Greif Inc (GEF) 2006 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Greif third 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 Thursday, August 31st, 2006. I would now like to turn the conference over to Deb Strohmaier. Please go ahead, Ms. Strohmaier.

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

We are now on slide 2. The information provided during this morning's call contains forward-looking statements; and 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 and 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 express 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 by 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 third quarter earnings release.

I will now turn over the call to Mr. Gasser.

Thank you, Deb. Good morning and thank you for joining us on our third quarter 2006 conference call.

If you're following our presentation on the Web please go to slide 4. During fiscal 2006, we have focused on implementing our strategic plan that was developed last year. We continue to strengthen the right Greif business system across our global footprint.

Also we are managing our business in a disciplined matter which includes the exploration of opportunities to achieve increased growth and profitability, and consolidation or redeployment of underperforming our nonstrategic assets within each of our three business segments.

Our focus is bearing fruit. We are pleased with our third quarter results. Generally higher volumes and improved pricing contribute to strong topline growth which in turn drove solid improvement in operating profits.

On slide 5 we have taken another turn of the crank of the Greif business system. We believe there remains the opportunity to achieve additional net savings by at least 5% of cost of goods sold over the next three years.

Industrial packaging plants around the world are taking a fresh look at their operations to find additional efficiencies in waste cutting opportunities. We continue to train our employees through our center of excellence and they in turn continue to focus on using main fundamentals to increase labor productivity, yield and throughput. We're also identifying world-class practices to institute in our plants.

Paper packaging operations continue with their first turn, replicating in a fairly short amount of time what has been achieved already by industrial packaging. We also are extremely pleased with the improved fundamentals in paper packaging which doubled its operating profit over the same quarter last year with no material onetime events.

Timber is actively managing assets to unlike value, consistent with our long-term plan. As noted in last quarter's conference call, we estimated that 8 to 10% of our timber holdings in the United States would possibly qualify for special use designation. During our third quarter we identified approximately 20,000 acres in the United States that would qualify as higher and better use property.

Sourcing has had a very good year, driving impact on indirect and direct costs, working capital and inventory management. As one example on a combined basis, there is an eight-day improvement in days inventory outstanding, compared to 2005 and the trend is excellent.

Overall our sourcing organization is eager to take on the challenges that lie ahead as we look to sustain what has been achieved and create even more value. In each of our results we have clearly re-earned our right to grow and have entered their earn and growth stage of our strategic plan.

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

Thank you, Mike. Good morning, everyone.

If you would please go to slide 6. We're delighted with our record third quarter net sales, which increased 12% on a constant currency basis compared to the same quarter last year. Improved volume levels contributed 7% of the increase; and price and mix explained the remainder.

All three of our business segments contributed to the increase.

Gross profit margin improved 4.5 points to 19.8% of net sales in the third quarter, due largely to the improvement in net sales; positive contributions from the Greif business systems; and favorable operating leverage. Overall benefits to gross profit continued to be partially offset by higher energy and transportation costs compared to the same quarter last year.

SG&A expenses were $70 million or 10.2% of net sales in the third quarter compared to 8.6% of the third quarter of 2005. The increase was primarily due to higher accruals for performance based incentive plans, resulting from improvements in our current and planned results.

On a full year basis, we expect SG&A expenses to be at or below our 10% of net sales target for fiscal 2006.

Operating profit before special items was 75 million in the third quarter, compared to 44 million in the third quarter of 2005 due to positive contributions from all of our business segments and geographic regions.

We also realized 8.8 million in gains on disposal of certain assets which primarily included monetization of a corporate surplus property and disposal of a warehouse in Europe. Net income before special items was 43 million in the third quarter compared to 27 million in the third quarter of last year.

Now on slide 7. In the industrial packaging segment, net sales rose 11% on a constant currency basis in the third quarter over the same quarter last year. The improvement in net sales was primarily due to strong organic growth. We also benefited from contributions from tuck-in acquisitions in fiber and plastic drums, and continued growth in sales volumes and emerging markets, particularly Russia and China.

Operating profits before special items rose to 57 million compared to 36 million a year ago. Gross profit margin improved to 20.5% in the third quarter compared to 16% the same quarter last year. This improvement was due to higher sales volumes, improved absorption of fixed costs, and the Greif business system.

