What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 975 added, 869 removed, 787 unchanged (70% of the section changed)

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

offshore, container,

mining, and metalworking companies.

offshore, container, mining,

and metalworking companies.

Our high-performing, innovative and sustainable solutions are backed

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Pennsylvania, located near Philadelphia in the U.S.

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

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 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, below.

The Company’s second quarter

Overall, the Company delivered solid results in the third quarter of 2022

despite continued and persistent financial, economic and

geopolitical headwinds, including ongoing raw material cost escalation

and overall inflationary pressures, supply chain and logistics

challenges, the direct and indirect impacts of the ongoing war in Ukraine, Zero-COVID

policies in China, and foreign currency

Notwithstanding these challenges, net sales in the third quarter of 2022

were $492.2 million, an increase of 10% compared

to $449.1 million in the third quarter of 2021.

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

approximately 25% and additional net sales from acquisitions of 1%, partially

offset by a decline in organic sales volumes of 9% and

an unfavorable impact from foreign currency translation of 7%.

The increase in selling price and product mix was primarily the result

of strategic price increases implemented to offset the

ongoing inflationary pressures that began at the onset of 2021 and have escalated

throughout 2021 and into the first nine months of 2022.

The decline in organic sales volumes was primarily attributable to

market conditions, particularly in Europe and Asia/Pacific, the wind-down

of the tolling agreement for products previously divested

related to the Combination and the direct and indirect impacts of the ongoing

war in Ukraine.

The Company generated net income in the third quarter of 2022 of $25.9 million,

or $1.44 per diluted share, compared to net

income of $31.1 million, or $1.73 per diluted share in the third quarter

Excluding non-recurring items in each period, the

Company’s third quarter of 2022

non-GAAP earnings per diluted share were $1.74 compared to $1.63 in the prior

year quarter and the

Company’s current quarter

adjusted EBITDA was $70.3 million compared to $66.2 million in the third quarter

These results

were primarily driven by higher net sales in the current quarter coupled with

an improvement in gross margins compared to the prior

year quarter, partially offset

by the unfavorable impact of foreign currency translation and higher selling,

general and administrative

expenses (“SG&A”) as a result of significant year-over-year

inflationary pressures.

See the Non-GAAP Measures section of this Item

below, as well as other

items discussed in the Company’s

Consolidated Operations Review in the Operations section of this Item,

The Company’s third quarter

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

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consolidated performance as each of 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

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

increases in selling price and product mix, while those increases in net sales were

partially offset by the significant and unfavorable

impact of foreign currency translation.

All geographic segments had lower organic sales volumes, however

organic sales volumes for

the Global Speciality Businesses increased in the third quarter of

2022 compared to the prior year quarter due to continued end market

Operating earnings for the Global Specialty Businesses and Americas increased compared

to the prior year quarter, driven

by higher net sales and an improvement in margins.

Operating earnings for Asia/Pacific were relatively flat year-over-year

net sales were offset by an improvement in the segment’s

EMEA operating earnings declined compared to the prior year due

to the persistent and significant inflationary pressures on raw materials and

other costs 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,

in the Operations section of this Item, below.

Additional details of each segment’s operating

performance are further

discussed in the Company’s Reportable

Segments Review, in the Operations

section of this Item, below.

The Company had a net operating cash outflow of $26.3 million in the first nine

months of 2022 compared to net operating cash

flow of $2.5 million in the first nine months of 2021.

The net operating cash outflow year-over-year reflects lower year-to-date

operating performance in 2022 compared to 2021 as well as the continued

significant current year working capital investment

primarily related to higher accounts receivable due to the increase in net

sales, higher inventory due to higher raw material costs and

lower levels of accounts payable.

The key drivers of the Company’s

operating cash flow and working capital are further discussed in

the Company’s Liquidity

and Capital Resources section of this Item, below.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company had a net operating cash 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.

driven by strong price realization, both sequentially

and year-over-year.

Coupled with an improvement in gross margin, these factors contributed

to the Company’s current quarter

earnings growth despite the ongoing inflationary pressures, unfavorable

foreign currency translation, macroeconomic and geopolitical

challenges and other disruptions that impacted the Company’s

customers and end markets.

Looking at the remainder of 2022,

Company remains focused on executing on items within its control

as it manages through a continued uneven end market environment

and softer market conditions, primarily in Europe and Asia/Pacific.

The Company is encouraged by the resilience of its diversified

portfolio despite significant uncertainty caused by several macroeconomic

to expect to deliver further sequential

gross margin improvement in the fourth quarter

of 2022, as well as higher earnings in the second half of 2022 as compared to

half of 2022 and second half of 2021.

On-going impact of COVID-19

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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.

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 continuing restrictions in China,

as well as border controls or closures and transportation

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

To the extent that the Company’s

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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

While the 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 be necessary as conditions

continue to evolve.

Impact of Political Conflicts

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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

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

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restrictions including closures of air space.

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

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

from these new challenges.

