John Faraci – Chairman and Chief Executive Officer Tim Nicholls – Senior Vice President and Chief Financial Officer Tom Cleves – Vice President of Investor Relations Carol Roberts – Senior Vice President Industrial Packaging Wayne Brafford – Senior Vice President Printing and Communications Papers Tom Kadien

Gail Glazerman – UBS Mark Wilde – Deutsche Bank Securities Richard Skidmore – Goldman Sachs Chip Dillon – Credit Suisse Claudia Shank Hueston – JP Morgan George Staphos – Band of America/Merrill Lynch Mark Connelly – Sterne, Agee & Leach Mark Weintraub – Buckingham Research

Welcome everyone to the EDS International Paper Third Quarter 2009 Earnings conference call. (Operator Instructions) I will now turn the call over to Tom Cleves, Vice President Investor Relations.

Our speakers this morning are John Faraci, Chairman and Chief Executive Officer and Tim Nicholls, Senior Vice President and Chief Financial Officer. During this call we will make forward-looking statements that are subject to risks and uncertainties. These are outlined on slide two of our presentation. We'll also present certain non U.S. GAAP financial information. A reconciliation of those figures the U.S. GAAP measures is available on our website. The website also contains copies of the third quarter 2009 earnings press release and today's presentation slide. Now I'll turn the call over to John Faraci.

Today, as our usual practice, in the next 20 or 30 minutes Tim and I are going to review our third quarter results with you and the performance of our individual businesses, and we'll also talk about our outlook for business ahead in the coming quarters. Once again for the third consecutive quarter International Paper delivered solid results during a quarter that's still very challenging market conditions, especially in North America. Despite the continuation of those weak economic conditions though we demonstrated we can continue to perform well in a tough economic environment. While demand was essentially flat and here I'm talking North America, we expanded our margins and it generated strong free cash flow which we used to accelerate our debt reduction efforts. And we reduced debt significantly during the quarter, which we will touch on later. We increased our earnings in $0.20 a share in second quarter to $0.37 a share in third quarter. And for the first nine months I think what we would all say in a tremendously challenging year we increased our EBITDA margins over 2008 levels and generated nearly $1.3 billion of free cash flow. To these strong results, along with the addition of alternative fuel and extra tax credits, which were not included in numbers I just referred to, enabled us to double the pace of our debt reduction during the third quarter. Our operations continued to run very well and we continue to make strong progress in taking cost out in getting those results of those cost reductions to the bottom line. So slide five, if you're following the slides, contains the third quarter summary. Sales were up slightly from second quarter levels to $5.9 billion but down sharply from the third quarter of last year, which included six weeks of Weyerhaeuser packaging volume. EBITDA increased 13% from $729 million in the second quarter to $822 million in the third quarter and EBITDA margins expanded by 80 basis points. Free cash flow held healthy at $600 million, again before alternative fuel credits, and $1.3 billion of debt repayment occurred during the quarter while we maintained a $1.7 billion cash balance. What we feel very good about is through the first nine months of 2009 we generated $1.7 billion of free cash flow, again before fuel credits, which is more than all of 2008. So going back to EBITDA in slide six, despite industry demand remains well below 2008 again mostly in North America. We've continued to expand EBITDA margins in our operating businesses. Our year-to-date EBITDA margins are 12.1%, which is 150 basis points higher than our 2008 EBITDA margins. And if we set aside margins in Xpedx, our distribution business, our EBITDA margins improved 160 basis points to 16.4%. This improvement is basically driven by our ongoing restructuring and overhead cost reduction efforts and our success in systematic improvement to drive manufacturing efficiencies not only across our mill businesses globally, but all of our converting operations as well. So turning to cash flow, we're generating strong free cash flow and that remains one of our top priorities. And despite the continuing challenging economic conditions, our operations generated over $700 million in cash during the third quarter, in addition to the cash received from the alternative fuel mixture credits. We continue to manage our working capital and to limit capital spending while spending capital on things that we need to maintain our facilities and all of this resulted in our consecutive quarter of cash flow of nearly $1.3 billion. And it was this strong free cash flow that allowed us to make significant progress on debt reduction. Slide eight shows our continued progress on this since we acquired the Weyerhaeuser packaging assets in August of last year. In the third quarter we reduced debt by an increment of $1.3 billion. Since we've completed the acquisition of Weyerhaeuser packaging business, we've reduced our debt by $3.1 billion. We remain committed to further strengthening our balance sheet and will continue aggressive debt repayment in the near-term. Matching our production to our customer's immediate needs remains the foundation of our strategy in our paper and packaging business here in North America. During the third quarter, we took more than 500,000 tons of lack of order downtime in the North America, which was in addition almost 100,000 tons of maintenance downtime. We also took more than 520,000 tons of downtime in our North American container board system, which is about 18% of our total capacity. We took 72,000 tons of downtime in our North American uncoated free sheet system or approximately 10% of our total capacity. We took 51,000 tons of total downtime in our North America coated paperboard system or rightly 11% of our capacity. While our downtime in the third quarter was less than it had been in the second quarter by about 300,000 tons, domestic demand remained relatively flat. The increased paper and packaging export shipments really are the drivers of the reduction in downtime. What is significant on that front is the container board export shipments have returned to levels stronger than we've seen in seven years. That I think is significant going forward and speaks to what's going on in terms of global demand. We continue to take significant amounts of lack of order downtime to manage our inventories and manage our margins because the cumulative cost of downtime is far less than a negative impact of chasing volume or building unneeded inventories, which don't sell just because prices are different. We will continue to manage our production and meet our customer's immediate needs. Since we're talking about lack of order downtime, I'd like to comment on last week's announcement concerning our permanent capacity closures. We had demand in 2009 contracted far deeper and has lasted far longer than we thought it would. Given the severe declines our view is demand will come back, but it won't be all at once. And we know now that we've been running our system, especially the new industrial packaging system, that we can produce more volume with our existing mill footprint. And as a result we've made tough decisions to permanently close three facilities in North America. We certainly recognize closing these facilities creates significant hardships for our employees in the surrounding communities, especially where we've been for a long time a big factor in the local community and we are providing severance and other assistance to our employees. We'll shift manufacturing from Franklin, Virginia to our printing paper mills and two industrial packaging mills, Pineville and Albany, to our remaining facilities and feel confident we cannot only service our customers existing needs and demands, but also their future needs. And reducing our manufacturing footprint will allow us to take out a $170 million in fixed cost over time. Before I give you an overview of third quarter earnings and turn the call over to Tim, let me also make another point about manufacturing and producing cost. This slide here shows our headcount over the last several years, and over the last several years we've had an aggressive systematic initiative throughout International Paper, not only in North America, but on a global basis to reduce headcount which is about 20% of our cost structure. All in since we began taking actions and really transform International paper our global headcount is down almost 30%, and this graph on slide 12 shows our progress in reducing the number of employees that we have in International paper. Relative to the end of the second quarter we've reduced total number of employees by about 8,000 representing a 12% reduction in 12 months. We've already achieved our year end goal of 58,000 employees and we'll continue to improve on this metric during the fourth quarter. Slide 11 provides detail on our third quarter earnings. This is the usual waterfall chart we show you every quarter. Earnings per share before special items were $0.37 a share in the third quarter, that's on the far right, compared to $0.20 a share in the second quarter, on the far left. Increase volumes, which as I said, was primarily due to exports added $0.09 a share which is offset by $0.12 a share of lower selling prices. Input and operating costs were $0.06 favorable and were offset by some mix erosion again, reflecting the impact at the increased exports which had lower margins. Lower maintenance adage expense, which we talked about in our second quarter call, increased earnings by $0.11. And a significant improvement in our llim equity earnings increased third quarter earnings by $0.07, and I'll just remind you that llim is reporting on a one quarter lag so what you're seeing there is their second quarter results. So with that, I'll turn it over to Tim for discussion on each of the businesses and we'll come back and talk about the outlook later on.

