Packaging Corp of America (PKG) 2002 Q4 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Packaging Corporation of America's Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only-mode. Later we will conduct a question and answer session, and instructions will follow at that time. As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference Mr. Paul Stecko, CEO. Mr. Stecko, you may begin.

Yeah, good morning and welcome to our Fourth Quarter Earnings Release Call. With me today in the room are Rich West our CFO, Will Sweeney who runs our Corrugated business and Mark Kowlzan who runs our mill system. I want to thank you for participating in the call and as usual after we complete the presentation, we'll open it up to any questions you might have.

So, let me start right in. We are reporting today fourth quarter net income of $12m or $0.12 a share and this would compare to fourth quarter 2001 earnings of $18m or $0.17 a share. Net sales for the fourth quarter were $418m compared to $413 million in the fourth quarter of last year. Our full year net income was $48m or $0.45 a share and that compares to a $106m or $0.98 a share in 2001. Full year 2002 net sales were $1.7b compared to $1.8b last year. Our cash generated from operating activities continue to remain strong and during the fourth quarter, we generated $67m in cash from operating activities and after capital expenditures of $35 million our free cash flow was $32m.

For the full year, our cash generated from operating activities was also strong at $240m. After deducting 2002 total capital expenditures of a $107 million, PCA generated free cash flow of a $133m and if you equate that to a per share basis that would be about a $1.24 of free cash per share. So pretty good cash flow.

During the year we used the free cash to pay down debt totaling $53m to repurchase $1.9 million shares our of common stock to 33 million, and our cash on hand which also included $2m from non-operating activities increased by $49m to a $131m at yearend.

During the fourth quarter, we repurchased 303,800 shares of PCA common stock for about $5m at an average price of $16.93. Through the end of 2002, we repurchased about 4.2 million shares of PCA common stock at a cost of $71m as a part of the $100m share repurchase program that we have. EBITDA for the fourth quarter was $74m versus $85m in the fourth quarter last year and full year 2002 EBITDA was $295m versus $391m last year. Lower earnings compared to the fourth quarter a year ago were driven primarily by higher fiber costs, mainly recycled of about $0.03 a share as well as increased medical costs of about $0.02 a share.

For the full year the single biggest factor by far impacting earnings compared to 2001 was, of course, lower prices for containerboard and corrugated products. And this negatively impacted year-over-year earnings by $0.56 a share. So, it was overwhelmingly the predominant factor. Looking closer at the fourth quarter, our corrugated products volume per workday was up 3.2% compared to the fourth quarter a year ago and that put our corrugated products volume per workday for the year up 3.9%. December industry numbers have not yet been released. But through November the industry was up only 0.4%. So, we have continued to outperform the industry by a rather wide margin again in 2002.

Mill containerboard production in the fourth quarter for us was 559,000 tons and that's about 20,000 tons lower than we produced in the third quarter of 2002. We did our best to take some machine slow backs and we also took our Filer City mill down for seven days over Christmas in December, which together have lowered our containerboard production by about 12,000 tons from what we had originally expected to produce at the beginning of the quarter. You know in fact, we probably did take a little more down time than we should have, but [Inaudible] sites 20,20.

We ended the year with very low containerboard inventories going into the fourth quarter, 11,000 tones below last year. On the price side, our box prices did move up the additional $9 a ton in October that we had anticipated. If you remember at the last earnings call, we were looking for $8 to $9 a ton more in October and we actually got $9. So, we hear our estimate is pretty well.

Looking at cost, recycled fiber prices did trend down during the quarter as expected, but we were still about $22 a ton higher than the fourth quarter of last year, and for the year recycled fiber OCC cost were up about $28 a ton. PCA's fourth quarter medical cost was up about $3.5m or $0.02 cents of share compared to the fourth quarter a year ago and that's a much higher increase than we expected.

