What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-01 compared with 2021-03-01 · 1663 added, 2068 removed, 319 unchanged (92% of the section changed)

1 unchanged sentence

of Financial Condition and Results of Operations.

As used in this Annual Report on Form 10-K (the “Report”),

the terms “Quaker Houghton”, the “Company”, “we”,

As used in this Annual Report on Form 10-K (the “Report”), the terms “Quaker

Houghton,” the “Company,”

“we,” and “our”

refer to Quaker Chemical Corporation (doing business as Quaker

1 unchanged sentence

context otherwise requires.

The term Legacy Quaker refers to the Company prior to

the closing of its combination with Houghton

The term Legacy Quaker refers to the Company prior to the closing of its combination

with Houghton

International, Inc.

(“Houghton”) (herein referred

to as the “Combination”) on August 1, 2019.

(“Houghton”) (herein referred to as the “Combination”)

on August 1, 2019.

Throughout the Report, all figures

presented, unless otherwise stated, reflect the results of

operations of the combined company for the year ended

December 31, 2020,

for the year ended December 31, 2019 includes the

result of Legacy Quaker plus five months of Houghton’s

operations post-closing of

the Combination on August 1, 2019, and for the year ended

December 31, 2018, the results only of Legacy Quaker.

presented, unless otherwise stated, reflect the results of operations

of the combined company for the years ended December 31, 2020

and for the year ended

December 31, 2019, the results of Legacy Quaker plus five months

of Houghton’s operations post-

closing of the Combination on August 1, 2019.

Executive Summary

Quaker Houghton is a global leader in industrial process

With a presence around the world,

including operations in over

Quaker Houghton is the global leader in industrial process fluids.

With a presence around the world, including

operations in over

25 countries, our customers include thousands of the world’s

most advanced and specialized steel, aluminum, automotive, aerospace,

offshore, can, mining, and metalworking

Our high-performing, innovative and sustainable solutions are

backed by best-

offshore, can, mining, and metalworking companies.

Our high-performing, innovative and sustainable solutions are backed by best-

in-class technology,

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Pennsylvania, located near Philadelphia in the U.S.

Overall, the Company’s

2020 performance, like most other companies in the

world, was negatively impacted by the COVID-19

pandemic and its impact on the global economy,

most of the Company’s

However, the Company’s

activity in late 2019, including the Houghton Combination

and the Norman Hay acquisition, drove a 25% increase in 2020 net

million compared to $1,133.5 million in 2019.

Excluding net sales from acquisitions, current year net

sales would have

declined approximately 11% primarily

due to a 9% decrease in sales volumes associated with the negative

impacts of COVID-19 on

global production levels throughout each of the Company’s

Similar to net sales, the Company’s

gross profit and selling,

general and administrative expenses (“SG&A”) also increased

due to the full year inclusion of Houghton and Norman

Hay, but both

also benefited from the realization of cost savings associated with

synergies achieved with the Combination as well

as the impact of

cost saving measures put in place to help offset

the impacts of COVID-19.

The Company’s 2020 reported operating

income of $59.4

million increased compared to $46.1 million in 2019.

Excluding all one-time costs and other non-core items that largely

related to the

Combination and Norman Hay in each period, the Company’s

non-GAAP operating income of $134.0 million

increased 10%

compared to $122.0 million in 2019, primarily due to

the net sales increases and cost synergies and savings

mentioned above.

details of the Company’s

consolidated operating performance are discussed in the Company’s

Consolidated Operations Review,

Operations section of this Item, below.

The Company’s net income

and earnings per diluted share of $39.7 million and $2.22 in

2020, respectively, increased

Overall, the Company’s 2021 performance

was highlighted by the continued recovery from the impacts of COVID-19 in

well as the ongoing execution of integration activities and synergy

realization, which led to record net sales and adjusted EBITDA in

2021 despite the continued escalation in raw material cost headwinds

and global supply chain pressures.

Specifically, net sales of

$1,761.2 million in 2021

increased 24% compared to $1,417.7 million in 2020, primarily

due to higher volumes of approximately

13%, including additional net sales from acquisitions of 4%, increases from

selling price and product mix of approximately 8% and

the positive impact from foreign currency translation of 3%.

The increase in sales volumes

compared to 2020 was primarily a result

of continued new business wins and the year-over-year

improvement in end market conditions since the beginning of the COVID-19

pandemic in early 2020, partially offset by lower automotive

sales due to semiconductor shortages and delayed shipments due

supply chain challenges that occurred towards the end of 2021.

The increase in selling price and product mix is primarily the result of

the Company’s broad price

increases implemented during 2021 to help offset the unprecedented

increases in raw material costs as well

as global supply chain and logistics cost pressures the Company has experienced

throughout 2021.

The Company’s net income and

earnings per diluted share of $121.4 million and $6.77 in 2021, respectively,

increased compared

to $39.7 million and $2.22 per diluted share, respectively,

Excluding all one-time costs and other non-core items that largely

related to the Combination and Norman Hay in each

period, the Company’s current

year non-GAAP net income and non-GAAP

earnings per diluted share were $85.2 million and $4.78,

respectively, compared

to $88.7 million and $5.83, respectively,

The increase in the Company’s current

year reported earnings drove a 28% higher adjusted EBITDA of

$222.0 million compared to

$173.1 million in 2019, primarily due to the Houghton

and Norman Hay acquisitions as well as the benefit of costs savings

with the Combination,

partially offset by the negative impacts of COVID-19.

See the Non-GAAP Measures section of this Item,

Excluding non-recurring items, including costs associated with the

Combination and other non-core items in each period, the Company’s

current year non-GAAP net income and non-GAAP earnings

per diluted share were $122.8 million and $6.85, respectively,

compared to $85.2 million and $4.78, respectively,

increase in the Company’s current

year earnings drove a 23% higher adjusted EBITDA to a full year record

of $274.1 million

compared to $222.0 million in 2020, primarily due to the significant increase

in net sales year-over-year as well as higher realized cost

synergies from the Combination, partially offset

by lower gross margins driven by higher raw material and input costs and the

of disruptions in the global supply chain experienced in 2021 as well as higher selling,

general and administrative expenses (“SG&A”)

including the impact of higher sales on direct selling expenses and additional

SG&A from recent acquisitions.

The Company’s 2021

operating performance in each of its four reportable segments:

(ii) Europe, Middle East and

Africa (“EMEA”);

(i) Americas;

(iii) Asia/Pacific;

and (iv) Global Specialty

Businesses, reflect similar drivers to that of its consolidated

Each segment’s net sales benefited

from a full year of Houghton and the Company’s

Global Specialty Businesses

segment also benefited from a full year of Norman Hay.

Without the inclusion of Houghton and

Norman Hay, net sales would

been lower in all segments compared to the prior year,

primarily driven by declines in volume primarily due to the

negative impacts of

COVID-19 on the Company’s

As reported, all of the Company’s

segment operating earnings were higher compared to

2019 because of the inclusion of a full year of Houghton and

Norman Hay as well as cost synergies achieved

with the Combination

and other cost savings actions taken due to COVID-19,

partially offset by the negative impacts of COVID-19

on global sales volumes.

and (iv) Global Specialty Businesses, reflect similar drivers to that of

its consolidated performance.

All four segments had higher net

sales compared to 2020 reflecting the continued rebound in 2021

from the negative impacts of COVID-19 on the Company’s

markets as well as continued success of winning new business in each of the

Company’s segments during 2021.

Company’s geographic segments

benefited from higher organic sales volumes in 2021

while all of the Company’s segments also

benefitted from additional net sales from acquisitions, the positive impact

from foreign currency translation due to the strengthening of

most major currencies against the U.S.

and from increases in selling price and product mix.

As reported, each of the

Company’s reportable

segment operating earnings were higher compared to 2020 reflecting the increase

in net sales including the

benefits of acquisitions and other factors mentioned;

however, all of the Company’s

segment’s operating earnings were negatively

impacted by persistent raw material inflation, higher logistics, labor and manufacturing

costs, impacts of disruptions to the global

supply chain as well as higher SG&A which were a result of an increase

in direct selling expenses associated with year-over-year

inflation increases and increases due to the increase in net sales as well as the lower levels

of prior year SG&A as a result of

temporary cost saving measures implemented in response to COVID-19.

Additional details of each segment’s

operating performance are further discussed in the Company’s

reportable segments review,

operating performance

are further discussed in the Company’s

reportable segments review, in the

Operations section of this Item 7, below.

The Company generated net operating cash flow of $178.4

million in 2020 compared to $82.4 million in 2019.

increase in net operating cash flow year-over

-year was primarily driven by the inclusion of a full year of earnings

from Houghton and

Norman Hay, as well as

higher operating cash flow due to changes in working

The key drivers of the Company’s

and overall liquidity are further discussed in the Company’s

The Company generated net operating cash flow of $48.9 million in 2021

compared to $178.4 million in 2020.

The decrease in

net operating cash flow year-over-year

was primarily driven by a significant change in working capital compared

to the prior year,

mainly increases in accounts receivable, due to higher net sales and in inventory,

due to higher costs as well as building inventories in

response to global supply chain and logistics pressures.

The key drivers of the Company’s operating

cash flow and overall liquidity

are further discussed in the Company’s

Liquidity and Capital Resources section of this Item 7, below.

Overall, the Company’s

2020 results reflect the fact that the negative impacts of COVID-19

were partially offset by the positive

impacts of a full year of Houghton and Norman Hay performance

Combination synergies and cost savings actions

The Company’s

performance showed a good quarterly growth trend across the

globe beginning after the second quarter of 2020, during

impacts of COVID-19 were most severe, indicating

a gradual improvement in the Company’s

end markets and continued market share

Despite these challenges, the Company was able to generate significant

net operating cash flow in 2020, continue to pay its

regular dividends, pay down its debt above its required commitments

and continue to execute its integration plans for the

The global economic slowdown and other impacts due

to COVID-19 posed an unprecedented challenge in 2020, but the

Company successfully navigated this downturn, demonstrating

its ability to respond quickly to changing market conditions and

on the benefits it anticipated from the Combination

with Houghton.

In 2020, the Company continued to service and supply its

customers despite very difficult economic

conditions, it continued to gain share in the market, it completed

a significant part of the

integration activities, and realized $58 million of cost

synergies which exceeded the original estimate of $35

also made recent bolt-on acquisitions which are expected

to contribute towards earnings growth in 2021 and, even with those

acquisitions, the Company reduced its net debt by

12% or $94 million during 2020.

As the Company looks forward, it

short-term headwinds from higher raw material costs and

lower than expected volumes in the automotive market due

semiconductor shortage.

However, the Company expects 2021

to result in a step change in its profitability from 2020 as the Company

completes its integration cost synergies, continues

to take further share in the marketplace, benefits from a projected

gradual rebound

in demand, and sees the positive impact of its recent acquisit

Impact of COVID-19

In early 2020, the global outbreak of COVID-19

negatively impacted all locations where the Company

does business.

the Company has now operated during several quarters

in this COVID-19 environment, the full extent of the outbreak

business impacts remains

uncertain and volatile, and therefore the full extent to which COVID-19

may impact the Company’s future

Overall, the Company’s 2021 results

were good and reflected the Company’s

ability to navigate through persistent raw material

cost pressures, supply chain challenges and automotive semiconductor

Increases in net sales in all segments were driven by

the continued year-over-year improvement

in the Company’s end-markets and increased

customer demand from lower levels

experienced during 2020 as a result of COVID-19;

each segment was negatively impacted by the significant

escalation of

raw material costs as well as higher levels of SG&A compared to the prior

year which included certain temporary cost saving

measures adopted during the onset of COVID-19.

Continued strong customer demand in 2021 coupled with ongoing new business

wins and the execution of integration activities and synergy realization

helped to partially offset the negative impacts from the

continued escalation of raw material costs and continued supply chain pressures.

As the Company looks toward 2022, the business is well positioned to

continue to outpace market growth rates and deliver value-

added solutions and services to its customers.

Demand remains healthy across most of our end markets;

expects raw material cost pressures and supply chain disruptions to persist throughout

To mitigate these headwinds,

Company continues to implement further price actions and is actively

managing its cost structure.

The Company believes these

actions will begin to drive a recovery in margins as it progresses through

The Company remains committed to advancing its

customer intimate strategy and sustainability program and delivering

earnings growth in 2022 and beyond.

On-going impact of COVID-19

The global outbreak of COVID-19 has negatively impacted all locations where

the Company does business.

Company has now operated in this COVID-19 environment for almost

two years, the full extent of the outbreak and related business

impacts continue to remain uncertain and volatile, and therefore the

full extent to which COVID-19 may impact the Company’s

results of operations or financial condition is uncertain.

This outbreak has significantly disrupted the operations

of the Company and

This outbreak has significantly disrupted the operations of the Company

those of its suppliers and customers.

The Company has experienced significant volume declines and

lower net sales as further

described in this section, initially at its China subsidiaries in the

first quarter of 2020 and, beginning in late March continued

throughout the rest of its business due to the global economic

slowdown brought on by COVID-19.

Management continues to

monitor the impact that the COVID-19 pandemic is having

on the Company,

the overall specialty chemical industry and the

economies and markets in which the Company operates.

Given the speed and frequency of the continuously evolving developments

with respect to this pandemic, the Company cannot, as

of the date of this Report, reasonably estimate the

magnitude or the full extent of the impact to its future results of

operations or to the

ability of it or its customers to resume more normal

operations, even as certain restrictions are lifted.

The prolonged pandemic and a

resurgence of the outbreak, and continued

restrictions on day-to-day life and business operations may result

in volume declines and

lower net sales in future periods as compared to pre-COVID-19

During the pandemic, the Company initially experienced volume declines

and lower net sales as

compared to pre-COVID-19 levels, as further described in this section.

Management continues to monitor the impact that the

COVID-19 pandemic is having on the Company,

the overall specialty chemical industry and the economies and markets in which the

Company operates.

The prolonged pandemic and resurgences of the outbreak including as new

variants continue to emerge, and

continued restrictions on day-to-day life and business

operations as well as increased border controls or closures and transportation

disruptions may result in volume declines and lower net sales in future periods.

To the extent that the Company’s

customers and suppliers

continue to be significantly and adversely impacted by

customers and

suppliers continue to be significantly and adversely impacted by

COVID-19, this could reduce the availability,

or result in delays, of materials

or supplies to or from the Company,

or result in delays, of

materials or supplies to or from the Company,

which in turn could significantly interrupt the Company’s

business operations.

ongoing uncertainty,

the Company cautions that its future results of operations could be significantly

adversely impacted by COVID-

Further, management continues to

evaluate how COVID-19-related circumstances, such as remote

work arrangements, illness or

staffing shortages and travel restrictions have affected

financial reporting processes and systems, internal control

over financial

reporting, and disclosure controls and procedures.

While the circumstances have presented and are expected

to continue to present

challenges, and have necessitated additional time

and resources to be deployed to sufficiently address the

challenges brought on by the

pandemic, at this time, except as otherwise noted in

Item 9A of this Report, management does not believe that

COVID-19 has had a

material impact on financial reporting processes, internal

controls over financial reporting, or disclosure controls and procedures.

additional information regarding the potential impact of COVID-19,

see Item 1A of Part I of this Report.

The Company’s top

priority is, and especially during this pandemic remains, to protect the health

and safety of its employees and

customers, while working to ensure business continuity

to meet customers’ needs:

– The Company has taken steps to protect the health and wellbeing

of its people in affected areas through various

actions, including enabling work at home where needed and

possible, and employing social distancing standards,

implementing travel restrictions where applicable, enhancing

onsite hygiene practices, and instituting visitation restrictions

the Company’s facilities.

The Company does not expect that it will incur material

expenses implementing health and safety

policies for employees, contractors, and customers.

Our Operations

– Currently, all of

the Company’s 31 production

facilities worldwide are open and operating and are deemed

as essential businesses in the jurisdictions where they are

The Company believes that to date it has been able to

meet the needs of all its customers across the globe

despite the current economic challenges.

Our Business Conditions

– The Company’s second

half of 2020 showed solid improvement over the first half,

consistent with expectations that April and May would

be the worst months of the year and that the Company

gradual quarterly improvement sequentially throughout

the remainder of the year.

However, demand still remained lower

than pre-COVID-19 levels as many customers maintained

reduced production levels through the end of 2020.

Houghton and Norman Hay net sales, all four of the Company’s

reportable segments showed declines in net sales due to

COVID-19 during 2020 compared to the prior year,

with the Americas and EMEA being the most impacted and

being the least impacted.

The Company currently expects that the impact from COVID-19

will gradually improve each

quarter in 2021 subject to the effective containment

of the virus and successful distribution of a vaccine.

incidence of reported cases of COVID-19 appears to

be again increasing in several geographies where we have

operations and it remains highly uncertain as to how long

the global pandemic and related economic challenges will last and

when our customers’ businesses will recover.

– The Company took various actions to temporarily conserve

cash and reduce costs during 2020.

Some of these

actions during 2020 included eliminating all discretionary

expenditures, delaying or freezing salary increases where legally

permitted, reducing executives’ salaries for a period of

time, lowering 2020 planned capital expenditures by approximately

30%, and accelerating and fine-tuning the Company’s

integration plans.

These temporary initiatives were designed and

implemented so that the Company could successfully manage through

the challenging COVID-19 situation while continuing

to protect the health of its employees, meet customers’ needs,

maintain the Company’s

long-term competitive advantages and

above-market growth, and enable it to continue to

effectively integrate Houghton.

While the actions taken in 2020 to protect

our workforce, to continue to serve our customers with excellence

and to conserve cash and reduce costs, have been effective

thus far, further actions to respond

to the pandemic and its effects may be necessary as conditions

continue to evolve.

this ongoing uncertainty,

the Company cautions that its future results of operations could be significantly adversely

Further, management continues to evaluate

how COVID-19-related circumstances, such as remote work arrangements,

illness or staffing shortages and travel restrictions have affected

financial reporting processes and systems, internal control over

financial reporting, and disclosure controls and procedures.

While the circumstances have presented and are expected to continue

present challenges, and have necessitated additional time and resources

to be deployed to sufficiently address the challenges brought

on by the pandemic, at this time, management does not believe that COVID-19

has had a material impact on financial reporting

processes, internal controls over financial reporting, or disclosure controls

and procedures.

The Company’s top priority,

especially during this pandemic, is to protect the health and safety of its employees

and customers,

while working to ensure business continuity to meet customers’ needs.

The Company continues to take steps to protect the health and

wellbeing of its people in affected areas through various

actions, including enabling work at home where needed and practicable, and

employing social distancing standards, implementing

travel restrictions where applicable, enhancing onsite hygiene practices, and

instituting visitation restrictions at the Company’s

The Company has not and does not expect that it will incur material

expenses implementing these health and safety policies.

All of the Company’s more than 30 production

facilities worldwide are open

and operating and are deemed as essential businesses in the jurisdictions where

they are operating.

The Company believes that to date

it has been able to meet the needs of all its customers across the globe despite

the current economic challenges.

The Company’s fiscal

year 2021 showed year-over-year improvement

from the prior fiscal year and continued a trend of gradual volume improvement which

began in the second half of 2020.

The Company continues to expect that the impacts from COVID-19 will gradually

decline subject

to the effective containment of the virus and its variants and successful

distribution and acceptance of the available vaccines and

However, the incidence of reported cases of COVID-19

or a variant in several geographies where the Company has

significant operations remains high and continues to evolve and it remains

highly uncertain as to how long the global pandemic and

related economic challenges will last and when our customers’ businesses will recover

to pre-COVID-19 levels.

The Company took

various actions to temporarily conserve cash and reduce costs since the onset of

the pandemic and these temporary initiatives were

designed and implemented so that the Company could successfully manage

through the challenging COVID-19 situation while

continuing to protect the health of its employees, meet customers’ needs,

maintain the Company’s long-term competitive

and above-market growth, and enable it to continue to effectively

integrate Houghton.

