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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 846 added, 538 removed, 768 unchanged (64% of the section changed)

3 unchanged sentences

(Dollars in thousands, except per share data)

Three Months Ended March 31,

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

Three Months Ended

Six Months Ended

Cost of goods sold (

excluding amortization expense - See Note 13

Selling, general and administrative expenses

Restructuring and related charges

Restructuring and related (credits) charges, net

Combination, integration and other acquisition-related expenses

2 unchanged sentences

Interest expense, net

Income before taxes and equity in net income of associated companies

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

associated companies

Taxes on income before

equity in net income of associated companies

Income before equity in net income of associated companies

Equity in net income of associated companies

equity in net (loss) income of associated

Income before equity in net (loss) income of associated

Equity in net (loss) income of associated companies

Net income attributable to noncontrolling interest

1 unchanged sentence

Per share data:

Net income attributable to Quaker Chemical Corporation common

shareholders – basic

Net income attributable to Quaker Chemical Corporation common

shareholders – diluted

Net income attributable to Quaker Chemical Corporation

common shareholders – basic

Net income attributable to Quaker Chemical Corporation

common shareholders – diluted

Dividends declared

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

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

Quaker Chemical Corporation

Condensed Consolidated Statements of Comprehensive

Condensed Consolidated Statements of Comprehensive Income

(Dollars in thousands)

Three Months Ended March 31,

Three Months Ended

Six Months Ended

Other comprehensive (loss) income, net of tax

2 unchanged sentences

Current period change in fair value of derivatives

Unrealized loss on available-for-sale securities

Other comprehensive loss

Comprehensive income

Comprehensive income attributable to noncontrolling

Comprehensive income attributable to Quaker Chemical Corporation

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

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

Other comprehensive (loss) income

Comprehensive (loss) income

Comprehensive

income (loss) attributable to

noncontrolling interest

Comprehensive (loss) income attributable to Quaker Chemical

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

Quaker Chemical Corporation

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Property, plant and equipment,

Less accumulated depreciation

Accumulated depreciation

Property, plant and equipment,

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outstanding 2022 –

17,897,033 shares

Capital in excess of par value

4 unchanged sentences

Total liabilities and equity

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

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

Quaker Chemical Corporation

1 unchanged sentence

(Dollars in thousands)

Three Months Ended March 31,

Six Months Ended

Cash flows from operating activities

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Share-based compensation

Gain on disposal of property, plant,

equipment and other assets

Loss on extinguishment of debt

Loss (gain) on disposal of property,

plant, equipment and other assets

Combination and other acquisition-related expenses, net of payments

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Payments of long-term debt

Proceeds from long-term debt

Borrowings on revolving credit facilities, net

Repayments on other debt, net

Financing-related debt issuance costs

Dividends paid

Stock options exercised, other

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Effect of foreign exchange rate changes on cash

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

Cash and cash equivalents at the end of the period

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

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

financial statements.

Quaker Chemical Corporation

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Balance at March 31, 2021

Amounts reported in other

comprehensive gain

Share issuance and equity-based

compensation plans

Balance at June 30, 2021

Balance at December 31, 2021

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Balance at March 31, 2022

Amounts reported in other

comprehensive loss

Share issuance and equity-based

compensation plans

Balance at June 30, 2022

The accompanying notes are an integral part

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Basis of Presentation

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

terms “Quaker,” “Quaker Houghton,” the

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

(doing business as Quaker Houghton), its subsidiaries, and

As used in these Notes to Condensed Consolidated Financial Statements of

this Quarterly Report on Form 10-Q for the period

ended June 30, 2022 (the “Report”),

the terms “Quaker Houghton,”

the “Company,”

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

Corporation (doing business as Quaker Houghton), its subsidiaries, and

associated companies, unless the context otherwise requires.

As used in these Notes to Condensed Consolidated Financial Statements,

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

the “Combination” refers to the legacy Quaker combination

with Houghton International, Inc.

(herein referred to as the “Combination”).

The condensed consolidated financial statements included herein are unaudited and

been prepared in accordance with generally accepted accounting principles

(“Houghton”).

The condensed consolidated financial statements included herein are unaudited

have been prepared in accordance with generally accepted accounting principles

in the United States (“U.S.

GAAP”) for interim financial

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

GAAP”) for interim

financial reporting and the United States Securities and Exchange Commission

(“SEC”) regulations.

Certain information and footnote

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for the interim periods.

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

of the results to be

expected for the full year.

The results for the six months ended June 30, 2022 are not necessarily indicative of the

results to be expected

for the full year.

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

Annual Report filed on Form

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

Annual Report filed on Form 10-K for

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

Description of Business

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mining, and metalworking

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

specialty products and offers

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

chemical specialty products and offers

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

9 unchanged sentences

economy was considered hyper-inflationary under U.S.

As of, and for the three months

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

As of, and for the three and six

months ended June 30, 2022, the Company's Argentine

subsidiaries represented less than

% of the Company’s consolidated

total assets and

net sales, respectively.

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

remeasurement losses associated with the applicable currency conversions

assets and net sales, respectively.

During the three and six months ended June 30, 2022, the Company recorded less than $

million, respectively, of remeasurement

losses associated with the applicable currency conversions related to Argentina.

Comparatively,

during the three and six months ended June 30, 2021, the Company recorded

million and $

respectively, of remeasurement

losses associated with the applicable currency conversions

related to Argentina.

These losses were recorded within

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

in the Company’s Condensed Consolidated

Statements of Income.

These losses were

recorded within foreign exchange losses, net, which is a component of other

(expense) income, net, in the Company’s Condensed

Consolidated Statements of Income.

Note 2 – Business Acquisitions

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

in various jurisdictions

in various jurisdictions in which the

Company operates.

2 unchanged sentences

sector, as well as impregnation resin and

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

impregnation systems for metal parts, for its Global Specialty Businesses reportable segment

for approximately

2 unchanged sentences

Germany as well as broadens its product offerings and

service capabilities within its existing impregnation business acquired

the Norman Hay acquisition in 2019.

service capabilities within its existing impregnation business.

Quaker Chemical Corporation

2 unchanged sentences

unless otherwise stated)

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

to the respective acquisition dates are included in

the unaudited Condensed Consolidated Statements of Income for the quarter ended

March 31, 2022.

The results of operations of the 2022 acquisitions subsequent to the respective

acquisition dates are included in the unaudited

Condensed Consolidated Statements of Income for the six month period ended

June 30, 2022.

