Greetings and welcome to the Quaker Chemical Fourth Quarter and Full-Year 2015 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Michael Barry, Chairman, Chief Executive Officer and President for Quaker Chemical Corporation. Thank you, you may now begin.

Thank you, [Diana]. Good morning, everyone. Joining me today are Mary Dean Hall, our Chief Financial Officer; 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 fourth quarter. I’m pleased that we have delivered another quarter of solid earnings and strong cash flow, despite a variety of market challenges. We have accomplished this notwithstanding some significant changes in our external environment over the past year, including a much stronger dollar against many of the world’s currencies, lower oil prices and the impact that both of these had on regional steel production. Let me now talk about each of these in greater details to give you a better perspective in which to evaluate our fourth quarter results. Foreign exchange rates negatively impacted sales by 7% and earnings by 5%. Lower oil prices also impacted our results in a couple ways. On the plus side, we saw some expansion on our gross margins as there can be a lag effect between the changes in our product pricing and our raw material costs. On the other hand, our topline was negatively impacted by 3% since we did see some declines in our product pricing. We also saw some shifts in regional production especially in our global steel markets, which make up approximately half of our business. The stronger dollar enticed more steel imports into the United States negatively impacting North America steel production. In fact, steel production was off by 14% in North America versus last year. Globally, the story was not much better.…

Thanks Mike, and good morning all. Quaker delivered a strong fourth quarter and a solid full-year despite the significant headwinds from FX and lower global steel production as Mike mentioned. We continue to benefit from market share gains, margin expansion and acquisitions and in 2015 our lower effective tax rates. As I lead us into the financial summary, please note the Quaker provides certain information including non-GAAP earnings per diluted share and adjusted EBITDA and an effort to provide shareholders with visibility and to Quaker’s operations excluding certain items, which we believe do not reflect our core operations. Reconciliations are provided in Chart 10 and 11 on these investor slides and they’re also in yesterday’s earnings release and our Form 10-K filed yesterday. We also caution you not to place undue reliance on forward-looking statements. My following comments are based on Charts 4 and 5 in your slide deck taken together. Quaker reported strong non-GAAP earnings per share of $1.16 for the quarter and $4.43 for the year an increase of 16% quarter-over-quarter and 4% year-over-year driven by strong operating performance and lower effective tax rates, which benefited Quaker an estimated $0.07 per share. Our results beat analyst consensus of $1.6 for the quarter and $4.34 for the full-year even adjusting for the low tax effect. Our Q4 reported GAAP earnings of $0.86 per share included a restructuring charge of $6.8 million or $0.36 per share for a global restructuring program initiated in Q4. This program will better align our cost structure with current market challenges. We expect the benefits of this restructuring to be about $3 million in 2016 and about $6 million per year going forward. Foreign exchange impacts were more negative than we expect that they would be this time last year hitting earnings per share for…

Thanks Mary. At this stage, we’d like to address any questions from any of the participants on the conference call. Diana?

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Laurence Alexander of Jefferies. Please proceed with your question.

Good morning. This is Dan Rizzo on for Laurence.

Hi Dan.

How are you guys doing? So you are expecting a little bit of steel rebound in 2016 and I’m just curious, automotive I think you said this is going to be up, are you seeing any signs that I mean things were kind of peaking just flatten out from here or do you expect continued growth be strong growth?

With automotive?

Yes, with your metals/automotive end market.

Okay. I would say we expect based on the external figures that we’re seeing, like kind of a 3% to 4% kind of global growth rate over the next several years.

Is that more I mean is there a regional disparity there with like I don’t know Chinese automotive being stronger or I mean Asia versus U.S. or I mean I think you guys have North American centric I was just wondering there is any breakdown?

Well, I don’t know for North America centric, I won’t say that, we saw to the automotive producers globally and we expect what China is probably not going to grow as fast as it did in the past. It still going to have decent growth and the U.S. has been growing and hopefully that will continue. Europe is been growing – coming out of their recession, it has automotive growth and of course South America is going in the opposite direction. So that continues to be declining I guess and so you kind of have this mixture around the world, but I think when you put it all together. You expect to see some type of 3% to 4% in automotive and like you said, flat to maybe some modest growth hopefully in steel.

And then I mean the Chinese – the change in Chinese tax flow, that’s not providing a boost to automotive in that region for you guys?

Well, the China auto sales picked up in the second half of the year. In the middle of the year, the Chinese auto industry was actually having kind of negative growth and then as we processed into the second half of the latter part of the year we actually saw some back to good year-over-year growth that [you are seeing] and we expect that based on what we see and new lines were getting and so forth, so we expect to grow in that market.

All right. Thank you very much.

Thanks Dan.

Thank you. Our next question is coming from Liam Burke of Wunderlich Securities. Please proceed with your question.

Thank you. Good morning Mike, good morning Mary.

Good morning Liam.

Good morning.

Mike, your acquisitions support really well in terms of adding geography and you pointed out technology, but use your baseball analogy, where are you in terms of innings, in terms of actually getting these products sold for your traditional channels and expanding what mostly regional businesses on to the global platform?

I would say right now we’re in the third innings, we are processing, we are making inroads in the various acquisitions that we have done, some have gone relatively quicker than others. The good news I think as we have people on place globally to sell these global technologies everywhere around the world now. We are been getting some new pieces of business and the way this works is once you get a new technology and you have to sell it somewhere else in the world and you have somebody else to make that business case to the customer with our sales force, you first get a trial and hopefully that will lead to get in that business and then once you get that piece of business you get a reference account. And so we've been progressing well and but there is still a lot of lead way to go here since we’re in the third inning and we think well if you look a lot of the kind of organic growth we’ve had in the past several years has been market share gain. And we still think we’ll get that market share gain as well going forward, but we think a bigger component of our growth will be more these new technologies as well.

And just staying on the acquisition theme how this pipeline and valuations look going into 2016?

Good. I mean we got a couple trials certainly going in China within aluminum, which we’re happy with, in our Grease business we are picking up – continue to pick up new pieces and we continue to evaluate other acquisitions as well for the future. We have a pipeline of things we are looking at. You never know if anything is going to hit or you know you go through processes and some are successful, some are not. We think we always want to make good acquisitions would be careful. So we’re happy with the opportunities that are in the marketplace right now.

Great. Thanks Mike.

Thank you.

Thank you. Our next question is coming from Garo Norian of Palisade Capital Management. Please proceed with your question.

Hi guys. First thing just a clarification I want to make sure that when you talk about the bottom line growth for 2016 that’s off from phase of the $4.43?

Yes, that’s correct.

Okay. And then you made a comment in your opening about maybe a little bit of a different year-end buying patterns in Asia, can you maybe explain that a little bit more?

Yes, sure Garo. Couple of things there. We normally have in China and if you go back historically with us we saw Tennessee a strong December and somewhat weaker January that kind of buying patterns that are – in this year it was reversed. We suspect that it maybe because some of the customers in China were do not have as much money and we are delaying purchases based on their budgets and maybe there is also some Chinese new year timing type of issue as well, but it was different this year.

Okay. And then broadly speaking with what’s going on in the marketplace particularly I guess the weakness in steel. Are you seeing any competitors kind of struggling in this environment or acting in anyway irrationally any change in that landscape?

I wouldn’t say there is any change of course we always have competitors that we face so over time we’ve been consistently taking share on the steel marketplace and that continues, but I would say no real changes given the dynamics in the marketplace.

Okay. And then just on the steel broad macro kind of view of a flat up I mean there's been I guess very poor in hindsight kind of forecasts over the past year?

I agree.

So do you actually plan the business for flat up, or is that kind of the hope and you're ready for kind of continued weakness?

Yes, we – lot of our energy kind of is going after new piece of business whether it’s market share gains and our existing customers or going after these new technologies, so kind of our mantra or thinking is no matter what happens good or bad, we are going to grow, we are going to get new business. And you are right. I mean it doesn’t really change our plans per se, because we’re just continually trying to service customers well and just going after new business, so it really doesn’t impacted that much obviously it does when you get the final results. But our approach to business doesn’t really change that dramatically.

Okay. And then kind of related to that just the R&D I guess mill that you guys had been putting up in China is that kind of where you wanted to be yet or still a little work to go?

Yes. It’s up and running and we are doing R&D work there and working with customers and helping us develop new technologies, helpful for our new evolution of technologies. So, yes we think you would be excited about it because nobody else to our knowledge in our competitive space has a pilot mill of that magnitude and our customers are happy that we have it because they see that as a proof of our support and engagement to help provide better products and services for them.

Great. And the last question just on the aluminum trial that you have going on in China, how long is that trial likely to take place and I guess the hope is that end successfully and brings in ultimately new business, but I just trying to get a sense of timing?

The trials have been running really for the past couple of months on average and in these particular ones I don't have the protocol exactly at one point a trial becomes the new piece of business, but what we have seen in most of the times in our business as once you get a trial, if you are successful they just continue on with you at some point. So that’s our goal is to continue to be successful in all these trials that we have ongoing whether it’s an aluminum or grease or any of the new technologies and just convert that. And then the real benefit is easy to not, obviously the benefit to get these new pieces of business, but then they become the reference accounts that you can use to get other new pieces of business.

Great. Thanks very much.

Thank you Garo.

[Operator Instructions] Our next question is coming from Curt Siegmeyer of KeyBanc Capital Markets. Please proceed with your question.

Hey good morning. Nice quarter.

Thank you. Good morning Curt.

Just a follow-up on expectation on the steel market for flat up, if we assume I guess maybe a more bearish scenario of another year of global production down similar levels as this year 4% or so. Would you guys still expect to grow earnings in that scenario given what you had already commented on with gross margins likely contracting to some degree as well. Are there enough offsets from a market share gain and potential acquisitions in the pipeline that you would still project positive earnings growth in that scenario?

Well, certainly if we add up more acquisition I think we should overcome that. It’s hard to deals some of these hypotheticals. I think if we had another down year would it negatively impact us in steel? Sure, it would be less and it would be less growth, be hard to say exactly we still grow, will it be slightly lower growth or even – it’s hard to exactly say because it depends on someway where that’s happening around the world and what account and so forth. But I got to say I feel good, I feel good about the prospects that we have around the world and trying to gain new business. I feel in each region of the world, we have really some good things happening the singles that I keep referring to whether it’s getting business and our base business getting these new technologies. So I feel good where we are and I feel good that will help us hopefully combat all these economic challenges that we seem to be facing.

Okay. And just one more on the acquisitions, obviously your balance sheets are in good shape. Is there any potential change or maybe I guess the better question is your strategy there would that – what’s kind of the threshold or where would you expect to kind of focus what's the wheelhouse in terms of size or types of returns you look for on acquisitions and is given the strength in your balance sheet is there potential for something more significant or would you more likely stay with kind of what the strategies been the smaller bolt-on deals that are typically accretive fairly quickly?

Well certainly in our industry there are companies on the smaller size which is kind of been the kind of acquisitions we’ve done. These 11 acquisitions we’ve done over the past five and a half years or so have been relatively small to modest size and then there's also much larger competitors, competitors that are significantly bigger and some of that it could even be bigger than Quaker. And so I think the probability just a sheer number tend to be more in the modest sized acquisitions and then as you get to the larger sizes there is smaller number of them. We look at all opportunities, a lot of what we've done over the past several years has brought a new technologies and that – we are very excited about this I think there's a great shareholder value creating opportunities and like I said we are in early innings in that and that will continue to provide good growth for us I think in the next several years. So once we haven’t done as much have been once that can provide good cost synergies more people directly in our same industries and same kind of products and there we would like to do some more of those, because we think those can actually create some significant shareholder value as well. So that’s hard to tell the probability of those so we are willing to look at everything from small to large and its really just what comes through the pipeline at any given point in time. And that’s kind of going back to some comments Mary made, we do feel the best use of our balance sheet is to – in that capacity is to do acquisitions and if we find that we can continue to do acquisitions and still have a lot of that capacity, we will use that to do things more or like the share repurchase program and take opportunities for that, but I still want to emphasize that we – the best thing, best use for our money we think as we continue to make acquisitions because they have nice rate of return for our shareholders.

Great, thank you.

Thank you Curt.

[Operator Instructions] Our next question is coming from Mike Harrison of Seaport Global Holdings. Please proceed with your question.

Hi, good morning Mike and welcome to the board Mary.

Thank you.

Thank you.

I don’t want to too much on the M&A discussion, but just a follow-up to your – answer to your last question it sounds like there maybe a little bit of a strategic shift doing on if you're going away from acquiring some of the smaller technology bolt-ons and looking at things that you could drive cost synergies from. Does that mean that you’re shifting your attention a little bit more towards consolidation of some of the more fragmented market that we see globally in metalworking and so forth?

It’s a good question Mike. I don’t know that’s really a shift in strategy I think we've always been open and looking at acquisitions i.e. brought new technologies or good cost synergies. What we find in our space is you have – you kind of have companies that are either owned privately or family run and or parts of bigger corporations and we are now owned by private equity and it really depends upon when these companies become available. And I would say most of what we've done over the past several years have been opportunities that people decided to sell the business. And our approach by the way to acquisitions is that we tried to keep up relationships with a number of companies throughout the world and even as they’re not ready to sell, we try to keep those relationships up and then when they get ready to sell and then they hopefully come to Quaker Chemical. And it just so happens I think most of them have been bringing these new technology areas and so forth. So lot of the ones that would be more cost synergy have been in play and who knows that doesn’t mean they’re going to play in the future either, but I just was kind of showing or indicating that we’d like to try to do more of those type, but it all depends upon what becomes for sale.

Okay. That makes sense. Also looking at the Asia-Pacific region and what looks like a fairly weak volume number. Can you breakout whether that was more automotive or metalworking driven or whether it was more steel driven?

Steel driven is the short answer and of course with Asia as well we also saw some pretty significant foreign exchange impact as well. So when I talk about those declines it’s not just declines in volumes. But generally what we are seeing at a high level I would say is the steel industry is somewhat down in China and the auto industry especially in the second half last year I thought it was very good in China.

So with respect to China and the steel capacity I know there’s been a lot of talk over the years, but I think that talk is intensified that there could be some capacity taken out in the Tier 2 and Tier 3 producers that are less efficient? How close do you think we are to that being a reality and what is Quaker’s exposure to those Tier 2 and Tier 3 steel producers in China?

It’s a really good question. It’s hard; we don’t have perfect knowledge of how close the things we heard its going to be something that’s done in an orderly fashion over a number of years. So I don’t think it’s like big crash or anything like that. I think they’re also the positive news for us is that we tend to be in the newer, bigger mill the latest technologies [indiscernible] type of companies and lot of the smaller type mills, we're not really – its not really a significant part of our business. So those are the ones that end up shutting down of what we expect – it shouldn’t be too bigger than it, really it impact. The bottom line of all this was a general comment I say the thing that impacts Quaker chemical is more global steel production overall and as steel shifts between regions of where it’s produced here and there because of our strong position in steel everywhere around the world. No matter where – how it shifts, we tend to – steel is going to flat globally, we are going to be overall even though it shift major between regions it’s not going to really impact us that much and the same thing I think could be said in China although hopefully its even less of an impact with these shutdowns because we tend to be in a bigger mills.

Okay. And just a couple of kind of housekeeping questions. Number one, the restructuring savings you mentioned that it's more like $3 million back in 2016 and $6 million beyond. So should we just assume that it’s kind of zero for the first half and $3 million for the second half or does it coming more gradually with that?

It starts to come in somewhat gradually and even now we’ve taken some actions. Some actions have not been taken yet and will be shortly and are implemented and then as they kick in it will be more towards the middle of the year. So you kind of have this kind of coming in over time for the first half of the year and into the third quarter and then as we get into the fourth quarter and exit the year we’ll be more at the $6 million type of run rate.

All right. And then in terms of the SG&A cost it was just interesting to see that dollar number for SG&A cost declined sequentially from Q3 to Q4, if we look back to 2012, 2013, and 2014 usually your Q4 SG&A costs are higher than Q3 so was that some early restructuring savings or pull back on expenses or incentive comp or how should we think about that?

I don’t think there is anything magical happening there, we've been probably taking some labor type of related type of action as we got into the fourth quarter a little bit.

Now we are seeing the benefit of the FX impact in this lower SG&A cost as well.

Right, yes I think the foreign exchange continues to go against us. I don’t have the exchange rates quarter-over-quarter, but I think it’s - the Brazilian real and different places Mexico it continues to fell lower against the dollar.

Just to be clear there was no catch up on lower incentive comp in Q4?

There is always a settlement of incentive comp, but I don’t think you should look at it there was any take backs in incentive comp in the fourth quarter and that’s driving our SG&A that was not the case.

All right, thank you very much.

Thanks Mike. End of Q&A

Thank you. At this time, we are showing no additional questions in the queue. I’d like to turn the floor back over to management for any additional or closing comments.

Okay, giving us no other questions we will end our conference call now. And I want to thank all of you for your interest today. We are pleased with our results for the fourth quarter and full-year and we continue to be confident in the future of Quaker Chemical. Our next conference call for the first quarter results will be in late April or early May. And if have any questions in the meantime, please feel free to contact Mary or myself. Thanks again for your interest in Quaker Chemical.

Ladies and gentlemen, thank you for your participation. This concludes today’s teleconference. You may disconnect your lines at this time. And have a wonderful day.