While the actions taken to date to protect our

workforce, to continue to serve our customers with excellence and to conserve

cash and reduce costs, have been effective thus far,

further actions to respond to the pandemic and its effects may

be necessary as conditions continue to evolve.

Critical Accounting Policies and Estimates

Quaker Houghton’s discussion

and analysis of its financial condition and results of operations

are based upon its consolidated

financial statements which have been prepared in accordance with

accounting principles generally accepted in the United States (“U.S.

and analysis of its financial condition and results of operations are based

upon its consolidated

financial statements which have been prepared in accordance with accounting

principles generally accepted in the United States (“U.S.

The preparation of these financial statements requires the Company

to make estimates and judgments that affect the

reported amounts of assets, liabilities, revenues and expenses, and

related disclosure of contingent assets and liabilities.

ongoing basis, the Company evaluates its estimates, including

those related to customer sales incentives, product returns, bad

reported amounts of assets, liabilities, revenues and expenses, and related disclosure

of contingent assets and liabilities.

ongoing basis, the Company evaluates its estimates, including those related

to customer sales incentives, product returns, bad debts,

inventories, property,

plant and equipment (“PP&E”), investments, goodwill, intangible

assets, income taxes, business combinations,

restructuring, incentive compensation plans (including

equity-based compensation), pensions and other postretirement benefits,

plant and equipment (“PP&E”), investments, goodwill, intangible assets, income taxes,

business combinations,

restructuring, incentive compensation plans (including equity-based

compensation), pensions and other postretirement benefits,

contingencies and litigation.

Quaker Houghton bases its estimates on historical experience

and on various other assumptions that are

believed to be reasonable under such circumstances, the

results of which form the basis for making judgments about the

values of assets and liabilities that are not readily apparent

from other sources.

However, actual results may differ

estimates under different assumptions or

Quaker Houghton believes the following critical accounting

policies describe the more significant judgments and

estimates used

Quaker Houghton bases its estimates on historical experience and on various

other assumptions that are

believed to be reasonable under such circumstances, the results of which

form the basis for making judgments about the carrying

values of assets and liabilities that are not readily apparent from other sources.

However, actual results may differ from

estimates under different assumptions or conditions.

Quaker Houghton believes the following critical accounting policies describe

the more significant judgments and estimates used

in the preparation of its consolidated financial statements:

Accounts receivable and inventory exposures:

Quaker Houghton establishes allowances for doubtful accounts

for estimated

losses resulting from the inability of its customers to

make required payments.

Quaker Houghton establishes allowances for doubtful accounts for estimated

losses resulting from the inability of its customers to make required

If the financial condition of the Company’s

were to deteriorate, resulting in an impairment of their

ability to make payments, additional allowances may be required.

our terms of trade, we may custom manufacture products

for certain large customers and/or may ship products

on a consignment basis.

Further, a significant portion of our

revenue is derived from sales to customers in industries where

companies have experienced past

were to deteriorate, resulting in an impairment of their ability to make payments,

additional allowances may be required.

our terms of trade, we may custom manufacture products for certain large

customers and/or may ship products on a consignment basis.

Further, a significant portion of our revenue

is derived from sales to customers in industries where companies have experienced

financial difficulties.

If a significant customer bankruptcy occurs, then we must judge

the amount of proceeds, if any,

ultimately be received through the bankruptcy or liquidation

If a significant customer bankruptcy occurs, then we must judge the amount of proceeds,

if any, that may

ultimately be received through the bankruptcy or liquidation process.

These matters may increase the Company’s

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bankruptcy occur, and may require

a write down or a disposal of certain inventory as well as the failure

to collect receivables.

Reserves for customers filing for bankruptcy protection

are established based on a percentage of the amount of receivables

a write down or a disposal of certain inventory as well as the failure to collect receivables.

Reserves for customers filing for bankruptcy protection are established

based on a percentage of the amount of receivables outstanding

at the bankruptcy filing date.

However, initially establishing

this reserve and the amount thereof is dependent on the Company’s

evaluation of likely proceeds to be received from the

bankruptcy process, which could result in the Company

recognizing minimal or

However, initially establishing this reserve

and the amount thereof is dependent on the Company’s

evaluation of likely proceeds to be received from the bankruptcy process, which

could result in the Company recognizing minimal or

no reserve at the date of bankruptcy.

We generally reserve

for large and/or financially distressed customers on

a specific review basis,

while a general reserve is maintained for other customers

based on historical experience.

for large and/or financially distressed customers on a specific review

while a general reserve is maintained for other customers based on

historical experience.

The Company’s consolidated

allowance for

doubtful accounts was $13.1 million and $11.7

million as of December 31, 2020 and 2019, respectively.

doubtful accounts was $12.3 million and $13.1 million as of December 31,

and 2020, respectively.

The Company recorded

expense to increase its provision for doubtful accounts by

$3.6 million, $1.9 million and $0.5 million for the years

ended December

expense to increase its provision for doubtful accounts by $0.7 million,

$3.6 million and $1.9 million for the years ended December

31, 2021, 2020 and 2019, respectively.

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increased or decreased the Company’s

pre-tax earnings by $0.4 million, $0.2 million and $0.1 million

for the years ended December

2019 and 2018,

respectively.

See Note 13 of Notes to Consolidated Financial Statements in Item

8 of this Report.

pre-tax earnings by $0.1 million, $0.4

million and $0.2 million for the years ended December

31, 2021, 2020 and 2019, respectively.

See Note 13 of Notes to Consolidated Financial Statements in Item 8 of this Report.

Environmental and litigation reserves:

Accruals for environmental and litigation matters are

recorded when it is probable that a

liability has been incurred and the amount of the liability

can be reasonably estimated.

for environmental and litigation matters are recorded when

it is probable that a

liability has been incurred and the amount of the liability can be reasonably

Environmental costs and remediation costs are

capitalized if the costs extend the life, increase the

capacity or improve the safety or efficiency of the property

from the date acquired

or constructed, and/or mitigate or prevent contamination

in the future.

capitalized if the costs extend the life, increase the capacity or improve

the safety or efficiency of the property from the date acquired

or constructed, and/or mitigate or prevent contamination in the future.

Estimates for accruals for environmental matters are based on a

variety of potential technical solutions, governmental regulations

and other factors, and are subject to a wide range of potential

variety of potential technical solutions, governmental regulations and

other factors, and are subject to a wide range of potential costs

for remediation and other actions.

A considerable amount of judgment is required in determining

the most likely estimate within the

range of total costs, and the factors determining this judgment

may vary over time.

Similarly, reserves for

litigation and similar

matters are based on a range of potential outcomes and

require considerable judgment in determining the

most probable outcome.

no amount within the range is considered more probable

than any other amount, the Company accrues the lowest amount

in that range

A considerable amount of judgment is required in determining the most likely

estimate within the

range of total costs, and the factors determining this judgment may vary

Similarly, reserves for litigation

matters are based on a range of potential outcomes and require considerable

judgment in determining the most probable outcome.

no amount within the range is considered more probable than any other

amount, the Company accrues the lowest amount in that range

in accordance with generally accepted accounting principles.

See Note 26 of Notes to Consolidated Financial Statements in

See Note 26 of Notes to Consolidated Financial Statements in Item 8 of

Realizability of equity investments:

The Company holds equity investments in various foreign

companies where it has the

ability to influence, but not control, the operations of the

entity and its future results.

The Company holds equity investments in various foreign companies

where it has the

ability to influence, but not control, the operations of the entity

and its future results.

The Company would record an impairment

charge to an investment if it concluded that a

decline in value that was other than temporary occurred.

changes in market

conditions, poor operating results of underlying investments,

devaluation of foreign currencies or other events or circumstances

result in losses or an inability to recover the carrying value

of the investments, potentially leading to an impairment charge

charge to an investment if it concluded that a decline in value that was other

than temporary occurred.

Adverse changes in market

conditions, poor operating results of underlying investments, devaluation

of foreign currencies or other events or circumstances could

result in losses or an inability to recover the carrying value of the investments,

potentially leading to an impairment charge in the

The carrying amount of the Company’s

equity investments as of December 31, 2020 was $95.8 million,

which included four

equity investments as of December 31, 2021

million, which included four

$21.5 million for a 32% interest in Primex, Ltd.

$7.8 million for a 50%

interest in Nippon Quaker Chemical,

$0.3 million for a 50% interest in Kelko

Quaker Chemical, S.A.

and $68.3 million for a 50% interest

$7.1 million for a 50% interest in Nippon Quaker Chemical,

$0.3 million for a 50% interest in Kelko Quaker Chemical, S.A.

and $66.4 million for a 50% interest in Korea

Houghton Corporation (Korea).

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affiliate, Kelko Quaker Chemical, S.A

Due to heightened foreign exchange controls, deteriorating

economic circumstances and other restrictions in Venezuela,

during the third quarter of 2018 the Company concluded that it no

longer had significant

Due to heightened foreign exchange controls, deteriorating economic circumstances

and other restrictions in Venezuela,

during 2018 the Company concluded that it no longer had significant

influence over this affiliate.

Prior to this

determination, the Company historically accounted

for this affiliate under the equity method.

As of December 31, 2020 and 2019, the

Company had no remaining carrying value for its investment

in Venezuela.

See Note 17 of Notes to Consolidated Financial

Statements in Item 8 of this Report.

exposures, uncertain tax positions and valuation

Prior to this determination, the

Company historically accounted for this affiliate under

the equity method.

As of December 31, 2021

and 2020, the Company had no

remaining carrying value for its investment in Venezuela.

See Note 17 of Notes to Consolidated Financial Statements in Item 8 of this

exposures, uncertain tax positions and valuation allowances:

Quaker Houghton records expenses and liabilities for taxes

based on estimates of amounts that will be determined as deductible

in tax returns filed in various jurisdictions.

based on estimates of amounts that will be determined as deductible in tax

returns filed in various jurisdictions.

The filed tax returns

are subject to audit, which often occur

several years subsequent to the date of the financial statements.

are subject to audit, which often occur several years subsequent to

the date of the financial statements.

Disputes or disagreements may

arise during audits over the timing or validity of certain

items or deductions, which may not be resolved for extended

periods of time.

The Company also evaluates uncertain tax positions on

all income tax positions taken on previously filed tax returns or

expected to be

taken on a future tax return in accordance with FIN 48,

which prescribes the recognition threshold and measurement attributes

financial statement recognition and measurement of tax

positions taken or expected to be taken on a tax return

and, also, whether the

benefits of tax positions are probable or if they will be more

likely than not to be sustained upon audit based upon the

technical merits

arise during audits over the timing or validity of certain items or deductions,

which may not be resolved for extended periods of time.

The Company also evaluates uncertain tax positions on all income tax

positions taken on previously filed tax returns or expected to be

taken on a future tax return in accordance with FIN 48, which prescribes

the recognition threshold and measurement attributes for

financial statement recognition and measurement of tax positions taken

or expected to be taken on a tax return and, also, whether the

benefits of tax positions are probable or if they will be more likely than not to be sustained upon

audit based upon the technical merits

of the tax position.

For tax positions that are determined to be more likely than not to

be sustained upon audit, the Company

recognizes the largest amount of benefit that

is greater than 50% likely of being realized upon ultimate

settlement in the financial

For tax positions that are not determined to be more

likely than not sustained upon audit, the Company does not recognize

For tax positions that are determined to be more likely than not to be sustained upon audit, the

recognizes the largest amount of benefit that is greater

than 50% likely of being realized upon ultimate settlement in the financial

For tax positions that are not determined to be more likely than not

sustained upon audit, the Company does not recognize

any portion of the benefit in its financial statements.

3 unchanged sentences

Also, the Company nets its liability for unrecognized tax benefits

against deferred tax assets related to net operating

losses or other tax credit carryforward on the basis that the uncertain

tax position is

settled for the presumed amount at the balance sheet

Quaker Houghton also records valuation allowances

when necessary to reduce its deferred tax assets to the amount

against deferred tax assets related to net operating losses or other tax credit carryforward

on the basis that the uncertain tax position is

settled for the presumed amount at the balance sheet date.

Quaker Houghton also records valuation allowances when necessary

to reduce its deferred tax assets to the amount that is more

likely than not to be realized.

While the Company has considered future taxable income

and assesses the need for a valuation

allowance, in the event Quaker Houghton were

to determine that it would be able to realize its deferred tax assets in the future

excess of its net recorded amount, an adjustment to

the deferred tax asset would increase income in the period

such determination was

Likewise, should the Company determine that it would not be able

to realize all or part of its net deferred tax assets in the

future, an adjustment to the deferred tax asset would be

charged to income in the period such determination was made.

While the Company has considered future taxable income and assesses the need for

allowance, in the event Quaker Houghton were to determine that it would

be able to realize its deferred tax assets in the future in

excess of its net recorded amount, an adjustment to the deferred

tax asset would increase income in the period such determination was

Likewise, should the Company determine that it would not be able to realize all or part of

its net deferred tax assets in the

future, an adjustment to the deferred tax asset would be charged

to income in the period such determination was made.

determinations could have a material impact on the Company’s

financial statements.

In 2017, the U.S.

government enacted comprehensive

tax legislation commonly referred to as “U.S.

implemented significant changes, particularly impacting

taxation for non-U.S.

earnings and dividends from certain

subsidiaries.

Based on interpretations and assumptions the Company

believes to be reasonable with regard to various uncertainties

and ambiguities in the application of certain provisions

and subsequent to numerous temporary regulations,

notices, and other formal guidance published by the Internal Revenue

Service (“I.R.S.”), U.S.

and various state taxing

authorities in 2018, the Company completed its accounting

for the tax effects of U.S.

Reform as of December 22, 2018.

possible that the I.R.S.

could issue subsequent guidance

or take positions on audit that differ from the Company’s

interpretations and

The Company currently believes that subsequent guidance

or interpretations made by the I.R.S.

will not be materially

different from the Company’s

application of the provisions of U.S.

Reform and would not have a material adverse effect on

Company’s tax liabilities,

earnings, or financial condition.

Pursuant to U.S.

Reform, the Company recorded a $15.5 million transition

tax liability for U.S.

income taxes on the

undistributed earnings of non-U.S.

Pursuant to the Tax

Cuts and Jobs Act (“U.S.

Reform”), the Company recorded a $15.5 million transition tax liability

income taxes on the undistributed earnings of non-U.S.

subsidiaries.

As of December 31, 2021, $7.0 million in installment have

been paid with the

remaining $8.5 million to be paid through installments

in future years.

been paid with the remaining $8.5 million to be paid through installments in future

However, the Company may also be subject

to other taxes,

such as withholding taxes and dividend distribution

taxes, if these undistributed earnings are ultimately remitted to

December 31, 2020,

the Company has a deferred tax liability of $5.9 million, which

primarily represents the estimate of the non-U.S.

taxes the Company will incur to remit certain previously taxed

earnings to the U.S.

It is the Company’s current

intention to reinvest

its future undistributed earnings of non-U.S.

to support working capital needs and certain other growth

initiatives outside

to other taxes, such as withholding taxes and dividend distribution taxes,

if these undistributed earnings are ultimately remitted to the

As of December 31, 2021, the Company has a deferred tax liability of

$8.4 million, which primarily represents the estimate of

taxes the Company will incur to remit certain previously

taxed earnings to the U.S.

It is the Company’s current intention

to reinvest its future undistributed earnings of non-U.S.

subsidiaries to support

working capital needs and certain other growth

initiatives outside of the U.S.

The amount of such undistributed earnings at December 31, 2021

was approximately $322.6 million.

Any tax liability

which might result from ultimate remittance of these

earnings is expected to be substantially offset by foreign

tax credits (subject to

certain limitations).

It is currently impractical to estimate any such incremental

See Note 10 of Notes to Consolidated

Financial Statements in Item 8 of this Report.

was approximately $377.4

Any tax liability which might result from ultimate remittance of these earnings

is expected to be substantially offset by

foreign tax credits (subject to certain limitations).

It is currently impractical to estimate any such incremental tax expense.

10 of Notes to Consolidated Financial Statements in Item 8 of this Report.

Goodwill and other intangible assets:

The Company accounts for business combinations und

er the acquisition method of

This method requires the recording of acquired assets, including

separately identifiable intangible assets, at their

The Company accounts for business combinations under the acquisition

This method requires the recording of acquired assets, including separately identifiable

intangible assets, at their

acquisition date fair values.

Any excess of the purchase price over the estimated fair value of

the identifiable net assets acquired is

Any excess of the purchase price over the estimated fair value of the identifiable

net assets acquired is

recorded as goodwill.

The determination of the estimated fair value of assets acquired

requires management’s judgment

involves the use of significant estimates and assumptions,

including assumptions with respect to future cash inflows

and outflows,

discount rates, royalty rates, asset lives and market multiples, among

When necessary, the Company

consults with

The determination of the estimated fair value of assets acquired requires management’s

judgment and often

involves the use of significant estimates and assumptions, including

assumptions with respect to future cash inflows and outflows,

discount rates, royalty rates, asset lives and market multiples, among other

When necessary, the Company consults with

external advisors to help determine fair value.

For non-observable market values, the Company may determine

fair value using

acceptable valuation principles, including the excess earnings,

relief from royalty,

lost profit or cost methods.

The Company amortizes definite-lived intangible assets on

a straight-line basis over their useful lives.

For non-observable market values, the Company may determine fair value

acceptable valuation principles, including the excess earnings, relief

from royalty, lost profit or cost

The Company amortizes definite-lived intangible assets on a straight-line

basis over their useful lives.

Goodwill and intangible

assets that have indefinite lives are not amortized and are

required to be assessed at least annually for impairment.

completes its annual goodwill and indefinite lived intangible

asset impairment test during the fourth quarter of each

year, or more

assets that have indefinite lives are not amortized and are required to be assessed at least annually

for impairment.

completes its annual goodwill and indefinite-lived intangible asset impairment

test during the fourth quarter of each year, or

frequently if triggering events indicate a possible impairment.

In completing a quantitative impairment test, the Company compares

the reporting units’ or indefinite lived intangible assets fair

value to their carrying value, primarily based on future discounted

flows, in order to determine if an impairment charge

is warranted.

The estimates of future discounted cash flows involve considerable

management judgment and are based upon certain significant

These assumptions include the weighted average cost of

capital (“WACC”)

as well as projected revenue growth rates and operating

income, which result in estimated EBITDA and EBITDA

As of March 31, 2020, the Company evaluated the initial impact

of COVID-19 on the Company’s

operations, as well as the

volatility and uncertainty in the economic outlook as a

result of COVID-19, to determine if this indicated it was more likely

that the carrying value of any of the Company’s

indefinite-lived or long-lived assets was not recoverable.

The Company considered

the negative effect of COVID-19 on the Company’s

operations and, at the time, the impact it expected to have

on its full year 2020

results in evaluating if a triggering event was present for

one or more of the Company indefinite-lived or long-lived

assets and, also,

the Company took into consideration the carrying value

and estimated fair value for each of its assets.

The Company concluded that

the impact of COVID-19 did not represent a triggering

event as of March 31, 2020 with regards to any of the Company’s

lived and long-lived assets, except for the Company’s

Houghton and Fluidcare trademarks

and tradename indefinite-lived intangible

Given the relatively short period of time between the

fair value determination of the acquired Houghton and Fluidcare

and tradename intangible assets as of the closing of the

Combination on August 1, 2019, and the 2019 annual impairment testing date

of October 1, the Company’s

2019 annual impairment assessment concluded that

the $242.0 million carrying value of acquired

Houghton and Fluidcare trademarks and tradename intangible

assets generally approximated fair value, with excess fair

value of less

Because of the previously concluded relatively narrow gap

between its fair value and its carrying value, the Company

concluded in the first quarter of 2020 that the expected

current year impact from COVID-19 on the Company’s

net sales represented a

triggering event.

