Glenn Landau - Vice President of Investor Relations John V. Faraci - Chairman, Chief Executive Officer and Chairman of Executive Committee Carol L. Roberts - Chief Financial Officer and Senior Vice President Mary A. Laschinger - Senior Vice President and President - Xpedx Mark Stephan Sutton - Senior Vice President of Industrial Packaging Thomas Gustave Kadien - Senior Vice President - Consumer Packaging and Ip Asia

George L. Staphos - BofA Merrill Lynch, Research Division Mark Wilde - Deutsche Bank AG, Research Division Phil M. Gresh - JP Morgan Chase & Co, Research Division Gail S. Glazerman - UBS Investment Bank, Research Division Chip A. Dillon - Vertical Research Partners Inc. Albert T. Kabili - Crédit Suisse AG, Research Division Anthony Pettinari - Citigroup Inc, Research Division Mark A. Weintraub - The Buckingham Research Group Incorporated

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 Fourth Quarter and Full Year 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Glenn Landau, Vice President, Investor Relations. Please go ahead, sir.

Thanks, Christy, and good morning. And thank you all for joining International Paper's Fourth Quarter and Full Year Earnings Conference Call. Our key speakers this morning are John Faraci, Chairman and Chief Executive Officer; and Carol Roberts, Senior Vice President and Chief Financial Officer. During the call, we will make forward-looking statements that are subject to risks and uncertainties, which are outlined on Slide 2 of the presentation. We will also present certain non-U.S. GAAP financial information. A reconciliation of those figures to U.S. GAAP financial measures are available on our website. As always, our website will also contain copies of our fourth quarter 2011 earnings press release and today's presentation slides. I will now turn the call over to John Faraci. John V. Faraci: Thanks, Glenn, and good morning, everybody or good afternoon depending where you're calling in from. Over the next 20 to 30 minutes, Carol Roberts and I will review our full year and fourth quarter 2011 results and the performance of our individual businesses. We've also got Mary Laschinger, Senior Vice President and President of xpedx, here to give you all an update on the progress we're making in transforming our distribution business. And I'm going to start just by talking about the full year and set that up for Carol to go into the quarter. We had stronger full year results for International Paper. Actually, it was the best financial results in almost 2 decades. Margin expansion where we needed it; price realization stayed with us throughout the year; great operations and cost management, outstanding results from Ilim, which we'll talk about; and excellent cash generation. Looking at International Paper in North America and around the world. This is now on Slide 2, volumes in North America were down slightly, but sales revenue was up slightly, reflecting the fact we've got price flow through and strong margin expansion in our North American businesses of 200 basis points. Outside the U.S., we improved earnings, but it was in a different way. Margins, which were high, stayed high, but we've got good, strong volume growth up 6%, and as a result of that a plus in sales price improvement. Sales were up 17% outside North America, including the Ilim Joint Venture. So we're going to the next slide, looking at all for 2011. Sales moved up from $25 billion to $26 billion, strong improvement in EBIT from $1.8 to $2.3. EPS up by close to 50%. Cash from operations, again, very strong, solid free cash flow even though capital spending was up year-over-year. Year-end debt up some because of the pre-funding or pre-borrowing for the Temple acquisition, and very strong cash balance, even when you take out the debt that we put on the balance sheet for Temple, and we funded the pension plan as well. Yes, this next slide, I think, just shows the journey that International Paper has been on. The transformation plan is over. It was all aimed at putting International Paper in a position. From a portfolio standpoint, we've earned good [ph] returns and the cost to capital zone. And with the exception of 2009, which is now in the rearview mirror, the worst recession we had in 80 years, we've steadily been on that margin in 2011, which is still a challenging economic environment, we got to that 80% return. So we feel very good about the year, feel we had a strong quarter to end a very strong year. I'll come back at the end and talk about how we're looking in 2012. So Carol? Carol L. Roberts: Thanks, John, and good morning, everybody. Let's take a look at the financial bridge from 2010 to 2011, where IP earned an incremental $1.20 per share from continuing operations and before special items. While volume in our consolidated businesses was down slightly, I think it's worth noting that our Ilim JV provided $0.21 of additional contribution, mainly driven by year-over-year revenue growth of 26%. I think the other main story that John mentioned in 2011 was the significant margin expansion driven by year-over-year price realization and mixed improvements, as well as excellent operations and cost management, and both of these more than offset the higher input cost of $0.61 a share. In summary, as John stated earlier, this result marks the best year that IP's had financially in almost 2 decades. So moving to the next slide to the fourth quarter. Earnings per share were $0.66. These results were in line with our expectations for the quarter as we experienced what we would see as the normal seasonal weakness in North America, and we did see some downward price pressure in market hold and exports from North America in both paper and packaging. Additionally, we had significant negative currency impact at our Ilim JV in this period, which did reduce their earnings in the quarter. These headwinds were somewhat offset by our global balance. We saw seasonally stronger demand in paper sales in Brazil, Russia and Eastern Europe, as well as stronger box volumes and improved margins in Europe. And we did see some input costs relief in fiber and energy. I think it's worth noting that as we exited the quarter, our inventory did remain in balance as we continued to balance our supply with our customers' demands. So taking a quick look at the fourth quarter financial snapshot that you can see on Slide 10. During the quarter, we did generate greater EBITDA year-over-year, and we did improve our margins by 100 basis points despite the headwinds that we just talked about. Importantly, the resulting free cash flow remained strong at $328 million. Going to the fourth quarter to third quarter slide, looking at the bridge from the third quarter, the seasonal headwinds on costs and volumes, you can see them there, and you can also see the impact of the lower prices for pulp and exports. And it did offset the positive on input costs. And also on this bridge, you can see the Ilim earnings impact, which was down $0.12 a share due to the currency impact that I've already mentioned. Let's just take a moment on the next slide and take a look at global input costs. As