Packaging Corp of America (PKG) 2010 Q4 法說會逐字稿

Thank you for joining Packaging Corporation of America's fourth-quarter and full-year 2010 earnings conference call. Your host today will be Mark Kowlzan, Chief Executive Officer of PCA. Upon conclusion of the narrative, there will be a Q&A session. I will now turn the conference over to Mr. Kowlzan. Please go ahead when you are ready.

Good morning and welcome to Packaging Corporation of America's fourth-quarter earnings release conference call. I'm Mark Kowlzan, CEO of PCA, and with me on the call today are Paul Stecko, Executive Chairman of PCA; Tom Hassfurther, who runs the corrugated business; and Rick West, PCA's Chief Financial Officer. Thanks for participating in this morning's call and after the presentation, we'll be glad to take any questions.

Yesterday we reported fourth-quarter 2010 net income of $55 million, or $0.54 per share, which included a $5 million, or $0.05 per share addition to income from cellulosic bio-fuel tax credits generated in 2009, and after-tax, non-cash charges totaling $3 million, or $0.03 per share, from asset disposals related to Counce, Tennessee, and Valdosta, Georgia, mills major energy projects and paper machine assets idled since April 2005 at the Tomahawk Mill. Reported results for the fourth quarter of 2009 were $59 million, or $0.57 per share, which included income of $44 million, or $0.42 per share from alternative fuel mixture tax credits and energy project asset disposal charges of $1 million, or $0.01 per share.

Net sales were a fourth-quarter record of $627 million, up 18% compared to fourth quarter of 2009 net sales of $532 million. Excluding income from bio-fuel tax credits and asset disposal charges, net income was a fourth-quarter record, $53 million, or $0.52 per share, versus fourth-quarter 2009 net income of $16 million, or $0.16 per share. This $0.36 per share increase in earnings was driven by higher container board and corrugated products price and mix of $0.44 per share and higher volume of $0.05 per share. These increases were partially offset by higher costs for recycled fiber of $0.05 per share; labor-related costs, including medical costs, of $0.04 per share; transportation costs of $0.02 per share; chemical costs of $0.02 per share; and a higher tax rate of $0.01 per share.

Excluding income from bio-fuel tax credits and for asset disposals and closure charges, earnings for 2010 were $166 million, or a record $1.62 per share, compared to $96 million, or $0.94 per share in 2009. Net sales were also a record $2.44 billion compared to $2.15 billion in 2009.

Looking at operations, our corrugated products volume was up 3.1% over last year's very strong fourth quarter, setting a record for fourth-quarter shipments. Our demand was relatively steady throughout the quarter, with shipments per work day up 4.3% in October, 2.2% in November, and 2.5% in December over last year. Since the fourth quarter of 2008, the low point in the economic downturn for us, total shipments are up 11.6%. Our outside sales and container board also remained very strong for both domestic and export shipments, up 8.6% over last year's fourth quarter. The increased sales volume benefited our earnings by about $0.05 per share compared to last-year's fourth quarter. All of our mills had an outstanding quarter, producing 639,000 tons of container board, up 39,000 tons, or 6.4% over the fourth quarter of 2009, driven by exceptional productivity and operating efficiencies. The high mill productivity enabled us to build about half of the container board inventory necessary to offset the 2011 production losses related to energy project work at our Valdosta and Counce mills, including the tie-ins and the rebuild of two of the Counce recovery boilers.

Looking at pricing, our container board and corrugated products prices were up significantly year over year, reflecting higher container board prices, both domestic and export, plus a full pass-through to boxes of our container board price increases, which along with mix improved earnings by about $0.44 per share compared to last-year's fourth quarter. Moving to costs, industry published prices for old corrugated containers, or OCC, excluding delivery costs, increased more than we expected when we provided our earnings guidance and were up about $75 per ton in the fourth quarter of 2010 compared to the fourth quarter of last year, and up $35 per ton compared to the third quarter of 2010. The higher OCC costs reduced our earnings year over yearby about $0.05 per share and lowered our earnings by about $0.01 per share compared to our fourth-quarter earnings guidance. Based on January's published prices, OCC is now about $10 per ton above the fourth quarter average.

