International Paper Co (IP) 2004 Q1 法說會逐字稿

Good morning. My name is Chris, Director of Investor Relations for Temple-Inland and I would like to welcome each of you who have joined us here in person and I extend a special welcome to those have joined us by conference call this morning to discuss the results for first-quarter 2004. Joining me this morning are Kenny Jastrow, Chairman and CEO of Temple-Inland and Doyle Simons, Chief Administrative Officer. Please read the warning statements in our press release and our slides concerning forward-looking statements as we will make forward-looking statements during this presentation. The format this morning is for Kenny Jastrow to give a 15-20 minute presentation on the results for the first quarter. After the completion of his presentation, we will take your questions.

If you would like to ask a question please raise your hand, and we will bring you a microphone so that our friends joining us by conference call can hear your question. When asking your question, we ask you to remember to state your name and the name of your organization. Thanks again for your interest in Temple-Inland and I would now like to turn the call over to Kenny Jastrow.

Chris, thank you very much and let me add my welcome to everybody that is here in person and to those who have joined us electronically. We appreciate your attendance and we very much appreciate your interest in Temple-Inland. As Chris said, I will walk through the quarter and then at the completion of these comments, certainly take questions to answer any questions or thoughts that you have before we conclude today.

First quarter 2004 income was $13 million, compared to first quarter of 2003 of a loss of $18 and fourth quarter 2003 of a loss of $39 million. Earnings per share for the first quarter were 24 cents, compared to a loss of 32 cents in the first quarter of '03 and a loss of 71 cents in the fourth quarter of '03. The first quarter of 2004 included special items that totaled 20 cents per share. One was an impairment charge at the Clarion MDF facility of $7 million that was taken due to a possible sale of that facility. That amounted to 13 cents per share. In addition to that, $4 million in the quarter related to Project TIP and box plant closures, and these combined totaled 7 cents per share.

In order to give you a reconciliation of net income excluding special items, in the first quarter of 2004, when you exclude special items, earnings on a per-share basis were 44 cents per share, compared to 2003 first quarter excluding special items of a loss of 21 cents per share. And compared to the fourth quarter excluding special items for that quarter, net income on a per-share basis was 40 cents per share. The effective tax rate for each quarter was as follows. In the first quarter of '04, the effective tax rate was 39 percent; in the first quarter of '03, 42 percent and in the fourth quarter of '03, 30 percent.

Let me turn to the segment results. On an operating income basis, corrugated packaging in the first quarter of 2004 was $10 million, compared to $2 million in the first quarter of '03 and a loss of $5 million in the fourth quarter of '03. Forest products in the first quarter of 2004 recorded operating income of $32 million, compared to the first quarter of 2003, which was a loss of $7 million and through the fourth quarter of 2003, which was an operating income of $35 million. Financial services in the first quarter of '04, $53 million in operating income. This compares to the first quarter '03 of $39 million and to the fourth quarter, which was $54 million for financial services. For the quarter then, operating income was $95 million versus the first quarter of '03, which was $34 million and compared to the fourth quarter of '03, which was $84 million.

Now let me turn to corrugated packaging first. As I said earlier, operating income for the quarter was $10 million. Average box prices for the quarter were down $38 a ton versus the first quarter 2003 and down $6 a ton versus fourth quarter 2003. Currently, we are implementing a box price increase corresponding to the $45 increase in linerboard in March. We expect this price increase to be substantially in place by the end of the second quarter. We have announced additionally a $50 price increase in linerboard for June 1st. On a volume basis, volume per workday basis shipments, were up 4.6 percent in the first quarter of 2004 with three less box plants in our system, compared with the first quarter of 2003 and up 0.5 percent compared to fourth quarter 2003. On an actual basis, shipments were up 7.9 percent in the first quarter of 2004, once again, with three less box plants in our system compared with first quarter 2003 and up 2.1 percent compared to fourth quarter 2003 levels.

Industry shipments were up 3.3 percent on a volume per workday basis in the first quarter 2004 compared to the first quarter of 2003, but down 2.6 percent compared with fourth quarter 2003. I would like to note that this is the third consecutive quarter that our box volumes have exceeded industry shipments. Last week, also let me report that at our company, we had an all-time record for box shipments.

