John Faraci - Chairman, Chief Executive Officer and Chairman of Executive Committee Glenn Landau - Vice President of Investor Relations Thomas Kadien - Senior Vice President of Consumer Packaging and IP Asia Carol Roberts - Senior Vice President of Industrial Packaging Timothy Nicholls - Chief Financial Officer and Senior Vice President

Peter Ruschmeier - Barclays Capital Chip Dillon - Citigroup Mark Connelly - Credit Agricole Securities (USA) Inc. Stephen Atkinson - BMO Capital Markets Canada Mark Wilde - Deutsche Bank AG George Staphos Steven Chercover - D.A. Davidson & Co. Mark Weintraub - Buckingham Research Group, Inc. Gail Glazerman - UBS Investment Bank Anthony Pettinari - Citigroup Inc

Good morning. My name is Misty, and I'll be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2011 earnings conference call. [Operator Instructions] Mr. Glenn Landau, Vice President of Investor Relations, you may begin your conference.

Thank you, Misty. Good morning and thank you for joining International Paper's Second Quarter Earnings Conference Call. Our key 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, which are outlined on Slide 2 of our presentation. 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 second quarter 2011 earnings press release and today's presentation slides. I will now turn the call over to Mr. John Faraci.

Thanks, Glenn, and good morning, everybody. Thanks for calling in. What we're going to do from here is, as we typically do, Tim and I will summarize the quarter and then we'll take questions on the quarter. Then, I'll make a couple of comments on the Temple acquisition proposal, and if we have time we'll take a couple of questions on that. So we'll do it in that order. So let me just start off talking about the second quarter. International Paper had a very strong second quarter in a recovering but obviously not fully-recovered economic environment here in North America. Our results were driven by a couple of things: a balanced segment and global portfolio of businesses around the world; very strong contributions from Printing Papers in North America, Coated Paperboard in North America and the Ilim Joint Venture; really outstanding operations and cost management that's continuing; good maintenance outage execution during the quarter; some seasonal improvement in demand and we offset significant input costs escalation that Tim will talk about. This next chart here just shows you the segment and global portfolio balance. It's part of International Paper's business platform today. As you can see on the left, the good balance in terms of where the earnings came from by segment and on the right, good balance in terms of where the earnings came from by geography. Turning to the financial snapshot page, strong revenue growth, revenues up 8%. EBITDA, over $900 million in the quarter, up 16% from the second quarter of last year, a run rate of $3.6 billion. Our free cash flow, amazingly, exactly equal to the first quarter but I would say that, that also has $40 million of additional capital spending in the second quarter. So our free cash flow is actually up around 10%, if you normalize for capital spending during the quarter. Really, if you look at this next slide here, which is the EPS over the last, really, 10 years, you can see there's a step change in our EPS performance. That’s just the result of the transformation plan. The 2009 period you're looking at there is the global recession, that is now in the rearview mirror. But importantly, our earnings over the last 4 or 5 quarters are not from land sales as they were in the prior years. So they were really operating earnings from our businesses and as you can see, we've achieved here on the step change in terms of the capability of International Paper to generate earnings and free cash flow and we think there's more left on the runway as we go forward. In terms of return on capital, 8% return -- over an 8% return on capital over the last 4 quarters into the cost of capital zone, which is important in terms of one of our key metrics. So with that, let me turn it over to Tim to summarize the quarter.

