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Item 1. Business

2023-02-23 compared with 2022-03-01 · 179 added, 503 removed, 38 unchanged (95% of the section changed)

General Description

The Company was organized in 1918, incorporated as a Pennsylvania

business corporation in 1930, and in August 2019

completed the Combination with Houghton to form Quaker Houghton.

Quaker Houghton is the global leader in industrial process

With a presence around the world, includi

ng operations in over 25 countries, the Company’s

customers include thousands of

the world’s most advanced and specialized

steel, aluminum, automotive, aerospace, offshore, can,

mining, and metalworking

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

chemical specialty products and offers

chemical management services (which we refer to as “Fluidcare

”) for various heavy industrial and manufacturing applications

throughout its four segments:

Europe, Middle East and Africa

The Company was organized in 1918 and incorporated as a Pennsylvania business corporation in 1930.

Quaker Houghton is the global leader in industrial process fluids.

With a presence around the world, including operations in over 25 countries, the Company’s customers include thousands of the world’s most advanced and specialized steel, aluminum, automotive, aerospace, offshore, container, mining, and metalworking companies.

Quaker Houghton develops, produces, and markets a broad range of formulated chemical specialty products and offers chemical management services (which we refer to as “Fluidcare TM ”) for various heavy industrial and manufacturing applications throughout its four segments:

Europe, Middle East and Africa (“EMEA”);

Asia/Pacific;

and Global Specialty Businesses.

The major product lines of Quaker Houghton include metal removal fluids,

cleaning fluids, corrosion inhibitors, metal drawing

and forming fluids, die cast mold releases, heat treatment and quenchants,

metal forging fluids, hydraulic fluids, specialty greases,

offshore sub-sea energy control fluids, rolling

lubricants, rod and wire drawing fluids and surface treatment chemicals.

The following

are the respective contributions to consolidated net sales of each of our principal

product lines representing more than 10% of

consolidated net sales for any of the past three years based on the Company’s

current product line segmentation:

The major product lines of Quaker Houghton include metal removal fluids, cleaning fluids, corrosion inhibitors, metal drawing and forming fluids, die cast mold releases, heat treatment and quenchants, metal forging fluids, hydraulic fluids, specialty greases, offshore sub-sea energy control fluids, rolling lubricants, rod and wire drawing fluids and surface treatment chemicals.

The following are the respective contributions to consolidated net sales of each of our principal product lines representing more than 10% of consolidated net sales for any of the past three years based on the Company’s current product line segmentation:

2022 2021 2020

Metal removal fluids 22.9 % 23.4 % 23.9 %

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Sales Revenue

A substantial portion of the Company’s

sales worldwide are made directly through its own employees and its Fluidcare

programs, with the balance sold through distributors and agents.

The Company’s employees typically

visit the plants of customers

regularly, work on

site, and through training and experience, identify production needs which can be resolved

or otherwise addressed

either by utilizing the Company’s existing

products or by applying new formulations developed in its laboratories.

As part of the Company’s Fluidcare

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

Where the Company acts as principal, revenues are recognized on

a gross reporting basis at the selling price negotiated with its

Where the Company acts as an agent for its customers, revenue is recognized on

a net reporting basis at the amount of the

administrative fee earned by the Company for ordering the goods.

See Note 5 of Notes to Consolidated Financial Statements in Item 8

of this Report.

The specialty chemical industry comprises a number of companies similar in

size to the Company, as well

as companies larger

and smaller than Quaker Houghton.

The Company cannot readily determine its precise competitive position

in every industry it

However, the Company estimates it holds a leading

global position in the market for industrial process fluids including

significant global positions in the markets for process fluids in portions of

the automotive and industrial markets, and a leading

position in the market for process fluids to produce sheet steel and aluminum.

The offerings of many of the Company’s

differ from those of Quaker Houghton;

a broad portfolio of fluids, including general lubricants, while others have more

specialized product ranges.

All competitors provide different levels of technical

services to individual customers.

Competition in the

industry is based primarily on the ability to supply products that meet the needs of

the customer and provide technical services and

laboratory assistance to the customer, and

to a lesser extent, on price.

A substantial portion of the Company’s sales worldwide are made directly through its own employees and its Fluidcare TM programs, with the balance sold through distributors and agents.

The Company’s employees typically visit the plants of customers regularly, work on site, and through training and experience, identify production needs which can be resolved or otherwise addressed either by utilizing the Company’s existing products or by applying new formulations developed in its laboratories.

As part of the Company’s Fluidcare TM business, certain third-party product sales to customers are managed by the Company.

Where the Company acts as principal, revenues are recognized on a gross reporting basis at the selling price negotiated with its customers.

Where the Company acts as an agent for its customers, revenue is recognized on a net reporting basis at the amount of the administrative fee earned by the Company for ordering the goods.

See Note 5 of Notes to Consolidated Financial Statements in Item 8 of this Report.

The specialty chemical industry comprises a number of companies similar in size to the Company, as well as companies larger and smaller than Quaker Houghton.

The Company cannot readily determine its precise competitive position in every industry it serves.

However, the Company estimates it holds a leading global position in the market for industrial process fluids including significant global positions in the markets for process fluids in portions of the automotive and industrial markets, and a leading position in the market for process fluids to produce sheet steel and aluminum.

