INTERNATIONAL PAPER CO /NEW/ (IP) FY 2023 MD&A

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,

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particularly in “Risk Factors” and “Forward-Looking Statements.”

The following generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussion of historical items in 2021, and year-to-year comparisons between 2022 and 2021, can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 17, 2023, under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

EXECUTIVE SUMMARY

Full-year 2023 net earnings attributable to shareholders were $288 million ($0.82 per diluted share) compared with $1.5 billion ($4.10 per diluted share) for full-year 2022.

During 2023, International Paper executed well, both commercially and operationally, as we navigated an uncertain and challenging demand environment. During much of the year, underlying demand for our products was lower as consumers prioritized spending on services and essential goods. This trend was influenced by the pull forward of goods during the pandemic, as well as by inflationary pressures and rising interest rates that impacted the consumer. Demand for our products was further constrained by inventory destocking as our customers, and the broader supply chain, worked through elevated inventories of their products. The lower demand combined with declining sales prices and continued cost inflation resulted in lower sales and earnings in 2023 as compared to 2022. During 2023, we remained focused on mitigating the impact of these challenges through commercial and cost reduction initiatives. We advanced our strategies to improve profitability across our portfolio by investing in capabilities in our Industrial Packaging business to enhance our value proposition to align with customer needs and optimizing our Global Cellulose Fibers business by reducing our exposure to commodity pulp. We took strategic actions to structurally reduce fixed costs in our mill system in both our Industrial Packaging and Global Cellulose Fibers businesses. We also made significant progress in Building a Better IP, driven by commercial and process improvement initiatives, resulting in benefits exceeding our 2023 target. Regarding capital allocation in 2023, we returned approximately $840 million to shareowners including approximately $640 million of dividends and $200 million of share repurchases. Finally, during 2023, we completed the sale of our ownership stake in Ilim for $508 million. International Paper no longer has investments in Russia following completion of this sale.

Comparing 2023 performance to 2022, price and mix was lower in our North American Industrial Packaging business due to prior index movements, lower export prices and higher export mix, as demand improved. Price in our Global Cellulose Fibers business was lower due to prior index movements and an unfavorable mix driven by lower absorbent pulp shipments. Volume in both business segments was impacted by ongoing inventory destocking across the supply chain. While there was demand recovery in the second half of the year in both business segments, volume was lower in our North American Industrial Packaging business as consumers shifted priorities toward non-discretionary goods and services while dealing with inflation. Volume in our Global Cellulose Fibers business was also impacted by lower demand as a result of the slowdown in the global economy. Operations and costs in both the North American Industrial Packaging and Global Cellulose Fibers businesses were higher reflecting the impact of inflation on materials and services along with the impact of higher unabsorbed costs resulting from increased economic downtime in the current year. Planned maintenance outage costs were lower in our North American Industrial Packaging business while higher in our Global Cellulose Fibers business. Input costs were lower in both business segments, primarily driven by lower energy, wood and distribution costs along with lower recovered fiber costs in our North American Industrial Packaging business.

Looking ahead to the first quarter 2024, as compared to the fourth quarter 2023, we expect this quarter to be an earnings trough on seasonally lower volumes, higher costs and from the impact of the January winter freeze. We also expect the majority of prior index movements to flow through in the first quarter 2024. Specifically in our Industrial Packaging business, we expect price to be relatively flat as prior price index movements are offset by the commercial benefits from contract restructuring in the box business. Volume is expected to be lower in the first quarter 2024 due to normal seasonal declines in North America, partially offset by two more shipping days. Operations and costs are expected to decrease earnings due to seasonally higher energy consumption and cost inflation on wages and employee benefits. These increases are expected to be partially offset by lower fixed costs resulting from the closure of our Orange, Texas mill. Maintenance outage expense is expected to be higher coming off of a seasonally lower fourth quarter 2023. Input costs are expected to decrease earnings on higher recovered fiber and energy costs. In our Global Cellulose Fibers business, we expect price and mix to modestly improve as a result of our strategy to reduce

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exposure to commodity pulp. We expect volume to be relatively flat as seasonally lower shipments due to the Chinese New Year are offset by improved demand in other areas. Operations and costs are expected to decrease earnings due to seasonality and cost inflation, partially offset by the non-repeat of a turbine maintenance outage and lower fixed costs resulting from the idling of our pulp machine in our Riegelwood, North Carolina mill. Maintenance outage expense is expected to increase earnings while higher input costs associated with energy and chemicals are expected to decrease earnings.

Looking at full-year 2024, we see a transitional year where markets continue to recover as we focus on improving mix and margins in both business segments through execution of our commercial strategies. We expect demand trends to continue to improve across our portfolio with year-over-year industry growth of approximately three percent for packaging and fluff pulp. Additionally, we expect more than $400 million of net benefits from our commercial and operational initiatives. This includes the fixed cost reductions tied to the closure of our Orange, Texas containerboard mill and the permanent shutdown of two pulp machines in our Global Cellulose Fibers business, with the benefits of both strategic actions expected to be at a full run rate by the fourth quarter 2024. These cost saving initiatives will be important in offsetting expected higher costs for recovered fiber, transportation and general inflation on wages, employee benefits, materials and services. With respect to our capital allocation framework, we are targeting capital expenditures of $800 million - $1.0 billion in 2024 for general maintenance, cost improvement and to enhance capabilities in our box business. As previously mentioned, we returned approximately $840 million of cash to shareowners in 2023 including approximately $640 million of dividends. Given our strategic customer relationships, talented teams, world class assets and market expertise, we are committed to maximizing long-term value for all our stakeholders.