Wood fiber costs were down slightly, with better weather compared to last year's very wet fourth quarter, plus we did a very good job of getting winter inventories built earlier this year, which kept wood costs down. Labor-related costs were up about $0.04 per share, including higher medical cost and higher accruals for incentive compensation based on higher earnings. Transportation costs were up $0.02 a share compared to last-year's fourth quarter, with higher diesel prices and increased demand on the nationwide truck fleet and rail system. Chemical costs, primarily cost of accelerant, were also up, reducing earnings by about $0.02 per share compared to last-year's fourth quarter, and the higher tax rate reduced earnings by about $0.01 per share.

I'm now going to turn it over to Rick West, our Chief Financial Officer, who will give you an update on our cash position, fuel tax credits and also our expected capital spending and tax rate for 2011.

Thank you, Mark. Looking at cash, in the fourth quarter PCA generated cash from operations of $139 million. Our uses of cash were capital expenditures of $89 million that included $41 million for the Counce and Valdosta energy optimization projects and $15 million for strategic projects at our box plants. For the year our total capital expenditures were $320 million that included $176 million for our major energy project, $39 million for strategic box plant projects and $105 million for normal capital expenditures. During the quarter, we also repurchased 496,000 shares of our common stock for about $25.50 per share, or $13 million, and paid our regular common stock dividends that amounted to approximately $15 million. For the year, we paid dividends of $62 million and repurchased 41 million in common stock. We ended the year with $197 million cash on hand.

With regard to bio-fuel credits, our Counce, Valdosta, and Tomahawk mills produced cellulosic bio-fuel in 2009. This quarter we, along with outside tax advisers, determined that our proprietary bio-fuel process at the Filer City corrugating medium mill will also likely qualify for 2009 cellulosic bio-fuel credits. Based on accounting guidelines, in the fourth quarter we recorded an addition to income of $5 million, or $0.05 per share, for the Filer City's 2009 cellulosic bio-fuel generated. The potential exists for higher after-tax credits than what we recorded under accounting guidelines because the Filer City bio-fuel process is unique and Internal Revenue Service regulations do not specifically address the process. We expect an expedited review of our amended 2009 tax return that will finalize any additional credits we are due from Filer City by the end of the year. During the fourth quarter, we used $15 million in tax credits to offset cash taxes and as of year end we have estimated tax credits remaining of $104 million, including the additional $5 million for the Filer City mill.

In terms of 2011 guidance for the taxes we expect our effective combined federal and state tax rate for income-reporting purposes to be 36% and our cash tax rate to be about 21%, the difference driven by both fuel tax credits and other tax deductions. Capital expenditures for 2011 are expected to be $255 million, down $65 million from 2010. The spending includes $115 million to complete the major energy projects at Counce and Valdosta, $40 million for our strategic projects in the box plants, and $100 million for normal capital.

With that, I will turn it back over to Mark.

Thank you, Rick. 2010 was a very successful and significant year for PCA, not only in terms of results but also strategically. In addition to generating record sales and earnings, we are very pleased with the performance of our box plants in achieving record shipments in the fourth quarter and bringing our volume back to the pre-economic downturn levels. The key priority for Tom Hassfurther and his team in 2011 will be to continue our strategic box plant expansions and continue to grow our corrugated products volume and increase our integration level. Our mills had an outstanding year, running at almost 100% of capacity, setting several new records for productivity. As you know, earlier this month we named Jack Carter, our new Vice President of mill operations, reporting to me. Jack and his team will have their plate full in 2011, with normal annual maintenance outages plus downtime and slow backs associated with the energy project work. Fortunately, we made good progress in the fourth quarter in building inventory to support these shutdowns and that will take some of the pressure off, but our mills will still need to run exceptionally well in 2011 in order to meet the expected demand and complete the rest of the inventory build for the shutdowns.

Looking ahead to the first quarter, our Counce and Valdosta mills will be down about a week at the end of March for their normal annual maintenance outages. Valdosta's shutdown will continue into April, making the total shutdown 11 days. One of our two paper machines at Counce will also be down an additional week in June to install a new electric drive on the machine. The downtime will result in lower production and increased costs. Higher fiber, energy, timing-related benefit costs, and a higher effective tax rate are also expected in the first quarter. Considering these items we currently estimate our first-quarter earnings at $0.42 per share.

With that we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call constituted forward-looking statements. These statements were based on current estimates, expectations and projections of the Company and of all inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC. The actual results could differ materially from those expressed in these forward-looking statements. And with that, operator, I'd like to open up the queue for questions.

Thank you. (Operator Instructions)Our first question comes from Chip Dillon of Credit Suisse.

Yes, good morning.

Morning, Chip.