For the year, PCA's medical cost was up $7.5m compared to 2001 or about 20%. Now medical cost usually drop for us about $1m in the fourth quarter, compared to the third quarter. A lot of people don't like to go to hospitals for major surgeries over the holiday season etc. But this year, our cost actually increased by a $1.5m and that represents a $2.5m swing from what had been the norm. We are not totally sure yet of all of the reasons for this or is this simply an aberration, where we got an unusual amount of large claims and we are analyzing that. We have taken some actions and that higher medical cost will be partially offset in 2003 by somewhat higher salaried employee medical plan contributions.

However, this is an area which we, along with many other companies, have to address further in order to reduce the expenses, and obviously the problem is bigger than just PCA. Moving next to our balance sheet, we continued to strengthen PCA's financial position. Our total yearend long-term debt was $742m which consists of our receivable revolver about $113m, term loans of $79m and then finally our $550m, 9.58% senior subordinated notes which are available on April 1st, 2004 at 104.81. So that's just over a year from now. Our yearend cash balance was $131m, which, if we deduct from long-term debt, would result in a net debt of $611m. This would be a $102m reduction in net debt during 2002 and since becoming a standalone company in April of '99, this brings our total debt reduction to about $1.25b and I think more importantly, our current annual cash interest expense is now down to only $60m a year, and obviously we will go much further if we call our long term debt, I mean our senior subordinated notes a little over a year from now. Our [cutted] ratios remain very strong with net debt till last twelve months, EBIDTA currently at 2.1 times, interest coverage at 4.6 times and net debt-to-total capital of 43%. If we look ahead, a little bit to the first quarter of 2003, we will be taking our two big linerboard mills at Valdosta and Counce Town for the annual maintenance outages. This has been our normal practice, as we do like to match this required maintenance stand time with both the seasonally slowest demand period of the year and also the highest energy cost and energy utilization period of the year.

We expect first quarter containerboard production to be about 26,000 tons lower than the fourth quarter of 2002. In addition overall cost per ton at these two mills will be somewhat higher as a result of this maintenance outage and normal shut down and start up efficiencies. Considering our two major shut downs, along with seasonally higher wood and energy costs, we would expect first quarter earnings this year to be about $.04 lower than the fourth quarter, which would put our first quarter of about $.08 share. We would however exit our first quarter with containerboard inventories at exceptionally lower levels, and except for a five-day maintenance outage at Tomahawk in April and Filer City in June, we would expect to run our system at full capacity in the second and third quarters.

As was the case last year, as we replenish inventories to reasonable levels for the fall season. And we were anticipating, as we did last year, to be able to run full in the fourth quarter, but, again would need a little help from the economy at the end of the year, to be able to do that. We thought we could run full this fourth quarter, but the economy was a little slower than what we have thought and that's why we took some downtime. With that, we would be happy to open it up for any questions, but I am obliged to remind you that some of the statements we have made on this call constitute forward-looking statements.

These statements were based on current expectations of the company and the overall risks and uncertainties, including those identified as risk factor in our S1 and S4 registration statements, all on file with the SEC. Actual results could differ materially from those expressed and these forward-looking statements and after reading that to you, I would like the operator to open the phones up for any calls you might have.

Thank you Mr. Stecko. If there is any question at this time, please press the one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again if you have a question, please press the one key on your touchtone telephone. One moment for question. Our first question is from Mark Weintraub of Goldman Sachs. Please go ahead sir.

Thank you. Good morning Paul.

Good morning Mark.

I wanted to just first of all confirm, when you take maintenance downtime like you are in the first quarter, does that all get charged to the first quarter or do you amortize that over the year?

Some of both and let Rich answer that.

The true maintenance cost is amortized over the course of the year, but any downtime efficiencies or any calls related to the shutdown outside of the maintenance costs that's done is charged in the quarter in which you have the costs, but the volume is charged to the first quarter. In other words, the fact that we are making 26,000 tons or less, that all charged to the fourth quarter, but let's say for example that we do a boiler maintenance work, half a million dollars to get all our boilers in shape. That is amortized over the year. So the answer is the bigger piece is taken in the first quarter, some of it is amortized over the whole year.

Okay, great.

