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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
12/31/2020
or
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from - to -
Commission File No. 1-3157
INTERNATIONAL PAPER COMPANY
(Exact name of registrant as specified in its charter)
New York 13-0872805
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
6400 Poplar Avenue
Memphis,Tennessee
(Address of principal executive offices)
38197
(Zip Code)
Registrant's telephone number, including area code:901419-9000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common SharesIPNew York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ý    No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ¨    No ý
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 ý   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 (section 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 ý   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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting companyEmerging growth company
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. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes     No ý
The aggregate market value of the Company’s outstanding common stock held by non-affiliates of the registrant, computed by reference to the closing price as reported on the New York Stock Exchange, as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2020) was approximately $13,786,056,781.
The number of shares outstanding of the Company’s common stock as of February 12, 2021 was 393,117,117.
Documents incorporated by reference:
Portions of the registrant’s proxy statement filed within 120 days of the close of the registrant’s fiscal year in connection with registrant’s 2021 annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K.


Table of Contents
INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2020
 
PART I. 
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
PART II. 
ITEM 5.
ITEM 6.ELIMINATED
ITEM 7.






INTERNATIONAL PAPER COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2020
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III. 
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV. 
ITEM 15.
ITEM 16.FORM 10-K SUMMARY
APPENDIX I
APPENDIX II


Table of Contents
PART I.

ITEM 1. BUSINESS

GENERAL
International Paper Company (the "Company" or "International Paper", which may also be referred to as "we" or "us") is a global producer of renewable fiber-based packaging, pulp and paper products with manufacturing operations in North America, Latin America, Europe, North Africa and Russia. We are a New York corporation, incorporated in 1941 as the successor to the New York corporation of the same name organized in 1898. You can learn more about us by visiting our website at www.internationalpaper.com.
In the United States, at December 31, 2020, the Company operated 27 pulp, paper and packaging mills, 162 converting and packaging plants, 16 recycling plants and three bag facilities. Production facilities at December 31, 2020 in Canada, Europe, North Africa and Latin America included 11 pulp, paper and packaging mills, 39 converting and packaging plants, and two recycling plants. We operate a printing and packaging products distribution business principally through six branches in Asia. At December 31, 2020, we owned or managed approximately 314,000 acres of forestland in Brazil and had, through licenses and forest management agreements, harvesting rights on government-owned forestlands in Russia. Substantially all of our businesses have experienced, and are likely to continue to experience, cycles relating to industry capacity and general economic conditions.
For management and financial reporting purposes, our businesses are separated into three segments: Industrial Packaging; Global Cellulose Fibers; and Printing Papers.
A description of these business segments can be found on pages 26 and 27 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Company’s equity interests in Ilim S.A. ("Ilim") and Graphic Packaging International Partners, LLC ("GPIP") are also separate reportable industry segments.
On December 3, 2020, we announced a plan to pursue a spin-off of our Printing Papers segment into a standalone publicly-traded company ("SpinCo"). See discussion on page 27 of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Note 8 Divestitures and Impairments of Businesses on page 59 of Item 8. Financial Statements and Supplementary Data.
From 2016 through 2020, International Paper’s capital spending approximated $6.3 billion, excluding mergers and acquisitions. These expenditures reflect our continuing efforts to use our capital strategically to improve product quality and environmental performance, as well as lower costs, maintain reliability of operations and strategic capital for capacity expansion. Capital spending in 2020 was approximately $751 million and is expected to be approximately $800 million in 2021. You can find more information about capital spending on page 33 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Discussions of acquisitions can be found on page 31 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You can find discussions of restructuring charges and other special items on pages 25 and 26 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Throughout this Annual Report on Form 10-K, we “incorporate by reference” certain information in parts of other documents filed with the Securities and Exchange Commission ("SEC"). The SEC permits us to disclose important information by referring to it in that manner. Please refer to such information. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, along with all other reports and any amendments thereto filed with or furnished to the SEC, are publicly available free of charge on the Investor Relations section of our website at www.internationalpaper.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained on or connected to our website is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that we filed with or furnished to the SEC.

HUMAN CAPITAL

Our strategic framework, The IP Way Forward, ensures our business strategy delivers sustainable outcomes for all of our stakeholders - employees, customers, suppliers, communities, governments, non-governmental organizations and shareholders – for generations to come. We accomplish this through a series of programs and processes as discussed below. Additionally in 2020, we established our Vision 2030 goals for healthy and abundant forests, thriving people and communities, sustainable operations and renewable solutions. Several of these goals are discussed in more detail below.



1

Table of Contents

EMPLOYEES
As of December 31, 2020, we have approximately 49,300 employees, nearly 33,400 of whom are located in the United States. Of our U.S. employees, approximately 23,100 are hourly, with unions representing approximately 14,300 employees. Approximately 10,800 of this number are represented by the United Steelworkers union ("USW").

International Paper, the USW, and several other unions have entered into two master agreements covering various mills and converting facilities. These master agreements cover several specific items, including wages, select benefit programs, successorship, employment security, and health and safety.  Individual facilities continue to have local agreements for other subjects not covered by the master agreements. If local facility agreements are not successfully negotiated at the time of expiration, under the terms of the master agreements the local contracts will automatically renew with the same terms in effect. The master agreements cover the majority of our union represented mills and converting facilities. In addition, International Paper is party to a master agreement with District Council 2, International Brotherhood of Teamsters, covering additional converting facilities.

SAFETY

The safety of our employees remains the primary focus of our leaders. Our goal is to create a 100% injury-free workplace for our employees and contractors. To accomplish this goal, we focus on the IP Way of doing things - we do the right things, in the right ways, for the right reasons, all of the time. Our stated Vision 2030 Goal is to achieve zero injuries for employees and contractors.

Throughout the COVID-19 pandemic, we have remained focused on protecting the health and safety of our employees while meeting the needs of our customers. Most of our manufacturing and converting facilities we deemed essential have remained open and operational during the pandemic. The health and safety of our employees and contractors is our most important responsibility as we manage through the COVID-19 pandemic. We have implemented work-systems across the Company, including hygiene, social distancing, site cleaning, contract tracing and other measures, as recommended by the Centers for Disease Control and Prevention and the World Health Organization. As a sign of our appreciation for our workers during the pandemic, the Company gave a one-time bonus to all employees in December 2020.




HUMAN CAPITAL MANAGEMENT

The attraction, retention and development of our employees is critical to our success. We accomplish this, in part, by developing the capabilities of our team members through our continuous learning, development and performance management programs. One such program is our REACH (Recruit, Engage, Align College Hires) program through which the Company recruits and develops early-career engineers and safety professionals for our U.S. Mill system, preparing them to become future leaders. We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our employees. We provide continuing education courses that are relevant to our industry and job function within the Company. In addition, we have created learning paths for specific positions that are designed to encourage an employee’s advancement and growth within our organization. We also offer a peer mentor program and leadership and customer service training to support and develop our employees. These resources provide employees with the skills they need to achieve their career goals, build management skills and become leaders within our Company. In 2019, 580 new hourly operations and maintenance employees at our mills experienced new hire integration training and 460 high potential leaders participated in experiential development programs.

DIVERSITY AND INCLUSION

The Company believes in an inclusive workforce, where diverse backgrounds are represented, engaged and empowered to inspire innovative ideas and decisions. Our stated Vision 2030 goal is to achieve 30% overall representation of women and 50% women in salaried positions and to implement regional diversity plans, including 30% minority representation in U.S. salaried positions. To foster a more diverse and inclusive culture, the Company is focused on (1) promoting a culture of diversity and inclusion that leverages the talents of all employees, and (2) implementing practices that attract, recruit and retain diverse top talent. The Company supports employee-led networking groups that are open to all employees and provide a forum to communicate and exchange ideas, build a network of relationships across the Company, and pursue personal and professional development, such as the Women in International Paper Employee Networking Circle, African American Employee Networking Circle ("IPmove"), LGBTQ Employee Networking Circle (“IPride”) and a Veterans Employee Networking Circle.



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We have a global workforce and have implemented programs around the globe to create diverse, inclusive workplaces. We have increased representation of women engineers in our REACH program to 38% with the Class of 2021. And our overall full-time diversity hiring for the REACH Class 2021 is 52%.

CITIZENSHIP

We encourage our employees to support the communities in which they live and in which the Company operates. Our citizenship efforts extend across the globe and support social and educational needs. To that end, in 2019 we invested more than $24 million to address critical needs in the communities in which we work and live. Our Vision 2030 goal is to strengthen the resilience of our communities and improve the lives of 100 million people in our communities. We are proud to have been named among the world’s most ethical companies by Ethisphere for 14 consecutive years.


COMPETITION AND COSTS
The pulp, paper and packaging sectors are large and fragmented, and the areas into which the Company sells its principal products are very competitive. Our products compete with similar products produced by other forest products companies. We also compete, in some instances, with companies in other industries and against substitutes for wood-fiber products.

Many factors influence the Company’s competitive position, including price, cost, product quality and services. You can find more information about the impact of these factors on operating profits on pages 20 through 31 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You can find information about the Company’s manufacturing capacities on page A-4 of Appendix II.
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MARKETING AND DISTRIBUTION
The Company sells products directly to end users and converters, as well as through agents, resellers and paper distributors.



DESCRIPTION OF PRINCIPAL PRODUCTS

The Company’s principal products are described on pages 26 and 27 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
SALES VOLUMES BY PRODUCT
Sales volumes of major products for 2020, 2019 and 2018 were as follows:
SALES VOLUMES BY PRODUCT (a)
 
In thousands of short tons (except as noted)202020192018
Industrial Packaging
Corrugated Packaging (b)10,671 10,454 10,624 
Containerboard3,097 2,909 3,229 
Recycling2,181 2,388 2,282 
Saturated Kraft158 174 196 
Gypsum/Release Kraft209 199 227 
Bleached Kraft30 22 31 
EMEA Packaging (b)1,627 1,538 1,476 
Brazilian Packaging (b)271 366 351 
European Coated Paperboard411 417 390 
Industrial Packaging18,655 18,467 18,806 
Global Cellulose Fibers (in thousands of metric tons) (c)
3,676 3,501 3,573 
Printing Papers
U.S. Uncoated Papers1,339 1,799 1,886 
European and Russian Uncoated Papers1,249 1,456 1,440 
Brazilian Uncoated Papers910 1,172 1,125 
Indian Uncoated Papers 206 263 
Printing Papers3,498 4,633 4,714 
(a)Includes third-party and inter-segment sales and excludes sales of equity investees.
(b)Volumes for corrugated box sales reflect consumed tons sold ("CTS"). Board sales by these businesses reflect invoiced tons.
(c) Includes North American, European and Brazilian volumes and internal sales to mills.

ENVIRONMENTAL PROTECTION

The Company is subject to extensive federal and state environmental regulation, as well as similar regulations internationally. In addition, new environmental laws or regulations impacting our facilities around the world are routinely passed or proposed. Our continuing objectives include: (1) controlling emissions and discharges from our facilities to avoid adverse impacts on the environment, and (2) maintaining compliance with applicable laws and regulations. The Company spent $46 million in 2020 for capital projects to control environmental releases into the air and water, and to assure environmentally sound management and disposal of waste. We expect to spend $50 million in 2021 for environmental capital projects. Capital expenditures for 2022 environmental projects are anticipated to be approximately $45 million. Capital

expenditures for 2023 environmental projects are estimated to be $30 million.

