Good day, everyone, and welcome to the Eastman Chemical Company Second Quarter Earnings Conference Call. Today's conference is being recorded. This call is being broadcast live on the Eastman's website at www.eastman.com. We will now turn the call over to Mr. Greg Riddle of Eastman Chemical Company Investor Relations. Mr. Riddle, please go ahead, sir.

Okay. Thanks, Rufus, and good morning everyone and thank you for joining us. On the call with me today are Brian Ferguson, Chairman and CEO; Rich Lorraine, Senior Vice President and Chief Financial Officer; Curt Espeland, Vice President, Finance; and Marie Wilson, Manager, Investor Relations. Before we begin, I'll cover two items. First, during this call you will hear certain forward-looking statements concerning our plans and expectations for the third quarter and full year 2008 and for 2009. 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 2008 financial results news release, on our website, and in our filings with the Securities and Exchange Commission, including the Form 10-K filed for 2007 and the Form 10-Q to be filed for second quarter 2008. Second, our comments today will reference non-GAAP financial measures such as earnings per share and operating earnings that exclude restructuring-related items. 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 2008 financial results news release and the tables accompanying the news release. With that, I'll turn the call over to Brian.

And good morning to everyone. Thanks for being with us. Last night, we announced earnings of $1.53 per share for the second quarter of 2008. The GAAP earnings were a few pennies lower due to restructuring-related chargers that Rich will cover in his comments. Both for second quarter and through six months, our EPS is up over last year 16% and 20% respectively. And given the current economic and raw material and energy environment, the increase is a testament to our global geographic profile and diverse portfolio of products. Sales revenue increased by 4%, as we continue to work hard to offset sharp increases in raw material and energy costs with higher selling prices. If you disregard the contract, ethylene, and polymer intermediate sales related to recent divestures, our corporate revenue increased by 8% as higher selling prices more than offset our 4% decline in sales volume. The volume decline was most significant in our Performance Polymer and PCI segments, both of which were impacted by restructuring actions we have taken. Gross profit dollars, excluding accelerated depreciation, improved slightly in the second quarter compared with the year ago period. And this is despite an approximately $200 million year-over-year increase in raw material and energy costs. Year-to-date, raw material and energy costs were up about $350 million. This is a clear indication that we are a different company today than we were a few years ago. And that means we have experienced raw material increases that were more than what we experienced with Katrina, and still had very good results. The ongoing operating margin for the continuing businesses was about 10% in the quarter and this is in line with our goal of maintaining our operating margin at 10%. We also had a tax benefit during the quarter, which I'll talk…

Good morning.

Curt has been with Eastman for over 10 years in a number of different roles and I'm compliment he'll do fantastic job. Finally, I'd like to also acknowledge my friend Rich Lorraine. This will be the last investor conference call for Rich. Rich has been with me in a number of foxholes and we've fought a lot of wars together over the last five years. He has made a tremendous contribution to Eastman's success over those five years. He is a quality guy. He is really going to be missed and we wish him nothing but happiness and success in his future. With that, I'll turn the call over to him.

Good morning, everyone. Thank you, Brian, for those kind words. My time here at Eastman has certainly been challenging, but always exciting. I am really proud of what we've accomplished as a company and where we are as compared to five years ago. I am looking forward to listening-in on these calls from the other side of the table, the investor side of the table, hearing about the growth in the businesses and the strategic initiatives delivering results. But for today now, let me come back around to the management side. This was a good quarter with solid operating results in the face of those strong headwinds. We benefited from the tax item going our way, and let me just hit a couple of highlights in our results for the second quarter. From just the first to the second quarter of this year, raw materials and energy were up about $100 million. And since the end of 2007, the increase is about $125 million. As Brian said, our business people have done a great job working through what you can only assume were very tough negotiations on a customer by customer basis, and ended up covering about 70% of that second quarter 2008 raw material increase through pricing actions. Given this cost environment, there is additional work still going on. Switching gears from pricing, Brian described the investment tax credit in support of TXE, our Beaumont project. We recorded $12 million of this credit in the second quarter, which improved earnings by $0.15 per share. Going forward, we project the benefit from this tax credit will continue with our investment in the Beaumont project growth. I'll get into a bit more detail on the tax credit in a couple of minutes. I'd like to return now to my usual agenda,…

Alright, thanks, Rich. This concludes our prepared remarks. Rufus, we are ready for questions. Question And Answer

Thank you, sir. Ladies and gentlemen, our question-and-answer session will be conducted electronically. [Operator Instructions] And for our first question we go to Mike Judd with Greenwich Consultants.

