富美實 (FMC) 2006 Q3 法說會逐字稿

Welcome to the 2006 third quarter earnings release conference call for FMC Corporation. [OPERATOR INSTRUCTIONS]. Thank you. I will now turn the conference over to Mr. Brennen Arndt. Mr. Arndt, you may begin.

Thank you and welcome everyone to FMC's third quarter 2006 conference call and webcast. Bill Walter, Chairman, President, and Chief Executive Officer will begin the call by reviewing our third quarter performance. Bill will then turn the call over to Kim foster, Senior Vice President and Chief Financial Officer, who will report on our financial position. Bill Walter will then discuss the outlook for the balance of the year for 2006 and will then complete the call by taking your questions.

Our discussion will include certain statements that are forward-looking and subject to various risks and uncertainties concerning specific factors that are summarized in FMC's 2005 Form 10-K our most recent Form 10-Q and other SEC filings. This information represents our best judgment based on today's information, actual results may vary based upon these risks and uncertainties. During the conference call we will refer to certain non-GAAP financial terms. On our FMC web site available at FMC.com you will find the definition of these terms under the heading entitled gloss RI of financial terms. Also on our web site we have provided a reconciliation to GAAP of the non-GAAP financials that will be used on the call today as well as provided 2006 outlook statement.

It's now my pleasure to turn the call over to Bill Walter, Bill.

Thanks Brennen, good morning everyone. As you saw in our press release we had another good quarter. Earnings per share of $1.02 were above the midpoint of the range issued in our outlook at our last conference call. Hydrotics delivered 8% earnings growth on the strength of our market positions in South America and the favorable timing of certain export sales. Specialty chemicals earnings increased 9% on continued volume growth and higher selling prices, and industrial chemicals continued to realize significant pricing leverage to deliver 18% earnings growth.

Let me briefly summarize our third quarter performance. Sales of $572 million were up 12% versus a third quarter of 2005, and earnings before restructuring and other income and charges of $1.02 per diluted share were 20% above last year's third quarter. On a GAAP basis, we reported net income of $35.1 million, or $0.89 per diluted share. GAAP earnings for the quarter included a net after tax charge of $0.13 per share, primarily related to discontinued operations. With that reconciliation, our non-GAAP earnings were $1.02 per diluted share versus $0.85 per diluted share in the prior year quarter. Our third quarter performance was achieved despite the headwinds of higher energy and raw material costs. Versus the prior year, higher company-wide energy and raw material costs unfavorably impacted earnings by $0.32 per share in the quarter.

Currency translation, however, unlike the last twelve months, had essentially no impact on our earnings results versus the year ago quarter, and in the third quarter this year, our share repurchase program provided approximately a $0.01 per share benefit to earnings. Kim will review the third quarter and year-to-date specifics of our repurchase program later in the call.

Let me now take a look at the performance of our businesses in the third quarter, starting with Ag Products. Ag Products revenue of $180 million was 12% above last year, primarily due to stronger sales in South America, particularly Brazil, as well as the favorable time to sales in Europe and Asia. Sales in Brazil benefited from the growth in sugarcane and cotton as planted acres increased 10% and 30% respectively, versus last season. In North America, past prices were moderate as expected.

Segment earnings of $28.5 million were 8% higher than in the prior year, due to the increased sales. Partially offsetting the sales growth were higher raw material costs, principally solvents. A less favorable geographic mix than a year ago and higher development spending associated with growth in innovation initiatives.

Specialty chemicals continued to deliver solid top line growth as revenue of $147 million increased 7% over the prior year quarter. Lithium sales growth was driven by higher volumes and selling price in upstream primary molecules due to the tight industry supply and demand situation as well as higher lithium sales. Polymer sales growth was broad based coming from our core food and pharmaceutical market positions as well as early sales from our health care initiatives.

Segment earnings in specialty of $27 million increased 9% versus a year ago. Driven by the strong commercial performance in both lithium and bio polymer particularly in food and ingredient business, mitigated somewhat by higher raw material and energy costs. In industrial chemical segment revenue of $246 million increased 16% versus a year ago. As sales gains were achieved across soda ash, oxygen. Our selling prices for soda ash and hydrogen peroxide were the primary drivers, where solid demand growth and tight supply conditions in key markets continue to provide us benefit. Segment earnings of $21.3 million increased 18% versus the year ago quarter driven by the higher selling prices. Our strong commercial performance was partially offset by higher energy and raw material cost and the absence of profits from Astaris which was divested in November, 2005.

As we discussed during last quarter's conference call, higher energy costs particularly impacted our Spanish operations. This was compounded in the current quarter by lower electrical selling prices for the code generated power we sell into the Spanish grid. The industrial segments earnings as a result were slightly lower than our prior guidance due to the weaker than forecast performance of PORAC. We remain optimistic that the Spanish administration will soon move to restore order to the electrical market in Spain and that we will be able in 2007 contracts to recover the increased cost resulting from the deregulation of natural gas.

And finally, corporate items, corporate expense of $11.3 million rose modestly from the level of a year ago. Interest expense net was $7.5 million, down from $13.3 million in the prior period due to lower interest rates and debt levels. On September 30, 2006, gross consolidated debt was $677 million and debt net of cash was $419 million. For the the quarter depreciation amortization was $32.4 million and capital expenditures were 34.6. That's a he review of our segments, let me now turn the call over to Kim Foster who will provide an update on cash flow and share repurchase program. Kim?

Thanks Bill. And good morning all. We define free cash flow as the cash generated by the Company before financing activities such as returning cash to shareholders or paying down debt. Throughout this year we have forecasted a free cash flow for 2006 of approximately $150 million. We still expect free cash flow for 2006 to be approximately $150 million. Regarding the 150 million repurchase plan authorized by our Board in February, during the quarter we repurchased approximately 821,000 shares at a total cost of $50 million. Year-to-date we have repurchased approximately 1.1 million shares at a total cost of $70 million.

Though our repurchase program does not include a specific timetable or price targets and may be suspended at any time we expect that the program will be accomplished over a two year period. And a reminder, as I mentioned at last quarter's conference call, we will not include future repurchase amounts in our earnings per share projections. For the quarter, the share repurchase program improved earnings per share by approximately $0.01. The average shares in the denominator of the earnings per share calculation are the average monthly share for the period reported. Consequently the impact of our share repurchase program will only gradually reduce the diluted shares outstanding. Going forward, we will continue to use cash to fund all internal opportunities for profitable growth.

In addition we will continue to validate attractive growth opportunities outside the Company such as product acquisitions, in-licensing deals or equity ventures in the agricultural products and bolt on acquisitions in specialty chemicals business. Each opportunity will be measured by impact on earnings, balance sheet and return on capital. Until the right external growth opportunities present themselves, we will continue to deliver value by returning cash to our shareholders as well as pursuing internal growth opportunities as they are identified.

With that I will now turn the call back to you, Bill.

Thanks Kim. Looking ahead, we're as confident about 2006 in the final few months of the year as we were when the year started. And that's the year will be another year of strong growth for FMC and one that will again meet our strategic objectives for earnings growth and return on capital. Regarding our specific outlook for the fourth quarter 2006, we expect earnings before restructuring and other income charges of $1.12 to $1.22 per diluted share. In ag products, segment earnings are expected to be down 10 to 15% due to the shift to some expert sales into the third quarter, less favorable market conditions in Brazil than we experienced a year ago, and continued higher spending associated with growth and innovation initiatives.

In specialty chemicals we expect fourth quarter earnings growth in the mid single digits as a result of continued good performance in both biopolymer and lithium. In industrial chemicals we expect earnings growth of approximately 40 to 45% due to the higher selling prices for soda ash and improved volumes, and improved volumes. Partially offset by higher input costs, particularly energy in Spain. With this expectation on the fourth quarter, our outlook for the full year 2007 earnings before restructuring and other income and charges is $5.35 to $5.45 per share. At the mid point, earnings would then be up 23% year over year. And through the first nine months of the year we will have returned approximately $85 million to shareholders and reduce net debt by approximately another $100 million. All in all, a very good year for FMC.

With that, I thank you for your time and attention and I will be happy to take your questions. Operator?

[OPERATOR INSTRUCTIONS]. Your first question comes from Mike Judd with Greenwich Consultants.

Congratulations on a good quarter.

Thanks Mike.

In looking at your earnings outlook for the full year, it appears that you have reduced the high end of the range in terms of, your expectations by about $0.10. I'm just wondering if you could comment about, the current environment in Brazil and is it really basically ag products which represents the change in your outlook since August 2nd.

Yes, Mike, before I get to answering your question, I think I misspoke in my comments just a few minutes ago about the outlook of the $5.35 to $5.45. I'm being told by my people here I said 2007 instead of 2006. So I just wanted to correct that if anybody was confused. We have lowered the top end of our range, getting closer to the end of the year and I would hope you guys would expect that we would be able to narrow our outlook which we have. But the top end has come down $0.10.

I would say Mike, it's for two reasons. One, ag and Brazil where we have taken what we believe to be a conservative outlook for the fourth quarter down there. We can get in if somebody cares to talk further about what the market is like down there, but again we think the right thing to do is to be conservative rather than aggressive in our outlook there.

And the second is the energy issue in Spain, as we talked in I think it was the second quarter conference call, the Spanish authorities deregulated gas effective July 1. There has been a dislocation in the electrical power pricing market as a result of a move by single Spanish electrical power generator. The net of all of which has led us to a lower outlook for industrial and therefore a lower high end of our range for the corporation in the fourth quarter.

Just as a follow up on the ag side, I was just wondering if you could provide a little bit more detail in terms of what the dynamics are there that are causing you to be a bit more conservative.

Yes, Mike, they're a continuation of the dynamics that have been going on in Brazil for the last six to 12 months. It if fundamentally comes down to cash flow issues with the growers down there. The result back on producers like us is extended terms and we have taken a position of, that we will aggressively try to collect receivables, but as importantly if not more importantly, we are not going to extend new credit to growers in the area that are, that are past due on what they owe us today. So again it's the fundamentals of the farm economy in Brazil, cash flow problems for the farmer and a conservative approach we're taking to new business until we can fully collect the receivables outstanding from the last season.

Thanks for the help.

Your next question comes from Bill Young with Credit Suisse.

Morning Bill. A couple quick questions now. Could you give us a little more detail on the price of electricity that you're able to get when you sell your excess power into the grid, what's it been like historically, what's it like now and what's it likely to do going forward. I don't understand the Spanish electricity market too well to be perfectly frank.

And I'm learning more about it than I ever hoped to, Bill. Let me -- this is a complicated issue, let me try to make it simple. In the second quarter of 2006 the Spanish government deregulated natural gas prices. We talked about that, the impact that would have on and the corporation for the full year in last quarter's conference call.

At the time they did that the Spanish government also froze electrical power prices to the consumer, i.e., putting a margin or squeeze on the electrical power generators. Electrical power generators in Spain sell surplus power into a pool, if you may, so you have got a, you have got a price increase in natural gas, capped electrical energy prices. As a result, the second largest electrical power generator in Spain, a company called Iberdrola, elected to move out of the pool and begin buying and selling electrical power outside of the traditional standard means by which power is bought and sold in Spain.

The result has been a collapse in the pool energy electrical energy, prices. Foret sells excess cogenerated electrical power into that pool. As a result we have seen just as all other producers, have an increase in the raw material cost for us, i.e., natural gas, and a collapse in the power price that we get for surplus electricity.

Okay. I can understand that and --

What's going to happen, when we gave our -- first of all Bill when we gave our guidance last quarter for the third quarter in the year, we had assumed that the electrical power pricing part of that energy issue in Spain would have resolved itself during the third quarter. We thought the Spanish government would step in and deregulate in some capacity retail electrical power. They have not. We have assumed for outlook purposes in the fourth quarter that they will not address that during the quarter, this quarter either.

So where does that leave us and what are the prospects going forward after the end of this year? First with respect to natural gas, given the annual contract nature of our business in Spain it's not going to be till January 1, '07 that we will be able to begin trying to recover some of the natural gas price, cost increases through prices. We are optimistic that by the beginning of next year, the Spanish government will in fact step back into the electrical power market and make the appropriate regulatory adjustments that permit power to be sold at closer to market prices. Iberdrola will return to the pool and we will eliminator at least reduce significantly the dislocation and the financial penalty that we have been incurring over the last four months.

Okay.

That was, that was a lot Bill.

No, no, no, it's pretty complicated. I'll have to find out off line how you can buy and sell power out of the pool, out of the grid, usually it's a simple type thing at least over here is my impression. As a follow up, back to the Brazil situation, you highlighted some good demand for products in the cotton and in the sugarcane area, this issue about collecting receivables, is that in other crops primarily, which ones, or is it pretty much across the board?

The receivable issues are primarily bill in corn and soybeans. And as we have talked in the past we don't have significant exposure to those two crops, but we do have an exposure. Sugarcane as you might expect is a fairly healthy market in Brazil given ethanol. And cotton, Brazil remains an exporter and that part of their ag economy remains fairly healthy. So I guess I'm wondering with you, but the issues of receivables are primarily in soybeans and corn, but there is some spillover effect in the rest of the crops.

Okay, great answer. I'll get back in the queue now, thank you.

Your next question comes from Robert, [Belisse], Gabelli & Company.

Hi guys, how are you.

Good Robert, how are you.

Good, good. Just a couple quick questions. I guess following up on is the last gentleman's question regarding Foret and the energy issue down there, I guess on a year over year basis what was the negative impact in dollar terms basis what was the negative impact in dollar terms of the energy issue.

Robert, we normally don't get that granular, but it's probably 3 to $5 million.

Okay. And on the sequential basis does that change at all?

Yes. And boy, Robert, it does change and I'm drawing a blank to be honest with you. But it is sequentially a negative as well.

Okay. Well, I guess what I'm getting at is assuming that this issue doesn't resolve itself in the fourth quarter or the first quarter of next year, should the incremental costs associated with the higher energy be fully phased into the P&L, so what I'm saying as we get to the second quarter of next year would you expect the negative impact, assuming it doesn't get corrected to be minimal?

Certainly by the third quarter of next year. I think second quarter of next year would be a transition quarter. We began to see some of the effects in the second quarter this year, but didn't have the full effect in the quarter.

Okay. But based on your, I guess based on your best judgment today would you expect that this issue is resolved prior to then?

That's our assumption Robert. Again, there are two dimensions to the energy issues we're facing. One is the deregulation of natural gas and the second is dislocation electrical power prices. Deregulation of natural gas we will address through the 07 contracts with our customers. We have got to be able to pass that cost increase on. And we're out trying to do that in our contract negotiations right now.

The electrical power dislocation, electrical power pricing dislocation is outside our control. From our perspective the Spanish authorities cannot let that continue as it is hurting not just FMC and the other 300 cogenerators in Spain, but it's hurting the if fundamental financial returns of the major electrical companies there. And that simply can't continue indefinitely. We have made an assumption they will correct, make the regulatory adjustments by 1-1-07. There's no guarantee our judgment is right, but we think it's the appropriate for planning purposes.

Okay, thanks for the color there. I guess flipping over to the soda ash side, I was hoping you can she did some color on how domestic are unfolding. I know over the past couple years you have gotten about half pricing, should we expect it's more or less than that this time around.

Robert, it's premature to talk about the contracting process, contracting results I guess. Here it is November 1 and what has historically and it looks like it's turning out to be again this year a three month long process. We really won't know the outcome of it till very late in December. How much of the announced price increase should we get I think is also speculative to try to answer at this point.

As you know the industry announced a $15 a ton price increase in May, then we had an additional $10 a ton price increase here. I think it was last month, may have been in late September. I think the big question to me is whether that second $10 was announced early enough to be effective in the negotiations. Again, enough to be effective in the negotiations. Again, only time is going to tell.

Okay. You know, your best judgment at this point relative to the tightness in the market, what would that suggest.

I'm sorry, Robert, repeat that.

I guess, you know, relative to the tightness in the domestic soda ash market right now and your best judgment at this point.

I don't, I'm not going there Robert. It's the answer that everybody wants this time of the year and again it's just too early for me to go out with a number. If I gave you one and we missed it on either side you'd -- well, you would remember.

All right. Well, we will avoid that one right now. I guess last question is you stepped up your spending during the quarter on R&D and I was hoping that you can highlight where those incremental dollars went to.

I'm sorry, we're having a little volume problem here at our end with everybody. Can you repeat that Robert.

Yes, no problem. You stepped up your R&D spend during the quarter and I was hoping you can comment on where the incremental dollars went to.

Yes, it was in both ag and specialty. No one item if particular driving it. In ag it was the continued implementation of the change in innovation model that Milton talked to you all about here nine months ago or so. And in specialty it was continued support, expanded support on our health care initiatives. Okay, thanks so up, I'm hop back in queue.

Your next question comes from Ian Zaffino with Oppenheimer.

Hi, good morning. A couple questions here. The first one would be on the lithium side, how much an increase, can you give the lithium side, how much an increase, can you give us an idea about the or magnitude of your volume growth versus your selling price growth and what end markets there are you seeing really drive that growth, then I have a follow up.

Yes. The majority and a significant majority of the top line growth in lithium was pricing related. I don't have the precise numbers in front of me, but it was again predominantly volume. The end use market or predominantly price. The end use markets for lithium at the primary end of the business or the more commodity oriented end of the business where we are seeing significant price increases globally is probably a 3 or 4% a year market growth. And we probably grew with the market. What's driving that growth, two things I would say just broad GDP, but also the secondary battery market. A major consumer of lithium carbonate lithium chloride, lithium metal and those markets are growing in excess of 10% a year.

And then just turning to the buyback here, you bought back a tremendous amount of shares, I know it's difficult for you guys to comment on exactly all the details here, but was there a particular reason for such a large increase and can we extrapolate that into, you know, this quarter, next quarter, then maybe a potential increase in the buyback.

Even, this is Kim. As I mentioned in my remarks, our basic strategy with the buyback of course broadly is to execute what we have announced which is the $150 million over two years. But within that there is also the desire for us to continue to fund both internal and external growth opportunities. And of course as you listen to bill talk we didn't, we didn't have the opportunity to be able to announce any of those with you on this quarter and consequently and we continue of course to meet our cash flow targets and consequently we had cash available to return in the form of stock buyback. We hope to be able to execute the growth strategy that Bill, Milton and Ted have talked about and we hope to be able to direct some of this increased cash flow we have toward that end. To the extent we can of course we're going to continue to evaluate stock buy backs just like we did in this quarter.

All right, thank you very much.

Your next question comes from Kevin McCarthy with Banc of America securities.

Yes, good morning bill. Would you comment on capacity utilization rates in soda ash. Market had been sold out for quite some time, is that still the case or some of the recent macro economic growth deceleration effecting that business at all.

First of all, hi Kevin. No, there's if fundamentally nothing has changed in the soda ash industry in North America or globally. Global demand continues to increase primarily in Latin America and Asia. Other than our second increment capacity in Granger there's been no new capacity brought on line in North America and no other capacity additions announced. Europe remains fairly stable. So no, again I think I'm wandering with you, but back to the basic question, nothing has changed from my perspective in either the North American or the global soda ash market from what we thought and talked about a quarter ago.

Okay. And then shifting gears to ag, some of the analysts are looking for substantial growth in U.S. corn acres to perhaps 84 million or more. And I recognize you have a diverse portfolio both geographically and with respect to crop mix, but if that forecast were to come to fruition should we anticipate any meaningful benefit in 2007 to your ag portfolio.

No, I don't think so Kevin. As we have talked our exposure to corn globally, our exposure to corn in North America is relatively small, I've forgotten whether it is, but it's 10% or 15% at most of our North American sales. So if you're seeing 6% growth in planted acres in corn times 10% of our sales it's a pretty small impact.

Yes, okay. Then on the export issue that you mentioned in ag, how much do you think may have been brought forward from the fourth quarter.

Not a lot, but enough that we had to dig that out to help explain why the third quarter turned out as much better than what we had thought. It's a couple of million dollars at most Kevin.

Okay. Then finally, just broad question Bill, it strikes me that you deleveraged the balance sheet quite a bit over the last couple years, meanwhile you have been very disciplined on the acquisition front. Now that you have more dry powder do you see anything interesting in the pipeline at this point that might cause us to expect, a larger acquisition or is that not the case.

We continue Kevin to look at acquisition opportunities both in ag, well primarily in specialty, but increasingly in ag as well. What we have, the story in specialty hasn't changed from that, we have been communicating here over the last couple years. In ag there are some opportunities. Whether or not we're going to end up pursuing any of those and how big they are I think is yet to be seen. But we would like to grow and we continue to invest internally in every attractive opportunity we have. And if we're going to grow we're increasingly going to have to rely on acquisitions to do that. Let me reassure you, having said that, don't panic anybody, we're not going to do anything undisciplined. I hope you know the management of this company well enough to believe that that won't happen.

Sure. And just to follow up on, that comment as it relates to ag, Kim I thought I heard in your remarks something about joint venture opportunities in ag, I'm not sure if you were talking at the micro level if you will with regard to product lines or something more far reaching, broader than that.

Kevin, this is Kim. I was referring to both in licensing, licensing agreements as well as joint development agreement as differentiated from joint ventures.

Okay, thank you very much.

Your next question comes from Dmitry Silversteyn with Longbow Research.

I just have a couple questions, most of my questions have been answered. In bio polymers can you provide some more color on what drove the growth there and if you're still seeing higher costs.

Yes, the growth was broad based across as I said both our core food and pharmaceutical markets. I don't think there was any one thing in either of those that drove the growth. We also are beginning to see some top line again from the health care initiatives we have been investing in over the last three or four years. With respect to raw material costs, they seem to at this point Eugene stabilized at the level which they were at in the second quarter. But that stabilized at a higher level than on average we experienced in 2005.

Okay, thank you very much. And during the last conference call you mentioned that you're expecting to see lower ex sports in soda ash in 2007, have you seen any changes there in third quarter, are you expecting to see any in the fourth quarter.

First of all your memory is correct. We believe that there will be potentially significantly less of soda ash from China, at least vis-a-vis 2005-2006. What have we seen here recently, Chinese exports have been largely flat, at about 150 to 155,000 metric tons a month now for the last year. There may be an up or down in one year or the other, but it's been essentially flat here for the last 12 months.

Okay, thank you. Just the last question if I may, raw material costs for third quarter in raw material cost in part due to hedging strategy that did not allow you to benefit from lower natural costs in North America and if that's the case when are you expecting to see some of those benefits.

Yes, I think I said in my formal comments the impact of raw material and energy combined for the quarter was $0.32 versus a year ago. Eugene, I don't remember how much of that was energy versus all other raws. And I'll be honest with you, I'm sitting here trying to do math in my head and can't. I'm not sure that our hedging strategy has ruled in higher average energy costs in 06 than what it would have been had we not hedged. That might have been true in the third quarter, but I'm not sure it's true year-to-date. I'm rambling here with you, I guess what I'm saying is I don't think I can answer your question.

Okay, thank you.

Your next question comes from Bill Young with Credit Suisse.

A follow up on the use of cash, I'm not getting into the OBO question Bill, you don't have to worry about that. But you want to fund your internal growth a little bit more, you're looking for acquisitions, have there been -- first of all, how many acquisitions have you looked at in the last say or year-to-date basis in some kind of a serious way realizing that we haven't heard any news about figure from you guys meaning either you didn't like the property or it was too expensive, you were out there something like that. And secondly, in line with that, what can you give us on the forecast for 07 as far as CapEx and R&D spending either year to year change or some absolute numbers.

Yes, Bill, thank you for not asking the OBO question. First of all let me address the second question. We're not giving any guidance or foreshadowing anything with respect to 07 so I'm just going to decline the answer to that part of the question. How many acquisition opportunities have we looked at seriously year-to-date, boy, I don't know. I mean, there is a staff here that that's their job is to look seriously at them and I don't know how many they may have looked at that never found their way into my office. But there have been several at least that did find their way into the office. Some got rejected out of hand, some are still alive. I think that's about all I'm going to say, Bill.

Are you talking about like half a dozen, something like that, in that ballpark?

Less than ten.

Okay, good. Okay, that puts a good bracket on it.

Your next question comes from Richard O'Reilly with Standard and Poor's.

Good morning gentlemen. You have got your outlook statements that you just issued and one thing that I catch is this other income line and it's now a positive two was I think a negative two, so it's a swing. And when I look on the segment line I think that's what it refers to, it's a negative 8 million year-to-date 8.5 million. Is there something in the fourth quarter or what am I missing.

Richard, this is Kim Foster. Your math is correct and you're not missing anything. What drives the fourth quarter and it actually if you looked back in the last few years a similar phenomenon occurs, it's associated with our initiative to continue to reduce and better control our working capital in particular our inventories. And for the last few years, and we're on LIFO from a domestic inventory perspective.

We have continued to reduce domestic inventories and as a result and the way LIFO works, we get an LIFO income benefit in the fourth quarter as we reconcile the actual reductions in domestic inventories. The swing from quarter to quarter guidance that you saw in the OID amount is largely driven by the continued success of our domestic inventory reduction program such that the LIFO benefit year over year that is to say 05 to 06 will be similar in nature.

Okay, okay, that shows -- it doesn't show up in the segments, it shows up there, okay. The second question, back on soda ash pricing, from previous price announcements in 04 and 05, how much do you think has been still realized just due to contract term changes, not from this year's negotiations, is there anything left that you can still realize?

Richard, I think what has been announced, what was announced in 04 and 05 and whatever was going to be realized what was announced in 0 had and 05 is behind us.

Okay.

I think we ought to, at least we are looking at the 07 contract season with a clean slate if you may starting with the $15 a ton price increase that was announced in May of this year followed by the $10 a ton price increase announced in September.

Okay. So no contract caps, limitations, anything like that would make a difference in 07.

No. By the time Richard we got into the 06 contract season this time last year, all contract caps for us were for all practical purposes already extinguished.

Okay. Last thing is on the specialty chemicals segment, the two product lines, you don't quantify the sales and I'm just going to suggest maybe you should give us some detail, maybe the absolute sales by those two product lines. That's all, okay, thanks a lot gentlemen.

Yes, Richard just for your information, we do do that in our annual report. We don't do it on an interim basis.

Okay, thank you then.

Okay.

[OPERATOR INSTRUCTIONS]. There are no further questions at this time.

Thank you operator. And thank all of you for joining our call today.

Our on target performance in the third quarter I think once again demonstrates the value of the diversified portfolio that is represents FMC. As $1.02 per share we exceed the slightly our expectations for the quarter despite the energy related issues which we have talked about in Foret. And all other businesses met or exceeded our expectations. Our outlook for the fourth quarter remains unchanged from our previous guidance and our full year earnings should be up a strong 20% plus year over year.

During the quarter we accelerated our share repurchase program and by quarter end we were approximately halfway through the previously announced plan. Finally our net debt has been reduced by approximately a $100 million since the beginning of this year of the all I think is a testament to the strength of our businesses and management's commitment to increasing shareholder value. With that let me again say thank you for joining us today and look forward to talking to you in the months ahead.

This concludes today's 2006 third quarter earnings release conference call for FMC Corporation. You may now disconnect.