As a result of the conclusion, the Company completed an interim

quantitative indefinite-lived intangible asset

impairment assessment as of March 31, 2020.

The determination of estimated fair value of the Houghton

and Fluidcare trademarks

and tradename intangible assets was based

on a relief from royalty valuation method which requires

management’s judgment

and often involves the use of significant estimates

and assumptions, including assumptions with respect to

and royalty rates, as well as revenue growth rates

growth rates.

In completing the interim quantitative impairment assessment as of March

31, 2020, the Company used a WACC

assumption of approximately 10% as well as current year

forecasted net sales and management’s

estimates with respect to future net

rates specific to legacy Houghton’s

As a result of an increase in the WACC

assumption as of March 31, 2020,

compared to the prior year fourth quarter annual impairment

assessment, and the significant decline in current year projected

Houghton net sales due to the impact of COVID-19,

the Company concluded that the estimated fair values of these intangible

were less than their carrying values and that an

impairment charge to write down their carrying values

to their estimated fair values

was warranted.

This resulted in a first quarter of 2020 non-cash impairment

charge of $38.0 million for these indefinite-lived

intangible assets, primarily related to the Houghton trademarks

and tradename.

The book value of these assets as of December 31,

2020 was $204.0 million.

The Company’s consolidated

goodwill at December 31, 2020 and 2019 was $631.2

million and $607.2 million, respectively.

Company completed its annual impairment assessment over

goodwill during the fourth quarter of 2020, and no impairment

were warranted.

Furthermore, the estimated fair value of each of the Company’s

reporting units substantially exceeded their carrying

value, with none of the Company’s

reporting units at risk for failing the goodwill impairment test.

The Company used a WACC

assumption for each of its reporting units of approximately

9.5%, and this assumption would have had to increase

by approximately

59%, or 6 percentage points, before any of the Company’s

reporting units would be considered potentially impaired.

Company’s assumption

of future and projected EBITDA margins by reporting

unit would have had to decrease by more than

approximately 75%

before any of the Company’s

reporting units would be considered potentially impaired.

The Company’s

consolidated indefinite-lived intangible assets at December

31, 2020 and 2019 were $205.1 million and $243.1 million,

respectively.

The Company completed its annual indefinite lived

intangible asset impairment assessment during the fourth quarter

determined that no impairment charge was

goodwill at both December 31, 2021 and

2020 was $631.2 million.

The Company completed its annual impairment assessment over goodwill during

the fourth quarter of 2021

by performing a qualitative assessment.

Based on the assessment performed, the Company concluded that there

was no evidence of

events or circumstances that would indicate a material change from

the Company’s prior year quantitative

assessment by reporting

unit and, therefore, no impairment charges were

The Company’s consolidated indefinite

-lived intangible assets at

December 31, 2021 and 2020 were $196.9 million and $205.1 million,

respectively, which primarily

consists of Houghton and

trademarks and tradename.

The Company completed its annual indefinite-lived intangible asset impairment assessment

during the fourth quarter of 2021, and determined that no impairment

charge was warranted.

The determination of estimated fair

value of these indefinite-lived intangible assets is based on a relief from royalty

valuation method, which requires management’s

judgment and often involves the use of significant estimates and assumptions,

including assumptions with respect to royalty rates, as

well as revenue growth rates and terminal growth rates.

The Company’s impairment assessment

concluded that the $204.0 million

carrying value of acquired Houghton and Fluidcare

trademarks and tradename intangible assets exceeded fair value

by approximately

See Note 16 of Notes to Consolidated Financial Statements in

Item 8 of this Report.

concluded that the carrying value of

acquired Houghton and Fluidcare

trademarks and tradename intangible assets exceeded fair value by

approximately 61%.

16 of Notes to Consolidated Financial Statements in Item 8 of this Report.

As previously disclosed, as of March 31, 2020, the Company concluded that

the impact of COVID-19 did not represent a

event with regards to any of the Company’s

indefinite-lived and long-lived assets, except for the Company’s

trademarks and tradename indefinite-lived intangible assets.

In the first quarter of 2020, as a result of the impact of

COVID-19 driving a decrease in projected legacy Houghton net sales during

that year and the impact of the sales decline on projected

future legacy Houghton net sales as well as an increase in the weighted average

cost of capital assumption utilized in the quantitative

impairment assessment, the Company concluded that the estimated fair

values of the Houghton and Fluidcare

trademarks and

tradename intangible assets were less than their carrying values.

As a result, an impairment charge of $38.0 million

during the first quarter of 2020 to write down the carrying values of these intangible

assets to their estimated fair values.

Pension and Postretirement benefits:

The Company provides certain defined benefit pension

and other postretirement benefits

The Company provides certain defined benefit pension and

other postretirement benefits

to current employees, former employees and retirees.

2 unchanged sentences

valuations to determine benefit expense and, if necessary,

non-cash charges to equity for additional minimum

pension liabilities.

Critical assumptions used in the actuarial valuation include

the weighted average discount rate, which is based on applicable

including the use of a split discount rate (spot-rate approach)

non-cash charges to equity for additional minimum pension liabilities.

Critical assumptions used in the actuarial valuation include the weighted

average discount rate, which is based on applicable yield

curve data, including the use of a split discount rate (spot-rate approach)

plans and certain foreign plans, rates of increase

in compensation levels, and expected long-term rates of

return on assets.

If different assumptions were used, additional

in compensation levels, and expected long-term rates of return

If different assumptions were used, additional pension

expense or charges to equity might be required.

The Company had two noncontributory U.S.

s, one of which (the “Legacy Quaker U.S.

Pension Plan”) had

November 30 year-end and a measurement date of December

As previously disclosed, the Company began the process of

terminating the Legacy Quaker U.S.

Pension Plan during

the fourth quarter of 2018.

During the third quarter of 2019, the Company

received a favorable termination determination letter

from the Internal Revenue Service (“I.R.S.”) and completed the

Legacy Quaker

Pension Plan termination during the first quarter

In order to terminate the Legacy Quaker U.S.

accordance with I.R.S.

and Pension Benefit Guaranty Corporation

requirements, the Company was required to fully fund the Legacy

Pension Plan on a termination basis and

the amount necessary to do so was approximately $1.8 million, subject to

true up adjustments.

In the third quarter of 2020, the Company finalized the amount

of the liability and related annuity payments and

received a refund in premium of approximately $1.6

In addition, the Company recorded a non-cash pension settlement

at plan termination of approximately $22.7 million.

This settlement charge included the immediate recognition

into expense of the

related unrecognized losses within accumulated other

comprehensive income (loss) (“AOCI”) on the balance sheet

as of the plan

termination date.

The following table highlights the potential impact

on the Company’s pre

-tax earnings due to changes in assumptions with respect

to the Company’s defined

benefit pension and postretirement benefit plans, based on assets and

liabilities as of December 31, 2020:

The following table highlights the potential impact on the Company’s

pre-tax earnings due to changes in assumptions with respect

to the Company’s defined benefit pension

and postretirement benefit plans, based on assets and liabilities as of December 31,

1/2 Percentage Point Increase

3 unchanged sentences

Expected rate of return on plan

The weighted-average discount rate used to determine

net periodic benefit costs for the year ended December 31, 2020 was

for Foreign plans and 3.1% for

The weighted average expected rate of return on plan

assets used to determine net periodic benefit costs for the year ended

December 31, 2020 was 2.2% for Foreign plans and

6.5% for U.S.

The weighted-average discount rate used to determine net periodic benefit

costs for the year ended December 31, 2021 was

1.4% for Foreign plans and 2.7% for U.S.

The weighted average expected rate of return on plan assets used to determine

net periodic benefit costs for the year ended

December 31, 2021 was 2.1% for Foreign plans and 5.8% for U.S.

Restructuring and other related liabilities:

A restructuring related program may consist of charges

for employee severance,

rationalization of manufacturing facilities and other related

To account for

such, the Company applies the Financial

A restructuring related program may consist of charges for

employee severance,

rationalization of manufacturing facilities and other related expenses.

To account for such, the

Company applies the Financial

Accounting Standards Board’s

1 unchanged sentence

This guidance requires that a liability for a cost

associated with an exit or disposal activity be recognized

when the liability is incurred, is estimable, and payment is probable.

Note 7 of Notes to Consolidated Financial Statements in

Item 8 of this Report.

associated with an exit or disposal activity be recognized when the liability

is incurred, is estimable, and payment is probable.

Note 7 of Notes to Consolidated Financial Statements in Item 8 of this Report.

Recently Issued Accounting Standards

See Note 3 of Notes to the Consolidated Financial Statements in

Item 8 of this Report for a discussion regarding recently issued

See Note 3 of Notes to the Consolidated Financial Statements in Item 8 of this Report

for a discussion regarding recently issued

accounting standards.

Liquidity and Capital Resources

At December 31, 2020, the Company had cash,

cash equivalents and restricted cash of $181.9 million.

At December 31, 2021, the Company had cash, cash equivalents and

restricted cash of $165.2 million.

Total cash, cash

equivalents and restricted cash was $143.6 million

at December 31, 2019.

The $38.3 million increase in cash, cash equivalents and

restricted cash was the net result of $178.4 million

of cash provided by operating activities and $6.6 million

of positive impacts due to

the effect of foreign currency translation on

cash, partially offset by $75.3 million of cash used in financing

activities and $71.4

million of cash used in investing activities.

Net cash flows provided by operating activities were $178.4

million in 2020 compared to $82.4 million in 2019.

equivalents and restricted cash was $181.9 million at December

The $16.7 million decrease in cash, cash equivalents and

restricted cash was the net result $49.1 million of cash used in investing

activities, $13.5 million of cash used in financing activities

and approximately $3.1 million of negative impacts due to the effect

of foreign currency translation on cash, partially offset by $48.9

million of cash provided by operating activities.

Net cash flows provided by operating activities were $48.9 million in

2021 compared to $178.4 million in 2020.

The Company’s

current year net operating cash flow increase was largely

due to higher earnings from including a full year of Houghton

Hay, lower net

cash outflows than in 2019 associated with restructuring and the Combination

and other acquisition-related expenses,

higher cash dividends received from its equity affiliated

companies year-over-year, and higher operating

cashflow from changes in

working capital.

The operating cashflow improvement due to working capital

changes includes benefits from changes in accounts

payable and accrued liabilities due to more favorable negotiated

vendor terms and other benefits from the Combination, impacts

volume declines related to COVID-19, and lower

cash tax payments due to current year mix of earnings and deductibility of

Net cash flows used in investing activities were $71.4

million in 2020 compared to $908.6 million in 2019.

current year net operating cash flow decrease was primarily driven by

a significant change in working capital which more than offset

the Company’s higher earnings in 2021

The significant increase in current year net sales resulted in a large

increase in accounts

receivable in 2021 as compared to a significant decrease during

2020 as net sales and the associated accounts receivables significantly

declined in 2020

due to the negative impact from COVID-19.

In addition, the Company has experienced an increase in inventory in

2021 as a result of continued rising raw material costs as well as a build in

inventory to ensure the Company has appropriate stock to

meet customer demands in response to ongoing stress on the global supply

Net cash flows used in investing activities were $49.1 million in 2021

compared to $71.4 million in 2020.

This $22.3 million

decrease in cash outflows used in investing activities

was largely due to a decrease in payments related to

acquisitions as the prior year

$893.4 million outflow included the closing of the

Combination on August 1, 2019, as further described below,

compared to the

current year payments related to acquisitions

of $56.2 million that were mainly driven by the acquisition of Coral

for approximately

net of cash acquired, further described below,

and a post-closing adjustment related to Norman Hay of approximately

$3.2 million.

In addition, the Company had higher investments in property,

plant and equipment in the current year due to the

inclusion of a full year of both Houghton and Norman

Hay, including higher

expenditures related to integrating the companies during

These higher outflows were partially offset by approximately

$2.6 million of higher proceeds from disposition of assets in

2020, which was mainly driven by the sale of certain

assets as part of its Combination integration plan.

Net cash flows used in financing activities

were $75.3 million in 2020 compared to cash provided

in financing activities of $844.1

million in 2019.

The $919.4 million decrease in net cash flows from financing

activities was due primarily to $897.1 million of

additional term loan and revolving credit facility borrowings in

the prior year used to close the Combination compared

million of current year debt repayments in accordance with

its term loan agreements and other reductions in borrowings

revolving credit facilities.

Also, as part of the Combination, the Company incurred and

paid debt issuance costs of approximately

$23.7 million in the prior year.

In addition, the Company paid $27.6 million of cash dividends

during 2020, a $5.7 million or 26%

increase in cash dividends compared to the prior year,

primarily due to the approximately 4.3 million shares issued at closing

Combination, as well as both the current year and

prior year cash dividend per share increases.

decrease in cash outflows used in investing activities was due to lower cash payments

related to acquisitions during 2021 as a result of

the level of acquisition activity in each year and higher cash proceeds

from the disposition of assets, which includes the sale of certain

held-for-sale real property assets related to the Combination.

Capital expenditures also increased to $21.5 million in 2021 compared

to $17.9 million in 2020 due to the continued strategic and integration related

capital investments the Company has and continues to

Net cash flows used in financing activities were $13.5 million in 2021

compared to $75.3 million in 2020.

The $61.8 million

decrease in net cash outflows from financing activities was primarily

driven by an increase in borrowings in the current year under the

Company’s revolving credit

facility compared to repayments in the prior year which was driven by significant

working capital

investment in the current year described above.

In addition, the Company paid $28.6 million of cash dividend during

million or 4% increase in cash dividends compared to the prior year due to cash dividend

per share increases.

Finally, during 2020,

2020, the Company

used $1.0 million to purchase the remaining noncontrolling

the Company used $1.0 million to purchase the remaining noncontrolling

interest in one of its South African affiliates.

Prior to this buyout, this

South African affiliate made a distribution

Prior to this

buyout, this South African affiliate made a distribution

to the prior noncontrolling affiliate shareholder of approximately $0.8

$0.8 million in 2020.

There were no similar noncontrolling interest activities in 2021.

On August 1, 2019, the Company completed the Combination,

whereby the Company acquired all of the issued and outstanding

shares of Houghton from Gulf Houghton Lubricants, Ltd.

in accordance with the Share Purchase Agreement dated

April 4, 2017.

final purchase consideration was comprised of:

(i) $170.8 million in cash;

(ii) the issuance of approximately

4.3 million shares of

common stock of the Company with par value of $1.00,

comprising 24.5% of the common stock of the Company

the Company’s refinancing

of $702.6 million of Houghton’s

indebtedness at closing.

Cash acquired in the Combination was $75.8

Prior to the Combination, the Company secured commitments

from certain banks for a new credit facility (as amended,

“Credit Facility”).

The Company’s primary credit facility

(the “Credit Facility”) is comprised of a $400.0 million multicurrency

revolver (the “Revolver”), a $600.0 million term loan (the

each with the Company as borrower,

and a $150.0 million (as of August 1, 2019) Euro equivalent term

“Euro Term Loan”

and together with the “U.S.

Loan”, the “Term

Loans”) with Quaker Chemical B.V.,

a Dutch subsidiary of the

Company as borrower, each

with a five-year term maturing in August 2024.

Subject to the consent of the administrative agent and

certain other conditions, the Company may designate

additional borrowers.

The maximum amount available under the Credit Facility

can be increased by up to $300.0 million at the Company’s

request if there are lenders who agree to accept additional commitments

and the Company has satisfied certain other conditions.

Borrowings under the Credit Facility bear interest at a base rate

plus an applicable margin based upon the

Company’s consolidated net leverage

There are LIBOR replacement provisions that

contemplate a further amendment if and when LIBOR ceases

to be reported.

The interest rate incurred on the outstanding borrowings

under the Credit Facility during 2020 was approximately

At December 31, 2020, the interest rate on the

borrowings under the Credit Facility was approximately

In addition to paying interest on outstanding principal under

Facility, the Company

is required to pay a commitment fee ranging from 0.2% to

0.3% depending on the Company’s

consolidated net

leverage ratio to the lenders under the Revolver in

respect of the unutilized commitments thereunder.

The Credit Facility is subject to certain financial and

other covenants.

The Company’s initial consolidated

consolidated adjusted EBITDA ratio could not exceed

4.25 to 1, with step downs in the permitted ratio over the

term of the Credit

revolver (the

“Revolver”), a $600.0 million term loan (the “U.S.

Loan”), each with the Company as borrower, and

a $150.0 million (as of

August 1, 2019) Euro equivalent term loan (the “Euro Term

Loan” and together with the “U.S.

Loan”, the “Term Loans”)

Quaker Chemical B.V.,

a Dutch subsidiary of the Company as borrower,

each with a five year term maturing in August 2024.

to the consent of the administrative agent and certain other conditions,

the Company may designate additional borrowers.

maximum amount available under the Credit Facility can be increased by

up to $300.0 million at the Company’s request

lenders who agree to accept additional commitments and the Company has

satisfied certain other conditions.

Borrowings under the

Credit Facility bear interest at a base rate or LIBOR plus an applicable margin

based upon the Company’s consolidated

On December 10, 2021, the Company amended the Credit Facility to include an update

to provide for the use of a non-USD

currency LIBOR successor rate.

The weighted average interest rate incurred on the outstanding borrowings

under the Credit Facility

during the year ended and as of December 31, 2021 was approximately

In addition to paying interest on outstanding principal

under the Credit Facility,

the Company is required to pay a commitment fee ranging from 0.2% to 0.3% depending

on the Company’s

consolidated net leverage ratio to the lenders under the Revolver in respect of

the unutilized commitments thereunder.

The Credit Facility is subject to certain financial and other covenants.

The Company’s initial consolidated net

consolidated adjusted EBITDA ratio could not exceed 4.25 to 1,

with step downs in the permitted ratio over the term of the Credit

As of December 31, 2021, the consolidated net debt to consolidated

1 unchanged sentence

Company’s consolidated

adjusted EBITDA to interest expense ratio may not be less than

3.0 to 1 over the term of the agreement.

Credit Facility also prohibits

the payment of cash dividend if the Company is in default

or if the amount of the dividend paid annually

exceeds the greater of $50.0 million and 20% of consolidated

adjusted EBITDA unless the ratio of consolidated

consolidated adjusted EBITDA is less than 2.0 to 1,

in which case there is no such limitation on amount.

adjusted EBITDA to interest expense ratio may not be less than 3.0 to 1 over the

term of the agreement.

Credit Facility also prohibits the payment of cash dividends

if the Company is in default or if the amount of the dividends

annually exceeds the greater of $50.0 million and 20% of consolidated adjusted

EBITDA unless the ratio of consolidated net debt to

consolidated adjusted EBITDA is less than 2.0 to 1, in which case there is no

such limitation on amount.

As of December 31, 2021

and December 31, 2019, the Company was in compliance

with all of the Credit Facility covenants.

The Term Loans have

principal amortization during their five-year terms,

with 5.0% amortization of the principal balance due in years 1 and

2, 7.5% in year

3, and 10.0% in years 4 and 5, with the remaining principal

amount due at maturity.

and 2020, the Company was in compliance with all of the Credit Facility covenants.

The Term Loans have quarterly

amortization during their five year terms, with 5.0% amortization of

the principal balance due in years 1 and 2, 7.5% in year 3, and

10.0% in years 4 and 5, with the remaining principal amount due at maturity.

The Credit Facility is guaranteed by certain of the

Company’s domestic subsidiaries

and is secured by first priority liens on substantially all of

the assets of the Company and the

and is secured by first-priority liens on substantially all of the assets of the

Company and the

domestic subsidiary guarantors, subject to certain customary exclusions.