Applicable transaction expenses

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

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

of the acquisitions are not considered material to the overall operations

of the Company for the periods presented.

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a privately held Company that provides vacuum

impregnation services of castings, powder metals and electrical components

for its Global Specialty Businesses reportable segment for

impregnation services of castings, powder metals and electrical components for

its Global Specialty Businesses reportable segment for

million, including an initial cash payment of $

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amortized over

In November 2021, the Company acquired a business that provides

hydraulic fluids, coolants, cleaners, and rust preventative oils

In November 2021, the Company acquired a business that provides hydraulic

fluids, coolants, cleaners, and rust preventative oils

in Turkey for its EMEA reportable segment for

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The Company recorded

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

Statements and accounted for the purchase of

the remaining interest as a step acquisition whereby the Company remeasured

the previously held equity method investment to its fair

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

product line in the Global Specialty

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

Financial Statements and accounted for the

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

remeasured the previously held equity method

investment to its fair value.

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

maskants product line in the Global Specialty

Businesses reportable segment for

million EUR or approximately $

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

the steel end market for $

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

for the steel end market for $

acquisition is part of each of the Company’s

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the Company recorded $

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

Factors contributing to the purchase price that resulted in goodwill included the

acquisition of business processes and

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

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

not been finalized and the one-year

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

solutions business acquired in February 2021, the

measurement period for which ended in February 2022.

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

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

and liabilities assumed.

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

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

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

assets, all of which is

expected to be tax deductible in various jurisdictions in which we operate.

Factors contributing to the purchase price that resulted in

goodwill included the acquisition of business processes and personne

that will allow Quaker Houghton to better serve its customers.

As of June 30, 2022, the allocation of the purchase price of all of the Company’s

2022 acquisitions, Grindaix, the acquisition in

and Baron have not been finalized and the one-year measurement period has not ended.

Further adjustments may be

necessary as a result of the Company’s

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

assets acquired and

liabilities assumed.

In December 2020, the Company acquired Coral Chemical Corporation

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

finishing fluid solutions.

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

worked to finalize

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

certain post-closing adjustments.

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

related to tax attributes of the acquisition.

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

believes the potential range of exposure for this claim is $

During the second quarter of 2022, after failing to reach resolution,

the Sellers filed suit asserting

certain amounts owed related to tax attributes of the acquisition.

Based on the facts and circumstances of the claim asserted by the

Sellers, the Company believes the potential range of exposure for this claim is $

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Note 3 – Recently Issued Accounting Standards

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ASU 2020-04 is

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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

be applied through December 31, 2022.

On December 10, 2021,

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

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

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

The Company elected to apply the expedients provided in ASU

2020-04 with respect to the Second Amendment.

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

based LIBOR rates.

See Note 14 of Notes to Condensed Consolidated Financial Statements.

On June 17, 2022, the

Company entered into an amendment to its primary credit facility which,

among other things, provided for the use of a USD currency

LIBOR successor rate (the Secured Overnight Financing Rate (“SOFR”)).

See Note 14 of Notes to Condensed Consolidated Financial

Note 4 – Business Segments

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each respective region, excluding net sales and operations managed globally

by the Global Specialty Businesses segment, which

includes the Company’s container,

metal finishing,

mining, offshore, specialty coatings, specialty grease and Norman

Hay businesses.

by the Global Specialty Businesses segment.

Specialty Businesses segment includes the Company’s

container, metal finishing,

mining, offshore, specialty coatings, specialty

grease and Norman Hay businesses.

Segment operating earnings for each of the Company’s

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Operating expenses not directly

attributable to the net sales of each respective segment,

such as certain corporate and administrative costs, Combination, integration

and other acquisition-related expenses, and Restructuring and related

attributable to the net sales of each respective segment, such as certain corporate

and administrative costs, Combination, integration

and other acquisition-related expenses, and Restructuring and related charges,

are not included in segment operating earnings.

1 unchanged sentence

reportable segments include Interest expense, net and Other (expense) income,

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

reportable operating segments for the three

months ended March 31, 2022 and 2021:

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

The following table presents information about the performance of

the Company’s reportable segments for

the three and six

months ended June 30, 2022 and 2021.

Three Months Ended

Six Months Ended

Global Specialty Businesses

Total net sales

Segment operating earnings

Global Specialty Businesses

segment operating earnings

Total segment operating

Combination, integration and other acquisition-related expenses

Restructuring and related charges

Restructuring and related credits (charges), net

Fair value step up of acquired inventory sold

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Interest expense, net

Income before taxes and equity in net income of associated companies

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

2022 and 2021 were $

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

associated companies

Inter-segment revenues for the three and six months ended

June 30, 2022, were $

million and $

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Specialty Businesses, respectively.

Inter-segment revenues for the three and six months ended

June 30, 2021, were $

million for Americas, $

million and $

million for EMEA, $

million and $

million for Asia/Pacific, and $

million for Global Specialty Businesses, respectively.

However, all inter-segment transactions

have been eliminated from each reportable operating

segment’s net sales and earnings for

all periods presented in the above tables.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

have been eliminated from

each reportable operating segment’s

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

Note 5 – Net Sales and Revenue Recognition

1 unchanged sentence

As part of the Company’s Fluidcare

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

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

Company transferred third-party products under arrangements recognized

1 unchanged sentence

million and $

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

for the three and six months ended June 30, 2022, respectively,

million and $

million for the three and six months ended

June 30, 2021, respectively.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Customer Concentration

1 unchanged sentence

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

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

As previously disclosed in the 2021 Form 10-K,

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

five largest customers (each composed of multiple subsidiaries or

with semiautonomous purchasing authority) accounted for approximately

% of consolidated net sales, with its largest customer

accounting for approximately

steel, aluminum, automobiles, aerospace,

industrial and agricultural equipment, and durable goods.

As previously disclosed in the

Company’s 2021 Form 10-K, during

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

five largest customers (each composed of

multiple subsidiaries or divisions with semiautonomous purchasing authority)

accounted for approximately

% of consolidated net

sales, with its largest customer accounting for approximately

% of consolidated net sales.

1 unchanged sentence

The Company had no material contract assets recorded on its Condensed

Consolidated Balance Sheets as of March 31, 2022 or

Consolidated Balance Sheets as of June 30, 2022 or

December 31, 2021.

1 unchanged sentence

million and $

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

million of deferred revenue as of June 30, 2022 and December 31, 2021,

respectively.

