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 Mark Stephan Sutton - Senior Vice President of Industrial Packaging Timothy S. Nicholls - Senior Vice President of Printing & Communications Papers Thomas Gustave Kadien - Senior Vice President - Consumer Packaging and Ip Asia

Chip A. Dillon - Vertical Research Partners, LLC Steven Chercover - D.A. Davidson & Co., Research Division Anthony Pettinari - Citigroup Inc, Research Division Mark Wilde - Deutsche Bank AG, Research Division George L. Staphos - BofA Merrill Lynch, Research Division Phil M. Gresh - JP Morgan Chase & Co, Research Division Gail S. Glazerman - UBS Investment Bank, Research Division Mark A. Weintraub - The Buckingham Research Group Incorporated Scott Gaffner - Barclays Capital, Research Division Stephen Atkinson - BMO Capital Markets Canada Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division Alex Ovshey Ovshey - Goldman Sachs Group Inc., Research Division

Good morning. My name is Phyllis, 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 2012 Earnings Conference Call. [Operator Instructions] Mr. Glenn Landau, you may begin your conference.

Thanks, Phyllis, and good morning, and thank you for joining International Paper's Fourth Quarter and Full Year 2012 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, as always, 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 which you'll find in -- on our website, and that reconciliation will be to our U.S. GAAP financial measures, as always. Our website also contains our fourth quarter 2012 earnings press release and today's presentation slides. So 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.

Thanks, Glenn, and good morning, everybody. Yes, let me just start out by saying 2012 was another milestone year for International Paper. I think as all of you know, International Paper's cash flow story in 2012 was an all-time record in terms of cash from operations for International Paper, $3 billion. Some of the drivers. You know the story around Temple. The synergies had been far greater than we anticipated, and we realized them far faster. We've also successfully and fully implemented a price increase in our Containerboard and box business. That didn't have a huge impact in 2012 but will have a pretty significant impact in 2013. Now looking at Slide 7, 2012 is the third year in a row where we've earned returns in excess of the cost of capital, and what I think the last 3 years is fairly characterized as less than robust through mid-cycle demand environment. We reduced debt by $2 billion on 2012; increased our dividend by 14%, with more runway on the dividend ahead of us; and last but most important, and I'll cover this at the end but I just want to say at the outset, we've made significant progress on our strategic initiatives that create more earnings and cash flow upside for International Paper, 2013 and 2014, even in a more-of-the-same macroeconomic environment. So with that as a summary, Carol, let's turn over to you to cover some of the fourth quarter and full year.

Sure. So if I take you to Page 6, you can just see the financial snapshot of the company. And you can see that revenues were very strong year-over-year, up $2 billion to $28 billion. We did have some lost earnings compression associated with lower pulp and export pricing. Realizations were down, but we feel like the bottom has been reached on that, and things are stabilizing. So moving forward, it should be very good. As John said, you can see that we continue to generate a very high level of sustainable free cash flow. John referenced 7. You can see it. We had very good return on invested capital, and we had our third year now of return on invested capital above our cost of capital. And importantly, as we move towards 2013, we see another step change in our performance on this metric, which should be our best returns and the highest in, really, decade. If I move you to Slide 8, let's take a look at the financial bridge from 2011 to 2012. I would frame our results as solid. And more importantly, the progress that we made integrating Temple-Inland in 2012 was meaningfully earnings accretive in under 12 months. Importantly, this has built a strong foundation for steadily improving, as well as less cyclical earnings for the company going forward. While that slower global growth environment did take its toll on our pricing in pulp and our consumer grades, really it impacted our export shipments across our product lines. As I said, I really believe the worst from that is behind us, and we've seen pulp market stabilized, come off the bottom, and export market in containerboard, importantly, have recovered nicely in the second half. It was, all said, an excellent year of execution across our…

