Jay Royalty - 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 Mark Stephan Sutton - Senior Vice President of Industrial Packaging Timothy S. Nicholls - Senior Vice President of Printing & Communications Papers - The America's Region Thomas Gustave Kadien - Senior Vice President - Consumer Packaging and Ip Asia

George L. Staphos - BofA Merrill Lynch, Research Division Philip Ng - Jefferies LLC, Research Division Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division Phil M. Gresh - JP Morgan Chase & Co, Research Division Adam J. Josephson - KeyBanc Capital Markets Inc., Research Division Anthony Pettinari - Citigroup Inc, Research Division Gail S. Glazerman - UBS Investment Bank, Research Division Mark Wilde - Deutsche Bank AG, Research Division

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 Second Quarter 2013 Earnings Call. [Operator Instructions] Thank you. I would now like to turn the call over to Jay Royalty, Vice President, Investor Relations. Please go ahead, sir.

Thanks, Christy. Good morning, everyone, and thank you for joining International Paper's Second Quarter Earnings Conference Call this morning. Our key speakers this morning are John Faraci, Chairman and Chief Executive Officer; and Carol Roberts, 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 are available on our website. Our website also contains copies of the second quarter 2013 earnings press release and today's presentation slides. Lastly, given our expanded disclosure around our Ilim JV, Slide 4 provides context around the joint venture's financial information and statistical measures. With that, I will now turn the call over to John Faraci. John V. Faraci: Thanks, Jay, and good morning, everybody. Let me just jump right in and say in the second quarter, International Paper delivered solid performance, increasing our EBITDA by $100 million, 10% over the first quarter of this year and the second quarter of last year to over $1 billion. And importantly, we continue to generate very strong cash flow from operations and free cash flow. I'll talk about that in a minute. We've got strong results from Industrial Packaging, driven by increased pricing, seasonally stronger volumes, coupled with, I'd say, very solid results out of Brazil and our European, Russian paper business. Those were the biggest drivers of our improved results during the quarter. We continue to see improved business conditions in our Coated Paperboard business as evidenced by increased volume and pricing momentum that increased through the quarter. Additionally, we executed our peak outages. This was the peak quarter for outages around the world. As we come to expect International Paper, we did that on time, on budget; in some cases, came up early. We continue to control costs effectively in a challenging, both U.S. market and global environment. And last week, we -- as we reported last Friday, we closed on the sale of the Temple Building Products business. This $710 million transaction with Georgia-Pacific, in addition to the sale of our share in a joint venture that was embedded in that building products business for $20 million, resulted in net proceeds to IP of $730 million as we expected. Additionally, the business generated $40 million of free cash flow during the time we operated it in 2013. So I'm pleased with the results of that process, took a little longer than we thought, but I want to wish everybody in that business all the best as they join the GP team. We did have a couple of sizable onetime items in the quarter. We took a bad debt charge of $28 million, attributable to our expected exposure with a large customer in our North American Printing Papers business, National Envelope. They filed for bankruptcy during the quarter, and we'll speak to more of the details on that shortly. And secondly, we realized an unfavorable noncash foreign exchange swing in our Ilim Joint Venture related to a stronger dollar and the JV's U.S. dollar-denominated debt. But all in, a very good quarter in terms of executing well and delivering solid results. And importantly, as I'll come to at the end, I think we're set up well for significant improvement in our earnings, cash from operations and free cash flow in the third quarter. So moving to our financial overview slide on Slide 6. Our revenues were up about 3% quarter-over-quarter. EBITDA margins improved by 70 basis points, and cash from operations was up sequentially -- substantially quarter-to-quarter and year-over-year. As I said at the outset, most importantly, free cash flow continues to grow with strong results from the second quarter, $450 million, that's up 70% from the second quarter of 2012 and up 50% in the first quarter of 2013. As I said in the first quarter, our cash flow story remains intact and we're on track to deliver full year free cash flow for International Paper in 2013 approaching $2 billion. So now let me turn it over to Carol. She'll give you a closer look at the quarter, and I'll come back and talk about the outlook for the third quarter and then we'll all answer your questions at the end. So Carol? Carol L. Roberts: Thanks, John, and good morning, everyone. Taking a look at the second quarter bridge from Q1, we earned $0.64 per share from continuing operations and before special items. As John said, it was a good quarter, with good improvement in pricing, seasonally stronger volumes, largely driven in Industrial Packaging, but we also saw that in our Consumer Packaging and Brazilian paper business. Additionally, our operations and cost performance across the businesses were solid and we executed our outages very well, as John mentioned. Miscellaneous corporate costs were lower than the higher-than-expected cost that we saw in Q1, and taxes returned to a more normalized level during the quarter of roughly 30%. As John mentioned, the charge for the National Envelope bankruptcy hit us in the quarter. At the time of NEC's bankruptcy filing, we had a total exposure of about $42 million. We have taken steps to mitigate, and we're confident that we should be able to reduce that potential impact by about $14 million once the bankruptcy process plays out. So there for net-net, we booked a bad debt charge of $28 million in the quarter. And finally, for the Ilim JV, we did experience a noncash FX swing that negatively impacted EPS by $0.05. Moving to Slide 8. We experienced our heaviest planned maintenance outage quarter of the year. We executed 11 mill outages in total, all of which went as expected and this resulted in nearly 200,000 tons of capacity idled during the quarter, over -- which about half within the Industrial Packaging business. Moving on to global input costs. It was kind of a bit of a mixed bag in the quarter, with fiber and energy providing a bit of a headwind, while chemicals actually decreased slightly in the quarter. OCC costs were up during the quarter, and wood cost negatively impacted our Printing Papers business. And I would say, looking forward, due to the weather challenges that continue to plague the Eastern U.S., we see wood cost as a growing concern and a cost headwind as we move into Q3. So let me turn to the businesses, and start with Industrial Packaging. And as you can see, our Industrial Packaging business posted a strong second quarter as we get to see the benefits of the implementation of the April price increase. The board price increase was implemented, and box prices in North America were up on average $10 per ton quarter-over-quarter. We did see seasonally strong volume in North America and that was predominantly in our agricultural market, which is a big part of our second quarter business. And this did contribute to the improved results as well. On the -- across the other side of the ocean, the economic conditions in our EMEA Packaging business continue to be challenged, and this impacted both pricing and volume in the quarter. What we're seeing in Europe is margins that are under pressure due to some rising board costs and lower box prices. This was made more difficult for us because of a subpar agricultural season, which was really impacted by the weather that had transpired over winter and into the spring, and this impacted our sales volume in the strong fresh fruit and vegetable segment for us. Once again, we executed the planned annual maintenance outages well and operations remained solid throughout the quarter for the overall business. Slide 11's one that we feel particularly good about. Improved prices, combined with solid operating results, added over 300 basis points across our business in the second quarter and this was for our North American Industrial Packaging business. EBITDA margin for this business is poised to grow further as we get further price improvement. And as we'll talk about, continued optimization of this very important and large business for the company. Let's talk a little bit about pricing on Slide 12. As we look at the expectations around the current North American price increase, we'll see significant realization in the third quarter. The timing issue that we saw with the board purchases from the divested mills is largely behind us, and we saw that in the second quarter as we begin to realize the box price increases associated with those board purchases. We do expect to more than double our realization of the box price increase in the third quarter, and we have line of sight of full recovery as we head into the fourth quarter. Chart 13 shows the significant growth that IP has had in the Industrial Packaging business through the acquisitions of Weyerhaeuser, and more recently, Temple-Inland. We're on a path to increase total EBITDA dollars in our North American business by more than 5x from the 2005 to 2007 level, and key to that is that has come as the result of the delivery of nearly $1 million of synergies to the bottom line, along with other key improvements to the base business. Great news is we're not done. As we've discussed previously, we -- Mark and the team has been extremely busy integrating 2 big acquisitions over the last 5 years, so there remains a tremendous opportunity to optimize this greatly expanded business that we've built. Just to kind of put a face of that. We have a manufacturing system that comprises 17 board mills and over 160 converting plants. We ship to more than 15,000 customers and nearly 44,000 locations. So the scale and complexity of the system's great, and that's a good thing because with that comes a lot of opportunity for improvement. And we believe that we can deliver in excess of another $200 million in additional benefits over the next few years. This comes in the areas that you would expect: improved mill performance, improved box plant efficiencies, reduced costs, streamlining the supply chain and upgrading the commercial portfolio. So all in all, a great story. Talking some more about Industrial Packaging, let's shift our focus to the new Brazilian Packaging business Orsa IP, which we're reporting on our first full quarter since the close of the acquisition that happened on January 15. And I will remind you that we are reporting this business on a 1-month lag, so the results represented here are for the period of March ending in May. We've very excited that the Brazilian box market continues to grow at a strong pace, roughly 4%. While we saw higher OCC cost in the second quarter that did impact our margins, we have announced and have begun implementing a box increase on the basis of that strong demand and increased input costs. We do expect the price increase to more than recover those increased costs and improve our margins. Additionally, the Orsa IP team has structured earnings improvement plans around the synergies that we have line of sight on, productivity improvements, particularly in the mills that provides great opportunity. And we should see those kinds of benefits accruing in the third quarter. So all in all, we are very excited about the acquisition, and we remain very confident in the prospects that this business has and our ability to deliver on the commitments that we've made. Moving on to Consumer Packaging on Slide 15. In our Consumer Packaging business, we saw improved volumes and operations, which was primarily in North America that improved overall segment profits, absent the very high heavy outage season that we saw. Market conditions in North America continue to be strong. We're seeing some price momentum through the quarter that also contributed to the results. And as many of you've seen, as I've shown on Slide 16, you can see the significantly improved market conditions that we've been seeing over the last couple of months. This is the industry data as reported by the AF&PA and it shows that the backlog of unmade SBS orders has increased significantly over the last couple of quarters and really remains at the highest level that we've seen in the last 2 years. We've implemented price increases since Q1, and based on this continued strong fundamentals and tight market conditions, we've announced an additional $45 per ton increase on folding carton board that we announced on July 9. So all in all, we feel good about our North American Consumer Packaging business and really feel that we've hit an inflection point and are heading in a good direction. Moving on to Printing Papers on Slide 17. In our Printing Papers business, operating profits came in at $76 million versus $149 million in the first quarter. We did see improved pricing, driven largely by pulp in Brazil, along with seasonally stronger volumes in Brazil. Along with some benefit from market pulp price increases, we really saw an improvement in our pulp mix and this was driven largely by the successful start-up and qualification of the Franklin mill on fluff pulp. And this is, once again, speaks to system flexibility and system capability due to the pulp system that we have and the flexibility we have. We were able to run Franklin full on 100% fluff because Riegelwood has a lot of capability. But I want to say that we've only added and introduced to the market the fluff that's required by the demand that's warranted by our customers. So at Riegelwood, we've been able to swing from fluff to softwood bales for an overall system benefit. And that's just really good news about the strength of our pulp system. In this business, as we expected, it was our heaviest maintenance outage quarter. And additionally, as we've already talked about, we did experience the bad debt write-off of $28 million related to National Envelope. Moving to 18, here's the results on Brazil. Brazil built on a very strong first quarter result, with even better results in the second quarter. EBITDA margins expanded to 34%, and this was driven by an increased mix of domestic business, which had better margins, some favorable FX gains and then lower operating costs associated with the new biomass boiler at Mogi, which has gone very well. I will note, however, that we did see some key export paper markets soften a bit as we headed into the end of the quarter. xpedx, on Page 19, had a much better quarter due to improved costs in the face of, really, what I would categorize as continued challenging business conditions. And this resulted in an overall operating profit improvement of $15 million quarter-over-quarter. And the team definitely remains focused on executing the things they can control, and they are executing well against our business improvement plan. Just a comment, as we continue