Operator: Good day, ladies and gentlemen, and welcome to the Third Quarter 2010 Albemarle Corporation Earnings Conference Call. My name is Jeff, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the conference over to your host for today, Ms. Sandra Rodriguez, Vice President of Investor Relations and Communications. Please proceed, Ms. Rodriguez.
Sandra B. Rodriguez - Director, IR: Thanks, Jeff. Good morning everyone, and thank you for joining us today for a review of Albemarle's third quarter results, which were released after the market close yesterday.
Our press release contains preliminary results for the quarter that are subject to further review by the Company and our auditors as part of our quarter end review process. Please note that we have posted our earnings presentation as well as non-GAAP reconciliation on our website under the Investor Information section at albemarle.com.
As with every conference call, I'd caution that remarks today contain forward-looking statements. Factors that could cause results to differ from expectations are listed in our annual report on Form 10-K.
Joining me today are Mark Rohr, Chairman and Chief Executive Officer; Luke Kissam, President; John Steitz, Chief Operating Officer; and Richard Fishman, Interim Chief Financial Officer.
At this time, I will turn the call over to Mark.
Mark C. Rohr - Chairman and CEO: Thank you, Sandra, and good morning, everyone. I appreciate you joining us today for the third quarter 2010 call and look forward to your questions in a few minutes. I'd like to begin with comments on some of our recent initiatives before sharing highlights on the quarter. John will follow with some specifics about performance in each segment and will also highlight a few key trends for you. Luke will then give a brief update on the Company's strategic efforts, Before I'll wrap up, we'll give our views on the next quarter and next year.
Building on our unique position at Polymer and Catalysts, we recently announced our intention to build a research, development and manufacturing facility is South Korea, to positing the Company to capitalize on a material growth opportunities in Asia. R&D lab and pilot plant assets are near completion, allowing our team to quickly provide Catalysts samples for qualification trials with local customers.
We are very excited about this first investment in South Korea. We also recently introduced a new polymer chain extender, ETHACURE 90, which greatly improves the processing and capability of our polyurea and polyurethane spray coating systems in applications such as truck bed liners and industrial coatings for concrete and steel. We see great prospects for this proprietary product and supportive infrastructure spending around the globe.
Those of you how know us realize that bromine has been part of Albemarle's business for nearly 25 years. Demand for this element remains strong and global supplies have shrunk, creating a very tight market. To help manage this situation, we are working daily with customers to see if their needs are met, while aggressively moving to debottleneck our facilities in Arkansas and Jordan.
We will complete the Arkansas additions by year end, and we expect to complete the Jordan addition by the second quarter of 2011. Beyond 2011, we have bromine reserves that can be brought on line as needed.
Raw materials and energy spending were up approximately $15 million in the quarter compared to a year ago and we expect our full year spend to be roughly $67 million up over 2009.
There are clear signs of inflation showing in the petrochemicals chain as well as with select specialties, and we are working our way to the end of the market. Recently there's been a lot of news about rare earth elements, which are one of the key raw materials used in advanced FCC catalysts. China controls nearly 95% of the production of rare earth elements. In July, the Chinese government cut export quarters on rare earths by 72% for the second half of the year, capping shipments at roughly 8,000 metric tons down from 28,000 tons for the same period a year ago.
As a result of these actions, rare earth proxies have increased by more than five times in the second half of this year. Our purchasing team has been able to secure quantities needed to meet our production requirements, albeit at a materially higher prices. To help offset this headwinds, we initiated cost pass-throughs across our FCC product lines.
These additional costs have been accepted in the market place helping us sustain FCC margins.
Now, moving to our quarterly results, I'm very pleased to report Albemarle achieved record earnings $1.02 per share, a year-over-year increase of 79%. Operating profit of $121 million, nearly doubled and net income improved by roughly 80%.
Net sales for the quarter of $585 million, were up 14%, compared to third quarter 2009, primarily driven by volume improvement of 11% and pricing of roughly 5%, partially offset by unfavorable foreign exchange impacts.
Consolidated gross margins for quarter improved 760 basis points year-over-year to 34% and EBITDA margins were up nearly 900 basis points year-over-year to 26%. Further improvements in liquidity were supported by strong cash flows from operations using cash and equivalents of $425 million at September 30 and record EBITDA for the quarter of $151 million.
Polymer Solutions posted exceptional results again this quarter delivering record segment income for the third consecutive period on strong volumes and pricing.
Net sales increased 18% year-over-year to $232 million. Segment income for the quarter was $58.5 million, a 125% increase from where we were a year ago and a 24% sequential increase. Segment margins for the quarter were 25% compared to 13% a year ago, a vast improvement of 1,200 basis points.
Fine Chemistry's solid performance in the quarter results and net sales of $138 million, up 7% from the third quarter of 2009. Segment income improved 16% year-over-year to $16.5 million, driven primarily by the strong volume and pricing in a performance chemicals division. Despite persistent weakness in clear brines, our bromine production rates continue to be at maximum levels to satisfy the demand for this product and in bromine derivatives.
Our Catalysts business delivered outstanding results in the third quarter. Net sales for the quarter totaled $214.8 million, up 14% from the third quarter of 2009. Catalysts reported its third consecutive quarter of record segment income of $69 million and margins of 32%. These results were driven by a combination of higher volumes, improved pricing, and higher production rates across our polyolefin refinery catalysts portfolios.
I expect you can appreciate how proud we are all with these results. It's a reflection of the strength of our technology in developing unique products and services that draw value from customers. These results were not easy to achieve; however, we're confident that our performance this quarter is indicative of the ongoing earnings potential of Albemarle.
In a few minutes, I'll comment on our business views looking forward. Let me first turn it over to John Steitz to provide more details on the performance of each business segment.
John M. Steitz - EVP and COO: Thanks, Mark and good morning, everyone. Again, this quarter, we saw strong year-over-year volume and profit growth across all three segments. We see positive trends in the end markets we serve and our order book looks good as we close out the year. We expect those trends to continue and have positioned each of our businesses for growth in 2011.
With that said, I'll go over each segment's performance, starting with Fine Chemistry. Increased volumes and better asset utilizations drove top and bottom line double-digit improvements in Fine Chemistry compared to last year. We posted segment income margins of 12% for the quarter. Year-to-date Fine Chemistry margins are up over 300 basis points compared to same period last year.
As expected, our bromine production rates were near maximum levels in the quarter, as demand for our derivatives remained steady. Momentum carrying into the fourth quarter is stronger than we had earlier anticipated. It's still early to tell the extent of normal year-end contractions, but our current view is showing trends similar to the fourth quarter of last year.
The added capacity from our debottlenecking actions in Arkansas and Jordan will help satisfy the demand growth expected in 2011. Our pricing initiatives in bromine have been successful and are capable of offsetting current and potential future cost increases.
Average global bromine prices are reaching record levels, reflecting the value and use across a growing range of new applications. Recent developments in our mercury-control markets are very encouraging. We are positioned to provide these markets with sensible, sustainable solutions to meet new regulatory demands.
In China, it was announced by the Ministry of Environmental Protection that China should integrate prevention and control of mercury emissions of coal-fueled power plants into that 12th five-year plan. This would initially include the larger power corporations, carrying out trials on mercury reduction in their coal-fired power plants in Beijing. Albemarle expects participating in some of these trials as early as next year.
Additionally in the United States, we are working with Portland cement producers to provide our concrete-friendly sorbent solution, C-PAC, a waste reducing solution for the new cement MACT mercury emission standard. We are excited about these opportunities to further expand our bromine offerings.
There is also positive news impacting our completion fluids business, which has been drastically down in the Gulf of Mexico. Last Tuesday, the administration lifted the six-month moratorium on deepwater drilling in the Gulf of Mexico that was imposed after the oil spill. While we're seeing volumes steadily improve outside of North America, we anticipate our completion fluids business in the Gulf of Mexico to slowly gain traction as deepwater drilling resumes.
Our life science businesses continue to deliver solid results and we expect those trends to continue as product development opportunities accelerate. You may have seen last week the U.S. Department of Health and Human Services awarded SIGA Technologies a contract, establishing a supply chain for their critical smallpox drop.
As previously announced, Albemarle was selected by SIGA to manufacture the active pharmaceutical ingredient for their ST-246. Our past experience, reliability, and overall cGMP manufacturing capabilities, best position Albemarle to partner with SIGA to meet their ST-246 API requirements to fulfill the obligations of their stockpile contract with BARDA or the Department of Defense.
Moving on to Polymer Solutions; we saw strong profit growth in flame retardants and in stabilizers and curatives this quarter. Both brominated and mineral flame retardant volumes increased year-over-year and earnings of those businesses more than doubled. The steady positive trends that we've seen in electronics over the past six quarters were not only from recovering demand, but also from a broadening demand especially (indiscernible) economies in Asia.
IPC's latest printed circuit board book-to-bill ratio stands at 1.07, as of August, a positive indicator for the next three to six months. From our advantage point, we see bromine derivatives supply remain tight as global demand for electronics remains healthy, particularly in emerging markets. Our pricing initiatives implemented across the chain earlier this year are expected to offset higher raw material costs and help strengthen our global bromine derivatives' franchise.
Similar trends in our stabilizers and curatives business drove the division to record profits in the third quarter and generated above segment average margins in some product lines. This success was complemented by our ongoing participation in China's high speed rail project.
Moving on to Catalysts, our polyolefin catalysts business posted very good results in the quarter with strong volume and revenue improvements compared to the same period in 2009. Improved production rates, strong volumes and favorable sales mix broke polyolefin's profitability up significantly over the third quarter of last year.
We're very excited about the growth prospects for this business, especially in Asia and the Middle East. Over the next three to four years, we expect strong growth in this sector as we position our leading single-site metallocene business in the center of the world's fastest growing polyolefin's market.
Our refinery catalysts business delivered solid results this quarter, posting nice sequential and year-over-year top and bottom line gains. FCC had a good quarter with volumes improving as global fuel demand increases. The DOT's latest traffic volume trend show an increase in miles driven, a positive indicator for the segment.
With the FCC market returning to more healthy levels, we're working hard to achieve pass through of critical rail road cost increases consistently around the globe. Good results in our HPC business as global refining utilization rates steadily increased and refining crack spreads are slightly improved mainly outside of the U.S.
Our teams continue working closely with refiners, providing unique catalysts solutions that address performance, demand and cost sensitivity. Growing global opportunities position our refinery catalysts well as we close out the year and head into what is expected to be a stronger 2011. We're seeing the beginning of what we believe to be a deteriorating and more unpredictable quality of crude. As oil consumption increases globally, the supply squeeze may result in a more robust HPC market driven by a more sour and heavy crude slate.
With that, I'll turn it over to Luke.
Luther C. Kissam, IV - President: Thanks, John, and good morning, everyone. In July, we talked about the momentum that we saw in the first half of 2010. Our third quarter results demonstrate how we're expanding on that momentum and making considerable progress on many fronts in restructuring our organization for continued cost performance, while retaining the agility and innovation that has driven our success.
At our Investor Day in 2009, we told you about the strategic restructuring that we were embarking upon. It was based upon the total review of our existing business strategies. A fresh look at growth opportunities in each sector and an assessment of the asset base needed to implement those strategies and capture that growth.
Step one was our plan C initiatives to reduce our fixed cost by $160 million from what they were in 2008. As a part of that effort, we divested underperforming assets such as our Port de Bouc France and Teesport, U.K. Facility improve the efficiency of our transactional process by utilizing lean manufacturing concepts. Opened a shared service centre in Budapest, Hungary and implemented an organizational restructuring of people across all of our European and U.S. sites. While our business team strategies are driving top line volume and pricing gains, these efforts are also contributing to our bottom line.
Our restructuring actions in Europe are progressing as planned, and we continue to add more services to our Budapest service center. In short, we're on track to achieve our $160 million goal by the end of 2010.
In step two of our strategic restructuring, we focused on expanding our global footprint. We previously talked about our TEA joint venture with SABIC, and Mark talked early about our investment in polyolefin catalyst in South Korea.
I'm happy to announce that our R&D facility in pilot plan at our Korean site are operational, and just yesterday we broke ground on commercial production unit at that site. We expect to continue moving more aggressively into emerging markets going forward.
Over the last few months, we started an earnings review of our corporate strategy to identify our road map for future growth. Utilizing the work that put us where we are today as a foundation, we're focusing on our core capabilities on what we believe are our greatest competitive advantages and identifying opportunities that allow us to exploit those capabilities in a way that offers the highest return and maximizes our enterprise value.
We are talking to customers and partners, reviewing our successes and failures, and analyzing how we stack up against our competitors in the various markets in which we participate. The goal is to have a clear definition of our core capabilities and a road map for us to use to realize the full potential of our core via through organic growth, expanding our existing technologies into adjacent markets in which we don't currently participate are few external opportunities.
At our next Investor Day in 2011, we expect to share this work and our corporate strategy with you. I'm pleased with our overall performance and the progress our organization has made to deliver record earnings for the past three quarters. Through judicious cost management and sound strategies, we positioned Albermarle to benefit as conditions improved and we continued to invest and focus on growth, new products, new markets and new applications. We have a clear line of sight for the work that remains to close out this year on track and to position us for continued growth.
With that, I'll turn it back over to Mark to wrap up.
Mark C. Rohr - Chairman and CEO: Thanks, Luke. With us today is Richard Fishman who, many of you know, has been our Vice President, Treasurer and Chief Tax Council. Richard is serving us Interim CFO and I have asked Richard to help me answer questions you may have on our financial results in just a few minutes.
Our effective tax rate for the quarter is 24.1% and as it stands now we expect the full year effective tax rate to end at about the same level. U.S. profitability has improved significantly this year having an effect of pushing us to a higher expected overall full year tax rate an increase of roughly 11 percentage points including specials.
Unallocated corporate expense in Q3 was $17 million, in line with our quarterly average for this year. Total year corporate expense is expected to be at the higher end of the $65 million to $70 million range of our 2010 guidance. We generated record EBITDA for the third consecutive quarter topping $150 million and handily beat last quarter's record of $136 million by over 10%.
CapEx for the quarter was $16 million, we expect full year CapEx of roughly $9 million down marginally from our prior forecast. Depreciation and amortization in Q3 was $23 million and is on pace with our full year expectation to be near $100 million.
Including the $41 million of debt at JBC, our Jordan joint venture, our quarter end consolidated debt was approximately $766 million, down $28 million from the last quarter and $47 million year-to-date.
$397 million of our debt is floating and $369 million is fixed, roughly a 52-48 split. Our weighted average floating rate of September was 1.2%. Our weighted average interest rate for Q3 was slightly below 3%.
Cash flow from operations was $142 million in the quarter, net working capital increased by $68 million from year end mainly for the business upturn we've seen. Our past due balances continue to be very well managed and controlled, and we continue to stay focused on inventory management.
We entered the quarter with $425 million of cash and equivalents and net debt of $317 million, excluding the $24 million of non-guaranteed debt from JBC joint venture.
Our debt-to-cap ratio was 34.9% and our net debt-to-cap ratio was 19%, both are down considerably versus the prior quarter due to debt reduction of strong cash generation.
Looking forward, we do see signs of a moderate seasonal downturn in the fourth quarter. Nonetheless, we expect to end the year strong. While it's too early to provide specifics for 2011, the same fundamentals have driven our performance in 2010 seem to remain firmly in place. Demand looks robust in Asia and other emerging economies, more than offsetting slow recoveries in the U.S. and Europe.
Customer demands for products that help them compete and address unique challenges they face, they've never been stronger which plays well to our strength. The global fuel demand is once increasing, and we expect to be able to maintain our margins through our pricing initiatives, offsetting inflation, and rise in raw material costs. We also expect new business to drop top and bottom line performance next year.
This quarter is the fourth consecutive quarter of year-over-year growth and the third consecutive quarter of record performance in catalysts and polymer solutions. The ability of our team to execute and secure opportunities remains in place, and I feel confident we'll continue to demonstrate this strong performance expected by our shareholders.
With that, I'll hand it back over to Sandra.
Sandra B. Rodriguez - Director, IR: Thanks, Mark. Okay, we'd like to open it up for the questions now.
Operator: David Begleiter, Deutsche Bank.
David Begleiter - Deutsche Bank: Mark, can you help quantify the impact of rare earths on FCC margins and profitability in Q4 and perhaps 2011?
Mark C. Rohr - Chairman and CEO: We have worked hard with our customers to see that they understand the situation in rare earths. We have worked hard to secure the volumes and materials. We need to meet our customers' needs, and to be honest we have lived through this without any disruption to our customers. The margins have not been impacted by this because of the work we have done without customers, as John noted earlier. So, we have not seen an impact with it. It could have been a pretty tough impact, but we've not seen it. As we look in 2011, our view is that this is a temporary situation. We see signs that China is going to work their way out of this. We also have activities in the U.S. underway, as you know, in other parts of the world to provide new sources of rare earths. So, I think we've got it under control, David. I wouldn't expect it is going to disrupt our business model going forward.
David Begleiter - Deutsche Bank: And just on bromine next year, given the tightness globally. Any reason we wouldn't see another substantial price increase in bromine and its derivatives in 2011?
Mark C. Rohr - Chairman and CEO: John, you want to answer that.
John M. Steitz - EVP and COO: Look, first, we're doing what we can to debottleneck our plans to make sure we take care of our customers. Bromine is very tight, and I think it offers tremendous value. We'll continue to drive that value as the market opportunities are presented. I would say, I think we're beginning to see a lot higher levels of inflationary trends and we are seeing some indications of higher prices on some of the derivative raw materials like BPA is at record levels today, benzene is heading up and some of the, believe it or not, the derivatives of natural gas, ethane at the point we're seeing heading back up to. So, we got to work hard to stay ahead of that curve as well.
David Begleiter - Deutsche Bank: Just last on, how much capacity are you adding and what's in bromine and what's your capacity plan post 2011?
John M. Steitz - EVP and COO: Well, it's in the mid double digit range in terms of volume David, but we've been running very tight. I think the important point there is in some of the derivatives, we're seeing some really great opportunities to continue to broaden the use of bromine in a wide range of markets. We're getting very excited about that. So, we want to stay ahead of the supply curve, if we can.
Operator: Jeff Zekauskas, JP Morgan
Olga Guteneva - JPMorgan: This is actually Olga Guteneva sitting here for Jeff. A quick question on catalyst, so year-over-year pricing was not that strong, it was just less than, I don't know, a little bit higher than flat. So, what was the sequential price change in catalysts?
John M. Steitz - EVP and COO: Well, most of the sequential pricing in catalyst is related to just metals changes, but HPC was overall up a little bit year-over-year, just down a hair sequentially on price. FCC was flat. We got a little bit of help on Polyolefin catalyst on pricing. But this is mostly mix related in catalysts, Olga.
Olga Guteneva - JPMorgan: So, this is this second quarter of very high margins, and I think last time you said that this is probably not really sustainable, but you did it again. So should we think about this level of margins as sustainable going forward for catalysts?
John M. Steitz - EVP and COO: Well, I think we've been clear over there. Our intension is to operate at this level of performance. But you need to appreciate that the – as John has noted and Luke's noted, there is seasonality and these products are fluctuation as mix, each product don't get the same net back. So you could see some honey around these levels, but we think that this kind of level performance is achievable and sustainable over a long period of time.
Olga Guteneva - JPMorgan: So you are not going back to 16% or 15% you had in the prior year?
John M. Steitz - EVP and COO: No. We're definitely not going back that far. But we've worked hard to position this as a mid to high 20s percent average margin kind of business, and yeah, we are little higher than at right now, but that's each quarters is a bit different, but you should appreciate that the numbers we put out there for margin and what we expect to do again at that level that we communicated in April is what we should be able to do over a long period of time.
Olga Guteneva - JPMorgan: Then quickly on bromine prices, so you basically had two price increases back in April if I remember correctly and another one in November. So, how far are you in terms of the price utilizations?
John M. Steitz - EVP and COO: In the bromine chain, Olga we've achieved the 100% of the first one. We're working as we speak on achieving the second one we announced by the month or so ago. And we are seeing a lot of market acceptance to that. Again supplying demand dynamics are very tight right now, especially out of China. So, this also transcends into a lot of our bromine derivative pricing and we're having a lot of success on that side of the coin as well.
Operator: Kevin Mccarthy, Bank of America Securities.
Kevin Mccarthy - BofA Securities: Mark, I was wondering if you could update us on your priorities for excess cash as well as free cash flow generation, and if you net that at this point is less than half what it was in mid '09, for example.
Luther C. Kissam, IV - President: Yeah, two comments on that. I think, we've been solemn like with our uses historically of cash, Kevin. Starting with R&D, we have a lot of initiatives underway in R&D and we're pretty flat year-over-year, in R&D we see opportunity to increase that and that activity is underway both in. We're primarily in polymers, but some perhaps even in catalyst. Now, we are expanding as you know our R&D facilities in Asia, that both Luke and John talked about. Of course, there's more cash, it will go into that. We're building new plants and you can see that there's I think from our tone, there's opportunities to do more there and those opportunities are in every area for us. So, you should expect that our CapEx budgets as we enter 2011 is going to be higher than it has been historically, if you take it to the $100 million run rate for the last several years. I can easily see a scenario based on what we've already committed to will be $150 million next year we may even drift that higher as we really get into some of these unique opportunities that are before us. The last comment I'll mention is that, we remained very aggressive on the acquisition front. We have several opportunities we're working to-date, and you never know if those going to materialize. But I hope that we have an opportunity to build on our platform through acquisitions, so you could expect, as we've done in the past for Albemarle continue to be active there and we'll be spending some money there I expect in the future.
Kevin Mccarthy - BofA Securities: And then, secondly, if I may. I wanted to follow-up on managing the rare earth costs in FCC. Can you comment on what proportion of your FCC contracts would have allowed you to pass through lanthanum costs automatically earlier this year, where you stand today and where you might be entering 2011?
John M. Steitz - EVP and COO: Let me just give you some additional insights on rare earth, just building on Mark's earlier comments. We just reported in the context, the catalyst portion of the total rare earth market is about 2% of the total. So, we're really kind of the tail of the dog here. And then if you look at the FCC product line itself its very low single digits. I mean volumetrically these are about – on average about 2% of the product line. They range from zero not at all to higher levels than that depending on what the refiners trying to achieve in their given refinery. And then, so you have technology offerings that can mitigate that as well in terms of depending on what the refiners trying to do. What I'd like to reiterate, first, the availability issue as Mark said is not an issue here, especially, considering we're such a small part of the market. So, it really comes down to, as your question highlights, is the importance of getting this price pass-through surcharges. The majority of our contracts because this isn't the first time we've seen dramatic rare earth inflation, it started on a pretty significant level four, five years ago and that highlighted some concerns of our. So, as you point out, we built-in rare earth pass-throughs in the large part of our contracts, close to two-thirds of those contracts. But to put it into context, it's a pretty significant issue to be dealt with, these products have gone from 5,000 a ton to 40,000 a ton and to get those quantities we've got to pay that level. So, if you look at $35,000 a ton increase at 2% that's about $700 a ton, which is at our price level, about 2% is about a 20% increase. What we found is the customers are receptive and understand this issue, they are concerned I'd say more about availability, which we have been able to satisfy rather than more so than the price issue. So, there were lags built in, but this was relatively minor issue in the third quarter, but it's growing in intensity through the fourth quarter and into – turn to next year. So, we're paying very close attention to inventories to make sure we're buying what the customer needs and wants, and is willing to pay for.
Kevin Mccarthy - BofA Securities: John, have you seen good utilizations rather on the 10% FCC catalysts price increase that you had proposed for the October 1?
John M. Steitz - EVP and COO: Kevin, we're working. We had announced that with immediate effect, but the fact is with contracts and with a lot of ongoing negotiations going on, that is in play now and we're looking really to have that fully implemented around the first of the year. But we'll just have to keep you tuned in on that. We're working hard on the rare earth issue, because that has gained so much in intensity compared to when we made that price increase announcements. So, the rare earth is kind of trumping the overall pricing, net pricing issue right now.
Operator: Michael Sison, KeyBanc Capital Markets.
Michael Sison - KeyBanc Capital Markets: John, in terms of polymer additives, the 8% increase in selling prices, is that mostly bromine going up or is that – will bromine price increases come more down the road?
John M. Steitz - EVP and COO: There are two aspects I'd like to use in addressing your questions. Bromine plus the mineral, and mineral flame retardants were also extremely tight right now. We're doing what we can to get our production levels up to meet the demand, and that pricing is gaining traction now what has too. The profitability of that business has been very weak over the last couple of years, so this is an opportunity to get to some level of reinvestment economics. So, we're working hard on that. So as part of that, we've gained sequentially in the 5% to 10% range, and we believe we'll achieve at a minimum that level going forward. On bromine, it's a little higher than that sequentially, and I believe right now we can get another 8% to 10% in the fourth quarter. So, the bigger issue there is what I see in terms of volume correction in the fourth quarter. I think we'll see something across the entire polymers business in the 5% to 10% range in terms of a sequential volume correction. But I think that that overall it would be a good thing because we don't see the end markets weakening much. This would more be a customer inventory or de-stocking level. Now, it allows to get off 2011 off to a real good start too. So, I look at that in a favorable light.
Michael Sison - KeyBanc Capital Markets: Then in terms of Catalysts, you strung on two very impressive quarters here. Did you take out a little bit away from the fourth in either three of the businesses or was it pretty clean and the outlook for Catalysts continues to look pretty good next couple of quarter?
Mark C. Rohr - Chairman and CEO: Mike, this is Mark. No, the quarter's real clean and as had been in the last three quarter for us. So, it's been real clean, real crisp. So, to answer your question, no, but there is a little bit of hunt that always goes on in these products and I think what we are trying to communicate is that you can expect to see a little bit of moderation of this, sort of, rocket ship growth that we've had. But the first quarter looks really good and next year look really good for us. So, I think the trend is going to be solid although it may moderate a bit in this fourth quarter.
Michael Sison - KeyBanc Capital Markets: Just one last quick question. It seems like the hot items these days in consumer electronics are these iPads and other tablets that are going to be rolled out by their players. Is the bromine flame retardant used in those?
Mark C. Rohr - Chairman and CEO: No.
John M. Steitz - EVP and COO: No, Mike but. No, but I'd tell I kind of look at that. Those products used some very advanced materials and which is why they cost anywhere from $400 to $700 a piece. So if you look at it on a per ounce basis and I've had iPod, those are very expensive items, and that really isn't the market we play in. We really play in helping, for example, television producers drive down their costs to produce using various resins, so they can offer an LCD TV for the same price you'd buy an iPad for. So that's kind of our game there.
Operator: Steve Schwartz, First Analysis.
Steven Schwartz - First Analysis: Sequentially sales declined in all three segments and that is from my model I'm not typical. So, could you comment on, whether or not you maybe saw some restocking in the second quarter? Then Mark, if you could just perhaps quantify what you consider the typical seasonal decline going into the fourth quarter?
Mark C. Rohr - Chairman and CEO: Yeah, Steve let me ask John to make some comments on the first and then I'll take the second.
John M. Steitz - EVP and COO: Steve, what we're looking at I think we're anticipating something in Polymers volumetrically in the 5% to 10% range in the fourth quarter. I think that would be somewhat typical, but again we're not seeing any kind of secular demand drop across our customer base there. So, I think that could help us get off to a good start in the first quarter of '11. But with that there were a few unique issues, why we didn't see sequential revenue growth and one, we've taken steps on to debottleneck our plants and we went into the quarter with some pretty low levels of inventory. So we got to continue to meet that customer demand, and we fell short of that in a couple of product lines, but with that said, we still see that volumetric decline in the fourth quarter in polymers. In Catalysts, I mean it was a very strong second quarter, and I think it was a great achievement to mirror that again in the third quarter. In Fine Chemistry, we had I think some unique issues as well sequentially. The Ag markets kind of surprised us a bit. The drought in a lot of farmlands create a lot of our customer base to ease up on their inventory levels and that was probably a $0.03 issue for us, and then the clear brines markets were no help as I think we described earlier.
Steven Schwartz - First Analysis: John, are you still expecting customer – I think in the first quarter an Ag customer had de-stocked inventory, you thought that they would come back in the fourth quarter and that would provide a boost for you, do you still expect that to come then?
John M. Steitz - EVP and COO: No. I don't think that's going to be much help to us in the fourth quarter, but we had earlier talked about our goal of achieving margins in Fine Chemistry, approaching 15% in the fourth quarter this year, and I believe we're going to do that and we are seeing good trends there across the bromine chain in the fourth quarter and our new products portfolio in Fine Chemistry continues to do well, and we're off to a better start on clear brines. With that said, we are really focusing on getting, having another really solid year in our Fine Chemistry business in 2011. We see a new product, we've talked about real specialty customized lube product that we happen to make in Fine Chemistry, those volumes are doubling next year. The SIGA opportunity, once some technicalities are worked through for them, I think will result in some uptick in our revenues for next year. We are excited about that. So, also we'll need that the country has to have, and so overall we are feeling really strong about Fine Chemistry into 2011.
Mark C. Rohr - Chairman and CEO: I'll summarize that, Steve, just real quick. If you roll all that together, that stuff together, and I roughly call it seasonality, but it's a whole bunch of things associated with it. I think the net impact is probably down between 10% to 15%, and so if you put in 15% number that's the right kind of range that we see, and there is a whole bunch of plusses and minuses that roll in relative to that, but that's what I would say from seasonality point of view.
Steven Schwartz - First Analysis: 10% to 15%, okay.
Operator: P.J. Juvekar, Citigroup.
P.J. Juvekar - Citigroup: I missed part of your call, you may have answered this, but I want to go back to bromine. Prices shot up in China, they have tripled in China. How high can they go in China and is there any demand destruction associated with that?
Mark C. Rohr - Chairman and CEO: You know, there is so well, but bromine is itself is not really sold. So, elemental bromine sales, which is what you are tracking is maybe 10% of the global kind of bromine movement, right. So when you see bromine go up and down, what that really means, is there is no availability, and so the producers that will take that and upgrade that are struggling to do and make any money. So that's reflected back and what John and his team are doing in terms of driving this business, because they are the real along with the few others the real players in this industry. So, how high can it go, is interesting question. I always thought it was more like (I have done) and anything else. So, if you believe my analogy, it's got 4, 5 times to go but I think I may get a little nervous when I say that. So, it's a pretty damn rare element. So, we'll see where this market goes over time, but we're just working hard to make sure our customers are satisfied, we're bringing value to them and that's worked for us in the past, I think it'll work going forward.
P.J. Juvekar - Citigroup: Can you just explain or clear for us, how much capacity got shut down in China over the last let's say 18 months?
Mark C. Rohr - Chairman and CEO: I won't put some numbers out and these are always continually updated and John just help in here if you got a more current view on that but we think the production out of China is down maybe 30%, maybe even 40% and that's a combination of depletion of the reserves, seasonal outages that they take, bad weather, military exercises, I mean there's all sorts of reasons why that area has been impacted by lower volume, but directionally the reserves are not as robust as they used to be and so the trend, which have been going up for a number of years is now on the back side of that curve, and we think it is going to continue to fall off, albeit at some more moderate pace going forward. So, what Luke talked about and John talked about, we're adding capacity to our existing facilities that gives up plus 15% or so. We're looking forward to additional capacity additions, when they are needed. So, we're going to work hard to see that we satisfy our customers through the accretive time and maintain the positive aspects of this business.
P.J. Juvekar - Citigroup: Just lastly on the HPC side, where are we in the HPC replacement cycle and can you just talk about the line of sight you have in that order book?
John M. Steitz - EVP and COO: Yeah P.J. Well, the fourth quarter is better than the third and the first quarter is looking better than the fourth, so what we're really seeing now I think is, as refiners have worked their way through really horrible period, they've got to get their refineries operating more efficiently. As we've pointed out, this is more happening outside the United States than within the United States, but the trend I think we're also beginning to see is a lot more difficult crude slate to use, and it's becoming heavier and sour again. We saw that and we have that view three to four years ago and with through the recession and the weakness in oil demand, we saw that that was ameliorated, if you will. So, we're beginning to see I think the beginning of a stronger cycle, but with that said, we have really tried to build the portfolio of our business here to achieve whatever the refiner wants. For example, I was at a larger refiner in Europe at the end of September and they basically wanted a HPC load to allow them to run for four to five months to optimize certain end product stream, four to five months. So we solved that problem for them and that was going to pave the way for a more significant (indiscernible) in the February, March timeframe. So, I think we're really positioning the business to satisfy whatever the needs of that refiner is.
Operator: Dmitry Silversteyn, Longbow Research.
Dmitry Silversteyn - Longbow: A couple of questions. I'm sticking with the rare earths and Catalysts business, you talked about that having a very modest impact in the third quarter, but you expect that impact to get a little bit more pronounced in the fourth quarter and early next year. Should we be looking at – I understand that these levels of profitability are difficult to sustain in a high 20s, but should we be looking at margins maybe coming down more kind of into the low 20s area until the price increases catch up with the $700 a ton move that you're seeing in your costs and given your contractual schedule and kind of customer acceptance of price increases, when do you think you're going to be made whole? Is it by the second half of next year?
Mark C. Rohr - Chairman and CEO: Dmitry, I think that's a bit too pessimistic. As John said, about 2% by way of the product on average is rare earth in FCC and we sell products that have none in it to more than that quantity in it and there's a fair amount of latitude that customers have than we have working with our customers to see that the impact of them is minimized. When it can't be minimized, we are passing through the costs of those products and John and his team has done a good a job with that today. Even it seems to be well received because of (this ever working) and so I wouldn't anticipate a dramatic and materially noticeable impact of that over the next couple of quarters. I am saying that assuming that in the start of the year China opens up a bit and we start seeing volumes flow a bit easier back into the marketplace. If they stay at 8,000 tons forever, then that will be a different ball game, but we don't anticipate that and as John also noticed, about 2% of the rare earths is the market that we play in. So we're not a huge consumer to start with. So, I think Dmitry, the broad question, rare earths, you shouldn't expect rare earths to have a big impact. Now we have had a lot of great products that we move with that good mix going forward, and that pushed us a bit – the cost reduction efforts that pushes a little bit. So can be sustained in the low 30s, no, I think that's a bit too aggressive for us to average, and (in the way claim) we can be at 30% margin. So I would pull that back a bit, but low 20s is too far.
Dmitry Silversteyn - Longbow: I guess, you were talking about EBITDA I think, right, and I'm talking about EBIT?
Mark C. Rohr - Chairman and CEO: I think we are talking about EBIT.
John M. Steitz - EVP and COO: Yeah, we are talking EBIT.
Dmitry Silversteyn - Longbow: Second question, staying with the Catalysts division, this is our third quarter in the last four that you posted double-digit volume growth with volume mix improvement on a year-over-year basis. So, are we seeing strong growth in polymerization catalysts and that's what driving the overall volumes? Are we seeing volumes in FCC pickup, which I think is where, most of the volumes in a division comes from? Or are we actually are seeing some signs of replacement cycles in HPC?
Mark C. Rohr - Chairman and CEO: It's a little bit of all the above, is what I'll say, Dmitry. HPC is the big volume play there, so a little bit uptick in volume, carries a lot of weight and of course that's going on as we've talked about as this market comes back a bit both in U.S. and Europe, but also in emerging economies where probably the biggest play has been for all of us in this industry. If we look at the replacement cycle, we've shared a lot of our views on that. Broadly speaking, these products add value in both throughput and the distribution of products and refinery. So as this refinery startup and their capacity, which we're doing, we start to see some spread developing again between the various grades accrued, and Catalysts takes on in a more meaningful role in driving refinery profitability. It's always important, but it becomes more important and so that's the situation that John tried to outline that we are seeing signs of. So I think you should expect that where we had shifted from fresh to recycle sort of in industry, our recovered catalyst, that's going to slowly start shifting back and I would expect that our throughput on fresh catalyst in HPC is going to continue to trend up. When you look at polyolefins, yeah, those trends are positive too. They really are two demands for these polymer plants and being able to compete when the big facilities that exist now in the Middle East, they got to find ways to drop value in their products and they come to companies like Albemarle do that with our catalysts technology. So, we're seeing that activity. The Korean plant that Luke talked about, the R&D facility is now complete and Amy Motto who runs that segment along with her team are out there just producing samples like crazy. It has been very well received by customers in region. We're quite confident as that plant comes on that our volume is going to continue to trend upward. So, it's a little bit of all the above but those trends you are seeing in volume, keep in mind quarter-to-quarter might may fluctuate a bit, I think directionally, they're going to be with us as we go through '11 and '12.
Dmitry Silversteyn - Longbow: On Polymer Solutions, first half of the year, you were delivering high teens operating margin. It spiked up here to the mid 20s in the September quarter. A lot of it probably had to do with the bromine price increases as well as price increases across curatives, and other part of your portfolio. Just in historical perspective, margins have rarely gotten to this level in a sustainable basis in Polymer Solutions. On the other hand, you haven't had a duopoly in bromine or virtual duopoly before. So, are we looking at the new level of profitability that's sustainable, maybe not at 25%, but maybe somewhere in the low 20s or is this just the combination of perfect storm between your pricing power and raw materials not giving you insurmountable obstacles and demand being strong, utilization rates high, how should we think about margins of the Polymer Solutions business longer term?
John M. Steitz - EVP and COO: We always had a view. We didn't externalize this, but we always had a view that we could get our margins up into the 20 plus percent range in Polymers. What was really unique I think about our performance in the third quarter is, it came from such a balance of different businesses and our strong portfolio across our Polymer platform is really beginning to share its worth here. Can we sustain 25%? I would be disappointed if we don't. I recognize, that's a high number, but is assuming we don't see any kind of double-dip recession and our base volume is holding there pretty well, we're very excited about continuing to grow this business and the opportunities that were being presented with in Polymer Solutions around the globe are really impressive. I cannot view our effort here as we are at the base camp and just heading up the mountain, so we would feel really strong about Polymers and the whole portfolio. Mineral flame retardants had a good quarter in the third quarter. It looks to be a little better in the fourth, and this is just one example of the business that we had to work hard to fix and curatives equally with the infrastructure development, especially in China, we're very positive about that and the new product portfolio that we have there.
Dmitry Silversteyn - Longbow: I was intrigued by the comment that you made on the sorbents technologies business, maybe actually seeing some signs of life out of China. Can you provide a little bit more granularity and I understand you said you're going to be participating in some trials in 2011, I'm assuming you're competing against alternative technologies, not necessarily bromine-based mercury removal. So, can you kind of give us an idea of the timeline and how sizeable this business can be, in the near-term interim and I am not looking for five to 10 years out, but over the next couple of years?
John M. Steitz - EVP and COO: Yeah, I think Dmitry, for example, some of the cement regulations I referred to would occur in 2013. But the good news on that side is it is compared to what the customer – large cement kilns have to put in terms of capital. An option is enormous amount of capital or putting in our system that is extraordinarily cost-effective. So, longer term in both the coal industry and in the cement industry we feel really positive about the development of that. China is part and parcel of that whole effort and we're really encouraged about how proactive the Chinese government has been in trying to facilitate the coal industry there, which is enormous to eliminate their mercury reductions or greatly reduce their mercury reductions. But these are all, I'd say, kind of on a three-year time horizon, but it's scary good what that could do to the overall growth in the market. I like to point out too in a lot of these applications, there are competing technologies, but many of them include bromine somewhere in that supply chain.
Mark C. Rohr - Chairman and CEO: Dmitry, to give you some weighted numbers there, U.S. regulations and power plants alone, so I'm not talking about the cement counts John was talking about. We'd probably take about 5% of the global bromine capacity to satisfy roughly. In China that's a good level. So, it would be material enough that you would see it in the system. What's now industry (just want to) essentially at capacity. If you fast forward and look at China, it would be 25% to 30% of global bromine demand would be required to satisfy that, which doesn't exists today in the world in terms of – it exists, but we can't produce it today, we have to invest money, all this in the industry to do. So, few things John said, scary good on the upside trend, you are right, it's not that material today, and we expect that material already grow over the next three years.
Dmitry Silversteyn - Longbow: Then one final question. How is your CFO – sorry to go, can you update us on your efforts there?
Mark C. Rohr - Chairman and CEO: Well, just to say that we're working hard on it. Richard is doing a great job here. As you can tell from these results, he is taking all the credit for it this quarter. But yeah, that process is underway and going fine.
Dmitry Silversteyn - Longbow: Do you have a timetable in mind or is it just going to be best available whenever you get him?
Mark C. Rohr - Chairman and CEO: You're always on these things. It always takes you five or six months to do it. So, it will be sometime early next year, I'll expect we'll make a decision.
Operator: Laurence Alexander, Jefferies & Company.
Rob Routh - Jefferies & Company: This is (Rob Routh) for Laurence. Just to follow-up on the comments on M&A, broadly which business lines and regions are you guys focusing your efforts on, and the pipeline, is it mostly bolt-ons or are you at the point where you're considering larger acquisitions as well?
Mark C. Rohr - Chairman and CEO: We work hard not considering ourselves too much. If you look at the businesses, we're pretty excited about some opportunities in the fine chemistry side, believe or not, we think that the service factor, I mean the service system we have in place is a value add system, but it lacks from mass and it lacks some geographical reach. So, we're looking hard in that area and hope to be able to do something there. In the polymer side, it's all about Asia and that part of the world, and we're pretty aggressive over there and whether we do acquisitions or make investments, we're not sure yet but we're looking a lot in Asia for some unique opportunities there to push into some, not only existing areas but will pass some areas. What I'll mention on catalyst is that we have great technology and we have a lot of ways we can push that technology vis-�-vis investments or acquisitions. So, we're looking at all the areas and we have leads in all the areas and we have discussions underway in all the areas. We would do a larger acquisition, but it's got to make sense. To fill that portfolio it has to be a (fifth one) of organizational point of view and a cultural point of view, and it's got to be something we do with the folks like yourself would stand up and say immediately, that make sense to me.
Rob Routh - Jefferies & Company: And then just one final question, just to follow-up on some of the comments on high open catalyst market. Could you just kind of characterize the pricing trends going forward in the quarter?
Mark C. Rohr - Chairman and CEO: Going forward there's a big mix impact there Rob, so some of our higher value added catalyst which take advantage of all the technology we bring, deploy are obviously higher priced than just pointing the base organometallic activators. So, it's a big mix effect. The base business is staying steady from the price and margin perspective. So, we don't see any issues there going forward.
Sandra B. Rodriguez - Director, IR: I'd like to thank you everyone for participating on the call today. If there are any further questions, you can contact me at the number indicated on the press release. Thanks everyone, have a great day.
Operator: Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.