INTERNATIONAL PAPER CO /NEW/

The Company operates in two segments: PS NA and PS EMEA.

The following tables present net sales and business segment operating profit (loss), which is the Company's measure of segment profitability and 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 profit (loss) is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280 - "Segment Reporting." For additional information regarding business segment operating profit (loss), including a description of the manner in which business segment operating profit (loss) is calculated, see Note 20 - Business Segment Information to the Condensed Notes to the Consolidated Financial Statements.

Beginning in the second quarter of 2026, segment information reviewed by the CODM excluded Deferred Compensation Savings Plan mark-to-market adjustments as these market-driven adjustments do not reflect on-going segment performance. The amounts are immaterial and are now reported as corporate expenses. Compensation expense related to employee contributions continues to be allocated to the segments.

PS NA

PS NAsales were higher compared to the first quarter of 2026 reflecting higher sales prices, higher sales volumes and a favorable mix due to lower export sales. Sales volumes were higher driven by continued growth in our domestic business, typical seasonal improvement and the impact of one additional shipping day. Cost of products sold increased by $101 million and was impacted by higher planned maintenance outage costs and higher sales volumes, partially offset by lower input costs. Input costs were favorably impacted by the non-repeat of higher natural gas costs and utility costs driven by the winter storm in the first quarter of 2026, partially offset by higher recovered fiber and freight costs. Manufacturing costs were slightly lower reflecting stronger mill performance, additional Ixtac insurance recovery and the non-repeat of winter storm impacts. These benefits were mostly offset by costs of the Riverdale paper machine conversion and other planned reliability spending. Depreciation and amortization expense and selling and administrative expenses were flat. Distribution expenses increased by $9 million due to higher sales. In the second quarter of 2026, the Company successfully completed several strategic initiatives, including the Riverdale machine conversion and the acquisitions of the NORPAC mill in Longview, Washington and the Dover converting facility in Delaware.

Compared with the second quarter of 2025, PS NA sales in the second quarter of 2026 were lower driven by lower sales volumes reflecting the impact of our mill strategic actions and lower export volumes partially offset by higher sales prices for boxes. Cost of products sold decreased by $87 million driven by lower sales volumes reflecting the impact of our footprint cost out benefits partially offset by higher planned maintenance outage costs and higher operating costs and input costs. Manufacturing costs were impacted by Riverdale machine conversion spending and higher costs for goods and services. Input costs were driven by higher freight costs partially offset by lower recovered fiber costs. Depreciation and amortization expense decreased $10 million. Selling and administrative expenses decreased by $6 million reflecting lower overhead costs. Distribution expense was higher driven by higher freight costs.

Entering the third quarter of 2026, sales volumes are expected to be lower compared to the second quarter of 2026 due to lower export sales partially offset by the impact of one additional shipping day in the third quarter of 2026. Price and mix are expected to be higher due to previously published price movements and a favorable mix. Operating costs are expected to be lower. Planned maintenance downtime costs are expected to be lower in the third quarter of 2026 compared with the second quarter of 2026. Input costs are expected to be higher.

PS EMEA

PS EMEA sales decreased in the second quarter of 2026 compared with the first quarter of 2026 as higher sales prices for paper were more than offset by lower sales volumes in a continued soft market driven by geopolitical uncertainty and consumer sentiment. Cost of products sold decreased $25 million driven by lower sales volumes, cost-out actions and lower input costs for energy, including subsidies, partially offset by higher recovered fiber costs. Packaging margins were impacted by higher paper prices not yet realized in box pricing. Planned maintenance outage costs were higher. Depreciation and amortization expense in the second quarter of 2026 was slightly higher compared with the first quarter of 2026. Selling and administrative expenses increased $14 million driven by planned annual wage increases. Distribution expenses were flat.

Compared with the second quarter of 2025, PS EMEA sales in the second quarter of 2026 were slightly lower driven by lower sales volumes and prices for paper. Cost of products sold decreased $12 million, reflecting lower sales volumes partially offset by lower input costs. Depreciation and amortization expense increased $67 million due to changes in the valuation of intangible assets and property, plant and equipment along with changes to the estimated lives associated with the acquisition accounting of DS Smith in the second half of 2025. Selling and administrative expenses were $17 million higher compared to the second quarter of 2025 driven by higher overhead costs. Distribution expenses were slightly higher.

