Magnera Corp (MAGN) 2002 Q4 法說會逐字稿

All participants welcome to today's Glatfelter Fourth Quarter Earnings Conference Call.

Following today's presentation, there will be a formal Q&A session.

Until that time all lines will remain in a listen-only fashion.

At his time, I would like to turn the call over to Ms. Pat Sweeney .

Ma'am you may begin.

Good morning.

Thank you.

I'd like to welcome you to today's conference call.

Joining us on the call are George Glatfelter, Chairman and Chief Executive Officer;

Bob Newcomer, President and Chief Operating Officer; and Don Parrini, Senior Vice President and General Manager.

Today's call will last approximately 30 minutes.

Mr. Newcomer will share financial highlights for the quarter and the year 2002, and Mr. Parrini will review operations and market conditions.

Mr. Glatfelter will offer closing remarks and entertain questions from call participants.

I would like to remind you that the statements made today with regard to our future expectations may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although we make such statements based on assumptions we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations.

And now, I would like to turn the call over to Mr. Glatfelter.

Thank you, Pat and good morning to everybody Welcome to our fourth quarter conference call.

I thank you for participating in today's call, and I hope that all of you had the opportunity to review our press release.

Excluding unusual items, fourth quarter earnings of 22 cents on net income of $9.8m was slightly higher than expected.

Although, these numbers offer little cause for exuberance, I'll tell you that I was quite pleased with our sales volume during the quarter and throughout the year.

Although difficulties in product pricing and cost of goods persisted throughout 2002, we were able to grow net sales volume by about 3%, in what was one of the most challenging markets, at least in my memory.

I believe that this level of performance speaks to the strength of the specialized business model that drives this company today.

Our 2002 earnings of 90 cents before unusual items on income of $39.6m also fell below our expectations, but frankly, we're not out of line when paired with the economic environment that we encountered during the year.

I think that I am glad that 2002 is behind us.

On the call today is Bob Newcomer, our President also acting as interim CFO; as well as, Dante Parrini, our newly appointed Vice President and General Manager.

As Pat indicated, Bob will take you through the numbers and Dante will cover the operational side of the business.

I'll conclude with some general remarks on my views for 2003, and then we'll open it up for questions.

Bob would you please take us through the financials.

Sure.

Thanks, George and good morning, everyone.

I'd like to quickly run through the financials and begin with the fourth quarter results.

Our revenues for the quarter were at $138.3m, which is a 3% increase over the $134.5m that we experienced in the fourth quarter of last year.

Our net income, as reported, was $5.6m and as George has indicated, exclusive of unusual charges relating to restructuring charge and a contingent liability related to a State regulatory negotiation, our net income was at $9.8m compared to $9.5m for the fourth quarter of last year.

That equates to an earnings per share of 22 cents, which is the same as the 22 cents earned in the fourth quarter of last year.

The reported number, including the unusual items, is at 13 cents per share.

For the year, our revenues were at $543.8m.

The year 2002 was at $635.7m.

I point out that if we exclude the impact of the Ecusta division for a portion of 2002, our revenues would have been at $544.9m for '02, again compared to the $543.8 virtually flat revenues, which is we believe very good performance considering the broader economic and industry conditions.

Our net income as reported for the year, is at $37.6m, again, exclusive of the unusual items including unusual gain that we recorded in the second quarter of 2003.

Our net income was at $39.6m versus the '02 reported number of $7m, which included an unusual charge related to the sale of Ecusta of $39.7m, so that the '02 number on a comparable basis to the '03 number of $39.6m is $46.7m.

On an earnings per share basis, the reported number of 87 cents exclusive of unusual items is 90, compared to the year 2002 the reported number of 16 cents when compared exclusive of unusual items was $1.09 I'll also fill in another comparison that if you look at the $1.09 exclusive of Ecusta in 2002 the number would have been 99 cents.

So on a real apples-to-apples comparison year of 2003 was at 90 cents per share compared to 99 cents for the year 2002.

A few other items of note from the balance sheet.

