3rd Quarter 2021 Press Release with Schedules

News Release

International Paper Reports Third Quarter 2021 Results

MEMPHIS, Tenn. - October 27, 2021 - International Paper (NYSE: IP) today reported third quarter 2021 financial results.

THIRD QUARTER 2021 HIGHLIGHTS

• Third quarter net earnings (loss) attributable to International Paper of $864 million ($2.20 per diluted share), compared with $432 million ($1.09 per diluted share) in the second quarter of 2021 and $204 million ($0.52 per diluted share) in the third quarter of 2020. Third quarter 2021 net earnings include a net after-tax gain of $350 million ($0.89 per diluted share) on the sale of our Kwidzyn, Poland mill.
• Third quarter adjusted operating earnings* (non-GAAP) of $532 million ($1.35 per diluted share) compared with $421 million ($1.06 per diluted share) in the second quarter of 2021 and $280 million ($0.71 per diluted share) in the third quarter of 2020
• Third quarter cash provided by operations of $645 million and year-to-date of $1.9 billion compared with $2.3 billion year-to-date in the same period of 2020. Third quarter 2021 cash generation also includes pre-tax sources of $737 million (net of cash divested) related to the sale of the Kwidzyn, Poland mill and $630 million related to the unwind of timber monetization notes.
• Ilim equity earnings of $95 million, bringing year-to-date to $245 million
• Debt reduction of $235 million, bringing year-to-date to $1.1 billion
• Share repurchases of $212 million, bringing year-to-date to $398 million

"In the third quarter, International Paper grew revenue, earnings and margins despite significant input cost and supply chain challenges, and continued to generate strong cash from operations," said Mark Sutton, Chairman and Chief Executive Officer. "Widespread supply chain constraints impacted our ability to capture the full opportunity that comes with the strong level of demand we're seeing. Input costs also rose far more than we anticipated and we expect this inflationary environment to continue for the foreseeable future."

Sutton added, "Looking ahead, we expect strong seasonal demand for corrugated packaging in the fourth quarter, with additional margin expansion from previous price increases."

Diluted Net EPS Attributable to International Paper Shareholders and Adjusted Operating EPS

			Third		Second			Third
		Quarter		Quarter		Quarter
			2021			2021			2020
Net Earnings (Loss) Attributable to International Paper	$	2.20	$	1.09	$	0.52
Add Back - Non-Operating Pension Expense (Income)			(0.10)			(0.10)			(0.02)
Add Back - Net Special Items Expense (Income)			(0.75)			0.07			0.21
Adjusted Operating Earnings*	$	1.35	$	1.06	$	0.71

• Adjusted operating earnings (non-GAAP) is defined as net earnings attributable to International Paper Company (GAAP) excluding net special items and non-operating pension expense (income). Management uses this measure to focus on on- going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present consolidated operating results. For discussion of net special items and non-operating pension expense (income), see the disclosure under Effects of Net Special Items and Consolidated Statement of Operations and related notes included later in this release.

Select Financial Measures
	Third		Second		Third
	Quarter		Quarter		Quarter
(In millions)	2021		2021		2020
Net Sales	$ 5,714	$ 5,616	$ 5,123
Net Earnings (Loss) Attributable to International Paper	864	432	204
Business Segment Operating Profit	631	494	473
Adjusted Operating Earnings	532	421	280
Cash Provided By (Used For) Operations	645	766	735
Free Cash Flow*	519	633	616

• Free cash flow is a non-GAAP financial measure. A reconciliation of free cash flow to the most comparable GAAP measure, cash provided by (used for) operations, and disclosure regarding why we believe that free cash flow provides useful information to investors, is included later in this release.

SEGMENT INFORMATION

Business segment operating profits are used by International Paper's management to measure the earnings performance of its businesses and is calculated as set forth in footnote (i) below under "Sales and Earnings by Business Segment". Third quarter 2021 net sales by business segment and operating profit (loss) by business segment compared with the second quarter of 2021 and the third quarter of 2020 are as follows:

	Business Segment Results
			Third		Second			Third
		Quarter		Quarter		Quarter
(In millions)			2021			2021			2020
Net Sales by Business Segment
Industrial Packaging	$	4,087	$	4,056	$	3,768
Global Cellulose Fibers			729			671			564
Printing Papers			846			846			743
Corporate and Inter-segment Sales			52			43			48
Net Sales	$	5,714	$	5,616	$	5,123
Operating Profit (Loss) by Business Segment
Industrial Packaging	$	429	$	408	$	469
Global Cellulose Fibers			96			10			(59)
Printing Papers			106			76			63
Total Business Segment Operating Profit	$	631	$	494	$	473

Industrial Packaging operating profits (losses) in the third quarter of 2021 were $429 million compared with $408 million in the second quarter of 2021. In North America, earnings increased driven by higher sales prices for corrugated boxes and containerboard and lower planned maintenance outage expenses. These benefits were partially offset by substantially higher wood fiber, recovered fiber and energy costs. We replenished containerboard inventories in the latter part of the third quarter, however, supply chains remain stretched with these constraints limiting our ability to capture the full opportunity that comes with the strong demand environment. In Europe, earnings were lower reflecting seasonally lower volumes primarily in Morocco, and lower average sales margins driven by higher containerboard costs, as well as higher recovered fiber and energy costs.

Global Cellulose Fibers operating profits (losses) in the third quarter of 2021 were $96 million compared with $10 million in the second quarter of 2021. Earnings improved significantly driven by higher average sales prices, lower operating costs and lower planned maintenance outage expenses. These benefits were partially offset by higher distribution costs, reflecting the challenging export supply chain environment, and higher costs for wood, chemicals and energy.

Printing Papers operating profits (losses) in the third quarter of 2021 were $106 million compared with $76 million in the second quarter of 2021. In North America, higher average sales prices and lower planned maintenance outage expenses were partially offset by higher input costs. In Brazil, earnings were stable as higher average sales prices and an improved geographic mix were mostly offset by higher planned maintenance outage expenses and input costs. In Europe and Russia, earnings were stable, despite only having approximately one month of the Kwidzyn, Poland mill results. Higher average sales prices, higher

sales volumes and lower planned maintenance outage expenses were offset by higher operating and input costs. We successfully completed the sale of our Kwidzyn, Poland mill on August 6, 2021 and the spin-off of our global papers business into a standalone, publicly traded company named Sylvamo Corporation on October 1, 2021.

EQUITY METHOD INVESTMENTS

Ilim joint venture equity earnings (loss) were $95 million in the third quarter of 2021 compared with $101 million in the second quarter of 2021. Operationally, earnings were slightly lower as higher export and domestic sales prices for softwood pulp, hardwood pulp and containerboard were more than offset by higher maintenance outage expenses and lower sales volumes related to scheduled maintenance.

CORPORATE EXPENSES

Corporate expenses were $12 million for the third quarter of 2021, compared with $7 million in the second quarter of 2021.

EFFECTIVE TAX RATE

The reported effective tax rate for the third quarter of 2021 was 16%, compared to a 2021 second quarter reported effective tax rate of 24%. The tax rate in the third quarter was lower primarily as a result of tax benefits recognized after the finalization of the 2020 U.S. Federal income tax return, and the impact of lower tax expense associated with the sale of our Kwidzyn, Poland mill. As a result of the sale of the Kwidzyn, Poland mill, the Company incurred approximately $10 million of tax expense in relation to the net $360 million gain.

Excluding special items and non-operating pension expense, the operational effective tax rate for the third quarter of 2021 was 18%, compared with 21% for the second quarter of 2021. The lower operational effective tax rate in the third quarter was primarily due to discrete tax benefits recognized after the finalization of the 2020 U.S. Federal income tax return, including increased U.S. research and development tax credits and lower than estimated U.S. income taxes on foreign earnings.

EFFECTS OF SPECIAL ITEMS

Net special items in the third quarter of 2021 amount to a net after-tax gain of $294 million ($0.75 per diluted share) compared with a charge of $28 million ($0.07 per diluted share) in the second quarter of 2021 and a charge of $83 million ($0.21 per diluted share) in the third quarter of 2020. Net special items in all periods include the following charges (gains):

		Third Quarter 2021		Second Quarter 2021			Third Quarter 2020
(In millions)	Before Tax			After Tax		Before Tax			After Tax		Before Tax			After Tax
Restructuring and other charges, net:
Debt extinguishment costs	$	35	$	26	$	170	$	128	$	105	$	79
Other		4			3			4			3			-			-
Total restructuring and other charges, net		39			29			174			131			105			79
Printing Papers spin-off / Building a Better IP		57			51			28			23			-			-
Foreign value-added tax credit (including interest) (a)		15			10			(70)			(47)			-			-
Environmental remediation reserve adjustment		5			4			5			3			7			6
Real estate - office impairment		-			-			21			16			-			-
Gain on sale of Kwidzyn, Poland mill		(360)			(350)			-			-			-			-
Gain on sale of La Mirada, CA distribution center		(86)			(65)			-			-			-			-
Gain on sale of equity investment in Graphic		-			-			(130)			(98)			-			-
Packaging
EMEA Packaging impairment - Turkey		-			-			(8)			(2)			-			-
Brazil Packaging impairment		-			-			-			-			(4)			(2)
Foreign and state taxes related to Printing Papers spin-		-			27			-			-			-			-
off
Other		-			-			3			2			1			-
Total special items, net	$	(330)	$	(294)	$	23	$	28	$	109	$	83

1. The net foreign value added tax credit accrual transferred to Sylvamo Corporation effective with the spin-off on October 1, 2021.

EARNINGS WEBCAST

The company will host a webcast today to discuss earnings and current market conditions, beginning at 10 a.m. ET (9 a.m. CT). All interested parties are invited to listen to the webcast via the company's website at internationalpaper.com by clicking on the Performance tab and going to the Presentations and Events/Webcasts page. A replay of the webcast will also be on the website beginning approximately two hours after the call. Parties who wish to participate in the webcast via teleconference may dial +1

1. 981-0132or, within the U.S. only, [phone], and ask to be connected to the International Paper third quarter
   earnings call. The conference ID number is 9272989. Participants should call in no later than 9:45 a.m. ET (8:45 a.m. CT). An audio-only replay will be available for ninety days following the call. To access the replay, dial [phone] or, within the U.S. only, [phone] or [phone], and when prompted for the conference ID, enter 9272989.

About International Paper

International Paper (NYSE: IP) is a leading global producer of renewable fiber-based packaging and pulp products with manufacturing operations in North America, Latin America, North Africa and Europe. We produce packaging products that protect and promote goods, and enable worldwide commerce, and pulp for diapers, tissue and other personal hygiene products that promote health and wellness. We are headquartered in Memphis, Tenn. and employ approximately 38,000 colleagues. Net sales for 2020 were $21 billion*. In Russia, the company has a 50/50 joint venture, Ilim Group, the country's largest integrated manufacturer of pulp and paper and its largest foreign-domestic alliance in the forestry products sector. For more information about International Paper, our products and global citizenship efforts, please visit internationalpaper.com.

*Inclusive of our former pulp and paper mill in Kwidzyn, Poland, which was sold on August 6, 2021, and our former global papers business, which became a standalone, publicly traded company on October 1, 2021.