As previously disclosed, the Company permanently closed its containerboard mill in Orange, Texas in December 2023 and permanently ceased production of two of its pulp machines at its Riegelwood, North Carolina and Pensacola, Florida mills on December 11, 2023. The mill closure resulted in pre-tax non-cash asset write-off and accelerated depreciation charges of approximately $347 million and pre-tax cash severance and other shutdown charges of approximately $81 million during the year ended

December 31, 2023. The machine shutdowns resulted in pre-tax non-cash asset write-off and accelerated depreciation charges of approximately $75 million and pre-tax cash severance and other shutdown charges of approximately $37 million during the year ended December 31, 2023.

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 discontinued operations, 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 discontinued operations, non-operating pension expense (income) and items considered by management to be unusual (net special items) from net earnings (loss) attributable to shareholders 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 from continuing operations. The Company believes that using this information, along with the most directly 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 on a total and per share basis. Additional detail is provided later in this Annual Report on Form 10-K regarding the net special items referenced in the charts below:

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Cash provided by operations, including discontinued operations, totaled approximately $1.8 billion and $2.2 billion for 2023 and 2022, respectively. The Company generated free cash flow of approximately $692 million in 2023 and $1.2 billion in 2022. 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:

The non-GAAP financial measures presented in this Annual Report on 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 Annual Report on Form 10-K may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as the Company.

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RESULTS OF OPERATIONS

Business Segment Operating Profits (Losses) are used by International Paper’s management to measure the earnings performance of its businesses. Management uses this measure to focus on ongoing 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 (Losses) are defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of less than wholly owned subsidiaries, and excluding interest expense, net, corporate expenses, net, corporate net special items, business net special items and non-operating pension expense. Business Segment Operating Profits (Losses) 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 - "Segment Reporting".

International Paper operates in two segments: Industrial Packaging and Global Cellulose Fibers. On September 18, 2023, the Company completed the sale of its Ilim equity investment and, as a result, all current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes and our equity investment in Ilim is no longer a separate reportable industry segment. For additional information, see discussion in Note 11 – Equity method Investments on pages 69 and 70 of Item 8. Financial Statements and Supplementary Data.

The following table presents a comparison of Net earnings (loss) from continuing operations attributable to International Paper Company to its total Business Segment Operating Profit (Loss):

Business Segment Operating Profit (Loss) in 2023 was $599 million lower than in 2022 as the benefits from lower input costs ($982 million) and lower maintenance outage costs ($8 million) were more than offset by lower average sales price realizations and an unfavorable mix ($435 million), lower sales volumes ($228 million) and higher operating costs ($926 million).

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The principal changes in operating profit by business segment were as follows:

•Industrial Packaging’s operating profit of $1.3 billion was $476 million lower than in 2022 as the benefits of lower input costs and maintenance outage costs were more than offset by lower average sales price and an unfavorable mix, lower sales volumes and higher operating costs.

•Global Cellulose Fibers' operating profit (loss) of $(17) million was $123 million lower than in 2022 as the benefits of lower input costs were more than offset by lower average sales price and an unfavorable mix, lower sales volumes, higher operating costs and maintenance outage costs.

LIQUIDITY AND CAPITAL RESOURCES

Including discontinued operations, International Paper generated $1.8 billion of cash flow from operations for the year ended December 31, 2023, compared with $2.2 billion in 2022. Capital spending for 2023 totaled $1.1 billion, or 80% of depreciation and amortization expense. Our liquidity position remains strong,

supported by approximately $1.9 billion of credit facilities.

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, 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 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,

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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, 2023, and the major factors affecting these results compared to 2022.

For the year ended December 31, 2023, International Paper reported net sales of $18.9 billion, compared with $21.2 billion in 2022. International net sales (based on the location of the seller and including U.S. exports) totaled $5.3 billion or 28% of total sales in 2023. This compares with international net sales of $5.9 billion in 2022.

Full year 2023 net earnings attributable to International Paper Company totaled $288 million ($0.82 per diluted share), compared with net earnings of $1.5 billion ($4.10 per diluted share) in 2022. Amounts in 2023 and 2022 include the results of discontinued operations.

Earnings from continuing operations attributable to International Paper Company after taxes in 2023 and 2022 were as follows:

(a)Includes $412 million of net special items charges and $41 million of non-operating pension expense.

(b)Includes $429 million of net special items income and $144 million of non-operating pension income.

Compared with 2022, the benefits from lower input costs ($743 million), lower maintenance outage costs ($6 million), lower corporate and other costs ($3 million), lower net interest expense ($25 million) and lower tax expense ($8 million) were more than offset by lower average sales price and an unfavorable mix ($329 million), lower sales volumes ($172 million) and higher operating costs ($700 million). In addition, excluding special items, 2023 results included higher equity earnings, net of taxes. Our Building a Better IP initiatives delivered $260 million of earnings in 2023 primarily though our strategy acceleration initiative to deliver profitable growth through commercial and investment excellence.

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See Business Segment Results on pages 36 and 37 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.

DISCONTINUED OPERATIONS

On September 18, 2023, the Company completed the sale of its Ilim equity investment and, as a result, all current and historical results of the Ilim investment are presented as Discontinued Operations, net of taxes and our equity investment is no longer a separate reportable industry segment. This transaction is discussed further in Note 11 - Equity Method Investments on pages 69 and 70 of Item 8. Financial Statements and Supplementary Data for further discussion.

Discontinued operations include the equity earnings of the prior Ilim joint venture. Discontinued operations also includes after-tax losses of $126 million and $533 million in 2023 and 2022, respectively for impairment and transaction costs related to our former equity method investment in the Ilim joint venture.