I will take you through segment performance today and I guess I'd make a summary statement up front saying for the environment that we're in we had really solid performance across all the business segments in the third quarter. Starting with industrial packaging, we earned $214 million in the quarter and volume was higher, as John mentioned, primarily as a result of the higher export shipments, which added about $12 million. On the pricing front, containerboard prices were flat in the quarter, but the third quarter average was a little bit less than the second quarter average. What we saw was box pricing decreasing by $33 a ton as box price caught up to previously announced liner board reductions. And just to put it in perspective, from the peak average box price is down about $70 or about 8%. So lower box prices accounted for the majority of the $74 million decline in price. Then we had a higher input cost primarily around OCC, which reduced earnings by $9 million. And then as we mentioned at the end of the second quarter, lower mill outages which added $42 million in earnings. : We turn to printing papers, printing papers overall increased earnings from $86 million in the second quarter to $138 million in the third. Increased volumes again driven by export shipments reduced lack of order downtime, and that improved earnings by $27 million but reduced mix cost is 29, and I'll put a little bit more color on that on the next slide. We also benefited from a lower input cost and improved operations, and across all of our printing papers businesses, the regional business in North America, Europe, and Brazil, we showed improvement. So if you go to the next slide, I'd just like to break it down by region for you and breakout pulp. In North America, the printing papers business improved earnings by $31 million, basically on lower input cost and reduce lack of order. And we expanded our EBITDA margins by more than 300 basis points by 19.8%. The pulp business, earnings deteriorated by $4 million but that was really the result of a $9 million negative hit based on increased export roll pulp sales. And it hurt our pulp business but it benefited our coated paperboard earnings by $9 million by reducing lack of order downtime. So if you exclude that charge around market pulp, we actually showed an increase of $5 million in the quarter basically reflecting the impact of increased selling prices. European papers earnings increased by $12 million, and again saw improvements in volume price, input cost, and operating cost, and Brazil's earnings increased by $13 million. We did see some reduction in prices but it was offset by improved volumes and lower operating cost. Consumer packaging also posted a good result in the third quarter. Earnings were up from $38 million in the second quarter to $68 million in the third, and we saw some small signs of demand recovery reflected in the higher shipments and that improved earnings by $8 million. That was mostly offset by lower selling prices, but again to put it context for you, selling prices in the third quarter of this year are still $31 a ton higher than they were in the third quarter of 2008. And then favorable input and operating costs improved earnings by combined $13 million, and lower maintenance outages added $19 million. Turning to distribution, Xpedx earnings increased to $21 million driven by improving business process improvements and also operating costs reductions, and the Xpedx team has been very aggressive throughout the year of trying to take costs out and right size their cost structure. We did see shipment volumes improved and improved across all of the segments. The printing segment was up 9%, packaging was up 9%, and facility supplies were up 2%. The volume gains were partially offset by reduced selling prices, particularly for coated paper. So as a result sales revenue per day improved in the quarter but was up smaller. It was up 3% in August versus July, and 5% in September over August. And we continue to win with new business at Xpedx as well, including new paper volume that we picked up with AT&T and with Roche Pharmaceuticals. Let me turn to the international operations now. Slide 18 provides a summary of llim second quarter results. As John mentioned, we think we bottomed there in the first quarter and started seeing some improvement in the second. You'll recall that we report on a one quarter lag basis so we're looking at their second quarter results. IP share of llim second quarter earnings improved by $30 million. We saw sales of the joint venture increase by 5% reflecting the beginning of the recovery and pulp shipments and prices in China and Russia. Pulp shipments improved by 3% and prices decreased by $5 a ton. Containerboard shipments increased by 7% while prices continued to decline in the second quarter by $26 a ton. And I like to also take you back to something we mentioned on our second quarter call. During that call we talked about the joint venture structure agreement that allowed each partner the right to reassess ongoing participation in the joint venture at any point in time after October of this year. And that we and our partners were discussing potential revisions to the original agreement, including the scope and timeline for our capital investment program. At the present time, the partners remain interested in continuing the structure and discussions continue about a revised partnership agreement, and we expect that there will be such a revision sometime in early 2010. Now I'll turn to Asia, and we're highlighting Asia here because we think we've hit a significant milestone in our Asian business. In the quarter we hit a run rate that would put us over $1 billion in sales revenue on an annual basis. And we generally report those results in the respective business products segments, so you don't always get a view of what's happening in the Asian businesses. Our Sun joint venture, which now is the largest producer of coated paperboard in China, and we have the new machine fully ramped at this point and all of those sales are going to customers in China. We're also recording significant organic growth in consumer packaging, our converting businesses for Shorewood and Foodservice, and we now have 12 corrugated packaging plants in Asia. The final piece of the business is our distribution business, which markets among some other things, uncoated free sheet from our U.S. and Brazilian mills in the Asian region, and also pulp and packaging grade. So our Asian operations are starting to build a critical mass that we think is going to be important to sales growth and earnings growth in International Paper going forward. And on Slide 21 I'll just share a couple of numbers with you. In the third quarter, as I mentioned, we passed a run rate of more than $1.1 billion for sales in Asia, that's 70% higher than our 2007 sales revenue. And during the quarter we also achieved an earnings run rate that was $62 million higher than 2008 earnings. So let me finish up with Brazil on Slide 22. In the quarter of sales revenue at the Brazilian operations increased by 28% to $275 million, again reflecting here the full ramp up of the operations at the new uncoated free sheet paper machine in [inaudible]. Earnings increased by $13 million, as I mentioned, to $36 million, and domestic and export shipments increased in the quarter over second quarter levels. But we did see some slippage in selling prices a little bit in Brazil, and we saw prices in the export markets come down by $48 a ton. Looking at EBITDA margins, we think that even though the margins have been impacted by lower prices than a higher mix of export shipments, we expect those margins to recover as export prices improve, and also as demand for the product in the region grows and we start shifting a greater mix of our production back into the region. So that's the segment overview. I'll turn it back over to John for summary and wrap-up.

