Greif Inc (GEF) 2004 Q4 法說會逐字稿

Welcome to the Greif, Inc. fourth quarter and fiscal 2004 results conference call. At this time all participants are in a listen-only mode. (OPERATOR INSTRUCTIONS). As a reminder this conference is being recorded today, Thursday, December 9, 2004. I would now like to turn the conference over to Ms. Deb Strohmaier.

Thank you. Good morning and welcome to Greif's fourth-quarter conference call. Slides are included as part of today's call and they are available on our website at www.greif.com in the investor center. We are currently on slide one.

Our speakers this morning are Mike Gasser, Chairman and Chief Executive Officer, who will discuss some significant achievements, and Don Huml, Chief Financial Officer, who will discuss our financial results for the 2004 fourth quarter and fiscal year. Following their remarks there will be an opportunity to ask questions.

At this time I will read the Company's Safe Harbor statement, which appears on slide two.

This presentation contains certain forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995. The words may, will, intend, project, continue, believe, expect, anticipate, estimate, target, and similar expressions, among others, identify forward-looking statements. All forward-looking statements are based on information currently available to management. Although the Company believes that the expectations reflected in these forward-looking statements have a reasonable basis, the Company can give no assurance that these expectations will prove to be correct. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied. The risks and uncertainties related to forward-looking statements are discussed in the Company's annual report on Form 10-K for the fiscal year ended October 31, 2003. The Company assumes no obligation to update any forward-looking statements.

In addition, as noted on slide 3, some of the comments during this conference call include certain GAAP and non-GAAP financial measures. The non-GAAP measures, which are reconciled to the GAAP amounts in the appendix of the slide presentation, are before restructuring charges, debt extinguishment charge, timberland gains, and the cumulative effect of change in accounting principles which are herein after referred to as special items.

Now I will turn the call over to Mike Gasser for his remarks.

Thank you, Deb. Good morning, everyone, and thank you for spending time with us today on our 2004 fourth-quarter and fiscal year-end conference call.

We are very pleased with our strong results in fiscal 2004. Don and I will go over them with you now.

If you click to slide four, I want to start my remarks with a remembrance of Trevor Armstrong, our Senior Vice President of Europe, who passed away unexpectedly three weeks ago. Trevor did a terrific job of overseeing a region that turned in a superlative performance and greatly increased its contribution to our business. But more than a strong performer, Trevor was a good friend and a free spirit and we miss him deeply. Until a successor is named, President and COO Bill Sparks has assumed Trevor's responsibilities. Our European operations continue to be in very good hands.

Now on slide five, I'm happy to take this opportunity to note four major milestones that we achieved since our last call.

One, in fiscal 2004 we recorded 2.2 billion in sales, an all-time high. Two, we achieved SG&A to net sales below our target of 10 percent a full two years earlier. Three, due to a combination of factors, including better operating profit, a significant reduction in working capital, and a $35 million impact from our European factory transaction, we paid down debt by almost $200 million by the end of fiscal 2004. This is on top of the restructuring charges that we absorbed this year. And four, Greif recently exceeded $1 billion in market capitalization.

We hit these milestones somewhat because of the improved operating environment, but more because of the hard work and focus of our employees. We hit them largely because we are staying on track with our transformation, continuing to find ways to improve everything we do and taking out waste wherever we find it.

Slide six shows you where we are in institutionalizing our transformation into the Greif business system. We presented this same slide last quarter, but it's important to show how far we have come and what remains on the horizon. Don and I recently attended the kickoff of our transformation initiative in Singapore and felt the excitement among our employees there. We have a solid platform in that region, positioning us well for growth in that market. Completing the roll-out, Latin America and Africa will officially introduce the transformation to their 28 locations in the coming months.

Going to slide seven, you will see the cumulative impact of our transformation initiatives through the fourth quarter of 2004, which is $82 million. Contributions are shifting beyond SG&A optimization, which we continue to manage, and are coming more from a balanced focus on continuous improvement in our work streams. Our transformation initiatives, which addresses operations, commercial functions, administrative processes, global sourcing and supply chain, and working capital, are hardening and taking shape as the Greif business system.

Now on slide eight -- late in the year we announced changes to our organization that will help us prepare for growth. We combined our North and South America and African regions into a super-region under the management of David Fisher, a former Dow Chemical executive with significant experience in manufacturing and delivering positive financial results.

We selected Ron Brown, formerly Vice President and General Manager of our IPS North America business, to head our global sourcing and supply chain organization as a separate business unit. Ron brings a unique business sense to the unit, focused on reducing our global spend as well as captured 100 percent of our expenditure in one database, creating a world-class purchasing organization, managing our logistics and transportation costs, and consolidating and rationalizing our supplier base.

We also created a transformation worldwide organization to insure focus, intensity and sustainability. This team, headed by Senior Vice President Mike Patton, will increase the speed and raise the trajectory of our transformation initiatives around the globe, further embedding the Greif business system in everything we do.

Finally, in reviewing our progress in 2004 we strengthened our cash flow, improved strategic and financial flexibility, achieved our target on earning our cost of capital, and in fact, delivered a positive spread. During fiscal 2005, our focus will continue to be on capturing identified opportunities and sustaining advantages already achieved in the transformation of our company.

And now, Don will review our fourth-quarter financial results.

Thank you, Mike, and good morning, everyone. I'm extremely pleased to report an exceptionally strong quarter, due in large part to the contribution of our transformation initiative.

As shown on slide nine, net sales rose 19 percent to 613 million for the fourth quarter, from 514 million for the same quarter last year. Higher selling prices and generally higher volumes in both our Industrial Packaging & Services and Paper, Packaging & Services segments contributed to this increase. For the fourth quarter operating profit before special items, it increased 33 percent to 60 million, compared to 45 million in the same period in 2003.

Net income before special items was 38 million for the fourth quarter versus 22 million in the same period last year. For the quarter, diluted earnings per Class A share before special items increased to $1.30 for the fourth quarter compared to 79 cents a year ago. For fiscal 2004, diluted earnings per Class A share before special items were $2.88, which represents an 88 percent increase over fiscal 2004. Significant benefits from the transformation initiatives and positive contributions from the Company's full ownership of CorrChoice being realized as planned were the primary drivers of this improvement.

Slide 10 shows gross profit was more than $114 million for the quarter, compared to 99 million a year ago. The margin decreased by 60 basis points compared to the same period last year. Gross profit margin was impacted by higher raw material costs, including steel and OCC, lower planned timber sales and higher energy costs. These negative impacts on the gross profit margin were mitigated by selling price increases and improved efficiencies in labor and manufacturing costs.

On slide 11 we see our quarterly SG&A expenses were $55 million, or 9 percent of net sales, versus 10.7 percent of net sales for the same period last year. Fiscal 2004 SG&A expenses declined to 219 million, or 9.9 percent of net sales, from 228 million, or 11.9 percent of net sales for fiscal 2003. As Mike mentioned earlier, we have exceeded our target of 10 percent of net sales for 2006 due to a 15 percent increase in net sales over last year, coupled with lower SG&A expenses.

As you can see on slide 12, our Industrial Packaging & Services business hit a home run. Net sales rose to 448 million for the quarter, up 22 percent, compared to 367 million for the same period last year. On a constant currency basis, IPS' net sales for the fourth quarter increased 16 percent over the same period last year, due to higher selling prices which were primarily driven by increased raw material costs and higher volumes for steel and plastic drums. Before special items, operating profit for the segment rose to $41 million for the fourth quarter compared to 25 million in the comparable prior-year period. Operating profit benefited from labor and other manufacturing efficiencies resulting from transformation initiatives. However, higher raw material costs continued to restrain even greater improvement.

For the fiscal year, IPS net sales were $1.6 billion, which represents a 10 percent increase on a constant currency basis. Operating profit before special items was $112 million for fiscal 2004 versus 70 million for last fiscal year. Annual operating profit before special items was influenced by the same factors as in the fourth quarter.

