Good morning, everyone, and welcome to the Sensient Technologies Corporation 2013 Second Quarter Conference Call. Today's call is being recorded. At this time, for opening remarks, I would like to turn the call over to Mr. Steve Rolfs. Please go ahead, sir.

Good morning. I would like to welcome all of you to Sensient's conference call to discuss 2013 second quarter financial results. I am joined this morning by Mr. Kenneth P. Manning, Sensient's Chairman and Chief Executive Officer; Dick Hobbs, Sensient's Senior Vice President and Chief Financial Officer; and Paul Manning, Sensient's President and Chief Operating Officer. Yesterday, we released our 2013 second quarter financial results. A copy of the release is now available on our website at sensient.com. Before we begin, I would like to remind everyone that comments made this morning, including responses to your questions, may include forward-looking statements as defined in the Securities Litigation Reform Act of 1995. Our statements may be affected by certain factors, including risks and uncertainties, which are discussed in detail in the company's filings with the Securities and Exchange Commission. We urge you to read Sensient's filings for a description of these factors. Please bear these factors in mind when you analyze our comments today. Now we'll hear from Ken Manning.

Thank you, Steve. Good morning. Sensient reported diluted earnings of $0.74 per share in the second quarter, excluding the impact of restructuring costs. This is an all-time high for quarterly EPS and an increase of 6% over the $0.70 reported in the second quarter of 2012. As reported, the second quarter earnings of $0.65 per share, which includes $0.09 of restructuring costs. Cash flow from operating activities was strong in the second quarter, reaching $44.5 million. This is an 11% increase over last year's results. Cash flow from operations for the first 6 months of 2013 is $70 million, an increase of more than 40% over last year's cash flow. Excluding the impact of restructuring, cash flow was up 24% in the second quarter and 58% year-to-date. Strong performance in the second quarter is the result of our strategy of focusing on high margin value-added products. The Color Group's operating income increased 4.4% in the second quarter and its operating margin increased 140 basis points to 21.9%. The digital inks and cosmetic businesses generated significant growth in both revenue and operating profit and also added solid margin improvement. Demand is sustainable for both of these businesses and they will make strong contributions to the Color Group's performance in the second half of this year. We have also been focusing on developing and commercializing unique value-added products in Flavor & Fragrance Group. This group has strong product development capabilities and has developed many unique technologies. Our new products are getting good reviews from customers and we should see some benefit from our project pipeline in the second half of this year. We will continue to improve the product mix for the Flavor & Fragrance Group, and this will drive the group's operating profit growth and margin improvement. The relocation of the…

Good morning. Sensient's revenue was $378.8 million for the second quarter of 2013, an increase of 3% from the $367.8 million reported in last year's second quarter. Operating income as reported was $48.7 million compared to $54.3 million in the second quarter of 2012. The 2013 second quarter operating results include $6.6 million of costs related to the restructuring program, which are reported in the Corporate & Other segment. Excluding the restructuring costs, operating income was $55.3 million, an increase of about 2%. Interest expense in the second quarter was $4 million, down 7.8% from $4.3 million reported in the comparable quarter last year. Earlier this year, the company announced that it has a commitment for the placement of approximately $125 million of fixed rate debt. This issuance improved our capital structure and helps protect the company from future increases and interest rates. The tax rates were 27.7% and 30.1% in the second quarters of 2013 and 2012, respectively. Excluding the restructuring impact, the tax rate was 27.9% in this year's second quarter. Diluted earnings per share as reported was $0.65, including the $0.09 restructuring charge compared to $0.70 last year. Excluding the impact of the restructuring charge, earnings per share were $0.74 in the quarter, an increase of 5.7%. For the first 6 months of 2013, revenue was $744.4 million compared to $733.4 million last year, an increase of 1.5%. Operating income as reported was $85 million in the first 6 months of 2013 and $100.8 million in the first 6 months of 2012. Excluding the restructuring impact, operating income grew about 4% to $104.4 million in the first half of 2013. Interest expense was $8.3 million for the 6 months ended June 30, 2013, a decrease of 5.5%, from $8.8 million reported in the comparable period last year.…

Thank you very much for your time this morning. We will now open the call for questions.

[Operator Instructions] Your first question comes from the line of Mike Sison with KeyBanc.

I think first off, Paul, if you can just maybe give us an idea in terms of what you plan to focus on for the rest of this year. And as you head into your 10-year into '14, maybe give us your thoughts in terms of how you would believe you'll drive shareholder value longer term for the company.

Sure. Let's start with Flavor & Fragrance, our key area of interest and a big opportunity for the company. As I've mentioned on some previous calls, there is, to begin, a lot of strategic opportunity in many of these business units. In many of these units, we have focused strongly on ingredients and this has been an important part of our success. But to bring the business to the next level and to really strongly grow top and bottom line, we see tremendous opportunities to really increase that value by incorporating really more of what we already do within flavors. So in other words, we can bring together ingredients, extracts, top notes reaction flavors into more of an integrated sale, and then also introduce other elements of service to that sale. I think that is a change that would really benefit flavors substantially, again, on both top and bottom line. It would provide a more defensible position in the market. It would allow us to really more effectively commercialize new technologies, which is fundamentally the second aspect of this improvement area for flavors and fragrance. Product development is going to be really the key differentiator moving forward. On the flavors industry, they're not looking for more of the same. They're looking for things that really revolutionize products. And we have many of those technologies that we've developed and simply have not effectively commercialized. We have many in the product development pipeline which are in the process of being commercialized, and we have a strong pipeline of opportunities moving forward. These are being in such areas as, again, extracts, sugar reduction platforms, taste masking. These are all very high-tech areas of the market, very consistent with what customers in the market are looking for. And so our ability to capitalize on…

Okay, great. And then just sort of -- your sort of macro or top-down philosophy in terms of driving shareholder value longer term, do you focused on returns or sort of just give us a feel for how you might change the way Sensient's been managed and move it to the next level.

Well, I think everybody likes EPS, that's probably number one. So we'll continue to focus on earnings and do so through top-line growth, better product mix and as well, some of the activities associated with our restructuring. These are all going to be very important. Clearly, return on invested capital is an area for improvement which we've acknowledged. We are going to work very closely on this one. I think this is an area where we have a lot of upside and you're going to start to see that as we move forward. There is some improvements that we can make with respect to cash flow. We have a very effective model in some of our businesses, which we can apply to others. So I would tell you that these are always going to be very important metrics. But I think you're also seeing within the business groups themselves the operating margin and the growth margin. What we've done in color, I think has elevated that business to a level of competitiveness and strength that is really putting us in a #1 position globally in many of those markets. I think we have the same ability to do so in flavors. I think flavors is a business that -- right now, we're in the mid to upper 20s on gross margin. As I've mentioned in the past, this is a business that should be a 40% gross margin or higher business. Similarly, on the operating margin, as we did with color, raising that from about 14% to 22% in just a few years, we have the opportunity to do so in flavors. So these are going to be some of the key metrics that we'd look at that I think are going to create the strongest return to shareholders.

Great. And then last question, your balance sheet is in very good shape, maybe under-levered to some degree. What are your thoughts there in terms of utilizing that balance sheet to drive -- to give -- to return cash back to shareholders or drive shareholder value longer term?

Sure. Well, we've had a very good history with our dividend, in terms of raising that. And as you saw, we raised that again. I think that's a very good indication. With respect to being, as you say, under-levered, some may think that's a fairly positive thing, given what's going on right now in the economy. However, we're feeling very confident about our business. We do generate a lot of profit in these businesses, so I think that positions us very well for an acquisition. We've talked about acquisitions that could be smaller, technology-driven acquisitions. But that -- with our balance sheet, that could certainly open up the possibility of a much larger acquisition in one of these areas. And then of course, we've talked about share repurchases in the past. We've executed on that in the fairly recent past. That may, again, be an element of the balance sheet utilization. And in that case, specifically returning -- improving the returns to shareholders.

Your next question comes from the line of Christopher Butler with Sidoti & Company. Christopher W. Butler - Sidoti & Company, LLC: I appreciate the big picture commentary that we've just had. Focusing more on the quarter, could you talk to the Flavor side of the business, the margin squeeze that was indicated and thoughts on when you're going to be able to recoup that with pricing or otherwise?

Sure. I would say, the flavors improvement plan is well underway. We started this back in the October, November timeframe. We're making a lot of progress. We are looking at everything from strategic change to organizational change to restructuring. So we've placed everything on the table. We have executed, we are executing and we will continue to execute on that strategy, very strongly directed at product development and commercialization. Now specific to the raw material part of your question, there are some -- a number of raw materials within the Flavor & Fragrance Group that we would anticipate improving from a pricing standpoint in the second half of the year. This will generate improvements to gross margin. And coupled with improvements to gross margin by improving the mix, I think we're going to start to see improvements there. And then certainly beyond, as I've alluded to before, there is tremendous upside in gross margin and operating margin in the Flavor & Fragrance business. Tremendous technical potential, new product releases. We have a, for instance, a sugar -- for the purpose of this call, just call it a sugar reducer agent. And what it is, is a -- it's a technology which allows customers to use less sugar in their products. So clearly, of tremendous interest in many of our markets. And we've recently showcased that to a number of head developers. And the developer, one of the largest food and nutraceutical companies in the world, indicated that he has seen every one of these in the market and we have the best one that he has seen. So that's a little taste of some of the product technologies that we have and that we are commercializing and that are really going to be a big impact. But I would say, those 2 elements are going to strongly help us. And beginning in this second half, we will get some more immediate relief on the raw material front. Christopher W. Butler - Sidoti & Company, LLC: And you've spoken a lot to product mix and new product development. Could you talk to the -- your customer side of this equation? Your new products require your customers to come up with new products. With the weakness in Europe, as the backdrop -- are they adopting products the way they have historically? Is it improving in Europe, for instance? Could you talk to that for us?

Sure. Well, I would tell you this, that our business in Europe in Flavors & Fragrance is making quite an improvement in many areas versus prior year. So we don't see all doom and gloom in Europe. Certainly, there has been a slowdown in product releases. They, Europeans, as the United States, as we've observed, at least on some of the food customers, there is a -- there are smaller product launches. Some of these product launches are more along the line of extensions. But we still see a sufficient amount of new product launches to be successful. And new product launches that are really going to revolutionize the product are always in vogue. And so I think, again, given the compelling nature of some of these technologies that we have, they would warrant interest from customers in any economy. And I would tell you that, that is, in large part, what we're seeing on many of these technologies. Christopher W. Butler - Sidoti & Company, LLC: On colors, revenues were down again this quarter. Desktop color was an issue last quarter. Could you give us a sense on how much that had an impact here? And when can we start to see top-line growth again in the color business?

Yes, that's right. You've hit one of the themes there with respect to the desktop side of things. And the broad umbrella platform that I've talked about for many quarters is the -- not only the highlighting of more advanced products, more defensible products, more value-added products, but also a little bit of the trimming of the low margin and/or nonstrategic-type businesses. And so desktop fits both of those criteria insofar as we see it as a industry that's fundamentally on the decline. It has strongly declined in Europe to a far greater degree than the U.S. The U.S. is -- that decline will continue moving forward. We believe that, that is not the future of our business. We had a tolling arrangement for desktop inks. We made this strategic decision to avoid further investment in that business. In my estimation, we had to complete upwards of a $15 million capital investment into this market to continue this type of focus and this type of capability. I didn't see that as in the best use of -- that was not a very good use of capital. That certainly was not going to contribute to a strong return on invested capital. And so for those reasons and others, we elected to focus on other areas of the inks world, most notably digital, which has largely made up for this tolling gap. But just the same, the tolling side of this has had an impact on revenue. I do expect that we would lap that in Q1. With respect to my earlier comments about really the low margin element of things, I think we've largely completed that program. This tolling piece is kind of the last leg. But I would continue to see operating profit growth in the Color Group in the second half. We continue to move forward on product launches and releases and geographic expansion and I would continue to see that. Plus, we get a stronger benefit from our restructuring programs in the second half, in both color and flavor. Christopher W. Butler - Sidoti & Company, LLC: What were the -- what was the sales in 2012 for desktop tolling?

I'd have to get back to you on that number, because there's a piece in the U.S., there's a piece in Europe, there's a piece in Asia Pacific. So I would have to get back to you on that number, Chris.

[Operator Instructions] Your next question is from the line of Edward Yang with Oppenheimer. Edward H. Yang - Oppenheimer & Co. Inc., Research Division: Staying on the color side of the business, it sounds like top line, you're still going to see some top-line pressure. You said that the desktop impact, that's going to continue on into the first quarter. So does that mean that you're going to continue to see some overall revenue declines in that business until the first quarter? Or do you expect the third or fourth quarter to see positive revenue growth in color?

I would tell you that moving forward, second half, we would expect to be fairly flat on revenue, but still up on operating profit. And then once we get into Q1, we'll -- towards the end of Q1, we'll have largely have lapped that desktop piece. Edward H. Yang - Oppenheimer & Co. Inc., Research Division: Got it. And what was -- how was the performance in natural colors in the second quarter?

I would tell you that the food color side, we've got -- depending on the region, we have -- so on the high end, when you're looking at places like Latin America and Brazil, we did quite well. Europe has made a recovery from last year to a large degree. Where we're seeing some softness is in the U.S. And beckoning back to my comments about new product releases, which we've really -- have maintained the lion's share of that in the market for the last few years, those have slowed down. And so therefore, we've had some slowness in the U.S. market. We are seeing some signs of recovery. But I think overall, it's certainly still a very important market. It's still a very good market. Europe had a very different conversion process than the U.S. The U.S. conversion process will continue, but I would not anticipate having any sort of legislative change in the U.S. that would lead to a very strong change all at once. I think it's going to -- evolutionary. Edward H. Yang - Oppenheimer & Co. Inc., Research Division: So in total, was natural colors up or down across all the regions? And the U.S. softness, was that just competition?

No, the U.S. softness was -- had more to do with existing customers. Some of their business was down. But really, it's the product development side of things. When customers are releasing new products, they tend to do so in a fairly large across-the-country fashion. So that generated a lot of our -- our new wins were really driving that business, for, let's say, the last 3 to 4 years. And when their product development pipe launch schedule slows, we feel a little bit of an impact. I would tell you that the pipeline is still in place, it's just a question of these launches that have been delayed and when could we expect to see an acceleration in the launch cycle for the customers. But it is still a very good business in the U.S., but I think this is the impact. We're -- I don't see this as a we're losing share type evolution. In fact, I would tell you, it's just the opposite in most of these markets at this point. Edward H. Yang - Oppenheimer & Co. Inc., Research Division: Okay. And it sounds like your strategy -- and I think it's the right strategy, is reinvesting in the business, reinvesting in R&D and innovation and moving up the value chain. But that could take some time, more evolutionary than revolutionary. Going -- maybe moving -- applying that to the Flavors business, there's been some margin issues there for an extended period of time actually. If margins peaked in 2009, and on a quarterly basis, they've been down year-over-year almost every quarter since then, so is that a product portfolio issue? And how long does that take to reverse that trend in terms of margins?

Well, I would tell you, there's a little bit of a portfolio. I think we were very strong in many of the ingredients, in the ingredients side of this business. And those -- typically, they are defensible, but there are times when they are a little bit more difficult to defend your position on. I would use the analogy of the Color Group where, just a few years ago, 2009, to use your number, we are roughly about a 33% gross margin and we're coming up to 42% here this quarter. Operating margin was in the low to mid teens and it's now 22%. So I think we've demonstrated, as an organization, when we take this approach that we use in color and we apply to other areas, that we'll generate success. So I would tell you that we have a lot of the same analogy here to the Flavor & Fragrance Group and so that the gross margin and the operating margin increase may not be as far off as you think. There are a lot of things that we can address in the shorter terms, in terms of mix. The product development, yes, you're right. They are -- oftentimes, you're at the timeline of a customer. But when it does come, it is rather profound. And so as we're seeing in inks and cosmetics, we're seeing that now. But as we showed in the base part of the business, you can definitely show these improvements in the short to midterm. Edward H. Yang - Oppenheimer & Co. Inc., Research Division: And the low-hanging fruit in terms of improvements you can make in flavors, is that -- are there any specific product lines that stand out or geographies, North America versus Europe, for example?

Well, some of our low-hanging fruit in flavors right now is from a capacity standpoint. We've had some very successful products in certain areas, for which we are making the investments in capacity, so that we can drive further top-line and bottom-line growth. So that would definitely be an element of low-hanging fruit. I think in terms of being able to capitalize on some pricing opportunities where we've seen inflation in raw materials, never an easy process, but certainly one that we can more readily obtain in the short term. So those are 2 areas that, I think, come to mind.

I would now turn the conference back over to the company for closing remarks.

Okay. If there are no further questions, I'd like to thank everyone for their time this morning, and that will conclude our call for today. Thank you.