Mary Laschinger - Senior Vice President and President of Xpedx Thomas Kadien - Senior Vice President of Consumer Packaging and IP Asia Carol Roberts - Senior Vice President of Industrial Packaging Mark Sutton - Senior Vice President of Printing and Communications, Papers of the Americas Thomas Cleves - Vice President of Investor Relations Timothy Nicholls - Chief Financial Officer and Senior Vice President John Faraci - Chairman, Chief Executive Officer and Chairman of Executive Committee

Peter Ruschmeier - Barclays Capital Claudia Hueston - JP Morgan Chase & Co Gail Glazerman - UBS Investment Bank Chip Dillon - Crédit Suisse First Boston, Inc. Mark Connelly - Credit Suisse Mark Wilde - Deutsche Bank AG Richard Skidmore - Goldman Sachs Group Inc. Mark Weintraub - Buckingham Research Group George Staphos

Good morning. My name is Christy and I will be your conference operator today. At this time, I would like to welcome everyone to the International Paper 2010 First Quarter Earnings Conference Call. [Operator Instructions] I will now turn the call over to Tom Cleves, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Christy. Good morning, everyone. Thanks for joining our First Quarter Earnings Call. 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, and these are outlined on Slide 2 of the presentation deck. We will also present certain non-U.S. GAAP financial information. A reconciliation of those figures to U.S. GAAP financial measures is available on our website. Our website also contains copies of the first quarter 2010 earnings press release and today's presentation slides. This morning, Tim and I are in New York City, and John and the balances of the senior management team are in Memphis. We're conducting our portion of the call in the Q&A remotely. So please understand that some of the transitions are not a smooth as usual. With that, I'll turn the call over to John in Memphis.

Thanks, Tom, and good morning, everybody. Thanks for joining us. As is usual over the next 20 to 30 minutes, Tim and I are going to review the financial performance of the company, our first quarter results and the individual businesses. And then we'll leave time for your questions. And we'll share our outlook on the second quarter. Let me just dive into the first quarter now and say it was a tough quarter. But it was in line with our original expectations. EPS came out at $0.04 and there's no doubt about it in our minds, the first quarter represents the cyclical trough. What's really important when you look at the quarter is the shape of the quarter, and by that means, the earnings shape during the quarter. January and February are really rugged and we made it all up and more in March. So I think the important thing here is the trajectory of earnings by month through the quarter and all these things that underlie that got increasingly positive. We absorbed $144 million of input cost inflation in the quarter. That's more than we thought. I think we had forecast about $120 million, and we actually turned out to be more. And we had planned for a heavy outage quarter, which is about $30 million. So between the input cost and the outages, that's about $0.30 a share. While it was a tough quarter, there were some good news there. European Paper and Packaging and Asia performed very well. Tim will talk more about that. And I think, importantly, demand and pricing increased as the quarter progressed and that continues in April. So we've got a much more positive outlook now on the second quarter and for the balance of the year. So first quarter sales are up $5.8 billion, up from $5.7 billion in the first quarter of last year. It's really our first quarter-over-quarter, year-over-year increase in quarterly sales since the start of the financial crisis and the recession that we're just coming out of. EBITDA in the first quarter was $560 million, compared to about $600 million in the first quarter 2009. Our free cash flow declined significantly but it declined because of the higher input costs, the significant increase in maintenance outages. And we used about $300 million of working capital in the first quarter, about half of that for non-business, one-time items in the company. Operating working capital percentage of sales was about flat. And we had ended the quarter with $1.7 billion in cash on hand. Turning to Slide 6, the first quarter results in more detail. It was a $0.04 quarter versus $0.24 in the fourth quarter. The change again, really driven by a fiber spike in North America that's both wood and OCC and higher maintenance expenses, improved the operations and reduced fixed cost from the facility closures that we announced last year that implemented in the fourth quarter, more in the first quarter, as the case of Franklin, added $0.16. We had some seasonal declines in volume that's principally in Brazil and in Europe. They reduced earnings by $0.07. Price, added only $0.09 during the quarter, almost all of that was in March, really with the exception of Pulp, which has been steadily improving for several months now. All of our price flow-through started to show up in March. As I said earlier, in the January call for the fourth quarter, we estimated input costs are going to be about $120 million, we thought higher. We really didn't know. But we knew they were going higher. They actually turned out to be $144 million higher. North American fiber prices wood and OCC are about 80% of that amount. So really that's the significant mover there. Wood was up close to $60 million. OCC cost were up about $55 million. As the quarter ended, input costs began to moderate. OCC prices peaked in March and declined by $30 a ton April, and another $12 to $15, according to some of the publications in May. Actually, we think OCC prices probably down more than that in the month of May. Bridge and fiber cost also peaked in March and that begun to moderate in April. With soft wood prices declining or falling at a faster rate than hard wood prices. But remember, they're falling from quite high levels. So we would expect fiber prices and other input cost to continue to moderate during the second quarter. And you can't be precise here. But I think what will happen is, second quarter input cost will probably look like first quarter input cost. But again, the shape of the curve will be -- will go out of the quarter with input cost falling even though for the quarter, the average maybe about the same. So I'm now on Slide 8 here and the business highlights slide. And before Tim reviews the performance of each of the businesses, just let me comment on a couple of highlights. All of our European businesses performed well with solid earnings in all three segments. Actually, it was a record quarter in both Paper and Packaging. And our European business, which for us is Europe, Russia, the Middle East and Africa. Those businesses earned 16% return on investment. And I think it just shows you the benefits of having some global balance of these Global Paper and Packaging businesses. It's helping IP results. xpedx also posted solid results while sales were nothing to write home about. Cost management led to a strong rebounded earnings in the first quarter compared to the first quarter of last year on flat sales. And all around the company, we're starting to show, again, the incremental benefits on top of all the benefits we already got last year, the facility rationalization. So footprint decisions we made at Franklin, Albany, Pineville and Valiant. And those benefits will continue to accrue as the years goes on. So with that, I'll turn it over to Tim and come back to talk about how we see the second quarter as Tim goes through the businesses. Tim?

