Greif Inc (GEF.B) 2006 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Greif Inc. second-quarter 2006 results conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today, Thursday, June 1, 2006.

I would now like to turn the conference over to Ms. Deb Strohmaier, Director of Corporate Communications. Please go ahead.

Thank you. Good morning. As a reminder, you may follow this presentation on the Web at Greif.com in the Investor Center under Conference Calls. If you don't already have the earnings release, it is also available on our website.

The information provided during this morning's call contains forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied. Some factors that could cause the results or outcomes to differ are on slide 2 of this presentation, in the Company's 2005 Form 10-K and in other Company SEC filings, as well as Company earnings news releases.

As noted on slide 3, this presentation uses certain non-GAAP financial measures, including those that exclude special items such as restructuring charges, a debt extinguishment charge and timberland gains. Management believes the non-GAAP measures provide a better indication of operational performance and a more stable platform on which to compare the historical performance of the Company than the most nearly equivalent GAAP data.

All non-GAAP data in the presentation are indicated by footnotes. Tables showing the reconciliation between GAAP and non-GAAP measures are available at the end of this presentation and in Greif's second-quarter earnings release.

I will now turn the call over to Mike Gasser.

Thank you, Deb. Good morning, everybody. Thank you for joining us on our second-quarter 2006 conference call. If you're following our presentation on the Web, please go to slide 4.

I'm pleased to report that we continued the positive momentum that we started at the end of our first quarter. Our results reflect improving volumes and expanding margins on both a sequential and year-over-year basis. Contributions from the Greif Business System and improving industry fundamentals in all of our business segments drove our solid results.

We turned in a strong performance in the emerging markets of Russia and China, where we continue to increase production capabilities at our existing plants and build additional plants to serve new locations. Next week, our Board of Directors will be in China to see firsthand the long-term importance of this market and the progress we are making there.

In South Africa, we attained broad-based Black Economic Empowered status, commonly referred to as BEE, capping a multi-year effort. Such status gives us an advantage as a BEE certified supplier to our customers in the country. This has been important particularly in the mining and oil industries, which have been the pioneers of the BEE mandate.

Through the efforts of our global sourcing and supply chain organization, under the strong leadership of Ron Brown we're mitigating the increasing costs of raw materials as much as possible. Also, their efforts to control transportation and energy costs are taking hold and we continue to make good progress in this area.

Now, if you'd please go to slide 5, our core businesses of industrial packaging, paper packaging and timber all recorded strong results in the quarter. Industrial packaging benefited from overall improvement in sales volume and a disciplined Greif business system. Paper packaging has in place a new energized management team firmly committed to the Greif Business System. This segment is seeing positive results from improved market fundamentals and strategic actions, including the recent rationalization of its corrugator footprint.

Timber is actively managing its assets and reviewing its timberland holdings to identify property more suited for development and other special uses. In our preliminary evaluation, we anticipate that 8 to 10% of holdings will be classified as higher-value property.

To conclude my comments on our business, I'm pleased to tell you that at the midpoint of fiscal 2006, we're ahead of our original plan and anticipate building upon these achievements during the remainder of the year.

Don will now provide you an update on our financial results.

Thank you, Mike. Good morning, everyone. If you will click to slide 6, net sales for this quarter were up 3% on a constant currency basis compared to the second quarter of last year. This increase was due to generally higher sales volumes in all three of our business segments.

The gross profit margin increased to 17.6% of net sales in the second quarter from 16% a year ago. Gross profit margin benefited from positive contributions from the Greif Business System and generally lower raw material costs compared to the second quarter of 2005. Overall benefits to gross profit were partially offset by higher energy and transportation costs of approximately $9 million.

SG&A expenses were $62 million or 10.1% of net sales in the second quarter, compared to 9.1% of net sales in the second quarter of 2005. The increase was primarily due to higher accruals for performance-based incentive plans resulting from improvements in the Company's current and planned results.

We continue to emphasize cost control through our administrative excellence initiative, which focuses on standardization, consolidation and automation of our business processes to improve SG&A scalability.

Operating profit before special items was $53 million in the second quarter, compared with 43 million in the second quarter of 2005. Net income before special items was $30 million in the second quarter, compared to 24 million in the second quarter of last year.

Diluted earnings per share before special items were $1.03 versus $0.81 per Class A share and $1.58 versus $1.25 per Class B share in the second quarter of 2006 and 2005, respectively.

Now on slide 7, in the industrial packaging segment, net sales rose 2% on a constant currency basis in the second quarter. The improvement in net sales was primarily due to increased steel, plastic and fibre drum sales. This improvement was partially offset by lower steel drum pricing due to lower steel costs on a year-over-year comparison. However, we previously announced and implemented price increases since the first quarter of this year for certain of our products due to increasing raw material costs.

Operating profit before special items rose to 34 million, compared to 29 million a year ago. Industrial packaging's gross profit margins improved 200 basis points to 17.6% in the second quarter from the same quarter last year. This improvement was due to lower raw material costs compared to the same period last year and contributions from the Greif Business System.

Slide 8 shows results for the paper and packaging segment. Second-quarter net sales increased to 157 million from 150 million last year, primarily because of higher containerboard selling prices and improved sales volumes of containerboard and corrugated sheets.

Operating profit before special items was 14 million, compared to 10 million a year ago. Improved net sales, lower OCC cost and gain on sale of a warehouse, partially offset by higher energy and transportation costs, contributed to the increase over last year. Operating profit also benefited from improving industry fundamentals, the rationalization of our corrugator footprint and operational excellence activities.

To slide 9 -- net sales for the second quarter were 5 million in 2006 and 2005. Operating profit before special items was 4 million, including 1.5 million from the sale of surplus, as well as higher and better-used properties, compared to 3 million in the second quarter of 2005.

We completed the final phase of our previously reported $90 million sale of timberland, timber and associated assets in the second quarter. In this phase, we sold 5700 acres of timberland holdings in Florida for $10 million, resulting in a gain of $9 million.

We're now on slide 10. At April 30, 2006, our net debt of 334 million is 104 million below the same date last year. The net debt to net capital ratio of 30.2% at the end of the second quarter positions us well as we enter the earn and grow phase of the Greif Business System agenda.

Our key financial performance goals are shown on slide 11. Operating profit margin before special items was 8.5% for the second quarter of 2006, and as noted on the slide, 7.5% for the last 12 months. This moves us closer to our target of 10%.

SG&A to net sales at 9.5% continues to outperform our target. Operating working capital to net sales with a ratio of 9.6% also tracks favorably to our 2006 goal. And our RONA achievement of 16.6% puts us in a range of our 20% target for 2006 on a run rate basis.

If you will now click to slide 12, as Mike noted, we entered the second quarter with positive momentum across our product portfolio and regions. Profitability has benefited from improving industry fundamentals and ongoing initiatives, including strategic sourcing, to further embed the Greif Business System throughout the Company.

Therefore, we are increasing our earnings guidance before special items by $0.30 to a range of $3.85 to $3.95 per Class A share for fiscal 2006. This range is approximately 18 to 21% above fiscal 2005 on a similar basis.

As reported earlier this week, the Board of Directors declared quarterly cash dividends of $0.36 per share of Class A common stock and $0.54 per share of Class B common stock. This marks the second consecutive year the Company has increased quarterly cash dividends by 50%. These increases reflect our solid performance improvement trajectory, confidence in its sustainability and our improved financial flexibility.

That concludes my formal remarks, and you should now click to slide 13. Mike and I will be pleased to answer your questions.

(OPERATOR INSTRUCTIONS). Chris Manuel, KeyBanc Capital Markets.

Congratulations on a fabulous quarter. A couple of questions for you. First on the volume side of the equation, it looks as though you had some very good results you mentioned in the industrial side. Can you give us a bit of a sense as what percentage -- let's say volumes were up, steel drums, fibre drums, plastic drums, and then how we could possibly think about that with respect to the acquisition you did as well?

Yes, Chris, the volume increase for industrial packaging is in the 5% range. On a consolidated basis, volume is up about 4%. And if we look at the volume change on a same-structure basis, the majority of the increase is going to be represented by the tuck-in acquisitions, but there was very solid growth by large steel drums. They were really in the 1 to 2% positive. You'll recall that we had experienced negative volumes last year at this time. We then basically got to a level where we were flat, and we're now seeing a positive growth, and I'm pleased to report that that is continuing as we enter the third quarter.

Also, in the plastic substrates, we have seen very strong growth there in the really low-double-digit range, and so really, across the portfolio, you see some differences, and also across regions, but we are in a positive year-over-year -- we see positive year-over-year improvements really across the portfolio.

And Chris, just to add a little color at 40,000 feet, I think the volume increase from a macro standpoint is really two reasons also -- is the economy was strong in the regions that we operated with our customers, so that helped. And two, we need to give credit to our senior operating people and the salespeople because they really have embraced the Greif Business System to allow our plants to become leaner from a cost-competitive standpoint and to embrace the commercial excellence programs that we've come in.

And both of these are important, because they show to us that this can be sustainable as we go forward in the future. So we ended the second quarter positively and we're optimistic as we go forward.

Okay, perfect. Next question I wanted to ask you was around the Greif Business System. Thus far, it looks like I think in the press release you said you had 23 million or so of savings achieved. I believe your target was 30 million for the year.

Does that now appear maybe a bit low? Do think you can overshoot that a bit? Can you give us a sense of, one, does that look a little conservative? And then two, what areas in particular are you seeing savings from? Is it more from procurement side of the equation, or is it more from activities in paper or continued stuff in international in your packaging side of the business, or a little extra color there?

Yes, that $23 million year-to-date impact for the Greif Business System would break down about two-thirds sourcing and one-third from operational excellence. So you can see that based on that sourcing impact, that would be about $15 million, so on an annualized basis, we're tracking a bit above the $25 million that was provided as our guidance at the beginning of the year.

So we're really very pleased with the contribution of our global sourcing and supply chain team. And that is notwithstanding a lot of offsets, because clearly, in the freight area, for example, we're doing a lot of good things to reduce our costs. They've ended up being more cost avoidance than cost reduction because of higher fuel costs. But we're very pleased that we were able to mitigate some of those rising costs.

But when that happens, we don't see as much impact as we otherwise would. But that is the rough breakout. The remainder is primarily in the operational excellence workstream. That would be the other third of the 23 million.

Okay. And is that from -- originally I think you guys had talked about -- you were planning on doing some more work in the paper and packaging side and in the industrial packaging side as you rolled out around the globe. Is that where that's coming from?

That is making a contribution, but I would say that we are in the very early stages of embedding the Greif Business System within PPS, and I think we're really going to be seeing a lot more impact going forward.

Yes, the paper is just starting, Chris. It takes a while to ramp that up, and so we have kicked off programs in the last 30 to 45 days, and so we would anticipate more future benefits there. The benefits that we have seen to date primarily have come in the industrial packaging. We have done some rationalization in Europe, as we have mentioned, and some in the United States. So it's coming from those areas.

Okay. I'll turn it over and jump back into queue. Thank you, fellows.

David Rosen, CR Intrinsic.

Excellent quarter, guys. I do have a couple questions. First, I'd like to focus a little bit on the HBU land sale -- on the land's strategic alternative. Can you give us some indication of the 8 to 10% land that you have identified a present HBU -- what type of price indications you think those would sell for?

Good morning, Dave. This is Mike. Dave, we are in a very preliminary stage of identifying this, and we really want to be transparent in this process, and so that's the reason we started this off by mentioning that. That 8 to 10% is just a preliminary estimation. So we really, again, are starting to develop the real numbers, and in future calls, we will be able to give you a little bit more meat on a more precise number and values as they relate.

Values -- we have seen values from other companies and other transactions, and I'll give you a big range, from 5 to 15,000 an acre, so -- and it really will depend on location, location, location, if you're into retail, but depending on location and a lot of other factors. So I think it would be very premature for us to attempt to narrow that band much more than we have right now.

Let me just take one step further, then. Of the 8 to 10% HBU land that you have identified, what percentage of that total is in the kind of Louisiana area?

Again, we have not got -- we're not comfortable enough to really share much more detail other than we anticipate that it will be in the 8 to 10% range, and we will share that as we develop that and become more comfortable with that data.

Fair enough. My second question relates to your share structure, which I'm sure it's modestly frustrating for you, and from a shareholder, it's tremendously frustrating, because it understates your earnings by 20%. And I think a lot of investors actually do value your Company on an EPS basis.

Have you guys thought about -- and I'm sure the Dempseys, as they are large shareholders, would prefer to see their shareholdings at a much higher price level. Have you had any discussions with them about prospectively changing the distribution structure so that it doesn't penalize your earnings?

Dave, this is a question that's come up in the past. We've addressed it in the past. It's as structure that we have had for really for 80 years, and so while it's different and more complicated as a structure, we're sort of used to it.

The earnings per share calculation -- I understand your frustration. That was really dictated by the SEC saying we needed to calculate our earnings per share that way. We five years ago did it two ways, where we showed earnings per share equal between the two classes. They have dictated that we do the way we are currently doing it. So we're really tied to what the SEC wants us to do on an earnings per share calculation.

We have had conversations in the boardroom on the capital structure in the past. I would anticipate we will have conversations with the Board -- the capital structure in the boardroom in the future. I cannot anticipate what the results of those conversations will be. But I can tell you there has been conversations and I would anticipate there would be future conversations.

Okay, because also maybe it would be helpful in the future if you actually included an EBITDA calculation as well in your guidance, because your stock is trading at some ridiculous multiple of EBITDA, but sometimes that gets masked by the EPS calculation.

Thanks, Dave. We'll take that into consideration.

My last question, I'm sorry, but you guys generate a significant amount of cash, and if I have my math right, it's almost $6 a share free cash this year. Now that you've raised your dividend, what alternative uses do you have for that cash now?

Well, Dave, we have -- raising that dividend was just one of the many areas that we have for the use of that cash. We have three primary purposes for our cash. One is to return money to our shareholders, and it could be dividends, it could be some stock buyback. The other is to continue to pay down debt, which we have been disciplined in for the last five years since we did the Van Leer acquisition.

And then the third one, and these are not in order of priority, so don't construe it that way, is to grow the Company, and as Don mentioned in the prepared remarks, we are entering the earn and grow phase of the Greif Business System. And in growing through new plants -- we have announced recently that we are opening new plants up in China and Russia -- could be some acquisitions if those acquisitions would bring value to our shareholders, and so we will be looking at this in a very prudent way to see what is the best use of that money.

Thank you very much and again, a fantastic quarter.

(OPERATOR INSTRUCTIONS). Chris Hanrahan, Sigma.

Great job on the quarter. I had a question, Don, in the past, you have spoken to the containerboard price increases and what's embedded in your earnings guidance and assumptions and such. I was wondering if you can just comment on the recent containerboard price increase, and in lieu of your guide-up on the range here, and if you have anything embedded in that number -- I know in the past, you've taken that number out. I just want to see if you can expand on that for us.

Yes, I would be happy to. Just to provide the context, as you know, there was a containerboard increase on October 1 of $30, and that was followed by a $40 per ton increase January 1, and as we've mentioned previously, those have been fully implemented and also realized downstream.

We do look at our value-added contribution from our sheet-feeding activities and our other converting activities just to make sure that that has been passed through to a price downstream. So we're very pleased with that.

As for the $50 per ton increase, that announcement was just -- that increase was implemented May 1, and so clearly, no impact in the second quarter. We previously did not include that in the guidance. I would say that based on the continued strength within that market and the initial traction that we have seen, that we have reflected that increase partially in the revised guidance. And I would say that's probably one of the key factors -- not the only one, but one of the key factors driving the upward revision to the guidance.

Okay. All right, thank you. And just now that you're in the earn and grow phase, especially given where your net debt to cap is, 30.2%, can you maybe talk about any tuck-in acquisitions? What's your current thinking right now on the M&A front?

Well, we have always looked at consolidating -- being a consolidator in the industrial packaging business because of our global structure. That -- we can do that. We look at a lot of acquisitions, Chris. We probably -- we don't do a lot more than we do. We say no to a lot of them, and it's a cultural thing.

So we're always looking at opportunities to grow that way. Because of our name recognition in that business, if anyone is selling a business, they normally contact us because we would be a natural buyer. And so we constantly look at that.

And just to talk about acquisitions for a second, one of the things that we started 10 years ago when I started was that after an acquisition, we would do a lesson -- what I call lessons learned, and we would look at what we did right and what we did wrong.

Last week, I went to a meeting where we -- a three-hour meeting where we went through the lessons learned from the last tuck-in acquisitions that we did at the end of last year. And I walked out of there really impressed because they've taken that concept and really taken it to the next level.