Our total debt at the end of the year was at $221m.

Our net debt was at $184.7m, which compares to the net debt position at the end of 2001 of $182.3m.

Our equity at the end of the year was at $372m, it was $353m at the end of last year, and so our net debt-to-capital went down from 34% at the end of 2001 to 33.2% at the end of 2002.

In general, I am pleased with the results especially when we considered the boarder economic conditions and the conditions in the paper industry specifically.

And one final comment, it is important to note that we have significant capital expenditures for the balance of this year associated with the environmental project in Spring Grove facility and the rebuilt of the paper machine in Germany, which will allow us to grow the long fiber and overlay business.

Both of these projects are critical for totally different reasons, and we will continue to fund them.

However, we are also committed and focused on maintaining the strength of our balance sheet.

In this type of a business environment focusing on cash flow is key.

Thank you and now I'll turn it over to Dante Parrini for an update on our business.

Thank you, Bob and good morning.

This is Dante Parrini.

I would like to review three primary areas during this mornings call.

First is a brief description of my role in the organization and my perspective on leadership especially as it pertains to my role.

Second is to provide an overview of the performance of our three business units and facilities during the fourth quarter of 2002.

And then lastly but certainly not least, is to present a high level summary of Glatfelter's 2003 operating plans.

First a few comments on my role.

As Senior Vice-President and General Manager, I am responsible for the operational side of the business.

This includes our sales and marketing activities, new product development functions, operations, which includes environmental health and safety and supply chain.

Some of you on this call might not be familiar with me.

So I will give you a little bit of a perspective on what I have been doing here.

I have been in Glatfelter for the last five years and came to the Company from outside the paper industry.

Prior to joining Glatfelter, I worked in two different industries, but always in the business-to-business sector.

I hope to bring a different perspective to my new role in the Company.

A few comments on my approach and perspective on leadership.

I can really boil it down to three things that would be execution, people, and communication.

Execution as you can all realize, is very important and consistently finding ways to get things done especially by using a disciplined approach to planning, measurement, accountability, and continual improvement is important.

I believe people are our most unique in diverse assets and can create the greatest competitive advantage.

So building a team that is fully invested and committed to a common goal is one of my top priorities.

In communication, obviously this is one of the single most important things we do as leaders, and we need to be cognizant of that especially as we deal with uncertain market conditions.

At the end of the day, we also have to find a way to have a little bit of fun as we approach our work.

Now shifting gears to give you an overview of the business performance during the fourth quarter.

I will start with our three business units.

First is printing and converting.

This business produces premium quality fine papers for the book publishing and envelop converting industries.

During the fourth quarter, our net sales dollars were 2% below the target for the quarter.

However, we were very pleased with overall volume levels, which exceeded target by 7%.

This is especially noteworthy given the fact that November and December are typically slower demand months.

I think our people did an outstanding job given the challenging business condition they faced.

Couple of thoughts on near-term demand and pricing outlook.

Demand for printing and converting papers is typically slow during most of the first quarter.

We are working very closely with our key customers to ensure that we maintain our leadership position in these markets and we do see demands picking up, as we enter the second quarter.

Pricing outlook is a bit of a mixed bag.

We observed a slide in commodity offset pricing over the last two months, which has put some pressure on selected book paper grades.

However, the recent announcement of pulp price increases will be very interesting to watch as they play out.

If they do stick, this will certainly stop any further price erosion in the white paper segment and potentially create momentum for an improved pricing environment for printing and converting papers.

Now, I will make a few comments on engineered products.

This business produces customized solutions for the digital imaging, casting and release, pressure-sensitive, metalization, and industrial specialty markets.

Products include ink-jet papers, heat transfer papers, medical non-woven, which are used for disposable surgical gowns, playing cards, and postage stamps, to name just a few.

During the fourth quarter, volumes were 2% below target and net sales dollars were 4% below target.

This was attributed to a seasonal slow down in metalized papers and anticipated weaker customer demand in some segments.

