International Paper 10-Q 2025-03-31

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission File Number 001-03157

INTERNATIONAL PAPER COMPANY

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (901) 419-9000

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange

Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, par value $1.00 per share, as of May 2, 2025 was 527,901,518.

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INDEX

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PART I. FINANCIAL INFORMATION

INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Operations

(Unaudited)

(In millions, except per share amounts)

The accompanying notes are an integral part of these condensed financial statements.

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INTERNATIONAL PAPER COMPANY

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

(In millions)

The accompanying notes are an integral part of these condensed financial statements.

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INTERNATIONAL PAPER COMPANY

Condensed Consolidated Balance Sheet

(In millions)

The accompanying notes are an integral part of these condensed financial statements.

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INTERNATIONAL PAPER COMPANY

**[Con

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in "Financial Statements and Supplementary Data" of this Quarterly Report on Form 10-Q (this "Form 10-Q") and the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (our "Annual Report"). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and in our Annual Report, particularly under "Risk Factors" and "Forward-Looking Statements" of this Form 10-Q and our Annual Report. Please see our "Cautionary Statement Regarding Forward-Looking Statements" below.

EXECUTIVE SUMMARY

Net earnings (loss) were $(105) million ($(0.24) per diluted share) in the first quarter of 2025, compared with $(147) million ($(0.42) per diluted share) in the fourth quarter of 2024 and $56 million ($0.16 per diluted share) in the first quarter of 2024. The Company generated Adjusted operating earnings (a non-GAAP measure defined below) of $101 million ($0.23 per diluted share) in the first quarter of 2025, compared with $(7) million ($(0.02) per diluted share) in the fourth quarter of 2024 and $61 million ($0.17 per diluted share) in the first quarter of 2024.

International Papers’ first quarter results reflect higher sales and earnings through the successful execution of sale price increases, benefits from transformation initiatives and some favorable non-recurring items. Our results also reflect two months of sales and earnings from the DS Smith acquisition completed on January 31, 2025. As a result of our commercial strategy, we believe we have made progress growing our position in our Packaging Solutions North America business, while executing price increases. We saw a shift in the demand environment during the first quarter of 2025 across the end markets we serve, which we believe is due to increased uncertainty related to potential tariff implications. Industry demand in North America was down in the first quarter of 2025 on a year-over-year basis and we expect that trend to continue into the second quarter of 2025. Demand across the European markets remained soft, but stable. Despite uncertainty in the macroeconomic landscape, we have several initiatives underway and solid momentum that we believe will help drive earnings improvement over the remainder of this year. We are taking actions designed to drive out cost, to increase productivity and efficiencies and to improve our commercial performance.

Comparing the first quarter of 2025 financial performance to the fourth quarter of 2024, for the legacy International Paper business, sales were relatively flat on seasonally lower volumes. This was offset by slightly higher price and mix in our Packaging Solutions North America business, driven by the flow through of prior price index movements. First quarter of 2025 cost of goods sold was lower on improved operations and costs due to better mill and box plant performance, cost reduction initiatives, along with favorable non-recurring items, which include employee benefit costs, insurance proceeds from the Ixtac, Mexico box plant fire and lower incentive compensation cost. Maintenance outage expense was sequentially flat while input costs were slightly higher due to increased energy costs early in the first quarter of 2025, partially offset by lower fiber costs. First quarter of 2025 results reflect the favorable impact of a lower tax rate versus the prior quarter as a result of favorable discrete items. Accelerated depreciation recognized in the first quarter of 2025 associated with the announced closure of the Campti, Louisiana mill largely offset the non-repeat of accelerated depreciation expense recognized in the fourth quarter of 2024 associated with the Georgetown, South Carolina mill closure and some box plant closures. Finally, first quarter sales and operating earnings reflect two months of DS Smith activity following the January 31, 2025 acquisition. This includes the impact of higher depreciation and amortization resulting from the stepped-up property, plant and equipment and intangible assets associated with the DS Smith purchase accounting.