INCOME TAXES

A net income tax provision from continuing operations of $59 million was recorded for 2023 and the reported effective income tax rate was 15%. This includes a tax benefit of $23 million related to the settlement of tax audits and tax expense of $4 million related to internal legal entity restructuring. Excluding these items, a $141 million net tax benefit for other special items and a $13 million tax benefit related to non-operating pension expense, the operational tax provision (non-GAAP) for 2023 was $232 million, or 23% of pre-tax earnings before equity earnings.

A net income tax benefit from continuing operations of $236 million was recorded for 2022 and the reported effective income tax rate was (16%). This includes a tax benefit of $604 million related to the settlement of the timber monetization restructuring tax matter, a tax benefit of $66 million related to the tax-free exchange of our shares of Sylvamo and tax expense of $45 million related to a foreign deferred tax valuation allowance. Excluding these items, a $37 million net tax benefit for other special items and $48 million tax expense related to non-operating pension income, the operational tax provision (non-GAAP) for 2022 was $378 million, or 24% of pre-tax earnings before equity earnings.

The operational tax provision and operational effective tax rate are non-GAAP financial measures and are calculated by adjusting the income tax provision from continuing operations and rate to exclude the tax effect of net special items and non-operating pension expense (income). Management believes that this presentation provides useful information to investors by providing a meaningful comparison of the income tax rate between past and present periods.

The following is a reconciliation of the net income tax provision (benefit) to the operational tax provision and rate:

INTEREST EXPENSE AND EQUITY EARNINGS, NET OF TAXES

Net corporate interest expense totaled $231 million in 2023 and $325 million in 2022. Net interest expense includes $3 million and $58 million of interest expense related to the timber monetization restructuring tax matter in 2023 and 2022, respectively. Net interest expense in 2023 also includes $6 million of interest income associated with the settlement of tax audits. The decrease in net interest expense in 2023 compared with 2022 was due to higher interest income.

Equity earnings, net of taxes were a loss of $21 million and a loss of $6 million in 2023 and 2022, respectively. Equity earnings in 2023 includes an $18 million other-than-temporary impairment of an equity method investment.

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SPECIAL ITEMS

Pre-tax special items (excluding interest expense and equity earnings) included in continuing operations totaling $557 million and $175 million were recorded in 2023 and 2022, respectively. Details of these charges were as follows:

(a) Recorded in the Industrial Packaging business segment.

(b) Recorded in the Global Cellulose Fibers business segment.

(c) Recorded in the Industrial Packaging business segment for the impairment of goodwill in our EMEA Packaging business.

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, unprofitable 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 2023 and 2022, pre-tax restructuring and other charges, net, totaling $99 million and $89 million, respectively, were recorded. Details of these charges were as follows:

(a) Recorded in the Industrial Packaging business segment.

(b) Recorded in the Global Cellulose Fibers segment.

(c) Includes $8 million income recorded in the Industrial Packaging business segment and $3 million income 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

The majority of our business is focused on creating fiber-based packaging that protects and promotes goods, enables worldwide commerce and helps keep consumers safe. We meet our customers’ most challenging sales, shipping, storage and display requirements with sustainable solutions. Our U.S. production capacity is over 13 million tons annually.

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Our products include linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft. About 80% of our production is converted into corrugated packaging and other packaging by our 173 North American corrugated packaging plants. Additionally, we recycle approximately one million tons of OCC and mixed and white paper through our 16 U.S. recycling plants. Our corrugated packaging plants are supported by regional design centers, which offer total packaging solutions and supply chain initiatives. In EMEA, our operations include a recycled fiber containerboard mill in Morocco and one in Spain and 23 corrugated packaging plants in France, Italy, Spain, Morocco and Portugal.

GLOBAL CELLULOSE FIBERS

Cellulose fibers are a sustainable, renewable raw material used in a variety of products people depend on every day. We create safe, quality pulp for a wide range of applications like diapers, towel and tissue products, feminine care, incontinence and other personal care products that promote health and wellness. In addition, our innovative specialty pulps serve as a sustainable raw material used in textiles, construction materials, paints, coatings and more. Our products are made in the United States and Canada and sold around the world. International Paper facilities have annual dried pulp capacity of about 3 million metric tons.

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 net sales for 2023 decreased 11% to $15.6 billion compared with $17.5 billion in 2022. Operating profits in 2023 were 27% lower than in 2022. Comparing 2023 with 2022, benefits from lower input costs ($856 million) and maintenance

outage costs ($21 million) were more than offset by lower average sales price and an unfavorable mix ($363 million), lower sales volumes ($177 million) and higher operating costs ($813 million).

(a) Includes intra-segment sales of $95 million for 2023 and $132 million for 2022.

North American Industrial Packaging's average sales margins were lower, reflecting lower prices for both containerboard and corrugated boxes and an unfavorable geographic mix. Sales volumes decreased in 2023 compared with 2022 for corrugated boxes across our segments, reflecting a soft demand environment as consumer spending focused on non-discretionary goods and services and retailers and manufacturers pulled down inventory levels. Containerboard sales volumes also decreased. Total maintenance and economic downtime was about 725,000 short tons higher in 2023 compared with 2022, primarily due to economic downtime. Operating and distribution costs increased, primarily due to inflation on materials and services and increased economic downtime. Planned maintenance downtime costs were lower in 2023 than in 2022. Input costs were significantly lower, driven by lower recovered fiber, energy and wood costs.

