Thanks, Glenn. Good morning.

Welcome to RockTenn's Fiscal Fourth Quarter 2012 Earnings Conference Call. I'm Steve Voorhees, Chief Financial Officer, and I'm joined this morning by RockTenn's CEO, Jim Rubright.

During the call, we will make forward-looking statements involving our plans, expectations, estimates and beliefs related to future events. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those that we discuss.

We describe these risks and uncertainties in our filings with the SEC, including the fiscal year '11 Form 10-K and the Form 10-Qs filed for the past 3 quarters.

During the call, we will refer to non-GAAP financial measures. We provide reconciliations of these non-GAAP measures to the most directly comparable GAAP measures in the Appendix to the slide presentation.

The slide presentation is available on our website. Jim will begin with commentary on the performance of our businesses during the quarter, and then I will discuss the status of the integration, as well as various items on our financial statements.

After our prepared comments, Jim and I will be available for questions. Jim?

Thanks, Steve. Good morning.

Our 46% earnings increase and adjusted earnings per share in the quarter resulted from slowing operating performance across our business units, payments we receive to resolve a dispute over determination of a paperboard sales agreement, which contributed $0.16 per share and the lower effective tax rate in our fourth quarter. Our Credit Agreement EBITDA margin of 13.7% was up 200 basis points over the third quarter, and we generated $128 million in free cash flow available for dividends, pension contributions in excess of pension expense, acquisitions and investments, all net of a small debt increase.

We continue to make a solid progress on synergies and earnings improvements, achieving a net run rate at quarter end in excess of $250 million, and the new leaders we put in place across our corrugated and recycled businesses are accelerating improvements in operating performance.

The containerboard price increase was implemented and published in the PPW index in September and export pricing is moving back up. While these increases provided only a small benefit in the fourth quarter, those increases, coupled with the box price increases we're implementing now should contribute strongly to earnings as we move through the next year.

We also increased our dividend to $0.90 per share on an annual rate, and that reflects our confidence on our growing free cash flow.

Major negatives in the quarter compared to our internal expectations as we set guidance at the outset of the fourth quarter were the continued slow startup curve at our Hodge mill, which reduced earnings during the quarter by at least $0.15 compared with our expectations. And the fact that the price increase was published in September, not August, as we anticipated at the outset of the quarter also slightly reducing earnings for the quarter relative to our initial expectations.

Our team at Hodge, which we significantly strengthened during the quarter, have made very good progress toward realizing the project benefits. But their efforts have begun to produce good results in October, too late to benefit the September quarter.

While the expected results at Hodge will be much better this quarter, we still believe that we will not hit the full project benefits until we complete 2 follow-up outages over the next 6 months.

On an adjusted EPS basis, our corrugated segment improvement contributed $0.33 to earnings. Consumer Packaging contributed $0.13 as the contracts settlement I mentioned before was partially offset primarily by lower paperboard pricing, and our recycling segment reduced earnings by $0.04 as lower OCC prices compressed margins and we took a lower cost per market charge in our recycled plant inventories.

As I mentioned, our cash flow generation continued to be strong in the quarter. We contributed $143 million to our pension plans in excess of pension expense in the quarter.

Also included in other in Chart 6 is $17 million that we used to purchase a leased cogeneration facility at our Florence, South Carolina mill. And although it's a relatively small expenditure, the purchase of those assets will be accretive to earnings compared to the prior lease.

We also used $10 million to fund debt issuance cost as we move to term out some debt of the $700 million note issuance that Steve will discuss.

In fiscal 2012, we generated approximately $515 million in cash flow or $7.18 per share that we applied to dividends, debt repayment, pension contributions in excess of pension expense and acquisitions. This is after $452 million in capital expenditures, the $17 million cogeneration plant purchase that I mentioned, $14 million we paid in a redemption premium to retire our $300 million 9 1/4 2016 notes and a total $16 million in new debt issuance costs.

Our capital expenditures of $104 million in the quarter and $452 million for the year are below our beginning of the year guidance of $480 million to $500 million for the fiscal year. However, much of the shortfall is a matter of timing -- wanting -- with expenditures running over in the fiscal 2013 and it simply has the effective increasing our full year 2013 expectation for capital expenditures from $400 million to a range of $430 million to $450 million, effectively no change in our capital expenditure plans over those 2 years.

Now I'll turn to more detail regarding our segment performance. Our corrugated shipments were up 1.3% over the June quarter compared to a slight decline for the industry.

Our fourth quarter 2012 corrugated shipments were up 4.3% on an equivalent per day FPA basis over the fourth quarter 2011 compared to the industry, which was up 0.2%.

Our containerboard production was up almost 176,000 tons as we had no major maintenance outages in the quarter compared to the 165,000 tons of major maintenance outage that we took in the June quarter. Even though we had no planned maintenance or economic downtime in the quarter, our containerboard system inventories were very tight throughout.

Our export markets were strong and we exported 246,000 tons in the quarter, an increase of 37,000 tons over the quarter. As I mentioned in the face of strong -- stable to strong demand depending upon the market, setting the basis for the higher prices we're seeing for the -- for calendar quarter.

Our exports in Latin America were approximately 40% of total export containerboard shipments based on the agricultural seasons in Latin America. Our exports to Europe and the Middle East were 50% of total exports and exports to Asia, 10%.

Higher containerboard and box shipments and lower fiber and energy costs increased segment income by $39 million and increased segment EBITDA margin by 240 basis points to 13.7%.

As I mentioned earlier, given the late September timing of publication of the containerboard price increase that had little effect on our overall pricing, which on an integrated basis, was down slightly on lower box pricing and mix.

We show an EBITDA average for the segment on Slide 9, reflecting the dollar effect and these other factors on a sequential quarter basis, which I won't detail in this call.

Our consumer segment operated well during the quarter. Revenues were up 5% over the preceding quarter.

Converting shipments per day were up 3%, primarily due to seasonal strengthening. And segment earnings, which include the contract settlement I mentioned earlier were up $15 million as volume gains contributed $6 million, more than offsetting the $4 million reduction due to price and mix.

During the quarter, we took a total of 5 days of economic downtime in our coated recycled mills to balance our production to our customer demand. Our CR backlog -- CRB backlogs have strengthened since mid-quarter, and we didn't take any economic downtime in October and we don't expect to take any in November.

Pricing has been very competitive in both Folding Cartons and Folding Carton paperboard board grades.

Our merchandising display operations had another very good quarter, as we expected, with seasonally higher revenues of $12 million and earnings of $4 million higher than Q3.

Our recycling segment lost $2.8 million in the quarter, as sharply lower recycled fiber prices which balance the rest of our business compressed margins in this segment. And we took a $2 million lower cost per market charge on plant inventories and we had a $1.6 million bad debt charge in the segment.

We made a leadership change in recycling in July 2012 followed by many changes throughout the organization that we did in order to facilitate the execution of the integration plan we developed for the former Smurfit plants in operations that will essentially bring them into conformity with the prior RockTenn recycling business model. As a part of that restructuring, we reduced our staffing levels by 40 people, mostly in front and mid-office positions.

That will result in about $8 million in annual cost reductions.

We also closed or are exiting from 6 recycling plants, and we have plans to optimize the balance of our plant footprint to conform to our mill system requirements and to our return expectations for our West Coast plants.

Looking to our outlook for the December quarter and for fiscal 2013, let's start with free cash flow growth, which we measure as cash available for dividends, pension contributions in excess of pension expense and debt repayment. For fiscal 2013, we expect to increase cash flow available for these purposes by about 25% to approximately $650 million to $675 million or an increase of about $130 million to $150 million over in 2012.

Achieving this goal represent approximately $9 per share in cash flow available for those purposes.

Our estimated free cash flow is based on, among other factors, our current outlook for domestic and international markets for our products and for commodity input costs. We expect that the net benefit to earnings realized from 2013 from the phase-in of the containerboard and box price increases will be about $270 million.

But we believe this will be partially offset by lower pulp paperboard and Folding Carton pricing, that based on today's current market prices, we estimate to be about $60 million on an annual basis.

We also expect to see higher energy prices, primarily for natural gas, somewhat higher virgin fiber costs and if current Chinese demand and higher pricing in the export markets continues to strengthen, higher OCC costs. Steve will detail changes in our depreciation and amortization expense, which we expect will be higher full year outage and amortization and we have the first -- as we have the first full year, full amortization across fiscal 2013.

And as you know, it builds over 2012 because of the acquisition accounting, as well as he'll detail changes on operating costs and update our expectations for synergies and performance improvements.

I also want to point out there are several actions that we're taking this year that will alter the slope of our quarterly earnings in 2013 from that in 2012. First, in comparison to the last year, we plan to accelerate our major maintenance outages to better match our seasonal system demand.

Thus, we plan to take approximately 28,000 tons of maintenance outage downtime in the December quarter and we'll take the majority of our downtime, 117,000 tons, in the March quarter. As a result, we'd expect that December quarter earnings will be somewhat lower than this quarter as the beginning of the effects of the containerboard and pulp box price increases where more than offset by maintenance outage expense, higher effective tax rate on some book tax rate because of the difference between our book taxes and our cash taxes, as you know, is a result of the carryforwards that we have, also normal seasonal slowing towards the end of the quarter and seasonally increasing recycled fiber pricing.

And also, we'll build some containerboard inventory in the fourth quarter and again into January and February, which we need to support our system demand during the heavy maintenance outage months to come.

We estimate that March quarter earnings will be the lowest quarterly earnings for the year based on the high degree of containerboard maintenance outage downtime, also the major maintenance outage downtime from the 24-month outage we'll take at our Demopolis rich paperboard mill, typical seasonal weakness in demand in early January and early February and then seasonally higher winter fiber pricing and energy use in our mills.

Again, based on our current outlook and assuming pass through the October box price increase, our earnings should build significantly in our third fiscal quarter to our seasonally strongest fourth fiscal quarter earnings.

Steve, I'll turn it over to you.

Thanks, Jim. At the end of September, our net debt was $3.4 billion.

Our Credit Agreement EBITDA was about $1.8 billion. And our credit agreement debt-to-EBITDA ratio was 2.96x.

Liquidity was $935 million at the end of the quarter.

In September, we issued an additional $700 million in notes with maturities during the years 2020 and 2023. We also extended the maturity of our credit facility through September of 2017.

Of our $3.4 billion in debt outstanding, approximately 70% matures in or after 2017.

Our credit agreement leverage ratio covenant will remain at 3.75x through the end of the current fiscal year 2013. Overall, our balance sheet and liquidity continue to be in good shape to support our business.

We made additional progress on integration during the September quarter. We are continuing the process of converting the acquired box plants to a standard operating system and have installed the system in 14 of our locations.

And we expect to complete the installation across our box plant system during fiscal year '14.

We continue to focus on box plant operating improvements and have closed 13 box plants and have closed or are exiting 6 recycling facilities. As of September 30, our run rate of achieved synergies and performance improvements was in excess of $250 million.

Approximately 57% of this is in administrative areas, procurement and energy. Approximately 20% is in the mills and 23% is in the box plants and other operational areas.

The benefits of the synergies and performance improvements have been more than offset by lower market pricing for containerboard and Corrugated Packaging, as well as ongoing inflation in our business for labor, including wages and health insurance.

We expect this headwinds to continue during fiscal year '13 when we expect approximately $70 million of increased wages and health insurance costs, $30 million of increased depreciation expense and recognize an additional $36 million in expense related to deferred mill average costs. These cost increases will be mitigated by increases to our run rate for synergies and performance improvements.

During fiscal year '13, we expect to generate an additional $135 million in synergies and performance improvements of our FY '12 and achieve a run rate of $400 million by the end of the year. The $135 million will be generated from $55 million in improvements at our containerboard mills, $35 million in our box plants, $10 million in our recycling operations and $35 million from other areas including procurement.

Tax restructuring costs for plant closures, acquisition and integration expenses were $15 million during the fourth quarter and $79 million over the past 15 months since the acquisition date. Over the same 15 months, we received $42 million in cash proceeds from the sale of real estate and equipment.

The net cash cost of $37 million are much better than our initial expectations. We consequently have had a positive impact on our cash flow over the past 15 months.

Turning to our key cost inputs, the largest cost drivers during the quarter were wood and fiber costs. Wood cost increased almost $7 million on a sequential quarter basis due primarily to wet weather in the South.

Our composite index for recycled fiber cost declined by $29 a ton from the June quarter, creating a benefit of $26 million as compared to the June quarter.

Market prices for recovered fiber reached the low point in the September quarter and have increased since then. We expect some upward trend from here.

Our recycled fiber composite index averaged $93 per ton during the quarter as compared to $122 per ton during the June quarter.

Although natural gas prices are higher than the recent past, they continue to be attractive. The current 12 months script [ph] of approximately $3.85 per MMBtu compares to an average price of $2.83 per MMBtu in fiscal year '12.

Our current run rate of natural gas consumption is 29 Bcf per year.

Our annual consumption will increase to approximately 32 Bcf when we begin to capture the benefits from our remaining 3 fuel oil natural gas conversion projects at the Fernandina Beach, Hopewell and West Point mills. Based on our current forward prices, we expect these 3 fuel to natural gas conversion projects to reduce annual energy costs by $30 million per year.

Turning to our guidance for the certain [ph] financial statistics. We're estimating depreciation and amortization for the year at $555 million.

We expect corporate cost in the range of $95 million to $100 million for the fiscal year. We expect interest expense to be in the range of $110 million to $115 million for the year, including $30 million for the December quarter.

Our book tax rate for the September quarter was 31%. This is lower than we expected, primarily due to year-end adjustments to a state tax provisions in light of the first full year of operations of the larger company.

We expect our book tax rate for the first quarter and fiscal year 2013 to be approximately 37%.

At September 30, we have unused tax items that total approximately $376 million. These can be used to reduce future federal tax cash taxes.

We expect to fully utilize the $150 million in federal net operating losses during the course of fiscal year '13 and fiscal year '14. We will use our remaining $226 million in cellulosic biofuel, alternative minimum tax and other federal credits over the following 2 to 3 years depending on our taxable income.

These tax items exclude the unreported asset related to additional federal net operating losses that will be available at the Smurfit-Stone black liquor tax credits signed as an excise tax credit proved to be nontaxable. If these tax credits do prove to be nontaxable, the tax benefit of our unused tax items will increase by $227 million to a total of $603 million.

Turning to our pension assets and liabilities. We've recorded an unfunded pension liability of approximately $1.5 billion, about $50 million higher than the $1.45 billion at the end of last year.

The liability increased by $522 million due to the decline in the discount rate used to calculate our liabilities. For our U.S.

plans, this rate decline from 5.27% to 5. -- to 4.22%, this was a decline of 105 basis points.

Going forward, each 10 basis points impact the unfunded liability by $42 million.

The recent pension funding legislation increased the interest rates used to calculate the required cash contributions to our U.S. qualified pension plans.

After final work with our actuaries, we are estimating total required pension plan contributions at $208 million for fiscal year '13 and $303 million for fiscal year '14. This is a significant reduction from our previous estimates.

Whether this funding reduction is a permanent reduction or a deferral of funding depends to a great extent the interest rate levels in 2015 and thereafter.

We expect to contribute $19 million to our pension plans in the December quarter. In fiscal year '13, we expect lower pension expense for qualified plan of about $35 million for the full year as compared to $47 million of pension expense during fiscal year '12.

We estimate that our pension funding in excess of expense will be $173 million in fiscal year '13, $132 million lower than fiscal year '12. We estimate that the expenses related to deferred outage cost for the containerboard and bleached paperboard mills will be $93 million as outlined in the table on Page 16.

As previously noted, in FY '13, this expense is expected to be $36 million higher than we experienced in fiscal year '12.

That concludes our prepared remarks. Jim and I are now available to respond to your questions.

I guess the first question that I had was related to the paper supply agreement. Would it be possible to give us a bit more color in terms of what led to that, I guess, cancellation of the agreement in the settlement and why you included it in earnings?

And I had 2 quick follow-ons.

We had a power outage here, and we were cut off, I think, as soon as George was being introduced with the question. So if we could resume with George, that would be fantastic.

I guess the first question I had was, could you give us a bit more color on that paper supply agreement that you wound up settling and including in earnings. And then I had a 2 quick follow-ons.

George, we signed a confidentiality agreement in connection with the settlement and termination and I provided all the information that we can provide, which is essentially the amount and the nature of the recovery.

Okay. I understand.

The next question I had was, can you -- let me back up, I'm guessing that Hodge's production issues have, to some degree, not only impacted the benefits you thought you'd get out of Hodge, but also impacted the pace of your integration efforts around the rest of the system. Could you confirm or provide additional color regarding that?

And perhaps what -- give us a bit more color into what integration work might now be able to accelerate as it appears that Hodge will be getting back to your ultimate production goals by the end of this year?

We started out the quarter producing at a rate of about 1,700 tons a day, where the project on the lightweight mix that we currently had planned for Hodge would have been more in the 2,350 to 2,400 tons per day range. So if you think of the $0.16, probably $8 million was -- approximately $8 million was simply straight-up margin on loss production, $5 million or $6 million was really increased maintenance expenses.

We did the things we had to do to float out of the outage and then the remainder was system disruption costs from the inefficiencies associated with making up the light-weight production from Hodge, other places. So those are the components.

The last 10 days we've been over 2,000 tons a day with all except for 1 day and a lot of days we're in the 2,100 to 2,200 ton per day range. So if we can save lives at that range, we'll get a substantial portion of the project benefits.

I mentioned in the call there, there were some things that were not done properly, I don't really want to go into a lot of detail because there'll be some likely claims dealt with associated with them, but we need to go back and fix 2 things that were done on the large paper machine 5 and do some other fatal [ph] improvements on 4 -- and we'll do that in connection with 2 outages that we'll take over that first 6 months of this quarter, possibly in April. I guess that's really into the third quarter.

But a lot of it is simply a function of stabilizing operations. As I mentioned, we really put a lot of resources into assist the people at the mill with the technical expertise they needed.

And so it took a while for them to basically start one of the mill and work through and get everything stabilized, but I feel that we're in a much better place at the outset of this quarter than we were last quarter, and I think ultimately the project benefits are going to be realized.

Okay. The last question I guess on exports.

It would seem that export trends seem -- are a bit stronger than normal this time of the year. Can you comment as to what you're seeing the market at, and what is driving that phenomenon if, in fact, you grew with that view?

Yes. Whether it's stronger than it otherwise would be, it's difficult to say.

We said pretty consistently, if you don't -- once you got out of November, December and January where the export markets got really torn up, export demands have been okay. It's really been -- it's very consistent with our expectations for the markets and it took a while for pricing to stabilize and turn up.

But now we're seeing good export pricing across most of the market, so I think we're going to see $35 to $40 per ton higher export pricing, probably for most of this quarter after October. So I'm pretty optimistic about where we are in export markets.

As you know, for us, the significant decline in export pricing was a major contributor to the reduction in our earnings from our expectations at the outset of the year, as was the reduction in pulp pricing, which is material to us. It's highly cyclical, as you know, and it really does appear that we hit a cyclical bottom and we're starting to see improving pulp pricing as well.

But we're not very good at predicting the slope of recovery in pulp pricing, so I think we're probably using some pretty conservative expectations in our cash flow guidance for next year with respect to what happens to pulp markets, and potentially with respect to export markets. But demand is not the issue in the demand -- in the export containerboard markets.

So I just want a little bit of clarification on Hodge. I believe last quarter, it was a $0.09 headwind and then this quarter you're talking about a $0.15 headwind relative to your expectations.

So I just want to clarify what you're expectations actually were heading into this quarter? Is it fair to say that we should think about kind of a peak to trough impact from a -- this as the $0.09 plus the $0.15 or -- I just want to calibrate that a little bit?

It's a good question because if you don't know what our expectations were in the third quarter compared with the fourth quarter, it's pretty difficult to understand what we're saying. We knew the mill was going to be down in -- because it was a -- of all the work that we're going to do for an extended period of time during the third quarter.

So therefore you're going to have very low production and then all the cash maintenance expense in the quarter, which although you amortize, you really don't make up the production loss and the system disruption, so our expectations included a very significant amount of expense in the third quarter. But when the mill came up at the end of the quarter, it came up in a state that was not what we expected and therefore it cost us $0.09 more in the quarter than it would have -- than we expected.

In this quarter, we assumed we could achieve a run rate of production faster than we've been able to achieve it and therefore, I went through the components of the difference between what we expected and what we achieved in response to George's call, and that's how you get the $0.15.

Okay. So I guess -- anyway you could calibrate what you think you would be able to get back this quarter on an EPS basis?

Or should we just take your prior comments?

No. I think it's somewhere -- going to be somewhere between $0.10 and $0.15 back from Hodge, depending upon how consistently we can run at the run rates that we've achieved today and whether we ramp-up further in anticipation of the outages or whether we simply have to get through the outages.

But I would expect somewhere between $0.10 and $0.15 from Hodge.

Okay. And then it sounds like you expect the full improvement to be after the maintenance outages, so perhaps on a 6 to 9 months basis, we're kind of back to where we should be?

Yes, I think if my recollection is right, the Hodge last maintenance, second maintenance outages in April -- it's either April or May, but in any event, there are some things we have to do that we can't do until then that will ultimately set things right.

Okay. And then just on the price increases, sounds like the timing was maybe a bit longer than some of what your peers highlighted.

You called out some customer contracts. Maybe you could just elaborate on that a little bit.

Is there an opportunity here moving forward to change some of the terms of perhaps old contracts? Or how should we think about that?

It's a half-empty, half full. If you take the slightly less than 7 million tons of domestic containerboard sales and multiply that tons by $50 assuming you pass through every dollar for the year, it would be about $330 million.

The thing didn't publish until September and then the box price increases were effective in October, and everybody has some contracts that they pass through and so forth. So the $270 million that we said we would recover is about 80% of the total, which we'll recover over this fiscal year, which is -- since our year starts in October, it doesn't compare to other's calendar years.

I can't look into others people's books in contractual situation. The thing you need to remember about our contracts are, if you're lag on the way up, you also lag on the way down, so it simply is a trade that I'm not sure in all cases we would necessarily find it in our interest to try to negotiate out off.

But the bottom line is that in the first year of the increase, we're going to get about 80% of potential benefit that we would have realized had we gotten 100% of it on the first date of the fiscal year.

Just if I could, so if you're expecting about a $0.10 to $0.15 benefit, hopefully, from Hodge in the December quarter and we should be getting some benefit from pricing, although, I guess, not fully clear how much of that ramps through into the December quarter. And yet you're anticipating kind of flattish to down-ish quarter-versus-quarter.

How much of that is the seasonal? And can you kind of help us with that bridging a little bit, please?

Sure. We had an $18 million contractual settlement in our fourth fiscal quarter that we will not have in the first fiscal quarter of 2013.

Our effective book tax rate was 30% or 31% and we expected to be 37%. So those 2 things will more than offset the increase we anticipate from Hodge.

And then as I mentioned, we will take 28,000 tons of maintenance downtime. We will build inventory during the fourth fiscal quarter in anticipation of the outages going forward.

When you build inventory, you don't record the gain on the sale, right? And then because you're going into the winter, you have higher energy usage in, particularly in the mills.

And then if you have normal seasonal trends in December and starts to wet, you're going to see a little bit higher fiber costs. So all of those things will seasonally affect our business and that's why we forecast somewhat down earnings from the $1.39 that we earned in the last quarter.

Now I would just remind you that if you look at our input costs and the materiality of them and why we're -- we don't try to give very precise earnings guidance, recycled fiber for us, a $10 change in recycled fiber, $40 million a year, $10 in a quarter. I promise you in the 13 years I have been here, we haven't been able to guess or forecast full year recycled fiber prices within $10.

And if there was a year where we did it, it was luck, right? Natural gas pricing is also about $25 million a year to us and it's going to $40 million when we complete those projects.

Again, $0.50 up or down in natural gas pricing is simply beyond our ability to forecast as would -- we use 19 million tons of trees in a year and so you can do the math on a $0.50 change in virgin fiber pricing over the year. Again, these things are not within those tolerances.

They tend to balance in over -- and they balance nicely over the course of the fiscal year, so while we have a pretty high degree of confidence of our ability to generate the $9 in free cash flow we said we'd generated over the course of the fiscal year, my confidence with respect to fine-tuning earnings on a quarterly basis is simply not that high.

Okay. Fair enough.

And just real quickly on the pension, if I heard you correctly the discount rate, that had about a $522 million negative impact, but the pension underfunding was only a $50 million change. So what was the positive $475 million?

We contributed $300 and some odd million into the pension plans and we also earned investment returns on the assets that we have.

Don't we detail that in the Appendix?

I don't think we do. It will be fleshed out on our 10-K when we file it out.

First question is, I know on the call, Jim, you mentioned sort of a free cash flow number that is available for pension contributions and -- I'm sorry, and debt reduction, et cetera, of $650 million to $675 million for -- I think that was for '13. And what was that number for '12?

And how do you exactly compute that quickly?

The number for '12 was $518 million and the number for '13 is the number you just indicated. In '13, assuming no acquisitions, we would use it for dividends, pension contributions in excess of pension expense and for debt repayment.

Now going back on why we treat pension contribution in excess of expense as a dollar for our shareholders is simply the fact that we assumed a large -- largely closed pension liability with respect to Smurfit that we simply treat is as an acquisition liability. Since you get a tax deduction, of course you have look at it on an after tax basis, so on the acquisition date, we assumed it was about $700 million.

Pension, discount rate declined by 1%, as Steve mentioned, so it results in a very large increase in the GAAP liability, but the fact is funding is what matters and because of the Pension Relief Act, which recognizes what is a relatively unsustainably low interest cost of the current, they reduce the funding obligations, so it didn't really change. The increase in the liability was met by what is a decrease in our funding obligation over time.

So whether that $1.5 billion ever turns out to be a real liability that we fund is a function of what interest rates are going to be in 2015 and beyond. But at any rate, those 3 things are the components.

Now in 2012, the number was $518 million. Steve detailed the amount of pension contributions in excess of expense, dividend was $0.80 a share.

We did do $125 million in acquisitions, which we also count. Those acquisitions have been nicely accretive.

We did not count the $17 million we used to purchase the lease out. We didn't count the debt issuance expense or the premium on the redemption of the '16, but those are the components of those free cash flow elements and why we count them.

Got you. And given that depreciation and CapEx from '12 to '13 don't really change a lot, and I know there might be some puts and takes, but it looks like if you go up by the amount that you indicate that you're in essence, as we look out, I know it's early days, that increment is about $2 a share.

And it looks like all things being equal, that would be kind of a ballpark guess as to how you see 2013 on an EPS basis versus '12. Am I reading that correctly?

Well, except you've got a book tax rate of 37% and a tax provision that is significantly lower than that as a result of all of the tax credits. So you have to take into account [indiscernible] cash tax.

Got you. So in other words, the EPS may be a little less, but the -- but because of the fact that you have a higher book tax rate, although you'll be -- if I'm hearing you correctly, although you have less cash taxes?

Yes. The NOLs are available and you can use a portion of the other tax benefits plus an offset of 100% year tax provision.

And that they generally don't offset a lot of the state taxes that you pay and then there are other taxes you pay. So you will have some cash taxes even in a year in which better NOLs would have offset your -- all of your tax -- federal taxes.

But I don't remember exactly what our -- we can follow up later with what we expect in terms of cash taxes, but there will be a very significant difference between the book cash tax rate.

Got you. And one last quick one.

It looks like from fourth quarter to fourth quarter, the segment EBIT and packaging was down about 1/4, $43 million and certainly, Hodge was part of it, but you did have some offset, I guess, from the settlement. My question is, if you look at published OCC prices and, again, they may not be exactly matching to your experience, it looks like they were down somewhere on the order of $70 year-over-year.

And given your purchases, it would seem like that, that could have been a $50 million-ish benefit that I know could have been offset by other things. But is that -- am I in the ballpark there and what -- are there other things you could point to that might have offset some of that benefit?

Yes. I didn't follow all of the numbers that you cited at the beginning, so I can't track through or confirm sort of the predicate cash.

But with respect to OCC itself, our purchases are a little over 4 million tons a year. So on a headline basis, there's a credit with respect to the passthrough of that into the -- ultimately into the mill system.

But we sell a significant amount of DLK and there's an offset of DLK and then it also compresses margins in our recycling business. So I think a $40 a ton change in OCC pricing is probably $30 million -- $30 a ton flow through to RockTenn.

And Steve, if I'm off on that, let me know, but I think that's about what we would realize.

Yes, I was just sighting the market pricing. RISI is saying that it was down about 70, third calendar quarter this year versus third calendar quarter last year.

So even if you cut that by 1/3, you'd still be looking at, I don't know, $32 million just in your -- and assuming you don't use the full 4 million, just maybe 3-plus million for your corrugated segment, so I didn't know if ...

No. You're not wrong.

The thing -- from a book income standpoint, you'll recall that because of the acquisition accounting we started out at 0 with respect to maintenance outage expense and then as we had 4 quarters of maintenance outages and since we have -- we amortize it over the course of the year, that then built. Our full run rate of amortization of maintenance outage is about $80 million a year, which we'll have next year so it's $20 million a quarter.

But in the third quarter, if you go back a full year, we would have had 1 or 2 quarters of amortization. So that's a major book difference in income.

And then, as I mentioned, essentially for the last 15 to 17 months, we've been sitting here without a containerboard price increase in a generally healthy market and you don't have an increase, you're going to typically see erosion, particularly in a relatively weak economy. And we've indicated we thought we had over $200 million in price erosion over the period of time from January of 2011 when we first announced the Smurfit transaction until the end of the summer when we announced the price increase in -- I guess, we announced in August and ultimately came effective in September.

So that was the major offsetting factor.

The payment outage item that Jim mentioned had an impact of $18 million on the year-over-year comparison that you were talking about.

Okay. And obviously if you annualize that $200 million of pricing, that's $50 million, which is what I was looking for, so that's very helpful.

And all that [indiscernible] wasn't all domestic. It would be wrong to think that's domestic containerboard because it includes export containerboard, it excludes export pulp pricing and some erosion in the consumer segment.

There was a price decline published for both SBS and CRB. So I think if you heard me say it first, you would have thought that was all box pricing and that's just not right.

It was spread across our business.

Which, by the way, I noticed you did for the first time, split out your pulp between the 2 segments and I didn't realize so much of it was in containerboard. So that makes all the sense in the world.

Just curious to get your thoughts on your price mix dynamic for -- corrugated was down sequentially, I would have thought it would have picked up with export prices moving higher. So I just want to get some thoughts on that.

The -- as I've mentioned, there was sort of a period of continuing erosion, which was relatively slight. We didn't really see any significant benefit from export pricing or pulp pricing in the quarter.

In fact, I believe they were lower. So those things offset the small benefit that we got from the late publication of the containerboard price increase.

Okay. And since you guys do have a box price increase coming in, that should be a positive.

I do remember last year during the seasonally slower period, you saw some box price erosion certainly from a demand supply dynamic, containerboard is a lot tighter now. So I just wanted to get some thoughts on that.

And then lastly, with this box price negotiation, is there an opportunity for you to reset the contracts so you have the quick capacity going forward?

As I've indicated, I' not of the view that we really need to make adjustments on our contracts. Those contracts generally benefit us with respect to stability and pass-throughs, as I mentioned, that you might lose them on the way up, you get them on the way back down.

So I just think it is an element of our business that it wouldn't -- it really doesn't sort of stand at the forefront of our thinking. As I said, in this fiscal year, we going to get 80% of the price increase just as we model out the price increase.

And then we don't -- because of timing, we didn't get it all in October. So it's not -- I just don't think it's the right thing to focus on from our standpoint, and it's not really something that we have as a priority.

Okay. And then can you give us some milepost on the synergies?

I know Hodge has been a drive you guys, but going forward can you talk about some of the opportunities in some of the major projects that you have in place and the timing of it?

I think Steve detailed where it is from a segment standpoint and there's a slide on that. The $250 million is a lot of purchasing synergies and then some business improvements across the mill system.

We do reduce it by the effective loss at Hodge because we feel like that was part of what we anticipated as a performance improvement. And since it's a drag, we've netted that out to get down to the $250 million.

I think the largest single component of increased benefit over the course of the next $12 million is the $40 -- whatever, Steve, we said $40 million or $50 million from the remaining 3 natural gas projects...

Yes. It's $30 million on the 3 projects.

If you include Stevenson, it's in the $40 million to $45 million range.

Yes, $30 million left natural gas projects. There's significant amount of actual turnaround in the recycling division, both from a standpoint of plant consolidation and headcount reduction that I mentioned.

Steve, purchasing, we think we're going to get another what?

Around $30 million.

Another $30 million. So there are a number of components like that.

Our box plant operations are going to improve significantly as a lot of -- as result of a lot of things we did this year. You didn't see the full run rate of benefit of the plant closures we've made and we continue to look at opportunities to improve the overall cost structure and performance of the box plant system.

So they're pretty well spread across the entire business unit.

On the SBS side, can you just talk about what kind of impact you may be seeing on the pricing side from some of the new capacity that's coming online in Asia, and whether or not you expect to see potential for a more material decline in SBS prices as that capacity fully ramps up?

Well, I certainly think that the $20 price increase that we saw in SBS was a result of lower, essentially order backlogs or unfilled orders in SBS. And I think that, that partly reflected availability, and therefore lower backlogs.

The availability I think was created by the push back into the U.S. of exported SBS.

It's a little -- and I'm doing it based on reported numbers. It's -- we don't have the visibility, really, because we don't export SBS, but certainly the global group of coated boards in Asia combined with a decline in Asian demand contributed to that.

We see it as relatively stable right now. And if you look at operating rates of domestic bleach board mills, they've been in a -- I think last week was 94%, but they've been in the low- to mid-90s pretty consistently for a while now.

And our unfilled orders as reported for the industry have been relatively stable, so I don't see conditions changing now. Looking into the future at what rate China will actually bring on coated capacity, whether they'll slow it down at what rate, China and the rest of Asia is going to grow.

Things are very difficult forecast. So I can't say whether conditions are going to improve, stay the same or get worse as we move over the next 6 to 9 to 24 months.

Okay, Jim. That's fair.

And then just putting together all the information you gave us on the benefit of higher containerboard prices, the change in the free cash flow level next year versus this year, do you also have an estimate on when you would expect to hit your targeted leverage ratio of less than 2x?

I think, Steve, do you have a view with respect to that? I think that it's optimistic, I think, that we'd get there within 12 months, but it's not optimistic beyond that.

No. I agree with that.

Two things. As your portfolio reshapes with the box plant closures and everything else you're doing, are we going to see your net export exposure change either in size or in geography much from what you laid out for us earlier?

And the second question, most of the companies we're hearing from this quarter are telling us they're not concerned about fiber availability or cost this winter. Your comments are a little more focused I assume on just weather, or is there anything regional that you're looking at as well?

Okay. Thanks, Mark.

I'll take the second question first. We may be more pessimistic than others.

I have seen what others have said, but it's our forecast and a lot of it is winter weather. There is those specifically in our Virginia markets where we have our West Point and Hopewell mills, we've decided that it's a good idea to burn trees for electric power in the United States and so we have some wood burners that are coming onstream in the Virginia market and then there's a competitor that's bringing up a mill in the Virginia market.

So I think there where we've got over 1 million tons of capacity, we're going to see some regional pressure on virgin fiber pricing. But again, I haven't tried to pencil out everybody else.

And then if you don't mind, Mark, please ask me your first question again.

Sure. Just wondering, you had given us a nice lay -- layout of all of your export exposure, I'm just curious whether you think that's going to change either geographically or in size, with given what you're doing with your portfolio over the next year or so?

Okay, thanks. No, I don't think it will change.

We set a very high bar for ourselves with respect to business retention in box plant closures and we're above 90% at the current run rate with respect to retention of businesses we closed. We are higher at that in folding cartons, but because of the shipping regulations [ph] of the Folding Carton plants and the box plant shortage, you can't have the same answer, but 90% is fine.

And given the effectiveness of the redoing of our sales effort and so forth and the fact that our volumes are growing, I think actually that our domestic system will expand. The best way to grow your system is to be cost competitive, which we're making significant strides on.

So I would say no, I think you'll see us in about the same mix of export to domestic. But it really depends on how we effective we are growing domestically, but I don't see it declining.

You discussed some amount of capital spending getting bumped from 2012 to 2013. And I'm wondering, I think previously you discussed a CapEx run rate for the system of $350 million over the long term.

And I was wondering if that's still applicable and if you think you can get there by 2014? And then maybe kind of a related question.

I think previously you had said that the net capacity increase from all of the performance improvements in capital investments, once they're all completed by, I guess, by 2014 would be 600,000 tons. And I'm wondering if you could give any update on that?

Yes, that's the gross capacity increase. It's not net.

We did close our Matan-Quebec mill, that was 180,000-ton reduction. The second -- the last piece of the production increase would be a project at Hopewell that we had estimated doing in '13 and then we switched that to '13 and '14.

So the net increase, if all we do is reducing the pan [ph] would be about 400,000 tons. But we pretty consistently said that we're only going to produce to our system demand, but the effect of this projects is to significantly reduce the cost of production and really modernize the affected mills.

So I don't know what the net production change will be, but the production capacity change if we did it today would be about 400,000 tons, and that still is a good estimate. And with respect to CapEx, sustained CapEx from the system could be $350 million and that's why we've given that out-year guidance.

What it will be, will depend upon opportunities that we see at the time and the $450 million and -- I mean the $480 million to $500 million and then $400 million estimates for '12 and '13, we really haven't changed them. It's just spread over the course of those 2 years.

Great. And then maybe just one final question.

You obviously got a number of facilities in the Northeast and mid-Atlantic. Can you discuss what impact on operations or productions, if any, you've seen from Hurricane Sandy?

And given your inventories are relatively lean and industry inventories are pretty lean, do you think the hurricane could have an impact on the containerboard industry?

Yes, thank you for raising that question because it's something we should cover. With respect to our major facilities, we did not sustain any significant damage, so we were fortunate in that respect and our people did a great job of taking the actions they needed to take to secure the facilities.

As a result, although we had some production reductions in our containerboard and paperboard systems, and there will be some costs associated with that, the assets were well protected and they're back operating. Because of the transportation disruption in the Northeast, recycled fiber access, depending upon the marketplace, it's been somewhat challenging.

We have a very large mill in Syracuse, New York, another recycled mill in Connecticut, another one in Stroudsburg, Pennsylvania. So the fiber supply into those mills has been affected, but they're operating.

And so there are some costs associated with that, that will be difficult to estimate. We have several -- I'm going to say 4 or 5 box plants in the Northeast region that today cannot operate.

The transportation network and the power supply simply doesn't exist to allow them to operate. And then more seriously, is the disruption of our customer base in the Northeast.

And as you point out, we do have a large concentration of plants and sales in the Northeast United States. So it is impossible at this juncture to estimate the total amount of loss because it's impossible to estimate the effect on demand and any effect on the ability of customers in the Northeast to produce.

So I would say that while it will be noticeable for us, and it will probably curve primarily in this quarter, I think it's difficult for me to estimate that effect, but there will be one.

I jumped on early and so you may have addressed this. But just on the box price realization occurring mostly at the end of March, it seems a little bit more of a delay versus some of the larger peers have indicated.

And I was wondering if you could address that particularly as you have less vertical integration on the box side as well?

Well, I want to clarify what I said because if I said what you repeated back to me, it's not what I intended to say. What we said was we would have realized the majority of the increase on a run-rate basis by the end of the second quarter.

That doesn't mean we're going to get it all then, not now. And in fact if you do the math on what I've said, and we get $270 million over the course of the year of the universe of $330 million, you would see that we will be recovering a significant portion of that over the course of the next 2 quarters and it is on a ramp-up basis.

But we will have vast majority of what we will recover in total by the end of the March quarter.

Okay. And is that just that the delay and the timing of the lag and the timing?

Is that just all contractually related? Can you just talk about how the non-contract pricing is -- how you see the noncontract pricing shaping up?

Is that going to be considerably earlier than that in the March period?

Well, certainly you're open -- if you're not limited by a contract, you're going to -- and particularly if it's containerboard for the independent market, that is clearest opportunity to increase prices that will benefit the full quarter. With respect to the box price increase, as you know, some people announced the box price increase October 1, there were other competitors who announced October 22, 23 or whatever.

So you have an issue with respect to specific accounts with respect to when the increase could be effective. And in other situations, you may face competitive issues that may limit your ability to get it on any particular day, and everybody faces those issues.

I can't speak to our competitors' realizations or what they've said. I'm just telling you, we have modeled out our system and that modeling suggested over the course of this year, we're going to get $270 million of the increase is our best estimate.

Okay, all right. I appreciate that.

I guess just also quickly on Hodge. If you could just comment, I know -- I think operationally it's a little better, assuming kind of where we are today in terms of how Hodge is running, is there an appreciable tailwind in '13 versus '12 given the rebuild issues or if you can address kind of how you see the improvement in -- expected improvement in Hodge?

Yes. I think based on higher costs that we've incurred there, the project is in the range of $100 million and we expect a return in the 20% to 25% range today, that's really the returns down because the cost of the project is up.

But on a full run-rate basis, that's about what we expect in terms of the improvement over a 2011 operating baseline. I think I've detailed pretty clearly what we think is the effect in the third -- in the fourth fiscal quarter would be, as well as the next quarter coming forward and achieving the balance of it after the April, I believe it's the April the second outage.

Okay. And then just one last quick one is on -- just on the Consumer Packaging.

Can you say how much of the pricing pressure we've experienced in this fiscal fourth quarter, how much of the price, published price decreases and whatnot we've experienced thus far and what's left to go on that?

We'll have to follow-up on it. We've said $60 million and the $60 million includes a lot of things in addition to just Folding Carton price declines.

That's something we probably should just detail if you're interested in that -- in specifics of that after the call.

A couple of questions. Apologize if I missed this, but the run rate of $250 million synergies at the end of the quarter, can you tell us, just of that $250 million, how much was actually realized over the fiscal year that just ended?

I don't have that number at my fingertips. What I did try to express was the increase in -- on a combined basis of '13 over '12, so we'd have an additional $135 million in '13 over what we've realized in '12.

And so that would be -- that $135 million is actual dollars, not run rate exiting '13?

Exactly.

Steve, could you give us a feel, would you expect the majority of that $135 million to be a pickup from the run rate exiting this year or to be from new synergies?

Well, it's a combination of both, so we're at $250 million at the end of fiscal year '12, and I said we'd be up at $400 million by the end of '13. So there's projects coming in and there's projects going out, but the math is -- it's relatively close between $135 million realized versus conditional [ph] $150 million run rate.

Okay. And then I guess stepping back for a moment, could you help us just think about the big picture for the business as we look out a couple years versus the plans that you've laid out?

If I think about a bridge, you did 1178 of Credit Agreement EBITDA in the year and if we don't think about for the moment, '13 versus '14 or any particular time period, but just big picture, Jim, I think you said, the full benefit of the price increase would be something like 340 when realized and then you've got arguably another of your 550 of synergies, I don't know exactly what the right number is, but an incremental maybe 300, maybe something like that. So let's call it, 550 to add to that base of 1178.

You mentioned the headwind of $60 million of pricing this coming year. I'm not sure what other headwinds you would put against that, but could you help us just sort of think about a big picture bridge for the business when we get to the end of '14, you've executed on the investments and presumed with the returns on Smurfit conceptually what you envision the business profitability looking like at that time?

Well, I think you've taken a number of the major components and said here are the potential increases in income. I think from the -- what you have to take into account are the ramp of expenses that are going to offset some of that.

Our payroll is $2 billion, so put some percentage inflation on payroll and then add essentially health care or -- and workers' compensation costs and you see you've got a fairly significant $60 million to $70 million ramp every year there. And health care mandates, if they actually come to pass, and you'll see there's a fair run rate there and then you have commodity cost inflation on all the other inputs.

Now they're all cyclical, so where are they going to be at any point in time is a good question, but presumably they're going to match inflation. So you've got to overcome the ramp of your increasing costs with cost declines.

So some of the performance improvements are going to be used to overcome that ramp of other costs. What other opportunities we'll have to reduce costs in our businesses, I can't say today, but it seems like we always find time.

So it's the function of how much we can exceed the ramp in costs . And then if you get out to 2014, I'd have to speculate with respect to what I thought containerboard domestic and export pricing would be, and it is not our policy to comment on our belief with respect to future actions with respect to containerboard pricing.

But it is fair to note that the industry is operating at very high operating rates as we speak and very low inventory rates. In my view, with respect to the containerboard business, generally, I think is highly confirmed by the strength of export pricing and not withstanding the global depression, returning an increasing export pricing for containerboard.

So again, you would ask me what in 2014 do I think containerboard export pricing is going to be, what is pulp pricing going to be, as well as what is going to happen with domestic containerboard pricing in an environment in which you have essentially a non-substitutable commodity in an economy that could potentially return to historic levels of growth of 3% to 4% instead of 1.5%. So I actually think that we are pretty bearish with respect to the long-term prospects of our business because we tend to focus on potential cost increases and then not really focus on what potential revenue increases exist either through further pricing initiatives or the volume growth in a growing U.S.

economy.

I appreciate that. I guess one last question.

I don't ever see much written about the impact that the housing market may or has had on your business, but given that there's some people who believe that we're starting to see perhaps finally the beginnings of a real recovery in housing, could you just talk about just and what impact a recovery in housing could have on your business, if any?

Yes. If you believe that housing drives a robust domestic economy, a restored demand for housing would be very positive for us in the long term because you'd see, again, you go back to that 3% or 4% economic growth in the United States and all of a sudden, you don't have enough containerboard capacity in North America, nor would you have enough paperboard capacity.

And again, if that -- if we were able to sustain or provide the basis for some global growth in the economy, particularly with the exporting country that exports in the United States, you're going to, again, have a higher rate of absorption of the capacity in Asia that we responded to a question about earlier. So all of those things will be long-term positive.

They also might be short-term negative because if you had a spike in economic activity. The first thing you would see is the demand domestically for recycled fiber, so you see a short-term pressure on recycled fiber, which is highly cyclical and again, on the cost of energy, independent on deliverability.

So you might see some short-term earnings pressure in an environment which was very healthy with respect to the long term.

Do you have a sense for, in a sort of more normal housing market, what kind of percentage impact that could have on volumes for containerboard?

No. We've always thought that packaging is GDP minus because we're always figuring out ways to make packaging more efficient, make containerboard lighter so forth.

So if you have -- whatever GDP is growing, we're going to be something trailing that. But, again, it could be -- you could see GDP grow 3% or 4% because we've done so significantly.

And then if you had containerboard growing at 2.5%, that would be, I think, in excess of creep, again, contributing to further tightening of relatively tight domestic containerboard market.

Okay. And -- sorry, one last question which is really just a follow-up to my earlier -- I Just want to make sure I was on the same page.

But when we look at sort of the moving parts and again, using that 1178 of Credit Agreement EBITDA coming out of this past year, it looks like on a gross basis, when we add in sort of the opportunity for price recovery and incremental synergies, that would get you somewhere close to $1.9 billion of EBITDA. And then against that, we would have to factor in some of the expense headwinds.

You mentioned pricing, health care, et cetera, is that sort of consistent with the way you look at the business?

I think you're asking me to be more specific with respect to forecasting future EBITDA than would be wise for me to do.

All right thank you, all, very much for joining our call.