Certain statements in this press release that are not historical in nature may be considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects", "anticipates", "believes", "estimates" and similar expressions identify forward-looking statements. These statements are not guarantees of future performance and reflect management's current views and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Factors which could cause actual results to differ include but are not limited to: (i) developments related to the COVID-19 pandemic, including the spread of new variants of the virus, the effectiveness, acceptance and availability of vaccines and booster shots, and associated levels of vaccination as well as the possibility that strains of the virus may be resistant to currently available vaccines, impacts of government responses to the pandemic on our operations, including vaccine mandates, impacts of the pandemic on global and domestic economic conditions, including with respect to commercial activity, our customers and business partners, consumer preferences and demand, supply chain shortages and disruptions, inflationary pressures and disruptions in the credit or financial markets; (ii) the level of indebtedness and changes in interest rates; (iii) industry conditions, including but not limited to changes in the cost or availability of raw materials, energy sources and transportation sources, the availability of labor and competitive labor market conditions, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products (including any such changes resulting from the COVID-19 pandemic); (iv) domestic and global economic conditions and political changes, changes in currency exchange rates, trade protectionist policies, downgrades in our credit ratings, and/or the credit ratings of banks issuing certain letters of credit, issued by recognized credit rating organizations, (v) the amount of our future pension funding obligations, and pension and health care costs; (vi) unanticipated expenditures or other adverse developments related to the cost of compliance with existing and new environmental, tax, labor and employment, privacy, and other U.S. and non-U.S. governmental laws and regulations (including new legal requirements arising from the COVID-19 pandemic); (vii) any material disruption at any of our manufacturing facilities or other adverse impact on our operations due to severe weather, natural disasters, climate change or similar causes; (viii) risks inherent in conducting business through joint ventures; (ix) our ability to achieve the benefits expected from, and other risks associated with, acquisitions, joint ventures, divestitures and other corporate transactions, (x) information technology risks; (xi) loss contingencies and pending, threatened or future litigation, including with respect to environmental related matters; (xii) our ability to realize the anticipated benefits of the spin-off transaction; and (xiii) the impact of the spin-off transaction on the Company and the relationship between the two companies going forward, including the ongoing commercial agreements and arrangements between us and Sylvamo. 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 U.S. Securities and Exchange Commission filings. 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.

###

Contacts:

Media: Amy Simpson, 901-419-4964 Investors: Guillermo Gutierrez; 901-419-1731; Michele Vargas, 901-419-7287.

INTERNATIONAL PAPER COMPANY

Consolidated Statement of Operations

Preliminary and Unaudited

(In millions, except per share amounts)

	Three Months Ended		Three Months Ended			Nine Months Ended
		September 30,			June 30,			September 30,
		2021			2020			2021			2021			2020
Net Sales	$	5,714		$	5,123		$	5,616		$	16,693		$	15,341
Costs and Expenses
Cost of products sold		3,924	(a)		3,541	(j)		3,913	(a)		11,684	(a)		10,714	(j)
Selling and administrative expenses		434	(b)		360	(k)		460	(b)		1,255	(b)		1,110	(k)
Depreciation, amortization and cost of timber harvested		318			320			306			933			955	(l)
Distribution expenses		446			377			420			1,272			1,149
Taxes other than payroll and income taxes		42			44			45			131			129
Restructuring and other charges, net		39	(c)		105	(m)		174	(c)		243	(c)		131	(m)
Net (gains) losses on sales and impairments of businesses		(360) (d)		(5) (n)		(9) (d)		(367) (d)		347	(n)
Net (gains) losses on sales of equity method investments		(1)			(2)			(130) (e)		(205) (e)		(35) (o)
Net (gains) losses on sales of fixed assets		(86)	(f)		-			-			(86)	(f)		-
Interest expense, net		93	(g)		112	(p)		57	(g)		242	(g)		345	(p)
Non-operating pension expense (income)		(51)			(11)			(52)			(156)			(31)
Earnings (Loss) Before Income Taxes and Equity Earnings		916			282			432			1,747			527
Income tax provision (benefit)		146	(h)		50			102			347	(h)		211
Equity earnings (loss), net of taxes		94			(28)			104			247			13
Net Earnings (Loss)		864			204			434			1,647			329
Less: Net earnings (loss) attributable to noncontrolling interests		-			-			2	(h)		2	(i)		-
Net Earnings (Loss) Attributable to International Paper Company	$	864		$	204		$	432		$	1,645		$	329
Basic Earnings Per Common Share Attributable to International Paper
Common Shareholders
Net earnings (loss)	$	2.22		$	0.52		$	1.10		$	4.21		$	0.84
Diluted Earnings Per Common Share Attributable to International Paper
Common Shareholders
Net earnings (loss)	$	2.20		$	0.52		$	1.09		$	4.16		$	0.83
Average Shares of Common Stock Outstanding - Diluted
	392.6			394.6			396.8			395.3			394.5

The accompanying notes are an integral part of this consolidated statement of operations.

1. Includes pre-tax charges of $5 million ($4 million after taxes), $5 million ($3 million after taxes) and $10 million ($7 million after taxes) for the three months ended September 30, 2021 and June 30, 2021 and the nine months ended September 30, 2021, respectively, for environmental remediation reserve adjustments, a pre-tax charge of $7 million ($5 million after taxes) and pre-tax income of $42 million ($28 million after taxes) and $35 million ($23 million after taxes) for the three months ended September 30, 2021 and June 30, 2021 and the nine months ended September 30, 2021, respectively, for the accrual of a foreign value-added tax credit which transferred to Sylvamo Corporation effective with the spin-off on October 1, 2021, a charge of $2 million (before and after taxes) for the three months and nine months ended September 30, 2021 for costs associated with the spin-off of our Printing Papers business and a pre-tax loss of $21 million ($16 million after taxes) for the three months ended June 30, 2021 and the nine months ended September 30, 2021 related to the impairment of real estate.
2. Includes pre-tax charges of $55 million ($49 million after taxes), $28 million ($23 million after taxes) and $108 million ($92 million after taxes) for the three months ended September 30, 2021 and June 30, 2021 and the nine months ended September 30, 2021, respectively, for costs associated with the spin-off of our Printing Papers business and Building a Better IP initiative and a pre-tax charge of $3 million ($2 million after taxes) for the three months ended June 30, 2021 and the nine months ended September 30, 2021 for other costs.
3. Includes pre-tax charges of $35 million ($26 million after taxes), $170 million ($128 million after taxes) and $223 million ($168 million after taxes) for the three months ended September 30, 2021 and June 30, 2021 and the nine months ended September 30, 2021, respectively, for debt extinguishment costs, a pre-tax charge of $12 million ($10 million after taxes) for the nine months ended September 30, 2021 for severance related to the optimization of our EMEA Packaging business and a pre-tax charge of $4 million ($3 million after taxes), $4 million ($3 million after taxes) and $8 million ($6 million after taxes) for the three months ended September 30, 2021 and June 30, 2021 and the nine months ended September 30, 2021, respectively, for other costs.
4. Includes a net pre-tax gain of $360 million ($350 million after taxes) for the three months and nine months ended September 30, 2021 related to the sale of our Kwidzyn, Poland mill and net pre-tax gains of $9 million ($3 million after taxes) and $7 million ($1 million after taxes) for the three months ended June 30, 2021 and the nine months ended September 30, 2021, respectively, related to the sale of our EMEA Packaging business in Turkey.
5. Includes pre-tax gains of $130 million ($98 million after taxes) and $204 million ($154 million after taxes) for the three months ended June 30, 2021 and the nine months ended September 30, 2021, respectively, related to the monetization of our remaining equity investment in Graphic Packaging.
6. Includes a pre-tax gain of $86 million ($65 million after taxes) for the three months and nine months ended September 30, 2021 related to the sale of our La Mirada, California distribution center.