Slide 8 shows results for the paper and packaging segment. Third quarter net sales increased to 172 million from 152 million last year, primarily because of higher container board selling prices and increased corrugated sheet volume. Operating profit before special items was 16 million doubling year ago levels, resulting from the full implementation of a $50 per ton increase in container board prices and improved sales volumes of corrugated sheets.

In addition our container board mills operated very efficiently during the quarter, setting several production records for those facilities.

Slide 9. Timber net sales for the third quarter were 3 million compared to 900,000 the same quarter last year. Operating profit before special items was 2.3 million including 1.9 million from sales of special use properties, compared to 100,000 in the third quarter of 2005.

We are now on slide 10. At July 31, 2006, our net debt of 274 million is 86 million less than the same date last year. Net debt to net capitalization is 25.7% at quarter end. Net debt includes 442 million of debt, less 168 million of cash. Our transactional cash requirements are approximately $50 million.

The surplus cash position of 118 million represents a temporary accumulation of cash in Europe, which will either be permanently reinvested or repatriated in a tax-efficient manner beyond fiscal 2006.

Our chief performance metrics are shown on slide 11. Operating profit margin before special items was 10.9% for the third quarter of 2006 and 8.5% for the prior 12 months. SG&A to net sales was 9.9%. Operating working capital to net sales was 8.9%. Our [Rona] achievement of 19.6% keeps us in the range of our 20% target for 2006.

Based on our achievements to date and our improvement trajectory, we are raising the performance bar. Our fiscal 2009 financial objectives are as follows. Operating profit margin of greater than 12.5%, Rona of greater than 25%, SG&A to net sales of less than 7.5% and operating working capital to net sales of less than 7.5%.

Each of these objectives represents at least a 25% improvement from the fiscal 2006 targets, all of which have now been achieved on a last 12 months or run rate bases.

We expect to deliver the upwardly revised targets by fully embedding the Greif business system within paper and packaging implementing the next chapter of the Greif business system with industrial packaging, including moving beyond optimizing the four walls of its plants to network optimization, based on best in class benchmarking. And by capturing additional sourcing savings.

In addition an administrative excellence work stream has been initiated to eliminate waste, drive standardization and create a scalable infrastructure, to support profitable growth in the future.

We will now go to slide 12. Double-digit sales growth, ongoing initiatives to strengthen the Greif business system, and improved industry fundamentals resulted in strong financial results for the quarter. Because we expect this momentum and these factors to continue to positively contribute to our results in the fourth quarter, we are raising our fiscal 2006 earnings guidance before special items to a range of $4.25 to $4.35 per Class A share. This range is approximately 30 to 33% above fiscal 2005 on a similar basis.

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) Christopher Chun with Deutsche Bank.

Thank you. Good morning. Congratulations on a fine quarter.

Great. Thank you.

Thanks Chris.

Thanks for the additional long-term target that you presented on slide 11. It seems like you guys are targeting some significant continued improvement over the next three years. Can you talk a little bit about your level of confidence in achieving these targets?

Yes Chris. I would say that these first three years of really embedding and optimizing the Greif business system give us a lot of confidence in our ability to deliver those results. And one of the ways to look at it is, basically, as I mentioned in the prepared remarks we have three primary focuses for closing the performance GAAP to achieve those new targets.

The first would be the operational excellence work stream of our Greif business system. We are very excited about the potential that Mike had referred to of really increasing the gross or really increasing the contributions so that we are able to lower our cost of goods sold by 5%. That will really be the combination of operational excellence and the sourcing savings.

So we have those two key elements and then the third would be the SG&A and that will really be by improving the scalability of our infrastructure as mentioned in the formal remarks and, really, as we grow, not adding to the SG&A proportion proportionately. So it is really going to be more true leverage as opposed to any draconian cuts.

Hi, Chris, this is Mike. We -- as in any goals you try to have stretch goals out there that challenge your organization to get to their optimum level and I think we set those in 2003 which were the 2006 goals.

We were very pleased to reach those goals so I think we have a degree of confidence that if we continue to develop the capabilities that we have started to develop here and continue to execute that these stretch goals can be obtained in 2009.

