Magnera Corp (MAGN) 2003 Q4 法說會逐字稿

Good morning and welcome to the Glatfelter fourth quarter and full-year earnings release teleconference. (OPERATOR INSTRUCTIONS) At this time it is now my pleasure to turn the call over to your host, Ms. Vickie Hoover (ph).

Ma'am, you may begin.

Good morning.

This is Vickie Hoover, Executive Assistant for Glatfelter, and I'd like to welcome you to today's conference call.

Joining us on the call today will be George Glatfelter, Chairman and Chief Executive Officer;

John van Roden, Senior Vice President and Chief Financial Officer; and Dante Parrini, Senior Vice President and General Manager.

Also with us this morning is John Chekunsky (ph), our Vice President and Corporate Controller.

Before we begin our discussion I'd 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.

Now I would like to turn the call over to Mr. Glatfelter.

Good morning and welcome to our 2003 fourth quarter conference call.

I thank you for participating in today's call, and I trust that you've had the opportunity to review the earnings release that was issued this morning.

As is our custom, after my introductory remarks John van Roden will provide an overview of our financial performance during the fourth quarter, followed by a review of the operational side of the business by Dante Parrini.

I will then conclude with a few remarks before opening the call for questions.

The vision of our company is to become the global supplier of choice in specialty papers and engineered products.

Frankly, our progress in 2003 with respect to our vision was mixed.

Although we experienced near double-digit revenue growth in our engineered products and long-fiber and overlay business units, the performance of our printing and converting unit was very disappointing.

Since printing and converting comprises nearly 46 percent of our total sales volume, the financial impact upon the Company was significant, reflecting a decline of $35 million in sales revenue from our largest business unit.

Revenue lost from printing and converting in 2003 was partially offset by sales volume growth of nearly 9 percent in our engineered products business unit and by 8.5 percent in our long-fiber and overlay business unit.

The fourth quarter results reflect challenging business conditions, as well as our continued efforts to restructure operations and reduce costs.

We have taken significant actions to eliminate high-cost excess capacity.

Excluding nonrecurring charges, our earnings per share were at a break-even level.

Obviously, this is disappointing.

More than that, it's unacceptable.

We're committed to making the changes necessary to significantly improve our business, and I will discuss those changes further in my closing remarks.

At this point I'd like to ask John van Roden to spend a few minutes reviewing the financial results.

For the fourth quarter of 2003 our results from continuing operations were a loss $7.7 million or 18 cents per diluted share compared to earnings of $5.6 million or 13 cents per share for the fourth quarter of 2002.

Excluding a wide array of special items that are fully detailed in our earnings release, adjusted earnings for the fourth quarter of 2003 were essentially break-even compared to adjusted earnings of $9.8 million or 22 cents per share in 2002.

Most of this decline was due to the volume and pricing shortfall in printing and converting, coupled with higher cost of products sold, which was driven by lower pension income, higher raw material costs, and increased market related down-time.

Overall the primary drivers of the decline in earnings for the fourth quarter of 2003 when compared to the fourth quarter of last year are as follows -- lower pension income, five cents; lower product pricing, six cents; lower volumes, five cents; higher fiber prices, two cents; and we did have the favorable effect of foreign currency of three cents.

Turning to the full-year, excluding nonrecurring items described in our earnings release, we earned $11 million or 25 cents per share, compared to $39.5 million and 90 cents per share in 2002.

The main drivers of the decline in earnings per share compared to last year were -- lower pension income of 21 cents, which negatively affects both cost of goods sold and SG&A; lower product pricing of 19 cents; higher fiber and energy prices of 15 cents; lower volumes and market-driven down-time of 5 cents; higher depreciation expense of 6 cents; and once again, partially offsetting these factors were the favorable effect of translating of foreign currency of 10 cents.

Turning to the balance sheet, we ended the year with net debt of $238 million and a debt to capital ratio of approximately 38 percent.

In 2003 we finished a period of significant capital outlays and expect capital expenditures in 2004 to be reduced to approximately 50 percent of our annual depreciation expense.

In addition, we expect to further reduce debt in 2004 by a significant amount.

As I near the end of my first year with the Company, it is fair to say that 2003 was a challenging and disappointing year.

However, I am more encouraged with our prospects now than I was when I first got here.

Not only do we see some market factors that are looking up, but last year in 2003 we took decisive and necessary actions to reduce costs and focus on maintaining our balance sheet.

However, we also know we must take further steps to improve our financial performance.

George will comment on this in his closing comments.

I am confident that we have an achievable plan and that we now have the management team in place capable of executing it.

That concludes my comments, George, and I will turn it back to you.

I would now like for Dante to provide the overview of the operational side of our business.

Dante?

Good morning.

I will provide some comments on the performance of our three business units and a few other areas of interest for the fourth quarter of 2003.

We'll start with the printing and converting business unit.

As you may recall, this business unit produces premium quality fine papers for the book publishing and envelope converting industries.

Fourth quarter performance saw net sales for the quarter down 25 percent compared to fourth quarter of 2002 and volumes were off 18 percent.

The weakness was primarily due to a volume shortfall in book publishing sales and continued price pressure across most of the product categories within this business unit.

Although 2003 was not a great year by any measure, we remain the market leader in book publishing papers and are committed to fortify this leadership position.

In terms of addressing the need to lower our cost structure and more accurately match capacity with demand, we completed the shutdown of a paper machine in the de-inking facility at our Neenah, Wisconsin location.

This action cut Neenah's capacity by 25 percent and will reduce complement by approximately 200 people.

We also shut down our small high-cost paper machine, which is PM3, at our Spring Grove, PA location in December.

We're actively engaged in a sales optimization plan that will better align our products and services with our customers' changing needs.

We believe this will enable us to grow our share in our core markets.

In terms of our near-term perspective on demand and pricing, the first quarter is typically a period of weaker demand.

However, the recently announced offset in envelope price increases of $60 a ton, combined with an up-tick in regular business, have generated a pick up in demand for North America.

Pricing outlook is a bit more positive for this business unit when compared to recent months.

We believe the price increases just announced may represent a turning point in the direction of product pricing.

The ultimate impact and success of these price increases will become clearer over the next several weeks.

Let's move on to engineered products.

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

Some products include things such as inkjet papers, heat transfer papers, base material for medical non-wovens, playing cards and postage stamps.

Fourth quarter performance saw net sales up 17 percent and volumes up 23 percent versus the fourth quarter of 2002.

We would attribute this good performance to the following factors -- more fully utilizing our specialty coder in Spring Grove; our metallized products business had a very strong performance; and we continue to grow in our digital imaging and industrial specialties market segments.

This top-line growth is due to a combination of new products, new markets and geographic expansion.

Actions are now being taken to further reduce our cost to serve for these markets which will improve profitability and further help us grow the top-line.

We continue to see growth opportunities for this business unit.

Our outlook for both demand and pricing in the near-term is stable for this business unit.

Now I'd like to make some comments on our long-fiber and overlay business.

This business is a world leader in the manufacturer of high-quality filter papers for the food and beverage markets, overlay papers for the composite laminate industry, and niche technical specialty markets.

The fourth quarter of 2003 saw net sales approximately 14 percent ahead of the same quarter a year ago, which is largely due to the positive effect of foreign currency.

Volumes were essentially flat in the quarter-to-quarter comparison.

We did experience some price pressure due to weak market demand and the need to defend our market share against competition in the food and beverage segment.

We continue to make very good progress in the growth and development of our technical specialties market segment.

And I would also like to make a few comments on the PM9 rebuild in Gernsbach, which is fully operational in the fourth quarter.

The learning curve is tracking very well.

Obviously we have some fine-tuning required, which is common with any new installation of this magnitude.

We've experienced things such as improved machine speeds and greater yields on certain products that have exceeded our expectations, which is further assisting us in pursuing NPD opportunities -- or new product development opportunities -- in our chosen markets.

The fourth quarter performance for this business unit improved compared to the third quarter primarily due to the completion of the PM9 rebuild and seeing the beginning of pick up of our busy season for teabag papers.

Let's go through the near-term demand and pricing outlook.

We're now in the busy season for tea and coffee papers and demand for overlay products remains solid.

We're also encouraged by our new product development activities.

Our trials are going quite well in all of our market segments and we're getting positive feedback from the marketplace.

The near-term outlook for pricing in this business unit is relatively stable, with some pockets of modest price pressure anticipated in certain markets.

One last comment on our new product development performance -- it was very strong in 2003.

Approximately 47 percent of our net revenue came from products that are less than five years old.

This is about double the productivity that we experienced five years ago.

This concludes my comments.

I will now turn it back to you, George.

This is a tough industry, you know that.

There are signs out there that things are getting better, but we're not counting on it.

The fact that this industry has not experienced a sustained recovery for over 14 years leads me to view positive projections with skepticism.

Also, it's clear that effective cost management is what yields sustainable success in this industry.

Even though our specialized product mix might produce higher margins than commodity producers, we've got to manage our cost with a low-cost mindset.

This is the reason that we're embarking on two strategic initiatives in 2004.

We call them our focus points.

The first is the North American profitability improvement plan.

This is a comprehensive plan to aggressively reduce costs and realign our product portfolio here in the US.

The improvement plan consists of four separate components.

They are -- first, a step change cost reduction program targeted at our Spring Grove, Pennsylvania facility; secondly, execution of an asset rationalization plan already underway at our Neenah facility, designed to improve operating efficiencies by 8 to $11 million; third, rightsizing our SG&A; fourth, realigning our product portfolio to drive costs from our customers' supply chain, enhance our service capabilities, and strengthen our position as the supplier of choice.

This project will engage the entire North American organization.

It will leverage new levels of management strength that have been built into the business over the past years.

I will be happy to get into more detail on project leadership and structure during the Q&A.

The second focus point is on growth.

It focuses on our growth strategy for long-fiber and overlay.

The objective of this strategy is to maximize financial return of our $30 million rebuild of the No. 9 paper machine that Dante referred to earlier in Gernsbach, Germany.

Key components of the plan are -- first, development of a new market segment of technical specialty papers, largely focused upon non-woven technology; secondly, expand our global penetration of our food and beverage markets to capitalize on the expanded capabilities of the No. 9 paper machine; third, execute a cost reduction effort across the span of our European operations to enhance profit margins in long-fiber and overlay; and finally, fourth, established a sales office in China to support geographic growth in overlay and other long-fiber products.

We expect the financial benefits of these initiatives to be significant.

And we will communicate them to all stakeholders as part of our first quarter earnings release.

To summarize, we're making progress towards our vision.

Our engineered products and long-fiber and overlay business units are growing at near double-digit rates.

As Dante mentioned, 47 percent of our 2003 product portfolio consisted of products that are new to the Company within the last five years.

We're seeing increasingly greater opportunities for growth, both within existing and new customers, as well as in existing and new geographies.

With respect to our core market of printing and converting, we are the market leader in the book publishing segment of the industry.

That is very important to us.

We're absolutely committed to growing our leadership position in book publishing, as well as in other core printing and converting markets.

Improvements to the business environment may indeed be happening.

Regardless of that, our focus upon cost control will not be deferred.

It's key to generating sustainable business success and acceptable returns to our shareholders.

We're committed to both of those objectives.

Our 2003 financial results were unacceptable.

This performance demands that we execute well the 2004 focus points of improving profitability of our operations here in North America and maximizing the growth opportunities inherent in our European business and (indiscernible).

At this point, I would like to thank you for your participation in today's conference call.

I'd like to turn the call back to Vickie to open the line for your questions.

Marisha, if you would get on line and give everyone instructions for the Q&A portion?

(OPERATOR INSTRUCTIONS) Mark Connelly, Credit Suisse First Boston.

When you talk about all the new product offerings, clearly this is a tough time for profitability and volumes probably aren't where you want them to be.

But it seems to me that one of the principal goals has been to innovate at a faster pace and get more value-added out there.

Can you see in the pricing and profitability of your products now that that's actually working; that the new product innovations coming faster are promising higher profitability?

That's a great question.

I think in fairness to the answer to your question, the entire market at this point, I think, is extraordinary from the standpoint of the impact of additional costs and the inability to drive pricing.

With respect to the new product developments that we have developed here, it's clear that we do see some pricing premium in that area, but I believe that pricing premium has been muted due to the environment that I just described.

I have a high degree of confidence that as the business environment improves the pricing for these products and their growth capabilities are going to be powerful drivers of improvement for the Company.

Dante, would you care to add anything in that?

Sure George.

A couple of other comments.

The speed in terms of idea generation and commercialization is something that we're very acutely focused on and are in the process of completing a 24 month project to compress that cycle time by 25 percent.

So we're getting much better at taking an idea and turning it into something that is commercially viable, which is one of the reasons why we've been able to grow our new product revenue to 47 percent or nearly half the Company's sales.

In terms of margin impact, I'm not going be redundant with what George said.

It is a bit of a frustrating perspective because we do have a lot of energy and effort going into our new product development activities.

The average margin for those products is better than what it's replacing, but the very challenging business environment has really muted the impact of our NPD activities.

So we're going to continue to focus on the things we can control, which is our internal process, the rate by which we innovate, the way we get products to the market faster and make sure they're what our customers need.

Another question -- you're talking about CapEx to half the depreciation.

Can you give us a sense of what's not going to happen in that number relative to what we had before?

When we look at our longer-term plan, we said we were going to bring our capital spending down anyway from levels that it had been.

So we will going forward for the next five to ten years, we will spend at the rate of depreciation or less.

For '04, as we say, we're going to spend 50 percent of that.

There is really nothing that we're not going to do this year.

All our plans can be executed without spending more than 50 percent for this year.

One more question.

Looking at the uncoated freesheet price hike attempt, we've seen a lot of uncoated freesheet price hike attempts; what we haven't seen is an operating rate that seems to be able to stay above 90 percent for very long.

Can you talk about the book paper market with respect to prices specifically because frankly, I look of this price hike attempt by the major producers and the commodity grades and say, "why don't you do something about the operating rate and then try to raise prices?"

I'm curious whether the book paper market looks meaningfully different from your perspective.

There are a few points of data that I think are helpful in addressing this question.

One is fundamentally operating rates need to improve in order to have a prolonged sustainable environment for better pricing.

There's no doubt in that.

If we look back to January of '01, which is, according to our data, the last time we've had the NDSK (ph) list prices where they are today, the average book prices in the marketplace are easily $100 a ton lower than what they were back then.

We also are beginning to see -- and it depends on your perspective -- the demand versus capacity outside of North America becoming much more in balance.

And the future look between now and, say, '06 is more positive than it has been in the past.

So you put all that in the pot, and you say if the commodity offset increase goes through, then perhaps some of the fringe competitors who have been interloping in these types of markets will go back to the businesses that they're best suited for.

But we're not going to rest our laurels on things such as that happening.

We're going to continue to focus on what we can control, which is everything the George mentioned from getting a better cost structure and improving our internal business processes, improving our product and service offerings to better match the current and future needs of our customers.

And we believe we are uniquely positioned when we compare ourselves to any other player in the market to do that most effectively.

I have a couple of quick housekeeping items, if I could.

First, the break-even number for the quarter; does that include the gains from the land sales?

No.

Do you have an after-tax number on the land sale gain?

For '03 it was $20 million.

Anything to say about expected pension income in 2004?

I think pension income in 2004 will be flat with '03.

Perfect.

So no change there.

Thanks very much.

One other point that you raised, we continue to aggressively pursue the sale of selected tracts of our woodland.

We announced recently a sale of 1,200 acres in the state of Delaware for approximately $17 million.

We're projecting at least $30 million of additional sales in the year 2004.

And we have about, I would say, 88,000 acres of woodland that continues to be part of the Company's ownership portfolio.

Obviously not all of that, or actually frankly much of that, has anywhere near the value of this particular sale that we just announced.

But I wanted to make you aware that we continue to look at that asset from the standpoint of monetizing the financial value that's embedded in it.

That's helpful, and I think it makes a lot of sense.

Thank you very much.

Mark Wilde, Deutsche Bank.

Just to be clear again about the land sale gain, which looked like it was about 1 million 2 pre-tax in the quarter, when you talk about your operating income being flat backing up the charges, that flat does include the gain or does not?

No, it does not include the gain.

Very good.

Can we move over and talk a little bit about what's going on in the book paper market?

I guess I'm curious in the fourth quarter how much of the weakness is just industry volumes being down; how much of it is any loss of share you think you might have; and what role some of these alternatives grades -- the uncoated ground-woods coming into the book paper market -- are having?

In the fourth quarter we had about 18,000 tons of down-time.

And a component of that was attributed to the permanent shutdown of PM84 in Neenah, Wisconsin, which was somewhere in the neighborhood of 7 to 9,000 tons.

If you look at fundamentally what happened to our book publishing business this year, I would say it was a combination of a few different events.

One was the very difficult business environment, which introduced, I would, say more fringe competition and a very difficult pricing environment.

As we stated on previous calls, we took a harder line in the beginning half of the year, which caused us to lose some share.

And our business was displaced by much lower-priced products at that time; prices that we felt were well below what the market was.

