Quaker(US:KWR)2021-03-01 21:55Financial Performance - The Company's 2020 net sales increased by 25% to $1,417.7 million compared to $1,133.5 million in 2019, driven by acquisitions[143]. - Excluding acquisitions, net sales would have declined approximately 11% due to a 9% decrease in sales volumes related to COVID-19 impacts[143]. - The reported operating income for 2020 was $59.4 million, up from $46.1 million in 2019, while non-GAAP operating income increased by 10% to $134.0 million[143][144]. - Net income for 2020 was $39.7 million, with earnings per diluted share rising to $2.22 from $2.08 in 2019[144]. - Adjusted EBITDA for 2020 was $222.0 million, a 28% increase compared to $173.1 million in 2019, primarily due to acquisitions and cost savings[144]. - The Company generated net operating cash flow of $178.4 million in 2020, a 117% increase from $82.4 million in 2019[146]. - Non-GAAP operating income for 2020 was $134,036 thousand, with a non-GAAP operating margin of 9.5%[196]. - EBITDA for 2020 was $145,459 thousand, with adjusted EBITDA of $221,974 thousand and an adjusted EBITDA margin of 15.7%[197]. - Non-GAAP net income for 2020 was $85,151 thousand, compared to $88,711 thousand in 2019[198]. - The Company reported a net income attributable to Quaker Chemical Corporation of $39,658 thousand for 2020[197]. Cost Management and Synergies - The Company realized $58 million in cost synergies from the Houghton Combination, exceeding the original estimate of $35 million[148]. - The Company incurred $30.3 million in total Combination, integration, and other acquisition-related expenses in 2020, down from $38.0 million in 2019[184]. - The Company realized full-year cost synergies of approximately $58 million in 2020, up from $7 million in 2019, and expects to achieve $75 million in 2021 and $80 million in 2022[183]. - The Company recognized an additional $5.5 million in restructuring and related charges in 2020 as part of the QH Program, which aims to reduce total headcount by approximately 350 people globally[185]. - Restructuring charges were $5.5 million in 2020, significantly lower than $26.7 million in 2019, as part of the global cost synergy plan[207]. Debt and Cash Flow - The Company reduced its net debt by 12% or $94 million during 2020, despite making recent acquisitions[148]. - As of December 31, 2020, the Company had cash, cash equivalents, and restricted cash of $181.9 million, an increase of $38.3 million from $143.6 million at the end of 2019[172]. - Net cash flows provided by operating activities were $178.4 million in 2020, a significant increase from $82.4 million in 2019, primarily due to higher earnings from acquisitions and improved working capital[173]. - Net cash flows used in investing activities decreased to $71.4 million in 2020 from $908.6 million in 2019, largely due to reduced acquisition payments[174]. - The Company has total contractual cash obligations of $1,029,420 thousand, with $78,210 thousand due in 2021 and $733,380 thousand due in 2024[192]. - The Company anticipates sufficient cash flows from operations and liquidity to support its business objectives for at least the next twelve months[190]. - The Company may seek additional debt or equity financing to fund future growth opportunities, including potential acquisitions[190]. Tax and Liabilities - The Company recorded a $15.5 million transition tax liability for U.S. income taxes on undistributed earnings of non-U.S. subsidiaries, with $7.0 million paid and $8.5 million remaining to be paid in installments[161]. - As of December 31, 2020, the Company's gross liability for uncertain tax positions was $28.9 million, with potential reductions of up to $7.5 million from offsetting benefits in other tax jurisdictions[188]. - Interest obligations on long-term debt total $52,997 thousand, with $14,514 thousand due in 2021[192]. - The effective tax rate for 2020 was a benefit of 19.5%, compared to an expense of 7.2% in 2019, with an estimated effective tax rate of approximately 25% for 2020 and 22% for 2019 when excluding non-core items[212]. Segment Performance - Net sales for the Americas segment were $450.2 million in 2020, an increase of $58.0 million or 15% compared to 2019, with a decrease of approximately 16% when excluding acquisitions[230]. - EMEA segment net sales were $383.2 million in 2020, an increase of $97.6 million or 34% compared to 2019, with a decrease of approximately 7% when excluding acquisitions[231]. - Asia/Pacific segment net sales were $315.3 million in 2020, an increase of $67.5 million or 27% compared to 2019, with a decrease of approximately 5% when excluding acquisitions[232]. - Global Specialty Businesses segment net sales were $269.0 million in 2020, an increase of $61.1 million or 29% compared to 2019, reflecting the inclusion of additional months of Houghton and Norman Hay net sales[233]. Impairment and Asset Valuation - An impairment charge of $38.0 million was recorded in Q1 2020 for indefinite-lived intangible assets, primarily related to Houghton trademarks, reducing their book value to $204.0 million[166]. - The Company's consolidated indefinite-lived intangible assets were valued at $205.1 million as of December 31, 2020, down from $243.1 million in 2019, with no impairment charge warranted[167]. - The estimated fair value of the Houghton and Fluidcare trademarks was assessed using a WACC assumption of approximately 10% during the interim impairment assessment[166]. - The Company evaluated the impact of COVID-19 on its operations and determined that it did not represent a triggering event for impairment of indefinite-lived or long-lived assets as of March 31, 2020[164].