But by far, the biggest hit is the downtime and a downtime we take in the quarter, we take it all in the quarter. The absorption of the fixed costs as any variable costs remains with the downtime.

Okay, what when I did a kind of back of the envelope calculations, I figured that a fairly substantial portion of the 4-cent deterioration could be related to the maintenance downtime. Would that be a fair estimate?

Well, you know, I'll throw the number out. It's in the 3-cent range.

Okay.

And I'll just give you a couple of other things. One of the other things that we have to do the way we do the accounting and the way we require to is, it's going to cost us a penny in FICA taxes as we take them all in the first quarter, it is not all of them but most of them and the bonuses that are paid out carry over to the first quarter and - you take FICA until people max-out, so we get that aberration in the first quarter every year and that costs us a penny every year.

Okay, I will now see if I could, can you sense where box prices are now for your relatives of the fourth quarter, maybe give us a sense of how business just started out in January?

Box prices for us are or I would say were stable. You do get a little seasonal change in mix. December for example, there is not nearly the displays that you have in October and November, so that brings your average price down, but that's a mix related issue, but I would say on box prices it is pretty stable, of course pulp and paper dropped the liner board price by $5 in November, but that's going back two months but I would say pretty stable. In terms of volume, volumes in the first half of January are pretty good for us, we are up a couple of percent over the last year and that's misleading, because we had a very good January last year. We are actually, if you go back to the last real good year for the industry in 2000, so you have to go back a couple of years to get to that. That's the last pretty good growth the industry had, we are actually up about 4% over 2000, but that could be a very, very misleading number, because what happens during the Christmas season, lot of people shut down and then they get back, and the first part of January is normally a catch-up period, and we have got 13 days in the bank out of 22, looks pretty good after 13, but usually, and I am looking at 4 years worth of date in front of me. It tends to slow down the last half of January, so in a way I wish I was doing this earnings call 2 weeks from now, because I can give you a much better picture than I can today, but so far so good is the answer.

Okay, thank you Paul.

Sure.

Our next question is from Chip Dillon of Salomon Smith Barney. Please go ahead sir.

Hi. Good morning Paul.

Good morning Chip.

Good morning Rich, I noticed last year you mentioned you will take your down time in the first quarter. The improvement from the first to the second quarter even the revenues really shot up the cost. The margins, actually, were pretty flat. So you had about a $0.02 improvement and if things like, you know, what you were saying with FICA and the down time, if everything else held constant, you would probably see something more than that going into the second quarter without asking you to forecast. If its my assumption that prices average the same in the second versus the first, would you therefore expect to see a better than $0.02 improvement going?

Absolutely. I see a lot bigger than that without getting into forecast but the other thing that I do want to mention on the cost another negative is energy in wood cost in the first quarter. Tougher logging conditions. You got to bring the [Inaudible] but primarily energy and I will tell you not for only us but for the entire industry, this cold weather cost money. And its a lot more than just heating up the buildings and it is worse for the white paper because they use a lot more water than making brown paper but just to give you something to think about. It takes us about 10,000 gallons of water to make a ton of paper and in the summer time, say, it counts. We have got to heat that water from, say, 80 degrees coming out of the river to say 125. [Inaudible] water today is 37 degrees and we have got to heat 10,000 gallons of that to make a ton of paper not from 80 to 125 but all the way from 37 degrees. So its heating water and heating air to make paper that consumes most of the energy. This is not simply keeping the buildings warm and this cold weather is something else that cost all the paper companies a good bit of money especially if it gets much cold and we are having one heck of a cold snap in the south and so that is the other reason we get a big pop in the second quarter because down south come March and April, it starts to warm up considerably and our energy cost drop and typically we are on a 100,000 [Inaudible] higher in the winter normal winter than in the summer and a lot more this year until we get through this cold snap. That's one of the reasons we liked to go down if we can requires better planning in December because, you know, we are not right now [Inaudible] is down cold we are not using any steam. We are not using any air. So our energy cost is darn good right now because we are not making any paper but we will be in about a week. So energy is another thing that will kick in. Could be a couple of cents.

