What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 1323 added, 939 removed, 333 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.

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”).

“Combination” refers to the legacy Quaker combination with Houghton

International, Inc.

(“Houghton”) on August 1, 2019.

Executive Summary

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

offshore, can, mining, and metalworking companies.

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

in-class technology,

offshore, container,

mining, and metalworking companies.

Our high-performing, innovative and sustainable solutions are backed

best-in-class technology,

deep process knowledge, and customized services.

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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%.

Overall, the Company’s second

quarter of 2022 performance reflected continued progress navigating

through a myriad of

financial, economic and geopolitical headwinds, including persistent and

significant raw material cost escalation and overall

inflationary pressures, supply chain and logistics challenges,

production and distribution disruptions due to COVID-19 related actions

in China, the direct and indirect impacts of the ongoing war in Ukraine

and foreign currency volatility.

Despite these challenges, net

sales in the second quarter of 2022 were a record $492.4 million, representing

an increase of approximately 13% compared to $435.3

million in the second quarter of 2021.

This was primarily driven by an increase in selling price and product mix of approximately

22% and additional net sales from acquisitions of 1%, partially offset

by a decline in organic sales volumes of 4% and the unfavorable

impact from foreign currency translation of 6%.

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

strategic price

increases implemented to help offset the ongoing inflationary

pressures that began during 2021 and have continued into 2022.

decline in organic sales volumes was primarily attributable

to COVID-19 related disruptions in China, the wind-down of the tolling

agreement for products previously divested related to the Combination,

the impact of the war in Ukraine and the Company’s

value-based pricing initiatives.

The Company generated net income in the second quarter of 2022 of $14.3

million, or $0.80 per diluted share, compared to net

income of $33.6 million, or $1.88 per diluted share in the second quarter of

Excluding non-recurring and non-core items in each

period, the Company’s second

quarter of 2022 non-GAAP earnings per diluted share were $1.32 compared

to $1.82 in the prior year

quarter and the Company’s current

quarter adjusted EBITDA was $58.5 million compared to $70.1 million in

the second 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,

the current quarter due to a significant increase in raw material

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

chain disruptions, the unfavorable impact of foreign

currency, and to a lesser extent,

by higher selling, general and administrative expenses (“SG&A”).

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 first quarter of 2022

operating performance in each of its four reportable segments:

Consolidated Operations Review in the Operations

section of this Item, below.

The Company’s second quarter

of 2022 operating performance in each of its four reportable segments:

(i) Americas;

Middle East and Africa (“EMEA”);

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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 net sales benefitted year-over-year from double-digit

increases in selling price and product mix and additional net sales from

acquisitions, while those increases in net sales for most

segments were partially offset by lower organic

sales volumes and the unfavorable impact of foreign currency translation.

volumes for the Global Speciality Businesses increased in the second

quarter of 2022 compared to the prior year quarter due to strong

demand for this segment’s products

Operating earnings for the Global Specialty Businesses and Americas

increased compared to the

prior year quarter, whereas operating earnings

for Asia/Pacific and EMEA declined, due to the persistent and significant

pressures on raw materials and other costs, the impact of COVID-19 disruptions

in China, and the negative impact of foreign currency

translation, partially offset by continued price

Sequentially, operating earnings increased

in Global Speciality Businesses

and the Americas driven by higher selling prices, and was relatively consistent

in Asia/Pacific.

Operating margins for the three

aforementioned segments increased sequentially,

as price realization was able to help offset the inflationary pressures

on each of the

segment’s gross margins.

Additional 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.

in the Operations section of this Item, below.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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

the Company does business.

Company has now operated in this COVID-19 environment for

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.

The Company had a net operating cash outflow of $8.4 million in the first six months

of 2022 as compared to a net operating cash

outflow of $9.6 million in the first six months of 2021.

The net operating cash outflow in both periods reflects a significant working

capital investment primarily related to higher accounts receivable due to

the increase in net sales as well as higher inventory due

primarily to the rising cost of raw materials and to a lesser extent a build in certain

inventory stock 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.

Overall, the Company delivered another quarter of strong net sales growth,

driven by strong price realization and above market

The expected decline in earnings was primarily driven by ongoing inflationary

pressures, COVID-19 disruptions in China,

unfavorable currency translation, geopolitical issues and other disruptions

that impacted our customers and end markets.

Notwithstanding, we delivered double-digit year-over-year

increases in selling price and largely stabilized the Company’s

margins on a sequential basis despite continued increases

in our costs.

Looking at the remainder of 2022, the Company’s

remains on executing on items within its control.

The Company is encouraged by the momentum in its business and resilience of its

end markets, with some regional differences.

The Company continues to work with its customers to get the needed pricing to

the persistent inflationary pressures on its margin while

also exhibiting continued cost controls.

Despite significant uncertainty

caused by several macroeconomic factors, the Company

continues to expect to deliver sequential gross margin expansion

growth in the second half of 2022.

On-going impact of COVID-19

The global outbreak of COVID-19 in March of 2020 has negatively impacted

all locations where the Company does business.

Although the Company has now operated in this COVID-19 environment

for more than 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 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

prolonged pandemic and resurgences of the outbreak

including as new variants continue to emerge, and continued restrictions on

to-day life and business operations such as recent restrictions in China as well as 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 are 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.

Given this ongoing uncertainty,

Company cautions that its future results of operations could be significantly

adversely impacted by COVID-19.

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

and adversely impacted by COVID-19.

circumstances have presented and are expected to continue to present challenges

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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.

COVID-19 has had a material impact on its 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

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

The Company has taken steps to protect the health and

is to protect the health and safety of its employees and customers, while working to ensure business

continuity to meet customers’ needs.

During the pandemic, the Company has taken incremental steps to protect

the health and

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

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expenses implementing these health and safety policies.

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.

All of the Company’s more than 30 production

facilities worldwide are open

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

they are operating.

The Company 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 relatively high.

Differing government responses

to these reported cases continues to evolve and 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 conducts

business and when our customers’ businesses

will recover to pre-COVID-19 levels.

