Huntsman Corporation (HUN) Q3 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the third-quarter 2014 Huntsman Corporation earnings conference call. My name is Denise and I'll be the operator for today. [Operator instructions] As a reminder, this conference is being recorded for replay purposes. I will now turn the conference over to Mr. Kurt Ogden, Huntsman Corporation's Vice President of Investor Relations. Please proceed, sir.

Thank you, Denise. Good morning, everyone. Welcome to Huntsman's third-quarter 2014 earnings call. Joining us on the call today are Jon Huntsman, our Founder and Executive Chairman; Peter Huntsman, President and CEO; and Kimo Esplin, Executive Vice President and CFO. This morning before the market opened we released our earnings for the third quarter 2014 via press release and posted it on our website, huntsman.com. We also posted a set of slides on our website which we intend to use on the call this morning in the discussion of our results. During this call we may make statements about our projections or expectations for the future. All such statements are forward-looking statements, and while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filings with the Securities and Exchange Commission for more information regarding the factors that could cause actual results to differ materially from these projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter. In addition we will also refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA and adjusted net income or loss. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted on our website at huntsman.com. Let's turn to some highlights on slide number 2. In our earnings release this morning we reported third-quarter 2014 revenue of $2.884 billion, adjusted EBITDA of $356 million, and adjusted earnings of share of $0.60 per diluted share. I will now turn the call over to Peter Huntsman, our President and CEO.

Thank you, Kurt. Good morning, everyone. Thank you for joining us. Let's turn to slide number 3. Adjusted EBITDA for our polyurethanes division in the third quarter 2014 was $187 million. During the quarter we experienced a manufacturing disruption at our Port Neches, Texas facility which negatively impacted EBITDA by approximately $30 million. Demand for our MDI remains strong. Global sales volumes grew 5% compared to the prior year despite a weak European economy which led to flat sales in Europe. Our Asia business continues to expand. Within China our sales volumes grew 7% in the third quarter, albeit at a slower pace than the second quarter. Asian growth was led by strong double-digit growth in our differentiated and consumer-driven automotive and furniture markets. North America was the real highlight in the third quarter, with volume growth at 12%. Demand in our 2 largest North American markets were strong, with insulation growing at more than 20%, and composite wood products increasing 9%. As a reminder, we have scheduled maintenance for the first quarter of 2015 at our PO/MTBE facility in Port Neches, Texas. We currently estimate that the facility will be offline for approximately 60 days, beginning around the 1st of February. The EBITDA impact will be approximately $60 million. This amount includes lost revenue and unabsorbed fixed costs for the period. In addition the maintenance costs will be approximately $90 million. However, these costs are capitalized and amortized over approximately 5 years until the next scheduled maintenance outage, reducing future EBITDA over that future period of time. The total cost of the maintenance will be approximately $150 million. We expect a typical seasonal slowdown in the fourth quarter as MDI demand slows and PO/MTBE prices soften. Turning to slide number 4, in the third quarter our performance products division achieved record margins and earned a record adjusted EBITDA of $129 million. We continue to see strong demand for amines used in energy, oilfield, and epoxy markets. Margins continue to improve as a result of the tightening supply-demand balance. Maleic and hydride volumes have been strong, in part due to some industry supply outages in North America. Our margins have improved generally as a direct result of our attractive integrated position and our leverage to low-cost raw materials on the US Gulf Coast. In the fourth quarter we expect to see a typical slowdown in demand as customers' business activity slows down and they reduce their year-end working capital. It's not unusual to see fourth-quarter sequential earnings decrease more than 20%. This year we sold our European commodity surfactants business in the second quarter and closed our Patrica, Italy facility in October. Along with the concentrated focus on differentiated surfactants, we believe we will improve our annual EBITDA by approximately $20 million beginning in 2015. Let's turn to slide number 5. Adjusted EBITDA for the third quarter in our advanced materials division was $57 million, in part due to $7 million of one-time benefit related to inventory accounting. We continue to see strong demand in our aerospace composites. Volumes in this key market increased at double-digit rates compared to the prior year. This important market was the highest margin within the division and represents approximately 30% of its earnings. We are encouraged by the long-term trends as production rates of next-generation aircraft, such as the Boeing 787 and the Airbus 350, continue to ramp up. We've seen strong demand in earnings growth in our composites used in NGL tanker linings, oilfield drilling, and epoxy coatings. Favorable business conditions in these applications led to a year-over-year increase in earnings of $7 million in our transportation and industrial and coatings construction markets. Although much of the fourth-quarter seasonality has been overshadowed recently by results of improved earnings from our restructuring, it is not unusual for fourth-quarter sequential earnings to decrease as much as 30% in this division. Turning to slide 6, our textile effects divisions reported adjusted EBITDA of $14 million in the third quarter, the most we have earned in any third quarter since we've owned the business. Second-quarter earnings are usually the strongest within this business. We've lowered our cost structure and refocused our emphasis on key sectors and markets. As a result, we have deselected certain lower-value business. Our sales volumes grew 6% compared to the [indiscernible] adjusted for this deselection process. Strong demand for our environmentally and economically sustainable chemicals and dyes has allowed us to raise our prices and improve margins. Our average selling price increased 17% compared to the prior year as a result of our focus on higher margin product and increased raw material costs. We are proud of the product improvement in this division. Chemical industry experts are also taking note. We recently received the highest award available and were the overall winner of the ICIS innovation awards. Let's turn to slide number 7. Our pigments division earned $18 million of adjusted EBITDA in the third quarter. Our global sales volumes improved 6% compared to the prior year as we saw meaningful improvement in North America and Asia Pacific. This is partially offset by lower demand in Europe where sales volumes decreased 8%, which we believe was consistent with the overall industry. Our average selling price decreased compared to the prior year and prior quarter. We believe the soft pricing environment is a result of high industry inventory days. At the end of the third quarter, our inventory days on hand were in the mid 50s. Starting in the fourth quarter this division will be reported as pigments and additives. All of the businesses acquired from Rockwood will be included in this division, with the exception of a small business known as Gomet which makes specialty automotive polyurethane molded components, and will be part of our polyurethanes division. Although we didn't own the assets in the third quarter, the Rockwood businesses earned $37 million this year, and was impacted by approximately $5 million of planned maintenance at its Duisburg, Germany facility. This compares to $40 million last year. We believe TiO2 prices and volumes in the fourth quarter will be seasonably soft. Last year the Rockwood businesses earned approximately $26 million in the fourth quarter, and we expect this year will be similar. We now have 7 pigment manufacturing facilities in Europe with over 700,000 metric tons of capacity. In light of the sluggish European economy and softer TiO2 demand, we're in the process of evaluating whether we need all of our current capacity. Before sharing some concluding thoughts, I'd like to turn a few minutes over to Kimo Esplin, our Chief Financial Officer.