Okay. Thanks, John. Good morning, everyone. As John said, we did have very strong performance in the second quarter. Volume contributed $0.08 to the change in results from the first quarter. And I would say that while volume here in North America is really moving sideways, and we'll talk about that a little bit in more detail as we go through the slide deck, in other parts of the world, we're continuing to see growth, whether it's Russia or various parts of Asia. So volume, price, strong operations and a great results from Ilim, more than offset the heavy maintenance outage schedule, the heaviest of the year in the second quarter and the impact of the Vicksburg's flood, which cost us about $20 million. Input costs were up in the quarter, $31 million, in line with expectations, about 75% of that in North America and 25% in Europe, which has been kind of a theme this year and it's really fiber and energy costs in Europe. All the businesses, industrial and consumer packaging and printing papers, also higher costs. So let me turn to the segments now, I'll start with Printing Papers. And Printing Papers, I thought, just had an excellent quarter. We've got a business in North America for the first half. It's running at a 14% of return on investment. EMEA, first half running at a 17% ROI. But in the quarter, pricing was up across all regions. Operations were really outstanding, big improvement over the first quarter in all regions but especially strong in North America and really good cost management. We did have the IR outages that I mentioned that was mainly in Europe and Brazil, and we had really good execution around all of those. We did have one issue at the Svetogorsk mill in Russia, where we found some things that required us to take a little bit more time and spend a little bit more money, probably cost us about $7 million in the quarter. Let me turn to Industrial Packaging now. And I thought Industrial Packaging, again, had a good quarter, still running at a 9% return on investment. Box price was mostly flat, down about $5 quarter-on-quarter. Volume was seasonally stronger, up about 170,000 tons, but not as strong as we had expected and I'll talk about that a little bit more in a slide or 2. Operations were really good and again, good cost management out of the Industrial Packaging group. Outages, the heaviest quarter of the year but we had great execution across the outages, and we also had great execution around the Vicksburg mill. I think most of you know that we had to take the mill down for 49 days due to the flooding that was experienced on the Mississippi River. But the manufacturing team, the business did a great job protecting the mill. We had no damage to the mill at all. It's now back up and running, but we did lose about 80,000 tons of production during the quarter. If you look at margins for Industrial Packaging in North America, IP had the highest margins in the industry in the second quarter at 17.6%, again, in a heavy maintenance outage quarter and year-over-year, a solid increase, up 180 basis points. Let me come back and talk about demand for a moment. As I said, we see demand really moving sideways. And it feels kind of like what it should feel like in a 1% to 2% GDP environment. The second quarter for us is normally our strongest quarter of the year because of our exposure and weighting to agricultural packaging out on the West Coast. And we had a much lighter season in the west region around agricultural packaging than we expected, mainly due to weather. So what you've got on the chart here, if you look at the blue bars, those are total shipments. And then the gold bars, we've pulled out the western region to show what the rest of the country looked like from a demand standpoint. And as I mentioned, we were disproportionately impacted in the quarter relative to the industry because of our weightings. But just as a couple of examples, the strawberry season came late. So in the quarter, we were down almost 6% year-on-year. Cherries were hit by weather. I think there was damage from hail and storms, and so we saw the cherry production almost cut in half on the West Coast and avocados were down as well. So it was a number of factors on the West Coast that really hit us hard in the quarter. Turning to Consumer Packaging, another great performance by Consumer Packaging. Stronger price, favorable ops, offset by outages and input costs but really solid performance across the businesses. Price and operations and cost management covered -- nearly covered $20 million in outages and another $9 million in input cost increases and continued to have really strong performance for coated paperboard in all the regions of the world, Europe, China and the U.S. And when you look at North American coated paperboard performance, for the first half, we've got a business that in the first half of 2011 has already earned more than in all of 2010, in the first half of this year is running at a 12% return on investment. Turning to the distribution business, xpedx saw only a slight improvement in earnings quarter-to-quarter, really due to pressures from fuel costs and transportation costs. We did see a bit of a bright spot in packaging, which is about 25% of xpedx's business, which posted a 9% growth rate quarter-on-quarter. The Ilim Joint Venture just had a great quarter. Again, we report on a one quarter lag but Ilim's earnings increased in the quarter from $44 million to $57 million. Volume was up, price was up and it was up both for pulp and containerboard. Operations ran well and just another very strong quarter turned in by the joint venture. So if you look at margins the first half of this year versus the first half of last year, strong performance across all the businesses. Different sets of challenges, region by region, business by business. Different sets of opportunities but business management completely focused on margin management and delivering the earnings and cash flows that we need to across all of the businesses. And I think if you turn to the next slide and look at returns, that's what's really making the difference in terms of our return on investment over the past 4 quarters. We're now in that cost capital zone and have been across each of the last 4 quarters. So with that, I'll end my summary and turn it back over to John for an outlook on earnings.

Okay. Thanks, Tim. Before I do that, let me just summarize the quarter quickly. I'd say we got the right assets in the right places. We're managing aggressively and we're executing well. The seasonal demand in North America arrived as expected. But as Tim said, the demand is not robust in North America. Outside North America, demand is good. Latin America, China, Russia, in places like Turkey, where we have a big presence in the corrugated packaging business, healthy demand. We've got some flow through on pricing during the quarter. Our input costs were not as we expected and OCC continues to move up as we look into the third quarter. And then Ilim delivered just a spectacular quarter. The Ilim accounted for 18% of our EPS during the quarter. So let me move on to the third quarter outlook. That’s the Page 21 for those of you who following along. The U.S. economy is growing at 1% to 2%. And from a demand standpoint, it feels like a 1% to 2% GDP economy. Export demand in containerboard is good but domestically, whether it's paper, coated paperboard, containerboard or xpedx, it feels like 1% to 2% GDP growth. Demand is not up, it's not down. I'd characterize it as moving sideways. Outside North America, as I said, demand is solid year-over-year and we think that will continue. The biggest area of concern as we move into the third quarter is input costs. And while our outage costs are going to be down $65 million quarter-over-quarter, we could easily see that get chewed up, all of it gets chewed up by input costs and the biggest headwind we have on the input cost side is OCC. That could end up accounting for almost half of the input cost increases that we can see on the horizon. The quarter is not over yet, but we can see on the horizon as we look out to the third quarter. So I will just stop right there and turn it back to Glenn, and we'll take your questions.