Okay. Thanks, Carol. I'm on Slide 31 now here, the map. And what I want to do, before I get into talking about 2013 and some of the -- revisit the strategic initiatives that I referenced at the beginning, just to give you a sense of how we see the world where International Paper operates, this map shows the 6 global economies that are important to International Paper in kind of 4 businesses: paper, corrugated packaging, coated board and pulp. And as you can see, when you look at all these, overall, we're forecasting 3.5% of global growth, which is consistent with most of what you see forecasters are thinking now, with North America being a lot slower than that and the rest of the world being better, especially places like Russia, India and China. So let us move on to the 2013 outlook, still all about cash. And as I said, I just want to reiterate, International Paper is a cash flow story. We're going to see the full impact of pricing that we've gotten. In fact, we've -- we're just about there now, in January, on our containerboard and box business. That is $400 million plus. The strategic initiatives, which I'll come to in a minute, are going to add about $350 million to $400 million of improvement in the year. And when you take in modest global growth, all that adds up to, roughly, $1 billion of overall improvement. There are some headwinds. We've got some cost headwinds of a couple hundred million dollars, so we expect another record year in terms of cash generation for International Paper. And as Carol said, what we'll be doing is returning some of that cash as it gets produced to shareholders and also reducing our debt. So let me take…

[Operator Instructions] Your first question comes from the line of Chip Dillon with Vertical Research.

First question is you mentioned on the improvement on Slide 33 from all the projects and that $350 million to $450 million on a mid-cycle basis would be just 40% of the improvement. Can you just clarify, that is the amount you would expect and hope to see in 2013, and all the improvement from these projects would actually be north of $1 billion plus whatever Ilim gives you. Is that the right way to read that?

Yes. Yes.

Okay, that's very helpful. And then next question is you mentioned, Carol, that the downtime in the fourth quarter in containerboard -- or in particularly not the downtime, the lack of downtime was to build inventories ahead of the seasonal downtime you're about to take. And I was just wondering if you could give us a gauge as to what the inventory increase was for your system in the fourth quarter, and even if you have a look at January.

I'll let Mark answer that question, Chip.

Chip, great question on inventory. We have entered the quarter with very lean inventories, as Carol mentioned. And we had a couple operating problems that made it difficult for us to build the inventories we needed. So we ended the fourth quarter trying to build inventory to prepare for our outages in -- actually in the first 2 quarters, and we didn't quite reach our target. We did build some finally through December but not enough, so we're working toward getting our inventories in shape in January so we could execute the outages that we have first half.

Yes, I'll just add there, Chip, on a 13 million-ton system, when you have supply chain problems, the numbers get big pretty quickly. So we want to rectify that and -- so we don't have those supply chain issues internally with customers going forward.

Got you. I mean, can we have seen like 100,000 tons, I mean, given the size your system, increase since the low point in September?

We would have loved to have seen that to prepare for, like I said, really the first half of the year upwards of 60% of our outage, but we didn't have anywhere near that number.

Got you. And then just the last question is, when you look at the goal of getting the total debt including pension below 3x, and you sort of mentioned that you can sort of see getting there at the end of the year. I guess a couple things, one is, I mean, the year is only a month old, but it's fascinating to see that the probably 25 basis points, I'm guessing, or 20 of that 100-basis-point hit you took that created that, I guess, $1.3 billion or $1.4 billion increase in the pension underfunded position. That a part of that has reversed and your assets have gone up. I mean, if you kind of looked at this in realtime, I guess, is that you're already seeing that reverse. And do you feel you need to get below that 3 point before you would, say, consider buying back shares?

Chip, I think what's important is using the cash in the most effective and prudent way that we can. We'll continue to evaluate debt pay-down, as well as other uses, as you've mentioned. Dividend's a priority, and share buybacks, certainly, are something that we would consider.

Yes, Chip, what we said consistently is our objective is not to fund the -- fully fund the pension plan with a discount rate at 50-year lows. That's not [indiscernible]. Certainly, we want to get the balance sheet debt down to less than 3. We're conscious of the pension obligation. We've got in our cash flow planning, we got plenty of cash to put in the pension plan as we need to. As Carol said, we don't need to put -- it's a modest amount for 2014. So interest rates, you're right, I think it will go a long way into helping us fund the pension plan, and we're not going to do it all with cash.