Just to clarify so we get the whole downtime situation set for the year, because obviously, you're hooking up these energy projects. You mentioned obviously the maintenance downs at Valdosta and Counce at the end of March, beginning of April. I think you also said there would be a Counce machine down in June, if I heard you right. And then the --

Correct.

-- press release it mentions some other downtime in Counce in the second half of 2011. If you could elaborate a little bit on that and maybe give us some idea what the cost would be?

Good question. The normal annual shutdowns will take place during this first quarter at Counce and Valdosta, but with the electric drive replacement we're going to be able to take advantage of some of the recovery boiler rebuild time when the mill is making less pulp. So, we're going to use that week in the first part of June to take care of number one paper machine drive.

Also, during the April, May period, during the second quarter, we'll see the Valdo -- the Tomahawk and Filer mills go through their annual shutdowns. But then later in the year, when you go through the remainder of the recovery boiler rebuilds at Counce, the number one recovery will be down during the June, July period. It will come back up and run through August. Once we're satisfied that the boiler is performing as we expect, the number two recovery will come down during the month of September and October, so during that period, which carries into the fourth quarter, we'll see some continued slow-back, which impacts the tons for the year. So, that's why you're seeing some of this impact carry over into the fourth quarter with the recovery boiler rebuild completing at Counce.

Got you. And then as we think about -- you're sort of pointing to different stages of downtime throughout the year, I would imagine --

Hey, Chip, let me interrupt you. I'm just getting word that the call has been cut off here. Can you hear ?

Yes.

Chip, go ahead and finish that last question.

Oh, sure. I guess just to make sure we get our models right. This is an unusual year and we'll see the payoff we expect next year from the energy projects, but it sounds to me that we, probably versus normal, should build in -- you tell me, $0.05, $0.06 a quarter of extra downtime in the second, third and fourth that -- or at least in the third and fourth, that we normally wouldn't see in a typical year as you all hook up the energy projects. I guess why I'm asking the question, is it fair to say that as you bring the final Counce boiler, number two, back on that we should see the full benefits starting in the first quarter of 2012 from the energy projects, or is there some ramp up period?

That's correct. As far as that part of the question, first quarter of 2012 we'll see the full benefits of all of these projects. The Valdosta boiler will be ramped up by then, Counce will be well behind us, and so first quarter everything's delivering full results.

Hey, Chip, this is Paul, good to hear from you. Let me just chip in on your first question. There's still a lot of moving parts on these shutdowns and what it's going to cost us. We've got an estimate, we don't release full-year estimates, but we'll try to get you in the right church. If you take all this downtime that we're going to experience because of the outages, et cetera, et cetera, it's probably going to amount to, on an order magnitude, $0.10 a share over the year. So, not as big a number as you thought, but it's about $0.10 a share in 2011, but that's going to be offset in most part by-- We will get some early savings from the project in 2011, okay?

For example, Mark got the turbine up and running in the fourth quarter of last year at Counce. We're banging out about seven megawatts of electricity as we speak. That's going to give us some savings.

In addition, although the Section 45 electric credits never got to Congress last year and we're hopeful they might get there this year, we did get an incentive from the utility in what we call an electricity reduction program. We're going to get about $2 million this year from that, which will help earnings, and that was not even put in their project. So, we will get benefits from the project, some of it this year, probably amounting close to $0.10, which will offset the downtime. So net-net, it should net out.

Got you, that's very helpful. Thank you.

And also, Chip, just to review. First quarter we're talking about a 25,000-ton impact from all the outages, second quarter, we're talking about 40,000-ton impact, and then into the third and fourth quarter, 25,000 tons. So for the year 90,000 tons of downtime impact.

And lastly, would you say -- you mentioned the offsetting benefits. That's probably more of a second, third, and fourth quarter issue than the first, or are we seeing some of those offsets -- or a full offset in the first quarter in the $0.42 guidance?

Well, it's -- there's a little bit in the first quarter, but it ramps up. In other words, we'll get more and more as the year goes on. For example, once we get one of those recovery boilers up we've got more -- we'll have -- we'll be able to generate more energy --

Got you.

-- because it's a more-efficient boiler ad we'll have higher efficiency, higher steam production, and higher steam production means higher electricity. So it's not linear, but over the course of the year we think we'll get about $0.10 this year from the projects.

The other thing that skews -- which makes this a difficult year to forecast is that although Mark said we got about 90,000 tons of downtime, we've already built 25,000 tons of inventory to offset some of that 90,000. So paper made in 2010 we get to sell and take the profit in 2011. If we continue to run exceptionally well we'll build another 20,000 or so between now and those outages, which may be made in the first quarter but not sold until later in the year when we have downtime. So as I said, a lot of moving parts on this thing.

Got you. Thanks very much.

All right, thanks. Next question, please.

Yes, sir, our next question comes from Mark Weintraub of Buckingham Research.

Good morning, Mark.

Good morning. Just to clarify the 90,000, is that specific to the recovery boiler projects or is that total?

That's total for the year. Again, the entire impact of -- put it this way. The normal annual maintenance outages are typically 45,000 to 50,000 tons, so this year you'll see about 50,000 tons of normal-type activity, regular outages at all four mills, and then 40,000 tons of incremental activity on top of that from the different rebuilds; Counce number one drive and the recovery boilers.

Okay, perfect. I'm trying to understanding the first-quarter guidance. I was looking back and my sense was that the seasonal drop from fourth quarter to first quarter is normally not quite as big as $0.10. I know that waste paper costs are a little bit higher, but am I just getting that wrong, or are there other things at play here to help explain why the first quarter guidance is basically $0.10 lower than fourth quarter?

Well, again, if you look at the ten-year history, four out of the ten years were $0.10 or greater differential going from fourth quarter into the first quarter. Then, if you look at three of those ten years they were $0.08 or greater. So, seven of the ten were greater than $0.08. Now this particular quarter has happened before. We have both Counce and Valdosta down during the first quarter, which is a significant impact on the system. It's approximately 60% of our tonnage and so it has a bigger proportional impact on our cost and profit capability.

The other point, Mark, is, as Mark pointed out, if you look at a ten-year average we're -- $0.07, $0.08 is a typical down, so that's normal. I would assume that everybody that follows us closely would build a number like that in. What's different this year, in addition to what Mark said, is paper prices are near all-time highs, or at all-time highs, which means for every ton of downtime you take you lose more profit than you did before. Prices are roughly, order of magnitude number, $100 higher than they were last year before the price increases of last year. So, we're making $100 a ton more on every ton we sell, which means that the downtime costs you more and that's on the order $0.02 and $0.025 and that makes up the difference.

Okay. So presumably, as you go through the year and you're selling the inventory you built to offset the downtime, you should presumably have a bigger seasonal pick up as the year goes on. Would that be a fair assessment?

You got it right on.

Okay. Thank you.

Next question.

Our next question comes from George Staphos or Merrill Lynch.

Morning, George.

Good morning, a couple of quick questions. One, could you give us an update on how the early trends for 2011, realizing that January is not necessarily the most relevant of the year? And then secondly, if possible, on this kind of forum, could you give us a bit more color in terms of the strategic spend that you're doing within the box plants?

We're going to let Tom go ahead and talk about those two items.

Good morning, George. Let me just first talk about volume. It remains very good, but I got to tell you, the measurement for the first 12 days is a little complicated. Less than a third of our box plants actually worked on January 3, due to a plant holiday and a lot of our customers didn't work that day either. However, the FBA has designated January 3 as a work day. So just briefly, with January 3 in there our shipments would be down 3%, but excluding January 3 we were up 6%. And our bookings with January 3 included we were flat; however, excluding January 3, we were up 9%. Now, of course, over the course of the 21 work days missing that one work day won't mean that much. And again, just to summarize, volume remains very good and has remained consistent.

With regard to the box plant strategic expansions and capital spend, I'd say we initiated this expansion because, as we mentioned before, we are out of capacity at some of our plants, or will be out in the near future. Additionally, we need some capability at some plants to better serve local markets and we will have just a very small amount of plant rationalization that will go along with this. Now, I'm not going to really go into any other great details because what we are doing is proprietary and it's not something we want to share with our competitors, but I will add that the returns are very good. Now -- go ahead.

If I could. In terms of the converting equipment or capability that you're building in for the local accounts, is this PKG proprietary technology that you've worked with machinery suppliers on, or is this more or less off the shelf?

No, it's more or less off the shelf, but I think it's proprietary in terms of how we apply it and what we do from a manufacturing position.

Okay.

And, George, this is Paul, I'd just like to amplify on what Tom said. The numbers are a little misleading the first ten days because we didn't work January 3 except for maybe less than a third of our plants, which is probably fairly typical for other people. If you exclude that day our volume is very strong and over the month, even counting that day, if the current trend continues, we'll have a pretty good month. Even though we set a record for volume in December, we're up about 3%, 3.5% over that December run rate as of right now.