Looking ahead to the first quarter of 2024, compared with the fourth quarter of 2023, sales volumes for corrugated boxes and containerboard are expected to be seasonally lower. Average sales margins are expected to be stable. Operating costs are expected to increase. Planned maintenance downtime costs are expected to be higher. Input costs are expected to be higher, primarily for recovered fiber.

EMEA Industrial Packaging's average sales margins were lower reflecting lower average sales prices for containerboard and an unfavorable product mix partially offset by higher average sales prices for corrugated boxes. Sales volumes in 2023 were lower than in 2022 driven by soft demand. Operating costs in 2023 were higher driven by inflation on materials and services. Planned maintenance outage costs were lower in 2023 compared with 2022. Input costs were significantly lower in 2023, driven by energy and recovered fiber costs.

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Entering the first quarter of 2024, compared with the fourth quarter of 2023, sales volumes are expected to be higher driven by seasonality. Average sales margins are expected to be higher, reflecting lower containerboard costs. Operating costs are expected to be lower. Planned maintenance outage costs are expected to be lower. Other input costs are expected to be stable. Earnings will be impacted by the non-repeat of an energy subsidy and other favorable one-time items in the fourth quarter 2023.

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 net sales for 2023 decreased 10% to $2.9 billion, compared with $3.2 billion in 2022. Operating profits in 2023 decreased compared to 2022. Comparing 2023 with 2022, benefits from lower input costs ($126 million) were more than offset by lower average sales price and an unfavorable mix ($72 million), lower sales volumes ($51 million), higher operating costs ($113 million) and higher maintenance outage costs ($13 million).

Sales volumes in 2023 compared with 2022 were lower, driven by customer inventory destocking. Total maintenance and economic downtime was about 507,000 short tons higher in 2023 compared with 2022, primarily due to economic downtime. Average sales margins were lower, reflecting lower average market pulp prices and an unfavorable product mix partially offset by higher average fluff pulp prices. Operating costs increased, driven by inflation on materials and services and downtime. Distribution costs were lower as the global supply chain environment improved. Planned maintenance outage costs were higher in 2023. Input costs were lower, driven by energy, freight, wood and chemicals.

Entering the first quarter of 2024, compared with the fourth quarter of 2023, sales volumes are expected to be stable. Average sales margins are expected to be stable. Operating costs are expected to be higher. Planned maintenance outage costs are expected to be lower than in the fourth quarter of 2023. Input costs are expected to be higher, primarily for energy and chemicals.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

A major factor in International Paper’s liquidity and capital resource planning is generation of operating cash flow, which is highly sensitive to changes in the pricing and demand for our major products. While changes in key operating cash costs, such as raw material, energy, mill outage and distribution, have an effect on operating cash generation, we believe our focus on commercial and operational excellence, as well as our ability to tightly manage costs and working capital has improved our cash flow generation over an operating cycle.

Use of cash during 2023 was primarily focused on working capital requirements, capital spending and returning cash to shareholders through dividends and share repurchases under the Company's share repurchase program.

CASH PROVIDED BY OPERATING ACTIVITIES

Cash provided by operations, including discontinued operations, totaled $1.8 billion in 2023, compared with $2.2 billion for 2022. Cash used by working capital components (accounts receivable, contract assets and inventory less accounts payable and accrued liabilities, interest payable and other) totaled $2 million in 2023, compared with cash used by working capital components of $145 million in 2022. Cash dividends received from equity investments were $13 million in 2023, compared with $204 million in 2022.

INVESTMENT ACTIVITIES

Investment activities in 2023 increased from 2022. Capital spending was $1.1 billion in 2023, or 80% of depreciation and amortization, compared with $931 million in 2022, or 90% of depreciation and amortization. Included in 2023 depreciation expense is $347 million of accelerated depreciation related to

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the closure of our containerboard mill in Orange, Texas and $75 million of accelerated depreciation related to the permanent shutdown of pulp machines at our Riegelwood, North Carolina and Pensacola, Florida mills. Capital spending as a percentage of depreciation and amortization was 62% for Global Cellulose Fibers and 81% for Industrial Packaging in 2023.

The following table shows capital spending by business segment for the years ended December 31, 2023 and 2022:

Capital spending in 2024 is expected to be approximately $800 million to $1.0 billion, or 78% to 97% of expected depreciation and amortization.

Acquisitions

See Note 7 Acquisitions on page 65 of Item 8. Financial Statements and Supplementary Data for a discussion of the Company's acquisitions.

FINANCING ACTIVITIES

Financing activities during 2023 included debt issuances of $783 million and reductions of $780 million for a net increase of $3 million. Financing activities during 2022 included debt issuances of $1.0 billion and reductions of $1.0 billion.

There were no early debt extinguishment amounts during the year ended December 31, 2023. Amounts related to early debt extinguishment during the year ended December 31, 2022 are below:

(a)Reductions related to notes with interest rates ranging from 3.00% to 8.70% with original maturities from 2021 to 2048 for the year ended December 31, 2022.

(b)Amounts are included in Restructuring and other charges in the accompanying consolidated statements of operations.

Other financing activities during 2023 included the net issuance of approximately 1.6 million shares of treasury stock. Repurchases of common stock and payments of restricted stock withholding taxes totaled $218 million, including $197 million related to shares repurchased under the Company's share repurchase program. Through December 31, 2023, the Company

has repurchased 119.8 million shares at an average price of $46.23, for a total of approximately $5.5 billion, since the repurchase program began in September 2013. The Company paid cash dividends totaling $642 million during 2023.