you can see on Slide 12, input costs in the quarter did provide some relief primarily at fiber, and that was primarily OCC; a little bit of energy. And so this was down and combined for a $42 million improvement in earnings from the third quarter. If I take you to Slide 13, I'd like to comment on our North American business operating rates. In North America, our mills ran at 91% operating rate in the quarter and 94% for the full year. And as you can see on this slide, our Packaging businesses did take nearly 240,000 tons of downtime in the quarter, and we did this quite simply to balance our supply with our customers' demand. As a result of these actions, our inventories are in good shape entering the new year. I will note that in containerboard, we do have a lot of outages coming up in the first and second quarter and then seasonally strong ivy [ph] season So we will plan to build some inventory early in the quarter to get through the second quarter. Moving to Slide 14, let's touch on Industrial Packaging. Industrial Packaging operating earnings in the fourth quarter of '11 were $316 million, compared to $301 million for the third quarter of '11. The current quarter's earnings were favorably impacted by very strong mill operations. We did talk about the lower recycled fiber costs in the U.S, and we do have a seasonally strong box volume in Europe and improved margins in Europe. Partially offsetting these positive variances were higher maintenance outages. We did see lower export prices in containerboard, and we do have just a seasonally slower U.S. box business in the fourth quarter. If I take you to the chart on margins. This puts our Industrial Packaging results in perspective. Slide 15 shows our North American EBITDA returns for both '10 and '11 relative to the competition, and it's worth noting that in 2011, our EBITDA margins were above 20%, and importantly, 250 basis points better than last year and 350 basis points better than our next competitor. Just a quick comment regarding the Temple-Inland acquisition. As we announced last Friday, we have agreed to an extension until February 13th to provide time for the parties to complete the binding documentation to resolve the DOJ concerns with respect to the transaction. We anticipate entering into the definitive agreement on terms acceptable to all parties within this timeframe. We continue to work internally on our integration plans, and importantly over the last several weeks, our teams did get a chance to visit all the mills and, if I remember, quite energized with what we saw in terms of assets and potential synergies. And we remain very confident in our synergy target of $300 million. Moving to Consumer Packaging on Slide 17. Operating profits were $62 million in the fourth quarter of '11 compared with $103 million in the third quarter of '11. Increased maintenance outages, seasonally weaker U.S. in export demand for coated paperboard and lower pricing in China and Europe nearly partially offset by the lower input costs in the quarter. Relative to our competition, if you look at the total year in North America, the business continues to outperform in this space, improving EBITDA margins by 440 basis points greater than our next large competitor in 2011 versus '10. And logically, not surprisingly, this would amount to a record year for our North American Coated Paperboard business. And on Slide 19, we show that we nearly doubled our earnings over 2010 and achieved an almost 11% return on investment. Moving to Page 20, there's so many good things going on in our Coated Paperboard, business but an area that's worth mentioning is a portion of the success can be contributed to our supply chain initiative, which really are enabled by our associated enterprise-wide operating model. Things like schedule integrity improvements, make-to-stock functionality have enabled the business to reduce inventories by greater than 5% while increasing terms to close to 9 times. So this is a good outcome in a complex business which shows the results we can get. Another great success in 2010 was our Foodservice business. As we discussed last quarter, this business closed an outstanding year, finishing above pre-recession volume level and increasing earnings by nearly 20%. The key for this business has really been about aligning our sales with growing and winning customers as we introduce innovative new products. In 2012, our new Hold&Go insulated hot cup product line is going to roll out with a number of market leaders in the quick service and convenience store segments, driving further profitable growth and mix improvement. Moving onto Asia. Just a quick update on our capital expansion in our Sun JV. Construction is underway on our new coated paperboard machine, PM26. This project remains on schedule for our fourth quarter 2012 startup. And importantly it brings on an incremental 550,000 tons of new annual capacity of very high-quality coated paperboard. Moving to Printing Papers on Slide 23, operating earnings were $190 million in the fourth quarter of '11 versus the $238 million that we saw in the third quarter of '11. Higher manufacturing operating costs, really primarily associated with the unfavorable seasonal energy used, increased maintenance outage expense and lower export and pulp prices in the quarter more than offset lower input costs and seasonally stronger papers sales in Brazil, Russia and Eastern Europe. So the way I would talk about Printing Papers is we had strong results in Russia, Europe and Brazil. And in North America, we had a solid quarter. Third quarter was outstanding, but we did see some of these headwinds in the higher maintenance expenses. If you look at North America Printing Papers for the full year, you can see that we finished the year with a record return on investment of nearly 13% and improved earnings over $45 million. Moving on to Slide 25, an exciting piece of work that we want to mention is Franklin, Virginia, where work continues on our fluff pulp repurposing project, with very exciting crews, opened the gates for the first time in nearly 2 years as wood began to flow and to arrive in preparation for our planned midyear startup. IP is currently -- we're the third largest global supplier of fluff pulp, and this investment is going to give us greater participation in a market that's growing 4% plus. The mill will be capable of producing 270,000 tons -- metric tons of high-quality fluff pulp for our customers across the globe. Moving to Page 26. Let me touch on IP India. As you know, in India integration is underway and best practice transfer is underway post our closing of Andhra Paper last quarter. And although it's still very early, we can clearly see that we've got a great opportunity for incremental opportunities to expand production, leveraging our global expertise in uncoated free sheet to take part in what's our very fast growing market, with uncoated free sheet growth of 7% to 15% in India. Andhra Paper noteworthy increased our revenue per ton by 12% in 2011 and operated at EBITDA margins of greater than 20%. First quarter had some noise in it, but going forward, I