factoring program that allows the Company to sell

trade receivables without recourse.

INVENTORIES

The last-in, first-out inventory method is used to value most of International Paper’s U.S. inventories. Approximately

56% of total raw materials and finished products inventories were valued using this method. The last-in, first-out

inventory reserve was$327 million and$272 million at December 31, 2025 and 2024, respectively.

PLANTS, PROPERTIES AND EQUIPMENT

Non-cash additions to plants, properties and equipment included within accounts payable were$240 million,$94

million and$132 million at December 31, 2025,2024 and 2023, respectively.

Annual straight-line depreciable lives generally are, for buildings -20 to 40 years, and for machinery and equipment

-3 to 20 years. Depreciation expense was$2.5 billion,$831 million and$1.1 billion for the years ended

December 31, 2025,2024 and 2023, respectively. Depreciation expense for the years ended December 31, 2025,

2024 and 2023 includes$958 million,$11 million and$347 million, respectively, of accelerated depreciation related

to mill and plant closures and other 80/20 actions. Cost of products sold excludes depreciation and amortization

expense.

ACCOUNTS PAYABLE

Under a supplier finance program, International Paper agrees to pay the relevant banks the stated amount of

confirmed invoices from its designated suppliers on the original maturity dates of the invoices. International Paper or

the relevant banks may terminate the agreement on notice periods from 28 to 90 days. The supplier invoices that

have been confirmed as valid under the program require payment in full on the due date with no terms exceeding

180 days. Theaccounts payable balance included$368 million and$90 million of supplier finance program liabilities

as of December 31, 2025 and 2024, respectively.

The following table presents supplier finance program obligations confirmed and paid for the years ended

December 31, 2025 and 2024:

INTEREST

Interest payments of$550 million,$437 million and$459 million were made during the years ended December 31,

2025,2024 and 2023, respectively.

Amounts related to interest were as follows:

ASSET RETIREMENT OBLIGATIONS

At December 31, 2025 and 2024, we had recorded liabilities of$193 million and$88 million, respectively, related to

asset retirement obligations.

In connection with potential future closures or redesigns of certain production facilities, it is possible that the

Company may be required to take steps to remove certain materials from these facilities. Applicable regulations and

standards provide that the removal of certain materials would only be required if the facility were to be demolished

or underwent major renovations. At this time, any such obligations have an indeterminate settlement date, and the

Company believes that adequate information does not exist to apply an expected-present-value technique to

estimate any such potential obligations. Accordingly, the Company does not record a liability for such remediation

until a decision is made that allows reasonable estimation of the timing of such remediation.

NOTE 10 LEASES

International Paper leases various real estate, including certain operating facilities, warehouses, office space and

land. The Company also leases material handling equipment, vehicles, and certain other equipment. The

Company's leases have remaining lease terms of up to 28 years.

COMPONENTS OF LEASE EXPENSE

SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES

(a)Finance leases are recorded net of accumulated amortization of$69 million and$59 million at December 31, 2025 and 2024, respectively.

LEASE TERM AND DISCOUNT RATE

SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES

MATURITY OF LEASE LIABILITIES

NOTE 11 EQUITY METHOD INVESTMENTS

The Company accounted for the following investment under the equity method of accounting.

ILIM S.A. ("Ilim")

On September 18, 2023, pursuant to a previously announced agreement, the Company completed the sale of its

50% equity interest in Ilim S.A. ("Ilim"), which was a joint venture that operated a pulp and paper business in Russia

and its subsidiaries including Ilim Group, to its joint venture partners for$484 million in cash. The Company also

completed the sale of all of its Ilim Group shares (constituting a 2.39% stake) for$24 million, and divested other

non-material residual interests associated with Ilim, to its joint venture partners. Following the completed sales, the

Company no longer has an interest in Ilim or any of its subsidiaries. Additionally, we incurred transaction fees of$36

million in the third quarter of 2023 in connection with the sale of our investment.

The Company reclassified currency translation adjustments in AOCL of$517 million to the investment at the

completion of the transaction.

All historical results of the Ilim investment are presented as Discontinued Operations, net of taxes in the

The following summarizes the items comprising Equity Earnings, Impairment Charges, Tax Expense (Benefit),

Discontinued Operations and Dividends related to the sale of our equity interest in Ilim:

(a)Discontinued operations, net of taxes is Equity Earnings less Impairment Charges and Tax Expense (Benefit).

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

NOTE 12 GOODWILL AND OTHER INTANGIBLES

GOODWILL

The following table presents changes in the goodwill balances as allocated to each reportable business segment for

the years ended December 31, 2025 and 2024:

(a) Reflects the acquisition of DS Smith. See Note 7 - Acquisitions for further details.

(b) Reflects PS EMEA Impairment losses and PS NA write-offs of previously impaired goodwill of$237 million and accumulated

impairment losses of$(237) million.

The Company completed its annual goodwill impairment testing for the Packaging Solutions North America (PS NA)

and Packaging Solutions EMEA (PS EMEA) reporting units as of October 1, 2025. Based on this assessment, no

impairment was identified for either reporting unit.

During the fourth quarter of 2025, the Company identified a triggering event as part of its annual strategic review,

driven by updated macroeconomic and industry outlooks, as well as the Company’s evaluation of a potential

separation into two independent, publicly traded companies. In response, the Company performed a quantitative

goodwill impairment test for the PS NA and PS EMEA reporting units, comparing each reporting unit’s carrying value

to its estimated fair value.

Estimated fair values were determined using discounted future cash flows and market multiples, which use inputs

that are classified within Level 2 and Level 3 of the fair value hierarchy. The discounted cash flow approach requires

significant management judgments, including assumptions related to forecasts of future revenues, operating

margins and discount rates. The market‑multiple approach similarly requires significant assumptions regarding

adjusted EBITDA multiples.

The quantitative impairment test concluded that the carrying amount of the PS EMEA reporting unit exceeded its

estimated fair value. As a result, the Company recorded a goodwill impairment charge of approximately

$2.47 billion, which is reflected in Impairment of goodwill in the accompanying consolidated statement of operations.

The carrying amount of the PS NA reporting unit did not exceed its estimated fair value, andno impairment was

recorded for that reporting unit.

OTHER INTANGIBLES

Identifiable intangible assets are recorded in Deferred Charges and Other Assets in the accompanying consolidated

balance sheets and comprised the following:

(a) Of this balance,$76 million has been placed in service and$27 million is in development.

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

Based on current intangibles subject to amortization, estimated amortization expense for each of the succeeding

years is as follows:

NOTE 13 INCOME TAXES

The components of International Paper’s earnings from continuing operations before income taxes and equity

earnings by taxing jurisdiction were as follows:

The provision (benefit) for income taxes from continuing operations (excluding noncontrolling interests) by taxing

jurisdiction was as follows:

The Company’s deferred income tax provision (benefit) includes a$(1) million benefit, a$1 million expense and a

$(6) million benefit for 2025,2024 and 2023, respectively, for the effect of various changes in non-U.S. and U.S.

state tax rates.