Other financing activities during 2022 included the net issuance of approximately 1.6 million shares of treasury stock. In 2022, repurchases of common stock and payments of restricted stock withholding taxes totaled $1.3 billion, including $1.3 billion related to shares repurchased under the Company's share repurchase program. The Company paid cash dividends totaling $673 million during 2022.

Interest Rate Swaps

Our policy is to manage interest cost using a mixture of fixed-rate and variable-rate debt. To manage this risk, International Paper utilizes interest rate swaps to change the mix of fixed and variable rate debt. During 2020, International Paper terminated its interest rate swaps with a notional amount of $700 million and maturities ranging from 2024 to 2026 with an approximate fair value of $85 million. Subsequent to the termination of the interest rate swaps, the fair value basis adjustment is amortized to earnings as interest income over the same period as a debt premium on the previously hedged debt. The Company had no outstanding interest rate swaps for the years ended December 31, 2023 and 2022.

Variable Interest Entities

Information concerning variable interest entities is set forth in Note 15 Variable Interest Entities on pages 78 through 80 of Item 8. Financial Statements and Supplementary Data. In connection with the 2006 International Paper installment sale of forestlands, we received $4.8 billion of installment notes. These installment notes were used by variable interest entities as collateral for borrowings from third-party lenders. These variable interest entities were restructured in 2015 (the "2015 Financing Entities") when the installment notes and third-party loans were extended. The 2015 Financing Entities held installment notes of $4.8 billion and third-party loans of $4.2 billion which both matured in August 2021. We settled the third-party loans at their maturity with the proceeds from the installment notes. This resulted in cash proceeds of approximately $630 million representing our equity in the 2015 Financing Entities. Maturity of the installment notes and termination of the monetization structure also resulted in a $72 million tax liability that was paid in the fourth quarter of 2021. On September 2, 2022, the Company and the Internal Revenue Service agreed to settle the 2015 Financing Entities timber monetization restructuring tax matter. Under this

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agreement, the Company agreed to fully resolve the matter and pay $252 million in U.S. federal income taxes. As a result, interest was charged upon closing of the audit. The amount of interest expense recognized in 2022 was $58 million. As of December 31, 2023, $252 million in U.S. federal income taxes and $58 million in interest expense have been paid as a result of the settlement agreement. The Company has now fully satisfied the payment terms of the settlement agreement regarding the 2015 Financing Entities timber monetization restructuring tax matter. The reversal of the Company’s remaining deferred tax liability associated with the 2015 Financing Entities of $604 million was recognized as a one-time tax benefit in the third quarter of 2022.

LIQUIDITY AND CAPITAL RESOURCES OUTLOOK FOR 2024

We intend to continue making choices for the use of cash that are consistent with our capital allocation framework to drive long-term value creation. These include maintaining a strong balance sheet and investment grade credit rating, returning meaningful cash to shareholders through dividends and share repurchases and making organic investments to maintain our world-class system and strengthen our businesses.

On October 11, 2022, our Board of Directors approved an additional $1.5 billion under our share repurchase program. This program does not have an expiration date and has approximately $2.96 billion aggregate amount of shares of common stock remaining authorized for purchase as of December 31, 2023. We may continue to repurchase shares under such authorization in open market transactions (including block trades), privately negotiated transactions or otherwise, subject to prevailing market conditions, our liquidity requirements, applicable securities laws requirements and other factors. In addition, we have paid regular quarterly cash dividends and expect to continue to pay regular quarterly cash dividends in the foreseeable future. Each quarterly dividend is subject to review and approval by our Board of Directors.

Capital Expenditures and Long-Term Debt

Capital spending for 2024 is planned at approximately $800 million to $1.0 billion, or about 78% to 97% of depreciation and amortization.

At December 31, 2023, International Paper’s credit agreements totaled $1.9 billion, which is comprised of the $1.4 billion contractually committed bank credit agreement and up to $500 million under the receivables securitization program. In June 2023, the Company amended and restated its credit agreement

to, among other things (i) reduce the size of the contractually committed bank facility from $1.5 billion to $1.4 billion, (ii) extend the maturity date from June 2026 to June 2028, and (iii) replace the LIBOR-based rate with a SOFR-based rate. Management believes these credit agreements are adequate to cover expected operating cash flow variability during the current economic cycle. The credit agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. At December 31, 2023, the Company had no borrowings outstanding under the $1.4 billion credit agreement or the $500 million receivables securitization program. The Company’s credit agreements are not subject to any restrictive covenants other than the financial covenants as disclosed on pages 80 and 81 in Note 16 - Debt and Lines of Credit of Item 8. Financial Statements and Supplementary Data, and the borrowings under the receivables securitization program being limited by eligible receivables. The Company was in compliance with all its debt covenants at December 31, 2023 and was well below the thresholds stipulated under the covenants as defined in the credit agreements. Further the financial covenants do not restrict any borrowings under the credit agreements.

In addition to the $1.9 billion capacity under the Company's credit agreements, International Paper has a commercial paper program with a borrowing capacity of $1.0 billion supported by its $1.4 billion credit agreement. Under the terms of the Company's commercial paper program, individual maturities on borrowings may vary, but not exceed one year from the date of issue. Interest bearing notes may be issued either as fixed or floating rate notes. The Company had no borrowings outstanding as of December 31, 2023, and $410 million outstanding as of December 31, 2022, under this program.

