What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 745 added, 1322 removed, 561 unchanged (79% of the section changed)

1 unchanged sentence

Quaker Chemical Corporation

Condensed Consolidated Statements of Operations

Condensed Consolidated Statements of Income

(Dollars in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

Cost of goods sold (

excluding amortization expense - See Note 14

Three Months Ended March 31,

Cost of goods sold (excluding amortization expense - See Note 13)

Selling, general and administrative expenses

Indefinite-lived intangible asset impairment

Restructuring and related charges

1 unchanged sentence

Operating income

Other income (expense), net

Other (expense) income, net

Interest expense, net

Income (loss) before taxes and equity in net income of

associated companies

Taxes on income (loss)

before equity in net income of associated

Income (loss) before equity in net income of associated

Income before taxes and equity in net income of associated companies

Taxes on income before

equity in net income of associated companies

Net income (loss)

Income before equity in net income of associated companies

Equity in net income of associated companies

Net income attributable to noncontrolling interest

Net income (loss) attributable to Quaker Chemical Corporation

Net income attributable to Quaker Chemical Corporation

Per share data:

Net income (loss) attributable to Quaker Chemical Corporation

common shareholders – basic

Net income (loss) attributable to Quaker Chemical Corporation

common shareholders – diluted

Net income attributable to Quaker Chemical Corporation common

shareholders – basic

Net income attributable to Quaker Chemical Corporation common

shareholders – diluted

Dividends declared

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

Quaker Chemical Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Comprehensive

(Dollars in thousands)

Three Months Ended

Nine Months Ended

September 30,

Net income (loss)

Three Months Ended March 31,

Other comprehensive (loss) income, net of tax

2 unchanged sentences

Current period change in fair value of derivatives

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

Other comprehensive (loss) income

Comprehensive income (loss)

Comprehensive (income) loss attributable to

noncontrolling interest

Comprehensive income (loss) attributable to Quaker Chemical

The accompanying notes are an integral part of these condensed consolidated financial statements.

Unrealized loss on available-for-sale securities

Other comprehensive loss

Comprehensive income

Comprehensive income attributable to noncontrolling

Comprehensive income attributable to Quaker Chemical Corporation

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

Quaker Chemical Corporation

1 unchanged sentence

(Dollars in thousands, except par value)

September 30,

Current assets

17 unchanged sentences

Short-term borrowings and current portion of long-term debt

Accounts and other payables

Accounts payable

Dividends payable

Accrued compensation

Accrued restructuring

Other current liabilities

Accrued pension and postretirement benefits

Other accrued liabilities

Total current

2 unchanged sentences

Deferred tax liabilities

Non-current accrued pension and postretirement benefits

Other non-current liabilities

3 unchanged sentences

outstanding 2022 –

17,897,033 shares

Capital in excess of par value

4 unchanged sentences

Total liabilities and equity

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

Quaker Chemical Corporation

1 unchanged sentence

(Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating

Adjustments to reconcile net income to net cash used in operating activities:

Amortization of debt issuance costs

4 unchanged sentences

Share-based compensation

(Gain) loss on disposal of property,

plant, equipment and other assets

Insurance settlement realized

Indefinite-lived intangible asset impairment

Gain on disposal of property, plant,

equipment and other assets

Combination and other acquisition-related expenses, net of payments

7 unchanged sentences

Accounts payable and accrued liabilities

Net cash provided by operating activities

Net cash used in operating activities

Cash flows from investing activities

3 unchanged sentences

Proceeds from disposition of assets

Insurance settlement interest earned

Net cash used in investing activities

Cash flows from financing activities

Payments of term loan debt

Borrowings (repayments) on revolving credit facilities, net

Payments of long-term debt

Borrowings on revolving credit facilities, net

Repayments on other debt, net

1 unchanged sentence

Stock options exercised, other

Purchase of noncontrolling interest in affiliates

Distributions to noncontrolling affiliate shareholders

Net cash used in financing activities

Net cash provided by financing activities

Effect of foreign exchange rate changes on cash

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

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

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

The accompanying notes are an integral part of these condensed consolidated financial

Net decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

Cash and cash equivalents at the end of the period

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

Quaker Chemical Corporation

Condensed Consolidated Statements of Changes in Equity

(Dollars in thousands, except per share amounts)

Comprehensive

Noncontrolling

Balance at December 31, 2020

Amounts reported in other

comprehensive loss

Share issuance and equity-based

compensation plans

Balance at March 31, 2021

Balance at December 31, 2021

Amounts reported in other

comprehensive loss

Share issuance and equity-based

compensation plans

Balance at March 31, 2022

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

Basis of Presentation

As used in these Notes to Condensed Consolidated Financial Statements of

this Quarterly Report on Form 10-Q for the period

ended September 30, 2021 (the “Report”),

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, unless the context otherwise

As used in these Notes to Condensed 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, unless the context otherwise requires.

As used in these Notes to Condensed Consolidated Financial Statements,

the term Legacy Quaker refers to the Company

prior to the closing of its combination with Houghton International, Inc.

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

with Houghton International, Inc.

(herein referred to as the “Combination”).

condensed consolidated financial statements included herein are

unaudited and have been prepared in accordance with generally

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

GAAP”) for interim

financial reporting and the United States Securities and

Exchange Commission (“SEC”) regulations.

Certain information and footnote disclosures normally included in financial statements

prepared in accordance with U.S.

The condensed consolidated financial statements included herein are unaudited and

been prepared in accordance with generally accepted accounting principles

in the United States (“U.S.

GAAP”) for interim financial

reporting and the United States Securities and Exchange Commission (“SEC”)

Certain information and footnote

disclosures normally included in financial statements prepared in accordance

GAAP have been condensed or omitted

pursuant to such rules and regulations.

In the opinion of

management, the financial statements reflect all adjustments consisting

only of normal recurring adjustments which are necessary for a

fair statement of the financial position, results of operations and cash

flows for the interim periods.

The results for the nine months

ended September 30, 2021 are not necessarily indicative of the results to be expected

for the full year.

These financial statements

should be read in conjunction with the Company’s

Annual Report filed on Form 10-K for the year ended December

31, 2020 (the

“2020 Form 10-K”).

During the three months ended September 30, 2020, the Company

identified and corrected certain immaterial adjustments relating

to the three months ended March 31, 2020 as well as the three and six months

ended June 30, 2020.

These adjustments related to the

Company’s over-recognition

of cost of goods sold (“COGS”) and corresponding under-recognition

of inventory, as well as the

associated tax impact of these adjustments, in the Company’s

previously issued interim financial statements for the three months

ended March 31, 2020 and the three and six months ended June 30, 2020.

These adjustments impact the Company’s

reportable segment.

The cumulative amount of reduction to COGS recorded in the three and nine months ended

September 30, 2020

was approximately $

million, with approximately $

million related to the three months ended March 31, 2020 and

approximately $

million related to the three months ended June 30, 2020.

In the opinion of management, the financial statements reflect all adjustments

consisting only

of normal recurring adjustments, which are necessary for a fair statement of

the financial position, results of operations and cash flows

for the interim periods.

The results for the three months ended March 31, 2022 are not necessarily indicative

of the results to be

expected for the full year.

These financial statements should be read in conjunction with the Company’s

Annual Report filed on Form

10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).

Description of Business

10 unchanged sentences

mining, and metalworking

Quaker Houghton develops, produces, and markets a broad range of formulated

chemical specialty products and offers

Quaker Houghton develops, produces, and markets a broad range of formulated chemical

specialty products and offers

chemical management services (which the Company refers to as “Fluidcare

9 unchanged sentences

economy was considered hyper-inflationary under U.S.

As of, and for the three and nine

months ended September 30, 2021, the Company's Argentine

subsidiaries represented less than

As of, and for the three months

ended March 31, 2022, the Company's Argentine subsidiaries represented

% of the Company’s consolidated

total assets and net sales, respectively.

