伊士曼化學 (EMN) 2006 Q2 法說會逐字稿

Good day, everyone, and welcome to the Eastman Chemical Company Second quarter earnings conference call.

Today's conference is being recorded. This call is being broadcast live on the Eastman's Web site at www.eastman.com.

We will now turn the call over to Mr. Greg Riddle of Eastman Chemical Company Investor Relations. Mr. Riddle, please go ahead, sir.

Okay, thanks, Rufus, and good morning, everyone, and thank you for joining us.

On the call with me today are Brian Ferguson, Chairman and CEO, Rich Lorraine, Senior Vice President and Chief Financial Officer, and Jennifer Boyne, Manager of Investor Relations.

Before we begin let me remind you that during this call you will hear certain forward-looking statements concerning our plans and expectations for second half and full year 2006. Actual results could differ materially from our plans and expectations.

Certain factors related to future expectations are or will be detailed in the Company's second quarter 2006 financial results news release on our Web site and in our filings with the Securities and Exchange Commission including the Form 10-Q, to be filed for second quarter 2006 and the Form 10-K filed for 2005.

With that, I'll turn the call over to Brian.

Hi, good morning, everyone, and thanks for joining our call.

As usual, I'll give you some highlights at the corporate level followed by some comments on the segments, the regions, talk about the second half of the year and then finally close up with some corporate strategy comments.

Last night, we reported earnings of $1.40 per share, or $1.37 per share depending on how you look at the exceptional items. That's very much in line with the guidance we gave you in April when we told you that our second quarter earnings would be similar to the first quarter. In fact, I don't think you can be more similar without being identical, so we came in pretty close on that estimation.

These results reflect very strong volumes throughout the Company with every segment increasing their sales volume year-over-year. They also reflect our ability to maintain margins with price increases in the face of historically high raw material and energy costs.

In this quarter our raw material and energy costs increased $125 million. Year-to-date, the increase is over $200 million, and for any of you who are keeping score, the increase in our raw material and energy costs over the past two-and-a-half years is over $1.3 billion.

Now fortunately, we have been able to mostly offset the higher costs with price increases. We have also run our facilities very hard over the last few years to meet this strong demand and we've only been able to do that as a result of all of the dedication and hard work of Eastman employees around the globe so I thank them for that.

Transitioning to segment highlights for the second quarter, our strong base of businesses consisting of Fibers, CASPI and Specialty Plastics really continued to deliver. Combined, they had an operating margin of 18% which is similar to last year's second quarter.

Their six-month operating earnings of $290 million is actually above last year's total through six months. The strong base of earnings accounted for about 75% of the Company's operating earnings for both the second quarter and for the first six months, while their revenues were about 40% of the overall revenue in both periods.

Looking at them by segment starting with Fibers. Fibers operating earnings were $61 million in the second quarter, that's a $14 million improvement over 2005 second quarter.

This translates to an operating margin of over 25% for the quarter so you can see we continue to benefit from our use of coal as a key raw material in this segment. As we look forward Fibers will be impacted slightly by some planned maintenance for the acetyl stream in the second half of this year.

Next is CASPI where, by the way, the second quarter operating earnings were the best in their history. Their operating margin for the quarter was 19% and that's at the top of the 15 to 20% operating margin range that we have referred in the past talking about this segment.

Sales revenue increased by 11%, mostly due to increased prices needed to offset the higher raw material and energy costs. We could face some challenges in the more cyclical CASPI commodity product lines in the second half of the year but we continue to expect this segment to record very strong results.

Turning to the Specialty Plastics segments, sales revenue increased by 12% driven by higher sales volume and increased selling prices. The higher sales volume of 9% reflects some evidence of the work that we are doing to develop new products and to pursue marketing initiatives. We continue to expect copolyester demand growth of between 8 to 10% over time.

Specialty Plastics is also confronting higher raw material and energy costs, particularly paraxylene, where paraxylene prices are now at last year's Hurricane Katrina levels. We've had to raise our prices to offset some of these costs but we have not been able to offset all of them.

In addition, we're continuing to spend on this segment to innovate and to grow it. We're making good progress. As an example, we expect to introduce a new family of copolyester products with improved temperature and chemical resistance next year, and these have been developed as a result of those innovation investments.

Now transitioning to our more cyclical segments, Performance Chemicals and Intermediates had another strong quarter with operating earnings of $47 million. Revenue increased 14% as higher selling prices offset higher raw material and energy costs.

Volumes also increased 4%. The segment continues to see strong demand.

Looking to the second half of the year for PCI, We expect the high costs to continue with propane at record levels. Volumes will also be slightly impacted by some planned maintenance in our olefin stream manufacturing facilities.

Next is the Performance Polymer segment. First, just a quick comment on polyethylene. Had another good quarter for polyethylene, expect them to keep cooking along pretty well.

Moving on to PET. I think it's clear to everyone that we continue to face difficult business conditions globally with the PET operating earnings down substantially year-over-year. Beginning with the North American PET, we have historically high raw material and energy costs persisting.

Paraxylene was high throughout the quarter, it's now approaching the level it was last year after the hurricanes. This is due in part to the BP Texas facility that makes paraxylene is still down, we expect it to come up around the end of the year.

We all know about the high price of crude oil which is driving high prices in gasoline and we all know that paraxylene can be diverted into the gasoline stream so that's part of the high cost solution there.

In addition, we continued to see imports of PET from Asia above the historical levels and this is due to the higher cost of paraxylene in North America compared to Asia. We are now seeing those spreads between those two costs of paraxylene starting to narrow, and although both our volumes and operating earnings improved sequentially in North America, they declined year-over-year.

European PET continues to be difficult. There's a lot of additional capacity that has been added and it's a very fragmented market so as a result we expect those difficult conditions to continue throughout 2006.

Operating earnings for PET in Latin America were also down year-over-year. There are some tariff issues and trade policies in Brazil which are impacting our business there.

Now, moving away from segments turning to regional performance beginning with North America. The second quarter North American revenues increased by 9% primarily due to higher selling prices. Our profitability in North America declined primarily due to lower PET polymer earnings.

In Europe, revenue increased 9% primarily due to higher sales volumes in Fibers. Our profitability in Europe increased particularly for Fibers, CASPI and PCI.

Asia Pacific continues to be a good story. Revenue increased by 7% year-over-year due to both increased selling prices and higher sales volume. The increase in revenues translated to improved operating earnings up over 15% in the Asia Pacific region.

And lastly, Latin America revenue increased by 24% as higher sales volume was partially offset by lower selling prices.

Now turning to the second half outlook, our strong base of businesses has had a wonderful first half and we expect them to continue to deliver very strong earnings in the second half of the year. We'll continue to face these high and volatile raw material and energy costs.

Reminding you again propane is currently very close to hurricane levels from last year and we expect it to continue at these record high levels throughout the end of this year. We also anticipate that paraxylene will remain near the high levels that I described earlier.

And as I mentioned earlier, we've been running our assets really hard over the last few years to meet the high demand for our products and we will need some planned maintenance in our acetyl and olefin streams in the second half of this year, and we do that in the second half because that's normally our lighter season where we have a little bit less volume. As a result, we expect our full year 2006 net earnings per share to follow our typical pattern of about 60% in the first half and about 40% in the second half of the year.

Now when you do the math, it will be easy for you to recognize that this year's decline in earnings compared with last year is almost completely due to PET, and I have to tell you, that factor is not lost on us. We are taking actions, a variety of actions, to improve the performance of our PET business.

For instance, the construction of our new PET facility in South Carolina is on time. It's on budget. It's going to be started up in the fourth quarter of this year, and it will be fully operational in the first quarter of next year.

Now, we've learned some things as we've gone down the road with this technology. We think we've figured out a way to get maybe 25 to 30% more capacity out of the facility that we are building there in South Carolina. We can do that for a very small investment.

We're not going to have that as the first thing that comes online in January. It may be a year or year and a half later before we get that increment but that provides some additional flexibility for us.

When we get that additional 25 to 30% of capacity, it gives us a choice of potentially picking up the pace of rationalizing some of our higher cost plants. If we do that, that would increase the transition of our North American PET assets to the lower cost IntegRex technology and we could get to maybe over 40% of the North American asset base being based on IntegRex by the middle of 2008 or so.

One benefit I need to continue to point out to you is that this new IntegRex technology enables some very enhanced product performance characteristics. We've been in private discussions with our customers about the benefits of the product and we believe it's going to give us a unique position in the marketplace so we have a high confidence that this plant is going to be operating at high rates very soon after it starts up.

And of course I've told you before we continue to look at a variety of strategic actions for our underperforming facilities outside of North America so that remains a very high priority for management as well.

Now zooming out to a broader corporate strategy view, we are making great progress on a number of the growth initiatives that we have discussed with you previously. I've talked about a couple of them this morning in Specialty Plastics and in Performance Polymers, but we are making progress in all the other areas as well including coal gasification and chemicals from coal.

When I've talked to you in the past about corporate strategy, I've said that I want you to hear the whole orchestra rather than just individual instruments so I want you to see the big picture instead of just talking about the pieces and parts one at a time. Because of the great progress that we have made, we have concluded that it makes sense for us to host an Investor Day in 2006 as well.

Now, for those of you that have followed us, you recognize this is the third one in a row. Reflecting back a minute, 2004's Investor Day was to tell you about a turnaround that we foresaw and we're working on and, by George, the turnaround did happen as we had explained in the 2004 Investor Day, it happened in 2005.

Last year we gave you a glimpse into what were the major themes of the corporate strategy and what decisions we were facing, and we indicated that we'd be coming to some conclusions and making decisions in 2006. So here we are in 2006, management has made a number of recommendations to our board.

We're in discussions on those recommendations and when we get to decisions later on this year it will be time to talk to you, so we have picked a date of November 15 at the St. Regis Hotel in New York City for an Investor Day, it will be in the morning. We'll be sending out a save the data announcement this morning with a more formal invitation to follow in a few weeks and we look forward to seeing you there.

So with that, I'll turn it over to Rich.

Thanks, Brian. Good morning, everybody.

Just a few comments. I'll add some color around the divestiture of our Arkansas facility, talk a little bit about cash flow, our net debt position, and finally our tax rate. We announced earlier this week that we entered into a definitive agreement to divest our Batesville, Arkansas manufacturing facility and its related assets and product lines and we've got that closing is scheduled early in the fourth quarter.

Sales price is $75 million cash at closing and we do have an earn out potential related to the amount of biodiesel sold by the facility over the next three years. Just to size that up a little bit, this opportunity may be in the low to mid single-digit millions of dollars. We do not expect to record any significant gain or loss related to the transaction and it's basically neutral to earnings going forward.

I should point out Arkansas does not represent all of our performance chemical assets. We will continue to manufacture fine chemicals at other facilities including Kingsport and we're comfortable with the contribution of these remaining businesses.

Lastly on this subject, I'd like to personally thank all of the employees at the Batesville site. They kept working hard, stayed very professional as we worked through this process, and they deserve a lot of credit.

On cash flow, our cash flow from operations for the second quarter was $126 million and we're at $163 million through six months driven primarily by the strong net earnings. We contributed $50 million to the U.S. Defined Benefit Pension Plan in the quarter, our expenditures, I'm sorry, in the half.

Our expenditures for capital and paying the dividend through six months all totaled, we ended up with net debt down slightly about $20 million for the half. However, looking forward since our contribution of $25 million to the pension plan for the second half of the year is obviously lower than the first and we expect to pull cash out of working capital in the second half, as is our normal pattern with the seasonality. I continue to expect that our free cash generation in the second half of the year will be strong.

On uses of cash, our capital expenditures totaled $91million for the second quarter and $169 million for the first half of the year, and I expect our second half capital expenditures to be somewhat higher than in the first half in our normal pattern. As a result, I continue to expect capital expenditures will be up to about $450 million for the year.

Since I expect there may be a question on share repurchase, as we've said previously, we're continuing to make progress in our growth initiatives and we'll revisit this question in the second half of 2006 and give you a more substantive comment at that time. The only alternative that we continue to rule out is a small or minor share repurchase to offset the dilution caused by the option exercises.

On net debt as I said earlier, net debt is down about $20 million for the first half and we're now a little below $1.1 billion. Our net debt to total capital is about 37%, again, driven by continued debt reduction and strengthening of our stockholder's equity.

Our net interest expense continues to track around $20 million per quarter and we expect that to continue and we'll close the year at about $80 million. Last point, our tax rate, our effective tax rate on normalized earnings was 34% for the quarter but we continue to expect our full year tax rate to be approximately 35%.

With that, back to you, Greg.

Okay, thanks, Rich. And this concludes our prepared remarks and we're ready for questions, Rufus.

Thank you, sir. Ladies and gentlemen, our question-and-answer session will be conducted electronically. [OPERATOR INSTRUCTIONS] For our first question we go to Sergey Vasnetsov with Lehman Brothers.

Good morning. I just wanted to ask my question on the share repurchase.

So far you said you plan to do them on a very small basis just to offset the current solution. What are your thoughts on something larger than that?

Sergey, we're going to comment on that at the November 15th meeting. We're looking at all the ways to create shareholder value and, again, I go back to my orchestra comment. I want to have the conversation with everybody in the context of all of the things, all of the moving parts, so I do want to answer your question, just not today.

Okay. Thanks.

And we go next to Mike Judd with Greenwich Consultants.

Hi, good morning.

Good morning.

A question about your PET business. I'm hearing that there's a possibility that some time in early next year, BP might be willing to consider actually lowering their prices of PTA, and I'm just curious from your perspective in terms of an investment perspective and the new IntegRex technology what your thoughts are about that or if you think that's likely or not.

I mean I realize that's, there's a little bit of speculation involved in this, but I mean the implications are that if that occurred then it would tend to more equilibrate the process economics, the cash cost of production.

Yeah, good question. Everybody wants to know the answer to that question.

If I just look at the history of commodity anything, but especially commodity polymers, it would indicate in all the histories that the various pieces of the value chain in commodity polymers continue to have an experience curve that causes them to decline in cost and they have to do that because there's always a decline in price.

So it is in our thinking that this experience curve, whether it's the experience curve for making polymers or the experience curve for making PTA, there's always a declining cost that you're obligated to deliver over time and then that comes along with a declining price because market pressures create that declining price. So I guess I'm telling you it wouldn't surprise me if that happened and that is absolutely figured into all of our business calculus here as we try to figure out what do we need to do.

Well it sounds like there's a very large profit that's already built into PTA production by some parties, and so, really they have substantial room in order not to lose volume to basically be able to reduce price, and that's really the key here is at some point, does that effect your capital allocation decisions?

Yeah, absolutely it would and that's, as I said, that's why the business calculus [inaudible] does affect our decisions, I think what you should also think about, too, is that in these conditions, industries tend to aggregate, they aggregate horizontally, they vertically integrate more so that however many steps of vertical integration they add to that there's more than one moving part that goes on in the environment that you're describing there so all of those, plus the one you mentioned, will affect the views that everyone has on invested capital in this business.

Thank you.

We go next to P.J. Juvekar with Citigroup. Good morning, Brian.

Good morning.

I want to go to Mike Judd's question again on this PTA situation.

Yeah.

Can you describe this PTA situation, sort of the pricing differences between U.S. and Asia currently and the arbitrage cap that you talked about?

Yeah.

Where do we stand on that?

Sure, I can tell you. We had an arbitrage difference in paraxylene prices between Asia and North America that was in the neighborhood of $40 a ton, maybe a little bit more than that, and that was driven, of course, by the hurricane impacts. It was the lack of supply in North America which we still have, at least one major plant down, and that drove the wedge in the cost position that opened the door for the Asians to come in and take the growth for the last year or so.

That arbitrage is down to something in the neighborhood of $20 a ton now. We expect that arbitrage to approach -- historically, the polarity on that was it did reverse. North America was somewhat advantaged over Asia.

We expect these two to start approaching parity over the next year or so for a variety of reasons and that will, the expected outcome is that it will drive the Asian imports to more historical levels which are less troublesome than they have been in the last year or so.

So you think your IntegRex line will drive that parity down? The difference down?

No, I don't think our IntegRex plant has anything to do with driving that. It has to do with the supply-demand situation in the oil companies where the PX is being built towards, not being built. It has nothing to do with us building a PET plant.

And the second question I had was on PCI. You got some nice price increases there. Dow wasn't able to get that kind of pricing so I was wondering if you could describe supply-demand situation in some of your key products like [twopaige] and all the oxo's?

Yeah. That's a good question, P.J.

One big difference between us and Dow is Dow is essentially an olefin machine and an benzene machine and we are a relatively modest olefin machine and more of a coal machine, the acetyl stream is based on coal. So our profitability in the PCI, we're roughly 50% chemicals from coal in PCI and that's what gives us a different characteristic than some of the other companies. In fact, any other company.

Well I'm talking about pricing and not profitability.

It has to do with the product slate as well, too, so the product slate is different so we didn't, if you're thinking somehow we got oxo prices that Dow didn't get, that's probably not, that's not the case.

Okay. Well is there a difference between your portfolio that maybe some of the products are tighter where you're getting better pricing?

We have, for instance, you're staying with the oxo stream for a minute, we have like 30 or 40 derivatives of the aldahydes, iso and normal butyraldehydes. It's probably the broadest portfolio. Some of those are pretty differentiated in their performance.

We have more of a boutique portfolio of some of those derivatives so, yes, it does give us a different position relative to some of our peers that make the same kinds of like oxo stream or, I guess, even some of the acetic acid, acetic hydride kinds of businesses.

Okay.

[Silicone] acetic hydride, for instance, and acetyl chemicals work sort of unique in that as well.

Great. Thank you.

We go next to Jeff Zekauskas with JP Morgan.

Hi, good morning.

Good morning.

My first question is on your capital expenditures. Of the 450 in capital that you're spending, can you remind me what the maintenance level is and what are the largest discretionary outlays you're making these days? That is just looking at the discretionary portion. How does it distribute among your big projects?

Jeff, the two major non-maintenance and routine related expenditures are in the PET plant in Carolina and in some intermediates expansions for our Specialty Plastics business. If you look back during our turnaround process, the discretionary spending, you could see the trail on that but it runs in the 250, $275 million range.

Second question is, you've had these lovely results in Fibers again in the first half and I think the volume number you posted was 11% for the first half. Can you divide that up into cigarette and non-cigarette end markets, that is, what's the growth rate in each of the pieces and can you talk a little bit about why the growth rate is what it is?

The growth rate in filter tow we've characterized as something in the neighborhood of 3%. We also use the chunky word and so sometimes it's higher, sometimes it's lower.

Well it's been higher mostly.

It has been for the last few years. I think right now, for instance, we see China buying less than they have bought previously, so filter tow volumes are -- they generally progress at about 3% levels.

The biggest growth has been in the acetate yarn and the acetyl chemicals.

And then lastly, you were talking about some possible pressure on the commodity parts of CASPI.

Yes.

Can you remind me what the commodity parts of CASPI are and how large they are? What percentage they are of the total of CASPI?

It's less than 50% and more than 20% of the business. I don't have the exact number in my head, but it's the commodity solvents and plasticizers typically, some unsaturated resins. It's a smaller fraction of CASPI but they do tend to be a little more cyclical.

Thanks very much, Brian.

And we go next to Kevin McCarthy with Banc of America Securities.

Good morning.

Hi.

Brian, you mentioned you've been running your assets fairly hard in recent years and I think your comment related to as a acetyls, maybe some other areas but I wanted to ask you about your crackers at Longview. Do you expect to reach a crossroads over the next several years where you'd have to choose between reinvestment or exploration of alternative sourcing for ethylene there?

Yeah, that's actually a topic that we'll be bringing up in the November conversation. Your insights are there good, Kevin.

We have old crackers, they're high cost, we have some really nice derivatives at that site that are being hampered by the high cost of those crackers and we have choices to make. And we're not forgetting the fact that we're living in North America here and we got North American economics to feed those, so we have a range of choices we have to consider, we've made some recommendations to our board and that's one of the topics we will definitely be discussing in November.

Okay.

And then in Fibers, you mentioned China maybe buying a bit less now and I thought I heard you say as well you'll have some planned maintenance activity in the back half of the year. Can you elaborate on your operating income expectations for the second half in Fibers?

Fibers is meaningfully better than last year, but I've been a little reluctant to give you a point estimate but it's going to be meaningfully better than last year but other than that, Greg is writing me a note.

On a full year basis.

On a full year basis. Okay, meaningfully better on a full year basis versus last year. We don't want to pinpoint it any further than that but they're high and steady and doing quite well.

Okay. Thank you very much.

We go next to Greg Goodnight with UBS.

Good morning, Brian.

Good morning.

You mentioned that you could potentially have 40% of your capacity on the IntegRex technology by 2008 with utilization of this expansion option. What would be the next logical step in above that? Are you in any way capped by your ability to apply that technology to your full product range?

No. We're not capped at all.

Let me just reflect a minute on your comment about the changing to the 40%. Right now, PET feels to us a little bit like the CASPI business felt to us in about 2003.

There were a lot of consternation about how does this business unfold, can it ever be good again? There were a lot of investor reports signaling the death knell for CASPI, and we told you then that we saw a combination of assets and technology that would yield a really good outcome and we needed a little while to get it done and so here in 2006 they just had their best quarter ever and I'm having a deja vu feeling here talking about PET.

We're in a very tough time in PET. It's some combination of market dynamics and the assets and the technologies we have.

As we look through all of the tough situation we have see a combination of assets and technology that yields an outcome that we're going to be happy with and I know you're going to be happy with. It's going to take us somewhere between 18 and 24 months to get through all the steps we have to take.

First step is the IntegRex plant in South Carolina at the size that we have built it. We get out another 18 months or 12 months something like that and we get to this increment that you just talked about. We have the choice of building a big facility.

It's typical for people to, in these commodity plastics, to rationalize their more expensive stuff as they bring on the lowest cost stuff where you can expect we would be doing that.

The capping is what caps everybody. It's what does the market need, who's providing it, do you think you can win by providing it? We're going to be deciding those things based on the market outlook, the financial outlook but there is no other capping mechanism in terms of how much can we extend this technology, how much do I have to rely on existing assets.

There's nothing that caps it other than the fact of whether it's a good business investment or not. So we have as much running room here as we need.

One of the real benefits is the quality of the product that yields some characteristics that the customers like and so I know that's going to be a feature that drives it a little bit harder. But these are big investments, we want to do things that are smart and the governor on the pace here is going to be about the economics more than about any other limiting factor.

Okay. That's great.

By the way, what is your estimate of NAFTA growth in terms of PET consumption?

We typically see 6 to 8% which translates to roughly 250,000 tons a year. Percentage is sometimes misleading because the denominator keeps on growing on you, but just in raw pounds and metric tons we see 250,000 tons a year in North America in the NAFTA region.

Globally it tends to be in that 8 to 10% range. Recently the Asians have taken a higher percentage of that growth away from everybody but that will equilibrate over time.

And finally, the announced expansions both in NAFTA and the [inaudible] Brazil, according to your feedback, are all of these expansions on time for their announced timing?

Yeah. I never like to comment on other people's timing but we're not convinced that everybody's coming on at the time that they've earlier, they indicated earlier. I can confirm for you that our plant is going to be on the fourth quarter and be fully operational in the first.

There's a lot of new capacity coming in early '07.

Right.

And the expectation is that that capacity will come on on schedule, your expectation?

Most of it I think will, yeah.

Okay. Thank you, Brian.

[OPERATOR INSTRUCTIONS] And we go next to Frank Dunau with Adage Capital.

I'd like to ask a question I know you're not going to answer it until November 15th but since I can't wait, I need to ask the question.

Okay.

Whenever we're talking about in the strategic thing is it a user of capital or is it not a user? Am I thinking about large uses of capital going forward?

On the strategic planning?

Yeah.

Yeah, there are some thoughts we have. I mean, obviously, we've been living off a capacity creep here, our volume growth is constrained by the amount of juice we can crank out, so if we intend to grow a top line the only way we can grow a top line is to have some more juice and that means you have build some stuff. No question that we'll be making some investments.

The range of those investments is a broad, broad range and we hope that when you look at that range of things it's going to make sense to you, Frank.

And I just want to follow-up on a question Jeff Zekauskas had.

Just back to Fibers. You've been above whatever this trend line is now for a while. Do we have to redraw the trend line or is something bad going to happen one of these days?

I don't think anything bad is going to happen it's just that we're still benefiting from a couple of good things that happened. We had a staring match with one of our competitors and they finally folded up their acetate yarn business, that was helpful. We had some sales of acetate flake. Acetate flake is in high demand right now, that's helped us, so we're operating at very high rates.

We benefited from some pretty good stuff. I think we still continue to believe that anybody that looks at the global filter tow business thinks that the growth is a modest 3% kind of a number. It's not just us.

We have benefited from some of the other stuff that is peripheral to that and we've, again, I go back to the first part of your question, we've pretty much benefited from that about as much as we can. We're about out of juice and it takes a little more investment to get a little more juice.

Thanks.

With that, ladies and gentlemen we have no further questions on our roster. Therefore, Mr. Riddle, I'll turn the conference back over to you for any closing remarks.

Thanks, Rufus, and thanks again, everyone, for joining us this morning. An audio replay of this conference call will be available this afternoon through Friday, August 4. Have a great day.

Ladies and gentlemen, this does conclude the Eastman Chemical Company second quarter earnings conference call. We do appreciate your participation and you may disconnect at this time.