Another component that you mentioned was uncoated ground-wood, and I'd like to speak to that a little bit more specifically.

Yes, we did see some people experiment or downgrade with uncoated ground-wood.

But to be very honest with you, that's been quite isolated and wasn't the primary driving force behind our weaker performance.

George and I recently spent a few days with a number of the largest publishers in the world, having very in-depth conversations about their business, their strategy, and their expectations of suppliers.

And many of them stated that they had concern with this type of substitute product because of quality and reversion issues, as well as the message it sends to their authors.

So they made very strong statements that was not a path they were choosing to taken.

We certainly felt encouraged by that, and feel that our going forward plan is going to be more appropriately matched with their needs.

Dante, can you give us some idea if we looked at your book paper volumes on a year-over-year basis what the fourth quarter looked like and then what you think the industry looked like?

Sure.

If I look at fourth quarter -- you want year-over-year or compared to third quarter --?

Can we do it both ways?

Sure.

If I look at -- '03 to '02 Q4, we saw about 17,000 tons unfavorable variance versus '02.

Most of that was in book publishing.

There might have been some other smaller converting grades, but the vast majority of that was in book publishing.

If I compare that to the performance we had in the third quarter of the '03, we were down about 4,000 tons.

If I were to look at the industry in general, I would say that in 2003 we did lose some share in book publishing compared to the performance of the broader markets for the reasons that I stated earlier.

But I do want to remind you that we still are the number one player in market share and are committed to fortifying and growing that position.

Would you care to quantify about where you think share is right now?

Traditionally you've run in the high-30s to 40 percent range.

To give you an exact number, again, I'm not prepared to do that today.

But it's fair to say that it's slightly lower than that.

Another question in book paper, Dante.

You've shut one machine down at Spring Grove, which I think probably leaves you running about four there.

Do you have the ability on those smaller machines in book papers to be cost competitive?

Or do you need to think about more rationalization or maybe acquiring some larger capacity to remain competitive in book paper from a price standpoint?

That's a good question.

I'd like to help clarify a few things.

The PM3 that we shuttered in Spring Grove had an annual production capacity of 7,000 tons.

So that's approximately two percent of the total capacity of the Spring Grove facility.

In terms of materiality, it's not going to have a significant impact on our ability to serve customers and markets.

The question that you asked about the competitive nature and the number of machines we have, we have five paper machines in Spring Grove and two coaters.

That's PMs 1, 2, 5, 7 and 8.

If I look at the primary competitors in book paper, when you look at the assets that are generally speaking serving these markets, our PM8 in Spring Grove is quite competitive in terms of the deco (ph) and the speed and the efficiency, and I believe that our PM8 in Spring Grove is the best book machine in North America.

So our opinion is we need to further reduce our cost structure.

We have a number of opportunities in the supply chain area to further integrate our business, perhaps take some complexities out of how we operate our business, further reducing our cost to serve, and leverage all the things that our customers tell us that we're best in class at.

And I feel that that's a winning formula to maintain and grow our leadership position in book.

Any thoughts on those other four machines?

I would say that there's nothing on the table right now, but you have to be open-minded and be very prudent about how you match capacity with demand in the markets.

And I believe we have a going position where we will consistently evaluate the performance of all of our assets and those that are marginally performing are going to have a high level of scrutiny.

I think we've proven over the last 12 months that we will take decisive actions when business rationale calls for it.

Can we move over to long-fiber?

I guess what I was curious about -- you mentioned that there was a little price pressure in food and beverage, which I take to be mainly teabag paper.

That is correct.

And I wonder, how much of that -- what the drivers are there, if part of that is FX related.

I guess that's a machine that's probably Euro cost base.

You compete against at least one machine, I think, over in the UK.

I think maybe they Euro has depreciated versus Sterling.

So I don't know if that's part of the equation.

Can you walk us --?

Certainly.

First of all, we have to keep in mind that over the last three years our long-fiber and overlay business unit has been growing at either double digits or near double-digits, which is faster than the market in general is growing.

So we are displacing other income and suppliers, which means you need to be competitive to do that.

So that's a component of the price pressure.

Another component that you hit the nail on the head is that our primary competitors operate in Pounds Sterling and US dollar.

And the strength of the Euro has hurt us in certain regions of the world where we've needed to adjust our pricing to remain competitive.

I would attribute those as the two primary drivers to the pricing circumstances.

And is it -- what would be your position on doing acquisitions in this area?

Is that something that's on the table or is it more really kind of optimizing that PM9 right now and maybe moving into markets like China that are really the focus for you?

I will tackle that.

Our focus right now is really to preserve the strength of the business, preserve this balance sheet.

That's the primary focus for this company right now.

I think you accurately targeted where our most likely markets of growth will be from an acquisition point of view.

And I can tell you that we're not turning a blind eye to that.

But the focus points that I described to you are really the way that we intend to operate this business in the near-term with the objective that I just described.

We will continue to cast an eye towards opportunities.

I think that the PM9 rebuild has opened up a wide array of opportunities for this company.

I mentioned development of that fourth market in the area of non-wovens.

We brought new people into the Company who have entree into those markets.

We believe that we can penetrate those markets, or at least segments of those markets, from a low-cost point of view.

And we also, frankly, believe that we can expand in the teabag market from a lower cost profile.

So there are good opportunities for growth in that segment of the business.

The China dimension is a dimension that is I think a very strong intrigue.

Some of our key customers happen to be located there -- some of the major multinationals.

The opening of that particular business office there reflects, I think, a low-cost, low-risk manner of really penetrating market that frankly we have not participated in in the past.

So I hope I've given you a sense.

We're going to be focused on controlling things that we can control.

A lot of those, frankly, our growth related.

But I think that as far as acquisitions go, while we keep an eye peeled in that direction our focus right now is elsewhere.

Two final details.

You mentioned in both North America and Europe cost take out initiatives, but I think the only thing you've quantified was an 8 to 11 million on that rationalization at Neenah.

I just wondered if you want to try to put some parameters around how much cost you're trying to take out in both North America and Europe.

And then also, if you could give us some sense, George, on this land sale, this $30 million minimum that you talked about in 2004, how much of your base that represents, and what you think the value opportunities are in that remaining 88,000 acres?

Let me start, first of all, with your first question.

I want to make sure that I respond to it.

You gave me sort of two ends of a spectrum here, but the first question, can you just restate that very briefly so I can --?

The first question really is just trying to quantify all these costs take out measures in both North America and Europe.

Let me start there.

The area that we've been able to quantify financial benefit has been the Neenah rationalization plan, simply because we initiated that earlier in the year -- third and fourth quarter of 2003.

We have in fact a project team assembled for the other two focus points that I talked about, and they're very actively engaged right now with making a final determination in terms of just what the financial benefit will be to the business and how that affects our shareholders.

The reason I'm not sharing that with you now is that we don't know that answer.

We're in the process of developing it.

Once it gets measured, gets managed so we're committed to identifying what those targets are, and when we know them we will share them with you and with all other stakeholders.

With respect to the Glatfelter woodland, I think I mentioned we have remaining about 88,000 acres.

I mentioned the major land sale of $17 million.

That is, in fact, part of the $30 million projection that I had indicated here for 2004.

We're in various stages of negotiation with a number of parties.

That's what gives me the confidence to give you that $30 million number.

John, is there anything else that you would care to add to that?

I think he also wanted to know how many acres we have left after that.

It would be about 85,000 acres (multiple speakers)

85,000 acres, but it's important to understand that a lot of those are not located where some of these higher value-added tracks have been marketed.

So I think the economic value of those acres is decidedly different.

In fact, the way that we're approaching this is we still believe that we need to be in the wood growing business to some degree to preserve the financial structure, the cost structure of our primary raw material.

So we're approaching this from a very strategic perspective -- where we see properties that have appreciated in value beyond the value that can be generated from growing pulpwood, those are the properties that we're looking at; where we see properties that have not appreciated that far, yet still serve to provide a low-cost fiber to the mill in Pennsylvania, those are properties that we continue to manage aggressively and at this point really have no desire at this point to divest.

So to try to frame it a little but, I just wanted to give you that color.

As I recall, George, the real high-value stuff is sort of $15,000 an acre stuff that's in the 17 million.

That's really just down near hobus beach (ph), so that really is really unusual timberland, is that right?

It is.

It's fair to say that.

Very good.

(OPERATOR INSTRUCTIONS) I'm showing no questions at this time.

I will now turn the call back over to Vickie Hoover.

If there's no more questions, this will conclude today's conference call.

Thank you so much for calling.

Good bye.

Thank you.

This does conclude this morning's teleconference.

You may disconnect your lines and have a wonderful weekend.