During the first quarter of 2023, the Company entered into a variable term loan agreement providing for a $600 million term loan which was fully drawn on the date of such loan agreement and matures in 2028. The $600 million debt was issued following the repayment of $410 million of commercial paper earlier in 2023. Additionally, during the first quarter of 2023, the Company issued an approximately $72 million environmental development bond ("EDB") with an interest rate of 4.00% and a maturity date of April 1, 2026. The proceeds from this issuance were used to repay an approximately $72 million outstanding EDB that matured on April 1, 2023.

During the second quarter of 2023, the Company issued approximately $24 million of debt with a variable interest rate and a maturity date of December 1, 2027. The Company had debt

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reductions of approximately $49 million of variable interest EDBs with current maturities. Additionally, during the second quarter of 2023, the Company issued an approximately $54 million EDB with a variable rate and a maturity date of May 1, 2028. The proceeds of this were used to repay an approximately $54 million EDB that matured on May 1, 2023. The Company issued an approximately $25 million EDB with a variable rate and a maturity date of June 1, 2030. The proceeds of this were used to repay an approximately $25 million EDB that matured on June 1, 2023.

During the third quarter of 2023, the Company repaid an approximately $70 million EDB with an interest rate of 2.90% that matured on September 1, 2023.

During the fourth quarter of 2023, the Company repaid an approximately $87 million note with an interest rate of 6.875% that matured on November 1, 2023. Additionally, the Company issued approximately $11 million of debt with a variable interest rate and a maturity date of December 1, 2027.

For additional information regarding the Company’s credit agreements and outstanding indebtedness, see Note 16 Debt and Lines of Credit on pages 80 and 81 of Item 8. Financial Statements and Supplementary Data.

International Paper expects to be able to meet projected capital expenditures, service existing debt, meet working capital and dividend requirements and make common stock and/or debt repurchases for the next 12 months and for the foreseeable future thereafter with current cash balances and cash from operations, supplemented as required by its existing credit facilities. The Company will continue to rely on debt and capital markets for the majority of any necessary long-term funding not provided by operating cash flows. Funding decisions will be guided by our capital structure planning objectives. The primary goals of the Company’s capital structure planning are to maximize financial flexibility and maintain appropriate levels of liquidity to meet our needs while managing balance sheet debt and interest expense. We have repurchased, and may continue to repurchase, our common stock (under our existing share repurchase program) and debt (including through open market purchases, privately negotiated transactions or otherwise) to the extent consistent with this capital structure planning, and subject to prevailing market conditions, our liquidity requirements, applicable securities laws requirements and other factors. The majority of International Paper’s debt is accessed through global public capital markets where we have a wide base of investors.

Maintaining an investment grade credit rating is an important element of International Paper’s financing strategy. At December 31, 2023, the Company held long-term credit ratings of BBB (stable outlook) and Baa2 (stable outlook) by S&P and Moody’s, respectively.

Contractual obligations for future payments under existing debt and lease commitments and purchase obligations at December 31, 2023, were as follows:

(a)Includes financing lease obligations.

(b)Includes $3.8 billion relating to fiber supply agreements.

(c)Not included in the above table due to the uncertainty of the amount and timing of the payment are unrecognized tax benefits of approximately $168 million. Also not included in the above table is $84 million of Deemed Repatriation Transition Tax associated with the 2017 Tax Cuts and Jobs Act which will be settled from 2024 - 2026. Additionally, the deferred tax liability of $485 million related to the Temple-Inland timber monetization is not included in the table above. It will be settled with the maturity of the notes in 2027.

We consider the undistributed earnings of our foreign subsidiaries as of December 31, 2023, to be permanently reinvested and, accordingly, no U.S. income taxes have been provided thereon (see Note 13 Income Taxes on pages 72 through 74 of Item 8. Financial Statements and Supplementary Data). We do not anticipate the need to repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Pension Obligations and Funding

At December 31, 2023, the projected benefit obligation for the Company’s U.S. defined benefit plans determined under U.S. GAAP was approximately $146 million higher than the fair value of plan assets, excluding non-U.S. plans. Plans that are subject to minimum funding requirements had plan assets of $118 million higher than the projected benefit obligation. Under current IRS funding rules, the calculation of minimum funding requirements differs from the calculation of the present value of plan benefits (the "projected benefit obligation") for accounting purposes. Funding contributions depend on the funding methods selected by the Company. The selected methods allow for the smoothing of asset values and interest rates used to measure the funding obligations. The Company continually reassesses the amount and timing of any

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discretionary contributions and elected not to make any voluntary contributions in 2021, 2022 or 2023. At this time, we do not expect to have any required contributions to our plans in 2024, although the Company may elect to make future voluntary contributions. The timing and amount of future contributions, which could be material, will depend on a number of factors, including the actual earnings and changes in values of plan assets and changes in interest rates.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires International Paper to establish accounting policies and to make estimates that affect both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require subjective judgments about matters that are inherently uncertain.

Accounting policies whose application has had or is reasonably likely to have a material impact on the reported results of operations and financial position of International Paper, and that can require a significant level of estimation or uncertainty by management that affect their application, include the accounting for contingencies, impairment or disposal of long-lived assets and goodwill, pensions and income taxes. Management has discussed the selection of critical accounting policies and the effect of significant estimates with the Audit and Finance Committee of the Company’s Board of Directors and with its independent registered public accounting firm.

