Good morning, ladies and gentlemen, and welcome to the PolyOne Corporation's Second Quarter 2012 Conference Call. My name is Kateena, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. At this time, I would like to turn the call over to Cynthia Tomasch, Vice President of Planning and Investor Relations. Please proceed.

Thank you, Kateena. Good morning, and welcome to everyone joining us on the call today. Before beginning, we would like to remind you that statements made during this conference call, which are not historical facts, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements will give current expectations or forecasts of future events and are not guarantees of future performance. They're based on management's expectation and involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Some of these risks and uncertainties can be found in the company's filings with the Securities and Exchange Commission, as well as in today's press release. During the discussion today, the company will use both GAAP and non-GAAP financial measures. Please refer to the earnings release posted on the PolyOne website, where the company describes the non-GAAP measures and provides a reconciliation of them to the most comparable GAAP financial measures. Operating results referenced during today's call will be comparing the second quarter of 2012 to the second quarter of 2011, unless otherwise stated. Joining me today on the call is our Chairman, President and Chief Executive Officer, Steve Newlin; Executive Vice President and Chief Operating Officer, Bob Patterson; and Senior Vice President and Chief Financial Officer, Rich Diemer. Now I will turn the call over to Steve Newlin.

Well, thanks, Cynthia, and thanks again to everyone who's with us on the call this morning. We welcome the opportunity to speak to our investors and analysts about the recent performance of PolyOne, and I'm particularly pleased to share the second quarter results with you. We delivered all-time record quarterly adjusted EPS of $0.37, which is 19% over last year's record of $0.31, and marks our 11th consecutive quarter of double-digit EPS growth. Rich will share the details of the other records we achieved in the second quarter, including revenue, gross margin, operating margins and operating income. As to operating margins, 2 of our 3 platforms established new record performances with the Specialty platform at 10.6% and Performance Products & Solutions at 10% return on sales. With this second quarter performance, all platforms reached or exceeded the target operating margins we set for ourselves to achieve by 2012. On a consolidated basis, PolyOne achieved an operating margin of 8.2%, that's our best return on sales ever. Recall that at the end of the first quarter, we cautioned that we had very difficult comps in the second quarter, particularly given the economic situation in Europe. And we certainly did see sluggish demand in Europe, but we were able to overcome this headwind by improving our profitability in North America and Asia. In fact, we feel the second quarter was an inflection point for us as both Specialty segments organically improved operating income. This is the first time this has been true for engineered materials since the European downturn, and it's 1 quarter ahead of the year-over-year gains we've been forecasting for this business. Bob will discuss the performance drivers of each segment later in the call. But I want to underscore how important we view this improvement in engineered materials to be. Lastly, I want to share an important organizational change we made this past quarter as we welcome Dr. Chris Murphy, Vice President of Research and Development and Chief Innovation Officer, to PolyOne. Chris replaces Dr. Cecil Chappelow who retired in May. Chris has an impressive track record of innovation and new product development at leading global specialty chemical companies, including Lubrizol, Elementis Specialties and Nalco. Chris is already adding value and will surely have a positive impact on our ongoing commitment to deliver value to our customers and shareholders. As you heard at our Investor Day, innovation is a cornerstone of our strategy to achieve our 2015 goals, and Chris is the right person to lead those efforts for PolyOne. At this time, I'm going to turn the call over to Rich Diemer, who will review our second quarter financial results.

