Greif Inc (GEF) 2005 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Greif, Inc. third-quarter 2005 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, today's call is being recorded Thursday, September 1, 2005.

I would now like to turn the conference over to Ms. Deb Strohmaier. Ma'am, please go ahead.

Thank you and good morning. At this time, I will read the Company Safe Harbor statement, which appears on slide 2. 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, 2004. The Company assumes no obligation to update any forward-looking statement.

In addition, as noted on slide 3, this presentation includes certain non-GAAP financial measures that exclude restructuring and other unusual charges and gains, such as timberland gains that fluctuate from period to period. 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. Stable showing the reconciliation between GAAP and non-GAAP measures are available at the end of this presentation and in the third-quarter 2005 earnings release, which is on the Greif website at www.Greif.com.

Now, I will turn the call over to Mike Gasser.

Thank you, Deb. Good morning and welcome to our call. For those of you following our presentation on the Web, if you go to slide 4 that is where I am going to start.

We are pleased with the strong cash flows and substantial reduction in debt during the third quarter, which benefited from the completion of the first phase of a significant timberland transaction. We also took action to mitigate soft market conditions, particularly in North America by expanding commercial excellence activities and adjusting costs consistent with operating performance.

We are encouraged by the generally stronger order intake levels this quarter end across our North American product portfolio. Additional contributions from the Greif business systems and benefits from our strategic sourcing initiative position us to continue to deliver strong year-over-year improvements in 2006.

Slide 5 recaps our news for the quarter. We closed the first phase of our Florida timberland sale. Proceeds from the first installments were monetized on a tax efficient basis and used to pay down debt. The second phase of this $90 million transaction is expected to be completed in several installments during 2006. We made three senior management appointments during the most recent quarter. We announced the successors to John Lilak, Head of our Paper, Packaging, and Services business and of Soterra, a wholly-owned subsidiary with timber assets in North America. We are extremely pleased that Mike Patton will be leading Paper, Packaging, and Services upon John's retirement. Currently, Mike is Senior Vice President of Transformation Worldwide -- has been instrumental in introducing and implementing the Greif business system in our operations.

Mike is coming full circle. He came to Greif from International Paper to work on our Paper, Packaging, and Services division, then led one of our North American regions in Industrial Packaging and Services before he's appointed to oversee the implementation of the Greif Business System. John is currently working with Mike to affect a smooth transition.

Because much of our timber business involves the legal aspects of land use, land purchases and land sales transactions, we placed our timber division under Senior Vice President and General Counsel, Gary Martz, who has a tremendous amount of experience with the business.

We also named Ivan Signorelli to lead Industrial Packaging and Services Europe. Previously, Strategic Business Unit Manager of Latin America and Africa, Ivan has extensive international experience that he is using to an advantage with employees and customers in his new position.

Now to slide 6. We continue to gain benefits from implementation of the Greif Business System throughout the world. As we complete the introduction of its tools and processes out our plants and as we continue to entrench the right business system and everything from purchasing to production to sales, we are identifying actions that will unlock value and achieve real economic benefits.

On slide 7, as you look to 2006, we anticipate more efficiencies and savings to be gained through further realization of the Greif Business System across the enterprise. Also further leveraging of global sourcing will help us achieve improved results. Construction continues in our new steel drum and water bottle plant in Omsk, Russia, which is scheduled to open later this year. This factory strengthens Greif's position in the growing regions of Western and Southern Siberia in Kazakhstan -- continue to evaluate opportunities in China. Last month, Eugene Leug (ph) began as our China business unit manager. His focus is on increasing Greif's presence and profitability in this significant high-growth emerging market. Originally from Shanghai, Eugene has a broad international strategic business background.

Now on slide 8. 2.5 years ago, we initiated our transformation process, which is the predecessor of the Greif Business System. During this period, we have specifically focused on re-earning our right to grow by optimizing SG&A expenses, improving our operations and commercial performance, strengthening the balance sheet, and increasing our financial results. Recently, we expanded our goals to include the achievement of a sustainable advantage in our businesses that will lead to further growth and profitability. The 50% increase in our quarterly cash dividend, which was announced on June 1, 2005 reflected the Board's and management's confidence that substantial benefits can continue to be realized through the Greif Business System and related initiatives.