In 2025, International Paper made income tax payments (net of refunds) of$161 million, consisting of$39 million of

U.S. Federal tax payments,$13 million of U.S. state and local income tax payments and$109 million of non-U.S.

tax payments. Of these amounts, income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid

(net of refunds) in the following jurisdictions:

The Company made income tax payments, net of refunds, of$394 million and$340 million in 2024 and 2023,

respectively.

The following table reconciles income tax expense using the statutory U.S. Federal income tax rate to the

consolidated income tax provision and reported effective tax rate in 2025:

(a) State taxes in California, Georgia, Illinois, Louisiana, Mississippi, New Jersey, Tennessee, and Wisconsin made up the majority (greater than

50%) of the tax effect in this category.

The following table reconciles income tax expense using the statutory U.S. Federal income tax rate to the

consolidated income tax provision and reported effective tax rate in 2024 and 2023:

The tax effects of significant temporary differences, representing deferred income tax assets and liabilities at

December 31, 2025 and 2024, were as follows:

(a)The net change in the total valuation allowance for the years ended December 31, 2025 and 2024 was an increase of$334 million and an

increase of$353 million, respectively.

(b)The net deferred income tax liability for the years ended December 31, 2025 and 2024 includes net deferred tax liability of$42 million and

$44 million included in held for sale.

Deferred income tax assets and liabilities are recorded in the accompanying consolidated balance sheets under the

captions Deferred charges and other assets and Deferred income taxes, respectively. The$487 million of deferred

tax liabilities for forestlands, related installment sales, and investment in subsidiary is attributable to a 2007 Temple-

Inland installment sale of forestlands (see Note 15 - Variable Interest Entities).

During 2025, the Company incurred a$2.47 billion impairment charge related to the PS EMEA business segment.

The impairment charge results in a deferred tax asset related to the investment in its PS EMEA subsidiaries. The

Company intends to realize a portion of this deferred tax asset in 2026 for which a capital loss will be recognized for

U.S. federal and state income tax purposes. A valuation allowance is recognized on the deferred tax asset to the

extent the capital loss exceeds anticipated future capital gains. This results in the recognition of a net tax benefit of

$271 million.

During 2024, the Company completed an internal legal entity restructuring for which a capital loss was recognized

for U.S. federal and state income tax purposes resulting in a tax benefit of$401 million. The Company intends to

carry back a portion of the loss to prior years and has set up a receivable in the amount of$265 million. The

remaining capital loss will be carried forward to offset future capital gains, and, as such, the Company recorded a

deferred tax asset in the amount of$136 million for the year ended December 31, 2025.

A reconciliation of the beginning and ending amount of unrecognized tax benefits recorded in Other Liabilities in the

accompanying consolidated balance sheet for the years ended December 31, 2025,2024 and 2023 is as follows:

If the Company were to prevail on the unrecognized tax benefits recorded, substantially all of the balances at

December 31, 2025,2024 and 2023 would benefit the effective tax rate.

The Company accrues interest on unrecognized tax benefits as a component of interest expense. Penalties, if

incurred, are recognized as a component of income tax expense. The Company had approximately$92 million and

$50 million accrued for the payment of estimated interest and penalties associated with unrecognized tax benefits at

December 31, 2025 and 2024, respectively.

The Company is currently subject to audits in the United States and other taxing jurisdictions around the world.

Generally, tax years 2012 through 2024 remain open and subject to examination by the relevant tax authorities. The

Company frequently faces challenges regarding the amount of taxes due. These challenges include positions taken

by the Company related to the timing, nature, and amount of deductions and the allocation of income among

various tax jurisdictions.

On September 3, 2024, the Company received the Unagreed Revenue Agent Report from the Internal Revenue

Service relating to investment tax credits for the 2017-2019 years that currently are under examination. The

estimated net incremental tax liability associated with the proposed adjustments would be approximately$50

million. The Company disagrees with the proposed adjustments and initiated the administrative appeals process on

October 30, 2024 with the filing of our Protest of the proposed adjustments. An unfavorable resolution in the

administrative appeals process or future tax litigation could result in cash tax payments and could adversely impact

the effective tax rate.

On July 4, 2025, the United States enacted the One Big Beautiful Bill Act (“OBBBA”). The OBBBA made significant

tax law changes, including the extension of certain provisions of the 2017 Tax Cuts and Jobs Act, modifications to

the U.S. international tax framework and the reinstatement of favorable treatment for certain business-related

deductions. The tax provisions of the OBBBA have staggered effective dates beginning in 2025 and extending

through 2027. The OBBBA did not have a material impact on the Company’s income tax provision or effective tax

rate for the year ended December 31, 2025.

The Company provides for foreign withholding taxes and any applicable U.S. state income taxes on earnings

intended to be repatriated from non-U.S. subsidiaries, which we believe will be limited in the future to each year's

current earnings. No provision for these taxes on undistributed earnings of non-U.S. subsidiaries as of

December 31, 2025 has been made, as these earnings are considered indefinitely invested. Determination of the

amount of taxes that might be paid on these undistributed earnings if eventually remitted in a taxable manner is not

practicable.

If management decided to monetize the Company’s foreign investments, we would recognize the tax cost related to

the excess of the book value over the tax basis of those investments. This would include foreign withholding taxes

and any applicable U.S. Federal and state income taxes. Determination of the tax cost that would be incurred upon

monetization of the Company’s foreign investments is not practicable; however, we do not believe it would be

material.

The following details the scheduled expiration dates of the Company’s net operating loss and income tax credit and

capital loss carryforwards:

(a)State amounts are presented net of federal benefit.

NOTE 14 COMMITMENTS AND CONTINGENT LIABILITIES

General

The Company is involved in various 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, that arise in the normal course of business. These matters may raise difficult and

complicated legal issues and may be subject to many uncertainties and complexities. Moreover, some of these

matters allege substantial or indeterminate monetary damages.

International Paper reviews inquiries, administrative proceedings and litigation, including with respect to

environmental matters, on an ongoing basis and establishes an estimated liability for specific legal proceedings and

other loss contingencies when it determines that the likelihood of an unfavorable outcome is probable, and the

amount of the loss can be reasonably estimated. In addition, if the likelihood of an unfavorable outcome with respect

to material loss contingencies is reasonably possible and International Paper is able to determine an estimate of the

possible loss or range of loss, whether in excess of a related accrued liability of where there is no accrued liability,

International Paper will disclose the estimate of the possible loss or range of loss. When no amount in a range of

loss is more likely than any other amount in the range, the low end of the range is used as the estimate of the

possible loss. International Paper’s assessment of whether a loss is probable is based on management’s

assessment of the ultimate outcome of the matter.