We did increase inventory slightly for this business during the fourth quarter and this is in anticipation of expected demand surge that we will see in the first half of this year, as well as preparing for a capital project on one of our coating assets in June.

Near-term demand and pricing outlook -- demand for most engineered product is stable and in some areas is beginning to improve.

Our pricing outlook is stable.

In many cases, this part of our business operates with longer-term supply agreements and experiences less price volatility.

Now, I will make a few comments about long-fiber and overlay.

If you recall, this business is a world leader in the manufacture of high quality filter papers for the tea and coffee markets, overlay papers for the laminate industry and various specialty niche each products made from abaca fiber.

During the fourth quarter, we had an incredible performance out of this business unit.

In U.S. dollars, net sales dollars exceeded target by 23% and volumes exceeded target by 28%.

This was driven by a seasonal pickup in the demand for teabag papers as well as continued strong demand for overlay papers.

Near-term demand and pricing outlook -- demand of this business unit was relatively strong since we are in our busy season.

The near-term outlook for pricing is stable.

Continued strength in the Euro could present some downward pressure on pricing in the future.

That will just need to be monitored, and we are very excited about the PM9 rebuilding in Gernsbach, Germany.

This state-of-the-art inclined wire paper machine will give us new capabilities and help facilitate more aggressive new product development activities.

Now, I would like to make a few comments on our operations and supply chain.

During the fourth quarter, our facilities on a consolidated basis exceeded plan volume levels by 2.4%.

Quality yield was also above target by approximately 1.5%.

In aggregate, we experienced very little market related down time during the quarter and for the year 2002.

Cost control performance was inline with internal targets for the quarter, which obviously remains a very high priority for 2003 and will be critical in managing through our current business environment.

Couple of comments on pulp.

As stated earlier, the recently announced pulp increases appear to have some short-term momentum, and we, obviously, view higher pulp prices as a positive for a couple of reasons.

One is our Spring Grove, PA mill is an integrated mill, which means we make our own pulp and higher selling prices typically follow increased pulp prices.

Couple of other comments; one on the drought situations, Spring Grove, and we are happy to report that the heavy precipitation over the last three months has enable us to relax our drought contingency planning.

And in December, we are also successful in reaching early ratification on a new five-year labor agreement with our unionized work force in Spring Grove, PA.

We are very pleased with this, we see that there is as a major accomplishment and attributed to the fact that we used the interest-based bargaining approach, and we had a very strong and collaborative working relationship between our union, pace representatives, and management.

To wrap up with the high level summary of the 2003 operating plan, I will put in very simple terms.

We could break it down in three components -- non-stop cost control; we are going to use operating profit as a primary internal metric to drive earnings per share and will work with passion to improve our environmental and safety performance.

As you might recall from pervious conference calls, we recently install SAP as an enterprise resource planning tool, and we'll plan on using this as an enabler to assist us in achieving our goals.

In summary, you have heard that we do have some challenges, however, opportunities embedded within each of these challenges.

And we are committed to hit our cost reduction targets and do it in a way that does not compromise safety, quality, or customer service.

We remain a customer-focused organization that is committed to our business model and most of all, we believe in Glatfelter people to get the job done, regardless of the circumstances.

With that I'll turn it back to you George.

Okay, thank you Dante and Bob thank you as well.

I will try to rap things up here with a bit of an overview.

The start of a New Year offers the opportunity for us to share our views of business conditions that we perceive for the next 11 months.

You have heard Bob and Dante each speak to that, and I would like to spend a couple of minutes on that as well.

I have got to share with you that, despite some recent and welcome improvements in the valuation of the dollar, improvements in pulp prices and the ratio that I watch the Monday announcement of the ISM results;

I frankly don't yet see any indication of sustainable improvements in product pricing.

Clearly, and I think we all recognize.

There are wildcard issues out there that could positively effect this prediction, but at the same time, in my view, there are equally as many issues that could negatively impact our business in the months ahead.

I believe that its lightly that margins in this industry and this business will continue to be squeezed by higher cost and lackluster pricing throughout much of 2003.

