Greetings, and welcome to the Quaker Chemical Third Quarter 2014 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'll now like to turn the conference over to your host, Michael Barry, Chairman, CEO and President of Quaker Chemical. Mr. Barry, please go ahead.

Thank you, Kevin. Good morning, everyone. Joining me today are Margo Loebl, our CFO; and Robert Traub, our General Counsel. After my comments, Margo will provide the 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 in the Investor Relations part of our website at www.quakerchem.com. I'll start off now with some remarks about the third quarter. I'm pleased to report that we had a very good quarter, as strong revenue growth led to double-digit growth in earnings per share. Let me now try to give you a sense of what we experienced in the quarter, and I'll start with sales. Our overall sales were up 8% for the quarter versus 2013, with growth primarily driven by higher volumes. We saw double-digit growth in sales in our 3 largest regions, which were partially offset by decline in our South America sales. Going region-by-region, South America was our most challenging region. Our revenues were down 25% due primarily to lower volumes associated with the poor economy and the decline in the overall steel and auto markets. In our Europe or EMEA region, we saw 11% growth despite only a modest increase in the auto and steel markets. In our Asia Pacific region, we had 13% growth, with China being the main driver. And in North America region, we had a growth of 10% with very strong growth coming from Mexico in our coatings business. Overall, we continue to do well in gaining share in the marketplace throughout the world. We believe this is due to our commitment to our customer intimacy model, which puts the customers' needs as our top priority and provide them with strong service and business solutions. I believe this approach…

Thank you, Mike. Good morning, everyone. I'm delighted to be here on the call, and I reiterate that we're very pleased with our results in the third quarter, despite the continued challenges in Brazil as well as the slowing global economy. Before launching a financial review of the quarter, please note that Quaker provides a non-GAAP earnings per diluted share table in an effort to provide investors with visibility into Quaker operations, excluding certain items, which we believe do not reflect our core operations, including, earnings related to Primex, our investment in a captive insurance company. The reference table is outlined in Chart 10 of the investor slides, yesterday's earnings release and our Form 10-Q, also filed yesterday. Next, I'd like to mention our special Quaker items, which relate to the third quarter. First, Quaker acquired ECLI Products LLC, a specialty grease manufacturer in the third quarter for $52 million, with estimated 2014 EBITDA of $7 million on sales of $25 million. Second, Quaker announced on June 30, the acquisition of the remaining 49% ownership interest in its Australian affiliate, Quaker Chemical Australasia for AUD 8 million from its joint venture partner, Nuplex Industries. I mentioned that second quarter 2014 transaction now, given that the resulting incremental impact on Quaker's consolidated net earnings only started to impact us in the third quarter of 2014. I also note that the impact of the 2 acquisitions on earnings was minimal this quarter due to the offsetting impact of the fair value accounting for ECLI and acquisition-related costs. Third, Quaker announced in May, 2014, a 20% increase in the quarterly cash dividend to $0.30 per share payable July 31, 2014, versus the $0.25 per share declared over the previous 4 quarters. As referenced in Chart 4, a financial review of Quaker's third quarter…

Thank you, Margo. At this stage, we'd like to address any questions from any of the participants on the conference call.

[Operator Instructions] Our first question today is coming from Daniel Rizzo from Sidoti & Company. Daniel D. Rizzo - Sidoti & Company, Inc.: You indicated that stable raw material costs have helped you over the past couple of quarters, but now with petroleum prices falling, would that provide more of a tailwind or you going to have to also lower your own prices as well to kind of catch up?

We don't think of it internally as a windfall to us at all. We don't think it's going to be a major impact. We are -- if I look at -- just talk about the raw materials themselves in a second, we buy a mixture of raw materials certainly, the ones related to crude should start to decline and, but we haven't seen much already on that, they're just starting. And then -- and even in some places like in Europe they're not going up or going down, I should say. Then you have other raw materials that we buy like, vegetable oil, that we expect to have upward pressure on. And then we have animal fats, there's a kind of a mixture, in some regions, it's down and others regions, it's up. And then, we also buy a whole bunch of other things like gasoline, derivatives and they're actually increasing. So overall, when you look at the basket of our raw materials, we expected to be maybe slightly down, maybe a couple of percentage points. But then, we have some contracts that automatically adjust based on raw material prices. And so, we're not going to see some a much of impact on from a gross margin level. We don't see because between that and other [indiscernible] discussions and negotiations with customers. Our whole goal still remains to keep our gross margins in that kind of consistent range we've been in over time. So again, bottom line is, you may have some slight thing. There is always a lag effect on some things, but we don't expect this to be a big thing one way positive or negative for us. Daniel D. Rizzo - Sidoti & Company, Inc.: The goal for gross margin is 36%, right? Is that, I think, you said that in the past?

35%. Daniel D. Rizzo - Sidoti & Company, Inc.: 35%. So we're above that, we think we can probably stay up above 35%?

Yes. I mean, obviously, it's hard to -- we have so many different kind of products sites in all around the world and so forth. But in round numbers, we have always said 35%. But if you look at where we were for the past 5 quarters, we've been between 35% and 36%. And certainly, that's kind of our goal that just continue to stay in that range.

Our next question today is coming from Liam Burke from Wunderlich Securities.

Mike, when I looked at revenue growth traditionally and then your revenue track with steel production, roughly during the quarter, steel production grew around 3%. Looking at your organic growth had more than twice that number, you mentioned acquisitions and market share gains. Was there anything, in particular, that it was stronger in the quarter to drive that, I'll call it, twice organic growth?

No, there's nothing in particular. It's really, I think of our growth in kind of different buckets. Some of them could be like new mills that we picked up over the past several years, and as mills start ramping up in time, because we get disproportion on amount of the business out of new mills that come up. And so as they come up, that gives us a little boost. And then, we're continuing to take share on our core products that we might be picking up on new mills here and there around the world, or we could be actually selling other products besides our core cold [ph] rolling lubricants and maybe making more penetration in cleaners or hydraulic fluids and so forth. And then the other aspect is we're continuing to make progress in some of the recent acquisitions that we made, whether it's grease or surface technologies or templating or dye casting. So it's not any one of this things, it's kind of a mixture of all these this things that's kind of leading to our growth.

Okay, and Margo, as the global footprint grows, you add acquisitions. Do you see any need to up any kind of capital expenditure.

We've been managing to date to stay pretty constant in our SG&A albeit we've grown and sell the plant in China and there has been some offsetting managing the CapEx to offset that. I think we evaluate it, we're going into the budget season now and evaluating where we're going with that. I do believe, we'll -- there will be investments for growth as you see from time-to-time. But we'll continue to be a CapEx-light company.

Our next question today is coming from Mike Sison from KeyBanc.

In terms of South America, where do you think you are at in terms of demand there? Is it stable, is it getting a little bit worse, getting a little bit better going forward?

We think we're at the bottom. I don't think, we're -- we don't expect that going worse. But you never know, right? I mean but I think, we saw -- we've definitely seen a decline in the economic environment in Brazil, say from the first quarter through the third quarter. It's kind of gotten consistently worse. But the feedback or the sense we have is hopefully we've reached the worse. And now the elections are over in Brazil, maybe that will have a positive impact. But we don't expect it to get worse, that's for sure and hopefully, we'll improve.

Okay, great. You talked about the market growing 2% to 3%, I think, in the current quarter. How do you look at the -- where do you see the market growing in maybe the fourth quarter heading into 2015. Do you think sort of this 1.5x to 2x the market type growth that you've been generating, which is impressive, will continue?