Misty, we're ready for questions.

[Operator Instructions] Your first question comes from the line of Anthony Pettinari with Citi. Anthony Pettinari - Citigroup Inc: Regarding the Temple-Inland bid, there's been a second data request from regulators. And I was wondering, if you could talk maybe with a broad brush about what you're expecting in terms of a timeline for a response from regulators?

Yes. We're going to come back and take Temple questions in just a few minutes. What we wanted to do was really talk about International Paper's earnings in this Q&A session. Anthony Pettinari - Citigroup Inc: Okay. Maybe moving to containerboard, you discussed the impact of the western region and the agricultural difficulty we've seen there. Given -- you gave us some color on one of the slides. Can you talk about to what extent that tonnage has been lost versus maybe just pushed out and when you would expect to see some of those volumes come through in the third quarter, if at all?

Carol, why don't you take that?

Anthony, the only commodity that I think we get a chance to get back is going to be strawberries. Strawberries got pushed out. They're going to come but I think a lot of the other commodities, they were just poor harvest and they're gone. So I think we'll see some strawberries in the third quarter but outside of that, I view it as really most of it lost.

I think that's the ag business. We're having a great fruit and vegetable season in Southern Europe, in Morocco and Turkey. And we didn't have a great one in California, we may have a great one next year. Anthony Pettinari - Citigroup Inc: And then maybe outside of ag and containerboard, can you talk about how demand trended in the 3 months of the quarter and maybe what you're seeing in July?

Yes, I would say, as we all know, after 6 very solid quarters of year-over-year growth, in the second quarter for the first time the industry saw a decline. And I would characterize our performance relative to that similarly. But when you look inside the quarter, Anthony, you had April was okay. May was the low point and then June bounced back to what I would categorize as mostly flat year-over-year. And it feels like July is trending in that same direction. Kind of moving sideways as I would call it.

Your next question comes from the line of Mark Connelly with CLSA. Mark Connelly - Credit Agricole Securities (USA) Inc.: Just 2 questions. First, in containerboard, with your outages and other people saw some outages, we're not hearing that customers are having difficulty getting boxes. So would you describe the current inventory situation as healthy or tight? And I'm curious whether you incurred extra costs at your box plants to deal with customer demand this quarter?

I will only speak for our situation and I would call our inventories very, very tight in May and June. Obviously, when you lose that many tons out of Vicksburg that we intended to use, we got way below where we needed to be. So behind the scenes, there was a tremendous amount of juggling extra freight, moving things around. We've made a few box customers nervous. So one of our challenges, Mark, is we've gotten so good with juggling that it gets pretty low and pretty tight and the market doesn't necessarily see it. So I would categorize inventories as on the low side. And for us, we've got to replenish those inventories in the July-August time frame to get back to a reasonable level. Mark Connelly - Credit Agricole Securities (USA) Inc.: Carol, did those extra costs actually clip earnings?

Yes, absolutely. Mark Connelly - Credit Agricole Securities (USA) Inc.: Any sense of -- was it a meaningful number?

Well, it's in the $20 million that we called out for Vicksburg. So we... Mark Connelly - Credit Agricole Securities (USA) Inc.: Okay, so it's all in there.

Yes, we kind of put it all in that bucket, Mark. Mark Connelly - Credit Agricole Securities (USA) Inc.: Okay, that's fair.

It's grade substitutions, Mark. It's extra freight as we move rolls around from one box plant to another, or ship from the mill we don't want to ship from. Mark Connelly - Credit Agricole Securities (USA) Inc.: Right, right. And just one more question, in white paper, the trade rags keep talking about weakness. You haven't reported any -- we don't hear it when we talk to the big retailers. So is there a significant difference in the market right now between cut size and rolls the way you're thinking about it? Or is this just noise around the edges?

Well, we had 2 very good months of cut-size shipments and I characterized, maybe it's noise around the edges. We're a big enough player in the market, we're going to see all parts of the market. It's down 2% to 3% year-over-year. Supply and demand are in balance, our inventories are in good shape. So we think -- and I think our earnings kind of supports just what I said, we're in pretty good shape.

Your next question comes from the line of Gail Glazerman with UBS. Gail Glazerman - UBS Investment Bank: On industrial packaging, can you talk a little bit about the export markets? And then maybe following on to Mark's question, can you talk about how easy it's been to kind of secure trade tons in the market? Just giving a sense of how tight things have been?

In industrial packaging? Gail Glazerman - UBS Investment Bank: Yes.