So just let me sum up for a minute. I think we posted solid results in the third quarter despite very challenging and difficult economic conditions, principally in North America. We continue to match our production to our customers needs to avoid tying up working capital and unneeded inventories that only put pressure on pricing. Volumes stabilized and as we exited the third quarter, we began to see some improvement, most noticeable in our Xpedx distribution business, which is a very short cycle business. We expanded our margins and generated $1.3 billion of free cash flow, which we used to reduce long-term debt by just about an equal amount of $1.3 billion. In the year since we've acquired Weyerhaeuser, Weyerhaeuser's packaging assets, we've reduced our debt by $3.1 billion or more than 50% of the total acquisition debt. Before I talk about the fourth quarter outlook, I'm just going to take a minute to make a couple comments on two items that many investors have asked about so I thought we'd just cover it now rather than wait for a question, and that's on the biomass crop assistance program and cellulolytic ethanol tax credits. Both are things that have been talked about a replacing these black liquor steel credits and let me just comment on each of those and share with you our perspective. First, on the biomass crop assistance program, like many others we're trying to understand what that program is all about. But we really need written regulations from the authors of that program to understand what it's about more clearly. These regulations are expected to be issued in the near future. So I think at this point in time it's wait and see. We believe these regulations should provide a narrow definition of biomass, so they don't disturb the market for wood. We've not lobbied for the program, but we feel it's important that any legislation or subsidy ensures a level playing field for the pulp and paper industry. We do encourage the implementation of Phase II of the program, which would promote the increase in the supply of biomass crops. So there should be, and it's a good thing to have incentives that incent people to grow more fiber. With respect to the cellulolytic ethanol tax credits, we do not believe that the pulp and paper producers qualify for these tax credits and International Paper will not pursue these tax credits. So, let me just shift gears now and make a couple comments about the fourth quarter and then we'll open up for your questions. In the fourth quarter, we anticipate only a very modest recovery in economic conditions in North America, principally given the seasonality of our business and the fragility of whatever recovery we're beginning to see in North America and all you have to do is pick up the newspaper, in fact this morning, to see how fragile that recovery which many believe is occurring, really is. With respect to volumes, we expect seasonal decreases in North America paper and packaging demand and stable to modestly increasing demand in other global markets where we participate. Looking at prices, we expect stable paper prices, improving pulp prices and we expect box prices to adjust down reflecting the impact of the already published containerboard price decrease, and we expect stable North American coated paperboard prices. Maintenance outages in the fourth quarter will increase by $31 million in North America and decline by $10 million in Europe. On the input cost side, we expect costs for natural gas to increase. They've moved up from their low point, which occurred early in the third quarter. And more or less we expect other energy costs to remain about flat. Wood costs are going to increase given the wet weather we have in the South and the low inventories. OCC costs have moved up, but we expect them to more or less remain flat as well. And chemical costs remain at about third quarter levels. We expect freight cost to increase somewhat. Xpedx earnings should remain stable, and we expect a modest improvement in our equity earnings from llim. Forest products earnings should remain similar to third quarter levels, not much going on there. We don't expect the pending, we don't expect the 140,000 acre transaction that we talked about I think on the previous conference call to close in the fourth quarter, although the interested parties are continuing their due diligence. So all things considered, we expect fourth quarter earnings to be significantly less than third quarter. And I'd say that's really a seasonal effect of our industry has always had a slow fourth quarter after Thanksgiving demand is really off the table until after January. So going forward, our priorities remain the same. We're going to continue to focus on aggressive cost management and we'll continue to match our production with our customers needs. We've now shifted the focus in industrial packaging from integration of two companies to optimization of a large business, and we think there's a lot of EBITDA and earnings runway in that business. And finally, we'll continue to strengthen our balance sheet by continuing to pay down debt. Our goal on that front remains the same, to reduce debt to less than three times EBITDA over the cycle. And everything we're doing at International Paper is about making International Paper stronger, better and creating more share on our value. So with that, I'll turn it back over to Tom and then we'll take your questions.

Operator, we are ready for our first question, please.

(Operator Instructions). Your first question comes from Gail Glazerman – UBS. Gail Glazerman – UBS: John, I just wanted to dig a little bit more into the demand comments you made where year end to the downturn and it doesn't seem like domestically you're seeing much of an uptick. Now obviously you reflected that in your closure announcements, but I'm just wondering if there are any anecdotes or thoughts that you can give and if you can give us any insight into some of the key businesses? You mentioned Xpedx, but any of the businesses kind of what you're seeing in October relative to kind of September and the third quarter average?

Well, Tom Kadien's here and runs our distribution business. I'll let him talk about Xpedx and he can give you some color on what's happening right now across the segments.

We're seeing I'd say a seasonal improvement that's typical on the print side. The year-over-year comps are still pretty disappointing. But as Tim said, our print business got better after probably eight months of almost no activity. We saw an improvement in August over July and then September was again better than August. I guess on the positive side, our packaging business was up also about 8% in Q3 over Q2, and we are seeing some more quote activity on packaging equipment. I still think it's more of a seasonal improvement than any sort of real recovery. And we're I'd say cautious about the fourth quarter because after Thanksgiving, as John said, it's going to slow down again, particularly the print business.

Carol, do you want to talk about boxes?

Sure, I remain cautiously optimistic on packaging demands. From the second to the third quarter there was an increase in nondurable production, which was a good sign and that translated into industry box shipments. We were down a little bit from second to third, but we have a large agricultural position and while we have a very good ag season in the second quarter, it's just seasonally a bit slower for us. So it's very hard to tell what the fourth quarter will bring because it's such a strange quarter with three less days and traditionally a fairly slow November and December. But September was our strongest month in the quarter. So as the economy recovers, I am confident that packaging demand will recover along with it. It's just a matter of when and how much.

Wayne, do you want to make a comment about paper in North America?

