Quaker Chemical Corp (KWR) 2015 Q4 法說會逐字稿

Greetings and welcome to the Quaker Chemical fourth quarter and full year 2015 results conference call. (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 begin.

Thank you, Donna. 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 will start off now with some remarks about the fourth quarter. I am pleased 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, low oil prices, and the impact that both of these had on regional steel production.

Let me now talk about each of these in greater detail 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 in 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 top line 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. In fact, all the major regions of the country showed declining steel production versus the fourth quarter of 2014. Overall global steel production declined 4.5% in the quarter versus last year. However, on the positive side, most of the external data I've seen about the steel industry suggests that we should see at least flat to modest growth over the next several years.

I would now like to make some comments about the quarter sales and I'll do this region by region. North America showed a decline of 2%, which was the same level as the foreign exchange impact. So given the large 14% decline in steel production, you can see we are continuing to have good market share gains in North America.

Our European, or EMEA, region showed a 6% increase in sales. This increase was primarily due to the Verkol acquisition and organic growth, partially offset by significant negative foreign exchange impacts. South America continues to be our most challenging region, as sales dropped 41%, with currency and the lower demand being the two largest causes for the decline.

Overall, though, I think it's important to point out that we continue to make money in South America and we have consistently reacted to the economic situation there as conditions change through actions similar to our past cost streamlining efforts.

In the Asia-Pacific region, sales were down 15%, with the primary driver being lower volumes and exchange rates. Overall product volumes were down due to the weakness in the steel markets in China as well as different-than-normal end-of-year buying patterns from customers.

As you can see, the sluggish global economic environment, strong US dollar, and low oil prices are significantly impacting our business dynamics for the quarter. Nevertheless, we were able to grow non-GAAP earnings and adjusted EBITDA.

In addition, we had strong operating cash flow in the quarter, which led to a full-year increase of 34% in operating cash flow versus 2014. We were able to achieve these results on the benefits from our recent acquisitions as well as taking share in the marketplace.

One way to see this share gain is to look at our overall product volumes and exclude acquisitions and also exclude the unique impact of Brazil, which is now less than 4% of our sales. When you do this, our product volumes are up 1% in an environment where our largest market indicator, steel production, is down over 4% in the quarter. This type of differential between our actual product volumes and trends in the market we supply is a high-level way of getting visibility into our market share gains.

We believe these share gains are due to our commitment to our customer intimacy model, which puts the customers' needs as our top priority and provides them with strong service and business solutions. I believe this approach continues to differentiate ourselves in the marketplace.

We have a great deal of initiatives in our base business lines and in each of our regions as well as through growing our recently acquired technologies around the globe. As I mentioned in the past, using a baseball analogy, I see each of these initiatives as singles. Our goal is to hit many singles to produce multiple runs and thereby show continuous growth, even in tough market conditions.

Over the next quarter, we expect our sales will continue to be impacted by low oil prices and a stronger dollar. In the case of raw materials, we suspect that we are probably reaching the bottom at this time and we will eventually see some modest firming in raw material costs going forward. But this is really hard to determine with the fluctuations in the price of crude oil. Over time, we would expect to see some potential compression in our gross margins. But if and when this will happen is hard to determine.

So while there's a great deal happening around us, the bottom line is I continue to be confident in our future. We believe that we can continue to grow our annual earnings and generate strong cash flow, despite the market challenges. We will do this by executing our business strategies, which we project will lead to continued share gains in the marketplace. Also, we continue to leverage our recent acquisitions by selling our newly acquired technologies on a global basis. And finally, we'll continue to work on new acquisition opportunities, such as the acquisition of Verkol last July.

The combination of all these growth vehicles gives us confidence that 2016 will be another good year for Quaker, as we expect to grow both our top and bottom lines, despite continued economic challenges and further foreign exchange headwinds.

In closing, I want to thank all of our associates whose dedication and expertise helps to create value for our customers and differentiate Quaker in the marketplace. People are everything in our business and by far our most valuable asset. And I'm very happy with the Quaker team we have in place throughout the world.

And now I'll turn it over to Mary Dean Hall, our Chief Financial Officer, so that she can provide you with more details behind our financials. Once Mary has completed her comments on the financials for the quarter, we'll address any questions you may have. Mary?

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, a lower effective tax rate.

As I lead us into the financial summary, please note that Quaker provides certain information, including non-GAAP earnings per diluted share and adjusted EBITDA, in an effort to provide shareholders with visibility into Quaker's operations, excluding certain items which we believe do not reflect our core operations. Reconciliations are provided in charts 10 and 11 of these investor slides and they are 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 a strong operating performance and lower effective tax rates, which benefited Quaker an estimated $0.07 per share. Our results beat analyst consensus of $1.06 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 expected they would be this time last year, hitting earnings per share for $0.05 or 5% in the quarter and $0.31 or 7% for the year. The negative impact of FX was also very evident in our net sales, with sales showing decreases of 6% Q4 over Q4 and 4% for the year. The FX impact of minus 7% for both the quarter and the year was the major driver of the sales decreases, with pricing pressure a factor as well, partially offset by volume growth in both the quarter and the year, including acquisitions.