Yes, good morning.

Good morning.

Question about the tax rate in the second half of the year. Because the tax rate was around 25% or so in the June quarter, in other words, should we be using a 30% tax rate for each of the quarter or should the September quarter tax rate be slightly higher or lower, how do we balance that out?

Mike, I wish I could give you an exact number on those, but that depends on the pace of capital spending on the Beaumont project. So we're going to have to help you out kind of quarter by quarter as we go forward and give you some advice on that.

It is reasonable to expect that it would be higher though than the 30% rate in the September quarter?

That's a reasonable expectation.

Okay. And then just lastly on the IntegRex capacity expansion or debottlenecking that you guys are doing in the fourth quarter, could you provide a little bit more color? In other words, should we expect that on an operating profit basis that that should be potentially negative because the whole plant is shut down in the December quarter or how does that work out from a logistical as well as financial perspective?

Yes, Mike, good question. The typical PET pattern is that their best half of the year is usually the first half of the year, we are done with that. The second half is seasonally slower. We have really high paraxylene costs and we are going to be down for weeks working on that facility. And absorb a lot of the cost to go along with that into the quarterly earnings. So yes, it's... all that hits the PET guys in the second half.

Okay. And just as a follow-up to that question. It is difficult looking on a year-over-year basis for comparisons because there has been so much restructuring in that business. And by the way, you guys have done a good job. But could you help us understand sort of what the magnitude of the operating profit loss could be in the December quarter?

I am not going... are you talking about in the forth quarter or --?

Yes, when you are doing the --

No, I am not going to call that one for you. We have a lot of shutdowns that we come and go with constantly in the business. And we never call what individual shutdowns do in terms of the earnings. But what we have done, Mike, is give you the longer view of what kind of turnaround... that's why I went out of my way to describe 2009 in this call.

Okay.

We talked about in our January timeframe the kind of turnaround we expected, and we said this is a messy year. In this messy year we're tearing things up and it just got messier with historic high raw material and energy costs. But after looking at all of this, we gave you an outlook in January of how much of a turnaround we were going to see. Nearly all of that was driven by the plastics business group, both Specialty Plastics and the PET business. So, by making my comments on 2009, I'm telling you what I think that is going to look like and it was a recognition of your question that it's messier, kind of hard to estimate what's going on.

And that's fine. I just wanted to understand... in other words, can you reserve for that turnaround? In other words, a lot of the times when there is plant turnaround, you can basically build than in over the year. Is there something unique or different about this one?

We don't do that. Rich, do you want to comment on that?

We will record that at it's incurred.

Okay, thanks for the help.

And we go next to Jeff Zekauskas with J.P. Morgan.

Hi, good morning.

Good morning, Jeff.

Can you give us an idea of what's going on in the domestic and global PET market in terms of volumes? It's a little difficult to read the volume effects you've got because, I guess, there are some divestitures in there.

Oh, yes. I think what we would do... we would characterize it as a slower growth period where it was growing over 200, may be 250,000 tons a year. This is probably growing less than 200 these days. As far as new capacity additions, we have a little bit from Indorama. We don't know anything may be more than you know about any kind of a future energy expansion because as far as we know, we haven't... they haven't ... we are not aware of the site that they have chosen to build that. So, lacking that, it is hard to estimate when and how they would come on. The market... the operating factors are generally pretty high for the PET industry. But you always have the ability of the agent coming over the top. So, it's... the biggest issue right now is more about paraxylene prices and the ability to move those downstream. We are able to keep the plants running basically full.

So the overall PET market... has it... why is it seem to be slower this year? Is it thinner walls of the bottles, is it the competition of the Asians versus the U.S.?

Yes, I mean, yes. It's also reduced basic demand and in many cases, PET is something of a discretionary luxury. When you are stopping at a gas station and if you just put $100 in you gas tank to keep your SUV running, you buy fewer carbonated soft drinks at the store. So it's a combination of reduced demand. The thin walling that you're describing, especially by the water guys, and you always... whenever there is an arbitrage between Asian raws and U.S. raws, the Asians come in over the top.

As far as your European business overall, it seems that there was growth in... that is Eastman as a whole, there was growth in the first quarter and contraction in the second. Can you describe what's going on in Europe and what your outlook is for the European business for the remainder of the year?

Europe has been... it's not going gangbusters, but it has been fairly steady for us. One of the factors that helps us in Europe is that we have been focusing our growth efforts on some of the Central and Eastern Europe countries that has... and that growth has maybe offset some other softness that could be in some of the other parts of Western Europe. But it has been a pretty steady performer for us. The euro-dollar exchange certainly helps and we're not feeling nervous about it to be... to any degree, Jeff.

I have a couple of questions for Rich. In terms of the tax credit, does the tax credit apply to moneys that you spent in 2007 as well as 2008?

Yes, there was a very modest spend in 2007 and yes, the current quarter... the second quarter ITC included the benefit of that.

So, philosophically, why isn't that called out as a non-recurring item? And I don't mean to be adversarial about it, but --

Jeff, it's just that the 2007 piece is was very small.

Very small?

Yes, it's really not of any significance.

Okay. And if you choose not to go ahead with the project, do these credits reverse or do you keep them because this has to do with moneys you've already spent?

Well, that's a kind of... it's a pretty hypothetical question, but yes, if we choose not to go forward with the project, sitting here I assume we'd have to reverse those credits.

You have to. And what's the relationship between the amount you spend and the credit you get?

It's a percentage of what we spend and I am certainly not sure I can project spending by quarter going forward and I'm not going to attempt it, but it's 20%.

It's 20%?

It's 20% till you reach the full amount of the ITC.

Okay. What's the full amount of the ITC?

$130 million.

$130 million. Okay. Thank you very much.

You're welcome.

By the way, Jeff, it'll take a couple of years to work through that we estimate. So, it's... you're going to see this every quarter for a couple of years or so.

We go next to Frank Mitsch with BB&T Capital Markets. Frank Mitsch - BB&T Capital Markets: Good morning and congratulations on your tenure at Eastman and best wishes for the future, Rich.

Well, thank you, Frank. I appreciate it. Frank Mitsch - BB&T Capital Markets: And more importantly, Rich, now that you are going to be on the investor side and any key difficult questions you'd like me to pose to Brian, by all means shoot be an email and I'll be happy to take that along.

I have got a direct line to Brian, though. Frank Mitsch - BB&T Capital Markets: I hope so. Rich, you dialed back share buyback fairly significantly here in the second quarter. Can you talk about the factors behind that and what should we expect going forward?

I am going to be a little bit coy on that, Frank. We're opportunistic and we're measured in that. And you put a little table out that described it and I'd just say that we are well aware of the remaining authorization and we'll just remain prudent on that going forward. Frank Mitsch - BB&T Capital Markets: Is it any sort of reaction to the fact that you are now solo on the coal gasification and your spending is going to be a bit higher than perhaps you targeted originally?

There's a lot factors, Frank. And again, wrapping them all together, I am just going to say we'll continue to be prudent and opportunistic going forward.

Yes, but Frank, that's... yes. I mean, obviously when you take on 100% of that project now, yes, that's a piece of it as well. Frank Mitsch - BB&T Capital Markets: Alright. And then with respect to the taxes, you suggested that '09 would be... I believe what you suggested, and I just want to make sure I heard it correctly that the '09 rates would be lower than the 30% rate. And if that's in fact the case, bigger than a bread basket?

Frank, as I said to Mike, I think you're going to have to be patient with us a little bit as we see what the CapEx schedule, how that's going to fall out. And Curt is going to have to provide you with some guidance on taxes more specifically as we go forward. Frank Mitsch - BB&T Capital Markets: The context of the question pertains to Brian's assertion that 09' would be 10% to 15% higher than '08. I was just curious as to --

That wasn't a tax credit comment, Frank. I was really talking about the basic earnings power of the business. Frank Mitsch - BB&T Capital Markets: Terrific, terrific.

Yes, I knew that was going to come up. Now this wasn't some kind of a tax credit, where [ph] 10% to 15% or better, yes. But it's all coming from tax. Now, that's not the thought that's behind that. This is the basic earnings power to business of 10% to 15%, driven by a much stronger performance in the polymers business group. Frank Mitsch - BB&T Capital Markets: Alright, terrific. And lastly, Brian, obviously volumes in the U.S. were down. Some of that was portfolio restructuring and some of that was obviously the softening of the economy. Can you talk a little bit about which areas appear to be slower than other areas and which areas you are noticing have started to take a turn downward? Any insights in providing some granularity on that?

Sure. And I'm not going to tell you anything you haven't heard 10 times already this quarter. The interesting thing for us probably has been it's not new news for anybody else, but since we have moved our portfolio to more specialty items, the products that got hit both in CASPI and Specialty Plastics were most specialty-oriented. And not surprising, you get to drive prices up as quickly in specialty items as you do commodity items because everybody understands and lives with putting margins on top of raw materials and the commodities. In the specialty, if you drive the price up too fast, the alternative for the customer is usually some different chemical or some different plastic. And once you drive that behavior, it is very hard to recover. So you are always a little cautious with the way you increase prices in the specialty, so you don't drive the customer away to a competing material. And that tension right now in the specialties, that caused most of the dip in both CASPI and Specialty Plastics. We are working our way through it and the customers understand the need for the price increases because they fully understand the environment they are living with. And so we... if the energy and raw material environment starts to stabilize, which it looks like it might be trying to do, then we have an opportunity to catch up here. Frank Mitsch - BB&T Capital Markets: Okay, thank you.

We go next to Kevin McCarthy with Banc of America Securities.

Yes, Good morning.

Good morning.

Good morning.

Brian, I think you mentioned that the raw material and energy inflation was about $350 million year-to-date. Can you give us a sense of how much of that you would consider as unrecovered at this point?

I think a rough number is that we are about 30% behind the April just because of the inertia, the speed and the magnitude. And we have got 30% on the table that we are probably trying to recover. That's a rough number and that presumes that every thing stays stable from this day forward for the next several months. And if it doesn't then that number will change.

So $105 million then?

I am not going to put it down to millions of dollars. But, I'm pulling a rough number out of this. We have gotten may be two-thirds or 70% of what's happened and we are working with our customers to see if we can get more.

Okay. Then I know as you cited propylene as one of the culprits in terms of inflation, cost inflation in CASPI and PCI. I know you have some propylene coming out of your crackers, but you shut one down. Can you give a sense of what your position in propylene looks like in terms of make versus buy?

We've become a bigger net buyer now because as we shut down these crackers that used to make our propylene... well, we were always a purchaser, just as you know. And I am not sure we've ever given you the ratios, but we were always not sure of our propylene we were buying. We become a bigger buyer as we shut down these crackers. So now we are more exposed to propylene prices and how they move. The good news in that story is that by and large the derivatives that we sell that are made from propylene track propylene prices better than they track the propylene prices we have in the crackers. So we had the dilemma when we were making crack propylene that if there is a divergence between what's happening with propane and propylene, we either enjoy or suffer from it. There is really more alignment as we become more exposed to propylene in the margins story. So we are going to continue to grow in that. And it's a healthy percentage. Greg, I'm not sure, we've given anybody a percent of how much of our raw materials come from propylene versus --

Not at this point. I don't have a number in front of me.

Yes, but it's a healthy percentage, getting healthier over time. We still make... I'm playing with words now, Kevin. I am not going to tell you.

Okay. Finally, Brian, any change in the milestones that you've laid out previously for the industrial gasification project or update there?

We are on track to hit the milestones. And then decisions will be made when our milestones are achieved. Next milestone is completion of the feed process. I go through the brief list; the input/output contracts making good progress on those. Those are not going to be the rate determination step in any kind of a progress. Good progress on the permits, very positive progress there. Working through the feed process and of course the biggest deal in the feed process is the CapEx. We all know CapEx is going nutty in any kind of estimate that you're making, whether it's big or small. And we are, every part of company, working through those kind of issues. I'm trying to think what other milestones on gasification I should have discussed.

Just financing, buying and --

Financing, that was it.

And we're making great progress with that.

Yes. So on track with all the milestones and when we get through those milestone, that's when we advice you of decisions and actions that we're going to take.

Okay, thank you very much.

We go next to P. J Juvekar with Citi.

Good morning.

Good morning.

Good morning.

It's good to see that you're going to pay less taxes. But do these tax credits come with any conditions like carbon capture or any other pollution related conditions?

Really not. They were part of the Energy Policy Act that was, I believe 2002 or it may have been 2004. But it was essentially for clean coal technologies and there was a competition among many companies and their projects for who would be able to use a allotted money that they had. We wanted $130 million of the lot of moneys. It's a straight investment tax credit against the investments that you make in the project. And I didn't really have much else in a way of strings attached. So, no, we don't have to sign up for an operating burden of some kind that goes along with it.

Now, clean coal, does that mean carbon capture?

The clean coal technology started for us with the isolation of mercury and sulfur, and that was the nature of the qualification. The capability of the capture and sequester was certainly a piece of it. Now, a capability is different than actual doing. The fact that you isolate the CO2 is a separate stream and had the ability to sequester it was the piece of the award. But it wasn't a requirement that we sequester as part of the order.

That wasn't a requirement, okay.

Yes.

And then another question on oxos and acetyls. Oxos must be feeling pressure from housing. Can you talk about that? And then in acetyls, your other acetyl competitor in the U.S. sounded very positive. So can you give your outlook on acetyls as well?

Yes. The acetyl business continues to be a solid business and we feel good about... we especially feel good about our position and using coal as the raw material for that. And you can see what it does for the Fibers businesses, as an example. Yes, the oxo businesses are stressed by both building construction and autos. And that shows up in both CASPI and PCI. There is a little bit of a supply effect in Asia as a result of a new expansion there. But again, P.J., there are things that don't wreck these businesses. As you see, the kind of softness that we have right now, but there's still pretty solid quarters. And that's again another reason why I gave you a view for 2009 to give you some confidence that we still believe that we're on track for some good growth and we don't think this is bad enough to derail those businesses.

And for 2009 outlook, you said you stress tested your models with high energy prices, low energy prices. What's your assumption on the economy?

We're assuming right now that it's going to rock along with the same kind of softness that we have right now. We're not... we are saying it is not necessarily a lot worse than it is... when I say right now, likely [ph] at this minute. We do the spot look at where we are right now with very soft auto and housing. And we said if this rocks along sideways and doesn't get a lot worse, but nor does it get a lot better, how do we think about that. And then we stress tested if the economy gets a lot worse, what happens to our volumes, what happens to our margins. If it gets a lot better, what happens. We stressed tested both sides of those. It's interesting the way our companies wire these days, there are some countercyclical pieces that kick in. And when one gets worse, another one gets better. And that was a factor in coming to this conclusion.

And finally, do you care to give us a delta in those stress tests, high versus low?

No.

Okay.

I will go this far to say we talked about $60 oil and $200 oil. So there is a range for you. We talked about GDP. We talked about negative... success of negative quarters of significant recession as one. And then of course, you don't need to stress test the high end. You don't have to talk about a great economy. So that will give you some sense of it.

Okay, thank you.

We'll go next to Andrew Fineman [ph] with the Iridian Asset Management.

Thanks. Are you still... this investment tax credit has nothing to do with the carbon credits that you're still working on. Was that correct?

That's correct. This is an investment tax credits only.

So you may get additional incentives for the Beaumont project if you are awarded those carbon tax... carbon credits?

The policy story has to unfold there, Andy, and what the U.S. government is going to do relative to capturing carbon and how they are going to charge and credit. And we expect that to unfold in the future. You are kind of assuming that I'm raising a European structure when you say what you said. But as that policy unfolds, we have the ability to potentially take advantage of it. And none of that is... the credit we're talking about today has nothing to do with that.

Where do we stand on the possibility of another gasification project?

We continue to develop projects pleural [ph], domestic and otherwise, and are still very optimistic on being able to do one of those... there are no milestones to report and when we have progress, I'll tell you more, Andy.

Okay. And the [indiscernible] licensing, we talked a lot about that in the last two calls. I was wondering how that's going and whether that's still --?

PET specifically or licensing in general?

Well, I'm thinking about PET, but I think you also do a little bit in... was it PCI? I don't remember really.

Yes, we have an acetic acid license a couple of them. We've had a lot of interest and we continue to be engaged in several negotiations relative to the PET, IntegRex technologies, both to PTA or PET. So we're very encouraged by those discussions. As far as any other licensing, I don't have anything else to report that we are still... we stand by the statements we've made before about there being a lot of interest and we expect that that's going to be a source of revenue in the future for PET.

So, PET licensing is probably not going to hit your numbers this year?

Hard to say. I wouldn't... if you are building a model, I wouldn't... I probably would not put it in there, and it will be a happy surprise if that happens. But I wouldn't put into your model.

And then finally, the last thing that you said about the full year was that it would be similar to $5.05 from the previous year. And the problem now is, I need to get rid of that statement because having it hang out there along with $1.27 versus $1.27 in the third quarter would mean that your fourth quarter comes in at $0.76 versus $1.27. So, I'd like you to give us some indication that your fourth quarter could at least be close or flat with last year.

Well, Andy, you're trying to get me to say more than I am willing to say right now. This is a hard economy to call anything in for a week, much less couple of quarters. While I've done, as I've given you, a forward view for the third quarter, we've given you a general outlook for how we feel about 2009 and that's as much... as much info as I am willing to give because you are asking for things that are just unknowable, Andy.

Well, I mean, I can hear what you are saying and I appreciate that and I apologize for trying to pin you down, but can I at least get you away from $0.76 versus $1.27? You know what I mean?

The time we give the fourth quarter outlook is when we get done with the third quarter, Andy, and I am going to stay with that pattern. But look, we are not going to... we are going to work really hard to make this as good a year as we possibly can, Andy. There is no one... I think when I was talking to you guys in the first quarter, I don't think any of us were talking about $140 oil as the basis or the thesis for the rest of the year. I don't even know what the thesis for the rest of this year ought to be. I think I am taking risks even taking about the third quarter, to be honest with you, because there is so much uncertainty. And so I would feel awkward trying to give you more thoughts on the forth quarter. I think I just got away.

Aright. Thank you.

We go next to Gregg Goodnight with UBS.

Good morning all and congratulation, Rich.

Thank you, Gregg.

Brian, great questions, great answers. I have learned a lot on this. One question I still have is did you mention your... did you give an update for your Asian acetate tow?

He was very quick. What I said is that we are on track to tell you what we are going to before the end of the year. It's a good story to tell. I am looking forward to telling it. Got to tell you, but it's just not time yet.

Okay, great. Second one, do you, at this point, still believe that the economics going to work out on your Beaumont project where it's readily a bankable deal and you will have no problem financing that?

The great news here... the really terrific news is that the basic value proposition that we started investing in to here is holding up and in fact, may be improving some. The basic spread, everybody worries about coal going up and PETCO [ph] going up and all those things are true. But the basic spread between solid hydrocarbon and natural gas continues to hold up and has even expanded a little bit. Detention in all of this, Gregg, is the CapEx costs, which, in my career, I have lived through two capital cycles. So I have lived through booms and busts in capital cycles over my 30 years two times. And when they boom, they get really nutty, and when they bust, they get really attractive. And we are in one of those booms right now. We are at... you don't exactly know what to do to make up some of the numbers. In many cases, we have worked through those numbers already in our company and found our way. Now, we are mid-way, we are only about half way through on that process in gasification. So it's just too early to call. But the really great news is the value proposition holds up and if I read the tea leaves of the future of this country and the future of the world right, this value proposition holds up for a very long time. So we are still very optimistic about this strategy and this whole platform of projects. There is no question, we have to work through our CapEx burden. And the point is we are not going to do something stupid here. We want to... we have a strong belief in us and a great feel for this initiative and we don't want something that we judge may be transient to cause us to do some thing stupid. So, we are going to... I got to play off those two tensions and when we get done with the process we'll tell you how we sorted it out.

Outstanding. Last question I had is with the recent run up of propylene pricing and the like, has it changed your outlook or your thinking on potential methanol to propylene process? Has it given extra incentive to maybe take a good hard look at that potential?

We are looking at all the derivatives that we can make from the coal gasification process. In that... of course, that one will be included in the mix. We are learning a lot of really interesting things about how to take basic chemicals on to more value-added products using some chemistries, and sometimes those chemistries are cropping up from old past chemistry that people practiced a long time ago. And that one would be a new one. The methanol-propylene is a brand new one. There is some other chemistries and other derivatives that have long proven histories that would compete against that. So, we are balancing and we are looking at all of those and we'll let you know when it's time.

Okay. Are you going to have an investor day meeting later this year?

Later this year is less likely, we're probably going to push it off into the first couple of months in next year, may be January-February of next year will be a more logical time.

Okay, hey, thanks for all these great responses.

Thank you.

For our next question we go to Brian Geiger with Merrill Lynch.

How are you doing guys?

Hey.

I was just curious if you guys had any kind a target debt structure or target debt to EBITDA leverage, and when you plan to get to that level?

Let me take that one, Brian. What we adhere to in terms of the targets for capital structure is more around bond credit rating. And so we focused on being BBB and really keep track of all the ratios and all the factors that go into that and that's where we'd want to stay.

Okay. It's a BBB flat or it's plus minus, some wiggle room there?

BBB flat would be the right target.

Okay, great, thank you very much.

And for our next question we go to Jeff Zekauskas with J.P. Morgan.

Thanks for taking my follow-up. So in order to recognize the tax credit for the Beaumont project and because you expect to recognize, I guess, 120 that means that you'll spend 600. That is 20% of 120. And I guess that would be the equity portion. And so if the project is financed at 30%, it's a $2 billion project. Has the Board approved all of this yet?

Well, your math is presuming a lot of different things.

Yes.

But your general... the general trust of your question is, we have step-wise approvals with our Board, each step of the way. Right now the expenditures that we are making are in the feed process and at some point we get early delivery of equipment that would be a capital expenditure. Then when you start breaking ground and each of those steps along the way we discussed with Board. We do not have a blanket, we have not asked for and any kind of a blanket of approval to go ahead with this project. This is not just time, it wouldn't be appropriate. Again, the nature of these projects are that you do, these front-end engineering and design initiatives and those define the big expenditures and then you ask for the blanket expenditure. We are not there yet.

Okay. And then lastly, again for Rich, this is a question of clarification. With the tax credit, this was a tax credit, if I understand that was that originally for Faustina and is now being used for Beaumont.

No, no. It was originally in our Longview site.

Longview. And so, is this already... is there a regulatory step that needs to take place for you to use this with certainty or can you use this tax credit with certainty?

We feel real good about the tax credit right now. It's been through legislation. And so, we feel very confident. And I'd like to clarify one other point, Jeff.

Sure.

On the... yes, about the equity portion of our project. It doesn't matter how we finance the project. The tax credit comes as we spend capital money and it's blind to the source of that money, whether it's the money that's sitting it in our bank today, or money that might come from any other financing source for the company.

So when you said... thank you, that's helpful. When you said that you are confident, what are you confident about?

That big D [ph].

We've the regulatory authority to claim the tax rate.

Okay, good. Alright, thank you very much.

Let's make the next question the last one please.

And with that, we have no further questions on our roster, ladies and gentlemen. So, Mr. Riddle, I will turn the conference back over to you for any closing remarks.

Alright. Thanks again for joining us this morning. An audio replay of this conference call will be available this afternoon through Friday, August 1st. Have a great day.

And ladies and gentlemen, this does conclude the Eastman Chemical Company Second Quarter Earnings Conference Call. We do appreciate your participation and you may disconnect at this time.