The Company has completed capital projects to meet the U.S. Environmental Protection Agency's ("EPA") maximum achievable control technology ("MACT") and risk and technology review ("RTR") regulations that require owners of specified pulp and paper process equipment and boilers to meet new air emissions standards for certain substances. As portions of these MACT and RTR regulations have been remanded to EPA for further consideration it is not clear at this time
what, if any, additional capital project expenditures might result from resolution of the open issues.
The Company has been named as a potentially responsible party ("PRP") in environmental remediation actions under various federal and state
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laws, including the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). Many of these proceedings involve the cleanup of hazardous substances at large commercial landfills that received waste from many different sources. While joint and several liability is authorized under CERCLA and equivalent state laws, as a practical matter, liability for CERCLA cleanups is typically allocated among the many PRPs. There are other remediation costs typically associated with the cleanup of hazardous substances at the Company’s current, closed or formerly-owned facilities, and recorded as liabilities on the balance sheet. For additional information regarding certain remediation actions, see Note 14 Commitments and Contingent Liabilities of Item 8. Financial Statements and Supplementary Data on pages 68 through 70.

See Item 1A. Risk Factors - WE ARE SUBJECT TO A WIDE VARIETY OF LAWS, REGULATIONS AND OTHER GOVERNMENT REQUIREMENTS THAT MAY CHANGE IN SIGNIFICANT WAYS, AND THE COST OF COMPLIANCE WITH SUCH REQUIREMENTS COULD IMPACT OUR BUSINESS AND RESULTS OF OPERATIONS.

CLIMATE CHANGE

The Company recognizes the impacts of climate change on people and our planet. In order to manage climate-related risks, we are taking actions throughout our value chain to advance a low-carbon economy.

We transform renewable resources into recyclable products that people depend on every day. This cycle begins with sourcing renewable fiber from responsibly managed forests, and at the end of use, our low-carbon products are recycled into new products at a higher rate than any other base material. We work to advance the shift to a low-carbon, circular economy by designing products that are 100% reusable, recyclable or compostable.

As part of our Vision 2030, we have committed to incremental reductions in our Scope I, II and III greenhouse gas emissions: 35% reduction by 2030. Our greenhouse gas emissions reduction goal is consistent with the Paris Climate Agreement. Furthermore, we use biomass and manufacturing residuals (rather than fossil fuels) to generate a majority of the manufacturing energy at our mills.

Our efforts to advance sustainable forest management and restore forest landscapes are an important lever for mitigating climate change through
carbon storage in forests.

In an effort to mitigate the impact of climate change various international, national and sub-national (regional, state and local) governmental actions have been or may be undertaken. Presently, these efforts have not materially impacted the Company, but such efforts may have a material impact on the Company in the future.

INTERNATIONAL EFFORTS
The Paris Agreement went into effect in November 2016 and continues international efforts and voluntary commitments toward reducing the emissions of greenhouse gases ("GHGs"). Consistent with this objective, participating countries aim to balance GHG emissions generation and sequestration in the second half of this century or, in effect, achieve net-zero global GHG emissions.

To assist member countries in meeting GHG reduction obligations, the EU operates an Emissions Trading System ("EU ETS"). Currently, we have two sites directly subject to regulation under Phase III of the EU ETS, one in Poland and one in France. Other sites that we operate in the EU experience indirect impacts of the EU ETS through purchased power pricing. Neither the direct nor indirect impacts of the EU ETS have been material to the Company, but they could be material to the Company in the future depending on how the Paris Agreement's non-binding commitments or allocation of and market prices for GHG credits under existing rules evolve over the coming years.

U.S. EFFORTS, INCLUDING STATE, REGIONAL AND LOCAL MEASURES
The U.S. Congress has not passed GHG legislation. The EPA manages regulations to: (i) control GHGs from mobile sources by adopting transportation fuel efficiency standards; (ii) control GHG emissions from new Electric Generating Units ("EGUs"); (iii) control emissions from new oil and gas processing operations and (iv) require reporting of GHGs from sources of GHGs greater than 25,000 tons per year.
Several U.S. states, including states in which we operate facilities, have enacted or are considering legal measures to require the reduction of emissions of GHGs by companies and public utilities. California, New York and Virginia have already enacted such programs, although these regulations have not, and are not expected to have a material impact on the Company. We monitor proposed programs in other states as well; however, it is unclear what impacts, if any, future state-level GHG rules will have on the Company’s operations.

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SUMMARY
Regulation of GHGs continues to evolve in various countries in which we do business. While it is likely that there will be increased governmental action regarding GHGs and climate change in the future, it is unclear when such actions will occur and at this time it is not reasonably possible to estimate the Company’s costs of compliance with rules that have not yet been adopted or implemented and may not be adopted or implemented in the future. In addition to possible direct impacts, future legislation and regulation could have indirect impacts on the Company, such as higher prices for transportation, energy and other inputs, as well as more protracted air permitting processes, causing delays and higher costs to implement capital projects. The Company has controls and procedures in place to stay informed about developments concerning possible climate change legislation and regulation in the U.S. and in other countries where we operate. We regularly assess whether such legislation or regulation may have a material effect on the Company, its operations or financial condition, and whether we have any related disclosure obligations.

Additional information regarding climate change and the Company is available in our 2019 Global Citizenship report found on our website at www.internationalpaper.com, though this information is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that we file with or furnish to the SEC.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Mark S. Sutton, 59, chairman (since January 1, 2015) & chief executive officer (since November 1, 2014). Mr. Sutton previously served as president & chief operating officer from June 1, 2014 to October 31, 2014, senior vice president - industrial packaging from November 2011 to May 31, 2014, senior vice president - printing and communications papers of the Americas from 2010 until 2011, senior vice president - supply chain from 2008 to 2009, vice president - supply chain from 2007 until 2008, and vice president - strategic planning from 2005 until 2007. Mr. Sutton joined International Paper in 1984. Mr. Sutton serves on the board of directors of The Kroger Company. He is a member of The Business Council, serves on the American Forest & Paper Association board of directors, The Business Roundtable board of directors, and the international advisory board of the Moscow School of Management - Skolkovo. He was appointed chairman of the U.S. Russian Business Council. He also serves on the board of directors for Memphis Tomorrow and board of governors for New Memphis
Institute. Mr. Sutton has been a director since June 1, 2014.

W. Michael Amick, Jr., 57, senior vice president - paper the Americas since January 1, 2017 until his anticipated departure on March 31, 2021. Mr. Amick previously served as senior vice president - North American papers & consumer packaging from July 2016 until December 2016, senior vice president - North American papers, pulp & consumer packaging from November 2014 until June 2016, vice president - president, IP India, from August 2012 to October 2014, and vice president and general manager for the coated paperboard business from 2010 to 2012. Mr. Amick joined International Paper in 1990.

Clay R. Ellis, 50, senior vice president - enterprise operational excellence since December 2019. Mr. Ellis previously served as vice president - manufacturing, global cellulose fibers from 2016 to December 2019, vice president of pulp from 2014 to 2016, and vice president manufacturing, North American papers from 2012 to 2014. Mr. Ellis joined International Paper in 1992.

W. Thomas Hamic, 55, senior vice president - global cellulose fibers and enterprise commercial excellence since September 2020. Mr. Hamic previously served as senior vice president - containerboard and enterprise commercial excellence from December 2019 until September 2020. Mr. Hamic has also previously served as vice president and general manager - containerboard & recycling, North American container from June 2015 until December 2019. Mr. Hamic became vice president and general manager of the south area in container of the Americas in 2009, and he was appointed to the role of vice president, industrial packaging group’s finance & strategy in 2010. Mr. Hamic joined International Paper in 1991.

Timothy S. Nicholls, 59, senior vice president & chief financial officer since June 2018. Mr. Nicholls previously served as senior vice president - industrial packaging the Americas from January 2017 through June 2018, senior vice president - industrial packaging from November 2014 through December 2016, senior vice president - printing and communications papers of the Americas from November 2011 through October 2014, senior vice president and chief financial officer from 2007 until 2011, vice president and executive project leader of IP Europe during 2007, and vice president and chief financial officer - IP Europe from 2005 until 2007. Mr. Nicholls joined International Paper in 1999.

Thomas J. Plath, 57, senior vice president - human resources and global citizenship since March 1, 2017. Mr. Plath previously served as vice president
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- human resources, global businesses from November 2014 through February 2017, and vice president - HR manufacturing, technology, EH&S and global supply chain from April 2013 to November 2014. Mr. Plath joined International Paper in 1991.

Jean-Michel Ribiéras, 58, senior vice president - paper the Americas and chief executive officer-elect of the standalone, publicly traded company that will result from the Company's anticipated spin-off SpinCo since January 2021. Mr. Ribieras previously served as senior vice president - industrial packaging the Americas from June 2018 until January 2021. Mr. Ribieras also previously served as senior vice president - global cellulose fibers from July 2016 through June 2018, senior vice president - president, IP Europe, Middle East, Africa & Russia from 2013 until June 2016, and president - IP Latin America from 2009 until 2013. Mr. Ribieras joined International Paper in 1993.

James P. Royalty, Jr., 51, senior vice president and president, Europe, the Middle East, Africa and Russia since December 2019. Most recently, Mr. Royalty served as vice president, corporate development and disruptive technologies from September 2018 until December 2019, vice president, strategic projects from 2017 until 2018, vice president, investor relations from 2013 until 2017, vice president and general manager, container the Americas in 2008 to 2013. Mr. Royalty joined International Paper in 1991.

Sharon R. Ryan, 61, senior vice president, general counsel & corporate secretary since November 2011. Ms. Ryan previously served as vice president, acting general counsel & corporate secretary from May 2011 until November 2011, vice president from March 2011 until May 2011, associate general counsel, chief ethics and compliance officer from 2009 until 2011, and associate general counsel from 2006 until 2009. Ms. Ryan joined International Paper in 1988.

John V. Sims, 58, senior vice president - finance, papers the Americas and chief financial officer-elect of SpinCo since January 2021. Mr. Sims previously served as senior vice president - corporate development from December 2019 until January 2021. Mr Sims previously served as senior vice president - president, IP Europe, Middle East, Africa & Russia from July 2016 until December 2019. Mr. Sims also previously served as vice president and general manager, European papers from January 2016 until June 2016, vice president & general manager, North American papers from 2014 until December 2015, and vice president, finance and strategy, industrial packaging, from 2009 until 2013. Mr. Sims is a director of Ilim in which International
Paper holds a 50% interest, and of its subsidiary, Ilim Group. Mr. Sims joined International Paper in 1994.

Gregory T. Wanta, 55, senior vice president - North American container since December 2016. Mr. Wanta has served in a variety of roles of increasing responsibility in manufacturing and commercial leadership roles in specialty papers, coated paperboard, printing papers, foodservice and industrial packaging, including vice president, central region, Container the Americas, from January 2012 through October 2016. Mr. Wanta joined International Paper in 1991.

RAW MATERIALS

Raw materials essential to our businesses include wood fiber, purchased in the form of pulpwood, wood chips and old corrugated containers (OCC), and certain chemicals, including caustic soda and starch. For further information concerning fiber supply purchase agreements, see pages 33 and 34.

