Good morning. My name is Rachel, and I will be your conference operator today. At this time, I would like to welcome everyone to the International Paper Third Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Mr. Jay Royalty, Vice President, Investor Relations. You may begin your conference.

Thanks, Rachel. Good morning, everyone. And thank you for joining International Paper's third quarter earnings conference call. Our key speakers this morning will be Mark Sutton, Chief Executive Officer; along with 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 two 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 third quarter press release and today's presentation slides. Lastly, slide four provides context around the Ilim joint ventures, financial information and statistical measures. With that, I'll now turn the call over to Mark Sutton.

Thanks, Jay, and good morning, everybody. We appreciate you joining our call today. Regarding the format for today’s call, it will be similar to what we've done recently. Carol and I will review our third quarter 2014 results and the performances of our individual businesses. We will then take a look at the fourth quarter outlook and open it up for your questions. I am on slide five now, International Paper delivered a record quarter both EBITDA and free cash flow in the third quarter. We had strong performance from many of our businesses, as our team continues to execute very well. We announced the dividend increase of 14% from a $1.40 to $1.60 per share, which is our third consecutive fourth quarter double-digit increase. We continue to opportunistically buyback shares and have purchased more than 1.4 billion worth of shares since last September and through yesterday as of this call. Additionally, we received the dividend of $56 million from Ilim during the quarter and the JV continues to ramp up post the major capital projects and had another good quarter of solid performance. Due to the devaluation of the Russian ruble, the JV took large non-cash charge against its U.S. denominated debt. Moving to the financials on slide six, I’d note that beginning this quarter, xpedx is reflected as a discontinued operation in all periods presented. And as you can see, International Paper delivered strong financial results across the Board. As mentioned earlier, both EBITDA and free cash flow are at record levels as was EBIT. Our EBITDA margins approached 20% for the entire company for the quarter. I’ll now turn it over to Carol Roberts and ask her to discuss the details on the quarter, as well as results of respected businesses. Carol?

Thanks, Mark, and good morning, everyone. Turning to slide seven, the sequential EPS bridge, IP earned $0.95 per share in the third quarter versus $0.93 per share in the second quarter. This was a strong performance for the company, particularly given the significant EPS impact of $0.25 per share sequentially from the FX on the Ilim debt that you see on the right hand side of the slide. So talking about the business fundamentals, pricing was relatively stable across the businesses, as was volume. Operational performance remained strong and contributed favorably to the results. Maintenance outages were substantially lower as we expected. Input costs moderated very slightly, but in our view remained at relatively high levels and if you’ll take a look at slide 42 in the appendix, you will see that input costs are actually $26 million higher than the same period last year and this is mostly driven by wood costs. Tax and interest expenses came in slightly lower than the second quarter, so a sequential pickup. And as Mark mentioned earlier, all results have been revised to account for xpedx moving to discontinued operations. Now turning to the individual businesses, Industrial Packaging delivered a really outstanding quarter, record earnings driven by stable prices, solid operations and lower outage expenses. The modest softness we experienced in pricing was attributable to lower export pricing, contributed also due to the strengthening U.S. dollar. Our lower volume quarter-over-quarter was driven by reduced U.S. exports. They were down 44,000 ton and lower shipments in our European Packaging business, which is really due to seasonal factors. Operations were strong as our teams continued to run well and as expected we had fewer outages. Relative input costs the benefit of lower OCC was offset by higher wood costs in the quarter. Turning to the…

Thanks Carol. So let me just summarize our remarks and wrap it up. IP had a very strong quarter setting records on a number of fronts as we continue to run our businesses very well. While we expect this strong execution to continue, our outlook for the fourth quarter is impacted by fewer shipping days in North American box and $60 million in higher planned maintenance outage expenses. We are leveraging our well-positioned businesses particularly in the absence of any tailwinds in most markets. Our teams around the globe are executing very well and are continuing to find ways to drive improved results and create value. Our free cash flow generation continues to be strong and sustainable which is enabling IP to deliver on its capital allocation strategy. We have delivered three consecutive annual double-digit increases in the dividends and today we are within $100 million of completing the original $1.5 billion share buyback program, that was authorized back in September 2013. We continue to look for value creating opportunities for reinvestment, for example, the recently announced restart project of our number three paper machine at Valliant for our containerboard business, the expansion of our Canton, Ohio foodservice facility and the coated paperboard enhancement project, we completed and are in current ramp up at our Kwidzyn mill in Poland. IP’s financial state is very solid. We remain focused on the execution of the plans we’ve outlined and going forward, we expect to make continued progress toward our key goals. Before we open it up for questions, I'd like to give you a brief update on where we are with the master limited partnership opportunity. As we said at the UBS conference in September, we moved to a more intensive evaluation phase. We’ve retained a team of external advisors and are actively working with them at this time. As part of the process of our discovery, we’re also talking to several companies in other industries. We have formed and are operating an MLP in an effort to better understand the process and their experiences. There is a lot of work going on to better understand what an MLP structure might look like specifically for International Paper and whether we would benefit from such a structure and whether we can create value for our shareholders. I can tell you we’re encouraged by what we’re learning through this process. And as part of our continuing evaluation, it is our intention to file a request with the IRS for the private letter ruling and we’re working with our advisors to get ready to do so. And with that, we'll be happy to open it up for your questions.