Ok now just to review the buy back situation, you mentioned that you buy back let me see, I might have written this down along, 383,000 shares in the fourth quarter?

I've got the right number. 300, I forgot the number too. 303,800.

I am sorry. 303,800. How much was that in dollars? Five?

Its about $5m.

Ok so $5m.

I think I gave it. $16.93 a share.

Okay I will get my calculator out and then for the full year 4.2m shares. No, no since you began the program, 4.2m shares for $71m. So that would include some buy backs in '01?

Yeah. We can give you the full year. We have that number. Somebody is looking for it right now. We'll give you that number in hopefully in ten sec.

And then the last housekeeping, when you said that OCC was $0.03 hit in the first quarter, that was a year-over-year situation obviously [Inaudible].

Well that wasn't OC. It was OCC and Virgin. And the other Virgin Fiber went up you know it was due to the wet weather so it you know OCC was yeah just a touch over $0.02 and Virgin was almost $0.01. So together they totaled $0.03 for us and for the year Chip, we repurchased 1.9m shares of stock for $33m.

Got you. Last question. On the, it is kind of early days here and obviously the holidays kind of, since we are still relatively close from that time might make it hard to see this but are you seeing any kind of change from the fact that the dollar as fallen another small amount either in terms of your US customers being busier or in terms of what's happening maybe in export market for [Inaudible].

Well I can say that a couple of people especially in Europe that we are not big exporters. I want to say that right off the bat. We are 82-83% vertically integrated and of the 17% or so that is left, 2/3rds we sell to independents in the US. So it makes our export position fairly small. So you know I am probably not one of the better sources to ask that question but of the 5% or so that we do export I could say that the people that we work with in Europe are now feeling a lot better about there ability to sell Liner Board because of the dollar and so they are all more optimistic that they are going to sell more tons of over there this year because of that fact. I can't tell you we are seeing it in the economy but I will tell you if you ask me one thing that I feel the best about is the dollar at 107 because eventually we are going to be able to export more out of this country, will import less because of price. That makes for more disposable income to buy the kind of things that we make in this country you know I thought you know we started off real strong in January that I started feeling real good about that until I looked at the last three four years and we always start off good in January. The key is can we sustain it and we might have a pick up here but again I don't know. I will know in two weeks a lot more than I know now and unfortunately that is the best answer that I can give you.

And just a last question. I need to ask this. I noticed your buyback. I guess you have $29m left on it as of the yearend. As you bump up against that $100m, I believe that's the limit. Are you expecting to get back to your board and get approval for, you know -- increasing the amount you can buyback?

Well, I am not going to answer that question because I haven't talked to my board yet about what I am going to do, and I can always like to let them know what I am going to do before I let you know. Plus the SEC likes that I do it that way too. But, so we obviously earned a strong cash flow position and we have numerous potential uses for the cash. Obviously, additional share buyback would be one that would be considered. You know -- I like the tax efficiency, that the second thing is, we have got a real opportunity in a little over a year to take out that high yield debt and maybe we take it out, maybe we refinance part of it and to do it, that's another option for the cash. And of course, the third thing it's gotten to get interesting on what the value of the dividend payment would be, but that is so cloudy and uncertain that obviously I am going to reserve opinion on that till I see what finally comes out of the process. So, I think the plus for us is, we have the ability we think to have cash and we'll try to put it where it does the most good and our definition of the most good is creating shareholder value. But I am not telling you, I can't tell you my plans, when it comes to appropriate time, I will make appropriate announcements.

Okay. Thank you very much Paul.

Our next question is from Mark Wilde of Deutsche Banc. Please go ahead sir.

Good morning Paul.

Good morning Mark.

Listen, just one other question on this kind of related to exports. We are hearing some, you know -- little noise that maybe the export market for waste paper is actually picking up. I wonder if you are seeing this yet in OCC cost?