Though the Company was able to supply customers with value added solutions,

as a result of

the government-imposed quarantine and lockdown measures implemented

at the end of March 2022 and continuing in effect until

early June 2022, the Company’s Shanghai,

China-based locations were significantly impacted.

The negative impact of those measures

on our operations and liquidity was experienced during the second quarter of 2022

and the ultimate impact will depend on how

quickly the Chinese economy recovers from the quarantine and lockdown

measures that were temporarily implemented.

actions the Company has 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

necessary as conditions continue to evolve.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Impact of Political Conflicts

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

operations which subjects

This subjects the Company

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

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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

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

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

bring inherent risks such as the potential

for supply chain disruptions, increased costs of resources including oil, decreased

trade activity and other consequences related to

economic or other sanctions.

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 markets.

conflict between Russia and Ukraine has had 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

restrictions including closures of air space.

If this conflict continues or expands, it could increase the costs, risks and adverse impacts

from these new challenges.

The Company and its customers and suppliers may also be the subject of increased cyber-attacks.

During the second quarter of 2022, the Company decided to cease its operations

The Company’s operations

conflict areas including Russia, Ukraine and Belarus historically represented

less than 2% of the Company’s consolidated net

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.

The Company’s primary exposure

in the conflict areas related to

outstanding customer accounts receivable.

The Company is actively monitoring its outstanding Russian receivables for collections

and has recorded incremental allowances

for doubtful accounts where warranted.

Liquidity and Capital Resources

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

$161.6 million.

At June 30, 2022, the Company had cash and cash equivalents of $202.3

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

The $37.2 million increase in cash and cash equivalents was the net result of $78.6

million of cash

provided by financing activities partially offset by $8.4 million

of cash used in operating activities, $24.4 million of cash used in

investing activities and $8.6 million negative impact due to the effect

of foreign currency translation.

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

Net cash flows used in operating activities were $8.4 million in the first six 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.

operating activities of $9.6 million in the first six months of 2021.

The net operating cash outflow in both periods reflects working

capital investment primarily related to higher accounts receivable due to

the increase in net sales and higher inventory due primarily to

the rising cost of raw materials and to a lesser extent a build in certain inventory

in response to global supply chain and logistics

The slight improvement in operating cash flow year-over-year

is a result of a lower working capital investment partially

offset by lower earnings in the first six months of 2022 compared

to the first six months of 2021.

Net cash flows used in investing activities were $24.4 million in the

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.

first six months of 2022 compared to $21.7 million in the first

six 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

See Note 2 of Notes to Condensed Consolidated Financial Statements in Item 1 of

Net cash flows provided by financing activities were $78.6 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.

See Note 2 of Notes

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

The Company’s primary credit facility

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

revolver (the

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

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

a $150.0 million (as of

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

Loan” and together with the U.S.

Loan”, the “Term Loans”)

six months of 2022 compared to net cash flows

used in financing activities of $4.4 million in the first six 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, which was amended

and extended, as further described

below, in the second

quarter of 2022.

In addition, the Company paid $14.9 million of cash dividends during the first six months

2022, a $0.7 million or 5% increase in cash dividends compared to the prior

The Company, its wholly

owned subsidiary,

Quaker Chemical B.V.,

a Dutch subsidiary of the Company as borrower,

each with a five year term maturing in August 2024.

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

the Company may designate additional borrowers.

maximum amount available under the Credit Facility can be increased by

up to $300.0 million at the Company’s request

lenders who agree to accept additional commitments and the Company has

satisfied certain other conditions.

Borrowings under the

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

based on the Company’s consolidated

net leverage ratio.

weighted average interest rate incurred on the outstanding borrowings

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

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”).

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.

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 Company used the proceeds of the

Amended Credit Facility to repay all outstanding loans under the Original

Credit Facility, as well as accrued interest

and fees, and to

terminate the revolving credit commitments under the Original Credit

Quaker Chemical Corporation

Management’s Discussion and Analysis

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

The Company’s initial consolidated net

consolidated adjusted EBITDA ratio could not exceed 4.25 to 1,

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

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

EBITDA ratio may not exceed 3.75 to 1.

Company’s consolidated

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

term of the agreement.

Credit Facility also prohibits the payment of cash dividends if the Company

is in default or if the amount of the dividends 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

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

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

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

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 20% of its total Term

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

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

The Company’s Amended Credit

Facility is comprised of a $500.0 million multicurrency revolver,

a $600.0 million term loan and

a $150.0 million (as of June 17, 2022) Euro equivalent term loan (collectively,

the “Amended Term Loans”)

with the Company and

Quaker Houghton B.V.,

as borrowers, each with a five-year term maturing in June 2027.

Subject to the consent of the Administrative

Agent and certain other conditions, the Company may designate additional

The Company has the right to increase the

amount of the Amended Credit Facility by an aggregate amount not

to exceed the greater of (i) $300 million and (ii) 100% of

Consolidated EBITDA, subject to certain conditions, including

the agreement to provide financing by any Lender providing any such

Dollar-denominated borrowings

under the Amended Credit Facility bear interest, at the Company’s

election, at the base

rate or term Secured Overnight Financing Rate (“SOFR”) plus an applicable

rate ranging from 1.00% to 1.75% for term SOFR loans

and from 0.00% to 0.75% for base rate loans, depending upon the

Company’s consolidated net leverage

Loans based on term

SOFR also include a spread adjustment equal to 0.10% per annum.

Borrowings under the Amended Credit Facility denominated in

currencies other than U.S.

Dollars bear interest at the alternative currency

term rate plus the applicable rate ranging from 1.00% to

In addition to paying interest on outstanding principal under

the Amended Credit Facility, the Company

is required to pay a

commitment fee ranging from 0.15% to 0.275% depending on the

Company’s consolidated net leverage

ratio to the Lenders under the

Amended Revolver in respect of the unutilized commitments thereunder.

The Amended Credit Facility contains affirmative

and negative covenants, financial covenants and events of default that are

customary for agreements of this nature.