I find it interesting, and reflecting back on past statements, this is exactly the same statement that I made to you last year at this time.

Here at Glatfelter our business plan is predicated upon the assumption that 2003 is going to be another challenging year.

As Dante has indicated, we've already taken steps necessary to drive cost from our business and we tend to continue our cost reduction efforts throughout the year, and in fact we're prepared to accelerate if business conditions deteriorate further.

Management and our board are absolutely committed to doing whatever is necessary; to improve the current cash flows and strengthen our balance sheet in 2003.

Those of you who have followed this Company for a long time can appreciate that financial discipline has been one of the core values of Glatfelter and strengthening the balance sheet and generating positive cash flow are of fundamental importance to us.

In support to these objectives, we are committed to the following activities in 2003.

Upon the completion of the capital projects previously targeted for 2003, that Bob referred to, we fully intend to reduce our capital spending to levels below depreciation.

Secondly, we recently enacted aggressive cost reduction plans in the areas of SG&A spend and cost of goods.

Third, the impending land sale of 25% of our Timberland base, located primarily on Maryland's eastern shore, is a great example of our commitments to unlock the value assets that are embedded in our balance sheet.

We'll continue to pursue this strategy in 2003.

We are actively engaged in the evaluation of all other opportunities and support a cash generation and nothing is off limits from consideration.

Likewise, we remain totally committed to effective execution of our specialized business model and intend to sustain our support for the development of new products within the Company.

We're encouraged by our performance in these areas of business.

Sales of new products were $207m in 2002; that's about 37% of gross revenue.

New product development is the life-blood of our company and as the specialized model, its going to continue to receive our full and active support.

This leads me to, perhaps the most exciting opportunities over the year -- the rebuild of our number 9 paper machine in Gernsbach, Germany.

This rebuild is in alignment with our strategy to exit production of tobacco papers and refocuses this machine on growth opportunities in two of our highest margin engineered products, tea bag paper and overlay.

As Dante has indicated, this project will incorporate leading edge paper making technology.

It's scheduled for the completion in the fall of 2003.

The project is currently on time and within budget.

Finally, as you know for some time we have been actively engaged in the search for new CFO for the Company.

I can tell you this search has been progressing well, and that we are pleased with the quality and credentials of available candidates.

I am hopeful, given the progress of our efforts, that we will finalize our search by the end of March.

This should give us ample time for the successful candidate to transition into the role prior to Bob's planned retirement in June.

In conclusion, Glatfelter remains committed to specialization as a means to differentiate us from our competitors.

We believe our value proposition to our customers is both appealing and robust.

The fact that our sales volume exceeded our expectations in 2003 and that customers are turning to Glatfelter for their next generation product needs speaks to the progress we are making.

Continuing economic challenges have caused us to look critically at our cost structure and make changes where necessary.

Although there are some signs of improvement on the horizon, we remain skeptical.

We are in this business for the long run.

We intend to continue to operate in a cost reduction mode in the belief that as a result of enacting tough decisions today our profitability leverage will increase when economic rebound occurs.

Thank you for you participations in today's call.

I will now turn the call back to Pat Sweeney to engage the Q&A.

Thank you.

And in a moment we will open up the call for questions and well, we will take it from there.

Thank you.

At this time if you would like to ask a question, simply press "*" "1" from your touchtone phone.

If your question has been answered and if you would like to withdraw your question simply "*" "2".

One moment while the questions registered.

Our first question comes from DOHYUN CHA from Credit Suisse First Boston.

Sir you may ask the question.

Good morning.

The first questions relates to engineered products, I am trying to understand, you said at the end of the third quarter you were planning to start a third shift and you are anticipating some stronger volumes there.

Can you just explain what happened during the quarter and whether that outlook remains so for the first quarter?

Sure DOHYUN CHA and this is Dante Parrini.

We have successfully gone to a three shift operation with our Specialty Coater in Spring Grove which serves the engineered products business unit, and we are operating all three shift as we speak and have plans to do so through the course of 2002.

Part of the benefit that we will accrue by virtue of running this three shifts will be some additional volume and additional revenues and some margin enhancement --- opportunities through improving our mix.

So, we are very pleased with the progress we have made.

We were -- actually we were a little bit ahead of plans in the fourth quarter of last year in terms of ramping up and feel comfortable with the prospects for 2003.

Thank you and I just have two more questions.

First on SG&A, it looks like you are making nice progress there.

Last we have seen SG&A at these levels was probably 2000, I am just trying to understand how much of that is coming from the reduction and restructuring that you have already announced and how much more we can expect this year?

And the other questions is related to pensions and I was just wondering if you have any guidance on what kind of change you expect with pension income in '03?

Thank you, DOHYUN CHA.

We have got Matt Smith, our controller here on the call as well.

Matthew, do you want to take that?

Yeah.

DOHYUN CHA concerning the SG&A, I would say that part of what you see in the fourth quarter is related to our focus on our cost reduction efforts, but a lot of what we --- the progress we are making there will actually be seen in 2003.

I will say that if you are focusing on the fourth quarter of 2002, there were some accounting-type adjustments that we did make in the fourth quarter that drew up, things like profits sharing and incentive accruals and some of our sales commissions and things of that nature.

So, I guess I have to say that, that number is probably a little lower than what our run rate would be if we hadn't had those adjustments.

Regarding the pensions, I don't think at this point we are prepared to really provide any guidance to you in regards to what the 2003 outlook is going to be, but I believe that something we will be looking to share as we start preparing our 10-K.

Thank you very much.

Thank you.

Our next question comes from Mark Wilde of Deutsche Bank.

Good Morning.

Good morning Mark.

I have got actually a few questions.

First, I just want to come back with Matthew Smith to this SG&A issue because that was down about a couple of million dollars just quarter-to-quarter.

How much of that is truing up?

Matt?

Mark, I would put an estimate of that as around $2m.

So, essentially sort of the quarter-to-quarter was just -- were these kind of one time adjustments?

Yes.

Okay.

All right.

And the second question I had is can we get a little up date on the Fox River issues?

We have got one of the two charges this morning.

It looks like it might be tied to Fox River.

I know that there was some -- with some kind of decision, which was supposed to come down, I think, from the DNR up in Wisconsin late in the fourth quarter early in the first quarter.

So I wondered if you could just update us.

Yeah Mark, I can tackle that and offer also the opportunity for Bob or Dante to chime in.

What you are referring to is a document known as a Record Of Decision.

For those of us who are in the business that's is called a ROD.

We had anticipated that the ROD would be issued sometime end of the year early 2003 and in fact on January 7th a ROD was issued specific to portions of the river that are directly down stream from our mill in Neenah Wisconsin.

The significance of a Record Of Decision is that it, it outlines in relatively broad terms our remedial action plan and the value of that is that, that plan provides a framework for activity in the river.

I will tell you that the ROD as issued was quite consistent with our expectations.

So there was no surprise from that perspective at all.

We are told that a second Record Of Decision covering the remainder of the river will be issued later this year.

While that is significant, we certainly believe that the remainder of the river carries with it substantially lesser exposure to Glatfelter than the issuance of the ROD covering the two areas directly downstream from the mill.

Bottom line, we are not surprised at all by the content of the ROD, and we continue to believe that with respect to the entire issue were adequately approved at this time.

Okay.

So the -- you know I read the filing and I wasn't frankly -- I wasn't quite sure what to make out of this.

You think most of your liability on the Fox is related to this one site right below the mill?

Without getting into a lot of detail or conjecture because you certainly appreciate it...

Right.

...This is a dynamic situation.

I would tell you that -- that is our belief.

Okay.

A couple of other questions.

Mark this is C. Matthew Smith.

Yes.

Sorry to jump in, but I want to get back to your previous question just for a second.

Yes.

That won't leave you with the wrong impression.

In terms of what our operating earnings were for the fourth quarter.

While we did have some of these type of adjustments in SG&A.

Yes.

We also had some negative adjustments that affected our cost of goods sold.

One of which related to our inventory adjustment and there was also a cozen outage that we had in the fourth quarter that actually have been planned for the third quarter, and looking at 2001 took place in the third quarter.

I'll just bring out to your attention that those -- the level of those adjustments were of a similar magnitude to the SG&A adjustments.

Okay.

So, you might look on it as essentially cancel each other out?

That's the point I'm trying to make.

Okay.

That's fine.

Thank you.

The next question I had was, you know, in sounds like you had a very good quarter in the long fiber business.

I'm just curious of the other two businesses, the printing and converting paper and the, I mean, the specialized papers.

Which of those two businesses was, you know, the biggest under performer, would you say, in fourth quarter or was the relatively, the weakest?

Hi, Mark, this is Dante again.

I'll give you a perspective on that.

As you know, printing and converting is the largest of our three business units.

So, in terms of impact on the business, that one has more significance, and the average selling price was below our expectations for printing and converting.

You might recall, we exceeded our internal targets on a volume basis by 7%, yet, net sales dollars were 2% below our expectations for the quarter.

So you can put that equation together and understand that from a pricing perspective.

That was certainly disappointing and had much more impact than the 4% unfavorable performance on a net sales dollars point of view from an engineered products perspective.

That sounds like prices were well below expected in, kind of, printing and converting?

Yeah, that was the area that we are much disappointed in 2002.

Okay.

We had to work very hard through the course of the year on mix improvements and volume to close the gap because of unfavorable selling prices.

Okay.

Right, next question I had was just capital spending -- that the number for this year and then, kind of, what you would point people to going forward?

Let me try to tackle that and again ask for any support from those on the phone.

I would tell you that the CAPEX for this year is about $75m, $50m of that is focused on, what I'll call two generational types pf projects; one is the environmental project in the Spring Grove pulp mill to comply with regulatory requirements, and the second is the one that we have talked a lot about the number done in rebuild.

We have about $25m in the budget this year for maintenance cost.

I think that's a reasonably good projection going forward.

It may vary somewhat year-to-year but depreciation is about $45m and that's the number that we are committing to stay below as we go forward here.

And finally George, the project over in Gernsbach and Gernsbach overall; if were to see a Euro at a $1.15, $1.20, can you give us some sense of impact on those operations and also impact on the new project?

Can you live with that kind of an exchange rate over there?

We're thinking Mark.

I guess, Mark.

This is Matt.

I think in terms of our earnings levels, if that was the exchange rate, I don't think it would have a dramatic impact on our earnings one way or the other because, in terms of the functional currency over in Europe, it would affect cost and revenues by similar magnitude.

Yeah.

So, I don't' see it having a real huge impact in that regard.

I cant really comment on what it might do to the markets in terms of -- whether we have trouble selling our product at that point.

Yeah, I know, like -- I think in the tea-bag paper business, most of the competition is all over in Europe, is that right?

Yeah, Mark.

This is Bob Newcomer.

It really won't have much of an impact in terms of, actually, improving or hurting our business over there because most of the transactions are in Euros, local currencies.

There is not a significant amount that is sold into the States.

Okay.

So really from a business standpoint, I don't think there will much of an impact.

From a P&L standpoint, I agree with what Matt says, it really isn't -- there really would not be a significant impact.

Okay.

Right.

It sounds good.

Thanks guys.

Thank you.

Once again, that is "*" "1" to ask a question, "*" "2" to withdraw or cancel the question.

Our next question or a follow-up question comes from DOHYUN CHA .

Hi, thanks for the couple follow-ups.

First on, could you talk about your mix improvements or those efforts that you described last quarter in your engineered products segment?

How that's coming along and what to expect in next couple of quarters?

And then, any updates on the Ecusta situation, I think you had a couple of million dollars that you were owed still.

Just wondering, if you had any update on the collect ability is there?

Sure DOHYUN CHA .

This is Dante.

Speaking to the mix improvement initiatives that have been enacted through the course of 2002 and would carry into '03.

And I would segregate them form our European operations and our North American operations, simply because the asset base is very different as you can appreciate.

However, We do have mix improvement initiatives on both continents.

We have assembled a cross functional team of individuals from the sales and marketing group, the manufacturing group as well as the finance group to look at opportunities to enhance our mix between the Neenah facility and the Spring Grove facility, as well as on specific assets in engineered products, for example we have two different coaters in Spring Grove and we have worked on a variety of projects to give us more flexibility, whether that's qualifying sheets on both coating assets, which give us more swing capabilities to adjust incoming demand and constraint that we have from a scheduling point of view; whether it's Shade Match project that we have for our trade book business that give us greater flexibility between Neenah and Spring Grove.

As you might know, we are the market leader in book publishing and we have pretty significant asset base dedicated to those markets; so the more flexibility we build in, we think it's a double win.

We have an opportunity to improve profitability through mix enhancement and we give our customers better service.

In Europe, we have looked at our facilities in Scaer, France and in Gernsbach, Germany especially with the impending PM 9 rebuild and are looking at opportunities to re-qualify grades in between facilities and look to put some of our higher volume grades on our biggest and most cost effective assets and some of the smaller niche businesses that require more servicing, greater flexibility on some of our smaller paper machines.

So that just gives you a kind of a summary of some of the activities that are going on from a mix of improvement process.

I'll turn it over to George for the Ecusta questions.

Now, I'll try to answer that as best I can.

I am sure you are aware that the RFS Ecusta is currently engaged in bankruptcy proceedings.

I can assure you that we are following all necessary steps to preserve our rights under those proceedings.

And I think a key milestone really is the auction of the facility and asset that will be conducted on the 18th of February.

I think that will determine -- will answer a lot of questions going forward.

I frankly am very hopeful of an outcome that will enable this facility to resume operation and provide important opportunities for the people down that lane and that frankly is the best outcome for everyone.

But beyond that I am just not prepared to talk.

Thank you very much.

Thank you our next question comes from Robert Call.

Yes a question for George.

George in your comments about cash flow that everything was on the table, I think, you used language like that.

Will that include the cost we are looking at the dividend in terms of reducing it to a level that makes some sense here?

Well, the way that I chose to answer that, Bob, is that if you look at the current economic conditions, we are paying careful attention to that balance sheet.

That shouldn't surprise anybody who follows Glatfelter for any amount of time.

We tend to look at that pretty conservatively.

It is extremely important and we watch it very carefully.

Our current adjusted CAP is actually pretty good, 33%, that's a level that is within our comfort zone.

But if you look at the numbers, we are really not generating what we will consider to be acceptable levels of cash.

There are three reasons for that.

The primary one, I think, is the one we have been talking about the most today -- lack of pricing power.

Incredible lever in this industry, incredible lever in this business, and we haven't seen it for a long time.

The second area is that we still are in the midst of these generational CAPEX projects that I talked about earlier.

Each one of them I think is valid, each one's focused on this business, going forward but we still have a substantial capital burden that we need to deal with and our objective is to get that behind us.

We talked a lot about cost related to SG&A and cost of goods and we built a business infrastructure three year ago, based upon our view that we were committed to growing this business well.

What we found very candidly during that time is that for a number of reason most of them related to the economic situation.

We could grow well; we easily could grow.

So, I just like to back something that I think is just very-very basic and very-very fundamental.

Number one priorities to ensure the long-term viability and prosperity of the business, that begins with a strong balance sheet and a healthy generation cash and that's the reason, that I said, we're looking at all alternatives.

I think that's the prudent and responsible thing to do.

Okay, George.

Thanks a lot.

Thank you, once again that's is "*" "1" to ask a question.

Okay, sounds like we have no additional questions.

That is correct.

Okay.

On behalf of Glatfelter, I would like to thank you for your participation today.

Bye, bye.

Thank you.

This concludes today's teleconference.

All participants please disconnect at this time.