Ladies and gentlemen, good morning, and thank you for standing by. Welcome to today's International Paper third quarter 2022 earnings call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, you will have an opportunity to ask questions. To ask a question, press one, then zero on your telephone keypad. To withdraw a question, press one, then zero again. As a reminder, today's conference is being recorded. I'd now like to turn the conference over to Mark Nelson, Vice President, Investor Relations. Please go ahead. Thank you, Paul. Good morning, and thank you for joining International Paper's third quarter 2022 earnings call. Our speakers this morning are Mark Sutton, Chairman and Chief Executive Officer, and Tim Nicholls, Senior Vice President and Chief Financial Officer. There is important information at the beginning of our presentation on slide two, including certain legal disclaimers. For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties. We will also present certain non-U.S. GAAP financial information, and a reconciliation of those figures to U.S. GAAP financial measures is available on our website. Our website also contains copies of the third quarter earnings press release and today's presentation slides. I will now turn the call over to Mark Sutton. Thank you, Mark, and good morning, everyone. We'll begin our discussion on slide three. The third quarter was a very dynamic and challenging environment, which had a significant impact on our earnings. We experienced a sharp decline in demand in our industrial packaging segment and significantly higher cost headwinds from higher energy and distribution costs. On a more positive note, I'm very pleased with the progress our Global Cellulose Fibers team is making to improve performance in that business. They are successfully advancing their commercial strategy and achieved cost to capital returns in the third quarter. In both businesses, we also delivered strong price realization. For the year, we expect to exceed our $225 million target related to our Building a Better IP initiatives. Now back to the demand environment. As we entered the third quarter, we recognized there were macroeconomic uncertainties ahead of us, and that our businesses are not immune to these risks. However, these macro trends shifted drastically midway through the quarter, creating stronger headwinds than expected versus our previous outlook, particularly in our industrial packaging business. Based on feedback from our customers and after observing order patterns across our various channels and end user segments, we believe inflationary pressures weighed heavily on the consumer, resulting in lower demand for goods. This had a large impact on demand for packaging as consumer priority shifted toward non-discretionary goods and services in the quarter. In addition, our customers and the broader retail channel continued to work through elevated inventories of their products, which further reduced packaging demand in the quarter. In response to these trends, we quickly aligned our production with our customer demand, which resulted in significant economic downtime in the quarter for our containerboard system. Also, our significantly lower export position versus prior years contributed to a higher level of downtime, all of which suboptimized our system from a cost standpoint in the quarter. I would point out that our mill system continued to operate very well before being constrained by lower demand. The work we did in the last several quarters to improve reliability is paying dividends. As we enter the fourth quarter, packaging demand appears to be stabilizing at these lower levels. Finally, on capital allocation, we returned $434 million to shareowners in the third quarter, including $269 million of share repurchases. As a result, we've returned approximately $1.6 billion of cash to shareowners so far this year. If we turn to the third quarter in particular on slide four, revenue increased by 10% year-over-year, driven by strong price realization across our two business segments. Operating earnings and margins were lower than prior periods due to the significant macro headwinds I discussed earlier. However, our free cash flow generation was stable in the quarter. I would also like to take this opportunity to mention that we are making good progress regarding Ilim. As I've mentioned before, the complexity of the situation and our joint venture structure impact the pace of reaching a resolution. We feel good about the progress we're making, and we'll provide another update when there is more information to share. I'll now turn to slide five, which is one that we shared with you last quarter as we recognized that there were a lot of macro uncertainties ahead of us. Our outlook for the fourth quarter, which Tim will share with you shortly, assumes our earnings will remain under pressure in the near term. However, I want to reinforce my confidence in the resiliency of IP and our ability to navigate through these dynamic environments. Our teams at International Paper know what it takes to successfully manage through a business cycle. Given the rapid change in demand, it will take some time to realign and optimize our system to the current environment. We have a wide range of options and capabilities across our large system of mills, box plants, and supply chain, and we know how to leverage them while taking care of our customers. Also, later in the presentation, Tim's gonna share some specific actions that our teams are taking to shift production to our lowest cost operations. Shed high marginal costs across the system. We're also continuing to invest in projects to drive structural cost reduction through efficiency improvements. Finally, we have built a very strong balance sheet, which we will preserve because we believe it's ensuring our financial stability and optionality, and it's foundational to our company, especially in softer economic environments. This allows us to continue investing in our businesses and to return cash to shareowners in a meaningful way by maintaining our dividend and through opportunistic share repurchases. I'm now going to turn it over to Tim, who will cover our business performances and outlook. Tim? Thank you, Mark. Good morning, everyone. I'm on slide six, which shows our sequential earnings bridge. Third quarter operating earnings per share were $1.01 as compared to $1.24 in the second quarter. Price and mix improved by $151 million or $0.31 per share, with strong price realization across both segments. Volume was lower in Industrial Packaging as a result of the softer demand across all channels. In Global Cellulose Fibers, demand was stable. However, pulp shipments were higher due to improved supply chain velocity. Operations and costs were impacted by the non-repeat of favorable one-time items in the second quarter, significant economic downtime in our Industrial Packaging business, and higher distribution costs and other inflation across all businesses. As you may recall, our operations and costs in the second quarter benefited from $96 million or $0.19 per share of favorable one-time items related to insurance recovery for our Prattville Mill, as well as lower employee benefit costs, medical claims, and workers' comp expenses. Maintenance outages were lower in the third quarter as planned, improving earnings by $0.13. Input costs continued to be a headwind and were $75 million or $0.15 per share higher in the third quarter, driven by higher energy and chemicals, partially offset by lower OCC costs. On slide 34 of the appendix, we provide details on our consumption of key inputs, including natural gas, which was a significant cost headwind in the quarter for our businesses in North America and Europe. Corporate and other items include benefits from lower tax expense and a lower share count. Lastly, equity earnings were below the prior quarter, primarily due to lower sales price and FX related to Ilim. Turning to the segments and starting with Industrial Packaging on slide seven. We had very strong price and mix improvement in the quarter as we successfully completed implementation of our March price increase. While also benefiting from higher average export prices and commercial initiatives focused on margin improvement. As Mark mentioned earlier, the challenging macro environment resulted in much lower volumes and unfavorable costs in our North American and European packaging businesses. Demand for packaging weakened significantly mid-quarter across all channels and segments from lower consumer demand and retailer inventory destocking. This large decline in volume impacted operations and costs in the quarter as we adjusted our system to align our production with our customers' demands. These actions resulted in approximately 400,000 tons of economic downtime across the system, resulting in higher unabsorbed fixed cost and a sub-optimized system. This represented approximately one-third of the higher cost in ops quarter-over-quarter. In addition, when not constrained, our mills ran very well, which increased the amount of economic downtime needed to match the reduced level of demand. Sequentially, operations and costs was also impacted by significantly higher distribution costs, inflation on materials and services, and the non-repeat of favorable one-time items we discussed in the second quarter. It also includes some additional spending on recovery boilers and bark boilers across our mills to make our own energy, given the significant increases in natural gas prices. Input costs were another significant headwind in the quarter and much higher than we expected, primarily due to higher energy costs that were only partially offset by lower OCC costs. These cost headwinds are even more significant for our packaging business in Europe, where natural gas prices doubled since the second quarter and averaged about nine times the normal level. Turning to slide eight, we thought it would be helpful if we share some additional perspective on underlying segment trends for our corrugated packaging business. As shown on the previous slide, our U.S. box shipments were down 5.4% year-over-year, and our overall U.S. channel was down 5.9%. As a reminder, our U.S. channel includes the U.S. Box system, as well as our open market containerboard customers and our equity partnerships with strategic sheet feeders. In the third quarter, we saw demand decline across all end-use segments. The yellow indicators represent segments where the demand decline was less than our overall average of 5.4%, and the red indicators represent declines that were worse than our overall average. Segments including beverage, durables, and nondurables, which are more discretionary in nature, came under the most pressure as consumers had to make choices while dealing with high inflation. In addition, retailer inventory destocking has exacerbated the demand declines for most segments in the near term. Based on feedback from our customers and our performance in October, demand appears to be stabilizing at these lower levels as companies continue to work through their inventories in the fourth quarter. Despite these near-term headwinds, we understand the critical role corrugated packaging plays in bringing essential products to consumers and believe that IP is well-positioned to grow with our customers over the long term. Turning to slide nine. As Mark mentioned earlier, in a softer demand environment where we aren't able to run our systems at full capacity, we have the ability to shed high marginal costs due to a wide range of options and capabilities across our large system of mills, box plants, and supply chain. For example, we are shifting between fiber options based on the marginal cost of wood versus OCC. In this case, our mill teams consider the total cost to process the fiber, including the benefits from own make energy when consuming wood versus the cost of natural gas used to process OCC. Another example would be in the supply chain area. Our teams are reducing premium freight through mode optimization and increased availability of lowest cost carriers. At mills, we're working to lower our planned maintenance outage costs by reducing overtime and premium pay that is traditionally associated with a shorter schedule. We're also continuing to invest in our operations to drive structural cost reduction from efficiency improvements in the areas of fiber and energy consumption. Ultimately, we are focused on restoring margins to historical levels by aligning our production with customer demand while optimizing our cost structure. Turning to cellulose fibers on slide 10. I'll start with an update on the demand environment and supply chain. Demand for fluff pulp remains stable across all regions. Feedback from customers continues to indicate that fluff pulp inventories are near historical lows. We are experiencing moderate improvement in supply chain efficiencies. However, they continue to remain stretched, driven by ongoing port congestion and vessel delays. We believe fluff pulp will continue to grow over the long term and are confident in the essential role of absorbent personal care products in meeting consumer needs. Taking a look at the second quarter performance, price mix improved by $62 million due to the successful execution of previously announced price increases, with solid momentum as we enter the fourth quarter. Volume in the quarter was higher due to some improvement in supply chain velocity. However, I would note that backlogs remain above normalized levels due to ongoing logistics challenges. Our mills continue to run well. Operations and costs were unfavorable in the quarter due to higher distribution costs and non-repeat favorable one-time items in the second quarter. Planned maintenance outages were lower by $26 million sequentially, while input costs were higher by $12 million. Turning to slide 11. On Global Cellulose Fibers, business continues to make significant progress towards growing earnings and delivering cost of capital returns in the third quarter, and the business remains well positioned to sustain this level of performance in the fourth quarter. Our team successfully deployed a commercial strategy focused on building strategic relationships with key global and regional customers and aligning with the most attractive regions and segments. We are focused on creating value for our customers by delivering products that meet their stringent product safety standards and deliver innovative value. In addition, we are driving structural margin improvement by ensuring we get paid for the value we