Dear Shareholders, Customers and Associates:
A Record Year.
2018 was another strong year for Quaker. We achieved record sales and marked nine straight years of records for non-GAAP earnings and adjusted EBITDA. These achievements were despite a challenging environment, including foreign exchange rate headwinds and a slowdown in global automotive markets.
Quaker’s non-GAAP earnings per diluted share increased 21% to $6.04, compared to $5.01 in 2017, and adjusted EBITDA increased 9% to $125.6 million. Sales were $867.5 million, up 6% from the prior year. Quaker’s balance sheet remains strong. At the end of the year, our cash exceeded our debt by $67.5 million with a record net operating cash flow of $78.8 million. We saw good growth in our product volumes and increased our share in key markets. Furthermore, we had year-over-year profitability improvement in all regions except South America.
Our total shareholder return in 2018 was 19% and our average share price rose to $168.20, another historic high for Quaker, representing an 18% increase over the $142.29 average share price in 2017. Delivering value to shareholders is always a top priority, so reaching these milestones is especially rewarding. We increased our dividend in July, making this the 47th consecutive year Quaker has maintained or increased the dividend paid to our shareholders.
Our performance in 2018 further bolsters our confidence that our strategy is working. Our customer-intimacy approach continues to help us expand into new markets—and to increase our market share. We have consistently achieved organic volume growth of at least 2% above the underlying growth in our markets. And we achieved this once again in 2018. Looking forward, as we double in size through our combination with Houghton, we expect our above-market growth to continue. This is due in part to the many new cross-selling opportunities that will be generated by our different, but complementary, customers and product lines.
Our Upcoming Combination.
With the upcoming combination of Quaker and Houghton—two already strong companies—we will build a new organization that will be united and transformed by the strengths of both. We are working together to select the best from each company—practices, systems and innovations—so we can become “the best of the best.” Our aim is to offer customer solutions that are supported by the best talent and technologies available anywhere.
We expect the regulatory approvals for the transaction to be completed within the next few months. Shortly after closing the transaction, we will communicate our plans for creating value in more detail, including updates on estimated cost synergies.
A Strong History, a Stronger Future.
I would like to take a moment to note that 2018 marked the 100th anniversary of Quaker Chemical Corporation, reaching a milestone few businesses ever attain. Today, we are stronger than ever because of the tireless efforts of our associates, who continue to deliver for our customers. As we begin a new century in our history, we are excited to be combining with such a complementary partner as Houghton International—with their more than 150 years of experience. I look forward to what we can accomplish together as a single company, transformed by the strengths that we each bring into the relationship. As always, our priority will be to create value for our customers, our shareholders, our associates and our communities.
I extend my thanks to all associates for delivering another year of record financial performance and preparing us for our combination with Houghton.
Michael F. Barry
Chairman of the Board, Chief Executive Officer and President