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

obligations and

For the six months ended June 30, 2022, the Company satisfied all of the associated

performance obligations and

recognized into revenue the advance payments received and recorded

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and its technical expertise as a global product

The Company generally manages and evaluates its performance by segment

first, and then by customer industry,

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

then by customer industry,

by individual product lines.

2 unchanged sentences

the Company’s geographic

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

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

sales in each region.

The following tables disaggregate the Company’s

1 unchanged sentence

and timing of

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

Three Months Ended March 31, 2022

revenue recognized for the three and six months ended June 30, 2022

Three Months Ended June 30, 2022

Customer Industries

4 unchanged sentences

Services transferred over time

Three Months Ended June 30, 2021

Customer Industries

Metalworking and other

Global Specialty Businesses

Timing of Revenue Recognized

Product sales at a point in time

Services transferred over time

Quaker Chemical Corporation

2 unchanged sentences

unless otherwise stated)

Three Months Ended March 31, 2021

Six Months Ended June 30, 2022

Customer Industries

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Services transferred over time

Six Months Ended June 30, 2021

Customer Industries

Metalworking and other

Global Specialty Businesses

Timing of Revenue Recognized

Product sales at a point in time

Services transferred over time

Note 6 - Leases

5 unchanged sentences

The Company has

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

material variable lease costs, sublease income or finance leases for three and six months ended

2022 and 2021.

following table sets forth the components of the Company’s

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

The following table sets forth the components of the Company’s

lease cost for three and six months ended June 30,

2022 and 2021:

Three Months Ended

Six Months Ended

Operating lease expense

Short-term lease expense

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Supplemental cash flow information related to the Company’s

1 unchanged sentence

Three Months Ended

Cash paid for amounts included in the measurement of lease liabilities

Six Months Ended

Cash paid for amounts included in the

measurement of lease liabilities:

Operating cash flows from operating leases

Non-cash lease liabilities activity:

Leased assets obtained in exchange for new operating lease liabilities

Leased assets obtained in exchange for new

operating lease liabilities

Supplemental balance sheet information related to the Company’s

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discount rate

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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

Maturities of operating lease liabilities were as follows:

For the remainder of 2022

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manufacturing and non-manufacturing facilities.

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

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

number of factors and are subject to change;

the Company currently expects reductions in headcount and site closures to

continue to occur throughout 2022 under the QH Program.

Employee separation benefits will vary depending on local regulations

within certain foreign countries and will include severance and other benefits.

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

the QH Program to continue to occur throughout 2022 and into 2023.

Employee separation benefits will vary depending on local

regulations within certain foreign countries and will include severance and other benefits.

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

including customary and routine adjustments to initial

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

facilities and are recorded in Restructuring and related

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

and are recorded in Restructuring and related

charges in the Company’s

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calculation of reportable

segments’ measure of operating earnings and therefore these costs are not

reviewed by or recorded to reportable segments.

segments’ measure of operating earnings and therefore these costs are not reviewed

by or recorded to reportable segments.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Activity in the Company’s accrual

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

for restructuring under the QH Program for the six months ended June 30, 2022

is as follows:

Accrued restructuring as of December 31, 2021

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Currency translation adjustments

Accrued restructuring as of March 31, 2022

Accrued restructuring as of June 30, 2022

Note 8 – Share-Based Compensation

1 unchanged sentence

in its Condensed Consolidated Statements of Income

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

for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

Six Months Ended

Stock options

5 unchanged sentences

compensation expense

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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

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

million and $

million during the three

months ended March 31, 2022 and 2021, respectively,

million for the three and six months

ended June 30, 2022, respectively,

million and $

million for the three and six months ended June 30, 2021, respectively,

recorded within Combination, integration and other acquisition-related

Stock Options

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

During the first six months of 2022, the Company granted stock options under

its long-term incentive plan (“LTIP”)

”) that are subject

only to time vesting over a

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

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

subject only to time vesting over a

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

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

in the table below:

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Expected term (years)

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

As of March 31, 2022, unrecognized

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

vesting period.

As of June 30, 2022, unrecognized

compensation expense related to all stock options granted

2 unchanged sentences

and Restricted Stock Units

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

During the six months ended June 30, 2022, the Company granted

non-vested restricted shares and

restricted stock units under its LTIP,

subject to time-based vesting, generally over a

The fair value of these grants is

based on the trading price of the Company’s

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

The fair value of

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

common stock on the date of grant.

The Company adjusts the grant date fair value of

these awards for expected forfeitures based on historical experience.

As of March 31, 2022, unrecognized compensation expense

related to the nonvested restricted shares was $

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

and unrecognized compensation expense related to nonvested restricted

stock units was $

million, to be recognized over a weighted

average remaining period of

The Company adjusts the grant date

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

As of June 30, 2022, unrecognized compensation

expense related to the non-vested restricted shares was $

million, to be recognized over a weighted average remaining period

years, and unrecognized compensation expense related to non-vested

restricted stock units was $

million, to be recognized over a

weighted average remaining period of

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Performance Stock Units

12 unchanged sentences

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

to issuances of the shares upon settlement.

Compensation expense for PSUs

is measured based on their grant date fair value and is recognized on

a straight-line basis over

to issuance of the shares upon settlement.

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

and is recognized on a straight-line basis over

the three year vesting period.

6 unchanged sentences

Expected term (years)

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

as of the applicable settlement date of all

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

to date for each award.

As of March 31, 2022,

As of June 30, 2022, based on the conditions of the PSUs and performance to date for

each award, the Company estimates that it

t issue any fully vested shares as of the applicable settlement date of all outstanding PSUs awards.

As of June 30, 2022, there

was approximately $

2 unchanged sentences

over a weighted-average period of

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Defined Contribution Plan

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

a majority of its U.S.

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

The Company matches

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

compensation.

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

% of compensation.

Additionally, the plan

5 unchanged sentences

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

in fully vested shares

of the Company’s common stock

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

the three months ended

March 31, 2021, total contributions were $

in fully vested shares of the Company’s common

matching contributions in stock for the three and six months ended June 30, 2022.

For the six months ended

June 30, 2021, total contributions were $

Note 9 – Pension and Other Postretirement

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

ended March 31, 2022 and 2021 are as follows:

Three Months Ended March 31,

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

six months ended June 30, 2022 and 2021 are as follows:

Months Ended June 30,

Six Months Ended June 30,

Postretirement

Pension Benefits

Postretirement Benefits

Pension Benefits

Interest cost

Expected return on plan assets

Actuarial loss (gain) amortization

Prior service cost (income) amortization

Total net periodic benefit

(income) cost

Actuarial loss amortization

Prior service cost amortization

Net periodic benefit (income)

Employer Contributions

As of March 31, 2022, $

As of June 30, 2022, $

million and $

9 unchanged sentences

million to its other postretirement benefit plans in 2022

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Note 10 – Other (Expense) Income, Net

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

March 31, 2022 and 2021 are as follows:

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

30, 2022 and 2021 are as follows:

Three Months Ended

Six Months Ended

Income from third party license fees

Foreign exchange losses, net

Gain on disposals of property,

plant, equipment and other assets, net

(Loss) gain on disposals of property,

plant, equipment and other

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

Pension and postretirement benefit income, non-service components

Pension and postretirement benefit income,

non-service components

Loss on extinguishment of debt

Other non-operating income, net

Total other (expense)

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

three months ended March 31, 2022 includes other expense

related to an indemnification asset associated with the settlement of certain

income tax audits at one of the Company’s

Italian affiliates

for tax periods prior to August 1, 2019.

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

the three and six months ended June 30, 2022, includes

adjustments to Combination-related indemnification assets associated with the

settlement of certain income tax audits at certain of the

Company’s Italian and German

affiliates for tax periods prior to August 1, 2019.

See Note 11 of Notes to Condensed Consolidated

Financial Statements.

Gain on disposals of

property, plant, equipment

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

sale of certain

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

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

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

million related to hyper-inflationary

accounting for the Company’s Argentine

subsidiaries.

See Note 1 of Notes to Condensed Consolidated Financial Statements.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

During the second quarter of 2022, the Company recorded a loss on extinguishment

of debt of approximately

million which includes the write-off of certain previously unamortized

deferred financing costs as well as a portion of the third

party and creditor debt issuance costs incurred to execute an amendment

to the Company’s primary credit facility.

See Note 14 of

Notes to the Condensed Consolidated Financial Statements.

Loss (gain) on disposals of property,

plant, equipment and other assets, net, during the six months ended June 30, 2021,

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

to the Combination.

Note 11 – Income Taxes

1 unchanged sentence

The Company’s effective

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

tax rates for the three and six months ended June 30, 2022 were

%, respectively,

% for the three and six months ended June 30, 2021, respectively.

The Company’s effective

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

the valuation

allowance for foreign tax credits due to recently issued legislative guidance

and audit settlements reached with Italian tax authorities.

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

ended March 31, 2022 related to the Company

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

the six months ended June 30, 2022 was largely driven by

state tax benefits, changes in the valuation allowance for foreign tax credits

due to recently issued legislative guidance,

the impact of audit settlements reached with German and Italian tax authorities, a deferred

tax benefit associated with an intercompany asset transfer,

a reduction in reserves for uncertain tax positions relating to management

fees, withholding taxes for increased forecasted dividends and the effects

of lower pre-tax earnings and the mix of such earnings.

addition, the Company incurred higher tax expense during the three and six months ended

June 30, 2022 at one of its subsidiaries as it

accrued taxes at a statutory tax rate of

% while it awaits recertification of a concessionary

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

% tax rate, which was available to the

Company during all of 2021.

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 assets related to the Combination.

the prior year effective tax rates were largely impacted

by the sale of a subsidiary which

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

changes in foreign tax credit valuation allowances, tax

law changes in a foreign jurisdiction and the income tax impacts of certain

non-income tax credits recorded by the Company’s

Brazilian subsidiaries.

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

4 unchanged sentences

earnings to the U.S.

The balance as of March 31, 2022 was $

As of March 31, 2022, the Company’s

As of June 30, 2022 this deferred tax liability balance was $

As of June 30, 2022, the Company’s

cumulative liability for gross unrecognized tax benefits was $

million, a decrease of

approximately $

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

million, a decrease of approximately $

million from the

cumulative liability accrued as of December 31, 2021.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

The Company continues to recognize interest and penalties associated with uncertain

1 unchanged sentence

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

Consolidated Statements

recognized a benefit of $

million for interest and a benefit of $

million for penalties in its Condensed Consolidated Statements of

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

an expense of less than $

million for interest and a benefit of

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

three months ended March 31, 2021.

March 31, 2022, the Company had accrued $

Consolidated Statements of Income.

recognized a benefit for interest of less than $

million and $

million and an expense of less than of $

million and a benefit of

million for penalties in its Condensed Consolidated Statement of Income for

the three and six months ended June 30, 2022,

respectively, and recognized

an expense for interest of approximately $

million and $

million and a benefit of less than $

million and $

million for penalties in its Condensed Consolidated Statement of Income for

the three and six months ended June 30,

2021, respectively.

As of June 30, 2022, the Company had accrued $

million for cumulative interest and $

million for cumulative penalties in its

Condensed Consolidated Balance Sheets, compared to $

cumulative penalties in its Condensed Consolidated Balance Sheets, compared

million for cumulative interest and $

million for cumulative penalties

accrued at December 31, 2021.

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

recognized decreases of $

for cumulative penalties accrued at December 31, 2021.

During the six months ended June 30, 2022 and 2021, the Company recognized

decreases of $

million and $

respectively, in its cumulative

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

tax audits with the Italian

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

limitations for certain tax years.

respectively,

in its cumulative liability for gross unrecognized tax benefits due to the settlement

of income tax audits with both the

Italian and German tax authorities, as well as the expiration of the applicable

statutes of limitations for certain tax years.

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

9 unchanged sentences

the year ending December 31, 2022.

and its subsidiaries are subject to U.S.

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

state and foreign

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

Federal income tax,

as well as the income tax of various state and foreign

tax jurisdictions.

2 unchanged sentences

, Brazil from

, the Netherlands, Mexico and China from

, Canada, Spain, and the U.S.

, the Netherlands and Mexico from

, Canada, China, Spain and the U.S.

, the United Kingdom

7 unchanged sentences

In 2020, the respective tax authorities in Italy, Spain and the Netherlands reached agreement with respect to the MAP

proceedings which the Company has accepted.

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

proceedings which the Company had accepted.

As of June 30, 2022, the Company received $

million in refunds from the

5 unchanged sentences

to utilize its remaining net operating losses to partially offset

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

million for the quarter ended March 31, 2022.

As of June 30, 2022, the Company has paid the full settlement amount, of which approximately

million may be

Houghton Italia, S.r.l is also involved

2 unchanged sentences

corporate income tax

audit with the Italian tax authorities for the tax years

During the three months ended March 31, 2022 the Company

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

During the six months ended June 30, 2022, the Company

settled tax years 2016 through 2018 for a total of $

5 unchanged sentences

to the tax provision of $

million during the first quarter of

The Company has established an indemnification receivable of $

million in connection with its claim against the former

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

million during the first six months of

The Company has an indemnification receivable of $

million in connection with its claim against the former owners of

Houghton for any pre-Combination tax liabilities arising from this matter.

As previously reported, Houghton Deutschland GmbH is also under

audit by the German tax authorities for the tax years

In the second quarter of 2022 the Company settled the corporate tax audit for the

tax years 2015-2017 with the German

tax authorities for a total of $

The Company has an indemnification receivable of $

million in connection with its claim

against the former owners of Houghton for any pre-Combination tax

liabilities arising from this matter.

Quaker Chemical Corporation

2 unchanged sentences

unless otherwise stated)

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

the tax years

preliminary audit findings, primarily related to transfer pricing,

the Company has recorded reserves for $

million as of March 31,

Of this amount, $

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

has submitted an

indemnification claim with Houghton’s

former owners for any tax liabilities arising pre-Combination.

As a result, a corresponding

indemnification receivable has also been established.

Note 12 – Earnings Per Share

The following table summarizes earnings per share calculations for

the three months ended March 31, 2022 and 2021:

the three and six months ended June 30, 2022 and 2021:

Three Months Ended

Six Months Ended

Basic earnings per common share

11 unchanged sentences

Diluted weighted average common shares outstanding

Diluted earnings per common

Certain stock options,

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

Diluted earnings per common share

Certain stock options, restricted stock units and PSUs are not included

in the diluted earnings per share calculation when the

effect would have been anti-dilutive.

1 unchanged sentence

for the three

months ended March 31, 2022 and 2021, respectively.

and six months ended June 30, 2022, respectively,

for the three and six months ended June 30, 2021, respectively.

Note 13 – Goodwill and Other Intangible Assets

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

March 31, 2022 were as follows:

Changes in the carrying amount of goodwill for the six months ended June 30, 2022

were as follows:

Balance as of December 31, 2021

1 unchanged sentence

Currency translation adjustments

Balance as of March 31, 2022

Balance as of June 30, 2022

Gross carrying amounts and accumulated amortization for definite-lived

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

intangible assets as of June 30, 2022 and December 31,

2021 were as follows:

4 unchanged sentences

intangible assets

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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

2 unchanged sentences

million and $

million of amortization expense for the three months ended March

31, 2022 and 2021, respectively.

million of amortization expense for the three and six months ended June

30, 2022, respectively.

Comparatively,

the Company recorded $

million and $

million of amortization expense for the three and six months ended

June 30, 2021, respectively.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Estimated annual aggregate amortization expense for the current year

6 unchanged sentences

For the year ended December 31, 2027 and beyond

The Company has four indefinite-lived intangible assets totaling $

million as of March 31, 2022, including $

The Company had four indefinite-lived intangible assets totaling

million as of June 30, 2022, including $

indefinite-lived intangible assets for trademarks and tradename associated

1 unchanged sentence

Comparatively, the Company had

four indefinitely-lived intangible assets for trademarks and tradename

four indefinite-lived intangible assets for trademarks and tradename

million as of December 31, 2021.

The Company completes its annual goodwill and indefinite-lived intangible

asset impairment test during the fourth quarter of

each year, or more frequently if triggering

events indicate a possible impairment.

The Company continually evaluates financial

performance, economic conditions and other relevant developments

in assessing if a triggering event indicates that it is more likely

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

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

Company continues to monitor various financial, economic and

geopolitical conditions impacting the Company,

including the Russia-

Ukraine war and the Company’s decision

to cease operations in Russia, raw material, supply chain, and logistics cost escalation,

rising interest rates and cost of capital among other factors.

The Company concluded that these and other factors which have and

continue to impact the Company did not represent a triggering event as of June 30, 2022.

The Company continues to take action to

offset these headwinds including, but not limited to, implementing

selling price increases aimed at offsetting raw material costs and

ongoing inflationary pressures.

However, if the Company is unable to successfully

implement these actions and future or projected

financial performance declines, then it is possible any of these financial, economic

or geopolitical conditions could represent a

triggering event in the future and could lead to a potential impairment of the

Company’s reporting unit goodwill

or other indefinite-

lived or long-lived assets.

Note 14 – Debt

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

As of March 31, 2022

Debt as of June 30, 2022 and December 31, 2021 includes the following:

As of June 30, 2022

As of December 31, 2021

Credit Facilities:

EURO Term Loan

Original Revolver

Original U.S.

Original Euro Term

Amended Revolver

Amended Euro Term

Industrial development bonds

4 unchanged sentences

Credit facilities

The Company’s primary credit facility

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

million multicurrency

revolver (the “Revolver”), a $

million term loan (the “U.S.

Loan”), each with the Company as borrower,

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

Loan” and together with the “U.S.

“Term Loans”)

with Quaker Chemical B.V.,

a Dutch subsidiary of the Company as borrower, each

with a five year term maturing in

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

may designate additional

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

million at the Company’s

request if there are lenders who agree to accept additional commitments and

the Company has satisfied certain other conditions.

Borrowings under the Credit Facility bear interest at a base rate or LIBOR plus an

applicable margin based upon the Company’s

consolidated net leverage ratio.

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

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

currency LIBOR successor rate.

The variable interest

rate incurred on the outstanding borrowings under the Credit Facility during

the three months ended March 31, 2022 was

The Company, its wholly

owned subsidiary,

Quaker Chemical B.V.,

as borrowers, Bank of America, N.A., as administrative

Dollar swing line lender and letter of credit issuer,

and the other lenders party thereto, entered into a credit agreement on

August 1, 2019, as amended (the “Original Credit Facility”).

The Original Credit Facility was comprised of a $

multicurrency revolver (the “Original Revolver”), a $

million term loan (the “Original U.S.

Loan”), each with the

Company as borrower, and a $

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

Quaker Chemical B.V.,

a Dutch subsidiary of the Company as borrower,

each with a five-year term, maturing in

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

During June 2022, the Company,

and its wholly owned subsidiary,

Quaker Houghton B.V.,

as borrowers, Bank of America, N.A.,

as administrative agent, U.S.

Dollar swing line lender and letter of credit

issuer, Bank of America Europe Designated Active

Company, as Euro

Swing Line Lender, certain guarantors and other lenders

entered into an amendment to the Original Credit Facility

(the “Amended Credit Facility”).