Okay, that's helpful, Paul. I guess the last question then I'll turn it over.Capital spending is declining this year, perhaps maybe not as much as we have been forecasting but some of that is, I think, the strategic spending on the box plants. You're obviously building cash and this question comes up periodically on the calls. When do you think you'll reach a point where you feel you have the ability to return value to shareholders in one form or another? What mile post should we look to in terms of trying to gauge the timing?

Yes, George, this is Paul, I'll take that one. We told everybody that we were going to spend about $70 million, $75 million on these strategic box plant expansions and about $100 million on acquisitions for box plants over the next, say, three years and that's still the number. I think we'll probably spend a little more on internal strategic box plants than acquisitions because, quite frankly -- and keep your fingers crossed -- it looks like things are bouncing back a little quicker than we thought, I think everybody thought. Even manufacturing activity is picking up. We feel we got to move a little quicker on some of these internal projects because of capacity constraints and we've pulled forward a little bit of capital on that. Once we get through the box plant [acques] we'll go back to that $110 million a year number.

Okay, thanks, I'll turn it over.

Next question.

Next question comes from Richard Skidmore of Goldman Sachs.

Hi, good morning. Mark, can your just talk about -- just maybe remind us what your returns expectations are from the recovery boiler spends that you're doing and has that changed at all given where natural gas prices are?

We're still looking at that 25% return range, which is very close to what we originally anticipated. The returns are still looking good and we're very excited about the project.

The only change is -- again, there's a lot of moving pieces, things go up and down, and when you get savings it's really two elements of savings. In this project it's mostly cost reduction. We will reduce our cost of electricity because we're making it all, but there's also cost avoidance. Cost avoidance basically says it may not improve your earnings but it offsets inflation; your earnings won't go down if things like natural gas and electricity spikes in prices. And quite frankly, starting -- energy prices with the recession have not escalated as much as we thought, but they're starting to. So by 2012, we may get to exactly what we thought on energy prices, but even if we don't there's some other pluses and minuses to bring this thing back to what we thought it would be.

We think our efficiencies are going to be higher based on some of the boiler work we did already at Counce and that will help the project. The only negative, I would say, on the project to date is the Section 45 electric credits never got enacted last year as the comprehensive energy bill never came forward and Congress spent a lot of time on healthcare. We haven't given up on that. We think Congress will get to a comprehensive energy program and we're optimistic that'll go through and that's on the order of $5 million to $6 million in savings. Inflation is starting to come back. Mark was giving me an anecdote yesterday on coal prices. Mark, I think it's just a pretty good proxy for things. You might want to comment on that.

Yes, at one of our mills, if you looked at the 2010 coal pricing, what we're getting quotes for 2011 deliveries are up 30% over last year's coal price. So obviously, that's regional specific, but we are starting to see some pressure in terms of 15% to 30% type increases just on coal alone. Electricity rates are also higher. If you look at Georgia, we're seeing rates going up in the Valdosta electric grid region. So we're seeing this pressure on both fuels and electricity now.

And I think an important point that we want to make is not only are we getting cost reduction, but strategically it puts us a good position going forward for cost avoidance.

And maybe on that topic of raw material costs, can you just elaborate more about what you might be seeing across the various cost inputs, whether it be fiber or chemicals?

I think if you go back to 2009 into 2010, one of the big stories down in the south was the wet weather conditions that impacted wood fiber costs. That abated during the summer. We had a good summer for logging and we were able to build winter inventories. Prices declined. That being said, obviously, OCC is at record-high prices and chemicals are another point effect. Chemicals are up. Some of the pressure in the southeast, obviously, is fiber where you're seeing some of the pressure from pellet plants, as an example, starting to move fiber somewhat. So, I think fiber will continue to be a factor on the upward trend, chemicals and energy in general. There's a good side of this. I hate to say cost going up offers some good side, but a little bit of inflation says the economy is really picking up. Some of the things that have been done in terms of the Bush tax cuts, I think one of the signs of economic activity is a little more inflation and I hope it's a little more inflation, not a lot. So we're not all displeased about that.

Okay, maybe just one last question, just --

You're out of questions. We need to give everybody in. Rich, excuse me. Go ahead, one more.

I just wanted to ask about where you're seeing the export markets?

I think coming off the fourth quarter we saw the normal seasonal slow-back for the first quarter, nothing dramatic. Volume is still what we'd expect. We had a great year last year. Right now South America is slowing back, they're getting ready to go into their winter season. Right now we don't see anything unusual with the export markets.

