Good day, ladies and gentlemen. And welcome to the First Quarter 2010 Cabot Earnings Conference Call. My name is [Shimita] and I'll be your coordinator for today. At this time all participants are on listen only mode. We'll conduct a question-and-answer session towards the end of today’s conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Christine Bracken [ph] with Investor Relations. Please proceed.

Thank you. Good morning or good afternoon. I would like to welcome you to the Cabot Corporation First Quarter 2010 Earnings Teleconference. Here this afternoon, are Patrick Prevost, Cabot President and CEO; Eddy Cordeiro, Cabot's Chief Financial Officer; Dave Miller, General Manager of the Core Segment; Sean Keohane, General Manager of the Performance Segment, Fred von Gottberg, General Manager of the New Business Segment; Ravi Paintal, General Manager of the Specialty Fluid Segment; Jim Kelly, Corporate Controller; and Brian Berube, General Counsel. Last night we released results for our first fiscal quarter 2010; copies of which are posted in the Investor Relations section of our website. For those on our mailing list, you received the press release either by email or fax. If you are not on our mailing list and are interested and receiving this information in the future. Please contact to me in Investor Relations. The slide that accompanies this call is also available in the Investor Relations portion of our website and will be available following the earnings teleconference in conjunction with the replay of the call. I will remind you that our conversation today will include forward-looking statements, which are subject to the risks and uncertainties and Cabot's actual results may differ materially from those expressed in the forward-looking statements. A list of factors that could affect Cabot actual results can be found in the press release we issued last night, as well as in our 2009 form 10-K filed with the Securities and Exchange Commission, Copies of which are available on our website. I will now turn the call over to Patrick Pravo, who will discuss the key highlights of the company's performance for the quarter. Eddy Cordeiro will than review the business segment and corporate financial details; following this Patrick, will provide closing comments and open the floor to questions. Patrick?

Thank you, Christine, and good afternoon. We are very pleased to report strong results this quarter. Excluding some positive onetime effects we're performing at pre-downturn earnings levels despite lower sales volumes. Looking at the highlights for the quarter, several key things emerge. First markets have continued to recover worldwide, and we benefited from improvements in all end markets in all regions. Second, our restructuring program has rebates the fixed costs of the company, improving results significantly. Third, our existing strong position and continued investments in emerging markets have allowed us to leverage the dramatic upturn in demand occurring in those regions. And finally, throughout the downturn, we have successfully maintained robust underlying unit margins in our business. All of these factors have contributed to this quarter's performance. Let me give you some details in each area. First in the area of volumes, as you may remember in the first fiscal quarter of 2009, we experience a rapid month on month decline in demand, which resulted in one of our weakest sales month on record in December 2008. Today, although we remain roughly 10% below peak 2008 levels, volumes in the first quarter of fiscal 2010 show the 20 to 25% improvement over the last year with increases in all of our regions and in markets. Relative to the fourth quarter of 2009, however, sales volumes remain relatively flat. This can nonetheless be seen as a positive development as many of our businesses typically display season weaknesses during the December quarter. Data we're seeing from the broader end markets indicate that demand in the entire automotive infrastructure and electronics sectors has grown during the second half of calendar year 2009, particularly in emerging markets. Volumes, however, stayed shy of the peak 2008 levels. Our customers are now indicating that volumes will…

Thank you, Patrick. Segment profitability improved both on a sequential and year-over-year basis by 37 and $52 million respectively. Year-over-year, business profitability benefited from higher volumes. The realization of cost savings from restructuring programs, favorable utilization variances and a weaker dollar. Partially offsetting these benefits was $3 million unfavorable lag and LIFO impact this quarter compared to a $42 million benefit in the first quarter of fiscal 2009. Sequentially, business PBT benefited from lower costs, resulting from the implementation of our restructuring programs, favorable utilization variances, a weaker dollar and lower unfavorable contract lag and LIFO effects. As we reflect on the first quarter results, I would note that we had three positive impacts that contributed significantly to the exceptionally strong quarter. First, we had $9 million of revenue that was realized from the reverse [inaudible] rebates at calendar year end, and the successful completion of milestones in one of our joint development programs. Second, we benefited from $7million dollars of foreign currency transition of the weakening dollar. And finally, we benefited by $3 million from the impact of utilization variances as we replenished to inventories. I will now discuss the details at the business level beginning with the Rubber Blacks business. Rubber Black profitability increased by $18 million when compared to the first quarter of 2009. With 24% higher volumes, lower fixed cost in the absence of high-cost inventory experienced in 2009. Volumes grew in all regions, specifically 76% in China, 33% in South America, 21% in Asia-Pacific excluding China, 17% in North America and 3% in Europe, Middle East and Africa regions. These factors were partially offset by a $35 million unfavorable contract lag and LIFO comparison as the first quarter 2009 benefit did not reoccur this quarter. Sequentially, profitability improved by 26 million, driven by 2% higher…

Thank you, Eddy. As I look back over the past year, I've been very pleased with Cabot strategic and operational execution. We made commitments to our shareholders and delivered upon these in spite of the most difficult economic environment. We committed to save an excess of $80 million of fixed costs and have delivered those savings this quarter at our full-year targeted run rate ahead of schedule and at lower costs than planned. We announced our intention to eliminate the impact of the contract lag on our business results and have reviews the percentage of our volume, subject to the four-month feed stock price lag from 50% in 2008 to approximately 10% by later this year. We committed to improve the financial performance of our new business activities and improved the business profitability by $25 million on an annual basis. The segment reached a cash breakeven position in 2009, and there are further growth opportunities ahead. These are only a few of the improvement projects that were brought to fruition during the last 18 months. Through the crisis, we have maintained robust unit margins, strengthened our competitive positions in the fastest growing regions of the world, maintained strong cash and liquidity and continued critical investments in key long-term projects. Taken in total, I believe that we have emerged from the downturn a stronger company; and given our strength and strategy, execution and ability to deliver on commitments, I am confident that we will continue to leverage our multiple innovation and business capabilities to meet our long-term financial targets. As I joined Cabot two years ago, I saw tremendous potential in its technology, portfolio and market positions. This recent economic crisis has been a real test of strength. Our able to deal with the crisis and get things done has further increased my confidence in our long-term potential as a key global player in the specialty chemicals and performance materials. Thank you very much for joining us today. And I will now turn the call back over for our question-and-answer session.

Thank you. [Operator Instructions] Your first question comes from the line of Lawrence Alexander of Jeffries. Please proceed.

Hi. This is Lucy Watson on for Lawrence today. Can you provide, I guess, a level of normalized margins that you expect when you reach your long-term financial targets?

Good afternoon, Lucy. As you may know, we are not able to provide that level of details on this call due to the competitive nature of that information. So, I'm sorry, I'm not going to be able to answer that question.

Okay. And do you view Supermetals as a core component of your business portfolio?

As you have seen, the Supermetals business has improved its performance dramatically this quarter. It has been under a lot of pressure due to the electronics downturn, which was quite significant during the -- certainly most significant during the first calendar quarter of 2009. We look at our business as having connectivity, strategic technology, synergies with the rest of the Cabot portfolio. And we believe that the industry structure with few players and the necessity for the end use of the tantalum capacitor applications as being a core strength support for the business. So clear, the business is part of the portfolio. It certainly needs to improve its performance further, and we're working at this currently.

Okay. And just one last one: Do you have any visibility into the inventory levels in rubber black supply chain, and are you seeing any more restocking there?

As we mentioned in the speech earlier, we believe that there has been a certain level of restocking through the chain as demand has improved. But what we're hearing from our customers is that the whole value chain remains very cautious. People are worried about a potential slow-down in demand and a decline in the economic environment. Therefore, I would say a slight increase in inventory in the change, but nothing substantial due to the concerns that everybody has about the coming quarters.

Thank you.

Thank you.

Your next question comes from the line of Jason Minor of Deutsche Bank. Please proceed.

Thank you. Good morning.

Good afternoon, Jason.

I am sorry. Good afternoon. Just sequentially in rubber blacks, that's great a normalized basis improvement; but with volumes up just 2%, I wonder if you could just touch again on what drove -- it looks like about an $18 million improvement.

There's a combination of factors here of which certainly the restructuring cost is one of the key factors. But what I'd suggest is, for our head of the business, Dave Miller, to provide you some more color. Dave?

Yes, Patrick. The -- I think maybe just to reinforce what Patrick said. I think there was a restructuring benefit here as well as a net access act that definitely it was impacting the sequential numbers.

So, there was a restructuring sort of an action that was abrupt or that affected things from Q4 to Q1 pretty dramatically?

Yes. I wouldn't say dramatically, but it did have an impact.

Okay. Just shipping gears little bit. If you look at your -- you talked a little bit about market share, and it sounded quite positive. I wonder, if you look, excluding the U.S. or the overseas markets, or how you could slice it to the growth in the emerging markets, what sort of share do you have in that group markets, do you estimate?

Yeah. So I think, without getting too specific, maybe just to reinforce Patrick's earlier comments that we've across the portfolio grown our share in the merging markets. The increase in sales in China clearly the result of the capacity we've added there, which we've been able to successfully sell. So beyond that, I don't think I want to comment in more particulars.

Okay. Well, my last -- my last one is my own inability to demand, like my own inability to tell. When I add up all of the factors, if I got it right, right in your release, I get, like, $0.93 per share attributable to these various items, including the volumes, the inventory restocking, and that sort of thing. But that looks like a lot more than the difference between the $0.65 and $0.08 you did last year. So how am I adding that up wrong or misunderstanding? If you could help me. Thanks.

I'll add Eddie to pick up on this question.

Jason, yes. The one big difference on the negative side was the difference in the lag LIFO impact from this quarter to the last first quarter, and while there was a very minimal impact this quarter, there was a huge benefit in the first quarter of 2009, and that attributes to about $40 million difference.

That's very helpful. Thank you.

Your next question comes from the line of John Robert of Buckingham Research. Please proceed.

Good afternoon.

Good afternoon, John

Eddie, you call out three items, the unrealized revenue of 9 million, the FX of 7 million and the inventory rebuild utilization variances of 3 million. FX will move up and down, but the unrealized revenue and the inventory utilization variance those should be thought of as one time?

Yes. And also on the FX, John. It's hard for us to forecast what that's going to be. So it's sort of up to you to decide if it's going to go up or down from here?

Okay. And then the performance black business had sequentially up variable margins, I think you said. I think you said the earnings improved sequentially, I think, by 6 million, but fixed costs were down, in variable margins were up. Was that higher prices or lower raw material costs? What drove a variable part of that profit improvement? Because volumes were down.

Right. Yeah. You know, Sean, Sean Keohane will pick this question.

Hi John. Yeah, we saw what is a typical seasonal softening in volume. So you're right; volumes were down a little, as expected, but continued strong margin due to our focus on new products, value pricing and in that -- that through to the margin line for us.

So, it was pricing mix that drove the variable margin component of that?

That's fair.

And then, lastly, my perception is that the channel business is lagging the other materials in the electronic supply chain. I mean, semiconductor materials and so forth seemed like they picked up earlier. You had a weak September we didn't a recovery based in the September quarter for [inaudible]. You didn't quantify it, but it sounded like volumes sequentially went up a lot. Is that perception correct that there's a lag and there's a structural reason why that would be?

I'm not sure I'd be able to confirm that, but what I can confirm is that the volumes have picked up, and Eddie, who was previously managing the business, may want to add something to.

Yeah, John. I see the integrated chips are a great indicator as best as we can tell, but we do tend to lag them a little bit. So we did see a volume pickup from the fourth fiscal quarter to the first fiscal quarter, and we saw, I think now three quarters in a row of IC shipments increasing.

So, your March quarter versus December quarter, if that lag stayed in place, you would continue to see a sequential improvement?

Yeah. I mean, remember, when you're looking at integrated chips, you're talking about billions and billions and billions, and the tantalum industry is a very small niche. So you can see lumpiness quarter-to-quarter.

Okay. Thank you.

Generally speaking, yes.

Got it.

Your next question comes from the line of Jeff Zekauskas from JP Morgan.

Hi. Just had a few questions. What was cash flow from operations in the quarter?

So, Jeff, we used about $50 million including about a $100 million dollar use of working capital.

Okay. Second, sequentially, the sales in rubber blocks went up about 15.5%, and I guess 2% is volume. So of the 13.5% increase sequentially, how much was currency and how much was price?

I don't have the breakout for you, Jeff, and I'm not sure we would give you the price.

Well, maybe you could just give me the currency.

As I said, we would not give out the price.

Thank you. Lastly, in those three items that you called out. Can you explain the 9 million item in a little bit more detail. And what EPS effect that 9 million had either positively or negatively?

The 9 million was a positive, and, you know, on rough numbers Jeff a million dollars of pre-tax income is about $0.001 per share. The key components are, we had some rebate that we were accruing for that, at year end, didn't come through, and so we were able to reverse those rebates. So that was one item. And the second item was that we have a development project, which hit a key milestone, and we are able to release some revenue that we had also accrued for. So those are really the key -- the key aspects of that item.

So the 9 and the 7 is 16, so it's roughly $0.16 per share?

No. Sorry, Jeff. The sum of those two with 9 million.

Forgive my.

And the 7 was FX.

And the 7 was FX. Thank you very much.

Your next question comes from the line of Saul Ludwig of KeyBanc. Please proceed.

Good afternoon.

Good afternoon. Saul?

You talk about this cautiousness that you are hearing from your customers. Does that cautiousness reflect a general cautiousness that we all have above the state of the economy and deficits, consumer spending, etcetera, or is it a reflection of actual current business trends that give them rise to be cautious?

No. I think the cautiousness we're basically picking up in the market, you know, at our customers seems to be reflecting the general cautiousness that is out there, meaning, you know, the speed of the continued economic recovery, the depth levels that, you know -- at the government level; and, you know, within the companies have needs to be worked through, so I don't see a specific business situation here that are driving this. It's more of a macro situation.

What we're hearing is that the manager rubber products they rising and inventory still remain quite low. So, but I understand the general cautious attitude that you reflected. From a seasonal standpoint you timed out that there is a quarter is particularly, you know, you're seasonally slowest over your four quarters. With that implied you would expect, at least directionally, what we see in Jan, Feb, March should be better than what we saw in October, November, December?

We'd like to see that way so unfortunately. What we're seeing currently in the January month is very much inline with what we saw in last quarter. So we were positively surprised by the year end quarter, the 2009 calendar year end quarter as it matched the roughly the volumes of the previous quarter in spite of the holiday season effect that we normally see in the U.S. and Europe. But as we look at this quarter, we're not seeing further pickup, and we're also in need of realizing and considering the fact that the Chinese New Year will be a major impact on, of course, the China market, and also most of the Asia-Pacific region.

Great. So that has another seasonal effect in a negative way?

That is correct.

And then finally, when you look at your first quarter margins -- and you talked about the higher unit margins and that's evident in our results. Do you think there was any flukiness there? Do you think the steps that you have taken -- LIFO lag was a minimal number based on you changing your contract? It's not expected to be a big number going forward. You would sustain the $20 million in cost savings, I assume. Is there any reason why your margins should get better, get worse, or should kind of track what they were in the first quarter?

As we mentioned, you know, the margins have returned to what we call a robust level. We had, as you know, significant inventory and feedstock effects during the course of 2009 as the demand volatility effect of the business and the accounting over the business. We're back to more, you know, normal levels. We're confident that, actually, on an adjusted basis those margins are robust, and we believe they will display, you know, continued performance including, of course, if we're looking at gross margins, the cost adjustments that we have been able to effect through the restructuring.

And then, finally, Eddie used a $100million in working capital in the first quarter not surprised there. And thinking about the cash as it would be consumed in working capital. What are you thinking about for the year? We realize, whatever your answer is kind of gas, because there's a lot of moving parts; but at least at this stage of the game, where is your head in terms of working capital as a consumption of cash for the year?

I think, you know, there is a lot of factor here, Saul, as you know very well.

I agree.

If --, you know, as we're looking forward, I would say, with a moderate growth level in the volume -- on the volume side, and with, I would say, potentially some continued growth in energy costs, we believe what there could be a moderate to flat situation with regard to the working capital situation. So we don't see much change here. Of course, we don't have a crystal ball in terms of being able to say how things are going to evolve, but we're confident at the current levels.

And finally, relative to this moderation in the outlook in demand. When you just analyze the situation yourself and you look at where the inventories are at your customer levels, look at the price of gas lean, look at -- do you really think that we're going to sort of flatten out in terms of demand. Or would you think -- this would be suggesting a more robust outlook you could not with standing the fact that January was fairly level with what your first quarter demand was?

As I look at the entire demand and the growth of tires on a global basis, where we know that this is a business that grows between 3.5% and 4.5% a year, has been growing at that rate for more than 20 years with some bumps in the road, and we just experienced one of these bumps. But I firmly believe that we're going to track back to this level of growth. So a steadily moderate growth level overall with tires and rubber products, and we're going to be kind of -- as one of the leading, if not -- of course the leading producer of carbon black going to be growing on that rate on a global basis. Now for us, the game is going be to grow in the market that grow faster and that's where we're putting our effort and putting our investments. So we're going to hopefully enable growth at a higher rate than this GDP type, global GDP type rate. But if I you know, so I believe this is going to be perhaps the rate of growth we're going to see. The big question is will demand rebates back to 2008 levels? I think if we look at prior recessions that we've analyzed, it takes about two to three years to come back to the trend line, and we believe that we're into year one of that two, three years period. Therefore, yes there will be growth, but I think it will take a little while before we're back to the let say first half of 2008 levels.

Thank you, Patrick.

Thank you, Saul.

Your next question comes from the line of Jay Harris, Investor. Please proceed.

Patrick, at the risk of going over some of the answers that you've just given, looking back at the 90 days the tone at the last conference call was not consistent with the robust quarter you just reported. When I look at your balance sheet, I see receivables are up dramatically. What happened during the quarter?

Well, I think a certain number of things happened. I would say we you know, we saw during the quarter the necessity to readjust our inventory levels to enable us to continue to meet the demands an the needs of our customers so that there's been, you know, some replenishment in the stock, although we're keeping days at very low levels and are still extremely focused on cash. We have continued to see the delivery of the restructuring effects, which are significant and have a bit of a lumpiness to them, and therefore, the prior quarters so our fourth quarter 2009 did not yet reflect the full impact of the restructuring, what we've done, and I would say that this current quarter now does, and we're still working on a certain number of things. But for the most part, I would say the big projects have been delivered, and we'll provide that, you know, new cost phase for the rest of the year. And I would say we've seen growth in the in the carbon black area in a somewhat, let's say, diverse geographical state, meaning that we've seen much more growth in China, South America, South Asia than we have seen in Europe or North America. So these are kind of the factors that have been driving the business I mentioned, and Shawn talked a little bit about the performance segment and the fact that there's been some margin improvement in that segment that has been driven by, again, product mix and feed-stork cost improvements.

Did you get much benefit in terms of unit cost reductions out of the inventory rebuild you just referred to?

I'm not sure -- would you mind repeating the question?

I thought you said that you grew your inventories to service customers at a higher level of ordering. Did that re growth of inventories benefit your unit costs significantly?

Yes, it did, and we had an effect of about 3 million.

Okay. All right. That was 3 million.

Yeah.

I'd like you to go back to the conference call at the beginning of the calendar year of 2009. You had had indicated that in the fourth quarter of -- December quarter of 2008, your operating rates had dropped in carbon black I guess to 65%. You indicated you were going to take a certain amount of capacity out…

Right.

And obviously you started the new facility up in China. Do we still have any capacity to shrink?

Let me remind you of what we said in actual terms. We talked about rebasing or actually reducing our operating capacity for carbon black to the tune of 16%.

Right.

Of which, half was going to be a permanent reduction in capacity and the other half mothballs an curtailments, so this is what we've done. In the meantime, we worked at making a very cautious decision with regard to the investment we had been building in Tianjin. And as we saw the recovery of the China market, we decided to start up a new facility quicker than planned. And if you think about it, the new facility basically replaced in kind the half of the permanent shutdowns that we had enabled; and in the meantime, the other half, which was curtailments and mothballs to a greater extent have been lifted as well. So if you think about this, there was a lot of activity here, but we're back to the same level of capacity we had before the downturn.

Well, what was the level -- what was the average operating rate in the December quarter, and where are you now?

So we -- what we're looking at right now in terms of utilization rates of the industry is we believe that the industry is running at around 85 to 90% of capacity so mid 80s to high 80s. As we look at our own utilization rate, we believe or we know that we're operating at a slightly higher rate than that.

So going forward, as your volume increases, you'll have direct benefits to your operating margin, or are there some startup expenses on mothballed facilities to be experienced?

No. We -- all of these -- if there were any expenses all of these have actually been captured. So, there is no more you know onetime effects that would be related to startup of operations. We're back operating our facilities, the ones that we've chosen to operate, the ones that are the most efficient in the system, and then back to your question around, you know, would you consider any closures or shutdowns. What we're doing is, and we've had quite a bit of you know practice lately we are going to be, if needed looking at the you know, the units that are the least efficient in our system or are located in the wrong place to serve our customers, and we will consider if those units are contributing or not to the bottom line, and that's how we make these -- these decisions with regard to either mothball or curtailments.

That doesn't sound like it's imminent, though.

Well we -- we're not seeing any decline in demand that would require us to do any further correction to our capacity.

Well, what is the benefit to be derived out of the restructuring charge that you took in the December quarter?

I'm sorry. I didn't pick up on that, Jay.

You took a restructuring charge in the December quarter. What is the future benefit to be arrived from that?

Eddie, can I ask you to pick up on that?

The charge we took in this December quarter was the amount, quite frankly, related to the restructuring that we put in place last year. And as accounting goes these days, you have to take it as certain points in time. So that charge would be related to the ongoing cost savings that Patrick had referred to, which was 80 million overall.

How much of 80 million was realized in the December quarter? I guess the thrust of the question is approximately are you looking for incremental benefits in the March quarter relative to the December quarter because you didn't realize everything for the full 90 days.

No. As Patrick had mentioned in his discussion up front, we realized the full 20 million in the first quarter. We have achieved the run rate that we were seeking to achieve.

I thought he said more than the run rate. That's why I asked the question. We're -- you know, our commitment and promise was in excess of $80 million and that's what we're still going to deliver.

Okay. Thank you very much.

Thank you, Jay.

Your next question comes from the line of Christopher Butler of Sidoti & Company. Please proceed. Christopher Butler - Sidoti & Company: Hi, good afternoon.

Hi Chris. Christopher Butler - Sidoti & Company: Just wondering, could you give us a sense of the visibility that you have right now? You had mentioned January. I mean, can you see as far as March or April as far as your demand environment goes at this point?

I would say that we -- we don't have that visibility at this time. So I'm sorry I can't give you much than what I mentioned earlier in terms of the general long-term trend that we see in the tire industry. Christopher Butler - Sidoti & Company: And looking at, you know, some of the metrics coming out of -- from new car sales to maintenance spending through the end of calendar 2009, you know, the numbers seem to be pretty good. Is there any element of this, especially on the maintenance side that it's -- would be consumers kind of catching up on spent-up or delayed spending that they didn't do earlier in the year? Does what often happen with recessions?

Dave, do you want to take that question?

I can try. I think it's fair to say that the trend has been more on the replacement side in recent months. The question being, as we look forward, do we anticipate that to be a bigger factor? I don't know that that would necessarily be the case, but miles driven is trending up. There's a cyclical pattern that we watched closely, and that would be our best indicator. Christopher Butler - Sidoti & Company: Could it be that there is sort of a boost of demand now because of it that sort of eases office as the year progress something of that nature?

That's going to be a tough question to answer because of our global position. It’s going to be very specific kind of region to region and I think it would be wrong for me to comment in a global way and how we see those trends trying to unfolding. Christopher Butler - Sidoti & Company: And, just touching on the outlook from the press release, you said that a full recovery to pre-downturn volumes may occur on more moderate base is this a more moderate pace than your previous forecast. Is that sort of the back end of that comment?

No I would Chris, I think what we're saying is that we are -- we’ve seen a faster recovery in the last few couple of quarters than we had expected, so what we're believing is that the rest of the recovery that we had planned to see over a period of you know, two to three years may occur at a somewhat slower pace. But it's not actually changing the modeling that we've done on the business. Christopher Butler - Sidoti & Company: On the raw material front, you had mentioned that you know Supermetals had benefited from the raw material cost, but you had a working capital bill due to higher feed stock costs. Could you give us an indication of what kind of impact raw materials are going to have as you move into the second quarter here?

In general, I think we're going to continue to see raw material costs increasing. I think the trend is up if you look at what's being discussed with regard to commodities in general and the oil price in particular, I think the current trend is to see oil in the mid 80s by the end of year moving back in the hundred dollar range by 2011, and I think that's a good proxy for raw materials in general. If you look at our business, we tend to have the ability to pass on raw materials to our -- to the value chain. So for us, the business is really about, you know, the ability to grow the margin we have been able to capture. Christopher Butler - Sidoti & Company: Now, I know that you had said that you had put in some you know pricing was a part of this story in the first quarter. As far as raw material costs, were they up or down sequentially in the first quarter?

I'm going to raw materials overall in the first quarter, Dave. Can you help me there?

Yes. They were driven primarily by oil prices. Christopher Butler - Sidoti & Company: Okay. And just to cover it, the Toyota recall that's a non-event as far as you guys are concerned is that correct?

That is a nonevent, correct. Christopher Butler - Sidoti & Company: I appreciate your time.

Thank you.

Your next question comes from the line of John Roberts of Buckingham Research. Please proceed.

Good afternoon again. Cabot Micro has reported reasonably strong results, and when corning reported, they indicated Dow corning had a pretty strong quarter. The Fumed Metal Oxides business was down 9% sequential in volume. Maybe those end markets for those companies were down that much because they didn't talk about volumes specifically, but it sounds like your business was down by more than a couple of bench mark and market customers out there I don't know if there's any comment you could make to confirm that or describe why the gap might have been there?

I would say there is more than to the business than Cabot micro so that would be the first -- I'm going ask Sean Keohane to perhaps answer the question further.

Sure, John. So those are -- those are, you know, important contributors to the business for sure, but don't represent the entire business by any stretch. But you're right. With respect to Cabot micro and some of the broader players in that industry have shown some pretty positive results, and I think we're benefiting from that. Often there's some lumpiness. So what will happen is that we will see the recovery earlier, and of course, because we're selling to them and they're selling downstream, and so, you can see some lumpiness quarter to quarter; but if you look over the last couple of quarters, the electronics industry has bounced nicely, and we've bounced with it. So I think that's the real take away, and I would say the same with respect to Dow corning. That's a pretty good proxy for the broad silicone industry and I wouldn't read too much into the sequential numbers there.

Okay. Thank you.

You have a question from the line of Jeff Zekauskas from JP Morgan. Please proceed.

Thanks very much. I just have a couple of final things. You said that the cost reduction in the quarter was about 20 million. If you had to allocate that by segment or business, how you do that?

We don't provide that level of granularity. Sorry, Jeff.

Okay. Secondly year over year, your general unallocated expense went from 10 million negative in the first quarter of '09 to a 1 million negative in the first quarter of '010. Why is that?

I'm going ask Eddie to..

That's a question for Ed.

Thank you, Jeff. That was principally FX related issues. There were some charges that we took in the first quarter a year ago specifically related to Brazil and Venezuela that we did not take again this quarter.

Okay. And in terms of your restructuring effort, how much is left in terms of the cash restructuring charges you might have to pay in the course of 2010?Fiscal '010?

Do we provide that..

Yeah. I think I can give you a rough number Jeff if that's okay.

Sure.

It's in the order of 20 to 40 million, and that would be in 2010 and beyond.

20 to 40. And did you pay any of that in this quarter?

There was some payment this quarter, but I don't have the exact number for you.

Okay. Good thank you very much.

Thank you, Jeff.

You have a question from the line of [Jonathan Chung of Laurel]. Please proceed.

Hi good afternoon Quick question. I think you guys started talking about this a little. But can you help me understand the seasonality of the business before sort of you know the world ended in third quarter of '08?

Right. I would say, in the tire business, and you I've got to realize that, you know, our business is very global and, you know, one of the slides that we had today showed that. We're about 30% in the Americas, about 33% in Europe, Middle East and Africa and about 37% in Asia-Pacific. So we're -- from a seasonality point of view, we see two major seasonal effects one is the Christmas New Year period in the western world, which affects Europe and North America to a greater degree and some of South America and then we have the Chinese New Year period, which is February, March, which affects mostly Asia-Pacific so we have two seasonality periods, but in general those are not very pronounced, so they tend to be in the few percent range and as the business is global, that tends to balance out over the year. So I would say over time and as we have been growing more balance, globally, the seasonal impact on the company from a volume point of view has diminished quite dramatically.

So if we're kind of rebasing here -- I mean, the normal seasonality trying to place out for the most part, outside of the world falling apart again is that the right take away?

Yeah. That would be the right take away.

Okay. And then other thing I want to ask I think Saul was asking about this from the margin perspective. Obviously you guys had great margins this quarter and just so I can make sure I understand this, it doesn't sound like we should see much movement in the margins going forward, especially as you go from 50% to 10% contract lines?

While we’re we continue to -- we're going to continue to expand our margins. That's -- that's part of our game plan and our strategy. So we'll going to you know continue to put investments so for example, our energy center investments that just occurred, three energy center and three plant from around the world are going to improve our efficiency and have a you know a significant effect on the variable margins output from these from this operations. So there's continued work going on there. I think what you're eluding to is the volatility in margin that relates to lag effects due to feed stock price recognition, and that has been one of our big effort during the course of last year, to eliminate this noise and this volatility as, whatever we lose on the way up, we don't actually tend to gain back on the way down, because the volume is beyond having recognized that we have gone to formal pricing or arrangement with customers that are more close to the time when the feed stock price is recognized. So now we move so into the rein of about monthly recognition of those prices, which dramatically diminish the volatility.

Got it. And this is kind of my last question, but a bigger picture question. So volume feels like it's come back a lot faster, and obviously we're not going to go back to the peak a lot faster we hope from here but it came back lot faster the cost side had come back come through a lot faster than you guys were expecting has that changed the way you might be thinking about kind of, the targets you kind of laid out over the past couple of years?

I would say that, you know, we're still on the plan that we've laid out. We believe that that plan is still appropriate and adequate in terms of anytime what we have in the pipeline with regard to projects and activities. So no, we're not changing that time frame.

Okay. Great. Thank you guys.

Thank you.

Your next question comes from the line of Saul Ludwig of KeyBanc. Please proceed.

Eliminating the lag, correct me here, make sure I'm on the right page here. 50% of your business is basically market based pricing, and then 50% is contract of the 50% of contract, as of the first quarter of this year where will that percentage be on a three-month lag and what's the phase-in to get to the 10%.

Saul, we had and you're correct when you say we have 50% of our business in the raw blacks segment on contracts, and the current renegotiation of contracts is going to bring us down to about 10% of our total volume on 4 month lag, sometime by the middle of this calendar year.

So. That would be about in time for your fourth quarter?

Yeah, that's correct.

And where is it now, Patrick?

I would say it's somewhere around 20%, 20 or 25%.

Okay. Good. The second question is, this Masterbatch plant in Dubai, when does it start up, and what does that mean, or what's its capacity, or if you sold it out, what's it sales potential?

Yeah. As you remember, Saul, we closed the Masterbatch facility in the UK at sometime at the beginning of last year, and we've been operating with lesser capacity in the system since we haven't replaced that plant. Knowing that Dubai was actually going to be coming up and I believe the start of date I am looking at it, Saul I believe is April of this year, and you know once we have that plant back in operation, we will be able to return to the volume levels and the capacity level that we had pre-downturn, and all of that at a much lower cost and the right part of the market.

How do you measure its capacity is it millions of pounds per year?

It's in thousands of tons per year, and Shawn, we're planning to have -- so that's right, and so also, it's thousands of metric tons, and…

Number?

It's in the 20 to 25,000 ton range.

Okay. Tons per year, okay. And then finally, Patrick, we've heard a lot about energy centers, you know, over the years, and it's exciting that you got three to just start it up. How should we think about the return, the incremental return? That's going to just show up in margin because you don't get any revenues in this, but it lowers your energy costs. What should we think about in terms of the dollar benefit that these energy centers are going to contribute to your company from the investments that you've made in them?

Right. And so what I'll do is give you a sense for it, and we've been providing that type of information in prior calls as we've talked about these energy centers. But in general, these energy centers attempt to cost us between 20 and $30 million each, and the returns that we attribute to them are in the range of 15 to 20%.

Pre-tax or after tax?

Those are after tax.

So if you started up you know, if on a $20 million investment, that's going to get you 3 million after tax, you signed off three of them at $9 million that by the fourth quarter you should be annualizing at that rate?

Well, you could do that type of modeling. I mean It's a little more complicated, because each of these energy centers is in a market that has its own -- with what I would say its own dynamic, because you're dependent on -- you are dependent on steam delivery if you're delivering steam to a neighbor, etcetera so I would say these are guiding numbers. But they're kind what we would consider to be, the types of projects we consider attractive.

Very good. Thank you very much.

Thank you, Saul.

You have a question from the line of Jay Harris, Investor. Please proceed.

Just one follow-up. What is your capital expenditures budget for this year?

We've indicated $150 million of CapEx.

Of which only 13 has gone out in the first quarter.

That is correct.

All right. Thank you.

Thank you.

This concludes the Q&A portion of today's conference. I would now like to turn the call back over to Patrick Prevost. Please proceed.

Thank you again for joining us this afternoon. I believe, at that the results that we have published yesterday on the business have been -- have been a strong sign of improvement in, you know both our underlying markets and we also believe that a lot of the efforts in the restructuring have started to come through. We're pleased with the situation we're in. We're looking at some moderate growth during the rest of this year, and we're continuing to deliver the expectations and looking at getting to our long-term objectives within the period announced. So thank you very much for your attention, and looking forward to speaking to you soon. Bye-bye.

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