INTERNATIONAL PAPER CO /NEW/
For the period ended Mar 31, 2026. Filed May 5, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 5, 2026
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Item 2. RESULTS OF OPERATIONS
The following summarizes our results of operations for first quarter of 2026 compared with the first quarter of 2025 and the fourth quarter of 2025:
| Three Months EndedMarch 31, · Three Months Ended December 31, · Change Compared to March 31, 2025 · Change Compared to December 31, 2025 | |||||
|---|---|---|---|---|---|
| In millions | 2026 | 2025 | 2025 | $ | $ |
| Net sales | $5,971 | $5,264 | $6,006 | $707 | $(35) |
| Cost of products sold | 4,244 | 3,805 | 4,123 | 439 | 121 |
| Selling and administrative expenses | 510 | 487 | 545 | 23 | (35) |
| Depreciation and amortization | 489 | 520 | 697 | (31) | (208) |
| Distribution expenses | 513 | 417 | 543 | 96 | (30) |
| Taxes other than payroll and income taxes | 41 | 87 | 42 | (46) | (1) |
| Restructuring charges, net (a) | 23 | 83 | 162 | ||
| Impairment of goodwill (a) | — | — | 2,467 | ||
| Net (gains) losses on sales and impairments of businesses (a) | — | — | 10 | ||
| Net (gains) losses on sales and impairments of assets (a) | — | (67) | (18) | ||
| Interest expense, net | 76 | 84 | 95 | (8) | (19) |
| Non-operating pension expense (income) | (18) | 3 | (6) | ||
| Earnings (loss) from continuing operations before income taxes and equity earnings (loss) | 93 | (155) | (2,654) | ||
| Income tax provision (benefit) | 17 | (32) | (291) | ||
| Equity earnings (loss), net of taxes | — | (1) | — | ||
| Earnings (loss) from continuing operations | 76 | (124) | $(2,363) | ||
| Discontinued operations, net of tax | (16) | 19 | $(21) | ||
| Net earnings (loss) | $60 | $(105) | $(2,384) | ||
| Diluted earnings (loss) per share | $0.11 | $(0.24) | $(4.52) | ||
(a) Refer to special items discussion on page 30
Refer to the Effects of Net Special Items Expense (Income) section on page 30 for details of net special items expense (income) discussed below.
Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025
Net sales
The increase compared to the first quarter of 2025 was primarily driven by three months of DS Smith activity in the first quarter of 2026 compared to two months of activity in the first quarter of 2025. Additional details on net sales are provided in the Business Segment Operating Results section below.
Cost of products sold
Cost of products sold increased by $439 million compared to the first quarter of 2025. Three months of DS Smith activity is included in the first quarter of 2026 ($1.6 billion) compared to two months in the first quarter of 2025 ($1.0 billion). For IP legacy, first quarter 2026 cost of products sold was impacted by lower maintenance and manufacturing costs of $63 million and lower raw materials and operating materials of $10 million, partially offset by higher fuel and utility expense of $19 million compared to the first quarter of 2025. Net special items charges of $70 million in the first quarter of 2025 are included in cost of products sold.
Selling and administrative expenses
Selling and administrative expenses increased by $23 million compared to the first quarter of 2025. Three months of DS Smith activity is included in the first quarter of 2026 ($121 million) compared to two months in the first quarter of 2025 ($74 million). For IP legacy, first quarter 2026 selling and administrative expenses were impacted by increases in incentive compensation and medical benefit costs compared to the first quarter of 2025. Net special items charges of $14 million and $101 million in the first quarter of 2026 and 2025, respectively, are included in selling and administrative expenses.
Depreciation and amortization
Depreciation and amortization decreased by $31 million compared to the first quarter. Three months of DS Smith activity is included in the first quarter of 2026 ($269 million) compared to two months in the first quarter of 2025 ($107 million). Depreciation expense includes accelerated depreciation of $16 million in the first quarter of 2026 compared to $197 million in the first quarter of 2025 associated with our site closures.
Distribution expenses
Distribution expenses increased by $96 million compared to the first quarter of 2025. Three months of DS Smith activity is included in the first quarter of 2026 ($228 million) compared to two months in the first quarter of 2025 ($144 million). For IP legacy, distribution expense was impacted by higher freight and warehousing expense in the first quarter of 2026 compared to the first quarter of 2025.
Taxes other than payroll and income taxes
Taxes other than payroll and income taxes decreased by $46 million compared to the first quarter of 2025. Three months of DS Smith activity is included in the first quarter of 2026 ($9 million) compared to two months in the first quarter of 2025 ($6 million). Net special items charges of $50 million are included in taxes other than payroll and income taxes in the first quarter of 2025.
Interest expense, net
Interest expense, net decreased by $8 million compared to the first quarter of 2025. Three months of DS Smith activity is included in the first quarter of 2026 ($36 million) compared to two months in the first quarter of 2025 ($25 million). Net special items interest income of $11 million is included in interest expense, net in the first quarter of 2026.
Income tax provision (benefit)
A net income tax expense from continuing operations of $17 million was recorded in the first quarter of 2026 and the reported effective income tax rate was 18%. Excluding a $7 million net tax benefit for other special items and $4 million tax expense related to non-operating pension income, the operational tax provision (benefit) (non-GAAP) for the first quarter of 2026 was $20 million, or 20% of pre-tax earnings before equity earnings.
A net income tax benefit from continuing operations of $32 million was recorded for the first quarter of 2025 and the reported effective income tax rate was 21%. Excluding a $42 million net tax benefit for other special items and a $1 million tax benefit related to non-operating pension expense, the operational tax provision (non-GAAP) for the first quarter of 2025 was $11 million, or 13% of pre-tax earnings before equity earnings.
Refer to "Non-GAAP Financial Measures" for a reconciliation of the net income tax provision (benefit) (GAAP) to the operational income tax provision (benefit) (non-GAAP) and the reported effective income tax rate (GAAP) to the operational effective income tax rate (non-GAAP).
Discontinued Operations, Net of Tax
On January 23, 2026, the Company completed the previously announced sale of its GCF business to AIP. See Note 9 - Divestitures of Condensed Notes to Consolidated Financial Statements for further details.
Discontinued operations includes the operating earnings of the GCF business. Discontinued operations also includes net special items expense of $3 million and $12 million for the first quarter 2026 and 2025, respectively, and includes non-operating pension expense of $19 million for the first quarter 2026.
Three Months Ended March 31, 2026 Compared to the Three Months Ended December 31, 2025
Net sales
The decrease in the first quarter of 2026 compared to the fourth quarter of 2025 was primarily driven by lower sales volumes. Additional details on net sales are provided in the Business Segment Operating Results section below.
Cost of products sold
Cost of products sold increased by $121 million compared to the fourth quarter of 2025. For IP including DS Smith activity, the increase compared to the fourth quarter of 2025 was driven by higher maintenance and other costs of $183 million and fuel and utility expense of $57 million, partially offset by decreases in raw materials and operating materials of $123 million. Net special items income of $5 million in the fourth quarter of 2025 is included in cost of products sold.
Selling and administrative expenses
Selling and administrative expenses decreased by $35 million compared to the fourth quarter of 2025. For IP including DS Smith activity compared to the fourth quarter of 2025, there were decreases in medical benefit costs offset by incentive compensation and other costs. Net special items charges of $14 million and $10 million in the first quarter of 2026 and fourth quarter of 2025, respectively, are included in selling and administrative expenses.
Depreciation and amortization
Depreciation and amortization decreased by $208 million compared to the fourth quarter of 2025. Depreciation expense includes accelerated depreciation of $16 million in the first quarter of 2026 compared to $86 million in the fourth quarter of 2025 associated with our site closures. Depreciation and amortization expense in the fourth quarter of 2025 was higher primarily due to the finalization of the valuation of assets and changes to the estimated lives associated with the acquisition accounting of DS Smith.
Distribution expenses
Distribution expenses decreased by $30 million compared to the fourth quarter of 2025. For IP including DS Smith activity, the decrease compared to the fourth quarter of 2025 was driven by lower warehousing expense.
Taxes other than payroll and income taxes
Taxes other than payroll and income taxes were relatively flat in the first quarter of 2026 compared to the fourth quarter of 2025.
Interest expense, net
Interest expense, net decreased by $19 million compared to the fourth quarter of 2025. Net special items interest income of $11 million is included in interest expense, net in the first quarter of 2026.
Income tax provision (benefit)
A net income tax benefit from continuing operations of $291 million was recorded for the fourth quarter of 2025 and the reported effective income tax rate was 11%. This includes a tax benefit of $271 million related to the EMEA goodwill impairment. Excluding this item, a $31 million net tax benefit for other special items and $2 million tax expense related to non-operating pension income, the operational tax provision (benefit) (non-GAAP) for the fourth quarter of 2025 was $9 million, or (26)% of pre-tax earnings before equity earnings.
Refer to "Non-GAAP Financial Measures" for a reconciliation of the net income tax provision (benefit) (GAAP) to the operational income tax provision (benefit) (non-GAAP) and the reported effective income tax rate (GAAP) to the operational effective income tax rate (non-GAAP).
Discontinued Operations, Net of Tax
Discontinued operations includes the operating earnings of the GCF business. Discontinued operations also includes net special items expense of $3 million and $69 million for the first quarter 2026 and the fourth quarter of 2025, respectively, and includes non-operating pension expense of $19 million for the first quarter 2026.
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