1 unchanged sentence

by certain foreign subsidiaries on an unsecured basis.

The Credit Facility required the Company to fix its variable

interest rates on at least 20% of its total Term

satisfy this requirement as well as to manage the

Company’s exposure to variable

interest rate risk associated with the Credit Facility,

The Credit Facility required the Company to fix its variable interest rates on at least 20%

of its total Term Loans.

satisfy this requirement as well as to manage the Company’s

exposure to variable interest rate risk associated with the Credit Facility,

in November 2019, the Company entered into $170.0

million notional amounts of three-year interest rate swaps at a base

1.64% plus an applicable margin as provided

in the Credit Facility, based on

the Company’s consolidated net

leverage ratio.

time the Company entered into the swaps, and as

of December 31, 2020, the aggregate interest rate on the swaps,

including the fixed

base rate plus an applicable margin, was 3.1%.

The Company capitalized $23.7 million of certain third-party

debt issuance costs in connection with executing the

Credit Facility.

million notional amounts of three year interest rate swaps at a base rate of 1.64%

plus an applicable margin as provided in the Credit Facility,

based on the Company’s consolidated

net leverage ratio.

At the time the

Company entered into the swaps, and as of December 31, 2021, the

aggregate interest rate on the swaps, including the fixed base rate

plus an applicable margin, was 3.1%.

The Company capitalized $23.7 million of certain third-party debt issuance

costs in connection with executing the Credit Facility.

Approximately $15.5 million of the capitalized costs were attributed to

the Term Loans and recorded

as a direct reduction of long-

term debt on the Company’s Consolidated

Balance Sheet.

Approximately $8.3 million of the capitalized costs were attributed

to the Term Loans and

recorded as a direct reduction of long-

term debt on the Company’s

Consolidated Balance Sheet.

Approximately $8.3 million of the capitalized costs were

attributed to the

Revolver and recorded within other assets on the Company’s

1 unchanged sentence

These capitalized costs are being

amortized into interest expense over the five-year term

of the Credit Facility.

As of December 31, 2020, the Company had Credit Facility

borrowings outstanding of $887.1 million.

amortized into interest expense over the five year term of the Credit Facility.

As of December 31, 2021, the Company had Credit Facility borrowings

outstanding of $889.6 million.

As of December 31, 2020,

the Company had Credit Facility borrowings outstandin

of $922.4 million.

the Company had Credit Facility borrowings outstanding of $887.1

The Company has unused capacity under the Revolver of

approximately $234 million, net of bank letters of

credit of approximately $6 million, as of December 31, 2020.

approximately $184 million, net of bank letters of credit of approximately

$4 million, as of December 31, 2021.

The Company’s other

debt obligations are primarily industrial development

bonds, bank lines of credit and municipality-related loans, which

totaled $12.1

million and $12.6 million as of December 31, 2020 and

2019, respectively.

Total unused capacity

under these arrangements as of

debt obligations are primarily industrial development bonds

bank lines of credit and municipality-related loans, which totaled $11.8

million and $12.1

million as of December 31, 2021

and 2020, respectively.

Total unused capacity under

these arrangements as of

December 31, 2021 was approximately $26 million.

1 unchanged sentence

as of December 31, 2021 was $736.2 million.

The Company estimates that it realized full year cost synergies

in 2020 of approximately $58 million compared to

$7 million in

The Company continues to expect to realize Combination cost synergies

of approximately $75 million in 2021 and $80 million

The Company expects to continue to incur additional costs

and make associated cash payments to integrate Quaker

and continue realizing the Combination’s

total anticipated cost synergies.

The Company expects total cash payments, including those

pursuant to the QH Program, described below,

but excluding incremental capital expenditures related to

the Combination, will be in

the range of 1.3 times its total anticipated 2022 cost

synergies of $80 million.

A significant portion of these costs were already

incurred in 2019 and 2020, but the Company expects

to continue to incur such costs through 2021.

The Company incurred $30.3

million of total Combination, integration and other acquisition-related

expenses in 2020, including $0.8 million of accelerated

depreciation, a $0.6 million loss on the sale of held-for-sale

assets, and $0.8 million of other income related to an indemnification

asset, described in the Non-GAAP Measures section of this

The Company had aggregate net cash outflows of

approximately $29.4 million related to the Combination,

The Company estimates that it realized full year cost synergies related

to the Combination in 2021

of approximately $75 million

compared to $58 million in 2020.

The Company has fully achieved its annual target Combination cost synergies

of approximately $80

million going forward.

The Company incurred $18.6 million of total Combination, integration

and other acquisition-related expenses

in 2021, which includes $0.7 million of accelerated depreciation

and is net of a $5.4 million gain on the sale of certain held-for-sale

real property assets and $0.6 million of other income related to an indemnification

asset, described in the Non-GAAP Measures

section of this Item below.

The Company had aggregate net cash outflows of approximately $20.6 million

related to the Combination,

integration and other acquisition-related expenses during 2021.

Comparatively,

in 2019, the Company incurred $38.0 million of total Combination,

integration and other acquisition-related expenses,

including $2.1 million of ticking fees as well as $0.6

million of accelerated depreciation, and aggregate net cash outflows related

these costs were approximately $52.4 million.

Comparatively, in 2020, the

Company incurred $30.3 million of total

Combination, integration and other acquisition-related expenses, including

$0.8 million of accelerated depreciation, a $0.6 million loss

on the sale of held-for-sale assets, an $0.8 million of other income related to an indemnification

asset, and aggregate net cash outflows

related to these costs were approximately $29.4 million.

While the Company has incurred significant integration costs in 2019, 2020

and 2021, the Company expects to incur additional integration and operating

costs as well as higher capital expenditures to further

optimize its footprint, processes and other functions over the next several years.

Quaker Houghton’s management

approved, and the Company initiated, a global restructuring

plan (the “QH Program”) in the

third quarter of 2019 as part of its planned cost synergies

associated with the Combination and recorded $26.7

million in restructuring

approved, and the Company initiated, a global restructuring plan (the

“QH Program”) in the

third quarter of 2019 as part of its planned cost synergies associated

with the Combination and recorded $26.7 million in restructuring

and related charges in 2019.

The Company recognized an additional $5.5 million of

restructuring and related charges in 2020 as

result of the QH Program.

The QH Program includes restructuring and associated severance costs to

reduce total headcount by

approximately 350 people globally and plans for the

closure of certain manufacturing and non-manufacturing

In connection

with the plans for closure of certain manufacturing and

non-manufacturing facilities, the Company made a decision

to make available

for sale certain facilities during the second quarter of 2020.

During the fourth quarter of 2020, certain of these facilities were

the Company recognized a loss on disposal of $0.6 million

included within other expense, net on the Consolidated Statement

Additionally, certain

buildings and land with an aggregate book value of

approximately $10.0 million have been reclassified

to other current assets from property,

plant and equipment as of December 31, 2020.

The Company expects to receive amounts

excess of net book value for the properties held for sale.

The exact timing and total costs associated with the QH Program

on a number of factors and is subject to change;

however, the Company currently expects

reduction in headcount and site closures will

continue to occur into 2021 under the QH Program

and estimates that the anticipated cost synergies realized

under this program will

The Company recognized an additional $1.4 million and $5.5 million

of restructuring and related charges

in 2021 and 2020, respectively,

as a result of the QH Program.

The QH Program includes restructuring and associated severance costs

to reduce total headcount by approximately 400 people globally and

plans for the closure of certain manufacturing and non-

manufacturing facilities.

In connection with the plans for closure of certain manufacturing and non-manufacturing

facilities, the

Company made a decision to make available for sale certain facilities during

the second quarter of 2020.

During the first quarter of

2021 and fourth quarter of 2020, certain of these facilities were sold

and the Company recognized a gain on disposal of $5.4 million

and a loss on disposal of $0.6 million, respectively,

included within other income (expense), net on the Consolidated Statement of

The exact timing and total costs associated with the QH Program will depend on a number of

factors and is subject to

however, reductions in headcount

and site closures have continued,

and the Company currently expects additional headcount

reductions and site closures to occur into 2022 and estimates that the anticipated

cost synergies realized under the QH Program will

approximate one-times restructuring costs incurred.

The Company made cash payments related to the settlement

of restructuring

liabilities under the QH Program during 2020 of approximately

$15.7 million compared to $8.9 million in 2019.

As described above, in the first quarter of 2020, the

Company completed the termination of the Legacy Quaker U.S.

and funded the plan on a termination basis with approximately

$1.8 million, subject to final true up adjustments.

In the third quarter

of 2020, the Company finalized the amount of liability and

related annuity payments and received a refund in premium

In addition, the Company recorded a non-cash pension settlement charge

at plan termination of approximately $22.7 million

in the first quarter of 2020.

On December 22, 2020, the Company closed its acquisition

of Coral Chemical Company (“Coral”), a privately held,

provider of metal finishing fluid solutions.

The purchase price was $54.1 million,

on a cash-free and debt-free basis, subject to routine

and customary post-closing adjustments related to working

capital and net indebtedness levels.

The Company expects to finalize its

post-closing adjustments for the Coral acquisition in the first quarter

Cash paid for Coral in the fourth quarter of 2020 was

approximately $53.1 million, net of cash acquired.

In February 2021, the Company acquired certain assets related to

solutions primarily for steel end markets for approximately

The Company made cash payments related to the settlement of restructuring

liabilities under the QH Program during 2021 of approximately $5.3 million

compared to $15.7 million in 2020.

During the first quarter of 2020, the Company completed the termination

of the Legacy Quaker U.S.

Pension Plan and funded the

plan on a termination basis with approximately $1.8 million, subject to final

true up adjustments.

In the third quarter of 2020, the

Company finalized the amount of liability and related annuity payments and

received a refund in premium of $1.6 million.

addition, the Company recorded a non-cash pension settlement charge

at plan termination of approximately $22.7 million in the first

quarter of 2020.

As of December 31, 2021, the Company’s

gross liability for uncertain tax positions, including interest

and penalties, was $28.9

The Company cannot determine a reliable estimate of the

timing of cash flows by period related to its uncertain tax position

However, should the entire liability

be paid, the amount of the payment may be reduced by up

to $7.5 million as a result of

gross liability for uncertain tax positions, including interest and penalties,

The Company cannot determine a reliable estimate of the timing of cash flows

by period related to its uncertain tax position

However, should the entire liability be

paid, the amount of the payment may be reduced by up to $7.3 million as a result of

offsetting benefits in other tax jurisdictions.

During the fourth quarter of 2020, one of the Company’s

subsidiaries received a notice of

inspection from a taxing authority in a country where certain

of its subsidiaries operate, which related to a non-income

(indirect) tax

that may be applicable to certain products the subsidiary

To date, the Company

has not received any assessment from the

authority related to potential liabilities that may be due

from the Company’s subsidiary.

Consequently there is substantial uncertainty

with respect to the Company’s

ultimate liability with respect to this indirect tax.

During the year ended 2021, the Company recorded $13.1 million of non-income tax

credits for certain of its Brazilian subsidiaries.

The Company expects to utilize these credits to offset certain Brazilian

payments over approximately two years, which began in the fourth quarter

See Note 26 of Notes to Consolidated Financial

Statements in Item 8 of this Report.

The Company believes that its existing cash, anticipated

cash flows from operations and available additional liquidity

sufficient to support its operating requirements

and fund its business objectives for at least the next twelve

months, including but not

limited to, payments of dividends to shareholders, costs related

to the Combination and integration, pension plan contributions,

expenditures, other business opportunities (including

potential acquisitions) and other potential contingencies.

The Company’s

liquidity is affected by many factors, some

based on normal operations of our business and others related

to the impact of the

pandemic on our business and on global economic

conditions as well as industry uncertainties, which we cannot

cannot predict economic conditions and industry downturns

or the timing, strength or duration of recoveries.

believe appropriate, additional debt or equity financing

which would provide capital for corporate purposes, working

capital funding,

During the third quarter of 2021, two of the Company’s

locations suffered property damage as a result of flooding and fire.

Company maintains property insurance for all of its facilities globally.

The Company, its insurance

adjuster and insurance carrier are

actively managing the remediation and restoration activities associated

with both of these events and at this time the Company has

concluded, based on all available information and discussions with its insurance

adjuster and insurance carrier, that the losses incurred

during 2021 will be covered under the Company’s

property insurance coverage, net of an aggregate deductible of $2.0 million.

Company has received payments from its insurers of $2.1 million and has

recorded an insurance receivable associated with these

events of $0.7 million as of December 31, 2021.

The Company and its insurance carrier continue to review the impact on operations

as it relates to a potential business interruption insurance claim;

as of the date of this report, the Company cannot reasonably

estimate any probable amount of business interruption insurance

claim recoverable, therefore the Company has not recorded a gain

contingency for a possible business interruption insurance claim as of December

See Note 26 of Notes to Consolidated

Financial Statements in Item 8 of this Report.

The Company believes that its existing cash, anticipated cash flows from

operations and available additional liquidity will be

sufficient to support its operating requirements and fund

its business objectives for at least the next twelve months and beyond,

including but not limited to, payments of dividends to shareholders, costs

related to the Combination and other acquisitions and as

well as ongoing integration and optimization,

pension plan contributions, capital expenditures, other business opportunities

potential acquisitions),

implementing actions to achieve the Company’s

sustainability goals and other potential contingencies.

Company’s liquidity is affected

by many factors, some based on normal operations of our business and

others related to the impact of

the pandemic on our business and on global economic conditions as well as industry

uncertainties, which we cannot predict.

cannot predict economic conditions and industry downturns or the

timing, strength or duration of recoveries.

believe appropriate, additional debt or equity financing which would

provide capital for corporate purposes, working capital funding,

additional liquidity needs or to fund future growth opportunities, including

1 unchanged sentence

The timing and

amount of potential capital requirements cannot be

determined at this time and will depend on a number of factors,

including the

actual and projected demand for our products, specialty

chemical industry conditions, competitive factors, and the

amount of potential capital requirements cannot be determined at this time

and will depend on a number of factors, including the

actual and projected demand for our products, specialty chemical industry

conditions, competitive factors, and the condition of

financial markets, among others.

The following table summarizes the Company’s

contractual obligations as of December 31, 2020, and the effect

such obligations

are expected to have on its liquidity and cash flows in

future periods.

Pension and postretirement plan contributions beyond 2021

not determinable since the amount of any contribution

is heavily dependent on the future economic environment and investment

contractual obligations as of December 31, 2021, and the effect such

are expected to have on its liquidity and cash flows in future periods.

Pension and postretirement plan contributions beyond 2021 are

not determinable since the amount of any contribution is heavily dependent

on the future economic environment and investment

returns on pension trust assets.

The timing of payments related to other long-term liabilities which

consists primarily of deferred

compensation agreements and environmental reserves,

also cannot be readily determined due to their uncertainty.

The timing of payments related to other long-term liabilities which consists primarily

compensation agreements and environmental reserves, also cannot

be readily determined due to their uncertainty.

Interest obligations

on the Company’s long-term

debt and capital leases assume the current debt levels will be outstanding

for the entire respective period

and apply the interest rates in effect as of

December 31, 2020.

debt and capital leases assume the current debt levels will be outstanding for

the entire respective period

and apply the interest rates in effect as of December 31, 2021.

Payments due by period

17 unchanged sentences

EBITDA, adjusted EBITDA margin, non-GAAP operating

income, non-GAAP operating margin, non-GAAP

net income and non-

income, non-GAAP operating margin, non-GAAP net

income and non-

GAAP earnings per diluted share.

The Company believes these non-GAAP financial measures provide

meaningful supplemental

The Company believes these non-GAAP financial measures provide meaningful supplemental

information as they enhance a reader’s understanding

2 unchanged sentences

performance of the Company,

and facilitate a comparison among fiscal periods, as the

non-GAAP financial measures exclude items

that are not considered indicative of future operating performance

or not considered core to the Company’s

results are presented for supplemental informational

purposes only and should not be considered a substitute for the

information presented in accordance with GAAP.

The Company presents EBITDA which is calculated as net income

attributable to the Company before depreciation and

amortization, interest expense, net, and taxes on income

before equity in net income of associated companies.

and facilitate a comparison among fiscal periods, as the non-GAAP financial

measures exclude items

that are not indicative of future operating performance or not considered

core to the Company’s operations.

Non-GAAP results are

presented for supplemental informational purposes only and should not be

considered a substitute for the financial information

presented in accordance with GAAP.

The Company presents EBITDA which is calculated as net income attributable

to the Company before depreciation and

amortization, interest expense, net, and taxes on income before equity in net income

of associated companies.

The Company also

presents adjusted EBITDA which is calculated as EBITDA plus

or minus certain items that are not considered indicative

operating performance or not considered core to the Company’s

In addition, the Company presents non-GAAP operating

income which is calculated as operating income plus or

minus certain items that are not considered indicative of future operating

presents adjusted EBITDA which is calculated as EBITDA plus or minus

certain items that are not indicative of future operating

performance or not considered core to the Company’s

Adjusted EBITDA margin and non-GAAP operating

calculated as the percentage of adjusted EBITDA and

non-GAAP operating income to consolidated net sales, respectively.

Company believes these non-GAAP measures provide

transparent and useful information and are widely used by analysts, investors,

and competitors in our industry as well as by management

in assessing the operating performance of the Company on

In addition, the Company presents non-GAAP operating income

which is calculated as operating income plus or minus certain items that are

not indicative of future operating performance or not

considered core to the Company’s

Adjusted EBITDA margin and non-GAAP operating margin

are calculated as the

percentage of adjusted EBITDA and non-GAAP operating income

to consolidated net sales, respectively.

The Company believes

these non-GAAP measures provide transparent and useful information and

are widely used by analysts, investors, and competitors in

our industry as well as by management in assessing the operating performance

of the Company on a consistent basis.

Additionally, the

Company presents non-GAAP net income and non-GAAP earnings

per diluted share as additional performance

Non-GAAP net income is calculated as adjusted EBITDA, defined

above, less depreciation and amortization, interest

expense, net, and taxes on income before equity in

net income of associated companies, in each case adjusted,

as applicable, for any

depreciation, amortization, interest or tax impacts resulting

from the non-core items identified in the reconciliation

of net income

Company presents non-GAAP net income and non-GAAP earnings per diluted share

as additional performance

Non-GAAP net income is calculated as adjusted EBITDA, defined above,

less depreciation and amortization, interest

expense, net, and taxes on income before equity in net income of associated

companies, in each case adjusted, as applicable, for any

depreciation, amortization, interest or tax impacts resulting from the non-core

items identified in the reconciliation of net income

attributable to the Company to adjusted EBITDA.

Non-GAAP earnings per diluted share is calculated as non

-GAAP net income per

diluted share as accounted for under the “two-class share

Non-GAAP earnings per diluted share is calculated as non-GAAP net income

diluted share as accounted for under the “two-class share method.”

The Company believes that non-GAAP net income and non-

GAAP earnings per diluted share provide transparent

and useful information and are widely used by analysts, investors,

competitors in our industry as well as by management in

assessing the operating performance of the Company on a consistent

GAAP earnings per diluted share provide transparent and useful information

and are widely used by analysts, investors, and

competitors in our industry as well as by management in assessing the operating

performance of the Company on a consistent basis.

