Andrew Liveris: The strategic drive is to create an earnings-ridge and not a decline to a trough. We''ve made statements that we would earn north of $3 at the next trough. I''m the last to keep wanting to see a decline on a year-on-year or sequential. Given our strategic moves paying off already through the portfolio moves we''ve made, inclusive of our joint ventures, we have arrested the decline and despite these headwinds, we still have very good cash flows and earnings power. This is because of our strategy working and we''ve committed ourselves to changing our earnings profile. That''s our strategy. The day will arrive when that profile is transformed and we will start talking about year-on-year earnings inclines and quarter inclines, which is what this management team is driven to do.
Scott Burk (Bear Stearns): There is significant cost increases year-over-year, but what does that look like sequentially?
Kathleen C. Fothergill: Sequentially, it was about $500 million.
Scott Burk (Bear Stearns): How much did you spend on share buyback in the first quarter?
Geoffery E. Merszei : We spent about $410 million.
Mike Judd (Greenwich Consultants): You have some new business in your polycarbonate resin business. Do you have detail as to how much of that business is durable versus the non-durable type applications?
Andrew Liveris: Polycarbonate is destined for our new joint venture with the Kuwaitis. It will go in there and one of the reasons we have done that is because of the position our company has globally. We are number five in the world and building ourselves to the top one or two from the position we are in needs some big stock back integration, which we can get with the our new partnership. The key raw materials there relate to aromatics and that''s very key in our Kuwait partnership.
Mike Judd (Greenwich Consultants): What is Dow''s position globally in terms of pounds?
Andrew Liveris: In terms of our position though, we do have two excellent joint ventures; one in Japan and another in Korea. It’s with Sumitomo and LG respectively. One of these joint ventures is the star of the shop. Both of them perform very well and most of their end-use markets are what the Asian market is all about, which is optical media. If you take those two joint ventures, which you don''t see consolidated in our top line because they are joint ventures, and if you add our share of those joint ventures in our total Polycarbonate business, you will see much more balance between optical media and durables. But if you take the pure Dow business, which is the U.S. and Europe, it''s more centered around durables.
Kevin McCarthy (Banc of America Securities): Can you provide an update on your Styrenics joint venture with Chevron?
Andrew Liveris: Expect the new joint venture Americas Styrenics to begin operations very shortly, probably next month. Once that joint venture launches, we''ll look at its envelope and begin to expect the synergies the two parents eagerly want to get. The first is on the downstream, which is polystyrene, which is mostly our contributions and the second is the upstream, which is styrene. The new joint venture management and the new joint venture Board will be intensely focused on making that the number one business in the Americans. The focus from the two shareholders remains intense on putting that company together for improving profitability and making that business a growth business.
Frank Mitsch (BB&T Capital Markets): Your commentary regarding the TIC JV is helpful. However, what are you going to do with the cash and is the timing of that announcement predicated on the closing of the transaction?
Andrew Liveris: The hurdle that has to be overcome with any M&A is share buyback. We understand accretion is instant on share buyback and takes time on an acquisition. But we''ve also said the types of properties we''re looking at are basically for growth. Cost synergies play a role in making affordability work. We want to grow and we''re putting in place a new earnings profile. Focusing on the businesses and markets that we''ve talked about, our market-facing units and our performance businesses, means that we’re looking at clean buys or as close to clean buy as we can get. The value proposition has to be right. As a consequence of that, the discipline has to stay intact.
It''s based on history; we''ve done 11 smaller acquisitions. The probability is that they will stay small until the right opportunity presents itself that''s bigger. Meantime, the deadline of the close of our Kuwait deal increases the probability that share buyback will become a reality and we''re fine with that. We''re preserving optionality and we''re doing share buyback. It''s a big and. That''s how we''re managing the precious cash our shareholders give us the right to manage.
Hassan Ahmed (HSBC Securities): It is commendable that despite the $2.2 billion run up in feedstock costs, you reported flat year-on-year EPS. How much of an offset to those high raw material prices did currency provide?
Geoffery E. Merszei: We do have a very strong international presence. That, of course, does translate into the benefits of a weaker U.S. dollar. But, our international footprint is very much with a local presence. In other words, we have very large fixed assets. In fact, the Euro is the largest component on the currency side. In Europe, 30% of our company''s fixed assets and employees are located in Europe. We therefore have a fairly sizable offset on the cost side. On the pricing side, less than one-third of the price increase is attributed to the stronger Euro or the weaker U.S. dollar. In addition, in the last quarter or two, there''s been a very strong correlation between the commodity prices, i.e., oil and the U.S. dollar. Historically, the correlation may have been considerably lower, maybe 10%. However, over the most recent times, there''s been a flight from the dollar to commodities; the metals and oil. I would therefore expect that if there were a major correction in the currency market, that you would see a similar correction on the commodity side which would also benefit us.
William Young (Chemspeak): How long do you think the pain will last in the ethylene overcapacity cycle over the next number of years, especially realizing that you still expect to earn $3 at the trough?
Geoffery E. Merszei: Pain is always relative. We clearly have said that we''re going to see capacity at the back end of this year that will cause oversupply. However, the Iranian stuff is still sputtering and it''s not all going to come on seamlessly. To the extent that 2009 will have some little more capacity than 2010, then clearly 2011 will have a lot more. There is probably a jagged ride down to an ethylene trough but remember we have announced our Kuwait deal. We''ve announced all of our low cost investments. There was a question about the EQUATE expansion; not the one we''re talking about but the one that we''ll talk about maybe in the future. We therefore have mitigating factors that gives us confidence that our proportionate share of that decline can still, on a proforma basis, reach the target we talked about $3 of the trough.
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