What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-04 · 932 added, 1316 removed, 340 unchanged (87% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

As used in this Report, the terms “Quaker Houghton,”

the “Company,”

Management’s Discussion and

Analysis of Financial Condition and Results of Operations

As used in this Report, the terms “Quaker Houghton,” the “Company

,” “we,” and “our” refer to Quaker Chemical Corporation

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unless the context otherwise requires.

this Report, the term Legacy Quaker refers to the Company prior to the closing of

its combination with Houghton International, Inc.

(“Houghton”) (herein referred to as the “Combination”) on August 1, 2019.

Throughout the Report, all figures presented, unless

otherwise stated, reflect the results of operations of the combined company for the

three and nine months ended September 30, 2021

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

with Houghton International, Inc.

in 2019 (“Houghton”)

(herein referred to as the “Combination”).

Executive Summary

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Quaker Houghton is headquartered in Conshohocken,

Pennsylvania, located near Philadelphia in the United States.

The Company’s third quarter

results were highlighted by record net sales as well as the on-going execution of

activities and synergy realization, but these positive

financial impacts were partially offset by continued raw material

cost headwinds

and global supply chain pressures.

Specifically, net sales of $449.1

million in the third quarter of 2021 increased 22% compared to

$367.2 million in the third quarter of 2020, primarily due to higher volumes

of approximately 10%, including additional net sales from

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

approximately 10% and the positive impact from foreign currency

Pennsylvania, located near Philadelphia in the U.S.

Overall, the Company’s first quarter

of 2022 performance reflected continued progress navigating through

a very challenging

economic environment, including significant raw material cost escalation, supply

chain and logistics disruptions and the direct,

indirect and global impacts of the war in Ukraine and other global events

that presented headwinds to the Company in the first quarter

Net sales in the first quarter of 2022 were $474.2 million, an increase of 10% compared

to $429.8 million in the first quarter

of 2021, primarily driven by an increase in selling price and product mix

of approximately 17% and additional net sales from

acquisitions of 2%, partially offset by a decline in organic

sales volume of 6% and the unfavorable impact from foreign currency

translation of 3%.

The increase in sales volumes compared to the third quarter of 2020 was primarily a

result of continued market

share gains and the year-over-year improvement

in end market conditions since the beginning of the COVID-19 pandemic.

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

the Company’s price increases implemented

during 2021 to help

offset the unprecedented increases in raw material

costs the Company has experienced throughout 2021.

The Company’s current

quarter gross margin of 32.3% declined sequentially

compared to 35.5% in the second quarter of 2021

which, as the Company had

was lower than the 38.2% in the prior year third quarter,

driven by the continued increase in raw material costs and logistics

The Company had net income in the third quarter of 2021 of $31.1 million, or $1.73 per diluted

share, compared to a third quarter

of 2020 net income of $27.3 million, or $1.53 per diluted share.

The current quarter results reflect the gross margin headwinds noted

above while the prior year third quarter net income was affected by

the COVID-19 pandemic and its impact on the global economy,

including most of the Company’s

end customers.

Excluding non-recurring items including costs associated with the Combination

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

third quarter of 2021 non-GAAP earnings per diluted share were $1.63 compared

to $1.56 in the prior year third quarter.

The Company’s current quarter adjusted

EBITDA of $66.2 million increased 3% compared to

$63.9 million in the third quarter of 2020 primarily due to the significant

increase in net sales quarter-over-quarter as well as higher

realized cost synergies from the Combination and foreign

currency transaction gains in the current quarter compared to foreign

currency transaction losses in the third quarter of 2020, partially offset

by lower gross margins driven by higher raw material costs and

the impacts of disruptions in the global supply chain experienced in 2021

as well as higher selling, general and administrative

expenses (“SG&A”) including the impact

of higher sales on direct selling expenses and additional SG&A from recent acquisitions.

The Company estimates that it realized cost synergies associated

with the Combination of approximately $19 million during the

quarter of 2021 compared to approximately $17 million during

the third quarter of 2020.

See the Non-GAAP Measures section of this

Item below, as well as other

items discussed in the Company’s

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

continued and strategic price increases

implemented to help offset the unprecedented increase in

raw material costs as well as global supply chain and logistics and labor cost

pressures that began during 2021 and continued through the first quarter

The decline in organic sales volumes was primarily

attributable to the comparison to a very strong first quarter of 2021, where

customers replenished their supply chains due to the

continued economic recovery from COVID-19, the impact of lower

volumes related to the tolling agreement for previously divested

products associated with the Combination and lower sales volumes attributable

to the war in Ukraine.

The Company’s organic

volumes increased approximately 3% sequentially compared to the

fourth quarter of 2021, as continued new business wins were

partially offset by the Company’s

actions to strategically reduce volumes in accordance with its ongoing value

-based pricing

The Company generated net income in the first quarter of 2022 of $19.8 million,

or $1.11 per diluted share, compared to a first

quarter of 2021 net income of $38.6 million, or $2.15 per diluted

Excluding non-recurring and non-core items in each period,

the Company’s first quarter of 2022

non-GAAP earnings per diluted share were $1.42 compared to $2.11

in the prior year first quarter

and the Company’s current quarter

adjusted EBITDA of $60.4 million decreased 22% compared to $77.1

million in the first quarter of

These results were primarily driven by lower gross margins in

the current quarter due to significantly higher raw material and

other input costs as well as the direct and indirect impacts of global supply chain disruptions,

and to a lesser extent, by higher selling,

general and administrative expenses (“SG&A”).

Sequentially, the Company’s

adjusted EBITDA was relatively flat compared to the

fourth quarter of 2021.

See the Non-GAAP Measures section of this Item below,

as well as other items discussed in the Company’s

Consolidated Operations Review in the Operations section of this Item,

The Company’s third quarter

of 2021 operating performance in each of its four reportable segments:

(i) Americas;

The Company’s first quarter of 2022

operating performance in each of its four reportable segments:

Middle East and Africa (“EMEA”);

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Businesses, reflect similar drivers to that of its

consolidated performance.

All four segments had higher net sales compared to the third quarter of 2020 reflecting

the continued

rebound in 2021 from the negative impacts

of COVID-19 on the Company’s

end markets during 2020 as well as continued success of

taking market share in each of the Company’s

segments during the third quarter of 2021.

All of the Company’s segments benefited

from higher organic sales volumes,

which excludes the benefits of recent acquisitions, as compared

to the prior year quarter, additional

net sales from acquisitions, the positive impact from foreign currency

translation due to the strengthening of most major currencies

against the U.S.

dollar, and from increases in

selling price and product mix.

As reported, the Company’s Americas and

segment operating earnings were higher compared to the third quarter of 2020

reflecting the increase in net sales including the benefits

of acquisitions;

however, all of the Company’s

segment’s operating earnings were negatively

impacted by the unprecedented raw

material cost increases and the impacts of disruptions in the global supply

chain that continued throughout the third quarter of 2021 as

well as higher SG&A which were a result of an increase in direct selling expenses

associated with year-over-year inflation increases

and increases due to the increase in net sales as well as the lower levels of prior year SG&A

as a result of temporary cost saving

measures implemented in response to COVID-19.

consolidated performance as each of the Company’s

reportable segments net sales benefitted from double-digit increases in selling

price and product mix and additional net sales from acquisitions, while most

segments were partially offset by lower sales volumes

and the unfavorable impact of foreign currency translation.

Operating earnings from the Global Specialty Businesses increased

compared to the prior year quarter whereas operating earnings from

the Americas, Asia/Pacific, and EMEA segments declined.

was a result of lower segment gross margins which

were unfavorably impacted by the lag in price capture compared to the continued

cost pressures on our raw materials, global supply chain and logistics networks,

and manufacturing, labor and other costs.

details of each segment’s

operating performance are further discussed in the Company’s

Reportable Segments Review,

Operations section of this Item, below.

The Company had a net operating cash outflow of $6.3 million in the first quarter

of 2022 as compared to a net operating cash

outflow of $12.6 million in the first quarter of 2021.

Despite the net operating cash outflow in both periods, the increase in net

operating cash flow quarter-over-quarter

was primarily driven by a modest improvement in working capital compared to the prior

first quarter, notably by a lower outflow

related to accounts receivable partially offset by an increase in inventory

due to higher raw

material costs and a build in certain inventory in response to global supply

chain and logistics challenges.

The key drivers of the

Company’s operating

cash flow and working capital are further discussed in the Company’s

Liquidity and Capital Resources section

of this Item, below.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company had a net operating cash flow of $2.5 million in the first nine

months of 2021 as compared to net operating cash

flow of $112.0 million in the first nine

months of 2020.

The decrease in net operating cash flow year-over-year was primarily driven

by a significant change in working capital compared to the prior year,

mainly increases in accounts receivable, due to higher net sales

and inventory, due to

higher costs as well as building inventories in response to global supply chain

and logistics pressures.

drivers of the Company’s operating

cash flow and working capital are further discussed in the Company’s

Liquidity and Capital

Resources section of this Item, below.

Overall, the Company’s third

quarter results were good, despite being negatively impacted by

the automotive semiconductor

shortage and continued supply chain challenges.

Increases in net sales in all segments were driven by the continued year-over

improvement in the Company’s

end-markets and increased customer demand from lower levels experienced

during 2020 as a result of

however, each segment was negatively

impacted by the significant escalation of raw material costs as well as higher

While sequential operating performance as compared to the second

quarter of 2021 was slightly lower, continued strong

customer demand in the third quarter of 2021 coupled with on-going

market share gains and the execution of integration activities and

synergy realization helped offset the negative

impacts from the continued escalation of raw material costs and continued supply

As the Company looks to the rest of 2021, it expects gross margins

to continue to be challenged by increased raw material costs

and supply chain headwinds, although it also expects to have sequential improvement

in product margins from current quarter levels

as it continues to implement price increases.

In addition, although the Company expects customer demand for most of its businesses

to remain strong, it also anticipates some near-term headwinds

due to the power restrictions in China, the global semiconductor

shortages in the automotive industry,

and some seasonality trends which the Company typically experiences in the last quarter

Looking ahead to 2022, the Company expects another strong year with net sales and earnings

growth to be above normal long-

term trends as the Company expects good growth in end markets, continued

market share gains and higher gross margins as pricing

initiatives catch up from the lag experienced in 2021 due to significant raw

material inflation.

On-going impact of COVID-19

Overall, results in the first quarter of 2022 reflected the Company’s

ability to continue to navigate through persistent raw material

cost pressures, supply chain challenges including those impacting

on semiconductors for the automotive end markets and the impacts

of certain global economic events including the Russia conflict with Ukraine.

Increases in net sales in all segments were primarily

driven by an increase in selling price implemented to offset the ongoing

and significant escalation of raw material costs and a

favorable demand environment across most of the Company’s

However, raw material cost increases continued

the Company’s broad-based

pricing initiatives in the first quarter of 2022, and the Company’s

margins and earnings reflect the

significantly different cost environment in the first

quarter of 2022 compared to the first quarter of 2021.

The Company continues to

implement further aggressive and strategic price increases and is actively

managing its cost structure to mitigate the current and

expected inflationary pressures.

While significant uncertainty exists, notably due to pandemic-related

restrictions in China and the

ongoing war in Ukraine, the Company remains committed to advancing

its customer intimate strategy, recovering

its margins and

investing in value enhancing initiatives to better position the Company

to continue to deliver on its growth potential.

Ongoing impact of COVID-19

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

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Company has now operated in this COVID-19 environment for

over a year, the full extent of the outbreak and related

impacts continue to remain uncertain and volatile, and therefore

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

results of operations or financial condition is uncertain.

This outbreak has significantly disrupted the operations of the Company

those of its suppliers and customers.

During the pandemic, the Company has experienced volume declines and

lower net sales as

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

Management continues to monitor the impact that the

COVID-19 pandemic is having on the Company,

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

Company operates.

Given the continuously evolving global developments with respect to this pandemic,

the Company cannot, as of

the date of this Report, reasonably estimate the magnitude or the full extent of

the impact to its future results of operations or to the

ability of it or its customers to resume more normal operations, even as certain restrictions

The prolonged pandemic and

of the outbreak including as new variants continue to emerge,

and continued restrictions on day-to-day life and business

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

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

continue to remain uncertain and volatile, and therefore the full extent

to which COVID-19 may impact the Company’s

future results

of operations or financial condition is uncertain.

This outbreak has significantly disrupted the operations of the Company and those of

its suppliers and customers and at times during the pandemic, the Company

has experienced volume declines and lower net sales as

compared to pre-COVID-19 levels.

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

is having on the

Company, the overall specialty

chemical industry and the economies and markets in which the Company operates.

The prolonged

pandemic and resurgences of the outbreak including

as new variants continue to emerge, and continued restrictions on

day-to-day life

and business operations as well as increased border controls or closures and transportation

disruptions may result in volume declines

and lower net sales in future periods.

To the extent that the Company’s

customers and

suppliers continue to be significantly and adversely impacted by

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

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.

this ongoing uncertainty,

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

Further, management continues to evaluate

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

illness or staffing shortages and travel restrictions have affected

financial reporting processes and systems, internal control over

financial reporting, and disclosure controls and procedures.

While the circumstances have presented and are expected to continue

present challenges, and have necessitated additional time and resources

to be deployed to sufficiently address the challenges brought

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

has had a material impact on financial reporting

processes, internal controls over financial reporting, or disclosure controls

Given this ongoing uncertainty,

Company cautions that its future results of operations could be significantly

adversely impacted by COVID-19.

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

and have necessitated additional time and resources

to be deployed to sufficiently address the challenges

brought on by the pandemic, at this time, management does not believe that

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

controls over financial reporting, or disclosure controls

and procedures.

The Company’s top priority,

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

and customers,

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

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

The Company continues to take steps to protect the health and

wellbeing of its people in affected areas through various

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

employing social distancing standards, implementing

travel restrictions where applicable, enhancing onsite hygiene practices, and

The Company has taken steps to protect the health and

wellbeing of its people in affected areas through various actions, including

enabling work at home where needed and practicable, and

employing social distancing standards, implementing travel restrictions where

applicable, enhancing onsite hygiene practices, and

instituting visitation restrictions at the Company’s

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expenses implementing these health and safety policies.

All of the Company’s 31 production

facilities worldwide are open and

operating and are deemed as essential businesses in the jurisdictions where

they are operating.

The Company believes that to date it

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

current economic challenges.

The Company’s third

quarter of 2021 showed year-over-year

improvement from the prior year third quarter and continued a trend of gradual

improvement which began in the second half of 2020.

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

gradually improve subject to the effective containment

With the exception of its Shanghai-based operations,

which have been and

continue to be significantly impacted since late March 2022 due to government restrictions

currently in place in that province of

China, all of the Company’s more

than 30 other production facilities worldwide are open and operating

and are deemed as essential

businesses in the jurisdictions where they are operating and the Company believes

that to date it has been able to meet the needs of all

its customers across the globe despite the current challenges.

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

gradually decline subject to the effective containment

of the virus and its variants and successful distribution and acceptance of the

available vaccines and treatments;

the incidence of reported cases of COVID-19 or a variant in several geographies where

the Company has significant operations remains high.

Differing government responses to these reported cases continues to

it therefore remains highly uncertain as to how long the global pandemic

and related economic challenges will last in each of the

jurisdictions where the Company does business and when our customers’

businesses will recover to pre-COVID-19 levels.

of the government-imposed quarantine and lockdown measures implemented

at the end of March 2022, which are currently in effect,

the Company’s Shanghai

-based locations have been and continue to be significantly impacted as of the date of

this Form 10-Q.

negative impact of these measures to operations and liquidity has and will be

experienced during the second quarter of 2022, and the

ultimate impact will depend on the duration of the quarantine and lockdown

measures in effect.

While the actions taken to date to

protect our workforce, to continue to serve our customers with excellence

and to conserve cash and reduce costs as applicable, have

been effective thus far, further actions

to respond to the pandemic and its effects may be necessary as conditions

continue to evolve.

Impact of Political Conflicts

A significant portion of the Company’s

revenues and earnings are generated by non-U.S.

operations which subjects

to political and economic risks that could adversely affect the Company’s

business, liquidity, financial

position and results of

The existence of military conflicts, for example the Russian invasion of Ukraine, bring

inherent risks such as the potential

for supply chain disruptions, decreased trade activity and other consequences related

to economic or other sanctions.

Quaker Chemical Corporation

Management’s Discussion and Analysis

available vaccines.

However, the incidence of reported cases of COVID-19

or a variant in several geographies where the Company

has significant operations remains high and continues to evolve and it remains

highly uncertain as to how long the global pandemic

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

will recover to pre-COVID-19 levels.

took various actions to temporarily conserve cash and reduce costs since the

onset of the pandemic and these temporary initiatives

were designed and implemented so that the Company could successfully manage

through the challenging COVID-19 situation while

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

maintain the Company’s long-term competitive

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

tively integrate Houghton.

While the actions taken to date to protect our

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

cash and reduce costs, have been effective thus far,

further actions to respond to the pandemic and its effects may

be necessary as conditions continue to evolve.

government and other nations have imposed significant restrictions on

most companies’ ability to do business in Russia as a result of

the military conflict between Russia and Ukraine.

It is not possible to predict the broader or longer-term consequences

of this conflict,

which could include further sanctions, embargoes,

regional instability, geopolitical

shifts and adverse effects on macroeconomic

conditions, security conditions, currency exchange rates and financial

Such geo-political instability and uncertainty could

have a negative impact on the Company’s

ability to sell to, ship products to, collect payments from, and support customers in certain

regions based on trade restrictions, embargoes and export

control law restrictions, and logistics restrictions including closures of

space, and could increase the costs, risks and adverse impacts from these new

The Company may also be the subject of

increased cyber-attacks.

The Company’s operations in the

conflict areas including Russia, Ukraine and Belarus represent less than 2% of

the Company’s

consolidated net sales and less than 1% of the Company’s

consolidated total assets.

The Company’s primary

exposure in the conflict

area relates to outstanding customer accounts receivable.

The Company is actively monitoring the outstanding receivables for

collections and has recorded incremental allowance for doubtful accounts

where warranted.

The Company continues to review the

facts and circumstances of its customers and the impact of the ongoing

sanctions as they relate to its continued business with impacted

customers and the collectability of outstanding accounts receivable.

The Company also has and continues to monitor the impact of the

volatility and uncertainty in the economic outlook as a result of the conflict with respect

to the recoverability of its long-term and

indefinite-lived assets, including assessing potential triggering events for

impairment considerations related to intangible assets and

As of March 31, 2022, the Company concluded that the conflict and its current and projected

impact to the Company did

not represent a triggering event and the Company continues to monitor and evaluate

the evolving situation.

Liquidity and Capital Resources

At September 30, 2021, the Company had cash, cash equivalents and restricted

cash of $141.4 million.

Total cash, cash

equivalents and restricted cash was $181.9 million at December

The $40.5 million decrease in cash, cash equivalents and

restricted cash was the net result of approximately $30.1 million of

cash used in investing activities, $10.5 million of cash used in

financing activities, and a $2.5 million negative impact due to the effect

At March 31, 2022, the Company had cash and cash equivalents of

$161.6 million.

Total cash and cash equivalents

million at December 31, 2021.

The $3.6 million decrease in cash and cash equivalents was the net result

of $18.2 million of cash used

in investing activities and $6.3 million of cash used in operating activities partiall

offset by $20.6 million of cash provided by

financing activities and a $0.3 million positive impact due to the effect

of foreign currency translation.

partially offset by $2.5 million

of cash provided by operating activities.

Net cash flows provided by operating activities were $2.5 million in the

first nine months of 2021 compared to $112.0 million in

the first nine months of 2020.

The decrease in net operating cash flows of $109.5 million was primarily

driven by a significant change

in working capital.

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

accounts receivable in the first nine

months of 2021 as compared to accounts receivable being a cash inflow in

the prior year as sales and the associated accounts

receivables significantly declined during the first nine months of 2020

due to the negative impact from COVID-19.

In addition, the

Company has experienced an increase in inventory in the first nine months

of 2021 as a result of continued rising raw material costs as

well as a build in inventory to ensure the Company has appropriate stock

to meet customer demands in response to ongoing stress on

the global supply chain.

In addition, the Company had higher cash dividends received from its associated companies

in the first nine

months of 2020, primarily due to $5.0 million received from the Company’s

joint venture in Korea with no similar dividend received

in the first nine months of 2021 related to the timing of dividends received.

Net cash flows used in operating activities were $6.3 million in the first three months

of 2022 compared to net cash flows used in

operating activities of $12.6 million in the first three months of 2021.

The increase in net operating cash flows of $6.3 million was

primarily driven by a lower working capital outflow quarter-over-quarter,

as the Company had a smaller increase in accounts

receivable in the first quarter of 2022 due to changes in current quarter net

sales, which was partially offset by a higher outflow from

inventory due to increases in raw material costs and continued build

of stock in response to global supply chain and logistics

challenges and other recent global economic events.

Also, in the first quarter of 2022, the Company received a $2.8 million dividend

from the Company’s Korean

joint venture, with no similar dividend received in the prior year period.

Net cash flows used in investing activities were $18.2 million in the

first nine months of 2021 compared to $15.3 million in the

first nine months of 2020.

This increase in cash outflows was driven by higher cash payments related to acquisitions

during the first

nine months of 2021, including $25.0 million for certain assets related to tin-plating

solutions primarily for steel end markets.

higher cash outflows were partially offset by cash proceeds

of approximately $14.7 million from the disposition of assets, which

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

Capital expenditures were relatively

consistent at $12.8 million in the first nine months of 2021 compared to $12.2

million in the first nine months of 2020.

Net cash flows used in financing activities were $10.5 million in the first nine

months of 2021 compared to $65.1 million in the

first nine months of 2020.

The decrease in net cash flows used in financing activities of $54.6 million

was primarily driven an

increase in borrowings in the current year under the Company’s

revolving credit facility compared to repayments in the prior year

which was primarily driven by the significant working capital investment

in the current year described above.

In addition, the

Company paid $21.2 million of cash dividends during the first nine months

of 2021, a $0.7 million or 3% increase in cash dividends

first three months of 2022 compared to $15.8 million in the

first three months of 2021.

This increase in cash outflows was a result of lower cash proceeds from the disposition

of assets which

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

Combination in the prior year period, and higher capital

expenditures in the current year largely related to certain

infrastructure and sustainability-related spending.

These increases in cash

used in investing activities were partially offset by

lower cash payments related to acquisitions as a result of the level of acquisition

activity in each year.

Net cash flows provided by financing activities were $20.6 million in the first

three months of 2022 compared to $13.0 million in

the first three months of 2021.

The increase in net cash flows was primarily related to an increase in borrowings

in the current year

under the Company’s credit

facility as compared to the prior year.

In addition, the Company paid $7.4 million of cash dividends

during the first three months of 2022, a $0.4 million or 5% increase in cash dividends

compared to the prior year.

Finally, during the first nine

months of 2020, the Company used $1.0 million to purchase the remaining

noncontrolling interest in a South Africa affiliate.

Prior to this buyout,

this South Africa affiliate made a distribution to the prior

noncontrolling affiliate shareholder of approximately

$0.8 million in the first nine months of 2020.

There were no similar

noncontrolling interest activities in the first nine months of 2021.

See Note 2 of Notes

to Condensed Consolidated Financial Statements in Item 1 of this Report.

The Company’s primary credit facility

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Borrowings under the

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

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

based on the Company’s consolidated

There are LIBOR replacement provisions that contemplate a further amendment

when LIBOR ceases to be reported.

net leverage ratio.

weighted average interest rate incurred on the outstanding borrowings

under the Credit Facility during both the first nine months of

2021 and as of September 30, 2021 was approximately 1.6%.

In addition to paying interest on outstanding principal under the Credit

Facility, the Company

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

the Company’s consolidated net

leverage ratio to the lenders under the Revolver in respect of the unutilized

commitments thereunder.

under the Credit Facility during both the first quarter of 2022

and as of March 31, 2022 was approximately 1.6%.

In addition to paying interest on outstanding principal under the Credit Facility,

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

to 0.3% depending on the Company’s

consolidated net leverage

ratio to the lenders under the Revolver in respect of the unutilized commitments

Quaker Chemical Corporation

4 unchanged sentences

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

As of September 30, 2021,

the consolidated net debt to consolidated adjusted EBITDA ratio may

not exceed 4.00 to 1.

As of March 31, 2022, the consolidated net debt to consolidated adjusted

EBITDA ratio may not exceed 3.75 to 1.

Company’s consolidated

6 unchanged sentences

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

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

As of March 31, 2022 and

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

The Term Loans

have quarterly

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

2 unchanged sentences

The Credit Facility is guaranteed by certain of the

Company’s domestic subsidiaries and

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

Company’s domestic subsidiaries

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

Company and the

domestic subsidiary guarantors, subject to certain customary exclusions.

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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 3.1%.

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 3.1%.

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

2 unchanged sentences

Loans and recorded as a direct reduction of long-

term debt on the Company’s Consolidated

Balance Sheet.

Approximately $8.3 million of the capitalized costs were attributed

Revolver and recorded within other assets on the Company’s

term debt on the Company’s Condensed

Consolidated Balance Sheet.

Approximately $8.3 million of the capitalized costs were

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

Condensed Consolidated Balance Sheet.

These capitalized costs are

being amortized into interest expense over the five year term of the Credit

As of September 30, 2021, the Company had Credit Facility borrowings

outstanding of $888.6 million.

As of December 31,

2020, the Company had Credit Facility borrowings outstanding of $887.1

The Company has unused capacity under the

Revolver of approximately $197 million, net of bank letters of credit

of approximately $4 million, as September 30, 2021.

Company’s other debt obligations

are primarily industrial development bonds, bank lines of credit and municipality-related

which totaled $12.1 million as of both September 30, 2021 and December

capitalized costs are being amortized into interest expense over the

five year term of the Credit Facility.

As of March 31, 2022, the Company had Credit Facility borrowings outstanding

of $915.2 million.

As of December 31, 2021, the

Company had Credit Facility borrowings outstanding of $889.6

The Company has unused capacity under the Revolver of

approximately $142 million, net of bank letters of credit of approximately

$4 million, as of March 31, 2022.

The Company’s other

debt obligations are primarily industrial development bonds, bank

lines of credit and municipality-related loans, which totaled $11.7

million and $11.8 million as of March

31, 2022 and December 31, 2021, respectively.

Total unused capacity under

these arrangements

as of September 30, 2021 was approximately $39 million.

The Company’s total net debt as of September

30, 2021 was $759.3

The Company estimates that it realized cost synergies in the first nine

months of 2021 of approximately $56 million compared to

approximately $40 million in the first nine months of 2020.

The Company continues to expect to realize Combination cost synergies

of approximately $75 million in 2021 and $80 million in 2022.

The Company continues to expect to incur additional costs and make

associated cash payments to integrate Quaker and Houghton and continue

realizing the Combination’s total anticipated

cost synergies.

The Company expects total cash payments, including those pursuant

to the QH Program, described below,

but excluding incremental

capital expenditures related to the Combination, will be approximately

1.3 times its total anticipated 2022 cost synergies of $80

A significant portion of these costs were already incurred in 2019, 2020 and the

first nine months of 2021, but the Company

expects to continue to incur such costs throughout the remainder

of 2021 and into 2022.

The Company incurred $13.6 million of total

Combination, integration and other acquisition-related expenses in the first

nine months of 2021, which includes $0.7 million of

accelerated depreciation and is net of a $5.4 million gain on the sale of

certain held-for-sale real property assets, described in the

GAAP Measures section of this Item below.

Comparatively, in the first nine months

of 2020, the Company incurred $23.4 million of

total Combination, integration and other acquisition-related expenses

including $0.8 million of accelerated depreciation, described in

the Non-GAAP Measures section of this Item below.

The Company had aggregate net cash outflows of approximately $20.0

related to the Combination, integration and other acquisition-related

expenses during the first nine months of 2021 as compared to

$20.9 million during the first nine months of 2020.

arrangements as of March 31, 2022

was approximately $30 million.

The Company’s total net debt as of

March 31, 2022

The Company incurred $6.0 million of total Combination,

integration and other acquisition-related expenses in the first quarter of

2022, which includes $2.0 million of other expenses related to an indemnification

asset, described in the Non-GAAP Measures section

of this Item below.

Comparatively, in the first quarter

of 2021, the Company incurred $0.8 million of total Combination,

and other acquisition-related expenses, which was net of a $5.4 million gain

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

and also $0.4 million of accelerated depreciation.

The Company had aggregate net cash outflows of approximately $8.3 million

related to the Combination,

integration and other acquisition-related expenses during the first three months

of 2022 as compared to

million during the first three months of 2021.

During the first quarter of 2022, the Company incurred $3.1 million of strategic

planning and transformation expenses.

The Company expects that these additional operating costs and associated

cash flows, as well

as higher capital expenditures related to strategic planning, process optimization

and the next phase of the Company’s

integration to further optimize its footprint, processes and other

functions will continue in 2022 and over the next several years.

Quaker Houghton’s management

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manufacturing and non-manufacturing facilities.

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

manufacturing facilities, the Company made a decision to make available

for sale certain facilities during the second quarter of 2020.

During the first quarter of 2021, certain of these facilities were sold

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

included within other income (expense), net on the Condensed

Consolidated Statement of Operations.

The exact timing and total

costs associated with the QH Program will depend on a number of factors

and is subject to change;

however, reductions in headcount

and site closures have continued into 2021.

The Company currently expects additional headcount reductions and site closures

Quaker Chemical Corporation

Management’s Discussion and Analysis

into 2022 and estimates that the anticipated cost synergies

realized under the QH Program will approximate one-times restructuring

costs incurred.

The Company made cash payments related to the settlement of restructuring liabilities under

the QH Program during

the first nine months of 2021 of approximately $4.6 million compared

to $12.8 million in the first nine months of 2020.

the fourth quarter of 2018, the Company began the process of terminating

its non-contributory U.S.

pension plan (“the Legacy

Pension Plan”) and in this process, which was completed

during the first quarter of 2020, the Company was required to

fully fund the Legacy Quaker U.S.

Pension Plan on a termination basis in the

amount of approximately $1.8 million, subject to final

true up adjustments.

In the third quarter of 2020, the Company finalized the amount of liability and related

annuity payments and

received a refund in premium of $1.6 million.

In addition, the Company recorded

a non-cash pension settlement charge at plan

termination of approximately $22.7 million in the first quarter of 2020.

As of September 30, 2021, the Company’s

The exact timing and total costs associated with the QH Program continues

depend on a number of factors and is subject to change;

reductions in headcount and site closures have occurred, and the

Company currently expects additional headcount reductions and

site closures to occur throughout the year and estimates that the

anticipated cost synergies realized under the QH Program

will approximate one-times restructuring costs incurred.

made cash payments related to the settlement of restructuring liabilities under

the QH Program during the first three months of 2022 of

approximately $0.4 million compared to $3.0 million in the first three months

As of March 31, 2022, the Company’s

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

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offsetting benefits in other tax jurisdictions.

During the first nine months of 2021, the Company recorded $13.3 million of non-

income tax credits for certain of its Brazilian subsidiaries.

The Company expects to utilize these credits to offset

certain Brazilian

federal tax payments over approximately two years beginning in the

fourth quarter of 2021.

See Note 19 of Notes to Condensed

Consolidated Financial Statements in Item 1 of this Report.

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

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

Company maintains property insurance for all of its facilities globally.

Quaker Chemical Corporation

Management’s Discussion and Analysis

In 2021, two of the Company’s locations

suffered significant property damage as a result of flooding

maintains property insurance for all of its facilities globally.

The Company, its insurance

adjuster and insurance carrier are

actively managing the remediation and restoration activities associated

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

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

adjuster and insurance carrier are actively

managing the remediation and restoration activities associated with both

of these events and at this time the Company has concluded,

based on all available information and discussions with its insurance

adjuster and insurance carrier, that the losses incurred

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

property insurance coverage, net of an aggregate deductible

$2.0 million.

The Company has received advance payments from its insurers of $1.0 million and

has recorded an insurance receivable

associated with these events of $1.7 million as of September 30, 2021.

The Company and its insurance carrier are in early stages of

reviewing the impact on operations as it relates to a potential business interruption

insurance claim;

however, as of the date of

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.

Note 19 of Notes to Condensed Consolidated Financial Statements in Item

2021 were covered under the Company’s

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

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

an insurance receivable associated with these events of $0.5

million as of March 31, 2022.

See Note 18 of Notes to Condensed Consolidated Financial Statements in Item

1 of this Report.

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its business objectives for at least the next twelve months, including but not

limited to, payments of dividends to shareholders, costs related to the

Combination and integration, pension plan contributions, capital

expenditures, other business opportunities (including potential acquisitions)

and other potential contingencies.

The Company’s

liquidity is affected by many factors, some based on normal operations

of our business and others related to the impact of the

on our business and on global economic conditions as well as industry uncertainties,

which we cannot predict.

cannot predict economic conditions and industry downturns or the

timing, strength or duration of recoveries.

believe appropriate, additional debt or equity financing which would

provide capital for corporate purposes, working capital funding,

additional liquidity needs or to fund future growth opportunities, including

possible acquisitions and investments.

The timing and

amount of potential capital requirements cannot be determined at this time

and will depend on a number of factors, including the

actual and projected demand for our products, specialty chemical industry

conditions, competitive factors, and the condition of

financial markets, among others.

limited to, payments of dividends to shareholders, costs related to ongoing

acquisition integration and optimization,

contributions, capital expenditures, other business opportunities (including

potential acquisitions), implementing actions to achieve the

Company’s sustainability

goals and other potential contingencies.

The Company believes it has sufficient additional liquidity to

support its operating requirements and fund its business obligations for

the period beyond the next twelve months as well, including

the aforementioned items which are expected to recur annually,

as well as future principal payments on the Company’s

Credit Facility,

transition tax obligations and other long-term liabilities.

The Company’s liquidity is affected

by many factors, some based on normal

operations of our business and others related to the impact of the pandemic

and other global events on our business and on global

economic conditions as well as industry uncertainties, which we cannot predict.

We also cannot predict

economic conditions and

industry downturns or the timing, strength or duration of recoveries.

as we believe appropriate, additional debt or

equity financing which would provide capital for corporate purposes,

working capital funding, additional liquidity needs or to fund

future growth opportunities, including possible acquisitions and

The timing and amount of potential capital requirements

cannot be determined at this time and will depend on a number of factors,

including the actual and projected demand for our products,

specialty chemical industry conditions, competitive factors, and

the condition of financial markets, among others.

Non-GAAP Measures

The information in this Form 10-Q includes non-GAAP (unaudited)

The information in this Form 10-Q filing includes non-GAAP (unaudited)

financial information that includes EBITDA, adjusted

EBITDA, adjusted EBITDA margin, non-GAAP operating

income, non-GAAP operating margin, non-GAAP

net income and non-

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

income and non-

GAAP earnings per diluted share.

The Company believes these non-GAAP financial measures provide meani

ngful supplemental

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

information as they enhance a reader’s understanding

6 unchanged sentences

considered core to the Company’s operations.

results are presented for supplemental informational purposes only

and should not be considered a substitute for the financial

results are presented for supplemental informational purposes only and

should not be considered a substitute for the financial

information presented in accordance with GAAP.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company presents EBITDA which is calculated as net income (loss)

attributable to the Company before depreciation and

amortization, interest expense, net, and taxes on income (loss) before

equity in net income of associated companies.

also presents adjusted EBITDA which is calculated as EBITDA plus or

minus certain items that are not considered indicative of future

operating performance or not considered core to the Company’s

In addition, the Company presents non-GAAP operating

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

are not considered indicative of future operating

The Company presents EBITDA which is calculated as net income attributable

to the Company before depreciation and

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

of associated companies.

The Company also

presents adjusted EBITDA which is calculated as EBITDA plus or minus

certain items that are not indicative of future operating

performance or not considered core to the Company’s

In addition, the Company presents non-GAAP operating income

which is calculated as operating income plus or minus certain items that are not

indicative of future operating performance or not

considered core to the Company’s

Adjusted EBITDA margin and non-GAAP operating margin

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

income to consolidated net sales, respectively.

Company believes these non-GAAP measures provide transparent

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

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

operating performance of the Company on a consistent

are calculated as the

percentage of adjusted EBITDA and non-GAAP operating income

to consolidated net sales, respectively.

The Company believes

these non-GAAP measures provide transparent and useful information and

are widely used by analysts, investors, and competitors in

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

of the Company on a consistent basis.

Additionally, the

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

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

-core items identified in the reconciliation of net income

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

items identified in the reconciliation of net income

attributable to the Company to adjusted EBITDA.

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

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

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

4 unchanged sentences

performance of the Company on a consistent basis.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The following tables reconcile the Company’s

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

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

GAAP (unaudited) financial measures (dollars in thousands, unless otherwise

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Operating income

Houghton combination, integration and other

acquisition-related expenses (a)

Restructuring and related charges (b)

Fair value step up of acquired inventory sold (c)

CEO transition costs (d)

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

Customer bankruptcy costs (f)

Facility remediation costs, net (g)

Indefinite-lived intangible asset impairment (h)

Combination, integration and other acquisition-related expenses (a)

Strategic planning and transformation expenses (b)

Restructuring and related charges (c)

Fair value step up of acquired inventory sold (d)

Executive transition costs (e)

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

Customer insolvency costs (g)

Non-GAAP operating income

Non-GAAP operating margin (%) (p)

Quaker Chemical Corporation

Management’s Discussion and Analysis

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin

and Non-GAAP Net Income Reconciliations

Non-GAAP operating margin (%) (n)

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and

Non-GAAP Net Income Reconciliations

Three Months Ended

Nine Months Ended

September 30,

Net income (loss) attributable to Quaker Chemical Corporation

Depreciation and amortization (a)(m)

Interest expense, net

Taxes on income (loss)

before equity in net income

of associated companies

Equity income in a captive insurance company (i)

Houghton combination, integration and other

acquisition-related expenses (a)

Restructuring and related charges (b)

Fair value step up of acquired inventory sold (c)

CEO transition costs (d)

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

Customer bankruptcy costs (f)

Facility remediation costs, net (g)

Indefinite-lived intangible asset impairment (h)

Pension and postretirement benefit (income) costs,

non-service components (j)

Brazilian non-income tax credits (k)

Currency conversion impacts of hyper-inflationary economies (l)

Net income attributable to Quaker Chemical Corporation

Depreciation and amortization (a) (l)

Interest expense, net (a)

Taxes on income

before equity in net income of associated companies (m)

Equity loss (income) in a captive insurance company (h)

Combination, integration and other acquisition-related expenses (a)

Strategic planning and transformation expenses (b)

Restructuring and related charges (c)

Fair value step up of acquired inventory sold (d)

Executive transition costs (e)

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

Customer insolvency costs (g)

Pension and postretirement benefit income, non-service components

Currency conversion impacts of hyper-inflationary economies (j)

Adjusted EBITDA

Adjusted EBITDA margin (%) (p)

Adjusted EBITDA margin (%) (n)

Adjusted EBITDA

2 unchanged sentences

Taxes on income

before equity in net income

of associated companies - adjusted (a)(o)

before equity in net income of associated companies - adjusted

Non-GAAP net income

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

GAAP earnings (loss) per diluted share attributable to

Quaker Chemical Corporation common shareholders

Equity income in a captive insurance company

per diluted share (i)

Houghton combination, integration and other

acquisition-related expenses per diluted share (a)

Restructuring and related charges per diluted share (b)

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

CEO transition costs per diluted share (d)

Inactive subsidiary's non-operating litigation costs per

diluted share (e)

Customer bankruptcy costs per diluted share (f)

Facility remediation costs, net, per diluted share (g)

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

Pension and postretirement benefit (income) costs,

non-service components per diluted share (j)

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

Currency conversion impacts of hyper-inflationary

economies per diluted share (l)

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

Non-GAAP earnings per diluted share (q)

Houghton combination, integration and other acquisition-related

expenses include certain legal, financial, and other advisory and

consultant costs incurred in connection with post-closing integration

activities including internal control readiness and

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

Approximately $0.2 million

and $0.7 million in the three and nine months ended September 30, 2021, respectively,

and approximately $0.3 million and $1.5

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

of these pre-tax costs were considered non-

deductible for the purpose of determining the Company’s

GAAP earnings per diluted share attributable to Quaker Chemical Corporation

common shareholders

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

Combination, integration and other acquisition-related expenses per diluted

Strategic planning and transformation expenses per diluted share (b)

Restructuring and related charges per diluted share (c)

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

Executive transition costs per diluted share (e)

Inactive subsidiary's non-operating litigation costs per diluted share (f)

Customer insolvency costs per diluted share (g)

Pension and postretirement benefit costs, non-service components per diluted

Currency conversion impacts of hyper-inflationary economies per

diluted share (j)

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

Non-GAAP earnings per diluted share (o)

integration and other acquisition-related expenses include certain legal, financial,

and other advisory and consultant

costs incurred in connection with integration activities including internal

control readiness and remediation.

These costs are not

indicative of the future operating performance of the Company.

Less than $0.1 million and $0.1 million for the three months

ended March 31, 2022 and 2021, respectively,

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

determining the Company’s

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

income of associated companies - adjusted reflects the impact of these

During the three and nine months ended September

30, 2021, the Company recorded $0.2 million and $0.7 million, respectively,

of accelerated depreciation related to certain of the

Company’s facilities compared

to $0.8 million during the nine months ended September 30, 2020, which is included

caption “Houghton combination, integration and other acquisition-related

expenses” in the reconciliation of operating income to

non-GAAP operating income and included in the caption “Depreciation

and amortization” in the reconciliation of net income

(loss) attributable to the Company to EBITDA, but excluded from the caption

“Depreciation and amortization - adjusted” in the

reconciliation of adjusted EBITDA to non-GAAP net income attributable

to the Company.

During the nine months ended

September 30, 2021, the Company recorded a $5.4 million gain on the sale of

certain held-for-sale real property assets related to

the Combination which is included in the caption “Houghton combination,

integration and other acquisition-related expenses” in

the reconciliation of GAAP earnings (loss) per diluted share attributed

to Quaker Chemical Corporation common shareholders to

Non-GAAP earnings per diluted share as well as the reconciliation of net

income (loss) attributable to Quaker Chemical

Corporation to Adjusted EBITDA and Non-GAAP net income.

See Note 2 of Notes to Condensed Consolidated Financial

Statements, which appears in Item 1 of this Report.

net income of associated

companies - adjusted reflects the impact of these items.

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

$2.0 million of other expense related to an indemnification asset.

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

recorded $0.4 million of accelerated depreciation related to certain of

the Company’s facilities, which is included

in the caption

“Combination, integration and other acquisition-related expenses” in the

reconciliation of operating income to non-GAAP

operating income and included in the caption “Depreciation and amortization”

in the reconciliation of net income attributable to

the Company to EBITDA, but excluded from the caption “Depreciation

and amortization – adjusted” in the reconciliation of

adjusted EBITDA to non-GAAP net income attributable to the Company

During the three months ended March 31, 2021, the

Company recorded a $5.4 million gain on the sale of certain held-for-sale

real property assets related to the Combination which is

included in the caption “Combination, integration and other acquisition-related

expenses” in the reconciliation of GAAP earnings

per diluted share attributable to Quaker Chemical Corporation common

shareholders to Non-GAAP earnings per diluted share as

well as the reconciliation of net income attributable to Quaker Chemical Corporation

to Adjusted EBITDA and Non-GAAP net

Strategic planning and transformation expenses include certain consultant

and advisory expenses for the Company’s

strategic planning, as well as process optimization and the next phase

of the Company’s long-term integration

to further optimize

its footprint, processes and other functions.

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

Restructuring and related charges represent the

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1 of this Report.

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

selling inventory of acquired businesses which

was adjusted to fair value as a part of purchase accounting.

This increase to COGS is not indicative of the future operating

performance of the Company.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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

search and hiring of a new CEO in connection with the

previously announced executive transition planned for the end of 2021.

These expenses are not indicative of the future operating

performance of the Company.

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

inventory from acquired businesses which

was adjusted to fair value as part of purchase accounting.

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

the future operating performance of the Company.

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

search, hiring and transition to a new CEO in connection

with the executive transition that took place in 2021 as well as the on-going

search for a new Chief Human Resources Officer

during the first quarter of 2022.

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

Inactive subsidiary’s non

-operating litigation costs represents the charges incurred by

-operating litigation costs represent the charges incurred by

an inactive subsidiary of the Company and

are a result of the termination of restrictions on insurance settlement reserves as previously

disclosed in the Company’s 2020

These charges are not indicative of the future operating performance

of the Company.

See Note 9 of Notes to

Condensed Consolidated Financial Statements, which appears in Item

1 of this Report.

Customer bankruptcy costs represent the cost associated with a specific

reserve for trade accounts receivable related to a customer

who filed for bankruptcy protection.

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

These charges are not indicative of the future

operating performance of the Company.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Customer insolvency costs represent the costs associated with a specific

reserve or changes to existing reserves for trade accounts

receivable within the Company’s

EMEA reportable segment related to certain customers who filed for

bankruptcy protection as

well as costs related to specific reserves recorded for certain customer accounts

receivables which have been directly impacted by

the current economic conflict between Russia and Ukraine.

These expenses are not indicative of the future operating performance

of the Company.

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

cleaning and subsequent restoration costs

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

facilities, net of insurance recoveries received.

These charges

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

of the Company.

See Note 19 of Notes to Condensed

Consolidated Financial Statements, which appears in Item 1 of this Report.

Indefinite-lived intangible asset impairment represents the non-cash

charge taken to write down the value of certain indefinite-

lived intangible assets associated with the Houghton Combination.

The Company has no prior history of goodwill or intangible

asset impairments and this charge is not indicative of the future

operating performance of the Company.

See Note 14 of Notes to

Condensed Consolidated Financial Statements, which appears in Item

1 of this Report.

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

income attributable to the Company’s

interest in Primex,

(“Primex”), a captive insurance company.

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

Primex, and therefore accounts for this interest under the equity method

Equity loss (income)

in a captive insurance company represents the after-tax

(loss) income attributable to the Company’s

in Primex, Ltd.

a captive insurance company.

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

over Primex, and therefore accounts for this interest under the equity method

of accounting.

The income attributable to Primex is not

indicative of the future operating performance of the Company

and is not considered core to the Company’s

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

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

The loss (income)

attributable to

Primex is not indicative of the future operating performance of the

Company and is not considered core to the Company’s

Pension and postretirement benefit income,

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

component of the

Company’s pension and postretirement

net periodic benefit cost in each period.

net periodic benefit income in each period.

These costs are not indicative of the future

operating performance of the Company.

The amount in the nine months ended September 30, 2020 includes the $22.7

settlement charge for the Company’s

termination of the Legacy Quaker U.S.

Pension Plan.

See Note 9 of Notes to Condensed

Consolidated Financial Statements, which appears in Item 1 of this Report.

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

of the Company’s Brazilian subsidiaries

prevailing in a legal claim as well as the Brazilian Supreme Court ruling

on these non-income tax matters.

The third quarter of

2021 impact to Non-GAAP earnings per diluted share reflects the tax only

adjustment related to the Brazilian Supreme Court

ruling on the taxability of interest income.

The non-income tax credit is non-recurring and not indicative of the future operating

performance of the Company.

See Note 19 of Notes to Condensed Consolidated Financial Statements, which

appears in Item 1 of

See Note 9 of Notes to Condensed Consolidated Financial Statements, which appears

Item 1 of this Report.

Currency conversion impacts of hyper-inflationary economies represents

2 unchanged sentences

whose local economies are designated as hyper-inflationary under

During the three

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

incurred non-deductible, pre-tax charges related to the

Company’s Argentine

These charges related to the immediate recognition of

foreign currency remeasurement in the

Condensed Consolidated Statements of Operations associated with these entities are

not indicative of the future operating

performance of the Company.

See Note 1 of Notes to Condensed Consolidated Financial Statements, which

appears in Item 1 of

The impact of certain discrete tax items includes the impact of changes

in certain valuation allowance recorded on certain of the

Company’s foreign

tax credits, tax law changes in a foreign jurisdiction, changes in withholding rates,

the tax impacts of non-

income tax credits associated with certain of the Company’s

Brazilian subsidiaries and the associated impact on previously

accrued for distributions at certain of the Company’s

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

transfer of additional intangible assets between the Company’s

subsidiaries as well as the offsetting impact and amortization

deferred tax benefit the Company recorded in the fourth quarters of

2019 and 2020 related to a similar intercompany intangible

asset transfer.

See Note 11 of Notes to Condensed Consolidated Financial

Statements, which appears in Item 1 of this Report.

Depreciation and amortization for the three and nine months ended

September 30, 2021 includes approximately $0.3 million and

$0.9 million, respectively,

and for the three and nine months ended September 30, 2020 includes $0.2 million

and $0.9 million,

respectively, of

amortization expense recorded within equity in net income of associated companies

in the Company’s Condensed

Consolidated Statements of Operations, which is attributable to

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

interest in a Houghton joint venture in Korea as a result of required purchase accounting.

Quaker Chemical Corporation

Management’s Discussion and Analysis

During both the

three months ended March 31, 2022

and 2021, the Company incurred non-deductible, pre-tax charges

related to the Company’s

Argentine affiliates.

The charges incurred related to the immediate recognition of foreign currency

remeasurement in the

Consolidated Statements of Income associated with these entities are not indicative

of the future operating performance of the

See Note 1 of Notes to Condensed Consolidated Financial Statements, which appears

in Item 1 of this Report.

The impacts of certain discrete tax items include changes in valuation

allowances recorded on certain Brazilian branch foreign tax

credits and the recording of deferred taxes on Brazilian branch income.

Both of these discrete items related to a result of tax law

changes in the U.S.

due to the issuance of final foreign tax credit regulations

during the period.

Additionally, the Company has

discrete items related to the release of the reserves for uncertain tax positions

settled during the quarter and certain taxes,

penalties, and interest due as a result of the settlements.

See Note 11 of Notes to Condensed Consolidated

Financial Statements,

which appears in Item 1 of this Report.

Depreciation and amortization for the three months ended March 31,

2022 and 2021 each included $0.3

million of amortization

expense recorded within equity in net income of associated companies

in the Company’s Condensed Consolidated

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

50% interest in a Houghton joint

venture in Korea as a result of required purchase accounting.

Taxes on income

2 unchanged sentences

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

in the reconciliation of net income (loss)

attributable to Quaker Chemical Corporation to adjusted EBITDA, and

was determined utilizing the applicable rates in the taxing

jurisdictions in which these adjustments occurred, subject to deductibility.

Houghton combination, integration and other

acquisition-related expenses described in (a) resulted in incremental taxes of $1.4 million

and $3.1 million during the three and

nine months ended September 30, 2021, and $1.7

million and $5.1 million during the three and nine months ended September 30,

respectively.

Restructuring and related charges described in (b) resulted in

a tax benefit of $0.2 million and incremental

taxes of $0.1 million during the three and nine months ended September

30, 2021, respectively, and

$0.4 million and $0.9

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

Fair value step up of acquired inventory sold described in

ended September 30, 2021 and less than $0.1 million

the nine months ended September 30, 2020.

CEO transition expenses described in (d) resulted in incremental taxes of $0.1

million and $0.3 million during the three and nine months ended September

30, 2021, respectively.

Inactive subsidiary litigation

described in (e) resulted in incremental taxes of $0.1 million and approximately

$0.2 million during the three and nine months

ended September 30, 2021, respectively.

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

during the nine months ended September 30, 2020.

Facility fire and flood remediation costs described in (g) resulted in

incremental taxes of $0.5 million in each of the three and nine months

ended September 30, 2021.

Indefinite-lived intangible

asset impairment described in (h) resulted in incremental taxes of $8.7 million

during the nine months ended September 30, 2020.

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

described in (j) resulted in a tax benefit of

approximately $0.1 million during each of the three and nine months

ended September 30, 2021,

and a reduction of taxes of $0.3

million and incremental taxes of $7.7 million for the three and nine months

ended September 30, 2020, respectively.

non-income tax credits described in (k) resulted in incremental taxes of

approximately $0.6 million and a tax benefit of $4.7

million during the three and nine months ended September 30, 2021.

Tax impact of certain discrete

items described in (m) above

resulted in a tax benefit of approximately $6.5 million and $5.1 million

during three and nine months ended September 30, 2021,

respectively, and resulted

in a tax benefit of $4.5 million and $0.4 million for the three and nine months ended

September 30,

in the reconciliation of net income attributable to

Quaker Chemical Corporation to adjusted EBITDA, and was determined

utilizing the applicable rates in the taxing jurisdictions in

which these adjustments occurred, subject to deductibility.

Combination, integration and other acquisition-related expenses

described in (a) resulted in incremental taxes of $1.4 million and $0.1

million during the three months ended March 31, 2022 and

2021, respectively.

Strategic planning and transformation expenses describes in (b) above resulted

in incremental taxes of $0.7

million during the three months ended March 31, 2022.

Restructuring and related charges described in (c) resulted in incremental

taxes of $0.2 million during each of the three months ended March 31, 2022

Fair value step up of acquired inventory

sold described in (d) resulted in incremental taxes of $0.2 million during

the three months ending March 31, 2021.

transition expenses described in (e) resulted in incremental taxes of $0.1

million during each of the three months ended March 31,

2022 and 2021.

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

taxes of less than $0.1

million for each of the three months ended March 31, 2022 and 2021.

Customer insolvency costs described in (g) resulted in

incremental taxes of $0.3 million during the three months ended

March 31, 2022.

Pension and postretirement benefit income,

non-service components described in (i) resulted in a tax benefit of $0.1

million and less than $0.1 million for the three months

ended March 31, 2022 and 2021, respectively.

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

$3.4 million and $0.4 million for the three months ended March 31, 2022

and 2021, respectively.

The Company calculates adjusted EBITDA margin

5 unchanged sentences

to calculate such in each given period.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Off-Balance Sheet Arrangements

The Company had no material off-balance sheet items, as defined

under Item 303(a)(4) of Regulation S-K as of September 30,

The Company’s only off-balance

sheet items outstanding as of September 30, 2021 represented approximately

$7 million of

total bank letters of credit and guarantees.

The Company had no material off-balance sheet commitments or

obligations as of March 31, 2022.

The Company’s only off-

balance sheet items outstanding as of March 31, 2022 represented approximately

$6 million of total bank letters of credit and

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

capital resources.

See Note 15 of Notes to Condensed Consolidated Financial Statements in Item 1 of

Consolidated Operations Review – Comparison of the Third

Quarter of 2021 with the Third Quarter of 2020

Net sales were $449.1 million in the third quarter

compared to $367.2 million in the third quarter of 2020.

liquidity or capital resources.

of Notes to Condensed Consolidated Financial Statements in Item

1 of this Report.

Consolidated Operations Review – Comparison of the First Quarter of 2022

with the First Quarter of 2021

Net sales were $474.2 million in the first quarter of 2022 compared to $429.8

million in the first quarter of 2021.

The net sales

increase of approximately $81.8 million or 22% quarter-over-quarter

was primarily due to higher sales volumes of 10%, which

includes additional net sales from recent acquisitions of 4%, increases

from selling price and product mix of 10% and the positive

impact of foreign currency translation of 2%.

The increase in organic sales volumes compared to the third quarter

primarily the result of the continued year-over-year

improvement in end market conditions and continued market share gains realized

in the current quarter.

Sales from acquisitions is driven by the Company’s

acquisition of Coral Chemical Company (“Coral”) in

December 2020 as well as the tin-plating solutions business acquired

in February 2021.

The increase from selling price and product

mix includes the impact of current year selling price increases implemented

in response to the increases in raw material costs

experienced in 2021.

The positive impact from foreign currency translation is primarily the result of the

strengthening of the Chinese

euro, and Mexican peso against the U.S.

dollar quarter-over-quarter.

COGS were $303.9 million in the third quarter of 2021 compared to

$227.0 million in the third quarter of 2020.

increase of $44.4 million or 10% quarter-over-quarter reflects increases in

selling price and product mix of approximately 17% and

additional net sales from acquisitions of 2% partially offset

by a decline in sales volume of approximately 6% and the unfavorable

impact from foreign currency translation of 3%.

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

implemented to help offset the significant increases in raw

material and other input costs that began during 2021.

The decline in sales

volumes was primarily attributable to the comparison to a very strong first quarter

of 2021, where customers replenished their supply

chains, the impact of lower volumes related to the tolling agreement

for previously divested products associated with the Combination

and lower sales volumes attributable to the war in Ukraine.

COGS were $328.1 million in the first quarter of 2022 compared to $273.6

million in the first quarter of 2021.

The increase in

COGS of 34% was driven by the associated COGS on the increase in net

sales described above and continued increases in the

Company’s global raw material costs compared

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

Gross profit in the third quarter of 2021 of $145.1 million increased $4.9 million

or approximately 4% from the third quarter of

2020, due primarily to the increase in net sales noted above.

COGS of $54.5 million or 20% was driven by the associated COGS on the

increase in net sales described above as well as continued

increases in the Company’s global

raw material and supply chain and logistics costs compared to the prior year.

Gross profit in the first quarter of 2022 decreased $10.1 million or 6%

from the first quarter of 2021.

The Company’s reported

gross margin in the third quarter of 2021 was

compared to 38.2% in the third quarter of 2020.

The lower current quarter gross margin is driven by significant raw material

cost increases that began in the fourth quarter of 2020 and have continued throughout

2021 and the impacts of constraints on the

world’s global supply

Quaker Chemical Corporation

Management’s Discussion and Analysis

SG&A in the third quarter of 2021 increased $7.2 million compared

to the third quarter of 2020 due primarily to the impact of

sales increases on direct selling costs, year-over-year

inflation increases,

additional SG&A from recent acquisitions and higher SG&A

due to foreign currency translation, partially offset by

lower incentive compensation quarter-over-quarter as well as the benefits of

additional realized cost savings associated with the Combination quarter-over-quarter.

In addition, SG&A was lower in the prior year

period as a result of temporary cost saving measures the Company

implemented in response to COVID-19.

While the Company

continues to manage costs during the on-going pandemic, it has incurred

higher SG&A quarter-over-quarter as the

global economy

continues to gradually rebound.

The Company estimates that it realized cost synergies associated with the

Combination of

approximately $19 million during the third quarter of 2021 compared

to approximately $17 million during the third quarter of 2020.

During the third quarter of 2021 and 2020, the Company incurred $5.8

million and $6.9 million, respectively,

gross margin in the first quarter of 2022 was 30.8% compared to

36.3% in the first quarter of 2021.

The Company’s current quarter

gross margin reflects a significant increase in raw

material and other input costs experienced throughout the first quarter of

the impacts of constraints on the global supply chain, partially offset

by the Company’s ongoing value

-based pricing initiatives.

SG&A in the first quarter of 2022 increased $7.5 million or 7% compared

to the first quarter of 2021 due primarily to the impact

of sales increases on direct selling costs, inflationary impacts on higher

operating costs, costs associated with strategic planning and

transformation initiatives (see the Non-GAAP Measures section of

this Item, above), and additional SG&A from recent acquisitions

partially offset by lower SG&A due to foreign currency

translation and lower incentive compensation compared to the prior year.

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

temporary cost saving measures the Company

implemented in response to the onset of COVID-19.

During the first quarter of 2022, the Company incurred $4.1 million

of Combination,

integration and other acquisition-related expenses primarily for professional

fees related to Houghton integration and other

acquisition-related activities.

integration and other acquisition-related

operating expenses primarily for professional fees related to the Houghton

integration and other acquisition-related activities.

Comparatively,

the Company incurred $5.8 million of expenses in the prior year first quarter,

primarily due to various professional

fees related to legal, financial and other advisory and consultant expenses

for integration activities including internal control readiness

and remediation.

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

4 unchanged sentences

in headcount and site

closures under this program,

net of adjustments to initial estimates for severance, of a credit of $0.8 million

and expense $1.4 million

during the third quarters of 2021 and 2020, respectively.

closures under this program, net of adjustments to initial estimates for severance

of $0.8 million and $1.2 million during the first

quarters of 2022 and 2021, respectively.

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

Operating income in the third quarter of 2021 was $36.0 million compared

to $34.9 million in the third quarter of 2020.

Excluding Combination, integration and other acquisition-related expenses,

restructuring and related charges and other non-core

items, the Company’s current quarter

non-GAAP operating income was consistent at $43.2 million in each of the current quarter

the prior year quarter primarily due to the increase in net sales described

above and the benefits from cost savings related to the

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

increases in raw material costs quarter-over-quarter.

The Company had other income, net, of $0.6 million in the third quarter

of 2021 compared to other expense, net, of $0.2 million

in the third quarter of 2020.

The third quarter of 2021 included foreign currency transaction gains compared

to foreign currency

transaction losses incurred in the prior year quarter.

In addition, the Company had lower non-service components of pension and

postretirement benefit costs in the current quarter,

partially offset by higher losses on fixed asset disposals related to the events

mentioned as facility remediation activities above.

Operating income in the first quarter of 2022 was $29.4 million compared

to $44.9 million in the first quarter of 2021.

non-recurring and non-core expenses that are not indicative of the future operating

performance of the Company described in the Non-

GAAP Measures section of this Item, above, the Company’s

current quarter non-GAAP operating income decreased

to $39.2 million

compared to $53.7 million in the prior year first quarter primarily due

to the lower gross profit described above.

The Company had other expense, net, of $2.2 million in the first quarter

of 2022 compared to other income, net of $4.7 million in

the first quarter of 2021.

The first quarter of 2022 includes other expenses related to the impact of certain adjustment

Company’s indemnification

receivables, while the prior year first quarter other income includes a gain on

the sale of certain held-for-

sale real property assets.

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

Interest expense, net, decreased $1.2 million compared to the third

quarter of 2020 driven by lower current quarter borrowings

outstanding as a result of the additional revolver borrowings drawn

down in March 2020 at the onset of the pandemic which were

subsequently repaid in September 2020 and, to a lesser extent, a slight decline

in overall interest rates quarter-over-quarter.

Interest expense, net, decreased $0.1 million compared to the first quarter

of 2021, due to a slight decrease in the average

borrowings outstanding in the first quarter of 2022 compared to the first

quarter of 2021 on relatively consistent interest rates during

both the first quarter of 2022 and 2021.

The Company’s effective

tax rates for the third quarters of 2021 and 2020 were 2.6% and 8.1%, respectively.

tax rates for the first quarters of 2022 and 2021 were 13.1% and 24.2%, respectively.

The Company’s

lower current quarter effective tax rate is primarily driven

by a one-time deferred tax benefit related to an intercompany intangible

asset transfer, described in the Non-GAAP

measures section of this Item, above.

Comparatively, the prior

year third quarter effective

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

items including benefits related to the impact of tax regulations and other

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

subsidiary’s statutory rate and impacts related

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

described in the Non-GAAP

Measures section of this Item, above, the Company estimates that its third quarters

of 2021 and 2020 effective tax rates would have

been approximately 25% and 24%, respectively.

The higher estimated current quarter tax rate was primarily driven by the impact

changes in mix of earnings and provision to return adjustments in the prior period,

partially offset with a change in permanent

reinvestment assertions.

Equity in net income of associated companies decreased $1.0 million

in the third quarter of 2021 compared to the third quarter of

2020, primarily due to lower current year quarter income from the Company’s

interest in a captive insurance company as well as from

its 50% interest in a joint venture in Korea compared to the prior year quarter.

See the Non-GAAP Measures section of this Item,

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

in both the third quarters of 2021 and 2020.

Foreign exchange positively impacted the Company’s

third quarter results by approximately 10% driven by the positive impact

from foreign currency translation on earnings as well as foreign exchange

transaction gains in the current year quarter as compared to

foreign exchange transaction losses in the prior year third quarter.

Consolidated Operations Review – Comparison of the First Nine Months of 202

with the First Nine Months of 2020

Net sales were $1,314.1 million in the first nine months of 2021 compared to $1,031.8

million in the first nine months of 2020.

The net sales increase of $282.3 million or 27% period-over-period

reflects a benefit from higher sales volumes of 18%, which

includes additional net sales from recent acquisitions of 4%, increases

in selling price and product mix of 5%, and the positive impact

from foreign currency translation of 4%.

The increase in sales volumes compared to the first nine months of 2020 was primarily

to improved end market conditions from the prior year impacts of COVID-19 and

continued market share gains.

Additional net sales

Quaker Chemical Corporation

Management’s Discussion and Analysis

from acquisitions relate primarily to the acquisitions of a tin-plating solutions

business and Coral, acquired in February 2021 and

December 2020, respectively.

The increase from selling price and product mix includes the benefits of

current year selling price

increases implemented to date to help offset the rising

raw material and input costs.

The positive impact from foreign currency

translation is primarily the result of the strengthening of the euro

and Chinese Renminbi against the U.S.

dollar year-over-year.

COGS were $858.3 million in the first nine months of 2021 compared to

$660.4 million in the first nine months of 2020.

increase in COGS of 30% was driven by the associated COGS on the increase

in net sales as described above, and the higher raw

material costs noted in the quarterly discussion.

Gross profit in the first nine months of 2021 increased $84.3 million

or 23% from the first nine months of 2020, due primarily to

the increase in net sales described above.

The Company’s reported gross margin

in the first nine months of 2021 was 34.7%

compared to 36.0% in the first nine months of 2020.

The Company’s lower current year gross margin

was primarily due to the

significant raw material increases described in the third quarter discussion

SG&A in the first nine months of 2021 increased $34.8 million compared

to the first nine months of 2020 due primarily to the

same drivers described in the third quarter discussion above.

During the first nine months of 2021 and 2020, the Company incurred

$18.3 million and $22.8 million, respectively,

Combination, integration and other acquisition-related expenses primarily

for professional fees related to Houghton integration and

other acquisition-related activities.

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

As described above, the Company initiated a restructuring program

during the third quarter of 2019 as part of its global plan to

realize cost synergies associated with the Combination.

The Company recorded restructuring and related charges of $0.6 million

during the first nine months of 2021 compared to $3.6 million during the first nine

months of 2020 under this program.

GAAP Measures section of this Item, above.

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

non-cash impairment charge to write down the value of

certain indefinite-lived intangible assets associated with the Combination.

This non-cash impairment charge is related to certain

acquired Houghton trademarks and tradenames and was primarily

the result of the projected negative impacts of COVID-19 as of

March 31, 2020 on their estimated fair values.

There was no similar impairment charges recorded during the first nine

Operating income in the first nine months of 2021 was $119.7

million compared to $24.7 million in the first nine months of 2020.

Excluding Combination, integration and other acquisition-related expenses,

restructuring and related charges, the non-cash indefinite-

lived intangible asset impairment charge, and other non

-core items, the Company’s

current year non-GAAP operating income of

$143.3 million increased compared to $90.4 million in the prior

year period, primarily due to the increase in net sales described above

and the continued benefits from cost savings related to the Combination

partially offset by higher SG&A and the negative impact of

significant increases in raw material costs due to constraints on the overall

global supply chain.

The Company’s other

income, net, was $19.3 million in the first nine months of 2021 compared to other

expense, net of $22.4

million in the prior year period.

The year-over-year change was primarily due to other income related to certain non-income

credits recorded by the Company’s

Brazilian subsidiaries during the second quarter of 2021 as well as the gain on

the sale of certain

held-for-sale real property assets during the first quarter of 2021

compared to a first quarter of 2020 pension plan settlement charge

associated with the termination of the Legacy Quaker U.S.

Pension Plan.

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

Interest expense, net, decreased $5.4 million in the first nine months

of 2021 compared to the first nine months of 2020 driven by

lower current year borrowings outstanding as a result of the additional

revolver borrowings drawn down in March 2020 at the onset of

the pandemic as well as a decline in overall interest rates year-over-year,

as the weighted average interest rate incurred on borrowings

under the Company’s credit

facility was approximately 1.6% during the first nine months of 2021 compared to approximately

during the first nine months of 2020.

The Company’s effective

tax rates for the first nine months of 2021 and 2020 were an expense of 21.8% compared to a benefit of

38.3%, respectively.

The Company’s effective

tax rate for the nine months ended September 30, 2021 was impacted by certain

tax law changes, the tax impact of certain non-income tax credits recorded by

the Company’s Brazilian subsidiaries, and a deferred

benefit related to an intercompany intangible asset transfer.

Comparatively,

the prior year first nine months effective tax rate was

impacted by the tax effect of certain one-time pre-tax losses as well as certain tax

charges and benefits in the period including those

related to changes in foreign tax credit valuation allowances, tax law changes

in a foreign jurisdiction, the tax impacts of the

Company’s termination

of its Legacy Quaker U.S.

Pension Plan and the Houghton indefinite-lived trademarks

and tradename

intangible asset impairment.

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

year, described in the

Non-GAAP Measures section of this Item, above, the Company estimates that

its first nine months of 2021 and 2020 effective tax

rates were relatively consistent at approximately 25% and 23%, respectively.

The year-over-year increase was largely

driven by the

impact of changes in pre-tax income levels on certain tax adjustments in each

period and the mix of earnings,

as well as withholding

taxes on repatriations and provision to return adjustments in the prior

period, partially offset with a change in permanent reinvestment

effective tax rate for the three months ended March 31,

2022 was largely driven by changes in the valuation allowance for foreign

credits due to recently issued legislative guidance and impacts due to settlements

reached on certain tax audits.

Comparatively, the

prior year first quarter effective tax rate was impacted by the sale of

a subsidiary which included certain held-for-sale real property

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company may experience continued volatility in its effective

tax rates due to several factors, including the timing of

tax audits and the expiration of applicable statutes of limitations as they

relate to uncertain tax positions, the unpredictability of the

timing and amount of certain incentives in various tax jurisdictions, the treatment

of certain acquisition-related costs and the timing

and amount of certain share-based compensation-related tax benefits, among

assets related to the Combination.

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

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

estimates that its effective tax rates for the first quarter of 2022

and 2021 would have been approximately 27% and 25%, respectively.

The Company incurred higher tax expense during the three

months ended March 31, 2022 primarily related to the Company recording earnings

in one of its subsidiaries at a statutory tax rate of

25% while it awaits recertification of a concessionary 15% tax rate, which

was available to the Company during all of 2021.

Company expects continued volatility in its effective tax

rates due to several factors, including the timing and scope of tax audits and

the expiration of applicable statutes of limitations as they relate to uncertain

tax positions, the unpredictability of the timing and

amount of certain incentives in various tax jurisdictions, the treatment of

certain acquisition-related costs and the timing and amount

of certain share-based compensation-related tax benefits, among

other factors.

In addition, the foreign tax credit valuation

allowance is based on a number of variables, including forecasted earnings,

which may vary.

Equity in net income of associated companies increased $4.1 million in

the first nine months of 2021 compared to the first nine

months of 2020, primarily due to higher current year earnings from the

Company’s interest in a captive insurance

Non-GAAP Measures section of this Item, above.

In addition, the Company had slightly higher earnings year-over-year

Company’s 50% interest in its joint

venture in Korea.

Equity in net income of associated companies decreased $4.4 million

in the first quarter of 2022 compared to the first quarter of

2021, primarily due to lower current year income from the Company’s

interest in a captive insurance company and from the

Company’s 50% interest in a joint venture

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

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

in both the first nine months of 2021 and 2020.

Foreign exchange positively impacted the Company’s

first nine months of 2021 results by approximately 6% driven by the

positive impact from foreign currency translation on earnings as well as lower foreign

exchange transaction losses in the current year

as compared to the prior year period.

Reportable Segments Review - Comparison of the Third

Quarter of 2021

with the Third Quarter of 2020

in both the first quarters of 2022 and 2021.

Foreign exchange unfavorably impacted the Company’s

first quarter of 2022 results by approximately 4% driven by the impact

from foreign currency translation on earnings as well as higher foreign

exchange transaction losses in the current quarter as compared

to the prior year first quarter.

Reportable Segments Review - Comparison of the First Quarter of 2022

with the First Quarter of 2021

The Company’s reportable

18 unchanged sentences

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

such as certain corporate and administrative costs, Combination,

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

integration and other acquisition-related expenses,

1 unchanged sentence

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

are not included in segment operating earnings.

accounting, are not included in segment operating earnings.

Other items not specifically identified with the Company’s

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

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

Americas represented approximately 33% of the Company’s

consolidated net sales in the third quarter of 2021.

The segment’s

net sales were $150.8 million, an increase of $31.3 million or 26% compared

to the third quarter of 2020.

Excluding sales from

acquisitions, the segment’s

net sales increase quarter-over-quarter of approximately 21% was driven

by higher volumes of 9%, a

benefit in selling price and product mix of 10% and the positive impact

of foreign currency translation of 2%.

The current quarter

organic volume increase was driven by the

continued improvement in end market conditions compared to the prior year quarter

was impacted by COVID-19.

consolidated net sales in the first quarter of 2022.

The segment’s net

sales were $154.1 million, an increase of $19.3 million or 14% compared

to the first quarter of 2021.

The increase in net sales was

due to higher selling price and product mix of 22% and additional net sales from

acquisitions of 2% partially offset by decreases in

organic sales volumes of 10%.

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

increases implemented to help

offset the significant increases in raw material

and other input costs incurred during 2021.

The foreign exchange impact was primarily

driven by the strengthening of the Mexican peso against the U.S.

as this exchange rate averaged 20.02 in the third quarter of

2021 compared to 22.06 during the third quarter of 2020.

increases implemented to

help offset the significant increases in raw material and

other input costs that began during 2021 and have continued in 2022.

current quarter decline in organic sales volume was largely

driven by the impact of lower volumes related to the tolling agreement for

previously divested products associated with the Combination

and the prior year period comparison,

which included a strong rebound

from COVID-19 impacts.

This segment’s operating earnings were $29.2

$31.3 million, an increase of $0.2

million or 1% compared to the third quarter of 2020.

The relatively consistent segment operating earnings quarter-over-quarter

net result of increases in net sales, described above, offset by lower

gross margins driven by the continued raw material cost increases

and global supply chain and logistics pressures coupled with higher

SG&A including an increase in direct selling costs associated with

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

year third quarter included temporary cost savings

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

million, a decrease of $3.0 million or 9% compared to the

first quarter of 2021.

The decrease in segment operating earnings was primarily a result of lower gross

margins driven by the lag in

price increases as compared to continued raw material cost increases and global

supply chain and logistics pressures, as well as higher

SG&A including an increase in direct selling costs, SG&A from acquisitions

and year-over-year inflationary increases

EMEA represented approximately 26% of the Company’s

consolidated net sales in the third quarter of 2021.

consolidated net sales in the first quarter of 2022.

The segment’s net

sales were $125.7 million, an increase of $5.9 million or 5% compared

to the third quarter of 2020.

The increase in net sales was

driven by a benefit from selling price and product mix of 19%, increases in organic

volumes of approximately 9%, the positive impact

of foreign currency translation of 1%, and additional net sales from acquisitions of

The increase in selling price and product mix

is primarily driven by price increases implemented to offset

the significant increase in raw material and other input costs incurred

The current quarter volume increase was driven by the continued improvement in end market

conditions compared to

the prior year quarter which was heavily impacted by COVID-19.

The foreign exchange impact was primarily driven by the

strengthening of the euro against the U.S.

to the first quarter of 2021.

The increase in net sales was due

to higher selling price and product mix of 18% and additional net sales from

acquisitions of 2%, partially offset by the unfavorable

impact of foreign currency translation of 9% and a decrease in organic

sales volumes

The increase in selling price and product

mix is primarily driven by price increases implemented to help offset

the significant increases in raw material and other input costs

that began during 2021 and have continued in 2022.

The current quarter organic volume decline was primarily driven

by the current

economic pressures including the direct and indirect impacts of the

Russia-Ukraine conflict and the impact of economic and other

sanctions by other nations on Russia as well as the prior year period comparison

including a strong rebound from COVID-19 impacts.

The foreign exchange impact was primarily due to the weakening of the

euro against the U.S.

dollar as this exchange rate averaged

1.18 in the third quarter of 2021 compared to 1.17 in

the third quarter of 2020.

This segment’s operating earnings were $20.2

million, an increase of $2.7 million or 16% compared to the

third quarter of 2020.

The increase in segment operating earnings reflects the higher net

sales described above, partially offset by

1.12 in the first quarter of 2022 compared to 1.21 in the first quarter of

This segment’s operating earnings

were $16.8 million, a

decrease of $8.5 million or 34% compared to the first quarter of 2021.

The decrease in segment operating earnings was primarily a

Quaker Chemical Corporation

Management’s Discussion and Analysis

lower current quarter gross margins driven by the continued

raw material cost increases and global supply chain and logistics

pressures as well as higher SG&A including increases in direct selling costs associated with

higher net sales as well as increases as the

prior year third quarter included temporary cost savings measures implemented

in response to the onset of the COVID-19 pandemic.

result of lower gross margins driven by the lag in price increases as compared

to continued raw material cost increases and global

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

an increase in direct selling costs, SG&A from acquisitions

and year-over-year inflationary increases

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

consolidated net sales in the third quarter of 2021.

consolidated net sales in the first quarter of 2022.

The segment’s

net sales were $98.7 million, an increase of approximately $13.8 million

or 16% compared to the third quarter of 2020.

in net sales quarter-over-quarter was driven by increases in volumes

of 7%, the positive impact of foreign currency translation of 5%,

increases from selling price and product mix of 3% and additional net sales from

acquisitions of 1%.

The current quarter volume

increase was driven by the continued improvement in end market conditions

compared to the prior year quarter which was impacted

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

against the U.S.

this exchange rate averaged 6.47 in the third quarter of 2021 compared

to 6.92 in the third quarter of 2020.

This segment’s operating

earnings were $23.3 million, a decrease of $4.0 million or 15% compared

to the third quarter of 2020.

The decrease in segment

operating earnings was largely driven by the continued

raw material cost increases and global supply chain and logistics pressures as

well as higher direct selling costs associated with higher net sales.

net sales were $104.2 million, an increase of $7.5 million or 8% compared

to the first quarter of 2021.

The increase in net sales was

driven by higher selling price and product mix of 12% partially offset

by lower organic sales volumes of 4%.

The increase in selling

price and product mix is primarily driven by price increases implemented

to help offset the significant increases in raw material and

other input costs that began during 2021 and continued throughout

the first quarter of 2022.

The current quarter decline in organic

sales volume was primarily driven by lower activity primarily in China related

to government mandates regarding the current year

Olympics as well as country restrictions over power and export related

activity compared to a very favorable demand environment in

the prior year period.

This segment’s operating earnings

were $21.9 million, a decrease of $5.6 million or 20% compared to the first

quarter of 2021.

The decrease in segment operating earnings was primarily a result of lower gross margins

driven by the lag in price

increases as compared to continued raw material cost increases and global

supply chain and logistics pressures, coupled with higher

SG&A including an increase in direct selling costs and year-over-year inflationary

Global Specialty Businesses

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Company’s consolidated net sales in the

third quarter of 2021.

first quarter of 2022.

The segment’s net sales were $90.1

million, an increase of $8.6 million or 12% compared to the third quarter of 2020.

Excluding net

sales from acquisitions, the segment’s

net sales would have increased 5% quarter-over-quarter

driven by increases in selling price and

product mix, including Norman Hay,

of 13% and the positive impact of foreign currency translation of 2% partially offset

declines of 10%.

