伊士曼化學 (EMN) 2010 Q2 法說會逐字稿

Good day, everyone, and welcome to the Eastman Chemical Company second quarter 2010 earnings conference call. Today's conference is being recorded. This call is being broadcast live on the Eastman's website, www.Eastman.com. We will now turn the call over to Mr. Greg Riddle of Eastman Chemical Company Investor Relations. Please go ahead.

Okay. Thanks, Angel, and good morning, everyone, and thank you for joining us. On the call with me today are Jim Rogers, President and CEO, and Curt Espeland, Senior Vice President and CFO. Before we begin, I'll cover three items. First, during this call you will hear certain forward-looking statements concerning our plans and expectations for third quarter and full year 2010. 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 2010 financial results news release on our website, and in our filings with the Securities and Exchange Commission, including the Form 10-Q filed for first quarter 2010, and the Form 10-Q to be filed for second quarter 2010.

Second, except when overwise indicated, all financial measures referenced in the call and in the slides accompanying the call will be non-GAAP financial measures, such as operating earnings, earnings per share and cash flows from operations, exclude restructuring charges and the impact of the adoption of amended accounting guidance applied to the Company's accounts receivable securitization program. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures, including a description of the restructuring related items are available in our second quarter 2010 financial results news release and in the tables accompanying our news release.

Lastly, we posted the slides that accompany our remarks for this morning's call on our website at www.investors.Eastman.com and you'll find them in the Presentations and Events section. With that, I'll turn the call over to Jim.

Thanks, Greg, and good morning, everyone. As usual I'll begin on slide three. Now, as I normally do, I'll begin with an update on some of the outlook statements we made on the call back in April. For second quarter EPS, we told you we expected to be between $1.50 and $1.60. I updated this guidance at an investors conference in early June saying we expected to be above $1.60, and of course we did report EPS well above $1.60 last night. I'll talk more about that in a minute.

Next we told you that we projected our full year 2010 EPS would be between $5 and $5.25. This was updated in early June to a range of $5.25 to $5.50. I'll talk more about our expectations for 2010 EPS when I get to outlook, but given our strong first half, we now expect to be well above this projection. We also told you that we expect to generate between $200 million and $300 million of free cash flow in 2010, and given our strong earnings, we are on track to be at the top of this range. Curt will walk you through this in more detail in his section.

And we told you we would be disciplined on capital allocation and we have been. In April we completed the acquisition of Genovique Specialty Chemicals. We expect the acquisition will be accretive to earnings in 2010 despite transaction costs and will be accretive above the cost of capital in 2011. We bought back more than $50 million of stock in the first half to offset dilution and we have held our capital expenditures this year to record lows, only now loosening the purse strings to meet increasing demand.

Moving next to slide four, and a review of our financial results for second quarter 2010. Our EPS of $2.05 is a quarterly record, with our next best quarter coming 15 years ago. Revenue increased 38% year-over-year. The main driver was volume, up 21% year-over-year, and 9% sequentially. We benefited from our growth initiatives and the actions we have taken over the years to improve our portfolio of businesses and reduce our cost structure.

Sequentially, volume increased as demand continued to improve. We benefited from competitor outages in Asia, particularly for Oxos and PCI, and there was some limited inventory restocking, particularly in the more specialty product lines in CASPI. And of course, the year-over-year increase was helped by the comparison to the recessionary levels of second quarter 2009. Operating earnings more than doubled year-over-year and our operating margin increased to over 15% in the second quarter, up almost 500 basis points year-over-year and 350 basis points sequentially.

The increased earnings reflected higher volumes, improved capacity utilization, and resulting lower unit costs, and higher selling prices. In addition, we recognized residual cost in the second quarter from the outage at our Longview facility that occurred in February. These costs were mostly offset by a partial insurance recovery in the quarter. Overall we are very pleased with these results. But we aren't standing still and I'll talk more about that in a few minutes.

Turning to the segments now, starting with fibers on slide five. I've said it before and I'll continue to say it. What a great business. Fibers' operating earnings in the quarter were another quarterly record, and over the past six quarters they have set records in four of them. Higher revenue reflected higher volume and higher volume was due to continued solid acetate tow volume and an increase in acetate yarn volume.

Operating earnings increased due to higher volume and higher acetate yarn capacity utilization. The operating margin in the quarter was just over 30%, and is right at 30% for the first six months. Looking at the full year, we expect to set a new annual operating earnings record above $300 million, and this would be the sixth record year out of the last seven.

Next up is CASPI. And this is another great business. We also set a quarterly record here with $94 million of operating earnings, surpassing last year's third quarter. Revenue increased 37% year-over-year, and was up 11% sequentially. Volume, price and mix were all contributors to the revenue increase year-over-year. Volume was up due to improved customer demand with the rebound in the economy. Sequentially volume increased 5% due to growth in all regions and we believe some limited inventory restocking for some of our more specialty businesses with longer value chains.

Selling prices were up to offset higher raw material and energy costs, particularly for our commodity solvents, and the favorable shift in mix reflects higher volumes for our specialty polymer and specialty coalescents, particularly in Asia-Pacific and Europe. The increased operating earnings reflected the higher volume and higher capacity utilization and a favorable shift in mix, and the operating margin increased to 23%. Looking forward, we expect CASPI will set an annual earnings record with operating earnings approaching $300 million.

PCI is next on slide seven. And we also had a terrific quarter in this business. Revenue increased substantially, up a very strong 72% year-over-year, volume was up due to the rebound in the economy over the last 12 months. We also benefited from tightness caused by planned maintenance and outages for Oxos in Asia. Selling prices increased to offset higher raw material and energy costs.

Sequentially, revenue was up 13% due to higher volumes as we recovered from the Texas outage in the first quarter. Operating earnings increased year-over-year due to higher selling prices, higher volume, and higher capacity utilization which led to lower cost. I would also remind you that the second quarter 2009 results included approximately $15 million of cost related to the reconfiguration of our Longview, Texas plant. Looking forward, a number of the facilities that experienced outages in the second quarter are now back online. However, we expect sales volume will remain solid, albeit at a slightly lower margin. As a result, we expect full year operating earnings to approach $200 million for this year.

Specialty Plastics is next. Here, our sales revenue increased 44% year-over-year, due to volume, which was up 36%. We're continuing to see the benefit of growth initiatives in core co-polyesters and areas such as shrink film and handled food packaging, and adoption of our new Tritan co-polyester continues to be ahead of schedule due to the product properties, including the higher temperature resistance and the fact that it is BPA free. And as Curt will discuss in his section, we have begun work on adding another 30,000 net tons of resin capacity for Tritan, which we expect will be online by the end of 2011. We also had a favorable shift in product mix due to higher volume for our cellulosics used in the LCD market.

Sequentially, revenue was up 9% due to an 8% increase in volume, which was driven by the growth initiatives in core co-polyester and increased demand for Tritan. This is the sixth quarter in a row where Specialty Plastics has had sequential volume improvement. Operating earnings increased substantially year-over-year due to the higher volume and higher capacity utilization. And so looking at the full year, we now expect operating earnings to approach $90 million for the year, as the momentum they have built up in the first half of the year carries through to the second half.

Turning next to performance polymers on slide nine. Sales revenue increased 20% year-over-year due to higher selling prices in response to higher raw material and energy costs, and increased volume due to the improved operations of our IntegRex based PET manufacturing facility. Back in January, I said we could check the box on improving the operational performance of our IntegRex asset, and in the second quarter we demonstrated that we had indeed addressed the operational issues. We are essentially running our IntegRex facility flat-out, setting record production volumes, and achieving debottleneck capacity and very importantly, achieving our expected cost positions and our class one yields are greater than 98%.

Primarily because of the improved volume from IntegRex, we are in the black for the quarter. But year-over-year, operating earnings were about flat as the volume improvement was offset by continued difficult market conditions pressuring margins. Looking forward, we expect the last three quarters of the year, when taken in aggregate, will be around breakeven. Lastly, a few comments about the strategic options we're pursuing for this business. I'd like to say the response from the market after our announcement in April has been very strong. And I'd say the process is proceeding on schedule. We continue to expect to complete the effort by the end of the year.

Next, is a look at the regions. And you can see from this slide that revenue was up significantly in all regions. Europe was the star for us this quarter, with a record for operating earnings, due to volumes which increased 23% in the quarter and 25% for the first half of the year, as we benefit from capacity we've added recently. You might remember, in fourth quarter 2008 we added acetate tow capacity in the UK and this is running at a very high utilization rate, and at the end of last year, we expanded our regal light hydrocarbon resin capacity by 30% and we are now going to expand it again for 2011. We've been prudent with the capacity we've added and we are now seeing the benefits.

Asia was also strong with 28% revenue growth due to equal increases in volume, price and mix. Operating earnings increased both year-over-year and sequentially in Asia. Latin America revenues were up a strong 50%, driven mainly by performance polymers, CASPI, and PCI. And North America revenue was up 40%, due to volume which was up 24%, with the strongest growth in PCI, CASPI, and Specialty Plastics.

That brings me to our guidance for the third quarter and the full year on slide 11. Given our very strong results in the first half of the year, we have good momentum heading into the second half of the year. We expect to continue to benefit from the economic recovery we've seen and from the continued implementation of growth initiatives that I've discussed throughout my remarks.

As many of you know, we do typically have a seasonal decline in our volumes in the second half of the year and we have that seasonal decline included in our expectations. We also know there was some competitor outages in the first half that we aren't expecting in the second half, and those will be a headwind. Now we're expecting raw material and energy cost to be less volatile in the second half of the year, compared with the first half. Taking these factors into consideration, we expect our third quarter 2010 EPS to be between $1.65 and $1.75 per share, and we are raising our full year 2010 EPS guidance to between $6.20 and $6.40 per share.

And I'll close with a few comments about 2011. Back at our Investor Day in November of last year, we said we could get to greater than $6 a share in a recovery and we thought that might be around 2012. Well, clearly a recovery has come faster than anyone expected including us. But with an expectation for our EPS to be better than $6 this year, we are focused on improving on this in 2011. We recognize there are many things that are outside of our control, the biggest being growth in the global economy. But we are working on things we can control.

On this slide are just a few of the initiatives that will benefit our 2011 earnings. We've talked a lot about Genovique since we closed the transaction a few months back. We expect it will be accretive even after transaction costs this year and next year it will be accretive above cost of capital, so it will be a benefit in 2011 over 2010. The Korea acetate tow facility will also be a benefit for next year as we qualify the material and work towards filling out the facility. As a reminder, this adds about 15% to our acetate tow capacity.

On Tritan, we are ahead of schedule, filling out the first 30,000 met tons of resin capacity, which is greater than $100 million in revenue. And as we make progress, we transition from a hurt this year to approaching neutral next year. And when additional resin capacity comes online, we expect to see positive income. With demand rebounding as strongly as it has, we are taking advantage of incremental opportunities for capacity expansions and looking at other growth opportunities. This is a core competency for Eastman. And taken together, these projects are a meaningful positive. To sum up, with reasonable economic growth, I'm confident we can grow EPS in 2011.

Now, before I turn it over to Curt, let me take one minute and highlight one of our key executives within Eastman. Ron Lindsay, Executive Vice President of Performance Polymers and Chemical Intermediates, has been with Eastman for 30 years after graduating as a chemical engineer from Clemson University. He also went to the Harvard Amp program but I don't know if he wants to admit that to everybody. I think of Ron as having particular expertise and operational excellence, and understanding our acetyl, olefin, and polyester streams very, very well. This quarter's numbers are evidence of the fine results he's been able to achieve in PCI, relying heavily on Heidi Barnes and Mike Humby to run the business with him. In Performance Polymers, Jennifer Stuart and Phil Begley have been instrumental in the improvement you see in that business.

Also, Ron helped us reach a decision to discontinue our Beaumont gasification efforts and is in the process of winding down that program. If that isn't enough, he also has responsibility for the Engineering and Construction group, as well as leading our efforts to find more advantaged feed stock opportunities around the globe. As you can see, Ron is a highly valued member of the Eastman executive team. Now let me turn it over to Curt.

All right. Thanks, Jim, and good morning, everyone. I'm going to start by reviewing our second quarter 2010 financial highlights on slide 14.

In the second quarter, we generated $206 million in cash from operations. This reflects a very strong net earnings and our continued working capital discipline. We did have a modest $55 million build in working capital, as we had an increase in receivables reflecting the strong sales revenue improvement, and a small rebuild in inventory, following our Texas outage in the first quarter.

Our capital expenditures were $47 million as our maintenance level expenditures are increasing, related to our improved capacity utilization. Our free cash flow in the quarter was $129 million, and is $41 million year-to-date. During the quarter, as Jim mentioned, we did acquire Genovique for approximately $160 million. Our integration efforts are proceeding very well and we are on track to achieve the financial expectations with this transaction. Our net debt to capital ratio remained at 41% at the end of this second quarter.

Turning next on slide 15 to update on free cash flow for the year. As provided in our full year EPS guidance, we are expecting continued strong net earnings for the year. We also expect working capital will increase on a full year basis, but will be a source of cash in the second half of the year, consistent with seasonal changes in demand. As a reminder, we are excluding the impact of the adoption of amended accounting guidance supplied to the Company's accounts receivable securitization program during the first quarter.

Our capital expenditures will ramp up in the second half of the year as we work to add capacity in response to growth in customer demand, and continue to support our strong operating performance. For the year, capital expenditures will be approximately $250 million, which is at the low end of the $250 million to $275 million range I had given previously. Put this together with our continued strong dividend, we expect free cash flow for the year will be approximately $300 million, on the high end of my previous guidance.

As I just mentioned, we are working on capacity additions to meet strong customer demand we have seen in many parts of the Company. First, we are expanding capacity for CHDM, a monomer used in the manufacture of co-polyesters in the Specialty Plastics segment. We plan to expand CHDM capacity by approximately 25% in two phases. The first phase will come online in mid-2011, and the second phase will be online in 2012. This capacity addition will enable us to meet our customers, as demand for co-polyester continues to grow.

Next is the continued expansion in our hydrogenated hydrocarbon resins in Middelburg, the Netherlands, and in Longview, Texas. In Middelburg we expanded capacity for our Regalite hydrocarbon resin by 30% in 2009, and have expanded capacity by 65% since 2006. We are increasing capacity in an additional 20% and expect to have the expansion online in early 2011. We are also expanding our capacity for Eastotac hydrocarbon resins at our Longview facility and expect this increase will also be online in early 2011. Hydrogenated hydrocarbon resins are used in a variety of hot mill adhesives and serve the packaging and hygiene markets.

And work has begun on expanding the resin capacity for our Tritan co-polyesters. You'll recall that we built the monomer facility to support 60,000 metric tons of resin capacity and then built a 30,000 metric ton resin facility. As Jim indicated in his remarks, demand has exceeded our expectations and we are ahead of our schedule for filling this out. As a result, we are working on adding the second 30,000 metric tons of capacity and expected to have it online by the end of 2011. As a reminder, each 30,000 metric tons of resin capacity is greater than $100 million in revenue.

Moving next to joint ventures and acquisitions. As we've discussed before, these four areas of emphasis are how we are targeting joint venture and acquisition opportunities as shown here on slide 17. Genovique is an example of an acquisition that really has achieved all four. Its asset base includes manufacturing assets in Estonia, and a joint venture in China. It's non-phthalate plasticizer product lines are differentiated and viewed as green and sustainable by the market, and the Estonia plant benefits from backward integration to benzoic acid. We will continue to pursue joint ventures and acquisitions that achieve one or more of these attributes.

Turning next to slide 18, we remain committed to returning cash to stockholders. Our last dividend payment was the 65th consecutive dividend we have paid to stockholders. In addition, in the second quarter, we repurchased $33 million of shares and year-to-date we have purchased $53 million. As of the end of the quarter, our remaining authorization was approximately $40 million, and we expect to continue to repurchasing shares over the coming quarters, primarily as a means to offsetting dilution.

In conclusion, we are focused on growth for 2011 and beyond. We are expanding capacity in target product lines where there is demonstrated demand growth. We are reviewing our joint venture and acquisition opportunities in a disciplined manner. And we remain committed to returning cash to stockholders both through a strong dividend and with share repurchases.

Thanks for your attention, and for your interest in Eastman Chemical, and with that, I'll turn it back to Greg.

Alright, thanks, Curt. This does conclude our prepared remarks. Angel, we are ready for questions.

Thank you. (Operator Instructions). And we'll go first to David Begleiter, Deutsche Bank.

Jim, can you comment on some of the trends you're seeing in raw materials and when you might begin to see some declines, some of the feed stocks have come off since their peaks?

Yes, I mean, let me just take you all the way back. So if you look over 12 months, we had a pretty good increase year-over-year in raw materials. That was a healthy number. But when you look from first quarter to second quarter, first quarter as we were walking in, the raws were still pretty strong and then they did start to come off. They didn't really behave the way we thought they would during the second quarter. In particular, propylene and paraxylene both were coming off.

What we're saying is we have no reason to believe you're going to have extraordinary volatility going forward, so we're kind of looking at this as we try and predict between now and year end, saying that we don't think there's going to be a lot of volatility in the raws, but we'll just have to wait and see what happens.

And Jim, on your order books and visibility, how much do you typically have and any signs of either seasonal or sequential slowing?

Yes, unfortunately you don't have a lot of visibility. I mean, at best, you see out two months and reality, it's more like six weeks, four to six weeks. That hasn't changed a whole lot. It was starting to get better I would say last quarter but it hasn't improved much from that. Frankly, we got into July and things stayed pretty strong, so things are still running quite strong for us. We know there will be some stuff that comes off, like we mentioned in our prepared remarks, but the start of the quarter has remained strong.

And Jim, last, just on Tritan, what is the earnings hit this year from Tritan?

Well, it's -- you kind of have to see inside the tent to see all the moving pieces, but basically you've got a $30 million fixed nut you have to cover and then as you sell -- so if you had zero volume, it would just be a $30 million hit I think is the best way to think about it. So as you make sales, it contributes towards reducing that hit. What we were saying is when you get to that first 30,000-ton line full, you're probably around breakeven and then the next 30,000-ton really starts up a very positive contribution.

Thank you.

Yes.

And we'll go next to Kevin McCarthy, Banc of America-Merrill Lynch.

Good morning. Jim, can you discuss the variances that you witnessed in earnings as the quarter progressed relative to your prior expectations? It would seem that even relative to early June, you have fairly significant upside here, so perhaps you could walk us through what accounted for that.

Yes. And how did I know to expect this question? I mean, once again, we had some stuff happen towards the end of the quarter that just -- I don't think you could have predicted. So as we began the quarter, we knew we had a decent month in April, but month by month it got better through the quarter and June was particularly strong. So of course as we were out in early June, we knew April was good, we thought May would be strong but we didn't know just how strong June was going to be. I'd say the other thing, the raw materials didn't move exactly the way we were expecting during the last few weeks of the month, so we didn't get any increase; in fact, probably came off the other way -- it came down.

And then, finally, while we knew we would have a hurt from some -- let's call it some overhang from the cracker outage in the first quarter and we could factor that pain into the results, we didn't realize we were going to get about $10 million of a partial insurance settlement until the very end of the quarter. So there was no way we could predict that. So, I mean, part of it is stuff we couldn't have seen; maybe some of it is us being conservative. But when I said we would be north of $1.60, there's no way I thought we were going to be anywhere $2, and the quarter just came in very strong.

When you take into account your normal seasonal patterns, Jim, how would you characterize the order books in July versus May and June?

I think it's still going to reflect the normal seasonal patterns. I mean, that would be true, usually the third quarter will really start to slow down in August and September, in particular places like Europe and you all know why that is. So I'm expecting a more normal seasonal pattern. Some of the things we had in the second quarter were the raws didn't quite behave the way we thought or we had some players with outages in Asia, in Oxos. We know they're back up and running again so PCI is going to have a tough comp quarter-over-quarter. CASPI is going to have a very tough comp quarter-over-quarter. We can see the decline coming off from -- moving from second to third.

And then, lastly, if I may, a few items on PCI. Any licensing payments in the numbers or do you expect any in the back half? And you mentioned a competitor outage there. Is that competitor back online, to your knowledge?

Yes, that's what I was just saying. It was more than one. You had planned and a little unplanned, unplanned in the extent that people stayed down longer than they thought. That was mainly Asia. That was mainly Oxos and we know that they are back online. So still expect demand to be strong, but you'll probably get squeezed a little bit on spreads there in PCI. What was the first part of your question?

Any licensing payments on the horizon?

Yes, the licensing, we do have another payment coming from an acetyl license in Asia. I don't think it's really factored into our forecast because the odds are it won't be this year, it will probably come in the beginning of next year.

Very good. Thanks a lot.

And we'll go next to Jeff Zekauskas, JPMorgan.

So in your comments, what you said was that sequential volume growth in CASPI was about 5%. So that's about $19 million. And your sequential operating profit growth is $28 million. So how do you do that?

Well, obviously something moved more than volume, right?

Yes, that's right. That's what I was wondering about.

Okay. So what you have, you have mix and you have spreads. And so mix improved, particularly the resins and what we used to call the old adhesives business just had a cracker jack quarter. That really helped Europe a lot. That goes to why we're so comfortable talking about expanding Middelburg again. And then CASPI, when you have specialty products like that, you have some lags between your pricing and your raws, sometimes it works for you, sometimes against you. It's usually just a matter of time. And so you had a little bit of that going on in CASPI too in terms of the spreads.

So what's your level of capacity utilization in CASPI today?

Well, let me talk across the whole Company. That will probably help you. CASPI won't be much different. But there's different parts of CASPI that run at different levels, right? So across the whole Company we're running in the low 90s, which is very strong, obviously. And CASPI would be similar to that. In the specialty products, you would be a little lower than that because you always want to make sure you have capacity, you always want to be able to tell your customers, don't worry, I've got plenty of capacity to serve you. On the commodity stuff though, in CASPI it's going to be higher. So, some of the solvent, some of the adhesives business, we're running pretty tight.

In the fibers area, how much were your shipments to China up year-over-year?

I don't have a clue sitting here today. I mean, it's -- typically, it's kind of interesting, I don't know how much you can really read into those regional sales because we're selling to multi-nationals. So just kind of the way it works within the -- kind of within the business, you're negotiating on annual contracts, and a lot of times, the determination is made by the customer whether they want something in Asia or do they want it in Europe, or exactly where they want the product. But overall, I would say our Asia tow business is pretty strong and certainly did not deteriorate year-over-year.

And then lastly, if you look at the profits in Specialty Plastics, they were flat, but in rough terms your revenues were up -- I don't know -- $25 million? So why is that?

Yes, part of that is mix and we talked about that before, and it also gets back to the spreads you're seeing within the business. But I try not to read too much into the very short-term trends. What I like is Specialty Plastics, they've had two good quarters in a row now and they have the confidence to say that the second half of their year is going to be better than the first half. And there aren't too many businesses -- frankly, there aren't too many parts of anybody's business across the industry that are saying the second half of the year is going to be better than the first half. So what you see there is they really are taking share. They really are replacing competing materials and our overall objective is to drive the long-term earnings growth of that business. I've talked for a long time about how I love that business because I can see how it's growing and I can see what we call value add, how that's increasing and now you're starting to see it in the earnings.

Well, looks like you took a step back in the second quarter and now you think you'll take a step forward in the third quarter. Can you just explain that?

Yes, I don't know why it would be a step back. I mean, I think the earnings were relatively flat. Yes, there was more volume but I told you we have several moving parts. You're bringing Tritan out, which is bringing volume, but in terms of carrying the cost, that will be clearer as you start to fill up the first line and then you'll see the positive impact of that. I'd just say overall, I don't really think of it as having taken a step back at all. I think it's on a pretty good path, especially when we start talking about making $90 million for the year.

Okay. Thanks very much, Jim.

And we'll go next to Frank Mitsch, BB&T Capital Markets.

Good morning, gentlemen. Jim, I hate to say this but you're getting a reputation as a terrible forecaster.

I thought we dealt with that last conference call, Frank.

But you continue to miss your forecast by a mile.

Well, I'm sure eventually you guys will do something to guarantee that we miss it the other way. I was just laughing with some of the guys about the people who have the lowest expectations for us in terms of buy, hold, whatever are the ones who seem to want to set the hurdle the highest for us. I guess that's just the way your industry works.

Well, I wouldn't fit into that category, but in terms of forecasting, you mentioned that you expect to have a decision on strategic options on PET by the end of the year. Can you give a bit of an update there? And are you seriously considering something other than an asset sale there?

Let me start it and then I'll let Curt talk. But we always say strategic options because we want to do just that. We want to keep our options open. I do think that we're seeing strong interest, and I would expect that -- my expectation is that there will be somebody that sees this business as worth more to them than it's worth to Eastman. Let me just let Curt give you an update.

Well, as Jim highlighted, we did have strong interest after our announcement at the end of April, and you may ask yourself, why is that? That is basically, we got a very attractive business offering with this asset. That's because it's got the scale and the integration benefits at the South Carolina site and it's got a great technology that gives us a conversion cost advantage for IntegRex. So part of the reason that we've had that strong interest is that anyone who wants to be a leader in North American PET is going to want this asset, Frank. And so that's what gives us the confidence, plus our experience in working with this type of process outside the US that we feel good that we'll conclude this by the end of the year.

All right. Terrific. Curt, as I look at your slide on uses of cash, et cetera, kind of down on the list is share buyback and I know that you've talked about offsetting dilution, but given the reset of the numbers, you guys are trading at five times EBITDA. I mean, are there better M&A opportunities out there at five times EBITDA than EMN?

Well, you got two parts to the question there, Frank. Let me first talk about the joint venture or M&A opportunities. I mean, there is an active pipeline. We continue to look at various opportunities. What I'm seeing right now in the marketplace, there is increased opportunities coming out there, but they tend to still be in the lower margin or the commodity product lines. In some of the more attractive areas we're still seeing a gap in the bid ask spread. So we're going to continue our discipline efforts and we're going to continue to look at joint venture and acquisition opportunities.

As relates to the buyback, as you mentioned, we have and will continue to be in the marketplace to repurchase shares. Our strategy has, continues to be to do that as a means to offset dilution. It is ultimately up to our Board if we're going to deviate from that plan but right now we believe repurchasing shares at a measured pace is the right strategy for Eastman right now.

As opposed to an aggressive pace?

Yes.

Frank, just on that, I mean, because you get -- there are varying views from different shareholders. Some love buybacks, some say what does it really do for you in the long term. I mean, what we've talked about is when we look at our cash and we realize that that's one of the mandates on management is to generate as much cash as possible, we want to spread it across the best opportunities in three buckets. This has been a consistent story. I want to find the best buys, I want to find the best builds, and we're more than willing and think it's an obligation to make sure we give a good cash return to our shareholders. So there you get the nice dividend and we will buy back stock. As the world changes -- and you were pointing out one of the things that aggravates me too, I look at our multiple versus the stuff that's out there to buy -- as the world changes, we can be flexible in terms of how much cash we send to each bucket. But other than that, I really can't say too much more.

Alright, terrific. Thank you and, hey, nice job, guys.

Thanks, Frank.

That appears to be all the questions we have at this time. I'll turn it back over to you, Mr. Riddle, for any closing comments or remarks.

Okay. Thanks, Angel, and thanks to everyone for joining us this morning. An audio replay of this conference call will be available on our website this afternoon through August 9th. Thanks very much and have a great day.

That concludes today's conference. We thank you for your participation.