伊士曼化學 (EMN) 2006 Q3 法說會逐字稿

Good day everyone, and welcome to the Eastman Chemical Company third quarter earnings conference call. Today's conference is being recorded. This call is being broadcast live on the Eastman website at www.Eastman.Com. We will now turn the conference over to Mr. Greg Riddle of Eastman Chemical Company Investor Relations. Mr. Riddle, please go ahead, sir.

Thank you, and good morning, everyone. Thanks for joining us. On the call with me today are Brian Ferguson, Chairman and CEO; and Richard Lorraine, Senior Vice President and Chief Financial Officer.

Before we begin let me remind you that during this call you will hear certain forward-looking statements concerning our plans and expectations for fourth quarter 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 third quarter 2006 financial results news release on our website and in our filings with the Securities and Exchange Commission, including the Form 10-Q to be filed for third quarter 2006 and the Form 10-K filed for 2005. With that I'll turn the call over to Brian.

Hi, good morning, everybody and welcome to the call. As is our custom, I'll start with some corporate highlights for the quarter and then talk about the segment, the regions , the fourth quarter outlook and then some comments about our 2006 Investor Day that's coming up.

Last night, we reported third quarter earnings of $1.15 per share excluding the charges in the quarter the EPS was $1.24. We set a record for quarterly sales volume topping last quarter's record. Of course the higher revenue reflects the price increases we needed to offset the very high raw material and energy costs. Our third quarter raw material and energy costs increased by approximately $175 million and have increased 400 million through nine months on top of 500 million the prior year, so that beat just continues to go on.

Our volumes were basically flat in the quarter and that reflects a few things. First, we're continuing to run just about flat out ahead of putting on new volumes in various places. Second, as raw materials have started to decline, some customers are holding off on their orders to wait for lower prices, and finally, we lost the opportunity to sell some volumes because we had some maintenance down time in our acetyl and olefin streams, but despite all of that we continued to deliver very strong results in the quarter with four of our five segments on track for a very good 2006.

Moving on to the segment highlights for the quarter, our strong base of earnings consisting of Fibers, CASPI, and Specialty Plastics delivered great results once again and I know I'm saying that every quarter now. It's a tribute to the solid sustained earnings that they continue to report. Their combined operating earnings in the quarter were $126 million with a 16% operating margin. Their nine month operating earnings of 416 million, are slightly above last year's total through nine months and remember 2005 was our second best year ever for earnings. The strong base of earnings accounted for about 75% of the Company's operating earnings for both the third quarter and through nine months and their revenue was only about 40% of the overall revenue in both periods, so very strong performance from those three and that continues.

Reviewing results individually, starting with Fibers, Fibers operating earnings were 55 million in the third quarter, a $5 million decline compared with 2005. Their operating margin was 24% for the quarter and is 26% through nine months. Volumes were slightly lower as they had some acetyl stream maintenance that I mentioned earlier. As we look forward they will continue to have very strong results. Next is CASPI. Sales revenue increased by 10%, mostly due to higher prices needed to offset the raws and energy. Their operating earnings of $53 million were a bit lower year-over-year as they experienced some margin compression particularly in their cyclical commodity and adhesives product lines, but they continue to report great results through nine months, their operating margin is 17% which is in the middle of the 15 to 20% range that we have given for you for CASPI as a general rule.

Turning to the Specialty Plastics segment, sales revenue increased by 16% driven by higher sales volume which was up 15%. The higher sales volume largely reflects the continued benefits of our investments in new product development and marketing initiatives. Year-over-year, operating earnings improved slightly to $18 million. We continue to confront high and volatile raw material and energy costs particularly for paraxylene in this segment, but the combination of volume growth and higher selling prices offset the higher costs. Their operating margin through nine months is 8%. We continue to believe they should be at or above 10% and they are on a path to get there. We'll talk more about that with you in a few weeks.

Next up, our more cyclical segment starting with Performance Chemicals and Intermediates which continues to report great results with $25 million in operating earnings for the quarter. Excluding the $11 million of asset impairments and restructuring charges that Rich is going to talk about in a minute, their operating earnings were $36 million. Revenue was up 7% as higher selling prices offset higher raw material and energy costs. Looking forward, propane costs have trended down recently from very high levels and as always our pricing comes into play when raw materials start to move down, so we'll see how that unfolds.

Next is the Performance Polymer segment. First, as you know, we announced the divestiture of our polyethylene business to Westlake a few weeks ago. Given the fact that our oldest cracking plants are on the wrong side of the cost curve, polyethylene just couldn't be a core business for us. As a result, it made sense for us to divest it to a strategic buyer like Westlake. This deal is really very good for both parties and we look forward to it closing before the end of the year.

Moving on to PET, you'll notice that with the impending polyethylene divestiture we have broken out results for the PET business and that's the way you'll see it from now . Although operating earnings improved sequentially, we continue to face difficult business conditions globally with operating earnings down year-over-year. Starting with PET in North America, remember that the hurricanes of last year disrupted the market by causing paraxylene prices to surge to record levels in North America and this invited the Asian producers who had lower paraxylene costs into the North American market and they took full advantage of that. Paraxylene remained at elevated levels in North America pretty much throughout the third quarter and as a result we continued to see high Asian imports. North American paraxylene prices have come down recently. Basically achieving parity with the Asian prices and that's going to impact the market in a few ways.

First, customers are holding off on orders waiting for lower PET prices and we expect the lower paraxylene prices in North America will make it more difficult for Asian producers to sell in North America. This should improve volumes for North American producers over time. Now, despite all this our North American PET business remained profitable during the quarter as we have been all year and this is despite preproduction costs of about $5 million in the quarter related to the start up of our IntegRex PET facility in South Carolina. For the full year the preproduction cost will be about $14 million with 6 million coming in the fourth quarter.

Next is Europe where operating results continued to be below acceptable levels. We continue to confront overcapacity in a fragmented PET market in the region and we expect conditions for PET in Europe to remain difficult throughout '06 and into '07. Lastly, operating results for PET in Latin America declined year-over-year as the operational environment remains difficult.

Talking about regions, and looking at our regional performance, a general comment first. As you look at the volumes in the regions, you'll see the impact of having some limits on our ability to sell due to the acetyl and olefin stream maintenance that I mentioned and some continued reduced availability of some raw materials for certain product lines such as Adhesives. The lower Q3 volumes for the most part are not due to a lack of end market demand and I just wanted to make that clear. End market demand continues to be strong.

Now, beginning with North America, third quarter North American revenues increased 6% primarily due to higher selling prices. Our profitability in North America declined due to lower PET polymers earnings. In Europe, revenue increased 12% primarily due to higher selling prices. Our profitability in Europe declined particularly for PCI and CASPI. Asia Pacific revenue increased 3% year-over-year due to higher selling prices. Operating earnings declined a bit, particularly for Fibers due to the lower acetate tow volumes. Just a comment there. Our orders from China are about 60% of normal year-over-year, and of course we expect that they are going to get better. Remember we talk about this being chunky and this is the other side of that equation. Lastly, Latin America revenue increased about 22% due to higher sales volume and selling prices.

Now, turning to our outlook for the fourth quarter. Our fourth quarter is historically our lowest earnings quarter for a few reasons. We normally experience seasonally slower demand for product lines such as coatings and PET and we expect to see that again this year. In addition, we normally experience volatile raw material and energy costs. Now we're grateful that those raws and energies have low up sum recently but we expect they are going to continue to remain volatile in the quarter. We expect our strong base of businesses to continue to deliver solid results for this quarter. There are also a number of other moving parts in the fourth quarter relating to the portfolio management actions we are taking and have announced and some others that we're considering which should result in both gains and charges, but when I sort through all of that looking what we expect, we expect to be at or above last year's EPS of $0.90 per share.

Lastly, some comments on our upcoming Investor Day. Recently we sent out invitations for our 2006 Investor Day to be held on November 15, in New York. I've said several times before that I want you to hear the entire orchestra rather than individual instruments when we're talking about the elements of our corporate strategy, at our Investor Day, we will have the full orchestra assembled there. We will have all of our executive team members attending and they will have a number of things to talk to you about.

First, Dr. Greg Nelson will talk about our plans to improve our PET results. With all of the other Eastman businesses doing pretty well this is the central issue that has been on your mind and ours and we'll take that subject head on during that meeting. You have asked many times about what we're doing in coal gasification. Mark Costa a new member of our executive goup that you'll meet there will give you more clarity around our progress, our strategy, and some specific actions that we will be taking. Jim Rogers will tell you about how our strong base of businesses will hold up over the next several years, and Rich Lorraine will give you a good view of the great financial outcomes that will result from all of this comprehensive corporate strategic activity. So, we'll cover these issues and several more. It's an important moment in our Company's history. I'm looking forward to sharing our vision with you. So I hope you'll join us and with that I'll turn it over to Rich.

Thank you, Brian and good morning, everybody. As Brian mentioned we announced earlier this month that we've entered into a definitive agreement with Westlake to divest our polyethylene and ethylene businesses and our ethylene pipeline. Purchase price is $255 million in cash and the transaction includes a clause with working capital subject to adjustment at closing, but this should be minor if anything at all. And right now, we expect to close the transaction in about a month.

In addition to the to the 255 million sales price, there's about $45 million of additional working capital primarily receivables which we will collect over the next couple of months through the normal turnover period. As a result, in total, the net cash from the transaction should be about $300 million and I'll use the word net again. It's net of tax and we have tax loss carry forwards that offset that gain for tax purposes.

As I look forward, this transaction really looks like a win-win for both Westlake and Eastman and you've heard from Westlake about why this is a good deal for them. For us, polyethylene has certainly been a good business for a number of years, but as we look forward through the cycle, given the vintage and size of our crackers, our ethylene costs will be on the wrong side of the cost curve. As a result, this is clearly, we think the right choice for Eastman. It will give our investors much more value through this transaction than would have been achieved by continuing to own and run the business.

The transaction is dilutive in the short run. In the financial tables accompanying our news release, you can see that through nine months we reported $52 million in operating earnings for polyethylene and we estimated it would have contributed to earnings next year as well. As a result, we do expect that diluted impact of the transaction on full year 2007 earnings per share to be somewhere in between $0.20 and $0.30. As I look out further though, given where the olefin cycle may be and the overhead cost reduction actions we're taking, I expect the impact on 2008 to be close to neutral and be accretive thereafter.

Moving on to the Arkansas divestiture that we announced a few months ago, it's proceeding smoothly and we expect to close that transaction within days actually. The purchase price on that is 75 million in cash. As Brian mentioned, we took an asset impairment in the quarter of of $11 million related to the transaction. I did want to go over one point though. There is an earnout as part of the agreement related to biodiesel production and sales and as a result, we expect to see a significant amount of that impairment we're taking here in the third quarter to come back into earnings over the next few years. Good accounting practice precluded us from rolling all of this into the gain/loss calculation, so we'll just look forward to that as we go forward.

My last comment on the divestitures is that these are two instances when the deal is without a doubt good for both sides and I feel good about both of them. Moving on to cash flow, our cash flow from operations for the third quarter was $70 million and we're at $233 million through nine months. There are a couple of key items. First, we have continued to have strong net earnings driving our cash generation. Second, during the quarter, our inventories increased by $85 million and that's primarily due to higher cost raw materials and the pre-buying of some key raw materials, primarily propane. We look at this all the time and think it makes good business sense for us given the volatility we've seen in these costs. Also, we contributed $25 million to our defined benefit pension plan during the quarter and that completes our $75 million contribution for the year that we've talked about in the past. We do expect to make another contribution in 2007, likely below 2006, but I'll give you more color on that in January in the call.

We do expect to pull cash out of working capital in the fourth quarter. There is a year-end factor that may mute this somewhat and that is that December 31, is on a Sunday and so some receivables will be collected in the first week of the New Year, so -- and that doesn't phase me too much. We'll be also watching the propane costs to judge when to use our physical hedge there. Nevertheless on an overall basis, we'll have good cash generation for the year.

On uses of cash, our capital expenditures totaled 110 million for the third quarter and that brings us up to 279 for the first nine months. I now expect our fourth quarter capital expenditures to be slightly higher than the third quarter, but below our previous expectations. As a result, capital expenditures should be approximately $400 million for the year. This does not reflect a slowdown in funding strategic projects but it's more the normal ebb and flow of capital expenditure projects.

That brings me to net debt which we define simply as total debt minus cash and cash equivalents. Our net debt rose slightly in the third quarter primarily due to the higher inventories I just mentioned. Right now we're a little below $1.2 billion with net debt to capital of about 38%. Having said that, the divestiture is expected to close in the fourth quarter will net cash proceeds of approximately $370 million. Coupling that with the good cash generation we expect during the fourth quarter, we'll end the year well below $1 billion in net debt.

Lastly, I'd like to talk about the tax rate. Our effective tax rate on normalized earnings was 30% for the quarter and 33.5% through nine months. That lower tax rate for the quarter is mainly due to higher earnings in lower tax jurisdictions and some discrete tax items, one major one being the reversal of a foreign tax loss evaluation allowance. In July, I guided you to a 35% tax rate for the full year. Given the items in the third quarter, I now expect the full year effective tax rate to be down slightly and between 33 and 34%. With that, I'll turn it back over to Greg.

Okay, thanks, Rich, and we are ready for questions.

Thank you, sir. [OPERATOR INSTRUCTIONS] And for our first question, we go to Mike Judd with Greenwich Consultants.

Good morning. Congratulations on a good quarter.

Thanks, Mike.

Thank you.

In your CASPI segment in the December quarter, can you just remind me last year, it was down sequentially from 65 to 35. Were there some seasonal issues there or was there something else going on?

CASPI is a very entry year seasonal business. If you think about it when you buy your paints, you buy it in the spring and the summer to go paint your, whatever you're going to paint at the house, and a lot of the construction guys are the same way. Holidays, the painting business falls off and so does our revenue in CASPI so that's basically the story there. Adhesives is a little bit counter cyclical to that. It actually offsets it a little bit, but that's the main story there.

I'd just add that you had propane costs that went up substantially in the fourth quarter and that in part was related to the hurricane so you will see higher costs as well.

Absolutely.

Okay so we should expect to see that type of sequential decline this year?

No. I mean, no, it's always a little weaker in the fourth but that was a pretty dramatic change.

And then on the strategic side in terms of your portfolio management, have you guys come to any conclusion in terms of your PET assets in Latin America?

Yes. And not to be shared with you today, but we have, as we said before, the under performing assets are in the fixed, sell, or shut down category and the truth is you evaluate all three of those when you're looking at your choices, you explore all three of them. We've come to some conclusions and as I said we're going to take all of that head on. It's easier to take that head on in a room full of people on November 15, when we can kind of explain the whole story around that.

Just in terms of a quick preview on that if you don't mind and I'm being a little pushy here, but if you think about the UK operations, is there likely to be something there also or is it really just a Latin American issue?

No. We referred to it as non-integrated assets so non-integrated assets are the vast majority of everything that we have offshore in PET.

Thank you very much.

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

Good morning, Brian. How are you?

Good morning, I'm fine, Kevin.

Maintenance down time you mentioned in some of the former Veridian businesses, can you give us an idea of how much you think that may have nicked profitability in polymers and fibers in the quarter?

Gosh. I don't think I have a number. Rich?

Yes, I would say it's about 8 to $10 million.

8 to $10 million?

It's always hard to assess that because you got to spread it out over more than one business. That's why I was stuttering. We had some down time in Singapore, we had some down time in Texas, that's the olefin stream stuff, we had some distillation polymer maintenance we had to do here in Tennessee which affected the acid portion of our facility here and the acid is used by everybody including the Fibers guys. So it really hit -- it didn't just hit the Fibers guys. It hit a lot of people on the volume story, but Rich is saying $10 million or something.

That would be across both segments?

Yes.

And then Brian, following the transaction with Westlake, is it reasonable to assume you'll be shuttering some of the older ethylene crackers at Longview and maybe keep the newer of the four units running for awhile?

That's correct. We have a phased shut down of the older crackers as part of the plan. One of them will go down pretty soon into 2007. The other one either another one goes down either in the latter part of '07 or the early part of 08. After that we have some flexibility on what to do. We have four total crackers. Three of them are small and old and one of them is larger and we will take the third small one down some time later. Remember that this is a site where we are making propylene derivatives that we are very committed to as part of our CASPI and PCI operations so we have to keep the best crackers operating to support them.

Kevin, excuse me. Let me just interject. We've got flexibility on that cracker shut down process, so we'll be -- we don't have at this point a very very strict calendar on it. It's going to be time to when it makes a lot of sense.

Okay, fair enough. And then finally, on the divestiture, I think you've given us some very helpful operating income numbers in table five of your release. I was wondering if you have handy the D&A associated with the polyethylene assets that you're parting with?

I'm turning to my CFO over here.

Or a rough idea of what that would be on an annualized basis?

I don't have a number right handy, Kevin.

Okay.

You can see the depreciation for the segment in our filings , so you got access to that. In terms of how much it would be as a percent of that, obviously it's not very much, Kevin.

It's a small fraction. I look at at the 76 million for '05 and consider the 300, it sounds like you sold them at less than four times EBIT and presumably the EBITDA multiple would be even lower than that. Is that a fair way to look at it?

Not really. I mean, you're looking at a peak EBIT, but this was a process that had several people bidding. All of us sophisticated, all of us looking through cycles, and when you have a business that cycles between making 60 million and making 0, you kind of look through that and bid for something else that's an average in there someplace but it depends on which number you want to use as your bookmark for that ratio.

Sure. Higher normalized number I guess. Okay, thank you, guys.

Yes, Kevin, Rich again. What we -- we looked forward at the future cash flows that we could expect from running this business on into the future and that was our benchmark. So like I said, I think this is a win-win for both sides.

Appreciate the thoughts.

And we go next to Frank Mitsch with BB&T Capital Partners.

Good morning, gentlemen. Nice results. You're to be commended, I've only heard you say a couple of times that we can't address that now. We'll address that November 15, so you're running ahead of my unofficial count here.

I'm not trying to stall on you Frank, I want to say as much as I can, but it's just we're geared up to tell you the story then, not now.

Brian, could you talk a little bit more about how things are trending in October? You've obviously put out some decent guidance for the fourth quarter and as you know, the fourth quarter has been the graveyard of Eastman on many occasion. And I think I heard you say that your Fibers business obviously chunky and you expect that that's going to get better. What else is going on that gives you some confidence that you are going to deliver some pretty decent results in the fourth quarter?

Well, the business is holding up I guess is the best way to describe that. We're not seeing an erosion of the quality of the business. Sometimes you can see things falling off a cliff and remember, you use the G word to describe the fourth quarter. The entry or seasonality on PET and CASPI is often a big part of that and it's maybe not quite as tough in the CASPI area. PET, well, it already wasn't making much money so it's not going to change that much. The rest of the business is holding up pretty good, especially SPBO. SPBO is really holding up pretty well.

And speaking of SPBO, I think you had some pretty terrific volume growth in the third quarter, 14% or something like that. How is that -- how sustainable is that and can you talk a little bit more about that?

We have been investing a ton of money in SPBO which has been weighing on their earnings numbers for the last couple of years because we have faith that his business is going to be -- deserves to be bigger than it is and you're just seeing the front end of some of that work. You spend money on it for a couple of years, some new products, some marketing and application development and it takes a couple years for it to start to kick in. It's starting to kick in right now, and frankly, SPBO earnings could have been a much bigger number this year if we had backed off on some of that internal spending yet we could be shooting the lights out with SPBO earnings this year if we chose to. Instead, we chose to invest in the business. Now it's starting to come to fruition and I guess that's my sustainability answer. It's coming and it's going to continue to come.

All right terrific. Thank you.

And we go next to Jeffrey Zekauskas with JP Morgan.

Hi, good morning.

Hi, Jeff.

How sensitive in general is pricing or pricing trends in CASPI to the price of propylene?

Fairly sensitive for maybe,I'm guessing about half of what they make. CASPI is a mix of things that behave like commodities and things that behave like specialties and things that behave like commodities float on top of raws, so I guess it's roughly half of what they sell. It kind of floats up and down like that.

And secondly, do you think that you'll have a better year in 2007 in PET? Or a worse year than 2006?

We're kind of going through the low watermark for PET now. I mean, it could get a little worse in '07 as an industry. We have the moving parts of we're going to be rationalizing some capacity. We're putting on IntegRex, so our year is going to be a little bit better. As an industry, I think they are looking that -- they are at the low watermark. Many of our peers are operating close to their cash costs. So I don't think that the spread equation can get a whole lot worse. Raws may drive prices up and down but the spread an equation may be as bad or tough as it can get and let people still operate that are at the life side of the cost curve. With our addition of the new facility and rationalizing some of our more expensive stuff and continuing to do that over the year, I think we're going to be a little better next year.

I'd add we've got the IntegRex start-up cost being absorbed this year.

That's right. We got $14 million of start-up costs that go away.

Right.

When does the IntegRex facility start up?

I'm hoping it starts up a couple days before we have Investor Day.

Oh, good.

Not like I'm petting any pressure on the guys or anything, but that's the plan.

Well, maybe you can bring some PET from the plant for that.

Absolutely.

To that occasion. Thanks very much.

And we go next to Gregg Goodnight with UBS.

Good morning, Brian.

Hi, Gregg.

Say, the chunkiness you described, I'm wondering about the impact of the SOPO fire and explosion over in China that took out some acetic acid capacity. I've seen a little bit of rolling of the market over there. I'm just wondering if that's had any pull through for you?

You know, we anticipated that question. Greg set me up with an appropriate answer for this one and we did some analysis, and the answer is it really doesn't matter much to us.

Neither way?

No, it really doesn't. It's not like it helps us or hurts us much. We're not big in the acid market generally. We have an acetyl stream, we try to consume as much as we can in higher value-added stuff and acid is a relief valve in many ways for extra opportunities, so no, it's not a big deal.

Okay. Second question, in terms of potential ethylene supply to Westlake, I assume that you're going to supply that in a way that would not only cover your costs but provide you some margins next year if you continue to run these crackers?

Oh, absolutely. I don't want to speak for Westlake, but I think there's a period of time where they want our ethylene because they have other commitments and then over time as they fulfill those commitments then move on to internal supply, then it allows us to phase out our crackers and of course, yes. I mean, we're going to make some money on what we sell.

So you possibly have some sort of cost base contract versus market base agreement?

I won't explain the agreement but the agreement takes care of us.

That's all I had. Thank you.

Thank you.

And for our next question, we go to Bob Goldberg with Scopus Asset Management.

Good morning. I had a question for Rich. On the net debt at year-end. If we start from the third quarter of about 1.16 billion, and I think you mentioned you're expecting net proceeds approaching 370 million?

Yes.

In the quarter that gets you to a little bit under 800 million. You guys have a very general comment that you'd end below a billion.

Yes. Well below.

Well, I'm just trying to fine tune it a little bit and trying to understand last year, you generated in the fourth quarter about 400 million or close to 400 million in cash flow from operations. I'm just trying to get a sense as to what kind of operational reduction we might see in addition to the net proceeds from divestitures.

Okay. We're not going to be anywhere near as strong this year in operational cash flow in the fourth quarter as 400 million. It will be, I think, a very strong cash generation quarter, just slightly muted by the receivable date thing I talked about earlier. The other wildcard is we've got a physical hedge of propane and we'll be watching prices on propane day by day actually and deciding what to do going forward, so that's a variable, but your math is working and I don't want to get pinned down too tightly on it.

But north of 500, south of a billion is probably a fair statement? Not that--.

Yes, I don't know if it will be that far.

That nails it down for us.

It's a real nice place.

Okay, where do you want to be next year, Rich?

Well, sorry, Rich, but we're going to be--.

How about from 0 to 500 million?

We're going to be talking about uses of cash going forward with our strategic initiatives on November 15, and I'll cover that then.

Let me just be a little bit more -- the initiatives that we're going to undertake we can't spend a ton next year, really. We're going to keep some dry powder in this process as these things develop a little bit further, so next year it's just mostly kind of keeping some dry powder handy as we make progress. The bigger spending comes a little later.

Okay. Thanks.

And we go next to Neil Zwallet] with Credit Suisse.

Good morning. Nice quarter. I had a question about co-polyesters and they seem, the results were really great there in the third quarter. Normally, they tend to compete or with the polycarbonate which had suffered a lot of pricing decline so I was wondering what was going on there and what drove those results?

Yes, good instincts, or good question. You're exactly right and one of the things that pounded our -- we had two things pounding our Specialty Plastics guys this year. One paraxylene was really high and you're exactly right when you're competing against poly carbonate and acrylic and their raws don't track paraxylene, that hurts you and then we didn't give them any relief on building their portfolio of action so they were spending money internally. So both of those wins are starting to reverse. Paraxylene is starting to fall off. That's allowing them to regain some volume because they don't have quite the discontinuity between raw materials and their marketing and applications development is starting to come to light now. So the combination of those bodes well for the Specialty Plastics guys going forward.

Thanks.

And 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.

Okay. Thanks, and thanks everyone for joining us this morning. An audio replay of this conference call will be available this afternoon through next Friday, November 3. Have a great day. Thanks.

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