(Operator Instructions) Our first question comes from the line of Mark Weintraub.

Thank you. I hope this is a fair question for quarterly earnings call but Mark, since you've taken over, as IP's CEO and I just wanted to throw this question at you. What do you think are the key levers you can pull to take IP to the next level or put it different way? What are the biggest opportunities that you're looking to act on in the next couple of years?

I guess, it’s a fair question, Mark. It’s an obvious one as well. I think we've got a strategy that we’ve embarked upon and we shared with the investment community, we shared with our employees. And we still got more runway on our current strategy and so executing very well against our current plans, which is essentially advantaged positions in paper and packaging globally, creating value for our shareholders. That’s still the important near-term task. And obviously without being able to predict the future as we go out beyond two years, we’ll have to continue to evaluate where we can create value. And I’m sure, can’t tell you what it will be, but I’m sure International Paper will evolve and will be different in five years than it is today. But the bottom line is we're committed to a strategy of balance used for the cash. We think we can continue to generate healthy cash flow and we’re going to look for ways in a balanced fashion to create value for the long-term.

And just as quick follow-up and how important is M&A to the strategy and how -- and do you feel that you're somewhat constrained given the various market positions that you already have?

I think in general, M&A is obviously a tool in your strategy toolbox. I wouldn’t comment on where we might be constrained or not. But I think IP is not a mergers and acquisition story to create value going forward. As you mentioned, we have strong positions in certain markets but there are opportunities for us to improve what we have. And I think M&A will come out where it comes out based on the opportunities we see in front of us. But all against the backdrop of creating value for the long-term.

Okay. Thank you, Mark.

Our next question is from the line of George Staphos.

Hi, everyone. Good morning. Thanks for the details. Again, congratulations everyone in their new endeavors. I guess the first question I had on MLPs, Mark, could you comment at all, or Carol, if you could comment on you're more encouraged by what you have found recognizing you still have more work to do. Relative to when you first examined the structure or thought about it to the current time, what has been the biggest source or biggest couple of sources of incremental encouragement or view on how it could create value?

George, I will just a make general comment and I will ask Carol to elaborate. I think what we talked about at the UBS Conference, I’ll refer to as learning how this specifically would work in, for example our containerboard business and whether or not, our core principles have been able to run the business effectively, can be maintained is what we're learning and most encouraged about. And as you remember, IP had a master limited partnership in our timberlands business years ago. We weren’t worried about the complexity. We were worried about whether or not the specific applications of this structure in this type of business and the way we need to run the business could work. I think we're learning more about that that a lot of those issues are manageable and Carol, if you would…?

Yeah. And I will do it from the other side. The other part we’ve learned is why would IP specifically be attractive to investors in an MLP, and what would they be looking for and what is it that we offer that would be attractive to that investor base and what would that be worth to them, because that’s what ultimately translates back to the value of International Paper. So just learning about the value drivers of MLPs. That’s been -- that we’ve learned a lot and we see some encouraging things from there.

If I could tag on, and again maybe this is preliminary and thus you can't really get to it. Would it be feasible in your view, given your work to date, for other portions of IP to be suitably dropped into the MLP, or have you not gotten to that point yet in terms of your valuation?

George, that’s the type detail that we aren’t really prepared to go into. But I can tell you that we’ve got a holistic approach to this and that’s how we are going to continue with it. But specifics about the structure and all that, it’s not the right time right now.

Understood. My last question. I'll turn it over to the rest of the analysts. A couple years ago, you talked about the $5 billion EBITDA goal, the Drive for Five, so to speak. Is it possible to comment in terms of how you gauge your prospects for reaching that given the current structure of IP and the current trends that you have both going for you and against you? Thanks. I'll turn it over.

Okay. George. That’s a great question. I mean, we are committed, we laid it out there back in 2012 that we were shooting for a milepost of $5 billion in EBITDA and we are not ready to give up on that. It’s harder to get to and we are getting there in a different way and I think the biggest gap we have is what we describe as mid-cycle conditions or mid-cycle cost and demand environment. I’m not sure we’ve seen that yet. But obviously, as I step into my role, we are rejuvenating our efforts to find additional ways with what we have today to try to get as close to that and look at reaching that target. So that’s our approach. We made a commitment and we are focused on trying to find the way to get there. We knew it would be different than we laid out. We just didn’t know what the actual path would look like. So, aspirational, a little bit but we think we have the company today that with the right conditions, we can achieve that level of performance.

Thank you.

Our next question comes from the line of Mark Connelly.

Thank you. So we're starting to see more capacity announcements in India from local players mostly and you said you're looking more. Have you come to the conclusion that India's a big opportunity? I think in the past, IP has described it as sort of its investment as a learning experience

Mark, I will make a general comment about how I kind of personally view India, then I will ask maybe, Tom Kadien to elaborate given his been running and will continue to be responsible. I think you are right. We said India has maybe the potential for the future and we want to start to learn how to do business there. I think we’ve learned some things in the last three years. I wouldn’t say our view has changed dramatically like -- that we see something that we didn’t see two or three years ago. But we do see the potential. We see the potential in the packaging area. And so we’ll be very measured and very careful with what we do in India. But it is still a market that is intriguing and again it’s for the future, not for tomorrow. And Tom and if you would maybe add a few comments.

Yeah. Mark, not a lot more to add to that. But it’s three years for us in the paper business over there. We made a lot of strides that have been covered up by wood cost and slowing economy. But I would say we are as optimistic about the fundamental opportunity in India as we were -- when we bought our way into APPM. And I think the capacity announcements that you're talking about are really on the containerboard side. We think that’s also an opportunity for the future, but we’ve got to earn our strides in the paper business first.

Okay. That's helpful. And second, in the second quarter, John Faraci said that his target was to buy back your stock below intrinsic value. I'm wondering whether you apply that same basic metric to acquisitions with maybe intrinsic value plus expected synergies. I was wondering if Carol could remind us how you do think about acquisition value.

Yeah. Mark, clearly our goal on acquisition is to create value which comes quite simply to we use our methodology’s discounted cash flow model, trying to look at all of the cash in for what we can get out of the base business plus synergies. And we want a nice spread between our -- what we view our cost of capital against what the return on that project could be and that’s all around the assumptions you make. And you can make those numbers tell you lots of things. So what we tried to do really hard is we look at cost of capital by region. We don't use one number for the company and we pressure test the assumptions real hard. And quite honestly to make our IP more valuable, we need a nice spread between our cost of capital and the potential return out of those projects. And we have a very robust review process here where we debate it, when we talk about it. And John always encourages us to have multiple of view and I think we’ll continue on path. So, I think you would find us to do the work much like you would expect.

Very good. Thank you.

Our next question is from the line of Gail Glazerman.

Good morning. Could we just start, maybe a little bit on the demand environment, kind of puts and takes, gas prices are down. Are you seeing that flow through to some of your business that might be tied closer to the consumer? Just generally speaking, maybe touch on what you're seeing in Brazil and China as well in paper versus board?

So, I think maybe the best way to do that is to have maybe Tim Nicholls talk a little bit as he enters into the Industrial Packaging role, which is obviously the best bellwether we have for general demand environment in economy then we will kind of touch on the other parts?

Sure. Thanks Mark. Good morning, everyone. I think demand’s been pretty stable. We saw our box demand in the quarter just slightly behind where the overall market was, and Carol pointed out the factors between east and west. If you look at the east, we performed fairly well both in absolute and on a relative basis. So I think demand fills okay here in the U.S. It’s actually been pretty good. Export markets; we did see some seasonal weakness, but I think beyond a seasonal, I think it’s just more of new capacity pushing out some suppliers from North America and other parts of the world. And we bump up in a lot of parts of the world because of the size of the system we are. So we probably got hit by that just a little bit more than maybe others. If you look at Brazil, Brazil on the paper and on the box side has struggled give them the economic environment. They are technically in recession first two quarters of this year. And it’s been exacerbated on the packaging side of Brazil just because of how some of our biggest customers have been impacted in their markets. They have lost share to local suppliers, which is filtered through the supply chain to us. We will see what happens now. I kind of felt like Brazil had taken a bit of a pause. It was hurt by the World Cup and then it went into a pause waiting on the outcome of the election. The election is behind now. We will see what impact that has on the balance of the year. Fourth quarter tends to be a seasonally stronger quarter both for paper and packaging. In the paper markets there, the domestic markets have been weak. The export markets around Latin America have been a little more robust, but not the kind of strength that we’ve seen in prior years. But still from how we performed, we are better than market on domestic paper in Brazil and we are kind of flattish on export volume to Latin America.

