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Executives

Martin Jarosick - Executive Director of Investor Relations

Paul D. Carrico - President and Chief Executive Officer

Gregory Thompson - Chief Financial Officer

Analysts

Michael Judd - Greenwich Consultants

Roger Spitz - Banc of America

Sabina Chatterjee - BB&T Capital Markets

Tariq Ahmed - JP Morgan

Georgia Gulf Corporation (GGC) Q2 2009 Earnings Call August 5, 2009 10:00 AM ET

Operator

Good morning. My name is Dixie and I will be your conference operator today. At this time I would like to welcome everyone to Georgia Gulf's Second Quarter Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. (Operator Instructions) Thank you Mr. Jarosick you may begin your conference.

Martin Jarosick

Thank you Dixie and good morning ladies and gentlemen. Thank you for participating in today's conference call to discuss Georgia Gulf's 2009 second quarter financial results. There are slides available to you on Georgia Gulf's website. These slides are for your reference. And we will not be speaking directly to the bullets on each slide.

Participating on today's call are Paul Carrico, President and Chief Executive Officer and Greg Thompson, Chief Financial Officer. During this call we will be making forward-looking statements. As you will appreciate, any business projections and assumptions about future events are subject to risks and other factors that could cause actual results to differ materially from our current outlook. A listing of factors that could affect future results is included in our 2008 in Form 10-K. Any forward-looking statements made on this call should be considered in light of those factors.

In addition, during this conference call, we may refer to certain non-GAAP financial measures. We have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure as in an appendix to the slides on our website. I will now turn the call over to Paul to begin the review of the second quarter. Paul?

Paul D. Carrico

Thank you Martin and good morning, ladies and gentlemen. Just one week ago we announced two significant financial restructuring achievements. A successful debt for equity exchange and a long term bank amendment. The debt exchange was clearly somewhat unique in the market. And we are very pleased that the stakeholders were able to work together with us to complete this.

The major benefit to the company includes a debt reduction of $736 million or about 50%. Cash interest savings of almost $70 million. Adjusted covenants through the life of the revolver which ends in the fourth quarter of 2011. And in avoidance of significant cost, distractions and delays that are common with other forms of financial restructuring. We worked very closely with our lenders and bond holders for several months to restructure our balance sheet. Our objective was to provide Georgia Gulf the financial flexibility to weather economic conditions and to provide a solid foundation for growth.

With our new capital structure valuable asset base and skilled and dedicated employees we are a strong business partner positioned for the long term in our chemicals and building products businesses. In additional to our debt exchange and long term bank amendment over the last 18 months we have tackled other important issues head-on including adjusting our cost structure to match market conditions, through plant consolidations and headcount reductions, improving the productivity of our assets through cost reduction actions and process improvements, obtaining a new asset securitization facility that runs through March 2011.

Because of all these actions Georgia Gulf is a much stronger and I believe much stronger company. And I believe we continue to be ahead of the curve in adjusting to the current market conditions and well positioned to excel when our markets recover.

Our second quarter performance reflects the benefits of the cost reduction actions we have taken over the last 18 months. These improvements partially offset the weakness in the North American housing and construction markets and a softening ECU value. We delivered $59.4 million of adjusted EBITDA compared to $70.8 million of adjusted EBITDA in the second quarter of 2008. And this was despite double-digit declines in sales volumes in all of our segments.

We also maintained our focus on cash generation and we increased our liquidity since the first quarter of 2009. Looking at the segments Chlorovinyl delivered $15.5 million less adjusted EBITDA than last year as following ECU values and lower volumes overcame the benefit of much lower energy and feedstock cost.

Our two building products segments Window and Door Profiles and Mouldings segment and Outdoor Buildings Products combined produced slightly higher adjusted EBITDA compared to the second quarter of 2008. This was despite sales volume declines in the high teens.

Our relatively positive performance in these three segments is mainly due to the cost reduction actions we have taken over the last 18 months. We will continue to match adjustments or make adjustments to match our production capacity to market demand. To that end we initiated two new plant consolidations in the Window and Door profile business in the second quarter.

Our Aromatics segment delivered adjusted EBITDA about $10.5 million higher than the same period last year despite a 32% decline in sales volumes. The improved performance was related to the price movement of the main feedstock for the business benzene and propylene as well as cost reductions. These raw material prices increased through the quarter and created an inventory holding gain.

At this time I'll turn the call over to Greg to review our financial results in greater detail.

Gregory Thompson

Thank you, Paul. Good morning ladies and gentlemen. Before I review our financial results I'd like to point out one particular item that you should note in our reported financial statements.

On the income statements you should note that the number of shares used for calculating earnings per share is based on the amount of shares that were issued and outstanding after taking into account the reverse stock split, which is 1.39 million. This number does not include the approximately 1.3 million common shares or the 30.2 million convertible preferred shares that were distributed in the debt exchange, but are as yet unregistered.

We will soon send out a proxy, and set a date for a special shareholder meeting where shareholders will be asked to approve an amendment to Georgia Gulf's charter to increase the number of common shares authorized to 100 million. Upon approval, the 30.2 million convertible preferred shares would automatically convert to common on a one-to-one basis. At that point we would have 32.9 million shares outstanding.

Net sales in the second quarter were 524.3 million down about 326 million from the same quarter of last year. The decrease in sales was driven by extremely challenging housing and construction markets in North America. ECU values that declined throughout the quarter and lower feedstock and energy costs.

Now let's look at our performance from continuing operations during the second quarter. Georgia Gulf reported operating income of 5.1 million for the second quarter of 2009 compared to operating income of 63.1 million in the second quarter of 2008.

Excluding the restructuring and impairment charges and gains on asset sales in both periods we reported adjusted operating income of 25.1 million in the second quarter of 2009 compared to adjusted operating income of 33.5 million in the second quarter of 2008. SG&A expense for the second quarter of 2009 was 50.2 million, 11.6 million higher than the same period last year. The increase was mainly related to higher professional fees related to contingency planning and financial restructuring activities, an increase in bad debt reserves and higher interest rates on the new assets securitization facility we put in place in March 2009.

Now that the debt exchange has been completed, we except professional fees to fall back to 2008 level and our normalized SG&A run rate to average around 40 million. Now looking at the segments, in the core volume segments second quarter 2009 sales decreased to 232 million from 401.8 million during the second quarter of 2008. Sales were impacted by extremely difficult housing and construction related market conditions, lower ECU value and lower feed stock in energy costs.

This segment posted operating income of 24.4 million compared to operating income of 38.8 million during the same quarter in the prior year. And into our profiles and moldings segments sales were 92.4 million for the second quarter of 2009 compared to 118.3 million during the same quarter in the prior year. Sales on a constant currency basis declined 17%.

The segment's operating loss was 16 million for the second quarter of 2009 compared to an operating loss of 1.6 million during the same quarter in the prior year. The increase in operating losses is primarily the result of 17.8 million of asset impairment and restructuring charges partially off set by cost reductions. Excluding the asset impermanent and restructuring charges, operating income improved to 1.8 million compared to an operating loss of 1.4 million in the same period last year.

In the Outdoor Building Products segment sales were 124 million for the second quarter of 2009 compared to 167.1 million during the same quarter in the prior year. Sales on a constant currency basis declined about 19% compared to 2008. Sales in the second quarter of 2008 include about 11 million related to the outdoor storage business we sold in 2008. This segment reported operating income of 8.4 million in the second quarter of 2009, compared to operating income of 5.2 million during the same quarter in the prior year. The operating income improvement is mainly driven by cost reduction actions partially offset by lower sales volumes.

In the Aromatics segment sales decreased 53% to 76 million for the second quarter of 2009 from 162.7 million in the second quarter of 2008. The dramatic drop in sales was driven by lower sales prices due to much cheaper feedstock and much lower sales volumes in phenol and acetone which primarily was due to the extremely difficult housing and construction markets in North America.

The segment recorded operating income of 7.9 million compared to an operating loss of 3.1 million during the second quarter of 2008. The increase in operating income is mainly attributable to inventory holding gains caused by raw material costs rising through the quarter as well as cost reduction actions.

The total FIFO impact for the second quarter was a positive 7.5 million compared to a 22.6 million positive FIFO impact in the same period last year.

Now let's discuss working capital. Due to the seasonality of our sales we typically invest cash in working capital in the first half of the year and generate cash from working capital in the second half. Controllable working capital defined as account receivable plus inventory less accounts payable decreased by about a 120 million compared to June 30, 2008 driven by lower feedstock and energy costs as well as our continued focus on working capital efficiency. Compared sequentially controllable working capital increased by $20 million.

Let me discuss taxes now. In the second quarter we had a benefit from income taxes of 34.2 million ended effective tax rate of 92%. Our consolidated tax calculations are very sensitive to changes in the level of earnings before taxes in the US and losses before taxes in Canada, so slight changes in those levels can have a large impact. The second quarter tax calculations were also affected by two additional factors.

We generated a large state tax benefit related to the Mississippi Industrial Revenue Bond that we repaid in May. We also reduced our taxable income forecast since the first quarter. This required us to true up and reduce taxes recorded in the first quarter of 2009. We currently project that we will pay in the range of about 20 million in cash income taxes this year mainly because of the debt exchange in the modification of the debt in March.

As many of you know one of the key is to our successful debt exchange was a provision of the stimulus bill that stipulates at the Federal Tax generated by the exchange might be deferred for five years and then paid in the five equal annual installments. It is up to each state to determine if it want to adopt the same provision or whether that states taxes are due this year. The majority of our estimated cash taxes for 2009 are related to states that have not adopted the deferral provisions in the federal tax law.

As a result of the operating performance and the interest with held on our bonds involved in the debt exchange, we generated 17.6 million of cash from operating activities during the second quarter of 2009 as compared to using 48.9 million in the second quarter of 2008. As Paul mentioned earlier with our long term bank amendment and debt exchange complete we are in much stronger business partner. Given this we have already seen several suppliers adjust lender payments terms back to normal levels based on much improved financial matrix.

We will continue to work with other suppliers to adjust payment terms to more normal levels going forward. We continue to tightly manage our capital expenditures while supporting the maintenance requirements and some select growth opportunities of our businesses. Capital expenditures were 5.9 million for the second quarter. Our CapEx budget for 2009 is 35 million.

While we believe that this is the right level of CapEx given a maintenance we are scheduled and current economic conditions, we did see some additional flexibility in our most recent bank amendment to allow additional CapEx to pursue growth opportunities. We now have an additional CapEx basket that allows us to invest 50% of net cash proceeds from our asset sales up to 45 million subject to several conditions, including meeting EBITDA thresholds.

Now the financing activities; as I previously mentioned the first and second quarters are typically periods when we use cash in the business and reduce our cash balances or increase borrowings.

In the second quarter of 2009 we actually increased our liquidity compared to the first quarter mainly due to the 38.1 million of withheld interest payments.

We ended the second quarter with 104.3 million in cash. As part of our most recent bank amendments, the 75 million minimum revolver restriction we received in the March 2009 amendment was made permanent through a 75 million commitment reduction. At the end of the second quarter we had 7.7 million available on our 300 million revolver.

As you know Lehman was part of our US revolver and their bankruptcy and failure to fund capital requests or meet letter of credit requirements caused us to freeze the US revolver and carry a higher level of cash. In conjunction with the recently completed amendment we put in place a plan to execute a provision of our Senior Secured Credit Agreement that allows us to replace Lehman with a funding lender. When completed sometime in the third quarter this will help in two ways.

First it will free up about 5 million in cash that we have to post as collateral on letters of credit. Second it allows us to return to a normal cash management practice and minimizing cash on hand and pay down or draw on the revolver to meet daily cash needs. Fixing the Lehman issue we'll increase our liquidity and we'll reduce our interest expense as we use available cash to reduce our revolver borrowings.

For the second quarter of 2009, we were governed by the bank amendment we announced last week. That amendment eliminated the minimum EBITDA covenant and the two new covenant ratios, maximum senior secured leverage and minimum fixed charge coverage ratio do not begin until the third quarter. The consolidated leverage ratio required in our covenants was a maximum of 10.3 times and our actual ratio for the second quarter was 8.3 times.

The consolidated interest coverage ratio required in our covenants was a minimum of one times and our actual ratio for the second quarter was 1.3 times. As you may recall the impact of the substantial modification of debt, we booked in first quarter 2009 as well as any similar future gain was eliminated from our covenant calculations as part of the eighth amendment and therefore not included in the calculations above.

In the most recent bank amendment we obtained adjusted covenant ratios through the term of the revolver which ends in the fourth quarter of 2011. The amendment also added a new minimum fixed charge coverage ratio covenant and a maximum senior secured leverage ratio covenant while eliminating the minimum EBITDA covenant.

In addition to the 2009 CapEx limit of 35 million, we now have CapEx limits of 45 million in 2010 and 50 million per year thereafter. We also have the additional CapEx basket opportunity I described a few moments ago. Under the amendment, the interest rate on the term loan and revolver increased 50 basis points to LIBOR plus 700 with a LIBOR for of 3%. Our asset securitization interest rate increased 25 basis points to LIBOR plus 475 with a LIBOR for of 2.5%.

I will now turn the call back over to Paul to discuss our outlook.

Paul D. Carrico

Thanks Greg. As I mentioned in my opening remarks we've made significant progress in our financial performance by adjusting our cost structure to match market conditions, improving the productivity of our assets and improving our capital structure.

Our adjusted EBITDA guidance for 2009 is $110 million. And for the first half of 2009 we generated $70.3 million. In the second half of the year our guidance includes further ECU value declines. No material increase in volumes year-over-year and a planned ECU outage. Given all of these factors we remained comfortable with our adjusted EBITDA guidance of a $110 million for 2009.

Now I'd like to open the call to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Mike Judd with Greenwich Consultants.

Michael Judd - Greenwich Consultants

Hi good morning.

Paul Carrico

Morning.

Gregory Thompson

Good morning. Hi Mike.

Michael Judd - Greenwich Consultants

Couple of questions. I'm kind of struggling here to come up with a clean number for the June quarter excluding all these one time charges and what should we be using as a tax rate just to kind of figure out what a clean EPS number is? Sorry this is an equity based question.

Gregory Thompson

Yeah, I guess the -- in terms of and I'll address your tax rate question, I think the best way to come up with a clean number is looking at the slides that we put out at least as to as EBITDA. I think that should be a pretty clean number the 59.4 million of adjusted EBITDA for Q2 '09 and year-to-date EBITDA of 70.3 million. That doesn't get you all the way down to net income of course but I think that's the best way to get a clean number.

Relative to the tax rate as I said it's a function of changes in our forecast, what we have for the highly unusual rate that we have for Q2. And the significant net income benefit in the second quarter. I can't give you a rate for the full year at this point, but I would tell you that given the substantial income that we would recognize in the third quarter related to the debt exchange and we're still working through all the accounting for that. But that will be a very significant amount of income I think with that and the book tax expense that should result we'll get back to probably something in the range of a more normalized level of tax rate going forward. But until then it’s going to bounce around.

Michael Judd - Greenwich Consultants

Okay. So just as a follow up should we be using a 35% tax rate for the June quarter and for the September quarter in order to come up with clean numbers?

Gregory Thompson

Yeah, I think but to do that you also have to would have to include all the tax that will be related to the significant debt exchange and I don't even know what that number will be, but it will be 500 plus million kind of dollars. So yeah it should be something probably in that sort to a range maybe a bit higher for traditional federal rate, plus some State tax on top of that, so 35-40% kind of range probably.

Michael Judd - Greenwich Consultants

Okay. And then I don't mean to beat this to death, but for the June quarter using the adjusted EBITDA numbers what tax rate should we use? I mean I realized that you guys are have been there doing a lot of work with the debt guys and they're not concerned about what the actual clean EPS number is, but those probably on the equity side do care.

Gregory Thompson

Well I think that's a hard -- because of the differences in the results and driven by the debt exchange that's a bit of a difficult question to answer. I guess if you just take the first two quarters of the year and you look at our year-to-date, our first six months of the year tax rate, that's representative of the kind of the tax rate that we had for the first six months of the year.

But the reason that you get so to a much lower rate than that is because we had a, as I mentioned in my script comments, we had a substantial tax benefit as result of the IDB that we paid off related to our Goldman Facility back in May. And so that alone was about $10 million of income tax benefit that we recognized in the second quarter as a result of that.

Michael Judd - Greenwich Consultants

Why don't we follow up on the tax rate offline, when you get a chance may be you could just give me a call. So moving on, you had 70.3 of adjusted EBITDA in the first half for the year. You are sticking with your forecast of a 110 million for the full year which implies that the second half of the year should be around 40 million? You are still comfortable with that number?

Gregory Thompson

Yeah we are I mean as Paul mentioned and I also mentioned in my comments in particular the ECU value and caustic prices continued to decline throughout the second quarter and our expectation is that that will occur further throughout the year-end. We also do have a VCM turnaround that is currently planned in the fourth quarter.

Michael Judd - Greenwich Consultants

Okay. And then lastly on the accounts receivable securitization, I believe that number was 81 million at the end of the March quarter. What is that figure at the end of the June please?

Gregory Thompson

At the end of June I believe that number is 85 million at the end of June. Let me just need to double check. Yeah 87.8 million at the end of June was the securitization amount.

Michael Judd - Greenwich Consultants

Okay. And then just lastly looking into, you could probably say in July and we're in early stages of August. We have been hearing that the de-stocking in the chemical chain appears to be coming to an end. But there's continually been a restocking. And so, I guess by influence I'm asking this question which is do you -- are you seeing some volume improvements in the September quarter which again just are related to the end of destocking or are you not saying it, that's part A.

And part B is for your own planning purposes in terms of inventory levels going into the end of the year. How are you planning on managing your inventory levels. Because as I can see here, your inventory levels are nearly flat sequentially, little lower in the June quarter versus the first quarter?

Paul Carrico

This is Paul, I'll comment on that. We really expect the fourth quarter to be typical of previous fourth quarter where there is a significant down time business which therefore means that you can reduce inventory and we fully expect to go to low levels of inventory at the end of the year.

In terms of level of business during this quarter, I would say generally speaking we're pleased in the sense that it’s not as bad as it was in earlier in the year but it still short of last year. So we're looking at the levels of de-stocking that have occurred and intuitively you would think that some of this has to come back it's just a question of timing. Particularly on the caustic side and I don't think we have a good year as to where that's going to go for the reminder of year

Michael Judd - Greenwich Consultants

Thanks for the help guys and good luck.

Gregory Thompson

Thanks Mike

Operator

Your next question comes from the line of Roger Spitz with Banc of America.

Roger Spitz - Banc of America

Thanks. Good morning guys.

Paul Carrico

Hi Roger.

Roger Spitz - Banc of America

What was your average PBC operating rate in Q2 '09 if you could tell us that?

Paul Carrico

Yeah. We don't typically give those numbers but it was marginally above the industry.

Roger Spitz - Banc of America

Okay. And in terms of working capital, how much cash do you think will might be able to generate from reducing work and capital over the second half of this year?

Gregory Thompson

Yeah. I think, we would we'd expect to do kind of what of we have typically done with working capital improvement in the second half of the year and I won't give you a number on that Roger, but I would expect that kind of level to occur as well as the comment that I have made about there we're working with lot of our suppliers to get vendor payment terms back to a normal level since terms significantly tightened as a result of all of our negotiate -- not making the interest payments and negotiating dealing with the incompletion of debt exchange process.

Roger Spitz - Banc of America

Would you suggest kind of a just sort of historical reasonable days outstanding to make a....

Gregory Thompson

Yeah, I think so and with all the other stuff we've been doing we haven't gone back and model that out and all honesty at this point. But I think the only thing so yeah the days, days outstanding for DSO and also for inventory. And the dollar amount just because of the fact that it sent to be careful given the feedstock costs and pricing is lower now than it certainly then it was last year at this time. So the unwinding and working capital benefit enrolled dollar should be less. I would expect in terms of those metrics that we continued to tightly manage DSOs. I wouldn't expect any change much there.

And then on inventory we've got a number of initiatives in place or I'm looking for some improvement there particularly related to oil and then vendor underpayment terms I mentioned to you.

Roger Spitz - Banc of America

Okay and lastly, how much of your D&A in your Q2 '09 cash flow statement relates to amounts included in your interest expense line, if you haven't know that.

Gregory Thompson

I don't. Yeah let me give you that offline.

Roger Spitz - Banc of America

I can get it off line.

Gregory Thompson

Yeah, let me give you that offline..

Gregory Thompson

Okay, thanks.

Operator

Your next question comes from the line of Frank Mitsch with BB&T Capital Markets.

Sabina Chatterjee - BB&T Capital Markets

Good morning this is Sabina Chatterjee in for Frank Mitsch. Can you hear me?

Gregory Thompson

Yes we can Sabina.

Sabina Chatterjee - BB&T Capital Markets

Okay. What are the interest payments of 38 million, when and how do you expect that to be repaid? Would that happen in 2009 and what sort of increments?

Gregory Thompson

Yeah. The 38 million will not be repaid, that was except to the extent to the debt exchange or those people that were holders of the bonds did not except the debt for equity exchange so, there is about I think it's $3.5 million or so of cash interest that we have paid just last week in connection with completing the exchange offer. But other than that, all of that interest that was owed related to the 800 million of bonds that were outstanding that will all -- you know that's all forgiven and written off as part of the debt for equity exchange process that we consummated and announced last week.

Sabina Chatterjee - BB&T Capital Markets

Okay. So the second half of '09 which the interest fall down to about the 30 million level?

Gregory Thompson

No. It won't fall down to that level the, I mean the total interest expense I would say on annualized basis -- well may be for the second half you might be close, a little low if you were just saying for the second half of the year. I would say going forward with the completion of the debt exchange annualized interest is should probably in the range of $75 million or so annualized interest expense.

Sabina Chatterjee - BB&T Capital Markets

Okay. And then, you had mentioned declining ECU values through the remainder of the year, can you just tell us what you are seeing on the Korean side of things and regarding caustic are there any competitive pressures that are driving those values lower or, just what are you seeing in terms of end market demand?

Paul Carrico

This is Paul, on the ECU in general there's certainly been a shift as the value of the caustic dropped over the last six months to try to shift some value back in the coring side of the equation. And to that end there is substantial PBC resin increases that are going on as we speak into the coming months.

And in terms of caustic still would say its not really come back to demand level that's sufficient to get price increases out there as to when that happens from our earlier comment. Kind of depends upon how people start looking at inventory for the remainder of the year and how businesses start to pickup. So it's a little bit uncertain in that area. Although I think in general we believe its bottom down.

Sabina Chatterjee - BB&T Capital Markets

Okay. And then in your EBITDA outlook of 110 million, what are you factoring in on the housing and construction side, I didn't really hear a lot about the demand there?

Paul Carrico

Yeah. Really not expecting that much considering the levels we are at right now. We think they will be the normal seasonal demand during the coming months. But then the big tail down in the fourth quarter and probably into the first quarter next year. So, we are not anticipating that housing will add substantially to those demand levels.

Sabina Chatterjee - BB&T Capital Markets

All right, great appreciate it, thanks.

Operator

The next question comes from the line of Tariq Ahmed of JP Morgan.

Tariq Ahmed - JP Morgan

Good morning.

Gregory Thompson

Good morning Tariq.

Tariq Ahmed - JP Morgan

On the caustic soda side, just want to get a sense what the average contract links you guys are -- have right now. And sort of how much of the price decline showed up in 2Q '09 versus how much would you expect to roll into 3Q'09?

Paul Carrico

Typically on our contract they vary substantially so there's really not a straight answer on that that we could put out. And generally speaking our contracts and our pricing rolls fairly closely to the market. So we've experienced the substantial downturn that we've seen on the caustic side between the first quarter and second quarter and like wise we on the costing side we would expect to see that increase as the PVC price goes up.

Tariq Ahmed - JP Morgan

Okay and then as you say on the vender term side but any other sort of opportunities for us monetization any acetyls on horizon, anything like that that we should be thinking about?

Gregory Thompson

Yeah we have a few things direct that we're looking at nothing, nothing enormous. But, we've got some -- in connection with the Window and Door consolidation that we're working on we've got a plant facility out west that we will be looking to market and sell that we'd hope should be some decent value. And some other things that are smaller than; all those things are smaller than that is that as well.

Tariq Ahmed - JP Morgan

Okay. That's all I have, great quarter given all the calls (ph) in there. Thank you very much

Gregory Thompson

Thanks Tariq.

Operator

(Operator Instructions) Your next question comes from the line of Christine Mcdoty (ph) with Goldman Sachs.

Unidentified Analyst

Yes, hi. As we enter the Chlor-alkali downturn Do you except to see able to continue to run all your facilities?

Paul Carrico

On the Chlor-alkali side we're not fully integrated relative to our demand on our PVC side. So, yes, we expected to run facilities at above industry rate.

Unidentified Analyst

And that's all the way through 2011?

Paul Carrico

Yeah. As from a planning point of view, we would expect to continue to be able to do that.

Unidentified Analyst

Okay. Thanks.

Operator

(Operator Instructions) And there are no more questions at this time.

Paul Carrico

Thanks Dixie. And thanks everyone for joining us. And we look forward to speaking with you in a few months start by the third quarter.

Operator

This concludes the conference call. You may now disconnect.

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