That wraps up my portfolio of the business for the quarter. Don will now provide you with an update of our financial results.

Thank you, Mike. Good morning, everyone. Slide 9 presents our financial summary for the quarter. Net sales rose 4% to 609 million for the third quarter compared to the same quarter last year, and we were up 2% on a constant currency basis. Higher selling prices primarily in response to higher raw material costs were partially offset by lower volumes for certain products, which reflected soft market conditions experienced by many of our customers. However, volume trends appear to be turning favorable.

Operating profit before restructuring charges and timberland gains increased 2% to 44 million for the third quarter compared to 43 million for the third quarter of 2004. The timber segment operating profit declined 3.3 million compared to last year due to lower planned at timber sales. Otherwise, operating profit would have been up 10% from the same period last year.

Diluted earnings per share before special items were $0.93 versus $0.80 for Class A share and $1.42 versus $1.22 for Class B share for the third quarter of 2005 and 2004, respectively.

If you move to slide 10, gross profit was 94 million or 15.3% of net sales for the third quarter versus 100 million or 17.1% of net sales for the third quarter of 2004. Improved selling prices and additional labor and other manufacturing efficiencies related to the Greif Business System were more than offset by higher raw material costs and lower absorption of fixed costs. During the third quarter, selling prices, especially for steel and plastic drums, declined faster than average raw material costs that respond on a lagged basis. This contributed to the gross profit margin erosion during the quarter.

Raw material costs, including steel and resin, have recently stabilized and are expected to trend upward near term. This should result in gross profit margin exposure in the near future.

On slide 11, selling, general and administrative expenses were 52 million or 8.6% of net sales for the third quarter compared to 57 million or 9.8% of net sales for the same period a year ago. SG&A expenses continue to be adjusted consistent with changes and operating performance.

On slide 12, net sales rose 5% to 457 million for the third quarter compared to the same period last year. Higher selling prices were partially offset by lower sales volumes for steel and fiber drums. Operating profit before restructuring charges rose to 36 million for the third quarter from 34 million for the same period a year ago.

The third-quarter comparisons for our Paper, Packaging, and Services businesses are shown on slide 13. In this segment, net sales rose 6% to 152 million for the third quarter versus the same period last year due to higher selling prices and improved sales volumes for containerboard.

However, sales volumes for corrugated sheets and containers on a composite basis were down 4% year over year. This does however compare favorably to the 9% decline during the comparable period in the East Central region, as reported by the Box Fiber Association -- the Fiber Box Association. Operating profit before restructuring charges was 8 million for the third quarter compared to 6 million the prior year.

Slide 14 reflects performance in our timber business over the past 4 years. Timber sales have been consistent with planned levels during all of the years shown on this slide. As Mike had noted earlier, we have completed the first phase of the sale of 56,000 acres of timberland -- timber and associated assets -- for $90 million. The first phase resulted in a gain of $42 million for the quarter. The second phase is expected to occur in several installments during 2006. We will recognize additional timberland gains in the periods that these transactions occur.

Slide 15 profiles our capital structure at the end of the third quarter at fiscal year end to 2004 and at July 31, 2004. Based on strong free cash flow and financial discipline, net debt at July 31, 2005 was down to $360 million compared to 431 million at fiscal year end and 592 million for the same quarter last year. Net debt to net capitalization was 33.7% at the end of the third quarter compared to 40.7% at October 31, 2004 and 49.8% at July 31, 2004. We are very pleased with the continued strengthening of our balance sheet and improved financial flexibility.

Our key financial performance targets are shown on slide 16. We continue to trend in the right direction to meet our goals, and we have already exceeded our 2006 targets for SG&A to net sales and operating working capitals to net sales.

Slide 17 recaps the savings we have achieved through our transformation to the Greif Business System. From its inception through 2004, the Greif Business System delivered annualized benefits of approximately $80 million. Additional annualized benefits of approximately 35 million are expected for 2004. A key driver as we enter the next phase of the Greif Business System is strategic sourcing, which will more effectively leverage the Company's global spend and provide the foundation for a world-class sourcing and supply chain capability. Incremental benefits of 25 million are expected to be realized during 2006.

Slide 18 includes our guidance. Results for the Paper, Packaging, and Services businesses are anticipated to be impacted in the fourth quarter of 2005 by the recently announced containerboard price reductions. This significant factor coupled with a higher energy and other input costs for the Company during 2005 resulted in management revising its guidance before special items to $3.25 to $3.35 from $3.50 to $3.60 per Class A share for 2005.

Management remains optimistic about 2006. Based on the expectation of improving market fundamentals from current levels, recent announcements related to the paper and packaging industry's rationalization of certain capacity and stabilization of commodity prices, particularly steel. In addition, the Greif Business System will be further embedded, and approximately 25 million of incremental savings are anticipated to be realized from strategic sourcing in 2006.

That concludes my formal remarks, and you should now click to slide 19. Mike and I will be pleased to answer your questions.

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

A couple questions for you. First of all, could we get a little more color on the volume side? I think you mentioned volumes were up in the paper side of the business I believe 4%. Could you walk us through where volumes were in your industrial packaging side and maybe a little more specifically by steel drums, by plastic drums, etc., as is important?

As far as the paper and packaging side, you are correct. On the converting activities on a composite basis were down about 4%. And as mentioned in the formal remarks, that does compare favorably to the primary market that we serve, the East Central market, which was down 9%. In addition, the mills were actually up about 2% based on increased third-party sales of containerboard.

As for the industrial packaging, we are really not able to disclose volumes by substrate for competitive reasons. But in terms of characterizing the volumes for the quarter, they were basically on a year-over-year basis down in the mid-single digit range. And that really reflects soft market conditions within the chemical and related industries, which represent about two-thirds of our end-use markets.

And we also did not get the normal seasonal strength from the West Coast agribusiness. We have a very strong franchise for providing containers for tomatoes, garlic and onions. The harvests have been down markedly, and that has impact volumes and has also had a margin impact since that tends to be very profitable business.

The one positive really is that sequentially, we have seen improvement. And as Mike mentioned, the indications early in the fourth quarter are really quite positive based on the uptick in order intake levels.

Well, how about can we look at volumes that say North America versus internationally, Europe or others? Was North America better or worse than your down mid-single digit?

North America was down a bit more than Europe and other regions.

And Chris, Don mentioned this, but I think it is worth repeating. Part of that volume decrease in North America was both a smaller food business on the West Coast this year and a delay in starting it. Last year in July, we had a lot of food drums. This July, quite honestly -- we won't get into monthly numbers -- but this July was more comparable to what a December would look like for us. December is historically a very short month volume-wise and primarily because a lot of the companies that we serve either took extended periods down or ran from their inventories. We are seeing that activity markedly improve in August. And so that affected both our year end -- with our quarter ending in July -- July being a short month hurt us in July, but we also seen a nice increase so far in August.

One last question and then I will jump back in the queue. With Hurricane Katrina running through the heart of your timber portfolio, any first thoughts as to how your lands fare? Could there be potential for -- you would have to cut more timber in the short run if some things got knocked over or something of that nature?

Well Chris, that obviously is a tragedy. And our first and foremost objective when something like that happens is to make sure our people are safe. We are very comfortable right now that they are safe, and we are very thankful for that. We do have some people that we have not got a hold of in one of our drum plants, but that's really because -- as you know -- there is no cellular phone, no electricity in certain of those areas yet.

First blush and timber -- and we have not got to all of that -- but we look like we will scave (ph) remarkably well through this process. We have looked at our land east of where the eye went, and that was relatively okay. Maybe 1 to 1.5 tree per acre fell down is what they reported back to me, which is relatively nothing.

We had already lined up, Chris, Matt Bond (ph), who runs that business for us, is a very conscientious person. He had already lined up loggers to be on standby that if we had a lot that they would get in there as soon as they can to get it out of the field. It looks like maybe the eye of the hurricane went through a small track, and I'm talking maybe a couple 1,000 acres. So it is nothing major. So we don't look like it is going to be a big deal at this point in time. We have not seen all of the lands yet. Because part of that region, especially when you get closer to New Orleans, it is still a war zone down there. But it looks like -- knock on wood -- that we got through this remarkably in good shape.

And we had two plants in the region. I will report on both of those. Both of those are fine. They both -- one is running right now, and the other one is not running. But they do have power in the buildings -- came out okay.

Also to follow-up on that, any thoughts on -- obviously, a lot of your drums are used for -- you've mentioned chemical and related two-thirds of your use. Any thoughts as to somehow some of your key customers may have fared down there? Could there be some potential for short run lower volumes?

We are still assessing that. It could cut both ways, Chris. We know that we have a lot of competitors down there, who have only one plant, and we know their plants are down. So we have got a lot of calls this week from customers of our competitors, and we are working on. One of the advantages we have -- have multiple locations. When a catastrophe like this happens that we can pull product from many locations. We have always used that as a point of distinction between ourselves.

And so it could cut both ways. And we're actually looking at -- there might even be some potential volume increases. And we are still assessing. It is still pretty early in the day to -- because of the lack of communication that seems to be coming from that region at this point in time.

Christopher Chun, Deutsche Bank.

Could you talk a little bit about what's going on with prices in your containerboard and box business? You know, industry data suggests that containerboard prices have come in quite a bit over the last several months. I was just wondering if you could tell us what prices were like 3Q versus 4Q or 2Q and what you're expecting for 4Q.

Yes, we have seen on a year-over-year basis an increase in basically at the containerboard level that would be in the $35 range year over year -- sequentially, fairly flat. But based on the recent pulp and paper transaction price reductions, we know that for the fourth quarter, there is going to be a cumulative decline of about $55 that is likely. And that's basically is what has triggered the downward revision to our guidance.

In terms of downstream for our sheets and box businesses, we are up on a year-over-year basis in pricing, not quite as much as at the containerboard level. And pricing has been down in the low-single digits on a sequential basis.

Okay and then in terms of further erosion that might have been due to the reductions in containerboard prices in your box and -- business? Will that be substantially contemporaneous, or will there be a lag?

That is fairly contemporaneous unfortunately. We are doing everything that we can to delay the implementation of those reductions. But we do need to keep our customers competitive. But those reductions are transmitted through the market fairly rapidly.

And moving on to your timber business. I've noticed that your timber income has come down presumably on lower arbitz (ph) volumes. Can you talk a little bit about why that is, and what we should expect for the future?

Well, I will start by just giving you why it is, Christopher. We had signals earlier in the year that we were going to be cutting less, and it is really a factor of how much we cut. Part of -- we had anticipated really cutting a little bit of the Florida timberland this year. But when we had an opportunity to sell the whole property, we did that. We actually took some cuttings that would have been considered as ordinary income and actually sold it as part of the land. So some of that got reclassified from timber income into the gain on sale of timberland. So part of it is because of that.

We have always looked at cutting on sustainable basis. We cut more in '03 and '04. We anticipated to cut less in '05, and we're really just working the plan that we had set up to do. It is something that we really can control a little bit the cutting. We obviously look at market pricing, and how that fluctuates would dictate a little bit. But most of these lands we have a plan way in advance of when we are going to cut it. Do you know what the number we had for cutting off the top, Don?

I don't know what that is off the top --

We basically are expecting that to be fairly flat on a full year basis.

Moving on to your land sales. You talked about the fact that you are able to accomplish that tax efficiently. Could you tell us a little bit more about what the tax impact exactly was and how it was that you are able to structure it in a tax efficient manner?

Yes, we used a fairly traditional structure for monetizing timber properties. A lot of our timber was acquired in the early 1900s, so the cost basis is extremely low. So clearly, there was a concern about tax leakage. So basically, the structure that we used was an installment note. And without getting into really the details of that note, we basically in consideration for the sale of the timber to the buyer, we took the note and then we basically securitized that note and then realized $43 million in proceeds.

If we had not used that structure, we would have basically paid taxes on the $42 million gain at a 38% rate. So that would have been about 16 million. So we would have received proceeds of about 34 million. So you can see that that structure basically resulted in cash proceeds of about 8 to $9 million above what the net cash proceeds would have been in an outright sale.

(OPERATOR INSTRUCTIONS). Bob Franklin, Prudential.