Thank you, Steve, and good morning. It's truly a pleasure to share our second quarter results and the many records that we achieved. For the second quarter of 2012, we reported an all-time quarterly sales record of $792 million and adjusted net income of $33.5 million versus sales of $768.8 million and adjusted net income of $29.8 million for the second quarter of 2011. Adjusted EPS expanded 19% to a quarterly record of $0.37 this quarter versus $0.31 last year. These results were driven by sales growth in the Specialty and Distribution platforms and operating margin increases in all platforms. Sales increased by 3% over prior year, driven by the ColorMatrix acquisition and gains in Asia, more than offsetting the demand challenges we experienced in Europe and the foreign exchange headwind, which had an unfavorable impact of 2.2% compared to last year. From an end market perspective, we experienced strong growth in health care and packaging. As we said last quarter, we attributed this success to our recent investments in commercial resources over the last few years, solid growth from new product introductions and the successful integration of ColorMatrix, which continues to progress even better than planned. The pre-special tax rate in the second quarter was 35% versus 34% in the second quarter of 2011, with the increase principally due to income mix, impacted by lower European income. The tax rate for the first 6 months of 2012 was 34.6%. Special items in the quarter resulted in an aftertax charge of $8 million or $0.09 per share. In addition to environmental charges, other special item charges include the specific action to reduce costs, primarily in Europe due to our view that the European recovery is likely to be prolonged. These activities impacted about 100 employees across 9 manufacturing sites, including…

Thanks, Rich, and good morning. I'm very pleased with our second quarter performance and would like to reiterate Steve's observation that we are ahead of schedule in our recovery in the Specialty platform as both EM and Color delivered year-over-year organic operating income growth despite the lower demand in Europe. Specialty revenues increased by 13% over prior year to $331 million, driven by the ColorMatrix acquisition, higher selling prices as a result of raw material inflation and new product introductions. Operating income for the Specialty platform in the quarter increased to a record level of $34.9 million, a 38% increase over last year, resulting in a return on sales of 10.6%, a 200-basis point improvement over last year and a record for the platform. This performance reaches the target operating margin ranges that we established for ourselves for 2012. I will remind you, however, that traditionally, the second quarter is our strongest quarter based on seasonality, and we do expect that to be true again in 2012. Breaking down the Specialty platform into its 2 segments. Specialty Engineered Materials sales declined 6% versus the prior year to $139 million in the quarter due to lower demand in Europe. However, with the positive effects of our mix improvement strategy, Engineered Materials delivered operating income of $12.8 million. This helped drive return on sales of 9.2%, which is a 60-basis point improvement over the prior year. We achieved the year-over-year improvement in Engineered Materials earnings 1 quarter ahead of our expectations, and we see this as a very positive indication that our strategy continues to be effective. Global Color, Additives and Inks revenue increased by 31% to $192 million due to the ColorMatrix acquisition and the strong performance in North America and Asia, offset by a decline in European demand. Organically, operating…

Thanks, Bob. I'm very pleased with the results that Rich and Bob just reviewed with you, as well as the investments that we're making to enable us to reach our longer-term goals. And I want to take a moment to thank those of you that attended our Investor Day in May, as well as those who listened to the webcast. We view our record-breaking second quarter as evidence that we can continue to set high aspirations and execute on our plans to achieve them despite challenges that we face in the market and the economy. We overcame substantial European weakness in the second quarter to deliver our 11th consecutive quarter of double-digit year-over-year adjusted EPS growth. Our second quarter performance positions us well to achieve the very aggressive 2012 targets that we've set for ourselves back in 2007. Looking forward, in view of the global economic uncertainty at this time, we will continue to both manage our spending in a prudent manner and focus on growth and mix improvements in all regions, with the goal and expectation of continuing to deliver quarter-over-quarter double-digit adjusted EPS growth. We remain committed to the execution of our 4-pillar strategy and delivering earnings expansion. With the proven track record of our employees, innovative new product launches and the further strengthened leadership team, I'm more confident than ever in our ability to execute and deliver on these expectations. So this concludes our prepared remarks, and now I'd like to turn the call back to Kateena who's going to open up the lines for your questions.

[Operator Instructions] Your first question comes from the line of Saul Ludwig representing Northcoast Research.

A couple of questions. The -- was there any FIFO benefit in the quarter? And talk about the trend in declining raw material cost and what effect that might have on your pricing and your gross margins as we look to the third quarter and the balance of the year.