Thanks, John. Good morning, everyone. Let me walk you through the businesses. I'll start with Industrial Packaging. And just start off by saying for Industrials that I was disappointed a bit with the results for Industrial Packaging in the quarter but it wasn't a typical quarter. It was a transition quarter. There was a lot of things going on. And I think we finished on a strong note. So we've made improvements through the quarter. One things to keep in mind is that when we started the quarter, we were coming off of running a fair amount of downtime. We took two mills down and then went to running full scenario at the time that we took the mills down, right at the height of the extreme cold weather and the wood shortages. So it wasn't an ideal operating conditions. We did see volumes across all the geographies. That's essentially flat. The North American Box business was up 2%, which was good news. And then we had a combination of favorable operations in price that really offset all of the impact to the higher input costs. Most of that being fiber. We started realizing the fixed cost savings from the two mills shutdowns that happened at the end of the fourth quarter and our box operations ran extremely well. All that said, the mill system didn't run as well as it could have. And we probably left $15 million of earnings on the table from the weather-related and the wood-related issues that were occurring in January and February. But I'd say by the middle to the end of February, we had put most of those issues behind us. And again, I thought we ran very strongly in March. So the real difference in the quarter from fourth quarter to first quarter were maintenance outages. And that's timing, it's how we had scheduled to take the Mills down. So $45 million higher in the quarter. The good news is, we've taken half of what we'll take for the year and we did it in the first quarter. So when you look at our margin, our margins are not where we wanted them to be but a couple of things: The maintenance outages, where we were taking a higher percentage of downtime versus our competitors; and also, the high OCC, which has now peaked and is moving down. So I'm confident we're going to be right back at top industry margins as we go through the second quarter and the balance of the year. If we turn to Printing Papers, I thought the Printing Papers business managed particularly well through what was a tough quarter. We held our margins in North America. We actually expanded margins in Europe by 200 basis points, and the European Paper business turns in another cost of capital return quarter. So a very good new story there. Brazil, we had disappointing results. We ran well and the business was fine overall. But we did have to take a hit for about $50 million in bad debt expense in the first quarter. We've taken the full impact of what we thought the exposure was. So that's behind us and Brazil will return to solid earnings in the second quarter. Domestic volumes were up 2%. North American volumes were down due to the shortages and we're seasonally down in Europe and Brazil coming off the fourth quarter because of just the nature of their season. First quarter is always the much slower season and the fourth quarter in those two regions. We do see prices start moving up in all three regions late in the quarter. And outside North America, we ran extremely well. As I mentioned, not so well in North America because of the weather and wood shortages. And if you recall, we had a lot of weather-related issues in the central and western part of the regions that we operate in, in the fourth quarter, and then all of the weather shifted to the east as we went into the first quarter. The other notable item in the quarter or post-quarter, I guess, and it'll be important for the second quarter, is that we are starting to realize of some of the reduced fixed cost benefits out of the Franklin Mill closure, producing the last real paper in the middle of April. So that will start falling through in the second quarter and beyond. Consumer Packaging was really hard hit in North America by input cost. And we did have some operating problems in one of our mills. If you look at it, 70% of the input cost inflation for the Consumer Packaging business, which is the global business was in North America and it's wood related, hard-wood related. So we're not going to see those costs come down as quickly as we're seeing OCC. And we're seeing the soft wood fiber come down. So that's probably going to drag on just a bit into the second quarter. As I mentioned, we didn't run very well in Augusta. We think that we're making progress and I'm expecting that we'll have a much better operating quarter in the second quarter. The real notable items here for the sector though were both Asia and Europe, where performance was extremely good. In Asia, our Sun joint venture had revenue up 8% and earnings actually doubled from the prior quarter. So that business is really starting to hit its stride and making a lot of great progress. Prices moved up at the end of the quarter. And I guess good news here is that backlogs are pretty strong. We now got backlogs that are at the highest level since we pre-crisis, back to August of 2008. Turning over to xpedx, the story here is recovery in the business continues to recover very well. If you look at revenue, we were even with last year. I'll explain why that is in just a moment. But on the same revenue from the first quarter last year, we had a $28 million earnings improvement, just phenomenal given what's going around run the business. As I said, revenue flat with 2009 levels. Volumes were up 4%. So we're starting to see a recovery. It started in the East and the Midwest regions, it's not extending into the West. We're seeing it for Packaging businesses. We're seeing it for facility supplies and then at a smaller rate of recovery, we're also seeing it in Paper. So the real story here is that the cost has been managed extremely well. And all the work that was done last year, leading into the quarter and the continued focus on cost are really providing the lift in earnings. Let me wrap up with Ilim joint venture. And again just to remind you, we report Ilim on a one-quarter lag. So this is the joint venture's fourth quarter results reported in our first quarter. And this was really the bottom quarter for the business. We started seeing sales revenue increasing and prices moving up. Volumes didn't move up as much as they could have because we had a major outage in the quarter, maintenance outage. It was planned. But earnings are starting to move up and there'll be a significant improvement in earnings in the second quarter. And by the time we hit the second quarter of this year for the joint venture, what we will report in the third quarter is the business should have recovered quite well. I fully expect to see that. So with that, I'll turn it back over to John and he'll take you through the summary and the second quarter outlook.

