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Executives

Vince Petrella, Chief Financial Officer

John Stropki , Chief Executive Officer

Christopher Mapes, Chief Operating Officer

Analysts

Thomas Hayes – Thompson Research Group

Walter Liptak - Barrington Research

Mark Douglass – Longbow Research

Liam Burke - Janney Capital Markets

Holden Lewis - BB&T Capital Markets

Steve Barger - KeyBanc Capital Markets

Gregory Halter - Great Lakes Review

Stanley Elliott - Stifel Nicolaus

Lincoln Electric Holdings, Inc. (LECO) Q2 2012 Earnings Conference Call July 30, 2012 10:00 AM ET

Operator

Greetings and welcome to the Lincoln Electric Q2 2012 financial results conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions)

It is now my pleasure to introduce your host, Mr. Vince Petrella, Chief Financial Officer for Lincoln Electric. Thank you Mr. Petrella. You may begin.

Vincent Petrella

Thank you, Jesse and good morning to you all. Welcome to Lincoln Electric 2012 second quarter financial results conference call.

We released our earnings this morning prior to the market’s open. Additional copies are available on the Lincoln Electric website or by contacting our Investor Relations office.

Lincoln’s Chairman and Chief Executive Officer, John Stropki will start the discussion this morning and provide commentary on the quarter. Also, joining the call today is Chris Mapes, Lincoln’s Chief Operating Officer. Chris will provide color on the region. After Chris makes his comments I will give you some more detail on the numbers. A PowerPoint presentation is part of today's discussion and is available on the Lincoln website under the Investor tab as part of today’s webcast. The presentation will also be posted along with a replay of today’s webcast on our website later this afternoon.

But before we get started, let me remind you that certain statements made during this call and in our discussions may be forward-looking and actual results may differ from our expectations. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the company's operating results. Risks and uncertainties that may affect our results are provided in our press release and in our SEC filings on Form 10-K and Form 10-Q.

Now with that, let me turn the call over to John Stropki.

John Stropki

Thank you Vince and good morning everyone. We are pleased with the overall financial results for the quarter. Q2 of 2012 marked the second consecutive quarter of record sales and our operating results were very solid especially given the ongoing economic challenges in many of our key markets. The ongoing commitment to our 2020 vision and our long term strategy continues to driver our results and position the company for continued success. The strong contributions of our global workforce resulted in improved operating performance, increased sales, improved overall profitability and strong operating cash flows. We are very pleased with the overall quality of our earnings and results, Vince will cover shortly.

As Vince mentioned at the beginning of our call, Chris Mapes has joined our discussion today. Last Friday, we announced that Chris will succeed me as President and Chief Executive Officer of Lincoln. I will remain as Chairman with a new title of Executive Chairman. This leadership transition will be effective December 31 of this year and it is a direct result of mine and the board’s conscientious focus on developing a deep talented and experienced management team for the company.

We believe, we have the strongest and the best global team in our history as a result of our ongoing commitment to hiring and developing the best people in our industry. As COO and as a Director, Chris has demonstrated outstanding global leadership skills, broad strategic insights and significant operational expertise.

The Board thoroughly evaluated Chris's qualifications as a director candidate before he joined the Board in 2010. Many of the trades that made him an outstanding Board candidate are also the same trades that the Board and I look for in a CEO. I will be working closely with Chris into the next year to ensure a seamless transition for Lincoln shareholders, employees, customers, industry associations and community and government relationships. Chris will cover the regions in a minute, but first let me comment on the general numbers and some of the trends we see going forward.

Sales in the quarter were up 6.4% to $744 million and operating income rose 20% to $96 million or to 12.9% of sales. Net income, increased 16.3% to 66.3 million or $0.79 per diluted share, a very good result.

As we are focused on maintaining the strength of our business and improving our operations as evidenced by the margin improvements in our strong cash flow generation. Even with some of the economic contractions, especially in Europe and the moderating economies in China and India, we see several key areas and end markets where there is good activity and opportunity for us to continue to grow and to achieve our long-term success. Several of our key industrial segments continue to show good growth with the strongest industry segments being energy-related, namely oil and gas from exploration, extraction, to transportation, as well as all types of power generation. In the offshore segment, the market situation and the positive effects of ongoing funding for offshore projects improved with further investments by major international players and large nationalized oil companies. As backlog grows, for a number of large engineering and construction companies, Lincoln is and stands to benefit in the future globally.

Here in North America, business in the Gulf Coast was very positive in both consumables and new equipment orders. The trends for exploration and production including subsea activities remain very strong with significant investment and new contracts announced in the first half. We are having strong interest and ongoing success with our newly introduced high alloy welding consumables around the globe. In the pipeline segment, the first half of year was essentially flat. The global forecast for new pipeline construction is back on the upswing with 2013 and 2014 accepted to be exceptional years for both onshore and offshore projects.

With the strong increase of shale oil and gas production, there has been a slight shift in the construction practices. With fewer miles of pipe being laid, however, there are a greater number of projects which tend to be shorter run of smaller diameter pipe. Most of the shale pipelines are being welded with traditional technologies, such as engine drives and stick electrodes in the U.S., which plays to one of our many strengths. There are also still a great number of global mega projects on the horizon, with most lines intended for long distance transmission of natural gas. With the new abundance of natural gas, which accounts for 75% of the planned U.S. projects, the prospects for the U.S. exporting LNG, there is a movement to lobby for new LNG export terminals and converting existing terminals from input to export capabilities here in the U.S. In the pipe mill segment, demand in the Middle East remains very strong and we are pursuing those opportunities and winning important new business opportunities.

Our process in power gen segment experienced significant success in the quarter with major project sales across all sub-segments, including LNG, nuclear, wind, thermal power, and process industries. From our LNG success in Asia and Australia to our participation in the new nuclear construction in the U.S. to wind power success in the U.S. and worldwide, Lincoln continues to gain share through globally coordinated and local focused segment efforts.

In automotive segment, overall global production of light vehicles is forecast to increase approximately 5% in 2012 to around 78 million vehicles, with most of that expanded production occurring in North America and China. And although, China's auto production is slowing as we enter the second half, the long-term forecast is still very positive.

Lincoln has a significant presence at many of the key global players in the very large chassis parts sub-segment, and we continue to increase our involvement with OEMs in the U.S. especially in automation.

Opportunities for our welding consumables used in the automotive segment are improving with good long-term growth expected in Asia Pacific, North America and Europe.

In the heavy fab segment, we show continued good progress despite recent global concerns over the slowing pace in China and softening commodity prices. The long-term prospects for heavy fab are still strong in all regions.

Ag machinery demand in the quarter for Asia Pacific region was more than twice that of any other region in 2011. China and India will be the primary nations fuelling future market advancements in this region. Although smaller markets including Thailand and Indonesia will also expand rapidly through 2016. Demand will be driven by the technology advancements as its efficiency gains afforded by newer equipment with more sophisticated technology will make it attractive for farmers to replace their old machinery with new and more productive models.

Industry experts predict Ag global demand will rise 6.7% annually through 2016 to 173 billion. Growth will be driven primarily by gains in the rapidly developing nation, particularly China and Brazil.

In our automation business, which was one of the fastest growing businesses we are seeing continued good growth. Our automation sales were up over 30%, year-over-year in this quarter.

Wayne Trails, our newest acquisition which Chris will talk about in a minute will be an important new engine for growth in this important segment. There are also a number of economic measures that we serve as parameters for the arc welding industry, and global steel production tops this list.

According to the World Steel Industry, June 2010 global crude steel production was down slightly from June of 2011. While China's production was flat year-over-year, and the U.S. production was up marginally.

The crude steel utilization ratio for the 62 countries that WSA tracks increased slightly to 80.4% from 79.7% in May of 2012, but was 2.5% lower than June of 2011. That's the macro view of business. Now let me turn the discussion over to Chris. Thank you, John. Our North America welding segment posted very strong results with strong order trends continuing through the second quarter and into July. Sales were up 29% year-over-year to $416 million. U.S. export sales rose over 20% with strong increases to the Middle East, Africa, and Asia-Pacific.

The impact on sales from North American acquisitions from the past 19 months was significant as we continue to execute on our strategy of aggressively pursuing strategic global opportunities. We have completed 5 acquisitions in the North American market since January 2011, strengthening and broadening our product portfolio as well as significantly increasing our automation capabilities.

We are excited about the acquisition of Wayne Trail during the quarter. The company manufactures integrated automated systems and is located in Ft. Loramie, Ohio. The integration of this business is going very well.

Wayne Trail has just recently been awarded a $20.5 million contract from one of the major domestic automakers to supply an automated laser welding and cutting solution for a new vehicle platform. Wayne Trail was selected for proprietary technology and expertise.

This contract is the largest single contract award ever made to Wayne Trail and Lincoln in automation.

In addition to its automation expertise and added benefit as Wayne Trail has a long history of collaboration with IPG Photonics, the leading developer and manufacturer of high performance fiber lasers and a company with which we have an ongoing marketing alliance. Taking a look at the overall macroeconomic picture, business conditions in our North American operations remained strong during the quarter.

Economically, industrial activity represented in key measures such as industrial production and capacity utilization across factories in the United States are running ahead of last year's comparable. Total manufacturing industrial production in the U.S. excluding the high-tech segment was trending 5.9% ahead of 2011, as of June 2012. While, capacity utilization was running at approximately 78%.

However, the Purchasing Managers' Index and the Export Orders Index have declined in the last two months and both are indicating a contracting economy, as of their latest readings. As we have discussed, we're a very short cycle from a visibility perspective. Our growth has been impressive, although we continue to have an uneasiness about the macroeconomic landscape and the political uncertainty in many of our key markets.

Turning to our Lincoln Europe welding segment, which includes Russia, the Middle East, and Africa, sales for the quarter were down 18% to $114 million and were impacted by the general slowdown in the European economies.

Although, our continued focus on margin improvement initiatives resulted in meaningful improvement in operating margins on the reduced sales. Price management also had an impact on volumes, which we are actively managing. Direct and indirect labor hours were reduced in the quarter in line with current demand levels. While the region produced an improved business result in the quarter compared to Q2, 2011, it was not as strong as Q1.

Excluding foreign currency impacts, sales in our traditional core European business were slightly down in the quarter year-on-year and remained flat year-to-date.

Southern Europe, and particularly Spain, where we have significant market share had the highest year-on-year decline, with Eastern Europe and the U.K showing positive growth during the quarter and year-to-date.

As John touched on in his remarks, our focus on key industry segments is generating positive results in terms of new business and strengthening relationships with key accounts across the region as we work within to generate cost reductions and productivity improvements.

Our Russia manufacturing consolidation initiative is progressing on-track and on-budget with the expectations to have all productions consolidated in one facility by early next year. Planned restructuring charges were taken during the quarter. We expect to see some of the cost reduction impacts commencing in Q4 and early into 2013.

The Middle East is one of the bright spots in the region with sales into the Arabian region up approximately 40% for the quarter, with products exported into the region from our plants in Europe, North America and Asia.

Government spending in the post Arab Spring areas has helped fuel strong sales growth. We have strength in our management and sales team in this area, which is clearly producing positive results.

Our South Africa commercial company continue to produce strong results in the quarter, well exceeding prior year sales and operating margins. Strong and financial discipline and practices effectively mitigated potential impacts of a high volatility of the South African rand during the quarter to enable us to show strong profitability in both local and U.S dollar currency.

Despite a challenging economic backdrop in Asia throughout the second quarter, Lincoln Asia Pacific continued to make some important progress in Q2. Although, sales for the quarter declined 16.8% year-on-year to 85 million, profitability improved as a result of our ongoing work to refine our business structure throughout the region.

As has been widely reported, the China market continues to suffer through a period of weakening demand. Key markets such as heavy equipment manufacturing and shipbuilding are seeing both seasonal and cyclical weakness. Lincoln China's business model however has continued to improve.

Our work through the course of last year to integrate our businesses into one commercial and administrative shared services structure has led to important gains in G&A efficiency and product line leverage.

We have seen exports continue to expand steadily providing a stabilizing source of demand for our globally competitive China factories. We feel strongly that this market and our execution of our strategy will provide increasing benefits over the long-term.

In India, our young business there also continues to make good strides despite weakening market conditions. During the quarter, we completed the launch of our trading company activities, which complement the sales of our locally manufactured product with our global product offering. Our productions set a record for Q2 for this facility, and we are excited about our position in the market. In the rest of the region, our Australian and Southeast Asia businesses continue to perform well as both areas are supported by strength in the long-cycle segments of offshore and mining projects.

Looking forward, we expect to see some continued seasonal weakness in the region through the third quarter, while we are hopeful that the often discussed stimulus actions by the Chinese government begin to provide a new source of market support in the next few quarters.

Switching to the South America welding segment, on a year-on-year basis Lincoln sales decreased by 1.7% to $37 million in the quarter, with most of the impact felt in Brazil and Argentina, and partially offset by strong sales in Venezuela. On a sequential basis, sales for the quarter experienced a decrease of 6.7% from the first quarter of 2012 also led by weaker sales in Brazil and Argentina.

2012 GDP growth expectations for the region have been revised down. Brazil, the largest economy in the region is expected to grow between 2% and 2.4% in 2012, down from earlier expectations of around 4%, representing a decline from the 2.7% in 2011.

Industrial production has contracted significantly in Brazil since late 2011. The rest of the region has also moderated its growth rate. Even though there has been a drop off, of industrial production year-on-year, there are number of industry segments that continue to see growth and investment.

We continue to sell solutions based product into the energy segments in Brazil, Argentina, and Chile, as wind power manufacturers take advantage of our Power Wave AC/DC submerged arc welding technology, as well as our flux/wire combination.

The offshore platform in shipbuilding industries continue to expand in Brazil and we are providing these industries the locally made consumables such as code wires, fluxes, and stick electrodes, as well as high-tech equipment sourced from Europe and the United States.

Oil and gas also remained strong throughout the region, especially in refineries and piping where we are supplying our Metrode unit's high alloy solution and Lincoln Electric's proprietary surface tension transfer or STT pipe route path technology.

Although, the auto industry is off a bit, we’ve seen demand for qualified welders in every country in most industries, especially every fabrication where we have a solid where have sold a number of our VRTEX 360 Virtual Reality Welding systems.

The technical trade schools are starting to see demand pickup and thus justification for investments in this best-in-class welding training technology, is leading the sales of these units to schools in the region.

The South American region is part of our strategic growth strategy and Lincoln remains committed to addressing key industry segment and value added solutions to our key global end user partners as well as leveraging our complete global product portfolio of products.

At The Harris Products Group sales in the quarter were down 7.3% to $91 million. Consumable sales decreased 12% from prior year, primarily driven by a reduction of base metal costs. Commodity market changes in materials such as copper and silver impact the revenue comparisons for our consumables products.

Our international sales outpaced domestic in the quarter. Our equipment sales increased 4.6% from prior year and have benefitted from stronger global sales and new product introductions. These recent product introductions and cost reduction programs have allowed us to expand our margins in this product segment. Growth from equipment and retail businesses has outpaced that of consumable brazing.

For WCTA, one of Harris Products segment businesses representing the Lincoln retail segment, the do-it-yourself outlets were up 8.6% year-over-year driven from increased volumes. New point of purchase sets drove higher same-store sales for our largest customers in this quarter.

Key drivers affecting the business growth going forward is the modest growth rate in the U.S. for HVAC replacement products, new housing starts, and construction spending for residential and non-residential products on a global basis. We have seen some improvements from recent extreme heat in the North American market for these products.

Those are the regional highlights. Before we get to Vince, let me comment on other activity we have underway.

During the quarter, we initiate cost reduction actions wherever possible throughout the organization, through rationalizations or consolidation. For instance, our VERNON Tool unit, our pipe cutting unit in Oceanside California is being consolidated into our Reno, Nevada based Torchmate business which was acquired a year ago. As mentioned earlier, the consolidation of our two Russian welding consumables businesses is progressing. And in Asia-Pacific, we have started the process of rationalizing our Australian welding consumables business.

All actions are expected to be completed by early 2013, projected savings and restructuring costs will be covered by Vince.

That's a snapshot of what we see and anticipate in the industry in our various geographies. We remain firmly committed to improving our operations and executing on our long-term strategic objectives. With that let me turn the call over to Vince, who will provide more detail to the numbers.

Vincent K. Petrella

Thank you Chris. Our second quarter 2012 financial results reflects a significant quarter-over-quarter improvement in operating earnings. Consolidated sales were up about 6% and operating income improved to $96 million. The second quarter also represented our 13th consecutive quarter of sales growth. Incremental operating profit margins excluding special items were up 42% in the quarter. The high incremental margins are attributable to an improved sales mix as well as our efforts to pair less profitable business, particularly in Europe and Asia.

On a consolidated basis and compared with the second quarter of 2011, volume increase reported sales by 2.1%, pricing increase sales by 1.6% and acquisitions contributed an increase of 6.3%. Foreign currency effects decreased sales by 3.6%. Second quarter gross profit margins increased to 30.2% compared with 28% in the comparable prior-year period.

The increase from gross margin resulted from improved pricing and favorable sales mix. The quarter included a $1 million charge to cost of goods sold related to a labor law change in Venezuela, requiring increased severance obligations. The quarter also included a $1.4 million charge related to the initial accounting for recent acquisitions.

SG&A expense for the quarter was $127.7 million or 17.2% of sales compared with $115 million or 16.5% of sales in the prior year. The increase from SG&A expense was driven by higher bonus accruals, increased cost from acquisitions and higher spending related to employees compensation.

Foreign currency translations decreased reported SG&A expenses by $4 million in the quarter. Operating income for the quarter at $96 million was 12.9% of sales compared to $80 million or 11.4% of sales in the same year-ago quarter, an improvement of 150 basis points. The quarter included rationalization charges, totaling $1.3 million and $1.4 million of charges related to the change of Venezuelan labor laws.

As Chris mentioned, rationalization charges include actions taken in Asia to restructure Australian (inaudible) operations, in Europe to combine two Russian manufacturing plants, and in North America to consolidate two plants operations. We expect these actions to result in $4 million to $5 million of annualized cost savings in 2013. Excluding these special items, operating income was $98.7 million or 13.3% of sales.

Net income for the second quarter was $66.3 million or $0.79 per diluted share compared with a net income of $57 million or $0.68 per diluted share in the 2011 second quarter, a 16% increase in diluted earnings per share. Excluding special items, net income was $68 million or $0.81 per diluted share in the second quarter, a 19% year-over-year increase. In addition, the translation effect of weaker foreign currencies had a negative impact on net income of $1.3 million or about $0.02 per diluted share in the quarter.

The effective tax rate for the second quarter was 32.4% compared with 30% in 2011. The effective tax rate is higher than the prior year’s rate primarily because of the mix of income earned and higher tax rate jurisdictions. This higher tax rate reduced our diluted EPS by approximately $0.03 per share from the prior year’s rate.

Now, moving to the segments. On a year-over-year basis, sales in North America were up 29.4%. Volume contributed 13.3%, prices increased sales 3.4%, acquisitions added 13.8% and foreign exchange decreased sales by about 1.1%. During May of 2012, the company acquired Wayne Trail Technologies, the manufacturer of automation and tooling systems. Wayne Trail contributed $10 million of sales or about 3% of the North America segment sales during the quarter.

Our legacy automation business grew by over 30% in the quarter, as more and more customers see the productivity and quality benefits of automated welding solutions. North America improved its EBIT margin in 2012 to 16.8% of sales, a 60 basis points improvement over the prior year. Strong volume leverage and good cost control drove the margin expansion.

The effective recent acquisitions, including initial accounting charges, reduced North American EBIT margins by 100 basis points in the quarter.

Now, Europe, sales in Europe were down 17.8%, volume decreased sales by about 9%, price increases over the prior year contributed 1.7% of sales, and foreign exchange decreased sales by 10.4%. Volume declines were more pronounced in southern Europe and Asia, with volumes in Northern Europe relatively stable. The foreign exchange impact was caused by the significant weakening of the euro against the dollar. Excluding special items, Europe achieved an EBIT margin of 9.2% of sales, an improvement of 160 basis points. The higher margins were the result of the improved mix and better pricing.

On a year-over-year basis, Asia-Pacific sales were down 16.8%, volumes contributed 17.1% to the decrease, prices increased sales by 1.2%, and foreign exchange decreased sales by 90 basis points. The volume declines were primarily related to weakness in construction and related markets in China.

Asia-Pacific’s EBIT margin was 4.4% in the quarter compared with 1.2% in the prior year. The improvement in EBIT margins was the result of strong performance in Australia and the improved mix. Sales in South America were down 1.6%, volume reduced sales by 5.1%, price increases contributed 12% of sales and foreign exchange decreased sales by 8.4%. The volume decreases were the result of softening demand in most markets outside of Venezuela. Price increases in South America are above the group average because of the higher inflation rates primarily in Venezuela. Excluding special items, South America’s EBIT margin declined by 130 basis points to 8% of sales compared with 9.3% in the second quarter of 2011. Weakening volumes and increased costs drove the margin deterioration.

In the Harris Products Group, sales were down 7.3%, volume increased sales by 4%, price decreases reduced sales by 7.8% and foreign exchange decreased sales by 3.4%. Price decreases were largely related to the decrease in metals cost, primarily silver and copper from the prior year’s same period. Harris Products improved its EBIT margin by 50 basis points to 9.7%. Strong volume increases in the equipment product line and good SG&A cost control led to the margin expansion.

Operating activities generated $81.7 million of cash flows in the second quarter, compared with $28.8 million in the same period last year. Cash flows for the quarter reflected improved working capital management and higher earnings. Our year-to-date operating cash flows totaled $161 million. The company closed the quarter with a cash balance of $308 million and net cash balance of $285 million and net cash to invest its capital ratio of a positive 21.8%.

The company invested $26 million in capital expenditures in the half year. We estimate 2012 capital spend of between $60 million and $70 million at this point in time. Through June 30th, we have contributed $36 million to our U.S. pension plans, and we expect to contribute a total of $60 million for the fiscal 2012 year.

In March, we announced the plan to allow participants in the U.S. pension plan to select a one-time lump sum payment of their planned benefits. The election period for the deferred vested participants will end in the third quarter and payments will be made in the fourth quarter of 2012. The maximum possible payments could total up to $100 million if all participants choose the lump sum option.

In addition, a special item settlement loss of up to $38 million will be recognized in the fourth quarter, if all participants choose the lump sum option. This special item charge will be non-cash, reflecting the required accounting for deferred actuarial lawsuit. The new lump sum payment option will reduce the company’s future pension obligation and lower investment risk and expense volatility.

During the quarter, we paid cash dividends of $14 million and $28 million for the half year. Our weighted average shares outstanding for the quarter ending June 30th were 83,527,000 shares. And finally, we purchased $20 million of treasury stock under our share repurchase program in the quarter and $40 million for the half year.

That’s the end of our prepared comments. Jessie, I would like to open up the call for questions

Question-And-Answer Session

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Our first question comes from the line of Thomas Hayes of Thompson Research Group. Please proceed with your question.

Thomas Hayes – Thompson Research Group

Thank you. Good morning, John. Chris, congratulations on your new position.

John Stropki

Thank you.

Thomas Hayes – Thompson Research Group

Just kind of wanted to try to, first on Europe position going into the third quarter, is it a slower quarter, because of vacations? I was just wondering how you guys are thinking about Europe now with the mix of general slowing and the seasonal slowing?

John Stropki

You are exactly right, Tom. I mean, the third quarter in Europe is always the slowest quarter because of the August shutdowns in the western, particularly the southern-western countries in Europe. I would expect that the slowing that we have seen seems to have stabilized, but I think that there is still a tremendous amount of uncertainty relative to the economic and the fiscal stature of the EU and what changes that might present. So, the forecasting of a short-cycle business like we are in under these volatile, political and economic times becomes quite challenging and problematic. I believe that we think we are doing the right things. We are focused on the right segments within Europe, and in those areas that we believe have the long-term future for the company we are strengthening and growing our position.

Thomas Hayes – Thompson Research Group

Okay. You guys have done a really good job this year of maintaining pricing and actually growing pricing. Just wondering what your thoughts about being able to maintain that momentum. Like you said, John, as going into a period of a little bit of more pronounced slowing?

John Stropki

We have said that for many, many years that our focus is on the value-added side of our business and our target is the customer that really appreciates the value that Lincoln brings to the equation, and Vince commented and Chris commented that we made significant progress of improving the margins in the quarter and that was a direct result of shedding low-margin business that we don’t put into that category. That will be our focus on a go-forward basis. And if you go back to the comments that I made about the individual market segments where we see very positive, not only current but long-term type of views, those are all value-added segments and that’s where we are going to continue to put our energy and muscle behind.

Vince Petrella

And Tom, I would just add to that, that certainly with our growth rates moderating and some volume declines in international markets, coupled with the softening that we are all seeing in commodity prices, the rate of price increases will be certainly more difficult moving forward in the short term.

Thomas Hayes – Thompson Research Group

Okay. Just one last one, Vince. You had mentioned that you expected benefits in the restructuring of $4 million to $5 million, and we saw $1.3 million in costs associated with that, I was just wondering what your thoughts were in terms of the cost side of that for the next few quarters.

Vince Petrella

Yes, we will have another, somewhere between $3 million to $6 million of additional costs before we fully rationalize those three locations.

Thomas Hayes – Thompson Research Group

Okay, thanks guys.

Operator

Thank you. Our next question comes from the line of Walt Liptak - Barrington Research. Please proceed with your question.

Walter Liptak - Barrington Research

Hi, thanks. Good morning, guys.

John Stropki

Hi, good morning, Walt.

Walter Liptak - Barrington Research

Let me ask about Europe, too, and on your comments, I guess on the last question, you said that Europe you thought was now stabilizing. But I wonder if you could talk a little bit more detail about what happened during the quarter, kind of on a month-to-month. You noted Russia or Spain get substantially worse. What kind of colors can you give us on the trend that's been occurring there?

John Stropki

I would just comment that from the first quarter to the second quarter, we saw a significant deterioration in Spain, Portugal in particular. And as Vince mentioned, those are markets where we have a very significant market share. So, obviously we are more directly impacted by that than we would be in markets where we are not as strong.

The Russian circumstances, one of us having to move fairly significant plant and relocated into an existing facility that requires significant change in the layout of that facility. And the Severstal business, and I think we commented on this when we bought it at a very important market share, but that it was not hugely profitable. And it has been our focus to shed the unprofitable side of that business as we make the move, and when we complete the move, we will reconfigure our marketing strategy to be sure that we get high utilization and maximize profitability of the newly-configured Russian consumable business. And we are quite optimistic, not only on our capabilities to do that, but also in the important growth that we forecast for that market long term.

Walter Liptak - Barrington Research

Okay. Thanks for that. That's an important thing to point out, because the euro profits look good, even though the revenue was a lot lower than I was expecting. Can you quantify how much of a headwind that Russian relo was during the quarter, in terms of like millions of dollars of revenue?

John Stropki

I would just say that Spain and Russia represented the predominant part of the decline on a sequential basis and year-over-year in our European segment.

Vince Petrella

Walter, if we look at our core European business and we break that down to the one, the markets, and two, the kind of equipment and consumables that we consider to be normal regular flow of products, year-over-year, for the full year and in for the quarter, those businesses are relatively flat. We got a few markets that are up a little, we got a few that are down, we have a few product categories that are up a little, and a few that are down. And again, if you take Spain and Russia out of that, that would have been the scenario that we see.

It's hard to predict that Spain could get any worse than what it is, unless there is total collapse of the euro, and again, while we will have another six months or so in re-organizing this Russian business, I think the prospects for growth in steel and in welding consumables in Russia is very positive because of the high demand in the energy sectors there.

Walter Liptak - Barrington Research

Okay, got it. So, you should see some kind of a sequential improvement out of Russia?

Vince Petrella

Yes, but I would emphasize just on the Europe sequentials, that the third quarter is almost always weaker in terms of volumes and sales levels than the second quarter, Walt. And it would take – because of the shutdowns in August that almost the whole month of sales are lost in the third quarter on our European segment. So, I wouldn't expect the third quarter of 2012 to be any better than the second quarter, and it’s likely to be a lower quarter because of that seasonality.

Walter Liptak - Barrington Research

Okay. And just looking at sequentials in Europe, the Spain and Russia might have crossed to $12 million in revenue during the quarter, is that the number that you are thinking of?

John Stropki

It was more than that.

Walter Liptak - Barrington Research

Okay. Good. Okay, and that answers the question of, you know, your competitors had better revenue numbers, organic growth numbers in the 7% to 9% range coming out of Europe during the quarter, and that it sounds like you would attribute the difference to this Russia situation, as well as Spain, Portugal?

John Stropki

Yes, I would say that we have a different situation in Russia, Walt, and that our exposure in the rest of the continent may be a little bit different than others in the industry. Spain is one of our biggest markets in the continent.

Walter Liptak - Barrington Research

Okay, thanks. I will get back in queue.

Operator

Thank you. Our next question comes from the line of Mark Douglass of Longbow Research. Please proceed with your question.

Mark Douglass – Longbow Research

Hi, good morning gentlemen, and congratulations Chris.

Christopher Mapes

Thank you.

Mark Douglass – Longbow Research

So, moving on from Europe to Asia, I assume that was incrementally worse than maybe what you are anticipating, can you talk a little bit more about just some of the markets that you saw some pretty declines in Asia-Pacific, and do you think that markets has stabilized as well as or, you know, there is more to go?

John Stropki

We certainly saw a softness in the Asian market across the host of the segments. We certainly feel that we will continue to see some seasonal and cyclical weakness in the ship-building area. We have seen a little softness compared to where we had expected in the automotive segment, but really, I think that the broader execution that we are working on in Asia and specifically China, is ensuring that we are positing the portfolio for the growth that we see in that market moving forward.

And certainly, although the general market was down as we expressed in our comment, certainly some of that top line compression was driven from some activities that we had in the marketplace to make some improvements in the portfolio, and we have executed on many of those in Q2, certainly believe that we are positioned for the growth that we think we see in that market moving forward.

Mark Douglass – Longbow Research

Would that be a lot of – I know in the past, you talked about – ship-building was really significant, it’s floating, you are trying to shift a lot of your, I don’t say production, but moved more towards end markets outside of ship-building, and is that I get what you are referring to on the product portfolio and market exposure?

Christopher Mapes

Yes, continuing to really expand into some of the other segments, as John mentioned earlier, that have a need and a desire for higher value-added applications for our products, then we are certainly, we believe achieving that in Asia. I also would say that the consolidation of our shared services structure in China, which we have completed in the last several months, we believe strongly, will be an enormous catalyst for us to be able to effectuate business there in that region and globally and more effectively, and the management team there has done a very nice job of completing that for the company over the last few months.

John Stropki

Yes, Mark, to Chris' point, I mean, the work that we have done with the regional headquarters and our ability to import globally produced products to fulfill a much broader segment of the Asian in total, but the Chinese market in particular is really starting to show some good progress.

Our exports in China were actually up despite the slowing economic conditions there, and we think that's a direct result of broadening our distribution to open up our global portfolio to a large group of Chinese specific distributors, who serve an important market segment there that we never really participated in.

Mark Douglass – Longbow Research

Okay. Would you offset the product lines you are moving towards, are more profitable than the ship-building as well, is there a mix benefit?

John Stropki

I think, there is a mix benefit from two perspectives. One, there really is no ship-building activity, it comes to almost a complete standstill. I mean, there are some shipyards that are fulfilling past contracts, but if you look at the new contract portfolio for shipyards, it's non-existent.

So, that was always a very challenging portfolio, and we made a very conscious effort to move away from that, which we think is good because of your comments that the products that we are going to produce in those facilities will be different products, that will be higher value added than the more generic products that are used in the shipyard segment. And we also believe that the segments that we will be approaching and focusing on will be much more organically growth-oriented than the ship-building industry that will be slow for the foreseeable future.

Mark Douglass – Longbow Research

Okay. And Vince, couple of questions, was there any LIFO gain or expense in the quarter than what the consumable equipment mix?

Vince Petrella

Yes, there was a LIFO credit in the quarter of about $1.4 million, and the mix on machines or equipment versus consumables now is about 65% consumables, 35% equipment, so a slight shift towards equipment.

Mark Douglass – Longbow Research

So, consumables were down a little more in the quarter versus equipment, it seems fair?

Vince Petrella

Both were relatively flat, and actually equipment was up double digits without acquisitions.

Mark Douglass – Longbow Research

Okay, thanks.

Operator

Thank you. Our next question comes from Liam Burke of Janney Capital Markets. Please proceed with your question.

Liam Burke - Janney Capital Markets

Thank you. Good morning. John, with the overall uncertainty of the markets, are you seeing acquisition pricing becoming more favorable since it is a big part of your strategy?

John Stropki

I would say that we are seeing the pipeline, maybe a merge with some people who had been sitting on the sidelines. But it’s my experience and we are early in the stages of that that people’s expectations for valuations change very slowly. So that will be an ongoing dialog that we will have to have and will be very much product specific in terms of how we see the long term value and market specific in terms of how we view those markets over the more medium term that will determine valuations, but we remain optimistic and I think that our track record, particularly in North America in the last year with the five acquisitions that we made and all of which are performing very well and ahead of expectations that we are optimistic that that pipeline is going to continue to stay full.

Liam Burke - Janney Capital Markets

Okay, thank you. You mentioned part of the second half of the year you would expect more product introductions and acquisitions to offset the weakness in Europe or help partially offset it rather. Is Europe a major focus in the product introductions, or are you looking across the board worldwide across all markets?

John Stropki

I would say we look across all markets. The products that are used in different geographies or sometimes different but when we look at all the important segments that we refocus on Energy, Construction equipment, transportation, there is a commonality that goes across most of those segments. In generally, there are global customers that we are focused on. So, an introduction of a product to specifically serve the oil and gas industry would have reach across all of the geographical type of segments because of that commonality. There are some uniqueness in the product developments in Europe, in Asia and North America that are very much market specific and as we see markets starts to soften, our focus would move from supporting existing product lines, by introducing new product lines to give us that opportunity to capture a larger share or may be a shrinking market.

Liam Burke - Janney Capital Markets

Thank you, John.

Operator

Thank you. Our next question comes from Holden Lewis of BB&T Capital Markets. Please proceed with your question.

Holden Lewis - BB&T Capital Markets

Thank you, good morning. Congratulations to both Chris and John. It sounds like should be pretty seamless, that’s fantastic.

John Stropki

Thank you, Holden.

Holden Lewis - BB&T Capital Markets

I wanted to ask, since we are repeating up the revenue stuff in Europe and Asia pretty well, I would say we can move now on the profit side, you in past downturns you actually sort of printed losses from an operating margin perspective. In Europe, I guess briefly third quarter in 2009, and then Asia of course since you had pretty significant operating losses. Can you just talk about what you have done to sort of improve the profit generating elements of the company? What I am trying to get down to is that volume come down and pricing softens, is it likely that’s going to generate losses, or the progress that you have seen in your margins in recent quarters, suggest that maybe your floor is somewhat higher? Just trying to get a feel for that.

John Stropki

Yes, Holden, thanks for that question. We do believe that we have improved our businesses, particularly in the international arena significantly in all aspects of execution. We have lowered our cost base, we have been impairing costs in both Europe and Asia aggressively. We have aggressively moved to manage our pricing much better with our existing customer base. I believe that the numbers speak for themselves in terms of the quality of earnings that we have delivered in this quarter, in the phase of 17% decline in volumes in Asia-Pacific. We have expanded our margins significantly. Same is true in Europe where we lost about 9% in pure volumes and we still expanded our margins there. So, it’s quite gratifying to all of our teams around that world that we have improved the quality of our business in both Europe and Asia-Pacific. And with that we firmly believe that if we were to have similar downturn to what we experienced in ’08 and ’09 which we don’t at this point foresee that we will have higher trough earnings capability across all of our operations. And again, as a reminder, our trough EBIT operating profit margins in 2009 were 7% on a consolidated basis and we are quite confident that with softening in world markets and the potential eventual natural cyclical decline that we will achieve a much higher trough EBIT earnings ratio.

Holden Lewis - BB&T Capital Markets

Okay. One of the things that happened this quarter was that your revenues started coming down in those two regions pretty aggressively, but the pricing seems held up pretty well, when you talk about sequential pricing, whether that begins to soften or whether we are just seeing the affected comps, but achieving the type of margin do you think you can in a weaker environment, does that rest heavily on the ability to maintain price in a weak environment or is that not the primary sort of determinant in how your margins were all clean?

Vincent Petrella

Yes, I would put that at the top of the list, Holden. It’s also how aggressively we are able to take cost out. Certainly, there is a fair amount of fixed cost in any manufacturing model and that’s difficult to pair [ph] down. But, what happens on the pricing line is that certainly the most powerful, determinant of what our margins will be in the down turn. But I would continue to emphasize that important factors driving that pricing capability are one, what volumes are in the industry in general, what level of capacity utilization we are experiencing, then finally, those two factors drive the third, which is what’s happening with raw material prices, and certainly as you follow those prices, you can see around the world the import inputs of steel and other commodities are falling and they are led by China and to a lesser extent Europe and not quite flowing through in earnest in North America. But as raw material prices fall in the future, that will certainly put pressure on pricing and the ability to hang on to that pricing is certainly a key determinant of what our margins will be in a softer environment.

Holden Lewis - BB&T Capital Markets

Okay. And just the last thing on that is, you referred sort of the mix, you just tell us exactly what about the mix is more favorable versus how it has normally been in boosting the margins?

Vincent Petrella

Well, our equipment business grew by over 10% and our consumables business was relatively stable and most of the business that we share was in consumable that was marginally profitable. So that mix certainly helps our margin profile.

John Stropki

And I would add to that, Holden, again, we talked about the particular market segments that we are strong, again oil and gas and energy, those are generally very product specific high margin kind of products and we expect that trend of the greater participation and that mix as well as the big demand that we are seeing now in the automation side that we talked about which is also a very good margin, just a continue as people look to shed product cost, offset shortages of skilled workers and improve quality by using automation as a tool. And Chris mentioned specifically the Wayne Trails acquisition, that is a very good margin business and it now has a pretty significant backlog in its portfolio where we see demand only increasing as we worked to integrate that business into Lincoln and then we will offer up a broad Lincoln product portfolio into their portfolio.

Holden Lewis - BB&T Capital Markets

Okay. Great, thanks guys.

John Stropki

Thank you, Holden.

Operator

Thank you. Our next question comes from the line of Steve Barger of KeyBanc Capital Markets. Please proceed with your question.

Steve Barger - KeyBanc Capital Markets

Good morning, gentlemen.

John Stropki

Hi, Steve.

Steve Barger - KeyBanc Capital Markets

Just to follow-up on that last conversation, Vince. As you look at 3Q and we are a month into it and you are looking at volumes, utilization, raw materials. Is it fair to say that you expect pricing will remain positive in the back half outside the US or I guess even inside the US, or is there some risk to that?

Vincent Petrella

Well, our overall consolidated price increase on a year-over-year basis was 1.6% and North America led the way in the core welding business with a 3.4% increase. That was largely in line with what our expectations were. I would say with what we are seeing in raw material costs right now and what we are forecasting into the rest of the year that these increases will abate in the last half of the year.

Steve Barger - KeyBanc Capital Markets

Abate towards, I guess towards zero or are you still thinking it remains positive or are things moving quickly in the marketplace right now?

Vincent Petrella

Well, certainly, raw material prices are in places like China are declining fairly rapidly. So, it will be difficult to equate positive pricing in the last half of the year.

Steve Barger - KeyBanc Capital Markets

Got it. And from a competitive standpoint, are the bigger more sophisticated players remaining rationale at this point?

Vincent Petrella

I don’t know that I can comment on our competitors’ rationality, but there is nothing notable that I can share with you in terms of irrational behavior at this point in time.

Steve Barger - KeyBanc Capital Markets

That’s fair enough.

John Stropki

I would also, Steve, just make a follow-up comment to that. Certain markets the global international players have a very significant share of the market and you have a certain dynamic that’s driven by that. There are other markets, Asia in particular, where there is no global international player and there are a lot of local players and that market dynamic is obviously significantly different that you would see in a mature consolidated market like North America.

Steve Barger - KeyBanc Capital Markets

Understood. To that point are you seeing things change more rapidly in Asia right now, or are some of the competitors getting more aggressive given some of the volume declines?

John Stropki

Well, the market has always been very very competitive. The customers always are very short term cycle buyers, they follow steel pricing and they move, they feel steel moving up and down the curve. I wouldn’t say that we are seeing any significant shift in terms of how that market evolves and I guess. As we talked earlier, we think we know where we want to play and how we are going to play and I think we will be pretty consistent with that.

Vincent Petrella

But I would emphasize again, Steve, Asia-Pacific really focused on China is the most stressed geographical area because of the highest volume declines in the industry, as well as the biggest raw material price declines. So those coupled together make that the most challenging markets that we face today.

Steve Barger - KeyBanc Capital Markets

Okay. And earlier you were talking about 3Q being lower than 2Q from a top line perspective, in Europe you do shutdowns, but just as you look at your order book, I know it’s short cycle, but should we be thinking about that general pattern for a consolidated sales, given how end markets are reacting, would you expect revenue to be down sequentially?

Vincent Petrella

Well, that’s a fairly a comment as well. The third quarter tends to be a lower volume in revenue quarter than the second and in Europe is simply the most pronounced of any region in terms of a quarter-to-quarter decline.

Steve Barger - KeyBanc Capital Markets

Okay. In North America, specifically, you are kind of facing a tough revenue comps. Should we be thinking that North America sales can still see double-digit organic growth based on what you are see right now is that moderating towards more single?

John Stropki

I won’t be able to make that kind of forecast at this point in time, but certainly our growth rates are moderating and double-digit would be a very fine result for us in the third quarter.

Steve Barger - KeyBanc Capital Markets

Got it, thank you.

Operator

Thank you. Our next question comes from the line of Greg Halter of Great Lakes Review. Please proceed with your question.

Gregory Halter - Great Lakes Review

Good morning, guys.

John Stropki

Hi, Greg.

Gregory Halter - Great Lakes Review

Relative to the pension situation, any indication on how many takers you have for that program so far?

John Stropki

It’s still early, Greg and the deadline for responding is the end of August and so, there is a fairly low percentage of the total available participants that can select this option that have responded to date. So, many of the responses are likely to common in august and even perhaps the later part of August. So, there is again a small percentage of elections that are in right now. It’s not in our view inductive or what might even happens. So, at the end of the third quarter we will have that count and we will be able to give you a final result in the third quarter call.

Gregory Halter - Great Lakes Review

Okay. What was pension expense on the P&L in the quarter?

Vincent Petrella

Well, the expense was about $11.8 million in the quarter as compared to about $8.8 million in the prior year. So we had $3 million increase in pension expense in the quarter on a year-over-year basis. As I have talked in previous calls, that’s split between COGS and SG&A, but the SG&A cost increase for pensions was $1.3 million.

Gregory Halter - Great Lakes Review

Okay. And you would expect that figure assuming that you have 100% or anywhere near that $11.8 million number coming down, assuming you gave a large portion that would take the offer?

Vincent Petrella

Well, it won’t necessarily come down, but it would be less volatile in the future.

Gregory Halter - Great Lakes Review

Okay. Do you have an estimate on how much of the consumable business that you refer to was shed in the quarter and if there is more of that to go?

Vincent Petrella

We don’t have an estimate of the amount of consumables that were shed in the quarter, but we think that we are not completely through that process and we will continue to see that shedding during the remainder of this year. We are still in the process of consolidating those two Russian plants, so we expect there to be a continual pairing there. We are not through yet in Asia-Pacific and China, in particular, and trying to reposition ourselves towards more profitable segments of that market, shedding less profitable parts of the business. So I think we see that continue through the last half of the year and probably taper off in the first half of next year.

Gregory Halter - Great Lakes Review

Okay, thank you.

Vincent Petrella

You are welcome.

Operator

Thank you. (Operator Instructions) We do have a follow-up question from the line of Walt Liptak of Barrington Research. Please proceed with your question.

Walter Liptak - Barrington Research

Hi, thanks. Sorry, everyone, I realized already (inaudible). I want to ask about the share repurchase, Vince. It looks like you are doing about $20 million per quarter last two quarters. With your stock down today, can you just refresh us and how much is left and I guess what your aspirations are with the repurchase?

Vincent Petrella

Well, we are certainly the buyers when the window opens at the end of this quarter. We have a fair amount of shares available, over 3 million, so there is no shortage of shares available on existing board authorization and even that is in my view isn’t limiting, if we do run out, we will ask our board to reauthorize additional shares in due course. We will continue to be the buyer in the last half of this year. As you can see we have ratcheted up our buying in 2012 and I would expect that to continue into the future.

Walter Liptak - Barrington Research

Okay, but the program right now is not $20 million per quarter, it could be whatever you think is appropriate?

Vincent Petrella

Yes, that’s what we think is appropriate. That was our number for the first and the second quarter, and that’s not a bad assumption for the last half of the year. But we remain open to increasing that amount if we see fit.

Walter Liptak - Barrington Research

Okay. I just wanted to get a couple ones on the acquisition. In the press release you had $50 million in revenue, is that LTM or is it more with that contract that you talked about on this call?

John Stropki

No, that’s total acquisitions. Chris mentioned that we had done five deals in North America in the last, just shy of a couple of years. So, it not only includes Wayne Trail but it also includes our acquisitions that were made in last year’s second and third quarter.

Walter Liptak - Barrington Research

Okay. In the press release from May 17, you got $50 million for Wayne Trail’s revenue?

John Stropki

Right. That was the latest 12-month Wayne Trails revenue.

Walter Liptak - Barrington Research

Okay, did that include the $20 million contract in it?

John Stropki

No, that hasn’t started yet.

Walter Liptak - Barrington Research

Okay. So over the next 12 months it is going to be something in excess of 50 million?

Vincent Petrella

Yes, Wayne Trails sales will be higher than 50 million in the next 12 months.

Walter Liptak - Barrington Research

Okay. And the purchased price from your cash flow looks like 27 million?

John Stropki

That’s not the complete purchase price, Walt, because there are some holdbacks. The total purchase price was a little over $31 million.

Walter Liptak - Barrington Research

Okay. And you mentioned, John, I think mentioned that the profitability is being very good. Is it above Lincoln margins, operating margins?

John Stropki

It is above Lincoln’s operating margins. Remember we did have some initial accounting charges of $1.4 million that came through the quarter. So, once that all gets cleaned up, we think it will have a very good margin profile.

Walter Liptak - Barrington Research

Okay. And this is going to get reported in North American segment?

John Stropki

Yes, it will be in North America.

Walter Liptak - Barrington Research

Okay. Are the margins above North American margins?

John Stropki

No, I am not going to give you any more detail on that, Walt.

Walter Liptak - Barrington Research

Okay. Alright, fine. Thank you.

Operator

Thank you. Our next question comes from Stanley Elliott of Stifel Nicolaus. Please proceed with your question.

Stanley Elliott - Stifel Nicolaus

Good morning. Thanks for taking my question. Real quick on the acquisition side, certainly been very active this year. Is there a trade off with some of the restructuring things that you are going to be doing now as opposed to continue with the momentum on the acquisition side in the back half of the year -- how do you think about that?

John Stropki

I don’t know that I see a trade off, Stanley. We are going to continue to execute our strategy and improve our business and one of those strategies is buying companies that fit our product or geographical mix requirements and the second one is continually improving our cost position and the operations of our existing businesses. We don’t see those as at all related. We will do both and we will do them both concurrently and we think we can do both of those well concurrently.

Stanley Elliott - Stifel Nicolaus

Last question from me. On the inventory on a year-over-year decline, was that more finished goods, raw materials, a little more color on that please?

John Stropki

Well, it was across the board. Some of that was translations as particularly the euro weakened significantly it translates into lower inventory dollars, but it was largely across the board in terms of the effect on categories of inventory.

Stanley Elliott - Stifel Nicolaus

Great, thank you very much.

Operator

Thank you. Our final question today is a follow-up question from the line of Holden Lewis of BB&T Capital Markets. Please proceed with your question.

Holden Lewis - BB&T Capital Markets

Thank you. I just wanted to touch base on sort of expectations for production and any risks you might have from under absorption, obviously, things that sort of cascaded lower pretty quickly here. Do you feel like your import levels are flat, but do you feel you need to adjust your production going forward to sort of the new global realities, or how are you viewing sort of your inventory and production levels?

John Stropki

That’s a good question, Holden. We are adjusting our production levels to meet current demand. And certainly lower product levels will have ultimately an impact on the absorption of those fixed overheads, so that will certainly result in a headwind to our business going forward, but we will aggressively manage our cost down to meet current productive needs.

Holden Lewis - BB&T Capital Markets

At current levels of demand how long do you think you need to under produce demand to get inventories where you sort of envision them being, is it a one quarter sort of hit or let me say, a couple of quarters all other things being equal?

Vincent Petrella

We are managing our inventory levels right now and to current demand and I wouldn’t say there is a period of adjustment that’s required, Holden, over the next quarter or two, it’s happening currently. We have reduced, based on the previous question, we have taken down our finished goods inventories in line with what our expectations are and raw, equips have come down to some extent as well. So, I wouldn’t say there is a significant adjustment period to come but we are continuing to adjust our production levels in all of our plants around the world, particularly in the slower regions to meet existing demands. So I wouldn’t say there is any period of adjustment from this point on.

John Stropki

I would add, Holden, we still have certain markets, North America being a good example, where our year over demand, the numbers are still positive and depending on what happens in the rest of the world and how that might impact the North American export business, we still view the second half of the year to be reasonably positive for North America.

Holden Lewis - BB&T Capital Markets

Okay.

John Stropki

You are welcome, Holden.

Vincent Petrella

Jessie, is that it?

Operator

There are no further questions at this time, Mr. Petrella.

Vincent Petrella

Thank you very much and thanks for joining our call today. We very much look forward to talking to you at the end of October and reviewing our third quarter operating results. Thank you, very much.

Operator

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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