BASIS OF PRESENTATION (Note)

9 Months Ended

Sep. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business Description and Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments that are necessary for the fair presentation of International Paper Company’s (International Paper’s, the Company’s or our) financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed herein, such adjustments are of a normal, recurring nature. Results for the first nine months of the year may not necessarily be indicative of full year results. It is suggested that these condensed financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which have previously been filed with the Securities and Exchange Commission.

On March 11, 2020 the World Health Organization (WHO) declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. During the third quarter of 2021, the number of COVID-19 cases and deaths increased in the United States and numerous other countries, and restrictive measures, including mask and vaccine requirements, have been implemented or reinstituted by various governmental authorities and private businesses. Economic recovery in the United States has continued but may be threatened by the resurgence of COVID-19 cases and other factors. Most of our manufacturing and converting facilities have remained open and operational during the pandemic and at the current time our manufacturing and converting facilities are generally operational.

The pandemic has had a mixed impact on demand for our products. Initially, demand for printing papers products was significantly impacted by the pandemic, but has seen a steady increase over the first nine months of 2021. Demand for our pulp, containerboard and corrugated box products has not been negatively impacted and in some cases has been positively impacted by COVID-19 to date. However, all of our operations continue to experience higher supply chain costs and a constrained transportation environment due in part to the impacts of COVID-19.

There continue to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the resurgence of new variants of the virus in many areas globally; the additional actions taken by governmental authorities and private businesses, including mask and vaccine requirements, to attempt to contain the COVID-19 outbreak or to mitigate its impact; the efficacy, acceptance and availability of various vaccines and booster shots, as well as the possibility that strains of the virus may be resistant to current available vaccines; and the impact of COVID-19 on economic conditions, including with respect to labor market conditions, economic activity, consumer behavior, supply shortages and disruptions and inflationary pressures. COVID-19 has had a significant adverse effect on portions of our business, and could have a material adverse effect on our financial condition, results of operations and cash flows if public health and/or global economic conditions deteriorate.

Printing Papers Spinoff

On October 1, 2021, the Company completed the previously announced spin-off of its Printing Papers segment along with certain mixed-use coated paperboard and pulp businesses in North America, France and Russia into a standalone, publicly-traded company, Sylvamo Corporation. The transaction was implemented through the distribution of shares of the standalone company to International Paper's shareholders (the "Distribution"). As a result of the Distribution, Sylvamo Corporation is an independent public company that trades on the New York Stock Exchange under the symbol "SLVM".

The Distribution was made to the Company's stockholders of record as of the close of business on September 15, 2021 (the "Record Date"), and such stockholders received one share of Sylvamo Corporation common stock for every 11 shares of International Paper common stock held as of the close of business on the Record Date. The Company retained 19.9% of the shares of Sylvamo at the time of the separation, with the intent to monetize its investment and to provide additional proceeds to the Company. The Company is accounting for its ownership interest in Sylvamo at fair value as an investment in equity securities. In the third quarter of 2021, Sylvamo incurred $1.5 billion in debt in anticipation of a net cash distribution of $1.4 billion to be made to the Company as part of the spin-off. See Note 17 – Debt for further details regarding the Sylvamo debt.

All current and historical operating results of the Sylvamo Corporation businesses will be presented as Discontinued Operations, net of tax, in the consolidated statement of operations in the fourth quarter of 2021. The spin-off was tax-free for the Company and its shareholders for U.S. federal income tax purposes.

In connection with the Distribution, on September 29, 2021, the Company and Sylvamo Corporation entered into a separation and distribution agreement as well as various other agreements that govern the relationships between the parties following the Distribution, including a transition services agreement, a tax matters agreement and an employee matters agreement. These

agreements provide for the allocation between International Paper Company and Sylvamo Corporation of assets, liabilities and obligations attributable to periods prior to, at and after the Distribution and govern certain relationships between International Paper and Sylvamo Corporation after the Distribution.