Assessments of lawsuits and claims and the estimates reflected herein, are subject to significant judgments about

future events, rely heavily on estimates and assumptions, and are otherwise subject to significant known and

unknown uncertainties. The matters underlying such estimates may change from time to time and actual losses may

vary significantly from current estimates. Additionally, the estimated liability for loss contingencies does not include

matters or losses that are not reasonably estimable and probable.

Based on information currently known to International Paper, management believes that loss contingencies arising

from pending matters, including the matters described herein, will not have a material adverse effect on the

consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in

such matters, some of which are beyond the Company's control, and the large or indeterminate damages sought in

some of these matters, a future adverse ruling, settlement, unfavorable development, or increase in accruals with

respect to these matters could result in future charges that could be materially adverse to the Company's results of

operations or cash flows in any particular reporting period.

Environmental

The Company has been named as a potentially responsible party ("PRP") in environmental remediation actions

under various U.S. federal and state laws, including the Comprehensive Environmental Response, Compensation

and Liability Act of 1980, as amended ("CERCLA"). Many involve cleanup of hazardous substances at large

commercial landfills that received waste from multiple sources. Liability for CERCLA cleanups is typically allocated

among the PRPs. There are other remediation costs typically associated with the cleanup of hazardous substances

at the Company’s current, closed and formerly-owned facilities, and recorded as liabilities in the consolidated

balance sheets.

Remediation costs are recorded in the consolidated financial statements when they become probable and

reasonably estimable. Reserve amounts may decline as remediation spending occurs. International Paper’s

estimated probable liability for these environmental matters, totaled approximately$270 million and$279 million in

the aggregate as of December 31, 2025 and December 31, 2024, respectively.

Cass Lake: One matter involves a closed wood-treatment facility located in Cass Lake, Minnesota . The Company

is performing remedial action ("RA") and continues to cooperate with the U.S. Environmental Protection Agency

(“EPA”) on the remaining remediation goals. The estimated liability for the Cass Lake superfund site was$47 million

and$48 million as of December 31, 2025 and December 31, 2024, respectively.

Kalamazoo River: The Company is a PRP for the Allied Paper, Inc./Portage Creek/Kalamazoo River Superfund

Site in Michigan, related to polychlorinated biphenyls contamination linked in part to a paper mill formerly owned by

St. Regis Paper Company ("St. Regis"), to which the Company is a successor.

•Operable Unit 5, Area 1 (“OU5”): In 2016, the EPA issued a special notice letter and a unilateral

administrative order ("UAO") directing PRPs to perform the remedy and seeking$37 million in

reimbursement costs. The Company continues to comply with the UAO while preserving defenses.

•Operable Unit 1 ("OU1"): The EPA issued a Record of Decision (“ROD”) in 2016 and initiated RA activities in

2021. The Company received a UAO in 2022 and began performing the RA in 2023. Reserves of$27

million were established in 2022, increased by$27 million in 2024, and increased by$7 million in 2025 to

account for the reasonably estimable costs for the next phases of the RA.

The total combined reserve for liabilities for OU5, Area 1 and OU1 was$20 million and$29 million as of

December 31, 2025 and December 31, 2024, respectively.

The Company, along with NCR Corporation and Weyerhauser, 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 related to the Company's potential CERCLA liability. The lawsuit

seeks contribution under CERCLA for approximately$79 million in past cleanup costs and unspecified future

remediation costs. Although a district court initially fixed the past cost amount at approximately$50 million (plus

interest to be determined) with 15% of those past costs allocated to the Company, the Sixth Circuit Court of Appeals

(the "Sixth Circuit") ultimately found the lawsuit was time-barred. GP attempted further appeals, but the U.S.

Supreme Court declined review. GP later sought a ruling that all parties were jointly and severally liable for future

costs. The District Court agreed, but on appeal the Sixth Circuit vacated that decision as well. The U.S. Supreme

Court denied GP’s petition for certiorari in October 2025, making the Sixth Circuit’s ruling final.

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 actively participate in activities at the site and share costs.

The Company initially reserved$65 million for estimated remediation costs: (a)$10 million for the southern

impoundment; and (b)$55 million for the northern impoundment. The reserve represented the Company's 50%

share of our estimate of the low end of the range of probable remediation costs. Reserves increased from

2020-2025 as completion of engineering estimates and higher than expected southern impoundment waste

volumes increased projected costs. The Company substantially completed the RA for the southern impoundment in

With respect to the northern impoundment, design revisions in 2024 and 2025 resulted in an increase to the reserve

of$27 million. The total estimated liability for the southern and northern impoundment was$97 million and$98

million as of December 31, 2025 and December 31, 2024, respectively. The current reserve primarily reflects the

Company’s 50% share of our estimate of the low end of the range of probable costs for the northern impoundment.

Additional losses in excess of our recorded liability are possible due to uncertainties in future cost, timing and the

development of additional site technical data pertaining to geotechnical, hydrological and other environmental

conditions.

Versailles Pond: The Company is a responsible party for the investigation and remediation of Versailles Pond, a

57-acre dammed river impoundment in Sprague, Connecticut contaminated with polychlorinated biphenyls, mercury,

and metals.. A preliminary remediation plan was developed in 2023 and a$30 million reserve established.

Negotiations with state and federal governmental officials about scope and timing of the remediation are ongoing.

The total estimated liability for Versailles Pond was$29 million and$30 million as of December 31, 2025 and

December 31, 2024, respectively.

Asbestos-Related Matters

We have been named as a defendant in various asbestos-related personal injury litigation, in both U.S. state and

federal court, primarily in relation to the prior operations of certain companies previously acquired by the Company.

The Company's total recorded liability with respect to pending and future asbestos-related claims was$103 million

and$100 million net of insurance recoveries as of December 31, 2025 and December 31, 2024, 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

On July 29, 2025,12 containerboard producers, including International Paper, were named as defendants in a

purported class action complaint that alleges a civil violation of Sections 1 and 3 of the Sherman Act. The suit is

captioned Artuso Pastry Foods Corp v. Packaging Corp. of America (N.D. Ill.). The complaint alleges that the

defendants, beginning in November 1, 2020 through the time of filing, conspired to fix, raise, maintain, and/or

stabilize prices of containerboard products and finished packaging products made from containerboard. The alleged

class is formed from persons who purchased containerboard products directly from one or more defendants for use

or delivery in the United States during the period November 1, 2020 to the present. The complaint seeks to recover

an unspecified amount of treble damages, injunctive relief, attorneys’ fees and actual damages on behalf of the

purported class.

Given the early stage of the claim and our intention to defend robustly against such claim, it is too early to predict or

reasonably estimate the overall outcome or ultimate potential liability (if any) that might be incurred. There can be

no guarantee that the aggregate of possible damages could not have a material impact on our financial condition.