Thanks, Tim. So let me just summarize the first quarter. As I said, it was a lousy January and February. Solid March. Good platform for the second quarter. Fiber prices peaked, spiked early in the quarter. Wood cost are moderating. OCC prices are falling. We didn't run well in Industrial Packaging and Consumer Packaging in January and February. March, we're running better. And April, running well. We had high outage expenses. That's good news because most of it's behind us at a point in time when demand's improving and with our right-sized footprint, we need the capacity. We've got the benefit to reduce the operating cost. We're beginning to see the fixed cost come down in both Industrial Packaging and in Printing Papers associated with those facility closures. Prices are improving as the quarter progressed. We're getting our announced price increases and I'll show you a slide in a minute. There's a huge amount out there. And we've just announced some additional price increases that at the quarter's end, we should be coming in, in subsequent quarters. So going forward, looking into the second quarter, I think the global economy continues to improve. I'm not euphoric about it but I'm certainly more positive. Certain parts of the word like Asia are very, very strong. But I think incrementally, what we thought would be a slow recovery is turning out to be still a slow recovery but maybe at a slightly faster clip. We see more and more of our customer's segments start to feel more positive about their business. Since we're a business-to-business company, when our customer's business gets better, so does ours. We're going to the see significant impact from price realizations in the second quarter. We're going to get an easing of wood cost and OCC prices, probably expect natural gas to climb a bit as well. The second quarter actually is going to be our highest maintenance outage quarter. And we just finished saying we took a lot in the first quarter. We're taking a huge amount in the second quarter. So by the end of the first half of the year, we'll have more than 2/3 of our maintenance outages behind us. Operations are running much better this quarter. And I think as Tim said, those issues we had earlier in the quarter are behind us now. So I'm on the page that, Slide 16, I believe, it says Earnings Runway. The key component of our earnings going forward is going to be bringing to the bottom line these price increases. This table just list the price increases that have been announced by segment around the world. The capacity they applied to, the effective date of the price increase and increase per ton, these supply demand fundamentals around the world was still very favorable. Inventories are low. Demand is picking up. So in terms of potential, if you sum all that on an annualized basis, you've got $1.5 billion to $2 billion of price increases, which will start to -- already started to flow-through, began in March, picking up in April and will continue to increase in the second and third quarters. Now obviously, that's not going to impact us all this year. Because that $1.5 billion to $2 billion number is an annualized number. But obviously, it's a very significant number. And this is coming at a time when we see demand starting to improve. Turning to cash and capital allocation. We continue to be committed to a balance capital allocation to increase shareowner value. We increased dividend. We've made that announcement this week to return more cash to shareowners, move from a $0.10 dividend to a $0.50 dividend. We're committed to getting our debt balance that includes the pension GAAP on an EBITDA-to-debt basis to less than three. We're going to strengthen our existing businesses with focus capital that reduces their cost. We're looking for high return in capital projects that offer short paybacks. Probably going to fund about $100 million to $150 million of those this year. No big project in there but they all got 40% return types of interim rates, return to short paybacks. And we're going to look for -- and when we find strategic acquisitions like the SCA Packaging business in Asia, and we'll talk about in a minute, things that strengthen International Paper and our Global Paper Packaging business and some good returns, we'll look to use cash through those as well. Let me comment on the dividend increase that we announced Monday. The global economic conditions that continued to improve, capital markets have certainly returned, if not to normal conditions to much, much closer to normal conditions than they were. We paid down $3.7 billion of debt over the last 20 months, nearly twice our original debt reduction commitment for that time period. And we remain committed to achieving the debt target I just talked about, a 3 EBITDA-to-debt target over the cycle. So with our outlook on 2010, we decided to restore the annual dividend to a $0.50 level. Also, a word or two about the SCA acquisition, I'm on now Page 19. We announced Monday that we had agreed to purchase SCA's Asian Box business for approximately $200 million, less in post-closing adjustments. Now that net price, when you take those post-closing adjustments, it's about 8x 2009 EBITDA, about 6x projected 2010 EBITDA, and those businesses in 2009 ran at about 40% of capacity because they've installed capacity that meet the needs of a growing market. So we've got a huge amount of opportunity there to improve those businesses without adding any additional capital. Good strategic fit with our existing Box business, high quality assets that we purchased that less than it would have cost to build them. The way we've been building on our footprint over there is by building by our own plants. This gave us an opportunity to buy cheaper than we could build and obviously get the capacity in place a lot faster than we could build. It would have taken us probably more than five years to build that capacity. We're acquiring a strong of book of customers, some new high-quality customers. And the combined sales of our existing Corrugated business, plus SCA Corrugated business will be about $350 million, more than 3x the size of Corrugated business we had. So it's a big step out for us. We've got capacity in place to grow those sales to over $800 million without any major additional capital. So with that, turning to the second quarter outlook, and this is the red, yellow, green chart we've been showing you, kind of, by business around the world. We anticipate a continued modest improvement, steady improvement, economic conditions in North America. That's what we're hearing from our customers. We expect stable volumes on shipments and North America and Europe in Paper. We expect increasing volumes in Brazil and Asia on Paper again. And we expect increasing shipments of Industrial Packaging in North America, probably stable volumes in Europe on average. Although some places like Turkey are really showing a lot of strength in the Packaging side. On pricing, we expect Pulp prices to continue to improve. We expect to realize the announced price increases from North America Paper and Containerboard. As the quarter is progressing, we're actually realizing those price increases as we speak in our April results. And we expect stable North American Coated Paperboard prices during the quarter. We also expect maintenance outages expenses to increase by about $8 million in North America and then by $16 million in Europe and Brazil quarter-over-quarter. Input cost, we think are going to decrease through the quarter. First time that I've been able to say that for a while. And even though, first overall second quarter prices we expect will probably be about level with first quarter prices, the trajectory, the exit rate will be down as we end the second quarter. We expect xpedx earnings to improve. And we expect the contribution from our Ilim joint venture to turn solidly profitable, reflecting the impact of selling prices that will offset some probably higher input costs in Ilim throughout the year. So all things considered, we would expect second quarter earnings to increase significantly above our first quarter results. And with that, Tom, I think I'll turn it back to you so we can get the Q&A session started.