Thanks, Peter. Slide 8 – in the third quarter of 2014 compared to the prior year, our adjusted EBITDA decreased to $356 million from $376 million, as a result of our PO/MTBE manufacturing outage, which impacted EBITDA by approximately $30 million. Sales volumes decreased in large part due to the deselection of lower-margin business. Average selling prices improved across the majority of our divisions, which more than offset higher raw material costs. Compared to the prior quarter, our EBITDA decreased $7 million. Our average selling prices improved, offsetting lower sales volumes. Slide 9 – our year-over-year consolidated sales revenue for the third quarter increased 1%. This was primarily due to higher average selling prices of 3%, offset by a decrease in sales volumes of 3%. From a regional perspective, US and Canada improved 12% and Asia Pacific improved 11%. Europe decreased 4% along with our rest of world category which is primarily comprised of Latin America, the Middle East and Africa, which decreased 7% as a result of our PO/MTBE manufacturing disruption. Third-quarter revenue increased across the majority of our divisions compared to the prior year. Polyurethanes is our largest division. It made up 45% of our total revenue in the third quarter and grew 1%. MDI urethanes revenue increased 8%, which more than offset the negative impact from the PO/MTBE manufacturing disruption. Performance products revenue decreased 2% due to the sale of our European surfactants business. In advanced materials and textile effects, higher average selling prices offset the impact of walking away from certain low-margin business. Sales revenue for advanced materials was flat while revenues for textile effects increased 12%. Pigments revenues increased 3% as a result of higher sales volumes, which grew 6%. Our total sales revenue decreased 3% in the third quarter this year compared to last quarter. All sales regions were down with the exception of Asia Pacific which was flat. Our average selling price was also flat. Sales revenue decreased in all our divisions with the exception of polyurethanes where MDI urethanes revenue increased 5%, more than offsetting the negative impact from the PO/MTBE manufacturing disruption. Slide 10 – at the end of the quarter we had approximately $1.4 billion of cash in unused borrowing capacity. During the quarter we generated $173 million of cash from improvements in working capital. Improvements in the fourth quarter are expected to be more modest as we prepare for our PO/MTBE maintenance beginning in the first quarter. In August of this year, we increased the capacity of our revolving credit facility by $200 million to $600 million. During the quarter, we experienced a $6 million decrease in EBITDA as a result of unallocated foreign currency exchange losses attributable to the decline in the value of the euro versus the US dollar. During the quarter we spent $137 million on capital expenditures. We expect to spend approximately $550 million on capital expenditures in 2014, including $50 million in the first quarter for the newly acquired Rockwood businesses and the Augusta, Georgia color pigments facility which is under construction. We expect to spend approximately $525 million on base capital expenditures in 2015, net of partner contributions, and including approximately $75 million for the Rockwood businesses. In addition, in 2015 we will spend approximately $100 million combined on our new Chinese MDI facility, the completion of the Augusta, Georgia pigments facility, and replacement of the Rockwood IT systems. During the quarter, assets from our 1999 ICI acquisition became fully depreciated. Including the impact from the newly acquired Rockwood businesses, we expect our fourth-quarter depreciation to be approximately $105 million. Our adjusted effective income tax rate for the third quarter 2014 was 29%. During the quarter we made elections on our US tax returns from 2008 through 2013, which allowed us to utilize substantially all of our US foreign tax credits. As a result of utilizing these assets that have been subject to evaluation allowance, we recognized a one-time income tax benefit of $94 million, which we adjusted out of our earnings. We expect our full-year 2014 adjusted effective tax rate to be approximately 30% including the impact of the Rockwood acquisition. We plan on opportunistically taking advantage of the low interest rate environment and refinancing higher cost debt as practical. Peter?

Thank you, Kimo. Let's turn to slide number 11. This past quarter, subtracting the $30 million one-time operating disruptions, proved to be one of the strongest quarters on record, yet we still see plenty of opportunity for improvement. Since the end of the third quarter we've seen a great deal of equity market volatility, with our own stock seeing drops and rebounds far greater than what market conditions warrant. While we're still in the early weeks of the fourth quarter, with the exception of our pigments division I am not seeing any fall-off that is materially different from what we would normally see going into a seasonally slow part of the year. Asia's growth has slowed but it still continues to be a growing market with plenty of opportunities, and one where we are still importing products to meet growing demand. North America demand continues to be strong across all of our divisions. At the present time Europe has shown signs of slight growth, but for the most part continues to be, as it has been for the past 2 or 3 years, quite lethargic. I'm not saying these economic conditions are not without their risk. However, we simply do not see the market conditions that we read about in the headlines. The one exception to this is our TiO2 business in Europe. While this is a product that used to be considered a leading economic indicator, I see it being more sensitive to inventories and pricing than overall GDP. While I'm not happy with the present margins and pricing, I do think we are hitting the bottom of pricing as we close out 2014. In the fourth quarter for our entire company we will see our usual seasonal softness, which historically has meant a 20% to 25% decrease in EBITDA. A few weeks ago we successfully completed the acquisition of Rockwood's performance additives and specialty titanium dioxide businesses. As we've now had an opportunity to visit all of our sites, associates, and many of our customers, we feel stronger about this business than ever before. Regardless of market conditions, our combined pigments businesses will be stronger a year from now than they are today. We're confident in our ability to deliver $130 million in annual synergies and more than $50 million in working capital savings by the middle of 2016. With market conditions where they are, I fully expect for us to be even more aggressive than we have committed to the market. Having purchased this business for approximately 5 times EBITDA before synergies and 3 times post synergies, this acquisition will be extremely accretive to shareholders. Over the past 18 months this management team has been successful in turning around our advanced materials and textile effects businesses at a time when market conditions did not give us any help. I feel that this is a very similar opportunity, if not larger. Earlier this year in March at our investor day, we laid out our plans to deliver approximately $2 billion of EBITDA within the next 2 to 3 years. Integrating the Rockwood business is a key component to our value-creation plans. Relative to current earnings, the acquisition provides a significant step change and future earnings potential. In addition, we have a number of projects that will fuel our growth and drive our earnings to a much higher level. Our EPS for the last 12 months was approximately $2.10. However, we can see a pathway to deliver approximately $3.75 of EPS to our shareholders in the next 2 to 3 years as we continue to see improvements across all of our divisions. Most of these improvements are within our control. 2014 is shaping up to be a great year for us. But as I said at the beginning of my remarks, we still have plenty of room for improvements. With that I'll turn the call back to Kurt.

Thank you, Peter. Denise, we'd like to take some questions. Will you explain the procedures for Q&A and then open the line?

[Operator instructions] Our first question comes from Bob Koort with Goldman Sachs. Neal Sangani – Goldman Sachs: Good morning. This is Neal Sangani on for Bob. A question on TiO2, and following up on your comments on Europe, are you seeing any changes in export behavior out of China impacting that market, as well?

No, I wouldn't say that materially we're seeing a lot of export coming out of Asia that's really impacting the market. As you look at where export business has grown over the last couple of years coming out of Asia, it's mostly going to APAC. And what we're seeing going into the European market today isn't materially different from what we were seeing two, 3 years ago in the business. I wouldn't say that's materially having an impact on the business. I'd say the biggest area is around pricing and the larger producers you see outside of Asia, frankly.

And I'd just add that we're not seeing U.S. imports into Europe either. Obviously higher-priced market in the U.S. So, either Asia or US imports into Europe are pretty consistent with historical trends.

I think it's always difficult to call the bottom of the market. I my prepared remarks, I talked about being at the bottom of the market on pricing and demand. As I just anecdotally speak with customers and speak within our own management, I think that with a softer European economy, I think that many of the buyers of TiO2 are hesitant to be buying at this time. I think that inventories, by and large, across the board are thin going downstream to our customers and so forth. Again, I think that as we look at the pricing and the supply/demand, most of the European market is determined by European suppliers and people that are selling in to the European market. Neal Sangani – Goldman Sachs: Great, thanks for the color. And then in advanced materials, great margins there. You closed some units last year. Have you now annualized most of the margin benefit? Or your ongoing mix improvements, is it still suggesting some upside from here?

I think most all of the improvements that we achieved in cost cutting and getting out of the lower-cost margins are reflected in our third-quarter numbers. I think that those are – for that seasonality effected and supply and demand and so forth, I think that's a pretty representative quarter as to where we ought to be in the strongest time of demand for the year. Neal Sangani – Goldman Sachs: Great, thanks.

Our next question comes from P.J. Juvekar with Citi. P.J. Juvekar – Citigroup: Good morning. Peter, if you take a step back, your volume EBITDA really hasn't grown in 2 years. It peaked in 2012 and then it has been flat to slightly down each year. Can you talk about reasons behind that and why do you think EBITDA will turn around next year and begin to grow when we have all this capacity coming online in China?

We do have capacity coming in China. We also see quite a bit of growth coming on in China, and the pricing that's coming on China. As I look at the opportunities around MDI urethane performance, we continue to do well in that particular business. I continue to see growth in the earnings in MDI and MDI-related downstream businesses and so forth. So, I would continue to be quite optimistic about MDI and where it's going.

P.J., if you go back all the way to 2009 – if you go back 6 years – each year consistently our urethanes, MDI urethanes business has improved. So, again, 2014 over 2013 by a significant amount. Roughly 10% year-to-date EBITDA improvement on the urethane side. So, 6 years of consistent improvement. What we've had is some PO/MTBE noise. PO/MTBE, when you adjust for the outage, is pretty flat with last year. P.J. Juvekar – Citigroup: Okay, thank you. And, Kimo, you talked about cash flow. I think in the last quarter you said you'll begin to see working capital release. We saw some good positive free cash flow this quarter. What is your expectation for 2014 and how do you see that progressing next year?

As you know, working capital is volumes and price, and raw materials certainly are a variable that is hard to peg for next year. For this year, we will see some more improvement in the fourth quarter. There will be roughly $40 million worth of inventory build for our propylene oxide MTBE turnaround in the first quarter. That build will be in the fourth quarter so that will offset some of the gains we'll have. But we won't see the same kind of benefit in working capital in the fourth quarter that we saw in the third quarter, even though that seasonally is usually our best working capital quarter. Again, because of the PO business. In 2015 I think we'll start to see some benefits in the Rockwood working capital. You remember nearly half of our purchase price was net working capital there. And we think we're going to be able to improve by $60 million in working capital just on the Rockwood side. P.J. Juvekar – Citigroup: Thank you.

Our next question comes from James Sheehan with SunTrust. James Sheehan – SunTrust Robinson Humphrey: Good morning. Thanks for taking my question. Just wondering if you could give us your broader thoughts on oil prices, and the impact on some of your feedstocks like butane. Do you see the drop in oil prices as overall a positive or negative for Huntsman over the next year?

For Huntsman, almost categorically across the board, assuming we don't see – I'm more concerned about severe volatility, both up and down, than necessarily higher or lower. But, by and large, we benefit by lower oil prices. As butane prices drop, benzene prices, all of our major raw materials related to the price of oil, we are going to see a fall-off in our raw materials. As we see a fall-off in our raw materials, most of the products that we produce, as I look across the gambit – MDI, armines, our epoxies and so forth – most of the products we produce are operating in the high 80%s or the low 90% capacity utilization. So, with falling raw materials, you're going to be able to grab some of that additional margin. I would think that falling raw materials is something that, by and large, ought to be something that's positive for us, and certainly will help our working capital, as well. James Sheehan – SunTrust Robinson Humphrey: Thanks. And could you also give us your sense of where MDI operating rates are today in each region of the world?

I think that we're probably, region by region, I think that we'd probably be around 90%-ish when you look at the North American markets. I think that you're probably looking at, in the European market you're probably less than that. And Asia I think you're probably in the high 80%s, pushing 90%. It's a tough one for us to get a handle on because so much of our MDI is not sold as MDI. We sell very little actual MDI. We're selling more and more downstream derivatives. So, as we look at capacity utilization, we're looking at the utilization, the impact of that 2 or 3 steps further down the chain as we look at formulations and systems and so forth. Our objective is to see where capacity utilization has less impact on the business than perhaps it did in the last cycle. But I would say globally I think the market is somewhere around 90%, give or take 1 or 2 points on either side. Regionally US has a bit of a tighter feel to it. Asia feels about that way and Europe is probably a bit sluggish in the high 80%s. James Sheehan – SunTrust Robinson Humphrey: Thank you very much.

Our next question comes from Kevin McCarthy with Bank of America Merrill Lynch. Kevin McCarthy – BofA Merrill Lynch: Good morning. Peter, you referenced your 7 TiO2 facilities in Europe and the softer regional volumes there in the quarter. If you did decide to go ahead with some consolidations, would the benefits be above and beyond your synergy target of $130 million related to the Rockwood deal, or is that something that you have baked in?

The $130 million did not include any plant closures, so that would be something that would be above and beyond the $130 million. Kevin McCarthy – BofA Merrill Lynch: Okay. And then switching gears, on the polyurethane side, it seems we have quite a lot of moving parts these days. You referenced the seasonality, MTBs oil-linked. You've had your own outage. I think Shell has had an outage in Europe. If you boil all that down, what is your expectation for the fourth-quarter trend versus the third quarter?

When you adjust for the outage – well, if you don't adjust for the outage in the third quarter, it will look an awful lot like what we had in the third quarter – flat. Kevin McCarthy – BofA Merrill Lynch: Okay. That's helpful. And then as a final maybe clarifying question, you referenced the step-down in depreciation related to I suppose the 15-year anniversary of your 1999 ICI deal. Can we annualize that number into 2015? So, should D be running about 420 or so next year?

You would expect in the fourth quarter depreciation would be roughly $105 million – $96 million in the Huntsman businesses, which was the third-quarter number, and then another $9 million for the Rockwood businesses. Obviously that's subject to evaluation that we have to do here in 2015, but roughly $9 or $10 million for the Rockwood businesses. So, roughly $105 million for the quarter and that's a good number to annualize for next year. Kevin McCarthy – BofA Merrill Lynch: Great, thank you.

Our next question comes from Hassan Ahmed with Alembic Global. Hassan Ahmed – Alembic Global Advisors: Good morning, Peter. Couple of questions about titanium dioxide. First and foremost, I think you talked about your inventories being around the mid $50 millions, which pretty much seems flattish with Q2 levels. Where exactly do you see inventory levels for the entire industry?

That used to be something that was pretty well known throughout the industry that is just not known today. I assume that it's probably pretty similar to ours, but I just really have no way of knowing.

We used to participate in a survey by industry participants but as part of the antitrust litigation settlement we all agreed not to do that anymore. So there's no visibility across the industry. Hassan Ahmed – Alembic Global Advisors: Okay, fair enough. Then you talked about the Rockwood contribution, or the Rockwood side of the business generating around, if I remember correctly, $37 million in EBITDA. That was ex of $5 million charge. So, that's around $42 million, I think relative to $50 million in Q2. So that business seemed to be far more resilient. Can you talk a bit about the volume side of things within the Rockwood side of assets? Did you see similar European volume declines there? Or were they more resilient than, call it, the legacy Huntsman pigment business in Europe?

As you remember, Hassan, that business's mix is a little different and they have more specialty businesses. Their European business actually was up a couple of percentage points versus ours being down. We don't think that is necessarily reflective of the overall industry given, again, the niches that they participate in. But the business globally looks a lot like ours outside of Europe in terms of volumes. Hassan Ahmed – Alembic Global Advisors: Fair enough. And one final one again on the TiO2 side of things. Peter, you sounded a bit positive in terms of bottoming out titanium dioxide pricing, obviously very cognizant of the fact that Q2 is a seasonally weak reporter. But one of the fares of this is that pricing for pigment may not bottom out till the pricing for ore bottoms out. So, what are your views about that? And, again, this is across ilmenite and rutile and the like for the overall industry.

Not being a big rutile buyer I'm not sure that I probably as am well equipped to answer that question as to the impact that rutile buyers have in the industry right now. A lot of them seem to be really content with falling margins. I really can't answer that. On the ilmenite side, prices have been low for ilmenite ores, and I think there's going to be continued downward pressure on those ores. Hassan Ahmed – Alembic Global Advisors: Understood. Thanks so much, guys.

Our next question comes from Laurence Alexander with Jefferies. George d'Angelo – Jefferies & Co.: Hi, this is George d'Angelo on for Laurence this morning. Are you guys seeing end-of-year destocking initiatives by customers starting any earlier than normal this year?

I wouldn't say anything that would raise awareness. Typically, as we track our order patterns division by division, day by day, compared to what we saw a year ago, we're not seeing anything that would say that there's any sort of destocking earlier this year than took place last year. George d'Angelo – Jefferies & Co.: Okay, thanks. And I know it's not a huge part of your business, but enhanced oil recovery, with the lower oil price, can you talk about trends, what you're seeing there? And just is there a peg for oil price where your products become a lot less important to the process? Thanks.

Again, I read about there being a migration out of North Dakota and the Bakken and Eagle Ford, and so forth. I'm just not seeing it in our sales to these areas. When somebody makes a multi million-dollar investment and they've got everything invested in an enhanced oil recovery project, a fall-off of 30 days in oil pricing is not going to materially change that business. They're not going to start shutting wells down the first sign of an oil fall-off. Obviously a year or so into this there might be something. But I think when you look at advanced oil recovery, that's usually some of the lower cost of bringing oil out of the ground. Certainly it's cheaper than the fracking. We sell more in to the enhanced oil recovery than we do into the fracking side of the business. I just don't see it in the demand trends that we're seeing right now as we look at fourth quarter. That's not to say it can't change, but I don't see it. George d'Angelo – Jefferies & Co.: Thanks.

Our next question comes from Roger Spitz with Bank of America. Roger Spitz – BofA Merrill Lynch: Can you provide a sense of your base epoxy resin EBITDA and how that looked year over year excluding the shutdown plant, and the effects of the shutting down of those 2 facilities?

Base epoxy resins on an EBITDA basis continues to be a negative EBITDA business for us. It looks an awful lot like last year on a per-unit basis. But on an absolute basis, the loss is lower simply because we've shut down the Chennai and Pamplona businesses. So, the loss has narrowed but still a loss nonetheless. Roger Spitz – BofA Merrill Lynch: I think now you're a net buyer, if I'm not mistaken, of LER. Can you describe the LER price levels versus year over year and quarter over quarter?

Sorry, I don't have that in front of me, Roger. That's probably something we ought to come back to you on. You're talking about base liquid epoxy resin prices year-over-year comparisons? I don't have that, unfortunately. Roger Spitz – BofA Merrill Lynch: Okay. That's fine. Thank you very much.

Our next question comes from Mike Ritzenthaler with Piper Jaffray. Mike Ritzenthaler – Piper Jaffray & Co.: Good morning. Just wanted to ask about to what extent the lower margin pruning is still a factor in advanced materials, and textile effects, as well. We've seen a couple quarters now sequentially where volumes are lighter but pricing is well up. Could these dynamics still be playing out in, say, 2 quarters?

I think that as we look as price pruning on the low end of the business, and that would be around the basic liquid resins and so forth, I think in both textile effects and advanced materials we've really seen the end of this. And the restructuring is pretty much done and the value uplift is ongoing. I see less and less, quote, walking away from various businesses and so forth. That almost happens simultaneous – as you shut down facilities, you'll sell out your inventory, there might be a drag of a quarter or 2 in some of those areas. But I don't see, especially as we move into 2015, that you'll see a material amount of either advanced materials of either epoxy or textile products that we'll be walking away from.

Some of the pruning we've been doing on the textile side relates to some of the raw material volatility, too, in H acids specifically, which has made some of the pricing and margin in some of the specific colors – I think black, for example, has been commoditized and margins have dropped to where we just didn't want to participate in some of those basic colors. Mike Ritzenthaler – Piper Jaffray & Co.: Okay, that makes sense. And then I just wanted to make sure I heard correctly – on the outage for 1Q 2015, it sounds like there may have been a slight benefit versus previous expectations to the 1Q shutdown, the turnaround impact from the unplanned outages this quarter. Is that fair?

Again, we see $60 million of EBITDA impact in the quarter. Still $150 million cash. So, if there was a little bit of movement it was really – EBITDA impact moving to maintenance capital that will be amortized. Mike Ritzenthaler – Piper Jaffray & Co.: Okay, thanks very much.

Our next question comes from Frank Mitsch with Wells Fargo Securities. Frank Mitsch – Wells Fargo Securities, LLC: Good morning, gentlemen. Peter, you gave a nice breakdown of how you expected the fourth quarter to play out. And you said, I think, seasonally you typically see a 20% to 25% EBITDA step-down seasonally. If I think about looking at the third quarter, it makes a little bit of a difference if you're looking at it from a normalized adding back that $30 million of outage in the polyurethane's business versus not, it makes a difference, I think, of like $310 million adding in Rockwood or $325 million. Just to set the base line, are you looking at the former or the latter?

I would add the $30 million back in. Frank Mitsch – Wells Fargo Securities, LLC: Terrific. And speaking on the polyurethane's business, when you were talking about it, you also mentioned that I think you had insulation, North American insulation up 20% and composite wood products up 9%. Obviously the housing data wouldn't suggest that level of jump. Can you expand upon that and how we should think about that playing out in the future, as well?

Again, as I look at it among housing start-ups, I look at it around product substitution and so forth, as I look at our last quarters, I look at the orders thus far into the fourth quarter around MDI polyurethane's, and so forth, Frank, I'm not seeing anything that would tell me – yes, things aren't going through the roof in the fourth quarter but I'm not seeing any slowdown that wouldn't be typical of seasonality.

If you look at the growth rates in insulation, remember, we have a large commercial business, but also we're seeing a lot of substitution on the residential side with spray foam that's substituting fiberglass. So, you may be seeing higher growth rates than underlying housing because of that substitution. Frank Mitsch – Wells Fargo Securities, LLC: All right, that makes sense. Thanks so much.

Our next question comes from John Roberts with UBS. John Roberts – UBS: Good morning. Sequentially it looked like pricing was up overall for the Company $33 million, if I look at slide 8. But when I look at the individual segments, only textiles had an up sequential local price. So, how do you get the $33 million for the entire Company positive when everything except textiles look like it went down in local pricing sequentially?

I don't know the answer to that. In terms of the growth, the numbers there, it excludes some tolling volumes, and those tolling volumes may push the variance analysis one way or another when they're excluded from the volume data. John Roberts – UBS: Have you given a timeframe when we should expect the first filing with the SEC around the TiO2 IPO?

We said we would do something within 2 years of the closing, so the clock is ticking. Obviously we'd like to see capital markets, we'd like to see the TiO2 underlying business trend positive. I think we want the debt markets to be strong, as well, because obviously we'll be placing nonrecourse debt on that entity. So, there are several markets that we're watching and we're getting ready with carve out audits and so forth. John Roberts – UBS: Wouldn't you like a placeholder filing just to have so you're ready in case market conditions change quickly?

That seems like a good idea.

Denise, this is Kurt. Do we have any more questions in the queue at this point in time?

At this time we have no further questions.

Very good. We want to thank everyone for joining us on the call today. A replay of this call will be available later on this afternoon. And, of course, if anyone has additional questions, please feel free to reach out to us. Thank you once again.