The Amended Credit Facility established

million Euro equivalent senior secured

term loan (the “Amended Euro Term

Loan”), (B) a new $

million senior secured term loan (the “Amended U.S.

and (C) a new $

million senior secured revolving credit facility (the “Amended Revolver”).

The Company has the right to

increase the amount of the Amended Credit Facility by an aggregate amount

not to exceed the greater of $

Consolidated EBITDA, subject to certain conditions including the agreement

to provide financing by any lender providing such

In addition, the Amended Credit Facility also:

(i) eliminated

the requirement that material foreign subsidiaries must guaranty the Original Euro

(ii) replaced

Dollar borrowings reference rate from LIBOR to SOFR;

(iii) extended the maturity date of the Original Credit Facility from August 2024 to June 2027;

(iv) effected certain other changes to the Original Credit

Facility as set forth in the Amended Credit Facility.

The Company used the proceeds of the Amended Credit Facility to repay

all outstanding loans under the Original Credit Facility,

unpaid accrued interest and fees on the closing date under the Original

Credit Facility and certain expenses and fees.

denominated borrowings under the Amended Credit Facility bear

interest, at the Company’s election, at

the base rate or term SOFR

plus an applicable rate ranging from

% for term SOFR loans and from

% for base rate loans, depending

upon the Company’s consolidated

net leverage ratio.

Loans based on term SOFR also include a spread adjustment equal to

Borrowings under the Amended Credit Facility denominated in currencies other

Dollars bear interest at the

alternative currency term rate plus the applicable rate ranging from

The Amended Credit Facility contains affirmative

and negative covenants, financial covenants and events of default, including

without limitation restrictions on (a) the incurrence of additional

indebtedness;

(b) investments in and acquisitions of other businesses,

lines of business and divisions;

and (d) dispositions of assets.

Dividends and

share repurchases are permitted in annual amounts not exceeding the greater

million annually and

% of consolidated

EBITDA if there is no default.

All restricted payments may be made if there is no default and if the consolidated

net leverage ratio is

Financial covenants contained in the Amended Credit Facility include

a consolidated interest coverage ratio test and a

consolidated net leverage ratio test.

The consolidated net leverage ratio at the end of a quarter may not be

subject to a permitted increase during a four-quarter

period after certain acquisitions.

The Company has the option of replacing the

consolidated net leverage ratio test with a consolidated senior net leverage ratio

test if the Company issues certain types of unsecured

notes, subject to certain limitations.

Events of default in the Amended Credit Facility include without limitation

defaults for non-

payment, breach of representations and warranties, non-performance

of covenants, cross-defaults, insolvency,

and a change of control

in certain circumstances.

The occurrence of an event of default under the Amended Credit Facility could result

in all loans and other

obligations becoming immediately due and payable and the Amended

Credit Facility being terminated.

As of June 30, 2022, the

Company was in compliance with all of the Amended Credit Facility covenants.

The weighted average variable interest rate incurred on the outstanding

borrowings under the Original Credit Facility and the

Amended Credit Facility during the six months ended June 30,

2022 was approximately

As of June 30, 2022, the interest rate on

the outstanding borrowings under the Amended Credit Facility was approximately

In addition to paying interest on outstanding

principal under the Original Credit Facility,

the Company was required to pay a commitment fee ranging from

depending on the Company’s consolidated

net leverage ratio under the Original Revolver in respect of the unutilized commitments

As part of the Amended Credit Facility,

the Company is required to pay a commitment fee ranging from

% related to unutilized commitments under the Amended Revolver,

depending on the Company’s

consolidated net leverage

The Company had unused capacity under the Amended Revolver of

approximately $

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

million, net of bank letters of credit of

approximately $

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

the Company is required to pay

a commitment fee ranging from

% depending on the Company’s consolidated

net leverage ratio to the lenders under the

Revolver in respect of the unutilized commitments thereunder.

The Company has unused capacity under the Revolver of

million, as of June 30, 2022.

The Company previously capitalized $

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

Original Credit Facility.

Approximately $

million, net of bank letters of credit of approximately $

million, as of March 31, 2022.

million of the capitalized costs were attributed to the Original Term

recorded as a direct reduction of Long-term debt on the Condensed

Consolidated Balance Sheet.

Approximately $

million of the

capitalized costs were attributed to the Original Revolver and recorded

within Other assets on the Condensed Consolidated Balance

These capitalized costs were being amortized into Interest expense over

term of the Original Credit Facility.

of December 31, 2021, the Company had $

million of debt issuance costs recorded as a reduction of Long-term debt attributable

the Original Credit Facility.

As of December 31, 2021, the Company had $

million of debt issuance costs recorded within Other

Quaker Chemical Corporation

2 unchanged sentences

unless otherwise stated)

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

The Company’s initial consolidated net debt to

consolidated adjusted EBITDA ratio could not exceed 4.25 to 1, with step downs in the permitted ratio over the term of the Credit

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

The Company’s

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

Facility also prohibits the payment of cash dividends if the Company is in default or if the amount of the dividend paid annually

exceeds the greater of $ 50.0 million and 20 % of consolidated adjusted EBITDA unless the ratio of consolidated net debt to

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

As of March 31, 2022 and

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

The Term Loans

have quarterly

principal amortization during their

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

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

During the three months ended March 31, 2022,

the Company made quarterly amortization payments related to

the Term Loans totaling

The Credit Facility is

guaranteed by certain of the Company’s

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

the Company and the domestic subsidiary guarantors, subject to certain

customary exclusions.

The obligations of the Dutch borrower

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

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

% of its total Term Loans.

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

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

in November 2019, the Company entered into $

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

plus an applicable margin as provided in the Credit Facility,

based on the Company’s consolidated

net leverage ratio.

At the time the

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

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

an applicable margin, was

See Note 17 of Notes to Condensed Consolidated Financial Statements.

The Company capitalized $

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

the Credit Facility.

assets attributable to the Original Credit Facility.

Prior to executing the Amended Credit Facility,

the Company had $

debt issuance costs recorded as a reduction of Long-term debt attributable

to the Original Credit Facility and $

million of debt

issuance costs recorded within Other assets attributable to the Original

Credit Facility.

In connection with executing the Amended Credit Facility,

the Company recorded a loss on extinguishment of debt of

approximately $

million of the capitalized costs were attributed to the Term

Loans and recorded as a direct reduction of long-

term debt on the Company’s Consolidated

million which includes the write-off of certain previously

unamortized deferred financing costs as well as a

portion of the third-party and creditor debt issuance costs incurred

to execute the Amended Credit Facility.

Also in connection with

executing the Amended Credit Facility,

during the second quarter of 2022, the Company capitalized $

million of certain third-party

and creditor debt issuance costs.

Approximately $

million of the capitalized costs were attributed to the Amended Euro Term

and Amended U.S.

These costs were recorded as a direct reduction of Long-term debt on the

Condensed Consolidated

Balance Sheet.

Approximately $

million of the capitalized costs were attributed to the

Revolver and recorded within other assets on the Company’s

Consolidated Balance Sheet.

These capitalized costs are being

amortized into interest expense over the

term of the Credit Facility.

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

Company had $

million and $

million, respectively,

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

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

million and $

million, respectively,

of debt issuance costs recorded

within other assets.

million of the capitalized costs were attributed to the Amended Revolver and

recorded within

Other assets on the Condensed Consolidated Balance Sheet.

These capitalized costs, as well as the previously capitalized costs that

were not written off will collectively be amortized into Interest expense

over the five-year term of the Amended Credit Facility.

June 30, 2022, the Company had $

million of debt issuance costs recorded as a reduction of Long-term

debt on the Condensed

Consolidated Balance Sheet and $

million of debt issuance costs recorded within Other assets on the Condensed Consolidated

Balance Sheet.

The Original Credit Facility required the Company to fix its variable interest

rates on at least

% of its total Original Term

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

exposure to variable interest rate risk associated with

the Original Credit Facility,

in November 2019, the Company entered into $

million notional amounts of three-year interest rate

swaps at a base rate of

% plus an applicable margin as provided in the Original Credit Facility,

based on the Company’s

consolidated net leverage ratio.

At the time the Company entered into the swaps, and as of June 30, 2022,

the aggregate interest rate

on the swaps, including the fixed base rate plus an applicable margin,

The Amended Credit Facility does not require the

Company to fix variable interest rates on any portion of its borrowings.

As of June 30, 2022, the Company has not amended its

current interest rate swaps.

See Note 17 of Notes to Condensed Consolidated Financial Statements.

Industrial development bonds

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

As of June 30, 2022 and December 31, 2021, the Company had fixed rate,

industrial development authority bonds totaling $

million in principal amount due in

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

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

Bank lines of credit and other debt obligations

The Company has certain unsecured bank lines of credit and discounting

facilities in certain foreign subsidiaries, which are not

The Company has certain unsecured bank lines of credit and discount

ing facilities in certain foreign subsidiaries, which are not

collateralized.

3 unchanged sentences

and capital lease obligations.

capacity under these arrangements as of March 31, 2022 was approximately

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

above, the Company’s only other

capacity under these arrangements as of June 30, 2022 was approximately

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

sheet arrangements include certain financial and other guarantees.

The Company’s total bank letters of

credit and guarantees

outstanding as of March 31, 2022 were approximately $

The Company’s total bank letters of credit and guarantees

outstanding as of June 30, 2022 were approximately $ 5 million.

The Company incurred the following debt related expenses included

2 unchanged sentences

Three Months Ended

Six Months Ended

Interest expense

Amortization of debt issuance costs

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

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

at which the Company’s total debt

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

Based on the variable interest rates associated with the Amended

Credit Facility, as of June 30,

2022 and the Original Credit

Facility as of December 31, 2021, the amounts at which the Company’s

total debt were recorded are not materially different from their

fair market value.

Quaker Chemical Corporation

2 unchanged sentences

unless otherwise stated)

On June 30, 2022, annual maturities on the Amended Credit Facility in the next

five fiscal years (excluding the reduction to

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

are as follows:

For the remainder of 2022

For the year ended December 31, 2023

For the year ended December 31, 2024

For the year ended December 31, 2025

For the year ended December 31, 2026

For the year ended December 31, 2027

Total payments

Note 15 – Accumulated Other Comprehensive Income

1 unchanged sentence

of accumulated other comprehensive income

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

(“AOCI”) for the three and six months ended June 30, 2022 and 2021:

Gain (Loss) in

1 unchanged sentence

Sale Securities

Balance at December 31, 2021

Balance at March 31, 2022

Other comprehensive (loss) income before

2 unchanged sentences

Related tax amounts

Balance at June 30, 2022

Balance at March 31, 2021

Other comprehensive income (loss) before

reclassifications

Amounts reclassified from AOCI

Related tax amounts

Balance at June 30, 2021

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

Gain (Loss) in

Available-for-

Sale Securities

Balance at December 31, 2021

3 unchanged sentences

Related tax amounts

Balance at March 31, 2021

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

relate to the Company’s equity

Balance at June 30, 2022

Balance at December 31, 2020

Other comprehensive (loss) income before

reclassifications

Amounts reclassified from AOCI

Related tax amounts

Balance at June 30, 2021

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

to the Company’s equity

interest in a

2 unchanged sentences

The amounts reported in other

comprehensive income for non-controlling interest are related to

currency translation adjustments.

comprehensive income for noncontrolling interest are related to currency

translation adjustments.

Note 16 – Fair Value

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measurement as follows:

Measurements at March 31, 2022

Measurements at June 30, 2022

Using Fair Value

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for like instruments with similar credit ratings and

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

2022 or December 31, 2021, respectively,

The Company did not hold any Level 3 investments as of June 30, 2022 or

December 31, 2021, respectively,

disclosures have not been included.

Note 17 – Hedging Activities

In order to satisfy certain requirements of the Credit Facility as well as to manage

In order to satisfy certain requirements of the Original Credit Facility as well as to manage

the Company’s exposure to variable

rate risk associated with the Credit Facility,

interest rate risk associated with the Original Credit Facility,

in November 2019, the Company entered into $

million notional amounts of three

year interest rate swaps.

million notional

interest rate swaps.

See Note 14 of Notes to Condensed Consolidated Financial Statements.

These interest rate swaps are

designated as cash flow hedges and, as such, the contracts are marked-to-market

at each reporting date and any unrealized gains or

losses are included in AOCI to the extent effective and reclassified to interest

expense in the period during which the transaction

effects earnings or it becomes probable that the forecasted

transaction will not occur.

These interest rate

swaps are designated as cash flow hedges and, as such, the contracts are marked-to-market

at each reporting date and any unrealized

gains or losses are included in AOCI to the extent effective

and reclassified to interest expense in the period during which the

transaction affects earnings or it becomes probable

that the forecasted transaction will not occur.

In June 2022, the Company amended the Original Credit Facility.