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

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

The Company’s operations

The Company’s operations in the

conflict areas including Russia, Ukraine and Belarus historically represented

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Liquidity and Capital Resources

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

Total cash and cash equivalents

At September 30, 2022, the Company had cash and cash equivalents of

$138.9 million.

Total cash and cash equivalents was

$165.2 million at December 31, 2021.

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

The $26.3 million decrease in cash and cash equivalents was the net result of

$46.6 million of

cash provided by financing activities offset by $26.3 million of

cash used in operating activities, $29.6

million of cash used in

investing activities and a $17.0 million negative impact due to the effect

of foreign currency translation.

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 $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

Net cash flows used in operating activities were $26.3 million in the first nine

months of 2022 compared to net cash flows

provided by operating activities of $2.5 million in the first nine months

The decrease in net operating cash flow year-over-

year reflects lower first nine months of the year operating performance

in 2022 compared to 2021 as well as the continued significant

current year working capital investment primarily related to higher

accounts receivable due to the increase in net sales, higher

inventory due to an increase in costs 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.

challenges, as well as lower levels of accounts payable due to timing.

Net cash flows used in investing activities were $29.6 million in the

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

first nine months of 2022 compared to $30.1 million in the

first nine months of 2021.

The relatively consistent level of cash used in investing activities year-over-year

is the net 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,

partially offset by lower cash payments related to acquisitions as a result

of the level of acquisition

activity in each year.

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

Net cash flows provided by financing activities were $46.6 million in the first

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

nine months of 2022 compared to net cash flows

used in financing activities of $10.5 million in the first nine months

The increase in net cash flows was primarily related to a

larger 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 $22.3 million of cash dividends during the first nine

months of 2022, a $1.1 million or 5% increase in cash dividends compared

to the prior year.

The Company, its wholly

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

During June 2022, the Company,

and its wholly owned subsidiary,

During June 2022, the

Company, and its wholly owned

Quaker Houghton B.V.,

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terminate the revolving credit commitments under the Original Credit

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company’s Amended Credit

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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

Agent and certain other

conditions, the Company may designate additional borrowers.

has the right to increase the

amount of the Amended Credit Facility by an aggregate amount not

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Amended Revolver in respect of the unutilized commitments thereunder.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Amended Credit Facility contains affirmative

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the payment of dividends or capital stock purchases by the Company

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

or certain of its subsidiaries and (d) dispositions

of assets by the

Company or certain of its subsidiaries.

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$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

If the Company’s consolidated

net leverage ratio is less

than 2.50 to 1.00 then the Company is no longer subject to restricted payments

Financial covenants contained in the Amended Credit Facility include

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greater than 4.00 to 1.00,

subject to a permitted increase during a four quarter period

after certain acquisitions.

subject to a permitted increase during a four quarter period after certain

acquisitions.

The Company has the option of replacing the

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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.

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

2022, the aggregate interest

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

In October 2022, the Company’s interest rate

swap contracts expired.

Upon expiration, the Company is entitled to a cash payment from the counterparties, which

is materially

consistent with the fair value as of September 30, 2022.

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

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Also in connection with executing the Amended Credit Facility,

during the second quarter of

during the third quarter of

2022, the Company capitalized $2.2 million of certain third-party

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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

As of September 30, 2022, the Company had $2.1 million of debt issuance costs recorded

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

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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,

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.

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

outstanding of $941.2 million.

December 31, 2021, the Company had Original Credit Facility borrowings

outstanding of $889.6 million.

The Company has unused

capacity under the Amended Revolver of approximately $295

million, net of bank letters of credit of approximately $3 million, as

September 30, 2022.

The Company’s other debt obligations are

primarily industrial development bonds, bank lines of credit and

municipality-related loans, which totaled $12.9 million and $11.8

million as of September 30, 2022 and December 31, 2021,

respectively.

Total unused capacity under

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

these arrangements as of September 30, 2022 was approximately $12 million.

Company’s total net debt

as of September 30, 2022 was $815.2 million.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company incurred $10.4 million of total Combination, integration

and other acquisition-related expenses in the first six

and other acquisition-related expenses in the first nine

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

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Measures section of this Item below.

Comparatively, in the first six months

Comparatively, in the first nine months

of 2021, the Company incurred $13.6 million of total

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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.

approximately $11.5 million related to the

Combination, integration and other acquisition-related expenses during

the first nine

months of 2022 as compared to $20.0 million during the first nine months

During the first nine months of 2022, the

Company incurred $10.7 million of strategic planning and transformation

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 in

2022 and extend into the next several years.

Quaker Houghton’s Management

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with the Combination.

The QH Program includes restructuring

The QH Program included restructuring

and associated severance costs to reduce total headcount by approximately

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manufacturing and non-manufacturing facilities.

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.

The exact timing to complete all actions and final costs associated with the QH

Program will depend on a number of factors and are subject to change;

the Company has had reduction in headcount and site

closures under the QH Program in 2022 and expects final headcount reductions

to continue into 2023.