Looking ahead to the third quarter of 2026, sales are expected to be higher. Operating costs are expected to be lower. Input costs are expected to be lower, driven by recovered fiber partially offset by higher energy costs.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by (used for) operations, including discontinued operations, totaled $1.1 billion and $188 million for the first six months of 2026 and 2025, respectively. Cash provided by (used for) working capital components (accounts receivable, contract assets and inventory less accounts payable and accrued liabilities, interest payable and other) totaled $54 million for the six months ended June 30, 2026 compared with cash provided by (used for) working capital components of $(683) million for the six months ended June 30, 2025. The change in cash provided by operations in the first six months of 2026 compared to the comparable 2025 six-month period was primarily due to certain significant payments related to the DS Smith acquisition transaction costs, incentive compensation and benefit payments and severance payments made in the first six months of 2025 which, in total, impacted operating cash flow by $670 million.

Cash provided by (used for) investment activities, including discontinued operations, totaled $(349) million in the first six months of 2026 compared with $(38) million in the first six months of 2025. The increase was primarily due to higher capital expenditures of $298 million, increased cash paid for acquisitions, net of cash acquired of $874 million and lower proceeds from the sale of fixed assets of $62 million. These were partially offset by cash proceeds from divestitures, net of cash divested of $945 million and higher insurance recoveries of $16 million.

Capital expenditures totaled $1.1 billion in the first six months of 2026, compared to $752 million in the first six months of 2025. Full-year 2026 capital expenditures are currently expected to be approximately $2.0 billion to $2.1 billion, or 102% to 107% of depreciation and amortization.

Financing activities for the first six months of 2026 included a $501 million net decrease in debt versus a $200 million net increase in debt during the comparable 2025 six-month period.

During the second quarter of 2026, the Company had no borrowings outstanding under its commercial paper program and its U.S. dollar denominated committed bank facility.

See Note 16 - Debt to the Condensed Notes to the Consolidated Financial Statements for a discussion of various debt-related actions taken by the Company during the six months ended June 30, 2026.

Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At June 30, 2026, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (negative outlook) by S&P and Moody’s, respectively. In addition, the Company held short-term credit ratings of A2 and P2 by S&P and Moody's, respectively, for borrowings under the Company's commercial paper program.

During the first six months of 2026, International Paper used 2.2 million shares of treasury stock for various incentive plans. International Paper also acquired 0.7 million shares of treasury stock, related to restricted stock tax withholdings during the first six months of 2026. Payments of restricted stock withholding taxes totaled $31 million during this period. Our current share repurchase program approved by our Board of Directors (the "Board") on October 11, 2022, does not have an expiration date and has approximately $2.96 billion aggregate amount of shares of common stock remaining authorized for purchase as of June 30, 2026. During the six months ended June 30, 2026, no shares of common stock were repurchased under our share repurchase program.

During the first six months of 2025, International Paper used approximately 3.5 million shares of treasury stock for various incentive plans. International Paper also acquired 1.1 million shares of treasury stock, related to restricted stock tax withholding during the first six months of 2025. Payments of restricted stock withholding taxes totaled $63 million. During the six months ended June 30, 2025, no shares of common stock were repurchased under our share repurchase program.

Cash dividend payments related to common stock totaled $490 million and $488 million for the first six months of 2026 and 2025, respectively. Dividends were $0.9250 per share for the first six months of 2026 and 2025.

Our U.S. and U.K. qualified pension plans are currently fully funded.

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

Long-Term Debt

The following summarizes certain material provisions of our long-term debt facilities and current obligations. This summary does not purport to be complete and is qualified in its entirety by reference to the documents governing such indebtedness. For additional information regarding the Company’s credit agreements, outstanding and assumed indebtedness, see Note 16 Debtof Condensed Notes to the Consolidated Financial Statements.

At June 30, 2026, International Paper’s U.S. dollar denominated credit facilities totaled $1.9 billion, comprised of a $1.4 billion contractually committed bank credit agreement and up to $500 million available under its receivables securitization program. Management believes these credit agreements provide sufficient liquidity to manage operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin tied to International Paper’s credit rating. At June 30, 2026, the Company had no borrowings outstanding under the $1.4 billion credit agreement or the $500 million receivables securitization program. The Company’s credit agreements contain no restrictive covenants other than the financial covenants as described in Note 16 Debtof Condensed Notes to the Consolidated Financial Statements, and the borrowings under the receivables securitization program being limited by eligible receivables. The Company was in compliance with all its debt covenants at June 30, 2026 and within the thresholds stipulated. The financial covenants do not restrict any borrowings under the credit agreements.

Commercial Paper

In addition to the $1.9 billion capacity under the Company's credit agreements, International Paper has a commercial paper program with a borrowing capacity of $1.0 billion supported by its $1.4 billion credit agreement. Under the terms of the Company's commercial paper 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 had no borrowings outstanding as of June 30, 2026 under this program.

Assumed Debt

In 2025, International Paper assumed foreign denominated debt of DS Smith in various currencies.

Euro Medium Term Notes

Our subsidiary DS Smith initiated consent solicitations with the holders of several series of its outstanding euro- and sterling denominated notes to approve certain amendments to the notes’ terms and related trust deeds (the “Euro Medium Term Notes”). The amendments were designed to align DS Smith’s reporting and covenant framework with that of International Paper, and to provide greater flexibility for the reorganization of DS Smith’s subsidiaries. As part of the solicitation process, International Paper agreed to provide guarantees of DS Smith’s obligations under each series of the Euro Medium Term Notes. These amendments and guarantees were implemented in March 2025 through supplemental trust deeds. All principal amounts of the affected Euro Medium Term Notes remain outstanding.

As part of the Company’s readiness efforts to prepare the EMEA packaging business to operate as an independent, standalone public company, on May 13, 2026, DS Smith Limited announced consent solicitations to certain holders of its outstanding notes, other than with respect to the notes due 2026 (which are proposed to be repaid on maturity and in respect of which no consent was sought), (such solicited Series, the "Solicited Notes") to approve amendments to the terms of the Solicited Notes and related governing documents. Meetings of noteholders were held on June 4, 2026, and the required quorum was reached for each series of the Solicited Notes. Noteholders approved the proposed amendments, and all entitlements to implement the proposed amendments were satisfied, other than the execution (and where applicable delivery) of the agreed form amendment documentation by DS Smith and International Paper, which will implement the amendments in respect of the relevant series of the Solicited Notes.

As a result, upon such implementation (the timing of which is at the sole discretion of International Paper and DS Smith), International Paper Company will become the issuer and primary obligor under each series of notes (other than the notes due 2026), totaling approximately $2.1 billion, replacing DS Smith. At the same time, International Paper's guarantee of the notes will be released, and the proposed amendments to the note terms and related documentation will become effective.

The consent solicitations were conducted only with eligible noteholders in accordance with applicable securities laws and offering restrictions. The consent solicitations are intended to enable the EMEA packaging business to issue new debt and optimize its debt mix and maturity profile.

Credit and Bank Facilities

In 2025, the Company amended and restated its £1.25 billion multi-currency credit facility agreement, its €200 million amortizing credit facility and €60 million committed bank facility. The amendments (i) replaced the Company's standalone financial reporting requirements with International Paper’s financial information; (ii) aligned the facility's financial covenant with those in International Paper’s existing credit facilities; and (iii) updated certain events of default and undertakings to reflect International Paper's financing framework and to provide additional flexibility for potential subsidiary reorganization within the International Paper group.

The £1.25 billion multi-currency credit facility allows for British pound sterling, euro and U.S. dollar-denominated borrowings at floating rates plus a pre-determined margin, with borrowings generally denominated to match the Company's cashflows. At June 30, 2026, the Company had €525 million and £40 million (approximately $653 million) borrowings outstanding under the credit facility. The Company’s credit facility agreement is not subject to any restrictive covenants other than that International Paper must comply with the same negative covenants as per its existing credit facilities. IP was in compliance with all its debt covenants at June 30, 2026, and was well below the thresholds stipulated under the covenants as defined in the credit facility agreement. Further the financial covenants do not restrict any borrowings under the £1.25 billion credit facility agreement.

The €200 million amortizing credit facility agreement provides for interest rates at a fixed rate for each facility. At June 30, 2026, the Company had €138 million (approximately $157 million) borrowings outstanding under the credit facility agreement.

The credit facility agreements do not impose restrictive covenants other than requiring International Paper to comply with the same negative covenants applicable to its existing credit facilities. IP was in compliance with all applicable covenants as of

June 30, 2026, and remained well within the thresholds. The financial covenants do not restrict the Company’s ability to borrow under the credit facility agreement.

The €60 million committed bank facility, maturing in 2026, allows for British pound sterling, euro and US dollar-denominated borrowings. At June 30, 2026, there were no borrowings outstanding under this agreement. The Company has a £50 million uncommitted bank facility. At June 30, 2026, the Company had €55 million (approximately $63 million) borrowings outstanding under this agreement.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES

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

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

The Company has included in its Annual Report a discussion of these critical accounting policies, which are important to the portrayal of the Company’s financial condition and results of operations and may require management’s judgments. The Company has not made any changes in these critical accounting policies during the first six months of 2026.

The PS EMEA reporting unit approximated fair value after the December 31, 2025 goodwill impairment charge. Based on updated forecast information, we performed a quantitative goodwill impairment test as of June 30, 2026. The results of the test indicated that the estimated fair value of the PS EMEA reporting unit continued to approximate its carrying value. The estimated fair value is sensitive to changes in key assumptions, and a material adverse change in any individual assumption or in a combination of assumptions could result in a future goodwill impairment charge.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 that are not historical in nature may be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements can be identified by the use of forward-looking or conditional words such as “expects,” “anticipates,” “believes,” “estimates,” “could,” “should,” “can,” “forecast,” “outlook,” “intend,” “look,” “may,” “will,” “remain,” “confident,” “commit” and “plan” or similar expressions. These statements are not guarantees of future performance and reflect management’s current views and speak only as to the dates the statements are made and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. All statements, other than statements of historical fact, are forward-looking statements, including, but not limited to, statements regarding anticipated financial results, economic conditions, industry trends, future prospects, and the anticipated benefits, execution and consummation of strategic corporate transactions. Factors which could cause actual results to differ include but are not limited to: (i) our ability to consummate and achieve the benefits expected from, and other risks, costs and expenses associated with, our plans to separate our North America and Europe, Middle East and Africa (“EMEA”) operations into two independent public companies and other corporate transactions on a timely basis or at all, including the risk that an impairment charge may be recorded for goodwill or other intangible assets, which may lead to decreased assets and reduced net earnings; (ii) our ability to successfully integrate and realize anticipated synergies, cost savings and profit opportunities from corporate transactions; (iii) risks associated with our strategic business decisions including facility closures, business exits, operational changes, corporate restructurings and portfolio rationalizations intended to support the Company’s 80/20 strategic approach for long-term growth; (iv) our failure to comply with the obligations associated with being a public company listed on the New York Stock Exchange and the London Stock Exchange and the costs associated therewith; (v) risks with respect to climate change and global, regional, and local weather conditions, as well as risks related to our targets and goals with respect to climate change and the emission of greenhouse gases and other environmental, social and governance matters, including our ability to meet such targets and goals; (vi) loss contingencies and pending, threatened or future litigation, including with respect to environmental and antitrust related matters; (vii) the level of our indebtedness, risks associated with our variable rate debt, and changes in interest rates (including the impact of current elevated interest rate levels); (viii) the impact of global and domestic economic conditions and industry conditions, including with respect to current challenging macroeconomic conditions, inflationary pressures and changes in the cost or availability of raw materials, energy price increases or shortages in energy sources and transportation sources, supply chain shortages and disruptions, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products, and conditions impacting the credit, capital and financial markets; (ix) risks arising from conducting business internationally, domestic and global geopolitical conditions and tensions involving military conflict (including major global actors such as Russia, the Middle East, the further expansion of such conflicts, and the geopolitical and economic consequences associated therewith), as well as broader geopolitical tensions, changes in currency exchange rates, including in light of our assets, liabilities and earnings denominated in foreign currencies as we proceed with the planned separation of our North America and EMEA packaging business, trade policies (including but not limited to protectionist measures and the imposition of new or increased tariffs as well as the potential impact of retaliatory tariffs and other penalties including retaliatory policies against the United States) and global trade tensions, downgrades in our credit ratings, and/or the credit ratings of banks issuing certain letters of credit, issued by recognized credit rating organizations; (x) the amount of our future pension funding obligations, and pension and healthcare costs; (xi) the costs of compliance, or the failure to comply with, existing, evolving or new environmental (including with respect to climate change and greenhouse gas emissions), tax, trade, labor and employment, privacy, anti-bribery and anti-corruption, and other U.S. and non-U.S. governmental laws, regulations and policies (including but not limited to those in the United Kingdom and European Union); (xii) a material disruption at any of our manufacturing facilities or other adverse impact on our operations due to severe weather, natural disasters, climate change or other causes; (xiii) cybersecurity and information technology risks, including as a result of security breaches and cybersecurity incidents; (xiv) our exposure to claims under our agreements with Sylvamo Corporation; (xv) our ability to attract and retain qualified personnel and maintain good employee or labor relations; (xvi) our ability to maintain effective internal control over financial reporting; and (xvii) our ability to adequately secure and protect our intellectual property rights. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements can be found in our press releases and reports filed with the U.S. Securities and Exchange Commission. In addition, other risks and uncertainties not presently known to the Company or that we currently believe to be immaterial could affect the accuracy of any forward-looking statements. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.