Michael Barry - Chairman, CEO and President Mary Hall - CFO Robert Traub - General Counsel

Laurence Alexander - Jefferies Edward Marshall - Sidoti & Company Mike Harrison - Seaport Global Jon Tanwanteng - CJS Securities Liam Burke - FBR Capital Mike Gyure - Janney Montomery Scott Garo Norian - Palisade Capital Management

Thank you, Don. Good morning, everyone.

Joining me today are Mary Hall, our CFO; and Robert Traub, our General Counsel. After my comments, Mary will provide the details around the financials, and then we'll address any questions that you may have.

We also have slides for the conference call. You can find them in the Investor Relations section of our website at www.quakerchem.com.

I'll start off now with some remarks about the second quarter. I'm pleased we have delivered a strong quarter, despite some market challenges.

The quarter's impressive results were largely driven by two major themes. The first being sales increases and the second was gross margins improvement.

Let me start with the margins. Since mid-2016, we have been in a generally rising raw material cost environment, and as we have discussed in the past with raw materials, there's a lag effect between changes in our raw material costs and adjustments to our product pricing.

On the last conference call, our expectation was that we would be catching up on this lag effect with our price increases and our gross margin will continue to increase in the second quarter, and I’m happy to report it did. While raw materials continue to rise sequentially from the first quarter, our price increases were enough to more than turn the tide leading to our gross margin expansion.

However, we are continuing to see raw material cost increases in the third quarter which we are addressing with additional price increases where necessary. How exactly this all plays out in the second half of the year is hard to predict in a precise manner, but our best estimate that our gross margins will be in the low to mid 36%.

And going forward, we still expect our gross margins to get back to our targeted 37% once raw material increases subside. Now let me move on to sales, our sales increased 10% versus prior year with 5% of this increase coming from strong volume growth and 2% from foreign exchange.

The remaining growth of revenue of 3% was primarily driven by price increases. Let me now give you some additional color on our region’s performance.

Our biggest segment, North America showed a sales increase of 8%, with volume growth and price increases both being about 4 percentages. Our European or EMEA region showed a 10% increase with price increases largely driving a 3% increase in sales and the rest being driven by exchange rates.

In our Asia Pacific region, our sales increased 16% largely driven by 10% higher volumes. To note some of this volume growth was higher than normal due to timing of shipments hitting this quarter versus other quarters.

However, even considering this timing we continue to see good growth in China. The remaining revenue growth in Asia Pacific of 6% was largely driven by foreign exchange rates and higher prices and product mix.

And for the eight quarter in a row, we are happy to report that South America showed solid revenue growth. The 5% growth in South America sales was due primarily to volume growth as well as price increases totaling 23%, which more than offset a negative exchange rate impact of 18%.

One way to see our market gains is to look at our overall organic product volume growth in the quarter and compare that to the underlying production growth in our base markets. Our overall volume growth was 5% as compared to the underlying growth in our base markets which we estimate at approximately 3%.

We believe the spread of approximately 2% is indicative of our share gains and is due to our commitment to our customer intimacy model. Specifically, we put our customer needs first as our top priority providing a strong service and business solutions.

I believe this approach continues to differentiate us in the marketplace. So in summary for the quarter, despite the continued challenges we faced with higher raw material cost, we were able to grow our adjusted EBITDA by 15% and our non-GAAP earnings by 26%.

In a nutshell, we were able to do this by growing in our base markets, taking share in the marketplace, increasing our gross margins and continuing to leverage our SG&A. And we’re also seeing an increase in our earnings per share due to favorable impacts from the US tax reforms, which was the primary reason why our non-GAAP earnings growth of 26% exceeded adjusted EBITDA growth of 15%.

I’d now like to make a few remarks about our combination with Houghton International. Nothing has really changed since July 9thpress release.

We continue to be in constructive discussion with both the FTC and the European Commission as well as with potential buyers of the product lines, we anticipate we’ll need to be divested. We intend to present a remedy to both commissions in the third quarter and we expect approval and the close of the combination to be in the fourth quarter.

Overall the magnitude of the divested product lines continues to be approximately 3% or less of the combined revenue with the companies which is consistent with our original expectations. This additional time allows us to finalize the process with both the regulators and the potential buyers.

I believe the end result will be a remedy which meets the needs of the market, the regulatory authorities and the new combination. And as we said in the past, we are excited about this combination as it will essentially double the size of the company, it enables continued above market growth through good cross-selling opportunities and provides at least $45 million in cross synergies.

Our intent is to have an investor call after the closing and to provide an updated view of the new company, as well as our expected synergies. To recap, I believe 2018 will be another good year for Quaker.