At this time, the Company does

not expect to incur material additional costs under the QH Program.

The Company made cash payments related to the settlement of

restructuring liabilities under the QH Program during the first nine months

of 2022 of approximately $1.8 million compared to $4.6

million in the first nine months of 2021.

As of September 30, 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 $6.4 million as a result of

offsetting benefits in other tax jurisdictions.

In 2021, two of the Company’s locations

suffered significant property damage as a result of flooding

maintains property insurance for all of its facilities globally.

and electrical fire.

Company maintains property and flood insurance for all of its facilities globally.

The Company, its insurance

adjuster and insurance carrier are actively

managing the remediation and restoration activities associated with both

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

based on all available information and discussions with its insurance

adjuster and insurance carrier, that the losses incurred

2021 were covered under the Company’s

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

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

an insurance receivable associated with these events of $0.9

million as of June 30, 2022.

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

1 of this Report.

adjuster and insurance

carrier are actively managing the remediation and restoration activities associated

with both of these events and at this time the

Company has concluded, based on all available information and discussions

with its insurance adjuster and insurance carrier,

losses incurred during 2021 were covered under the Company’s

property and flood insurance coverage, net of an aggregate deductible

of $2.0 million.

Through September 30, 2022, the Company has received payments from its insurers of

$3.9 million associated with

these events.

The Company has recorded an insurance receivable of $0.2 million as of September

See Note 18 of Notes to

Condensed Consolidated Financial Statements in Item 1 of this Report.

The Company believes that its existing cash, anticipated cash flows from

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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.

Critical Accounting Policies and Estimates

The Company’s critical accounting

policies and estimates, as set forth in its 2021

Form 10-K remain materially consistent.

However, due to the ongoing financial,

economic and geopolitical conditions impacting the Company,

the Company re-evaluated

certain of its estimates, most notably its estimates and assumptions with regards

to the fair value of its EMEA reporting unit during the

third quarter of 2022.

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.

The Company accounts for business combinations under

the acquisition method of accounting.

This method requires

the recording of acquired assets, including separately identifiable intangible

assets, at their acquisition date fair values.

Any excess of

the purchase price over the estimated fair value of the

identifiable net assets acquired is recorded as goodwill.

The determination of

the estimated fair value of assets acquired requires management’s

judgment and often involves the use of significant estimates and

When necessary, the Company

consults with external advisors to help determine fair value.

Goodwill and intangible assets that have indefinite lives are not amortized

and are required to be assessed at least annually for

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

test during the fourth

quarter of each year, or more frequently

if triggering events indicate a possible impairment.

The Company continually

financial performance, economic conditions and other recent developments

in assessing if a triggering event indicates that the carrying

values of goodwill, indefinite-lived, or long-lived assets are impaired.

The Company continues to monitor various financial, economic

and geopolitical conditions impacting the Company,

including the ongoing Russia-Ukraine war and the Company’s

decision to cease

operations in Russia, continued raw material cost escalation, supply

chain constraints and disruptions, as well as rising interest rates

and the cost of capital among other factors.

The Company concluded that these and other factors, which have and continue

the Company, did not

represent a triggering event during the third quarter of 2022, except for the Company’s

EMEA reporting unit

and the associated goodwill,

as well as the related asset group.

The Company concluded that during the third quarter of 2022 the

escalation of these events adversely impacted EMEA’s

financial performance and represented a triggering event.

As a result of this conclusion, the Company completed an interim impairment

assessment for its EMEA reporting unit, as well as

the related asset group, during the third quarter of 2022.

The Company concluded that the undiscounted cash flows exceeded

carrying value of the long-lived assets and it is not more likely than not that

an impairment exists.

In completing a quantitative

goodwill impairment test, the Company compares the reporting

unit’s fair value, primarily based

on future discounted cash flows, to

its carrying value in order to determine if an impairment charge

is warranted.

The estimates of future discounted cash flows involve

considerable management judgment and are based upon certain significan

assumptions including the weighted average cost of capital

as well as projected EBITDA, which includes assumptions related to

revenue growth rates, gross margin levels and operating

As a result of this interim impairment assessment, the estimated fair value of

the EMEA reporting unit exceeded its

carrying value by approximately 22% and the Company concluded

no impairment was warranted.

In completing the interim

quantitative impairment assessment, the Company used a WACC

assumption of approximately 10.0% and holding all other

assumptions constant, the WACC

would have to increase by approximately 1.8 percentage points

before the Company’s EMEA

reporting unit would be considered impaired.

In addition, holding EBITDA margins and all other assumptions constant,

Company’s compound

annual revenue growth rate during the entire projection period would need to decline

by approximately 3.0

percentage points before the Company’s

EMEA reporting unit would be considered impaired.

Similarly, holding reve

nue growth rates

and all other assumptions constant, the Company’s

average EBITDA margins throughout the entire projection

period would need to

decline by approximately 1.7 percentage points before the

Company’s EMEA reporting unit would be

considered impaired.