provide. To date, we have made solid progress in our fluff pulp contract negotiations, which will provide additional commercial benefits as we move into 2023. We are committed to building on this momentum and delivering value-creating returns over the business cycle. I would also note that this is a key part of Building a Better IP initiative in the category of strategy acceleration. Turning to slide 12, I would like to update you on Building a Better IP set of initiatives. We're making solid progress in delivering $70 million of earnings in the third quarter for a total of $175 million year to date, and we're on track to exceed the high end of our full year target. About half of the benefits to date are from our lean effectiveness initiative. By rapidly streamlining our corporate and staff functions to realign with a more simplified portfolio, we have already offset 100% of the dyssynergies from the printing papers spin-off. Although most of these benefits have been achieved, we will continue to pursue additional opportunities. The process optimization initiative has the potential to significantly reduce costs across areas such as maintenance and reliability, distribution and logistics, and sourcing as we leverage advanced technology and data analytics. These initiatives will deliver meaningful benefits in 2023 as we finish implementing new capabilities across our businesses. Finally, strategy acceleration is about delivering profitable growth through commercial and investment excellence. Getting our Global Cellulose Fibers business to deliver value-creating returns is one example of this. We are also focused on profitably growing our industrial packaging business by improving margins and investing for organic growth. Turning to slide 13 and a look at the fourth quarter outlook. As Mark mentioned, our earnings will remain under pressure in the near term given the current demand environment. With that, I'll start with industrial packaging. We expect price and mix in the export channel to be lower by $10 million. Volume is expected to decrease by $30 million with four less days sequentially in North America, and the traditional seasonal pickup from holiday demand is not expected to be as strong this year. This will be partially offset by seasonally higher produce volume and EMEA packaging. Operations and costs are expected to decrease earnings by $120 million. A little more than half of this is from the higher unabsorbed fixed costs resulting from lower volumes, as well as seasonally higher costs, primarily from energy consumption and labor benefits. The remainder includes such items as inflation on materials and service, services and timing of spending. Maintenance outage expense is generally flat. Lastly, input costs are expected to decrease by $80 million from lower fiber and energy costs. In Global Cellulose Fibers, we expect price and mix to improve by $20 million on the realization of prior increases. Volume is expected to decrease by $10 million based on timing of shipments through the supply chain. Operations and costs are expected to increase by $5 million due to seasonality, while maintenance outage expense is expected to increase by $34 million. Lastly, input costs are expected to increase by $5 million, primarily related to energy costs at our converting operation in Poland. Turning to slide 14, I'll take a moment to update you on our capital allocation actions in the third quarter. As Mark mentioned earlier, we have a very strong balance sheet, which we will preserve because we believe it is core to our capital allocation framework. Our 2021 year-end leverage was 2.3x on a Moody's basis, which is below our target range of 2.5x-2.8x. Looking ahead, we have limited medium-term maturities with about $1.3 billion due over the next 10 years. Finally, even in this environment, the risk mitigation strategies we've taken to ensure our pension plan remains fully funded are in place and are delivering. Returning cash to shareholders is a meaningful part of our capital allocation framework. In the third quarter, we returned $434 million to shareholders, including $269 million through share repurchases, which represents 6.4 million shares or about 1.8% of shares outstanding. As a result, we've returned approximately $1.6 billion of cash to shareholders so far this year. In October, our board of directors authorized an additional $1.5 billion of share repurchases, which brings our total authorization to approximately $3.4 billion. Going forward, we are committed to returning cash through maintaining our dividend and through opportunistic share repurchases. Investment excellence is essential to growing earnings and cash generation. We are targeting between $900 million-$1 billion, which includes the funding cost for the funding for cost reduction projects with attractive returns and for strategic projects to build out capabilities and capacity in our box system to support future profitable growth. We will continue to be disciplined and selective when assessing M&A opportunities that may supplement our goal of accelerating profitable growth. You can expect M&A to focus primarily on bolt-on opportunities in our packaging businesses in North America and Europe. Any potential opportunity we pursue must create a compelling long-term value for shareholders. With that, I'll turn it back over to Mark. Thanks, Tim, for all the details. Look, this is clearly a very dynamic environment with a lot of moving parts. As I look back across our company, I'm really proud of the improvement we've made in customer service over the last several quarters, considering where we were in the middle of last year with containerboard inventory issues and box plant availability for our customers. The reliability improvements we've made in our mill system, both in Global Cellulose Fibers and in containerboard, I feel really good about because we're running very, very well in some cases, at levels, productivity levels better than the best we've ever run. I also feel good about the progress our Global Cellulose Fibers team is making and the trajectory of the profitability, earnings, and the business model changes we've made that Tim described a bit earlier. At the same time, I'm not at all satisfied with the level of our profitability, which has been impacted by supply chain disruptions, inflation, and falling demand in the second half of this year. I am certain we will make improvements in this area. I'm also very certain about the resiliency of International Paper. During the past few years, we have significantly enhanced our financial strength and flexibility and taken a lot of risk out of the company. This strong foundation makes IP well-positioned for success across a wide spectrum of economic environments. With that, operator, we're ready to take questions. As a reminder, to ask a question, press one then zero. To withdraw a question, repeat the one zero command. Thank you. We will pause a moment to compile the Q&A roster. Our first question comes from Bank of America on the line of George Staphos. Please go ahead. Hi. Thanks very much. Hi, everyone. Good morning. Thanks for all the details, Mark and Tim. First question broadly on containerboard and the second one on pulp. In containerboard, can you talk to us about what benefit you expect to get from the optimization efforts on a run rate basis, what the horizon would be in terms of, you know, when you expect to be at a more optimized level that you're targeting? How do current box shipments and trends play into your optimization, you know, and what are you seeing early in the quarter? Early in the quarter, we are seeing, as Tim mentioned, box shipments, you know, still, kind of stabilized from where they exited the third quarter. That's down. Got it. You know, 6% or so from where, you know, quarter progressively got a little worse. You know, I think, George, the issue on optimizing, which we have called in the past, you know, variabilizing our cost structure, I think part of what's unique right now compared to maybe prior periods is the amount of production slowdowns we're taking over a relatively short period of time, and in a period where most of our maintenance outages almost all of our maintenance outages are behind us. If you look at prior periods where we adjusted our output to match our demand, A, it was spread out more evenly. Some of it was in the first half of the year where we also had maintenance outages. The third quarter, we did a lot, and it was really in the last two months of the quarter. In the fourth quarter, it spread out more evenly, but it's still trying to, you know, anticipate the demand that we think we see, but being willing to turn it back on if the demand picks up. I think the fourth quarter is gonna be a transitionary quarter. I will say from the last time we took economic downtime in our containerboard system in any appreciable amount, you will all remember that was 2019. If we look at the variable cost per unit of production in that environment, we're actually doing a little bit better than that. What's different this time is we're doing this in a really high inflationary environment, so the price part of a lot of our inputs is persistently sticky. We think some of that will start to relieve itself in the fourth quarter, but it hasn't all happened yet. We weren't dealing with that part of the cost component in 2019. Our teams know what to do. We also didn't have a high energy environment then. The goal right now is to maximize our own make energy as anybody who makes their own energy in any industry would be trying to do right now. You got to match that goal with the actual production output you need, and that changes the way we run our pulp mill. I think we'll see through the fourth quarter continued improvement in how we shed those marginal costs. Thanks, Mark. My other question on pulp. You said, I believe, demand for GCF was stable, yet your customers' inventories are still relatively low. You've seen some improvement, but not a lot, I'm paraphrasing there, in the supply chain. With inventories low, did customers pick up their purchases relative to where they otherwise would have been because they could access more material because the supply chain's improved? As we look out over the next couple of quarters, presumably the supply chain improves, do you think that will lead customers to purchase more and improve their inventory position? No, it'll be much more hand to mouth because the supply chain has improved, and so the need to have inventory will diminish somewhat. Thanks, guys. Good luck in the quarter. I think the low levels of inventory for this particular type of product, given it's not easily substitutable in the short term, given the qualifications, the low levels of inventory make the value chain very nervous. I think customers will work to get to some level of comfort that they're used to. I don't think anyone will trust the supply chain for quite a while to be the answer to, "I can run with a lot lower inventories." Some of our shipments, as Tim mentioned or alluded to, we shipped a little more than we expected, partly because the supply chain velocity improved a little bit, as you paraphrased. We don't know for sure if that's permanent or if that was just in the third quarter. We hope it's gonna get better because it will help us lower our costs. We still have issues in the market. For example, China's market is still semi-closed with some of the lockdowns. We think the inventory situation is gonna remain strained, meaning low for finished products throughout the value chain for the coming several quarters. We think that the demand is stable. It could improve if China figures out their vaccine and all that strategy and maybe opens the economy a little more. Right now, what we see is stable demand going forward, a lot of commercial improvements that will flow into 2023, and the ability with a little bit better supply chains to really start to take cost out of our system that we get to keep. Thank you, Mark. Thanks, George. Thank you. Our next question comes from Citi, and the line of Anthony Pettinari. Please go ahead. Good morning. Just following up on inventories, maybe on the containerboard side, you know, how would you characterize customer inventories here in October, as well as your own inventories? To the extent that there's maybe an overhang still in the channel, like, how long do you think it might take to work through that? I think there's. If you go back to the slide Tim showed Anthony with the yellow and red segment descriptors, those that were the demand declined more than the average demand, those are the customers in those segments. We have very big customers, national type accounts, and we have very small customers inside of each of those little segment descriptors. Those that were greater than the average, a big portion of their commentary to us on their order pattern was too much inventory. We think they think, best they can tell from the consumer, I watched a few of their earnings calls earlier this week, that's a fourth quarter unwinding process, but maybe not terribly much beyond that. If you look at the other part of that chart where our decline, in some cases, we didn't break it out, but in some cases, we had customers inside of segments that the demand didn't decline at all, and they're very big and important customers to us. They would say their inventories are a little high, but, you know, we'll see what happens with fourth quarter consumer demand. They're predicting a little less of a holiday pickup, but any pickup at all, and they'll feel like they're in great shape. It's really a tale of those segments on that chart we showed. Even in the worst case, we think most of our customers believe that this is a work it through the fourth quarter process. Obviously, you hate to make a prediction because it seems to be so many variables that come up and inflation is still persistent and high. The consumer can be fickle after this holiday period and spending a lot of money on services. What happens to the goods market in the first quarter, I think that's what a lot of us are trying to figure out right now. Okay. That's very helpful. And then just with the updated CapEx guidance, can you remind us kinda how you think about normalized, you know, maintenance versus growth versus regulatory CapEx to the extent that you're maybe trimming some of that? You know, maybe where is that coming from? And then, you know, understanding you're not giving guidance on 2023, just kinda directionally, are there capital needs for the business that might cause CapEx to go higher next year? Could it go lower? Do you think you're kind of in a good position here? Just any incremental thoughts on CapEx. Yeah, great. Thanks, Anthony. It's Tim. So, you know, over time, longer term, we look to add capital investment around the level of depreciation that can be a little bit higher in some years. What usually drives that is not so much maintenance and regulatory. We try to keep that fairly consistent. We look over a five-year period. We have five-year plans about how we're gonna do maintenance schedules. What tends to drive it up and down a little bit on the margin tends to be more of the strategic projects, whether it's building out capability or more recently, adding capacity in our converting operations. You know, the $900 million-$1 billion is not necessarily us actively pulling back capital. It's just the, you know, coming to the realization this close to the end of the year that as hard as we've tried all through the year, supply chain has been a limiting factor about how much capital you can have installed and have it be productive in a given period of time. So that's the reason for the adjustment, just acknowledging that we're not gonna get as much done as we thought we were earlier in the year, and longer term, we'll try to be around depreciation. But where there's either good cost reduction projects or strategic needs, building out capability, it could be a little bit higher than that in given years. Okay, that's very helpful. I'll turn it over. Thank you. Our next question comes from Bank of Montreal and the line of Mark Wilde. Please go ahead. Thanks. Good morning, Mark. Good morning, Tim. Morning. Mark, I wanted just to start out, you took a lot of economic downtime in the third quarter, and you're suggesting more in the fourth quarter. I just wonder, given that level of downtime and coupling that with all the new capacity that's coming into the industry over the next 15 months, are there some more efficient ways to adjust your capital base over the next 12 months-18 months, whether it's some permanent moves or maybe moves like we saw at Valliant several years ago when they just mothballed one of the machines? Or is just, you know, continuing to, you know, take kind of rolling downtime across the system, is that the optimum approach? That's a great question, Mark. I think the variables we look at, of course, we don't know what the demand environment is gonna be over the next year or two, and we don't know exactly what the ramp of the new capacity you mentioned will be. So there's a lot of variables. The other thing that's a little different and a unique addition to the algorithm we use to figure out how to take downtime is, one, you have very high natural gas costs, which change the competitiveness of your recycled mills, and we have a few that are 100% recycled. The flip side of that is you got a very expensive and congested supply chain. An IP example would be our large recycle mill that's up in the Midwest might be a candidate to scale back for energy costs, but it defeats our ability to save on logistics because it's so close to the market. One of the reasons you see us doing more of, as you described, rolling, not fully shutting down, but adjusting the output of multiple plants, is to try to make all of that balance, get our integrated mills to be as close to energy independent as possible, and our non-integrated mills, which tend to be located physically in places, and they were built for that reason, to be close to the end-use market, and they're beyond a lot of the rail choke points to get those to serve as much. As things change, as supply chain costs change, as energy changes, it will lead us to different conclusions. That's how we make that decision on how much we run to our order book and where we do it. Okay. Now I wanted to just turn to cellulose. I know that this whole strategic effort in cellulose over the last two years has a number of different elements. Just, you know, if we look at the pulp price charts right now, they're, you know, at the highest levels any of us have ever seen. Can you just help us on this call get confidence that, you know, if pulp prices start to roll over, you're actually gonna be able to maintain those cost to capital returns going forward in cellulose? That it's not just the market that's gotten you there at this point. Yeah. I think if you look at a couple of indicators, one of the things we've tried to do with our value proposition is to make arrangements with customers. Tim, you used the word moving to strategic arrangements versus just contractual volume for price. Two, how we participate in the different regions of the world, given the nature of the product and what requirements a customer has, from the standpoint of substitution and making sure we get paid for that. You can see some evidence in certain charts, in certain regions where that phenomena has already started to occur, and there's no impact on our absorbent products' economics. The reason for that is our strategy adjustment has been to work with our customers and to basically have the effect of decoupling that as much as we possibly can. Your point is well taken. We will see how that plays out as we go through, you know, a normal business cycle. We're very comfortable that we've made structural changes in the way we go to market. I'm not saying you won't see any cyclicality, but I think you will begin to see a different spread over time than you've seen in the past. The proof will be in the coming quarters. I'll take you back, Mark, to what I said over a year ago. Investors can expect with the changes we're making for Global Cellulose Fibers to improve quarter after quarter after quarter, that we will be at the cost of capital returns in the second half of 2022, and that you could expect the business as we enter into 2023 to be a value-creating business. So far, that's the track we're on. Let's keep talking about it quarter after quarter. I think your point is a great one, and I think we'll learn a lot more about whether or not our strategy adjustments have resiliency and sustainability as we move into 2023. I believe they do. Okay. That's helpful, Mark. I'll turn it over to some other questions. Thank you. Next from Seaport Research Partners, Mark Weintraub, your line is open. Thank you. I'm just trying to think through, work out the downtime, the magnitude of downtime that you guys took in the third quarter, obviously acting quickly to adjust to the demand environment. I think your North American system order of magnitude is 13.5 million tons, so roughly 3.5 million tons a quarter. Just the economic downtime itself was about 400,000 tons, which, if I'm doing my math right and I'm not missing something, is, you know, suggesting you're kind of in the 85%-90% range in terms of operating rates. You know, basically containerboard production presumably was down by, you know, 10%+ year-over-year. Two questions on that. One, have you been bringing containerboard inventory down in your system during this quarter? You also made the comments that you, if I understood correctly, that in the fourth quarter you're probably gonna be taking out as much or maybe more. Did I hear that right? Mark, that's a multifaceted question. Let me just take you back to a higher level. The containerboard system has a certain capacity. It's a little higher than the number you mentioned. The way we run it is not by quarter. I mean, we have to do what we have to do in a single quarter. The way we think about our system is we have a certain amount of output capability. We strategically target about 3% of that, and you can look at our, you know, earnings calls from the past and how much volume we take out for planned maintenance. Ends up being around between 3% and 4%. Then there's another 3%-4% that we tend to average just in terms of being flexible for customer service, for unforeseen problems. Every once in a while, to match a change in demand, like 2019, we'll adjust our output to match a reduced demand environment. That, again, has multiple variables. It depends on how strong the export market is during the same period of time. Sometimes the markets are connected, sometimes they're not. That number as a percentage of our total capacity in 2019 was probably 6%-7% of our total capacity once in a multi-year period. I don't know what it's gonna be. We don't forecast. We're just trying to match up the principle of we're gonna make the containerboard we need to serve the order book we have and to maintain what is much healthier inventories for our supply chain. Those numbers, as you know, for almost every industry, are a little higher in this kind of supply chain environment. That's the way you should think about it. Think about it big picture, not in a 60-day or 90-day period. There's a system, there's maintenance, there's flexibility, time, and occasionally there's an adjustment, and that's the kind of way it's gonna play out. Roughly the percentages I gave you if you annualize. What's unique about this, and I mentioned it in a prior answer, is, A, markets slow down in quarters that normally the market's not slowing down. For IP, quarters where we don't have any other maintenance outages that would normally be taking production offline like we had in the first half of the year. That's the differences. That's what adds to the cost mitigation challenge. Thank you. Helpful. Just to clarify, I guess what I'm trying to ascertain is whether or not the amount of downtime you took, you know, and I appreciate all the talk about maintenance and levels along those lines, et cetera, having an impact. Was there almost some catch up down? If we were to remain in a down 6% type of demand environment, would you anticipate continuing to take this level of downtime, or was there the degree of downtime on the board side of things was even more than what the box shipment type of environment would have indicated? Again, Mark, the way you need to think about the answer to that question is any downtime we take is a product of doing the analysis of our North American order book, our export order book, any maintenance outages that would already take production offline. I think Tim mentioned it, how well we're running in the moment. We're running really, really well right now, i.e., we're making too much containerboard, which is where you wanna be. That's what we've worked on to be reliable. What that means in plain speak is the lack of reliability interruptions in the quarter, which is a good thing, but not in a quarter where you necessarily don't need the production, so you end up slowing back, but at least you didn't have a repair cost. It's impossible to answer the question without knowing the answer to all four of those variables I just gave you. Understood. That's really helpful. I get it. I think basically you've improved your system. You can actually make more products if you could continue like this. Which I guess would then sort of go back to Mark Wilde's question a little bit. Does that then give you a little bit added flexibility to think about your footprint on a different basis too, if you've actually done that? Is that a fair observation? I think it's fair to think about the way I answered Mark's question. In the moment where you're considering, which let's take right now, you look at the other variables like transportation and logistics costs and like energy costs, and you make the decisions for production at the lowest. I think Tim used the word, the lowest marginal cost operations. That could change in a month because of a hurricane that wets the woodlands, and now you've got high cost wood in a mill that you didn't think you. My point is not to be evasive. It's a dynamic set of variables, and we make those decisions not in real time, but you know, in a 7-day-1 0-day period. If the answer to the question, how do we make the production we need at the lowest cost involves some of the examples you and Mark mentioned, then that's what we would do. Right now, with the variables we have with supply chain and energy, that's not the most cost-effective way to do it. Thanks very much. Thank you. Our next question comes from Truist Securities and the line of Mike Roxland. Please go ahead. Thanks. Hi, Mark, Tim. Thanks for taking my questions. Just wanted to follow up, I guess, on your inventories as well. Just following up on Mark's question and Anthony's questions about the overall or the aggregate level of your inventories during the quarter. Can you give us a sense of where they stand? I mean, I remember last quarter you mentioning that your containerboard inventories are now back at sufficient levels. But with demand slowing as aggressively as it has, given the economic downtime you've taken, given, you know, some of the slow backs, would it be fair to say that your inventories have declined sequentially and relative to your comments from last quarter? Yeah. We were back where we needed to be. Part of the reaction that you saw in the quarter, it happened, you know, midway through the quarter, as Mark referenced. It was really in response to making sure that inventories don't get away from us. If we're running to demand, we're trying to look, you know, our S&OP process is trying to look at not only in the moment but further out in time and what kind of product availability needs we're going to have. We were able to kind of keep inventories in line with where we want them through the way we ran the system. Mike, again, I'll just reiterate, the decisions we make are for what we can see upcoming. Think about the calendar. The other variable as you're taking adjustments to inventory at this time of year versus in the middle of the year, is we enter into the first half of the year, which is our heavy 75% of our maintenance outages. Part of our normal operating strategy is to predict how do we make sure we have the inventory we need in the first and second quarter of next year, so we don't lose a sale because we did something to inventories in the moment in the fourth quarter without looking at what's getting ready to happen. That's factored into our decisions as well. It's not just about the inventory to match the demand in the fourth quarter. It probably would be if we were in the second quarter because the outages are done, you got plenty of inventory, you don't have any more mills down, but that's not the case here. We're getting ready to enter into our normal outage season, and that factors into what we think we have to run, whether or not there was an economic slowdown or not, so we can get through our outages. Yeah. The other thing I would add is, even though we've seen some modest improvement in transit times with ocean vessels, here on the ground in North America, rail and truck, our network, the supply chain has not picked up a lot of velocity. We're still dealing with the extra time it takes to move product in between mills and converting operations. Got you. I appreciate the call. Just one quick follow-up. If demand remains depressed through this quarter through the earlier part of next year, would it be fair to say that you continue not to, let's say, you could tell production to slow back. Is that the point at which you would draw down your inventory? Mark, you know, you mentioned if it was 2Q, but would it be fair to say that if you were in early 1Q and year-over-year demand environment is 6%, you would start to draw down your inventories at that point? We would run the system to match the demand that we have. We don't know what the demand is gonna be in the first quarter, but as we get closer to that, we'll have a better idea. If that results in the supply chain velocities improve, then we don't solve for the inventory level number. We solve for making sure we can take care of our customers, and that we have the business prepared because what we make today gets used in the future, not today. You know, we've already made the inventory for today yesterday. That's why it's difficult to give you a finite period answer. There's again a lot of variables. We need less absolute inventory when the supply chain is flowing than we do when it's not. It's a long way from flowing, and especially in the rail area. A lot of our mills are in the Southeast, deep Southeast, where the rail choke points are not getting any better, and the labor situation is not getting a lot better. We're working with what we know right now, and what we know right now says the inventory levels we have, the absolute number, matches the slow velocity of the supply chain. If that changes, we'll adjust our production output to match the fact that the inventory is moving faster. It's not a matter of will we lower our inventory, it's a matter of all of those variables lead to an inventory number. Got you. Appreciate all the color. Good luck with the balance of the year. Thank you. Thank you. Our next question comes from Adam Josephson of KeyBanc. Please go ahead. Mark and Tim, good morning. Thanks very much for taking my questions. Mark, just one more kinda way of asking that capacity question that I think both Marks were getting at is, obviously, you have to hazard a guess as to what long-run demand will be to figure out what the optimal level of capacity is. Obviously, there was this exceptionally unusual surge in demand during the pandemic, and now we're starting to see the other side of that. When you're thinking about the right amount of capacity to have long term, how are you thinking about the right level of demand? Obviously, it's near impossible to forecast it, but are you thinking that 2019 levels were kind of normal? Or, and what the long run rate of demand growth will be? Obviously, there's capacity coming that I think Mark Wilde mentioned. How are you thinking about all those factors when determining what the right level of long-term capacity is for you? Yeah. Again, Adam, I appreciate you coming at it from a different angle. I mean, the long-term capacity we think we need is based on what we believe about the markets we serve. The markets we serve, ex the pandemic, just normalized volume. Unless there's some major change in the structure of the U.S. economy, it's been a 1%-2% growth market for boxes. The open market, similar because we're selling to people who make boxes in the same market. Global containerboard, virgin containerboard, to service the rest of the world and to create recycled fiber, has been a 2%-3% growth. We've typically tried to position ourselves to have positions in those channels in the most profitable areas. I'd say right now, again, with those numbers in mind over time, not here in the moment, but over time, we're good on containerboard. We just made the Riverdale Investment in 2020. That was another good chunk of high-quality White Top. We made small project investments across the North American system in years prior to that. I think we've got the containerboard capacity we need. We're working on different grades, lighter weights, different things like that. But I think that's how we think about the containerboard capacity. We back it into what do we need in containerboard based on what we think the end-use markets are gonna need for box, which is the biggest, and then the actual open market we sell in North America and export. Those are the numbers we use. We didn't change our strategy because of the pandemic demand. What we did is we realized we can't run as close to the full capacity that we were running in our converting operations, meaning, you know, you could always use a little labor to get some extra capacity by working some overtime, but you can't do that forever because there's people, and they can't do that forever. You do need to have a better asset strategy, and we learned that through the pandemic demand. We didn't change our strategy on what we look at long-term growth of containerboard and its uses. No, it's just, I think part of what you were getting at, Adam, is the pull forward that's maybe some other industry saw. Right. Primarily around durable goods. You know, durable goods is small for us. It's small in total. And a lot of what people are buying are consumable items. It's not like maybe in some cases there's demand pull forward a little bit, but I don't feel like that's the bulk of it. It's just. No, I appreciate that. I think we have seen the shift. I think we shift. I think we have seen the shift that Mark talked about between goods and services, and that'll normalize at some point too. Yep. No, I appreciate that. Just Tim, one on the dividends. Your balance sheet, you've done a lot of work to get it in much better shape than it used to be, and kudos to you for that. When I think about the dividend payout, just in light of what you're guiding to for this year, the $900 million-$1 billion. If I assume that you sell or do something with your Ilim stake, that would mean that you wouldn't get that $200 million-ish of cash dividends next year and thereafter for that matter. Such that ex Ilim you'd be paying out, I think, what, 90% of your free cash flow this year. Obviously, you have a view of where trough cash flow is, a normalized cash flow, peak cash flow. How are you thinking about the dividend payout in light of what you're guiding to for this year in light of what you're hoping to do with Ilim, et cetera? Yeah. It's a great question, Adam. I mean, you know, the way we think about it is, and we say 40%-50% of free cash flow, that in our minds, and I think we've said this before, but that's not an every moment of time. That is through the cycle. There have been moments when our dividend payout has been higher than that, and it's been right down on the bottom end of that at times too. I think we're in a moment, but we still believe that the dividend is structured. We have bought a lot of shares at the same time, is still perfectly situated in that 40%-50% of free cash flow, and we still believe in the resiliency of our cash flow over time. Yeah. I think it's important to know, Adam, that what Tim said is really, really important, 40%-50% over a cycle, which means it's gonna be at the upper end, and it could be the number you just gave, and it could be much lower and be at the lower end. It has even dipped into 30%-something of free cash flow. The dividend's really important to us. It's really important to our investors. That's what we hear from investors. It is important for us to make sure that it's not a tactical thing that we calculate free cash flow for a given year, and then we say, "Oh, 50% of that." That's not how we do it. It's 40%-50%. It's an overall guideline through a cycle, and a lot of things happen to converge in trough conditions, which you might describe as low demand and all its negative impacts, usually followed by lower cost environments, unwinding of working capital. Cash, as you know, has many components, but that's the way for people to think about our dividend. It is not a calculation in the moment. We'll pick your moment quarter, half year. It's through a cycle, and I just wanna be really clear about that. Thanks so much, Mark. Thank you. Our final question for today comes from Deutsche Bank and the line of Kyle White. Please go ahead. Hey, good morning. Thanks for taking the question. I was just hoping to get some more details on demand. I know it's been talked about a lot, but just trying to understand the two large dynamics impacting demand here. You know, the destock impact and now inflationary pressures on consumers. We kinda knew about the destock impact hitting into the quarter, but you mentioned that demand saw a sharper decline midway through. It seems like inflationary pressures are now taking over and having a larger impact on demand going forward. Should that not carry kind of forward into 2023 such that we could see mid-single-digit declines in the first half of 2023? What are you seeing now, and how are you thinking about that for next year? You know, Kyle, I think it's a really great question. That's the kind of conversations we're having with customers. You know, our business doesn't have that long of a cycle, so we got some visibility into the fourth quarter. There's really not a lot of visibility other than algorithms and analytics into the first quarter. But what I think our customers said what they saw and then hence we saw is as inflation remains persistent, customers had to make choices. You look at the time of year we're in, approaching holidays, a little more travel. They're making choices to spend money on services or save money for a future airplane flight over the holidays and backing off of some discretionary things. Fast-forward through the fourth quarter and you flush out all that service spending. Where does the consumer find themself in the first quarter? I think it has a lot to do with whether this, quote, "slowing market" and slowing economy actually creates different policy, interest rates. How does the consumer feel? You know, you listen to the bank CEOs, and they have a general view that the consumer is still in pretty good shape, and that's true, looking at bank balances and all that. That won't stay that way if inflation remains at 9%-10% and rents are high and all the other things. That's the real variables we're watching and our customers are watching. We'll deal with whatever the environment is in the first part of next year. I think we have to see what does the consumer do as they work their way through, at least in this part of the world, a very heavily service-oriented holiday spending pattern, and will they make choices that are different. It looks like they're making choices on less goods, more services. After the services are all spent, will the goods replenishment, as Tim said, some of this is consumables, will that regain a normal cadence in the first quarter. It's a great question. We're watching it. We'll know a lot more, obviously, as we go through the fourth quarter. When we're talking to all of you at the end of January with our full year, we'll be in it, so we'll have a lot better view on that. All right, that's very helpful. What's the latest on Ilim? Understanding you can't share all the details, but just curious what you can on a call like this regarding the timing of potential sale that you think could happen there. Also curious, do you expect to receive any additional dividends from Ilim next year or, you know, in the future? Yeah, we're not forecasting dividends into next year. We're in the middle of a process, and you're right, there's not a whole lot more we can say about it, but we feel good about where we are. We have made progress, and we're pushing hard. Yes, I made a couple of comments in the prepared remarks, Kyle, that we were not where we were at the beginning of the quarter. We're much more advanced, but it is a complex process. The fact that it's a joint venture and not wholly owned when you look at the process for executing strategic options under these current guidelines by both governments, the joint venture structure makes it a more time-consuming and more complex process. We have advanced along that process timeline quite a bit, so I'm really pleased. We're not there till we're there, so that's why we're not you know, getting out over our skis on where we are on it. I feel really good about the amount of movement we made through the quarter. Got it. Thank you for all the details. Thank you. I'd like to turn the call back over to Mark Sutton for closing comments. Thank you, operator. I'd just like to close by really saying thank you to all the International Paper team members, employees around the world, what they're doing every day for our customers and what they're doing every day for each other, to stay safe and to operate in environments that I don't think any of them ever thought they'd be operating in. They continue to do an outstanding job. I'd just like to close by reiterating a couple of comments I made. You know, we think the second half of this year is clearly transitory. We're taking the actions we need to take, pulling the levers we need to pull to make sure International Paper gets through this period in a very good way. I'm really pleased with the kind of financial underpinnings we have entering into any type of economic environment. We have a lot of opportunity and flexibility, even at lower demand levels, and in some cases, there could be a silver lining in the fact that it allows us to get some of our supply chain dysfunction back into a proper alignment. The strong balance sheet gives us options so we can continue to make organic investments in structural cost reduction and in strategic capacity and capability. In the past, we would have probably had to stop some of that just to manage the balance sheet. There's no meaningful debt for the foreseeable future that we need to deal with. We've got a lot of risk off the table. We're built for this type of environment, and we're built for a strong environment. I feel good about our ability to get through it. Look forward to talking to you with our full year call at the end of January. Thank you for your interest in International Paper. Ladies and gentlemen, thank you for your participation in International Paper's third quarter 2022 earnings call. You may now disconnect.