To give you an example of the magnitude of the FX impact, the euro averaged about 1.11 in 2015 versus 1.33 in 2014, weakening over 16%. Our sales in EMEA were down 8% as the minus 16% impact of FX was partially offset by higher volumes, including acquisitions.

Looking at our gross margins, you can see a significant increase in both Q4 and full year of 1.6% and 1.9%, respectively. This gross margin expansion was a key driver to strong operating performance in both the quarter and the full year and we attribute it to the timing of raw material cost decreases. You can see that operating margins declined over 1% Q4 over Q4, as operating margin includes the restructuring charge of $6.8 million that I mentioned. The adjusted EBITDA margin excludes the restructuring charge and you can see that this margin increased 1.5% Q4 over Q4 and almost 1% year over year.

I mentioned earlier that our earnings benefited from our low tax rate: 16.5% for the quarter and 25.3% for the full year. This was due largely to a change in tax regulations impacting a non-US subsidiary and also the mix of earnings in our different tax jurisdictions, adjustments to certain tax estimates, and one-time items that inflated the 2014 effective tax rate. For 2016, we expect our effective tax rate in the first half of the year will be in the 31% to 33% range. However, we expect the full-year effective tax rate to return to a more normal range of 28% to 30%.

Now turning to our balance sheet and cash flow, our solid operating performance drove strong operating cash flow of $22.6 million for the quarter and $73.4 million for the full year, an increase, as Mike mentioned, of over 34% year over year. The strong cash flow allowed us to increase our year-end cash position over 25% to $81 million, reducing our net debt to $1 million. Keep in mind, we accomplished this while acquiring Verkol for about $25 million in Q3, repurchasing 87,000 shares for about $7.3 million during the year, and paying dividends of $1.5 million.

Quaker remains committed to using our strong balance sheet to grow the Company and return cash to shareholders. For example, in January, we repurchased 84,000 shares for about $5.9 million.

The next few charts give you some additional history and context to certain key items. With respect to volume, Quaker has delivered volume growth for six consecutive years through a combination of organic and acquisition-related growth, as we show in chart 6.

Chart 7 highlights the improvement in gross margin in 2015 that I mentioned to 37.5% for the quarter and 37.6% for the full year, which we attribute again to the timing of raw material decreases. For 2016, we do expect some margin compression in gross margins, although the timing and magnitude is hard to predict.

We continue to show good growth in adjusted EBITDA, as shown in chart 8, with adjusted EBITDA up 2% year over year. Please note that our adjusted EBITDA margin has increased almost 7 percentage points -- 700 basis points since 2008.

I talked earlier about our balance sheet strength and chart 9 gives you a bit of history. Our net debt position of just about $1 million at year end 2015 is reflective of our strong operating performance and cash flow, which allowed us to improve net debt by $10 million year over year.

In summary, Quaker's operating performance demonstrated strength in a very challenging environment. Our non-GAAP earnings and adjusted EBITDA continued their positive trends, and our balance sheet will continue to support future growth, including acquisitions.

Looking at 2016, we expect auto to show positive growth, steel, as Mike mentioned, to show flat to modest growth, continued market share gains, and continued benefits from acquisitions, with the full-year effective Verkol expected to add $0.10 to $0.15 to the bottom line in 2016. We also expect benefits from our restructuring program, as I mentioned, of $3 million in 2016 and $6 million per year going forward.

We expect some compression of gross margin, as I mentioned, although hard to predict when and how much. We expect continued volatility of FX rates and the possible negative impact of about 4% to 6% due to FX for the year.

We expect to continue with our share repurchases to at least offset dilution and a return to a more normalized effective tax rate of 28% to 30%. But remember: it's a first-half, second-half story in 2016, with the first-half effective tax rate in the 31% to 33% range and lower rates in the second half.

Overall, we expect Quaker will have another year of good performance, with growth in the top and bottom lines. And we expect to deliver our seventh consecutive year of positive earnings growth.

Thank you all for joining us and for your interest in Quaker. And now, I'll turn it back to Mike.

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

(Operator Instructions) Laurence Alexander, Jefferies.

This is Dan Rizzo on for Laurence. So, you are expecting a little bit of a steel rebound in 2016. And I'm just curious, automotive -- I think you said it's going to be up. Are you seeing any signs that things are kind of peaking and might just flatten out from here? Or do you expect continued relatively strong growth?

With automotive?

Yes. With your metal/automotive end market.