The Amended Credit Facility contains a number of customary business covenants,

without limitation restrictions on (a) the incurrence of additional

indebtedness by the Company or certain of its subsidiaries, (b)

investments in and acquisitions of other businesses, lines of business and

divisions by the Company or certain of its subsidiaries, (c)

the payment of dividends or capital stock purchases by the Company

or certain of its subsidiaries and (d) dispositions of assets by the

Company or certain of its subsidiaries.

Dividends and share repurchases are permitted in annual amounts

not exceeding the greater of

$75 million annually and 25% 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 less than 2.50

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

greater than 4.00 to 1.00,

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

debt, subject to certain customary limitations.

Customary 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,

change of control of the Company 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

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

rates on at least 20% 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 $170.0 million notional

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

plus an applicable margin as provided in the Credit Facility,

based on the Company’s consolidated

net leverage ratio.

At the time the

Company entered into the swaps, and as of 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

costs in connection with executing the Credit Facility.

Approximately $15.5 million of the capitalized costs were attributed to the Term

Loans and recorded as a direct reduction of long-

term debt on the Company’s 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

amounts of three year interest rate

swaps at a base rate of 1.64% 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.

The Company previously capitalized $23.7 million of certain third-party

debt issuance costs in connection with the Original

Credit Facility.

Approximately $15.5 million of the capitalized costs were attributed

to the Original Term Loans and recorded

direct reduction of Long-term debt on the Condensed Consolidated

Balance Sheet.

Approximately $8.3 million of the capitalized

costs were attributed to the Original Revolver and recorded within Other

assets on the Condensed Consolidated Balance Sheet.

capitalized costs were being amortized into Interest expense over

the five-year term of the Original Credit Facility.

As of December

31, 2021, the Company had $8.0 million of debt issuance costs recorded

as a reduction of Long-term debt attributable to the Original

Credit Facility.

As of December 31, 2021, the Company had $4.3 million of debt issuance

costs recorded within Other assets

attributable to the Original Credit Facility.

Prior to executing the Amended Credit Facility,

the Company had $6.6 million of debt

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

to the Original Credit Facility and $3.5 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 $6.8 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 $2.2 million of certain third-party

debt issuance costs.

Approximately $0.7 million of the capitalized

costs were attributed to the Amended Euro Term

Loan and Amended U.S.

These costs were recorded as a direct reduction

of Long-term debt on the Condensed Consolidated Balance Sheet.

Approximately $1.5 million of the capitalized costs were attributed

to the Amended Revolver and recorded within Other assets on the

Condensed Consolidated Balance Sheet.

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

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

term of the Amended Credit Facility.

As of June 30, 2022, the Company had $2.2 million of debt issuance

costs recorded as a

reduction of Long-term debt on the Condensed Consolidated Balance Sheet

and $4.8 million of debt issuance costs recorded within

Other assets on the Condensed Consolidated Balance Sheet.

As of June 30, 2022, the Company had Amended Credit Facility borrowings outstanding

of $977.6 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.

As of December 31,

the Company had Original Credit Facility borrowings outstanding of

$889.6 million.

The Company has unused capacity under

the Amended Revolver of approximately $268 million, net of bank letters of

credit of approximately $4 million, as June 30, 2022.

The Company’s other debt

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

-related loans,

which totaled $11.5 million and $11.8

million as of June 30, 2022 and December 31, 2021, respectively.

Total unused capacity under

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.

these arrangements as of June 30, 2022 was approximately $28 million.

The Company’s total net debt as of June

30, 2022 was $786.7

The Company incurred $8.3 million of total Combination, integration

and other acquisition-related expenses in the first six

months of 2022, which includes $2.4 million of other expenses related to

indemnification assets, described in the Non-GAAP

Measures section of this Item below.

Comparatively, in the first six months

of 2021, the Company incurred $7.6 million of total

Combination, integration 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 included $0.5 million of accelerated depreciation.

The Company had aggregate net cash outflows of

approximately $9.2 million related to the Combination, integration and other acquisition

-related expenses during the first six months

of 2022 as compared to $14.8 million during the first six months of 2021.

During the first six months of 2022, the Company incurred

$6.2 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 long-term integration

to further optimize its footprint, processes and other functions will continue

potentially extend into the next several years.

Quaker Houghton’s Management

7 unchanged sentences

manufacturing and non-manufacturing facilities.

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,

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

by period related to its uncertain tax position

However, should the entire liability be

paid, the amount of the payment may be reduced by up to $7.2 million as a result of

offsetting benefits in other tax jurisdictions.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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

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 2022 and into 2023.

The Company made cash

payments related to the settlement of restructuring liabilities under

the QH Program during the first six months of 2022 of

approximately $0.8 million compared to $4.2 million in the first six months

As of June 30, 2022, the Company’s

gross liability for uncertain tax positions, including interest and penalties, was $21.9 million.

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

flows by period

related to its uncertain tax position liability.

However, should the entire liability be paid,

the amount of the payment may be reduced by up to $6.9 million as a result of offsetting

benefits in other tax jurisdictions.

In 2021, two of the Company’s locations

11 unchanged sentences

an insurance receivable associated with these events of $0.9

million as of March 31, 2022.

million as of June 30, 2022.

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

5 unchanged sentences

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

acquisition integration and optimization,

acquisition integration and optimization, pension plan

contributions, capital expenditures, other business opportunities (including

1 unchanged sentence

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.

goals and other potential known or anticipated contingencies.

The Company believes it has sufficient

additional liquidity to support its operating requirements and to 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 Amended

Credit Facility, tax obligations

and other long-term liabilities.

The Company’s liquidity

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.

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 organic investments.

and amount of potential capital requirements cannot be determined

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

actual and projected demand for our products, specialty chemical indust

ry conditions, competitive factors, and the condition of

financial markets, among others.

Non-GAAP Measures

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

The information in this Form 10-Q 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 meaningful supplemental

The Company believes these non-GAAP financial measures provide meaningful

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.

1 unchanged sentence

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

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

in net (loss) 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

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

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.

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 investors, analysts,

and peers in our industry as well as by management in assessing the operating

performance of the Company on a consistent basis.