Notwithstanding the results of the Company’s

interim impairment assessment, if the Company is unable to successfully

implement selling price increases aimed at more than offsetting

raw material costs and ongoing inflationary pressures and the financial

performance of the EMEA reporting unit declines further,

or interest rates continue to rise and this leads to an increase in the cost of

capital, then it is possible these financial, economic and geopolitical conditions

could result in another triggering event for the EMEA

reporting unit in the future and could lead to a potential impairment.

In addition, if any of these financial, economic or geopolitical

conditions has a more significant adverse effect on

the Company, these could lead to a potential impairment

of the Company’s

goodwill or other indefinite-lived or long-lived assets.

Non-GAAP Measures

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information presented in accordance with GAAP.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company presents EBITDA which is calculated as net income attributable

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating income

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Russia-Ukraine conflict related expenses (d)

Facility remediation costs, net (f)

Other charges (e)

Non-GAAP operating income

Non-GAAP operating margin (%) (l)

Non-GAAP operating margin (%) (m)

Quaker Chemical Corporation

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income attributable to Quaker Chemical Corporation

Depreciation and amortization (a)(j)

Depreciation and amortization (a)(k)

Interest expense, net

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equity in net (loss) income

of associated companies (k)

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

of associated companies (l)

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

Combination, restructuring and other

3 unchanged sentences

Russia-Ukraine conflict related expenses (d)

Facility remediation (recovery) costs, net (f)

Brazilian non-income tax credits (g)

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Adjusted EBITDA

Adjusted EBITDA margin (%) (l)

Adjusted EBITDA margin (%) (m)

Adjusted EBITDA

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before equity in net income

of associated companies - adjusted (a)(k)

of associated companies - adjusted (a)(l)

Non-GAAP net income

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

GAAP earnings per diluted share attributable to

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Equity loss (income) in a captive insurance company

per diluted share (f)

per diluted share (i)

Combination, restructuring and other

4 unchanged sentences

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

Facility remediation (recovery) costs, net per diluted share (f)

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

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Other charges per diluted share (e)

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

Non-GAAP earnings per diluted share (m)

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

Non-GAAP earnings per diluted share (n)

Quaker Chemical Corporation

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certain legal, financial, and other advisory and

consultant costs incurred in connection with the Combination integration

activities including internal control readiness and

consultant costs incurred in connection with the Combination integrat

ion 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

QH restructuring program, which was initiated in the

third quarter of 2019 as part of the Company’s

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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

acquisitions, including certain legal, financial, and other advisory

and consultant costs incurred in connection with due diligence as well as costs associated

with selling inventory from acquired

businesses which was adjusted to fair value as part of purchase accounting.

These costs are not indicative of the future operating

performance of the Company.

Approximately $0.3 million and $0.5 million for the three and nine months

ended September 30,

2022, respectively,

and approximately $0.4

million and $0.5 million in the three and six months ended June 30, 2021,

and approximately $0.2 million and $0.7 million in the three and nine months ended September

respectively, of

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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,

During the nine months ended September 30, 2022, the Company recorded

$2.4 million 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.

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

recorded $0.2 million $0.7 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,

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.

During the nine months ended

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

certain held-for-sale real property assets related to

the Combination which is included in the caption “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 nine months ended September 30, 2022, respectively,

Company recorded restructuring and related credits of $1.4 million

and $0.6 million, respectively,

and $0.9 million and net

charges of $0.6 million during the three and nine months ended September

30, 2021, 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.

During the nine months ended

September 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

Financial Statements, which appear in Item

1 of this Report.

Strategic planning and transformation expenses include certain consultant

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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

nine months of 2022.

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

performance of the

Russia-Ukraine conflict related expenses represent the direct costs associated

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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

during 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.

These expenses are not indicative of the

future operating performance of the Company.

Other charges include charges incurred

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and the foreign currency remeasurement impacts associated with the

Company’s affiliates whos

Company’s affiliates whose

local economies are designated

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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.

(“Primex”), a captive insurance company.

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

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

of accounting.

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

Facility remediation (recovery) costs, net presents the costs associated

with remediation, cleaning and subsequent restoration costs

associated with property damages to certain of the Company’s

facilities, net of insurance recoveries received.

These charges are

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

of the Company.

See Note 18 of Notes to Condensed

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

Quaker Chemical Corporation

4 unchanged sentences

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.

The 2021 impact to

Non-GAAP earnings per diluted share reflects the tax only adjustment

related to the Brazilian Supreme Court ruling on the

taxability of interest income.

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

of the Company.

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,

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See Note 14 of Notes to Condensed Consolidated Financial

Statements, which appears

in Item 1 of this Report.

Statements, which appears 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.

(“Primex”), a captive insurance company.

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

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

of accounting.

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

The impacts of certain discrete tax items include changes in valuation

4 unchanged sentences

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 and six months ended June 30,

2022 includes approximately $0.2 million and $0.5

items related to the remeasurement of deferred taxes on the transfer

of intellectual property and the release of the reserves for

uncertain tax positions settled during the period and certain taxes, penalties,

and interest due as a result of the settlements.

Note 11 of Notes to Condensed Consolidated

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

Depreciation and amortization for the three and nine months ended

September 30, 2022 includes approximately $0.3 million and

$0.8 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.

and for the three and nine months ended September 30, 2021 includes $0.3 million

and $0.9 million,

respectively, of

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

in the Company’s

Condensed Consolidated Statements of income, which is attributable to

the amortization of the fair value step up for the

Company’s 50% interest in a joint venture

in Korea as a result of required purchase accounting.

Taxes on income

7 unchanged sentences

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.

related expenses described in (a) resulted in incremental taxes of approximately

million and $1.8 million for the three and

nine months ended September 30, 2022, respectively,

compared to $1.2 million and $3.4 million for the three and nine months

ended September 30, 2021, respectively.

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

incremental taxes of $1.0 million and $2.4 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,

nine months ended September 30, 2022, respectively.

Executive transition costs described in (c) resulted in incremental taxes of

$0.2 million and $0.5 million for the three and nine

months ended September 30, 2022, respectively,

compared to $0.1 million and $0.3 million for the three and nine months ended

September 30, 2021, respectively.

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

incremental taxes of less

than $0.1 million and $0.5

million for the three and nine months ended September 30, 2022,

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,

Other charges

described in (e) resulted in a tax benefit of less than $0.1 million and $0.1 million

for the three and nine months ended September

30, 2022, respectively,

and incremental taxes of less than $0.1 million and $0.1 million in the three and nine months ended

September 30, 2021.

Facility remediation (recovery) costs, net described in (f) resulted in a tax benefit

of $0.3 million in the

three and nine months ended September 30, 2022, respectively and

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

ended September 30, 2021.

Brazilian non-income tax credits described in (g) resulted in incremental

taxes of approximately $0.6

million and a tax benefit of $4.7 million during the three and nine months ended

September 30, 2021, respectively.

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

$1.6 million during the nine months ended September 30,

The impact of certain discrete items described in (j) resulted in a tax benefit of $0.5 million

and an incremental expense of

$6.4 million for the three and nine months ended September 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.

to a benefit of $6.5 million and

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

2021, respectively.

The Company calculates adjusted EBITDA margin

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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 June 30, 2022.

obligations as of September 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

balance sheet items outstanding as of September 30, 2022 includes approximately

$5 million of total bank letters of credit and

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

liquidity or capital resources.

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.

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

of Notes to Condensed Consolidated Financial Statements in Item

1 of this Report.

Consolidated Operations Review – Comparison of the Third

Quarter of 2022 with the Third Quarter of 2021

Net sales were $492.2 million in the third quarter of 2022 compared

to $449.1 million in the third quarter of 2021.

The net sales

increase of $43.1 million or 10% quarter-over-quarter reflects an increase

in selling price and product mix of 25% and additional net

sales from acquisitions of 1%, partially offset by a decline

in organic sales volumes of approximately 9% and the unfavorable impact

from foreign currency translation of 7%.

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

implemented to offset the significant increases in raw

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

The decline in organic sales volumes was primarily

attributable to softer end market conditions, particularly in Europe and

Asia/Pacific, the wind-down of the tolling agreement for products previously

divested related to the Combination and the impact of

the ongoing war in Ukraine, partially offset by net new

business wins, including the impact of the Company’s

ongoing value-based

pricing initiatives.

COGS were $331.5 million in the third quarter of 2022 compared to

$303.9 million in the third quarter of 2021.

The increase in

COGS of $27.5 million or 9% was driven by the continued increases in the Company’s

global raw material, manufacturing and supply

chain and logistics costs compared to the prior year.

Gross profit in the third quarter of 2022 increased $15.6 million or 11%

from the third quarter of 2021.

The Company’s reported

gross margin in the third quarter of 2022 was 32.7%, an improvement

compared to 32.3% in the third quarter of 2021 as increases in

selling prices, due to the Company’s

value based pricing initiatives, helped offset the significant increase

in raw material and other

input costs experienced throughout the third quarter of 2022.

SG&A in the third quarter of 2022 increased $11.2

million or 11%

compared to the third quarter of 2021 due primarily to the

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

4 unchanged sentences

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

During the third quarter of 2022, the Company incurred $2.1 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 $6.7 million of expenses in the prior year second quarter,

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

primarily due to various professional

9 unchanged sentences

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.

of a credit of $1.4 million and $0.9 million

during the third 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

Operating income in the third quarter of 2022 was $44.6 million compared

to $36.0 million in the third quarter 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 quarter non-GAAP operating income decreased to

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

current quarter non-GAAP operating income increased to

$50.9 million compared to $43.2 million in the prior year third 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

The Company had other income, net, of $0.1 million in the third quarter

of 2022 compared to $0.6 million in the third quarter of

The third quarter of 2022 included a gain on insurance recoveries, see the Non-GAAP Measures

section of this Item, above.

addition, the Company incurred foreign exchange transaction losses in the third

quarter of 2022 compared to the foreign exchange

transaction gains in the prior year quarter.

Interest expense, net, increased $2.8 million compared to the third quarter

of 2021 as a result of increases in the average

borrowings outstanding in the third quarter of 2022 compared to

the third quarter of 2021 coupled with an increase in interest rates

quarter-over-quarter.

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.

The Company’s effective

tax rates for the third quarters of 2022 and 2021 were 28.1% and 2.6%, respectively.

The Company’s

effective tax rate for the third quarter of 2022

was largely driven by a decline in forecasted profits and earnings mix,

inclusions, changes in the valuation allowance for foreign tax credits,

a reduction in reserves for uncertain tax positions and

withholding taxes.

In addition, the Company incurred higher tax expense

during the third 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

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

intangible asset transfer.

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 its third quarters of 2022 and 2021 would have been approximately

26% and 25%, respectively.

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 $1.1 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

in the third quarter of 2022 compared to the third quarter of

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

interest in a captive insurance company due to lower market

performance on equity investments and from the Company’s

50% interest in a joint venture in Korea due to overall market challenges.

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.

in both the third 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

third quarter 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 quarter as compared

to the prior year third quarter.

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

with the First Nine Months of 2021

Net sales were $1,458.8 million in the first nine months of 2022 compared to $1,314.1

million in the first nine months of 2021.

The net sales increase of $144.7 million or 11%

year-over-year reflects increases in selling price

and product mix of approximately

21% and additional net sales from acquisitions of 1% partially offset

by a decline in organic sales volumes of approximately 6% and

the unfavorable impact from foreign currency translation of 5%.

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 in 2022.

The decline in sales volumes was primarily attributable to the comparison

to a strong first half of 2021, and

primarily in the first quarter of 2021, where customers replenished their

supply chains.

Lower volumes were also due to softer end

market conditions, particularly in Europe and Asia/Pacific, the wind-down

of the tolling agreement for products previously divested

related to the Combination and the impact of the ongoing war in Ukraine,

partially offset by net new business wins, including the

impact of 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

COGS were $1,002.4 million in the first nine months of 2022 compared

to $858.3 million in the first nine months of 2021.

increase in COGS of $144.1 million or 17% was driven by the significant

increase in the Company’s global raw

manufacturing and supply chain and logistics costs compared to the prior

Gross profit in the first nine months of 2022 increased $0.6 million or

less than 1% from the first nine months of 2021.

Company’s reported gross

margin in the first nine months of 2022 was 31.3% compared to 34.7% in

the first nine 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 nine months of 2022 increased $25.9 million or 8% compared

to the first nine 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

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 COVID-19.

During the first nine months of 2022, the Company incurred $8.0

million of Combination, integration and other acquisition-

related operating expenses primarily for professional fees related to the Houghton

integration and other acquisition-related activities.

1 unchanged sentence

the Company incurred $18.3 million of expenses in the prior year’s

first six months, primarily due to various

first nine months, primarily due to various

professional fees related to legal, financial and other advisory and

2 unchanged sentences

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company initiated a restructuring program during the third quarter

1 unchanged sentence

associated with the Combination.

The Company incurred Restructuring and related charges for reductions

in headcount and site

The Company incurred Restructuring and related credits for reductions in headcount and

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

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.

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.

of $0.6 million during the first nine months of 2022

compared to Restructuring and related charges for reductions in headcount

and site closures under this program, net of adjustments to

initial estimates for severance of $0.6 million during the first nine

months of 2021.

See the Non-GAAP Measures section of this Item,

Operating income in the first nine months of 2022 was $105.9 million

compared to $119.7 million in the first nine months of

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

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

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 $128.9 million for the first nine months of 2022 compared

to $143.3 million in the prior year’s first nine months

primarily due to the lower gross profit and higher SG&A described above.

The Company had other expense, net, of $10.5 million in the first nine months

of 2022 compared to other income, net of $19.3

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

million in the first nine months of 2021.

The first nine months of 2022’s results include

$6.8 million of 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

refinancing the Original Credit Facility and also higher foreign currency transaction

losses year-over-year,

while the prior year’s first nine months of 2022 other income includes

$14.4 million of non-income tax credits recorded by the

Company’s Brazilian subsidiaries

as well as a $4.8 million gain on the sale of certain held-for-sale real property assets.

Interest expense, net, increased $3.5 million compared to the first nine

months of 2021, due to an increase in the average

borrowings outstanding in the first nine months of 2022 coupled

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

the prior year.

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

tax rates for the first nine months of 2022 and 2021 were 19.2% and 21.8%, respective

Company’s effective

tax rate for the nine months ended September 30, 2022 was largely driven

by a decline in forecasted profits and

earnings mix, foreign tax inclusions, changes in the valuation allowance

for foreign tax credits, the impact of audit settlements reached

with Italian tax authorities, a reduction in reserves for uncertain tax positions

and withholding taxes.