We expect to close the combination of Houghton to year-over-year gross margin improvement and realize benefits from the US tax reform. In addition, we expect to have good growth in our end markets in most regions of the world and we expect to continue to grow above the market as we’ve done historically through our growth initiatives and market share gains.

In closing, I want to thank all of our associates whose dedication and expertise helps to create value for our customers and shareholders and differentiate Quaker in the market place. People are everything in our business and by far for our most valuable asset.

I’m very happy with our Quaker team and continue to be excited about the upcoming combination with the Houghton International team. And now I’ll turn it over to Mary Hall, our CFO, so that she can provide you with details behind the financials.

Once Mary has completed her comments on the financials for the quarter, we’ll address any questions that you may have. Mary?

Thank you, Mike, and good morning all. Before I begin, please remember that comments made during this call include forward-looking statements which are based on current expectations, estimates, projections, and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially.

For a discussion of these risks, please review the cautionary statements regarding forward-looking statements included in our earnings release and the Risk Factors included in our 2017 Form 10-K filed with the SEC. These are available on our website.

Please refer now to Chart 4 and 5 as I review our financial performance. Quaker reported a 26% increase in non-GAAP earnings per share to $1.56 as a result of strong operating performance across the company.

In a similar scene to Q1 of this year, strong sales growth and good cost control were key drivers of performance and in this quarter we also saw gross margin improve both sequentially and year-over-year. All these factors combined resulted in a very strong quarter.

Our net sales increased 10% to about $222 million compared to Q2 last year, with organic volume growth of 5% leading the way and our pricing initiatives driving selling price and mixed improvements of 3%. In addition, the generally weaker US dollar year-over-year benefitted our topline by about 2% with a major being the euro which appreciated 8% versus the dollar from 1.1 in Q2 2017 to 1.19 in Q2 2018.

Our gross margin of 36.5% is up 8/10 of a percent versus last year’s 35.7% and is also up sequentially over Q1 35.6%. This is a second quarter of sequential gross margin improvement.

In addition Quaker continued to share good cost discipline as we further leveraged our operating cost to support our strong topline growth. Note that our GAAP operating income and operating margin reflect 4.3 million of Houghton related expenses.

If we look at the ratio of SG&A to sales on chart 5, the Q2 ratio of 24.4% compares favorably to 24.7% in Q2 of last year, and together with our gross margin increase drove improved operating income and operating margin. Our lower effective tax rate in the current quarter of 1t6.8% versus last year’s 26.2% was another contributor to the strong earnings performance.

In the current quarter, we adjusted our estimate of the [total] tax on unrepatriated earnings related to US tax reform that we booked in Q4 of 2017. The adjustment reduced our current quarter taxes by $1.2 million and this combined with the lower statutory rate in the US of 21% versus 35% last year resulted in a relative low Q2 effective tax rate.

For the full year, we continue to expect that our effective tax rate will be between 23% and 25% excluding the impact of Houghton combination related cost and any current year adjustments to the US tax reform charge that we booked in Q4 of 2017. As a result of our strong operating performance, adjusted EBITDA was up 15% year-over-year, operating cash flow is down a big year-over-year as we invested in working capital to support the 10% increase in sales.

Our liquidity and balance sheet remained strong with a net cash position of 26.1 million at June 30. Turning to chart 6, here you can see the continued growth in volume, which is all organic volume growth for the quarter.

In chart 7, we see the sequential and year-over-year increases in gross margin that I described earlier. As Mike mentioned, we see raw materials continuing to increase and now expect gross margin to be in the low to mid 36% area for the rest of the year.

Chart 8 shows our continued and consistent positive trend and adjusted EBITDA as we further leverage our operating cost while growing the company. Also the current trailing 12 months adjusted EBITDA with 122 million is a record.

Chart 9 shows our cash and debt balances and highlights our strong balance sheet and good liquidity with a net cash position of 26.1 million as I mentioned earlier. In summary, Quaker continues to consistently deliver good earnings in cash flow despite various market challenges.

We expect 2018 to be another good year for Quaker as we focus on delivering value to our shareholders and closing the Houghton combination. Thank you all for your interest in Quaker, and now I will turn it back over to you Mike.

Thank you, Mary. At this stage, we’d like to address any questions from any participants on the conference call.

Given that there are no other questions we’ll end the conference call now. And I want to thank you for your interest today.

We are pleased with our results in the second quarter and we continue to be confident in the future of Quaker Chemical. Our next conference call for the third quarter of 2018 will be in late October or in early November.

And if you have any questions in the meantime please feel free to contact Mary or myself. Thanks again for your interest in Quaker Chemical.