Good day, ladies and gentlemen and welcome to the Second Quarter 2008 Albemarle Corporation Earnings Conference Call. My name is Amity and I'll be your operator for today. At this time, all attendees are in a listen-only mode. We will conduct a question-and-answer session towards the end of today's conference. [Operator Instructions]. I would now like to turn the presentation over to your host for today's conference, Ms. Sandra Rodriguez. Please proceed.

Thank you, Amity. Good morning, everyone, and thank you for joining us today for a review of Albemarle's second quarter results, which were released before the market opened today. Our press release contains preliminary results for the quarter, and this information is subject to further review by the company and our auditors, as part of our quarter-end review process. Please note that we have posted supplemental sales information as well as reconciliations for net debt and EBITDA on our website under the Investor Information section at www.albemarle.com. I'd also like to caution that the remarks today contain forward-looking statements. Factors that could cause results to differ from expectations are listed in our Annual Report on Form 10-K. Participating with me on the call this morning are Mark Rohr, President and CEO; John Steitz, Executive Vice President and Chief Operating Officer; and Rich Diemer, Senior Vice President and CFO. Now, I'd like to turn the call over to Mark.

Thanks Sandra, and good morning to everyone. We are pleased to have the opportunity to share our second quarter results today. And we all look forward to answering your questions after a few remarks. Before commenting on Albemarle's second quarter consolidated results, I would like to update you on some of our strategic initiatives. You may have seen our recent press release, announcing the June 30th completion of the acquisition of the remaining 25% of our Jinhai Albemarle joint ventures. We are excited at both of these Chinese facilities as 100% holding on subsidiaries of Albemarle. The acquisition of the leading antioxidant supplier in China, strengthens our foot ground in one of the world's fastest growing markets. Currently operating at nearly 100% capacity the Shanghai plant expansion which will double antioxidants capacity is expected to be completed in the summer of 2009. Another strategic opportunity is a joint venture in China between Albemarle and Sinobrom. Pending file approval by the Chinese authorities, we expect to complete the transaction with 75% ownership, in the third quarter of this year. Sinobrom's solid position in the bromine derivatives industry in China, coupled with Albemarle's innovative leadership in a global bromine industry offers unique value to the Chinese bromine market, which will create a strong growth platform for us in this critical region. In June, we also announced a merger between Albemarle and Sorbent Technologies. Pending Sorbent's shareholder approval, expected later this month we plan to close on the purchase by the end of this month. Driven by the federal and state regulations to control mercury levels, submitted into the atmosphere, Sorbent's full-service mercury control solution is gaining traction with U.S. power plants, needing to comply with these regulations. Albemarle's cost position in bromine, creates an excellent synergy with Sorbent's technology, and what we…

Thanks Mark. Good morning everyone. As I walk through the operating results today, I would like to point out that comparisons exclude the impact of the special item from the second quarter of '07. But together our business has delivered roughly 10% top-line revenue growth year-over-year on relatively flat volumes and improved pricing across most of our businesses. Furthermore we are able to hold operating profits steady, while dealing with more than $45 million in our input cost over the same period of last year. With that backdrop let's move on to the individual segment results. Starting with Polymer Additives. We are extremely pleased with Polymer Additives record quarterly sales revenues of $261 million. Overall we saw double-digit year-over-year revenue growth in our flame retardants portfolio and in stabilizers and curatives, which includes revenues from our Jinhai joint ventures. Volumes were up year-over-year and sequentially in brominated flame retardants and strong electronics demand. We believe without any growth in overall supply chain inventory. This is offset by decreased volumes in mineral flame retardants on weak auto sector volume. Polymer Additives segment income declined 25% year-over-year. The profit decline in Polymer Additives resulted from raw material and energy cost inflation. And our inability to cover significant amount of the cost of ATH, aluminum trihydrate used in our mineral flame retardant division, where competitive pricing environment in Europe has been extremely difficult and intense. In addition, earnings were negatively impacted by inventory reductions we took in the quarter. Our highly oil dependant stabilizers and curatives business was also challenged for staying ahead of the raw material and energy environment. All this lead to a tough quarter on segment margins that were diluted by inflating revenues and relentless input costs that have been difficult to recover. Going forward, we expect volumes and pricing…

Thanks John, and good morning to all. The items I will address on the call today are corporate expenses, income taxes, cash flow and our June 30th balance sheet and financial position. Unallocated corporate expense was $12.9 million in the second quarter, up $2.1 million from last year, but comparable with our Q1 2008 expense level. SG&A expense was up 14% year-over-year at 10.9% of revenues in the quarter. And for the year-to-date are at 10.2% of revenues versus 10.6% last year. R&D expense in the quarter is up 18% over prior year levels. So, we continue to fund future growth opportunities. Taxes; our effective tax rate for the quarter was 18%. Our current view of our full year effective tax rate is 20%. This is the same as the effective tax rate that we recorded for last year, and is lower than the rate we envisioned at the beginning of this year and after Q1. It is based on our current forecast of the level and mix of income in 2008, and the benefits from tax planning activities we have undertaken. Our EBITDA this quarter is $110.5 million comparable to last year. We ended the quarter with cash and equivalents of $168 million. CapEx for the quarter was $20 million and we are retaining our full year CapEx estimate in the $90 million to $100 million range. Deprecation and amortization was $27.5 million. We did not buyback any additional shares in Q2 after executing the buyback of $4.1 million shares in Q1. At quarter end, we have consolidated debt of $891 million, including $57 million of debt from JBC, our Jordanian bromine venture. $390 million of our debt is fixed rate and $501 million is floating rate, up 44% to 56% split. Our floating debt interest rate is 3.14% at quarter-end. The weighted average interest rate for Q2 was 4.12%. Net of $168 million cash on hand and excluding $32 million of non-guaranteed JBC debt, our net debt is $691 million, up $141 million from year-end and down $11 million from Q1 levels. Our debt cap ratio is 39.6% and our net debt cap is 34.6%. Given our business outlook and expected cash flow for the reminder of the year, we are comfortable with our current leverage employee. And, with that I will pass it back to Sandra.

Thanks Rich. We'd like to open it up for your questions now. Question And Answer

[Operator Instructions]. And your first question comes from the line of P.J. Juvekar with Albero [ph]. Please proceed.

Yes, hi. Good morning.

Good morning, P.J.

Good morning, P.J.

Though,in Polymer Additives, most of your sales increase came from volumes with very little pricing. And you had announced several price increases throughout the first half. So my question is how much of this price increases that you have announced are actually sticking?

Yes, P.J. This is John. When you look at the numbers, it's a big impact in Polymer Additives, because with the volume decline in mineral, we have actually had a pretty solid mix effect from the brominated flame retardant business. So overall, our negotiated returns on our announced price increases have been quite successful, but there is a big mix effect in polymer additives. So with that said, most of our work now is regaining. Mineral flame retardant, margin losses and the phosphorus flame retardant margin losses because of the dramatic influence in the future on phosphorus going forward.

So John, with 16% increases in sales, how much of that was pricing versus volume? Can you just break that down for us?

I'd say roughly about a third of it is pure pricing. The balance would be, maybe another half of that would be mix and then you have the overall volume impact.

Okay. And what were your operating rates in your bromine production facilities?

Bromine was pretty high P.J. I'd say in the... our bromine, bromine wells in 85% to 90% range yielding about the same. Our specialties in brominated flame retardants have been higher. The real volume downturn is occurring in our mineral business and those rates are probably in the low 70s.

Okay and then one last question on Fine Chemicals. You talked about raw material and energy costs. Now what is the mechanism in Fine Chemicals to pass through this cost? Is it a contract based pass through or do you have great prices on ibuprofen and other products?

No, we have to drive those price improvements in Fine Chemicals for sure. I mentioned that we've had some good solid gains in clear brine fluids, for example. The profit hasn't fully come down from those products because of the dramatic increases in transportation costs, for example. So, we just announced couple weeks ago an increase in calcium bromine pricing, for example to cover that. We announced about a month ago sodium bromide price increase. So, we are working hard to get that pass through, but we really have to drive that in Fine Chemicals.

Okay, thank you.

Thank you, P.J.

Your next question comes from the line of Kevin McCarthy with Banc of America Securities. Please proceed.

Yes, good morning. John, if I look at Polymer Additives and focus on the brominated flame retardants, in that piece of the portfolio, what would the margin trends be there on a year-over-year basis. Are those margins, hanging in relatively stable, such that the bulk of the erosion is really on the mineral side?

You bet Kevin; it's actually... grew nicely on a sequential basis, our brominated flame retardants. So that's why the real focus is on our mineral. We've had $5 million sequentially of uncovered raw material increase, probably another $2 million related to sales volumes due to weakness in the automotive sector and some poaching going on in Europe. So in that environment, we are working to get these prices up in mineral. We were somewhat pleased to see last week an announcement by European competitor announcing a mineral flame retardant price increase. So, obviously, we are going to work to support that as much as we can.

Elsewhere in the chemical sector we've seen a few companies attempt to change pricing mechanisms to indexure [ph] or formulaic route. Have you thought about that all and as far as where you have to deal with ATH and phosphorous in these sorts of inputs. Might that be an option for you to avoid the lag affects associated with those pressures?

Yes, I think what I think Kevin, we are looking at all of the above. We are looking at transportation surcharges, natural gas surcharges, things like that. But the key in specialty chemicals is really to price those products for the value they bring, more than anything. And I think in that context many of these products that have lost margin, really need to be priced for the value they bring and that would be significantly more in many cases than the raw material increases we are seeing. But we've got to take this one step at a time, just as you say, and look at everything possible.

Okay. And then finally, just couple of quick financial questions. Number one, when might you expect to resume share repurchase activity and then Rich, can you give us an update on your working capital goals that you mentioned at Investor Day?

Sure Kevin. We may get back into the market as soon as possible. I mean, we are always looking at that equation, so we have not precluded doing further buybacks. The rest of this year, we'll just have to see how things go. We had a little bit of a step back in working capital from a day's point of view in our second quarter, but we still have visibility to driving the improvements that we have as a goal for the year. Our net working capital is pretty much flat in the second quarter, but we are still trying to get money out there and we'll be continuing to focus on that as the year proceeds.

Okay. Thank you very much.

Thank you, Kevin.

Your next question comes from the line of Jeff Zekauskas with JPMorgan. Please proceed.

Hi, good morning.

Good morning, Jeff.

Good morning.

In your... catalyst volumes were down, I think 11% in the quarter. So, which was down more, HPC or FCC?

Sequentially HPC and secondarily sequentially FCC, year-over-year, it was... the majority of the decrease was in FCC.

Majority of that. So, you brought on this large slug of HPC capacity? I take it that you feel that the... whatever volatility in the market has caused the sales volumes to ramp up slower than you expected and you said that the third quarter would also be slow is that right?

Yes, Jeff, I think we've been pretty crystal in our view that over the next two years we we'll fill that unit up.

Yes.

And we've also been very clear in communicating that volumes would be weak in the second and third quarters as part of that. So I don't think there is any inconsistency here. In that volume that the broad perspective I would just urge you and I think everybody to have on this businesses is if you plot the growth in these volumes, now that we don't give out publicly. What you'll see is the quarter-to-quarter volatility is just a myth and the month-to-month volatility is just a myth. As a matter of fact, the month-to-month volatility is equal to the mini. So you can have pretty big swings depending on what the market is doing out there. So I... it may have been lower than some have predicated, but I think it was quiet consistent with our views that were given.

Yes, you bet.

So you still expect to sell at least on average half of your new HPC capacity this year, you haven't changed that view?

Will be sold out next year and what I'm not quiet prepared to say is, it will exactly half at the end of this year. The team is pretty confident. We are going to see those volumes come on strong as we end this year but it's all a function what those refineries do. Some refineries have in places reduced rates. We've not seen a near term impact of that but you always worry, and kind of paranoid gods [ph] all worried a bit about the impact of that. But in the scheme of things from over this two year cycle, I'm pretty confident will be full swing next year.

Just a couple of more quick questions in Polymer Additives, apparently brominated flame retardants are growing and mineral based flame retardants are contracting. Broadly speaking, why is that? Is it the difference between the electronics and the auto markets?

Well I think the auto market has in particular impacted the mineral flame retardant business and that's used as a PVC alternative and conduit for automobiles. So I think that's been the biggest impact there. But I really don't see any kind of secular trend here, Jeff. I think it's really as we work through some inventories in the marketplace and frankly in Europe we've got a competitor who really hasn't been supporting the price increase effort and has been intent on trying to take market shares. So we've had to take steps to protect our market shares in Europe as well. So I think that is mostly a dynamic in our mineral flame retardants.

Of the 220 in raw materials costs that you have expect. How much of that is not pass through. Or to ask it in another way, how much of the raw materials of this 220 do you pass through contractually?

We get about half pass through in catalysts on lot of that to HPC related to molybdenum, cobalt, nickel.

Right.

The other... a big portion of the catalyst though is FCC related and that has to be pass through in the marketplace. The balance of that is spread evenly between half Fine Chemicals and half Polymers. So, you can see from the net margins, there is thin in polymers there's about $8 million that we're not getting pas through today. Five of that mineral and about three in stabilized urgent curatives related to products like isobutylene, phenol, natural gas, and other energy costs.

I guess lastly for Rich Diemer, are there any prior period adjustments that have affected the tax rate this year either in the first two quarters or in the second two quarters?

Absolutely not. If there were, we would obviously highlight that out for you, so you would see it. It will be transparent. I think the biggest change between... what we did last year Jeff, is we said all our incremental income on a worst case basis would be in high tax jurisdictions. And what's happened, part of this actually planned, is we have seen the bulk of the incremental income in either low or no tax jurisdictions. So what you see is JBC actually had a record quarter, that's tax free money. It's almost like an arbitrage of our production assets. And with that... so you'll see a benefit on the tax line from that, but you'll also see a hurt on minority interest line to that. So, we feel on a total sustainable basis, 20% is where we see the full year coming out right at this moment. Should we start making more money in the back half in higher tax jurisdictions we'll then adjust that accordingly. And we are hopeful that we are getting closer to a settlement with our back years with the IRS but while we've had conversations there, we have nothing yet to announce and when we do have that will account for that we'll make sure you know what that is.

Okay. Thank you very much.

Thanks, Jeff.

Your next question comes from the line of David Begleiter with Deutsche Bank. Please proceed.

Thank you, good morning.

Hi, David.

David, good morning.

John, you discussed FCC pricing, how the price increase is flowing through and are margins above, go above 10% in FCCs?

David, yes, we've had continuing success in selling the value equation in FCC and our average price was right around $3,100 a ton in the second quarter. So, I think, we've demonstrated consistently the ability to sell that value equation in our FCC catalysts. Overall the margins are less today, than the overall margin of the entire catalyst business. So, we still have some work to do there as it's still being somewhat dilutive. But, there is an announcement last week on a price increase but, one of our competitors and again I think that's demonstrating the value these products bring. So, we're studying that right now.

And, John the lower volumes in FCC this quarter, were there any competitive situations you couldn't respond to or is it normal seasonality?

Well, some of it is seasonality. I think, probably about a half of it is seasonality or year-on-year there was a major one-off shipment made in FCC that occurred. But overall, yes, I would have to say that we have lost some market share in Europe due to some other competitors, not having the same view of the value that these products bring. So, I'd view a miss if I didn't tell you that. But things are tightening up on a supply basis and that's good. Raw materials continue to escalate dramatically in this portfolio. rare earths, silicates, ATH, ATH we always talk about in terms of mineral flame retardants, but there is a big part ATH goes into FCC catalyst as well. So, I mean, those input costs are rising dramatically and we see going forward could have another $250 per ton impact in the second half. So, we have to got to work to get that pass through.

And John similar color on bromine FR pricing, how is that trending?

Yes, we've had some good success over the last couple of months on continuing to get prices up. The mix is really the issue there, David, our tetrabrom volumes have rebounded from a year ago. And, so that is dilutive in terms of the mix of the overall business. But our specialties are doing quite well including our decabrom alternative and products like that. So, we're continuing to see a pretty resilient market out there for these products. And we're somewhat pleased by that and hopeful that, that will continue into the third quarter. And, the third quarter comp will be a little easier in the sense of last year third quarter volumes were very, very weak in the overall brominated flame retardant portfolio. Hope that gives you a little color on it.

It does. And lastly for Rich next year's tax rate should we assume a slight increase versus this year?

Hi, that would be the safe way to go. And we will give you a lot more color on that as we get closer to the end of year.

Thank you.

Thanks, David.

The next question comes from the line of Laurence Alexander with Jefferies. Please proceed. Laurence Alexander - Jefferies & Co: Good morning.

Hi, Laurence, good morning. Laurence Alexander - Jefferies & Co: I guess the first question is in Polymer Additives. Can you give some details some more clarity on the inventory reduction? What the impact was this quarter if thinking behind it. And whether you feel you need to do another one in Q3?

Well, we try to, yes, Laurence this is John. We really try to manage our working capital and our inventories quite tightly especially with this volatile raw material environment. If there ever is a downturn, we certainly don't want to be situated holding on to very high cost raw materials. So, that is kind of the driving principle, but we just want to use our cash very well, as well. So, if you look sequentially at our entire polymers portfolio. It is down; inventory is down about 12%. And I mean that did not have an insignificant impact on the profitability for the business. My guess is it's in as far a nickel a share right there. So that is good discipline around our working capital and our volumes in our Polymer Additives business did not help in terms of our margin contribution in that sector. Laurence Alexander - Jefferies & Co: And do you see a similar reduction needed in Q3 or do you think you're done at this point?

No, all depends on primarily volumes in Europe around flame retardants. We're starting to see some times that we've rebonded out of it; the brominated flame retardant business looks pretty robust right now. And our antioxidants business in China where we have some concerns in the intermediates area. The end product seems to be, volume seem to be pretty healthy. So, overall, we're cautiously optimistic. Laurence Alexander - Jefferies & Co: Okay. And then, on raw material terms, do you have about a $5 million to $8 million net lag currently depending on how you look at the... sort of headwinds in Polymer Additive -- ?

Right. Laurence Alexander - Jefferies & Co: For the full year, where do you think you are going to end the year with the tier in $20 million increase in raw materials? How much of a lag do you think you'll need to catch up in 2009?

Well, I think if it were to stay at $220 million. We feel we can cover that. Laurence Alexander - Jefferies & Co: By the end of the year?

Yes. My worry is really what happens in terms of the markets and the volatility around these products, I was reading at oil today is up another $2 a barrel. So it's a tough environment to understand it. We are just trying to really stay all over it. And we haven't had certainly any luck at all in the first half with this ramping raw material issue, but I think all those in our space are based with the same issue. I think we intend to do a better job of really getting out in front of it and understanding its impact and trying to communicate that across to our business folks and to our customer base.

One of the tough thing. This is Mark, that John and company face is that there is a frame on a lag time. I'm not sure quite how to do that, the calculus on that. But even today if oil started dropping, I think inflation will continue to grow for a while. As this sort of works its way through all the sectors. And, so the 220 is an anticipation of a continuing work through. And I think that's a little bit independent of where oil ends up at the end of the year. I mean I think it's going to be there before oil drops $20 a barrel, my gut it is still about 220. If it goes up another $20 a barrel, then you've got another round of inflation that rolls through in 2009 yet to yet to determined. So, it is an unsettling time from that point of view. And John's team I think has done really good job driving these prices and there's only that one or two areas that John has mentioned where because of other market situations, we are just not able to do so. That must be in Polymer Additives. Laurence Alexander - Jefferies & Co: Then, lastly just quickly on the net fee multi year order that you mentioned, is that a material, or is that more just interesting a validation of the technology moving forward?

No. I think that's going to be quite material. We are talking 2000, for the most part 2009 and '10 for that. And Neste is...if you go to webpage and look, they are really promoting this technology or a number of new plants that are scheduled to be built. They will come on stream after we end this decade. So it could be a... it's a first step for us in alternative fuels, it could be a huge step, and I think there could be steps to follow. Laurence Alexander - Jefferies & Co: Any rules of thumb to help us to gauge the impact next year?

We really not do that right now. But it's bigger than a bread basket. Laurence Alexander - Jefferies & Co: Okay. Thank you.

Thanks, Laurence.

Your next question comes from the line of Steve Schwartz with First Analysis. Please proceed.

Good morning.

Hi, Steve.

John, I think in answering David's question, you touched on this. But, what the catalyst volume drop, FX also disappeared. Are those two connected to each other or this related to FCC in Europe?

With the catalyst volume drop was there an FX impact?

Well you can see that your ForEx impact to revenue in the quarter was zero in catalyst.

Yes.

Whereas, in the previous quarter, it had been 3.5% or 4%. So, I am just... I am wondering if there is a regional mix component in what happened with the volume, and if that's tied to why FX was zero? So in other words --

Yes, I understand Steve. So well, we are kind of naturally hedged and the volume we sold in both FCC and HPC in catalyst is pretty naturally hedged by the production base there, if that helps to answer your question.

Steve, this is Rich. On the usual break out we do for top-line growth, we have 3.5% impact positive on for catalyst. So I'm not... you maybe picking up a bad number here.

Okay. Okay, I'll check that.

Okay.

And then just from a longer perspective on catalyst, we are starting to see demand destruction in gasoline in the U.S. And, I know that U.S., from North American refineries are a big portion of your revenue there. How do you see that demand destruction impacting your business in the next six to 18 months?

Yes. Well, that's a challenging question. Because probably a lot of people have a lot different opinions on it. But you know at its heart, what our catalyst do and what our competitor's catalyst do bring tremendous value. They make processes more efficient, they help drive a better product mix, they help improve the environmental situation by pulling out non-wanted pollutants and contaminants. And overall, my belief is that the catalysts help refiners in that context. Now, with that said, I think the refiners are going to do everything possible they can to extend reactor times before they go through a turnaround. And try to utilize catalysts on longer duration. And things like anything they can do to try to beef up their margins, because obviously with the dramatic ramp up in oil costs a lot of the pure refining places are struggling in this environment. But we think overall, longer term; our catalysts really help out that situation and not hurt it.

Okay. So in other words, the technology should overcome any decline in consumption?

Absolutely. And if we don't, we're not doing our job to really drive value in their use.

Okay. And then just one last one on SG&A, it looks like if I look over the past couple of years on a quarterly basis, on the even years, your SG&A expenses typically lower in the first and third quarter and this year you certainly seemed to be following that pattern. So should we expect that SG&A could be flat in the third quarter, on a year-over-year dollar basis?

I think, we haven't done that sort of regression analysis Steve, so maybe you've figured out a pattern here but I would say we are going to be very mindful of SG&A expense in light of everything else we've talked about in the third quarter. So we're only going to spend what we need to spend.

Okay, got you. Thanks John thanks Rich.

Thank you, Steve.

Your next question comes from the line of Mike Sison of KeyBanc. Please proceed. Michael J. Sison - KeyBanc Capital Markets/McDonald: Hi guys.

Hi, Mike.

Hi, Michael. Michael J. Sison - KeyBanc Capital Markets/McDonald: Any update on HPC operating rates or you have been running that business sort of at a pretty good trajectory [ph] expansion anticipation of these of the better order, timing that you see in the second half to 2009?

Well, in the second quarter. We actually build a bit of inventory. We had couple of upside orders for us that originally were planned to go out at the end of the quarter and didn't go for a sundry reasons. But there were some pretty significant volume in that business. So, we had the inventory there ready to go. So to conclude that, yes, we had been running at reasonably high rates to make the volumes for those two significant international HPC orders. The other thing Mike I'd comment on is, the great thing about our catalyst business is the ways we can make money of this business. And one of those that wasn't insignificant in the quarter was the royalties we make of the regeneration process. And that yielded some significant profit for us. But it's just another great example of how the overall portfolio within catalyst is so strong, so balanced, so diverse and allows us many different opportunities to make money. So, I'd kind of include that in the HPC kind of portfolio and that was equivalent to about 1,000 tons of HPC volume, just regeneration work that we did. So it's not insignificant. Michael J. Sison - KeyBanc Capital Markets/McDonald: Okay.

That also helped our... help drive the margins at record levels that you see. Michael J. Sison - KeyBanc Capital Markets/McDonald: And Mark your confidence in filling up the plant by the end of '09 are you contracted out yet? Have you signed most of that capacity out?

We have some big orders in there that... between, that will come in at 2009. That helps me stake my confidence. I think second to that, there are number of units that are on the radar screen that we feel that we have a good chance to get that business and John also mentioned some of the, he had mentioned some of the advances we're making in catalyst technology. Last thing I'll mention is UOP is going to start kicking in the bid in 2009. So, Mike, I think that we'll be full as we end next year, yes. What... I am little bit less clear on in just that question is we'll be half way there by the end of this year, I think a lots going to depend on the fourth quarter to make that happen, and we have seen a few order slip a little bit, So I'm a little anxious about, about whether will we'll actually do this linearly is going to be a bit back end and weighted. Michael J. Sison - KeyBanc Capital Markets/McDonald: And the way to think about the third quarter based on FCC maybe some market share loss there, that you noted John, and maybe some push out for HPCs, the volumes there would probably still be down a little bit in catalyst as it was in the second and then you have a sort of big fourth quarter surround out the year.

Yes but, Mike, this is John. Compared to the second quarter, I think we'll see some sequential gain in FCC and see some modest sequential gain in HPC. Michael J. Sison - KeyBanc Capital Markets/McDonald: Okay. So the year-over-year decline would be less than what you saw in the second quarter and the third directionally?

That's correct. Michael J. Sison - KeyBanc Capital Markets/McDonald: Okay then. I wanted to leave with a real quick Polymer Additives, the $8 million sort of squeeze in raw materials that you noted, do you have price increases to cover that right now correct?

On the mineral Michael J. Sison - KeyBanc Capital Markets/McDonald: And phosphorus.

And phosphorus. We are working on phosphorus as we speak. We're having some success. The stabilizers and curatives, we believe we can get that. We are working on those increases across in antioxidant and intermediates portfolio, but, ATH we do not have yet. We are working through that right now. Michael J. Sison - KeyBanc Capital Markets/McDonald: What's the delta in the third and fourth quarter? Does that $5 million in ATH get bigger in your assumptions based on what you know, now?

No, unless the euro changes dramatically. But -- Michael J. Sison - KeyBanc Capital Markets/McDonald: So, you sort of have a $5 million squeeze in the second, another $5 million in the third and another $5 million in the fourth to offset?

Yes, we have got to work to get offset. That's correct. Michael J. Sison - KeyBanc Capital Markets/McDonald: Okay. So, there is sort of 15, a $10 million headwind in the second half for ATH. I am curious [ph] as it stabilizes, are you... that's the business you normally can get pricing for that, right?

You bet. Michael J. Sison - KeyBanc Capital Markets/McDonald: Okay. So, that $3 million you had in the third quarter, whatever the assumption is in the second half, you should be able to get that?

You bet and we are hoping for sequential increases in brominated flame retardants to help offset the... what we don't achieve on ATH. Michael J. Sison - KeyBanc Capital Markets/McDonald: And there is no squeeze in the bromine flame retardant side. Everybody seems to be raising prices to offset and maybe get more pricing than raw materials?

Yes, it seems to be a good disciplined environment out there Mike. Michael J. Sison - KeyBanc Capital Markets/McDonald: Okay. And, last question, minerals, I know it's a necessary business for you to be in longer term. What do you think needs to happen, do you need the right size of the business or is it just... do you need to help consolidate the industry a little bit to maybe help improve the stability?

Well, clearly there is some competition going on in Europe that just doesn't make any sense to me. Michael J. Sison - KeyBanc Capital Markets/McDonald: Right.

And the net results that are demonstrated by that, particular entity are not good and one of them just announced a price increase, just Thursday of last week. So, it's not enough to cover all this inflation we are seeing in ATH and energy. Michael J. Sison - KeyBanc Capital Markets/McDonald: Right.

But it's a start. So, we are going to pay close attention to that. Michael J. Sison - KeyBanc Capital Markets/McDonald: Okay, thank you.

Thank you, Michael.

Bye, Mike.

Your next question comes from the line of Chris Shaw with UBS. Please proceed.

Hi, good morning. How are you doing?

Good.

Hi, Chris.

Hey, I might have missed it, but what was the... why were volumes down in Fine Chemicals? What was the main culprit there?

Well, the main thing, sequentially is our ag intermediates business, which is primarily a 4Q through 1Q campaign. So, sequentially, it was almost all that. I mean, that was probably 7% or 8% of the total volume.

And year-over-year?

Year-over-year primarily. Well, year-over-year, our volume was up.

It was?

Yes, the volume, now there are some mix affects in there, but pure volume was up about 5% to 6%, Fine Chemicals.

So the number you... the negative 1.6 that's in the release or in the --

That's the mix impact of revenue it plays a big part in that.

Okay, okay, okay.

And we debate with that numbers what we kind of publish and we have gotten ourselves in a habit of always doing this on one methodology. But I think with the net, the volume impact year-over-year, volume in Fine Chemicals was actually up.

Okay, and then, just curious, you mentioned that FCC is around $3,100. What were they in 1Q, did you give that or do you know?

Yes.

They are not small increases. A pretty big impact?

Yes, it was I mean it's up about 7% - 8% sequentially. And up about 25% year-over-year.

All right and excuse, the... well the minority interest line for Polymer Additives, will that go away that you have bought out the JV in China?

For that JV yes, that part will, but there are some other smaller items that are also in there.

Was that half of it or more, I mean approximately.

More than half will.

Yes, almost all of that.

Most of it will go away.

I guess I mean if refineries are struggling at margins and I mean you are operating a little less, does that, that doesn't encourage them to take a turnaround in price from HPCs, now?

Not in my experience, they are just half or down and cut cost and if you look at it on the variable basis and you set aside oil, the other thing is the catalysts starts getting up there. They will do things to slow down rights and slow capacity.

Okay. And one last one quickly. For ATH, what's actually driving the increase there, is it just aluminum prices?

Yes, absolutely. And aluminum and the ATH market itself. I mean there are limited choices. There are lot of alternatives to achieve. So we are competing against much bigger volume absorbers. So we have to buy according to market.

But some of that going to pigments is running well, I thought maybe like our coatings, or some I thought maybe that would actually have created less demand?

Some of the complementary uses?

yes.

I am not sure, I say most of it in other aluminum based applications.

Okay, great. Thanks a lot guys.

Your next comes from the line of Dimitry Silversteyn with Longbow Research. Please proceed.

Good morning.

Hi, Dimitry.

Hi, Dimitry.

I just want to follow-up on a couple of questions first, and then switch gears over to talk about Fine Chemicals. Did I understand you correctly, in response to Mike Sison's question that the $3 million in that you say you are lagging in the second quarter and price increases in stabilizers and lubricants you'll be able to get that in the third quarter?

Yes, we hope so. We are working hard to get that through.

Okay. So --

[Multiple Speakers] isobutylene, phenol related. We are going to work hard to achieve that.

Okay, all right. Now the softness that you expect in this second and third quarters in the catalyst business? Did you expect it to come on the FCC side? Or did you expect it to come in the HPC side? And just have it to come on the FCC side?

No, we expected both because generally the first quarter is pretty high volume. We had lost some volume as I mentioned in Europe to a lesser extent in Europe, that's more market share related. And we've had couple of those customers come back to us, which is a good thing. And so, we are continuing out there to try to sell based on our value equation Dimitry, and now it appears that the market is tightening, the raw materials continue to escalate. I think we've been kind of on track with that curve. But if it hadn't been for that dramatic increases that we saw in rare earth and silicates and ATH, our margins would have been even higher. But with what we're facing, we are pretty happy where we are.

Now... so if I can kind of summarize what's going on in FCC business and why then the volumes there are negative, you are having a little bit less of a market if you will in the U.S. because of you know fuel miles driven, whatever. And then you have market share loss in Europe?

Correct.

Okay. And then on the HPC side you talked about some orders that you were thinking of shipping this quarter that got pushed into the next quarter. Is that the way to understand your comments?

Well, they were originally planned for the third quarter and then the customer you know, tried to move them up. But there is some complications in it because these are fairly complex orders. So, they didn't end up going. Now, what we don't know is what's going to happen at the end of the third quarter. So, overall we are anticipating a sequential volume growth in HPC, but we are also aided by a very strong mix effect in the second quarter. So, if we could... I would anticipate that the net profit we make of a catalyst would decline in the third quarter, but that's kind of in our plan for the year.

Versus the second quarter or versus third quarter of last year?

Versus second quarter.

Okay.

Yes, versus second quarter.

All right. And then, switching gears a little bit, talk about the Dr. Reddy agreement which I do believe was for your ibuprofen supply, was that agreement or dissipation of part of your comments during Investor Day that you were looking to get the ibuprofen plant to 90% utilization rate, I think by the end of next year?

Yes, that's part of it Dimitry. That and we've got a number of other good volume opportunity. So, the business from volume perspective is doing pretty well. It's also faced with a lot of raw material inflation. So, to bring that down to bottom-line we've got to run our plants very well and we've got to continue to get pricing up because a lot of these organic drive raw material are involved in ibuprofen. Natural gas is used in making ibuprofen and other input costs like hydrochloric acid and things that are used in ibuprofen production. So, it's all going up, and to continue to drive the profit we've got the volume now, we've got to produce efficiently and get some improved pricing.

So do you have price announcements or private price initiatives out there in the marketplace currently?

Not right now but it's been worked on.

And is the Dr. Reddy contract have any kind of a price band on it or is it just market pricing or any kind of --

I wouldn't want to get into all of details around that but, yes there is some coverage there.

Okay. All right thank you.

Thanks, Dimitry.

Your next question comes from the line of Robert Koort, Goldman Sachs. Please proceed.

Good morning.

Hi, Bob.

Hi, Bob.

Mark I need you to move down the bad news more quickly. So I can take advantages of the huge and bad moves connection speed maybe next time.

Its happening buddy. It's happening.

A couple of questions first on the ATH do you guys buy ATH or do you buy box.

We buy ATH, Bob.

And do or do you know your competitors buy it from Chinese sources because I guess they are really curtailing aluminum production over there. So that's going to create some supply constraints for somebody.

No they don't buy so much from Chinese sources.

You mentioned that maybe your competitors have a little different objective on pricing and profit margins in AT or mineral flame retardants and obviously you guys are still producing 10% margin, which I know you probably disappointed in but looks quite a way is out from others in the industry. So do you think this is just an issue where you have got much higher expectations and the rest of the industry is willing to accept lower returns or can we have some reason to hope that this is just a temporary issue?

Well, I think it is just temporary. When I look at the financial results you know delivered by the competition it is way below anything close to what we are doing. So you know their orders are magnitude. The question you asked is one of you know relativity but I think there is so far off the mark that they have got to do something. to get the --

To get to be more explosive, and I'm wondering, John, is do you have... are your margins sufficiently higher than your competitors that even if they raise price. That your create umbrella there, I mean what do you think your competitive margin structure looks like in that particular product line is there some reason to think that you are constrained in margins or not?

No, I don't think so. Because we know where ours are of course and actually the company I'm referring to is a public entity. So, we know, where there's are and they continue to kind of talk about buying expansion which in this environment we just don't understand. So, we've to take steps protect our market share. And, but, as I said there is just a recent announcement last week, and it's only an announcement but, it's first one of its kind. So, we will see how, the behavior, what the behavior is coming out of that, and pay attention to that closely.

And, John, I think you mentioned, mix effects partly resulting in the weakish looking price mix dynamic in additives. I guess when I look on an annualized basis given what raw materials have generally done; I wouldn't have expected that this year would be the slowest rate of increase especially given your comments about bromines still having some improvement over in Fine Chemicals you've got a lot of price obviously that's influenced in part by the bromine molecule. So, are we talking actual price declines in some of these products or what would cost such a modest price movement in '08 so far?

Well, the mineral product line is priced roughly half of that off the bromine. Might be target line just by its nature and cost structure. So, that's really the mix effect that I'm talking about. When we've seen just the base volume decline year-on-year in mineral its got a big volume impact because it is much bigger volume is twice the volume level flame retardants and then on a pricing level it's half. So that's really what I was talking about was a big mix impact. So, the help is on the bromine flame retardants side we've continued to see profit improvement sequentially and we're helping for a good third quarter there as well, does that help you to understand a little better.

Yes and I will try one more it does although I am often and still confused with ATH if you are suffering on volume given its got the lowest product price point when that actually help your year-on-year realization from a mix stand point

Yes, it's right.

Okay so I guess my question is in the quarter you showed 1% price mix improvement in additives and given where benzene and phenol and bromine costs are down, our prices are down broadly I would have expected a much higher rate I guess.

Yes if you look at our polymers business in total, the polymer volumes are actually up sequentially and up year-over-year if you actually look at volumes in polymers and exclude the mix effect.

Okay. I think I'll have to talk with you guys. Thanks John.

Talk with you later. Thank Bob.

Your next question comes from the line of Todd Vencil of Davenport. Please proceed. Todd Vencil - Davenport & Co. of Virginia, Inc.: Hi guys, thanks.

Hi, Todd.

Hi, Todd. Todd Vencil - Davenport & Co. of Virginia, Inc.: Quick question, most of my questions about the business have obviously been answered. You guys have done a good job. You have talked in the past about your feelings regarding the consensus estimate out there for fuels I think at this point it's 270, 61 weight on, weighing on how you feel about those right now?

Todd this is Mark. I think, we kind of start the year given that perspective then we said we felt okay, with consensus, yes we started the year-end and so far we have not changed that perspective. Todd Vencil - Davenport & Co. of Virginia, Inc.: Okay, thanks a lot.

Thanks Todd.

Your next question comes from the line of Steve Sherman with Newburn & Associates [ph]. Please proceed.

Hi, good morning guys.

Hi, Steve.

On FCCs, there is only two parts of the businesses, so the base FCC catalysts and additives, can you go over how those two are doing to sort of sum up to the total in FCC business?

Well, additives business is a real small portion of our overall FCC business, but it is doing well, they tend to be SOx and NOx reduction additives, but it's, in terms of total volume of the overall business it is fairly amount of piece of that.

I guess some profitability however, I think you made comments that those are they add much more value than sort of your core catalyst. Our profitability side isn't much; you know is it punching above its way to fuel?

Yes, on a relative basis it is... it's doing well. But still on terms of being a significant part of the FCC profitability. It's still much less than the majority, I mean you are talking in 10% or 20% of total.

And can you give us an update methyl bromide in any expectations in next couple of years, out side sort of your previous comments?

Well, methyl bromide year-on-year, is just stable, it's flat, it's under the critically used exemption process, we still don't see any change there. Pricing year-over-year has changed does the cost structure has obviously increased as well. And though we've been successful year-over-year in getting some reasonable price improvements. But for us year-over-year there is really much more significant change in the methyl bromide either way and we don't anticipate any changes going forward that's governed by the EPA critically use exemption process.

And, then finally on the Chinese antioxidants plants net of any if you will shut down or slow down in manufacturing other parts of the world and how materials that really going to be at the end of the day?

That business been a really nice business for us, now we are working continuing do to drive pricing improvement to cover the oil based input cost there. But that's been a good business for us, and I think is one of the other colors mentioned, the minority interest line will go away as we're now on 100%. But its overall margins are higher than the margins of the total Polymer Additives business. So, it's accretive to our margins and it's accretive to our earnings it's been a great deal for us, it has put us really on the map in terms of China and roughly about $5 million a month in sales. So it's good.

Steve this is Rich just to clarify we do have JBC as minority interest in both the Fine Chemicals business and in the polymer business. So John's comment is that as it relates to anything Jinhai related that minority interest will go away, that will disappear.

All right, and then a clarification on couple of HPC orders that didn't go in the second quarter were those due to complications on the customer end or in your end? And then you mentioned that you will have to wait till the end of the third quarter to see if they was a way. I would imagine they would be pretty much right away if they run a cost for the quarter?

Yes, and although we think those are going to go in July. But what I was referring to was other orders that are on the fringe of the quarter, Mark mentioned how lumpy this business is and in the last week of a given quarter can make or break this business many times. So, the... but, to your specific questions, mostly delays due to at the customer side of things.

Great, thanks guys.

You bet.

And then, your next question is a follow-up question from the line of Jeff Zekauskas with JPMorgan. Please proceed.

Hi.

Hi, Jeff.

Couple of short things. The interest expense for the quarter was about $8.5 million, is that a good number to use for the next two quarters?

I'd use that might of the next quarter and hopefully by the end of the year you know it will be a combination of what if say anything we do in terms of potential additional buyback and where rates are. So, we should be very cash generative in the third and fourth quarter and you know, what we do with that cash influence there.

What was the operating cash flow in the quarter?

Operatingcash flow for the six months Jeff is about $94 million up 10% year-over-year.

That catalyst equity income went from $5 million to $7.5 million. How did you do that?

Yes. It was two factors. We mentioned good growth in the regeneration piece of that. And that's through one of our ventures. And also our Nippon Ketjen HPC venture in Japan did better.

Okay. I was little bit confused in that. There are some orders that will probably flop into the third quarter. And I think, one of the commentators said that you thought that all in your segment income and catalyst would be sequentially down. Are both of those true?

Yes.

Okay.

Now, there is... reiterated by a very strong mix in the second quarter, and particularly in HPC. Jeff, our Nebula very high activity self reduction catalyst did quite well, and is probably the highest margin product in the whole family, so strong this impact.

In terms of the whole raw material issue, sort of order of magnitude, your prices were up 10%. And last year you had, call it $560 million in sales. So, your prices looks like they are up about $56 million and your cost of goods sold is up, maybe about $45 million, all things being equal. So, I take it then in the aggregate, you're still ahead of your raw material price inflation. Is that right?

Yes. Now, you have to take into account, we reduced volumes in polymers year-over-year and sequentially. I think that had an absorption impact as we watched that working capital, my guess, is about $5 million. And then... so there is other impacts like that. But you really have to get into the weeds Jeff, and that's where when we look at polymers. And in its margin decline either year-over-year or sequentially, it really comes down to this mineral flame retardant. And our inability to get that ATH passed through in this European competitive environment.

Then lastly, for Mark, it just seems that marginally, you are just a slightest bit more conservative about your HPC volumes for the entire year. And there is all kinds of reasons why maybe volatile and quarter-to-quarter basis. But, are there fundamental reasons why you're a little bit more cautious for the year and what would those fundamental reasons be if there are any?

Well, every time I make a comment it's based on some fundamental perspective in the market Jeff.

Okay.

What we see in 2009 is a fair amount of clarity on new business, is booked. And so, that base goes in the year. And so the rest of the ambiguity deals will change our... change our schedules, whether we win or don't win an account. As we as... I just got back from Asia and there were a couple of our accounts in Asia. This is... there is no impact on us to-date where refineries in Korea had actually slipped the turnaround by a year. So they sort of backing off a bit on sulfur. That's an example. It's a data point. And so I... until I get the orders book, and said that when John gets some books, he comes and reports to me. I'll start relaxing and then I haven't got that point to relax yet for this year. So, we got work ahead of us to get to draw volume I think this year. I think we've got more tailwinds next year. I think we end up quite... I feel good we're going to end up there Jeff within next year. But this year, it's just too difficult to tell.

Okay. Thank you very much.

Thanks.

And you have no further questions at this time.

Okay. Thank you everyone for participating on the call today. If you have any further questions, please contact me at the number indicated on the press release. Have a great day everyone.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.