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 International Paper's Italian packaging subsidiary ("IP Italy") and certain subsidiaries of DS

Smith operating in Italy ("DS Smith Italy"), improperly coordinated the production and sale of corrugated sheets and

boxes. In August 2019, the ICA issued its decision and assessed IP Italy a fine of€29 million (approximately$31

million at the then-current exchange rates) for participation in the boxes coordination, which was recorded in the

third quarter of 2019. Following a series of appeals by IP Italy to the Italian Council of State, IP Italy's fine was

reduced by€6 million (approximately$6 million). As of December 31, 2025, after giving effect to this development,

the Company did not have any remaining liability related to IP Italy's fine. IP Italy has further appealed the most

recent decision (in July 2024) seeking further reduction. DS Smith Italy was also subject to the ICA decision but not

fined, given its position as leniency applicant. IP Italy, DS Smith Italy, and other producers also have been named in

lawsuits, and we have received other claims, by a number of customers for damages associated with the alleged

anticompetitive conduct. Given the early stages of these claims and the intention of the Company to defend robustly

against such claims, it is too early to predict the overall outcome and ultimate potential liability (if any) that might be

incurred in connection therewith, and there can be no guarantee that the aggregate of possible damages against IP

Italy and DS Smith Italy could not, together, have a material impact on the Company’s financial condition.

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"), which was a wholly

owned subsidiary of the Company 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$106 million (adjusted for variation in currency exchange rates) in tax, plus

interest, penalties and fees. The interest, penalties and fees currently total approximately$288 million (adjusted for

variation in currency exchange rates). Accordingly, the assessments currently total approximately$394 million

(adjusted for variation in currency exchange rates). After 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 appealed these decisions. On October 11, 2024, the federal regional court issued a

ruling favorable to Sylvamo Brazil in the first stage of judicial review on the assessments for tax years 2007 and

2008-2012, comprising approximately$250 million of the total$394 million as of December 31, 2025. On December

18, 2024, the Brazilian Federal Revenue Service appealed this ruling. 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 should be sustained, based on Brazilian tax law.

This matter pertains to a business that was conveyed to Sylvamo on 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,

the Company will 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 tax

matters 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 thus has no control over any decision

related to this ongoing litigation. The Company intends to vigorously defend this historical 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 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 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 was$48 million and remains this amount at

December 31, 2025. This liability will not be increased in subsequent periods unless facts and circumstances

change such that an amount greater than the initial recognized liability becomes probable and estimable.

NOTE 15 VARIABLE INTEREST ENTITIES

In connection with the acquisition of Temple-Inland in February 2012, two special purpose entities became wholly-

owned subsidiaries of International Paper. The use of thetwo wholly-owned special purpose entities discussed

below preserved the tax deferral that resulted from the 2007 Temple-Inland timberlands sales. As of December 31,

2025, this deferred tax liability was$487 million, which will be settled with the maturity of the notes in 2027.

In October 2007, Temple-Inland sold 1.55 million acres of timberland for$2.4 billion. The total consideration

consisted almost entirely of notes due in 2027 issued by the buyer of the timberland, which Temple-Inland

contributed totwo wholly-owned, bankruptcy-remote special purpose entities. The notes are shown in Long-term

financial assets of variable interest entities in the accompanying consolidated balance sheet and are supported by

$2.4 billion of irrevocable letters of credit issued bythree banks, which are required to maintain minimum credit

ratings on their long-term debt.

In December 2007, Temple-Inland'stwo wholly-owned special purpose entities borrowed$2.1 billion which is shown

in Long-term nonrecourse financial liabilities of variable interest entities. The loans are repayable in 2027 and are

secured by the$2.4 billion of notes and the irrevocable letters of credit securing the notes, and are nonrecourse to

us. The loan agreements provide that if a credit rating of any of the banks issuing the letters of credit is downgraded

below the specified threshold, the letters of credit issued by that bank must be replaced within 30 days with letters of

credit from another qualifying financial institution.

As of both December 31, 2025 and 2024, the fair value of the notes receivable was$2.3 billion. As of both

December 31, 2025 and 2024, the fair value of this debt was$2.1 billion. The notes receivable and debt are

classified as Level 2 within the fair value hierarchy.

Activity between the Company and the 2007 financing entities was as follows:

(a)The revenue is included in Interest expense, net, in the accompanying consolidated statements of operations and includes approximately

$19 million for the years ended December 31, 2025,2024 and 2023, respectively, of accretion income for the amortization of the purchase

accounting adjustment on the Financial assets of variable interest entities.

(b)The expense is included in Interest expense, net, in the accompanying consolidated statements of operations and includes approximately

$7 million for the years ended December 31, 2025,2024 and 2023, respectively, of accretion expense for the amortization of the purchase

accounting adjustment on the Long-term nonrecourse financial liabilities of variable interest entities.

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

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

NOTE 16 DEBT AND LINES OF CREDIT

The borrowing capacity of the Company's commercial paper program is$1.0 billion supported by its$1.4 billion

credit agreement. Under the terms of this 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. The

Company hadno borrowings outstanding as of December 31, 2025 and December 31, 2024 under this program.

At December 31, 2025, the Company's credit facilities totaled$1.9 billion, excluding the DS Smith credit facilities

discussed below. The credit facilities generally provide for interest rates at a floating rate index plus a pre-

determined margin dependent upon International Paper's credit rating. The credit facilities include a$1.4 billion

contractually committed bank facility with a maturity date of June 2028. The liquidity facilities also include up to$500

million of uncommitted financings based on eligible receivables balances under a receivable securitization program

that expires in June 2026. As of December 31, 2025 and December 31, 2024, the Company hadno borrowings

outstanding under the program.

Below is a table of the foreign denominated credit facilities:

Following the DS Smith acquisition, International Paper assumed foreign denominated debt of DS Smith in various

currencies with an approximated value of$3.6 billion. In March 2025, the Company amended and restated DS

Smith's credit facility agreements and entered into agreements to guarantee the outstanding notes of DS Smith.

A summary of all long-term debt follows:

(a)The weighted average interest rate on these notes was 4.0% in 2025 and 4.6% in 2024.

(b)The weighted average interest rate on these bonds was 3.7% in 2025 and 2.8% in 2024.

(c)The fair market value was approximately$9.6 billion at December 31, 2025 and$5.2 billion at December 31, 2024. Debt fair value

measurements use Level 2 inputs.

At December 31, 2025, contractual obligations for future payments of debt maturities (including finance lease

liabilities disclosed in Note 10 - Leases and excluding the timber monetization structures disclosed in Note 15 -

Variable Interest Entities) by calendar year were as follows over the next five years:2026 –$992 million;2027 –

$2.6 billion;2028 –$739 million;2029 –$381 million; and 2030 –$807 million.

The Company’s financial covenants require the maintenance of a minimum net worth, as defined in our debt

agreements, of$9.0 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 December 31, 2025, we were in compliance with our

debt covenants.

NOTE 17 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.

International Paper periodically uses derivatives and other financial instruments to hedge exposures to interest rate,

commodity and currency risks. International Paper does not hold or issue financial instruments for trading purposes.

For hedges that meet the hedge accounting criteria at inception, International Paper formally designates and

documents the instrument as a fair value hedge, a cash flow hedge or a net investment hedge of a specific

underlying exposure.

Commodity Risk Management

The Company has entered into commodity swap and commodity forward contracts which have been designated as

cash flow hedges of commodity price risk associated with forecasted purchases and sales of various commodities

used in the Company’s operations. These commodity contracts are used to manage exposure to changes in natural

gas, electricity, and carbon credit prices. Individual commodity contracts are entered into up to three years prior to

the occurrence of the hedged transactions.

Foreign Currency Risk Management

The Company and its subsidiaries periodically use non-derivative, foreign currency denominated loans to hedge the

Company’s foreign currency exposure related to the translation of its net investment in foreign subsidiaries. Certain

of these loans are designated as net investment hedges.

The component of the gains and losses on our net investment in these designated foreign operations, driven by

changes in foreign exchange rates, are economically offset by remeasurements of our foreign-currency

denominated debt.

The notional amounts of financial instruments used in hedging transactions were as follows:

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

Based on our valuation at December 31, 2025, and assuming market rates remain constant through contract

maturities, we expect transfers to earnings of the existing gain or losses reported in AOCL on cash flow hedges

during the next 12 months to correspond with the current assets and liabilities portion of the derivative as disclosed

below.

The amounts of gains and losses recognized in the consolidated statements of operations on financial instruments

used in hedging transactions were as follows:

Fair Value Measurements

The Company uses the discounted cash flow valuation methodology for measuring the fair value of any financial

assets or liabilities. Transfers between levels, if any, are recognized at the end of the reporting period. International

Paper’s derivatives are classified as Level 2 within the fair value hierarchy. Fair value hierarchies are further defined

in Note 1.

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

(a)Includes$47 million recorded in Other current assets and$22 million recorded in Deferred charges and other assets in the

accompanying consolidated balance sheet.

(b)Includes$3 million recorded in Other current assets in the accompanying consolidated balance sheet.

(c)Includes$73 million recorded in Other current liabilities and$17 million recorded in Other liabilities in the accompanying consolidated

balance sheet.

The above contracts are subject to enforceable master netting arrangements that provide rights of offset with each

counterparty when amounts are payable on the same date in the same currency or in the case of certain specified

defaults. Management has made an accounting policy election to not offset the fair value of recognized derivative

assets and derivative liabilities in the balance sheet. The amounts owed to the counterparties and owed to the

Company are considered immaterial with respect to each counterparty and in the aggregate with all counterparties.

Credit-Risk-Related Contingent Features

International Paper evaluates credit risk by monitoring its exposure with each counterparty to ensure that exposure

stays within acceptable policy limits. Credit risk is also mitigated by contractual provisions with the majority of our

banks. Certain of the contracts include a credit support annex that requires the posting of collateral by the

counterparty or International Paper based on each party’s rating and level of exposure. Based on the Company’s

current credit rating, the collateral threshold is generally$15 million. The commodity swap and commodity forward

contracts entered into by the Company do not contain collateral posting requirements.

If the lower of the Company’s credit rating by Moody’s or S&P were to drop below investment grade, the Company

would be required to post collateral for all of its derivatives in a net liability position, although no derivatives would

terminate. There were no derivative instruments containing credit-risk-related contingent features in a net liability

position as of December 31, 2025. The Company was not required to post any collateral as of December 31, 2025.

NOTE 18 CAPITAL STOCK

The authorized capital stock at both December 31, 2025 and 2024, consisted of 990,850,000 shares of common

stock,$1 par value;400,000 shares of cumulative$4 preferred stock, without par value (stated value$100 per

share); and 8,750,000 shares of serial preferred stock,$1 par value. The serial preferred stock is issuable in one or

more series by the Board of Directors without further shareholder action.

The following is a roll forward of shares of common stock for the three years ended December 31, 2025,2024 and

2023:

NOTE 19 RETIREMENT AND POSTRETIREMENT 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 certain employees.

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).

In connection with our acquisition, International Paper acquired the existing DS Smith Group Pension Scheme (the

"Group Scheme"), a U.K. funded defined benefit plan providing pension benefits and lump sum benefits to members

and dependents. The Group Scheme closed to new entrants and future accruals as of April 30, 2011. International

Paper also acquired various non-U.S. retirement benefit arrangements as part of the acquisition, some of which are

considered to be defined benefit pension plans for accounting purposes.

The Company also hastwo unfunded nonqualified defined benefit pension plans: the Pension Restoration Plan that

provides retirement benefits based on eligible compensation in excess of limits set by the Internal Revenue Service,

and the Unfunded Supplemental Retirement Plan for Senior Managers ("SERP"), which is an alternative retirement

plan for salaried employees who are senior vice presidents and above or who are designated by the chief executive

officer as participants. These nonqualified plans are only funded to the extent of benefits paid, which totaled$49

million,$23 million and$22 million in 2025,2024 and 2023, respectively, and which are expected to be$20 million

in 2026.

Effective January 1, 2019, the Company froze participation, including credited service and compensation, for

salaried employees under the Pension Plan, the Pension Restoration Plan and the SERP. This change does not

affect benefits accrued through December 31, 2018. For service after December 31, 2018, employees affected by

the freeze receive a Company contribution to their individual Retirement Savings Account as described later in this

Note 19.

Many non-U.S. employees are covered by various retirement benefit arrangements, some of which are considered

to be defined benefit pension plans for accounting purposes.

OBLIGATIONS AND FUNDED STATUS

The following table shows the changes in the benefit obligation and plan assets for 2025 and 2024 and the plans’

funded status.

(a) Amounts included in Other current liabilities in the accompanying consolidated balance sheets.

The non-current asset for the qualified plan is included in the accompanying consolidated balance sheets under

Overfunded Pension Plan Assets. The non-current portion of the liability is included with the pension liability under

Underfunded Pension Benefit Obligation.

The largest contributor to the actuarial loss affecting the benefit obligation was the decrease in the discount rate

from 5.68% at December 31, 2024 to 5.53% at December 31, 2025.

The following are the components of the amounts recognized in other comprehensive income ("OCI") related to

U.S. and non-U.S. plans during the years ended 2025,2024 and 2023:

The portion of the change in the funded status that was recognized in net periodic benefit cost and OCI for the U.S.

plans was$(254) million,$32 million and$197 million in 2025,2024 and 2023, respectively. The portion of the

change in funded status for the non-U.S. plans was$1 million,$11 million and$2 million in 2025,2024 and 2023,

respectively.

The accumulated benefit obligation at both December 31, 2025 and 2024 was$8.3 billion for our U.S. defined

benefit plans and$1.1 billion and$46 million at December 31, 2025 and 2024, respectively, for our non-U.S. defined

benefit plans.

The following table summarizes information for pension plans with an accumulated benefit obligation in excess of

plan assets at December 31, 2025 and 2024:

ASC 715, “Compensation – Retirement Benefits” provides for delayed recognition of actuarial gains and losses,

including amounts arising from changes in the estimated projected plan benefit obligation due to changes in the

assumed discount rate, differences between the actual and expected return on plan assets and other assumption

changes. These net gains and losses are recognized prospectively over a period that approximates the average

remaining service period of active employees expected to receive benefits under the plans to the extent that they

are not offset by gains in subsequent years.

NET PERIODIC PENSION EXPENSE

Service cost is the actuarial present value of benefits attributed by the plans’ benefit formula to services rendered by

employees during the year. Interest cost represents the increase in the projected benefit obligation, which is a

discounted amount, due to the passage of time. The expected return on plan assets reflects the computed amount

of current-year earnings from the investment of plan assets using an estimated long-term rate of return.

Net periodic pension expense for qualified and nonqualified U.S. and non-U.S. defined benefit plans comprised the

following:

The components of net periodic pension expense other than the Service cost component are included in Non-

operating pension (income) expense in the Consolidated Statements of Operations.

The increase in 2025 pension expense primarily reflects lower asset returns, higher interest cost due to a higher

discount rate, and the impact of curtailment and settlement losses.

ASSUMPTIONS

International Paper evaluates its actuarial assumptions annually as of December 31 (the measurement date) and

considers changes in these long-term factors based upon market conditions and the requirements for employers’

accounting for pensions. These assumptions are used to calculate benefit obligations as of December 31 of the

current year and pension expense to be recorded in the following year (i.e., the discount rate used to determine the

benefit obligation as of December 31, 2025 is also the discount rate used to determine net pension expense for the

2026 year).

Major actuarial assumptions used in determining the benefit obligations and net periodic pension cost for our

defined benefit plans are presented in the following table:

(a) Nonqualified benefit cost reflects 5.68% for the period January 1, 2025 to March 31, 2025 and 5.52% for the period April 1, 2025 to

December 31, 2025.

(b) The discount rate assumption reflects a rate of 5.11% applied to the non-U.S. Plans and the 5.16% applied to the Group Scheme.

(c)The rate of compensation increase reflects a rate of 2.90% applied to the Group Scheme and the 3.39% applied to the non-U.S. Plans.

The expected long-term rate of return on plan assets is based on projected rates of return for current asset classes

in the plan’s investment portfolio. Projected rates of return are developed through an asset/liability study in which

projected returns for each of the plan’s asset classes are determined after analyzing historical experience and future

expectations of returns and volatility of the various asset classes.

Based on the target asset allocation for each asset class, the overall expected rate of return for the portfolio is

developed considering the effects of active portfolio management and expenses paid from plan assets. The

discount rate assumption was determined from a universe of high-quality corporate bonds. A settlement portfolio is

selected and matched to the present value of the plan’s projected benefit payments. To calculate pension expense

for 2026, the Company will use an expected long-term rate of return on plan assets of 7.00% for the Retirement

Plan of International Paper, a discount rate of 5.53% and an assumed rate of compensation increase of 3.00%. The

Company estimates that it will record net pension expense (income) of approximately$(14) million for its U.S.

defined benefit plans in 2026, compared to expense of$42 million in 2025. To calculate pension expense for 2026,

the Company will use an expected long-term rate of return on plan assets of 6.53% for the Group Scheme, a

discount rate of 5.16% and an assumed rate of compensation increase of 2.90%. The Company estimates that it will

record net pension income of approximately$(19) million for the Group Scheme benefit plans in 2026, compared to

income of$(16) million in 2025.

For non-U.S. pension plans, assumptions reflect economic assumptions applicable to each country.

The following illustrates the effect on the U.S. plan pension expense for 2026 of a 25 basis point decrease in the

above assumptions:

PLAN ASSETS

International Paper’s Board of Directors has appointed a Fiduciary Review Committee that is responsible for

fiduciary oversight of the U.S. Pension Plan, approving investment policy and reviewing the management and

control of plan assets. Pension Plan assets are invested to maximize returns within prudent levels of risk.

The Pension Plan maintains a strategic asset allocation policy that designates target allocations by asset class.

Investments are diversified across classes and within each class to minimize the risk of large losses. Derivatives,

including swaps, forward and futures contracts, may be used as asset class substitutes or for hedging or other risk

management purposes. Periodic reviews are made of investment policy objectives and investment manager

performance.

The Group Scheme has appointed a Board of Trustees responsible for the oversight of the Scheme, preparing the

Statement of Investment Principles, and preparing, maintaining and revising a Schedule of Contributions. The

investment strategy of the Scheme is designed to protect the security of members' accrued rights, limit volatility in

the contribution rate, and to manage risk in a controlled fashion to achieve incremental excess return. The Group

Scheme has established a strategic objective and investment benchmark, along with a long-term de-risking

framework. Pension plan assets acquired as part of the DS Smith acquisition outside of the Group Scheme are not

material.

International Paper’s U.S. pension allocations by type of fund at December 31, 2025 and 2024 and target

allocations were as follows:

(a) Return seeking assets include Real Estate (8% for 2025 and 8% for 2024) and Private Equity (6% and 7% for 2025 and 2024, respectively).

The Group Scheme allocations by type of fund at December 31, 2025 and target allocations were as follows:

The fair values of International Paper’s pension plan assets at December 31, 2025 and 2024 by asset class are

shown below. Hedge funds disclosed in the following table are allocated to hedging assets for target allocation

purposes.

In accordance with accounting standards, certain investments that are measured at NAV are not classified in the fair

value hierarchy.

(a)A private equity fund investment ("partnership interest") is contractually locked up for the life of the private equity fund by the partnership

agreement. Limited partners do not have the option to redeem partnership interests.

(a) Private fixed income involves lending money directly to companies or projects outside public markets, offering customized, non-traded debt

with potentially higher yields. Private fixed income includes private placements, direct loans, and infrastructure financing, acting as a middle

ground between traditional bank loans and public bonds.

(a)A private equity fund investment ("partnership interest") is contractually locked up for the life of the private equity fund by the partnership

agreement. Limited partners do not have the option to redeem partnership interests.

Equity securities consist primarily of publicly traded U.S. companies and international companies. Publicly traded

equities are valued at the closing prices reported in the active market in which the individual securities are traded.

Fixed income consists of government securities, mortgage-backed securities, corporate bonds, common collective

funds and other fixed income investments. Government securities are valued by third-party pricing sources.

Mortgage-backed security holdings consist primarily of agency-rated holdings. The fair value estimates for mortgage

securities are calculated by third-party pricing sources chosen by the custodian’s price matrix. Corporate bonds are

valued using either the yields currently available on comparable securities of issuers with similar credit ratings or

using a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments,

but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks. Common

collective funds are valued at the net asset value per share multiplied by the number of shares held as of the

measurement date.

Derivative investments such as futures, forward contracts, options and swaps are used to help manage risks.

Derivatives are generally employed as asset class substitutes (such as when employed in a portable alpha

strategy), for managing asset/liability mismatches, or bona fide hedging or other appropriate risk management

purposes. Derivative instruments are generally valued by the investment managers or in certain instances by third-

party pricing sources.

The following tables summarize derivative holdings as of December 31, 2025 and 2024, respectively:

Hedge funds are investment structures for managing private, loosely-regulated investment pools that can pursue a

diverse array of investment strategies with a wide range of different securities and derivative instruments. These

investments are made through funds-of-funds (commingled, multi-manager fund structures) and through direct

investments in individual hedge funds. Hedge funds are primarily valued by each fund’s third-party administrator

based upon the valuation of the underlying securities and instruments and primarily by applying a market or income

valuation methodology as appropriate depending on the specific type of security or instrument held. Funds-of-funds

are valued based upon the net asset values of the underlying investments in hedge funds.

Private equity consists of interests in partnerships that invest in U.S. and non-U.S. debt and equity securities.

Partnership interests are valued using the most recent general partner statement of fair value, updated for any

subsequent partnership interest cash flows.

Real estate funds include commercial properties, land and timberland, and generally include, but are not limited to,

retail, office, industrial, multifamily and hotel properties. Real estate fund values are primarily reported by the fund

manager and are based on valuation of the underlying investments which include inputs such as cost, discounted

cash flows, independent appraisals and market-based comparable data.

The following is a reconciliation of the assets that are classified using significant unobservable inputs (Level 3) at

December 31, 2025:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

FUNDING AND CASH FLOWS

The Company’s funding policy for the Pension Plan 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 plans, tax deductibility, cash flow generated by the Company, and other factors. The Company

continually reassesses the amount and timing of any discretionary contributions. No voluntary contributions were

made in 2025,2024 or 2023. Generally, International Paper’s non-U.S. pension plans are funded using the

projected benefit as a target, except in certain countries where funding of benefit plans is not required.

At December 31, 2025, projected future pension benefit payments, excluding any termination benefits, were as

follows:

OTHER U.S. PLANS

International Paper sponsors the International Paper Company Salaried Savings Plan and the International Paper

Company Hourly Savings Plan, both of which are tax-qualified defined contribution 401(k) savings plans.

Substantially all U.S. salaried and certain hourly employees are eligible to participate and may make elective

deferrals to such plans to save for retirement. International Paper makes matching contributions to participant

accounts on a specified percentage of employee deferrals as determined by the provisions of each plan. The

Company makes Retirement Savings Account contributions equal to a percentage of an eligible employee’s pay.

Beginning in 2019, as a result of the freeze for salaried employees under the Pension Plan, all salaried employees

are eligible for the contribution to the Retirement Savings Account.

The Company also sponsors the International Paper Company Deferred Compensation Savings Plan, which is an

unfunded nonqualified defined contribution plan. This plan permits eligible employees to continue to make deferrals

and receive company matching contributions (and Retirement Savings Account contributions) when their

contributions to the International Paper Salaried Savings Plan are stopped due to limitations under U.S. tax law.

Participant deferrals and Company contributions are not invested in a separate trust, but are paid directly from

International Paper’s general assets at the time benefits become due and payable. Company contributions to the

plans totaled approximately$178 million,$177 million and$160 million for the plan years ended in 2025,2024 and

2023, respectively.

POSTRETIREMENT BENEFITS

International Paper provides certain retiree health care and life insurance benefits covering certain salaried and

hourly employees. These benefits are not considered material to the financial statements of the Company.

NOTE 20 INCENTIVE PLANS

On February 13, 2024, the Company's Board of Directors, upon recommendation of the Management Development

and Compensation Committee (the "MDCC"), 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"). 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. Shares for which payment is in cash, including the shares withheld to cover associate payroll

taxes, as well as shares that expire, terminate, or are canceled or forfeited, may be awarded or granted again under

the LTICP. The LTICP is administered by the Committee.

Additionally, non-employee members of our Board of Directors receive grants of restricted stock for RSUs, under

the Company's Restricted Stock and Deferred Compensation Plan for Non-Employee Directors, a subplan of the

2024 LTICP.

Performance Stock Units

PSU awards are earned over athree-year period based on the achievement of pre-established performance goals.

The 2023-2025 and 2024-2026 Awards are weighted at 50% Return on Invested Capital ("ROIC") and 50% relative

Total Shareholder Return ("TSR") for all participants. The 2025-2027 Awards are weighted 100% relative TSR for all

participants. The ROIC component of the PSU awards is valued at the 20-trading day average closing price

immediately prior to the grant date. As the ROIC component contains a performance condition, compensation

expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable

number of awards expected to vest. The TSR component of the PSU awards is valued using the same methodology

as the RSUs but then adjusted using a factor derived from a Monte Carlo simulation as the TSR component

contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on

the expected term of the award, a risk-free rate, expected dividends, and the expected volatility for the Company

and its competitors. The expected term is estimated based on the vesting period of the awards, the risk-free rate is

based on the yield on U.S. Treasury securities matching the vesting period, and the volatility is based on the

Company’s historical volatility over the expected term. PSUs are payable in cash or shares at the Company's

discretion.

Restricted Stock Units

Time-based RSU awards granted under the LTIP are expected to vest in three equal installments commencing on

February 1st following the first anniversary of the grant date over a 3-year service period, subject to forfeiture and

transfer restrictions. RSUs are payable in cash or shares at the Company’s discretion.

Generally, the requisite service period is the vesting period. In the case of retirement (eligibility for which is based on

the associate's age and years of service as provided in the relevant award agreement), awards vest pro-rata based

on length of service during the award period, subject to continued employment and paid upon termination.

Dividend equivalents are generally accrued on PSUs and RSUs outstanding as of the record date. These dividend

equivalents are paid only on PSUs and RSUs that ultimately vest.

RSU’s granted to non-employee directors vest annually and are restricted through January 1 following the year in

which the non-employee director terminates service as a non-employee director. RSUs awarded to non-employee

directors settle in cash.

Restricted Stock

Restricted stock granted to non-employee directors vests annually following theone-year period beginning on the

date of the Annual Meeting of Shareowners and ending on the last business day immediately preceding the next

Annual Meeting of Shareowners. Restricted stock awarded to non-employee directors settle in shares.