to work towards our transaction with Unisource to spin and merge the businesses, as a reminder, we signed the LOI with Unisource on April 19. Since then, we've done a very -- a significant amount of work on a number of fronts, parallel path, including the continued preparation of financial information needed to facilitate the potential transaction. We continue to believe that the proposed transaction will be beneficial to both businesses and definitely to the IP share owners. And we are working toward a deal and we'll see this process play out over the next few months and through the end of the year. So talking about our Ilim Joint Venture. On the joint venture, we have seen significant progress in the second quarter with the start-up of the capital projects at both Bratsk and Koryazhma. We've now moved from start-up to ramp-up, and we plan to reach full production capacity of these projects by year end. Outside of the business operations, the JV did experience a negative FX impact associated with the $1 billion of U.S. denominated debt that we mark-to-market at the end of each quarter. Taking a look at Slide 21, this clearly illustrates where the JV is with the start-up and ramp-up of the project and what's expected over the next couple of quarters. The second quarter saw the greatest impact, with start-up costs roughly double what we saw in the first quarter. And although the start-up costs will be significantly less in the third quarter, there are still costs that are associated with ramping up the new capabilities to full production that continues to be somewhat of a headwind. Ilim does expect to have the vast majority on these start-up and ramp-up costs behind us by the fourth quarter, at which time we'll really start to see more significant benefits from the project. All in all, Ilim expects the benefits that we'll realize from the projects in '13 to outweigh the costs. However, there's no doubt that the benefits are going to be heavily weighted towards the fourth quarter, and more importantly, flow into next year, 2014. So let me shift the focus now to the third quarter outlook as depicted on Slide 22. We see seasonally lower volume, and importantly, one less shipping day, which, for us, is about 40,000 tons of production in North American Industrial Packaging. And you have to remember that, for us, we have a heavy ag mix and the second quarter for this industry is just a big agricultural quarter. While we continue to see seasonally higher volumes in Brazil papers, business conditions in Western Europe will continue to provide challenges, particularly in our EMEA Packaging business. Overall, on price, we'll be higher in the third quarter and that's driven primarily by the North American box increase that we discussed earlier. All in all, other price mix will be largely flat, while we expect continued pressure potentially in Europe. We continue to see solid operations, which is the largest quarter-to-quarter swing coming as a result of the non-recurrence of the National Envelope bad debt expense. We do expect some headwinds on input costs, primarily fiber, and that comes in a number of places: wood in North American papers, higher wood and energy in European and Russian papers and higher in OCC and wood in our Industrial Packaging business. Maintenance outages will be significantly less, $94 million lower than the second quarter, which was our peak. And while the start-up costs associated with the Ilim projects will be substantially less as we spoke, ramp-up costs, along with some potential near-term risks to pulp prices in China, will likely result in a relatively flat operational quarter. And we will then have the benefit of the non-recurrence of the second quarter currency swing. So with that outline, what I'd like to do now is turn it back over to John to summarize and wrap up. John V. Faraci: Yes, thanks, Carol. I guess the way to summarize is I feel good about where we are and how the second half of the year is shaping up, not based on so much on a robust economic outlook, but more on our ability to execute and deliver results in the second quarter and kind of the run rate momentum we came out of the second quarter at kind of June going into July. The U.S. and global economies are still recovering. But the cash flow we're able to generate, I think, gives me encouragement that we're going to have a substantially better second half of the year than the first half. As Carol described, we realized about 20% of the benefits of the price increase in Industrial Packaging on the second quarter and have line of sight to the rest of it in the third and fourth quarter, and that's going to continue to further expand our already industry-leading EBITDA margins. Trends in our North America Consumer Packaging business are improving. We expect to realize improved supply-demand conditions that Carol referred to in the industry. And as you know, we made the tough decision to take down a machine at Augusta earlier in the year and that certainly improved our supply-demand balance as we look at our customer base. The third quarter is the lowest maintenance outage period of the year. And I'm pleased and positive that the heavy lifting's behind us on the Ilim capital projects. We completed those projects. As Carol said, we're into the start-up mode now, and we'll have start-up costs. We had a lot in the second quarter. We'll have a significant amount in the third quarter. But as we get to the end of the year, those will be behind us. And at the big tailwind, those projects completed a big tailwind for International Paper and for the JV as we go into 2014. And most importantly, we're generating strong free cash flow and we'll continue to build on this in the third and fourth quarters. As I said last quarter, we expect to have cash -- free cash flow approaching $2 billion this year, and that outlook remains intact. Additionally, we have more clear now, which we're a year into it, a more clear line of sight into the $5 billion EBITDA we've talked about last year and I'll describe on this last slide here. As I wrap up the call, I just want to give you an update on that. And this slide shows our expected EBITDA potential at mid-cycle margins. We're probably going to get there a different way than we outlined but the reality is International Paper's got a lot of levers to pull, so the good news is when things change, we can take advantage of opportunities and offset the challenges. So there are some headwinds and some tailwinds. There's more runway in Industrial Packaging, which Carol shared with you. We continue to see margin expansion opportunities within that business. The optimization opportunities are huge. When you think about 5 years ago, IP had a $3 billion to $4 billion business and now it's a $12 billion business. Beyond that, we can capitalize on our global footprint and capabilities in the Printing Papers business as we effectively and profitably move mix around the world to optimize margin opportunities. So those are some of the tailwinds. We've got headwinds as well, mainly in the form of softer demand, probably everywhere in the world. And pulp prices that continue to be well below mid-cycle levels. The oversupply situation that was -- that exists in coated paperboard in China is going to be with us for a while. The joint venture is operating well but there's a lot of excess capacity. And we didn't see all that at the time. So we've got pluses and minuses, but importantly, with all that said, we continue to see the potential of our portfolio as generating over $5 billion EBITDA, and that's not counting Ilim, which, as you know, is equity earnings and dividends. So let me turn it over to the operator now, and we'll all take your questions.

[Operator Instructions] And your first question comes from George Staphos of Bank of America Merrill Lynch. George L. Staphos - BofA Merrill Lynch, Research Division: I guess, my first question is around pricing within the North American box market. I know discussion on pricing can be sensitive to talk about on a conference call, but is the pace of the increase and its implementation pretty much going as you would expect, more quickly or less quickly, and if you can give some color around that? If there is any variance, that will be great. And I had a couple of follow-ons.

George, this is Mark Sutton. Box market realization, if you remember what we said at the end of the first quarter, is about where we thought it would be. So we're on track. The $10 in the second quarter really manifested itself in the last month of the quarter. But as we left Q2, our run rate was north of $30 a ton. So we're pretty much on schedule. We have confidence that we'll have the whole price increase realized just as we did on the first one from last year before the end of this year. George L. Staphos - BofA Merrill Lynch, Research Division: Okay. And related question, just on North American containerboard and boxes, can you give us some update early in the quarter in terms of what you've seen in terms of volume, booking, whatever you feel like talking about thus far within July?

Yes, I'd be happy to. July has started off good for us. We had talked about our year-over-year comps for the last couple of quarters, and we've been tracking below our prior year comps. We're beginning to see that turn, as I mentioned a quarter ago, as we now have kind of lapped ourselves in some of the business that we were restructuring right after the Temple close. So, so far in July, we're up over last year and we're up sequentially. So we feel pretty good about it. It's early in the quarter, but we feel pretty good about it. George L. Staphos - BofA Merrill Lynch, Research Division: Okay. Last one and then I'll turn it over. Clearly, National Envelope had an impact on you in the quarter and the Printing Papers business, but if I look at the detail that you provide regionally, and again, we really appreciate that, and to all the details that you provide during your presentation, it certainly was not a great profitability quarter for North American Printing Papers. What mile marker should we look to? What factors should we consider relative to what you were looking at as you look at your mill system in North American Printing Papers and whether over time you might need to further adjust that system? Timothy S. Nicholls: George, it's Tim. Just looking at North American Printing Papers, I would say we had, outside of National Envelope, the quarter that we kind of expected we would, we could have run a little bit better. But if you look at the fundamentals around price and volume and mix, we were kind of flat from first quarter to second quarter. So we knew we were going to have a big outage quarter. We had almost $40 million more in outages. We executed those outages very well. We continue to leverage the export markets at an enterprise level to make sure that we're managing our capacity effectively. And I think that's the plan going forward. We still got opportunities to work with Europe and Brazil and make sure that we're producing product in the right place for the right markets. I also believe there's an opportunity around operations in the second half, now having our outages behind us. John V. Faraci: George, this is John. Just let me add -- quantify that -- there's $70 million of quarter-to-quarter change in that segment that's solely attributable to the North American Printing Papers business. I mean, you take the outages in North America and National Envelope. George L. Staphos - BofA Merrill Lynch, Research Division: Fair point. So are you at cost of capital within North American Printing Papers? Timothy S. Nicholls: We are, as we look out for the year. Now obviously, in the second quarter, we had a heavy outage quarter. But I think we're looking at it more than just quarter-by-quarter.

Your next question comes from Philip Ng of Jefferies. Philip Ng - Jefferies LLC, Research Division: After accounting for $1 billion of debt paydown and the proceeds from your building product sales and the free cash flow you're generating, it would imply that you probably have $1 billion in excess cash to spend. How should we be thinking about that cash being deployed over the course of the year? Carol L. Roberts: Philip, this is Carol. Yes, that's exactly the math that we see as well. And so as we continue to look at that capital allocation, the first thing we'll do is we'll continue to reevaluate the dividend relative to that free cash flow. And today, we're in the low end of our target range of the 30% to 40% of free cash flow, so that's certainly an option. We'll continue to look at the debt. That always presents an option to see where we want to go with that. Obviously, another mechanism for returning cash to share owners could be through the form of a share buyback. So that's something that we'll look at and talk about. And then we'll also continue to look at what are the best investments for creating value for our share owners for today and tomorrow. So I think the great news is, is we have options and all of those options remain on the table. Philip Ng - Jefferies LLC, Research Division: Okay. And then for Consumer Packaging, demand is decent for Bleached Board, but I'm kind of surprised that backlogs have been that robust, and certainly, you guys played a role in that. Can you just give me -- us a little more perspective on what's driving that pickup there? And have you seen any impact from the ivory board capacity that's coming on from China? John V. Faraci: Kadien, you want to take that one?

Yes, sure. I would characterize demand as much better than decent. We've seen, as you see in the chart that's in the deck, backlogs have really skyrocketed. I would say that they're not sustainable at 600,000 tons. But clearly, we've seen some rebuilding of inventory in the channels. But more importantly, our customer activity is very strong, particularly in the folding and plate areas and also in the Foodservice. So we took out capacity. There was a little bit of inventory rebuild, but we and our customers, most importantly, are feeling some real strong demand. On the buildup of capacity in Asia, we're not seeing a lot of impact on that in North America. Clearly, we're feeling it with our JV in China, but there's, I think, inventory -- excuse me, imports are up probably 20% but on a small base, and I think we're running on like 100,000 ton rate for the year. So that's really not impacting us, and certainly, not in our core segments like cup stock and folding carton. Philip Ng - Jefferies LLC, Research Division: And just sticking on that theme on China with -- and when you guys flagged how there could be some downside risk on pulp prices in China, could that weigh on your Asia business out there? Because prices -- your box board prices do kind of move with pulp prices historically, right?

Yes, we are largely nonintegrated in our joint venture, and we certainly follow pulp costs. And right now, the supply and demand is way out of balance and it's driving the pricing. So pricing is very, very competitive. And I, frankly, I don't think it can go a whole lot lower from where it is without impacting a large part of the cost curve. So I think it's bouncing around near the bottom.

Your next question comes from Mark Connelly of CLSA. Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division: Two things. Can you talk about your pan-European-North Africa container footprint? You made a strategic decision there. And this quarter's maybe sloppier performance aside, that does seem to have been the right decision. Are you satisfied with that footprint? Or do you want to grow further in converting there? And also, would you consider expanding in folding carton? And I'm not really thinking about [indiscernible]. I'm just thinking about carton in general and your Consumer Packaging footprint. John V. Faraci: Mark, this is John. Let me take the box business in Europe first. Our box business in Europe is France, Italy, Spain, Morocco and Turkey. Morocco and Turkey are doing quite well from the demand standpoint and from a profitability standpoint. We're going to have a record year in Morocco. The -- so the geographic footprint is really in the fruit and vegetable segment for Europe and what Europe, Southern Europe, exports to other parts of the world like Russia. We like that. There's no getting around the fact that the Industrial segments in France, Italy and Spain are just what you would expect they would be, very soft. So we're going to have to manage through a difficult time, but I think we like the fact that we bought out -- our partner wanted to sell us their stake in the joint venture we had in Turkey. So now we own 100% of it. We're able to do that at what we thought was fair price and a good price and so we own 100% of that business. And we certainly are glad that we invested in Morocco when we did. Would we expand in that business? Yes, we would if we saw the right opportunity that capitalized on our existing strengths, which is really serving the fruit and vegetable market. But everything between Morocco and Turkey right now looks a little bit unstable. I think we're going to sit back and watch. Folding cartons, we like -- in North America, we like the fact that we're in the coated board business and we like being in the Foodservice business and don't see any need or reason to be in the folding carton business. Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division: Okay, fair enough. And just one quick question for Tim. You talked a bit about white paper. Can you talk about whether you're seeing more pressure in cut size? We're starting to hear that there are more deals again in cut size relative to roll. Just curious if you're seeing that. John V. Faraci: Before Tim takes that one, Mark. The other thing I'd say is we bought out our partner in Turkey but we still have 12% that's held by the public. So -- and we're -- we don't own all of it. Timothy S. Nicholls: It's Tim. We haven't seen any significant pressure on cut size. There are -- there's a lot of chatter in the market around imports, the threat of imports, and what might be about to happen. That's been maybe a constant theme over -- quarter-by-quarter over the past year, 1.5 years. It hasn't materialized to date in a significant way, so I think it's more buzz at this point. But there's no doubt there's some marginal tons that are flowing in. But it's marginal tons, very low quantities that are showing up episodically, and I think just one shipment gets talked about 10 times. So no, we have not seen any major pressure on cut size pricing.

Your next question comes from Phil Gresh of JPMorgan. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Just starting with the free cash flow target for the year of approaching $2 billion. In the first half of year, hear you have about a $400 million headwind from working capital, understanding some of that's seasonally and you also had these containerboard price increases that are flowing through that can impact that. So Carol, I was hoping maybe you could kind of help us think through how you would think about working capital for the year in terms of hitting that number, given the $750 million of free cash in the first half. Carol L. Roberts: Phil, you're correct that the consuming of the free cash for working capital in the first half of the year was driven by those 2 phenomenons: the seasonality of the business, as well as the Industrial Packaging price increase. Obviously, the Industrial Packaging price increase will stay with us, but your December sales are just very different than your end of your second quarter and even the end of your first quarter. So that will naturally reverse. And if you look underneath, we feel very good about our metrics relative to days sales outstanding, days of inventory and whatnot. So all of those metrics, we feel, are in pretty good control. So we should see a flip back on that by year end. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Okay. So you would expect to get closer to neutral. Carol L. Roberts: I wouldn't speculate on exactly what the number is because like we said, we do have a price increase in North American Industrial Packaging, that's a pretty big business. But it won't be the consumption of working capital that we've had so far through the first 6 months. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Sure, okay. And then John, I know you're not trying to manage the consensus here, understood, but -- and I guess, if I just kind of look at all these moving pieces around the third quarter, the Street's at $1.15 and it seems to me that there's some headwinds here. So any way you could kind of put a bogey around how we should think about the earnings side of things for this quarter, just to kind of calibrate? I mean, it seems like it might be closer to $1 to me, but I may be off. I was hoping you could maybe put a little bit of parameter on that. John V. Faraci: We don't give guidance, as you know, and the way I think about it is, where are we going from the second quarter? And we see significant improvement in earnings and cash from operations and free cash flow in the third quarter. And then that's based on how we executed in the second quarter, the run rate in June and what we're seeing at the beginning of July. So I think about a significant improvement in earnings from the second quarter. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Okay, fair enough. And then the last question, just on input costs. Any change to your view on this $200 million headwind? I think that you had thought about before for the year in light of what you've talked about with these higher wood prices and other inputs. Carol L. Roberts: Phil, I would say that things come and go and so I still think that's a good planning assumption for the full year.

Your next question comes from Adam Josephson of KeyBanc. Adam J. Josephson - KeyBanc Capital Markets Inc., Research Division: Mark, how would you characterize your North American containerboard inventories at this point? Are they as high as you would like them to be?

Adam, I'd say we had a big outage first half of the year, so it was very difficult for us to make any real progress in inventory. So I'd say, in general, we're still a bit on the lean side. We got to learn something in the fourth quarter last year that we will try not to repeat this year in terms of heading into heavy outages with the, not only the amount, but the quality of the inventory, meaning, the right grades and the right location. So I'd say we're still a little bit on the lean side right now. Adam J. Josephson - KeyBanc Capital Markets Inc., Research Division: That's helpful. And John, just 2 for you. One is, can you characterize the changes in economic trends in the regions in which you operate in recent weeks? Any notable changes in June or to this point in July? John V. Faraci: I think it's more of the same. Every place is a little different, but it's really more of the same. Adam J. Josephson - KeyBanc Capital Markets Inc., Research Division: Okay. And just one more, John. As you know, The Wall Street Journal published an article not too long ago about the Ilim Joint Venture and about the risks associated with that investment. Would you care to comment on that? John V. Faraci: Yes, I would. I mean, our view -- my view is the article missed important aspects of the story around the joint venture with our Russian partners. And first of all, that joint venture is unique in our industry, but we're in year 6 of what had been very successful commercially, if you look at the impact on International Paper. We've got good governance, and we've got a strong and effective board and joint venture management. And the kind of -- the reality is, here's an example of a Russian company, U.S. company coming together, doing something that neither of us could do on our own. We just completed $1 billion of capital projects to expand, upgrade and modernize and improve the environmental footprint of an important industry in Russia. That project in Siberia is one of the biggest ones in the industry, in Russian industry, I think, in over 30 years. And in one way, we're helping to diversify the Russian economy and business in an industry where they're very competitive, and that's forest products industry. And finally -- or you see it favored by both the Russian and the U.S. government. And I guess, finally, I'd say that the working relationship and trust and mutual respect we've built together over the last 6 years is real, it's important and it's the key reason the joint venture has been successful. So overall, we think it's -- the story about the joint venture is a positive one with a lot of upside and so we're pleased with both JV and the partnership. The joint venture has been successful.

Your next question comes from Anthony Pettinari of Citigroup. Anthony Pettinari - Citigroup Inc, Research Division: In Industrial Packaging, you had a good price realization, but you also called out a 3% volume decline year-over-year in North American container. And I'm just wondering, is there anything that happened in the quarter in terms of share shift or maybe some account rationalization with Temple that you can point out that would explain the volume decline, especially in light of what sounded like a pretty good ag season?

Anthony, the year-over-year volume decline has been a bit of a trend for the last several quarters. And most of it is related to the -- 2 things, really, the acquisition and integration of Temple in the first half of last year. We made some changes commercially to some business that we had. There were some business that Temple was in the process of losing as we closed on the deal. And then as we implemented the price increase last fall, we made further commercial decisions. And so all that business was in last year's comps and it's not in this year's. But we feel real good about our volume trend now in the first quarter and in the second quarter. We've rebuilt some of that volume that we moved away from. And we talk about this. We're overweighted in some segments as a result of 2 big acquisitions and maybe some segments that have struggled a little bit more in this economy versus some other segments. So we're working to rebalance our segment portfolio. And then we have the other 2 channels that we believe are important and I think our margins show the results of that. We feel strongly about the open market in the domestic sense, and we feel strongly about the export open market for kraft linerboard. And so we look at all 3 of those segments and adjust our sales revenue through those segments on a continuous basis to optimize the business and looking at the margins and a few other metrics as our guide. Anthony Pettinari - Citigroup Inc, Research Division: Okay, that's very helpful. Maybe just switching to the box side in Europe. You referenced some pressure on box prices and a weaker ag season in Europe. And I'm just wondering, as you exited the quarter and into July, are you seeing that price pressure continue? Are you seeing any stabilization? Or any kind of comments you can give on European box prices currently? John V. Faraci: I don't think we're seeing a lot of -- there's always pressure; it's a competitive business. So to say there's no pressure on box prices would not be correct. But we're not seeing weak box prices. What's happened is there's been a little bit of compression on margins because containerboard prices have gone up and box prices haven't. There's been a bit of a mix shift and so some of the realization loss we have is not price related, it's mix related. We had a plant in Italy. It was destroyed by an earthquake. We rebuilt that plant, and in the process, we kept most of the customers but some of the customers moved some business in other directions. And so we've got some work to do to rebuild our mix, but I wouldn't say there's a lot of pressure on box prices in Europe other than the normal competitive activity.

Your next question comes from Gail Glazerman of UBS. Gail S. Glazerman - UBS Investment Bank, Research Division: Carol, can you talk maybe a little bit more about how you think about debt? And specifically, where you see the pension falling? And as you look towards applying the GP, the building products sale proceeds and the rising EBITDA that you're expecting in the back half, how you think you'll be looking at debt as you exit the year? Carol L. Roberts: Sure, Gail. Well, let me just talk about the pension real quickly. And as you know, with interest rates rising, the higher discount rate helps on the liability side. And so the rule of thumb for International Paper is about 100 basis points is equivalent to $1.5 billion of liability, given where Treasuries ended at the end of the -- or at least at point of time today. That's probably a $1.2 billion to $1.3 billion reduction in our unfunded liability. And that's all good news. That helped, primarily really, from a credit metric perspective, and then longer term, it should help on the funding side. So that said, the way we think about debt is we want to pay some more debt down. We want to pay that debt down effectively. We've got a number of choices to do that. Now that we've gotten the funds from the building products, we're in a position to work on that. I mean, we've got a great treasury group who's looking at those options. So we're still thinking that the debt reduction for the company this year is going to be in the $600 million to $700 million range of net debt reduction by the time the year is over. That's kind of our planning from this point. And we've also made the one pension cash contribution that was required for 2013. That was only $31 million, but we've taken care of that and that's done. John V. Faraci: Still a lot of room, Gail, for this year and certainly more next year for a very balanced use of cash that we've talked about with all of you over time. We're still committed to that. I think we're generating the cash to be able to make decisions consistent with that. Gail S. Glazerman - UBS Investment Bank, Research Division: Okay. And Mark, can you talk a little bit about what you're seeing in terms of export markets for board? Any changes there?