The following is a discussion, by segment, of first quarter of 2025 performance versus the fourth quarter of 2024 as well as the second quarter of 2025 outlook. First quarter of 2025 operating profit in our Packaging Solutions North America business was $142 million versus $228 million in the fourth quarter of 2024. This includes an operating loss of $9 million for the DS Smith North America business for the two months following the acquisition. Price and mix was higher from the realization of index movement and open market sales. We expect continued price realization in the second quarter of 2025 due to the prior index movement. Volume was seasonally lower in the first quarter of 2025, but we expect improvements in the second quarter of 2025 as we enter the heavy agriculture season along with anticipated continued progress in growing our position as a result of our commercial strategy. Operations and costs in the first quarter of 2025 was sequentially lower due to our cost out initiatives, along with lower costs associated with employee incentive compensation and favorable medical benefits. We also received $30 million of insurance recoveries related to the 2024 fire at our Ixtac, Mexico facility. Operations and costs are expected to be higher in the second quarter of 2025 as the favorable items from the first quarter of 2025 are not expected to repeat along with

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additional maintenance costs due to timing. Planned maintenance outage costs were sequentially flat in the first quarter of 2025 but the second quarter is expected to be a heavier maintenance outage quarter. Depreciation and amortization was $208 million higher in the first quarter of 2025 primarily due to the closure of the Campti, Louisiana mill. The second quarter of 2025 will reflect the non-repeat of accelerated depreciation.

First quarter 2025 operating profit in our Packaging Solutions EMEA business was $46 million versus $19 million in the fourth quarter of 2024. This includes an operating profit of $13 million for the DS Smith EMEA business for the two months following the acquisition. Price and mix was sequentially lower in the first quarter of 2025 due to the impact of price decreases. We expect price and mix to be flat in the second quarter of 2025. Volume was sequentially flat in the first quarter of 2025, and we expect the second quarter of 2025 to remain flat relative to the first quarter of 2025. Operations and costs in the first quarter of 2025 was sequentially lower driven by lower employee incentive compensation and favorable medical benefit costs. Additionally, operations and costs benefited from energy credits on efficiency projects in the business. Operations and costs are expected to be higher in the second quarter of 2025 as these credits are not expected to repeat. Planned maintenance outage costs were slightly lower in the first quarter of 2025 versus the fourth quarter of 2024. The second quarter of 2025 is expected to be marginally higher than the first quarter of 2025.

First quarter of 2025 operating profit in our Global Cellulose Fibers business was $17 million versus a $250 million operating loss in the fourth quarter of 2024. Price and mix was higher versus the fourth quarter of 2024 on improved fluff mix and the sale of energy credits. We expect price and mix to be higher in the sec

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Information relating to quantitative and qualitative disclosures about market risk is shown on pages 50-51 of International Paper’s Annual Report, which information is incorporated herein by reference. There have been no material changes in the Company’s exposure to market risk since December 31, 2024.

Evaluation of Disclosure Controls and Procedures:

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported (and accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure) within the time periods specified in the SEC’s rules and forms. As of the end of the period covered by this Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2025 (the end of the period covered by this Form 10-Q).

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Changes in Internal Control over Financial Reporting:

As previously disclosed, on January 31, 2025, we completed the acquisition of the entire issued and to be issued share capital of DS Smith. See Note 8 - Acquisitions to the Condensed Consolidated Financial Statements for additional information. We are in the process of integrating DS Smith into our systems and control environment. This ongoing integration process may result in changes in our internal control over financial reporting.

Except as described above, there have been no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.****LEGAL PROCEEDINGS

A discussion of material developments regarding certain legal proceedings involving the Company occurring in the period covered by this Form 10-Q is found in Note 13 - Commitments and Contingencies of the Condensed Notes to the Consolidated Financial Statements in this Form 10-Q, which is incorporated by reference herein. Except as set forth in Note 13 – Commitments and Contingencies of the Condensed Notes to the Consolidated Financial Statements in this Form 10-Q, the Company is not subject to any administrative or judicial proceeding arising under any Federal, State or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that is likely to result in monetary sanctions of $1 million or more.

Other than as set forth below, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K (Part I, Item 1A) for the period ended December 31, 2024.

Changes in international conditions or other risks arising from conducting business internationally could adversely affect our business and operations.

As a global producer of renewable fiber-based packaging and pulp products, we operate in many different countries. As a result, we are vulnerable to risks related to our international operations. These risks, which can vary substantially by country, include economic or political instability, geopolitical events, corruption, anti-American sentiment, expropriation measures, social and ethnic unrest, natural disasters, military conflicts and terrorism, the regulatory environment (including the risks of operating in developing or emerging markets in which there are significant uncertainties regarding the interpretation and enforceability of legal requirements and the enforceability of contractual rights and intellectual property rights), adverse currency fluctuations, foreign exchange control regimes (including restrictions on currency conversion), downturns or changes in economic conditions (including in relation to commodity inflation and tariffs), adverse tax consequences or rulings, import restrictions, controls or other trade protection measures, economic sanctions, health guidelines and safety protocols, nationalization, changes in social, political or labor conditions, and adverse developments regarding sustainability, environmental regulations and trade policies and agreements, any of which risks could negatively affect our financial results. For example, a portion of our sales could be adversely affected by changes in economic conditions and demographics, including as a result of tariffs. Trade protection measures in favor of local producers of competing products, including governmental subsidies, tariffs, tax benefits and other measures may give local producers a competitive advantage and adversely impact our operating results and our business prospects in these countries. Likewise, disruption in existing trade agreements or increased trade friction between countries (such as in relation to the trade tensions between the U.S. and China) could have a negative effect on our business and results of operations by restricting the free flow of goods and services across borders. Additionally, the U.S. government recently increased certain rates and broadened the scope of certain tariffs imposed on goods imported into the U.S., such as from China, which may strain international trade relations and increase the risk that foreign governments implement retaliatory tariffs on goods imported from the United States. Specifically, the U.S. government implemented tariffs on certain foreign goods and may implement additional tariffs on foreign goods. If lasting, such tariffs and any further legislation or actions taken by the U.S. federal government that restrict trade, such as additional tariffs, trade barriers, and other protectionist or retaliatory measures taken by governments in Europe, Asia, and other countries, could adversely impact our ability to sell products and services in our international markets. Tariffs could increase the cost of our products and the components and raw materials that go into our manufacturing process. These increased costs could adversely impact the profit margin that we earn on our products, which could make our products less competitive and reduce consumer demand. Countries have and may continue to also adopt other protectionist measures that could limit our ability to offer our products and services. Conversely, these tariffs and retaliatory tariffs may be subject to negotiations which could lower or remove them in the near or longer term with a return to more normalized trade conditions in some instances. Due to this uncertainty, the ultimate impact of any tariffs and trade tension is unclear and will depend on various factors, including if there are negotiated bilateral agreements to remove or lower tariffs, and the timing, amount, scope, and nature of the tariffs that remain implemented.

We may continue to be adversely affected by ongoing geopolitical instability and the economic consequences and disruptions arising therefrom, including as the result of the military conflict between Russia and Ukraine, the conflict in the Middle East, and increasing tensions between China and Taiwan. These risks may be further heightened in the event of the expansion in the scope or escalation of any such conflicts. In addition, changes to economic sanctions programs, could put us at risk of violating sanctions as a result of an existing presence in a newly sanctioned jurisdiction or relationship with a newly sanctioned entity if we fail or are unable to end such presence or relationship in a timely manner.

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In addition, we are subject to laws related to operations in foreign jurisdictions, including laws prohibiting bribery of government officials and other corrupt practices. Anti-bribery laws such as the U.K. Bribery Act 2010, the Foreign Corrupt Practices Act of 1977, and similar worldwide anti-corruption laws generally prohibit companies and their intermediaries from making improper payments to public officials for the purpose of obtaining or retaining business. Further, the U.S. Department of the Treasury’s Office of Foreign Assets Control and other non-U.S. government entities maintain economic sanctions targeting various countries, persons and entities. We are also subject to the laws and regulations of governmental and regulatory agencies. Failure to comply with domestic or foreign laws could result in various adverse consequences for us including the imposition of civil or criminal sanctions, reputational damage and the prosecution of executives overseeing international operations.

We are exposed to the translation of the results of overseas subsidiaries into their respective reporting currencies, as well as the impact of currency fluctuations on their commercial transactions denominated in foreign currencies. Adverse movements in foreign exchange rates relating to foreign currency denominated commodities, assets and liabilities, and transactions could have a material impact on our business, financial condition, results of operations and/or future prospects.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

(a) 1,103,894 shares were acquired from employees or members of our Board as a result of share withholdings to pay income taxes under the Company's 2024 Long-Term Incentive Compensation Plan (the "2024 LTICP"), approved and effective as of May 13, 2024. The 2024 LTICP replaced the Amended and Restated 2009 Incentive Compensation Plan. During these periods, no shares were purchased under our share repurchase program, which does not have an expiration date. On October 11, 2022, our Board increased the authorization to repurchase shares up to a total of $3.35 billion shares. As of March 31, 2025, approximately $2.96 billion aggregate shares of our common stock remained authorized for repurchase under this Board authorization.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a) None.

(b) Not applicable.

(c) During the quarter ended March 31, 2025, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements, as defined in Item 408 of Regulation S-K.

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ITEM 6. EXHIBITS

** Filed herewith*

*** Furnished herewith*

+ Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.