Greetings ladies and gentlemen and welcome to the Quaker Chemical Corporation’s second quarter earnings conference call. (Operator instructions) It is now my pleasure to introduce your host, Mr. Ronald J. Naples, Chairman and CEO for Quaker Chemical. Thank you. Mr. Naples, you may begin.

Thanks very much, and welcome everybody. Glad to have you here. As usual, Mark Featherstone and I are here. And our typical process is as it has been that I’ll provide an overview and then Mark will provide some detail and we’ll both be available for questions. Also here today I want to point out is Mike Barry, currently our Senior Vice President North America and the Managing Director of that region. Mike was our CFO for six years, so some of you may know him and certainly, he is no stranger to these meetings. But he is here today actually with a different portfolio in mind. As you may know, we announced early in May that I will step down as CEO on October. I’ll keep the Chairmanship for a while but I will be turning over to the top executive job. At the same time, we announced that Mike will succeed me in that top executive job as CEO. So, I’ve been at this for about 13 years with you but the next time Quaker has one of these sessions, it’s Mike you’ll be hearing from. And I know since all of you have your mute buttons on at this point in the conference, at least I’m spared all the signs of relief. But I am very pleased to have Mike succeed me. He has been at Quaker for ten years. He is very well prepared in terms of the range of assignments he has had from CFO to a global leader of our global metal working business, to now Managing Director of our North American operation which is our largest operation. He is very accomplished in terms of what he has achieved here at Quaker particularly in his recent North American role where he has led a…

Thank you, Ron. Good afternoon everyone. While our reported EPS of $0.41 per diluted share is the same as the previous year, this includes $0.12 per diluted share charge related to CEO transition which I will discuss further later. I will now spend the next few minutes focusing on the second quarter P&L and then we’ll go on to questions. As Ron mentioned, revenues for the second quarter compared with the same period of last year were up 15% to $158.2 million. The growth was driven by volume growth in Asia Pacific and South America, pricing improvement, as well as higher revenue related to the company’s CMS channel. The higher CMS revenue is both from new CMS programs and the renewals and restructuring of several CMS contracts in 2007. Foreign exchange has also increased revenues by approximately 8% as the US dollar weakens against both major currencies. Regarding volume, overall volume for the quarter was up modestly. Asia Pacific volume grew again by double digits, and South America was also higher which more that offset declines in North America and Europe. In North America, both steel and metal working volumes were lower than the prior year. Steel volume was essentially flat with the first quarter but behind last year’s second quarter. The weaker dollar continues to help limit steel imports and also boosted customer export activity which has helped to offset lower steel demand for our consumer durables including autos, as well as housing related demands such as appliances. Our sales to the auto sector were also lower despite continued share gains and convergence at CMS sites. Overall pricing was up about 5% from last year’s second quarter. The higher sales prices reflect our continuing efforts to work with our customers to deliver value while also recognizing the impact of…

Okay, Mark, thank you very much, and at this stage, we will turn to any questions that you may all have.

(Operator instructions) Our first question is coming from Robert Felice with Gabelli & Company. Please state your question. Robert Felice – Gabelli & Company: Hey guys, just a couple of quick questions. First, what was the magnitude of your second quarter raw material cost increases and how much pricing did you get? So, in other words, I'm curious to get my hands around the delta between the two of the price cost gap.

Mark, why don’t you give figures on that?

Yes. For the first half of this year, we're looking at higher cost compared to last year in the range of $12 million or $13 million, and the under recovery was probably between $1 million and $2 million. And as we discussed, we're looking for – we have already implemented price increases to get that back in the third quarter. However, because raw material price has continued to escalate in the third quarter, we're looking at additional price increases as well beyond that.

We think though that going into the second half of the year that we should be able to see a little more gross margin recovery than we see, in terms of the percentage than the kind of decline you've seen in the first half of the year. Robert Felice – Gabelli & Company: Well, you mentioned a cumulative $40 million of cost increases that you'll experience this year and you received $12 million or $13 million of that so far. So you've got $27 million or $28 million left. Do you have pricing in place enough to fully offset that and to also cover the $1 million or $2 million delta from the first half, or you need to go out in the market with additional price increase?

As I mentioned, I'm sorry Ronald, I (inaudible) we do have a lot of price increases that went into effect July 1 and some more going into back on August 1. But we are going back for additional price increases, because as I mentioned, we have raw materials continue to escalate into the third quarter as well.

Yes. I think the point here is that $40 million that we've talked about, that of course is we can't know that number specifically yet. That's based on projections given what we know has already come down to track and we expect to come down the track further. Of course we have to stay responsive to the market as they actually develop. But all of our regions are working hard on making sure that we're able to keep our margins in good shape even in the face of these increases. So as Mark said, we've got increases that we planned in the last quarter that are going into effect early in the third quarter. And we will be implementing other increase to try to do our best to stay ahead of the kind of escalation that we see coming. Of course, it's always built around working with our customers to find the right way to get this done, because we're serious about the notion of – the question here is the kind of value we can deliver to our customers and we will really focus hard trying to make sure that is understood in our customers. Robert Felice – Gabelli & Company: So, do you feel comfortable at this juncture that you'll able to fully cover your raw material cost by the end of the year or do you think there's going to be some GAAP?

Well, our expectation is that we should be able to recover some of the gross margin falloff, the gross margin percent falloff that we've seen in the first half of the year. Robert Felice – Gabelli & Company: Okay. And then I guess if I look at the operating income by segment, it implies that your unallocated expenses are trending lower on a year-over-year basis for the quarter and similar in the first quarter as well. So I'm curious to know what's driving the decline there, and may be you can give us just some rough guidance for the full year.

When you say unallocated, you mean indirect? Robert Felice – Gabelli & Company: Yes.

Mark?

Yes. I think as I mentioned in my remarks, we have lower legal and environmental costs and also lower incentive compensation costs this year compared to last. That's what's driven the cost lower so far this year. And do we like to see incentive come back? We will see how that goes, but the – so the environment and legal, we expect to be lower this year for the full year than last year. Robert Felice – Gabelli & Company: So what I expect that unallocated amount to be similar in the second half to the first half or it will trend up, just trying to get my hands around that?

Same kind of neighborhood. Robert Felice – Gabelli & Company: Okay, so it should benefit you in the back half of the year?

Yes.

Yes. We expect to continue to get the leverage on SG&A spending. That's when you got your topside margins getting squeezed, you got to get the benefit elsewhere. And I think one of the things that the growth in revenues we had allowed us to do is to take more of this to the bottom line. But that's one of the reasons we work so hard in getting that top line up. Robert Felice – Gabelli & Company: Okay, great. Thanks for taking my questions.

You're welcome.

(Operator instructions) Our next question is coming from Daniel Rizzo with Sidoti & Company. Please state your question. Daniel Rizzo – Sidoti & Company: Hi guys.

Hi, Dan. Daniel Rizzo – Sidoti & Company: You mentioned that you fully reduced debt by $40 million for the quarter, is that something that's going to be your focus going forward with your free cash. By getting the debt level lower, are you comfortable where it is, what's the story with that?

Well, we are not focused on a targeted debt level and we want to use our cash the most effective way we can find and we want to preserve it for acquisitions if we can. We do think that probably our cash levels in the second quarter are probably as good as we're gonna see them during the year because there will be other demands coming down the road, increases in working capital that kind of thing, but we still expect the year to be a pretty solid year from a cash standpoint.

The thing that's going to happen in the second half, Dan, is we've announce the expansion of our Middletown facility and we will have a lot of CapEx on that occurring in the second half and we've actually (inaudible) in the second quarter double fund about half of that expansion. And when we talk about the net debt, we are excluding that. We are pulling that construction fund down from the net debt calculation. Daniel Rizzo – Sidoti & Company: Okay. And just given the environment that we are in, with (inaudible) and sometimes softening in some end markets, do you see more possible acquisition opportunities, I mean, just some weakened competitors that you might be able to take over or anything like that?

Well, we are always anxious to make acquisitions that we think are important complements to what we do. But I think the important part of any acquisition we make is that has to contribute something to our market position and to our technology position. So we don’t want to simply add – I mean there are weaker competitors out there but were not really interested in simply adding low margin business because a regional competitor for instance is having a hard time. As I said, we want to find an acquisition opportunity that will be meaningful to us in terms of size that helps us to bulk up the businesses we have now and something that were doing that's important to us in the metalworking side or the steel side and also brings us some opportunity to build on our technology or to combine our technologies to develop other products that we think have promise for us. Daniel Rizzo – Sidoti & Company: Okay, alright. Thanks guys.

You're welcome.

We have a followup question coming from Robert Felice with Gabelli & Company. Robert Felice – Gabelli & Company: Hi guys just a quick – another quick question. Do you have a metric in place that you use to track or follow how quickly or how much progress you are making converting your CMS business to Quaker product?

Yes, absolutely. I mean that's an important competitive opportunity for us and it's also we think an important opportunity for our CMS customers so we track that very closely. Robert Felice – Gabelli & Company: And what metric is that, or rather is that something you consider publishing on an ongoing basis with your earnings report?

No. It's not something that we think is something proprietary and important to us in terms of how we compete in CMS and would be good information for our competitors to have. We just soon not talk about that probably. Robert Felice – Gabelli & Company: Okay.

But you should know that when we look at competing for a piece of CMS business, the economic value add of that piece of business is a very rigorous exercise for us and what we expect to use in terms of Quakers products in those accounts is an important aspect of that. But the bottom line is always what delivers the best result for the customer, not simply they are products. Robert Felice – Gabelli & Company: Well, I guess if we were to look back and track your conversion rate historically since you started the CMS business, what would it look like?

I'm trying to get us to give you a number here. Robert Felice – Gabelli & Company: Well – or a trend, just qualitatively.

I think that would be CMS – well I'll put it this way. The CMS business has been very successful for us. We chose an account carefully in terms of the business we want to compete on. The economic value added analysis we've done in choosing our accounts builds in conversion opportunities. And so far we've made most of what we have planned on in those analyses happen. So I think that what you should take away from this is that we've been successful in serving our customer better with our products in these accounts where we think there's an opportunity. Robert Felice – Gabelli & Company: Okay, that’s helpful.

If there are any other questions, we would be – we are at your disposal. Okay, I'll assume there are no other questions, so I just thank you all for your interest. We are of course focused on delivering the best second half we can deliver. We have tremendous amount of confidence on what we can get done. So, I was going to say I look forward to seeing you talking again in the quarter, but that won't happen, but I look forward to listen with Mike has to say in a quarter, and I hope all of you have a good summer with (inaudible) of it. Thanks for the interest. Goodbye.