Yes, Saul, this is Bob. A couple observations on that. First, we did have a FIFO benefit in the first quarter in our distribution benefit -- or Distribution segment, which was a little greater than $2 million. We did not see that repeat in the second quarter. However, we did have some benefit in our PP&S platform as a result of raw material changes in certain contracts, which are index priced. I would estimate that to be about $3 million in the second quarter. And generally speaking, those benefits don't replicate over time. So as you think about the second half of the year, I wouldn't think that, that would continue.

Now with prices still coming down, how is that working with your own selling prices across your different product platforms?

Well, as you know, I mean, we have very -- very little of our product is priced on an index basis. It's a percentage of the PP&S platform really, and then otherwise, our products are based on the value of the service offering that we provide to those customers, and they're separately negotiated based on those factors. And so obviously, in a declining price environment, there's always pressures to reduce price, and we have to demonstrate the value of our service offering to offset that.

Saul, let me just follow up on that, it's Steve, if you don't mind. We didn't see as much decline in the quarter as you might think, relative to -- on average, we saw raw material prices decrease in low-single digits compared to Q1, and that's more like a 1% to 2% comp to Q1. And that actually increased relative to the same prior year quarter around 5% to 7%. So we got some benefit and we were able to maintain that. But generally, we're not seeing as much of a pullback as you might expect in some of the raws that we're putting in. And as Bob has mentioned, we're pricing for the value that we create, which includes the service offering we provide. So I think we're managing it relatively well. I don't expect major downturns that will benefit us in this quarter in raws.

And then just finally, from looking at the data in the Q, the ColorMatrix operating margin, just on the ColorMatrix was much higher in the second quarter than it was in the first quarter. Was there things that you were doing that caused that to happen and are we now at a sort of a normal equilibrium point on ColorMatrix profitability or is that likely to change in the second half of the year?

I think the single greatest influence is mix and seasonality where they do see their strongest quarter being the second and a heavier weighting towards additives for PET consumption during the warmer months. And that's how I would describe that. So we're obviously very pleased with how well the integration is going. But I would assign most of that to the seasonality in the quarter than anything else.

The next question comes from the line of Frank Mitsch representing Wells Fargo.

All right. Okay. Well, listen, I quickly looked at the Q and looked at some of these volume numbers and I mean, obviously, your results in the quarter were very strong. But the volume numbers look pretty frightening on the Color side and certainly on the PP&S side, and can you give a little more handholding here as to why we should not be overly concerned about those volume declines?

Yes. In the first -- I'll take those in reverse order, if I may. On PP&S, that's really driven by the phenomena we saw last year where I would say, there was an almost euphoric expectation of improving housing starts in 2011 that ultimately didn't materialize. So construction-related customers were really buying in advance of that in the first and second quarter of last year, and we saw that reverse in the second half. So this year, we are seeing, I think, more moderate expectations of what's going to happen in housing, and as a result, purchasing is down. We also saw some pull-forward of demand into the first quarter from the second quarter. And I would say, that largely explains the volume decline that we saw in PP&S. With respect to Color, I would say that it is a continuation of our pruning strategy and our elimination of lower margin accounts that's really driving the preponderance of that, as well as a decline in European business, which I would describe more as same-store sales than anything else. Those are the 2 key factors in Color. And we obviously recognize those results and we've taken actions to improve profitability as a result and don't believe there's any cause for further concern.

Just to pile on to that, Frank. I mean, Europe was -- it was a tough quarter in Europe, and that was for both EM, as well as Color. And frankly, we're out selling a lot of new business, but it -- we didn't turn enough new business in fast enough to offset the same-store sales declines there, as is simply put. So we have work to do to continue to grow faster in new revenue business and try to weather this storm that could be protracted in Europe, and that's exactly what we attempted to do in the quarter.

