What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-01 · 2324 added, 2715 removed, 1285 unchanged (80% of the section changed)

This section is long enough that the comparison stopped early. What follows is partial, and the remainder is not necessarily unchanged.

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Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting

the Board of Directors and Shareholders of Quaker Chemical Corporation

Report of Independent Registered Public Accounting Firm

To the Board of

Directors and Shareholders of Quaker Chemical Corporation

Opinions on the Financial Statements and Internal Control over

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We have audited

the accompanying consolidated balance sheets of Quaker

Chemical Corporation and its subsidiaries (the

“Company”) as of December 31, 2020 and 2019, and the

related consolidated statements of income, of comprehensive

changes in equity and of cash flows for each of the three

years in the period ended December 31, 2020, including

the related notes

the accompanying consolidated balance sheets of Quaker Chemical Corporation

and its subsidiaries (the

“Company”) as of December 31, 2021 and 2020, and the related consolidated

statements of income, of comprehensive income, of

changes in equity and of cash flows for each of the three years in the period ended December

31, 2021, including the related notes

(collectively referred to as the “consolidated financial statements”).

audited the Company's internal control over

financial reporting as of December 31, 2020, based on criteria

established in Internal Control - Integrated Framework

(2013) issued by

the Committee of Sponsoring Organizations

of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred

to above present fairly,

in all material respects, the financial position of

the Company as of December 31, 2020 and 2019, and the

results of its operations and its cash flows for each of the three

period ended December 31, 2020 in conformity with accounting

principles generally accepted in the United States of America.

in our opinion, the Company did not maintain, in all material

respects, effective internal control over financial

reporting as of

December 31, 2020, based on criteria established in

Internal Control - Integrated Framework

(2013) issued by the COSO because

material weaknesses in internal control over financial

reporting existed as of that date as the Company did not design

effective controls (i) in response to the risks of

material misstatement and (ii) over the review of pricing,

quantity and customer data to

verify that revenue recognized was complete and

A material weakness is a deficiency,

or a combination of deficiencies, in internal control over financial

reporting, such that there is a

reasonable possibility that a material misstatement of the

annual or interim financial statements will not be prevented

or detected on a

timely basis.

weaknesses referred to above are described in Management’s

Report on Internal Control over Financial

Reporting appearing under Item 9A.

We considered

these material weaknesses in determining the nature, timing,

and extent of audit

tests applied in our audit of the 2020 consolidated financial

statements, and our opinion regarding the effectiveness

of the Company’s

internal control over financial reporting does not affect

our opinion on those consolidated financial statements.

Change in Accounting Principle

As discussed in Note 6 to the consolidated financial statements,

the Company changed the manner in which

it accounts for leases in

We also have audited

the Company's internal control over

financial reporting as of December 31, 2021, based on criteria established in Internal

Control - Integrated Framework (2013) issued by

the Committee of Sponsoring Organizations of

the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present

fairly, in all material respects, the financial

the Company as of December 31, 2021 and 2020, and the results of its operations

and its cash flows for each of the three years in the

period ended December 31, 2021 in conformity with accounting principles

generally accepted in the United States of America.

in our opinion, the Company maintained, in all material respects, effective

internal control over financial reporting as of December 31,

2021, based on criteria established in Internal Control - Integrated Framework

(2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for

these consolidated financial statements, for maintaining effective

internal control over

financial reporting, and for its assessment of the effectiveness

of internal control over financial reporting, included

in management's

report referred to above.

Our responsibility is to express opinions on the Company’s

consolidated financial statements and on the

Company's internal control over financial reporting based

The Company's management is responsible for these consolidated

financial statements, for maintaining effective internal control

financial reporting, and for its assessment of the effectiveness of

internal control over financial reporting, included in Management's

Report on Internal Control over Financial Reporting appearing under

Our responsibility is to express opinions on the

Company’s consolidated

financial statements and on the Company's internal control over financial reporting based

on our audits.

We are a public

accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and

are required to be independent with respect to the Company in

accordance with the U.S.

federal securities laws and the

applicable rules and regulations of the Securities and

Exchange Commission

and the PCAOB.

are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (PCAOB) and are

required to be independent with respect to the Company in accordance with

federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform

audits to obtain reasonable assurance about whether

the consolidated financial statements are free of material misstatement,

Those standards require that we plan and perform the

audits to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether

due to error or fraud, and whether effective

internal control over financial reporting was maintained in all material

Our audits of the consolidated financial statements included

performing procedures to assess the risks of material misstatement

consolidated financial statements, whether due to error

or fraud, and performing procedures that respond to those

procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated

Our audits also included evaluating the accounting

principles used and significant estimates made by management, as well

as evaluating the overall presentation of the consolidated

financial statements.

internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures

to assess the risks of material misstatement of the

consolidated financial statements, whether due to error or fraud, and

performing procedures that respond to those risks.

procedures included examining, on a test basis, evidence regarding the amounts

and disclosures in the consolidated financial

Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well

as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting

included obtaining an understanding of internal control over financial

reporting, assessing the risk that a material weakness exists, and

testing and evaluating the design and operating effectiveness

of internal control based on the assessed risk.

included obtaining an understanding of internal control over financial reporting,

assessing the risk that a material weakness exists, and

testing and evaluating the design and operating effectiveness of

internal control based on the assessed risk.

Our audits also included

performing such other procedures as we considered necessary

in the circumstances.

performing such other procedures as we considered necessary in the circumstances.

We believe that our

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basis for our opinions.

As described in Management’s

Report on Internal Control over Financial Reporting, management

has excluded Tel

Nordic ApS and

Coral Chemical Company from its assessment of internal

control over financial reporting as of December 31, 2020,

because they were

acquired by the Company in purchase business combinations during

These excluded entities are wholly owned subsidiaries,

whose total assets represent less than 1% and approximately 2%,

respectively,

and whose total revenues each represent less than 1%,

of the related consolidated financial statement amounts

As described in Management’s Report

on Internal Control over Financial Reporting, management has excluded

Baron Industries and

Grindaix GmbH from its assessment of internal control over financial reporting

as of December 31, 2021 because they were acquired

by the Company in purchase business combinations during 2021.

We have also excluded Baron

Industries and Grindaix from our

audit of internal control over financial reporting.

Baron Industries and Grindaix are wholly-owned subsidiaries whose total assets and

total revenues excluded from management’s

assessment and our audit of internal control over financial reporting for each entity

represent less than 1% of the related consolidated financial statement amounts

as of and for the year ended December 31, 2021.

Definition and Limitations of Internal Control over Financial

A company’s internal

control over financial reporting is a process designed to provide

reasonable assurance regarding the reliability of

financial reporting and the preparation of financial statements

for external purposes in accordance with generally

accepted accounting

A company’s internal control

over financial reporting includes those policies and procedures

that (i) pertain to the

maintenance of records that, in reasonable detail, accurately

and fairly reflect the transactions and dispositions of the

assets of the

(ii) provide reasonable assurance that transactions are

recorded as necessary to permit preparation of financial statements

accordance with generally accepted accounting principles,

and that receipts and expenditures of the company are being

accordance with authorizations of management and directors

of the company;

and (iii) provide reasonable assurance

prevention or timely detection of unauthorized acquisition,

use, or disposition of the company’s

assets that could have a material effect

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over

financial reporting is a process designed to provide reasonable assurance regarding

the reliability of

financial reporting and the preparation of financial statements for external

purposes in accordance with generally accepted accounting

A company’s internal control over financial

reporting includes those policies and procedures that (i) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect

the transactions and dispositions of the assets of the

(ii) provide reasonable assurance that transactions are recorded

as necessary to permit preparation of financial statements in

accordance with generally accepted accounting principles, and that receipts

and expenditures of the company are being made only in

accordance with authorizations of management and directors of the

and (iii) provide reasonable assurance regarding

prevention or timely detection of unauthorized acquisition, use, or disposition

of the company’s assets that could have

a material effect

on the financial statements.

Because of its inherent limitations, internal control

over financial reporting may not prevent or detect misstatements.

Because of its inherent limitations, internal control over financial reporting

may not prevent or detect misstatements.

Also, projections

of any evaluation of effectiveness to future

periods are subject to the risk that controls may become

inadequate because of changes in

conditions, or that the degree of compliance with the

policies or procedures may deteriorate.

of any evaluation of effectiveness to future periods are subject

to the risk that controls may become inadequate because of changes

conditions, or that the degree of compliance with the policies or procedures

may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter

arising from the current period audit of the consolidated financial

that was communicated or required to be communicated

to the audit committee and that (i) relates to accounts or disclosures that

material to the consolidated financial statements and (ii)

involved our especially challenging, subjective, or complex judgments.

communication of critical audit matters does not alter

in any way our opinion on the consolidated financial statements,

taken as a whole,

and we are not, by communicating the critical audit

matter below, providing

a separate opinion on the critical audit matter or on the

accounts or disclosures to which it relates.

The critical audit matter communicated below is a matter arising from the current period

audit of the consolidated financial statements

that was communicated or required to be communicated to the audit committee and

that (i) relates to accounts or disclosures that are

material to the consolidated financial statements and (ii) involved our especially

challenging, subjective, or complex judgments.

communication of critical audit matters does not alter in any way our opinion

on the consolidated financial statements, taken as a

whole, and we are not, by communicating the critical audit matter below,

providing a separate opinion on the critical audit matter or

on the accounts or disclosures to which it relates.

Houghton Trademarks and

Tradename Impairment Assessments

As described in Note 16 to the consolidated financial

statements, the Company’s consolidated

Other intangible assets, net balance was

Tradename – Annual Impairment Assessment

As described in Note 16 to the consolidated financial statements, the Company’s

consolidated other intangible assets, net balance was

$1,027.8 million as of December 31, 2021, and the indefinite-lived

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the Houghton trademarks and tradename.

Management completes its annual indefinite-lived intangible

asset impairment test during

the fourth quarter of each year, or

more frequently if triggering events indicate a potential impairment.

An impairment exists when it

is determined that it is more likely than not that the indefinite

-lived intangible asset carrying value exceeds its fair value and

In the first quarter of 2020, as a result of the impact of COVID-19

driving a decrease in projected legacy Houghton net

sales in the current year and the impact of the current year

decline on projected future legacy Houghton net sales as well as an

in the weighted average cost of capital (“WACC”)

assumption utilized in the quantitative impairment

assessment, the Company

concluded that the estimated fair value of the Houghton

trademarks and tradename intangible asset was less than its carrying

As a result, an impairment charge of $38.0

million, primarily related to the Houghton trademarks and tradename,

was recorded in the

first quarter of 2020.

The Company completed its annual

impairment assessment during the fourth quarter of 2020

for the Houghton

trademarks and tradename and concluded no impairment charge

was warranted.

The determination of estimated fair value of the

Houghton trademarks and tradename is based on a relief

from royalty valuation method which requires management’s

often involves the use of significant estimates and assumptions

with respect to the WACC

and royalty rates, as well as revenue growth

rates and terminal growth rates.

The principal considerations for our determination that

performing procedures relating to the Houghton trademarks

and tradename

impairment assessments is a critical audit matter are

(i) the significant judgment by management when determining

the fair value

measurement of the Houghton trademarks and tradename;

(ii) a high degree of auditor judgment, subjectivity,

Management completes its annual indefinite-lived intangible asset impairment test during

the fourth quarter of each year, or more frequently

if triggering events indicate a possible impairment.

Management completed its

annual impairment assessment during the fourth quarter of 2021 for the Houghton

trademarks and tradename and concluded no

impairment charge was warranted.

The determination of estimated fair value of the Houghton trademarks and

tradename is based on a

relief from royalty valuation method, which requires management’s

judgment and often involves the use of significant estimates and

assumptions with respect to the weighted average cost of capital and royalty rates,

as well as revenue growth rates and terminal growth

The principal considerations for our determination that performing procedures

relating to the Houghton trademarks and tradename

annual impairment assessment is a critical audit matter are (i) the significant

judgment by management when determining the fair

value of the Houghton trademarks and tradename;

(ii) a high degree of

auditor judgment, subjectivity,

and effort in performing

procedures and evaluating

management’s significant

assumptions related to the WACC,

royalty rates, revenue growth rates and

terminal growth rates;

and (iii) the audit effort

involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and

evaluating audit evidence in connection with forming our overall opinion

procedures and evaluating management’s

significant assumptions related to the royalty rate, revenue growth rates, and terminal

growth rates;

and (iii) the audit effort involved the use of professionals with specialized

skill and knowledge.

Addressing the matter involved performing procedures and evaluating

audit evidence in connection with forming our overall opinion

on the consolidated financial statements.

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relating to management’s

indefinite-lived intangible assets impairment assessments, including

indefinite-lived intangible assets annual impairment assessment, including

controls over the valuation of the Houghton trademarks and

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process for determining the fair value estimate;

(ii) evaluating the appropriateness of the relief from

royalty valuation method;

(iii) testing the completeness

and accuracy of

underlying data used in the estimate;

and (iv) evaluating

the reasonableness of significant assumptions related to

rates, revenue growth rates and terminal growth rates.

Evaluating management’s

assumptions related to the royalty rates, revenue

growth rates and terminal growth rates involved evaluating

whether the assumptions used by management were

considering (i) the current and past performance of the

legacy Houghton business;

(ii) the consistency with external

industry data;

and (iii) whether these assumptions were consistent with

evidence obtained in other areas of the audit.

Professionals

with specialized skill and knowledge were used to

assist in evaluating the appropriateness of the relief from

royalty valuation method

and evaluating the reasonableness

of royalty rates and the WACC.

/s/PricewaterhouseCoopers LLP

(ii) evaluating the appropriateness of the relief from royalty valuation

(iii) testing the completeness and accuracy of

underlying data used in the method;

and (iv) evaluating the reasonableness

of significant assumptions related to the royalty rate,

revenue growth rates and terminal growth rates.

Evaluating management’s assumptions

related to the royalty rate, revenue growth

rates, and terminal growth rates involved evaluating whether the

assumptions used by management were reasonable considering (i) the

current and past performance of the legacy Houghton business;

(ii) the consistency

with external market and industry data;

whether these assumptions were consistent with evidence obtained in other

areas of the audit.

Professionals with specialized skill and

knowledge were used to assist in the evaluation of the relief from royalty valuation

method and the royalty rate assumption.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

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We have served

as the Company’s auditor since

at least 1972.

have not been able to determine the specific year we began

as the Company’s auditor since at least 1972.

We have not been able

to determine the specific year we began serving

as auditor of the Company.

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Ended December 31,

Cost of goods sold (excluding amortization expense -

Cost of goods sold (excluding amortization expense - See Note 16)

Selling, general and administrative expenses

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Restructuring and related charges

Combination, integration and other acquisition-related

Combination, integration and other acquisition-related expenses

Operating income

Other expense, net

Other income (expense), net

Interest expense, net

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Equity in net income of associated companies

Net income attributable to noncontrolling intere

Net income attributable to noncontrolling interest

Net income attributable to Quaker Chemical Corporation

Per share data:

Net income attributable to Quaker Chemical Corporatio

shareholders – basic

Net income attributable to Quaker Chemical Corporation

shareholders – basic

Net income attributable to Quaker Chemical Corporation common

shareholders – diluted

The accompanying notes are an integral

part of these consolidated financial statements.

The accompanying notes are an integral part

of these consolidated financial statements.

QUAKER CHEMICAL CORPORATION

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Ended December 31,

Other comprehensive income (loss), net of tax

Other comprehensive (loss) income, net of tax

Currency translation adjustments

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Current period change in fair value of derivatives

Unrealized gain (loss) on available-for-sale securities

Other comprehensive income (loss)

Unrealized (loss) gain on available-for-sale securities

Other comprehensive (loss) income

Comprehensive income

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Comprehensive income attributable to Quaker Chemical Corporation

The accompanying notes are an integral

part of these consolidated financial statements.

The accompanying notes are an integral part

of these consolidated financial statements.

QUAKER CHEMICAL CORPORATION

CONSOLIDATED BALANCE

Dollars in thousands, except par value and share amounts

BALANCE SHEETS

Dollars in thousands, except par value

Current assets

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Total current

Property, plant and

equipment, net

Property, plant and equipment,

Right of use lease assets

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Noncontrolling interest

Total liabilities and

The accompanying notes are an integral

part of these consolidated financial statements.

Total liabilities and equity

The accompanying notes are an integral part

of these consolidated financial statements.

QUAKER CHEMICAL CORPORATION

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Share-based compensation

Loss (gain) on disposal of property, plant, equipment and other assets

(Gain) loss on disposal of property, plant, equipment and other assets

Insurance settlement realized

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Pension and other postretirement benefits

Increase (decrease) in cash from changes in current assets and current

(Decrease) increase in cash from changes in current assets and current

liabilities, net of acquisitions:

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Proceeds from term loan debt

(Repayments) borrowings on revolving credit facilities, net

Borrowings (repayments) on revolving credit facilities, net

Repayments on other debt, net

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Effect of foreign exchange rate changes on cash

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at the beginning of the period

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Change in accrued purchases of property, plant and equipment, net

The accompanying notes are an integral

part of these consolidated financial statements.

The accompanying notes are an integral part

of these consolidated financial statements.

QUAKER CHEMICAL CORPORATION

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comprehensive

Noncontrolling

Noncontrollin

Balance as of December 31, 2018

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Balance as of January 1, 2019

Amounts reported in other comprehensive loss

Amounts reported in other comprehensive

Dividends declared ($

Distributions to noncontrolling affiliate

Shares issued related to the Combination

Shares issued upon exercise of stock options

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Balance as of January 1, 2020

Amounts reported in other comprehensive income

Amounts reported in other comprehensive

income (loss)

Dividends declared ($

Shares issued related to the Combination

Acquisition of noncontrolling interest

Distributions to noncontrolling affiliate

Shares issued upon exercise of stock options

Shares issued for employee stock purchase plan

Share-based compensation plans

Balance as of December 31, 2020

Cumulative effect of an accounting change

Balance as of January 1, 2020

Amounts reported in other comprehensive income

Amounts reported in other comprehensive

(loss) income

Dividends declared ($

Acquisition of noncontrolling interest

Distributions to noncontrolling affiliate

Shares issued upon exercise of stock options

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FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

Note 1 – Significant Accounting Policies

As used in these Notes to Consolidated Financial Statements,

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

and “our” refer to Quaker Chemical Corporation (doing

business as Quaker Houghton), its subsidiaries, and associated companies,

As used in these Notes to Consolidated Financial Statements, the terms

“Quaker,” “Quaker Houghton,” the “Company,”

and “our” refer to Quaker Chemical Corporation (doing business as Quaker Houghton),

its subsidiaries, and associated companies,

unless the context otherwise requires.

As used in these Notes to Consolidated Financial Statements, the

term Legacy Quaker refers to

the Company prior to the closing of its combination with

Houghton International, Inc.

(“Houghton”) (herein referred

As used in these Notes to Consolidated Financial Statements, the term Legacy Quaker

the Company prior to the closing of its combination with Houghton International,

(“Houghton”) (herein referred to as the

“Combination”).

Principles of consolidation:

All majority-owned subsidiaries are included in the

Company’s consolidated financial

with appropriate elimination of intercompany balances and

transactions.

All majority-owned subsidiaries are included in the Company’s

consolidated financial statements,

with appropriate elimination of intercompany balances and transactions.

Investments in associated companies (less than majority-

owned and in which the Company has significant

influence) are accounted for under the equity method.

owned and in which the Company has significant influence) are accounted

for under the equity method.

The Company’s share of net

income or losses in these investments in associated companies

is included in the Consolidated Statements

periodically reviews these investments for impairments

and, if necessary, would adjust

these investments to their fair value when a

decline in market value or other impairment indicators are

deemed to be other than temporary.

income or losses in these investments in associated companies is included in

the Consolidated Statements of Income.

periodically reviews these investments for impairments and, if necessary,

would adjust these investments to their fair value when a

decline in market value or other impairment indicators are deemed to be other

than temporary.

See Note 17 of Notes to Consolidated

Financial Statements.

The Company is not the primary beneficiary of any

variable interest entities (“VIEs”) and therefore the

The Company is not the primary beneficiary of any variable interest entities (“VIEs”)

and therefore the

Company’s consolidated

financial statements do not include the accounts of any VIEs.

Translation of

foreign currency:

Translation of foreign

Assets and liabilities of non-U.S.

subsidiaries and associated comp

anies are translated into

dollars at the respective rates of exchange prevailing

at the end of the year.

subsidiaries and associated companies are translated into

dollars at the respective rates of exchange prevailing at the end of the year.

Income and expense accounts are translated at

average exchange rates prevailing during the year.