think the first quarter and beyond will give us a better indication of the progress and the success of Andhra Paper. So let me touch on xpedx. Xpedx had a strong fourth quarter, with operating earnings of $33 million compared with $27 million in the third quarter of '11. The fourth quarter costs did decrease primarily associated with the transformation initiatives and more than offset lower printing paper volumes due to fewer shipping days. And at this point, I'd like to turn it over to my colleague Mary Laschinger, Senior Vice President and President of xpedx to share more news about the progress we're making in transforming our distribution business. Mary A. Laschinger: Thank you, Carol. Good morning everyone. Last April, we shared with you that xpedx had just finished a strategic assessment in our business, and that we would launch that work in 2011. And today, I'm going to provide an update on that work and the outlook for the business. But first, I wanted to take an opportunity because I believe it's important to provide some background which helps explain the opportunity available to us in the distribution business. On Page 28, you can see that xpedx had many acquisitions over the years, and during that time we continued to progress and had improved earnings through 2008. But it's only just been recently that we've actually achieved a single operating system to take advantage of those capabilities. On the next page, you can see that we had improvement up until 2008. 2009 not only brought a general economic decline, but it also was the beginning of a structural demand decline in print, especially in the coated grades, and that still has not recovered to pre-recession level. So 2010, we took the time to assess our options to reposition the business. And 2011 was all about building capabilities on how to win and making choices on where to win. And we believe through centralizing strategies with local execution, we can deliver more than $100 million of improvement over the next few years, taking the EBIT to over $200 million. The next few slides that I'm going to cover further explain the 3 key levers of buy, handle and sell, and how the benefits are achieved with some specific examples to show this success. And I'll finish to share with you the impact on our second half and fourth quarters specifically and the long-term outlook. The buy part of this business is all about building a robust capability around strategic sourcing and replenishment. We are thoroughly assessing our suppliers' capabilities. Were matching those to our customer and product needs and then making some tough choices. We're also currently in the process of upgrading our technology around our replenishment capabilities, which will improve service levels and provide robust inventory management capabilities. On the left-hand side of this chart I've shared with you, where we've highlighted a category within each of our focus segment of print, packaging and facility solutions, and the outcome of our first phase of work. You can see we have fewer suppliers and fewer SKUs, all of this resulting in better service to our customers, with improved product availability, better total value at a lower total cost to the enterprise. This first phase of work is just now being implemented in the 1st and 2nd quarter of 2012. The second key lever in our business, shown on Page 31, is all about optimizing our supply chain. It's matching our warehouse network to our customer demand and the service levels required in each segment. We are also installing warehouse and fleet management systems to optimize our national footprint. All of this, resulting in better service, higher order fuel rates and lower fixed and variable costs. The chart on the left shows our progress and our plan on revenue per square foot throughout our warehouse network, which is a productivity measure, and you can see we are making significant improvement in productivity. The example on the right is the success story in the repositioning of our Salt Lake City operation, where we took 4 locations, 3 brands, consolidated into one, and you can see the outstanding results. Again, this handle initiative is all about fewer, larger facilities with best-in-class capabilities, leading to better service and lower cost. The last key driver in our business is about making choices on where to focus and investing in growth. As you can see from the top part of this grid, we have opportunities in this business to grow, and we are investing in those segments. For example, in our Packaging business, we have invested in packaging design centers to support growth in specialty packaging, and we coupled that with a commodity product offering. You can see our results in 2011 have been significant, with great improvement year-over-year. But we also recognize that the commercial print segment is in decline, but we have a very large position with many strengths to win, and we're going to continue to support that segment as a core part of our business. Lastly, we did make some tough choices in 2011 and we are in the process of exiting some markets or segments due to either market dynamics or our assessment of our ability to win. Page 33, the last picture shows our progress in 2011 and the long-term outlook. As I've stated earlier, 2011 was all about building a plan and capabilities, and we began executing in late 2011 with some impact in the fourth quarter. We do have seasonality in this business, but our fourth quarter results were significantly better than prior years. This is a multiyear program, and we're about 3 to 6 months into the execution. But we're very confident that this business has significant potential to add value to International Paper. With that, I'm going to turn it back to Carol. Carol L. Roberts: Thanks, Mary. Appreciate it. So one final update before I move on to the outlook, and then John provides the wrap up. I wanted to comment on our progress at the Ilim joint venture, specifically our Bratsk and Koryazhma mills, and those projects continue on schedule. As you can see from these pictures on Slide 24, we essentially have passed the halfway mark and remain on plan for startup in late 2012. And just to remind you of the scope of those projects, in the Bratsk project, we'll bring on 500,000 tons of bleached soft wood pulp, leveraging our low cost export position to China. And our new paper machine in Koryazhma will add 155,000 tons of uncoated free sheet, which will support our domestic market growth in Russia. So very exciting and on track and on plan. So let me take us to Slide 35 and move in to the summary of the fourth quarter and then to the outlook. As we said, we had a solid fourth quarter despite the seasonally weaker demand environment in North America that we normally experience in this timeframe. All things considered, we continue to feel more positive about the demand trend in North America, about our ability to expand margins globally and to grow our business in the emerging markets that we've invested in. So let me take you through a detailed look of our first quarter outlook on Slide 36. Looking ahead, the first quarter is always a seasonally slower period. With that said, we do expect modest increases in volume in North America versus the fourth quarter, primarily in Packaging -- that's primarily due to 4 more box shipping days. But we do expect an increase in exports in our paper business. Through January, good news is that U.S. box demand held up to what I would consider quite nicely. Although we are working with a fairly weak year-over-year comp, our box demand is up nearly 4% versus January of last year. Moving on to pricing. The continued pass-through of previously negotiated export price reductions really in packaging, containerboard and in paper and pulp will materially impact realizations in the first quarter. And additionally in Brazil, seasonally weaker domestic demand -- that will result in us shipping a greater percentage of lower-priced paper exports, which will be a drag on earnings. As to inputs, we see slightly higher costs in North America, primarily wood, energy and chemical, which will largely offset the benefit of some lower outage expense. And it's fairly new news today, but OCC just came out today, and it's up anywhere from $10 to $15 for February. Xpedx earnings will decrease as the quarter is just seasonally a slower shipping period for the distribution business. On a positive note contribution from our Ilim joint venture will improve and that's really based largely on the absence of the negative currency impact that we experienced in the fourth quarter. I would point out that our run rate earnings coming out of this currency issue will reflect about the half of the peak level that will be saw earlier in 2011, which is a result of the full impact of the pulp price erosion for the period. And lastly, I'd like to point out that manufacturing operations and all other costs associated with the businesses will be impacted in the quarter versus the fourth quarter. Essentially, there's 4 major buckets, each worth between $10 million to $25 million of incremental expense in the quarter, and let me take you through those. First we do expect one-time cost in the first quarter associated with the pending startups later this year at both Franklin and our Sun joint venture. The second, we talked about it, but there are seasonally higher costs related to the consumption of energy, fuel, primarily due to the colder weather, that will create some headwind for our manufacturing operations. Third, one-time annual true-ups that we experienced in the fourth quarter, largely related to company-paid benefits. We do not expect that to repeat in the first quarter. And finally, the company's favorable experience related to last year's inventory reevaluations will not occur -- will not reoccur in the first quarter, impacting first quarter earnings. So at this point, what I would like to do is turn the call back to you, John. John V. Faraci: Good, Carol, thanks. Carol just covered the outlook. So let me talk more about just extending the outlook beyond the first quarter and the full year. Looking at the U.S. economy, I think recovering but far for from fully recovered. The economic growth, we've got some growth, but it's still a lot slower than we'd all like to see. So we see modest demand growth in IP business segments, mostly continuing to be driven by the growth in emerging markets. None of us have a great crystal ball in input costs, but as far as we can see -- with what we can see, I'd say our view on input costs is more or less stable. There's certainly is moderate inflation in the U.S. economy. Inventories are in good shape. We're going to get the realization of high-return cost reduction projects, most of that in the second half of the year, and I'll talk about those in a minute. The major earnings runway drivers that kind of ramp up in the second half of the year, the most significant one being Temple-related synergies. We are going to have some higher pension costs during the year and interest in tax expenses, which are covered in the appendix. So let me go and just talk about capital for a minute. We discussed -- if you look at this chart, it shows our capital spending over the last 7 or 8 years and then the 2008 to '12 average, which is how we think about capital over a cycle. We're going to spend more money in 2012. The $1.3 billion before Temple, probably close to $1.5 billion with Temple, fairly close to depreciation, whether it be big capital spending year. The 2008 to '12, capital spending -- cycle spending will be below depreciation -- well below depreciation, as we said, about 75% over that period. So we've got an impressive backlog of high-return projects, and we're going to begin to fund those. We'll start funding in 2011 aggressively, we're going to continue to fund those aggressively in 2012. And if you go to the next slide, what you see are these projects, and they really fall into 4 categories, the biggest one being energy consumption. No matter where we are, whether it's Russia, Brazil or the U.S., reducing energy consumption are really high payback return projects. As you can see, we're going to spend close to $190 million this year on cost reduction projects. Turning to Slide 42, the major earnings run rate drivers we see as we look out not only in 2012 but beyond are, first, the Temple acquisition. As Carol said, we're very confident about the $300 million of synergies, more confident now that we've been in the Temple facilities. That's going to start to impact us right away after closing, which we think is not too far away. The Franklin soft pulp conversion is also going to start to impact the company positively in the second half of the year and in 2013. You heard Mary talk about the xpedx transformation, which is starting to produce results, and those will accelerate as we get to the back half of 2012. The capital projects that are coming on in the markets where we need capacity, Russia and China, are going to be coming on stream at the end of the year and really start to impact International Paper in a positive way as we move into 2013. And finally, the APPM acquisition, which we'll talk to you more about probably at the end of the first quarter on our Investor Day, we think is a terrific opportunity for International Paper to build a platform that will give us earnings, sales and expansion over the next 5 years. So summing up our priorities, as we think about International Paper, before we kind of take your questions, remain very consistent. We're going to continue to grow strong, sustainable free cash flow, be very disciplined in how we spend money to do that. Our objectives are to extend our margins and earnings in all of our businesses, achieving cycle average of returns above the cost of capital, maintain a strong balance sheet and continue to use that free cash flow in a balanced way to fund good cost reduction projects, delivering on our strategic initiatives, paying down the debt associated with Temple to maintain a strong balance sheet. And finally, but importantly, increasing the dividend over time as sustainable free cash flow permits. So with that, I think I will turn it back over to all of you to ask your questions.

[Operator Instructions] And your first question comes from the line of George Staphos of Merrill Lynch. George L. Staphos - BofA Merrill Lynch, Research Division: I guess, first question on exports in containerboard. I think earlier in the slide deck, you show about $6 million of price reduction for the Industrial Packaging business. Should we assume that most of that was related to exports? And can you comment at all what type of trend you're seeing more recently terms of export pricing in containerboard. John V. Faraci: George, so most of that was export related and I'll let Mark Sutton, who's here, who runs the Industrial Packaging business now just comment on what we see in the marketplace today.

It was all export. In the fourth quarter, we lost about $28 a ton in export, and we've seen that continues a little bit more into January. But we believe it's pretty much hitting a bottom and firming up. There are even a couple of cases with some export markets, where we've actually -- we see price increases as we go through January. So I think we hopefully are seeing the bottom of that. George L. Staphos - BofA Merrill Lynch, Research Division: Mark, would it be fair to say that you're seeing some pickup in South American export pricing? Or is that too simplistic?

Probably too simplistic. We're still -- we're still working through our customer activity in South America, but the one area we have seen firming in somewhat of a reversal is more in our Mediterranean basin region. George L. Staphos - BofA Merrill Lynch, Research Division: Okay. Two last ones, and I'll turn it over. If we think about the bleached board market, certainly it would appear from the data that you shared, you're comfortable with your performance versus the market. It is a smaller market, though, say versus containerboard. And you are seeing capacity coming on not necessarily in North America, obviously, but around the world. The decline that we saw in the fourth quarter, how comfortable are you that's really more seasonal and/or cyclical and not the beginning of a more structural issue you need to deal with within coated paperboard. John V. Faraci: Tom, you want to comment on that? Tom Kadien runs our Consumer Packaging business, which includes coated paperboard.

Yes, we saw the industry backlogs here in North America start to fall in October, and I would say they kind of bounced along the bottom in October and November. But we've actually seen some improvements in backlog since then, and I'd say for the last 3 weeks we felt very good about the demand. So I think from a North American perspective, the demand, I'll say, softness is behind us and we feel much better about the first quarter. I guess, from a structural standpoint, I think I don't think we have a structural issue. I think we just had an inventory correction and some slowdown in the segments that we participate in, but it seems like we're headed in the right direction this year. John V. Faraci: We export about 20% of what we make in Coated Paperboard, and we're very targeted and selective about putting that volume to customers that need an SDS product. So while, yes, there is capacity being added around the world, we think we got the right customer base in the export markets to support that kind of position going forward. George L. Staphos - BofA Merrill Lynch, Research Division: Carol, last question. On the appendix, you note the tax rate guidance is trending higher interest expense and corporate expenses well versus 2011. Can you give us kind of a quick overview why those are trending higher? Carol L. Roberts: Yes, the tax rate simply just geographic mix post Temple and then we're just going to have more of a U.S-based business-based relative to the Corporate. And I know Glenn can take you guys through more detail, but that's simply pension expense is going to be high. The biggest driver is pension expense is going to be higher. And of course, the net interest expense is all around our Temple-Inland work. But Glenn can take you through any other details you might need on that. John V. Faraci: And remember that pension expense is not cash.

Your next question comes from Mark Wilde of Deutsche Bank. Mark Wilde - Deutsche Bank AG, Research Division: I wondered if we could start out. I noticed in Containerboard, really you took a lot of downtime -- market downtime in the fourth quarter. And I wondered if you can give us a little color where you're taking it and whether that's continuing in January, or whether you're running a little fuller as you try to build those inventories that Carol talked about?

Mark, this is Mark Sutton. On the market downtime, as you know, we run to our customer base, the needs of our customer base, and we took what we took in the fourth quarter simply to match what our customer demands were. And really, we tend to take it based on our flexible system, so we take the downtime in the most cost-effective way, as one of the benefits of having a system as flexible as ours. So we took some of that downtime in some of the recycled mills. And we are running stronger in the beginning of this year so far. Mark Wilde - Deutsche Bank AG, Research Division: Okay. And Mark, you mentioned in the release a couple of times the improved performance in European container. Is that simply a result of European containerboard prices having fallen so much in the fourth quarter? John V. Faraci: Yes what that is, Mark, is you've got board prices fell, and with the customer base we've had, we've gotten some margin expansion because prices haven't. Mark Wilde - Deutsche Bank AG, Research Division: Okay. And then just, John, just a couple of questions about some of these offshore operations. First of all, it seems like there's a lot of restructuring going on in the European containerboard and corrugated business. And I wondered if we could get your thoughts on your business in Europe and your strategy. John V. Faraci: Well, we've got a great corrugated business in Southern Europe, North Africa and Turkey. It's focused on fruit and vegetables. It's not insulated from what's going on in Spain and Italy. We have an industrial business there. It's not integrated in the sense that we buy all our containerboard. A lot of the virgin linerboard that we need for fruit and vegetables comes from International Paper, so to that degree, think of it as an extension of our integration here in North America. There is some consolidation, as you pointed out, but I think is -- we'll see how that plays out. Our business over there is a $1 billion business. And we like it; we'd like to grow it if the right opportunity arises. But we're not focused on growing our business in Western Europe, either in packaging or in paper. Our tilt is more to the east, in Russia. Mark Wilde - Deutsche Bank AG, Research Division: Okay. And then down in China, in the Sun JV, the EBIT margins there continue to be quite low despite you guys having built a lot of new modern equipment over there. I wondered if you could just talk about the sort of the year outlook for where margin should trend in China over time. And also talk about how your funding this latest machine within the JV. John V. Faraci: Well, let me just comment on margins, and then Tom or Carol can talk about how we're funding it. I mean, the China business model is different than for just about every business we're in different in the rest of the world. The margins are lower because it's the most competitive market we're in anywhere, but the capital turnover is a lot higher. we're building capacity over there for, in some cases, less than 50% of what it would cost in Brazil or Europe or North America. We've got a great example of that. We built a paper machine in Brazil, the same time we built a coated board machine in China, and we saw the difference in the capital cost. And that's what that means is you can make good returns with lower margins. And fortunately that's the case because China is just so competitive. These markets are big and growing that margins are lower. Mark Wilde - Deutsche Bank AG, Research Division: And would you expect those margins to improve from where they're at right now, about 4%? John V. Faraci: The margins are better, I think, in the Bleached Board business, with 4%, maybe an aggregate. Therefore, I don't see anything changing in China to make China less competitive than it is. Every time I go there, I see more competitors.