Sorry if you mentioned this, and I missed it -- what are your current plans now for the balance sheet now that they've paid down more debt?

We basically had targeted a net debt to net capital ratio of in the 35 to 40% range at the time the balance sheet was levered up to do the Van Leer transaction. So we are now in that range. And at this point, we feel very comfortable with the flexibility that we have.

Yes, and I will just add a little bit more color to that, Bob. Is that we have looked at this, as Don said, we are very comfortable with the debt where we have right now. We did increase the dividends fairly substantially, which we mentioned in our prepared remarks. We increased it 50% actually in June 1st. So that is actually giving some money back to the shareholders. And we will continue to be opportunistic as -- if there is some opportunities come by that we can you use our balance sheet, we will look at those.

We made a commitment to you when we bought Van Leer that our first priority would be to pay down debt. We have done that to the level we said we were going to do it.

Continue to pay it down would be okay too. So if those opportunities don't come up, that is not a problem. So we will continue to --

What is there to pay down? I can see that you would build cash for the net debt calculation. But I'm not sure what you have for bank debt or prepayable debt at this point.

Basically, the borrowings under the revolving credit facility of 350 million or about 65 million. So your point is a good one. Once you get beyond that, then you are really talking about the 10-year notes that are outstanding.

Has there been any discussion about those?

We are always looking for opportunities to lower our cost of capital, so we have evaluated different options.

You mentioned using the balance sheet. How often do you see acquisitions you could make?

How often did you say, Bob?

Yes, is that an active thing you are looking at?

We have in the industrial packaging end of the business, we have done a good job of rolling that industry being a consolidator in that industry. So we are constantly looking at other options to either enhance our position in that business. Or if we have a portfolio weakness, we look at that. So I would have to say -- yes, we are always looking at opportunities.

We get calls all the time from people in that business, so we are always talking to them. We are looking for those right opportunities. So it is an ongoing process.

Mike Peasley (ph), Priority Capital.

Would you mind giving a little bit more color on how volumes have changed here in August? You've said they have turned favorable. Are you speaking more on a sequential basis or on a year-over-year basis? And then it sounds like obviously they are up on the industrial packaging side, is that also true on the paper side?

Yes, we are definitely referring to a sequential uptick and really across the portfolio in the mid-single digits. Some of that is clearly a seasonal uptick and to be expected. Basically, in our industrial packaging side, we will be a bit below the difficult comparisons for the fourth quarter of 2004.

On the paper and packaging side, we will be for the mills positive on a year-over-year basis in the low-single digit range and then are converting activities basically downstream. We would be flat with the prior year.

So just based on your expectations at the end of the previous quarter, where you sort of expected volumes to be flat for the second half of the year, the industrial side is the segment that seems to be lagging a little bit. Is that right? Is that fair?

I think that is a fair characterization.

Have you given any indications on preliminary what you might see in '06?

No, it would be a little bit premature based on where we are in the budgeting process. We did provide a step of the bridge to 2006 based on strategic sourcing. Because our team has really done a very good job of formalizing their plans for 2006. They have identified the opportunities through the diagnostic that they have performed. They basically put the infrastructure in place and the tracking mechanism. So we are highly confident in their ability to deliver the impact. So we felt comfortable providing that step of the bridge. And then on our next conference call, I will provide additional guidance.

Chris Manuel.

Two quick questions for you. One is on the transformation or from restructuring things of that nature -- saving side. You talked about this year being 35 million. First quarter, you had 12, second quarter 15. Can you give us an update on what you achieved in the third quarter?

Yes, it is becoming increasingly difficult, Chris, to really discuss sort of the impact. I could give you our impact, but we do have some offsets based on the issues that we have discussed. We clearly are expecting to realize fully the 35 million that was part of the guidance that was provided. I think there is upside potential. But quite frankly, there are also some downside risks that may very well be offsetting.

And then on the procurement initiatives, I think previously you indicated you might get about -- I think last quarter when I asked the question, you said maybe 10 million this year. And now you're quantifying next year as 25 million; that would leave the balance in '07. Is that accurate?

Yes, and that's really going to be an ongoing process. But that is definitely accurate. We are very pleased with the opportunities that have been identified. We have much greater transparency of our global spend, and it's really surfacing some additional opportunities, including low-cost country sourcing for our locking bands and levers and latches. It's taking a little bit longer. I think sometimes one tends to underestimate the challenges of standardization and really some of the enablers to leveraging the global spend. But we're really making very good progress. So basically, the guidance that we are providing for sourcing is a bit above previous expectations.

And Chris, part of this is that we have really put together a top-notch team to run this sourcing initiative. As we said earlier in the year, we put Ron Brown, Senior Vice President, who ran actually one of our big operating businesses in the past -- put him in charge of sourcing. And then he has gone out and hired some real good professionals from industries that had sourcing as one of their core competencies.

So we are expecting some big things. And to date, they've been able to deliver on them. So this is something that we believe it's going to be a big plus for us in the future.

And previously you had discussed last quarter as well, potentially expanding and doing a little more restructuring. Can you give us an update there as to what the thought process is? I think you had identified some opportunities you said and made a decision on them. Any update?

I would say that in Europe, we are looking at some opportunities to really take the Greif Business System to the next level. Clearly, as we are improving our productivity, we are identifying some rationalization options that at this point we really haven't bracketed. It's something -- clearly, on a full year basis would be substantially below any of the timberland gains that we have that we expect to realize. But there are a few opportunities for further rationalization of the footprint.

But no decisions have been made yet, Chris, on this, so we really can't report that. I'm actually going to be in Europe in October and look at some of those projects. We will make a decision shortly thereafter I think. At our next conference call, we probably will have some -- we will be able to give you some update then.

And then the last question I had, Don, was -- when you had originally given us earnings guidance for '05, you had gone through a bridge where you had your restructuring savings in there. You had paper packaging pick-up there, a little fall-off from timber for lower timber sales you had planned. You had an other line. And you got to that 350 to 360 number. I realize you haven't necessarily updated that particular bridge. But conceptually, if you were going to change that bridge to match your new guidance that you're giving today, what would be the big drivers in there? It sounds like most of that is in Paper, Packaging, and Services segment. Is that fair? Or is there some other moving parts as well?

There are definitely moving parts. That, I will acknowledge. But clearly the trigger for the revision in guidance was the pulp and paper transaction price reductions. When you do the extension -- and I know you've already done it -- that is an $8 million impact at a minimum. That is basically assuming no further erosion. And we are expecting energy and transportation costs to be up about $2 million. And so that is really the $10 million or $0.25 per share revision to the guidance.

But to your point, there are some offsetting items. But that is really the trigger for the revision.

I guess another direction I wanted to go with this question as well was -- embedded into that original guidance was that the industrial packaging side would remain fairly stable, let's say. Has there been any change in that business? Or maybe another way of looking at it -- is it performing as you would have originally anticipated?

I will start off on that, Chris. Obviously, we didn't -- when we started the year -- anticipate the softness in the market that we experienced. We have done a very good job of flexing down costs to match those volumes. That was our responsibility. It's first to get enough feet on the ground to make sure we are getting every sale that we possibly can. And then second is to flex our costs or to match our costs to be commisatory (ph) to the levels we had.

And honestly, we didn't expect the market softness. But to profitability is -- it's that softness that has been mitigated to a big extent by both the Greif Business System, which is continuing to deliver real cost savings, and by us flexing the costs down. So I think we keep on going back to the biggest unknown, the biggest change from what we started back in December of the 350 to 360 -- is the paper price decrease, which -- if you remember that call, we got questioned a little bit why we didn't have any paper increases in our plan because we had projected no paper increases for the year.

I was anticipating and hopefully that there would be one. I do not think anyone anticipated the decreases (multiple speakers).

The other direction, right.

And gentleman, there are no further questions at this time. Please continue.

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, Septembers 6th. The playback telephone numbers are 800-405-2236 for domestic callers and +1-303-590-3000 for international callers. That passcode is 11037679#. This call will be posted on the Company's website in approximately 1 hour. We appreciate your participation.

Ladies and gentlemen, this concludes the Greif, Inc. third-quarter 2005 results conference call. Thank you all for your participation today. You may now disconnect.