Translation adjustments resulting

from this process are recorded directly in equity

as accumulated other comprehensive (loss) income

(“AOCI”) and will be included as income or expense only upon

sale or liquidation

Translation adjustments resulting from this process are

recorded directly in equity

as accumulated other comprehensive (loss) income (“AOCI”) and

will be included as income or expense only upon sale or liquidation

of the underlying entity or asset.

Generally, all of the

Company’s non-U.S.

use their local currency as their functional

Generally, all of the Company’s

subsidiaries use their local currency as their functional

Cash and cash equivalents:

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The Company has not experienced losses from the aforementioned

Inventories are valued at the lower of cost or net realizable

value, and are valued using the first-in, first-out method.

Accounts receivable and allowance for doubtful accounts:

Trade accounts receivable subject the Company to credit risk.

Trade accounts receivable are recorded at the

invoiced amount and generally do not bear interest.

The allowance for doubtful

accounts is the Company’s best estimate of

the amount of expected credit losses with its existing accounts receivable.

adopted ASU 2016-13,

Financial Instruments - Credit Losses (Topic

Measurement of Credit

Losses on Financial Instruments

a modified retrospective basis, effective January 1, 2020.

The Company recognizes an allowance for credit losses, which represents

the portion of the receivable that the Company does not

expect to collect over its contractual life, considering past events and reasonable

and supportable forecasts of future economic

The Company’s allowance for credit losses on

its trade accounts receivable is based on specific collectability facts and

circumstances for each outstanding receivable and customer,

the aging of outstanding receivables, and the associated collection risk

the Company estimates for certain past due aging categories, and also,

the general risk to all outstanding accounts receivable based on

historical amounts determined to be uncollectible.

The Company does not have any off-balance-sheet credit exposure related

See Note 13 of Notes to Consolidated Financial Statements.

Inventories are valued at the lower of cost or net realizable value,

and are valued using the first-in, first-out method.

See Note 14 of Notes to Consolidated Financial Statements.

Right of use lease assets and lease liabilities:

The Company determines if an arrangement is a lease at its inception.

determination generally depends on whether the arrangement conveys

the right to control the use of an identified fixed asset explicitly

or implicitly for a period of time in exchange for consideration.

Control of an underlying asset is conveyed if the Company obtains

the rights to direct the use of, and obtains substantially all of the economic benefits from

the use of, the underlying asset.

expense for variable leases and short-term leases is recognized when

the obligation is incurred.

The lease term for all of the Company’s

leases includes the non-cancellable period of the lease plus any additional periods

covered by an option to extend the lease that the Company is reasonably certain

it will exercise.

Operating leases are included in right

of use lease assets, other accrued liabilities and long-term lease liabilities on the Consolidated

Balance Sheet.

Right of use lease assets

and liabilities are recognized at each lease’s

commencement date based on the present value of its lease payments over its respective

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

The Company uses the stated borrowing rate for a lease when readily determinable.

When a stated borrowing rate is not available

in a lease agreement, the Company uses its incremental borrowing rate

based on information available at the lease’s

date to determine the present value of its lease payments.

In determining the incremental borrowing rate used to present value each

its leases, the Company considers certain information including fully

secured borrowing rates readily available to the Company and its

subsidiaries.

The Company has immaterial finance leases, which are included in

Property, plant and equipment (“PP&E”)

portion of long-term debt and long-term debt on the Consolidated Balance

Long-lived assets:

Property, plant and

equipment (“PP&E”) are stated at gross cost, less accumulated depreciation.

is computed using the straight-line method on an individual

asset basis over the following estimated useful lives:

improvements,

and machinery and equipment,

The carrying values of long-lived assets are evaluated

whenever changes in circumstances or current events indicate

the carrying amount of such assets may not be recoverable.

of undiscounted cash flows produced by the asset, or the

appropriate group of assets, is compared with the carrying value to

whether an impairment exists.

If necessary, the Company

recognizes an impairment loss for the difference between

amount of the assets and their estimated fair value.

PP&E is stated at gross cost, less accumulated depreciation.

Depreciation is computed using the straight-

line method on an individual asset basis over the following estimated useful lives:

and improvements,

machinery and equipment,

The carrying values of long-lived assets are evaluated whenever changes in circumstances

current events indicate the carrying amount of such assets may not be

An estimate of undiscounted cash flows produced

by the asset, or the appropriate group of assets, is compared with the carrying value to

determine whether an impairment exists.

necessary, the Company

recognizes an impairment loss for the difference between the carrying

amount of the assets and their

estimated fair value.

Fair value is based on current and anticipated future cash flows.

other dispositions of long-lived assets, the applicable amounts of

asset cost and accumulated depreciation are removed from

accounts and the net amount, less proceeds from

disposals, is recorded in the Consolidated Statements of Income.

Expenditures for

renewals or improvements that increase the estimated useful

life or capacity of the assets are capitalized, whereas

expenditures for

repairs and maintenance are expensed when incurred.

See Notes 9 and 15 of Notes to Consolidated Financial

Upon sale or other dispositions of long-lived

assets, the applicable amounts of asset cost and accumulated depreciation

are removed from the accounts and the net amount, less

proceeds from disposals, is recorded in the Consolidated Statements of Income.

Expenditures for renewals or improvements that

increase the estimated useful life or capacity of the assets are capitalized, whereas

expenditures for repairs and maintenance are

expensed when incurred.

See Notes 9 and 15 of Notes to Consolidated Financial Statements.

Capitalized software:

The Company capitalizes certain costs in connection with developing

or obtaining software for internal

The Company capitalizes certain costs in connection with developing or obtaining

software for internal

use, depending on the associated project.

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intended use.

In connection with the implementations and upgrades to

the Company’s global transaction,

consolidation and other

In connection with the implementations and upgrades to the Company’s

global transaction, consolidation and other

related systems, approximately $

million of net costs were capitalized in PP&E on the

Company’s Consolidated

million and $

million of net costs were capitalized in PP&E on the Company’s

Balance Sheets at December 31, 2021 and 2020, respectively.

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intangible assets at fair value at the date of acquisition.

Goodwill and indefinite-lived intangible assets are not amortized

but tested for

Goodwill and indefinite-lived intangible assets are not amortized but

impairment at least annually.

These tests will be performed more frequently if triggering

events indicate potential impairment.

Definite-lived intangible assets are amortized on a straight

-line basis over their estimated useful lives, generally for periods ranging

The Company continually evaluates the reasonableness of

the useful lives of these assets, consistent with the

These tests will be performed more frequently if triggering events indicate

potential impairment.

Definite-lived intangible assets are amortized on a straight-line basis over their estimated

useful lives, generally for periods ranging

The Company continually evaluates the reasonableness of the useful lives of these assets, consistent

discussion of long-lived assets, above.

See Note 16 of Notes to Consolidated Financial Statements.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Revenue recognition:

The Company applies the Financial Accounting Standards

Board’s (“FASB’s”)

The Company applies the Financial Accounting Standards Board’s

guidance on revenue

recognition which requires the Company to recognize

revenue in an amount that reflects the consideration to which

expects to be entitled in exchange for goods or services

transferred to its customers.

recognition which requires the Company to recognize revenue in an amount

that reflects the consideration to which the Company

expects to be entitled in exchange for goods or services transferred

to its customers.

To do this, the Company

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guidance, which requires the Company to:

the contract with a customer;

(i) identify the contract

with a customer;

(ii) identify the performance

obligations in the contract;

(iii) determine the transaction

(iv) allocate the transaction price to the performance

obligations in the

and (v) recognize revenue when, or as,

the Company satisfies a performance obligation.

See Note 5 of Notes to Consolidated

(iii) determine the transaction price;

(iv) allocate

the transaction price to the performance obligations in the

and (v) recognize revenue when, or as, the Company satisfies a performance

The Company identifies a contract with a customer when a sales agreement indicates

approval and commitment of the parties;

identifies the rights of the parties;

identifies the payment terms;

has commercial

and it is probable that the Company will

collect the consideration to which it will be entitled in exchange for the goods

or services that will be transferred to the customer.

The Company identifies a performance obligation in a contract for each promised

good or service that is separately identifiable

from other obligations in the contract and for which the customer can benefit

from the good or service either on its own or together

with other resources that are readily available to the customer.

The Company determines the transaction price as the amount of

consideration it expects to be entitled to in exchange for fulfilling the performance

obligations, including the effects of any variable

consideration, significant financing elements, amounts payable to the customer

or noncash consideration.

For any contracts that have

more than one performance obligation, the Company allocates the transaction

price to each performance obligation in an amount that

depicts the amount of consideration to which the Company expects to be entitled

in exchange for satisfying each performance

In accordance with the last step of the FASB’s

guidance, the Company recognizes revenue when, or as, it satisfies the

performance obligation in a contract by transferring control of a promised

good or providing the service to the customer.

Company typically satisfies its performance obligations and recognizes

revenue at a point in time for product sales, generally when

products are shipped or delivered to the customer,

depending on the terms underlying each arrangement.

In circumstances where the

Company’s products are on

consignment, revenue is generally recognized upon usage or consumption by the customer.

or other services provided by the Company to the customer,

the Company typically satisfies its performance obligations

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Accounts receivable and allowance for doubtful

Trade accounts receivable subject the Company

to credit risk.

Trade accounts receivable are recorded

at the invoiced amount and generally do not bear interest.

The allowance for doubtful

accounts is the Company’s

best estimate of the amount of expected credit losses with its existing

accounts receivable.

adopted ASU 2016-13,

Financial Instruments - Credit Losses (Topic

Measurement of Credit

Losses on Financial Instruments

a modified retrospective basis, effective January

See Note 3 of Notes to the Consolidated Financial Statements.

The Company recognizes an allowance for credit losses, which

represents the portion of the receivable that the Company does

expect to collect over its contractual life, considering

past events and reasonable and supportable forecasts of

future economic

The Company’s allowance for

credit losses on its trade accounts receivable is based on specific

collectability facts and

circumstances for each outstanding receivable and customer,

the aging of outstanding receivables, and the associated

collection risk

the Company estimates for certain past due aging categories,

and also, the general risk to all outstanding accounts receivable

historical amounts determined to be uncollectible.

The Company does not have any off-balance-sheet credit

exposure related to its

Dollars in thousands, except per share amounts, unless otherwise stated

and recognizes revenue over time, as the promised services are performed.

The Company uses input methods to recognize revenue

over time related to these services, including labor costs and time incurred.

The Company believes that these input methods represent

the most indicative measure of the Fluidcare

or other service work performed by the Company.

The Company does not have standard payment terms for all customers,

however the Company’s general

payment terms require

customers to pay for products or services provided after the performance

obligation is satisfied.

The Company does not have

significant financing arrangements with its customers.

Therefore, the Company does not adjust the promised amount of consideration

for the effects of a significant financing component as the Company

expects, at contract inception, that the period between when the

Company transfers a promised good or service to the customer and when the

customer pays for that good or service will be one year or

In addition, the Company expenses costs to obtain a contract as incurred

when the expected period of benefit, and therefore the

amortization period, is one year or less.

In addition, the Company excludes from the measurement of the transaction price all taxes

assessed by a governmental authority that are both imposed on and concurrent

with a specific revenue-producing transaction and

collected by the entity from a customer,

including sales, use, value added, excise and various other taxes.

Lastly, the Company has

elected to account for shipping and handling activities that occur after the

customer has obtained control of a good as a fulfilment cost,

rather than an additional promised service.

The Company does not have significant amounts of variable consideration in

its contracts

with customers and where applicable, the Company’s

estimates of variable consideration are not constrained.

The Company records certain third-party license fees in other income

(expense), net, in its Consolidated Statement of Income,

which generally include sales-based royalties in exchange for the license of

intellectual property.

These license fees are recognized in

accordance with their agreed-upon terms and when performance obligations are

satisfied, which is generally when the third party has a

subsequent sale.

The Company recognizes a contract asset or receivable on its Consolidated Balance Sheet

when the Company performs a service

or transfers a good in advance of receiving consideration.

A receivable is the Company’s right to consideration

that is unconditional

and only the passage of time is required before payment of that consideration

A contract asset is the Company’s right

consideration in exchange for goods or services that the Company has transferred

to a customer.

A contract liability is recognized when the Company receives consideration,

or if it has the unconditional right to receive

consideration, in advance of performance.

A contract liability is the Company’s

obligation to transfer goods or services to a customer

for which the Company has received consideration, or a specified amount

of consideration is due, from the customer.

See Note 5 of Notes to Consolidated Financial Statements.

Research and development costs:

Research and development costs are expensed as incurred

and are included in selling, general

Research and development costs are expensed as incurred and are included

in selling, general

and administrative expenses (“SG&A”).

Research and development expenses were $

the years ended December 31, 2020, 2019 and 2018,

respectively.

million and $

the years ended December 31, 2021, 2020 and 2019, respectively.

Environmental liabilities and expenditures:

Accruals for environmental matters are recorded

when it is probable that a liability

has been incurred and the amount of the liability can

be reasonably estimated.

Accruals for environmental matters are recorded when it is probable

that a liability

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

If there is a range of estimated liability and no amount

in that range is considered more probable than another,

then the Company records the lowest amount in the range in accordance

generally accepted accounting principles in the United

States (“U.S.

then the Company records the lowest amount in the range in accordance with

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

Environmental costs and remediation costs are

capitalized if the costs extend the life, increase the

capacity or improve 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

safety or efficiency of the property from the date acquired or

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

See Note 26 of Notes to Consolidated Financial Statements.

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The Company follows the FASB’s

guidance regarding asset retirement obligations,

addresses the accounting and reporting for obligations

associated with the retirement of tangible long-lived assets and the associated

guidance regarding asset retirement obligations, which

addresses the accounting and reporting for obligations associated with the

retirement of tangible long-lived assets and the associated

retirement costs.

Also, the Company follows the FASB’s

guidance for conditional asset retirement obligations

(“CARO”), which

relates to legal obligations to perform an asset retirement

activity in which the timing and (or) method of settlement are

conditional on

a future event that may or may not be within the control

of the entity.

guidance for conditional asset retirement obligations (“CARO”),

relates to legal obligations to perform an asset retirement activity in which

the timing and (or) method of settlement are conditional on

a future event that may or may not be within the control of the entity.

In accordance with this guidance, the Company records a

liability when there is enough information regarding the

timing of the CARO to perform a probability-weighted discounted cash

As of December 31, 2020 and 2019, the Company

had limited exposure to such obligations and had immaterial

liability when there is enough information regarding the timing of the CARO to perform

a probability-weighted discounted cash flow

As of December 31, 2021 and 2020, the Company had limited exposure

to such obligations and had immaterial liabilities

recorded for such on its Consolidated Balance Sheets.

Pension and o

ther postretirement benefits:

The Company maintains various noncontributory retirement

plans, covering a

Pension and other postretirement benefits:

The Company maintains various noncontributory retirement plans,

portion of its employees in the U.S.

and certain other

countries, including the Netherlands, the United Kingdom

(“U.K.”), Mexico,

and certain other countries, including

the Netherlands, the United Kingdom (“U.K.”), Mexico,

Sweden, Germany and France.

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The plans of the remaining non-U.S.

subsidiaries are, for

the most part, either fully

insured or integrated with the local governments’ plans and

are not subject to the provisions of the guidance.

subsidiaries are, for the most part, either

insured or integrated with the local governments’ plans and are not subject

to the provisions of the guidance.

The guidance requires

that employers recognize on a prospective basis the

funded status of their defined benefit pension and other

postretirement plans on

their consolidated balance sheet and, also, recognize

as a component of AOCI, net of tax, the gains or losses and prior

service costs or

credits that arise during the period but are not recognized

as components of net periodic benefit cost.

In addition, the guidance

requires that an employer recognize a settlement charge

in their consolidated statement of income when certain events occur,

including plan termination or the settlement of certain

plan liabilities.

A settlement charge represents the immediate

recognition into

expense of a portion of the unrecognized loss within AOCI on

the balance sheet in proportion to the share of the projected benefit

obligation that was settled.

The Company’s Legacy

pension plan year ends on November 30 and the

measurement date is

The measurement date for the Company’s

other postretirement benefits plan is December 31.

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The Company’s global

pension investment policies are designed to ensure that

pension assets are invested in a manner consistent

with meeting the future benefit obligations of the pension

plans and maintaining compliance with various laws and regulations

including the Employee Retirement Income Security

Dollars in thousands, except per share amounts, unless otherwise stated

that employers recognize on a prospective basis the funded status of their

defined benefit pension and other postretirement plans on

their consolidated balance sheet and, also, recognize as a component of AOCI,

net of tax, the gains or losses and prior service costs or

credits that arise during the period but are not recognized as components of

net periodic benefit cost.

In addition, the guidance

requires that an employer recognize a settlement charge in

their consolidated statement of income when certain events occur,

including plan termination or the settlement of certain plan liabilities.

A settlement charge represents the immediate recognition

expense of a portion of the unrecognized loss within AOCI on the balance sheet in

proportion to the share of the projected benefit

obligation that was settled.

The measurement date for the Company’s

postretirement benefits plan is December 31.

The Company’s global pension

investment policies are designed to ensure that pension assets are invested in a manner

with meeting the future benefit obligations of the pension plans and maintaining

compliance with various laws and regulations

including the Employee Retirement Income Security Act of 1974.

The Company establishes strategic asset allocation percentage

targets and benchmarks for significant asset classes

with the aim of achieving a prudent balance between

return and risk.

Company’s investment

horizon is generally long term, and, accordingly,

targets and benchmarks for significant asset classes with the aim of

achieving a prudent balance between return and risk.

Company’s investment horizon

is generally long term, and, accordingly,

the target asset allocations encompass a long-term

perspective of capital markets, expected risk and return

and perceived future economic conditions while also considering

the profile of

perspective of capital markets, expected risk and return and perceived future

economic conditions while also considering the profile of

plan liabilities.

To the extent

feasible, the short-term investment portfolio is managed

to match the short-term obligations, the

intermediate portfolio duration is matched to reduce

the risk of volatility in intermediate plan distributions, and the

portfolio is managed to maximize the long-term real

growth of plan assets.

To the extent feasible,

the short-term investment portfolio is managed to match the short

-term obligations, the

intermediate portfolio duration is matched to reduce the risk of volatility in

intermediate plan distributions, and the total return

portfolio is managed to maximize the long-term real growth of plan

The critical investment principles of diversification,

assessment of risk and targeting the optimal expected

returns for given levels of risk are applied.

assessment of risk and targeting the optimal expected returns for

given levels of risk are applied.

The Company’s investment

guidelines prohibit the use of securities such as letter stock and

other unregistered securities, commodities or commodity contracts,

guidelines prohibit the use of securities such as letter stock and other unregistered

securities, commodities or commodity contracts,

short sales, margin transactions, private placements

(unless specifically addressed by addendum), or any derivatives, options or

(unless specifically addressed by addendum), or any derivatives, options or futures

for the purpose of portfolio leveraging.

The target asset allocation is reviewed periodically

and is determined based on a long-term projection of capital market

inflation rates, fixed income yields, returns, volatilities and

correlation relationships.

The target asset allocation is reviewed periodically and is determined

based on a long-term projection of capital market outcomes,

inflation rates, fixed income yields, returns, volatilities and correlation

relationships.

The interaction between plan assets and benefit

obligations is periodically studied to assist in establishing such

strategic asset allocation targets.

obligations is periodically studied to assist in establishing such strategic asset allocation

Asset performance is monitored with

an overall expectation that plan assets will meet or exceed

benchmark performance over rolling five-year periods.

an overall expectation that plan assets will meet or exceed benchmark performance

over rolling five year periods.

The Company’s

pension committee, as authorized by the Company’s

Board of Directors, has discretion to manage the assets within

established asset

allocation ranges approved by senior management of the

See Note 21 of Notes to Consolidated Financial Statements.

Board of Directors (the “Board”), has discretion to manage the assets within

established asset allocation ranges approved by senior management

of the Company.

See Note 21 of Notes to Consolidated Financial

Comprehensive income (loss):

The Company presents other comprehensive income (loss) in its Statements

of Comprehensive

The Company presents other comprehensive income (loss) in its Statements of Comprehensive

The Company follows the FASB’s

guidance regarding the disclosure of reclassifications from

AOCI which requires the

disclosure of significant amounts reclassified from each

component of AOCI, the related tax amounts and the income

statement line

guidance regarding the disclosure of reclassifications from AOCI

which requires the

disclosure of significant amounts reclassified from each component of

AOCI, the related tax amounts and the income statement line

items affected by such reclassifications.

1 unchanged sentence

Income taxes and uncertain tax positions:

The provision for income taxes is determined using the asset and

liability approach

The provision for income taxes is determined using the asset and liability approach

of accounting for income taxes.