Yes, we have four segments. I'll just take each of the four. The commercial print side in the third quarter was up about 7% for the whole industry. That confirms what Tom was saying to you. In the converting grades, we did not see a lift in the third quarter. But here in October, direct mail has begun to come alive. We are seeing more and more advertising on the direct mail front, the envelope converters are starting to see some lift, which is a good sign on the advertising front. On the imaging paper side, fairly flat not a whole lot of lift on the cut size and we wouldn't have expected that because that's much more employment related. And employment, as you know, has not seen a whole lot of lift in the country. And I would just add on the pulp side the pulp data came out most of you saw this the surprisingly strong offshore, but again it's mainly China and somewhat Latin America. But pulp inventories continue to fall and another around of increases have been launched for November. Gail Glazerman - UBS: Can you give any update where the pension stands to date and just slightly related on debt I appreciate you're still talking about that three times this is kind of [EV] over the cycle, but you did say the 2009 goal which I think you're pretty much out at the end of the third quarter. I'm wondering if you have any type of update in terms of your term debt.

Well the pension we've seen really good returns I mean you can look at the returns in the marketplace and our pension fund has enjoyed a lot of those returns. And if you were measuring it at the end of September, we would have seen double-digit returns in pension and assets but interest rates stepped down. So from a funding standpoint if we were marking it at the end of the third quarter we'd be roughly in line from a funded standpoint as we were at the beginning of the year. And you rightly mentioned that when we look at debt we look at not only balance sheet debt, but we look at debt like obligations which would include pensions. So while we said that we thought we would be around $9.5 billion of balance sheet debt at the end of the year and we're very close to that now, the focus is still on paying down all debt and debt like and you could see us continue to pay down balance sheet debt maybe make a voluntarily pension contribution or do a combination of the two.

Your next question comes from Mark Wilde – Deutsche Bank. Mark Wilde - Deutsche Bank Securities: First question is just involving kind of capital as we move into next year wondered if you could give us some guidance on where you think capital spending may end up for the full year and also just update us on your thinking on that option you've got out of another machine out of Brazil.

Do you want to talk about capital and I'll talk about Brazil?

For capital this year it looks like we had a target to be around $600 million I think we'll be somewhere between $500 million and $600 million. We've actually found as we've gone through the year that we've been able to do the projects that we had slated for this year more cost effectively than we thought when we were putting the plan together last year. We haven't finalized our capital plans for next year just yet. We would probably have a slight increase I don't know exactly how it's going to be, but it might be $100 million, $200 million higher because we've got a whole backlog of really good cost reduction projects that had extremely high returns. So we want to see primarily our mill assets, but there is a little bit on the converting side with mill assets continue investing in cost competitiveness.

As we've said before, I think investors ought to continue to think about International Paper spending about $1 billion on average over the cycle and capital some years will be a lot less like this year. Some years it will be slightly more but $1 billion a year which is about 65% to 70% depreciation over the cycle. And the comment Tim made about getting more work done, we didn't have inflated cost and what's happening is with the economic recession and deflation materials are coming down in price and we're doing all our construction activities and capital work on straight time because we don't need to get the jobs done quickly and saves us a lot of money on labor and installation. And you're seeing this across all of heavy industry. If you talk to people in the chemicals business they'd be saying the same thing. On Brazil, we don't have to make that decision until sometime in the first quarter and we do have options and we'll see what our outlook is at that point in time for future capacity. The machine we have we're pleased with. We're selling out the volume. A lot is going in export markets, which I think has hit the bottom. The Brazilian currency isn't helping us right now but we're going to be in global businesses so we're going to have currency moving in all sorts of directions and we'll be making a decision not for the short-term, but for the medium to long-term about what the right thing to do is. Mark Wilde - Deutsche Bank Securities: John, just one other thing on capital. One of your competitors is talking about a couple of large energy related projects and they're pointing to very large returns. Do you have any of those types of projects out there? If you do, can you give us a sense of how much they might aggregate to?

Well in fact our projects, I think the one you're referring to is in the 15%, 20%, 25% range our projects we're looking at are in the 40% to 50% range. They're not $200 million per project they're $5 million, $10 million, $15 million and they're energy consumption reduction projects, or wood fiber consumption reduction projects or chemical consumption reduction projects. They're not big $100 million projects, which is good because we can more of them done then. Mark Wilde - Deutsche Bank Securities: Just one other question, Tim can you just give us some thoughts on that cash balance that you're carrying right now and whether we're likely to see that continue.

You broke up a little bit could you repeat the question please? Mark Wilde - Deutsche Bank Securities: The question really is just that almost $1.7 billion in cash that you're carrying and whether we should expect to see you carry large cash balance over the next few quarters.

I don't expect that we'll carry balances that like that going forward. Will we carry a little more than we have historically carried? Yes, because we're still managing in a slightly conservative fashion, but the goal again is to continue reducing debt. So we're not trying to build large cash balances we're trying to take out debt where we can.

