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We also do not plan to update any forward-looking statements during the quarter. Please note that information recorded on this call speaks only as of today August 03, 2012, and therefore, you are advised that time sensitive information may no longer be accurate at the time of any replay.In addition, some of our comments may reference non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures, and other associated disclosures are contained in our earnings release and on our website. And with that, I will turn the call over to Mike. Mike McDonnell Thanks, [Dan]. Good morning, everyone, and thank you for joining the call. This morning, we will review our second quarter results, both as reported and underlying and the drivers behind our results. We will continue to provide the high level of transparency that we began a year ago, discussing our inherently stable, services based business model generates consistent underlying earnings. Finally, we will provide and update on current market conditions and our strategic growth projects. Our second quarter underlying results of $37 million which exclude the temporary impact of butadiene price changes of $13 million compare well versus our best ever quarter one year ago when we experienced stronger market demand, customer inventory restocking and normal feed stock supply quantities. Our better than expected results this quarter were achieved in spite of the challenges of temporarily reduced feed stock volumes, softer end user demand and destocking. As you recall, our feed stock constraints in the first and second quarters of this year were due to the abnormally high concentration of planned ethylene plant outages that we communicated during previous investor calls. Our second quarter results really confirm the resilience of our fee-based business model and the inherent value of our aggregation, processing, logistics and other services that we provide for our suppliers and customers. The results reflect our strategies of service fee expansion, operational excellence and targeted volume growth.
Our employees did a terrific job in working with our suppliers and customers to manage through the challenging feedstock constraints during the quarter. Overall the company continued to execute well.In addition to the solid underlying earnings for the quarter, we generated $26 million in free cash flow as a result of lower working capital requirements that resulted from the decline in butadiene pricing. As we anticipated and communicated since late last year, the U.S. ethylene industry experienced an unusual number of extended turnarounds during the first half of 2012. As a consequence we were challenged by the reduced amount of available crude C$ feed stock which negatively impacted our volumes of all products in C4 processing segment and one product in our performance products segment. At the same time, market demand for butadiene derivatives such as in synthetic rubber has been soft and many customers report that destocking activities are underway. As a result of the C4 feedstock constraints and softer demand for butadiene compared to the prior year, our C4 processing segment sales were down 13% in the first six months of the year which reflect a consistent 13% decline in both the first and second quarters. Our performance products segment sales volume was down 7% in our core products, mainly as a result of the temporary feedstock restrictions in one product line as well as some demand softness. Now, I would like to address butadiene supply demand and pricing. The structural shortage of butadiene due to light cracking based on cost advantage of ethane from shale gas is now firmly in place and widely understood. This structural shift couple with demand growth will continue to drive butadiene pricing upward over the longer term. Our customers understand this long term structural issue and place a premium on our ability to provide them with security of supply for the future. While the long term trend is for pricing to move up, butadiene can also exhibit short term volatility as we have seen over the past several years. As we foreshadowed during our first quarter investor call, butadiene pricing fell significantly over the last several months. Read the rest of this transcript for free on seekingalpha.com