Under this approach, deferred taxes represent the future tax consequences

expected to occur when the

reported amounts of assets and liabilities are recovered

The provision for income taxes represents income taxes paid

payable for the current year and the change in deferred taxes

during the year.

Under this approach, deferred taxes represent the future tax consequences expected

to occur when the

reported amounts of assets and liabilities are recovered or paid.

The provision for income taxes represents income taxes paid or

payable for the current year and the change in deferred taxes during the year.

Deferred taxes result from differences between the

financial and tax bases of the Company’s

assets and liabilities and are adjusted for changes in tax rates and

tax laws when changes are

allowances are recorded to reduce deferred tax assets when it is more

likely than not that a tax benefit will not be

guidance regarding accounting for uncertainty in income

taxes 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

The guidance further requires the determination of whether

the benefits of tax positions are probable or more likely than not

sustained upon audit based upon the technical merits of

the tax position.

assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are

allowances are recorded to reduce deferred tax assets when it is more likely than not

that a tax benefit will not be

guidance regarding accounting for uncertainty in income taxes 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

The guidance further requires the determination of whether the benefits

of tax positions are probable or more likely than not

sustained upon audit based upon the technical merits of the tax position.

For tax positions that are determined to be more likely than

not sustained upon audit, a company recognizes the largest

amount of benefit that is greater than

not sustained upon audit, a company recognizes the largest amount

of benefit that is greater than

% likely of being realized upon

ultimate settlement in the financial statements.

For tax positions that are not determined to be more likely

than not sustained upon

audit, a company does not recognize any portion of the

benefit in the financial statements.

Additionally, the Company

adjusts for derecognition, classification, and penalties and

interest in interim periods, with appropriate disclosure and

Also, the amount of interest expense and income related to uncertain

tax positions is computed by applying the applicable

statutory rate of interest to the difference

between the tax position recognized, including timing differences,

and the amount previously

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

audit, a company does not recognize any portion of the benefit in the financial statements.

Additionally, the

Company monitors and

adjusts for derecognition, classification, and penalties and interest in interim

periods, with appropriate disclosure and transition

Also, the amount of interest expense and income related to uncertain tax positions is computed

by applying the applicable

statutory rate of interest to the difference between the

tax position recognized, including timing differences, and the amount previously

taken or expected to be taken in a tax return.

2 unchanged sentences

income tax expense.

Finally, when applicable,

the Company nets its liability for unrecognized tax benefits

against deferred tax assets

related to net operating losses or other tax credit carryforwards

that would apply if the uncertain tax position were settled

Finally, when applicable, the

Company nets its liability for unrecognized tax benefits against deferred

related to net operating losses or other tax credit carryforwards that would apply

if the uncertain tax position were settled for the

presumed amount at the balance sheet date.

Pursuant to the Tax

Cuts and Jobs Act (“U.S.

Reform”), specifically the one-time tax on deemed repatriation

(the “Transition

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

Pursuant to the Tax Cuts and

Jobs Act (“U.S.

specifically the one-time tax on deemed repatriation (the “Transition

the Company has provided for U.S.

income tax on its undistributed

earnings of non-U.S.

subsidiaries, however,

the Company is

subject to and will incur other taxes, such as withholding taxes and

dividend distribution taxes, if these undistributed earnings were

income tax on its undistributed earnings of non-U.S.

subsidiaries, however, the Company

subject to and will incur other taxes, such as withholding taxes and dividend

distribution taxes, if these undistributed earnings were

ultimately remitted to the U.S.

2 unchanged sentences

subsidiaries to

support working capital needs and certain other growth

initiatives of those subsidiaries.

However, in certain cases the Company

and may in the future change its indefinite reinvestment

assertion for any or all of these undistributed earnings.

support working capital needs and certain other growth initiatives of

those subsidiaries.

However, in certain cases the Company has

and may in the future change its indefinite reinvestment assertion for any or

all of these undistributed earnings.

In this case, the

Company would estimate and record a tax liability and

corresponding tax expense for the amount of non-U.S.

Company would estimate and record a tax liability and corresponding

tax expense for the amount of non-U.S.

income taxes it would

1 unchanged sentence

See Note 10 of Notes to Consolidated Financial Statements.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The Company is exposed to the impact of changes in interest rates,

foreign currency fluctuations, changes in

The Company is exposed to the impact of changes in interest rates, foreign currency fluctuations,

commodity prices and credit risk.

The Company utilizes interest rate swap agreements to enhance

its ability to manage risk, including

exposure to variability in interest payments associated with its variable

The Company utilizes interest rate swap agreements to enhance its ability to manage

risk, including

exposure to variability in interest payments associated with its variable rate debt.

Derivative instruments are entered into for periods

consistent with the related underlying exposures and do not

constitute positions independent of those exposures.

consistent with the related underlying exposures and do not constitute positions

independent of those exposures.

As of December 31,

2020 and 2019,

the Company had certain interest rate swap agreements that

were designated as cash flow hedges.

2021 and 2020, the Company had certain interest rate swap agreements

that were designated as cash flow hedges.

Interest rate swaps

are entered into with a limited number of counterparties,

each of which allows for net settlement of all contracts through

payment in a single currency in the event of a default

on or termination of any one contract.

are entered into with a limited number of counterparties, each of which allows for net

settlement of all contracts through a single

payment in a single currency in the event of a default on or termination of any one

The Company records these instruments

on a net basis within the Consolidated Balance Sheets.

The effective portion of the change in fair value

of the agreement is recorded

in AOCI and will be recognized in the Consolidated Statements

of Income when the hedge item affects earnings

or losses or it

The effective portion of the change in fair value of the agreement is recorded

in AOCI and will be recognized in the Consolidated Statements of Income when the

hedge item affects earnings or losses or it

becomes probable that the forecasted transaction will not occur.

2 unchanged sentences

The Company utilizes the FASB’s

guidance regarding fair value measurements,

which establishes a

common definition for fair value to be applied to guidance

requiring use of fair value, establishes a framework for

measuring fair

guidance regarding fair value measurements, which establishes a

common definition for fair value to be applied to guidance requiring use

of fair value, establishes a framework for measuring fair

value and expands disclosure about such fair value measurements.

Specifically, the guidance

utilizes a fair value hierarchy that

prioritizes the inputs to valuation techniques used to measure fair

value into three broad levels.

Specifically, the guidance utilizes

a fair value hierarchy that

prioritizes the inputs to valuation techniques used to measure fair value

into three broad levels.

See Notes 21 and 24 of Notes to

1 unchanged sentence

The following is a brief description of those three levels:

Observable inputs such as quoted prices (unadjusted)

in active markets for identical assets or liabilities.

Inputs other than quoted prices that are observable

for the asset or liability,

Observable inputs such as quoted prices (unadjusted) in active markets for identical

assets or liabilities.

Inputs other than quoted prices that are observable for the asset or liability,

either directly or indirectly.

include quoted prices for similar assets or liabilities in active

markets and quoted prices for identical or similar assets or

include quoted prices for similar assets or liabilities in active markets and quoted

prices for identical or similar assets or

liabilities in markets that are not active.

3 unchanged sentences

guidance regarding share-based payments, which

recognition of the fair value of share-based compensation

as a component of expense.

recognition of the fair value of share-based compensation as a component

The Company has a long-term incentive

program (“LTIP”)

for key employees which provides for the granting of options

to purchase stock at prices not less than its market

for key employees which provides for the granting of options to purchase stock at prices not

less than its market

value on the date of the grant.

8 unchanged sentences

In addition, as part of the

Company’s Annual Incentive

Plan, nonvested shares may be issued to key employees,

which generally would vest over a

Company’s Annual Incentive Plan,

nonvested shares may be issued to key employees, which generally would

In addition, while the FASB’s

guidance permits the Company to make an accounting

policy election to account for forfeitures as

they occur for service condition aspects of certain share-based

awards, the Company has decided not to elect this accounting

and instead has elected to continue utilizing a forfeiture

rate assumption.

guidance permits the Company to make an accounting policy election

to account for forfeitures as

they occur for service condition aspects of certain share-based awards, the

Company has decided not to elect this accounting policy

and instead has elected to continue utilizing a forfeiture rate assumption.

Based on historical experience, the Company has assumed a

2 unchanged sentences

The Company will record additional expense if the actual forfeiture

rate is lower than estimated and will record a recovery

of prior expense if the actual forfeiture is higher than

The Company also issues performance-dependent

stock awards as a component of its LTIP.

rate is lower than estimated and will record a recovery of prior expense if the

actual forfeiture is higher than estimated.

The Company also issues performance-dependent stock awards as a component

The fair value of the performance-

dependent stock awards is based on their grant-date market

value adjusted for the likelihood of attaining certain pre

performance goals and is calculated by utilizing a Monte Carlo

Simulation model.

dependent stock awards is based on their grant-date market value adjusted

for the likelihood of attaining certain pre-determined

performance goals and is calculated by utilizing a Monte Carlo simulation

Compensation expense is recognized on a straight-

3 unchanged sentences

The Company follows the FASB’s

guidance regarding the calculation of earnings per

share for nonvested

guidance regarding the calculation of earnings per share for nonvested

stock awards with rights to non-forfeitable dividends.

The guidance requires nonvested stock awards with rights to

non-forfeitable

dividends to be included as part of the basic weighted

average share calculation under the two-class method.

The guidance requires nonvested stock awards with rights to non-forfeitable

dividends to be included as part of the basic weighted average share calculation

under the two-class method.

See Note 11 of Notes to

Consolidated Financial Statements.

The Company’s reportable

segments reflect the structure of the Company’s

internal organization, the method by

which the Company’s resources

are allocated and the manner by which the Company

and the chief operating decision maker assess its

See Note 4 of Notes to Consolidated Financial Statements.

Hyper-inflationary accounting:

Economies that have a cumulative three-year rate of inflation

% are considered

hyper-inflationary in accordance with U.S.

A legal entity that operates within an economy deemed

to be hyper-inflationary is

required to remeasure its monetary assets and liabilities to the

applicable published exchange rates and record the associated gains

losses resulting from the remeasurement directly to the Consolidated

Statements of Income.

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

economy has been considered hyper-inflationary

GAAP since 2010.

The Company has a

interest in a Venezuelan

affiliate, Kelko Quaker Chemical, S.A (“Kelko Venezuela”).

Due to heightened foreign exchange controls

and restrictions currently present within Venezuela,

during the third quarter of 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

remaining carrying value for its investment in Kelko

Dollars in thousands, except per share amounts, unless otherwise stated

The Company’s operating

segments, which are consistent with its reportable segments, reflect the

structure of the

Company’s 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

See Note 4 of Notes to Consolidated Financial Statements.

Based on various indices or index compilations currently

being used to monitor inflation in Argentina as well as

recent economic

Hyper-inflationary accounting:

Economies that have a cumulative three year rate of inflation exceeding

% are considered

hyper-inflationary in accordance with U.S.

A legal entity that operates within an economy deemed to be hyper-inflationary

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

Based on various indices or index compilations being used to monitor inflation

in Argentina as well as recent economic

instability, effective

1 unchanged sentence

economy was considered hyper-inflationary under U.S.

As a result, the

Company began applying hyper-inflationary

accounting with respect to the Company's wholly owned

Argentine subsidiary beginning

July 1, 2018.

In addition, Houghton has an Argentine subsidiary to

which hyper-inflationary accounting also is applied.

for the year ended December 31, 2020, the Company's Argentine

subsidiaries represented less than

% of the Company’s consolidated

total assets and net sales, respectively.

As of, and for the year

ended December 31, 2021, the Company's Argentine subsidiaries represented

% of the Company’s consolidated total assets

and net sales, respectively.

During the years ended December 31, 2021, 2020 and 2019, the Company recorded

million, $ 1.0 million, and $ 0.7 million, respectively, of remeasurement losses associated with the applicable currency conversions

related to Venezuela and Argentina.

million, and $

million, respectively, of remeasurement

losses associated with the applicable currency conversions related to

Business combinations:

The Company accounts for business combinations under

the acquisition method of accounting.

method requires the recording of acquired assets, including

separately identifiable intangible assets and assumed liabilities at their

The Company accounts for business combinations under the acquisition method

of accounting.

method requires the recording of acquired assets, including separately

identifiable intangible assets, and assumed liabilities at their

respective acquisition date estimated fair values.

Any excess of the purchase price over the estimated fair value

of the identifiable net

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

assets acquired is recorded as goodwill.

The determination of the estimated fair value of assets acquired and

liabilities assumed

The determination of the estimated fair value of assets acquired and liabilities assumed

requires significant estimates and assumptions.

Based on the assessment of additional information during the measurement

which may be up to one year from the acquisition date,

the Company may record adjustments to the estimated fair value of assets

Based on the assessment of additional information during the measurement period,

which may be up to one year from the acquisition date, the Company may record

adjustments to the estimated fair value of assets

acquired and liabilities assumed.

1 unchanged sentence

Restructuring activities:

Restructuring programs consist of employee severance,

rationalization of manufacturing or other

Restructuring programs consist of employee severance, rationalization of

manufacturing or other

facilities and other related items.

To account for

such programs,

To account for such programs,

the Company applies FASB’s

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cost obligations.

This guidance requires that a liability for a cost associated with an

exit or disposal activity be recognized when the

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.

1 unchanged sentence

Reclassifications:

Certain information has been reclassified to conform

to the current year presentation.

Certain information has been reclassified to conform to the current year presentation.

Accounting estimates:

The preparation of financial statements in conformity

with generally accepted accounting principles

requires management to make estimates and assumptions that

affect the reported amounts of assets, liabilities

and disclosure of

contingencies at the date of the financial statements and

the reported amounts of net sales and expenses during the reporting

The preparation of financial statements in conformity with generally accepted

accounting principles

requires management to make estimates and assumptions that affect

the reported amounts of assets, liabilities and disclosure of

contingencies at the date of the financial statements and the reported amounts

of net sales and expenses during the reporting period.

Actual results could differ from such estimates.

Note 2 – Business Combinations

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.

and certain other selling shareholders in exchange for a combination

and shares of the Company’s

common stock in accordance with the Share Purchase Agreement

dated April 4, 2017.

Houghton is a

leading global provider of specialty chemicals and technical

services for metalworking and other industrial applications.

Company believes that combining the Legacy Quaker

and Houghton products and service offerings allows Quaker

Houghton to better

serve its customers in its various end markets.

The Combination was subject to certain regulatory

and shareholder approvals.

At a shareholder meeting held during 2017, the

Company’s shareholders

approved the issuance of new shares of the Company’s

common stock at closing of the Combination.

in 2017, the Company received regulatory approvals for

the Combination from China and Australia.

The Company received

regulatory approvals from the European Commission

(“EC”) during the second quarter of 2019 and the U.S.

Commission (“FTC”) in July 2019.

The approvals from the FTC and the EC required the concurrent

divestiture of certain steel and

aluminum related product lines of Houghton, which

were sold by Houghton on August 1, 2019 for approximately

million in cash.

The final remedy agreed with the EC and the FTC was consistent

with the Company’s

previous expectation that the total divested

product lines would be approximately

% of the combined company’s

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The following table summarizes the fair value of consideration

transferred in the Combination:

Cash transferred to Houghton shareholders (a)

Cash paid to extinguish Houghton debt obligations

Fair value of common stock issued as consideration (b)

Total fair value

of consideration transferred

A portion is held in escrow by a third party,

subject to indemnification rights that lapse upon the achievement

Amount was determined based on approximately

million shares, comprising

% of the common stock of the Company

immediately after the closing, and the closing price per

share of Quaker Chemical Corporation common stock

August 1, 2019.

The Company accounted for the Combination under the

acquisition method of accounting.

This method requires the recording of

acquired assets, including separately identifiable

intangible assets, at their fair value on the acquisition date.

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, including indefinite

and definite-lived intangible assets, requires management’s

often involves the use of significant estimates and assumptions,

including assumptions with respect to future cash inflows and

outflows, discount rates, customer attrition rates, royalty

rates, asset lives and market multiples, among other items.

Fair values were

determined by management using a variety of methodologies

and resources, including external independent valuation

valuation methods included physical appraisals, discounted

cash flow analyses, excess earnings, relief from

royalty, and other

appropriate valuation techniques to determine the fair value

of assets acquired and liabilities assumed.

The following table presents the final estimated fair

values of Houghton net assets acquired:

August 1, 2019

(as adjusted)

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other assets

2021 Acquisitions

In November 2021, the Company acquired Baron Industries (“Baron”),

a privately held Company that provides vacuum

impregnation services of castings, powder metals and electrical components for

its Global Specialty Businesses reportable segment for

million, including an initial cash payment of $

million, subject to post-closing adjustments as well as certain earn-out

provisions currently estimated at $

million that are payable at different times from 2022 through

The earn-out provisions

could total a maximum of $

The Company allocated $

million of the purchase price to intangible assets, $

property, plant and

Right of use lease assets

Investments in associated companies

Other non-current assets

Intangible assets

Total assets purchased

Short-term borrowings, not refinanced at closing

payable, accrued expenses and other accrued liabilities

Deferred tax liabilities

Long-term lease liabilities

Other non-current liabilities

Total liabilities assumed

Total consideration

paid for Houghton

cash acquired

fair value of common stock issued as consideration

Net cash paid for Houghton

(1) As previously disclosed in the Company’s

2019 Form 10-K.

During 2020, the allocation of the purchase price for

the Combination was finalized and the

measurement period has

Houghton assets acquired and liabilities assumed were assigned to

each of the Company’s reportable

segments on a specific

identification or allocated basis, as applicable.

Prior to finalizing the purchase price allocation, certain measurement

adjustments were recorded during 2020 related primarily

to increasing the valuation allowances against the deferred

associated with foreign tax credits acquired as part of

the Combination as additional information became available and

equipment and $

million of other assets acquired net of liabilities assumed, which includes $

million of cash

In addition, the Company recorded $

million of goodwill, none of which is expected to be tax deductible.

assets comprised $

million of customer relationships to be amortized over

million of existing product technology

to be amortized over

In November 2021, the Company acquired a business that provides

hydraulic fluids, coolants, cleaners, and rust preventative oils

in Turkey for its EMEA reportable segment

million EUR or approximately $

In September 2021, the Company acquired the remaining interest in Grindaix

-GmbH (“Grindaix”), a Germany-based, high-tech

provider of coolant control and delivery systems for its Global Specialty Businesses reportable

million EUR or

approximately $

million, which is gross of approximately $

million of cash acquired.

Previously, in February

Company acquired a

% ownership interest in Grindaix for

million EUR or approximately $

The Company recorded

its initial investment as an equity method investment within the Condensed Consolidated

Financial Statements and accounted for the

purchase of the remaining interest as a step acquisition whereby the Company

remeasured the previously held equity method

investment to its fair value.

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

update the Company’s initial

estimates of expenses allocated to foreign source income

and expected creditable foreign taxes.

addition, measurement period adjustments included

the recognition of additional other non-current assets and other non-current

liabilities based on additional information obtained regarding

certain tax audits and associated rights to indemnification,

non-income tax liabilities payable upon closing of the

Combination in certain countries.

Dollars in thousands, except per share amounts, unless otherwise stated

In June 2021, the Company acquired certain assets for its chemical milling

maskants product line in the Global Specialty

Businesses reportable segment for

million EUR or approximately $

In February 2021, the Company acquired a tin-plating solutions business for

the steel end market for $

acquisition is part of each of the Company’s

geographic reportable segments.

The Company allocated $

million of the purchase price to intangible assets, including certain

measurement period

adjustments, comprised of $

million of trademarks and tradename, to which management has

assigned indefinite lives;

million of the purchase

price to intangible assets, comprised of $

million of customer relationships, to be amortized over

million of existing product technology,

amortized over

In addition, the Company recorded $

million of goodwill, including measurement period adjustments,

related to expected value not allocated to other acquired

assets, none of which will be tax deductible.

See Note 16 of Notes to

Consolidated Financial Statements.

Factors contributing to the purchase price that resulted in

goodwill included the acquisition of

management, business processes and personnel that

will allow Quaker Houghton to better serve its customers.

The expanded portfolio

is expected to generate significant cross-selling opportunities and

allow further expansion into certain emerging

growth markets.

million of existing

product technology to be amortized over

million of a licensed trademark to be amortized over

the Company recorded $

million of goodwill, all of which is expected to be tax deductible in various jurisdictions

Factors contributing to the purchase price that resulted in goodwill included

the acquisition of business processes and

personnel that will allow Quaker Houghton to better serve its customers.

As of December 31, 2021, the allocation of the purchase price of the 2021

acquisitions has not been finalized and the one year

measurement period has not ended for any of these acquisitions.

Further adjustments may be necessary as a result of the Company’s

on-going assessment of additional information related to the fair value

of assets acquired and liabilities assumed.

