Greetings, and welcome to the Quaker Chemical Corporation Firsts Quarter 2015 Results Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Michael Barry, Chairman, CEO, and President of Quaker Chemical Corporation. Thank you Mr. Barry, you may begin.

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 section of the website at www.QuakerChem.com. I'll start it off now with some remarks about the first quarter. We have seen some significant changes in our external environment over the past several months, including a much stronger dollar against many of the world's currencies, low oil prices, and the impact that both these had on regional steel production. Let me now talk about each of these further. Foreign exchange rates have significantly changed over the past several months. This negatively impacted our earnings by 8% or $0.08 a share and our revenue by 7%. So you can see that our earnings and revenue while essentially flat on an actual currency basis would have shown good growth, if not for the exchange rate impact. Lower oil prices also impacted our results in several ways. On the plus side, we saw some expansion on our gross margins as there can be some lag effect between the changes in our pricing and our raw material costs. On the demand side, we did see some lower volumes in our tube and pipe segment, which was negatively impacted due to lower production of pipes for the oil and gas markets. This highlights the mixed impact that low oil prices have had on our results. We also saw some shifts in regional production especially in our steel markets, which makes up close to half our business. The stronger dollar enticed more steel imports into the U.S., negatively impacting North American steel production.…

Thank you, Mike. Good morning, everyone. Overall, we had a good quarter, which was greatly impacted by the effects of foreign exchange. Quarterly results were $0.78 per diluted share or $0.94 per share on a non-GAAP basis, which both reflect a negative $1.1 million or $0.08 per diluted share impact from foreign exchange. Before launching a financial review of the quarter, please note that Quaker provides non-GAAP earnings per diluted share table in an effort to provide shareholders of visibility into Quaker operations, excluding certain items, which we believe do not reflect our core operations. Such a 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 highlight certain of these non-GAAP items recorded in the first quarter of 2015. First, we had a $0.21 per diluted share currency charge in the quarter related to the decline of the Venezuelan Bolivar Fuerte. I will talk about this in more detail later in my comments. Second, we recorded a cost streamlining initiative of $0.01 per diluted share in Brazil to right size our cost and the continuous difficult economy. Third, we recorded a $0.06 per diluted share related to the equity income in our captive insurance company, Primex. Finally for reference, the prior year quarter had a $0.05 per diluted share charge related to our UK pension plan. As referenced in chart 4, Quaker's first quarter 2015 includes the following chief financial officer highlights. With respect to CFO highlights number one and number two, both of which cover the implications of foreign exchange for Quaker in the first quarter of 2015, I will first note the two highlights. Number one, increased volumes including recent acquisitions offset 7% decline on net sales from foreign currency exchange. And number…

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

Thank you, sir. [Operator Instructions] Our first question comes from the line of Laurence Alexander with Jefferies. Please go ahead with your question.

Hi this is Dan Rizzo in for Laurence. Margo, you were talking about your M&A pipeline and you used the word significant acquisitions. Would that suggest – am I reading too much into this or would that suggest that the pipeline has – that the targets are larger than they have been in the past or is it more of the same or just a little more color?

Good question, thank you, Dan. We remain business as usual. We are really – we're looking at a variety of acquisitions. Our pipeline is on track and no, I'm not signaling to you any change at this point in time. But we have a variety of types of deals that we look at.

Okay. And then you indicated that, I think you said that raw material costs are expected to increase modestly or moderately over the – going forward. Do you think we've hit a low point here? Is there of big I guess, difference between say vegetable oil versus some of the more petroleum-based stuff or is – I mean, are they moving at different rates or is there just – again a little bit more color?

Sure, we have kind of three major groups of raw materials. Mineral oils, we expect them to be kind of relatively stable, animal fats is another category. Those have actually been bottoming out. Recently, we think that they may go up somewhat, but then they may come down at the end of the year, has a lot to do with the kills that go into the cattle. Vegetable oils are probably the most likely ones that could potentially be going up just because of supply conditions as weather related things with the crops and so forth. But it also depends whether you're talking about palm oil or coconut oil or soybean those kind of things. So it's all very related, but I'd say overall they may see some increases.

All right. Thank you, guys.

Sure.

Thank you, Dan.

Thank you. Our next question comes from the line of Mike Harrison with Global Hunter Securities. Please go ahead with you question.

Hi, good morning.

Morning, Mike.

Morning. Mike, on the U.S. steel side, the weakness in tubulars, as well as the strong dollar is drawing in a lot of imports. We're seeing definitely some negative impacts on those producers. How are you seeing your customers respond to this environment, and do you think we're in for a prolonged stretch of weakness in primary metals in the U.S. just based on these macro trends?

Good question. What we've seen in both steel and in the tube and pipe mill, we've seen the producers cutting back in production. And in tube and pipe, it's probably even more severe, some shutdowns some prolonged shutdowns at times, and you see in the steel side maybe some people taking prolonged maintenance outages and using this time period to do things. So yes, we've seen definitely impacts and that this is how they've reacted. I think the good news on the steel side is we saw a pretty dramatic drop in the capacity utilization in North America steel. A year ago it was in the mid 70%s and it went closer to the –into the 60%s capacity utilization. Over the past several weeks, we have started to see the steel capacity utilization come up and kind of we've – the indications we have picked up I guess the marketplace seem to suggest that it will, while imports will continue to be an issue they may be less of an issue in the future.

And when your U.S. primary metals business is struggling, does that mean that you're performing that much better in another part of the world? In other words is there a net neutral trade-off if you're seeing steel imports coming from Asia and the Asia business is performing that much better or do you come out a little behind or a little ahead with those dynamics?

Yes, great question again. I would say generally we have similar market shares everywhere around the world. So in the case of like this U.S. situation, yes the U.S. is down. But that means yes, maybe things from Russia or China or more imports are coming in. Yes, we're definitely getting that business as well. But then I think the other thing just that the China market is relatively weak, the Russian internal market is weak. So it's not that they are producing a lot more or anything like that, but definitely they're just importing or exporting more than they had in the past. So, yes, I'd say in general we're neutral where steel is – as a general, very high-level statement, we're neutral where steel is produced. We just wanted to grow globally and that did not happen in the first quarter. Obviously, there can be some differences. So for example, like when you are producing steel in China, you're producing on newer mills and those newer mills tend to be more efficient and use less of our products than maybe in the older type of U.S. mills. But I would say in general, we're relatively neutral but in this case it might be a little bit of a negative.

And the last question I had is, just looking at South America, are there attractive acquisition targets in that region, and is now maybe the time to pursue some consolidation opportunities that might help you build some additional scale there given the weakness on the macro side?

We have continued to have discussions with some producers. I think sometimes when the values of companies maybe just a year or two ago were a lot higher and a lot of these are family-run companies they might have a hard time mentally selling at a much lower price today. I think that's the biggest obstacle we tend to face in situations like this. But to your point, I think if it becomes more of a dire situation for them and they are losing money, it might be an opportunity for us. And just going off something Margo said earlier, such as we do have and are looking at acquisitions pretty much all over the world. It's just a matter when one of these will hit for us.

And the strength of the dollar can be an advantage in those situations too, when you are converting them to reais or some other currency?

Yes, exactly. Today's is a good time to buy those, yes.

Yes, we keep an eye on that actually.

All right. Thanks very much.

Thank you, Mike.

Thank you. [Operator Instructions] Our next question comes from the line of Liam Burke with Wunderlich. Please go ahead with your question.

Thank you. Good morning, Mike. Good morning, Margo

Morning, Liam.

Morning, Liam.

Mike, normally when we're looking at a period of price increases or commodity increase, especially oil, you are able to push prices through to recoup that additional cost, and there's about a 90 day lag between the actual increase in raw materials and then the realization of those price gains. In a declining oil environment, is that lag a similar period of time or are there other variables involved that would change that trend?

I would say it's similar in nature. We've – raw materials really started declining for us in the fourth quarter of last year and you can kind of see looking at our gross margin how they've expanded over the past six months, as oil and raw materials continue to go down. So yes, I would say that same kind of effect happens. It's hard to exactly predict where things shake out on a quarter-by-quarter basis because, yes, we think raw materials are starting to bottom out. But now we are having – you'll see more effects of the price adjustments coming through this quarter. So it's all a matter of how things shake out. I think in the short term, we still expect to see our gross margin to be above our long-term target of 35%, but it's hard to say exactly what that number will be.

Great. And you touched on product mix as favorably affecting your gross margin. Is that a trend you expect to continue?

Yes, I guess it depends on some of these new technologies. If we sell more and more greases that could impact and have a positive mix effect on things. So yes – but it really depends on, we have so many different products out there and different dynamics, more of a depends, I don't know if I would follow the long-term trend at this point.

Great. Thanks, Mike.

Thank you.

Thank you. Ladies and gentlemen, there are no further questions at this time. I would now like to turn the floor back over to management for closing remarks.

Very good. I want to thank everybody for joining us today and their interest in Quaker Chemical. And certainly we continue to be very confident in our future despite pretty interesting circumstances and realities we are dealing with. Our next conference call for the second quarter will be in late July or early August, and if you have any questions the meantime please feel free to contact Margo Loebl or myself. Thanks again for your interest in Quaker Chemical.

Thank you, ladies and gentlemen, this does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.