The offerings of many of the Company’s competitors differ from those of Quaker Houghton;

some offer a broad portfolio of fluids, including general lubricants, while others have more specialized product ranges.

All competitors provide different levels of technical services to individual customers.

Competition in the industry is based primarily on the ability to supply products that meet the needs of the customer and provide technical services and laboratory assistance to the customer, and to a lesser extent, on price.

Major Customers and Markets

In 2021, Quaker Houghton’s

five largest customers (each composed of multiple subsidiaries or divisions

with semi-autonomous

purchasing authority) accounted for approximately 10% of

consolidated net sales, with its largest customer accounting for

approximately 3% of consolidated net sales.

A significant portion of the Company’s

revenues are realized from the sale of process

fluids and services to manufacturers of steel, aluminum, automobiles,

aircraft, industrial equipment, and durable goods and, therefore,

Quaker Houghton is subject to the same business cycles as those experienced

by these manufacturers and their customers.

The Company’s financial

performance is generally correlated to the volume of global production within

the industries it serves, rather

than directly related to the financial performance of its customers.

Furthermore, steel and aluminum customers typically have limited

manufacturing locations compared to metalworking customers and

generally use higher volumes of products at a single location.

In 2022, Quaker Houghton’s five largest customers (each composed of multiple subsidiaries or divisions with semi-autonomous purchasing authority) accounted for approximately 11% of consolidated net sales, with its largest customer accounting for approximately 3% of consolidated net sales.

A significant portion of the Company’s revenues are realized from the sale of process fluids and services to manufacturers of steel, aluminum, automobiles, aircraft, industrial equipment, and durable goods and, therefore, Quaker Houghton is subject to the same business cycles as those experienced by these manufacturers and their customers.

The Company’s financial performance is generally correlated to the volume of global production within the industries it serves, rather than directly related to the financial performance of its customers.

Furthermore, steel and aluminum customers typically have limited manufacturing locations compared to metalworking customers and generally use higher volumes of products at a single location.

Raw Materials

Quaker Houghton uses approximately 3,000

raw materials, including animal fats, vegetable oils, mineral oils, oleochemicals,

ethylene, solvents, surfactant agents, various chemical compounds

that act as additives to our base formulations, and a wide variety of

other organic and inorganic compounds and

various derivatives of the foregoing.

The price of mineral oil and its derivatives can be

affected by the price of crude oil and industry refining

Animal fat and vegetable oil prices, as well as the prices of other raw

materials, are impacted by their own unique supply and demand factors,

and by biodiesel consumption which is affected by the price

of crude oil.

Accordingly, significant fluctuations

in the price of crude oil can have a material impact on the cost of these raw

In addition, many of the raw materials used by Quaker Houghton are

commodity chemicals which can experience

significant price volatility.

As experienced during 2021, the Company’s

earnings have been and could continue to be affected by

market changes in raw material prices.

Quaker Houghton uses approximately 3,000 raw materials, including animal fats, vegetable oils, mineral oils, oleochemicals, ethylene, solvents, surfactant agents, various chemical compounds that act as additives to our base formulations, and a wide variety of other organic and inorganic compounds and various derivatives of the foregoing.

The price of mineral oil and its derivatives can be affected by the price of crude oil and industry refining capacity.

Animal fat and vegetable oil prices, as well as the prices of other raw materials, are impacted by their own unique supply and demand factors, and by biodiesel consumption which is affected by the price of crude oil.

Accordingly, significant fluctuations in the price of crude oil can have a material impact on the cost of these raw materials.

In addition, many of the raw materials used by Quaker Houghton are commodity chemicals which can experience significant price volatility.

As experienced during 2022, the Company’s earnings have been and could continue to be affected by market changes in raw material prices.

Reference is made to the disclosure contained in Item 7A of this Report.

Patents and Trademarks

Quaker Houghton has a limited number of patents and patent applications including

patents issued, applied for, or acquired in the

and in various foreign countries, some of which may prove to be material

to its business, with the earliest patent expiry in 2024.

The Company principally relies on its proprietary formulae and its applications

know-how and experience to meet customer needs.

Quaker Houghton products are identified by numerous trademarks that

are registered throughout its marketing area.

Quaker Houghton has a limited number of patents and patent applications including patents issued, applied for, or acquired in the U.S.

and in various foreign countries, some of which may be material to its business, with the earliest patent expiry in 2024.

The Company principally relies on its proprietary formulae and its applications know-how and experience to meet customer needs.

Quaker Houghton products are identified by numerous trademarks that are registered throughout its marketing area.

Research and Development—Laboratories

The Company maintains approximately thirty separate laboratory

facilities worldwide that are primarily devoted to applied

research and development.

In addition, the Company maintains quality control labs at each of its manufacturing

Houghton research and development is directed primarily

toward applied technology since the nature of the Company’s

requires continual modification and improvement of formulations to provide

specialty chemicals to satisfy customer requirements.

problems are encountered which cannot be resolved by local laboratories,

the problem is referred to one of our ten principal

laboratories, located in Conshohocken, Pennsylvania;

Forge, Pennsylvania;

The Company maintains approximately thirty separate laboratory facilities worldwide that are primarily devoted to applied research and development.

