Innospec Inc (IOSP) 2008 Q3 法說會逐字稿

Hello and welcome to today's Innospec quarter three, 2008 results conference call. On the call today we have Paul Jennings, President and CEO; Patrick Williams, Executive Vice President; and Ian Cleminson, Chief Financial Officer of Innospec. During this call, all participants will be in listen-only mode. Afterwards there will be a question-and-answer session.

I'll now hand you over to Kate Davison.

Thank you and good morning everyone. My name is Kate Davison, group Legal Advisor and head of Investor Relations at Innospec. Thanks for joining our third quarter 2008 financial results conference call. Today's call is being recorded.

As you know, last night we reported our third quarter 2008 financial results. The press release is posted on the Company's website, www.innospecInc.com. An audio webcast of the call and the slide presentation on the results are also now available and will be archived on the website. Before we start, I'd like to remind everybody that certain comments made during this call might be characterized as forward-looking statements under the Private Securities Litigation Reform Act of 1995. Generally speaking, any comments regarding management's beliefs, expectations, targets or other predictions of the future are forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the anticipated results implied by those forward-looking statements. These risks and uncertainties are detailed in Innospec's most recent 10-K report as well as other filings we file with the SEC. We refer to you the SEC's website for these and other documents.

In our discussions today, we have also included some non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measures is contained in our earnings release and in the presentation that follows. A copy of which is available on the Innospec website. With us today from Innospec are Paul Jennings, President and Chief Executive Officer; Ian Cleminson, Executive Vice President and Chief Financial Officer; and Patrick Williams, Executive Vice President and President, Fuel Specialties. And with that I'll turn it over to you, Paul.

Thank you, Kate. And thanks to everyone on the call for taking the time to join us today. Turning to slide four in the presentation, I have a few summary comments before Ian takes us through the numbers in greater detail. Overall, we are pleased with the solid results our businesses are achieving at the operating level in the face of significant headwinds in the global economic environment. We achieved double-digit revenue growth for the quarter, despite the continued decline in our Octane Additives business with an 11% increase in the Company's total revenues. Fuel Specialties, which is by far our largest business, delivered another excellent performance, with 22% revenue growth. In Active Chemicals, we reported a 12% sales increase as well as significant gross margin improvement sequentially as we expected after the difficult second quarter.

Our GAAP net income and earnings per share were lower for the quarter, but that was entirely due to a number of special items that we have detailed in our press release. These include a significant additional accrual for legal and other professional expenses related to the ongoing Oil for Food and related investigations, large non-cash foreign exchange losses, and the benefit from the reversal of contract related provisions. Ian will have the particulars in each case but if you exclude these items our adjusted earnings per share were up more than 50% from a year ago. Finally, we're very pleased given the current economic conditions to be able to raise our 2008 guidance range for sales growth in Fuel Specialties. And with that I'll turn the call over to Ian Cleminson, our Chief Financial Officer.

Thank you, Paul. Turning to slide six, on a consolidated basis revenues for the quarter increased 11% despite a 55% revenue decrease in our Octane Additives business which continues its expected long-term decline. Taken together, revenues in Fuel Specialties and Active Chemicals our ongoing businesses were up a very solid 19% for the quarter.

On a reported basis, our gross profit percentage was 31.3%, down only 0.6 points from a year ago. However, the gross profit for the current year includes $5.5 million pretax from the reversal of contract related provisions which were no longer necessary. Excluding these benefits our overall gross profit percentage was 27.8%. As you know, on a GAAP basis, we reported diluted earnings per share of $0.16 this quarter versus $0.22 a year ago. Those numbers include several special items in both periods which are summarized in the table in our press release. The largest of these on a cents per share basis are the $0.31 charge for additional Oil for Food expenses, $0.18 in non-cash foreign exchange losses and the $0.20 gain for the reversal of provisions. We also have $0.05 in our goodwill impairments, and $0.01 in restructuring charges. If you net out all that there was a $0.35 negative impact in our third quarter EPS. A year ago, we had a much smaller impact, only $0.09 from similar items. If you back these out from the reported numbers you get adjusted earnings per share of $0.51 in this year's third quarter compared with $0.32 a year ago.

Turning to slide seven, in Fuel Specialties, revenue growth for the quarter was 22%, an acceleration from the 10% increase in the second quarter, in part reflecting the resolution of raw material supply issues we referred to quarter two. This is an excellent performance in view of the macro environments we are facing in both the US and EMEA. The 22% revenue growth was driven by 12% additional volumes, 8% due to price and product mix and 2% due to the favorable impact of exchange rates. Fuel specialties did see some flattening in its gross margins as we expected, reflecting increased raw material and energy costs. The segment's gross profit percentage of 31.8% was down 1.8 percentage points from a year ago.

By region, revenues increased 15% in the Americas, with volume gains across the entire portfolio. Gross margins were softer in this region as raw material costs for some key products increased significantly. The EMEA region performed exceptionally well, with a 39% revenue gain and a strong gross margin reflecting a favorable sales mix and improved margins on detergents. The EMEA revenue growth was broad based but particularly strong in diesel detergents. In the Asia Pacific region sales increased 8% due to the increased sales of cetane and diesel detergents. The segment operating income for the quarter was $20 million or 23% from last year's third quarter.

Moving on to slide eight, in Active Chemicals we reported a small operating loss of about $300,000, but that was significantly improved from our second quarter loss of $2.4 million and importantly the business was profitable for the last two months of the quarter. Revenue growth was a solid 12% overall. The revenue growth was driven by 8% additional volumes, 1% due to price and product mix and 3% due to the favorable impact of exchange rates. By region, sales were up 10% in the Americas, reflecting growth in both fragrances and Personal Care. In the EMEA region, revenues increased 9%, due mainly to increased sales of (inaudible - highly accented language) for agricultural use. Asia Pacific sales remained relatively small but were up 52% with strong growth in personal care, fragrance, and polymer lines.

As promised, Active Chemicals margins were much stronger sequentially though still below a year ago. The overall margin of 11.1% was more than double the 5.3% margin in the second quarter, reflecting price increases across many of our products, sales mix and the resolution of some manufacturing issues. The improvement was achieved despite continued cost pressures. For example, in the Americas raw material and energy costs were up 32% and 39% respectively from a year ago. We have made significant progress in Active Chemicals but still have a long way to go to deliver acceptable bottom line results. Paul will have more to say on this in a few minutes.

Turning to slide nine, in the Octane Additives segment were broadly in line with our expectations if you take out the special items that impact the reported numbers. Revenue for the quarter was down 55% on a 49% decline in unit volume which again was a little weaker than we expected but not inconsistent with the long-term decline in this legacy business. The large drop this quarter reflect a difficult comparison with a relatively strong set of numbers a year ago and the relatively high inventory numbers held by our customers which is affecting the timing of our shipments. As we noted earlier, this segments gross profits includes $5.5 million from the provision releases no longer deemed necessary. Excluding this, our gross margin was 50.7% compared with 50.6% a year ago. And somewhat above our expectations due to customer mix in the quarter. Operating results for this segment also include the $8.7 million in additional Oil for Food expenses that we bought this quarter.

Moving onto slide 10, corporate costs for the quarter were $4.9 million, down slightly from $5.1 million a year ago, primarily due to the strengthening US dollar on the predominantly UK Sterling corporate cost base. As expected, the Octane Additives impairment charge was again down sharply at $1.1 million compared with $2.4 million a year ago. We incurred a small restructuring charge of $0.3 million compared with $0.9 million a year ago.

Reflecting the volatility in the foreign exchange markets we incurred a non-cash foreign exchange loss of $5 million before taxes, compared to a $1.5 million gain a year ago. This is primarily driven by the requirements under US GAAP to put mark-to-market losses on our forward currency contract positions. These positions have been severely impacted by the recent weakening of both UK sterling and the euro against the US dollar. In addition we recorded another non-cash charge of $0.6 million related to our United Kingdom pension plan, down from $1.1 million in last years third quarter.

Turning to slide 11, our liquidity remains excellent with $15.2 million in cash and cash equivalents. Total debt of $92 million and net debt of $76.8 million. Net debt is up $20 million from year end and about $12 million from the end of Q2, primarily reflecting working capital increases in support of the Company's growth. We did not repurchase any additional shares during the quarter. The Board revisited topic frequently but given the current environment has decided for the time being that preserving liquidity and maximizing cash flow should take precedence over stock repurchases. The first half of the year the Company repurchased approximately 484,000 Innospec shares for a total of $9.6 million. Now I'll turn it back over to Paul for some concluding comments.

Thank you, Ian. Moving on to slide 13, which shows Innospec's ongoing operating profitability. This is a metric we use to back out the performance of our legacy Octane Additives business and demonstrate the progress in our ongoing specialty chemicals businesses. For the third quarter our ongoing operating profitability was up 17% from a year ago, and for the first nine months of the year it increased 15%. Just three years ago, we were losing money on this basis as our operating income from Fuel Specialties and Active Chemicals did not cover our corporate costs.

Slide 14 shows the changes we have made in our 2008 guidance ranges. We now expect revenue growth in Fuel Specialties to be between 12 and 16%, significantly above our previous guidance of 7 to 11%. We remain comfortable with our previous gross margin guidance of Fuel Specialties. We have not changed our revenue or gross margin guidance for Active Chemicals.

In Octane Additives we continue to expect a 25 to 30% revenue decline but now expect the gross margin to be between 52 and 56%, compared with 40 to 44% previously, reflecting the benefit from the release of contract related provisions. We now expect the tax rate for the year to be approximately 29%, compared with our previous expectation of 34% due to the revised assumption that significant legal and other professional expenses may be tax deductible.

Turning to slide 15, I'd like to make a few more points before we take your questions. Regarding the investigations related to the UN's Oil for Food program and other related areas, there is not a great deal more we can say that we have not said previously. We have taken an additional charge this quarter for further legal and professional expenses we now expect to incur. This covers projected expenses through the first quarter of 2009. We continue to cooperate fully with the investigations. We still don't know how much longer the investigations will take, or what the ultimate results will be. When we do, we will communicate that promptly. In the meantime, there is nothing more to say beyond the disclosures we have already made in our public filings with the SEC.

As Ian noted, Active Chemicals had a better quarter sequentially but its performance is still far below our longer term expectations. We made good progress during the quarter with the integration of Active Chemicals into the existing Fuel Specialties organization which is very customer-focused. We continue to believe the new global specialty chemicals structure will be more efficient with a sharper focus on meeting customers' needs through innovative products and exceptional customer service.

You may have noticed that all of our debt is now characterized as short-term, reflecting the fact that our credit facility matures next June. We expect to begin discussions about the new facility during the current quarter. We will probably be looking at the smaller facility that still fully meets the needs of our ongoing businesses. Given the current environment in the debt market as Ian noted, we are maximizing our liquidity and our cash flow and holding off on additional share repurchases to put ourselves in the best possible position going into negotiations.

Finally, we are obviously just as concerned as many of you about the performance of Innospec's stock over the last few months. Innospec continues to generate substantial cash flows and our stock is one of the least expensive in the industry on an enterprise value to EBITDA basis. Our return on capital is among the highest in the group and our balance sheet remains very strong. Our biggest business, Fuel Specialties, continues to deliver very strong operating results. Ultimately, our share price decline is mainly due to outside forces over which we have no control. So while we are certainly not ignoring the markets, we are dedicating ourselves to our latest sharp focus on the things we can control or influence within our business. Now we'd like to turn the call back to the Operator and take any questions you may have.

Okay. At this stage we will begin the question and answer portion of this call. (OPERATOR INSTRUCTIONS) The first question is from Jeff Zekauskas of JPMorgan. Please go ahead, sir.

Hi. Good day.

Hi, Jeff.

You say in your revised expectations that you expect your Octane Additive revenues to be down 25 to 30%. So assuming that it's down 30% since you at least by my calculations did $94 million in sales last year, you'd have to get to about $66 million, which would imply a fourth quarter of about $27 million in sales. And since you booked 7.3 this quarter, doesn't that seem a little high?

Jeff, it's Paul. As you know, the Octane Additives business is one where it does get very lumpy from quarter-to-quarter and we've always said that we feel it's almost impossible to look at that business on a quarterly basis. Because shipments can move around so much. At the moment, we still see the guidelines that we've put out for Octane Additives as being relatively robust but it will be dependent upon the timing of the shipments in the fourth quarter and we obviously won't know those until we get towards the end of the year. At the moment we're prepared to stick with that guidance.

So you accept -- you're expecting then an exceptionally strong fourth quarter. Second, as lead revenues wind down, so if your target would be at something like $65 million, and then if what we did is we went down another 30% next year, you'd be around 45. Are you profitable at $45 million? When do you start to go unprofitable in lead additives? What level of revenue?

Jeff, this is Ian. We're profitable next year and we'll remain profitable over the life of this business when we look forward. What you'll see is that margins will decline in this business next year and beyond but we remain profitable through the lifetime and the life cycle of this business segments.

Right. Well, I mean if you're going to remain profitable, I mean, presumably you're not going to remain that profitable; right? I mean, you're going to be close to break-even next year; is that right?

We obviously haven't given any guidance for next year, Jeff. In terms of that business, Ian's statement is right, we worked very hard to amend the production facility to have a more flexible operation in place and taking out costs where we feel as though it can come out. But we do expect that business to stay profitable through the end of its life and, it's just really a case of how much longer we would expect it to go on for and I think three or four years ago I said we've probably got another three to five years left. I think right now I'd probably say it's got another three to five years left.

Okay. So turning to your growth business, Fuel Specialties, you have these -- you talked about your volume being up 12% and you have very strong revenue growth in all of these different areas. I would imagine that the cetane market or the detergent market probably grows a couple of percent, or after least that's my assumption, but you're growing at five or six times that. How do you do that? And what's the value proposition that you offer to your customers such that your volume growth is so high relative to the underlying growth of the markets?

Jeff, what I'll do is -- I've got Patrick Williams on the call who runs that business. So Patrick, I'll let you go ahead and respond to that if that's okay.

No problem. Good morning, Jeff.

Good morning.

A couple of things. I think one of the things we always preach is that we're very diverse with our market. We sell a lot of multi-functional products. We feel like in our market, obviously, customer focus is number one. Customer relation is number one. But primarily, Jeff, we have really focused on areas and points of entry where we have not been very strong and obviously we've shown growth in those markets this past year. And more so, continually with our R&D and our team to bring new products to the market and also our core products, not only make those better than what they were for lack of a better word, but I think obviously put points of barriers of entry for competitors come into. But I think for the new markets and you see new engines, new technologies coming into the marketplace, we have new products that actually hit certain specs those engines need for functionality.

Okay. That's helpful. Lastly, in Active Chemicals, we seem to be going into a sharp economic decline in the US and in Europe. How cyclical is the Active Chemicals business? In other words, is this something that really would be tremendously affected as the economic activity goes down or are you so tied into the agricultural markets or definite contracts that your business can hold up reasonably well?

Well, I'll just comment on that initially, Jeff and maybe Patrick might want to add a few extra comments. We focus that business now on three main markets which is Personal Care, fragrances and the detergents market and the positions that we have with our customers actually we believe are relatively strong. What we haven't done a good job of is running our plants and also managing the margins so that we're passing on price increases at the appropriate time. As Ian mentioned earlier on in the call, we have started to see that turn around. I think we've proven the way in which we run our plants, particularly in North America. We have started to see some velocity on the top line in terms of pricing and in terms of volume in some of the markets as well. And we expect that to continue into the fourth quarter. What's really encouraging for me is that we started the third quarter off with a loss in that business, but the last two months of the quarter were profitable. So to me, that shows directionally it's good and the trajectory is good as well. But Patrick, are there any other things you would like to add on that?

I think real quick, I think obviously it's a fairly small business in proportion to the other businesses that we have or the Fuel Specialties business in particular. So I don't think a global recession in respect is going to negatively affect the Active Chemicals business due to the fact that we feel there's a lot more growth than I originally anticipated when I reviewed the business. But we looked at it from the aspect as we really needed to fix our pricing because we had a run-away of raw materials as Paul and Ian alluded to earlier and we had a run-away with manufacturing. I think we've got a very good grip on both of those as we speak. The next factor is getting our volumes up in those three specific markets. I think if we can do that, which we've done the previous two, you'll see good things from Active Chemicals here to come.

Okay. Thank you very much.

You're welcome, Jeff.

We now go to Greg Hillman of (inaudible). Go ahead, sir.

Good morning, gentlemen.

Hi, Greg.

Just a couple things, one question about your sensitivity to changes in the price of oil, the sensitivity of your earnings. Could you just review that again, basically if oil is above $150 a barrel crude, or -- and what level does it have to go below before your customers require you to readjust your prices downward and kind of where we are in that cycle right now?

Maybe if I just covered it broadly and then if Ian or Patrick have got any other points they'd like to add. As we always said before, Greg, I mean, the oil price fluctuations impacts us in a number of different ways. The higher the price of oil, the more people are trying to get out of a barrel of oil and the more additives they need to help support that. But increasingly, because a lot of our raw material costs are oil based, it tends to drive up raw material costs as well. Interestingly, when oil prices start to come down, we start to see a reduction in our raw material costs, albeit with some lag, but there's still different types of additives that are needed in order to support the growth in our customers. So generally speaking, what we tend to say is that up or down, it's broadly the same impact on the company. There might be some specific areas of our business where it's better than some other areas, but overall across the Company, we don't see having a dramatic impact on the performance. Ian, Patrick, any further comments you would make?

No, I think that's a fair statement.

Okay. And just another couple questions about Fuel Specialties. Number one, are you going for a CARB certification right now.

Carb certification for what product specifically? What are you talking about?

For just diesel additives for the state of the California.

Well, you've got to have -- obviously when you talk about CARB certification, it's customer specific. So they have to take your product and they've got to get CARB certification with your product. So it's not necessarily an additive approved CARB certified product. It's a finished fuel certification.

I guess because a lot of the -- I think the refineries make maybe achieve that certification or emission levels through their refinery by I don't know reducing aromatics or other things they do at the refinery level and then there is I guess refineries in California that haven't gone -- haven't expended that capital cost. I was wondering if there was any way to help those refineries that haven't expended the capital cost to get the CARB certification with just a liquid additive?

Obviously, we're working with I would say the majority of the refineries in California specifically. Whether they go for CARB certification or not is their call. But yes, we do have additives to help them get CARB certification. That's probably the only way I can answer that question.

For you to help them get certification, your additives or the combination of your additives and their gasoline has to be approved by the state?

That's correct.

And heretofore you have not received approval for anything.

Our products are approved. Again, Greg, you have, CARB does not approve additives, they approve fuel. So what you do is you go get your fuel with your additive and you go get CARB certification. So a refinery will take their fuel with your additive and go get CARB certification. So we work with the refinery to get the right specifications to go get CARB certification and we help them with those tests.

Okay. That's what you're trying to do. Okay. And just one other point. On some additives. The question of -- I guess the United States going in the direction of I think mono acids versus synthetics for the new diesel engines, have you gotten any further insight into what's going on there?

I -- overall I think it's the other way around, actually, with a lot of the new engines out in the marketplace and with a lot of the issues that we've seen from a technical standpoint, it's more going towards synthetics than it is mono acids. Mono acids have been more of a Canadian and European market. Synthetics are coming on strongly and we still foresee that in the issue due to some of the issues we see with mono acids in the marketplace today. We are properly positioned for both but obviously we feel like the synthetics are the best way to go.

So they would just grow as the engine use in the United States -- as diesel engine use in vehicles increases in the United States.

Yes, I would say that's probably a fair statement.

Okay. Thank you.

Okay. We now go to David Wilson of Smith Barney. Over to you, David.

Thank you, good morning, guys.

Hi, David.

Good morning, David.

Could you give me an idea of how your gas volumes are holding up? Are they about flat year-over-year? Could you give us some idea of what they are on a yearly basis?

David, this is Ian. If you were to recollect the second quarter of 2007, actually -- sorry, the third quarter of 2007 actually benefited from some of the positive impacts of the pricing and volume due to (inaudible).. So compared to this year's third quarter, it's a little bit flat. And overall, what we've seen, the results are about 7% up year-over-year and importantly, margins in this business still remain attractive, around about the 50% mark.

Okay. Talk a little bit about what the contract provisions were for the $4.8 million?

Yes, David, this is Ian again. Obviously when we've dealt with a, some of the countries we deal with we have long-term contracts and we have tails on those contracts when they step out of the Octane Additives market that requires some cleaning up of sites, finalizing of settlements around the contract and the like and we always hold a number of provisions just until those issues have been resolved. This is an appropriate point in time as we head into the year to clean up our balance sheets and release those provisions. They're the countries that have stepped out of the Octane Additives market over a number of years.

I do agree with you that your stock -- I wish you luck in getting your financing facility redone and I hope it's with provisions that don't restrict you from buying stock back in the Company at times like this.

I'm going to say this point, David, I hope that everybody understands what we're trying to do here, which is this is a very difficult financing market. We think that we're in good shape but until we actually get into those negotiations, have the discussions, you don't really know. I think at this particular time, running the business in the way that we are, we will protect the longer term position of the Company which is what I think we need to do.

David, does that answer your question?

Yes.

(OPERATOR INSTRUCTIONS) Okay. And we go to Jonathan Lichter of Sidoti & Company. Please go ahead, sir.

Good morning, guys.

Hey, Jonathan.

Is this the new gross margin level that we should expect for Fuel Specialties, given the run-up in raw materials?

Jonathan, this is Ian. I think what we've seen in quarter three is a little bit of timing in our margins. We've seen some increasing raw material costs and energy costs and we are a little bit towards the lower end of our margins and what we've actually seen is continued increases in raw material pricing, about 20% year-over-year and this has been particularly so in respect to the products that we sell in the US. Now, we can't really seek to mitigate those costs and we constantly seek to increase our prices, we have to seek a profit range where we can and we'll continue to do that in the future quarters and what we'll also do is we'll build strategic inventory if required to secure that supply. And so overall, gross margin we expect to operate within that but from time to time we'll be toward the middle to lower end and other times we'll be towards the middle and the higher end.

Can you talk about overall competition in the Fuel Specialties space.

Patrick, you want to go ahead with that?

Yes, no problem. Jonathan, I think it's been a very responsible market to date. Still the same players in the market that we've had over the previous 10 years. There has not been a lot of movement from the standpoint of acquisition standpoint or a merging of markets as you say. But for the most part, there's been no real point blank technologies that have come out from any of the major competitors in the group. I think we've all be putting heavy R&D monies into the marketplace for new products, for the new engines coming out. Specifically, HSDI, HPFI and I feel like -- I think that we have maintained our leadership position and obviously we're going to keep struggling to do that. That's our goal. But from a competition standpoint, Jonathan, there's not been any major changes in the top five.

And they've not been more price competitive?

It's funny. You can look at price increases, obviously from a raw materials standpoint they're quick to raise prices. From a raw material, but they're not quick to lower prices when crude drops below 100, obviously. But we have not seen, like I said, I think it's been a fairly responsible market. We have not seen somebody out there doing things, anything crazy, as you say.

Okay. And on Active Chemicals, have you seen any push-out of new product introductions because of the weaker economy?

We have not. And as I alluded to earlier, we have not seen -- the global recession has not necessarily affected Active Chemicals from the standpoint it is a smaller business and we feel like where our products are placed in that market segment, there has not been a major decline. Our goal is to obviously get a better feel for the variety of products that we have and enhance those product portfolios that we currently have in place and I think that that obviously with the global recession, with the business plan that we have in place, we're hoping and we don't think it should affect the Active Chemicals growth.

Okay. And finally, I know, Paul, you said there is nothing additional to say on the legal fees but if you had a guess, what would you say -- how far through the costs here are you through? Are you 50% of the way?

I think, Jonathan, what I said on that one is the increase in the provision is we expect it to take us through the end of quarter one next year and but what we don't know is what the likely timing is or what the likely results of the investigations are. But in reviewing this situation, we feel as though the provision's appropriate to take us through that time period.

Okay. Thanks.

Okay. There's another question from Greg Hillman of (inaudible). Please go ahead, sir.

Yes. Just coming back to food for fuel again, I was wondering if you could help me review the public statements you have made in some of your filings historically. For example, I think one of the statements you made, you thought the possible exposure would be $30 million. I was wondering, why did you come up with a $30 million figure rather than $200 million, for example?

This is Paul. When we reveal our disclosures, which are in our Qs and Ks, we felt it was appropriate to give some sort of number, just so that people were aware of the magnitude of what we're looking at. And when we made that disclosure, that was based upon all available information in the marketplace around other companies that have similar type issues. So in reflecting on it, we thought that was an appropriate number to put in there. What I would say is this particular moment in time, we're cooperating fully with all the investigations and with the authorities' concern. We do not know how long it will take to bring it to a conclusion and we don't know what the results of that will be. But we thought it was appropriate in the last Q to just give a range of what we have seen from other companies' activities.

Relative to their size, what -- some companies that have settled so-to-speak relative to their size and relative to what they're accused of doing, or something like that?

I think that that's not something I'm prepared to comment on, to be honest, Greg. People want to have a look at what other companies have done, that's fair enough. It's t not for me to comment on their size or what they may or may not have done.

Right. Okay. And then the other thing, historically -- I don't know if you can comment on it, but had you ever had an opportunity to settle this matter in the past or with past managements of the Company?

As we've said in our investigations and in our filings, this was brought to our attention 18 months or a couple of years ago, when the original report was issued. And we've continued to work with the authorities during that time and at this stage I don't know when it's going to finish and I don't know what the likely result's going to be.

Okay. But I asked you whether you ever had an opportunity to settle. So you never had an opportunity to settle, so-to-speak, or to put it behind you?

As I've said, Greg, we're continuing to operate and to work with the respective authorities and to make sure the investigation's performed in a robust way and as soon as we know anything different to that then we'll be very prompt in disclosing it.

Okay. Thank you. That was helpful. Moving to the ethyl matter, I don't know if you could review it, but could you talk about actually when you made cash payments to ethyl as you exited your agreement with them and do they have the capability to make tetra ethyl lead to sell them in any markets right now?

Well, this is going back over 15 months ago, when we actually negotiated a settlement with ethyl and all the cash payments were made at that particular time and so we remain now the only Company manufacturing tetra ethyl lead. And so it's well back in our history now, Greg, in terms of when this happened.

Okay. So that didn't impact your fiscal '08 at all?

No.

Okay. Fine. Thank you very much.

You're welcome.

Okay. (OPERATOR INSTRUCTIONS) Okay. There seems to be no further questions in the queue so can I please pass it back to you, Paul.

Thank you very much and thank you to everybody for your questions and I'd now like to leave you with a few final thoughts. While we are generally satisfied with our overall results for the quarter, we recognize that there's still room for improvement in some of our businesses. Fuel Specialties remains on track for a strong year in 2008 and we're very pleased to be in a position to increase our guidance range for its projected sales growth. Active Chemicals demonstrated substantial improvement versus the second quarter and should benefit as we complete the process of integrating it with the existing fuel specialties organization. Some of the details have changed but in many ways our strategy for driving growth and building shareholder value remain the same today as it was three years ago when we embarked on this journey. We want to continue running our core businesses better and our restructuring of Fuel Specialties and Active Chemicals into a single streamlined specialty chemicals business is a great example. Our ongoing growth businesses in Fuel Specialties and Active Chemicals are the leading positions in a variety of attractive markets that we can leverage in the years ahead.

If you have any further questions please don't hesitate to call. If we don't hear from you in the meantime, we will look forward to sharing our fourth quarter results with you early next year. Thanks again for being with us on the call today and good-bye.

This now concludes the call. Thank you all very much for attending.