The following tables reconcile the Company’s

non-GAAP financial measures (unaudited) to their most

directly comparable

GAAP financial measures (dollars in thousands, unless otherwise

noted, except per share amounts):

non-GAAP financial measures (unaudited) to their most directly comparable

GAAP financial measures (dollars in thousands, unless otherwise noted,

except per share amounts):

Non-GAAP Operating Income and Margin Reconciliations

1 unchanged sentence

Operating income

Fair value step up of inventory sold (a)

Houghton combination, integration and other

acquisition-related expenses (b)

Restructuring and related charges (c)

Customer bankruptcy costs (d)

Charges related to the settlement of a non-core

equipment sale (e)

Indefinite-lived intangible asset impairment (f)

acquisition-related expenses (a)

Restructuring and related charges (b)

Fair value step up of acquired inventory sold (c)

Executive transition costs (d)

Inactive subsidiary's non-operating litigation costs (e)

Customer bankruptcy costs (f)

Facility remediation costs, net (g)

Charges related to the settlement of a non-core equipment sale (h)

Indefinite-lived intangible asset impairment (i)

Non-GAAP operating income

Non-GAAP operating margin (%) (o)

Non-GAAP operating margin (%) (r)

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and

2 unchanged sentences

Net income attributable to Quaker Chemical Corporation

Depreciation and amortization (b)(m)

Interest expense, net (b)

Taxes on income

before equity in net income of associated companies (n)

Equity income in a captive insurance company (g)

Fair value step up of inventory sold (a)

Depreciation and amortization (a)(p)

Interest expense, net (a)

Taxes on income before

equity in net income of associated companies (q)

Equity income in a captive insurance company (j)

Houghton combination, integration and other

acquisition-related expenses (b)

Restructuring and related charges (c)

Customer bankruptcy costs (d)

Charges related to the settlement of a non-core

equipment sale (e)

Indefinite-lived intangible asset impairment (f)

Pension and postretirement benefit costs, non-service components

Gain on changes in insurance settlement restrictions of an

subsidiary and related insurance insolvency recovery (i)

Gain on liquidation of an inactive legal entity (j)

Currency conversion impacts of hyper-inflationary economies (k)

acquisition-related expenses (a)

Restructuring and related charges (b)

Fair value step up of acquired inventory sold (c)

Executive transition costs (d)

Inactive subsidiary’s non

-operating litigation cost (e)

Customer bankruptcy costs (f)

Facility remediation costs, net (g)

Charges related to the settlement of a non-core equipment sale (h)

Indefinite-lived intangible asset impairment (i)

Pension and postretirement benefit (income) costs,

non-service components (k)

Gain on changes in insurance settlement restrictions of an inactive

subsidiary and related insurance insolvency recovery (l)

Brazilian non-income tax credits (m)

Currency conversion impacts of hyper-inflationary economies (n)

Adjusted EBITDA

Adjusted EBITDA margin (%) (o)

Adjusted EBITDA margin (%) (r)

Adjusted EBITDA

Depreciation and amortization - adjusted (b)

Interest expense, net - adjusted (b)

Depreciation and amortization - adjusted (a)

Interest expense, net - adjusted (a)

Taxes on income

before equity in net income

of associated companies - adjusted (l)(n)

of associated companies - adjusted (o)(q)

Non-GAAP net income

3 unchanged sentences

Quaker Chemical Corporation common shareholders

Equity income in a captive insurance company per diluted

Fair value step up of

inventory sold per diluted share (a)

Equity income in a captive insurance company per diluted share (j)

Houghton combination, integration and other

acquisition-related expenses per diluted share (b)

Restructuring and related charges per diluted

Customer bankruptcy costs per diluted share (d)

Charges related to the settlement of a non-core

sale per diluted share (e)

Indefinite-lived intangible asset impairment per diluted

acquisition-related expenses per diluted share (a)

Restructuring and related charges per diluted share (b)

Fair value step up of acquired inventory sold per diluted share (c)

Executive transition costs per diluted share (d)

Inactive subsidiary’s non

-operating litigation costs per diluted share (e)

Customer bankruptcy costs per diluted share (f)

Facility remediation costs, net per diluted share (g)

Charges related to the settlement of a non-core equipment

sale per diluted share (h)

Indefinite-lived intangible asset impairment per diluted share (i)

Pension and postretirement benefit costs, non-service

components per diluted share (h)

Gain on changes in insurance settlement restrictions of an

subsidiary and related insurance insolvency recovery per diluted

Gain on liquidation of an inactive legal entity per diluted

components per diluted share (k)

Gain on changes in insurance settlement restrictions of an inactive

subsidiary and related insurance insolvency recovery per diluted share (l)

Brazilian non-income tax credits per diluted share (m)

Currency conversion impacts of hyper-inflationary economies

per diluted share (k)

Impact of certain discrete tax items per diluted share (l)

Non-GAAP earnings per diluted share (p)

Fair value step up of inventory sold relates to expenses associated

with selling inventory from acquired businesses which

adjusted to fair value as part of purchase accounting.

These increases to costs of goods sold (“COGS”) are not indicative

future operating performance of the Company.

per diluted share (n)

Impact of certain discrete tax items per diluted share (o)

Non-GAAP earnings per diluted share (s)

Houghton combination, integration and other acquisition-related

expenses include certain legal, financial, and other advisory

consultant costs incurred in connection with due diligence,

regulatory approvals and closing the Combination, as well as

integration planning and post-closing integration activities including

internal control readiness and remediation.

These cost also

include certain one-time labor costs associated with the Company’s

acquisition-related activities.

These costs are not indicative

of the future operating performance of the Company.

Approximately $1.5 million, $9.4 million and $5.1 million for

ended December 31, 2020, 2019 and 2018, respectively,

of these pre-tax costs were considered non-deductible for the

expenses include certain legal, financial, and other advisory and

consultant costs incurred in connection with post-closing integration

activities including internal control readiness and

remediation, as well as due diligence, regulatory approvals and closing

the Combination.

These costs are not indicative of the

future operating performance of the Company.

Approximately $0.6 million, $1.5 million and $9.4 million for the years ended

December 31, 2021, 2020 and 2019, respectively,

of these pre-tax costs were considered non-deductible for the purpose of

determining the Company’s

effective tax rate, and, therefore, taxes on income before

equity in net income of associated

effective tax rate, and, therefore, taxes on income before equity in

net income of associated

companies - adjusted reflects the impact of these items.

During 2021, 2020 and 2019, the Company recorded $0.7 million, $0.8

million, respectively,

million, and $0.6 million, respectively,

of accelerated depreciation related to certain of the Company’s

facilities, which is included in the caption

“Houghton combination, integration and other acquisition

-related expenses” in the reconciliation of operating income

GAAP operating income and included in the caption

“Depreciation and amortization” in the reconciliation of net

attributable to the Company to EBITDA, but excluded from

the caption “Depreciation and amortization – adjusted” in the

reconciliation of adjusted EBITDA to non-GAAP net

income attributable to the Company.

During 2019 and 2018, the Company

incurred $2.1 million and $3.5 million, respectively,

of ticking fees to maintain the bank commitment related

to the Combination.

These interest costs are included in the caption “Interest expense,

net” in the reconciliation of net income attributable to

Company to EBITDA, but are excluded from the caption

“Interest expense, net – adjusted” in the reconciliation of adjusted

EBITDA to non-GAAP net income.

During 2020, the Company recorded $0.8 million of other income

related to an

indemnification asset.

During 2020 and 2018, the Company recorded a loss of

$0.6 million and a gain of $0.6 million,

respectively, on the

sale of held-for-sale assets related to the Combination.

Each of these items are included in the caption

“Houghton combination, integration and other acquisition

expenses” in the reconciliation of GAAP earnings per diluted

attributable to Quaker Chemical Corporation common shareholders

to Non-GAAP earnings per diluted share as well as the

reconciliation of Net Income attributable to Quaker Chemical Corporation

to Adjusted EBITDA and Non-GAAP net income See

Note 2 and Note 9 of Notes to Consolidated Financial Statements,

facilities, which is

included in the caption “Houghton combination, integration and other

acquisition-related expenses” in the reconciliation of

operating income to non-GAAP operating income and included in the

caption “Depreciation and amortization” in the

reconciliation of net income attributable to the Company to EBITDA, but

excluded from the caption “Depreciation and

amortization – adjusted” in the reconciliation of adjusted EBITDA to

non-GAAP net income attributable to the Company.

2019, the Company incurred $2.1 million of ticking fees to maintain the bank

commitment related to the Combination.

interest costs are included in the caption “Interest expense, net” in the reconciliation

of net income attributable to the Company to

EBITDA, but are excluded from the caption “Interest expense, net

– adjusted” in the reconciliation of adjusted EBITDA to non-

GAAP net income.

During 2021 and 2020, the Company recorded $0.6 million and $0.8 million, respectively,

of other income

related to an indemnification asset.

During 2021 and 2020, the Company recorded a gain of $5.4 million

and a loss of $0.6

million, respectively,

on the sale of certain held-for-sale real property assets related to

the Combination.

Each of these items are

included in the caption “Houghton combination, integration and other

acquisition expenses” in the reconciliation of GAAP

earnings per diluted share attributable to Quaker Chemical Corporation

common shareholders to Non-GAAP earnings per diluted

share as well as the reconciliation of Net Income attributable to Quaker

Chemical Corporation to Adjusted EBITDA and Non-

GAAP net income See Note 2 and Note 9 of Notes to Consolidated Financial

Statements, which appears in Item 8 of this Report.

Restructuring and related charges represent the

costs incurred by the Company associated with the QH restructuring program

which was initiated in the third quarter of 2019 as part of the Company’s

plan to realize cost synergies associated with the

These costs are not indicative of the future operating performance of the Company.

See Note 7 of Notes to

Consolidated Financial Statements,

which appears in Item 8 of this Report.

Restructuring and related charges represent

the costs incurred by the Company associated with the QH restructuring

which was initiated in the third quarter of 2019 as part

of the Company’s plan

to realize cost synergies associated with the

These costs are not indicative of the future operating performance

Fair value step up of inventory sold relates to expense associated with selling

inventory of acquired businesses which was

adjusted to fair value as part of purchase accounting.

This increases to costs of goods sold (“COGS”) are not indicative of the

future operating performance of the Company.

Executive transition costs represent the costs related to the Company’s

search, hiring and transition to a new CEO in connection

with the executive transition that look place in 2021.

These expenses are not indicative of the future operating performance of the

Inactive subsidiary’s non

-operating litigation costs represents the charges incurred by

an inactive subsidiary of the Company and

are a result of the termination of restrictions on insurance settlement reserves.

These charges are not indicative of the future

operating performance of the Company.

See Note 26 of Notes to Consolidated Financial Statements, which appears

Customer bankruptcy costs represent the cost associated with a specific

reserve for trade accounts receivable related to a customer

who filed for bankruptcy protection.

These expenses are not indicative of the future operating performance

of the Company.

Note 13 of Notes to Consolidated Financial Statements, which appears

in Item 8 of this Report.

Facility remediation costs, net, presents the gross costs associated with remediation,

cleaning and subsequent restoration costs

associated with the property damage to certain of the Company’s

facilities, net of insurance recoveries received.

These charges

are non-recurring and are not indicative of the future operating performance

of the Company.

See Note 26 of Notes to

Consolidated Financial Statements, which appears in Item

8 of this Report.

Customer bankruptcy costs represent the cost associated

with a specific reserve for trade accounts receivable related

to a customer

who filed for bankruptcy protection.

These expenses are not indicative of the future operating

performance of the Company.

Note 13 of Notes to Consolidated Financial Statements, which

appears in Item 8 of this Report.

Charges related to the settlement of a non-core

equipment sale represent the pre-tax charge related to

a one-time, uncommon,

customer settlement associated with a prior sale of non

-core equipment.

Consolidated Financial Statements, which appears in Item 8 of this Report.

Charges related to the settlement of a non-core equipment

sale represent the pre-tax charge related to a one-time, uncommon,

customer settlement associated with a prior sale of non-core equipment.

These charges are not indicative of the future operating

performance of the Company.

Indefinite-lived intangible asset impairment represents the

non-cash charge taken to write down the value

of certain indefinite-

lived intangible assets associated with the Houghton

The Company has no prior history of goodwill or intangible

asset impairments and this charge is not indicative

of the future operating performance of the Company.

Indefinite-lived intangible asset impairment represents the non-cash

charge taken to write down the value of certain indefinite-

lived intangible assets associated with the Combination.

The Company has no prior history of goodwill or intangible asset

impairments and this charge is not indicative of the future operating

performance of the Company.

See Note 16 of Notes to

Consolidated Financial Statements, which appears in Item

8 of this Report.

Equity income in a captive insurance company represents the

after-tax income attributable to the Company’s

Consolidated Financial Statements, which appears in Item 8 of this Report.

Equity income in a captive insurance company represents the after-tax

income attributable to the Company’s

interest in Primex,

(“Primex”), a captive insurance company.

The Company holds a 32% investment in and has significant

influence over

Primex, and therefore accounts for this investment under

the equity method of accounting.

The Company holds a 32% investment in and has significant influence over

Primex, and therefore accounts for this investment under the equity method of

The income attributable to Primex is

not indicative of the future operating performance of the

Company and is not considered core to the Company’s

Pension and postretirement benefit costs, non-service components

not indicative of the future operating performance of the Company

and is not considered core to the Company’s operations.

Pension and postretirement benefit (income) costs, non-service components

represent the pre-tax, non-service components of the

Company’s pension and

postretirement net periodic benefit cost in each period.

Company’s pension and postretirement

net periodic benefit cost in each period.

These costs are not indicative of the future

operating performance of the Company.

The year ended December 31, 2020 includes a $22.7 million

settlement charge for the

The year ended December 31, 2020 includes a $22.7 million settlement charge

Company’s termination

3 unchanged sentences

which appears in Item 8 of this Report.

Gain on changes in insurance settlement restrictions of an

inactive subsidiary and related insurance insolvency recovery

represents income associated with the gain on the termination

of restrictions on insurance settlement reserves and the cash

receipts from an insolvent insurance carrier for previously

submitted claims by an inactive subsidiary of the Company.

income is not indicative of the future operating performance

of the Company.

Gain on changes in insurance settlement restrictions of an inactive subsidiary

and related insurance insolvency recovery

represents income associated with the gain on the termination of restrictions

on insurance settlement reserves and the cash

receipts from an insolvent insurance carrier for previously submitted

claims by an inactive subsidiary of the Company.

income is not indicative of the future operating performance of the Company.

See Notes 9 and 26 of Notes to Consolidated

Financial Statements, which appears in Item 8 of this Report.

Gain on liquidation of an inactive legal entity represents

the decrease in historical cumulative currency translation adjustments

associated with an inactive legal entity which was closed.

These cumulative currency translation adjustments were the result of

remeasuring the legal entity’s

monetary assets and liabilities to the applicable published

exchange rates and were a component of

accumulated other comprehensive loss, which was included

in total shareholder’s equity on the Company’s

Consolidated Balance

As required under U.S.

when a legal entity is liquidated, any amount attributable to that

legal entity and

accumulated in the currency translation adjustment component

of equity is required to be removed from equity and reported

part of the gain or loss on liquidation of the legal entity

during the period in which the liquidation occurs.

This non-deductible

recognized gain is not indicative of the future operating

performance of the Company.

See Note 9 of Notes to Consolidated

Financial Statements, which appears in Item 8 of this Report.

Brazilian non-income tax credits represent indirect tax credits related to certain

of the Company’s Brazilian subsidiaries

prevailing in a legal claim as well as the Brazil Supreme Court ruling on these non

-income tax matters.

The non-income tax

credit is non-recurring and not indicative of the future operating performance

of the Company.

See Note 26 of Note to

Consolidated Financial Statements, which appears in Item 8 of this Report.

Currency conversion impacts of hyper-inflationary economies represents

1 unchanged sentence

with the Company’s affiliates

whose local economies are designated as hyper-inflationary

whose local economies are designated as hyper-inflationary under

An entity which

operates within an economy deemed to be hyper-inflationary

GAAP is required to remeasure its monetary

liabilities to the applicable published exchange rates and

record the associated gains or losses resulting from the remeasurement

GAAP is required to remeasure its monetary assets and

liabilities to the applicable published exchange rates and record the

associated gains or losses resulting from the remeasurement

directly to the Consolidated Statements of Income.

economy has been considered hyper-inflationary

economy has been considered hyper-inflationary under

GAAP since 2010, while Argentina’s

2 unchanged sentences

In addition, the

Company acquired an Argentine Houghton

subsidiary which also applies hyper-inflationary accounting.

During 2020 and 2019,

the Company incurred non-deductible, pre-tax charges

Company’s Argentine

Houghton subsidiary also applies hyper-inflationary accounting.

During 2021, 2020 and 2019, the

Company incurred non-deductible, pre-tax charges

related to the Company’s Argentine

During 2018, the Company

incurred non-deductible, pre-tax charges related

to the Company’s Legacy

Quaker Argentine affiliate as well as after

related to the Company’s

joint venture.

The charges incurred related to the immediate recognition

of foreign currency

remeasurement in the Consolidated Statements of

Income associated with these entities are not indicative of the

future operating

performance of the Company.

See Notes 1, 9 and 17 of Notes to Consolidated Financial

Statements, which appears in Item 8 of

The impacts of certain discrete tax items included the impact of

changes in the valuation allowance for foreign tax credits

acquired with the Combination, changes in withholding

tax rates and the associated impact on previously accrued

for distributions

at certain of the Company’s

Asia/Pacific subsidiaries, additional reserves for uncertain

tax positions related to tax audits at certain

of the Company’s EMEA

subsidiaries.

This line item also includes deferred tax benefits the Company

recorded in 2020 and 2019

related to intercompany intangible asset transfers and

the related amortization of these deferred tax benefits.

Additionally, the

2019 and 2018 amounts include certain transition tax adjustments

related to adjustments to adopt U.S.

of Notes to Consolidated Financial Statements, which appears

in Item 8 of this Report.

Depreciation and amortization for the years ended

December 31, 2020 and 2019 includes $1.2 million and $0.4 million,

respectively, of

amortization expense recorded within equity in net income of

associated companies in the Company’s

Consolidated Statements of Income, which is attributable

to the amortization of the fair value step up for the Company’s

interest in a Houghton joint venture in Korea as a result

of required purchase accounting.

The charges incurred related to

the immediate recognition of foreign currency remeasurement in the

Consolidated Statements of Income associated with these

entities are not indicative of the future operating performance of the Company.

See Notes 1, 9 and 17 of Notes to Consolidated

Financial Statements, which appears in Item 8 of this Report.

The impacts of certain discrete tax items includes

the impact of changes in certain valuation allowances

recorded on certain of the

Company’s foreign

tax credits, tax law changes in foreign jurisdictions, changes in withholding tax rates, the

tax impacts of non-

income tax credits associated with certain of the Company’s

Brazilian subsidiaries and the associated impact on previously

accrued for distributions at certain of the Company’s

Asia/Pacific subsidiaries, the one-time deferred tax benefit recorded on the

transfer of intangible assets between the Company’s

subsidiaries as well as the offsetting impact and amortization

of a deferred

tax benefit the Company recorded during 2020 and 2019 related to

similar intercompany intangible asset transfers.

Additionally,

the 2019 amounts include certain transition tax adjustments related to adjustments

to adopt U.S.

See Note 10 of

Notes to Consolidated Financial Statements, which appears in Item

8 of this Report.

Depreciation and amortization for the years ended December 31, 2021,

2020 and 2019 includes $1.2 million, $1.2 million and

$0.4 million, respectively,

of amortization expense recorded within equity in net income of associated

companies in the

Company’s Consolidated

Statements of Income, which is attributable to the amortization of the fair value step up for

Company’s 50% interest Korea Houghton

Corporation as a result of required purchase accounting.

Taxes on income

before equity in net income of associated companies – adjusted

presents the impact of any current and deferred

income tax expense (benefit), as applicable, of

the reconciling items presented in the reconciliation of net income attributable

Quaker Chemical Corporation to adjusted EBITDA, and

was determined utilizing the applicable rates in the taxing jurisdictions

before equity in net income of associated companies – adjusted presents the impact

of any current and deferred

income tax expense (benefit), as applicable, of the reconciling items presented

in the reconciliation of net income attributable to

Quaker Chemical Corporation to adjusted EBITDA, and was determined

utilizing the applicable rates in the taxing jurisdictions in

which these adjustments occurred, subject to deductibility.