That's very helpful. Thanks. Moving onto the 20,000 acres of HBU land, can you talk a little bit about where exactly those acres are? Whether you have any plans to provide any more specific information on them? Maybe in terms of the timing of how you might capitalize on their HBU potential?

Yes. Let me start off, Chris, and then, Don can fill in the gaps that I might miss. I am going to start off by saying that last quarter we estimated a range; and during this quarter, during the third quarter we actually went and identified property.

So we have identified approximately 20,000 acres. So we have made some progress there. Most of this acres -- all of these acres are in the Southeast United States in that quadrant which is where we have the majority of our timber holdings.

This was identified by our people so we are fairly confident, but we have not market tested this yet. This information. And this process of the HBU land is going to be an ongoing process. It is not a one off. So we continue to look at that.

We are going to be disciplined sellers of this property similar to what we are disciplined buyers. We believe that brings us the greatest value to our shareholders by being disciplined so it is not going to be a fire sale and it is not going to have an artificial timetable that we need to meet because we think that that will not allow us to get the greatest value.

So as we continue to develop information we will be transparent to you but as of today, we have identified properties and we are going to start a process of being a disciplined seller to dispose of those properties or to capitalize on the value of those properties.

Great. Then finally in 3Q you guys really managed to the estimates and in fact your own guidance by quite a wide margin and relative to that it seemed to me that your full year guidance is not raised by as much as I thought it might be. Is there anything that changed or seasonality or anything that caused that?

That is a good question. I would say what we are looking at is really sustaining the very strong operating performance that we saw in the third quarter. And if you exclude the gain from the asset dispositions, the run rate is really quite consistent.

And based on our seasonal pattern, we think that is a reasonable expectation and, Chris, you also know we really do like to undercommit and overdeliver. So I would like to think that there may be a little bit of upside potential.

Is there a reason why you chose to treat the gain on the disposal of assets as not as a special item?

We have been very very consistent in constructing our performance and sometimes it benefits us and sometimes we are disadvantaged; but we are always consistent. And we exclude, from the pro formas, any timberland gains that we consider to be truly nonrecurring. And we also exclude restructuring items that are on that line item. So, you can very easily track and reconcile the GAAP to the non GAAP numbers.

When we look at the sale of surplus or higher and better use properties, that is an ongoing process. And we do consider that as part of our continuing activities. And so that is the reason we make that distinction between a timberland sale and a sale of higher and better use property or a disposition of a surplus asset.

Fair enough. I will go ahead and turn over. Thanks again.

Chris Manuel with KeyBanc Capital Markets.

Good morning. First of all, congratulations on a very very good quarter. A couple of questions for you.

First of all, Mike, could you run us through what it looks like you had a very good quarter from a fundamental standpoint, volume and price. Could you walk us through what you think underlying volumes were like by the key substrates?

Yes. Don has that data right in front him so I'm going to let Don give that, Chris. But generally volumes were up across all substrates and all regions. So we were pleased from that standpoint. So it was not one product or one region covering or carrying the results this time.

So, Don, I think you have those right in front of you.

Yes and perhaps stepping back just a moment, at a consolidated level I had mentioned the 7% volume improvement. On a same structure basis, Chris, that would be 4%. So there was a contribution from the tuck-in acquisitions that we had referenced.

When we look at it by substrate, steel, we were extremely pleased with the mid single digit growth on a year-over-year basis. Plastic was high single digits on a same structure basis, and fiber was basically flat on the same structure basis.

Very good. Couple other questions for you. First you talked a little bit about timber and you have identified 20,000 acres in the U.S. Is there any in Canada that -- I believe up there you are not actively foresting that land. Is there any up there that you identified as HBU or any plans to do some work up there?

Yes Chris. There potentially is some land up in Canada. We have not finalized that to the point that we are confident to disclose that right now, but yes. There are some land up there that potentially would be in that same category.

To follow on that when we think about asset redeployment, it's something you touched on. And should you elect over the next, whatever, timeframe to sell some of this HBU timber could generate substantial proceeds. Could you rank for me what you think would be the primary uses of -- or what you would plan to do with redeploying proceeds?

Timber proceeds would be treated like any proceeds of cash. We would first use it to pay down debt. Then we would look at reinvesting it back into the business and by that we -- every capital expenditure competes in our Company.