The following table sets forth the assumptions used to determine compensation cost for the market condition

component of the LTIP plan:

The following summarizes LTIP activity for the three years ended December 31, 2025:

RECOGNITION AWARD PROGRAM

The Recognition Award Program ("RA Program") is time-based and designed for recruitment, retention and special

recognition purposes. It provides for awards of RSUs to key employees.

The following summarizes the activity of the RA Program for the three years ended December 31, 2025:

At December 31, 2025,2024 and 2023 a total of 7.1 million,9.1 million and 5.5 million shares, respectively, were

available for grant under the LTICP.

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

At December 31, 2025,$70 million of compensation cost, net of estimated forfeitures, related to unvested restricted

stock unit awards, performance stock unit awards and restricted stock attributable to future performance had not yet

been recognized. This amount will be recognized in expense over a weighted-average period of 1.5 years.

NOTE 21 FINANCIAL INFORMATION BY BUSINESS SEGMENT AND GEOGRAPHIC AREA

On January 23, 2026, the Company completed the previously announced sale of its Global Cellulose Fibers

business to AIP. As a result of the sale, the Global Cellulose Fibers business is no longer a reportable segment and

all current and historical operating results of the Global Cellulose Fibers business are presented as Discontinued

Operations, net of taxes, in the consolidated statements of operations. All current and historical assets and liabilities

of the Global Cellulose Fibers business are classified as Assets held for sale and Long-Term Assets Held For Sale

and Liabilities held for sale and Long-Term Liabilities Held For Sale in the accompanying consolidated balance

sheets. See Note 8 - Divestiture for further details regarding the Global Cellulose Fibers business and discontinued

operations.

As a result of the acquisition of DS Smith, the Chief Operating Decision Maker (CODM) began reviewing and

managing the Company’s financial results and operations under a revised structure that reflects the scope of the

Company’s continuing operations: Packaging Solutions North America (PS NA) and Packaging Solutions EMEA (PS

EMEA). The PS EMEA segment includes the Company's legacy EMEA Industrial Packaging business and the

EMEA DS Smith business. As such, amounts related to the Company's legacy EMEA Industrial Packaging business

have been recast out of the Industrial Packaging segment into the new PS EMEA segment for all prior periods. The

North America DS Smith business has been included in the PS NA segment. Amounts related to the Company's

legacy North America Industrial Packaging business have been reported in the PS NA segment for all prior periods.

PS NA and PS EMEA are primarily focused on producing fiber-based packaging. We produce linerboard, medium,

whitetop, recycled linerboard, recycled medium and saturating kraft of which a majority of our production is

converted into corrugated packaging and other packaging. The revenue for our PS NA and PS EMEA segments are

derived from selling these products to our customers.

The CODM assesses performance for these segments and decides how to allocate resources based on business

segment operating profit, which is defined as earnings (loss) before income taxes and equity earnings (losses),

including the impact of less than wholly owned subsidiaries and excluding interest expense, net, corporate

expenses, net, net special items and non-operating pension expense. Business segment operating profits (losses)

are also used by International Paper's CODM to measure the earnings performance of its businesses and to focus

on on-going operations.

INFORMATION BY BUSINESS SEGMENT

The following tables illustrate reportable segment revenue, significant segment expenses, and measures of a

segment’s profit or loss for the years ended December 31, 2025,2024 and 2023. The table also reconciles these

amounts to Earnings (loss) from continuing operations before income taxes and equity earnings (losses).

2025:

(i) Includes a charge of$2.47 billion for the impairment of goodwill related to our PS EMEA business,$237 million for transaction and other costs

related to the DS Smith acquisition, a charge of$84 million for severance and other costs related to the closure of our Red River containerboard

mill, a net gain of$46 million related to the sale of EMEA plants, a net gain of$94 million related to the sale of fixed assets primarily associated

with permanently closed mills, a charge of$125 million for costs related to the closure of our Savannah containerboard mill, a charge of$96

million for costs related to the closure of our Riceboro containerboard mill, charges of$321 million for restructuring charges related to resource

and asset realignment and a net charge of$47 million for other items.

2024:

(i) Includes a charge of$86 million for transaction and other costs related to the DS Smith acquisition, a charge of$104 million for severance and

other costs related to mill closures and other 80/20 actions, charges of$60 million for environmental reserve adjustments, a gain of$54 million

related to the sale of a building at our Orange, Texas containerboard mill,$37 million for strategic advisory fees and a net charge of$12 million

for other items.

2023:

(i) Includes$81 million for severance and other costs associated with our mill strategic actions, charges of$36 million for environmental reserve

adjustments and other income of$16 million.

Assets

Capital Expenditures

INFORMATION BY GEOGRAPHIC AREA

Net Sales (e)

Long-Lived Assets (g)

(a)Other segment items includes Taxes other than payroll.

(b)Operating profits for industry segments include each segment’s percentage share of the profits of subsidiaries included in that segment

that are less than wholly-owned. The pre-tax earnings for these subsidiaries is added here to present consolidated earnings from

continuing operations before income taxes and equity earnings.

(c)Includes Corporate assets and held for sale assets related to the GCF business.

(d)Includes capital expenditures related to Corporate and the GCF business.

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

(f)Export sales to unaffiliated customers were$965 million in 2025,$1.1 billion in 2024 and$919 million in 2023.

(g)Long-Lived Assets includes Forestlands and Plants, Properties and Equipment, net.

NOTE 22 SUBSEQUENT EVENTS

On January 29, 2026, the Company announced a plan to createtwo independent, publicly traded companies

through the separation of its PS NA and PS EMEA businesses. The PS NA business will be comprised of the

Company's current business in North America, including both legacy IP and DS Smith assets, and the PS EMEA

business will be comprised of both legacy DS Smith and IP assets in EMEA. The separation is expected to be

structured as a spin-off of the PS EMEA businesses to shareholders and is expected to be completed in 12-15

months, subject to the satisfaction of certain customary conditions. No assurance can be provided regarding the

ultimate timing or structure of the proposed separation or its eventual completion.

INTERIM FINANCIAL RESULTS (UNAUDITED)

Note: International Paper's common shares are listed on the New York Stock Exchange (IP) and London Stock Exchange (IPC).

Note: Since basic and diluted earnings per share are computed independently for each period and category, full year per share amounts may not

equal the sum of the four quarters. In addition, the unaudited selected consolidated financial data are derived from our audited consolidated

financial statements and have been revised to reflect discontinued operations.

Footnotes to Interim Financial Results

(a) Includes the following pre-tax charges (gains):

(b) Includes the operating earnings of the Global Cellulose Fibers business for the full year. Also includes the following charges (gains):

(c) Includes the following tax expenses (benefits):

(d) Includes the following pre-tax charges (gains):

(e) Includes the operating earnings of the Global Cellulose Fibers business for the full year. Also includes the following charges (gains):

(f) Includes the following tax expenses (benefits):