Gail, the export markets have been very healthy. I mean, I think it shows up in the data. The demand is good, the mill nets are solid. So I would categorize the export markets as solid, steady, at a healthy rate. And the second part of your question, Gail? Gail Glazerman - UBS Investment Bank: Just trying to get a better sense of the market, like, did you try to seek incremental trade tons, push-forward tons to make up for Vicksburg, and if so, how easy or hard was that?

The trades kind of get locked in. It's really hard to move them in a meaningful way. So certainly, we attempted to get more but I wouldn't say we were able to -- it didn't mean -- it wasn't a meaningful shift in our order patterns with our trade partners in the second quarter. Gail Glazerman - UBS Investment Bank: Okay. Can you guys give an update on your Industrial Packaging business in Asia, and when we might start to see that turnaround?

Tom, you want to talk about that?

Hi, Gail, it's Tom Kadien. In the second quarter, we saw some improvement and I'll say consistently profitable operating results. We also took down a facility that clipped us for a couple million dollars, and that was really the final step in our integration plan from the acquisition. So our volumes are up about 7%. But the real story that we've been working on is getting our margins up. The business we inherited in the acquisition was much below our expectations and we've gotten prices up well into the mid-teens from when we closed on it. So we'll start to see cleaner numbers in the third quarter and it’ll be profitable. Gail Glazerman - UBS Investment Bank: Okay. And just one last question, can you give an update on the India acquisition. I guess getting the approvals there is taking perhaps longer than expected?

Remember, Gail, it's India.

Yes, we're still waiting on government approvals. It's slow but it shouldn't be a surprise because as John said, that's India. We have our management team on the ground as of August 1, and we're looking to close early in the fourth quarter.

Your next question comes from the line of Mark Weintraub with Buckingham Research. Mark Weintraub - Buckingham Research Group, Inc.: Two quick ones. First, the $129 million asset impairment, what was that for?

Well, it was in our consumer packaging business. It was Shorewood. We just looked at performance against planned. And as we looked at it, we realized the business was underperforming, so we took the charge in North America. It's primarily the North American business, not the international locations that we have. Mark Weintraub - Buckingham Research Group, Inc.: Okay. And then on xpedx, last, last quarter you gave us that the kind of overview and I realized it's a 3-year project, I think. But when do we start potentially seeing benefits from xpedx start flowing through?

Well, we've already started to see some of the benefits flow through on the footprint side. We'll wait until we get to year-end, Mark, because while it's a 3-year program, we'll have some meaningful progress to -- we're expecting some and we'll get some. And we'll probably summarize that at the end of the year, but we're not going to try to do it every quarter. Mark Weintraub - Buckingham Research Group, Inc.: Okay. And then just lastly, I realize mix can make this difficult to analyze. But it looks, based on that slide you showed on the box shipments and then taking out the West Coast, it looks like you may have lost share on the West Coast and maybe a decent amount of share on the West Coast. Is there something going on, on the share side on the West Coast for you?

Mark, we have a disproportionate share. We have a higher supply position in ag than the average. So we're more predisposed to that. What I would say about our approach to the box business in general, our objective is to maximize profitability and to make the most money we can. And we are continuing to make choices around where we sell and what we sell and the decisions we make commercially. So I think you see a combination of all of those things.

I'll just add to that, Mark, when you lose a customer, you’ve lost share. When a customer doesn't get some business, you haven't lost share. The customer doesn't have the business. And in the ag market, if the crop is half of what it was, and that was cherries, that doesn't mean we lost share. It means our customer base didn't have the business but in the ag business, they'll get it the next time around in the next season. Mark Weintraub - Buckingham Research Group, Inc.: That's fair. Can you give us a sense, roughly, what percentage of your West Coast business is ag?

Well, if you think about the industry, 7% to 8% of the total industry is ag. Granted, that's not all California. And you know, we are -- 10% of our total business is ag. So that doesn't sound like a lot but if you'd look at the percentage, 7% to 10%, that's a much higher degree of concentration. And obviously, with Weyerhaeuser our ag position became a much more important part of our business.

Your next question comes from the line of Stephen Atkinson with BMO Capital Markets. Stephen Atkinson - BMO Capital Markets Canada: Question about Ilim, would you be able to give us an update as to the project at Bratsk and Kotlas?

Sure. We got 2 projects going on, a $300-million project at Kotlas, which is the addition of paper machine. That project is on schedule, on budget. Scheduled to start up on the first part of next year. The other project is at Bratsk pulp mill. That's a very extensive project, $700 million. We expect that to start up in the latter half of 2012. We're a little behind on schedule and so far so good on the cost side. So we're well into construction on both of those. And the Bratsk project is probably the biggest project in the industry in 40 years in Russia, and we've got a really – it’s really a global team over there. I think there are 900 people on site now and that will peak out at probably a couple thousand, as we get into the heavy construction period next year. Stephen Atkinson - BMO Capital Markets Canada: Would there be any benefit, like my understanding is, you're putting in the recovery boiler first and would there be any benefit before the latter half of next year?

No. Don't expect to see any meaningful benefit out of that until we get to the latter half of the year. Although on the paper machine, it should be starting up sooner than that, so we'll start to see some benefit from that. Stephen Atkinson - BMO Capital Markets Canada: Okay. Second thing, I know you provide guidance on corporate charges of $175 million to $200 million. You did $36 million in the second quarter. Are you moving down towards that level, like, would that be a target that we can annualize down the road?

No. I think our -- the forecast that we gave at the beginning of the year continues to be the range that we think we'll be in. Stephen Atkinson - BMO Capital Markets Canada: And would you be able to update me a bit on the flat pulp market?

Fluff pulp market? Stephen Atkinson - BMO Capital Markets Canada: Yes.

Fluff pulp market continues to show pretty healthy growth and outside some of the emerging markets, 5% to 6% a year, year-on-year. We like that business. We announced we're converting or re-purposing the uncoated freesheet mill that we closed in Franklin, Virginia to fluff pulp, that’ll be coming online next year. And while not a core business to International Paper, it's a segment of our paper business because, because we produced Fluff at the mills where we produce uncoated freesheet that we find quite attractive, and we've got a good position in it, with a solid customer base. Stephen Atkinson - BMO Capital Markets Canada: And the order backlog is still good?

Yes.

Your last question for this portion comes from Peter Ruschmeier with Barclays Capital. Peter Ruschmeier - Barclays Capital: John, I wanted to see if you could elaborate on, you mentioned the second quarter. I think you said the second quarter felt like 1% to 2% kind of GDP in your business. A number of companies pointed to a bit of a slowdown as the quarter progressed, with some of that continuing in July. I'm curious if you can try to help us a little bit with a little more granularity of was it even in the quarter in terms of the demand trends you felt? Or was it skewed? And any initial read on July would be really helpful.

I think, Pete, it's all over the map in our different businesses, whether it's -- Carol said, May was the low point for industrial packaging. But just look at any of the economic reports: housing is still weak, there's been somewhat of a slowdown in manufacturing in the durable goods side. The economy is, I think it's going sideways, not up, not down, from our perspective as we see it. There's going to be some seasonal pickup in some of the businesses but not all of them because we're in a lot of different segments, when you look at xpedx, Coated Paperboard, Industrial Packaging and Printing Papers. The Commercial Print side of xpedx is still a struggle. Peter Ruschmeier - Barclays Capital: Okay, that's helpful. Shifting to fiber costs, Timber Mart-South showed a 9% sequential drop in pulpwood costs on a stumpage basis. I guess, delivered basis wasn't as much. But I'm curious if you saw any benefit from that in the second quarter, and if you anticipate any benefit in the third quarter?

Yes. We're seeing the logging conditions are excellent in the south. We've gone from too much water to not enough in a lot of places. So stumpage costs are down. But then you remember, diesel is almost $4 a gallon. So surcharges kick in when you get over somewhere between $2.30 to $2.50 a gallon. So a lot of that stumpage is getting eaten up by fuel surcharges and you still got this issue that's a big issue across the South, with housing at 600,000 starts, sawmills are curtailed and we're still having to go longer distances to get wood than we normally would in anything close to an average kind of housing environment, which is probably several years away. Peter Ruschmeier - Barclays Capital: Okay. And obviously, in the quarter, you had the Vicksburg outage. But as you look forward, do you have any ability to flex your system more toward virgin away from the rising recycled fiber costs output that you have? Or are you more or less maxing out your virgin capacity at this point?

I'll let Carol talk about the industrial packaging system.

Yes, Pete, that's one of the advantages I think we have is the fact that the current operating rates that we're running and how we're running our system, we do have some flexibility to move a little bit. Even -- take a mill like the Valliant, when we shut that third machine down, we have more back-end than we have paper machine. Therefore, we can push our virgin limits to our advantage and back off OCC and vice versa. So we fell like we're in pretty good shape. Our mill inventories on OCC are in good shape. Our wood inventories are in good shape, and we'll do everything we can to optimize that for the best benefit. Peter Ruschmeier - Barclays Capital: Okay. And just lastly, if I could maybe for Tim, on working capital. Looks like there's a big drag in the first half. How do you think about working capital in the second half in terms of its impact on cash flow, both on a second-half basis and a full-year basis?

I don't think it's going to be a big drag on cash flow. We were up in the first quarter. We unwound the AR securitization program that we had in Europe, which had an impact on that. But if you look at our operating working capital percentage of sales, we're running around 14% or just north of 14%. It's some of the best performance that we've really ever seen across all the businesses in terms of really being focused on working capital, inventories, receivables and payables.

Your next question comes from the line of Mark Wilde with Deutsche Bank. Mark Wilde - Deutsche Bank AG: I got couple questions for Carol, if I could, just back to the containerboard market. Carol, I wondered, did you have any fallout from all of that produce upheaval in Europe?

Yes. Our colleagues in Europe had some loss of some volume and, of course, we supply them their craft liners. So I mean, that was definitely a bit of a hit but they still ended up having a pretty good quarter over there. Mark Wilde - Deutsche Bank AG: Okay. And then, also on that, there was a report in one of the trade papers a couple of weeks ago that European, I guess, German test liner prices had fallen, this created some concern. Do you have any insight into what's going on over there in terms of European containerboard prices?

We do know that test liner prices have dropped a little bit, Mark. So that report, I think, is accurate. But my outlook on craft liner is it's been fairly stable still. So they're kind of moving a little bit in opposite directions but there was some price reduction on the test liners side. Mark Wilde - Deutsche Bank AG: Okay. And then just one other question for John, a little bigger picture question. I think the restructuring of the company really has made you a better operating company. But I'm just -- I'm curious with the dollar so weak right now, whether you're concerned at all kind of going forward, if for some reason, we were to get a real rally in the dollar, how defensible your earnings and your margin levels are? Historically, currency's been a big swing factor for the U.S. industry.

There's no question that it's helping our customers, Mark, be more export-competitive. And it's kind of hard to – with us -- the big customer base even though we have a more focused portfolio, we've got a very diverse customer base. But on balance, when you look at the macro numbers, exports from the U.S. are up, which is I think, something good. They’re still a small part of the economy, so they're not going to overtake consumer spending as the economic driver. So a material and sudden strength in the U.S. dollar would probably hurt our customer base. But if it -- it was also reflected in a weaker currency in some of these emerging markets, we’d get some help and we were getting hammered in Brazil on currency as the real continues to get very strong as a result of a weak U.S. dollar. So there's some offsets there. And on balance, I think as we become a more global company, that's how we're going to look at currency, there'll be some pluses and minuses and that's how you have to think about it because you're always going to have some currencies moving against you. But in the U.S., I think a materially stronger dollar would impact our customers from the ripple effect of exports.

Your last question for this portion comes from Chip Dillon with Vertical Research Partners. Chip Dillon - Citigroup: A couple things quickly. Could you just remind us, you look at Ilim and it's earning, I guess, after tax for you all over $200 million annualized. What is your net investment in Ilim at this point?

$450 million. We put in $650 million to start with. We've taken out about $200 million in dividends. [Indiscernible] Ilim, Chip, is something that is probably unappreciated by many of our investors in terms of its earnings potential to International Paper. I mean, they're going to be -- it's the pulp business but it's also when we finish with Kotlas, we're going to have a much bigger domestic presence similar to what we have in Svetogorsk with our paper business. So we're pretty positive on the outlook. Remember to recognize, it is a pulp business, so it's going to have a cycle to it. We're just coming off the -- probably what was a -- may not be the high point of the cycle but a high point. But even underlying that, demand for pulp in China is going to be -- continue to be robust going forward. We're going to have the lowest cost soft wood pulp mill on the planet delivered to China at Bratsk. Chip Dillon - Citigroup: Got you. And on that point though, we all know that you're going to report in October what Ilim did in the second quarter. Should we -- and of course, pulp was rising through the quarter. Is there any -- are there any other factors we should take into account as we think about Ilim in terms of what they do between what you just reported and what you'll report in October?

Well, you're going to have some currency moving around, you're going to have probably a heavier maintenance outage schedule. So yes, it's not going to look drastically different but there'll be some puts and takes. Chip Dillon - Citigroup: Okay. And then just lastly, quickly. I've noticed that -- it appears that bleaks board [ph] backlogs have gone from being quite super strong to maybe just more normal. Is that your experience and does it concern you at all? Is it still at a healthy level?

Chip, it's Tom Kadien. I'd characterize them as seasonal. This is the slow time of the year as we look at our system. We didn't build any inventory throughout the second quarter, and we're expecting a seasonal pickup here shortly. So it has come down from 4 weeks to 3 weeks. But that's about where we were this time last year.

We have reached the allotted time for questions and answers for this portion of the call. I'll now hand the floor to John Faraci.

Thanks. As I said, I'd like to stop here for a moment and provide all of you with an update on our offer to acquire Temple-Inland. Then as I said, if we have time, we'll take a couple of questions. And I'd say first is as we said from the start of this process, we're very committed to seeing this transaction through to completion. We believe the industrial logic of the combination is solid and I don't think there's any debate there. We haven't heard any from anybody. It makes a very good business at IP. They're our industrial packaging business, an excellent one, and it creates a powerful cash flow engine that will continue to drive free cash flow and ROI improvement in International Paper. It strengthens our portfolio and it's consistent with the objective of our transformation plan, which is focusing on solid cost of capital returns in all of our businesses throughout the cycle. Importantly, it's meaningful, accretive to IP shareowners that synergies are realized and that is an acquisition requirement. As far as the price goes, we believe we have a very strong offer on the table, which deserves serious consideration. We believe our offer is highly compelling on a present-value basis and reflects the future outlet for Temple for both containerboard and for building products, and has a reasonable split of expected synergies. At $30.60 a share in all cash, it represents almost a 20% premium of Temple's all-time high, and a 46% premium to their prior day close, and it's also priced significantly above their 52-week high. As all of you know, we've attempted to engage Temple in negotiations. We told them that a negotiated process, with us having an opportunity to [indiscernible] due diligence would lead to the best value. We strongly prefer to negotiate this directly with Temple, but we are prepared to let Temple shareowners decide the compelling nature of our offer. On the regulatory side, just one update that we posted yesterday. As expected, so we expected this, we received a second request from the Justice Department yesterday. We've been working with them for several weeks to help them understand the economic benefits of this transaction. And of course, we'll be continuing to cooperate with the Justice Department and their process and expect to be able to address any questions they have quite promptly. So with that, I would be happy to take a couple of questions if we have some time on Temple, and if any of you have any.

[Operator Instructions] Your next question comes from the line of George Staphos with BoA Merrill Lynch.

John, I guess the question I had and I think a lot of people have is then, what are the next mile markers for you in this process? You've put an offer out, Temple-Inland has refused and it seems that at this juncture to the outside observer, it's a bit of a stalemate. Do you consider your offer depending on what facts you get back from the Justice Department? Are you waiting for perhaps additional certainty on the strength of the economy or capital markets based on what happens with the debt ceiling? In other words, help us understand what the next steps are, in your view, to the extent that you can and what the mile markers are behind that?

Well, as I said, we'd like the next step to be a negotiation. We've made what we believe to be a serious offer, 20% above Temple's all-time highs since they became the new Temple several years ago. [indiscernible] having discussions, we've got to continue with the process. We're serious, we're committed, intend on seeing it through. And we had 2 conditions in our proposal, one was regulatory approval and the other was the withdrawal of Poison Pill and our next step is to go get regulatory approval.

Okay. John, do you potentially see this then taking as many as 3 years to complete the process?

I don't want to speculate, George, about how long it's going to take. It's going to take a while to get regulatory approval. That's not going to occur overnight. So I think we just take it one step at a time. We're committed to the process. We believe this is a good transaction for both Temple shareowners and for International Paper shareowners. It has to be, for it to work.

Your next question comes from the line of Chip Dillon with Vertical Research Partners. Chip Dillon - Citigroup: John, as you go through the process, I know with the second request, which was totally expected, does Temple have to do anything? Can they be compelled by the government to provide information? Or is the onus completely on International Paper?

As I understand it, Chip, Temple will also get a request to supply some information and they'll have their discussions with the Justice Department and ultimately, they, as we will, will have to provide the information the Justice Department requests. And the timeline that they'll be on is one that they'll work out with the Justice Department, and the timeline we'll be on is one we'll work out with the Justice Department. Chip Dillon - Citigroup: Will either of the side, if you can answer this, have access to the answers of the other party?

Pardon me? Chip Dillon - Citigroup: Will, for example, you be able to find out what Temple says to the Justice Department and can they find out what you say to them?

I believe those submissions are confidential, Chip, for both parties.

Your next question comes from the line of Steve Chercover with D.A. Davidson. Steven Chercover - D.A. Davidson & Co.: My question was for the previous section, if I may, and it was the $20 million expense that was taken from Vicksburg, is that reflected in your kind of the pro forma numbers for the containerboard segment?

We won't make you wait until next quarter to ask that question, Steve. But was it reflected in the pro forma numbers for...

We had a charge. Think about it this way, Steve, we had a charge of $20 million from all the lost production and the other things we had to do to move volume around, that hit us in the second quarter. We moved a couple of outages because of these complications out to later in the year. And so we won't have the Vicksburg impact as we go through the rest of the year, but we will have more outages that were moved from second quarter to third and fourth. Steven Chercover - D.A. Davidson & Co.: Sure. So the $279 million reflects the impact of Vicksburg?

I'm sorry. Say that one more time? Steven Chercover - D.A. Davidson & Co.: The $279 million of operating earnings reflects the impact of Vicksburg?

Yes, that's right.

Yes, it does.

[Operator Instructions] Your next question comes from the line of Mark Wilde with Deutsche Bank. Mark Wilde - Deutsche Bank AG: John, is it possible for you to just recap for us kind of the marching orders you've given Carol in terms of continuing to manage her business, while this is going on? I think there's been a lot of concern about particularly around pricing-type issues? And I think with your costs going up, what a lot of people are concerned about is if costs continue to go up, would you be unwilling to try to recoup those through a pricing initiative as long as this deal is under review?

First of all, we don't give marching orders at International Paper. But we do agree on priorities and then we go out and execute, and that's not only Carol but all the other leaders in the company. And I'm not going to talk about pricing on this call because I can't and I shouldn't. We just don't talk about pricing in a forward-looking way. Mark Wilde - Deutsche Bank AG: But, John, just in terms of, is the focus in industrial packaging just to manage the business kind of as you would under normal circumstances or does this deal change anything?

Absolutely. I mean, the focus is on International Paper everywhere from Shanghai to Memphis to Brussels to São Paulo is run your business. I mean, the reason we can consider something like Temple is because of the cash flow we're generating, the balance sheet we put together and the business performance we put together. And I feel pretty pleased with how the organization is responding to that. Mark Wilde - Deutsche Bank AG: And without asking you to kind of predict or make any call about what you would do on pricing. Is it fair to say that if you thought the market conditions were right, you would be willing to consider a move on price in the midst of this bid or not?

I'm just not going to comment on pricing, Mark, but I think we have talked -- what's important in any business, in any of our businesses around the world, as it relates to pricing. Inventories got to be in good shape, supply and demand needs to be in balance, operating rates need to be high and demand needs to be consistent with supply. And we're not in a cost-push business, where automatically when costs go up, prices go up. And wood side works too, when costs go down, automatically prices don't follow.

Your next question comes from the line of Mark Weintraub with Buckingham Research. Mark Weintraub - Buckingham Research Group, Inc.: I think when -- originally you were talking about Justice Department review, you bracketed it as if it might be a 6- to 7-month process as a guess. Do you have an updated view on that?

No, we don't, Mark. We're just getting the in-process started with DOJ and that time frame is going to be, absent any meaningful discussions with Temple, that time frame is going to be one of the gates.

Your next question comes from the line of Peter Ruschmeier with Barclays Capital. Peter Ruschmeier - Barclays Capital: I guess 2-part question, if I could. Two different questions, if I could. First, I'm curious, John, how you think about whether there's an opportunity cost related to the deal dragging on over time? And I'm really thinking about the type of response and behavior that Willamette had in reaction to the Weyerhaeuser bid over the 2-year period, and whether or not you view this as something that could be disruptive, which potentially has a true cost to your business? So how do you think about the opportunity cost of a deal that could drag on?

Well, in terms of our business performance, Pete, I don't see any opportunity cost. We're focused on running International Paper as it is all across the company, as I said from Memphis to Shanghai to São Paulo, to Bratsk in Russia. In terms of time frame, I think there's an opportunity cost to Temple shareowners. We've made a serious offer that's 20% above their all-time high, and we think the right thing to do is to sit down with Temple and have a serious discussion. The world moves on and we're committed, we're serious, we're patient, we're disciplined. If things change at some point in time, and we think the right thing for International Paper is to do something else, we'll make that call. But we're serious and we're committed to this and we'll be disciplined. Peter Ruschmeier - Barclays Capital: Okay. And, John, as we all try to figure out the next steps here, what appears at the moment to be a standoff. One point that I'm not clear on, is it even possible for Temple to have a confidential conversation with you at this point or doesn't the hostile nature of the deal at this point preempt that from happening?

Well, now that we've launched a tender offer, there are some things we have to comply with. And I guess I’d just leave it right there. We've got plenty of advisors, at least International Paper does. I presume Temple does. And there's always a way to have a discussion if we choose to have one. But I'm not going to get into what we have to do under any circumstance. Peter Ruschmeier - Barclays Capital: Okay. Maybe just lastly, on the tender itself with the date coming up, shares of Temple trading roughly at the bid. Can you remind us on the flexibility you have with that tender? I guess, you'll cross the bridge when you get to it. But can you extend that tender offer in an effort to try to facilitate a higher participation rate?

Sure, we can extend it a number of times. We've launched a tender process because we weren't having meaningful discussions, we're serious and we wanted to get the kind of the train rolling. So that's where we are but we can extend the tender offer and expect that we will do that. Okay, operator, I think that wraps it up. So thank you very much for tuning in. We're pretty pleased with the quarter and look forward to talking to you on the next quarter.

This concludes today's conference call. You may now disconnect.