All right, great. As you sit here today, I mean, what would be your expectations for the outlook for Europe? Are we close to a bottom or is there more to go? And obviously, I know you're taking company-specific actions to offset that, but in broadly speaking, what's your sense there? And on the PP&S side, Bob, I hear what you're saying, and if I just took what you said, I would not have expected your earnings to actually be up. So obviously, there was something very positive that you guys were doing in PP&S to offset that volume decline, and can you just elaborate a little bit on that?

Yes, I mean, I'm just going to reference the comment that I made to Saul about benefit related to raw material price in the second quarter, which I estimate added $3 million benefit. So I think that's explaining, Frank, the improvement in operating income relative to the decline in sales in PP&S. I would point out that on a normalized basis, that puts the operating margin for PP&S though at 8.7%, which is still very good relative to historical performance, so it's improving. Hopefully that explains your question on PP&S.

Let me tackle the Europe piece. We're bracing for rather protracted trends to continue in Europe. I think the good news is, we're going to start in the third quarter, start lapping some of that downturn so same-store sales will remain low but it won't look as -- optically, it won't look like it's such a fall from the base. And for us, we've got to offset that growth in North America, Asia, Latin America, as well as gain new business in Europe. And I think our team in Europe is very focused on selling new business. Their prospecting activity is at an all-time high. They've recently had a new sales -- new business sales campaign that kicked off and generated a lot of new business in their sales funnels. So they have to grow their way out of this. They've got to offset the losses and grow the business, not so much in existing accounts, but grow through new business acquisitions. That's the only way we're going to get Europe on its feet again. And the reason that we took these actions, we take it very seriously when we have to close a plant even if it's a small plant. But we felt that the -- there could be some -- we need to rightsize that business for what is probably for a while the normal flow of existing base business. And that's what we -- exactly what we've done.

The next question comes from the line of Mike Sison representing KeyBanc Capital Markets.

In terms of the Specialty businesses, you talked about new product introductions and the ability to grow organically there on an earnings basis, and you also gave us some data on price mix. How much of that price mixes is really mix? And I guess, if that -- if we can get a feel for that number, that should be sustainable as we head into the second half of the year.

Yes. Well, just first of all, we don't split out price and mix, so what you see in the Q is a combination of those 2 things. But I would overweight the mix effect versus price effect in that business and believe that you should continue to see favorable comps in the second half of this year that exceed what we delivered in the second quarter.

Okay. And then, when you think about ColorMatrix in terms of that business -- growth as we head into the second half of the year, into '13, clearly looking better than we thought in the second quarter. Can you comment on the level of year-over-year growth you'd expect in that business as we head into the second half?

Yes. I mean, I think our primary concern is European weakness. Outside of that, ColorMatrix continues to do very well and even doing so in Europe. So I think that if I were to just generalize our expectations for ColorMatrix for the full year, our EPS accretion estimate previously was $0.04 to $0.06 and I think we'll be at the high end of that range, if not just a little over.

Great. And last question, Steve, you commented that you felt pretty comfortable on double-digit growth in the release for '12 versus '11. The first half was -- and the second quarter was pretty strong given that you have a lot of these things under your control, the mix is positive, would you expect that the growth rate in the second half would maybe mirror the first half in terms of growth?

As you know, Mike, we don't really give guidance, and that would be pretty close to giving guidance. So I would just say to you that we'll stick with -- stick by our guns, which is, we expect quarterly to have double-digit -- I know that's a wide number. I mean, it could be 10%, it could be 99%, and that's an awfully big range. But I think at this time, to get much more specific than that would be something we wouldn't be comfortable doing.

The next question comes from line of Dmitry Silversteyn representing Longbow Research.

Couple of questions, if I may. First of all, in ColorMatrix, can you give me an idea of what the year-over-year growth was in sales and in operating profit for that business?

Yes. Year-over-year increase in sales was low single digits. And that really is a result of an increase in base business, offset by a weaker euro. So I think the growth would have been a little bit higher as a result of that. And then from an operating income perspective, it was just a little bit below where it was last year, primarily related to mix where we saw lower sales and additives in Europe than we did anywhere else in the world.

And coupled with some investment that we're making in the business.

So it sounds like despite what Saul noted was a very strong margin in the quarter, last year they did even better.

Yes, they did. But I would point out that there is about $0.75 million of additional investment that's been put into that business since the end of last year, and that we did have some mix changes just as a result of where that revenue is derived on a global basis.

They had, for a variety of different reasons we won't get into, an extremely exceptionally strong Q2 last year as a comp, and I'm confident that the comps for the second half of this year with ColorMatrix will be -- will show a much greater growth rate.

Got it. I was also interested in hearing you talk about Engineered Materials passing through an inflection point in the quarter. Can you expand on that a little bit? What's on the other side of the inflection point? And sort of what was the -- what gives you the confidence to say that you've passed it?

Yes, I mean, if you just recall from last year during the third quarter, that was the first time in years where we had actually reported a year-over-year decline in operating income, and that really was a result of 3 factors: one being a decline in demand for our high-end Wire & Cable business in Europe related to solar applications; the second being a general decline in demand for Europe; and the third being some pullback in demand to client for high-margin products in the consumer end space, which we aligned to some of the headlines related to consumer customers like Procter & Gamble, et cetera. And that was really in the third quarter, which was in the August-September time frame when there was just a general concern about what was going on in the economy. And what we've said all along was is that we expect our comparables to begin to improve really towards the second half of this year as a result of those things improving, as well as new business gains. And we're just a little bit ahead of that with our operating income improvement in the second quarter. So that's really what we're referencing about being just a little bit ahead of schedule.

And Dmitry, I think the other thing that gives us great confidence in EM is the flow of new business, particularly in Europe. I mean, we're taking a beating in -- automotive production, as you probably know, is down substantially in Europe, and that's a bad guy for us. But we are having really good success in penetrating some new business applications. So we're feeling better and better about EM's near-term and, of course, long-term future.

Got it, got it. Okay. You mentioned several times weakness in Europe, and obviously you're not the only ones. Automotive market sounds like it continues to be weak for you, which is a comment that was echoed by one of your peers with a big exposure in European auto market as well. Are there -- what's sort of the consumer market looking like for you and are there other bad guys in Europe in terms of market segments? And are there any segments that are actually holding up fairly well or even growing in this environment?

I would say that in Europe, you can pretty much -- with the exception of health care, you can pretty much broadbrush it as just a general overall slowing across all markets, across all segments. And I think health care has always been a little more resistant to the downturns. In addition to that, I think our efforts and our resources that have been allocated to that market in Europe have been bearing some fruit. But I think just overall, it's a very sluggish economy with a lot of conservatism in the buyer's mind and in terms of inventory placement, in terms of demand and consumption.

Okay, but it sounds like your lapping, even that, in the second half of the year may not seem big of a [indiscernible].

Well, yes. I think it started during the third quarter, and I can't say that we had it for all the third quarter. Certainly, Q4 will -- we'll have a full year of overlap. But it -- we did certainly start to see the slowdown in Europe in the third quarter of last year. And Q3 in Europe is -- as you know, is always low because there's a lot of shutdowns and extended vacations, et cetera. But that's just -- on a year-over-year basis, that's when we began to see the downturn, and I would say was probably starting more the last 2/3 of the quarter than the first third.

Got it. Okay. And the last question on Asia, you mentioned a couple of times with a number of your segments that you've seen good Asian growth that's helped you offset some of the weakness in Europe, along with growth in North America and ColorMatrix. Asian economy has been slowing down as well, particularly the Chinese economy, and yet most of the stuff that you said in the call were pretty positive about the region. So can you reconcile those for us, I mean what are you seeing in Asia right now, and if it's different from a slowing growth that everybody else is seeing, why the difference?

So let me take a shot, and then I'll give it to Bob because he spends a lot more time in Asia than I do. First of all, I would say, I think the reason that we're optimistic in showing better-than-normal results there is, we're executing extremely well right now in Asia. We have made some investments. We have made some changes that were done over a year ago. They've been working hard, and I think they're paying off. So I think it's more to do -- has more to do with our own execution than it has to do with the general backdrop of the market. Bob?

And related to Steve's execution comment, and this -- if this wasn't clear in the call, then let me try to do so right now. I mean, we have had the most noticeable growth at the operating income level. So as a result of execution, leadership changes, et cetera, we've improved the profitability of that region. And that's really the primary statement that we were trying to make about Asia rather than a macroeconomic-type observation.

Okay. So you -- so Bob, with that, is that your way of saying that you are seeing the economic conditions there beginning to slow down at least, if not decline?

Yes, that's a fair observation. We are seeing that. I mean, across the emerging markets in general, we do think that there has been some deceleration of growth. I mean, keep in mind that in China, that's still very high relative to anywhere else in the world. But I think it's fair to say that, that -- it has slowed. We had a lot of opportunity for improvement in our own business, and that's what we're focused on, and that's how we're getting the operating income growth.

Your next question comes from the line of Mike Ritzenthaler representing Piper Jaffray.

I guess, I just want to add my question under the previous ones on ColorMatrix from a little bit different angle. So it seems like -- I guess, the spirit of the question is, what was the performance like in the base business? I mean, if you take out the ColorMatrix and look at organic growth, it doesn't -- the story is not quite as robust. I was wondering if you could just add a little bit of color to that.

Yes. Well, I mean, it is delineated in the Q, hopefully. If not, then let us know. But we did have organic improvement in the Color segment at the operating income level, and that was as a result of mixed improvements, largely. We obviously delineated that on an organic basis, we did see volume declines, which were principally related to previously undertaken pruning actions, as well as demand declines in Europe. We were very happy with the results, given the headwinds in Europe to have operating income improve on an organic basis. So I think that was a good guy for us. And I think ColorMatrix is also a good guy for us. While their own comparables year-over-year were down slightly on the operating income level, it was really more a matter of mix-driven in Europe for the higher-margin Additives products than anything else that we don't think is a long-term trend or cause for concern.

They have -- ColorMatrix does have a fair bit of exposure in Europe, but they're managing it. And as I mentioned earlier, I'm extremely confident that we'll see an expansion and acceleration of their growth in the second half of the year. It was -- it really was a very anomalous quarter for them in Q2 of last year, and they had some pull-forward from Q3 and just a really strong quarter to comp. But we are not the least bit concerned about ColorMatrix. We're highly encouraged and excited about current and future growth prospects.

Okay, outstanding. And then the $8.7 million charge for cost reductions in Europe, I think it'd be helpful to get a little bit more clarity on what that all entails, if there's anything else that's left that you have to do there in terms of charges. And then maybe, what the -- I'm assuming that the plant in Sweden focused on auto end markets primarily.

So this is Rich. Mike, what I would tell you is this. So the total charge, it was about 3/4 in Europe, and there were 10 sites involved, principally in and around manufacturing. So that, we think, is rightsizing our footprint there for the long term. I think overall, there is a little bit that we did in Asia and a little bit that we did in South America, so that's the remainder of the charge. Again, the small footprint-type actions that are there. So it was a relatively small plant in Sweden, but we're going to do that business out of elsewhere on the continent. And we just think it was the right thing to do given our, I guess I would say, somewhat Euro-skeptical outlook on how quickly things will rebound there.

Another observation I would make on that, Mike, is that we still have a presence in Sweden with a sales force and a commercial organization. This really was just a relocation of manufacturing activities to other locations in Europe to support that business. So we haven't exited Sweden or conducting business there. It really was just the manufacturing activities.

Okay. And I guess just to follow up on that, no other charges expected, kind of in the next half?

Well, Mike -- this is Rich. When you do things like this, some of the things you can take on a charge and some are more period costs. But yes, those are relatively small.

Okay. All right, got it. And then, it looked like SG&A substantially higher even though -- despite -- even though they are record revenues, so you would expect some sort of SG&A uptick. But it seems like the leverage maybe wasn't quite there this quarter. Is that a fair observation?

Your question was SG&A was up or down versus what period, I'm sorry?

I was just comparing year-over-year.

Well, ColorMatrix is the biggest part of that increase year-over-year.

They have a more intensive service model. And therefore, their SG&A costs as a percent of sales are higher than the normal PolyOne mix as well, just to point out.

Yes, of course, that makes sense. I guess just one last one, in terms of the bio-based resins and maybe this kind of links up with the personnel announcement that, Steve, that you had made earlier in the call. Is there any sense you can give us on maybe projects or something the R&D folks are working on to give us a sense for whether specialty additives or biopolymers is something that could happen in the next couple of years? Is there anything in particular that you're excited about on that front?

I mean, there are quite a few things going on in that space, and we've been investing here now for about 5 years, and we've got, I think, a very strong position. It's not a market that you can really push, you got to get some pull from, and we're seeing evidence of it. I would say, the U.S. is lagging a little bit in terms of demand, but we are in a really strong position here. We've got some products that have been -- that have come out recently that are doing well. We have our reFlex 100 Bioplasticizer. That's a renewable plant-based feedstock, and that was something that we developed in collaboration with Archer Daniels Midland. So we think it's a great alternative to conventional plasticizers, and there's been a lot of regulatory pressure for plasticizers. And regulatory is what drives these kinds of growth in the U.S. and unless there's some economic advantage, and there generally isn't a big economic advantage until you get oil prices in there around $100 or so. So that's roughly the tipping point. It can be between $85 and $125 or so, depending on the application. I don't know what else you'd like me to comment on. But I think we've got a strong position in bio-derived and biodegradable products. And what's interesting, Mike, is we're learning how to formulate better with these products, how to create additional performance attributes and characteristics. For example, the ability to withstand greater temperature. And that's a huge step as you begin to use different cornerstone raw materials. If you want to use these products in value-added application, we're not talking about garbage bags here, we're not in those applications. You want to put this under the hood of a vehicle, you've got to make this work under intense temperature conditions, and we are progressing very rapidly on that front.

Your next question comes from the line of Rosemarie Morbelli representing Gabelli & Company.

Just following up on Europe. Could you talk about the trend during the quarter? Did you actually see a deterioration between March and June? And is that deterioration continuing into July?

I think that it was, like -- the headlines continue to be fairly oppressive, and they didn't get any better through the course of the quarter. It might be more accurate to say that things didn't get any better than they got worse. But certainly, things have slowed down some in the summer months. And I'm not entirely certain whether or not that is just in anticipation of a seasonally slow third quarter or if there's something else behind that.

I mean, we know that 90% of Europe shuts down in August; well, now they share it between July and August. But do you see that they are extending their plant shutdown versus what they did last year? Or is it more or less at the same level, taking advantage of the summer vacation to close for a longer period of time?

We saw -- we actually saw some of that last year, Rosemarie, and that's what was sort of the trigger point for us in understanding that this was a very serious downturn that ultimately has been extrapolated now for really 4 quarters. So the phenomena is probably pretty steady this year with what we saw last year. But we actually, starting August of last year, saw people take plants down for an extra 2 to 4 weeks beyond what we'd seen in other historical seasonality comparables.

Okay, so similar this year, not adding another week?

Not so far. But I mean, it's the season, and it would not surprise me to learn that people that were shutting businesses, that were shutting down for the month of August decide to extend that out into mid-September. I wouldn't be surprised to see a little bit of that go on. And again, I think for us, we're going to deal with the macroeconomics that we are dealt, and we're going to mitigate those by selling more new applications and growing new business faster. And I think we're in a nice position to do that now in Europe.

Okay. And still in Europe, regarding the restructuring. What are your expectations in savings? I mean, did I understand Rich properly and you will more or less save $8.8 million of -- that was the cost of restructuring over a period of 1 year? Is that what Rich meant?

That's correct, Rosemarie. But as I said earlier, about 3/4 of that restructuring was in the manufacturing area. So that comes in over time with higher margins, and we think this is the rightsizing our manufacturing footprint given the longer-term outlook there.

And you don't -- and you really think that you have done everything that you need to do? You don't think that you should go ahead of the curve and do a little more and still be able to operate and grow as the economies recover in the region?

PolyOne did significant restructuring a couple of years ago, and we think this is -- we think we're always ahead of the curve. We try to be ahead of the curve as much as we can be.

Okay. And regarding cross-selling where you are making progress as I understand it. Could you quantify how much cross-selling you have been experiencing?

I mean, the recent -- the gains that we had this year and the observations we've had around progress in certain process we've had in Asia and Europe generated about $18 million of sales leads as a result of those 2 activities, which we view as very positive. I mean, it was directed towards cross-selling, as well as prospecting. But that gives you a little bit of flavor for what we've done in the current period.

About 20% of our new business, which is at a record high right now, is a result of cross-selling. So it's a nice increment. I'd like it to be higher, but we're certainly headed the right direction there. And I'd also mention this is a metric that I look at a lot, and I know Bob does as well, is new prospecting, so that's what kind of activity you have going out to gather new business, and that's at an all-time high for the quarter. So we're pretty enthusiastic about the new business gains we're seeing and the future of the same. That's the only way we can get out of this European challenge. I mean, automotive -- for example, automotive sales in Europe were down 26.5% for the quarter, and we have a fairly decent degree of penetration in that marketplace in Europe. Asia grew faster than that, but we don't have the same degree or anywhere near the same degree of penetration in automotive in Asia. So the only to get through these sort of downturns like this is to sell your way out of them, minimize your expenses, rightsize the organization and get more new business back in the house.

And Steve, do you have any exposure to the North American automotive market?

Yes, and we have pretty good penetration. And that business was -- had a decent high-single digit production rated increase in the quarter.

And you saw the same kind of growth in Europe products -- product lines going into that?

Yes.

Yes, we [indiscernible] in U.S. dollars, that's right.

Your next question comes from the line of Steve Schwartz representing First Analysis.

Rich, I didn't hear you say anything about CapEx. I didn't see anything in the Q. Can you guys give us an update on what your spending plans for the year are?

Sure, Steve. I think we've kind of underspent compared to our guidance in the first half, but we just had a review the other day, and I would still range it at $50 million to $55 million for the year, and my money would be on closer to $50 million than $55 million.

Okay. I think at the last conference call, you guys were talking more of $55 million to $60 million, does that sound right to you? And why is it lower?

We may have been. But I think we've gone through the projects, and that's where we stand right now.

Okay. And then just lastly, can you give us an update on Latin America expansions? I know you have been spending some capital and planning on expanding that business there.

Yes, we're continuing to look at organic initiatives, including the addition of TPE capabilities, which is our GLS business line, as well as our high capability wire and cable products under the ECCOH brand name. Those 2 initiatives are moving forward with manufacturing to begin, hopefully, at the end of this year. And then as always, we're looking for M&A opportunities to supplement what we have in that region.

Well, I think that's it. It's time to conclude our second quarter 2012 conference call. I want to thank you all for your continued interest in PolyOne and for joining us today. And we're really looking forward to updating you on our progress for the third quarter, and that's scheduled for late October. Thank you all very much. Have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.