Turning to slide 13, we are encouraged by the recent performance of Paper, Packaging & Services. Net sales for the segment rose to 161 million, compared to 144 million for the third quarter of this year and 139 million for the fourth quarter of last year, due to improved fundamentals which have resulted in generally higher selling prices and volumes. Before special items, operating profit was $16 million in the fourth quarter, up $10 million from last quarter and higher than the $14 million recorded in the same quarter last year. Improved sales volumes and pricing were partially offset by higher raw material costs, particularly for OCC, and higher energy costs in our containerboard operations. Net sales for fiscal 2004 were $568 million versus 504 million in 2003. Operating profit before special items was approximately $30 million in both fiscal 2004 and 2003.

Slide 14 reflects our fourth-quarter performance in the timber business over the past three years. Timber sales are consistent with the planned levels during each of the quarters shown on this slide, and operating profit is driven by sales levels.

Slide 15 highlights our capital structure at year-end fiscal 2004 and 2003. Total debt at October 31, 2004 was 469 million, or 42.3 percent of total capital, versus 662 million, or 53.6 percent of total capital on the same date last year. Sequentially, long-term debt declined 148 million from the third quarter, including a $39 million reduction resulting from the European factoring transaction.

On slide 16 we present the 2004 progress toward achieving our key financial metrics, which include operating profit margin, RONA, SG&A to net sales, and working capital to net sales. Operating profit margin before special items continues to improve. Currently at 7 percent, we remain on track to realize our goal of 10 percent by fiscal 2006. The 12.9 percent return on net assets for fiscal 2004 moves us toward our 20 percent target in 2006.

As stated earlier, we achieved our 2006 objective of 10 percent SG&A to net sales two years early. For fiscal 2004 this measure was 9.9 percent, a decrease from 11.9 percent in 2003, well below the 15.4 percent we started from in 2002. We will be closely managing SG&A costs to assure continued improvement. We're also making progress toward our goal of 12 percent operating working capital to net sales. For the most recent 12-month period we were at 13.2 percent, compared to 14.9 percent last year and 16 percent two years ago.

Turning to slide 17, incremental benefits from the transformation initiatives of 82 cents per diluted Class A share, coupled with improved fundamentals for our Paper, Packaging & Services segment contributing 25 cents, are expected to positively impact earnings in fiscal 2005. It is anticipated that these benefits will be partially offset by lower planned timber sales and other items totaling 35 to 45 cents.

As you will note on slide 18, management's guidance before restructuring charges and timberland gains is $3.50 to $3.60 per Class A share for fiscal 2005, a solid increase over what we delivered in 2004.

That concludes my remarks. Mike and I will now be pleased to answer your questions. If you go to the next slide, it has the instructions for entering the queue.

(OPERATOR INSTRUCTIONS). Walt Liptak, KeyBanc Capital Markets.

Let me be the first to congratulate you on a really nice quarter and a really great year. Just a couple of quick questions, I guess maybe an easy one. Tax rate -- what will it look like?

We benefited in 2004 from really a shift in our earnings mix favoring non-U.S. tax jurisdictions, which tend to have a lower statutory and effective rate. That will not be the case for 2005 as we start to see increased contributions from our U.S.-based activities. We will see likely an uptick in the rate. So, if you look at 2003, the effective rate was 30.8 percent. It was 24.5 percent for the full year in 2004. And to be conservative, our guidance implies a rate towards the upper end of that range. And I would say that the midpoint would not be an unreasonable expectation.

Got it. 28 percent, right?

We'd give the upper end of the range, Walt.

Our guidance is consistent with the upper end of the range.

A couple of more quick questions. Your SG&A at around 55 million -- what is the outlook for spending levels? Can that stay fairly stable next year? (multiple speakers)

The one thing that Mike Gasser has mentioned several times is that we're excited about having achieved the target, but now it's time to reset the bar. We are working on an administrative excellence initiative that's really looking at ways to eliminate waste in our administrative processes. So we would expect that statistic to remain relatively stable, but hopefully as we continue to grow we can see some further improvement.

Walt, this is something we constantly are focusing on, because obviously a tendency is for this to creep upward. And we are well aware of that phenomena that occurs in most places. So we're focused on this on a daily basis, and quite honestly, Don and I are having conversations to see if we can reset that bar even lower in the future. But for the immediate future, I think that we -- you should anticipate that it will be in that range.

Great. A couple of quick ones and I'll let somebody else go. I've never asked you this one before, but in the industrial packaging segment, if you look at unit volumes, how much are unit volumes? Can you track that kind of thing, and how much are they up?

We do track units. We track units around the world by product. Units were up last year. Do you have that in front of you? Units were up mid digits, 5 to 6 percent, generally, around the world. And steel, which is the primary -- our biggest component -- pretty equal both in Europe and in North America. Europe was a little bit higher than North America. The European operations had a very good year last year.

And did that ramp during the year? How did you do going out in the fourth quarter? What kind of volumes did you have?

The fourth quarter was stronger. The fourth quarter seasonally is stronger, Walt, in North America. It's seasonally stronger in the third quarter in Europe, but the economy had gradually picked up during the year. If you recall the first part of the year, our business was not up as much. And so we have seen a gradual increase all year long as we go forward. So I would say it's been gradually increasing as the year has gone on.

The last question. CorrChoice -- what was the EBIT that it added during the year?

Incremental. We really have not provided details by business unit. I would say that when we constructed the guidance bridge for 2004, we indicated that there would be about a 17 cents per share benefit as a result of no minority interest deduction, which clearly we realized that. We also signaled that as a result of the full integration of our network and synergies that there would be another contribution, and that was realized as planned.

Christopher Chung, Deutsche Bank.

Congratulations again on a very impressive quarter, guys. It seems like you were able to outperform even your own expectations from the last time we held a conference call quite significantly. Can you talk a little bit about what the factors were from your perspective that allowed you to perform so well?

I'll start off, Chris, by trying to answer that question. We were generally pleased with the quarter, so we'll start off by that; I think we did have a good quarter. What came together this quarter, and hopefully is starting to come together in the future, is we have talked over the year about this transformation effort that we have embarked upon. And this has been a big undertaking for our company, as any company would if they undertake the magnitude that we have, which is really look at instituting lean operations in all the plants, instituting a mindset in the commercial end, looking at inventory and working capital control, controlling SG&A expenses. And this is starting to come together. So I would think the biggest thing that really happened in the fourth quarter is that all these initiatives are starting to come together, and we're starting to get some benefit from that.

Now we've coupled that with seasonally-strong business in North America and our industrial packaging, seasonally strong business in the paper business, and a couple of those -- those three points together generated a strong quarter, which is what we reported on right now. So I think it's really a combination of the efforts that we've been putting through throughout the year that generated that. Do you want to add anything, Don?

No, I think that really explains it.

Great. And next, going back to slide 17, you mentioned that you are expecting another 82 cents a share in '05 from operational excellence. Can you help us out with a little more detail on what that encompasses and what if anything might be left even beyond 2005?

Yes. That is going to be a result primarily of our operational excellence initiative, as we continue to launch that across the enterprise. Also, there is a commercial excellence component, but it's primarily that operational excellence component that we identified really last -- for 2004 we indicated that the initiatives that we were undertaking were going to have an impact of $50 million overall, of which 15 million would be in 2004 -- reflected in 2004 results, and the remainder of 35 million would occur or benefit 2005. And we are pleased that we can provide guidance for 2005 that is really consistent with the expectations that we had set forth earlier in 2004. But that is primarily related to operational excellence, basically the lean manufacturing initiative.

Do you have any other initiatives in place that might see you benefit beyond 2005?

The Greif business system which we have referred to all this year is the transformation process, and we will start in future conversations talking about the Greif business system. It is an ongoing process of continuous improvement, continuous change. I like to relate this, Christopher, to being in school. We're probably in middle school right now, and we can go up to the next grade and get into high school and then to college. So there's different areas we can continue to improve in, and we have not launched those yet internally but we have processes that we're looking at to say can we take this even to the next step. So I think that we're going to -- this will be a continuous process of our system of how we operate in the future.

That's helpful. Thanks. Just a couple of more questions, if I may. Can you talk a little bit more, a little bit about your paper packaging business in terms of how much you got on the two rounds of box prices earlier this year and what the current conditions are right now?

Yes. We have realized about 50 percent of the first box increase in April, and then a little bit more than 50 percent for the August increase. So on a combined basis in the -- basically in that 10 to 11 percent range. So we feel pretty good about that. When you look at what's happened to containerboard prices over that period, they are up in the 20 to 24 percent range, based on pulp and paper, and our experience is tracking that quick closely. So it does imply a fairly full recovery downstream of the containerboard increase.

Finally, can you talk a little bit about what your priorities are for usage of cash going forward?

I will start off again, Chris. We have always said the last 18 months -- we'll continue to say it again right now -- one of the priorities is to continue to pay down debt. That is something that we've stated that we would do back in '01 when we made the major acquisition that put us on a global basis. So that will continue to be a priority. And while we were pleased with the paydown we did this year, we'll continue to work hard to continue to pay down debt. In addition to that, I think we're constantly looking at ways we can continue to expand and grow our company. I think there's opportunities out there for us on a one-off basis for us to look at, but our first priority has been and will continue to be to pay down our debt.

Have you guys disclosed sort of a target debt-to-cap ratio or any ratio like that that you would like to be, where debt paydown would no longer be a priority?

We did indicate that a total debt to capital ratio of 30 to 35 percent would be the target.

Okay, great. That takes care of all my questions. Thanks for your help.

Stefan Mykytiuk, Pike Place Capital.

Can you just comment on just whether there's a business reason or a strategic reason why your planned timber sales have been declining year-over-year, and they are expected to decline next year?

We said a couple years of ago that we would like to maintain our timber sales to be in the $30 million range. And we actually sped up the cutting in 2002/2003, and actually exceeded that quite significantly to the $45 million range. So we made a conscious effort this year and we're making a conscious effort next year to cut back on those timber sales so that we don't actually deplete that land faster than we had anticipated. We had some opportunities in 2002/2003 to take advantage of some opportunities when pricing was good, but felt that for the long-term benefit of that land -- and it seems to make sense that we have actually decided to make the decision to cut back on the cutting.

And along those lines, I think in previous calls you've mentioned the fact that at some point you want to look at your portfolio of businesses and decide where you should take them. So is there some sort of timeframe under which you decide -- you know, you plan to decide what to do with the current portfolio of three businesses, and specifically the timber business?

I think what we've said in the past if I remember correctly is that that is an ongoing process that we do. We're constantly looking at our portfolio of businesses. As we're looking at our plants, we're constantly looking at the utilization of assets and business. We have not self-imposed any timetable; I think that's a little dangerous to do that, so we do not have a timetable. But it's a process that we're ongoing, looking at on a continuing basis.

Sandy Burns (ph), Deutsche Bank.

First, in the industrial packaging business, you did a traffic job it looks like passing through the rapid steel and resin increases that you were being hit with throughout the year. I guess as you look into 2005, do you still feel pretty confident that the customers will accept those increases, or are you starting to see a lot more sustained push-back from customers given the increases you have achieved this year?

It's always concerning when raw materials rise at the tremendous rate that steel specifically did last year, and we are forced -- in this case forced to go out and raise prices to cover those costs. So it is a concern as we look at it, and we try to work very hard with the customers to see if there are ways that we can take costs out of the package to ensure that those packages don't get cost-prohibitive as they go forward. So, yes, it's always a concern as we go forward. So we're constantly working with our customers to say -- hey, is there a way we could take cost out of the system, down-gauge the product in some way to make it less costly to them. But we were really forced last year because of the higher rising, specifically steel.

Going forward, we have to address that. And it depends on what scenario you want to look at, what steel is going to do and what resin is going to do. But we cannot afford to absorb increases of the magnitude that they occurred last year. Our customers know that, have worked with us, but we all have to be concerned. We don't want to kill the golden goose here, so we've got to be careful that that those raw materials don't get so high that they affect the package. So, yes, that is a concern, but we work very hard with them.

Do you find most of your major competitors have gone along with price increases that pass through these raw material hikes?

Last year their increases, Sandy, were so draconian that everyone almost had to. Sometimes if it's a minor increase you can get companies that may or may not -- that may want to try to absorb it to get market share. But last year the increases were so large that no one had an opportunity; they could not absorb because they were so (indiscernible) so they had to. So last year -- '04 was sort of a different year from that standpoint because no one could afford to absorb them themselves.

Given your portfolio of businesses and customer base, obviously the Company's had a pretty good pulse on what is going on in the general economy. I guess just as you have had discussions with customers, what is your sense on what the feeling is in terms of economic growth next year? And I guess kind of tied into that, in your EPS bridge for '05 you talk about the paper packaging business being up in operational excellence, that there was no bridge in terms of additional, I'll call it organic growth away from the cost savings on the industrial packaging side. So I don't know if that's partly a view that that business has peaked at this point in time.

Not really a view that it's peaked; I think there's a view that there's some cautiousness there that there is continuing to be -- there's a concern that there could continue to be some cost pressures on raw materials, a big increase on steel in North America. Probably -- it looks like those are going to continue in Europe in 2005. There's concerns about what resin is going to do in 2005. So there's no bridge in '05 because of industrial packaging, not because we don't believe (indiscernible) that business has peaked, but we also believe that there is going to be cost pressures on that business. And you know, we're just going to have to address those issues as they come up.

I guess in terms of just general volume growth on the industrial packaging as well as paper packaging, say kind of a continuation of the trends you saw in the second half of the year. As you mentioned, the economy from your standpoint seemed to pick up a bit. Do customers feel optimistic that will continue until at least the first half of '05?

We're seeing cautious optimism. Certainly within the paper and packaging segment, we are in a seasonally slow period, and so we'll know more later in the quarter. But no, I would characterize it as really cautious optimism.

Last question. On the working capital front, your accounts payable has gone up quite a bit really in the second half of this year. I imagine a good portion of that is based on raw materials. Just wondering besides the raw material increases that you're seeing there, anything else happening there and do you feel that the current level is sustainable, or will it be some reversal in the first half of '05 as you have to work down some of those payables?

That's a very good question, and you're exactly right that it is being driven by cost inflation, without a doubt. Also there is a currency component. Europe, I guess not surprisingly, was one of the major contributors to the increase. We've also, as part of our working capital initiative, have been negotiating extension of terms. We have been increasing our utilization of procurement cards, which has a similar effect. So it's really the cumulative effect of those factors that has contributed to the increase, which really is sustainable. Now, there's a seasonal component. So based on the seasonally-lower volumes in the first quarter you'll see a reduction as a result of that. But it really -- it should be a sustainable situation, but it's basically onetime and can't be extrapolated to have that sort of improvement on a going-forward basis.

On the other side, the receivables, which also, obviously, impact -- get impacted by the raw material pass-through -- you've kept pretty constant. So it seems like you've been able to work that harder as well to collect on your receivables quicker.

Yes. And also, the inventory has been under good control. One of the metrics that we look at, we do track the operating working capital to sales ratio as an indicator of working capital efficiency. We also look at the operating working capital days, and we do that over a rolling 12-month period. And we have seen continued reductions in the days of operating working capital. They are down to 56 days, down seven days from a year ago, and once again, on a rolling 12-month basis. So there's definitely been progress across all components of working capital, but for the reasons that we have discussed, payables was particularly impacted.

(OPERATOR INSTRUCTIONS). Ross Haberman, Haberman Funds.

Very nice quarter. I got on a little late. I was wondering if you could just talk a little bit about what you might have said about your expectations on the paper and packaging side for calendar '05, in terms of selling, prices and volume, in terms of your expectations there as well as the cost side.

The one thing that's very fortunate is we have sort of a reversal of the situation of last year. When we entered 2004, containerboard pricing levels were down from the year earlier period quite significantly. And for this year, we have pricing at the end of the year that is quite a bit higher than the year ago period. So we do expect to realize a benefit as a result of that. We are assuming stable pricing. That is near-term perhaps an aggressive assumption, because we are in that seasonally-slow period, but we are anticipating price stability. And depending upon the level of activity early in the year, there has been talk about the possibility of a containerboard price increase. That has not been factored into our assumptions, but it is something that, clearly, if an increase were announced we would be supportive.

So there's no price increase baked into your $3 and change for '05?