Yeah. I will wrap up the demand comments with China and our demand probably reflects the Chinese economy. It’s slowed down. We still have pockets of positive demand growth, but it doesn’t mirror a 7% plus GDP number that gets published mainly because our demand is really dependent on one component of that GDP and that’s the consumer and/or exports and both of those or it’s sluggish in China right now. So we don’t see it getting a lot worse right now, it’s just not the level of demand growth that we’re accustomed to.

Okay. And then just on the MLP, I guess you said one of the considerations that you learnt about is the value drivers and what investors would be looking for. Can you give a little bit of insights, certainly one thing investors look for typically is yields driven? And just how you are thinking about the more normalized interest environment might impact the success of an MLP?

Sure, Gail. Yes, so it’s MLP 101, so I will be brief, but it’s about the yield, but it’s about the growth rate and it’s about the longevity. And when you think about International Paper with the size and scale of the system we have, we’ve got a lot of EBITDA, lot of cash flow, and so you’ve got growth and you’ve got longevity. And then if you look at the value to the International Paper shareholder, the value comes from your general partner stake and your incentive distribution right stake. So you’ve got some drivers that could be valuable to International Paper. So then it comes back to what Mark said, okay given those things, if you believe those are real and you’ve got enough experience to see actual examples of that, what would it take to run it in the business we’re in and with the company we have and the structure we have to not violate our true north goals of how we know we want to run the business. So that’s kind of where our learnings have taken. I hope that helps.

Sure. Thank you.

Our next question is from the line of Philip NG.

One of your competitors just reported and he sounded a little more upbeat on demand for October based on Tim’s tone it sounds like more the same. So I just want to get some color on that front.

Yeah. We are looking at our October. We came out about where we thought we’re going to and kind of in line with what we saw in September. So I would say that it’s fairly consistent, not a big direction one way or the other.

That’s helpful. And then on the MLP front, as you guys elect to move forward. Carol, can you provide some color how are you thinking about using the cash proceeds? And you commented on why you would move forward be creating value for shareholders. So can you help us understand strategically what’s the game plan on an MLP if you guys do move forward?

Yeah, Philip, that’s a great question. And I am not sure this is the right forum to answer it, but clearly one of the things that happens if you went down that path is you would be getting a big influx of cash to International Paper. Now what we do with that cash and where we take that, I mean that’s the question that we continue to think about herein with Mark and the team. So I am not prepared to answer that question, but the multiple arbitrage is really the key thing that enables the flow of that cash in.

Okay. That’s helpful. And then just switching gear to Ilim, you saw some price slippage in the quarter. Is that starting to stabilize and how should we be thinking about the cadence of the EBIT progression of that business, especially considering the ramp up for production is going to be pretty close to full production year end?

Phil, this is Carol. And I think on the appendix slide where we had Ilim in there and I am going to go to it pretty quickly if I can. I think what you see there is you see some whole price down quarter-over-quarter. There is a lot of mix in that for Ilim.

Okay.

It’s got hardwood in it. It’s got different grades of the softwood, different quality grades. So I would not react to that too strongly. I think the markets are pretty strong and pretty stable. And we feel pretty good about the outlook for softwood pulp.

Okay. All right. Thanks guys.

Our next question is from the line of Chip Dillon.

Thank you very much. First question is on your view toward what maybe CapEx looks like in 2015. I know you probably haven’t finished your budgeting, but at least maybe directionally as you look at some of the projects or the pipeline how could that look versus this year?

Well, Chip, I would say that it is a little early to predict that. When we do the fourth quarter results and we talk about those in late January, we will give some color on that. But I would say that generally speaking, we have a pipeline of really good ideas that we need to think about how do we want to fund those ideas that are some really some good value creating opportunities. And when the time comes, we will speak to those.

Okay. And at least versus expectations and modeling, we need to give the white paper business a little bit of credit this quarter. It looked very good. And I had a question on that segment. One concern a lot of investors have had has been the impact of imports that seem to have stopped some of the pricing momentum this year. And some of the import increases of course have come from Brazil and we were just kind of wondering, it would make a lot of sense that you guys might have sent a lot of paper up from you operations down there with the Courtland closure. And maybe with the benefit of hindsight not all of those tons were necessarily needed or customers have made other arrangements. Do you see the import situation changing at all, especially given the freight costs and the distances involved from other countries?