In addition, the Company maintains quality control labs at each of its manufacturing facilities.

Quaker Houghton research and development is directed primarily toward applied technology since the nature of the Company’s business requires continual modification and improvement of formulations to provide specialty chemicals to satisfy customer requirements.

If problems are encountered which cannot be resolved by local laboratories, the problem is referred to one of our ten principal laboratories, located in Conshohocken, Pennsylvania;

Valley Forge, Pennsylvania;

Aurora, Illinois;

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Uithoorn, the Netherlands;

United Kingdom;

Coventry, United Kingdom;

Dortmund, Germany;

Barcelona, Spain;

Italy or Qingpu, China.

Turin, Italy or Qingpu, China.

Research and development costs are expensed as incurred.

Research and development expenses during the years ended

December 31, 2021, 2020 and 2019 were $44.9 million, $40.0 million and

$32.1 million, respectively.

Research and development expenses during the years ended December 31, 2022, 2021 and 2020 were $46.0 million, $44.9 million and $40.0 million, respectively.

Recent Acquisition Activity

The Company has completed several recent acquisitions that expand its strategic product

offerings and increase the Company's

presence in its core industries.

The Company's 2021 and 2022 acquisitions consist of:

In January 2022, the Company acquired a business related to the sealing

and impregnation of metal castings for the

automotive sector, as well as impregnation resin

and impregnation systems for metal parts for approximately $1.4 million.

This business expands the Company's geographic presence in Germany

as well as broadens its product offerings and service

capabilities within its existing impregnation business that was initially entered into

as part of its past acquisition of Norman

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

inhibitor technologies for the steel industry,

drawing lubricants and stamping oil for metalworking, and various other

lubrication, rust preventative, and cleaner

applications, for approximately $8.0 million.

This business broadens the Company’s

product offerings within its existing

metals and metalworking business in the Americas

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

fluids, coolants, cleaners, and rust preventative

oils for approximately $3.7 million.

This business expands the Company’s

geographic presence in Turkey as well as

broadens its product offerings within its existing metalworking

In November 2021, the Company acquired Baron Industries ("Baron"),

based privately held company that provides

vacuum impregnation services of castings, powder metal and electrical components

for an initial payment of approximately

$7.1 million.

Baron expands the Company's geographic presence as well as broadens its product

offerings and service

capabilities within its existing impregnation business.

In September 2021, the Company acquired the remaining interest in Grindaix-GmbH

(“Grindaix”), a Germany-based, high-

tech provider of coolant control and delivery systems for approximately $2.9

Previously, in February 2021,

Company acquired a 38% ownership interest in Grindaix for approximately $1.7

Grindaix expands the Company's

geographic presence in Germany and broadens its product offerings

and service capabilities within its equipment solutions

and fluid intelligence business.

In June 2021, the Company acquired certain assets for the Company’s

chemical milling maskants product line for

approximately $2.8 million.

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

the steel end market for approximately $25.0

This business broadens the Company’s product

offerings within its existing metals business globally.

The Company has completed several recent acquisitions that expand its strategic product offerings and increase the Company's presence in its core industries.

The Company's 2022 acquisitions consist of:

• In October 2022, the Company acquired a business that provides pickling and rinsing products and services, which is part of the EMEA reportable segment, for approximately $3.5 million.

This acquisition, along with the Company’s January 2022 acquisition in the Americas reportable segment (described below), which had similar specializations and product offerings in pickling inhibitor technologies, strengthens Quaker Houghton’s position in pickling inhibitors and additives, enabling the Company to better support and optimize production processes for customers across the Metals industry.

• In January 2022, the Company acquired a business that provides pickling inhibitor technologies, drawing lubricants and stamping oil, and various other lubrication, rust preventative, and cleaner applications, which is part of the Americas reportable segment for approximately $8.0 million.

This business broadens the Company’s product offerings within its existing metals and metalworking business in the Americas reportable segment.

• In January 2022, the Company acquired a business related to the sealing and impregnation of metal castings for the automotive sector, as well as impregnation resin and impregnation systems for metal parts, which is part of the Global Specialty Businesses reportable segment for approximately $1.4 million.

This business broadens the Company’s product offerings and service capabilities within its existing impregnation business.

Impact of COVID-19

The global outbreak of COVID-19, and its variants, has negatively impacted

all locations where the Company does business.

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

for almost two years, the full extent of the outbreak and

related business impacts continue to remain uncertain and volatile.

This outbreak has significantly disrupted the operations of the

Company and those of its suppliers and customers.

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

having on the Company,

the overall specialty chemical industry,

and the economies and markets in which the Company operates.

During 2022, COVID-19 continued to negatively impact the Company's business operations, as well as those of its customers and suppliers, including increased costs and decreased availability of labor and raw materials.

The Company’s top priority, especially during this pandemic, has been to protect the health and safety of its employees and customers, while working to ensure business continuity to meet its customers’ needs.

In response, the Company implemented additional operational, health, and safety protocols, including enabling remote work where needed and practicable, employing social distancing standards, implementing travel restrictions where necessary, enhancing onsite hygiene practices, and instituting visitation restrictions at the Company’s facilities, where necessary these operational changes remain in place.

Although restrictions imposed by governments around the world have largely been eliminated or loosened, management continues to monitor and respond to the impacts related to COVID-19 on the Company, the overall specialty chemical industry, and the economies and markets in which the Company operates.

Management continues to evaluate how COVID-19-related circumstances, such as remote work arrangements, illness or staffing shortages and travel restrictions, may impact financial reporting processes and systems, internal control over financial reporting, and disclosure controls and procedures.

At this time, management does not believe that COVID-19 has had a material impact on financial reporting processes, internal controls over financial reporting, or disclosure controls and procedures.

Regulatory Matters

In order to facilitate compliance

with applicable federal, state, and local statutes and regulations relating

to occupational health

and safety and protection of the environment, the Company has an ongoing

program of site assessment for the purpose of identifying

capital expenditures or other actions that may be necessary to comply with

such requirements.

The program includes periodic

inspections of each facility by the Company and/or independent

experts, as well as ongoing inspections and training by on-site

Such inspections address operational matters, record keeping, reporting requirements

and capital improvements.

expenditures directed solely or primarily to regulatory compliance amounted

to approximately $4.2

million, $3.7 million and $4.4

million during the years ended December 31, 2021, 2020 and 2019,

respectively.

In order to facilitate compliance with applicable federal, state, and local statutes and regulations relating to occupational health and safety and protection of the environment, the Company has an ongoing program of site assessment for the purpose of identifying capital expenditures or other actions that may be necessary to comply with such requirements.

The program includes periodic inspections of each facility by the Company and/or independent experts, as well as ongoing inspections and training by on-site personnel.

Such inspections address operational matters, record keeping, reporting requirements and capital improvements.

Capital expenditures directed solely or primarily to regulatory compliance amounted to approximately $2.2 million, $4.2 million and $3.7 million during the years ended December 31, 2022, 2021 and 2020, respectively.

Company Segmentation

The Company’s operating

segments, which are consistent with its reportable segments, reflect the structure of the

internal organization, the method by which the Company’s

resources are allocated and the manner by which the chief operating

decision maker assesses the Company’s

The Company has four reportable segments:

The Company’s operating segments, which are consistent with its reportable segments, reflect the structure of the Company’s internal organization, the method by which the Company’s resources are allocated and the manner by which the chief operating decision maker assesses the Company’s performance.

The reportable segments presented in this Annual Report reflect the business structure the Company operated with during the periods presented, which was four reportable segments:

(i) Americas;

Asia/Pacific;

(iii) Asia/Pacific;

and (iv) Global Specialty Businesses.

In January 2023, the Company reorganized certain of its executive management team to align with a new business structure.

This change was made subsequent to December 31, 2022;

therefore, the reportable segments presented in this Annual Report on Form 10-K reflect the business structure the Company operated with during the periods presented.

Effective beginning in the first quarter of 2023, the Company’s new structure will include three reportable segments:

(i) Americas;

(ii) Europe, Middle East and Africa (“EMEA”);

and (iii) Asia/Pacific.

See Note 4 of Notes to Consolidated Financial Statements in Item 8 of this Report.

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

the Company’s financial results are

currency fluctuations, particularly between the U.S.

dollar and the

euro, the British pound sterling, the Brazilian real, the Mexican

peso, the Chinese renminbi and the Indian rupee, and the impact of those currency

fluctuations on the underlying economies.

Reference is made to (i) the foreign exchange risk information

contained in Item 7A of this Report, (ii) the geographic information in

Note 4 of Notes to Consolidated Financial Statements included

in Item 8 of this Report, and (iii) information regarding risks attendant

to foreign operations included in Item 1A of this Report.

operations, the Company’s financial results are affected by currency fluctuations, particularly between the U.S.

dollar and the euro, the British pound sterling, the Brazilian real, the Mexican peso, the Chinese renminbi and the Indian rupee, and the impact of those currency fluctuations on the underlying economies.

Reference is made to (i) the foreign exchange risk information contained in Item 7A of this Report, (ii) the geographic information in Note 4 of Notes to Consolidated Financial Statements included in Item 8 of this Report, and (iii) information regarding risks attendant to foreign operations included in Item 1A of this Report.

Number of Employees

On December 31, 2021, Quaker Houghton had approximately 4,700

full-time employees globally of whom approximately 1,200

were employed by the parent company and its U.S.

subsidiaries, and approximately

3,500 were employed by its non-U.S.

On December 31, 2022, Quaker Houghton had approximately 4,600 full-time employees globally of whom approximately 1,100 were employed by the parent company and its U.S.

subsidiaries, and approximately 3,500 were employed by its non-U.S.

subsidiaries.

Associated companies of Quaker Houghton (in which it owns 50% or less and has

significant influence) employed approximately 600

people on December 31, 2021.

Quaker Houghton considers its employees as its greatest strength in differentiating

our business and strengthening our market

We have established

core values that are inclusive of embracing diversity and creating a culture

where we learn from and

are inspired by the many cultures, backgrounds and knowledge of our

team members.

The Company’s goal is to have

an organization

that is inclusive of all its people and is representative of the communities

in which we operate.

The Company’s core values

are (i) live safe;

Associated companies of Quaker Houghton (in which it owns 50% or less and has significant influence) employed approximately 600 people on December 31, 2022.

Quaker Houghton considers its employees as its greatest strength in differentiating our business and strengthening our market positions.

We have established core values that are inclusive of embracing diversity and creating a culture where we learn from and are inspired by the many cultures, backgrounds and knowledge of our team members.

The Company’s goal is to have an organization that is inclusive of all its people and is representative of the communities in which we operate.

The Company’s core values are (i) live safe;

(ii) act with integrity;

(iii) drive results;

(iv) exceed customer

expectations;

embrace diversity;

(iv) exceed customer expectations;

(v) embrace diversity;

and (vi) do great things together.

Our core values embody who we are as a company,

guide our decisions and

Our commitment to these values, in words and actions, builds a safer,

stronger Quaker Houghton, and these values guide

the Company’s internal conduct

and its relationship with the outside world.

By fostering a culture and environment that exemplifies

our core values, we gain, as a company,

unique perspectives, backgrounds and varying experiences to ensure

continued long-term

The Company respects and values all of its employees and believes inclusion,

diversity and equality are essential pillars to

drive the Company’s success.

Our core values embody who we are as a company, guide our decisions and inspire us.

Our commitment to these values, in words and actions, builds a safer, stronger Quaker Houghton, and these values guide the Company’s internal conduct and its relationship with the outside world.

By fostering a culture and environment that exemplifies our core values, we gain, as a company, unique perspectives, backgrounds and varying experiences to ensure continued long-term success.

The Company respects and values all of its employees and believes inclusion, diversity and equality are essential pillars to drive the Company’s success.

Aligned to our core values, in 2022 we evolved our enterprise-wide approach to volunteerism.

Moving forward, all employees will be provided with access to two paid days off per year that can be leveraged to volunteer for local charity organizations, or local chapters of national charity organizations, that seek to improve the conditions and lives of the people living in the communities in which our employees live and work.

Sustainability Governance and Strategy

In 2020, we established the Board Sustainability Committee, which has specific responsibility to assist the Board of Directors (the “Board”) in its assessment, evaluation, and oversight of the Company’s sustainability programs and initiatives pertaining to the Company’s business, operations, and employees.

In formulating our Sustainability strategy, our Executive Leadership Team (“ELT”) and Board consider certain risks and uncertainties that may materially impact our financial condition and results of operations.

These risks and uncertainties are further described in Item 1A of this Report.

In 2021, we set a target to achieve carbon neutrality in our global operations by 2030 and net zero emissions across our entire value chain by 2050.

In addition, the Company established 15 long-term environmental and social goals, based on the results of the Company's 2020 materiality assessment, which was completed with input from customers, investors, suppliers, and internal stakeholders.

Our 15 long-term goals are closely aligned with the United Nations Sustainable Development Goals.

We also identified short-term and medium-term milestones that may help support the achievement of our 2030 targets.

Sustainability Report

We report our

progress on Environmental, Social, and Governance (“ESG”) milestones in our

sustainability report, which is

published annually and is available free of charge on our corporate

website at home.quakerhoughton.com/sustainability.

Company’s 2020 Sustainability

Report reflects the most recent available data on a variety of topics, including

specific information

relating to the Company’s:

We report our progress on Environmental, Social, and Governance (“ESG”) milestones in our sustainability report, which is published annually and is available free of charge on our corporate website at home.quakerhoughton.com/sustainability.

The Company’s 2021 Sustainability Report reflects the most recent available data on a variety of topics, including specific information relating to the Company’s:

(i) environmental footprint and climate change commitments;

(ii) diversity initiatives;

(iii) safety initiatives

and performance;

and (iv) training courses our employees have completed.

Information in these sustainability reports and on our

website are not incorporated by reference in this Report and, accordingly,

should not be considered part of this Report.

Environmental Strategy

In 2020, we established the Board Sustainability Committee, which has specific

responsibility to assist the Board of Directors (the

“Board”) in its assessment, evaluation, and oversight of the Company’s

sustainability programs and initiatives pertaining to the

Company’s business, operations,

and employees.

In formulating our environmental strategy,

our Executive Leadership Team

and Board consider certain risks and uncertainties that may materially impact

our financial condition and results of operations.

risks and uncertainties are further described in Item 1A of this Report.

In 2021, we set a target to achieve carbon neutrality in our global

operations by 2030 and net zero emissions across our entire

value chain by 2050.

The Company established 15 long-term goals,

based on the results of the Company's 2020 materiality

assessment, which was completed with input from customers, investors, suppliers,

and internal stakeholders.

Our 15 long-term goals

are closely aligned with the United Nations Sustainable Development Goals.

We also identified short

and medium-term milestones

that may help support the achievement of our 2030 targets.

Management and Retention

Maintaining a robust pipeline of talent is crucial to our continued

success and is a key aspect of succession planning efforts across

the organization.

and human resources teams are responsible for attracting and retaining top talent by facilitating

environment where employees want to show up to work and do great

things together.

To achieve sustained high performance,

management invests in the development, safety,

and wellbeing of our employees.

Among other metrics, we measure training hours,

turnover, time to hire, and diversity hiring

to assess our progress in these areas.

Additionally, we

regularly evaluate our compensation and benefits packages

for our employees, including health and wellness

benefits, paid-time off policies, monetary compensation,

and educational reimbursements, to ensure that our total compensation and

benefits packages are aligned with our business strategy,

organizational culture, and diversity and inclusion philosophy

while ensuring

that we remain competitive in the markets we serve while following

local and statutory wage and benefits laws and guidelines.

Diversity, Equity,

and Inclusion

As a global company,

we want to build an organization that is inclusive of all people and representative of

the communities in

which we operate.

Quaker Houghton provides equal employment opportunities and does not discriminate

based on age, ethnicity,

gender identity,

disability / medical, race, religion, or sexual orientation.

We believe that diversity and

inclusion are embodied by

having working norms and cultural familiarities whereby employees

feel included, engaged, and rewarded, regardless of their

background or where they sit in the organization.

(iii) safety initiatives and performance;

and (iv) training courses which our employees have completed.

Information in these sustainability reports and on our website are not incorporated by reference in this Report and, accordingly, should not be considered part of this Report.

Talent and Culture

We strive to make Quaker Houghton a great place to work for all employees.

We are committed to creating a workplace where employees feel valued, respected and challenged, while fostering an environment that attracts and engages a talented workforce that contributes to the Company’s growth and sustained success.

Our Compensation and Human Resources Committee is responsible for overseeing our policies and strategies related to culture and human capital, including diversity, equity and inclusion.

Our Quaker Houghton University is available to all employees and provides a library of tools and resources for career development and growth.

Through ongoing dialogue with leaders, employees are encouraged to plan for their development and leverage the tools available to create meaningful and actionable development plans that drive personal and company growth.

We endeavor to ensure that our leaders of tomorrow are members of the Company today.

Leadership capability is critical in supporting our culture of inclusion and collaboration.

As such, leaders have access to various structured development and learning experiences.

This includes our global management program ("MAP") which provides guidance on applying sound and consistent management approaches to leading and developing teams.

In addition, we provide custom development programs germane to the needs of our leaders today.

Recent topics including Financial Acumen for Leaders, Building Resilient Teams and Leading Change.

We continue to invest in processes to help the organization assess and develop talent, including a formalized annual performance evaluation program, an annual critical skills and potential analysis, and succession planning for the organization’s most critical and senior roles.

Additionally, we regularly evaluate our Total Rewards offerings for our employees, including health and wellness benefits, paid-time off policies, monetary compensation, and educational reimbursements, to ensure that our total compensation and benefits packages are aligned with our business strategy, organizational culture, and diversity and inclusion approach while ensuring that we remain competitive in the markets we serve and follow local statutory wage and benefits laws.

We pay particular attention to wellness and the well-being of our employees with specific investments on a variety of health related topics including forums for learning, dialogue, and enterprise collaboration.

We strive to create a culture where recognition is ingrained within it, and do so by utilization of an enterprise reward and recognition program celebrating and incentivizing the results and behaviors of our employees and their impacts on our teams and company.

Diversity, Equity, and Inclusion (“DEI”)

As a global company, we want to build an organization that is inclusive of all people and representative of the communities in which we operate.

Quaker Houghton provides equal employment opportunities and does not discriminate based on age, ethnicity, gender identity, disability / medical condition, race, religion, or sexual orientation.

We believe that diversity and inclusion are embodied by having working norms and cultural familiarities whereby employees feel included, engaged, and rewarded, regardless of their background or where they sit in the organization.

We seek to create an environment where every employee can feel their best allowing them to be their best.

Inclusion and diversity begin with the Board and ELT.

The Board is comprised of twelve individuals with diverse experience and

credentials, selected for their business acumen and ability to challenge and add

value to management.

Our current Board composition

includes two female and four racially diverse directors out of a total of

twelve directors.

For additional information on the Company’s

leadership, refer to Item 4(a) Information about our Executive Officers

Directors, Executive Officers and Corporate

our workforce demographics in our Sustainability Report.

By publicly disclosing our workforce demographics, we

increase transparency in the composition of our workforce as well as facilitate accountability

in achieving progress in our diversity

goals, including ensuring that diverse candidates are actively considered

for roles throughout the organization.

We are committed

to maintaining a strong safety culture and to emphasizing the importance of

our employees’ role in identifying,

mitigating and communicating safety risks.

We maintain policies and

operational practices that communicate a culture where all

levels of employees are responsible for safety.

We believe that

the achievement of superior safety performance is both an important

short-term and long-term strategic goal in managing our operations.

We emphasize ten

“lifesaving” rules which make a significant

difference in preventing serious injuries and fatalities.

We also require

all employees to regularly complete safety training.

Additionally, our

ELT is closely involved

in our safety programs and conducts regular reviews of safety performance

reviews the Company’s safety

performance during Company-wide meetings.

The Board is comprised of twelve individuals with diverse experience and credentials, selected for their business acumen and ability to challenge and add value to management.

Our current Board composition includes two female and four racially diverse directors out of a total of twelve directors.

For additional information on the Company’s leadership, refer to Item 4(a) Information about our Executive Officers and Item 10.

Directors, Executive Officers and Corporate Governance.

In 2022, we focused on and dedicated investment in our talent acquisition, talent development, and succession planning efforts as a means to diversify our workforce.

We have continually provided minority and female leaders the opportunity to attend targeted world-class external development programs that speak to the unique experiences these employees can face in the workplace while investing in their continued growth both personally and professionally.

In addition, our core principles of a culture of inclusion are reflected in required employee training programs, which we offer on our policies against harassment and discrimination of any kind.

In 2022 we began a multi-year investment in the Future of STEM Scholars Initiative (“FOSSI”).

This program seeks to create pathways for under-represented groups to enter and succeed in the chemical industry.

As part of this program, Quaker Houghton has committed to providing meaningful paid summer internships that build knowledge in the student’s chosen areas of study along with mentoring conversations with current Quaker Houghton leaders and opportunities for learning more about the industry and business.

We recognize that we are on a journey and, as such, we are working to formalize our DEI strategy as part of our broader investment in culture and engagement.

Through partnerships with thought leaders in diversity, equity and inclusion, we intend to continue the journey we have started by expanding our employee resource groups, building processes to support the attraction and development of historically underrepresented talent early in their careers, hosting inclusion training events for all employees, providing forums for feedback and engagement on inclusion and continuing to build on our talent processes that enable change.

For example, we published our workforce demographics in our Sustainability Report.

By publicly disclosing our workforce demographics, we increase transparency in the composition of our workforce as well as facilitate accountability in achieving progress in our diversity goals, including ensuring that diverse candidates are actively considered for roles throughout the organization.

Workplace Safety

We are committed to maintaining a strong safety culture and to emphasizing the importance of our employees’ role in identifying, mitigating and communicating safety risks.

We maintain policies and operational practices that communicate a culture where all levels of employees are responsible for safety.

We believe that the achievement of superior safety performance is both an important short-term and long-term strategic goal in managing our operations.

We emphasize ten “lifesaving” rules which make a significant difference in preventing serious injuries and fatalities.

We have launched several “Live Safe” initiatives to create an environment of openness and awareness in which all employees are actively engaged in meeting safety targets.

We are keen in reporting near misses, hazard identifications and educating our employees on their “Stop Work Authority”, which are seen as leading indicators, helping us to get to zero incidents.

Our leading indicators are proactive and preventive measures that can shed light about the effectiveness of safety and health activities and reveal potential problems in a safety and health program.

We also require all employees to regularly complete safety training.

Additionally, our ELT is closely involved in our safety programs and conducts regular reviews of safety performance metrics and reviews the Company’s safety performance during Company-wide meetings.

Quaker Houghton on the Internet

Financial results, news and other information about Quaker Houghton

can be accessed from the Company’s

https://www.quakerhoughton.com

This site includes important information on the Company’s

locations, products and services,

financial reports, news releases and career opportunities.

The Company’s periodic and current reports

on Forms 10-K, 10-Q, 8-K, and

other filings, including exhibits and supplemental schedules filed therewith,

and amendments to those reports, filed with the Securities

and Exchange Commission (“SEC”) are available on the Company’s

website, free of charge, as soon as reasonably practicable after

they are electronically filed with or furnished to the SEC.

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

website is not incorporated by reference in this Report and, accordingly,

you should not consider that information part of this Report.

Financial results, news and other information about Quaker Houghton can be accessed from the Company’s website at https://www.quakerhoughton.com.

This site includes important information on the Company’s locations, products and services, financial reports, news releases and career opportunities.

The Company’s periodic and current reports on Forms 10-K, 10-Q, 8-K, and other filings, including exhibits and supplemental schedules filed therewith, and amendments to those reports, filed with the Securities and Exchange Commission (“SEC”) are available on the Company’s website, free of charge, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.

Information contained on, or that may be accessed through, the Company’s website is not incorporated by reference in this Report and, accordingly, you should not consider that information part of this Report.

Factors that May Affect Our Future Results

(Cautionary Statements under the Private Securities Litigation Reform

Certain information included in this Report and other materials filed or

to be filed by Quaker Chemical Corporation with the SEC,

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

or to be made by us, contain or may contain

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

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

Securities Exchange Act of 1934, as amended.

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

historical or current facts.

We have based

these forward-looking statements, including statements regarding the potential

effects of the

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

business, results of operations, and financial condition,

our expectation that we will maintain sufficient liquidity and

remediate any of our material weaknesses in internal control over

financial reporting, and statements regarding the impact of increased

raw material costs and pricing initiatives on our current

expectations about future events.

These forward-looking statements include statements with respect to

our beliefs, plans, objectives, goals, expectations,

anticipations, intentions, financial condition, results of operations, future

performance, and business, including:

the potential benefits of the Combination and other acquisitions;

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

any projected global economic rebound or

anticipated positive results due to Company actions taken in response;

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

disruptions in the global supply chain;

(Cautionary Statements under the Private Securities Litigation Reform Act of 1995)

Certain information included in this Report and other materials filed or to be filed by us with the SEC, as well as information included in oral statements or other written statements made or to be made by us, contain or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

These statements can be identified by the fact that they do not relate strictly to historical or current facts.

We have based these forward-looking statements, including statements regarding the potential effects of the COVID-19 pandemic, the Russia and Ukraine conflict, inflation and global supply chain constraints on the Company’s business, results of operations, and financial condition, our expectation that we will maintain sufficient liquidity, remain in compliance with the terms of the Company’s credit facility, expectations about future demand and raw material costs, and statements regarding the impact of increased raw material costs and pricing initiatives on our current expectations about future events.

These forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, intentions, financial condition, results of operations, future performance, and business, including:

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

• the timing and extent of the projected impacts on our business as a result of the Ukrainian and Russian conflict and actions taken by various governments and governmental organizations in response;

• inflationary pressures, cost increases, and the impacts of constraints and disruptions in the global supply chain;

• the potential benefits of acquisitions;

• the potential for a variety of macroeconomic events, including the possibility of global or regional recessions, inflation generally, cost increases in prices of raw materials such as oil and increasing interest rates, to impact the value of our assets or result in asset impairments;

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

statements that include the words “may,”

“could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,”

“intend,” “plan” or similar expressions.

Such statements include information relating to current and future business activities,

operational matters, capital spending, and

financing sources.

From time to time, forward-looking statements are also included in the Company’s

other periodic reports on Forms

10-K, 10-Q and 8-K, press releases, and other materials released to,

or statements made to, the public.

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

Annual Report to Shareholders for 2021 and in any

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

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

of known or unknown risks and uncertainties.

Many factors discussed in this Report will be important in determining our future

Consequently, actual results may

differ materially from those that might be anticipated from our forward-looking

no obligation to publicly update any forward-looking statements, whether

as a result of new information, future

events or otherwise.

However, any further disclosures made on

related subjects in the Company’s subsequent

reports on Forms 10-K,

10-Q, 8-K and other related filings should be consulted.

A major risk is that demand for the Company’s

products and services is

largely derived from the demand for our customers’ products, which

subjects the Company to uncertainties related to downturns in a

customer’s business and unanticipated customer production

slowdowns and shutdowns, including as is currently being experienced by

many automotive industry companies as a result of supply chain disruption.

Other major risks and uncertainties include, but are not

limited to, the primary and secondary impacts of the COVID-19 pandemic,

including actions taken in response to the pandemic by

various governments, which could exacerbate

some or all of the other risks and uncertainties faced by the Company,

as well as the

potential for significant increases in raw material costs, supply chain

disruptions, customer financial instability,

worldwide economic

and political disruptions such as the current conflict between Russia and Ukraine

foreign currency fluctuations, significant changes in

applicable tax rates and regulations, future terrorist attacks and other acts of violence.

Furthermore, the Company is subject to the

same business cycles as those experienced by our customers in the steel, automobile,

aircraft, industrial equipment, and durable goods

The ultimate impact of COVID-19 on our business will depend on,

among other things, the extent and duration of the

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

with the virus including new variants, the continued

uncertainty regarding global availability,

administration, acceptance and long-term efficacy

of vaccines, or other treatments for

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

economy of the pandemic, including the resulting market volatility,

the measures taken by governmental authorities and other third parties restricting

day-to-day life and business operations and the

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

governmental programs implemented to address the

pandemic or assist impacted businesses, such as fiscal stimulus and other legislation

designed to deliver monetary aid and other relief.

Other factors could also adversely affect us, including those related

to the Combination and other acquisitions and the integration of

acquired businesses.

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

assumptions about the Company and its

operations that are subject to change based on various important factors,

some of which are beyond our control.

uncertainties, and possible inaccurate assumptions relevant to our business

could cause our actual results to differ 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 of

this Report and in our quarterly and other reports filed from time to time

with the SEC.

This discussion is provided as permitted by

the Private Securities Litigation Reform Act of 1995.

• statements that include the words “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan” or similar expressions.

Such statements include information relating to current and future business activities, operational matters, capital spending, and financing sources.

From time to time, forward-looking statements are also included in the Company’s other periodic reports on Forms 10-K, 10-Q and 8-K, press releases, and other materials released to, or statements made to, the public.

Any or all of the forward-looking statements in this Report, in the Company’s Annual Report to Shareholders for 2022 and in any other public statements we make may turn out to be wrong.

This can occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties.

Many factors discussed in this Report will be important in determining our future performance.

Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

However, any further disclosures made on related subjects in the Company’s subsequent reports on Forms 10-K, 10-Q, 8-K and other related filings should be consulted.

A major risk is that demand for the Company’s products and services is largely derived from the demand for our customers’ products, which subjects the Company to uncertainties related to downturns in a customer’s business and unanticipated customer production slowdowns and shutdowns, including as is currently being experienced by many automotive industry companies as a result of supply chain disruptions.

Other major risks and uncertainties include, but are not limited to, the primary and secondary impacts of the COVID-19 pandemic, including actions taken in response to the pandemic by various governments, which could exacerbate some or all of the other risks and uncertainties faced by the Company, as well as 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 of violence.

Furthermore, the Company is subject to the same business cycles as those experienced by our customers in the steel, automobile, aircraft, industrial equipment, and durable goods industries.

Other factors could also adversely affect us, including those related to acquisitions and the integration of acquired businesses.

Our forward-looking statements are subject to risks, uncertainties and assumptions about the Company and its operations that are subject to change based on various important factors, some of which are beyond our control.

These risks, uncertainties, and possible inaccurate assumptions relevant to our business could cause our actual results to differ materially from expected and historical results.

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

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 of this Report and in our quarterly and other reports filed from time to time with the SEC.

This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

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-K

Item 1. Business