Mark, this is Tom Kadien. What we see is coated paperboard prices in China do tend to follow pulp because there's a fair amount of nonintegrated capacity over there. Margins came under pressure in the second half of last year for that reason, as well as a lot of extra capacity coming online. So I would say, we're kind of -- we're probably a little bit past the bottom on the margin side at the Sun JV. And for the full year, we had a very good year, a double-digit ROI on the investment. And to John's point about the capital turns, they're over 3 on the JV. So the margins don't tell the whole story. John V. Faraci: That's our new capital, so you'll be looking at capital turnover probably 0.8 here in North America. From a funding standpoint, we own 55% of that joint venture, so our partner contributed real estate and infrastructure, and we contributed cash. And we're generating cash in that business up until a point in time we had to put some -- and put the capital out to fund the project, which is roughly..

It's under $300 million. John V. Faraci: $300 million.

For the whole project. And then the JV borrows the majority of the funds.

Your next question comes from Phil Gresh of JPMorgan. Phil M. Gresh - JP Morgan Chase & Co, Research Division: In terms of containerboard, it sounds like you are running a bit more full here in the first quarter, but if I add it up last year, there's about 380,000 tons of market-related downtime. So I guess, I'm just kind of curious how you're thinking about that flex capacity at this stage. Obviously it's upside as markets recover, but is there a point where you consider that as more of the cost-reduction opportunity, considering you have capacity creep every year through your own productivity?

So Phil, this is Mark. I think the way we think about it is this system is pretty large at International Paper, and last year as you quoted, it was 380,000 tons. When you look at the flexibility of our system and the size of it and the constant work we do to select customers across the globe, especially for the kraft linerboard, we view that as something we can do at an ongoing way. And demand as you said in North America would take a big hit out of that. But we already tried to optimize how we take the downtime, and actually, we've gotten pretty good at it in terms of doing it in the most cost-effective way. John V. Faraci: Phil, let me just add to that. If you think about our channel access, our market access, we've got a big position in export markets. That's a 4 million-ton market. It's growing faster than North American box consumption. And that's where we're targeting our virgin linerboard. And we're more than willing to take temporary downtime because we think the U.S. market is growing over time. We are going to get back -- box demand will get back to pre-recession levels. And as Mark said, with the flexible system we have, more flexible system now, the cost of taking temporary downtime as opposed to kind of long-term downtime -- or structural downtime, is a cost that is quite low. So I think we're well advantaged to having this multiple market strategy to be able to manage through times when there's a bit of excess capacity. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Okay. And then my second question is over the past 2 quarters, the domestic demand on containerboard has held up a lot better than the domestic demand for bleached board. And as the industry leader in both, I was wondering if you could share any observations as to why that might be perhaps by certain and markets or otherwise. John V. Faraci: We've been asking ourselves that question, and we frankly we don't have a real good answer. In some inventory destocking, we think, in the bleached board business, but yet, there's no question. If you look at corrugated shipments, you look at bleached board shipments, you'd say the 2 in the fourth quarter didn't really move in the same direction. As Tom said, we're feeling more optimistic about the paperboard backlogs and shipments as we go into 2012. Carol L. Roberts: The other observation, Phil, is if you take it over a longer period of time, they start to look closer. And the Containerboard business is just a much shorter-cycle business. So you see the changes in the supply chain. It reacts much faster because you can't store corrugated. And in the Coated Paperboard business as any of these markets, the cycle time and the supply chain is just longer.

Your next question comes from Gail Glazerman of UBS. Gail S. Glazerman - UBS Investment Bank, Research Division: Carol, I apologize if you quantified these numbers, but you had mentioned something about those true-ups in inventory adjustments that seem to benefit the fourth quarter. I was wondering if you could quantify them if you haven't. Carol L. Roberts: Gail, this is Carol. As I stated, there's kind of buckets of those, and some of those buckets were in the $10 million to $25 million of expense range. So that kind of gives you a range. And what I'd do I'd say that we could follow up just with Glenn to see if there's any more detail in that. But I think that kind of gives you the directionality of those in the magnitude that you need. Gail S. Glazerman - UBS Investment Bank, Research Division: Okay. And can you just remind us what your policy is on natural gas hedging and to what extent the recent declines may or may not flow through? John V. Faraci: It's been pretty good shape to see the steady downdraft of natural gas hit the bottom line because, for all intents and purposes, we're just about 100% spot now. But we're hedging in the past, and we've let those hedges run off, Gail. Gail S. Glazerman - UBS Investment Bank, Research Division: Okay. And I think a new competitor had a favorable ruling from the IRS in terms of fuel tax credits. And I'm just wondering if you could give us an update if there's any kind of incremental potential benefit that could come to you? Carol L. Roberts: Yes, Gail, this is Carol. We also filed our amended return for the summer, and we booked a reserve against that. So the ball is kind of in the IRS court, and we're waiting on their determination. So in the meantime, we just wait and see, and I think that was -- we've disclosed that. I think it was in the $660 million range. Gail S. Glazerman - UBS Investment Bank, Research Division: Okay. And just one last question. I guess you're seeing OCC move up a little bit, and I'm just wondering, is that a driver -- is that being driven by, I guess, pickup in China? And maybe some insights into what you're seeing in your Chinese box business and what that might mean for OCC moving forward?

This is Mark. That's definitely a part of it, and we expected to see that because what happened in the drop off really was a lack of Chinese demand. So we are seeing that pickup and seeing the expected rise in OCC cost. John V. Faraci: Tom, do you want to comment on how you see box demand in China?

Yes, we saw box demand slow down in the second half of the year, kind of mirroring everything you read about economic activity over there. On the other -- and what we didn't see, what we normally see is a bit of a buildup before Chinese New Year in inventories, and folks did not do that over in China. Now we're out of Chinese New Year now, and I think we expected it will start to pick back up again. But it was slower in the second half, more like a plus 5% then plus 10% in the box market that we have been experiencing. John V. Faraci: Yes. We still think that China is going to grow at 5-plus percent in terms of box consumption, and it's a 40 million ton market. So those are big numbers, even though it's not the kind of numbers we're looking at maybe 2 years ago.

Your next question is coming from Chip Dillon of Vertical Research. Chip A. Dillon - Vertical Research Partners Inc.: One thing that we're noticing is that depreciation and amortization seems to be coming down, which is obviously a benefit to earnings. I noticed in the quarters year-over-year, it was down $40 million, like 10%, and you're guiding to 1.2x Temple versus 1.5x in 2010. Could you give us give us a little color as to what's causing that? I guess, maybe some runoff of previous acquisition, accelerated depreciation? And sort of how we could expect that to progress with or without on a post-Temple or a pre-Temple basis? Carol L. Roberts: Well, Chip, this is Carol. I think what you're seeing is you're seeing that depreciation is coming off from warehouse or where that's coming down. Depreciation coming down from there. You'll also see the result of the capital spending, and we've been spending less in the last few years. So I think it works itself out over time. But I don't think there's anything more extraordinary or dramatic from that, than that. John V. Faraci: And Chip, we'll have to go through kind of the whole asset allocation issue with Temple, which probably is going to result in step up of assets, which will lead to higher depreciation again. But if you think about our capital spending, our target had been 75% depreciation over the last cycle and we're not going to be over depreciation in this coming cycle. But we'll share a bit more of that with you when we get to Investor Day. Chip A. Dillon - Vertical Research Partners Inc.: Got you. And sort of on that score, we are seeing sort of above your average level this year, as you've guided us. And we have another player out there that just recently made a big acquisition that sort of stepped up the CapEx for a year after that closed. It seems, though, that your situation is a little different. Should we expect sort of post-Temple for your CapEx to still sort of be kind of at a peak-ish level in '12 and '13 and then likely come down a little bit, all things being equal? John V. Faraci: Well, in '12, we got these projects we're talking about, the Franklin project, we've got the Sun project, that are expansion projects. Plus we have $200 million of cost production projects, which don't have any volume associated with them. You'll have to see how the Boiler MACT regulations get played out, but that's the wave of capital that is going to hit the industry that we haven't had in the last 5 or 6 years. And we'll quantify that for you and share with you on Investor Day. At that point in time, we'll know more. Chip A. Dillon - Vertical Research Partners Inc.: Got you. And one last one. With the increasing corporate expense of about $75 million, is most of that tied to the pension increase? Or I'll ask it differently: is any of the pension increase going to be allocated to the segments? Carol L. Roberts: Most of that is the pension increase, Chip. Chip A. Dillon - Vertical Research Partners Inc.: But some of the pension increase will also show up in the segments, is that fair? Carol L. Roberts: No, this particular part of the expense, we keep on that corporate line.

Your next question comes from Al Kabili of Credit Suisse. Albert T. Kabili - Crédit Suisse AG, Research Division: I've been bounced around calls, so I apologize if some of these have been addressed. But I guess, first is on bleached capacity in China, we're seeing a meaningful ramp, I guess, there. One, is how are you feeling about the returns on the expansion on the Sun JV. And then two, if you could talk about maybe any risk you see or addressing the risk of some of that coming into North America.

It's Tom Kadien. Relative to the returns, our business at the Sun JV really plays in the higher-end, higher-priced, more technical grades, around food and beverage and antiseptic. And I think where we're at, where we've positioned ourselves purposely because of the excess capacity, is to move as much of our mix up there where others typically don't play. So 60% of our mix at the JV is up at the higher end. And mostly, I'll say insulated from a lot of that capacity that's coming in folding boxboard. Now that said, there's still kind of a second effect, the pressure. So we saw some of that in the second half of last year, but I think long term, we still look at the investment on PM26 as being a double-digit kind of return, and we have to work through some of this excess capacity in coated board. But the market is still growing 8% to 10% over there, and that will chew up a bunch of that pretty quickly. Relative to the impact on the U.S., I think it's relatively minor. We see some of it coming in, and I'll say in sheet form for commercial printing applications but not a lot of tons, and it shouldn't impact our business much here in the U.S. at all. I'm talking about the excess in China capacity. Albert T. Kabili - Crédit Suisse AG, Research Division: Okay. And then if I could ask a question for Carol. I don't know if you could quantify the pension expense is incremental pension expense this year and also what that means. How should we be thinking about corporate expense this year? Carol L. Roberts: Yes, Al. And just to clarify that, what we keep at corporate is the investment performance, and the service cost, which is much more of a flatter number, stays out of the business. And I think if you look in the appendix, I think on Page 43, there is some data or, 44, and I think the majority of the increase in the corporate item is in that pension expense, which is investment performance related. Albert T. Kabili - Crédit Suisse AG, Research Division: Okay. And for 2012, how should we be thinking about corporate expense? Carol L. Roberts: On that chart, it's $220 million. Albert T. Kabili - Crédit Suisse AG, Research Division: $220 million. Okay. Carol L. Roberts: All that stuff is in the appendix. So there's even some more detail. And if you have any questions, of course, you can follow up with us. Albert T. Kabili - Crédit Suisse AG, Research Division: Okay. I apologize, I missed it. Carol L. Roberts: That's okay. No problem, Al. Albert T. Kabili - Crédit Suisse AG, Research Division: Okay. And then I guess, the final question, maybe for John. Again, I apologize if you've addressed this already. But the inventory levels and industry inventory levels in the U.S. on containerboard, how are you feeling about those and your own inventory? John V. Faraci: I feel good about them. But I let Mark Sutton talk how he sees from his perspectives since he's running the business.

Yes, I think I would agree with John's comment. The inventory levels are in the normal range, both measured and absolute, in the number of weeks. What rise we've seen has been pretty clearly discussed as bills for outages and specific needs. So I think we feel pretty good about the overall level. Our inventories were flat in the fourth quarter. And as Carol mentioned, we do have some maintenance outages in the first 2 quarters, obviously, and we will have some bill to deal with that. And we're expecting, based on the way the weather has played out, a stronger agricultural fees, and so we want to be prepared for that to be successful there even though we have some maintenance outages. Albert T. Kabili - Crédit Suisse AG, Research Division: Your next question comes from Anthony Pettinari of Citi. Anthony Pettinari - Citigroup Inc, Research Division: Looking at 2011. I guess U.S. uncoated free sheet volumes were down 3% industry-wide. As you look at 2012, is there any reason to think that those volumes could be materially better or worse than 2011? And just a follow-up on the quarter, it seems like you're free sheet volumes were flat year-over-year, which I think is a little bit better than the industry. Would you give a little color there as well?

Anthony, it's Tim. Most of the third-party forecasts that I've seen for this year are showing about a 3% decline forecasted. We'll have to see what impact the election and some of the other 2012 events, how they impact the market. But we're not seeing anything dramatically different for 2012 than we saw in 2011. John V. Faraci: One of the things is it's structural. It won't last forever, but as unemployment comes down, one of the biggest drivers of cut-size consumption, which is the biggest segment of uncoated free sheet is white-collar employment. And that's still then strictly high. And if that comes down, you would expect to see some offset to the structural decline in uncoated free sheet be offset a bit. Albert T. Kabili - Crédit Suisse AG, Research Division: Okay. That's helpful. And then on the containerboard side, you've had competitors that have announced or completed large projects that are going to try to move them down the cost curve. And I was wondering if you could discuss your overall cost position in North America and maybe what steps you can take. You referenced the $190 million in capital projects, the Temple integration. What steps can you take to protect your cost advantage, and just sort of how you think about that? John V. Faraci: Well, I'd say that there's no company that's got the opportunities that International Paper has. If you think about opportunities to improve the cost structure with the Temple integration, there's $300 million there that we can see just in integration opportunities. And then as we deal with the warehouses, the whole re-optimization platform that's significantly different fast-forward in 2013 than the one we have today. So I think International Paper, because we made these opportunities for ourselves, it's got far more leverage to pull than anybody has in the world to kind of manage our own cost structure and improve it. And whether that's in Ilim, with the Bratsk project, the Temple integration, we've got a big energy project going on in Brazil that's going to make Mogi Guaçu totally non-dependent on fossil fuel. It would be all wood fiber or biomass. Those types of things we've got going on all around the world. We're just about to start up a new turbine project in Svetogorsk, which is going to significantly reduce our energy costs. So we're pulling those levers everywhere, and we got more from the pull than anybody else does. Albert T. Kabili - Crédit Suisse AG, Research Division: Can you give any kind of guidance about what portion of that $190 million would be going towards North American containerboard? Carol L. Roberts: It's probably in -- I don't have that exact number -- this is Carol. But it's probably in the $40 million range.

Our final question will be coming from the line of Mark Weintraub of Buckingham Research. Mark A. Weintraub - The Buckingham Research Group Incorporated: Three clarifications. First on the black liquor question, which Gail had brought up. I believe in the case of Capstone, they basically would be reversing a liability, so there wasn't going to be any cash coming to them. I don't see that you have a liability. So in your case, if you were to get _ a similar ruling, would that actually mean that you would get cash coming to you? Carol L. Roberts: We basically paid the taxes on the gain we got when we had the black liquor credit and therefore, we've kind of believed in the beginning that it was not taxable. But we did indeed paid the tax on it. And so now we're coming back and saying we're amending the tax return. Gee, that shouldn't have been taxed. And so how that comes back to us in the form of either refund or deferred -- another tax credit in other way, it will come back to us over time. Mark A. Weintraub - The Buckingham Research Group Incorporated: Okay. Second, Carol, when you were referencing Page 36, you threw 4 items that you were truing up. You zipped through those pretty quick. It sounds like 2 of them were positive 4Q to 1Q, and 2 of them negative. Did I just hear that right? Carol L. Roberts: I don't think you've captured that correctly, Mark. Sorry. They're all negative. They're all going in the opposite direction, in the negative direction. More costs for the startups, higher costs for the consumption of energy and fuel, and there were some positive in '11 that do not repeat in '12. Mark A. Weintraub - The Buckingham Research Group Incorporated: Got it. Okay. And then lastly in terms of the $300 million synergies that you reiterated. Again, I take it that that's, is that not that dependent on the specifics of the pending binding documentation with DOJ? John V. Faraci: I'm thinking about both of those synergies are, Mark, they're related to eliminating duplication, combining 2 companies that have a lot of duplication. And the other part are, we said that having fewer box plants at the end of the day. So that's what we see as the main portion of the synergies. And based on what we've seen in Temple, because we put together an estimate, without having visited any facilities. Now we've been to all the mills. We feel very good about that $300 million number. Okay. Well, listen. That wraps it up, and let me just summarize. I think International Paper finished a very good year. In fact, last year, we had almost 2 decades on a strong note. We're in a seasonally slow time of the year. But we're very positive about the prospects for International Paper to flow through 2012. Having said that, we're looking forward to talking to you about the Temple integration on our next conference call. So thank you.

Thanks, John. And of course, Investor Relations and Media Relations are available on the phone numbers on our website after the call. Have a good day, everyone.

Thank you. This does conclude today's conference call. You may now disconnect.