Fair value step up of inventory sold described in (a) resulted

incremental taxes of less than $0.1 million and $2.9

million for 2020 and 2019, respectively.

Houghton combination,

and other acquisition-related expenses described in

(b) resulted in incremental taxes of $6.9 million for 2020

Houghton combination, integration and other acquisition-related

expenses described in (a) resulted in incremental taxes of $4.2 million

for 2021, $6.9 million for 2020, and $6.7 million for 2019.

Restructuring and related charges described in (b)

resulted in incremental taxes of $0.3 million for 2021, $1.4 million for 2020

and $6.2 million for 2019.

Fair value step up of inventory sold described in (c) resulted in incremental taxes of $0.2 million,

than $0.1 million and $2.9 million for 2021, 2020 and 2019, respectively.

Executive transition expenses described in (d) resulted

in incremental taxes of $0.7 million for 2021.

Inactive subsidiary non-operating litigation costs described in (e) resulted in

incremental taxes of $0.2

million for 2021.

Customer bankruptcy costs described in (f) resulted in incremental taxes of $0.1

million in 2020 and $0.3 million in 2019.

Facility remediation costs, net described in (g) results in incremental taxes of $0.5

million for 2021.

Charges related to the settlement of a non-core equipment

sale described in (h) resulted in incremental taxes of

$0.1 million for 2019.

Indefinite-lived intangible asset impairment described in (i) resulted in

incremental taxes of $8.7 million

Pension and postretirement benefit (income) costs, non-service components

described in (k) resulted in a reduction of

taxes of $0.1 million for 2021 and incremental taxes of $7.5 million for 2020,

and $0.7 million for 2019.

Restructuring and related charges described in (c) resulted

in incremental taxes of $1.4 million

for 2020 and $6.2 million for 2019.

Customer bankruptcy costs described in (d) resulted in incremental

taxes of $0.1 million in

2020 and $0.3 million in 2019.

Charges related to the settlement of a non-core

equipment sale described in (e) resulted in

incremental taxes of $0.1 million for 2019.

Indefinite-lived intangible asset impairment described in (f) resulted

in incremental

taxes of $8.7 million for 2020.

Pension and postretirement benefit costs, non-service components

described in (h) resulted in

incremental taxes of $7.5 million for 2020, $0.7 million

for 2019, and $0.5 million for 2018.

Gain on changes in insurance

settlement restrictions of an inactive subsidiary and related

insurance insolvency recovery described in (i) resulted in a reduction

of taxes of $4.2 million in 2020 and less than $0.1

million in 2019 and 2018.

Gain on liquidation of an inactive legal entity

described in (k) resulted in a reduction of taxes of $0.1

million in 2018.

The impact of certain discrete items described in (m)

resulted in incremental taxes of $11.2

million for 2020, $5.7 million for 2019, and a reduction of taxes

of $5.8 million in 2018.

Gain on changes in

insurance settlement restrictions of an inactive subsidiary

and related insurance insolvency recovery described in (l) resulted in a

reduction of taxes of $4.2 million in 2020 and less than $0.1 million in

Brazilian non-income tax credits described in (m)

resulted in a reduction of taxes of $4.8 million for 2021.

The impact of certain discrete items described in (o) resulted in a tax

benefit of $5.8 million for 2021, incremental taxes of $11.2

million for 2020, and a reduction of taxes of $5.7 million in 2019.

The Company calculates adjusted EBITDA margin

and non-GAAP operating margin as the percentage

of adjusted EBITDA and

and non-GAAP operating margin as the percentage of adjusted EBITDA

non-GAAP operating income to consolidated net sales.

The Company calculates non-GAAP earnings per diluted share

as non-GAAP net income attributable to the Company

weighted average diluted shares outstanding using the “two-class share

method” to calculate such in each given period.

The Company calculates non-GAAP earnings per diluted share as non

-GAAP net income attributable to the Company per

weighted average diluted shares outstanding using the “two-class share method”

to calculate such in each given period.

Off-Balance Sheet Arrangements

The Company had no material off-balance

sheet items, as defined under Item 303(a)(4) of Regulation S-K as of

The Company had no material off-balance sheet commitments or

obligations as of December 31, 2021.

The Company’s only off-

-balance sheet items outstanding as of December 31,

2020 represented approximately $10 million of

total bank letters of credit and guarantees.

The bank letters of credit and guarantees are not significant to

the Company’s liquidity or

capital resources.

See Note 20 of Notes to Consolidated Financial Statements in

Item 8 of this Report.

Consolidated Operations Review – Comparison of 2020

Net sales were 1,417.7 million in 2020 compared to $1,133.5

million in 2019.

balance sheet commitments or obligations outstanding as of December 31,

2021 represented approximately $6 million of total bank

letters of credit and guarantees.

The bank letters of credit and guarantees are not significant to the Company’s

liquidity or capital

See Note 20 of Notes to Consolidated Financial Statements in Item 8 of this Report.

Consolidated Operations Review – Comparison of 2021 with 2020

Net sales were $1,761.2 million in 2021 compared to $1,417.7 million

The net sales increase of approximately $343.5

million or 24% year-over-year was primarily due to higher sales volumes of

13%, which includes additional net sales from recent

acquisitions of 4%, increases from selling price and product mix of 8% and

the positive impact of foreign currency translation of 3%.

The increase in organic sales volumes compared to 2020

was primarily the result of the continued year-over-year

improvement in end

market conditions from the prior year impacts of COVID-19 and continued

market share gains.

Sales from acquisitions is primarily

driven by the Company’s acquisition

of Coral Chemical Company (“Coral”) in December 2020 and

the tin-plating solutions business

acquired in February 2021.

The increase from selling price and product mix includes the impact of current

year selling price increases

implemented in response to the increases in raw material costs experienced

The positive impact from foreign currency

translation is primarily the result of the strengthening of the Chinese renminbi,

euro, Mexican peso, the Canadian dollar and the

British pound against the U.S.

dollar year-over-year.

COGS were $1,166.5 million in 2021 compared to $904.2 million in 2020.

The increase in COGS of 29% was driven by the

associated COGS on the increase in net sales described above, and

continued increases in the Company’s global

raw material costs

compared to the prior year and the impacts of supply constraints in the current year.

Gross profit in 2021 of $594.6 million increased $81.2 million or approximately

16% from 2020, due primarily to the increase in

net sales noted above.

The Company’s reported gross margin

in 2021 was 33.8% compared to 36.2% in 2020.

The lower current year

gross margin is primarily attributable to increased raw materials and

other costs that began in the fourth quarter of 2020 and have

continued throughout 2021 and the impacts of constraints on the world’s

global supply chain partially offset by the Company’s

ongoing pricing initiatives.

SG&A in 2021 increased $38.1 million compared to 2020 due primarily to

the impact of sales increases on direct selling costs,

year-over-year inflation increases, additional

SG&A from recent acquisitions and higher SG&A due to foreign currency

partially offset by lower incentive compensation year-over

-year as well as the benefits of additional realized cost synergies associated

with the Combination year-over-year.

In addition, SG&A was lower in the prior year period as a result of temporary

measures the Company implemented in response to COVID-19.

While the Company continues to manage costs during the on-going

pandemic, it has incurred higher SG&A year-over-year

as the global economy continues to gradually rebound.

During 2021 and 2020, the Company incurred $23.9 million and $29.8

million, respectively, of

Combination, integration and

other acquisition-related expenses primarily for professional fees related

to Houghton integration and other acquisition-related

See the Non-GAAP Measures section of this Item, above.

The Company initiated a restructuring program during 2019 as part of

its global plan to realize cost synergies associated with the

The Company incurred restructuring and related charges for reductions

in headcount and site closures under this

program, net of adjustments to initial estimates for severance, of

an expense of $1.4 million and $5.5 million during 2021 and 2020,

respectively.

See the Non-GAAP Measures section of this Item, above.

Operating income in 2021 was $150.5 million compared to $59.4 million

Excluding Combination, integration and other

acquisition-related expenses, restructuring and related charges and

other non-core items, the Company’s

current year non-GAAP

operating income of $182.6 million increased compared to $134.0

million in the prior year, primarily due

to the increase in net sales

described above and the benefits from cost savings related to the Combination

offset by an increase in SG&A as well as the significant

increases in raw material costs year-over-year.

The Company estimates that it realized cost synergies associated with the

of approximately $75 million during 2021 compared to approximately

$58 million during 2020.

The Company had other income, net, of $18.9 million in 2021 compared

to other expense, net, of $5.6 million in 2020.

over-year change was primarily a result of other income related to certain

non-income tax credits recorded by the Company’s

Brazilian subsidiaries, the gain on the sale of certain held-for-sale real property assets and lower

foreign currency transaction losses in

2021 as compared to the prior year.

The Company had non-service components of pension and postretirement

benefit income in the

current year compared to an expense in the prior year as a result of the $22.7

million pension settlement charge directly related to the

termination of the Legacy Quaker U.S.

pension plan partially offset

by a $18.1 million gain related to the lapse of restrictions over

certain cash that was previously designated solely for the settlement of

asbestos claims at an inactive subsidiary,

all of which are

described in the Non-GAAP Measures section of this Item, above.

Interest expense, net, decreased $4.3 million compared to 2020 driven

by lower current year average borrowings outstanding as a

result of the additional revolver borrowings drawn during part of 2020

at the onset of the pandemic to add additional liquidity,

with a decline in overall interest rates year-over-year,

as the weighted average interest rate incurred on borrowings under the

Company’s credit facility was approximately

1.6% during 2021 compared to approximately 2.2% during 2020.

The Company’s effective

tax rates for 2021 and 2020 were an expense of 23.8% and benefit of 19.5%, respectively.

Company’s higher current year

effective tax rate is driven by a higher level of pre-tax earnings and

mix of earnings, as well as

deferred tax expense related to the planned repatriation of non-U.S.

In addition, the rate was impacted by certain one-time

charges and benefits related to an intercompany intangible

asset transfer and related royalty income recognition offset

by changes in

the valuation allowance for foreign tax credits.

Comparatively, the prior

year effective tax rate was impacted by the tax effect of

certain one-time tax charges and benefits related to a 2020 intercompany

intangible asset transfer, additional charges

for uncertain tax

positions relating to certain foreign tax audits, and the tax impact of the Company’s

termination of its Legacy Quaker U.S.

Excluding the impact of these items as well as all other non-core items in

each year, described in the Non-GAAP Measures

section of this Item, above, the Company estimates that the 2021 and 2020

effective tax rates would have been approximately 26%

and 25%, respectively.

The higher estimated current year tax rate was primarily driven by a higher level of pre

-tax earnings and the

impact of changes in mix of earnings,

deferred taxes related to the planned repatriation of non-U.S.

earnings, and provision

adjustments in the prior period.

The Company may experience continued volatility in its effective tax

rates due to several factors,

including the timing of tax audits and the expiration of applicable statutes of

limitations as they relate to uncertain tax positions, the

unpredictability of the timing and amount of certain incentives in various

tax jurisdictions, the treatment of certain acquisition-related

costs and the timing and amount of certain share-based compensation-related

tax benefits, among other factors.

In addition, the

foreign tax credit valuation allowance, or absence thereof, is based on

a number of variables, including forecasted earnings, which

Equity in net income of associated companies increased $2.0 million in

2021 compared to 2020, primarily due to higher current

year income from the Company’s interest

in a captive insurance company partially offset by lower earnings

from the Company’s 50%

interest in a joint venture in Korea compared to the prior year.

See the Non-GAAP Measures section of this Item, above.

Net income attributable to noncontrolling interest was less than $0.1 million

in 2021 compared to $0.1 million in 2020

result of the first quarter of 2020 acquisition of the remaining ownership

interest in one of the Company’s South

African affiliates

Foreign exchange positively impacted the Company’s

yearly results by approximately 6% driven by the positive impact from

foreign currency translation on earnings as well as lower foreign exchange

transaction losses in the current year as compared to the

Consolidated Operations Review – Comparison of 2020 with 2019

Net sales were $1,417.7 million in 2020 compared to $1,133.5 million

The net sales increase of 25% year-over-year

includes additional net sales from acquisitions, primarily

Houghton and Norman Hay,

of $408.6 million.

includes additional net sales from acquisitions, primarily Houghton

and Norman Hay, of $408.6 million.

Excluding net sales related

to acquisitions, the Company’s

current year net sales would have declined approximately

11% which reflects a decrease in

volumes of 9%, a negative impact from foreign currency

translation of 1% and a decrease from selling price and product

The primary driver of the volume decline in the current

year was the negative impact of COVID-19 on global production

COGS were $904.2 million in 2020 compared to $741.4

million in 2019.

to acquisitions, the Company’s prior

year net sales would have declined approximately 11%

which reflects a decrease in sales volumes

of 9%, a negative impact from foreign currency translation of 1% and

a decrease from selling price and product mix of 1%.

primary driver of the volume decline in the prior year was the negative

impact of COVID-19 on global production levels.

COGS were $904.2 million in 2020 compared to $741.4 million in

The increase in COGS of 22% was primarily due to the

inclusion of a full year of Houghton and Norman Hay COGS and

$0.8 million of accelerated depreciation charges in

the current year,

partially offset by lower current year COGS on

the decline in net sales due to COVID-19 and prior year charges

of $11.7 million to

increase acquired inventory to its fair value, described

in the Non-GAAP Measures section of this Item above.

Gross profit in 2020 increased $121.3 million or 31%

from 2019 due primarily to additional gross profit from

The Company’s reported

gross margin in the current period

was 36.2% compared to 34.6% in 2019, which included the

inventory fair value step up described above.

Excluding one-time increases to COGS in both periods,

the Company estimates that its

gross margins for 2020 and 2019 would have

been 36.3% and 35.7%, respectively.

The estimated increase in gross margin year-over-

year was primarily due to lower COGS as a result of the Company’s

inclusion of a full year of Houghton and Norman Hay COGS and $0.8 million of

accelerated depreciation charges in 2020, partially

offset by lower prior year COGS on the decline in net sales due

to COVID-19 and 2019 charges of $11.7

million to increase acquired

inventory to its fair value, described in the Non-GAAP Measures section of this Item

Gross profit in 2020 increased $121.3 million or 31% from 2019 due primarily

to additional gross profit from Houghton and

The Company’s reported gross

margin in 2020 was 36.2% compared to 34.6% in 2019, which included

the inventory

fair value step up described above.

Excluding one-time increases to COGS in both periods, the Company

estimates that its gross

margins for 2020 and 2019 would have been 36.3% and 35.7%,

respectively.

The estimated increase in gross margin year-over-year

was primarily due to lower COGS as a result of the Company’s

progress on Combination-related logistics, procurement and

manufacturing cost savings initiatives, partially offset

by the lower current year sales volumes on certain fixed

manufacturing costs.

SG&A in 2020 increased $96.9 million compared

to 2019 due primarily to additional SG&A from Houghton and Norman

partially offset by the impact of COVID-19

cost savings actions, including lower travel expenses, and the

benefits of realized costs

by the lower sales volumes on certain fixed manufacturing costs.

SG&A in 2020 increased $96.9 million compared to 2019 due primarily to

additional SG&A from Houghton and Norman Hay,

partially offset by the impact of COVID-19 cost savings

actions, including lower travel expenses, and the benefits of realized costs

savings associated with the Combination.

During 2020, the Company incurred $29.8 million

of Combination, integration and other acquisition-related

expenses, primarily

for professional fees related to Houghton integration

and other acquisition-related activities.

During 2020, the Company incurred $29.8 million of Combination,

integration and other acquisition-related expenses, primarily

for professional fees related to Houghton integration and other acquisition

-related activities.

Comparatively,

the Company incurred

$35.5 million of similar expenses in the prior year,

primarily due to various professional fees related to integration

regulatory approval as well as professional fees associated

with closing the Combination.

See the Non-GAAP Measures section of

this Item, above.

The Company initiated a restructuring program during

the third quarter of 2019 as part of its global plan to realize cost

$35.5 million of similar expenses in 2019,

primarily due to various professional fees related to integration planning

and regulatory

approval as well as professional fees associated with closing the Combination.

See the Non-GAAP Measures section of this Item,

The Company initiated a restructuring program during the third quarter

of 2019 as part of its global plan to realize cost synergies

associated with the Combination.

1 unchanged sentence

of $5.5 million during 2020

compared to $26.7 million during 2019 under this program.

to $26.7 million during 2019 under this program.

See the Non-GAAP Measures section of this Item, above.

During the first quarter of 2020, the Company recorded

a $38.0 million non-cash impairment charge to write

down the value of

certain indefinite-lived intangible assets associated with the

During the first quarter of 2020, the Company recorded a $38.0 million

non-cash impairment charge to write down the value of

certain indefinite-lived intangible assets associated with the Combination.

This non-cash impairment charge is related to certain

acquired Houghton trademarks and tradenames and

is primarily the result of the current year negative impacts of

COVID-19 on their

estimated fair values.

There were no additional impairment charges in the

remainder of 2020 or in the prior year.

See the Critical

Accounting Policies and Estimates section as well as the Non

-GAAP Measures section,

of this Item, above.

Operating income in 2020 was $59.4 million compared

to $46.1 million in 2019.

acquired Houghton trademarks and tradenames and is primarily the

result of the negative impacts of COVID-19 on their estimated fair

There were no additional impairment charges in the remainder of

2020 or in 2019.

See the Critical Accounting Policies and

Estimates section as well as the Non-GAAP Measures section, of this Item, above.

Operating income in 2020 was $59.4 million compared to $46.1 million

Excluding Combination, integration and other

acquisition-related expenses, restructuring and related

charges, the non-cash indefinite-lived intangible

asset impairment charge, and

acquisition-related expenses, restructuring and related charges, the

non-cash indefinite-lived intangible asset impairment charge,

other expenses that are not indicative of the Company’s

future operating performance,

the Company’s current year

operating income of $134.0 million increased compared

to $121.9 million in the prior year, primarily

due to additional operating

income from Houghton and Norman Hay and

the benefits from costs savings initiatives related to the Combination

partially offset by

the current year negative impact due to COVID-19.

future operating performance, the Company’s

non-GAAP operating income

during 2020 of $134.0 million increased compared to $121.9 million

in 2019, primarily due to additional operating income from

Houghton and Norman Hay and the benefits from costs savings initiatives related

to the Combination, partially offset by the current

year negative impact due to COVID-19.

The Company’s other

1 unchanged sentence

The year-over-year increase in

other expense, net was primarily due to the first quarter

of 2020 non-cash settlement charge of $22.7 million

associated with the

other expense, net was primarily due to the first quarter of 2020 non-cash

settlement charge of $22.7 million associated with the

termination of the Legacy Quaker U.S.

Pension Plan,

partially offset by a fourth quarter of 2020 gain

of $18.1 million related to the

lapsing of restrictions over certain cash that was previously

designated solely for the settlement of asbestos claims at

Pension Plan, partially offset

by a fourth quarter of 2020 gain of $18.1 million related to the

lapsing of restrictions over certain cash that was previously designated

solely for the settlement of asbestos claims at an inactive

subsidiary of the Company,

which are both described in the Non-GAAP Measures section of this

which are both described in the Non-GAAP Measures section of this Item, above.

Additionally, the

increase year-over-year in other expense,

net, includes higher foreign currency transaction losses in the current

Interest expense, net, increased $9.6 million in 2020 compared

to 2019 primarily due to a full year of borrowings under the

Company’s Credit Facility

to finance the closing of the Combination on August 1,

2019, partially offset by lower overall interest rates

in the current year.

net, includes higher foreign currency transaction losses in 2020.

Interest expense, net, increased $9.6 million in 2020 compared to 2019 primarily

due to a full year of borrowings under the

Company’s Credit Facility to

finance the closing of the Combination on August 1, 2019, partially offset

by lower overall interest rates

The Company’s effective

tax rates for 2020 and 2019 were a benefit of 19.5% and an expense of

7.2%, respectively.

Company’s current year

effective tax rate was impacted by the tax effect

of certain one-time tax charges and benefits in the

period, including deferred tax benefits related to an intercompany

intangible asset transfer, as well as changes in

the valuation

allowance for foreign tax credits acquired with the Combination,

additional charges for uncertain tax positions relating

foreign tax audits, and the tax impact of the Company’s

termination of its Legacy Quaker U.S.

tax rates for 2020 and 2019 were a benefit of 19.5% and an expense of 7.2%, respectively.

Company’s 2020 effective

tax rate was impacted by the tax effect of certain one-time

tax charges and benefits, including deferred tax

benefits related to an intercompany intangible asset transfer,

as well as changes in the valuation allowance for foreign tax credits,

additional charges for uncertain tax positions relating to

certain foreign tax audits, and the tax impact of the Company’s

termination of

its Legacy Quaker U.S.

pension plan.

Comparatively, the prior

year effective tax rate was primarily impacted

by certain non-deductible costs associated with the Combination

as well as a prior year

deferred tax benefit related to a separate intercompany

intangible asset transfer.

Excluding the impact of all non-core items in each

year, described in the Non-GAAP measures

section of this Item, above, the Company estimates that its effective

tax rates for 2020 and

2019 were approximately 25% and 22%, respectively.

The year-over-year increase is driven primarily

by higher U.S.

resulting from a change in certain deductions and

the taxability of foreign earnings in the U.S., partially offset

by a change in the mix

The Company has experienced and expects to continue to experience

volatility in its effective tax rates due to several

factors, including the timing of tax audits and the expiration

of applicable statutes of limitations as they relate to uncertain

positions, the unpredictability of the timing and

amount of certain incentives in various tax jurisdictions, valuation

necessary on certain of the Company’s

tax positions, the treatment of certain acquisition-related costs and

the timing and amount of

certain share-based compensation-related tax benefits,

among other factors.

Equity in net income of associated companies increased $2.3

million in 2020 compared to 2019, primarily due to additional

earnings from our 50% interest in a joint venture

in Korea partially offset by lower earnings as compared

to the prior year period from

the Company’s interest in

a captive insurance company.

Comparatively, the 2019 effectiv

tax rate was primarily impacted by certain non-deductible

costs associated with the Combination as well as a deferred tax benefit related

to a separate intercompany intangible asset transfer.

Excluding the impact of all non-core items in each year,

described in the Non-GAAP measures section of this Item, above, the

Company estimates that its effective tax rates for 2020

and 2019 were approximately 25% and 22%, respectively.

The year-over-year

increase is driven primarily by higher U.S.

income taxes resulting from a

change in certain deductions and the taxability of foreign

earnings in the U.S., partially offset by a change in the mix of earnings.

Equity in net income of associated companies increased $2.3 million in

2020 compared to 2019, primarily due to additional

earnings from our 50% interest in a joint venture in Korea partially offset

by lower earnings from the Company’s

interest in a captive

insurance company.

See the Non-GAAP Measures section of this Item, above.

Net income attributable to noncontrolling interest was $0.1

million in 2020 compared to $0.3 million in 2019

primarily a result of

the first quarter of 2020 acquisition of the remaining

ownership interest in one of the Company’s

South African affiliates.

Net income attributable to noncontrolling interest was $0.1 million in

2020 compared to $0.3 million in 2019 primarily a result of

the first quarter of 2020 acquisition of the remaining ownership interest

in one of the Company’s South African

Foreign exchange negatively impacted the Company’s

2020 results by approximately $0.38 per diluted share, primarily

higher foreign exchange transaction losses year-over-year

and, to a lesser extent, an aggregate negative

impact from foreign currency

2020 results by approximately $0.38 per diluted share, primarily due

higher foreign exchange transaction losses year-over-year and, to

a lesser extent, an aggregate negative impact from foreign currency

translation on earnings.

Consolidated Operations Review – Comparison of 2019

Net sales were $1,133.5 million in 2019 compared to

$867.5 million in 2018.

The net sales increase of 31% year-over-year

includes additional net sales from Houghton and

Norman Hay of $319.4 million.

Excluding Houghton and Norman Hay net sales, the

Company’s 2019 net sales would

have declined 6% compared to the prior year,

reflecting a decrease in sales volumes of

approximately 3% and a negative impact from foreign

currency translation of 3%.

COGS in 2019 of $741.4 million increased approximately

$186.2 million or 34% from $555.2 million in 2018.

The increase in

COGS was primarily due to the inclusion of Houghton

and Norman Hay COGS, as well as the fair value inventory step

accelerated depreciation charges described in

the Non-GAAP Measures section of this Item above, partially

offset by lower COGS on

the decline in Legacy Quaker net sales.

Gross profit in 2019 increased $79.8 million from 2018

due primarily to Houghton and Norman Hay net sales noted above.

Company’s reported

gross margin in 2019 was 34.6%, which includes

an aggregate $11.7 million of expense

associated with selling

Houghton and Norman Hay acquired inventory adjusted

to fair value as well as 2019 accelerated depreciation

charges, both of which

are described in the Non-GAAP Measures section of this

Excluding these one-time increases to COGS, the Company

estimates that its gross margin would have been

approximately 35.7% in 2019 compared to 36.0% in 2018.

The decrease in gross

margin year-over-year

was primarily the result of price and product mix attributed

to lower Houghton gross margin compared to

Legacy Quaker.

SG&A in 2019 increased $76.0 million compared to 2018 driven

by additional Houghton and Norman Hay SG&A as

well as charges related to the settlement of a

non-core equipment sale and certain customer bankruptcy costs, both

described in the Non-GAAP Measures section of this Item

above, partially offset by lower SG&A due to

foreign currency translation,

the impact of the year-over-year base

sales decline noted above on direct selling costs, and the benefits

of realized cost savings

associated with the Combination.

During 2019, the Company incurred $35.5 million

of Combination and other acquisition-related expenses,

primarily for legal,

financial, and other advisory and consultant expenses for

integration planning and regulatory approvals, fees associated

closing of the Combination and costs associated with various integration

Comparatively, the Company

incurred $16.7

million of expenses in 2018, primarily due to various professional

fees related to integration planning and regulatory approval.

the Non-GAAP Measures section of this Item above.

The Company initiated a restructuring program during

the third quarter of 2019 as part of its global

plan to realize cost synergies

associated with the Combination.

The Company expects reductions in headcount and site closures to occur

over the next two years

under this program.

The Company recorded restructuring expense during 2019 of $26.7

million related to this program.

no similar restructuring expenses recorded during the prior

See the Non-GAAP Measures section of this Item, above.

Operating income in 2019 was $46.1 million compared

to $87.8 million in 2018.

Excluding the Combination and other

acquisition-related charges, restructuring

expenses and other non-core items, described in the Non-GAAP Measures

section of this

Item, above, the Company’s

2019 non-GAAP operating income increased to $121.9 million

compared to $104.4 million in 2018,

primarily due to additional net sales and operating income

from Houghton and Norman Hay.

The Company had other expense, net, of $0.3 million

in 2019 compared to $0.6 million in 2018.

The decrease in other expense,

net, was primarily driven by foreign currency transaction

gains in 2019 compared to foreign currency transaction

losses in 2018.

Company’s 2019 and

2018 foreign currency transaction gains and losses included

both recurring transactional activity as well as

foreign currency transaction losses of approximately $1.0

million and $0.4 million, respectively,

related to the Company’s Argentine

subsidiaries and, in 2018, a foreign currency transaction

gain of approximately $0.4 million related to the liquidation

of an inactive

legal entity, both

of which are described in the Non-GAAP measures section of

this Item, above.

In addition, the Company had an

increase in receipts of local municipality-related grants in

one of the Company’s regions year

-over-year, partially offset

by an increase

in pension and postretirement benefit costs, non-service

components, in 2019 compared to 2018.

Lastly, in 2018, the

recorded a gain of $0.6 million for the sale of a

held-for-sale asset.

Interest expense, net, increased $12.9 million in 2019

compared to 2018, primarily as a result of additional borrowings

Company’s Credit Facility

to finance the closing of the Combination on August 1,

The Company’s effective

tax rates for 2019 and 2018 were 7.2% and 30.1%, respectively.

The Company’s low 2019

effective tax

rate was primarily driven by a one-time deferred tax

benefit related to an intercompany intangible asset transfer,

described in the Non-

GAAP measures section of this Item, above.

Comparatively, the Company’s

higher 2018 effective tax rate was largel

combination-related expenses incurred, certain of which

were non-deductible for the purpose of determining the

Company’s effective

tax rate, as well as tax charges related to an

adjustment to the Company’s

initial estimate of the impact from U.S.

Excluding the impact of these and all other non-core items

in each period, described in the Non-GAAP Measures section

of this Item,

above, the Company estimates that its effective tax

rates would have been approximately 22% in each year.

Equity in net income of associated companies increased $3.3 million

in 2019 compared to 2018, primarily due to additional

earnings from the Company’s

50% interest in a Houghton joint venture in Korea and

higher earnings from the Company’s

interest in a

captive insurance company.

Net income attributable to noncontrolling interest was relatively

consistent in both 2019 and 2018.

Foreign exchange negatively impacted the Company’s

2019 earnings by approximately 2% or $0.09 per diluted share, as the

negative impact from foreign currency translation

of approximately 3% due to the strengthening of the U.S.

dollar in 2019 was

partially offset by higher 2019 foreign exchange

transaction gains.

Reportable Segments Review – Comparison of 2020

Reportable Segments Review - Comparison of 2021 with 2020

The Company’s reportable

1 unchanged sentence

internal organization, the method by which the

Company’s resources are

allocated and the manner by which the chief operating decision

maker assesses the Company’s

During the third quarter of 2019 and in connection with the

Combination, the Company reorganized its executive

management team to

align with its new business structure which reflects the method

by which the Company assesses its performance and allocates its

The Company’s current

reportable segment structure includes four segments:

Company’s resources are allocated

and the manner by which the chief operating decision maker of the Company

The Company has four reportable segments:

(i) Americas;

(iii) Asia/Pacific;

and (iv) Global Specialty Businesses.

The three geographic segments are composed of

the net sales and operations in each respective

region, excluding net sales and operations managed globally

by the Global Specialty Businesses segment, which includes the

Company’s container,

metal finishing, mining, offshore, specialty coatings,

specialty grease and Norman Hay businesses.

Segment operating earnings for each of the Company’s

reportable segments are comprised of the segment’s

net sales less directly

related COGS and SG&A.

Operating expenses not directly attributable to the net sales of

each respective segment are not included in

segment operating earnings, such as certain corporate

and administrative costs, Combination,

integration and other acquisition-related

expenses, Restructuring and related charges

and COGS related to acquired inventory sold, which is adjusted

to fair value as part of

purchase accounting.

Asia/Pacific;

and (iv) Global Specialty

The three geographic segments are composed of the net sales and operations

in each respective region, excluding net

sales and operations managed globally by the Global Specialty Businesses

segment, which includes the Company’s

container, metal

finishing, mining, offshore, specialty coatings, specialty grease and

Norman Hay businesses.

Segment operating earnings for the Company’s

reportable segments are comprised of net sales less COGS and SG&A directly

related to the respective segment’s product

Operating expenses not directly attributable to the net sales of each respective

segment, such as certain corporate and administrative costs, Combination,

integration and other acquisition-related expenses,

Restructuring and related charges, and COGS related

to acquired inventory sold, which is adjusted to fair value as part of purchase

accounting, are not included in segment operating earnings.

Other items not specifically identified with the Company’s

reportable segments include interest expense, net

and other expense, net.

Certain immaterial reclassifications within the segment disclosures for

the years ended December 31, 2019

have been made to conform with the Company’s

current customer industry segmentation and reflected in the prior

year comparisons

segments include interest expense, net, and other income (expense),

Americas represented approximately 33% of the Company’s

1 unchanged sentence

The segment’s net sales were $572.6

million, an increase of $58.0 million or 15% compared

The increase in net sales reflects additional net sales from

acquisitions of $120.4 million, primarily a result of

the inclusion of seven additional months of Houghton net sales, as the

Combination closed on August 1 in the prior year.

Excluding net sales from acquisitions, the segment’s

net sales decreased

year by approximately 16% due to lower volumes of 12%

and a negative impact of foreign currency translation of 4%.

year volume decline was driven by the economic slowdown

that began in late March and continued throughout 2020

impacts of COVID-19.

The foreign exchange impact was primarily due to the weakening

of the Brazilian real and the Mexican peso

against the U.S.

dollar, as these exchange

rates averaged 5.10 and 21.34, respectively,

in 2020 compared to 3.94 and 19.24,

respectively in 2019.

This segment’s operating earnings

were $96.4 million, an increase of $18.1 million or 23% compared

The increase in segment operating earnings reflects the

inclusion of a full year of Houghton net sales, noted,

above, and the impacts on

gross margins and SG&A due to the Combination’s

cost synergies and costs savings actions related to COVID-19

year-over-year,

partially offset by the impact of COVID-19

on current year sales volumes and higher COGS and SG&A due

to seven additional

months of Houghton in the current year.

million, an increase of $122.5 million or 27% compared to 2020.

The increase in net sales was driven by a benefit in selling price and

product mix of 11%, increases in organic

volumes of approximately 10%, additional net sales from acquisitions of 5%, and the

positive impact of foreign currency translation of 1%.

The current year organic volume increase was driven by the continued

improvement in end market conditions compared to the prior year which

was impacted by COVID-19.

The increase in selling price

and product mix is primarily driven by price increases implemented

to help offset the significant increases in raw material and other

input costs incurred during 2021.

The foreign exchange impact was primarily driven by the strengthening of

the Mexican peso against

dollar, as this exchange rate averaged

20.27 in 2021 compared to 21.34 during 2020.

This segment’s operating earnings were

$124.9 million, an increase of $28.5 million or 30% compared to 2020.

The increase in segment operating earnings reflects the higher

net sales, described above, partially offset by lower gross

margins driven by the continued raw material cost increases and

supply chain and logistics pressures coupled with higher SG&A including

an increase in direct selling costs associated with higher net

sales, SG&A from acquisitions and an increase in SG&A as the prior year

included temporary cost savings measures implemented in

response to the onset of the COVID-19 pandemic.

EMEA represented approximately 27% of the Company’s

consolidated net sales in 2021.

The segment’s net

sales were $383.2

million, an increase of $97.6 million or 34% compared

The increase in net sales reflects additional net sales from

acquisitions of $117.9 million, primarily

a result of the inclusion of seven additional months of Houghton net

sales, as the

Combination closed on August 1 in the prior year.

Excluding net sales from acquisitions, the segment’s

net sales decreased

year by approximately 7% due to lower volumes of

10%, partially offset by a positive impact of foreign

currency translation of 2%

and increases in selling price and product mix of 1%.

The current year volume decline was driven by the economic slowdown

began in late March and continued throughout 2020

due to the impacts of COVID-19.

The foreign exchange impact was primarily

due to the strengthening of the euro against the U.S.

as this exchange rate averaged 1.14 in 2020 compared to 1.12

This segment’s operating

earnings were $69.2 million, an increase of $22.1

million or 47% compared to 2019.

The increase in

segment operating earnings reflects the inclusion of

a full year of Houghton net sales, noted, above, and the impacts on

gross margins

and SG&A due to the Combination’s

cost synergies and costs savings actions related

to COVID-19 year-over-year,

partially offset by

the impact of COVID-19 on current year sales volumes

and higher COGS and SG&A due to seven additional months of

the current year.

Asia/Pacific represented approximately 22% of the

Company’s consolidated net

sales in 2020.

The segment’s net sales were $480.1

$315.3 million,

an increase of $67.5 million or 27% compared to 2019.

The increase in net sales reflects the inclusion of seven

additional months of Houghton net sales of $79.7 million,

as the Combination closed on August 1 in the prior year.

Houghton net sales, the segment’s

net sales decreased

by approximately 5% year-over-year was due to

lower volumes of 3% and

decreases in selling price and product mix of 3% partially offset

by the positive impact of foreign currency translation

current year volume decline was driven by the economic

slowdown that began in the first quarter in China and in late March

throughout the rest of the region due to the impacts of

The foreign exchange impact was primarily due to the

strengthening of the Chinese renminbi against the U.S.

While this exchange rate averaged

6.90 in each of 2020 and 2019,

respectively, post

the closing of the Combination, this exchange rate strengthened

in the last 5 months of 2020 to average 6.72

compared to 7.06 in the last 5 months of 2019, partially offset

by the weakening of the Indian rupee against the U.S.

million, an increase of $96.9 million or 25% compared to 2020.

The increase in net sales was driven by a benefit from selling price

and product mix of 10%, increases in organic volumes of

approximately 9%, the positive impact of foreign currency translation of 4%,

and additional net sales from acquisitions of 2%.

The increase in selling price and product mix is primarily driven by price increases

implemented to offset the significant increase in raw

material and other input costs incurred during 2021.

The current year volume

increase was driven by the continued improvement in end market conditions

compared to the prior year which was heavily impacted

The foreign exchange impact was primarily driven by the strengthening

of the euro against the U.S.

dollar as this

exchange rate averaged

exchange rate averaged 1.18 in 2021 compared to 1.14 in 2020.

This segment’s operating earnings were

$85.2 million, an increase of

$16.0 million or 23% compared to 2020.

The increase in segment operating earnings reflects the higher net sales described

partially offset by lower current year gross margins

driven by the continued raw material cost increases and global supply chain and

logistics pressures as well as higher SG&A including increases in direct selling

costs associated with higher net sales as well as

increases as the prior year included temporary cost savings measures implemented

in response to the onset of the COVID-19

Asia/Pacific represented approximately 22% of the Company’s

consolidated net sales in 2021.

The segment’s net sales were

$388.2 million, an increase of approximately $72.9 million or 23%

compared to 2020.

The increase in net sales year-over-year was

driven by increases in volumes of approximately 15%, the positive impact

of foreign currency translation of 5%, increases from

selling price and product mix of 2% and additional net sales from

acquisitions of 1%.

The current year volume increase was driven by

the continued improvement in end market conditions compared to the prior

year which was impacted by COVID-19.

exchange impact was primarily due to the strengthening of the Chinese renminbi

against the U.S.

dollar as this exchange rate averaged

6.45 in 2021 compared to 6.90 in 2020.

This segment’s operating earnings

were $88.4 million, an increase

of $20.8 million or 31% compared to 2019.

The increase in segment operating earnings reflects the inclusion

of incremental

Houghton net sales, noted, above, and the impacts on

gross margins and SG&A due to the Combination’s

cost synergies and costs

savings actions related to COVID-19 year-over-year,

partially offset by the impact of COVID-19 on current

year sales volumes and

higher COGS and SG&A due to seven additional months

of Houghton in the current year.

This segment’s operating earnings were

$96.3 million, an increase of $8.0 million or 9%

compared to 2020.

The increase in segment operating earnings was driven by the higher net sales described above,

partially offset by

lower gross margins driven by the continued raw material cost increases

and global supply chain and logistics pressures as well as

higher direct selling costs associated with higher net sales and an increase

in SG&A as the prior year included temporary cost savings

measures implemented in response to the onset of the COVID-19 pandemic

Global Specialty Businesses

Global Specialty Businesses represented approximately

19% of the Company’s consoli

dated net sales in 2020.

Global Specialty Businesses represented approximately 18% of the

Company’s consolidated net sales in

The segment’s net

sales were $269.0 million, an increase of $61.1 million

compared to 2019.

The increase in net sales reflects the inclusion of

seven additional months of Houghton net sales and nine

additional months of Norman Hay net sales, totaling $90.6

million, as the

Combination closed on August 1 and the Norman Hay

acquisition closed on October 1 in the prior year.

Excluding Houghton and

Norman Hay net sales, the segment’s

net sales decreased by approximately 14%

year-over-year due to lower volumes of 7%,

decreases in selling price and product mix of 5% and a negative

impact from foreign currency translation of 2%.

The current year

volume decline was primarily due to a decrease in

the Company’s specialty coatings

business driven by Boeing’s

temporarily stop production of the 737 Max aircraft and

volume declines due to the economic slowdown resulting

from COVID-19.

Partially offsetting these volume declines,

and contributing to the decrease in selling price and product mix

were higher shipments of

a lower priced product in the Company’s

mining business compared to the prior year.

The foreign exchange impact was primarily due

to the weakening of the Brazilian real against the U.S.

dollar described in the Americas section, above.

This segment’s operating

earnings were $79.7 million, an increase of $20.8

million or 35%

sales were $320.2 million, an increase of $51.2 million or 19% compared

The increase in net sales was driven by increases in

selling price and product mix, including Norman Hay,

of 14%, additional net sales from acquisitions of 8%, and the positive impact

foreign currency translation of 2% partially offset by volume declines

of approximately 5%.

Both the changes in selling price and

product mix and sales volumes were primarily driven by higher amounts of

shipments of a lower priced product in the Company’s

mining business in the prior year.

The foreign exchange impact was a result of similar strengthening of certain

currencies in EMEA

and Americas as described above.

This segment’s

operating earnings were $90.6 million, an increase of $10.9 million or 14%

compared to 2020.

The increase in segment operating earnings

reflects the inclusion of incremental Houghton and Norman

Hay net sales, noted above, coupled with an increase in

gross margin due

to the Company’s progress

on Combination-related logistics, procurement and manufacturing

cost savings initiatives, partially offset

by higher SG&A, including seven additional months of

Houghton and nine additional months of Norman Hay SG&A in the current

Reportable Segments Review – Comparison of 2019

The increase in segment operating earnings reflects the higher net sales, described

above, partially offset by lower

gross margins in the current year coupled with higher SG&A, including

an increase in direct selling costs associated with higher net

sales, SG&A from acquisitions and an increase in SG&A as the prior year

included temporary cost savings measures implemented in

response to the onset of the COVID-19 pandemic.

Reportable Segments Review – Comparison of 2020 with 2019

Americas represented approximately 32% of the Company’s

1 unchanged sentence

The segment’s net sales were $450.2

million, an increase of $94.5 million or 32% compared

The increase in net sales reflects the inclusion of Houghton

of $110.1 million.

Excluding Houghton net sales, the segment’s

net sales decrease year-over-year of 5% was due

primarily to lower

volumes of 6% and a negative impact from foreign

currency translation of 1% partially offset by a positive impact

from selling price

and product mix of 2%.

The decline in volumes compared to 2018 was driven by compounding

conditions of weak automotive and

steel markets, a generally weaker overall industrial environment

in the region and some customer inventory corrections.

segment’s operating earnings

were $78.3 million, an increase of $15.6 million or 25%

million, an increase of $58.0 million or 15% compared to 2019.

The increase in net sales reflects additional net sales from

acquisitions of $120.4 million, primarily a result of the inclusion of

seven additional months of Houghton net sales, as the

Combination closed on August 1, 2019.

Excluding net sales from acquisitions, the segment’s

net sales decreased by approximately

16% due to lower volumes of 12% and a negative impact of foreign

currency translation of 4%.

The volume decline was driven by

the economic slowdown that began in late March and continued throughout

2020 due to the impacts of COVID-19.

exchange impact was primarily due to the weakening of the Brazilian real

and the Mexican peso against the U.S.

exchange rates averaged 5.10 and 21.34, respectively,

in 2020 compared to 3.94 and 19.24, respectively in 2019.

This segment’s

operating earnings were $96.4 million, an increase of $18.1 million or

23% compared to 2019.

The increase in segment

operating earnings reflects the inclusion of Houghton

net sales, partially offset by a lower gross margin

due to price and product mix,

including lower Houghton gross margins compared

to Legacy Quaker and higher SG&A, including Houghton

The increase in segment operating

earnings reflects the inclusion of a full year of Houghton net sales, noted,

above, and the impacts on gross margins and SG&A due to

the Combination’s cost synergies

and costs savings actions related to COVID-19 year-over-year,

partially offset by the impact of

COVID-19 on sales volumes and higher COGS and SG&A due to seven additional

months of Houghton in 2020.

EMEA represented approximately 27% of the Company’s

consolidated net sales in 2020.

The segment’s net

sales were $285.6

million, an increase of $68.6 million or 32% compared

The increase in net sales reflects the inclusion of Houghton

of $92.5 million.

Excluding Houghton net sales, the segment’s

net sales decrease year-over-year of 11%

was due to a negative impact

of foreign currency translation of 5%, lower volumes of

approximately 5% and a decrease from selling price and product

The segment’s net sales were $383.2

million, an increase of $97.6 million or 34% compared to 2019.

The increase in net sales reflects additional net sales from

acquisitions of $117.9 million, primarily

a result of the inclusion of seven additional months of Houghton net sales, as the

Combination closed on August 1, 2019.

Excluding net sales from acquisitions, the segment’s

net sales decreased year-over-year by

approximately 7% due to lower volumes of 10%, partially offset by

a positive impact of foreign currency translation of 2% and

increases in selling price and product mix of 1%.

The current year volume decline was driven by the economic slowdown that began

in late March and continued throughout 2020 due to the impacts of COVID-19.

The foreign exchange impact was primarily due to the

weakening of the euro against the U.S.

strengthening of the euro against the U.S.

dollar as this exchange rate averaged

1.14 in 2020 compared to 1.12 in 2019.

The decline in volumes compared to 2018 was driven by a weak

automotive market and the

challenging overall industrial environment in the region,

as well as a decrease in volume associated with a specific piece

which the Company stopped selling during the second

half of 2018 primarily due to its limited profitability.

This segment’s operating

earnings were $47.0 million, an increase of $10.9

million or 30% compared to 2018.

The increase in segment operating earnings

reflects the inclusion of Houghton net sales and

a slightly higher gross margin, partially offset by

higher SG&A, including Houghton

Asia/Pacific represented approximately 22% of the

Company’s consolidated net

sales in 2019.

segment’s operating earnings were

$69.2 million, an increase of $22.1 million or 47% compared to 2019.

The increase in segment

operating earnings reflects the inclusion of a full year of Houghton net sales,

noted, above, and the impacts on gross margins and

SG&A due to the Combination’s cost synergies

and costs savings actions related to COVID-19 year-over-year,

partially offset by the

impact of COVID-19 on sales volumes and higher COGS and SG&A due

to seven additional months of Houghton in 2020.

Asia/Pacific represented approximately 22% of the Company’s

consolidated net sales in 2020.

The segment’s net sales were

$247.8 million, an increase of $55.3 million or 29%

compared to 2018.

The increase in net sales reflects the inclusion of Houghton

net sales of $67.4 million.

Excluding Houghton net sales, the segment’s

net sales decreased 6% year-over-year due

primarily to the

negative impact of foreign currency translation of 3% and

lower volumes of approximately 3%.

The foreign exchange impact was

primarily due to the weakening of the Chinese renminbi

and India rupee against the U.S.

dollar as these exchange rates

averaged 6.90

and 70.3, respectively,

in 2019 compared to 6.60 and 68.18, respectively,

The decline in volumes was driven by weak

automotive and steel markets and the challenging overall

industrial environment in the region.

This segment’s operating earnings

were $67.5 million, an increase of $13.8 million or 26%

compared to 2018.

The increase in segment operating earnings reflects the

inclusion of Houghton net sales, and relatively consistent gross margins,

partially offset by higher SG&A, including

Houghton SG&A.

$315.3 million, an increase of $67.5 million or 27% compared to 2019.

The increase in net sales reflects the inclusion of seven

additional months of Houghton net sales of $79.7 million, as the Combination

closed on August 1, 2019.

Excluding Houghton net

sales, the segment’s net sales decreased

by approximately 5% year-over-year was due

to lower volumes of 3% and decreases in selling

price and product mix of 3% partially offset by the positive

impact of foreign currency translation of 1%.

The current year volume

decline was driven by the economic slowdown that began in the first quarter

of 2020 in China and in late March throughout the rest of

the region due to the impacts of COVID-19.

The foreign exchange impact was primarily due to the strengthening of the Chinese

renminbi against the U.S.

While this exchange rate averaged 6.90 in each of 2020 and 2019, respectively,

post the closing of

the Combination, this exchange rate strengthened in the last 5 months of 2020

to average 6.72 compared to 7.06 in the last 5 months of

2019, partially offset by the weakening of the Indian rupee against the

dollar as this exchange rate averaged 73.95 in 2020

compared to 70.35 in 2019.

This segment’s operating earnings were

$88.4 million, an increase of $20.8 million or 31% compared to

The increase in segment operating earnings reflects the inclusion of incremental

Houghton net sales, noted, above, and the

impacts on gross margins and SG&A due to the Combination’s

cost synergies and costs savings actions related to COVID-19 year-

over-year, partially offset

by the impact of COVID-19 on sales volumes and higher COGS and SG&A due

to seven additional months

of Houghton in 2020.

Global Specialty Businesses

Global Specialty Businesses represented approximately

18% of the Company’s consolidated

net sales in 2019.

Global Specialty Businesses represented approximately 19% of the

Company’s consolidated net sales in

The segment’s net

sales were $208.0 million, an increase of $47.5 million

or 30% compared to 2018.

sales were $269.0 million, an increase of $61.1 million or 29% compared

The increase in net sales reflects the inclusion of

Houghton and Norman Hay net sales of $49.4 million.

Excluding Houghton and Norman Hay net sales, the segment’s

decreased 1% year-over-year driven

by a decline in selling price and product mix of 5% and

a negative impact from foreign currency

translation of less than 1% partially offset by

an increase in volume of 4%.

seven additional months of Houghton net sales and nine additional months

of Norman Hay net sales, totaling $90.6 million, as the

Combination closed on August 1, 2019 and the Norman Hay acquisition

closed on October 1, 2019.

Excluding Houghton and

Norman Hay net sales, the segment’s

net sales decreased by approximately 14% year-over-year

due to lower volumes of 7%,

decreases in selling price and product mix of 5% and a negative impact from foreign

currency translation of 2%.

The current year

volume decline was primarily due to a decrease in the Company’s

specialty coatings business driven by Boeing’s

temporarily stop production of the 737 Max aircraft and volume declines

due to the economic slowdown resulting from COVID-19.

Partially offsetting these volume declines, and

contributing to the decrease in selling price and product mix, were higher shipments of

a lower priced product in the Company’s

mining business compared to 2019.

The foreign exchange impact was primarily due to the

weakening of the Brazilian real against the U.S.

dollar described

in the Americas section, above.

This segment’s operating earnings

were $58.9 million, an

increase of approximately $15.9 million or 37% compared

The increase in segment operating earnings reflects the inclusion

of Houghton and Norman Hay net sales, and relatively

consistent gross margins, partially offset by

higher SG&A, including Houghton

and Norman Hay.

were $79.7 million, an increase of $20.8 million or 35% compared

The increase in segment operating earnings reflects the

inclusion of incremental Houghton and Norman Hay net sales, noted

above, coupled with an increase in gross margin due to the

Company’s progress on Combination

-related logistics, procurement and manufacturing cost savings initiatives, partially

higher SG&A, including seven additional months of Houghton

and nine additional months of Norman Hay SG&A in 2020.

Environmental Clean-up Activities

The Company is involved in environmental clean-up

activities in connection with an existing plant location and former

The Company is involved in environmental clean-up activities in connection

with an existing plant location and former waste

disposal sites.

This includes certain soil and groundwater contamination

the Company identified in 1992 at AC Products, Inc.

This includes certain soil and groundwater contamination the

Company identified in 1992 at AC Products, Inc.

(“ACP”), a wholly owned subsidiary.

In voluntary coordination with the Santa Ana California Regional

Water Quality

In voluntary coordination with the Santa Ana California Regional Water

Quality Board, ACP

has been remediating the contamination.

In 2007, ACP agreed to operate two groundwater treatment systems,

so as to hydraulically

In 2007, ACP agreed to operate two groundwater treatment systems, so as to hydraulically

contain groundwater contamination emanating from ACP’s

site until such time as the concentrations of contaminants

are below the

current Federal maximum contaminant level for four

consecutive quarterly sampling events.

site until such time as the concentrations of contaminants are below

current Federal maximum contaminant level for four consecutive

quarterly sampling events.

In 2014, ACP ceased operation at one of

its two groundwater treatment systems, as it had met the above

condition for closure.

its two groundwater treatment systems, as it had met the above condition

In 2020, the Santa Ana Regional Water

Control Board asked that ACP conduct some additional

indoor and outdoor soil vapor testing on and near the ACP site to

ACP continues to meet the applicable local standards

and ACP has begun the testing program.

As of December 31, 2020, ACP

believes it is close to meeting the conditions for closure of the

remaining groundwater treatment system, but continues to

system while in discussions with the relevant authorities.

As of December 31, 2020, the Company believes that the range of

known liabilities associated with the balance of the

ACP water remediation program is approximately $0.1 million to

$1.0 million.

The low and high ends of the range are based on the

length of operation of the treatment system as determined

by groundwater

As a result of the closing of the Combination on August

1, 2019, the Company is party to environmental matters related

Houghton domestic and foreign properties currently or previously

Houghton’s Sao Paulo, Brazil site

was required under

Brazilian environmental, health and safety regulations to

perform an environmental assessment as part of a permit renewal process.

Initial investigations

identified soil and ground water contamination in select areas

The site has conducted a multi-year soil

and groundwater investigation and corresponding

risk assessments based on the result of the investigations.

In 2017, the site had to

submit a new 5-year permit renewal request and was asked

to complete additional investigations to further delineate

the site based on

review of the technical data by the local regulatory agency,

Companhia Ambiental do Estado de São Paulo (“CETESB”).

review of the updated investigation data, CETESB issued a Technical

Opinion regarding the investigation and remedial actions taken

Control Board asked that ACP conduct some additional indoor

and outdoor soil vapor testing on and near the ACP site to confirm that

ACP continues to meet the applicable local standards and ACP has begun the

testing program.

Such testing began in 2020 and

continued into 2021.

As of December 31, 2021, ACP believes it is close to meeting the conditions for closure

of the remaining

groundwater treatment system but continues to operate this system while in

discussions with the relevant authorities.

As of December

31, 2021, the Company believes that the range of potential-known

liabilities associated with the balance of the ACP water remediation

program is approximately $0.1 million to $1.0 million.

The low and high ends of the range are based on the length of operation of the

treatment system as determined by groundwater modeling.

The Company is party to environmental matters related to certain domestic

and foreign properties.

The Company’s Sao Paulo,

Brazil site was required under Brazilian environmental, health and

safety regulations to perform an environmental assessment as part

of a permit renewal process.

Initial investigations identified soil and ground water contamination in

select areas of the site.

has conducted a multi-year soil and groundwater investigation and

corresponding risk assessments based on the result of the

investigations.

In 2017, the site had to submit a new 5-year permit renewal request and was asked to

complete additional

investigations to further delineate the site based on review of the technical

data by the local regulatory agency,

Companhia Ambiental

do Estado de São Paulo (“CETESB”).

Based on review of the updated investigation data, CETESB issued a Technical

regarding the investigation and remedial actions taken to date.

The site developed an action plan and submitted it to CETESB in 2018

based on CETESB requirements.

intervention plan primarily requires the site, among

other actions, to conduct periodic monitoring for methane in

soil vapors, source

zone delineation, groundwater plume delineation, bedrock

aquifer assessment, update the human health risk assessment, develop

current site conceptual model and conduct a remedial feasibility

study and provide a revised intervention plan.

In December 2019, the

site submitted a report on the activities completed including

the revised site conceptual model and results of the remedial feasibility

study and recommended remedial strategy for the site.

Other Houghton environmental matters include participation in

payments in connection with four currently active environmental

consent orders related to certain hazardous waste cleanup

under the U.S.

The site intervention plan primarily requires the site, among other actions,

to conduct periodic

monitoring for methane in soil vapors, source zone delineation, groundwater

plume delineation, bedrock aquifer assessment, update

the human health risk assessment, develop a current site conceptual model

and conduct a remedial feasibility study and provide a

revised intervention plan.

In 2019, the site submitted a report on the activities completed including the revised

site conceptual model

and results of the remedial feasibility study and recommended remedial

strategy for the site.

Other environmental matters include

participation in certain payments in connection with four currently

active environmental consent orders related to certain hazardous

waste cleanup activities under the U.S.

Federal Superfund statute.

Houghton has been designated a potentially responsible party (“PRP”)

Environmental Protection Agency along with other PRPs depending

on the site, and has other obligations to perform cleanup

at certain other foreign subsidiaries.

These environmental matters primarily require the

Company to perform long-term monitoring as

well as operating and maintenance at each of the applicable

The Company continually evaluates its obligations related

to such matters and, based on historical costs incurred and projected

costs to be incurred over the next 28 years, has estimated the present

value range of costs for all of the Houghton environmental

matters, on a discounted basis, to be between approximately

$5.5 million and $6.5 million as of December 31,

2020, for which $6.0

million is accrued within other accrued liabilities and

other non-current liabilities on the Company’s

Consolidated Balance Sheet as of

The Company has been designated a potentially responsible party

(“PRP”) by the Environmental Protection Agency along with other

PRPs depending on the site, and has other obligations to perform

cleanup activities at certain other foreign subsidiaries.

These environmental matters primarily require the Company to perform

term monitoring as well as operating and maintenance at each of the applicable

The Company continually evaluates its obligations related to such matters,

and based on historical costs incurred and projected

costs to be incurred over the next 27 years, has estimated the present value range

of costs for these environmental matters, on a

discounted basis, to be between approximately $5.0 million and $6.0

million as of December 31, 2021, for which $5.6 million is

accrued within other accrued liabilities and other non-current liabilities on

the Company’s Consolidated

Balance Sheet as of

December 31, 2021.

Comparatively, as of

December 31, 2019, the Company had $6.6 million accrued

with respect to these matters.

The Company believes, although there can be no assurance

regarding the outcome of other unrelated environmental matters, that

it has made adequate accruals for costs associated with other

environmental problems of which it is aware.

December 31, 2020, the Company had $6.0 million accrued with respect

to these matters.

The Company believes, although there can be no assurance regarding the

outcome of other unrelated environmental matters, that

it has made adequate accruals for costs associated with other environmental

problems of which it is aware.

Approximately $0.4

million and $0.1 million were accrued as of December 31, 2021

31, 2020 and 2019, respectively,

to provide for such anticipated future

and 2020, respectively, to provide for

such anticipated future

environmental assessments and remediation costs.

Notwithstanding the foregoing, the Company cannot be

certain that future liabilities in the form of remediation expenses and

Notwithstanding the foregoing, the Company cannot be certain that

future liabilities in the form of remediation expenses and

damages will not exceed amounts reserved.

See Note 26 of Notes to Consolidated Financial Statements in Item

8 of this Report

See Note 26 of Notes to Consolidated Financial Statements in Item 8 of this Report

See Item 7A of this Report, below,

for further discussion of certain quantitative and qualitative

disclosures about market risk.

for further discussion of certain quantitative and qualitative disclosures

about market risk.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis