IP 10-K & 10-Q changes, risk factors and insider trading

Risks Related to the Business Combination and the Share Issuance

•Failure to achieve the benefits and operating synergies expected from the business combination of DS Smith.

•Significant integration costs that could cause an interruption of, or loss of momentum in, the activities of the Company.

•Exposure to significant unanticipated liabilities.

•Shareholders are more exposed to currency exchange rate fluctuations.

•Failure to successfully integrate DS Smith and realize the benefits and operating synergies expected from the business combination to the extent or within the timeframes anticipated

•Adverse effects and pricing differentials arising from the maintenance of two exchange listings

•There are risks associated with our review of strategic options for our Global Cellulose Fibers business, and there is no assurance that this review will result in any transaction or other outcome.

•If our spin-off of Sylvamo Corporation were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then we may be subject to significant U.S. federal income taxes.

We may fail to successfully integrate DS Smith and realize the anticipated benefits and operating synergies expected from the business combination, which could adversely affect our business, financial condition and operating results.

On January 31, 2025, we completed the previously announced business combination with DS Smith. The success of the business combination will depend, in significant part, on our ability to successfully integrate DS Smith, grow the revenue of the combined company and realize the anticipated strategic benefits and synergies from the business combination.

The complexity and magnitude of the integration effort associated with the business combination are significant, and integrating DS Smith has resulted, and will continue to result, in significant costs. The integration process could cause an interruption of, or loss of momentum in, the other activities of the Company, and our failure to meet the challenges involved in integrating DS Smith and realize the anticipated benefits of the business combination could adversely affect our business, financial condition and results of operations. These challenges include, without limitation:

•Diversion of management’s attention from ongoing business concerns;

•Managing the larger combined business, including in light of our increased scale and global presence;

•Difficulties in the integration of operations and systems, including significant modifications to our internal control systems, processes and critical information systems;

•Designing, implementing and maintaining effective internal control over financial reporting and remediating the previously disclosed material weaknesses of DS Smith;

•Unanticipated expenses, difficulties of delays; and

•Designing and implementing control processes to comply with additional regulations and laws related to the environment, climate change, privacy, and data protection in light of our increased scale and global presence.

There are many factors beyond our control that could affect the timing or total amount of integration-related risks. The failure to effectively address any of these risks, or any other risks related to the integration of DS Smith, could materially adversely impact our business, financial condition and results of operations. In addition, the impact and extent of these integration challenges may exacerbate the other risks described in this “Risk Factors” section, which could materially adversely affect us.

The anticipated benefits of the business combination may not be realized fully or at all, or may take longer to realize than we expect. Actual operating, technological, strategic and revenue benefits, if achieved at all, may be less significant than we expect or may take longer to achieve than anticipated. Further, our results of operations may differ from the projections made with respect to the business combination prior to closing, which were based on assumptions and estimates known to management at the time. If we are not able to realize the anticipated benefits and synergies expected from the business combination within a reasonable time, our business, financial condition and operating results may be adversely affected.

The business combination may expose us to significant unanticipated liabilities that could adversely affect our business, financial condition and results of operations.

The business combination may expose us to significant unanticipated liabilities relating to the operation of the combined company. These liabilities could include tax liabilities, employment or severance-related obligations under applicable law or other benefits arrangements, legal claims, warranty or similar liabilities to customers, and claims by or amounts owed to vendors. Particularly in international jurisdictions, the business combination, or our decision to enter new international markets where DS Smith previously conducted business, could also expose us to tax liabilities and other amounts previously owed by DS Smith. The occurrence of such unforeseen or unanticipated liabilities, should they be significant, could have a material adverse effect on our business, financial condition and results of operations.

As a result of the business combination, our financial results are more exposed to currency exchange rate fluctuations and an increased proportion of assets, liabilities and earnings are denominated in non-U.S. Dollar currencies. We present our financial statements in U.S. Dollars and will have a significant proportion of net assets and income in non-U.S. Dollar currencies, primarily the Pound Sterling and Euro. Our financial condition and results of operation will therefore be more sensitive to movements in foreign exchange rates. A depreciation of non-U.S. Dollar currencies relative to the U.S. Dollar could have an adverse impact on our financial results.

RISKS RELATED TO INDUSTRY CONDITIONS

Substantially all of our business has experienced, and is expected to continue to experience, cycles relating to industry capacity, customer demand, and general economic conditions. The length and magnitude of these cycles have varied over time and by product. Product prices and sales volumes have fallen in the past in periods and regions where demand was lower than available supply, and there can be no assurance that this will not recur. New or existing producers of pulp or paper products may add or adjust capacity affecting available supply. Further, changes in customer or consumer preferences may increase or decrease the demand for fiber-based products and non-fiber substitutes. Customer and consumer preferences change based on, among other factors, cost, convenience, health concerns and perceptions and an increased awareness of sustainability considerations. In some areas, customers have increasingly shown interest in environmentally-friendly products such as fiber-based packaging. Advances in non-fiber technologies such as plastic packaging or other materials could result in decreased demand for our products. In addition, legal developments, such as new governmental regulations on single-use packaging products could significantly alter the market for our products. Any of the foregoing, including a failure to anticipate and respond to changing trends, customer preferences and technological and regulatory developments could have a material adverse effect on our business, financial condition, results of operations and/or future prospects. A lack of investor confidence in the paper and packaging industry could also have a negative impact on our business, financial condition, results of operations and/or future prospects.

We rely heavily on the use of certain raw materials (principally virgin wood fiber, recycled fiber, caustic soda, starch and adhesives), energy sources (principally biomass, natural gas, electricity and fuel oil) and third-party transport companies. The market price of virgin wood fiber varies based upon availability, demand, quality, and source. The global supply and demand for recycled fiber may be affected by factors such as trade policies between countries, individual governments’ legislation and regulations, and general macroeconomic conditions. In addition, the increase in demand of products manufactured, in whole or in part, from recycled fiber, on a global basis, may cause significant fluctuations in recycled fiber prices. Taking into account ongoing inflationary conditions in domestic and global markets, we have experienced, and may continue to experience, a significant increase in various costs, including recycled fiber, energy, freight, chemical, and other supply chain costs, which has adversely affected, and may continue to adversely affect, our operations.

Moreover, the availability of labor and the market price for fuel may affect third-party transportation costs.

We have significant exposure to energy costs, in particular gas, electricity and other fuel costs. Energy prices have fluctuated dramatically in the past and may continue to increase and/or fluctuate in the future. Transportation costs are also impacted by energy costs since a key component of transportation costs relates to the cost of oil. We have employed and expect to continue to employ, strategies and tools to reduce the volatility of energy costs and ensure a degree of certainty over future energy costs. However, there can be no certainty that those strategies and tools will continue to manage such impact in the future. Volatile and increasing energy prices, including as a consequence of the conflict between Russia and Ukraine and other geopolitical conflicts, or a failure to effectively implement such strategies and tools could have a material adverse effect on our business, financial condition, results of operations and/or future prospects.

We operate in a competitive international environment in all operating segments. Our products compete with products produced by other forest products companies. Product innovations, manufacturing and operating efficiencies, additional manufacturing capacity, distribution and commercial strategies pursued or achieved by competitors, the increased use of artificial intelligence ("AI") and machine learning solutions in the paper industry, and the entry of new competitors, could negatively impact our financial results. In addition, our products compete with companies that produce substitutes for wood-fiber products, such as plastics and various types of metal. Customer shifts away from wood-fiber products toward such substitute products may adversely affect our business and financial results. Further, we depend on critical suppliers and key customers. An inability to foster these relationships and to manage any material changes in commercial terms and service levels could have a material adverse impact on our business, financial condition, results of operations and/or future prospects.

Pricing in the paper and packaging industry can be affected by, among other things, product commoditization, changes in demand, price reductions, entrance of new competitors or capacity, changes in product supply, and the introduction of new products, technologies and equipment, including the use of AI and machine learning solutions. We face significant pressure to reduce per unit costs to achieve commercially acceptable returns. In circumstances where we are unable to adjust the relevant cost base sufficiently, pricing pressure could have a material adverse effect on our business, financial condition, results of operations and/or future prospects.

Climate change impacts, including rising temperatures and the increasing severity and/or frequency of adverse weather conditions, may result in operational impacts on our facilities, as well as supply chain disruptions and increased raw material and other costs. These adverse weather conditions and other physical impacts which may be exacerbated as the result of climate change include floods, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, snow, ice storms and drought. Climate change may also contribute to the decreased productivity of forests, a key source in the production of paper products, and adverse impacts on the distribution and abundance of species, and the spread of disease and insect epidemics, any of which developments could adversely affect forestland management and the availability of energy and water resources. The effects of climate change and global, regional and local weather conditions, including the resulting financial costs of compliance with legal or regulatory initiatives, could have a material adverse effect on our results of operations and business.

In recent years, there has been a heightened focus, including from investors, customers, the general public, domestic and foreign governmental (including but not limited to the United Kingdom and the European Union) and nongovernmental authorities, regarding sustainability matters, including with respect to climate change, greenhouse gas (“GHG”) emissions, packaging and waste, sustainable supply chain practices, biodiversity, deforestation, land, energy and water use, and human capital matters. This heightened focus on sustainability matters, including climate change, has resulted in more prescriptive reporting requirements with respect to sustainability metrics and other new requirements, an increased expectation that such metrics will be voluntarily disclosed by companies such as ours, and increased pressure with respect to making commitments, setting targets, or establishing goals, and taking action to meet them, which has caused and is expected to continue to cause the incurrence by us of increased compliance costs. As the result of this increased focus and commitment to sustainability matters, we (either voluntarily and/or as required by applicable law and regulation) have provided disclosure and established targets and goals with respect to various sustainability matters, including climate change. For example, we have publicly committed to reducing our Scope 1, 2 and 3 GHG emissions by 35% from 2019 to 2030. Meeting these and other sustainability targets and goals have increased our capital and operational costs. Further, we may continue to establish, increase and/or revise such disclosure, targets and goals in the future. For example, following the completion of our business combination with DS Smith, we are reassessing our Vision 2030 goals to ensure that they align with our expanded operations and capabilities, which may result in modifications to our existing targets and timelines. While we aim to lever the strengths and synergies of our combined Company to enhance our initiatives, there is a risk that we may need to revise our Vision 2030 goals to ensure they align with our expanded business operations, increased scale and global presence. Efforts to achieve our initiatives and goals, including collecting, measuring, and reporting sustainability information, involve operational, reputational, financial, legal, and other challenges and may result in additional costs or delays related to achieving our Vision 2030 goals. Such efforts may have a negative impact on us, including our brand name, reputation, and the market price of our common stock.

Full-year 2024 net earnings attributable to shareholders were $557 million ($1.57 per diluted share) compared with $288 million ($0.82 per diluted share) for full-year 2023.

In 2024, we initiated our strategy to deliver profitable growth as the low-cost, most reliable and innovative sustainable packaging solutions provider for our customers. Through a disciplined 80/20 approach, we restructured our corporate organization, added resources to the business, reduced structural costs through footprint actions and successfully piloted regional box plant optimization. Our earnings stabilized in the fourth quarter 2024 and we intend to accelerate earnings improvement in 2025. Our Go-to-Market value over volume reset was largely complete in 2024 and we expect the final unfavorable impacts to volume to be behind us later in 2025. There was a significant focus throughout 2024 on cost reduction. This included a zero-up approach to the corporate organization, including shifting resources to the business and reducing corporate staffing to the level required as a public company. We expect this to reduce costs by approximately $120 million on a run rate basis. Additionally, we made the challenging decision to close five box plants and our Global Cellulose Fibers Georgetown, South Carolina mill. These actions are expected to remove roughly another $110 million of annual cost on a run rate basis. Mill reliability was an issue in 2024 resulting in elevated costs throughout the year. This presents a significant cost reduction opportunity and we will continue to improve the reliability at our mills and optimize our mill and box system so that we are able to reduce structural costs. Finally, we completed the acquisition of DS Smith on January 31, 2025, creating a global leader in sustainable packaging solutions, focused on the attractive and growing North American and EMEA regions.

Comparing 2024 financial performance to 2023, sales in our North American Industrial Packaging business were relatively flat versus the prior year. This was due in part to higher price and mix driven by favorable prior index movements and the execution of our go-to-market strategy. The improved price and mix was offset by lower volumes as we worked through customer contract restructuring. This decline was in line with our expectations. Sales in our Global Cellulose Fibers business were lower compared to prior year. This was due to lower price and mix driven by prior index movements. Volume was relatively flat versus 2023. Cost of products sold in our North American Industrial Packaging business was lower versus the prior year in line with lower sales during 2024 along with lower maintenance outage expenses. This was partially offset by higher costs associated with mill reliability issues along with increased input costs on higher recovered fiber costs. Cost of products sold in our Global Cellulose Fibers business was lower versus the prior year in line with lower sales during 2024 along with lower maintenance outage expenses and lower input costs. Cost of products sold includes higher costs associated with mill reliability issues. Selling and administrative expenses were higher in our North American Industrial Packaging and Global Cellulose Fibers businesses primarily driven by higher employee incentive compensation expense. Distribution expenses were lower in both our North American Industrial Packaging and Global Cellulose Fibers businesses primarily driven by lower freight expense on reduced sales.

Looking ahead to the first quarter 2025 in our North American Industrial Packaging business, as compared to the fourth quarter 2024 and without consideration of the DS Smith acquisition, we expect slightly lower price and mix based on lower export pricing observed to date along with an unfavorable seasonal mix impact. Volume is expected to be slightly higher in the first quarter 2025 due to two more shipping days partially offset by the near-term impact of our go-to-market strategy. Operations and costs are expected to increase earnings driven by the benefits of our box plant optimization as well as the non-repeat of the higher incentive compensation costs and other unfavorable items from the fourth quarter 2024. Maintenance outage expense is expected to be marginally lower relative to the fourth quarter 2024. Input costs are expected to be relatively flat as higher energy costs will be offset by lower recovered fiber costs. Finally, in February we announced our plan to close the containerboard mill in Campti, Louisiana with operations expected to cease by March 31, 2025. We estimate that the closure will result in aggregate pre-tax charges of approximately $357 million, including pre-tax noncash asset write-offs of approximately $311 million (of which $276 million is accelerated depreciation), and pre-tax cash severance and other shutdown charges of approximately $46 million. In our Global Cellulose Fibers business, we expect price and mix to be lower due to unfavorable prior index movements. We expect volume to be relatively flat. Operations and costs are expected to increase earnings due to improved mill performance and reliability along with the non-repeat of the higher incentive compensation costs and other unfavorable one-time items from the fourth quarter 2024. Maintenance outage expense is expected to decrease earnings while input costs are expected to be stable relative to the fourth quarter 2024.

In closing, we believe 2025 will be a transformational year. During the first few months, we anticipate earnings will continue the stabilization trend we saw in the fourth quarter 2024. As we progress further in the year, we expect our earnings to progressively ramp up as the commercial contract restructuring is completed and the 80/20 initiatives deliver value. We have an ambitious pipeline of capital projects that we predict will facilitate the regional optimization of our box system and deliver profitable market share growth. We believe we are well on our way to building a performance-driven and customer-centric culture. We are confident we have developed the right strategy and a concrete plan that will deliver customer excellence and drive profitable growth. We believe our actions will drive transformational improvements and create significant value for our shareholders.

Acquisition of DS Smith

On January 31, 2025, the Company, through its indirect wholly owned subsidiary, International Paper UK Holdings Limited, completed the closing (the “Closing”) of its previously announced business combination of the entire issued and to be issued ordinary shares of DS Smith plc, a public limited company registered in England and Wales that has since been re-registered as DS Smith Limited, a private limited company (“DS Smith”). The business combination was effected by means of a court-sanctioned scheme of arrangement between DS Smith and shareholders of DS Smith under Part 26 of the UK Companies Act 2006, as amended.

The consummation followed the Company’s April 16, 2024 announcement pursuant to Rule 2.7 of the United Kingdom City Code on Takeovers and Mergers disclosing the terms of the business combination (the “Rule 2.7 Announcement”), pursuant to which, for each ordinary share of DS Smith (the “DS Smith Shares”), DS Smith shareholders would receive 0.1285 of a new share of common stock of the Company, par value $1.00 per share (the “Company Common Stock”), resulting in the issuance of 178,126,631 new shares of Company Common Stock (the “New Company Common Stock”).

On January 24, 2025, the European Commission issued its Phase I clearance of the business combination, conditional on International Paper entering into commitments to divest its plants in Mortagne, Saint-Amand, and Cabourg (France), Over (Portugal) and Bilbao (Spain). As such, the Company has agreed to divest these locations.

On February 4, 2025, the DS Smith Shares were delisted from the London Stock Exchange (the “LSE”) and the shares of New Company Common Stock began trading on the New York Stock Exchange under the symbol “IP” and the shares of Company Common Stock, including the shares of New Company Common Stock, began trading on the LSE via a secondary listing under the symbol “IPC.”

Reconciliation of Net earnings (loss) to Adjusted operating earnings (loss)

(a) Adjusted operating earnings (non-GAAP), and adjusted operating earnings per share (non-GAAP) for the year ended December 31, 2023, included in this Annual Report on Form 10-K have been adjusted to include the pre-tax charge of $422 million for accelerated depreciation related to mill strategic actions in the year ended December 31, 2023. This charge was previously treated as a special item and excluded from these non-GAAP earnings measures.

(a) This amount for the three months ended December 31, 2024 includes tax expense of $2 million on the non-operating pension income and a tax benefit of $36 million associated with special items. Special items for the three months ended September 30, 2024 include a tax benefit of $78 million related to internal legal entity restructuring. This amount also includes tax expense of $3 million on the non-operating pension income and a tax benefit of $24 million associated with special items. Special items for the three months ended December 31, 2023 include tax expense of $4 million related to internal legal entity restructuring. This amount also includes tax benefit of $3 million on the non-operating pension expense and a tax benefit of $30 million associated with special items.

(a) Severance and other closure costs associated with our mill strategic actions recorded in restructuring and other charges, net.

•Received $1.1 billion of net proceeds from the sale of our Global Cellulose Fibers ("GCF") business and used a portion of those proceeds to pay down $660 million of debt

The Company’s first quarter results reinforced the importance of discipline around controllable costs in a dynamic operating environment. Renewed pressures stemming from macroeconomic developments, coupled with the impact of severe winter weather events, resulted in higher operating costs. Revenues were sequentially lower, as expected, due to seasonality and the exit of non‑strategic export business in our Packaging Solutions North America ("PS NA") segment following the shutdown of our Savannah, Georgia mill. Despite the challenging environment, we continued to realize incremental commercial and operational benefits driven by our 80/20 performance system.

In North America, adjusted EBITDA was sequentially lower, driven by normal seasonal volume declines and the impacts of a severe winter storm, partially offset by higher export pricing and productivity improvements. Commercial volumes, although down sequentially, reflected above‑market growth with box shipments exceeding industry demand by approximately 3%. First quarter marked the third consecutive quarter in which our North America sales volumes outpaced industry growth. Higher operating and energy costs stemming from the January severe winter storm were partially offset by productivity gains across both our box and mill systems. Since the third quarter of 2024, efficiency initiatives in the box system continued to improve as "lighthouse" practices - proven best-performing operating methods - expanded across the network, delivering significant run‑rate benefits. Productivity across the mill system also improved, with capacity utilization increasing over that same period. These gains were supported by increased capital investment and reinforced by the continued rollout of "lighthouse" best performance practices across the system.

In EMEA, adjusted EBITDA was sequentially lower, primarily due to higher costs, partially offset by expanded packaging margins and moderately higher volumes. Despite a challenging and dynamic macroeconomic environment, the Company continued to execute its strategy and mitigate near‑term volatility in the region. Focused cost‑reduction initiatives, including footprint optimization and overhead efficiency actions, improved structural cost competitiveness while maintaining service and operational stability. Run‑rate savings associated with cost‑out actions increased by approximately $40 million from the fourth quarter, resulting in total announced savings in excess of $200 million. The Company also continued to leverage its disciplined hedging program to mitigate the impact of higher regional energy prices during the first quarter.

Looking ahead, we expect adjusted EBITDA to be sequentially lower in the second quarter across both regions. In North America, significantly higher planned maintenance outage spending is expected to be partially offset by an improved sales mix, seasonally higher volumes and seasonally lower energy costs. We expect the most significant outage-related impact in PS NA during the second quarter, which represents North America’s peak maintenance outage spending, including paper machine conversion activity at our Riverdale mill in Selma, Alabama. In PS EMEA, sales mix is expected to be unfavorable in the second quarter. Higher distribution costs and lower energy subsidies are expected to be partially offset by higher sales volumes. We expect the improving sales trends observed toward the end of the first quarter to continue into the second quarter. In addition, we anticipate incremental contributions from new business secured in 2025 to ramp through the second quarter.

During the first quarter of 2026, International Paper Company continued to execute strategic initiatives designed to optimize our portfolio and reinforce our position as a leading packaging solutions provider. As part of the Company's strategy, the Company intends to guide investments and align resources to win with our most strategic customers, while reducing complexity and cost across the Company.

Acquisition of North Pacific Paper Company("NORPAC"): The Company has entered into an agreement to acquire NORPAC, a portfolio company of One Rock Capital Partners, for $360 million. The facility expands our capabilities to serve the growing West Coast region and is intended to complement IP's existing mill system, increasing system flexibility, reducing costs and expanding capabilities to support growing customer demand for lightweight, high-performance recycled containerboard. The consummation of the acquisition is subject to customary closing conditions, including regulatory approval.

New Sustainable Packaging Facility: The Company plans to construct a new 468,000-square-foot sustainable packaging facility in Rankin County, Mississippi. The $225 million investment reinforces our commitment to strategic growth, operational and customer excellence and long-term value creation. The new plant is designed to strengthen International Paper's cost position, improve reliability and product quality and enhance service capabilities across the Mid-South region. By replacing older infrastructure with a modern, highly efficient facility, the investment is expected to reduce structural costs and support growth in key market segments. The modern design and updated equipment should provide the latest innovations in safety and efficiency for employees. Construction is expected to begin in June 2026, with commencement of operations anticipated in the fourth quarter of 2027.

Progress Continues with Strategic Separation of EMEA Packaging Business: As previously disclosed, the Company plans to separate its North America and EMEA packaging operations into two independent, publicly traded companies: International Paper will be comprised of its current business in North America including both legacy IP and DS Smith assets, and the EMEA packaging business will be comprised of both legacy DS Smith and IP assets in EMEA. The Company expects that creating two regionally focused businesses will allow each to tailor strategies to their distinct markets, enhance management focus, and support long-term value creation.

The separation is expected to be structured as a spinoff, with International Paper retaining a meaningful ownership stake of approximately 20 percent. The EMEA packaging business is expected to be listed on both the London Stock Exchange and the New York Stock Exchange.

During the first quarter, the Company made strides toward the strategic separation including formation of transition and separation management offices. The transaction is expected to be completed within 12 to 15 months from the announcement, subject to customary approvals, including final approval by IP’s Board of Directors, filing and effectiveness of a registration statement with the U.S. SEC and publication of a prospectus approved by the U.K. Financial Conduct Authority.

We remain confident that the initiatives undertaken as part of our transformational journey will deliver operational excellence and create value for our employees, customers and shareowners.

In the first quarter, industry demand in both North America and EMEA remained subdued, reflecting continued consumer caution amid ongoing economic uncertainty. Against a backdrop of persistent geopolitical tensions, freight costs represent the most significant near‑term cost pressure across both regions. Higher diesel prices are pressuring transportation and logistics costs throughout the supply chain, which adversely affects cost of goods sold and margins. While the Company expects to recover higher freight costs through pricing actions, such recovery typically occurs with a time lag and does not provide immediate offset in the near term.

In North America, higher diesel prices are also flowing through to old corrugated container (“OCC”) and chemical costs, reflecting elevated transportation expenses and oil‑linked input pricing. In EMEA, OCC pricing remained relatively stable during the first quarter due to adequate supply conditions; however, the Company expects higher collection and distribution costs to impact results in the second quarter.

Taxes other than payroll and income taxes decreased by $46 million compared to the first quarter of 2025. Three months of DS Smith activity is included in the first quarter of 2026 ($9 million) compared to two months in the first quarter of 2025 ($6 million). Net special items charges of $50 million are included in taxes other than payroll and income taxes in the first quarter of 2025.

Interest expense, net

Interest expense, net decreased by $8 million compared to the first quarter of 2025. Three months of DS Smith activity is included in the first quarter of 2026 ($36 million) compared to two months in the first quarter of 2025 ($25 million). Net special items interest income of $11 million is included in interest expense, net in the first quarter of 2026.