Your next question comes from the line of Steve Chercover with D.A. Davidson. Steven Chercover - D.A. Davidson & Co., Research Division: It's great to see that your market, really, of downtime in containerboard was down by basically 1/6 of what it was. But why even take downtime if you had the supply-chain disruptions, or you just didn't realize that you were that lean?

This is Mark. That's part of the issue. All of the lack of order or market downtime was taken very early in the quarter. Usually, we expect a little more seasonal decline in the fourth quarter, and it wasn't really happening, so we unwound the planned lack of order downtime early in the quarter. And everything looked good until we had a couple of reliability issues, and that resulted in us having some additional costs, mainly in freight and in waste in the box plants because we were sourcing board from less-than-optimal mills. But we really got the lack of order downtime out of the way early in the quarter, really in October. Steven Chercover - D.A. Davidson & Co., Research Division: Okay. And we know you're taking some maintenance, Q1. Can you discuss, I guess, just your order trends in the first few weeks of January?

For the box business in North America or in the U.S., the order trends look about what -- like we expected. So for us, we've been tracking probably a little lower than the overall market and in the box market in the U.S., and that's kind of what we're seeing. But I'll remind you that the way we run the business is we try to maximize our potential through all 3 channels, the North American box business, but also the open market and the export market for containerboard. And we'll constantly move between those 3 segments to optimize the business. Steven Chercover - D.A. Davidson & Co., Research Division: And why do you think you're running a little below the North American trend? Is it just that you're turning away bad business?

I think if you think about what we've been through in the year, obviously, we took on a lot of new business with the form of Temple business. There's a lot of integration activities on the commercial side. Not all of that business met our objectives in terms of capability or economics. And so in order to make improvements in the business, we have to make choices, and we've been doing that and will probably continue to do that for a period of time until we have the best mix for International Paper and the best service for our customers. So it's not anything that we are alarmed by. It's part of the process of optimizing the new company that we built.

Another point, Steve, is we're under-weighted in durables relative to maybe the overall market and overweighted in nondurables. So as you get the flow in impact to housing, which is going to be significant on the durable side, we're going to be -- we're underrepresented there now, and we're probably going to grow that durables segment over time selectively.

Your next question comes from the line of Anthony Pettinari with Citigroup.

You have a helpful slide showing your returns over the past decade, and maybe 2 questions there. When you think big picture about the dip in returns from 2011 to 2012, should we think about that as being primarily driven by the heavy lifting around the Temple integration and maybe a slightly larger capital base? And then second question, when you think about moving those returns higher in 2013, what are the businesses or geographies within IP that really have the most potential to improve their return on capital in 2013 relative to where they were in 2012?

Anthony, this as Carol. I'll just take the first part on that. Yes, the dip you see in '12 was certainly the fact that we made a big investment. But when you see the rebound that's going to happen in 2013, it's going to show how successful and accretive and synergistic the Temple-Inland acquisition is going to be to the financial performance of the company.

And some of the big levers, Anthony, in terms of where returns are going to improve, Industrial Packaging in North America for sure, with a full year of merger benefits now and a full year of the implementation of the pricing -- of the containerboard and box price increase, that's big. In Latin America, the returns in Brazil get better because we're selling more paper in the region, where the EBITDA per ton or the EBIT per ton is significantly higher than it is for the rest of the world. And that market's growing. And we got the boiler project in India. And we paid the price to get into India, and we see a lot of improvement. We can sell all we can make, which is something you can't say about the paper business necessarily in North America, but got good growth there. So India is still small. But those are 3 of other places, 1 very large, Industrial Packaging; 1 smaller, where we see a lot of upside for improving return on invested capital.