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report may be considered “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are often identified by the words “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “appear,” “project,” “estimate,” “intend” and words of a similar nature. These statements are not guarantees of future performance and reflect management’s current views with respect to future events, which 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 severity, magnitude and duration of the pandemic, negative global economic conditions arising from the pandemic, the development, availability and effectiveness of treatments and vaccines, impacts of governments’ responses to the pandemic on our operations, impacts of the pandemic on commercial activity, our customers and business partners and consumer preferences and demand, supply chain disruptions, and disruptions in the capital 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 and transportation costs, competition International Paper faces, cyclicality and changes in consumer preferences, demand and pricing for International Paper products (including 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 International Paper’s credit ratings, and/or the credit ratings of
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banks issuing certain letters of credit, issued by recognized credit rating organizations; (v) the amount of International Paper’s 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 International Paper’s manufacturing facilities due to severe weather, natural disasters or other causes (including as the result of the COVID-19 pandemic); (viii) risks inherent in conducting business through joint ventures; (ix) International Paper’s ability to achieve the benefits expected from, and other risks associated with, acquisitions, joint ventures, divestitures and other corporate transactions; (x) information technology risks; and (xi) loss contingencies and pending, threatened or future litigation, including with respect to environmental related matters, (xii) the receipt of regulatory approvals relating to the spin-off transaction without unexpected delays or conditions; (xiii) International Paper’s ability to successfully separate the SpinCo business and realize the anticipated benefits of the spin-off transaction; (xiv) the ability to satisfy any necessary conditions to consummate the spin-off transaction within the estimated timeframes or at all; and (xv) the final terms and conditions of the spin-off transaction, including the amount of any dividend by SpinCo to International Paper and the terms of any ongoing commercial agreements and arrangements between International Paper and SpinCo following any such transaction, the costs of any such transaction, the nature and amount of indebtedness incurred by SpinCo, the qualification of the spin-off transaction as a tax-free transaction for U.S. federal income tax purposes (including whether an IRS ruling will be obtained), diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties, and the impact of any such transaction on the businesses of International Paper and SpinCo and the relationship between the two companies following any such transaction. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements can be found in International Paper’s press releases and U.S. Securities and Exchange Commission filings. In addition, other risks and uncertainties not presently known to International Paper or that it currently believes to be immaterial could affect the accuracy of any forward-looking statements. International Paper undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 1A. RISK FACTORS

The Company faces risks in the normal course of business and through global, regional, and local events that could have an adverse impact on its
reputation, operations, and financial performance. The Board of Directors exercises oversight of the Company’s enterprise risk management program, which includes strategic, operational and financial matters, as well as compliance and legal risks. The Audit and Finance Committee coordinates the risk oversight role exercised by the Board’s standing committees and management, and it receives updates on the risk management processes twice per year.
In addition to the risks and uncertainties discussed elsewhere in this Annual Report on Form 10-K (particularly in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations), or in the Company’s other filings with the Securities and Exchange Commission, the following are some important factors that could cause the Company’s actual results to differ materially from those projected in any forward-looking statement. If any of the events or circumstances described in any of the following risk factors occurs, our business, results of operations and/or financial condition could be materially and adversely affected, and our actual results may differ materially from those contemplated in any forward-looking statements we make in any public disclosures.
OVERALL RISKS
THE CURRENT COVID-19 PANDEMIC HAS HAD AN ADVERSE EFFECT ON PORTIONS OF OUR BUSINESS, AND MAY HAVE MATERIAL ADVERSE EFFECTS ON OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS, PARTICULARLY IF NEGATIVE ECONOMIC CONDITIONS ASSOCIATED WITH COVID-19 PERSIST OR DETERIORATE. The COVID-19 pandemic has resulted in authorities throughout the world implementing widespread measures attempting to contain the spread and impact of COVID-19, such as travel bans and restrictions, quarantines, stay-at-home orders, the promotion of social distancing and limitations on business activity, including business closures. These measures and the pandemic have caused a significant global economic downturn, disrupting supply chains, significantly increasing unemployment and underemployment levels, and adversely impacting consumer confidence and spending. The continued spread of COVID-19 has also led to significant disruption and volatility in the global capital and financial markets.

Although governments of countries in which we operate have generally considered forest products and the supply chain on which we depend to be “essential industries” that should remain operational during this pandemic, any significant disruption in operations at one or more of our mills, plants or other
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facilities as a result of the COVID-19 pandemic, including precautionary measures we take or are taken by governmental authorities that limits in-person workplace contact at any of our facilities to reduce the potential for employee exposure to COVID-19, could have an adverse effect on our business or operations. If a significant portion of our workforce is unable to work effectively due to measures taken in response to the COVID-19 pandemic such as those described herein, our operations will likely be negatively impacted.

COVID-19 has had a significant negative impact on demand for our printing papers products. In addition, our operations in Industrial Packaging experienced higher supply chain costs due to the impact of COVID-19.

In addition to the reduction in demand for our products that the COVID-19 pandemic has had or could have, other negative impacts on our business, include, but are not limited to, the following:

We rely on a global workforce, and we take measures to protect the health and safety of our employees, customers and others with whom we do business, while continuing to effectively manage our employees and maintain business operations. During the pandemic, we have taken additional measures and incurred additional expenses to protect the health and safety of our employees to comply with applicable government requirements and safety guidance. Our business operations may be additionally disrupted if a significant portion of our workforce is unable to work safely and effectively due to illness, quarantines, government actions, or other restrictions or measures responsive to the pandemic. Measures taken across our business operations to address health and safety may not be sufficient to prevent the spread of COVID-19 among our employee base, customers and others.
A significant number of our employees as well as customers and others with whom we do business, continue to work remotely in response to the COVID-19 pandemic. Our business operations may be disrupted, and we may experience increased risk of adverse effects to our business, if a significant portion of our workforce or certain business operations are negatively impacted as a result of remote work arrangements, including due to cyber risks or other disruption to our technology infrastructure.

Cost management and various cost-containment actions implemented across our business in response to the COVID-19 pandemic could hinder execution of our business strategy, including deferral of planned capital expenditures, and could adversely affect our business and results of operations.

While we are closely monitoring the impact of the pandemic on all aspects of our business, the extent of the impact on our results of operations, cash flow, liquidity, and financial performance, as well as our ability to execute near-term and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and which we cannot predict or control, and some of which we are not currently aware, including, but not limited to: (a) the duration, severity and scope of the pandemic, including additional waves, increases and spikes in the number of COVID-19 cases in certain areas; (b) rapidly-changing governmental and public health directives to contain and combat the outbreak, including the duration, degree and effectiveness of directives, as well as the easing, removal and potential reinstitution of directives; (c) the availability and wide-spread administration of treatments and vaccines for COVID-19; (d) the extent and duration of the pandemic’s adverse effect on economic and social activity, consumer confidence, discretionary spending and preferences, labor and healthcare costs, and unemployment rates, any of which may reduce demand for our products; (e) any temporary reduction in our workforce, closures of our offices and facilities and our ability to adequately staff and maintain our operations; and (f) the ability of our customers and suppliers to continue their operations, which could result in terminations of contracts, losses of revenue, adverse effects to our supply chain. If the pandemic continues to create disruptions or turmoil in the credit or financial markets, or impacts our credit ratings, it could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs.

Given the inherent uncertainty surrounding COVID-19, we expect the pandemic will continue to have an adverse impact on portions of our business in the near term. If these conditions persist for a prolonged period, the COVID-19 pandemic, including any of the above factors and others that are currently unknown, may have a material adverse effect on our business, results of operations, cash flow, liquidity, or financial condition.



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WE ARE SUBJECT TO PHYSICAL AND FINANCIAL RISKS ASSOCIATED WITH CLIMATE CHANGE AND GLOBAL, REGIONAL AND LOCAL WEATHER CONDITIONS.

Our operations and the operations of our suppliers are subject to climate variations, which impact the productivity of forests, the frequency and severity of wildfires, the distribution and abundance of species, and the spread of disease or insect epidemics. Additionally, the unpredictability and frequency of natural disasters such as hurricanes, earthquakes, hailstorms, wildfires, snow, ice storms, the spread of disease, and insect infestations could also affect timber supply or cause variations in the cost of raw materials. Changes in precipitation could make wildfires more frequent or more severe, and could adversely affect timber harvesting. The effects of climate change and global, regional and local weather conditions could also have a material adverse effect on our results of operations.
RISKS RELATING TO INDUSTRY CONDITIONS
CHANGES IN THE COST OR AVAILABILITY OF RAW MATERIALS, ENERGY AND TRANSPORTATION COULD AFFECT OUR PROFITABILITY. We rely heavily on the use of certain raw materials (principally virgin wood fiber, recycled fiber, caustic soda and starch), energy sources (principally biomass, natural gas, electricity and fuel oil) and third-party companies that transport our goods. The market price of virgin wood fiber varies based upon availability and source. The global supply and demand for recycled fiber may be affected by trade policies between countries, individual governments' legislation and regulations, as well as changes in the global economy. 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. Energy prices, in particular prices for oil and natural gas, have fluctuated dramatically in the past and may continue to fluctuate in the future. The availability of labor and the market price for fuel may affect our costs for third-party transportation. Our profitability has been, and will continue to be, affected by changes in the costs and availability of such raw materials, energy sources and transportation sources.
THE INDUSTRIES IN WHICH WE OPERATE EXPERIENCE BOTH ECONOMIC CYCLICALITY AND CHANGES IN CONSUMER PREFERENCES. FLUCTUATIONS IN THE PRICES OF, AND THE DEMAND FOR, OUR PRODUCTS COULD MATERIALLY AFFECT OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS. Substantially all of our businesses have experienced, and are likely to continue to experience, cycles relating to industry capacity and
general economic conditions. The length and magnitude of these cycles have varied over time and by product. In addition, changes in consumer preferences may increase or decrease the demand for our fiber-based products and non-fiber substitutes. Moreover, consumer preferences are constantly changing based on, among other factors, cost, convenience and health, environmental and social concerns and perceptions. These consumer preferences affect the prices of our products. Consequently, our financial results are sensitive to changes in the pricing and demand for our products.
COMPETITION IN THE UNITED STATES AND INTERNATIONALLY COULD NEGATIVELY IMPACT OUR FINANCIAL RESULTS. We operate in a competitive environment, both in the United States and internationally, in all of our operating segments. Product innovations, manufacturing and operating efficiencies, and marketing, distribution and pricing strategies pursued or achieved by competitors could negatively impact our financial results.
RISKS RELATING TO MARKET AND ECONOMIC FACTORS
ADVERSE DEVELOPMENTS IN GENERAL BUSINESS AND ECONOMIC CONDITIONS COULD HAVE AN ADVERSE EFFECT ON THE DEMAND FOR OUR PRODUCTS AND OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS. General economic conditions may adversely affect industrial non-durable goods production, consumer spending, commercial printing and advertising activity, white-collar employment levels and consumer confidence, all of which impact demand for our products. In addition, volatility in the capital and credit markets, which impacts interest rates, currency exchange rates and the availability of credit, could have a material adverse effect on our business, financial condition and our results of operations.
CHANGES IN INTERNATIONAL CONDITIONS COULD ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS. Our operating results and business prospects could be substantially affected by risks related to the countries outside the United States in which we have manufacturing facilities or sell our products. Specifically, Russia, Brazil, Poland, and Turkey, where we have substantial manufacturing facilities, are countries that are exposed to economic and political instability in their respective regions of the world. Fluctuations in the value of local currency versus the U.S. dollar, downturns in economic activity, adverse tax consequences or rulings, nationalization or any change in social, political or labor conditions in any of these countries or regions impacting matters such as sustainability, environmental regulations and trade policies and agreements, could negatively affect our financial results. Trade protection measures in favor
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of local producers of competing products, including governmental subsidies, tax benefits and other measures giving local producers a competitive advantage over International Paper, may also adversely impact our operating results and business prospects in these countries. Likewise, disruption in existing trade agreements or increased trade friction between countries (e.g., the U.S. and China), which can result in tariffs, could have a negative effect on our business and results of operations by restricting the free flow of goods and services across borders. In addition, our international operations are subject to regulation under U.S. law and other laws related to operations in foreign jurisdictions. For example, the Foreign Corrupt Practices Act prohibits U.S. companies and their representatives from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business abroad, and the U.S. Department of Treasury’s Office of Foreign Asset Control and other non-U.S. government entities maintain economic sanctions targeting various countries, persons and entities. Failure to comply with domestic or foreign laws could result in various adverse consequences, including the imposition of civil or criminal sanctions and the prosecution of executives overseeing our international operations.
THE LEVEL OF OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND IMPAIR OUR ABILITY TO OPERATE OUR BUSINESS. As of December 31, 2020, International Paper had approximately $8.1 billion of outstanding indebtedness. The level of our indebtedness could have important consequences to our financial condition, operating results and business, including the following:
it may limit our ability to obtain additional debt or equity financing for working capital, capital expenditures, product development, dividends, share repurchases, debt service requirements, acquisitions and general corporate or other purposes;
a portion of our cash flows from operations will be dedicated to payments on indebtedness and will not be available for other purposes, including operations, capital expenditures and future business opportunities;
the debt service requirements of our indebtedness could make it more difficult for us to satisfy other obligations;
it may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors that have less debt; and
it may increase our vulnerability to a downturn in general economic conditions or in our business, and may make us unable to carry out capital spending that is important to our growth.
In addition, we are subject to agreements governing our indebtedness that require us to meet and maintain certain financial ratios and covenants. A significant or prolonged downturn in general business and economic conditions, or other significant adverse developments with respect to our results of operations or financial condition, may affect our ability to comply with these covenants or meet those financial ratios and tests and could require us to take action to reduce our debt or to act in a manner contrary to our current business objectives. Moreover, the restrictions associated with these financial ratios and covenants may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. Additionally, despite these restrictions, we may be able to incur substantial additional indebtedness in the future, which might subject us to additional restrictive covenants that could affect our financial and operational flexibility and otherwise increase the risks associated with our indebtedness as noted above.