Yeah, I am glad that you brought that up but I forgot to mention. I had a report two days ago that the Chinese were back in the market with some big orders and that the price in the Miami had gone up, the price in Cleveland had gone up. We were not seeing it at our mills and we are keeping an eye on that situation. Again we are on the low end of the OCC consumers, you know -- our net buy, you know -- we use about 20, 21% right now. We supply about 8 from our mills, so only about 12% of our [Inaudible] comes OCC. So where small consumers were primarily virgin, but you know -- I got feelers if this is true and it persisted it could raise the price in February and March on the East coast, maybe the West coast and it'll take a while to get into the interior because some other mills are going to be going down also for [Inaudible]. I understand there a couple of competitive mills quite big that are down, either for inventory reduction purposes or maintenance purposes, I don't know why. And that may help the situation for the next few months, but I did hear from my own people that the Chinese are buying up some OCC.

Well, I mean....

I don't have a lot of detail.

It is not so much an issue for you as it is for the industry's overall cost structure, if these things really start to go out right?

Yeah, -- I mean obviously a rise in OCC puts cost pressure on everybody including us, maybe not to the extent of some of the others and then you have to deal with that in various ways and obviously, historically when OCC pricing has gone up, that put pricing on final product there, pressure on final product pricing.

Okay. One other export question, if the dollar keeps going down, I mean, we keep hearing about how ugly export liner board prices are. Is there a point where you think the drop in the dollar is going to start to make a difference on export pricing?

Well, it's making a difference right now because we get paid in dollars. So basically we are getting more money for our products, as the dollar is weaker because we can compete at a higher price and still sell. So we expect pricing to move up in relation to the, you know -- net realize will actually move up.

Okay. Very good. Thanks Paul.

Our next is from Lisa Shonfield of J.P. Morgan. Please go ahead Ms. Shonfield.

Good morning. Just got a couple of financial questions. I noticed that through the year, your tax rate seems to have come sort sought of down and a little lower again in the fourth quarter. Could you provide some guidance on where we should be for 2003 and then maybe you also remind us on what your CAPEX plans are for 2003 and 2004?

Okay. I will take the first part and then I am going to let Rick take the second part on detail. CAPEX this year, we are forecasting between a $110m and $115m. We have a lot of cash. We've always run with a pretty tight ship CAPEX wise. But we got a couple particularly good smaller projects with very good energy savings. 40%, 50%, 60% return projects and I am probably going to release an another $5m, $6m, $7m, $8m to fund those because compared to the interest rate in the banks of 50% return on my money is pretty good. That said we are not going to hard wild. On 2004, our normal number for CAPEX is about $110m and being up a little bit this year and would probably in a $105m, $110m range for 2004. But my accuracy is plus or minus 5m or so. This is not nailed in concrete. We did get a full year tax rebate in the fourth quarter. Rick will tell you about that in a second. That was about a penny a share. We will get it again next year. But it will be a fourth of a share a cent and let me give you a, let me turn it over to Rick to give you the details on tax rates.

The tax reduction, Lisa, was a result of us determining that we had not taken full advantage of the income tax exclusion on foreign shipments going into primarily Mexico. And it was something we have just not picked up upon and that was the total difference in the fourth quarter as it relates to the effective tax rate of 35.2% versus our norm 38.5% to 39%. And as Paul indicated, for next year we will be getting some of that benefit each quarter, but it will be in the range, I would say our effective tax rate would be 38.5% to 39%. I don't see it being lower than that.

Okay. That was great. Thanks a lot.

Our next question is from Mark Connelly of Credit Suisse First Boston. Please go ahead sir.

Paul, when you look at the downtime you are taking in the first quarter for the scheduled maintenance. Can you compare that in tonnage terms to, what you took in October?

Yeah, I will give you the exact number here. In 2002, we produced, in the first quarter, 520,000 tons, this year we are going to produce about 532,000 to 533,000. So, we took a lot of down time last year in the first quarter, as we did this year. We had our two big outages and we took some marketing downtime. We don't see taking any marketing down time in the first quarter; this is all maintenance down time this year.

Okay, Okay, so no market downtime?

No, we are scary and [Inaudible] got to get these mills up and run them, we need the paper. One of the things that we are also doing is [Inaudible] this is a longer than normal downtime, we usually get down six and half, seven days at [Inaudible]. We are going to be down nine or nine and a half this year, and one of the things that we have done is, we had a roughly $2m, $2.5m capital project to reconfigure the press section of the machine to go to what we call no drop. One another thing that we have done over the years at [Inaudible] is being able to run lighter and lighter weights and in order to increase the efficiency of that machine, we felt that we needed a no drop press, so obviously lighter the sheet, the more likely it is to break, and we are doing that this year, that will pay us big dividends the rest of the year. On running light weights and as a matter of fact, we will probably catch up with the tons we have lost during the outage those extra couple days, we will more than make that up on light weights as we will have a much more efficient machine operationally. So, we do have a little bigger than normal downtime this year, it is just the way the things allot (ph).

So, as you go to light weights, you don't expect to lose any net machine ton?

No, that's the beauty of it. See what happens, the machine limit was speed limited at [Inaudible]. So, on heavy weights doesn't matter, but on lightweights say we got to make 35 ton instead of 42. We had to degrade the capacity of the mill by 50 tons or 75 tons a day. Now, we don't, we can maintain the same capacity on lighter weights and the beauty of [Inaudible] is that the wood fiber as you know is in very good shape, where there are shortages throughout the south, we are in great shape at [Inaudible] and we actually have the ability to move some tons in there when cost rising counts, but in order to be able to do that on light weights, we needed to be able to run that machine little faster and we needed to reconfigure that to a no drop press and now we are efficient on light weights as well as heavy weights.

Okay, two mixed questions Paul. First on fiber, was there any material shift in your fiber mix in the fourth quarter, given the shortages and given everything else what's going on and do you anticipate over the next couple of quarters that you will be making any shifts?

We made one shift, wasn't a big shift, at Counce, we dropped the hard wood percentage in the sheet about 5%, we are running at 15%, 16% hard wood, we took it down to 10% or 11% because hard wood was in short supply and we picked up a little bit on the OCC to replace it because OCC costs were coming down and we made more chips than we normally make because a lot of saw mills in the south were down because log prices are, I mean you couldn't get the, wood prices were going up there because of non-availability and so we didn't have as much residual, but they are minor shifts and I think, as you know Mark, one of the strengths of our manufacturing system is fiber flexibility. We have got the ability to run more hard wood, less hard wood, more OCC, less OCC and not screw up the paper machine and we consider that one of our core competencies. Like I say, we are not the smartest people in the world, we don't know where the price of various species of wood are going. So, we need flexibility. So, whatever wood is the cheapest, we got the capability to run that fiber mix and we are not afraid to vary our fiber mix and screw up the process because it is a core competency, but we only made a slight adjustment in the fourth quarter and primarily on hard wood.

Okay, and last question Paul. When you look quarter-to-quarter, I know it's probably hard given seasonality, but, if you look year-over-year, has your mix of business changed very much?

No, I would say that our mix really has remained remarkably constant and as a matter of fact, Bill Sweeney and I was talking about that about a month ago, that our growth, a lot of our growth has come from existing customers, where we have a pretty big position and they have done pretty well. Now, you always win some business and lose some business, but I would say that remained about the same and lot of our growth has just come from our existing customers being able to grow, and our mix has remained pretty steady.

Okay, thanks very much Paul.

Thank you Mark.

We have a follow-up question from Mark Wilde. Please go ahead sir.

Yeah Paul. What are the uses for cash that you didn't mention that you have in the past are little converting acquisitions. Is that...

You know, - that is just an over side on my part. You know one of our strategies is to continue to grow our volume or corrugated volume both internally and if we could find a right box plans, we would use some of that case to pick up a few box plans absolutely and I appreciate you re-raising that issue because that was purely an over side on my part.

Lot of your [Inaudible] in the industry had been kind of chasing this full integration strategy. [Inaudible] prices for converting assets had been bit up over the last 2 or 3 years?

I do not think they had not been beat up. They have remained fairly stable. I would also say that there are not a lot of assets for sale. I think like any good seller you probably have a psychological bias about selling when you think the economy is at a low and when the economy picks up, the people may get more interest, then your property maybe willing to pay more and I think that any potential sellers really aren't that motivated. They are like everybody else. They are waiting for this economy to pick up and have a better time to sell their asset and that is always my feeling on it. You know that is -- this has not been the two last years. It has not been the best box market in the world, as you know.

One other question. The last big block of land you sold down around Counce. I think you put it in a special vehicle and you kept a minority interest and I am just curious about how is that vehicle performing. Because it seems like the [Inaudible] markets excluding the last quarter have really come down and I just, you know, wonder if this is putting any financial pressure on the vehicle.

We have a minority interest of one-third interest in Southern Timber venture. In 2002, it paid dividend and obviously it performed fairly well in order to be able to pay out a dividend to the shareholders, which we reported as income and we will see how 2003 goes and hopefully that venture will perform well enough to pass another dividend some day but no guarantees there and you know I really can't comment about the details of that. It is only a minority player.

Okay. All right. Thanks very much.

Our next question is from Mark Weintraub of Goldman Sachs. Please go ahead sir.

Yeah, hi. Most of my questions were answered but, just on the EPS guidance for the first quarter, can you just give me a number what that translates into for EBITDA.

I do not have one off the top of my head. We [Inaudible] around here. You know, rough number $70m.

Okay, that's all, thanks.

Again if any questions, please press the one key on your touchtone telephone. Our next question is from Andrew Flemming of [Inaudible]. Please go ahead sir.

Thank you I was just wondering, if you might be able to give me three numbers. If you got them.

7, 8, and 11.

Thanks a million.

I will look it now.

Yeah, I know. Cost sales, SG&A, and corporate overhead. If you have for the full year.

Growth,hold on here. Lets have those again.

Cost of sales, SG&A, and corporate overhead for the full year.

Cost of sales for the full year?

Yeah.

$1.409b.

Okay, thank you.

SG&A 132.

All right.

Other income expense, an expense of eight and corporate overhead 41.

Okay. With that dividend, when you talk...

We limit everybody to three numbers.

What is that?

I said we limit everybody to three numbers.

Yeah, but you gave me four. So I appreciate it. I got a freebee.

Na, I am kidding. What else do you need?

That's all I really needed. Thank you very much.

Good talking to you.

My pleasure.

Our next question is from David Martin of Deutsche Bank. Please go ahead sir.

Good morning Paul, just one question. Early in the call you mentioned slow backs. What is your experience been in benefits of using slow backs in your experience versus full outages?

Yeah, we favor full outages over slow backs, because obviously, you get more, you get labor content out. You do not get any labor content out at all on the slow backs but the reason, there is a reason you do slow back and that is if your incremental cost of raw materials goes up, then slow back starts to make sense. We slow back at counts, when wood cost started rising in the region. And we might be paying, these are not exact numbers, but lets say we are paying $25 a ton for wood. That is what we can get the run at say 2,500 tones a day. But [Inaudible] the last 250 tons a day, that $25 would might be $30-$32 a wood. And so what we did is, we slowed, we did two things. We slow back at counts a little bit, because that is the only place we saw the wood pressure. We moved some additional tonnage out of our accounts into [Inaudible] because the wood cost would better primarily to the heavy weight. And we slow back counts. Now after our shutdown, we will have the flexibility that if wood cost rise in the one part, we can move that tonnage somewhere else. And if we move it to obviously [Inaudible], we can do it on lightweight or heavy weight. But the answer to your question, the reason we did slow-backs this time with to offset the incremental cost of wood. And, in the steady state position, it would be better off just taking down time.

Okay, thanks Paul.

There is no further question at this time. Gentlemen, please continue with any closing remarks.

I have no closing remarks. Thank you for your attendance and we will talk to you next quarter.

Thank you, Mr. Stecko. Ladies and gentlemen, this does conclude today's conference call. Thank you, for your participation. You may disconnect at this time and have a good day.