Both the changes in selling price and product mix and sales volumes were primarily

driven by higher amounts of

shipments of a lower priced product in the Company’s

mining business in the prior year period.

The foreign exchange impact was a

result of similar strengthening of certain currencies in EMEA and

Americas as described above.

This segment’s operating earnings

were $20.7 million, a decrease of $0.5 million or 2% compared to the third quarter

The decrease in segment operating

earnings was driven by the continued raw material cost increases and global

supply chain and logistics pressures as well as higher

SG&A, including SG&A from acquisitions in the current year quarter.

Reportable Segments Review - Comparison of the First Nine months of 2021

with the First Nine months of 2020

Americas represented approximately 32% of the Company’s

consolidated net sales in the first nine months of 2021.

segment’s net sales were $425.3

million, an increase of $95.3 million or 29% compared to the first nine months of 2020.

in net sales was due to higher sales volumes of approximately

16%, additional net sales from acquisitions of 6% primarily resulting

from Coral, benefits from selling price and product mix of 6%, and

the positive impact of foreign currency translation of 1%.

current year volume increase was driven by the continued economic

rebound from the COVID-19 slowdown that began in late March

and continued throughout the third quarter of 2020.

This segment’s operating earnings were $97.2

million, an increase of $26.6

million or 38% compared to the first nine months of 2020.

The increase in segment operating earnings reflects the higher net

described above, partially offset by lower gross margins

in the current year period coupled with higher SG&A, including SG&A from

acquisitions primarily due to the same drivers as described in the third quarter

discussion above.

EMEA represented approximately 28% of the Company’s

consolidated net sales in the first nine months of 2021.

The segment’s

net sales were $365.5 million, an increase of $88.9 million or 32% compared

to the first nine months of 2020.

The increase in net

sales was due to higher sales volumes of 15%, increases in selling price and product

mix of 8%, the positive impacts from foreign

exchange translation of 7% and additional net sales from acquisitions of

The current year volume increase was driven by the

continued economic rebound from the COVID-19 slowdown.

The foreign exchange impact was primarily due to the strengthening of

the euro and British pound against the U.S.

dollar as these exchange rates averaged

1.20 and 1.39, respectively,

during the first nine

months of 2021 compared to 1.12 and 1.27, respectively,

during the first nine months of 2020.

This segment’s operating earnings

were $68.8 million, an increase of $22.5 million or 49% compared

to the first nine months of 2020.

The increase in segment operating

earnings reflect the higher net sales described above partially offset

lower gross margins in the current year period coupled with

direct selling expenses on the increase in net sales primarily due to the same

drivers as described in the third quarter discussion above.

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

consolidated net sales in the first nine months of 2021.

segment’s net sales were $286.9

million, an increase of $60.1 million or 26% compared to the first nine months of 2020.

in net sales was driven by higher sales volumes of approximately 19% and

the positive impact of foreign currency translation of 7%.

The current year volume increase was driven by the

continued gradual economic rebound from the COVID-19 slowdown as the

pandemic notably impacted China beginning in the first quarter of 2020 and then

the rest of the region through the third quarter of

Quaker Chemical Corporation

Management’s Discussion and Analysis

The foreign exchange impact was primarily due to the strengthening

of the Chinese renminbi against the U.S.

dollar as this

exchange rate averaged 6.47 during the first nine months of 2021

compared to 6.99 during the first nine months of 2020.

million, an increase of $11.7 million or 15% compared

to the first quarter of 2021.

in net sales was driven by higher selling price and product mix of 10%, including

Norman Hay, additional net sales from

of 4% and an increase in organic sales volumes of 2%, partially offset

by the unfavorable impact from foreign currency transaction of

approximately 1%.

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

to help offset the

significant increases in raw material and other input costs that began during

2021 and continued throughout the first quarter of 2022.

The increase in organic sales volumes was primarily attributable

to a favorable demand environment for our products.

exchange impact was primarily due to the weakening of the euro

against the U.S.

dollar described in the EMEA section above.

segment’s operating earnings were

$74.0 million, an increase of $7.9 million or 12% compared to the first nine

months of 2020.

increase in segment operating earnings reflect the higher net sales described

above partially offset lower gross margins

in the current

year period coupled with higher direct selling expenses on the increase

in net sales primarily due to the same drivers as described in

the third quarter discussion above.

Global Specialty Businesses

Global Specialty Businesses represented 18% of the Company’s

consolidated net sales in the first nine months of 2021.

segment’s net sales were $236.4

million, an increase of $37.9 million or 19% compared to the first nine months of 2020.

in net sales was driven by benefits from selling price and product mix, including

Norman Hay, of 16%, additional

net sales from

acquisitions of 7% primarily driven by Coral, and the positive impact of

foreign currency transaction of 3%, partially offset by

decreases in volumes of 7%.

The foreign exchange impact was a result of similar strengthening of

certain currencies in EMEA and

Americas as described above.

Both the changes in selling price and product mix and sales volumes were

primarily driven by higher

shipments of a lower priced product in the Company’s

mining business in the period year period.

This segment’s operating earnings

were $69.0 million, an increase of $10.9 million or 19% compared

to the first nine months of 2020.

The increase in segment operating

earnings reflects the higher net sales described above, partially offset

by lower gross margins in the current year period coupled with

higher SG&A, including SG&A from acquisitions primarily due

to the same drivers as described in the third quarter discussion above.

Quaker Chemical Corporation

Management’s Discussion and Analysis

$25.0 million, an increase of $0.9 million or 4% compared to the first quarter

increase in segment operating earnings reflects the aforementioned

higher net sales partially offset by slightly lower gross margins

the current year coupled with higher SG&A, including an increase in direct

selling costs, SG&A from acquisitions and year-over-year

inflationary increases.

Factors That May Affect Our Future Results

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Certain information included in this Report and other materials filed or

to be filed by Quaker Chemical Corporation with the

Securities and Exchange Commission (“SEC”) (as well as information

included in oral statements or other written statements made or

to be made by us) contain or may contain forward-looking statements within the

meaning of Section 27A of the Securities Act of

1933, as amended, and Section 21E of the Securities Exchange Act of 1934,

These statements can be identified by the

fact that they do not relate strictly to historical or current facts.

to be filed by Quaker Chemical Corporation with the SEC,

as well as information included in oral statements or other written statements made

or to be made by us, contain or may contain

forward-looking statements within the meaning of Section 27A of the

Securities Act of 1933, as amended, and Section 21E of the

Securities Exchange Act of 1934, as amended.

These statements can be identified by the fact that they do not relate strictly to

historical or current facts.

We have based

these forward-looking statements, including statements

regarding the potential effects of the COVID-19 pandemic

and global supply chain constraints on the Company’s

business, results of

operations, and financial condition, our expectation that we will maintain sufficient

liquidity and remediate any of our material

weaknesses in internal control over financial reporting, and statements regarding

the impact of increased raw material costs and

pricing initiatives on our current expectations about future

these forward-looking statements, including statements regarding the potential

effects of the

COVID-19 pandemic and global supply chain constraints on the Company’s

business, results of operations, and financial condition,

our expectation that we will maintain sufficient liquidity and

remediate any of our material weaknesses in internal control over

financial reporting, and statements regarding the impact of increased

raw material costs and pricing initiatives on our current

expectations about future events.

These forward-looking statements include statements with respect to

3 unchanged sentences

the potential benefits of the Combination and other acquisitions;

the impacts on our business as a result of the COVID-19 pandemic and

any projected global economic rebound or

anticipated positive results due to Company actions taken in response;

the impacts on our business as a result of the COVID-19 pandemic;

the timing and extent of the projected impacts on our business as a result of the Ukrainian

and Russian conflict;

cost increases in prices of raw materials and the impacts of constraints and

disruptions in the global supply chain;

our current and future results and plans;

our current and future results and plans including our sustainability goals;

statements that include the words “may,”

8 unchanged sentences

or statements made to, the public.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Any or all of the forward-looking statements in this Report, in the Company’s

29 unchanged sentences

worldwide economic

and political disruptions, foreign currency fluctuations,

significant changes in applicable tax rates and regulations, future terrorist

attacks and other acts of violence.

Furthermore, the Company is subject to the same business cycles as those experienced

customers in the steel, automobile, aircraft, industrial equipment, and durable

goods industries.

The ultimate impact of COVID-19 on

our business will depend on, among other things, the extent and duration of

the pandemic, the severity of the disease and the number

of people infected with the virus including as new variants emerge,

the continued uncertainty regarding global availability,

administration, acceptance and long-term efficacy

of vaccines, or other treatments for COVID-19 or its variants, the longer-term

effects on the economy of the pandemic, including the

resulting market volatility,

and by the measures taken by governmental

authorities and other third parties restricting day-to-day life and

business operations and the length of time that such measures remain

in place, as well as laws and other governmental programs implemented

to address the pandemic or assist impacted businesses, such

as fiscal stimulus and other legislation designed to deliver monetary

aid and other relief.

Other factors could also adversely affect us,

including those related to the Combination and other acquisitions and the

integration of acquired businesses.

Our forward-looking

statements are subject to risks, uncertainties and assumptions about

the Company and its operations that are subject to change based

on various important

factors, some of which are beyond our control.

These risks, uncertainties, and possible inaccurate assumptions

relevant to our business could cause our actual results to differ

materially from expected and historical results.

Quaker Chemical Corporation

Management’s Discussion and Analysis

and political disruptions including the impacts of the military conflict

between Russia and Ukraine, the economic and other sanctions

imposed by other nations on Russia, suspensions of activities in Russia by

many multinational companies and the potential expansion

of military activity, foreign

currency fluctuations, significant changes in applicable tax rates and

regulations, future terrorist attacks

and other acts of violence.

Furthermore, the Company is subject to the same business cycles as those experienced by

our customers in

the steel, automobile, aircraft, industrial equipment, and durable goods industries.

The ultimate impact of COVID-19 on our business

will depend on, among other things, the extent and duration of the

pandemic, the severity of the disease and the number of people

infected with the virus including new variants, the continued uncertainty

regarding global availability,

administration, acceptance and

long-term efficacy of vaccines, or other treatments for

COVID-19 or its variants, the longer-term effects

on the economy of the

pandemic, including the resulting market volatility,

and by the measures taken by governmental authorities and other third parties

restricting day-to-day life and business operations and the length

of time that such measures remain in place, as well as laws and other

governmental programs implemented to address the pandemic or assist impacted

businesses, such as fiscal stimulus and other

legislation designed to deliver monetary aid and other relief.

Other factors could also adversely affect us, including those related

acquisitions and the integration of acquired businesses.

Our forward-looking statements are subject to risks, uncertainties and

assumptions about the Company and its operations that are subject to change

based on various important factors, some of which are

beyond our control.

These risks, uncertainties, and possible inaccurate assumptions relevant to our

business could cause our actual

results to differ materially from expected and historical

Therefore, we caution you not to place undue reliance on our forward-looking

21 unchanged sentences

furnished to the SEC.

Information contained on, or that may be accessed through,

the Company’s website is not incorporated

Information contained on, or that may be accessed through, the Company’s

website is not incorporated by

reference in this Report and, accordingly,

2 unchanged sentences

We have evaluated

the information required under this Item that was disclosed in Part II, Item 7A, of our Annual Report on

the information required under this Item that was disclosed in Part II, Item 7A, of our Annual

Report on Form

10-K for the year ended December 31, 2021, and we believe there has been no material

1 unchanged sentence

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 2. Management’s Discussion and Analysis