Additionally, the

3 unchanged sentences

less depreciation and amortization, interest

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

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

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

items identified in the reconciliation of net income

expense, net, and taxes on income before equity in net (loss) income

of associated companies, in each case adjusted, as applicable, for

any depreciation, amortization, interest or tax impacts resulting from

the non-core items identified in the reconciliation of net income

attributable to the Company to adjusted EBITDA.

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

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

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

1 unchanged sentence

GAAP earnings per diluted share provide transparent and useful information

and are widely used by analysts, investors, and

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

performance of the Company on a consistent basis.

Quaker Chemical Corporation

Management’s Discussion and Analysis

and are widely used by investors, analysts, and peers in

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

of the Company on a consistent basis.

Certain of the prior period non-GAAP financial measures presented

in the following tables have been adjusted to conform with

current period presentation.

The following tables reconcile the Company’s

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

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

noted, except per share amounts):

non-GAAP financial measures (unaudited) to their most

directly comparable GAAP (unaudited) financial measures

(dollars in thousands unless otherwise noted, except per share amounts):

Non-GAAP Operating Income and Margin Reconciliations

Three Months Ended

Six Months Ended

Operating income

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

Combination, restructuring 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)

Executive transition costs (c)

Russia-Ukraine conflict related expenses (d)

Other charges (e)

Non-GAAP operating income

Non-GAAP operating margin (%) (n)

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and

Non-GAAP Net Income Reconciliations

Non-GAAP operating margin (%) (l)

Quaker Chemical Corporation

Management’s Discussion and Analysis

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin

and Non-GAAP Net Income Reconciliations

Three Months Ended

Six Months Ended

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)

Depreciation and amortization (a)(j)

Interest expense, net

Taxes on income before

equity in net (loss) income

of associated companies (k)

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

Combination, restructuring 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)

Executive transition costs (c)

Russia-Ukraine conflict related expenses (d)

Brazilian non-income tax credits (g)

Loss on extinguishment of debt (h)

Other charges (e)

Adjusted EBITDA

Adjusted EBITDA margin (%) (n)

Adjusted EBITDA margin (%) (l)

Adjusted EBITDA

2 unchanged sentences

Taxes on income

before equity in net income of associated companies - adjusted

before equity in net income

of associated companies - adjusted (a)(k)

Non-GAAP net income

Quaker Chemical Corporation

Management’s Discussion and Analysis

Non-GAAP Earnings per Diluted Share Reconciliations

Three Months Ended

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

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

Six Months Ended

GAAP earnings per diluted share attributable to

Quaker Chemical Corporation common shareholders

Equity loss (income) in a captive insurance company

per diluted share (f)

Combination, restructuring and other

acquisition-related expenses per diluted share (a)

Strategic planning and transformation expenses per

diluted share (b)

Executive transition costs per diluted share (c)

Russia-Ukraine conflict related expenses per diluted share (d)

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

Loss on extinguishment of debt per diluted share (h)

Other charges per diluted share (e)

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

Non-GAAP earnings per diluted share (m)

Quaker Chemical Corporation

Management’s Discussion and Analysis

Combination, restructuring and other acquisition-related expenses include

certain legal, financial, and other advisory and

consultant costs incurred in connection with the Combination integration

activities including internal control readiness and

remediation as well as costs incurred by the Company associated with the

QH restructuring program,

which was initiated in the

third quarter of 2019 as part of the Company’s

plan to realize cost synergies associated with the Combination

These amounts

also include expense associated with other of the Company’s

acquisitions, including cost associated with selling inventory from

acquired businesses which was adjusted to fair value as part of purchase

These costs are not indicative of the future

operating performance of the Company.

Approximately $0.1 million and $0.2 million for the three and six months ended

30, 2022, respectively,

and approximately $0.4

million and $0.5 million in the three and six months ended June 30, 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 net income of associated

companies - adjusted reflects the impact of these

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

$0.4 million and $2.4

million, respectively,

of other expense related to an indemnification asset, which is included

in the caption “Combination, restructuring and other

acquisition-related expenses” in the reconciliation of GAAP earnings 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 attributable to Quaker

Chemical Corporation to Adjusted EBITDA and Non-GAAP net income

three and six months ended June 30, 2021,

the Company recorded $0.1 million $0.5 million, respectively,

of accelerated depreciation related to certain of the Company’s

facilities, which is included in the caption “Combination, restructuring

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.

the six months ended June 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 “Combination,

restructuring and other acquisition-related

expenses” in the reconciliation of GAAP earnings 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 attributable to Quaker Chemical

Corporation to Adjusted EBITDA and Non-GAAP net income.

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

respectively,

the Company recorded restructuring and related charges

of less than $0.1 million and $0.8 million, respectively,

$0.3 million and $1.5 million during the three and six months ended

June 30, 2021, respectively.

During the six months ended

June 30, 2021, the Company recorded $0.8 million related to the sale

of inventory from acquired businesses which was adjusted

to fair value.

See Notes 2, 7, 10 and 11 of Notes to Condensed Consolidated

Financial Statements, which appear in Item 1 of this

Strategic planning and transformation expenses include certain consultant

5 unchanged sentences

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

Restructuring and related charges represent the

costs incurred by the Company associated with the QH restructuring program

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

plan to realize cost synergies associated with the

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

See Note 7 of Notes to

Condensed Consolidated Financial Statements, which appears in Item

1 of this Report.

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 represent the charges incurred by

an inactive subsidiary of the Company and

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

These charges are not indicative of the future

operating performance of the Company.

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.

with the executive transition that took place in 2021 as well as the search,

hiring and transition for other officers during the first

six months of 2022.

These expenses are one-time in nature and not indicative of the future operating performance

Russia-Ukraine conflict related expenses represent the direct costs associated

with the Company’s

exit of operations in Russia

during the second quarter of 2022, primarily for employee separation

benefits, as well as costs associated with establishing

specific reserves or changes to existing reserves for trade accounts receivable

within the Company’s EMEA reportable segment

due to the economic instability associated with certain customer accounts receivables

which have been directly impacted by the

current economic conflict between Russia and Ukraine or the Company’s

decision to end operations in Russia.