Mark, just to go back to capital I think the other thing that investors should think about it's different for International Paper I think from many of our competitors is we're going to continue to benefit from the portfolio choices we made and the balance that International Paper has around the world. So as Tim was talking about around Asia, we've got investment opportunities in growing parts of the world which will offset lower growth that we're going to see in North America and Europe.

Your next question comes from Richard Skidmore – Goldman Sachs. Richard Skidmore - Goldman Sachs: John, can you talk about the containerboard operations specifically you mentioned in the end of the second quarter that you had achieved the synergies that you had targeted. Can you talk about what additional opportunities lie ahead for you there? You talked about the capacity shuts that are coming but can you elaborate a little bit more on the potential opportunities in container board?

I'm sitting right next to the leader of the containerboard business so I think I'll let her talk about those since she's right on top of it.

This is Carol. We remain excited about the opportunity to improve the industrial packaging business. As we said our goal on synergies when we started was the 440 million and we've achieved in the 500 million range already. So we're what I would say is beyond integration and we're onto optimization. And as I shared previously and I'm looking at my colleagues here, we had shared conservatively an opportunity to create another 300 million of just sheer improvement inside the business. That's going to come from a number of areas. On one of the big areas John had already mentioned is in the mill system. While we have a very good mill system and a low cost mill system we have an opportunity to make it even better. There's energy projects particularly in the Weyerhaeuser system, there's a chemical and fiber usage. These are a lot of usage projects. We've also got with the tough decision we made this past week with our footprint decision that's clearly going to help us next year. In converting, we haven't talked about a major converting transformation but we have made a huge improvement in cost position in our converting plan. Our focus has been on labor usage per unit of production, and we've had an over 40% improvement in that metric. And that's just more productivity through few machines with less people and so that's a big opportunity for us and we're going to continue there. And then we're going to keep working on the total overall headcount that's another opportunity for us. So we have opportunities across the system to make it stronger and better, and we're going to keep pushing at all those levers and we're not out of room to continue to make it better.

Rick, what I think about that we have a business that in the last 15 months we've been 100% focused on putting the two businesses together. It's now an $8 billion business more than double what it was before and we've got a huge number of optimization opportunities, which we haven't been thinking about because we've been working on integration. So think about we had six mills now we've got 15 we're going to have two fewer with the two shutdown decisions we've made, and we went from 60 plus plants to over 100. The optimization opportunities there are huge and that what's we're turning our attention to now. Richard Skidmore – Goldman Sachs: Shifting to llim just one other question, what was the key driver of the magnitude of the improvement there because it doesn't look like it was really driven by price and pulp prices have improved pretty significantly. Should we expect that you're going to see another meaningful improvement in the llim business in the next quarter?

You have to get a significant amount of cost of llim, Rick, as you're right not showing up in price. Remember llim's up one quarter lag so the sharp run up in pulp prices is really all occurred in the last three to four months, Wayne? So that's ahead for llim but they made huge progress on their cost structure and accelerated plans that we had in place to improve the cost structure but that's what enabling them to show better margins even before prices rebounded.

Your next question comes from Chip Dillon – Credit Suisse Chip Dillon – Credit Suisse: I had a question regarding sort of the cash. You showed on the slide, this is more for Tim, the benefits of the black liquor program of actually adding up to about $1.15 billion if you take the $688 million in the second and $463 million in the third, and yet I know you've accrued pre-tax of $1.5 billion and after-tax less than $1 billion. So I guess my real question is, is there some associated tax payment that you have not made that you anticipate making either in the fourth quarter or next year tied to black liquor or could you explain sort of the numbers in the accruals you're taking.

You're absolutely right, Chip. I mean our thinking at the moment is that we'll use some of the credit in the fourth quarter to offset whatever income tax liability we would have for the benefit of the fuel credits for the year. Chip Dillon – Credit Suisse: So the way to think about it is that you're basically going to end up not paying really these taxes and that you'll get a refund next year? Or not a refund but you just won't have to pay the taxes.

Right. On a cash tax basis what we will do is try to forego receiving the cash for the portion of fuel credits that we need to offset whatever cash tax liability we would have. Chip Dillon – Credit Suisse: Just back to the B-cap program and I appreciate the update on your view. I know it would be nice to have the taxpayers pay like 75% of cost of goods sold to make pulp, but then you would have to negotiate with Congress for your bonuses, so I can understand the black liquor too comment totally. But on the B-Cap, I guess the big concern aside from the rules, is any thought as to how much money would actually be put into this because I understand it was pretty light this year, $25 million. What sort of a realistic range that you hear about in Washington for the future?

Yes, I'm not trying to listen to all the realistic ranges because I don't think there are any until we see the detailed regulations. What I'm hoping is that this is, if there is an incentive program, that it's aimed at incremental fiber residues which aren't currently being used. In some parts of this country that's a lot, in some parts it's a little. So I mean at the end of the day that would drive the value if it's driven toward incremental as far as residues that aren't being used. And I have given no thought to the size of this. We're waiting to see what the regulations are going to look like.

