Tim Nicholls: Yes. We don’t comment on any plans we have or don’t about economic downtime going forward. But we have a view of the market growth and how we’ll need to run the system as we go through the year.
Cleveland Rueckert: Okay, that’s fair enough. And then just finally for me, thinking a little bit bigger picture. I’m just curious, I’m just sort of wondering conceptually here, how frequently you evaluate through cycle free cash flow. I think it looks like you need about another $200 million to $300 million of free cash flow to support the dividend within that 40% to 50% payout that we’ve talked about before. I’m just curious how you plan to get there from here just on a conceptual basis.
Tim Nicholls: Yes. I mean we look at free cash flow through the cycle. We do trough testing around sustainability of the dividend. I mean, we feel very good about our ability to meet the dividend requirement. And the 40% to 50% is not a hard and fast rule that it will always be within that. Sometimes it could be a little bit above and sometimes it might be a little bit below. But over time through the cycle, we think averaging 40 to 50 across a number of years is an appropriate range to shoot for.
Cleveland Rueckert: Would you say that CapEx is running like a little bit above average in ’23? I mean is that something we should expect to come down.
Tim Nicholls: I think it’s within $100 million or $200 million, it’s probably in the zone. I mean we were trying to spend more on last year but just given supply chain difficulties and long lead times, it was impossible. And so we were just short of $1 billion last year. We’re targeting between $1 billion and $1.2 billion this year. But again, it depends on suppliers and vendors’ ability to deliver within a time frame. But D&A runs about a little over $1.1 billion. We’ve looked at average that over time in terms of capital spending.
Operator: Then next from Jefferies, we go to the line of Philip Ng.
John Dunigan: This is John Dunigan on for Phil. Congratulations guys on a great quarter. I wanted to first ask about the containerboard inventories for IP. Where are they now? I mean, one is your base maintenance outage but do you see them in a decent spot with kind of this continuing weak demand environment? Or do you actually see the need to build up a little bit just because of 1Q being your largest maintenance outage?
Tim Nicholls: Yes. I mean without getting into the numbers, they came down a little bit in the fourth quarter. We’re going into heavy maintenance outage season, first quarter for sure but in the second quarter. So we’ll look at inventories and make sure that we are at an appropriate level to support our outages. So — but I don’t expect a lot of movement.
John Dunigan: Okay. And then just with the new capacity for the industry that’s coming online, have you seen any impact from that? Any businesses coming up for bid more frequently or anything along those lines? And just in terms of how IP is maybe responding to all the capacity that’s heavily coming on here in the latter half of the quarter. Have you been able to lock in any customers for a longer period of time or kind of shore up some of your contracts to avoid some of the potential instability in the supply demand?
Mark Sutton: John, I think the way we think about it is our containerboard and box system obviously, is an integrated system for the board that we use to make our boxes. And the balance is what we would call our open market position. There’s 2 pieces to that: domestic market and export market. And for the domestic market, all of our customers that buy board from us are long-term strategic agreement type customers. We do very little in just kind of what would be considered a spot market. And so we really don’t have some of that churn issue that you’re talking about. And then we look at demand for virgin kraft linerboard which is all that we export and we oscillate our output on that to match the demand signal. So we’ve seen capacity come on in the past and it comes on in varying degrees of velocity and varying degrees of success.
And we’ll just navigate this one like we’ve done in the past. But we really do run — for all practical purposes, we run a pretty integrated operation from fiber to box, whether we’re making the box or whether a long-term strategic open market box makers making it.
John Dunigan: Okay, understood. And just one point of clarification. In the deck, it says there’s no dividend expected from Ilim in 2023. I mean given the closing, it was just expected sometime this year, is there no cash dividend that could come from just holding on to the Ilim for longer portion of this year depending on the closing? Or that’s kind of off the table included in the sale price?
Tim Nicholls: Yes, that wouldn’t be base case. We don’t expect it.
Operator: The next from Deutsche Bank — I’m sorry, from KeyBanc, Adam Josephson.
Adam Josephson: Just couple of questions about your — the assumptions embedded in your full year guidance. One on demand, I think, Tim, you mentioned you’re thinking underlying box demand will be flattish sequentially 4Q to 1Q. Could you talk about what your expectations are thereafter? Just given the destocking that you talked about affecting the fourth quarter, one would think that demand would be getting better sequentially at some point over the course of 2023. So just wondering what exactly your expectations are beyond 1Q and for full year shipments ’23 versus ’22, if you’re able to talk about that.
Tim Nicholls: I mean we do see a modest recovery. I think we’re looking at something in the neighborhood of maybe 1% absolute over the course of the year. So as we get out of the first quarter going into the latter part of the year, a pickup is anticipated but modest.