These expenses

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

Other charges include charges incurred

by an inactive subsidiary of the Company as a result of the termination of restrictions on

insurance settlement reserves, non-service components of the Company’s

pension and postretirement net periodic benefit income

and the foreign currency remeasurement impacts associated with the

Company’s affiliates whos

local economies are designated

as hyper-inflationary under U.S.

These expenses are not indicative of the future operating performance

of the Company.

Equity loss (income)

in a captive insurance company represents the after-tax

See Notes 1 and 9 of Notes to Condensed Consolidated Financial Statements,

which appear in Item 1 of this Report.

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.

(“Primex”), a captive insurance company.

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

1 unchanged sentence

of accounting.

The loss (income)

attributable to

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 income in each period.

These costs are not indicative of the future

operating performance of the Company.

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

the foreign currency remeasurement impacts associated

with the Company’s affiliates

whose local economies are designated as hyper-inflationary under

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

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 non-income tax

credits arising from the claim and court ruling are non-recurring

and not indicative of the future operating performance of the

See Note 18 of Notes to Condensed Consolidated Financial Statements, which appears

in Item 1 of this Report.

In connection with executing the Amended Credit Facility,

the Company recorded a loss on extinguishment of debt of

approximately $6.8 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.

These expenses are

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.

The impacts of certain discrete tax items include changes in valuation

1 unchanged sentence

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.

Both of these discrete items related to tax law changes in

due to the issuance of final foreign tax credit regulations during the

Additionally, the Company

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.

Financial Statements, which appears

in Item 1 of this Report.

Depreciation and amortization for the three and six months ended June 30,

2022 includes approximately $0.2 million and $0.5

million, respectively,

and for the three and six months ended June 30, 2021 includes $0.3 million and $0.6 million,

respectively,

of amortization expense recorded within equity in net loss (income)

of associated companies in the Company’s

Consolidated Statements of income, which is attributable to the amortization

of the fair value step up for the Company’s

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

Taxes on income

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

of any current and deferred

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

in the reconciliation of net income attributable 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

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

of any current and

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

items presented in the reconciliation of net income

attributable to Quaker Chemical Corporation to adjusted EBITDA, and

was determined utilizing the applicable rates in the taxing

jurisdictions in which these adjustments occurred, subject to deductibility.

Combination, restructuring and other acquisition-

related expenses described in (a) resulted in a tax benefit of approximatel

$0.1 million and incremental taxes of $1.6 million for

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

compared to $1.6 million and $2.2 million for the three and six

months ended June 30, 2021, respectively.

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

incremental taxes of $0.7 million and $1.4 million for the three and

six months ended June 30, 2022, respectively.

transition costs described in (c) resulted in incremental taxes of $0.2

million and $0.3 million for the three and six months ended

June 30, 2022, respectively,

compared to $0.1 million and $0.2 million for the three and six months ended

June 30, 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.

Russia-Ukraine conflict related expenses described in (d) resulted in incremental taxes

of $0.2 million and $0.5

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

Other charges described in (e) resulted in incremental

taxes of less than $0.1 million and a tax benefit of less than $0.1 million for

the three and six months ended June 30, 2022,

respectively, compared

to $0.1 million during each of the three and six months ended June 30, 2021.

Brazilian non-income tax

credits described in (g) resulted in incremental taxes of $5.3 million during

the three and six months ended June 30, 2021.

on extinguishment of debt described in (h) resulted in incremental

taxes of $1.6 million during the three and six months ended

June 30, 2022.

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

$3.5 million and $6.9 million for

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

compared to $1.9 million and $1.5 million for the three and six

months ended June 30, 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 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

obligations as of June 30, 2022.

The Company’s off

sheet items outstanding as of June 30, 2022 includes approximately $5

million of total bank letters of credit and guarantees.

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

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 $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 $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 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

See Note 14 of Notes to Condensed

Consolidated Financial Statements in Item 1 of this Report.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Consolidated Operations Review – Comparison of the Second Quarter of 2022

with the Second Quarter of 2021

Net sales were $492.4

million in the second quarter of 2022 compared to $435.3 million in the second quarter

sales increase of $57.1 million or 13% quarter-over-quarter reflects increases

in selling price and product mix of approximately 22%

and additional net sales from acquisitions of 1% partially offset

by the unfavorable impact from foreign currency translation

a decline in organic sales volumes of approximately 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 into 2022.

The decline in organic sales volumes was primarily attributable

to COVID-19 related production disruptions in

China, the tolling agreement for products previously divested related

to the Combination, the ongoing war in Ukraine and 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

COGS were $342.8 million in the second quarter of 2022 compared

to $280.8 million in the second quarter of 2021.

in COGS of $62.0 million or 22% was driven by the continued increases in the

Company’s global raw material and

supply chain and

logistics costs compared to the prior year.

Gross profit in the second quarter of 2022 decreased $4.9 million or 3%

from the second quarter of 2021.

The Company’s

reported gross margin in the second quarter of 2022 was 30.4%

compared to 35.5% in the second quarter of 2021.

The Company’s

current quarter gross margin reflects the continued significant

increase in raw material and other input costs experienced throughout

the second quarter of 2022 and the impacts of constraints on the global

supply chain, partially offset by the Company’s

ongoing value-

based pricing initiatives.

SG&A in the second quarter of 2022 increased $7.2 million or 7% compared

to the second quarter of 2021 due primarily to the

impact of sales increases on direct selling costs, inflation driven higher

operating costs, costs associated with strategic planning and

2 unchanged sentences

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

translation compared to the prior year.

During the second quarter of 2022, the Company incurred $1.8 million

of Combination, integration and other acquisition-related

operating expenses primarily for professional fees related to the Houghton

1 unchanged sentence

Comparatively,

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

the Company incurred $6.7 million of expenses in the prior year second quarter,

primarily due to various professional

6 unchanged sentences

associated with the Combination.

The Company incurred Restructuring and related (credits) charges

for reductions in headcount and

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

of a credit of less than $0.1 million and a charge

of $0.3 million during the second quarters of 2022 and 2021, respectively.

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

Operating income in the second quarter of 2022 was $31.9 million compared

to $38.8 million in the second quarter of 2021.

Excluding non-recurring and non-core expenses that are not indicat

ive 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

$38.8 million compared to $46.4 million in the prior year second quarter primarily

due to the lower gross profit and higher SG&A

described above.

The Company had other expense, net, of $8.4 million in the second quarter

of 2022 compared to other income, net of $14.0

million in the second quarter of 2021.

The second quarter of 2022 includes a loss on extinguishment of debt of $6.8 million

with the refinancing of the Original Credit Facility while the second quarter

of 2021 included $13.3 million of income related to

certain non-income tax credits recorded by the Company’s

Brazilian subsidiaries.

See the Non-GAAP Measures section of this Item,

In addition, the Company incurred higher foreign exchange transaction

losses in the second quarter of 2022 compared to the

prior year quarter.

Interest expense, net, increased $0.9 million compared to the second

quarter of 2021 as a result of increases in the average

borrowings outstanding in the second quarter of 2022 compared

to the second quarter of 2021 coupled with an increase in interest

rates quarter-over-quarter.

The Company’s effective

tax rates for the second quarters of 2022 and 2021 were 8.1% and 32.2%, respectively.

The Company’s

effective tax rate for the second quarter of 2022 was largely

driven by state tax benefits, a reduction in reserves for uncertain tax

positions relating to management fees, a deferred tax benefit associated with

an intercompany asset transfer,

withholding taxes for

increased forecasted dividends, and the effects of

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

In addition, the Company

incurred higher tax expense during the second quarter of 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.

Comparatively,

the prior year quarter effective tax rate was impacted by changes

in foreign tax credit

Quaker Chemical Corporation

Management’s Discussion and Analysis

valuation allowances, tax law changes in foreign jurisdictions as well as the tax impacts

of certain non-income tax credits recorded by

the Company’s Brazilian subsidiaries.

Excluding the impact of non-core items in each quarter,

described in the Non-GAAP Measures

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

tax rates for both the second quarters of 2022 and 2021 would

have been approximately 24%.

The 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, including the high technology incentive at

one of our subsidiaries based in China which is currently up for triennial renewal,

the treatment of certain acquisition-related costs and

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

tax benefits, among other factors.

Equity in net income of associated companies decreased $2.9 million

in the second quarter of 2022 compared to the second

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 second quarters of 2022 and 2021.

Foreign exchange unfavorably impacted the Company’s

second quarter of 2022 results by approximately 11% driven

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 second quarter.

Consolidated Operations Review – Comparison of the First Six Months of 2022

with the First Six Months of 2021

Net sales were $966.6 million in the first six months of 2022 compared to

$865.0 million in the first six months of 2021.

sales increase of $101.5 million or 12% year-over-year reflects increases in selling

price and product mix of approximately 19% and

additional net sales from acquisitions of 2% partially offset by a decline

in organic sales volumes of approximately 5% and the

unfavorable impact from foreign currency translation 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 into 2022.

The decline in sales volumes was primarily attributable to the comparison to a very strong

first half of 2021, and

primarily the first quarter of 2021, where customers replenished

their supply chains, the impact of lower volumes related to the tolling

agreement for products previously divested related to the Combination,

the ongoing war in Ukraine, COVID-19 disruptions in China

and the Company’s ongoing

value-based pricing initiatives.

COGS were $670.9 million in the first six months of 2022 compared

to $554.4 million in the first six months of 2021.

increase in COGS of $116.5 million or

21% was driven by the 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 six months of 2022 decreased $15.0 million or 5%

from the first six months of 2021.

The Company’s

reported gross margin in the first six months of 2022 was 30.6% compared

to 35.9% in the first six months of 2021.

The Company’s

current year gross margin reflects a significant increase in

raw material and other input costs and 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 six months of 2022 increased $14.6 million or 7% compared

to the first six months of 2021 due primarily to the

impact of sales increases on direct selling costs, inflation driven 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 compared to the prior year.

In 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

During the first six months of 2022, the Company incurred $5.9 million of

Combination, 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 $12.5 million of expenses in the prior year’s

first six months, 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.

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 incurred Restructuring and related charges for reductions

1 unchanged sentence

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 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.

of $0.8 million and $1.5 million during the first six

months of 2022 and 2021, respectively.

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

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 first quarters of 2022 and 2021 were 13.1% and 24.2%, 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

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

Operating income in the first six months of 2022 was $61.3 million compared

to $83.7 million in the first six months of 2021.

Excluding 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 year non-GAAP operating income decreased to $78.0

million for the first six months of 2022 compared to $100.1 million in

the prior year’s first six months primarily due to the lower gross

profit and higher SG&A described above.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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.

The Company had other expense, net, of $10.6 million in the first six months

of 2022 compared to other income, net of $18.7

million in the first six months of 2021.

The first six months of 2022’s results include

$6.8 million loss on extinguishment of debt

related to the Company’s

refinancing the Original Credit Facility and other expenses of $2.4 million related

to the impact of certain

adjustments to the Company’s

Combination related indemnification receivables, while the prior

year’s first six months of 2022 other

income includes $13.3 million of income related to certain non-income

tax credits recorded by the Company’s

Brazilian subsidiary as

well as a $5.4 million gain on the sale of certain held-for-sale

real property assets.

See the Non-GAAP Measures section of this Item,

In addition, the Company incurred higher foreign exchange transaction

losses in the first six months of 2022 compared to the

prior year period.

Interest expense, net, increased $0.8 million compared to the first six months

of 2021, due to an increase in the average

borrowings outstanding in the first six months of 2022 coupled with an

increase in interest rates in the current year as compared to the

The Company’s effective

tax rates for the first six months of 2022 and 2021 were 10.9% and 28.4%, respectively.

Company’s eff

ective tax rate for the six months ended June 30, 2022 was largely driven

by changes in the valuation allowance for

foreign tax credits due to recently issued legislative guidance, impacts due

to settlements reached on certain tax audits, state tax

benefits, a reduction in reserves for uncertain tax positions relating to management

fees, a deferred tax benefit associated with an

intercompany asset transfer, withholding

taxes for increased forecasted dividends and the effects of lower

pre-tax earnings and the mix

of such earnings.