Your next question comes from Claudia Hueston – JP Morgan. Claudia Shank Hueston – JP Morgan: I was hoping you could comment just a little bit on where you're inventories stand and then importantly, if you've got any color on where customer inventories are right now, particularly in the printing paper business, that would be great.

Our inventories are at year-low levels. We're down in all the large businesses in North America, coated paperboard, industrial packaging, and in printing papers our inventories are coming down in Brazil. Europe doesn't come to mind right now. On the customer side, maybe I'll let Tom comment on that because Xpedx is closer to a lot of customers. It is a customer so they can reflect probably what is going on in the marketplace.

Maybe Wayne can too. Claudia, Xpedx inventories are at probably an 18-month low and I'd say we've gotten our inventories back to the kind of metrics in terms of BIOH to where we were when our business was much bigger say in 2008. So, I would say at least in the merchant channel the inventories are low and many of our competitors frankly don't have the cash to have in their inventory anyway. So, I don't think there's much channel inventory in either the merchant channel or out in the printer channel. I would say that's lower than its been in a long, long time.

I would just add that what Tom just said, I would echo for our merchant partners and I would also say that the data that we have around the converter group, which is not as robust, but the data we have would suggest those pipelines are pretty lean as well. In the cut size world inventories are pretty much not there. So our view is the pipeline is fairly empty and is running pretty much in and out.

Which is all good news for any pickup of demand, we're going to see right away because in the segments we're really significant in, bleach board, uncoated free sheet, and containerboard, inventories are in very good shape. Claudia Shank Hueston – JP Morgan: Could you just remind me what your energy hedging position is, that would be great.

We're close to 50% hedged for this year and a little bit less than that going into next year. I think you know we don't really take a point of view on where energy prices are going and just to try to smooth volatility.

Your next question comes from George Staphos – Bank of America/Merrill Lynch. George Staphos – Bank of America/Merrill Lynch: The first question I had was back to Brazil. Obviously it's been a tougher year this year, although there's been of a rebound sequentially next year, there's reason cyclically why you should see perhaps better industry demand. John, At this juncture do you think it will be a tight enough market next year where you could overall improve returns and margins back to where you'd like them to be?

A lot of that, George as you know, is currency related. Every time the real gets stronger our margins are under pressure and we write up the value of the asset, and I guess we've concluded we are lousy currency forecasters. We're seeing demand in the Brazilian market grow. Now I think year-over-year it's about flat, but in the third quarter demand in Brazil grew. That's the most important market for us and we're going to see growth in the region, which is the second most important market for us. So our strategy is more than a Brazilian strategy, it's a Latin American strategy that's focused in Brazil because that's a low cost place to produce and it's the biggest market. George Staphos – Bank of America/Merrill Lynch.: Switching to Asia, could you remind us what kind of return on capital you're getting in that business right now and in the region overall? Given the progress that you've seen, could there be some investment in capacity in Asia in 2010 or would that be too soon to see that kind of priority show up?

What we've got in the business model in Asia in terms of making returns is a little different in North America. In North America you've got capital turnover of one and to get decent returns you got to have EBITDA margins in the 15% to 20% range. In Asia, you got capital returns that are two and three times on paper mill type assets and so the margins are a lot of lower, but we're getting double-digit returns out of Sun because you've only got what $170 million, that's our half. So $340 million invested for close to 900,000 tons of new capacity and you just can't do that in North America. George Staphos – Bank of America/Merrill Lynch.: I guess if you could and this is probably available somewhere, but what amount of capital do you have in total tied up in Asia right now?

Can we get back to you on that? The biggest piece is in the Sun JV, which is about $170. George Staphos – Bank of America/Merrill Lynch.: Last question, Carol, what kind of timing do you think we should think about related to the incremental benefits we should see from optimizing industrial packaging over the next several years. Obviously it's not going to go show up all in 2010 or maybe it will, but help us think about what the right rate of progress should be there.

The capital in Asia is about $400 million in total.

George, I'm going to put myself out on a limb and hopefully not take us all with me, but I would think that improvement should be in our run rate by the end of next year. George Staphos - Bank of America/Merrill Lynch: So ratably improving and all in by fourth quarter, would that be fair?

That's my expectation.

Your next question comes from Mark Connelly – Sterne, Agee & Leach. Mark Connelly - Sterne, Agee & Leach: Just two things. John, your consumer packaging numbers I think are the best we've ever seen, better than 2006 in Q3. That's a business that's been very hard for us to see the end game. How excited should we be about this pickup? I guess I'm really asking how excited are you about the pickup?