Great. Thank you, John. Christy, we're now ready for the first question please.

[Operator Instructions] Your first question comes from the line of Gail Glazerman with UBS. Gail Glazerman - UBS Investment Bank: Can you just give -- just on the cost issues, can you just give a little bit more insight? I guess maybe where you are today versus the first quarter average. Or just sense of how quickly those costs are coming down or not?

Well, Gail, I can talk about OCC here. In OCC prices, the published prices were off $30 in April from where they were and another, kind of, $12 to $15 made from where they were. We think spot prices are off even more than that so OCC could be down 50 from where they peaked. Gail Glazerman - UBS Investment Bank: And how about wood costs? I mean, I appreciate. . .

Wood costs aren't falling as fast. But wood costs are falling on the Pine side, which will impact Packaging more than Paper. They're probably down maybe $1, $2 a ton. And in hard wood, they're just starting to decline. So a sharper decline on OCC prices than we're seeing on wood fiber. But wood fiber will unfold during the summer. We've had great weather, logging conditions are getting better. Actually if we get some supply, if saw mills come back on stream, we'll get some of our chip supply back, which will help take the pressure off Pulpwood. So I mean, a color on that would be things are trending in the right way and probably with OCC, recently having falling faster than fiber cost had. Gail Glazerman - UBS Investment Bank: Just on I guess maybe some of the fixed cost benefit. Have you seen everything you'd expect to see in the Industrial side? From the no-closures? And when would we expect to see the real benefits from Franklin?

Well, Carol Roberts is sitting right here. And so is Marc Sutton. Since Carol got Industial Packaging and Marc's got Franklin, I'll let both of them talk about that.

Gail, this is Carol. We did see the full benefit from Pineville in Albany. Although with all of the heavy maintenance outages in the quarter, some of our other fixed spending was up. And when John or Tim talked about some of the little bit of money we left on the table of that $15 million, we probably had other spending that was probably up, maybe $5 million to $7 million in the quarter due to pushing the other mills hard to run. And I think that will come back. So I feel like we're going to be quite successful in getting all of that savings from Pineville in Albany to the bottom line in the second quarter.

For Franklin, as Tim mentioned in his section, we just made the last real paper in the middle of April. And what we've been doing through the first quarter is transitioning the business that we plan on keeping, which is a significant portion of it to the other mills in the system. So while we're bringing the mill down, we have transition cost and logistics cost to get the grades in the right mill for the future. So the Franklin, in fact, at fixed cost savings, will really materialize in the second half of the year. It would be an important driver. Gail Glazerman - UBS Investment Bank: Carol, can you talk a little bit about maybe current demand on what you saw in April? And how much of the first Box price increase did you have in by the end of the quarter?