Hey, Chip, it’s Tim. Let me just tackle imports in general first and I will come back to Brazil. Imports in general, if you go back and you look at 2013 data kind of quarter by quarter or month by month, imports had started coming in the first half of last year. And as we were making decisions about our system and our footprint here, we were taking to account what imports we are doing and what customers were telling us their intentions were about additional imports. Now having said that, you referenced freight costs and they are definitely up and that has a big impact on the viability of imports, especially if they go up and they stay there for a long period of time as does currency. But the other piece of it is just supply chain, its not uncommon to be managing the supply chain that might be four or five months long, given imports and where they have to come from and the planning that goes into it versus 30 days or 40 days from domestic supplier like ourselves. With regards to Brazil, we do not import paper into the U.S. -- for distribution in the U.S. from Brazil. We do send paper here to traders that take it back out and distribute it for us in the Latin American region. And reason we do that is because of customer mix in some cases and because of quantities that are ordered. So it’s just more efficient for us to ship into Miami and have it redistribute it back out into the regions, because our partner manages a very efficient supply chain and it is for us to try to do all of that ourselves. We have some direct shipments into South American region but we also go through distribution as well.

Okay. That’s helpful. And one last quick one, I think, Mark, you mentioned that you had done all the first original authorization in terms of the buyback, except for $100 million and just a clarification, was that as of September 30th or as of for example today?

Chip, if I could before that question is answered. Just on the imports into Miami, you should keep in mind that there are other imports that come into that part of the U.S. for redistribution as well. So everything that comes into, say the Port of Miami or on the West Coast into some of the southern ports, it doesn’t all stay here necessarily.

And I guess, those would both be shown in the AF and PA data as imports and exports?

Not always. No. That’s the problem.

Okay.

… because of the way reporting is done.

I see.

On your question about the share buyback, the $1.4 billion actual against the $1.5 billion authorizations through today.

Thank you.

Our next question is from the line of Steve Chercover.

Thank you. Good morning. First question, the margins in North Americans container board are really terrific and you’ve said, you intend to maintain that? As one, A, how much run rate do you have on that optimization plan, and B, is it possible that it get too good because folks lower margins can still earn their cost of capital?

Hi. Steve, it is Tim. Too good, I think, it depends on how, where the improvement comes from, so we said, earlier this year that optimization was going to take us a couple of maybe two to three years. If it’s internal improvement than I think, it’s probably more sustainable than if it comes from other places. Having said that, you look at -- just take a broader chunk of time because third quarter was wide on outages. You can still see margin and expansion, and I think, that’s coming from how we run the box system, how we’re managing supply chain. What’s not coming through, just yet, but I think, its coming over the near-term is the mill system. We were better in the mills and we did perform well in the quarter, but some of the mills were acquired. We know have reliability issues and those reliability issues cost us and we’re underway correcting those. But it also has an impact on supply chain too, because when you can’t produce product in he mill of choice based on geography, it causes you to sub-optimize the system. So I say it playing out just as we characterized it in the past over the next couple of years.

Okay. And switching gears, I imagine you got to be rather frustrated with what’s going on in Asia or China specifically, I mean, year in year out there is really no contributions. So I’m wondering how long you tolerate that or is there a means by which you could maybe extract your capital?

So, Steve, you’re right. It’s frustrating to, especially for our team on the ground there to deal with difficult market conditions, but we’re in these businesses for the long-term, and if and when we would make a decision that we don’t think, we can get to a position that we like, then we’d be prepare to talk about strategic changes. But I think this is a time where as leaders of the company, you have to have perseverance, you have to take the long view and we have a company that’s not everything is going to be hitting on all cylinders that the exact same time. So, I think, we will continue to evaluate our businesses around the globe and in North America, and that’s just part of our role to make sure that we continue to stay flexible and nimble and position the company for the future. And the Asian markets are in a little bit of a downturn right now, but there’s a lot of future potential in those market for paper and forest products companies and a lot of other industries. So we have a modest position there by all measures and we will continue to evaluate.

Okay. And just forgive me. It’s terrific that you’ve executed as you have on the repo? Did you reop that, I think you did.

Yeah. Steve, we did. We -- the Board authorized an additional $1.5 billion in July.

I thought so. Thanks for assisting my senior moment. Thank you.

Our next question is from the line of Alex Ovshey.

Thank you. Good morning, everyone. Wanted to come back to MLP point, obviously, the IRS and the moratorium but once that’s lifted, if hypothetically you were to get a favorable ruling on the PLR? I mean, do you think you’ve done enough work around what the structure would look like operationally, where you can say that you're comfortable that if you could get a favorable PLR from the IRS, you would move towards MLP structure for the containerboard business?

Alex, I think it’s probably premature to get into that. I mean, as I said in the beginning and Carol elaborated on. We’re still working through it. So, I think at the appropriate time in the process, we would be able to talk more about that.

That’s fair, Mark. And then would you be able to tell us, what’s your box shipments were in October. And just a follow-on to that question, if I look at last year, there was a meaningful step-up in the downtime for the North American industrial business in the fourth quarter versus the third quarter. Can you give us a sense of how we should be thinking about that number this year?

Hey, Alex, this is Tim. Our October shipments, we are still wrapping up the months. So if we just look at daily cut-off and how we performed in our box plans, I think it feels a lot like September and we finished on a little bit stronger in September than the rest of the quarter. In terms of outage, we don't forecast going forward. We have to look and see what our demand signal looks like and then we plan accordingly.

Appreciate the color, Tim. Thank you.

Our next question is from the line of Anthony Pettinari.

Good morning. I had a question on input costs. You took a hit from higher wood costs, but OCC prices have been really weak and understanding that you're not giving guidance. As you look forward, do you think that we could be -- do you expect the OCC to pick up, or could we be looking at another 6 months, 12 months for OCC as a $100 or below $100? And is the price of OCC is something that concerns you from the perspective of potentially incenting new containerboard capacity in the U.S.?

Anthony, this is Carol. I think, speaking for the team, I think the OCC, it would be very difficult for us to predict where OCC is in six months because there is going to be really all around global demand and global economic activity. So, I think what you're seeing there is just a sheer result of the demand for OCC. But over time, we are convinced that it will cost more in the future than it cost today. And so we think it goes up higher through time. And if you're making a decision on a containerboard machine, recycled containerboard machine, you’re not going to make it on the stock price on OCC. You’re going to make it over a long-term decision around, what do I have to pay for my input materials, what am I going to sell my products and importantly whom I going to sell it to. And that’s the strategic question that any investor would have to make around on your containerboard machine. And I think, I answered your question but if there was another one in there, I’ve had my own senior moment, I can't recall it.

No. That was -- I think you covered it. That was helpful. And then just maybe following up on North American box markets and specifically box prices, I mean, you saw stable box prices in the quarter, talked about October looking good. Some trade publications have talked about discounting in boxes. And I’m just wondering, if you’ve seen any of that kind of discounting in the marketplace in a real way? Or if you could just talk about competitive conditions in North American box markets, maybe how they’ve changed, if they’ve changed in the last three, four months?

Hi. It’s Tim. We were relatively flat in the quarter and we don’t forecast price going forward. But this is a seasonally slower period of time and it’s a competitive market. So we will update you when we get through the fourth quarter.

Okay. That’s helpful. I will turn it over.

Our next question is from the line of Adam Josephson.

Thanks. Good morning everyone. Congratulations on your performance in the quarter and Mark, best of luck in your new role. One on export. In terms of the export price weakness that you are guiding to in the fourth quarter, how much of that would you say seasonal versus reflective of current conditions, and how would you characterize export conditions, just a moment given the recent strength in U.S. dollar and the weakness in a number of economies as I think, Carol talked about earlier.

Yeah. Hi, it’s Tim. It really depends on what projects you are talking about. If it’s containerboard, there is an element of seasonality in that. There’s how regions are producing around the world and then there is -- as I mentioned earlier, some capacities that’s probably left, North America and it’s finding its way to other parts of the world, So probably half and half. On the paper side, this is a seasonally slower period of time and we usually do see some export price erosion. As we go to the fourth quarter in certain parts of the world, as I mentioned in Brazil, the fourth quarter tends to be a seasonally stronger period. So overall, it’s probably going to be down but I don’t expect big decreases.

Thanks, Tim. And just one on the capacity -- containerboard capacity additions in North America. How would you characterize the impact that they’ve had, both on your business and on the market? Obviously, your margins in North America industrial packaging are as high as they have ever been, but we continue to read about pricing pressure, both domestically and in terms of export containerboard prices. Thanks very much.

Sure. I wouldn’t comment on how it impacts the market. I can tell you how it’s impacted us. We haven’t seen a big impact on volume. And I think you have to keep in mind that all of this capacity is not the same. You’ve got different levels of quality in some cases and you’ve also got basis weights that are fit for use, not necessarily more broadly applicable to all segments. And you’ve got geographies in some cases. They come and play as well. So we haven’t seen a big volume impact. We run a very large system that has a lot of channel access across different channels with a lot of different products. So we bring a different type of value proposition to our customers that some of these new capacity starting up just can’t because of what they have to offer.