There is also no price erosion factored into that. And another key assumption, as you know, is the cost of recycled fiber, the old corrugated containers, OCC. And we are basically assuming a modest uptick. But clearly, that is a key assumption underpinning the guidance.

Just two other quick questions. Further cost pressures on the paper side -- do you expect to see any moderation in terms of energy costs for that business, or it's going to stay stable -- stable, I guess, in terms of energy?

Energy has been a significant cost factor for 2004. We have seen a bit of stability. We also have hedged our natural gas requirements, which are significant at our Masolin (ph) mill. Those are approximately 90 percent hedged. So I think we've done about everything that we can to manage the risks associated with energy, and it's really difficult to comment beyond that.

On the industrial packaging side, are you running at full capacity now?

In industrial packaging? No, we are not. We still have headroom in our plants -- in most of our plants. In some plants we have it, but most of our plants we have some headroom that we could run more business.

Could you give us a sense of given where the dollar has gone the last one or two or three months, how do you see that affecting -- clearly, I guess it's going to help on the translation coming back in, but how do you -- what other effects do you see that happening?

The impact for 2004, as you know, on a full-year basis it's contributed about 5 percent of the 15 percent topline growth. And if you were to look at what the operating profit impact would have been, it was approximately $4 million.

That was for the year?

That was for the year.

And that was an operating -- a positive operating (multiple speakers)

(multiple speakers) operating profit impact as a result of translation.

That was overall or that was just for the --

That was overall.

If rates, for argument's sake, stayed where they are today, would you expect to see similar type of translation gains in '05 if we kept the same exchange rate?

If we remained at the 133 level, I think that's a reasonable assumption.

I guess what I'm trying to think about is given the exchange rate, would you begin to export goods given the exchange rate at some point there?

Ross, our products -- part of the problem with our products is that they are very difficult to ship long distance empty. We ship a lot of air, so the opportunities for us to export finished products is not very good.

I didn't know if the exchange rate got to such a point where it would pay to do that.

Not yet.

That's what I'm thinking about.

We would have to go a long ways to get there, and it's not there yet. We have opportunities to move -- to look at our global spend from a raw materials standpoint, but from a finished goods standpoint, that would be -- I can't phantom (ph) where the exchange rate would have to come from.

I was just curious about that aspect of it. And I've got to ask my final usual question. Are we any closer about combining the A and D stock than we were a quarter or two or three ago?

We'll give you the same answer.

Don Netter (ph), Dawson (ph) Partners.

Let me be the sixth person to congratulate you on a really fabulous year. Mike, Don, your group -- you've done a wonderful job with the operating performance of the Company, integrating CorrChoice and Van Leer, achieving enormous cost savings. If I look on page 16 of your financial performance goals, and you have return on assets in 2006, a target of 20 percent, would it be fair to say if the Company sold in a tax-efficient basis its domestic timber, which is presently exhibiting declining returns, that that 20 percent would be understated?

We haven't run that math through, Don, as it sounds like you may have run the math through. So I would --

I'm just speculating, but you have some numbers throughout your presentation on various assets and their returns. And if, for argument's sake, that's a $300 million asset, and you sold that tax-efficiently, the question for you guys is would that make your job a lot easier in 2006 with that 20 percent target?

I think that there's ways to -- our job isn't really just focusing on one metric. We have a -- that's the reason we have a combination of metrics to look at, and one of them is return on assets, which we think is a good way to measure ourselves. And I think we could speculate if we would sell this business or do that what it would make our job easier. But as we said earlier in the conversation, we're constantly looking at the portfolio of businesses and constantly are going to decide. I think we would leave it at that at this point.

At this time I show no further questions. I would like to turn the conference back over for any concluding comments.

Thank you again for joining us on today's quarterly conference call. As a reminder, this call will be available for replay from noon Eastern time today through noon on Tuesday, December 14, 2004. For domestic callers the number is 800-405-2236. For international callers the number is 303-590-3000. Please use the reservation code 11016496#. You can also hear a replay and see the slides at the investor center on our website at www.greif.com. This call will be posted in approximately one our. We appreciate your participation.

Ladies and gentlemen, this concludes the Greif, Inc. fourth quarter and fiscal 2004 results conference call.