Yes, Gail. On the other current demand, as we've shown, we saw a sequential increase in actual shipments from fourth to first and we saw a year-over-year increase of 2%. For our particular case, we had a fairly weak January. And we saw our business improved through the quarter. And just to give you a couple of examples, some of our consumer packaged goods companies was slower in the beginning of the quarter and got better. In April, we've seen that trend continue. So what I'm, kind of, anticipating is that the year-over-year increase in that 2% to 3% is still solidly there. Plus, we'll get the seasonal uptick in the second quarter due to the agriculture. And it does feel like it's going to be a good Agricultural segment. Relative to the box pricing, we, kind of, hit our low-end box pricing in December and when we exited the quarter, we were about $20 higher. And then when April 1 hit, of course, we had contracts that came in. So in April, we got another pop and I think we had in the appendix -- which pages is that?

Slide 29, Carol.

29. You can see that as of the 28th of April, which is really pretty solid through the whole month of April. We're up $39 on boxes on the first increase. So I would say the first increase is pretty much done. And of course, we're moving now to implement the second 60.

Your next question comes from the line of Mark Wilde with Deutsche Bank. Mark Wilde - Deutsche Bank AG: John, can we talk a little bit about the issue of returning cash to shareholders? And I think everybody is happy to see that dividend back at $0.50. Any thoughts about further restoration, maybe going back to that $1 that we were at, kind of, pre-crisis?

Well, I think the move we made is indicative of what we think we can maintain, and we're going to be cautious about that. And to the extent we generate cash and we're pretty positive about our free cash flow target that we'd rather be distributing the cash when have it as opposed to in advance of having it. I think, if we knew then what we know now, we may not have needed to decrease the dividend. But back last year, everybody was planning for the worst and we are committed to the return of cash. We're going to generate $1.5 billion of free cash flow a year, a good portion of that will go back to shareholders in the form of dividend and/or share buybacks. Mark Wilde - Deutsche Bank AG: And any thoughts on buybacks?

Again, I think that reflect a balanced program of how you're returning cash to shareholders is I think what we're going to have and we're going to talk to shareholders about -- some prefer share buybacks, some prefer dividends. We had a what we thought was a healthy dividend in place. We have to cut it. We didn't want to but we did. And we're in the process of bringing it back in steps.

John, if I could just add one comment, I think all right. And, Mark, the other thing that we'll look at is what might happen with tax rates on dividend as we go through this year and the next year. So all of the things John mentioned, as well as that. Mark Wilde - Deutsche Bank AG: And then, John, if I could, just as a follow-up, if we just take two steps back, it seems like a very good setting for International Paper right now. As you mentioned, price to be moving up on a global basis. We're seeing some signs that kind of costs are easing. Demand seems to be picking up maybe even a little better than a lot of us expected. So with that backdrop, what are the things that you worry about, that you're concerned about at this point?

OCC isn't going to fall to $200 a ton. for sure. The fiber cost increase that we got hit with in the first quarter was not anything other than weather-related and a contraction supply due to the plan in the lumber plywood markets. I think OCC has taken a pause, it probably got higher than it should have. So we're not going to see continuing falling prices in OCC. We don't know when they're going to level out. So we're thinking about that when we have a lot of flexibility in terms of how we run our system. So frankly for us, given the 65% versus fiber higher OCC prices over the long term are a good thing for us. The thing I think most of that, Mark, is getting the right people in place to the job that needs to be done around International Paper, which is different in Russia than it is in Consumer Packaging. It's different in xpedx than it is in coated paperboard. I think we've got the right people in place. We've made a number of moves at the end of the year, which I think enabled us to get some fresh thinking into a lot of businesses, get some new leadership in place. And that to me is, that's my job.

Your next question comes from the line of Richard Skidmore with Goldman Sachs. Richard Skidmore - Goldman Sachs Group Inc.: I just wanted to follow up on the Industrial Packaging segment for a moment. Last quarter, you talked about a $300 million productivity benefits through the year, exiting 2010. I just wondered if you could update us on where you're at in that process and what you saw in the first quarter in terms of benefits and how you see that trend going through the year?

Yes, Rick, this is Carol. We did make progress in the first quarter over a couple of fronts very specifically, and I'll give you the highlights. Our plan is pretty broad-based plan. Number one, was the fixed cost savings down in the mills system. And as we already comment on that, we successfully implemented that and that will flow to the bottom line. The second piece of our plan was clearly on the box side, driving further improvement in our box operation. People don't realize how much money actually get spend in the box side in making those productive, efficient, low-cost, is absolutely vital. So we did well there. The other two big areas that we have identified for this year, one was on the supply chain on our distribution costs. That's an area where we did not have a good quarter, mainly due to our low inventory levels and the challenges in our supply chain. But I'm very confident that we will get those average back on track as soon as we get our inventories to a manageable level. And the other area obviously is just in our mills system. We're transitioning from running slow and not pull to pretty much running full. We've made progress on our consumption in the quarter on things like fiber, energy, chemicals. We did not do as well on spending due to some reliability issues that John and Tim had mentioned. So at the end of the day, I believe we'll be on track. We exited quarters slightly behind. But I believe we're on track and our commitment is to hit that $300 million run rate on top of what we did last year by the end of the year. And a feel confident that we're going to be able to do that. Richard Skidmore - Goldman Sachs Group Inc.: So you're still feel comfortable with the $300 million, if I heard that last statement correctly? And then second, just wanted to follow up on your prior statement about box pricing. I think you said that you're up $39 at the end of April and essentially moving on to the second price increase? Can you just elaborate on that $39 versus the $50 increase that was announced for January. And is that suggesting that there's $10 that's being left on the table or $10 that you are going to see show up in May?