Thanks, Tim.

Our next question is from the line of Debbie Jones.

Hi. Good morning. My first questions, just like to talk about OCC for a minute. Just recognizing it’s difficult to kind of predict this. Do you have any thoughts on the trajectory for recycle fiber pricing and I know on recent call you’ve mentioned China having less of reliance on the U.S. has been an issue. What kind of trends should we be thinking about over the near term on OCC pricing?

Well, Carol gave an answer a minute ago that I would be hard to contradict. She said it’s really hard to point where OCC goes over the longer period of time. I think that’s right. It depends on what the level of demand in China is going to be and other parts of world.

So Debbie, let me see if I can help, maybe more satisfying -- a little more satisfying. There is a cost curve for OCC, collection cost curve and you start getting into below $100 and you start to take a fly out of the market place because the cost more to collect and it does the selling price. And so I think if you think about where it is today, the trajectory ought to be up with any kind of economic improvement across the world. So there is tax over the bracket when it becomes uneconomical to collect the high cost OCC.

Okay. Thanks. Apologies. I guess from my senior moment in the repeat question I guess -- my follow-up I guess would be on MLPs -- it’s more of the process question. If you could comment on this, you submit the application and I’m assuming you are trying to get having review various craft assets and whether or not they have MLP qualifying incoming. The IRS, what type of due diligence do they do when you submit the PLR? Are they actually coming out and visiting your operations or do they tend to look at kind of industry definition and things like that?

Debbie, this is Carol. I’m not aware that they would come, do a visit. I don’t think that that’s what they would do. And I think they would base it upon your submission of the fact that you represented and they could always research those facts and verify those were performed by point of view.

Okay. Great. Thank you, that’s helpful. I’ll pass it over.

Our next question comes from the line of Scott Gaffner.

Good morning.

Good morning.

Just looking at your corrugated shipments in the quarter. I realized West of the Rockies, you are more heavily exposed to the agricultural markets. But I think I recall before you are going to try to maybe mitigate some of that by moving it to some other end markets. One, are you making any progress moving into other end markets and two, as we go into 2015, I mean, it’s look like some of those issue in the ag market aren’t going abate. Are there any measures you could take to sort of change your customer mix there to mitigate some of that some of those issues?

Yeah. Hi. It’s Tim. I’m not sure about the question around the market segment shifts and what not. I mean we’re talking about a lot of volume. We’re talking about a big market in California. So it’s really hard to impact that on the meaningful way in short term and I don’t how long the drought is going to last. And you would think that at some point the drought situation will reverse itself and we’ll see some uplift on the comfortable basis but what we’re doing is we’re competing in all the segments that we play in. We’ve got big protein segments. We’ve got big segment and processed foods. And so we’re working all of those segments hard across the country and we’re faced in the last, situation where there is just not -- there is much demand because the product not there to be packaged.

Okay. But working at your shipments there versus the industry, you’re down 3.7% industry at 1% of that. Is that purely overweighting towards ag or is there something else going on?

Yeah. Sorry. I missed that part of your question. Maybe my senior moment, yeah, I mean there is more than just ag in the west in the industrial business. But we tend to be overweighted to the ag segment in that part of the country?

Right. Is that something where maybe an acquisition would help you to balance out the end market exposure there?

I don’t think you look at acquisitions for situational factors that impact demand. We’re running our business and we would look at the way Carol talked about if there was one that made sense. And we thought the growth in intrinsic value but we’re running the business day-to-day and trying to optimize what we have.

Okay. Got the biggest lever we had as Tim mentioned earlier is the channel distribution strategy that we have, domestic containerboard in the open market where we have top notch customers, our own box business and of course our export markets. And that allows us to move containerboard through this channel. So at the West Coast ag business is difficult while we’ve got other outlets and that’s what we do on the ongoing basis. It’s really maximize our flow through through different channels to market because all of those channels are permanent channels for IP that we viewed strategically.

And as I mentioned, we don’t expect the ag segment on the West Coast to be down for ever. It will comeback.

Right. Now I hear on that argument. We’ve been just waiting for above average harvest around food can for three or four years now. So…

Right.

That’s where the concern is coming from there. Just moving over to consumer for a minute on cup stock, can you talk about any continued improvement in the uptick there? On -- I think may be you are adding some capacity but also from a consumer -- from a customer demand perspective, are you seeing any continued switch from phone to paper?

Yes, Scott this is Tom Kadien. We see robust demand growth in our food service business. And we are I think our volumes are up high single-digits year-over-year and we still have customers who are moving geographies and moving products out of foam and into paper and that’s driving our volumes that’s why we are expanding Canton, Ohio plant to add capacity for the back half next year because we still see that trend moving in our direction and that’s pulling through a lot of cups talk through our coated board business as well.

Great. Thanks for all the color.

Our last question is from the line of Al Kabili.

All right. Thanks. Good morning. Carol just housekeeping question for you is on the pension. If you had any preliminary thoughts around what the lower discount rate and change in mortality tables might mean for your pension expense next year more broadly and also as how you define operational pension expense?

So, Al, good morning. So on pension, let me just comment from clearly the discount rate as of December 31st will impact the accounting side of the pension, it will not impact the cash required contribution side. The law that got passed legislation of the summer will trump all of that and the required contribution that we are looking at now for '15 and '16 is in aggregate probably round number a $100 million in totalish. So it's a very small amount. So the impact on the discount rate will be a balance sheet and a credit metric issue by itself. Relative to the mortality table, they will come in, they're not sure of the exact day when all that hits, but I thinks its '16 or '17, some thing like that. And clearly when the lifespan is longer, the liability will go up from that, but we -- I am not prepared to give any preliminary math on that. And then the operating pension expense which you referred to that flows through the business P&L. Operating pension expense is really the cost of providing that benefit, taking out the kind of swings that come from the accounting. So it’s a benefit that we provide to our employees. There is cost associated with that and that flows through the businesses. On the non-operating, it’s the kind of things like the change in liability, the change in interest rates, all that kind of stuff that’s really accounting driven. And that’s why we separated the two not to distort our operating performance.

Right. And understanding you are not prepared to give the change in mortality table update just yet as far as quantifying. But it sounds like it’s probably not going to have that much of an impact on the operating pension expense if I understand it correctly, Carol?

No, I will tell you the truth that we have done it more from an overall liability perspective. We have not moved it back through to the operating line, but it certainly won't be an impact in '15 and I think it would become an impact in '16, '17. And I don’t think it will be.

Okay. Appreciate it. Understood. Okay. And then just last question. Just more broadly on to the team and just the emerging markets. And clearly the macro has been a struggle, but if we look at India and we look at Brazil or so, those businesses have been challenged by cost inflation the last few years. And I wanted to just get a sense to the pulse on the opportunity just to improve the performance next year on those businesses irrespective of the macro and just catching up to some of those cost inflation what the outlook is there?

Yeah. Hi, it's Tim. Just on Brazil and then I'll pass it off to Tom Kadien for India or so. Yes, the environment is challenging, but even with the challenging environment this past quarter we were still getting price increases. The big level for us is really around cost structure, especially in the box plans. We’re spending low capital dollars or significant automation opportunities that takes out headcount. So will end up taking out this year probably the better part of our 160 people across the system. And we think there is more opportunity as you go into 2015. On the volume side, if you look at the business absent these three multinational customers that we have that have lost share, we’re kind of holding our own. We are just faced with the additional challenge of in a soft market trying to replace the tons that we’ve lost through those customers. But I think we are making headway on it. So I expect an improved fourth quarter from a margin standpoint. Third quarter was very heavy to outages, which impacted us and expanding margins of '15, '16.

And on the India side, there is a lot of optimism in India right now with the changing government and we’ve seen some tangible signs that give us optimism as well about the macro environment. We expect demand -- our GDP to drive demand and GDP is going to increase next year over the issuers 5.5% or what for so. Fiber prices which have been an issue are coming down. So that spells good for earnings. And we’ve also gotten -- with this new government, we’ve gotten some consents approved on additional capacity that will help us grow the business next year. So we feel really pretty upbeat about our paper business in India.

Okay. Terrific and good luck the remainder of the year.

Okay. I think that will wrap us up here. I would just like to make a couple of closing comments. At IP, we expect to continuously improve. We hold ourselves as leaders accountable for that. We are going to focus on our customers. It’s even more important than slow economic times to really redouble our efforts to be better and better with customers. We will continue to focus on improvement and how we operate. You saw a lot of the evidence of being able to do that and bring it to the bottomline in the third quarter. Our focus on good sustainable cash flow will remain. And balanced use of that cash that rewards our shareholders will be the principles that we continue to operate going forward. We have great group of employees that are engaged in winning and winning with customers and outperforming the competition all over the world. And it’s a privilege for me to have the opportunity to lead International Paper. And I look forward to speaking with all of you on a regular basis going forward.

Thanks, Mark. And thanks again to all of you for taking the time to join us this morning. As always, Rachel and I will be available after the call. Our phone numbers are on slide 20 of the presentation. Have a great day.

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