During the three and nine months ended September 30, 2021, the Company

recorded less than

million and $

million, respectively,

of remeasurement losses associated with the applicable currency conversions

Comparatively, during the

three and nine months ended September 30, 2020, the Company recorded $

million and $

million, respectively,

of remeasurement losses associated with the applicable currency conversions

total assets and

net sales, respectively.

During each of the three months ended March 31, 2022 and 2021, the Company

remeasurement losses associated with the applicable currency conversions

related to Argentina.

were recorded within foreign exchange losses, net, which is a component

of other income (expense), net, in the Company’s

Condensed Consolidated Statements of Operations.

Management continues to monitor the impact that the COVID-19 pandemic

is having on the Company, the overall

chemical industry, and

the economies and markets in which the Company operates.

The full extent of the COVID-19 pandemic

related business and travel restrictions and changes to business and consumer behavior

intended to reduce its spread are uncertain as of

the date of the Report as COVID-19 and the responses of governmental

authorities continue to evolve globally.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

Further, management continues to evaluate

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

financial reporting processes, internal control over financial reporting,

and disclosure controls and procedures.

circumstances have presented and are expected to continue to present challenges,

at this time, Management does not believe that

COVID-19 has had a material impact on financial reporting processes, internal

control over financial reporting, and disclosure

controls and procedures.

The Company cannot reasonably estimate the magnitude of the effects

these conditions will have on the Company’s

operations in

the future as they are subject to significant uncertainties relating to the ultimate

geographic spread of the virus, the incidence and

severity of the symptoms, the duration or resurgences

of the outbreak including the impact of new variants, the global availability,

acceptance and efficacy of vaccines, the length of the travel restrictions

and business closures imposed by governments of impacted

countries, and the economic response by governments of impacted countries,

all of which continue to evolve.

To the extent

that the Company’s customers and suppliers continue

to be significantly and adversely impacted by COVID-19, this

could reduce the availability,

or result in delays, of materials or supplies to or from the Company,

which in turn could significantly

interrupt the Company’s business operations.

Such impacts could grow and become more significant to the Company’s

and the Company’s liquidity

or financial position.

Therefore, given the continuously evolving global developments with respect to

this pandemic, the Company cannot reasonably estimate the magnitude or

the full extent to which COVID-19 may impact the

Company’s results of operations,

liquidity or financial position.

These losses were recorded within

foreign exchange losses, net, which is a component of other (expense) income, net,

in the Company’s Condensed Consolidated

Statements of Income.

Note 2 – Business Acquisitions

2022 Acquisitions

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 approximately

In January 2022, the Company acquired a business that provides pickling

inhibitor technologies for the steel industry,

lubricants and stamping oil for metalworking, and various other lubrication,

rust preventative, and cleaner applications, for its

Americas reportable segment for approximately $

This business broadens the Company’s

product offerings within its

existing metals and metalworking business in the Americas region.

The Company allocated $

million of the purchase price to

intangible assets, comprised of $

million of customer relationships to be amortized over

million of existing

product technologies to be amortized over

In addition, the Company recorded $

million of goodwill related to expected

value not allocated to other acquired assets, all of which is expected to be tax deductible

in various jurisdictions

Company operates.

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 reportable segment

for approximately

million EUR or approximately $

million for its Global

Specialty Businesses reportable segment.

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 acquired

the Norman Hay acquisition in 2019.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

The results of operations of the 2022 acquired assets and businesses subsequent

to the respective acquisition dates are included in

the unaudited Condensed Consolidated Statements of Income for the quarter ended

March 31, 2022.

Applicable transaction expenses

associated with these acquisitions are included in Combination,

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

unaudited Condensed Consolidated Statements of Income.

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

of the acquired assets and businesses are not considered material to the overall operations

of the Company for the periods presented.

Previous 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 initially 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

equipment and $

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

million of cash

In addition, the Company recorded $

million of goodwill, all of which is expected to be tax deductible.

Intangible assets

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 for

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

the Company acquired a

% ownership interest in Grindaix

for approximately

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.

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

product line in the Global Specialty Businesses

reportable segment for

The Company recorded

its initial investment as an equity method investment within the 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

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 $

The Company accounted for the acquisition using the asset

acquisition method under ASC 805,

Business Combinations

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

for the steel end market for approximately $

This acquisition is part of each of the Company’s

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, comprised of $

million of the purchase

price to intangible assets, comprised of $

million of customer relationships, to be amortized over

of existing product technology to be amortized over

million of existing

product technology to be amortized over

million of a licensed trademark to be amortized over

In addition, the Company recorded $

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

assets, all of

which is expected to be tax deductible in various jurisdictions in which we

As of September 30, 2021, the allocation of the

purchase price has not been finalized and the

measurement period has not ended.

Further adjustments may be necessary as a

result of the Company’s on-going

the Company recorded $

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

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 March 31, 2022, the allocation of the purchase price of these acquisitions have

not been finalized and the one-year

measurement period has not ended, with the exception of the tin-plating

solutions business acquired in February 2021, the

measurement period for which ended in February 2022.

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

assessment of additional information related to the fair value of assets acquired

and liabilities

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

respective acquisition dates are included in the

Condensed Consolidated Statements of Operations as of September 30, 2021.

Applicable transaction expenses associated with these

acquisitions are included in Combination, integration and other acquisition

-related expenses in the Company’s Condensed

Consolidated Statements of Operations.

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

assets and businesses are not considered material to the overall operations of the

Company for the periods presented.

In November 2021, the Company closed two additional acquisitions that expand

its strategic product offerings and increase the

Company’s presence in its core metalworking

The total initial purchase price for these acquisitions was approximately $

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

provisions that could total approximately $

Transaction expenses associated with these

acquisitions are included in Combination, integration and other acquisition-related

expenses in the Condensed Consolidated Statements of Operations.

The results of operations of these two acquisitions are not

included in the Consolidated Statements of Operations because the date of

closing for each was subsequent to September 30, 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 Condensed Consolidated Financial Statements.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

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 original purchase

price was approximately $

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

capital and net

indebtedness levels.

The Company anticipates finalizing its post-closing adjustments for the Coral acquisition

during the fourth

quarter of 2021.

The following table presents the preliminary estimated fair values of

Coral net assets acquired:

(as adjusted)

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other assets

Property, plant and equipment

Intangible assets

Total assets purchased

Long-term debt including current portions and finance leases

Accounts payable, accrued expenses and other accrued liabilities

Total liabilities assumed

Total consideration

paid for Coral

estimated purchase price settlement

cash acquired

Net cash paid for Coral

(1) As previously disclosed in the Company’s

2020 Form 10-K

Measurement period adjustments recorded during the first nine months of

2021 include certain adjustments related to refining

original estimates for assets and liabilities for certain acquired finance

leases, as well the adjustment to reflect the expected settlement

of post-closing working capital and net indebtedness true ups to the original purchase

As of September 30, 2021, the allocation

of the purchase price for Coral has not been finalized and the

measurement period has not ended.

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.

In May 2020, the Company acquired Tel

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

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.

An adjustment to the purchase price of approximately

million DKK, or less than $

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.

September 30, 2021, the allocation of the purchase price of TEL was finalized

measurement period ended.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

In March 2020, the Company acquired the remaining

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

Chemical South Africa Limited (“QSA”) for

million ZAR, or approximately $

million, from its joint venture partner PQ

Holdings South Africa.

QSA is a part of the Company’s EMEA

reportable segment.

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

interest in Capital in excess of par value.

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.

In December 2020, the Company acquired Coral Chemical Corporation (“Coral”),

a privately held U.S.-based provider of metal

finishing fluid solutions.

Subsequent to the acquisition, the Company and the sellers of Coral (the “Sellers”) have

worked to finalize

certain post-closing adjustments.

In April 2022, after failing to reach resolution, the Sellers filed suit asserting certain

related to tax attributes of the acquisition.

Based on the facts and circumstances of the claim asserted by the Sellers, the Company

believes the potential range of exposure for this claim is $

Note 3 – Recently Issued Accounting Standards

Recently Issued Accounting Standards

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 on a prospective basis, effective January

There was no cumulative effect of adoption recorded within

retained earnings on January 1, 2021.