We're pleased. Remember, we had no maintenance outages in the quarter so that was a contributing factor, but that's not all the contributing factor. Shorewood's results were better, bleached board results were better, food service probably wasn't better during the quarter but is going to have a strong year, and we're getting some benefit in the pulp business there because we're taking less downtime. So the consumer packaging business is not the biggest leg of the company but it's an important leg of the company. We like the bleached board business. We've been struggling with Shorewood but we've got a plan now to make that business profitable on the current revenue base and it's improving year-over-year. So we've still got, we had two facilities. We only have three facilities in bleached board. We had two of them that weren't running well and now we've got one of them that's not running well, so we've got more internal improvement opportunities in consumer packaging even with no changes in demand. And as you recall, we fixed a lot of the commercial decisions that were holding that business back to 2008. Mark Connelly - Sterne, Agee & Leach: So relatively speaking, you sound reasonably bullish versus some previous comments about the outlook for this. Is that fair?

I don't think we were ever bearish on consumer packaging. We said we had some operating problems at Riegelwood and Augusta. We solved Riegelwood, we're working on Augusta. We've got big bleached board business in Asia. We're the largest bleached board producer in Asia. And we've got a significant bleached board business in both Poland and Russia. So we're probably the only bleached board player with a global footprint. The numbers don't come together all that way when you talk about businesses, but we like the business. Mark Connelly - Sterne, Agee & Leach: John, you're slide about the strategic importance of Asia was helpful too. Moving past George's question about Sun, it seems to me that you've still got a lot of runway with your existing investment across the world to grow into Asia before you need to put a lot of additional investment on the ground there. If you think about the Asian opportunity across all the businesses that you listed on the slide, is that a fair characterization?

We're tapped out at Sun, so [inaudible] on Sun would be more we'd have to put some more hardware on the ground or go invest in some things. We've been adding small capital amounts, $10 million, so we haven't been talking about them a lot. We've been adding box plants about two a year. We're now moving some corrugators that are available from North America over to Asia so we can make those box plants corrugating plants because the volume is growing. We started up a Shorewood plant last year so we've got significant amount of organic growth opportunity there because it's not full yet. And we're adding another press in South Korea, another Shorewood facility because the first two presses are sold out. So you're right in the sense that when you're growing a business, you're really never full on a revenue spot because the revenue is growing at 15% to 20% a year, you're trying to keep capacity available ahead of your customer demand so they don't go somewhere else. So we're pretty excited about what we see in the packaging side. Paper's a little more complicated because we haven't found an opportunity yet that we're convinced makes money. And obviously at llim, we like sitting right across the Chinese border with low cost soft wood pulp, and it was tough in the first quarter but that market's come back.

Your final question comes from Mark Weintraub – Buckingham Research. Mark Weintraub - Buckingham Research: First, a big picture question for you, John. Obviously during this down cycle you've done a tremendous job with proactive supply management matching supply to demand, etc., and it really seems to have paid dividends. If we look back to the last up cycle, you did okay the industry did okay, but it certainly didn't do nearly as well as a number of other industries, steel, copper, what have you. Hopefully, we're now getting close to that point in time where we're going to be thinking about behavior during an up cycle. Do you think there's anything that you need to be doing differently when the up cycle comes than you did in the past?

That's a good question. I'm trying to remember the last up cycle. We want to make sure we've got capacity for our customers, and I think one of the pieces of good news is even with this adjustment in the big decisions in North America, we think we've got a lot of volume runway. And if you think about just what's going on in printing paper and Industrial Packaging, we're taking more than our capacity share of downtime. And some of our competitors are running full, which means we've got more volume runway and we don't have a big price decline because prices haven't collapsed, they've drifted and I think that's really important. We've also got no inventory hangover to work off. So I think the industry is in a much better position now and International Paper is in a much better position as demand comes back, and I believe it will. It's a question of when and how fast to capitalize on that. Mark Weintraub - Buckingham Research: Just a question on the fourth quarter outlook. It's pretty interesting to see your stock react when you said significantly less than third quarter. And one thing is if I look at the slide on 25, I see I think it's six reds and five greens and normally that would suggest, yes, that's going to be lower but not necessarily dramatically lower. Can you give us a little bit more color on when you say significantly less what you mean by that?

We don't give guidance, Mark, and it all depends on the colors of the red and green. It could be dark red and light green, and the size of the businesses. We all know that the fourth quarter is never a great quarter on an annual basis for our industry because it's one of the slowest quarters seasonally. Mark Weintraub - Buckingham Research: Let me ask the question a little bit differently. With your third quarter results, do you think that you have some improvements there relative to what your expectations and presumably the market expectations were that are sustainable, or do you think that it was mostly a one-time thing and it comes back undone in the fourth quarter?

No, it's not. The stuff that is going on the cost side are not one-time things. This is really what's happening to demand and the fourth quarter, even in a mid-cycle environment or a top of the cycle environment, the fourth quarter is always significantly lower than the third quarter, and I think if you go back over the last 10 years you'd find that. The seasonality by far and away is the biggest factor in the fourth quarter.

I will now return the call to Tom Cleves for final remarks.

Thanks everyone who joined our call today. For those of you that have follow-up questions, [Emily Nicks] and I will be available via telephone. Have a great day.

That does concludes today's EDS International Paper third quarter 2009 earnings conference call. You may now disconnect.