And so today, as we look at future acquisitions, our structure is I would tell you world-class to be able to look at acquisitions, to be able to integrate acquisitions -- as you know, is the most important part of doing something. And so I walked out of there thinking, the future is pretty bright if we want to do these.

And so we're going to be disciplined. We're going to be -- to make sure that we don't overpay, to make sure that we have the manpower to do it, but it will be something that we'll continue to look at.

Okay. And then Don, just in reference to the tuck-in acquisitions in the second half of last year, I think we spoke to some accretion in '06, but are we still set up for meaningful accretion in '07? Maybe just talk about how that's transpired -- all the plants are closed, etc.

Yes, we would expect those transactions to be accretive. As we had mentioned on I believe on our previous call, the tuck-in acquisitions involved eight facilities, all of which were closed, and basically the business was transferred to existing facilities of Greif. And we've been very pleased with the customer retention rate. So they're very powerful transactions. You're basically capturing the contribution margin of the acquired business. So yes, they would -- we would expect them to be accretive next year.

Should I assign about a 20% type of contribution margin on that business?

We really have not gotten that detailed.

Okay. I'll jump back in the queue. Great job, guys, on the quarter, and thank you.

Mark Wilde, Deutsche Bank Securities.

This is Matt Butler calling on behalf of Mark. Good quarter. You said you had implemented partially the latest box hike price-through into your new numbers. Do you care to comment on the degree to which you've baked that in there?

The expectation that we have is that the increase will be fully implemented at the mill. We're quite confident of that. And we are going to be very disciplined in its implementation at the sheet and box level.

I would say that the concern is as we move further downstream, and we have basically -- we had previously stated that the upside potential of the increase was based on -- the calendarization over our fiscal year was in the $12 million range, and we have basically reflected half of that. So there continues to be upside potential. We would like to think that the guidance is conservative.

And Matt, as you know very well, when you announce these increases, if history is any indication of the present or future, when you announce a mill increase, it's about a 90-day period before it fully gets implemented. Now, our intent is to move that much quicker, but that is normally a rule of thumb which mills have been able to do. And then you have the downstream activity that Don is talking about. So it is a little process.

One more question. Do you care to comment on current demand for industrial packaging, both in the U.S. and in Europe?

Right now, the demand is strong, Matt. We ended the quarter strong, as Don mentioned in his remarks. Indications are currently that the demand continues to be strong. And so our plants are busy right now and the volumes look good right now.

Bob Franklin, Prudential Financial.

How much cash do you think you need on the balance sheet just to run the business?

The transactional balance requirements are typically in that 25 to $50 million range. And we right now have amounts quite a bit above that. We're at about 150 million, and the reason, really, the reason for that is a lot of that cash is outside the United States, and we have opportunities for -- that we may be able to utilize that cash. So we're really not interested in repatriating funds and incurring tax leakages. So for a period of time, there will be some cash accumulation.

Okay, can you give us a sense of how much is outside the U.S. versus inside?

Substantially all of that amount in excess of our transactional requirements, so about 100 million.

Okay, and so as you pay your dividends, that is going to be paid out of the 50 -- as you repay dividends and repurchase shares, that's going to be out of cash flow from operations in the U.S. and out of the cash on the balance sheet in the U.S. Is that right?

Right.

Okay. And one other question -- I think I have heard you sort of answer it, but I'll try anyway. Last quarter, the steel drums were weak, and I believe you attributed that in part to residual hurricane problems. Is any of the strength now catch-up?

I really don't think so.

No, Bob, we have asked that question. If it is, Bob, it's such on a gradual basis that it's getting lost in the transition. As you know, today's starting hurricane season again, so we'll see what happens.

Maybe it will be a wash.

But we have asked that. We just haven't seen any indication that that's what the case is -- more of a strength of economy than a blip from a one-time catch-up type thing.

Okay, so in general, you're still seeing strength?

Yes.

Okay, great. Thank you very much.

Chris Manuel.

Another follow-up in the timber segment. Could you give us an update on, now that you have sold some timber properties, what is a reasonable forecast for cuttings and things of that nature this year and on an ongoing basis?

Well, we really have not factored changes into our guidance. And I would say that we're basically on the plan that was developed as part of our budgeting process.

So, a rough amount each year -- I think you've been in that 15 million a year sort of window, 12, 15 million -- is that still reasonable?

I would -- when we did provide the guidance for 2006, we were in that $10 million range.

Okay.

And a lot of this, Chris, as you know, really depends on pricing, because this is an asset that does not -- it continues to add value as it continues to grow, so if the pricing gets weak, then we'll just get out of the market. And if the pricing is strong, or where we want it to be, then we will sell the timber. So some of it is depending on pricing, because we're not going to sell it at a value that we don't think it's a realistic value, because we'll just let it continue to grow in the ground at that point.

All right, that's fine. Next question I wanted to ask you centered around substitution. Have you been seeing anything across the various substrates, particularly with steel now starting to move back up again in price and resin potentially starting to move back up and paper still looking pretty reasonable? Any substitution between steel, plastic, fiber?

We've been in a state of relative equilibrium, really have not seen any evidence of substitution against one substrate for the other. So no, I've -- and as you pointed out, Chris, the raw material costs across substrates are moving up really in unison, so it's not tending to significantly favor one over the other.

Okay. Last question I wanted to ask you was more of a ticky-tack one. If you could give me the pretax/post-tax -- I think I've got the pretax numbers -- for the two gains -- the one for HBU land, I think it was 1.5 million pretax. If you have a post-tax number there, and what the pretax/post-tax number was for the warehouse sale gain.

Well, basically, the warehouse, it really depends on where the assets are located and what the tax jurisdiction is. And in the case of the warehouse, that was a domestic transaction, and so that was taxed at an effective rate of 38%. That includes the statutory federal plus the composite state rates.

And then in the case of the sale of the HBU and higher-value properties, those were primarily U.S.-based, so the tax effect would be similar. Now, that one, it depends on whether we make a 1031 election for a like-kind exchange, whether that's going to translate into cash taxes or deferred taxes, but we are anticipating on a consolidated basis that our cash tax rate would be in the 20% range, and those like-kind exchanges would contribute to that deferred component.

(OPERATOR INSTRUCTIONS). Ross Levin, Arbiter.

In light of the increased EPS guidance and given the CapEx outside of timber acquisitions guidance you guys provided, one imagines that there would be a material increase in available free cash flow. Could you comment on the usage of that and the prospects for increased buyback?

Ross, we've touched on that a little bit previously about use of cash, and I think we have really -- we talked about three dimensions. One was giving some back to the shareholders -- we increased dividends and we continue to look at stock buybacks. So we have been in the market. We will continue to look at that as we go forward.

Paying down debt is a second component of that, and then a third one is to grow the business, either through new plants, as we have announced in China and Russia, and acquisitions if they make sense. So it's a multiuse for this cash, and the stock buyback is obviously one of those arrows that we're going to look at.

Does that satisfy your question, Mr. Levin?

Yes, thanks.

[G.J. Baldoni], Deutsche Asset Management.

Regarding your bonds, can you talk about the flexibility that you have under your restricted payments covenants to buy back stock?

We have a lot of flexibility because of the strong earnings. So that has resulted in significant additions to the restricted payments baskets, so we really are not constrained by that.

Can you quantify the amount that you have available on the restricted payments basket?

Would really prefer not to. But it comfortably exceeds the projected dividend distributions by a multiple.

Do you have any plans to reduce this debt, which is at a pretty high rate, prior to its call date?

The call date, as you know, is 2007. We do have a very high coupon. We did enter into a euro slot so that our effective rate is actually a bit lower. We were able to take advantage of the significant differential in rates between here and Europe. So that basically was the way we had mitigated the high cost, and then we'll be evaluating our options as the call date approaches.

And one final question. If you were to decide to do something prior to the call date, are there significant breakage costs with regard to the swap?

It would depend really when we executed the transaction.

Management, there are no further questions at this time. Please continue with any closing comments.

Thank you, again, for joining us this morning. As a reminder, this call will be available for replay from noon Eastern Time today through noon on Tuesday, June 6. The playback telephone numbers are 800-405-2236 for domestic callers and 1-303-590-3000 for international callers. The passcode is 11061396#. This call will be posted on the Company's website in approximately one hour. We appreciate your participation. Have a good day.

Thank you. And ladies and gentlemen, this does conclude the Greif Inc. second-quarter 2006 results conference call. You may now disconnect. Thank you for using AT&T teleconferencing, and have a very pleasant day.