On your -- on the first part of the question around market growth, we, certainly our sense is that the market itself -- the overall global markets that we're dealing intend to be slowing, say versus earlier in the year. I think of places like China, we already just talked about Brazil, even Europe is slowing. So our sense is that the market will have low growth. And then the second part of your question is our goal continues to be to hit on these bunch of singles, whether it's the new technologies we acquired, we still think we're very early in that game of rolling those out, and we have a lot of leeway there. We continue to want to take share in the marketplace. That's been our track record like you said, the past several years. So our goal is just to continue to as we have been with our business model and our strategic initiatives as well, as bringing on new acquisitions and our goal is to continue to growth no matter what the market conditions are.

Okay. And then Margo, final question. When you think about the acquisition contribution expected for the next couple of quarters in terms of top line growth, can you give us a little help of roughly how much that is.

We haven't really -- we've told you in the past that we prior to ECLI, we thought, we had about $75 million as added sales for acquisitions when we put them on. We have another $25 million with ECLI, so that's the base starting point. And then you have to make assumptions from there as to how we grow, our acquisitions would grow, and add to the bottom line. But as Mike said, we're in the second innings of adding those -- rolling those out around the world. So I would anticipate, it'll be at a measured steady pace.

[Operator Instructions] Our next question is coming from Mike Harrison from First Analysis Corporation.

Just following up a little further on the acquisition stuff. Does the ECLI acquisition put you where you need to be in terms of your specialty grease portfolio? Or do you see the grease market is having some additional consolidation opportunities that you guys could execute and benefit from?

I think, in specialty grease, first of all it's a huge market. It's well over $1 billion total market and that's what attracted us to the specialty grease market to begin with and certainly going into the first acquisition that we made Summit Lubricants gave us kind of an entree into it and the ability to start grease -- getting grease to penetrate some of our existing markets. One of the things as we -- was hard to penetrate, was this existing automotive market, where you have to be spec'd in and it's a level of approval and it wasn't -- to do that organically wasn't really that kind -- wasn't really feasible. So we're very happy with the ECLI, because that gives us that ability to penetrate that segment of the specialty grease market and then grow it more globally than they have. And we're very pleased with that. And we also believe there's other segments in the grease area that we want to continue to go after geographically. We're -- right now we're predominantly a U.S. -- almost all U.S., in grease and we want to grow that and look at acquisitions elsewhere around the world for grease. And there's other markets that grease goes into as well that we haven't really begun to penetrate. So we think there's a lot of potential headroom to grow in grease with both organically and acquisitions throughout the years.

And then, obviously, the volumes were pretty strong across the board with the exception of Brazil. But I think, the Europe, year-over-year growth at 14% is the one that stands out to me. Obviously, sometimes you get a kind of a one-time sale in association with a plant sale. But was there one-time benefit in that number? Are you viewing Europe as a region where you can kind of see sustained better growth, given the work you've done to grow that business over time.

Well, any quarter, when you're only looking at a quarter piece of business, you always have the potential of shipments flowing in one quarter when you go to the comparative period versus another quarter and so forth. But there's -- but there are definitely -- in Europe, we did see, over the years, some good share gain and how we're especially in the primary metals area. So a bulk of what we're seeing, I believe, is true business, true growth that we've achieved. It's hard to predict, I'm not saying, we're going to expect to see that kind of growth every quarter from Europe, because you always you do have these fluctuations and order patterns and so forth. But we are definitely seeing some good overall growth in Europe.

And the margin strength in Europe, is that the volume growth driving that or we starting to see some of the restructuring benefits contribute there?

Yes, I think, it's mainly volumes that we're seeing. It's not really -- we haven't really experienced the, that small kind of restructuring that we did over the past year.

And presumably, if you keep the volume growth going, you should be able to leverage those restructuring benefits pretty nicely then?

Sure. Yes, volume helps everywhere around the world.

The last question I have is on -- you referenced some of the year-on-year improvements in SG&A costs. But if I look sequentially, those costs crept a little bit higher. Are we seeing higher labor costs and incentives and merit compensation in the third quarter, as compared to Q2 levels? Or were there other components contributing to the higher expense? And I guess, just looking into Q4, is it fair to assume that we see further increase in the SG&A costs and the labor costs [indiscernible] comp?

That's a good question, and I'm glad you asked. We are basically staying with the outlook that we have some timing issues here. We don't see any unnecessary creeping in our -- the structure of our SG&A. So you're seeing the -- we're sticking with our standard approach that is we have some timing issues here and at the same time, we continue to invest to grow our business year -- we are steady and I don't see any unusual, anything that concern me. We mentioned..

Unusual expenses in the quarter, right? There was the acquisitions and the bankruptcy and I think like that.

How much acquisition-related costs was within SG&A?

We haven't put that in our disclosures at this point in time.

Was it bigger or smaller than the $300,000 for the customer bankruptcy?

Yes. It's bigger.

Bigger.

Bigger.

Our next question today is coming from Scott Blumenthal from Emerald Research.

Margo, you talked a little bit about interest income from overseas cash and maybe you can give us an idea as to obviously, however, you feel comfortably doing it, as to how much you have over there. What percentage maybe?

That's a good question. Basically, we see a couple of things going on. You look back about four quarters and I see, the last 2 quarters I had credits. There are elevated levels, because I had credits related to interest earned on some tax credits. So you can then go back to the period before last the 2 quarters and that's a little more normalized. And basically, yes, we are seeing higher levels than you might get in the U.S. because a large portion of the cash is overseas. If we -- so yes, it's largely overseas.

How much cash?

I said the majority of the cash is overseas. Yes. It's largely overseas.

That's helpful. And I guess, we're all kind of struck as to how much South America is down. Maybe, you can give us some more details on what's happening there. Did you lose a customer and maybe. What, is South America basically Brazil, or maybe you can give us an idea as to what percentage of your South America sales Brazil represents?

It's certainly, predominantly, Brazil, and vast majority of it. We certainly added Argentina and some -- and other countries around there. But it's over 90% would be Brazil. So that's really driving it and it's really, I mean, we're seeing pretty large declines in and it really is, it's not necessary share-related. And if you look at our steel position everything is kind of -- steel, we haven't lost a customer. And so it's really just showing what's been of kind of happening in the markets down there. So and the auto market has been really hit very hard down there. It's been showing a double-digit type of declines quarter-over-quarter. So it's not a pretty place right now.

Okay, Mike, I appreciate that. And Maybe you can -- my last one here, maybe you can delve into some of the nonpetroleum raw materials a bit for us. You did mention that you're expecting some upward pressure on vegetable oils. We understand that it's supply and demand, but maybe you can talk about where you're sourcing some of those and why you feel there may be continued upward pressure? I believe we're expecting a record harvest here. So maybe that could mitigate that some of that for you.

Yes, I mean, what we've -- certainly seeing, our raw material people are saying that there are certainly some lower yield globally on some of the key raw materials that we buy. We buy coconut oil, palm oil and mostly, that comes from Southeast Asia, type area. So yes, we expect to see some upward pressure on that. Obviously, things could change, but that's our best guess. But again, as I said overall, we expect to see our raw materials to be, as a basket, slightly declined. And one other thing just mentioned here, I guess, Scott, is to go back to Brazil for a second. I just want to mention, yes, I said, Brazil is a pretty tough place, but it's not like we're losing money in Brazil. I want to highlight that, we're still -- Brazil is still a profitable place, we're generating cash in Brazil. It's just not at the standards where we expect to be.

That's very helpful. I appreciate that.

We've reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Okay. Thank you. I appreciate, Kevin. So given that there are no other questions, we'll end our conference call now. And I want to thank, everyone, for your interest today. We're pleased with our results for the third quarter, and we continue to be confident in the future of Quaker Chemical. Our next conference call for the fourth quarter and full year results will be in late February or early March. 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.

Thank you. That does concludes today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.