Okay. That's helpful. And you mentioned the North American paper business, and you had pretty positive performance globally. But when you look at -- I was wondering if you could talk about how maybe volumes in 4Q trended versus your expectations. And we seemed to have a pretty bad industry number in December, if you have any kind of observations on that. I saw that you have like a 3% volume decline assumption for 2013, and maybe if you could just kind of comment on those trends.

Anthony, it's Tim Nicholls. Actually, in the fourth quarter, I think as the quarter started, we felt relatively good about our volume levels. And they held up well in October and the first half of November as well, and then you always get the seasonal downtick around Thanksgiving. But I think what was notable, first part of December looked very good, and then I think probably around the 20th of the month, the weekend before Christmas, everything shut down, and they pretty much shut down for the year. We heard that consistently across all segments of customers, and I think it was probably a combination of what was going on in Washington, as well as everybody wanted to run the inventory levels down as much as they could or had sufficient inventories they felt to hold them over. So I don't read too much into the December number. I think it's overstated. And when you look at this year, the 3% is really not our forecast for sale, though we agree with it, it's what third parties are saying. So it's a blended rate between PPPC and RISI. But I think when you look at volume for total year 2012, a little bit higher than the 3% to 4% that we think on a secular basis. But I think secularly, we're right in line where we think we should be. And cyclically, we didn't get as much help from the economy as we thought we would.

Your next question comes from the line of Mark Wilde with Deutsche Bank.

A question for Mark Sutton, just to start. Mark, it looks like you had about 570,000 tons of market downtime for the full year. And I assume in 2013, you're going to get some more operational benefits from integrating the Temple mill. Is there any reason with that kind of slack in the system and sort of low growth scenario in front of us for the next 12 months why you wouldn't look at making some permanent moves on the supply side?

Well, it's a good question because we honestly don't want to take that much lack of order downtime if we don't have to. But you got to remember what I've said earlier about the 3 channels of export, open market and domestic box, and the fact that we have these off-take agreements from the mills we divested. When we look at all of those moving parts, we believe we're going to need the containerboard that our system can currently make going forward. So while this might be a little slack in the near term as we move through those divested mill offtakes and as we look at the global growth in the containerboard. And as I said earlier, we don't intend to track below the market forever in the box. We just have to get in the right segments and optimize the business. I think we're in pretty good shape. We would have to believe, Mark, in a real structural change in the demand profile for us to be considering permanent capacity adjustments.

Yes, that's fair. Those offtakes are pretty important. Can you remind us just generally how long those offtakes run for?

It's a 3-year agreement, from -- starting from the summer of 2012, and it goes down in commitment volume each year.

Okay. And then, John, a question for you. Can you just talk with us, generally, about the potential for kind of further acquisition or growth initiatives over the next year or 2? I'm particularly curious in some of the offshore markets, say, the Packaging business in Russia or that packaging business in India. You've talked about, particularly in India, wanting to grow in packaging.

Well, International Paper is not an M&A story. We're through the transformation plan. That's over. We've rebuilt the company. It looks different, and it's got a lot of performance potential upside in the existing assets we have. So I'll just say that to reinforce that we're not out saying we have to do things to improve International Paper, we've got plenty on our plate that we've put in place over the last several years. India, we think, is going to be an exciting market for International Paper for a long time. That doesn't mean we're going to be doing a whole lot of things in 2013 other than continue to make improvements at APPM. We are going to generate a lot of cash. Our priorities are to use that in a balanced way. And if there aren't opportunities to reinvest in some of our strategic businesses, we'll return more to shareholders. But International Paper is not M&A-driven at this point, and we've put in place what we need to make International Paper a much better company. And we're excited about the runway for '13 and '14 with just what we have.

Okay. The last question I have was for Carol. I wondered if you could just help us with the ramp-up that we might see from Ilim in the second half of the year? And if you can give us any color on this sort of next phase of Ilim build-out that Paul Herbert had talked about publicly about 15 months ago?

Let me take that one, Mark. The -- we'll be starting out -- start with Koryazhma. That's where we're putting a paper machine in that we moved from Scotland. That will be starting up in March. Behind -- we're already running the converting equipment. Behind that, we've got a coater going in, in the second quarter, so we'll be able to make 50,000 to 100,000 tons of coated paper. We're the only producer of coated paper in the Russia market. Going back to Bratsk, that's a pulp line will start up probably late in the first quarter. We're going to do that right because of what's going on with the markets in China. And you'll see those facilities ramp up. The pulp lines will be a little shorter than the paper machine because we've got to get all the grades qualified. And we should be at full ramp as we come out of '13 into '14. The objective at Ilim is going to be to pay down some of the debt that the joint venture has taken on to fund the projects. But we're going to have a whole lot more debt capacity because, as I said, we'll add $400 million of EBITDA to an already pretty healthy Ilim at mid-cycle. And there are some possibilities, as Paul talked about. We have -- the Ilim board hasn't made any decision but they'll be talking about that as -- probably as we move out to '13 into '14. But the priority of Ilim is get those projects started up and start to give Ilim some more headroom on its balance sheet, so that it's got some options. Plus we got an opportunity to increase the dividend. All those things are available to us.

Okay. It sounds like, John, in summary, we shouldn't expect a lot of benefit in the second half of '13 just from equity contribution standpoint, that's really more 2014, is that correct?

Correct. Because you've got increased interest and increased depreciation which is going to kind of offset most of the EBIT improvement we expect to see if pricing stays where it is.

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

John, I guess I had a question for you and the team. As we look at the incremental runway drivers that you call that in total worth $350 million to $450 million, what confidence level would you place on the lower and upper bounds and other discrete factors you are risk adjusting for that provide the range of outcomes in your guidance, what could you share with us in terms of how those numbers -- or how that performance, rather, could move over the year?

Well, just starting at the top. We have a lot of confidence in what we see with -- in industrial packaging with Temple, I said that the price increase is in. The -- we have -- we know what we got to do to get more synergies. And we can't wait to get through the synergies and turn optimization, so a lot of confidence on that. That's a big number. Franklin, we basically sold a lot of fluff pulp, but we need to qualify it. So our customers are waiting for us to qualify the pulp. We're going to have more Tier 1 and Tier 2 customers than we thought, which is better margins in Q3. A lot of confidence on that. xpedx has made a huge amount of progress on the warehouse side and the purchasing side. It's all then offset by what's happening on the revenue side and print. So xpedx has been treading water, but if they haven't been working hard on what they've been doing, we wouldn't be treading water. Our Mogi boiler is up and running. I'd say that's in the bank. We've got to work through the excess capacity that exists in China around the coated board business, as you've seen before when China's markets, since they're all growing, when they grow, they can take and absorb capacity pretty quickly. And I think the Chinese economy has kind of seen its a slow point. So Olmuksa and -- Olmuksa has been operating for a decade, so we know that. Orsa's new, but we like what we see so far. It's in the early days. Ilim is -- we're operating in Russia, it's going to take some time to get those ramped up. Hopefully they come on faster, but we know how to do this, we've done it before. So I'd say, all in, we're pretty confident. And this all assumes a more-of-the-same economic environment. The economic environment gets better, that's terrific.

Okay. So really, the $100 million, that is really driven by the macro, not any specific issue you have in terms of execution or any of the projects. It sounds like maybe out of all of them, Asia and China relative to Sun JV is where you might potentially have the most swing factor. Will those be the 2 growth areas?

Probably, yes, that's a fair statement, George. Let's see -- trying to forecast what's happening in China is never easy. We could easily have a $50 million swing.

Okay. Appreciate the color on that and for that matter, all the details on the slide deck and the conference call. I wanted to take it back on earlier question I think Mark had asked and directed at Mark Sutton in terms of the supply chain and output potential within containerboard. Now given as you see the world and given your 3 channels, you believe that you have a need for all the 13 million tons that you produced. And certainly, the results you've been putting out would suggest that, that's correct. Do you see the footprint necessarily being unchanged in producing those 13 million tons over time, or could you have a leaner or lighter footprint as you get those tons out of your system over the next couple of years? And what are the next big moves within the mill and supply chain optimization program?