The FASB issued ASU 2020

16 unchanged sentences

ASU 2020-04 is

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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

be applied through December 31, 2022.

As of September 30, 2021,

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

however, the Company will continue

to monitor for

potential impacts on its consolidated financial statements.

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.

The Company 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 14 of Notes to Condensed Consolidated Financial Statements.

Note 4 – Business Segments

13 unchanged sentences

includes the Company’s container,

metal finishing, mining, offshore, specialty coatings, specialty grease

and Norman Hay businesses.

metal finishing,

mining, offshore, specialty coatings, specialty grease and Norman

Hay businesses.

Segment operating earnings for each of the Company’s

1 unchanged sentence

net sales less directly

related COGS and selling, general and administrative expenses (“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,

related cost of goods sold (“COGS”) and selling, general and administrative

expenses (“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

are not included in segment operating earnings.

Other items not specifically

identified with the Company’s reportable

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

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

items not specifically identified with the Company’s

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

The following table presents information about the performance of the Company’s

reportable segments for the three and nine

months ended September 30, 2021 and 2020.

reportable operating segments for the three

months ended March 31, 2022 and 2021:

Three Months Ended

Nine Months Ended

September 30,

Global Specialty Businesses

Total net sales

Segment operating earnings

Global Specialty Businesses

Total segment operating

segment operating earnings

Combination, integration and other acquisition-related expenses

1 unchanged sentence

Fair value step up of acquired inventory sold

Indefinite-lived intangible asset impairment

Non-operating and administrative expenses

of corporate assets and amortization

Depreciation of corporate assets and amortization

Operating income

Other income (expense), net

Other (expense) income, net

Interest expense, net

Income (loss) before taxes and equity in net income of

associated companies

Inter-segment revenues for the three and nine months ended September

30, 2021 were $

Income before taxes and equity in net income of associated companies

Inter-segment revenues for the three months ended March 31,

2022 and 2021 were $

million and $

7 unchanged sentences

Specialty Businesses, respectively.

Inter-segment revenues for the three and nine months ended

September 30, 2020 were $

million and $

million for Americas, $

million and $

million for EMEA, $

million and $

million for Asia/Pacific, and

million and $

million for Global Specialty Businesses, respectively.

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.

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.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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 chemical

management services (“Fluidcare”) for various heavy industrial and

manufacturing applications throughout its four segments.

significant portion of the Company’s

revenues are realized from the sale of process fluids and services made directly

to manufacturers

through its own employees and its Fluidcare programs, with the balance

being handled through distributors and agents.

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 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 by

the Company for ordering the goods.

The Company transferred third-party products under arrangements recognized

on a net reporting

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

Company transferred third-party products under arrangements recognized

on a net reporting basis of $

million and $

million for the three and nine months ended September 30, 2021, respectively,

million for the three and nine months ended September 30, 2020, respectively.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

As previously disclosed in the Company’s

2020 Form 10-K, during 2020, 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

for the three months ended March 31, 2022 and 2021, 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

As previously disclosed in the 2021 Form 10-K,

during the year ended December 31, 2021, the Company’s

five largest customers (each composed of multiple subsidiaries or

with semiautonomous purchasing authority) accounted for approximately

% of consolidated net sales, with its largest customer

accounting for approximately

% of consolidated net sales.

Revenue Recognition Model

The Company applies the five-step model in the FASB’s

guidance, which requires the Company to:

(i) identify the

contract with a

(ii) identify the performance obligations in the contract;

determine the transaction price;

(iv) allocate the transaction

price to the performance obligations in the contract;

and (v) recognize

revenue when, or as, the Company satisfies a performance

Refer to the Company’s 2020 Form 10-K

for additional information on the Company’s

revenue recognition policies,

including its practical expedients and accounting policy elections.

Allowance for Doubtful Accounts

As previously disclosed in the Company’s

2020 Form 10-K, during 2020, the Company adopted, as required, an accounting

standard update related to the accounting and disclosure of credit losses effective

January 1, 2020.

The Company recognizes an

allowance for credit losses, which represents the portion of its trade accounts

receivable that the Company does not expect to collect

over the contractual life, considering past events and reasonable and

supportable forecasts of future economic conditions.

Company’s allowance for

credit losses on its trade accounts receivables is based on specific collectability facts and circumstances

each outstanding receivable and customer,

the aging of outstanding receivables, and the associated collection risk the

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 to its customers.

Contract Assets and Liabilities

The Company recognizes a contract asset or receivable on its Condensed

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 is due.

A contract asset is the

Company’s right to consideration

in exchange for goods or services that the Company has transferred to a customer.

had no material contract assets recorded on its Condensed Consolidated

Balance Sheets as of September 30, 2021 or December 31,

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.

The Company’s

contract liabilities primarily represent deferred revenue recorded

for customer payments received by the Company prior to the

Company satisfying the associated performance obligation.

Deferred revenues are presented within other current liabilities in the

Company’s Condensed Consolidated

Balance Sheets.

The Company had no material contract assets recorded on its Condensed

Consolidated Balance Sheets as of March 31, 2022 or

December 31, 2021.

The Company had approximately $

million and $

million of deferred

revenue as of September 30, 2021 and December 31, 2020, respectively.

For the nine months ended September 30, 2021, the

Company satisfied all of the associated performance obligations

and recognized into revenue the advance payments received and

recorded as of December 31, 2020.

million of deferred revenue as of March 31, 2022 and December 31,

2021, respectively.

For three months ended March 31, 2022, the Company satisfied all of the associated performance

obligations and

recognized into revenue the advance payments received and recorded

as of December 31, 2021.

Disaggregated Revenue

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 of

the Company’s geographic

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

The following tables disaggregate the Company’s

1 unchanged sentence

and timing of

revenue recognized for the three and nine months ended September 30, 2021

Three Months Ended September 30, 2021

revenue recognized for the three months ended March 31, 2022 and 2021.

Three Months Ended March 31, 2022

Customer Industries

6 unchanged sentences

Notes to Condensed Consolidated Financial Statements - Continued

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

Three Months Ended September 30, 2020

Customer Industries

Metalworking and other

Global Specialty Businesses

Timing of Revenue Recognized

Product sales at a point in time

Services transferred over time

Nine Months Ended September 30, 2021

Customer Industries

Metalworking and other

Global Specialty Businesses

Timing of Revenue Recognized

Product sales at a point in time

Services transferred over time

Nine Months Ended September 30, 2020

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Three Months Ended March 31, 2021

Customer Industries

4 unchanged sentences

Services transferred over time

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

Note 6 - Leases

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 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

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 to

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

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 Condensed 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 lease term.

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

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 property,

plant and equipment, current portion of

long-term debt and long-term debt on the Condensed Consolidated Balance

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

Operating lease expense for the three and nine

months ended September 30, 2021 was $

million and $

million, respectively.

Comparatively, operating

lease expense for the

three and nine months ended September 30, 2020 was $

million and $

million, respectively.

Short-term lease expense for the

three and nine months ended September 30, 2021 was $

million and $

million, respectively.

Comparatively, short-term

expense for the three and nine months ended September 30, 2020

million and $

million, respectively.

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

the Company has certain land

use leases with remaining lease terms up to

The Company has

material variable lease costs or sublease income for the three or nine months ended September

material variable lease costs or sublease income for three months ended March

31, 2022 and 2021.

Cash paid for operating leases during the nine months ended September 30, 2021

and 2020 was $

million and $

respectively.

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

million during the nine

months ended September 30, 2021.

following table sets forth the components of the Company’s

lease cost for three months ended March 31, 2022 and 2021:

Three Months Ended

Operating lease expense

Short-term lease expense

Supplemental cash flow information related to the Company’s

leases is as follows

Three Months Ended

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

Non-cash lease liabilities activity:

Leased assets obtained in exchange for new operating lease liabilities

Supplemental balance sheet information related to the Company’s

leases is as follows:

September 30,

Right of use lease assets

6 unchanged sentences

discount rate

Maturities of operating lease liabilities as of September 30, 2021 were

September 30,

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Maturities of operating lease liabilities as of March 31, 2022 were as follows:

For the remainder of 2022

7 unchanged sentences

Present value of lease liabilities

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

Note 7 – Restructuring and Related Activities

4 unchanged sentences

manufacturing and non-manufacturing facilities.

