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Executives

Martin Jarosick – Executive Director, IR

Paul Carrico – President and CEO

Greg Thompson – CFO

Doug Shannon – VP, Procurement

Analysts

Mark Connolly – Credit Suisse

Frank Mitsch – BB&T Capital

Bill Hoffman – UBS

Roger Spitz – Merrill Lynch

Bo Hunt – Banc of America Securities

Don Carson – Merrill Lynch

Barrett Einen [ph] – Brownstone Asset Management

John Noel [ph] – Barrington

David Silver – JP Morgan

Tarek Hamid – JP Morgan

David Troyer – Credit Suisse

Gregg Goodnight – UBS

Cheryl Van Winkle – Independence United

Andrew Chan – Lehman Brothers

Raul Adaral [ph] – Merison Asset Management [ph]

Jed Nussbaum – Redwood Capital

Georgia Gulf Corporation (GGC) Q2 2008 Earnings Call Transcript August 6, 2008 10:00 AM ET

Operator

Good morning. My name is Alexandria and I will be your conference operator. At this time, I would like to welcome everyone to the second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions)

I'll now like to turn the conference over to our host, Mr. Martin Jarosick, Executive Director of Investor Relations for Georgia Gulf. Mr. Jarosick, please go ahead.

Martin Jarosick

Thank you, Alexandria and good morning, ladies and gentlemen. Thank you for participating in today's conference call to discuss Georgia Gulf's 2008 second quarter financial results.

There are slides available to you on our Web site. These slides are for your reference. 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 within the meaning of Federal Securities laws. As will you 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 2007 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 measures to the most directly comparable GAAP measure as an appendix in the slides and on our Web site at www.ggc.com.

I will now turn the call over to Paul to begin the review of the second quarter. Paul?

Paul Carrico

Thank you, Martin and good morning ladies and gentlemen. We were pleased with our operational performance in the second quarter. We exceeded our plans and excluding our gains from asset sales this quarter, operating profit was flat with the second quarter of 2007. I would normally not consider staying flat to last year much of an achievement, but there is nothing normal about the environment we are currently in.

Housing starts declined 27% since June of last year, raw material costs have increased even more dramatically with natural gas and ethylene up 45% in the second quarter compared to the same quarter last year. This rapid acceleration in feedstock prices not only compresses margins, it also ties up more working capital in raw materials and finished goods. At the same time, price increases have failed to keep pace, especially in our Building Products segment. In the second half of the year, there will be an increased push for price increases to recover raw material costs and re-establish sustainable margins for our businesses.

Now moving on to more specifics about our second quarter results. For the second quarter, we reported net income of $27.9 million or $0.80 per share compared to a loss of $4.2 million or $0.12 per share in the previous year.

Net sales in the second quarter were $850 million, down $2 million from the same quarter last year. Sales volumes declined in all four segments due to the softening end use markets, especially the housing and construction markets in the United States. The impact of lower volumes on sales was partially offset by price increases in vinyl resin, caustic, and increased chlorovinyls exports.

Greg will cover our financial performance in more detail in just a moment.

Now I'd like to provide an update on some of the actions we've taken toward our 2008 goals. Compared to the second quarter of 2007, we have significantly reduced SG&A from about $57 million to $39 million. The reduction is driven by lower professional fees and consolidation and centralization of support functions. These are all benefits of the integration work we've done over the past year. We significantly increased our export sales volumes in the chlorovinyl segment as the weakness of the US dollar has created sales opportunities in that market.

In the second quarter GGC set a new company record for export volumes in resin. We also made progress towards our debt reduction targets by completing the sale of undeveloped land in Pasadena, Texas, and other transactions that generated proceeds of $52.9 million.

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

Greg Thompson

Thank you, Paul. Good morning, ladies and gentlemen. Now let's look at our performance from continuing operations during the second quarter. Georgia Gulf reported operating profit of $63.1 million for the second quarter of 2008 compared to operating profit of $32.4 million in the second quarter of 2007.

Second quarter 2008 includes pretax gains on sale of $31.1 million from the Pasadena land sale and other similar transactions. Excluding these gains on asset sales, operating income was flat compared to second quarter 2007.

Our second quarter net income includes a $4.4 million benefit from lower tax expense as a result of correcting the tax calculation for the first quarter of 2008. This correction has no impact on the year-to-date results. Our effective income tax rate is very sensitive to changes in our pretax results and dependent on the tax jurisdiction where results are generated.

We currently expect an effective tax rate for the year in the mid 20% range in the US and 0% for Canadian operations for an overall blended rate in the single digits. As Paul mentioned, rising feedstock and energy costs, coupled with weak demand, challenged the results of each of our segments.

In the Chlorovinyl segment, sales and operating income grew as a result of strong ECU value increases that offset lower sales volumes. Sales and operating income in both the window and door profile and molding segment and outdoor building products segment were negatively impacted by the continued weakness in the US housing and construction market and higher raw material costs.

These two drivers more than offset the productivity gains we have made at both segments as a result of lower head counts and facilities consolidation. The Aromatic segment sales were flat while operating profits swung to a loss of $3.1 million due to lower phenol sales volumes as well as higher propylene costs which could not fully offset with acetone price increases.

As Paul mentioned, we have not increased prices enough to cover the much higher feedstock costs in all of our businesses and our margins have suffered as a result. In the first half of the year, we had some difficulty in pushing through price increases, especially in our two Building Products segments.

We notified our customers of price increases across many products in the second quarter, and expect to push through price increases across all of our product lines in the second half of the year to recover the increased feedstock costs and improve our margins.

The FICO impact for the second quarter was a positive impact of $22.6 million compared to $2.1 million benefit in the same period last year, and a negative $4.8 million in the first quarter of 2008. This second quarter impact was driven by rapidly increasing feedstock costs late in the quarter.

Now let's discuss some changes in working capital. Our efforts to use our working capital more efficiently resulted in fewer units of inventory in all four segments, but the decline in units was almost completely offset by the large increases in feedstock costs.

Inventory days sales outstanding improved slightly compared to the second quarter of 2007. Accounts receivable days sales outstanding also improved driven by further centralization and improved credit and collection processes in the Building Products segments.

There was negative impact on working capital resulting from a decline in days payable, principally driven by the tightening of trade terms by suppliers to our Aromatic segment. This was primarily a reaction to the notice of default we received on our 7.125% notes in early June, which we satisfactorily revolved after the end of the second quarter.

Turning to the cash flow statement, we used $48.9 million of cash in operating activities as compared with $26.8 million for the second quarter of 2007, primarily due to the increase in working capital I just described. We continue to tightly manage our capital expenditures to support the maintenance requirements and growth opportunities of our businesses as efficiently as possible.

Capital expenditures were $14.5 million for the second quarter. We started the year with a 2008 CapEx target of $65 million to $75 million. We have now lowered our target to $60 million to $65 million. With the proceeds from asset sales Paul mentioned earlier, investing activities provided $38.4 million.

As a result of the above, we paid down $71 million of Term B debt and increased the revolver by $85.3 million, up to $134 million at quarter-end. This revolver increase will be tempered in future months as the seasonal working capital decline generates cash in the second half of the year.

Financing activities provided $11.5 million. The effective exchange rates absorbed $600,000 for a net change in cash of $500,000. Our accounts receivable securitization balance was $154 million at the end of the quarter. Our operating performance along with the gain on asset sales enabled us to maintain compliance with our debt covenants for the second quarter.

The consolidated leverage ratio required in our covenants was a maximum of 6.25 and our actual ratio for the second quarter was 5.65. The consolidated interest coverage ratio required in our covenants was a minimum of two times coverage and our actual ratio for the second quarter was 2.08.

Now let me provide an update to our outlook for the rest of the year. Compared to our operating plan at the end of the first quarter, we are now expecting lower non-core asset sales in uncertain economic conditions for the remainder of the year and into 2009. The energy and feedstock cost volatility we have seen so far this year, as well as the timing and level of price increases we plan for our products in the second half, makes it very difficult to forecast the remainder of the year. This creates a range of possible outcomes for 2008 EBITDA that could result in EBITDA as much as 15% below the 2007 level.

Our current covenant schedule was set at a time when the economic expectations and in particular, the US housing market, were much higher than what we are in fact experiencing today. There is a significant tightening in the covenant requirements through the first quarter of 2010 when the bank facility terminates.

When we approached the bank group for consent on the amendment to the 7.125% notes, we will also seek a covenant amendment. Now that the alleged defaults surrounding the 7.125% notes has been satisfactorily resolved, we are back in a position to pursue a refinancing of the senior credit facility into a structure that provides more long-term flexibility.

I will now turn the call over to the operator so we can take your questions.

Question-and-Answer Session

Operator

(Operator instructions) Our first question is from Mark Connolly of Credit Suisse.

Mark Connolly – Credit Suisse

Thank you. Just two things. I wonder if you can help us understand a little bit more the progression you are expecting in working capital. If I have this right, your asset sale proceeds were used to pay down debt, the debt went up anyway, presumably, because of the working capital. So can you help me understand how you are going to balance the working capital needs with presumably, your desire to run previously at high operating rates? Do you have a sense of what that's going to look like in the second half?

Greg Thompson

Well, most of the increase was related to the normal seasonal working capital build. Though I did mention in terms of vendor terms was also a bit of a drain in the second quarter. But going forward, as is normal with our – with the seasonality of the business we would expect that there would be cash generation through the rest of the year, and we would expect some of those balances to come – to generate cash and that to come down with revolver balances during the remainder of the year. That's obviously somewhat dependent upon the volatility of input costs that we have seen that could swing that around.

Mark Connolly – Credit Suisse

But you're not expecting anything too different from the normal pattern.

Greg Thompson

No.

Mark Connolly – Credit Suisse

And just one last question, we've been hearing mixed things about the impact of energy efficiency spending on repair and remodel. Are you seeing much of that in your window and door business or is it just completely swamped by the slowdown in housing?

Paul Carrico

I would say that the slowdown is overwhelming everything right now. I'm sure that, that aspect of the business will become more important as we go forward in the future. But for now, we are still feeling the effects of the housing downturn.

Mark Connolly – Credit Suisse

I'm just curious whether your customer base may be better or worse positioned, your window and door profile business might be better or worse positioned for repair and remodel, if you have any sense of that.

Paul Carrico

I would say we are in good position to deal with that part of the market segment, if that becomes more robust. Certainly though, from an overall business point of view, particularly in windows, I think it needs a recovery of the economy and the housing market to really feel good about it down the road.

Mark Connolly – Credit Suisse

Sure, perfect. Thank you very much. Appreciate it.

Operator

Our next question is from Frank Mitsch with BB&T Capital. Frank?

Frank Mitsch – BB&T Capital

Yes, thank you, good morning. Can you talk a little bit about the basis of the 2008 EBITDA being 15% lower than the '07 EBITDA? Does this include the asset sales in your '08 number? And what is your baseline '07 EBITDA number that you're using for that statement?

Greg Thompson

Yes, it does include the asset sales in 2008. The baseline number is the $222 million of reported EBITDA for 2007 that we are referring to. And as I indicated in my comments, that's the – we could see that it could be as low as 15% of that 2007 number, but there's a lot of variability as we talked about relative to input costs and also pricing.

Frank Mitsch – BB&T Capital

Okay. Great. And the $22.6 million in FIFO, is that a pretax number or is that an after-tax number? And also, if you could give us an idea of how that breaks down in the various operating segments for you guys?

Greg Thompson

The $22.6 million is a pretax number and it is – the vast majority of that is related to chlorovinyls.

Frank Mitsch – BB&T Capital

Alright, terrific. And then lastly, you talked about exports, I guess in chlorovinyls setting – or PVC setting a high water mark for you. What was the actual number and how did those net backs compare to your domestic market? Was it a function of, gee, there just wasn't the demand here, or were you actually able to realize much better profitability on your PVC exports and what's your expectation going forward?

Paul Carrico

In terms of exports for Georgia Gulf, we were more closely in line with what the industry is doing, has been doing, so we are in that range is the way I'll put it. In terms of the net back that you realize on those types of sales, I would say they are also in the range. There is some pluses and minuses but not that much different. Either way, the domestic demand is certainly not there this year as you can quickly calculate if you go through the export percentage for the industry versus the operating rate. Literally, we are probably something on the range of 70% demand when you look at the full capacity of the business. So, that's a function of the times right now and we expect that to continue. If you tell me that the dollar value will still be in the range it is now the oil and gas stays where it is.

Frank Mitsch – BB&T Capital

Okay, thank you.

Operator

Our next question is from Bill Hoffman with UBS.

Bill Hoffman – UBS

Hi, guys, good morning.

Paul Carrico

Good morning.

Bill Hoffman – UBS

The question I have is if you look at your second quarter and compare it to the historical, we normally will see a little ebb and flow between the second and third quarters from a seasonal billing strength. Just given some of the guidance you've given for this reduction in EBITDA year-over-year, it seem to indicate to me that you felt the second quarter was stronger than what you are seeing, maybe in the third. I wonder if you could talk a little bit about that. And then the other thing I wanted to dive into a little bit further was just between the windows and doors and the outdoor building products, trying to get a sense what's really happening in those markets. You obviously had a little bit better quarter, which we would expect to see usually in the second quarter, but they still seem to be very challenged.

Paul Carrico

Well, maybe starting off with your first question about the second and third. We have real difficulty in the current environment as quickly as prices are fluctuating to determine just what the third quarter is going to play out to be. So we are trying to be realistic, if not slightly conservative. It is an unusual year, as it has been for the last six months. I'd say generally speaking, the third quarter is nearly in the same range of volumes as the second, as we got to the end of the second quarter. So the basic point here is, we just can't tell you at this point in time with the volatility of the – particularly energy as to where we are going to wind up. But hopefully, third quarter will be even better than we are projecting.

Greg Thompson

If I could just add to that, I think, as Paul said, we are being cautious on the economy. And I think he has some comments relative to building products or window and doors. I think those segments do continue to disappoint in the results, so we are being cautious there as well. And that cycle impact that I mentioned in the second quarter, which is certainly dependent upon what pricing, what costs do as far as feedstock and energy in the third quarter, but that will flow through and that inventory will be utilized in the third quarter which could, again, depending upon what pricing does, that could be some drag on the third quarter.

Paul Carrico

The basic problem is we don't see a significant recovery in housing from the next six to 12 months so the only thing that's going to change the equation maybe a little bit is price increases in the building product side. If you look at the recent information out there, certainly the chemical side is moving price increases through in a significant way. And at some point in time, I guess I would feel that the industry has to do the same on the building products side, and that would be the most significant help we could realize if in fact that happened.

Bill Hoffman – UBS

Great, that's helpful. Just maybe if you could comment on the Canadian markets, one of the things we don't have as much visibility on, but what is the competitive situation up in your business up there?

Paul Carrico

Canadian market is forecasted to be a bit down this year. I think we generally say that's something that we would agree with. But to say it's down anywhere near the order of magnitude of the US market would not be the case. We really don't see that kind of a drop, nor do we think that we'll anticipate that much of a drop in the future. So it's a bit of a help, but overall, the US economy, the magnitude of how much it's down or the magnitude of how much the housing market is down overshadows the rest of it.

Bill Hoffman – UBS

Thank you very much.

Operator

Our next question comes from the line of Roger Spitz with Merrill Lynch.

Roger Spitz – Merrill Lynch

Good morning. Could you indicate if you have any other non-core, non-operating assets you can sell or in the process of selling or describe them, please?

Paul Carrico

I would say there's always opportunities to have sales in the future of different assets. It's not something, though, that we want to focus on at this point in time. It's not the ideal time as you look forward to do that type of action. So, relative to the type of assets we might sell, I don't think we really want to go there in terms of describing that. It could be more land as an example, things that don't necessarily materially impact our business. And we think there are those types of opportunities in a general way to make some further sales, but it's not on our radar screen at the moment.

Greg Thompson

And, Roger, I would add that as part of the change in the guidance, we were looking at some other asset sales and we just didn't think we were getting the kind of value that we really thought made sense there, and so if we do get back into that process, we just want to make sure we are getting full value, otherwise we won't go forward on some asset sales.

Roger Spitz – Merrill Lynch

And can you give a sense of a delta between your Q2 '08 caustic selling price and the selling price of caustic that has been fully implemented to-date in Q3? I'm not asking for what you are actually selling caustic for, I'm trying to get a sense of the increase – the delta increase in price that you might receive in Q3 for caustic versus Q2?

Paul Carrico

Yes, I would say we really don't want to get into that level of detail about our pricing. Let me make some background comments and maybe that will help you. As you know, there certainly is significant increases out there in the market, and we have formulas that are mostly tied to indices in one fashion or another and there could be some lags and variations, but it is reasonable to say that, that market is particularly strong and driven as much as anything by both the energy increases and the supply/demand balance. And we experienced a good increase during the second quarter based upon the price increases that are out there. For both the third and the fourth, we would expect similar results going forward.

Roger Spitz – Merrill Lynch

Are there any material amounts of your receivables with customers who you believe are in financial stress where the receivable is perhaps a little more questionable?

Greg Thompson

Well, that's always a risk and that's something we stay very focused on, particularly in the building products sector and so we are always mindful of that. We have actually – so we've tightened down on some of our credit and collection procedures and we in fact have seen a little bit of improvement in our days sales outstanding. So, not to say that there's no risk, there's always that risk given what's going on with our customer base as I said, particularly in the building products sector, but we feel pretty comfortable for the moment with where we are in our valuation of those risks.

Roger Spitz – Merrill Lynch

Can you give an updated sense of the percent of your total company sales that are going into housing right now?

Paul Carrico

I would say in general, in the large percentage certainly of the building products, is going that direction and even some of the chemical side ultimately reflects on what the housing market is doing. So to give you an exact percentage, no, I don't have that, but when you look across the company, it's really a significant percentage counting the chemicals that directly roll down to housing.

Roger Spitz – Merrill Lynch

And lastly, a percent within the two Royal segments, percent of remodeling versus new construction. At the beginning of the deal, we sort of have some sense but you've sold a number of businesses since then, I'm wondering if you can update the split between those two.

Paul Carrico

It's difficult because it's an ever changing target for us. I guess we would say it's a little bit heavier weighted towards the remodeling than new construction in windows, to give you an example.

Roger Spitz – Merrill Lynch

Okay. Thank you very much, guys.

Operator

Our next question comes from the line of Bo Hunt with Banc of America Securities. Mr. Hunt?

Bo Hunt – Banc of America Securities

Hi, I think you answered most of my questions here, but regarding the lower level of SG&A that we saw in the second quarter, is this what we should expect on a quarterly basis going forward, somewhere in that area?

Paul Carrico

Yes, we expect to continue to realize lower SG&A going forward as we alluded to in the information we put out. We made reductions during the past year and that will continue as we go through this year.

Bo Hunt – Banc of America Securities

And then in terms of your receivable securitization facility, where was that at June 30?

Greg Thompson

We had – Bo, we had $154 million outstanding as of June 30. And it's $165 million facility that we have. So a little more (inaudible) there.

Bo Hunt – Banc of America Securities

Got you. And then obviously natural gas is wildly volatile recently. I was hoping you could just remind us of where you stand on your natural gas exposure and if there's any hedging program in place?

Paul Carrico

We traditionally don't hedge natural gas. We let the market pricing of the product determine. If you've got some lower price gas you'd like to sell though, I would be happy to take it off your hands. The hedging thing just doesn't work over the long-term, as illustrated by the recent events for us. So – and plus, it's a significant investment if you go that way. We think the market will react to the pricing in an appropriate way given a reasonable amount of time. But the problem is the volatility. The speed with which it's moving up and down and then the trends transposing that cost into the pricing.

Bo Hunt – Banc of America Securities

Okay, thank you very much guys.

Operator

Our next question is from Don Carson with Merrill Lynch.

Don Carson – Merrill Lynch

Just a follow-up on ECU pricing. You mentioned that you're tied to various indices. Do you have any caps on your contracts, though, that would prevent you from realizing those benchmark indices?

Paul Carrico

I'm just going to have to repeat my earlier comment. We prefer not to get into our pricing mechanisms. I guess I'd have to say that we fully expect that much of the price increases in the market out there have a good chance of playing out as we go through the rest of the year and will be a positive to the industry. So from that point of view, we should continue seeing perhaps more of an improvement in the chlorovinyls area because of that, and in fact, that's partly one of the reasons that you have some variability in terms of our forecast going forward.

Don Carson – Merrill Lynch

And bow about operating rates on your chlor alkali business, given that you are a net buyer of chlorine, presumably, you can run at a lot higher operating rate than the industry overall, can you comment on your second quarter operating rates?

Paul Carrico

Yes, we were down a bit because we took a maintenance outage to do some work that was causing – a piece of equipment that was causing us some problem, which I think I alluded to in earlier quarters. So there was a need to get that fixed and it was a successful repair work for us. And so we were reduced in the second quarter by that amount. Subject to nothing else showing up, we expect to operate at a higher rate in the third quarter and the fourth quarter.

Don Carson – Merrill Lynch

Thank you.

Operator

Our next question is from Barrett Einen [ph] with Brownstone Asset Management.

Barrett Einen – Brownstone Asset Management

Just a clarification of the EBITDA number, you were saying that for the full year, it was 222 last year and then you are saying it could be down as much as 15% this year. How much of a – how many gains, can you quantify the gains that are included in that number from asset sales?

Greg Thompson

The gains included in the 2008 number?

Barrett Einen – Brownstone Asset Management

Yes, in terms of your –- you say you are going to be down 15% you say it includes gains. Can you quantify the gains that are included in that number so far this year?

Greg Thompson

In the 2008 number, the gains so far this year would be – since I don't believe there was anything of any significance in the first quarter and we did have some charges, we had some charges that are actually on the footnotes in the slides, but the gains would principally be that $31.1 million in the second quarter that we have noted in the press release.

Barrett Einen – Brownstone Asset Management

So if you are seeing 15% lower for the full year, which implies about a 191 number and you take out the gains, you're saying stripping out gains, you guys could be as low as 160 for the year?

Greg Thompson

Your math works, that's right.

Barrett Einen – Brownstone Asset Management

Okay.

Greg Thompson

Could be as low as that, but as we said earlier, there's a lot of variability there related to the energy pricing and other input costs and pricing. That could be some upside.

Barrett Einen – Brownstone Asset Management

Or further down side or no? You think 15% is sort of threshold?

Greg Thompson

We said it could be as low as 15%. So we don't expect anything less than that.

Barrett Einen – Brownstone Asset Management

Okay. Then on the FIFO, you said it was about $23 million pretax during the quarter. Do you expect to reverse itself in the next quarter in terms of that end up not being a gain?

Greg Thompson

Well, certainly all of that inventory that we capitalized at the end of the first quarter will be utilized in the third quarter as we turn that inventory over, so the question is, what will be the pricing in the third quarter? Will it continue to go up or will it pull back a little bit? But based upon our expectations, we certainly see that, that will be, and that's factored into our forecast, that, that will be a net negative impact on the results in the third quarter as that higher priced FIFO inventory is utilized and rolls through the P&L.

Barrett Einen – Brownstone Asset Management

By the same amount, like a $22 million impact, that sort of range?

Greg Thompson

I wouldn't expect all of that, no. Based upon what we see with costs, but hence, some of the variability comments I was talking about earlier. It's all a function of that utilization of that higher priced inventory as well as what the current costs are and how pricing gets rolled through.

Paul Carrico

I would emphasize that on the pricing side, at some point, the building products industry has to recognize the level of push from the price increases coming via raw materials, and so while it may not be next month or the following month, at some point, just to sustain the investment capital, there has to be that price increase on the downstream side which helps deflect some of that recovery of the FIFO.

Barrett Einen – Brownstone Asset Management

Even with such weak demand from the end of that market?

Paul Carrico

I would say the chemicals industry in general has weak demand, and yet there's been an industry recognition that something has to change, that you have to make some amount of return, even on lower demand, so, yes, I would say at some point, it's going to push the industry to higher pricing.

Barrett Einen – Brownstone Asset Management

Right, so you are kind of implying though is that third quarter should be lower than second quarter, taking in the things we've discussed so far on the EBITDA line?

Greg Thompson

Well, we haven't really gotten into individual quarters. We are just saying that the second, in the second half of the year, we are trying to give you a, the bottom end of the range that we expect for EBITDA, or at least you can back into that based upon the up to 15% lower EBITDA for 2008 versus 2007.

Barrett Einen – Brownstone Asset Management

Right. But you had mentioned though that the FIFO could reverse in the third quarter, so assuming everything stayed the same and FIFO reverses, third quarter, you are implying maybe weaker?

Paul Carrico

I don't think we are going to speculate on those kinds of numbers. There's too many moving pieces, just if you look in the past month as far as prices and costs. So it would be difficult just for us to give you quarter to quarter.

Barrett Einen – Brownstone Asset Management

Okay. One other question, SG&A was dramatically lower balance, $20 million year-over-year. You said you're continuing to take costs out, but is that basically reflective of the ongoing rate we should think about? So third quarter should be 38, fourth quarter could be lower, is that sort of how you're looking at it?

Greg Thompson

We are going to continue to take costs out. I would, just based upon how our expenses bounce around, I wouldn't necessarily just take that number and annualize it. We do have some additional cost reduction programs. There was a little bit of benefit in the quarter related to some insurance proceeds that we got of a few million and also some capital taxes that we've been working on in Canada of $1 million or so. But – so a little bit of that I wouldn't expect to recur. But we are going to continue to drive cost down.

Barrett Einen – Brownstone Asset Management

What kind of numbers should we be thinking about then? Because $20 million decline year-over-year is pretty significant.

Paul Carrico

I'm not sure we're prepared to give you a number. It will be above that number by year-end, because of the continuing efforts we've got in place. But this time, I don't think we are prepared to give you an estimate.

Barrett Einen – Brownstone Asset Management

Can you ballpark – is it going to be – should we think it 50? It's sort of such a big decline, sort of helps you guys this quarter a lot, so I was trying to understand if that's an ongoing, sustainable level?

Greg Thompson

Overall, I gave you some pieces of the benefit that we got in the second quarter that were disproportionately falling in the second quarter, but overall, that's going to be a continuing focus, so I would expect that in the range of that kind of number, that's where we would hope to be.

Barrett Einen – Brownstone Asset Management

Can you quantify the benefits you had then that contributed to the low number, you mentioned them but you didn't really quantify them?

Greg Thompson

I said a few million related to insurance recoveries and $1 million or so related to – I don't have those numbers precisely in front of me, I just remember them, but in $1 million or so related to capital tax refunds that we've been working on for sometime related to – that related to earlier years in Canada.

Barrett Einen – Brownstone Asset Management

So if SG&A hadn't come down that much, would you guys still have been compliant this quarter, then, with your covenants?

Greg Thompson

There are a lot of, a lot of variability related to what goes into the covenant compliance on interest coverage versus leverage. So I don't think it makes a lot of sense to hone in on just SG&A related to covenant compliance.

Barrett Einen – Brownstone Asset Management

Well, EBITDA I think would be a pretty big component, so SG&A probably impacts your EBITDA number, right?

Greg Thompson

Yes.

Barrett Einen – Brownstone Asset Management

Okay. Then one last question. How do you guys sort of anticipate delevering from here? You are sort of sitting around the 7.3 leverage level. You are saying EBITDA is going lower this year and you don't have the assets (inaudible) left, I'm just trying to understand how you bring leverage down.

Greg Thompson

Well, as I said earlier, our working capital seasonally builds in the first half of the year, and so we would expect that through that normal seasonal delevering that we will generate cash that would enable us to pay down debt in the second half of the year as well as we've got working capital, is a key focus related to accounts receivable, but even more importantly, related to inventory levels. We've seen some progress on that really in both chlorovinyls and both building product segments as far as our inventory volumes that was overshadowed by the dramatic increase in input costs. But we are starting to see some benefits of that focus on inventory. In fact, in the Royal divisions, most of the Royal divisions actually reduced their inventory balances in the second quarter. And so we are starting to, as I said, see some traction reduced on a days basis. So we are starting to see some traction from that focus on working capital management.

Barrett Einen – Brownstone Asset Management

Even though you said working capital is going to be less beneficial than you thought before?

Paul Carrico

Yes, we are just essentially saying it's not as big a percentage as what we were –

Barrett Einen – Brownstone Asset Management

Alright, thank you.

Operator

Next question, John Noel [ph] with Barrington.

John Noel – Barrington

My question has been asked and answered. Thank you.

Paul Carrico

Okay, John.

Operator

Our next question is from David Silver with JP Morgan.

David Silver – JP Morgan

Hi, a couple of questions. I guess for, Greg, I was hoping you could maybe just discuss your tax situation in terms of potential refunds or carry backs, carry forwards. As you go forward here as you've kind of analyzed the tax situation, are there any expectations you have for the ability to reclaim taxes paid in prior periods, either in the US or Canada? Any update on that, please? Thanks.

Greg Thompson

We actually received a tax refund of around 10 million right at the beginning – right after the end of the second quarter. We were hoping to get that in before the end of the second quarter. And so that $10 million, I mean, there are some other much more minor items that we are looking at for tax refunds, the rest of this year. So nothing of great significance, David, that we are looking at on a cash basis. Overall, I would tell you we won't, as far as from a cash tax standpoint, we will likely pay a little bit of taxes in the US, but we are certainly not paying taxes in Canada given the results that we are generating.

David Silver – JP Morgan

Okay. Thanks. And I guess for Paul, I was hoping maybe just to get a little more detail on your comments earlier about the export business you've been doing and how it's going to be taking on a position of growing prominence. I'm assuming that that's all for PVC, but I was wondering, would there be some other opportunities to export? I think of either your aromatics or chlor alkali might be in shorter supply due to various market issues right now. Is your export business pretty much focused on one region, one product, PVC or how do you kind of look at your strategies going forward for exporting products versus selling in the domestic market?

Paul Carrico

Well, relative to the aromatics business the demand on the export side this year is down from last year and I'm not sure I see that turning dramatically as a lot of regions of the world are showing a little bit lower demand requirement plus capacity has come on. So – not so much in aromatics. PVC is clearly the prime focus, because of its need – or the needs there is out there in the world for that product and its cost position relative to North America. Perhaps the VCM side would be an opportunity as we go forward, but that kind of remains to be seen.

David Silver – JP Morgan

Okay. And then any comment on, I guess, the new facility that Shintech is bringing up? So, I know it's early, but can you make any qualitative comments on how you think they are going about marketing their early output from that unit?

Paul Carrico

Difficult for us to say. We don't get reports as to their progress on start up and such. But the rumors out there are they probably marketed some of the output of it already, and I'm sure they are going to move forward with the project sometime in the latter half of this year. From a PVC point of view, if you're asking on a domestic basis, that would be more clearly something that would affect the market if it does in the latter part of the year.

David Silver – JP Morgan

Just wondering on just some early read on how much finesse, or lack of finesse they are using. Thank you very much.

Operator

Our next question is from Tarek Hamid with JP Morgan.

Tarek Hamid – JP Morgan

Thanks. Most of my questions have been asked already. Just one quick one on CapEx. Any update to your expectations for the rest of the year?

Greg Thompson

Yes. We reduced our CapEx target earlier in the year. We were saying $65 million to $75 million of total spend related to CapEx and we have now reduced that to $60 million to $65 million is our expectation for CapEx for 2008.

Tarek Hamid – JP Morgan

Right. And then I guess a little bigger picture in terms of what David was asking? Any update, just given the move in caustic on what you are seeing on the supply side of the industry in general? I mean, we (inaudible) offered no demands, but any color you guys could give on supply would be very, very helpful.

Paul Carrico

I think the only thing we can provide is that the market, the supply demand balance continues to be tight relative to caustic. There is probably a lot of reason to think that won't change dramatically as we go through the rest of the year, as much as anything because of the decreased demand on the chlorine side as we go forward. So at this point, still in a good supply demand balance situation, a tight one. So we expect that to continue probably for the rest of this year.

Tarek Hamid – JP Morgan

Great. Thank you.

Operator

Our next question is from David Troyer with Credit Suisse.

David Troyer – Credit Suisse

Hi, first is just, following up again on the outlook, maybe approaching it a different way. So the 222 down buy as much as 15%, maybe not that much, but as much as 15%, implies something like 193 for the full year. 107 in the first half including asset sales gains suggests something like $86 million in the back half or as low as $86 million in the back half. I'm just trying to understand the components that might make up that $86 million or greater. One is clearly, organic, legitimate EBITDA. I think you've implied that a second portion of that $86 million might include LIFO to FIFO losses, hard to quantify at this point. But that would be a factor in your kind of implied $86 million or greater?

Greg Thompson

Yes, that's correct. Let me just give you some further thoughts on that maybe and then Paul could add some additional color. I think as far as the second half of the year, that bottom end of the range that we spoke of factors in that we are cautious on the US economy in particular, the building products segments, as I said early, they do continue to disappoint. Though they appear to have stabilized, we are being very cautious there. The FIFO adjustment that you mentioned is likely to be a drag in the third quarter, but again is dependent upon what costs do. On the positive side, I would say we do feel good about our caustic pricing, as Paul has kind of talked about that, as well as further price increases in the other segments, and also realizing some of the continuing cost reductions. So that's why it would be those first items, the downside that I mentioned, that's why we see that it will be down the second half of the year, up to that 15%, but there are some positive factors that we could see that it might be better than that.

David Troyer – Credit Suisse

And just to be clear, the, a component that does not make up the $86 million, or at least not in a material way, is any expectations from gains from further asset sales in the second half of the year? Maybe they happen, but at this point, that's not a material component of the estimate?

Greg Thompson

That is correct. We do not have any gains from further asset sales in – really any gains from asset sales in that bottom end of the expectation.

David Troyer – Credit Suisse

Okay. Second question, I apologize if I missed, you provided total debt balances, but I didn't hear a breakdown. At the end of the quarter, do you have a revolver balance versus a term balance given the pay down?

Greg Thompson

The revolver balance was $134 million at the end of the quarter and the term B balance was $352 million at the end of the second quarter.

David Troyer – Credit Suisse

Okay. And then the 154 out on the AR.

Greg Thompson

Correct.

David Troyer – Credit Suisse

Any, I think on the first quarter conference call, you talked about how you thought you had some significant eligible receivables in the, in Canada that had you just never really put into a securitization program, either in this one or standalone. Any progress there?

Greg Thompson

We do have some upside based upon the size of the facility that we have. We've got $165 million facility and we are at $154 million, as we just talked about. So there was a bit more funding availability there. As the whole securitization market is changing and so that's, I think based upon that market changing as to accounts receivable securitizations, we are really not focused on upsizing that securitization facility any more at this point above the $165 million. We are really more focused on looking at the – our total capital structure as far as the overall debt load, including that securitization facility.

David Troyer – Credit Suisse

But when you're contemplating your changes of the capital structure, it's fair to say that you have a fair amount of flexibility because you have some receivables. If you're –

Greg Thompson

That's certainly true. If, for example, we moved as part of a refinancing, we moved to an ABL kind of structure, or even a different securitization accounts receivable structure, we have a lot of – we have significant additional qualified receivables that we could utilize for our funding needs that are not currently in the existing accounts receivable securitization facility.

David Troyer – Credit Suisse

Just third and final question, I think, hope, is that I heard you address some of the ECU expectations for incremental ECU capacity. I was wondering if there was any update you could provide on some of the existing capacity that has had either operating problems declared Force Majeure, things of that nature and any expectations that, that will come back on any time as soon?

Paul Carrico

No, I don't think we can really give you too much there. I think there's been some recovery of the issues that were out there, but there's also make up then required for the whole that was dug, so still in – I will just repeat, still in a tight supply demand balance situation.

David Troyer – Credit Suisse

Great. Thank you very much.

Operator

Our next question is from Gregg Goodnight with UBS.

Gregg Goodnight – UBS

Good morning all.

Greg Thompson

Good morning, Greg.

Gregg Goodnight – UBS

The question on your Lake Charles, what is your assumption going forward? Is it restart or not? Are you able to keep up with your exports, your current exports with that unit down?

Paul Carrico

We are restarting that unit this month, so repairs are complete. We are moving forward.

Gregg Goodnight – UBS

Excellent. Second question, ethylene wasn't settled when you had to close the quarter. Could you remind us what your assumption was for contract ethylene in June and what your outlook is then for July and moving forward?

Paul Carrico

On the ethylene side I think we have Doug Shannon on the line. Doug, I will let you respond, basically the increases were slightly less than what we had originally anticipated. Doug, you want to comment?

Doug Shannon

Paul, that's correct. Greg, if you look at the fly up in ethylene production costs, it really happened second half June, first half of July. So if you go back to June, I think our outlook for ethylene pricing was more robust than it would be today. The world was $1.45 on oil, and now it's $1.20. So the outlook has changed and the outlook is lower.

Gregg Goodnight – UBS

Your assumption for June was a contract price increase of what exactly?

Doug Shannon

I'm not sure I understand the question, because depending on when you're trying to reference that price, that June price wasn't settled until the end of July?

Gregg Goodnight – UBS

Right. If you had to have some sort of assumption that closed the quarter for pricing?

Doug Shannon

Yes –

Paul Carrico

I don't think we have that number handy right now.

Gregg Thompson

We'll have to get back to you on that, Greg.

Greg Goodnight – UBS

I would assume it would be up four, up five, something like that. But do your expectations going forward, is more moderation of ethylene pricing?

Doug Shannon

Without a doubt. As long as costs stay in the range that they are today, yes.

Paul Carrico

I'll qualify that. Three weeks ago, you might have had a different answer, so it's really dependant upon the current circumstances with natural gas and oil.

Gregg Goodnight – UBS

And final question, could you update us on the $0.08 PVC price increase proposal for August? What's your outlook and expectations on that?

Paul Carrico

Yes, I would say right now, it looks as though that increase will be split 4 and 4.

Gregg Goodnight – UBS

And do you think all $0.08 will be able to get into the market?

Paul Carrico

Well, certainly the market has to determine that, but, as I was saying earlier, sooner or later, some of these increases have to pass through, much as the way the rest of the chemical industry has done, and so I would think there would be a reasonable chance that that would be the case.

Gregg Goodnight – UBS

Thanks for the help, guys.

Operator

Our next question is from with Eva Yen [ph] with Independence United.

Cheryl Van Winkle – Independence United

Hi, it's Cheryl Van Winkle. A couple questions, the first one is about the – you said that you've announced price increases sort of across your various siding, window, et cetera businesses and you said you were going to be pushing for those two to get in place in the second half. I guess when were those increased? What month were those announcements made and are other people making announcements? And then what are you hearing from your customers? What sort of signs are there about what's likely to happen with those increases?

Paul Carrico

It's difficult to address the individual businesses, because we did not take the approach that some of the chemical industries have done in terms of saying there's just going to be a large increase across the board in the building products side. It's been more business by business. So it really started – or the process was started as these raw materials started moving up so quickly. I'll say July started the process, August, September, so all of that is starting to roll through. To say that we realized much of it in the second quarter would not be correct. It's much more anticipated that, that would be an influence in the third, a general comment.

Cheryl Van Winkle – Independence United

Just to interrupt for a second, I'm sorry, you said when were the prices actually announced?

Paul Carrico

The July, June, July, August time frame.

Cheryl Van Winkle – Independence United

You're talking about – of 2007?

Greg Thompson

No, the price increases were announced in building products starting in, starting –

Paul Carrico

Primarily – mostly in June, focused in June. Focused in July.

Cheryl Van Winkle – Independence United

Okay. So you announced them in June, but you told people this was going in, in July, this one is going in, in August, this one is going in, in September?

Paul Carrico

No, let me drop back and try to start over again on this one. The emphasis to increase prices started in June as all these other things started moving up. I would say more of the increases, in a general comment, started coming out in July and then continued into August.

Cheryl Van Winkle – Independence United

Okay. Okay. And what are you hearing back from your customers so far?

Paul Carrico

Customers in general prefer not to have higher prices, is what I've been told.

Cheryl Van Winkle – Independence United

I'm sure. I'm sure.

Paul Carrico

It goes back to, can the industry sustain not having price increases on the products when your feedstocks, your materials you use to make those products are going up at an unprecedented rate. And so, I think they don't like it. We are trying to manage it as much as possible in terms of improving our efficiencies and I think moderating the cost increases. But it's like you going to the gas pump, you got to pay more for gas if you want gas, and sooner or later, the building products industry is going to have to pay more for the products if they want to sustain their markets.

Cheryl Van Winkle – Independence United

And has everyone in the industry kind of made announcements like this or are there hold outs that haven't yet or – ?

Paul Carrico

Same response as to the pricing or on the pricing before. There's many variations in how this plays out in the market. I would say by market segment, some of them are a little bit stronger than others, but in general, you can read the published financial information. You can see that people just really need more pricing, or higher pricing in order to continue forward. And in general, yes, there's a general push to get those higher prices in. Is there specific individuals or groups that might be doing something a little different? Probably, but the question is whether they could sustain that more than a month or two and then have to ultimately pay the price on the higher cost.

Cheryl Van Winkle – Independence United

Okay. And I just wanted to find out on the receivables – or, not receivables, on the bank line, what was your availability at the end of the quarter?

Greg Thompson

Well, we've got a $375 million facility. The borrowings on, going through the math out loud here, 375, I said the borrowings were 134, we had roughly $80 million of letters of credit, so that's about $160 million availability that we had as of the end of June, and that has some practical limitations to it, given the leverage covenant and those sorts of things. But the facility had $160 million available as of June 30.

Cheryl Van Winkle – Independence United

Okay. Thank you.

Operator

Our next question comes from the line of Andrew Chan with Lehman Brothers.

Andrew Chan – Lehman Brothers

Thanks. Just a couple quick questions. One, when you speak about potentially seeking to refinance your credit facility that includes your revolver and the term loan as well?

Greg Thompson

That's correct.

Andrew Chan – Lehman Brothers

And then secondly, what do you think is the preferred route in terms of dealing with potential covenant compliances? Would you prefer to seek amendments with the banks or refinancing?

Greg Thompson

We are looking at all of those options and an amendment is certainly a possibility as well as – we continue to monitor the markets and we could choose, if the markets made sense, choose to go directly to the markets for a complete refinancing. Those are all options that we continue to evaluate and we stay in close contact with our banks and are engaged in ongoing and active dialogue related to that.

Andrew Chan – Lehman Brothers

Great. That's it from me. Thank you.

Operator

Our next question is from Raul Adaral [ph] with Merison Asset Management [ph].

Raul Adaral – Merison Asset Management

Most of my questions have been answered. One quick one, on the SG&A, you answered a previous question that you expect savings to keep going on. Could you give us some idea as to what the numbers would be for the rest half of the year in terms of SG&A expense, more or less?

Paul Carrico

I think the number we put in there was $27 million for year-to-date –

Greg Thompson

$27 million decrease.

Paul Carrico

– decrease, let me speak more to the decrease. That number would continue to grow as far as the decrease relative to last year, because of the sequence of when those numbers come in. It's more than a single-digit further decrease from last year, maybe that helps. In addition to the $27 million, I mean.

Raul Adaral – Merison Asset Management

So you don't see $27 million becoming $54 million on a run rate basis by the end of the year?

Paul Carrico

No, no.

Raul Adaral – Merison Asset Management

Okay, thanks.

Operator

Our next question is a follow-up question from Bo Hunt of Banc of America Securities.

Bo Hunt – Banc of America Securities

Hey, guys, some I forgot to ask you about, sorry if you already answered this, how do you see your operating rate so far in third quarter in the building products business versus where we were in the second quarter? Are we relatively flat sequentially, or are you seeing a seasonal dip?

Paul Carrico

I'm going to say in a broad sense it's flat. It's still down from last year in particular, the overall 15% to 20% down that you see in a lot of different areas. It's not been as much of a dip – I guess my perspective is, it's not been as much of a dip this summer as it might be in normal summers. So it's consistently lower than last year, but maybe better than the normal summer situation.

Bo Hunt – Banc of America Securities

Okay. And do you feel that building products industry – I know I'm speaking pretty vague terms here, but do you feel building products sitting on excess inventory at this point, or has a lot of that cleared out? I know in the past, you've guided to the fact that maybe inventory looked a little high versus norms?

Paul Carrico

I would be real surprised if there is excess inventory out there across the board. I think everybody has got the same perspective that we do, inventories is not your friend right now and so you try to keep it to a low number. I'm sure there's some people out there doing it, but as an industry trend, not so much I don't think.

Bo Hunt – Banc of America Securities

So we are not seeing people running hard and hopes kind of a rebound then? I guess that's good. And then, just more generally, have you seen a higher level of competition in some of these businesses? In particular, I'm looking at the window profiles business versus where we were when Georgia Gulf and Royal first came together in late '06. Have you seen significant new entrants in any of these markets?

Paul Carrico

I think that question was asked in the first quarter conference call in a slightly different way, but –

Bo Hunt – Banc of America Securities

I think I ask it every time, actually.

Greg Thompson

Probably you, Bo.

Paul Carrico

The problem with the window market is not the competition. We have a lot of good competitors and competitors keep coming into the market. So that's not the problem with the industry. The problem with the industry is that demand is down, new housing is killing us in that area and at some point the industry will hopefully see a recovery, based upon that improvement in the economy and the improvement in housing. Alright, got it. Are you guys ready to call the bottom in housing yet? Give me some good news, come on.

Paul Carrico

If I thought that would work I would do it.

Bo Hunt – Banc of America Securities

Alright. Thanks, guys, I appreciate it.

Operator

Our next question is from Jed Nussbaum with Redwood Capital.

Jed Nussbaum – Redwood Capital

Hi, I was just hoping you could help me with – there's been a lot of confusion about EBITDA, what credit agreement EBITDA is, LTM and for the last couple of quarters?

Greg Thompson

I'm sorry, could you say that again?

Jed Nussbaum – Redwood Capital

Sure, I'm just looking for – we've been talking about a lot of different EBITDA numbers and what's included versus excluded and I'm looking for EBITDA as defined under your credit agreement, both for the LTM period as well as for just the last couple of quarters.

Greg Thompson

I mean the numbers that I have spoken to earlier and a couple of times were all reported EBITDA numbers with reported EBITDA of $222 million for 2007. There are numerous adjustments as to, as to EBITDA on the debt covenants, there are quite a few add backs that are counted for the debt covenants. So we provide you an overview of that as to the leverage and interest coverage, but we have chosen not to get into the specific details of the individual components of the covenant calculation.

Jed Nussbaum – Redwood Capital

Okay. Is it, is – I guess the obvious question that everybody is trying to figure out is, do you expect to be in covenant compliance in the third quarter? Obviously, you mentioned you are going for an amendment and it wasn't – I don't know if that was preemptive or whether you actually expect that you need an amendment based on your third quarter results?

Greg Thompson

Well, in – the third quarter does present a challenge in that the leverage tests steps down from 6.25 where it is in this quarter down to 5.75 in the third quarter. Now I would tell you, we are, as I said earlier in my prepared remarks, the leverage test as of the end of the second quarter, we were at 5.65, so it's not a step down lower than where we were, where we ended the second quarter, and the coverage ratio remains at two times on the interest coverage test in the third quarter, just like it is in the second quarter. So we are obviously very, very focused on as we go forward relative to that as relative to continuing to evaluate a refinancing.

Jed Nussbaum – Redwood Capital

Okay, thanks. Just one other question. I was just trying to understand the thought process in prepaying a portion of the term-loan. Was that just due to the timing of cash flow? Because obviously, that wasn't required, that was not fully a required prepayment given that you drew down a fair amount under the revolver that offset the term loan prepayment?

Greg Thompson

Most of it was actually a required – I mean there's some quarterly payments on the term B and then to the extent that we have asset sales, that also generally requires that we utilize the proceeds from those asset sales to pay down debt. And so that was really all of the term B pay down that we did.

Jed Nussbaum – Redwood Capital

Okay. Thanks.

Operator

Our next question is from David Troyer with Credit Suisse.

David Troyer – Credit Suisse

Just a quick follow up. The ECU, the chloro alkali down time in second quarter for operating promise. Can you quantify how many days that was?

Paul Carrico

I will say it was a bit less than 90% for the quarter.

David Troyer – Credit Suisse

Okay. And is there an estimate at the economic impact?

Paul Carrico

No, I don't calculate, I don't have that –

David Troyer – Credit Suisse

I can't imagine –

Paul Carrico

It's depends upon what you would compare to the base, we were losing some amount of production because of the mechanical issue we had, so.

David Troyer – Credit Suisse

I can't imagine you had caustic soda inventory of any significance to help, to sell through a downturn – or the downtime?

Paul Carrico

We did that in a planned manner.

David Troyer – Credit Suisse

Thank you.

Operator

That concludes our formal question-and-answer session. I would now like to turn the conference back over to Mr. Paul Carrico.

Paul Carrico

Just one last comment to make. The first half of this year has certainly been challenging with the economic conditions in all four of our businesses and the soft sales environment, and as I said earlier, the rising pricing has been a challenge to deal with. I do want to personally knowledge the team for the second quarter results and how they were able to execute the plans we had on the books to achieve the goals we were looking to achieve. We expect the outlook to continue to be challenging for the rest of the year and to – through next year, as we intimated in this discussion.

Our focus, though, for the second half of the year will be continuing to implement price increases we talked about and to really overcome some of these higher energy feedstock and freight costs that we've been dealing with and also to adjust our cost structure to match the market conditions that we expect. We are going to pursue opportunities across all of our businesses and at the corporate level to take cost out of the system and to adjust our company to the current economic environment. So thank you for joining us today and we look forward to speaking with you in November.

Operator

Ladies and gentlemen, thank you for your participation in today's Georgia Gulf Corporation second quarter earnings call. This concludes today's conference. You may now disconnect.

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