All right. Thank you.

Next question.

Our next question comes from Mark Connelly of CLSA.

Mark, just two things. The pick up in outside sales, can you tell us why business is picking up outside? I would think that-- with being so tight in the third quarter and coming into the fourth, that you'd be struggling to supply your existing customers more. I'm just wondering whether it's a seasonal pattern or whether your integration level is actually falling. Then, my second question, to get it out of the way quickly, is what would you say your operating rate was overall in the fourth quarter?

I think as far as the mill operating rate, we are close to 100%. Rounded off, we're right at 100% on the mill operating rate. And your first question, I think it's all about the economy. I think the economy is stronger than many people see. And we're seeing that with our sales.

But not from your existing customers. That's what I'm trying to figure out. I would have thought that your existing customers would be leaning on you more.

No, our existing customer demand was incredibly good and was up significantly. And as Paul mentioned, we continue to be up even over the record that we set last month on a per day basis, so we've got a lot of demand. The other things that is factored in, in our outside sales, or export sales, we do play some catch-up by the end of the year on some of those accounts, so it tends to run a little higher for us in the fourth quarter.

Okay, very helpful. Thank you.

I think an important point, just so we make it, our outside sales domestically was up more than our outside sales in export, and basically, our existing customers are buying more. It's not that we're adding more customers, it's that they need more paper and we're selling them more paper. And as Mark said, we think their business is better and it's related to the economy.

Think your integration rate is falling overall?

No, no.

No, because our box demand is also increasing. We set in December an all-time record for the period.

Okay, thanks very much.

So they're pretty much in parallel and if anything we're picking up a little on integration level.

Got it, thank you.

Next question.

(Operator Instructions) Our next question comes from Andrew Feinman of Iridian Asset Management.

Thank you. Could you tell us what -- Rick, what depreciation and amortization was for 2010 and what it would be for 2011?

Well, for 2010 it's about $156 million. I would say for 2011, because of projects not coming on board, it's very little up. I would say about $160 million in depreciation for 2011.

Okay, thanks. And you guys already answered a question about the returns on the Counce and Valdosta project of 25%, which I remember from the last call is after tax, not pretax. I also had in my notes from the last call that on the box plants spending you thought that the return might be over 40% after tax. Is that still reasonable?

Yes, that's still reasonable. We said some of the projects could be as high as 40%, is what I think we said, and they vary in -- We've got a number of them and the returns, I would say it's more fair to say they're going to be from in the 25% on the low side and the 40% on the high side.

Okay.

So it's a combination depending on the project, the particular circumstance and probably is more important than anything else the amount of capital required.

Okay.

That's an after-tax number.

Right, and then the last question. You mentioned coal, what kind of coal do you burn?

Well, again, it's varying. The mill up in Filer City requires a low ash coal, so it's a little more expensive in general because of the nature of the boilers and the environmental controls on the boiler. So that coal, in general, is always more expensive than the coal that would be burned in the Counce mill. It's basically the ash content is what differs.

I mean like met coal, steam coal. I don't know, I'll ask it later. Thank you.

Next question.

Our next question comes from Eric Seeve of GoldenTree.

Hi, guys, two clerical questions. What is the current share count outstanding and what's the year-end debt level, please? Thank you.

Well, the debt level is still $658 million for debt level and we're at about $102 million even on shares outstanding at year end.

Thank you.

Next question.

Our next question comes from Jonathan Hirschtritt of Sheffield Asset Management.

Hey, guys, how are you?

Good, morning.

I just wanted to clarify Paul's commentary on the $0.10 effect from the energy project downtime this year. I was a little confused when he said - - net-net it should net out - - in terms of the offset. Is the $0.10 including any offsets, or is $0.10 to start and then you'll have some offsets to that?

It's net. In other words, what I'm saying is rough number, order of magnitude number, so don't get overly precise because our estimates are not overly precise at this point. But the down time that we're going to take related to the energy project, not annual outages, is going to be about $0.10 a share. However, the energy project, some aspects of it, will contribute earnings and that's on an order of magnitude of $0.10 a share. So those two taken together wipe each other out.

Got you. So the things like the electricity subsidy wipe out some of the $0.10 effect.

Exactly.

You got it.

Got you. Great, thank you very much.

Thank you. (Operator Instructions)

With that, operator, we'd like to end the call and we'll see you next quarter. Thank you.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude today's conference, you may all now disconnect. Thank you and have a nice day.