OCC prices in the quarter were up $21 a ton versus the first quarter 2003 and up $12 a ton versus the fourth quarter 2003. OCC pricing is currently in the $115 range and for the quarter, averaged $103. On the energy front, energy costs were down $3 million versus the first quarter 2003 and up $4 million versus fourth quarter 2003. Pension expense was up $2 million versus the first quarter of 2003 and the fourth quarter 2003. Let me remind you that pension expense for 2004 is anticipated to be $50 million for Temple-Inland compared to $43 million in 2003. Cash cost for pension, however, is expected to be $2 million in 2004, which was similar to the amount on a cash basis in 2003.

Let me give you some summarized thoughts regarding our packaging group's progress to improve financially results. Comparing first quarter 2004 with first quarter 2003, market factors such as box pricing and OCC had a $42 million negative impact quarter-over-quarter. However, these factors were more than offset by a reduction in mill and converting costs and increased box volumes, which resulted in approximately $50 million improvement quarter-to-quarter, translating into an $8 million increase in earnings quarter-over-quarter.

Now let's turn our of forest products operations. In the first quarter of 2004, operating income was $32 million, compared to a loss of $7 million in the first quarter of 2003 and compared to fourth quarter 2003 income of $35 million. On the lumber side, average price was up $49 in the quarter versus first quarter 2003, but down $6 versus fourth quarter 2003. Let me note, however, that current prices for lumber are up approximately $40 versus the average pricing in the first quarter 2004. Volume was up 19 percent versus the first quarter of 2003 and up 6 percent versus fourth quarter 2003.

Particleboard. Average price was up $28 versus the first quarter 2003 and up $20 versus the fourth quarter of last year. Volume was up 3 percent compared to the first quarter 2003 and up 4 percent compared to fourth quarter 2003.

On the MDF front, prices were up $6 in this quarter versus the first quarter of 2003 and up $12 versus fourth quarter 2003. Excluding the Clarion facility, volume was up 14 percent versus the first quarter of 2003 and up 2 percent versus fourth quarter 2003.

Gypsum. Average price in the first quarter of 2004 was up $24 versus the first quarter of last year and up $6 versus fourth quarter last year. Volume was up 6 to 7 versus first quarter 2003 and flat versus fourth quarter 2003.

On the high-value land sales front, during the quarter we realized $3 million from high-value land sales in the first quarter of 2004 versus 1 million in the first quarter 2003 and 5 million versus fourth quarter 2003. I might note that average price in the first quarter 2004 for high-value lands sold this quarter was approximately $8000 an acre.

In our financial services operations, income for the quarter, first quarter 2004, was $53 million, compared to the first quarter 2003 of $39 million and fourth quarter 2003 of $54 million. Improvement in the first quarter 2004 earnings compared to the first quarter 2003 was due to three primary factors -- increased spreads, a lower loan loss provision and continued benefits from cost reduction initiatives. First quarter of 2004 was very good earnings period for us. We expect the second quarter of this year to compare favorably with the second quarter 2003.

Project TIP. During the first quarter of 2004, savings totaled $12 million for the quarter. This converts to an annual run rate of approximately $48 million. The $60 million that we had targeted in annual savings from Project TIP, which was a consolidation and supply chain initiatives, we expect those to be realized by year-end 2004 and $75 million by year end 2005. With a run rate of $48 million in the first quarter 2004, we are well on our way to accomplishing our objectives that we set out for ourselves in Project TIP.

Let me make a couple of other comments before we take questions, first regarding box plant cost improvement initiatives. From a personnel perspective, over 300 positions were eliminated in the fourth quarter of 2003 resulting in annual savings of $20 million, 5 million of which were in the first quarter of 2004. From a box plant closure perspective, the Dallas box plant was closed during the first quarter of 2004 and we announces the Raleigh box plant closure on March 1st. From a mill improvement perspective, mill production increased 9 percent compared with the first quarter of 2003 due to the elimination of mill downtime and process improvements. This increase in production was consumed by our box plant. In fact, our mills are hustling to keep up with our box plant demand. And then thirdly on the issue of natural gas consumption, for 2004, we believe that the consumption will be just less than 20 million in MBTU's, which compares to approximately 25 million in MBTU's in past years. We are moving on further reduction in our use of gas through process improvements and also targeted capital investment. But nonetheless for this year, we anticipate using less gas than we have in years past.

Now that concludes my formal comments and I would be happy to take any questions. As Chris said the beginning, it would be helpful and I believe essential for you to use the microphone so that those who are joining us electronically can hear the question. Not only state your question, but also your name and the Company you're with. All right, Chris?

