E. Rajkowski - Chief Financial Officer and Senior Vice President James Buzzard - President John Luke - Chairman, Chief Executive Officer and Chairman of Executive Committee Jason Thompson - Director of Investor Relations

Mark Connelly - Credit Agricole Securities (USA) Inc. Mark Weintraub - Buckingham Research Group Mark Wilde - Deutsche Bank AG George Staphos Richard Skidmore - Goldman Sachs Group Inc.

Unknown Analyst - Gail Glazerman - UBS Investment Bank

Thanks, Tara, and good morning, everyone. This morning, we announced our results before the market opened.

The notification of this morning's call was broadly disclosed. Further, this morning's call is being webcast at mwv.com, and slides that accompany this call are available there as well.

I'll briefly remind you that certain statements we make are forward looking, and are not guarantees of future performance and are subject to known and unknown risks and uncertainties described in our public filings. Furthermore, contents contain time sensitive information that, although correct today, may change with the passage of time.

All the results we show this morning are presented on a continuing operations basis. For the first quarter, we reported income from continuing operations of $71 million or $0.41 per share.

X items, adjusted income from continuing operations was $75 million or $0.43 per share. Now here to tell you more about our results for the first quarter are John Luke, Chairman and CEO; Jim Buzzard, our President; and Mark Rajkowski, Chief Financial Officer.

I'll now turn the call over to John.

Thanks, Jason, and good morning. I'm pleased to report that MWV is off to a very strong start through its first quarter following a record year in 2010.

We continue to demonstrate the strength of our transforming business through revenue and earnings growth across the company. MWV's results in the first quarter were very strong during what is a seasonally slower period for our business.

We expanded revenue by 8% and generated $71 million of income, $0.41 per share from continuing operations, a record performance for the first quarter. This step change in our performance stems from the work we have undertaken over the past several years to reshape our market participation and our cost and operating structure, improvements to our business model that we have confidence are sustainable going forward.

During the quarter, we continued to make progress with our commercial strategy, building increased business in targeted markets especially within emerging economies, expanding our market share with brand owners and diligently driving price based on the value we deliver to our customers, which also positions us ahead of the curve on rising input costs. The impact of this commercial success was particularly apparent in the results of our Packaging businesses and Specialty Chemicals.

That said, we also made good progress in our Land Management business and had a positive performance in Consumer & Office Products. Let me share with you some specific examples of where our market participation strategies contributed to strong results during the quarter.

We had nearly 9% volume growth in food packaging. This was the result of our focus on engaging global brand owners to specify our paperboard for use in products such as frozen food and aseptic dairy, a category that is growing rapidly in markets like China.

We won new packaging machinery placements with global beverage customers. These placements had a small positive impact on the quarter, but more important, they give us a footprint to further build our participation in targeted dairy, carbonated and beer markets, again especially in emerging economies.

We had double digit sales increases in the home and garden market. We gained additional business from one of our largest global brand owners because of the new capabilities from our Spray Plast acquisition for their product extensions into new regions, including the Middle East and South Africa.

We saw healthy demand in fragrance during the quarter, most notably in Europe, and also expanded the customer base for our leading airless dispensing solutions. Our leading customers continue to reinforce that our airless technology is the right solution for the growing personal care market.

In health care, we continued an ongoing adherence packaging trial with Kroger. We also funded research demonstrating that our adherence packaging solutions improve patient adherence to prescriptions.

The results of this research will be published broadly soon, and we expect to use data on patient health and retailer profitability to help expand our Shellpak programs with customers such as Walmart and Kroger. In Brazil, Rigesa continued to do well in targeted corrugated packaging markets for poultry and produce, as well as folding cartons for personal care.

There has been some moderation in economic activity in Brazil from the extremely rapid growth rates during much of the past year due to an increase in inflation and related government initiated interest rate hikes and currency appreciation. We are well positioned and experienced to deal with these changes.

In Specialty Chemicals, we continue to have outstanding results in all of our end markets during the quarter. There was a small rebound in volume for automotive carbon with an increase in car and truck production.

But in most cases, we're generating these results by gaining share with our innovative products, including Evotherm warm mix asphalt, which is gaining ground in a generally slow market for road paving. These examples of our progress demonstrate that we are winning in the areas where we have made strategic participation choices to grow in our most profitable markets, doing so with innovative value creating solutions.

This foundation enables us to further hone our commercial excellence initiatives, which are directed toward achieving participation and pricing that reflects the value we bring to customers, while also staying well ahead of mounting inflationary pressures. Our progress during the quarter is also indicative of continued progress in our effort to establish a management structure that supports an end market approach to our business.

As we complete the process, we will provide more visibility into the profitable growth opportunities that we see in our markets, and we'll do that by reporting in a new segment structure at that time. In the meantime, Jim will continue to share details on our performance by segment as we presently report them.

And then Mark will follow with a review of our financial performance for the first quarter and an outlook for our business in the second quarter. Before turning to Jim, however, I want to emphasize that we continue to drive the execution of our profitable growth plans even as we deal with ongoing challenges associated with the global economic environment, including events and developments that are beyond our control, such as the tragedy in Japan, disruptions in the Middle East or moderating economic activity in Brazil.

Regardless of the challenges that emerge, we continue to focus on the elements of our strategy that we can best control and influence. We know that as much as we might like it, our improvement won't always follow a straight line upwards due to the influence of such external developments.

With this in mind, we actively scan the horizon for such developments and work to design mitigation plans in advance while remaining very confident about our company's momentum and future performance. That confidence hinges on the profitable growth opportunities we are capturing in markets that have demonstrated profitable positive and profitable momentum even through difficult economic times.

These opportunities will be the key to further earnings improvement in the future. I'll now turn to Jim for a report on our operational and segment performance.

Jim?

Thank you, John. MWV's performance in the first quarter shows that our transformed business model is generating sustainable earnings improvement across our businesses, improvements that we expect to continue throughout 2011.

Some highlights of our first quarter performance include an 8% sales growth. This was driven by value based pricing and mix improvements that directly track to our reshaped market participation and which have enabled us to stay ahead of inflation.

All of our businesses had price and mix gains with particular strength in our Packaging Resources and Specialty Chemicals segments. Strong productivity gains.

This added to the operating leverage we've already created with our transformed business model and contributed to our record adjusted EBIT for the first quarter. On commercial momentum in the markets we've targeted for profitable growth.

Our markets are generally strong, and we've added new business and new customers, as well as continuing to grow our sales in emerging markets. I'll now provide some details about the contributions from each of our business segments to this performance.

Additional information is available in our press release and the slides that accompany this call. In the Packaging Resources segment, sales were up 9% in the first quarter with especially strong year over year pricing gains across all of our paperboard end markets.

We continue to make strong gains in global markets for food packaging, liquid packaging and commercial print. In China, for instance, we had double digit volume growth for aseptic liquid packaging with key dairy customers.

And we also had strong sales gains in Rigesa for corrugated packaging for poultry and produce. Overall volume in the food market was up nearly 9% in the first quarter, and we believe there is much more room to grow in this market around the world.

Looking at overall shipments by volume. Bleached board was essentially unchanged, and CNK was down slightly in the quarter.

We exited some lower value product lines, and we had some weather related and transportation challenges during the quarter. In general, availability of truck and ocean freight across our operations has been constrained as economic activity has improved.

Shipments in April have picked up and are above the levels we saw during the first quarter. And our backlogs are holding at 4 to 5 weeks.

Earnings in the Packaging Resources segment were $84 million in the quarter. This is a very strong result compared to the first quarter last year even considering the $25 million negative impact from reduced fiber availability during the last year's first quarter.

Our market participation strategies and strong value proposition drove a 10% improvement in our pricing and product mix, which more than offset increased input costs and, along with productivity improvements, contributed to this very strong result to start the year. I would add that the investment in Rigesa's business in Brazil is on track at this early stage of the project.

We have completed the major purchase commitments, and the team is fully staffed and executing site prep work at our Tres Barras facility. In the Consumer Solutions segment, sales increased by 2% during the quarter, reflecting growth in packaging markets for home and garden, tobacco, fragrance and luxury personal care products.

The business also had broad based gains in emerging markets, including new personal care customers in China, India and Latin America. Including the strong growth we're seeing in home and garden packaging due to the acquisition of Spray Plast, our total dispensing platform sales were up 10% in the quarter.

Earnings in the Consumer Solutions group were up 4%. Again, our pricing and product mix enhancements offset some inflation, especially for resin.

We recouped these increased resin costs through contractual pass-throughs. But as we've noted before, there is a lag when resin prices are moving up.

The business delivered productivity improvements in addition to these pricing and product mix gains that resulted in an increase in profitability for the quarter compared to last year. In the Consumer & Office Products segment, we had sales and earnings growth in the quarter in which we build inventory for the upcoming back to school season in North America.

Sales were up 4% driven by higher volumes of calendar and time management products and the shift of sales for back to school products in Brazil from the fourth quarter of 2010 into the first quarter of 2011. Our School Supplies business in the U.S.

was somewhat lower during the first quarter, but we continue to plan for stable back to school demand and expect growing contributions from new products, such as our early learning line for preschool students. The segment continued to generate good productivity, which helped drive a modest improvement in profits compared to last year.

In the Specialty Chemicals segment, we again had very strong sales and earnings gains from the disciplined application of our market participation strategies. The team continues to have success with our value added solutions for automotive, infrastructure and energy markets both in developed and emerging geographies.

The segment recorded double digit volume growth in performance chemicals for oilfield, inks and adhesives markets, as well as an increase in carbon volume for cars and trucks in the U.S., Europe and the emerging markets. Good productivity gains also contributed to another record breaking quarter of profitability for this business.

In Community Development and Land Management, we had a breakthrough transaction during the quarter. We sold our first development property in the Charleston region as part of our joint venture with the Rockefeller Group.

In just a little over year, this site was transformed from course land to a 1.1 million square foot tire distribution facility and then sold to an affiliate of USAA for nearly $50 million. We also closed on approximately 5,600 acres of rural land sales with gross proceeds of $21 million or an average price per acre of more than $3,700.

This good progress from our development activities and rural land sales during the first quarter demonstrates the impact of our focus on extracting the maximum value from our landholdings, especially in South Carolina. This remains a very attractive market for residential and industrial developments, including properties that can take advantage of the new Boeing Dreamliner assembly plant in North Charleston.

Now I'd like to turn the call over to Mark to discuss some of our financial metrics for the first quarter. Mark?

Thanks, Jim. We are very pleased with the great start to what we expect will be another year of improved financial performance at MWV.

We had record first quarter adjusted EBIT and generated adjusted EBIT margins of over 11%. These results directly reflect the excellent progress we're making across our businesses to generate higher sustainable returns for our shareholders.

We're delivering this through outstanding commercial execution, driving price based on the value we deliver to customers, further penetrating emerging markets across our businesses and increasing sales of innovative products as well as a continued focus on cost and productivity. I'll quickly review some of the highlights of our first quarter results and then provide our outlook for the second quarter.

We continue to generate top line success with strong commercial execution. We're growing in the higher value areas of our business, which is improving overall mix and generating stronger pricing.

The contribution from price mix improvement across our businesses was 7 percentage points of our 8% top line growth. In the quarter, sales in emerging markets were up 24% compared to last year, with strong contributions from products for liquid packaging, home and garden and beverage markets, corrugated packaging in Brazil, as well as continued gains across Asia and Brazil in specialty chemical solutions for automotive, infrastructure and energy markets.

We're also benefiting from increased momentum with innovative products across our packaging platform. We had solid growth with new products in personal care packaging for fragrance customers and continued to win new business with our airless products.

And our home and garden business continues to grow with the products and technologies we acquired with Spray Plast. In fact, we are adding 3 additional lines to service new wins with existing customers in this market.

We're also continuing to grow our pipeline including shopper ready packaging innovations for our major food and beverage customers and new adherence packaging solutions for our healthcare business. We also continue to generate significant leverage with MWV's transformed operating platform, which helped drive nearly 500 basis points of year over year improvement to adjusted gross margin.

And as Jim said, we're delivering substantial operating productivity from our streamlined asset base, and that's contributing strongly to our bottom line results. Looking at cash and capital deployment, adjusted cash flow from operations improved about $30 million over last year's first quarter.

This includes a more aggressive buildup of finished goods inventories across each of our businesses, in line with our forecast of stronger demand during the busy summer season for asphalt and beverage sales as well as solid demand for back to school products. During the quarter, we spent $113 million on capital, a large portion of which relates to the expansion of our Corrugated Packaging business in Brazil, which is progressing very well.

As we've indicated, about 2/3 of the project investment will take place this year. I'm also pleased to report that we've secured in country financing from the Brazilian Development Bank.

This local financing is not only economically attractive but also provides us with a natural hedge against currency. Now turning to our outlook.

We expect to deliver another solid year of earnings improvement in 2011. Our commercial strategies are working.

And we'll remain focused on driving revenue growth in targeted markets and protecting margins with value based pricing initiatives. We are, however, continuing to closely watch the trajectory of oil prices and the impact on our energy, raw materials and freight costs.

As we demonstrated this past quarter, we are well positioned to manage our businesses through the near term effects of elevated oil prices. However, if oil prices continue to rise over a prolonged period, along with ongoing food inflation and high domestic unemployment, it could reduce consumer spending and slow overall demand in the back half of this year.

This would impact the relative degree of our year over year earnings improvement. Now a quick rundown of our second quarter outlook for each of our segments.

In the Packaging Resources segment, we expect profits to be above last year and above this year's first quarter earnings as we head into the busier season for beverage. Order backlogs are above normal levels for this time of year at 4 to 5 weeks as we're seeing solid demand in food and beverage and stronger shipments in April.

We'll also continue to benefit from pricing actions taken over the last 12 months. Partially offsetting these positive segment profit drivers will be higher costs for raw materials and freight.

Looking ahead for the full year, we are planning a 40 day outage to repair our recovery boiler at the Covington mill in the fourth quarter. This is longer than our usual annual maintenance outage and will result in approximately $30 million of higher costs compared to the previous year.

In the Consumer Solutions segment, we expect profits to be modestly above year ago levels, driven by volume growth in targeted markets, price and mix improvements, including the recovery of higher costs through contractual price escalators and continued productivity gains. These benefits will be partially offset by higher costs for materials, particularly resin and freight.

In the Specialty Chemicals segment, we expect another strong year over year increase in profits. Benefits from continued strong demand across Pine Chemical and activated carbon markets, price and mix improvements and higher productivity levels are expected to drive substantially improved earnings.

However, inflation in certain raw materials and freight costs will partially offset these positive factors in the near term. In the Consumer & Office Products segment, we are expecting another solid overall back to school season.

Segment profit is expected to be comparable to last year's very strong second quarter performance. In our Community Development and Land Management business, real estate market conditions make it difficult to forecast sales and earnings.

However, there has been an increase in inquiries for both rural and industrial properties, and we are continuing with our approach to marketing that we expect will generate premium values per acre. That said, based on our current pipeline, we are expecting lower land sales compared to both last year and the first quarter of this year.

With that, I'll turn it back to John.

Thanks, Mark. To summarize, our strong results in the first quarter reflect the benefits of our continuing business transformation as well as the diligent execution of commercial strategies in our targeted markets.

We're winning with our highest value products, capturing profitable growth opportunities and staying ahead of inflation with pricing actions based on the value we bring to customers, all while delivering productivity throughout our manufacturing system around the world. This progress puts us in an excellent position to continue to generate improved earnings for our shareholders in the second quarter and beyond.

This concludes our prepared remarks this morning, and we'd now be glad to address your questions.

John, a couple of things. In Packaging Resources, despite the lack of volume growth, you obviously had some pretty strong results.

How should we think about that for next quarter? You're expecting higher volumes.

Should we expect you to be able to leverage that further and actually get margins up? Or should we be thinking more in terms of stable margins at this point?

Mark, thanks very much. Our game plan would be to continue, through our participation strategies, to put emphasis on expanding margins wherever we possibly can.

And you're right, we would expect obviously a rebound in volume as we do so. The challenge, as Mark Rajkowski indicated, is to balance those participation and pricing strategies against what is going to continue to be pressure from an inflationary cost standpoint.

So balancing those 2 will be key. But you can be sure that we will be actively working to manage pricing driven by participation and a valued focus in the marketplace.

John, do you feel like you're ahead of the curve in terms of pricing? Because certainly, we're seeing other paperboard companies struggling quite a bit more to hit expectations than you are.

Do you think of yourself as ahead of the curve on pricing? Or are you just keeping up with these price hikes that are coming out?

And is the improvement coming from someplace else?

I think the improvement is coming through a variety of areas. But clearly, on the inflationary front, one of the key priorities we have established for ourselves is a business model that enables us, through good visibility into what's going on, to keep as far ahead of the curve as possible.

Okay. And just quickly on Specialty Chemicals.

Your focus on autos is clearly paying off cyclically right now. But can you talk about the geographic balance of your sales as you talk about the your optimism about sustaining these high levels of performance?

Can you talk about whether the geography is going to continue to shift for you?

I think I'll ask Jim to comment in a moment, but I think it's fair to say that the geography will continue to shift, and we are working hard to sustain and nurture participations that we've worked to build over a long period of time in the developed markets outside of the United States, like Europe, as well as in emerging markets where auto production and auto consumption is continuing to grow, most notably in China. Jim?

Mark, and I would add to that. While we are seeing some modest improvement based on the automotive volume growth, really the performance is driven across the entire platform.

So the performance chemical markets and their participation in oilfield, adhesives, our asphalt participation, every one of them is really contributing to the strong performance improvement.

Okay. Very helpful, thank you.

Thank you, Mark.

John, I had a few questions, one for Mark Rajkowski. Mark, you over the past few years have really been focusing on this SG&A number, and it actually, as a percent of sales, creeped up this quarter.

Can you talk a little bit about that? And are we have we still got a game plan to get this down to around 10%?

Yes, couple of things, Mark, on that. We've made good progress over the last number of years.

We continued to focus on opportunities to continue to drive out nonvalue added back office costs. We are focused on growing in a number of key areas, particularly in just we talk about our health care business, beauty and personal care, food in emerging markets.

So we do have some investments that are there a little bit ahead of the growth curve, okay? And we also saw last year as we if you'll recall a year ago this time, we did have some credits as a result of the reversal of some incentive comp of about $7 million.

So you have that tough compare. And we also saw a little bit of, which was welcome, a bump up in our stock price.

So as you look at some of the noncash charges we've seen for deferred comp and long term comp, that's been a factor as well. But I think the point here is that we are very focused on continuing to improve our business model.

But we want to make sure that we continue to appropriately invest for profitable growth in the future.

Yes. And Mark, let me just build on Mark's comments.

I think Mark has summed it up well. We are actively working to excise nonvalue related costs, and that is an ongoing effort.

And you will continue to see us move in that direction. But as Mark noted, the participation shift both here and around the world, which is paying off nicely most particularly in emerging market growth year over year, quarter after quarter, is a reflection of very concerted, deliberate investments, on some cases ahead of the curve in such things as innovation, commercial excellence, capabilities and in talent acquisition.

That's all part of the strategy to ensure that we not only succeed in going where we want to go, but that we're able to build on that with the momentum that we've demonstrated is desirable.

Okay. Second question I had.

The actually, the input cost inflation, which I think you'd pointed to about $35 million year over year, that was actually a little bit smaller than I might have expected. Is there anything going on inside the company that might have hedged you or protected you a little bit that may roll off as we move through the year?

Mark, let me answer that one. We hedge natural gas, but that was not really a driver of that performance.

So we look at our energy, materials and freight inflation, it was still up about 5% year over year. That is a pretty healthy increase.

We have built a very, very strong global sourcing group, and certainly, they have been working hard at moderating those impacts. But that was not too far off of what we expected.

It continues to be a very challenging environment as oil continues to move upward, but we've got a good sourcing team, which is really what we're leveraging to keep those costs in check as much as possible. Hedging was not really a really had no significant impact on that factor.

Okay. One area that was a little weaker than I expected was Consumer Packaging.

Some of that, I think, was probably inputs, some of the other things you align [ph]. But it just seemed to me in some of the markets that you pointed to, your volume was weaker than I would have expected, particularly comparing it to another company that reported last week that has a big presence in sort of pumps and dispensers and things.

I wondered if you could just talk a little more about that.

Mark, this is Jim. Maybe Mark and I will tag team on this one.

I think in key targeted markets that we've talk about, airless fragrance or fine mist sprayers, all really solid growth in emerging markets. We continued to see good growth there.

The real driver of volume for us downward was the, what we call our 2 cc pumps, which are largely tied to hand sanitizers and soaps and those sorts of things. And if you'll recall, with H1N1 last year, we were just completely sold out.

Without the good flu season this year, unfortunately, those volumes have dropped off.

Yes, I think we did see a little bit of a softness consistent with the market in carbonated soft drinks and beer. So I think, as Jim pointed out, the impact the tough compare year over year on H1N1 on the 2 cc pump and a little bit of softness in beverage were really the key drivers there.

Yes, and I would just add to that, Mark, that I think your broader question is what can we expect to see there. And we our strategy related to market participation strategy, continue to identify significant opportunities for growth in the categories that we have targeted both here and around the world.

And we are and we'll be continuing to put major emphasis on ensuring, with a real focus on profitable participation, that we are growing with or hopefully above market rates.

Okay. The last question I had, just can you talk about the land outside of South Carolina in the U.S?

Just remind us of sort of the acreage that remains outside of South Carolina and also what the strategy is there.

Yes, right. I think, Mark, roughly 300,000 plus acres are outside of South Carolina.

And most of that is rural land, and we're looking at opportunities to achieve enhanced premium values per acre through some of the segmentation work that we're doing. Part of that also is lands we have in West Virginia that certainly is important to supporting our Covington mill and also, as we've pointed out, holds some, we believe, some natural gas reserves as well.

So that's really the bulk of what we have outside of South Carolina.

Okay, very good, I'll turn it over. Thanks, guys.

Thank you, Mark.

Spray Plast acquisition. It sounds like it's done pretty well.

Can you just maybe comment on its contribution? And then as you look across your businesses, are there what does the pipeline of M&A opportunities look like in either geographies, product lines?

And then also potential size that you might be looking at?

Rick, it's John. Let me comment broadly, and then I'll ask Jim to speak specifically to your Spray Plast question.

I think exactly what you're seeing in Spray Plast is the approach we're bringing to considering bolt on acquisitions where we can get good market position, acquire technology that broadens our capabilities, and where we see good opportunity to extend that technology into new and growing markets either through our own plant expansion or through our customer's distribution system. And I think as we look at the potential for similar acquisitions both in that end of our business and others, we're actively scouring the landscape.

But our real focus is going to be ensuring that we're value driven, that we're looking for things that will meaningfully enhance our participation strategies and support the broader market, profitable market growth that I referred to a moment ago in Mark Wilde's question. So you'll be seeing more of these things as we go forward.

Jim, on Spray Plast?

Thank you, John. Rick, with Spray Plast, we have been very excited about the acquisition.

The integration has gone very, very well. We've seen the improvements in price.

We've seen improvements in mix. We've seen improvements in both top and bottom line performance.

As John mentioned, part of it is the technology that we acquired that we can now take globally. So it gives us a lot of growth opportunities to build off of this acquisition with organic growth.

And then lastly, it's a really strong team. And so we're really pleased to have them on board, and we see a lot of opportunity to leverage the acquisition with further organic growth around the world.

Okay. Maybe just shifting to Specialty Chemicals for a moment.

As you think about the sustainability of the performance and what's driven that performance over the last year, is it primarily that you've been able to increase volume and so you're getting the benefit of the operating leverage in the business? Or is it mostly price that's been driving that performance?

Rick, really -- this is Jim, it's been a combination of both things, frankly. And this, I think as I reported on the last call, is really work that we've been going on for the last 3 or 4 years all coming together.

And so whether it's our expansion and participation in places like Brazil and China. We've made a capacity expansion down in our DeRidder facility.

We've moved into new markets and changed our market participation strategy in areas like adhesives, oilfield, chemicals and others. It really is a culmination of all those things, plus good focus on pricing for value.

Our products have a really important part to play in our customers' products performance. And our ability to quantify that and get that value based pricing has been a key lever as well.

And really, those are the reasons why performance has improved so much. They're also the reasons why we've got a lot of confidence that it is sustainable and frankly that there's further opportunity for improvement over time.

And Jim, just on the volume. Is that volume is it under any longer term contracts with customers?

Or is this a shorter term volume?

Rick, we tend to be shorter term, so we don't have any really long term supply contracts. Part of that reason is our customers' demands are always changing.

And so it allows us to drive our innovation, have really strong technology in our products. And their changing demands require us to keep up with them.

Okay. And then just lastly in the Land Management business.

Is there anything, as you look at the pipeline over the next couple of quarters or year, that would be similar to what you did with your joint venture partner where you built the warehouse and then sold it? Is there anything that you see that's upcoming over the next year that looks similar to that?

Yes, Rick. This is Mark.

There are a number of projects that the team is actively engaged on. And they're making great progress.

But over the next 2 or 3 quarters, there's nothing that is in the pipeline that is as significant as we saw in this first quarter. And as you know, we are going to be having a day in June for our investors to provide them with a much more detailed look at the progress that, that team has made.

And that'll give you and others a much better sense in terms of the timing of some of those cash flows.

Maybe a comment to cash flows. In the sense of we have good visibility into the overall planning that lies ahead, so you'll understand better how projects like the one we described this morning fit into the grand scheme, and you'll have a sense of what's likely to come down the road.

Congratulations. It really was a very, very strong quarter.

Thanks, Mark.

Thanks, Mark.

One question on the Covington outage at the end of the year. What exactly are you doing there?

And when you come out of it into next year, are you going to have enhanced capabilities or is this just is it really kind of a large maintenance project?

Hey, Mark. This is Jim.

It's really a combination. So we, as we noted, are having some very extensive boiler work that we have to get done, and that really is the reason for the duration.

But part of the work that we will do with the machine down is make some enhancements on a couple of large world class machines that we have there. So we should have some enhanced capability coming out of the outage while going into 2012.

Okay. And then I saw on the slide on the Community Development and Land Management you noted that approximately 190,000 acres in West Virginia land.

You have mineral rights leases with Bluescape at this point. Can you provide any more details on what those the terms on those mineral right leases?

Hey, Mark. You got that right.

And we're not at this point permitted, given the terms of the agreement, to provide details on the royalty arrangements.

Okay. But I do think it says they are currently drilling test wells.

When might we get a sense as to the results on those test wells?

I think we'll learn more over the course of the next year or so. I mean, there is a phased in approach that they're going to be taking on our property.

And as those wells get drilled, we'll learn more. But it's not going to happen next quarter.

This is something that takes place over a number of quarters.

Okay, thank you.

Can you talk a little bit more about the demand trends that you're seeing? You talked about seeing a pickup in April.

Is that more kind of catch up from the weakness in the first quarter, underlying demand strength [ph]? Are there any end markets just from kind of a cyclical underlying demand level that you're particularly encouraged by or concerned about?

Yes, this is Jim. We certainly wouldn't characterize it as an underlying bubble.

I think there's a couple things going on. I referenced a few anomalies in the first quarter I will confess.

Seasonally, the second quarter is stronger for us. So we would expect to see some seasonality there.

And the fact that our backlogs are steady at 4 to 5 weeks leads us to have confidence that the demand is there.

Okay.

And Gail, I would just add on that. I think that Jim has characterized that well.

I think it's one of the we know we're in a period where we're seeing relatively sound demand, there's been some moderation in some areas. As we look more broadly, fortunately we haven't experienced that much at this stage of the game.

But our focus is all on, as I've said several times this morning, on market participation, identifying areas that are going to be more stable, that are going to be likely to grow less subjected to what we hope won't occur but, as Mark in his formal comments indicated, could be, if oil prices continue to go up, some adverse influences on consumer spending. So our participation strategies are all designed to enable us, against this relatively stable backdrop and improving backdrop, to further ensure our volume while ideally giving us an opportunity for enhanced participation in certain areas.

Okay, thank you. And touching on the productivity gains you've been making.

At this point, are we starting to have all of those hanging fruits picked? Or is this something that you think you can kind of maintain on an ongoing basis?

Jim?

Gail, this is Jim. Our objective, and then it's one that we've been delivering against and we expect to continue to deliver against, is to shoot for 3% to 3.5% productivity gains year in and year out.

And while certainly, we have gotten some of the low hanging fruit, what we've really developed is a very rigorous program within each of the facilities with detailed diagnostics. We do a lot of Lean Six Sigma training with the entire organization, and we continue to refresh the agenda of things for the teams to be working on, on all of our operating platforms.

And to date, we have seen the fact that we can continue to drive those gains, and we expect to do it for the foreseeable future.

Okay. And just last question.

Looking at Consumer Solutions and, I guess, the gap between price and cost. Is there anything structurally that you can do there to change that relationship, change your contracts with quicker pass throughs?

Is there anything that can help you finally start to catch up with that?

Well, certainly, I think as I mentioned in my comments on the plastic side of the business, we have in North America the very high percentage of our business tied to resin prices. So we get those pass throughs automatically.

The dilemma is that those typically lag 90 days, some 180 days. So we have been working over the last couple of years to put those in place.

They didn't exist as rigorously as they do today, and we've been working to shorten them up. So it is an area that, given the inflationary environment that we are seeing now and expect to see in the future, we'll continue to focus on.

And would you consider trying to look at pass throughs in other ways when you look at other businesses? The mill businesses, would there be a possible way to kind of just make sure you can stay ahead of inflation or...

Well, I think in the mill based businesses and others, what we have really been focused on is this value based pricing that we talked about. And so it's understanding the value that we provide to our customers and making sure that all of our products are priced appropriately and, as John noted in his comments, making sure that as we look out to where inflation is, we're really focus on staying ahead of the curve.

And so I think the contracts have both plusses and minuses. And I think our ability to expand our margins through our pricing and mix improvements this year and throughout last year suggests that if we were tied just to inflation, we may not have [indiscernible].

And the other point I'd make is I think we'll continue to see good progress there as we deliver more new products and innovations to the marketplace. And with those successful commercializations, we will be in an even better position to get paid for value and continue to move up that mix curve and get price.

Okay, thank you.

On the Specialty Chemicals side, just a couple of follow up questions. One, I'm just wondering if you could walk us through what the mix of input costs are there.

I mean, I know you talked about freight potentially being higher, but I'm wondering what that mix is, if you could remind us, and if some of those are actually locked in for this year.

Bill, what drove the inflation in the first quarter was largely freight. As well as, we do have some fairly extensive petroleum based inputs as well.

And so those were the key drivers on the inflationary side. We do have certain raw materials where we have locked in pricing for 2011.

So we feel good about those.

Okay. And then on the volume side, you had talked, in response to a previous question, about capacity expansions that you've made.

Do you have any volume constraints at this point? I mean, if demand were to continue in this double digit range, would you be able to handle that with the existing capacity?

We can. We have some products that we would actually, we call it derivatization, we would add value to those and start to drive the product mix.

So our refineries are fairly full, but our downstream capabilities, we continue to have opportunities to drive increased volume of final products and drive our mix up as a result of that.

Got it. Okay.

Thanks.

I had, I guess, 3 general areas of questions. I'll try to keep it tight because it's the end of the call here or towards the end of the call.

One on Brazil, one on PRG and then just one on productivity. I guess first on Brazil.

You mentioned that you're seeing some signs of deceleration in the market. I'm not sure if that's the word you used, but that's what you were suggesting.

Does that change at all the strategy around Rigesa in terms of what you've been expecting? And can you comment at all?

There have been some fairly large, at least, projections of capacity increases in South America more broadly in containerboard. Does that affect that at all how you'd expect performance in Rigesa should proceed over the next couple years?

George, I'll take that one. Look, I think that we continue to feel very, very bullish about the opportunities in the near and longer term in Brazil for all the reasons that we've talked about.

The word I used was moderation. And that's moderation a year [ph] from the pretty heavy growth rates we've seen there over the course of the past year.

And I think as we're all aware, what we're seeing is a little bit of an uptick in inflation, a little bit of concerns among consumers broadly in the country that's going to put to test the new government. But their responses to date certainly seem to be sound and constructive.

And what we're seeing in our own markets is good opportunities for the profitable participation that is embedded in our strategy. And for the longer haul, as Jim noted, we're on target with the expansion work, and we continue to be very, very positive about the opportunities for participation.

Again, as we've said, we've been operating there for several decades, and the market participation we have has been carefully built and will be extended upon as that market grows over time and as we expand in other areas where the value that our packaging can bring to the market exists.

Okay. On PRG, I seem to remember last quarter there were some shipments that you missed that was related to export vessel availability.

I think you had the same factor here. But were you able to recover the volumes on those shipments last quarter?

I kind of remember the number being about 1.5 points. And similarly, could you quantify at all what the effect of the volume you walked away from was in the quarter on a year on year basis for other CUK or bleached board?

Sure, George. This is Jim.

We did pick up I would say those terms have drifted from the fourth quarter. We picked them up on the first quarter on the export shipments.

But we continue to have issues around the transportation system as others are as well. In terms of the business that we exited from, it was it impacted us probably around 13,000 tons, as I recall, in the first quarter.

Okay, thanks for that, Jim. And the last question actually, I'm going to switch gears.

I'm going to go to dispensing systems. Other peers that you have, have been implementing their own end market reorganization now, they'd been setting up for maybe a year or 2.

You're just beginning, I guess, this process. What do you expect to learn from this?

What sales reorganization might you need to do to fully put this into place? Do you have any view on what kind of cost may be associated with the realignment once you're all said and done?

Thanks, guys, and good luck in the quarter.

George, thanks you very much. Let me comment on broadly.

We have been actively working over the last several quarters to address those questions so that the time we finalize the changes in organization that we've talked about and resulting segment reporting, all of those things will be nicely in place. And we will be we have worked very hard to ensure that as we've done that, that we have realigned both the calling efforts as well as the capabilities of our frontline commercial organization.

What we expect to get out of that even more than we are today is a much better understanding of the trends, the growth rates, the product development, innovation opportunities in the market essentially with a reorganization of the sort we're talking to really develop a level of expertise market by market, customer by customer of strategies that our customers have. And with it, strategies that we should be refining to ensure that the participation plan that we develop are going to be ones that are going to yield results that are expected by our shareholders.

Okay. Well, thanks, everyone, for joining us.

We look forward to speaking with you next quarter.

You can give out the replay information please, Tara.