Dow Inc.
Q4 2008 Earnings Call Transcript

Published: 3 Feb 2009

[Operator:]

Good day everyone and welcome to The Dow Chemical Company's Fourth Quarter 2008 Earnings Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Howard Ungerleider, Vice President of Investor Relations. Please go ahead sir.

[Howard Ungerleider:]

Thanks Jennifer. Good morning everyone and welcome. As usual, we are making this call available to investors and the media via webcast. This call is the property of The Dow Chemical Company. Any redistribution, retransmission or rebroadcast of this call in any form without Dow's expressed written consent is strictly prohibited. On the call with me today are Andrew Liveris, Dow's Chairman and CEO; Geoffery Merszei, Dow's Executive Vice President and Chief Financial Officer and Jeff Tate, Director, Investor Relations. Around 6

[Andrew N. Liveris:]

Thank you, Howard, and good morning everyone. Thanks for joining us as I review 2008 and give you a glimpse of what 2009 looks like. I promise you, I will cover every topic that's on the minds of everyone who follows our company. We have never shied away from the truth neither in good times or bad and we are not going to start now. So as you turn to slide 13, there are five things I would like you to take away from my comments today. First, the financial results are very disappointing and a reflection of the demand deterioration we saw in global markets and the turmoil in the financial world. Second, we have a very good cash flow story to tell as the interventions and quick actions we committed to take as the crisis unfolded helped us create cash in a very difficult economy. The fact that we quickly and proactively started this work in the early fall helped us meet our cash goals. Third, we have taken and will continue take actions to repair the company for both the current economic downturn and the continued implementation of our long-term strategy. Fourth, considering today's economy, we remain a strong company with many options moving forward. Although we had a very significant setback in December to our long-term strategy, it was a temporary setback. I say again today, we are committed to our strategy and we will address the setback as creating a pause in our implementation. And fifth, we are committed above all else to maintaining an investment grade rating and are prepared to take all necessarily steps to do so. With that framework, let's begin by looking back at 2008. As everyone on this call knows, 2008 proved to be a very tough year for everyone in our sector, or in any industry for that matter. What started out as the fear of inflation at the beginning of the middle of the year quickly morphed into a banking and credit crisis that ultimately caused the U.S. economy to totally disintegrate in the latter part of the year, which then affected the entire global economy in a heartbeat. The meltdown was swift and unprecedented in modern times. So in many ways, it was a tale of two years. In the first half, we weathered a huge run-up in feedstock and energy costs, which net-net resulted in us recording the sixth consecutive year of double-digit percentage increases in feedstock and energy costs. And just when raw material costs seemed to moderate and thoughts of margin expansion began to reappear, however, we were hit with two major hurricanes on the U.S. Gulf Coast, which disrupted over 80% of our North American capacity. Also in the second half of the year, financial markets unraveled and took with them consumer confidence. The rapid demand destruction and unprecedented destocking throughout almost every value chain is something none of us have ever experienced. The impact of this global economic correction in the fourth quarter was inescapable, and that is reflected in the financial results we recorded in 2008 with the fourth quarter being one of the worst quarters we have seen in more than two decades. For the year, we once again posted record sales, a reflection of our ability early in the year to push through two unprecedented companywide price increases. The price increases helped offset the $5.9 billion year-over-year increase in purchased feedstock and energy costs but did little for margins. Overall volume however was negatively impacted by the world's economic problems. What begins as luck less the demand in the United States spread through every geography, leading us to an overall volume drop of 5% year-over-year. The vast majority of that occurred in the fourth quarter. Equity earnings, which were robust for the three quarters of 2008, fell for the year to $787 million. The combination of demand destruction, particularly in the EO/EG polyester chain, lower oil prices and naphtha disconnecting from oil in the quarter caused our Basics joint ventures, which are typically advantaged to also suffer, the reality is that demand destruction, which of course drives oil prices lower, will hurt even these cost advantaged joint ventures. Excluding certain items, 2008 earnings per share were $1.82 versus $3.76 in 2007. If you turn to slide 15. Given the speed of the deteriorating economy in the fourth quarter, we responded with two proactive interventions

[Howard Ungerleider:]

Thanks Andrew. That wraps up our prepared remarks. For your reference, a copy of these comments will be posted on Dow's website later today. Now we'll move on your questions. Before we do, though, I would like to remind you that my comments on forward-looking statements and non-GAAP financial measures apply to both our prepared remarks and to anything that may come up during the Q&A. Jennifer, would you please explain the Q&A procedure?

[Operator:]

Yes, sir. (Operator Instructions). And we will go ahead to our first question, which will come from David Begleiter with Deutsche Bank.

[David Begleiter:]

Good morning.

[Andrew Liveris:]

Good morning David.

[Howard Ungerleider:]

Hi Dave.

[David Begleiter:]

Andrew, do you foresee the need to raise or sell equity to help maintain your investment grade rating?

[Andrew Liveris:]

David, as I said towards the end of my talk here, we are looking at everything we need to do to protect our investment grade rating. We don't preclude that. We understand the cost of raising equity. We understand that the operating environment we saw in the fourth quarter, as we are assuming, continues in all of 2009. Lots of companies are going to have to do lots of things. The equity markets aren't great as you know. It's not necessarily the top option; there are other options we are working with. And as I also said towards the end of my talk, we are working on all the flank fronts you can imagine to the financial ones as well as the asset ones to look at maintaining our investment grade rating. So the answer is yes, we would look at that, but it's not our top option.

[David Begleiter:]

And lastly on the JV, what's a reasonable timeframe to expect a decision on a new partner?

[Andrew Liveris:]

Yes, as I said, there was dozen parties, some of them directly negotiating. The topic at hand is strategic partner versus financial partner. I think that there is a mixture of interest. This is very valuable assets, it fits the strategic partner model very well. I would tell you that the next several months would tell us the palatability of the answer. It's obviously part financial, part strategic. And we would have to decide whether this is the right moment to execute against just a financial answer. And that clearly is one of the weapons we are using. But you can be guaranteed, we are not going to fire sell that asset.

[David Begleiter:]

Thank you.

[Operator:]

All right, we'll move to our next question which will come from Frank Mitsch with BB&T Capital Markets.

[Frank Mitsch:]

Good morning gentlemen.

[Howard Ungerleider:]

Hi Frank.

[Andrew Liveris:]

Good morning Frank.

[Frank Mitsch:]

I don't normally say this, but in terms of reading legal documents, yours was actually readable. So congratulations for dummying it down so that I could even understand it. And looking through it, it was interesting that just middle of December, December 10th, you guys actually thought that you were going to earn $0.30 a share in the fourth quarter and you wind up reporting a negative 62. That seems extremely dramatic. Can you talk about what specifically led to the $0.90 change in the expectation to the result?

[Andrew Liveris:]

Thanks Frank. Firstly, you've got to adjust for the tax rate. So it's a $0.60 going, but that still doesn't take... takes your question down maybe a little notch, but not a very big notch. We were through November taking out assets very fast, but the number of assets we had to take down in December was dramatic, Frank. And 180 assets, for exampling in polyethylene 53 assets. We have 53 trains... or plants around the world, excuse me; 22 of those were down in December, which was way more than we were conjecturing late in November or early December. Demand basically stopped. I've read from others who had earnings before us where there was some days where they had no orders. We were close to that in December. Obviously, it's all the combined effects that we are reading about, but notably, I think December basically disappeared from a demand point of view for the chemical sector. Some have told me that one of the possibilities here, and I don't dismiss this, is destocking was so rapid and rapid that as a consequence of that, we may end up having a 13-month year this year. We are not seeing that in January yet. But that was really the big swing, Frank.

[Frank Mitsch:]

Okay, great. And you specifically talked about suing for more than 2.5 billion with the Kuwaiti litigation, and obviously that was the figure that was in the JV agreement. Can talk about the justifications for a number north of 2.5 billion and what would be the case in terms of timing of a settlement there?

[Andrew Liveris:]

None of our financial scenarios are incorporating any number that says that gets received any time soon. I think the three things we said concerning K-Dow is the rights in and around commercially binding agreement speak to arbitration, the (ph) $2.5 billion number. But they breached in many areas in terms of conditions meant for closing. And the consequence of that is litigation. We aren't saying anything about the litigation right now because of a third point, which in we are in dialogue with the Kuwaitis and where obliviously the best stands through in all told would be that we find our way back to doing the deal with Kuwait and find our way back outside of litigation and find our way back outside of even arbitration. But those two levers, legal litigation and arbitration are being paralleled and you will see a lot more about the litigation event towards the back half of February.

[Frank Mitsch:]

Great, thank you.

[Operator:]

We will move to a question from Sergey Vasnetsov with Barclays Capital.

[Sergey Vasnetsov:]

Good morning.

[Andrew Liveris:]

Good morning, Sergey.

[Howard Ungerleider:]

Good morning.

[Sergey Vasnetsov:]

Andrew, you have taken significant steps to reduce your capacity in the fourth quarter. I know the answer might vary specific plan-by-plan, quarter-by-quarter, but how long would you need to wait for the demand to come back before you decide if some of those shutdowns will be permanent?

[Andrew Liveris:]

Yes, it's a good question. Mike Gambrell has been appointed to head our entire restructuring effort and we has... we have weekly meetings on plants that are staying idle versus plants that come down permanently. Clearly, the restocking phenomenon, especially in the Basics, especially in polyethylene, Sergey, is saying that we are being quite conservative there and not looking at permanent shutdowns, especially in polyethylene right now. As I said on the pervious question, 22 trains... plants being down, that's a significant number in December and that pretty much is continuing in January. On something like a polyethylene, frankly, we've been here before. We have seen these demand-led troughs go this vicious, and polyethylene, as I said in my prepared remarks, is a very resilient thermoplastic. And even with a emerging country GDP, or say a China of a 5 or 6% next year, that's still double-digit... this year... that's still double-digit demand for polyethylene. So something like polyethylene I'd expect very little permanent closure. So that speaks maybe to a big product for us. But across the board, Sergey, I mean with 20 permanents announced in November, you can expect that number will climb in the next three to four months, which also speaks to another point. We made a major announcement in December on restructuring. We are implementing it fast like I said in my prepared remarks. But we are already working on another round to see if another is necessary based on your point, which is more permanent shutdowns from the idling. I would expect another two or three months before we have more to say on that, Sergey.

[Sergey Vasnetsov:]

Okay. And another question on your Ras Tanura Project. You have said yourself that circumstances in the world could change significantly with oversupply, at the same time construction costs coming down. What's your current view for 2009-2010, how this project might proceed?

[Andrew Liveris:]

Yeah, our partners in it (ph) and we are obviously looking at that very carefully; in fact, Saudi Aramco has been very public with some of their other projects that they deliberately paused some of their other projects to take advantage of rapidly declining EPC and materials costs as you've really said. And I think, well, you should know that that's something we are very much looking at with Saudi Aramco. This is the year where we are finalizing the FEED [Front-End Engineering and Design] study. Even the FEED study itself, which, as you know is detailed engineering, we have the flexibility to do what we need to do this year to attenuate the start up of the first facility so they go beyond the original dates and more critically, take advantage of the low construction costs, low EPC costs that you've referenced. We will have probably by the end of first quarter between the two partners a decision on when Ras Tanura as a complex should start up. But you should assume that it won't be when we originally said, so we can take advantage of this down cycle on EPC.

[Sergey Vasnetsov:]

Thanks, that's helpful.

[Andrew Liveris:]

Thank you, Sergey.

[Operator:]

We'll now move to a question from Khan Ahmed with HSBC. Sir, your line is open. Mr. Ahmed, your line is open sir. Okay, hearing no response, we'll move to a question from Bill Young with Chemspeak (ph).

[Unidentified Analyst:]

Bill Young

[Andrew Liveris:]

Well, firstly, Bill it's nice to hear your voice again, and thank you for your question. Obliviously, your question was loaded, and I also remember that very well. I would also tell you that December changed everything, Bill. I mean I'm a realist, the talked about realist. The Board of The Dow Chemical Company decides on dividend every quarter. I obliviously with my management team are looking at all options to retain investment grade. It will be foolhardy of us to go back to those pre-December words and say they must stay intact. I also recognize we have been in very... a lot of conversations with our long-term owners. Many of our long-term owners rely on a dividend, and one of the reasons we have long-term owners is the dividend. This current equity market correction is pretty vicious. I know we have been overcorrected, but I would say to you there aren't many stocks out there, especially in the commodity chemical world that haven't been overcorrected of late because of what's happening in this demand-led trough. We have been here before, '01-'02, when know we have paid dividends throughout that period of time at very high percentage payout ratios based on earnings inference, you might say. So we are very respectful of the need to look after the interest of all shareholders. And whether that means the dividend cut occurs or not, it would have to be a collection of things that we'd look at to ensure we stay strong investment grade. And right now, I would be the first to tell you that that is a different statement than what I said prior to December, and I acknowledge the reality of the moment.

[Unidentified Analyst:]

Okay. Secondly, let's look at polyethylene for a second. You did paint a pretty bleak picture for volumes going ahead actually throughout the company in the new term. I believe one or two of your competitors said there were signs of the end of destocking in polyethylene and they have seen some significant improvement in demand. Maybe you could give us a little more color there on what you are seeing in one of your largest products.

[Andrew Liveris:]

Yes, in my prepared remarks, I actually... interesting you should say I was bleak. I actually... I didn't think I was as bleak as that. Maybe I'm not as optimistic as what some of our competitors have said. But I would put us closer to their end of the scale than complete bleakness. Look, the realty is, as I said to a previous question, that polyethylene is very much an emerging market event plus a lot of our polyethylene is in things like packaging. And once the emerging market restocks, polyethylene, and we are already seeing it, we've got a price increase announcement of $0.07 a pound for the month of February; maybe we'll get $0.03 of that. But that's a price increase in what is a terrible volume correction. So restocking and price increase, low hydrocarbon values. I don't want to paint too optimistic a scenario, maybe not as far as some of our competitors went. But we are seeing some signs of life. And right now, given what we've just gone through, I want to put that down as a bonus. We can't speak to the timing of recovery, certainly with this market as terrible as it is. But Bill, I would be a little more optimistic than what you suggested I was.

[Unidentified Analyst:]

Okay, great. Thanks.

[Andrew Liveris:]

Thank you Bill.

[Operator:]

We'll move to our question from Jeff Zekauskas with JPMorgan.

[Jeffrey Zekauskas:]

Hi, good morning.

[Andrew Liveris:]

Good morning Jeff.

[Jeffrey Zekauskas:]

I've got two questions. The first is really a question I guess for Geoffery Merszei. It looks to me like the working capital benefit in the quarter was about 3.3 billion in that your receivables are down almost 3 billion and your inventories are down 1.5, and that's made up a little bit by the payables. So if that's the case, and normally your accounts receivables are around 9.5 billion and you're running at around, I don't know, 6.8, your working capital next year should be something like negative 3 billion. And if your working capital is negative 3 billion, and normally, I don't know, for the last few years, you've generated something like 4.5 billion in cash flow annually, you are really not going to have very much free cash flow next year with your 1.1 billion in CapEx. Is that a correct analysis or an incorrect analysis?

[Geoffery Merszei:]

No, I don't think so Jeff. I don't think the conclusion is correct. We will see obviously somewhat the benefit of this huge cash inflow in the beginning of the first quarter. As you know, with the accounts payables flowing out in the first quarter, I do expect some pressure on working capital in the first quarter. We are going to mitigate that with a continued very, very strong effort on controlling inventory in the pipeline. And on the accounts receivable side again with a very low DSO around 40 days on the accounts receivable side, we should be minimizing that. So I think there is going to be a little pressure in the first quarter. But I think overall, I think we can still continue to improve our overall working capital management and reduced the overall investment in working capital. And then of course from a cash flow from operations, as you, or Andrew pointed out, for 2008, we had a very strong cash flow from operations. Obviously, with this very uncertain economic environment and pressure on earnings, that's going to hurt. But the combination of our restructuring program, the acceleration of the run rate to 500 as well as the, as you pointed out, the reduction in CapEx from 2.1 to 1.1 billion, I expect a positive free cash flow for the year.

[Jeffrey Zekauskas:]

Okay. And then just to thank you, and then my second question. It's a question for Andrew, and it's really more of a conceptual question. When the Kuwait deal fell through, roughly, there was 7 billion that you were going to get in cash that you didn't get. And so the way I thought of the Rohm and Haas transaction and your investment grade rating is you have something like a $7 billion hole that you have to fill. And right now, commodity chemical assets... so the first part is that the hole you have to fill? Is that what you were trying to do in order to affect your Rohm and Haas transaction? And then secondly, I mean we've seen the price of NOVA Chemical, we've seeing what's happen to Lyondell. Right now, petrochemical assets are really sort of trading at very distressed multiples. But it is the case that you have a very valuable agricultural business and there is a very valuable salt business that Rohm and Haas has. So in order to fill this $7 billion hole, as you say, all options are on the table, are some of those options the sale of the higher quality assets of Dow in order to fill that gap?

[Andrew Liveris:]

Yes, Jeff, that's a great conceptual question. And I think the bandwidth you provided it is exactly right. I mean if you take... even if you read the legal brief we filed this morning, I Frank Mitsch was asking about and he said it was put in layman's terms. So I think it's pretty clear if you read that brief that throughout the month of the December, all the way up until the Kuwaiti event, we were closing the Rohm and Haas deal whenever regulatory approvals came through. Despite this massive correction, despite the pressure on paying too much in July, I think all these things, the reality was that the market was deteriorating, December was a terrible month, we started to see it in the back end of December and then the Kuwaitis withdrew from us. So we've got two holes created to us. Hole number one was the Kuwait hole, if we can call it that, which is a $7 billion net hole. And the second hole was '09 started to look very differently at the back end of '08 than what we originally said as recent as, I think Frank pointed out, early in December. And so that hole was an operating hole that of course had the two events together with the downgrades that occurred the day after the Kuwaitis made their announcement, verbal notification to us, hit our ability to look at the financing of the whole transaction period. So the dominos that occurred all within a matter of weeks. Yes, simplistically, you could say it's a $7 billion hole, but it's a $7 billion hole net plus an operating environment that is horrible that is creating almost no money from income, basically as Geoff said earlier, plus this tenuousness on the financing side. Those three things together with the economic uncertainty we are facing and maintaining investment grade rating to recover... to put a recovery plan in place that makes sense to your conceptual question to fill against all those uncertainties, you've got to do many things and put them all on the table. And I think your point on divestments is not lost on us. We have 12 assets we are working on right now, including the K-Dow assets of varying sizes that we are working on with divestment teams and also banks, investment banks. So to help us work out which of these are realizable in the context of filling the hole that we just addressed together in your question and my answer and on top of that more specifically, where there is traction from a buyer universe. And I think your analysis on the commodity side is fair. I won't declare defeat yet. I think there is strong interest in a, let's call it, an asset that is number one in the world, polyethylene, that has proven demonstrated earnings capability through upcycles. So the clarity around cycle average earnings there is demonstrated over many, many cycles. But having said that, I think your point is very valid. And so therefore, you have to go through the universe of specialty assets and say to yourself, which in the portfolio fit the Dow long-term strategy, which ones don't? And we've always said that AgroSciences needs a different act. It can't be just the current act. We are very proud of the business, it's a high earner. In the last five years we have invested in it. It's generated a great R&D pipeline and in fact generated a lot of great niches and in fact good positions around the world in various crops and in various chemical markets. But having said that, I would tell you that all options are on the table. And the mere fact that I've said that there are 12 assets that we are working on I think answers your question.

[Jeffrey Zekauskas:]

Thanks very much. That's a very clear answer.

[Andrew Liveris:]

Thank you, Jeff.

[Operator:]

Our next question will come from Michael Judd with Greenwich Consultants.

[Michael Judd:]

Yes, good morning. A question on the financing with the banks. I know that you've been working hard on the strategic plans. But I am just wondering if you could give us an update in terms of the potentiality for more permanent financing of that $1 billion.... Sorry, not $1 billion, but for the one year bridge loan. And in addition to that, I have a follow-on question. Thank you.

[Geoffery Merszei:]

Yes, Mike, this is Geoffery. I mean recognizing that we're in a very difficult banking environment, right, we are I think making pretty good progress in our discussions with the lead arrangers, i.e., Citi, Morgan Stanley and BofA, the combination of Merrill. If you recall, Merrill was one of the three lead arrangers. And so now we are talking to BofA. We haven't yet concluded the extension that you referred to of the term out for an additional one year. But like I said, we are making good progress and we hope sometime in the future, in the near term future, to conclude this transaction.

[Michael Judd:]

Fair enough. And as a part of that, will there be something beyond just bridge financing? Could there be more permanent financing? And then just secondarily, on the preferreds, the Kuwaitis had made a commitment I believe for 1 billion. Is that still reasonable to anticipate that that would still occur?

[Geoffery Merszei:]

Yes, Mike. Both the KI and Warren Buffet's 3 billion, the total of 4 billion convertibles, we expect those still to occur. And with regards to additional financing, the whole idea is to get a term out for our exiting bridge, which will allow us then to secure the right type of rating, a strong investment grade rating so that we can go and tap the public debt markets. So the intention is not to make full use of this bridge, but in fact this is an interim kind of a bridge in order to tap the public debt market. Did I answer your question?

[Michael Judd:]

Yes, it does. Thanks for the help.

[Geoffery Merszei:]

Okay, Mike.

[Operator:]

We'll move to a question from Kevin McCarthy with Bank of America.

[Kevin McCarthy:]

Yes, good morning. Andrew would you address the subject of asset rationalization in the chemical segment? And as destocking abates, would you expect that business to return to profitability at some point this year?

[Andrew Liveris:]

And when you say chemical business, Kevin, just so I'm clear, you mean our Basic chemical business, right?

[Kevin McCarthy:]

Your chemical segment, correct.

[Andrew Liveris:]

Yes, right. Yes, look, it's no question that if you take EO/EG, it appears we are going through a cyclical trough. In other words, the compressed margins that are pretty much led by this demand destruction in the polyester textile change, which is basically China, has basically said that the EO/EG business for most of this year is the demand-led trough which should not therefore benefit from any restocking. I think that would be the first point we'd make. So we don't have much hope there for margin of any sort in the EO/EG business. That's part of Ghana (ph), the overwhelming stable we are making around how we see '09. There is also of course in the basic chemical sector, there is the big ones for us is EDC vinyl and the PVC chain in general on the caustic side. Clearly, the housing, residential markets, the piping markets, all of that. Chlorine and it's associated exposure to that is really bad, I mean not just in the United States, but around the world. And on top of that, there are other chlorine derivates that Dow has over these many years moved our portfolio to value add chlorine derivates like those in the polyurethanes chain. The polyurethanes chain has also been hit. So whether it's the isocyanides or polyol in general for bedding and furniture, appliances, other durables, those markets have also had massive demand destruction. And there's no end in sight and that's also global. So you'd look at all that and say chlorine margin recovery, whether it's in the specialty side of the house or in the EDC vinyl side of the house, we're not assuming any of it this year. So very prolonged chlorine trough. Of course, the flip is going on in caustic. I mean caustic is having the restrained supply issue, which of course is causing their prices to stay up. But that doesn't mitigate the negativity on chlorine at all. And of course the other issue on caustic is as metals, especially aluminum go through their massive correction, it will start to impact caustic as well. So I hate to be the harbinger of doom,, but I will tell you, the basic chemical sector is going to have a terrible '09.

[Kevin McCarthy:]

Okay. And then as a follow up on a different subject and perhaps one with some better outlook, Dow AgroSciences has hung in quite nicely. Looking ahead to '09, we do have lower commodity prices, some credit availability issues around the world among growers and some degree of pressure on farm income. So just filling that down, Andrew, would you expect Dow AgroSciences' operating income to rise, fall or stay about flat in '09 versus '08?

[Andrew Liveris:]

Yes, I think '08 as Jerome Peribere liked to tell me, all the stars were aligned for a perfect year. And '09, where we're thinking that if it stays flat, that will be sensational because '08 was so good. There is uncertainty out there on what U.S. farmers are going to plant. And as you probably know, I mean many farmers are awaiting to see what commodity and fertilizer prices are going to do before deciding. And with high fertilizer prices relative to commodity prices, they probably will favor soybean planting over corn in the U.S. And there are drought issues in Argentina and California and Texas. There are some challenging financial situations in Latin America and Eastern Europe. So even though agriculture is somewhat protected from the economic meltdown, it's going to be hard to keep the agricultural economy at the same levels of '08. So flat would be great and maybe a little down.

[Kevin McCarthy:]

Thanks very much.

[Howard Ungerleider:]

Jennifer, we've time for one last question.

[Operator:]

Okay, sir. We'll take our last question from John Roberts with Buckingham Research.

[John Roberts:]

Good morning guys.

[Andrew Liveris:]

Good morning, John.

[John Roberts:]

I didn't read all of your legal filing this morning, but is the crux of your case that Rohm and Haas Board has responsibility on just the shareholders, they've got responsibility to the employees and community. And is there any precedent where a Board has been forced to put employees in community ahead of the shareholders?

[Kevin McCarthy:]

So, John, I am sorry, I am going to... even though it's the last question, I am going have to defer given we've got litigation pending. I just... we don't want to be disruptive to the process. But I would encourage not only to read the briefing, but read actually my transcript here, my prepared remarks. I think I pretty much addressed the point you are making and I think you derive the answer you need from those two documents.

[John Roberts:]

Okay. Maybe you take one more question then from someone then. Thanks.

[Howard Ungerleider:]

That's all the time we have. Thanks John. Thanks to everybody for joining us on the call today. Our team looks forward to talking with you again soon. Bye bye.

[Operator:]

Thank you, sir. This does conclude today's teleconference. We thank you all for your participation. Have a great day.