Comparatively, the prior year six month

effective tax rate was impacted by the sale of a subsidiary which included

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

Combination, certain U.S.

tax law changes and the tax impact of certain

income tax credits recorded by the Company’s

Brazilian subsidiaries.

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

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

the Company estimates that its effective

tax rates for the first six

months of 2022 and 2021 would have been approximately 26% and 24%,

respectively.

In addition, the Company incurred higher tax

expense during the six months ended June 30, 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

Equity in net income of associated companies decreased $7.3 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

in the first six months of 2022 compared to the first six

months 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

1 unchanged sentence

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

in both the first quarters of 2022 and 2021.

in both the first six months 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

first six months of 2022 results by approximately 7% driven by the

impact from foreign currency translation on earnings as well as higher

foreign exchange transaction losses in the current year as

compared to the prior year’s first six months.

Reportable Segments Review - Comparison of the Second Quarter of 202

with the Second Quarter of 2021

The Company’s reportable

18 unchanged sentences

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

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

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

accounting, are not included in segment operating earnings.

are not included in segment operating earnings.

Other items not specifically identified with the Company’s

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

Americas represented approximately 35% of the Company’s

consolidated net sales in the first quarter of 2022.

consolidated net sales in the second quarter of 2022.

The segment’s net

sales were $172.7 million, an increase of $33.1 million or 24% compared

to the first quarter of 2021.

to the second 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 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.

due to higher selling price and product mix of 28%, additional net sales from

acquisitions of 1% and a favorable impact from foreign

currency translation of 1%, partially offset by a 6% decline

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 continued through the second quarter of 2022.

The current quarter decline in organic sales volumes was

primarily driven by the tolling agreement for previously divested products

related to the Combination, the Company’s

ongoing value-

based pricing initiatives and lower volumes into the automotive industry

due to the semiconductor supply constraints, partially offset

by net new business wins.

This segment’s operating earnings were

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

$33.8 million, an increase of $0.1 million compared to the second

quarter of 2021.

The increase in segment operating earnings was primarily driven by higher net sales which

were partially offset by

on-going inflationary pressures on our business.

EMEA represented approximately 25% of the Company’s

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 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

consolidated net sales in the second quarter of 2022.

The segment’s

net sales were $123.1 million, a decrease of $0.4 million compared

to the second quarter of 2021.

This was driven by higher selling

price and product mix of 21% and additional net sales from acquisitions of

approximately 1%, partially offset by the unfavorable

impact of foreign currency translation of 15% 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

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

sales volumes of 7%.

The increase in selling price and

product mix was primarily driven by price increases implemented

to help offset the significant increases in raw material and

input costs that began during 2021 and continued through the second

quarter of 2022.

The decline in organic sales volumes was

primarily driven by the current geopolitical and macroeconomic pressures

including the direct and indirect impacts of the ongoing war

in Ukraine and the impact of the economic and other sanctions by other

nations on Russia in response to the war, as well as lower

volumes associated with the Company’s

ongoing value-based pricing initiatives, the tolling agreement for products

divested related to the Combination and softer economic conditions in the

The unfavorable foreign exchange impact was

primarily due to the strengthening of the U.S.

dollar against the euro

as this exchange rate averaged 1.07 in the second quarter of 2022

compared to 1.20 in the second quarter of 2021.

This segment’s operating earnings were

$13.3 million, a decrease of $10.1 million or

43% compared to the second quarter of 2021.

The decrease in segment operating earnings was primarily a result of higher net sales

which were more than offset by lower gross margins

due to inflationary pressures on the Company’s

costs exceeding its value-based

pricing actions.

Operating earnings were also negatively impacted by foreign currency translation.

Asia/Pacific represented approximately 20% of the Company’s

consolidated net sales in the second quarter of 2022.

segment’s net sales were $99.8

million, an increase of $8.3 million or 9% compared to the second quarter

The increase in net

sales was driven by higher selling price and product mix of 17% partially

offset by lower organic sales volumes of 4% and an

unfavorable impact from foreign currency translation of 4%.

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

price increases implemented to help offset the significant

increases in raw material and other input costs that began during 2021

continued through the second quarter of 2022, partially offset

by a net increase in volumes elsewhere in the region.

The decline in

organic sales volumes was primarily driven by lower

sales volumes in China as a result of the government imposed COVID-19

quarantine and related production disruptions implemented

at the end of March 2022 and continued throughout the second quarter of

The unfavorable foreign exchange impact was primarily due to the

strengthening of the U.S.

dollar against the Chinese

renminbi as this exchange rate averaged 6.61 in the second quarter of 2022

compared to 6.46 in the second quarter of 2021.

segment’s operating earnings were

$22.2 million, a decrease of $1.0 million or 4% compared to the second quarter

decrease in segment operating earnings was primarily a result of higher

net sales which was more than offset by lower gross margins

due to inflationary pressures and higher costs as a result of the COVID-19 production

disruptions in China.

Global Specialty Businesses

Global Specialty Businesses represented approximately 20% of the

Company’s consolidated net sales in the

second quarter of

The segment’s net sales were $96.8

million, an increase of $16.2 million or 20% compared to the second quarter of 2021.

increase in net sales was driven by higher selling price and product

mix of 11%, additional net sales from acquisitions of 3% and

increase in organic sales volumes of 10%, partially offset

by the unfavorable impact from foreign currency translation

increase in selling price and product mix was 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

through the second quarter of 2022.

The increase in

organic sales volumes was primarily attributable

to a continued favorable demand environment for this segment’s

unfavorable foreign exchange impact was primarily due to the strengthening

dollar against the euro as described in the

EMEA section above.

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

were $27.8 million, an increase of $3.6 million or 15% compared to the

second quarter of 2021.

The increase in segment operating earnings reflects the higher net sales partially offset

by lower gross

margins in the current year and slightly higher operating

expenses due to inflationary pressures.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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 first quarter of 2022.

Reportable Segments Review - Comparison of the First Six months of 2022

with the First Six months of 2021

Americas represented approximately 34% of the Company’s

consolidated net sales in the first six months of 2022.

The segment’s

net sales were $326.9 million, an increase of $52.4 million or 19% 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 the first six months of 2021.

The increase in net sales

was due to higher selling price and product mix of 26%, additional net sales from

acquisitions of 1% and the favorable impacts of

foreign currency translation of 1%, partially offset by

a decrease in organic sales volumes of 9%.

The increase in selling price and

product mix was 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.

input costs that began during 2021 and have continued into 2022.

The current year decline in organic sales volumes was primarily

driven by lower sales volumes into the automotive end market, the tolling

agreement for previously divested products related to the

Combination, the prior year period comparison which included a

strong rebound from COVID-19 impacts and the Company’s

ongoing value-based pricing initiatives, partially offset

by net new business wins.

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

million, a decrease of $2.9 million or 4% compared to the first six months of

The decrease in segment operating earnings was

primarily a result of higher net sales which was more than offset by

lower gross margins driven by inflationary pressures.

EMEA represented approximately 26% of the Company’s

consolidated net sales in the first six months of 2022.

The segment’s

net sales were $248.7 million, an increase of $5.5 million or 2% compared

to the first six months of 2021.

The increase in net sales

was due to higher selling price and product mix of 19% and additional

net sales from acquisitions of 2%, partially offset by the

unfavorable impact of foreign currency translation of 12% and

a decrease in organic sales volumes of 7%.

The increase in selling

price and product mix was 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 into 2022.

The decline in organic sales volumes was primarily driven by

the current geopolitical and macroeconomic pressures including

the direct and indirect impacts of the ongoing war in Ukraine and the

impact of the economic and other sanctions by other nations on Russia in respons

to the war, lower volumes associated with the

Company’s ongoing value

-based pricing initiatives, the tolling agreement for products previously divested

related to the Combination,

the prior year period comparison which included a strong rebound from

COVID-19 impacts,

and softer economic conditions in the

region in the current period, partially offset by net new business wins.

The unfavorable foreign exchange impact was primarily due

the strengthening of the U.S.

dollar against the euro as this exchange rate

averaged 1.09 in the first six months of 2022 compared to

1.21 in first six months of 2021.

This segment’s operating earnings were

$30.0 million, a decrease of $18.6 million or 38% compared

to the first six months of 2021.

The decrease in segment operating earnings was primarily a result of higher

net sales which was more

than offset by lower gross margins driven

by significant inflationary pressures and the negative impact of foreign

currency translation

year-over-year.

Asia/Pacific represented approximately 21% of the Company’s

consolidated net sales in the first six months of 2022.

segment’s net sales were $204.1

million, an increase of $15.8 million or 8% compared to the first six months of 2021.

The increase in

net sales was driven by higher selling price and product mix of 14% partially

offset by lower organic sales volumes of 4% and the

unfavorable impacts of foreign currency translation of 2%.

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

price increases implemented to help offset the significant

increases in raw material and other input costs that began during 2021

continued into 2022.

The current year decline in organic sales volumes was primarily driven by

lower sales volumes in China as a

result of the government imposed COVID-19 quarantine and related

production disruptions implemented at the end of March 2022

and which continued throughout the second quarter of 2022 and the prior

year comparison which included a strong rebound from

COVID-19 impacts as customers replenished their supply chains, partially

offset by net new business wins.

This segment’s operating

earnings were $44.1 million, a decrease of $6.6 million or 13% compared

to the first six months of 2021.

The decrease in segment

operating earnings was primarily a result of higher net sales which was more

than offset by lower gross margins driven by significant

inflationary pressures and the unfavorable impact of foreign currency

Quaker Chemical Corporation

Management’s Discussion and Analysis

Global Specialty Businesses

1 unchanged sentence

Company’s consolidated net sales in the

first quarter of 2022.

first six months of

The segment’s net sales were $186.9

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

million, an increase of $27.9 million or 18% compared to the first six months of 2021.

The increase in net sales was driven by higher selling price and product

mix of 11%, an increase in organic sales volumes

additional net sales from acquisitions of 4%, partially offset

by the unfavorable impact from foreign currency translation of

approximately 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 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

$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.

The increase in selling price and product mix was 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 into 2022.

The increase in

organic sales volumes was primarily attributable

to a continued favorable demand environment for this segment’s

unfavorable foreign exchange impact was primarily

due to the strengthening of the U.S.

dollar against the euro described in the EMEA

section above.

This segment’s operating earnings

were $52.9 million, an increase of $4.5 million or 9% compared to the first six

months of 2021.

The increase in segment operating earnings reflects higher net sales partially offset

by lower gross margins driven by

inflationary pressures and the negative impact of foreign currency

translation year-over-year.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Factors That May Affect Our Future Results

26 unchanged sentences

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;

and Russian conflict and

actions taken by various governments and governmental organizat

ions in response;

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

the potential for a variety of macroeconomic events, including the possibility of global

or regional recessions, inflation

generally, cost increases in

prices of raw materials such as oil and increasing interest rates, to impact the value

assets or result in asset impairments;

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

9 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

1 unchanged sentence

other public statements we make may turn out to be wrong.

This can occur as a result of inaccurate assumptions or as a consequence

This can occur as a result of inaccurate assumptions or as a conseque

of known or unknown risks and uncertainties.

21 unchanged sentences

risks and uncertainties faced by the Company,

as well as the

potential for significant increases in raw material costs, supply chain

disruptions, customer financial instability,

worldwide economic

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,

inflationary pressures, including the potential for significant increases

in raw material costs, supply chain disruptions, customer

financial instability,

rising interest rates and the possibility of economic recession, worldwide economic

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

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.

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.

to acquisitions and the

Quaker Chemical Corporation

Management’s Discussion and Analysis

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

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

from expected and historical results.

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

For more information regarding these

risks and uncertainties as well as certain additional risks that we face,

refer to the Risk Factors section, which appears in Item 1A in

risks and uncertainties as well as certain additional risks that we face, refer

to the Risk Factors section, which appears in Item 1A in

our 2021 Form 10-K and in our quarterly and other reports filed from time to

21 unchanged sentences

you should not consider that information part of this Report.

Quantitative and Qualitative Disclosures About Market

We have evaluated

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

change to that information.

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