So we look at where we can get the greatest return at the end of the day. We look at competing capital and we will redeploy that to where the greatest opportunities lie for us at that point.

But as far as redeployment outside the Company, thinking of acquisitions or things of that nature, another one of the things you mentioned was you felt you earned the right to grow, I think earlier in your discussion. Could you talk about the up [tight track] acquisitions both either here in North America or outside of North America? I think you alluded to some -- Don may have alluded to some money that is located in Europe that you could do international stuff with.

Yes; we do believe we have earned the right to grow to use our terminology and you heard that very correctly. Our appetite is that we are going to be listening. There is more activity out there right now so we are going to be listening to see what's out there and if it makes sense for us, we will be looking at it very seriously. And it really falls into four categories, Chris, just to give a little bit more clarity to it.

One we were going to continue to look at consolidation and in the industrial packaging business and as you know we have been the consolidator and we are the leaders. So we look at continue to do that all around the world.

We will look at geographic and core product opportunities in the emerging markets. We have talked about that in the past. Russia and China, so we will continue to look at that. We will look at value-added opportunities in the paper business. If there's some value-added opportunities that would make that business stronger we will look at that.

And, generally, we are going to stay focused on those core businesses and with maybe a limited exploration into some adjacencies. So that's the flavor of what we would be looking at.

Very good. One last question for you and that concerns also a little bit in the timber side. What would be -- what should we be able to consider as a new run rate for revenues or operating income from timber now that I think the portfolio has been trunked out a bit after a few sales and as you guys have gotten the program more established now? What's a good run rate going forward?

Don can answer that. I think we are probably better served to wait until we do our budgets for next year and the next call might be a better time to give you some clarity on that answer, Chris. Don, you want to -- ?

, No, I would agree with that.

Thank you much.

[David Rosen] with CR Intrinsic.

Again, congratulations on a good quarter.

I want to spend a little bit of time talking about this dual class structure. We talked about this last call and in my mind and I think most investors would agree, your valuation delta between your peers is primarily caused by this. And I would like to understand if you could take -- I'm going to propose that you guys take a charge to go to the Dempsey and try to figure out a way of restructuring this so it benefits all shareholders.

Because it -- I mean it impacts -- I mean, you look at your peers and they trade at two multiples of EBITDA higher then you guys just because you have different dividend distributions. I mean, how -- yes. (MULTIPLE SPEAKERS)

Go ahead. David.

I'd love to hear your responses because this is -- I think this is the primary concern of all current -- one of the primary concerns of all prospective investors.

David, my response would have to the identical to my response to that given in the past. It is a structure that has been in existence for a long period of time and it is something that is talked about. Something that we will continue to talk about but it is not something that can be -- that can be and will be changed overnight. I think that -- I hear what you are saying. I think some people have a difference of opinion on that but I do respect your opinion on that. And it is something that we continue to look at and talk about.

(technical difficulties) have you ever made it (technical difficulty) actually changing the structure?

David, you broke up. We did not hear that question. I'm sorry.

Have you made any formal requests to the Dempsey family to change the structure?

I think what we have with individual shareholders should be private between individual shareholders and I don't think that that's -- conversations like that are not necessarily public disclosures at this time.

I would implore you and I would like -- hopefully you make those transcripts of mobile to your other board members. I would implore you to pursue some type of agreement with them; because this really does do a disservice to all shareholders because it makes it a lot more difficult for people to recognize the true inherent value of the Company.

Thank you, David.

A second item is just talk little bit about cash uses. And I understand that you have an appetite for acquisitions but, with that said, I don't quite understand why you don't spend a little bit more of your excess cash on repurchasing shares.

Your shares in my estimation and a lot of investors' estimations are very inexpensive right now. And it would truly be a service if you were to maybe use a small fraction of the stock -- of your cash balance. I mean you have -- your leverage ratios right now are nominal. I mean Net Debt to EBITDA is under half a turn and that is crazy. Kind of be like yours could be levered three times. You've got to historically the number three to four times.

Why not take $50 to $100 million and do some type of tender stock buyback? I mean you have plenty of dry powder, regardless. It wouldn't impact your ability to do acquisitions or pursue growth in the business; and I don't quite understand with the cash generation that you currently have and your debt position why you haven't implemented that already.

We will continue to look at that and as we look at the continuing uses of our cash, and I think that we do have some good plans for that cash. I think as you -- as the year, the next materializes you'll probably see some opportunities of that.

Any thought to doing a stock tender?

We have not had serious discussions on that. We have had serious discussions on buying back shares which we have an authorization from the Board to do that. And we will continue to evaluate that but we have not had a serious discussion on a tender as of this moment.

Again I would appreciate if you would actually bring that up to the Board and even if it's not a tender just some type of aggressive stock buyback, whether you are actually -- I mean not a $7, $8 million a quarter but I mean you should be able to do $15, $20 million a quarter. Just look at the cash generation of the business again and the fact that you are so underlevered.

Thank you.

[Bob Frankfield] with Prudential Financial.

I'm going to follow up on a couple of questions. I think it was two questions ago when somebody asked what you are going to do with the cash and the first thing you said was repurchase debt. Or pay down -- the first thing you would look at was paying down debt.

I was under the impression that you were kind of done with that and I guess part B to that question would be as I look at the Moodys web site they haven't written on you in two years.

So what are you thinking along those lines? And are you talking to the rating agencies about changing your ratings?

Yes; and I really think in terms of rank order of priority. I mean clearly debt is the easiest to the extent that there is debt outstanding to reduce that.

So I would not say that that's necessarily the highest and best use of the cash. It was really more that that would be clearly the interim step. And as far as the rating agencies -- and we have very good relationships -- clearly, they view the rapid deleveraging of our balance sheet as a real positive. We really can't speculate on their ratings or the positions that they take.

Can you tell me how often you speak with them and when the last time is you did that?

We have an ongoing dialogue. We provide quarterly updates. We make a trek to New York annually to give them a full review of our results with a great deal of transparency.

Thank you. One other question. I want to follow up on how you are reporting the gain on sale of assets. In the press release this morning I am just trying to reconcile on page 8 you had the gain on sale of assets of 9,173,000. I'm trying to figure out where that runs through on page 9 so that one is part of the GAAP reporting and the other isn't.

That we don't have that right here, but clearly that will -- there will be a full reconciliation of that in the 10-Q. Then if there are any further questions, don't hesitate to --.

Is any part of that in -- the facilities that you sold, for example. Are those part of industrial packaging and services or the paper packaging and services and would those run through the operating income in those sectors -- segments?

Those are basically -- they would basically be allocated based on the revenues of the segments.

Tim Burns with Cranial Capital.

Good morning. Switching gears here a little bit. I guess there's a lot of price increases going on for raw materials. And some are forecasting more in the second half, calendar half which would impact your fiscal fourth quarter. Are you seeing any prebuying that might be impacting your volumes today?

For instance, we have seen I think container board inventories jump up by about 14% which to me -- I don't know how to read that. But I wondered if you had any input on that as well as steel and plastic? Do you think there's any impact on volume now and will you be able to pass through raw material costs later on?

We really don't think there is prebuying. As you know very well, the characteristics of our product doesn't allow customers to prebuy too much because it uses a lot of space. And so people don't necessarily buy and if anything they actually want to get more of adjusted time type of arrangement. So we don't see prebuying.

In our inventory at the paper inventories went up slightly in July. They are down year-over-year but slightly in July compared to June. So there was a little bit of inventory buildup. Paper, there is a lot of speculation what is going to happen to paper. Volumes are strong right now. There's rumblings in the market of what could happen and you saw the announcements yesterday of a plant closing in Canada that is going to tighten up the supply a little bit more. So there could be some movement yet this year in paper because of strong demand and tightening of the market.

As far as steel and resins are concerned, we are very close to those products and the people who manufacture those. And quite honestly they are a little bit confused on what is going to happen, too. It's still tight but, historically, those -- steel especially historically does loosen up towards the end of the year. If it (indiscernible) historical problem, that would be the case although right now it's not. Right now it still is quite tight.

And as prices change, and if you look at our price increase over this quarter it is really because raw materials go up. We raise our prices as raw materials raise so that really is a factor of raising -- rising raw material costs we are able to -- we have to raise our sales price to offset that.

So, you don't have any multiyear contracts or annual contracts where it is kind of a gamble every time you sign on the line?

We have a historic -- I mean generally it is a one-year contract and generally they have 90 at a quarter -- every 90 days, you can adjust for raw material changes.

I know you said that all product lines and business units were up year-over-year. There's a lot of question regarding the North American economy. You guys are so globally diverse you're almost an interesting analysis model for where the global economy is going. Where the hot spots are and where the cold spots are. Do you have any read about that?

No more than what is already out there. Into North America we had a strong quarter which is good but that was really bucking a trend as we have, in the past, has been a little bit weaker. It was a strong quarter for us but we are still continuing to see more investment. If I'm looking at assets on the ground, more investments by our customer outside the United States than in the United States.

So we are seeing business move where more -- new money being put in other parts of the world than in the United States and that trend has not stopped and that appears to be continuing.

Got you. Last question, I guess.

Obviously you are building new plants around the world. You may in fact be rationalizing in other places good that seems to be a global trend. In light of the footprint let's say on average remaining, growing a little bit, how was your innovation program going to kind of increase the value per unit produced? While you are also reducing the cost?

You know, that is something we are working on and you hit a very good point. It is something that we need to work a lot harder on. I think we have worked really hard of getting our costs in line and getting our footprint in line. We really do need to work harder on the inhibition.

We have some and we have it in pockets around the world but we need to really work on making that a core competency that to be [honest with you] here today we don't have. So I think we have some upside as we try to make that more of a reality.

Thank you for taking the questions. Last two quarters have been like Tiger Woods' tour.

Thank you. That's a good analogy.

(OPERATOR INSTRUCTIONS) Chris Manuel.

One quick follow-up for you. First of all, Mike, when you talked about some of the incremental savings you planned on driving going forward it, one of the things you mentioned were network optimization. Is that something that is new? A new wave? Can you give us a little more color and detail on what you're doing there?

It's not new. We have always looked at optimizing our network. As we continue to become more efficient and we have become more efficient, Chris, threw the Greif business system. We are seeing opportunities that we can continue to optimize in that work which will help us drive cost down.

So that really is just an indication that the Greif business system is working and that we are going to continue to look at assets on the ground to make sure that we have the right number. Not too many and not enough. So we will continue to look at optimizing our network to make sure we are the most efficient we can be.

Sort of a follow-up on that would be from a restructuring side, you've done a good bit of restructuring over the past several years. Are we close to a point where you think that regular quarterly restructuring charges are about completed? Or do you think we still have a little bit more to go there? Kind of a thought (indiscernible).

We are clearly nearing the end of the one caveat would be that beyond 2006 to the extent that acquisitions are integrated and could potentially trigger some restructuring item. So we certainly can't say that there will not be any further restructuring beyond 2006. But they will be really limited and be likely directly linked with transaction.

Thank you very much and congratulations again on a great quarter.

Christopher Chun.

Can you talk a little bit more about your timberland purchases this quarter? How many acres there were and where they were?

Yes. We purchased approximately 20,000 acres in Mississippi. That was really a part of the Florida Timberland transaction we had signaled that of that $90 million transaction we would be monetizing about half of it and using an installment note to reduce the tax leakage. And then the remainder would be reinvested under a 10/31 election.

So that really is the final purchase as part of that transaction.

It seems to me that 16 million for 20,000 acres in the South is actually quite a good price, relative to some of the other transactions we have seen. Can you talked a little bit about how well the land was stocked and things like that?

We do think that it was a very good good purchase and that it represents a fair price.

We will pass on your congratulations to the people down there who bought it for us.

I am just wondering if the trees were young or there were any issues like that that dove down the price.

No. It fit very nicely with our maturity curve.

Thanks.

At this time I'm showing no additional questions. Please continue with any closing remarks you may have.

Thank you. 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, September 5th. The playback telephone numbers are 800-405-2236 for domestic callers and + 1303-590-3000 for international callers. The pass code is 1168335 pound.

This call will be posted on the Company's website in approximately one hour. Thank you and have a good day.

Ladies and gentlemen, this does conclude the Greif third quarter 2006 results conference call. You may now disconnect and thank you for using AT&T Teleconferencing.