Thanks, Kenny. Just two questions. First on the containerboard side. It looks like your costs were fabulous, and yet other competitors have had to pay overtime as they cut people in the fourth quarter to keep up with demand. So could you just talk a little bit about how the cost benefits were in new mill system, vis-a-vis the box plants? And then shifting gears, if you could just talk a little bit about the bank. And typically we see a sequential drop in the first quarter as you start out a little more conservative on your reserves, and yet it was a great number. Do you expect to see on a sequential basis a comparable number possibly in the second quarter? I know you mentioned the year-over-year comparison.

The first part of your question dealt with costs, both the mills and the box plants. As you know, our strategy has been to integrate our containerboard packaging system, which essentially fully got done last year in the third quarter. With that, our mills now can run full to keep up with demand and through both process improvements and running better, mill costs or down. In addition to that, on the box plant side, we have restored our volumes in the marketplace. In fact, as I've said for the last three quarters, we have actually exceeded the growth in the marketplace and that has allowed our box plants to run more full. In addition to that, we believe that there is significant progress that can be made through this process of doing more business through less plants. And in fact through this quarter, we have closed three box plants, which lowers fixed costs while at the same time, volume increase. That has allowed us the lower converting costs. And we think there's opportunity to win forward, Chip, to still do more.

On the bank, relative to the issue of the first quarter. The first quarter 2004 was a good quarter for our financial services group. Three things made up that, one of which was a loan loss provision, but also spreads were up, and secondly, cost. We continue to benefit from our cost initiative, which over the last two years, we have lower cost by some $35 million. On the issue -- and all three of those make up the results for the quarter, compared to the first quarter of last year. Having said that though, on the loan loss issue, the loan loss provision is certainly reflective of credit conditions. I believe I said at this meeting last year that credit conditions to us look like they had stabilized. And indeed as the U.S. economy has had a pickup now in the third and fourth quarter and into the first quarter, I think it is fair to say that credit conditions have actually improved some. I would say to you though, over an extended period of time, the range for loan loss provisions on an annual basis have somewhere been between $40-$50 million. So credit conditions, because of the pickup in the economy, have in fact improved some.

You have had a lot of success in this cost reduction program. Can you talk about why you think this program is hitting the bottom line so much faster than some of the programs you've done before?

I think it is hitting the bottom line because it is focused on hitting the bottom line. We had the first step, Mark, to get our cost structure in a more competitive format, was to get our system bigger so that we could spread costs against a larger system. That we did with both box plant acquisitions and of course the Gaylord acquisition. With that, a key goal was not only size, but also integration. And as you know, we closed down the Antioch Mill and shut down the three small machines at Bogalusa (ph), drove our integration on a statistical basis over 100 percent. Our strategy then was to keep these mills running full with an internal demand for board. That has happened. That began in the third quarter of last year. It took us awhile to get Antioch shut down, Orange brought back up, the three small machines, but the third quarter began to culminate in this process.

Now following that, we have enacted through the addition to our team of Pat Mailey (ph), who I know all of you know. Pat has done a very good job in our company of changing processes in the mills that when combined with the strategy of integration and running full, have had improvement on the cost side.

On the box plant issues, we think there is real opportunity for our company, which has a large system, a system that has consistent quality for boxes and a system that has a very state-of-the-art technology platform, who really do more with less. By doing that, we can increase the utilization rates for box plants and lower fixed costs and we have seen some of that in the first quarter. Having said that, let me say to you that in our company, we have a driving passion to be the best in this industry, and in addition to that, to really progress on getting better. We had a good quarter, but I will tell you, we don't rest. We intend to do better from here and we're working on that. So there's more to come as we go along with these strategies in place. Mark?

Kenny, can you talk a little bit about what you think might be left in both the mill and the converting systems? I mean, to have production up 9 percent year-over-year -- is there more to come there?

Mark, I don't want to make forward-looking statements regarding cost. What I will say to you is that I believe that the strategy we have implemented, this integration, running full, changing processes and also increasing utilization in box plants, still has more to come going forward. And as we work on those issues, we will certainly tell you what we're doing. All I'm going to say is -- we're working on those issues confidently.

Secondly if I can. Can you talk a little bit about what we might see in the final three quarters of this year, in terms of land sales? Maybe also update us on that program around Atlanta, which I think now has spread down to Texas as well?

Initially, we set aside 160,000 acres out of our forestland, principally in Georgia, as high-value land sales. We sold acreage last year, but after a continuous review of what might be high-value land sales, actually now have approximately 173,000 acres that we've categorized as high-value. Once again, let me note what we mean by high-value. It is lands where we believe that user values can the brought to these lands through infrastructure -- roads, water, sewer -- so that we're working with city, county and state authorities to align roads. So this is a process that takes time. And it is -- we are not able, Mark, to make a forecast when things are going to happen. What I can tell you, though, is we don't intend to sell or develop land until it is ready, ready meeting with user values. One of the things that we do each quarter is we give you a sense of what the per-acre value was for that quarter. And you'll notice this quarter, it was up compared to what went on last year. So as we have said in the past, we believe long-term this is a very good benefit for our shareholders and we're focused on the issue of developing user value. And a lot of this land is in and around Atlanta, and Atlanta, I believe, last year was either the number one or number two housing market in the United States.

Just to clarify, Kenny. On the acreage, the 173,000 acres, is that what you have now, or is that what would have been in the program from the start?

Now. Pete?

Thanks. Getting back to the strong performance in costs and the containerboard system, can you elaborate on what percent of your box plants are running 24/7 now and what that may be in the future?

I'm not going to comment specifically, Pete, on the percentages that are on 7/24. What I will say to you is this. When you look at a box plant system that has the characteristic of ours, which I talk about quality, wide diversity from geography and a technology platform, we believe that plants, particularly those with larger corrugators, can be effectively operated on a 7/24 basis. And when you look at box plant utilization, there is no number that I know of published. What I do know inside of Temple-Inland, we believe we can drive utilization up. And by driving utilization up, we can in fact lower fixed costs. Interestingly enough too, as you eliminate box plants, you also have less shipping points, which helps in supply chain issues relative to the cost of transportation of moving board around. Same amount of board going to less places lower cost. All of these issues we're working on. Now having said that, you still have to have within a system surge capacity. We've got to able to take care of customers. But the utilization can be delivered upwards and still maintain surge capacity. To the extent that you can do that, we believe you can fundamentally lower cost.

Another question if I can on the financial services business. Can you comment on loan volume and the trends you are seeing and with rates going higher as your expectation of getting stronger volumes because of people moving to adjustable-rate mortgages?

One thing in the financial services group at the bank, as you know, we have a diverse portfolio of loans. And different factors affect various portfolios, various asset categories within the portfolio. Clearly, the mortgage company had significant volume last year during their refinance activity. That activity with the increase and uptick and rates has slowed. Interestingly enough now, we're beginning to see more adjustable-rate loans come to the market, which is certainly an asset category that we're focused on, so that is a positive. In addition to that, last year, particularly when the economy -- before the economy began to gather some strength, other loan markets were slower. They're beginning to pick up now as economic activity is moving. I think the issue for our bank for this year is the challenge of leading loan volume targets, because the marketplace, all banks, are competitive relative to loans. And so it will be a year where loan volume will the challenged. But I think as in years past, our bank can get its fair share in the marketplace.

A couple of questions. If you look at your TIP program, I think you said you achieved $48 million on an annualized basis. If I remember, 35 million of that is coming from shared services and the other 40 million comes from the supply chain management. Could you give us an update on where you are on both aspects? I imagine you've achieved most of the 35, and what success you've had on the supply chain management side?

We have -- we started the TIP project at the beginning of 2003. And we set for ourselves the goal by the end of '04, to have the $35 million from shared services in place. We have a lot of that under our belt now, Rich, so that most of that is accomplished. Still some to go, but most of it.

In addition to that, the $40 million relating to the supply chain had an '05 target for it to be fully in effect. We are making progress on the supply chain, and that is the reason why the run rate is above $35 million; it's in the $48 million range. I would say to you, and I want to emphasize this, the TIP project is not only a financial benefit for Temple-Inland, it is a significant operating issue for us because we have developed a one-company approach. We now look at things throughout Temple-Inland from a consolidated prospective. So when you do supply chain, it facilitates supply chain management to be able to look throughout the entire company and affect supply chain issues for all of Temple-Inland, not just separate operations. And we feel confident where we're headed in that. And clearly, this one-company approach is very important to that.

I might note, when you look at the slide on the screen here, we have a new logo in our company. We have one logo in our company. We used to have separate logos. But in order to reinforce our concept of one company, we have redone our logo so that everybody uses now Temple-Inland in the manufacturing operations. Now that logo is intentionally slightly tilted to the right and sort of upward in an upward fashion. That is to remind our sales and shareholders that the job of getting better is never finished, that everyday we need to work getting better. So that new logo is out and it is a real symbol within our company of what we are intending to do to drive Temple-Inland.

Just a follow-up on your balance sheet. Could you talk about any improvements that occurred during the quarter? You've got one of the best balance sheets in the industry. At the end of last year, I think you were 45 percent debt to capital ratio. How far down could you push that ratio? Next year, you have the DEX (ph), which converts, which automatically does that. How far are you willing to push it down? Where do you expect your free cash flow to start to move to? What area?

Well, to put some structure on those comments, the debt to cap ratio at the end of the year did finish in the 44-45 percent area, assuming or counting the DEXIS (ph) debt. In the DEX convert, which is March of 2005, and that is $345 million, the debt to capital on a pro forma basis, not including any cash flow between now and then, would be in the mid 30s. We think it is important that our company operate with an appropriate capital structure that allows us flexibility and takes advantage of opportunities going forward.

Relative to the use of free cash flow, clearly, we would like to grow our company, but we're going to be disciplined about what we buy and how we go about that. Secondly, we believe that it is important to pay a dividend to shareholders. For the last two years, we've raised our dividend. Our dividend now is the $1.44 per share and we think it is important that we continue to look at that issue going forwards. So as we go forwards, we will look at various opportunities which to utilize free cash flow, but we do think it is important to have a solid balance sheet so that we can take advantage of opportunities and be flexible in our approach on those.

Josh (indiscernible), Oppenheimer & Company. Kenny, do you have in your corrugated packaging business a targeted EBIT or EBITDA margin?

We really focus on ROI, and there is a reason for that. Margin is part of the story, but capital invested in the other half. And so we are more focused on ROI. And clearly, ROI is affected by pricing in the marketplace. But we are intending to drive ROI upwards in our company not simply from market movement, but from lower costs. And I think you're seeing some of that. Now internally, we use an 18.5 percent pretax hurdle rate for an ROI. And to reinforce that, we act actually tie compensation. And the way we look at ROI is EBIT divided by investment. It is all a pretax calculation. But having said that, we're very much driven by ROI. Clearly, margin is not huge. But more importantly to us is ROI.

All we seem to hear about the last year or two is the troubles the manufactured home industry has had. And the more we see furniture being made in China, and yet we have seen an amazing turnaround, it looks like in particleboard and MDF and you're obviously very close to it. Could you tell us what you think is causing that great turnaround?

I think both businesses, Chip, have actually benefited from a pickup in the U.S. economy. There is still furniture manufactured in China. But I do believe that the pickup in the U.S. economy that really began third or fourth quarter of last year, continuing this year, has had an impact on markets. In addition to that, clearly, the change in the dollar has had some impact on operations, particularly those that might have been challenge from overseas competition. But I would say to you that, in general, I think the overriding factor is a pickup in the economy which has been helpful with these products.

Good morning. You were talking earlier about credit conditions and loan loss provisions coming down. The last couple of years, provisions have been below what your charge-off rate has been. Can you comment on what you expect for charge-offs this year and can you comment at all, in terms of what the provision change was in the first quarter? Then a follow-on.

When you look long-term, the loan loss provision is ultimately reflected in the charge-off provisions. The timing is different so I gave you the statistics over a four-year period, what loan loss provision has looked like. Relative to the first quarter, we have not made specific comment on the loan loss provision. All I can say to you is, it is lumpy too. It does not come in sequentially month-to-month. So during the first quarter, because of what was in our view somewhat improving credit conditions, we had a good quarter. But over a long time, for the year, loan loss provision has generally been in that range. Charge-offs happened ultimately relative to loan loss provisions. First loan loss provision, second charge-off. So the charge-offs are ultimately follow-on to loan loss provision, unless you have the coverage.

Maybe the answer is the same, different topic. In terms of high-value land, it seems like you had a pretty good quarter, in terms of realizations per acre. Was there anything specifically driving the $8000 per acre number, which is quite good relative to past quarters?

No. When you look at user values, residential land will have a certain user value, commercial type property will have a higher user value. So a lot of what drives the ultimate realization is sort of the mix. And to the extent there might be a little higher non-residential, use that might drive the realization. We think it is very important that each quarter, we report to you what we have done, relative to sales in that area. As we go along, we intend to capture those values, either by selling or maybe participating in a venture, whatever. But the first objective is to get this land to a user value.

Kenny, can you just update as on your gypsum business? It looks like it is doing much better. Have there been additional price increases, and maybe some thoughts on commercial activity?

The gypsum business has been good. We -- I believe gypsum pricing is around $115, $129 range now, but there is another price increase for gypsum in the marketplace for a couple of months out. So I think that business market has been strong, reflecting the strength in the home building markets and indeed of repair and remodeling markets. It is our view that long-term, 10-year forward look, that these home building and repair and remodeling markets are going to be strong. Fannie Mae has a projection out that shows housing from a starts perspective at 1.7 million units plus per year, which is strong housing demand for a long time. So we really think the markets that our products go into look very good long-term. Not that there won't be aberration between months; there will be. But fundamentally, we think that these housing markets look good for a long time. Pete?

Kenny, can you provide an update on your expectation for a book tax rate, cash tax rate in capital spending?

We -- when you look at both federal and state, a proxy that -- it would be pretty close normally, is 40 percent. On a cash basis, at least for an extended period of time, we would anticipate cash taxes roughly in the 20 percent range. Now that doesn't mean it doesn't move around some within the quarter, because we are impacted some by what income we have in Mexico and in Canada, which has a little tweaking of that. But basically, 40 on the statutory rate, state and federal, and secondly 20 percent on the cash tax.

Capital spending?

Our depreciation is roughly $225 million. When you look over an extended period of time, we would anticipate CapEx somewhere in the 75 percent range. Last year, we were under 75 percent. This year, we would be over 75 percent. But when you look at the two years combined, it ought to be pretty close to the 75 -- some of it's just timing and then money gets spent. But I think 75 percent is a good proxy with this year being somewhat higher because last year, there were still carry-over projects we're working on.

Lastly on strategy. Can you comment on to remind us on your financial criteria for making acquisitions, both in times of hurdle rates, accretion, other criteria you consider? And then also for the right transaction, can you comment on whether you would potentially be willing to fund in part and acquisition with some asset sales?

When we look at any capital investment, we look at the acquisitions, we basically use this pretax EBIT divided by investment and have a hurdle rate of 18.5 percent. I would say to you that our cost of capital under the same calculation, which does vary, given the level of rates, etc., is lower than that, maybe down in the 12-12.5 percent range. As we look at any capital investment or any acquisition opportunity, we utilize that hurdle rate. As I said earlier, when we did the Gaylord transaction, we subsequently went in the market, sold some stock, did the DEX and that was over two-thirds of the purchase price. We wanted to restore our balance sheet into a range where we had flexibility to look at opportunities going forward. We believe it is important to have a strong balance sheet so that you can take advantage of opportunities and operate the Company in a safe and fair manner.

Kenny, just to go a little bit further on the question of acquisitions, because you mentioned wanting to grow the Company. If we look back over the last decade, Temple-Inland has done a lot of acquisitions and some have worked and some, like the clearing facility that you're closing down, really haven't worked very well. I wonder if you just step back, if you can identify two or three common denominators that you think have kind of marked successful acquisitions that you've made?

In 2000, when we really began the transformation of our Company, some of the things that we did as we looked back and very honestly and critically analyzed every single acquisition, what went right, what went wrong, and we did a significant series of presentations so that not only internally, but the Board and understood what went right, what went wrong. It is very clear to me in what we have done since 2000, is focus on acquisitions that meet our strategic objectives. And our strategic objectives are four -- basically to be customer-oriented; secondly, to focus on corrugated packaging from an integrated platform to lower cost; to be focused in forest products on growing timber and converting timber through our facilities and to take advantage of high-value land; and four, two continued to realize strong earnings and cash flow out of financial services.

We have a very focused strategy, Mark. And as we go down the road, acquisitions line up with that strategy make more sense to us. We have been through every deal we have done to understand what went right and what went wrong. And as I said earlier, we're in the process of selling Clarion.

Any other questions? We want to thank you for your attendance. It's always a pleasure to be here. We will have a conference call for the second quarter by phone, which is now our practice, first and -- fourth and second on the phone and we will be once again in October to be in front of you. Thank you all for coming today. We appreciate your interest in Temple-Inland.