Yes, I speaking in the majority of it. We still have some contracts, some things that are lagging. We have some stuff that will come in July that had a longer lag, it's not a lot. The other thing that happened in the quarter, which we had some other contracts that some prices went down at the first of the year, a few dollars. So when you add it all up, I believe we're going to get very close, at the end of the day, to the full $50 when you take everything into consideration.

I just want to comment because we also have the ag business work too because we got a big ag now.

The agricultural piece, that pricing gets set by season. And so in the first quarter, because that price was happening through the quarter, some of those prices got set pre-season. And so that kind of comes in chunks as the commodities come online. So it's a little choppier, Rick, that's under the standard consumer packaged goods business or the industrial segment.

But at the end of the day, we get the price..

Absolutely.

Your next question comes from the line of Chip Dillon with Crédit Suisse. Chip Dillon - Crédit Suisse First Boston, Inc.: I thought we'd just spend a minute in the on the acquisition in China, the SCA box plants. I mean it looks like you said that with their 15 plants, you tripled your revenues there. And that would suggest that perhaps their throughput was a little bit more than yours on a legacy basis? And if you could just talk a little bit about how you expect what kind of board flexible do you have there, will you depend solely on domestically-sourced test liner or recycled liner board? Or will you actually be able to export board from the U.S. to help fiber those box plants?

My sense, Chip, at least for now is we're going to be that core buyer of China, we have been. We are in Europe, we like that position. There's a lot of recycle capacity that's been committed to by the board producers over there. And they bring out all the capacity that we're talking about. We like being board buyer in Asia just like being a board buyer in Europe. And I wouldn't anticipate us bringing liner board in from the U.S. in a big way because the probably the low-cost provider of liner board into China right now than Russia. Now we finished the Bronx project, we're going to make liner board approximately to make the market full. And China is mostly recycled market, there's not a lot of virgin fiber that gets user now. Chip Dillon - Crédit Suisse First Boston, Inc.: And what you're saying by the ability to ramp up to $800 million, that's basically just with the sort of 27 box plant facility footprint you have now?

SCA's plants are running about 40% of capacity. We have roughly $100 million box business and we acquired roughly a $250 million box business. So if you just kind of extrapolate, we're probably a little more than 50% of capacity in our plants because we haven't built in this as fast as SCA had. The markets over there are growing and 15% a year, pick the number. It's not going to take long for those plants to really start to ramp up in terms of capacity utilization. Chip Dillon - Crédit Suisse First Boston, Inc.: We've heard a lot in recent months about the difficulty in keeping up with export liner board orders. And in fact, people like perhaps yourselves or others that make liner turning away export business. Our condition still the same as we've been hearing?

Yes, it's tugging. Stated all around the world and why would you sell export liner board at a price that's below your mill net in North America when demand is starting to increase in North America. So we're out there. And I'll let Carol comment on this, but we're out there getting our prices up around the world so that our margins are comparable in a mill net basis anyway where sell.

Yes, we definitely constrained export production in the first quarter and will continue to do so in the second quarter. The demand is still strong. The deeds are there, prices are moving up. So that's a good thing.

We've got the capacity to meet our customers planned needs over the cycle. And we made a footprint decision so we can carry a lot of excess capacity, which we think what we need. But as those market plays out, when we get modest but steady growth in North America of 2%, let's say, a year, we'll be in great shape to be able to meet our needs. What we want is to be able to supply our strategic customers but supply and demand are at a point where we don't have to sell product at lower margin somewhere we're not going to.

Your next question comes from the line of Claudia Hueston with JPMorgan. Claudia Hueston - JP Morgan Chase & Co: Maybe just building off that question, I just wondered if you've seen any change trade on the paper side of your business, just given the change in currency and somewhat what surprised you?

I'd ask Mark Sutton, who runs our Paper business in North America and Brazil, to talk about that.

Claudia, the only thing we saw probably partially related to currency was a bit more imports into Brazil in the first quarter than we had a normally seen in the past and than what we're expecting. As far as a Europe, I don't think there were any issues. And exports out of the U.S. were actually, as an industry, down and core IP down. But most of that was related to the inability to get fiber to meet all of our commitments. So the Brazil import piece was the only thing that I see from a potential currency influence the quarter. Claudia Hueston - JP Morgan Chase & Co: And then I was wondering if you could just comment on the visibility of your customers now and how you think it compares to what might be normal? have you seen any changes in the buying patterns or inventory management on their end or just any really noticeable change in mood?

Our business is closest to lot of customers at xpedx. Maybe Mary Laschinger is just going to add some color on that.

Claudia, Mary Laschinger here. Claudia, I think what we're seeing, first of all, in the print side of our business is that I would characterize it as more stable and with some optimism in the marketplace. And again, we saw some improvement more or less focused in the east coast as a stronger region for us than in the West, but we are starting to see some greater demand coming across the country. But again of the print side, I'd characterize it as stable with some optimism. When we move over to packaging, we've actually seen a pretty healthy improvement in volume in packaging in our business across the country, more heavily focused in the Midwest. And the customers seem quite optimistic about the Packaging side of the business.

Claudia, in the consumer packaging and our converting business that was really a bimodal quarter. We went from taking downtime in coated paperboard in January to being sold out in March. And we also experienced similar trends in our Shorewood business and in Food Service. So again, like John said, we're not ready to call it a recovery yet but our customers are feeling a whole lot better in March and April, probably sooner than we expected.

Maybe the way to say it is to think about it as we're not calling euphoric robust recovery but it clearly is recovery that's starting to get more legs and more tentacles.

Your next question comes from the line of Peter Ruschmeier with Barclays Capital. Peter Ruschmeier - Barclays Capital: John, I was hoping if you could update us on the Ilim strategy in the recently announced investment there? Is that presumably fiber that's going to go into China? But can you elaborate on your thoughts on the strategy?

Same strategy, Pete, that we had when we made the joint venture investment two plus years ago. The whole notion here was to build out the position in Siberia and modernize the facility in Western Russia so that we can reduce costs, improve product quality and expand capacity. But all got put on hold by about for a year, maybe 15 months, because of what happened in the end of 2008, 2009 because it's being financed off the balance sheet. We're basically going add call it $1.5 billion modernization program, the single biggest project, the single biggest piece being the pulp project at Rogers. About $700 million of that is about half of the overall program. Theres another investment that's underway or being studied or kind of finalized for a conference which is the facility that serves the Russian market in paper. Peter Ruschmeier - Barclays Capital: I was curious to see your 9% headcount reduction at xpedx, pretty big number. Can you elaborate what you see going forward there? I we kind of through some of the rightsizing? Or do you view this as ongoing? How should we think about that?

I'll let Mary talk about xpedx and then I'll just make a comment about International Paper.

As was reported, we did experience a 9% reduction in 2009. We continue to look at the business in terms of what's going to be the right structure as well as headcount going forward. I wouldn't anticipate at this time that we're going to see the kind of reduction we saw in 2009, but we'll continue to evaluate the business in accordance with the revenue of that we're being able to generate within the business.

Pete, we've submitted for paper perspective, we've got roughly 80% of revenues. We had eight or nine years ago with less than half the people. Now, I mean, no one likes to have a fewer jobs. I think it needs a lot of tough decision but at the end of the day, that's what we've done over the past eight years and we've done it systematically as opposed hypothetically. So we're going to continue to look for ways to get the job better in all of our businesses, with the big push on productivity and planning for attrition. Peter Ruschmeier - Barclays Capital: John, I think you mentioned pretty heavy maintenance expense in 1Q, your slides indicate a little bit heavier in 2Q and I think you said first half is a 2/3 of the year. So what kind of a drop might we might expect from between 2Q and 3Q in terms of lower maintenance expense level?

I think that's in the appendix, isn't it, Tom?

Yes, it's on Slide 27, Pete, in the Appendix.

Your next question comes from the line of Mark Weintraub with Buckingham Research. Mark Weintraub - Buckingham Research Group: If I'm getting a ride that downtime, that's like a $0.15 swing from second to third quarter, is that right, Tom?

It's about $90 million, Mark. Mark Weintraub - Buckingham Research Group: I thought you were more specific on this than I heard. But in terms of the pension funding, have you determined order of magnitude what you might contribute this year?

We haven't made a determination yet. As you know, we don't have a funding requirement in 2010. We probably do have one in 2011 unless there's some changes in legislation. But we're looking at the potential voluntary contribution this year as part of our overall debt reduction plan. So we're thinking of balance sheet debt and pension combined and looking at the options we have for further debt reduction as we go through the year. Mark Weintraub - Buckingham Research Group: What is striking, the price increases which you had with the fact that you do have input costs coming down and maintenance would be coming down, the free cash generation of things play out as hopefully they will, will get really very, very strong. You talked about dividend and share repurchase as a things would be sorting through. I mean is it feasible six-month we do see things are working out and hope for that would be something you'd be revisiting potentially. We'd be hearing more about it another step up in the dividend and/or share repurchase, recognizing that there are a number of factors that you alluded to that would help to determine what the mix, et cetera, might be?

Mark, it's something that we constantly look out. So yes, it will be tied to economic performance. It'll be tied to our earnings growth and our cash flow generation. I think 2010, you're right, 2010 is going to be a strong cash flow year for the company. So it's something we'll consider as we go through the year.

Think about on where we are on some of these valid uses of cash. Our balance sheet that is about where we think it ought to be. We still got a pension issue to deal with. That number becomes a moving target based on interest rates and return. So we do want to end up with an overfunded pension plan but we've got a couple of billion dollars over a several year period that we anticipate we're going to need to put the pension plan. So our cash would be used for that and it will also be used to go back insurance. We don't need to sit on $2 billion, $3 billion of cash. Mark Weintraub - Buckingham Research Group: You guys struck me that was the one gaining factor was getting the cash in to deal with the pension before you would then be ready to potentially more aggressive because as you said, arguably, you would not need have even cut the dividend at all from a dollar had you known how things were playing out, which kind of raised the question of why you couldn't go right back to a dollar right now.

Yes, I think we moved the dividend at the right time. We moved it at the right amount from where we are, Mark.

And pension, we have more visibility on the legislation. And obviously, we have a $600 million, $700 million changing in that liability from an accounting standpoint just in one year. So we know we can move pretty significantly both ways. The dividend, Mark, is something we've just decided to take just the could have got all the way back to $1.01 when we thought that the right thing to do is to make a meaningful move and hopefully assigned to investors that we're feeling that 2009 is behind us. We've got a lot ahead of us.

Your next question comes from the line of the George Staphos with Bank of America.

Could you update us at all in terms of how you're thinking about capital spending and investment longer term. I know you have the estimate for this year at $800 million, is that number perhaps move a little bit higher now as the platform is growing internationally?

We are moving higher this year. Most of the increase is focused on cost reduction, consumption reduction, projects towards that, quick return, quick payback types of opportunities that really we put off last year so we're going through the crisis. We've said for 12 to 18 months now, we think a more normalized level is probably around $1 billion of capital investment on average for the cycle versus D&A of about $1.5 billion. And I think it will be situational, we've learned through the crisis there might be some opportunities to be more efficient about how we invest given pricing on inputs, or components that go in. And so that's somewhere between $900 million and $1 billion on average a year through cycle.

I think that's the important thing, George. A little bit higher, lower, a lot lower last year. Maybe $1.1 billion, $1.2 billion, but we're committed to the discipline keeping well below depreciation, being very selective of where the capital goes. That kind of include some organic growth outside North America if and when those projects will be having a affect of returns.

If I relate that to John what you're saying earlier about $1.5 billion of free cash flow and it took your comment is being an average figure over the course of the cycle. That would then roughly translate if I assume nothing longer-term for pension funding and working capital to roughly about $250 million of average earnings power through the cycle. Does that figure sound about right given your long-term playing horizon? How should we think about that is that if that is the right number?

Your forecast, but not necessarily ours. The way we think about that, George, is what it's going to take to get $20 billion capital base, roughly $20 billion capital base across the capital returns our cycle. And our target is get a mid-cycle basis, which means less in the down market, more in the up market in 2011 or 2010. Certainly not anywhere near mid-cycle markets. So you can do your own math to figure out what the EPS is going to be, or 8% return on $20 billion of capital.

Relating to what you said before, last one, just the trade flow question maybe for Mark. One of the European companies is now saying recently that they are beginning to shift some cut size here to the U.S. I realized it's a big affect given how much of the market's driven by the big box retail, but have you seen any effect of that at all in the market or over the course of the year?

We haven't seen a significant impact. There is always some movement and it really tends to be tied into things that you mentioned, or that was mentioned earlier. One is currency and one is excess startup capacity in the market. So we haven't seen any noticeable impact from increased imports in cut size.

Your final question comes from the line of Mark Connelly with CLSA. Mark Connelly - Credit Suisse: What assumptions do you have make about SCA in your existing container business in Asia to make the SCA acquisition accretive and when? And do you expect it to be the cost of capital in 2011. I'm just trying to get a sense of what kind of growth and assumptions you need to make that deal hit your own hurdles?

Mark, let me use our box business that we've got into China right now as a proxy. It's a growing North of 15%. We got a number of a brand-new plants that we've built a lot of over the last couple of years. But we've got several plants I'd say are four years or older. If you look at those, their earnings north the cost of capital returns right now. And as we fill them up, they are cost of capital returns. The key to the into China is not overpay the capacity. And what's kind of unique is our EBITDA margins are about our ROI is, which is in my experience a bit unusual usual. But as long as you're paying the right price to build it or to buy it, we have the cost of capital in China, just like what we do in our non-integrated business in Europe. Mark Weintraub - Buckingham Research Group: So would SCA accretive this year?

On the calculation, I don't know, Mark. We can take that off-line and kind of work it out.

And we'll now turn the call back over to Mr. Cleves for closing remarks.

Thanks, Christi. We appreciate your help. Thanks, everybody for joining us for the call today. Investor Relations will be available for follow-up questions. With that said, I'm going to go to the airport and get on an airplane. I'll be back in Memphis midafternoon. But next we'll be in the office for immediate responses. Please go either one of us with additional questions. Thanks for joining today's call.

Thank you for participating today is International Paper 2010 First Quarter Earnings Conference Call. You may now disconnect.