The results of operations of the 2021 acquired assets and businesses subsequent

to the respective acquisition dates are included in

the Consolidated Statements of Income for the year ended December

Applicable transaction expenses associated with these

acquisitions are included in Combination, integration and other acquisition

-related expenses in the Company’s Consolidated

Statements of Income.

Certain pro forma and other information is not presented, as the operations of the acquired

businesses are not considered material to the overall operations of the Company

for the periods presented.

2022 Acquisitions

In January 2022, the Company acquired a business related to the sealing and impregnation

of metal castings for the automotive

sector, as well as impregnation resin and

impregnation systems for metal parts, for its Global Specialty Business reporting segment for

approximately

million EUR or approximately $

This business expands the Company's geographic presence in

Germany as well as broadens its product offerings and

service capabilities within its existing impregnation business that was initially

entered into as part of its past acquisition of Norman Hay.

Also in in January 2022, the Company acquired a business that provides

pickling inhibitor technologies for the steel industry,

drawing lubricants and stamping oil for metalworking, and various other

lubrication, rust preventative, and cleaner applications, for its Americas reportable

segment for approximately $

business broadens the Company’s

product offerings within its existing metals and metalworking business

in the Americas region.

The results of operations of these two January 2022 acquisitions are not included

in the Consolidated Statements of Income

because the date of closing for each was subsequent to December 31, 2021.

Preliminary purchase price allocation of assets acquired

and liabilities assumed have not been presented as that information is not

available as of the date of these Consolidated Financial

In August 2019, the Company completed the Combination, whereby

the Company acquired all of the issued and outstanding

shares of Houghton from Gulf Houghton Lubricants, Ltd.

other selling shareholders in exchange for a combination of cash

and shares of the Company’s common

stock in accordance with the Share Purchase Agreement dated April 4,

Commencing August 1, 2019, the Company’s

Consolidated Statements of Income included the results of

Houghton subsequent to closing of the Combination and included

in the Company’s Consolidated

Statements of Income for the year

Consolidated Statements of Income included the results of Houghton.

Houghton subsequent to closing of the Combination and included in the Company’s

Consolidated Statements of Income for the year

ended December 31, 2019 were $

The following unaudited pro forma consolidated financial information

prepared as if the Combination had taken place

on January 1, 2018.

prepared as if the Combination had taken place on January 1, 2018.

The unaudited pro forma results include certain adjustments to

1 unchanged sentence

actual results, including:

(i) additional depreciation and amort

ization expense based on the initial estimates

of fair value step up and estimated useful lives of depreciable

fixed assets, definite-lived intangible assets and investment in

(i) additional depreciation and amortization expense based

on the initial estimates

of fair value step up and estimated useful lives of depreciable fixed

assets, definite-lived intangible assets and investment in associated

companies acquired;

(ii) adoption of required accounting

guidance and alignment of related accounting policies, (iii)

elimination of

guidance and alignment of related accounting policies, (iii) elimination

transactions between Legacy Quaker and Houghton;

(iv) elimination of results associated with the divested product

adjustment to interest expense, net, to reflect the impact

of the financing and capital structure of the combined Company;

(iv) elimination

of results associated with the divested product lines;

adjustment to interest expense, net, to reflect the impact of the financing

and capital structure of the combined Company;

adjustment for certain Combination,

integration and other acquisition-related costs to reflect such costs as

if they were incurred in the

period immediately following the pro-forma closing

of the Combination on January 1, 2018.

integration and other acquisition-related costs to reflect such costs as if they were

incurred in the

period immediately following the pro-forma closing of the

Combination on January 1, 2018.

The adjustments described in (vi)

include an expense recorded in costs of goods sold (“COGS”)

associated with selling inventory acquired in the Combination which

was adjusted to fair value as part of purchase accounting,

restructuring expense incurred associated with the Company’s

include an expense recorded in costs of goods sold (“COGS”) associated with selling

inventory acquired in the Combination which

was adjusted to fair value as part of purchase accounting, restructuring expense incurred

associated with the Company’s global

restructuring program initiated post-closing of the Combination

and certain other integration costs incurred post-closing included

and certain other integration costs incurred post-closing included in

combination and other acquisition-related expenses.

These costs have been presented in the unaudited pro forma

table below as these

costs on a pro forma basis were incurred during the year

ended December 31, 2018.

These costs have been presented in the unaudited pro forma table below

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

costs on a pro forma basis were incurred during the year ended December 31,

Unaudited pro forma results are not necessarily

indicative of the results that would have occurred if the

acquisition had occurred on the date indicated, or that may result in the

for various reasons, including the potential impact of revenue

and cost synergies on the business.

For the years ending

indicative of the results that would have occurred if the acquisition had occurred

on the date indicated, or that may result in the future

for various reasons, including the potential impact of revenue and cost

synergies on the business.

Unaudited Pro Forma

(as if the Combination occurred on

January 1, 2018)

(as if the Combination occurred on January 1,

Net income attributable to Quaker Chemical Corporation

integration and other acquisition-related expenses have been

and are expected to continue to be significant.

integration and other acquisition-related expenses have been and are expected to

continue to be significant.

Company incurred total costs of $

1 unchanged sentence

million for the years ended December 31, 2021, 2020 and

related to the Combination,

2019, respectively, related

to the Combination,

integration and other acquisition-related activities.

These costs included certain legal, financial and

other advisory

and consultant costs related to 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 costs also include interest

costs to maintain the bank commitment (“ticking fees”)

for the Combination during each of the years ended December

accelerated depreciation charges during the year

ended December 31, 2020 and 2019, a loss on the sale of a held-for-sale

during the year ended December 31, 2020, and a gain

on the sale of a held-for-sale asset during the year ended

December 31, 2018.

As of December 31, 2020 and 2019, the Company

had current liabilities related to the Combination and other acquisition-related

activities of $

These costs included 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 also

interest costs to maintain the bank commitment (“ticking fees”) for the Combination

during the year ended December 31,

accelerated depreciation charges during the years ended December

31, 2021, 2020 and 2019, a gain on the sale of a held-for-sale

real property during the year ended December 31, 2021, a loss on the sale of a held-for-sale

asset during the year ended December 31,

2020, and recorded income related to indemnification rights during the

years ended December 31, 2021 and 2020.

As of December

31, 2021 and 2020, the Company had current liabilities related to the Combination

and other acquisition-related activities of $

million and $

million, respectively,

primarily recorded within other accrued liabilities on its Consolidated

, the Company completed its acquisition of the operating divisions

Norman Hay plc

(“Norman Hay”), a private

that provides specialty chemicals, operating equipment, and

services to industrial end markets.

The acquisition adds

new technologies in automotive, original equipment

manufacturer (“OEM”), and aerospace, as well as engineering

expertise which is

expected to strengthen the Company’s

existing equipment solutions platform.

The acquired Norman Hay assets and liabilities were

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

assigned to the Global Specialty Businesses reportable segment.

The original purchase price was

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 following table presents the final estimated fair

values of Norman Hay net assets acquired:

October 1, 2019

(as adjusted)

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other assets

Property, plant and

Right of use lease assets

Intangible assets

Total assets purchased

Long-term debt included current portions

Accounts payable, accrued expenses and other accrued

Deferred tax liabilities

Long-term lease liabilities

Total liabilities assumed

Total consideration

paid for Norman Hay

estimated purchase price settlement (2)

cash acquired

Net cash paid for Norman Hay

(1) As previously disclosed in the Company’s

2019 Form 10-K.

(2) The Company finalized its post-closing adjustments for

the Norman Hay acquisition and paid approximately

during the first quarter of 2020 to settle such adjustments.

During 2020, the allocation of the purchase price for

Norman Hay was finalized and the

measurement period has ended.

The Company allocated $

million of the purchase price to intangible assets, comprised

million of customer relationships,

to be amortized over

million of existing product technology,

to be amortized over

trademarks, to be amortized over

million of non-compete agreements, to be amortized over

addition, the Company recorded $

million of goodwill related to expected value not allocated to

other acquired assets, none of

which will be tax deductible.

Factors contributing to the purchase price that resulted

in goodwill included the acquisition of

management, business processes and personnel that

will allow Quaker Houghton to better serve its customers.

The results of operations of Norman Hay are included

in the Consolidated Statements of Income as of October 1, 2019.

Transaction expenses associated with

this acquisition are included in Combination,

integration and other acquisition-related expenses

in the Company’s Consolidated

Statements of Income.

Certain pro forma and other information is not presented, as the operations

Norman Hay are not considered material to the overall

operations of the Company for the periods presented.

Coral Chemical Company

December 2020

, the Company completed its acquisition of

Coral Chemical Company

(“Coral”), a privately held, U.S.-based

million, respectively, primarily

recorded within other accrued liabilities on its Consolidated Balance Sheets.

Other Previous Acquisitions

In December 2020, the Company completed its acquisition of Coral Chemical

Company (“Coral”), a privately held, U.S.-based

provider of metal finishing fluid solutions.

The acquisition provides

technical expertise and product solutions for pre-treatment,

metalworking and wastewater treatment applications

to the beverage cans and general industrial end markets.

The acquisition provides technical expertise and product solutions for pre-treatment,

metalworking and wastewater treatment applications to the beverage

cans and general industrial end markets.

The acquired Coral

assets and liabilities were assigned to the Americas and Global

Specialty Businesses reportable segments.

assets and liabilities were assigned to the Americas and Global Specialty Businesses reportable

The original purchase price

was approximately $

million, subject to routine and customary post-closing adjustments related

to working capital and net

million, subject to routine and customary post-closing adjustments related to working

capital and net

indebtedness levels.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The following table presents the preliminary estimated fair

values of Coral net assets acquired:

The following table presents the final estimated fair values of Coral net assets acquired:

(as adjusted)

Cash and cash equivalents

1 unchanged sentence

Prepaid expenses and other assets

Property, plant and

Property, plant and equipment

Intangible assets

Total assets purchased

Long-term debt included current portions

Long-term debt including current portions and finance leases

Accounts payable, accrued expenses and other accrued liabilities

2 unchanged sentences

paid for Coral

estimated purchase price settlement

cash acquired

Net cash paid for Coral

The Company allocated $

million of the purchase price to intangible assets, comprised

million of customer

relationships, to be amortized over

million of existing product technology,

to be amortized over

million of trademarks, to be amortized over

In addition, the Company recorded $

million of goodwill related to

expected value not allocated to other acquired assets, none

of which will be tax deductible.

Factors contributing to the purchase price

that resulted in goodwill included the acquisition of

management, business processes and personnel that will

allow Quaker Houghton

to better serve its customers.

As of December 31, 2020, the allocation of the purchase

price for Coral has not been finalized and the

period has not ended.

Further adjustments may be necessary as a result of the

Company’s on-going assessment of

information related to the fair value of assets acquired

and liabilities assumed.

The preliminary purchase price allocations are based

upon the valuation of assets and these estimates and assumptions

are subject to change as the Company obtains additional information

during the measurement period.

These assets pending finalization include fixed assets and intangible

assets which could also result in

adjustments to goodwill.

The results of operations of Coral subsequent to the

acquisition date are included in the Consolidated Statements of

December 31, 2020.

Transaction expenses associated with this acquisition

are included in Combination,

integration and other

acquisition-related expenses in the Company’s

Consolidated Statements of Income.

Certain pro forma and other information is not

presented, as the operations of Coral are not considered

material to the overall operations of the Company for the

periods presented.

Other Acquisitions

In February 2021, the Company acquired certain assets related

to tin-plating solutions in the steel end market for approximately

The results of operations of the acquired assets are not

included in the Consolidated Statements of Income, because the

date of closing was after December 31, 2020.

Transaction expenses associated with this acquisition

that were incurred during the year

ended December 31, 2020 are included in Combination,

integration and other acquisition-related expenses in the Company’s

Consolidated Statements of Income.

A preliminary purchase price allocation of assets acquired

and liabilities assumed has not been

presented as that information is not available as of

the date of these Consolidated Financial Statements.

As previously disclosed in the Company’s

2020 Form 10-K.

Measurement period adjustments recorded during the year ended December

31, 2021 include certain adjustments related to

refining original estimates for assets and liabilities for certain acquired finance

leases, as well as an adjustment to reflect the expected

settlement of post-closing working capital and net indebtedness true ups to the initial

purchase price.

The Company continues to work

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

with the seller to finalize certain post-closing adjustments and the above

table includes the Company’s best estimate

as of December

As of December 31, 2021, the allocation of the purchase price for Coral has been finalized

period has ended.

In May 2020, the Company acquired Tel

Nordic ApS (“TEL”), a company that specializes in lubricants and engineering

in high pressure aluminum die casting for its Europe,

Middle East and Africa (“EMEA”) reportable segment.

Consideration paid was

in the form of a convertible promissory note in the amount

Nordic ApS (“TEL”), a company that specializes in lubricants and engineering primaril

in high pressure aluminum die casting for its EMEA reportable segment.

Consideration paid was in the form of a convertible

promissory note in the amount of

million DKK, or approximately $

million, which was

subsequently converted into shares of the Company’s

common stock.

million, which was subsequently converted into shares of

the Company’s common stock.

An adjustment to the purchase price of approximately

million DKK, or less than $

million, was made as a result of finalizing a post-closing

settlement in the second quarter of 2020.

Company allocated approximately $

million of the purchase price to intangible assets to be amortized

the Company recorded approximately $

million of goodwill, related to expected value not allocated to

other acquired assets, none

of which will be tax deductible.

The allocation of the purchase price of TEL has not been

finalized and the one-year measurement

period has not ended.

Further adjustments may be necessary as a result of the

Company’s on-going assessment of

information related to the fair value of assets acquired

and liabilities assumed.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

made as a result of finalizing a post-closing settlement in the second

quarter of 2020.

The Company allocated approximately $

million of the purchase price to intangible assets to be amortized over

In addition, the Company recorded approximately

million of goodwill, related to expected value not allocated to other acquired

assets, none of which will be tax deductible.

December 31, 2021, the allocation of the purchase price of TEL was finalized

and the one year measurement period ended.

In March 2020, the Company acquired the remaining

% ownership interest in one of its South African affiliates,

% ownership interest in one of its South African affiliates, Quaker

Chemical South Africa Limited (“QSA”) for

2 unchanged sentences

Holdings South Africa.

QSA is a part of the Company’s

EMEA reportable segment.

QSA is a part of the Company’s EMEA reportable

As this acquisition was a change in an existing

controlling ownership, the Company recorded $

million of excess purchase price over the carrying value of

the noncontrolling

million of excess purchase price over the carrying value of the noncontrolling

interest in Capital in excess of par value.

In March 2018, the Company purchased certain formulations

and product technology for the mining industry for $

The Company allocated the entire purchase price to intangible

assets representing formulations and product technology,

amortized over

In accordance with the terms of the applicable purchase agreement,

million of the purchase price was

paid at signing, and the remaining $

million of the purchase price was paid during the first quarter of 2019.

In October 2019, the Company completed its acquisition of the operating

divisions of Norman Hay plc (“Norman Hay”), a private

company that provides specialty chemicals, operating equipment, and

services to industrial end markets.

The original purchase

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 finalized its post-closing adjustments for the

Norman Hay acquisition and

paid approximately

million GBP during the first quarter of 2020 to settle such adjustments.

Note 3 – Recently Issued Accounting Standards

Recently Issued Accounting Standards

The FASB issued

Account Standards Update (“ASU”)

The Financial Accounting Standards Board (“FASB”)

issued Account Standards Update (“ASU”)

, Income Taxes

Simplifying the Accounting for Income Taxes

in December 2019 to simplify the accounting for income taxes.

guidance within this accounting standard update removes

certain exceptions, including the exception to the incremental approach for

certain intra-period tax allocations, to the requirement to recognize

or not recognize certain deferred tax liabilities for equity method

investments and foreign subsidiaries, and to the general methodology for

calculating income taxes in an interim period when a year-to-

date loss exceeds the anticipated loss for the year.

Further, the guidance simplifies the accounting related

to franchise taxes, the step

up in tax basis for goodwill, current and deferred tax expense, and codification

improvements for income taxes related to employee

stock ownership plans.

The guidance is effective for annual and interim periods beginning

after December 15, 2020.

adopted this standard,

as required, effective January 1, 2021.

There was no cumulative effect of adoption recorded within retained

earnings on January 1, 2021.

The FASB issued ASU 2020

, Reference Rate Reform (Topic

Facilitation of the Effects of

Reference Rate Reform on Financial

Facilitation of the Effects of Reference Rate Reform

Financial Reporting

in March 2020.

The amendments provide temporary optional expedients and

exceptions for applying GAAP to contract modifications,

hedging relationships and other transactions to ease the potential

and financial reporting burden associated with transitioning

away from reference rates that are expected to be discontinued,

the London Interbank Offered Rate (“LIBOR”).

ASU 2020-04 is effective for the

Company as of March 12, 2020 and generally can

be applied through December 31, 2022.

As of December 31, 2020,

the expedients provided in ASU 2020-04 do not impact the

however, the Company

will continue to monitor for potential impacts on its consolidated

financial statements.

The FASB issued

Accounting for Implementation Costs Incurred

in a Cloud Computing Arrangement

That Is a Service Contract

in August 2018 that clarifies the accounting for implementation

costs incurred in a cloud computing

arrangement under a service contract.

This guidance generally aligns the requirements for capitalizing

implementation costs incurred

in a hosting arrangement under a service contract with the

requirements for capitalizing implementation costs related

to internal-use

The guidance within this accounting standard update is effective

for annual periods beginning after December 15, 2019 and

should be applied either retrospectively or prospec

tively to all implementation costs incurred after the date of

adoption was permitted.

The Company adopted this standard on a prospective basis, effective

January 1, 2020.

cumulative effect of adoption recorded within

retained earnings on January 1, 2020.

The FASB issued

Disclosure Framework — Changes to

the Disclosure Requirements

for Defined Benefit Plans

August 2018 that modifies certain disclosure requirements

for fair value measurements.

The guidance removes certain disclosure

requirements regarding transfers between levels of

the fair value hierarchy as well as certain disclosures related

to the valuation

processes for certain fair value measurements.

Further, the guidance added certain disclosure

requirements including unrealized gains

and losses and significant unobservable inputs used to

develop certain fair value measurements.

The guidance within this accounting

standard update is effective for annual and

interim periods beginning after December 15, 2019, and should

be applied prospectively in

the initial year of adoption or prospectively to all periods

presented, depending on the amended disclosure requirement.

adoption was permitted.

The Company adopted this standard on a prospective basis, effective

January 1, 2020.

addresses disclosures only and will not

have an impact on the Company’s

consolidated financial statements.

The FASB issued

ASU 2018-13, Fair Value

Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure

Requirements for Fair Value

Measurement in August 2018 that modifies certain disclosure

requirements for employers that sponsor

defined benefit pension or other postretirement plans.

The amendments in this ASU remove disclosures that are

no longer considered

cost beneficial, clarify the specific requirements of certain

disclosures, and add new disclosure requirements as relevant.

guidance within this accounting standard update

is effective for annual periods beginning after December

15, 2019, and should be

applied retrospectively to all periods presented.

The Company adopted this standard on a prospective basis, effective

January 1, 2020.

There was no cumulative effect of adoption

recorded within retained earnings on January 1, 2020.

The FASB issued

Financial Instruments - Credit Losses (Topic

Measurement of Credit

Losses on Financial

in June 2016 related to the accounting for and disclosure of

credit losses.

The FASB subsequently

issued several

additional accounting standard updates which amended

and clarified the guidance, but did not materially change

the guidance or its

applicability to the Company.

This accounting guidance introduces a new model for

recognizing credit losses on financial

instruments, including customer accounts receivable,

based on an estimate of current expected credit losses.

The Company adopted

the guidance in this accounting standard update, including

all applicable subsequent updates to this accounting guidance, as required,

on a modified retrospective basis, effective January

Adoption did not have a material impact to the Company’s

statements as expected.

However, as a result of this adoption,

the Company recorded a cumulative effect of

accounting change that

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

resulted in an increase to its allowance for doubtful

accounts of approximately $

million, a decrease to deferred tax liabilities of

million and a decrease to retained earnings of $

In accordance with this guidance, the Company recognizes

an allowance for credit losses reflecting the net amount expected to

collected from its financial assets, primarily trade accounts

This allowance represents the portion of the receivable that the

Company does not expect to collect over its contractual

life, considering past events and reasonable and supportable forecasts of

economic conditions.

The Company’s allowance for

credit losses on its trade accounts receivable is based on

specific collectability

facts and circumstances for each outstanding receivable and

customer, the aging of outstanding

receivables and the associated

collection risk the Company estimates for certain past due

aging categories, and also, the general risk to all outstanding accounts

receivable based on historical amounts determined to

be uncollectible.

See Note 13 of Notes to the Consolidated Financial

Recently Issued Accounting Standards

Not Yet Adopted

issued ASU 2021-01

Investments – Equity Securities (To

pic 321), Investments – Equity Method and Joint Ventures

323), and Derivatives and Hedging (Topic

815) –Clarifying the Interactions between Topic

323, and Topic

January 2020 clarifying the interaction among the

accounting standards related to equity securities, equity method investments,

certain derivatives.

The new guidance, among other things, states that a company

should consider observable transactions that require

a company to either apply or discontinue the equity method

of accounting, for the purposes of applying the fair value

alternative immediately before applying or upon discontinuing

the equity method.

The new guidance also addresses the measurement

of certain purchased options and forward contracts used

to acquire investments.

The guidance within this accounting standard update

is effective for annual and interim periods beginning

after December 15, 2020 and is to be applied prospectively.

Early adoption is

The Company will adopt this standard, as required, on a prospective

basis, effective January 1, 2021, and does not expect

adoption to have an impact to its financial statements.

The FASB issued

, Income Taxes

Simplifying the Accounting for Income Taxes

in December 2019.

The guidance within this accounting standard update

removes certain exceptions, including the exception to the incremental

for certain intra-period tax allocations, to the requirement

to recognize or not recognize certain deferred tax liabilities for

method investments and foreign subsidiaries, and to the

general methodology for calculating income taxes in

an interim period when a

year-to-date loss exceeds the anticipated loss for

Further, the guidance simplifies the accounting

related to franchise taxes,

the step up in tax basis for goodwill, current and deferred

tax expense, and codification improvements for income taxes

employee stock ownership plans.

The guidance is effective for annual and interim

periods beginning after December 15, 2020.

adoption is permitted.

The Company will adopt this standard, as required, effective

January 1, 2021, and is currently evaluating its

implementation and any potential adoption impact.

, Reference Rate Reform (Topic

January 2021 which clarified the guidance but did not materially change

the guidance or its applicability to the Company.

amendments provide temporary optional expedients and exceptions

for applying U.S.

GAAP to contract modifications, hedging

relationships and other transactions to ease the potential accounting

and financial reporting burden associated with transitioning away

from reference rates that are expected to be discontinued, including

the London Interbank Offered Rate (“LIBOR”).

ASU 2020-04 is

effective for the Company as of March 12, 2020 and generally can

be applied through December 31, 2022.

On December 10, 2021,

the Company entered into a Second Amendment to Credit Agreement (“Second

Amendment”) with Bank of America N.A., an update

to provide for the use of a non-USD currency LIBOR successor rate.

elected to apply the expedients provided in ASU

2020-04 with respect to the Second Amendment.

The Company will continue to monitor for potential impacts related to its USD-

based LIBOR rates.

See Note 20 of Notes to Consolidated Financial Statements..

Note 4 – Business Segments

The Company’s operating

segments, which are consistent with its reportable segments,

reflect the structure of the Company’s

internal organization, the method by which

the Company’s resources are allocated

and the manner by which the chief operating

maker assess 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

chief operating decision maker assesses the Company’s

performance and allocates its resources.

The Company’s current reportable

segment structure includes four segments:

segments, which are consistent with its reportable segments, reflect the structure of the Company’s

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

The Company has

reportable segments:

(i) Americas;

(iii) Asia/Pacific;

Asia/Pacific;

and (iv) Global Specialty Businesses.

geographic segments are composed of the net sales and

operations in each respective region, excluding net sales and

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.

Although the Company changed its reportable segments in

the third quarter of 2019, the calculation of the reportable

measures of earnings remains otherwise generally

consistent with past practices.

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, such as certain corporate and administrative costs, Combination,

integration and other acquisition-related expenses, and Restructuring

and related charges, are not included in segment operating

Other items not specifically identified with the Company’s

reportable segments include interest expense, net and other

expense, net.

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.

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The following tables present information about the performance

of the Company’s reportable segments

for the years ended

Dollars in thousands, except per share amounts, unless otherwise stated

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, such as certain

corporate and administrative costs, Combination, integration and other

acquisition-related expenses, and Restructuring and related

charges, are not included in segment operating earnings.

Other items not specifically identified with the Company’s

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

The following tables present information about the performance of the Company’s

reportable segments for the years ended

December 31, 2021, 2020 and 2019.

Certain immaterial reclassifications within the segment disclosures

for the years ended

December 31, 2019 and 2018 have been made to conform with

the Company’s current customer

industry segmentation.

Global Specialty Businesses

2 unchanged sentences

segment operating earnings

Combination, integration and other acquisition-related

Combination, integration and other acquisition-related expenses

Restructuring and related charges

Fair value step up of inventory sold

Fair value step up of acquired inventory sold

Indefinite-lived intangible asset impairment

2 unchanged sentences

Operating income

Other expense, net

Other income (expense), net

Interest expense, net

Income before taxes and equity in net income

Income before taxes and equity in net income of

associated companies

The following tables present information regarding the

Company’s reportable segments’

assets and long-lived assets, including

certain identifiable assets as well as an allocation of

shared assets, of December 31, 2020, 2019 and 2018:

The following tables present information regarding the Company’s

reportable segments’ assets and long-lived assets, including

certain identifiable assets as well as an allocation of shared assets, as of December

31, 2021, 2020 and 2019:

Segment assets

1 unchanged sentence

Total segment assets

Segment long-lived assets

Global Specialty Businesses

Total segment long-lived

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The following tables present information regarding the

Company’s reportable segments’

capital expenditures and depreciation for

identifiable assets for the years ended December 31,

2020, 2019 and 2018:

Dollars in thousands, except per share amounts, unless otherwise stated

Segment long-lived assets

Global Specialty Businesses

Total segment long-lived

The following tables present information regarding the Company’s

reportable segments’ capital expenditures and depreciation for

identifiable assets for the years ended December 31, 2021, 2020 and 2019:

Capital expenditures

3 unchanged sentences

Total segment depreciation

During the years ended December 31, 2020, 2019 and 2018,

the Company had approximately

During the years ended December 31, 2021, 2020 and 2019, the Company

had approximately $

million of net sales, respectively,

attributable to non-U.S.

As of December 31, 2020, 2019 and 2018, the Company

had approximately

As of December 31, 2021, 2020 and 2019, the

Company had approximately $

million and $

million of long-lived assets, respectively,

attributable to non-U.S.

attributable to non-

Inter-segment revenue for the years ended December

31, 2021, 2020 and 2019 was $

million and $

for Americas, $

million and $

million for EMEA, $

million for Asia/Pacific and

million and $

million for Asia/Pacific

million and $

million for Global Specialty Businesses, respectively.

However, all inter-segment

have been eliminated from each reportable operating

segment’s net sales and earnings

for all periods presented in the above tables.

However, all inter-segment transactions

have been eliminated from each reportable operating segment’s

net sales and earnings for all periods presented in the above tables.

Note 5 – Net Sales and Revenue Recognition

Business Description

The Company develops, produces, and markets a broad

range of formulated chemical specialty products and offers

management services (“Fluidcare”) for various heavy

industrial and manufacturing applications throughout its four

Combination increased the Company’s

addressable metalworking, metals and industrial end markets, including

steel, aluminum,

defense, transportation-OEM, transportation-components, offshore

sub-sea energy,

architectural aluminum, construction,

tube and pipe, can and container,

mining, specialty coatings and specialty greases.

The Combination also strengthened the product

portfolio of the combined Company.

The major product lines of Quaker Houghton include metal removal

fluids, cleaning fluids,

corrosion inhibitors, metal drawing and forming fluids, die

cast mold releases, heat treatment and quenchants, metal forging

hydraulic fluids, specialty greases, offshore

sub-sea energy control fluids, rolling lubricants, rod

and wire drawing fluids and surface

treatment chemicals.

A substantial portion of the Company’s

sales worldwide are made directly through its own employees

and its Fluidcare programs,

with the balance being handled through distributors and

The Company’s employees typic

ally visit the plants of customers

regularly, work

on site, and, through training and experience, identify production

which can be resolved or otherwise addressed

either by adapting the Company’s

existing products or by applying new formulations developed

in its laboratories.

The specialty

chemical industry comprises many companies similar in

size to the Company,

as well as companies larger and smaller than Quaker

The offerings of many of the Company’s

competitors differ from those of Quaker Houghton;

some offer a broad portfolio

of fluids, including general lubricants, while others have

a more specialized product range.

All competitors provide different levels of

technical services to individual customers.

in the industry is based primarily on the ability to provide products that meet

the needs of the customer, render

technical services and laboratory assistance to the customer and,

to a lesser extent, on price.

As part of the Company’s

Fluidcare business, certain third-party product sales to customers are

managed by the Company.

the Company acts as a principal, revenues are recognized

on a gross reporting basis at the selling price negotiated with

its customers.

Where the Company acts as an agent, revenue is recognized on

a net reporting basis at the amount of the administrative fee earned

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

the Company for ordering the goods.

In determining whether the Company is acting as a principal

or an agent in each arrangement,

the Company considers whether it is primarily responsible

for the obligation to provide the specified good, has inventory

the specified good has been transferred to the customer

and has discretion in establishing the prices for the specified

Company transferred third-party products under arrangements

resulting in net reporting of $

Arrangements Resulting in Net Reporting

As part of the Company’s Fluidcare

business, certain third-party product sales to customers are managed by the Company.

Company transferred third-party products under arrangements resulting

in net reporting of $

million and $

million for the years ended December 31, 2020,

2019 and 2018, respectively.

million for the years ended December 31, 2021, 2020 and 2019, respectively.

Customer Concentration

A significant portion of the Company’s

revenues are realized from the sale of process fluids and services

to manufacturers of

steel, aluminum, automobiles, aircraft, industrial equipment,

and durable goods, and, therefore, the Company is subject

business cycles as those experienced by these manufacturers and

their customers.

The Company’s financial performance

correlated to the volume of global production within the

industries it serves, rather than discretely related to the financial performance

of such industries.

Furthermore, steel and aluminum customers typically have

limited manufacturing locations compared to

metalworking customers and generally use higher

volumes of products at a single location.

During the year ended December 31,

the Company’s five largest

customers (each composed of multiple subsidiaries or

divisions with semiautonomous purchasing

authority) accounted for approximately

revenues are realized from the sale of process fluids and services to manufacturers of

steel, aluminum, automobiles, aircraft, industrial equipment, and durable

During the year ended December 31, 2021, the

Company’s five largest

customers (each composed of multiple subsidiaries or divisions with semiautonomous

purchasing authority)

accounted for approximately

% of consolidated net sales, with its largest customer accounting

for approximately

consolidated net sales.

Revenue Recognition Model

The Company applies the FASB’s

guidance on revenue recognition which requires the

Company to recognize revenue in an

amount that reflects the consideration to which the Company

expects to be entitled in exchange for goods or services transferred

To do this, the Company

applies the five-step model in the FASB’s

guidance, which requires the Company to:

the contract with a customer;

(ii) identify the performance

obligations in the contract;

(iii) determine the transaction price;

(iv) allocate

the transaction price to the performance obligations in the

and (v) recognize revenue when, or as, the Company

performance obligation.

The Company identifies a contract with a customer when a

sales agreement indicates approval and commitment of the parties;

identifies the rights of the parties;

identifies the payment

has commercial substance;

and it is probable that the

collect the consideration to which it will be entitled in

exchange for the goods or services that will be transferr

ed to the customer.

most instances, the Company’s

contract with a customer is the customer’s

purchase order.

For certain customers, the Company may

also enter into a sales agreement which outlines a

framework of terms and conditions which apply to all future

and subsequent

purchase orders for that customer.

In these situations, the Company’s

contract with the customer is both the sales agreement as well as

the specific customer purchase order.

Because the Company’s contract

with a customer is typically for a single transaction or

customer purchase order, the duration

of the contract is almost always one year or less.

As a result, the Company has elected to apply

certain practical expedients and omit certain disclosures of

remaining performance obligations for contracts that have an

initial term of

one year or less as permitted by the FASB.

The Company identifies a performance obligation in a

contract for each promised good or service that is separately identifiable

from other obligations in the contract and for which the

customer can benefit from the good or service either on its own or together

with other resources that are readily available to

the customer.

The Company determines the transaction price as the amount

consideration it expects to be entitled to in exchange

for fulfilling the performance obligations, including the

effects of any variable

consideration, significant financing elements, amounts

payable to the customer or noncash consideration.

For any contracts that have

more than one performance obligation, the Company

allocates the transaction price to each performance obligation

in an amount that

depicts the amount of consideration to which the Company

expects to be entitled in exchange for satisfying each performance

In accordance with the last step of the FASB’s

guidance, the Company recognizes revenue when,

or as, it satisfies the

performance obligation in a contract by transferring control

of a promised good or providing the service to the customer.

Company recognizes revenue over time as the customer

receives and consumes the benefits provided by the Company’s

the Company’s performance

creates or enhances an asset that the customer controls as the

asset is created or enhanced;

Company’s performance

does not create an asset with an alternative use to the entity,

and the entity has an enforceable right to

payment, including a profit margin, for performance

completed to date.

For performance obligations not satisfied over time, the

Company determines the point in time at which a customer

obtains control of an asset and the Company satisfies a performance

obligation by considering when the Company has a right

to payment for the asset;

the customer has legal title to the

Company has transferred physical possession of the asset;

customer has the significant risks and rewards of ownership

of the asset;

or the customer has accepted the asset.

% of consolidated

Contract Assets and Liabilities

The Company had no material contract assets recorded on its Consolidated

Balance Sheets as of December 31, 2021 and 2020.

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The Company typically satisfies its performance obligations

and recognizes revenue at a point in time for product

sales, generally

when products are shipped or delivered to the customer,

depending on the terms underlying each arrangement.

In circumstances

where the Company’s

products are on consignment, revenue is generally recognized

upon usage or consumption by the customer.

any Fluidcare or other services provided by the Company

to the customer, the Company typically satisfies its

performance obligations

and recognizes revenue over time, as the promised services

are performed.

The Company uses input methods to recognize revenue

over time related to these services, including labor costs

and time incurred.

The Company believes that these input methods represent

the most indicative measure of the Fluidcare or other service

work performed by the Company.

Other Considerations

The Company does not have standard payment terms for

all customers, however the Company’s

general payment terms require

customers to pay for products or services provided after

the performance obligation is satisfied.

The Company does not have

significant financing arrangements with its customers.

The Company does not have significant amounts of variable

consideration in

its contracts with customers and where applicable,

the Company’s estimates of variable

consideration are not constrained.

Company records certain third-party license fees in

other income (expense), net, in its Consolidated Statement

of Income, which

generally include sales-based royalties in exchange for

the license of intellectual property.

These license fees are recognized in

accordance with their agreed-upon terms and when performance

obligations are satisfied, which is generally when the

third party has a

subsequent sale.

Practical Expedients and Accounting Policy Elections

The Company has made certain accounting

policy elections and elected to use certain practical expedients as permitted

FASB in applying

the guidance on revenue recognition.

The Company does not adjust the promised amount of consideration for

effects of a significant financing compon

ent as the Company expects, at contract inception, that the

period between when the

Company transfers a promised good or service to the

customer and when the customer pays for that good or service will be one

In addition, the Company expenses

costs to obtain a contract as incurred when the expected

period of benefit, and therefore the

amortization period, is one year or less.

In addition, the Company excludes from the measurement of

the transaction price all taxes

assessed by a governmental authority that are both imposed

on and concurrent with a specific revenue-producing

transaction and

collected by the entity from a customer,

including sales, use, value added, excise and various other taxes.

Lastly, the Company

elected to account for shipping and handling activities that

occur after the customer has obtained control of a good

as a fulfilment cost,

rather than an additional promised service.

Contract Assets and Liabilities

The Company recognizes a contract asset or receivable

on its Consolidated Balance Sheet when the Company performs

or transfers a good in advance of receiving consideration.

A receivable is the Company’s

right to consideration that is unconditional

and only the passage of time is required before payment

of that consideration is due.

A contract asset is the Company’s right

consideration in exchange for goods

or services that the Company has transferred to a customer.

The Company had no material

contract assets recorded on its Consolidated Balance Sheets

as of December 31, 2020 and 2019.

A contract liability is recognized when the Company

receives consideration, or if it has the unconditional right

consideration, in advance of performance.

A contract liability is the Company’s

obligation to transfer goods or services to a customer

for which the Company has received consideration,

or a specified amount of consideration is due, from the customer.

The Company’s

contract liabilities primarily represent deferred revenue

recorded for customer payments received by the Company

Company satisfying the associated performance obligation.

The Company acquired and recorded an immaterial

amount of deferred

revenue as of the respective opening balance sheet dates

related to the Combination and Norman Hay acquisition.

Deferred revenues

are presented within other accrued liabilities in the Company’s

Consolidated Balance Sheets.

Dollars in thousands, except per share amounts, unless otherwise stated

The Company had approximately $

2 unchanged sentences

respectively.

During the years ended December 31,

2020 and 2019,

respectively, the Company satisfied

all of the associated performance obligations and recognized

into revenue the

advance payments received and recorded as of December

31, 2020, 2019 and 2018, respectively.

During the years ended December 31, 2021 and 2020, respectively,

the Company satisfied all of the associated

performance obligations and recognized into revenue the advance payments

received and recorded as of December 31, 2020 and 2019,

respectively.

Disaggregated Revenue

The Company sells its various industrial process fluids,

its specialty chemicals and its technical expertise as a global

The Company generally manages and evaluates its performance

by segment first, and then by customer industry,

The Company sells its various industrial process fluids, its specialty chemicals

and its technical expertise as a global product

The Company generally manages and evaluates its performance by segment first, and

then by customer industry,

by individual product lines.

Also, net sales of each of the Company’s

major product lines are generally spread throughout all three

Also, net sales of each of the Company’s major product

lines are generally spread throughout all three of

the Company’s geographic

regions, and in most cases, approximately proportionate

to the level of total sales in each region.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The following tables present disaggregated information

regarding the Company’s net

sales, first by major product lines that

represent more than 10% of the Company’s

consolidated net sales for any of the years ended December

31, 2020, 2019 and 2018,

regions, and in most cases, approximately proportionate to the level of total

sales in each region.

The following tables present disaggregated information regarding

the Company’s net sales, first by major product

represent more than

% of the Company’s consolidated net sales for any

of the years ended December 31, 2021, 2020 and 2019, and

followed then by a disaggregation of the Company’s

1 unchanged sentence

and timing of

revenue recognized for the years ended December 31, 2020,

2019 and 2018.

revenue recognized for the years ended December 31, 2021, 2020 and

Metal removal fluids

18 unchanged sentences

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

Net sales for the year ending December 31, 2019

6 unchanged sentences

Note 6 – Leases

As previously disclosed in the Company’s

2019 Form 10-K, during 2019, the Company adopted, as required,

an accounting

standard update regarding the accounting and disclosure

for leases which changed the manner in which it accounts for

leases effective

January 1, 2019.

The Company determines if an arrangement is a lease at its inception.

This determination generally depends on

whether the arrangement conveys the right to control the

use of an identified fixed asset explicitly or implicitly for a period

exchange for consideration.

Control of an underlying asset is conveyed if the Company

obtains the rights to direct the use of, and

substantially all of the economic benefits from the use of,

the underlying asset.

Lease expense for variable leases and short-

term leases is recognized when the obligation is incurred.

The Company has operating leases for certain facilities, vehicles

and machinery and equipment with remaining lease terms up

In addition, the Company has certain land use leases with remaining

lease terms up to

The lease term for all of the

Company’s leases includes

the non-cancellable period of the lease plus any additional periods

covered by an option to extend the lease

that the Company is reasonably certain it will exercise.

Operating leases are included in

right of use lease assets

, other current

liabilities and long-term

lease liabilities

on the Consolidated Balance Sheet.

Right of use lease assets and liabilities are recognized

each lease’s commencement

date based on the present value of its lease payments over its respective

The Company uses

the stated borrowing rate for a lease when readily

determinable.

When a stated borrowing rate is not available in a lease agreement,

the Company uses its incremental borrowing rate

based on information available at the lease’s

commencement date to determine the

present value of its lease payments.

In determining the incremental borrowing rate used to present

value each of its leases, the

Company considers certain information including fully

secured borrowing rates readily available to the Company and its subsidiaries.

The Company has immaterial finance leases, which are

included in PP&E, current portion of long-term debt and long-term debt

Consolidated Balance Sheet.

Operating lease expense is recognized on a straight-line

basis over the lease term.

The Company has operating leases for certain facilities, vehicles and machinery

and equipment with remaining lease terms up to

In addition, the Company has certain land use leases with remaining lease terms up

Operating lease expense is recognized on a straight-line basis over the

Operating lease expense for the years ended

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million, respectively.

Short-term lease expense for the years ended

December 31, 2020 and 2019 was $

Short-term lease expense for the

years ended December 31, 2021, 2020 and 2019 was $

million and $

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The Company has

material variable lease costs or

sublease income for the years ended December 31,

2020 and 2019.

material variable lease costs or sublease income for the years ended

December 31, 2021, 2020 and 2019.

Cash paid for operating leases during the years ended December 31, 2021, 2020

and 2019 was $

million and $

respectively.

The Company recorded new right of use lease assets and associated lease liabilities

million during the year

ended December 31, 2020.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

million, respectively.

The Company recorded new right of use lease assets and associated lease liabilities of

million during

the year ended December 31, 2021.

Supplemental balance sheet information related to the Company’s

3 unchanged sentences

Long-term lease liabilities

Total operating

lease liabilities

Total operating lease liabilities

Weighted average

2 unchanged sentences

discount rate

Maturities of operating lease liabilities as of December

31, 2020 were as follows:

Maturities of operating lease liabilities as of December 31, 2021 were

For the year ended December 31, 2022

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Present value of lease liabilities

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

Note 7 – Restructuring and Related Activities

The Company’s management

approved a global restructuring plan (the “QH Program”)

as part of its plan to realize certain cost

synergies associated with the Combination

in the third quarter of 2019.

The Company’s management approved

a global restructuring plan (the “QH Program”) as part of its plan to realize certain cost

synergies associated with the Combination in

the third quarter of 2019.

The QH Program includes restructuring and associated

severance costs to reduce total headcount by approximately

people globally, as well as plans

for the closure of certain

people globally, as well as plans for

the closure of certain

manufacturing and non-manufacturing facilities.

The exact timing and total costs associated with the QH Program

will depend on a

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

number of factors and is subject to change;

the Company currently expects reduction in headcount and

site closures to

the Company currently expects reduction in headcount and site closures to

continue to occur into 2022 under the QH Program.

and estimates that anticipated cost synergies realized from

the QH Program will

approximate one-times the restructuring costs incurred.

Employee separation benefits will vary depending on local

regulations within

certain foreign countries and will include severance

and other benefits.

All costs incurred to date relate to severance costs to reduce

headcount as well as costs to close certain facilities and are

in restructuring and related charges in the

Company’s Consolidated Statements of

As described in Note 4 of Notes to

Consolidated Financial Statements, restructuring and

related charges are not included in the Company’s

calculation of reportable

segments’ measure of operating earnings and therefore

these costs are not reviewed by or recorded to reportable segments.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Activity in the Company’s

accrual for restructuring under the QH Program for the years ended

December 31, 2020 and 2019 is as

Employee separation benefits will vary depending on local regulations within

certain foreign countries and will include severance and other benefits.

All costs incurred to date relate to severance costs to reduce headcount,

including customary and routine adjustments to initial

estimates for employee separation costs, as well as costs to close certain facilities

and are recorded in Restructuring and related

charges in the Company’s

Consolidated Statements of Income.

As described in Note 4 of Notes to Consolidated Financial Statements,

Restructuring and related charges are not included

in the Company’s calculation of reportable

segments’ measure of operating

earnings and therefore these costs are not reviewed by or recorded

to reportable segments.

Activity in the Company’s accrual

for restructuring under the QH Program for the years ended December 31, 2021 and 2020

Accrued restructuring as of December 31, 2019

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Accrued restructuring as of December 31, 2021

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 fourth quarter of 2020, certain of these facilities were

sold and the Company

recognized a loss on disposal of approximately $

million included within other expense, net on the Consolidated

Additionally, certain

buildings and land with an aggregate book value of

approximately $

million continues to be held-

for-sale as of December 31, 2020 and are

recorded in other current assets on the Company’s

In connection with the plans for closure of certain manufacturing

and non-manufacturing facilities, the Company has made a

decision to make available for sale certain facilities.

During the years ended December 31, 2021 and 2020, certain of these facilities

were sold and the Company recognized a gain of $

million in 2021 and a loss of approximately $

million in 2020 which is

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

Additionally, certain buildings

and land with

an aggregate book value of approximately $

million continues to be held-for-sale as of December 31, 2021

and are recorded in

prepaid expenses and other current assets on the Company’s

Consolidated Balance Sheet.

The Company will continue to evaluate for

future decisions about making certain other facilities available for

Note 8 – Share-Based Compensation

The Company recognized the following share-based compensation

expense in its Consolidated Statements

The Company recognized the following share-based compensation expense

in its Consolidated Statements

of Income for the years

2 unchanged sentences

Non-vested stock awards and restricted stock units

Non-elective and elective 401(k) matching contribution in

Non-elective and elective 401(k) matching contribution in stock

Employee stock purchase plan

1 unchanged sentence

Performance stock units

Annual incentive plan (1)

Total share-based

compensation expense

(1) Refer to the section entitled

Annual Incentive Plan

below for additional information.

Share-based compensation expense is recorded in SG&A,

Share-based compensation expense is recorded in SG&A, except for $

million and $

million during the years

ended December 31, 2020,

2019 and 2018,

respectively, recorded

within Combination,

ended December 31, 2021, 2020 and 2019, respectively,

recorded within Combination,

integration and other acquisition-related

The increase in total share-based compensation expense for

the year ended December 31, 2020 includes performance stock

units and non-elective and elective 401(k) matching

contributions in stock as components of share-based compensation

2020, described further below.

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

Stock Options

3 unchanged sentences

Options exercised

Options forfeited

Options outstanding as of December 31, 2021

1 unchanged sentence

Options exercisable as of December 31, 2021

The total intrinsic value of options exercised during the years ended

December 31, 2020, 2019 and 2018 was approximately

The total intrinsic value of options exercised during the years ended December

31, 2021, 2020 and 2019 was approximately $

million and $

million, respectively.

Intrinsic value is calculated as the difference between

the current market price of

the underlying security and the strike price of a related

A summary of the Company’s

outstanding stock options as of December 31, 2020 is as follows:

Intrinsic value is calculated as the difference between the current

market price of

the underlying security and the strike price of a related option.

A summary of the Company’s outstanding

stock options as of December 31, 2021 is as follows:

Exercise Price

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Exercise Prices

As of December 31, 2020, unrecognized compensation expense

related to options granted in 2020, 2019 and 2018 was

million and less than

million, respectively, to be

recognized over a weighted average period of

As of December 31, 2021, unrecognized compensation expense related

to options granted in 2021, 2020 and 2019 was $

million and $

million, respectively,

to be recognized over a weighted average period of

The Company granted stock options under its LTIP

plan that are subject only to time vesting generally over a

three-year period

2018 and 2017.

For the purposes of determining the fair value of stock option

awards, the Company uses the

Black-Scholes option pricing model and the assumptions

set forth in the table below:

during 2021, 2020, 2019 and 2018.

For the purposes of determining the fair value of stock option awards, the Company

used a Black-

Scholes option pricing model

and primarily used the assumptions set forth in the table below:

Number of stock options granted

6 unchanged sentences

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The fair value of these options is being amortized on a

straight-line basis over the respective vesting period of each award.

compensation expense recorded on each award during

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

Dollars in thousands, except per share amounts, unless otherwise stated

The fair value of these options is being amortized on a straight-line basis over

the respective vesting period of each award.

compensation expense recorded on each award during the years ended

December 31, 2021, 2020 and 2019, respectively,

is as follows:

3 unchanged sentences

2018 Stock option awards

2017 Stock option awards

Restricted Stock Awards

Activity of non-vested restricted stock awards granted

under the Company’s LTIP

Activity of non-vested restricted stock awards granted under the Company’s

plan is shown below:

3 unchanged sentences

Nonvested awards, December 31, 2021

The fair value of the non-vested stock is based on the trading

price of the Company’s

The fair value of the non-vested stock is based on the trading price of the Company’s

common stock on the date of grant.

Company adjusts the grant date fair value for expected

forfeitures based on historical experience for similar

Company adjusts the grant date fair value for expected forfeitures based

on historical experience for similar awards.

As of December

31, 2020, unrecognized compensation expense related to

these awards was

31, 2021, unrecognized compensation expense related to these awards was $

million, to be recognized over a weighted average

1 unchanged sentence

Restricted Stock Units

Activity of non-vested restricted stock units granted under

the Company’s LTIP

Activity of non-vested restricted stock units granted under the Company’s

plan is shown below:

3 unchanged sentences

Nonvested awards, December 31, 2021

The fair value of the non-vested restricted stock units is based

on the trading price of the Company’s

common stock on the date of

The Company adjusts the grant date fair value for expected forfeitures

based on historical experience for similar awards.

December 31, 2020, unrecognized compensation expense

related to these awards was

The fair value of the non-vested restricted stock units is based on the trading price

of the Company’s common

stock on the date of

The Company adjusts the grant date fair value for expected forfeitures based on

historical experience for similar awards.

December 31, 2021, unrecognized compensation expense related

to these awards was $

million, to be recognized over a weighted

1 unchanged sentence

Performance Stock Units

In March 2020, the Company included performance

-dependent stock awards (“PSUs”) as a component of its LTIP,

which will be

settled in a certain number of shares subject to market

-based and time-based vesting conditions.

The number of fully vested shares

that may ultimately be issued as settlement for each

award may range from

% of the target award, subject to the

achievement of the Company’s

total shareholder return (“TSR”) relative to the performance

of the Company’s peer

group, the S&P

Midcap 400 Materials group.

The service period required for the PSUs is three years and

the TSR measurement period for the PSUs is

from January 1, 2020 through December 31, 2022.

Compensation expense for PSUs is measured based on

their grant date fair value and is recognized on a straight-line basis over

the three-year vesting period.

The grant-date fair value of the PSUs was estimated using a

Monte Carlo simulation on the grant date

and using the following assumptions:

(i) a risk-free

(ii) an expected term of

and (iii) a three-year daily

historical volatility for each of the companies in the

peer group, including Quaker Houghton.

The Company grants performance-dependent stock awards (“PSUs”) as a component

which will be settled in a

certain number of shares subject to market-based and time-based vesting conditions.

The number of fully vested shares that may

ultimately be issued as settlement for each award may range from

% of the target award, subject to the achievement of

the Company’s total shareholder

return (“TSR”) relative to the performance of the Company’s

peer group, the S&P Midcap 400

Materials group.

The service period required for the PSUs is

and the TSR measurement period for the PSUs is generally

from January 1 of the year of grant through December 31 of the year prior

to issuances of the shares upon settlement.

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

As of December 31, 2020, the Company estimates that it will issue

approximately

fully vested shares as of the settlement

date of the award based on the conditions of the

PSUs and Company’s closing

stock price on December 31, 2020.

As of December

31, 2020, there was approximately $

Dollars in thousands, except per share amounts, unless otherwise stated

Compensation expense for PSUs is measured based on their grant date fair value

and is recognized on a straight-line basis over

vesting period.

The grant-date fair value of the PSUs was estimated using a Monte Carlo

simulation on the grant date

and using the following assumptions

set forth in the table below:

Fully vested shares

Risk-free interest rate

Dividend yield

Expected term (years)

On September 2, 2021, the Board appointed Andrew Tometich

to serve as CEO and entered into an Employment Agreement,

and granted an equity award consisting of a mix of time-based restricted

stock and PSUs.

As of December 31, 2021, there was approximately $

million of total unrecognized compensation cost related to PSUs which

the Company expects

to recognize over a weighted-average period of

Annual Incentive Plan

The Company maintains an Annual Incentive Plan

(“AIP”), which may be settled in cash or a certain number of

shares subject to

performance-based and time-based vesting conditions.

As previously disclosed within the Company’s

Form 10-Q for the first three

quarters of 2020, it was the Company’s

intention at that time to settle the 2020 AIP in shares, and

therefore, expense associated with

the AIP in 2020 was recorded as a component of share

-based compensation expense during the first nine months of 2020.

In the fourth quarter of 2020, the Company determined

that it would settle the current year AIP in cash.

Therefore, the share-

based compensation associated with the AIP during

the year ended December 31, 2020 was reclassified from a

component of share-

based compensation expense to incentive compensation.

This determination and conclusion had no impact on

the classification of

AIP expense within the Company’s

Consolidated Statement of Income for the year ended December

31, 2020 as both are a component

As a result of the change, there was an immaterial impact

on the Company’s calculation

of diluted earnings per share for the year

ended December 31, 2020 as the Company no longer considers

the estimated number of shares related to a hypothetical

settlement in shares as a component of its diluted earnings

per share calculation.

In addition, there was no impact on the Company’s

Consolidated Balance Sheet as of December 31, 2020, as the

continues to be classified as a liability and included within

accrued compensation.

Similarly, there was a

reclassification on the

Company’s Consolidated

Statement of Cash Flow between lines within Net cash provided by

operating activities in the fourth quarter

The expected cash flow impact of the AIP settled in cash is presented

as a component of accounts payable and accrued

liabilities for the year ended December 31, 2020.

the Company expects to recognize over a weighted-average period

Defined Contribution Plan

The Company has a 401(k) plan with an employer

match covering a majority of its U.S.

The Company has a 401(k) plan with an employer match covering a majority

The Company matches

% of compensation that is contributed to the plan, with a maximum

matching contribution of

% of compensation that is contributed to the plan, with a maximum matching contribution

% of compensation.

Additionally, the

plan provides for non-elective nondiscretionary contributions

on behalf of participants who have completed one year

Additionally, the plan

provides for non-elective nondiscretionary contributions on behalf of participants

who have completed one year

of service equal to

% of the eligible participant's compensation.

The Company’s matching contributions

and non-elective

contributions may be made in cash or in fully vested shares

of the Company’s common

Beginning in April 2020,

began matching both non-elective and elective 401(k)

contributions in fully vested shares of its common stock rather than

the year ended December 31, 2020, total contributions

Beginning in April 2020 and continuing through March 2021, the

Company matched both non-elective and elective 401(k) contributions

in fully vested shares of the Company’s

common stock rather

For the years ended December 31, 2021, and 2020, total contributions were $

million and $

million, respectively.

Employee Stock Purchase Plan

In 2000, the Board adopted an Employee Stock Purchase

Plan (“ESPP”) whereby employees may purchase Company stock

In 2000, the Board adopted an Employee Stock Purchase Plan (“ESPP”) whereby

employees may purchase Company stock

through a payroll deduction plan.

Purchases were made from the plan and credited to each

participant’s account on

the last day of

each calendar month in which the organized

securities trading markets in the U.S.

were open for business (the

“Investment Date”).

Purchases were made from the plan and credited to each participant’s

account on the last day of

each calendar month in which the organized securities

trading markets in the U.S.

were open for business (the “Investment

The purchase price of the stock was

% of the fair market value on the Investment Date.

The plan was compensatory,

The plan was compensatory, and

discount was expensed on the Investment Date.

1 unchanged sentence

in this plan.

participant could withdraw all uninvested payment

balances credited to a participant’s

account at any time.

participant could withdraw all uninvested payment balances credited

to a participant’s account at any time.

An employee whose stock

ownership of the Company exceeds five percent of

the outstanding common stock was not eligible to participate in this plan.

Effective January 1, 2020, the Company

discontinued the ESPP.

ownership of the Company exceeds

of the outstanding common stock was not eligible to participate in this plan.

Effective January 1, 2020, the Company discontinued

2013 Director Stock Ownership Plan

In 2013, the Company adopted the 2013 Director Stock

Ownership Plan (the “Plan”), to encourage the Directors to increase their

In 2013, the Company adopted the 2013 Director Stock Ownership Plan (the

“Plan”), to encourage the Directors to increase their

investment in the Company,

which was approved at the Company’s

May 2013 shareholders’ meeting.

which was approved at the Company’s May 2013

shareholders’ meeting.

The Plan authorizes the

issuance of up to

shares of Quaker common stock in accordance with

the terms of the Plan in payment of all or a portion of the

shares of Quaker common stock in accordance with the terms of the Plan in payment

of all or a portion of the

annual cash retainer payable to each of the Company’s

non-employee directors in 2013 and subsequent years during

the term of the

non-employee directors in 2013 and subsequent years during the term of the

Under the Plan, each director who, on May 1

1 unchanged sentence

% of the annual cash retainer

for the applicable calendar year,

divided by the average of the closing price of a share of

Quaker Common Stock as reported by the

for the applicable calendar year, divided

by the average of the closing price of a share of Quaker Common Stock as reported by

composite tape of the New York

Stock Exchange for the previous calendar year (the “Threshold Amount”),

is required to receive

Stock Exchange for the previous calendar year (the “Threshold Amount”), is required

of the annual cash retainer in Quaker common stock and

% of the retainer in cash, unless the director elects to receive a

% of the retainer in cash, unless the director elects to receive a greater

percentage of Quaker common stock, up to

1 unchanged sentence

Each director who owns more

than the Threshold Amount may elect to receive

common stock in payment of a percentage (up to

than the Threshold Amount may elect to receive common stock in payment

of a percentage (up to

%) of the annual cash retainer.

4 unchanged sentences

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Note 9 – Other Expense, net

Other expense, net, for the years ended December 31, 2020,

Dollars in thousands, except per share amounts, unless otherwise stated

Note 9 – Other Income (Expense), net

Other income (expense), net, for the years ended December 31,

2021, 2020 and 2019 are as follows:

1 unchanged sentence

Foreign exchange (losses) gains, net

(Loss) gain on fixed asset disposals, net

Gain (loss) on disposals of property,

plant, equipment and other

tax refunds and other related credits

Pension and postretirement benefit costs, non-service components

Gain on changes in insurance settlement restrictions of an

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

Gain on changes in insurance settlement restrictions of an inactive

subsidiary and related insurance insolvency recovery

non-operating income, net

Pension and postretirement benefit costs, non-service components

during the year ended December 31, 2020 include a

million refund in premium and a $

million non-cash settlement charge related to the

Legacy Quaker U.S.

Pension Plan, as

Other non-operating income, net

Total other income

(expense), net

Gain (loss) on disposals of property,

plant, equipment and other assets, net, includes losses related to certain fixed

assets disposals

resulting from the property damage caused by flooding of the Company’s

Conshohocken, Pennsylvania headquarters in 2021,

described in Note 26 of Notes to Consolidated Financial Statements, as well as a gain

in 2021 and a loss in 2020 on the sale of certain

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

described in Note 7 of Notes to Consolidated Financial Statements.

Gain on changes in insurance restrictions of an inactive

subsidiary and related insurance insolvency recovery relate

to the termination of restrictions over certain cash that was previously

designated solely to be used for settlement of asbestos

claims at an inactive subsidiary of the Company and

cash proceeds from an

insolvent insurance carrier with respect to previously

filed recovery claims.

See Note 12, Note 19 and Note 26 of Notes to

income tax refunds and other related credits during the year ended

December 31, 2021 includes certain non-income tax credits for the

Company’s Brazilian subsidiaries

described in Note 26 of Notes to Consolidated Financial Statements.

Pension and postretirement

benefit income (costs), non-service components during the year ended December

31, 2020 include a $

million refund in premium

million non-cash settlement charge related to the Legacy Quaker

Pension Plan, as described in Note 21 of Notes to

Consolidated Financial Statements.

Foreign exchange (losses) gains, net, during the years

ended December 31, 2020,

2019 and 2018,

include foreign currency transaction losses of approximately

Gain on changes in insurance settlement restrictions of an inactive subsidiary

insurance insolvency recovery relate to the termination of restrictions over

certain cash that was previously designated solely to be

used for settlement of asbestos claims at an inactive subsidiary of the Company

and cash proceeds from an insolvent insurance carrier

with respect to previously filed recovery claims.

See Note 12, Note 19 and Note 26 of Notes to Consolidated Financial Statements.

Foreign exchange (losses) gains, net, during the years ended December

31, 2021, 2020 and 2019, include foreign currency transaction

losses of approximately $

million and $

million, respectively,

hyper-inflationary accounting for the Company’s

Argentine subsidiaries, and specific to 2018,

a foreign currency transaction gain of

approximately $

million related to the liquidation of an inactive legal entity.

See Note 1 of Notes to Consolidated Financial

(Loss) gain on fixed asset disposals, net, during the year

ended December 31, 2020 and 2018, included $

million gain, respectively,

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

related to hyper-inflationary accounting for the

Company’s Argentine

subsidiaries.

See Note 1 of Notes to Consolidated Financial Statements.

Note 10 – Taxes

On December 22, 2017, the U.S.

government enacted

comprehensive tax legislation commonly referred to as U.S.

government enacted comprehensive

tax legislation commonly referred to as U.S.

implemented a new system of taxation for non-U.S.

earnings which

eliminated U.S.

federal income taxes on

dividends from certain foreign subsidiaries and imposed

a one-time transition tax on the deemed repatriation of undistributed

of certain foreign subsidiaries that is payable over eight

Following numerous regulations, notices, and other formal

guidance published by the Internal Revenue Service (“I.R.S.”),

earnings which eliminated U.S.

income taxes on

dividends from certain foreign subsidiaries and imposed a one-time transition

tax on the deemed repatriation of undistributed earnings

of certain foreign subsidiaries that is payable over eight years.

Following numerous regulations, notices, and other formal guidance

published by the Internal Revenue Service (“I.R.S.”), U.S.

Department of Treasury,

and various state taxing authorities, the Company has completed

its accounting for the transition tax and has

and various state taxing authorities, the Company completed its accounting

for the transition tax and has

elected to pay its $

million transition tax in installments over eight years as permitted

million transition tax in installments over eight years as permitted under

As of December

1 unchanged sentence

million to be paid through installments in future years.

As of December 31, 2020, the Company has a deferred

tax liability of $

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

million on certain undistributed foreign earnings,

1 unchanged sentence

estimate of the non-U.S.

income taxes the Company will incur

to ultimately remit certain

income taxes the Company will incur to ultimately remit certain

earnings to the U.S.

4 unchanged sentences

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

Taxes on income

before equity in net income of associated companies for the

years ended December 31, 2020, 2019 and 2018 are

The components of earnings before income taxes for the

years ended December 31, 2020, 2019 and 2018 are as follows:

before equity in net income of associated companies for the years ended December

31, 2021, 2020 and 2019 are

The components of earnings before income taxes for the years ended December

31, 2021, 2020 and 2019 are as follows:

Total deferred

tax assets and liabilities are composed of the following

as of December 31, 2020 and 2019:

tax assets and liabilities are composed of the following as of December

31, 2021 and 2020:

Retirement benefits

4 unchanged sentences

Prepaid expense

Insurance settlement

Operating loss carryforward

2 unchanged sentences

Right of use lease assets

Royalties and license fees

Inventory reserves

Research and development

Total deferred

tax assets, net

Total deferred tax

Foreign pension and other

Amortization and other

Lease liabilities

1 unchanged sentence

Unremitted Earnings

Total deferred

tax liabilities

Total deferred tax

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

The Company has $

million of deferred tax assets related to state net operating

million of deferred tax assets related to state net operating losses.

A partial valuation allowance of $

million has been established against this amount resulting

million has been established against this amount resulting in a net $

million expected future benefit.

Management analyzed the

expected impact of the reversal of existing taxable temporary

differences, considered expiration dates, analyzed

current state tax laws,

expected impact of the reversal of existing taxable temporary differences,

considered expiration dates, analyzed current state tax laws,

and determined that $

million of state net operating loss carryforwards will be

realized based on the reversal of deferred tax

These state net operating losses are subject to various

carryforward periods of

million of state net operating loss carryforwards will be realized based on

the reversal of deferred tax

These state net operating losses are subject to various carryforward

years or an indefinite

1 unchanged sentence

An additional $

million of valuation allowance was established for other net

state deferred tax assets.

million of valuation allowance was established for other net state deferred tax assets.

The Company has $

million of deferred tax assets related to foreign net operating

loss carryforwards.

million of deferred tax assets related to foreign net operating loss carryforwards.

A partial valuation

1 unchanged sentence

million has been established against the $

million due to the expected expiration of these losses before

million due to the expected expiration of these losses before they are

able to be utilized.

These foreign net operating losses are subject to various carryforward

periods with the majority having an

These foreign net operating losses are subject to various carryforward periods with the

majority having an

indefinite carryforward period.

2 unchanged sentences

foreign deferred tax assets.

In conjunction with the Combination, the Company

acquired foreign tax credit deferred tax assets of $

In conjunction with the Combination, the Company acquired foreign tax

credit deferred tax assets of $

million expiring

1 unchanged sentence

Foreign tax credits may be carried forward for

As of December 31, 2019, the foreign tax credit

carry forward was $

million with an $

million valuation allowance recorded against the deferred

analyzed the expected impact of the utilization of foreign

tax credits based on certain assumptions such as projected

income, overall domestic loss recapture, and annual limitations due

to the ownership change under the Internal Revenue

Consequently, as of

December 31, 2020, the foreign tax credit carry forward

million with a $

million valuation

allowance reflecting the amount of credits that are not

expected to be utilized before expiration.

The Company also acquired disallowed interest deferred

tax assets of $

Management analyzed the expected impact of the

utilization of foreign tax credits based on certain assumptions such as projected

taxable income, overall domestic loss recapture,

and annual limitations due to the ownership change under the Internal Revenue

The Company had a foreign tax credit carry

forward of $15.9 million and $

million as of December 31, 2021 and 2020, respectively,

with a $5.8 million and $

valuation allowance as of December 31, 2021 and 2020, respectively,

reflecting the amount of credits that are not expected to be

utilized before expiration.

The Company also acquired disallowed interest deferred tax assets of $

million as part of the Combination.

interest may be carried forward indefinitely.

Management analyzed the expected impact of the utilization

of disallowed interest

carryforwards based on projected US taxable income

and determined that the Company will utilize all expected future

As of December 31, 2020, the Company had a net realizable disallowed

interest carryforward of $

Management analyzed the expected impact of the utilization of disallowed interest

carryforwards based on projected US taxable income and determined

that the Company will utilize all expected future benefits by

As of December 31, 2021, the Company had a net realizable disallowed interest carryforward

million on its balance

As of December 31, 2020, the Company had deferred tax

liabilities of $

As of December 31, 2021, the Company had deferred tax liabilities of $

million primarily related to the step-up in

intangibles resulting from the Combination and Norman

Hay acquisition.

intangibles resulting from the Combination and Norman Hay acquisition.

As part of the Combination, the Company acquired a

% interest in the Korea Houghton Corporation joint venture and

% interest in the Korea Houghton Corporation joint venture and has

million deferred tax liability for its outside basis difference.

The following are the changes in the Company’s

deferred tax asset valuation allowance for the years ended

December 31, 2020,

deferred tax asset valuation allowance for the years ended December 31, 2021,

2020 and 2019:

3 unchanged sentences

The Company’s net deferred

tax assets and liabilities are classified in the Consolidated Balance

as of December 31, 2020

tax assets and liabilities are classified in the Consolidated Balance Sheets as of December

and 2020 as follows:

5 unchanged sentences

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The following is a reconciliation of income taxes at the Federal

statutory rate with income taxes recorded by the Company

Dollars in thousands, except per share amounts, unless otherwise stated

The following is a reconciliation of income taxes at the Federal statutory rate with income taxes

recorded by the Company for the

years ended December 31, 2021, 2020 and 2019.

Certain immaterial reclassifications within the presentation of the reconciliation

income taxes have been made to the years ended December 31, 2020

Income tax provision at the Federal statutory tax rate

1 unchanged sentence

Tax law changes

Sub part F / Global intangible low taxed income

tax on foreign operations

Pension settlement

11 unchanged sentences

Miscellaneous items, net

Taxes on income

before equity in net income of associated companies

Taxes on income before

equity in net income of associated companies

Pursuant to U.S.

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subsidiaries.

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 the U.S.

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 the U.S.

As a result of the Combination,

additional third-party debt was incurred resulting in

the Company re-evaluating its global cash strategy in order

to meet its goal of

additional third-party debt was incurred resulting in the Company re-evaluating

its global cash strategy in order to meet its goal of

reducing leverage in upcoming years.

As of December 31, 2020, the Company has a deferred tax

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

million, which

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

taxes the Company will incur to ultimately remit these earnings to

Company’s current inten

tion to reinvest its additional undistributed earnings of non-U.S.

subsidiaries to support working capital needs

taxes the Company

will incur to ultimately remit these earnings to the U.S.

Company’s current intention

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

subsidiaries to support

working capital needs

and certain other growth initiatives outside of the U.S.

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approximately $

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).

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

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million for cumulative interest as of December

The Company continues to recognize interest and penalties

associated with uncertain tax positions as a component of

on income before equity in net income of associated companies

in its Consolidated Statements of Income.

The Company recognized

an expense of less than $

million for penalties and $

The Company continues to recognize interest and penalties associated with uncertain

tax positions as a component of tax expense

on income before equity in net income of associated companies in its Consolidated

Statements of Income.

The Company recognized a

million for penalties and an expense of $

million for interest (net of expirations and settlements) in its Consolidated

Statement of Income for the year ended December 31,

2020, a credit of $

Statement of Income for the year ended December 31, 2021, an expense of

million for penalties and $

interest (net of expirations and settlements) in its Consolidated Statement

of Income for the year ended December 31, 2020, and a

million for penalties and an expense of $

interest (net of expirations and settlements) in its Consolidated

Statement of Income for the year ended December 31, 2019, and

million for penalties and a credit of $

million for interest (net of expirations and settlements)

in its Consolidated

million for interest (net of expirations and settlements) in its Consolidated

Statement of Income for the year ended December 31, 201

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unrecognized tax benefits by approximately $

million due to the expiration of the statute of limitations with regard

to certain tax

This estimated reduction in the cumulative liability for unrecognized

tax benefits does not consider any increase in liability

for unrecognized tax benefits with regard to existing tax

positions or any increase in cumulative liability for unrecognized

million due to the expiration of the statute of limitations with regard to certain tax

This estimated reduction in the cumulative liability for unrecognized tax

benefits does not consider any increase in liability

for unrecognized tax benefits with regard to existing tax positions or any increase

in cumulative liability for unrecognized tax benefits

with regard to new tax positions for the year ending December 31, 2022.

2 unchanged sentences

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

A reconciliation of the beginning and ending amounts

of unrecognized tax benefits for the years ended December

31, 2020, 2019

Dollars in thousands, except per share amounts, unless otherwise stated

A reconciliation of the beginning and ending amounts of unrecognized

tax benefits for the years ended December 31, 2021, 2020

and 2019, respectively,

1 unchanged sentence

Unrecognized tax benefits as of January 1

Increase (decrease) in unrecognized tax benefits taken

in prior periods

Increase (decrease) in unrecognized tax benefits taken in prior periods

Increase in unrecognized tax benefits taken in current period

Decrease in unrecognized tax benefits due to lapse of statute of

Decrease in unrecognized tax benefits due to lapse of statute of limitations

Increase in unrecognized tax benefits due to acquisition

Increase (decrease) due to foreign exchange rates

(Decrease) increase due to foreign exchange rates

Unrecognized tax benefits as of December 31

The amount of net unrecognized tax benefits above that, if

recognized, would impact the Company’s

tax expense and effective tax

The amount of net unrecognized tax benefits above that, if recognized, would

impact the Company’s tax expense

and effective tax

million and $

million for the years ended December 31, 2020, 2019

and 2018, respectively.

million for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company and its subsidiaries are subject to U.S.

Federal income

tax, as well as the income tax of various state and foreign

Federal income tax,

as well as the income tax of various state and foreign

tax jurisdictions.

Tax years that remain

subject to examination by major tax jurisdictions include Italy

, Brazil from

Mexico, the Netherlands and China from

, Spain, Germany and the United Kingdom from

, Canada and the U.S.

India from fiscal year beginning April 1,

subject to examination by major tax jurisdictions include Italy from 2007, Brazil from

the Netherlands, Mexico and China from

, Mexico, Canada, Germany,

and the United Kingdom from

from fiscal year beginning April 1,

and ending March 31, 2020, and various U.S.

state tax jurisdictions

As previously reported, the Italian tax authorities have

assessed additional tax due from the Company’s

subsidiary, Quaker Italia

S.r.l., relating to the tax

years 2007 through 2015.

The Company filed for competent authority

relief from these assessments under the

Mutual Agreement Procedures (“MAP”) of the Organization

for Economic Co-Operation and Development for all

years except 2007.

state tax jurisdictions from

As previously reported, the Italian tax authorities have assessed additional

tax due from the Company’s subsidiary,

Quaker Italia

S.r.l., relating to the tax years 2007

through 2015.

The Company has filed for competent authority relief from these assessments under

the Mutual Agreement Procedures (“MAP”) of the Organization

for Economic Co-Operation and Development for all years except

In 2020, the respective tax authorities in Italy,

Spain, and Netherland reached agreement with respect to the

MAP proceedings, which

the Company has accepted.

As a result, the Company has

recorded an estimated tax liability of $

million to finalize these

proceedings, net of refunds expected to be received from

the Spanish and Dutch tax authorities.

As of December 31, 2020, the

Company believes it has adequate reserves for uncertain

tax positions with respect to these and all other audits.

Houghton Italia, S.r.l

is also currently involved in a corporate income tax audit with the

Italian tax authorities covering tax years

Spain, and Netherland reached agreement with respect to the MAP proceedings,

which the Company has accepted.

As of December 31, 2021, the Company has received $

million in refunds from the Netherlands

and Spain and has an accrual for $

million due to Italy.

In February 2022, the Company received a settlement notice from the

Italian taxing authorities confirming the amount due of $

million, having granted the Company’s

request to utilize its remaining net

operating losses to partially offset the liability.

This amendment to the tax assessment is expected to result in the Company

recognizing tax expense of $

million in Q1 2022.

Houghton Italia, S.r.l is also involved

in a corporate income tax audit with the Italian tax authorities covering tax years 2014

through 2018.

2 unchanged sentences

related to this audit.

Since this reserve relates to the tax periods prior to August 1,

2019, the tax liability was established through

Because the reserve relates to the tax periods prior to August 1, 2019, the tax liability

was established through

purchase accounting related to the Combination.

The Company has also submitted an indemnification claim

against funds held in

escrow by Houghton’s former

owners and as a result, a corresponding $

The Company has also submitted an indemnification claim against funds held in

escrow by Houghton’s former owners

and as a result, a corresponding $

million indemnification receivable has also been

established through purchase accounting.

Houghton Deutschland GmbH is also under audit by

the German tax authorities for tax years 2015-2017.

Based on preliminary

audit findings, primarily related to transfer pricing, the

Company has recorded a reserve for $

During the fourth quarter of 2021, the Company settled a portion of the

Houghton Italia,

corporate income tax

audit with the Italian tax authorities for the tax years 2014 and 2015.

The Company remains under audit

for tax years 2016 through 2018 and believes it has adequate reverses

for the remaining uncertain tax positions.

Houghton Deutschland GmbH is also under audit by the German tax authorities for

tax years 2015 through 2017.

preliminary audit findings, primarily related to transfer pricing,

the Company has recorded a reserve for $

million as of December

this amount, $

million relates to tax periods prior to the Combination and

therefore the Company has submitted an indemnification

claim with Houghton’s

Of this amount, $

million relates to tax periods prior to the Combination and therefore the Company

has submitted an

indemnification claim with Houghton’s

former owners for any tax liabilities arising pre-Combination.

1 unchanged sentence

indemnification receivable has also been established.

to offset the $

million tax liability.

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

Note 11 – Earnings Per Share

The following table summarizes earnings per share calculations

for the years ended December 31, 2020, 2019 and 2018:

The following table summarizes earnings per share calculations for

the years ended December 31, 2021, 2020 and 2019:

Basic earnings per common share

10 unchanged sentences

Effect of dilutive securities

Diluted weighted

average common shares outstanding

Diluted weighted average common shares outstanding

Diluted earnings per common share

The Company’s calculation

of earnings per diluted share attributable to Quaker Chemical Corporation

common shareholders for

the year ended December 31, 2019 was impacted by the

variability of its reported earnings during the year and the approximately

million shares issued as a component of the consideration transferred

in the Combination, comprising

of earnings per diluted share attributable to Quaker Chemical Corporation common

shareholders for

the year ended December 31, 2019 was impacted by the variability of

its reported earnings during the year and the approximately

million shares issued as a component of the consideration transferred in

the Combination, comprising

% of the common stock of

the Company immediately after the closing.

Certain stock options and restricted stock units are not included

in the diluted earnings

per share calculation because the effect would

Certain stock options, restricted stock units and PSUs are not included in the diluted

earnings per share calculation when the effect would

have been anti-dilutive.

The calculated amount of anti-diluted shares not included were

The calculated amount of anti-diluted shares not

included were

Note 12 – Restricted Cash

2 unchanged sentences

original total value of $ 35.0 million.

The proceeds of both settlements were restricted and could

only be used to pay claims and costs

The proceeds of both settlements were restricted and could only be used

to pay claims and costs

of defense associated with the subsidiary’s

asbestos litigation.

The proceeds of the settlement and release agreements

were deposited

The proceeds of the settlement and release agreements were deposited

into interest bearing accounts which earned less then $

5 unchanged sentences

Due to the restricted nature

of the proceeds, a corresponding deferred credit was established

in other non-current liabilities for an equal and offsetting

During December 2020, the restrictions ended on these

previously received insurance settlements and the

Company transferred

of the proceeds, a corresponding deferred credit was established in other

non-current liabilities for an equal and offsetting amount that

continued until the restrictions lapsed.

During December 2020, the restrictions ended on these previously received

settlements and the Company transferred

the cash into an operating account.

In connection with the termination in restrictions, the Company

recognized an $

on its Consolidated Statement of Income in Other expense,

In connection with the termination in restrictions, the Company recognized

on its Consolidated Statement of Income in Other income (expense

), net, for the amount of previously restricted cash, net of the

liability to pay claims and associated with the inactive

subsidiary’s asbestos litigation as of

December 31, 2020.

See Notes 18, 22 and

26 of Notes to Consolidated Financial Statements.

The following table provides a reconciliation of cash,

cash equivalents and restricted cash as December 31, 2020, 2019,

estimated liability to pay claims and associated with the inactive subsidiary’s

asbestos litigation as of December 31, 2020.

due to these restrictions ending, there is

restricted cash for the year ended December 31, 2021.

See Notes 18, 22 and 26 of Notes to

Consolidated Financial Statements.

The following table provides a reconciliation of cash, cash equivalents

and restricted cash as December 31, 2021, 2020, 2019 and

Cash and cash equivalents

5 unchanged sentences

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

Note 13 – Accounts Receivable and Allowance for Doubtful Accounts

As of December 31, 2020 and 2019, the Company

had gross trade accounts receivable totaling

As of December 31, 2021 and 2020, the Company had gross trade accounts receivable

million and $

respectively.

The Company recognizes an allowance for credit losses, which

represents the portion of the receivable that the Company does

expect to collect over its contractual life, considering

past events and reasonable and supportable forecasts of

future economic

The Company estimates credit losses for trade receivables by

aggregating similar customer types, because they tend to

share similar credit risk characteristics.

The Company’s allowance

for credit losses on its trade accounts receivable is based on

specific collectability facts and circumstances for each

outstanding receivable and customer, the

aging of outstanding receivables, and

the associated collection risk the Company estimates for certain

past due aging categories, and also, the general risk to all outstanding

accounts receivable based on historical amounts determined to

be uncollectible.

Trade and other receivables are written off

there is no reasonable expectation of recovery.

The following are changes in the allowance for doubtful

accounts during the years ended December 31, 2020, 2019 and 2018:

The following are changes in the allowance for doubtful accounts during the years

ended December 31, 2021, 2020 and 2019:

Exchange Rate

3 unchanged sentences

ended December 31, 2019

Included in exchange rate changes and other adjustments for

the year ended December 31, 2019 are the allowance for

Included in exchange rate changes and other adjustments for the year

ended December 31, 2019 are the allowance for doubtful

accounts of $

million related to the acquired receivables in connection with

the Combination and Norman Hay acquisition.

Note 2 of Notes to Consolidated Financial Statements.

Included in exchange rate changes and other adjustments for

the year ended

December 31, 2018 is a reclassification of $

million to other assets related to certain customer receivables due

greater than a year.

million related to the acquired receivables in connection with the Combination and

Norman Hay acquisition.

Note 14 – Inventories

Inventories, net, as of December 31, 2020 and 2019 were

Inventories, net, as of December 31, 2021 and 2020 were as follows:

Raw materials and supplies

process, finished goods and reserves

Total inventories,

Work in process,

finished goods and reserves

Total inventories, net

Note 15 – Property,

Plant and Equipment

Property, plant and

equipment as of December 31, 2020 and 2019 were as follows:

Property, plant and equipment

as of December 31, 2021 and 2020 were as follows:

Building and improvements

1 unchanged sentence

Construction in progress

Property, plant and

equipment, at cost

Property, plant and equipment,

accumulated depreciation

5 unchanged sentences

with the plans for closure of certain facilities, certain buildings and land with an aggregate book value of approximately $ 0.7 million

continue to be held-for-sale as of December 31, 2020 and are recorded in other current assets on the Company’s Consolidated Balance

continue to be held-for-sale as of December 31, 2021 and are recorded in prepaid expenses and other current assets on the Company’s

Consolidated Balance Sheet.

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

Note 16 – Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the

years ended December 31, 2020 and 2019 were as follows:

Changes in the carrying amount of goodwill for the years ended December 31,

2021 and 2020 were as follows:

Balance as of December 31, 2019

Goodwill additions

Currency translation adjustments

Currency translation and other

Balance as of December 31, 2020

2 unchanged sentences

Balance as of December 31, 2021

Other adjustments in the table above includes updates to

the Company’s allocation

of the Houghton purchase price and associated

Other adjustments in the table above includes updates to the Company’s

allocation of the Houghton purchase price and associated

goodwill to each of the Company’s

reportable segments during the year ended December 31, 2020,

including a $

reportable segments during the year ended December 31, 2020, including

million decrease

4 unchanged sentences

Specialty Businesses.

Gross carrying amounts and accumulated amortization

for definite-lived intangible assets as of December 31, 2020 and

Gross carrying amounts and accumulated amortization for definite-lived

intangible assets as of December 31, 2021 and 2020 were

Gross Carrying

1 unchanged sentence

Trademarks, formulations and product

Total definite

-lived intangible assets

Total definite-lived

intangible assets

The Company recorded $

4 unchanged sentences

Consolidated Statements of Income.

Estimated annual aggregate amortization expense for

the subsequent five years is as follows:

Estimated annual aggregate amortization expense for the subsequent

five years is as follows:

For the year ended December 31, 2022

3 unchanged sentences

For the year ended December 31, 2026

The Company has four indefinite-lived intangible

assets totaling $

The Company has four indefinite-lived intangible assets totaling $

million as of December 31, 2021, including $

million of indefinite-lived intangible assets for trademarks and

tradename associated with the Combination.

million of indefinite-lived intangible assets for trademarks and tradename associated

with the Combination.

Comparatively, the

Company had four indefinite-lived intangible assets for trademarks

and tradename totaling $

Company had four indefinite-lived intangible assets for trademarks and

tradename totaling $

million as of December 31, 2020.

The Company completes its annual goodwill and indefinite

-lived intangible asset impairment test during the fourth

The Company completes its annual goodwill and indefinite-lived intangible

asset impairment test during the fourth quarter of

each year, or more frequently if triggering

events indicate a possible impairment in one or more of its reporting

completed its annual impairment assessment during the

fourth quarter of 2020 and concluded no impairment charge

was warranted.

The Company continually evaluates financial performance,

economic conditions and other relevant developments

in assessing if an

interim period impairment test for one or more of

its reporting units is necessary.

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

of COVID-19 on the Company’s

operations, and the volatility

and uncertainty in the economic outlook as a result of

COVID-19 to determine if they indicated it was more likely

than not that the

events indicate a possible impairment in one or more of its reporting units.

completed its annual impairment assessment during the fourth quarter

of 2021 and concluded

impairment charge was warranted.

The Company continually evaluates financial performance, economic

conditions and other relevant developments in assessing if an

interim period impairment test for one or more of its reporting units is necessary.

As of March 31, 2020, the Company evaluated the initial impact of COVID-19

on the Company’s operations,

and the volatility

and uncertainty in the economic outlook as a result of COVID-19 to determine

if they indicated it was more likely than not that the

carrying value of any of the Company’s

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

concluded that the impact of COVID-19 did not represent

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

reporting units or indefinite-lived and long-lived assets, except

for the Company’s Houghton

and Fluidcare trademarks

and tradename

indefinite-lived intangible assets.

concluded that the impact of COVID-19 did not represent a triggering

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

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

The determination of estimated fair value of the Houghton

and Fluidcare trademarks and tradename indefinite-lived

based on a relief from royalty valuation method which

requires management’s

Dollars in thousands, except per share amounts, unless otherwise stated

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

Houghton and Fluidcare

tradename indefinite-lived intangible assets.

The determination of estimated fair value of the Houghton and Fluidcare

trademarks and tradename indefinite-lived 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 the weighted average cost of capital (“WACC”)

estimates and assumptions, including assumptions with respect to the

weighted average cost of capital (“WACC”)

and royalty rates, as

well as revenue growth rates and terminal growth rates.

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

COVID-19 driving a

decrease in projected legacy Houghton net sales in the

current year and the impact of the current year decline on projected

In the first quarter of 2020, as a result of the impact of COVID-19 driving

decrease in projected legacy Houghton net sales in the current year

and the impact of the current year decline on projected future

legacy Houghton net sales as well as an increase in the WACC

assumption utilized in the quantitative impairment

assessment, the

Company concluded that the estimated fair values of

the Houghton and Fluidcare trademarks and tradename intangible

assumption utilized in the quantitative impairment assessment,

Company concluded that the estimated fair values of the Houghton and

trademarks and tradename intangible assets were

less than their carrying values.

1 unchanged sentence

million, primarily related to the Houghton trademarks and

tradename, to write down the carrying values of these intangible

assets to their estimated fair values was recorded in the

first quarter

As of December 31, 2020, the Company continued to

evaluate the on-going impact of COVID-19 on the Company’s

and the volatility and uncertainty in the economic outlook

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

than not that the carrying value of any of the Company’s

reporting units or indefinite-lived or long-lived intangible

assets were not

The Company concluded that the impact of COVID-19 did not represent

a triggering event as of December 31, 2020

with regards to any of the Company’s

reporting units or indefinite-lived and long-lived intangible

While the Company concluded that the impact of COVID-19

did not represent a triggering event as of December 31,

of its other long-lived or indefinite-lived assets or reporting

units, the Company will continue to evaluate the impact

of COVID-19 on

the Company’s current

and projected results.

If the current economic conditions worsen or projections of the

timeline for recovery are

significantly extended, then the Company may conclude

in the future that the impact from COVID-19 requires the need

further interim quantitative impairment tests, which could

result in additional impairment charges in the future.

tradename, to write down the carrying values of these intangible assets to their estimated

fair values was recorded in the first quarter

Note 17 – Investments in Associated Companies

As of December 31, 2021, the Company held a

% investment in and had significant influence over Nippon

Quaker Chemical,

% investment in and had significant influence over Nippon Quaker Chemical,

(“Nippon Japan”), Kelko Quaker Chemical, S.A.

(“Kelko Panama”) and Houghton Korea acquired in 2019 in

connection with the

(“Kelko Panama”)

and Houghton Korea acquired in 2019 in connection with the

Combination, and held a

% investment in and had significant influence over Primex,

See Note 2 of Notes to

Consolidated Financial Statements.

% investment in and had significant influence over Primex, Ltd.

The carrying amount of the Company’s

10 unchanged sentences

economic circumstances and other restrictions in Venezuela,

during 2018 the Company concluded that it no longer

had significant

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

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

remaining carrying value for its investment in Kelko Venezuela.

The following table is a summary of equity income in associated

companies by investment for the years ending December 31,

The following table is a summary of equity income in associated companies by

investment for the years ending December 31,

2021, 2020 and 2019:

1 unchanged sentence

Houghton Korea

Kelko Venezuela

in net income of associated companies

As the Combination closed on August 1, 2019, the Company

included five months of equity income from Houghton

Total equity in net

income of associated companies

(1) In February 2021, the Company acquired a

% ownership interest in Grindaix.

From that date through September 2021

when the Company purchased the remaining interest of Grindaix, the

Company accounted for its

% interest under the

equity method of accounting and recorded equity in net income of associated

See Note 2 of Notes to

Consolidated Financial Statements.

As the Combination closed on August 1, 2019, the Company included five

months of equity income from Houghton Korea in its

December 31, 2019 Consolidated Statement of Income.

2 unchanged sentences

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

Note 18 – Other Non-Current Assets

Other non-current assets as of December 31, 2020

and 2019 were as follows:

Uncertain tax positions

Other non-current assets as of December 31, 2021 and 2020 were as follows:

Pension assets

Debt issuance costs

Uncertain tax positions

Indemnification assets

Debt issuance costs

Supplemental retirement income program

Restricted insurance settlement

During December 2020, the restrictions lapsed over certain

cash that was previously only designated to be used for settlement

asbestos claims at an inactive subsidiary of the Company.

As of December 31, 2020 and 2019, indemnification assets relates to

certain Houghton foreign subsidiaries for which the Company

expects it will incur additional tax amounts which are subject to

indemnification under the terms of the Combination

share and purchase agreement.

These indemnification assets have a

corresponding uncertain tax position recorded in

other non-current liabilities.

As of December 31, 2020, one of the Company’s

foreign pension plan’s

fair value of plan assets exceeded its gross benefit obligation

and was therefore over-funded, which is

represented by the line Pension assets in the table above.

See Notes 10, 12, 21 and 22 of Notes to Consolidated Financial

Total other non

-current assets

As of December 31, 2021 and 2020, indemnification assets relates to certain

Houghton foreign subsidiaries for which the

Company expects it will incur additional tax amounts which are subject

to indemnification under the terms of the Combination share

and purchase agreement.

These indemnification assets have a corresponding uncertain tax position recorded

in other non-current

As of December 31, 2021 and 2020, one of the Company’s

foreign pension plan’s fair value of

plan assets exceeded its

gross benefit obligation and was therefore over-funded,

which is represented by the line Pension assets in the table above.

10, 12, 21 and 22 of Notes to Consolidated Financial Statements.

Note 19 – Other Accrued Liabilities

Other accrued liabilities as of December 31, 2020 and

2019 were as follows:

Other accrued liabilities as of December 31, 2021 and 2020 were as follows:

Non-income taxes

1 unchanged sentence

Professional fees, legal, and acquisition-related accruals

Short-term lease liabilities

Selling expenses and freight accruals

Short-term lease liabilities

Customer advances and sales return reserves

accrued liabilities

Interest rate swap

Total other accrued

Note 20 – Debt

Debt as of December 31, 2020 and 2019 includes the

Debt as of December 31, 2021 and 2020 includes the following:

As of December 31, 2021

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short-term and current portion of long-term debts

Total long-term debt

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

Credit facilities

The Company’s primary

credit facility (as amended, the “Credit Facility”) is comprised

The Company’s primary credit facility

(as amended, the “Credit Facility”) is comprised of a $

million multicurrency

2 unchanged sentences

Loan”), each with the Company as borrower,

million (as of August 1, 2019) Euro equivalent term loan (the

“EURO Term Loan”

and together with the “U.S.

million (as of August 1, 2019) Euro equivalent term loan (the “EURO Term

Loan” and together with the “U.S.

“Term Loans”)

with Quaker Chemical B.V.,

a Dutch subsidiary of the Company as borrower,

each with a five-year term maturing in

Subject to the consent of the administrative agent and certain

other conditions, the Company may designate additional

The maximum amount available under the Credit Facility can be

increased by up to $

a Dutch subsidiary of the Company as borrower, each

term maturing in

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

may designate additional

The maximum amount available under the Credit Facility can be increased by up

million at the Company’s

request if there are lenders who agree to accept additional

commitments and the Company has satisfied certain other

Borrowings under the Credit Facility bear interest at a base

rate or LIBOR plus an applicable margin based upon

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 or LIBOR plus an

applicable margin based upon the Company’s

consolidated net leverage ratio.

There are LIBOR replacement provisions that contemplate a further

amendment if and when LIBOR

ceases to be reported.

The variable interest rate incurred on the outstanding borrowings under

the Credit Facility during the year

ended December 31, 2020 was approximately

As of December 31, 2020, the variable interest rate on the outstanding

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

% depending on the Company’s

consolidated net

leverage ratio to the lenders under the Revolver in

respect of the unutilized commitments thereunder.

The Company has unused

capacity under the Revolver of approximately $

On December 10, 2021, the Company entered into the Second Amendment with Bank of America

N.A., to include among other things, an update to provide for use of a non-USD

currency LIBOR successor rate.

The variable interest

rate incurred on the outstanding borrowings under the Credit Facility as of and

during the year ended 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

% depending on the Company’s consolidated

net leverage ratio to the lenders under the

Revolver in respect of the unutilized commitments thereunder.

The Company has unused capacity under the Revolver of

approximately $

million, net of bank letters of credit of approximately $

million, as of December 31, 2021.

Until closing of the Combination, the Company incurred ticking

fees to maintain the bank commitment, which began to

accrue on September 29, 2017.

Concurrent with the closing of the Combination and executing the

Credit Facility on August 1, 2019,

the Company paid approximately $

million of ticking fees.

The Credit Facility is subject to certain financial and

other covenants.

The Company’s initial consolidated net debt to

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, 2020, the consolidated net debt to adjusted EBITDA may not exceed 4.00 to 1.

The Credit Facility is subject to certain financial and other covenants

The Company’s initial consolidated net

consolidated adjusted EBITDA ratio could not exceed

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 adjusted EBITDA

may not exceed

The Company’s

consolidated adjusted EBITDA to interest expense ratio cannot be less than 3.0 to 1 over the term of the agreement.

Facility also prohibits the payment of cash dividends 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 net debt to

consolidated adjusted EBITDA is less than 2.0 to 1, in which case there is no such limitation on amount.

consolidated adjusted EBITDA to interest expense ratio cannot be less than

to 1 over the term of the agreement.

Facility also prohibits the payment of cash dividends if the Company

is in default or if the amount of the dividend paid annually

exceeds the greater of $

% of consolidated adjusted EBITDA unless the ratio of consolidated net debt

consolidated adjusted EBITDA is less than

to 1, in which case there is no such limitation on amount.

As of December 31, 2021

and December 31, 2020, the Company was in compliance with all of the Credit Facility covenants.

The Term Loans have

principal amortization during their five-year terms,

% amortization of the principal balance due in years

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

The Term Loans have quarterly

principal amortization during their five year terms, with

% amortization of the principal balance due in years 1 and 2,

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

During the year ended December 31, 2021, the

Company made four quarterly amortization payments

related to the Term Loans

Company made four quarterly amortization payments related to the

Term Loans totaling $

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 domestic subsidiary guarantors,

subject to certain customary exclusions.

domestic subsidiaries 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.

The obligations of the Dutch borrower

are guaranteed only 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,

are guaranteed only by certain foreign subsidiaries on an unsecured basis.

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

% 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 $

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

% 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

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

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

See Note 25 of Notes to Consolidated Financial Statements.

The Company capitalized $

million of certain third-party debt issuance costs in connection

with executing the Credit Facility.

million of certain third-party debt issuance costs in connection with executing

the Credit Facility.

Approximately $

1 unchanged sentence

Loans and recorded as a direct reduction of long-

term debt on the Company’s

Consolidated Balance Sheet.

term debt on the Company’s Consolidated

Balance Sheet.

Approximately $

3 unchanged sentences

These capitalized costs are being

amortized into interest expense over the five-year term

of the Credit Facility.

As of December 31, 2020 and 2019,

the Company had

amortized into interest expense over the

term of the Credit Facility.

As of December 31, 2021 and 2020, the Company had

million and $

million, respectively,

of debt issuance costs recorded as a reduction of long-term

million, respectively, of debt

issuance costs recorded as a reduction of long-term debt.

As of December 31,

1 unchanged sentence

million and $

million, respectively,

of debt issuance costs recorded within other assets.

million, respectively, of

debt issuance costs recorded within other non-current

Industrial development bonds

As of December 31, 2020 and 2019, the Company

had fixed rate, industrial development authority bonds totaling $

As of December 31, 2021 and 2020, the Company had fixed rate, industrial

development authority bonds totaling $

principal amount due in

These bonds have similar covenants to the Credit Facility noted

The Company also had a $

million industrial development authority bond bearing

interest at a rate of

%, which matured

and was paid off during the fourth quarter of

These bonds have similar covenants to the Credit Facility noted above.

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Bank lines of credit and other

debt obligations

The Company has certain unsecured bank lines of credit

and discounting facilities in certain foreign subsidiaries, which are

Dollars in thousands, except per share amounts, unless otherwise stated

Bank lines of credit and other debt obligations

The Company has certain unsecured bank lines of credit and discounting

facilities in certain foreign subsidiaries, which are not

collateralized.

The Company’s other debt

obligations primarily consist of certain domestic and foreign

low interest rate or interest-

free municipality-related loans, local credit facilities of

certain foreign subsidiaries and capital lease obligations.

capacity under these arrangements as of December

31, 2020 was approximately $

In addition to the bank letters of credit described in

the “Credit facilities” subsection above, the Company’s

only other off-balance

sheet arrangements include certain financial and other

The Company’s total bank

letters of credit and guarantees

The Company’s other debt obligations

primarily consist of certain domestic and foreign low interest rate or interest-

free municipality-related loans, local credit facilities of certain foreign subsidiaries

and capital lease obligations.

capacity under these arrangements as of December 31, 2021, was approximately

In addition to the bank letters of credit described in the “Credit facilities” subsection

above, the Company’s only other

sheet arrangements include certain financial and other guarantees.

The Company’s total bank letters

of credit and guarantees

outstanding as of December 31, 2021 were approximately $

The Company incurred the following debt related expenses

included within Interest expense, net, in the Consolidated

The Company incurred the following debt related expenses included

within Interest expense, net, in the Consolidated Statements

Ended December 31,

1 unchanged sentence

Amortization of debt issuance costs

Based on the variable interest rates associated with the Credit

Facility, as of December

31, 2020 and 2019, the amounts at which

the Company’s total debt

were recorded are not materially different from

their fair market value.

At December 31, 2020, annual maturities on long-term

borrowings maturing in the next five fiscal years (excluding

the reduction

to long-term debt attributed to capitalized and unamortized

debt issuance costs) are as follows:

Based on the variable interest rates associated with the Credit Facility,

as of December 31, 2021 and 2020, the amounts at which

the Company’s total debt were recorded

are not materially different from their fair market value.

At December 31, 2021, annual maturities on long-term borrowings maturing

in the next five fiscal years (excluding the reduction

to long-term debt attributed to capitalized and unamortized debt issuance costs)

are as follows:

Note 21 – Pension and Other Postretirement

15 unchanged sentences

Transfer in of business acquisition

Actuarial loss (gain)

Translation differences and

Actuarial (gain) loss

Translation differences and other

Gross benefit obligation at end of year

2 unchanged sentences

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Dollars in thousands, except per share amounts, unless otherwise stated

Pension Benefits

9 unchanged sentences

Plan expenses and premiums paid

Transfer in of business acquisition

Translation differences

10 unchanged sentences

accumulated other comprehensive loss:

Prior service credit

Accumulated loss

Prior service (cost) credit

Accumulated (loss) gain

Cumulative employer contributions

(below) or in excess of

in excess of or (below) net

periodic benefit cost

Net benefit obligation recognized

The accumulated benefit obligation for all defined benefit

pension plans was

The accumulated benefit obligation for all defined benefit pension plans was

million Foreign) and $

2 unchanged sentences

2020, respectively.

Information for pension plans with an accumulated benefit

obligation in excess of plan assets:

Information for pension plans with an accumulated benefit obligation

in excess of plan assets:

Projected benefit obligation

4 unchanged sentences

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Information for pension plans with a projected

benefit obligation in excess of plan assets:

Dollars in thousands, except per share amounts, unless otherwise stated

Information for pension plans with a projected benefit obligation

in excess of plan assets:

Projected benefit obligation

3 unchanged sentences

Expected return on plan assets

Settlement loss

Settlement loss (gain)

Curtailment charge

Actuarial loss amortization

Prior service (credit) cost

Net periodic benefit cost

Prior service cost (credit)

Net periodic benefit (income) cost

Interest cost

2 unchanged sentences

Actuarial loss amortization

Prior service (credit) cost amortization

Prior service credit amortization

Net periodic benefit cost

6 unchanged sentences

Settlement loss

Prior service credit (cost)

Actuarial loss

Prior service (cost) credit

Actuarial (loss) gain

Curtailment Recognition

2 unchanged sentences

Total recognized

comprehensive loss (income)

comprehensive (income) loss

Total recognized

1 unchanged sentence

benefit cost and other

comprehensive loss (income)

comprehensive (income) loss

QUAKER CHEMICAL CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

Dollars in thousands, except share and per share amounts,

unless otherwise stated

Net gain arising during period

Dollars in thousands, except per share amounts, unless otherwise stated

Net loss arising during period

Recognition of amortization in net periodic benefit

Prior service credit (cost)

Prior service credit

Actuarial loss

8 unchanged sentences

Actuarial loss amortization

Prior service credit amortization

Net periodic benefit costs

Other changes recognized in other comprehensive

income – other postretirement benefit

income – other postretirement benefit plans:

Net (gain) loss arising during period

Amortization of actuarial loss in net periodic

benefit costs

Recognition of amortizations in net periodic

Prior service credit

Actuarial gain amortization

Total recognized

4 unchanged sentences

Weighted-average

assumptions used to determine benefit obligations as of December

31, 2020 and 2019:

assumptions used to determine benefit obligations as of December 31, 2021 and 2020:

What changed 10-K

Item 8. Financial Statements and Supplementary Data