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

number of factors and is subject to change;

however, the Company currently expects reduction in headcount and site closures to

continue to occur throughout 2021 and 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.

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

number of factors and are subject to change;

the Company currently expects reductions in headcount and site closures to

continue to occur throughout 2022 under the QH Program.

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

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

Condensed Statements of Operations.

As described in Note 4 of Notes to Condensed 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.

Condensed Consolidated Statements of Income.

As described in Note 4 of Notes to Condensed

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 nine months ended September 30, 2021

for restructuring under the QH Program for the three months ended March 31, 2022

Accrued restructuring as of December 31, 2021

2 unchanged sentences

Currency translation adjustments

Accrued restructuring as of September 30, 2021

Accrued restructuring as of March 31, 2022

Note 8 – Share-Based Compensation

The Company recognized the following share-based compensation expense

in its Condensed Consolidated Statements of

Operations for the three and nine months ended September 30, 2021

in its Condensed Consolidated Statements of Income

for the three months ended March 31, 2022 and 2021:

Three Months Ended

Nine Months Ended

September 30,

Stock options

3 unchanged sentences

Performance stock units

Annual incentive plan

Total share-based

compensation expense

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

million and $

million for the three and nine months

ended September 30, 2021, respectively,

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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

million and $

million for the three and nine months ended September 30, 2020,

respectively, recorded

within Combination, integration and other acquisition-related expenses.

million during the three

months ended March 31, 2022 and 2021, respectively,

recorded within Combination, integration and other acquisition-related

Stock Options

During the first nine months of 2021, the Company granted stock options

under its long-term incentive plan (“LTIP”)

subject only to time-based vesting over a

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

Company used a Black-Scholes option pricing model and which primarily used

the assumptions set forth in the table below:

During the first quarter of 2022, the Company granted stock options under

its long-term incentive plan (“LTIP

”) that are subject

only to time vesting over a

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

used a Black-Scholes option pricing model and the assumptions set forth

in the table below:

Number of options granted

3 unchanged sentences

Expected term (years)

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

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

vesting period.

As of September 30, 2021,

unrecognized compensation expense related to all stock options granted was $

million, to be recognized over a weighted average

remaining period of

The fair value of these options is amortized on a straight-line basis over the vesting period.

As of March 31, 2022, unrecognized

compensation expense related to all stock options granted

million, to be recognized over a weighted average remaining

Restricted Stock Awards

and Restricted Stock Units

During the nine months ended September 30, 2021, the Company granted

During the three months ended March 31, 2022, the Company granted

non-vested restricted shares and

vested restricted stock units under its LTIP,

which are subject to time-based vesting, generally over a

The fair value

of these grants is based on the trading price of the Company’s

restricted stock units under its LTIP,

subject to time-based vesting, generally over a

The fair value of these grants is

based on the trading price of the Company’s

common stock on the date of grant.

The Company adjusts the grant

date fair value of these awards for expected forfeitures based on historical experience.

As of September 30, 2021, unrecognized

compensation expense related to the non-vested restricted

million, to be recognized over a weighted average

remaining period of

years, and unrecognized compensation expense related to non-vested restricted

The Company adjusts the grant date fair value of

these awards for expected forfeitures based on historical experience.

As of March 31, 2022, unrecognized compensation expense

related to the nonvested restricted shares was $

million, to be recognized over a weighted average remaining period of

and unrecognized compensation expense related to nonvested restricted

stock units was $

to be recognized over a weighted average remaining period of

million, to be recognized over a weighted

average remaining period of

Performance Stock Units

During the first nine months of 2021, the Company granted performance

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

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

group, the S&P Midcap 400 Materials group.

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 three years and the TSR measurement

period for the PSUs is from January 1 of the year of grant through December 31 of the year prior

to issuance of the shares upon

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 granted during the first nine months

of 2021 was estimated using

a Monte Carlo simulation on the grant date and using the following assumptions:

(i) a risk-free rate of

(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.

As of September 30, 2021, the Company estimates that it will issue approximately

fully vested shares as of the applicable

settlement date of all outstanding PSUs awards based on the conditions

of the PSUs and performance to date for each award.

September 30, 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 of September 30, 2020, it had been the Company’s

intention 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.

In the fourth quarter of 2020, the Company determined that it would settle the 2020

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

Condensed Consolidated Statement of Operations for the periods as both are

component of SG&A.

As of September 30, 2021, it is the Company’s

intention to settle the 2021 AIP in cash.

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.

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 set forth in the table below:

Number of PSUs granted

Risk-free interest rate

Dividend yield

Expected term (years)

As of March 31, 2022, the Company estimates that it will issue 0 fully vested shares

as of the applicable settlement date of all

outstanding PSUs awards based on the conditions of the PSUs and performance

to date for each award.

As of March 31, 2022,

was approximately $

million of total unrecognized compensation cost related to PSUs which the Company

expects to recognize

over a weighted-average period of

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Defined Contribution Plan

2 unchanged sentences

The Company matches

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

% of compensation.

Additionally,

the plan provides for non-elective nondiscretionary contributions on behalf

of participants who have completed one year

% of compensation that is contributed to the plan, with a maximum matching contribution of 3% of

compensation.

Additionally, the plan

provides for non-elective nondiscretionary contributions on behalf of participants

who have completed one year

of service equal to

2 unchanged sentences

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

in fully vested shares of the Company’s common

For the three months ended September 30, 2021, there were

matching contributions in stock.

For the nine months ended

September 30, 2021, total contributions were $

Comparatively,

total contributions for the three and nine months ended

September 30, 2020 were $

million and $

million, respectively.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

in fully vested shares

of the Company’s common stock

matching contributions in stock for the three months ended March 31, 2022.

the three months ended

March 31, 2021, total contributions were $

Note 9 – Pension and Other Postretirement

The components of net periodic benefit cost for the three and nine months

ended September 30, 2021 and 2020 are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Postretirement

Pension Benefits

The components of net periodic benefit (income) cost for the three months

ended March 31, 2022 and 2021 are as follows:

Three Months Ended March 31,

Pension Benefits

Postretirement Benefits

Interest cost

Expected return on plan assets

Settlement charge

Actuarial loss amortization

Prior service cost amortization

Net periodic benefit cost

As disclosed in the Company’s 2020

Form 10-K, in the fourth quarter of 2018, the Company began the process of terminating

legacy Quaker non-contributory U.S.

pension plan (“Legacy Quaker

Pension Plan”).

During the third quarter of 2019, the

Company received a favorable termination determination letter from the

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

Legacy Quaker U.S.

Pension Plan termination during the first quarter of 2020.

In order to terminate the Legacy Quaker U.S.

Plan in accordance with I.R.S.

and Pension Benefit Guaranty Corporation requirements,

the Company was required to fully fund the

Legacy Quaker U.S.

Pension Plan on a termination basis and the amount

necessary to do so was approximately $

million, subject to

final true up adjustments,

which were completed in the third quarter of 2020 resulting in a refund in premium received

quarter of 2020 of approximately $

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

termination of approximately $

This settlement charge included the immediate recognition into expense

of the related

unrecognized losses within accumulated other comprehensive (loss) income

(“AOCI”) on the balance sheet as of the plan termination

Actuarial loss (gain) amortization

Prior service cost (income) amortization

Total net periodic benefit

(income) cost

Employer Contributions

As of September 30, 2021, $

As of March 31, 2022, $

million and $

million of contributions have been made to the Company’s

pension plans and its other postretirement benefit plans, respectively

and foreign pension

plans and its other postretirement benefit plans, respectively.

Taking into consideration

current minimum cash contribution

requirements, the Company expects to make full year cash contributions

requirements, the Company currently expects to make full year cash contributions

of approximately $

million to its U.S.

and foreign pension

plans and less than $

foreign pension plans and approximately $

million to its other postretirement benefit plans in 2022.

Note 10 – Other Income (Expense), Net

The components of other income (expense), net, for the three and nine months

ended September 30, 2021 and 2020 are as

Note 10 – Other (Expense) Income, Net

The components of other (expense) income, net for the three months ended

March 31, 2022 and 2021 are as follows:

Three Months Ended

Nine Months Ended

September 30,

Income from third party license fees

Foreign exchange gains (losses), net

(Loss) gain on disposals of property,

plant, equipment and other

Non-income tax refunds and other related credits

Pension and postretirement benefit income (costs),

non-service components

Foreign exchange losses, net

Gain on disposals of property,

plant, equipment and other assets, net

Non-income tax refunds and other related (expense) credits

Pension and postretirement benefit income, non-service components

Other non-operating income, net

Total other income

(expense), net

Total other (expense)

Non-income tax refunds and other related (expense) credits during the

three months ended March 31, 2022 includes other expense

related to an indemnification asset associated with the settlement of certain

income tax audits at one of the Company’s

Italian affiliates

for tax periods prior to August 1, 2019.

See Note 11 of Notes to Condensed Consolidated

Financial Statements.

Gain on disposals of

property, plant, equipment

and other assets, net, during the three months ended March 31, 2021, includes a gain on the

sale of certain

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

Foreign exchange losses, net, during each of the three months ended

March 31, 2022 and 2021 include foreign currency transaction losses of approximately

million related to hyper-inflationary

accounting for the Company’s Argentine

subsidiaries.

See Note 1 of Notes to Condensed Consolidated Financial Statements.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

The (Loss) gain on disposals of property,

plant, equipment and other assets, net, during the three months ended

September 30,

includes losses related to certain fixed asset disposals resulting from the

property damage caused by flooding of the Company’s

Conshohocken, Pennsylvania headquarters, described in Note 19 of Notes

to Condensed Consolidated Financial Statements, and

during the nine months ended September 30, 2021, includes the gain on the

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

the Combination.

Non-income tax refunds and other related credits during the nine months ended September

30, 2021 includes

certain non-income tax credits for the Company’s

Brazilian subsidiaries described in Note 19 of Notes to Condensed Consolidated

Financial Statements.

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

components during both the three and nine

months ended September 30, 2020 includes the refund in premium described

in Note 9 of Notes to Condensed Consolidated Financial

In addition, this line also includes the Legacy Quaker U.S.

Pension Plan non

-cash settlement charge during the nine

months ended September 30, 2020, also described in Note 9 of Notes to

Condensed Consolidated Financial Statements.

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Note 11 – Income Taxes

1 unchanged sentence

The Company’s effective

tax rates for the three and nine months ended September 30, 2021 were an expense

respectively, compared

to an expense of

% and a benefit of

% for the three and nine months ended September 30, 2020,

tax rates for the three months ended March 31, 2022 and 2021 were

%, respectively.

The Company’s current year

effective tax rates were largely impacted by changes in permanent

reinvestment assertions,

changes in foreign tax credit valuation allowances, tax law changes in a foreign

jurisdiction, deferred tax benefits related to an

intercompany intangible asset transfer and the income tax impacts of certain

non-income tax credits recorded by the Company’s

Brazilian subsidiaries described in Note 19 of Notes to Condensed Consolidated

Financial Statements.

The Company’s effective

tax rate for the three months ended March 31, 2022 was largely driven by changes in

the valuation

allowance for foreign tax credits due to recently issued legislative guidance

and audit settlements reached with Italian tax authorities.

In addition, the Company incurred higher tax expense during the three months

ended March 31, 2022 related to the Company

recording earnings in one of its subsidiaries at a statutory tax rate of

% while it awaits recertification of a concessionary

rate, which was available to the Company during all of 2021.

Comparatively,

the prior year

effective tax rates were impacted by the tax effect

of certain one-time pre-tax losses as well as certain tax charges and benefits

prior year period including those related to changes in tax regulations and

other changes in foreign tax credit valuation allowances, tax

law changes in foreign jurisdictions and the tax impacts of the Company’s

termination of its Legacy Quaker U.S.

Pension Plan.

the prior year first quarter effective tax rate was

impacted by the sale of a subsidiary which included certain held-for-sale

real property assets related to the Combination.

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

million, which primarily represents the Company’s

million on certain undistributed foreign earnings,

which primarily represents the Company’s

estimate of non-U.S.

taxes it will incur to repatriate certain foreign earnings to

The balance as of September 30, 2021 was

As of September 30, 2021, the Company’s

income taxes the Company will incur to ultimately remit certain

earnings to the U.S.

The balance as of March 31, 2022 was $

As of March 31, 2022, the Company’s

cumulative liability for gross unrecognized tax benefits was $

increase of $

million, a decrease of

approximately $

million from the cumulative liability accrued as of December 31, 2021.

1 unchanged sentence

tax positions as a component of taxes on

income (loss) before equity in net income of associated companies

in its Condensed Consolidated Statements of Operations.

Company recognized an expense for interest of approximately $

million and $

million and a benefit of less than $

million for penalties in its Condensed Consolidated Statement of Operations for the

three and nine months ended September 30,

2021, respectively,

and recognized a credit for interest of $

million and an expense of $

million and an expense for penalties of

million and $

million in its Condensed Consolidated Statement of Operations for the

three and nine months ended

September 30, 2020, respectively.

As of September 30, 2021, the Company had accrued $

income before equity in net income of associated companies in its Condensed

Consolidated Statements

recognized a benefit of $

million for interest and a benefit of $

million for penalties in its Condensed Consolidated Statements of

Income for the three months ended March 31, 2022, and recognized

an expense of less than $

million for interest and a benefit of

million for penalties in its Condensed Consolidated Statements of Income for the

three months ended March 31, 2021.

March 31, 2022, the Company had accrued $

million for cumulative interest and $

million for cumulative penalties in its Condensed Consolidated

Balance Sheets, compared to $

million for cumulative penalties in its

Condensed Consolidated Balance Sheets, compared to $

million for cumulative interest and $

million for cumulative penalties accrued at December 31, 2020.

During the nine months ended September 30, 2021 and 2020,

the Company recognized decreases of $

million for cumulative penalties

accrued at December 31, 2021.

During the three months ended March 31, 2022 and 2021, the Company

recognized decreases of $

million and $

million, respectively,

in its cumulative liability for gross unrecognized tax

benefits due to the expiration of the applicable statutes of limitations for

certain tax years.

respectively, in its cumulative

liability for gross unrecognized tax benefits due to the settlement of income

tax audits with the Italian

tax authorities, as well as the expiration of the applicable statutes of

limitations for certain tax years.

The Company estimates that during the year ending December 31, 202

1 unchanged sentence

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 tax benefits

with regard to new tax positions for the year ending December 31, 2021.

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

Federal income tax,

as well as the income tax of various state and foreign

million due to the settlement of income tax audits and the expiration of the statute of

limitations with regard to certain tax positions.

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

and its subsidiaries are subject to U.S.

Federal income tax, as well as the income tax of various

state and foreign

tax jurisdictions.

2 unchanged sentences

, Brazil from

the Netherlands and China from

, Mexico, Spain, Germany and the United Kingdom from

, Canada and the U.S.

, the Netherlands, Mexico and China from

, Canada, Spain, and the U.S.

, the United Kingdom

, India from fiscal year beginning April 1, 2017 and ending March 31,

7 unchanged sentences

proceedings which the Company has accepted.

As of September 30, 2021, the Company has received $

As of March 31, 2022, the Company has received $

million in refunds from the

Netherlands and Spain and currently expects to pay $

million due to Italy in the fourth quarter of 2021.

As of September 30, 2021,

the Company believes it has adequate reserves for the remaining uncertain

tax positions related to 2007.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

Netherlands and Spain.

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

As a result of the settlement the Company recognized tax expense of $

million for the quarter ended March 31, 2022.

Houghton Italia, S.r.l is also involved

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

As of September 30, 2021, the Company has a $

million reserve for uncertain tax positions relating to matters

related to this audit.

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

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 $

million indemnification receivable has also been

established through purchase accounting.

In October 2021, the Company settled a portion of the Houghton Italia

S.r.l corporate

income tax audit with the Italian tax authorities for the tax year 2015.

The Company remains under audit for tax years 2014 and 2016

through 2018 and believes it has adequate reserves for the remaining uncertain

tax positions.

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

During the three months ended March 31, 2022 the Company

settled tax years 2016 through 2018 for a total of $

In total, the Company has now settled all years 2014 through 2018 for

Accordingly, the Company has

released all reserves relating to this audit for the settled tax years.

As a result of the

settlement and reserve release the Company recognized a net benefit

to the tax provision of $

million during the first quarter of

The Company has established an indemnification receivable of $

million in connection with its claim against the former

owners of Houghton for any pre-Combination tax liabilities arising from

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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

2 unchanged sentences

the Company has recorded reserves for $

million as of September

million as of March 31,

Of this amount, $

million relates to tax periods prior to the Combination and therefore

the Company has submitted an

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

has submitted an

indemnification claim with Houghton’s

1 unchanged sentence

As a result, a corresponding

million indemnification receivable has also been established to offset

million tax liability.

In October 2021 the

Company received a settlement proposal from the German

tax authorities and is currently reviewing the proposal with Houghton’s

former owners.

indemnification receivable has also been established.

Note 12 – Earnings Per Share

The following table summarizes earnings per share calculations for

the three and nine months ended September 30, 2021 and

the three months ended March 31, 2022 and 2021:

Three Months Ended

Nine Months Ended

September 30,

Basic earnings (loss) per common share

Net income (loss) attributable to Quaker Chemical Corporation

(income) loss allocated to participating securities

Net income (loss) available to common shareholders

Basic earnings per common share

Net income attributable to Quaker Chemical Corporation

income allocated to participating securities

Net income available to common shareholders

Basic weighted average common shares outstanding

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Net income (loss) attributable to Quaker Chemical Corporation

(income) loss allocated to participating securities

Net income (loss) available to common shareholders

Basic earnings per common share

Diluted earnings per common share

Net income attributable to Quaker Chemical Corporation

income allocated to participating securities

Net income available to common shareholders

Basic weighted average common shares outstanding

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Diluted weighted average common shares outstanding

Diluted earnings (loss) per common share

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

earnings (loss) per share calculation when the effect

would have been anti-dilutive.

The calculated amount of anti-diluted shares not included was

for the three and nine

months ended September 30, 2021,

respectively.

All of the Company’s potentially

dilutive shares for the nine months ended

September 30, 2020 are anti-dilutive and not included in the dilutive loss per

share calculations because of the Company’s net

during the period.

anti-dilutive shares excluded from the diluted earnings per share calculation for the three months

ended September 30, 2020.

Note 13 – Restricted Cash

Prior to December 2020, the Company had restricted cash recorded in other assets related to proceeds from an inactive subsidiary

of the Company which previously executed separate settlement and release agreements with two of its insurance carriers for an

original total value of $ 35.0 million.

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

into interest bearing accounts that earned less than $

million offset by $

million of net payments during the nine months ended

September 30, 2020.

Due to the restricted nature of the proceeds, a corresponding deferred credit was established

in other non-current

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

liabilities for an equal and offsetting amount that continued

until the restrictions lapsed.

As disclosed in the Company’s 2020

10-K, during December 2020, the restrictions ended on these previously

received insurance settlements and the Company transferred

the cash into an operating account.

The following table provides a reconciliation of cash, cash equivalents

and restricted cash as of September 30, 2021 and 2020,

well as December 31, 2020 and 2019:

September 30,

Cash and cash equivalents

Restricted cash included in other current assets

Restricted cash included in other assets

Cash, cash equivalents and restricted cash

Diluted earnings per common

Certain stock options,

restricted stock units and PSUs are not included in the diluted earnings per share calculation

effect would have been anti-dilutive.

The calculated amount of anti-diluted shares not included were

for the three

months ended March 31, 2022 and 2021, respectively.

Note 13 – Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended

September 30, 2021 were as follows:

Changes in the carrying amount of goodwill for the three months ended

March 31, 2022 were as follows:

Balance as of December 31, 2021

Goodwill additions

Currency translation and other adjustments

Balance as of September 30, 2021

Currency translation adjustments

Balance as of March 31, 2022

Gross carrying amounts and accumulated amortization for definite-lived

intangible assets as of September 30, 2021 and

December 31, 2020 were as follows:

intangible assets as of March 31, 2022 and December 31,

2021 were as follows:

Gross Carrying

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intangible assets

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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

2 unchanged sentences

million and $

million of amortization expense for the three and nine months ended September

30, 2021, respectively.

Comparatively,

the Company recorded $

million and $

million of amortization expense for the three and nine months ended

September 30, 2020, respectively.

million of amortization expense for the three months ended March

31, 2022 and 2021, respectively.

Estimated annual aggregate amortization expense for the current year

5 unchanged sentences

For the year ended December 31, 2026

For the year ended December 31, 2027 and beyond

The Company has four indefinite-lived intangible assets totaling $

million as of both September 30, 2021 and December 31,

2020, including $

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

million as of March 31, 2022, including $

indefinite-lived intangible assets for trademarks and tradename associated

with the Combination.

Goodwill and intangible assets that have indefinite lives are not amortized and

are required to be assessed at least annually for

The Company completes its annual goodwill and indefinite-lived intangible asset impairment

test during the fourth

quarter of each year.

The Company continuously evaluates if triggering events indicate a possible impairment

in one or more of its

reporting units or indefinite-lived or long-lived assets.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

The Company previously disclosed in its 2020 Form 10-K that as of March 31, 2020,

the Company concluded that the impact of

COVID-19 did not represent a triggering event 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.

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

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 during that year and the impact of the sales 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 assets were less than their carrying values.

result, an impairment charge of $

million was recorded in the first quarter of 2020 to write down the carrying values of

intangible assets to their estimated fair values.

As of September 30, 2021, the Company continued to evaluate all potential triggering

events, including the on-going impact of

COVID-19 on the Company’s operations,

and the volatility and uncertainty in the economic outlook as a result of COVID-19,

determine if this 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 intangible assets were not recoverable.

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

triggering event as of September 30, 2021.

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

event as of September 30, 2021, the Company will continue to evaluate the

impact of COVID-19 on the Company’s

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 to perform further interim quantitative

impairment tests, which could result in additional impairment charges

in the future.

Comparatively, the Company had

four indefinitely-lived intangible assets for trademarks and tradename

million as of December 31, 2021.

Note 14 – Debt

Debt as of September 30, 2021 and December 31, 2020 includes the following:

As of September 30, 2021

Debt as of March 31, 2022 and December 31, 2021 includes the following:

As of March 31, 2022

As of December 31, 2021

18 unchanged sentences

a Dutch subsidiary of the Company as borrower, each

term maturing in

with a five year term maturing in

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

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consolidated net leverage ratio.

There are LIBOR replacement provisions that contemplate a further amendment

when LIBOR ceases

to be reported.

The variable interest rate incurred on the outstanding borrowings under

the Credit Facility as of and during the nine

months ended September 30, 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

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 during

the three months ended March 31, 2022 was

approximately

As of March 31, 2022, the interest rate of the outstanding borrowings under the Credit

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

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 $

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 September

million, as of March 31, 2022.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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

1 unchanged sentence

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 September 30, 2021, the consolidated net debt to adjusted EBITDA

may not exceed

As of March 31, 2021, the consolidated net debt to adjusted EBITDA may not exceed 3.75 to 1.

The Company’s

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 September 30, 2021

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

The Term Loans have quarterly

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.

As of March 31, 2022 and

December 31, 2021, the Company was in compliance with all of the Credit Facility covenants

The Term Loans

have quarterly

principal amortization during their

1 unchanged sentence

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

During the nine months ended September 30,

2021, the Company made quarterly amortization payments related to the

Term Loans totaling $

During the three months ended March 31, 2022,

the Company made quarterly amortization payments related to

the Term Loans totaling

The Credit Facility is

15 unchanged sentences

At the time the

Company entered into the swaps, and as of September 30, 2021, the

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

plus an applicable margin, was

Company entered into the swaps, and as of March 31, 2022, the aggregate

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

an applicable margin, was

See Note 17 of Notes to Condensed Consolidated Financial Statements.

5 unchanged sentences

Loans and recorded as a direct reduction of long-

term debt on the Company’s Condensed

Consolidated Balance Sheet.

term debt on the Company’s Consolidated

Balance Sheet.

Approximately $

million of the capitalized costs were

attributed to the Revolver and recorded within other assets on the Company’s

Condensed Consolidated Balance Sheet.

capitalized costs are being amortized into interest expense over the

five year term of the Credit Facility.

As of September 30, 2021

and December 31, 2020, the Company had $

million of the capitalized costs were attributed to the

Revolver and recorded within other assets on the Company’s

Consolidated Balance Sheet.

These capitalized costs are being

amortized into interest expense over the

term of the Credit Facility.

As of March 31, 2022 and December 31, 2021, the

Company had $

million and $

million, respectively, of debt

issuance costs recorded as a reduction

of long-term debt.

As of September 30, 2021 and December 31, 2020, the Company had $

million, respectively,

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

March 31, 2022 and December 31, 2021, the Company had $

million and $

million, respectively,

of debt issuance costs recorded within other assets.

of debt issuance costs recorded

within other assets.

Industrial development bonds

As of September 30, 2021 and December 31, 2020, the Company had fixed

rate, industrial development authority bonds totaling

As of March 31, 2022 and December 31, 2021, the Company had fixed rate,

industrial development authority bonds totaling

million in principal amount due in

2 unchanged sentences

The Company has certain unsecured bank lines of credit and discounting

facilities in one of its foreign subsidiaries, which are not

facilities in certain foreign subsidiaries, which are not

collateralized.

The Company’s other debt obligat

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

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 September 30, 2021 was approximately

In addition to the bank letters of credit described in the “Credit facilities” subsection above, the Company’s only other off-balance

capacity under these arrangements as of March 31, 2022 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 September 30, 2021 were approximately $ 7 million.

The Company’s total bank letters of

credit and guarantees

outstanding as of March 31, 2022 were approximately $

The Company incurred the following debt related expenses included

within Interest expense, net, in the Condensed Consolidated

Statements of Operations:

Statements of Income:

Three Months Ended

Nine Months Ended

September 30,

Interest expense

1 unchanged sentence

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

as of September 30, 2021 and December 31, 2020, the

amounts at which the Company’s

total debt were recorded are not materially different from

their fair market value.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

Note 16 – Equity

The following tables present the changes in equity,

net of tax, for the three and nine months ended September 30, 2021 and 2020:

Comprehensive

Noncontrolling

Balance at June 30, 2021

Amounts reported in other comprehensive

Share issuance and equity-based

compensation plans

Balance at September 30, 2021

Balance at June 30, 2020

Amounts reported in other comprehensive

Share issuance and equity-based

compensation plans

Balance at September 30, 2020

Comprehensive

Noncontrolling

Balance at December 31, 2020

Amounts reported in other comprehensive

(loss) income

Share issuance and equity-based

compensation plans

Balance at September 30, 2021

Balance at December 31, 2019

Cumulative effect of an accounting change

Balance at January 1, 2020

Net (loss) income

Amounts reported in other comprehensive

income (loss)

Acquisition of noncontrolling interest

Distributions to noncontrolling affiliate

Share issuance and equity-based

compensation plans

Balance at September 30, 2020

as of March 31, 2022 and December 31, 2021, the amounts

at which the Company’s total debt

were recorded are not materially different from their fair market value.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Note 15 – Accumulated Other Comprehensive Income

The following tables show the reclassifications from and resulting balances

of AOCI for the three and nine months ended

September 30, 2021 and 2020:

Gain (Loss) in

Available-for-

Sale Securities

Balance at June 30, 2021

Other comprehensive (loss) income before

reclassifications

Amounts reclassified from AOCI

Related tax amounts

Balance at September 30, 2021

Balance at June 30, 2020

Other comprehensive income (loss) before

reclassifications

Amounts reclassified from AOCI

Related tax amounts

Balance at September 30, 2020

of accumulated other comprehensive income

(“AOCI”) for the three months ended March 31, 2022 and 2021:

Gain (Loss) in

6 unchanged sentences

Related tax amounts

Balance at September 30, 2021

Balance at March 31, 2022

Balance at December 31, 2020

3 unchanged sentences

Related tax amounts

Balance at September 30, 2020

All reclassifications related to unrealized gain (loss) in available-for-sale securities relate

to the Company’s equity

Balance at March 31, 2021

All reclassifications related to unrealized gain (loss) in available-for-sale securities

relate to the Company’s equity

interest in a

2 unchanged sentences

The amounts reported in other

comprehensive income for noncontrolling interest are related to currency

translation adjustments.

comprehensive income for non-controlling interest are related to

currency translation adjustments.

Note 16 – Fair Value

2 unchanged sentences

measurement as follows:

Measurements at September 30, 2021

Measurements at March 31, 2022

Using Fair Value

Company-owned life insurance

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

Measurements at December 31, 2021

3 unchanged sentences

for like instruments with similar credit ratings and

The Company did not hold any Level 3 investments as of September 30,

The Company did not hold any Level 3 investments as of March 31,

2022 or December 31, 2021, respectively,

5 unchanged sentences

in November 2019, the Company entered into $

million notional amounts of

interest rate swaps.

million notional amounts of three

year interest rate swaps.

See Note 14 of Notes to Condensed Consolidated Financial Statements.

4 unchanged sentences

expense in the period during which the transaction

affects earnings or it becomes probable that the forecasted

effects earnings or it becomes probable that the forecasted

transaction will not occur.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

The balance sheet classification and fair values of the Company’s

derivative instruments, which are Level 2 measurements, are as

Condensed Consolidated

September 30,

Balance Sheet Location

1 unchanged sentence

Interest rate swaps

Other non-current liabilities

Other accrued liabilities

The following table presents the net unrealized loss deferred to AOCI:

September 30,

Derivatives designated as cash flow hedges:

Interest rate swaps

The following table presents the net loss reclassified from AOCI to earnings:

The following table presents the net gain reclassified from AOCI to earnings:

Three Months Ended

Nine Months Ended

September 30,

Amount and location of expense reclassified

3 unchanged sentences

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 contract.

contracts through a single payment in a single currency in the event of a default on

or termination of any one contract.

accordance with the Company’s accounting

8 unchanged sentences

principal contaminant of which is perchloroethylene.

As of September 30, 2021, ACP believes it is close to meeting the conditions

As of March 31, 2022, ACP believes it is close to meeting the conditions for

closure of the groundwater treatment system, but continues to operate

this system while in discussions with the relevant authorities.

As of September 30, 2021, the Company believes that the range of potential

-known liabilities associated with the balance of the ACP

As of March 31, 2022, the Company believes that the range of potential-known

liabilities associated with the balance of the ACP

water remediation program is approximately $

4 unchanged sentences

program management.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

The Company previously disclosed in its 2021 Form 10-K that an inactive

3 unchanged sentences

injury due to exposure to asbestos.

During the three and nine months ended September 30, 2021, there have been

no significant

changes to the facts or circumstances of this previously disclosed matter,

aside from on-going claims and routine payments associated

with this litigation.

Based on a continued analysis of the existing and anticipated future claims against this subsidiary,

it is currently

projected that the subsidiary’s total

liability over the next 50 years for these claims is approximately $

million (excluding costs of

During the three months ended March 31, 2022, there have been no significant

changes to the facts

or circumstances of this previously disclosed matter,

aside from on-going claims and routine payments associated with this litigation.

Based on a continued analysis of the existing and anticipated future claims against

this subsidiary, it is currently

projected that the

subsidiary’s total liability over

for these claims is approximately $

million (excluding costs of defense).

The Company previously disclosed in its 2021 Form 10-K that it is party to certain environmental

matters related to certain

domestic and foreign properties currently or previously owned by Houghton.

These environmental matters primarily require the

Company to perform long-term monitoring as well as operating and

maintenance at each of the applicable sites.

During the three and

nine months ended September 30, 2021, there have been no significant

changes to the facts or circumstances of these previously

disclosed matters, aside from on-going monitoring and maintenance

activities and routine payments associated with each of the sites.

The Company continually evaluates its obligations related to such matters,

and based on historical costs incurred and projected costs

to be incurred over the next 28 years, has estimated the present value

range of costs for all of the Houghton environmental matters,

a discounted basis, to be between approximately $

domestic and foreign properties.

These environmental matters primarily require the Company

to perform long-term monitoring as

well as operating and maintenance at each of the applicable sites.

During the three months ended March 31, 2022, there have been

significant changes to the facts or circumstances of these previously disclosed

matters, aside from on-going monitoring and

maintenance activities and routine payments associated with each of

The Company continually evaluates its obligations

related to such matters, and based on historical costs incurred and

projected costs to be incurred over the next

, has estimated

the range of costs for all of these environmental matters, on a discounted

basis, to be between approximately $

million and $

million as of September 30, 2021, for which $

accrued within other accrued liabilities and other non-current liabilities on

the Company’s Condensed

Consolidated Balance Sheet as

of September 30, 2021.

as of March 31, 2022, for which $

million was accrued within other accrued liabilities and other non-current

liabilities on the

Condensed Consolidated Balance Sheet as of March 31, 2022.

Comparatively, as of December

31, 2020, the Company had $

million accrued for with respect to these

The Company believes, although there can be no assurance regarding the outcome

of other unrelated environmental matters, that

31, 2021, the Company

million accrued for with respect to these matters.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

The Company believes, although there can be no assurance regarding the

outcome of other unrelated environmental matters, that

it has made adequate accruals for costs associated with other environmental

1 unchanged sentence

Approximately $

million and $

million was accrued as of September 30, 2021 and December 31, 2020,

respectively, to provide for

such anticipated

future environmental assessments and remediation costs.

The Company previously disclosed in its 2020 Form 10-K that during the fourth

quarter of 2020, one of the Company’s

subsidiaries received a notice of inspection from a taxing authority

in a country where certain of its subsidiaries operate which related

to a non-income (indirect) tax that may be applicable to certain products the

subsidiary sells.

During the third quarter of 2021, the

Company’s subsidiary received

notice from the taxing authority that the inspection was closed, with no tax

assessment issued.

on this development, during the third quarter of 2021, the Company reversed

its previously recorded $

million liability related to

The Company also reversed the associated $

million indemnification receivable, as the asserted tax liability in

related to a Houghton entity acquired in the Combination and for

the periods prior to the Combination, for which the Company would

be indemnified by Houghton’s

former owners.

Based on all available information as of the date of this Report, the Company does not

anticipate further tax inspection or liabilities related to this matter to be

asserted by the taxing authority.

During the first half of 2021, one of the Company’s

Brazilian subsidiaries received a notice that it had prevailed on an existing

legal claim in regard to certain non-income (indirect) taxes that had been

previously charged and paid.

The matter specifically relates

to companies’ rights to exclude the state tax on goods circulation (a valued-added-tax

equivalent, known in Brazil as “ICMS”)

from the calculation of certain additional indirect taxes (specifically the program

of social integration (“PIS”) and contribution for the

financing of social security (“COFINS”)) levied by the Brazilian States on the sale of

In May 2021, the Brazilian Supreme

Court concluded that ICMS should not be included in the tax base of PIS

and COFINS, and confirmed the methodology for

calculating the PIS and COFINS tax credit claims to which taxpayers are

The Company’s Brazilian entities had

filed legal or administrative disputes on this matter and are entitled to receive

tax credits and interest dating back to five years

preceding the date of their legal claims.

As a result of these court rulings, during the second quarter of 2021, the

Company recognized

non-income tax credits of

million BRL or approximately $

million, which included approximately $

million for the PIS

and COFINS tax credits as well as interest on these tax credits of $

The tax credits to which the Company’s Brazilian

subsidiaries are entitled are claimable once registered with the

Brazilian tax authorities.

The Company submitted its formal claim for

tax credits in October 2021.

These tax credits can be used to offset future Brazilian federal taxes and

the Company currently

anticipates using the full amount of credits during the five year period of

time permitted.

During the third quarter of 2021, the

Brazilian Supreme Court ruled that interest income to which companies are

entitled for matters such as this claim should not be

taxable, which resulted in a reduction to the estimated income tax expense

associated with the tax credits recorded.

million were accrued as of both March 31, 2022 and December 31, 2021,

respectively, to provide

for such anticipated future

environmental assessments and remediation costs.

In connection with obtaining regulatory approvals for the Combination,

certain steel and aluminum related product lines of

Houghton were divested on August 1, 2019.

In July 2021, the entity that acquired

these divested product lines submitted an

indemnification claim for certain alleged breaches of representation made

by Houghton in the agreement pursuant to which such assets

had been divested.

The Company and the acquirer have agreed to extend the period for

a possible negotiated resolution of this claim

through November 30, 2021 so that both parties can evaluate the other’s

positions with respect to the subject matters of the claim.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

The Company is evaluating the merits of the alleged losses in the indemnification

claim received.

As of the date of this Report, the

Company does not believe it is reasonably possible to determine or quantify

any possible exposure.

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

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

Company maintains property insurance for all of its facilities globally.

In Conshohocken, Pennsylvania, the Company’s

headquarters as well as its laboratory experienced property damages

as a result of flooding from Hurricane Ida.

Also, one of the

Company’s North American

production facilities in its Global Specialty Businesses segment experienced an

electrical fire that

resulted in damage and the temporary shutdown of production,

and also required remediation, cleaning and subsequent restoration.

Houghton were divested in August 2019.

The Company previously disclosed in its 2021 Form 10-K that in July 2021, the entity

acquired these divested product lines submitted an indemnification claim

for certain alleged breaches of representation made by

Houghton in the agreement pursuant to which such assets had been divested.

The Company responded to the subject matters of the

indemnification claim and during the first quarter of 2022 the matter was resolved

consistent with the Company’s expectations

position that there were no amounts owed by the Company.

The Company previously disclosed in its 2021 Form 10-K that two of the Company’s

locations suffered property damages as a

result of flooding and fire, respectively.

The Company maintains property insurance for all of its facilities globally.

During the three

months ended March 31, 2022, there have been no significant changes to

the facts or circumstances of these previously disclosed

matters, aside from the on-going restoration of both sites.

The Company, its insurance

adjuster and insurance carrier are actively managing the remediation and restoration

activities associated

with these events and at this time the Company has concluded, based on all available

information and discussions with its insurance

adjuster and insurance carrier, that the losses incurred

during the third quarter of 2021 will be covered under the Company’s

insurance coverage, net of an aggregate deductible of $

The Company has received advance payments from its insurers of

million and has recorded an insurance receivable associated with these events

(and a gain on insurance recoveries for losses

incurred) of $

million as of September 30, 2021.

The Company and its insurance carrier are in early stages of reviewing the impact

of the electrical fire on the production facility’s

operations as it relates to a potential business interruption insurance claim;

as of the date of this Report, the Company cannot reasonably estimate any

probable amount of business interruption insurance claim

recoverable, therefore the Company has not recorded a gain contingency

for a possible business interruption insurance claim as of

September 30, 2021.

adjuster and insurance carrier are actively

managing the remediation and restoration activities associated with these

events and at this time the Company has concluded, based on

all available information and discussions with its insurance adjuster

and insurance carrier, that the losses were covered

Company’s property insurance

coverage, net of an aggregate deductible of $

The Company has received payments from

its insurers of $

million and has recorded an insurance receivable associated with these events (and

a gain on insurance recoveries

for losses incurred) of $

million as of March 31, 2022.

The Company is party to other litigation which management currently

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements