Good day and welcome to the Innospec Incorporated Q1 earnings conference call. For your information, today's conference is being recorded. At this time, I'd like to turn the conference over to Mrs. Kate Davison. Please go ahead, Madam.

Thank you and good morning, everyone. My name is Kate Davison, Group Legal Advisor and Head of Investor Relations with Innospec. Thanks for joining our first quarter 2008 financial results conference call. Today's call is being recorded. As you know, last night, we reported our first quarter 2008 financial results. The press release is posted on the company's web site, www.innospecinc.com. An audio webcast of the call and the slide presentation on the results are now available and will be archived on the web site. Before we start, I'd like to remind everybody that certain comments made during this call might be characterized as forward-looking statements under the Private Securities Litigation Reform Act of 1995. Generally speaking, any comments regarding Management's beliefs, expectations, targets or other predictions of the future are forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the anticipated results implied by those forward-looking statements. These risks and uncertainties are detailed in Innospec's most recent 10-K Report as well as other filings we've with the SEC. We refer you to the SEC's web site or our site for these and other documents. In our discussion today, we've also included some non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure is contained in our earnings release and in the presentation that follows, a copy of which is available on the Innospec web site. With us today from Innospec are Paul Jennings, President and Chief Executive Officer; Ian Cleminson, Executive Vice President and Chief Financial Officer; and Patrick Williams, Executive Vice President and President of Fuel Specialties. And with that, I'll turn it over to you, Paul.

Thank you, Kate, and thanks to everyone on the call for taking the time to join us. Turning to slide four in the presentation, I have a few summary comments about our results before Ian takes us through the numbers in greater detail. Overall, we're very pleased with the results for the quarter. Total revenues were up 16% with GAAP EPS on a diluted basis of $0.30 a share, compared with $0.24 a share a year ago. The results include Octane Additives' goodwill impairment and a small restructuring charge totaling $0.06 per share in the quarter compared with similar charges totaling $0.19 per share a year ago. The results also include an accrual for the quarter of $6.8 million or $0.28 per diluted share for legal and professional expenses related to the ongoing investigation into the Oil-for-Food Programme. Fuel Specialities' excellent performance continued in the quarter with impressive revenue growth of 34% ahead of expectations. Octane Additives performed in line with our longer-term outlook of decline of this segment. Active Chemicals' results were slightly below our expectations, mainly due to the timing of certain shipments and reduced gross margins. However, following the restructuring of that segment early in the fourth quarter 2007, we believe it is positioned for a better performance in the remainder of 2008. We generated free cash flow for the quarter of $18.1 million and used $7.7 million to buy back our stock. Overall, we remain comfortable with the guidance ranges for the three core businesses that we provided on our last call. I'd now like to turn the call over to Ian Cleminson, our Chief Financial Officer.

Thank you, Paul. Turning to slide six, on a consolidated basis, revenues for the quarter increased 16%, mainly due to the strong performance in our Fuel Specialties business. The overall gross profit percentage was 30.6%, which represents a 3.6 percentage point decrease from a year ago. This is mainly due to lower production volumes and a lower proportion of high-margin sales in our Octane Additives business, and also reduced gross margins in Active Chemicals. Operating income of $14.1 million was down 23% from a year ago, primarily due to $6.8 million provided in the quarter for legal and other expenses in relation to the ongoing Oil-for-Food investigation and the reduced gross margins in Active Chemicals. Our GAAP earnings per share of $0.30 on a diluted basis was up 25% from $0.24 per share a year ago. If we exclude the legal and professional fees accrued, earnings per share on a diluted basis for the quarter was $0.58. Turning to the individual business segments, starting with slide seven. In Fuel Specialties, we had another excellent quarter with a reported revenue growth of 34%. By region, reported revenues were up 30% in Americas, 33% in EMEA and 52% in Asia-Pacific. Results in the Americas were fuelled by strong product volumes in cetane enhancers as well as our winter product range. Demand for products remained high, even though price increases on certain products were implemented, enabling the region to maintain a solid gross margin. The EMEA region started the year well with growth across all product lines and in particular coal flow improvers and heating oil additives. In Asia-Pacific, the strong sales growth was mainly due to sales of coal flow improvers, marine product lines and conductivity improvers. Overall, the segment's gross margin remained strong at 34.4 % compared with 34.8% a year…

Thank you, Ian. Moving on to slide 13, which shows Innospec's ongoing operating profitability. This is a regular slide and shows how we measure the success of our transformation of Innospec over the last three years. In 2005, operating income from our continuing growth businesses in Fuel Specialties and Active Chemicals did not cover our corporate costs. As you can see, our ongoing operating profitability continues to improve. For the first quarter 2008, it was at 49% against the year-ago level. Slide 14 is a reminder of the guidance ranges we set on the last call. We will look at these ranges again throughout the year but, at this point, we feel it will be premature to amend any of these for the full year. Moving on to slide 15, I wanted to touch on a few more points before we take any questions. As you know, innovation is one of the core values of Innospec. In the quarter we've increased our R&D investments by approximately 16% quarter-over-quarter showing our continued commitment to future innovation. Our stock, like many others, was affected by the market turmoil back in the summer of 2007. However, it has recovered well and during the first quarter, our share price rose 23.5%. During the quarter, we completed a 10b5-1 share repurchase program, retiring 398,000 shares at a cost of $7.7 million. As we've said, the performance of Active Chemicals in the quarter was below our expectations. However, we remain confident that following the restructuring of this segment in last year's fourth quarter into three geographical regions – the Americas, EMEA and Asia-Pacific – as we've done in our larger and very successful Fuel Specialities business, its performance will improve as we move through 2008. In particular, we are pleased with the year-over-year growth achieved in our fragrance and personal care businesses. We remain open to the possibility of growth by an acquisition in either Fuel Specialties or Active Chemicals and as we've said previously, any acquisition would need to create long-term value to our shareholders and complement our existing businesses. I'd now like to turn the call back to the operator and take any questions you may have.

Thank you. (Operator instructions) And we've our first question from Jeff Zajkowski from JPMorgan. Please go ahead. Jeff Zajkowski – JPMorgan: Hi, good day.

Hi, Jeff.

Hi, Jeff. Jeff Zajkowski – JPMorgan: Hi. A few questions, in Fuel Specialties, can you tell us sort of what was price, volume and currency in the quarter?

Hi, Jeff, good morning; this is Ian. We achieved a really pleasing 34% growth in Fuel Specialties business compared to the first quarter a year ago. Growth in volumes accounted for 23 percentage points and the favorable impact of exchange rates accounted for another 5 percentage points. The balance, a further 6 percentage points of growth, was due to price and product mix. Jeff Zajkowski – JPMorgan: Did you feel that you pulled forward business from future quarters in that the level of growth is very, very surprising? Is that a sustainable level, or a roughly sustainable level? Or how do you see the volume for that business for this year?

Jeff, this is Paul. As you've noted, we haven't actually changed the guidance for the full year as far as Fuel Specialties are concerned. Quarter one was a good quarter for us; principally we had growth due to the cold weather and some of the heating products that we sell and other similar products that perform at that level. So we're pleased with the performance in the first quarter, but I wouldn't say that's – you could actually say that that's what it's going to be for each of the following three quarters. Jeff Zajkowski – JPMorgan: A couple of questions more, in Active Chemicals, your revenues were up year-over-year, and your operating profit, you were just barely profitable. You said that some orders didn't come through that you expected. So, do you think you're going to get back all of the operating profit you would normally get in the first quarter? That is, there's a wide discrepancy between what you reported and I think what you hoped to report.

I think with Active Chemicals, Jeff, what we've seen there is – as we mentioned earlier on – is the shift in a particular customer, a different mix of sales, etc. And also, I've always believed in the majority of our businesses that you can't just take one quarter and say that's necessarily reflective of that operation. I think that we'll see sequentially better performance in the second quarter than what we saw in the first quarter and we will certainly be pushing hard to make sure that we try and deliver the full-year performance for 2008, recognizing that we've got off to a slow start. Having said all that, the changes in Active Chemicals I think are the right ones to make. We're focusing on the right markets and it's our job now to go ahead and deliver those. Jeff Zajkowski – JPMorgan: Were you satisfied with the gross margins in Octane Additives? That is, I think 40.3% is a new low for you. Is the trend in gross margins there up or down?

Jeff, this is Ian again. As you know, the Octane Additives market can be fairly lumpy for us and we've seen a decline of around about 18% in volume terms, and that's pretty consistent with what we expected. What we've seen in terms of the margins is that has really been impacted by the sales mix in the first quarter. With the relatively small number of countries that are left in this business, it's difficult for us to avoid some of the swings. So the first quarter has been a little bit more focused on the lower-margin countries as opposed to the higher-margin countries. All that being said, our guidance has indicated that, against 2007, margins for this business will decline and a little bit off where we expect them to be. But, for the full year, we expect to be within our guidance range. Jeff Zajkowski – JPMorgan: And then, lastly, as far as your Oil-for-Food charge, didn't you take a charge in the fourth quarter for this? So, what happened so that fourth quarter charge wasn't enough?

We did take a charge in the fourth quarter; I think it was just shy of $4million at that particular time. Obviously, things have moved on a little bit since then and we've taken a good view of the position for the full year. So, we provided the $6.8 million accrual, which we see as anticipated fees for the balance of 2008. So, we just had more information, so we can make that accrual. Jeff Zajkowski – JPMorgan: So do you expect this issue to be resolved in '08, or is it going to stretch longer than that?

It's difficult to judge in terms of timing on it. We're obviously working closely as far as the investigation is concerned and responding to the various requests; I don't think I could actually say when it's going to stop, but obviously we would prefer that to happen sooner rather than later. Jeff Zajkowski – JPMorgan: So you've spent $10 million now, or you're spending $10 million over the course of two years; it seems an awful lot for legal fees?

I agree. Jeff Zajkowski – JPMorgan: But maybe you have very talented attorneys you're hiring?

I think in anything like this, it's important that you get the best possible advice and we feel as though we have that, and the accrual reflects what we think we will spend in this particular area. Jeff Zajkowski – JPMorgan: Okay, thank you very much.

You're welcome.

Thanks, Jeff.

Our next question comes from Jonathan Victor [ph] from Sidoti. Please go ahead. Jonathan Victor – Sidoti & Co.: Good morning.

Hi, Jonathan. Jonathan Victor – Sidoti & Co.: Hi. Were some of the quarterly sales gains in Fuel Specialties because of competitors buying again? I think that happened in Q4.

Jonathan, this is Ian. Yes, we benefited in Q4 and also in Q1 from some of our co-producers coming to us for volumes. Now, we can't exactly predict that will happen, but we certainly managed it through our supply chain, so we were pleased to take that upside. Jonathan Victor – Sidoti & Co.: Can you quantify what percentage, or how much that helped on either the sales line or the margin line?

Jonathan, I won't go there – if that's okay – that's commercially sensitive. Jonathan Victor – Sidoti & Co.: Okay. Has Active Chemicals' margin been hurt by the start up of a plant last August in Ellesmere?

No. This is Paul, Jonathan. That's not what hurt the margin. It was principally, as Ian said, the mix of sales that we've had into certain lower margin business in the polymers and plastics area and the fact that we weren't able to – because a major customer didn't take shipments in this particular quarter – we haven't seen any impact from what you described. Jonathan Victor – Sidoti & Co.: Okay. So, it's not because there's additional capacity there that really hasn't been filled with high-margin product yet?

No, that's not the reason for the year-over-year decline. In fact, we're working hard to operate these plants with a significant capacity increase. So we don't see that impacting results quarter-over-quarter. Jonathan Victor – Sidoti & Co.: Given the possibility of potentially some penalties resulting from the investigation, do you think it makes sense to continue to buy back stock?

We bought back stock in the first quarter, which I think was important that we did that, and we generated a lot of cash at that particular stage. We always review these activities on a quarterly basis when we hold our Board meetings. We have a Board meeting coming up in the next week and I'm sure this will be on the agenda again, but it's too early to say what we'll actually do at this stage. Jonathan Victor – Sidoti & Co.: Okay. Thank you.

You're welcome.

Thanks, Jonathan.

(Operator instructions) We will now take a question from John Walthausen from Walthausen & Co. Please go ahead. John Walthausen – Walthausen & Co.: Yes, good morning.

Good morning. John Walthausen – Walthausen & Co.: A couple of quick questions. One, you've increased your R&D spending; could you talk about what segment that it's being used in and whether there's some specific projects that you can reference in that?

Sure, this is Paul. John, the increased R&D spending – a lot of our R&D goes into our Fuel Specialties business, with the balance of it going into Active Chemicals. We don't spend anything in the Octane Additives area. So, we've been working hard on a number of projects in Fuel Specialties that are key to us, and we've also been looking to develop some of the Active Chemicals business where we can take some of our products into newer markets. So all of that spend is on the future of Innospec, which is the Fuel Specialties and Active Chemicals area, and we're pleased that we're able to free up enough resource to be able to increase it by 16% quarter-over-quarter. John Walthausen – Walthausen & Co.: Okay, that's very helpful. Going back to the issue of the guidance that we were talking about before and the decision not to do it; if I do some simple mathematics and use the mid-point of your guidance, it suggests that for the next three quarters Fuel Specialties will grow only by about $4 million and the gross profit will be off about $4 million. So I guess the question is, can you help us to remember whether there were some special non-recurring sales gains that we had in the last three quarters of last year that will make the comparisons tougher, or whether there are some pieces of business that we expect now will go away?

Again, this is Paul, John. I think that I can understand you taking the mid-point of the range as far as the business is concerned and obviously, the math works out the way you described, but there are no significant one-offs year-over-year that would change those numbers. And whilst we haven't changed the guidance, obviously there's room within there for it to be significantly more than 9%, we've said up to 11% and a GP of up to 34% and we just feel at this early stage of the year, with still a number of months to go, we'd rather stay within that range rather than give a more definitive number. But, our expectation is it's probably going to (inaudible) towards the higher end of that range rather than the lower end of that range. John Walthausen – Walthausen & Co.: Okay. That's very helpful. Thanks.

You're welcome.

Our next question comes from David Wilson from Smith Barney. Please go ahead. David Wilson – Smith Barney: Hi, guys. Could you talk a little bit about the pricing in your TEL, both for the Fuel Specialties and the Octane Additives units? How much were you able to increase prices? Are you feeling some resistance there?

David, this is Ian. As regards to the Octane Additives side, we've managed to get some price increases through year-over-year in quarter one and, as you will remember from previous calls, this is really an economic decision by each country as to the value that they get out of our products, so we have to be careful of how hard we push that. But, we continue to see the ability for our business to push prices through there and that's particularly pleasing. As regards the Avtel business, we've seen some very strong growth in that business and we've also seen some benefit from pricing as well, and that is partly due to the Ethyl settlement which wasn't in there in the first quarter of last year, but it is in there this year. So we've got better volumes and better pricing coming through the Avtel portion. David Wilson – Smith Barney: Okay. Thank you very much.

Thank you, David.

(Operator instructions) As there are no further questions, I'd like to turn the call back over to Mr. Paul Jennings for any additional or closing remarks.

Thank you. Thank you for your questions. Now, I'd like to leave you with a few final thoughts on slide 17. Our solid first quarter results were largely driven by the excellent performance of our core Fuel Specialties business, which is clearly benefiting from continued R&D investment and the service-focused approach to its markets. Our Active Chemicals division was affected by temporary timing issues. However, we are optimistic that Active Chemicals will show stronger results in the second quarter, as the restructuring of that segment to a model similar to that of Fuel Specialties starts to bear fruit. In both Fuel Specialties and Active Chemicals, our ongoing growth businesses, we've strong leadership positions in attractive markets. We remain well positioned to leverage those strengths in the future, both organically and through potential acquisitions. If you have no further questions, please give Kate, Ian or myself a call in the future. We look forward to sharing our second quarter results with you in a few months' time. Thanks again for being with us on the call today and good-bye.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.