In addition, the Company

incurred higher tax expense during the nine months ended September

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 all of 2021.

Comparatively,

the prior year nine-month effective tax rate was impacted

by certain U.S.

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

the Company’s Brazilian subsidiaries, and a deferred

benefit related to an intercompany intangible asset transfer.

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

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

its effective tax rates for the first nine months of 2022

and 2021 would have been approximately 26% and 25%, respectively.

Equity in net income of associated companies decreased $8.3 million

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

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

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

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

company due to lower

market performance on equity investments (see the Non-GAAP Measures

section of this Item, above), as well as lower current year

income from the Company’s 50% interest

in a joint venture in Korea.

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

in both the first six months of 2022 and 2021.

in both the first nine months of 2022 and 2021.

Foreign exchange unfavorably impacted the Company’s

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

first nine 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

compared to the prior year’s first nine months.

Reportable Segments Review - Comparison of the Third

Quarter of 2022

with the Third Quarter of 2021

The Company’s reportable

28 unchanged sentences

Americas represented approximately 38% of the Company’s

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 second quarter of 2021.

The increase in net sales was

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

$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 second quarter of 2022.

consolidated net sales in the third 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 of 7%.

net sales were $186.5 million, an increase of $35.7 million or 24% compared

to the third quarter of 2021.

The increase in net sales

was due to higher selling price and product mix of 30% and additional

net sales from acquisition of 1%, partially offset by 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

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

product mix was primarily driven by price increases implemented to

offset the significant increases in raw material and other input costs that

began during 2021 and continued through the third quarter of

The current quarter decline in organic sales volumes was primarily

driven by the wind-down of the tolling agreement for

products previously divested related to the Combination, the Company’s

ongoing value-based pricing initiatives and lower volumes

sold into the automotive industry due to the semiconductor supply constraints,

partially offset by net new business wins.

segment’s operating earnings were

$45.0 million, an increase of $13.7 million compared to the third quarter

of 2021 primarily driven

by higher net sales, which were partially offset by ongoing

inflationary pressures on the business.

EMEA represented approximately 23% of the Company’s

consolidated net sales in the third quarter of 2022.

The segment’s net

sales were $113.4 million, a decrease of

$8.9 million, or 7%, compared to the third quarter of 2021.

This was driven by higher selling

price and product mix of 21% which was more than offset

by the unfavorable impact of foreign currency translation of 18% and a

decrease in sales volumes of 10%.

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

increases implemented

to offset the significant increases in raw material and other input

costs that began during 2021 and continued through the third quarter

The decline in 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

wind-down of the tolling agreement for products previously divested related

to the Combination and softer economic conditions in the

The significant and unfavorable foreign currency translation impact was primarily

due to the strengthening of the U.S.

against the euro as this exchange rate averaged 1.01 in the third quarter

of 2022 compared to 1.18 in the third quarter of 2021.

segment’s operating earnings were

$9.9 million, a decrease of $10.3 million or 51% compared to the third quarter

decrease in segment operating earnings was primarily a result of lower

net sales and lower gross margins due to the significant

inflationary pressures on the Company’s

costs exceeding the impact of its value-based pricing actions.

Operating earnings in EMEA

were also negatively impacted by foreign currency translation.

Asia/Pacific represented approximately 19% of the Company’s

consolidated net sales in the third quarter of 2022.

The segment’s

net sales were $91.2 million, a decrease of $7.4 million or 8% compared

to the third quarter of 2021.

The decrease in net sales was

driven by lower organic sales volumes of 20% and an unfavorable

impact from foreign currency translation of 6%, partially offset

higher selling price and product mix of 18%.

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

implemented to offset the significant increases in raw

material and other input costs that began during 2021 and continued through the

third quarter of 2022.

The decline in organic sales volumes was primarily

driven by softer market conditions, primarily in China, as a

result of government imposed COVID-19 quarantines

and related production disruptions implemented at the end of March 2022

continued throughout the third quarter of 2022, partially offset by

net new business.

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.

dollar against the Chinese renminbi

as this exchange rate averaged 6.85 in the third

quarter of 2022 compared to 6.47 in the third 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.

$23.3 million, an increase of

$0.1 million compared to the third quarter of 2021 as lower net sales were offset

by improved margins.

Global Specialty Businesses

1 unchanged sentence

Company’s consolidated net sales in the

second quarter of

third quarter of 2022.

The segment’s net sales were $101.1

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.

million, an increase of $23.7 million or 31% compared to the third quarter

in net sales was driven by higher selling price and product mix of 20%,

an increase in organic sales volumes of 12% and additional net

sales from acquisitions of 2%, partially offset by an unfavorable

impact from foreign currency translation of 6%.

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.

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 third quarter of 2022.

The increase in organic sales

volumes was primarily attributable to a continued favorable demand

environment for this segment’s products.

The unfavorable

foreign exchange impact was primarily due to the strengthening

dollar against the euro as described in the EMEA section

This segment’s operating earnings

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.

were $30.7 million, an increase of $10.1 million or 49% compared to the third quarter

The increase in segment operating earnings reflects the higher net sales and

gross margins in the current year despite slightly

higher raw materials costs due to continued inflationary pressures.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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

with the First Six months of 2021

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

with the First Nine months of 2021

Americas represented approximately 35% 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 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

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

consolidated net sales in the first nine months of 2022.

segment’s net sales were $513.4

million, an increase of $88.1 million or 21% compared to the first nine months of 2021.

in net sales was due to higher selling price and product mix of 27%

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

by 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

The decline in organic sales volumes was primarily driven by lower sales volumes into

the automotive end market, the

wind-down of 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 the Company’s

ongoing value-based pricing initiatives, partially offset

by net new business wins.

This segment’s operating earnings

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.

This segment’s operating earnings were

$108.0 million, an increase of $10.8 million or 11%

the first nine months of 2021.

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

sales which more than

offset lower gross margins driven by inflationary

EMEA represented approximately 25% of the Company’s

consolidated net sales in the first six months of 2022.

consolidated net sales in the first nine 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

net sales were $362.1 million, a decrease of $3.4 million or 1% compared

to the first nine months of 2021.

The decrease in net sales

was a result of higher selling price and product mix of 20% and additional

net sales from acquisitions of 1%, more than offset by the

unfavorable impact of foreign currency translation of 15% and

7 unchanged sentences

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

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

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.

-based pricing initiatives, the wind-down of 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 to the strengthening of the U.S.

dollar against the euro

as this exchange rate averaged 1.07 in the first nine months of

2022 compared to 1.20 in first nine months of 2021.

This segment’s operating earnings were $39.9

$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.

million, a decrease of $28.9

million or 42% compared to the first nine months of 2021.

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

gross margins driven by significant inflationary pressures

and the negative impact of foreign currency translation year-over-year.

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

consolidated net sales in the first six months of 2022.

consolidated net sales in the first nine months of 2022.

segment’s net sales were $295.3

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

million, an increase of $8.3 million or 3% compared to the first nine 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

net sales was driven by higher selling price and product mix of 15%,

partially offset by lower organic sales volumes

of 9% and the

unfavorable impact of foreign currency translation of 3%.

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 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

The decline in organic sales volumes was primarily driven by softer end

market conditions in China as a result

of the government imposed COVID-19 quarantine and related production

disruptions 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.

segment’s operating earnings were

$67.5 million, a decrease of $6.5 million or 9% compared to the first nine months of

decrease in segment operating earnings was primarily a result of higher

net sales, which was more than offset by lower gross margins

due to significant inflationary pressures and the unfavorable impact

of foreign currency translation.

Global Specialty Businesses

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Company’s consolidated net sales in the

first six months of

first nine months of

The segment’s net sales were $288.0

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

million, an increase of $51.6 million or 22% compared to the first nine 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

mix of 15%, an increase in organic sales volumes of 8% and

additional net sales from acquisitions of 3%, partially offset

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to a continued favorable demand environment for this segment’s

unfavorable foreign exchange impact was primarily

due to the strengthening of the U.S.

unfavorable foreign exchange impact was primarily due to the strengthening

dollar against the euro described in the EMEA

1 unchanged sentence

This segment’s operating earnings

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

were $83.6 million, an increase of $14.6 million or 21% compared to the first

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.

The increase in segment operating earnings reflects higher net sales and comparable gross

margins, partially offset

by the negative impact of foreign currency translation.

Quaker Chemical Corporation

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business, results of operations, and financial condition,

our expectation that we will maintain sufficient liquidity and

remediate any of our material weaknesses in internal control over

financial reporting, and statements regarding the impact of increased

raw material costs and pricing initiatives on our current

expectations about future events.

our expectation that we will maintain sufficient liquidity,

and statements regarding the impact of increased raw material costs and

pricing initiatives on our current expectations about future

These forward-looking statements include statements with respect to

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and Russian conflict and

actions taken by various governments and governmental organizat

ions in response;

actions taken by various governments and governmental organizations

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

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generally, cost increases in

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

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

assets or result in asset impairments;

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

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

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

of known or unknown risks and uncertainties.

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risks and uncertainties faced by the Company,

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

inflationary pressures, including the potential for continued 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

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

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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

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

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including the resulting market volatility,

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

restricting day-

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

es restricting day-

to-day life and business operations and the length of time that such measures

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to acquisitions and the

Quaker Chemical Corporation

Management’s Discussion and Analysis

integration of acquired businesses.

1 unchanged sentence

assumptions about the

Quaker Chemical Corporation

Management’s Discussion and Analysis

Company and its operations that are subject to change based on various important

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to our business could cause our actual results to differ

from expected and historical results.

materially 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

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furnished to the SEC.

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

website is not incorporated by

Information contained on, or that may be accessed through,

the Company’s website is not incorporated

reference in this Report and, accordingly,

1 unchanged sentence

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis