Greetings, and welcome to the NewMarket Corporation's Second Quarter 2012 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Fiorenza. Thank you, Mr. Fiorenza. You may now begin.

Thanks, Tim, and thanks to everyone for joining us to discuss our second quarter performance at a little bit unusual time for us. With me today is Teddy Gottwald, and I have our planned comment, and then we'll open the lines for your question. As a reminder some of the comments we'll make today are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We believe we base our statements on reasonable expectations and assumptions within the bounds of what we know about our business and operations. However, we offer no assurance that actual results will not differ materially from our expectations due to uncertainties and factors that are difficult to predict and beyond our control. A full discussion of these factors can be found in our 2011 10-K. We filed our 10-Q this morning. It contains more details on the operations of our company. Please take time to review it. Net income for the second quarter improved to $55 million, or $4.12 a share, an increase of 6% over net income for the second quarter of last year. For the first half of this year, net income increased to $122 million, or $9.09 a share, an improvement of 20% compared to the net income of the first half of last year. Earnings per share for the second quarter and the first half increased 9% and 24%, respectively. Earnings for both quarters of this year include a charge for an interest rate swap and for the early extinguishment of debt. Excluding these items from all comparable periods, earnings for the second quarter of 2012 improved to $63 million, or $4.69 a share, an increase of 15% over earnings for the second quarter of last year. The details of this information is highlighted in yesterday's earnings…

[Operator Instructions] Our first question is coming from Ivan Marcuse from KeyBanc Capital Markets.

In your -- for the volumes for the second half, just to be clear, so even though they're going to be down sequentially you still expect them to be up on a year-over-year basis?

Yes, that's correct.

And then with material costs, is that going to flow about the same? Would you expect it to be down in the second half versus the first half, and by about what degree would you sort of gauge it at right now?

No, Ivan. That's always a little bit difficult one. When we -- our outlook is that in the second half we'll be roughly the same as the second quarter. So we don't see any big movements in either way, you well know base oil has trended down, but all the other materials haven't done that, so our planning base is they'll be about like they were in the second quarter.

And then moving over the new plant that you announced, how big is this going to be? Meaning, how much capacity is this going to add to your global footprint? And does it start up in 2015 and it's full go or do you expect to ramp-up over a multiyear period? And how should I think about that looking out?

Ivan, this is Teddy. You should look at this plant as being incremental to what we have. And when we start it up in 2015, mid-year 2015, we'll essentially be starting up a detergent plant first and adding on to it over a period of years. We're not prepared to say what else we're adding initially, because a lot of those decisions are still being worked through. It's not huge capacity initially, relative to what we have in place and relative to the market. But it is a significant step for us. This plant, coupled with the disbursement capacity we already have in place in Singapore, with our toll manufacturer and blending capacity there, gives us a much better footprint to serve our customers in that region with shorter lead time. It gives us some breathing room in existing plants and it positions us, particularly as we add to it, in the several years beyond 2015, it positions us well to have the capacity to meet our growth ambitions.

And one last question, I see you've, instead of buying back stock, I guess you've been paying down debt, how do you -- when you look at either paying down debt, because you're barely any leveraged at all and I don't think that debt is -- that might be 1.5%, 2% right now, why buy back debt versus buying back stock or even increasing dividend, how do you and the Board sort of look at debt and how are you looking at it going forward?

Our views on those issues haven't changed. We still look at the relative price of the stock, the potential for acquisitions in the near term and general overall uses of cash, including stepped-up capital spending, it all fits together. And our views really haven't changed on how we approach that.

Our next question is coming from Todd Vencil from Stern Agee.

David, I think I might have missed it or half heard it. Did you weigh in on the top line, the revenue in the back half of the year given that you've had some price increases but the volumes are going to be down a little versus the first half?

No, we didn't comment on that. Our comment was really on the shipment side.

Okay. So well, then I'll ask you in the form of a question. I mean, given that you've had some price increases, is it reasonable to think that, that might offset it more than offset whatever level of decline in volumes you're thinking about?

Yes. I haven't actually thought about that, but that's not unreasonable assumption.

Should we be thinking about any sort of margin impact from the lower shipments?

We said a couple percentage points, so there might be some, but it would be small as opposed to some big number that I would have to call out.

Okay. So maybe in the range of the air band that you got around sort of your general guidance or a bit below that?

I don't know what that general guidance means, but I won't be telling you it's $10 million, is what I'm telling you in subsequent quarters so...

Got it. Switching to the swap costs. Are we done with that now, or is that still going to -- are we still going to see some impact from that?

That particular swap was actually not affected by us taking out the Foundry Park loan, so you'll -- we will still see that in subsequent periods.

Okay. And then the other thing is the tetraethyl lead, something special going on or tetraethyl lead and other, I should say, something special going on this quarter?

Yes. There were a couple of onetime favorables. The last year's performance is a better guide of what that's going to be going forward than looking at the second quarter and thinking something's going on there.

Anything in particular in terms of onetime favorables we ought to think about or just...

No. It was just -- we always look at future cost and mark them to current expectations. Nothing that's of any interest to anybody.

[Operator Instructions] Our next question is coming from Dmitry Silversteyn from Longbow Research.

Just wanted to understand a little bit better the sort of the quarter-to-quarter volatility in margins we saw between the first and the second quarter in the additives business. If you just look at the sequential margin move, how much of that was lower production volumes versus kind of a raw material run-up sequentially, and was there a big mix component to that? I'm just trying to get my hands around the 2.5-, 3-point sequential move in margins.

Yes, Dmitry. That's an excellent question. We've got to go back to the first quarter to answer that. So when we posted that 19.2, I think it was in the first quarter, we talked about that really was a perfect storm in a good sense. Raw materials dropped through the P&L, happened quickly. Margins expanded and now this quarter, we're posting, what, 16.4 or so, 16.6. So I would say the 16.6 is more in the band of what we expected than the first quarter. So there's really not much to point to. It was just a good set of circumstances in the first quarter.

Okay. But by that token, with the decline in base oil pricing that we're going to see in the second half of the year, why aren't you more confident about your margins in the second half of the year, assuming that you can hang on to pricing through this decline in base oil cost?

Well, I just like to focus on the fact that when there's sustained movements, we do deal with that with our customers and 15%, 16%, 17% is kind of what we think this business can make on an annual basis.

Okay. If you sort of look at the year-over-year results now in the Petroleum Additives segment, your revenues were up, roughly speaking, about $10 million and that was actually with your operating profit was up. So your incremental margin by that calculation is pretty close to 100% which obviously isn't the case. So on a year-over-year basis was it more of a mix or price realization? I mean, kind of what drove the high conversion of top line to profit dollars?

Yes, again, that's a good question. And it just has to do with where your start point is. We're always catching up or we're always lagging, so I don't have a real scientific answer for you on that question.

Okay. But then if I could just follow up with one more. We sort of know with the base oil situation, that's pretty public. But can you give us an idea of what's going on with your other raw materials, the additives that you buy from third parties to blend with your own packaging deliverable cost? How should we think about the broader raw material basket?

I think the way you should look at it is a comment we made just a little while ago that, we look at that overall outlook for raw materials to be flat with the second quarter performance. We all know base oil is going down but, remember, base oil is 20% of our purchases and that other basket isn't following that right now.

Okay. So you're still seeing price pressures on the...

No, I'm just -- we're not seeing all the drops, so when we look out, we see a flattish raw material picture.

Okay, got it. All right and then just -- does the $5.5 million corporate and other run rate that you had in the last couple of quarters, that's a good rate to use for the balance of the year?

Yes, it is.

Our next question is coming from Saul Ludwig from Northcoast Research.

I wonder if you could give us some granularity on the 7% volume decline. Did that differ much by Asia, Europe and North America?

I guess so, when we look at the volume decline, we see more a difference in Europe when we look at our numbers. I almost hesitate to say that because coming off of a record quarter to a second record quarter, it is the arithmetic, but it's hard to say it was bad. So Asia, yes -- I mean, Europe, yes. I'm sorry, I misspoke. Europe.

How about Asia? Where they up or down or flat or?

Asia was up. Latin America was up. Predominantly Europe and then some North America.

And in terms of pricing, you talked about raw materials being flattish going forward. It's a little surprising, actually, when you think of ethylene is down and propylene is down, and oil was down, and anything to do with petrochemicals seems to be down. I'm sort of surprised that your other basket of raw materials isn't directionally moving lower. Am I missing the boat someplace? Or should they be trending lower because all of these peripheral products that would go into those other materials, butadiene, everything is sort of heading south pretty sharply.

Well, when the day is done you may be right. But when -- it's also a fact that if that happens, we'll be happy to deal with that on the revenue line. That's why I'd like to focus you on the longer-term margin of this business and so we don't get all caught up in that. I'm just saying right now we're not seeing that.

Okay, and are you assuming -- let's go back to the flat raw material sequentially. Would you assume pricing then would be fairly flat, your unit price be fairly flat at your back to the end of the...

I think that's a fair assumption, yes.

Sure. And then another question, David. With the volume being down, are you running your plants a little less full than you did previously and has there been any impact from a fixed-cost absorption in the second quarter or might there be any fixed cost absorption issues and expenses in the back end of the year?

I think the second quarter run rate and the third quarter run rates will be close to each other. Some number 1, 2, 3, pick a number, 1 million, that was of kind of Todd's question a little bit earlier. But you know what, that gets lost in all of the other moving variables that we have.

And then, Teddy, you've been talking about acquisition searches for as long as we've been on these calls. What do you think the opportunities are that are out there? Or are we at the point to say it's just unlikely that there'll be anything in acquisitions?

Saul, we've been stressing patience ever since we really started talking about it. And that's still a key word here. There are not that many opportunities in our field and we're not spending a whole lot of energy looking beyond Petroleum Additives. We're looking a little bit outside but most of our focus is on acquisitions in our field, and there's just not many of them. So, yes, you shouldn't expect a whole lot of activity there.

[Operator Instructions] It appears there are no further questions. I'll turn the floor back over to management for closing comments.

Well, thanks, everyone, for joining us, and we'll talk to you on the next call. Have a good afternoon.

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