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 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 second quarter of 2026 reflecting higher sales prices. Sales volumes were lower, as the benefit of one additional shipping day was offset by typical seasonally lower volumes and softer demand, including West Coast agriculture. Cost of products sold decreased by $82 million and was impacted by lower sales volumes and lower planned maintenance outage expenses partially offset by higher input costs. Input costs were impacted by higher recovered fiber, energy and fuel costs. Operating costs were lower driven by the non-repeat of the Riverdale paper machine conversion costs, partially offset by Pine Hill roof repair costs and lower Ixtac insurance recoveries. Depreciation and amortization expense increased $16 million due to two additional months of depreciation expense in the third quarter compared to the second quarter for the NORPAC mill and additional box system investments. Selling and administrative expenses were flat. Distribution expenses increased by $34 million due to higher freight costs. Results also reflected a full quarter of earnings in the third quarter of 2026 from the NORPAC mill acquisition of $3 million compared to a loss of $5 million for one month in the second quarter of 2026.

Compared with the third quarter of 2025, PS NA sales in the third quarter of 2026 were lower driven by lower sales volumes reflecting the impact of our mill strategic actions and softer demand partially offset by higher sales prices for boxes. Cost of products sold decreased by $56 million driven by lower sales volumes partially offset by higher input costs for recovered fiber and diesel costs. Manufacturing costs were impacted by higher costs for goods and services and Pinehill roof repair costs, partially offset by an Ixtac insurance recovery. Depreciation and amortization expense decreased $589 million due to lower accelerated depreciation associated with our mill cost out actions. Distribution expenses increased $32 million driven by higher freight costs. Selling and administrative expenses were flat. Earnings in the third quarter of 2026 benefited from the Riverdale paper machine conversion and the acquisitions of the NORPAC mill and the Dover converting facility.

Entering the fourth quarter of 2026, sales volumes are expected to be higher compared to the third quarter of 2026 driven by seasonality partially offset by the impact of two less shipping days in the fourth quarter of 2026. Sales prices are expected to be higher due to previously published price movements. Operating costs are expected to be lower. Input costs are expected to be higher.

PS EMEA

PS EMEA sales decreased in the third quarter of 2026 compared with the second quarter of 2026 as higher sales prices for paper were more than offset by lower sales volumes in a continued soft market. Cost of products sold decreased $21 million driven by lower sales volumes and continued cost-out actions partially offset by higher input costs for energy and fiber. Packaging margins were impacted by higher paper prices not yet realized in box pricing. Planned maintenance outage costs were higher. Depreciation and amortization expense increased $21 million in the third quarter of 2026 due to accelerated depreciation associated with cost-out actions. Selling and administrative expenses decreased $17 million driven by lower overhead and incentive compensation expense. Distribution expenses were slightly higher.

Compared with the third quarter of 2025, PS EMEA sales in the third quarter of 2026 were lower driven by lower sales volumes for both paper and boxes reflecting the soft market driven by geopolitical uncertainty and consumer sentiment. Sales prices for paper were higher while packaging margins were impacted by higher paper prices not yet realized in box pricing. Cost of products sold decreased $55 million, reflecting lower sales volumes partially offset by higher input costs for energy. Depreciation and amortization expense increased $16 million due to changes in the assets values and estimated lives resulting from the acquisition accounting of DS Smith in the second half of 2025. Selling and administrative expenses were $20 million higher compared to the third quarter of 2025 driven by higher overhead costs. Distribution expenses were higher.

In light of regulatory requirements and the planned separation, management has elected to not provide fourth quarter financial expectations for the PS EMEA segment. Following completion of the separation, the segment's results will no longer be reflected in the Company's continuing operations, and as such, management believes that providing forward-looking guidance would not be useful to investors.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by (used for) operations, including discontinued operations, totaled $1.5 billion and $793 million for the first nine 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 $(197) million for the nine months ended September 30, 2026 compared with cash provided by (used for) working capital components of $(867) million for the nine months ended September 30, 2025. The change in cash provided by operations in the first nine months of 2026 compared to the comparable 2025 nine-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 nine months of 2025 which, in total, impacted operating cash flow by $670 million.

Cash provided by (used for) investment activities, including discontinued operations, totaled $(907) million in the first nine months of 2026 compared with $(478) million in the first nine months of 2025. The increase was primarily due to higher capital expenditures of $449 million, increased cash paid for acquisitions, net of cash acquired of $871 million and lower proceeds from the sale of fixed assets of $5 million. These were partially offset by an increase of cash proceeds from divestitures, net of cash divested of $907 million and higher insurance recoveries of $32 million.

Capital expenditures totaled $1.7 billion in the first nine months of 2026, compared to $1.2 billion in the first nine months of 2025. Full-year 2026 capital expenditures are currently expected to be approximately $2.0 billion to $2.1 billion, or 99% to 104% of depreciation and amortization. These capital expenditures reflect significant reinvestment into the business intended to position the Company as a leading provider of sustainable packaging solutions while supporting long-term value creation.

Financing activities for the first nine months of 2026 included a $40 million net decrease in debt versus a $229 million net increase in debt during the comparable 2025 nine-month period.

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 nine months ended September 30, 2026.

Maintaining an investment-grade credit rating is an important element of International Paper’s financing strategy. At September 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 nine 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 nine 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 September 30, 2026. During the nine months ended September 30, 2026, no shares of common stock were repurchased under our share repurchase program.

During the first nine months of 2025, International Paper used approximately 3.6 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 nine months of 2025. Payments of restricted stock withholding taxes totaled $64 million. During the nine months ended September 30, 2025, no shares of common stock were repurchased under our share repurchase program.

Cash dividend payments related to common stock totaled $735 million and $733 million for the first nine months of 2026 and 2025, respectively. Dividends were $1.3875 per share for the first nine 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 and, as appropriate, additional financing arrangements that the Company may evaluate and implement from time to time to enhance financial flexibility and liquidity. The Company will continue to rely on bank and debt capital markets for the majority of any necessary long-term funding not provided by operating cash flows. Funding decisions will continue to 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. The Company may repurchase, our common stock under our existing share repurchase program and/or debt securities, including through open market transactions, to the extent consistent with its capital structure planning, subject to prevailing market conditions, liquidity requirements, applicable securities laws requirements, and other factors. The Company has not repurchased shares under its share purchase program in recent years. 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 September 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. As of September 30, 2026, the Company had $170 million outstanding under the 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 September 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 $450 million outstanding, as of September 30, 2026, under this program.

Euro Medium Term Notes

In 2025, International Paper assumed foreign denominated debt of DS Smith in various currencies. 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. During the third quarter, the Company repaid $692 million of euro denominated bonds with an interest rate of 0.875% upon maturity using short-term borrowings. Following repayment, all principal amounts of the remaining series of 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 2026 notes (which were repaid on maturity, as described above, 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 outstanding notes, 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 £1.3 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 £1.3 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 September 30, 2026, the Company had €1.1 billion (approximately $1.2 billion) 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 September 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 £1.3 billion credit facility agreement.

The €200 million amortizing credit facility agreement provides for interest rates at a fixed rate for each facility. At September 30, 2026, the Company had €125 million (approximately $142 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 September 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 September 30, 2026, there were no borrowings outstanding under this agreement. The Company has a £50 million uncommitted bank facility. At September 30, 2026, the Company had €55 million (approximately $62 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 nine months of 2026.

The PS EMEA reporting unit approximated fair value after the December 31, 2025 goodwill impairment charge. Based on updated macroeconomic indicators and updated industry outlooks, we performed a quantitative goodwill impairment test as of September 30, 2026. The results of the 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 $1.4 billion, which is reflected in Impairment of goodwill in the accompanying consolidated statements of operations.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q for the quarter ended September 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,” “progress,” “positions,” “support,” 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 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) the possibility that, following evaluation of strategic alternatives, the separation of our EMEA operations may be effected in a different form than initially contemplated; (iii) our ability to successfully integrate and realize anticipated synergies, cost savings and profit opportunities from corporate transactions; (iv) 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; (v) 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; (vi) 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; (vii) loss contingencies and pending, threatened or future litigation or investigations, including with respect to environmental and antitrust related matters; (viii) 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); (ix) 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; (x) 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; (xi) the amount of our future pension funding obligations, and pension and healthcare costs; (xii) 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); (xiii) 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; (ivx) cybersecurity and information technology risks, including as a result of security breaches and cybersecurity incidents; (xv) our exposure to claims under our agreements with Sylvamo Corporation; (xvi) our ability to attract and retain qualified personnel and maintain good employee or labor relations; (xvii) our ability to maintain effective internal control over financial reporting; and (xviii) 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.