Moreover, certain of our variable rate debt uses the London Interbank Offering Rate (“LIBOR”) as a benchmark for establishing the interest rate. The U.K. Financial Conduct Authority announced in 2017 that it intends to phase out LIBOR by the end of 2021. In November 2020, the administrator of LIBOR announced it will consult on its intention to extend the retirement date of certain offered rates whereby the publication of the one week and two month LIBOR offered rates will cease after December 31, 2021, but the publication of the remaining LIBOR offered rates will continue until June 20 2023. In addition, other regulators have suggested reforming or replacing other benchmark rates. The discontinuation, reform or replacement of LIBOR or any other benchmark rates may have an unpredictable impact on contractual mechanics in the credit markets or cause disruption to the broader financial markets. Additionally, uncertainty as to the nature of such potential discontinuation, reform or replacement may negatively impact the cost of our variable rate debt.
CHANGES IN CREDIT RATINGS ISSUED BY NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS COULD ADVERSELY AFFECT OUR COST OF FINANCING AND HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR SECURITIES. Maintaining an investment-grade credit rating is an important element of our
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financial strategy, and a downgrade of the Company’s ratings below investment grade will likely eliminate our ability to access the commercial paper market, may limit our access to the capital markets, have an adverse effect on the market price of our securities, increase our cost of borrowing and require us to post collateral for derivatives in a net liability position. The Company’s desire to maintain its investment grade rating may cause the Company to take certain actions designed to improve its cash flow, including sale of assets, suspension or reduction of our dividend and reductions in capital expenditures and working capital.
Under the terms of the agreements governing approximately $1.0 billion of our debt as of December 31, 2020, the applicable interest rate on such debt may increase upon each downgrade in our credit rating below investment grade. As a result, a downgrade in our credit rating below investment grade may lead to an increase in our interest expense. There can be no assurance that such credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant. Any such downgrade, suspension or withdrawal of our credit ratings could adversely affect our cost of borrowing, limit our access to the capital markets or result in more restrictive covenants in agreements governing the terms of any future indebtedness that we may incur.
DOWNGRADES IN THE CREDIT RATINGS OF BANKS ISSUING CERTAIN LETTERS OF CREDIT WILL INCREASE OUR COST OF MAINTAINING CERTAIN INDEBTEDNESS AND MAY RESULT IN THE ACCELERATION OF DEFERRED TAXES. We are subject to the risk that a bank with currently issued irrevocable letters of credit supporting installment notes, including those delivered to Temple-Inland in connection with Temple-Inland's 2007 sales of forestlands, may be downgraded below a required rating. Since 2007, certain banks have fallen below the required ratings threshold and were successfully replaced, or waivers were obtained regarding their replacement. As a result of continuing uncertainty in the banking environment, a number of the letter-of-credit banks currently in place remain subject to risk of downgrade and the number of qualified replacement banks remains limited. The downgrade of one or more of these banks may subject the Company to additional costs of securing a replacement letter-of-credit bank or could result in an acceleration of payments of up to $488 million in deferred income taxes if replacement banks cannot be obtained. The deferred taxes are currently recorded in the Company's consolidated financial statements. See Note 15, Variable Interest Entities,
on pages 70 through 72, and Note 13, Income Taxes, on pages 65 through 68, in Item 8. Financial Statements and Supplementary Data for further information.
OUR PENSION AND HEALTH CARE COSTS ARE SUBJECT TO NUMEROUS FACTORS WHICH COULD CAUSE THESE COSTS TO CHANGE. We have defined benefit pension plans covering substantially all U.S. salaried employees hired prior to July 1, 2004 (or later for certain acquired populations, as described in Note 19. Retirement Plans, on pages 78 through 84, in Item 8. Financial Statements and Supplementary Data) and substantially all hourly union and non-union employees regardless of hire date. The Company has frozen participation under these plans for U.S. salaried employees, including credited service and compensation on or after January 1, 2019; however, the pension freeze does not affect benefits accrued through December 31, 2018. We provide retiree health care benefits to certain former U.S. employees, as well as financial assistance towards the cost of individual retiree medical coverage for certain former U.S. salaried employees. Our pension costs are dependent upon numerous factors resulting from actual plan experience and assumptions of future experience. Pension plan assets are primarily made up of equity and fixed income investments. Fluctuations in actual equity market returns, changes in general interest rates and changes in the number of retirees may impact pension costs in future periods. Likewise, changes in assumptions regarding current discount rates and expected rates of return on plan assets could increase pension costs. Drivers for fluctuating health costs include unit cost changes, health care utilization by participants, and potential legislative impacts and government oversight.
OUR PENSION PLANS ARE CURRENTLY UNDERFUNDED ON A PROJECTED BENEFIT OBLIGATION BASIS, AND OVER TIME WE MAY BE REQUIRED TO MAKE CASH PAYMENTS TO THE PLANS, REDUCING THE CASH AVAILABLE FOR OUR BUSINESS. We record a liability associated with our pension plans equal to the excess of the benefit obligation over the fair value of plan assets. The benefit liability recorded under the provisions of Accounting Standards Codification ("ASC") 715, “Compensation – Retirement Benefits,” at December 31, 2020 was $1.1 billion. The amount and timing of future contributions, which could be material, will depend upon a number of factors, including the actual earnings and changes in values of plan assets and changes in interest rates.
RISKS RELATING TO OUR OPERATIONS
MATERIAL DISRUPTIONS AT ONE OF OUR MANUFACTURING FACILITIES COULD
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NEGATIVELY IMPACT OUR FINANCIAL RESULTS. We operate our facilities in compliance with applicable rules and regulations and take measures to minimize the risks of disruption at our facilities. A material disruption at our corporate headquarters or one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales and/or negatively impact our financial condition. Any of our manufacturing facilities, or any of our machines within an otherwise operational facility, could cease operations unexpectedly due to a number of events, including:
fires, floods, earthquakes, hurricanes or other catastrophes;
the effect of a drought or reduced rainfall on its water supply;
the effect of other severe weather conditions on equipment and facilities;
disruption in the supply of raw materials or other manufacturing inputs;
terrorism or threats of terrorism;
information system disruptions or failures due to any number of causes, including cyber-attacks;
domestic and international laws and regulations applicable to our Company and our business partners, including joint venture partners, around the world;
unscheduled maintenance outages;
prolonged power failures;
an equipment failure;
a chemical spill or release;
explosion of a boiler or other equipment;
damage or disruptions caused by third parties operating on or adjacent to one of our manufacturing facilities;
disruptions in the transportation infrastructure, including roads, bridges, railroad tracks and tunnels;
a widespread outbreak of an illness or any other communicable disease, such as the outbreak of the COVID-19 virus, or any other public health crisis;
failure of our third party service providers and business partners to satisfactorily fulfill their commitments and responsibilities in a timely manner and in accordance with agreed upon terms;
labor difficulties; and
other operational problems.
Any such downtime or facility damage could prevent us from meeting customer demand for our products and/or require us to make unplanned expenditures. If one of these machines or facilities were to incur significant downtime, our ability to meet our production targets and satisfy customer requirements could be impaired, resulting in lower sales and having a negative effect on our business and financial results.
CERTAIN OPERATIONS ARE CONDUCTED BY JOINT VENTURES THAT WE CANNOT OPERATE SOLELY FOR OUR BENEFIT. Certain operations in Russia are carried on by a joint venture, Ilim. In joint ventures, we share ownership and management of a company with one or more parties who may or may not have the same goals, strategies, priorities or resources as we do. In general, joint ventures are intended to be operated for the benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities as well as time-consuming procedures for sharing information and making decisions. In joint ventures, we are required to pay more attention to our relationship with our co-owners as well as with the joint venture, and if a co-owner changes, our relationship may be adversely affected. In addition, the benefits from a successful joint venture are shared among the co-owners, so we receive only our portion of those benefits.

THE ANNOUNCED PROPOSED SPIN-OFF OF OUR PRINTING PAPERS BUSINESS MAY NOT BE COMPLETED WITHIN THE EXPECTED TIMEFRAME, OR AT ALL, AND WE MAY NOT ACHIEVE THE EXPECTED BENEFITS FROM THE SEPARATION. On December 3, 2020, we announced a plan to pursue a spin-off of our Printing Papers segment into SpinCo, a standalone, publicly traded company. International Paper will distribute shares of SpinCo to International Paper shareholders on a pro rata basis in a manner intended to be tax-free to International Paper and its shareholders for U.S. Federal income tax purposes. The transaction is expected to be completed in late third quarter 2021. The proposed spin-off is subject to customary conditions, including final approval by the International Paper Board of Directors, receipt of a tax opinion and the filing and effectiveness of a Form 10 registration statement with the U.S. Securities and Exchange Commission. No assurance can be given regarding the form that a spin-off transaction may take or the specific terms or timing thereof, or that a spin-off will in fact occur. In addition, International Paper expects to retain up to 19.9% of the shares of
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SpinCo at the time of the separation, with the intent to monetize in the future and provide additional proceeds to International Paper. No assurance can be given that we will be able to monetize the shares of SpinCo at a favorable price or at all, or the timing thereof.

International Paper and SpinCo may not realize some or all of the anticipated strategic, financial, operational or other benefits, including cost savings, from the separation on the expected timeframe or at all. As independent publicly-traded companies, International Paper and SpinCo will be smaller, less diversified companies with a narrower business focus and may be more vulnerable to changing market conditions, such as changes in the industrial packaging or printing papers industry, which could result in increased volatility in their respective cash flows, working capital and financing requirements and could materially and adversely affect the respective business, financial condition and results of operations. In connection with the transaction, SpinCo is expected to pay International Paper a dividend to be used to pay down outstanding International Paper indebtedness. There can be no assurance that SpinCo will be able to pay a dividend, the amount of any such dividend, or that any dividend paid will be sufficient to repay the amount of indebtedness expected. Further, there can be no assurance that the combined value of the common stock of the two publicly-traded companies will be equal to or greater than what the value of International Paper’s common stock would have been had the proposed separation not occurred.

Moreover, substantial expenses will be incurred in connection with the transaction. Such expenses are difficult to estimate accurately and may exceed current estimates. Accordingly, the benefits from the transaction may be offset by costs or delays incurred in effectuating the transaction. Executing the proposed transaction will require significant time and attention from International Paper’s senior management and employees, which could disrupt International Paper’s ongoing business and adversely affect the financial results and results of operations.
WE MAY NOT ACHIEVE THE EXPECTED BENEFITS FROM STRATEGIC ACQUISITIONS, JOINT VENTURES, DIVESTITURES, CAPITAL INVESTMENTS AND OTHER CORPORATE TRANSACTIONS THAT WE HAVE PURSUED OR MAY PURSUE. Our strategy for long-term growth, productivity and profitability depends, in part, on our ability to accomplish prudent acquisitions, joint ventures, divestitures, capital investments and other corporate transactions that we may pursue and to realize the benefits we expect from such transactions, and we are subject to the risk that we may not
achieve the expected benefits. This failure could require us to record an impairment charge for goodwill or other intangible assets, which could lead to decreased assets and reduced net earnings. Among the benefits we expect from potential as well as completed acquisitions and joint ventures are synergies, cost savings, growth opportunities or access to new markets (or a combination thereof), and in the case of divestitures, the realization of proceeds from the sale of businesses and assets to purchasers who place higher strategic value on such businesses and assets than does International Paper.
Corporate transactions of this nature which we may pursue involve a number of special risks, including with respect to our inability to realize our business goals with respect to such transactions as noted above, the focus of our management’s attention on these transactions and the assimilation of acquired businesses into our operations, the demands on our financial, operational and information technology systems resulting from acquired businesses, and the possibility that we may become responsible for substantial contingent or unanticipated legal liabilities as the result of acquisitions or other corporate transactions.
WE ARE SUBJECT TO INFORMATION TECHNOLOGY RISKS RELATED TO BREACHES OF SECURITY PERTAINING TO SENSITIVE COMPANY, CUSTOMER, EMPLOYEE AND VENDOR INFORMATION AS WELL AS BREACHES IN THE TECHNOLOGY USED TO MANAGE OPERATIONS AND OTHER BUSINESS PROCESSES. Our business operations rely upon secure information technology systems for data capture, processing, storage and reporting. Despite careful security and controls design, implementation, updating and independent third party verification, our information technology systems, and those of our third party providers or joint venture partners, could become subject to employee error or malfeasance, cyber-attacks, such as ransomware and data theft, by common hackers, criminal groups or nation-state organizations or social activist ("hacktivist") organizations, geopolitical events, natural disasters, failures or impairments of telecommunications networks or other catastrophic events. Network, system, application and data breaches could result in operational disruptions or information misappropriation including, but not limited to, interruption to systems availability, denial of access to and misuse of applications required by our customers to conduct business with International Paper. Access to applications required to plan our operations, source materials, manufacture and ship finished goods and account for orders could be denied or misused. Theft of intellectual property or trade secrets, and inappropriate disclosure of confidential company,
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employee, customer or vendor information, could stem from such incidents. Any of these operational disruptions and/or misappropriation of information could result in lost sales, business delays, negative publicity and could have a material effect on our business.
RISKS RELATING TO LEGAL PROCEEDINGS AND COMPLIANCE COSTS

WE ARE SUBJECT TO A WIDE VARIETY OF LAWS, REGULATIONS AND OTHER GOVERNMENT REQUIREMENTS THAT MAY CHANGE IN SIGNIFICANT WAYS, AND THE COST OF COMPLIANCE WITH SUCH REQUIREMENTS COULD IMPACT OUR BUSINESS AND RESULTS OF OPERATIONS. Our operations are subject to regulation under a wide variety of U.S. federal and state and non-U.S. laws, regulations and other government requirements -- including, among others, those relating to the environment, health and safety, labor and employment, data privacy, tax, trade and health care. There can be no assurance that laws, regulations and government requirements will not be changed, applied or interpreted in ways that will require us to modify our operations and objectives or affect our returns on investments by restricting existing activities and products, subjecting them to escalating costs.

For example, we have incurred, and expect that we will continue to incur, significant capital, operating and other expenditures complying with applicable environmental laws and regulations. Our environmental expenditures include, among other areas, those related to air and water quality, waste disposal and the cleanup of contaminated soil and groundwater, including situations where we have been identified as a potentially responsible party. Moreover, we may be directly impacted by, and are working to manage, the risks and costs to us, our customers and our vendors of the effects of climate change, greenhouse gases, and the availability of energy and water resources. These risks include the potentially adverse impact on forestlands, which are a key resource in the production of our products, increased product costs and a change in the types of products that customers purchase. We also face risks arising from the increased public focus, including by governmental and nongovernmental organizations, on these and other environmental sustainability matters, such as packaging and waste, deforestation, and land use. These risks also include the increased pressure to make commitments, set targets, or establish additional goals and take actions to meet them. These risks could expose us to market, operational, and execution costs or risks. There can be no assurance that future remediation requirements and compliance with existing and new laws and
requirements will not require significant expenditures, or that existing reserves for specific matters will be adequate to cover future costs. We could also incur substantial fines or sanctions, enforcement actions (including orders limiting our operations or requiring corrective measures), natural resource damages claims, cleanup and closure costs, and third-party claims for property damage and personal injury as a result of violations of, or liabilities under, environmental laws, regulations, codes and common law. The amount and timing of environmental expenditures is difficult to predict, and, in some cases, liability may be imposed without regard to contribution or to whether we knew of, or caused, the release of hazardous substances.

Our global operations subject us to complex and evolving U.S and international privacy laws and regulations, such as General Data Protection Regulation (“GDPR”), Brazil's Lei Geral de Pnoteçāo de Dados ("LGPD") and the California Consumer Privacy Act of 2018 (“CCPA”) and the California Privacy Rights Act ("CPRA"). These laws require the Company to comply with a range of compliance obligations regarding the handling of personal data. These are significant penalties for non-compliance including monetary fines, disruption of operations and reputational harm. Moreover, governmental authorities around the world are considering, or are in the process of implementing new data protection regulations.

Many of these laws and regulations are subject to uncertain application, interpretation or enforcement standards that could result in claims, changes to our business practices, data processing and security systems, penalties, increased operating costs or other impacts on our businesses. The recently enacted laws often provide for civil penalties for violations, as well as private rights of action for data breaches that may increase data breach litigation. IP proactively uses internal and external resources to monitor compliance with relevant legislation and continually evaluates and, where necessary, modifies its data processing practices and policies in order to comply with evolving privacy laws. Nevertheless, relevant regulatory authorities could determine that our data handling practices fail to address all the requirements of certain new laws, which could subject us to penalties and/or litigation. In addition, there is no assurance that our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we implemented or may implement in the future will prevent the improper disclosure of personal data. Improper disclosure of personal data in violation of the GDPR, the CCPA and/or of other personal data protection laws could harm our reputation, cause loss of consumer
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confidence, subject us to government enforcement actions (including fines), or result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and/or criminal prosecution, all of which could negatively affect our business and operating results.

As a final example, the application of tax law is subject to interpretation and is subject to audit by taxing authorities. Additionally, administrative guidance can be incomplete or vary from legislative intent, and therefore the application of the tax law is uncertain. While we believe the positions reported by the Company comply with relevant tax laws and regulations, taxing authorities could interpret our application of certain laws and regulations differently. We are currently subject to tax audits in the U.S., Brazil, Poland, Russia and other taxing jurisdictions around the world. In some cases, we have appealed and may continue to appeal, assessments by taxing authorities in the court system. As such, tax controversy matters may result in previously unrecorded tax expenses, higher future tax expenses or the assessment of interest and penalties.
RESULTS OF LEGAL PROCEEDINGS COULD HAVE A MATERIAL EFFECT ON OUR CONSOLIDATED FINANCIAL RESULTS. We are a party to various legal, regulatory and governmental proceedings and other related matters, including with respect to environmental matters. In addition, we are and may become subject to other loss contingencies, both known and unknown, which may relate to past, present and future facts, events, circumstances and occurrences. Should an unfavorable outcome occur in connection with our legal, regulatory or governmental proceedings or other loss contingencies, or if we become subject to any such loss contingencies in the future, there could be a material adverse impact on our financial results.

IF THE SPIN-OFF WERE TO FAIL TO QUALIFY FOR NON-RECOGNITION TREATMENT FOR U.S. FEDERAL INCOME TAX PURPOSES, THEN INTERNATIONAL PAPER, SPINCO AND OUR SHAREHOLDERS MAY BE SUBJECT TO SIGNIFICANT U.S. FEDERAL INCOME TAXES. International Paper intends to receive an opinion of tax counsel, to the effect that the spin-off and certain related transactions will qualify as tax-free to SpinCo, International Paper and its shareholders for U.S. federal income tax purposes. A tax opinion is not binding on the IRS or the courts, and there can be no assurance that the IRS or a court will not take a contrary position. In addition, International Paper’s tax counsel will rely on certain representations and covenants delivered by International Paper and SpinCo in rendering such opinion. International Paper may also pursue a private letter ruling from the IRS to
the effect that the spin-off and certain related transactions will qualify as tax-free to International Paper, SpinCo and International Paper shareholders for U.S. federal income tax purposes.

If the IRS ultimately determines that the spin-off is taxable, then the spin-off could be treated as a taxable dividend or capital gain to the International Paper shareholders for U.S. federal income tax purposes, International Paper could incur significant U.S. federal income tax liabilities, and SpinCo may be required to indemnify International Paper for such tax liability pursuant to a tax matters agreement. There can be no assurance that SpinCo would have the resources or liquidity required to indemnify International Paper for any such tax liability.

Even if the spin-off otherwise qualifies for non-recognition of gain or loss under Internal Revenue Code ("the Code") Section 355 of the Code, the spin-off may be taxable to International Paper (but not International Paper’s shareholders) pursuant to Section 355(e) of the Code if there is a 50% or more (by vote or value) change in ownership of either International Paper or SpinCo, directly or indirectly, as part of a plan or series of related transactions that include the spin-off. For this purpose, any acquisitions of International Paper’s or SpinCo’s common stock within two years before or after the spin-off are presumed to be part of such a plan, although International Paper or SpinCo may be able to rebut that presumption based on either applicable facts and circumstances or a “safe harbor” described in the U.S. income tax regulations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM  2. PROPERTIES

FORESTLANDS

As of December 31, 2020, the Company owned or managed approximately 314,000 acres of forestlands
in Brazil, and had, through licenses and forest management agreements, harvesting rights on government-owned forestlands in Russia. All owned lands in Brazil are independently third-party certified for sustainable forestry under the Brazilian National Forest Certification Program ("CERFLOR") and the Forest Stewardship Council ("FSC").

MILLS AND PLANTS
A listing of our production facilities by segment, the vast majority of which we own, can be found in Appendix I hereto, which is incorporated herein by reference.

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The Company’s facilities are in good operating condition and are suited for the purposes for which they are presently being used. We continue to study the economics of modernization or adopting other alternatives for higher cost facilities.

CAPITAL INVESTMENTS AND DISPOSITIONS

Given the size, scope and complexity of our business interests, we continually examine and evaluate a wide variety of business opportunities and planning alternatives, including possible acquisitions and sales or other dispositions of properties. You can find a discussion about the level of planned capital investments for 2021 on page 33, and dispositions and restructuring activities as of December 31, 2020, on
pages 25 through 26 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in Note 7 Acquisitions on page 59 of Item 8. Financial Statements and Supplementary Data.

ITEM 3. LEGAL PROCEEDINGS
Information concerning certain legal proceedings of the Company is set forth in Note 14 Commitments and Contingent Liabilities on pages 68 through 70 of Item  8. Financial Statements and Supplementary Data which is incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
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PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
As of the filing of this Annual Report on Form 10-K, the Company’s common shares are traded on the New York Stock Exchange (NYSE: IP). As of February 12, 2021, there were approximately 9,379 record holders of common stock of the Company.


We pay regular quarterly cash dividends and expect to continue to pay regular quarterly cash dividends in the foreseeable future, though each quarterly dividend payment is subject to review and approval by our Board of Directors. Our ability to pay dividends is, and in the future may continue to be, limited by the terms of our debt documents.
The table below presents information regarding the Company’s purchases of its equity securities for the time periods presented.



PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
PeriodTotal Number of Shares Purchased (a)Average Price Paid per ShareTotal Number of Shares (or Units) Purchased as Part of Publicly Announced ProgramsMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in billions)
October 1, 2020 - October 31, 2020244 $40.54 — $1.73 
November 1, 2020 - November 30, 20201,393 43.75 — 1.73 
December 1, 2020 - December 31, 2020— — — 1.73 
Total1,637 
(a)1,637 shares were acquired from employees from share withholdings to pay income taxes under the Company’s restricted stock programs. During 2020, 389,100 shares were purchased under our share repurchase program, which was approved on September 30, 2013, and increased twice on July 8, 2014 and October 9, 2018. Through this program, which does not have an expiration date, we are authorized to purchase, in open market transactions (including block trades), privately negotiated transactions or otherwise, up to $5 billion shares of our common stock. As of December 31, 2020, approximately $1.73 billion aggregate amount of shares of our common stock remain authorized for purchase under this program.
















































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PERFORMANCE GRAPH
The performance graph shall not be deemed "soliciting material" or to be "filed" with the Commission or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act of 1934, as amended.
The following graph compares a $100 investment in Company stock on December 31, 2015 with a $100 investment in our Peer Group and the S&P also made at market close on December 31, 2015. The graph portrays total return, 2015-2020, assuming reinvestment of dividends.
ip-20201231_g1.jpg
1)The companies included in the Peer Group are Domtar Inc., Graphic Packaging Holding Company, Klabin S.A., Metsa Board Corporation, Mondi Group, Packaging Corporation of America, Smurfit Kappa Group, Stora Enso Group, UPM-Kymmene Corp., and WestRock Company.
2)Returns are calculated in $USD
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. 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 elsewhere in this Annual Report on Form 10-K, particularly in “Risk Factors” and “Forward-Looking Statements.”
The following generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussion of historical items in 2018, and year-to-year comparisons between 2019 and 2018, can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 19, 2020, under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

EXECUTIVE SUMMARY

Full-year 2020 net earnings attributable to shareholders were $482 million ($1.22 per diluted share) compared with $1.2 billion ($3.07 per diluted share) for full-year 2019.

International Paper navigated the impacts of the Covid-19 pandemic in 2020 to deliver solid earnings and outstanding cash generation. Our 2020 performance demonstrates the strength and resilience of our employees, our diverse customer base and our world class manufacturing and supply chain capabilities. We ran our manufacturing system well and leveraged the flexibility of our mill and converting systems to overcome significant challenges due to the pandemic, while managing costs extremely well across our three businesses, with no material operational disruptions due to the pandemic. We continued to grow value for our shareholders with a return above our cost of capital, which marks the eleventh consecutive year with value-creating returns. We generated full-year cash from operations of $3.1 billion and free cash flow of $2.3 billion. Given the significant economic uncertainty, we took prudent and early actions to reinforce cash generation and enhance our financial strength. We continued to execute on our capital allocation framework. In 2020, we returned $820
million to shareowners and reduced debt by $1.7 billion. We also invested in our North American and EMEA corrugated packaging businesses to enhance our capabilities and grow earnings. Finally, in the fourth quarter, we announced plans to spin-off our Printing Papers business into a stand-alone, publicly traded company, which we expect to complete in the third quarter 2021.

Compared to 2019, the Company’s 2020 results reflect strong execution and effective cost management to mitigate the impact of market disruptions associated with the pandemic. Price and mix were negatively affected by the full-year impact of 2019 price index movements in our North America Packaging business, as well as lower average pricing in our Global Cellulose Fibers and Printing Papers businesses. Volume was also an earnings headwind due to the unprecedented decline in demand for Printing Papers related to the pandemic. These price and volume headwinds were partly offset by strong volume growth in our North American Packaging business, outstanding cost management and lower maintenance outage expenses. During 2020, we made choices around planned maintenance and other spending priorities in response to market disruptions resulting from the pandemic. Operating costs were higher in 2020, primarily due to higher costs in the latter part of the year, as we flexed our system to meet strong packaging demand. Overall, input costs were favorable in 2020, driven by lower wood, energy and distribution costs although we did see an increase in recovered fiber, energy and distribution in the fourth quarter. Equity earnings were lower in 2020 due to decreased Ilim earnings, driven by the challenging global pulp markets along with a foreign exchange loss on Ilim’s U.S. dollar denominated net debt.

Looking ahead to the first quarter 2021, as compared to the fourth quarter of 2019, in our Industrial Packaging business, we expect price and mix to improve on the realization of prior price index movement. Volume is expected to be flat sequentially with continued strong box demand in North America. Operations and costs are expected to improve sequentially, resulting from the non-repeat of isolated reliability issues and other unfavorable one-time items in the fourth quarter 2020. Maintenance outage expense is expected to be higher along with increased input costs, mainly due to higher recovered fiber and distribution costs. In our Global Cellulose Fibers business, we expect improved price and mix on the realization of prior price index movements. Volume is expected to be stable and operations and costs are expected to improve on the non-repeat of unfavorable fourth quarter items. Maintenance outage expenses are expected to decrease moderately and input costs are expected to increase on seasonally
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higher wood and energy costs. In our Printing Papers business, price and mix is expected to be stable and volume is expected to decrease, mostly due to lower seasonal demand in Brazil and Russia. Operations and costs are expected to improve and maintenance outage expense is expected to be flat. Input costs are expected to be higher, primarily due to higher seasonal wood and energy costs. Lastly, for our Ilim joint venture, we expect lower earnings on the non-repeat of the foreign currency gain on US denominated debt recognized in the fourth quarter 2020.

As we enter 2021, we are mindful that we are still in the midst of a global pandemic and there is still uncertainty. Accordingly, we remain committed to our COVID-19 principles to focus on what we need to do as a company to remain strong and resilient for all our stakeholders – to keep our employees and contractors safe, to take care of our customers and to maintain our financial strength. Looking to 2021, we anticipate continued strong demand for corrugated packaging and pulp and are poised to grow earnings. We remain focused on cash generation and will continue to make choices consistent with our capital allocation framework to drive long-term value creation.

On March 11, 2020 the World Health Organization declared the novel strain of coronavirus ("COVID-19") a global pandemic and recommended containment and mitigation measures worldwide. Since that time, most of our manufacturing and converting facilities have remained open and operational during the pandemic. The health and safety of our employees and contractors is our most important responsibility as we manage through the COVID-19 pandemic. We have implemented work-systems across the Company, including hygiene, social distancing, site cleaning, contact tracing, and other measures, as recommended by the CDC and WHO. Our COVID-19 measures are proving to be effective and we have not had any material disruptions to our operations.

We have seen a significant negative impact on demand for our printing papers products. Demand for our pulp, containerboard and corrugated box products has not been negatively impacted by COVID-19 to date, but our operations in Industrial Packaging experienced higher supply chain costs due to the impacts of COVID-19. The recent resurgence of the virus in many areas has led to additional governmental measures, such as stay-at-home orders or business and school closures, negatively impacting our supply chain, and therefore our production.

There continue to be significant uncertainties associated with the COVID-19 pandemic, including
with respect to the various economic reopening plans
and the resurgence of the virus in many areas; additional actions that may be taken by governmental authorities and private businesses to attempt to contain the COVID-19 outbreak or to mitigate its impact; the extent and duration of social distancing and stay-at-home orders; the efficacy of various vaccines; and availability and the ongoing impact of COVID-19 on unemployment, economic activity and consumer confidence. Developments related to COVID-19 are significantly adversely affecting portions of our business, and could have a material adverse effect on our financial condition, results of operations and cash flows, particularly if negative global economic conditions persist for a significant period of time or deteriorate.

Adjusted Operating Earnings and Adjusted Operating Earnings Per Share are non-GAAP measures and are defined as net earnings (loss) attributable to International Paper (a GAAP measure) excluding net special items and non-operating pension expense (income). Net earnings (loss) and Diluted earnings (loss) per share attributable to common shareholders are the most directly comparable GAAP measures. The Company calculates Adjusted Operating Earnings by excluding the after-tax effect of non-operating pension expense (income) and items considered by management to be unusual (net special items) from the earnings reported under GAAP. Adjusted Operating Earnings Per Share is calculated by dividing Adjusted Operating Earnings by diluted average shares of common stock outstanding. 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. The Company believes that using this information, along with the most direct comparable GAAP measure, provides for a more complete analysis of the results of operations.

The following are reconciliations of Earnings (loss) attributable to common shareholders to Adjusted operating earnings (loss) attributable to common shareholders. Additional detail is provided later in this Form 10-K regarding the net special items referenced in the charts below. 

In millions20202019
Net Earnings (Loss) Attributable to Shareholders$482 $1,225 
Add back - Non-operating pension expense (income)(41)36 
Add back - Net special items expense (income)762 409 
Income tax effect - Non-operating pension and special items expense(96)98 
Adjusted Operating Earnings (Loss) Attributable to Shareholders$1,107 $1,768 
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20202019
Diluted Earnings (Loss) Per Share Attributable to Shareholders$1.22 $3.07 
Add back - Non-operating pension expense (income) per share(0.10)0.09 
Add back - Net special items expense (income) per share1.93 1.02 
Income tax effect per share - Non-operating pension and special items expense(0.25)0.25 
Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders$2.80 $4.43 

In millionsThree Months Ended December 31, 2020Three Months Ended September 30, 2020Three Months Ended December 31, 2019
Net Earnings (Loss) Attributable to Shareholders$153 $204 $165 
Add back - Non-operating pension expense (income)(10)(11)
Add back - Net special items expense (income)201 109 136 
Income tax effect - Non-operating pension and special items expense(48)(22)120 
Adjusted Operating Earnings (Loss) Attributable to Shareholders$296 $280 $430 

Three Months Ended December 31, 2020Three Months Ended September 30, 2020Three Months Ended December 31, 2019
Diluted Earnings (Loss) Per Share Attributable to Shareholders$0.39 $0.52 $0.42 
Add back - Non-operating pension expense (income) per share(0.03)(0.03)0.02 
Add back - Net special items expense (income) per share0.51 0.28 0.34 
Income tax effect per share - Non-operating pension and special items expense(0.12)(0.06)0.31 
Adjusted Operating Earnings (Loss) Per Share Attributable to Shareholders$0.75 $0.71 $1.09 

Cash provided by operations totaled $3.1 billion and $3.6 billion for 2020 and 2019, respectively. The Company generated free cash flow of approximately $2.3 billion in both 2020 and 2019. Free Cash Flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management utilizes this measure in connection with managing our business and believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the
business, to maintain a strong balance sheet, pay dividends, repurchase stock, service debt and make investments for future growth. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company's ongoing underlying operational performance, we believe that free cash flow also enables investors to perform meaningful comparisons between past and present periods.

The following are reconciliations of free cash flow to cash provided by operations: 

In millions20202019
Cash provided by operations$3,063 $3,610 
Adjustments:
Cash invested in capital projects, net of insurance recoveries(751)(1,276)
Free Cash Flow$2,312 $2,334 

In millionsThree Months Ended December 31, 2020Three Months Ended September 30, 2020Three Months Ended December 31, 2019
Cash provided by operations$789 $735 $928 
Adjustments:
Cash invested in capital projects, net of insurance recoveries(94)(119)(363)
Free Cash Flow$695 $616 $565 

The non-GAAP financial measures presented in this Form 10-K as referenced above have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies utilize identical calculations, the Company’s presentation of non-GAAP measures in this Form 10-K may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as the Company.
RESULTS OF OPERATIONS
Business Segment Operating Profits are used by International Paper’s management to measure the earnings performance of its businesses. 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 operating results. International Paper believes that using this information, along with net earnings, provides a more complete analysis of the results of operations by year. Business Segment Operating Profits are defined as earnings (loss) before income taxes and equity earnings, but including the impact of noncontrolling interests, and
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excluding interest expense, net, corporate expenses, net, corporate net special items, business net special items and non-operating pension expense. Business Segment Operating Profits is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280.

International Paper operates in three segments: Industrial Packaging, Global Cellulose Fibers and Printing Papers.

The following table presents a comparison of net earnings (loss) attributable to International Paper Company to its total Business Segment Operating Profit: 

In millions20202019
Net Earnings (Loss) Attributable to International Paper Company$482 $1,225 
Add back (deduct)
Income tax provision (benefit)245 634 
Equity (earnings) loss, net of taxes(77)(250)
Noncontrolling interests, net of taxes (5)
Earnings (Loss) Before Income Taxes and Equity Earnings650 1,604 
Interest expense, net444 491 
Noncontrolling interests included in operations 
Corporate expenses, net(7)54 
Corporate net special items274 104 
Business net special items490 307 
Non-operating pension expense (income)(41)36 
$1,810 $2,599 
Business Segment Operating Profit (Loss):
Industrial Packaging$1,819 $2,076 
Global Cellulose Fibers(237)(6)
Printing Papers228 529 
Total Business Segment Operating Profit$1,810 $2,599 

Business Segment Operating Profit in 2020 was $789 million lower than in 2019 as the benefits from lower input costs ($221 million) and lower maintenance outage costs ($64 million) were more than offset by lower average sales price realizations and mix ($907 million), lower sales volumes ($95 million) and higher operating costs ($72 million).
ip-20201231_g2.jpg
The principal changes in operating profit by business segment were as follows:
 
Industrial Packaging’s operating profit of $1.8 billion was $257 million lower than in 2019 as the benefits of higher sales volumes, lower input costs and lower maintenance outage costs were more than offset by lower average sales price, unfavorable mix and higher operating costs.
Global Cellulose Fibers' operating loss of $237 million was $231 million higher than the operating loss in 2019 as the benefits of higher sales volumes, lower operating costs, lower maintenance outage costs and lower input costs were more than offset by lower average sales price, net of mix.
Printing Papers’ operating profit of $228 million was $301 million lower than in 2019 as the benefits of lower input costs and lower maintenance outage costs were more than offset by lower average sales price, unfavorable mix, lower sales volumes and higher operating costs.

LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 2020, International Paper generated $3.1 billion of cash flow from operations compared with $3.6 billion in 2019. Capital spending for 2020 totaled $751 million, or 58% of depreciation and amortization expense. Our liquidity position remains strong, supported by approximately $2.8 billion of credit facilities.

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RESULTS OF OPERATIONS
While the operating results for International Paper’s various business segments are driven by a number of business-specific factors, changes in International Paper’s operating results are closely tied to changes in general economic conditions in North America, Europe, Russia, Latin America, North Africa and the Middle East.
Factors that impact the demand for our products include industrial non-durable goods production, consumer preferences, consumer spending, commercial printing and advertising activity, white-collar employment levels and location, and movements in currency exchange rates.
Product prices are affected by a variety of factors including general economic trends, inventory levels, currency exchange rate movements and worldwide capacity utilization. In addition to these revenue-related factors, net earnings are impacted by various cost drivers, the more significant of which include changes in raw material costs, principally wood, recovered fiber and chemical costs; energy costs; freight costs; mill outage costs; salary and benefits costs, including pensions; and manufacturing conversion costs.
The following is a discussion of International Paper’s consolidated results of operations for the year ended December 31, 2020, and the major factors affecting these results compared to 2019.
For the year ended December 31, 2020, International Paper reported net sales of $20.6 billion, compared with $22.4 billion in 2019. International net sales (based on the location of the seller and including U.S. exports) totaled $6.9 billion or 34% of total sales in 2020. This compares with international net sales of $8.1 billion in 2019.
Full year 2020 net earnings attributable to International Paper Company totaled $0.5 billion ($1.22 per diluted share), compared with net earnings of $1.2 billion ($3.07 per diluted share) in 2019.
Earnings from continuing operations attributable to International Paper Company after taxes in 2020 and 2019 were as follows:

In millions20202019
Earnings from continuing operations attributable to International Paper Company$482 (a)$1,225 (b)

(a)Includes $656 million of net special items charges and $31 million of non-operating pension income.
(b)Includes $515 million of net special items charges which included tax expense of $203 million related to a foreign
deferred tax valuation allowance and $28 million of non-operating pension expense.
Compared with 2019, the benefits from lower input costs ($163 million), lower maintenance outage costs ($47 million), lower corporate and other costs ($44 million), lower net interest expense ($35 million) and lower tax expense ($16 million) were more than offset by lower average sales price and an unfavorable mix ($670 million), lower sales volumes ($70 million) and higher operating costs ($53 million). In addition, 2020 results included lower equity earnings, net of taxes, relating to the Company’s investments in Ilim and GPIP.

ip-20201231_g3.jpg
See Business Segment Results on pages 27 through 31 of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the impact of these factors by segment.
INCOME TAXES
A net income tax provision of $245 million was recorded for 2020, including a tax benefit of $32 million related to the settlement of tax audits. Excluding this item, a $74 million net tax benefit for other special items and a $10 million tax expense related to non-operating pension income, the operational tax provision was $341 million, or 25% of pre-tax earnings before equity earnings.
A net income tax provision of $634 million was recorded for 2019, including tax expense of $203 million related to a foreign deferred tax valuation allowance, a tax benefit of $53 million related to internal investment restructuring, tax expense of $9 million related to a non U.S. tax rate change, tax expense of $3 million related to foreign tax audits and a tax benefit of $3 million related to state income tax legislative changes. Excluding these items, a $53 million net tax benefit for other special items and a $8 million tax benefit related to non-operating pension expense, the operational tax provision was $536 million, or 26% of pre-tax earnings before equity earnings.
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EQUITY EARNINGS, NET OF TAXES
Equity earnings, net of taxes, consisted principally of the Company’s share of earnings from its 50% investment in Ilim of $48 million and $207 million in 2020 and 2019, respectively, and from its 15.0% ownership interest at December 31, 2020 in GPIP of $40 million in 2020, and from its 20.5% ownership interest at December 31, 2019 of $46 million in 2019 (see page 30).
INTEREST EXPENSE AND NONCONTROLLING INTEREST
Net corporate interest expense totaled $444 million in 2020 and $491 million in 2019. Net interest expense in 2020 includes $2 million of interest income associated with a foreign value-added tax refund accrual. Net interest expense in 2019 includes $3 million of interest income associated with a foreign value-added tax refund accrual and $1 million of interest expense related to foreign tax audits. The decrease in 2020 compared with 2019 was due to lower average outstanding debt.
Net earnings attributable to noncontrolling interests were zero in 2020, compared with a loss of $5 million in 2019. The loss in 2019 includes the allocation of loss of $9 million associated with the impairment of the net assets of our India Papers business.

SPECIAL ITEMS
Pre-tax special items totaling $764 million and $420 million were recorded in 2020 and 2019, respectively. Details of these charges were as follows:
Special Items
In millions20202019
Business Segments
Net loss on sales and impairments of businesses$467 $205 
Abandoned property removal14 (a)50 (a)
Environmental remediation reserve adjustments7 (b)— 
Riverdale mill conversion accelerated depreciation1 (b)(b)
Restructuring and other, net(1)25 
Antitrust fines 32 (c)
Multi-employer pension plan exit liability (c)
Gain on sale of previously closed Albany, Oregon mill site (9)(c)
Other2 (d)(1)(d)
490 316 
Corporate
Restructuring and other, net$196 $32 
Asbestos litigation reserve adjustment43 — 
Environmental remediation reserve adjustments41 25 
India investment11 
Printing Papers business spin-off costs9 — 
Litigation reserves 41 
India transaction costs 
Gain on sale of portion of equity investment in Graphic Packaging(33)— 
Net gain on sales and impairments of businesses(2)— 
Other9 — 
274 104 
Total$764 $420 
(a) Includes $9 million and $35 million recorded in the Industrial Packaging business segment for 2020 and 2019, respectively; $5 million and $12 million recorded in the Global Cellulose Fibers business segment for 2020 and 2019, respectively; $3 million recorded in the Printing Papers business segment for 2019.
(b) Recorded in the Printing Papers business segment.
(c) Recorded in the Industrial Packaging business segment.
(d) Includes expense of $2 million for 2019 recorded in the Industrial Packaging business segment and expense of $2 million and income of $3 million for 2020 and 2019, respectively, recorded in the Printing Papers business segment.








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Net losses on sales and impairments of businesses included in special items totaled a pre-tax loss of $465 million and $205 million in 2020 and 2019, respectively. Details of these losses were as follows:

Net Loss on Sales and Impairments of Businesses
In millions20202019
Brazil Packaging impairment$348 $— 
EMEA Packaging impairment - Turkey123 — 
India Papers impairment 159 
Global Cellulose Fibers goodwill impairment 52 
Gain on sale of EMEA Packaging box plant (6)
Other(6)— 
Total$465 $205 
See Note 8 Divestitures and Impairments on pages 59 through 61 of Item 8. Financial Statements and Supplementary Data for further discussion.
International Paper continually evaluates its operations for improvement opportunities targeted to (a) focus our portfolio on our core businesses, (b) realign capacity to operate fewer facilities with the same revenue capability, (c) close high cost facilities, and (d) reduce costs. Additionally, the Company is committed to its capital allocation framework to maintain a strong balance sheet including reducing debt to maximize value creation and maintain our current investment grade credit rating.

During 2020 and 2019, pre-tax restructuring and other charges, net, totaling $195 million and $57 million were recorded. Details of these charges were as follows:

Restructuring and Other, Net
In millions20202019
Business Segments
EMEA Packaging optimization$ $15 (a)
Overhead reduction initiative 10 (b)
Other(1)(a)— 
(1)25 
Corporate
Early debt extinguishment costs (see Note 16)$196 $21 
Overhead reduction initiative 11 
196 32 
Total$195 $57 

(a) Recorded in the Industrial Packaging business segment.
(b) Includes $6 million recorded in the Printing Papers business segment and $4 million recorded in the Global Cellulose Fibers business segment.


DESCRIPTION OF BUSINESS SEGMENTS

International Paper’s business segments discussed below are consistent with the internal structure used to manage these businesses. All segments are differentiated on a common product, common customer basis consistent with the business segmentation generally used in the forest products industry.

INDUSTRIAL PACKAGING

International Paper is the largest manufacturer of containerboard in the United States. Our U.S. production capacity is over 13 million tons annually. Our products include linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft. About 80% of our production is converted into corrugated boxes and other packaging by our 174 North American container plants. Additionally, we recycle approximately one million tons of OCC and mixed and white paper through our 18 recycling plants. Our container plants are supported by regional design centers, which offer total packaging solutions and supply chain initiatives. In EMEA, our operations include one recycled fiber containerboard mill in Morocco, a recycled containerboard mill in Spain and 27 container plants in France, Italy, Spain, Morocco, Turkey and Portugal. On January 5, 2021, the Company announced that it had entered into an agreement with Mondi Group to sell its 90.38% ownership interest in Olmuksan International Paper, a corrugated packaging business in Turkey. See Note 8 Divestitures and Impairments of Businesses on pages 59 through 61 of Item 8. Financial Statements and Supplementary Data.

International Paper also produces high quality coated paperboard for a variety of packaging end uses with 443,000 tons of annual capacity at our mills in Poland and Russia.

GLOBAL CELLULOSE FIBERS

Our cellulose fibers product portfolio includes fluff, market and specialty pulps. International Paper is the largest producer of fluff pulp which is used to make absorbent hygiene products like baby diapers, feminine care, adult incontinence and other non-woven products. Our market pulp is used for tissue and paper products. We continue to invest in exploring new innovative uses for our products, such as our specialty pulps, which are used for non-absorbent end uses including textiles, filtration, construction material, paints and coatings, reinforced plastics and more. Our products are made in the United States, Canada, France, Poland, and Russia and are sold around the world. International Paper facilities have annual dried pulp capacity of about 4 million metric tons.
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PRINTING PAPERS

International Paper is one of the world’s largest producers of printing and writing papers. The primary product in this segment is uncoated papers. This business produces papers for use in copiers, desktop and laser printers and digital imaging. End-use applications include advertising and promotional materials such as brochures, pamphlets, greeting cards, books, annual reports and direct mail. Uncoated papers also produces a variety of grades that are converted by our customers into envelopes, tablets, business forms and file folders. Uncoated papers are sold under private label and International Paper brand names that include Hammermill, Springhill, Williamsburg, Postmark, Accent, Great White, Chamex, Ballet, Rey, Pol, and Svetocopy. The mills producing uncoated papers are located in the United States, France, Poland, Russia and Brazil. The mills have uncoated paper production capacity of over 4 million tons annually. Brazilian operations function through International Paper do Brasil, Ltda, which owns or manages approximately 314,000 acres of forestlands in Brazil. On December 3, 2020, the Company announced a plan to pursue a spin-off of the Printing Papers segment into SpinCo, a standalone, publicly-traded company. The transaction will be implemented through the distribution of SpinCo shares to International Paper shareholders. We expect the transaction to be tax-free for International Paper's shareholders for U.S. federal income tax purposes. International Paper will retain approximately 19.9% of the shares of SpinCo at the time of the separation, with the intent to monetize and provide additional proceeds to International Paper. The transaction is expected to close late in the third quarter of 2021 and is subject to customary conditions, including final approval by the International Paper board of directors and the filing and effectiveness of a Form 10 registration statement with the SEC. See further discussion in Note 8 Divestitures and Impairments of Businesses on pages 59 through 61 of Item 8. Financial Statements and Supplementary Data.

ILIM

In October 2007, International Paper and Ilim completed a 50:50 joint venture to operate a pulp and paper business located in Russia. Ilim’s facilities include three paper mills located in Bratsk, Ust-Ilimsk, and Koryazhma, Russia, with combined total pulp and paper capacity of over 3.6 million metric tons. Ilim has exclusive harvesting rights on timberland and forest areas exceeding 19.8 million acres (8.01 million hectares).




GPIP

On January 1, 2018, the Company completed the transfer of its North American Consumer Packaging business, which includes its North American Coated Paperboard and Foodservice businesses, to Graphic Packaging International Partners, LLC ("GPIP"), a subsidiary of Graphic Packaging Holding Company, in exchange for a 20.5% ownership interest in GPIP. GPIP subsequently transferred the North American Consumer Packaging business to Graphic Packaging International, LLC ("GPI"), a wholly-owned subsidiary of GPIP that holds the assets of the combined business.

On January 29, 2020, the Company exchanged 15,150,784 units of the aggregate units owned by the Company for an aggregated price of $250 million, resulting in a pre-tax gain of $33 million ($25 million after taxes) which was recorded in the first quarter of 2020. On August 7, 2020, the Company exchanged 17,399,414 units of the aggregate units owned by the Company for an aggregated price of $250 million, resulting in an immaterial gain which was recorded in the third quarter of 2020. After these transactions, the Company's ownership percentage in GPIP is approximately 15%. See Note 11 Equity Method Investments on pages 62 and 63 and Note 23 Subsequent Events on page 88 of Item 8. Financial Statements and Supplementary Data for further information.

Products and brand designations appearing in italics are trademarks of International Paper or a related company.

BUSINESS SEGMENT RESULTS

The following tables present net sales and operating profit (loss) which is the Company's measure of segment profitability.

INDUSTRIAL PACKAGING

Demand for Industrial Packaging products is closely correlated with non-durable industrial goods production, as well as with demand for e-commerce, processed foods, poultry, meat and agricultural products. In addition to prices and volumes, major factors affecting the profitability of Industrial Packaging are raw material and energy costs, freight costs, mill outage costs, manufacturing efficiency and product mix.

Industrial Packaging  
In millions20202019
Net Sales$15,033 $15,326 
Operating Profit (Loss)$1,819 $2,076 

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Industrial Packaging net sales for 2020 decreased 2% to $15.0 billion compared with $15.3 billion in 2019. Operating profits in 2020 were 12% lower than in 2019. Comparing 2020 with 2019, benefits from higher sales volumes ($66 million), lower input costs ($125 million) and lower maintenance outage costs ($56 million) were more than offset by lower average sales price and an unfavorable mix ($431 million) and higher operating costs ($73 million).

North American Industrial Packaging
In millions20202019
Net Sales (a)$13,318 $13,509 
Operating Profit (Loss)$1,722 $2,043 
(a) Includes intra-segment sales of $116 million for 2020 and $118 million for 2019.
North American Industrial Packaging's sales volumes increased in 2020 compared with 2019 for boxes driven by strong demand in certain customer segments including e-commerce and shipping and distribution, reflecting the impacts of the COVID-19 pandemic. Export containerboard sales volumes also increased. Total maintenance and economic downtime was about 942,000 tons lower in 2020 compared with 2019, primarily due to economic downtime. Average sales prices were lower for both export containerboard and box. Operating costs increased primarily due to inflation and costs related to the Riverdale conversion. Planned maintenance downtime costs were $60 million lower in 2020 than in 2019. Input costs were lower, driven by lower wood and energy costs partially offset by higher recovered fiber costs.

Looking ahead to the first quarter of 2021, compared with the fourth quarter of 2020, sales volumes for boxes are expected to be stable, with strong box demand offset by one less shipping day in the first quarter. Average sales margins are expected to be higher. Operating costs are expected to be lower. Planned maintenance downtime costs are expected to be $87 million higher. Input costs are expected to be higher primarily for recovered fiber, wood and energy.
EMEA Industrial Packaging  
In millions20202019
Net Sales$1,317 $1,335 
Operating Profit (Loss)$38 $(17)

EMEA Industrial Packaging's sales volumes in 2020 were higher than in 2019, despite the negative demand impact of the COVID-19 pandemic which was more than offset by improved economic conditions in Turkey and the full-year impact of 2019 acquisitions. Average sales margins improved
significantly in all regions driven by lower containerboard costs and stable sales prices for boxes. Operating costs were lower, driven by the ramp-up of the Madrid, Spain mill and improved box plant operations partially offset by inflation in Turkey. Planned maintenance outage costs were $3 million higher in 2020 compared with 2019. Other input costs were lower. Earnings were negatively affected by unfavorable foreign currency impacts in Turkey.
Entering the first quarter of 2021, compared with the fourth quarter of 2020, sales volumes are expected to be seasonally higher. Average sales margins are expected to be lower, reflecting higher input costs. Operating costs are expected to be lower. Planned maintenance outage costs are expected to be flat due to no outages in the fourth quarter and no planned outages in the first quarter. Input costs are expected to be stable.

Brazilian Industrial Packaging  
In millions20202019
Net Sales$148 $235 
Operating Profit (Loss)$(3)$(14)
On October 14, 2020, the Company closed the previously announced sale of its Brazilian Packaging business. See Note 8 Divestitures and Impairments on pages 59 through 61 of Item 8. Financial Statements and Supplementary Data for further discussion.

European Coated Paperboard  
In millions20202019
Net Sales$366 $365 
Operating Profit (Loss)$62 $64 

European Coated Paperboard's sales volumes in 2020 compared with 2019 were stable as higher volumes in Russia were offset by lower volumes in Europe. Average sales margins were slightly higher as higher sales prices in Russia and a favorable mix in Europe were mostly offset by an unfavorable mix in Russia. Operating costs were higher. Planned maintenance outage costs were $3 million higher in 2020 compared with 2019. Input costs were lower, driven by purchased pulp, wood and energy costs in Europe. In Russia, input costs were slightly higher, primarily for wood. Earnings benefited from favorable foreign currency impacts in Russia, partially offset by unfavorable impacts in Europe.
Looking forward to the first quarter of 2021, compared with the fourth quarter of 2020, sales volumes are expected to be stable in both regions. Average sales margins are expected to be slightly higher, driven by a favorable mix in Russia. Operating costs are expected to be lower. Planned maintenance outage costs are expected to be flat due to no outages in the fourth quarter and no planned outages in the first
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quarter. Input costs are expected to be higher driven by purchased pulp, wood and energy in Europe.

GLOBAL CELLULOSE FIBERS

Demand for Cellulose Fibers products is closely correlated with changes in demand for absorbent hygiene products, primarily driven by the demographics and income growth in various geographic regions. It is further affected by changes in currency rates that can benefit or hurt producers in different geographic regions. Principal cost drivers include manufacturing efficiency, raw material and energy costs, mill outage costs, and freight costs.

Global Cellulose Fibers  
In millions20202019
Net Sales$2,319 $2,551 
Operating Profit (Loss)$(237)$(6)

Global Cellulose Fibers net sales for 2020 decreased 9% to $2.3 billion, compared with $2.6 billion in 2019. Operating profits in 2020 were significantly lower than in 2019. Comparing 2020 with 2019, benefits from higher sales volumes ($1 million), lower operating costs ($15 million), lower input costs ($33 million) and lower maintenance outage costs ($2 million) were more than offset by lower average sales price, net of mix ($282 million).
Sales volumes in 2020 compared with 2019 were slightly higher as higher volumes in North America were mostly offset by lower volumes in Europe and Russia. Total maintenance and economic downtime was about 104,000 tons lower in 2020 compared with 2019, primarily due to economic downtime. Average sales margins were significantly lower, reflecting lower average fluff and market pulp prices driven by the flow through of 2019 price decreases. Operating costs increased primarily due to inflation. Planned maintenance outage costs were $2 million lower in 2020. Input costs were lower, driven by wood, chemicals and energy.
Entering the first quarter of 2021, compared with the fourth quarter of 2020, sales volumes are expected to be stable. Average sales margins are expected to be higher. Operating costs are expected to be lower, reflecting the non-repeat of unfavorable items in the fourth quarter of 2020. Planned maintenance outage costs are expected to be $6 million lower than in the fourth quarter of 2020. Input costs are expected to be seasonally higher, primarily for wood, chemicals and energy.



PRINTING PAPERS

Demand for Printing Papers products is closely correlated with changes in commercial printing and
advertising activity, direct mail volumes and, for uncoated cut-size products, with changes in white-collar employment levels and work location that affect the usage of copy and laser printer paper. Principal cost drivers include manufacturing efficiency, raw material and energy costs, mill outage costs and freight costs.

Printing Papers  
In millions20202019
Net Sales$3,036 $4,291 
Operating Profit (Loss)$228 $529 

Printing Papers net sales for 2020 of $3.0 billion decreased 29%, compared with $4.3 billion in 2019. Operating profits in 2020 were 57% lower than in 2019. Comparing 2020 with 2019, benefits from lower input costs ($63 million) and lower planned maintenance outage costs ($6 million), were more than offset by lower average sales price realizations and an unfavorable of mix ($194 million), lower sales volumes ($162 million) and higher operating costs ($14 million).

North American Printing Papers  
In millions20202019
Net Sales$1,436 $1,956 
Operating Profit (Loss)$53 $211 
North American Printing Papers' sales volumes for 2020 were significantly lower across all grades for uncoated freesheet paper than in 2019 driven by the unprecedented demand decline due to the COVID-19 pandemic. The Riverdale conversion also negatively impacted volumes. Total maintenance and economic downtime was about 281,000 tons higher in 2020 compared with 2019, primarily due to demand conditions. Average sales margins were lower, reflecting lower sales prices for cutsize paper and rolls, net of a favorable geographic mix. Operating costs were lower, reflecting cost reduction initiatives and strong cost management. Planned maintenance outage costs were flat in 2020 compared with 2019. Input costs were lower, primarily for wood and chemicals.

Entering the first quarter of 2021, compared with the fourth quarter of 2020, sales volumes are expected to be stable. Average sales margins are also expected to be stable. Operating costs are expected to be higher due to seasonality and inflation. Planned maintenance outage costs are expected to be about $4 million higher in the first quarter of 2021. Input
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costs are expected to be higher, primarily for wood and chemicals.

Brazilian Papers