CONTINGENT LIABILITIES

Accruals for contingent liabilities, including personal injury, product liability, environmental, asbestos and other legal matters, are recorded when it is probable that a liability has been incurred or an asset impaired and the amount of the loss can be reasonably estimated. Liabilities accrued for legal matters require judgments regarding projected outcomes and range of loss based on historical litigation and settlement experience and recommendations of legal counsel and, if applicable, other experts. Liabilities for environmental matters require evaluations of relevant environmental regulations and estimates of future remediation alternatives and costs. The Company estimated the probable liability associated with environmental matters to be approximately $251 million and $243 million in the aggregate as of December 31, 2023 and 2022, respectively. Liabilities for asbestos-related matters require reviews of recent and historical claims data. The Company's total recorded liability with respect to pending and future

asbestos-related claims was $97 million and $105 million, net of estimated insurance recoveries, as of December 31, 2023 and 2022, respectively. The Company utilizes its in-house legal counsel and environmental experts to develop estimates of its legal, environmental and asbestos obligations, supplemented as needed by third-party specialists to analyze its most complex contingent liabilities.

IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable. A recoverability test is performed by comparing the undiscounted cash flows to carrying value of the assets. If the carrying amount is less than the undiscounted cash flows, the fair value of the assets is compared to the carrying value to determine if they are impaired. An impairment of a long-lived asset exists when the asset’s carrying amount exceeds its fair value.

We perform an annual goodwill impairment as of October 1. Additionally, interim assessments of possible impairments of goodwill are also made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. A goodwill impairment exists when the carrying amount of goodwill exceeds its fair value.

The amount and timing of goodwill and long-lived asset impairment charges based on these assessments requires the estimation of future cash flows or the fair market value of the related assets based on management’s best estimates of certain key factors, including future selling prices and volumes, operating, raw material, energy and freight costs, various other projected operating economic factors and other intended uses of the assets.

ASU 2011-08, "Intangibles - Goodwill and Other," allows entities testing goodwill for impairment the option of performing a qualitative assessment before performing the quantitative goodwill impairment test. If a qualitative assessment is performed, an entity is not required to perform the quantitative goodwill impairment test unless the entity determines that, based on that qualitative assessment, it is more likely than not that its fair value is less than its carrying value.

The North America Industrial Packaging reporting unit is the Company’s only reporting unit with goodwill. As of October 1, 2023, we performed our annual goodwill impairment test for this reporting unit through a quantitative goodwill impairment test. For the 2023 quantitative assessment, the estimated fair value of

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the reporting unit was calculated using a weighted approach based on discounted future cash flows, market multiples and transaction multiples. The determination of fair value using the discounted cash flow approach requires management to make significant estimates and assumptions related to forecasts of future revenues, operating profit margins, and discount rates. The determination of fair value using market multiples and transaction multiples requires management to make significant assumptions related to revenue multiples and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA") multiples. The results of our quantitative goodwill impairment test indicated that the carrying amount did not exceed the estimated fair value of the North America Industrial Packaging reporting unit.

PENSION BENEFIT OBLIGATIONS

The calculation of the pension benefit obligation and corresponding expense amounts are determined annually, with involvement of International Paper’s consulting actuary, and are dependent upon various assumptions including the expected long-term rate of return on plan assets, discount rates, projected future compensation increases and mortality rates.

The calculations of pension benefit obligations and expense require decisions about a number of key assumptions that can significantly affect liability and expense amounts, including the expected long-term rate of return on plan assets and the discount rate used to calculate plan liabilities.

Benefit obligations and fair values of plan assets as of December 31, 2023, for International Paper’s pension plan were as follows:

The table below shows the discount rate used by International Paper to calculate U.S. pension obligations for the years shown:

International Paper determines these actuarial assumptions, after consultation with our actuaries, on December 31 each year or more frequently if required, to calculate liability information as of that date and pension expense for the following year. The expected long-term rate of return on plan assets is

based on projected rates of return for current asset classes in the plan’s investment portfolio. The discount rate assumption was determined based on a hypothetical settlement portfolio selected from a universe of high-quality corporate bonds.

The expected long-term rate of return on U.S. pension plan assets used to determine net periodic cost for the year ended December 31, 2023 was 6.50%.

Increasing the expected long-term rate of return on U.S. plan assets by an additional 0.25% would decrease 2024 pension expense by approximately $21 million, while a (decrease) increase of 0.25% in the discount rate would (increase) decrease pension expense by approximately $12 million.

Actual rates of return earned on U.S. pension plan assets for each of the last 10 years were:

ASC 715, “Compensation – Retirement Benefits,” provides for delayed recognition of actuarial gains and losses, including amounts arising from changes in the estimated projected plan benefit obligation due to changes in the assumed discount rate, differences between the actual and expected return on plan assets, and other assumption changes. These net gains and losses are recognized in pension expense prospectively over a period that approximates the average remaining service period of active employees expected to receive benefits under the plans to the extent that they are not offset by gains and losses in subsequent years.

Net periodic pension plan expenses, calculated for all of International Paper’s plans, were as follows:

The increase in 2023 pension expense primarily reflects higher interest cost and lower expected return on assets, offset by lower service cost.

Assuming that discount rates, expected long-term returns on plan assets and rates of future compensation increases remain the same as of

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December 31, 2023, projected future net periodic pension plan expense (income) would be as follows:

The Company estimates that it will record net pension income of approximately $7 million for its U.S. defined benefit plans in 2024, compared to expense of $94 million in 2023.

The market value of plan assets for International Paper’s U.S. qualified pension plan at December 31, 2023 totaled approximately $8.8 billion, consisting of approximately 66% hedging assets and 34% return seeking assets. The Company’s funding policy for its qualified pension plan is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plan, tax deductibility, the cash flows generated by the Company, and other factors. The Company continually reassesses the amount and timing of any discretionary contributions and could elect to make voluntary contributions in the future. There were no required contributions to the U.S. qualified plan in 2023. The nonqualified defined benefit plans are funded to the extent of benefit payments, which totaled $22 million for the year ended December 31, 2023.

INCOME TAXES

International Paper records its global tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where the Company believes that a tax position is supportable for income tax purposes, the item is included in its income tax returns. Where treatment of a position is uncertain, liabilities are recorded based upon the Company’s evaluation of the “more likely than not” outcome considering technical merits of the position based on specific tax regulations and facts of each matter. Changes to recorded liabilities are only made when an identifiable event occurs that changes the likely outcome, such as settlement with the relevant tax authority, the expiration of statutes of limitation for the subject tax year, change in tax laws, or recent court cases that are relevant to the matter. Accrued interest related to these uncertain tax positions is recorded in our consolidated statement of operations in Interest expense, net.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in assessing the need for and magnitude of appropriate valuation allowances against deferred tax assets. This assessment is completed by tax jurisdiction and relies on both positive and negative evidence available, with significant weight placed on recent financial results. Cumulative reported pre-tax income is considered objectively verifiable positive evidence of our ability to generate positive pre-tax income in the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little or no weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. When necessary, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the use of estimates are required when scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies. The Company's valuation allowance was $848 million and $677 million at December 31, 2023 and 2022, respectively.

While International Paper believes that these judgments and estimates are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts.

LEGAL PROCEEDINGS

Information concerning the Company’s environmental and other legal proceedings is set forth in Note 14 Commitments and Contingent Liabilities on pages 74 through 78 of Item  8. Financial Statements and Supplementary Data. The Company is not subject to any administrative or judicial proceeding arising under any Federal, State or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that is likely to result in monetary sanctions of $1 million or more.

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RECENT ACCOUNTING DEVELOPMENTS

See Note 2 Recent Accounting Developments on page 60 of Item 8. Financial Statements and Supplementary Data for a discussion of new accounting pronouncements.

EFFECT OF INFLATION

Inflationary increases in certain input costs, such as energy, wood, recycled fiber, freight and chemical costs, had an adverse impact on the Company’s operating results in 2023 and 2022. The effects of inflation have been more significant in recent years due to general inflationary conditions, including labor market conditions, economic activity, consumer behavior, supply shortages and disruptions. Sales prices and volumes are primarily influenced by economic supply and demand factors in specific markets and by exchange rate fluctuations but are also currently being impacted by the current inflationary environment.

FOREIGN CURRENCY EFFECTS

International Paper has operations in a number of countries. Its operations in those countries also export to, and compete with imports from other regions. As such, currency movements can have a number of direct and indirect impacts on the Company’s financial statements. Direct impacts include the translation of international operations’ local currency financial statements into U.S. dollars and the remeasurement impact associated with non-functional currency financial assets and liabilities. Indirect impacts include the change in competitiveness of imports into, and exports out of, the United States (and the impact on local currency pricing of products that are traded internationally). In general, a weaker U.S. dollar and stronger local currency is beneficial to International Paper. The currency that has the most impact is the Euro.

MARKET RISK

We use financial instruments, including fixed and variable rate debt, to finance operations, for capital spending programs and for general corporate purposes. Additionally, financial instruments, including various derivative contracts, are used to hedge exposures to interest rate, commodity and foreign currency risks. We do not use financial instruments for trading purposes. Information related to International Paper’s debt obligations is included in

Note 16 Debt and Lines of Credit on pages 80 and 81 of Item 8. Financial Statements and Supplementary Data.

The fair value of our debt and financial instruments varies due to changes in market interest and foreign currency rates and commodity prices since the inception of the related instruments. We assess this market risk utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and currency rates and commodity prices.

INTEREST RATE RISK

Our exposure to market risk for changes in interest rates relates primarily to short- and long-term debt obligations and investments in marketable securities. We invest in investment-grade securities of financial institutions and money market mutual funds with a minimum rating of AAA and limit exposure to any one issuer or fund. Our investments in marketable securities at December 31, 2023 and 2022 are stated at cost, which approximates market due to their short-term nature. Our interest rate risk exposure related to these investments was not material.

We issue fixed and floating rate debt in a proportion that management deems appropriate based on current and projected market conditions. Derivative instruments, such as interest rate swaps, may be used to execute this strategy. At December 31, 2023 and 2022, the fair value of the net liability of financial instruments with exposure to interest rate risk was approximately $4.5 billion and $4.3 billion, respectively. The potential increase in fair value resulting from a 10% adverse shift in quoted interest rates would have been approximately $273 million and $328 million at December 31, 2023 and 2022, respectively.

COMMODITY PRICE RISK

The objective of our commodity exposure management is to minimize volatility in earnings due to large fluctuations in the price of commodities. Commodity swap or forward purchase contracts may be used to manage risks associated with market fluctuations in energy prices. At December 31, 2023 and 2022, the net fair value of these contracts was $27 million asset and $20 million asset. The potential loss in fair value from a 10% adverse change in quoted commodity prices for these contracts would have been approximately $4 million and $3 million at December 31, 2023 and 2022, respectively.

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FOREIGN CURRENCY RISK

International Paper transacts business in many currencies and is also subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries. The currency that has the most impact is the Euro. Our objective in managing the associated foreign currency risks is to minimize the effect of adverse exchange rate fluctuations on our after-tax cash flows. We address these risks on a limited basis by entering into cross-currency interest rate swaps, or foreign exchange contracts.

At December 31, 2023 and 2022, the net fair value of financial instruments with exposure to foreign currency risk was immaterial. The potential loss in fair value for such financial instruments from a 10% adverse change in quoted foreign currency exchange rates was also immaterial.