Greetings, and welcome to the Quaker Chemical Corporation Second Quarter Results Conference Call. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Barry, Chairman, Chief Executive Officer and President for Quaker Chemical Corporation. Thank you. Mr. Barry, you may now begin.

Thank you, Rob. Good morning, everyone. Joining me today is Margo Loebl, our new CFO; and Robert Traub, our General Counsel. After my comments, Margo will provide details around the financials and then we'll address any questions that you may have. We also have slides for our conference call. You can find them at the Investor Relations part of our website at www.quakerchem.com. I'll start it off now with some remarks about the second quarter. The second quarter net income was relatively strong at $10.5 million. This was a 7% improvement over the net income from the second quarter of 2011. We incurred approximately $0.09 per share of special charges, which were made up of bankruptcy-related reserves of $0.06 per share and CFO transition costs of $0.03 per share. Let me now go into some of the variables impacting our sales and gross margins. Sales were up 5% from the second quarter of 2011 and essentially flat from the first quarter of 2012. The stronger dollar is really impacting our top line. Foreign exchange negatively impacted our sales by 6% from the second quarter of 2011 and 2% from the first quarter of 2012. From a volume perspective, you can see the overall sequential quarterly increase in our volume on Page 3 of our slides, where we had a modest 1% increase in our sequential volumes. However, across the globe, we are experiencing different situations. In North America, our sales were strong and we saw double-digit increases in sales versus the second quarter of last year. This was due to good steel and auto production, as well as 2 North American-based acquisitions we made last year. But when you look at the rest of the world, we saw a different story. Yes, we still saw growth in the Asia Pacific…

Thank you, Mike. Turning to the financial portion of the call today, I will reiterate that Quaker had a solid second quarter and year-to-date in 2012. We reported, as you know, second quarter 2012 earnings per diluted share of $0.81 reflects an approximate $0.03 dilutive effect as a result of the company's equity offering in May of 2011. Excluding the $0.09 of share -- charges related to bankruptcies and CFO transition charges, EPS would have been even better. Let me walk you through the second quarter results briefly. I will first make a few comments regarding foreign exchange. For both the second quarter of 2012 versus the second quarter of 2011 and year-to-date 2012 versus year-to-date 2011 comparisons, we have seen, as you all noticed, meaningful strengthening of the U.S. dollar versus both the euro and the real, while there has been some weakening of the U.S. dollar versus the renminbi for both periods. Given that well over half of Quaker's business is conducted outside of the U.S., these fluctuations, largely a strengthening dollar, negatively impact the company's translated results. Now let's turn to the P&L more specifically. Looking at net sales, our net sales for the second quarter of 2012 were $176.8 million, an increase of 5% from $167.8 million in the second quarter of 2011. Product volumes, including acquisitions, were higher by 6%, selling price and mix increased revenues by 5%, while foreign exchange rates decreased revenues by 6%. Meanwhile, net sales for the first half of 2012 were $354.4 million, an increase of 8% from $327.7 million in the first half of 2011. Product volume, including acquisitions, were higher by 5%, selling price and mix increased revenues by 7%, while foreign exchange rates decreased revenues by 4%. Looking at gross profit and gross margin for the second…

Thank you, Margo. At this stage, we would like to address any questions from any participants on this conference.

[Operator Instructions] Our first question is from the line of Laurence Alexander with Jefferies & Company.

Could you speak a little bit to how you're thinking about raw material trends over the next 6 to 12 months?

Sure. Crude has certainly come down in the second quarter, and we're just -- a lot of our raw materials haven't come down as yet. We do expect over time, after a certain lag period, that our raw materials would generally follow that trend. That certainly has been the history with it. So I would say, sometime in the second half, we should see a decrease in our raw materials. Some of that decrease can be delayed because we're locked in to certain contracts or with certain raw materials. Others are more kind of immediate. And generally then, from our customer perspective, we have some customers that have contracts that automatically change their -- our product pricing to our customers based on raw material indices. So -- and those customers, they will change, and then with other customers, it will be more of an ongoing discussion and dialogue, depending upon what happens to our raw material costs.

And then as you look at the M&A environment, can you characterize how it might change if the end markets become more volatile? I guess, what I'm getting at is does it help -- does volatility help shake targets loose? Or are you just focusing on the kind of premium targets where they'll just hunker down and wait until stabilization?

That's a great question. I don't know if I have a perfect answer to that question. But I -- a lot of the acquisition targets we tend to be looking at might be family-owned businesses or regional players. And in those cases, it really depends more probably upon their own personal situations. But I would think in a time of volatility, it could only help us.

And then lastly, how would you characterize sequential trends over the course of the quarter and into July?

We think, I would say, it depends. There's some seasonality trends in our business, so -- and sometimes, like for example the month of June is generally can be a decent month from us. But if I had to take and factor out the seasonality, my sense is, is that our business is slowing down. You will feel it in China and in Brazil and in Europe. And that's where we have a great deal of uncertainty. So is it going to go lower, or is it going to be the same? If you would ask me 6 months ago, we had a view that in the second half of the year, in these areas, in these regional areas I just mentioned, we would have seen demand have an uptick in the second half of the year. Right now, we feel a lot more uncertain about that. We don't see an uptick, we think it's going to be relatively stable, but we don't know. And it could go down. We just don't have very good visibility.

Our next question is from the line of Mike Sison with KeyBanc Capital.

In terms of the new product wins that you have had, can you maybe describe the backlog heading into the second half of the year? It sounds like the momentum is still pretty positive.

When you say -- I'm sorry, Mike, when you say new product, what do you mean?

I'm sorry. Product wins? Market share gains you were talking about?

You mean the new business we've been talking about?

New business wins, I'm sorry.

Okay, I'm sorry. Yes, a lot of our new business that we picked up is not something -- it really starts from efforts we've taken a while ago. So we have a long sales cycle in our business. Generally it could take over a year or so to get a new piece of business. Usually people need to test our products and so forth. So we have pointed out that, yes, while in places like Europe and Brazil and China, where the inherent demand at our customer base is kind of down, we've been able to offset that with new pieces of business that we've picked up. And we're still -- and we think that will help mitigate things going forward. But again, new business that are -- will we continue to gain momentum in that? That's hard to say. We are, obviously, continuing to strive to take more market share. We've been very successful about it. But again, it's a long process. But we've been very proud about what we have done so far with that.

Okay. And in terms of the outlook for the rest of the year, to hit net income up for '12 versus '11, looks like the second half of the year net income needs to be up a little bit. Under that assumption, do you need to generate volume growth? Or can you do that, excluding acquisitions, with a year of maybe the second half a little bit down?

Well one thing I just wanted to point out in our -- what we mention about our view for the year. We said we would be up over net income in 2011 relative to the $40.9 million that we made last year, which was excluding the noncash gain. We had a pretty large noncash gain in the Mexico acquisition. So actually, under those circumstances, you would not need to have an increase in net income like you described. So -- but absent that, I just want to make that -- clear that point up. I don't know if we expect to see much volume growth in the second half. It's hard to say with all this uncertainty going on in the world. But we're hoping that there could be -- we continue to get -- want to get our margins to a more acceptable level. So we hope that can at least offset some of the any kind of declines we see in our volume base.

Okay. And if raw materials fall, would you be able to keep pricing pretty firm over the next couple of quarters?

Could you repeat that again, I'm sorry?

If raw materials prices fall, would you be able to keep your pricing pretty firm as we head into that period?

Well, it depends. It depends on the piece of business. Some piece of business, we're still haven't gotten back to where we need to be. And in those cases, we would be able to keep -- just because raw materials went up and in those pieces of business we would certainly strive to keep the price where it is. Other pieces of business we've either had adjusted with raw materials, as raw materials adjust, we adjust our product pricing. There's more of a formula base. And as raw materials go down, those would go down. But just like other -- when prices go up, there tend to be a lag effect with that. And then in other customers where we have put up price increases and gotten them through in the past, if raw materials do go down, we would go back to our customer base in those situations where we felt it was necessary to reduce our pricing. So, it's kind of a mixed bag. But I would say, generally, as prices go down, there's generally some kind of lag effect that we see. Just like we see it when prices are on the way up, we got -- we get hurt our margins on the way up, but on the way down, we tend to benefit for a little bit, but then it tends to adjust after a 3- or 6-month period.

[Operator Instructions] The next question is coming from the line of Liam Burke with Janney Capital Markets.

Mike, you've been steadily -- I mean, the market share gains that you've seen have been a steady progression of maintaining sales and service organization since the last recession. Have any of your competitors responded with price rather than -- I mean, since they can't respond with a higher level or a comparable level of service?

We do have some competitors out there that are lower-priced competitors. And it really depends upon what our customer base is looking for. So -- and if our customers base is really purely looking at price, they'll go with somebody else. If they're looking at, generally, the total cost of ownership and the value we can bring in, in reducing their total cost of production for the customer, they generally would choose a company like Quaker.

Okay. And then, you had the one-time charges related to the customer bankruptcies. This was -- is this a trend, or are these isolated, 2 isolated incidences?

Sure. I mean the 2 bankruptcies that you're referring to are RG Steel and Patriot Coal. The -- we have looked at that. Because our customer base, in general, is not as profitable as it was in the past, so it is hurting. But we don't see any other imminent bankruptcies out there. But stuff can always change and things. But we don't see it as a trend, a big trend that's going to be hitting us quarter-after-quarter based on what we know now. And we have looked at that company by company in our portfolio.

I will also, just as a note here, mention that with respect to RG Steel, which is one of the bankruptcies we experienced in our portfolio this quarter, we -- they are a company that in the press is being discussed as up for sale with buyers looking at it and so forth. We do -- and we would imagine that after the sale, we would be in the game with them as a supplier. We'll be told when that happens, obviously. Patriot, at this point in time, has debt financing, and we continue to work with them at this time as their supplier.

[Operator Instructions] There are no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Okay. Given there's no other questions, we'll end the conference call now, and I want to thank you all for your interest today. We are pleased with our results in the second quarter and we continue to be confident in the future of Quaker Chemical. Our next conference call for the third quarter results will be in late October or early November. And if you have any questions in the meantime, please feel free to contact Margo Loebl or myself. Thanks again for your interest in Quaker Chemical.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.