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

Is that more -- I mean, is there a reasonable disparity there, with like, I don't know, Chinese automotive being stronger or Asia versus the US? Or I think you guys have -- are North American-centric. I was just wondering if there was any breakdown.

I don't know if we are North America-centric. I wouldn't say that. You know, we sell to the automotive producers globally. And you know, we expect that while China is probably not going to grow as fast as it did in the past, it's still going to have decent growth.

And you know, the US has been growing and hopefully that will continue. Europe has been coming out of their recession and has automotive growth, and of course, South America is going in the opposite direction. So that continues to be declining, I guess.

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 for once.

Then the change in Chinese tax law, 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. You know, in the middle of the year, the Chinese auto industry was actually having kind of negative growth. And then as we progressed into the second half in the latter part of the year, we actually saw some back to good year-over-year growth figures. And we expect that based on what we see and we are -- new lines we are getting and so forth, we expect to grow in that market.

All right. Thank you very much.

Liam Burke, Wunderlich Securities.

Mike, your acquisitions have worked really well in terms of adding geography and, as you pointed out, technology. But to use your baseball analogy, where are you in the -- in terms of innings in terms of actually getting these products sold through your traditional channels? And expanding what are mostly regional businesses onto the global platform?

I would say right now, we are in the third inning. We are progressing. We are making inroads in the various acquisitions that we have done. Some have gone relatively quicker than others. The good news I think is we have people in 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 getting 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's still a lot of leeway to go here, since we're only in the third inning. And we think while 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 think a lot of -- 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.

Just staying on the acquisition theme, how does the pipeline of valuations look going into 2016?

Good. We got a couple trials certainly going in China in aluminum, which we are happy with. We -- in our grease business, we are picking up, continue to pick up new pieces. And we continue to evaluate other acquisition as well, you know, for the future. We have a pipeline of things we're looking at.

You never know if anything is going to hit or you go through processes. And some are successful; some are not. But we think we always want to make good acquisitions and be careful. But we are happy with the opportunities that are in the marketplace right now.

Great. Thanks, Mike.

Garo Norian, Palisade Capital Management.

First thing is just a clarification. I want to make sure that when you talk about the bottom-line growth for 2016, that's off of a base 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 pattern in Asia. Can you maybe explain that a little bit more?

Yes, sure. Sure, Garo. Couple things there. We normally have in China, you know, if you go back historically with us, we saw -- we tend to see a stronger -- a strong December and a somewhat weaker January. Just the kind of buying patterns that are, and this year, it was reversed.

We suspect that it may be because some of the customers in China were -- did not have as much money and were delaying purchases based on their budgets. And maybe there was 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 any way irrationally? Any change in that landscape?

I wouldn't say there's any change. Of course, we always have competitors that we face. I say over time, we've been consistently taking share in 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 the flat to up, I mean, there's been I guess very poor, in hindsight, kind of forecasts over the past year.

I agree.

And so do you actually plan the business for flat to up or is that kind of the hope and you are ready for kind of continued weakness?

A lot of our energy kind of is going after new piece of business, whether it's market share gains in our existing customers or going after these new technologies. So kind of our mantra, our thinking, is no matter what happens, good or bad, we're going to grow, we are going to get new business.

And you are right. It doesn't really change our plans, per say, if -- because we are just continually trying to service customers we have well and just keep going after new business. So it really doesn't impact us 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 itself, is that kind of where you want it 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 it's helping us, you know, develop new technologies, help with our new evolution of technologies. So yes, we continue to 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 proof of our support and engagement to help provide better products and services for them.

Okay, and sorry. My last question is 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 it ends successfully and brings in ultimately new business. So I'm just trying to get a sense of timing.

The trials have been running really for the past couple months on average. And you know, in these particular ones, I don't have the protocol exactly at what point a trial becomes a new piece of business. But what we have seen in most of the times in our business is once you get a trial, if you are successful, they just continue on with you at some point.

So that's our goal is just to continue to be successful in all these trials that we have ongoing, whether it's in aluminum or grease or any of the new technologies, and just convert that. And then the real benefit is easy to not -- obviously it's a 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.

All right. Thanks very much.

(Operator Instructions) Curt Siegmeyer, KeyBanc Capital Markets.

Nice quarter. Just follow up on the expectation on the steel market for flat to up. You know, 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?

Certainly if we add up more acquisitions, I think we should overcome that. You know, it's hard to field some of these hypotheticals. I think if we had another down year, would it negatively impact us, you know, in steel? Sure. It would be less and it would be less growth. It would be hard to say exactly would we still grow and would it be slightly lower growth or be even? It's hard to exactly say, because it depends in some ways where that is happening around the world and what accounts and so forth.

But you know, I feel good. I got to say: I feel good. I feel good about the prospects that we have around the world in trying to gain new business. I feel in each region of the world, we have really some good things happening. These singles that I keep referring to, whether it's getting business in our base business, getting these new technologies. And so I feel good where we are and I feel good that that will help us hopefully combat all these economic challenges that we seem to be facing.

Okay. And just one more on the acquisitions. You know, obviously, your balance sheet is 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 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 strategy has been, these smaller bolt-on deals that are typically accretive fairly quickly?

Certainly in our industry, there are companies on a smaller size, which has kind of been the kind of acquisitions we've done. These 11 acquisitions we've done over the past 5.5 years or so have been relatively in the small to modest size.

And then there is also much larger competitors, competitors that are significantly bigger and some that could even be bigger than Quaker. So I think the probability, just the sheer number of, tend to be more in the modest size acquisitions. And then as you get to the larger size, there is a smaller number of them.

We look at all opportunities. You know, a lot of what we've done over the past several years has brought in new technologies. And that's -- very excited about those. I think those are a great shareholder-value-creating opportunities. And like I said, we are early innings in that and that will continue to provide good growth for us I think in the next several years.

The ones we haven't done as much have been ones that can provide good costs 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 it's just hard to tell the probability of those.

So we are willing to look at everything, from small to large. And it's 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 and -- is to -- and debt capacity -- is to do acquisitions. And if we find that we can continue to do acquisitions and still have a lot of debt capacity, we will use that to do things more like the share repurchase program and take opportunities for that.

But I still want to emphasize that we -- the best use for our money we think is we continue to make acquisitions because they have nice rates of return for our shareholders.

Great, thank you.

(Operator Instructions) Mike Harrison, Seaport Global Holdings.

Good morning, Mike, and welcome aboard, Mary.

Thank you.

I don't want to talk too much on the M&A discussion, but just a follow-up here in answer to your last question. It sounds like there may be a little bit of a strategic shift going on if you are going away from acquiring some of the smaller technology bolt-ons and looking at things that you could derive cost synergies from.

Does that mean that you are shifting your attention a little bit more towards consolidation of some of the more fragmented markets that we see globally and in metalworking and so forth?

That's a good question, Mike. I don't know if it's really a shift in strategy. I think we've always been open and looking at acquisitions that either brought new technologies or good costs synergies. What we find in our space is, you know, you have -- you kind of have companies that are either owned privately, are family-run, or are parts of bigger corporations and were 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 decide to sell the business. And our approach, by the way, to acquisitions is that we try to keep up relationships with a number of companies throughout the world. And even though they are not ready to sell, we try to keep those relationships up. And then when they get ready to sell, then they hopefully come to Quaker Chemical.

And it just so happens I think most of them have been, you know, bringing these new technology areas and so forth. So a lot of the ones that would be more cost synergy haven't been in play. Who knows? That doesn't mean they are going to be in play in the future either, but I just was kind of showing or indicating that we would like to try to do more of those type. But it all depends upon what becomes for sale.

Okay, that makes sense. Looking at the Asia-Pacific region and the -- what looks like a fairly weak volume number, can you break out whether that was more automotive- or metalworking-driven or whether it was more steel-driven?

Steel. Steel-driven is the short answer. And of course, you know, with Asia as well, we also saw some pretty significant foreign exchange impacts as well. So when I talk about those declines, it's not just declines in volume. 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 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 has 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've heard, it's going to be something that's done in an orderly fashion over a number of years. So I don't think it's like a big crash or anything like that.

I think that also the positive news for us is that we tend to be in the newer, bigger mills, the latest technologies -- the Bao Steel, Wuhans, type of companies. And a lot of the smaller type mills, we are not really -- it's not really a significant part of our business. So if those are the ones that end up shutting down, which is what we expect, then it shouldn't be too big of a really impact.

And the bottom line of all of this, just as a general comment I say it -- you know, the thing that impacts Quaker Chemical is more global steel production overall. And you know, as steel shifts between regions of where it is produced here and there, because of our strong position in the steel everywhere around the world, no matter where -- how it shifts, we tend to -- steel is going to be flat globally. We're going to be -- overall, even though it shifts 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, it's even less of an impact with these shutdowns because we tend to be in the bigger mills.

Okay. And then I had just a couple of kind of housekeeping questions. Number one: does the restructuring savings -- you mentioned that it's more like $3 million a bit 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 come in more gradually than 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 -- or 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 over 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 the dollar number for SG&A costs declined sequentially from Q3 to Q4. If we look back to 2012, 2013, 2014, usually your Q4 SG&A costs are higher than Q3. So was that some early restructuring savings or pullback on expenses or incentive comp? How should we think about that?

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

But we are seeing the benefit of the FX impact in those lower SG&A costs as well.

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

But just to be clear, there was no catch-up on lower incentive comps or anything in Q4?

There's always a settlement of incentive comp, but I don't think you should look at it there was any takebacks 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.

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

Okay. Given there is 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 you 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.