George, that's a great question on the footprint. I mean, we are optimizing the 17 mills that we have now, and it's always possible that we could find a way to make immediate containerboard with a lighter footprint. We don't have anything in the near term that would say we found that. The biggest work left to do in the supply chain is -- we sort of don't talk about this much, but we're operating these mills on 2 different, distinctly different, supply chain systems, but we've completely blended the supply to the box plants and to the open market between the 2 systems. And so there's a level of manual operation that will go away through 2013 as we install the new supply chain systems that we use in International Paper in all of the former Temple mills. And that is probably going to produce the opportunity for the biggest internal cost benefit and external service benefit for our customers. So that's what we're focused on for this year. In addition to, as Carol mentioned, the one area in the synergy target that's not quite filled, the bucket that's not quite filled, is the mills in the supply chain. There are some projects we're going to execute in the first half of the year, mainly in the first quarter, that will allow us to capture those mill synergies from a cost and operational flexibility and, in some cases, from a quality standpoint. So I think we've got a lot of opportunity, and we are always studying the footprint not only in this business but in all the businesses in the company and looking for the smartest way to produce the product we need for the demand we have.

We can make what we need to with less facilities to do it.

Okay. I appreciate that. Two last quick ones, and I'll turn it over, one on xpedx and the other on maintenance spending for the year. On xpedx, and taking a step back, were you pleased with the performance in the business in the quarter and in the year in light of the discussion, I guess, from a year or so ago, where Mary gave a review on the next step change, where you used that as a phrase of the day, in terms of xpedx's potential in improving your profitability, how would you have us think about that? And then on maintenance spending, we appreciate the schedules. I thought I heard you say at one point in time there's a $7 million improvement or reduction in maintenance spending. One of the slides has $11 million. And then when I compared Slides 30 and 37 to look at the sequential change in maintenance, I don't see much of a difference, at least not in my deck. Can you just tic-and-tac that for us?

Well, George, Mary is not here, so I'll speak to the xpedx. I think if Mary was here, she'd say she wasn't satisfied with xpedx's performance in 2012 and principally because we weren't able to offset all these challenges we had on the print side with revenues. And that said, we like the progress we've made on the buy, handle, sell front. And if we hadn't done that, we wouldn't be where we're at. But we've got to quickly get our warehouse configuration in place. That will be in place by the end of the year. And get all of the purchasing that we're going to centralize to get the advantage of that. So more work to be done, but I'd say we're basically close to being on schedule in terms of the internal stuff. What we didn't see was the challenge we're going to see in the print space, principally commercial printing. So it's not paper overall, it's coated papers. That's our biggest product line. So, no, we're not satisfied or pleased where we're at, but this is where we are at, and we're holding our own.

And related to your question on maintenance, I see what you're saying. On 37 and 38, we're showing essentially flat, and yet I called out a change. And we'll clarify that for you, and -- but my guess is the back schedules are probably closer, and we probably have some other projects that I included in that, that were operational in nature.

[Operator Instructions] Your next question comes from the line of Phil Gresh with JPMorgan. Phil M. Gresh - JP Morgan Chase & Co, Research Division: So on recent calls, it seems there had been some diverging views around virgin wood fiber prices in the U.S. And your charts, obviously, do show a bit of an uptick in your wood basket. So I'm just kind of curious how you guys are thinking about these recent trends. How much would you say is seasonal versus, perhaps, the start of a structural trend given the recovery in housing and increased wood pellet demand?

Well, I guess I'd characterize that, Phil, saying we've come to see more upside -- more pressure on recycled fiber costs than we see on virgin fiber costs. But we see upside pressure on both but more on the recovered fiber side of it. And we're big -- obviously big in both, so you're right. What's going on with housing, OSB plants coming back online, lumber mills coming back online. We're going to get the chips, but we're not going to get chips from OSB plants when you've got some wood pellet plants that are starting up. And so that's all principally softwood. On the hardwood side, I'd say it's not as acute on the demand side, but we see some upside pressure, but hardwood prices didn't come down as much as plant prices did. So we don't see a blowout in fiber prices, but we see some upside pressure, probably more upside pressure on recycled fiber prices, just because of the impact that China has on recovered fiber markets around the world. They've got a 40 million-ton box market now, and most all of that's recycled fiber. And that's going to continue to grow, and it's going to grow all with recycled fiber. Phil M. Gresh - JP Morgan Chase & Co, Research Division: And to clarify the $200 million input costs, does it assume stable wood fiber prices after the first quarter, basically, or declines, or how you're thinking about that?

We're assuming some virgin fiber prices rise through 2013. We're assuming that the OCC prices rise through 2013, and we got a little bit of year-over-year energy costs, because we don't see -- we see low energy gas prices, we don't see $2 gas on the horizon. We have that for a while in 2012.

Our next question comes from the light of Gail Glazerman with UBS.

I'm just curious, when you look at the comments on kind of appreciated demand in late December, we saw that across all the printing and rating grades. Just wondering, did you see that type of phenomenon in any other product area where kind of at the end of the year, things dropped off, and just to clarify exactly kind of has that bounced back, to what extent, in January?

Gail, this is Tom Kadien. We saw, I think, a similar pattern, as Tim described, on uncoated freesheet and the coated board segment. But I would say that I'm feeling a bit better as January has gotten longer, things have seem to come out of the seasonal fourth quarter, which was pretty weak in the back part of the quarter.

And, Gail, it's Tim. I would just build on, as we mentioned earlier, that we saw a similar thing in the uncoated freesheet business as we moved into January. It seemed like people were building or rebuilding pipelines, inventory pipelines, as we got into the first couple weeks of this month. So in our mind, it just reinforced the fact that things kind of shut down at the end of the year.

Yes, keeping in mind IP is a global company. We had in Europe, in South America, in India, in Russia, we finished the year probably as strong on the demand side as we started the year. We're gaining share in Europe. We're gaining share in South America. We're probably growing with the market in India. And we need more capacity in Russia. So the trends that we were talking about are really North American trends, but they're not the same as the global trends.

Our next question comes from the line of Mark Weintraub with Buckingham Research.

Just some questions on the containerboard export market, if you could just give us more color on what you're seeing there and in particular, what's happened to pricing in the last little bit and maybe, if possible, where mill mets are on export tonnage versus domestic?

Mark, the export market, really, that was one of the positives in the fourth quarter. It remains strong where we normally see a bit of a dip. We saw strong demand, especially in Europe, the Middle East and Asia and also in Latin America. Craft liner demand in Asia wasn't quite as strong, but it was stable with the prior quarter, so we just didn't see any uptick. And prices continue to improve. I think our prices were up over the third quarter, close to $40 a ton, and $57 to $60 from the beginning of the year. So in essence, demand has been steady to improving in all the markets we serve, and pricing has been improving.

And have those trends effectively continued in the first part of this year?

Yes, they have.

Our next question comes from the line of Scott Gaffner with Barclays.

Just had a quick question on the box plant system. You mentioned that you're at 100% for the synergy savings. That got you to the $150 million on the box plant savings for the synergies. But you also mentioned at the Analyst Day of $50 million of optimization savings above and beyond that $150 million. Can you talk about sort of when you think you can attain that, what else is left to do to optimize the box system going forward? Maybe how soon you can get to the $50 million run rate?

Scott, the $50 million was part of the overall optimization. That's the part we sort of peg for the box business, and we feel -- we still feel very good about being able to achieve that. And I think a good portion of that we'll achieve through the 2013 time period. And it's a lot -- it's not a silver bullet, it's a lot of initiatives on the commercial side. And some of it relates back to what we talked about on the supply chain. As soon as we can have one system and really optimize our supply chain, we'll make sure that freight is at an absolute lowest and box plant waste is at an absolute lowest, and then we'll have opportunity to improve our commercial performance. And we still feel very good about the optimization targets that we shared back at Investor Day.

Maybe there are some potential upside to the $350 million to $400 million project in 2013 from the box optimization? I didn't see it listed in the projects anywhere.

Part of the reason it's not listed as a project, is we view it -- as we move through the synergy acquisition period, as John said, we view it as optimizing the business, so we don't call it out. But at the end, it's inside of the words we used around the upside of industrial packaging for 2013 and beyond.

Our next question comes from the line of Stephen Atkinson with BMO Capital.

In terms of Orsa, are you able to take about any, should we say, low-hanging fruit or synergies with regards to your existing businesses there?

Stephen, it's Tim. I think we're -- it's 2 weeks, so, as I think John said, it is early days, but what we see so far, we like. It's kind of right in line with expectations. If you recall, this was all about taking what was generally a good commercial operation and looking at the manufacturing side and increasing efficiencies and lowering costs. Our first view being in the facilities for a couple weeks says that everything that we thought was there is there, and there may be other opportunities.

It's a 20% EBITDA margin business, and we think we can get it to the 25% range.

Our next question comes from the line of Mark Connelly with CLSA. Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division: Following on that question, do you think that Orsa's lack of Timberland is a competitive disadvantage versus the other virgin producers? And do you expect to acquire Timberland to support Orsa?

No, that's not the plan, currently, Mark. In the holding company that Orsa was pulled out of, there are forestry assets. We chose not to have them included in the business because, quite frankly, we didn't feel like we needed them to support the business. So there's supply arrangements with their forestry operations for a portion of the furnished, but a lot of it will be coming from open market.

Mark, the dynamics of the pine supply-side in Brazil are very different than the hardwood side. A lot of pine was planted a long time ago, and so you don't have to have plantations like you do in the paper business to be able to access fiber. Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division: Sure. We've seen those prices move up. That was why I was wondering.

Yes. The prices will move up, but you know the land business, if prices then should move up on your own land because you need market to market.

Our next question comes from the line of Alex Ovshey with Goldman Sachs.

John, I think you said that you expect free cash flow in '13 of $2 billion?

I think we should be approaching $2 billion.

Approaching $2 billion, so that would imply that free cash flow is up about $450 million on a year-over-year basis?

In that ballpark, yes.

Okay. And then you guys talked about the incremental runway from the internal projects of $350 million to $450 million, so a midpoint of about $400 million, so that imply that price cost minus the impact from divested mills is about $50 million in 2013?

Well, part of the free cash flow generation is coming from that $400 million of strategic initiatives improvement, then you've got the box price increase in containerboard, and then you've got a bunch of cost headwinds. And so all that nets out to just what we -- $450 million roughly of free cash flow. But remember, only -- that's only 40% of the impact of those projects. There is another kind of double it to come in 2014, '15.

Yes, let me just, before I need to wrap up here, just summarize kind of how we see things. So 2012 is now behind us. We thought it was very much of a transition year for International Paper. And setting an all-time free cash flow or all-time cash from operations record in the transition year, we're pleased with, but we're not satisfied that you've seen all that International Paper can do. So we're excited about 2013. I hope it remains a cash flow story. And even in a more-of-the-same economic environment, we're pretty positive on the kind of incremental earnings and cash flow we're going to generate in what still is in the mid-cycle environment around the world. So we'll be looking forward to talking to you in the quarters coming about our progress.

Thanks, John, and thank you, all, for joining today. Of course, please direct any further questions or follow-ups to me or Michele Vargas at the phone numbers on Page 34 in your Appendix; and for Media, to Tom Ryan. Thanks again, and have a great morning.

Thank you. This concludes today's conference. You may now disconnect.