See Note 14 of Notes to the Condensed Consolidated Financial

The Amended Credit Facility does not require the Company to fix variable

interest rates on any portion of its borrowings.

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

derivative instruments, which are Level 2 measurements, are as

Quaker Chemical Corporation

2 unchanged sentences

unless otherwise stated)

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

derivative instruments, which are Level 2 measurements, are as

Condensed Consolidated

Balance Sheet Location

1 unchanged sentence

Interest rate swaps

Prepaid expenses and other current assets

Other accrued liabilities

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

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

Derivatives designated as cash flow hedges:

Interest rate swaps

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

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

Three Months Ended

Six Months Ended

Amount and location of expense reclassified

3 unchanged sentences

each of which allows for net settlement of all

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

or termination of any one contract.

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

on or termination of any one contract.

accordance with the Company’s accounting

5 unchanged sentences

(“ACP”), a wholly owned subsidiary,

operating a groundwater treatment system to hydraulically contain groundwater

contamination emanating from ACP’s site,

principal contaminant of which is perchloroethylene.

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

closure of the groundwater treatment system, but continues to operate

this system while in discussions with the relevant authorities.

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

agreed to operate two groundwater treatment systems, so as to hydraulically

contain groundwater contamination emanating from

ACP’s site until such time as the concentrations

of contaminants are below the current Federal maximum contaminant

level for four

consecutive quarterly sampling events.

In 2014, ACP ceased operation

at one of its two groundwater treatment systems, as it had met

the above condition for closure.

As of June 30, 2022, ACP continues to operate

the second groundwater treatment system, while the

Company discusses with the relevant authorities whether the second groundwater

treatment system meets the conditions for closure.

In addition, the Santa Ana Regional Water

Quality Control Board requested that ACP conduct additional indoor

and outdoor soil

vapor testing on and near the ACP site to confirm that ACP continues to

meet the applicable local soil vapor standards.

As of June 30,

2022, ACP performed such testing and is awaiting the review of the results from

the Santa Ana Regional Water

Quality Control

As of June 30, 2022, the Company believes that the range of potential-known

liabilities associated with the balance of the ACP

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injury due to exposure to asbestos.

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

changes to the facts

or circumstances of this previously disclosed matter,

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

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

this subsidiary, it is currently

projected that the

subsidiary’s total liability over

for these claims is approximately $

During the three and six months ended June 30, 2022, there have been no

significant changes to

the facts or circumstances of this previously disclosed matter,

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

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

it is currently projected

that the subsidiary’s total liability over

the next 50 years for these claims is approximately $

million (excluding costs of defense).

3 unchanged sentences

These environmental matters primarily require the Company

to perform long-term monitoring as

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

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

significant changes to the facts or circumstances of these previously disclosed

matters, aside from on-going monitoring and

maintenance activities and routine payments associated with each of

The Company continually evaluates its obligations

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

projected costs to be incurred over the next

, has estimated

to perform long-term monitoring and

maintenance at each of the applicable sites.

During the three and six months ended June 30, 2022, there have been no significant

changes to the facts or circumstances of these previously disclosed matters,

aside from on-going monitoring and maintenance

activities and routine payments associated with each of the sites.

The Company continually evaluates its obligations related to such

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

matters, and based on historical costs incurred and projected costs to be incurred

over the next approximately 30 years, has estimated

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

1 unchanged sentence

million and $

as of March 31, 2022, for which $

million as of June 30, 2022, for which $

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

liabilities on the

Condensed Consolidated Balance Sheet as of March 31, 2022.

Company’s Condensed Consolidated

Balance Sheet as of June 30, 2022.

Comparatively, as of December

31, 2021, the Company

31, 2021, the Company had

million accrued for with respect to these matters.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

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

outcome of other unrelated environmental matters, that

it has made adequate accruals for costs associated with other environmental

problems of which it is aware.

Approximately $

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

respectively, to provide

for such anticipated future

environmental assessments and remediation costs.

Although there can be no assurance regarding the outcome of other

unrelated environmental matters, the Company believes that it

has made adequate accruals for costs associated with other environmental problems

for which it is aware, and has accrued $

as of both June 30, 2022 and December 31, 2021, respectively,

to provide for such anticipated future environmental assessments and

remediation costs.

The Company previously disclosed in its 2021 Form 10-K that during the first six months

of 2021, one of the Company’s

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

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

that had been previously charged and paid.

The matter specifically related to companies’ rights to exclude the state tax on goods

circulation (a valued-added-tax or VAT

equivalent, known in Brazil as “ICMS”) from the calculation of certain additional indirect

taxes (specifically the program of social integration (“PIS”) and contribution

for the financing of social security (“COFINS”)) levied

by the Brazilian States on the sale of goods.

In May 2021, the Brazilian Supreme Court concluded that ICMS should

not be included

in the tax base of PIS and COFINS, and confirmed the methodology for calculating the

PIS and COFINS tax credit claims to which

taxpayers are entitled.

The Company’s Brazilian entities had previously

filed legal or administrative disputes on this matter and are

entitled to receive tax credits and interest dating back five years preceding the

date of their legal claims.

As a result of these court

rulings in the first six months of 2021, the Company recognized non-income

tax credits of

million BRL or approximately $

million, which includes approximately $

million for the PIS and COFINS tax credits as well as interest on these tax credits of $

The tax credits to which the Company’s

Brazilian subsidiaries are entitled are claimable once registered with the Brazilian

tax authorities which the Company subsequently completed.

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

the Company currently anticipates using the full amount of credits during the

five year period of time permitted.

In connection with obtaining regulatory approvals for the Combination,

1 unchanged sentence

Houghton were divested in August 2019.

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

The Company previously disclosed

in its 2021 Form 10-K that in July 2021, the entity that

acquired these divested product lines submitted an indemnification claim

2 unchanged sentences

The Company responded to the subject matters of the

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

consistent with the Company’s expectations

indemnification claim and during the first quarter of 2022, the

matter was resolved consistent with the Company’s

expectations and

position that there were no amounts owed by the Company.

3 unchanged sentences

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

During the three

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

During the six

months ended June 30, 2022, there have been no significant changes to

the facts or circumstances of these previously disclosed

4 unchanged sentences

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

all available information and discussions with its insurance adjuster

and insurance carrier, that the losses were covered

all available information and discussions with its insurance adjuster and

insurance carrier, that the losses were covered under

Company’s property insurance

5 unchanged sentences

for losses incurred) of $

million as of March 31, 2022.

million as of June 30, 2022.

The Company is party to other litigation which management currently

7 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements