Greetings, and welcome to the Quaker Houghton Fourth Quarter and Full Year 2019 Results Conference Call. A brief 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 Houghton. Thank you. Mr. Barry, you may begin.

Good morning, everyone. Joining me today are Mary Hall, our CFO; Robert Traub, our General Counsel and Shane Hostetter, our Head of Finance and Chief Accounting Officer. We have slides for our conference call. You can find them in the investor relations section of our website at www.quackerhouhgton.com. We've recently passed the 7 month mark of completing our combination and certainly has been very eventful period of time. Since August we have seen our end markets continue to be challenged with certainly some impacts from the trade war as we enter 2020 we expect that these market challenges to begin to turn around and now there are two new specific challenges the Corona virus and the temporary halt of the Boeing 737 Max production which will be headwinds for us in 2020. However, on the things we can control like margins, achieving synergies, integrating well, taking market share and investing in our strategic initiatives, we are doing well and they are also helping us to more than overcome these market challenges. So let me start it off now with some remarks about the fourth quarter results and then I'll get into our outlook for 2020. Overall, our results came in somewhat over the high end of our previous guidance. This improvement was largely driven by faster achievement of synergies as we achieve $7 million versus the $5 million projected. However, the real story of the fourth quarter was the poor too bad in most of our end markets and most of our geographies. We experienced a 9% decline in our pro-forma sales volumes for the quarter. This was due to weak automotive markets and generally weaker industrial markets throughout the world. Also we continue to face significant inventory corrections by our customers throughout the world. So a logical question based…

Thank you Mike and good morning all. Before I begin, let me remind you 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 in our 2018 Form 10-K filed with the SEC. These are available on our website. Please also note that updated risk factors will be included in our 2019 form 10-K which we will file before the extension deadline of March 17. As we disclosed in our press release furnished last night and the subsequent form 12B 25 of filing submitted to the SEC the company is filed for the 15 calendar day extension permitted by the SEC to allow its time to complete our year-end procedures and file our annual report on Form 10-K, which we will do no later than March 17. Therefore, all 2019 numbers we are presenting are preliminary, unaudited and subject to change as the number of regular audit and control procedures remain open. That said management believes that the financial statements included in our press release and the results discussed during this call will not change materially if at all when our Form 10-K is filed. In our press release and in this presentation we have provided certain information including non-GAAP earnings per diluted share, non-GAAP operating earnings and adjusted EBITDA as well as certain pro forma items in an effort to provide shareholders with better visibility into the company's core operations excluding certain items which we believe do not reflect our core operating performance. Reconciliations are provided in charts 15 to 24 of this investor deck…

Thanks Mary. We will now open it up for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Jon Tanwanteng with CJS Securities. Please proceed with your question.

Good morning. Thank you for taking my questions, also nice job in the quarter.

Thanks John.

Mike or Mary can you comment on what you're seeing from customers who are in Italy and South Korea and Japan and if you're seeing any slowdown or fears from -- due to Corona virus there at all?

Italy, we have not seen any impact so far. It doesn't mean there won't be but so far so good there. Japan is with a joint venture with us. We haven't really heard any incidence or anything there that gives us any cause or concern not a big monitoring movement saying for us anyway there and then China is really the area that we've been impacted by far the most. That's for sure.

Okay. Got it. Any inflow in South Korea at all?

South Korea not that so far from what we heard things are continuing to progress there but as things get worse it could happen but so far everything's fine.

Okay. Great. And then just helping to bridge between this year's pro forma – or excuse me 2019s pro forma EBITDA and the outlook for this year. So you're gaining, call it $35 million in synergy realizations. You're seeing a $16 million headwind but a net increase of $30 million year-over-year, I assume the rest is market share, gains and growth. Is that right and –

Yes. Norman Hay as well in there right. So the incremental EBITDA for Norman Hay maybe 10-ish million but just one thing clarity, just one point I want to clarify when Mary mentioned about the $35 million of synergies that was the cumulative synergies to date that we would expect to have in the full year. So the incremental amount there would be $28 million.

Okay. Great. Thanks. That's helpful and then I'm just on the synergies themselves, did you realize more than expected or was it just a faster pace than expected and it's still the same amount of total synergies and maybe were there any revenue synergies in the mix at all just heading out of the year?

Yes. There were some certainly, not there's no revenue synergies included in any those numbers that we reflected. That’s just built into our business. In fact – and certainly we've had some relatively small at this point but we've had some cross-selling synergies that have already taken place and we expect more next year and then what was the other part of your question.

Just was it faster than expected or [indiscernible] more --

Yes. So the faster, yes. I mean that’s a good question, I mean, I think we are keeping our guidance where it is right now. So we're kind of saying we got in the first year, we expected 5, we got 7 that's really just acceleration of some of the synergies that we did. We're keeping to our overall guidance that we've already had. So that shows the $35 million for example by the end of 2021 or 2020 rather and then -- so we're keeping that guidance. Doesn't mean we're not trying and we certainly have plans in place to exceed. This is just a really big year in our integration and our achieving of cost synergies. So as we go through the year we can probably try to give you more updates but being where we are in this point of the year we're just continuing with our previous guidance.

Okay. Got it. And just a quick one what amount of global steel and auto production are you assuming this year in your EBITDA outlook?

I would say the latest forecast that we've seen -- certainly before the Corona virus steel was 1.5% to 2% in that kind of range and now what I've seen lately is global steel may be closer to 1% growth and then from an automotive perspective some of the forecasts I saw before the Corona virus is negative 1% and now it's certainly going to be knocked down another percent or two from that, but who knows exactly? But that is a negative even was negative before Corona virus.

Okay. Great. Thanks guys. Great job.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Laurence Alexander with Jefferies. Please proceed with your question.

Hi guys, this is Dan Rizzo for Lawrence. How are you?

Hi Dan.

Good morning.

Just following up on your assumptions for this year, if global growth was cut by say 50 basis points, is there -- what is the rule of thumb of how your business will respond? I mean this is a third as much of that? What should we think about it?

I mean, we don't know if we have a rule of thumb because so things can be very indifferent how we can react and how fast we can react to instances, so but I mean it's surprise as good as any. I don't really have a specific answer for you on that.

Okay. And then I'm sorry if I miss this but obviously we're talking about the effect of the Corona virus but with that oil prices are falling? I was just wondering your outlook is for raw materials for 2020?

We expect our gross margins throughout the year to be come up in general just because of the cost synergies. You might recall that raw material savings in general are a significant part of what we're trying to achieve. Over the full integration period, we expect our gross margins to increase by approximately 2% because of not only the cost synergies, the raw material synergies as well as the manufacturing. So having said that, our projection this year is around that 36 % range as Mary mentioned and certainly we haven't seen much really happening in the raw material front so far. It takes a little while to kind of hit us and as things fall as we said in the past that can be a tailwind a little bit for us. Before things adjust on the pricing side of things this tends three tends to be six month live period with pricing so, but right now we're just counting on something in that 36 % range for gross margins for this year.

All right. Thank you very much.

Thanks Dan.

Thank you. [Operator Instructions] There are no further questions at this time. I'd like to turn the call back over to Mr. Barry for any closing remarks.

Okay. Given there no other questions we will end our conference call now and I want to thank all of you for your interest today. Our next conference call for the first quarter will be in early May and if you have any questions in the meantime, please feel free to contact Mary or myself. Thanks again for your interest in Quaker Houghton.

Thank You. This concludes today's teleconference. You may disconnect your lines at this time and have a nice day.