Gail, the export markets, we saw price increases through the second quarter. I think we're heading into what generally is a seasonally slower period in some of the export markets. We're in pretty much all of them to some degree. So I think we see a stable outlook as we head into the second half of the year, both on volume and probably a pricing standpoint. But the third quarter, in particular, tends to be on balance across the export regions a bit of a seasonally slower period from a demand standpoint. Gail S. Glazerman - UBS Investment Bank, Research Division: Okay. And just in terms of inflation, the wood cost inflation that you're discussing, is that really just weather related? Is there anything more fundamental with OSB mills restarting and anything else that will be pressuring prices? John V. Faraci: It's weather related, Gail. We've seen that OSB and wood products pressure all year because housing has been coming back quite strong. It's -- I think we got 20 inches of rain in the Riegelwood area in the 40-day period. So we got a lot of mills over in that area of Eastover, Georgetown, Augusta, Riegelwood. So the East side is getting hit harder for us than the West. Gail S. Glazerman - UBS Investment Bank, Research Division: Okay. And just one last question. In terms of fluff pulp, are you starting to see any benefit or impact in the market with Rayonier having completed the conversion at Jesup? Timothy S. Nicholls: Yes, Gail, it's Tim. I wouldn't characterize it that way. I think we're generally seeing fluff pulp continue to grow at the rate similarly that we expect it to. For us, we're bringing on capacity this year that Carol referenced that we're bringing on, trying to, in the most intelligent way possible. So out of the 300,000 ton increment of additional capacity we're probably going to be around 200,000 that flows to the fluff pulp markets. Having said that, we'll get a better benefit out of Franklin because we're going to try to run and we will be out of 300,000 run rate in Franklin on fluff but we'll balance it out with other mill operations on the softwood side. So we still see 4% annual growth on fluff and no real new capacity coming on. So as capacity comes out, it should help but we haven't seen it materially yet.

Our final question will be coming from Mark Wilde of Deutsche Bank. Mark Wilde - Deutsche Bank AG, Research Division: Just have some segment questions. First of all, you mentioned that you were seeing some weakness in some of the export uncoated free sheet markets in -- toward the end of the second quarter. Can you give us a little color on that? Timothy S. Nicholls: Yes, Mark, it's Tim. I think a part of it is just seasonal impact. We're in one of the dog days of summer and we saw some markets slow toward the end of the second quarter, continue into the first part of July. I don't expect that to last for the rest of the quarter or the rest of the year. But -- and it's not a significant downturn. It's just on the margin. Mark Wilde - Deutsche Bank AG, Research Division: Okay. Then for Mark Sutton, I noticed, Mark, on some of the presentations recently, you guys have been putting on a little dotted line for that idled machine up at Valliant. And I just wondered if you can give us a little color on how you think about that machine, particularly with the industry operating at a very high operating rate right now?

Sure, Mark. There's a machine at Valliant, along with a number of other small opportunities, are things we constantly evaluate to make sure we've got the right capacity and the right geographic locations and the right mix between virgin and recycled liner. So we'll monitor the market. We also -- John mentioned and Carol mentioned the optimization opportunity is a big part of that, is really examining that 17 mill system and ending up with the best footprint we can. So we don't have any immediate plans for that particular asset that you mentioned, but it's definitely something that if we need to, for either volume or cost reasons to deploy it, we would. Mark Wilde - Deutsche Bank AG, Research Division: Would the roll-off, Mark, of that new India agreement would that make that restarted Valliant more attractive to you?

It could. I mean, part of what we're doing right now is, what you mentioned, new India. And also from Hood Container, we're buying on a 3-year plan, 2 years left of products from these divested mills. And if it makes sense for us to internalize some of that demand in the future and it likely could, that might play into our plans for internalizing that. John V. Faraci: Think of it this way, Mark. If we had to, it takes 18 months plus to do a retrofit of some machine or a greenfield. We can bring on Valliant capacity very quickly, very cost-effectively if the demand was there. And we're going to manage the businesses [indiscernible] to our supply and demand, but we can move very quickly and it would be very cost-effective because we kept the machine and capability basically intact. Mark Wilde - Deutsche Bank AG, Research Division: Okay. And then lastly, I just wondered, since we've got Tom Kadien on the line, Tom, can you give us a little color on how the Sun joint venture is operating right now? What kind of volumes? Where that product is being sold and kind of pricing? John V. Faraci: Tom may not be on but I'd say the -- let me answer that, Mark, quickly. The joint venture is operating well. Operationally, everything is running very well. It always happens when the market is oversupplied. Pricing, as Tom said, has probably hit bottom but there are no signs that it's going to improve next quarter. So we're seeing more of the same. That volume is staying in China. There's very little of it that's -- some is going outside of China to the region, but we're not exporting it all over the world. We have Coated Paperboard business in Russia and Poland and the U.S. and China, so we know overall what we're [ph] all doing. And that capacity was set up to serve the high end of the Chinese market, not necessarily the commodity and the folding boxboard market. Mark Wilde - Deutsche Bank AG, Research Division: Okay. And John, is there any -- in the Bleached Board market, is the Augusta machine just gone forever? Or given the tightness in the market, could you ever see bringing that back? John V. Faraci: You consider that out. We don't consider that an idle machine like [indiscernible]. Mark Wilde - Deutsche Bank AG, Research Division: Like Valliant. John V. Faraci: Well, let me just summarize for everybody, a solid performance in the first quarter. We're pleased, but the important thing is we've got more runway ahead and you can see that in the third quarter. We're set up well for significant improvement in earnings, cash from operations and free cash flow in the third quarter, and we'll be starting to talk to you about how we see 2014 as the year unfolds. So thanks for being on the call. We'll talk to you next quarter.

Thanks to all. Thanks for taking the time to join us this morning. As always, Michelle and I will be available after the call. Our phone numbers on Page 25 of the Appendix. Have a great day.

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